<PAGE>
As filed with the Securities and Exchange Commission on March 1, 1999
File Nos. 33-36556
811-6154
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 21
And
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 27
CITIFUNDS INTERNATIONAL 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 March 1, 1999
pursuant to paragraph (b) of Rule 485.
Asset Allocation Portfolios, on behalf of International Portfolio, has also
executed this Registration Statement.
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* This filing relates solely to shares of the Trust's series CitiFunds
International Growth & Income Portfolio.
<PAGE>
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PROSPECTUS
----------
MARCH 1, 1999
CitiFunds(SM)
International Growth &
Income Portfolio
CITIBANK, N.A., INVESTMENT MANAGER
CLASS A AND CLASS B SHARES
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the accuracy of this prospectus, and any
representation to the contrary is a criminal offense.
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Table of Contents
FUND AT A GLANCE ....................................................... 3
YOUR CITIFUNDS(SM) ACCOUNT ............................................. 11
CHOOSING A SHARE CLASS .............................................. 11
HOW TO BUY SHARES ................................................... 17
HOW THE PRICE OF YOUR SHARES IS CALCULATED 18
HOW TO SELL SHARES .................................................. 18
REINSTATING RECENTLY SOLD SHARES .................................... 20
EXCHANGES ........................................................... 20
DIVIDENDS ........................................................... 22
TAX MATTERS ......................................................... 22
MANAGEMENT OF THE FUND ................................................. 25
MANAGER ............................................................. 25
MANAGEMENT FEES ..................................................... 26
MORE ABOUT THE FUND .................................................... 27
PRINCIPAL INVESTMENT STRATEGIES ..................................... 27
RISKS ............................................................... 31
FINANCIAL HIGHLIGHTS ................................................... A-1
APPENDIX ............................................................... B-1
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Fund at a Glance
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Fund at a Glance
This summary briefly describes CitiFunds International Growth & Income
Portfolio and the principal risks of investing in it. Please note that
the Fund invests in securities through an underlying mutual fund. For
more information, see "More About the Fund" on page 27.
CitiFunds(SM)
International Growth &
Income Portfolio
FUND GOAL
The Fund's goal is to provide current income and long-term growth of
income accompanied by growth of capital. Of course, there is no
assurance that the Fund will achieve its goal.
MAIN INVESTMENT STRATEGIES
CitiFunds International Growth & Income Portfolio invests primarily in
international stocks that the Fund's portfolio managers believe are
undervalued. Under normal circumstances, at least 80% of the Fund's
total assets is invested in income-producing equity securities issued
by companies with a record of earnings and dividends.
The Fund's portfolio managers use a value oriented approach in
managing the Fund. This means that they look for securities that they
believe are currently undervalued, or priced below their true worth,
but whose issuers have good longer term business prospects. In
selecting securities, the Fund's portfolio managers emphasize issuers
in developed international equity markets, including Europe,
Australia, New Zealand, Japan, Hong Kong, Singapore, Canada and South
Korea. The Fund may also purchase securities of issuers in developing
countries. Under normal circumstances, at least 65% of the Fund's
total assets is invested in equity securities of companies in at least
three non-U.S. markets.
The Fund's equity securities may include common stocks and securities
having characteristics of common stocks such as convertible preferred
stocks, convertible debt securities, warrants and depositary receipts
(receipts which represent the right to receive the securities of
foreign issuers deposited in a U.S. bank or a local branch of a
foreign bank). The Fund may also purchase debt securities. The Fund's
foreign debt securities are short term, with maturities of one year or
less.
The Fund may use derivatives in order to protect (or "hedge") against
changes in the prices of securities held or to be bought. The Fund may
also use derivatives for non-hedging purposes, to enhance potential
gains or generate income. These derivatives include futures, options
(including options on foreign currency), swap agreements and related
transactions such as caps, floors and collars, and forward foreign
currency exchange contracts. The Fund's ability to use derivatives
successfully depends on a number of factors, including derivatives
being available at prices that are not too costly, tax considerations,
and the portfolio managers accurately predicting movements in stock
prices, currency exchange rates and other economic factors.
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 31 for more information about risks.
o MARKET RISK. This is the risk that the prices of securities will
rise or fall due to changing economic, political or market
conditions, or due to a company's individual situation. 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 FOREIGN SECURITIES. Investments in foreign securities involve
risks relating to adverse political, social and economic
developments abroad, as well as risks resulting from the
differences between the regulations to which U.S. and foreign
issuers and markets are subject. These risks may include
expropriation of assets, confiscatory taxation, withholding taxes
on dividends and interest paid on Fund investments, fluctuations
in currency exchange rates, currency exchange controls and other
limitations on the use or transfer of assets by the Fund or
issuers of securities, and political or social instability. There
may be rapid changes in the value of foreign currencies or
securities, causing the Fund's share price to be volatile. Also,
in certain circumstances, the Fund could realize reduced or no
value in U.S. dollars from its investments in foreign securities,
causing the Fund's share price to go down.
The Fund may invest in issuers located in emerging, or developing,
markets. All of the risks of investing in foreign securities are
heightened by investing in these markets.
o EQUITY SECURITIES. Equity securities are subject to market risk
that historically has resulted in greater price volatility than
exhibited by fixed income securities.
o VALUE INVESTING. The success of the Fund's investment strategy
depends largely on the skill of the Fund's portfolio managers in
identifying securities of companies that are in fact undervalued,
but have good longer term business prospects. A security may not
achieve its expected value because the circumstances causing it to
be underpriced worsen (causing the security's price to decline
further) or do not change or because the portfolio managers are
incorrect in their determinations. In addition, the Fund may
underperform certain other stock funds (those emphasizing growth
stocks, for example) during periods when value stocks are out of
favor.
o INTEREST RATE RISK. In general, the prices of debt securities rise
when interest rates fall, and fall when interest rates rise.
Longer term obligations are usually more sensitive to interest
rate changes. A change in interest rates could cause the Fund's
share price to go down.
o CREDIT RISK. Some issuers may not make payments on debt securities
held by the Fund, causing a loss. Or, an issuer's financial
condition may deteriorate, lowering the credit quality of a
security and leading to greater volatility in the price of the
security and in shares of the Fund. The prices of lower rated
securities often are more volatile than those of higher rated
securities.
o SPECIAL CHARACTERISTICS OF CONVERTIBLE SECURITIES. Convertible
securities, which are debt securities or preferred stock that may
be converted into common stock, are subject to the market risk of
stocks, and, like debt securities, are also subject to interest
rate risk and the credit risk of their issuers.
o DERIVATIVES. The Fund's use of derivatives (such as futures
contracts, options, swap agreements and forward foreign currency
exchange contracts), particularly for non-hedging purposes, may be
risky. This practice could result in losses that are not offset by
gains on other portfolio assets. Losses would cause the Fund's
share price to go down. The Fund's ability to use derivatives
successfully depends on a number of factors, including the ability
of the Fund's portfolio managers to accurately predict stock
prices, interest rates and currency exchange rates. If these
predictions are wrong, 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 keep in mind that an investment in CitiFunds International
Growth & Income Portfolio is not a complete investment program.
You should consider investing in CitiFunds International Growth &
Income Portfolio if:
o You want to direct a portion of your overall investment portfolio
to securities of non-U.S. companies.
o Your investment horizon is longer term -- typically at least five
years.
Don't invest in CitiFunds International Growth & Income Portfolio if:
o You are not prepared to accept the additional risks of
international investing including currency, political, social and
economic risks.
o You are not prepared to accept significant fluctuations in
dividends or share price and possible losses.
o Your investment horizon is shorter term -- usually less than five
years.
Fund Performance
The Fund began operations in 1998 and does not have a full calendar
year of investment returns at the date of this prospectus. The Fund's
total return for the fiscal year ended October 31, 1998 is provided in
the "Financial Highlights" section of this prospectus.
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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.
SHAREHOLDER FEES
FEES PAID DIRECTLY FROM YOUR INVESTMENT
...............................................................................
SHARE CLASS (Class descriptions begin on page 11) CLASS A CLASS B
...............................................................................
Maximum Sales Charge (Load) Imposed on Purchases 5.00% None
...............................................................................
Maximum Deferred Sales Charge (Load) None(1) 5.00%(2)
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ANNUAL FUND OPERATING EXPENSES(3)
EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
...............................................................................
Management Fees 1.05% 1.05%
...............................................................................
Distribution (12b-1) Fees 0.25% 1.00%
...............................................................................
Other Expenses (administrative, shareholder servicing
and other expenses) 0.76% 0.76%
...............................................................................
TOTAL ANNUAL FUND OPERATING EXPENSES* 2.06% 2.81%
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* Because some of the Fund's expenses were waived or reimbursed, actual total
operating expenses for the prior year were (or, in the case of Class B shares,
would have been): 1.65% 2.40%
These fee waivers and reimbursements may be reduced or terminated at any time.
(1) Except for investment of $500,000 or more.
(2) Class B shares have a contingent deferred sales charge (CDSC) which is
deducted from your sale proceeds if you sell your Class B shares within
five years of your original purchase of the shares. In the first year after
purchase, the CDSC is 5.00% of the price at which you purchased your
shares, or the price at which you sold your shares, whichever is less,
declining to 1.00% in the fifth year after purchase.
(3) The Fund invests in an underlying mutual fund, International Portfolio.
This table reflects the expenses of the Fund and International 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; and
o you then sell all your shares at the end of those periods, if you
own Class A shares.
If you own Class B shares, two numbers are given, one showing your
expenses if you sold (redeemed) all your shares at the end of each
time period and one if you held onto your shares. The example also
shows the effects of the conversion of Class B shares to Class A
shares after 8 years.
The example also assumes that:
o each 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 shown in the Fund Fees and Expenses
table remain the same before taking into consideration any fee
waivers or reimbursements.
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
..............................................................................
1 Year 3 Years 5 Years 10 Years
..............................................................................
Class A $699 $1,113 $1,553 $2,770
..............................................................................
Class B
..............................................................................
Assuming redemption at end of $784 $1,171 $1,584 $3,062
period
..............................................................................
Assuming no redemption $284 $ 871 $1,484 $3,062
<PAGE>
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YOUR CITIFUNDS ACCOUNT
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Your CitiFunds Account
CHOOSING A SHARE CLASS
The Fund offers two share classes, Class A and Class B. Each class has
its own sales charge and expense structure. Please read the
information below carefully to help you decide which share class is
best for you.
CLASS A AT A GLANCE
o Front-end load -- there is an initial sales charge of 5.00% or
less
o Lower sales charge rates for larger investments
o Annual distribution/service fee of up to 0.25%
o Lower annual expenses than Class B shares
CLASS B AT A GLANCE
o No initial sales charge
o The deferred sales charge declines from 5% to 1% over five years,
and is eliminated if you hold your shares for six years or more
o Annual distribution/service fee of up to 1.00%
o Automatic conversion to Class A shares after 8 years
WHAT ARE DISTRIBUTION/SERVICE FEES?
Both Class A and Class B shares 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 professionals who 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. For this reason, you
should consider the effects of 12b-1 fees as well as sales loads when
choosing a share class.
SALES CHARGES -- CLASS A SHARES
o Class A 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 Class A 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
professionals who sell shares of the Fund receive. The distributor
keeps up to approximately 10% of the sales charge imposed on Class
A shares. Financial professionals that sell Class A shares will
also receive the service fee payable on Class A shares at an
annual rate equal to 0.25% of the average daily net assets
represented by the Class A shares sold by them.
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 $25,000 5.00% 5.26% 4.50%
..............................................................................
$25,000 to less than $50,000 4.00% 4.17% 3.60%
..............................................................................
$50,000 to less than $100,000 3.50% 3.63% 3.15%
..............................................................................
$100,000 to less than $250,000 3.00% 3.09% 2.70%
..............................................................................
$250,000 to less than $500,000 2.00% 2.04% 1.80%
..............................................................................
$500,000 or more none* none* up to 1.00%
*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. If you qualify to purchase Class A shares
without a sales load, you should purchase Class A shares rather
than Class B shares because Class A shares pay lower fees.
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% of the purchase price, or the
sale price, whichever is less, if you sell within the first year.
Under certain circumstances, waivers may apply. Other policies
regarding the application of the CDSC are the same as for Class B
shares. Please read the discussion below on Class B shares for
more information.
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.
SALES CHARGES -- CLASS B SHARES
o Class B shares are sold without a front-end, or initial, sales
charge, but you are charged a contingent deferred sales charge
(CDSC) when you sell shares within five years of purchase. The
rate of CDSC goes down the longer you hold your shares. The table
below shows the rates that you pay, as a percentage of your
original purchase price (or the sale price, whichever is less),
depending upon when you sell your shares.
SALE DURING CDSC ON SHARES BEING SOLD
..............................................................................
1st year since purchase 5%
..............................................................................
2nd year since purchase 4%
..............................................................................
3rd year since purchase 3%
..............................................................................
4th year since purchase 2%
..............................................................................
5th year since purchase 1%
..............................................................................
6th year (or later) since purchase None
o Financial professionals selling Class B shares receive a
commission of 4.50% of the purchase price of the Class B shares
that they sell, except for sales exempt from the CDSC. Financial
professionals also receive a service fee at an annual rate equal
to 0.25% of the average daily net assets represented by the Class
B shares that they have sold.
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 do not pay a CDSC on shares acquired through reinvestment of
dividends and capital gain distributions or on shares representing
capital appreciation.
o To ensure that you pay the lowest CDSC possible, the Fund will
always use the Class B shares with the lowest CDSC to fill your
sell requests.
o You do not pay a CDSC at the time you exchange your Class B shares
for Class B shares of certain CitiFunds -- any payment will be
deferred until your Class B shares are redeemed.
o If you acquired your Class B 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. If the rate of CDSC on the shares exchanged was
higher than the rate of CDSC on your Fund shares, you will be
charged the higher rate when you sell your Fund shares.
From time to time, the Fund's distributor or Citibank may provide
additional promotional bonuses, incentives or payments to dealers that
sell shares of the Fund. These may include payments for travel
expenses, including lodging, incurred in connection with trips taken
by invited registered representatives and their guests to locations
within and outside the United States for meetings or seminars of a
business nature. In some instances, these bonuses, incentives or
payments may be offered only to dealers who have sold or may sell
significant amounts of shares. Certain dealers may not sell all
classes of shares.
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 Class A shares. 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.
AUTOMATIC CONVERSION OF CLASS B SHARES
Class B shares automatically convert to Class A shares approximately
eight years after purchase. If you acquired your shares through an
exchange, the date of your initial investment will be used to
determine your conversion date. You will receive the same dollar
amount of Class A shares as the Class B shares converted. The price of
Class A shares may be higher than Class B shares at the time of
conversion, because of the lower expenses of Class A shares.
Therefore, you may receive fewer Class A shares than the number of
Class B shares converted.
HOW TO BUY SHARES
Shares of CitiFunds International Growth & 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
Service Agent) that has entered into a service agreement with the
distributor concerning the Fund. Please specify whether you are
purchasing Class A or Class B shares. If you fail to so specify, Class
A shares will be purchased for your account. 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. If you
are purchasing Class A shares, the applicable sales charge will be
added to the cost of your shares.
Your Service 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 Service Agent
transmits the order when the check clears, usually within two business
days.
If you are a customer of a Service Agent, your Service Agent will
establish and maintain your account and be the shareholder of record.
If you wish to transfer your account, you may only transfer it to
another financial institution that acts as a Service Agent, 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. NAV is calculated separately for each class of shares. NAV may
be higher for Class A shares because Class A shares bear lower
expenses. On days when the financial markets in which the Fund invests
close early, NAV will be calculated as of the 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. For foreign securities the values are
translated from the local currency into U.S. dollars using current
exchange rates. If trading in the currency is restricted, the Fund
uses a rate believed to reflect the currency's fair value in U.S.
dollars. Trading may take place in foreign securities held by the Fund
on days when the Fund is not open for business. As a result, the
Fund's NAV may change on days on which it is not possible to purchase
or sell shares of the Fund.
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 are a customer of a Service Agent, through
your Service Agent. If your account application permits, you may also
make redemption requests by calling the Fund's transfer agent or, if
you are a customer of a Service Agent, your Service Agent. Each
Service 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
your Service Agent.
If you own both Class A and Class B shares, and want to sell shares,
you should specify which class of shares you wish to sell. If you fail
to specify, Class A shares will be redeemed first.
When you sell your Class B shares, they will be redeemed so as to
minimize your CDSC. Shares on which the CDSC is not payable, i.e.
o shares representing capital appreciation and
o shares representing the reinvestment of dividends and capital
gain distributions
will be sold first followed by
o shares held for the longest period of time.
You will receive your redemption proceeds in federal funds normally on
the business day after you sell your shares but generally within seven
days. 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.
REINSTATING RECENTLY SOLD SHARES
For 90 days after you sell your Class A shares, the Fund permits you
to repurchase Class A shares in the Fund, up to the dollar amount of
the shares redeemed, without paying any sales charges. To take
advantage of this reinstatement privilege, you must notify the Fund in
writing at the time you wish to repurchase the shares.
EXCHANGES
You may exchange Fund shares for shares of the same class of certain
other CitiFunds. You may also be able to exchange your Class A shares
for shares of certain CitiFunds that offer only a single class of
shares, unless your Class A shares are subject to a CDSC. You may not
exchange Class B shares for shares of CitiFunds that offer only a
single class of shares. You may also acquire Fund shares through an
exchange from another fund managed by Citibank.
You may place exchange orders through the transfer agent or, if you
are a customer of a Service Agent, through your Service Agent. You may
place exchange orders by telephone if your account application
permits. The transfer agent or your Service 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 both funds when
they are next 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 Class A shares, 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 Class A 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.
When you exchange your Class B shares, you will not pay any initial
sales charge, and no CDSC is imposed when your Class B shares are
exchanged for Class B shares of certain other CitiFunds that are made
available by your Service Agent. However, you may be required to pay a
CDSC when you sell those shares. The length of time that you owned
Fund shares will be included in the holding period of your new Class B
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.
DIVIDENDS
The Fund pays substantially all of its net income (if any) from
dividends to its shareholders of record as a dividend semi-annually.
The Fund's net realized short-term and long-term capital gains, if
any, will be distributed to Fund shareholders at least 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 taxes is for general information only. You should
consult your own tax adviser about your particular situation, and the
status of your account under state and local laws.
TAXATION OF FUND. As long as the Fund qualifies for treatment as a
regulated investment company (which it has in the past and intends to
do in the future), it pays no federal income tax on the earnings it
distributes to shareholders. The Fund may pay taxes to non-U.S.
governments in connection with its foreign investments. To the extent
the Fund does pay foreign taxes, for federal income tax purposes
shareholders may be able to claim an itemized deduction, or a tax
credit, for their portion of such taxes after recognizing a deemed
distribution equal to their portion of such taxes.
TAXABILITY OF DISTRIBUTIONS. 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. The IRS Form 1099 that is mailed to you every January
details 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.
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 transactions.
<PAGE>
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MANAGEMENT OF THE FUND
- ----------------------
Management of the Fund
MANAGER
CitiFunds International Growth & Income Portfolio draws on the
strength and experience of Citibank. Citibank is the investment
manager 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 $290 billion in assets worldwide.
Citibank, with headquarters at 153 East 53rd Street, New York, New
York, is a wholly-owned subsidiary of Citicorp, which is, in turn, a
wholly-owned subsidiary of Citigroup Inc. Citigroup Inc. was formed as
a result of the merger of Citicorp and Travelers Group, Inc., which
was completed on October 8, 1998. "CitiFunds" is a service mark of
Citicorp.
Citibank and its affiliates may have banking and investment banking
relationships with the issuers of securities that are held in the
Fund. 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.
Citibank has delegated the daily management of the Fund to a
subadviser, Hotchkis and Wiley, 725 Figueroa Street, Suite 4000, Los
Angeles, California 90017-5400. Hotchkis and Wiley is a division of
Merrill Lynch Asset Management, L.P.
Harry W. Hartford and Sarah H. Ketterer have been the portfolio
managers of the Fund since its inception. Mr. Hartford and Ms.
Ketterer manage international equity accounts and are also responsible
for international investment research. Each has served on the
Investment Policy Committee at Hotchkis and Wiley since joining the
firm. Prior to joining Hotchkis and Wiley in 1994, Mr. Hartford was
with The Investment Bank of Ireland (now Bank of Ireland Asset
Management), as a Senior Manager, where he gained 10 years of
experience in both international and global equity management. Prior
to joining Hotchkis and Wiley in 1990, Ms. Ketterer was an associate
with Bankers Trust and an analyst at Dean Witter.
Citibank is responsible for recommending the hiring, termination or
replacement of any subadviser and for supervising and monitoring the
performance of any subadviser. The Fund's underlying mutual fund has
applied for exemptive relief from the Securities and Exchange
Commission which would permit it to employ other or additional
subadvisers without shareholder approval. The requested exemptive
relief also would permit the terms of subadvisory agreements to be
changed and the employment of subadvisers to be continued after events
that would otherwise cause an automatic termination of a subadvisory
agreement, in each case without shareholder approval if those changes
or continuation are approved by the Fund's Board of Trustees. There is
no assurance that the SEC will grant the requested relief. If the
requested relief is granted, the Fund would be permitted to employ
subadvisers without shareholder approval, subject to compliance with
certain conditions. If the Fund adds or changes a subadviser without
shareholder approval, this prospectus will be revised and shareholders
notified.
MANAGEMENT FEES
For the management services Citibank and the subadviser provided to
the Fund and its underlying mutual fund during the fiscal year ended
October 31, 1998, Citibank and the subadviser received a total of
0.80% of the Fund's average daily net assets, after waivers.
<PAGE>
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MORE ABOUT THE FUND
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More About the Fund
The Fund's goal, principal investments and risks are summarized in
FUND AT A GLANCE on page 3. More information on investments,
investment strategies and risks appears below.
PRINCIPAL INVESTMENT STRATEGIES
The Fund's principal investment strategies are the strategies that, in
the opinion of Citibank and the subadviser, are most likely to achieve
the Fund's investment goal. Of course, there can be no assurance that
the Fund will achieve its goal. Please note that the Fund may also use
strategies and invest in securities that are not described below but
that are described in the Statement of Additional Information. Of
course, the Fund's portfolio managers may decide, as a matter of
investment strategy, not to use the investments and investment
techniques described below and in the Statement of Additional
Information at any particular time. The Fund's goal and strategies may
be changed without shareholder approval.
The Fund invests at least 65% of its total assets in stocks in at
least three foreign markets. Ordinarily, the Fund invests in stocks of
companies located in the developed foreign markets. The Fund may also
purchase securities of issuers in developing countries. Normally the
Fund invests at least 80% of its total assets in stocks that pay
dividends. It also may invest in stocks that don't pay dividends, but
have growth potential unrecognized by the market or changes in
business or management that indicate growth potential.
The Fund invests in equity securities, including common stocks and
other securities with common stock characteristics, like convertible
preferred stocks, convertible bonds or warrants. It may also buy
bonds. Convertible securities and bonds will be rated at least A by a
nationally recognized statistical rating organization (like Moody's
Investors Service or Standard & Poor's) or, if unrated, be of
comparable quality in the portfolio manager's opinion. The Fund's
foreign debt securities are short term, with maturities of one year or
less.
After the Fund buys a bond or convertible security, it may be given a
lower rating or stop being rated. This would not require the Fund to
sell the security, but the portfolio managers will consider the change
in rating in deciding whether to keep the security.
WHAT ARE EQUITY SECURITIES?
EQUITY SECURITIES generally represent an ownership interest (or a
right to acquire an ownership interest) in an issuer, and include
COMMON STOCKS, SECURITIES CONVERTIBLE INTO COMMON STOCKS, PREFERRED
STOCKS, WARRANTS for the purchase of stock and DEPOSITARY RECEIPTS
(receipts which represent the right to receive the securities of
foreign issuers deposited in a U.S. bank or a local branch of a
foreign bank). While equity securities historically have been more
volatile than fixed income securities, they historically have produced
higher levels of total return.
The Fund may hold cash pending investment, and may invest in money
market instruments, repurchase agreements and reverse repurchase
agreements for cash management purposes.
See "Risks" for more information about the risks associated with
investing in equity securities.
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
cost of securities to be purchased in the future. The Fund may also
use derivatives for non-hedging purposes, to generate income or
enhance potential gains. These derivatives include financial futures,
stock index futures, foreign currency futures, forwards and exchange
contracts, options on securities and foreign currencies, options on
interest rate and stock index futures and swap agreements and related
transactions such as caps, floors and collars. In some cases, 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 guaranties counterparty risk. In some cases, the
derivatives may be illiquid, and the Fund may bear more counterparty
risk. Derivatives may not be available on terms that make economic
sense (they may be too costly). The Fund's ability to use derivatives
may also be limited by tax considerations.
DEFENSIVE STRATEGIES. The Fund may, from time to time, take temporary
defensive positions that are inconsistent with the Fund's principal
investment strategies in attempting to respond to adverse market,
political or other conditions. When doing so, the Fund may invest
without limit in high quality money market and other short-term
instruments, and may not be pursuing its investment goal.
INVESTMENT STRUCTURE. The Fund does not invest directly in securities
but instead invests through an underlying mutual fund, International
Portfolio, having the same investment goals and strategies as the
Fund. International Portfolio buys, holds and sells securities in
accordance with these goals and strategies. 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. In purchasing securities for the Fund, the Fund's
portfolio managers follow a value style. Stocks may be "undervalued"
because they are part of an industry that is out of favor with
investors generally. Even in those industries, though, individual
companies may have high rates of growth of earnings and be financially
sound. At the same time, the price of their common stock may be
depressed because investors associate the companies with their
industries. Typical value factors are:
o earnings yield at least 3% greater than the yield on long-term
bonds
o dividend yield that exceeds the yield on a benchmark index
o the company's overall financial strength
o low price-to-earnings ratio relative to the company's expected
growth rate
The portfolio managers consider these same factors when deciding which
securities to sell. Securities are sold when the Fund needs cash to
meet redemptions, or when the manager believes that better
opportunities exist or that the security no longer fits within the
managers' overall strategies for achieving the Fund's goals. For more
information about the portfolio managers, see "Manager" on page 25.
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 or the subadviser may use brokers or dealers for Fund
transactions who also provide brokerage and research services to the
Fund or other accounts over which Citibank, the subadviser, or their
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 or the subadviser 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
or the subadviser 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. More information about risks appears in the Fund's
Statement of Additional Information. Remember that you may receive
little or no return on your investment in the Fund. 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, or
due to a company's individual situation. 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.
FOREIGN SECURITIES. Investments in foreign securities involve
risks relating to adverse political, social and economic
developments abroad, as well as risks resulting from the
differences between the regulations to which U.S. and foreign
issuers and markets are subject.
o These risks may include expropriation of assets, confiscatory
taxation, withholding taxes on dividends and interest paid on Fund
investments, currency exchange controls and other limitations on
the use or transfer of Fund assets and political or social
instability.
o Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there
may be less public information about their operations.
o Foreign markets may be less liquid and more volatile than U.S.
markets. Rapid increases in money supply may result in speculative
investing, contributing to volatility. Also, equity securities may
trade at price-earnings multiples that are higher than those of
comparable U.S. companies, and that may not be sustainable. As a
result, there may be rapid changes in the value of foreign
securities.
o Foreign markets may offer less protection to investors. Enforcing
legal rights may be difficult, costly and slow. There may be
special problems enforcing claims against foreign governments.
o Since foreign securities often trade in currencies other than the
U.S. dollar, changes in currency exchange rates will affect the
Fund's net asset value, the value of dividends and interest
earned, and gains and losses realized on the sale of securities.
An increase in the U.S. dollar relative to these other currencies
will adversely affect the value of the Fund. In addition, some
foreign currency values may be volatile and there is the
possibility of governmental controls on currency exchanges or
governmental intervention in currency markets. Controls or
intervention could limit or prevent the Fund from realizing value
in U.S. dollars from its investment in foreign securities.
o The Fund may invest in issuers located in emerging, or developing,
markets.
o Emerging or developing countries are generally defined as
countries in the initial stages of their industrialization
cycles with low per capita income.
o All of the risks of investing in foreign securities are heightened
by investing in developing countries.
o The markets of developing countries have been more volatile than
the markets of developed countries with more mature economies.
EQUITY SECURITIES. Equity securities are subject to market risk that
historically has resulted in greater price volatility than exhibited
by fixed income securities.
VALUE INVESTING. The success of the Fund's investment strategy depends
largely on the skill of the Fund's portfolio managers in identifying
securities of companies that are in fact undervalued, but have good
longer term business prospects. A security may not achieve its
expected value because the circumstances causing it to be underpriced
worsen (causing the security's price to decline further) or do not
change or because the portfolio managers are incorrect in their
determinations. In addition, the Fund may underperform certain other
stock funds (those emphasizing growth stocks, for example) during
periods when value stocks are out of favor.
INTEREST RATE RISK. In general, the prices of debt securities rise
when interest rates fall, and fall when interest rates rise. Longer
term obligations are usually more sensitive to interest rate changes.
A change in interest rates could cause the Fund's share price to go
down.
CREDIT RISK. The Fund invests in investment grade debt securities. It
is possible that some issuers will not make payments on debt
securities held by the Fund, causing a loss. Or, an issuer may suffer
adverse changes in its financial condition that could lower the credit
quality of a security, leading to greater volatility in the price of
the security and in shares of the Fund. A change in the quality rating
of a bond or other security can also affect the security's liquidity
and make it more difficult for the Fund to sell. The lower quality
debt securities in which the Fund may invest are more susceptible to
these problems than higher quality obligations.
SPECIAL CHARACTERISTICS OF CONVERTIBLE SECURITIES. Convertible
securities, which are debt securities or preferred stock that may be
converted into common stock, are subject to the market risk of stocks,
and, like debt securities, are also subject to interest rate risk and
the credit risk of their issuers. Call provisions may allow the issuer
to repay the debt before it matures.
DERIVATIVES. The Fund's use of derivatives (such as futures contracts,
options, swap agreements and related transactions such as caps, floors
and collars, and forward foreign currency exchange 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. Losses would cause the Fund's share price to go
down. There is also the risk that the counterparty may fail to honor
its contract terms. This risk becomes more acute when the Fund invests
in derivatives that are not traded on commodities exchanges or boards
of trade. The Fund's ability to use derivatives successfully depends
on the portfolio managers' ability to accurately predict movements in
stock prices, interest rates and currency exchange rates. If the
portfolio managers' predictions are wrong, the Fund could suffer
greater losses than if the Fund had not used derivatives.
EURO CONVERSION. The Fund may invest in securities of issuers in
European countries. Certain European countries have joined the
European Economic and Monetary Union (EMU). Each EMU participant's
currency began a conversion into a single European currency, called
the euro, on January 1, 1999, to be completed by July 1, 2002. The
consequences of the euro conversion for foreign exchange rates,
interest rates and the value of European securities held by the Fund
are presently unclear. European financial markets, and therefore, the
Fund, could be adversely affected if the euro conversion does not
continue as planned or if a participating country chooses to withdraw
from the EMU. The Fund could also be adversely affected if the
computing, accounting and trading systems used by its service
providers are not capable of processing transactions related to the
euro. These issues may negatively affect the operations of the
companies in which the Fund invests as well.
YEAR 2000. The Fund could be adversely affected if the computer
systems used by the Fund or its service providers are not programmed
to accurately process information on or after January 1, 2000. The
Fund, and its service providers, are making efforts to resolve any
potential Year 2000 problems. While it is likely these efforts will be
successful, the failure to implement any necessary modifications could
have an adverse impact on the Fund. The Fund also could be adversely
affected if the issuers of securities held by the Fund do not solve
their Year 2000 problems, or if it costs them large amounts of money
to solve these problems.
<PAGE>
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FINANCIAL HIGHLIGHTS
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Financial Highlights
The financial highlights table is intended to help you understand the Fund's
performance for the fiscal period indicated. Certain information reflects
financial results for a single Class A 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 reinvestment of all dividends and
distributions). The 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 into the Statement of
Additional Information and which is available upon request.
For the Period March 2, 1998 (Commencement of Operations) to October 31, 1998
........................................................................
Net Asset Value, beginning of period $10.00
........................................................................
Income from Operations:
Net investment income 0.079
Net realized and unrealized loss on investments (1.039)
........................................................................
Total from operations (0.960)
........................................................................
Less Distributions From:
Net investment income --
Net realized gain on investments --
........................................................................
Total distributions --
........................................................................
Net Asset Value, end of period $ 9.04
........................................................................
Total return (9.60)%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $17,186
Ratio of expenses to average net assets (A) 1.66%*
Ratio of net investment income to average net assets 1.76%*
Portfolio turnover rate (B) 43%
Note: If agents of the Fund for the period indicated had not voluntarily
waived a portion of their fees, the net investment income per share and the
ratios would have been as follows:
Net investment income per share $0.061
RATIOS:
Expenses to average net assets (A) 2.06%*
Net investment income to average net assets 1.36%*
* Annualized.
** Not annualized.
(A) Includes the Fund's share of International Portfolio allocated
expenses for the period indicated.
(B) Portfolio turnover represents the rate of portfolio activity of
International Portfolio, the underlying portfolio through which the
Fund invests.
<PAGE>
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APPENDIX
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Appendix
CLASS A SHARES -- ELIGIBLE PURCHASERS
Class A 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 agent
[] employees of Citibank and its affiliates, CFBDS, Inc. and its
affiliates or any Service Agent and its affiliates (including
immediate families of any of the foregoing), and retired employees
of Citibank and its affiliates or CFBDS and its affiliates
(including immediate families of any of the foregoing)
[] investors participating in a fee-based or promotional arrangement
sponsored or advised by Citibank or its affiliates
[] investors participating in a rewards program that offers Fund
shares as an investment option based on an investor's balances in
selected Citigroup Inc. products and services
[] employees of members of the National Association of Securities
Dealers, Inc., provided that such sales are made upon the
assurance of the purchaser that the purchase is made for
investment purposes and that the securities will not be resold
except through redemption or repurchase
[] separate accounts used to fund certain unregistered variable
annuity contracts
[] direct rollovers by plan participants from a 401(k) plan offered
to Citigroup employees
[] shareholder accounts established through a reorganization or
similar form of business combination approved by the Fund's Board
of Trustees or by the Board of Trustees of any other CitiFund or
mutual fund managed or advised by Citibank (all of such funds
being referred to herein as CitiFunds) the terms of which entitle
those shareholders to purchase shares of the Fund or any other
CitiFund at net asset value without a sales charge
[] employee benefit plans qualified under Section 401(k) of the
Internal Revenue Code with accounts outstanding on January 4, 1999
[] employee benefit plans qualified under Section 401 of the Internal
Revenue Code, including salary reduction plans qualified under
Section 401(k) of the Code, subject to minimum requirements as may
be established by CFBDS with respect to the amount of purchase;
currently, the amount invested by the qualified plan in the Fund
or in any combination of CitiFunds must total a minimum of $1
million
[] accounts associated with Copeland Retirement Programs
[] investors purchasing $500,000 or more of Class A shares; however,
a contingent deferred sales charge will be imposed on the
investments in the event of certain share redemptions within 12
months following the share purchase, at the rate of 1% of the
lesser of the value of the shares redeemed (not including
reinvested dividends and capital gains distributions) or the total
cost of the shares; the contingent deferred sales charge on Class
A shares will be waived under the same circumstances as the
contingent deferred sales charge on Class B shares will be waived;
in determining whether a contingent deferred sales charge on Class
A shares is payable, and if so, the amount of the charge:
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 Class A shares for Class A shares
of another CitiFund and deducted from the redemption proceeds
when the exchanged shares are subsequently redeemed (assuming
the contingent deferred sales charge is then payable)
o the holding period of Class A shares so acquired through an
exchange will be aggregated with the period during which the
original Class A shares were held
[] subject to appropriate documentation, investors where the amount
invested represents redemption proceeds from a mutual fund (other
than a CitiFund), if:
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 Class A shares of the Fund
[] an investor who has a business relationship with an investment
consultant or other registered representative who joined a
broker-dealer which has a sales agreement with CFBDS from another
investment firm within six months prior to the date of purchase by
the investor, if:
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
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[THIS PAGE INTENTIONALLY LEFT BLANK]
<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 is also available from the Securities and Exchange Commission.
You can find it 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 1-800-SEC-0330. You can receive copies of this
information by sending your request and a duplicating fee to the SEC's
Public Reference Section, Washington, DC 20549-6009.
SEC File Number: 811-6154 CFP/IG1399
<PAGE>
Statement of
Additional Information
March 1, 1999
CITIFUNDS(SM) INTERNATIONAL GROWTH & INCOME PORTFOLIO
(A Member of the CitiFunds(SM) Family of Funds)
CitiFunds International 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 August 7, 1990. The Trust offers shares of
CitiFunds International Growth & Income Portfolio (the "Fund"), to which this
Statement of Additional Information relates, as well as shares of one other
active series. The address and telephone number of the Trust are 21 Milk Street,
Boston, Massachusetts 02109, (617) 423-1679. The Fund is permitted to invest all
or a portion of its assets in one or more other investment companies. Currently,
the Fund invests all of its investable assets in International Portfolio (the
"Portfolio"), which is a series of Asset Allocation Portfolios (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 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 .............................................. 16
5. Performance Information .............................................. 17
6. Determination of Net Asset Value; Valuation of Securities ............ 19
7. Additional Information on the Purchase and Sale of Fund Shares and
Shareholder Programs ................................................. 20
8. Management ........................................................... 26
9. Portfolio Transactions ............................................... 33
10. Description of Shares, Voting Rights and Liabilities ................. 34
11. Tax Matters .......................................................... 35
12. Certain Bank Regulatory Matters ...................................... 37
13. Financial Statements ................................................. 37
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 March 1, 1999, 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 37 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
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 International Trust is an open-end management investment company
organized as a business trust under the laws of the Commonwealth of
Massachusetts on August 7, 1990. Prior to January 7, 1998, the Trust was called
Landmark International Funds. This Statement of Additional Information describes
shares of CitiFunds International Growth & Income Portfolio, which is one of two
active series of the Trust. References in this Statement of Additional
Information to the "Prospectus" are to the Prospectus, dated March 1, 1999, of
the Fund.
The Fund is a diversified fund. The Fund is permitted to seek its investment
objective 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 International Portfolio. The Portfolio is a series of Asset
Allocation Portfolios and is an open-end, diversified management investment
company. The Portfolio has the same investment objective 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, except as
otherwise noted. In addition, references to the Trust include the Portfolio
Trust, except as otherwise noted.
Citibank, N.A. ("Citibank" or the "Manager") is the Manager of the Fund and
the Portfolio. Citibank has delegated the daily management of the investments of
the Portfolio to Hotchkis and Wiley, a division of Merrill Lynch Asset
Management, L.P. (the "Subadviser"). The Subadviser manages the investments of
the Portfolio from day to day in accordance with the Portfolio's investment
objective and policies. The selection of investments for the Portfolio, and the
way they are managed, depend on the conditions and trends in the economy and the
financial marketplaces.
The 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, Inc., the Fund's distributor
("CFBDS" or the "Distributor").
2. INVESTMENT OBJECTIVE AND POLICIES; SPECIAL INFORMATION CONCERNING
INVESTMENT STRUCTURE
The investment objective of the Fund is current income and long-term growth
of income accompanied by growth of capital. The Fund invests primarily (i.e., at
least 65% of its total assets under normal circumstances) in equity securities
of issuers in at least three non-U.S. markets. The Fund's portfolio managers use
a value oriented approach in managing the Fund. This means that they look for
securities that they believe are undervalued, or priced below their true worth,
but whose issuers have good longer term business prospects.
The investment objective of the Fund may be changed by its Trustees 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 objective.
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
and those described below under "Description of Permitted Investments and
Investment Practices" are not fundamental and may be changed without shareholder
approval.
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 objective and policies as the Fund. The Portfolio, in turn, buys,
holds and sells securities in accordance with this objective and these policies.
Of course, there can be no assurance that the Fund or the Portfolio will achieve
its objective. 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 the investment objective and
policies described herein, either directly in securities or in another mutual
fund or pooled investment vehicle having the same investment objective 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 objective 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 objective, 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 any or all of the investments and
utilize any or all of the investment techniques described in the Prospectus and
herein. The selection of investments and the utilization of investment
techniques depend on, among other things, the Manager's and, as applicable, the
Subadviser's investment strategies for the Fund, conditions and trends in the
economy and financial markets and investments being available on terms that, in
the Manager's or the Subadviser's opinion, make economic sense.
SECURITIES OF NON-U.S. ISSUERS
The Fund may invest in securities of non-U.S. issuers. Investing in
securities of foreign issuers may involve significant risks not present in
domestic investments. For example, the value of such securities fluctuates based
on the relative strength of the U.S. dollar. In addition, there is generally
less publicly available information about foreign issuers, particularly those
not subject to the disclosure and reporting requirements of the U.S. securities
laws. Non-U.S. issuers are generally not bound by uniform accounting, auditing
and financial reporting requirements comparable to those applicable to domestic
issuers. Investments in securities of non-U.S. issuers also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of the Fund, political or financial instability or diplomatic and
other developments which would affect such investments. Further, economies of
other countries or areas of the world may differ favorably or unfavorably from
the economy of the U.S.
It is anticipated that in most cases the best available market for
securities of non-U.S. issuers would be on exchanges or in over-the-counter
markets located outside the U.S. Non-U.S. stock markets, while growing in
volume and sophistication, are generally not as developed as those in the
U.S., and securities of some non-U.S. issuers (particularly those located in
developing countries) may be less liquid and more volatile than securities of
comparable U.S. companies. Prices at which the Fund may acquire securities may
be affected by trading by persons with material non-public information and by
securities transactions by brokers in anticipation of transactions by the
Fund. Non-U.S. security trading practices, including those involving
securities settlement where the Fund's assets may be released prior to receipt
of payments, may expose the Fund to increased risk in the event of a failed
trade or the insolvency of a non-U.S. broker-dealer. In addition, foreign
brokerage commissions are generally higher than commissions on securities
traded in the U.S. and may be non-negotiable. In general, there is less
overall governmental supervision and regulation of non-U.S. securities
exchanges, brokers and listed companies than in the U.S.
The Fund may invest in issuers located in developing countries, which are
generally defined as countries in the initial stages of their industrialization
cycles with lower per capita income. All of the risks of investing in non-U.S.
securities are heightened by investing in developing countries. Shareholders
should be aware that investing in the equity and fixed income markets of
developing countries involves exposure to economic structures that are generally
less diverse and mature, and to political systems which can be expected to have
less stability, than those of developed countries. Historical experience
indicates that the markets of developing countries have been more volatile than
the markets of developed countries with more mature economies; such markets
often have provided higher rates of return, and greater risks, to investors, but
they also may provide lower rates of return or negative returns, for extended
periods. These heightened risks include (i) greater risks of expropriation,
confiscatory taxation and nationalization, and less social, political and
economic stability; (ii) the small current size of markets for securities of
issuers based in developing countries and the currently low or non-existent
volume of trading, resulting in a lack of liquidity and in price volatility;
(iii) certain national policies which may restrict the Fund's investment
opportunities including restrictions on investing in issuers or industries
deemed sensitive to relevant national interests; and (iv) the absence of
developed legal structures. Such characteristics can be expected to continue in
the future.
The costs attributable to non-U.S. investing, such as the costs of
maintaining custody of securities in non-U.S. countries, frequently are higher
than those involved in U.S. investing. As a result, the operating expense
ratio of the Fund may be higher than that of investment companies investing
exclusively in U.S. securities.
Subject to applicable statutory and regulatory limitations, assets of the
Fund may be invested in shares of other investment companies. The Fund may
invest up to 5% of its assets in closed-end investment companies which primarily
hold securities of non-U.S. issuers. Investments in closed-end investment
companies which primarily hold securities of non-U.S. issuers may entail the
risk that the market value of such investments may be substantially less than
their net asset value and that there would be duplication of investment
management and other fees and expenses.
American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs") and other forms of depositary
receipts for securities of non-U.S. issuers provide an alternative method for
the Fund to make non-U.S. investments. These securities are not usually
denominated in the same currency as the securities into which they may be
converted. Generally, ADRs, in registered form, are designed for use in U.S.
securities markets and EDRs and GDRs, in bearer form, are designed for use in
European and global securities markets. ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities.
EDRs and GDRs are European and global receipts, respectively, evidencing a
similar arrangement. ADRs, EDRs and GDRs are subject to many of the same risks
that apply to other investments in non-U.S. securities.
ADRs, EDRs, and GDRs may be issued pursuant to sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have its
securities traded in the form of depositary receipts. In unsponsored programs,
the issuer may not be directly involved in the creation of the program. Although
regulatory requirements with respect to sponsored and unsponsored programs are
generally similar, in some cases it may be easier to obtain financial
information from an issuer that has participated in the creation of a sponsored
program. Accordingly, there may be less information available regarding issuers
of securities underlying unsponsored programs and there may not be a correlation
between such information and the market value of the depositary receipts.
The Fund may invest in securities of non-U.S. issuers that impose
restrictions on transfer within the U.S. or to U.S. persons. Although
securities subject to such transfer restrictions may be marketable abroad,
they may be less liquid than securities of non-U.S. issuers of the same class
that are not subject to such restrictions.
FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Because the Fund may buy and sell securities denominated in currencies other
than the U.S. dollar, and receive interest, dividends and sale proceeds in
currencies other than the U.S. dollar, the Fund may enter into foreign currency
exchange transactions to convert U.S. currency to foreign currency and foreign
currency to U.S. currency, as well as convert foreign currency to other foreign
currencies. The Fund either enters into these transactions on a spot (i.e.,
cash) basis at the spot rate prevailing in the foreign currency exchange market,
or uses forward contracts to purchase or sell foreign currencies. The Fund may
also enter into foreign currency hedging transactions in an attempt to protect
the value of the assets of the Fund as measured in U.S. dollars from unfavorable
changes in currency exchange rates and control regulations. (Although the Fund's
assets are valued daily in terms of U.S. dollars, the Trust does not intend to
convert the Fund's holdings of other currencies into U.S. dollars on a daily
basis.)
The Fund may convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion. Although currency
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference (the "spread") between the prices at which they are
buying and selling various currencies. Thus, a dealer may offer to sell a
currency at one rate, while offering a lesser rate of exchange should the Fund
desire to resell that currency to the dealer.
A forward contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract, agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers.
Because these contracts are traded in the interbank market and not on organized
commodities or securities exchanges, these contracts operate in a manner
distinct from exchange-traded instruments, and their use involves certain risks
beyond those associated with transactions in the futures and options contracts
described herein. A forward contract generally has no deposit requirement, and
no fees or commissions are charged at any stage for trades.
When the Fund enters into a contract for the purchase or sale of a
security denominated in a non-U.S. currency, it may desire to "lock in" the
U.S. dollar price of the security. By entering into a forward contract for the
purchase or sale, for a fixed amount of U.S. dollars, of the amount of non-
U.S. currency involved in the underlying security transaction, the Fund may be
able to protect against a possible loss resulting from an adverse change in
the relationship between the U.S. dollar and the non-U.S. currency during the
period between the date the security is purchased or sold and the date on
which payment is made or received.
When the Subadviser believes that the currency of a particular country may
suffer a substantial decline against the U.S. dollar, the Fund may enter into a
forward contract to sell, for a fixed amount of U.S. dollars, the amount of
non-U.S. currency approximating the value of some or all of the Fund's
securities denominated in such non-U.S. currency. The precise matching of the
forward contract amounts and the value of the securities involved is not
generally possible since the future value of such securities in non-U.S.
currencies changes as a consequence of market movements in the value of those
securities between the date the forward contract is entered into and the date it
matures. The projection of a short-term hedging strategy is highly uncertain.
The Fund generally does not enter into such forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts obligates the
Fund to deliver an amount of non-U.S. currency in excess of the value of the
Fund's securities or other assets denominated in that currency. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated in the investment decisions made with regard to overall
diversification strategies. However, the Fund believes that it is important to
have the flexibility to enter into such forward contracts when it determines
that its best interests will be served.
The Fund generally would not enter into a forward contract with a term
greater than one year. At the maturity of a forward contract, the Fund will
either sell the security and make delivery of the non-U.S. currency, or retain
the security and terminate its contractual obligation to deliver the non-U.S.
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
non-U.S. currency. If the Fund retains the security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If the Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the non-U.S. currency. Should forward prices decline
during the period between the date the Fund enters into a forward contract for
the sale of the non-U.S. currency and the date it enters into an offsetting
contract for the purchase of such currency, the Fund will realize a gain to the
extent the selling price of the currency exceeds the purchase price of the
currency. Should forward prices increase, the Fund will suffer a loss to the
extent that the purchase price of the currency exceeds the selling price of the
currency.
It is impossible to forecast with precision the market value of Fund
securities at the expiration of the contract. Accordingly, it may be necessary
for the Fund to purchase additional non-U.S. currency on the spot market if the
market value of the security is less than the amount of non-U.S. currency the
Fund is obligated to deliver and if a decision is made to sell the security and
make delivery of such currency. Conversely, it may be necessary to sell on the
spot market some of the non-U.S. currency received upon the sale of the security
if its market value exceeds the amount of such currency the Fund is obligated to
deliver.
The Fund may also purchase put options on a non-U.S. currency in order to
protect against currency rate fluctuations. If the Fund purchases a put option
on a non-U.S. currency and the value of the non-U.S. currency declines, the
Fund will have the right to sell the non-U.S. currency for a fixed amount in
U.S. dollars and will thereby offset, in whole or in part, the adverse effect
on the Fund which otherwise would have resulted. Conversely, where a rise in
the U.S. dollar value of another currency is projected, and where the Fund
anticipates investing in securities traded in such currency, the Fund may
purchase call options on the non-U.S. currency.
The purchase of such options could offset, at least partially, the effects
of the adverse movements in exchange rates. However, the benefit to the Fund
from purchases of foreign currency options will be reduced by the amount of the
premium and related transaction costs. In addition, where currency exchange
rates do not move in the direction or to the extent anticipated, the Fund could
sustain losses on transactions in foreign currency options which would require
it to forego a portion or all of the benefits of advantageous changes in such
rates.
The Fund may write options on non-U.S. currencies for hedging purposes or
otherwise to achieve its investment objective. For example, where the Fund
anticipates a decline in the value of the U.S. dollar value of a foreign
security due to adverse fluctuations in exchange rates it could, instead of
purchasing a put option, write a call option on the relevant currency. If the
expected decline occurs, the option will most likely not be exercised, and the
diminution in value of the security held by the Fund may be offset by the amount
of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the cost of a foreign security to be acquired because of
an increase in the U.S. dollar value of the currency in which the underlying
security is primarily traded, the Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will expire unexercised
and allow the Fund to hedge such increased cost up to the amount of the premium.
However, the writing of a currency option will constitute only a partial hedge
up to the amount of the premium, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at a loss which
may not be offset by the amount of the premium. Through the writing of options
on currencies, the Fund also may be required to forego all or a portion of the
benefits which might otherwise have been obtained from favorable movements in
exchange rates.
Put and call options on non-U.S. currencies written by the Fund will be
covered by segregation of cash and liquid securities in an account with the
custodian in an amount sufficient to discharge the Fund's obligations with
respect to the option, by acquisition of the non-U.S. currency or of a right to
acquire such currency (in the case of a call option) or the acquisition of a
right to dispose of the currency (in the case of a put option), or in such other
manner as may be in accordance with the requirements of any exchange on which,
or the counterparty with which, the option is traded and applicable laws and
regulations.
Investing in ADRs and other depositary receipts presents many of the same
risks regarding currency exchange rates as investing directly in securities
denominated in currencies other than the U.S. dollar. Because the securities
underlying these receipts are traded primarily in non-U.S. currencies, changes
in currency exchange rates will affect the value of these receipts. For example,
a decline in the U.S. dollar value of another currency in which securities are
primarily traded will reduce the U.S. dollar value of such securities, even if
their value in the other non-U.S. currency remains constant, and thus will
reduce the value of the receipts covering such securities. The Fund may employ
any of the above described foreign currency hedging techniques to protect the
value of its assets invested in depositary receipts.
Of course, the Fund is not required to enter into the transactions described
above and does not do so unless deemed appropriate by the Subadviser. It should
be realized that under certain circumstances, hedging arrangements to protect
the value of the Fund's securities against a decline in currency values may not
be available to the Fund on terms that make economic sense (they may be too
costly). It should also be realized that these methods of protecting the value
of the Fund's securities against a decline in the value of a currency do not
eliminate fluctuations in the underlying prices of the securities. Additionally,
although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, they also tend to limit any potential gain
which might result should the value of such currency increase.
The Fund has established procedures consistent with policies of the
Securities and Exchange Commission ("SEC") concerning forward contracts. 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. Therefore, the Fund expects to always have cash or liquid securities
available sufficient to cover any commitments under these contracts.
BANK OBLIGATIONS
The Fund may invest in bank obligations, i.e., certificates of deposit, time
deposits (including Eurodollar time deposits) and bankers' acceptances and other
short-term debt obligations issued by domestic banks, foreign subsidiaries or
foreign branches of domestic banks, domestic and foreign branches of foreign
banks, domestic savings and loan associations and other banking institutions. A
bankers' acceptance is a bill of exchange or time draft drawn on and accepted by
a commercial bank. It is used by corporations to finance the shipment and
storage of goods and to furnish dollar exchange. Maturities are generally six
months or less. A certificate of deposit is a negotiable interest-bearing
instrument with a specific maturity. Certificates of deposit are issued by banks
and savings and loan institutions in exchange for the deposit of funds and
normally can be traded in the secondary market prior to maturity. A time deposit
is a non-negotiable receipt issued by a bank in exchange for the deposit of
funds. Like a certificate of deposit, it earns a specified rate of interest over
a definite period of time; however, it cannot be traded in the secondary market.
Time deposits with a withdrawal penalty are considered to be illiquid
securities.
COMMERCIAL PAPER
The Fund may invest in commercial paper, which is unsecured debt of
corporations usually maturing in 270 days or less from its date of issuance.
SECURITIES RATED BAA OR BBB
The Fund may purchase securities rated Baa by Moody's Investors Service,
Inc. or BBB by Standard & Poor's Ratings Group and securities of comparable
quality, which may have poor protection of payment of principal and interest.
These securities are often considered to be speculative and involve greater risk
of default or price changes than securities assigned a higher quality rating due
to changes in the issuer's creditworthiness. The market prices of these
securities may fluctuate more than higher-rated securities and may decline
significantly in periods of general economic difficulty which may follow periods
of rising interest rates.
CONVERTIBLE SECURITIES
The Fund may invest in convertible securities. A convertible security is a
fixed-income security (a bond or preferred stock) which may be converted at a
stated price within a specified period of time into a certain quantity of common
stock or other equity securities of the same or a different issuer. Convertible
securities rank senior to common stock in a corporation's capital structure but
are usually subordinated to similar non-convertible securities. While providing
a fixed-income stream (generally higher in yield than the income derivable from
common stock but lower than that afforded by a similar non-convertible
security), a convertible security also affords an investor the opportunity,
through its conversion feature, to participate in the capital appreciation
attendant upon a market price advance in the convertible security's underlying
common stock. Convertible securities will be rated at least A by a nationally
recognized statistical rating organization (like Moody's Investors Service or
Standard & Poor's) or, if unrated, be of comparable quality in the portfolio
manager's opinion.
In general, the market value of a convertible security is at least the
higher of its "investment value" (i.e., its value as a fixed-income security) or
its "conversion value" (i.e., its value upon conversion into its underlying
stock). As a fixed-income security, a convertible security tends to increase in
market value when interest rates decline and tends to decrease in value when
interest rates rise. However, the price of a convertible security is also
influenced by the market value of the security's underlying common stock. The
price of a convertible security tends to increase as the market value of the
underlying stock rises, whereas it tends to decrease as the market value of the
underlying stock declines. While no securities investment is without some risk,
investments in convertible securities generally entail less risk than
investments in the common stock of the same issuer.
RULE 144A SECURITIES
Consistent with applicable investment restrictions, the Fund may purchase
securities that are not registered ("restricted securities") 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.
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 restricted securities, unless, in the case of restricted
securities, the Board of Trustees of the Trust determines, based on the trading
markets for the specific restricted security, that it is liquid. The Trustees
have adopted guidelines and, subject to oversight by the Trustees, have
delegated to the Manager or to a subadviser the daily function of determining
and monitoring liquidity of restricted 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.
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 (usually not more than
seven) 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. In the event
of the bankruptcy of the other party to a repurchase agreement, the Fund could
experience delays in recovering the resale price. To the extent that, in the
meantime, the value of the securities purchased has decreased, the Fund could
experience a loss.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements. Reverse repurchase
agreements involve the sale of securities held by the Fund and the agreement by
the Fund to repurchase the securities at an agreed-upon price, date and interest
payment. When 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. 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 increased, the Fund could experience a loss.
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 terminate 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) or a fee from the borrower in the event the collateral
consists of securities. 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 its
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 Subadviser to be of good standing, and when,
in the judgment of the Subadviser, the consideration which can be earned
currently from loans of this type justifies the attendant risk. In addition, the
Fund could suffer 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. If the Subadviser 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.
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. When the Fund commits to purchase a security on a
"when-issued" or on a "forward delivery" basis, it sets up procedures consistent
with 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. For example, the Fund may have to sell assets which have been set
aside in order to meet redemptions. Also, if the Subadviser determines it is
advisable as a matter of investment strategy to sell the "when-issued" or
"forward delivery" securities, the Fund would be required to meet its
obligations from the then available cash flow or the sale of securities, or,
although it would not normally expect to do so, from the sale of the
"when-issued" or "forward delivery" securities themselves (which may have a
value greater or less than the Fund's payment obligation). 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.
OPTIONS
The Fund may write covered call and put options and purchase call and put
options on securities. Call and put options written by the Fund may be covered
in the manner set forth below.
A call option written by the Fund is "covered" if the Fund owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account) upon conversion or exchange of other
securities held in its portfolio. A call option is also covered if the Fund
holds a call on the same security and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written or (b) is greater than the exercise price
of the call written if the difference is maintained by the Fund in cash or
liquid securities in a segregated account. A put option written by the Fund is
"covered" if the Fund maintains cash or liquid securities with a value equal to
the exercise price in a segregated account, or else holds a put on the same
security and in the same principal amount as the put written where the exercise
price of the put held is equal to or greater than the exercise price of the put
written or where the exercise price of the put held is less than the exercise
price of the put written if the difference is maintained by the Fund in cash or
liquid securities in a segregated account. Put and call options written by the
Fund may also be covered in such other manner as may be in accordance with the
requirements of the exchange on which, or the counterparty with which, the
option is traded, and applicable laws and regulations. If the writer's
obligation is not so covered, it is subject to the risk of the full change in
value of the underlying security from the time the option is written until
exercise.
The Fund may purchase options for hedging purposes or to increase its
return. Put options may be purchased to hedge against a decline in the value of
portfolio securities. If such decline occurs, the put options will permit the
Fund to sell the securities at the exercise price, or to close out the options
at a profit. By using put options in this way, the Fund will reduce any profit
it might otherwise have realized in the underlying security by the amount of the
premium paid for the put option and by transaction costs.
The Fund may purchase call options to hedge against an increase in the price
of securities that the Fund anticipates purchasing in the future. If such
increase occurs, the call option will permit the Fund to purchase the securities
at the exercise price, or to close out the options at a profit. The premium paid
for the call option plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise of the option, and, unless the price of the
underlying security rises sufficiently, the option may expire worthless to the
Fund.
The Fund may write (sell) covered call and put options and purchase call and
put options on stock indices. In contrast to an option on a security, an option
on a stock index provides the holder with the right, but not the obligation, to
make or receive a cash settlement upon exercise of the option, rather than the
right to purchase or sell a security. The amount of this settlement is equal to
(i) the amount, if any, by which the fixed exercise price of the option exceeds
(in the case of a call) or is below (in the case of a put) the closing value of
the underlying index on the date of exercise, multiplied by (ii) a fixed "index
multiplier."
The Fund may cover call options on stock indices by owning securities whose
price changes, in the opinion of the Subadviser, are expected to be similar to
those of the underlying index, or by having an absolute and immediate right to
acquire such securities without additional cash consideration (or for additional
cash consideration held in a segregated account) upon conversion or exchange of
other securities in its portfolio. Where the Fund covers a call option on a
stock index through ownership of securities, such securities may not match the
composition of the index and, in that event, the Fund will not be fully covered
and could be subject to risk of loss in the event of adverse changes in the
value of the index. The Fund may also cover call options on stock indices by
holding a call on the same index and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written or (b) is greater than the exercise price
of the call written if the difference is maintained by the Fund in cash or
liquid securities in a segregated account. The Fund may cover put options on
stock indices by maintaining cash or liquid securities with a value equal to the
exercise price in a segregated account, or by holding a put on the same stock
index and in the same principal amount as the put written where the exercise
price of the put held is equal to or greater than the exercise price of the put
written or where the exercise price of the put held is less than the exercise
price of the put written if the difference is maintained by the Fund in cash or
liquid securities in a segregated account. Put and call options on stock indices
may also be covered in such other manner as may be in accordance with the rules
of the exchange on which, or the counterparty with which, the option is traded
and applicable laws and regulations.
The Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised or
is closed out at a profit. If the value of an index on which the Fund has
written a call option falls or remains the same, the Fund will realize a profit
in the form of the premium received (less transaction costs) that could offset
all or a portion of any decline in the value of the securities it owns. If the
value of the index rises, however, the Fund will realize a loss in its call
option position, which will reduce the benefit of any unrealized appreciation in
the Fund's stock investments. By writing a put option, the Fund assumes the risk
of a decline in the index. To the extent that the price changes of securities
owned by the Fund correlate with changes in the value of the index, writing
covered put options on indices will increase the Fund's losses in the event of a
market decline, although such losses will be offset in part by the premium
received for writing the option.
The Fund may also purchase put options on stock indices to hedge the Fund's
investments against a decline in value. By purchasing a put option on a stock
index, the Fund will seek to offset a decline in the value of securities it owns
through appreciation of the put option. If the value of the Fund's investments
does not decline as anticipated, or if the value of the option does not
increase, the Fund's loss will be limited to the premium paid for the option
plus related transaction costs. The success of this strategy will largely depend
on the accuracy of the correlation between the changes in value of the index and
the changes in value of the Fund's security holdings.
The purchase of call options on stock indices may be used by the Fund to
attempt to reduce the risk of missing a broad market advance, or an advance in
an industry or market segment, at a time when the Fund holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options for
this purpose, the Fund will also bear the risk of losing all or a portion of the
premium paid if the value of the index does not rise. The purchase of call
options on stock indices when the Fund is substantially fully invested is a form
of leverage, up to the amount of the premium and related transaction costs, and
involves risks of loss and of increased volatility similar to those involved in
purchasing calls on securities the Fund owns.
The Fund may purchase and write options on foreign currencies in a manner
similar to that in which futures contracts on foreign currencies, or forward
contracts, will be utilized.
FUTURES CONTRACTS
The Fund may enter into interest rate futures contracts, stock index futures
contracts and foreign currency futures contracts. Such investment strategies
will be used for hedging purposes and for nonhedging purposes, subject to
applicable law.
A futures contract is an agreement between two parties for the purchase or
sale for future delivery of securities or for the payment or acceptance of a
cash settlement based upon changes in the value of the securities or of an index
of securities. A "sale" of a futures contract means the acquisition of a
contractual obligation to deliver the securities called for by the contract at a
specified price, or to make or accept the cash settlement called for by the
contract, on a specified date. A "purchase" of a futures contract means the
acquisition of a contractual obligation to acquire the securities called for by
the contract at a specified price, or to make or accept the cash settlement
called for by the contract, on a specified date. Futures contracts in the United
States have been designed by exchanges 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 investment 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
purchase 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.
The Fund may enter into stock index futures contracts to gain stock market
exposure while holding cash available for investments and redemptions and may
sell such contracts to protect against a decline in the stock market.
The Fund may purchase and sell foreign currency futures contracts to attempt
to protect its current or intended investments from fluctuations in currency
exchange rates. Such fluctuations could reduce the dollar value of portfolio
securities denominated in foreign currencies, or increase the cost of
foreign-denominated securities to be acquired, even if the value of such
securities in the currencies in which they are denominated remains constant. The
Fund may sell futures contracts on a foreign currency, for example, where it
holds securities denominated in such currency and it anticipates a decline in
the value of such currency relative to the dollar. In the event such decline
occurs, the resulting adverse effect on the value of foreign- denominated
securities may be offset, in whole or in part, by gains on the futures
contracts.
Conversely, the Fund could protect against a rise in the dollar cost of
foreign-denominated securities to be acquired by purchasing futures contracts on
the relevant currency, which could offset, in whole or in part, the increased
cost of such securities resulting from a rise in the dollar value of the
underlying currencies. Where the Fund purchases futures contracts under such
circumstances, however, and the prices of securities to be acquired instead
decline, the Fund will sustain losses on its futures position which could reduce
or eliminate the benefits of the reduced cost of portfolio securities to be
acquired.
Although the use of futures for hedging 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 securities held by the
Fund), at the same time the futures contract limits 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 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 contract
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
Subadviser's investment judgment about the general direction of interest rates,
equity markets, or other economic factors is incorrect, the Fund's overall
performance may be poorer than if any such contract had not been entered into.
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 Manager
and the Subadviser do not believe that these trading and position limits would
have an adverse impact on the Fund's hedging strategies.
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 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 exceed
approximately 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 a projected market-wide decline or changes in interest or exchange 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 or exchange rates, the Fund could
purchase call options on futures contracts, rather than purchasing the
underlying futures contracts.
SWAPS AND RELATED TRANSACTIONS
The Fund may enter into interest rate swaps, currency swaps, equity swaps
and other types of available swap agreements, such as caps, collars and floors,
for the purpose of attempting to obtain a particular desired return at a lower
cost to the Fund than if the Fund had invested directly in an instrument that
yielded that desired return. In a standard swap agreement, two parties agree to
exchange the returns (or differentials in rates of return) earned or realized on
a particular predetermined investment or investments. Interest rate swaps
involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest. An equity swap is an agreement to
exchange cash flows on a principal amount based on changes in the values of the
reference index. A currency swap is an agreement to exchange cash flows on a
principal amount based on changes in the values of the currency exchange rates.
In a typical cap or floor agreement, one party agrees to make payments only
under specified circumstances, usually in return for payment of a fee by the
counterparty. For example, the purchase of an interest rate cap entitles the
buyer, to the extent that a specified index exceeds a predetermined interest
rate, to receive payments of interest on a contractually-based principal amount
from the counterparty selling such interest rate cap. The sale of an interest
rate floor obligates the seller to make payments to the extent that a specified
interest rate falls below an agreed-upon level. A collar arrangement combines
elements of buying a cap and selling a floor.
The Fund will maintain liquid assets with its custodian to cover its current
obligations under swap transactions. If the Fund enters into a swap agreement on
a net basis (i.e., the two payments streams are netted out, with the Fund
receiving or paying, as the case may be, only the net amount of the two
payments), the Fund will maintain liquid assets with its custodian with a daily
value at least equal to the excess, if any, of the Fund's accrued obligations
under the swap agreement over the accrued amount the Fund is entitled to receive
under the agreement. If the Fund enters into a swap agreement on other than a
net basis, it will maintain liquid assets with a value equal to the full amount
of the Fund's accrued obligations under the agreement.
The most significant factor in the performance of swaps, caps, floors and
collars is the change in the specific interest rate, equity, currency or other
factor that determines the amount of payments to be made under the arrangement.
If the Manager or the Subadviser is incorrect in its forecasts of such factors,
the investment performance of the Fund would be less than what it would have
been if these investment techniques had not been used. If a swap agreement calls
for payments by the Fund, the Fund must be prepared to make such payments when
due. The Fund will not enter into any swap unless the Manager or Subadviser
deems the counterparty to be creditworthy. If the counterparty's
creditworthiness declined, the value of the swap agreement would be likely to
decline, potentially resulting in losses. If the counterparty defaults, the
Fund's risk of loss consists of the net amount of payments that the Fund is
contractually entitled to receive. The Fund anticipates that it will be able to
eliminate or reduce its exposure under these arrangements by assignment or other
disposition or by entering into an offsetting agreement with the same or another
counterparty.
Swap agreements are subject to the Fund's overall limit that not more than
15% of its net assets may be invested in illiquid securities, and the Fund will
not enter into a swap agreement with any single party if the net amount owed or
to be received under existing contracts with that party would exceed 5% of the
Fund's assets.
FURTHER INFORMATION REGARDING DERIVATIVES
Transactions in options, futures contracts, options on futures contracts and
forward contracts entered into for non-hedging purposes involve greater risk and
could result in losses which are not offset by gains on other portfolio assets.
For example, the Fund may sell futures contracts on an index of securities in
order to profit from any anticipated decline in the value of the securities
comprising the underlying index. In such instances, any losses on the futures
transactions will not be offset by gains on any portfolio securities comprising
such index, as might occur in connection with a hedging transaction.
Options, futures contracts, options on futures contracts, forward contracts,
and swaps may be used alone or in combinations in order to create synthetic
exposure to securities in which the Fund otherwise invests, such as non-U.S.
government securities.
DEFENSIVE STRATEGIES
During periods of unusual economic or market conditions or for temporary
defensive purposes or liquidity, the Fund may invest without limit in cash and
in U.S. dollar-denominated high quality money market and short-term instruments.
These investments may result in a lower yield than would be available from
investments in a lower quality or longer term.
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 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, except that as a temporary measure for extraordinary
or emergency purposes it may borrow in an amount not to exceed 1/3 of the
current value of its net assets, including the amount borrowed, or purchase
any securities at any time at which borrowings exceed 5% of the total assets
of the Fund or Portfolio, taken at market value. It is intended that the
Fund and Portfolio would borrow money 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.
(2) Make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loans not exceed 30% of the
Fund's or Portfolio's total assets (taken at market value), (b) through the
use of repurchase agreements or fixed time deposits or the purchase of
short-term obligations or (c) by purchasing all or a portion of an issue of
debt securities of types commonly distributed privately to financial
institutions. The purchase of short-term commercial paper or a portion of an
issue of debt securities which is part of an issue to the public shall not
be considered the making of a loan.
(3) Purchase securities of any issuer if such purchase at the time
thereof would cause with respect to 75% of the total assets of the Fund or
Portfolio more than 10% of the voting securities of such issuer to be held
by the Fund or Portfolio; provided that, for purposes of this restriction,
the issuer of an option or futures contract shall not be deemed to be the
issuer of the security or securities underlying such contract; and provided
further that the Fund and Portfolio may invest all or any portion of their
respective assets in one or more investment companies, to the extent not
prohibited by the 1940 Act, the rules and regulations thereunder, and
exemptive orders granted under such Act.
(4) Purchase securities of any issuer if such purchase at the time
thereof would cause as to 75% of the Fund's or Portfolio's total assets more
than 5% of the Fund's or Portfolio's assets (taken at market value) to be
invested in the securities of such issuer (other than securities or
obligations issued or guaranteed by the United States, any state or
political subdivision thereof, or any political subdivision of any such
state, or any agency or instrumentality of the United States or of any state
or of any political subdivision of any state); provided that, for purposes
of this restriction, the issuer of an option or futures contract shall not
be deemed to be the issuer of the security or securities underlying such
contract; and provided further that the Fund and Portfolio may invest all or
any portion of its assets in one or more investment companies, to the extent
not prohibited by the 1940 Act, the rules and regulations thereunder, and
exemptive orders granted under such Act.
(5) Concentrate its investments in any particular industry, but if it is
deemed appropriate for the achievement of the Fund's or Portfolio's
investment objective, up to 25% of its assets, at market value at the time
of each investment, may be invested in any one industry, except that
positions in futures contracts shall not be subject to this restriction.
(6) Underwrite securities issued by other persons, except that all or
any portion of the assets of the Fund or Portfolio may be invested in one or
more investment companies, to the extent not prohibited by the 1940 Act, the
rules and regulations thereunder, and exemptive orders granted under such
Act, and except insofar as the Fund or Portfolio may technically be deemed
an underwriter under the Securities Act in selling a security.
(7) Purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities or commodity
contracts in the ordinary course of business (the foregoing shall not be
deemed to preclude the Fund or Portfolio from purchasing or selling futures
contracts or options thereon, and the Fund and Portfolio 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).
(8) Issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder.
If a percentage restriction or rating 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 or a
later change in the rating of the securities held for the Fund or Portfolio is
not considered a violation of policy.
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. Yield 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 and average annualized "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.
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 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.
Total returns calculated for the Fund for any period which includes a period
prior to the commencement of operations of the Fund will reflect the historical
performance of the Portfolio, as adjusted for Fund expenses.
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.
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.
Set forth below is total rate of return information for the Class A shares
of the Fund for the periods indicated, assuming that dividends and capital gains
distributions, if any, were reinvested. All outstanding shares were designated
Class A shares on January 4, 1999. 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. The Class A performance for past periods has
therefore been adjusted to reflect the maximum sales charge currently in effect.
The Class B shares are newly offered and have no investment history. 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
OF A HYPOTHETICAL
AVERAGE ANNUAL $1,000 INVESTMENT
CITIFUNDS INTERNATIONAL TOTAL AT THE END OF
GROWTH & INCOME PORTFOLIO RATE OF RETURN THE PERIOD
- ------------------------- -------------- ----------
<S> <C> <C>
March 2, 1998 (commencement of operations) to October 31, 1998 (14.12)% $858.80
</TABLE>
The following table sets forth the average annual total returns for the
periods ended December 31, 1998 for the International Fund, a series of the
Hotchkis and Wiley Funds. The International Fund is an existing registered
investment company managed by the Subadviser that began operations on October 1,
1990 and, as of December 31, 1998, had approximately $1.4 billion in assets. The
investment objective, policies and strategies of the International Fund are
substantially similar to those of the Fund and the Portfolio. The International
Fund is managed in a manner that is in all material respects the same as the
Portfolio is managed.
The data in the table is provided to illustrate the past performance of the
Subadviser in managing a substantially similar mutual fund and does not
represent the performance of the Fund or Portfolio. Investors should not
consider this performance data as an indication of future performance of the
Fund, the Portfolio or the Subadviser. The performance of the Fund may be
greater or less than the performance of the International Fund due to, among
other things, differences in expenses and cash flows. The Fund's expense ratio
is expected to be higher than that of the International Fund, which would make
the performance of the Fund lower than that of the International Fund. The
Subadviser also manages other accounts with substantially similar investment
objectives and returns to the International Fund, performance for which accounts
has been excluded.
1 YEAR 5 YEARS 10 YEARS
------ ------- --------
International Fund* ................... 6.4% 9.1% 12.5%
* Average annual returns reflect changes in share prices and reinvestment of
dividends and distributions and are net of fund expenses.
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. The Fund's advertising materials
also may refer to the integration of the world's securities markets, discuss the
investment opportunities available worldwide and mention the increasing
importance of an investment strategy including non- U.S. investments.
For advertising and sales purposes, the Fund will generally use the
performance of Class A shares. All outstanding Fund shares were designated Class
A shares on January 4, 1999. Performance prior to that date will be adjusted to
include the sales charges currently in effect. Class A shares are sold at net
asset value plus a current maximum sales charge of 5.00%. Performance will
typically include this maximum sales charge for the purposes of calculating
performance figures. If the performance of Class B shares is used for
advertising and sales purposes, performance after class inception on January 4,
1999 will be actual performance, while performance prior to that date will be
Class A performance, adjusted to reflect the differences in sales charges (but
not the differences in fees and expenses) between the classes. For these
purposes, it will be assumed that the maximum contingent deferred sales charge
applicable to the Class B shares is deducted at the times, in the amount, and
under the terms stated in the Prospectus. Class B share performance generally
would have been lower than Class A performance, had the Class B shares been
offered for the entire period, because the expenses attributable to Class B
shares are higher than the expenses attributable to the Class A shares. 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 per share of the Fund is determined for each class on
each day which the New York Stock Exchange is open for trading ("Business Day").
As of the date of this Statement of Additional Information, the Exchange is open
for trading every weekday except for the following holidays (or the days on
which they are observed): New Year's Day, Martin Luther King Jr. Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. This determination of net asset value is
made once each day as of the close of regular trading on such Exchange (normally
4:00 p.m. Eastern time) by adding the market value of all securities and other
assets attributable to the class (including its interest in the Portfolio), then
subtracting the liabilities attributable to that class, and then dividing the
result by the number of outstanding shares of the class. The net asset value per
share is effective for orders received and accepted by the Transfer Agent prior
to its calculation.
For purposes of calculating net asset value per share, all assets and
liabilities initially expressed in non-U.S. currencies will be converted into
U.S. dollars at the prevailing market rates or if there are no market rates, at
fair value, at the time of valuation. Equity securities are valued at the last
sale price on the exchange on which they are primarily traded or on the NASDAQ
system for unlisted national market issues, or at the last quoted bid price for
securities in which there were no sales during the day or for unlisted
securities not reported on the NASDAQ system. Securities listed on a foreign
exchange are valued at the last quoted sale price available before the time when
net assets are valued. Bonds and other fixed income securities (other than
short-term obligations) are valued on the basis of valuations furnished by a
pricing service, use of which has been approved by the Board of Trustees of the
Trust. In making such valuations, the pricing service utilizes both
dealer-supplied valuations and electronic data processing techniques which take
into account appropriate factors such as institutional-size trading in similar
groups of securities, yield, quality, coupon rate, maturity, type of issue,
trading characteristics and other market data, without exclusive reliance upon
quoted prices or exchange or over-the- counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Short-term obligations (maturing in 60 days or less) are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees of the
Trust. Futures contracts are normally valued at the settlement price on the
exchange on which they are traded. Securities for which there are no such
valuations are valued at fair value as determined in good faith by or at the
direction of the Board of Trustees of the Trust.
Trading in securities on most foreign exchanges and over-the-counter markets
is normally completed before the close of regular trading on the New York Stock
Exchange and may also take place on days on which the Exchange is closed. If
events materially affecting the value of foreign securities occur between the
time when the exchange on which they are traded closes and the time when the
Fund's net asset value is calculated, such securities may be valued at fair
value in accordance with procedures established by and under the general
supervision of the Board of Trustees of the Trust.
Interest income on long-term obligations held for 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 premiums.
7. ADDITIONAL INFORMATION ON THE PURCHASE AND SALE OF FUND SHARES AND
SHAREHOLDER PROGRAMS
As described in the Prospectus, the Fund provides you with alternative ways
of purchasing shares based upon your individual investment needs.
Each class of shares of the Fund represents an interest in the same
portfolio of investments. Each class is identical in all respects except that
each class bears its own class expenses, including distribution and service
fees, and each class has exclusive voting rights with respect to any
distribution or service plan applicable to its shares. As a result of the
differences in the expenses borne by each class of shares, net income per share,
dividends per share and net asset value per share will vary for each class of
shares. There are no conversion, preemptive or other subscription rights, except
that Class B shares automatically convert to Class A shares in eight years as
more fully described below.
Shareholders of each class will share expenses proportionately for services
that are received equally by all shareholders. A particular class of shares will
bear only those expenses that are directly attributable to that class, where the
type or amount of services received by a class varies from one class to another.
The expenses that may be borne by specific classes of shares may include (i)
transfer agency fees attributable to a specific class of shares, (ii) printing
and postage expenses related to preparing and distributing materials such as
shareholder reports, prospectuses and proxy statements to current shareholders
of a specific class of shares, (iii) SEC and state securities registration fees
incurred by a specific class, (iv) the expense of administrative personnel and
services required to support the shareholders of a specific class of shares, (v)
litigation or other legal expenses relating to a specific class of shares, (vi)
accounting expenses relating to a specific class of shares and (vii) any
additional incremental expenses subsequently identified and determined to be
properly allocated to one or more classes of shares.
CLASS A SHARES
You may purchase Class A 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 upon the amount of your purchase, or the sales
charge may be waived in its entirety, as described below under "Sales Charge
Waivers." If you qualify to purchase Class A shares without a sales load, you
should purchase Class A shares rather than Class B shares because Class A shares
pay lower fees. Class A shares are also subject to an annual
distribution/service fee of up to.25%. See "Distributor." Set forth below is an
example of the method of computing the offering price of the Class A shares of
the Fund. The example assumes a purchase on October 31, 1998 of Class A shares
from the Fund aggregating less than $25,000 subject to the schedule of sales
charges set forth below.
CITIFUNDS INTERNATIONAL
GROWTH & INCOME PORTFOLIO
-------------------------
Net Asset Value per share ............................. $9.04
Per Share Sales Charge -- 5.00% of public offering
price (5.26% of net asset value per share) .......... $0.48
Per Share Offering Price to the Public ................ $9.52
The Fund receives the entire net asset value of all Class A shares that are
sold. The Distributor retains the full applicable sales charge from which it
pays the uniform reallowances shown in the table below.
The front-end sales charge for Class A shares 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.
<TABLE>
<CAPTION>
SALES CHARGE SALES CHARGE DEALER REALLOWANCE
AS A % OF AS A % OF AS A % OF
AMOUNT OF INVESTMENT OFFERING PRICE INVESTMENT OFFERING PRICE
- -------------------- -------------- ---------- --------------
<S> <C> <C> <C>
Less than $25,000 ................................ 5.00% 5.26% 4.50%
$25,000 to less than $50,000 ..................... 4.00% 4.17% 3.60%
$50,000 to less than $100,000 .................... 3.50% 3.63% 3.15%
$100,000 to less than $250,000 ................... 3.00% 3.09% 2.70%
$250,000 to less than $500,000 ................... 2.00% 2.04% 1.80%
$500,000 or more ................................. none* none* up to 1.00%
- ----------
*A contingent deferred sales charge may apply in certain instances. See "Sales Charge Waivers--Class A" below.
</TABLE>
CLASS B SHARES
Class B shares are sold without a front-end, or initial, sales charge, but
you are charged a "contingent deferred sales charge" (CDSC) when you sell shares
within five years of purchase. The rate of CDSC goes down the longer you hold
your shares. The table below shows the rates that you pay, as a percentage of
the purchase price (or the sale price, whichever is less), depending upon when
you sell your shares.
SALE DURING CDSC ON SHARES BEING SOLD
1st year since purchase .................. 5%
2nd year since purchase .................. 4%
3rd year since purchase .................. 3%
4th year since purchase .................. 2%
5th year since purchase .................. 1%
6th year (or later) since purchase ....... None
Class B shares pay distribution/service fees of up to 1.00% of the average
daily net assets of the Fund represented by the Class B shares. The Distributor
pays commissions to brokers, dealers and other institutions of 4.50% of the
offering price of Class B shares sold by these entities. These commissions are
not paid on exchanges from other CitiFunds or on sales of Class B shares to
investors exempt from the CDSC. The Distributor is compensated for these
payments through the receipt of the ongoing distribution fees from the Fund, and
through the CDSC, if any. The Distributor will also advance the first year
service fee to dealers at an annual rate equal to 0.25% of the average daily net
assets represented by Class B shares sold by them. As a result, the total amount
paid to a dealer upon the purchase of Class B shares may be a maximum of 4.75%
of the purchase price of the Class B shares.
When you sell your shares, the CDSC will be based on either your purchase
price, or the sale price, whichever is less. You do not pay a CDSC on shares
acquired through reinvestment of dividends, capital gain distributions and
shares representing capital appreciation. The Fund will assume that a redemption
of Class B shares is made:
[] first, of Class B shares representing capital appreciation
[] next, of shares representing the reinvestment of dividends and capital
gains distributions
[] finally, of other shares held by the investor for the longest period of
time.
Under certain circumstances, as set forth below in "Sales Charge Waivers,"
the CDSC will be waived.
The holding period of Class B shares of the Fund acquired through an
exchange with another CitiFund will be calculated from the date that the Class B
shares were initially acquired in the other CitiFund, and Class B shares being
redeemed will be considered to represent, as applicable, capital appreciation or
dividend and capital gains distribution reinvestments in the other fund. When
determining the amount of the CDSC, the Fund will use the CDSC schedule of any
fund from which you have exchanged shares that would result in you paying the
highest CDSC.
SALES CHARGE WAIVERS
In certain circumstances, the initial sales charge imposed on purchases of
Class A shares, and the CDSC imposed upon sales of Class A or Class B shares,
are waived. Waivers are generally instituted in order to promote good will 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.
CLASS A -- FRONT-END SALES CHARGE
o Reinvestment. The sales charge does not apply to Class A shares acquired
through the reinvestment of dividends and capital gains distributions.
o Eligible Purchasers. Class A shares may be purchased without a sales
charge by:
[] tax exempt organizations under Section 501(c)(3-13) of the Internal
Revenue Code
[] trust accounts for which Citibank, N.A or any subsidiary or affiliate
of Citibank acts as trustee and exercises discretionary investment
management authority
[] accounts for which Citibank or any subsidiary or affiliate of Citibank
performs investment advisory services or charges fees for acting as
custodian
[] directors or trustees (and their immediate families), and retired
directors or trustees (and their immediate families), of any
investment company for which Citibank or any subsidiary or affiliate
of Citibank serves as the investment adviser or as a service agent
[] employees of Citibank and its affiliates, CFBDS, Inc. and its
affiliates or any Service Agent and its affiliates (including
immediate families of any of the foregoing), and retired employees of
Citibank and its affiliates or CFBDS, Inc. and its affiliates
(including immediate families of the foregoing)
[] investors participating in a fee-based or promotional arrangement
sponsored or advised by Citibank or its affiliates
[] investors participating in a rewards program that offers Fund shares
as an investment option based on an investor's balances in selected
Citigroup Inc. products and services
[] employees of members of the National Association of Securities
Dealers, Inc., provided that such sales are made upon the assurance of
the purchaser that the purchase is made for investment purposes and
that the securities will not be resold except through redemption or
repurchase
[] separate accounts used to fund certain unregistered variable annuity
contracts
[] direct rollovers by plan participants from a 401(k) plan offered to
Citigroup employees
[] shareholder accounts established through a reorganization or similar
form of business combination approved by the Fund's Board of Trustees
or by the Board of Trustees of any other CitiFund or mutual fund
managed or advised by Citibank (all of such funds being referred to
herein as CitiFunds) the terms of which entitle those shareholders to
purchase shares of the Fund or any other CitiFund at net asset value
without a sales charge
[] employee benefit plans qualified under Section 401(k) of the Internal
Revenue Code with accounts outstanding on January 4, 1999
[] employee benefit plans qualified under Section 401 of the Internal
Revenue Code, including salary reduction plans qualified under Section
401(k) of the Code, subject to minimum requirements as may be
established by CFBDS with respect to the amount of purchase;
currently, the amount invested by the qualified plan in the Fund or in
any combination of CitiFunds must total a minimum of $1 million
[] accounts associated with Copeland Retirement Systems
[] investors purchasing $500,000 or more of Class A shares; however, a
contingent deferred sales charge will be imposed on the investments in
the event of certain share redemptions within 12 months following the
share purchase, at the rate of 1% of the lesser of the value of the
shares redeemed (not including reinvested dividends and capital gains
distributions) or the total cost of the shares; the contingent
deferred sales charge on Class A shares will be waived under the same
circumstances as the contingent deferred sales charge on Class B
shares will be waived; in determining whether a contingent deferred
sales charge on Class A shares is payable, and if so, the amount of
the charge:
+ it is assumed that shares not subject to the contingent deferred
sales charge are the first redeemed followed by other shares held
for the longest period of time
+ all investments made during a calendar month will age one month on
the last day of the month and each subsequent month
+ any applicable contingent deferred sales charge will be deferred
upon an exchange of Class A shares for Class A shares of another
CitiFund and deducted from the redemption proceeds when the
exchanged shares are subsequently redeemed (assuming the contingent
deferred sales charge is then payable)
+ the holding period of Class A shares so acquired through an
exchange will be aggregated with the period during which the
original Class A shares were held
[] subject to appropriate documentation, investors where the amount
invested represents redemption proceeds from a mutual fund (other than
a CitiFund), if:
+ the redeemed shares were subject to an initial sales charge or a
deferred sales charge (whether or not actually imposed), and
+ the redemption has occurred no more than 60 days prior to the
purchase of Class A shares of the Fund
[] an investor who has a business relationship with an investment
consultant or other registered representative who joined a broker-
dealer which has a sales agreement with CFBDS from another investment
firm within six months prior to the date of purchase by the investor,
if:
+ the investor redeems shares of another mutual fund sold through the
investment firm that previously employed that investment consultant
or other registered 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
AUTOMATIC CONVERSION OF CLASS B SHARES
A shareholder's Class B shares will automatically convert to Class A shares
in the Fund approximately eight years after the date of issuance. At the same
time, a portion of all Class B shares representing dividends and other
distributions paid in additional Class B shares will be converted in accordance
with procedures from time to time approved by the Fund's Trustees. The
conversion will be effected at the relative net asset values per share of the
two classes on the first business day of the month in which the eighth
anniversary of the issuance of the Class B shares occurs. If a shareholder
effects one or more exchanges among Class B shares of the CitiFunds during the
eight-year period, the holding periods for the shares so exchanged will be
counted toward the eight-year period. Because the per share net asset value of
the Class A shares may be higher than that of the Class B shares at the time of
conversion, a shareholder may receive fewer Class A shares than the number of
Class B shares converted, although the dollar value will be the same.
SHAREHOLDER PROGRAMS
The Fund makes the following programs available to shareholders to enable
them to reduce or eliminate the front-end sales charges on Class A shares or to
exchange Fund shares for shares of other CitiFunds, without, in many cases, the
payment of a sales charge. These programs may be changed or discontinued at any
time. For more information, please contact your Service 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 Class A shares
of the Fund alone or in combination with Class B shares of the Fund or 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 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 is a customer of a Service Agent,
his or her Service Agent must inform CFBDS that the letter of intent is
in effect each time shares are purchased.
[] 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 the Transfer Agent or a Service 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
Class A shares when his or her new investment, together with the current
offering price value of all holdings of that shareholder in the CitiFunds,
reaches a discount level. For example, if a Fund shareholder owns shares valued
at $50,000 and purchases an additional $50,000 of Class A shares of the Fund,
the sales charge for the $50,000 purchase would be at the rate of 3.00% (the
rate applicable to single transactions from $100,000 to less than $250,000). A
shareholder must provide the Transfer Agent with information to verify that the
quantity sales charge discount is applicable at the time the investment is made.
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 Class A or Class B 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 your Service Agent.
REINSTATEMENT PRIVILEGE
Shareholders who have redeemed Class A shares may reinstate their Fund
account without a sales charge up to the dollar amount redeemed (with a credit
for any contingent deferred sales charge paid) by purchasing Class A shares of
the Fund within 90 days after the redemption. To take advantage of this
reinstatement privilege, shareholders must notify their Service Agents in
writing at the time the privilege is exercised.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of the same class of certain
other CitiFunds that are made available by your Service Agent, or may be
acquired through an exchange of shares of the same class of those funds. Class A
shares also may be exchanged for shares of certain CitiFunds money market funds
that offer only a single class of shares, unless the Class A shares are subject
to a contingent deferred sales charge. Class B shares may not be exchanged for
shares of CitiFunds money market funds other than Cash Reserves.
No initial sales charge is imposed on shares being acquired through an
exchange unless Class A shares are being acquired and the sales charge for Class
A 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). Investors whose shares are outstanding on January 4, 1999
will be able to exchange those Class A 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.
No CDSC is imposed on Class B shares at the time they are exchanged for
Class B shares of certain other CitiFunds that are made available by your
Service Agent. However, you may be required to pay a CDSC when you sell those
shares. When determining the amount of the CDSC, the Fund will use the CDSC
schedule of any fund from which you have exchanged shares that would result in
you paying the highest CDSC.
You must notify your Service 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. 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 their Service 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
Each Service 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. Each Service Agent is responsible for transmitting
promptly orders of its customers. Your Service Agent is the shareholder of
record for the shares of the Fund you own.
Investors may be able to establish new accounts 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 Service 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 are
customers of a Service Agent, their Service Agent. 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 Service 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 Service 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 has reserved
the right to pay the redemption price of shares of the Fund, 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 being
sold. If a holder of shares received a distribution in kind, such holder could
incur brokerage or other charges in converting the securities to cash.
The Trust may suspend the right of redemption or postpone the date of
payment for shares of the Fund more than seven days during any period when (a)
trading in the markets the Fund normally utilizes is restricted, or an
emergency, as defined by the rules and regulations of the SEC, exists making
disposal of the Fund's investments or determination of its net asset value not
reasonably practicable; (b) the New York Stock Exchange is closed (other than
customary weekend and holiday closings); or (c) the SEC has by order permitted
such suspension.
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.
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* (aged 47) -- President of the Trust and the Portfolio
Trust; Chief Executive Officer and President, Signature Financial Group, Inc.
and CFBDS.
RILEY C. GILLEY (aged 72) -- 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 (aged 58) -- Professor, Babson College (since September
1993); Visiting Professor, Kellogg Graduate School of Management, Northwestern
University (September 1992 to September 1993); Professor, Darden Graduate School
of Business, University of Virginia (September 1978 to September 1993); Trustee,
The Highland Family of Funds (March 1997 to March 1998). Her address is 120
Goulding Street, Holliston, Massachusetts.
SUSAN B. KERLEY (aged 47) -- President, Global Research Associates, Inc.
(Investment Research) (since August 1990); Manager, Rockefeller & Co. (March
1988 to July 1990); Trustee, Mainstay Institutional Funds (since December
1990). Her address is P.O. Box 9572 New Haven, Connecticut.
HEATH B. MCLENDON* (aged 65) -- Chairman, President, and Chief Executive
Officer of Mutual Management Corp. (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. (aged 63) -- Chairman of the Board of Trustees of the Trust
and the Portfolio Trust; Managing Director, Morong Capital Management (since
February 1993); Senior Vice President and Investment Manager, CREF Investments,
Teachers Insurance & Annuity Association (retired, January 1993); Director,
Indonesia Fund; Trustee, MAS Funds (since 1993). His address is 1385 Outlook
Drive, West, Mountainside, New Jersey.
E. KIRBY WARREN (aged 64) -- Professor of Management, Graduate School of
Business, Columbia University (since 1987); Samuel Bronfman Professor of
Democratic Business Enterprise (1978 to 1987). His address is Columbia
University, Graduate School of Business, 725 Uris Hall, New York, New York.
WILLIAM S. WOODS, JR. (aged 78) -- Vice President - Investments, Sun Company,
Inc. (retired, April 1984). His address is 35 Colwick Road, Cherry Hill, New
Jersey.
TRUSTEES OF THE PORTFOLIO TRUST
ELLIOTT J. BERV (aged 55) -- Chairman and Director, Catalyst, Inc. (Management
Consultants) (since June 1992); President, Chief Operating Officer and
Director, Deven International, Inc. (International Consultants) (June 1991 to
June 1992); President and Director, Elliott J. Berv & Associates (Management
Consultants) (since May 1984). His address is 24 Atlantic Drive, Scarborough,
Maine.
PHILIP W. COOLIDGE* (aged 47) -- President of the Trust and the Portfolio
Trust; Chief Executive Officer and President, Signature Financial Group, Inc.
and CFBDS.
MARK T. FINN (aged 55) -- President and Director, Delta Financial, Inc. (since
June 1983); Chairman of the Board and Chief Executive Officer, FX 500 Ltd.
(Commodity Trading Advisory Firm) (since April 1990); General Partner and
Shareholder, Greenwich Ventures LLC (Investment Partnership) (since January
1996); President and Secretary, Phoenix Trading Co. (Commodity Trading
Advisory Firm) (since March 1997); Director, Vantage Consulting Group, Inc.
(since October 1988). His address is 3500 Pacific Avenue, P.O. Box 539,
Virginia Beach, Virginia.
C. OSCAR MORONG, JR. (aged 63) -- Chairman of the Board of Trustees of the Trust
and the Portfolio Trust; Managing Director, Morong Capital Management (since
February 1993); Senior Vice President and Investment Manager, CREF Investments,
Teachers Insurance & Annuity Association (retired, January 1993); Director,
Indonesia Fund; Trustee, MAS Funds (since 1993). His address is 1385 Outlook
Drive, West, Mountainside, New Jersey.
WALTER E. ROBB, III (aged 72) -- President, Benchmark Consulting Group, Inc.
(since 1991); Principal, Robb Associates (Corporate Financial Advisors) (since
1978); President, Benchmark Advisors, Inc. (Corporate Financial Advisors)
(since 1989); Trustee of certain registered investment companies in the MFS
Family of Funds. His address is 35 Farm Road, Sherborn, Massachusetts.
E. KIRBY WARREN (aged 64) -- Professor of Management, Graduate School of
Business, Columbia University (since 1987). Samuel Bronfman Professor of
Democratic Business Enterprise (1978 to 1987). His address is Columbia
University, Graduate School of Business, 725 Uris Hall, New York, New York.
OFFICERS OF THE TRUST AND THE PORTFOLIO TRUST
PHILIP W. COOLIDGE* (aged 47) -- President of the Trust and the Portfolio
Trust; Chief Executive Officer and President, Signature Financial Group, Inc.
and CFBDS.
CHRISTINE A. DRAPEAU* (aged 28) -- Assistant Secretary and Assistant Treasurer
of the Trust and the Portfolio Trust; Vice President, Signature Financial
Group, Inc. (since January 1996); Paralegal and Compliance Officer, various
financial companies (July 1992 to January 1996).
TAMIE EBANKS-CUNNINGHAM*(aged 26) -- 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.
JOHN R. ELDER* (aged 50) -- Treasurer of the Trust and the Portfolio Trust;
Vice President, Signature Financial Group, Inc. (since April 1995); Assistant
Treasurer, CFBDS (since April 1995); Treasurer, Phoenix Family of Mutual Funds
(Phoenix Home Life Mutual Insurance Company) (1983 to March 1995).
LINDA T. GIBSON* (aged 33) -- Secretary of the Trust and the Portfolio Trust;
Senior Vice President, Signature Financial Group, Inc.; Secretary, CFBDS.
JAMES E. HOOLAHAN* (aged 51) -- Vice President, Assistant Secretary and
Assistant Treasurer of the Trust and the Portfolio Trust; Senior Vice
President, Signature Financial Group, Inc.
SUSAN JAKUBOSKI* (aged 34) -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolio Trust; Vice President, Signature
Financial Group (Cayman) Ltd. (since August 1994); Fund Compliance
Administrator, Concord Financial Group (November 1990 to August 1994).
MOLLY S. MUGLER* (aged 47) -- Assistant Secretary and Assistant Treasurer of
the Trust and the Portfolio Trust; Vice President, Signature Financial Group,
Inc.; Assistant Secretary, CFBDS.
CLAIR TOMALIN*(aged 30) -- Assistant Secretary of the Trust and the Portfolio
Trust; Office Manager, Signature Financial Group (Europe) Limited. Her address
is 117 Charterhouse Street, London ECIM 6AA.
SHARON M. WHITSON* (aged 50) -- Assistant Secretary and Assistant Treasurer of
the Trust and the Portfolio Trust; Assistant Vice President, Signature
Financial Group, Inc.
JULIE J. WYETZNER* (aged 39) -- 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, Signature
Financial Group, Inc., or their affiliates serve as the distributor or
administrator.
The following table shows Trustee compensation for the period indicated.
<TABLE>
<CAPTION>
TRUSTEES COMPENSATION TABLE
TOTAL COMPENSATION
PENSION OR FROM THE
AGGREGATE RETIREMENT BENEFITS ESTIMATED REGISTRANT
COMPENSATION ACCRUED AS PART ANNUAL BENEFITS AND FUND COMPLEX
TRUSTEE FROM FUND(1) OF FUND EXPENSES UPON RETIREMENT PAID TO TRUSTEES(1)(2)
------- ------------ ---------------- --------------- ----------------------
<S> <C> <C> <C> <C>
Philip W. Coolidge .............. $ 0 None None $ 0
Riley C. Gilley ................. $337 None None $41,500
Diana R. Harrington ............. $380 None None $59,000
Susan B. Kerley ................. $371 None None $55,000
Heath B. McLendon (3) ........... $ 0 None None $ 0
C. Oscar Morong, Jr. ............ $400 None None $71,000
E. Kirby Warren ................. $366 None None $49,000
William S. Woods, Jr. ........... $365 None None $54,000
- ------------
(1) For the fiscal year ended October 31, 1998.
(2) Information relates to the fiscal year ended October 31, 1998. Messrs. Coolidge, Gilley, McLendon, Morong, Warren and Woods
and Mses. Harrington and Kerley are trustees of 49, 33, 20, 40, 40, 26, 28 and 28 funds, respectively, in the family of
open-end registered investment companies advised or managed by Citibank.
(3) Mr. McLendon was appointed as Trustee in February, 1999.
</TABLE>
As of February 22, 1999, all Trustees and officers as a group owned less
than 1% of the outstanding shares of the Fund. As of the same date, more than
95% of the outstanding shares of the Fund were held of record by Citibank or its
affiliates, as Service Agents of the Fund for the accounts of their respective
clients.
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 or 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.
MANAGER
Citibank serves as the manager of the Portfolio and provides certain
administrative services to the Fund and the Portfolio pursuant to separate
management agreements (the "Management Agreements"). Subject to policies as the
Board of Trustees of the Portfolio Trust may determine, Citibank manages the
securities of the Portfolio and makes investment decisions for the Portfolio.
The Management Agreement with the Portfolio Trust provides that Citibank may
delegate the daily management of the securities of the Portfolio to one or more
subadvisers. Citibank furnishes at its own expense all services, facilities and
personnel necessary in connection with managing the Portfolio's investments and
effecting securities transactions for the Portfolio. Unless otherwise
terminated, the Management Agreement with the Portfolio Trust will continue in
effect indefinitely as long as such continuance is specifically approved at
least annually by the Board of Trustees of the Portfolio Trust or by a vote of a
majority of the outstanding voting securities of the Portfolio, and, in either
case, by a majority of the Trustees of the Portfolio Trust who are not parties
to the Management Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on the Management Agreement. Unless
otherwise terminated, the Management Agreement with the Trust will continue in
effect indefinitely as long as such continuance is specifically approved at
least annually by the Board of Trustees of the Trust or by a vote of a majority
of the outstanding voting securities of the Fund, and, in either case, by a
majority of the Trustees of the Trust who are not parties to the Management
Agreement or interested persons of any such party, at a meeting called for the
purpose of voting on the Management Agreement.
Citibank provides the Fund and the Portfolio with general office facilities
and supervises the overall administration of the Fund and the Portfolio,
including, among other responsibilities, the negotiation of contracts and fees
with, and the monitoring of performance and billings of, the Fund's or the
Portfolio's independent contractors and agents; the preparation and filing of
all documents required for compliance by the Fund or the Portfolio with
applicable laws and regulations; and arranging for the maintenance of books and
records of the Fund or the Portfolio. Trustees, officers, and investors in the
Trust and the Portfolio Trust are or may be or may become interested in
Citibank, as directors, officers, employees, or otherwise and directors,
officers and employees of Citibank are or may become similarly interested in the
Trust and the Portfolio Trust.
Each Management Agreement provides that Citibank may render services to
others. Each Management Agreement is terminable without penalty on not more than
60 days' nor less than 30 days' written notice by the Portfolio Trust or the
Trust, as the case may be, when authorized either by a vote of a majority of the
outstanding voting securities of the Portfolio or Fund or by a vote of a
majority of the Board of Trustees of the Portfolio Trust or the Trust, or by
Citibank on not more than 60 days' nor less than 30 days' written notice, and
will automatically terminate in the event of its assignment. The Management
Agreement with the Portfolio Trust provides that neither Citibank nor its
personnel shall be liable for any error of judgment or mistake of law or for any
loss arising out of any investment or for any act or omission in the execution
of security transactions for the Portfolio, except for willful misfeasance, bad
faith or gross negligence or reckless disregard of its or their obligations and
duties under the Management Agreement with the Portfolio Trust. The Management
Agreement with the Trust provides that neither Citibank nor its personnel shall
be liable for any error of judgment or mistake of law or for any omission in the
administration or management of the Trust or the performance of its duties under
the Management Agreement, except for willful misfeasance, bad faith or gross
negligence or reckless disregard of its or their obligations and duties under
the Management Agreement with the Trust.
For its services under the Management Agreements with respect to the Fund
and the Portfolio, Citibank receives fees, which are computed daily and paid
monthly, at annual rates equal to 0.25% of the Fund's average net assets, and
0.80% of the Portfolio's average net assets less the aggregate amount (if any)
payable by the Portfolio Trust pursuant to the Submanagement Agreement with the
Subadviser. These combined management fees are higher than the management fees
paid by most mutual funds. Citibank may reimburse the Fund or Portfolio or waive
all or a portion of its management fees.
For the period from March 2, 1998 (commencement of operations of the Fund)
to October 31, 1998, the fee payable from the Fund to Citibank under its
Management Agreement was $30,714 (all of which was voluntarily waived). For the
period from November 1, 1997 (commencement of operations of the Portfolio) to
October 31, 1998, the fee payable from the Portfolio to Citibank under its
Management Agreement was $922,580.
Pursuant to separate sub-administrative services agreements with Citibank,
CFBDS and Signature Financial Group (Cayman) Ltd. ("SFG") perform such sub-
administrative duties for the Trust and the Portfolio Trust, respectively, as
from time to time are agreed upon by Citibank, CFBDS and SFG, as appropriate.
For performing such sub-administrative services, CFBDS and SFG receive
compensation as from time to time is agreed upon by Citibank, not in excess of
the amount paid to Citibank for its services under the Management Agreements
with the Trust and the Portfolio Trust, respectively. All such compensation is
paid by Citibank.
The Portfolio Trust has entered into a Submanagement Agreement with the
Subadviser. It is the responsibility of the Subadviser to make the day-to-day
investment decisions for its allocated assets of the Fund, and to place the
purchase and sales orders for securities transactions concerning those assets,
subject in all cases to the general supervision of Citibank. The Subadviser
furnishes at its own expense all services, facilities and personnel necessary in
connection with managing the assets of the Fund allocated to it and effecting
securities transactions concerning those assets.
The Submanagement Agreement will continue in effect indefinitely 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 Submanagement
Agreement or interested persons of any such party, at a meeting called for the
purpose of voting on the Submanagement Agreement.
The Submanagement Agreement provides that the Subadviser may render services
to others. The Submanagement 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, or by Citibank on not more than 60 days' nor less than 30 days'
written notice, and will automatically terminate in the event of its assignment.
The Submanagement Agreement may be terminated by the Subadviser on not less than
90 days' written notice. Upon termination of the Submanagement Agreement,
Citibank will maintain responsibility for managing those assets formerly managed
by the Subadviser. The Submanagement Agreement provides that neither the
Subadviser nor its personnel shall be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the execution of security transactions for the Portfolio, except for
willful misfeasance, bad faith or gross negligence or reckless disregard of its
or their obligations and duties under the Submanagement Agreement.
The Subadviser's compensation is payable by the Portfolio Trust from the
assets of the Portfolio. The Portfolio pays the Subadviser the following fees,
which are accrued daily and payable monthly and are at the annual rates equal to
the percentages specified below of the aggregate assets of the Portfolio
allocated to the Subadviser:
0.60% on first $10 million
0.55% on next $40 million
0.45% on next $100 million
0.35% on next $150 million
0.30% on remaining assets
For the period from November 1, 1997 (commencement of operations of the
Portfolio) to October 31, 1998, the fee paid from the Portfolio to the
Subadviser under its Submanagement Agreement was $1,082,007.
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 with respect
to each class of shares of the Fund (each, a "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 Agreements, CFBDS is obligated to use its best efforts to sell
shares of each class of the Fund.
Either party may terminate a Distribution Agreement on not less than thirty
days' nor more than sixty days' written notice to the other party. Unless
otherwise terminated each Distribution Agreement will continue from year to year
upon annual approval by the Trust's Board of Trustees and 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. Each
Distribution Agreement will terminate in the event of its assignment, as defined
in the 1940 Act.
Each class of the Fund has a Service Plan (each, a "Service Plan") adopted
in accordance with Rule 12b-1 under the 1940 Act. Under the Plans, the Fund may
pay monthly fees at an annual rate not to exceed 0.25% of the average daily net
assets of the Fund attributable to that class in the case of the Plan relating
to Class A shares, and not to exceed 1.00% of the average daily net assets of
the Fund attributable to that class in the case of the Plan relating to Class B
shares. Such fees may be used to make payments to the Distributor for
distribution services, to securities dealers and other industry professionals
(called "Service Agents") that have entered into service agreements with the
Distributor and others in respect of the sale of shares of the Fund, and to
other parties in respect of the sale of shares of the Fund, and to make payments
for advertising, marketing or other promotional activity, and payments for
preparation, printing, and distribution of prospectuses, statements of
additional information and reports for recipients other than regulators and
existing shareholders. The Fund also may make payments to the Distributor,
Service Agents and others for providing personal service or the maintenance of
shareholder accounts. The amounts paid by the Distributor to each recipient may
vary based upon certain factors, including, among other things, the levels of
sales of Fund shares and/or shareholder services provided. Recipients may
receive different compensation for sales for Class A and Class B shares.
The Service Plan with respect to Class A shares also provides that the
Distributor, broker-dealers, banks and other financial intermediaries may
receive the sales charge paid by Class A investors as partial compensation for
their services in connection with the sale of shares. The Service Plan with
respect to Class B shares provides that the Distributor, dealers, and others may
receive all or a portion of the deferred sales charges paid by Class B
investors.
The Service Plans permit the Fund to pay fees to the Distributor, Service
Agents and others as compensation for their services, not as reimbursement for
specific expenses incurred. Thus, even if their expenses exceed the fees
provided for by the applicable Plan for the Fund, the Fund will not be obligated
to pay more than those fees and, if their expenses are less than the fees paid
to them, they will realize a profit. The Fund will pay the fees to the
Distributor and others until the applicable Plan or Distribution Agreement is
terminated or not renewed. In that event, the Distributor's or other recipient's
expenses in excess of fees received or accrued through the termination date will
be the Distributor's or other recipient's sole responsibility and not
obligations of the Fund.
Each Service Plan continues in effect if such continuance is specifically
approved at least annually by a vote of both a majority of the Trust's Trustees
and a majority of the Trust's Trustees who are not "interested persons" of the
Trust and who have no direct or indirect financial interest in the operation of
the Service Plan or in any agreement related to such Plan (for purposes of this
paragraph "Qualified Trustees"). Each Service Plan requires that the Trust and
the Distributor provide to the Board of Trustees and the Board of Trustees
review, at least quarterly, a written report of the amounts expended (and the
purposes therefor) under the Service Plan. Each Service Plan further provides
that the selection and nomination of the Qualified Trustees is committed to the
discretion of such Qualified Trustees then in office. A Service Plan may be
terminated with respect to any class of the Fund at any time by a vote of a
majority of the Trust's Qualified Trustees or by a vote of a majority of the
outstanding voting securities of that class. A Service Plan may not be amended
to increase materially the amount of permitted expenses of the class thereunder
without the approval of a majority of the outstanding voting securities of that
class and may not be materially amended in any case without a vote of the
majority of both the Trustees and Qualified Trustees. The Distributor will
preserve copies of any plan, agreement or report made pursuant to the Service
Plans for a period of not less than six years, and for the first two years the
Distributor will preserve such copies in an easily accessible place.
As contemplated by the Service Plans, CFBDS acts as agent of the Trust in
connection with the offering of shares of the Fund pursuant to the Distribution
Agreements. For the period from March 2, 1998 (commencement of operations of the
Fund) to October 31, 1998, the fee payable to CFBDS under a prior distribution
agreement with respect to the Fund was $30,714.
The Distributor may enter into agreements with Service Agents and may pay
compensation to such Service Agents for accounts for which the Service Agents
are holders of record. Payments may be made to the Service Agents or for other
distribution expenses out of the distribution fees received by the Distributor
and out of the Distributor's past profits or any other source available to it.
EXPENSES
In addition to amounts payable under its Management Agreement and Service
Plans, the Fund is responsible for its own expenses, including, among other
things, the costs of securities transactions, the compensation of Trustees that
are not affiliated with Citibank or the Fund's Distributor, government fees,
taxes, accounting and legal fees, expenses of communication with shareholders,
interest expense, and insurance premiums.
TRANSFER AGENT AND CUSTODIAN
The Trust has 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 also 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, on behalf of the Portfolio, has entered into a
Custodian Agreement with State Street pursuant to which State Street acts as
custodian for the Portfolio. The Portfolio Trust, on behalf of the Portfolio,
also has entered into a Fund Accounting Agreement with State Street Cayman Trust
Company, Ltd. ("State Street Cayman") pursuant to which State Street Cayman
provides fund accounting services for the Portfolio. State Street Cayman also
provides transfer agency services to the Portfolio.
The principal business address of State Street 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 Trust,
providing audit services and assistance and consultation with respect to the
preparation of filings with the SEC. The address of PricewaterhouseCoopers LLP
is 160 Federal Street, Boston, Massachusetts 02110. PricewaterhouseCoopers 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 M5K 1G8.
COUNSEL
Bingham Dana LLP, 150 Federal Street, Boston, MA 02110, acts 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 objective. Changes in the Fund's investments are made without regard
to the length of time a security has been held or whether a sale would result in
the recognition of a profit or loss. Therefore, the rate of turnover is not a
limiting factor when changes are appropriate. Specific decisions to purchase or
sell securities for the Fund are made by a portfolio manager who is an employee
of Citibank and who is appointed and supervised by its senior officers or by the
Subadviser. The portfolio manager or Subadviser may serve other clients of
Citibank in a similar capacity.
In connection with the selection of brokers or dealers and the placing of
portfolio securities transactions, brokers or dealers may be selected who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Fund and/or the other
accounts over which Citibank, the Subadviser or their affiliates exercise
investment discretion. Citibank and the Subadviser are authorized to pay a
broker or dealer who provides such brokerage and research services a commission
for executing a portfolio transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if Citibank or the Subadviser determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services provided by such broker or dealer. This
determination may be viewed in terms of either that particular transaction or
the overall responsibilities which Citibank, the Subadviser and their 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 management fee paid Citibank or the Subadviser will not be reduced as a
consequence of Citibank's or the Subadviser's receipt of brokerage and research
services. While such services are not expected to reduce the expenses of
Citibank or the Subadviser, Citibank or the Subadviser would, through the use of
the services, avoid the additional expenses which would be incurred if it should
attempt to develop comparable information through its own staff or obtain such
services independently.
In making purchases or sales of securities and other property for the
account of the Portfolio, the Subadviser may deal with itself or with the
Trustees of the Trust or the Trust's underwriter or distributor, to the extent
permitted by the 1940 Act.
In certain instances there may be securities that are suitable as an
investment for the Fund as well as for one or more of Citibank's or the
Subadviser's other clients. Investment decisions for the Fund and for Citibank's
and the Subadviser'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 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 Citibank or the Subadviser occur contemporaneously, the
purchase or sale orders may be aggregated in order to obtain any price
advantages available to large volume purchases or sales.
For the period from March 2, 1998 to October 31, 1998, the Portfolio paid
$575,320 in 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 represents an equal
proportionate interest in the Fund with each other share of that class. Shares
of each series of the Trust participate equally in the earnings, dividends and
distribution of net assets of the particular series upon liquidation or
dissolution (except for any differences between classes of shares of a series).
Shares of each series are entitled to vote separately to approve management
agreements or changes in investment policy, and shares of a class are entitled
to vote separately to approve any distribution or service arrangements relating
to that class, but shares of all series may vote together in the election or
selection of Trustees and accountants for the Trust. In matters affecting only a
particular 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 and has no present
intention of holding annual meetings of shareholders but the Trust will hold
special meetings of the Fund's shareholders when in the judgment of the Trust's
Trustees it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have under certain circumstances (e.g., upon 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 the Fund, a Service 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 Service Agent is the holder of
record.
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 the 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.
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 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 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 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, which is organized as a
trust under the laws of the state of New York. Each investor in the Portfolio,
including the Fund, may add to or withdraw from its investment in the Portfolio
on each Business Day. As of the close of regular trading on each Business Day,
the value of each investor's beneficial interest in the Portfolio is determined
by multiplying the net asset value of the Portfolio by the percentage, effective
for that day, that represents that investor's share of the aggregate beneficial
interest in the Portfolio. Any additions or withdrawals that are to be effected
on that day are then effected. The investor's percentage of the aggregate
beneficial interests in the Portfolio is then re-computed 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
FEDERAL TAXES. 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, no U.S. 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 income to shareholders. The Portfolio Trust believes the Portfolio also
will not be required to pay any U.S. federal income or excise taxes on its
income.
FOREIGN TAXES. Investment income and gains received by the Fund from non-
U.S. securities may be subject to non-U.S. taxes. The U.S. has entered into
tax treaties with many other countries that may entitle the Fund to a reduced
rate of tax or an exemption from tax on such income. The Fund intends to
qualify for treaty reduced rates where available. It is not possible, however,
to determine the Fund's effective rate of non-U.S. tax in advance since the
amount of the Fund's assets to be invested within various countries is not
known.
If the Fund holds more than 50% of its assets in foreign stock and
securities at the close of its taxable year, the Fund may elect to "pass
through" to the Fund's shareholders foreign income taxes paid. If the Fund so
elects, shareholders will be required to treat their pro rata portion of the
foreign income taxes paid by the Fund as part of the amounts distributed to them
by the Fund and thus includable in their gross income for federal income tax
purposes. Shareholders who itemize deductions would then be allowed to claim a
deduction or credit (but not both) on their federal income tax returns for such
amounts, subject to certain limitations. Shareholders who do not itemize
deductions would (subject to such limitations) be able to claim a credit but not
a deduction. No deduction for such amounts will be permitted to individuals in
computing their alternative minimum tax liability. If the Fund does not qualify
or elect to "pass through" to its shareholders foreign income taxes paid by it,
shareholders will not be able to claim any deduction or credit for any part of
the foreign taxes paid by the Fund.
TAXATION OF SHAREHOLDERS
TAXATION OF DISTRIBUTIONS. Shareholders of the Fund will generally have to
pay federal income taxes and any state or local taxes on the dividends and
capital gain distributions they receive from the Fund. Dividends from ordinary
income and any distributions from net short-term capital gains are taxable to
shareholders as ordinary income for federal income tax purposes, whether the
distributions are made in cash or in additional shares. Distributions of net
capital gains (i.e., the excess of net long-term capital gains over net
short-term capital losses), whether made in cash or in additional shares, are
taxable to shareholders as long-term capital gains without regard to the length
of time the shareholders have held their shares. Any Fund dividend that is
declared in October, November, or December of any calendar year, that is payable
to shareholders of record in such a month, and that is paid the following
January, will be treated as if received by the shareholders on December 31 of
the year in which the dividend is declared.
Any Fund distribution will have the effect of reducing the per share net
asset value of shares in the Fund by the amount of the distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
DIVIDENDS-RECEIVED DEDUCTION. The portion of the Fund's ordinary income
dividends attributable to dividends received in respect to equity securities of
U.S. issuers is normally eligible for the dividends received deduction for
corporations subject to U.S. federal income taxes. Availability of the deduction
for particular shareholders is subject to certain limitations, and deducted
amounts may be subject to the alternative minimum tax and result in certain
basis adjustments.
SPECIAL CONSIDERATIONS FOR NON-U.S. PERSONS. The Fund will withhold tax
payments at a rate of 30% (or any lower applicable tax treaty rate) on taxable
dividends and other payments subject to withholding taxes that are made to
persons who are not citizens or residents of the U.S. 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. The Fund may be required to withhold (and
pay over to the IRS for the shareholder's credit) tax at the rate of 31% on
certain distributions and redemption proceeds paid to shareholders who fail to
provide this information or who otherwise violate IRS regulations.
DISPOSITION OF SHARES. In general, any gain or loss realized upon a taxable
disposition of shares of 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 disposition 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 of Class A Fund shares held for 90 days or less followed by any
purchase of shares of the Fund or another of the CitiFunds, 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
Class A Fund shares.
EFFECTS OF CERTAIN INVESTMENTS AND TRANSACTIONS
CERTAIN DEBT INVESTMENTS. Any investment by the Fund in zero coupon bonds,
deferred interest bonds, payment-in-kind bonds, certain stripped securities, and
certain securities purchased at a market discount will cause the Fund to
recognize income prior to the receipt of cash payments with respect to those
securities. In order to distribute this income and avoid a tax on the Fund, the
Fund may be required to liquidate portfolio securities that it might otherwise
have continued to hold potentially resulting in additional taxable gain or loss
to the Fund. An investment by the Fund in residual interests of a CMO that has
elected to be treated as a real estate mortgage investment conduit, or "REMIC,"
can create complex tax problems, especially if the Fund has state or local
governments or other tax-exempt organizations as shareholders.
OPTIONS, ETC. The Fund's transactions in options, futures and forward contracts
will be subject to special tax rules that may affect the amount, timing and
character of Fund income and distributions to shareholders. For example, certain
positions held by the Fund on the last business day of each taxable year will be
marked to market (i.e., treated as if closed out) on that day, and any gain or
loss associated with the positions will be treated as 60% long-term and 40%
short-term capital gain or loss. Certain positions held by the Fund that
substantially diminish its risk of loss with respect to other positions in its
portfolio may constitute "straddles," and may be subject to special tax rules
that would cause deferral of Fund losses, adjustments in the holding periods of
Fund securities, and conversion of short-term into long-term capital losses.
Certain tax elections exist for straddles that may alter the effects of these
rules. The Fund intends to limit its activities in options, futures and forward
contracts to the extent necessary to meet the requirements of Subchapter M of
the Code.
FOREIGN INVESTMENTS. Special tax considerations apply with respect to non-U.S.
investments of the Fund. Foreign exchange gains and losses realized by the Fund
will generally be treated as ordinary income and loss. Use of non-U.S.
currencies for non-hedging purposes and investment by the Fund in certain
"passive foreign investment companies" may have to be limited in order to avoid
a tax on the Fund. The Fund may elect to mark to market any investments in
"passive foreign investment companies" on the last day of each taxable year.
This election may cause the Fund to recognize ordinary income prior to the
receipt of cash payments with respect to those investments; in order to
distribute this income and avoid a tax on the Fund, the Fund may be required to
liquidate portfolio securities that it might otherwise have continued to hold
potentially resulting in additional taxable gain or loss to the Fund.
12. CERTAIN BANK REGULATORY MATTERS
The Glass-Steagall Act prohibits certain financial institutions, such as
Citibank, from underwriting securities of open-end investment companies, such as
the Fund. Citibank believes that its services under the Management Agreements
and the activities performed by it or its affiliates as Service Agents are not
underwriting and are consistent with the Glass-Steagall Act and other relevant
federal and state laws. However, there is no controlling precedent regarding the
performance of the combination of investment advisory, shareholder servicing and
administrative activities by banks. State laws on this issue may differ from
applicable federal law, and banks and financial institutions may be required to
register as dealers pursuant to state securities laws. Changes in either federal
or state statutes or regulations, or in their interpretations, could prevent
Citibank or its affiliates from continuing to perform these services. If
Citibank or its affiliates were to be prevented from acting as the Manager or
Service Agent, the Fund would seek alternative means for obtaining these
services. The Fund does not expect that shareholders would suffer any adverse
financial consequences as a result of any such occurrence.
13. FINANCIAL STATEMENTS
The audited financial statements of the Fund (Portfolio of Investments at
October 31, 1998, Statement of Assets and Liabilities at October 31, 1998,
Statement of Operations for the period March 2, 1998 (commencement of
operations) to October 31, 1998, Statement of Changes in Net Assets for the
period March 2, 1998 (commencement of operations) to October 31, 1998, Financial
Highlights for the period March 2, 1998 (commencement of operations) to October
31, 1998, 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,
independent accountants, on behalf of the Fund.
The audited financial statements of the Portfolio (Portfolio of Investments
at October 31, 1998) Statement of Assets and Liabilities at October 31, 1998,
Statement of Operations for the period November 1, 1997 (commencement of
operations) to October 31, 1998, 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.
A copy of the Annual Report to Shareholders of the Fund accompanies this
Statement of Additional Information.
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH & INCOME PORTFOLIO
INVESTMENT MANAGER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
DISTRIBUTOR
CFBDS, Inc.
21 Milk Street, Boston, MA 02109 (617) 423-1679
TRANSFER AGENT AND CUSTODIAN State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street, Boston, MA 02110
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
PART C
Item 23. Exhibits.
** a(1) Declaration of Trust of the Registrant
*, **, **** a(2) Amendments to the Declaration of Trust of the
Registrant ** b(1) Amended and Restated By-Laws of the
Registrant
* and ** b(2) Amendments to the Amended and Restated By-Laws of the
Registrant
**** d Management Agreement between the Registrant and
Citibank, N.A., as manager to CitiFunds International
Growth & Income Portfolio
e(1) Amended and Restated Distribution Agreement between the
Registrant and CFBDS, Inc. ("CFBDS"), as distributor
with respect to Class A shares of CitiFunds
International Growth & Income Portfolio
e(2) Distribution Agreement between the Registrant and
CFBDS, as distributor with respect to Class B shares of
CitiFunds International Growth & Income Portfolio
* g(1) Custodian Contract between the Registrant and State
Street Bank and Trust Company ("State Street"), as
custodian
**** g(2) Letter Agreement adding CitiFunds International Growth
& Income Portfolio to the Custodian Contract between
the Registrant and State Street
** h(1) Transfer Agency and Servicing Agreement between the
Registrant and State Street, as transfer agent
**** h(2) Letter Agreement adding CitiFunds International Growth
& Income Portfolio to the Transfer Agency and Servicing
Agreement between the Registrant and State Street
* h(3) Fund Accounting Agreement between the Registrant and
State Street, as fund accounting agent
**** h(4) Letter Agreement adding CitiFunds International Growth
& Income Portfolio to the Fund Accounting Agreement
between the Registrant and State Street
*** i Opinion and consent of counsel
j Independent auditor's consent
m(1) Amended and Restated Service Plan of the Registrant for
Class A shares of CitiFunds International Growth &
Income Portfolio
m(2) Service Plan of the Registrant for Class B shares of
CitiFunds International Growth & Income Portfolio
n Financial Data Schedule
***** o Multiple Class Plan of the Registrant
** and filed p(1) Powers of Attorney for the Registrant
herewith
*** p(2) Powers of Attorney for Asset Allocation Portfolios
- --------------------------------
* Incorporated herein by reference to Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A (File No. 33-36556) as
filed with the Securities and Exchange Commission on October 24, 1997.
** Incorporated herein by reference to Post-Effective Amendment No. 17 to the
Registrant's Registration Statement on Form N-1A (File No. 33-36556) as
filed with the Securities and Exchange Commission on April 30, 1998.
*** Incorporated herein by reference to Post-Effective Amendment No. 18 to the
Registrant's Registration Statement on Form N-1A (File No. 33-36556) as
filed with the Securities and Exchange Commission on December 16, 1998.
**** Incorporated herein by reference to Post-Effective Amendment No. 19 to the
Registrant's Registration Statement on Form N-1A (File No. 33-36556) as
filed with the Securities and Exchange Commission on December 22, 1998.
***** Incorporated herein by reference to Post-Effective Amendment No. 20 to the
Registrant's Registration Statement on Form N-1A (File No. 33-36556) as
filed with the Securities and Exchange Commission on February 12, 1999.
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. 17 to
its Registration Statement on Form N-1A; (b) Section 6 of the Distribution
Agreements between the Registrant and CFBDS, filed as Exhibits hereto; and
(c) the undertaking of the Registrant regarding indemnification set forth in its
Registration Statement on Form N-1A.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
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, Foreign Bond Portfolio, Intermediate
Income Portfolio and Short-Term Portfolio), The Premium Portfolios (U.S. Fixed
Income Portfolio, Growth & Income 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, CitiSelect(R) VIP Folio 300, CitiSelect(R) VIP Folio 400,
CitiSelect(R) VIP Folio 500 and CitiFunds(SM) Small Cap Growth VIP Portfolio).
Citibank and its affiliates manage assets in excess of $290 billion worldwide.
The principal place of business of Citibank is located at 399 Park Avenue, New
York, New York 10043.
John S. Reed is the Chairman and a Director of Citibank. Victor J.
Menezes is the President 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.
Each of the individuals named above is also a Director of Citigroup
Inc. In addition, the following persons have the affiliations indicated:
Paul J. Collins Director, Kimberly-Clark Corporation
Robert I. Lipp Chairman, Chief Executive Officer and President,
Travelers Property Casualty Co.
John S. Reed Director, Monsanto Company
Director, Philip Morris Companies Incorporated
Stockholder, Tampa Tank & Welding, Inc.
William R. Rhodes Director, Private Export Funding
Corporation
H. Onno Ruding Supervisory Director, Amsterdamsch Trustees
Cantoor B.V.
Director, Pechiney S.A.
Advisory Director, Unilever NV and Unilever PLC
Director, Corning Incorporated
Hotchkis and Wiley, a division of the Capital Management Group of
Merrill Lynch Asset Management, L.P. ("Hotchkis"), a sub-adviser to
International Portfolio, a series of Asset Allocation Portfolios, maintains its
principal office at 725 South Figueroa Street, Suite 4000, Los Angeles,
California 90017-5400. Harry Hartford and Sarah Ketterer manage international
equity accounts and are also responsible for international investment research.
Each serves on the Investment Policy Committee at Hotchkis. Prior to joining
Hotchkis, Mr. Hartford was with the Investment Bank of Ireland, where he gained
10 years of experience in both international and global equity management. Prior
to joining Hotchkis, Ms. Ketterer was an associate with Bankers Trust and an
analyst at Dean Witter.
Hotchkis became a division of the Capital Management Group of Merrill
Lynch Asset Management, L.P. upon the completion of the sale by Hotchkis and
Wiley, a Delaware Limited Liability Company and the general partner of Hotchkis
& Wiley, a California limited partnership, of all of the partnership interests
in Hotchkis & Wiley to Merrill Lynch & Co., Inc., a Delaware corporation, in
November of 1996.
Following are the managing personnel of Hotchkis:
Name and Position: Other Affiliations:
John F. Hotchkis Trustee, Hotchkis and Wiley Funds
Portfolio Manager Board of Governors, The Music Center
Chairman Director, The Music Center Foundation
Director, Los Angeles Philharmonic Orchestra
Director, Big Brothers of Greater Los Angeles
Director, Executive Service Corps of Southern California
Director, KCET Director, Teach for
America Trustee, The Lawrenceville
School Trustee, Robert Louis
Stevenson School Director,
Fountainhead Water Company, Inc.
Michael L. Quinn Head of Merrill Lynch Capital Management Group
Chief Executive
Officer
Item 27. Principal Underwriters.
(a) CFBDS, the Registrant's Distributor, is also the distributor for
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) International Growth Portfolio, CitiFunds(SM) Balanced Portfolio,
CitiFunds(SM) Small Cap Value Portfolio, CitiFunds(SM) Growth & Income
Portfolio, CitiFunds(SM) Large Cap Growth Portfolio, CitiFunds(SM) Small Cap
Growth Portfolio, CitiSelect(R) VIP Folio 200, CitiSelect(R) VIP Folio 300,
CitiSelect(R) VIP Folio 400, CitiSelect(R) VIP Folio 500, CitiFunds(SM) Small
Cap Growth VIP Portfolio, CitiSelect(R) Folio 200, CitiSelect(R) Folio 300,
CitiSelect(R) Folio 400, and CitiSelect(R) Folio 500. 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, Emerging Growth Fund,
Government Fund, Growth and Income Fund, International Equity Fund, Municipal
Fund, 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, Small Capitalization Growth Investments, Small
Capitalization Value Equity 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, 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 Special Equities 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 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, 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
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 Balanced Portfolio, International
Equity Portfolio, Pacific Portfolio, AIM Capital Appreciation Portfolio,
Alliance Growth Portfolio, GT 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, TBC Managed
Income Portfolio, Van Kampen American Capital Enterprise Portfolio, Centurion
Tax-Managed U.S. Equity Fund, Centurion Tax-Managed International Equity Fund,
Centurion U.S. Protection Fund, Centurion International Protection 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 Strategic Bond Fund,
Salomon Brothers Total Return Fund, Salomon Brothers Asia Growth Fund, Salomon
Brothers Capital Fund Inc, Salomon Brothers Investors 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, and Salomon Brothers Variable Asia Growth 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
(custodian and transfer agent) North Quincy, MA 02171
Citibank, N.A. 153 East 53rd Street
(investment manager) New York, NY 10043
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 26th day of February, 1999.
CITIFUNDS INTERNATIONAL TRUST
By: Philip W. Coolidge
----------------------
Philip W. Coolidge
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to this Registration Statement has been signed below by
the following persons in the capacities indicated below on February 26, 1999.
Signature Title
--------- -----
Philip W. Coolidge President, Principal Executive
- ------------------------ Officer and Trustee
Philip W. Coolidge
John R. Elder Principal Financial Officer and
- ------------------------ Principal Accounting Officer
John R. Elder
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
William S. Woods, Jr.* Trustee
- ------------------------
William S. Woods, Jr.
*By: Philip W. Coolidge
--------------------
Philip W. Coolidge
Executed by Philip W. Coolidge
on behalf of those indicated
pursuant to Powers of Attorney.
<PAGE>
SIGNATURES
Asset Allocation Portfolios has duly caused this Post-Effective
Amendment to the Registration Statement on Form N-1A of CitiFunds International
Trust to be signed on its behalf by the undersigned, thereunto duly authorized,
in Grand Cayman, Cayman Islands, on the 26th day of February, 1999.
ASSET ALLOCATION PORTFOLIOS
on behalf of International Portfolio
By: Tamie Ebanks-Cunningham
---------------------------
Tamie Ebanks-Cunningham,
Assistant Secretary of
Asset Allocation Portfolios
This Post-Effective Amendment to the Registration Statement on Form
N-1A of CitiFunds International Trust has been signed by the following persons
in the capacities indicated on February 26, 1999.
Signature Title
--------- -----
Philip W. Coolidge President, Principal Executive
- ------------------------ Officer and Trustee
Philip W. Coolidge
John R. Elder Principal Financial Officer and
- ------------------------ Principal Accounting Officer
John R. Elder
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: Tamie Ebanks-Cunningham
------------------------
Tamie Ebanks-Cunningham
Executed by
Tamie Ebanks-Cunningham
on behalf of those
indicated as
attorney in fact.
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
e(1) Amended and Restated Distribution Agreement
between the Registrant and CFBDS, as
distributor with respect to Class A shares
of CitiFunds International Growth & Income
Portfolio
e(2) Distribution Agreement between the
Registrant and CFBDS, as distributor with
respect to Class B shares of CitiFunds
International Growth & Income Portfolio
j Independent auditors consent
m(1) Amended and Restated Service Plan of the Registrant
for Class A shares o CitiFunds International Growth & Income
Portfolio
m(2) Service Plan of the Registrant for Class B shares of
CitiFunds International Growth & Income Portfolio
n Financial Data Schedule
p(1) Powers of Attorney for the Registrant
<PAGE>
Exhibit e(1)
AMENDED AND RESTATED
DISTRIBUTION AGREEMENT
AGREEMENT, dated as of November 14, 1997 and amended and restated as of
January 4, 1999, by and between CitiFunds International Trust (formerly,
Landmark International Funds), a Massachusetts business trust (the "Trust"), and
CFBDS, Inc., a Massachusetts corporation ("Distributor"). This Agreement relates
solely to (i) Shares of Beneficial Interest of each series of the Trust with
Shares that are not divided into classes and (ii) Shares of Beneficial Interest
of each series of the Trust that are divided into classes which are designated
"Class A" ("Shares").
WHEREAS, the Trust engages in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS, the Trust's shares of beneficial interest are divided into
separate series representing interests in separate funds of securities and other
assets;
WHEREAS, the Trust wishes to retain the services of a distributor for
Shares of each of the Trust's series listed on Exhibit A hereto (the "Funds")
and has registered the Shares of the Funds under the Securities Act of 1933, as
amended (the "1933 Act");
WHEREAS, the Trust has adopted an Amended and Restated Service Plan
pursuant to Rule 12b-1 under the 1940 Act (the "Service Plan") and may enter
into related agreements providing for the distribution and servicing of Shares
of the Funds;
WHEREAS, Distributor has agreed to act as distributor of the Shares of
the Funds for the period of this Agreement;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. Appointment of Distributor.
(a) The Trust hereby appoints Distributor its exclusive agent for the
distribution of Shares of the Funds in jurisdictions wherein such Shares may be
legally offered for sale; provided, however, that the Trust in its absolute
discretion may issue Shares of the Funds in connection with (i) the payment or
reinvestment of dividends or distributions; (ii) any merger or consolidation of
the Trust or of the Funds with any other investment company or trust or any
personal holding company, or the acquisition of the assets of any such entity or
another series of the Trust; or (iii) any offer of exchange permitted by Section
11 of the 1940 Act.
(b) Distributor hereby accepts such appointment as exclusive agent for
the distribution of Shares of the Funds and agrees that it will sell the Shares
as agent for the Trust at prices determined as hereinafter provided and on the
terms hereinafter set forth, all according to the then-current prospectus and
statement of additional information of each Fund (collectively, the "Prospectus"
and the "Statement of Additional Information"), applicable laws, rules and
regulations and the Declaration of Trust of the Trust. Distributor agrees to use
its best efforts to solicit orders for the sale of Shares of the Funds, and
agrees to transmit promptly to the Trust (or to the transfer agent of the Funds,
if so instructed in writing by the Trust) any orders received by it for purchase
or redemption of Shares.
(c) Distributor may sell Shares of the Funds to or through qualified
securities dealers, financial institutions or others. Distributor will require
each dealer or other such party to conform to the provisions of this Agreement,
the Prospectus, the Statement of Additional Information and applicable law; and
neither Distributor nor any such dealers or others shall withhold the placing of
purchase orders for Shares so as to make a profit thereby.
(d) Distributor shall order Shares of the Funds from the Trust only to
the extent that it shall have received unconditional purchase orders therefor.
Distributor will not make, or authorize any dealers or others to make: (i) any
short sales of Shares; or (ii) any sales of Shares to any Trustee or officer of
the Trust, any officer or director of Distributor or any corporation or
association furnishing investment advisory, managerial or supervisory services
to the Trust, or to any such corporation or association, unless such sales are
made in accordance with the Prospectus and the Statement of Additional
Information.
(e) Distributor is not authorized by the Trust to give any information
or make any representations regarding Shares of the Funds, except such
information or representations as are contained in the Prospectus, the Statement
of Additional Information or advertisements and sales literature prepared by or
on behalf of the Trust for Distributor's use.
(f) The Trust agrees to execute any and all documents, to furnish any
and all information and otherwise to take all actions which may be reasonably
necessary in the discretion of the Trust's officers in connection with the
qualification of Shares of each Fund for sale in such states as Distributor and
the Trust agree.
(g) No Shares of any Fund shall be offered by either Distributor or the
Trust under this Agreement, and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Trust, if and so long as the
effectiveness of the Trust's then current registration statement as to Shares of
that Fund or any necessary amendments thereto shall be suspended under any of
the provisions of the 1933 Act, or if and so long as a current prospectus for
Shares of that Fund as required by Section 10 of the 1933 Act is not on file
with the Securities and Exchange Commission; provided, however, that nothing
contained in this paragraph (g) shall in any way restrict the Trust's obligation
to repurchase any Shares from any shareholder in accordance with the provisions
of the applicable Fund's Prospectus or charter documents.
(h) Notwithstanding any provision hereof, the Trust may terminate,
suspend or withdraw the offering of Shares of any Fund whenever, in its sole
discretion, it deems such action to be desirable.
2. Offering Price of Shares. All Fund Shares sold under this Agreement
shall be sold at the public offering price per Share in effect at the time of
the sale, as described in the Prospectus. The public offering price of the
Shares of each Fund shall be the net asset value of such Shares plus the amount
of any applicable sales charge, as provided in the Prospectus. The excess, if
any, of the public offering price of the Shares over the net asset value of the
Shares, and any contingent deferred sales charge applicable to Shares of any
Fund as set forth in the applicable Fund's Prospectus, may be paid to, or
retained by, the Distributor, securities dealers, financial institutions
(including banks) and others, as partial compensation for their services in
connection with the sale of Shares. At no time shall the Trust receive less than
the full net asset value of the Shares of each Fund, determined in the manner
set forth in the Prospectus and the Statement of Additional Information.
Distributor also may receive such compensation under the Trust's Service Plan
for Shares as may be authorized by the Trustees of the Trust from time to time.
3. Furnishing of Information.
(a) The Trust shall furnish to Distributor copies of any information,
financial statements and other documents that Distributor may reasonably request
for use in connection with the sale of Shares of the Funds under this Agreement.
The Trust shall also make available a sufficient number of copies of the Funds'
Prospectus and Statement of Additional Information for use by the Distributor.
(b) The Trust agrees to advise Distributor immediately in writing:
(i) of any request by the Securities and Exchange Commission
for amendments to any registration statement concerning a Fund or to a
Prospectus or for additional information;
(ii) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the effectiveness of
any such registration statement or Prospectus or the initiation of any
proceeding for that purpose;
(iii) of the happening of any event which makes untrue any
statement of a material fact made in any such registration statement or
Prospectus or which requires the making of a change in such
registration statement or Prospectus in order to make the statements
therein not misleading; and
(iv) of all actions of the Securities and Exchange Commission
with respect to any amendments to any such registration statement or
Prospectus which may from time to time be filed with the Securities and
Exchange Commission.
4. Expenses.
(a) The Trust will pay or cause to be paid the following expenses:
organization costs of the Funds; compensation of Trustees who are not
"affiliated persons" of the Distributor; governmental fees; interest charges;
loan commitment fees; taxes; membership dues in industry associations allocable
to the Trust; fees and expenses of independent auditors, legal counsel and any
transfer agent, distributor, shareholder servicing agent, registrar or dividend
disbursing agent of the Trust; expenses of issuing and redeeming shares of
beneficial interest and servicing shareholder accounts; expenses of preparing,
typesetting, printing and mailing prospectuses, statements of additional
information, shareholder reports, notices, proxy statements and reports to
governmental officers and commissions and to existing shareholders of the Funds;
expenses connected with the execution, recording and settlement of security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Funds, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of the Funds (including but not limited to the fees of independent pricing
services); expenses of meetings of shareholders; expenses relating to the
issuance, registration and qualification of shares; and such non-recurring or
extraordinary expenses as may arise, including those relating to actions, suits
or proceedings to which the Trust may be a party and the legal obligation which
the Trust may have to indemnify its Trustees and officers with respect thereto.
(b) Except as otherwise provided in this Agreement and except to the
extent such expenses are borne by the Trust pursuant to the Service Plan,
Distributor will pay or cause to be paid all expenses connected with its own
qualification as a dealer under state and federal laws and all other expenses
incurred by Distributor in connection with the sale of Shares of each Fund as
contemplated by this Agreement.
(c) Distributor shall prepare and deliver reports to the Trustees of
the Trust on a regular basis, at least quarterly, showing the expenditures with
respect to each Fund pursuant to the Service Plan and the purposes therefor, as
well as any supplemental reports that the Trustees of the Trust, from time to
time, may reasonably request.
5. Repurchase of Shares. Distributor as agent and for the account of
the Trust may repurchase Shares of the Funds offered for resale to it and redeem
such Shares at their net asset value, subject to the imposition of any deferred
sales charge.
6. Indemnification by the Trust. In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of Distributor, the Trust agrees to indemnify Distributor,
its officers and directors, and any person which controls Distributor within the
meaning of the 1933 Act against any and all claims, demands, liabilities and
expenses that any such indemnified party may incur under the 1933 Act, or common
law or otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in the registration statement for any Fund, any
Prospectus or Statement of Additional Information, or any advertisements or
sales literature prepared by or on behalf of the Trust for Distributor's use, or
any omission to state a material fact therein, the omission of which makes any
statement contained therein misleading, unless such statement or omission was
made in reliance upon and in conformity with information furnished to the Trust
in connection therewith by or on behalf of Distributor. Nothing herein contained
shall require the Trust to take any action contrary to any provision of its
Declaration of Trust or any applicable statute or regulation.
7. Indemnification by Distributor. Distributor agrees to indemnify the
Trust, its officers and Trustees and any person which controls the Trust within
the meaning of the 1933 Act against any and all claims, demands, liabilities and
expenses that any such indemnified party may incur under the 1933 Act, or common
law or otherwise, arising out of or based upon (i) any alleged untrue statement
of a material fact contained in the registration statement for any Fund, any
Prospectus or Statement of Additional Information, or any advertisements or
sales literature prepared by or on behalf of the Trust for Distributor's use, or
any omission to state a material fact therein, the omission of which makes any
statement contained therein misleading, if such statement or omission was made
in reliance upon and in conformity with information furnished to the Trust in
connection therewith by or on behalf of Distributor; and (ii) any act or deed of
Distributor or its sales representatives that has not been authorized by the
Trust in any Prospectus or Statement of Additional Information or by this
Agreement.
8. Term and Termination.
(a) Unless terminated as herein provided, this Agreement shall continue
in effect as to each Fund until November 13, 1999 and shall continue in effect
for successive periods of one year, but only so long as each such continuance is
specifically approved by votes of a majority of both the Trustees of the Trust
and the Trustees of the Trust who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party and who have
no direct or indirect financial interest in this Agreement or in the operation
of the Service Plan or in any agreement related thereto ("Independent
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval.
(b) This Agreement may be terminated as to any Fund on not less than
thirty days' nor more than sixty days' written notice to the other party.
(c) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
9. Limitation of Liability. The obligations of the Trust hereunder
shall not be binding upon any of the Trustees, officers or shareholders of the
Trust personally, but shall bind only the assets and property of the particular
Fund in question, and not any other Fund or series of the Trust. The term
"CitiFunds International Trust" means and refers to the Trustees from time to
time serving under the Declaration of Trust of the Trust, a copy of which is on
file with the Secretary of the Commonwealth of Massachusetts. The execution and
delivery of this Agreement has been authorized by the Trustees, and this
Agreement has been signed on behalf of the Trust by an authorized officer of the
Trust, acting as such and not individually, and neither such authorization by
such Trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the assets and property of the Trust as
provided in the Declaration of Trust.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts and the provisions
of the 1940 Act.
<PAGE>
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
CitiFunds International Trust
By: /s/ Philip Coolidge
-----------------------
CFBDS, Inc.
By: /s/ Philip Coolidge
----------------------
<PAGE>
Exhibit A
Funds
CitiFunds International Growth & Income Portfolio
<PAGE>
Exhibit e(2)
DISTRIBUTION AGREEMENT
AGREEMENT, dated as of January 4, 1999, by and between CitiFunds
International Trust (formerly, Landmark International Funds), a Massachusetts
business trust (the "Trust"), and CFBDS, Inc., a Massachusetts corporation
("Distributor"). This Agreement relates solely to Shares of Beneficial Interest
designated "Class B."
WHEREAS, the Trust engages in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS, the Trust's shares of beneficial interest ("Shares") are
divided into separate series representing interests in separate funds of
securities and other assets;
WHEREAS, the Trust wishes to retain the services of a distributor for
Class B Shares of each of the Trust's series listed on Exhibit A hereto (the
"Funds") and has registered the Shares of the Funds under the Securities Act of
1933, as amended (the "1933 Act");
WHEREAS, the Trust has adopted a Service Plan pursuant to Rule 12b-1
under the 1940 Act (the "Service Plan") and may enter into related agreements
providing for the distribution and servicing of Shares of the Funds;
WHEREAS, Distributor has agreed to act as distributor of the Class B
Shares of the Funds for the period of this Agreement;
NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:
1. Appointment of Distributor.
(a) The Trust hereby appoints Distributor its exclusive agent for the
distribution of Class B Shares of the Funds in jurisdictions wherein such Shares
may be legally offered for sale; provided, however, that the Trust in its
absolute discretion may issue Shares of the Funds in connection with (i) the
payment or reinvestment of dividends or distributions; (ii) any merger or
consolidation of the Trust or of the Funds with any other investment company or
trust or any personal holding company, or the acquisition of the assets of any
such entity or another series of the Trust; or (iii) any offer of exchange
permitted by Section 11 of the 1940 Act.
(b) Distributor hereby accepts such appointment as exclusive agent for
the distribution of Class B Shares of the Funds and agrees that it will sell the
Shares as agent for the Trust at prices determined as hereinafter provided and
on the terms hereinafter set forth, all according to the then-current prospectus
and statement of additional information of each Fund (collectively, the
"Prospectus" and the "Statement of Additional Information"), applicable laws,
rules and regulations and the Declaration of Trust of the Trust. Distributor
agrees to use its best efforts to solicit orders for the sale of Shares of the
Funds, and agrees to transmit promptly to the Trust (or to the transfer agent of
the Funds, if so instructed in writing by the Trust) any orders received by it
for purchase or redemption of Shares.
(c) Distributor may sell Shares of the Funds to or through qualified
securities dealers, financial institutions or others. Distributor will require
each dealer or other such party to conform to the provisions of this Agreement,
the Prospectus, the Statement of Additional Information and applicable law; and
neither Distributor nor any such dealers or others shall withhold the placing of
purchase orders for Shares so as to make a profit thereby.
(d) Distributor shall order Shares of the Funds from the Trust only to
the extent that it shall have received unconditional purchase orders therefor.
Distributor will not make, or authorize any dealers or others to make: (i) any
short sales of Shares; or (ii) any sales of Shares to any Trustee or officer of
the Trust, any officer or director of Distributor or any corporation or
association furnishing investment advisory, managerial or supervisory services
to the Trust, or to any such corporation or association, unless such sales are
made in accordance with the Prospectus and the Statement of Additional
Information.
(e) Distributor is not authorized by the Trust to give any information
or make any representations regarding Shares of the Funds, except such
information or representations as are contained in the Prospectus, the Statement
of Additional Information or advertisements and sales literature prepared by or
on behalf of the Trust for Distributor's use.
(f) The Trust agrees to execute any and all documents, to furnish any
and all information and otherwise to take all actions which may be reasonably
necessary in the discretion of the Trust's officers in connection with the
qualification of Shares of each Fund for sale in such states as Distributor and
the Trust agree.
(g) No Shares of any Fund shall be offered by either Distributor or the
Trust under this Agreement, and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Trust, if and so long as the
effectiveness of the Trust's then current registration statement as to Shares of
that Fund or any necessary amendments thereto shall be suspended under any of
the provisions of the 1933 Act, or if and so long as a current prospectus for
Shares of that Fund as required by Section 10 of the 1933 Act is not on file
with the Securities and Exchange Commission; provided, however, that nothing
contained in this paragraph (g) shall in any way restrict the Trust's obligation
to repurchase any Shares from any shareholder in accordance with the provisions
of the applicable Fund's Prospectus or charter documents.
(h) Notwithstanding any provision hereof, the Trust may terminate,
suspend or withdraw the offering of Shares of any Fund whenever, in its sole
discretion, it deems such action to be desirable.
2. Offering Price of Shares. All Fund Shares sold under this Agreement
shall be sold at the public offering price per Share in effect at the time of
the sale, as described in the Prospectus. The public offering price of the Class
B Shares of each Fund shall be the net asset value of such Shares, as provided
in the Prospectus. Any contingent deferred sales charge applicable to Class B
Shares of any Fund as set forth in the applicable Fund's Prospectus, may be paid
to, or retained by, the Distributor, securities dealers, financial institutions
(including banks) and others, as partial compensation for their services in
connection with the sale of Class B Shares. At no time shall the Trust receive
less than the full net asset value of the Shares of each Fund, determined in the
manner set forth in the Prospectus and the Statement of Additional Information.
Distributor also may receive such compensation under the Trust's Service Plan
for Class B Shares as may be authorized by the Trustees of the Trust from time
to time.
3. Furnishing of Information.
(a) The Trust shall furnish to Distributor copies of any information,
financial statements and other documents that Distributor may reasonably request
for use in connection with the sale of Shares of the Funds under this Agreement.
The Trust shall also make available a sufficient number of copies of the Funds'
Prospectus and Statement of Additional Information for use by the Distributor.
(b) The Trust agrees to advise Distributor immediately in writing:
(i) of any request by the Securities and Exchange Commission
for amendments to any registration statement concerning a Fund or to a
Prospectus or for additional information;
(ii) in the event of the issuance by the Securities and
Exchange Commission of any stop order suspending the effectiveness of
any such registration statement or Prospectus or the initiation of any
proceeding for that purpose;
(iii) of the happening of any event which makes untrue any
statement of a material fact made in any such registration statement or
Prospectus or which requires the making of a change in such
registration statement or Prospectus in order to make the statements
therein not misleading; and
(iv) of all actions of the Securities and Exchange Commission
with respect to any amendments to any such registration statement or
Prospectus which may from time to time be filed with the Securities and
Exchange Commission.
4. Expenses.
(a) The Trust will pay or cause to be paid the following expenses:
organization costs of the Funds; compensation of Trustees who are not
"affiliated persons" of the Distributor; governmental fees; interest charges;
loan commitment fees; taxes; membership dues in industry associations allocable
to the Trust; fees and expenses of independent auditors, legal counsel and any
transfer agent, distributor, shareholder servicing agent, registrar or dividend
disbursing agent of the Trust; expenses of issuing and redeeming shares of
beneficial interest and servicing shareholder accounts; expenses of preparing,
typesetting, printing and mailing prospectuses, statements of additional
information, shareholder reports, notices, proxy statements and reports to
governmental officers and commissions and to existing shareholders of the Funds;
expenses connected with the execution, recording and settlement of security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Funds, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of the Funds (including but not limited to the fees of independent pricing
services); expenses of meetings of shareholders; expenses relating to the
issuance, registration and qualification of shares; and such non-recurring or
extraordinary expenses as may arise, including those relating to actions, suits
or proceedings to which the Trust may be a party and the legal obligation which
the Trust may have to indemnify its Trustees and officers with respect thereto.
(b) Except as otherwise provided in this Agreement and except to the
extent such expenses are borne by the Trust pursuant to the Service Plan,
Distributor will pay or cause to be paid all expenses connected with its own
qualification as a dealer under state and federal laws and all other expenses
incurred by Distributor in connection with the sale of Shares of each Fund as
contemplated by this Agreement.
(c) Distributor shall prepare and deliver reports to the Trustees of
the Trust on a regular basis, at least quarterly, showing the expenditures with
respect to each Fund pursuant to the Service Plan and the purposes therefor, as
well as any supplemental reports that the Trustees of the Trust, from time to
time, may reasonably request.
5. Repurchase of Shares. Distributor as agent and for the account of
the Trust may repurchase Shares of the Funds offered for resale to it and redeem
such Shares at their net asset value, subject to the imposition of any deferred
sales charge.
6. Indemnification by the Trust. In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of Distributor, the Trust agrees to indemnify Distributor,
its officers and directors, and any person which controls Distributor within the
meaning of the 1933 Act against any and all claims, demands, liabilities and
expenses that any such indemnified party may incur under the 1933 Act, or common
law or otherwise, arising out of or based upon any alleged untrue statement of a
material fact contained in the registration statement for any Fund, any
Prospectus or Statement of Additional Information, or any advertisements or
sales literature prepared by or on behalf of the Trust for Distributor's use, or
any omission to state a material fact therein, the omission of which makes any
statement contained therein misleading, unless such statement or omission was
made in reliance upon and in conformity with information furnished to the Trust
in connection therewith by or on behalf of Distributor. Nothing herein contained
shall require the Trust to take any action contrary to any provision of its
Declaration of Trust or any applicable statute or regulation.
7. Indemnification by Distributor. Distributor agrees to indemnify the
Trust, its officers and Trustees and any person which controls the Trust within
the meaning of the 1933 Act against any and all claims, demands, liabilities and
expenses that any such indemnified party may incur under the 1933 Act, or common
law or otherwise, arising out of or based upon (i) any alleged untrue statement
of a material fact contained in the registration statement for any Fund, any
Prospectus or Statement of Additional Information, or any advertisements or
sales literature prepared by or on behalf of the Trust for Distributor's use, or
any omission to state a material fact therein, the omission of which makes any
statement contained therein misleading, if such statement or omission was made
in reliance upon and in conformity with information furnished to the Trust in
connection therewith by or on behalf of Distributor; and (ii) any act or deed of
Distributor or its sales representatives that has not been authorized by the
Trust in any Prospectus or Statement of Additional Information or by this
Agreement.
8. Term and Termination.
(a) Unless terminated as herein provided, this Agreement shall continue
in effect as to each Fund until November 13, 1999 and shall continue in effect
for successive periods of one year, but only so long as each such continuance is
specifically approved by votes of a majority of both the Trustees of the Trust
and the Trustees of the Trust who are not parties to this Agreement or
interested persons (as defined in the 1940 Act) of any such party and who have
no direct or indirect financial interest in this Agreement or in the operation
of the Service Plan or in any agreement related thereto ("Independent
Trustees"), cast in person at a meeting called for the purpose of voting on such
approval.
(b) This Agreement may be terminated as to any Fund on not less than
thirty days' nor more than sixty days' written notice to the other party.
(c) This Agreement shall automatically terminate in the event of its
assignment (as defined in the 1940 Act).
9. Limitation of Liability. The obligations of the Trust hereunder
shall not be binding upon any of the Trustees, officers or shareholders of the
Trust personally, but shall bind only the assets and property of the particular
Fund in question, and not any other Fund or series of the Trust. The term
"CitiFunds International Trust" means and refers to the Trustees from time to
time serving under the Declaration of Trust of the Trust, a copy of which is on
file with the Secretary of the Commonwealth of Massachusetts. The execution and
delivery of this Agreement has been authorized by the Trustees, and this
Agreement has been signed on behalf of the Trust by an authorized officer of the
Trust, acting as such and not individually, and neither such authorization by
such Trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the assets and property of the Trust as
provided in the Declaration of Trust.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts and the provisions
of the 1940 Act.
IN WITNESS THEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
CitiFunds International Trust
By: /s/ Philip Coolidge
----------------------
CFBDS, Inc.
By: /s/ Philip Coolidge
----------------------
<PAGE>
Exhibit A
Funds
CitiFunds International Growth & Income Portfolio
<PAGE>
EXHIBIT 99.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. 21 to the registration statement on Form N-1A (the "Registration
Statement") of CitiFunds International Trust of our report dated December 14,
1998, relating to the financial statements and financial highlights of CitiFunds
International Growth & Income Portfolio appearing in the October 31, 1998 Annual
Report of CitiFunds International Growth & Income Portfolio, which are also
incorporated by reference into the Registration Statement. We also consent to
the references to us under heading "Financial Highlights" in the Prospectus and
under the headings "Auditors" and "Financial Statements" in the Statement of
Additional Information.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 26, 1999
<PAGE>
EXHIBIT 99.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. 21
to the registration statement on Form N-1A (the "Registration Statement") of
CitiFunds International Trust of our report dated December 14, 1998, relating to
the financial statements and financial highlights of International Portfolio
appearing in the October 31, 1998 Annual Report of CitiFunds International
Growth & 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
February 26, 1999
<PAGE>
Exhibit m(1)
AMENDED AND RESTATED
SERVICE PLAN
SERVICE PLAN, dated as of November 14, 1997 and amended and restated
effective as of January 4, 1999, of CitiFunds International Trust, a
Massachusetts business trust (the "Trust"), with respect to shares of beneficial
interest of its series CitiFunds International Growth & Income Portfolio and any
other series of the Trust adopting this plan (the "Series"). This Plan relates
solely to (i) shares of beneficial interest of the Series that are not divided
into Classes and (ii) shares of beneficial interest of each of the Series that
are divided into Classes which are designated "Class A" ("Shares").
WHEREAS, the Trust engages in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS, the Trust's shares of beneficial interest are divided into
separate series representing interests in separate funds of securities and other
assets;
WHEREAS, the Trust intends to distribute Shares in accordance with Rule
12b-1 under the 1940 Act, and wishes to adopt this Plan as a plan of
distribution pursuant to Rule 12b-1;
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are
not interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Non-Interested Trustees"), having determined, in
the exercise of reasonable business judgment and in light of their fiduciary
duties under state law and under Section 36(a) and (b) of the 1940 Act, that
there is a reasonable likelihood that this Plan will benefit the Trust and the
shareholders of the Series, have approved this Plan by votes cast at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
WHEREAS, an initial sales charge may be paid by investors who purchase
Shares, and CFBDS, Inc. (the "Distributor"), broker-dealers, banks and other
financial intermediaries may receive such sales charge as partial compensation
for their services in connection with the sale of Shares;
WHEREAS, each Series or the Distributor may impose certain deferred
sales charges in connection with the repurchase of Shares by such Series, and
the Series may pay to the Distributor, dealers and others, or the Series may
permit such persons to retain, as the case may be, all or any portion of such
deferred sales charges;
NOW, THEREFORE, the Trust hereby adopts this Plan as a plan of
distribution in accordance with Rule 12b-1 under the 1940 Act, with the terms of
the Plan being as follows:
1. Distribution and Servicing Activities. Subject to the supervision of
the Trustees of the Trust, the Trust may:
(a) engage, directly or indirectly, in any activities
primarily intended to result in the sale of Shares of the Series, which
activities may include, but are not limited to (i) payments to the
Trust's Distributor for distribution services, (ii) payments to
securities dealers, financial institutions (which may include banks)
and others in respect of the sale of Shares of the Series, (iii)
payments for advertising, marketing or other promotional activity, and
(iv) payments for preparation, printing, and distribution of
prospectuses and statements of additional information and reports of
the Trust for recipients other than regulators and existing
shareholders of the Trust; and
(b) make payments, directly or indirectly, to the Trust's
Distributor, securities dealers, financial institutions (which may
include banks) and others for providing personal service and/or the
maintenance of shareholder accounts.
The Trust is authorized to engage in the activities listed above either directly
or through other persons with which the Trust has entered into agreements
related to this Plan.
2. Sales Charges. It is understood that, under certain circumstances,
an initial sales charge may be paid by investors who purchase Shares of each
Series, and the Series may pay to the Distributor, securities dealers, financial
institutions (including banks) and others, or the Series may permit such persons
to retain, as the case may be, such sales charge as partial compensation for
their services in connection with the sale of Shares. It is also understood
that, under certain circumstances, each Series or the Distributor may impose
certain deferred sales charges in connection with the repurchase of Shares of
such Series, and the Series may pay to the Distributor, securities dealers,
financial institutions (including banks) and others, or the Series may permit
such persons to retain, as the case may be, all or any portion of such deferred
sales charges.
3. Maximum Expenditures. The expenditures to be made by the Trust
pursuant to this Plan and the basis upon which payment of such expenditures will
be made shall be determined by the Trustees of the Trust, but in no event may
such expenditures exceed an amount calculated at the rate of 0.25% per annum of
the average daily net assets of the Shares of each Series. Payments pursuant to
this Plan may be made directly by the Trust to the Distributor or to other
persons with which the Trust has entered into agreements related to this Plan.
For purposes of determining the fees payable under this Plan, the value of each
Series' average daily net assets shall be computed in the manner specified in
the applicable Series' then-current prospectus and statement of additional
information.
4. Trust's Expenses. The Trust shall pay all expenses of its
operations, including the following, and such expenses shall not constitute
expenditures under this Plan: organization costs of each Series; compensation of
Trustees; governmental fees; interest charges; loan commitment fees; taxes;
membership dues in industry associations allocable to the Trust; fees and
expenses of independent auditors, legal counsel and any transfer agent,
distributor, shareholder servicing agent, registrar or dividend disbursing agent
of the Trust; expenses of issuing and redeeming shares of beneficial interest
and servicing shareholder accounts; expenses of preparing, typesetting, printing
and mailing prospectuses, statements of additional information, shareholder
reports, notices, proxy statements and reports to governmental officers and
commissions and to existing shareholders of the Series; expenses connected with
the execution, recording and settlement of security transactions; insurance
premiums; fees and expenses of the custodian for all services to the Series,
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of the Series (including
but not limited to the fees of independent pricing services); expenses of
meetings of shareholders; expenses relating to the issuance, registration and
qualification of shares; and such non-recurring or extraordinary expenses as may
arise, including those relating to actions, suits or proceedings to which the
Trust may be a party and the legal obligation which the Trust may have to
indemnify its Trustees and officers with respect thereto.
5. Term and Termination. (a) Unless terminated as herein provided, this
Plan shall continue in effect until November 13, 1999 and shall continue in
effect for successive periods of one year, but only so long as each such
continuance is specifically approved by votes of a majority of both the Trustees
of the Trust and the Non-Interested Trustees, cast in person at a meeting called
for the purpose of voting on such approval.
(b) This Plan may be terminated at any time with respect to any Series
by a vote of a majority of the Non-Interested Trustees or by a vote of a
majority of the outstanding voting securities, as defined in the 1940 Act, of
Shares of the applicable Series.
6. Amendments. This Plan may not be amended to increase materially the
maximum expenditures permitted by Section 3 hereof unless such amendment is
approved by a vote of the majority of the outstanding voting securities, as
defined in the 1940 Act, of Shares of the applicable Series, and no material
amendment to this Plan shall be made unless approved in the manner provided for
annual renewal of this Plan in Section 5(a) hereof.
7. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of the Non-Interested Trustees of the Trust shall
be committed to the discretion of such Non-Interested Trustees.
8. Quarterly Reports. The Treasurer of the Trust shall provide to the
Trustees of the Trust and the Trustees shall review quarterly a written report
of the amounts expended pursuant to this Plan and any related agreement and the
purposes for which such expenditures were made.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 8 hereof, for a
period of not less than six years from the date of this Plan. Any such related
agreement or such reports for the first two years will be maintained in an
easily accessible place.
10. Governing Law. This Plan shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts and the provisions
of the 1940 Act.
<PAGE>
Exhibit m(2)
SERVICE PLAN
SERVICE PLAN, dated as of January 4, 1999, of CitiFunds International
Trust, a Massachusetts business trust (the "Trust"), with respect to shares of
beneficial interest of its series CitiFunds International Growth & Income
Portfolio and any other series of the Trust adopting this plan (the "Series").
This Plan relates solely to shares of beneficial interest of each Series which
are designated "Class B" ("Shares").
WHEREAS, the Trust engages in business as an open-end management
investment company and is registered as such under the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS, the Trust's shares of beneficial interest are divided into
separate series representing interests in separate funds of securities and other
assets;
WHEREAS, the Trust intends to distribute Shares in accordance with Rule
12b-1 under the 1940 Act, and wishes to adopt this Plan as a plan of
distribution pursuant to Rule 12b-1;
WHEREAS, the Trustees of the Trust as a whole, and the Trustees who are
not interested persons of the Trust (as defined in the 1940 Act) and who have no
direct or indirect financial interest in the operation of this Plan or in any
agreement relating hereto (the "Non-Interested Trustees"), having determined, in
the exercise of reasonable business judgment and in light of their fiduciary
duties under state law and under Section 36(a) and (b) of the 1940 Act, that
there is a reasonable likelihood that this Plan will benefit the Trust and the
shareholders of the Series, have approved this Plan by votes cast at a meeting
called for the purpose of voting hereon and on any agreements related hereto;
WHEREAS, each Series or CFBDS, Inc. (the "Distributor") may impose
certain deferred sales charges in connection with the repurchase of Shares by
such Series, and the Series may pay to the Distributor, dealers and others, or
the Series may permit such persons to retain, as the case may be, all or any
portion of such deferred sales charges;
NOW, THEREFORE, the Trust hereby adopts this Plan as a plan of
distribution in accordance with Rule 12b-1 under the 1940 Act, with the terms of
the Plan being as follows:
1. Distribution and Servicing Activities. Subject to the supervision of
the Trustees of the Trust, the Trust may:
(a) engage, directly or indirectly, in any activities
primarily intended to result in the sale of Shares of the Series, which
activities may include, but are not limited to (i) payments to the
Trust's Distributor for distribution services, (ii) payments to
securities dealers, financial institutions (which may include banks)
and others in respect of the sale of Shares of the Series, (iii)
payments for advertising, marketing or other promotional activity, and
(iv) payments for preparation, printing, and distribution of
prospectuses and statements of additional information and reports of
the Trust for recipients other than regulators and existing
shareholders of the Trust; and
(b) make payments, directly or indirectly, to the Trust's
Distributor, securities dealers, financial institutions (which may
include banks) and others for providing personal service and/or the
maintenance of shareholder accounts.
The Trust is authorized to engage in the activities listed above either directly
or through other persons with which the Trust has entered into agreements
related to this Plan.
2. Sales Charges. It is understood that, under certain circumstances,
each Series or the Distributor may impose certain deferred sales charges in
connection with the repurchase of Shares of such Series, and the Series may pay
to the Distributor, securities dealers, financial institutions (including banks)
and others, or the Series may permit such persons to retain, as the case may be,
all or any portion of such deferred sales charges.
3. Maximum Expenditures. The expenditures to be made by the Trust
pursuant to this Plan and the basis upon which payment of such expenditures will
be made shall be determined by the Trustees of the Trust, but in no event may
such expenditures exceed an amount calculated at the rate of 1.00% per annum of
the average daily net assets of the Shares of each Series. Payments pursuant to
this Plan may be made directly by the Trust to the Distributor or to other
persons with which the Trust has entered into agreements related to this Plan.
For purposes of determining the fees payable under this Plan, the value of each
Series' average daily net assets shall be computed in the manner specified in
the applicable Series' then-current prospectus and statement of additional
information.
4. Trust's Expenses. The Trust shall pay all expenses of its
operations, including the following, and such expenses shall not constitute
expenditures under this Plan: organization costs of each Series; compensation of
Trustees; governmental fees; interest charges; loan commitment fees; taxes;
membership dues in industry associations allocable to the Trust; fees and
expenses of independent auditors, legal counsel and any transfer agent,
distributor, shareholder servicing agent, registrar or dividend disbursing agent
of the Trust; expenses of issuing and redeeming shares of beneficial interest
and servicing shareholder accounts; expenses of preparing, typesetting, printing
and mailing prospectuses, statements of additional information, shareholder
reports, notices, proxy statements and reports to governmental officers and
commissions and to existing shareholders of the Series; expenses connected with
the execution, recording and settlement of security transactions; insurance
premiums; fees and expenses of the custodian for all services to the Series,
including safekeeping of funds and securities and maintaining required books and
accounts; expenses of calculating the net asset value of the Series (including
but not limited to the fees of independent pricing services); expenses of
meetings of shareholders; expenses relating to the issuance, registration and
qualification of shares; and such non-recurring or extraordinary expenses as may
arise, including those relating to actions, suits or proceedings to which the
Trust may be a party and the legal obligation which the Trust may have to
indemnify its Trustees and officers with respect thereto.
5. Term and Termination. (a) This Plan shall become effective as to a
Series upon (i) approval by a vote of at least a majority of the outstanding
voting securities (as defined in the 1940 Act) of Shares of the particular
Series, and (ii) approval by a majority of the Trustees of the Trust and a
majority of the Non-Interested Trustees cast in person at a meeting called for
the purpose of voting on this Plan. Unless terminated as herein provided, this
Plan shall continue in effect until November 13, 1999 and shall continue in
effect for successive periods of one year, but only so long as each such
continuance is specifically approved by votes of a majority of both the Trustees
of the Trust and the Non-Interested Trustees, cast in person at a meeting called
for the purpose of voting on such approval.
(b) This Plan may be terminated at any time with respect to any Series
by a vote of a majority of the Non-Interested Trustees or by a vote of a
majority of the outstanding voting securities, as defined in the 1940 Act, of
Shares of the applicable Series.
6. Amendments. This Plan may not be amended to increase materially the
maximum expenditures permitted by Section 3 hereof unless such amendment is
approved by a vote of the majority of the outstanding voting securities, as
defined in the 1940 Act, of Shares of the applicable Series, and no material
amendment to this Plan shall be made unless approved in the manner provided for
annual renewal of this Plan in Section 5(a) hereof.
7. Selection and Nomination of Trustees. While this Plan is in effect,
the selection and nomination of the Non-Interested Trustees of the Trust shall
be committed to the discretion of such Non-Interested Trustees.
8. Quarterly Reports. The Treasurer of the Trust shall provide to the
Trustees of the Trust and the Trustees shall review quarterly a written report
of the amounts expended pursuant to this Plan and any related agreement and the
purposes for which such expenditures were made.
9. Recordkeeping. The Trust shall preserve copies of this Plan and any
related agreement and all reports made pursuant to Section 8 hereof, for a
period of not less than six years from the date of this Plan. Any such related
agreement or such reports for the first two years will be maintained in an
easily accessible place.
10. Governing Law. This Plan shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts and the provisions
of the 1940 Act.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000866747
<NAME> CITIFUNDS INT'L GROWTH AND INCOME
<SERIES>
<NUMBER> 003
<NAME> CITIFUNDS INTERNATIONAL TRUST
<S> <C>
<PERIOD-TYPE> 8-mos
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 17,162,831
<RECEIVABLES> 26,734
<ASSETS-OTHER> 44,998
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 17,234,563
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 19,874,029
<SHARES-COMMON-STOCK> 1,902,066
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 216,322
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 490,577
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (3,397,596)
<NET-ASSETS> 17,186,207
<DIVIDEND-INCOME> 365,449
<INTEREST-INCOME> 13,027
<OTHER-INCOME> 42,123
<EXPENSES-NET> 204,277
<NET-INVESTMENT-INCOME> 216,322
<REALIZED-GAINS-CURRENT> 490,577
<APPREC-INCREASE-CURRENT> (3,394,721)
<NET-CHANGE-FROM-OPS> (2,687,822)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 28,257,432
<NUMBER-OF-SHARES-REDEEMED> (8,383,403)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 17,186,207
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 30,714
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 253,384
<AVERAGE-NET-ASSETS> 18,781,884
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.11
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.04
<EXPENSE-RATIO> 1.66
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<PAGE>
Exhibit p(1)
CITIFUNDS INTERNATIONAL TRUST
The undersigned hereby constitutes and appoints Philip W. Coolidge, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, and each of them,
with full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities the Registration
Statements on Form N-1A, and any and all amendments thereto, filed by CitiFunds
International Trust (on behalf of each of its series now or hereinafter created)
(the "Registrant") with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and under the Investment Company Act of
1940, as amended, and any and all other instruments which such attorneys and
agents, or any of them, deem necessary or advisable to enable the Registrant to
comply with the Securities Act of 1933, as amended, and the Investment Company
Act of 1940, as amended, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction; and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand as of the 11th day
of February, 1999.
/s/ Heath B. McLendon
---------------------
Heath B. McLendon
