<PAGE>
As filed with the Securities and Exchange Commission on April 28, 2000
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. 25
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 31
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 May 1, 2000
pursuant to paragraph (b) of Rule 485.
The Premium Portfolios, on behalf of International Equity 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 Portfolio.
<PAGE>
----------
PROSPECTUS
----------
MAY 1, 2000
CitiFunds(SM)
International Growth
Portfolio
CITIBANK, N.A., INVESTMENT ADVISER
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.
<PAGE>
Table of Contents
FUND AT A GLANCE ....................................................... 3
YOUR CITIFUNDS ACCOUNT ................................................. 12
CHOOSING A SHARE CLASS .............................................. 12
HOW TO BUY SHARES ................................................... 18
HOW THE PRICE OF YOUR SHARES IS CALCULATED 19
HOW TO SELL SHARES .................................................. 20
REINSTATING RECENTLY SOLD SHARES .................................... 22
EXCHANGES ........................................................... 22
ACCOUNT INQUIRIES ................................................... 23
DIVIDENDS ........................................................... 23
TAX MATTERS ......................................................... 24
MANAGEMENT OF THE FUND ................................................. 26
INVESTMENT ADVISER .................................................. 26
ADVISORY FEES ....................................................... 27
MORE ABOUT THE FUND .................................................... 28
PRINCIPAL INVESTMENT STRATEGIES ..................................... 28
RISKS ............................................................... 32
FINANCIAL HIGHLIGHTS ................................................... A-1
APPENDIX ............................................................... B-1
<PAGE>
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FUND AT A GLANCE
----------------
Fund at a Glance
This summary briefly describes CitiFunds International Growth
Portfolio and the principal risks of investing in it. For more
information, see MORE ABOUT THE FUND on page 28.
CitiFunds(SM)
International Growth Portfolio
FUND GOAL
The Fund's goal is to provide long-term capital growth.
Dividend income, if any, is incidental to this goal. Of
course, there is no assurance that the Fund will achieve its
goal.
MAIN INVESTMENT STRATEGIES
CitiFunds International Growth Portfolio invests primarily in
the common stocks of foreign companies that the Fund's
portfolio managers believe have above-average prospects for
growth, including companies in developing countries. In
managing the Fund, Citibank looks for well-established
companies with medium to large capitalizations (typically $750
million or more), superior management teams and histories of
above-average revenues and earnings growth. Citibank seeks
opportunities to invest in foreign economies that it believes
are growing faster than the U.S. economy.
In addition to common stocks, the Fund may also invest in other
equity securities including rights to purchase common stocks as
well as securities having characteristics of common stocks.
Generally, the Fund invests in a number of different countries
and, under normal circumstances, the Fund invests at least 65%
of its assets in equity securities of companies in at least
three foreign markets. The Fund also may, but is not required
to, invest in other foreign securities including fixed income
and convertible securities. The Fund usually invests in
securities listed on securities exchanges.
The Fund may, but is not required to, enter into forward
currency exchange contracts for the purchase or sale of
foreign currency for hedging purposes. A currency exchange
contract allows the Fund to fix a definite price in dollars
for securities of foreign issuers that the Fund buys and
sells.
Please note that the Fund invests in securities through an
underlying mutual fund.
MAIN RISKS
As with all mutual funds, you may lose money if you invest in
this Fund. The principal risks of investing in the Fund are
described below. See page 32 for more information about risks.
The value of the Fund's shares will change daily as the value
of its underlying securities change. This means that your
shares of the Fund may be worth more or less when you sell
them than when you bought them.
o MARKET RISK. This is the risk that the prices of securities
will rise or fall due to changing economic, political or
market conditions, or due to a company's individual
situation. Some securities held by the Fund may be quite
volatile, meaning that their prices can change significantly
in a short time.
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 GROWTH SECURITIES. Growth securities typically are quite
sensitive to market movements because their market prices
tend to reflect future expectations. When it appears those
expectations will not be met, the prices of growth securities
typically fall. The Fund may underperform certain other
international stock funds (those emphasizing value stocks,
for example) during periods when growth stocks are out of
favor.
o PORTFOLIO SELECTION. The success of the Fund's investment
strategy depends largely on Citibank's skill in assessing the
growth potential of companies in which the Fund invests. The
portfolio managers may fail to pick stocks that outperform
the market or that do as well as the market. In that case,
you may lose money, or your investment may not do as well as
an investment in another international equity fund.
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.
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. If the
credit quality of a security deteriorates below investment
grade, the Fund may continue to hold this security, commonly
known as a junk bond. The prices of lower rated securities,
especially junk bonds, often are more volatile than those of
higher rated securities.
o 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 CURRENCY EXCHANGE CONTRACTS. The Fund may use forward foreign
currency exchange contracts to hedge against adverse rate
changes. The Fund's use of these contracts may prevent the
Fund from realizing profits on favorable movements in
exchange rates. The Fund's ability to use currency exchange
contracts successfully depends on a number of factors,
including the ability of the Fund's portfolio managers to
accurately predict the direction of changes in currency
exchange rates. If these predictions are wrong, the Fund
could suffer greater losses than if the Fund had not entered
into the foreign currency exchange contracts.
Please note that an investment in the Fund is not a deposit of
Citibank and is not insured or guaranteed by the Federal
Deposit Insurance Corporation or any other government agency.
WHO MAY WANT TO INVEST
You should consider investing in CitiFunds International
Growth 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 the Fund 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
share price and possible losses.
o You are seeking current income.
o Your investment horizon is shorter term (less than five
years).
Please keep in mind that an investment in any international
equity fund is not a complete investment program.
<PAGE>
Fund Performance
The following bar chart and table can help you evaluate the
risks and performance of the Fund.
o The bar chart shows changes in the Fund's performance from
year to year for the calendar years indicated. The chart and
related information do not take into account any sales
charges that you may be required to pay. Any sales charges
will reduce your return.
o The table compares the Fund's average annual returns for the
periods indicated to those of a broad measure of market
performance. Please remember that, unlike the Fund, the
market index does not include the costs of buying and selling
securities and other Fund expenses or sales charges. The
Fund's returns in the table reflect the maximum sales charge
currently applicable.
o In both the chart and table, the returns shown for Class A
shares include returns for periods before the creation of
share classes on January 4, 1999. Prior to that date, there
were no sales charges on the purchase or sale of Fund shares.
The returns for Class A in the table have been adjusted to
reflect the maximum front-end sales charge currently
applicable to the Class A shares.
o Class B shares have been offered since January 4, 1999. Class
B performance is lower than that shown for Class A shares,
because of higher fund expenses and the effect of the
contingent deferred sales charge.
o The Fund's performance reflects certain fee waivers or
reimbursements. If these are reduced or eliminated, the
Fund's performance may go down.
When you consider this information, please remember that the
Fund's past performance is not necessarily an indication of
how it will perform in the future.
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
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ANNUAL TOTAL RETURNS - CLASS A
(WITHOUT SALES CHARGE)
1992 (1.45)%
1993 29.82%
1994 (11.46)%
1995 18.08%
1996 2.59%
1997 5.15%
1998 17.62%
1999 35.66%
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FUND'S HIGHEST AND LOWEST RETURNS (WITHOUT SALES CHARGE)
FOR CALENDAR QUARTERS COVERED BY THE BAR CHART
................................................................................
Quarter Ending
................................................................................
Highest 28.09% December 31, 1999
................................................................................
Lowest (14.04%) September 30, 1998
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AVERAGE ANNUAL TOTAL RETURNS (WITH MAXIMUM SALES CHARGE)
AS OF DECEMBER 31, 1999
................................................................................
Life of Fund
Since
1 Year 5 Years March 1, 1991
................................................................................
Class A 28.87% 14.06% 9.45%
................................................................................
Class B 25.35% N/A N/A
................................................................................
MSCI EAFE Index 27.30% 13.15% *
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*Information regarding performance for this period is not available.
<PAGE>
Fund Fees and Expenses
This table describes the fees and expenses that you may pay if you
buy and hold shares of the Fund.
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
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SHAREHOLDER FEES
FEES PAID DIRECTLY FROM YOUR INVESTMENT
................................................................................
SHARE CLASS (Class descriptions begin on page 12) 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
EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS(3)
................................................................................
Management Fees 1.00% 1.00%
................................................................................
Distribution (12b-1) Fees 0.15% 1.00%
................................................................................
Other Expenses
................................................................................
Shareholder services 0.25% 0.15%
................................................................................
Administrative and other services 0.55% 0.55%
................................................................................
TOTAL ANNUAL FUND OPERATING EXPENSES* 1.95% 2.70%
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* Because some of the Fund's expenses were waived
or reimbursed, actual total operating expenses for the
prior year were: 1.75% 2.50%
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 securities through an underlying mutual fund,
International Equity Portfolio. This table reflects the expenses of the
Fund and International Equity Portfolio.
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<PAGE>
EXAMPLE
This example is intended to help you compare the cost of
investing in the Fund to the cost of investing in other mutual
funds. The example assumes that:
o you invest $10,000 in the Fund for the time periods
indicated;
o you pay the maximum applicable sales charge;
o you reinvest all dividends;
o you then sell all your shares at the end of those periods --
for Class B shares a number is also given showing your
expenses 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;
o your investment has a 5% return each year -- the assumption
of a 5% return is required by the SEC for the purpose of this
example and is not a prediction of the Fund's future
performance; and
o the Fund's operating expenses as shown in the table without
waivers remain the same.
Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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1 Year 3 Years 5 Years 10 Years
................................................................................
Class A $688 $1,082 $1,500 $2,661
................................................................................
Class B
................................................................................
Assuming redemption at end of period $773 $1,138 $1,530 $2,848
................................................................................
Assuming no redemption $273 $ 838 $1,430 $2,848
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<PAGE>
----------------------
YOUR CITIFUNDS ACCOUNT
----------------------
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 0.10%, currently
being waived on a voluntary basis
o Annual fee of up to 0.05% for certain advertising costs
currently not being paid
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 5.00% to 1.00% 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
<PAGE>
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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 intermediaries such as broker/dealers that sell fund
shares and provide ongoing services to shareholders and to pay
other marketing and advertising expenses. Because you pay
these fees during the whole period that you own the shares,
over time you may pay more than if you had paid other types of
sales charges. For this reason, you should consider the
effects of 12b-1 fees as well as sales loads when choosing a
share class.
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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 intermediaries that sell shares of the Fund
receive. The distributor generally keeps up to approximately
10% of the sales charge imposed on Class A shares. Financial
intermediaries that sell Class A shares will also receive the
shareholder servicing 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.
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BROKER/
SALES CHARGE SALES CHARGE DEALER
AS A % OF AS A % OF COMMISSION
AMOUNT OF OFFERING YOUR AS A % OF
YOUR INVESTMENT PRICE INVESTMENT OFFERING PRICE
................................................................................
Less than $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%
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*A contingent deferred sales charge may apply in certain instances. See page 15.
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.
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SALE DURING CDSC ON SHARES BEING SOLD
................................................................................
1st year since purchase 5.00%
................................................................................
2nd year since purchase 4.00%
................................................................................
3rd year since purchase 3.00%
................................................................................
4th year since purchase 2.00%
................................................................................
5th year since purchase 1.00%
................................................................................
6th year (or later) since purchase None
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o Financial intermediaries 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 intermediaries 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 applicable CDSC, 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.
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 Portfolio are offered
continuously and purchases may be made Monday through Friday,
except on certain holidays. Shares may be purchased from the
Fund's distributor or a broker-dealer or financial institution
(called a Shareholder Servicing Agent) that has entered into a
sales or shareholder servicing agreement with the distributor
concerning the Fund. 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. The Fund does
not impose any minimum initial or subsequent investment
requirements but your Shareholder Servicing Agent may.
Your Shareholder Servicing Agent will not transmit your purchase
order for Fund shares until it receives the purchase price in
federal or other immediately available funds. If you pay by
check, the Shareholder Servicing Agent transmits the order when
the check clears.
If you hold your shares through a Shareholder Servicing Agent,
your Shareholder Servicing Agent establishes and maintains your
account and is the shareholder of record. If you wish to transfer
your account, you may transfer it to another financial
institution 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 may be calculated as of
the earlier close of those markets.
The Fund's securities are valued primarily on the basis of market
quotations. When market quotations are not readily available, the
Fund may price securities at fair value. Fair value is determined
in accordance with procedures approved by the Fund's Board of
Trustees. When the Fund uses the fair value pricing method, a
security may be priced higher or lower than if the Fund had used
a market quotation to price the same security.
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. 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, the securities may
be valued at fair value in accordance with procedures established
by and under the general supervision of the Board of Trustees.
HOW TO SELL SHARES
You may sell (redeem) your shares on any business day. The price
will be the NAV the next time it is calculated after your
redemption request in proper form has been received by the Fund's
transfer agent. If your shares are subject to a CDSC, the
applicable charge will be deducted from your sale proceeds.
You may make redemption requests in writing through the Fund's
transfer agent or, if you hold your shares through a Shareholder
Servicing Agent, through your Agent. If your account application
permits, you may also make redemption requests by telephone. Each
Shareholder Servicing Agent is responsible for promptly
submitting redemption requests to the Fund's transfer agent. You
are responsible for making sure your redemption request is in
proper form.
The Fund has a Systematic Withdrawal Plan which allows you to
automatically withdraw a specific dollar amount from your account
on a regular basis. You must have at least $10,000 in your
account to participate in this program. Under the Plan, if your
shares are subject to a CDSC, you may only withdraw up to 10% of
the value of your account in any year, but you will not be
subject to the CDSC on the shares withdrawn under the Plan. For
more information, please contact the Fund's transfer agent, or if
you hold your shares through a Shareholder Servicing Agent, your
Agent.
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 third business day after you sell your shares but
in any event within seven days. However, your redemption proceeds
may be delayed for up to ten days if your purchase was made by
check. Your redemption proceeds may also be delayed, or your
right to receive redemption proceeds suspended, if the New York
Stock Exchange is closed (other than on weekends or holidays) or
trading is restricted, or if an emergency exists. The Fund has
the right to pay your redemption proceeds by giving you
securities instead of cash. In that case, you may incur costs
(such as brokerage commissions) converting the securities into
cash. You should be aware that you may have to pay taxes on your
redemption proceeds.
Your account balance with the Fund may be subject to a $500
minimum. If so, the Fund reserves the right to close your account
if it falls below $500 because of redemptions. You will have 60
days to make an additional investment. If you do not increase
your balance, the Fund may close your account and send the
proceeds to you. Your shares will be sold at NAV on the day your
account was closed.
REINSTATING RECENTLY SOLD SHARES
For 90 days after you sell your Class A shares, the Fund permits
you to repurchase Class A shares in the Fund, up to the dollar
amount of shares redeemed, without paying any sales charges. To
take advantage of this reinstatement privilege, you must notify
your Shareholder Servicing Agent in writing at the time you wish
to repurchase the shares.
EXCHANGES
You may exchange Fund shares for 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 hold your shares through a Shareholder Servicing Agent, your
Agent. You may place exchange orders by telephone if your account
application permits. The transfer agent or your Shareholder
Servicing Agent can provide you with more information, including
a prospectus for any fund that may be acquired through an
exchange.
The exchange will be based on the relative NAVs of each fund the
next time they are determined after your order is accepted by the
Fund's transfer agent, subject to any applicable sales charge.
You cannot exchange shares until the Fund has received payment in
federal funds for your shares.
When you exchange your 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 Class A 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 for exchange. 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.
ACCOUNT INQUIRIES
Please contact your Shareholder Servicing Agent. If you hold your
shares through the transfer agent, please call 1-800-625-4554.
DIVIDENDS
CitiFunds International Growth Portfolio pays substantially all
of its net income (if any) from dividends to its shareholders of
record as a dividend semiannually on or about the last day of
June and December.
The Fund's net realized short-term and long-term capital gains,
if any, will be distributed to Fund shareholders semi-annually.
The Fund may also make additional distributions to shareholders
to the extent necessary to avoid the application of the 4%
non-deductible excise tax on certain undistributed income and net
capital gains of mutual funds.
Unless you choose to receive your dividends in cash, you will
receive them as full and fractional additional Fund shares.
TAX MATTERS
This discussion of federal taxes is very general. You should
consult your own tax adviser about your particular situation, and
the status of your account under state and local 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 you may be able to claim an itemized
deduction, or a tax credit, for your portion of such taxes after
recognizing a deemed distribution equal to your 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. Each year the Fund will
mail you a report of your distributions for the prior year and
how they are treated for federal tax purposes.
Fund distributions will reduce the Fund's net asset value per
share. As a result, if you buy shares just before the Fund makes
a distribution, you may pay the full price for the shares and
then effectively receive a portion of the purchase price back as
a taxable distribution.
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 that
are made to persons who are not citizens or residents of the
United States. Fund distributions received by non-U.S. persons
also may be subject to tax under the laws of their own
jurisdictions.
TAXABILITY OF TRANSACTIONS. Any time you sell or exchange shares,
it is considered a taxable event for you. Depending on the
purchase price and the sale price of the shares you sell or
exchange, you may have a gain or a loss on the transaction. You
are responsible for any tax liabilities generated by your
transaction.
----------------------
MANAGEMENT OF THE FUND
----------------------
Management of the Fund
INVESTMENT ADVISER
CitiFunds International Growth Portfolio draws on the strength
and experience of Citibank. Citibank is the investment adviser
of the Fund, and subject to policies set by the Fund's
Trustees, Citibank makes investment decisions. Citibank has
been managing money since 1822. With its affiliates, it
currently manages more than $351 billion in assets worldwide.
Citibank, with headquarters at 153 East 53rd Street, New York,
New York, is a wholly-owned subsidiary of Citigroup Inc.
"CitiFunds" is a service mark of Citicorp.
Citibank and its affiliates, including their directors,
officers or employees, may have banking and investment banking
relationships with the issuers of securities that are held in
the Fund. They may also own the securities of these issuers.
However, in making investment decisions for the Fund, Citibank
does not obtain or use material inside information acquired by
any division, department or affiliate of Citibank in the
course of those relationships. Citibank and its affiliates may
have loans outstanding that are repaid with proceeds of
securities purchased by the Fund.
Matthew Bowyer, a Vice President of Citibank, has managed the
Fund since February 1999. Mr. Bowyer is a Senior Portfolio
Manager and Cross Border Equity Strategist who has been
responsible for managing global equity and balanced portfolios
at Citibank since mid 1996. Prior to that he ran a
quantitative research group, providing portfolio and market
analysis to Citibank's equity and fixed income teams in
London. Mr. Bowyer has 14 years of investment management
experience at Citibank.
ADVISORY FEES
For the Fund's fiscal year ended December 31, 1999, Citibank
received management fees totaling 1% of the Fund's average
daily net assets, after waivers.
-------------------
MORE ABOUT THE FUND
-------------------
More About the Fund
The Fund's goal, principal investments and risks are
summarized in FUND AT A GLANCE. More information on
investments, investment strategies and risks appears below.
PRINCIPAL INVESTMENT STRATEGIES
The Fund's principal investment strategies are described
below. The Fund may use other strategies and invest in other
securities that are described in the Statement of Additional
Information. However, the Fund may not use all of the
strategies and techniques or invest in all of the types of
securities described in this Prospectus or in the Statement of
Additional Information. The Fund's goals may be changed
without shareholder approval. Of course, there can be no
assurance that the Fund will achieve its goals.
CitiFunds International Growth Portfolio invests primarily in
the common stocks of foreign companies that the Fund's
portfolio managers believe have above-average prospects for
growth, including companies in developing countries. In
managing the Fund, Citibank looks for well-established
companies with medium to large capitalizations (typically $750
million or more), superior management teams and histories of
above-average revenues and earnings growth. Citibank seeks
opportunities to invest in foreign economies that are growing
faster than the U.S. economy.
In addition to common stocks, the Fund may invest in other
equity securities including rights to purchase common stocks
as well as securities with common stock characteristics, such
as securities convertible into common stock, trust or limited
partnership interests, 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). Generally, the Fund invests in a number of
different countries and under normal circumstances, the Fund
invests at least 65% of its assets in equity securities of
companies in at least three foreign markets. The Fund may
invest in preferred stock or warrants, and also, to a limited
extent, purchase shares in other investment companies,
including closed end investment companies that invest in
foreign securities.
The Fund may, but is not required to, buy debt securities of
foreign issuers. Long-term debt securities must be investment
grade at the time of purchase, meaning they are rated at least
Baa by Moody's or BBB by Standard & Poor's or, if unrated, of
comparable quality in the portfolio managers' opinion. After
the Fund buys a bond, 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 most
fixed income securities, they historically have produced
higher levels of total return.
- --------------------------------------------------------------------------------
The Fund generally invests in securities that are sold on
securities exchanges, although it may also purchase securities
which are not registered for sale to the general public, or,
to a limited extent, securities that are not readily
marketable.
The Fund may hold cash pending investment, and may invest in
money market instruments, repurchase agreements and reverse
repurchase agreements for cash management purposes. The Fund
may also lend its portfolio securities or sell its securities
short, as long as, in the case of a short sale, the Fund owns,
or has the right to obtain, the securities being sold short.
The Fund may, but is not required to, enter into forward
currency exchange contracts for the purchase or sale of
foreign currency for hedging purposes. A currency exchange
contract allows the Fund to fix a definite price in dollars
for securities of non-U.S. issuers that the Fund buys and
sells.
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
U.S. 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 Equity Portfolio, having the same
investment goals and strategies as the Fund. International
Equity Portfolio buys, holds and sells securities in
accordance with these goals and strategies. Unless otherwise
indicated, references to the Fund in this Prospectus include
the underlying fund. The Fund may stop investing in its
underlying mutual fund at any time, and will do so if the
Fund's Trustees believe that to be in the best interests of
the Fund's shareholders. The Fund could then invest in another
mutual fund or pooled investment vehicle or invest directly in
securities.
MANAGEMENT STYLE. Managers of mutual funds use different
styles when selecting securities to purchase and to sell.
Citibank's portfolio managers seek to add value primarily
through selection of companies believed to be reasonably
valued compared to their long-term earnings potential. The
Fund's managers use fundamental analysis to find companies
that they believe have growth potential, and look first at a
particular company and then at the country in which the
company is located and the industry in which the company
participates. The managers eliminate stocks that they believe
are overpriced relative to a company's financial statements
and projections. The managers then analyze each company to
find those believed to have good management, solid product
lines, strong competitive positioning and attractive cash
flows. The portfolio managers use this same approach when
deciding which securities to sell. Securities are sold when
the Fund needs cash to meet redemptions, or when the managers
believe that better opportunities exist or that the security
no longer fits within the managers' overall strategies for
achieving the Fund's goals.
The Fund is actively managed. Although the portfolio managers
attempt to minimize portfolio turnover, from time to time the
Fund's annual portfolio turnover rate may exceed 100%. The
sale of securities may produce capital gains, which, when
distributed, are taxable to investors. Active trading may also
increase the amount of commissions or mark-ups the Fund pays
to brokers or dealers when it buys and sells securities. The
"Financial Highlights" section of this Prospectus shows the
Fund's historical portfolio turnover rate.
Citibank may use brokers or dealers for Fund transactions who
also provide brokerage and research services to the Fund or
other accounts over which Citibank or its affiliates exercise
investment discretion. The Fund may "pay up" for brokerage
services, meaning that it is authorized to pay a broker or
dealer who provides these brokerage and research services a
commission for executing a portfolio transaction which is
higher than the commission another broker or dealer would have
charged. However, the Fund will "pay up" only if Citibank
determines in good faith that the higher commission is
reasonable in relation to the brokerage and research services
provided, viewed in terms of either the particular transaction
or all of the accounts over which Citibank exercises
investment discretion.
RISKS
Investing in a mutual fund involves risk. Before investing,
you should consider the risks you will assume. Certain of
these risks are described below. Please note that there are
many other factors that could adversely affect your investment
and that could prevent the Fund from achieving its goals,
which are not described here. More information about risks
appears in the Fund's Statement of Additional Information.
The value of the Fund's shares will change daily as the value
of its underlying securities changes. This means that your
shares of the Fund may be worth more or less when you sell
them than when you bought them. You may lose money if you
invest in this Fund.
Please remember that an investment in the Fund is not a
deposit of Citibank and is not insured or guaranteed by the
Federal Deposit Insurance Corporation or any other government
agency.
MARKET RISK. This is the risk that the prices of securities
will rise or fall due to changing economic, political or
market conditions, or due to a company's individual situation.
Some securities held by the Fund may be quite volatile,
meaning that their prices can change significantly in a short
time.
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.
PORTFOLIO SELECTION. The success of the Fund's investment
strategy depends largely on Citibank's skill in assessing the
growth potential of companies in which the Fund invests. The
portfolio managers may fail to pick stocks that outperform the
market or that do as well as the market. In that case, you may
lose money, or your investment may not do as well as an
investment in another international equity fund.
GROWTH SECURITIES. Growth securities typically are quite
sensitive to market movements because their market prices tend
to reflect future expectations. When it appears those
expectations will not be met, the prices of growth securities
typically fall. The Fund may underperform certain other
international stock funds (those emphasizing value stocks, for
example) during periods when growth 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.
CREDIT RISK. The Fund may invest 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. If the credit quality of a security
deteriorates below investment grade, the Fund may continue to
hold this security, commonly known as a junk bond. The prices
of lower rated securities, especially junk bonds, often are
more volatile than those of higher rated securities. 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.
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.
CURRENCY EXCHANGE CONTRACTS. The Fund may use forward foreign
currency exchange contracts to hedge against adverse rate
changes. The Fund's use of forward foreign currency exchange
contracts may prevent the Fund from realizing profits on
favorable movements in exchange rates. The Fund's ability to
use currency exchange contracts successfully depends on a
number of factors, including the contracts being available at
prices that are not too costly, the availability of liquid
markets, and the ability of the Fund's portfolio managers to
accurately predict the direction of changes in currency
exchange rates. If these predictions are wrong, the Fund could
suffer greater losses than if the Fund had not entered into
the foreign currency exchange contracts. In addition, the Fund
could suffer losses if a counterparty to a contract does not
perform its obligations.
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.
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
--------------------
FINANCIAL HIGHLIGHTS
--------------------
Financial Highlights
The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal periods indicated. Certain information
reflects financial results for a single Class A and Class B Fund share. The
total returns in the table represent the rate that an investor would have
earned or lost on an investment in the Fund (assuming investment of all
dividends and distributions). This information has been audited by
PricewaterhouseCoopers LLP, whose report, along with the Fund's financial
statements, is included in the annual report which is incorporated by
reference in the Statement of Additional Information and which is available
upon request.
<TABLE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
<CAPTION>
CLASS A CLASS B
--------------------------------------------------------------- ------------------
January 4, 1999
Year Ended December 31, (Commencement of
--------------------------------------------------------------- Operations) to
1999 1998 1997 1996 1995 December 31, 1999
...................................................................................................................................
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period $12.60 $11.42 $11.79 $13.46 $11.44 $12.87
...................................................................................................................................
Income From Operations:
Net investment income (loss) (0.077) (0.009) 0.004* 0.028* 0.013* (0.095)
Net realized and unrealized gain
(loss) 4.452 1.996 0.592* 0.314* 2.055* 4.090
...................................................................................................................................
Total from operations 4.375 1.987 0.596 0.342 2.068 3.995
...................................................................................................................................
Less Distributions From:
Net investment income -- (0.008) (0.025) (0.021) (0.048) --
In excess of net investment
income -- (0.001) -- -- -- --
Net realized gain on investments (1.055) (0.798) (0.941) (1.991) -- (1.055)
...................................................................................................................................
Total from distributions (1.055) (0.807) (0.966) (2.012) (0.048) (1.055)
...................................................................................................................................
Net Asset Value, end of period $15.92 $12.60 $11.42 $11.79 $13.46 $15.81
...................................................................................................................................
Total return 35.66% 17.62% 5.15% 2.59% 18.08% 31.95%++
...................................................................................................................................
</TABLE>
<PAGE>
<TABLE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
<CAPTION>
CLASS A CLASS B
--------------------------------------------------------------- ------------------
January 4, 1999
Year Ended December 31, (Commencement of
--------------------------------------------------------------- Operations) to
1999 1998 1997 1996 1995 December 31, 1999
...................................................................................................................................
<S> <C> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $25,058 $21,132 $18,333 $32,589 $32,159 $ 323
Ratio of expenses to average net
assets (A) 1.75% 1.75% 1.75% 1.75% 1.75% 2.50%+
Ratio of net investment income
(loss) to average net assets (0.49)% (0.17)% 0.03% 0.18% 0.10% (1.24)%+
Portfolio turnover (B) 68% 118% 99% 109% 51% 68%
Note: If agents of the Fund for the periods indicated had not voluntarily waived a portion of their fees and expenses, the net
investment income (loss) per share and the ratios would have been as follows:
Net investment income (loss) per
share $(0.210) $(0.011) $(0.004)* $(0.002)* $0.013* $(0.108)
RATIOS:
Expenses to average net assets (A) 1.90% 1.80% 1.82% 1.94% 1.75% 2.70%+
Net investment income (loss) to
average net assets (0.64)% (0.22)% (0.04)% (0.01)% 0.10% (1.44)%+
* The per share amounts were computed using a monthly average number of shares outstanding during the period.
(A) Includes the Fund's share of International Equity Portfolio allocated expenses.
(B) The portfolio turnover rates represent the rate of portfolio activity of International Equity Portfolio, the underlying
portfolio through which the Fund invests.
+ Annualized.
++ Not annualized.
</TABLE>
<PAGE>
--------
APPENDIX
--------
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 or shareholder servicing agent
[] employees and retired employees of Citibank and its affiliates,
CFBDS, Inc. and its affiliates, any Shareholder Servicing Agent
and its affiliates and certain other Fund service providers
(including immediate families of any of the foregoing)
[] investors participating in a fee-based or promotional arrangement
sponsored or advised by Citibank or its affiliates
[] investors participating in a rewards program that offers Fund
shares as an investment option based on an investor's balances in
selected Citigroup Inc. products and services
[] employees of members of the National Association of Securities
Dealers, Inc., provided that such sales are made upon the
assurance of the purchaser that the purchase is made for
investment purposes and that the securities will not be resold
except through redemption or repurchase
[] separate accounts used to fund certain unregistered variable
annuity contracts
[] direct rollovers by plan participants from a 401(k) plan offered
to Citigroup employees
[] shareholder accounts established through a reorganization or
similar form of business combination approved by the Fund's Board
of Trustees or by the Board of Trustees of any other CitiFund or
mutual fund managed or advised by Citibank (all of such funds
being referred to herein as CitiFunds), the terms of which
entitle those shareholders to purchase shares of the Fund or any
other CitiFund at net asset value without a sales charge
[] employee benefit plans qualified under Section 401(k) of the
Internal Revenue Code with accounts outstanding on January 4,
1999
[] employee benefit plans qualified under Section 401 of the
Internal Revenue Code, including salary reduction plans qualified
under Section 401(k) of the Code, subject to minimum requirements
as may be established by CFBDS with respect to the amount of
purchase; currently, the amount invested by the qualified plan in
the Fund or in any combination of CitiFunds must total a minimum
of $1 million (qualified plans investing through certain programs
sponsored by Citibank or its affiliates are not subject to this
minimum)
[] accounts associated with Copeland Retirement Programs
[] investors purchasing $500,000 or more of 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
<PAGE>
The Statement of Additional Information (SAI) provides more
details about the Fund and its policies. The SAI is
incorporated by reference into this Prospectus and is legally
part of it.
Additional information about the Fund's investments is
available in the Fund's Annual and Semi-Annual Reports to
Shareholders. In the Fund's Annual Report, you will find a
discussion of the market conditions and investment strategies
that significantly affected the Fund's performance.
The Annual and Semi-Annual Reports for the Fund list its
portfolio holdings and describe its performance.
To obtain free copies of the SAI and the Annual and Semi-
Annual Reports or to make other inquiries, please call toll-
free 1-800-625-4554.
The SAI, reports, and other information about the Fund are
also available on the Edgar Database on the SEC Internet site
at http://www.sec.gov. Information about the Fund (including
the SAI) can also be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. You can get information on
the operation of the Public Reference Room by calling the SEC
at 1-202-942-8090. Copies may also be obtained upon payment of
a duplicating fee by electronic request to [email protected],
or by writing to the SEC's Public Reference Section,
Washington, DC 20549-6009.
SEC File Number: 811-6154 CFP/IGP 5/00
<PAGE>
Statement of
Additional Information
May 1, 2000
CITIFUNDS(SM) INTERNATIONAL GROWTH PORTFOLIO
CitiFunds(SM) International Growth Portfolio (the "Fund") is a series of
CitiFunds(SM) International Trust (the "Trust"). The address and telephone
number of the Trust are 21 Milk Street, Boston, MA 02109, (617) 423-1679. The
Trust invests all of the investable assets of the Fund in International Equity
Portfolio (the "Portfolio"), which is a series of The Premium Portfolios, a
trust organized under the laws of the State of New York (the "Portfolio
Trust"). The address of the Portfolio Trust is Elizabethan Square, George
Town, Grand Cayman, British West Indies.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, CITIBANK, N.A. OR ANY OF ITS AFFILIATES, ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER GOVERNMENT AGENCY, AND INVOLVE
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
TABLE OF CONTENTS PAGE
- ----------------- ----
1. The Trust ........................................................... 2
2. Investment Objective and Policies; Special Information Concerning
Investment Structure .............................................. 2
3. Description of Permitted Investments and Investment Practices ....... 3
4. Investment Restrictions ............................................. 10
5. Performance Information ............................................. 11
6. Determination of Net Asset Value; Valuation of Securities ........... 13
7. Additional Information on the Purchase and Sale of Fund Shares and
Shareholder Programs .............................................. 14
8. Management .......................................................... 21
9. Portfolio Transactions .............................................. 29
10. Description of Shares, Voting Rights and Liabilities ................ 30
11. Tax Matters ......................................................... 31
12. Financial Statements ................................................ 33
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Fund's Prospectus, dated May 1, 2000, by which shares of the Fund are offered.
This Statement of Additional Information should be read in conjunction with
the Prospectus. This Statement of Additional Information incorporates by
reference the financial statements described on page 33 hereof. These
financial statements can be found in the Fund's Annual Report to Shareholders.
An investor may obtain copies of the Fund's Prospectus and Annual Report
without charge by calling toll-free 1-800-625-4554.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
<PAGE>
1. THE TRUST
CitiFunds International Trust is an open-end management investment company
that was organized as a business trust under the laws of the Commonwealth of
Massachusetts on August 7, 1990. The Trust was called Landmark International
Equity Fund until its name was changed to Landmark International Funds
effective May 5, 1995. Effective January 7, 1998, the Trust's name was changed
to CitiFunds International Trust. This Statement of Additional Information
describes CitiFunds International Growth Portfolio (the "Fund"), which is a
series of the Trust. Prior to October 5, 1998, the Fund was called CitiFunds
International Equity Portfolio, and prior to March 2, 1998 the Fund was called
Landmark International Equity Fund. References in this Statement of Additional
Information to the "Prospectus" of the Fund are to the Prospectus, dated May
1, 2000.
The Fund is a diversified fund. The Fund is permitted to seek its
investment objectives by investing all or a portion of its assets in one or
more investment companies to the extent not prohibited by the Investment
Company Act of 1940, as amended (the "1940 Act"), the rules and regulations
thereunder, and exemptive orders granted under the 1940 Act. Currently, the
Fund invests all of its investable assets in International Equity Portfolio
(the "Portfolio"). The Portfolio is a series of The Premium Portfolios (the
"Portfolio Trust") and is an open-end, diversified management investment
company. The Portfolio has the same investment objectives and policies as the
Fund.
Under the 1940 Act, a diversified management investment company must
invest at least 75% of its assets in cash and cash items, U.S. Government
securities, investment company securities and other securities limited as to
any one issuer to not more than 5% of the total assets of the investment
company and not more than 10% of the voting securities of the issuer.
Because the Fund invests through the Portfolio, all references in this
Statement of Additional Information to the Fund include the Portfolio, unless
the context otherwise requires. In addition, references to the Trust include
the Portfolio Trust, unless the context otherwise requires.
Citibank, N.A. ("Citibank" or the "Adviser") is investment adviser to the
Portfolio. The Adviser manages the investments of the Portfolio from day to
day in accordance with the Portfolio's investment objectives and policies. The
selection of investments for the Portfolio and the way it is managed depend on
the conditions and trends in the economy and the financial marketplaces.
CFBDS, Inc. ("CFBDS"), the administrator of the Fund (the
"Administrator"), and Signature Financial Group (Cayman) Ltd. ("SFG"), the
administrator of the Portfolio (the "Portfolio Administrator"), supervise the
overall administration of the Fund and the Portfolio, respectively. The Boards
of Trustees of the Trust and the Portfolio Trust provide broad supervision
over the affairs of the Fund and the Portfolio, respectively. Shares of the
Fund are continuously sold by CFBDS, the Fund's distributor (the
"Distributor"), only to investors who are customers of a financial
institution, such as a federal or state-chartered bank, trust company, savings
and loan association or savings bank, or a securities broker, that has entered
into a shareholder servicing agreement with the Trust (collectively,
"Shareholder Servicing Agents").
2. INVESTMENT OBJECTIVE AND POLICIES;
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE
The investment objective of the Fund is to promote long-term capital
growth. Dividend income, if any, is incidental to this investment objective.
The investment objective of the Fund may be changed without approval by
the Fund's shareholders, but shareholders will be given written notice at
least 30 days before any change is implemented. Of course, there can be no
assurance that the Fund will achieve its investment objective.
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 its investment
objective and policies, 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 all of the investments and utilize
all of the investment techniques described below and in the Prospectus. The
selection of investments and the utilization of investment techniques depend
on, among other things, the Adviser's investment strategies for the Fund,
conditions and trends in the economy and financial markets and investments
being available on terms that, in the Adviser's opinion, make economic sense.
The Prospectus contains a discussion of the principal investment
strategies of the Fund and the principal risks of investing in the Fund. The
following supplements the information contained in the Prospectus concerning
the investment policies and techniques of the Fund. The policies described
herein are not fundamental and may be changed without shareholder approval.
As a non-fundamental policy, at least 65% of the value of the Fund's total
assets will be invested in equity securities of issuers organized in at least
three countries other than the United States. While the Fund's policy is to
invest primarily in common stocks of companies organized outside the United
States ("non-U.S. issuers") believed to possess better than average prospects
for growth, appreciation may be sought in other types of securities,
principally of non-U.S. issuers, such as fixed income securities, convertible
and non-convertible bonds, preferred stocks and warrants, when relative values
make such purchases appear attractive either as individual issues or as types
of securities in certain economic environments. There is no formula as to the
percentage of assets that may be invested in any one type of security.
REPURCHASE AGREEMENTS
The Fund may invest in repurchase agreements collateralized by securities
in which the Fund may otherwise invest. Repurchase agreements are agreements
by which the Fund purchases a security and simultaneously commits to resell
that security to the seller (which is usually a member bank of the U.S.
Federal Reserve System or a member firm of the New York Stock Exchange (or a
subsidiary thereof)) at an agreed-upon date within a number of days
(frequently overnight and usually not more than seven days) from the date of
purchase. The resale price reflects the purchase price plus an agreed-upon
market rate of interest which is unrelated to the coupon rate or maturity of
the purchased security. A repurchase agreement involves the obligation of the
seller to pay the agreed upon price, which obligation is in effect secured by
the value of the underlying security, usually U.S. Government or Government
agency issues. Under the 1940 Act, repurchase agreements may be considered to
be loans by the buyer. The Fund's risk is limited to the ability of the seller
to pay the agreed-upon amount on the delivery date. If the seller defaults,
the underlying security constitutes collateral for the seller's obligation to
pay although the Fund may incur certain costs in liquidating this collateral
and in certain cases may not be permitted to liquidate this collateral. All
repurchase agreements entered into by the Fund are fully collateralized, with
such collateral being marked to market daily.
REVERSE REPURCHASE AGREEMENTS
The Fund may enter into reverse repurchase agreements, subject to the
Fund's investment restriction on borrowing. Reverse repurchase agreements
involve the sale of securities held by the Fund and the agreement by the Fund
to repurchase the securities at an agreed-upon price, date and interest
payment. When the Fund enters into reverse repurchase transactions, securities
of a dollar amount equal in value to the securities subject to the agreement
will be segregated. The segregation of assets could impair the Fund's ability
to meet its current obligations or impede investment management if a large
portion of the Fund's assets are involved. Reverse repurchase agreements are
considered to be a form of borrowing by the Fund. In the event of the
bankruptcy of the other party to a reverse repurchase agreement, the Fund
could experience delays in recovering the securities sold. To the extent that,
in the meantime, the value of the securities sold has changed, the Fund could
experience a loss.
RULE 144A SECURITIES
Consistent with applicable investment restrictions, the Fund may purchase
securities that are not registered under the Securities Act of 1933 (the
"Securities Act"), but can be offered and sold to "qualified institutional
buyers" under Rule 144A under the Securities Act ("Rule 144A securities").
However, the Fund will not invest more than 15% of its net assets (taken at
market value) in illiquid investments, which include securities for which
there is no readily available market, securities subject to contractual
restrictions on resale and Rule 144A securities, unless, in the case of Rule
144A securities, the Board of Trustees determines, based on the trading
markets for the specific Rule 144A security, that it is liquid. The Trustees
have adopted guidelines and, subject to oversight by the Trustees, have
delegated to the Adviser the daily function of determining and monitoring
liquidity of Rule 144A securities. The Trustees, however, retain oversight and
are ultimately responsible for the determinations.
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.
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.
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.
SECURITIES OF NON-U.S. ISSUERS
The Fund invests 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, limitations 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. securities 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 issuers 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. 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.
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.
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 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 also may, but is not obligated to, 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 does not currently intend to speculate in currency exchange rates or
forward contracts.
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. 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 Adviser 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 projection of a short-
term hedging strategy is highly uncertain. 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 Portfolio
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 has established procedures consistent with policies of the
Securities and Exchange Commission (the "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 or that the Fund otherwise covers its position in accordance
with applicable regulations and policies.
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 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.
The writing of put or call options on non-U.S. currencies by the Fund 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 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 Adviser.
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, if correctly used, may
minimize the risk of loss due to a decline in the value of the hedged
currency, they do not eliminate the risk of loss and also tend to limit any
potential gain which might result should the value of such currency increase.
SHORT SALES "AGAINST THE BOX"
In a short sale, the Fund sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. The
Fund, in accordance with applicable investment restrictions, may engage in
short sales only if at the time of the short sale it owns or has the right to
obtain, at no additional cost, an equal amount of the security being sold
short. This investment technique is known as a short sale "against the box."
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. If the Fund engages in a short sale, the collateral for the short
position is maintained for the Fund by the custodian or qualified sub-
custodian. While the short sale is open, an amount of securities equal in kind
and amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities is maintained in a segregated
account for the Fund. These securities constitute the Fund's long position.
The Fund does not engage in short sales against the box for investment
purposes. The Fund may, however, make a short sale against the box as a hedge,
when it believes that the price of a security may decline, causing a decline
in the value of a security owned by the Fund (or a security convertible or
exchangeable for such security). In such case, any future losses in the Fund's
long position should be reduced by a gain in the short position. Conversely,
any gain in the long position should be reduced by a loss in the short
position. The extent to which such gains or losses are reduced depends upon
the amount of the security sold short relative to the amount the Fund owns.
There are certain additional transaction costs associated with short sales
against the box, but the Fund endeavors to offset these costs with the income
from the investment of the cash proceeds of short sales.
The Adviser does not expect that more than 40% of the Fund's total assets
would be involved in short sales against the box. The Adviser does not
currently intend to engage in such sales.
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). Where the borrower
provides the Fund with collateral consisting of U.S. Treasury obligations, the
borrower is also obligated to pay the Fund a fee for use of the borrowed
securities. The Fund would not, however, have the right to vote any securities
having voting rights during the existence of the loan, but would call the loan
in anticipation of an important vote to be taken among holders of the
securities or of the giving or withholding of their consent on a material
matter affecting the investment. As with other extensions of credit, there are
risks of delay in recovery or even loss of rights in the collateral should the
borrower fail financially. However, the loans would be made only to entities
deemed by the Adviser to be of good standing. In addition, the Fund could
suffer loss if the borrower terminates the loan and the Fund is forced to
liquidate investments in order to return the cash collateral to the buyer. The
Adviser will make loans only when, in the judgment of the Adviser, the
considerations which can be earned currently from loans of this type justifies
the attendant risk. If the Adviser determines to make loans, it is not
intended that the value of the securities loaned would exceed 33 1/3% of the
market value of the Fund's total net 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 but the Fund may sell them before the settlement
date. When the Fund commits to purchase a security on a "when-issued" or on a
"forward delivery" basis, it sets up procedures consistent with SEC policies.
Since those policies currently require that an amount of the Fund's assets
equal to the amount of the purchase be held aside or segregated to be used to
pay for the commitment, the Fund expects always to have cash or liquid
securities sufficient to cover any commitments or to limit any potential risk.
However, even though the Fund does not intend to make such purchases for
speculative purposes and intends to adhere to the provisions of SEC policies,
purchases of securities on such bases may involve more risk than other types
of purchases. The when-issued securities are subject to market fluctuation,
and no interest accrues on the security to the purchaser during this period.
The payment obligation and the interest rate that will be received on the
securities are each fixed at the time the purchaser enters into the
commitment. Purchasing obligations on a when-issued basis is a form of
leveraging and can involve a risk that the yields available in the market when
the delivery takes place may actually be higher than those obtained in the
transactions itself. In that case, there could be an unrealized loss at the
time of delivery. An increase in the percentage of the Fund's assets committed
to the purchase of securities on a "when-issued basis" may increase the
volatility of its net asset value.
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, each have adopted the following policies which may not be
changed with respect to the Fund or the Portfolio, as the case may be, without
approval by holders of a majority of the outstanding voting securities of the
Fund or the 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 Portfolio nor the Fund may:
(1) Borrow money, except that as a temporary measure for extraordinary
or emergency purposes it may borrow from banks in an amount not to exceed
1/3 of the current value of its respective net assets, including the
amount borrowed (and neither the Portfolio nor the Fund may purchase any
securities at any time at which borrowings exceed 5% of the total assets
of the Portfolio or the Fund, taken at market value). It is intended that
the Fund or 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) Purchase any security or evidence of interest therein on margin,
except that the Portfolio may obtain such short term credit as may be
necessary for the clearance of purchases and sales of securities.
(3) Underwrite securities issued by other persons, except that all the
assets of the Fund may be invested in another registered investment
company having the same investment objectives and policies and
substantially the same investment restrictions as those with respect to
the Fund (a "Qualifying Portfolio") and except insofar as the Portfolio
may technically be deemed an underwriter under the Securities Act in
selling a security.
(4) Make loans to other persons except (a) through the lending of its
portfolio securities, but not in excess of 33 1/3% of the Fund's or
Portfolio's net assets, (b) through the use of fixed time deposits or
repurchase agreements 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; for purposes of
this paragraph 4 the purchase of short-term commercial paper or a portion
of an issue of debt securities which are part of an issue to the public
shall not be considered the making of a loan.
(5) 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 investing in
futures contracts, 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 and the Portfolio).
(6) With respect to 75% of the Fund's or Portfolio's total assets,
purchase securities of any issuer if such purchase at the time thereof
would cause more than 5% of the Fund's or the Portfolio's assets (taken at
market value) to be invested in the securities of such issuer (other than
securities or obligations issued or guaranteed by the United States or any
agency or instrumentality of the United States); 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 further provided that the Fund may invest
all or substantially all of its assets in a Qualifying Portfolio.
(7) With respect to 75% of the total assets of the Fund or Portfolio,
purchase securities of any issuer if such purchase at the time thereof
would cause more than 10% of the voting securities of such issuer to be
held by the Fund, except that all the assets of the Fund may be invested
in a Qualifying Portfolio.
(8) Concentrate its investments in any particular industry, but the
Fund may invest all of its assets in a Qualifying Portfolio (except that
positions in futures or options contracts shall not be subject to this
restriction).
(9) 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, except as appropriate to
evidence a debt incurred without violating Investment Restriction (1)
above.
For purposes of restriction (1) above, arrangements with respect to
securities lending are not treated as borrowing.
As an operating policy, the Fund will not invest more than 15% of its net
assets (taken at market value) in securities for which there is no readily
available market. This policy is not fundamental and may be changed without
shareholder approval.
If a percentage or rating restriction on investment or utilization of
assets (taken at market value) set forth above or referred to in the Fund's
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 will not be considered a violation of policy. If the value
of the Fund's holdings of illiquid securities at any time exceeds the
percentage limitation applicable at the time of acquisition due to subsequent
fluctuations in value or other reasons, the Board of Trustees will consider
what actions, if any, are appropriate to maintain adequate liquidity.
5. PERFORMANCE INFORMATION
Fund performance may be quoted in advertising, shareholder reports and
other communications in terms of yield, effective yield or total rate of
return. All performance information is historical and is not intended to
indicate future performance. Yields and total rates of return fluctuate in
response to market conditions and other factors, and the value of the Fund's
shares when redeemed may be more or less than their original cost.
The Fund may provide its period, annualized, cumulative, and average
annual "total rates of return." The "total rate of return" refers to the
change in the value of an investment in the Fund over a stated period,
reflects any change in net asset value per share and is compounded to include
the value of any shares purchased with any dividends or capital gains declared
during such period. Period total rates of return may be "annualized." An
"annualized" total rate of return assumes that the period total rate of return
is generated over a one-year period. Average annual total return figures
represent the average annual percentage change over the specified period.
Cumulative total return figures are not annualized and represent the aggregate
percentage or dollar value change over a stated period of time.
A total rate of return quotation for the Fund is calculated for any period
by (a) dividing (i) the sum of the net asset value per share on the last day
of the period and the net asset value per share on the last day of the period
of shares purchasable with dividends and capital gains distributions declared
during such period with respect to a share held at the beginning of such
period and with respect to shares purchased with such dividends and capital
gains distributions, by (ii) the public offering price on the first day of
such period, and (b) subtracting 1 from the result. Any annualized total rate
of return quotation is calculated by (x) adding 1 to the period total rate of
return quotation calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting
1 from the result.
Average annual total return is a measure of the Fund's performance over
time. It is determined by taking the Fund's performance over a given period
and expressing it as an average annual rate. The average annual total return
quotation is computed in accordance with a standardized method prescribed by
SEC rules. The average annual total return for a specific period is found by
taking a hypothetical $1,000 initial investment in Fund shares on the first
day of the period, reducing the amount to reflect the maximum sales charge,
and computing the redeemable value of that investment at the end of the
period. The redeemable value is then divided by the initial investment, and
this quotient is taken to the Nth root (N representing the number of years in
the period) and 1 is subtracted from the result, which is then expressed as a
percentage. The calculation assumes that all income and capital gains
distributions have been reinvested in Fund shares at net asset value on the
reinvestment dates during the period.
Cumulative total return for a specific period is calculated by first
taking a hypothetical initial investment in Fund shares on the first day of a
period, deducting (as applicable) the maximum sales charge, and computing the
"redeemable value" of that investment at the end of the period. The cumulative
total return percentage is then determined by subtracting the initial
investment from the redeemable value and dividing the remainder by the initial
investment and expressing the result as a percentage. The calculation assumes
that all income and capital gains distributions by the Fund have been
reinvested at net asset value on the reinvestment dates during the period.
Cumulative total return may also be shown as the increased dollar value of the
hypothetical investment over the period.
Average annual and cumulative total returns may also be presented in
advertising and sales literature without the inclusion of sales charges. Total
return calculations that do not include the effect of a sales charge would be
reduced if such charge were included.
The Fund may provide annualized "yield" and "effective yield" quotations.
The "yield" of the Fund refers to the income generated by an investment in the
Fund over a 30-day or one-month period (which period is stated in any such
advertisement or communication). This income is then annualized, that is, the
amount of income generated by the investment over that period is assumed to be
generated each month over a one-year period and is shown as a percentage of
the public offering price on the last day of that period. The "effective
yield" is calculated similarly, but when annualized the income earned by the
investment during that 30-day or one-month period is assumed to be reinvested.
The effective yield is slightly higher than the yield because of the
compounding effect of this assumed reinvestment. A "yield" quotation, unlike a
total rate of return quotation, does not reflect changes in net asset value.
Any fees charged by a shareholder's Shareholder Servicing Agent will reduce
that shareholder's net return on his or her investment.
A current yield quotation for the Fund consists of an annualized
historical yield, carried at least to the nearest hundredth of one percent,
based on a 30 calendar day or one month period and is calculated by (a)
raising to the sixth power the sum of 1 plus the quotient obtained by dividing
the Fund's net investment income earned during the period by the product of
the average daily number of shares outstanding during the period that were
entitled to receive dividends and the maximum public offering price per share
on the last day of the period, (b) subtracting 1 from the result, and (c)
multiplying the result by 2.
In computing total rates of return and yield quotations, all Fund expenses
are included. However, fees that may be charged directly to a shareholder by
that shareholder's broker dealer, Shareholder Servicing Agent or other
financial intermediaries are not included. Of course, any such fees will
reduce the shareholder's net return on investment.
Set forth below is average annual 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. Prior to January 4,
1999, there were no sales charges on the purchase or sale of the Fund's
shares. The Class A share performance for past periods has therefore been
adjusted to reflect the maximum sales charge currently in effect. The Fund
offered Class B shares beginning January 4, 1999. For periods prior to that
date, Class B share performance includes the performance of the Fund's Class A
shares, adjusted to take into account the deduction of the Class B contingent
deferred sales charge, which declines over six years from 5% to 0%, rather
than the initial sales charge applicable to Class A shares. This blended
performance has not been adjusted to take into account differences in class-
specific operating expenses. Because operating expenses of Class B shares are
higher than those of Class A shares, this blended Class B share performance is
higher than the performance of Class B shares would have been had Class B
shares been offered for the entire period.
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 otherwise would have been.
<TABLE>
<CAPTION>
REDEEMABLE VALUE
AVERAGE OF A HYPOTHETICAL
ANNUAL $1,000 INVESTMENT
TOTAL RATE AT THE END OF
OF RETURN THE PERIOD
--------- -----------------
<S> <C> <C>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
CLASS A
March 1, 1991 (commencement of operations) to December 31, 1999 ....... 9.45% $2,222.27
Five years ended December 31, 1999 .................................... 14.06% $1,930.90
One year ended December 31, 1999 ...................................... 28.87% $1,288.73
CLASS B
January 4, 1999 (commencement of operations) to December 31, 1999 ..... 25.35% $1,253.52
Five years ended December 31, 1999 .................................... 13.24% $1,861.90
One year ended December 31, 1999 ...................................... 28.03% $1,280.28
</TABLE>
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. 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 may not reflect 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 during which the New York Stock Exchange (the "Exchange") is open for
trading (a "Business Day"). As of the date of this Statement of Additional
Information, the Exchange is open for trading every weekday except for the
following holidays (or the days on which they are observed): New Year's Day,
Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. This
determination of net asset value is made once each day as of the close of
regular trading on such Exchange (normally 4:00 p.m. Eastern time) by adding
the market value of all securities and other assets attributable to 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 Shareholder Servicing Agent prior to
its calculation.
The value of the Portfolio's net assets (i.e. the value of its securities
and other assets less its liabilities, including expenses payable or accrued)
is determined at the same time and on the same days as the net asset value per
share of the Fund is determined. The net asset value of the Fund's investment
in the Portfolio is equal to the Fund's pro rata share of the net assets of
the Portfolio.
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 that
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. 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
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 any premium.
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 shareholder servicing agent fees, and each class has exclusive voting
rights with respect to any distribution plan or administrative services 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 fee of up to 0.10% which is currently being waived on a voluntary
basis, an additional fee of up to 0.05% for expenses incurred in connection
with print or electronic media advertising, and a 0.25% shareholder servicing
agent fee. See "Distributor." Set forth below is an example of the method of
computing the offering price of the Class A shares of the Fund. The example
assumes a purchase on December 31, 1999 of Class A shares from the Fund
aggregating less than $25,000 subject to the schedule of sales charges set
forth below.
<TABLE>
<CAPTION>
CITIFUNDS
INTERNATIONAL
GROWTH PORTFOLIO
----------------
<S> <C>
Net Asset Value per share ............................................. $15.92
Per Share Sales Charge - 5.00% of public offering price
(5.26% of net asset value per share) ................................ $ 0.84
Per Share Offering Price to the Public ................................ $16.76
</TABLE>
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 to shareholder
servicing agents which are broker-dealers. The Distributor keeps the full
applicable sales charge with respect to Class A shares sold by shareholder
servicing agents that are not broker-dealers.
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
AMOUNT OF AS A % OF AS A % OF AS A % 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%
</TABLE>
- ----------
*A contingent deferred sales charge may apply in certain instances. See "Sales
Charge Waivers -- Class A" below.
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 Shareholder Servicing Agents which are broker-
dealers of 4.50% of the offering price of Class B shares sold by these
entities. The Distributor keeps the full applicable sales charge with respect
to Class B shares sold by Shareholder Servicing Agents that are not broker-
dealers. 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.
ADDITIONAL DEALER CONCESSIONS
From time to time, the Distributor or Citibank, at its expense, may
provide additional commissions, compensation or promotional incentives
("concessions") to dealers that sell or arrange for the sale of shares of the
Fund. Such concessions provided by the Distributor or Citibank may include
financial assistance to dealers in connection with pre-approved conferences or
seminars, sales or training programs for invited registered representatives
and other employees, payment for travel expenses, including lodging, incurred
by registered representatives and other employees for such seminars or
training programs, seminars for the public, advertising and sales campaigns
regarding the Fund, and/or other dealer-sponsored events. From time to time,
the Distributor or Citibank may make expense reimbursements for special
training of a dealer's registered representatives and other employees in group
meetings or to help pay the expenses of sales contests. Other concessions may
be offered to the extent not prohibited by state laws or any self-regulatory
agency, such as the NASD.
SALES CHARGE WAIVERS
In certain circumstances, the initial sales charge imposed on purchases of
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 goodwill with
persons or entities with which Citibank or the Distributor or their affiliates
have business relationships, or because the sales effort, if any, involved in
making such sales is negligible, or, in the case of certain CDSC waivers,
because the circumstances surrounding the sale of Fund shares were not
foreseeable or voluntary. These sales charge waivers may be modified or
discontinued at any time.
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
the following eligible purchasers:
[] tax exempt organizations under Section 501(c)(3-13) of the Internal Revenue
Code
[] trust accounts for which Citibank or any subsidiary or affiliate of
Citibank acts as trustee and exercises discretionary investment management
authority
[] accounts for which Citibank or any subsidiary or affiliate of Citibank
performs investment advisory services or charges fees for acting as
custodian
[] directors or trustees (and their immediate families), and retired directors
or trustees (and their immediate families), of any investment company for
which Citibank or any subsidiary or affiliate of Citibank serves as the
investment adviser or as a service or shareholder servicing agent
[] employees and retired employees of Citibank and its affiliates, CFBDS, Inc.
and its affiliates or any Shareholder Servicing Agent and its affiliates
(including immediate families of any of the foregoing)
[] investors participating in a fee-based or promotional arrangement sponsored
or advised by Citibank or its affiliates
[] investors participating in a rewards program that offers Fund shares as an
investment option based on an investor's balances in selected Citigroup
Inc. products and services
[] employees of members of the National Association of Securities Dealers,
Inc., provided that such sales are made upon the assurance of the purchaser
that the purchase is made for investment purposes and that the securities
will not be resold except through redemption or repurchase
[] separate accounts used to fund certain unregistered variable annuity
contracts
[] direct rollovers by plan participants from a 401(k) plan offered to
Citigroup employees
[] shareholder accounts established through a reorganization or similar form
of business combination approved by the Fund's Board of Trustees or by the
Board of Trustees of any other CitiFund or mutual fund managed or advised
by Citibank (all of such funds being referred to herein as CitiFunds) the
terms of which entitle those shareholders to purchase shares of the Fund or
any other CitiFund at net asset value without a sales charge
[] employee benefit plans qualified under Section 401(k) of the Internal
Revenue Code with accounts outstanding on January 4, 1999
[] employee benefit plans qualified under Section 401 of the Internal Revenue
Code, including salary reduction plans qualified under Section 401(k) of
the Code, subject to minimum requirements as may be established by CFBDS
with respect to the amount of purchase; currently, the amount invested by
the qualified plan in the Fund or in any combination of CitiFunds must
total a minimum of $1 million (qualified plans investing through certain
programs sponsored by Citibank or its affiliates are not subject to this
minimum)
[] accounts associated with Copeland Retirement Programs
[] investors purchasing $500,000 or more of 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, to
exchange Fund shares for shares of other CitiFunds, without, in many cases,
the payment of a sales charge or to provide for the automatic withdrawal of
cash. These programs may be changed or discontinued at any time. For more
information, please contact your Shareholder Servicing Agent.
REDUCED SALES CHARGE PLAN
A qualified group may purchase shares as a single purchaser under the
reduced sales charge plan. The purchases by the group are lumped together and
the sales charge is based on the lump sum. A qualified group must:
[] have been in existence for more than six months
[] have a purpose other than acquiring Fund shares at a discount
[] satisfy uniform criteria that enable CFBDS to realize economies of
scale in its costs of distributing shares
[] have more than ten members
[] be available to arrange for group meetings between representatives of
the Fund and the members
[] agree to include sales and other materials related to the Fund in its
publications and mailings to members at reduced or no cost to the
distributor
[] seek to arrange for payroll deduction or other bulk transmission of
investments to the Fund
LETTER OF INTENT
If an investor anticipates purchasing $25,000 or more of 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 front-
end sales charge as though the total quantity were invested in one lump sum by
completing a letter of intent on the terms described below. Subject to
acceptance by CFBDS, Inc., the Fund's distributor, and the conditions
mentioned below, each purchase will be made at a public offering price
applicable to a single transaction of the dollar amount specified in the
letter of intent.
[] The shareholder or, if the shareholder holds Fund shares through a
Shareholder Servicing Agent, his or her Shareholder Servicing Agent
must inform CFBDS that the letter of intent is in effect each time
shares are purchased.
[] The shareholder makes no commitment to purchase additional shares, but
if his or her purchases within 13 months plus the value of shares
credited toward completion of the letter of intent do not total the sum
specified, an increased sales charge will apply as described below.
[] A purchase not originally made pursuant to a letter of intent may be
included under a subsequent letter of intent executed within 90 days of
the purchase if CFBDS is informed in writing of this intent within the
90-day period.
[] The value of shares of the Fund presently held, at cost or maximum
offering price (whichever is higher), on the date of the first purchase
under the letter of intent, may be included as a credit toward the
completion of the letter, but the reduced sales charge applicable to
the amount covered by the letter is applied only to new purchases.
[] Instructions for issuance of shares in the name of a person other than
the person signing the letter of intent must be accompanied by a
written statement from a Shareholder Servicing Agent stating that the
shares were paid for by the person signing the letter.
[] Neither income dividends nor capital gains distributions taken in
additional shares will apply toward the completion of the letter of
intent.
[] The value of any shares redeemed or otherwise disposed of by the
purchaser prior to termination or completion of the letter of intent
are deducted from the total purchases made under the letter of intent.
[] Class B shares included in the shares covered by the letter of intent
will continue to be subject to the applicable CDSC.
If the investment specified in the letter of intent is not completed
(either prior to or by the end of the 13-month period), the Shareholder
Servicing Agent will redeem, within 20 days of the expiration of the letter of
intent, an appropriate number of the shares in order to realize the difference
between the reduced sales charge that would apply if the investment under the
letter of intent had been completed and the sales charge that would normally
apply to the number of shares actually purchased. By completing and signing
the letter of intent, the shareholder irrevocably grants a power of attorney
to the Shareholder Servicing Agent to redeem any or all shares purchased under
the letter of intent, with full power of substitution.
RIGHT OF ACCUMULATION
A shareholder qualifies for cumulative quantity discounts on the purchase
of 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 his or her Shareholder Servicing Agent
with information to verify that the quantity sales charge discount is
applicable at the time the investment is made.
SYSTEMATIC WITHDRAWAL PLAN
The Fund's Systematic Withdrawal Plan permits you to have a specified
dollar amount (minimum of $100 per withdrawal) automatically withdrawn from
your account on a regular basis if you have at least $10,000 in your Fund
account at the time of enrollment. You are limited to one withdrawal per month
under the Plan.
If you redeem shares under the Plan that are subject to a CDSC, you are
not subject to any CDSC applicable to the shares redeemed, but the maximum
amount that you can redeem under the Plan in any year is limited to 10% of the
average daily balance in your account.
You may receive your withdrawals by check, or have the monies transferred
directly into your bank account. Or you may direct that payments be made
directly to a third party.
To participate in the Plan, you must complete the appropriate forms
provided by the Transfer Agent, or if you hold your shares through a
Shareholder Servicing Agent, your Shareholder Servicing 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 the Transfer Agent or, if
they hold Fund shares through Shareholder Servicing Agents, their Shareholder
Servicing Agents in writing at the time the privilege is exercised.
EXCHANGE PRIVILEGE
Shares of the Fund may be exchanged for shares of the same class of
certain other CitiFunds, or may be acquired through an exchange of shares of
the same class of those funds. Class A shares also may be exchanged for shares
of certain CitiFunds that offer only a single class of shares, unless the
Class A shares are subject to a contingent deferred sales charge. Class B
shares may not be exchanged for shares of CitiFunds that offer only a single
class of shares.
No initial sales charge is imposed on shares being acquired through an
exchange unless Class A shares are being acquired and the sales charge for
Class A 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 were outstanding on
January 4, 1999 may 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. 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 the Transfer Agent or, if you hold your shares through a
Shareholder Servicing Agent, your Shareholder Servicing Agent at the time of
exchange if you believe that you qualify for share prices which do not include
the sales charge or which reflect a reduced sales charge, because the Fund
shares you are exchanging were: (a) purchased with a sales charge, (b)
acquired through a previous exchange from shares purchased with a sales
charge, (c) outstanding as of January 4, 1999, or (d) acquired through capital
appreciation or the reinvestment of dividends and capital gains distributions
on those shares. Any such qualification may be subject to confirmation,
through a check of appropriate records and documentation, of your existing
share balances and any sales charges paid on prior share purchases.
This exchange privilege may be modified or terminated at any time, and is
available only in those jurisdictions where such exchanges legally may be
made. Before making any exchange, shareholders should contact the Transfer
Agent or, if they hold Fund shares through Shareholder Servicing Agents, their
Shareholder Servicing Agents to obtain more information and prospectuses of
the funds to be acquired through the exchange. An exchange is treated as a
sale of the shares exchanged and could result in taxable gain or loss to the
shareholder making the exchange.
ADDITIONAL PURCHASE AND SALE INFORMATION
If a shareholder's account is established and maintained by a Shareholder
Servicing Agent, the Shareholder Servicing Agent is the shareholder of record
of the Fund. Each Shareholder Servicing Agent establishes its own terms,
conditions and charges with respect to services it offers to its customers.
Charges for these services may include fixed annual fees and account
maintenance fees. Each Shareholder Servicing Agent has agreed to transmit to
its customers who are shareholders of the Fund appropriate written disclosure
of any fees that it may charge them directly. The effect of any such fees will
be to reduce the net return on the investment of customers of that Shareholder
Servicing Agent. Each Shareholder Servicing Agent is responsible for
transmitting promptly orders of its customers.
Investors may be able to invest in the Fund under one of several tax-
sheltered plans. Such plans include IRAs, Keogh or Corporate Profit-Sharing
and Money-Purchase Plans, 403(b) Custodian Accounts, and certain other
qualified pension and profit-sharing plans. Investors should consult with
their Shareholder Servicing Agent and their tax and retirement advisers.
Shareholders may redeem or exchange Fund shares by telephone, if their
account applications so permit, by calling the Transfer Agent, or if they hold
Fund shares through Shareholder Servicing Agents, their Shareholder Servicing
Agents. During periods of drastic economic or market changes or severe weather
or other emergencies, shareholders may experience difficulties implementing a
telephone exchange or redemption. In such an event, another method of
instruction, such as a written request sent via an overnight delivery service,
should be considered. The Fund, the transfer agent and each Shareholder
Servicing Agent will employ reasonable procedures to confirm that instructions
communicated by telephone are genuine. These procedures may include recording
of the telephone instructions and verification of a caller's identity by
asking for his or her name, address, telephone, Social Security number, and
account number. If these or other reasonable procedures are not followed, the
Fund, the transfer agent or the Shareholder Servicing Agent may be liable for
any losses to a shareholder due to unauthorized or fraudulent instructions.
Otherwise, the shareholder will bear all risk of loss relating to a redemption
or exchange by telephone.
Subject to compliance with applicable regulations, the Trust and the
Portfolio Trust have each reserved the right to pay the redemption price of
shares of the Fund or beneficial interests in the Portfolio, either totally or
partially, by a distribution in kind of readily marketable securities (instead
of cash). The securities so distributed would be valued at the same amount as
that assigned to them in calculating the net asset value for the shares or
beneficial interests being sold. If a holder of shares or beneficial interests
received a distribution in kind, such holder could incur brokerage or other
charges in converting the securities to cash.
The Trust or the Portfolio Trust may suspend the right of redemption or
postpone the date of payment for shares of the Fund or beneficial interests in
the Portfolio more than seven days during any period when (a) trading in the
markets the Fund or the Portfolio normally utilizes is restricted or an
emergency, as defined by the rules and regulations of the SEC, exists making
disposal of the Fund's or the Portfolio's investments or determination of its
net asset value not reasonably practicable; (b) the New York Stock Exchange is
closed (other than customary weekend and holiday closings); or (c) the SEC has
by order permitted such suspension.
A redemption is treated as a sale of the shares redeemed and could result
in taxable gain or loss to the shareholder making the redemption.
8. MANAGEMENT
The Fund is supervised by the Board of Trustees of the Trust, and the
Portfolio is supervised by the Board of Trustees of the Portfolio Trust. In
each case, a majority of the Trustees are not affiliated with Citibank. In
addition, a majority of the disinterested Trustees of the Fund are different
from a majority of the disinterested Trustees of the Portfolio.
The Trustees and officers of the Trust and the Portfolio Trust, their ages
and their principal occupations during at least 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. Unless otherwise indicated below, the address
of each Trustee and officer is 21 Milk Street, Boston, Massachusetts. The
address of the Portfolio Trust is Elizabethan Square, George Town, Grand
Cayman, British West Indies.
TRUSTEES OF THE TRUST
PHILIP W. COOLIDGE*; 48 -- President of the Trust and the Portfolio Trust;
Chief Executive Officer and President, Signature Financial Group, Inc. and
CFBDS.
RILEY C. GILLEY; 73 -- Vice President and General Counsel, Corporate Property
Investors (November 1988 to December 1991); Partner, Breed, Abbott & Morgan
(Attorneys) (retired, December 1987). His address is 4041 Gulf Shore Boulevard
North, Naples, Florida.
DIANA R. HARRINGTON; 60 -- Professor, Babson College (since September 1994);
Trustee, The Highland Family of Funds (March 1997 to March 1998). Her address
is 120 Goulding Street, Holliston, Massachusetts.
SUSAN B. KERLEY; 48 -- Consultant, Global Research Associates, Inc.
(Investment Research) (since September 1990); Director, Mainstay Institutional
Funds (since December 1990). Her address is P.O. Box 9572, New Haven,
Connecticut.
HEATH B. MCLENDON*; 66 -- Chairman, President, and Chief Executive Officer of
SSB Citi Fund Management LLC (formerly known as SSBC Fund Management, Inc.)
(since March 1996); Managing Director of Salomon Smith Barney (since August
1993); and Chairman, President and Chief Executive Officer of fifty-eight
investment companies sponsored by Salomon Smith Barney. His address is 388
Greenwich Street, New York, New York.
C. OSCAR MORONG, JR.; 65 -- Chairman of the Board of Trustees of the Trust and
the Portfolio Trust; Managing Director, Morong Capital Management (since
February 1993); Director, Indonesia Fund (1990 to 1999); Trustee, MAS Funds
(since 1993). His address is 1385 Outlook Drive West, Mountainside, New
Jersey.
E. KIRBY WARREN; 65 -- Professor of Management, Graduate School of Business,
Columbia University (1987 to December 1999). His address is Laurel Road, P.O.
Box 146, Tuxedo Park, New York.
TRUSTEES OF THE PORTFOLIO TRUST
ELLIOTT J. BERV; 57 -- Chief Executive Officer, Rocket City Enterprises
(Consulting, Publishing, Internet Services) (since January 2000); President and
Chief Executive Officer, Catalyst, Inc. (Management Consultants) (since June
1992); President and Director, Elliott J. Berv & Associates (Management
Consultants) (since May 1984). His address is 24 Atlantic Drive, Scarborough,
Maine.
PHILIP W. COOLIDGE*; 48 -- President of the Trust and the Portfolio Trust;
Chief Executive Officer and President, Signature Financial Group, Inc. and
CFBDS.
MARK T. FINN; 56 -- President and Director, Delta Financial, Inc. (since June
1983); Chairman of the Board and Part Owner, FX 500 Ltd. (Commodity Trading
Advisory Firm) (April 1990 to February 1996); General Partner and Shareholder,
Greenwich Ventures LLC (Investment Partnership) (since January 1996);
President, Secretary and Owner, Phoenix Trading Co. (Commodity Trading
Advisory Firm) (since March 1997); Director, Chairman and Owner, Vantage
Consulting Group, Inc. (since October 1988). His address is 3500 Pacific
Avenue, P.O. Box 539, Virginia Beach, Virginia.
C. OSCAR MORONG, JR.; 65 -- Chairman of the Board of Trustees of the Trust and
the Portfolio Trust; Managing Director, Morong Capital Management (since
February 1993); Director, Indonesia Fund (1990 to 1999); Trustee, MAS Funds
(since 1993). His address is 1385 Outlook Drive West, Mountainside, New
Jersey.
WALTER E. ROBB, III; 73 -- President, Benchmark Consulting Group, Inc. (since
1991); Principal, Robb Associates (Corporate Financial Advisors) (since 1978);
President and Treasurer, Benchmark Advisors, Inc. (Corporate Financial
Advisors) (since 1989); Trustee of certain registered investment companies in
the MFS Family of Funds (since 1985). His address is 35 Farm Road, Sherborn,
Massachusetts.
E. KIRBY WARREN, 65 -- Professor of Management, Graduate School of Business,
Columbia University (1987 to December 1999). His address is Laurel Road, P.O.
Box 146, Tuxedo Park, New York.
OFFICERS OF THE TRUST AND THE PORTFOLIO TRUST
PHILIP W. COOLIDGE*; 48 -- President of the Trust and the Portfolio Trust;
Chief Executive Officer and President, Signature Financial Group, Inc. and
CFBDS.
CHRISTINE D. DORSEY*; 29 -- Assistant Secretary and Assistant Treasurer of the
Trust and the Portfolio Trust; Vice President, Signature Financial Group, Inc.
(since January 1996); Paralegal and Compliance Officer, various financial
companies (July 1992 to January 1996).
LINWOOD C. DOWNS*; 38 -- Treasurer of the Trust and the Portfolio Trust; Chief
Financial Officer and Senior Vice President, Signature Financial Group;
Treasurer, CFBDS.
TAMIE EBANKS-CUNNINGHAM*; 27 -- Assistant Secretary of the Trust and the
Portfolio Trust; Office Manager, Signature Financial Group (Cayman) Ltd.
(since April 1995); Administrator, Cayman Islands Primary School (prior to
April 1995). Her address is P.O. Box 2494, Elizabethan Square, George Town,
Grand Cayman, Cayman Islands, B.W.I.
SUSAN JAKUBOSKI*; 36 -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolio Trust; Vice President, Signature
Financial Group (Cayman) Ltd.
MOLLY S. MUGLER*; 48 -- Assistant Secretary and Assistant Treasurer of the
Trust and the Portfolio Trust; Vice President, Signature Financial Group,
Inc.; Assistant Secretary, CFBDS.
JULIE J. WYETZNER*; 40 -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolio Trust; Vice President, Signature
Financial Group, Inc.
The Trustees and officers of the Trust and the Portfolio Trust also hold
comparable positions with certain other funds for which CFBDS, SFG or their
affiliates serve as the distributor or administrator.
The Trustees of the Trust received the following remuneration from the
sources indicated below during its fiscal year ended December 31, 1999:
<TABLE>
<CAPTION>
PENSION OR TOTAL COMPENSATION
RETIREMENT FROM THE TRUST
AGGREGATE BENEFITS ACCRUED ESTIMATED ANNUAL AND FUND COMPLEX
COMPENSATION AS PART OF FUND BENEFITS UPON PAID TO
TRUSTEE FROM FUND(1) EXPENSES RETIREMENT TRUSTEES(1)
------- ------------ ---------------- ---------------- -------------------
<S> <C> <C>
Philip W. Coolidge None None None None
Riley C. Gilley $1,696 None None $65,250
Diana R. Harrington $1,749 None None $71,250
Susan B. Kerley $1,745 None None $69,750
Heath B. McLendon None None None None
C. Oscar Morong, Jr. $1,789 None None $92,000
E. Kirby Warren $1,722 None None $62,750
William S. Woods, Jr. (2) $1,784 None None $66,000
- ------------
(1) Messrs. Coolidge, Gilley, McLendon, Morong and Warren and Mses. Harrington and Kerley are Trustees of 48, 35, 23, 39,
39, 30, and 30 funds or portfolios, respectively, in the family of open-end registered investment companies advised or
managed by Citibank.
(2) Effective December 31, 1999, Mr. Woods became a Trustee Emeritus of the Trust. Per the terms of the Trust's Trustee
Emeritus Plan, Mr. Woods serves the Board of Trustees in an advisory capacity. As a Trustee Emeritus, Mr. Woods is
paid 50% of the annual retainer fee and meeting fees otherwise applicable to Trustees, together with reasonable
out-of-pocket expenses for each meeting attended.
</TABLE>
As of April 12, 2000, all Trustees and officers as a group owned less than
1% of the outstanding shares of the Fund. The following shareholders owned of
record 5% or more of the Fund's outstanding voting securities on April 12, 2000:
Class A shares: Fiserv Securities Inc., Attn: Mutual Funds, One Commerce Square,
2005 Market Street, Suite 1200, Philadelphia, PA 19103-7042 - 25.28%; Citibank,
N.A., Tailored Trust Co. Trustee, 1 Court Square, 22nd Fl Zone 4, Attn: Jeff
Jardine, Long Island City, NY 11120-0001 - 10.74%; Citibank, N.A., Tailored
Trust Co. Trustee, 1 Court Square, 22nd Fl Zone 4, Attn: Jeff Jardine, Long
Island City, NY 11120-0001 - 10.74%; Class B shares: Fiserv Securities Inc.,
Attn: Mutual Funds Dept., One Commerce Square, 2005 Market Street, Suite 1200,
Philadelphia, PA 19103-7084 - 36.92%.
The Declaration of Trust of each of the Trust and the Portfolio Trust
provides that the Trust or the Portfolio Trust, as the case may be, will
indemnify its Trustees and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with the Trust or the Portfolio Trust, as the case may be, unless, as
to liability to the Trust, the Portfolio Trust or their respective investors,
it is finally adjudicated that they engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in their
offices, or unless with respect to any other matter it is finally adjudicated
that they did not act in good faith in the reasonable belief that their
actions were in the best interests of the Trust or the Portfolio Trust, as the
case may be. In the case of settlement, such indemnification will not be
provided unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination, based upon
a review of readily available facts, by vote of a majority of disinterested
Trustees of the Trust or the Portfolio Trust, or in a written opinion of
independent counsel, that such officers or Trustees have not engaged in
willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
ADVISER
Citibank manages the assets of the Portfolio pursuant to an investment
advisory agreement (the "Advisory Agreement"). Subject to such policies as the
Board of Trustees of the Portfolio Trust may determine, the Adviser manages
the securities of the Portfolio and makes investment decisions for the
Portfolio. The Adviser furnishes at its own expense all services, facilities
and personnel necessary in connection with managing the Portfolio's
investments and effecting securities transactions for the Portfolio. Unless
otherwise terminated, the Advisory Agreement will continue in effect as long
as such continuance is specifically approved at least annually by the Board of
Trustees of the Portfolio Trust or by a vote of a majority of the outstanding
voting securities of the Portfolio, and, in either case, by a majority of the
Trustees of the Portfolio Trust who are not parties to the Advisory Agreement
or interested persons of any such party, at a meeting called for the purpose
of voting on the Advisory Agreement.
The Advisory Agreement provides that the Adviser may render services to
others. The Advisory Agreement is terminable without penalty on not more than
60 days' nor less than 30 days' written notice by the Portfolio Trust when
authorized either by a vote of a majority of the outstanding voting securities
of the Portfolio or by a vote of a majority of the Board of Trustees of the
Portfolio Trust, or by the Adviser on not more than 60 days' nor less than 30
days' written notice, and will automatically terminate in the event of its
assignment. The Advisory Agreement provides that neither the Adviser nor its
personnel shall be liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act or omission in the
execution 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 Advisory Agreement.
For its services under the Advisory Agreement with respect to the
Portfolio, Citibank receives fees, which are computed daily and paid monthly,
at an annual rate equal to 1.00% of the Portfolio's average daily net assets
on an annualized basis for the Fund's then-current fiscal year. This
investment advisory fee is higher than the investment advisory fees paid by
most mutual funds. The Trustees of the Portfolio have determined that the
1.00% investment advisory fee is reasonable in light of the Portfolio's
investment policy of investing primarily in foreign securities. Citibank may
reimburse the Portfolio or waive all or a portion of its advisory fees. For
the fiscal years ended December 31, 1997, 1998 and 1999, the fees paid to
Citibank under the Advisory Agreement, after fee waivers, were $438,017,
$353,752 and $348,915, respectively.
ADMINISTRATOR
Pursuant to administrative services agreements (the "Administrative
Services Agreements"), CFBDS and SFG provide the Trust and the Portfolio
Trust, respectively, with general office facilities and CFBDS and SFG
supervise the over-all administration of the Trust and the Portfolio Trust,
respectively, including, among other responsibilities, the negotiation of
contracts and fees with, and the monitoring of performance and billings of,
the Trust's or the Portfolio Trust's independent contractors and agents; the
preparation and filing of all documents required for compliance by the Trust
or the Portfolio Trust with applicable laws and regulations; and arranging for
the maintenance of books and records of the Trust or the Portfolio Trust. The
Administrator and the Portfolio Administrator provide persons satisfactory to
the Board of Trustees of the Trust or the Portfolio Trust to serve as Trustees
and officers of the Trust and the Portfolio Trust, respectively. Such Trustees
and officers, as well as certain other employees and Trustees of the Trust and
the Portfolio Trust, may be directors, officers or employees of CFBDS, SFG or
their affiliates.
The fees payable to the Administrator and the Portfolio Administrator,
respectively, under the Administrative Services Agreements are 0.30% of the
average daily net assets of the Fund and 0.05% of the average daily net assets
of the Portfolio, accrued daily and paid monthly, in each case on an
annualized basis for the Fund's or the Portfolio's then-current fiscal year.
However each of the Administrator and the Portfolio Administrator has
voluntarily agreed to waive a portion of the fees payable as necessary to
maintain the projected rate of total operating expenses. CFBDS has agreed to
pay certain expenses of the Fund. SFG has agreed to pay certain expenses of
the Portfolio. For the fiscal years ended December 31, 1997, 1998 and 1999,
the fees paid by the Fund to CFBDS under the Administrative Services Agreement
and a prior administrative services agreement, after waivers, were $79,045,
$58,123 and $62,978, respectively. For the fiscal years ended December 31,
1997, 1998 and 1999, the Portfolio paid no fees, after waivers, to SFG under
the Administrative Services Agreement with the Portfolio Trust.
The Administrative Services Agreements with the Trust and the Portfolio
Trust provide that CFBDS or SFG, as the case may be, may render administrative
services to others. These Administrative Services Agreements continue in
effect as to the Fund or the Portfolio, as applicable, if such continuance is
specifically approved at least annually by the Trust's or the Portfolio
Trust's Board of Trustees or by a vote of a majority of the outstanding voting
securities of the Fund or the Portfolio and, in either case, by a majority of
the Trustees of the Trust or Portfolio Trust who are not parties to the
applicable Administrative Services Agreement or interested persons of any such
party. The Administrative Services Agreements with the Trust and the Portfolio
Trust terminate automatically if they are assigned and may be terminated by
the Trust or the Portfolio Trust without penalty by vote of a majority of the
outstanding voting securities of the Fund or Portfolio, as applicable, or by
either party thereto on not more than 60 days' nor less than 30 days' written
notice. The Administrative Services Agreements with the Trust and the
Portfolio Trust also provide that CFBDS, SFG and their personnel shall not be
liable for any error of judgment or mistake of law or for any act or omission
in the administration or management of the Trust or the Portfolio Trust,
except for willful misfeasance, bad faith or gross negligence in the
performance of its or their duties or by reason of reckless disregard of its
or their obligations and duties under the Administrative Services Agreements.
CFBDS and SFG are wholly-owned subsidiaries of Signature Financial Group,
Inc. SFG is a company organized under the laws of the Cayman Islands. Its
principal place of business is in George Town, Grand Cayman, British West
Indies.
Pursuant to sub-administrative services agreements, Citibank performs such
sub-administrative duties for the Trust and the Portfolio Trust as from time
to time are agreed upon by Citibank and respectively, CFBDS and SFG.
Citibank's sub-administrative duties may include providing equipment and
clerical personnel necessary for maintaining the Trust's and the Portfolio
Trust's organization, participation in the preparation of documents required
for compliance by the Trust and the Portfolio Trust with applicable laws and
regulations, the preparation of certain documents in connection with meetings
of Trustees and shareholders, and other functions which would otherwise be
performed by the Administrator. For performing such sub-administrative
services, Citibank receives compensation as from time to time is agreed upon
by CFBDS or SFG, not in excess of the amount paid to CFBDS or SFG for its
services under the Administrative Services Agreements with the Trust and the
Portfolio Trust. All such compensation is paid by CFBDS or SFG.
DISTRIBUTOR
CFBDS, 21 Milk Street, Boston, MA 02109, serves as the Distributor of the
Fund's shares pursuant to a Distribution Agreement with the Trust 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 30
days' nor more than 60 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 by vote of a
majority of the Board of Trustees of the Trust who are not parties to such
Distribution Agreement or interested persons of any party to such 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 adopted a Distribution Plan (each, a
"Distribution Plan") in accordance with Rule 12b-1 under the 1940 Act with
respect to shares of the Fund after concluding that there is a reasonable
likelihood that a Distribution Plan will benefit the Fund and its
shareholders. The Distribution Plan with respect to Class A shares provides
that the Fund shall pay a monthly distribution fee to the Distributor at an
annual rate not to exceed 0.10% of the Fund's average daily net assets with
respect to Class A shares. The Distributor receives distribution fees for its
services under the Distribution Agreement with respect to Class A shares in
connection with the distribution of Class A Fund shares (exclusive of any
advertising expenses incurred by the Distributor in connection with the sale
of shares). The Distributor may use all or any portion of such distribution
fee to pay for expenses of printing prospectuses and reports used for sales
purposes, expenses of the preparation and printing of sales literature and
other such expenses related to the distribution of Class A shares. The
Distribution Plan with respect to Class A shares also permits the Fund to pay
the Distributor an additional fee (not to exceed 0.05% of the average daily
net assets of the Fund with respect to Class A shares) in anticipation of or
as reimbursement for print or electronic media advertising expenses incurred.
The Fund did not pay this fee during its most recent fiscal year and does not
anticipate paying it during the current fiscal year. The Distributor receives
a fee, not to exceed 1.00% of the average daily net assets of the Fund
attributable to Class B shares. Such fees may be used to make payments to the
Distributor for distribution services, to Shareholder Servicing Agents that
have entered into shareholder servicing agreements with the Distributor and
others in respect of the sale of Class B shares of the Fund, and to other
parties in respect of the sale of Class B 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, Shareholder Servicing 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.
Each Distribution Plan continues in effect if such continuance is
specifically approved at least annually by a vote of both a majority of the
Trustees and a majority of the Trustees who are not "interested persons" (as
defined in the 1940 Act) of the Trust and who have no direct or indirect
financial interest in the operation of the Distribution Plans or in any
agreement related to the Plans (for purposes of this paragraph "Qualified
Trustees"). Each Distribution Plan requires that the Trust and the Distributor
provide to the Board of Trustees and the Board of Trustees review, at least
quarterly, a written report of the amounts expended (and the purposes
therefor) under the Distribution Plans. Each Distribution Plan further
provides that the selection and nomination of the Qualified Trustees is
committed to the discretion of the Qualified Trustees then in office who are
not interested Trustees of the Trust. A Distribution 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 Distribution 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 securities of that class
and may not be materially amended in any case without a vote of a majority of
both the Trustees and Qualified Trustees. The Distributor will preserve copies
of any plan, agreement or report made pursuant to the Distribution Plans for a
period of not less than six years from the date of each Plan, and for the
first two years the Distributor will preserve such copies in an easily
accessible place.
As contemplated by the Distribution Plans, CFBDS acts as the agent of the
Trust in connection with the offering of shares of the Fund pursuant to the
Distribution Agreements. After the prospectuses and periodic reports of the
Fund have been prepared, set in type and mailed to existing shareholders, the
Distributor pays for the printing and distribution of copies thereof which are
used in connection with the offering of shares of the Fund to prospective
investors. For the fiscal years ended December 31, 1997, 1998 and 1999, the
fees paid to CFBDS under the Distribution Agreements with respect to Class A
shares of the Fund were $27,121, $19,374 and $0, respectively, no portion of
which was applicable to reimbursement for expenses incurred in connection with
print or electronic media advertising. For the period January 4, 1999
(commencement of operations) to December 31, 1999, the fees paid to CFBDS
under the Distribution Agreements with respect to Class B shares of the Fund
were $1,420. All of the foregoing amounts paid under the Distribution Plans
were spent on printing and mailing expenses.
The Distributor may enter into agreements with Shareholder Servicing
Agents and may pay compensation to such Shareholder Servicing Agents for
accounts for which the Shareholder Servicing Agents are holders of record. The
Distributor may make payments for distribution and/or shareholder servicing
activities out of its past profits and other available sources. The
Distributor may also make payments for marketing, promotional or related
expenses to dealers. The amount of these payments are determined by the
Distributor and may vary. Citibank may make similar payments under similar
arrangements.
CODE OF ETHICS
The Trust, the Portfolio Trust, the Adviser and the Distributor each have
adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act. Each code
of ethics permits personnel subject to such code to invest in securities,
including securities that may be purchased or held by the Fund. However, the
codes of ethics contain provisions and requirements designed to identify and
address certain conflicts of interest between personal investment activities
and the interests of the Fund. Of course, there can be no assurance that the
codes of ethics will be effective in identifying and addressing all conflicts
of interest relating to personal securities transactions.
EXPENSES
In addition to amounts payable under its Investment Advisory Agreement,
the Administrative Services Plan and the Distribution 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.
CFBDS has agreed to pay the Fund's ordinary operating expenses (excluding
interest, taxes, brokerage commission, litigation costs or other extraordinary
costs and expenses and excluding the fees paid under the Fund's Investment
Advisory Agreement, Administrative Services Agreement, Distribution Agreements
and Shareholder Servicing Agreements). CFBDS receives a fee from the Fund, in
addition to the administrative services and distribution fees, estimated and
accrued daily and paid monthly in an amount such that immediately after any
such payment the aggregate ordinary operating expenses of the Fund would not
on a per annum basis exceed an agreed upon rate of the Fund's average daily
net assets. For the fiscal year ended December 31, 1999, CFBDS paid expenses of
the Fund in the amount of $195,158, and the Fund paid CFBDS under this agreement
the amount of $42,645. For that fiscal year, the total expenses of Class A
shares and Class B shares (commencement of operations, January 4, 1999) were
1.75% and 2.50%, respectively, of their average daily assets. The agreement of
CFBDS to pay the ordinary operating expenses of the Fund, as well as the
obligation of the Fund to pay any corresponding fee to CFBDS, may be terminated
by either CFBDS or the Fund upon not less than 30 days nor more than 60 days
written notice.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
The Trust has adopted an administrative services plan (the "Administrative
Services Plan") after having concluded that there is a reasonable likelihood
that the Administrative Services Plan will benefit the Fund and its
shareholders. The Administrative Services Plan provides that the Trust may
obtain the services of an administrator, a transfer agent, a custodian, a fund
accountant and one or more Shareholder Servicing Agents, and may enter into
agreements providing for the payment of fees for such services. Under the
Trust's Administrative Services Plan, the total of the fees paid from the Fund
to the Trust's Administrator and Shareholder Servicing Agents with respect to
Class A shares may not exceed 0.65% of the Fund's average daily net assets on
an annualized basis for the Fund's then-current fiscal year. Distribution fees
(other than any fee concerning electronic or media advertising) paid under the
Distribution Plan with respect to the Class A shares are included in this
percentage limitation. Within this overall limitation, individual fees may
vary. Distribution fees may be used to offset the Fund's marketing costs, such
as preparation of sales literature, advertising, and printing and distributing
prospectuses and other shareholder materials to prospective investors, and to
pay costs related to distribution activities, including employee salaries,
bonuses and other overhead expenses.
The Administrative Services Plan continues in effect if such continuance
is specifically approved at least annually by a vote of both a majority of the
Trustees and a majority of the Trustees who are not "interested persons" of
the Trust and who have no direct or indirect financial interest in the
operation of the Administrative Services Plan or in any agreement related to
such Plan (for purposes of this paragraph "Qualified Trustees"). The
Administrative Services Plan requires that the Trust provide to its Board of
Trustees and the Board of Trustees review, at least quarterly, a written
report of the amounts expended (and the purposes therefor) under the
Administrative Services Plan. The Administrative Services Plan may be
terminated at any time by a vote of a majority of the Qualified Trustees of
the Trust or as to a class by a vote of a majority of the outstanding voting
securities of that class. The Administrative Services Plan for the Fund may
not be materially amended in any case without a vote of the majority of both
the Trustees and the Qualified Trustees.
The Trust has entered into a shareholder servicing agreement (a
"Shareholder Servicing Agreement") with each Shareholder Servicing Agent
pursuant to such that Shareholder Servicing Agent provides shareholder
services, including answering customer inquiries, assisting in processing
purchase, exchange and redemption transactions and furnishing Fund
communications to shareholders. Some Shareholder Servicing Agents may impose
certain conditions on their customers in addition to or different from those
imposed by the Fund, such as requiring a minimum initial investment or
charging their customers a direct fee for their services. Each Shareholder
Servicing Agent has agreed to transmit to its customers who are shareholders
of the Fund appropriate prior written disclosure of any fees that it may
charge them directly and to provide written notice at least 30 days prior to
imposition of any transaction fees. Shareholder Servicing Agents that sell
Class A shares or Class B shares receive a shareholder servicing fee payable
on such shares at an annual rate equal to, as applicable, 0.25% of the average
daily net assets represented by such Class A shares and/or 0.15% of the
average daily net assets represented by such Class B shares. For the fiscal
years ended December 31, 1997, 1998 and 1999, the aggregate fees paid to
Shareholder Servicing Agents under the Shareholder Servicing Agreements with
respect to Class A Shares of the Fund, after waivers, were $67,802, $48,436
and $52,604, respectively. For the period from January 4, 1999 (commencement
of operations) to December 31, 1999, the aggregate fees paid to Shareholder
Servicing Agents under the Shareholder Servicing Agreements with respect to
Class B shares of the Fund, after waivers, were $0.
The Trust has also entered into a Transfer Agency and Service Agreement
with State Street Bank and Trust Company ("State Street") pursuant to which
State Street acts as transfer agent. The Trust, on behalf of the Fund, has
also entered into a Custodian Agreement and a Fund Accounting Agreement with
State Street pursuant to which custodial and fund accounting services,
respectively, are provided for the Fund. Among other things, State Street
calculates the daily net asset value for the Fund. Securities may be held by a
sub-custodian bank approved by the Trustees.
The Portfolio Trust has also adopted an administrative services plan (the
"Portfolio Administrative Plan"), which provides that the Portfolio Trust may
obtain the services of an administrator, a transfer agent, a custodian and a
fund accountant and may enter into agreements providing for the payment of
fees for such services. Under the Portfolio Administrative Plan, the
administrative services fee payable to the Portfolio Administrator from the
Portfolio may not exceed 0.05% of the Portfolio's average daily net assets on
an annualized basis for its then-current fiscal year.
The Portfolio Administrative Plan continues in effect if such continuance
is specifically approved at least annually by a vote of both a majority of the
Portfolio Trust's Trustees and a majority of the Portfolio Trust's Trustees
who are not "interested persons" of the Portfolio and who have no direct or
indirect financial interest in the operation of the Portfolio Administrative
Plan or in any agreement related to such Plan (for purposes of this paragraph
"Qualified Trustees"). The Portfolio Administrative Plan requires that the
Portfolio Trust provide to the Board of Trustees and the Board of Trustees
review, at least quarterly, a written report of the amounts expended (and the
purposes therefor) under the Portfolio Administrative Plan. The Portfolio
Administrative Plan may not be amended to increase materially the amount of
permitted expenses thereunder without the approval of a majority of the
outstanding voting securities of the Portfolio Trust and may not be materially
amended in any case without a vote of the majority of both the Portfolio
Trust's Trustees and the Portfolio Trust's Qualified Trustees.
The Portfolio Trust, on behalf of the Portfolio, has entered into a
Custodian Agreement with State Street pursuant to which custodial services are
provided for the Portfolio. The Portfolio Trust, on behalf of the Portfolio,
has also entered into a Fund Accounting Agreement with State Street Cayman
Trust Company, Ltd. ("State Street Cayman") pursuant to which State Street
Cayman provides fund accounting services for the Portfolio. State Street
Cayman also provides transfer agency services to the Portfolio Trust.
The principal business address of State Street is 225 Franklin Street,
Boston, Massachusetts 02110. The principal business address of State Street
Cayman is P.O. Box 2508 GT Grand Cayman, Cayman Islands, 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, serves as counsel
for the Fund.
9. PORTFOLIO TRANSACTIONS
The Portfolio Trust trades securities for the Portfolio if it believes
that a transaction net of costs (including custodian charges) will help
achieve the Portfolio's investment objective. Changes in the Portfolio'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. For the fiscal years ended December 31, 1998 and December 31,
1999, the turnover rates for the Portfolio were 118% and 68%, respectively.
The amount of brokerage commissions and realization of taxable capital gains
will tend to increase as the level of Portfolio activity increases. Specific
decisions to purchase or sell securities for the Portfolio are made by a
portfolio manager who is an employee of the Adviser and who is appointed and
supervised by its senior officers. The portfolio manager may serve other
clients of the Adviser in a similar capacity.
The primary consideration in placing portfolio securities transactions
with broker-dealers for execution is to obtain and maintain the availability
of execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting broker-
dealers to execute transactions on behalf of the Portfolio and other clients
of the Adviser on the basis of their professional capability, the value and
quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Adviser normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere.
In the case of securities purchased from underwriters, the cost of such
securities generally includes a fixed underwriting commission or concession.
From time to time, soliciting dealer fees are available to the Adviser on the
tender of the Portfolio's securities in so-called tender or exchange offers.
Such soliciting dealer fees are in effect recaptured for the Portfolio by the
Adviser. At present no other recapture arrangements are in effect.
In connection with the selection of brokers or dealers and the placing of
portfolio securities transactions, brokers or dealers may be selected who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Fund and/or the other
accounts over which Citibank or its affiliates exercise investment discretion.
Citibank is authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio transaction for
the Fund which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Citibank
determines in good faith that such amount of commission is reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer. This determination may be viewed in terms of either that
particular transaction or the overall responsibilities which Citibank and its
affiliates have with respect to accounts over which they exercise investment
discretion. The Trustees of the Trust periodically review the commissions paid
by the Fund to determine if the commissions paid over representative periods
of time were reasonable in relation to the benefits to the Fund.
The investment advisory fee that the Portfolio pays to the Adviser will
not be reduced as a consequence of the Adviser's receipt of brokerage and
research services. While such services are not expected to reduce the expenses
of the Adviser, the Adviser would, through the use of the services, avoid the
additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff or obtain such services
independently.
In certain instances there may be securities that are suitable as an
investment for the Portfolio as well as for one or more of the Adviser's other
clients. Investment decisions for the Portfolio and for the Adviser's other
clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for
only one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more clients are selling the same security. Some simultaneous
transactions are inevitable when several clients receive investment advice
from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or
more clients are simultaneously engaged in the purchase or sale of the same
security, the securities are allocated among clients in a manner believed to
be equitable to each. It is recognized that in some cases this system could
adversely affect the price of or the size of the position obtainable in a
security for the Portfolio. When purchases or sales of the same security for
the Portfolio and for other portfolios managed by the Adviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large volume purchases or sales.
For the fiscal years ended December 31, 1997, 1998 and 1999, the Portfolio
paid brokerage commissions in the amount of $215,467, $167,104 and $137,501,
respectively.
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 (par value
$0.00001 per share) 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 advisory 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 to hold, and
has no present intention of holding, annual meetings of shareholders but the
Trust will hold special meetings of shareholders when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. Shareholders have, under certain circumstances (e.g., upon the
application and submission of certain specified documents to the Trustees by a
specified number of shareholders), the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees. Shareholders also have under certain
circumstances the right to remove one or more Trustees without a meeting by a
declaration in writing by a specified number of shareholders. No material
amendment may be made to the Trust's Declaration of Trust without the
affirmative vote of the holders of a majority of the outstanding shares of
each series affected by the amendment. (See "Investment Restrictions.") The
Trust's Declaration of Trust provides that, at any meeting of shareholders of
the Trust or of any series of the Trust, a Shareholder Servicing Agent may
vote any shares of which it is the holder of record and for which it does not
receive voting instructions proportionately in accordance with the
instructions received for all other shares of which that Shareholder Servicing
Agent is the holder of record. Shares have no preference, pre-emptive,
conversion or similar rights. Shares, when issued, are fully paid and non-
assessable, except as set forth below.
The Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets (or all or substantially all of the assets
belonging to any series of the Trust), if approved by a vote of the holders of
two-thirds of the Trust's outstanding shares, voting as a single class, or of
the affected series of the Trust, as the case may be, except that if the
Trustees of the Trust recommend such sale of assets, merger or consolidation,
the approval by vote of the holders of a majority of the Trust's outstanding
shares (or the affected series) 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 of the
Trust contains an express disclaimer of shareholder liability for acts or
obligations of the Trust and provides for indemnification and reimbursement of
expenses out of Trust property for any shareholder held personally liable for
the obligations of the Trust. The Declaration of Trust of the Trust also
provides that the Trust may maintain appropriate insurance (e.g., fidelity
bonding, and errors and omissions insurance) for the protection of the Trust,
its shareholders, Trustees, officers, employees and agents covering possible
tort and other liabilities. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which both inadequate insurance existed and the Trust itself was unable to
meet its obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the
property of the Trust and that the Trustees will not be liable for any action
or failure to act, but nothing in the Declaration of Trust of the Trust
protects a Trustee against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
The Portfolio is a series of the Portfolio Trust, organized as a trust
under the laws of the State of New York. The Portfolio Trust's Declaration of
Trust provides that investors in the Portfolio (e.g., other investment
companies (including the Fund), insurance company separate accounts and common
and commingled trust funds) are each liable for all obligations of the
Portfolio. However, the risk of the Fund incurring financial loss on account
of such liability is limited to circumstances in which both inadequate
insurance existed and the Portfolio itself was unable to meet its obligations.
It is not expected that the liabilities of the Portfolio would ever exceed its
assets.
Each investor in the Portfolio, including the Fund, may add to or withdraw
from its investment in the Portfolio on each Business Day. As of the close of
regular trading on each Business Day, the value of each investor's beneficial
interest in the Portfolio is determined by multiplying the net asset value of
the Portfolio by the percentage, effective for that day, that represents that
investor's share of the aggregate beneficial interests in the Portfolio. Any
additions or withdrawals, that are to be effected on that day, are then
effected. The investor's percentage of the aggregate beneficial interests in
the Portfolio is then 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 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 United States 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 rates 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 amount 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 amount, 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 will be permitted to individuals in
computing their alternative minimum tax liability. If the Fund does not
qualify to 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 their 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 of 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 the rate of 30% (or any lower rate permitted under an applicable
treaty) on taxable dividends and other payments subject to withholding taxes
that are made to persons who are not citizens or residents of the United
States. Distributions received from the Fund by non-U.S. persons also may be
subject to tax under the laws of their own jurisdiction.
BACKUP WITHHOLDING. The account application asks each new shareholder to
certify that the shareholder's Social Security or taxpayer identification
number is correct and that the shareholder is not subject to 31% backup
withholding for failing to report income to the IRS. If a shareholder fails to
provide this information, or otherwise violates IRS regulations, the Fund may
be required to withhold tax at the rate of 31% on certain distributions and
redemption proceeds paid to that shareholder. Backup withholding will not,
however, be applied to payments that have been subject to 30% withholding.
DISPOSITION OF SHARES. In general, any gain or loss realized upon a
taxable disposition of shares of the Fund by a shareholder that holds such
shares as a capital asset will be treated as a long-term capital gain or loss
if the shares have been held for more than twelve months and otherwise as a
short-term capital gain or loss. However, any loss realized upon a 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 of another
CitiFund, 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
OPTIONS, ETC. The Fund's transactions in forward contracts, short sales
"against the box," and options 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 forward contracts and options 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. FINANCIAL STATEMENTS
The audited financial statements of CitiFunds International Growth
Portfolio (formerly CitiFunds International Equity Portfolio; prior to March
2, 1998, the Fund was known as Landmark International Equity Fund) (Statement
of Assets and Liabilities at December 31, 1999, Statement of Operations for
the year ended December 31, 1999, Statement of Changes in Net Assets for each
of the years in the two-year period ended December 31, 1999, Financial
Highlights for each of the years in the five-year period ended December 31,
1999, Notes to Financial Statements and Independent Auditors' Report), each of
which is included in the Annual Report to Shareholders of the Fund, are
incorporated by reference into this Statement of Additional Information and
have been so incorporated in reliance upon the reports of
PricewaterhouseCoopers LLP independent accountants, on behalf of the Fund.
The audited financial statements of the International Equity Portfolio
(Portfolio of Investments at December 31, 1999, Statement of Assets and
Liabilities at December 31, 1999, Statement of Operations for the fiscal year
ended December 31, 1999, Statement of Changes in Net Assets for the fiscal
years ended December 31, 1999 and 1998, Financial Highlights for each of the
years in the five-year period ended December 31, 1999, Notes to Financial
Statements and Independent Auditors' Report), each of which is included in the
Annual Report to Shareholders of CitiFunds International Growth Portfolio, are
incorporated by reference into this Statement of Additional Information and
have been so incorporated in reliance upon the reports of
PricewaterhouseCoopers LLP, chartered accountants, on behalf of the Portfolio.
A copy of the Annual Report for the Fund accompanies this Statement of
Additional Information.
<PAGE>
PART C
Item 23. Exhibits.
*** a(1) Declaration of Trust of the Registrant
**, *** and 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
****** e(1) Amended and Restated Distribution Agreement
between the Registrant and CFBDS, as distributor with
respect to Class A shares of CitiFunds International
Growth Portfolio
****** e(2) Distribution Agreement between the Registrant and
CFBDS, as distributor with respect to Class B shares of
CitiFunds International Growth Portfolio
** g Custodian Contract between the Registrant and State
Street Bank and Trust Company ("State Street"), as
custodian
*** h(1) Amended and Restated Administrative Services Plan
of the Registrant with respect to CitiFunds
International Growth Portfolio
****** h(2) Amendment to the Amended and Restated
Administrative Services Plan of the Registrant with
respect to CitiFunds International Growth Portfolio
*** h(3) Administrative Services Agreement between the
Registrant and CFBDS, as administrator for
CitiFunds International Growth Portfolio
*** h(4) Sub-Administrative Services Agreement between
Citibank, N.A. and CFBDS with respect to CitiFunds
International Growth Portfolio
*** h(5)(i) Form of Shareholder Servicing Agreement between
the Registrant and Citibank, N.A., as shareholder
servicing agent for CitiFunds International Growth
Portfolio
*** h(5)(ii) Form of Shareholder Servicing Agreement between
the Registrant and a federal savings bank, as
shareholder servicing agent for CitiFunds International
Growth Portfolio
*** h(5)(iii) Form of Shareholder Servicing Agreement
between the Registrant and CFBDS, as shareholder
servicing agent for CitiFunds International Growth
Portfolio
* h(5)(iv) Form of Shareholder Servicing Agreement between
the Registrant and a national banking association or
subsidiary thereof or state chartered banking
association, as shareholder servicing agent for
CitiFunds International Growth Portfolio
*** h(6) Transfer Agency and Servicing Agreement between the
Registrant and State Street, as transfer agent
** h(7) Fund Accounting Agreement between the Registrant
and State Street, as fund accounting agent
**** i Opinion and consent of counsel
j Independent auditors' consent
****** m(1) Amended and Restated Distribution Plan of the
Registrant for Class A Shares of CitiFunds
International Growth Portfolio
****** m(2) Distribution Plan of the Registrant for Class B
Shares of CitiFunds International Growth Portfolio
****** o Multiple Class Plan of the Registrant
*** and p(1) Powers of Attorney for the Registrant
*******
**** and filed
herewith Powers of Attorney for The Premium Portfolios
q(1) Code of Ethics of the Registrant
q(2) Code of Ethics of CFBDS
- ---------------------
* Incorporated herein by reference to Post Effective Amendment No. 13 to
the Registrant's Registration Statement on Form N-1A (File No. 33-36556)
as filed with the Securities and Exchange Commission on April 29, 1996.
** 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 16,
1999.
******* Incorporated herein by reference to Post-Effective Amendment No. 22 to
the Registrant's Registration Statement on Form N-1A (File No. 33-36556)
as filed with the Securities and Exchange Commission on April 16, 1999.
********Incorporated herein by reference to Post-Effective Amendment No. 24 to
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 to Post-Effective
Amendment No. 20 to its Registration Statement on Form N-1A; and (c) the
undertaking of the Registrant regarding indemnification set forth in its
Registration Statement on Form N-1A.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
Item 26. Business and Other Connections of Investment Adviser.
Citibank, N.A. ("Citibank") is a commercial bank offering a wide range of
banking and investment services to customers across the United States and around
the world. Citibank is a wholly-owned subsidiary of Citicorp, which is, in turn,
a wholly-owned subsidiary of Citigroup Inc. Citibank also serves as investment
adviser to the following registered investment companies (or series thereof):
Asset Allocation Portfolios (Large Cap Value Portfolio, Small Cap Value
Portfolio, International Portfolio and Foreign Bond Portfolio), The Premium
Portfolios (U.S. Fixed Income Portfolio, High Yield Portfolio, Balanced
Portfolio, Large Cap Growth Portfolio, International Equity Portfolio,
Government Income Portfolio and Small Cap Growth Portfolio), Tax Free Reserves
Portfolio, U.S. Treasury Reserves Portfolio, Cash Reserves Portfolio,
CitiFundsSM Tax Free Income Trust (CitiFundsSM New York Tax Free Income
Portfolio, CitiFundsSM National Tax Free Income Portfolio and CitiFundsSM
California Tax Free Income Portfolio), CitiFundsSM Multi-State Tax Free Trust
(CitiFundsSM California Tax Free Reserves, CitiFundsSM New York Tax Free
Reserves and CitiFundsSM Connecticut Tax Free Reserves), CitiFundsSM
Institutional Trust (CitiFundsSM Institutional Cash Reserves) and Variable
Annuity Portfolios (CitiSelect(R) VIP Folio 200 Conservative, CitiSelect(R) VIP
Folio 300 Balanced, CitiSelect(R) VIP Folio 400, Growth CitiSelect(R) VIP Folio
500 Growth Plus and CitiFundsSM Small Cap Growth VIP Portfolio). Citibank and
its affiliates manage assets in excess of $327 billion worldwide. The principal
place of business of Citibank is located at 399 Park Avenue, New York, New York
10043.
Victor J. Menezes is the Chairman and a Director of Citibank. William R.
Rhodes and H. Onno Ruding are Vice Chairmen and Directors of Citibank. The other
Directors of Citibank are Paul J. Collins, Vice Chairman of Citigroup Inc. and
Robert I. Lipp, Chairman and Chief Executive Officer of The Travelers Insurance
Group Inc. and of Travelers Property Casualty Corp.
The following persons have the affiliations indicated:
Paul J. Collins Director, Kimberly-Clark Corporation
Director, Nokia Corporation
Robert I. Lipp Chairman, Chief Executive Officer and
President, Travelers Property Casualty Corp.
William R. Rhodes Director, Private Export Funding
Corporation
Director, Conoco, Inc.
H. Onno Ruding Supervisory Director, Amsterdamsch Trustees
Cantoor B.V.
Director, Pechiney S.A.
Advisory Director, Unilever NV and Unilever
PLC
Director, Corning Incorporated
Item 27. Principal Underwriters.
(a) CFBDS, the Registrant's Distributor, is also the distributor for
CitiFunds(SM) International Growth & Income Portfolio, CitiFunds(SM)
International Growth Portfolio, CitiFunds(SM) U.S. Treasury Reserves,
CitiFunds(SM) Cash Reserves, CitiFunds(SM) Premium U.S. Treasury Reserves,
CitiFunds(SM) Premium Liquid Reserves, CitiFunds(SM) Institutional U.S. Treasury
Reserves, CitiFunds(SM) Institutional Liquid Reserves, CitiFunds(SM)
Institutional Cash Reserves, CitiFunds(SM) Tax Free Reserves, CitiFunds(SM)
Institutional Tax Free Reserves, CitiFunds(SM) California Tax Free Reserves,
CitiFunds(SM) Connecticut Tax Free Reserves, CitiFunds(SM) New York Tax Free
Reserves, CitiFunds(SM) Intermediate Income Portfolio, CitiFunds(SM) Short-Term
U.S. Government Income Portfolio, CitiFunds(SM) New York Tax Free Income
Portfolio, CitiFunds(SM) National Tax Free Income Portfolio, CitiFunds(SM)
California Tax Free Income Portfolio, CitiFunds(SM) Small Cap Value Portfolio,
CitiFunds(SM) Growth & Income Portfolio, CitiFunds(SM) Large Cap Growth
Portfolio, CitiFunds(SM) Small Cap Growth Portfolio, CitiFunds(SM) Balanced
Portfolio, CitiSelect(R) 100 Income, CitiSelect(R) 200 Conservative,
CitiSelect(R) 300 Balanced, CitiSelect(R) 400 Growth, CitiSelect(R) 500 Growth
Plus, CitiSelect(R) VIP Folio 200 Conservative, CitiSelect(R) VIP Folio 300
Balanced, CitiSelect(R) VIP Folio 400 Growth, CitiSelect(R) VIP Folio 500 Growth
Plus and CitiFunds(SM) Small Cap Growth VIP Portfolio. CFBDS is also the
placement agent for Large Cap Value Portfolio, Small Cap Value Portfolio,
International Portfolio, Foreign Bond Portfolio, Intermediate Income Portfolio,
Short-Term Portfolio, Growth & Income Portfolio, U.S. Fixed Income Portfolio,
Large Cap Growth Portfolio, Small Cap Growth Portfolio, International Equity
Portfolio, Balanced Portfolio, Government Income Portfolio, Tax Free Reserves
Portfolio, Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio. CFBDS
also serves as the distributor for the following funds: The Travelers Fund U for
Variable Annuities, The Travelers Fund VA for Variable Annuities, The Travelers
Fund BD for Variable Annuities, The Travelers Fund BD II for Variable Annuities,
The Travelers Fund BD III for Variable Annuities, The Travelers Fund BD IV for
Variable Annuities, The Travelers Fund ABD for Variable Annuities, The Travelers
Fund ABD II for Variable Annuities, The Travelers Separate Account PF for
Variable Annuities, The Travelers Separate Account PF II for Variable Annuities,
The Travelers Separate Account QP for Variable Annuities, The Travelers Separate
Account TM for Variable Annuities, The Travelers Separate Account TM II for
Variable Annuities, The Travelers Separate Account Five for Variable Annuities,
The Travelers Separate Account Six for Variable Annuities, The Travelers
Separate Account Seven for Variable Annuities, The Travelers Separate Account
Eight for Variable Annuities, The Travelers Fund UL for Variable Annuities, The
Travelers Fund UL II for Variable Annuities, The Travelers Variable Life
Insurance Separate Account One, The Travelers Variable Life Insurance Separate
Account Two, The Travelers Variable Life Insurance Separate Account Three, The
Travelers Variable Life Insurance Separate Account Four, The Travelers Separate
Account MGA, The Travelers Separate Account MGA II, The Travelers Growth and
Income Stock Account for Variable Annuities, The Travelers Quality Bond Account
for Variable Annuities, The Travelers Money Market Account for Variable
Annuities, The Travelers Timed Growth and Income Stock Account for Variable
Annuities, The Travelers Timed Short-Term Bond Account for Variable Annuities,
The Travelers Timed Aggressive Stock Account for Variable Annuities, The
Travelers Timed Bond Account for Variable Annuities, Small Cap Fund, Government
Fund, Growth Fund, Growth and Income Fund, International Equity Fund, Mid Cap
Fund, Municipal Bond Fund, Select Small Cap Portfolio, Select Government
Portfolio, Select Growth Portfolio, Select Growth and Income Portfolio, Select
Mid Cap Portfolio, Balanced Investments, Emerging Markets Equity Investments,
Government Money Investments, High Yield Investments, Intermediate Fixed Income
Investments, International Equity Investments, International Fixed Income
Investments, Large Capitalization Growth Investments, Large Capitalization Value
Equity Investments, Long-Term Bond Investments, Mortgage Backed Investments,
Municipal Bond Investments, S&P Index Investments, Small Capitalization Growth
Investments, Small Capitalization Value Equity Investments, Multi-Sector Fixed
Income Investments, Multi-Strategy Market Neutral Investments, Appreciation
Portfolio, Diversified Strategic Income Portfolio, Emerging Growth Portfolio,
Equity Income Portfolio, Equity Index Portfolio, Growth & Income Portfolio,
Intermediate High Grade Portfolio, International Equity Portfolio, Money Market
Portfolio, Total Return Portfolio, Smith Barney Adjustable Rate Government
Income Fund, Smith Barney Aggressive Growth Fund Inc., Smith Barney Appreciation
Fund Inc., Smith Barney Arizona Municipals Fund Inc., Smith Barney California
Municipals Fund Inc., Balanced Portfolio, Conservative Portfolio, Growth
Portfolio, High Growth Portfolio, Income Portfolio, Global Portfolio, Select
Balanced Portfolio, Select Conservative Portfolio, Select Growth Portfolio,
Select High Growth Portfolio, Select Income Portfolio, Concert Social Awareness
Fund, Smith Barney Large Cap Blend Fund, Smith Barney Fundamental Value Fund
Inc., Large Cap Value Fund, Short-Term High Grade Bond Fund, U.S. Government
Securities Fund, Smith Barney Balanced Fund, Smith Barney Convertible Fund,
Smith Barney Diversified Strategic Income Fund, Smith Barney Exchange Reserve
Fund, Smith Barney High Income Fund, Smith Barney Municipal High Income Fund,
Smith Barney Premium Total Return Fund, Smith Barney Total Return Bond Fund,
Cash Portfolio, Government Portfolio, Municipal Portfolio, Concert Peachtree
Growth Fund, Smith Barney Contrarian Fund, Smith Barney Government Securities
Fund, Smith Barney Hansberger Global Small Cap Value Fund, Smith Barney
Hansberger Global Value Fund, Smith Barney Investment Grade Bond Fund, Smith
Barney Premier Selections Fund, Smith Barney Small Cap Value Fund, Smith Barney
Small Cap Growth Fund, Smith Barney Intermediate Maturity California Municipals
Fund, Smith Barney Intermediate Maturity New York Municipals Fund, Smith Barney
Large Capitalization Growth Fund, Smith Barney S&P 500 Index Fund, Smith Barney
Mid Cap Blend Fund, Smith Barney EAFE Index Fund, Smith Barney US 5000 Index
Fund, Smith Barney Managed Governments Fund Inc., Smith Barney Managed
Municipals Fund Inc., Smith Barney Massachusetts Municipals Fund, Cash
Portfolio, Government Portfolio, Retirement Portfolio, California Money Market
Portfolio, Florida Portfolio, Georgia Portfolio, Limited Term Portfolio,
National Portfolio, Massachusetts Money Market Portfolio, New York Money Market
Portfolio, New York Portfolio, Pennsylvania Portfolio, Smith Barney Municipal
Money Market Fund, Inc., Smith Barney Natural Resources Fund Inc., Smith Barney
Financial Services Fund, Smith Barney Health Sciences Fund, Smith Barney
Technology Fund, Smith Barney New Jersey Municipals Fund Inc., Smith Barney
Oregon Municipals Fund, Zeros Plus Emerging Growth Series 2000, Smith Barney
Security and Growth Fund, Smith Barney Small Cap Blend Fund, Inc., Smith Barney
Telecommunications Income Fund, Income and Growth Portfolio, Reserve Account
Portfolio, U.S. Government/High Quality Securities Portfolio, Emerging Markets
Portfolio, European Portfolio, Global Government Bond Portfolio, International
Equity Portfolio, Pacific Portfolio, AIM Capital Appreciation Portfolio, Smith
Aggressive Growth Portfolio, Smith Mid Cap Portfolio, Alliance Growth Portfolio,
INVESCO Global Strategic Income Portfolio, MFS Total Return Portfolio, Putnam
Diversified Income Portfolio, Smith Barney High Income Portfolio, Smith Barney
Large Cap Value Portfolio, Smith Barney International Equity Portfolio, Smith
Barney Large Capitalization Growth Portfolio, Smith Barney Money Market
Portfolio, Smith Barney Pacific Basin Portfolio, Travelers Managed Income
Portfolio, Van Kampen Enterprise Portfolio, Centurion U.S. Equity Fund,
Centurion International Equity Fund, Centurion U.S. Contra Fund, Centurion
International Contra Fund, Global High-Yield Bond Fund, International Equity
Fund, Emerging Opportunities Fund, Core Equity Fund, Long-Term Bond Fund, Global
Dimensions Fund L.P., Citicorp Private Equity L.P., AIM V.I. Capital
Appreciation Fund, AIM V.I. Government Series Fund, AIM V.I. Growth Fund, AIM
V.I. International Equity Fund, AIM V.I. Value Fund, Fidelity VIP Growth
Portfolio, Fidelity VIP High Income Portfolio, Fidelity VIP Equity Income
Portfolio, Fidelity VIP Overseas Portfolio, Fidelity VIP II Contrafund
Portfolio, Fidelity VIP II Index 500 Portfolio, MFS World Government Series, MFS
Money Market Series, MFS Bond Series, MFS Total Return Series, MFS Research
Series, MFS Emerging Growth Series, Salomon Brothers Institutional Money Market
Fund, Salomon Brothers Cash Management Fund, Salomon Brothers New York Municipal
Money Market Fund, Salomon Brothers National Intermediate Municipal Fund,
Salomon Brothers U.S. Government Income Fund, Salomon Brothers High Yield Bond
Fund, Salomon Brothers International Equity Fund, Salomon Brothers Strategic
Bond Fund, Salomon Brothers Large Cap Growth Fund, Salomon Brothers Balanced
Fund, Salomon Brothers Asia Growth Fund, Salomon Brothers Capital Fund Inc,
Salomon Brothers Investors Value Fund Inc, Salomon Brothers Opportunity Fund
Inc, Salomon Brothers Institutional High Yield Bond Fund, Salomon Brothers
Institutional Emerging Markets Debt Fund, Salomon Brothers Variable Investors
Fund, Salomon Brothers Variable Capital Fund, Salomon Brothers Variable Total
Return Fund, Salomon Brothers Variable High Yield Bond Fund, Salomon Brothers
Variable Strategic Bond Fund, Salomon Brothers Variable U.S. Government Income
Fund, Salomon Brothers Variable Asia Growth Fund, and Salomon Brothers Variable
Small Cap Fund.
(b) The information required by this Item 27 with respect to each director
and officer of CFBDS is incorporated by reference to Schedule A of Form BD filed
by CFBDS pursuant to the Securities and Exchange Act of 1934 (File No. 8-32417).
(c) Not applicable.
Item 28. Location of Accounts and Records.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
NAME ADDRESS
CFBDS, Inc. 21 Milk Street, 5th Floor
(administrator and distributor) Boston, MA 02109
State Street Bank and Trust Company 1776 Heritage Drive
(custodian and transfer agent) North Quincy, MA 02171
Citibank, N.A. 153 East 53rd Street
(investment adviser) New York, NY 10043
SHAREHOLDER SERVICING AGENTS
Citibank, N.A. 450 West 33rd Street
New York, NY 10001
Citibank, N.A. -- Citigold Citicorp Mortgage Inc. - Citigold
15851 Clayton Road
Ballwin, MO 63011
Citibank, N.A. -- The Citibank 153 East 53rd Street
Private Bank New York, NY 10043
Citibank, N.A. -- Citibank Global 153 East 53rd Street
Asset Management New York, NY 10043
Citibank, N.A. -- North American 111 Wall Street
Investor Services New York, NY 10094
Citicorp Investment Services One Court Square
Long Island City, NY 11120
Item 29. Management Services.
Not applicable.
Item 30. Undertakings.
Not applicable.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Boston and
Commonwealth of Massachusetts on the 28th day of April, 2000.
CITIFUNDS 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 April 28, 2000.
Signature Title
--------- -----
Philip W. Coolidge President, Principal Executive
- ---------------------------- Officer and Trustee
Philip W. Coolidge
Linwood C. Downs Principal Financial Officer and
- ---------------------------- Principal Accounting Officer
Linwood C. Downs
Riley C. Gilley* Trustee
- ----------------------------
Riley C. Gilley
Diana R. Harrington* Trustee
- ----------------------------
Diana R. Harrington
Susan B. Kerley* Trustee
- ----------------------------
Susan B. Kerley
Heath B. McLendon* Trustee
- ----------------------------
Heath B. McLendon
C. Oscar Morong, Jr.* Trustee
- ----------------------------
C. Oscar Morong, Jr.
E. Kirby Warren* Trustee
- ----------------------------
E. Kirby Warren
*By: Philip W. Coolidge
------------------------
Philip W. Coolidge
Executed by Philip W. Coolidge
on behalf of those indicated
pursuant to Powers of Attorney.
<PAGE>
SIGNATURES
The Premium Portfolios has duly caused this Post-Effective Amendment to
the Registration Statement on Form N-1A of CitiFunds International Trust to be
signed on its behalf by the undersigned, thereunto duly authorized, in Grand
Cayman, Cayman Islands, on the 28th day of April, 2000.
THE PREMIUM PORTFOLIOS
on behalf of International Equity Portfolio
By: Susan Jakuboski
----------------------------------
Susan Jakuboski
Assistant Secretary of
The Premium Portfolios
This Post-Effective Amendment to the Registration Statement on Form N-1A
of CitiFunds International Trust has been signed by the following persons in the
capacities indicated on April 28, 2000.
Signature Title
--------- -----
Philip W. Coolidge* President, Principal Executive
- ---------------------------- Officer and Trustee
Philip W. Coolidge
Linwood C. Downs* Principal Financial Officer and
- ---------------------------- Principal Accounting Officer
Linwood C. Downs
Elliott J. Berv* Trustee
- ----------------------------
Elliott J. Berv
Mark T. Finn* Trustee
- ----------------------------
Mark T. Finn
C. Oscar Morong, Jr.* Trustee
- ----------------------------
C. Oscar Morong, Jr.
Walter E. Robb, III* Trustee
- ----------------------------
Walter E. Robb, III
E. Kirby Warren* Trustee
- ----------------------------
E. Kirby Warren
*By: Susan Jakuboski
------------------------
Susan Jakuboski
Executed by Susan
Jakuboski on behalf
of those indicated as
attorney in fact.
<PAGE>
EXHIBIT INDEX
Exhibit
No.: Description:
------- ------------
j Independent auditors' consent
p(2) Powers of Attorney for The Premium Portfolios
q(1) Code of Ethics of the Registrant
q(2) Code of Ethics of CFBDS
<PAGE>
Exhibit j
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 25 to the registration statement on Form N-1A ( "Registration
Statement") of CitiFunds International Trust of our report dated February 23,
2000, relating to the financial statements and financial highlights which
appears in the December 31, 1999 Annual Report of CitiFunds International Growth
Portfolio, which are also incorporated by reference into the Registration
Statement. We also consent to the references to us under the heading "Financial
Highlights" in the Prospectus and under the headings "Auditors" and "Financial
Statements" in the Statement of Additional Information.
PricewaterhouseCoopers LLP
Boston, Massachusetts
April 27, 2000
<PAGE>
Exhibit j
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 25
to the registration statement on Form N-1A ("Registration Statement") of
CitiFunds International Trust of our report dated February 23, 2000, relating to
the financial statements and financial highlights of International Equity
Portfolio which appears in the December 31, 1999 Annual Report of CitiFunds
International Growth Portfolio, which are also incorporated by reference into
the Registration Statement. We also consent to the references to us under the
headings "Auditors" and "Financial Statements" in the Statement of Additional
Information.
PricewaterhouseCoopers LLP
Chartered Accountants
Toronto, Ontario
April 27, 2000
<PAGE>
Exhibit p(2)
THE PREMIUM PORTFOLIOS
The undersigned hereby constitutes and appoints Philip W. Coolidge, Susan
Jakuboski, Tamie Ebanks-Cunningham, 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 The Premium Portfolios (on behalf of each of its series now existing or
hereinafter created) (the "Registrant") with the Securities and Exchange
Commission under the Investment Company Act of 1940, as amended, the
Registration Statements on Form N-1A, and any and all amendments thereto, to be
executed by the Registrant and filed by another registrant with the Securities
and Exchange Commission under the Investment Company Act of 1940, as amended, or
under the Securities Act of 1933, 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 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 28th day
of December, 1999.
Linwood C. Downs
- ----------------------
Linwood C. Downs
<PAGE>
Exhibit q(1)
AMENDED AND RESTATED
CODE OF ETHICS
FEBRUARY 4, 2000
This Amended and Restated Code of Ethics has been duly adopted by the
Board of Trustees, including a majority of the Disinterested Trustees (as
defined below in this Code of Ethics), of each investment company listed in
Appendix I hereto (each, an "Investment Company" and collectively, the
"Investment Companies"), pursuant to Rule 17j-1 under the Investment Company Act
of 1940, as amended (the "1940 Act").
I. RULES APPLICABLE TO ACCESS PERSONS
A. Definitions
1. "Access Person" means
(i) any trustee, officer or Advisory Person (as defined below) of
any Investment Company or investment adviser thereof, or
(ii) any director or officer of a principal underwriter of an
Investment Company who, in the ordinary course of his or her
business, makes, participates in or obtains information
regarding the purchase or sale of securities for the
Investment Company for which the principal underwriter so acts
or whose functions or duties as part of the ordinary course of
his or her business relate to the making of any recommendation
to such Investment Company regarding the purchase or sale of
securities, or
(iii) notwithstanding the provisions of clause (i) above, where the
investment adviser is primarily engaged in a business or
businesses other than advising registered investment companies
or other advisory clients (as determined in accordance with
Rule 17j-1 under the 1940 Act), any director, officer or
Advisory Person of the investment adviser who, with respect to
any Investment Company, makes any recommendation, participates
in the determination of which recommendation shall be made, or
whose principal function or duties relate to the determination
of which recommendation shall be made to any Investment
Company, or who, in connection with his or her duties, obtains
any information concerning securities recommendations being
made by such investment adviser to any Investment Company.
2. An "Advisory Person" is any employee of an Investment Company or of
the Investment Company's investment adviser (or of any company in a control
relationship to the Investment Company or its investment adviser) who, in
connection with his or her regular functions or duties, makes, participates in
or obtains information regarding the purchase or sale of securities by an
Investment Company or whose functions relate to any recommendations with respect
to such purchases or sales, and any natural person in a control relationship
with the Investment Company or adviser who obtains information regarding the
purchase or sale of securities by the Investment Company.
3. "Beneficial Ownership" shall be interpreted subject to the
provisions of Rule 16a-1(a)(exclusive of Section (a)(1) of such Rule) of the
Securities Exchange Act of 1934, as amended, but without regard to any provision
in such Rule limiting its application only to equity securities.
4. "Control" shall have the meaning set forth in Section 2(a)(9) of the
1940 Act.
5. "Disinterested Trustee" of an Investment Company means a Trustee who
is not an "interested person" of that Investment Company within the meaning of
Section 2(a)(19) of the 1940 Act. An "interested person" of an Investment
Company includes any person who is a trustee, director, officer, employee or
owner of 5% or more of the outstanding stock of the investment adviser or
principal underwriter, if any, of such Investment Company. Affiliates of brokers
or dealers are also "interested persons" of such Investment Company, except as
provided in Rule 2a19-1 under the 1940 Act.
6. "Portfolio Manager" means the person or persons who have or share
direct responsibility and authority to make investment decisions affecting an
Investment Company.
7. "Purchase or sale of a security" includes, among other things, the
writing of an option to purchase or sell a security or the purchase or sale of a
future or index on a security or option thereon.
8. "Review Officer" means, with respect to an Investment Company, the
Secretary of such Investment Company or such other person as may be designated
by the Board of Trustees of such Investment Company, except that with respect to
Advisory Persons who are employees of the investment adviser of an Investment
Company, Review Officer shall mean such person or persons as such investment
adviser shall designate from time to time.
9. "Security" shall have the meaning as set forth in Section 2(a)(36)
of the 1940 Act, except that it shall not include:
(i) direct obligations of the Government of the United States;
(ii) bankers acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments (meaning
instruments having a maturity at issuance of less than 366
days and that are rated in one of the two highest rating
categories by a Nationally Recognized Statistical Rating
Organization), including repurchase agreements; and
(iii) shares of registered open-end investment companies.
10. A security is "being considered for purchase or sale" when, among
other circumstances, the assigned analyst or Portfolio Manager is seriously
considering a change in the rating of the security.
11. Nothwithstanding any other provision hereof, the terms Access
Person, Advisory Person and Portfolio Manager shall not include any person who
is subject to provisions of a code of ethics adopted by an investment adviser or
principal underwriter of an Investment Company in compliance with Rule 17j-1
under the 1940 Act and approved by the Board of Trustees of each Investment
Company, so long as the investment adviser or principal underwriter complies
with Section V of this Code.
B. Statement of General Principles on Personal Investment Activities
Personal investment activities engaged in by an Access Person shall be
subject to the following general principles:
1. No personal investment activities shall conflict with the duty to
place the interests of the Investment Company before any personal interests;
2. All personal investment activities shall be conducted consistent
with the requirements and standards set forth in this Code and in such a manner
as to avoid any actual or potential conflict of interest or any abuse of an
individual's position of trust and responsibility; and
3. No Access Person shall, directly or indirectly, otherwise take
inappropriate advantage of his or her position with the Investment Company.
C. Avoiding Conflicts of Interest
Without limiting the foregoing Section I-B, no Access Person shall
enter into or engage in a security transaction or business activity or
relationship which may result in any financial or other conflict of interest
between such person and an Investment Company and each such person shall at all
times and in all matters endeavor to place the interests of the Investment
Company before his or her personal interests.
D. Prohibited Activities
1. Blackout Periods: No Access Person shall purchase or sell, directly
or indirectly, any security in which he or she has, or by reason of such
transaction acquires, any direct or indirect Beneficial Ownership:
a. and which to his or her knowledge at the time of such purchase or
sale is being considered for purchase or sale, or is to be purchased
or sold, by the Investment Company; or
b. on a day during which, to his or her knowledge, the Investment
Company has a pending "buy" or "sell" order in that same security
until that order is executed or withdrawn.
No Portfolio Manager of an Investment Company shall purchase or sell,
directly or indirectly, any security in which he or she has, or by reason of
such transaction acquires, any direct or indirect Beneficial Ownership within
seven (7) calendar days before or after that Investment Company trades in that
security.
2. Interested Transactions: No Access Person shall recommend any
securities transactions by the Investment Company without having disclosed his
or her interest, if any, in such securities or the issuer thereof, including
without limitation:
a. any direct or indirect Beneficial Ownership of any securities of
such issuer;
b. any contemplated transaction by such person in such securities;
c. any position with such issuer or its affiliates; and
d. any present or proposed business relationship between such issuer or
its affiliates and such person or any party in which such person has
a significant interest.
3. Initial Public Offerings: No Advisory Person shall acquire any
securities in an initial public offering for his or her personal account.
4. Private Placements: No Advisory Person shall acquire, directly or
indirectly, Beneficial Ownership of any securities in a private placement
without the prior approval of the Review Officer, who has been provided by such
Advisory Person with full details of the proposed transaction (including written
certification that the investment opportunity did not arise by virtue of the
Advisory Person's activities on behalf of the Investment Company) and has
concluded after consultation with other investment advisory personnel of the
Investment Company that the Investment Company has no foreseeable interest in
purchasing such securities.
5. Short-Term Trading Profits: No Advisory Person shall profit from the
purchase and sale, or sale and purchase, of the same (or equivalent) securities
of which such Advisory Person has Beneficial Ownership within sixty (60)
calendar days. Any profit so realized shall, unless the Investment Company's
Board approves otherwise, be paid over to the Investment Company or to a
charitable organization of the Advisory Person's choosing.
6. Gifts: No Advisory Person shall receive any gift or other things of
more than de minimis value from any person or entity that does business with or
on behalf of the Investment Company; provided, however, that the foregoing shall
not prohibit receipt of:
a. an occasional breakfast, luncheon, dinner or reception, ticket
to a sporting event or the theater, or comparable entertainment,
attended in the company of the giver of the entertainment in
question, that is not so frequent, costly or extensive as to raise
any question of impropriety;
b. a breakfast, luncheon, dinner, reception or cocktail party in
conjunction with a bona fide business meeting;
c. a promotional item, such as a mug, pen or other article
bearing the logo or advertising of any such person or entity,
having a value not in excess of $100; or
d. a gift approved in writing by the Review Officer.
7. Service as a Director: No Advisory Person shall serve on the board
of directors of any publicly traded company without prior authorization from the
Review Officer based upon a determination that such board service would be
consistent with the interests of the Investment Company and its shareholders.
E. Exempted Transactions
The prohibitions of Sections I-D(1) and I-D(5) above shall not apply
to:
1. purchases or sales effected in any account over which such person
has no direct or indirect influence or control;
2. purchases or sales which are nonvolitional on the part of the person
or an Investment Company;
3. purchases which are part of an automatic dividend reinvestment plan;
4. purchases effected upon the exercise of rights issued by an issuer
pro rata to all holders of a class of its securities, to the extent such rights
were acquired from such issuer, and sales of such rights so acquired;
5. purchases and sales previously approved in writing by the Review
Officer (a) as only remotely potentially harmful to an Investment Company
because they would be very unlikely to affect a highly institutional market or
because they clearly are not economically related to the securities to be
purchased or sold or held by an Investment Company or client or (b) as not
representing any danger of the abuses proscribed by Rule 17j-1 under the 1940
Act;
6. purchases or sales of securities which are not eligible for purchase
or sale by an Investment Company.
II. COMPLIANCE PROCEDURES
A. Preclearance
An Advisory Person may directly or indirectly, acquire or dispose of
Beneficial Ownership of a security only if (1) such purchase or sale has been
approved by the Review Officer, (2) the approved transaction is completed within
two (2) business days of the day approval is received and (3) the Review Officer
has not rescinded such approval prior to execution of the transaction. The
requirements of this Section II-A shall not apply to transactions described in
Sections I-E(1), (2) and (3). The fact that preclearance of a transaction is
obtained pursuant to this Section II-A does not render the other prohibitions,
restrictions and provisions of this Code inapplicable to the transaction.
B. Reporting
1. Except as otherwise provided in paragraph 2 of this Section II-B,
each Access Person of an Investment Company must report to the Review Officer as
follows:
a. Initial Holdings Reports. Not later than 10 days after the person
becomes an Access Person, the following information:
o the title, number of shares and principal amount of each security in
which the Access Person had any direct or indirect beneficial
ownership when the person became an Access Person;
o the name of any broker, dealer or bank with whom the Access Person
maintained an account in which any securities were held for the
direct or indirect benefit of the Access Person as of the date the
person became an Access Person; and
o the date that the report is submitted by the Access Person.
b. Quarterly Transaction Reports. Not later than 10 days after the end
of each calendar quarter, the following information:
(i) With respect to any transaction during the quarter in
a security in which the Access Person had any direct
or indirect beneficial ownership:
o the date of the transaction, the title, the interest
rate and maturity date (if applicable), the number of
shares and the principal amount of each security
involved;
o the nature of the transaction (i.e., purchase, sale or any
other type of acquisition or disposition);
o the price of the security at which the transaction was
effected;
o the name of the broker, dealer or bank with or through which
the transaction was effected; and
o the date that the report is submitted by the Access Person.
(ii) With respect to any account established by the Access Person
in which any securities were held during the quarter for the
direct or indirect benefit of the Access Person:
o the name of the broker, dealer or bank with whom the Access
Person established the account;
o the date that the account was established; and
o the date that the report is submitted by the Access Person.
In the event that no reportable transactions occurred during the
quarter, the report should so state, and should be returned signed and
dated.
c. Annual Holdings Reports. Not later than January 31 of each year, the
following information (which information must be current as of the
immediately preceding December 31):
o the title, number of shares and principal amount of each
security in which the Access Person had any dirtect or
indirect beneficial ownership;
o the name of any broker, dealer or bank with whom the Access
Person maintains an account in which any securities are held
for the direct or indirect benefit of the Access Person; and
o the date on which the report is submitted by the Access
Person.
d. Brokerage Statements. Copies of all of such person's brokerage
statements shall be furnished to the Review Officer on a quarterly
basis.
2. The following are exceptions to the reporting requirements outlined
in Section II-B(1):
a. An Access Person need not make any report required under
Section II-B (1)(a)-(c) with respect to transactions effected
for, and securities held in, any account over which the person
has no direct influence or control, including such an account
in which the person has any beneficial ownership.
b. A Disinterested Trustee who would be required to make the
reports required under Section II-B(1) solely by reason of
being a trustee of an Investment Company need not file with or
deliver to the Review Officer:
(i) an initial holdings report or an annual holdings
report; or
(ii) a quarterly transaction report unless the
Disinterested Trustee knew or, in the
ordinary course of fulfilling his or her
official duties as a Trustee of the
Investment Company, should have known, that
during the 15-day period immediately before
or after the Trustee's transaction in a
security, the Investment Company purchased
or sold the security or the security was
being considered for purchase or sale by the
Investment Company or a series thereof; or
(iii) copies of his or her brokerage statements.
c. An Access Person need not make a quarterly transaction report
under Section II-B(1) if the report would duplicate
information contained in broker trade confirmations or account
statements received by the Review Officer with respect to the
person in the time period required under Section II-B(1), if
all of the information required under Section II-B(1) is
contained in the broker trade confirmations or account
statements or in the records of the Investment Company.
3. Any report delivered pursuant to Section II-B may contain a
statement that the report shall not be construed as an admission by the person
making such report that he or she has any direct or indirect beneficial
ownership in the securities to which the report relates.
4. Each Access Person must certify annually (no later than January 31
of each year) that he or she has read and understands this Code of Ethics and
has complied with its provisions. Such certificates and reports are to be
given to the Review Officer.
C. Review
The Review Officer shall review all of the reports delivered under
Section II-B to determine whether a violation of this Code of Ethics may have
occurred. In reviewing transactions, the Review Officer shall take into account
the exemptions allowed under Section I-E above. Before making a determination
that a violation has been committed by a Trustee, the Review Officer shall give
such person an opportunity to supply additional information regarding the
transaction in question.
III. REVIEW BY THE BOARD OF TRUSTEES
The Review Officer of each Investment Company, each Investment
Company's investment adviser or advisers and each Investment Company's principal
underwriter shall furnish a written report to the Board of Trustees of each
Investment Company, at least annually, that:
A. describes any issues arising under the Code of Ethics or
procedures of such entity since the last report to the Board
of Trustees, including, but not limited to, information about
material violations of its Code of Ethics or procedures and
sanctions imposed in response to the material violations;
B. describes any recommended changes to the Code or procedures;
and
C. certifies that the Investment Company, investment adviser or
principal underwriter, as applicable, has adopted procedures
reasonably necessary to prevent its Access Persons from
violating its Code of Ethics.
The first such report pursuant to this Code shall be delivered to the
Board of Trustees not later than September, 1, 2000.
IV. SANCTIONS
A. Sanctions for Violations by Access Persons
If the Review Officer determines that an Access Person (other than a
Disinterested Trustee) has violated this Code, he or she shall so advise the
respective Board of Trustees and such persons may be subject to sanctions,
including, inter alia, a letter of censure or suspension or termination of the
employment of the violator. As provided in Section I-D(5) above, any financial
profits realized by an Advisory Person through the prohibited personal trading
activities described in such Section may be required to be disgorged. All
violations of the Code and any sanctions imposed as a result thereof shall be
reported to the respective Board of Trustees at least quarterly.
B. Sanctions for Violations by Disinterested Trustees
If the Review Officer determines that any Disinterested Trustee has
violated this Code, he or she shall so advise the President of an Investment
Company and also the Disinterested Trustees (other than the person whose
transaction is at issue) and shall provide such persons with the report, the
record of pertinent actual or contemplated portfolio transactions of an
Investment Company and any additional information supplied by such person. The
Disinterested Trustees, at their option, shall either impose such sanctions as
they deem appropriate or refer the matter to the full Board of Trustees of an
Investment Company, which shall impose such sanctions as it deems appropriate.
V. Other Codes of Ethics
Each investment adviser and principal underwriter of an Investment
Company shall:
1. submit to the Board of Trustees of each Investment Company
a copy of the Code of Ethics adopted by such person pursuant to Rule 17j-1,
which Code of Ethics shall comply with the recommendations of the Investment
Company Institute's Advisory Group on Personal Investing or be accompanied by a
statement explaining any difference and supplying the rationale therefor;
2. promptly report to the Board of Trustees of each Investment
Company in writing any material amendments to such Code of Ethics;
3. promptly furnish to the Board of Trustees of each
Investment Company, upon request, copies of any reports made pursuant to such
Code of Ethics by any person who would be an Access Person or Portfolio Manager
hereunder if such person were not subject to such other Code of Ethics; and
4. immediately furnish to the Board of Trustees of each
Investment Company all material information regarding any violation of such Code
of Ethics by any person who would be an Access Person or Portfolio Manager
hereunder if such person were not subject to such other Code of Ethics.
VI. MISCELLANEOUS
A. Access Persons
The Review Officer of each Investment Company will identify all Access
Persons who are under a duty to make reports to the Investment Company and will
inform such persons of such duty. Any failure by the Review Officer to notify
any person of his or her duties under this Code shall not relieve such person of
his or her obligations hereunder.
B. Records
The administrator or any sub-administrator of an Investment Company
shall maintain records in the manner and to the extent set forth below, which
records may be maintained on microfilm under the conditions described in Rule
31a-2(f) under the 1940 Act, and shall be available for examination by
representatives of the Securities and Exchange Commission:
1. a copy of this Code and any other code which is, or at any time
within the past five years has been, in effect shall be preserved in an easily
accessible place;
2. a record of any violation of this Code and of any action taken as a
result of such violation shall be preserved in an easily accessible place for a
period of not less than five years following the end of the fiscal year in which
the violation occurs;
3. a copy of each report made pursuant to this Code shall be preserved
for a period of not less than five years from the end of the fiscal year in
which it is made, the first two years in an easily accessible place;
4. a list of all persons who are required, or within the past five
years have been required, to make reports pursuant to this Code shall be
maintained in an easily accessible place;
5. copy of each report required under Section II shall be preserved for
a period of not less than five years from the end of the fiscal year in which it
is made, the first two years in an early accessible place; and
6. record of any decision, and the reasons supporting the decision, to
approve the acquisition by Advisory Persons of securities under Section I-D(3)
or (4) shall be preserved for a period of not less than five years from the end
of the fiscal year in which the approval is granted.
C. Confidentiality
All reports of securities transactions and any other information filed
pursuant to this Code shall be treated as confidential, except that the same may
be disclosed to the Board of Trustees of the Investment Companies, to any
regulatory or self-regulatory authority or agency upon its request, or as
required by law or court or administrative order.
D. Interpretation of Provisions
The Board of Trustees of an Investment Company may from time to time
adopt such interpretations of this Code as it deems appropriate.
<PAGE>
Appendix I
CITIFUNDS TRUST I
CITIFUNDS TRUST II
CITIFUNDS TRUST III
CITIFUNDS FIXED INCOME TRUST
CITIFUNDS PREMIUM TRUST
CITIFUNDS MULTI-STATE TAX FREE TRUST
CITIFUNDS INSTITUTIONAL TRUST
CITIFUNDS TAX FREE INCOME TRUST
CITIFUNDS TAX FREE RESERVES
CITIFUNDS INTERNATIONAL TRUST
CASH RESERVES PORTFOLIO
TAX FREE RESERVES PORTFOLIO
U.S. TREASURY RESERVES PORTFOLIO
THE PREMIUM PORTFOLIOS
ASSET ALLOCATION PORTFOLIOS
VARIABLE ANNUITY PORTFOLIOS
VAP MASTER PORTFOLIOS
<PAGE>
Exhibit q(2)
CODE OF ETHICS FOR
SIGNATURE BROKER-DEALER SERVICES, INC.
Signature Broker-Dealer Services, Inc. and its affiliates (collectively
"SBDS"), have each adopted this Code of Ethics (the "Code") to specify and
prohibit certain types of personal securities transactions deemed to create a
conflict of interest and to establish reporting requirements and preventive
procedures pursuant to the provisions of Rule 17j-1(c)(1) under the Investment
Company Act of 1940 (the "1940 Act").
I. DEFINITIONS
A. An "Access Person" means any employee, Director or officer of
SBDS who, in the ordinary course of his or her business, makes,
participates in or obtains information regarding the purchase or
sale of Covered Securities for a Fund for which SBDS acts as
distributor or whose functions or duties as a part of the
ordinary course of his or her business relate to the making of
any recommendation to such Fund regarding the purchase or sale of
securities or who serves as an officer or Trustee/Director for
any such Fund All Access Persons of SBDS shall be advised they
are considered such by the Review Officer.
B. "Beneficial Ownership" shall be interpreted subject to the
provisions of Rule 16a-1(a) (exclusive of Section (a)(1) of such
Rule) of the Securities Exchange Act of 1934, a copy of which is
attached hereto.
C. "Control" shall have the same meaning as set forth in Section
2(a)(9) of the 1940 Act.
D. "Covered Security" means a security as defined in section
2(a)(36) of the Act, except that it does not include:
1. Direct obligations of the Government of the United States;
2. Bankers' acceptances, bank certificates of deposit, commercial
paper and high quality short-term debt instruments, including
repurchase agreements; and
3. Shares issued by open-end Funds.
E. A "Covered Security Held or to be Acquired by a Fund" means:
1. Any Covered Security which, within the most recent 15 days:
(a) Is or has been held by the Fund; or
(b) Is being or has been considered by the Fund or its
investment adviser for purchase by the Fund; and
2. Any option to purchase or sell, and any security convertible
into or exchangeable for, a Covered Security described in (i)
of this section.
F. "Fund" means an investment company registered under the 1940 Act.
G. "Holdings Reports" are reports filed by Access Persons and
contain the following information:
1. the title, number of shares and principal amount of each
Covered Security in which the Access Person has any direct or
indirect beneficial ownership; and
2. the name of any broker, dealer or bank with whom the Access
Person maintained an account in which any securities were held
for the direct or indirect benefit of the Access Person; and
3. the date the report is submitted by the Access Person.
H. The "Review Officer" is the person designated by SBDS' Board of
Directors to monitor the overall compliance with this Code.
Included in the duties of the Review Officer is the review of all
initial and annual Holdings Reports and quarterly transaction
reports and the maintenance of the list of Access Persons. In the
absence of any such designation, the Review Officer shall be the
General Counsel of SBDS or Molly S. Mugler.
I. "Purchase or sale of a Covered Security" includes, among other
things, the writing of an option to purchase or sell a Covered
Security
II. STATEMENT OF GENERAL PRINCIPLES
The following general fiduciary principles shall govern the personal
investment activities of all Access Persons.
Each Access Person shall:
A. at all times, place the interests of Funds SBDS distributes
before his or her personal interests;
B. conduct all personal securities transactions in a manner
consistent with this Code, so as to avoid any actual or potential
conflicts of interest, or an abuse of position of trust and
responsibility; and
C. not take any inappropriate advantage of his or her position with
SBDS with respect to any Fund SBDS distributes.
It is unlawful for any affiliated person of or principal underwriter for a
Fund, or any affiliated person of a principal underwriter for a Fund, in
connection with the purchase or sale, directly or indirectly, by the person
of a Covered Security Held or to be Acquired by the Fund: (1) To employ any
device, scheme or artifice to defraud the Fund; (2) To make any untrue
statement of a material fact to the Fund or omit to state a material fact
necessary in order to make the statements made to the Fund, in light of the
circumstances under which they are made, not misleading; (3) To engage in
any act, practice or course of business that operates or would operate as a
fraud or deceit on the Fund; or (4) To engage in any manipulative practice
with respect to the Fund.
III. RESTRICTIONS ON PERSONAL INVESTING ACTIVITIES.
A. BLACKOUT PERIODS
No Access Person shall purchase or sell, directly or indirectly,
any Covered Security in which he or she has, or by reason of such
transaction acquires, any direct or indirect beneficial ownership
on a day during which he or she knows or should have known a Fund
has a pending "buy" and "sell" order in that same security until
that order is executed or withdrawn.
B. EXEMPTED TRANSACTIONS
The prohibitions of Section III shall not apply to:
1. purchases or sales effected in any account over which the
Access Person has no direct or indirect influence or control;
2. purchases or sales that are non-volitional on the part of the
Access Person, including mergers, recapitalizations or similar
transactions;
3. purchases which are part of an automatic dividend reinvestment
plan;
4. purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from such issuer, and
sales of such rights so acquired; and
5. purchases and sales that receive prior approval in writing by
the Review Officer as (a) only remotely potentially harmful to
a Fund because they would be very unlikely to affect a highly
institutional market, (b) clearly not economically related to
the securities to be purchased or sold or held by a Fund or
client, and (c) not representing any danger of the abuses
proscribed by Rule 17j-1, but only if in each case the
prospective purchaser has identified to the Review Officer all
factors of which he or she is aware which are potentially
relevant to a conflict of interest analysis, including the
existence of any substantial economic relationship between his
or her transaction and securities held or to be held by a
Fund.
IV. COMPLIANCE PROCEDURES
A. REPORTING
1. Quarterly Transaction Reports
(a) Coverage of Quarterly Transaction Reports: Each Access
Person shall, unless otherwise exempted, file with the
Review Officer confidential quarterly reports containing
the information required in section (b) below, with
respect to all transactions during the preceding quarter
in any Covered Securities in which such person has, or by
reason of such transaction acquires, any direct or
indirect beneficial ownership. All such Access Persons
shall file reports, even when no transactions have been
effected, representing that no transactions subject to
reporting requirements were effected.
(b) Filing of Quarterly Transaction Reports: Every report
shall be made no later than 10 days after the end of the
calendar quarter in which the transaction to which the
report relates was effected, and shall contain the
following information:
(i) the date of the transaction, the title, the interest
rate and maturity (if applicable), the number of
shares, and the principal amount of each Covered
Security involved;
(ii) the nature of the transaction (i.e., purchase, sale
or any other type of acquisition or disposition);
(iii) the price at which the transaction was effected;
(iv) the name of the broker, dealer or bank with or
through whom the transaction was effected;
(v) the date that the report is submitted by the Access
Person; and
(vi) with respect to any account established by the
Access Person in which securities were held during
the quarter for the direct or indirect benefit of
the Access Person, the name of the broker, dealer or
bank with whom the Access Person established the
account, the date the account was established and
the date the report is submitted by the Access
Person.
(c) Broker Confirmations/Account Statements: An Access Persons
may direct his or her brokers to supply the Review Officer
on a timely basis, duplicate copies of confirmations of
all personal transactions in Covered Securities. An Access
Person need not make a quarterly transaction report if the
report would duplicate information contained in duplicate
information contained in broker trade confirmations or
account statements received by the Review Officer in the
time period required if all the information required is
contained in the broker trade confirmations or account
statements or in the records of the Review Officer.
2. Initial Holdings Reports: All persons who become Access
Persons must file an initial Holdings Report with the Review
Officer within ten days after that person becomes an Access
Person. The information contained in the initial Holdings
Report must be current as of the date the person became and
Access Person.
3. Annual Holdings Reports: All Access Persons, unless exempted,
must file an annual Holdings Report by the later of September
1 of each year or such earlier time as requested by the Review
Officer. The information contained in the annual Holdings
Report must be current as of a date no more than 30 days
before the report is submitted.
4. Exceptions from Reporting Requirements: No Access Person shall
be required to report transactions effected for any account
over which such Access Person has no direct or indirect
influence or control (except that such an Access Person must
file a written certification stating that he or she has no
direct or indirect influence or control over the account in
question).
B. Review
The Review Officer shall be responsible for reviewing
transactions. Before making a determination that a violation has
been committed by an Access Person, the Review Officer shall give
such person an opportunity to supply additional information
regarding the transaction in question.
V. REVIEW BY THE PRESIDENT
At least annually, the Review Officer shall report to the President
regarding:
A. All existing procedures concerning Access Persons' personal
trading activities and any procedural changes made during the
past year;
B. Any recommended changes to the Code or procedures; and
C. A summary of any violations which occurred during the past year
with respect to which significant remedial action was taken.
VI. SANCTIONS FOR VIOLATIONS BY ACCESS PERSONS
If the Review Officer determines that a violation of this Code has
occurred, he or she shall so advise the President who may advise the
Board of Directors and the President or the Board may impose such
sanctions as he or she or it deems appropriate, including, inter alia,
disgorgement of profits, censure, suspension or termination of the
employment of the violator. All material violations of the Code and any
sanctions imposed as a result thereto shall be reported periodically to
the Board of Directors.
VII. MISCELLANEOUS
A. ACCESS PERSONS
The Review Officer will identify all Access Persons who are under
a duty to make reports to SBDS and will inform such persons of
such duty. Any failure by the Review Officer to notify any person
of his or her duties under this Code shall not relieve such
person of his or her obligations hereunder.
B. RECORDS
SBDS shall maintain records in the manner and to the extent set
forth below, which records may be maintained on microfilm under
the conditions described in Rule 31a-2(f) under the 1940 Act, and
shall be available for examination by representatives of the
Securities and Exchange Commission ("SEC"):
1. a copy of this Code and any other code which is, or at any
time within the past five years has been, in effect shall be
preserved in an easily accessible place;
2. a record of any violation of this Code and of any action taken
as a result of such violation shall be preserved in an easily
accessible place for a period of not less than five years
following the end of the fiscal year in which the violation
occurs;
3. a copy of each report made pursuant to this Code shall be
preserved for a period of not less than five years from the
end of the fiscal year in which it is made, the first two
years in an easily accessible place; and
4. a list of all persons who are required, or within the past
five years have been required, to make reports pursuant to
this Code shall be maintained in an easily accessible place.
C. CONFIDENTIALITY
All reports of Covered Securities transactions and any other
information filed pursuant to this Code shall be treated as
confidential, except to the extent required by law.
D. INTERPRETATION OF PROVISIONS
The Board of Directors of SBDS may from time to time adopt such
interpretations of this Code as it deems appropriate.
SFG293b
<PAGE>
SFG293c
SIGNATURE BROKER-DEALER SERVICES, INC. AND ITS AFFILIATES
TRANSACTIONS REPORT
To: Molly S. Mugler, Senior Legal Counsel
From:
(Your Name)
This Transaction Report (the "Report") is submitted pursuant to the
Code of Ethics (the "Code") of Signature Broker-Dealer Services, Inc. and its
affiliates ("SBDS") and supplies (below) information with respect to
transactions in any security in which I may be deemed to have, or by reason of
such transaction acquire, any direct or indirect beneficial ownership interest
(whether or not such security is a security held or to be acquired by an
investment company administered or distributed by SBDS) for the calendar quarter
ended _____.
Unless the context otherwise requires, all terms used in the Report
shall have the same meaning as set forth in the Code. For purposes of the
Report, beneficial ownership shall be interpreted subject to the provisions of
the Code and Rule 16a-1(a) (exclusive of Section (a)(1) of such Rule) of the
Securities Exchange Act of 1934.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C> <C>
Nature of
Transaction
(Whether Name of the
Purchase, Principal Broker, Dealer
Sale, or Amount of Price at Or Bank with
Other Type of Securities Which the Whom the Nature of
Name of Title of Date of Disposition Acquired or Transaction Transaction Ownership of
Fund Securities Transaction Or Acquisition Disposed of Was Effected Was Effected Securities*
- ---- ---------- ----------- -------------- ----------- ------------ ------------ -----------
<CAPTION>
<S> <C> <C>
Name of Covered Securities Account Established in Last Quarter Date Account was Established
- ---------------------------------- --------------------------- ----------------------------
</TABLE>
I HEREBY CERTIFY THAT I (1) HAVE READ AND UNDERSTAND THE CODE OF SBDS,
(2) RECOGNIZE THAT I AM SUBJECT TO THE CODE, (3) HAVE DISCLOSED ALL SECURITIES
HOLDINGS AS REQUIRED, AND (4) THAT TO THE BEST OF MY KNOWLEDGE THE INFORMATION
FURNISHED IN THIS REPORT IS TRUE AND CORRECT.
NAME (Print) _____________________________ DATE ____________________
SIGNATURE _________________________________________________
* If appropriate, you may disclaim beneficial ownership of any security listed
in this report.
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE BROKER-DEALER SERVICES, INC.
ACCESS PERSONS AS OF MARCH 31, 2000
DATE BECAME
NAME ACCESS PERSON REASON DESIGNATED AS ACCESS PERSON
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C>
MOLLY S. MUGLER PRE-2000 OFFICER OF 59 WALL STREET FUNDS, CITIFUNDS
- ---------------------------------------------------------------------------------------------------------------
PHILIP W. COOLIDGE PRE-2000 OFFICER OF 59 WALL STREET FUNDS, CITIFUNDS
- ---------------------------------------------------------------------------------------------------------------
CHRISTINE D. DORSEY PRE-2000 OFFICER OF 59 WALL STREET FUNDS, CITIFUNDS
- ---------------------------------------------------------------------------------------------------------------
JAMES E. HOOLAHAN PRE-2000 OFFICER OF 59 WALL STREET FUNDS, CITIFUNDS
- ---------------------------------------------------------------------------------------------------------------
LINWOOD C. DOWNS PRE-2000 OFFICER OF CITIFUNDS
- ---------------------------------------------------------------------------------------------------------------
SUSAN JAKUBOSKI PRE-2000 OFFICER OF 59 WALL STREET FUNDS, CITIFUNDS
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
