-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RaF+gi5kba6Xzqdy5iLExrMZz3qdseD94x07gnvNUcIOSPN6AjCleUKz+qAOnszy 91p1mzxQ1JS0daz2sgxi0A== /in/edgar/work/0000950156-00-000482/0000950156-00-000482.txt : 20001003 0000950156-00-000482.hdr.sgml : 20001003 ACCESSION NUMBER: 0000950156-00-000482 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 9 FILED AS OF DATE: 20000929 EFFECTIVENESS DATE: 20000929 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITIFUNDS FIXED INCOME TRUST CENTRAL INDEX KEY: 0000795808 STANDARD INDUSTRIAL CLASSIFICATION: [0000 ] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-06540 FILM NUMBER: 731479 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-05033 FILM NUMBER: 731480 BUSINESS ADDRESS: STREET 1: 21 MILK STREET STREET 2: 5TH FLOOR CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6174231679 FORMER COMPANY: FORMER CONFORMED NAME: LANDMARK FIXED INCOME FUNDS/ DATE OF NAME CHANGE: 19931117 FORMER COMPANY: FORMER CONFORMED NAME: LANDMARK FIXED INCOME FUNCS/DE DATE OF NAME CHANGE: 19931115 FORMER COMPANY: FORMER CONFORMED NAME: LANDMARK U S GOVERNMENT INCOME FUND DATE OF NAME CHANGE: 19920703 485BPOS 1 0001.txt CITIFUNDS FIXED INCOME TRUST As filed with the Securities and Exchange Commission on September 28, 2000 File Nos. 33-6540 811-5033 SECURITIES AND EXCHANGE COMMISSION WASHINGTON D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 POST-EFFECTIVE AMENDMENT NO. 36 AND REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 AMENDMENT NO. 37 CITIFUNDS FIXED INCOME TRUST* (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER) 388 GREENWICH STREET, NEW YORK, NEW YORK 10013 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (800) 451-2010 ROBERT I. FRENKEL, 388 GREENWICH STREET, 23RD FLOOR, NEW YORK, NEW YORK 10013 (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 September 30, 2000, pursuant to paragraph (b) of Rule 485. The Premium Portfolios, on behalf of Government Income Portfolio, has also executed this registration statement. - -------------------------------------------------------------------------------- * This filing relates solely to shares of the Trust's series Citi Short-Term U.S. Government Income Fund. PROSPECTUS SEPTEMBER 30, 2000 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. [photographs] Citi(SM) Short-Term U.S. Government Income Fund Citi Shares D Shares CITIFUNDS(R) FIXED INCOME SERIES - ------------------------------------------------------------------------------ INVESTMENT PRODUCTS: NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE - ------------------------------------------------------------------------------ TABLE OF CONTENTS THE FUND .................................................................. 3 YOUR ACCOUNT .............................................................. 8 CHOOSING A CLASS OF SHARES TO BUY ..................................... 8 HOW TO BUY SHARES ..................................................... 8 CITITRADE INVESTING ................................................... 8 HOW THE PRICE OF YOUR SHARES IS CALCULATED ............................ 9 HOW TO SELL SHARES .................................................... 9 EXCHANGES ............................................................. 9 DIVIDENDS ............................................................. 10 TAX MATTERS ........................................................... 10 MANAGEMENT OF THE FUND .................................................... 11 DISTRIBUTION ARRANGEMENTS ............................................. 11 FINANCIAL HIGHLIGHTS ...................................................... A-1 CITI SHORT-TERM U.S. GOVERNMENT INCOME FUND The Fund's goals are to generate current income and preserve the value of its shareholders' investment. PRINCIPAL STRATEGIES Citi Short-Term U.S. Government Income Fund invests in securities that are backed by the full faith and credit of the United States. The Fund invests in U.S. Treasury bills, notes and bonds, and obligations issued or guaranteed by U.S. government agencies or instrumentalities, including mortgage-backed securities guaranteed by the Government National Mortgage Association (GNMA), as long as the timely payment of interest and principal are backed by the U.S. government. The Fund may use derivatives, such as financial futures and options on futures contracts, in order to protect (or "hedge") against changes in the prices of securities held or to be bought, or changes in interest rates, or to manage the maturity or duration of fixed income securities. The Fund may also invest in derivatives for non-hedging purposes, to enhance yields, price sensitivity, and potential gain. The Fund is permitted to invest in bonds with any maturity. However, the Fund's dollar-weighted average maturity is normally expected to be three years or less. Please note that the Fund invests in securities through an underlying mutual fund. WHO MAY WANT TO INVEST Citi Short-Term U.S. Government Income Fund may be an appropriate investment if you: o Are seeking to participate in the fixed income market. o Are seeking current income from your investments. o Are seeking the added protection against credit risk provided by U.S. government securities. o Have an investment horizon that is at least intermediate term -- typically at least three years. PRINCIPAL RISKS As with any mutual fund, you may lose money if you invest in the Fund. The Fund's principal risks are: MARKET RISK. This is the risk that the prices of securities will rise or fall due to changing economic, political or market conditions. Some securities held by the Fund may be quite volatile, meaning that their prices can change significantly in a short time. INTEREST RATE RISK. In general, the prices of debt securities rise when interest rates fall, and fall when interest rates rise, although shorter term obligations are usually less sensitive to interest rate changes. A change in interest rates could cause the Fund's share price to go down. INCOME RISK. If interest rates decline, the amount of income paid to you by the Fund as dividends may also decline. CREDIT RISK. The Fund invests only in securities that are backed by the full faith and credit of the United States. These securities are generally thought to have minimal credit risk. PORTFOLIO SELECTION. The success of the Fund's investment strategy depends in large part on the investment process. The portfolio managers may fail to pick securities that perform well because they are unable to predict accurately the direction of interest rates or to assess other economic factors. In that case, you may lose money, or your investment may not do as well as an investment in another fixed income fund. PREPAYMENT AND EXTENSION RISK. The issuers of debt securities held by the Fund may be able to call a bond or prepay principal due on the securities, particularly during periods of declining interest rates. The Fund may not be able to reinvest that principal at attractive rates, reducing income to the Fund, and the Fund may lose any premium paid. The Fund would also lose the benefit of falling interest rates on the price of the repaid bond. On the other hand, rising interest rates may cause prepayments to occur at slower than expected rates. This effectively lengthens the maturities of the affected securities, making them more sensitive to interest rate changes and the Fund's share price more volatile. Securities subject to prepayment risk generally offer less potential for gains when interest rates decline, and may offer a greater potential for loss when interest rates rise. Mortgage-backed securities, including collateralized mortgage obligations or CMOs, are particularly susceptible to prepayment risk and their prices may be more volatile than a security having no pre-payment option. DERIVATIVES. The Fund's use of derivatives such as futures and options on futures contracts, particularly when used for non-hedging purposes, may be risky. This practice could result in losses that are not offset by gains on other portfolio assets, causing the Fund's share price to go down. In addition, the Fund's ability to use derivatives successfully depends on the manager's ability to accurately predict movements in interest rates and other economic factors and the availability of liquid markets. If the manager's predictions are wrong, or if the derivatives do not work as anticipated, the Fund could suffer greater losses than if the Fund had not used derivatives. The derivatives purchased by the Fund are standardized contracts traded on commodities exchanges or boards of trade. This means that the exchange or board of trade guarantees counterparty performance. Derivatives may not be available on terms that make economic sense (for example, they may be too costly). MORE ON THE FUND'S INVESTMENTS AND RISKS INVESTMENTS. The Fund invests in debt securities that are backed, as to timely repayment of principal and interest, by the full faith and credit of the U.S. Government. The Fund may also invest in obligations of foreign governments that are guaranteed by the U.S. government. Even if the U.S. government or one of its agencies guarantees principal and interest payments, the market price of the security is not insured and may be volatile. The Fund may invest up to 80% of its assets in mortgage-backed securities that are direct pass-through certificates called "GNMAs" or in collateralized mortgage obligations that are backed by GNMAs. GNMAs are securities backed by a pool of mortgages guaranteed as to payment and principal by the Government National Mortgage Association. The Fund may hold cash pending investment, and may invest in money market instruments, repurchase agreements and reverse repurchase agreements for cash management purposes. The Fund may also lend its portfolio securities or sell its securities short, as long as, in the case of a short sale, the Fund owns, or has the right to obtain, the securities being sold short. 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. DEFENSIVE STRATEGIES. The Fund may, from time to time, take temporary defensive positions in attempting to respond to adverse market, political or other conditions. When doing so, the Fund may invest without limit in money market instruments and other very short-term instruments. The income on money market and other very short-term instruments is likely to be less than the income on the debt obligations generally purchased by the Fund. INVESTMENT STRUCTURE. The Fund does not invest directly in securities but instead invests through an underlying mutual fund, Government Income Portfolio, which has the same investment goals and strategies as the Fund. Government Income Portfolio buys, holds and sells securities in accordance with these goals and strategies. Unless otherwise indicated, references to the Fund in this prospectus include the underlying fund. The Fund may stop investing in its underlying mutual fund at any time, and will do so if the Fund's Trustees believe that to be in the best interests of the Fund's shareholders. The Fund could then invest in another mutual fund or pooled investment vehicle or invest directly in securities. MANAGEMENT STYLE. Managers of mutual funds use different styles when selecting securities to purchase. In selecting securities to buy for the Fund, the manager first establishes the overall duration of the portfolio and its yield curve position, based upon the portfolio managers' outlook on the economy, prospects for economic growth and inflation, and the U.S. government bond market. The portfolio managers then allocate the portfolio between the two primary sectors of the U.S. government securities market, U.S. Treasury and agency obligations, in an attempt to maximize exposure to securities providing the best relative values. The portfolio managers then choose individual securities based upon their relative value within their sector. The portfolio managers use this same approach when deciding which securities to sell. Securities are sold when the Fund needs cash to meet redemptions, or when the portfolio managers believe that better opportunities exist or that the security no longer fits within the managers' overall strategies for achieving the Fund's goals. The Fund is actively managed. Although the portfolio managers attempt to minimize portfolio turnover, from time to time the Fund's annual portfolio turnover rate may exceed 100%. The sale of securities may produce capital gains, which, when distributed, are taxable to investors. Active trading may also increase the amount of commissions or mark-ups the Fund pays to brokers or dealers when it buys and sells securities. The "Financial Highlights" section of this prospectus shows the Fund's historical portfolio turnover rate. The manager may use brokers or dealers for Fund transactions who also provide brokerage and research services to the Fund or other accounts over which the manager 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 the manager 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 the manager exercises investment discretion. FUND PERFORMANCE The bar chart indicates the risks of investing in the Fund by showing changes in the Fund's performance from year to year. Past performance does not necessarily indicate how the Fund will perform in the future. The bar chart shows the performance of the Fund's Citi Shares for each of the past 10 full calendar years. The table indicates the risks of investing in the Fund by comparing the average annual total return of each class for the periods shown with that of the Lehman 1-3 Year U.S. Government Index, a broad measure of market performance. Effective September 30, 2000 all outstanding shares of the Fund are called Citi Shares. D Shares are newly offered. D Shares performance would have been higher than that shown for Citi Shares because of lower D Shares expenses. The Fund's performance reflects certain fee waivers or reimbursements. If these are reduced or eliminated, the Fund's performance may go down. CITI SHORT-TERM U.S. GOVERNMENT INCOME FUND ANNUAL TOTAL RETURNS [in bar chart] - ---------------------------------- 1990 7.90% - ---------------------------------- 1991 13.80% - ---------------------------------- 1992 5.56% - ---------------------------------- 1993 6.08% - ---------------------------------- 1994 (1.72)% - ---------------------------------- 1995 11.48% - ---------------------------------- 1996 3.02% - ---------------------------------- 1997 6.11% - ---------------------------------- 1998 6.33% - ---------------------------------- 1999 2.07% - ---------------------------------- QUARTERLY RETURNS: (FOR CALENDAR QUARTERS COVERED BY THE BAR CHART) Highest: 6.47% in third quarter 1991 Lowest: (1.79)% in first quarter 1990 Year to date performance as of 6/30/00: 2.96% AVERAGE ANNUAL TOTAL RETURNS AS OF DECEMBER 31, 1999 1 Year 5 Years 10 Years Citi Shares 2.07% 5.75% 5.98% D Shares* N/A N/A N/A Lehman 1-3 Year U.S. Gov't. Index 2.97% 6.48% 6.56% *There were no D Shares outstanding for the calendar year ended December 31, 1999. For up-to-date yield information, please call 1-800-995-0134, toll-free, or contact your account representative. If you are a Cititrade(R) customer, please call 1-888-663-CITI[2484], toll free. FEES AND EXPENSES This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. - -------------------------------------------------------------------------------- Fee Table - -------------------------------------------------------------------------------- SHAREHOLDER FEES - fees paid directly from your investment Share Class CITI SHARES D SHARES(1) - -------------------------------------------------------------------------------- None None ANNUAL OPERATING EXPENSES (% of average net assets) expenses deducted from Fund assets(2) - -------------------------------------------------------------------------------- Management fees 0.35% 0.35% Distribution (12b-1) fees 0.20% None Other expenses (administrative, shareholder servicing and other expenses) 0.87% 0.87% Total annual operating expenses 1.42%* 1.22% - -------------------------------------------------------------------------------- * Because some of the Fund's expenses were waived or reimbursed, actual total operating expenses for the prior fiscal year were: 0.80% Fee waivers and reimbursements may be reduced or terminated at any time. (1) Based on estimated expenses for the fiscal year ending December 31, 2000. (2) The Fund invests in securities through an underlying mutual fund, Government Income Portfolio. This table reflects the expenses of the Fund and Government Income Portfolio. - -------------------------------------------------------------------------------- Expenses on a $10,000 investment 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 reinvest all dividends; o you then sell all of your shares at the end of those periods; o your investment has a 5% return each year - the assumption of a 5% return is required by the SEC for the purpose of this example and is not a prediction of the Fund's future performance; and o the Fund's operating expenses as shown in the table remain the same the example does not include voluntary fee caps. Although your actual costs may be higher or lower, based on these assumptions your costs would be: - -------------------------------------------------------------------------------- CITI SHORT-TERM U.S. GOVERNMENT INCOME FUND 1 Year 3 Years 5 Years 10 Years Citi Shares $145 $449 $776 $1,702 D Shares $124 $387 $670 $1,477 - -------------------------------------------------------------------------------- YOUR ACCOUNT CHOOSING A CLASS OF SHARES TO BUY You may purchase CITI SHARES which are sold at net asset value with no initial or deferred sales charge. Citi Shares are subject to an ongoing service fee. Citi Shares is the class of shares generally available for purchase by investors. D SHARES are sold at net asset value with no initial or deferred sales charge. D Shares are not subject to an ongoing service fee. You may purchase D Shares only if you are participating in certain investment programs. D Shares also are offered to certain tax-exempt employee benefit and retirement plans. For more information about these programs, please call 1-800-995-0134. Each share class may not be available for purchase by every investor. HOW TO BUY SHARES Shares of the Fund are offered continuously and purchases may be made Monday through Friday, except on certain holidays. Shares may be purchased from the Fund's distributor, from financial institutions, such as federal or state-chartered banks, trust companies, savings and loan associations or savings banks, or securities brokers (called Shareholder Servicing Agents), or from a broker-dealer or financial institution (called a Service Agent). Please call 1-800-995-0134 for information. You may also purchase shares directly from the Fund by calling the Fund's sub-transfer agent at 1-800-995-0134 between the hours of 8:00 a.m. and 4:00 p.m. Please specify whether you are purchasing Citi or D Shares. If you fail to specify, Citi Shares will be purchased for your account. The Fund does not, but your Service Agent or Shareholder Servicing Agent may, impose a minimum initial or subsequent investment requirement. Shares are purchased at net asset value the next time it is calculated after your order is received in proper form by the Fund. The Fund has the right to reject any purchase order or cease offering Fund shares at any time. Your Service Agent will not transmit your purchase order for Fund shares until it receives the purchase price in federal or other immediately available funds. If you pay by check, the Service Agent transmits the order when the check clears. If you hold your shares through a Service Agent or a Shareholder Servicing Agent, your Service Agent or Shareholder Servicing Agent may establish and maintain your account and be 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 sub-transfer agent. The Fund has a Systematic Investment Plan which allows you to automatically invest a specific dollar amount in your account on a periodic basis. For more information, please contact the Fund's sub-transfer agent at 1-800-995-0134 or, if you hold your shares through a Service Agent or a Shareholder Servicing Agent, your Service Agent or Shareholder Servicing Agent. Cititrade customers should contact a Cititrade account representative at 1-888-663-CITI[2484] for more information. CITITRADE(R) INVESTING Shares may be purchased through the Cititrade Program by customers that have established a Cititrade Account. For more detailed information on how to open a Cititrade Account, please visit the Cititrade website at www.mycititrade.com, or call a Cititrade account representative at 1-888-663-CITI[2484]. Once you open your Cititrade Account, you will be subject to the general account requirements of the Cititrade Program, as described in the Cititrade account application, and will have access to all the electronic financial services made available from time to time over the Internet by the Cititrade Program. This prospectus is readily available for viewing and printing on the Cititrade website. Please note that www.mycititrade.com is an inactive textual reference only, meaning that the information contained on the website is not part of this prospectus and is not incorporated herein by reference. Investors who have established an account with Cititrade may receive shareholder information about the Fund electronically, unless they otherwise request to receive the information in paper format. Shareholder information includes prospectuses, financial reports, confirmations, proxy solicitations and financial statements. Cititrade shareholders may also receive other Fund-related correspondence through their e-mail account. You may incur costs imposed by your Internet service provider for on-line access to shareholder documents and maintaining an e-mail account. The Fund reserves the right to deliver paper-based documents to investors in certain circumstances, at no cost to you. Cititrade is a registered service mark of Citicorp. HOW THE PRICE OF YOUR SHARES IS CALCULATED You may buy, exchange or redeem shares at their net asset value next determined after receipt of your request in good order. The Fund's net asset value is the value of its assets minus its liabilities. Net asset value is calculated separately for each class of shares. The Fund calculates its net asset value every day the New York Stock Exchange is open. This calculation is done when regular trading closes on the Exchange (normally 4:00 p.m., Eastern time). The Exchange is closed on certain holidays listed in the Statement of Additional Information. When reliable market prices or quotations are not readily available, the Fund may price those securities at fair value. Fair value is determined in accordance with procedures approved by the Fund's Board of Trustees. A fund that uses fair value to price securities may value those securities higher or lower than another fund using market quotations to price the same securities. HOW TO SELL SHARES You may sell (redeem) your shares Monday through Friday, except on certain holidays. You may make redemption requests in writing through the Fund's sub- transfer agent or, if you hold your shares through a Service Agent or a Shareholder Servicing Agent, through your Service Agent or Shareholder Servicing Agent. If your account application permits, you may also make redemption requests by telephone. Cititrade customers may redeem shares by contacting a Cititrade account representative at 1-888-663-CITI[2484]. All redemption requests must be in proper form, as determined by the sub-transfer agent. Each Service Agent and Shareholder Servicing Agent is responsible for promptly submitting redemption requests to the Fund's sub-transfer agent. For your protection, the Fund may request documentation for large redemptions or other unusual activity in your account. 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. For more information, please contact the Fund's sub-transfer agent at 1-800-995-0134 or, if you hold your shares through a Service Agent or a Shareholder Servicing Agent, your Service Agent or Shareholder Servicing Agent. Cititrade customers should contact a Cititrade account representative at 1-888-663-CITI [2484] for more information. The price of any redemption of Fund shares will be the NAV the next time it is calculated after your redemption request has been received by the transfer agent. Fund shares are redeemed without a sales charge. Your account will be credited with your redemption proceeds in federal funds normally on the third business day after you sell your shares but, in any event, within seven days. Your redemption proceeds may be delayed for up to ten days if your purchase was made by check. Your redemption proceeds may also be delayed, or your right to receive redemption proceeds suspended, if the New York Stock Exchange is closed (other than on weekends or holidays) or trading is restricted, or if an emergency exists. The Fund has the right to pay your redemption proceeds by giving you securities instead of cash. In that case, you may incur costs (such as brokerage commissions) converting the securities into cash. You should be aware that you may have to pay taxes on your redemption proceeds. 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. EXCHANGES Shares may be exchanged for shares of any other Fund offered in the no-load family of CitiFunds(R). CitiFunds is a registered service mark of Citicorp. You may place exchange orders through the sub-transfer agent or, if you hold your shares through a Service Agent or a Shareholder Servicing Agent, through your Service Agent or Shareholder Servicing Agent. You may place exchange orders by telephone if your account application permits. The sub-transfer agent or your Service Agent or Shareholder Servicing Agent can provide you with more information. Cititrade customers may exchange Fund shares by contacting a Cititrade account representative at 1-888-663-CITI [2484]. There is no sales charge on Fund shares you get through an exchange. 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. All share classes may not be available upon exchange. DIVIDENDS Citi Short-Term U.S. Government Income Fund pays substantially all of its net income (if any) from dividends to its shareholders of record as a dividend monthly. The Fund's net realized short-term and long-term capital gains, if any, will be distributed to Fund shareholders at least semi-annually. The Fund may also make additional distributions to shareholders to the extent necessary to avoid the application of the 4% non-deductible excise tax on certain undistributed income and net capital gains of mutual funds. Unless you choose to receive your dividends in cash, you will receive them as full and fractional additional Fund shares. TAX MATTERS This discussion of taxes is very general. You should consult your own tax adviser about your particular situation, and the status of your account under state and local law. TAXABILITY OF DISTRIBUTIONS; FEDERAL INCOME TAXES. You will normally have to pay federal income taxes on the distributions you receive from the Fund, whether you take the distributions in cash or reinvest them in additional shares. Distributions designated by the Fund as capital gain dividends are taxable as long-term capital gains. Other distributions are generally taxable as ordinary income. Some distributions paid in January may be taxable to you as if they had been paid the previous December. Each year the Fund will mail you a report of your distributions for the prior year and how they are treated for federal tax purposes. Fund distributions will reduce the Fund's net asset value per share. As a result, if you buy shares just before the Fund makes a distribution, you may pay the full price for the shares and then effectively receive a portion of the purchase price back as a taxable distribution. STATE AND LOCAL TAXES. Generally, you will have to pay state or local taxes on Fund dividends and other distributions, although distributions derived from interest on U.S. government obligations may be exempt from certain state and local taxes. BACKUP WITHHOLDING. The account application asks each new investor to certify that the investor's Social Security or taxpayer identification number is correct and that the shareholder is not subject to 31% backup withholding for failing to report income to the IRS. The Fund may be required to withhold (and pay over to the IRS for your credit) 31% of certain distributions and proceeds it pays you if you fail to provide this information or otherwise violate IRS regulations. FOREIGN SHAREHOLDERS. If you are not a citizen or resident of the U.S., the Fund will withhold U.S. federal income tax payments at the rate of 30% (or any lower applicable treaty rate) on taxable dividends and other payments subject to withholding taxes. Fund distributions received by non-U.S. persons also may be subject to tax under the laws of their own jurisdictions. TAXABILITY OF TRANSACTIONS. Any time you sell or exchange shares, it is considered a taxable event for you. Depending on the purchase price and the sale price of the shares you sell or exchange, you may have a gain or a loss on the transaction. You are responsible for any tax liabilities generated by your transaction. MANAGEMENT OF THE FUND MANAGER. Citi Short-Term U.S. Government Income Fund draws on the strength and experience of Citibank, N.A. Citibank is the investment adviser of the Fund, and subject to policies set by the Fund's Trustees, Citibank makes investment decisions. Citibank also provides administrative services to the Fund. 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. Citi is a service mark of Citicorp. Citibank and its affiliates, including their directors, officers or employees, may have banking and investment banking relationships with the issuers of securities that are held in the Fund. They may also own the securities of these issuers. However, in making investment decisions for the Fund, Citibank does not obtain or use material inside information acquired by any division, department or affiliate of Citibank in the course of those relationships. Citibank and its affiliates may have loans outstanding that are repaid with proceeds of securities purchased by the Fund. Denise Guetta, a Vice President of Citibank, has served as manager of the Fund since April 1997. Ms. Guetta is a Senior Portfolio Manager responsible for managing institutional liquidity and short-duration portfolios. Ms. Guetta has over thirteen years of investment experience. Prior to joining Citibank in 1996, she was a portfolio manager at Fischer Francis Trees and Watts, Inc., managing leveraged risk positions in the U.S. Treasury and Canadian markets. ADVISORY FEES. For the Fund's fiscal year ended December 31, 1999, Citibank received management fees totaling 0.35% of the Fund's average daily net assets. DISTRIBUTION ARRANGEMENTS The Fund has two classes of shares, Citi Shares and D Shares. These classes have different expense levels. The Fund does not charge any sales loads or deferred sales loads in connection with the purchase of Citi or D Shares. The distributor may make payments for distribution and/or shareholder servicing activities out of its past profits and other available sources. The distributor may also make payments for marketing, promotional or related expenses to dealers. The amount of these payments is determined by the distributor and may be substantial. Citibank or an affiliate may make similar payments under similar arrangements. FINANCIAL HIGHLIGHTS The financial highlights table is intended to help you understand the Fund's financial performance for the past 5 years. Certain information reflects financial results for a single 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, except for the six months ended June 30, 2000, 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. No information is provided for D Shares because that class had no outstanding shares as of December 31, 1999. Citi Short-Term U.S. Government Income Fund -- Citi Shares Year Ended December 31,
Six months ended June 30, 2000 1999 1998 1997 1996 1995 Net Asset Value, beginning of period $9.46 $9.73 $9.61 $9.55 $9.78 $9.28 Income From Operations: Net investment income 0.258 0.473 0.473 0.504 0.516 0.543 Net realized and unrealized gain (loss) 0.018 (0.276) 0.121 0.064 (0.232) 0.500 Total from operations 0.276 0.197 0.594 0.568 0.284 1.043 Less Distributions From: Net investment income (0.246) (0.467) (0.474) (0.508) (0.514) (0.543) Total distributions (0.246) (0.467) (0.474) (0.508) (0.514) (0.543) Net Asset Value, end of period $9.49 $9.46 $9.73 $9.61 $9.55 $9.78 Total return 2.96%** 2.07% 6.33% 6.11% 3.02% 11.48% RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (in thousands) $26,966 $31,109 $48,034 $20,237 $26,744 $35,525 Ratio of expenses to average net assets (A) 0.80%* 0.80% 0.80% 0.80% 0.80% 0.80% Ratio of net investment income to average net assets 5.56%* 5.02% 4.98% 5.20% 5.31% 5.38% Portfolio turnover (B) 168% 201% 288% 126% 100% 284% Note: If agents of the Fund for the periods indicated and agents of Government Income Portfolio for the periods indicated had not voluntarily waived a portion of their fees and assumed Fund expenses, the net investment income per share and the ratios would have been as follows: Net investment income per share $0.253 $0.411 $0.413 $0.442 $0.460 $0.499 RATIOS: Expenses to average net assets (A) 1.46%* 1.37% 1.42% 1.43% 1.38% 1.23% Net investment income to average net assets 4.90%* 4.45% 4.36% 4.57% 4.73% 4.95% * Annualized ** Not Annualized
(A) Includes the Fund's share of Government Income Portfolio allocated expenses. (B) The portfolio turnover rates represent the rate of portfolio activity of Government Income Portfolio, the portfolio through which the Fund invests. 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. 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 included 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 Fund's SAI and the Fund's Annual and Semi-Annual Reports, when available, or to make other inquiries, please call 1-800-995-0134 toll-free. Cititrade customers should contact a Cititrade account representative at 1-888-663-CITI [2484]. The SAI is also available from the Securities and Exchange Commission. You can find it 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: (202) 942-8090. Copies may also be obtained upon payment of a duplicating fee by electronic request to publicinfo@sec.gov, or by writing to the SEC's Public Reference Section, Washington, DC 20549-0102. SEC File Number 811-5034 Statement of Additional Information September 30, 2000 CITISM SHORT-TERM U.S. GOVERNMENT INCOME FUND CitiFunds(R) Fixed Income Trust (the "Trust") is an open-end management investment company which was organized as a business trust under the laws of the Commonwealth of Massachusetts on June 23, 1986. The Trust offers two classes of shares of Citi Short-Term U.S. Government Income Fund (the "Fund"), to which this Statement of Additional Information relates. The address and telephone number of the Trust are 388 Greenwich Street, 23rd Floor, New York, New York 10013, 1-800-451-2010. The Trust invests all of the investable assets of the Fund in Government Income Portfolio (the "Portfolio"), which is a separate series of The Premium Portfolios, a trust organized under the laws of the State of New York (the "Portfolio Trust"). The address of the Portfolio Trust is 388 Greenwich Street, 23rd Floor, New York, New York 10013. - ------------------------------------------------------------------------------- INVESTMENT PRODUCTS: NOT FDIC INSURED -- NO BANK GUARANTEE -- MAY LOSE VALUE - ------------------------------------------------------------------------------- TABLE OF CONTENTS PAGE - ----------------- ---- 1. The Trust ........................................................... 2 2. Investment Objectives and Policies; Special Information Concerning Investment Structure ................................................ 2 3. Description of Permitted Investments and Investment Practices ....... 3 4. Investment Restrictions ............................................. 11 5. Performance Information and Advertising ............................. 13 6. Determination of Net Asset Value; Valuation of Securities ........... 15 7. Additional Information on the Purchase and Sale of Fund Shares ...... 15 8. Management .......................................................... 17 9. Portfolio Transactions .............................................. 24 10. Description of Shares, Voting Rights and Liabilities ................ 25 11. Tax Matters ......................................................... 27 12. Financial Statements ................................................ 28 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 September 30, 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 28 hereof. These financial statements can be found in the Fund's Annual Report to Shareholders. Please call 1-800-995-0134 toll free to obtain a Prospectus for the Fund. A Cititrade customer may obtain copies of the Fund's Prospectus and annual report without charge on the Cititrade website at www.mycititrade.com or by calling 1-888-663-CITI[2484]. 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. 1. THE TRUST CitiFunds Fixed Income Trust (the "Trust") is an open-end management investment company which was organized as a business trust under the laws of the Commonwealth of Massachusetts on June 23, 1986. The Trust was called Landmark U.S. Government Income Fund until its name was changed to Landmark Fixed Income Funds effective June 11, 1992. Effective March 2, 1998, the Trust's name was changed to CitiFunds Fixed Income Trust. This Statement of Additional Information describes Citi Short-Term U.S. Government Income Fund (the "Fund"), a series of the Trust. Prior to March 2, 1998, the Fund was called Landmark U.S. Government Income Fund and prior to September 4, 2000, the Fund was called CitiFunds Short-Term U.S. Government Income Portfolio. References in this Statement of Additional Information to the "Prospectus" are to the Prospectus, dated September 30, 2000, of the Fund. The Fund is a diversified fund. The Fund is permitted to seek its investment objectives by investing all or a portion of its assets in one or more investment companies to the extent not prohibited by the Investment Company Act of 1940, as amended (the "1940 Act"), the rules and regulations thereunder, and exemptive orders granted under the 1940 Act. Currently, the Fund invests all of its investable assets in Government Income Portfolio (the "Portfolio"). The Portfolio is a series of The Premium Portfolios (the "Portfolio Trust") and is an open-end, diversified management investment company. The Portfolio has the same investment objectives and policies as the Fund. Under the 1940 Act, a diversified management investment company must invest at least 75% of its assets in cash and cash items, U.S. Government securities, investment company securities and other securities limited as to any one issuer to not more than 5% of the total assets of the investment company and not more than 10% of the voting securities of the issuer. Because the Fund invests through the Portfolio, all references in this Statement of Additional Information to the Fund include the Portfolio, unless the context otherwise requires. In addition, references to the Trust include the Portfolio Trust, unless the context otherwise requires. Citibank, N.A. ("Citibank" or the "Manager") is investment adviser to the Portfolio and also provides certain administrative services to the Fund and the Portfolio. The Manager 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. 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 Salomon Smith Barney, Inc., the Fund's distributor ("Salomon Smith Barney" or the "Distributor"). 2. INVESTMENT OBJECTIVES AND POLICIES; SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE The investment objectives of the Fund are to generate current income and preserve the value of its shareholders' investment. The investment objectives of the Fund may be changed without approval by the Fund's shareholders, but shareholders will be given written notice at least 30 days before any change is implemented. Of course, there can be no assurance that the Fund will achieve its investment objectives. As noted above, the Fund does not invest directly in securities, but instead invests all of its investable assets in the Portfolio, which has the same investment objectives and policies as the Fund. The Portfolio, in turn, buys, holds and sells securities in accordance with these objectives and policies. Of course, there can be no assurance that the Fund or the Portfolio will achieve their objectives. The Trustees of the Fund believe that the aggregate per share expenses of the Fund and the Portfolio will be less than or approximately equal to the expenses that the Fund would incur if the assets of the Fund were invested directly in the types of securities held by the Portfolio. The Trust may withdraw the investment of the Fund from the Portfolio at any time if the Board of Trustees of the Trust determines that it is in the best interests of the Fund to do so. Upon any such withdrawal, the Fund's assets would continue to be invested in accordance with its investment objectives and policies, either directly in securities or in another mutual fund or pooled investment vehicle having the same investment objectives and policies. If the Fund were to withdraw, the Fund could receive securities from the Portfolio instead of cash, causing the Fund to incur brokerage, tax and other charges or leaving it with securities which may or may not be readily marketable or widely diversified. The Portfolio may change its investment objectives and certain of its investment policies and restrictions without approval by its investors, but the Portfolio will notify the Fund (which in turn will notify its shareholders) and its other investors at least 30 days before implementing any change in its investment objective. A change in investment objectives, policies or restrictions may cause the Fund to withdraw its investment in the Portfolio. Certain investment restrictions of the Portfolio described below under "Investment Restrictions" are fundamental and cannot be changed without approval by the investors in the Portfolio. When the Fund is asked to vote on certain matters concerning the Portfolio, the Fund will either hold a shareholder meeting and vote in accordance with shareholder instructions or otherwise vote in accordance with applicable rules and regulations. Of course, the Fund could be outvoted, or otherwise adversely affected by other investors in the Portfolio. The Portfolio may sell interests to investors in addition to the Fund. These investors may be mutual funds which offer shares to their shareholders with different costs and expenses than the Fund. Therefore, the investment return for all investors in funds investing in the Portfolio may not be the same. These differences in returns are also present in other mutual fund structures. Information about other holders of interests in the Portfolio is available from the Fund's distributor, Salomon Smith Barney. 3. DESCRIPTION OF PERMITTED INVESTMENTS AND INVESTMENT PRACTICES The Fund may, but need not, invest in all of the investments and utilize any or all of the investment techniques described below and in the Prospectus. The selection of investments and the utilization of investment techniques depend on, among other things, the Manager's investment strategies for the Fund, conditions and trends in the economy and financial markets and investments being available on terms that, in the Manager's opinion, make economic sense. The Prospectus contains a discussion of the principal investment strategies of the Fund and the principal risks of investing in the Fund. The following supplements the information contained in the Prospectus concerning the investment policies and techniques of the Fund. The policies described herein are not fundamental and may be changed without shareholder approval. U.S. GOVERNMENT SECURITIES The Fund invests in debt obligations that are backed, as to the timely payment of interest and principal, by the full faith and credit of the U.S. Government. The debt obligations in which assets of the Fund are invested include (1) U.S. Treasury obligations, which differ only in their interest rates, maturities and times of issuance: U.S. Treasury bills (maturities of one year or less), U.S. Treasury notes (maturities of one to 10 years), and U.S. Treasury bonds (generally maturities of greater than 10 years); and (2) obligations issued or guaranteed by the U.S. Government or its agencies, authorities or instrumentalities. The Fund may only invest in obligations issued or guaranteed by U.S. Government agencies if such obligations are backed, as to the timely payment of interest and principal, by the full faith and credit of the U.S. Government, e.g., direct pass-through certificates of the Government National Mortgage Association. When and if available, U.S. Government obligations may be purchased at a discount from face value. However, it is not intended that such securities will be held to maturity for the purpose of achieving potential capital gains, unless current yields on these securities remain attractive. Although U.S. Government obligations which are purchased for the Fund may be backed, as to the timely payment of interest and principal, by the full faith and credit of the U.S. Government, shares of the Fund are neither insured nor guaranteed by the U.S. Government or its agencies, authorities or instrumentalities. The Manager intends to fully manage the investments of the Fund by buying and selling U.S. Government obligations, and by entering into repurchase agreements covering such obligations, as well as by holding selected obligations to maturity. In managing the Fund's investments, the Manager seeks to maximize the return for the Fund by taking advantage of market developments and yield disparities, which may include use of the following strategies: (1) shortening the average maturity of the Fund's securities in anticipation of a rise in interest rates so as to minimize depreciation of principal; (2) lengthening the average maturity of the Fund's securities in anticipation of a decline in interest rates so as to maximize appreciation of principal; (3) selling one type of U.S. Government obligation (e.g., Treasury bonds) and buying another (e.g., GNMA direct pass-through certificates) when disparities arise in the relative values of each; and (4) changing from one U.S. Government obligation to an essentially similar U.S. Government obligation when their respective yields are distorted due to market factors. These strategies may result in increases or decreases in the Fund's current income and in the holding for the Fund of obligations which sell at moderate to substantial premiums or discounts from face value. Moreover, if the Manager's expectations of changes in interest rates or its valuation of the normal yield relationship between two obligations proves to be incorrect, the Fund's income, net asset value and potential capital gain may be decreased or its potential capital loss may be increased. In order to enhance the stability of the value of shares of the Fund by reducing volatility resulting from changes in interest rates and other market conditions, the dollar weighted average maturity of the Fund's investment securities is generally three years or less. The Fund is managed to provide an income yield that is generally higher than those offered by money market funds, which have a share price which is more stable than the value of an investment in the Fund and which have a portfolio of investments with an average maturity which is shorter than the Fund's securities. It is intended that the Fund will have a share price that is more stable than the share price of other fixed income funds that have a longer term investment focus. Debt securities with longer maturities than those in which the assets of the Fund are invested generally tend to produce higher yields and are subject to greater market fluctuation as a result of changes in interest rates than debt securities with shorter maturities. At the same time, the securities in which the assets of the Fund are invested tend to produce lower yields and are subject to lower market fluctuation as a result of changes in interest rates than debt securities with longer maturities that tend to be purchased by longer term bond funds than the Fund. However, since available yields vary over time, no specific level of income can be assured. The income derived from an investment in the Fund increases or decreases in relation to the income received by the Fund from its investments, which in any case is reduced by the Fund's expenses. REPURCHASE AGREEMENTS The Fund may invest in repurchase agreements. collateralized by securities in which the Fund may otherwise invest. Repurchase agreements are agreements by which the Fund purchases a security and simultaneously commits to resell that security to the seller (which is usually a member bank of the U.S. Federal Reserve System or a member firm of the New York Stock Exchange (or a subsidiary thereof)) at an agreed-upon date within a number of days (frequently overnight and usually not more than seven days) from the date of purchase. The resale price reflects the purchase price plus an agreed-upon market rate of interest which is unrelated to the coupon rate or maturity of the purchased security. A repurchase agreement involves the obligation of the seller to pay the agreed upon price, which obligation is in effect secured by the value of the underlying security, usually U.S. Government or government agency issues. Under the 1940 Act, repurchase agreements may be considered to be loans by the buyer. The Fund's risk is limited to the ability of the seller to pay the agreed-upon amount on the delivery date. If the seller defaults, the underlying security constitutes collateral for the seller's obligation to pay although the Fund may incur certain costs in liquidating this collateral and in certain cases may not be permitted to liquidate this collateral. All repurchase agreements entered into by the Fund are fully collateralized, with such collateral being marked to market daily. REVERSE REPURCHASE AGREEMENTS The Fund may enter into reverse repurchase agreements subject to the Fund's investment restriction on borrowing. Reverse repurchase agreements involve the sale of securities held by the Fund and the agreement by the Fund to repurchase the securities at an agreed-upon price, date and interest payment. When the Fund enters into reverse repurchase transactions, securities of a dollar amount equal in value to the securities subject to the agreement will be segregated. The segregation of assets could impair the Fund's ability to meet its current obligations or impede investment management if a large portion of the Fund's assets are involved. Reverse repurchase agreements are considered to be a form of borrowing by the Fund. In the event of the bankruptcy of the other party to a reverse repurchase agreement, the Fund could experience delays in recovering the securities sold. To the extent that, in the meantime, the value of the securities sold has changed, the Fund could experience a loss. FUTURES CONTRACTS A futures contract is an agreement between two parties for the purchase or sale for future delivery of securities or for the payment or acceptance of a cash settlement based upon changes in the value of the securities or of an index of securities. A "sale" of a futures contract means the acquisition of a contractual obligation to deliver the securities called for by the contract at a specified price, or to make or accept the cash settlement called for by the contract, on a specified date. A "purchase" of a futures contract means the acquisition of a contractual obligation to acquire the securities called for by the contract at a specified price, or to make or accept the cash settlement called for by the contract, on a specified date. Futures contracts in the United States have been designed by exchanges which have been designated "contract markets" by the Commodity Futures Trading Commission ("CFTC") and must be executed through a futures commission merchant, or brokerage firm, which is a member of the relevant contract market. Futures contracts trade on these markets, and the exchanges, through their clearing organizations, guarantee that the contracts will be performed as between the clearing members of the exchange. Futures contracts may also be traded on markets outside the U.S. While futures contracts based on debt securities do provide for the delivery and acceptance of securities, such deliveries and acceptances are very seldom made. Generally, a futures contract is terminated by entering into an offsetting transaction. Brokerage fees will be incurred when the Fund purchases or sells a futures contract. At the same time such a purchase or sale is made, the Fund must provide cash or securities as a deposit ("initial deposit") known as "margin." The initial deposit required will vary, but may be as low as 1% or less of a contract's face value. Daily thereafter, the futures contract is valued through a process known as "marking to market," and the Fund may receive or be required to pay additional "variation margin" as the futures contract becomes more or less valuable. At the time of delivery of securities pursuant to such a contract, adjustments are made to recognize differences in value arising from the delivery of securities with a different interest rate than the specific security that provides the standard for the contract. In some (but not many) cases, securities called for by a futures contract may not have been issued when the contract was entered into. The Fund may purchase or sell futures contracts to attempt to protect the Fund from fluctuations in interest rates, or to manage the effective maturity or duration of the Fund's portfolio in an effort to reduce potential losses or enhance potential gain, without actually buying or selling debt securities. For example, if interest rates were expected to increase, the Fund might enter into futures contracts for the sale of debt securities. Such a sale would have much the same effect as if the Fund sold bonds that it owned, or as if the Fund sold longer-term bonds and purchased shorter-term bonds. If interest rates did increase, the value of the Fund's debt securities would decline, but the value of the futures contracts would increase, thereby keeping the net asset value of the Fund from declining as much as it otherwise would have. Similar results could be accomplished by selling bonds, or by selling bonds with longer maturities and investing in bonds with shorter maturities. However, by using futures contracts, the Fund avoids having to sell its securities. Similarly, when it is expected that interest rates may decline, the Fund might enter into futures contracts for the purchase of debt securities. Such a transaction would be intended to have much the same effect as if the Fund purchased bonds, or as if the Fund sold shorter-term bonds and purchased longer-term bonds. If interest rates did decline, the value of the futures contracts would increase. Although the use of futures for hedging, if correctly used, should tend to minimize the risk of loss due to a decline in the value of the hedged position (e.g., if the Fund sells a futures contract to protect against losses in the debt securities held by the Fund), they do not eliminate the risk of loss and at the same time the futures contracts limit any potential gain which might result from an increase in value of a hedged position. In addition, the ability effectively to hedge all or a portion of the Fund's investments through transactions in futures contracts depends on the degree to which movements in the value of the debt securities underlying such contracts correlate with movements in the value of the Fund's securities. If the security underlying a futures contract is different than the security being hedged, they may not move to the same extent or in the same direction. In that event, the Fund's hedging strategy might not be successful and the Fund could sustain losses on these hedging transactions which would not be offset by gains on the Fund's other investments or, alternatively, the gains on the hedging transaction might not be sufficient to offset losses on the Fund's other investments. It is also possible that there may be a negative correlation between the security underlying a futures contract and the securities being hedged, which could result in losses both on the hedging transaction and the securities. In these and other instances, the Fund's overall return could be less than if the hedging transactions had not been undertaken. Similarly, even where the Fund enters into futures transactions other than for hedging purposes, the effectiveness of its strategy may be affected by lack of correlation between changes in the value of the futures contracts and changes in value of the securities which the Fund would otherwise buy or sell. The ordinary spreads between prices in the cash and futures markets, due to differences in the nature of those markets, are subject to distortions. First, all participants in the futures market are subject to initial deposit and variation margin requirements. Rather than meeting additional variation margin requirements, investors may close out futures contracts through offsetting transactions which could distort the normal relationship between the cash and futures markets. Second, there is the potential that the liquidity of the futures market may be lacking. Prior to expiration, a futures contract may be terminated only by entering into a closing purchase or sale transaction, which requires a secondary market on the contract market on which the futures contracts was originally entered into. While the Fund will establish a futures position only if there appears to be a liquid secondary market therefor, there can be no assurance that such a market will exist for any particular futures contract at any specific time. In that event, it may not be possible to close out a position held by the Fund, which could require the Fund to purchase or sell the instrument underlying the futures contract or to meet ongoing variation margin requirements. The inability to close out futures positions also could have an adverse impact on the ability effectively to use futures transactions for hedging or other purposes. The liquidity of a secondary market in a futures contract may be adversely affected by "daily price fluctuation limits" established by the exchanges, which limit the amount of fluctuation in the price of a futures contract during a single trading day and prohibit trading beyond such limits once they have been reached. The trading of futures contracts also is subject to the risk of trading halts, suspensions, exchange or clearing house equipment failures, government intervention, insolvency of a brokerage firm or clearing house or other disruptions of normal trading activity, which could at times make it difficult or impossible to liquidate existing positions or to recover excess variation margin payments. Investments in futures contracts also entail the risk that if the Manager's investment judgment about the general direction of interest rates or other economic factors is incorrect, the Fund's overall performance may be poorer than if any such contract had not been entered into. For example, if the Fund hedged against the possibility of an increase in interest rates which would adversely affect the price of the Fund's bonds and interest rates decrease instead, part or all of the benefit of the increased value of the Fund's bonds which were hedged will be lost because the Fund will have offsetting losses in its futures positions. Similarly, if the Fund purchases futures contracts expecting a decrease in interest rates and interest rates instead increased, the Fund will have losses in its futures positions which will increase the amount of the losses on the securities in its portfolio which will also decline in value because of the increase in interest rates. In addition, in such situations, if the Fund has insufficient cash, the Fund may have to sell bonds from its investments to meet daily variation margin requirements, possibly at a time when it may be disadvantageous to do so. Each contract market on which futures contracts are traded has established a number of limitations governing the maximum number of positions which may be held by a trader, whether acting alone or in concert with others. The Manager does not believe that these trading and position limits would have an adverse impact on the Fund's strategies involving futures. CFTC regulations require compliance with certain limitations in order to assure that the Fund is not deemed to be a "commodity pool" under such regulations. In particular, CFTC regulations prohibit the Fund from purchasing or selling futures contracts (other than for bona fide hedging transactions) if, immediately thereafter, the sum of the amount of initial margin required to establish the Fund's non-hedging futures positions, together with any premiums on options on futures contracts (see "Options on Futures Contracts" below) used for non-hedging purposes, would exceed 5% of the Fund's net assets. The Fund will comply with this CFTC requirement, and the Fund currently intends to adhere to the additional policies described below. First, an amount of cash or liquid securities will be maintained by the Fund in a segregated account so that the amount so segregated, plus the applicable margin held on deposit, will be approximately equal to the amount necessary to satisfy the Fund's obligations under the futures contract. The second is that the Fund will not enter into a futures contract if immediately thereafter the amount of initial margin deposits on all the futures contracts held by the Fund would exceed approximately 5% of the net assets of the Fund. The third is that the aggregate market value of the futures contracts held by the Fund not generally exceed 50% of the market value of the Fund's total assets other than its futures contracts. For purposes of this third policy, "market value" of a futures contract is deemed to be the amount obtained by multiplying the number of units covered by the futures contract times the per unit price of the securities covered by that contract. The use of futures contracts potentially exposes the Fund to the effects of "leveraging," which occurs when futures are used so that the Fund's exposure to the market is greater than it would have been if the Fund had invested directly in the underlying securities. "Leveraging" increases the Fund's potential for both gain and loss. As noted above, the Fund intends to adhere to certain policies relating to the use of futures contracts, which should have the effect of limiting the amount of leverage by the Fund. The use of futures contracts may increase the amount of taxable income of the Fund and may affect the amount, timing and character of the Fund's income for tax purposes, as more fully discussed herein in the section entitled "Tax Matters." OPTIONS ON FUTURES CONTRACTS The Fund may purchase and write options to buy or sell futures contracts in which the Fund may invest. Such investment strategies may be used for hedging purposes and for non-hedging purposes, subject to applicable law. An option on a futures contract provides the holder with the right to enter into a "long" position in the underlying futures contract, in the case of a call option, or a "short" position in the underlying futures contract, in the case of a put option, at a fixed exercise price up to a stated expiration date or, in the case of certain options, on such date. Upon exercise of the option by the holder, the contract market clearinghouse establishes a corresponding short position for the writer of the option, in the case of a call option, or a corresponding long position in the case of a put option. In the event that an option is exercised, the parties will be subject to all the risks associated with the trading of futures contracts, such as payment of initial and variation margin deposits. In addition, the writer of an option on a futures contract, unlike the holder, is subject to initial and variation margin requirements on the option position. A position in an option on a futures contract may be terminated by the purchaser or seller prior to expiration by effecting a closing purchase or sale transaction, subject to the availability of a liquid secondary market, which is the purchase or sale of an option of the same series (i.e., the same exercise price and expiration date), as the option previously purchased or sold. The difference between the premiums paid and received represents the trader's profits or loss on the transaction. Options on futures contracts that are written or purchased by the Fund on U.S. exchanges are traded on the same contract market as the underlying futures contract, and, like futures contracts, are subject to regulation by the CFTC and the performance guarantee of the exchange clearinghouse. In addition, options on futures contracts may be traded on foreign exchanges. The Fund may cover the writing of call options on futures contracts (a) through purchases of the underlying futures contract, (b) through ownership of the instrument, or instruments included in the index underlying the futures contract, or (c) through the holding of a call on the same futures contract and in the same principal amount as the call written where the exercise price of the call held (i) is equal to or less than the exercise price of the call written or (ii) is greater than the exercise price of the call written if the difference is maintained by the Fund in cash or securities in a segregated account. The Fund may cover the writing of put options on futures contracts (a) through sales of the underlying futures contract, (b) through segregation of cash or liquid securities in an amount equal to the value of the security or index underlying the futures contract, (c) through the holding of a put on the same futures contract and in the same principal amount as the put written where the exercise price of the put held is equal to or greater than the exercise price of the put written or where the exercise price of the put held is less than the exercise price of the put written if the difference is maintained by the Fund in cash or liquid securities in a segregated account. Put and call options on futures contracts may also be covered in such other manner as may be in accordance with the rules of the exchange on which the option is traded and applicable laws and regulations. Upon the exercise of a call option on a futures contract written by the Fund, the Fund will be required to sell the underlying futures contract which, if the Fund has covered its obligation through the purchase of such contract, will serve to liquidate its futures position. Similarly, where a put option on a futures contract written by the Fund is exercised, the Fund will be required to purchase the underlying futures contract which, if the Fund has covered its obligation through the sale of such contract, will close out its futures position. The writing of a call option on a futures contract constitutes a partial hedge against declining prices of the securities deliverable on exercise of the futures contract. The Fund will receive an option premium when it writes the call, and, if the price of the futures contract at expiration of the option is below the option exercise price, the Fund will retain the full amount of this option premium, which provides a partial hedge against any decline that may have occurred in the Fund's security holdings. Similarly, the writing of a put option on a futures contract constitutes a partial hedge against increasing prices of the securities deliverable upon exercise of the futures contract. If the Fund writes an option on a futures contract and that option is exercised, the Fund may incur a loss, which loss will be reduced by the amount of the option premium received, less related transaction costs. The Fund's ability to hedge effectively through transactions in options on futures contracts depends on, among other factors, the degree of correlation between changes in the value of securities held by the Fund and changes in the value of its futures positions. This correlation cannot be expected to be exact, and the Fund bears a risk that the value of the futures contract being hedged will not move in the same amount, or even in the same direction, as the hedging instrument. Thus it may be possible for the Fund to incur a loss on both the hedging instrument and the futures contract being hedged. The Fund may purchase options on futures contracts for hedging purposes instead of purchasing or selling the underlying futures contracts. For example, where a decrease in the value of portfolio securities is anticipated as a result of projected changes in interest rates, the Fund could, in lieu of selling futures contracts, purchase put options thereon. In the event that such decrease occurs, it may be offset, in whole or part, by a profit on the option. Conversely, where it is projected that the value of securities to be acquired by the Fund will increase prior to acquisition, due to a market advance or changes in interest rates, the Fund could purchase call options on futures contracts, rather than purchasing the underlying futures contracts. FURTHER INFORMATION REGARDING DERIVATIVES Transactions in financial futures and options on futures contracts entered into for non-hedging purposes involve greater risk and could result in losses which are not offset by gains on other portfolio assets. Financial futures and options on futures contracts may be used alone or in combinations in order to create synthetic exposure to securities in which the Fund otherwise invests. WHEN-ISSUED SECURITIES The Fund may purchase securities on a "when-issued" or on a "forward delivery" basis, meaning that delivery of the securities occurs beyond normal settlement times. In general, the Fund does not pay for the securities until received and does not start earning interest until the contractual settlement date. It is expected that, under normal circumstances, the Fund would take delivery of such securities but the Fund may sell them before the settlement date. When the Fund commits to purchase a security on a "when-issued" or on a "forward delivery" basis, it sets up procedures consistent with Securities and Exchange Commission ("SEC") policies. Since those policies currently require that an amount of the Fund's assets equal to the amount of the purchase be held aside or segregated to be used to pay for the commitment, the Fund expects always to have cash or liquid securities sufficient to cover any commitments or to limit any potential risk. However, even though the Fund does not intend to make such purchases for speculative purposes and intends to adhere to the provisions of SEC policies, purchases of securities on such bases may involve more risk than other types of purchases. The when-issued securities are subject to market fluctuation, and no interest accrues on the security to the purchaser during this period. The payment obligation and the interest rate that will be received on the securities are each fixed at the time the purchaser enters into the commitment. Purchasing obligations on a when-issued basis is a form of leveraging and can involve a risk that the yields available in the market when the delivery takes place may actually be higher than those obtained in the transaction itself. In that case, there could be an unrealized loss at the time of delivery. An increase in the percentage of the Fund's assets committed to the purchase of securities on a "when-issued" basis may increase the volatility of its net asset value. SHORT SALES "AGAINST THE BOX" In a short sale, the Fund sells a borrowed security and has a corresponding obligation to the lender to return the identical security. The Fund, in accordance with applicable investment restrictions, may engage in short sales only if at the time of the short sale it owns or has the right to obtain, at no additional cost, an equal amount of the security being sold short. This investment technique is known as a short sale "against the box." In a short sale, the seller does not immediately deliver the securities sold and is said to have a short position in those securities until delivery occurs. If the Fund engages in a short sale, the collateral for the short position is maintained for the Fund by the custodian or qualified sub- custodian. While the short sale is open, an amount of securities equal in kind and amount to the securities sold short or securities convertible into or exchangeable for such equivalent securities are maintained in a segregated account for the Fund. These securities constitute the Fund's long position. The Fund does not engage in short sales against the box for investment purposes. The Fund may, however, make a short sale against the box as a hedge, when it believes that the price of a security may decline, causing a decline in the value of a security owned by the Fund (or a security convertible or exchangeable for such security). In such case, any future losses in the Fund's long position should be reduced by a gain in the short position. Conversely, any gain in the long position should be reduced by a loss in the short position. The extent to which such gains or losses are reduced depends upon the amount of the security sold short relative to the amount the Fund owns. There are certain additional transaction costs associated with short sales against the box, but the Fund endeavors to offset these costs with the income from the investment of the cash proceeds of short sales. The Manager does not expect that more than 40% of the Fund's total assets would be involved in short sales against the box. The Manager does not currently intend to engage in such sales. MORTGAGE-BACKED SECURITIES AND COLLATERALIZED MORTGAGE OBLIGATIONS The Fund may invest in mortgage-backed securities, which are securities representing interests in pools of mortgage loans, as long as they are backed by the full faith and credit of the United States Government. Interests in pools of mortgage-related securities differ from other forms of debt securities which normally provide for periodic payment of interest in fixed amounts with principal payments at maturity or specified call dates. Instead, these securities provide a monthly payment which consists of both interest and principal payments. In effect, these payments are a "pass-through" of the monthly payments made by the individual borrowers on their mortgage loans, net of any fees paid to the issuer or guarantor of such securities. Additional payments are caused by prepayments of principal resulting from the sale, refinancing or foreclosure of the underlying property, net of fees or costs which may be incurred. The market value and interest yield of these instruments can vary due to market interest rate fluctuations and early prepayments of underlying mortgages. The Fund may purchase mortgage-backed securities issued or guaranteed by the Government National Mortgage Association ("GNMA"). Obligations of GNMA are backed by the full faith and credit of the United States Government. Although GNMA certificates may offer yields higher than those available from other types of U.S. Government securities, GNMA certificates may be less effective than other types of securities as a means of "locking in" attractive long-term rates because of the prepayment feature. For instance, when interest rates decline, the value of a GNMA certificate likely will not rise as much as comparable debt securities due to the prepayment feature. In addition, these prepayments can cause the price of a GNMA certificate originally purchased at a premium to decline in price to its par value which may result in a loss. A portion of the Fund's assets may be invested in collateralized mortgage obligations ("CMOs"), which are debt obligations collateralized by mortgage loans or mortgage pass-through securities (such collateral collectively hereinafter referred to as "Mortgage Assets"); provided, however, that the CMOs are backed as to the timely payment of interest and principal by the full faith and credit of the U.S. Government. The Fund may also invest a portion of its assets in multi-class pass-through securities which are interests in a trust composed of Mortgage Assets; provided, however, that the Mortgage Assets are backed as to the timely payment of interest and principal by the full faith and credit of the U.S. Government. CMOs (which include multi-class pass- through securities) may be issued by agencies, authorities or instrumentalities of the U.S. Government or by private originators of or investors in mortgage loans, including savings and loan associations, mortgage banks, commercial banks, investment banks and special purpose subsidiaries of the foregoing. Payments of principal of and interest on the Mortgage Assets, and any reinvestment income thereon, provide the funds to pay debt service on the CMOs or make scheduled distributions on the multi-class pass-through securities. In a CMO, a series of bonds or certificates is usually issued in multiple classes with different maturities. Each class of a CMO, often referred to as a "tranche," is issued at a specific fixed or floating coupon rate and has a stated maturity or final distribution date. Principal prepayments on the Mortgage Assets may cause the CMOs to be retired substantially earlier than their stated maturities or final distribution dates, resulting in a loss of all or part of the premium if any has been paid. Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly or semiannual basis. The principal of and interest on the Mortgage Assets may be allocated among the several classes of a series of a CMO in various ways. In a common structure, payments of principal, including any principal prepayments, on the Mortgage Assets are applied to the classes of the series of a CMO in the order of their respective stated maturities or final distribution dates, so that no payment of principal will be made on any class of CMOs until all other classes having an earlier stated maturity or final distribution date have been paid in full. Even if the U.S. government or one of its agencies guarantees principal and interest payments of a mortgage-backed security, the market price of a mortgage-backed security is not insured and may be subject to market volatility. When interest rates decline, mortgage-backed securities experience higher rates of prepayment because the underlying mortgages are refinanced to take advantage of the lower rates. The prices of mortgage-backed securities may not increase as much as prices of other debt obligations when interest rates decline, and mortgage-backed securities may not be an effective means of locking in a particular interest rate. In addition, any premium paid for a mortgage-backed security may be lost when it is prepaid. When interest rates go up, mortgage-backed securities experience lower rates of prepayment. This has the effect of lengthening the expected maturity of a mortgage-backed security. This particular risk, referred to as "maturity extension risk," may effectively convert a security that was considered short or intermediate-term at the time of purchase into a long-term security. Long-term securities generally fluctuate more widely in response to changes in interest rates than short or intermediate-term securities. Thus, rising interest rates would not only likely decrease the value of the Fund's fixed income securities, but would also increase the inherent volatility of the Fund by effectively converting short-term debt instruments into long-term debt instruments. As a result, prices of mortgage-backed securities may decrease more than prices of other debt obligations when interest rates go up. Determinations of average maturity of mortgage-backed securities take into account expectations of prepayments, which may change in different interest rate environments. The Fund will not consider it a violation of policy if its average maturity deviates from its normal range as a result of actual or expected changes in prepayments. LENDING OF SECURITIES Consistent with applicable regulatory requirements and in order to generate income, the Fund may lend its securities to broker-dealers and other institutional borrowers. Such loans will usually be made only to member banks of the U.S. Federal Reserve System and to member firms of the New York Stock Exchange (and subsidiaries thereof). Loans of securities would be secured continuously by collateral in cash, cash equivalents, or U.S. Treasury obligations maintained on a current basis at an amount at least equal to the market value of the securities loaned. The cash collateral would be invested in high quality short-term instruments. Either party has the right to call a loan at any time on customary industry settlement notice (which will not usually exceed three business days). During the existence of a loan, the Fund would continue to receive the equivalent of the interest or dividends paid by the issuer on the securities loaned and with respect to cash collateral would also receive compensation based on investment of cash collateral (subject to a rebate payable to the borrower). Where the borrower provides the Fund with collateral consisting of U.S. Treasury obligations, the borrower is also obligated to pay the Fund a fee for use of the borrowed securities. The Fund would not, however, have the right to vote any securities having voting rights during the existence of the loan, but would call the loan in anticipation of an important vote to be taken among holders of the securities or of the giving or withholding of their consent on a material matter affecting the investment. As with other extensions of credit, there are risks of delay in recovery or even loss of rights in the collateral should the borrower fail financially. However, the loans would be made only to entities deemed by the Manager to be of good standing. In addition, the Fund could suffer a loss if the borrower terminates the loan and the Fund is forced to liquidate investments in order to return the cash collateral to the buyer. The Manager will make loans only when, in the judgment of the Manager, the consideration which can be earned currently from loans of this type justifies the attendant risk. If the Manager determines to make loans, it is not intended that the value of the securities loaned would exceed 30% of the market value of the Fund's total assets. RULE 144A SECURITIES Consistent with applicable investment restrictions, the Fund may purchase securities that are not registered under the Securities Act of 1933 (the "Securities Act"), but can be offered and sold to "qualified institutional buyers" under Rule 144A under the Securities Act ("Rule 144A securities"). However, the Fund will not invest more than 15% of its net assets (taken at market value) in illiquid investments, which include securities for which there is no readily available market, securities subject to contractual restrictions on resale and Rule 144A securities, unless, in the case of restricted securities, the Board of Trustees determines, based on the trading markets for the specific Rule 144A security, that it is liquid. The Trustees have adopted guidelines and, subject to oversight by the Trustees, have delegated to the Manager the daily function of determining and monitoring liquidity of Rule 144A securities. PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS The Fund may invest up to 15% of its net assets in securities for which there is no readily available market. These illiquid securities may include privately placed restricted securities for which no institutional market exists. The absence of a trading market can make it difficult to ascertain a market value for illiquid investments. Disposing of illiquid investments may involve time-consuming negotiation and legal expenses, and it may be difficult or impossible for the Fund to sell them promptly at an acceptable price. DEFENSIVE STRATEGIES The Fund may, from time to time, take temporary defensive positions in attempting to respond to adverse market, political or other conditions. When doing so, the Fund may invest without limit in money market instruments and other very short-term instruments, as long as the instruments purchased are backed by the full faith and credit of the United States. The income on money market and other very short-term instruments is likely to be less than the income on the debt obligations generally purchased by the Fund. 4. INVESTMENT RESTRICTIONS The Trust, on behalf of the Fund, and the Portfolio Trust, on behalf of the Portfolio, have each adopted the following policies which may not be changed with respect to the Fund or the Portfolio without approval by holders of a majority of the outstanding voting securities of the Fund or Portfolio, which as used in this Statement of Additional Information means the vote of the lesser of (i) 67% or more of the outstanding voting securities of the Fund or Portfolio present at a meeting at which the holders of more than 50% of the outstanding voting securities of the Fund or Portfolio are present or represented by proxy, or (ii) more than 50% of the outstanding voting securities of the Fund or Portfolio. The term "voting securities" as used in this paragraph has the same meaning as in the 1940 Act. Neither the Fund nor the Portfolio may: (1) Borrow money or pledge, mortgage or hypothecate assets of the Fund or Portfolio, except that as a temporary measure for extraordinary or emergency purposes it may borrow in an amount not to exceed 1/3 of the current value of the Fund's or the Portfolio's net assets, including the amount borrowed, and may pledge, mortgage or hypothecate not more than 1/ 3 of such assets to secure such borrowings (it is intended that money would be borrowed for the Fund or Portfolio only from banks and only to accommodate requests for the repurchase of shares of the Fund or beneficial interests in the Portfolio while effecting an orderly liquidation of portfolio securities), provided that collateral arrangements with respect to futures contracts, including deposits of initial and variation margin, are not considered a pledge of assets for purposes of this restriction. (2) Purchase any security or evidence of interest therein on margin, except that such short-term credit may be obtained for the Fund or Portfolio as may be necessary for the clearance of purchases and sales of securities and except that deposits of initial and variation margin may be made for the Fund or Portfolio in connection with the purchase, ownership, holding or sale of futures contracts. (3) Write, purchase or sell any put or call option or any combination thereof, provided that this shall not prevent (i) the writing, purchasing or selling of puts, calls or combinations thereof with respect to U.S. Government securities or with respect to futures contracts, or (ii) the writing, purchase, ownership, holding or sale of futures contracts. (4) Underwrite securities issued by other persons except insofar as either the Trust or the Portfolio Trust may technically be deemed an underwriter under the Securities Act of 1933 in selling a portfolio security (provided, however, that the Fund may invest all of its assets in an open-end management investment company with the same investment objective and policies and substantially the same investment restrictions as the Fund (a "Qualifying Portfolio")). (5) Make loans to other persons except (a) through the lending of the Fund's or Portfolio's securities and provided that any such loans not exceed 30% of the Fund's or Portfolio's total assets, as the case may be (taken at market value), (b) through the use of repurchase agreements or the purchase of short-term obligations, or (c) by purchasing a portion of an issue of debt securities of types commonly distributed privately to financial institutions. The purchase of short-term commercial paper or a portion of an issue of debt securities which are part of an issue to the public shall not be considered the making of a loan. (6) Purchase or sell real estate (including limited partnership interests but excluding securities secured by real estate or interests therein), interests in oil, gas or mineral leases, commodities or commodity contracts (except futures contracts) in the ordinary course of business (the Trust and Portfolio Trust reserve the freedom of action to hold and to sell real estate acquired as a result of the ownership of securities by the Fund or Portfolio). (7) Purchase securities of any issuer if such purchase at the time thereof would cause more than 10% of the voting securities of such issuer to be held for the Fund or Portfolio, except that all of the assets of the Fund may be invested in a Qualifying Portfolio. (8) Purchase securities of any issuer if such purchase at the time thereof would cause more than 5% of the assets of the Fund or Portfolio (taken at market value) to be invested in the securities of such issuer (other than securities or obligations issued or guaranteed by the United States, any state or any political subdivision of the United States or any state, or any agency or instrumentality of the United States or of any state or of any political subdivision of any state or the United States); provided that for purposes of this restriction the issuer of a futures contract shall not be deemed to be the issuer of the security or securities underlying such contract; and further provided that all of the assets of the Fund may be invested in a Qualifying Portfolio. (9) Make short sales of securities or maintain a short position, unless at all times when a short position is open the Fund or Portfolio owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities sold short, and unless not more than 10% of the net assets of the Fund or Portfolio (taken at market value), is held as collateral for such sales at any one time. (10) Concentrate its investments in any particular industry, but if it is deemed appropriate for the achievement of the investment objective of the Fund or Portfolio up to 25% of its assets, at market value at the time of each investment, may be invested in any one industry, except that positions in futures contracts shall not be subject to this restriction and except that all of the assets of the Fund may be invested in a Qualifying Portfolio. (11) Issue any senior security (as that term is defined in the 1940 Act) if such issuance is specifically prohibited by the 1940 Act or the rules and regulations promulgated thereunder, provided that collateral arrangements with respect to futures contracts, including deposits of initial and variation margin, are not considered to be the issuance of a senior security for purposes of this restriction. The Trust, with respect to the Fund, and the Portfolio Trust, with respect to the Portfolio, have each also adopted a policy which is fundamental and which provides that all of the assets of the Fund or Portfolio will be invested in obligations that are backed by the full faith and credit of the U.S. Government except that all of the assets of the Fund may be invested in a Qualifying Portfolio all of whose assets will be invested in obligations that are backed by the full faith and credit of the U.S. Government. This policy is not intended to prohibit the use of futures contracts on fixed income securities or options on futures contracts by the Fund. Investment Restriction (9) above applies only to short sales of or short positions in securities, and does not prevent the writing, purchase, ownership, holding or sale of futures contracts. For purposes of restriction (1) above, arrangements with respect to securities lending are not treated as borrowing. For purposes of restriction (6) above, the Fund may also purchase and sell securities issued by companies that invest or deal in real estate or real estate investment trusts. As an operating policy, the Fund will not invest more than 15% of its net assets (taken at market value) in securities for which there is no readily available market. This policy is not fundamental and may be changed without shareholder approval. If a percentage restriction on investment or utilization of assets set forth above or referred to in the Prospectus is adhered to at the time an investment is made or assets are so utilized, a later change in percentage resulting from changes in the value of the securities held for the Fund is not considered a violation of policy. If the value of the Fund's holdings of illiquid securities at any time exceeds the percentage limitation applicable at the time of acquisition due to subsequent fluctuations in value or other reasons, the Board of Trustees will consider what actions, if any, are appropriate to maintain adequate liquidity. 5. PERFORMANCE INFORMATION AND ADVERTISING Fund performance may be quoted in advertising, shareholder reports and other communications in terms of yield, effective yield or total rate of return. All performance information is historical and is not intended to indicate future performance. Yields and total rates of return fluctuate in response to market conditions and other factors, and the value of the Fund's shares when redeemed may be more or less than their original cost. The Fund may provide its period, annualized, cumulative and average annual "total rates of return." The "total rate of return" refers to the change in the value of an investment in the Fund over a stated period, reflects any change in net asset value per share and is compounded to include the value of any shares purchased with any dividends or capital gains declared during such period. Period total rates of return may be "annualized." An "annualized" total rate of return assumes that the period total rate of return is generated over a one-year period. Average annual total return figures represent the average annual percentage change over the specified period. Cumulative total return figures are not annualized and represent the aggregate percentage or dollar value change over a stated period of time. A total rate of return quotation for the Fund is calculated for any period by (a) dividing (i) the sum of the net asset value per share on the last day of the period and the net asset value per share on the last day of the period of shares purchasable with dividends and capital gains distributions declared during such period with respect to a share held at the beginning of such period and with respect to shares purchased with such dividends and capital gains distributions, by (ii) the public offering price per share on the first day of such period, and (b) subtracting 1 from the result. Any annualized total rate of return quotation is calculated by (x) adding 1 to the period total rate of return quotation calculated above, (y) raising such sum to a power which is equal to 365 divided by the number of days in such period, and (z) subtracting 1 from the result. Average annual total return is a measure of the Fund's performance over time. It is determined by taking the Fund's performance over a given period and expressing it as an average annual rate. The average annual total return quotation is computed in accordance with a standardized method prescribed by SEC rules. The average annual total return for a specific period is found by taking a hypothetical $1,000 initial investment in Fund shares on the first day of the period, reducing the amount to reflect the maximum sales charge, and computing the redeemable value of that investment at the end of the period. The redeemable value is then divided by the initial investment, and this quotient is taken to the Nth root (N representing the number of years in the period) and 1 is subtracted from the result, which is then expressed as a percentage. The calculation assumes that all income and capital gains distributions have been reinvested in Fund shares at net asset value on the reinvestment dates during the period. Cumulative total return for a specific period is calculated by first taking a hypothetical initial investment in Fund shares on the first day of a period, deducting (as applicable) the maximum sales charge and computing the "redeemable value" of that investment at the end of the period. The cumulative total return percentage is then determined by subtracting the initial investment from the redeemable value and dividing the remainder by the initial investment and expressing the result as a percentage. The calculation assumes that all income and capital gains distributions by the Fund have been reinvested at net asset value on the reinvestment dates during the period. Cumulative total return may also be shown as the increased dollar value of the hypothetical investment over the period. 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, Service Agent or other financial intermediaries are not included. Of course, any such fees will reduce the shareholder's net return on investment. Any tax equivalent yield quotation of the Fund is calculated as follows: If the entire current yield quotation for such period is state tax-exempt, the tax equivalent yield would be the current yield quotation divided by 1 minus a stated income tax rate or rates. If a portion of the current yield quotation is not state tax-exempt, the tax equivalent yield would be the sum of (a) that portion of the yield which is state tax-exempt divided by 1 minus a stated income tax rate or rates and (b) the portion of the yield which is not state tax-exempt. Set forth below is average annual total rate of return information for the Citi Shares (previously called "Class A shares") of the Fund for the periods indicated, assuming that dividends and capital gains distributions, if any, were reinvested. Commencing July 14, 2000, the Fund converted to a no-load fund, which means that there are no sales charges on the purchase or sale of Citi or D Shares. Also on that date, all outstanding shares of the Fund were designated Citi Shares. The Citi Share performance includes periods when sales charges applied to the purchase of Fund shares. D Shares are not yet offered as of the date of this Statement of Additional Information and performance information for D Shares currently is not available. REDEEMABLE VALUE AVERAGE ANNUAL OF A HYPOTHETICAL TOTAL RATE $1,000 INVESTMENT OF RETURN AT THE END OF THE PERIOD --------- ------------------------ CITI SHORT-TERM U.S. GOVERNMENT INCOME FUND CITI SHARES Ten years ended December 31, 1999 ........ 5.98% $1,787.17 Five years ended December 31, 1999 ....... 5.75% $1,322.61 One year ended December 31, 1999 ......... 2.07% $1,020.72 The annualized yield of Citi Shares of the Fund for the 30-day period ended December 31, 1999 was 5.34%. 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. For advertising and sales purposes, the Fund will generally use the performance of Citi Shares. If the performance of D Shares is used for advertising and sales purposes, performance after class inception will be actual performance, while performance prior to that date will be Citi Shares performance, although this Citi Shares performance may not reflect the differences in fees and expenses between the classes. D Share performance generally would have been higher than Citi Shares performance, had the D Shares been offered for the entire period, because the expenses attributable to D Shares are lower than the expenses attributable to the Citi Shares. 6. DETERMINATION OF NET ASSET VALUE; VALUATION OF SECURITIES The net asset value of each 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 Distributor prior to its calculation. The value of the Portfolio's net assets (i.e., the value of its securities and other assets less its liabilities, including expenses payable or accrued) is determined at the same time and on the same days as the net asset value per share of each class of the Fund is determined. The net asset value of the Fund's investment in the Portfolio is equal to the Fund's pro rata share of the net assets of the Portfolio. Bonds and other fixed income securities (other than short-term obligations maturing in 60 days or less) held for the Fund are valued on the basis of valuations furnished by a pricing service, use of which has been approved by the Board of Trustees of the Trust. In making such valuations, the pricing service utilizes both dealer-supplied valuations and electronic data processing techniques which take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, trading characteristics and other market data, without exclusive reliance upon quoted prices or exchange or over-the- counter prices, since such valuations are believed to reflect more accurately the fair value of such securities. Short-term obligations (maturing in 60 days or less) are valued at amortized cost, which constitutes fair value as determined by the Board of Trustees of the Trust. Futures contracts are normally valued at the settlement price on the exchange on which they are traded. Securities for which there are no such valuations are valued at fair value as determined in good faith by or at the direction of the Board of Trustees of the Trust. Interest income on long-term obligations held for the Fund is determined on the basis of interest accrued plus amortization of "original issue discount" (generally, the difference between issue price and stated redemption price at maturity) and premiums (generally, the excess of purchase price over stated redemption price at maturity). Interest income on short-term obligations is determined on the basis of interest accrued plus amortization of any premium. 7. ADDITIONAL INFORMATION ON THE PURCHASE AND SALE OF FUND SHARES The Fund offers two classes of shares, Citi Shares and D Shares. Both Citi and D Shares of the Fund are sold at net asset value without an initial sales charge. There are no deferred sales charges when you sell your shares. Citi Shares may be purchased from (a) the Distributor, (b) financial institutions, such as federal or state-chartered banks, trust companies, savings and loan associations or savings banks, or securities brokers (collectively, "Shareholder Servicing Agents"), or (c) a broker-dealer, financial intermediary, financial institution, or the Distributor's financial consultants (each called a "Service Agent"). Shares may be purchased through the Cititrade Program by customers that have established a Cititrade Account. For more detailed information on how to open a Cititrade Account, please visit the Cititrade website at www.mycititrade.com or call a Cititrade account representative at 1-888-663-CITI [2484]. D Shares may be purchased from a Service Agent or from a Fund, but only if the investor is investing through certain qualified plans or certain dealer representatives. Service Agents may charge their customers an annual account maintenance fee in connection with a brokerage account through which an investor purchases or holds D Shares. D Shares held directly at the sub- transfer agent are not subject to a maintenance fee. Citi Shares of the Fund may pay a distribution fee of up to 0.20% of the average daily net assets represented by these shares. D Shares are not subject to a distribution or service fee. During periods of drastic economic or market changes or severe weather or other emergencies, shareholders may experience difficulties implementing a telephone or Internet exchange or redemption. In such an event, another method of instruction, if available, should be considered. The Fund 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 shareholder's identity by asking for the shareholder's name, address, telephone number, Social Security number, account number, or password identification number. If these or other reasonable procedures are not followed, the Fund or its transfer agent may be liable for any losses to a shareholder due to unauthorized or fraudulent instructions. Otherwise, the shareholders will bear all risk of loss relating to a redemption or exchange by telephone. SYSTEMATIC WITHDRAWAL PLAN. The Citi Shares' Systematic Withdrawal Plan permits you to have a specified dollar amount (minimum of $100 per withdrawal) automatically withdrawn from your account without a redemption fee 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. 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 sub-transfer agent or, if you hold your shares through a Shareholder Servicing Agent or Service Agent, by your Shareholder Servicing Agent or Service Agent. Cititrade customers should contact a Cititrade account representative at 1-888-663-CITI[2484] for more information. The D Shares' Withdrawal Plan is available to shareholders of the Fund who own D Shares of the Fund with a value of at least $10,000 and who wish to receive specific amounts of cash monthly or quarterly. Withdrawals of at least $50 may be made without a redemption fee under the Withdrawal Plan by redeeming as many D Shares of the Fund as may be necessary to cover the stipulated withdrawal payment. As it generally would not be advantageous to a shareholder to make additional investments in D Shares at the same time he or she is participating in the Withdrawal Plan, purchases by such shareholders in amounts of less than $5,000 ordinarily will not be permitted. All dividends and distributions on shares in the Withdrawal Plan are reinvested automatically at net asset value in additional D Shares of the Fund. A shareholder who purchases shares directly through the sub-transfer agent may continue to do so and applications for participation in the Withdrawal Plan must be received by the sub-transfer agent no later than the eighth day of the month to be eligible for participation beginning with that month's withdrawal. For additional information, shareholders should contact their Service Agent. To the extent withdrawals exceed dividends, distributions and appreciation of a shareholder's investment in the Fund, continued withdrawal payments will reduce the shareholder's investment, and may ultimately exhaust it. Withdrawal payments should not be considered as income from investment in the Fund. SYSTEMATIC INVESTMENT PLAN. Citi and D Shares shareholders may make additions to their accounts at any time by purchasing shares through a service known as the Systematic Investment Plan. Under the Systematic Investment Plan, a Shareholder Servicing Agent, Service Agent or the sub-transfer agent is authorized through preauthorized transfers of at least $25 on a monthly basis or at least $50 on a quarterly basis to charge the shareholder's account held with a bank or other financial institution on a monthly or quarterly basis as indicated by the shareholder, to provide for systematic additions to the shareholder's Fund account. A shareholder who has insufficient funds to complete the transfer will be charged a fee of up to $25 by a Servicing Agent, Service Agent or the sub-transfer agent. The Systematic Investment Plan also authorizes the Fund to apply cash held in a D Shares shareholder's brokerage account or redeem the shareholder's shares of a Smith Barney money market fund to make additions to the account. For Cititrade customers, the Systematic Investment Plan authorizes the Fund to apply cash held in a Citi Shares shareholder's Cititrade Account to make additions to the account. For additional information, please contact the Fund's sub-transfer agent, or if you hold your shares through a Shareholder Servicing Agent or Service Agent, your Shareholder Servicing Agent or Service Agent. You 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. You should consult with the transfer agent and your tax and retirement advisers. Subject to compliance with applicable regulations, the Trust has reserved the right to pay the redemption price of shares of the Fund either totally or partially, by a distribution in kind of securities (instead of cash). The securities so distributed would be valued at the same amount as that assigned to them in calculating the net asset value for the shares being sold. If a holder of shares received a distribution in kind, such holder could incur brokerage or other charges in converting the securities to cash. The Trust may suspend the right of redemption or postpone the date of payment for shares of the Fund more than seven days during any period when (a) trading in the markets the Fund normally utilizes is restricted, or an emergency, as defined by the rules and regulations of the SEC, exists making disposal of the Fund's investments or determination of its net asset value not reasonably practicable; (b) the New York Stock Exchange is closed (other than customary weekend and holiday closings); or (c) the SEC has by order permitted such suspension. There are no conversion, preemptive or other subscription rights. ADDITIONAL DEALER CONCESSIONS From time to time, the Fund's 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 Fund's 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 Fund's 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. 8. MANAGEMENT The Fund is supervised by the Board of Trustees of the Trust, and the Portfolio is supervised by the Board of Trustees of the Portfolio Trust. In each case, a majority of the Trustees are not affiliated with Citibank. In addition, a majority of the disinterested Trustees of the Fund are different from a majority of the disinterested Trustees of the Portfolio. The Trustees and officers of the Trust and the Portfolio Trust, their ages and their principal occupations during the past five years are set forth below. Their titles may have varied during that period. Asterisks indicate that those Trustees and officers are "interested persons" (as defined in the 1940 Act) of the Trust or the Portfolio Trust. Unless otherwise indicated below, the address of each Trustee and officer is 388 Greenwich Street, New York, New York 10013. The address of the Portfolio Trust is 388 Greenwich Street, New York, New York 10013. TRUSTEES OF THE TRUST PHILIP W. COOLIDGE*; 48 - Chief Executive Officer and President, Signature Financial Group, Inc. and CFBDS Inc. RILEY C. GILLEY; 74 - Vice President and General Counsel, Corporate Property Investors (November 1988 to December 1991); Partner, Breed, Abbott & Morgan (Attorneys) (retired, December 1987). DIANA R. HARRINGTON; 60 - Professor, Babson College (since September 1994); Trustee, The Highland Family of Funds (March 1997 to March 1998). SUSAN B. KERLEY; 49 - President, Global Research Associates, Inc. (Investment Research) (since September 1990); Trustee, Mainstay Institutional Funds (since December 1990). HEATH B. MCLENDON*; 66 ;- President of the Trust and the Portfolio Trust; 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. C. OSCAR MORONG, JR.; 65 - Chairman of the Board of Trustees of the Trust; Managing Director, Morong Capital Management (since February 1993); Director, Indonesia Fund (1990 to 1999); Trustee, MAS Funds (since 1993). E. KIRBY WARREN; 66 - Professor of Management, Graduate School of Business, Columbia University (1987 to December 1999). 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). PHILIP W. COOLIDGE*; 48 - Chief Executive Officer and President, Signature Financial Group, Inc. and CFBDS. MARK T. FINN; 57 - 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). C. OSCAR MORONG, JR.; 65 - Chairman of the Board of Trustees of the Trust; Managing Director, Morong Capital Management (since February 1993); Director, Indonesia Fund (1990 to 1999); Trustee, MAS Funds (since 1993). WALTER E. ROBB, III; 74 - 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). E. KIRBY WARREN; 66 - Professor of Management, Graduate School of Business, Columbia University (1987 to December 1999). OFFICERS OF THE TRUST AND THE PORTFOLIO TRUST HEATH B. McLENDON* (age 66) - President of the Trust and the Portfolio Trust; Chairman, President, and Chief Executive Officer of SSB Citi Fund Management LLC ("SSB Citi") (since March 1996); Managing Director of Salomon Smith Barney (since August 1993); President of Travelers Investment Adviser, Inc. ("TIA"); Chairman or Co-Chairman of the Board of seventy-one investment companies associated with Salomon Smith Barney. His address is 7 World Trade Center, New York, New York 10048. LEWIS E. DAIDONE* (age 42) - Senior Vice President and Treasurer of the Trust and the Portfolio Trust; Managing Director of Salomon Smith Barney; Chief Financial Officer of the Smith Barney mutual funds; Treasurer and Senior Vice President or Executive Vice President of sixty-one investment companies associated with Citigroup; Director and Senior Vice President of SSB Citi and TIA. His address is 125 Broad Street, New York, New York 10004. IRVING DAVID* (age 39) - Controller of the Trust and the Portfolio Trust; Director of Salomon Smith Barney; formerly Assistant Treasurer of First Investment Management Company. Controller or Assistant Treasurer of fifty- three investment companies associated with Citigroup. His address is 125 Broad Street, New York, New York 10004. FRANCES GUGGINO* (age 42) - Assistant Controller of the Trust and the Portfolio Trust; Vice President of Citibank since February, 1991. PAUL BROOK* (age 46) - Assistant Controller of the Trust and the Portfolio Trust; Director of Salomon Smith Barney; Controller or Assistant Treasurer of forty-three investment companies associated with Citigroup; from 1997-1998 Managing Director of AMT Capital Services Inc.; prior to 1997 Partner with Ernst & Young LLP. His address is 125 Broad Street, New York, New York 10004. ANTHONY PACE* (age 35) - Assistant Treasurer of the Trust and the Portfolio Trust. Mr. Pace is Vice President - Mutual Fund Administration for Salomon Smith Barney Inc. Since 1986, when he joined the company as a Fund Accountant, Mr. Pace has been responsible for accounts payable, financial reporting and performance of mutual funds and other investment products. MARIANNE MOTLEY* (age 41) - Assistant Treasurer of the Trust and the Portfolio Trust. Ms. Motley is Director - Mutual Fund Administration for Salomon Smith Barney Inc. Since 1994, when she joined the company as a Vice President, Ms. Motley has been responsible for accounts payable, financial reporting and performance of mutual funds and other investment products. ROBERT I. FRENKEL, ESQ.* (age 45) - Secretary of the Trust and the Portfolio Trust. Mr. Frenkel is a Managing Director and General Counsel - Global Mutual Funds for SSB Citi Asset Management Group. Since 1994, when he joined Citibank as a Vice President and Division Counsel, he has been responsible for legal affairs relating to mutual funds and other investment products. THOMAS C. MANDIA, ESQ.* (age 38) - Assistant Secretary of the Trust and the Portfolio Trust. Mr. Mandia is a Vice President and Associate General Counsel for SSB Citi Asset Management Group. Since 1992, he has been responsible for legal affairs relating to mutual funds and other investment products. ROSEMARY D. EMMENS, ESQ.* (age 30) - Assistant Secretary of the Trust and the Portfolio Trust. Ms. Emmens has been a Vice President and Associate General Counsel of SSB Citi Asset Management Group since 1998, where she has been responsible for legal affairs relating to mutual funds and other investment products. Before joining Citibank, Ms. Emmens was Counsel at The Dreyfus Corporation since 1995. HARRIS GOLDBLAT, ESQ.* (age 30) - Assistant Secretary of the Trust and the Portfolio Trust. Associate General Counsel at SSB Citi Asset Management Group since April 2000. From June 1997 to March 2000, he was an associate at the law firm of Stroock & Stroock & Lavan LLP, New York City, and from September 1996 to May 1997, he was an associate at the law firm of Sills Cummis Radin Tischman Epstein & Gross, Newark, NJ. From August 1995 to September 1996. Mr. Goldblat served as a law clerk to the Honorable James M. Havey, P.J.A.D., in New Jersey. The officers of the Trust and the Portfolio Trust also hold comparable positions with certain other funds for which Salomon Smith Barney or its affiliates serve as the distributor or administrator. 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:
PENSION OR TOTAL COMPENSATION RETIREMENT ESTIMATED FROM TRUST AGGREGATE BENEFITS ACCRUED ANNUAL AND FUND COMPLEX COMPENSATION AS PART OF FUND BENEFITS PAID TO TRUSTEE FROM FUND(1) EXPENSES UPON RETIREMENT TRUSTEES(1) ------- ------------ -------- --------------- ----------- Philip W. Coolidge None None None None Riley C. Gilley $1,726 None None $65,250 Diana R. Harrington $1,833 None None $71,250 Susan B. Kerley $1,826 None None $69,750 Heath B. McLendon None None None None C. Oscar Morong, Jr. $1,910 None None $92,000 E. Kirby Warren $1,776 None None $62,750 William S. Woods, Jr. (2) $1,904 None None $66,000 - ---------- (1) Messrs. Coolidge, Gilley, McLendon, Morong and Warren and Mses. Harrington and Kerley are Trustees of 47, 34, 22, 38, 38, 29, and 29 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.
As of September 25, 2000, all Trustees and officers as a group owned less than 1% of the outstanding shares of the Fund. As of the same date, more than 95% of the outstanding shares of the Fund were held of record by Citibank, N.A. or its affiliates, as Shareholder Servicing Agents of the Fund for the accounts of their respective clients. The Declaration of Trust of each of the Trust and the Portfolio Trust provides that the Trust or the Portfolio Trust, as the case may be, will indemnify its Trustees and officers against liabilities and expenses incurred in connection with litigation in which they may be involved because of their offices with the Trust or the Portfolio Trust, as the case may be, unless, as to liability to the Trust, the Portfolio Trust or their respective investors, it is finally adjudicated that they engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in their offices, or unless with respect to any other matter it is finally adjudicated that they did not act in good faith in the reasonable belief that their actions were in the best interests of the Trust or the Portfolio Trust, as the case may be. In the case of settlement, such indemnification will not be provided unless it has been determined by a court or other body approving the settlement or other disposition, or by a reasonable determination, based upon a review of readily available facts, by vote of a majority of disinterested Trustees of the Trust or the Portfolio Trust, or in a written opinion of independent counsel, that such officers or Trustees have not engaged in willful misfeasance, bad faith, gross negligence or reckless disregard of their duties. MANAGER Citibank 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 Manager manages the securities of the Portfolio and makes investment decisions for the Portfolio. The Manager furnishes at its own expense all services, facilities and personnel necessary in connection with managing the Portfolio's investments and effecting securities transactions for the Portfolio. The Advisory Agreement will continue in effect as long as such continuance is specifically approved at least annually by the Board of Trustees of the Portfolio Trust or by a vote of a majority of the outstanding voting securities of the Portfolio, and, in either case, by a majority of the Trustees of the Portfolio Trust who are not parties to the Advisory Agreement or interested persons of any such party, at a meeting called for the purpose of voting on the Advisory Agreement. The Advisory Agreement provides that the Manager may render services to others. The Advisory Agreement is terminable without penalty on not more than 60 days' nor less than 30 days' written notice by the Portfolio Trust, when authorized either by a vote of a majority of the outstanding voting securities of the Portfolio or by a vote of a majority of the Board of Trustees of the Portfolio Trust, as appropriate, or by the Manager 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 Manager nor its personnel shall be liable for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in the execution and management of the Portfolio, except for willful misfeasance, bad faith or gross negligence or reckless disregard of its or their obligations and duties under the Advisory Agreement. For its services under the Advisory Agreement with respect to the Portfolio, Citibank receives fees, which are computed daily and paid monthly, at an annual rate equal to 0.35% of the Portfolio's average daily net assets on an annualized basis for the Portfolio's then-current fiscal year. Citibank may reimburse the Portfolio or waive all or a portion of its advisory fees. For the fiscal years ended December 31, 1997, 1998 and 1999, the fees paid to Citibank under the Advisory Agreement, were $196,529 (of which $5,466 was voluntarily waived), $235,934 and $228,067, respectively. ADMINISTRATOR Pursuant to administrative services agreements (the "Administrative Services Agreements"), Citibank provides the Trust and the Portfolio Trust with general office facilities and supervises the overall administration of the Trust and the Portfolio Trust, including, among other responsibilities, the negotiation of contracts and fees with, and the monitoring of performance and billings of, the Trust's and the Portfolio Trust's independent contractors and agents; the preparation and filing of all documents required for compliance by the Trust and the Portfolio Trust with applicable laws and regulations; and arranging for the maintenance of books and records of the Trust and the Portfolio Trust. Citibank provides persons satisfactory to the Board of Trustees of the Trust and the Portfolio Trust to serve as Trustees and officers of the Trust and the Portfolio Trust. 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 Citibank or its affiliates. The fees payable to Citibank under the Administrative Services Agreements are 0.25% of the average daily net assets of the Fund, and 0.05% of the average daily net assets of the Portfolio, accrued daily and paid monthly, in each case on an annualized basis for the Fund's or the Portfolio's then- current fiscal year. However, each of the Administrator and the Portfolio Administrator has voluntarily agreed to waive a portion of the fees payable as necessary to maintain the projected rate of total operating expenses. For the fiscal years ended December 31, 1997, 1998 and 1999, the fees payable to CFBDS, Inc., the former administrator for the Trust and the Portfolio Trust, from the Fund under a prior administrative services agreement were $58,254 (all of which was voluntarily waived), $72,730 (all of which was voluntarily waived) and $97,993 (all of which was voluntarily waived), respectively. For the fiscal years ended December 31, 1997, 1998 and 1999, the fees payable to Signature Financial Group (Cayman) Limited, the former administrator for the Portfolio Trust, from the Portfolio under a prior administrative services agreement with the Portfolio Trust were $28,076 (of which $27,174 was voluntarily waived), $33,706 (all of which was voluntarily waived) and $32,582 (all of which was voluntarily waived), respectively. The Administrative Services Agreements with the Trust and the Portfolio Trust provide that Citibank 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 Citibank and its 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. DISTRIBUTOR Salomon Smith Barney, 388 Greenwich Street, New York, New York 10013, 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 (the "Distribution Agreements"). Under the Distribution Agreements, Salomon Smith Barney is obligated to use its best efforts to sell shares of the Fund. Each Distribution Agreement is terminable with or without cause, without penalty, on 60 days' notice by the Board of Trustees of the Trust or by vote of holders of a majority relevant class of the Fund's outstanding voting securities, or on 90 days' notice by Salomon Smith Barney. Unless otherwise terminated, each Distribution Agreement shall continue for successive annual periods so long as such continuance is specifically approved at least annually by (a) the Trust's Board of Trustees, or (b) by a vote of a majority (as defined in the 1940 Act) of the relevant class of the Fund's outstanding voting securities, provided that in either event the continuance is also approved by a majority of the Board members of the Trust who are not interested persons (as defined in the 1940 Act) of any party to the Distribution Agreement, by vote cast in person at a meeting called for the purpose of voting on such approval. Each Distribution Agreement will terminate automatically in the event of its assignment, as defined in the 1940 Act and the rules and regulations thereunder. The Citi Shares of the Fund have adopted a Distribution Plan (the "Distribution Plan") in accordance with Rule 12b-1 under the 1940 Act with respect to shares of the Fund after concluding that there is a reasonable likelihood that the Distribution Plan will benefit the Fund and its shareholders. The Distribution Plan provides that the Fund may pay a distribution fee to the Distributor at an annual rate not to exceed 0.15% of the Fund's average daily net assets. The Distributor receives the distribution fees for its services under the Distribution Agreement in connection with the distribution of the Fund's Citi Shares (exclusive of any advertising expenses incurred by the Distributor in connection with the sale of Citi Shares of the Fund). The Distributor may use all or any portion of such distribution fee to pay for expenses of printing prospectuses and reports used for sales purposes, expenses of the preparation and printing of sales literature, commissions to dealers who sell Citi Shares of the Fund and other distribution-related expenses. The Distribution Plan permits the Citi Shares of the Fund to pay the Distributor an additional fee (not to exceed 0.05% of the average daily net assets of the Citi Shares of the Fund) in anticipation of or as reimbursement for print or electronic media advertising expenses incurred in connection with the sale of Citi Shares. The Distribution Plan continues in effect if such continuance is specifically approved at least annually by a vote of both a majority of the Trust's Trustees and a majority of the Trustees who are not "interested persons" (as defined in the 1940 Act) of the Trust and who have no direct or indirect financial interest in the operation of the Distribution Plan or in any agreement related to the Plan (for purposes of this paragraph "Qualified Trustees"). The Distribution Plan requires that the Trust and the Distributor provide to the Board of Trustees, and the Board of Trustees review, at least quarterly, a written report of the amounts expended (and the purposes therefor) under the Distribution Plan. The Distribution Plan further provides that the selection and nomination of the Qualified Trustees is committed to the discretion of the Qualified Trustees then in office who are not interested Trustees of the Trust. The Distribution Plan may be terminated at any time by a vote of a majority of the Trust's Qualified Trustees or by a vote of a majority of the outstanding voting securities representing the Citi Shares of the Fund. The Distribution Plan may not be amended to increase materially the amount of the Fund's permitted expenses thereunder without the approval of a majority of the outstanding securities representing the Citi Shares of the Fund and may not be materially amended in any case without a vote of a majority of both the Trustees and Qualified Trustees. The Distributor will preserve copies of any plan, agreement or report made pursuant to the Distribution Plan for a period of not less than six years from the date of the Plan, and for the first two years the Distributor will preserve such copies in an easily accessible place. As contemplated by the Distribution Plan, Salomon Smith Barney acts as the agent of the Trust in connection with the offering of Citi Shares of the Fund pursuant to the Distribution Agreement. After the prospectuses and periodic reports of the Fund have been prepared, set in type and mailed to existing shareholders, the Distributor pays for the printing and distribution of copies thereof which are used in connection with the offering of Citi Shares of the Fund to prospective investors. For the fiscal years ended December 31, 1997, 1998 and 1999, the fees payable to CFBDS, Inc., the former distributor for the Fund, by the Fund under a distribution agreement with CFBDS, Inc. were $34,953 (all of which was voluntarily waived), $43,638 (all of which was voluntarily waived) and $58,796 (all of which was voluntarily waived), respectively, no portion of which was applicable to reimbursement for expenses incurred in connection with print or electronic media advertising. The Distributor may enter into agreements with Shareholder Servicing Agents and may pay compensation to such Shareholder Servicing Agents for accounts for which the Shareholder Servicing Agents are holders of record. The Distributor may make payments for distribution and/or shareholder servicing activities out of its past profits and other available sources. The Distributor may also make payments for marketing, promotional or related expenses to dealers. The amount of these payments are determined by the Distributor and may vary. Citibank may make similar payments under similar arrangements. CODE OF ETHICS The Trust, the Portfolio Trust, the Manager and the Distributor each have adopted a code of ethics pursuant to Rule 17j-1 under the 1940 Act. Each code of ethics permits personnel subject to such code to invest in securities, including securities that may be purchased or held by the Fund. However, the codes of ethics contain provisions and requirements designed to identify and address certain conflicts of interest between personal investment activities and the interests of the Fund. Of course, there can be no assurance that the codes of ethics will be effective in identifying and addressing all conflicts of interest relating to personal securities transactions. SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN The Trust has adopted an administrative services plan (the "Administrative Services Plan") after having concluded that there is a reasonable likelihood that the Administrative Services Plan will benefit the Fund and its shareholders. The Administrative Services Plan provides that the Trust may obtain the services of an administrator, a transfer agent, a custodian and one or more Shareholder Servicing Agents, and may enter into agreements providing for the payment of fees for such services. Under the Trust's Administrative Services Plan, the total of the fees paid from the Fund to the Trust's Administrator and Shareholder Servicing Agents may not exceed 0.65% of the Fund's average daily net assets on an annualized basis for the Fund's then- current fiscal year. Any distribution fees (other than any fee concerning electronic or other media advertising) payable under the Distribution Plan are included in this expense limitation. Within this overall limitation, individual fees may vary. Distribution fees may be used to offset the Fund's marketing costs, such as preparation of sales literature, advertising, and printing and distributing prospectuses and other shareholder materials to prospective investors, and to pay costs related to distribution activities, including employee salaries, bonuses and other overhead expenses. The Administrative Services Plan continues in effect if such continuance is specifically approved at least annually by a vote of both a majority of the Trustees and a majority of the Trustees who are not "interested persons" of the Trust and who have no direct or indirect financial interest in the operation of the Administrative Services Plan or in any agreement related to such Plan (for purposes of this paragraph "Qualified Trustees"). The Administrative Services Plan requires that the Trust provide to its Board of Trustees and the Board of Trustees review, at least quarterly, a written report of the amounts expended (and the purposes therefor) under the Administrative Services Plan. The Administrative Services Plan may be terminated at any time by a vote of a majority of the Qualified Trustees of the Trust or by a vote of a majority of the outstanding voting securities of the Fund. The Administrative Services Plan may not be amended to increase materially the amount of permitted expenses thereunder without the approval of a majority of the outstanding voting securities of the Fund. The Administrative Services Plan with respect to the Fund may not be materially amended in any case without a vote of the majority of both the Trustees and the Qualified Trustees. The Trust has entered into a shareholder servicing agreement (a "Shareholder Servicing Agreement") with each Shareholder Servicing Agent pursuant to which such Shareholder Servicing Agent provides shareholder services, including answering customer inquiries, assisting in processing purchase, exchange and redemption transactions and furnishing Fund communications to shareholders. Some Shareholder Servicing Agents may impose certain conditions on their customers in addition to or different from those imposed by the Fund, such as requiring a minimum initial investment or charging their customers a direct fee for their services. Each Shareholder Servicing Agent has agreed to transmit to its customers who are shareholders of the Fund appropriate prior written disclosure of any fees that it may charge them directly and to provide written notice at least 30 days prior to imposition of any transaction fees. Shareholder Servicing Agents that sell shares of the Fund receive a shareholder servicing fee payable on such shares at an annual rate equal to 0.25% of the average daily net assets represented by such shares. For the fiscal years ended December 31, 1997, 1998 and 1999, the aggregate fees paid to Shareholder Servicing Agents under the Shareholder Servicing Agreements for the Fund, were $58,254, $72,730 and $97,993, respectively. The Portfolio Trust has also adopted an administrative services plan (the "Portfolio Administrative Plan"), which provides that the Portfolio Trust may obtain the services of an administrator, a transfer agent and a custodian and may enter into agreements providing for the payment of fees for such services. Under the Portfolio Administrative Plan, the administrative services fee payable to the Portfolio Administrator from the Portfolio may not exceed 0.05% of the Portfolio's average daily net assets on an annualized basis for its then-current fiscal year. The Portfolio Administrative Plan continues in effect if such continuance is specifically approved at least annually by a vote of both a majority of the Portfolio Trust's Trustees and a majority of the Portfolio Trust's Trustees who are not "interested persons" of the Portfolio and who have no direct or indirect financial interest in the operation of the Portfolio Administrative Plan or in any agreement related to such Plan (for purposes of this paragraph "Qualified Trustees"). The Portfolio Administrative Plan requires that the Portfolio Trust provide to the Board of Trustees and the Board of Trustees review, at least quarterly, a written report of the amounts expended (and the purposes therefor) under the Portfolio Administrative Plan. The Portfolio Administrative Plan may not be amended to increase materially the amount of permitted expenses thereunder without the approval of a majority of the outstanding voting securities of the Portfolio Trust and may not be materially amended in any case without a vote of the majority of both the Portfolio Trust's Trustees and the Portfolio Trust's Qualified Trustees. The Trust and the Portfolio Trust each have entered into a Transfer Agency and Service Agreement with Citi Fiduciary Trust Company ("Citi Fiduciary") pursuant to which Citi Fiduciary acts as transfer agent for the Fund and the Portfolio. Under the Transfer Agency and Service Agreements, Citi Fiduciary maintains the shareholder and investor account records for the Fund and the Portfolio, handles certain communications between shareholders and the Fund and distributes dividends and distributions payable by the Fund. For these services, Citi Fiduciary receives a monthly fee from the Fund computed on the basis of the number of shareholder accounts it maintains for the Fund during the month and is reimbursed for out-of-pocket expenses. The principal business address of Citi Fiduciary is 25 Broad Street, New York, New York 10004. Boston Financial Data Services ("BFDS" or "sub-transfer agent"), P.O. Box 9083, Boston, Massachusetts 02205-9083, serves as the Fund's and the Portfolio's sub-transfer agent. Under the sub-transfer agency agreements, the sub-transfer agent maintains the shareholder and investor account records for the Fund and the Portfolio, handles certain communications between shareholders and the Fund, and distributes dividends and distributions payable by the Fund. For these services, the sub-transfer agent receives from the Fund a monthly fee computed on the basis of the number of shareholder accounts it maintains for the Fund during the month, and is reimbursed for out-of-pocket expenses. The Trust has entered into a Custodian Agreement and a Fund Accounting Agreement with State Street Bank and Trust Company ("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. The Portfolio has entered into a Custodian Agreement with State Street and a Fund Accounting Agreement with State Street Cayman Trust Company, Ltd. ("State Street Cayman"). Securities may be held by a sub- custodian bank approved by the Trustees. The principal business address of State Street is 225 Franklin Street, Boston, Massachusetts 02110. The principal business address of State Street Cayman is P.O. Box 2508 GT, Grand Cayman, British West Indies. AUDITORS PricewaterhouseCoopers LLP are the independent accountants for the Fund, providing audit services and assistance and consultation with respect to the preparation of filings with the SEC. The address of PricewaterhouseCoopers LLP is 160 Federal Street, Boston, Massachusetts 02110. PricewaterhouseCoopers LLP are the chartered accountants for the Portfolio Trust. The address of PricewaterhouseCoopers LLP is Suite 3000, Box 82, Royal Trust Towers, Toronto Dominion Center, Toronto, Ontario, Canada M5X 1G8. COUNSEL Bingham Dana LLP, 150 Federal Street, Boston, MA 02110, serves as counsel for the Fund. 9. PORTFOLIO TRANSACTIONS The Trust trades securities for the Fund if it believes that a transaction net of costs (including custodian charges) will help achieve the Fund's investment objectives. Changes in the Fund's investments are made without regard to the length of time a security has been held, or whether a sale would result in the recognition of a profit or loss. Therefore, the rate of turnover is not a limiting factor when changes are appropriate. The amount of brokerage commissions and realization of taxable capital gains will tend to increase as the level of Portfolio activity increases. Specific decisions to purchase or sell securities for the Fund are made by a portfolio manager who is an employee of the Manager and who is appointed and supervised by its senior officers. The portfolio manager may serve other clients of the Manager 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 Manager attempts to achieve this result by selecting broker- dealers to execute transactions on behalf of the Fund and other clients of the Manager 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 Manager 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 Manager on the tender of the Fund's securities in so-called tender or exchange offers. Such soliciting dealer fees are in effect recaptured for the Fund by the Manager. At present no other recapture arrangements are in effect. In connection with the selection of brokers or dealers and the placing of portfolio securities transactions, brokers or dealers may be selected who also provide brokerage and research services (as those terms are defined in Section 28(e) of the Securities Exchange Act of 1934) to the Fund and/or the other accounts over which Citibank or its affiliates exercise investment discretion. Citibank is authorized to pay a broker or dealer who provides such brokerage and research services a commission for executing a portfolio transaction for the Fund which is in excess of the amount of commission another broker or dealer would have charged for effecting that transaction if Citibank determines in good faith that such amount of commission is reasonable in relation to the value of the brokerage and research services provided by such broker or dealer. This determination may be viewed in terms of either that particular transaction or the overall responsibilities which Citibank and its affiliates have with respect to accounts over which they exercise investment discretion. The Trustees of the Trust periodically review the commissions paid by the Fund to determine if the commissions paid over representative periods of time were reasonable in relation to the benefits to the Fund. The investment advisory fee that the Fund pays to the Manager will not be reduced as a consequence of the Manager's receipt of brokerage and research services. While such services are not expected to reduce the expenses of the Manager, the Manager would, through the use of the services, avoid the additional expenses which would be incurred if it should attempt to develop comparable information through its own staff or obtain such services independently. In certain instances there may be securities that are suitable as an investment for the Fund as well as for one or more of the Manager's other clients. Investment decisions for the Fund and for the Manager's other clients are made with a view to achieving their respective investment objectives. It may develop that a particular security is bought or sold for only one client even though it might be held by, or bought or sold for, other clients. Likewise, a particular security may be bought for one or more clients when one or more clients are selling the same security. Some simultaneous transactions are inevitable when several clients receive investment advice from the same investment adviser, particularly when the same security is suitable for the investment objectives of more than one client. When two or more clients are simultaneously engaged in the purchase or sale of the same security, the securities are allocated among clients in a manner believed to be equitable to each. It is recognized that in some cases this system could adversely affect the price of or the size of the position obtainable in a security for the Fund. When purchases or sales of the same security for the Fund and for other portfolios managed by the Manager occur contemporaneously, the purchase or sale orders may be aggregated in order to obtain any price advantages available to large volume purchases or sales. For the fiscal years ended December 31, 1997, 1998 and 1999, the Portfolio paid no brokerage commissions. 10. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES The Trust's Declaration of Trust permits the Trust to issue an unlimited number of full and fractional shares of beneficial interest (without par value) of each series and to divide or combine the shares of any series into a greater or lesser number of shares of that series without thereby changing the proportionate beneficial interests in that series and to divide such shares into classes. The Trust has reserved the right to create and issue additional series and classes of shares. Each share of each class of each series represents an equal proportionate interest in the series with each other share of that class. Shares of each series participate equally in the earnings, dividends and distribution of net assets of the particular series upon liquidation or dissolution (except for any differences among classes of shares in a series). Shares of each series are entitled to vote separately to approve advisory agreements or changes in investment policy, but shares of all series may vote together in the election or selection of Trustees and accountants for the Trust. In matters affecting only a particular series or class, only shares of that series or class are entitled to vote. Shareholders are entitled to one vote for each share held on matters on which they are entitled to vote. Shareholders in the Trust do not have cumulative voting rights, and shareholders owning more than 50% of the outstanding shares of the Trust may elect all of the Trustees of the Trust if they choose to do so and in such event the other shareholders in the Trust would not be able to elect any Trustee. The Trust is not required to hold, and has no present intention of holding, annual meetings of shareholders but the Trust will hold special meetings of shareholders when in the judgment of the Trustees it is necessary or desirable to submit matters for a shareholder vote. Shareholders have, under certain circumstances (e.g., upon the application and submission of certain specified documents to the Trustees by a specified number of shareholders), the right to communicate with other shareholders in connection with requesting a meeting of shareholders for the purpose of removing one or more Trustees. Shareholders also have under certain circumstances the right to remove one or more Trustees without a meeting by a declaration in writing by a specified number of shareholders. No material amendment may be made to the Trust's Declaration of Trust without the affirmative vote of the holders of a majority of the outstanding shares of each series affected by the amendment. (See "Investment Restrictions.") At any meeting of shareholders of any series, a Shareholder Servicing Agent or Service Agent may vote any shares of which it is the holder of record and for which it does not receive voting instructions proportionately in accordance with the instructions it receives for all other shares of which that Shareholder Servicing Agent or Service Agent is the holder of record. Shares have no preference, preemptive, conversion or similar rights. Shares, when issued, are fully paid and non-assessable, except as set forth below. The Trust may enter into a merger or consolidation, or sell all or substantially all of its assets (or all or substantially all of the assets belonging to any series of the Trust), if approved by a vote of the holders of two-thirds of the Trust's outstanding shares, voting as a single class, or of the affected series of the Trust, as the case may be, except that if the Trustees of the Trust recommend such sale of assets, merger or consolidation, the approval by vote of the holders of a majority of the Trust's (or the affected series') outstanding shares would be sufficient. The Trust or any series of the Trust, as the case may be, may be terminated (i) by a vote of a majority of the outstanding voting securities of the Trust or the affected series or (ii) by the Trustees by written notice to the shareholders of the Trust or the affected series. If not so terminated, the Trust will continue indefinitely. If shares are held through a Shareholder Servicing Agent, the Shareholder Servicing Agent establishes and maintains the holder's account, and is the shareholder of record for the Fund. The Fund's transfer agent maintains a share register for shareholders of record. Share certificates are not issued. The Trust is an entity of the type commonly known as a "Massachusetts business trust." Under Massachusetts law, shareholders of such a business trust may, under certain circumstances, be held personally liable as partners for its obligations and liabilities. However, the Declaration of Trust of the Trust contains an express disclaimer of shareholder liability for acts or obligations of the Trust and provides for indemnification and reimbursement of expenses out of Trust property for any shareholder held personally liable for the obligations of the Trust. The Declaration of Trust of the Trust also provides that the Trust may maintain appropriate insurance (e.g., fidelity bonding and errors and omissions insurance) for the protection of the Trust, its shareholders, Trustees, officers, employees and agents covering possible tort and other liabilities. Thus, the risk of a shareholder incurring financial loss on account of shareholder liability is limited to circumstances in which both inadequate insurance existed and the Trust itself was unable to meet its obligations. The Trust's Declaration of Trust further provides that obligations of the Trust are not binding upon the Trustees individually but only upon the property of the Trust and that the Trustees will not be liable for any action or failure to act, but nothing in the Declaration of Trust of the Trust protects a Trustee against any liability to which he or she would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of the duties involved in the conduct of his or her office. The Portfolio is a series of the Portfolio Trust, organized as a trust under the laws of the State of New York. The Portfolio Trust's Declaration of Trust provides that investors in the Portfolio (e.g., other investment companies (including the Fund), insurance company separate accounts and common and commingled trust funds) are each liable for all obligations of the Portfolio. However, the risk of the Fund incurring financial loss on account of such liability is limited to circumstances in which both inadequate insurance existed and the Portfolio itself was unable to meet its obligations. It is not expected that the liabilities of the Portfolio would ever exceed its assets. Each investor in the Portfolio, including the Fund, may add to or withdraw from its investment in the Portfolio on each Business Day. As of the close of regular trading on each Business Day, the value of each investor's beneficial interest in the Portfolio is determined by multiplying the net asset value of the Portfolio by the percentage, effective for that day, that represents that investor's share of the aggregate beneficial interests in the Portfolio. Any additions or withdrawals that are to be effected on that day are then effected. The investor's percentage of the aggregate beneficial interests in the Portfolio is then recomputed as the percentage equal to the fraction (i) the numerator of which is the value of such investor's investment in the Portfolio as of the close of regular trading on such day plus or minus, as the case may be, the amount of any additions to or withdrawals from the investor's investment in the Portfolio effected on such day, and (ii) the denominator of which is the aggregate net asset value of the Portfolio as of the close of regular trading on such day plus or minus, as the case may be, the amount of the net additions to or withdrawals from the aggregate investments in the Portfolio by all investors in the Portfolio. The percentage so determined is then applied to determine the value of the investor's interest in the Portfolio as of the close of regular trading on the next following Business Day. 11. TAX MATTERS TAXATION OF THE FUND AND PORTFOLIO The Fund has elected to be treated, and intends to qualify each year, as a "regulated investment company" under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), by meeting all applicable requirements of Subchapter M, including requirements as to the nature of the Fund's gross income, the amount of Fund distributions, and the composition of the Fund's portfolio assets. Provided all such requirements are met and all of the Fund's net investment income and net realized capital gains are distributed to shareholders in accordance with the timing requirements imposed by the Code, no federal income or excise taxes generally will be required to be paid by the Fund. If the Fund should fail to qualify as a "regulated investment company" for any year, the Fund would incur a regular corporate federal income tax upon its taxable income and Fund distributions would generally be taxable as ordinary dividend income to shareholders. The Portfolio Trust believes the Portfolio also will not be required to pay any federal income taxes. TAXATION OF SHAREHOLDERS TAXATION OF DISTRIBUTIONS; FEDERAL. Shareholders of the Fund will generally have to pay federal income taxes on the dividends and capital gain distributions they receive from the Fund. Dividends from ordinary income and any distributions from net short-term capital gains are taxable to shareholders as ordinary income for federal income tax purposes, whether the distributions are made in cash or in additional shares. Because the Fund expects to earn primarily interest income, it is expected that no Fund dividends will qualify for the dividends received deduction for corporations. Distributions of net capital gains (i.e., the excess of net long-term capital gains over net short-term capital losses), whether made in cash or in additional shares, are taxable to shareholders as long-term capital gains without regard to the length of time the shareholders have held their shares. Any Fund dividend that is declared in October, November or December of any calendar year, that is payable to shareholders of record in such a month, and that is paid the following January will be treated as if received by the shareholders on December 31 of the year in which the dividend is declared. Any Fund distribution will have the effect of reducing the per share net asset value of shares in the Fund by the amount of the distribution. Shareholders purchasing shares shortly before the record date of any distribution may thus pay the full price for the shares and then effectively receive a portion of the purchase price back as a taxable distribution. TAXATION OF DISTRIBUTIONS; STATE. Although shareholders of the Fund generally will have to pay state and local taxes on the dividends and capital gain distributions they receive from the Fund, distributions of the Fund that are derived from interest on obligations of the U.S. Government and certain of its agencies and instrumentalities (but not generally from capital gains realized upon the dispositions of such obligations) may be exempt from state and local taxes. Shareholders are urged to consult their tax advisers regarding the possible exclusion of such portion of their dividends for state and local income tax purposes. SPECIAL CONSIDERATIONS FOR NON-U.S. PERSONS. The Fund will withhold tax payments at the rate of 30% (or any lower rate permitted under an applicable treaty) on taxable dividends and other payments subject to withholding taxes that are made to persons who are not citizens or residents of the United States. Distributions received from the Fund by non-U.S. persons also may be subject to tax under the laws of their own jurisdiction. BACKUP WITHHOLDING. The account application asks each new shareholder to certify that the shareholder's Social Security or taxpayer identification number is correct and that the shareholder is not subject to 31% backup withholding for failing to report income to the IRS. If a shareholder fails to provide this information, or otherwise violates IRS regulations, the Fund may be required to withhold tax at the rate of 31% on certain distributions and redemption proceeds paid to that shareholder. Backup withholding will not, however, be applied to payments that have been subject to 30% withholding. DISPOSITION OF SHARES. In general, any gain or loss realized upon a taxable disposition of shares of the Fund by a shareholder that holds such shares as a capital asset will be treated as a long-term capital gain or loss if the shares have been held for more than twelve months and otherwise as a short-term capital gain or loss. However, any loss realized upon a redemption of shares in the Fund held for six months or less will be treated as a long- term capital loss to the extent of any distributions of net capital gain made with respect to those shares. Any loss realized upon a disposition of shares may also be disallowed under rules relating to wash sales. EFFECTS OF CERTAIN INVESTMENTS. The Fund's and the Portfolio's transactions in options, short sales "against the box," futures contracts and forward contracts will be subject to special tax rules that may affect the amount, timing, and character of Fund or Portfolio income and distributions to shareholders. For example, certain positions held by the Fund or the Portfolio on the last business day of each taxable year will be marked to market (i.e., treated as if closed out) on that day, and any gain or loss associated with the positions will be treated as 60% long-term and 40% short-term capital gain or loss. Certain positions held by the Fund or the Portfolio that substantially diminish its risk of loss with respect to other positions in its portfolio may constitute straddles, and may be subject to special tax rules that would cause deferral of Fund or Portfolio losses, adjustments in the holding periods of securities held by the Fund or the Portfolio and conversion of short-term into long-term capital losses. Certain tax elections exist for straddles which may alter the effects of these rules. The Fund and the Portfolio each intend to limit its investment activities in options, futures contracts and forward contracts to the extent necessary to meet the requirements of Subchapter M of the Code. 12. FINANCIAL STATEMENTS The audited financial statements of the Fund (Statement of Assets and Liabilities at December 31, 1999, Statement of Operations for the year ended December 31, 1999, Statement of Changes in Net Assets for the years in the two-year period ended December 31, 1999 and Financial Highlights for each of the years in the five-year period ended December 31, 1999, Notes to Financial Statements and Independent Auditors' Report), each of which is included in the Annual Report to Shareholders of the Fund, are incorporated by reference into this Statement of Additional Information and have been so incorporated in reliance upon the report of PricewaterhouseCoopers LLP, on behalf of the Fund. The audited financial statements of the Portfolio (Portfolio of Investments at December 31, 1999, Statement of Assets and Liabilities at December 31, 1999, Statement of Operations for the year ended December 31, 1999, Statement of Changes in Net Assets for the years in the two-year period ended December 31, 1999 and Financial Highlights for each of the years in the five-year period ended December 31, 1999, Notes to Financial Statements and Independent Auditors' Report), each of which is included in the Annual Report to Shareholders of the Fund, are incorporated by reference into this Statement of Additional Information and have been so incorporated in reliance upon the report of PricewaterhouseCoopers LLP, chartered accountants, on behalf of the Portfolio. Copies of the Annual Report to Shareholders of the Fund accompany this Statement of Additional Information. PART C Item 23. Exhibits. * a(1) Declaration of Trust of Registrant *,*** and filed herewith a(2) Amendments to Registrant's Declaration of Trust * b(1) Amended and Restated By-Laws of Registrant * b(2) Amendments to Amended and Restated By-Laws of Registrant e Distribution Agreement between the Registrant and Salomon Smith Barney, Inc. ("Salomon Smith Barney"), as distributor with respect to shares of Citi Short-Term U.S. Government Income Fund * 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 Citi Short-Term U.S. Government Income Fund h(2) Form of Administrative Services Agreement between the Registrant and Citibank, N.A., as administrator with respect to Citi Short-Term U.S. Government Income Fund **** h(3)(i) Form of Shareholder Servicing Agreement between the Registrant and Citibank, N.A., as shareholder servicing agent for Citi Short-Term U.S. Government Income Fund **** h(4)(ii) Form of Shareholder Servicing Agreement between the Registrant and a federal savings bank, as shareholder servicing agent for Citi Short-Term U.S. Government Income Fund h(5) Transfer Agency and Service Agreement between the Registrant and Citi Fiduciary Trust Company, as transfer agent * h(6) Accounting Services Agreement between the Registrant and State Street, as Fund accounting agent ** i Opinion and consent of counsel j Independent auditors' consent m Amended and Restated Distribution Plan of the Registrant for Citi Shares of Citi Short-Term U.S. Government Income Fund o Multiple Class Plan of the Registrant ******* p(1) Code of Ethics for the Registrant p(2) Code of Ethics for Salomon Smith Barney ******* p(3) Code of Ethics for Citibank, N.A. *and ***** q(1) Powers of Attorney for the Registrant **and ****** q(2) Powers of Attorney for The Premium Portfolios - --------------------- * Incorporated herein by reference to Post-Effective Amendment No. 24 to the Registrant's Registration Statement on Form N-1A (File No. 33-6540) as filed with the Securities and Exchange Commission on February 20, 1998. ** Incorporated herein by reference to Post-Effective Amendment No. 27 to the Registrant's Registration Statement on Form N-1A (File No. 33-6540) as filed with the Securities and Exchange Commission on December 16, 1998. *** Incorporated herein by reference to Post-Effective Amendment No. 28 to the Registrant's Registration Statement on Form N-1A (File No. 33-6540) as filed with the Securities and Exchange Commission on December 21, 1998 **** Incorporated herein by reference to Post-Effective Amendment No. 29 to the Registrant's Registration Statement on Form N-1A (File No. 33-6540) as filed with the Securities and Exchange Commission on February 16, 1999. ***** Incorporated herein by reference to Post-Effective Amendment No. 31 to the Registrant's Registration Statement on Form N-1A (file No. 33-6540) as filed with the Securities and Exchange Commission on April 16, 1999. ****** Incorporated herein by reference to Post-Effective Amendment No. 32 to the Registrant's Registration Statement on Form N-1A (File No. 33-6540) as filed with the Securities and Exchange Commission on February 28, 2000. ******* Incorporated herein by reference to Post-Effective Amendment No. 35 to the Registrant's Registration Statement on Form N-1A (File No. 33-6540) as filed with the Securities and Exchange Commission on June 16, 2000. Item 24. Persons Controlled by or under Common Control with Registrant. Not applicable. Item 25. Indemnification. Reference is hereby made to (a) Article V of the Registrant's Declaration of Trust, filed as an Exhibit to Post-Effective Amendment No. 24 to its Registration Statement on Form N-1A; (b) Section 6 of the Distribution Agreement between the Registrant and Salomon Smith Barney filed as an Exhibit hereto; and (c) the undertaking of the Registrant regarding indemnification set forth in its Registration Statement on Form N-1A. The Trustees and officers of the Registrant and the personnel of the Registrant's administrator are insured under an errors and omissions liability insurance policy. The Registrant and its officers are also insured under the fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940. Item 26. Business and Other Connections of Investment Adviser. Citibank, N.A. ("Citibank") is a commercial bank offering a wide range of banking and investment services to customers across the United States and around the world. Citibank is a wholly-owned subsidiary of Citicorp, which is, in turn, a wholly-owned subsidiary of Citigroup Inc. Citibank also serves as investment adviser to the following registered investment companies (or series thereof): Asset Allocation Portfolios (Large Cap Value Portfolio, Small Cap Value Portfolio, International Portfolio and Foreign Bond Portfolio), The Premium Portfolios (U.S. Fixed Income Portfolio, High Yield Portfolio, Balanced Portfolio, Large Cap Growth Portfolio, International Equity Portfolio, Government Income Portfolio and Small Cap Growth Portfolio), Tax Free Reserves Portfolio, U.S. Treasury Reserves Portfolio, Cash Reserves Portfolio, CitiFunds(SM) Tax Free Income Trust (CitiFunds(SM) New York Tax Free Income Portfolio, CitiFunds(SM) National Tax Free Income Portfolio and CitiFunds(SM) California Tax Free Income Portfolio), CitiFunds(SM) Multi-State Tax Free Trust (CitiFunds(SM) California Tax Free Reserves, CitiFunds(SM) New York Tax Free Reserves and CitiFunds(SM) Connecticut Tax Free Reserves), CitiFunds(SM) Institutional Trust (CitiFunds(SM) Institutional Cash Reserves) and Variable Annuity Portfolios (CitiSelect(R) VIP Folio 200 Conservative, CitiSelect(R) VIP Folio 300 Balanced, CitiSelect(R) VIP Folio 400 Growth, CitiSelect(R) VIP Folio 500 Growth Plus and CitiFunds(SM) Small Cap Growth VIP Portfolio). Citibank and its affiliates manage assets in excess of $351 billion worldwide. The principal place of business of Citibank is located at 399 Park Avenue, New York, New York 10043. John S. Reed is the Chairman and a Director of Citibank. Victor J. Menezes is the President and a Director of Citibank. William R. Rhodes and H. Onno Ruding are Vice Chairmen and Directors of Citibank. The other Directors of Citibank are Paul J. Collins, Vice Chairman of Citigroup Inc. and Robert I. Lipp, Chairman and Chief Executive Officer of The Travelers Insurance Group Inc. and of Travelers Property Casualty Corp. 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) Salomon Smith Barney, Inc., the Registrant's distributor, is also the distributor for CitiFunds(R) International Growth & Income Portfolio, CitiFunds(R) U.S. Treasury Reserves, CitiFunds(R) Cash Reserves, CitiFunds(R) Premium U.S. Treasury Reserves, CitiFunds(R) Premium Liquid Reserves, CitiFunds(R) Institutional U.S. Treasury Reserves, CitiFunds(R) Institutional Liquid Reserves, CitiFunds(R) Institutional Cash Reserves, CitiFunds(R) Tax Free Reserves, CitiFunds(R) Institutional Tax Free Reserves, CitiFunds(R) California Tax Free Reserves, CitiFunds(R) Connecticut Tax Free Reserves, CitiFunds(R) New York Tax Free Reserves, CitiFunds(R) Intermediate Income Portfolio, CitiFunds(R) New York Tax Free Income Portfolio, CitiFunds(R) National Tax Free Income Portfolio, CitiFunds(R) California Tax Free Income Portfolio, CitiFunds (R) Growth & Income Portfolio, CitiFunds(R) Small Cap Value Portfolio, CitiFunds(R) Balanced Portfolio, CitiSelect(R) Folio 100 Income, CitiSelect(R) Folio 200 Conservative, CitiSelect(R) Folio 300 Balanced, CitiSelect(R) Folio 400 Growth, CitiSelect(R) Folio 500 Growth Plus, Citi(SM) Nasdaq-100 Index Fund, Citi(SM) Small Cap Index Fund, Citi(SM) U.S. 1000 Index Fund, Citi(SM) Global Titans Index Fund, Citi(SM) Financial Services Index Fund, Citi(SM) Health Science Index Fund, Citi(SM) Technology Index Fund, Citi(SM) U.S. Bond Index Fund, Citi(SM) International Index Portfolio, 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(R) Small Cap Growth VIP Portfolio. Salomon Smith Barney, Inc. is also the placement agent for Large Cap Growth Portfolio, Small Cap Growth Portfolio, High Yield Portfolio, U.S. Fixed Income Portfolio, Government Income Portfolio, International Equity Portfolio, Large Cap Value Portfolio, Small Cap Value Portfolio, International Portfolio, Foreign Bond Portfolio, Tax Free Reserves Portfolio, Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio. Salomon Smith Barney, Inc. is also the distributor for the following Smith Barney funds: Smith Barney Diversified Large Cap Growth Fund, Smith Barney Small Cap Growth Opportunities, Smith Barney International Large Cap Fund, Consulting Group Capital Markets Funds, Concert Investment Series, Greenwich Street Series Fund, 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., Smith Barney Concert Allocation Series Inc., Smith Barney Equity Funds, Smith Barney Fundamental Value Fund Inc., Smith Barney Funds, Inc., Smith Barney Income Funds, Smith Barney Institutional Cash Management Fund, Inc., Smith Barney Investment Trust, Smith Barney Managed Governments Fund Inc., Smith Barney Managed Municipals Fund Inc., Smith Barney Massachusetts Municipals Fund, Smith Barney Money Funds, Inc., Smith Barney Muni Funds, Smith Barney Municipal Money Market Fund, Inc., Smith Barney New Jersey Municipals Fund Inc., Smith Barney Oregon Municipals Fund Inc., Smith Barney Principal Return Fund, Smith Barney Sector Series Inc., Smith Barney Small Cap Blend Fund, Inc., Smith Barney Telecommunications Trust, Smith Barney Variable Account Funds, Smith Barney World Funds, Inc., Travelers Series Fund Inc., and various series of unit investment trusts. (b) The information required by this Item 27 with respect to each director, officer and partner of Salomon Smith Barney is incorporated by reference to Schedule A of FORM BD filed by Salomon Smith Barney pursuant to the Securities Exchange Act of 1934 (SEC File No. 812-8510). (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 Salomon Smith Barney, Inc. 388 Greenwich Street (distributor) New York, NY 10013 State Street Bank and Trust Company 1776 Heritage Drive (custodian and fund accounting agent) North Quincy, MA 02171 Citi Fiduciary Trust Company 388 Greenwich Street (transfer agent) New York, NY 10013 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. 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 New York and State of New York on the 27th day of September, 2000. CITIFUNDS FIXED INCOME TRUST By: Heath B. McLendon ------------------------------ Heath B. McLendon President Pursuant to the requirements of the Securities Act of 1933, this Post-Effective Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated below on September 27, 2000. Signature Title --------- ----- Heath B. McLendon President, Principal Executive - ---------------------------- Officer and Trustee Heath B. McLendon Lewis E. Daidone Principal Financial Officer and - ---------------------------- Principal Accounting Officer Lewis E. Daidone Riley C. Gilley* Trustee - ---------------------------- Riley C. Gilley Diana R. Harrington* Trustee - ---------------------------- Diana R. Harrington Susan B. Kerley* Trustee - ---------------------------- Susan B. Kerley 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. SIGNATURES The Premium Portfolios has duly caused this Post-Effective Amendment to the Registration Statement on Form N-1A of CitiFunds Fixed Income Trust to be signed on its behalf by the undersigned, thereunto duly authorized, in New York, New York, on the 27th day of September, 2000. THE PREMIUM PORTFOLIOS on behalf of Government Income Portfolio By: Heath B. McLendon ------------------------------ Heath B. McLendon, President of The Premium Portfolios This Post-Effective Amendment to the Registration Statement on Form N-1A of CitiFunds Fixed Income Trust has been signed by the following persons in the capacities indicated on September 27, 2000. Signature Title --------- ----- Heath B. McLendon President, Principal Executive - ---------------------------- Officer and Trustee Heath B. McLendon Lewis E. Daidone Principal Financial Officer and - ---------------------------- Principal Accounting Officer Lewis E. Daidone 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: Philip W. Coolidge ------------------------ Philip W. Coolidge Executed by Philip W. Coolidge on behalf of those indicated as attorney in fact. EXHIBIT INDEX Exhibit No.: Description: ------- ------------ a(2) Amendments to Registrant's Declaration of Trust e Distribution Agreement between the Registrant and Salomon Smith Barney, Inc. ("Salomon Smith Barney"), as distributor with respect to shares of Citi Short-Term U.S. Government Income Fund h(2) Form of Administrative Services Agreement between the Registrant and Citibank, N.A., as administrator with respect to Citi Short-Term U.S. Government Income Fund h(5) Transfer Agency and Service Agreement between the Registrant and Citi Fiduciary Trust Company, as transfer agent j Independent auditors' consent m Amended and Restated Distribution Plan of the Registrant for Citi Shares of Citi Short-Term U.S. Government Income Fund o Multiple Class Plan of the Registrant p(2) Code of Ethics for Salomon Smith Barney EX-99.A(2) 2 0002.txt AMENDMENTS TO DECLARATION OF TRUST Exhibit a(2) CITIFUNDS FIXED INCOME TRUST AMENDED AND RESTATED ESTABLISHMENT AND DESIGNATION OF SERIES OF SHARES OF BENEFICIAL INTEREST (WITHOUT PAR VALUE) Pursuant to Section 6.9 of the Declaration of Trust, dated June 23, 1986, as amended (the "Declaration of Trust"), of CitiFunds Fixed Income Trust (formerly, Landmark Fixed Income Funds) (the "Trust"), the undersigned, being a majority of the Trustees of the Trust, do hereby amend and restate the Trust's existing Establishment and Designation of Series of Shares of Beneficial Interest (without par value) in order to change the name of one series which was previously established and designated, and to eliminate one series which was previously established and designated (there being no shares of such series outstanding). No other changes to the special and relative rights of the existing series are intended by this amendment and restatement. 1. The series shall be as follows: The series previously designated as "CitiFunds Short-Term U.S. Government Income Portfolio" shall be redesignated "Citi Short-Term U.S. Government Income Fund." The series previously designated as "CitiFunds Diversified Income Portfolio" is hereby eliminated. The remaining series is "CitiFunds Intermediate Income Portfolio." 2. Each series shall be authorized to invest in cash, securities, instruments and other property as from time to time described in the Trust's then currently effective registration statement under the Securities Act of 1933 to the extent pertaining to the offering of Shares of each series. Each Share of each series shall be redeemable, shall be entitled to one vote or fraction thereof in respect of a fractional share on matters on which shares of that series shall be entitled to vote, shall represent a pro rata beneficial interest in the assets allocated or belonging to such series, and shall be entitled to receive its pro rata share of the net assets of such series upon liquidation of the series, all as provided in Section 6.9 of the Declaration of Trust. 3. Shareholders of each series shall vote separately as a class on any matter to the extent required by, and any matter shall be deemed to have been effectively acted upon with respect to each series as provided in, Rule 18f-2, as from time to time in effect, under the Investment Company Act of 1940, as amended, or any successor rule, and by the Declaration of Trust. 4. The assets and liabilities of the Trust shall be allocated to each series as set forth in Section 6.9 of the Declaration of Trust. 5. Subject to the provisions of Section 6.9 and Article IX of the Declaration of Trust, the Trustees (including any successor Trustees) shall have the right at any time and from time to time to reallocate assets and expenses or to change the designation of any series now or hereafter created or otherwise to change the special and relative rights of any such series. 6. This Amended and Restated Establishment and Designation of Series supercedes any and all Establishments and Designations of Series heretofore adopted by the Board of Trustees of the Trust with respect to its series, and shall become effective as of September 5, 2000. IN WITNESS WHEREOF, the undersigned have executed this Establishment and Designation of Series (which may be in one or more separate counterparts) as of this 5th day of September, 2000. Philip W. Coolidge Riley C. Gilley - ------------------------------- ------------------------------- PHILIP W. COOLIDGE RILEY C. GILLEY As Trustee and Not Individually As Trustee and Not Individually Susan B. Kerley - ------------------------------- ------------------------------- DIANA R. HARRINGTON SUSAN B. KERLEY As Trustee and Not Individually As Trustee and Not Individually Heath B. McLendon - ------------------------------- ------------------------------- HEATH B. MCLENDON C. OSCAR MORONG, JR. As Trustee and Not Individually As Trustee and Not Individually E. Kirby Warren - ------------------------------- E. KIRBY WARREN As Trustee and Not Individually EX-99.E 3 0003.txt DISTRIBUTION AGREEMENT Exhibit e DISTRIBUTION AGREEMENT AGREEMENT, dated as of September 5, 2000, by and between each of the trusts listed on the signature pages hereto (each a "Trust," and collectively, the "Trusts"), each a business trust organized under the laws of the Commonwealth of Massachusetts, and Salomon Smith Barney Inc., a New York corporation ("Distributor"). WHEREAS, each Trust engages in business as an open-end management investment company and is registered as such under the Investment Company Act of 1940, as amended (the "1940 Act"); WHEREAS, each Trust's shares of beneficial interest ("Shares") may be divided into separate series and/or classes; WHEREAS, each Trust has registered its Shares under the Securities Act of 1933, as amended (the "1933 Act") and wishes to retain the services of a distributor for its Shares or for the Shares of each of its series listed on Exhibit A hereto (the "Funds"), as the case may be and as indicated in Exhibit A; WHEREAS, Distributor has agreed to act as distributor of the Shares indicated on Exhibit A from and after the date specified therein; WHEREAS, each Trust has adopted a Distribution and/or Service Plan pursuant to Rule 12b-1 under the 1940 Act (each, a "Service Plan") with respect to those Funds and/or classes of Shares designated as having a Service Plan on Exhibit A hereto, and may enter into related agreements providing for the distribution and servicing of Shares covered thereby; NOW, THEREFORE, it is hereby agreed between the parties hereto as follows: 1. Appointment of Distributor. (a) Each Trust hereby appoints Distributor its agent for the distribution of Shares of the Funds or of the Trust itself, as indicated on Exhibit A, in jurisdictions wherein such Shares may be legally offered for sale; provided, however, that the Trust in its absolute discretion may issue Shares of the Funds or of the Trust, as the case may be, in connection with (i) the payment or reinvestment of dividends or distributions; (ii) any merger or consolidation of the Trust or of any Fund with any other investment company or trust or any personal holding company, or the acquisition of the assets of any such entity or another Fund of the Trust; or (iii) any offer of exchange permitted by Section 11 of the 1940 Act. (b) Distributor hereby accepts such appointment as agent for the distribution of Shares of the Funds or of the Trust itself, as indicated on Exhibit A, and agrees that it will sell the Shares as agent for each Trust at prices determined as hereinafter provided and on the terms hereinafter set forth, all according to the then-current prospectus and statement of additional information of the applicable Trust or Fund (the "Prospectus" and the "Statement of Additional Information"), applicable laws, rules and regulations and the Declaration of Trust of the applicable Trust. Distributor agrees to use its best efforts to solicit orders for the sale of Shares, and agrees to transmit promptly to the applicable Trust (or to the transfer agent, if so instructed in writing by the Trust) any orders received by it for purchase or redemption of Shares. (c) Distributor may sell Shares to or through qualified securities dealers, financial institutions or others. Distributor will require each dealer or other such party to conform to the provisions of this Agreement, the applicable Prospectus and Statement of Additional Information and applicable law; and neither Distributor nor any such dealers or others shall withhold the placing of purchase orders for Shares so as to make a profit thereby. (d) Distributor shall order Shares from the applicable Trust only to the extent that it shall have received unconditional purchase orders therefor. Distributor will not make, or authorize any dealers or others to make: (i) any short sales of Shares; or (ii) any sales of Shares to any Trustee or officer of the applicable Trust, any officer or director of Distributor or any corporation or association furnishing investment advisory, managerial or supervisory services to the applicable Trust, or to any such corporation or association, unless such sales are made in accordance with the applicable Prospectus and the Statement of Additional Information. (e) Distributor is not authorized by any Trust to give any information or make any representations regarding Shares, except such information or representations as are contained in the applicable Prospectus and Statement of Additional Information or advertisements and sales literature prepared by or on behalf of the Trust for Distributor's use. (f) Each Trust agrees to execute any and all documents, to furnish any and all information and otherwise to take all actions which may be reasonably necessary in the discretion of the Trust's officers in connection with the qualification of Shares for sale in such states as Distributor and the Trust agree. (g) No Shares shall be offered by either Distributor or a Trust under this Agreement, and no orders for the purchase or sale of such Shares hereunder shall be accepted by the Trust, if and so long as the effectiveness of the Trust's then current registration statement as to such Shares or any necessary amendments thereto shall be suspended under any of the provisions of the 1933 Act, or if and so long as a current prospectus for such Shares as required by Section 10 of the 1933 Act is not on file with the Securities and Exchange Commission; provided, however, that nothing contained in this paragraph (g) shall in any way restrict the Trust's obligation to repurchase Shares from any shareholder in accordance with the provisions of the applicable Prospectus or charter documents. (h) Notwithstanding any provision hereof, a Trust may terminate, suspend or withdraw the offering of any Shares whenever, in its sole discretion, it deems such action to be desirable. (i) The parties acknowledge that each Trust reserves the right to appoint one or more other distributors for its Shares pursuant to separate distribution agreements. 2. Offering Price of Shares. All Shares sold under this Agreement shall be sold at the public offering price per Share in effect at the time of the sale, as described in the applicable Prospectus. The excess, if any, of the public offering price over the net asset value of the Shares sold by Distributor as agent, and any contingent deferred sales charge applicable to Shares of any class as set forth in the applicable Prospectus, shall be retained by Distributor as a commission for its services hereunder. Out of such commission Distributor may allow commissions, concessions or agency fees to dealers or other financial institutions, including banks, and may allow them to others in its discretion in such amounts as Distributor shall determine from time to time, consistent with any disclosure in the then-current applicable Prospectus and Statement of Additional Information. Except as may be otherwise determined by Distributor from time to time, such commissions, concessions or agency fees shall be uniform to all dealers and other financial institutions. At no time shall a Trust receive less than the full net asset value of the Shares, determined in the manner set forth in the applicable Prospectus and the Statement of Additional Information. Distributor also may receive such compensation under a Trust's Service Plan, if applicable, with respect to a Fund or a particular class of Shares as may be authorized by the Trustees of the Trust from time to time. 3. Furnishing of Information. (a) Each Trust shall furnish to Distributor copies of any information, financial statements and other documents that Distributor may reasonably request for use in connection with the sale of Shares under this Agreement. Each Trust shall also make available a sufficient number of copies of any applicable Prospectus and Statement of Additional Information for use by the Distributor. (b) Each Trust agrees to advise Distributor immediately in writing: (i) of any request by the Securities and Exchange Commission for amendments to any registration statement or to a Prospectus or for additional information; (ii) in the event of the issuance by the Securities and Exchange Commission of any stop order suspending the effectiveness of any such registration statement or Prospectus or the initiation of any proceeding for that purpose; (iii) of the happening of any event which makes untrue any statement of a material fact made in any such registration statement or Prospectus or which requires the making of a change in such registration statement or Prospectus in order to make the statements therein not misleading; and (iv) of all actions of the Securities and Exchange Commission with respect to any amendments to any such registration statement or Prospectus which may from time to time be filed with the Securities and Exchange Commission. 4. Expenses. (a) Each Trust will pay or cause to be paid the following expenses: organization costs of that Trust and its Funds, as applicable; compensation of Trustees who are not "affiliated persons" of Distributor; governmental fees; interest charges; loan commitment fees; taxes; membership dues in industry associations allocable to the Trust; fees and expenses of independent auditors, legal counsel and any transfer agent, distributor, shareholder servicing agent, registrar or dividend disbursing agent of the Trust; expenses of issuing and redeeming shares of beneficial interest and servicing shareholder accounts; expenses of preparing, typesetting, printing and mailing prospectuses, statements of additional information, shareholder reports, notices, proxy statements and reports to governmental officers and commissions and to existing shareholders; expenses connected with the execution, recording and settlement of security transactions; insurance premiums; fees and expenses of the custodian for all services, including safekeeping of funds and securities and maintaining required books and accounts; expenses of calculating net asset value (including but not limited to the fees of independent pricing services); expenses of meetings of shareholders; expenses relating to the issuance, registration and qualification of shares; and such non-recurring or extraordinary expenses as may arise, including those relating to actions, suits or proceedings to which the Trust may be a party and the legal obligation which the Trust may have to indemnify its Trustees and officers with respect thereto. (b) Except as otherwise provided in this Agreement and except to the extent such expenses are borne by a Trust pursuant to the Service Plan of a Fund or a particular class of Shares, Distributor will pay or cause to be paid all expenses connected with its own qualification as a dealer under state and federal laws and all other expenses incurred by Distributor in connection with the sale of Shares as contemplated by this Agreement. (c) Distributor shall prepare and deliver reports to the Trustees of each Trust on a regular basis, at least quarterly, showing the expenditures pursuant to each Service Plan of each Fund or a particular class the Fund or Trust, as the case may be, and the purposes therefor, as well as any supplemental reports that the Trustees of the Trust, from time to time, may reasonably request. 5. Repurchase of Shares. Distributor as agent and for the account of a Trust may repurchase Shares of the applicable Trust or Fund offered for resale to it and redeem such Shares at their net asset value. 6. Indemnification by the Trust. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of Distributor, each Trust agrees to indemnify Distributor, its officers and directors, and any person which controls Distributor within the meaning of the 1933 Act against any and all claims, demands, liabilities and expenses that any such indemnified party may incur under the 1933 Act, or common law or otherwise, arising out of or based upon any alleged untrue statement of a material fact contained in the registration statement for that Trust or any of its Funds, any applicable Prospectus or Statement of Additional Information, or any advertisements or sales literature prepared by or on behalf of the Trust for Distributor's use, or any omission to state a material fact therein, the omission of which makes any statement contained therein misleading, unless such statement or omission was made in reliance upon and in conformity with information furnished to the Trust in connection therewith by or on behalf of Distributor. Nothing herein contained shall require a Trust to take any action contrary to any provision of its Declaration of Trust or any applicable statute or regulation. 7. Indemnification by Distributor. Distributor agrees to indemnify each Trust, its officers and Trustees and any person which controls the Trust within the meaning of the 1933 Act against any and all claims, demands, liabilities and expenses that any such indemnified party may incur under the 1933 Act, or common law or otherwise, arising out of or based upon (i) any alleged untrue statement of a material fact contained in the registration statement for any Trust or any Fund, any Prospectus or Statement of Additional Information, or any advertisements or sales literature prepared by or on behalf of the Trust for Distributor's use, or any omission to state a material fact therein, the omission of which makes any statement contained therein misleading, if such statement or omission was made in reliance upon and in conformity with information furnished to the Trust in connection therewith by or on behalf of Distributor; and (ii) any act or deed of Distributor or its sales representatives that has not been authorized by the Trust in any Prospectus or Statement of Additional Information or by this Agreement. 8. Term and Termination. (a) This Agreement shall become effective with respect to a Trust or Fund or any class of Shares of a Trust or Fund on the date indicated on Exhibit A attached hereto. Exhibit A may be amended from time to time to add additional series or classes of a Trust as agreed by that Trust and Distributor. This Agreement shall continue with respect to a Trust or Fund or applicable class, as the case may be, for successive annual periods after its effectiveness so long as each such continuance is specifically approved by votes of a majority of both the Trustees of the applicable Trust and the Trustees of the Trust who are not parties to this Agreement or interested persons (as defined in the 1940 Act) of any such party and who have no direct or indirect financial interest in this Agreement or in the operation of the Service Plan, if applicable, or in any agreement related thereto ("Independent Trustees"), cast in person at a meeting called for the purpose of voting on such approval. (b) This Agreement is terminable as to a Trust or any Fund, or any class of a Trust or Fund, without penalty, on 60 days' notice by the Trustees of the applicable Trust, by vote of the holders of a majority of the Shares of the Trust, Fund or class, as applicable, or on 90 days' notice by Distributor. (c) This Agreement shall automatically terminate in the event of its assignment (as defined in the 1940 Act). 9. Limitation of Liability. Each party acknowledges and agrees that all obligations of each Trust under this Agreement are binding only with respect to that Trust or, if the Shares of the Trust have been divided into series, the applicable Fund; that any liability of the Trust under this Agreement, or in connection with the transactions contemplated herein, shall be discharged only out of the assets of that Trust or Fund, as the case may be; and that no other series of the Trust shall be liable with respect to this Agreement or in connection with the transactions contemplated herein. The obligations of each Trust hereunder shall not be binding upon any of the Trustees, officers or shareholders of the Trust personally, but shall bind only the assets and property of the particular Trust or, if the Shares of the Trust have been divided into series, the particular Fund or Funds in question, and not any other Fund or series of the Trust or any other Trust that is party to this Agreement. Any reference to a Trust hereunder means and refers to the Trustees from time to time serving under the Declaration of Trust of the Trust, a copy of which is on file with the Secretary of the Commonwealth of Massachusetts. The execution and delivery of this Agreement has been authorized by the Trustees, and this Agreement has been signed on behalf of each Trust by an authorized officer of the Trust, acting as such and not individually, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the assets and property of the Trust as provided in the Declaration of Trust. 10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of The Commonwealth of Massachusetts and the provisions of the 1940 Act. IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above. CITIFUNDS TRUST I CITIFUNDS TRUST II CITIFUNDS TRUST III CITIFUNDS TAX FREE RESERVES CITIFUNDS FIXED INCOME TRUST CITIFUNDS MULTI-STATE TAX FREE TRUST CITIFUNDS TAX FREE INCOME TRUST CITIFUNDS INTERNATIONAL TRUST CITIFUNDS PREMIUM TRUST CITIFUNDS INSTITUTIONAL TRUST each on behalf of its series listed on Exhibit A attached hereto By: Robert I. Frenkel ------------------------ SALOMON SMITH BARNEY INC. By: Laurie A. Hesslein ------------------------
EXHIBIT A TRUST AND FUND CLASSES OF SHARES EFFECTIVE DATE - -------------- ----------------- -------------- CITIFUNDS TRUST I - -------------------------------------------------------------------------------------------------- Citi Nasdaq-100 Index Fund Citi Nasdaq-100 Index Shares September 5, 2000 Smith Barney Nasdaq-100 Index Shares* September 11, 2000 - -------------------------------------------------------------------------------------------------- Citi Small Cap Index Fund Citi Small Cap Index Shares September 5, 2000 Smith Barney Small Cap Index Shares* September 11, 2000 - -------------------------------------------------------------------------------------------------- Citi U.S. 1000 Index Fund Citi U.S. 1000 Index Shares September 5, 2000 Smith Barney U.S. 1000 Index Shares* September 11, 2000 - -------------------------------------------------------------------------------------------------- Citi Global Titans Index Fund Citi Global Titans Index Shares September 5, 2000 Smith Barney Global Titans Index September 11, 2000 Shares* - -------------------------------------------------------------------------------------------------- Citi Financial Services Index Fund Citi Financial Services Index Shares September 5, 2000 Smith Barney Financial Services September 11, 2000 Index Shares* - -------------------------------------------------------------------------------------------------- Citi Health Sciences Index Fund Citi Health Sciences Index Shares September 5, 2000 Smith Barney Health Sciences Index September 11, 2000 Shares* - -------------------------------------------------------------------------------------------------- Citi Technology Index Fund Citi Technology Index Shares September 5, 2000 Smith Barney Technology Index Shares* September 11, 2000 - -------------------------------------------------------------------------------------------------- Citi U.S. Bond Index Fund Citi U.S. Bond Index Shares September 5, 2000 Smith Barney U.S. Bond Index Shares* September 11, 2000 - -------------------------------------------------------------------------------------------------- CITIFUNDS TRUST II - -------------------------------------------------------------------------------------------------- Smith Barney Diversified Large Cap Class A* September 11, 2000 Growth Fund Class B* September 11, 2000 Class L* September 11, 2000 Class Y September 11, 2000 - -------------------------------------------------------------------------------------------------- Smith Barney Small Cap Growth Class A* September 11, 2000 Opportunities Fund Class B* September 11, 2000 Class L* September 11, 2000 Class Y September 11, 2000 - -------------------------------------------------------------------------------------------------- CITIFUNDS TRUST III - -------------------------------------------------------------------------------------------------- CitiFunds Cash Reserves Class A shares* _________ __, 2000 Class N shares* _________ __, 2000 Cititrade Cash Reserves shares* _________ __, 2000 - -------------------------------------------------------------------------------------------------- CitiFunds U.S. Treasury Reserves Class N shares* _________ __, 2000 Cititrade U.S. Treasury Reserves _________ __, 2000 shares* - -------------------------------------------------------------------------------------------------- CITIFUNDS TAX FREE RESERVES Class N shares* _________ __, 2000 Cititrade Tax Free Reserves shares* _________ __, 2000 - -------------------------------------------------------------------------------------------------- CITIFUNDS FIXED INCOME TRUST - -------------------------------------------------------------------------------------------------- Citi Short-Term U.S. Government Income N/A September 5, 2000 Fund* - -------------------------------------------------------------------------------------------------- CITIFUNDS MULTI-STATE TAX FREE INCOME TRUST - -------------------------------------------------------------------------------------------------- CitiFunds California Tax Free Reserves Class N shares* _________ __, 2000 Cititrade California Tax Free _________ __, 2000 Reserves shares* - --------------------------------------------------------------------------------------------------- CitiFunds Connecticut Tax Free Reserves Class N shares* _________ __, 2000 Cititrade Connecticut Tax Free _________ __, 2000 Reserves shares* - --------------------------------------------------------------------------------------------------- CitiFunds New York Tax Free Reserves Class N shares* _________ __, 2000 Cititrade New York Tax Free Reserves _________ __, 2000 shares* - --------------------------------------------------------------------------------------------------- CITIFUNDS TAX FREE INCOME TRUST - --------------------------------------------------------------------------------------------------- Citi National Tax Free Income Fund* N/A September 5, 2000 - --------------------------------------------------------------------------------------------------- Citi California Tax Free Income Fund* N/A September 5, 2000 - --------------------------------------------------------------------------------------------------- Citi New York Tax Free Income Fund* N/A September 5, 2000 - --------------------------------------------------------------------------------------------------- CITIFUNDS INTERNATIONAL TRUST - --------------------------------------------------------------------------------------------------- Smith Barney International Growth Fund Class A* September 11, 2000 Class B* September 11, 2000 Class L* September 11, 2000 Class Y September 11, 2000 - --------------------------------------------------------------------------------------------------- CITIFUNDS PREMIUM TRUST - --------------------------------------------------------------------------------------------------- CitiFunds Premium Liquid Reserves* N/A __________ __, 2000 - --------------------------------------------------------------------------------------------------- CitiFunds Premium U.S. Treasury N/A __________ __, 2000 Reserves* - --------------------------------------------------------------------------------------------------- CITIFUNDS INSTITUTIONAL TRUST - --------------------------------------------------------------------------------------------------- CitiFunds Institutional Liquid Reserves Class A* __________ __, 2000 Class C* __________ __, 2000 Class D* __________ __, 2000 SVB Liquid Reserves shares* __________ __, 2000 - --------------------------------------------------------------------------------------------------- CitiFunds Institutional U.S. Treasury N/A* __________ __, 2000 Reserves - --------------------------------------------------------------------------------------------------- CitiFunds Institutional Tax Free N/A* __________ __, 2000 Reserves - --------------------------------------------------------------------------------------------------- CitiFunds Institutional Cash Reserves Class I* __________ __, 2000 Class L* __________ __, 2000 Class O* __________ __, 2000 Class S* __________ __, 2000 - --------------------------------------------------------------------------------------------------- *Denotes Distribution and/or Service Plan under Rule 12b-1 under the Investment Company Act of 1940, as amended.
EX-99.H(2) 4 0004.txt ADMINISTRATIVE SERVICES AGREEMENT Exhibit h(2) ADMINISTRATIVE SERVICES AGREEMENT ADMINISTRATIVE SERVICES AGREEMENT, dated as of September 5, 2000, by and between each of the trusts listed on the signature page hereto (each a "Trust," and collectively, the "Trusts"), each a business trust organized under the laws of the Commonwealth of Massachusetts or a New York trust, and Citibank, N.A., a national banking association ("Citibank" or the "Administrator"). W I T N E S S E T H: WHEREAS, each Trust engages in business as an open-end management investment company and is registered as such under the Investment Company Act of 1940, as amended (the "1940 Act"); WHEREAS, each Trust's shares of beneficial interest ("Shares") or beneficial interests ("Interests") may be divided into separate series and/or classes; WHEREAS, each Trust wishes to retain the services of an administrator for its Shares or Interests or for the Shares of or Interests in each of its series listed on Exhibit A hereto (the "Funds"), as the case may be and as indicated in Exhibit A; WHEREAS, the Board of Trustees of each Trust has adopted an Administrative Services Plan (as amended and in effect from time to time, each a "Plan," and collectively, the "Plans"), which are incorporated herein by reference and pursuant to which each Trust desires to enter into this Administrative Services Agreement; and WHEREAS, each Trust wishes to engage Citibank to provide certain administrative and management services for the Trusts and the Funds, and Citibank is willing to provide such administrative and management services to the Trusts and the Funds, on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants and agreements of the parties hereto as herein set forth, the parties covenant and agree as follows: 1. Duties of the Administrator. Subject to the direction and control of the Board of Trustees of each Trust, the Administrator shall perform such administrative and management services as may from time to time be reasonably requested by a Trust, which shall include without limitation: (a) providing office space, equipment and clerical personnel necessary for maintaining the organization of the Trust and for performing the administrative and management functions herein set forth; (b) arranging, if desired by the Trust, for directors, officers and employees of the Administrator to serve as Trustees, officers or agents of the Trust if duly elected or appointed to such positions and subject to their individual consent and to any limitations imposed by law; (c) supervising the overall administration of the Trust, including negotiation of contracts and fees with and the monitoring of performance and billings of the Trust's transfer agent, shareholder servicing agents, service agents, custodian and other independent contractors or agents; (d) preparing and, if applicable, filing all documents required for compliance by the Trust with applicable laws and regulations, including registration statements, prospectuses and statements of additional information, semi-annual and annual reports to shareholders or investors, proxy statements and tax returns; (e) preparation of agendas and supporting documents for and minutes of meetings of Trustees, committees of Trustees and shareholders or investors; and (f) arranging for maintenance of books and records of the Trust. Notwithstanding the foregoing, and unless otherwise agreed to in another agreement between a Trust and the Administrator, the Administrator shall not be deemed to have assumed any duties with respect to, and shall not be responsible for, the management of any Trust's assets or the rendering of investment advice and supervision with respect thereto or the distribution of Shares of or Interests in any Fund, nor shall the Administrator be deemed to have assumed or have any responsibility with respect to functions specifically assumed by any transfer agent, custodian, service agent or shareholder servicing agent of the Trust. 2. Allocation of Charges and Expenses. Citibank shall pay the entire salaries and wages of all of each Trust's Trustees, officers and agents who devote part or all of their time to the affairs of Citibank or its affiliates, and the wages and salaries of such persons shall not be deemed to be expenses incurred by the Trust for purposes of this Section 2. Except as provided in the foregoing sentence, each Trust will pay all of its own expenses including, without limitation, compensation of Trustees not affiliated with the Administrator; governmental fees; interest charges; taxes; membership dues in the Investment Company Institute allocable to the Trust; fees and expenses of each Fund's investment adviser or advisers; fees and expenses of independent auditors, of legal counsel and of any transfer agent, distributor, shareholder servicing agent, service agent, registrar or dividend disbursing agent of the Trust; expenses of distributing and redeeming Shares and Interests and servicing shareholder or investor accounts; expenses of preparing, printing and mailing prospectuses and statements of additional information, reports, notices, proxy statements and reports to shareholders or investors and governmental officers and commissions; expenses connected with the execution, recording and settlement of portfolio security transactions; insurance premiums; fees and expenses of the Trust's custodian for all services to the Trust, including safekeeping of funds and securities and maintaining required books and accounts; expenses of calculating the net asset value of Shares of or Interests in each Fund; expenses of shareholder or investor meetings; and expenses relating to the issuance, registration and qualification of Shares of or Interests in each Fund. 3. Compensation of Administrator. Subject to paragraph 5 of the Plan, for the services to be rendered and the facilities to be provided by the Administrator hereunder, each Trust shall pay to the Administrator an administrative fee from the assets of each Fund as may be agreed to from time to time by the Trust and the Administrator. If Citibank serves as Administrator for less than the whole of any period specified in this Section 3, the compensation to Citibank, as Administrator, shall be prorated. For purposes of computing the fees payable to the Administrator hereunder, the value of the net assets of any Fund shall be computed in the manner specified in the Trust's then-current prospectus and statement of additional information. 4. Limitation of Liability of the Administrator. The Administrator 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 any Trust or the performance of its duties hereunder, except for willful misfeasance, bad faith or gross negligence in the performance of its duties, or by reason of the reckless disregard of its obligations and duties hereunder. As used in this Section 4, the term "Administrator" shall include Citibank and/or any of its affiliates and the directors, officers and employees of Citibank and/or any of its affiliates. 5. Activities of the Administrator. The services of the Administrator to each Trust are not to be deemed to be exclusive, Citibank being free to render administrative and/or other services to other parties. It is understood that Trustees, officers, and shareholders of or investors in the Trusts are or may become interested in the Administrator and/or any of its affiliates, as directors, officers, employees, or otherwise, and that directors, officers and employees of the Administrator and/or any of its affiliates are or may become similarly interested in the Trusts and that the Administrator and/or any of its affiliates may be or become interested in the Trusts as a shareholder or investor or otherwise. 6. Subcontracting by Citibank. Citibank may subcontract for the performance of Citibank's obligations hereunder with any one or more persons; provided, however, that Citibank shall not enter into any such subcontract unless the Trustees of the Trust shall have found the subcontracting party to be qualified to perform the obligations sought to be subcontracted; and provided, further, that, unless a Trust otherwise expressly agrees in writing, Citibank shall be as fully responsible to that Trust for the acts and omissions of any subcontractor as it would be for its own acts or omissions. 7. Limitation of Liability. Each party acknowledges and agrees that all obligations of each Trust under this Agreement are binding only with respect to that Trust or, if the Shares of or Interests in the Trust have been divided into series, the applicable Fund; that any liability of the Trust under this Agreement, or in connection with the transactions contemplated herein, shall be discharged only out of the assets of that Trust or Fund, as the case may be; and that no other series of the Trust shall be liable with respect to this Agreement or in connection with the transactions contemplated herein. The obligations of each Trust hereunder shall not be binding upon any of the Trustees, officers or shareholders of or investors in the Trust personally, but shall bind only the assets and property of the particular Trust or, if the Shares of or Interests in the Trust have been divided into series, the particular Fund or Funds in question, and not any other Fund or series of the Trust or any other Trust that is party to this Agreement. Any reference to a Trust hereunder means and refers to the Trustees from time to time serving under the Declaration of Trust of the Trust. The execution and delivery of this Agreement has been authorized by the Trustees, and this Agreement has been signed on behalf of each Trust by an authorized officer of the Trust, acting as such and not individually, and neither such authorization by such Trustees nor such execution and delivery by such officer shall be deemed to have been made by any of them individually or to impose any liability on any of them personally, but shall bind only the assets and property of the Trust as provided in the Declaration of Trust. 8. Duration and Termination of this Agreement. This Agreement shall become effective with respect to each Trust on the date indicated on Exhibit A attached hereto and shall govern the relations between the parties hereto thereafter, and shall remain in force with respect to any Trust indefinitely, provided that its continuance is "specifically approved at least annually" (a) by the vote of a majority of the Board of Trustees of that Trust who are not "interested persons" of the Trust or of the Administrator at a meeting specifically called for the purpose of voting on such approval, and (b) by the Board of Trustees of that Trust or by the "vote of a majority of the outstanding voting securities" of each Fund which is a series of that Trust as to which this Agreement is to continue, and provided, however, that the term "assignment" shall include (without limitation) any sale, transfer or conversion of a controlling interest of any class of voting stock of Citibank or of any entity which holds a controlling interest of any class of voting stock of Citibank or another such entity. Exhibit A may be amended from time to time to add additional series of a Trust as agreed by that Trust and Administrator. This Agreement may be terminated as to any Fund at any time, without the payment of any penalty, by the Board of Trustees of the Trust or by the "vote of a majority of the outstanding voting securities" of such Fund, or by the Administrator, in each case on not more than 60 days' nor less than 30 days' written notice to the other party. This Agreement shall automatically terminate in the event of its "assignment." The terms "specifically approved at least annually", "vote of a majority of the outstanding voting securities", "assignment", and "interested persons", when used in this Agreement, shall have the respective meanings specified in, and shall be construed in a manner consistent with, the 1940 Act, subject, however, to such exemptions as may be granted by the Securities and Exchange Commission under said Act. IN WITNESS THEREOF, the parties hereto have caused this Agreement to be executed as of the date first written above. CITIFUNDS TRUST III CITIFUNDS TAX FREE RESERVES CITIFUNDS FIXED INCOME TRUST CITIFUNDS MULTI-STATE TAX FREE TRUST CITIFUNDS INTERNATIONAL TRUST CITIFUNDS PREMIUM TRUST CITIFUNDS INSTITUTIONAL TRUSt THE PREMIUM PORTFOLIOS CASH RESERVES PORTFOLIO TAX FREE RESERVES PORTFOLIO U.S. TREASURY RESERVES PORTFOLIO each on behalf of its series listed on Exhibit A attached hereto By: ------------------------- CITIBANK, N.A. By: ------------------------- EXHIBIT A TRUST AND FUND EFFECTIVE DATE - ------------------------------------------------------------------------------- CITIFUNDS TRUST III - ------------------------------------------------------------------------------- CitiFunds Cash Reserves _________ __, 2000 - ------------------------------------------------------------------------------- CitiFunds U.S. Treasury Reserves _________ __, 2000 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CITIFUNDS TAX FREE RESERVES _________ __, 2000 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CITIFUNDS FIXED INCOME TRUST - ------------------------------------------------------------------------------- Citi ShortTerm U.S. Government Income Fund September 5, 2000 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CITIFUNDS MULTISTATE TAX FREE TRUST - ------------------------------------------------------------------------------- CitiFunds California Tax Free Reserves __________ __, 2000 - ------------------------------------------------------------------------------- CitiFunds Connecticut Tax Free Reserves __________ __, 2000 - ------------------------------------------------------------------------------- CitiFunds New York Tax Free Reserves __________ __, 2000 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CITIFUNDS INTERNATIONAL TRUST - ------------------------------------------------------------------------------- Smith Barney International Growth Fund September 11, 2000 - ------------------------------------------------------------------------------- CITIFUNDS PREMIUM TRUST - ------------------------------------------------------------------------------- CitiFunds Premium Liquid Reserves __________ __, 2000 - ------------------------------------------------------------------------------- CitiFunds Premium U.S. Treasury Reserves __________ __, 2000 - ------------------------------------------------------------------------------- CITIFUNDS INSTITUTIONAL TRUST - ------------------------------------------------------------------------------- CitiFunds Institutional Liquid Reserves __________ __, 2000 - ------------------------------------------------------------------------------- CitiFunds Institutional U.S. Treasury Reserves __________ __, 2000 - ------------------------------------------------------------------------------- CitiFunds Institutional Tax Free Reserves __________ __, 2000 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- THE PREMIUM PORTFOLIOS - ------------------------------------------------------------------------------- Government Income Portfolio September 5, 2000 - ------------------------------------------------------------------------------- International Equity Portfolio September 11, 2000 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- CASH RESERVES PORTFOLIO __________ __, 2000 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- TAX FREE RESERVES PORTFOLIO __________ __, 2000 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- U.S. TREASURY RESERVES PORTFOLIO __________ __, 2000 - ------------------------------------------------------------------------------- EX-99.H(5) 5 0005.txt TRANSFER AGENCY AND SERVICES AGREEMENT Exhibit h(5) TRANSFER AGENCY AND SERVICES AGREEMENT AGREEMENT, dated as of October 1, 1999 by and between each of the investment companies listed on Schedule A hereto, as amended from time to time (each a "Fund" and collectively the "Funds") and each having its principal place of business at 388 Greenwich Street, New York, New York 10413 and SMITH BARNEY PRIVATE TRUST COMPANY ("Private Trust"), a New York corporation with principal offices at 388 Greenwich Street, New York, New York 10013. WITNESSETH WHEREAS, each Fund desires to appoint Private Trust as its transfer agent, dividend disbursing agent and shareholder servicing agent and Private Trust desires to accept such appointment; NOW, THEREFORE, in consideration of the mutual covenants and promises hereinafter set forth, each Fund and Private Trust agree as follows: Article 1 Definitions 1.1 Whenever used in this Agreement, the following words and phrases, unless the context otherwise requires, shall have the following meanings: (a) "Articles of Incorporation" shall mean the Articles of Incorporation, Declaration of Trust, or other similar organizational document as the case may be, of a Fund as the same may be amended from time to time. (b) "Authorized Person" shall be deemed to include (i) any authorized officer of a Fund; (ii) or any person, whether or not such person is an officer or employee of a Fund, duly authorized to give Oral Instructions or Written Instructions on behalf of the Fund as indicated in writing to Private Trust from time to time. (c) "Board Members" shall mean the Directors or Trustees of the governing body of the Fund, as the case may be. (d) "Board of Directors" shall mean the Board of Directors or Board of Trustees of the Fund, as the case may be. (e) "Commission" shall mean the Securities and Exchange Commission. (f) "Custodian" refers to any custodian or subcustodian of securities and other property which a Fund may from time to time deposit, or cause to be deposited or held under the name or account of such a custodian pursuant to a Custodian Agreement. (g) "1934 Act" shall mean the Securities Exchange Act of 1934 and the rules and regulations promulgated thereunder, all as amended from time to time. (h) "1940 Act" shall mean the Investment Company Act of 1940 and the rules and regulations promulgated thereunder, all as amended from time to time. (i) "Oral Instructions" shall mean instructions, other than Written Instructions, actually received by Private Trust from a person reasonably believed by Private Trust to be an Authorized Person; (j) "Prospectus" shall mean the most recently dated Fund Prospectus and Statement of Additional Information, including any supplements thereto if any, which has become effective under the Securities Act of 1933 and the 1940 Act. (k) "Shares" refers collectively to such shares of capital stock or beneficial interest, as the case may be, or class thereof, of a Fund as may be issued from time to time. (l) "Shareholder" shall mean a holder of Shares of a Fund. (m) "Written Instructions" shall mean a written communication signed by a person reasonably believed by Private Trust to be an Authorized Person and actually received by Private Trust. Written Instructions shall include manually executed originals and authorized electronic transmissions, including telefacsimile of a manually executed original or other process. Article 2 Appointment of Private Trust 2.1 The Fund hereby appoints and constitutes Private Trust as transfer agent, registrar and dividend disbursing agent for Shares of the Funds and as shareholder servicing agent for the Funds. Private Trust accepts such appointment and agrees to perform the duties hereinafter set forth. Article 3 Duties of Private Trust 3.1 Private Trust shall be responsible for: (a) Administering and/or performing the customary services of a transfer agent; acting as service agent in connection with dividend and distribution functions; and for performing shareholder account and administrative agent functions in connection with the issuance, transfer and redemption or repurchase (including coordination with the Custodian) of Shares of each Fund, as more fully described in the written schedule of Duties of Private Trust annexed hereto as Schedule B and incorporated herein, and in accordance with the terms of the Prospectus of each Fund, applicable law and the procedures established from time to time between the Funds and Private Trust. (b) Recording the issuance of Shares and maintaining pursuant to Rule 17Ad-10(e) of the 1934 Act a record of the total number of Shares of each Fund which are authorized, based upon data provided to it by the Fund, and issued and outstanding. Private Trust shall provide each Fund on a regular basis with the total number of Shares which are authorized and issued and outstanding and shall have no obligation, when recording the issuance of Shares, to monitor the issuance of such Shares or to take cognizance of any laws relating to the issue or sale of such Shares, which functions shall be the sole responsibility of the Fund. (c) Notwithstanding any of the foregoing provisions of this Agreement, Private Trust shall be under no duty or obligation to inquire into, and shall not be liable for: (i) the legality of the issuance or sale of any Shares or the sufficiency of the amount to be received therefor; (ii) the legality of the redemption of any Shares, or the propriety of the amount to be paid therefor; (iii) the legality of the declaration of any dividend by a Fund's Board of Directors, or the legality of the issuance of any Shares in payment of any dividend; or, (iv) the legality of any recapitalization or readjustment of the Shares. 3.2 In addition, each Fund shall (i) identify to Private Trust in writing or by transmission those transactions and assets to be treated as exempt from blue sky reporting for each State and (ii) verify the establishment of transactions for each State on the system prior to activation and thereafter monitor the daily activity for each State. The responsibility of Private Trust for the Fund's blue sky State registration status is solely limited to the initial establishment of transactions subject to blue sky compliance by the Funds and the reporting of such transactions to the Funds as provided above. 3.3 In addition to the duties set forth in Schedule B, Private Trust shall perform such other duties and functions, and shall be paid such amounts therefor, as may from time to time be agreed upon in writing between the Fund and the Transfer Agent. The compensation for such other duties and functions shall be reflected in a written amendment to Schedule C and the duties and functions shall be reflected in an amendment to Schedule B, both dated and signed by authorized persons of the parties hereto. Article 4 Delegation of Responsibilities 4.1 With respect to any Fund, Private Trust may delegate some or all of its duties under this Agreement to other parties that after reasonable inquiry Private Trust deems to be competent to assume such duties. In the event of any such delegation, Private Trust shall enter into a written agreement with the delegatee in which the delegatee will, among other things: (a) agree to provide the services delegated to it in accordance with a written schedule of Performance Standards developed by Private Trust; and (b) represent and warrant that it is duly registered as required under all federal and state securities laws. Article 5 Recordkeeping and Other Information 5.1 Private Trust shall create and maintain all records required of it pursuant to its duties hereunder and as set forth in Schedule B in accordance with all applicable laws, rules and regulations, including records required by Section 31(a) of the 1940 Act. Where applicable, such records shall be maintained by Private Trust for the period and in the places required by Rule 31a-2 under the 1940 Act. 5.2 To the extent required by Section 31 of the 1940 Act, Private Trust agrees that all such records prepared or maintained by Private Trust relating to the services to be performed by Private Trust hereunder, are the property of the Funds and will be preserved, maintained and made available in accordance with, such, section, and will be surrendered promptly to the Funds on and in accordance with the Funds' request. 5.3 In case of any requests. or demands for the inspection of Shareholder records of a Fund, Private Trust will endeavor to notify the Fund of such request and secure Written Instructions as to the handling of such request. Private Trust reserves the right, however, to exhibit the Shareholder records to any person whenever it is advised by its counsel that it may be held liable for the failure to comply with such request. Article 6 Fund Instructions 6.1 Private Trust will have no liability when acting upon Written or Oral Instructions believed to have been executed or orally communicated by an Authorized Person and will not be held to have any notice of any change of authority of any person until receipt of a Written Instruction thereof from a Fund. Private Trust will also have no liability when processing Share certificates which it reasonably believes to bear the proper manual or facsimile signatures of the officers of a Fund and the proper countersignature of Private Trust. 6.2 At any time, Private Trust may request Written Instructions from a Fund and may seek advice from legal counsel for the Fund, or its own legal counsel, with respect to any matter arising in connection with this Agreement, and it shall not be liable for any action taken or not taken or suffered by it in good faith in accordance with such Written Instructions or in accordance with the opinion of counsel for the Fund or for Private Trust. Written Instructions requested by Private Trust will be provided by a Fund within a reasonable period of time. 6.3 Private Trust, its officers, agents or employees, shall accept Oral Instructions or Written Instructions given to them by any person representing or acting on behalf of a Fund only if said representative is an Authorized Person. Each Fund agrees that all Oral Instructions shall be followed within one business day by confirming Written Instructions, and that the Fund's failure to so confirm shall not impair in any respect Private Trust's right to rely on Oral Instructions. Article 7 Compensation 7.1 The Funds will compensate or cause Private Trust to be compensated for the performance of its obligations hereunder in accordance with the fees set forth in the written schedule of fees annexed hereto as Schedule C and incorporated herein. Private Trust will transmit an invoice to the Fund as soon as practicable after the end of each calendar month which will be detailed in accordance with Schedule C, and the Fund will pay to Private Trust the amount of such invoice within thirty (30) days after the Fund's receipt of the invoice. 7.2 In addition, the Funds agree to pay, and will be billed separately for, reasonable out-of-pocket expenses incurred by Private Trust in the performance of its duties hereunder. Out-of-pocket expenses shall include, but shall not be limited to, the items specified in the written schedule of out-of-pocket charges annexed hereto as Schedule D and incorporated herein. Schedule D may be modified by written agreement between the parties. Unspecified out-of-pocket expenses shall be limited to those out-of-pocket expenses reasonably incurred by Private Trust in the performance of its obligations hereunder. 7.3 Any compensation agreed to hereunder may be adjusted from time to time by attaching to Schedule C, a revised fee schedule executed and dated by the parties hereto. Article 8 Representations and Warranties 8.1 Each Fund represents and warrants to Private Trust that: (a) it is duly organized, existing and in good standing under the laws of the jurisdiction in which it is organized; (b) it is empowered under applicable laws and by its Articles of Incorporation, By-laws to enter into this Agreement; (c) all corporate proceedings required by said Articles of Incorporation, By-laws and applicable laws have been taken to authorize it to enter into this Agreement; (d) a registration statement under the Securities Act of 1933, as amended, and the 1940 Act on behalf of the Fund is currently effective and will remain effective, and all appropriate state securities law filings have been made and will continue to be made, with respect to all Shares of the Fund being offered for sale; and (e) all outstanding Shares are validly issued, fully paid and non-assessable and when Shares are hereafter issued in accordance with the terms of the Fund's Articles of Incorporation and its Prospectus, such Shares shall be validly issued, fully paid and non-assessable. 8.2 Private Trust represents and warrants to each Fund that: (a) it is duly organized, existing and in good standing under the laws of the state of New York; (b) it is empowered under applicable laws and by its Articles of Incorporation and By-laws to enter into and perform this Agreement; (c) all corporate proceedings required by said Articles of Incorporation, Bylaws and applicable laws have been taken to authorize it to enter into this Agreement; and (d) it is duly registered with its appropriate regulatory agency as a transfer agent and such registration will remain in effect for the duration of this Agreement; and (e) it has and will continue to have access to the necessary facilities, equipment and personnel to perform its duties and obligations under this Agreement. Article 9 Indemnification 9.1 Each party hereto (the "Indemnifying Party") will indemnify the other party (the "Indemnified Party") against and hold it harmless from any and all losses, claims, damages, liabilities or expenses of any sort or kind (including seasonable counsel fees and expenses) resulting from any claim, demand, action or suit or other proceeding (a "Claim") unless such Claim has resulted from a negligent failure to act or omission to act or bad faith of the Indemnified Party in the performance of its duties hereunder. In addition, each Fund will indemnify Private Trust against and hold it harmless from any Claim, damages, liabilities or expenses (including reasonable counsel fees) that is a result of (i) any action taken in accordance with Written or Oral Instructions, or any other instructions, or share certificates reasonably believed by Private Trust to be genuine and to be signed, countersigned or executed, or orally communicated by an Authorized Person; (ii) any action taken in accordance with written or oral advice reasonably believed by Private Trust to have been given by counsel for the Fund or its own counsel; (iii) any action taken as a result of any error or omission in any record (including but not limited to magnetic tapes, computer printouts, hard copies and microfilm copies) delivered, or caused to be delivered by the Fund to Private Trust in connection with this Agreement; or (iv) the offer or sale of Shares in violation of any requirement under the securities laws or regulations of any state that such Shares be registered in such state or in violation of any stop order or other determination or ruling by any state with respect to the offer or sale of such shares in such state. 9.2 In any case in which the Indemnifying Party may be asked to indemnify or hold the Indemnified Party harmless, the Indemnifying Party shall be advised of all pertinent facts concerning the situation in question. The Indemnified Party will notify the Indemnifying Party promptly after identifying any situation which it believes presents or appears likely to present a claim for indemnification against the Indemnifying Party although the failure to do so shall not prevent recovery by the Indemnified Party. The Indemnifying Party shall have the option to defend the Indemnified Party against any Claim which may be the subject of this indemnification, and, in the event that the Indemnifying Party so elects, such defense shall be conducted by counsel chosen by the Indemnifying Party and satisfactory to the Indemnified Party, and thereupon the Indemnifying Party shall take over complete defense of the Claim and the Indemnified Party shall sustain no further legal or other expenses in respect of such Claim. The Indemnified Party will not confess any Claim or make any compromise in any case in which the Indemnifying Party will be asked to provide indemnification, except with the Indemnifying Party's prior written consent. The obligations of the parties hereto under this Section shall survive the termination of this Agreement. 9.3 Except for remedies that cannot be waived as a matter of law (and injunctive or provisional relief), the provisions of this Article 9 shall be a party's sole and exclusive remedy for claims or other actions or proceedings to which the other party's indemnification obligations pursuant to this Article 9 may apply. Article 10 Standard of Care 10.1 Private Trust shall provide its services as transfer agent in accordance with the applicable provisions of Section 17A of the 1934 Act. Private Trust shall at all times act in good faith and agrees to use its best efforts within commercially reasonable limits to ensure the accuracy of all services performed under this Agreement, but assumes no responsibility for loss or damage to the Funds unless said errors are caused by Private Trust's own negligence, bad faith, willful misconduct or that of its employees or knowing violations of applicable law pertaining to the manner in which transfer agency services are to be performed by Private Trust. Article 11 Consequential Damages NOTWITSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL ANY PARTY UNDER THIS AGREEMENT, ITS AFFILIATES OR ANY OF ITS OR THEIR DIRECTORS, OFFICERS, EMPLOYEES, AGENTS OR SUBCONTRACTORS BE LIABLE TO THE OTHER PARTY UNDER ANY THEORY OF TORT, CONTRACT, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY FOR LOST PROFITS, EXEMPLARY, PUNITIVE, SPECIAL, INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, EACH OF WHICH IS HEREBY EXCLUDED BY AGREEMENT OF THE PARTIES REGARDLESS OF WHETHER SUCH DAMAGES WERE FORESEEABLE OR WHETHER ANY PARTY OR ANY ENTITY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. Article 12 Term and Termination 12.1 This Agreement shall be effective on the date first written above and shall continue until October 1, 2000, and thereafter shall automatically continue for successive annual periods ending on the anniversary of the date first written above, provided that it may be terminated by either party upon written notice given at least 90 days prior to termination. 12.2 In the event a termination notice is given by a Fund, it shall be accompanied by a resolution of the Board of Directors, certified by the Secretary of the Fund, designating a successor transfer agent or transfer agents. Upon such termination and at the expense of the Fund, Private Trust will deliver to such successor a certified list of shareholders of the Fund (with names and addresses), and all other relevant books, records, correspondence and other Fund records or data in the possession of Private Trust, and Private Trust will cooperate with the Fund and any successor transfer agent or agents in the substitution process. Article 13 Confidentiality 13.1 The parties agree that any non public information obtained hereunder concerning the other party is confidential and may not be disclosed to any other person without the consent of the other party, except as may be required by applicable law or at the request of the Commission or other governmental agency. The parties further agree that a breach of this provision would irreparably damage the other party and accordingly agree that each of them is entitled, without bond or other security, to an injunction or injunctions to prevent breaches of this provision. Article 14 Force Majeure 14.1 No party shall be liable for any default or delay in the performance of its obligations under this Agreement if and to the extent such default or delay is caused, directly or indirectly, by (i) fire, flood, elements of nature or other acts of God; (ii) any outbreak or escalation of hostilities, war, riots or civil disorders in any country; (iii) any act or omission of the other party or any governmental authority; (iv) any labor disputes beyond the reasonable control of such party; or (v) nonperformance by a third party or any similar cause beyond the reasonable control of such party, including without limitation, failures or fluctuations in telecommunications or other equipment. Except to the extent that the non-performing party shall have failed to use its reasonable best efforts to minimize the likelihood of occurrence of such circumstances or to mitigate any loss or damage to the other party caused by such circumstances. In any such event, the non-performing party shall be excused from any further performance and observance of the obligations so affected only for as long as such circumstances prevail and such party continues to use commercially reasonable efforts to recommence performance or observance as soon as practicable. Article 15 Assignment and Subcontracting 15.1 This Agreement may not be assigned or otherwise transferred by Private Trust, without the prior written consent of the Funds, which consent shall not be unreasonably withheld; provided, however, that Private Trust may, in its sole discretion, assign all its right, title and interest in this Agreement to an affiliate, parent or subsidiary of Private Trust who is qualified to act under the 1940 Act. The Funds agree that Private Trust may, in its sole discretion, engage subcontractors to perform any of the obligations in this Agreement to be performed by Private Trust. Article 16 Notices 16.1 Any notice or other instrument authorized or required by this Agreement to be given in writing to a Fund or Private Trust, shall be sufficiently given if addressed to that party and received by it at its office set forth below or at such other place as it may from time to time designate in writing. To the Funds: Smith Barney Mutual Funds 388 Greenwich Street, 22nd Floor New York, NY 10013 Attention: Heath B. McLendon To Private Trust: Smith Barney Private Trust Company 388 Greenwich Street, 22nd Floor New York, NY 10013 Attention: George Betzios Article 17 Governing Law/Venue 17.1 The laws of the State of New York, excluding the laws on conflicts of laws, shall govern the interpretation, validity, and enforcement of this agreement. Article 18 Counterparts 18.1 This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original; but such counterparts shall, together, constitute only one instrument. Article 19 Captions 19.1 The captions of this Agreement are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. Article 20 Publicity 20.1 Neither a Fund nor Private Trust shall release or publish news releases, public announcements, advertising or other publicity relating to this Agreement or to the transactions contemplated by it without the prior review and written approval of the other party; provided, however, that either party may make such disclosures as are required by legal, accounting or regulatory requirements after making reasonable efforts in the circumstances to consult in advance with the other party. Article 21 Relationship of Parties 21.1 The parties agree that they are independent contractors and not partners or co-venturers and nothing contained herein shall be interpreted or construed otherwise. Article 22 Entire Agreement; Severability 22.1 This Agreement, including Schedules and Exhibits hereto, constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous proposals, agreements, contracts, representations, and understandings, whether written or oral, between the parties with respect to the subject matter hereof. No change, termination, modification, or waiver of any term or condition of the Agreement shall be valid unless in writing signed by the party affected. A party's waiver of a breach of any term or condition in the Agreement shall not be deemed a waiver of any subsequent breach of the same or another term or condition. 22.2 The parties intend every provision of this Agreement to be severable. If a court of competent jurisdiction determines that any term or provision is illegal or invalid for any reason, the illegality or invalidity shall not affect the validity of the remainder of this Agreement. In such case, the parties shall in good faith modify or substitute such provision consistent with the original intent of the parties. Without limiting the generality of this paragraph, if a court determines that any remedy stated in this Agreement has failed of its essential purpose, then all other provisions of this Agreement, including the limitations on liability and exclusion of damages, shall remain fully effective. IN WITNESS WHEREOF the parties hereto have caused this Agreement to be executed by their duly authorized officers, as of the day and year first above written. Each of the Investment Companies Listed On Schedule A Hereto, Each of Which Is Acting On Its Own Behalf And Not On Behalf Of Any Other Investment Company By: Heath B. McLendon Chairman of the Boards of Directors SMITH BARNEY PRIVATE TRUST COMPANY By: George Betzios Director - Transfer Agency Operations SCHEDULE A SALOMON SMITH BARNEY FUNDS CONCERT INVESTMENT SERIES Emerging Growth Fund Government Fund Growth Fund Growth and Income Fund International Equity Fund Municipal Fund CONSULTING GROUP CAPITAL MARKETS FUNDS Balanced Investment Emerging Market Equity Investment Government Money Investments High Yield Investments Intermediate Fixed Income Investments International Equity Investments International Fixed Income Investments Large Capitalization Growth Investments Large Capitalization Value Equity Investments Long-Term Bond Investments Mortgage Backed Investments Municipal Bond Investments Small Capitalization Growth Investments Small Capitalization Value Equity Investments GREENWICH STREET SERIES FUND (VARIABLE ANNUITY) Appreciation Portfolio Diversified Strategic Income Portfolio Emerging Growth Portfolio Equity Income Portfolio Equity Index Portfolio Growth & Income Portfolio Intermediate High Grade Bond 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 SMITH BARNEY CONCERT ALLOCATION SERIES, INC. Balanced Portfolio Conservative Portfolio Growth Portfolio High Growth Portfolio Income Portfolio Global Portfolio Select Balanced Portfolio (variable annuity) Select Conservative Portfolio (variable annuity) Select Growth Portfolio (variable annuity) Select High Growth Portfolio (variable annuity) Select Income Portfolio (variable annuity) SMITH BARNEY EQUITY FUNDS Concert Social Awareness Fund Smith Barney Large Cap Blend Fund SMITH BARNEY FUNDAMENTAL VALUE FUND INC SMITH BARNEY FUNDS, INC Large Cap Value Fund Short-Term High Grade Bond Fund US Government Securities Fund SMITH BARNEY INCOME FUNDS 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 SMITH BARNEY INSTITUTIONAL CASH MANAGEMENT FUND, INC Cash Portfolio Government Portfolio Municipal Portfolio SMITH BARNEY INVESTMENT FUNDS INC. Concert Peachtree Growth Fund Smith Barney Contrarian Fund Smith Barney Government Securities Fund Smith Barney Hansberger Global Small Cap Value Fund Smith Barney Hansberger Global Value Fund Smith Barney Investment Grade Bond Fund Smith Barney Special Equities Fund SMITH BARNEY INVESTMENT TRUST 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 Index Fund Smith Barney Mid Cap Blend Fund SMITH BARNEY MANAGED GOVERNMENTS FUND INC. SMITH BARNEY MANAGED MUNICIPALS FUND INC. SMITH BARNEY MASSACHUSETTS MUNICIPALS FUND INC. SMITH BARNEY MONEY FUNDS, INC. Cash Portfolio Government Portfolio Retirement Portfolio SMITH BARNEY MUNI FUNDS California Money Market Portfolio Florida Portfolio Georgia Portfolio Limited Term Portfolio National Portfolio New York Money Market Portfolio New York Portfolio Pennsylvania Portfolio SMITH BARNEY MUNICIPAL MONEY MARKET FUND, INC. SMITH BARNEY NATURAL RESOURCES FUND INC. SMITH BARNEY NEW JERSEY MUNICIPALS FUND INC. SMITH BARNEY OREGON MUNICIPALS FUND SMITH BARNEY PRINCIPAL RETURN FUND Zeros Plus Emerging Growth Series 2000 Smith Barney Security and Growth Fund 2005 SMITH BARNEY SMALL CAP BLEND FUND, INC SMITH BARNEY TELECOMMUNICATIONS TRUST Smith Barney Telecommunications Income Fund SMITH BARNEY VARIABLE ACCOUNT FUNDS (VARIABLE ANNUITY) Income and Growth Portfolio Reserve Account Portfolio U.S. Government/High Quality Securities Portfolio SMITH BARNEY WORLD FUNDS, INC. Emerging Markets Portfolio European Portfolio Global Government Bond Portfolio International Balanced Portfolio International Equity Portfolio Pacific Portfolio TRAVELERS SERIES FUND (VARIABLE ANNUITY) AIM Capital Appreciation Portfolio Alliance Growth Portfolio GT Global Strategic Income Portfolio WS Total Return Portfolio Putnam Diversified Income Portfolio Smith Barney High Income Portfolio Smith Barney Large Cap Value Portfolio Smith Barney International Equity Portfolio Smith Barney Large Capitalization Growth Portfolio Smith Barney Money Market Portfolio Smith Barney Pacific Basin Portfolio TBC Managed Income Portfolio Van Kampen American Capital Enterprise Portfolio FEDERATED HIGH YIELD PORTFOLIO (VARIABLE ANNUITY) FEDERATED STOCK PORTFOLIO (VARIABLE ANNUITY) LAZARD INTERNATIONAL EQUITY PORTFOLIO (VARIABLE ANNUITY) MFS EMERGING GROWTH PORTFOLIO (VARIABLE ANNUITY) TRAVELERS SERIES TRUST (VARIABLE ANNUITY) Travelers 0 Coupon Bond FD 1998 Travelers 0 Coupon Bond FD 2000 Travelers 0 Coupon Bond FD 2005 Social Awareness Stock Portfolio US Government Securities Portfolio Utilities Portfolio Convertible Bond Portfolio Disciplined Small Cap Stock Portfolio Strategic Stock Portfolio MFS Research Portfolio MFS Mid Cap Growth Portfolio NWQ Large Cap Portfolio Juriak & Voyles Core Equity Portfolio TRAVELERS FUNDS (VARIABLE ANNUITY) Capital Appreciation Fund Money Market Portfolio High Yield Bond Trust Mid Cap Disciplined Equity Fund Managed Assets Trust TRAVELERS QUALITY BOND PORTFOLIO (VARIABLE ANNUITY) THE FUND FOR STABLE VALUE INVESTMENTS SCHEDULE B DUTIES OF PRIVATE TRUST 1. Shareholder Information. Private Trust or its agent shall maintain a record of the number of Shares held by each holder of record which shall include name, address, taxpayer identification and which shall indicate whether such Shares are held in certificates or uncertificated form. 2. Shareholder Services: Private Trust or its agent will investigate all inquiries from shareholders of a Fund relating to Shareholder accounts and will respond to all communications from Shareholders and others relating to its duties hereunder and such other correspondence as may from time to time be mutually agreed upon between Private Trust and a Fund. Private Trust shall provide the Fund with reports concerning shareholder inquires and the responses thereto by Private Trust, in such form and at such times as are agreed to by the Fund and Private Trust. 3. Share Certificates. (a) At the expense of each Fund, Private Trust or its agent shall be supplied with an adequate supply of blank share certificates to meet Private Trust or its agent's requirements therefor. Such Share certificates shall be properly signed by facsimile. Each Fund agrees that, notwithstanding the death, resignation, or removal of any officer of the Fund whose signature appears on such certificates, Private Trust or its agent may continue to countersign certificates which bear such signatures until otherwise directed by Written Instructions. (b) With respect to each Fund, Private Trust or its agent shall issue replacement Share certificates in lieu of certificates which have been lost, stolen or destroyed, upon receipt by Private Trust or its agent of properly executed affidavits and lost certificate bonds, in form satisfactory to Private Trust or its agent, with the Fund and Private Trust or its agent as obligees under the bond. (c) With respect to each Fund, Private Trust or its agent shall also maintain a record of each certificate issued, the number of Shares represented thereby and the holder of record. With respect to Shares held in open accounts or uncertificated form, i.e., no certificate being issued with respect thereto, Private Trust or its agent shall maintain comparable records of the record holders thereof, including their names, addresses and taxpayer identification. Private Trust or its agent shall further maintain a stop transfer record on lost and/or replaced certificates. 4. Mailing Communications to Shareholders: Proxy Materials. Private Trust or its agent will address and mail to Shareholders of the Funds, all reports to Shareholders, dividend and distribution notices and proxy material for the Fund's meetings of Shareholders. In connection with meetings of Shareholders, Private Trust or its agent will prepare Shareholder lists, mail and certify as to the mailing of proxy materials, process and tabulate returned proxy cards, report on proxies voted prior to meetings, act as inspector of election at meetings and certify Shares voted at meetings. 5. Sales of Shares (a) Suspension of Sale of Shares. Private Trust or its agent shall not be required to issue any Shares of a Fund where it has received a Written Instruction from the Fund or official notice from any appropriate authority that the sale of the Shares of the Fund has been suspended or discontinued. The existence of such Written Instructions or such official notice shall be conclusive evidence of the right of Private Trust or its agent to rely on such Written Instructions or official notice. (b) Returned Checks. In the event that any check or other order for the payment of money is returned unpaid for any reason, Private Trust or its agent will: (i) give prompt notice of such return to the Fund or its designee; (ii) place a stop transfer order against all Shares issued as a result of such check or order; and (iii) take such actions as Private Trust may from time to time deem appropriate. 6. Transfer and Repurchase (a) Private Trust or its agent shall process all requests to transfer or redeem Shares in accordance with the transfer or repurchase procedures set forth in each Fund's Prospectus. (b) Private Trust or its agent will transfer or repurchase Shares upon receipt of Oral or Written Instructions or otherwise pursuant to the Prospectus and Share certificates, if any, properly endorsed for transfer or redemption, accompanied by such documents as Private Trust or its agent reasonably may deem necessary. (c) Private Trust or its agent reserves the right to refuse to transfer or repurchase Shares until it is satisfied that the endorsement on the instructions is valid and genuine. Private Trust or its agent also reserves the right to refuse to transfer or repurchase Shares until it is satisfied that the requested transfer or repurchase is legally authorized, and it shall incur no liability for the refusal, in good faith, to make transfers or repurchases which Private Trust or its agent, in its good judgement, deems improper or unauthorized, or until it is reasonably satisfied that there is no basis to any claims adverse to such transfer or repurchase. (d) When Shares are redeemed, Private Trust or its agent shall, upon receipt of the instructions and documents in proper form, deliver to the Custodian and each Fund or its designee a notification setting forth the number of Shares to be repurchased. Such repurchased shares shall be reflected on appropriate accounts maintained by Private Trust or its agent reflecting outstanding Shares of each Fund and Shares attributed to individual accounts. (e) Private Trust or is agent shall, upon receipt of the moneys paid to it by the Custodian for the repurchase of Shares, pay such moneys as are received from the Custodian, all in accordance with the procedures described in the written instruction received by Private Trust or its agent from the Fund. (f) Private Trust or its agent shall not process or effect any repurchase with respect to Shares of a Fund after receipt by Private Trust or its agent of notification of the suspension of the determination of the net asset value of the Fund. 7. Dividends (a) Upon the declaration of each dividend and each capital gains distribution by the Board of Directors of a Fund with respect to Shares of the Fund, the Fund shall furnish or cause to be furnished to Private Trust or its agent a copy of a resolution of the Fund's Board of Directors certified by the Secretary of the Fund setting forth the date of the declaration of such dividend or distribution, the ex-dividend date; the date of payment thereof, the record date as of which shareholders entitled to payment shall be determined; the amount payable per Share to the shareholders of record as of that date, the total amount payable to Private Trust or its agent on the payment date and whether such dividend or distribution is to be paid in Shares of such class at net asset value. (b) On or before the payment date specified in such resolution of the Board of Directors, a Fund will provide Private Trust with sufficient cash to make payment to the Shareholders of record as of such payment date. (c) If Private Trust or its agent does not receive sufficient cash from a Fund to make total dividend and/or distribution payments to all shareholders of the Fund as of the record date, Private Trust or its agent will, upon notifying the Fund, withhold payment to all Shareholders of record as of the record date until sufficient cash is provided to Private Trust or its agent. 8. Cash Management Services. Funds received by Private Trust in the course of performing its services hereunder will be held in demand deposit bank accounts or money market fund accounts in the name of Private Trust (or its nominee) as agent for the Funds. Private Trust shall be entitled to retain any interest, dividends, balance credits or fee reductions or other concessions or benefits earned or generated by or associated with such accounts or made available by the institution with which such accounts are maintained. 9. Lost Shareholders. Private Trust shall perform such services as are required in order to comply with Rules 17a-24 and 17Ad-17 of the 1934 Act (the "Lost Shareholder Rules"), including, but not limited to those set forth below. Private Trust may, in its sole discretion, use the services of a third party to perform some or all of such services. (a) documentation of electronic search policies and procedures; (b) execution of required searches; (c) creation and mailing of confirmation letters; (d) taking receipt of returned verification forms; (e) providing confirmed address corrections in batch via electronic media; (f) tracking results and maintaining data sufficient to comply with the Lost Shareholder Rules; and (g) preparation and submission of data required under the Lost Shareholder Rules. 10. Miscellaneous. In addition to and neither in lieu nor in contravention of the services set forth above, Private Trust shall: (i) perform all the customary services of a transfer agent, registrar, dividend disbursing agent and agent of the dividend reinvestment and cash purchase plan as described herein consistent with those requirements set forth as at the date of this Agreement; (ii) require proper forms of instructions, signatures and signature guarantees and any necessary documents supporting the opening of shareholder accounts, transfers and redemptions and other shareholder account transactions, all in conformance with Private Trust's present procedures with such changes or deviations therefrom as may be from time to time required or approved by a Fund, or the Fund's counsel or Private Trust's counsel and the rejection of orders or instructions not in good order in accordance with the applicable Fund prospectus; (iii) provide to the person designated by the Funds daily Blue Sky reports generated by Private Trust; (iv) provide to the Funds escheatment reports as reasonably requested by the Funds with respect to the status of the Funds' accounts and outstanding checks; and (v) maintain a current, duplicate set of the Funds' essential records at a secure separate location in a form available and usable forthwith in the event of any breakdown or disaster disruption of Private Trust's main operation. The detailed definition, frequency, limitations and associated costs (if any) set out in the attached fee schedule, include but are not limited to: maintaining all Shareholder accounts, preparing Shareholder meeting lists, mailing proxies, tabulating proxies, mailing Shareholder reports to current Shareholders, withholding taxes on U.S. resident and non-resident alien accounts where applicable, preparing and filing U.S. Treasury Department Forms 1099 and other appropriate forms required with respect to dividends and distributions by federal authorities for all Shareholders. 11. Print/Mail Services. Private Trust shall perform print/mail services on behalf of the Funds with respect to the following items: (a) Daily, Monthly Quarterly and Annual Output Confirmations -Brokerage SB money market fund SWEEP transactions -Direct Accounts (non-brokerage) all transactions -New account and Change of Allocation Welcome letters Checks: -Dividend -ACW -Commission -Daily Redemption Statements: -All Non Brokerage Accounts -Shareholder Statements -Dealer Statements -Dealer Statements (non-Transfer Agent) -Commission Statements Y/E Tax Forms -Non-brokerage Accounts -Non-networked Accounts (b) Special Mailings (includes 6700, proxy except NSCC NT3) o Report Mailings (quarterly, annual and semi-annual) o Prospectus Fulfillment & Mailings o Shareholder/Information Letters CitiFunds Fixed Income Trust 388 Greenwich Street New York, New York 10013 August 24, 2000 Citi Fiduciary Trust Company 125 Broad Street 11th Floor New York, New York 10004 Re: CitiFunds Fixed Income Trust - Transfer Agency and Service Agreement Ladies and Gentlemen: This letter serves as notice that Citi Short-Term U.S. Government Income Fund (the "Series"), is added to the list of series to which Citi Fiduciary Trust Company ("Citi Fiduciary") renders services as transfer agent pursuant to the terms of the Transfer Agency and Service Agreement dated as of October 1, 1999 (the "Agreement") between each of the investment companies listed on Schedule A thereto and Citi Fiduciary (formerly known as, "Smith Barney Private Trust Company"). Please sign below to acknowledge your receipt of this notice adding the Series as beneficiaries under the Agreement. CITIFUNDS FIXED INCOME TRUST By: Philip Coolidge -------------------------------- Title: President -------------------------------- Acknowledgment: CITI FIDUCIARY TRUST COMPANY By: [illegible] ----------------------------------- Title: Director Transfer Agency Operations ----------------------------------- EX-99.J 6 0006.txt INDEPENDENT AUDITORS CONSENT 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. 36 to the registration statement on Form N-1A ( "Registration Statement") of CitiFunds Fixed Income Trust of our report dated February 18, 2000, relating to the financial statements and financial highlights which appears in the December 31, 1999 Annual Report of CitiFunds Short-Term U.S. Government Income Portfolio, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the heading "Financial Highlights" in the Prospectus and under the headings "Auditors" and "Financial Statements" in the Statement of Additional Information. PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Boston, Massachusetts September 28, 2000 Exhibit j CONSENT OF CHARTERED ACCOUNTANTS We hereby consent to the incorporation by reference in the Statement of Additional Information constituting part of this Post-Effective Amendment No. 36 to the registration statement on Form N-1A ("Registration Statement") of CitiFunds Fixed Income Trust of our report dated February 18, 2000, relating to the financial statements and financial highlights of Government Income Portfolio which appears in the December 31, 1999 Annual Report of CitiFunds Short-Term U.S. Government Income Portfolio, which are also incorporated by reference into the Registration Statement. We also consent to the references to us under the headings "Auditors" and "Financial Statements" in the Statement of Additional Information. PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Chartered Accountants Toronto, Ontario September 28, 2000 EX-99.M 7 0007.txt AMENDED AND RESTATED DISTRIBUTION PLAN Exhibit m AMENDED AND RESTATED DISTRIBUTION PLAN DISTRIBUTION PLAN, dated as of June 24, 1986, amended and restated as of August 19, 1994, and further amended and restated as of September 5, 2000, of CitiFunds(R) Fixed Income Trust (formerly, "Landmark Fixed Income Funds"), a Massachusetts business trust (the "Trust"), with respect to shares of beneficial interest of its series CitiSM Short-Term U.S. Government Income Fund (the "Fund") designated "Citi Shares" (formerly, "Class A" shares) ("Shares"). W I T N E S S E T H: WHEREAS, the Trust is engaged in business as an open-end management investment company and is registered under the Investment Company Act of 1940 (collectively with the rules and regulations promulgated thereunder, the "1940 Act"); and WHEREAS, the shares of beneficial interest of the Trust are divided into one or more separate series; and WHEREAS, the Trust intends to distribute Shares in accordance with Rule 12b-1 under the 1940 Act ("Rule 12b-1"), and desires to adopt this Distribution Plan (the "Plan") as a plan of distribution pursuant to such Rule; and WHEREAS, the Trust desires to engage Salomon Smith Barney Inc., a New York corporation, to provide certain distribution services for the Trust (the "Distributor"); and WHEREAS, the Trust desires to enter into a distribution agreement (in such form as may from time to time be approved by the Board of Trustees of the Trust in the manner specified in Rule 12b-1) with the Distributor, whereby the Distributor will provide facilities and personnel and render services to the Trust in connection with the offering and distribution of the Shares of the Fund (the "Distribution Agreement"); and WHEREAS, the Trust recognizes and agrees that the Distributor may retain the services of any one or more broker-dealers registered as such under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), banks and other financial intermediaries, to act as dealer or agent in connection with the offering of Shares of the Fund, and the Distributor may make periodic payments, out of the fee paid to the Distributor, its profits or any other source available to it, to such broker-dealer, bank or other intermediary for such services; and WHEREAS, the Board of Trustees of the Trust, in considering whether the Trust should adopt and implement this Plan, has evaluated such information as it deemed necessary to an informed determination as to whether this Plan should be adopted and implemented and has considered such pertinent factors as it deemed necessary to form the basis for a decision to use assets of the Fund for such purposes, and has determined that there is a reasonable likelihood that the adoption and implementation of this Plan will benefit the Trust and the Fund and its shareholders; NOW, THEREFORE, the Board of Trustees of the Trust hereby adopts this Plan for the Trust as a plan for distribution in accordance with Rule 12b-1, on the following terms and conditions: 1. As specified in the Distribution Agreement, the Distributor shall provide facilities, personnel and a program with respect to the offering and sale of Shares of the Fund. Among other things, the Distributor shall be responsible for all expenses of printing (excluding typesetting) and distributing prospectuses, and, upon request, statements of additional information, to prospective shareholders of the Fund and providing such other related services as are reasonably necessary in connection therewith. 2. The Distributor shall bear all distribution-related expenses described in paragraph 1, including without limitation, the compensation of personnel necessary to provide such services and all costs of travel, office expenses (including rent and overhead), equipment, printing, delivery and mailing costs. 3. It is understood that, under certain circumstances, the Distributor may impose certain deferred sales charges in connection with the repurchase of Shares of the Fund and the Distributor may retain (or receive from the Fund, as the case may be) all such deferred sales charges. As additional consideration for services performed and expenses incurred in the performance of its obligations under the Distribution Agreement, except in connection with print or electronic media advertising, the Trust shall pay the Distributor from the assets of the Fund a distribution fee periodically at an annual rate not to exceed 0.15% of the average daily net assets of the Fund for its then-current fiscal year attributable to the Shares of the Fund (the "Basic Distribution Fee"). The Trust shall pay the Distributor an additional fee from the assets of the Fund at an annual rate not to exceed 0.05% of the average daily net assets of the Fund for its then-current fiscal year attributable to the Shares of the Fund in anticipation of, or as reimbursement for, expenses incurred by the Distributor in connection with print or electronic media advertising in connection with the sale of Shares of the Fund. 4. The Trust understands that an agreement between the Distributor and any broker-dealer registered as such under the Exchange Act, bank or other financial intermediary may provide for a portion (which may be substantially all) of the fees payable to the Distributor under the Distribution Agreement to be paid by the Distributor to such broker-dealer, bank or other financial intermediary in consideration of services in connection with the sale of the Shares of the Fund. Nothing in this Plan shall be construed as requiring the Trust to make any payment to any such broker-dealer, bank or other financial intermediary or to have any obligation to such broker-dealer, bank or other financial intermediary in connection with its services. The Distributor agrees and hereby undertakes that any agreement entered into between the Distributor and any such broker-dealer, bank or other financial intermediary shall provide that such broker-dealer, bank or other financial intermediary shall look solely to the Distributor for compensation for its services thereunder and that in no event shall such broker-dealer, bank or other financial intermediary seek any payment from the Trust or its shareholders. 5. The Trust shall pay all fees and expenses of any independent auditor, legal counsel, administrator, transfer agent, custodian, shareholder servicing agent, service agent, registrar or dividend disbursing agent of the Trust; expenses of distributing and redeeming Shares and servicing shareholder accounts; expenses of preparing, printing and mailing prospectuses and statements of additional information, shareholder reports, notices, proxy statements and reports to government officers and commissions and to shareholders of the Trust except that the Distributor shall be responsible for the expenses of printing (excluding typesetting) and distributing prospectuses and statements of additional information to prospective shareholders as provided in paragraphs 1 and 2 hereof; expenses connected with the execution, recording and settlement of portfolio security transactions; insurance premiums; expenses of calculating the net asset value of Shares; expenses of shareholder meetings; and expenses relating to the issuance, registration and qualification of Shares. 6. Nothing herein contained shall be deemed to require the Trust to take any action contrary to its Declaration of Trust or By-Laws or any applicable statutory or regulatory requirement to which it is subject or by which it is bound, or to relieve or deprive the Board of Trustees of the responsibility for and control of the conduct of the affairs of the Trust. 7. This Plan shall become effective as to the Fund upon approval by a vote of the Board of Trustees and vote of 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 Plan or in any agreement related to the Plan (the "Qualified Trustees"), such votes to be cast in person at a meeting called for the purpose of voting on this Plan. 8. This Plan shall continue in effect indefinitely; provided, however, that such continuance is subject to annual approval by a vote of the Board of Trustees of the Trust and a majority of the Qualified Trustees, such votes to be cast in person at a meeting called for the purpose of voting on continuance of this Plan. If such annual approval is not obtained, this Plan shall expire on the date which is 15 months after the date of the last approval. 9. This Plan may be amended at any time by the Board of Trustees of the Trust, provided that (a) any amendment to increase materially the amount to be expended from the assets of the Fund attributable to the Shares for the services described herein shall be effective only upon approval by a vote of a "majority of the outstanding voting securities" of the Shares of the Fund, and (b) any material amendment of this Plan shall be effective only upon approval by a vote of the Board of Trustees of the Trust and a majority of the Qualified Trustees, such votes to be cast in person at a meeting called for the purpose of voting on such amendment. This Plan may be terminated at any time by vote of a majority of the Qualified Trustees or by a vote of a "majority of the outstanding voting securities" of the Shares of the Fund. 10. The Trust and the Distributor each shall provide the Board of Trustees of the Trust, and the Board of Trustees of the Trust shall review, at least quarterly, a written report of the amounts expended under the Plan and the purposes for which such expenditures were made. 11. While this Plan is in effect, the selection and nomination of Qualified Trustees shall be committed to the discretion of the Trustees who are not "interested persons" of the Trust. 12. For the purposes of this Plan, the terms "interested persons" and "majority of the outstanding voting securities" are used as defined in the 1940 Act. In addition, for purposes of determining the fees payable to the Distributor, the value of the net assets of the Fund shall be computed in the manner specified in the Trust's then-current prospectus and statement of additional information applicable to the Fund for computation of the net asset value applicable to Shares of the Fund. 13. The Trust shall preserve copies of this Plan, and each agreement related hereto and each report referred to in paragraph 10 hereof (collectively, the "Records") for a period of six years from the end of the fiscal year in which such Record was made and each such Record shall be kept in an easily accessible place for the first two years of said record-keeping. 14. This Plan shall be construed in accordance with the laws of the Commonwealth of Massachusetts and the applicable provisions of the 1940 Act. 15. If any provision of this Plan shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Plan shall not be affected thereby. EX-99.O 8 0008.txt MULTIPLE CLASS PLAN OF REGISTRANT Exhibit o CITIFUNDS FIXED INCOME TRUST MULTIPLE CLASS PLAN MULTIPLE CLASS PLAN, dated as of July 13, 2000, of CitiFunds Fixed Income Trust, a Massachusetts business trust (the "Trust"), with respect to its series designated CitiFunds Short-Term U.S. Government Income Portfolio (the "Fund"). W I T N E S S E T H: WHEREAS, the Trust is engaged in business as an open-end management investment company and is registered under the Investment Company Act of 1940, as amended (collectively with the rules and regulations promulgated thereunder, the "1940 Act"); and WHEREAS, the shares of beneficial interest (without par value) of the Trust (the "Shares") are divided into separate series and may be divided into one or more separate classes; WHEREAS, the Trust desires to adopt this Multiple Class Plan (the "Plan") on behalf of the Fund as a plan pursuant to Rule 18f-3 in order that the Fund may issue multiple classes of Shares; WHEREAS, the Board of Trustees of the Trust, in considering whether the Trust should adopt and implement this Plan, has evaluated such information and considered such pertinent factors as it deemed necessary to an informed evaluation of this Plan and determination as to whether this Plan should be adopted and implemented, and has determined that the adoption and implementation of this Plan, including the expense allocation contemplated herein, are in the best interests of each class of Shares individually, as well as the best interests of the Fund; NOW THEREFORE, the Trust hereby adopts this Plan pursuant to Rule 18f-3 under the 1940 Act, on the following terms and conditions: 1. The Fund may issue Shares in one or more classes (each, a "Class" and collectively, the "Classes"). Shares so issued will have the rights and preferences set forth in the Establishment and Designation of Classes and the Trust's then current registration statement relating to the Fund. 2. Shares issued in Classes will be issued subject to and in accordance with the terms of Rule 18f-3 under the 1940 Act, including, without limitation: (a) Each Class shall have a different arrangement for shareholder services or the distribution of securities or both, and shall pay all of the expenses of that arrangement; (b) Each Class may pay a different share of other expenses, not including advisory or custodial fees or other expenses related to the management of the Trust's assets, if these expenses are actually incurred in a different amount by that Class, or if the Class receives services of a different kind or to a different degree than other Classes; (c) Each Class shall have exclusive voting rights on any matter submitted to shareholders that relates solely to its arrangement; (d) Each Class shall have separate voting rights on any matter submitted to shareholders in which the interests of one Class differ from the interests of any other Class; and (e) Except as otherwise permitted under Rule 18f-3 under the 1940 Act, each Class shall have the same rights and obligations as each other Class. 3. Nothing herein contained shall be deemed to require the Trust to take any action contrary to its Declaration of Trust or By-Laws or any applicable statutory or regulatory requirement to which it is subject or by which it is bound, or to relieve or deprive the Board of Trustees of the responsibility for and control of the conduct of the affairs of the Trust. 4. This Plan shall become effective as to the Fund upon approval by a vote of the Board of Trustees and vote of a majority of the Trustees who are not "interested persons" of the Trust (the "Qualified Trustees"). 5. This Plan shall continue in effect indefinitely unless terminated by a vote of the Board of Trustees of the Trust. This Plan may be terminated at any time with respect to the Fund by a vote of the Board of Trustees of the Trust. This Plan supercedes any and all other multiple class plans heretofore approved by the Board of Trustees of the Trust with respect to the Fund. 6. This Plan may be amended at any time by the Board of Trustees of the Trust, provided that any material amendment of this Plan shall be effective only upon approval by a vote of the Board of Trustees of the Trust and a majority of the Qualified Trustees. 7. This Plan shall be construed in accordance with the laws of the Commonwealth of Massachusetts and the applicable provisions of the 1940 Act. 8. If any provision of this Plan shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of the Plan shall not be affected thereby. EX-99.P2 9 0009.txt CODE OF ETHICS FOR SALOMON SMITH BARNEY Exhibit p(2) PERSONAL INVESTMENT POLICY FOR SALOMON SMITH BARNEY INC. IN CONNECTION WITH ITS ACTIVITY AS DISTRIBUTOR OF CERTAIN REGISTERED INVESTMENT COMPANIES Salomon Smith Barney Inc. ("SSB") has adopted this policy on securities transactions in order to provide policies and procedures consistent with Rule 17j-1 under the Investment Company Act of 1940 to prevent fraudulent or manipulative practices with respect to purchases or sales of securities held or to be acquired by those U.S. registered investment companies ("Funds") advised or managed by SSB Citi Asset Management Group ("SSB Citi")1 for which SSB acts as distributor. ALL DIRECTORS AND OFFICERS OF SSB WHO, IN THE ORDINARY COURSE OF BUSINESS, MAKE, PARTICIPATE IN OR OBTAIN INFORMATION REGARDING, THE PURCHASE OR SALE OF SECURITIES BY THE FUNDS, OR WHOSE FUNCTIONS OR DUTIES IN THE ORDINARY COURSE OF BUSINESS RELATE TO THE MAKING OF ANY RECOMMENDATION TO THE FUNDS REGARDING THE PURCHASE OR SALE OF SECURITIES AND WHO ARE NOT SUBJECT TO THE SSB CITI PERSONAL INVESTMENT POLICY ARE COVERED PERSONS UNDER THIS POLICY. I. STATEMENT OF PRINCIPLES - The fundamental standard to be followed in personal securities transactions is that Covered Persons may not take inappropriate advantage of their positions. All personal securities transactions by Covered Persons shall adhere to the requirements of this policy and shall be conducted in such a manner as to avoid any actual or potential conflict of interest, the appearance of such a conflict, or the abuse of the person's position of trust and responsibility. While this policy is designed to address both identified conflicts and potential conflicts, it cannot possibly be written broadly enough to cover all potential situations. In this regard, Covered Persons are expected to adhere not only to the letter, but also the spirit of the policies contained herein. Covered Persons are reminded that they also are subject to other Citigroup policies, including policies on insider trading, the purchase and sale of securities listed on any applicable SSB restricted list, the receipt of gifts and service as a director of a publicly traded company. Covered Persons must never trade in a security or commodity while in possession of material, non-public information about the issuer or the market for those securities or commodities, even if the Covered Person has satisfied all other requirements of this policy. The reputation of SSB and its employees for straightforward practices and integrity is a priceless asset, and all employees have the duty and obligation to support and maintain it when conducting their personal securities transactions. - -------- 1 The investment advisory entities of SSB Citi covered by this policy include: Salomon Brothers Asset Management Inc.; SSB Citi Fund Management LLC; Smith Barney Asset Management Division of Salomon Smith Barney Inc.; Travelers Investment Management Company; and the Citibank Global Asset Management Division of Citibank, N.A. and Citicorp Trust, N.A.-California. II. APPLICABILITY - Each Covered Person must comply with all of the provisions of this policy. The personal investment policies, procedures and restrictions referred to herein also apply to a Covered Person's spouse and minor children. The policies also apply to any other account over which the Covered Person is deemed to have beneficial ownership. This includes: accounts of any immediate family members sharing the same household as the Covered Person; accounts of persons or other third parties for whom the Covered Person exercises investment discretion or gives investment advice; a legal vehicle in which the Covered Person has a direct or indirect beneficial interest and has power over investment decisions; accounts for the benefit of a third party (e.g., a charity) which may be directed by the Covered Person (other than in the capacity of an employee); and any account over which the Covered Person may be deemed to have control. For a more detailed description of beneficial ownership, see Exhibit A attached hereto. These policies place certain restrictions on the ability of a Covered Person to purchase or sell securities that are being or have been purchased or sold by the Funds. The restrictions also apply to securities that are "related" to a security being purchased or sold by the Funds. A "related security" is one whose value is derived from the value of another security (e.g., a warrant, option or an indexed instrument). SECURITIES are defined as stocks, notes, bonds, closed-end mutual funds, debentures, and other evidences of indebtedness, including senior debt, subordinated debt, investment contracts, commodity contracts, futures and all derivative instruments such as options, warrants and indexed instruments, or, in general, any interest or instrument commonly known as a "security." III. ENFORCEMENT - It is the responsibility of each Covered Person to act in accordance with a high standard of conduct and to comply with the policies and procedures set forth in this document. SSB takes seriously its obligation to monitor the personal investment activities of its employees. Any violation of this policy by Covered Persons will be considered serious, and may result in disciplinary action, which may include the unwinding of trades, disgorgement of profits, monetary fine or censure, and suspension or termination of employment. IV. OPENING AND MAINTAINING EMPLOYEE ACCOUNTS - All employee brokerage accounts, including spouse accounts, accounts for which the Covered Person is deemed to have beneficial ownership, and any other accounts over which the Covered Person and/or spouse exercise control, must be maintained either at SSB or at Citicorp Investment Services ("CIS").(2) For spouses or other persons who, by reason of their employment, are required to conduct their securities, commodities or other financial transactions in a manner inconsistent with this policy, or in other exceptional circumstances, Covered Persons may submit a written request for an exemption to the Compliance Department. If approval is granted, copies of trade confirmations and monthly statements must be sent to the Compliance Department. In addition, all other provisions of this policy will apply. - ----------- 2 This requirement will become effective as to all employees on a date to be determined by the Compliance Department and may be subject to a phase-in implementation process. V. EXCLUDED ACCOUNTS AND TRANSACTIONS - The following types of accounts/transactions need not be maintained at SSB or CIS, nor are they subject to the other restrictions of this policy: 1. Accounts at outside mutual funds that hold only shares of open-end funds purchased directly from that fund company. Note: transactions relating to closed-end funds are subject to the pre-clearance, blackout period and other restrictions of this policy; 2. Estate or trust accounts in which a Covered Person or related person has a beneficial interest, but no power to affect investment decisions. There must be no communication between the account(s) and the Covered Person with regard to investment decisions prior to execution. The Covered Person must direct the trustee/bank to furnish copies of confirmations and statements to the Compliance Department; 3. Fully discretionary accounts managed by either an internal or external registered investment adviser are permitted and may be custodied away from SSB and CIS if (i) the Covered Person receives permission from the Director of Compliance, and (ii) there is no communication between the manager and the Covered Person with regard to investment decisions prior to execution. The Covered Person must designate that copies of trade confirmations and monthly statements be sent to the Compliance Department; 4. Covered Persons may participate in direct investment programs which allow the purchase of securities directly from the issuer without the intermediation of a broker/dealer provided that the timing and size of the purchases are established by a pre-arranged, regularized schedule (e.g., dividend reinvestment plans). Covered Persons must pre-clear the transaction at the time that the dividend reinvestment plan is being set up. Covered Persons also must provide documentation of these arrangements and direct periodic (monthly or quarterly) statements to the Compliance Department; and 5. In addition to the foregoing, the following types of securities are exempted from pre-clearance, blackout periods, reporting and short-term trading requirements: open-ended mutual funds; open-end unit investment trusts; U.S. Treasury bills, bonds and notes; mortgage pass-throughs (e.g. Ginnie Maes) that are direct obligations of the U.S. government; bankers acceptances; bank certificates of deposit; commercial paper; and high quality short-term debt instruments (meaning any instrument that has a maturity at issuance of less than 366 days and that is rated in one of the two highest rating categories by a nationally recognized statistical rating organization, such as S&P or Moody's), including repurchase agreements. VI. SECURITIES HOLDING PERIOD/SHORT-TERM TRADING - Securities transactions must be for investment purposes rather than for speculation. Consequently, employees may not profit from the purchase and sale, or sale and purchase, of the same or equivalent securities within sixty (60) calendar days, calculated on a First In, First Out (FIFO) basis (i.e., the security may be sold on the 61st day). Citigroup securities received as part of a Covered Person's compensation are not subject to the 60-day holding period. All profits from short-term trades are subject to disgorgement. However, with the prior written approval of the Director of Compliance, and only in rare and/or unusual circumstances, a Covered Person may execute a short-term trade that results in a significant loss or in break-even status. VII. PRE-CLEARANCE - Covered Persons must pre-clear all personal securities transactions (see Section V for a listing of accounts, transactions and securities that do not require pre-clearance). A copy of the pre-clearance form is attached as Exhibit B. IN ADDITION, COVERED PERSONS ARE PROHIBITED FROM ENGAGING IN MORE THAN TWENTY (20) TRANSACTIONS IN ANY CALENDAR MONTH, EXCEPT WITH THE PRIOR WRITTEN APPROVAL FROM THE DIRECTOR OF COMPLIANCE. A transaction must not be executed until the Covered Person has received the necessary approval. Pre-clearance is valid only on the day it is given. If a transaction is not executed on the day pre-clearance is granted, it is required that pre-clearance be sought again on a subsequent day (i.e., open orders, such as limit orders, good until cancelled orders and stop-loss orders, must be pre-cleared each day until the transaction is effected). In connection with obtaining approval for any personal securities transaction, Covered Persons must describe in detail any factors that might be relevant to an analysis of the possibility of a conflict of interest. Any trade that violates the pre-clearance process may be unwound at the Covered Person's expense, and the Covered Person will be required to absorb any resulting loss and to disgorge any resulting profit. VIII. BLACKOUT PERIODS - No Covered Person shall purchase or sell, directly or indirectly, any security in which he/she has, or by reason of the transaction acquires, any direct or indirect beneficial ownership if he/she has knowledge at the time of such transaction that the security is being purchased or sold, or is being considered for purchase or sale, by a Fund. In addition, a Covered Person may not buy or sell any securities for personal accounts on the same day that a Fund about which the Covered Person is likely to have trading or portfolio information (as determined by the Compliance Department) trades in that security. Any violation of the foregoing provision will require the Covered Person's trade to be unwound, with the Covered Person absorbing any resulting loss and disgorging any resulting profit. Please be reminded that, regardless of the provisions set forth above, all employees are always prohibited from effecting personal securities transactions based on material, non-public information. Blackout period requirements shall not apply to any purchase or sale, or series of related transactions involving the same or related securities, involving 500 or fewer shares in the aggregate if the issuer has a market capitalization (outstanding shares multiplied by the current price per share) greater than $10 billion and is listed on a U.S. Stock Exchange or NASDAQ. Note: Pre-clearance is still required. Under certain circumstances, the Compliance Department may determine that a Covered Person may not rely upon this "Large Cap/De Minimis" exemption. In such a case, the Covered Person will be notified prior to or at the time the pre-clearance request is made. IX. PROHIBITED TRANSACTIONS - The following transactions by Covered Persons are prohibited without the prior written approval from the Compliance Director: 1. The purchase of private placements; and 2. The acquisition of any securities in an initial public offering (new issues of municipal debt securities may be acquired subject to the other requirements of this policy (e.g., pre-clearance).) X. TRANSACTIONS IN OPTIONS AND FUTURES - Covered Persons may buy or sell derivative instruments such as individual stock options, options and futures on indexes and options and futures on fixed-income securities, and may buy or sell physical commodities and futures and forwards on such commodities. These transactions must comply with all of the policies and restrictions described in this policy, including pre-clearance, blackout periods, transactions in Citigroup securities and the 60-day holding period. However, the 60-day holding period does not apply to individual stock options that are part of a hedged position where the underlying stock has been held for more than 60 days and the entire position (including the underlying security) is closed out. XI. PROHIBITED RECOMMENDATIONS - No Covered Person shall recommend or execute any securities transaction by any Fund without having disclosed, in writing, to SSB Citi's Chief Investment Officer, or designee, any direct or indirect interest in such securities or issuers, except for those securities purchased pursuant to the "Large Cap/De Minimis" exemption described in Section VIII above. Prior written approval of such recommendation or execution also must be received from the Chief Investment Officer, or designee. The interest in personal accounts could be in the form of: 1. Any direct or indirect beneficial ownership of any securities of such issuer; 2. Any contemplated transaction by the person in such securities; 3. Any position with such issuer or its affiliates; or 4. Any present or proposed business relationship between such issuer or its affiliates and the person or any party in which such person has a significant interest. XII. TRANSACTIONS IN CITIGROUP SECURITIES - Unless a Covered Person is a member of a designated group subject to more restrictive provisions, or is otherwise notified to the contrary, the Covered Person may trade in Citigroup securities without restriction (other than the pre-clearance and other requirements of this policy), subject to the limitations set forth below. Covered Persons whose jobs are such that they know about Citigroup's quarterly earnings prior to release may not engage in any transactions in Citigroup securities during the "blackout periods" beginning on the first day of a calendar quarter and ending on the second business day following the release of earnings for the prior quarter. Stock option exercises are permitted during a blackout period (but the simultaneous exercise of an option and sale of the underlying stock is prohibited). With regard to exchange traded options, no transactions in Citigroup options are permitted except to close or roll an option position that expires during a blackout period. Charitable contributions of Citigroup securities may be made during the blackout period, but an individual's private foundation may not sell donated Citigroup common stock during the blackout period. "Good `til cancelled" orders on Citigroup stock must be cancelled before entering a blackout period and no such orders may be entered during a blackout period. No Covered Person may engage at any time in any personal transactions in Citigroup securities while in possession of material non-public information. Investments in Citigroup securities must be made with a long-term orientation rather than for speculation or for the generation of short-term trading profits. In addition, please note that Covered Persons may not engage in the following transactions: o Short sales of Citigroup securities; o Purchasesor sales of options ("puts" or "calls") on Citigroup securities, except writing a covered call at a time when the securities could have been sold under this policy; o Purchases or sales of futures on Citigroup securities; or o Any transactions relating to Citigroup securities that might reasonably appear speculative. The number of Citigroup shares a Covered Person is entitled to in the Citigroup Stock Purchase Plan is not treated as a long stock position until such time as the Covered Person has given instructions to purchase the shares of Citigroup. Thus, Covered Persons are not permitted to use options to hedge their financial interest in the Citigroup Stock Purchase Plan. Contributions into the firm's 401(k) Plan are not subject to the restrictions and prohibitions described in this policy. XIII. ACKNOWLEDGEMENT AND REPORTING REQUIREMENTS - All new Covered Persons must certify that they have received a copy of this policy, and have read and understood its provisions. In addition, all Covered Persons must: 1. Acknowledge receipt of the policy and any modifications thereof, in writing (see Exhibit C for the form of Acknowledgement); 2. Within 10 days of becoming a Covered Person, disclose in writing all information with respect to all securities beneficially owned and any existing personal brokerage relationships (Covered Persons must also disclose any new brokerage relationships whenever established). Such information should be provided on the form attached as Exhibit D; 3. Direct their brokers to supply, on a timely basis, duplicate copies of confirmations of all personal securities transactions (Note: this requirement may be satisfied through the transmission of automated feeds); 4. Within 10 days after the end of each calendar quarter, provide information relating to securities transactions executed during the previous quarter for all securities accounts (Note: this requirement may be satisfied through the transmission of automated feeds); 5. Submit an annual holdings report containing similar information that must be current as of a date no more than 30 days before the report is submitted, and confirm at least annually all brokerage relationships and any and all outside business affiliations (Note: this requirement may be satisfied through the transmission of automated feeds or the regular receipt of monthly brokerage statements); and 6. Certify on an annual basis that he/she has read and understood the policy, complied with the requirements of the policy and that he/she has pre-cleared and disclosed or reported all personal securities transactions and securities accounts required to be disclosed or reported pursuant to the requirements of the policy. DISCLAIMER OF BENEFICIAL OWNERSHIP - The reports described in Items 4 and 5 above may contain a statement that the reports shall not be construed as an admission by the person making the reports that he/she has any direct or indirect beneficial ownership in the securities to which the reports relate. XIV. HANDLING OF DISGORGED PROFITS - Any amounts that are paid/disgorged by a Covered Person under this policy shall be donated by SSB to one or more charities. Amounts donated may be aggregated by SSB and paid to such charity or charities at the end of each year. XV. CONFIDENTIALITY - All information obtained from any Covered Person pursuant to this policy shall be kept in strict confidence, except that such information will be made available to the Securities and Exchange Commission or any other regulatory or self-regulatory organization or to the Fund Boards of Directors to the extent required by law, regulation or this policy. XVI. OTHER LAWS, RULES AND STATEMENTS OF POLICY - Nothing contained in this policy shall be interpreted as relieving any person subject to the policy from acting in accordance with the provision of any applicable law, rule or regulation or any statement of policy or procedure governing the conduct of such person adopted by Citigroup, its affiliates and subsidiaries. XVII. RETENTION OF RECORDS - All records relating to personal securities transactions hereunder and other records meeting the requirements of applicable law, including a copy of this policy and any other policies covering the subject matter hereof, shall be maintained in the manner and to the extent required by applicable law, including Rule 17j-1 under the 1940 Act. The Compliance Department shall have the responsibility for maintaining records created under this policy. XVIII. MONITORING - SSB takes seriously its obligation to monitor the personal investment activities of its employees and to review the periodic reports of all Covered Persons. Employee personal investment transaction activity will be monitored by the Compliance Department. All noted deviations from the policy requirements will be referred back to the employee for follow-up and resolution (with a copy to be supplied to the employee's supervisor). XIX. EXCEPTIONS TO THE POLICY - Any exceptions to this policy must have the prior written approval of the Director of Compliance. Any questions about this policy should be directed to the Compliance Department. XX. BOARD REVIEW - Fund Management and SSB shall provide to the Board of Directors of each Fund, on a quarterly basis, a written report of all material violations of this policy, and at least annually, a written report and certification meeting the requirements of Rule 17j-1 under the 1940 Act. XXI. AMENDMENTS - Unless otherwise noted herein, this policy shall become effective as to all Covered Persons on July 5, 2000. This policy may be amended from time to time by the Compliance Department. Any material amendment of this policy shall be submitted to the Board of Directors of each Fund for approval in accordance with Rule 17j-1 under the 1940 Act. July 5, 2000 EXHIBIT A EXPLANATION OF BENEFICIAL OWNERSHIP You are considered to have "Beneficial Ownership" of Securities if you have or share a direct or indirect "Pecuniary Interest" in the Securities. You have a "Pecuniary Interest" in Securities if you have the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in the Securities. The following are examples of an indirect Pecuniary Interest in Securities: 1. Securities held by members of your immediate family sharing the same household; however, this presumption may be rebutted by convincing evidence that profits derived from transactions in these Securities will not provide you with any economic benefit. "Immediate family" means any child, stepchild, grandchild, parent, stepparent, grandparent, spouse, sibling, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law, and includes any adoptive relationship. 2. Your interest as a general partner in Securities held by a general or limited partnership. 3. Your interest as a manager-member in the Securities held by a limited liability company. You do not have an indirect Pecuniary Interest in Securities held by a corporation, partnership, limited liability company or other entity in which you hold an equity interest, unless you are a controlling equityholder or you have or share investment control over the Securities held by the entity. The following circumstances constitute Beneficial Ownership by you of Securities held by a trust: 1. Your ownership of Securities as a trustee where either you or members of your immediate family have a vested interest in the principal or income of the trust. 2. Your ownership of a vested interest in a trust. 3. Your status as a settlor of a trust, unless the consent of all of the beneficiaries is required in order for you to revoke the trust. The foregoing is a summary of the meaning of "beneficial ownership". For purposes of the attached policy, "beneficial ownership" shall be interpreted in the same manner as it would be in determining whether a person is subject to the provisions of Section 16 of the Securities Exchange Act of 1934 and the rules and regulations thereunder EXHIBIT B SALOMON SMITH BARNEY INC. ("SSB") COVERED PERSON TRADE PRE-APPROVAL FORM (PAGE 1) INSTRUCTIONS: Covered Persons are required to submit this form to the Compliance Department of SSB Citi Asset Management Group ("SSB Citi") prior to placing a trade. The Compliance Department will notify the Covered Person as to whether or not pre-approval is granted. Pre-approval is effective only on the date granted. I. COVERED PERSON INFORMATION - ------------------------------------------------------------------------------------------------------------------------ Covered Person Name: Phone Number: - ------------------------------------------------------------------------------------------------------------------------ Account Title: - ------------------------------------------------------------------------------------------------------------------------ Account Number: - ------------------------------------------------------------------------------------------------------------------------ Fund(s) for which employee is a Covered Person: - ------------------------------------------------------------------------------------------------------------------------ II. SECURITY INFORMATION IPO [ ] Yes [ ] No PRIVATE PLACEMENT [ ] Yes [ ] No
- ------------------------------------------------------------------------------------------------------------------------ Security Type-e.g., If Sale, Date First No. Large Cap Security Name common stock, etc. Ticker Buy/Sell Acquired(1) Shares/Units Stock?2 - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------------------------------------ III. CERTIFICATION I certify that I will not effect the transaction(s) described above unless and until pre-clearance approval is obtained from the Compliance Department. I further certify that, except as described on an attached page, to the best of my knowledge, the proposed transaction(s) will not result in a conflict of interest with any Fund managed by SSB Citi. I further certify that, to the best of my knowledge, there are no pending orders for any security listed above or any related security for any Funds for which I am considered a Covered Person. The proposed transaction(s) are consistent with all firm policies regarding employee personal securities transactions. SIGNATURE ----------------------------------- DATE -------------------------- - ------------------------------------------------------------------------------------------------------------------------ FOR USE BY THE COMPLIANCE DEPARTMENT - ------------------------------------------------------------------------------------------------------------------------ [ ] Yes [ ] No [ ] Yes [ ] No Reason not granted: ARE SECURITIES RESTRICTED? PRE-APPROVAL - ------------------------------------------------------------------------------------------------------------------------ COMPLIANCE DEPARTMENT SIGNATURE: Date: Time: - ------------------------------------------------------------------------------------------------------------------------ 1. All securities sold must have been held for at least 60 days. 2. For purposes of SSB's personal trading policies, a Large Cap Exemption applies to transactions involving 500 or fewer shares in aggregate and the stock is one that is listed on a U.S. stock exchange or NASDAQ and whose issuer has a market capitalization (outstanding shares multiplied by current price) of more than $10 billion.
EXHIBIT C PERSONAL INVESTMENT POLICY FOR SALOMON SMITH BARNEY INC. IN CONNECTION WITH ITS ACTIVITY AS DISTRIBUTOR OF CERTAIN REGISTERED INVESTMENT COMPANIES ACKNOWLEDGMENT I acknowledge that I have received and read the Personal Investment Policy For Salomon Smith Barney Inc. in connection with its activity as Distributor of Certain Registered Investment Companies dated July 5, 2000. I understand the provisions of the Personal Investment Policy as described therein and agree to abide by them. COVERED PERSON NAME (PRINT): ------------------------ SIGNATURE: -------------------- DATE: -------------------- - ------------------------------------------------------------------------------- SOCIAL SECURITY DATE OF HIRE: NUMBER: - ------------------------------------------------------------------------------- JOB FUNCTION & SUPERVISOR: TITLE: - ------------------------------------------------------------------------------- LOCATION: - ------------------------------------------------------------------------------- FLOOR AND/OR ZONE: TELEPHONE NUMBER: - ------------------------------------------------------------------------------- NASD REGISTERED EMPLOYEE (Please check one) [ ] Yes [ ] No - ------------------------------------------------------------------------------- If REGISTERED, list Registration \ License: - ------------------------------------------------------------------------------- This Acknowledgment form must be completed and returned to the Compliance Department of Salomon Smith Barney Inc., 7 World Trade Center, 30th floor, New York, NY 10048. EXHIBIT D SALOMON SMITH BARNEY INC. PERSONAL INVESTMENT POLICY FINANCIAL SERVICES FIRM DISCLOSURE AND INITIAL REPORT OF SECURITIES HOLDINGS THIS REPORT MUST BE SIGNED, DATED AND RETURNED WITHIN 10 DAYS OF EMPLOYMENT TO THE COMPLIANCE DEPARTMENT OF SALOMON SMITH BARNEY INC., 7 WORLD TRADE CENTER, 30TH FLOOR - ------------------------------------------------------------------------------- COVERED PERSON NAME: ------------------- DATE OF EMPLOYMENT: -------------- - ----------------------------------------------------------------------------- BROKERAGE ACCOUNTS: [ ] I do not have a beneficial interest in any account(s) with any financial services firm. [ ] I maintain the following account(s) with the financial services firm(s) listed below (attach additional information if necessary-e.g., a brokerage statement). Please include the information required below for any broker, dealer or bank where an account is maintained which holds securities for your direct or indirect benefit as of the date you began your employment. Name of Financial Service(s) Firm and Address Account Title Account Number SECURITIES HOLDINGS: Complete the following (or attach a copy of your most recent statement(s)) listing all of your securities holdings, with the exception of open-ended mutual funds and U.S Government securities if: o You own securities which are held by financial services firm(s) as described above. If you submit a copy of a statement, it must include all of the information set forth below. Please be sure to include any additional securities purchased since the date of the brokerage statement which is attached. Use additional sheets if necessary. o Your securities are not held with a financial service(s) firm (e.g., dividend reinvestment programs and private placements). - ------------------------------------------------------------------------------- Title of Ticker # of Principal Held Financial Security Symbol Shares Amt. Since Services Firm - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- [ ] I have no securities holdings to report. I certify that I have received the Salomon Smith Barney Inc. Personal Investment Policy and have read it and understood its contents. I further certify that the above represents a complete and accurate description of my brokerage account(s) and securities holdings as of my date of employment. Signature: ----------------------------- Date of Signature: ----------------- -----END PRIVACY-ENHANCED MESSAGE-----