SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant
[ ] Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CitiFunds Trust I on behalf of its series - CitiSelect Folio 200,
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CitiSelect Folio 300, CitiSelect Folio 400 and CitiSelect Folio 500
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(Name of Registrant as Specified In Its Charter)
Lea Anne Copenhefer
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(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1. Title of each class of securities to which transaction applies:
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2. Aggregate number of securities to which transaction applies:
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3. Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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5. Total fee paid:
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[ ] Fee paid previously with preliminary materials
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1. Amount Previously Paid:
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2. Form, Schedule or Registration Statement No.:
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CITISELECT(R) FOLIO 200, CITISELECT(R) FOLIO 300,
CITISELECT(R) FOLIO 400 AND CITISELECT(R) FOLIO 500
21 Milk Street
Boston, Massachusetts 02109
February 18, 1999
Dear Shareholder:
The accompanying materials relate to a Special Meeting of Shareholders of
CitiSelect(R) Folio 200, CitiSelect(R) Folio 300, CitiSelect(R) Folio 400 and
CitiSelect(R) Folio 500. The Meeting will be held on Friday, April 9, 1999 at
3:30 p.m., Eastern time.
YOUR PARTICIPATION AT THIS MEETING IS VERY IMPORTANT IN ORDER TO ACCOMPLISH
PROPOSED ACTIONS THAT YOUR BOARD OF TRUSTEES HAS DETERMINED ARE FAIR AND
REASONABLE AND IN YOUR BEST INTERESTS.
If you cannot attend the Meeting, you may participate by proxy. As a
shareholder, you cast one vote for each share that you own. Please take a few
moments to read the enclosed materials and then cast your vote on the enclosed
proxy card. If the Funds do not receive your proxy card, our proxy solicitor,
Shareholder Communications Corporation, may contact you to help you decide how
to cast your vote.
VOTING TAKES ONLY A FEW MINUTES. EACH SHAREHOLDER'S VOTE IS IMPORTANT. YOUR
PROMPT RESPONSE WILL BE MUCH APPRECIATED.
Shareholders are being asked to vote on two new subadvisers for their Funds
and the transfer of the assets of Intermediate Income Portfolio, an underlying
mutual fund in which the Funds invest, to U.S. Fixed Income Portfolio, a
mutual fund with a similar investment objective. In addition, shareholders are
being asked to approve the selection of the Funds' accountants.
After you have voted on the proposals, please be sure to SIGN YOUR PROXY
CARD AND RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE. If you have any
questions regarding the issues to be voted on, or need assistance in
completing your proxy card, please contact Shareholder Communications
Corporation at 1-800-790-7068.
We appreciate your participation in this important Meeting. Thank you.
Sincerely,
/s/ Philip W. Coolidge
Philip W. Coolidge
President
CITISELECT(R) FOLIO 200, CITISELECT(R) FOLIO 300,
CITISELECT(R) FOLIO 400 AND CITISELECT(R) FOLIO 500
21 Milk Street
Boston, Massachusetts 02109
Telephone: (617) 423-1679
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
To be held Friday, April 9, 1999
A Special Meeting of Shareholders of CitiSelect(R) Folio 200, CitiSelect(R)
Folio 300, CitiSelect(R) Folio 400 and CitiSelect(R) Folio 500 will be held at
Citicorp Center, 153 East 53rd Street, 14th Floor, New York, New York, on
Friday, April 9, 1999 at 3:30 p.m., Eastern Time, for the following purposes:
ITEM 1. To vote on a Sub-Management Agreement between Mutual Management
Corp. and Asset Allocation Portfolios, with respect to Large Cap
Value Portfolio.
ITEM 2. To vote on a Sub-Management Agreement between Salomon Brothers Asset
Management Limited and Asset Allocation Portfolios, with respect to
Foreign Bond Portfolio.
ITEM 3. To vote on the transfer by Intermediate Income Portfolio of all of
its assets to U.S. Fixed Income Portfolio in exchange for an
interest in U.S. Fixed Income Portfolio, followed by the dissolution
of Intermediate Income Portfolio.
ITEM 4. To vote on the selection of PricewaterhouseCoopers LLP as the
independent certified public accountants for each Fund.
ITEM 5. To transact such other business as may properly come before the
Special Meeting of Shareholders and any adjournments thereof.
THE BOARD OF TRUSTEES OF THE FUNDS RECOMMENDS THAT YOU VOTE IN FAVOR OF EACH
OF ITEMS 1 THROUGH 4.
Only shareholders of record on February 10, 1999 will be entitled to vote at
the Special Meeting of Shareholders and at any adjournments thereof.
Linda T. Gibson, Secretary
February 18, 1999
YOUR VOTE IS IMPORTANT. WE WOULD APPRECIATE YOUR PROMPTLY VOTING, SIGNING AND
RETURNING THE ENCLOSED PROXY, WHICH WILL HELP AVOID THE ADDITIONAL EXPENSE OF
A SECOND SOLICITATION. THE ENCLOSED ADDRESSED ENVELOPE REQUIRES NO POSTAGE AND
IS PROVIDED FOR YOUR CONVENIENCE.
CITISELECT(R) FOLIO 200, CITISELECT(R) FOLIO 300,
CITISELECT(R) FOLIO 400 AND CITISELECT(R) FOLIO 500
21 Milk Street
Boston, Massachusetts 02109
Telephone: (617) 423-1679
PROXY STATEMENT
This Proxy Statement and Notice of Special Meeting with accompanying form of
proxy are being furnished in connection with the solicitation of proxies by the
Board of Trustees of CitiSelect(R) Folio 200, CitiSelect(R) Folio 300,
CitiSelect(R) Folio 400 and CitiSelect(R) Folio 500 for use at a Special Meeting
of Shareholders of these Funds, or any adjournment thereof, to be held at
Citicorp Center, 153 East 53rd Street, 14th Floor, New York, New York, on
Friday, April 9, 1999 at 3:30 p.m., Eastern Time, for the purposes set forth in
the accompanying Notice of Special Meeting.
The close of business on February 10, 1999 has been fixed as the Record Date
for the determination of shareholders entitled to notice of and to vote at the
Meeting. 16,758,947.054 shares of CitiSelect(R) Folio 200, -- Class A,
29,771.177 shares of CitiSelect(R) Folio 200 -- Class B; 27,977,438.392 shares
of CitiSelect(R) Folio 300 -- Class A, 20,635.234 shares of CitiSelect(R)
Folio 300 -- Class B, 32,297,455.066 shares of CitiSelect(R) Folio 400 --
Class A, 26,443.175 shares of CitiSelect(R) Folio 400 -- Class B,
12,324,179.810 shares of CitiSelect(R) Folio 500 -- Class A, and 8,071.279
shares of CitiSelect(R) Folio 500 -- Class B (without par value) were
outstanding as of the close of business on the Record Date. Shareholders of
record at the close of business on the Record Date will be entitled to one
vote for each share held.
The Funds' Annual Report for the fiscal years ended October 31, 1998,
including audited financial statements, has previously been sent to
shareholders and is available without charge by written request or by calling
Shareholder Communications Corporation at 1-800-790-7068.
This Proxy Statement and Notice of Special Meeting with accompanying form of
proxy are being mailed by the Board of Trustees on or about February 18, 1999.
MANNER OF VOTING PROXIES AND VOTE REQUIRED
If the accompanying form of proxy is executed properly and returned, shares
represented by it will be voted at the Meeting in accordance with the
instructions on the proxy. Shareholders of each Fund will vote separately with
respect to each Item. IF NO INSTRUCTIONS ARE SPECIFIED, ALL SHARES OF EACH FUND
WILL BE VOTED FOR EACH OF PROPOSED ITEMS 1 THROUGH 4. If the enclosed form of
proxy is executed and returned, it may nevertheless be revoked prior to its
exercise by a signed writing delivered at the Meeting or filed with the
Secretary of the Funds.
If sufficient votes to approve the proposed Items 1 through 4 are not
received, the persons named as proxies may propose one or more adjournments of
the Meeting to permit further solicitation of proxies. Any such adjournment
will require the affirmative vote of a majority of those shares voted at the
Meeting. When voting on a proposed adjournment, the persons named as proxies
will vote all shares that they are entitled to vote with respect to Items 1
through 4 for the proposed adjournment, unless directed to disapprove the
Item, in which case such shares will be voted against the proposed
adjournment.
With respect to each Fund, the presence in person or by proxy of the holders
of a majority of the outstanding shares of that Fund entitled to vote is
required to constitute a quorum at the Meeting for purposes of voting on Items
1 through 4. For purposes of determining the presence of a quorum for
transacting business at the Meeting, abstentions and broker "non-votes" (that
is, proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owner or other persons entitled to
vote shares on a particular matter with respect to which the brokers or
nominees do not have discretionary power) will be treated as shares that are
present but which have not been voted. For this reason, abstentions and broker
"non-votes" will have the effect of a "no" vote for purposes of obtaining the
requisite approval of Items 1 through 4.
GENERAL BACKGROUND
The Funds are asset allocation funds managed by Citibank, N.A. Each of the
Funds invests in a mix of equity, fixed income and money market securities
that is designed by Citibank to offer a different level of potential return
with a different amount of risk. Each Fund invests through multiple underlying
mutual funds (called Portfolios). Certain Portfolios employ investment
subadvisers to manage certain types of securities or to manage securities in
particular investment styles. Citibank monitors and supervises the
subadvisers. Shareholders of the Funds are being asked to approve two new
subadvisers for the Portfolios. Approval of these subadvisers is covered by
Items 1 and 2 below.
CURRENT OPERATIONS AND SUBADVISERS
Each Fund invests in securities through multiple Portfolios. Each Portfolio
invests directly in securities in a particular asset class. Currently, the
Funds invest their assets in Large Cap Growth Portfolio, Small Cap Growth
Portfolio, Large Cap Value Portfolio, Small Cap Value Portfolio, Short-Term
Portfolio, Intermediate Income Portfolio, Foreign Bond Portfolio and
International Portfolio. In the future, the Funds may invest directly in
securities, or may invest through different Portfolios.
Citibank manages certain of the Portfolios itself, and supervises
subadvisers that manage certain assets of the remaining Portfolios. Currently,
Citibank manages Large Cap Growth Portfolio, Small Cap Growth Portfolio,
Intermediate Income Portfolio and Short-Term Portfolio. The following
subadvisers currently manage the Portfolios indicated: Large Cap Value
Portfolio, Mutual Management Corp.; Small Cap Value Portfolio, Franklin
Advisory Services, Inc; Foreign Bond Portfolio, Salomon Brothers Asset
Management Limited (effective March 1, 1999); and International Portfolio,
Hotchkis and Wiley.
Each Portfolio pays a management fee to Citibank. If a subadviser manages
any Portfolio assets, the Portfolio pays that subadviser a fee on those
assets, and that fee is deducted from the management fee paid by the Portfolio
to Citibank. Each investor in a Portfolio (including the Funds) bears its pro
rata share of the Portfolio's management fee.
Mutual Management Corp. and Salomon Brothers Asset Management Limited may
act as subadvisers only for an interim period unless their sub-management
agreements are approved by investors in the appropriate Portfolios (including
the Funds). The Funds' Board of Trustees has decided to submit the sub-
management agreements to Fund shareholders for approval. When the Funds are
asked by the Portfolios to vote on their Sub-Management Agreements, each Fund
will cast its votes with respect to each Sub-Management Agreement in the same
proportion as the votes cast at the Meeting by that Fund's shareholders on the
applicable Sub-Management Agreement.
PROPOSED OPERATIONS AND SUBADVISERS
Citibank has proposed the following changes to the Funds' current investment
operations. These changes will be effective May 1, 1999 (or another date
selected by Citibank to implement them). Except for the merger of the two
Portfolios described below, these changes do not require Portfolio investor
approval, and no Fund shareholder approval is being sought.
o Money market securities will no longer be treated as a separate asset class.
Each Portfolio in which the Funds invest will hold money market securities
to the extent that Citibank deems necessary or appropriate. These money
market investments will be managed by Citibank, as they are today in the
Short-Term Portfolio, but the Funds will not invest in the Short-Term
Portfolio. This change does not require Portfolio investor approval.
o High yield securities will be added as an additional asset class for the
Funds. To accomplish this, the Funds will invest in a new High Yield
Portfolio. The addition of the new asset class and the investment in High
Yield Portfolio do not require Portfolio investor approval.
o Intermediate Income Portfolio will transfer its assets to U.S. Fixed Income
Portfolio, a mutual fund with a similar investment objective, in exchange
for interests in U.S. Fixed Income Portfolio. Intermediate Income Portfolio
will then dissolve, and its investors, including the Funds, will receive
interests in U.S. Fixed Income Portfolio. As a result, each Fund will invest
the securities in its intermediate income asset class in U.S. Fixed Income
Portfolio rather than Intermediate Income Portfolio. The transfer of assets
to U.S. Fixed Income Portfolio requires approval by investors in
Intermediate Income Portfolio. The Funds' Board of Trustees has decided to
submit this matter to Fund shareholders for approval.
These changes are illustrated by the charts below.
CURRENT OPERATIONS:
[Description of Chart
(Page layout - landscape)
Four boxes across page. Each box contains the name of one Fund. The boxes
contain the following names (from left to right): CitiSelect Folio 200,
CitiSelect Folio 300, CitiSelect Folio 400 and CitiSelect Folio 500. Eight boxes
are placed across the page under the five boxes containing the names of the
Funds. Each of the eight boxes contains the name of a Portfolio. The names of
the Portfolios in the boxes are (from left to right): Large Cap Growth
Portfolio, Large Cap Value Portfolio, Small Cap Growth Portfolio, Small Cap
Value Portfolio, International Portfolio, Foreign Bond Portfolio, Short-Term
Portfolio and Intermediate Income Portfolio. Arrows connect each box containing
the name of a Fund to each of the eight boxes beneath it.]
PROPOSED OPERATIONS:
[Description of Chart
(Page layout - landscape)
Four boxes across page. Each box contains the name of one Fund. The boxes
contain the following names (from left to right): CitiSelect Folio 200,
CitiSelect Folio 300, CitiSelect Folio 400 and CitiSelect Folio 500. Eight boxes
are placed across the page under the five boxes containing the names of the
Funds. Each of the eight boxes contains the name of a Portfolio. The names of
the Portfolios in the boxes are (from left to right): Large Cap Growth
Portfolio, Large Cap Value Portfolio, Small Cap Growth Portfolio, Small Cap
Value Portfolio, International Portfolio, Foreign Bond Portfolio, High Yield
Portfolio and U.S. Fixed Income Portfolio. Arrows connect each box containing
the name of a Fund to each of the eight boxes beneath it.]
SHAREHOLDERS SHOULD NOTE THAT THE CONTRACTUAL LEVEL OF MANAGEMENT FEES FOR
FUND SHAREHOLDERS WILL NOT INCREASE AS A RESULT OF ANY OF THESE PROPOSALS.
ITEM 1. TO VOTE ON A SUB-MANAGEMENT AGREEMENT BETWEEN MUTUAL MANAGEMENT
CORP. AND ASSET ALLOCATION PORTFOLIOS, WITH RESPECT TO LARGE CAP VALUE
PORTFOLIO.
ITEM 2. TO VOTE ON A SUB-MANAGEMENT AGREEMENT BETWEEN SALOMON BROTHERS ASSET
MANAGEMENT LIMITED AND ASSET ALLOCATION PORTFOLIOS, WITH RESPECT TO
FOREIGN BOND PORTFOLIO.
Citibank, N.A. currently manages the assets of Large Cap Value Portfolio and
Foreign Bond Portfolio and provides administrative services to these
Portfolios pursuant to separate Management Agreements with Asset Allocation
Portfolios, each dated May 9, 1997. Subject to the terms of each Management
Agreement, Citibank is responsible for the investment management of the
Portfolios and, selects, subject to the review and approval of the Portfolios'
Board of Trustees, appropriate subadvisers to make the investment selections
with respect to the Portfolios consistent with the guidelines and directions
set by Citibank and the Board of Trustees. Citibank then reviews each
subadviser's continued performance.
Miller Anderson & Sherrerd, LLP served as subadviser for Large Cap Value
Portfolio from the Portfolio's inception through January 21, 1999. Since
January 22, 1999, Mutual Management Corp. (MMC), an affiliate of Citibank, has
managed the assets of Large Cap Value Portfolio that were previously managed
by Miller Anderson.
Pacific Investment Management Company (PIMCO) has served as subadviser for
Foreign Bond Portfolio from the Portfolio's inception. Commencing March 1,
1999, Salomon Brothers Asset Management Limited (SBAM), also an affiliate of
Citibank, will manage the assets of Foreign Bond Portfolio that are currently
managed by PIMCO.
MMC, a Delaware corporation, maintains its principal office at 388 Greenwich
Street, New York, New York 10013. MMC currently manages the large cap value
securities of Large Cap Value Portfolio on an interim basis, with approval of
the Portfolio's Board of Trustees. Approval of investors in the Portfolio is
necessary for MMC to continue to serve as subadviser. If the Portfolio's
investors approve MMC's Sub-Management Agreement, MMC will continue to be
responsible for the daily management of the large cap value securities of
Large Cap Value Portfolio.
SBAM, a limited liability private company formed and domiciled in England
and Wales, maintains its principal office at Victoria Plaza, 111 Buckingham
Palace Road, London, England. SBAM is a U.S. registered investment adviser.
Commencing March 1, 1999, SBAM will manage the foreign government securities
of Foreign Bond Portfolio on an interim basis, with approval of the
Portfolio's Board of Trustees. Approval of investors in the Portfolio is
necessary for SBAM to continue to serve as subadviser. If the Portfolio's
investors approve SBAM's Sub-Management Agreement, SBAM will continue to be
responsible for the daily management of the foreign government securities of
Foreign Bond Portfolio.
The Board of Trustees of Large Cap Value Portfolio and Foreign Bond
Portfolio terminated the Portfolios' Sub-Management Agreements with Miller
Anderson and PIMCO upon Citibank's recommendations. These recommendations were
based on Citibank's evaluation of the services provided by these subadvisers,
as well as the availability of appropriate asset management capabilities and
resources in its affiliates, MMC and SBAM.
In accordance with the requirements of the 1940 Act, each Sub-Management
Agreement must be approved by the investors in the Portfolio to which it
relates. These investors include the Funds. The Funds' Board of Trustees has
determined to submit the Sub-Management Agreements to Fund shareholders for
their approval. When asked by each Portfolio to vote on the Portfolio's Sub-
Management Agreement, each Fund will cast its votes with respect to that Sub-
Management Agreement in the same proportion as the votes of that Fund's
shareholders cast at the Meeting on the applicable Item. The percentage of a
Fund's votes representing shareholders of that Fund not voting at the Meeting
will be voted in the same proportion as those cast by shareholders of that
Fund who do, in fact, vote. By voting in favor of Items 1 and 2, Fund
shareholders will be authorizing the Funds' Trustees to vote to approve the
Sub-Management Agreements. Because there are investors in Large Cap Value
Portfolio and Foreign Bond Portfolio besides the Funds, it is possible that
either or both of the Sub-Management Agreements will not be approved by the
requisite vote, even if the Funds' Trustees are instructed to vote in favor of
the Sub-Management Agreements.
THE SUB-MANAGEMENT AGREEMENTS
If the Sub-Management Agreements with MMC and SBAM are approved by the
required holders of beneficial interests in Large Cap Value Portfolio and
Foreign Bond Portfolio, MMC and SBAM will continue to serve as subadvisers to
Large Cap Value Portfolio and Foreign Bond Portfolio, respectively. Each Sub-
Management Agreement, if approved by the "vote of a majority of the
outstanding voting securities" of the Portfolio, will continue in effect for a
two-year period, and thereafter from year to year, subject to approval
annually in accordance with the 1940 Act. Each Sub-Management Agreement may be
terminated at any time without the payment of any penalty by the Board of
Trustees of the applicable Portfolio or by the vote of a "majority of the
outstanding voting securities" of the appropriate Portfolio or by Citibank.
Each Sub-Management Agreement may also be terminated by the applicable
subadviser upon 90 days' advance written notice to Citibank. Each Sub-
Management Agreement will also terminate automatically in the event of its
"assignment" (as defined in the 1940 Act).
Under each Sub-Management Agreement, MMC or SBAM, as the case may be, will
furnish continuing portfolio management services with respect to the large cap
value or foreign government securities of Large Cap Value Portfolio or Foreign
Bond Portfolio, as applicable, subject always to the provisions of the 1940
Act and to the investment objective, policies, procedures and restrictions
imposed by the then current Registration Statement under the 1940 Act with
respect to the applicable Portfolio. Each subadviser will also provide
Citibank with such investment advice and reports and data as are requested by
Citibank.
Each Sub-Management Agreement provides that the subadviser will be
responsible for providing Citibank with such investment advice and supervision
as Citibank may from time to time consider necessary for the proper
supervision of such portion of a Portfolio's assets as Citibank may designate
from time to time; furnishing continuously an investment program and
determining from time to time what securities shall be purchased, sold or
exchanged and what portion of the assets of the Portfolio allocated by
Citibank to the subadviser will be held uninvested, subject always to the
restrictions of the Portfolio's Declaration of Trust, dated as of December 14,
1995, and By-laws, as each may be amended and restated from time to time, the
provisions of the 1940 Act, the then-current Registration Statement with
respect to the applicable Portfolio, and subject, further, to the applicable
subadviser notifying Citibank in advance of its intention to purchase any
securities except insofar as the requirement for such notification may be
waived or limited by Citibank; making recommendations to Citibank as to the
manner in which proxies, voting rights, rights to consent to corporate action
and any other rights pertaining to the Portfolio's portfolio securities shall
be exercised; and taking, on behalf of the Portfolio, all actions which the
subadviser deems necessary to implement the investment policies of the
Portfolio, and in particular placing all orders for the purchase or sale of
securities for the Portfolio's account with the brokers or dealers selected by
it, and to that end each subadviser is authorized as agent to give
instructions to the custodian and any subcustodian of the Portfolio as to
deliveries of securities and payments of cash for the account of the
Portfolio.
The subadvisers are not liable for any error of judgment or mistake of law
or for any loss suffered by Large Cap Value Portfolio or Foreign Bond
Portfolio, as the case may be, in connection with the matters to which the
applicable Sub-Management Agreement relates, except a loss resulting from
willful misfeasance, bad faith or gross negligence in the performance of their
obligations and duties, or by reason of reckless disregard of their
obligations and duties under the applicable Agreement.
Shareholders should refer to Exhibits A and B attached hereto for the
complete terms of the Sub-Management Agreements with MMC and SBAM,
respectively. The description of each Sub-Management Agreement set forth
herein is qualified in its entirety by the provisions of the Sub-Management
Agreements as set forth in such Exhibits.
INVESTMENT ADVISORY FEES
Under the MMC Sub-Management Agreement, Large Cap Value Portfolio pays MMC
for its services on the basis of the following annual fee schedule:
MMC FEE SCHEDULE
0.65% on the first $10 million;
0.50% on the next $10 million;
0.40% on the next $10 million; and
0.30% on remaining assets.
Fees are accrued daily and payable monthly and are at the annual rates
specified above of the aggregate assets of Large Cap Value Portfolio allocated
to MMC. At certain asset levels, fees under the MMC Sub-Management Agreement
will be higher than those that would have been payable to Miller Anderson;
however, Large Cap Value Portfolio's management fees will remain the same. To
the extent that MMC's fees are higher than those that would have been payable
to Miller Anderson, the fees payable to Citibank under its Management
Agreement with Large Cap Value Portfolio will go down by the same amount. As a
result, Fund shareholders will not be affected by the increase.
The fees payable under the Miller Anderson Sub-Management Agreement were
accrued daily and payable monthly and were equal to the percentages specified
below of the aggregate assets of the Funds allocated to Miller Anderson:
FEES PREVIOUSLY PAYABLE TO MILLER ANDERSON
0.625% on the first $25 million;
0.375% on the next $75 million;
0.250% on the next $400 million; and
0.200% on assets in excess of $500 million.
During Large Cap Value Portfolio's fiscal year ended October 31, 1998,
Miller Anderson received $511,370 in advisory fees from the Portfolio. Had the
proposed fees under the MMC Sub-Management Agreement been in effect during
this period, Miller Anderson would have received $454,077 in advisory fees
from the Portfolio, or 88.73% of the fees that Miller Anderson actually
received during this period.
Under the SBAM Sub-Management Agreement, Foreign Bond Portfolio will pay
SBAM for its services on the basis of the following annual fee schedule:
SBAM FEE SCHEDULE
0.30% on the first $200 million;
0.25% on assets over $200 million.
Fees are accrued daily and payable monthly and are at the annual rates
specified above of the aggregate assets of Foreign Bond Portfolio allocated to
SBAM. Fees under the SBAM Sub-Management Agreement will be lower than those
that would have been payable to PIMCO; however, Foreign Bond Portfolio's
management fees paid by shareholders will remain the same. To the extent that
SBAM's fees are lower than those that would have been payable to PIMCO,
Citibank's management fee will increase by the same amount. As a result, Fund
shareholders will not be affected by the decrease.
The fees payable under the PIMCO Sub-Management Agreement were accrued daily
and payable monthly and were equal to the percentages specified below of the
aggregate assets of the Funds allocated to PIMCO:
FEES PREVIOUSLY PAYABLE TO PIMCO
0.35% on the first $200 million;
0.30% on remaining assets.
During Foreign Bond Portfolio's fiscal year ended October 31, 1998, PIMCO
received $900,099 in advisory fees from the Portfolio. Had the proposed fees
under the new SBAM Sub-Management Agreement been in effect during this period,
PIMCO would have received $766,749 in advisory fees from the Portfolio, or
85.18% of the fees that PIMCO actually received during this period.
INFORMATION REGARDING MUTUAL MANAGEMENT CORP.
The following information regarding MMC has been provided by MMC.
MMC is a wholly-owned subsidiary of Salomon Smith Barney Holdings Inc, which
in turn is a wholly-owned subsidiary of Citigroup Inc. Citigroup businesses
produce a broad range of financial services - asset management, banking and
consumer finance, credit and charge cards, insurance, investments, investment
banking and trading - and use diverse channels to make them available to
consumers and corporate managers to numerous investment companies having
aggregate assets as of the date of this Proxy Statement in excess of $290
billion. Citigroup's principal business address is 153 East 53rd Street, New
York, New York 10043.
Frances A. Root will manage the large cap value securities of Large Cap Value
Portfolio allocated to MMC. Ms. Root is an Investment Officer of MMC and a
Senior Portfolio Manager. She joined Smith Barney Capital Management in 1992.
Formerly, she was with Shearson Lehman Advisors as a Vice President and
Portfolio Manager for seven years; and prior to that, with E.F. Hutton &
Company, Inc. She is a Chartered Financial Analyst and a member of The New York
Society of Security Analysts. Ms. Root holds a BA degree from Sweet Briar
College.
The following table sets forth certain information concerning the principal
executive officers and directors of MMC. The address of each of the following
persons is 388 Greenwich Street, New York, New York 10013.
NAME PRINCIPAL OCCUPATION
---- --------------------
Heath B. McLendon .............. Chairman, President and Chief Executive
Officer of MMC; Managing Director of
Salomon Smith Barney and Chairman,
President and Chief Executive Officer of
fifty-eight investment companies sponsored
by Salomon Smith Barney
Lewis E. Daidone ............... Director and Senior Vice President of MMC;
Managing Director of Salomon Smith Barney
and Senior Vice President and Treasurer of
fifty-eight investment companies sponsored
by Salomon Smith Barney
A. George Saks ................. Director of MMC and Executive Vice President
of Salomon Smith Barney
Michael J. Day ................. Treasurer of MMC and Managing Director of
Salomon Smith Barney
Christina T. Sydor ............. General Counsel and Secretary of MMC;
Managing Director of Salomon Smith Barney
and Secretary of the fifty-eight
investment companies sponsored by Salomon
Smith Barney
The following table indicates the size of each investment company advised by
MMC with an investment objective that is similar to the objective for the
large cap value securities asset class and the advisory fee rates of these
investment companies.
ANNUAL
NET ASSETS ON MANAGEMENT FEE
DECEMBER 31, 1998 PERCENT OF
FUND (IN THOUSANDS) AVERAGE NET ASSETS
---- -------------- ------------------
OPEN-END FUND
Smith Barney Funds, Inc. $1,227,783 0.60% to $500 million;
Large Cap Value Fund 0.55% next $500 million;
0.50% after $1 billion.
VARIABLE ANNUITY FUNDS
Smith Barney Variable Account $ 13,779 0.60%
Funds
Income and Growth Portfolio
Travelers Series Fund, Inc.
Smith Barney Large Cap Value $ 464,936 0.65%
Portfolio
INFORMATION REGARDING SALOMON BROTHERS ASSET MANAGEMENT LIMITED
The following information regarding SBAM has been provided by SBAM.
SBAM is a limited liability private company formed and domiciled in England
and Wales. It is a wholly owned subsidiary of Salomon Brothers Europe Limited,
Victoria Plaza, 111 Buckingham Palace Road, London SW1W OSB. Salomon Brothers
Europe Limited is owned by two wholly owned subsidiaries of Salomon Brothers
Holding Company Inc (388 Greenwich Street, New York, New York 10013), Salomon
(International) Finance AG (Schipfe 2, P.O. Box 4406, Zurich, Switzerland) and
Salomon International Limited (Victoria Plaza, 111 Buckingham Palace Road,
London SW1W OSB). Salomon Brothers Holding Company Inc is wholly owned by
Salomon Smith Barney Holdings Inc, which in turn is a wholly owned subsidiary
of Citigroup Inc. Citigroup's businesses are described above.
David J. Scott will be the portfolio manager. Mr. Scott is a Managing
Director, Portfolio Manager and Investment Policy Committee Member of SBAM. Mr.
Scott joined SBAM in April 1994 as Director and Head of Global Fixed Income
responsible for their global bond products. Prior to joining SBAM, Mr. Scott
worked for four years at JP Morgan Investment Management where he had
responsibility for global and non- dollar portfolios; and prior to that, for
Mercury Asset Management. Mr. Scott is a Fellow of the Institute of Actuaries.
He received a B.Sc. in Mathematics and Economics from Nottingham University.
The following table sets forth certain information concerning the principal
executive officers and directors of SBAM. The address of each of the following
persons is Victoria Plaza, 111 Buckingham Palace Road, London SW1W OSB,
England.
NAME PRINCIPAL OCCUPATION
---- --------------------
Vilas V. Gadkari .................. Managing Director and Chief Investment
Officer of SBAM; Managing Director of
Salomon Brothers Asset Management Inc;
Managing Director of Salomon Smith
Barney Inc; and Managing Director
Salomon Brothers International Limited
David J. Scott .................... Director of SBAM
David J. Griffiths ................ Economist and Portfolio Manager of SBAM
Karolos Haggipavlou ............... Portfolio Manager of SBAM
The following table indicates the size of each investment company advised by
SBAM with an investment objective that is similar to the objective for the
foreign government securities asset class and the advisory fee rates of these
investment companies.
ANNUAL
MANAGEMENT FEE
NET ASSETS ON PERCENT OF
FUND DECEMBER 31, 1998 AVERAGE NET ASSETS
---- ----------------- ------------------
OPEN-END FUNDS
Salomon Brothers Global Bond $ 45,046,911 0.375% to $50 million;
Series of the JNL Series 0.35% next $100 million;
Trust 0.30% next $350 million;
0.25% over $500 million.
Salomon Brothers Investment $117,747,606 0.75%
Series -- Strategic Bond
Fund
Strategic Bond Opportunity $ 95,200,414 0.35% to $50 million;
Series of the American 0.30% next $150 million;
Growth Series 0.25% next $300 million;
0.10% over $500 million.
Strategic Bond Trust for the $441,725,216 0.35% to $50 million;
NASL Series 0.30% next $150 million;
0.25% next $300 million;
0.20% over $500 million.
Strategic Income Fund of the $ 79,754,865 0.35% to $50 million;
North American Funds Series 0.30% next $150 million;
0.25% next $300 million;
0.20% over $500 million.
VARIABLE ANNUITY FUND
Salomon Brothers Variable $10,390,056 0.75%
Series Fund
THE EVALUATION BY THE BOARDS OF TRUSTEES
At meetings held on February 4 and 5, 1999 the Trustees of Large Cap Value
Portfolio, Foreign Bond Portfolio and the Funds considered information with
respect to whether each proposed Sub-Management Agreement was in the best
interests of the Portfolios and their respective investors and the Funds and
their shareholders. The Boards of Trustees considered, among other factors,
representations by each subadviser regarding the nature and quality of
services provided or to be provided by the subadviser, and information
regarding fees, expense ratios and performance. In evaluating each
subadviser's ability to provide services to the Portfolios, the Trustees
considered information as to the subadviser's business organization, financial
resources and personnel. The Boards of Trustees also considered the conflicts
of interest inherent in Citibank's recommendation that its affiliates be hired
as subadvisers.
The Boards of Trustees also considered that under circumstances in which
best price and execution may be obtained from more than one broker or dealer,
each subadviser may, in its discretion, purchase and sell securities through
dealers who provide research, statistical and other information to the
subadviser. Although certain research, market and statistical information from
brokers and dealers can be useful to the Portfolios and subadvisers, each
subadviser has advised that such information is, in its opinion, only
supplementary to the subadviser's own research activities and the information
must still be analyzed, weighed and reviewed by the subadviser. It was noted
that such information may be useful to the subadvisers in providing services
to clients other than the Portfolios. Conversely, it was noted that
information provided to the subadvisers by brokers and dealers through whom
other clients of the subadvisers effect securities transactions may be useful
to the subadvisers in providing services to these Portfolios.
Based upon their review, the Boards of Trustees of Large Cap Value Portfolio,
Foreign Bond Portfolio and the Funds concluded that each of the Sub-Management
Agreements is reasonable, fair and in the best interests of each of the
Portfolios and their respective investors and the Funds and their
shareholders, and that the fees provided in each of the Sub-Management
Agreements are fair and reasonable in light of the usual and customary charges
made by others for services of the same nature and quality. Accordingly, after
consideration of the above factors, and such other factors and information as
they deemed relevant, the Boards of Trustees of the Portfolios and the Funds,
including all of the Independent Trustees, unanimously approved each of the
Sub-Management Agreements and voted to recommend their approval by the
investors in Large Cap Value Portfolio and Foreign Bond Portfolio and by
shareholders of the Funds.
VOTE REQUIRED
Approval of each Sub-Management Agreement will require the approval of "a
majority of the outstanding voting securities" of Large Cap Value Portfolio or
Foreign Bond Portfolio, as applicable, present in person or represented by
proxy at a meeting of the investors in that Portfolio. A "majority of the
outstanding voting securities" requires approval by the holders of 67% or more
of the issuer's voting securities which are present at the Meeting if the
holders of more than 50% of such securities are present in person or by proxy,
or more than 50% of the issuer's voting securities, whichever is less.
In the event that a Sub-Management Agreement does not receive the requisite
approval, Citibank would (a) manage all of the assets of the applicable
Portfolio itself, (b) negotiate a new investment subadvisory agreement with a
different advisory organization, or (c) make other appropriate arrangements,
in the case of alternative (b) or (c), subject to approval in accordance with
the 1940 Act.
THE BOARD OF TRUSTEES OF THE FUNDS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF EACH OF THE FUNDS VOTE FOR APPROVAL OF THE SUB-MANAGEMENT
AGREEMENT WITH MMC AND FOR APPROVAL OF THE SUB-MANAGEMENT AGREEMENT WITH SBAM.
ITEM 3. TO VOTE ON THE TRANSFER BY INTERMEDIATE INCOME PORTFOLIO OF ALL OF
ITS ASSETS TO U.S. FIXED INCOME PORTFOLIO IN EXCHANGE FOR AN
INTEREST IN U.S. FIXED INCOME PORTFOLIO, FOLLOWED BY THE DISSOLUTION
OF INTERMEDIATE INCOME PORTFOLIO.
It is intended that proxies submitted by Fund shareholders not limited to
the contrary will be voted in favor of Intermediate Income Portfolio
transferring all of its assets to U.S. Fixed Income Portfolio, a mutual fund
with a similar investment objective, in exchange for an interest in U.S. Fixed
Income Portfolio, followed by the dissolution of Intermediate Income
Portfolio.
Intermediate Income Portfolio's Declaration of Trust currently requires that
investors in that Portfolio approve sales, transfers or exchanges of all or
substantially all of the assets of the Portfolio, including the transfer of
the Portfolio's assets to U.S. Fixed Income Portfolio. Intermediate Income
Portfolio will call a meeting of its investors (including the Funds) to
approve the transfer of its assets to U.S. Fixed Income Portfolio. The Funds'
Board of Trustees has determined to submit this matter to Fund shareholders
for their approval. When asked by the Portfolio to vote on this matter, each
Fund will cast its votes in the same proportion as the votes of that Fund's
shareholders cast at the Meeting on this Item. The percentage of a Fund's
votes representing shareholders of that Fund not voting at the Meeting will be
voted in the same proportion as those cast by shareholders of that Fund who
do, in fact, vote. By voting in favor of this Item, Fund shareholders will be
authorizing the Funds' Trustees to vote in favor of this transfer.
In the event that the proposal in Item 3 does not receive the requisite
shareholder approval for any Fund, the Trustees will consider possible
alternatives, which might include resubmission of the proposal for approval by
shareholders of that Fund.
VOTE REQUIRED
Approval of the transfer of assets of Intermediate Income Portfolio will
require the approval of "a majority interests vote" of Intermediate Income
Portfolio present or represented by proxy at a meeting of the investors in that
Portfolio. "A majority interests vote" requires approval by the holders of 67%
or more of the Portfolio's beneficial interests which are present or represented
at the meeting if the holders of more than 50% of such interests are present or
represented by proxy, or more than 50% of the Portfolio's beneficial interests,
whichever is less.
THE BOARD OF TRUSTEES OF THE FUNDS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF EACH FUND VOTE FOR APPROVAL OF THE TRANSFER OF ASSETS OF
INTERMEDIATE INCOME PORTFOLIO TO U.S. FIXED INCOME PORTFOLIO.
ITEM 4. TO VOTE ON THE SELECTION OF PRICEWATERHOUSECOOPERS LLP AS THE
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR EACH FUND.
It is intended that proxies cast by each Fund's shareholders not limited to
the contrary will be voted in favor of ratifying the selection, by a majority
of the Trustees of the Funds who are not "interested persons" (as that term is
defined in the 1940 Act) of the Funds, of PricewaterhouseCoopers LLP under
Section 32(a) of the 1940 Act as independent public accountants, to certify
every financial statement of each Fund required by any law or regulation to be
certified by independent public accountants and filed with the Securities and
Exchange Commission in respect of all or any part of the fiscal year of the
Fund ending October 31, 1999. PricewaterhouseCoopers LLP has no direct or
material indirect interest in any Fund.
PricewaterhouseCoopers LLP has served as the Funds" independent certified
public accountants since their commencement of operations, providing audit
services and consultation with respect to the preparation of filings with the
Securities and Exchange Commission.
PricewaterhouseCoopers LLP, chartered accountants, an affiliate of
PricewaterhouseCoopers LLP, has served as the Portfolios' independent
certified public accountants since their commencement of operations. At the
meeting of the Portfolios' investors to vote on the matters described above,
investors in the Portfolios also will be asked to approve
PricewaterhouseCoopers LLP, chartered accountants, as the Portfolios'
independent certified public accountants. By voting in favor of this Item,
Fund shareholders will be authorizing the Funds' Trustees to vote in favor of
PricewaterhouseCoopers LLP, chartered accountants, as the Portfolios'
independent certified public accountants.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Meeting and are expected to be available to respond to appropriate
questions. Representatives of PricewaterhouseCoopers LLP are expected to have
the opportunity to make a statement if they desire to do so.
VOTE REQUIRED
Approval of this proposal with respect to a Fund will require approval by
the holders of a majority of the outstanding shares of that Fund which are
present at the Meeting in person or by proxy.
THE BOARD OF TRUSTEES OF THE FUNDS UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF EACH FUND VOTE FOR APPROVAL OF PRICEWATERHOUSECOOPERS LLP AS
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR EACH FUND.
ITEM 5. TO TRANSACT SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE
SPECIAL MEETING OF SHAREHOLDERS AND ANY ADJOURNMENTS THEREOF.
The management of the Funds knows of no other business to be presented at
the Meeting. If any additional matters should be properly presented, it is
intended that the enclosed proxy (if not limited to the contrary) will be
voted in accordance with the judgment of the persons named in the enclosed
form of proxy.
INTERESTS OF CERTAIN PERSONS
As of February 10, 1999, Walter E. Robb, III, a Trustee of the Funds, owned
2,172.74 Class A shares of CitiSelect Folio 400 representing less than 1% of
the outstanding shares of the Class and the Folio. As of that date no other
Trustee or officer of the Funds owned beneficially or had the right to vote any
outstanding shares of the Funds.
As of February 10, 1999, to the best knowledge of the Funds, no person
beneficially owned 5% or more of the outstanding shares of the Funds.
ADDITIONAL INFORMATION
Each Fund is a series of CitiFunds Trust I, a diversified, open-end
registered investment company organized as a Massachusetts business trust
under a Declaration of Trust dated as of April 13, 1984, as amended and
restated on August 9, 1996. The Funds were designated as separate series of
the Trust on February 9, 1996. The mailing address of the Trust is 21 Milk
Street, Boston, Massachusetts 02109.
Fund shareholders may have purchased their shares through banks or other
financial institutions, securities dealers or others (called Service Agents)
that have entered into service agreements with the Funds' distributor. In
these cases, the Service Agents are the shareholders of record of the Funds.
At any meeting of Fund shareholders, a Service Agent may vote any shares of
which it is the holder of record and for which it does not receive voting
instructions proportionately in accordance with the instructions it receives
for all other shares of which that Service Agent is the holder of record.
The cost of soliciting proxies in the accompanying form, which is expected
to be about $375,000, including the fees of a proxy soliciting agent, will be
borne by Citibank. In addition to solicitation by mail, proxies may be
solicited by the Board of Trustees, officers, and regular employees and agents
of the Funds without compensation therefor. Citibank may reimburse brokerage
firms and others for their expenses in forwarding proxy materials to the
beneficial owners and soliciting them to execute the proxies.
The Funds' distributor is CFBDS, Inc., 21 Milk Street, Boston, Massachusetts
02109. State Street Bank and Trust Company acts as transfer agent, dividend
disbursing agent and custodian for each Fund. The principal business address
of State Street is 225 Franklin Street, Boston, Massachusetts 02110.
SUBMISSION OF CERTAIN PROPOSALS
The Trust is a Massachusetts business trust and as such is not required to
hold annual meetings of shareholders, although special meetings may be called
for the Funds, or for CitiFunds Trust I as a whole, for purposes such as
electing Trustees or removing Trustees, changing fundamental policies, or
approving an advisory contract. Shareholder proposals to be presented at any
subsequent meeting of shareholders must be received by the Trust at the
Trust's office within a reasonable time before the proxy solicitation is made.
YOU ARE URGED TO FILL IN, DATE, SIGN AND RETURN THE ENCLOSED PROXY PROMPTLY.
By Order of the Board of Trustees,
Linda T. Gibson, Secretary
February 18, 1999
EXHIBIT A
SUB-MANAGEMENT AGREEMENT
ASSET ALLOCATION PORTFOLIOS
Large Cap Value Portfolio
SUB-MANAGEMENT AGREEMENT, dated January 22, 1999, by and between Asset
Allocation Portfolios (the "Trust"), and Mutual Management Corp., a Delaware
corporation (the "Subadviser").
WITNESSETH:
WHEREAS, Citibank, N.A. (the "Adviser") has been retained by the Trust to
act as investment adviser to the Trust with respect to the series of the Trust
designated as Large Cap Value Portfolio (the "Portfolio"), and
WHEREAS, the Trust engages in business as an open-end management investment
company and is registered as such under the Investment Company Act of 1940, as
amended (collectively with the rules and regulations promulgated thereunder,
the "1940 Act"), and
WHEREAS, the Adviser has requested that the Trust engage the Subadviser to
provide certain investment advisory services for the Portfolio, and the
Subadviser is willing to provide such investment advisory services for the
Portfolio 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. Appointment of the Subadviser. In accordance with and subject to the
Management Agreement between the Trust and the Adviser (the "Management
Agreement"), the Trust hereby appoints the Subadviser to act as subadviser
with respect to the Portfolio for the period and on the terms set forth in
this Agreement. The Subadviser accepts such appointment and agrees to
provide an investment program with respect to the Portfolio for the
compensation provided by this Agreement.
2. Duties of the Subadviser. The Subadviser shall provide the Portfolio
and the Adviser with such investment advice and supervision as the Adviser
may from time to time consider necessary for the proper management of such
portion of the Portfolio's investment assets as the Adviser may designate
from time to time. Notwithstanding any provision of this Agreement, the
Adviser shall retain all rights and ultimate responsibilities to supervise
and, in its discretion, conduct investment advisory activities relating to
the Trust. The Subadviser shall furnish continuously an investment program
and shall determine from time to time what securities shall be purchased,
sold or exchanged and what portion of the assets of the Portfolio allocated
by the Adviser to the Subadviser shall be held uninvested, subject always to
the restrictions of the Trust's Declaration of Trust, dated as of December
14, 1995, and By-laws, as each may be amended from time to time
(respectively, the "Declaration" and the "By-Laws"), the provisions of the
1940 Act, and the then-current Registration Statement of the Trust with
respect to the Portfolio, and subject, further, to the Subadviser notifying
the Adviser in advance of the Subadviser's intention to purchase any
securities except insofar as the requirement for such notification may be
waived or limited by the Adviser, it being understood that the Subadviser
shall be responsible for compliance with any restrictions imposed in writing
by the Adviser from time to time in order to facilitate compliance with the
above-mentioned restrictions and such other restrictions as the Adviser may
determine. Further, the Adviser or the Trustees of the Trust may at any
time, upon written notice to the Subadviser, suspend or restrict the right
of the Subadviser to determine what securities shall be purchased or sold on
behalf of the Portfolio and what portion, if any, of the assets of the
Portfolio allocated by the Adviser to the Subadviser shall be held
uninvested. The Subadviser shall also, as requested, make recommendations to
the Adviser as to the manner in which proxies, voting rights, rights to
consent to corporate action and any other rights pertaining to the
Portfolio's portfolio securities shall be exercised. Should the Board of
Trustees of the Trust or the Adviser at any time, however, make any definite
determination as to investment policy applicable to the Portfolio and notify
the Subadviser thereof in writing, the Subadviser shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked.
The Subadviser shall take, on behalf of the Portfolio, all actions which
it deems necessary to implement the investment policies determined as
provided above, and in particular to place all orders for the purchase or
sale of securities for the Portfolio's account with the brokers or dealers
selected by it, and to that end the Subadviser is authorized as the agent of
the Trust to give instructions to the custodian and any subcustodian of the
Portfolio as to deliveries of securities and payments of cash for the
account of the Portfolio. The Subadviser will advise the Adviser on the same
day it gives any such instructions. In connection with the selection of such
brokers or dealers and the placing of such orders, 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
Portfolio and/or the other accounts over which the Subadviser or its
affiliates exercise investment discretion. The Subadviser is authorized to
pay a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Portfolio which is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Subadviser determines in good
faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular
transaction or the overall responsibilities which the Subadviser and its
affiliates have with respect to accounts over which they exercise investment
discretion. In making purchases or sales of securities or other property for
the account of the Portfolio, the Subadviser may deal with itself or with
the Trustees of the Trust or the Trust's underwriter or distributor to the
extent such actions are permitted by the 1940 Act. The Board of Trustees of
the Trust, in its discretion, may instruct the Subadviser to effect all or a
portion of its securities transactions with one or more brokers and/or
dealers selected by the Board of Trustees, if it determines that the use of
such brokers and/or dealers is in the best interest of the Trust.
3. Allocation of Charges and Expenses. The Subadviser shall furnish at
its own expense all necessary services, facilities and personnel in
connection with its responsibilities under Section 2 above. Except as
provided in the foregoing sentence, it is understood that the Trust will pay
from the assets of the Portfolio all of its own expenses allocable to the
Portfolio including, without limitation, organization costs of the
Portfolio; compensation of Trustees who are not "interested persons" of the
Trust; 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, registrar or dividend disbursing agent of the Trust; expenses
of issuing and redeeming beneficial interests and servicing investor
accounts; expenses of preparing, typesetting, printing and mailing investor
reports, notices, proxy statements and reports to governmental officers and
commissions and to investors in the Portfolio; expenses connected with the
execution, recording and settlement of security transactions; insurance
premiums; fees and expenses of the custodian for all services to the
Portfolio, including safekeeping of funds and securities and maintaining
required books and accounts; expenses of calculating the net asset value of
the Portfolio (including but not limited to the fees of independent pricing
services); expenses of meetings of the Portfolio's investors; expenses
relating to the issuance of beneficial interests in the Portfolio; and such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Trust on behalf of
the Portfolio may be a party and the legal obligation which the Trust may
have to indemnify its Trustees and officers with respect thereto.
4. Compensation of the Subadviser. For the services to be rendered by the
Subadviser hereunder, the Trust shall pay to the Subadviser from the assets
of the Portfolio an investment subadvisory fee, accrued daily and paid
monthly, at an annual rate equal to the percentages specified below of the
aggregate assets of the Portfolio allocated to the Subadviser:
0.65% on the first $10 million;
0.50% on the next $10 million;
0.40% on the next $10 million; and
0.30% on remaining assets.
If the Subadviser serves as investment subadviser for less than the whole
of any period specified in this Section 4, the compensation to the
Subadviser shall be prorated.
5. Covenants of the Subadviser. The Subadviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Trust's principal
underwriter or distributor, if any, as principals in making purchases or
sales of securities or other property for the account of the Portfolio,
except as permitted by the 1940 Act, will not take a long or short position
in beneficial interests of the Portfolio except as permitted by the
Declaration, and will comply with all other provisions of the Declaration
and By-Laws and the then-current Registration Statement applicable to the
Portfolio relative to the Subadviser and its directors and officers.
6. Limitation of Liability of the Subadviser. The Subadviser shall not be
liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution of
securities transactions for the Portfolio, except for willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by reason
of reckless disregard of its obligations and duties hereunder. As used in
this Section 6, the term "Subadviser" shall include directors, officers,
partners and employees of the Subadviser as well as the Subadviser itself.
The Adviser is expressly made a third party beneficiary of this Agreement,
and may enforce any obligations of the Subadviser under this Agreement and
recover directly from the Subadviser for any liability the Subadviser may
have hereunder.
7. Activities of the Subadviser. The services of the Subadviser to the
Portfolio are not to be deemed to be exclusive, the Subadviser being free to
render investment advisory and/or other services to others, including
accounts or investment management companies with similar or identical
investment objectives to the Portfolio. It is understood that Trustees,
officers, and investors of the Trust or the Adviser are or may be or may
become interested in the Subadviser, as directors, officers, partners,
employees, or otherwise and that directors, officers, partners and employees
of the Subadviser are or may become similarly interested in the Trust or the
Adviser and that the Subadviser may be or may become interested in the Trust
as an investor or otherwise.
8. Duration, Termination and Amendments of this Agreement. This Agreement
shall become effective as of the day and year first above written, and shall
govern the relations between the parties hereto thereafter and shall remain
in force until January 22, 2001, on which date it will terminate unless its
continuance after January 22, 2001 is "specifically approved at least
annually" (a) by the vote of a majority of the Trustees of the Trust who are
not "interested persons" of the Trust or of the Adviser or of the Subadviser
at a meeting specifically called for the purpose of voting on such approval,
and (b) by the Board of Trustees of the Trust or by "vote of a majority of
the outstanding voting securities" of the Portfolio.
This Agreement may be terminated at any time without the payment of any
penalty by (i) the Trustees, (ii) the "vote of a majority of the outstanding
voting securities" of the Portfolio, or (iii) the Adviser, in each case on
not more than 60 days' nor less than 30 days' written notice to the other
party. This Agreement may be terminated at any time without the payment of
any penalty by the Subadviser on not less than 90 days' written notice to
the Adviser. This Agreement shall automatically terminate in the event of
its "assignment."
This Agreement constitutes the entire agreement between the parties and
may be amended only if such amendment is approved by the Subadviser and the
"vote of a majority of the outstanding voting securities" of the Portfolio
(except for any such amendment as may be effected in the absence of such
approval without violating the 1940 Act).
The terms "specifically approved at least annually," "vote of a majority
of the outstanding voting securities," "assignment," "affiliated person,"
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.
Each party acknowledges and agrees that all obligations of the Trust under
this Agreement are binding only with respect to the Portfolio; 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 the Portfolio; 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 undersigned officer of the Trust has executed this Agreement not
individually but in his capacity as an officer of the Trust under the
Declaration, and the obligations of this Agreement are not binding upon any
of the Trustees, officers or holders of beneficial interests in the Trust
individually.
9. Governing Law. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of The
Commonwealth of Massachusetts provided, however, that nothing herein will be
construed in a manner inconsistent with the 1940 Act or any rules or
regulations of the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
ASSET ALLOCATION PORTFOLIOS MUTUAL MANAGEMENT CORP.
on behalf of Large Cap Value Portfolio
By: ------------------------------------ By: --------------------------------
Title: --------------------------------- Title: -----------------------------
The foregoing is acknowledged:
Citibank, N.A.
By: ------------------------------------
Title: ---------------------------------
EXHIBIT B
SUB-MANAGEMENT AGREEMENT
ASSET ALLOCATION PORTFOLIOS
Foreign Bond Portfolio
SUB-MANAGEMENT AGREEMENT, dated March 1, 1999, by and between Asset
Allocation Portfolios (the "Trust"), and Salomon Brothers Asset Management
Limited, a British limited liability private corporation (the "Subadviser").
WITNESSETH:
WHEREAS, Citibank, N.A. (the "Adviser") has been retained by the Trust to
act as investment adviser to the Trust with respect to the series of the Trust
designated as Foreign Bond Portfolio (the "Portfolio"), and
WHEREAS, the Trust engages in business as an open-end management investment
company and is registered as such under the Investment Company Act of 1940, as
amended (collectively with the rules and regulations promulgated thereunder,
the "1940 Act"), and
WHEREAS, the Adviser has requested that the Trust engage the Subadviser to
provide certain investment advisory services for the Portfolio, and the
Subadviser is willing to provide such investment advisory services for the
Portfolio 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. Appointment of the Subadviser. In accordance with and subject to the
Management Agreement between the Trust and the Adviser (the "Management
Agreement"), the Trust hereby appoints the Subadviser to act as subadviser
with respect to the Portfolio for the period and on the terms set forth in
this Agreement. The Subadviser accepts such appointment and agrees to
provide an investment program with respect to the Portfolio for the
compensation provided by this Agreement.
2. Duties of the Subadviser. The Subadviser shall provide the Portfolio
and the Adviser with such investment advice and supervision as the Adviser
may from time to time consider necessary for the proper management of such
portion of the Portfolio's investment assets as the Adviser may designate
from time to time. Notwithstanding any provision of this Agreement, the
Adviser shall retain all rights and ultimate responsibilities to supervise
and, in its discretion, conduct investment advisory activities relating to
the Trust. The Subadviser shall furnish continuously an investment program
and shall determine from time to time what securities shall be purchased,
sold or exchanged and what portion of the assets of the Portfolio allocated
by the Adviser to the Subadviser shall be held uninvested, subject always to
the restrictions of the Trust's Declaration of Trust, dated as of December
14, 1995, and By-laws, as each may be amended from time to time
(respectively, the "Declaration" and the "By-Laws"), the provisions of the
1940 Act, and the then-current Registration Statement of the Trust with
respect to the Portfolio, and subject, further, to the Subadviser notifying
the Adviser in advance of the Subadviser's intention to purchase any
securities except insofar as the requirement for such notification may be
waived or limited by the Adviser, it being understood that the Subadviser
shall be responsible for compliance with any restrictions imposed in writing
by the Adviser from time to time in order to facilitate compliance with the
above-mentioned restrictions and such other restrictions as the Adviser may
determine. Further, the Adviser or the Trustees of the Trust may at any
time, upon written notice to the Subadviser, suspend or restrict the right
of the Subadviser to determine what securities shall be purchased or sold on
behalf of the Portfolio and what portion, if any, of the assets of the
Portfolio allocated by the Adviser to the Subadviser shall be held
uninvested. The Subadviser shall also, as requested, make recommendations to
the Adviser as to the manner in which proxies, voting rights, rights to
consent to corporate action and any other rights pertaining to the
Portfolio's portfolio securities shall be exercised. Should the Board of
Trustees of the Trust or the Adviser at any time, however, make any definite
determination as to investment policy applicable to the Portfolio and notify
the Subadviser thereof in writing, the Subadviser shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked.
The Subadviser shall take, on behalf of the Portfolio, all actions which
it deems necessary to implement the investment policies determined as
provided above, and in particular to place all orders for the purchase or
sale of securities for the Portfolio's account with the brokers or dealers
selected by it, and to that end the Subadviser is authorized as the agent of
the Trust to give instructions to the custodian and any subcustodian of the
Portfolio as to deliveries of securities and payments of cash for the
account of the Portfolio. The Subadviser will advise the Adviser on the same
day it gives any such instructions. In connection with the selection of such
brokers or dealers and the placing of such orders, 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
Portfolio and/or the other accounts over which the Subadviser or its
affiliates exercise investment discretion. The Subadviser is authorized to
pay a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Portfolio which is
in excess of the amount of commission another broker or dealer would have
charged for effecting that transaction if the Subadviser determines in good
faith that such amount of commission is reasonable in relation to the value
of the brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular
transaction or the overall responsibilities which the Subadviser and its
affiliates have with respect to accounts over which they exercise investment
discretion. In making purchases or sales of securities or other property for
the account of the Portfolio, the Subadviser may deal with itself or with
the Trustees of the Trust or the Trust's underwriter or distributor to the
extent such actions are permitted by the 1940 Act. The Board of Trustees of
the Trust, in its discretion, may instruct the Subadviser to effect all or a
portion of its securities transactions with one or more brokers and/or
dealers selected by the Board of Trustees, if it determines that the use of
such brokers and/or dealers is in the best interest of the Trust.
3. Allocation of Charges and Expenses. The Subadviser shall furnish at
its own expense all necessary services, facilities and personnel in
connection with its responsibilities under Section 2 above. Except as
provided in the foregoing sentence, it is understood that the Trust will pay
from the assets of the Portfolio all of its own expenses allocable to the
Portfolio including, without limitation, organization costs of the
Portfolio; compensation of Trustees who are not "interested persons" of the
Trust; 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, registrar or dividend disbursing agent of the Trust; expenses
of issuing and redeeming beneficial interests and servicing investor
accounts; expenses of preparing, typesetting, printing and mailing investor
reports, notices, proxy statements and reports to governmental officers and
commissions and to investors in the Portfolio; expenses connected with the
execution, recording and settlement of security transactions; insurance
premiums; fees and expenses of the custodian for all services to the
Portfolio, including safekeeping of funds and securities and maintaining
required books and accounts; expenses of calculating the net asset value of
the Portfolio (including but not limited to the fees of independent pricing
services); expenses of meetings of the Portfolio's investors; expenses
relating to the issuance of beneficial interests in the Portfolio; and such
non-recurring or extraordinary expenses as may arise, including those
relating to actions, suits or proceedings to which the Trust on behalf of
the Portfolio may be a party and the legal obligation which the Trust may
have to indemnify its Trustees and officers with respect thereto.
4. Compensation of the Subadviser. For the services to be rendered by the
Subadviser hereunder, the Trust shall pay to the Subadviser from the assets
of the Portfolio an investment subadvisory fee, accrued daily and paid
monthly, at an annual rate equal to the percentages specified below of the
aggregate assets of the Portfolio allocated to the Subadviser:
0.30% on the first $200 million;
0.25% on assets over $200 million
If the Subadviser serves as investment subadviser for less than the whole
of any period specified in this Section 4, the compensation to the
Subadviser shall be prorated.
5. Covenants of the Subadviser. The Subadviser agrees that it will not
deal with itself, or with the Trustees of the Trust or the Trust's principal
underwriter or distributor, if any, as principals in making purchases or
sales of securities or other property for the account of the Portfolio,
except as permitted by the 1940 Act, will not take a long or short position
in beneficial interests of the Portfolio except as permitted by the
Declaration, and will comply with all other provisions of the Declaration
and By-Laws and the then-current Registration Statement applicable to the
Portfolio relative to the Subadviser and its directors and officers.
6. Limitation of Liability of the Subadviser. The Subadviser shall not be
liable for any error of judgment or mistake of law or for any loss arising
out of any investment or for any act or omission in the execution of
securities transactions for the Portfolio, except for willful misfeasance,
bad faith or gross negligence in the performance of its duties, or by reason
of reckless disregard of its obligations and duties hereunder. As used in
this Section 6, the term "Subadviser" shall include directors, officers,
partners and employees of the Subadviser as well as the Subadviser itself.
The Adviser is expressly made a third party beneficiary of this Agreement,
and may enforce any obligations of the Subadviser under this Agreement and
recover directly from the Subadviser for any liability the Subadviser may
have hereunder.
7. Activities of the Subadviser. The services of the Subadviser to the
Portfolio are not to be deemed to be exclusive, the Subadviser being free to
render investment advisory and/or other services to others, including
accounts or investment management companies with similar or identical
investment objectives to the Portfolio. It is understood that Trustees,
officers, and investors of the Trust or the Adviser are or may be or may
become interested in the Subadviser, as directors, officers, partners,
employees, or otherwise and that directors, officers, partners and employees
of the Subadviser are or may become similarly interested in the Trust or the
Adviser and that the Subadviser may be or may become interested in the Trust
as an investor or otherwise.
8. Duration, Termination and Amendments of this Agreement. This Agreement
shall become effective as of the day and year first above written, and shall
govern the relations between the parties hereto thereafter and shall remain
in force until March 1, 2001, on which date it will terminate unless its
continuance after March 1, 2001 is "specifically approved at least annually"
(a) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Adviser or of the Subadviser at
a meeting specifically called for the purpose of voting on such approval,
and (b) by the Board of Trustees of the Trust or by "vote of a majority of
the outstanding voting securities" of the Portfolio.
This Agreement may be terminated at any time without the payment of any
penalty by (i) the Trustees, (ii) the "vote of a majority of the outstanding
voting securities" of the Portfolio, or (iii) the Adviser, in each case on
not more than 60 days' nor less than 30 days' written notice to the other
party. This Agreement may be terminated at any time without the payment of
any penalty by the Subadviser on not less than 90 days' written notice to
the Adviser. This Agreement shall automatically terminate in the event of
its "assignment."
This Agreement constitutes the entire agreement between the parties and
may be amended only if such amendment is approved by the Subadviser and the
"vote of a majority of the outstanding voting securities" of the Portfolio
(except for any such amendment as may be effected in the absence of such
approval without violating the 1940 Act).
The terms "specifically approved at least annually," "vote of a majority
of the outstanding voting securities," "assignment," "affiliated person,"
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.
Each party acknowledges and agrees that all obligations of the Trust under
this Agreement are binding only with respect to the Portfolio; 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 the Portfolio; 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 undersigned officer of the Trust has executed this Agreement not
individually but in his capacity as an officer of the Trust under the
Declaration, and the obligations of this Agreement are not binding upon any
of the Trustees, officers or holders of beneficial interests in the Trust
individually.
9. Governing Law. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of The
Commonwealth of Massachusetts provided, however, that nothing herein will be
construed in a manner inconsistent with the 1940 Act or any rules or
regulations of the Securities and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.
ASSET ALLOCATION PORTFOLIOS SALOMON BROTHERS ASSET
on behalf of Foreign Bond Portfolio MANAGEMENT LIMITED
By: ------------------------------------ By: --------------------------------
Title: --------------------------------- Title: -----------------------------
The foregoing is acknowledged:
Citibank, N.A.
By: ------------------------------------
Title: ---------------------------------
PROXY CARD PROXY CARD
[NAME OF FUND]
A SPECIAL MEETING OF SHAREHOLDERS TO BE HELD APRIL 9, 1999
The undersigned, revoking all Proxies heretofore given, hereby appoints each of
Susan Jakuboski and Christine A. Drapeau, or any of them, as Proxies of the
undersigned with full power of substitution, to vote on behalf of the
undersigned all shares in [Name of Fund] which the undersigned is entitled to
vote at the Special Meeting of Shareholders of the Fund to be held at Citicorp
Center, 153 East 53rd Street, 14th Floor, New York, New York, on Friday, April
9, 1999 at 3:30 p.m., Eastern Time and at any adjournment thereof, as fully as
the undersigned would be entitled to vote if personally present , as follows.
THE SHARES REPRESENTED HEREBY WILL BE VOTED AS INDICATED OR FOR ANY PROPOSALS
FOR WHICH NO CHOICE IS INDICATED.
THE PROXIES ARE AUTHORIZED IN THEIR DISCRETION TO VOTE UPON SUCH OTHER MATTERS
AS MAY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
Control Number: ______________
NOTE: PLEASE SIGN EXACTLY AS YOUR
NAME(S) APPEAR ON THIS PROXY CARD.
When signing as attorney, executor,
administrator, trustee, guardian or
as custodian for a minor, please sign
your name and give your full title as
such. If signing on behalf of a
corporation, please sign the full
corporate name and your name and
indicate your title. If you are a
partner signing for a partnership,
please sign the partnership name and
your name. Joint owners should each
sign this proxy. Please sign, date
and return in the enclosed envelope.
____________________________________
Signature
____________________________________
Signature of joint owner, if any
____________________________________
Date
PROXY SOLICITED ON BEHALF OF THE FUND'S BOARD OF TRUSTEES.
THE BOARD OF TRUSTEES RECOMMENDS A VOTE FOR THE FOLLOWING PROPOSALS.
FOR AGAINST ABSTAIN
1. A Sub Management Agreement between Mutual [ ] [ ] [ ]
Management Corp. and Asset Allocation
Portfolios, with respect to Large Cap Value
Portfolio.
2. A Sub Management Agreement between Salomon [ ] [ ] [ ]
Brothers Asset Management Limited and Asset
Allocation Portfolios, with respect to
Foreign Bond Portfolio.
3. The transfer by Intermediate Income [ ] [ ] [ ]
Portfolio of all of its assets to U.S. Fixed
Income Portfolio in exchange for an interest
in U.S. Fixed Income Portfolio, followed by
the dissolution of Intermediate Income
Portfolio.
4. The selection of PricewaterhouseCoopers LLP [ ] [ ] [ ]
as the independent certified public
accountants for each fund.
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.
FOUR SIMPLE METHODS TO VOTE YOUR PROXY
THE ACCOMPANYING PROXY STATEMENT DISCUSSES MATTERS REGARDING THE CITISELECT
PORTFOLIOS. It is important that you vote on these issues. So, after you have
reviewed the proxy information, please vote your shares by utilizing one of the
following methods described below.
Call toll free 1-800-790-7068 and follow
[graphic omitted] BY PHONE: the automated instructions. You will need
the 8 digit control number located on your
proxy card.
[graphic omitted] BY MAIL: Simply enclose your executed proxy card
in the postage-paid envelope found within
your proxy package.
Visit https://www.proxycard.com
[graphic omitted] BY INTERNET: Once there, enter the 8 digit control
number located on your proxy card.
[graphic omitted] BY FAX: Simply fax your executed proxy to
1-800-733-1885.
If you have any questions regarding the meeting agenda or the execution of
your proxy, please call 1-800-790-7068.
YOUR VOTE IS IMPORTANT! PLEASE VOTE TODAY.