Citigroup (C)

Transfer Agency

        Beginning in August 2005, five putative class action lawsuits alleging violations of federal securities laws and state law have been filed in the United States District Court for the Southern District of New York against Citigroup Global Markets Inc. and Smith Barney Fund Management LLC ("SBFM") based on the previously announced settlement resolving an SEC investigation into matters relating to arrangements among certain Smith Barney mutual funds, an affiliated transfer agent, and an unaffiliated sub-transfer agent. The complaints seek injunctive relief and compensatory and punitive damages, removal of SBFM as the advisor for the Smith Barney family of funds, rescission of the funds' management and other contracts with SBFM, recovery of all fees paid to SBFM pursuant to such contracts, and an award of attorneys' fees and litigation expenses.

Transfer Agency

Citigroup’s 2004 results reflect an aggregate reserve of $196 million ($151 million after-tax) related to the expected resolution of the previously disclosed SEC investigation into mutual fund transfer agent matters that began in November 2003.

In 1999, Citigroup Asset Management (“CAM”) recommended that an affiliate become the transfer agent for certain mutual funds managed by CAM.  The affiliate that became the transfer agent, Citicorp Trust Bank (“CTB”), subcontracted transfer agency work to the previous (unaffiliated) transfer agent.  At the time CAM entered the business, CAM concluded a separate agreement with the sub-transfer agent that guaranteed certain benefits to CAM and its affiliates.  That agreement, and a one-time payment related to termination of the agreement, were not disclosed to the boards of the mutual funds that approved the retention of the affiliated transfer agent.

As previously discussed, in July 2004, the staff of the SEC indicated that it was considering recommending an enforcement proceeding against CAM and certain of its affiliates relating to the transfer agency and sub-transfer agency arrangements, including the creation and operation of this transfer agency, the compensation received by CTB and the adequacy of CAM’s disclosures to the fund boards.  The staff subsequently informed four individuals (none of whom remains in his or her prior position with CAM) that it was also considering similar enforcement proceedings against them.  The Company is cooperating with the SEC in its investigation.  The reserve fully covers the financial terms that the SEC staff has agreed to recommend to the Commission for resolution of this matter.  The Citigroup offer of settlement is subject to final negotiation, and any settlement of this matter with the SEC will require approval by the Board of Directors of Citigroup and acceptance by the SEC.

Transfer Agency

        On May 31, 2005, Smith Barney Fund Management LLC (SBFM) and Citigroup Global Markets Inc. (CGMI) completed its settlement with the U.S. Securities and Exchange Commission resolving an investigation by the SEC into matters relating to arrangements between certain Smith Barney mutual funds, an affiliated transfer agent, and an unaffiliated sub-transfer agent. Under the terms of the settlement, SBFM and CGMI paid a total of $208.1 million, consisting of $128 million in disgorgement and $80 million in penalties. The settlement, in which SBFM and CGMI have neither admitted nor denied wrongdoing or liability, includes fraud charges resulting from failure by SBFM and CGMI to disclose aspects of the transfer agent arrangements to the Funds. The settlement does not establish wrongdoing or liability for purposes of any other proceeding.

Transfer Agency

Citigroup’s 2004 results reflect an aggregate reserve of $196 million ($151 million after-tax) related to the expected resolution of the previously disclosed SEC investigation into mutual fund transfer agent matters that began in November 2003.

In 1999, Citigroup Asset Management (“CAM”) recommended that an affiliate become the transfer agent for certain mutual funds managed by CAM.  The affiliate that became the transfer agent, Citicorp Trust Bank (“CTB”), subcontracted transfer agency work to the previous (unaffiliated) transfer agent.  At the time CAM entered the business, CAM concluded a separate agreement with the sub-transfer agent that guaranteed certain benefits to CAM and its affiliates.  That agreement, and a one-time payment related to termination of the agreement, were not disclosed to the boards of the mutual funds that approved the retention of the affiliated transfer agent.

As previously discussed, in July 2004, the staff of the SEC indicated that it was considering recommending an enforcement proceeding against CAM and certain of its affiliates relating to the transfer agency and sub-transfer agency arrangements, including the creation and operation of this transfer agency, the compensation received by CTB and the adequacy of CAM’s disclosures to the fund boards.  The staff subsequently informed four individuals (none of whom remains in his or her prior position with CAM) that it was also considering similar enforcement proceedings against them.  The Company is cooperating with the SEC in its investigation.  The reserve fully covers the financial terms that the SEC staff has agreed to recommend to the Commission for resolution of this matter.  The Citigroup offer of settlement is subject to final negotiation, and any settlement of this matter with the SEC will require approval by the Board of Directors of Citigroup and acceptance by the SEC.

Transfer Agency

        Citigroup's 2004 results reflect an aggregate reserve of $196 million ($151 million after-tax) related to the expected resolution of the previously disclosed SEC investigation into mutual fund transfer agent matters that began in November 2003.

        In 1999, Citigroup Asset Management ("CAM") recommended that an affiliate become the transfer agent for certain mutual funds managed by CAM. The affiliate that became the transfer agent, Citicorp Trust Bank ("CTB"), subcontracted transfer agency work to the previous (unaffiliated) transfer agent. At the time CAM entered the business, CAM concluded a separate agreement with the sub-transfer agent that guaranteed certain benefits to CAM and its affiliates. That agreement, and a one-time payment related to termination of the agreement, were not disclosed to the boards of the mutual funds that approved the retention of the affiliated transfer agent.

        As previously discussed, in July 2004, the staff of the SEC indicated that it was considering recommending an enforcement proceeding against CAM and certain of its affiliates relating to the transfer agency and sub-transfer agency arrangements, including the creation and operation of this transfer agency, the compensation received by CTB and the adequacy of CAM's disclosures to the fund boards. The staff subsequently informed four individuals (none of whom remains in his or her prior position with CAM) that it was also considering similar enforcement proceedings against them. The Company is cooperating with the SEC in its investigation. The reserve fully covers the financial terms that the SEC staff has agreed to recommend to the Commission for resolution of this matter. The Citigroup offer of settlement is subject to final negotiation, and any settlement of this matter with the SEC will require approval by the Board of Directors of Citigroup and acceptance by the SEC.