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Hope you and your family and friends are safe. Thought you might find the attached of interest. Michael Matthews Salomon Smith Barney First Vice President- Investments Portfolio Manager 1661 International Drive Suite 200 Memphis, TN 38120 (901)818-4224 (800)227-4146 < Words cannot begin to describe our feelings at this moment or our concern < for the safety of so many of our friends and colleagues placed at risk in < the recent terrorist attacks. We know that all of our thoughts, hopes and < prayers go out to all the victims and their families. < < At this time we are cautiously relieved to hear that there have been no < reported injuries to Citigroup employees. < < As you may have seen in media reports, our facilities located at Seven < World Trade Center were destroyed. We have been told by Citigroup Asset < Management senior management that pre-existing business continuation plans < for offices located in lower Manhattan have been put in place. They < expect to resume operations as the exchanges and markets re-open. < Displaced staff has already been relocated to designated Citigroup offices < in mid-town Manhattan, New Jersey and Connecticut. < < Please rest assured that your assets are safe and that they will be < properly and continuously managed by the portfolio managers of Smith < Barney Asset Management and Salomon Brothers Asset Management. < < The days ahead for all of us will be difficult. Please feel free to call < us with any questions you may have. As always, we appreciate the < opportunity to be of service to you. < < Best Regards, < < Jerrold Graber Michael Matthews < Scott Notowich < Sr. Vice Pres-Investments 1st Vice Pres-Investments 1st Vice < Pres-Investments < Financial Consultant Financial Consultant Financial < Consultant < < We thought you would be interested in seeing Equity Strategist view for < the markets: < < As we await the re-opening of the U.S. equity markets it seems to be < a good time to reflect on some of the fundamental and technical issues we < will have to confront in the weeks ahead. To say that the future is < unclear is to state the obvious. We must examine the information < currently available, make suppositions about the likelihood of future < events and structure our portfolios in a way most likely to exploit short < term market inefficiencies and take advantage of our long term strategic < views. < To us, there are at least five issues which will influence the < course of the economy and markets in the time ahead. The effects of < global liquidity, consumer confidence and energy prices should determine a < great deal of the equity market's direction and internal dynamics. In < addition, the fundamental and market performance of the Technology and < Financial sectors should have an impact beyond their normal sphere of < influence. < < 1. Global Liquidity: We believe that the Government will try to make < individuals and institutions as whole as possible. Clearly, Washington < does not want a financial panic to exacerbate the physical damage already < done. We believe that the Federal Reserve will effectively make unlimited < liquidity available to the system, as they have done during prior crises. < Additionally, the Executive and Legislative branches appear ready to < provide fiscal assistance as needed. We should assume that the Government < will behave rationally and apply the techniques used successfully in the < past. These actions would tend to be supportive to the markets. While < the European Central Bank has stated that no easing is imminent, they < obviously are ready to inject liquidity on an "as-needed" basis. < < 2. Consumer Confidence: Clearly the Consumer will be negatively impacted < in the short run by recent events. Obviously air travel and lodging will < feel an immediate impact. However, the key questions are: how much will < the consumer be effected and for how long? We note that following the < "Crash" of 1987, Wall Street predicted a dramatic consumer slowdown which < did not materialize. We do not intend to draw direct analogies to 1987 < but would merely point out that predictions of Consumer collapse have < proved to be unreliable. While some slowdown will inevitably result from < the catastrophe, one must remain aware of the Consumer's inherent < resilience and the potential offset of the fiscal and monetary stimulus < discussed above. < While we do not wish to minimize this potential problem, we believe that < it must be viewed in a broader historical context. < < 3. Oil Prices: Early indications are that responsible oil producing < nations will not move to seriously curtail production or shipments. < While nothing can be ruled out, it is hard to say that the perceived risk < to world-wide oil supplies will necessarily result in higher oil prices. < This is important. The absence of a price spike would significantly < differentiate today from the 1990 precedent. Then, the risk of inflation < affected the Fed's ability to rapidly lower rates and offset the price < rises. In 1990, higher energy prices undoubtedly contributed to the < subsequent recession; and the Fed's decision not to immediately cut rates < adversely impacted the Consumer. We must indeed ask ourselves if the risk < to the world's oil supplies is significantly greater today than it was a < week ago? < < 4. Technology and Communication Services: Surprisingly, Technology was < one of the better performing areas in the European markets in the days < immediately after the tragedy. While one does not want to read too much < into this, a logical progression of events could help the group's < fundamentals in the months ahead. Initially, much of the infrastructure < damage done will have to be undone. After any disaster, the first < response is to replace or repair that which has been damaged. This could < provide a short-term boost in spending. Longer-term, there will likely be < a need for increased spending on bandwidth, back-up (recovery) systems, < storage and communications systems. In recent months, many corporations < have deferred technology expenditures. This week's events may accelerate < the resumption of meaningful technology spending, lending a much needed < boost to the group. < < < 5.Financials: Financial Services companies are obviously adversely < affected by recent developments. Existing concerns have been heightened < by these events. Insurers face the potential of massive claims. Banks < and brokers face potential credit concerns and the impact of distracted < capital markets. However, as mentioned earlier, we anticipate that the < Fed will be injecting needed liquidity. It would be rare indeed for < Financials to fare poorly while such an easing is underway. A healthy < financial system is essential to our country as well as the world. < Investors, while recognizing the damage done, should also be aware of the < potential benefits of impending remedies. < < < <<...OLE_Obj...<< < Michael Matthews < Salomon Smith Barney < First Vice President- Investments < Portfolio Manager < 1661 International Drive < Suite 200 < Memphis, TN 38120 < (901)818-4224 (800)227-4146 < -------------------------------------------------------------- Reminder: E-mail sent through the Internet is not secure. Do not use e-mail to send us confidential information such as credit card numbers, changes of address, PIN numbers, passwords, or other important information. Do not e-mail orders to buy or sell securities, transfer funds, or send time sensitive instructions. We will not accept such orders or instructions. This e-mail is not an official trade confirmation for transactions executed for your account. Your e-mail message is not private in that it is subject to review by the Firm, its officers, agents and employees. --------------------------------------------------------------
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