Citibank's Hedged Mutual Fund Fee Trust priced its first offering for 2004 last week, and it was also the first 12b-1 fee-backed transaction of the year. The sector appears to be unaffected by the noxious headlines that have plagued the mutual fund industry during the past year.

The $331 million single-tranche, double-A rated floater priced at 135 basis points over one-month Libor, representing a 10-point tightening over the comparably structured A class from the 2003-3 series, which priced in November. Moody's Investors Service Senior Vice President Michael O'Connor said that despite speculation, it remains improbable that fines will be levied against the funds themselves. "For individuals who have taken action for which they are going to be punished, there is an extreme risk," O'Connor said. "By fining the corporation, all you are doing is hurting the shareholder who has already been hurt." To date, none of the settlements have imposed a fine on the fund.

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