Semi-Annual Report o April 30, 1999
CitiFunds(TM)
LARGE CAP GROWTH PORTFOLIO
LARGE CAP STOCKS
INVESTMENT PRODUCTS:
NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
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Portfolio Environment and Outlook 2
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Fund Facts 3
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Portfolio Highlights 4
- --------------------------------------------------------------------------------
Fund Performance 5
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CITIFUNDS LARGE CAP GROWTH PORTFOLIO
Statement of Assets and Liabilities 6
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Statement of Operations 7
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Statement of Changes in Net Assets 8
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Financial Highlights 9
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Notes to Financial Statements 11
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LARGE CAP GROWTH PORTFOLIO
Portfolio of Investments 14
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Statement of Assets and Liabilities 16
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Statement of Operations 16
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Statement of Changes in Net Assets 17
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Financial Highlights 17
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Notes to Financial Statements 18
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<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
This semi-annual report covers the period from November 1, 1998 through April
30, 1999 for CitiFundsSM Large Cap Growth Portfolio. Citibank, N.A. the
CitiFunds' investment manager, discusses the market conditions it faced, the
strategies it employed as well as its outlook for the future.
Effective May 1999, Grant Hobson, co-manager of CitiFunds Large Cap Growth
Portfolio, retired from Citibank and the Portfolio is now managed solely by
Richard Goldman. We would like to thank Grant for all his contributions to the
Large Cap Growth Portfolio and wish him well in the future.
The reporting period saw a continuation of the strong economic conditions in
the U.S., a favorable environment that has existed for more than seven years.
Lower short-term interest rates and a looser monetary policy adopted by the
Federal Reserve Board in the fall of 1998 appear to have helped U.S. businesses
better cope with the effects of economic weakness in Japan, Asia and Latin
America. During the reporting period, consumer spending remained high, corporate
earnings grew, the rate of unemployment was low and inflationary pressures
continued to be virtually nonexistent.
These economic conditions produced good results for stocks over the past six
months as the S&P 500 Index recorded new highs. (The S&P 500 Index is an index
composed of widely held common stocks listed on the New York Stock Exchange,
American Stock Exchange and over-the-counter market.) However, the stock
market's advance as defined by the S&P 500 Index was remarkably narrow, led by a
relatively small number of large cap growth and technology companies. Since the
Portfolio invests primarily in large-cap growth companies, it participated in
much of the market's rise.
Thank you for your continued confidence and participation.
Sincerely,
/s/Philip Coolidge
- ------------------
Philip W. Coolidge
President
May 20, 1999
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
CitiFunds Large Cap Growth Portfolio's focus on large capitalization
companies with track records of consistent revenue and earnings growth continued
to produce good results during the final months of 1998 and the beginning of
1999. During the reporting periods, the Portfolio benefited from the remarkable
resilience of the U.S. financial markets, which rallied strongly after last
fall's sharp declines. In part, we attribute the rebound to the implementation
of lower interest rates by central banks throughout the world, which helped
stimulate economic growth in the U.S. and overseas.
Most importantly, lower interest rates signaled the central banks'
willingness to fight the spread of the global currency and credit crisis, which
began in Asia in 1997 and extended to Russia and parts of Latin America in 1998.
These moves eased investors' concerns that economic weakness might adversely
affect corporate earnings, convincing them to shift their assets back to stocks
from the safe haven of government bonds.
However, the U.S. stock market's advance between November and February
continued to be concentrated primarily in a relatively small number of large-cap
companies with predictable earnings. Large Cap Growth Portfolio participated
strongly in these types of companies, and received the benefits of strong gains
from its holdings in the retail, technology and commercial services industries.
In fact, because we expected companies in the information processing and
specialty retail industries to prosper in the prevailing environment, we
remained overweighted in them relative to the portfolio's benchmark, the S&P
BARRA Growth Index (an index that is made up of the growth component of the S&P
500 Index).
In March and April, the stock market experienced a change in leadership.
After many months of lagging the broader averages, value-oriented stocks (i.e.,
those selling at low prices relative to earnings) posted larger short-term gains
than growth stocks. What's more, lower quality stocks began to rally while high
quality stocks, such as those in which we primarily invest, declined modestly.
During the reporting period, we reduced our holdings of select financial
services and health care companies, selling those that we believed were
vulnerable to a slowdown in the industry's growth rate. At the same time, we
shifted assets within the technology industry from computer manufacturers to
networking and communications-related companies. We also reallocated assets in
the telecommunications sector, shifting our emphasis from regional telephone
companies to long-distance carriers. These changes reflected our more positive
outlook for earnings growth within the latter sectors of the technology and
telecommunications industries.
Consistent with our investment discipline, we continued to avoid many
Internet stocks, which represented the best-performing segment of the stock
market over the past six months. While we believe that the Internet is an
exciting growth area, most Internet companies do not meet our high quality
standards. As a high quality large cap growth fund, we invest based on a track
record of consistent earnings growth driven by higher revenues and low levels of
debt. We will, however, continue to seek out select Internet-related
opportunities that meet our high quality
2
<PAGE>
criteria and we will focus on identifying companies that stand to benefit from
the Internet revolution.
Looking ahead, we are prepared for continued market volatility over the near
term. Overall, stock prices appear to be quite high relative to historical
valuations. Large-cap growth companies seem to be particularly expensive,
selling at historically wide valuations relative to small-cap, mid-cap and
value-oriented stocks. In our view, the best way to protect shareholders from
the risk of price declines is to maintain CitiFunds Large Cap Growth Portfolio's
longstanding investment approach, the centerpiece of which includes an
unwavering focus on quality and consistency. We believe that our approach may be
a particularly effective way to participate in long-term market gains while
helping to reduce short-term risks.
FUND FACTS
FUND OBJECTIVE
Long-term capital growth; dividend income, if any, is incidental to this
investment objective.
INVESTMENT MANAGER DIVIDENDS
Citibank, N.A. Paid semi-annually, if any
COMMENCEMENT OF OPERATIONS CAPITAL GAINS
October 19, 1990 Distributed annually, if any
NET ASSETS AS OF 4/30/99 BENCHMARKS
Class A shares o Standard & Poor's Barra Growth Index
$528.1 million o Lipper Growth Funds Average
Class B shares
$24.7 million
3
<PAGE>
PORTFOLIO HIGHLIGHTS
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TOP TEN EQUITY HOLDINGS AS OF APRIL 30, 1999 (Unaudited)
COMPANY, INDUSTRY % OF NET ASSETS
Microsoft Corp., Technology 8.10%
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General Electric Co., Producer Manufacturing 6.51%
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Wal Mart Stores Inc., Retail 4.14%
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Cisco Systems Inc., Technology 4.13%
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Procter & Gamble Co., Consumer Non-Durables 3.60%
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Pfizer Inc., Healthcare 3.48%
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International Business Machines, Technology 3.39%
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Intel Corp., Semiconductor Technology 2.96%
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Lucent Technology Inc., Technology 2.90%
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MCI Worldcom Inc., Consumer Services 2.76%
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PORTFOLIO DIVERSIFICATION AS OF APRIL 30, 1999 (Unaudited)
[The following table represents a Pie Chart in the printed piece]
Finance 10%
Consumer 10%
Producer Manufacturing 9%
Transportation 1%
Technology Services 6%
Technology 22%
Semi Conductor Technology 4%
Healthcare 16%
*Short-Term 3%
Retail 14%
Commercial Services 5%
*Includes cash and net other assets
4
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
<TABLE>
<CAPTION>
SINCE
SIX ONE FIVE 10/19/90
ALL PERIODS ENDED APRIL 30, 1999 (Unaudited) MONTH** YEAR YEARS* INCEPTION*
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CitiFunds Large Cap Growth Portfolio (Class A) 16.77% 19.84% 21.81% 18.83%
without sales charge
Lipper Growth Funds Average 22.70% 15.05% 20.90% 19.04%+
S&P Barra Growth Index 22.56% 29.35% 30.61% 22.63%+
CitiFunds Large Cap Growth Portfolio (Class A)
with a maximum sales charge of 5.00% 10.93% 13.85% 20.57% 18.12%
CitiFunds Large Cap Growth Portfolio (Class B)
without deferred sales charge -- -- -- 1.32%#**
Lipper Growth Funds Average -- -- -- 7.32%++**
S&P Barra Growth Index -- -- -- 6.68%++**
CitiFunds Large Cap Growth Portfolio (Class B)
with a maximum deferred sales charge of 5.00% -- -- -- (3.75%)#**
</TABLE>
* Average Annual Total Return
** Not Annualized
+ From 10/31/90
++ From 12/31/98
# Commencement of Operations 1/4/99
Capital Gain Distributions $1.915 for Class A
GROWTH OF A $10,000 INVESTMENT
A $10,000 investment in the Fund made on inception date would have grown to
$41,407 with sales charge (as of 4/30/99). The graph shows how the Fund compares
to its benchmarks over the same period.
[The following table represents a chart in the printed piece].
Lipper Growth S&P Barra CitiFunds Large
Date Funds Index Growth Index Cap Growth Fund
- --------------------------------------------------------------------------------
10/19/90 9500
10/31/90 10000 10000 9354
11/30/90 10660 10604 9916
12/31/90 11014 10941 10007
1/31/91 11690 11396 10447
2/28/91 12534 12280 11220
3/31/91 12938 12744 11294
4/30/91 12922 12720 11053
5/31/91 13456 13200 11806
6/30/91 12795 12649 11137
7/31/91 13430 13325 11791
8/31/91 13838 13754 12456
9/30/91 13712 13453 12034
10/31/91 13993 13617 12308
11/30/91 13435 13270 11781
12/31/91 14921 15140 13083
1/31/92 14997 14608 12871
2/29/92 15208 14695 13189
3/31/92 14755 14354 12840
4/30/92 14656 14506 12893
5/31/92 14738 14619 12861
6/30/92 14309 14316 12451
7/31/92 14821 14962 12982
8/31/92 14499 14790 12621
9/30/92 14724 14964 12897
10/31/92 15021 15189 13226
11/30/92 15769 15803 13959
12/31/92 16061 15907 14077
1/31/93 16259 15735 14152
2/28/93 16004 15608 13950
3/31/93 16447 15828 14758
4/30/93 15937 15098 14524
5/31/93 16516 15636 14939
6/30/93 16566 15503 14794
7/31/93 16526 15183 14602
8/31/93 17225 15737 15262
9/30/93 17401 15497 15305
10/31/93 17643 16073 15518
11/30/93 17297 16062 15326
12/31/93 17797 16174 15804
1/31/94 18322 16520 16124
2/28/94 18036 16225 15868
3/31/94 17187 15475 15163
4/30/94 17244 15545 15441
5/31/94 17310 15798 15750
6/30/94 16727 15462 15298
7/31/94 17169 15955 15777
8/31/94 17955 16807 16169
9/30/94 17632 16567 15755
10/31/94 17911 16953 16049
11/30/94 17239 16397 15516
12/31/94 17398 16680 15740
1/31/95 17520 17094 15840
2/28/95 18173 17761 16397
3/31/95 18678 18318 16798
4/30/95 19061 18794 16976
5/31/95 19616 19467 17522
6/30/95 20420 20213 17799
7/31/95 21372 20858 18362
8/31/95 21537 20789 18182
9/30/95 22157 21816 18733
10/31/95 21825 21990 18789
11/30/95 22585 22782 19801
12/31/95 22664 23039 20076
1/31/96 23149 23920 20601
2/29/96 23672 24137 20729
3/31/96 23883 24036 21103
4/30/96 24669 24505 21266
5/31/96 25323 25406 21651
6/30/96 24958 25724 21890
7/31/96 23475 26107 20641
8/31/96 24304 24903 21195
9/30/96 25682 25272 22373
10/31/96 25857 27026 22385
11/30/96 27398 27612 23635
12/31/96 27001 29675 22854
1/31/97 28381 28989 24207
2/28/97 27969 31259 24044
3/31/97 26646 31522 22779
4/30/97 27637 30025 24720
5/31/97 29682 32448 25948
6/30/97 30851 34093 27217
7/31/97 33446 36793 29121
8/31/97 32336 34347 27164
9/30/97 34134 36098 28433
10/31/97 32840 35012 27944
11/30/97 33392 36913 29557
12/31/97 33709 37367 30026
1/31/98 33867 38623 30769
2/28/98 36421 41306 32933
3/31/98 38024 43442 34519
4/30/98 38476 43806 34552
5/31/98 37349 42926 33660
6/30/98 38705 45987 36401
7/31/98 37807 45959 35923
8/31/98 31614 39980 31265
9/30/98 33489 42630 33594
10/31/98 35860 46207 35460
11/30/98 38037 49337 37475
12/31/98 41031 53090 41192
1/31/99 42709 56332 43005
2/28/99 40971 54122 40941
3/31/99 42766 56744 42843
4/30/99 44002 56634 41407
The graph includes the initial sales charge on the Fund (no comparable charge
exists for the other indices) and assumes all dividends and distributions from
the Fund are reinvested at Net Asset Value.
Notes: All Fund performance numbers represent past performance, and are no
guarantee of future results. The Fund's share price and investment return will
fluctuate, so that the value of an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns include change in
share price and reinvestment of dividends and distributions, if any. Total
return figures "with sales charge" are provided in accordance with SEC
guidelines for comparative purposes for prospective investors, and reflect
voluntary fee waivers which may be terminated at any time. If the waivers were
not in place, the Fund's returns would have been lower. The maximum sales charge
of 5.00% went into effect on January 4, 1999. Investors may not invest directly
in an index.
5
<PAGE>
CITIFUNDS LARGE CAP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investment in Large Cap Growth Portfolio, at value (Note 1A) $551,995,064
Receivable for shares of beneficial interest sold 1,645,643
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Total assets 553,640,707
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LIABILITIES:
Payable for shares of beneficial interest repurchased 695,647
Payable to affiliates-Management fee (Note 2) 21,913
Accrued expenses and other liabilities165,015
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Total liabilities 882,575
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NET ASSETS $552,758,132
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NET ASSETS CONSIST OF:
Paid-in capital $411,346,272
Unrealized appreciation 107,670,259
Accumulated net realized gain 34,598,394
Undistributed net investment loss (856,793)
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Total $552,758,132
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COMPUTATION OF
CLASS A SHARES:
Net Asset Value per share ($528,064,873/22,886,933 shares outstanding) $23.07
Offering Price per share ($23.07 / 0.95) $24.28**
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CLASS B SHARES:
Net Asset Value per share and offering price
($24,693,259/1,072,318 shares outstanding) $23.03*
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* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charges.
** Based upon single purchases of less than $25,000.
See notes to financial statements
6
<PAGE>
CITIFUNDS LARGE CAP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (Note 1B):
Dividend Income from Large Cap Growth Portfolio $1,387,619
Interest Income from Large Cap Growth Portfolio 355,244
Allocated Expenses from Large Cap Growth Portfolio (1,680,051)
- --------------------------------------------------------------------------------
$ 62,812
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 734,835
Service fees Class A (Note 3) 602,977
Service fees Class B (Note 3) 37,545
Transfer agent fees 28,556
Shareholder reports 16,625
Legal fees 12,336
Trustees fees 11,826
Custody and fund accounting fees 11,707
Audit fees 9,575
Other 11,187
- --------------------------------------------------------------------------------
Total expenses 1,477,169
Less aggregate amount waived by the Manager (Note 2) (557,564)
- --------------------------------------------------------------------------------
Net expenses 919,605
- --------------------------------------------------------------------------------
Net investment loss (856,793)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN FROM
LARGE CAP GROWTH PORTFOLIO:
Net realized gain 35,647,563
Unrealized appreciation 31,007,429
- --------------------------------------------------------------------------------
Net realized and unrealized gain from
Large Cap Growth Portfolio 66,654,992
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $65,798,199
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See notes to financial statements
7
<PAGE>
CITIFUNDS LARGE CAP GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 1999 OCTOBER 31,
(Unaudited) 1998
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment loss $ (856,793) $ (332,222)
Net realized gain 35,647,563 34,918,080
Unrealized appreciation 31,007,429 31,323,892
- --------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 65,798,199 65,909,750
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (Class A) -- (138,253)
Net realized gain (Class A) (35,754,369) (50,358,634)
- --------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (35,754,369) (50,496,887)
- --------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 5):
CLASS A
Net proceeds from sale of shares 123,571,227 107,344,145
Net asset value of shares issued to shareholders
from reinvestment of distributions 35,750,665 50,485,303
Cost of shares repurchased (40,163,040) (43,022,818)
- --------------------------------------------------------------------------------
Total Class A 119,158,852 114,806,630
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CLASS B*
Net proceeds from sale of shares 25,638,559 --
Net asset value of shares issued to shareholders
from reinvestment of distributions -- --
Cost of shares repurchased (463,310) --
- --------------------------------------------------------------------------------
Total Class B 25,175,249 --
- --------------------------------------------------------------------------------
Net increase in net assets from transactions
in shares of beneficial interest 144,334,101 114,806,630
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 174,377,931 130,219,493
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 378,380,201 248,160,708
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End of period (including overdistributed
and undistributed net investment income
of $(856,793) and $0, respectively) $552,758,132 $378,380,201
- --------------------------------------------------------------------------------
* January 4, 1999 (Commencement of Operations) to April 30, 1999.
See notes to financial statements
8
<PAGE>
CITIFUNDS LARGE CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------
SIX MONTHS TEN MONTHS
ENDED YEAR ENDED
APRIL 30, ENDED OCTOBER 31, YEAR ENDED DECEMBER 31,
1999 OCTOBER 31, 1997 -----------------------------------------
(Unaudited) 1998 (Note 1F) 1996 1995 1994++ 1993++
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period $ 21.47 $ 21.14 $ 18.25 $ 17.20 $ 14.13 $ 14.80 $ 13.23
- ----------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment
income (loss) (0.035) (0.022)** 0.031 0.122 0.211 0.173 0.071**
Net realized and
unrealized gain (loss)
on investments 3.550 4.735** 4.016 2.250 3.651 (0.245) 1.550**
- ----------------------------------------------------------------------------------------------------------
Total from operations 3.515 4.713 4.047 2.372 3.862 (0.072) 1.621
- ----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- (0.012) (0.030) (0.118) (0.210) (0.169) (0.051)
Net realized gain on
investments (1.915) (4.371) (1.127) (1.204) (0.582) (0.429) --
- ----------------------------------------------------------------------------------------------------------
Total distributions (1.915) (4.383) (1.157) (1.322) (0.792) (0.598) (0.051)
- ----------------------------------------------------------------------------------------------------------
Net Asset Value, end
of period $ 23.07 $ 21.47 $ 21.14 $ 18.25 $ 17.20 $ 14.13 $ 14.80
- ----------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $528,065 $378,380 $248,161 $228,954 $213,729 $183,975 $200,903
Ratio of expenses to
average net assets 1.05%(A)* 1.05%(A) 1.05%(A)* 1.05%(A) 1.05%(A) 1.05%(A) 1.07%
Ratio of net investment
income (loss) to
average net assets (0.34)%* (0.11)% 0.18%* 0.67% 1.30% 1.15% 0.52%
Portfolio turnover(B) -- -- -- -- -- 1.00% 23.00%
Total return 16.77%+ 26.90% 22.27%+ 13.84% 27.55% (0.41)% 12.26%
Note: If Agents of the Fund for the periods indicated had not voluntarily waived
a portion of their fees and had expenses been limited to that required by
certain state securities laws for the year ended December 31, 1992, the net
investment income (loss) per share and the ratios would have been as follows:
Net investment income
(loss) per share $(0.059) $(0.078)** $(0.023) $0.067 $0.170 $0.136 $(0.029)**
RATIOS:
Expenses to average
net assets 1.27%(A)* 1.32%(A) 1.35%(A)* 1.35%(A) 1.30%(A) 1.29%(A) 1.37%
Net investment income
(loss) to average
net assets (0.56)%* (0.38)% (0.12)%* 0.37% 1.05% 0.91% 0.21%
- ----------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized.
** The per share amounts were computed using a monthly average number of
shares outstanding during the year.
(A) Includes the Fund's share of Large Cap Growth Portfolio allocated expenses
for the periods subsequent to May 1, 1994.
(B) Portfolio turnover represents the rate of portfolio activity for the period
while the Fund was making investments directly in securities. The portfolio
turnover rate for the period since the Fund transferred all of its
investable assets to the Portfolio is shown in the Portfolio's financial
statements which are included elsewhere in this report.
+ Not Annualized.
++ On May 1, 1994 the Fund began investing all of its investable assets in
Large Cap Growth Portfolio.
See notes to financial statements
9
<PAGE>
CITIFUNDS LARGE CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
CLASS B
-------
JANUARY 4, 1999
(COMMENCEMENT
OF OPERATIONS) TO
APRIL 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
Net Asset Value,
beginning of period $22.73
- --------------------------------------------------------------------------------
Income From Operations:
Net investment
income (loss) (0.043)
Net realized and unrealized
gain (loss) on investments 0.343
- --------------------------------------------------------------------------------
Total from operations 0.300
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income --
Net realized gain on
investments --
- --------------------------------------------------------------------------------
Total distributions --
- --------------------------------------------------------------------------------
Net Asset Value, end
of period $23.03
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $24,693
Ratio of expenses to
average net assets 1.80%(A)*
Ratio of net investment loss to average net assets (1.23)%*
Total return 1.32%**
Note: If Agents of the Fund for the periods indicated had not voluntarily waived
a portion of their fees and had expenses been limited to that required by
certain state securities laws for the year ended December 31, 1992, the net
investment loss per share and the ratios would have been as follows:
Net investment loss per share $(0.066)
RATIOS:
Expenses to average net assets 2.02%(A)*
Net investment loss to average net assets (1.45)%*
- --------------------------------------------------------------------------------
* Annualized.
** Not Annualized.
(A) Includes the Fund's share of Large Cap Growth Portfolio allocated expenses.
See notes to financial statements
10
<PAGE>
CITIFUNDS LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds Large Cap Growth Portfolio (the
"Fund") is a separate diversified series of CitiFunds Trust II (the "Trust"), a
Massachusetts business trust. The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Fund invests all of its investable assets in Large Cap Growth Portfolio (the
"Portfolio"), a management investment company for which Citibank, N.A.
("Citibank") serves as Investment Manager. The value of such investment reflects
the Fund's proportionate interest (73.1% at April 30, 1999) in the net assets of
the Portfolio. CFBDS, Inc ("CFBDS"), acts as the Fund's Sub-Administrator and
Distributor.
The Fund offers Class A and Class B shares. The Fund commenced its public
offering of Class B shares on January 4, 1999. Class A shares have a front-end,
or initial, sales charge effective January 4, 1999. This sales charge may be
reduced or eliminated in certain circumstances. Class B shares have no front-end
sales charge, pay a higher ongoing distribution fee than Class A, but are
subject to a deferred sales charge if sold within five years of purchase. Class
B shares automatically convert into Class A shares after eight years. Expenses
of the Fund are borne pro-rata by the holders of each class of shares, except
that each class bears expenses unique to that class (including the Rule 12b-1
service and distribution fees applicable to such class), and votes as a class
only with respect to its own Rule 12b-1 plan. Shares of each class would receive
their pro-rata share of the net assets of the Fund, if the Fund were liquidated.
Class A shares have lower expenses than Class B.
The financial statements of the Portfolio, including the portfolio of
investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Fund are as
follows:
A. INVESTMENT VALUATION Valuation of securities by the Portfolio is discussed
in Note 1A of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report.
B. INVESTMENT INCOME The Fund earns income, net of Portfolio expenses, daily
based on its investment in the Portfolio.
C. FEDERAL TAXES The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investment transactions. Accordingly, no provision for federal income or
excise tax is necessary.
D. EXPENSES The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and CFBDS. Expenses incurred by the Trust
11
<PAGE>
CITIFUNDS LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
with respect to any two or more funds or series are allocated in proportion to
the average net assets of each fund, except when allocations of direct expenses
to each fund can otherwise be made fairly. Expenses directly attributable to a
fund are charged to that fund. The Fund's share of the Portfolio's expenses are
charged against and reduce the amount of the Fund's investment in the Portfolio.
E. DISTRIBUTIONS Distributions to shareholders are recorded on ex-dividend
date. The amount and character of income and net realized gains to be
distributed are determined in accordance with income tax rules and regulations,
which may differ from generally accepted accounting principles. These
differences are attributable to permanent book and tax accounting differences.
Reclassifications are made to the Fund's capital accounts to reflect income and
net realized gains available for distribution (or available capital loss
carryovers) under income tax rules and regulations.
F. CHANGE IN FISCAL YEAR END During fiscal year 1997, the Fund changed its
fiscal year end from December 31 to October 31.
G. OTHER All the net investment income, realized and unrealized gain and loss
of the Portfolio is allocated pro rata, based on respective ownership interests,
among the Fund and the other investors in the Portfolio at the time of such
determination. Investment transactions are accounted for on the trade date
basis. Realized gains and losses are determined on the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the Fund's
business affairs, and has a Management Agreement with the Fund. Citibank also
provides certain administrative services to the Fund. These administrative
services include providing general office facilities and supervising the overall
administration of the Fund. CFBDS acts as Sub-Administrator and performs certain
duties and receives compensation from Citibank as from time to time is agreed to
by Citibank and CFBDS. Citibank is a wholly-owned subsidiary of Citicorp, which
in turn is a wholly-owned subsidiary of Citigroup Inc. Citigroup Inc. was formed
as a result of the merger of Citicorp and Travelers Group, Inc. which was
completed on October 8, 1998.
The management fees paid to Citibank are accrued daily and payable monthly.
The management fee is computed at the annual rate of 0.30% of the Fund's average
daily net assets. The management fee amounted to $734,835 of which $557,564 was
voluntarily waived for the six months ended April 30, 1999.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Sub-Administrator, all of whom receive remuneration
for their services to the Trust from the Sub-Administrator or its affiliates.
3. SERVICE FEES The Fund maintains separate Service Plans for Class A and Class
B shares, which have been adopted in accordance with Rule 12b-1 under the 1940
Act. Under the Class A Service Plan, the Fund may pay monthly fees at an annual
rate not to exceed 0.25% of the average daily net assets represented by Class A
12
<PAGE>
CITIFUNDS LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
shares of the Fund. The Service fees for Class A shares amounted to $602,977 for
the six months ended April 30, 1999. Under the Class B Service Plan, the Fund
may pay a combined monthly distribution and service fee at an annual rate not to
exceed 1.00% of the average daily net assets represented by Class B shares of
the Fund. The Distribution fees for Class B shares amounted to $37,545 for the
period ended April 30, 1999. These fees may be used to make payments to the
Distributor for distribution services and to others as compensation for the sale
of shares of the applicable class of the Fund, for advertising, marketing or
other promotional activity, and for preparation, printing and distribution of
prospectuses, statements of additional information and reports for recipients
other than regulators and existing shareholders. The Fund may also make payments
to the Distributor and others for providing personal service or the maintenance
of shareholder accounts.
4. INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in
the Portfolio for the six months ended April 30, 1999 aggregated $151,694,918
and $42,458,758, respectively.
5. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest (without par value). Transactions in shares of beneficial interest were
as follows:
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1999 OCTOBER 31,
(Unaudited) 1998
- --------------------------------------------------------------------------------
CLASS A
Shares sold 5,367,276 5,093,051
Shares issued to shareholders from
reinvestment of distributions 1,619,142 2,873,381
Shares repurchased (1,724,713) (2,082,551)
- --------------------------------------------------------------------------------
Class A net increase 5,261,705 5,883,881
- --------------------------------------------------------------------------------
CLASS B*
Shares sold 1,091,966 --
Shares issued to shareholders from
reinvestment of distributions -- --
Shares repurchased (19,648) --
- --------------------------------------------------------------------------------
Class B net increase 1,072,318 --
- --------------------------------------------------------------------------------
* January 4, 1999 (Commencement of Operations) to April 30, 1999
13
<PAGE>
LARGE CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 1999
(Unaudited)
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.4%
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 5.6%
- --------------------------------------------------------------------------------
Cintas Corp. 155,500 $ 10,690,625
Ecolab Inc. 208,500 8,743,969
Interpublic Group
Companies Inc. 171,300 13,286,454
Omnicom Group 127,200 9,222,000
------------
41,943,048
------------
CONSUMER NON-DURABLES -- 5.1%
- --------------------------------------------------------------------------------
Clorox Co. 97,100 11,202,913
Procter & Gamble Co. 289,180 27,128,699
------------
38,331,612
------------
CONSUMER SERVICES -- 4.3%
- --------------------------------------------------------------------------------
Clear Channel
Communications* 169,700 11,794,150
MCI Worldcom Inc.* 253,000 20,793,438
------------
32,587,588
------------
FINANCE -- 9.9%
- --------------------------------------------------------------------------------
American International
Group 141,750 16,646,765
Bank of New York 195,100 7,804,000
Charles Schwab Corp. 82,000 8,999,500
Federal Home Loan
Mortgage Corp. 278,000 17,444,500
Firstar 277,800 8,351,363
Zions Bancorp 234,400 15,631,550
------------
74,877,678
------------
HEALTHCARE -- 16.4%
- --------------------------------------------------------------------------------
American Home
Products Corp. 185,000 11,285,000
Cardinal Health Inc. 180,200 10,778,213
Guidant Corp. 174,000 9,341,625
Johnson & Johnson 183,700 17,910,750
Lilly (Eli) & Co. 216,600 15,947,175
Merck & Co. 165,800 11,647,450
Pfizer Inc. 228,200 26,257,263
Schering Plough Corp. 425,200 20,542,475
------------
123,709,951
------------
PRODUCER MANUFACTURING -- 8.9%
- --------------------------------------------------------------------------------
Danaher Corp. 155,500 10,331,031
General Electric Co. 465,900 49,152,450
Tyco International Ltd. 94,000 7,637,500
------------
67,120,981
------------
RETAIL -- 13.8%
- --------------------------------------------------------------------------------
Bed Bath & Beyond Inc.* 460,100 $ 16,419,819
Costco Companies Inc.* 106,300 8,603,655
Gap Inc. 111,000 7,388,438
Home Depot 286,000 17,142,125
Kohls Corp.* 105,000 6,975,938
Staples Inc.* 273,550 8,206,500
Wal Mart Stores Inc. 678,200 31,197,200
Walgreen Co. 295,200 7,933,500
------------
103,867,175
------------
SEMICONDUCTOR TECHNOLOGY -- 4.5%
- --------------------------------------------------------------------------------
Altera Corp.* 96,000 6,936,000
Intel Corp. 364,600 22,308,963
Xilinx Inc.* 93,000 4,243,125
------------
33,488,088
------------
TECHNOLOGY -- 21.8%
- --------------------------------------------------------------------------------
Cisco Systems Inc.* 273,400 31,184,687
EMC Corp.* 108,800 11,852,400
International Business
Machines 122,600 25,646,388
Jabil Circuit Inc.* 124,327 5,788,976
Lucent Technology Inc. 363,600 21,861,450
Microsoft Corp.* 751,600 61,114,475
Sun Microsystems Inc.* 122,000 7,297,125
------------
164,745,501
------------
TECHNOLOGY SERVICES -- 6.5%
- --------------------------------------------------------------------------------
Automatic Data
Processing Inc. 347,500 15,463,750
Ceridian Corp.* 402,600 14,745,225
Solectron Corp.* 124,600 6,043,100
SunGard Data Systems* 405,300 12,944,268
------------
49,196,343
------------
TRANSPORTATION -- 0.6%
- --------------------------------------------------------------------------------
Southwest Airlines Co. 144,915 4,718,795
------------
TOTAL COMMON STOCKS
(Identified Cost
$564,310,015) 734,586,760
------------
14
<PAGE>
LARGE CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)
(Unaudited) April 30, 1999
ISSUER VALUE
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS
AT AMORTIZED COST-- 2.7%
- --------------------------------------------------------------------------------
State Street Bank & Trust
Repurchase Agreement
4.92% due 5/3/99 proceeds
maturity $20,748,503
(collateralized by $20,910,000
Federal Home Loan Mortgage
5.56% due 8/24/00, valued at
21,159,101) $ 20,740,000
------------
TOTAL INVESTMENTS
(Identified Cost
$585,050,015) 100.1% 755,326,760
OTHER ASSETS,
LESS LIABILITIES (0.1) (716,164)
----- ------------
NET ASSETS 100.0% $754,610,596
===== ============
* Non income producing
See notes to financial statements
15
<PAGE>
LARGE CAP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) (Identified Cost, $585,050,015) $755,326,760
Cash 761
Dividends and interest receivable 157,125
- --------------------------------------------------------------------------------
Total assets 755,484,646
- --------------------------------------------------------------------------------
LIABILITIES:
Payable to affiliates-Management fees (Note 2) 389,228
Accrued expenses and other liabilities 484,822
- --------------------------------------------------------------------------------
Total liabilities 874,050
- --------------------------------------------------------------------------------
NET ASSETS $754,610,596
- --------------------------------------------------------------------------------
REPRESENTED BY:
Paid-in capital for beneficial interests $754,610,596
- --------------------------------------------------------------------------------
LARGE CAP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividend income $2,051,434
Interest income 525,265
- --------------------------------------------------------------------------------
Total investment income $ 2,576,699
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 2,155,201
Custody and fund accounting fees 234,737
Legal fees 31,556
Audit fees 14,163
Trustees fees 6,964
Other 27,860
- --------------------------------------------------------------------------------
Total expenses 2,470,481
- --------------------------------------------------------------------------------
Net investment income 106,218
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain from investment transactions 52,493,096
Unrealized appreciation of investments 52,465,828
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 104,958,924
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $105,065,142
- --------------------------------------------------------------------------------
See notes to financial statements
16
<PAGE>
LARGE CAP GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS YEAR
ENDED ENDED
APRIL 30, 1999 OCTOBER 31,
(Unaudited) 1998
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 106,218 $ 1,225,038
Net realized gain on investment transactions 52,493,096 61,181,518
Unrealized appreciation of investments 52,465,828 55,065,852
- --------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 105,065,142 117,472,408
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions (Note 1) 213,680,255 369,790,712
Value of withdrawals (175,039,268) (201,271,389)
- --------------------------------------------------------------------------------
Net increase in net assets
from capital transactions 38,640,987 168,519,323
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS: 143,706,129 285,991,731
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 610,904,467 324,912,736
- --------------------------------------------------------------------------------
End of period $754,610,596 $610,904,467
- --------------------------------------------------------------------------------
LARGE CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS TEN MONTHS MAY 1, 1994
ENDED YEAR ENDED YEAR ENDED (COMMENCEMENT
APRIL 30, ENDED OCTOBER 31, DECEMBER 31, OF OPERATIONS)
1999 OCTOBER 31, 1997 ---------------- TO DECEMBER 31,
(Unaudited) 1998 (Note 1F) 1996 1995 1994
- -------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
<S> <C> <C> <C> <C> <C> <C>
Net assets, end of period
(000's omitted) $754,611 $610,904 $324,913 $288,562 $246,158 $186,685
Ratio of expenses to
average net assets 0.69%* 0.71% 0.60%* 0.60% 0.60% 0.60%*
Ratio of net investment income
to average net assets 0.03%* 0.23%* 0.62%* 1.10% 1.73% 1.81%*
Portfolio turnover 32% 53% 103% 90% 67% 35%
- -------------------------------------------------------------------------------------------------------
</TABLE>
* Annualized
See notes to financial statements
17
<PAGE>
LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES Large Cap Growth Portfolio (the "Portfolio"),
a separate series of The Premium Portfolios (the "Trust"), is registered under
the Investment Company Act of 1940, as amended, as a diversified, open-end
management investment company which was organized as a trust under the laws of
the State of New York. The Declaration of Trust permits the Trustees to issue
beneficial interests in the Portfolio. The Investment Manager of the Portfolio
is Citibank, N.A. ("Citibank"). Signature Financial Group (Grand Cayman), Ltd.
("SFG") acts as the Portfolio's Sub-Administrator.
On November 1, 1997 CitiSelect Folio 200, CitiSelect Folio 300, CitiSelect
Folio 400 and CitiSelect Folio 500 each transferred a portion of their
investable assets in the amount of $12,183,616, $34,554,616, $38,508,816 and
$16,346,503 including $1,107,028, $3,598,984, $4,092,260 and $1,450,560,
respectively, of unrealized appreciation, to the Portfolio in exchange for an
interest in the Portfolio. The total investable assets and contributions are
included in the year ended October 31, 1998 "Proceeds from contributions" on the
Statement of Changes in Net Assets.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. INVESTMENT SECURITY VALUATIONS Equity securities listed on securities
exchanges or reported through the NASDAQ system are valued at last sale prices.
Unlisted securities or listed securities for which last sales prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations maturing in sixty days or less), are valued on the basis
of valuations furnished by pricing services approved by the Board of Trustees
which take into account appropriate factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, and other market data, without exclusive reliance on quoted prices or
exchange or over-the-counter prices. Short-term obligations, maturing in sixty
days or less, are valued at amortized cost, which constitutes fair value as
determined by the Trustees. Securities, if any, for which there are no such
valuations or quotations are valued at fair value as determined in good faith by
or under guidelines established by the Trustees.
B. INCOME Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on long-term debt securities
when required for U.S. federal income tax purposes. Dividend income is recorded
on the ex-dividend date.
C. U.S. FEDERAL INCOME TAXES The Portfolio is considered a partnership under
the U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary.
18
<PAGE>
LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
D. REPURCHASE AGREEMENTS It is the policy of the Portfolio to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase agreements.
Additionally, procedures have been established by the Portfolio to monitor, on a
daily basis, the market value of the repurchase agreement's underlying
investments to ensure the existence of a proper level of collateral.
E. EXPENSES The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
Portfolio Trust with respect to any two or more portfolios or series are
allocated in proportion to the average net assets of each portfolio, except when
allocations of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that portfolio.
F. CHANGE IN FISCAL YEAR END During the fiscal year 1997, the Portfolio
changed its fiscal year end from December 31 to October 31.
G. OTHER Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolio's business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolio. SFG acts
as Sub-Administrator and performs certain duties and receives compensation from
Citibank as from time to time are agreed to by Citibank and SFG. Citibank is a
wholly-owned subsidiary of Citicorp, which in turn is a wholly-owned subsidiary
of Citigroup Inc. Citigroup Inc. was formed as a result of the merger of
Citicorp and Travelers Group, Inc., which was completed on October 8, 1998.
The management fees paid to Citibank amounted to $2,155,201 for the six
months ended April 30, 1999. Management fees are computed at the annual rate of
0.60% of the Portfolio's average daily net assets.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Sub-Administrator, all of whom receive remuneration
for their services to the Trust from the Sub-Administrator or its affiliates.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $234,318,706 and $223,882,192,
respectively, for the six months ended April 30, 1999.
19
<PAGE>
LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1999, as
computed on a federal income tax basis, are as follows:
AGGREGATE COST $585,050,015
- --------------------------------------------------------------------------------
Gross unrealized appreciation $173,979,879
Gross unrealized depreciation (3,703,134)
- --------------------------------------------------------------------------------
Net unrealized appreciation $170,276,745
- --------------------------------------------------------------------------------
5. LINE OF CREDIT The Portfolio, along with various other Portfolios in the
CitiFunds Family, entered into an ongoing agreement with a bank which allows the
Portfolios collectively to borrow up to $75 million for temporary or emergency
purposes. Interest on the borrowings, if any, is charged to the specific
portfolio executing the borrowing at the base rate of the bank. The line of
credit requires a quarterly payment of a commitment fee based on the average
daily unused portion of the line of credit. For the six months ended April 30,
1999, the commitment fee allocated to the Portfolio was $981. Since the line of
credit was established, there have been no borrowings.
20
<PAGE>
TRUSTEES AND OFFICERS
Philip W. Coolidge*, President
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Heath B. McLendon**
C. Oscar Morong Jr.
E. Kirby Warren
William S. Woods Jr.
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
* Affiliated Person of Sub-Administrator and Distributor
** Affiliated Person of Investment Manager
INVESTMENT MANAGER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
DISTRIBUTOR
CFBDS, Inc.
21 Milk Street, 5th Floor,
Boston, MA 02109
(617) 423-1679
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street,Boston, MA 02110
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
THE CITIFUNDS FAMILY
LARGE CAP STOCKS
o CitiFunds Growth & Income Portfolio
o CitiFunds Large Cap Growth Portfolio
SMALL CAP STOCKS
o CitiFunds Small Cap Growth Portfolio
o CitiFunds Small Cap Value Portfolio
INTERNATIONAL STOCKS
o CitiFunds International Growth & Income Portfolio
o CitiFunds International Growth Portfolio
GROWTH WITH INCOME
o CitiFunds Balanced Portfolio
BONDS
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds Intermediate Income Portfolio
o CitiFunds National Tax Free Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
o CitiFunds CaliforniaTax Free Income Portfolio
MONEY MARKETS
o CitiFunds Cash Reserves
o CitiFunds U.S. Treasury Reserves
o CitiFunds Tax Free Reserves
o CitiFunds New York Tax Free Reserves
o CitiFunds California Tax Free Reserves
o CitiFunds Connecticut Tax Free Reserves
This report is prepared for the information of shareholders. It is authorized
for distribution to prospective investors only when preceded or accompanied by
an effective prospectus.
For more information contact your Service Agent or call 1-800-625-4554
CitiFunds are made available by CFBDS, Inc. as distributor.
(C)1999 Citicorp [logo] Printed on recycled paper CFS/LCG/499
<PAGE>
Semi-Annual Report o April 30, 1999
SMALL CAP VALUE
PORTFOLIO
SMALL CAP STOCKS
INVESTMENT PRODUCTS:
NOT FDIC INSURED O NO BANK GUARANTEE O MAY LOSE VALUE
<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
- --------------------------------------------------------------------------------
Portfolio Environment and Outlook 2
- --------------------------------------------------------------------------------
Fund Facts 3
- --------------------------------------------------------------------------------
Portfolio Highlights 4
- --------------------------------------------------------------------------------
Fund Performance 5
- --------------------------------------------------------------------------------
CITIFUNDS SMALL CAP VALUE PORTFOLIO
Statement of Assets and Liabilities 6
- --------------------------------------------------------------------------------
Statement of Operations 7
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets 8
- --------------------------------------------------------------------------------
Financial Highlights 9
- --------------------------------------------------------------------------------
Notes to Financial Statements 11
- --------------------------------------------------------------------------------
SMALL CAP VALUE PORTFOLIO
Portfolio of Investments 14
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities 16
- --------------------------------------------------------------------------------
Statement of Operations 16
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets 17
- --------------------------------------------------------------------------------
Financial Highlights 17
- --------------------------------------------------------------------------------
Notes to Financial Statements 18
- --------------------------------------------------------------------------------
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
This semi-annual report covers the period from November 1, 1998, through
April 30, 1999 for CitiFunds Small Cap Value Portfolio. Inside, we discuss the
market conditions faced by the Portfolio's subadviser, Franklin Advisory
Services, LLC as well as the strategies employed and its outlook for the future.
The reporting period saw a continuation of the positive economic conditions
that have dominated the U.S. economy for more than seven years. Lower short-term
interest rates adopted by the Federal Reserve Board in the fall of 1998 appear
to have helped U.S. businesses withstand the effects of economic weakness in
Japan, Asia and Latin America. Consumer spending remained high, corporate
earnings grew, unemployment was low and inflationary pressures continued to be
virtually absent.
These economic conditions produced mixed results for stocks during the
reporting period. On one hand, the Dow Jones Industrial Average closed over
10,000 for the first time in history and the broader Standard & Poor's 500
Composite Stock Index and the technology-driven NASDAQ indices also recorded new
highs. (The Dow Jones Industrial Average is a price-weighted average of 30
actively traded blue chip stocks. The Standard & Poor's 500 Composite Stock
Index is an index composed of widely held common stocks listed on the New York
Stock Exchange, American Stock Exchange and over-the-counter market. The NASDAQ
Composite Index is a market value weighted index that measures all domestic and
non-U.S. based securities, more than 4700 companies, listed on the NASDAQ stock
market.)
On the other hand, the stock market's advance was remarkably narrow, led by a
relatively small number of large-cap growth and technology companies. Small
capitalization companies in general, and value-oriented companies in particular,
continued to lag the major averages substantially and failed to participate in
the gains of their larger, growth-oriented counterparts. Because CitiFunds Small
Cap Value Portfolio invests primarily in small companies selling at attractive
valuations, its performance reflected the sector's recent weakness.
Thank you for your continued confidence and participation.
Sincerely,
/s/Philip Coolidge
- ------------------
Philip W. Coolidge
President
May 20, 1999
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
The Portfolio provided disappointing returns in a very difficult environment
for small cap stocks. The small cap sector of the U.S. stock market posted
modest declines over the past six months, and continued to lag both the
large-cap and mid- cap sectors. We believe that the small cap market's weakness
is due primarily to investors' preference for highly liquid, large cap names
with a history of consistent and predictable earnings.
In addition to the relative underperformance of small company stocks, value
style investing was out of favor for most of the reporting period. The value
style, which seeks to identify companies whose true worth is not reflected in
their stock prices, has taken a back seat to the growth style, a style that
focuses on companies' ability to increase their profitability over time. In
these unfavorable market conditions, we continued to increase the average size
of the companies represented in the Portfolio. We remain committed to the
small-cap universe but are seeking out opportunities among relatively larger
small-cap companies. In recognition of the market's preference for larger
capitalization companies, we have reduced our exposure to companies with market
capitalizations below $100 million, which is at the low end of our
capitalization range. Instead, we have focused on companies within the small cap
universe in the $500 million to $1 billion range. In our view, companies in this
capitalization range should offer greater liquidity, be more recognizable to
investors and represent better opportunities.
We also tried to take advantage of attractive valuations by purchasing stocks
of companies that we regarded as unfairly punished during last fall's steep
market declines. We found such opportunities in a variety of industries. These
recent additions contributed positively to performance as their stock prices
rebounded. Our long-standing investment approach, which evaluates stocks on a
company-by-company basis rather than according to macroeconomic or industry
trends, led to modest changes in the Portfolio's industry and market-sector
concentrations. For example, we increased our holdings in the consumer
nondurables sector, which includes apparel companies, from about 4% of the
Portfolio to approximately 10%.
We also increased our exposure to the industrial services sector, which we
believed represented attractive values in an environment characterized by low
oil prices. While energy service stocks hurt the Portfolio's performance for
most of the reporting period, they rose sharply in April when oil prices
increased from a low of $11 per barrel to about $16 per barrel. In fact, April
was a very good month for the CitiFunds Small Cap Value Portfolio.
Value-oriented stocks provided better returns than growth stocks for the first
time in many years, and investors began to show signs of renewed interest in
small cap stocks. The difference in valuations between large cap and small cap
stocks, which had reached historically wide levels, began to narrow. Merger
activity increased as small companies were targeted for acquisition by larger
competitors because of their attractive prices. Perhaps most significantly,
earnings reports from many small companies began to meet or exceed analysts'
expectations, while many larger companies reported disappointing earnings.
2
<PAGE>
Looking forward, we are optimistic regarding the growth potential of
small-cap value stocks over the long term. While it is much too soon to
determine if April's positive developments will hold true over the longer term,
we remain confident that the question facing investors is not whether small-cap
stocks will recover, but when.
Our experience is that patience, discipline and a long-term perspective are
some of the keys to investing successfully in smaller, value-oriented companies.
The Portfolio's average price to earnings ratio, a key indicator of value,
stands at 11 times earnings. In our view, this leaves plenty of room for the
Portfolio's valuations to grow. That is why we urge our shareholders to stay the
course.
FUND FACTS
FUND OBJECTIVE
Long-term capital growth; dividend income, if any, is incidental to this
investment objective.
INVESTMENT MANAGER DIVIDENDS
Citibank, N.A. Paid semi-annually, if any
PORTFOLIO SUBADVISER CAPITAL GAINS
Franklin Advisory Services, LLC Distributed annually, if any
COMMENCEMENT OF OPERATIONS BENCHMARKS
March 2, 1998 o Lipper Small Cap Funds Average
o Russell 2000(R) Value Index
NET ASSETS AS OF 4/30/99
Class A shares
$23.8 million
Class B shares
$46,341
3
<PAGE>
PORTFOLIO HIGHLIGHTS
- --------------------------------------------------------------------------------
TOP TEN EQUITY HOLDINGS AS OF APRIL 30, 1999 (Unaudited)
COMPANY, INDUSTRY % OF NET ASSETS
JLG Industries Inc., Producer Manufacturing 3.35%
- --------------------------------------------------------------------------------
Global Industrial Technologies Inc., Producer Manufacturing 2.89%
- --------------------------------------------------------------------------------
Timberland Co., Consumer Non-Durables 2.14%
- --------------------------------------------------------------------------------
Timken Co., Producer Manufacturing 2.12%
- --------------------------------------------------------------------------------
Rowan Companies Inc., Industrial Services 2.07%
- --------------------------------------------------------------------------------
Atwood Oceanics Inc., Industrial Services 2.06%
- --------------------------------------------------------------------------------
Aztar Corp., Consumer Services 2.02%
- --------------------------------------------------------------------------------
West Pharmaceutical Services Inc., Health Technology 1.96%
- --------------------------------------------------------------------------------
Fritz Companies Inc., Transportation 1.95%
- --------------------------------------------------------------------------------
Wolverine World Wide Inc., Consumer Non-Durables 1.93%
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION AS OF APRIL 30, 1999 (Unaudited)
[GRAPH OMITTED]
[The following table represents a Pie Chart in the printed piece]
Technology Services 2%
Consumer 15%
Producer Manufacturing 20%
Retail Trade 4%
Process Industries 1%
Non-Energy Minerals 4%
Finance 13%
Commercial Services 3%
Health Technology 3%
Electronic Technology 5%
Energy Minerals 2%
Transportation 8%
*Short-Term 12%
Industrial Services 8%
*Includes cash and net other assets
4
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
SINCE
SIX ONE 3/2/98
ALL PERIODS ENDED APRIL 30, 1999 (Unaudited) MONTHS** YEAR (INCEPTION)*
- --------------------------------------------------------------------------------
CitiFunds SmallCap Value Portfolio (Class A)
without sales charge 1.54% (29.69)% (24.00)%
Lipper Small Cap Funds Average 14.27% (11.11)% (3.00)%+
Russell 2000(R)Value Index 9.16% (15.33)% (6.38)%+
CitiFunds SmallCap Value Portfolio (Class A)
with maximum sales charge of 5.00% (3.54)% (33.21)% (27.28)%
CitiFunds SmallCap Value Portfolio (Class B)
without deferred sales charge -- -- (3.07)%#**
Lipper Small Cap Funds Average -- -- (0.07)%++**
Russell 2000(R) Value Index -- -- (1.45)%++**
CitiFunds SmallCap Value Portfolio (Class B)
with a maximum deffered sales charge of 5.00% -- -- (7.92)%#**
* Average Annual Total Return
** Not Annualized
+ From 2/28/98
++ From 12/31/98
# Commencement of Operations 1/4/99
GROWTH OF A $10,000 INVESTMENT
A $10,000 investment in the Fund made on inception date would have declined to
$6,906 with sales charge (as of 4/30/99). The graph shows how the Fund compares
to its benchmarks over the same period.
[The following table represents a chart in the printed piece].
Lipper Growth & Russell 2000 CitiFunds Small Cap
Date Income Funds Avg. Value Index Value Portfolio (A)
3/2/98 10000 10000 9500
3/31/98 10465 10405.6 9861
4/30/98 10550.81 10456.59 9823
5/31/98 9955.75 10086.42 9234
6/30/98 10034.4 10029.94 8816
7/31/98 9312.92 9244.6 7818.5
8/31/98 7449.41 7796.89 6393.5
9/30/98 8122.83 8237.42 6488.5
10/31/98 8445.31 8482.07 6802
11/30/98 8991.72 8711.93 6811.5
12/31/98 9650.82 8985.49 7020.5
1/31/99 9687.49 9104.99 8944.5
2/28/99 8896.02 8367.49 6232
3/31/99 9068.6 8498.02 6232
4/30/99 9649.9 9259.44 6906.5
The graph includes the initial sales charge on the Fund (no comparable charge
exists for the other indices) and assumes all dividends and distributions from
the Fund are reinvested at Net Asset Value.
Notes: All Fund performance numbers represent past performance, and are no
guarantee of future results. The Fund's share price and investment return will
fluctuate, so that the value of an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns include change in
share price and reinvestment of dividends and distributions, if any. Total
return figures "with sales charge" are provided in accordance with SEC
guidelines for comparative purposes for prospective investors, and reflect
voluntary fee waivers which may be terminated at anytime. If the waivers were
not in place, the Fund's returns would have been lower. The maximum sales charge
of 5.00% went into effect January 4, 1999. Investors may not invest directly in
an index.
5
<PAGE>
CITIFUNDS SMALL CAP VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investment in Small Cap Value Portfolio, at value (Note 1A) $23,946,619
Receivable for shares of beneficial interest sold 3,698
Receivable from Sub-Administrator 23,638
- --------------------------------------------------------------------------------
Total assets 23,973,955
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for shares of beneficial interest repurchased 59,017
Accrued expenses and other liabilities 50,233
- --------------------------------------------------------------------------------
Total liabilities 109,250
- --------------------------------------------------------------------------------
NET ASSETS $23,864,705
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in capital $39,627,529
Unrealized depreciation (13,351,919)
Accumulated net realized loss (2,365,284)
Undistributed net investment loss (45,621)
- --------------------------------------------------------------------------------
Total $23,864,705
- --------------------------------------------------------------------------------
COMPUTATION OF
CLASS A SHARES:
Net Asset Value per share ($23,818,364/3,275,597 shares outstanding) $7.27
Offering Price per share (7.27 / 0.95) $7.65**
- --------------------------------------------------------------------------------
CLASS B SHARES:
Net Asset Value per share and offering price
($46,341/6,393 shares outstanding) $7.25*
- --------------------------------------------------------------------------------
* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
** Based upon single purchases of less than $25,000.
See notes to financial statements
6
<PAGE>
CITIFUNDS SMALL CAP VALUE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (Note 1B):
Dividend Income from Small Cap Value Portfolio $156,271
Interest Income from Small Cap Value Portfolio 12,268
Allocated Expenses from Small Cap Value Portfolio (125,118)
- --------------------------------------------------------------------------------
$43,421
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 35,685
Service fees Class A (Note 3) 35,666
Service fees Class B (Note 3) 19
Transfer agent fees 17,234
Custody and fund accounting fees 11,263
Legal fees 10,501
Audit fees 7,360
Shareholder reports 7,068
Trustees fees 3,349
Other 20,220
- --------------------------------------------------------------------------------
Total expenses 148,365
Less expenses assumed by the Sub-Administrator (Note 6) (23,638)
Less aggregate amount waived by the Manager (Note 2) (35,685)
- --------------------------------------------------------------------------------
Net expenses 89,042
- --------------------------------------------------------------------------------
Net investment loss (45,621)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM
SMALL CAP VALUE PORTFOLIO:
Net realized loss (3,986,423)
Unrealized appreciation 4,062,193
- --------------------------------------------------------------------------------
Net realized and unrealized gain from
Small Cap Value Portfolio 75,770
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $30,149
- --------------------------------------------------------------------------------
See notes to financial statements
7
<PAGE>
CITIFUNDS SMALL CAP VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
SIX MONTHS MARCH 2, 1998
ENDED (COMMENCEMENT
APRIL 30, 1999 OF OPERATIONS) TO
(Unaudited) OCTOBER 31, 1998
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment loss $ (45,621) $ (112,586)
Net realized gain (loss) (3,986,423) 1,621,139
Unrealized appreciation(depreciation) 4,062,193 (17,414,112)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 30,149 (15,905,559)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income -- --
Net realized gain -- --
- --------------------------------------------------------------------------------
Decrease in net assets from distributions to shareholder -- --
- --------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 5):
CLASS A
Net proceeds from sale of shares 1,464,468 67,749,327
Net asset value of shares issued to shareholders
from reinvestment of distributions -- --
Cost of shares repurchased (10,986,316) (18,531,110)
- --------------------------------------------------------------------------------
Total Class A (9,521,848) 49,218,217
- --------------------------------------------------------------------------------
CLASS B*
Net proceeds from sale of shares 48,570 --
Net asset value of shares issued to shareholders
from reinvestment of distributions -- --
Cost of shares repurchased (4,824) --
- --------------------------------------------------------------------------------
Total Class B 43,746 --
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets from
transactions in shares of beneficial interest (9,478,102) 49,218,217
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (9,447,953) 33,312,658
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period $33,312,658 --
- --------------------------------------------------------------------------------
End of period (Including undistributed
net investment income (loss)
of (45,621) and $0) $23,864,705 $33,312,658
- --------------------------------------------------------------------------------
* January 4, 1999 (Commencement of Operations) to April 30, 1999.
See notes to financial statements
8
<PAGE>
CITIFUNDS SMALL CAP VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
CLASS A
---------------------------------
FOR THE PERIOD
SIX MONTHS MARCH 2, 1998
ENDED (COMMENCEMENT
APRIL 30, 1999 OF OPERATIONS) TO
(Unaudited) OCTOBER 31, 1998
- --------------------------------------------------------------------------------
Net Asset Value, beginning of period $7.16 $10.00
- --------------------------------------------------------------------------------
Income From Operations:
Net investment loss (0.014) (0.022)+
Net realized and unrealized gain (loss)
on investments 0.124 (2.818)
- --------------------------------------------------------------------------------
Total from operations 0.110 (2.840)
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- --
Net realized gain on investments -- --
- --------------------------------------------------------------------------------
Total distributions -- --
- --------------------------------------------------------------------------------
Net Asset Value, end of period $7.27 $ 7.16
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $23,819 $33,313
Ratio of expenses to average net assets (A) 1.50%* 1.50%*
Ratio of net investment income (loss) to
average net assets (0.32)%* (0.39)%*
Total return 1.54%** (28.40)%**
Note: If Agents of the Fund had not voluntarily waived a portion of their fees,
the net investment income (loss) per share and the ratios would have been as
follows:
Net investment loss per share ($0.032) ($0.036)
RATIOS:
Expenses to average net assets (A) 1.92%* 1.74%*
Net investment loss to average net assets (0.74)%* (0.63)%*
- --------------------------------------------------------------------------------
* Annualized
** Not Annualized
+ The per share amounts were computed using monthly average of shares during
the period
(A) Includes the Fund's share of Small Cap Value Portfolio allocated expenses
for the period indicated.
See notes to financial statements
9
<PAGE>
CITIFUNDS SMALL CAP VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS (Continued)
CLASS B
-----------------
FOR THE PERIOD
JANUARY 4, 1999
(COMMENCEMENT
OF OPERATIONS) TO
APRIL 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
Net Asset Value, beginning of period $7.48
- --------------------------------------------------------------------------------
Income From Operations:
Net investment loss (0.014)
Net realized and unrealized loss on investments (0.216)
- --------------------------------------------------------------------------------
Total from operations (0.23)
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income --
Net realized gain on investments --
- --------------------------------------------------------------------------------
Total distributions --
- --------------------------------------------------------------------------------
Net Asset Value, end of period $7.25
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $46,341
Ratio of expenses to average net assets (A) 2.25%*
Ratio of net investment income (loss) to average net assets (0.18)%*
Total return (3.07)%**
Note: If Agents of the Fund had not voluntarily waived a portion of their fees,
the net investment income (loss) per share and the ratios would have been as
follows:
Net investment loss per share ($0.025)
RATIOS:
Expenses to average net assets (A) 2.67%*
Net investment loss to average net assets (0.60)%*
- --------------------------------------------------------------------------------
* Annualized
** Not Annualized
(A) Includes the Fund's share of Small Cap Value Portfolio allocated expenses
for the period indicated.
See notes to financial statements
10
<PAGE>
CITIFUNDS SMALL CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds Small Cap Value Portfolio (the
"Fund") is a separate diversified series of CitiFunds Trust II (the "Trust"), a
Massachusetts business trust. The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Fund invests all of its investable assets in Small Cap Value Portfolio (the
"Portfolio"), a management investment company for which Citibank, N.A.
("Citibank") serves as Investment Manager. The value of such investment reflects
the Fund's proportionate interest (17.1% at April 30, 1999) in the net assets of
the Portfolio. CFBDS, Inc. ("CFBDS") acts as the Fund's Sub-Administrator and
Distributor.
The Fund offers Class A and Class B shares. The Fund commenced its public
offering of Class B shares on January 4, 1999. Class A shares have a front-end,
or initial sales charge effective January 4, 1999. This sales charge may be
reduced or eliminated in certain circumstances. Class B shares have no front-end
sales charges, pay a higher ongoing distribution fee than Class A but are
subject to a deferred sales charges if sold within five years of purchase. Class
B shares automatically convert into Class A shares after eight years. Expenses
of the Fund are borne pro-rata by the holders of each class of shares, except
that each class bears expenses unique to that class (including the Rule 12b-1
service and distribution fees applicable to such class), and votes as a class
only with respect to its own Rule 12b-1 plan. Shares of each class would receive
their pro-rata share of the assets of the Fund, if the Fund were liquidated.
Class A shares have lower expenses than Class B shares.
The financial statements of the Portfolio, including the portfolio of
investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Fund are as
follows:
A. INVESTMENT VALUATION Valuation of securities by the Portfolio is discussed
in Note 1A of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report.
B. INVESTMENT INCOME The Fund earns income, net of Portfolio expenses, daily
based on its investment in the Portfolio.
C. FEDERAL TAXES The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investment transactions. Accordingly, no provision for federal income or
excise tax is necessary. At October 31, 1998, the Fund, for federal income tax
purposes, had a capital loss carryover of $7,280,447 which will expire on
October 31, 2006. Such capital loss carryover will reduce the Fund's taxable
income arising from future net
11
<PAGE>
CITIFUNDS SMALL CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
realized gain on investment transactions, if any, to the extent permitted by the
Internal Revenue Code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal income or excise tax.
D. EXPENSES The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and CFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund. The Fund's share of the Portfolio's expenses are
charged against and reduce the amount of the Fund's investment in the Portfolio.
E. DISTRIBUTIONS Distributions to shareholders are recorded on ex-dividend
date. The amount and character of income and net realized gains to be
distributed are determined in accordance with income tax rules and regulations,
which may differ from generally accepted accounting principles. These
differences are attributable to permanent book and tax accounting differences.
Reclassifications are made to the Fund's capital accounts to reflect income and
net realized gains available for distribution (or available capital loss
carryovers) under income tax rules and regulations.
F. OTHER All the net investment income, realized and unrealized gain and loss
of the Portfolio is allocated pro rata, based on respective ownership interests,
among the Fund and the other investors in the Portfolio at the time of such
determination. Investment transactions are accounted for on the trade date
basis. Realized gains and losses are determined on the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the Fund's
business affairs and has a separate Management Agreement with the Fund. Citibank
also provides certain administrative services to the Fund. These administrative
services include providing general office facilities and supervising the overall
administration of the Fund. CFBDS acts as Sub-Administrator and performs certain
duties and receives compensation from Citibank as from time to time is agreed to
by Citibank and CFBDS. Citibank is a wholly-owned subsidiary of Citicorp, which
in turn, is a wholly-owned subsidiary of Citigroup Inc. Citigroup Inc. was
formed as a result of the merger of Citicorp and Travelers Group, Inc. which was
completed on October 8, 1998.
The management fees paid to Citibank are accrued daily and payable monthly.
The management fee is computed at the annual rate of 0.25% of the Fund's average
daily net assets. The management fee amounted to $35,685 all of which was
voluntarily waived for the period ended April 30, 1999.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Sub-Administrator, all of whom receive remuneration
for their services to the Trust from the Sub-Administrator or its affiliates.
12
<PAGE>
CITIFUNDS SMALL CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
3. SERVICE FEES The Fund maintains separate Service Plans for Class A and Class
B shares, which have been adopted in accordance with Plan Rule 12b-1 under the
Investment Company Act of 1940 as amended. Under the Class A Service Plan, the
Fund may pay monthly fees at an annual rate not to exceed 0.25% of the average
daily net assets represented by Class Ashares of the Fund. The Service fees for
Class A shares amounted to $35,666 for the six months ended April 30, 1999.
Under the Class B Service Plan, the Fund may pay a combined monthly distribution
and service fee at an annual rate not to exceed 1.00% of the average daily net
assets represented by Class B shares of the Fund. The Service fees for Class B
shares amounted to $19 for the period ended April 30, 1999. These fees may be
used to make payments to the Distributor for distribution services and to others
as compensation for the sale of shares of the applicable class of the Fund, for
advertising, marketing or other promotional activity, and for preparation,
printing and distribution of prospectuses, statements of additional information
and reports for recipients other than regulators and existing shareholders. The
Fund also may make payments to the Distributor and others for providing personal
service or the maintenance of shareholder accounts.
4. INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in
the Portfolio for the six months ended April 30, 1999 aggregated $1,649,556 and
$11,106,157, respectively.
5. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest (without par value). Transactions in shares of beneficial interest were
as follows:
SIX FOR THE PERIOD
MONTHS MARCH 2, 1998
ENDED (COMMENCEMENT
APRIL 30, 1999 OF OPERATIONS) TO
(Unaudited) OCTOBER 31, 1998
- --------------------------------------------------------------------------------
CLASS A
Shares sold 202,349 6,804,115
Shares repurchased (1,580,239) (2,150,628)
- --------------------------------------------------------------------------------
Class A Net increase (decrease) (1,377,890) 4,653,487
- --------------------------------------------------------------------------------
CLASS B*
Shares sold 7,057 --
Shares repurchased (664) --
- --------------------------------------------------------------------------------
Class B Net increase 6,393 --
- --------------------------------------------------------------------------------
* January 4, 1999 (Commencement of Operations) to April 30, 1999.
6. ASSUMPTION OF EXPENSES CFBDS has voluntarily agreed to pay a portion of the
unwaived expenses of the Fund for the six months ended April 30, 1999, which
amounted to $23,638.
13
<PAGE>
SMALL CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 1999
(Unaudited)
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 87.7%
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 2.9%
- --------------------------------------------------------------------------------
Nash Finch Co. 72,500 $ 688,750
Reynolds & Reynolds Co 74,800 1,706,375
Unisource Worldwide
Inc 184,000 1,495,000
------------
3,890,125
------------
CONSUMER DURABLE GOODS -- 3.4%
- --------------------------------------------------------------------------------
Cannondale Corp.* 66,000 627,000
Coachmen Industries Inc. 37,500 594,562
D.R. Horton Inc. 48,500 936,656
Engle Homes Inc. 55,500 645,187
Flexsteel Industries Inc. 89,200 1,165,175
Rockshox Inc.* 124,900 175,641
TBC Corp.* 70,000 542,500
------------
4,686,721
------------
CONSUMER NON-DURABLES -- 9.9%
- --------------------------------------------------------------------------------
Dimon Inc. 200,000 875,000
Scweitzer-Mauduit
International Inc. 90,800 1,503,875
Sola International Inc.* 89,700 1,334,288
Standard Commercial
Corp 479,000 2,125,563
Timberland Co.* 43,400 3,005,450
Tropical Sportswear
International Corp.* 109,500 2,402,156
Wolverine World
Wide Inc. 226,000 2,712,000
------------
13,958,332
------------
CONSUMER SERVICES -- 2.0%
- --------------------------------------------------------------------------------
AZTAR CORP.* 407,700 2,828,419
------------
ELECTRONIC TECHNOLOGY -- 5.1%
- --------------------------------------------------------------------------------
Aehr Test Systems* 260,000 1,170,000
Cordant Technologies Inc. 13,000 599,625
ESCO Electronics Corp.* 129,200 1,251,625
Flir Systems Inc.* 35,500 488,125
Ladish Inc.* 249,000 1,665,187
Spacehab Inc.* 233,000 1,281,500
United Industrial Corp. 58,900 692,075
------------
7,148,137
------------
ENERGY MINERALS -- 1.8%
- --------------------------------------------------------------------------------
Nuevo Energy Co.* 163,000 2,587,625
------------
FINANCE -- 13.4%
- --------------------------------------------------------------------------------
Acceptance Insurance
Co.* 96,500 1,357,031
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
Centris Group Inc. 170,900 $ 1,943,988
Executive Risk Inc. 8,200 588,350
HCC Holdings 86,000 1,816,750
MMI Companies Inc. 128,400 1,990,200
Matrix Capital Corp 116,400 1,746,000
PBOC Holdings Inc.* 85,000 743,750
PMI Group Inc. 17,500 976,719
Penn-America
Group Inc. 112,100 1,177,050
Presidential Life Corp. 113,800 2,041,288
Professionals Group* 59,200 1,505,900
Seibels Bruce
Group Inc.* 276,300 1,139,738
Stancorp Financial
Group Inc.* 45,000 1,082,813
Symons International
Group Inc.* 110,600 622,125
------------
18,731,702
------------
HEALTH TECHNOLOGY -- 2.8%
- --------------------------------------------------------------------------------
Orthologic Corp.* 357,800 1,073,400
Skyepharma 15,301 154,923
West Pharmaceutical
Services Inc. 83,200 2,750,800
------------
3,979,123
------------
INDUSTRIAL SERVICES -- 8.4%
- --------------------------------------------------------------------------------
Atwood Oceanics Inc.* 82,900 2,891,138
ENSCO International Inc. 138,400 2,569,050
Perini Corp.* 123,800 603,525
R&B Falcon Corp.* 139,140 1,391,400
Rowan Companies Inc.* 181,600 2,905,600
Santa Fe International
Corp 69,100 1,485,650
------------
11,846,363
------------
NON-ENERGY MINERALS -- 4.1%
- --------------------------------------------------------------------------------
Carpenter Technology
Corp 50,400 1,578,150
LTV Corp. 410,100 2,614,388
Lone Star Technologies
Inc.* 92,100 1,582,967
------------
5,775,505
------------
PROCESS INDUSTRIES -- 1.3%
- --------------------------------------------------------------------------------
RPM Inc. 90,400 1,271,250
Tuscarora Inc. 48,000 606,000
------------
1,877,250
------------
14
<PAGE>
SMALL CAP VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 1999
(Unaudited)
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
PRODUCER MANUFACTURING -- 19.5%
- --------------------------------------------------------------------------------
Baldor Electric Co. 88,700 $ 1,713,019
Commercial Intertech
Corp 115,800 1,483,687
Commonwealth
Industries Inc. 136,500 1,313,813
Easco, Inc. 190,400 1,428,000
Global Industrial
Technologies Inc.* 307,600 4,056,475
Holophane Corp.* 75,800 1,956,587
JLG Industries Inc. 292,500 4,698,281
Keystone Consolidated
Industries Inc.* 181,400 1,235,787
Myers Industries Inc. 92,900 2,101,863
Patrick Industries Inc. 93,100 1,187,025
Superior Industries
International Inc. 69,300 1,732,500
Timken Co. 133,000 2,967,562
Watts Industries Inc. 97,900 1,505,212
------------
27,379,811
------------
RETAIL TRADE -- 3.7%
- --------------------------------------------------------------------------------
Duckwall-Alco
Stores Inc.* 65,400 600,863
Little Switzerland Inc.* 83,800 78,562
Schultz Sav-O Stores Inc. 150,950 2,415,200
Syms Corp.* 250,000 2,015,625
------------
5,110,250
------------
TECHNOLOGY SERVICES -- 1.4%
- --------------------------------------------------------------------------------
Ultrak Inc.* 326,200 1,916,425
------------
TRANSPORTATION -- 8.0%
- --------------------------------------------------------------------------------
Air Express International
Corp 48,600 1,063,125
Conrad Industries Inc.* 28,200 169,200
Fritz Companies Inc.* 269,600 2,729,700
Kenan Transport Co. 83,200 2,600,000
Midwest Express
Holdings Inc.* 51,300 1,603,125
Motor Cargo
Industries Inc.* 192,600 1,083,375
Tidewater Inc. 75,000 1,987,500
------------
11,236,025
------------
TOTAL COMMON STOCKS
(Identified Cost
$143,399,069) 122,951,813
------------
SHORT-TERM OBLIGATIONS
AT AMORTIZED COST -- 11.4%
- --------------------------------------------------------------------------------
State Street Bank
Repurchase Agreement
4.00% due 5/03/99
proceeds at maturity
$16,042,346 (collateralized by
$16,120,000 Federal National
Mortgage Association
5.30% due 1/08/01;
valued at $16,358,386) $ 16,037,000
------------
TOTAL INVESTMENTS
(Identified Cost
$159,436,069) 99.1% 138,988,813
OTHER ASSETS,
LESS LIABILITIES 0.9% 1,269,576
----- ------------
NET ASSETS 100.0 $140,258,389
===== ============
* Non income producing securities.
See notes to financial statements
15
<PAGE>
SMALL CAP VALUE PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) (Identified Cost, $159,436,069) $138,988,813
Cash 55,868
Receivable for securities sold 1,416,319
Dividend and interest receivable 49,785
- --------------------------------------------------------------------------------
Total assets 140,510,785
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 21,600
Payable to affiliates-- Management fees (Note 2) 23,190
Accrued expenses and other liabilities 207,606
- --------------------------------------------------------------------------------
Total liabilities 252,396
- --------------------------------------------------------------------------------
NET ASSETS $140,258,389
- --------------------------------------------------------------------------------
REPRESENTED BY:
Paid-in capital for beneficial interests $140,258,389
- --------------------------------------------------------------------------------
SMALL CAP VALUE PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
Dividend income $861,930
Interest income 67,785
- --------------------------------------------------------------------------------
$ 929,715
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 597,726
Custody and fund accounting fees 26,693
Audit fees 13,835
Legal fees 11,336
Trustees fees 3,594
Other 41,871
- --------------------------------------------------------------------------------
Total expenses 695,055
- --------------------------------------------------------------------------------
Net investment income 234,660
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Unrealized appreciation of investments 24,268,482
Net realized loss from investment transactions (22,928,761)
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 1,339,721
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS $1,574,381
- --------------------------------------------------------------------------------
See notes to financial statements
16
<PAGE>
SMALL CAP VALUE PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
SIX MONTHS NOVEMBER 1, 1997
ENDED (COMMENCEMENT
APRIL 30, 1999 OF OPERATIONS) TO
(Unaudited) OCTOBER 31, 1998
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
Net investment income $ 234,660 $ 433,451
Net realized gain (loss) on
investment transactions (22,928,761) 12,366,831
Unrealized appreciation (depreciation)
of investments 24,268,482 (75,028,999)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 1,574,381 (62,228,717)
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions (Note 1) 3,708,766 434,934,898
Value of withdrawals (35,890,285) (201,840,654)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital transactions (32,181,519) 233,094,244
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS: (30,607,138) 170,865,527
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 170,865,527 --
- --------------------------------------------------------------------------------
End of period $140,258,389 $170,865,527
- --------------------------------------------------------------------------------
SMALL CAP VALUE PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD
SIX MONTHS NOVEMBER 1, 1997
ENDED (COMMENCEMENT
APRIL 30, 1999 OF OPERATIONS) TO
(Unaudited) OCTOBER 31, 1998
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted) $140,258 $170,866
Ratio of expenses to average net assets 0.87%* 0.89%
Ratio of net investment income
to average net assets 0.29%* 0.22%
Portfolio turnover 21% 47%
- --------------------------------------------------------------------------------
*Annualized
See notes to financial statements
17
<PAGE>
SMALL CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES Small Cap Value Portfolio (the "Portfolio"),
a separate series of The Asset Allocation Portfolios (the "Portfolio Trust"), is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York. The Declaration of Trust permits
the Trustees to issue beneficial interests in the Portfolio. The Investment
Manager of the Portfolio is Citibank N.A., ("Citibank"). Signature Financial
Group (Grand Cayman), Ltd. ("SFG") acts as the Portfolio's Sub-Administrator.
On November 1, 1997, CitiSelect Folio 200, CitiSelect Folio 300, CitiSelect
Folio 400 and CitiSelect Folio 500 each transferred a portion of their
investable assets in the amounts of $16,913,632, $42,092,855, $81,236,129 and
$40,503,947 including $2,712,350, $7,246,592, $14,228,135 and $6,126,184,
respectively, of unrealized appreciation, to the Portfolio in exchange for an
interest in the Portfolio. The total investable assets and contributions are
included in the period November 1, 1997 (Commencement of Operations) to October
31, 1998. "Proceeds from contributions" in the Statement of Changes in Net
Assets.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. INVESTMENT SECURITY VALUATIONS Equity securities listed on securities
exchanges or reported through the NASDAQ system are valued at last sale prices.
Unlisted securities or listed securities for which last sales prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations maturing in sixty days or less), are valued on the basis
of valuations furnished by pricing services approved by the Board of Trustees
which take into account appropriate factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, and other market data, without exclusive reliance on quoted prices or
exchange or over-the-counter prices. Short-term obligations, maturing in sixty
days or less, are valued at amortized cost, which constitutes fair value as
determined by the Trustees. Securities, if any, for which there are no such
valuations or quotations are valued at fair value as determined in good faith by
or under guidelines established by the Trustees.
B. INCOME Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on long-term debt securities
when required for U.S. federal income tax purposes. Dividend income is recorded
on the ex-dividend date.
C. U.S. FEDERAL INCOME TAXES The Portfolio is considered a partnership under
the U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary.
18
<PAGE>
SMALL CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued)
D. EXPENSES The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
Portfolio Trust with respect to any two or more portfolios or series are
allocated in proportion to the average net assets of each portfolio, except when
allocations of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that portfolio.
E. REPURCHASE AGREEMENTS It is the policy of the Portfolio to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase agreements.
Additionally, procedures have been established by the Portfolio to monitor, on a
daily basis, the market value of the repurchase agreement's underlying
investments to ensure the existence of a proper level of collateral.
F. OTHER Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolio's business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolio. SFG acts
as Sub-Administrator and performs certain duties and receives compensation from
Citibank as from time to time are agreed to by Citibank and SFG. Citibank has
delegated the daily management of the Portfolio to Franklin Advisory Services,
LLC ("the Subadviser"). Citibank is a wholly owned subsidiary of Citicorp, which
in turn, is a wholly-owned subsidiary of Citigroup Inc. Citigroup Inc. was
formed as a result of the merger of Citicorp and Travelers Group, Inc. which was
completed on October 8, 1998.
The management fees paid to Citibank, amounted to $159,394 for the six months
ended April 30, 1999. Management fees are computed at the annual rate of 0.75%
of the Portfolio's average daily net assets less the aggregate amount, if any,
payable by the Portfolio pursuant to the Sub-Management Agreement with the
Subadviser. The Portfolio pays the Subadviser the following fees, which are
accrued daily and payable monthly and are at the annual rates equal to the
percentages of the aggregate assets of the Portfolio allocated to the
Subadviser: 0.55% on first $250 million and 0.50% on remaining assets.
The management fees paid to the Subadviser amounted to $438,332 for the six
months ended April 30, 1999.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $32,104,029 and $76,752,225,
respectively, for the six months ended April 30, 1999.
19
<PAGE>
SMALL CAP VALUE PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued)
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1999, as
computed on a federal income tax basis, are as follows:
Aggregate Cost $159,436,069
- --------------------------------------------------------------------------------
Gross unrealized appreciation $12,285,702
Gross unrealized depreciation (32,732,958)
- --------------------------------------------------------------------------------
Net unrealized depreciation $(20,447,256)
- --------------------------------------------------------------------------------
5. LINE OF CREDIT The Portfolio, along with various other Portfolios in the
CitiFunds Family, entered into an ongoing agreement with a bank which allows the
Portfolios collectively to borrow up to $75 million for temporary or emergency
purposes. Interest on the borrowings, if any, is charged to the specific
portfolio executing the borrowing at the base rate of the bank. The line of
credit requires a quarterly payment of a commitment fee based on the average
daily unused portion of the line of credit. For the six months ended April 30,
1999, the commitment fee allocated to the Portfolio was $674. Since the line of
credit was established, there have been no borrowings.
20
<PAGE>
TRUSTEES AND OFFICERS
Philip W. Coolidge*, PRESIDENT
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Heath B. McLendon**
C. Oscar Morong Jr.
E. Kirby Warren
William S. Woods Jr.
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
* AFFILIATED PERSON OF SUB-ADMINISTRATOR AND DISTRIBUTOR
** AFFILIATED PERSON OF INVESTMENT MANAGER
INVESTMENT MANAGER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
DISTRIBUTOR
CFBDS, Inc.
21 Milk Street, 5th Floor
Boston, MA 02109
(617) 423-1679
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street,Boston, MA 02110
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
THE CITIFUNDS FAMILY
LARGE CAP STOCKS
o CitiFunds Growth & Income Portfolio
o CitiFunds Large Cap Growth Portfolio
SMALL CAP STOCKS
o CitiFunds Small Cap Growth Portfolio
o CitiFunds Small Cap Value Portfolio
INTERNATIONAL STOCKS
o CitiFunds International Growth & Income Portfolio
o CitiFunds International Growth Portfolio
GROWTH WITH INCOME
o CitiFunds Balanced Portfolio
BONDS
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds Intermediate Income Portfolio
o CitiFunds National Tax Free Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio
MONEY MARKETS
o CitiFunds Cash Reserves
o CitiFunds U.S. Treasury Reserves
o CitiFunds Tax Free Reserves
o CitiFunds New York Tax Free Reserves
o CitiFunds California Tax Free Reserves
o CitiFunds Connecticut Tax Free Reserves
This report is prepared for the information of shareholders. It is authorized
for distribution to prospective investors only when preceded or accompanied by
an effective prospectus.
For more information contact your Service Agent or call 1-800-625-4554
CitiFunds are made available by CFBDS, Inc. as distributor.
(C)1999 Citicorp [logo] Printed on recycled paper CFS/SCV/499
<PAGE>
SEMI-ANNUAL REPORT o APRIL 30, 1999
CitiFunds(TM)
Growth & Income Portfolio
LARGE CAP STOCKS
INVESTMENT PRODUCTS:
NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
- --------------------------------------------------------------------------------
Portfolio Environment and Outlook 2
- --------------------------------------------------------------------------------
Fund Facts 3
- --------------------------------------------------------------------------------
Portfolio Highlights 4
- --------------------------------------------------------------------------------
Fund Performance 5
- --------------------------------------------------------------------------------
CITIFUNDS GROWTH & INCOME PORTFOLIO
Statement of Assets and Liabilities 6
- --------------------------------------------------------------------------------
Statement of Operations 7
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets 8
- --------------------------------------------------------------------------------
Financial Highlights 9
- --------------------------------------------------------------------------------
Notes to Financial Statements 11
- --------------------------------------------------------------------------------
GROWTH & INCOME PORTFOLIO
Portfolio of Investments 14
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities 16
- --------------------------------------------------------------------------------
Statement of Operations 16
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets 17
- --------------------------------------------------------------------------------
Financial Highlights 17
- --------------------------------------------------------------------------------
Notes to Financial Statements 18
- --------------------------------------------------------------------------------
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
This semi-annual report covers the period from November 1, 1998 through April
30, 1999, for the CitiFundsSM Growth & Income Portfolio. Inside, the CitiFunds'
investment manager, Citibank, N.A., discusses the market conditions faced, the
strategies it employed and its outlook for the future.
Beginning May 17, 1999, Citibank, N.A. has delegated the daily management of
the CitiFunds Growth & Income Portfolio's securities to a new portfolio
subadviser, SSBC Fund Management, Inc. (SSBC). SSBC, an affiliate of Citibank,
is an indirect wholly-owned subsidiary of Citigroup Inc.
In managing the Fund's portfolio, SSBC uses a value-oriented approach similar
to Citibank's value style as described in the Fund's prospectus. The Fund will
invest primarily in common stocks that SSBC believes have potential for capital
growth or current income, or both. In selecting securities, SSBC emphasizes
securities of established, large-cap U.S. issuers, meaning those with market
capitalizations within the top 1,000 stocks of the U.S. equity market. Frances
A. Root is the new portfolio manager of the CitiFunds Growth & Income Portfolio.
Ms. Root is a Managing Director and a Senior Equity Portfolio Manager at SSBC.
The reporting period saw a continuation of strong market trends in the U.S.
which have existed for more than seven years. Lower short-term interest rates
and a looser monetary policy adopted by the Federal Reserve Board in the fall of
1998 appear to have enabled U.S. businesses to more efficiently deal with the
effects of economic uncertainty in Japan, Asia and Latin America. During the
reporting period, consumer spending remained high, corporate earnings grew, the
rate of unemployment was low and inflationary pressures continued to be
virtually nonexistent.
These economic conditions produced good results for stocks over the past six
months. The Dow Jones Industrial Average ("DJIA") closed over 10,000 for the
first time in history and the broader Standard & Poor's 500 Index and
technology-driven Nasdaq Composite Index also recorded new highs.
However, the stock market's advance was remarkably narrow, led by a
relatively small number of growth and technology companies. Although CitiFunds
Growth & Income Portfolio invests primarily in large-cap value companies, the
manager pursues a patient, disciplined stock selection strategy that enabled the
Portfolio to participate in much of the stock market's rise.
Thank you for your continued confidence and participation.
Sincerely,
/s/Philip W. Coolidge
- ---------------------
Philip W. Coolidge
President
May 20, 1999
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
CitiFunds Growth & Income Portfolio's focus on well-established companies
selling for attractive prices produced solid results during the final months of
1998 and the beginning of 1999. During this time period, the Portfolio benefited
from the remarkable resilience of the U.S. financial markets that rallied
strongly after last fall's sharp declines. The Portfolio also benefited in the
latter part of the reporting period as the market looked toward more cyclical
names with valuation characteristics representing good values that were broadly
owned. (Value style investors seeks to earn a return by investing in the stocks
of companies that are believed to be temporarily out of favor or priced below
their worth.)
In part, the manager attributed the market's rebound to the efforts of the
central banks throughout the world to lower interest rates. These policies
helped stimulate economic growth in the U.S. and overseas. Perhaps most
importantly, lower interest rates signaled the central banks' willingness to
fight the spread of the global currency and credit crisis that began in Asia in
1997 and extended to Russia and parts of Latin America in 1998. These moves
eased investors; concerns that economic weakness might adversely affect
corporate earnings, convincing them to shift their assets back to stocks from
the safe haven of government bonds.
However, the U.S. stock market's advance between November and February
continued to be concentrated primarily in a relatively small number of large-cap
growth companies with predictable earnings. The Portfolio held few of these
types of companies, preferring instead to maintain its focus on established
companies that have temporarily fallen out of favor among investors but where
actions were in place to drive future earnings growth.
The Portfolio's investment strategy paid off during the first four months of
1999, when investors appeared to become more comfortable with such "fallen
angels." In fact, April 1999 was the first month in more than a year in which
value stocks provided higher returns than growth stocks in the large cap sector.
Growth stocks are of companies that generally have more stable earnings that are
not as vulnerable to the economy.
As "bottom-up" value managers, we identify opportunities on a
company-by-company basis rather than according to broad macroeconomic or market
trends. However, it is interesting to note that the Portfolio received the
benefit of strong gains from holdings in a number of different market sectors,
including companies with exposure to the global economic cycle in the paper,
chemicals and manufacturing industries. Many of these stocks rebounded sharply
during the period as investors recognized that the worst of the global financial
crisis is probably behind us. The Portfolio also received good performance from
its health care holdings, some of which recovered when investors' outlooks
improved.
In March and April, the U.S. stock market experienced a significant change in
leadership. After many months of lagging the broader averages, value-oriented
stocks posted larger short-term gains than growth stocks. In addition,
economically sensitive "cyclical" companies began to go up, as investors became
more comfortable with global economic conditions.
2
<PAGE>
In response to these developments, the Portfolio reduced its holdings in
selective financial services companies, selling those that were believed to have
already appreciated to a point at which they could no longer be considered
compelling values while maintaining exposure in the sector with investments in
companies possessing positive fundamentals. At the same time, the Portfolio
reduced its allocation to the technology industry, a response to this sector's
rapid rise that, in the view of the manager, left few attractive values in this
sector.
Looking forward, we believe we may be in the early rounds of economic
conditions under which value stocks have traditionally done well. Stronger
economies overseas and continuing economic strength in the U.S. should make
low-priced value stocks more attractive relative to large-cap growth conditions.
In fact, as of April 30, 1999, growth stocks continued to be expensive, selling
at higher-than-average valuations relative to value-oriented stocks.
FUND FACTS
FUND OBJECTIVE
Long-term capital growth and current income.
INVESTMENT MANAGER DIVIDENDS
Citibank, N.A. Paid quarterly, if any
COMMENCEMENT OF OPERATIONS CAPITAL GAINS
March 2, 1998 Distributed annually, if any
NET ASSETS AS OF 4/30/99 BENCHMARKS
Class A shares o Standard & Poor's Barra Value Index*
$56.6 million o Lipper Growth & Income
Class B shares Funds Average
$306,018
* The S&P Index is an index of U.S. common stocks and is used as a gauge of
general U.S. stock market performance. The S&P Barra Value Index represents
the value stocks in the S&P 500.
3
<PAGE>
PORTFOLIO HIGHLIGHTS
================================================================================
TOP TEN EQUITY HOLDINGS AS OF APRIL 30, 1999 (Unaudited)
COMPANY, INDUSTRY % OF NET ASSETS
American Telephone & Telegraph Corp., Utilities 5.03%
- --------------------------------------------------------------------------------
Mobil Corp., Energy 3.36%
- --------------------------------------------------------------------------------
Chase Manhattan Bank Corp., Finance 3.29%
- --------------------------------------------------------------------------------
Bank One Corp., Finance 3.18%
- --------------------------------------------------------------------------------
Exxon Corp., Energy 3.00%
- --------------------------------------------------------------------------------
Martin Marietta Materials Inc., Basic Industries 2.68%
- --------------------------------------------------------------------------------
Raytheon Corp., Technology 2.68%
- --------------------------------------------------------------------------------
J.P. Morgan & Co. Inc., Finance 2.66%
- --------------------------------------------------------------------------------
Union Pacific Corp., Transportation 2.57%
- --------------------------------------------------------------------------------
Oxford Health Plans, Healthcare Services 2.55%
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION AS OF APRIL 30, 1999 (Unaudited)
[The following table represents a chart in the printed piece].
Real Estate 1%
Industrial Services 3%
Finance 23%
Capital Goods 1%
Energy 13%
Consumer 13%
Basic Industries 6%
Retail 6%
Utilities 15%
Technology 11%
Healthcare Services 6%
Transportation 4%
*Short Term 2%
* Includes cash and net other assets.
4
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
SINCE
SIX ONE 3/2/98
ALL PERIOD ENDED APRIL 30, 1999 (Unaudited) MONTHS** YEAR (INCEPTION)*
================================================================================
CitiFunds Growth & Income
Portfolio (Class A)
without sales charge 20.91% 5.95% 9.70%
Lipper Growth & Income Funds Average 18.22% 10.73% 13.70%+
S&P Barra Value Index 21.66% 13.02% 17.41%+
CitiFunds Growth & Income
Portfolio (Class A) with a
maximum charge of 5.00% 14.86% 0.65% 4.96%
CitiFunds Growth & Income
Portfolio (Class B) without
deferred sales charge -- -- 12.10%#**
Lipper Growth & Income
Funds Average -- -- 7.74%++**
S&P Barra Value Index -- -- 11.24%++**
CitiFunds Growth & Income
Portfolio (Class B) with a
maximum deferred sales
charge of 5.00% -- -- 6.50%#**
*Average Annual Total Return
**Not Annualized
+From 2/28/98
++From 12/31/98
#Commencement of Operations 1/4/99
Income Dividends Per Share $0.046 for Class A
GROWTH OF A $10,000 INVESTMENT
A $10,000 investment in the Fund made on inception date would have grown $10,578
with sales charge (as of 4/30/99). The graph shows how the Fund compares to its
benchmarks over the same period.
[The following table represents a chart in the printed piece].
Lipper Growth & S&P Barra CitiFunds Growth
Date Income Funds Avg. Value Index & Income Fund
- --------------------------------------------------------------------------------
2/28/98 10000 10000 9500
3/31/98 10440.9 10507 9956
4/30/98 10513.03 10630.98 9984.5
5/31/98 10294.42 10481.09 9623.5
6/30/98 10468.13 10560.64 9623.58
7/31/98 10197.26 10331.47 9157.61
8/31/98 8702.34 8670.17 7664.63
9/30/98 9162.37 9197.32 7997.03
10/31/98 9826.29 9912.87 8749.13
11/30/98 10324.6 10429.23 9034.73
12/31/98 10785.37 10795.5 9370.98
1/31/99 10962.02 11013.57 9628.63
2/28/99 10621.23 10776.45 9409.15
3/31/99 10968.64 11103.09 9669.54
4/30/99 11617.11 12060.28 10578.15
The graph includes the initial sales charge on the Fund (no comparable charge
exists for other indices) and assumes all dividends and distributions from the
Fund are reinvested at Net Asset Value.
Notes: All Fund performance numbers represent past performance, and are no
guarantee of future results. The Fund's share price and investment return will
fluctuate, so that the value of an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns include change in
share price and reinvestment of dividends and distributions, if any. Total
return figures are provided in accordance with SEC guidelines for comparative
purposes for prospective investors and reflect certain voluntary fee waivers
which may be terminated at anytime. If the waivers were not in place, the Fund's
returns would have been lower. The maxum sales charge of 5.00% went into effect
on January 4, 1999. Investors may not invest directly in an index.
5
<PAGE>
CITIFUNDS GROWTH & INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (Unaudited)
================================================================================
ASSETS:
Investment in Growth & Income Portfolio, at value (Note 1A) $57,969,484
Receivable for shares of beneficial interest sold 22,627
- --------------------------------------------------------------------------------
Total assets 57,992,111
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for shares of beneficial interest repurchased 1,036,228
Accrued expenses and other liabilities 38,462
- --------------------------------------------------------------------------------
Total liabilities 1,074,690
- --------------------------------------------------------------------------------
Net Assets $56,917,421
================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $54,166,296
Unrealized appreciation 5,977,442
Accumulated net realized loss (3,298,395)
Undistributed net investment income 72,078
- --------------------------------------------------------------------------------
Total $56,917,421
================================================================================
COMPUTATION OF
CLASS A SHARES:
Net Assets Value per share ($56,611,403/5,119,500 shares outstanding) $11.06
Offering price per share ($11.06 / 0.95) $11.64*
================================================================================
CLASS B SHARES:
Net Assets Value per share and offering price
($306,018/27,712 shares outstanding) $11.04**
- --------------------------------------------------------------------------------
* Based upon single purchases of less than $25,000.
** Redemption Price per share is equal to net asset value less an applicable
contingent deferred sales charge.
See notes to financial statements
6
<PAGE>
CITIFUNDS GROWTH & INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (Unaudited)
================================================================================
INVESTMENT INCOME (Note 1B):
Dividend Income from Growth & Income Portfolio $610,472
Interest Income from Growth & Income Portfolio 28,304
Allocated Expenses from Growth & Income Portfolio (244,661)
- --------------------------------------------------------------------------------
$394,115
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 32,540
Service fees Class A (Note 3) 81,233
Service fees Class B (Note 3) 470
Transfer agent fees 18,446
Legal fees 9,501
Audit fees 8,152
Custody and fund accounting fees 6,842
Trustees fees 4,526
Shareholder reports 3,935
Other 17,883
- --------------------------------------------------------------------------------
Total expenses 183,528
Less aggregate amounts waived by the Manager (Note 2) (4,750)
- --------------------------------------------------------------------------------
Net expense 178,778
- --------------------------------------------------------------------------------
Net investment income 215,337
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN FROM
GROWTH & INCOME PORTFOLIO:
Net realized gain 1,053,974
Unrealized appreciation 10,979,580
- --------------------------------------------------------------------------------
Net realized and unrealized gain from
Growth & Income Portfolio 12,033,554
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $12,248,891
================================================================================
See notes to financial statements
<PAGE>
CITIFUNDS GROWTH & INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
SIX MONTHS MARCH 2, 1998
ENDED (COMMENCEMENT
APRIL 30, 1999 OF OPERATIONS) TO
(Unaudited) OCTOBER 31, 1998
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 215,337 $ 327,336
Net realized gain (loss) 1,053,974 (4,352,369)
Unrealized appreciation (depreciation) 10,979,580 (5,002,138)
- --------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 12,248,891 (9,027,171)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (305,178) (165,417)
- --------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST (Note 5):
CLASS A
Net proceeds from sale of shares 3,489,086 101,995,867
Net asset value of shares issued
to shareholders from
reinvestment of distributions 304,800 165,417
Cost of shares repurchased (29,568,224) (22,508,144)
- --------------------------------------------------------------------------------
Total Class A (25,774,338) 79,653,140
- --------------------------------------------------------------------------------
CLASS B*
Net proceeds from sale of shares 287,219 --
Net asset value of shares issued
to shareholders from
reinvestment of distributions 378 --
Cost of shares repurchased (103) --
- --------------------------------------------------------------------------------
Total Class B 287,494 --
- --------------------------------------------------------------------------------
Net increase (decrease)in net
assets from transactions in
shares of beneficial interest (25,486,844) 79,653,140
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (13,543,131) 70,460,552
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 70,460,552 --
- --------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $72,078
and $161,919, respectively) $56,917,421 $70,460,552
================================================================================
* January 4, 1999 (Commencement of Operations) to April 30, 1999.
See notes to financial statements
8
<PAGE>
CITIFUNDS GROWTH & INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
CLASS A
--------------------------------------------
FOR THE PERIOD
SIX MONTHS MARCH 2, 1998
ENDED (COMMENCEMENT OF
APRIL 30, 1999 OPERATIONS) TO
(UNAUDITED) OCTOBER 31, 1998
================================================================================
Net Asset Value,
beginning of period $9.19 $10.00
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.060 0.041
Net realized and unrealized
gain (loss) on investments 1.856 (0.831)
- --------------------------------------------------------------------------------
Total from operations 1.916 (0.790)
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.046) (0.020)
Net realized gain on investments -- --
- --------------------------------------------------------------------------------
Total distributions (0.046) (0.020)
- --------------------------------------------------------------------------------
Net Asset Value, end of period $11.06 $9.19
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $56,611 $70,461
Ratio of expenses to average
net assets (A) 1.30% *1.30%*
Ratio of net investment income to
average net assets 0.66%* 0.68%*
Total return 20.91** (7.90)%**
Note: If Agents of the Fund for the periods indicated had not voluntarily waived
a portion of their fees, the net investment income per share and the ratios
would have been as follows:
Net investment income per share $0.05 $0.03
RATIOS:
Expenses to average net assets (A) 1.43%* 1.47%*
Net investment income to average
net assets 0.53% 0.51%*
================================================================================
* Annualized.
** Not Annualized
(A) Includes the Fund's share of Growth &Income Portfolio allocated expenses for
the periods indicated.
See notes to financial statements
9
<PAGE>
CITIFUNDS GROWTH & INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS (Continued)
CLASS B
-------------------
JANUARY 4, 1999
(COMMENCEMENT OF
OPERATIONS) TO
APRIL 30, 1999
(Unaudited)
- --------------------------------------------------------------------------------
Net Asset Value, beginning of period $10.00
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income (loss) 0.013
Net realized and unrealized gain (loss)
on investments 1.050
- --------------------------------------------------------------------------------
Total from operations 1.063
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.023)
Net realized gain on investments --
Total distributions (0.023)
Net Asset Value, end of period $11.04
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $306,018
Ratio of expenses to average net assets (A) 2.05%*
Ratio of net investment income to average net assets 0.20%*
Total return 12.10%**
Note: If Agents of the Fund for the periods indicated had not voluntarily waived
a portion of their fees the net investment income (loss) per share and the
ratios would have been as follows:
Net investment income per share $0.012
RATIOS:
Expenses to average net assets 2.18%*
Net investment income to average net assets 0.07%*
================================================================================
* Annualized.
** Not Annualized.
(A) Includes the Fund's share of Growth & Income Portfolio allocated expenses
for the periods indicated.
10
See notes to financial statements
<PAGE>
CITIFUNDS GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds Growth & Income Portfolio (the
"Fund") is a separate diversified series of CitiFunds Trust II (the "Trust"), a
Massachusetts business trust. The Fund commenced operations on March 2, 1998.
The Trust is registered under the Investment Company Act of 1940, as amended, as
an open-end, management investment company. The Fund invests all of its
investable assets in Growth & Income Portfolio (the "Portfolio"), a management
investment company for which Citibank, N.A. ("Citibank") serves as Investment
Manager. The value of such investment reflects the Fund's proportionate interest
(approximately 71.0% at April 30, 1999) in the net assets of the Portfolio.
CFBDS, Inc. ("CFBDS") acts as the Fund's Sub-Administrator and Distributor.
The Fund offers Class A and Class B shares. The Fund commenced its public
offering of Class B shares on January 4, 1999. Class A shares have a front-end,
or initial sales charge, effective January 4, 1999. This sales charge may be
reduced or eliminated in certain circumstances. Class B shares have no front-end
sales charge, pay a higher ongoing distribution fee than Class A, but are
subject to a deferred sales charge if sold within five years of purchase. Class
B shares automatically convert into Class A shares after eight years. Expenses
of the Fund are borne pro-rata by the holders of each class of shares, except
that each class bears expenses unique to that class (including the Rule 12b-1
service and distribution fees applicable to such class), and votes as a class
only with respect to its own Rule 12b-1 plan. Shares of each class woul receive
their pro-rata share of the net assets of the Fund, if the Fund were liquidated.
Class A shares have lower expenses than Class B.
The financial statements of the Portfolio, including the portfolio of
investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Fund are as
follows:
A. INVESTMENT VALUATION Valuation of securities by the Portfolio is discussed
in Note 1A of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report.
B. INVESTMENT INCOME The Fund earns income, net of Portfolio expenses, daily
based on its investment in the Portfolio.
C. FEDERAL TAXES The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investment transactions. Accordingly, no provision for federal income or
excise tax is necessary. At October 31, 1998, the Fund, for federal income tax
purposes, had a capital loss carryover of $4,188,946 which will expire on
October 31, 2006. Such
11
<PAGE>
CITIFUNDS GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
capital loss carryover will reduce the Fund's taxable income arising from future
net realized gain on investment transactions, if any, to the extent permitted by
the Internal Revenue Code, and thus will reduce the amount of the distributions
to shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal income or excise tax.
D. EXPENSES The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and CFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund. The Fund's share of the Portfolio's expenses are
charged against and reduce the amount of the Fund's investment in the Portfolio.
E. DISTRIBUTIONS Distributions to shareholders are recorded on ex-dividend
date. The amount and character of income and net realized gains to be
distributed are determined in accordance with income tax rules and regulations,
which may differ from generally accepted accounting principles. These
differences are attributable to permanent book and tax accounting differences.
Reclassifications are made to the Fund's capital accounts to reflect income and
net realized gains available for distribution (or available capital loss
carryovers) under income tax rules and regulations.
F. OTHER All the net investment income, realized and unrealized gain and loss
of the Portfolio is allocated pro rata, based on respective ownership interests,
among the Fund and the other investors in the Portfolio at the time of such
determination. Investment transactions are accounted for on the trade date
basis. Realized gains and losses are determined on the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the Fund's
business affairs and has a Management Agreement with the Fund. Citibank also
provides certain administrative services to the Fund. These administrative
services include providing general office facilities and supervising the overall
administration of the Fund. CFBDS acts as Sub-Administrator and performs certain
duties and receives compensation from Citibank as from time to time is agreed to
by Citibank and CFBDS. Citibank is a wholly-owned subsidiary of Citicorp, which
in turn, is a wholly-owned subsidiary of Citigroup Inc. Citigroup Inc. was
formed as a result of the merger of Citicorp and Travelers Group, Inc. which was
completed on October 8, 1998.
The management fees paid to Citibank are accrued daily and payable monthly.
The management fee is computed at the annual rate of 0.10% of the Fund's average
daily net assets. The management fee amounted to $32,540 of which $4,750 was
voluntarily waived for the six months ended April 30, 1999. The Trust pays no
compensation directly to any Trustee or any other officer who is affiliated with
the Sub-Administrator, all of whom receive remuneration for their services to
the Trust from the Sub-Administrator or its affiliates.
<PAGE>
CITIFUNDS GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
3. SERVICE FEES The Fund maintains separate Service Plans for Class A and Class
B shares, which have been adopted in accordance with Rule 12b-1 under the 1940
Act. Under the Class A Service Plan, the Fund may pay monthly fees at an annual
rate not exceed 0.25% of the average daily net assets represented by Class A
shares of the Fund. The Service fees for Class A shares amounted to $81,233 for
the six months ended April 30, 1999. Under the Class B Service Plan, the fund
may pay a combined monthly distribution and service fee at an annual rate not to
exceed 1.00% of the average daily net assets represented by Class B shares of
the Fund. The Service fees for Class B shares amounted to $470 for the period
ended April 30, 1999. These fees may be used to make payments to the distributor
for distribution services and to others as compensation for the sale of shares
of the applicable class of the Fund, for advertising, marketing or other
promotional activity, and for preparation, printing and distribution of
prospectuses, statements of additional information and reports for recipients
other than regulators and existing shareholders. The Fund may also make payments
to the Distributor and others for providing personal service of the maintenance
of shareholder accounts. Commissions (including deferred contingent sales
charges) on Fund shares paid by investors in shares of the Fund amounted to $100
for the period ended April 30, 1999.
4. INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in
the Portfolio for the six months ended April 30, 1999 aggregated $161,520 and
$25,204,305, respectively.
5. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest (without par value). Transactions in shares of beneficial interest were
as follows:
FOR THE PERIOD
SIX MONTHS MARCH 2, 1998
ENDED (COMMENCEMENT
APRIL 30, 1999 OF OPERATIONS) TO
(UNAUDITED) OCTOBER 31, 1998
- --------------------------------------------------------------------------------
CLASS A:
Shares sold 348,486 10,026,741
Shares issued to shareholders from
reinvestment of distributions 30,468 17,590
Shares repurchased (2,925,503) (2,378,282)
- --------------------------------------------------------------------------------
Net increase (decrease) (2,546,549) 7,666,049
- --------------------------------------------------------------------------------
CLASS B:*
Shares sold 27,685 --
Shares issued to shareholders from
reinvestment of distributions 37 --
Shares repurchased (10) --
- --------------------------------------------------------------------------------
Net increase 27,712 --
================================================================================
* January 4, 1999 (Commencement of Operations) to April 30, 1999.
13
<PAGE>
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 1999
(Unaudited)
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 98.4 %
- --------------------------------------------------------------------------------
BASIC INDUSTRIES-- 5.7%
Dow Chemical Corp. 7,100 $ 931,431
Martin Marietta
Materials Inc. 35,460 2,191,871
Mead Corp. 35,600 1,488,525
-----------
4,611,827
-----------
- --------------------------------------------------------------------------------
CAPITAL GOODS -- 1.6%
- --------------------------------------------------------------------------------
Parker Hannifin Corp. 26,600 1,248,537
-----------
CONSUMER DURABLE -- 5.3%
- --------------------------------------------------------------------------------
Dana Corp. 42,100 1,983,963
Eastman Kodak Co. 3,015 224,994
Goodyear Tire & Rubber 20,100 1,149,469
Sunbeam Corp. 176,300 947,613
-----------
4,306,039
-----------
CONSUMER NON-DURABLE -- 1.9%
- --------------------------------------------------------------------------------
Philip Morris Companies Inc. 44,600 1,563,788
-----------
CONSUMER SERVICES -- 6.5%
- --------------------------------------------------------------------------------
McDonalds Corp. 44,700 1,894,163
New York Times Co. 49,500 1,707,750
Tribune Co. 4,900 408,844
Walt Disney Co. 41,450 1,316,037
-----------
5,326,794
-----------
ENERGY -- 13.0%
- --------------------------------------------------------------------------------
Amerada Hess Corp. 27,000 1,539,000
Burlington Resources Inc. 39,900 1,837,894
Exxon Corp. 29,500 2,450,343
Halliburton Co. 29,400 1,253,175
Mobil Corp. 26,200 2,744,450
Royal Dutch
Petroleum Corp. 14,100 827,494
-----------
10,652,356
-----------
FINANCE -- 22.6%
- --------------------------------------------------------------------------------
Allstate Corp. 19,900 723,862
Bank One Corp. 44,000 2,596,000
Bankamerica Corp. 22,300 1,605,600
Chase Manhattan
Bank Corp. 32,500 2,689,375
Everest Reinsurance
Holdings 48,000 1,455,000
Franklin Resource Inc. 19,600 784,000
J.P. Morgan & Co. Inc. 16,100 2,169,475
Lehman Brothers
Holdings Inc. 12,600 700,088
Mellon Bank Corp. 22,100 1,642,306
Morgan Stanley
Dean Witter & Co. 14,530 1,441,194
Safeco Corp. 28,200 1,120,950
Washington Mutual Inc. 36,300 1,492,838
-----------
18,420,688
-----------
HEALTHCARE SERVICES -- 6.2%
- --------------------------------------------------------------------------------
American Home
Products Corp. 33,100 2,019,100
Columbia
Healthcare Corp. 39,500 975,156
Oxford Health Plans* 104,400 2,081,475
-----------
5,075,731
-----------
INDUSTRIAL SERVICES -- 2.5%
- --------------------------------------------------------------------------------
Waste Management Inc. 36,000 2,034,000
-----------
REAL ESTATE -- 1.5%
- --------------------------------------------------------------------------------
Avalonbay
Communities Inc. 7,260 254,100
Camden Property Trust 9,260 250,020
Duke Realty
Investments Inc. 10,960 257,560
Healthcare Reit Inc. 10,450 245,575
Meditrust 19,630 244,148
-----------
1,251,403
-----------
RETAIL -- 2.0%
- --------------------------------------------------------------------------------
Tommy Hilfiger Corp.* 15,200 1,062,100
Toys "R" Us Inc.* 27,500 598,125
-----------
1,660,225
-----------
TECHNOLOGY -- 10.7%
- --------------------------------------------------------------------------------
Applied Materials Inc. 17,300 927,712
Hewlett Packard Co. 19,700 1,553,838
Honeywell Inc. 17,800 1,686,550
International Business
Machines 3,800 794,912
Raytheon Corp. 31,100 2,184,775
3Com Corp. 61,900 1,617,138
-----------
8,764,925
-----------
14
<PAGE>
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued)April 30, 1998
(Unaudited)
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION -- 3.7%
- --------------------------------------------------------------------------------
Delta Airlines Inc. 8,400 $ 532,875
Union Pacific Corp. 35,000 2,100,000
United Airlines Corp. 4,800 387,600
-----------
3,020,475
-----------
UTILITIES -- 15.2%
- --------------------------------------------------------------------------------
American Electric
Power Inc. 18,400 762,450
American Telephone
& Telegraph Corp. 81,300 4,105,650
Bell Atlantic Corp. 25,800 1,486,725
Cinergy Corp. 28,400 846,675
Entergy Corp. 32,500 1,015,625
Public Service
Enterprise Group 39,900 1,596,000
SBC Communications Inc. 36,600 2,049,600
Texas Utilities Co. 14,400 572,400
-----------
12,435,125
-----------
TOTAL COMMON STOCKS
(Identified Cost
$73,002,822) 80,371,913
-----------
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS
AT AMORTIZED COST -- 2.3%
- --------------------------------------------------------------------------------
State Street Bank & Trust
Repurchase Agreement 4.92%
due 5/03/99 proceeds at
maturity $1,830,000
(collateralized by
$1,845,000 Federal
National Mortgage
Association, 5.30%
due 1/12/01, valued
at $1,871,175) $ 1,830,000
-----------
TOTAL INVESTMENTS
(Identified Cost
$74,832,822) 100.7% 82,201,913
OTHER ASSETS,
LESS LIABILITIES (0.7) (537,461)
----- -----------
NET ASSETS 100.0% $81,664,452
----- -----------
* Non income producing securities
See notes to financial statements
15
<PAGE>
GROWTH & INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
April 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A)
(Identified Cost, 74,832,822) $82,201,913
Cash 324
Dividends and interest receivable 90,219
- --------------------------------------------------------------------------------
Total assets 82,292,456
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investment purchased 553,351
Payable to affiliate--Management fee (Note 2) 30,510
Accrued expenses and other liabilities 44,143
- --------------------------------------------------------------------------------
Total liabilities 628,004
- --------------------------------------------------------------------------------
NET ASSETS $81,664,452
================================================================================
REPRESENTED BY:
Paid-in capital for beneficial interests $81,664,452
- --------------------------------------------------------------------------------
GROWTH & INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (Unaudited)
================================================================================
INVESTMENT INCOME:
Dividend income (net of foreign tax of $1,150) $ 709,300
Interest income 32,634
- --------------------------------------------------------------------------------
$ 741,934
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 268,817
Custody and fund accounting fees 45,897
Audit fees 12,115
Legal fees 7,258
Trustees fees 3,538
Other 313
- --------------------------------------------------------------------------------
Total expenses 337,938
Less aggregate amounts waived by the Manager (Note 2) (49,884)
- --------------------------------------------------------------------------------
Net expense 288,054
- --------------------------------------------------------------------------------
Net investment income 453,880
- --------------------------------------------------------------------------------
Net realized gain from investment transaction 1,661,708
Unrealized appreciation of investments 12,371,228
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 14,032,936
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $14,486,816
================================================================================
See notes to financial statements
16
<PAGE>
GROWTH & INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
SIX MONTHS MARCH 2, 1998
ENDED (COMMENCEMENT OF
APRIL 30, 1999 OPERATIONS) TO
(Unaudited) OCTOBER 31, 1998
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 453,880 $ 599,983
Net realized gain (loss) on
investment transactions 1,661,708 (4,352,369)
Unrealized appreciation (depreciation)
of investments 12,371,228 (5,002,138)
- --------------------------------------------------------------------------------
Net increase (decrease) in
net assets resulting
from operations 14,486,816 (8,754,524)
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 22,926,455 89,328,025
Value of withdrawals (26,333,519) (9,988,801)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets from
capital transactions (3,407,064) 79,339,224
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS: 11,079,752 70,584,700
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 70,584,700 --
- --------------------------------------------------------------------------------
End of period $81,664,452 $70,584,700
================================================================================
GROWTH & INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD
SIX MONTHS MARCH 2, 1998
ENDED (COMMENCEMENT OF
APRIL 30, 1999 OPERATIONS) TO
(Unaudited) OCTOBER 31, 1998
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $81,664 $70,585
Ratio of expenses to average net assets 0.75%* 0.75%*
Ratio of net investment income to
average net assets 1.18%* 1.27%*
Portfolio turnover 40% 59%
Note: If Agents of the Portfolio had not voluntarily waived a portion of their
fees during the periods indicated, the ratios would have been as follows:
RATIOS:
Expenses to average net assets 0.88%* 0.93%*
Net investment income to average net assets 1.05%* 1.09%*
================================================================================
* Annualized
See notes to financial statements
17
<PAGE>
GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES Growth & Income Portfolio (the "Portfolio"),
a separate series of The Premium Portfolios (the "Portfolio Trust"), is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York. The Portfolio commenced
operations on March 2, 1998. The Declaration of Trust permits the Trustees to
issue beneficial interests in the Portfolio. The Investment Manager of the
Portfolio is Citibank, N.A. ("Citibank"). Signature Financial Group (Grand
Cayman), Ltd. ("SFG") acts as the Portfolio's Sub-Administrator.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. INVESTMENT SECURITY VALUATIONS Equity securities listed on securities
exchanges or reported through the NASDAQ system are valued at last sale prices.
Unlisted securities or listed securities for which last sales prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations maturing in sixty days or less), are valued on the basis
of valuations furnished by pricing services approved by the Board of Trustees
which take into account appropriate factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, and other market data, without exclusive reliance on quoted prices or
exchange or over-the-counter prices. Short-term obligations, maturing in sixty
days or less, are valued at amortized cost, which constitutes fair value as
determined by the Trustees. Securities, if any, for which there are no such
valuations or quotations are valued at fair value as determined in good faith by
or under guidelines established by the Trustees.
B. INCOME Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on long-term debt securities
when required for U.S. federal income tax purposes. Dividend income is recorded
on the ex-dividend date.
C. U.S. FEDERAL INCOME TAXES The Portfolio is considered a partnership under
the U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary.
D. REPURCHASE AGREEMENTS It is the policy of the Portfolio to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase agreements.
Additionally, procedures have been established by the Portfolio to monitor, on a
daily basis, the market value of the repurchase agreement's underlying
investments to ensure the existence of a proper level of collateral.
18
<PAGE>
GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) Continued)
E. EXPENSES The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
Portfolio Trust with respect to any two or more portfolios or series are
allocated in proportion to the average net assets of each portfolio, except when
allocations of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that portfolio.
F. OTHER Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolio's business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolio. SFG acts
as Sub-Administrator and performs certain duties and receives compensation from
Citibank as from time to time are agreed to by Citibank and SFG. Citibank is a
wholly-owned subsidiary of Citicorp, which in turn, is a wholly-owned subsidiary
of Citigroup Inc. Citigroup Inc. was formed as a result of the merger of
Citicorp and Travelers Group, Inc. which was completed on October 8, 1998.
The management fees paid to Citibank, amounted to $268,817, of which $49,884
was voluntarily waived for the six months ended April 30, 1999. The management
fees are computed at the annual rate of 0.70% of the Portfolio's average daily
net assets.The Trust pays no compensation directly to any Trustee or any other
officer who is affiliated with the Sub-Administrator, all of whom receive
remuneration for their services to the Trust from the Sub-Administrator or its
affiliates.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $29,943,958 and $32,063,902,
respectively, for the six months ended April 30, 1999.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1999, as
computed on a federal income tax basis, are as follows:
Aggregate cost $74,832,822
================================================================================
Gross unrealized appreciation $10,206,949
Gross unrealized depreciation (2,837,858)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 7,369,091
================================================================================
19
<PAGE>
GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) Continued)
5. LINE OF CREDIT The Portfolio, along with various other Portfolios in the
CitiFunds family, entered into an ongoing agreement with a bank which allows the
Portfolios collectively to borrow up to $75 million for temporary or emergency
purposes. Interest on the borrowings, if any, is charged to the specific
portfolio executing the borrowing at the base rate of the bank. The line of
credit requires a quarterly payment of a commitment fee based on the average
daily unused portion of the line of credit. For the six months ended April 30,
1999, the commitment fee allocated to the Portfolio was $102. Since the line of
credit was established, there have been no borrowings.
20
<PAGE>
TRUSTEES AND OFFICERS
Philip W. Coolidge*, PRESIDENT
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Heath B. McLendon**
C. Oscar Morong Jr.
E. Kirby Warren
William S. Woods Jr.
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
* AFFILIATED PERSON OF SUB-ADMINISTRATOR AND DISTRIBUTOR
** AFFILIATED PERSON OF INVESTMENT MANAGER
INVESTMENT MANAGER
Citibank, N.A.
153 East 53rd Street,
New York, NY 10043
DISTRIBUTOR
CFBDS, Inc.
21 Milk Street, 5th Floor,
Boston, MA 02109
(617) 423-1679
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street
Boston, MA 02110
AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street,Boston, MA 02110
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
LARGE CAP STOCKS
o CitiFunds Growth & Income Portfolio
o CitiFunds Large Cap Growth Portfolio
SMALL CAP STOCKS
o CitiFunds Small Cap Growth Portfolio
o CitiFunds Small Cap Value Portfolio
INTERNATIONAL STOCKS
o CitiFunds International Growth & Income Portfolio
o CitiFunds International Growth Portfolio
GROWTH WITH INCOME
o CitiFunds Balanced Portfolio
BONDS
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds Intermediate Income Portfolio
o CitiFunds National Tax Free Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio
MONEY MARKETS
o CitiFunds Cash Reserves
o CitiFunds U.S. Treasury Reserves
o CitiFunds Tax Free Reserves
o CitiFunds New York Tax Free Reserves
o CitiFunds California Tax Free Reserves
o CitiFunds Connecticut Tax Free Reserves
This report is prepared for the information of share holders. It is authorized
for distribution to prospective investors only when preceded or accompanied by
an effective prospectus.
For more information contact your Service Agent
or call 1-800-625-4554
CitiFunds are made available by CFBDS, Inc. as distributor.
(C)1999 Citicorp
Printed on recycled paper CFS/SCG/499
<PAGE>
Semi-Annual Report o April 30, 1999
CitiFunds
Small Cap Growth
Portfolio
SMALL CAP STOCKS
INVESTMENT PRODUCTS:
NOT FDIC INSURED * NO BANK GUARANTEE * MAY LOSE VALUE
<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
- --------------------------------------------------------------------------------
Portfolio Environment and Outlook 2
- --------------------------------------------------------------------------------
Fund Facts 3
- --------------------------------------------------------------------------------
Portfolio Highlights 4
- --------------------------------------------------------------------------------
Fund Performance 5
- --------------------------------------------------------------------------------
CITIFUNDS SMALL CAP GROWTH PORTFOLIO
Statement of Assets and Liabilities 6
- --------------------------------------------------------------------------------
Statement of Operations 7
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets 8
- --------------------------------------------------------------------------------
Financial Highlights 9
- --------------------------------------------------------------------------------
Notes to Financial Statements 11
- --------------------------------------------------------------------------------
SMALL CAP GROWTH PORTFOLIO
Portfolio of Investments 14
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities 16
- --------------------------------------------------------------------------------
Statement of Operations 16
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets 17
- --------------------------------------------------------------------------------
Financial Highlights 17
- --------------------------------------------------------------------------------
Notes to Financial Statements 18
- --------------------------------------------------------------------------------
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
This semi-annual report covers the period from November 1, 1998 through April
30, 1999, for the CitiFundsSM Small Cap Growth Portfolio. Inside, the CitiFunds
investment manager, Citibank, N.A., discusses the market conditions it faced,
the strategies it employed and its outlook for the future.
The reporting period saw a continuation of the strong conditions that have
dominated the U.S. economy for more than seven years. Lower short-term interest
rates adopted by the Federal Reserve Board in the fall of 1998 appear to have
helped U.S. businesses withstand the effects of economic weakness in Japan, Asia
and Latin America. Consumer spending remained high, corporate earnings grew,
unemployment was low and inflationary pressures continued to be virtually
absent.
These economic conditions produced mixed results for stocks over the past six
months. On one hand, the Dow Jones Industrial Average closed over 10,000 for the
first time in history, and the broader Standard & Poor's 500 and
technology-driven Nasdaq indices also recorded new highs. On the other hand, the
stock market's advance was remarkably narrow, led by a relatively small number
of large cap growth and technology companies. Small-cap companies continued to
lag the averages substantially, failing to participate in the gains of their
larger counterparts. Because, as its name suggests, CitiFunds Small Cap Growth
Portfolio invests primarily in small companies, its performance reflected the
market sector's recent weakness.
Finally, we are pleased to announce the appointment of Marguerite Wagner as
portfolio manager of CitiFunds Small Cap Growth Portfolio as of January 1, 1999.
Ms. Wagner has been an integral part of CitiFunds' small cap management team.
Ms. Wagner joined Citibank in 1985. Since 1995, she has had portfolio management
and research analyst responsibilities for an internal mid-cap fund and private
equity managed accounts.
Thank you for your continued confidence and participation.
Sincerely,
/s/ Philip W. Coolidge
- ----------------------
Philip W. Coolidge
President
May 20, 1999
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
CitiFunds Small Cap Growth Portfolio provided disappointing returns in a very
difficult environment for small-cap stocks. The small-cap sector of the stock
market posted modest declines over the past six months, and continued to lag
both large- and mid-cap stocks. We attribute the small cap market's weakness to
investors' preference for highly liquid, large-cap names with a history of
consistent and predictable earnings. We are also disappointed that we did not
match or exceed the returns of our benchmark, the Russell 2000 Growth Index.*
However, the Index's performance was driven by a handful of high-flying Internet
stocks.
When the reporting period began in November 1998, the Portfolio contained
relatively few Internet stocks. Our underweighted position in this area hurt
performance. As managers, we seek to invest in small companies with a history of
strong revenue and earnings growth. Most Internet companies have only very short
track records, and many have no earnings at all. Later in the reporting period,
however, we identified a number of Internet companies that met our high
standards of revenue growth, and we have received encouraging results from these
recent additions to the Portfolio.
At the same time, we reduced our exposure to the lower end of our
capitalization range. Because many of the smallest capitalization stocks in our
range are relatively illiquid, (i.e., few buyers and sellers), we believed that
it would be more prudent to shift assets to companies toward the higher end of
our capitalization range.
The Portfolio received positive returns from its holdings in the
telecommunications industry, particularly companies in the cable television,
telephone and media businesses. These companies have benefited from the rapid
growth in demand for ways to quickly and efficiently transmit voices, data and
images worldwide. We also received competitive returns from our holdings in the
health care industry. Although the health care sector as a whole performed
relatively poorly, our stock selection strategy led us to identify a variety of
biotechnology companies and generic drug manufacturers that performed well.
On the other hand, our holdings in the commercial services sector contributed
negatively to the Portfolio's performance. Software manufacturers and other
companies providing products and services to corporations saw their stock prices
fall as investors became concerned that their revenues might be vulnerable to
lower capital spending if the economy slows.
Looking forward, we believe that the small-cap sector of the stock market
still offers outstanding opportunities to invest in growing companies at
attractive prices. The differences in valuations between large-sized and
small-sized companies have never been greater.
In our view, it is not a question of whether small-cap stocks will eventually
regain market leadership, but when. While there is no way to predict the timing
of such an event, we urge shareholders to stay the course. That's because our
experience suggests that patience, discipline and a long-term perspective are
crucial to investing successfully in smaller companies.
*THE RUSSELL 2000 GROWTH INDEX IS AN INDEX OF SMALL CAPITALIZATION STOCKS.
2
<PAGE>
FUND FACTS
FUND OBJECTIVE
Long-term capital growth; dividend income, if any, is incidental to this
investment objective
INVESTMENT MANAGER DIVIDENDS
Citibank, N.A. Paid semi-annually, if any
COMMENCEMENT OF OPERATIONS CAPITAL GAINS
June 21, 1995 Distributed annually, if any
NET ASSETS AS OF 4/30/99 BENCHMARKS
Class A shares o Lipper Small Cap Funds Average
$25.2 million o Russell 2000 Growth Index
Class B shares
$487,479
3
<PAGE>
PORTFOLIO HIGHLIGHTS
================================================================================
TOP TEN EQUITY HOLDINGS AS OF APRIL 30, 1999 (Unaudited)
COMPANY, INDUSTRY % OF NET ASSETS
E Trade Group Inc., Finance 2.12%
- --------------------------------------------------------------------------------
Level One Communications Inc., Electronics/Technical Services 1.87%
- --------------------------------------------------------------------------------
CMG Information Services Inc., Electronics/Technical Services 1.84%
- --------------------------------------------------------------------------------
Catalina Marketing Corp., Commercial Services 1.75%
- --------------------------------------------------------------------------------
Whittman Hart Inc., Electronics/Technical Services 1.70%
- --------------------------------------------------------------------------------
SFX Entertainment Inc., Consumer Services 1.68%
- --------------------------------------------------------------------------------
Heftel Broadcasting Corp., Consumer Services 1.58%
- --------------------------------------------------------------------------------
Cullen Frost Bankers Inc., Finance 1.52%
- --------------------------------------------------------------------------------
OM Group Inc., Commodities & Processing 1.48%
- --------------------------------------------------------------------------------
Peoples Heritage Financial Group, Finance 1.47%
- --------------------------------------------------------------------------------
PORTFOLIO DIVERSIFICATION AS OF APRIL 30, 1999 (Unaudited)
[GRAPH OMITTED]
Commercial Services 9%
Multi-Industry 3%
Utilities 4%
Raw Materials 1%
Electronics/Technical Services 23%
Consumer 10%
Finance 12%
Health Services/Technoloty 10%
Producer Manufacturing 1%
Retail 5%
Commodities & Processing 2%
Energy Minerals 1%
Industrial Services 1%
*Short-Term 14%
4
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
<TABLE>
<CAPTION>
SINCE
SIX ONE JUNE 21, 1995
ALL PERIODS ENDED APRIL 30, 1999 (Unaudited) MONTHS** YEAR (INCEPTION)*
================================================================================
<S> <C> <C> <C>
CitiFunds Small Cap Growth Portfolio (Class A)
without sales charge 7.43% (18.84)% 21.09%
Lipper Small Cap Funds Average 14.27% (11.11)% 14.34%+
Russell 2000 Growth Index 21.10% (3.77)% 10.77%+
CitiFunds Small Cap Growth Portfolio (Class A)
with a maximum sales charge of 5.00% 2.06% (22.90)% 19.49%
Citifunds Small Cap Growth Portfolio (Class B)
without deferred sales charge -- -- (4.01)%#**
Lipper Small Cap Funds Average -- -- (0.07)%++**
Russell 2000 Growth Index -- -- (7.00)%++**
CitiFunds Small Cap Growth Portfolio (Class B)
with a maximum deferred sales charge of 5.00% -- -- (8.81)%#**
</TABLE>
* Average Annual Total Return
** Not Annualized
+ From 6/30/95
++ From 12/31/98
# Commencement of Operations 1/4/99
GROWTH OF A $10,000 INVESTMENT
A $10,000 investmentin the Fund made on inception date would have grown to
$19,886 with sales charge (as of 4/30/99). The graph shows how the Fund compares
to its benchmarks over the same period
Date Citifunds Lipper Russell
6/21/95 9500
6/30/95 9548 10000 10000
7/31/95 10422 10748 10779
8/31/95 11058 10925 10912
9/30/95 11400 11188 11136
10/31/95 11381 10812 10588
11/30/95 12873 11212 11055
12/31/95 13754 11375 11301
1/31/96 14099 11295 11207
2/29/96 15483 11763 11718
3/31/96 16270 12077 11950
4/30/96 18239 12980 12868
5/31/96 19555 13547 13528
6/30/96 18965 13023 12649
7/31/96 16790 11903 11104
8/31/96 18877 12624 11926
9/30/96 19676 13265 12540
10/31/96 19072 13000 12000
11/30/96 19423 13378 12333
12/31/96 18952 13582 12574
1/31/97 19764 13929 12878
2/28/97 18619 13333 12100
3/31/97 17495 12634 11246
4/30/97 16975 12538 11115
5/31/97 19473 14062 12786
6/30/97 20534 14804 13220
7/31/97 21234 15727 13896
8/31/97 21547 16014 14313
9/30/97 23396 17228 15456
10/31/97 22184 16463 14527
11/30/97 21986 16221 14181
12/31/97 21949 16358 14189
1/31/98 20967 16076 14001
2/28/98 23456 17327 15237
3/31/98 24405 18133 15875
4/30/98 24503 18281 15972
5/31/98 22593 17250 14811
6/30/98 24263 17387 14962
7/31/98 22211 16136 13713
8/31/98 16667 12908 10548
9/30/98 18173 14074 11617
10/31/98 18511 14633 12224
11/30/98 19690 15580 13172
12/31/98 20978 16722 14365
1/31/99 21054 16785 14556
2/28/99 18981 15414 13377
3/31/99 19417 15713 13585
4/30/99 19886 16720 14803
The graph includes the initial sales charge on the Fund (no comparable charge
exists for the other indices) and assumes all dividends and distributions from
the Fund are reinvested at Net Asset Value.
Notes: All Fund performance numbers represent past performance, and are no
guarantee of future results. The Fund's share price and investment return will
fluctuate, so that the value of an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns include change in
share price and reinvestment of dividends and distributions, if any. Total
return figures "with sales charge" are provided in accordance with SEC
guidelines for comparative purposes for prospective investors and reflect
certain voluntary fee waivers which may be terminated at any time. If the
waivers were not in place, the fund's returns would have been lower. The maximum
sales charge of 5.00% went into effect on January 4, 1999.
5
<PAGE>
CITIFUNDS SMALL CAP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (Unaudited)
================================================================================
ASSETS:
Investment in Small Cap Growth Portfolio, at value (Note 1A) $25,988,991
Receivable for shares of beneficial interest sold 5,500
Receivable from the Sub-Administrator 79,839
- --------------------------------------------------------------------------------
Total assets 26,074,330
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for shares of beneficial interest repurchased 338,091
Accrued expenses and other liabilities 83,576
- --------------------------------------------------------------------------------
Total liabilities 421,667
- --------------------------------------------------------------------------------
NET ASSETS $25,652,663
================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $22,848,755
Unrealized appreciation 2,934,915
Accumulated net realized gain 26,663
Undistributed net investment loss (157,670)
- --------------------------------------------------------------------------------
Total $25,652,663
================================================================================
COMPUTATION OF
CLASS A SHARES:
Net Asset Value per share
($25,165,184/1,381,023 shares outstanding) $18.22
Offering Price per share ($18.22/0.95) $19.18**
================================================================================
CLASS B SHARES:
Net Asset Value per share and offering price
($487,479/26,807 shares outstanding) $18.18*
================================================================================
* Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
** Based upon single purchases of less than $25,000.
See notes to financial statements
6
<PAGE>
CITIFUNDS SMALL CAP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (Unaudited)
================================================================================
INVESTMENT INCOME/LOSS (NOTE 1B):
Dividend Income from Small Cap Growth Portfolio $27,013
Interest Income from Small Cap Growth Portfolio 12,794
Allocated Expenses from Small Cap Growth Portfolio (126,159)
- --------------------------------------------------------------------------------
$(86,352)
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 51,007
Service fees Class A (Note 3) 36,183
Service fees Class B (Note 3) 1,000
Transfer agent fees 23,243
Audit fees 10,980
Custody and fund accounting fees 9,890
Legal fees 9,102
Shareholder reports 7,362
Trustees fees 6,259
Other 12,972
- --------------------------------------------------------------------------------
Total expenses 167,998
Less expenses assumed by the Sub-Administrator
(Note 6) (45,673)
Less aggregate amount waived by the Manager
(Note 2) (51,007)
- --------------------------------------------------------------------------------
Net expenses 71,318
- --------------------------------------------------------------------------------
Net investment loss (157,670)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN FROM
SMALL CAP GROWTH PORTFOLIO:
Net realized gain 1,553,391
Unrealized appreciation 627,533
- --------------------------------------------------------------------------------
Net realized and unrealized gain from
Small Cap Growth Portfolio 2,180,924
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2,023,254
================================================================================
See notes to financial statements
7
<PAGE>
CITIFUNDS SMALL CAP GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
Six Months
Ended
April 30, 1999 Year Ended
(Unaudited) October 31, 1998
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment loss $(157,670) $(263,943)
Net realized gain (loss) 1,553,391 (1,484,882)
Unrealized appreciation (depreciation) 627,533 (3,811,810)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 2,023,254 (5,560,635)
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain -- (1,049,618)
- --------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 5):
CLASS A
Net proceeds from sale of shares 4,072,947 15,634,929
Net asset value of shares issued to
shareholders from reinvestment
of distributions -- 1,020,162
Cost of shares repurchased (8,741,345) (8,041,832)
- --------------------------------------------------------------------------------
Total Class A (4,668,398) 8,613,259
- --------------------------------------------------------------------------------
CLASS B*
Net proceeds from sale of shares 504,782 --
Net asset value of shares issued to
shareholders from reinvestment
of distributions -- --
Cost of shares repurchased (9,286) --
- --------------------------------------------------------------------------------
Total Class B 495,496 --
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets
from transactions in shares of
beneficial interest (4,172,902) 8,613,259
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (2,149,648) 2,003,006
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 27,802,311 25,799,305
- --------------------------------------------------------------------------------
End of period (undistributed
net investment loss of ($157,670) and
$0, respectively) $25,652,663 $27,802,311
================================================================================
* January 4, 1999 (Commencement of Operations) to April 30, 1999.
See notes to financial statements
8
<PAGE>
CITIFUNDS SMALL CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------------------
SIX MONTHS TEN MONTHS JUNE 21, 1995
ENDED ENDED (COMMENCEMENT
APRIL 30, YEAR ENDED OCTOBER 31, YEAR ENDED OF OPERATIONS)
1999 OCTOBER 31, 1997 DECEMBER 31, TO DECEMBER 31,
(Unaudited) 1998 (Note 1F) 1996 1995
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
beginning
of period $16.96 $21.24 $18.21 $14.32 $10.00
- ------------------------------------------------------------------------------------------------------------------------------------
Income From
Operations:
Net investment income (loss) (0.113) (0.193)+ (0.138)+ (0.016) 0.050
Net realized and
unrealized
gain (loss) 1.373 (3.224) 3.236 5.407 4.420
- ------------------------------------------------------------------------------------------------------------------------------------
Total from operations 1.260 (3.417) 3.098 5.391 4.470
- ------------------------------------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- -- -- (0.050)
Net realized gain -- (0.863) (0.068) (1.501) (0.100)
- ------------------------------------------------------------------------------------------------------------------------------------
Total distributions -- (0.863) (0.068) (1.501) (0.150)
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
end of period $18.22 $16.96 $21.24 $18.21 $14.32
====================================================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $25,165 $27,802 $25,799 $24,311 $5,148
Ratio of expenses to average
net assets (A) 1.35%* 1.35% 1.35%* 0.88% 0.00%*
Ratio of net investment income
(loss) to average net assets (1.07)%* (0.98)% (0.87)%* (0.13)% 1.21%*
Total return 7.43%** (16.56)% 17.05%** 37.80% 44.78%**
Note: If Agents of the Fund and Agents of Small Cap Growth Portfolio had not
voluntarily waived a portion of their fees, assumed Fund expenses for the
periods indicated and had expenses been limited to that required by certain
state securities laws for the period ended December 31, 1995, the net investment
income (loss) per share and the ratios would have been as follows:
Net investment loss
per share $(0.182) $(0.319)+ $(0.252)+ $(0.133) $(0.288)
RATIOS:
Expenses to average
net assets (A) 2.01%* 1.99% 2.06%* 1.83% 2.50%*
Net investment loss to
average net assets (1.73)%* (1.62)% (1.58)%* (1.08)% (1.29)%*
====================================================================================================================================
</TABLE>
* Annualized
** Not Annualized
+ The per share amounts were computed using a monthly average number of
shares outstanding during the period.
(A) Includes the Fund's share of Small Cap Growth Portfolio
(formerly Small Cap Equity Portfolio) allocated expenses
for the periods indicated.
See notes to financial statements
9
<PAGE>
CITIFUNDS SMALL CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS (Continued)
CLASS B
---------------
JANUARY 4, 1999
(COMMENCEMENT
OF OPERATIONS) TO
APRIL 30, 1999
(Unaudited)
================================================================================
Net Asset Value, beginning
of period $18.95
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income (loss) (0.071)
Net realized and unrealized
gain (loss) (0.699)
- --------------------------------------------------------------------------------
Total from operations (0.770)
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income --
Net realized gain --
- --------------------------------------------------------------------------------
Total distributions --
- --------------------------------------------------------------------------------
Net Asset Value, end of period $18.18
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period $487,479
Ratio of expenses to average net assets (A) 2.10%*
Ratio of net investment loss to average net assets (1.89)%*
Total return (4.01)%**
Note: If Agents of the Fund and Agents of Small Cap Growth Portfolio had not
voluntarily waived a portion of their fees, assumed Fund expenses for the
periods indicated, the net investment income (loss) per share and the ratios
would have been as follows:
Net investment loss per share $(0.139)
RATIOS:
Expenses to average net assets (A) 2.76%*
Net investment loss to average net assets (2.55)%*
================================================================================
* Annualized
** Not Annualized
(A) Includes the Fund's share of Small Cap Growth Portfolio (formerly Small Cap
Equity Portfolio) allocated expenses for the periods indicated.
See notes to financial statements
10
<PAGE>
CITIFUNDS SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds Small Cap Growth Portfolio, (the
"Fund") is a separate diversified series of CitiFunds Trust II (the "Trust"), a
Massachusetts business trust. The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Fund invests all of its investable assets in Small Cap Growth Portfolio (the
"Portfolio"), a management investment company for which Citibank, N.A.
("Citibank") serves as Investment Manager. The value of such investment reflects
the Fund's proportionate interest (17.5% at April 30, 1999) in the net assets of
the Portfolio. CFBDS, Inc. ("CFBDS") acts as the Fund's Sub-Administrator and
Distributor.
The Fund offers Class A and Class B shares. The Fund commenced its public
offering of Class B shares on January 4, 1999. Class A shares have a front-end,
or initial, sales charge effective January 4, 1998. This sales charge may be
reduced or eliminated in certain circumstances. Class B shares have no front-end
sales charge, pay a higher ongoing distribution fee than Class A but are subject
to a deferred sales charge if sold within five years of purchase. Class B shares
automatically convert into Class A shares after eight years. Expenses of the
Fund are borne pro-rata by the holders of each class of shares, except that each
class bears expenses unique to that class (including the Rule 12b-1 service and
distribution fees applicable to such class), and votes as a class only with
respect to its own Rule 12b-1 plan. Shares of each class would receive their
pro-rata share of the net assets of the Fund, if the Fund were liquidated. Class
A shares have lower expenses than Class B.
The financial statements of the Portfolio, including the portfolio of
investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Fund are as
follows:
A. INVESTMENT VALUATION Valuation of securities by the Portfolio is discussed
in Note 1A of the Portfolio's Notes to Financial Statements which are included
elsewhere in this report.
B. INVESTMENT INCOME The Fund earns income, net of Portfolio expenses, daily
based on its investment in the Portfolio.
C. FEDERAL TAXES The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investment transactions. Accordingly, no provision for federal income or
excise tax is necessary. At October 31, 1998, the Fund, for federal income tax
11
<PAGE>
CITIFUNDS SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
purposes, had a capital loss carryover of $2,190,643 which will expire on
October 31, 2006. Such capital loss carryover will reduce the Fund's taxable
income arising from future net realized gain on investment transactions, if any,
to the extent permitted by the Internal Revenue Code, and thus will reduce the
amount of the distributions to shareholders which would otherwise be necessary
to relieve the Fund of any liability for federal income or excise tax.
D. EXPENSES The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and CFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund. The Fund's share of the Portfolio's expenses are
charged against and reduce the amount of the Fund's investment in the Portfolio.
E. DISTRIBUTIONS Distributions to shareholders are recorded on ex-dividend
date. The amount and character of income and net realized gains to be
distributed are determined in accordance with income tax rules and regulations,
which may differ from generally accepted accounting principles. These
differences are attributable to permanent book and tax accounting differences.
Reclassifications are made to the Fund's capital accounts to reflect income and
net realized gains available for distribution (or available capital loss
carryovers) under income tax rules and regulations.
F. CHANGE IN FISCAL YEAR END During fiscal year 1997, the Fund changed its
fiscal year end from December 31 to October 31.
G. OTHER All the net investment
income, realized and unrealized gain and loss of the Portfolio are allocated pro
rata, based on respective ownership interests, among the Fund and the other
investors in the Portfolio at the time of such determination. Investment
transactions are accounted for on the trade date basis. Realized gains and
losses are determined on the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the Funds'
business affairs, and has a Management Agreement with the Fund. Citibank also
provides certain administrative services to the Fund. These administrative
services include providing general office facilities and supervising the overall
administration of the Fund. CFBDS acts as Sub-Administrator and performs certain
duties and receives compensation from Citibank as from time to time is agreed to
by Citibank and CFBDS. Citibank is a wholly-owned subsidiary of Citicorp, which
in turn, is a wholly-owned subsidiary of Citigroup Inc. Citigroup Inc. was
formed as a result of the merger of Citicorp and Travelers Group, Inc. which was
completed on October 8, 1998.
The management fees paid to Citibank, are accrued daily and payable monthly.
The management fee is computed at the annual rate of 0.35% of the Funds' average
daily net assets. The management fee amounted to $51,007 all of which was
voluntarily waived for the six months ended April 30, 1999.
12
<PAGE>
CITIFUNDS SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
The Trust pays no compensation directly to any Trustee or any other officer who
is affiliated with the Sub-Administrator, all of whom receive remuneration for
their services to the Trust from the Sub-Administrator or its affiliates.
3. SERVICE FEES The Fund maintains separate Service Plans for Class A and Class
B shares, which have been adopted in accordance with Rule 12b-1 under the
Investment Company Act of the 1940 as amended. Under the Class A Service Plan,
the Fund may pay monthly fees at an annual rate not to exceed 0.25% of the
average daily net assets represented by Class A shares of the Fund. The Service
fees for Class A shares amounted to $36,183 for the six months ended April 30,
1999. Under the Class B Service Plan, the Fund may pay a combined monthly
distribution and service fee at an annual rate not to exceed 1.00% of the
average daily net assets represented by Class B shares of the Fund. The Service
fees for Class B shares amounted to $1,000 for the period ended April 30, 1999.
These fees may be used to make payments to the Distributor for distribution
services and to others as compensation for the sale of shares of the applicable
class of the Fund, for advertising, marketing, or other promotional activity,
and for preparation, printing and distribution of prospectuses, statements of
additional information and reports for recipients other than regulators and
existing shareholders. The Fund also may make payments to the Distributor and
others for providing personal service or the maintenance of shareholder
accounts.
4. INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in
the Portfolio for the period aggregated $5,043,619 and $8,721,921, respectively.
5. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest (without par value). Transactions in shares of beneficial interest were
as follows:
SIX MONTHS ENDED
APRIL 30, 1999 YEAR ENDED
(Unaudited) OCTOBER 31, 1998
================================================================================
CLASS A
Shares sold 225,048 775,662
Shares issued to shareholders
from reinvestment of
distributions 0 53,147
Shares repurchased (483,186) (404,041)
- --------------------------------------------------------------------------------
Class A net increase (decrease) (258,138) 424,768
================================================================================
CLASS B*
Shares sold 27,320 --
Shares issued to shareholders from
reinvestment of distributions -- --
Shares repurchased (513) --
- --------------------------------------------------------------------------------
Class B net increase (decrease) 26,807
================================================================================
* January 4, 1999 (Commencement of Operations) to April 30, 1999.
6. ASSUMPTION OF EXPENSES CFBDS has voluntarily agreed to pay a portion of the
unwaived expenses of the Fund for the six months ended April 30, 1999, which
amounted to $45,673.
13
<PAGE>
SMALL CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 1999
(Unaudited)
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 85.5%
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 9.0%
- --------------------------------------------------------------------------------
Abacus Direct Corp.* 17,655 $ 1,306,470
Applied Power Inc. 28,500 899,531
Catalina Marketing Corp.* 30,390 2,596,446
Consolidated Graphics Inc.* 9,097 387,760
Ha Lo Industries Inc.* 72,143 847,680
ITT Services Inc.* 39,000 957,938
Lamar Advertising Co.* 36,435 1,225,127
Lernout & Hauspie
Speech Products* 16,825 658,278
Medquist Inc.* 11,920 408,260
Metzler Group Inc.* 51,800 1,443,925
Probusiness Services Inc.* 45,640 1,637,335
Profit Recovery Group
International Inc.* 27,051 987,361
-----------
13,356,361
-----------
COMMODITIES & PROCESSING -- 2.1%
- --------------------------------------------------------------------------------
OM GROUP INC 60,566 2,203,088
Synetic Inc.* 9,500 897,156
-----------
3,100,244
-----------
CONSUMER DURABLES -- 1.3%
- --------------------------------------------------------------------------------
Ethan Allen Interiors Inc. 14,300 724,831
Tower Automotive Inc.* 50,165 1,153,795
-----------
1,878,626
-----------
CONSUMER NON-DURABLES -- 2.3%
- --------------------------------------------------------------------------------
Beringer Wine Estate
Holdings* 34,270 1,349,381
General Nutrition Co.* 80,400 1,331,625
Horizon Organic
Holding Corp.* 45,830 773,381
-----------
3,454,387
-----------
CONSUMER SERVICES -- 6.4%
- --------------------------------------------------------------------------------
Heftel Broadcasting Corp.* 43,235 2,350,903
Houghton Mifflin Co. 16,400 731,850
Metro Networks Inc.* 32,250 1,710,855
Premier Parks Inc.* 55,656 1,923,610
SFX Entertainment Inc.* 40,415 2,495,626
Wiley John & Son 8,895 359,692
-----------
9,572,536
-----------
ELECTRONICS/TECHNICAL SERVICES -- 23.4%
- --------------------------------------------------------------------------------
Alliant Techsystems Inc.* 9,500 777,813
C Cube
Microsystems Inc.* 55,495 1,255,574
CMG Information
Services Inc.* 10,725 2,730,183
Critical Path Inc.* 4,766 $ 474,217
Dallas Semiconducter
Corp. 17,400 739,500
Earthlink Network Inc.* 5,600 386,050
Electronics For
Imaging Inc.* 42,880 2,028,760
Exodus
Communications Inc.* 18,000 1,622,250
ICG
Communications Inc.* 65,804 1,451,801
Infoseek Corp.* 8,400 428,925
Launch Media Inc.* 580 14,645
Legato Systems Inc.* 34,995 1,415,110
Level One
Communications Inc.* 53,915 2,769,883
Macromedia Inc.* 29,685 1,230,072
Mercury Interactive
Corp.* 49,560 1,396,973
Mettler Toledo
International Inc.* 31,600 825,550
Microchip Technology Inc.* 18,185 636,475
Miningco Com Inc.* 997 65,304
Network Appliance Inc.* 40,950 2,060,297
Network Solutions Inc.* 4,200 326,550
Novellus Systems Inc.* 28,595 1,351,114
PMC Sierra Inc.* 6,800 651,950
Powerwave
Technologies Inc.* 14,300 434,362
Rational Software Corp.* 34,175 1,012,434
Safeguard Scientifics Inc.* 22,600 1,830,600
Sapient Corp.* 7,890 495,097
Sipex Corp.* 53,555 749,770
Smart Modular
Technologies Inc.* 59,395 794,408
Tekelec Inc.* 88,075 795,427
Transaction System
Architects Inc.* 18,900 613,069
USinternetworkong Inc.* 902 46,115
Verticalnet Inc.* 690 78,315
Whittman Hart Inc.* 89,150 2,518,487
Wind Systems Inc.* 46,056 690,840
----------
34,697,920
----------
ENERGY MINERALS -- 1.2%
- --------------------------------------------------------------------------------
Petroleum Geological
Services * 105,535 1,767,711
----------
- --------------------------------------------------------------------------------
FINANCE -- 11.6%
- --------------------------------------------------------------------------------
Centura Banks Inc. 25,310 1,507,527
Checkfree
Holdings Corp.* 32,800 1,574,400
Chittenden Corp. 46,000 1,322,500
Cullen Frost Bankers Inc. 41,730 2,250,812
E Trade Group Inc.* 27,200 3,141,600
14
<PAGE>
SMALL CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) April 30, 1999
(Unaudited)
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
FINANCE (CONT'D)
- --------------------------------------------------------------------------------
Enhance Financial
Services Group Inc. 37,740 $ 780,746
Executive Risk Inc. 14,095 1,011,316
Peoples Heritage
Financial Group 112,295 2,175,716
SEI Investments Co. 6,600 627,000
Telebanc Financial Corp.* 10,174 1,054,281
U.S. Trust Corp. 18,910 1,727,901
- --------------------------------------------------------------------------------
17,173,799
-----------
HEALTH SERVICES/TECHNOLOGY -- 9.6%
- --------------------------------------------------------------------------------
Andrx Corp.* 20,600 1,622,250
Apria Healthcare
Group Inc.* 39,200 612,500
Barr Laboratories Inc.* 41,760 1,255,410
Bisys Group Inc.* 20,320 1,031,240
Coflexip 17,800 795,393
Coulter
Pharmaceutical Inc.* 17,600 354,200
Covance Inc.* 25,600 561,600
Gentex Corp.* 22,600 679,413
Gilead Sciences Inc.* 15,700 723,181
Hanger Orthopedic
Group* 46,200 675,675
Medimmune Inc.* 13,710 755,764
PSS World Medical Inc.* 32,150 313,463
Roberts Pharmaceutical
Corp.* 93,600 1,591,200
Ventana Medical
Systems Inc.* 64,000 1,560,000
Visx Inc.* 7,500 965,625
Xomed Surgical
Products Inc.* 16,500 686,813
-----------
14,183,727
-----------
INDUSTRIAL SERVICES -- 1.1%
- --------------------------------------------------------------------------------
Service Experts Inc.* 28,840 466,847
Waste Connections Inc.* 42,955 1,132,938
-----------
1,599,785
-----------
MULTI-INDUSTRY -- 2.8%
- --------------------------------------------------------------------------------
Covad Communications
Group Inc.* 15,075 1,447,200
Pinnicle Holdings Inc.* 97,410 1,996,905
R & B Falcon Corp.* 74,200 756,157
-----------
4,200,262
-----------
PRODUCER MANUFACTURING -- 1.0%
- --------------------------------------------------------------------------------
Aptargroup Inc. 50,695 1,419,460
Marimba Inc.* 631 12,620
-----------
1,432,080
-----------
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
RAW MATERIALS -- 0.7%
- --------------------------------------------------------------------------------
Carlisle Co. 21,500 $ 1,053,500
-----------
RETAIL -- 5.2%
- --------------------------------------------------------------------------------
Boyds Collection * 35,400 619,500
Linens N Things Inc.* 33,310 1,523,933
Men's Wearhouse Inc.* 26,151 715,884
O'Reilly Automotive Inc.* 21,400 979,050
Tiffany & Co. 11,615 975,660
Wholesale Foods
Market Inc.* 43,685 1,703,715
Wilmar Industries Inc.* 71,275 864,209
Zale Corp.* 9,800 370,563
-----------
7,752,514
-----------
TRANSPORTATION -- 3.9%
- --------------------------------------------------------------------------------
CH Robinson
Worldwide 35,800 1,071,763
CNF Transportation Inc. 25,300 1,105,294
Eagle U.S.A
Airfreight Inc.* 45,775 1,670,788
Hub Group Inc.* 37,640 856,310
Skywest Inc. 40,958 1,064,908
-----------
5,769,063
-----------
UTILITIES -- 3.9%
- --------------------------------------------------------------------------------
American Tower Corp.* 55,915 1,184,699
National Inc.* 26,840 2,046,550
RSL Communications* 36,600 1,198,650
Western Wireless Corp.* 34,850 1,431,028
-----------
5,860,927
-----------
TOTAL COMMON STOCKS
(Identified Cost $114,236,630) 126,853,192
-----------
SHORT-TERM OBLIGATIONS
AT AMORTIZED COST-- 0.3%
- --------------------------------------------------------------------------------
Student Loan Marketing
Discount Note
4.80% due 5/03/99 485,870
-----------
TOTAL INVESTMENTS
(Identified Cost
$114,722,500) 85.8% 127,339,062
OTHER ASSETS,
LESS LIABILITIES 14.2% 21,024,912
----- ------------
NET ASSETS 100.0% $148,363,974
===== ============
*Non income producing securities
See notes to financial statements
15
<PAGE>
SMALL CAP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 1999 (Unaudited)
================================================================================
ASSETS:
Investments at value (Note 1A) (Identified Cost, $114,722,500) $127,339,062
Cash 736
Receivable for securities sold 25,003,762
- --------------------------------------------------------------------------------
Total assets 152,343,560
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 3,742,381
Payable to affiliates-- Management fees (Note 2) 96,058
- --------------------------------------------------------------------------------
Accrued expenses and other liabilities 141,147
- --------------------------------------------------------------------------------
Total liabilities 3,979,586
- --------------------------------------------------------------------------------
Net Assets $148,363,974
================================================================================
Represented by:
Paid-in capital for beneficial interests $148,363,974
================================================================================
SMALL CAP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1999 (Unaudited)
================================================================================
INVESTMENT INCOME:
Dividend income $170,922
Interest income 84,860
- --------------------------------------------------------------------------------
$ 255,782
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 689,437
Custody and fund accounting fees 73,520
Audit fees 14,163
Legal fees 5,556
Shareholder reports 5,000
Trustees fees 3,270
Other 2,942
- --------------------------------------------------------------------------------
Total expenses 793,888
- --------------------------------------------------------------------------------
Net investment loss (538,106)
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain on Investments:
Net realized gain from investment transactions 9,425,980
Unrealized appreciation of investments 6,780,033
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain On Investments 16,206,013
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $15,667,907
================================================================================
See notes to financial statements
16
<PAGE>
SMALL CAP GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 1999 OCTOBER 31,
(Unaudited) 1998
=====================================================================================
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment loss $ (538,106) $ (1,122,896)
Net realized gain (loss) on investment transactions 9,425,980 (9,691,394)
Unrealized appreciation (depreciation) of investments 6,780,033 (27,795,086)
- ------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 15,667,907 (38,609,376)
- -------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions (Note 1) 10,146,221 260,666,527
Value of withdrawals (72,121,397) (76,983,925)
- -------------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital transactions (61,975,176) 183,682,602
- -------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS: (46,307,269) 145,073,226
- -------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 194,671,243 49,598,017
- -------------------------------------------------------------------------------------
End of period $148,363,974 $194,671,243
=====================================================================================
</TABLE>
SMALL CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS TEN MONTHS JUNE 21, 1995
ENDED ENDED (COMMENCEMENT
APRIL 30, YEAR ENDED OCTOBER 31, YEAR ENDED OF OPERATIONS)
1999 OCTOBER 31, 1997 DECEMBER 31, TO DECEMBER 31,
(Unaudited) 1998 (Note 1F) 1996 1995
=============================================================================================================
<S> <C> <C> <C> <C> <C>
Ratios/Supplemental Data:
Net Assets, end of period
(000's omitted) $ 148,364 $194,671 $ 49,598 $ 47,142 $ 4,989
Ratio of expenses to average
net assets 0.86%* 0.88% 0.85%* 0.61% 0.00%*
Ratio of net investment income
(loss) to average net assets (0.58)%* (0.50)% (0.37)%* 0.15% 1.22%*
Portfolio turnover 63% 51% 108% 89% 41%
Note: If Agents of the Portfolio had not voluntarily waived a portion of their
fees and assumed Portfolio expenses for the periods indicated and had expenses
been limited to that required by certain state securities law for the period
ended December 31, 1995, the ratios would have been as follows:
RATIOS:
Expenses to average net assets 0.86% *0.88% 1.04%* 1.17% 2.50%*
Net investment loss to average
net assets (0.58)%* (0.50)% (0.56)%* (0.41)% (1.28)%*
=============================================================================================================
</TABLE>
* Annualized
See notes to financial statements
17
<PAGE>
SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES Small Cap Growth Portfolio (the "Portfolio"),
a separate series of The Premium Portfolios (the "Portfolio Trust"), is
registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York. The Declaration of Trust permits
the Trustees to issue beneficial interests in the Portfolio. The Investment
Manager of the Portfolio is Citibank N.A., ("Citibank"). Signature Financial
Group (Grand Cayman), Ltd. ("SFG") acts as the Portfolio's Sub-Administrator.
On November 1, 1997 CitiSelect Folio 200, CitiSelect Folio 300, CitiSelect
Folio 400 and CitiSelect Folio 500 each transferred a portion of their
investable assets in the amount of $15,439,632, $38,272,468, $75,166,816 and
$37,432,299 including $2,166,532, $5,841,516, $11,815,501 and $5,364,662,
respectively of unrealized appreciation to the Portfolio in exchange for an
interest in the Portfolio. The total investable assets, and contributions are
included in the "Proceeds from contributions" on the Statement of Changes in Net
Assets.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles require management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. INVESTMENT SECURITY VALUATIONS Equity securities listed on securities
exchanges or reported through the NASDAQ system are valued at last sale prices.
Unlisted securities or listed securities for which last sales prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations maturing in sixty days or less), are valued on the basis
of valuations furnished by pricing services approved by the Board of Trustees
which take into account appropriate factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, and other market data, without exclusive reliance on quoted prices or
exchange or over-the-counter prices. Short-term obligations, maturing in sixty
days or less, are valued at amortized cost, which constitutes fair value as
determined by the Trustees. Securities, if any, for which there are no such
valuations or quotations are valued at fair value as determined in good faith by
or under guidelines established by the Trustees.
B. INCOME Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on long-term debt securities
when required for U.S. federal income tax purposes. Dividend income is recorded
on the ex-dividend date.
18
<PAGE>
SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
C. U.S. FEDERAL INCOME TAXES The Portfolio is considered a partnership under
the U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary.
D. EXPENSES The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
Portfolio Trust with respect to any two or more portfolios or series are
allocated in proportion to the average net assets of each portfolio, except when
allocations of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that portfolio.
E. REPURCHASE AGREEMENTS It is the policy of the Portfolio to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase agreements.
Additionally, procedures have been established by the Portfolio to monitor, on a
daily basis, the market value of the repurchase agreement's underlying
investments to ensure the existence of a proper level of collateral.
F. CHANGE IN FISCAL YEAR END During fiscal year 1997, the Portfolio changed
its fiscal year end from December 31 to October 31.
G. OTHER Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolios' business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolio. SFG acts
as Sub-Administrator and performs certain duties and receives compensation from
Citibank as from time to time are agreed to by Citibank and SFG. Citibank is a
wholly-owned subsidiary of Citicorp, which in turn, is a wholly-owned subsidiary
of Citigroup Inc. Citigroup Inc. was formed as a result of the merger of
Citicorp and Travelers Group, Inc. which was completed on October 8, 1998.
The management fees paid to Citibank, amounted to $689,437 for the six months
ended April 30, 1999. The management fees are computed at the annual rate of
0.75% of the Portfolio's average daily net assets.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $112,095,186 and $189,159,751,
respectively, for the six months ended April 30, 1999.
19
<PAGE>
SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at April 30, 1999, as
computed on a federal income tax basis, are as follows:
AGGREGATE COST $114,722,500
================================================================================
Gross unrealized appreciation $ 21,955,556
Gross unrealized depreciation (9,338,994)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 12,616,562
================================================================================
5. LINE OF CREDIT The Portfolio, along with various other Portfolios in the
CitiFunds family, entered into an ongoing agreement with a bank which allows the
Portfolio collectively to borrow up to $75 million for temporary or emergency
purposes. Interest on the borrowings, if any, is charged to the specific
portfolio executing the borrowing at the base rate of the bank. The line of
credit requires a quarterly payment of a commitment fee based on the average
daily unused portion of the line of credit. For the six months ended April 30,
1999, the commitment fee allocated to the Portfolio was $212. Since the line of
credit was established, there have been no borrowings.
20
<PAGE>
TRUSTEES AND OFFICERS
Philip W. Coolidge*, PRESIDENT
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Heath B. McLendon**
C. Oscar Morong Jr
E. Kirby Warren
William S. Woods Jr
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
* AFFILIATED PERSON OF SUB-ADMINISTRATOR AND DISTRIBUTOR
** AFFILIATED PERSON OF INVESTMENT MANAGER
INVESTMENT MANAGER
Citibank, N.A
153 East 53rd Street, New York, NY 10043
DISTRIBUTOR
CFBDS, Inc
21 Milk Street, 5th Floor
Boston, MA 02109
(617) 423-1679
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street, Boston, MA 02110
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
THE CITIFUNDS FAMILY
LARGE CAP STOCKS
o CitiFunds Growth & Income Portfolio
o CitiFunds Large Cap Growth Portfolio
SMALL CAP STOCKS
o CitiFunds Small Cap Growth Portfolio
o CitiFunds Small Cap Value Portfolio
INTERNATIONAL STOCKS
o CitiFunds International Growth & Income Portfolio
o CitiFunds International Growth Portfolio
GROWTH WITH INCOME
o CitiFunds Balanced Portfolio
BONDS
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds Intermediate Income Portfolio
o CitiFunds National Tax Free Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio
MONEY MARKETS
o CitiFunds Cash Reserves
o CitiFunds U.S. Treasury Reserves
o CitiFunds Tax Free Reserves
o CitiFunds New York Tax Free Reserves
o CitiFunds California Tax Free Reserves
o CitiFunds Connecticut Tax Free Reserves
This report is prepared for the information of shareholders. It is authorized
for distribution to prospective investors only when preceded or accompanied by
an effective prospectus.
For more information contact your Service Agent or call 1-800-625-4554
CitiFunds are made available by CFBDS, Inc. as distributor.
(C)1999 Citicorp [R LOGO] Printed on recycled paper CFS/SCG/499
