<PAGE>
Annual Report o August 31, 1998
[Logo]
New York
Tax Free Reserves
MONEY MARKETS
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INVESTMENT PRODUCTS:
NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
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<PAGE>
TABLE OF CONTENTS
CITIFUNDS NEW YORK TAX FREE RESERVES
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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Fund Performance 4
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Portfolio of Investments 5
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Statement of Assets and Liabilities 12
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Statement of Operations 13
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Statement of Changes in Net Assets 14
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Financial Highlights 15
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Notes to Financial Statements 16
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Independent Auditors' Report 20
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<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
The 12-month period ended August 31, 1998 saw a continuation of the positive
economic conditions that have prevailed over the past three years. Late in the
period, however, heightened volatility caused the stock market to retrace its
gains for the year.
Such volatility suggests that tax-exempt money market securities may once
again be poised to demonstrate their true value as relatively safer investments
where investors seek to protect their principal and earn interest that is free
from federal income taxes. In our view, CitiFundsSM New York Tax Free Reserves
can play a valuable role in investors' diversified investment portfolios.
As you have probably heard, Citicorp announced its intention to merge with
The Travelers Group. The merger is expected to occur on or about October 8,
1998. As necessary, we will provide you with information that specifically
affects the fund.
Thank you for your continued confidence and participation.
Sincerely,
/s/ Philip W. Coolidge
Philip W. Coolidge
President
September 21, 1998
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
YIELDS ON MONEY MARKET INSTRUMENTS ENDED THE 12-MONTH REPORTING PERIOD LOWER
THAN WHERE THEY BEGAN, reflecting the general trend of short-term interest
rates. That decline was interrupted, however, during the first quarter of 1998,
which saw an increase in short-term interest rates amid uncertainty over the
economic effects of the financial crisis in Asia. When evidence emerged early in
the year that U.S. economic growth was stronger than most analysts expected,
interest rates rose in anticipation of a move by the Federal Reserve Board to a
more restrictive monetary policy.
Such a move never took place, however, because of the absence of inflationary
pressures. During the second and third quarters of 1998, it became clearer that
the Asian crisis was, in fact, negatively affecting U.S. corporate earnings and
dampening U.S. economic growth. In effect, lower demand for U.S. goods from
overseas markets and improved competitive positions for Asian companies
constrained sales and earnings of U.S. exporters. As a result, fixed-income
investors became more confident that the Federal Reserve would maintain
short-term interest rates at current levels, and money market yields settled
back to their previous lows.
In this economic environment, yields of short-term municipal securities
generally tracked the movements of yields of comparable U.S. Treasury bills.
However, the market also responded to its own unique influences, most notably
changes in the supply of newly issued securities. While issuance of longer-term
municipal securities increased, the short end of the market saw a reduction of
supply relative to one year ago. Favorable economic conditions, attractive rates
in the longer end of the market and improved fiscal operations appear to have
reduced the need for New York municipalities to finance their operating and
capital needs with short-term debt.
The relative shortage of short-term municipal notes was offset by increased
issuance of tax-exempt variable-rate demand notes (VRDNs), which are securitized
and issued by investment banks. Some of the VRDNs in which we invested were
securitized from the bonds issued by the Long Island Power Authority in May.
This $4.3 billion deal, issued to privatize the Long Island Lighting Company,
represented the largest single issuance of municipal bonds in history.
We increased the portfolio's exposure to VRDNs to take advantage of higher
yields. By mid-1998, VRDNs comprised approximately 69% of the portfolio, with
the remainder allocated to short-term municipal securities from some of the
state's school districts. Seasonal issuance of non-rated notes during the first
half of 1998 gave us an opportunity to extend the portfolio's average maturity,
enabling us to lock in higher yields than were generally available from
conventional short-term notes.
WE BELIEVE SHORT-TERM INTEREST RATES ARE LIKELY TO REMAIN NEAR CURRENT LEVELS
FOR THE REMAINDER OF THE YEAR. If economic growth continues to moderate in the
fourth quarter of 1998, as we expect, the Federal Reserve Board will have little
reason to raise short-term interest rates, which they might otherwise do to
forestall a reacceleration of inflation. In our opinion, the opposite is the
more likely scenario: if the economy continues to slow, the Federal Reserve
Board may eventually reduce short-term interest rates modestly in order to
provide an economic stimulus.
In the meantime, we remain encouraged by the strength of New York's
short-term municipal securities market. In our analysis, the state and its
municipalities are more fiscally sound than at any other time in recent memory.
Even cities and towns that had persistent financial problems just a few years
ago, particularly New York City, appear to be economically healthier. Both New
York State and New York City are currently enjoying multi-billion-dollar
surpluses, some of which they are allocating to "rainy day" reserves for use in
the event that economic conditions deteriorate in the future. If this favorable
credit environment continues, it should help us continue to deliver competitive
after-tax returns consistent with capital preservation to our shareholders.
<PAGE>
FUND FACTS
FUND OBJECTIVE
To provide its shareholders with high levels of current income exempt from
federal, New York State and New York City personal income taxes*, preservation
of capital and liquidity.
INVESTMENT ADVISER DIVIDENDS
Citibank, N.A. Declared daily, paid monthly
COMMENCEMENT OF OPERATIONS CAPITAL GAINS
November 4, 1985 Distributed annually, if any
NET ASSETS AS OF 8/31/98 BENCHMARKS
$1,094.7 million o Lipper New York Tax Exempt Money Funds Average
o IBC New York Tax Free Money Funds Average
*A portion of the income may be subject to the Federal Alternative Minimum Tax
(AMT). Consult your personal tax advisor.
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
ONE FIVE TEN
ALL PERIODS ENDED AUGUST 31, 1998 YEAR YEARS* YEARS*
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CitiFunds New York Tax Free Reserves 3.03% 2.83% 3.37%
Lipper New York Tax Exempt Money Funds Average 3.00% 2.82% 3.38%
* Average Annual Total Return
7-DAY YIELDS
Annualized Current 2.79%
Effective 2.82%
The Annualized Current 7-Day Yield reflects the amount of income generated by
the investment during that seven-day period and assumes that the income is
generated each week over a 365 day period. The yield is shown as a percentage of
the investment.
The Effective 7-Day Yield is calculated similarly, but when annualized the
income earned by the investment during that seven-day period is assumed to be
reinvested. The effective yield is slightly higher than the current yield
because of the compounding effect of this assumed reinvestment.
Note: A money market fund's yield more closely reflects the current earnings of
the fund than does the total return.
IMPORTANT TAX INFORMATION--For the fiscal year ended August 31, 1998, the Fund
paid $0.02991 per share to shareholders from net investment income. Fur such
period, the Fund designated all dividends paid as exempt-interest dividends.
Thus, 100% of these distributions during this period were exempt from Federal
income tax and 77.6% of dividends earned were also exempt from New York personal
income tax. In addition, 13.8% of the dividends were derived from income earned
from certain government obligations which may be subject to the Federal
Alternative Minimum Tax (AMT).
COMPARISON OF 7-DAY YIELDS FOR CITIFUNDS NEW YORK TAX FREE RESERVES
VS. IBC NEW YORK TAX FREE MONEY FUNDS AVERAGE
As illustrated, CitiFunds New York Tax Free Reserves generally provided a
similar annualized seven-day yield to that of a comparable IBC Money Fund
Average, as published in IBC Money Fund Report(TM), for the one-year period.
IBC New York CitiFunds New York
T-F Funds Avg. T-F Reserve
-------------- -----------
9/2/97 2.83% 2.87%
9/9/97 2.88% 2.89%
9/16/97 2.97% 2.97%
9/23/97 3.08% 3.07%
9/30/97 3.24% 3.24%
10/7/97 3.04% 3.08%
10/14/97 2.98% 3.00%
10/21/97 2.99% 3.01%
10/28/97 3.03% 3.05%
11/4/97 3.04% 3.06%
11/11/97 3.09% 3.10%
11/18/97 3.19% 3.20%
11/25/97 3.22% 3.25%
12/2/97 3.19% 3.22%
12/9/97 2.95% 3.03%
12/16/97 3.06% 3.08%
12/23/97 3.18% 3.22%
12/30/97 3.29% 3.36%
1/6/98 3.17% 3.19%
1/13/98 2.86% 2.86%
1/20/98 2.80% 2.86%
1/27/98 2.84% 2.84%
2/3/98 2.92% 2.95%
2/10/98 2.60% 2.74%
2/17/98 2.51% 2.57%
2/24/98 2.70% 2.72%
3/3/98 2.82% 2.87%
3/10/98 2.43% 2.63%
3/17/98 2.47% 2.59%
3/24/98 2.76% 2.83%
3/31/98 2.92% 2.99%
4/7/98 2.88% 2.98%
4/14/98 2.88% 2.98%
4/21/98 3.15% 3.21%
4/28/98 3.34% 3.40%
5/5/98 3.22% 3.31%
5/12/98 3.10% 3.16%
5/19/98 3.12% 3.17%
5/26/98 3.09% 3.15%
6/2/98 3.14% 3.15%
6/9/98 2.92% 3.00%
6/16/98 2.94% 2.98%
6/23/98 2.92% 2.97%
6/30/98 2.95% 2.97%
7/7/98 2.60% 2.73%
7/14/98 2.55% 2.68%
7/21/98 2.85% 2.92%
7/28/98 2.92% 3.01%
8/4/98 2.91% 3.00%
8/11/98 2.57% 2.77%
8/18/98 2.71% 2.81%
8/25/98 2.64% 2.82%
9/1/98 2.66% 2.79%
Note: The Fund seeks to maintain a stable $1.00 per share price, although there
is no assurance that this will be so on a continuing basis. Fund shares are not
insured or guaranteed by the U.S. Government. Yields and total returns will
fluctuate and past performance is no guarantee of future results. Total return
figures include reinvestment of dividends. Returns and yields reflect certain
voluntary fee waivers. If the waivers were not in place, the Fund's returns
would have been lower.
<PAGE>
CitiFunds New York Tax Free Reserves
IBC New York Tax Free Money Funds Average
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS August 31, 1998
Principal
Amount
Issuer (000's omitted) Value
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Tax Exempt Commercial Paper -- 1.0%
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Municipal Assistance
Corp., NY,
3.20% due 10/08/98 $ 7,500 $ 7,500,000
New York State Dormitory
Authority Revenue,
3.35% due 9/08/98 3,000 3,000,000
--------------
10,500,000
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Bond, Revenue, Tax and Tax Revenue
Anticipation Notes and General
Obligation Bonds and Notes -- 17.1%
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Albany, NY, City School
District, TANs,
4.00% due 10/16/98 11,000 11,005,035
Ballston Spa, NY, Central
School District, G.O.,
4.25% due 12/30/98 3,000 3,003,797
Bedford, NY, Central
School District, TANs,
3.75% due 11/15/98 6,000 6,003,077
Brookhaven, NY, G.O.,
5.70% due 11/15/98 1,830 1,837,808
Central Islip, NY, Union
Free School, BANs,
4.25% due 12/23/98 1,000 1,001,040
Central Islip, NY, Union
Free School, BANs,
4.00% due 6/30/99 14,000 14,033,452
Chautauqua County,
NY, TANs,
4.00% due 12/22/98 3,000 3,003,833
Chautauqua County,
NY, TANs,
4.00% due 2/18/99 10,000 10,016,627
Colonie, NY, BANs,
4.00% due 7/30/99 1,662 1,666,381
East Hampton, NY, G.O.,
4.38% due 4/15/99 679 681,964
East Islip, NY, Union Free
School District, TANs,
4.00% due 6/25/99 10,000 10,023,495
Galway, NY, Central
School District, BANs,
4.00% due 3/16/99 3,950 3,957,028
Greenburgh, NY, Central
School District,
TANs, AMT
3.90% due 10/09/98 7,500 7,502,682
Hempstead, NY BANs,
4.00% due 1/06/99 2,000 2,002,461
Holly, NY, Central School
District, BANs,
4.25% due 1/07/99 4,410 4,414,454
Levittown, NY, Union
Free School District, TANs,
4.00% due 6/23/99 9,000 9,020,991
Longwood, NY, Central
School District, TANs,
4.00% due 6/30/99 11,000 11,026,315
Marion, NY, Central
School District, BANs,
4.25% due 1/06/99 4,800 4,805,612
Middletown, NY, City
School District, BANs,
5.50% due 11/01/98 400 401,259
Miller Place, NY, Union
Free School District, TANs,
4.00% due 6/30/99 5,000 5,011,950
Monroe County, NY, BANs,
4.00% due 7/23/99 3,000 3,010,313
Monroe County, NY, G.O.,
3.45% due 9/10/98 7,500 7,500,000
Monroe County, NY, G.O.,
6.00% due 3/01/99 565 571,136
North Hempstead,
NY, BANs,
4.50% due 9/01/98 1,110 1,110,000
North Hempstead, NY, G.O.,
4.00% due 3/01/99 425 425,610
North Warren, NY,
Central School
District, BANs, 4.25%
due 1/07/99 3,300 3,303,888
Nyack, NY, Union
Free School District, TANs,
3.90% due 1/15/99 2,500 2,503,623
Onondaga County,
NY, BANs,
3.20% due 11/13/98 1,000 1,000,000
Oyster Bay, NY, BANs,
4.00% due 10/02/98 10,000 10,003,775
Sachem, NY,
Central School
District, TANs,
4.00% due 6/25/99 5,000 5,012,971
Sayville, NY, Union Free
School District, TANs,
4.00% due 6/29/99 5,000 5,012,689
South Country, NY, Central
School District, TANs,
4.00% due 6/24/99 8,000 8,018,776
Thousand Island, NY,
Central School
District, BANs,
4.00% due 4/28/99 10,000 10,014,471
Wayne, NY, Central
School District, BANs,
4.00% due 3/30/99 6,000 6,013,325
Westchester County,
NY, TANs,
3.59% due 12/29/98 10,000 10,000,606
West Islip, NY,
Union Free School
District, TANs,
3.90% due 6/30/99 2,800 2,804,457
White Plains, NY,
G.O. Bonds,
9.70% due 12/15/98 1,060 1,078,373
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187,803,274
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Annual, Semi-Annual and Quarterly
Tender Revenue Bonds and Notes
(Puts) -- 9.8%
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Buffalo, NY,
3.70% due 2/01/99 800 800,000
Chicago, IL,
3.55% due 2/04/99 7,000 7,000,000
Dutchess County, NY,
7.00% due 2/15/99 650 660,137
Municipal Pooled Trusts,
3.85% due 7/15/99 14,395 14,395,000
Municipal Security
Trust Certificates,
3.80% due 10/02/98 13,000 13,000,000
New York City, NY,
Housing
Development Corp.,
4.40% due 5/01/99 250 250,801
New York City, NY,
Industrial Development
Agency,
5.50% due 11/15/98 1,200 1,204,640
New York State Dormitory
Authority Revenue,
3.60% due 9/10/98 8,115 8,115,000
New York State Dormitory
Authority Revenue,
3.60% due 1/15/99 8,955 8,955,000
New York State Dormitory
Authority
Revenue,
4.75% due 2/15/99 750 753,479
New York State Dormitory
Authority Revenue,
4.00% due 7/01/99 500 501,363
New York State Energy,
Research and
Development,
3.80% due 10/15/98 5,000 5,000,000
New York State
Environmental Revenue,
3.60% due 9/10/98 9,000 9,000,000
New York State
Environmental Revenue,
3.65% due 12/15/98 860 859,983
New York State
Environmental Revenue,
4.00% due 6/15/99 750 751,411
New York State Housing
Finance Authority,
3.60% due 9/10/98 8,745 8,745,000
New York State Housing
Finance Authority,
8.00% due 11/01/98 4,150 4,263,030
New York State
Medical Care Facilities,
7.25% due 2/15/99 1,955 2,024,687
New York State Medical
Care Facilities,
7.80% due 2/15/99 2,000 2,076,963
New York State Power
Authority Revenue,
3.60% due 9/01/98 15,000 15,000,000
New York State Power
Authority Revenue,
5.50% due 1/01/99 825 829,823
Suffolk County, NY,
Cooperative Bonds,
4.00% due 12/30/98 2,800 2,802,221
--------------
106,988,538
--------------
Variable Rate Demand Notes* -- 75.6%
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Alaska State Housing
Finance Corp.,
due 6/01/26 3,500 3,500,000
Babylon, NY, Industrial
Development Agency,
due 7/01/14 700 700,000
Babylon, NY, Industrial
Development Agency,
due 1/01/19 5,000 5,000,000
Chicago, IL, Tax Increment,
due 12/01/14 3,000 3,000,000
Chicago, IL, O'Hare
International Airport
Revenue, AMT,
due 7/01/10 6,500 6,500,000
Clipper Tax Exempt
Trust, AMT,
due 3/01/15 11,275 11,275,000
Clipper Tax Exempt
Trust, AMT,
due 3/01/16 9,120 9,120,000
Connecticut State, G.O.,
due 8/01/12 1,800 1,800,000
Connecticut State Housing
Financial Authority, AMT,
due 5/15/18 3,745 3,745,000
Connecticut State Housing
Financial Authority, AMT,
due 11/15/27 3,940 3,940,000
Connecticut State Special
Tax Obligation,
due 12/01/10 5,600 5,600,000
Escambia County, FL,
Industrial Development
Revenue, due 3/01/22 3,700 3,700,000
Florida Housing Finance
Agency, due 6/01/26 5,000 5,000,000
Fort Wayne, IN,
Hospital Authority
Revenue,
due 1/01/16 2,450 2,450,000
Fulton County, GA,
Development Authority,
AMT, due 6/01/27 2,400 2,400,000
Georgia Municipal
Electric Authority,
due 6/01/20 1,600 1,600,000
Glens Falls, NY, Industrial
Development Agency,
due 12/01/04 1,610 1,610,000
Hampton, VA,
Redevelopment
and Housing Authority,
due 6/15/26 1,200 1,200,000
Howard County, MD,
Multi-Family Revenue,
due 6/15/26 1,200 1,200,000
Iowa Industrial Development
Finance Authority
Revenue, AMT,
due 10/01/15 1,000 1,000,000
Iowa Student Loan
Liquidity Corp., AMT,
due 12/01/23 1,000 1,000,000
Jasper County, MO,
Industrial Development
Authority,
due 8/01/16 2,300 2,300,000
Jefferson County, NY,
Industrial Development,
AMT, due 7/01/05 1,750 1,750,000
Joplin, MO, Industrial
Development Authority,
due 10/01/01 1,865 1,865,000
Laurens County, GA,
Development Authority,
AMT, due 5/01/17 1,000 1,000,000
Lone Star, TX, Tax Airport
Authority, due 12/01/14 600 600,000
Long Island Power
Authority, NY,
due 12/01/13 20,600 20,600,000
Long Island Power
Authority, NY,
due 12/01/24 15,000 15,000,000
Long Island Power
Authority, NY,
due 2/15/26 2,200 2,200,000
Long Island Power
Authority, NY,
due 5/01/33 6,000 6,000,000
Louisville and Jefferson
County, KY, AMT
due 7/01/13 6,370 6,370,000
Lubbock, TX, Health
Facilities Development
Authority,
due 7/01/13 200 200,000
Macon Trust,
due 3/03/07 23,390 23,390,000
Macon Trust, AMT,
due 2/05/30 2,205 2,205,000
Macon Trust, AMT,
due 12/05/30 1,810 1,810,000
Maryland State Community
Development Housing
Department, AMT,
due 6/01/20 3,705 3,705,000
Maryland State Health and
Higher Education Authority,
due 7/01/27 4,500 4,500,000
Massachusetts State
Housing Finance
Authority, AMT,
due 7/01/19 9,195 9,195,000
Massachusetts State
Turnpike Authority,
due 1/01/17 14,100 14,100,000
Mercer County, WV,
Industrial Development
Revenue,
due 5/01/01 1,000 1,000,000
Metropolitan Tennessee,
Government, National
and Davidson,
due 5/15/25 2,400 2,400,000
Metropolitan Transit
Authority, NY,
due 7/01/17 2,500 2,500,000
Metropolitan Transit
Authority, NY,
due 7/01/26 25,245 25,245,000
Mississippi Single Family
Home Corp.,
due 6/01/30 9,135 9,135,000
Missouri Higher Education
Student Loan, AMT,
due 6/01/17 2,000 2,000,000
Moorhead, MN, Solid
Waste Disposal,
AMT, due 4/01/12 2,500 2,500,000
Morgan Keegan
Municipal Trust Receipts,
AMT, due 5/06/99 10,375 10,375,000
Municipal Assistance
Corp., NY,
due 7/01/04 9,900 9,900,000
Municipal Pooled
Trust, due 10/01/30 5,895 5,895,000
Municipal Pooled
Trust, due 10/01/32 10,875 10,875,000
Municipal Security
Trust Certificates,
due 9/01/02 10,000 10,000,000
Municipal Security Trust
Certificates,
due 1/01/03 10,000 10,000,000
Municipal Security Trust
Certificates,
due 6/01/06 10,000 10,000,000
Nassau County, NY,
Industrial Development
Agency,
due 12/01/99 4,000 4,000,000
New Hanover County,
NC, due 3/01/13 2,250 2,250,000
New Rochelle, NY,
due 12/01/05 5,500 5,500,000
New York City, NY,
due 4/15/07 500 500,000
New York City, NY,
due 8/01/09 2,000 2,000,000
New York City, NY,
due 2/15/12 25,100 25,100,000
New York City, NY,
due 2/15/13 1,300 1,300,000
New York City, NY,
due 8/01/13 7,395 7,395,000
New York City, NY,
due 6/01/17 7,175 7,175,000
New York City, NY,
due 8/01/17 13,900 13,900,000
New York City, NY,
due 2/01/19 6,100 6,100,000
New York City, NY,
due 8/01/21 9,570 9,570,000
New York City, NY,
due 6/01/22 2,000 2,000,000
New York City, NY,
due 6/01/27 10,000 10,000,000
New York City, NY,
Cultural Affairs
(Carnegie Hall),
due 12/01/10 2,000 2,000,000
New York City, NY,
Cultural Affairs
(Carnegie Hall),
due 12/01/15 4,325 4,325,000
New York City, NY,
Municipal Water Finance,
due 6/15/30 800 800,000
New York City Health and
Hospital Corp.,
due 2/15/26 20,800 20,800,000
New York City Housing
Development Corp.,
due 4/15/07 6,000 6,000,000
New York City Housing
Development Corp.,
due 1/15/19 500 500,000
New York City Housing
Development Corp.,
due 3/15/25 1,000 1,000,000
New York City Housing
Development Corp.,
AMT, due 12/01/29 7,000 7,000,000
New York City Industrial
Development Agency,
due 12/01/01 1,000 1,000,000
New York City Industrial
Development Agency,
due 6/30/14 1,800 1,800,000
New York City Industrial
Development Agency,
due 6/30/23 2,100 2,100,000
New York City Industrial
Development Agency,
AMT, due 12/01/17 3,000 3,000,000
New York City Industrial
Development Agency,
AMT, due 6/01/22 1,180 1,180,000
New York MTA Facility
Municipal Trust,
due 1/01/18 9,100 9,100,000
New York MTA Facility
Municipal Trust,
due 1/01/22 6,200 6,200,000
New York State,
due 1/01/06 8,850 8,850,000
New York State Dormitory
Authority Revenue,
due 7/01/15 1,200 1,200,000
New York State Dormitory
Authority Revenue,
due 7/01/19 2,815 2,815,000
New York State Dormitory
Authority Revenue,
due 7/01/25 700 700,000
New York State Dormitory
Authority Revenue,
due 7/01/27 3,625 3,625,000
New York State Energy,
Research and
Development,
due 12/01/20 5,200 5,200,000
New York State Energy,
Research and
Development,
due 6/01/27 2,000 2,000,000
New York State Energy,
Research and Development,
due 6/01/29 3,315 3,315,000
New York State Energy,
Research and
Development, AMT,
due 7/01/27 1,500 1,500,000
New York State Environmental
Facility Revenue,
due 6/15/11 23,215 23,215,000
New York State Environmental
Facility Revenue,
due 6/15/12 3,700 3,700,000
New York State Housing
Finance Authority,
due 11/15/99 10,700 10,700,000
New York State Housing
Finance Authority,
due 11/15/19 2,000 2,000,000
New York State Housing
Finance Authority, AMT,
due 11/01/28 4,000 4,000,000
New York State Housing
Finance Authority, AMT,
due 11/01/30 1,000 1,000,000
New York State Job
Development
Authority, AMT,
due 3/01/05 400 400,000
New York State Local
Government
Assistance Corp.,
due 4/01/11 1,000 1,000,000
New York State Local
Government
Assistance Corp.,
due 4/01/22 11,400 11,400,000
New York State Local
Government
Assistance Corp.,
due 4/01/23 3,700 3,700,000
New York State Local
Government
Assistance Corp.,
due 4/01/25 6,100 6,100,000
New York State Medical Care
Facilities Agency,
due 11/01/08 3,200 3,200,000
New York State Medical Care
Facilities Agency,
due 8/15/14 9,405 9,405,000
New York State Medical
Care Facilities Agency,
due 8/15/22 4,900 4,900,000
New York State Medical Care
Facilities Agency,
due 2/05/29 5,625 5,625,000
New York State Power
Authority Revenue,
due 1/01/23 5,000 5,000,000
New York State Thruway
Authority, due 4/01/08 10,000 10,000,000
New York State Thruway
Authority, due 4/01/10 4,495 4,495,000
New York State Thruway
Authority, due 1/01/25 2,500 2,500,000
New York State Thruway
Authority, due 1/01/27 12,805 12,805,000
New York State Thruway
Authority, due 7/01/27 5,000 5,000,000
North Carolina, Medical
Care, Hospital Revenue,
due 10/01/20 500 500,000
Orange County, FL, Industrial
Development Authority,
due 2/01/04 575 575,000
Orange County, FL, Housing
Finance Authority,
due 6/01/25 2,000 2,000,000
Orlando, FL, Special
Assessment Revenue,
due 10/01/21 3,200 3,200,000
Port Authority of New York
& New Jersey,
due 1/01/01 40,000 40,000,000
Port Authority of New York
& New Jersey, AMT,
due 1/01/01 25,000 25,000,000
Puerto Rico Commonwealth,
due 7/01/20 3,000 3,000,000
Puerto Rico Commonwealth,
due 7/01/24 2,000 2,000,000
Puerto Rico Commonwealth
Highway Transportation,
due 7/01/14 4,800 4,800,000
Puerto Rico Commonwealth
Highway Transportation,
due 7/01/15 9,045 9,045,000
Puerto Rico Commonwealth
Highway Transportation,
due 7/01/28 2,700 2,700,000
Puerto Rico Electric Power
Authority, due 1/01/12 2,180 2,180,000
Puerto Rico Electric Power
Authority, due 7/01/13 2,000 2,000,000
Puerto Rico Electric Power
Authority, due 7/01/22 9,500 9,500,000
Puerto Rico Finance
Corp., due 6/01/13 10,640 10,640,000
Puerto Rico Public Buildings
Authority, due 7/01/21 9,380 9,380,000
Puerto Rico Public Buildings
Authority, due 7/01/25 9,330 9,330,000
Red Bay, AL, Industrial
Development Revenue
Board, due 11/01/10 5,300 5,300,000
Rockport, IN, Pollution Control
Authority, due 7/01/25 300 300,000
Rutherford County, TN,
Industrial Development,
AMT, due 6/01/03 1,750 1,750,000
Schenectady County, NY,
Industrial Development,
due 6/01/09 1,730 1,730,000
Seneca, NY, Industrial
Development Authority,
due 11/01/27 7,000 7,000,000
Seveir County, TN, Public
Building Authority,
due 6/01/09 500 500,000
Seveir County, TN, Public
Building Authority,
due 6/01/17 1,765 1,765,000
Seveir County, TN, Public
Building Authority,
AMT, due 6/01/12 2,000 2,000,000
South Carolina Educational
Facilities Authority,
due 10/01/26 4,600 4,600,000
Southwestern, IL, Environmental
Development Authority,
due 11/01/25 300 300,000
Trail County, ND, Solid Waste,
AMT, due 12/01/11 5,200 5,200,000
Trail County, ND, Solid Waste,
AMT, due 3/01/13 5,750 5,750,000
Triborough Bridge & Tunnel
Authority, NY,
due 1/01/04 8,149 8,149,000
Triborough Bridge & Tunnel
Authority, NY,
due 1/01/12 6,400 6,400,000
Utah State Board Regents
Student Loan, AMT,
due 11/01/31 3,500 3,500,000
Walton County, GA, Industrial
Building Authority, AMT,
due 10/01/17 1,600 1,600,000
Warren and Washington
County, NY, Industrial
Development,
due 11/01/98 7,800 7,800,000
Wisconsin Housing &
Economic Development,
AMT due 9/01/17 1,675 1,675,000
--------------
828,069,000
--------------
TOTAL INVESTMENTS,
AT AMORTIZED COST 103.5% 1,133,360,812
OTHER ASSETS,
LESS LIABILITIES (3.5) (38,628,848)
------ --------------
NET ASSETS 100.0% $1,094,731,964
===== ==============
AMT--Subject to Alternative Minimum Tax
* Variable rate demand notes have a demand feature under which the fund could
tender them back to the issuer on no more than 7 day's notice.
See notes to financial statements
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
- --------------------------------------------------------------------------------
ASSETS:
Investments, at amortized cost (Note 1A) $1,133,360,812
Cash 297,897
Interest receivable 7,761,820
Receivable for shares of beneficial interest sold 143,167
- --------------------------------------------------------------------------------
Total assets 1,141,563,696
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for shares of beneficial interest repurchased 44,599,631
Dividends payable 1,492,715
Payable to affiliates:
Investment advisory fees (Note 3) 105,058
Shareholder servicing agents' fees (Note 4B) 237,245
Accrued expenses and other liabilities 397,083
- --------------------------------------------------------------------------------
Total liabilities 46,831,732
- --------------------------------------------------------------------------------
NET ASSETS for 1,094,821,655 shares of beneficial interest
outstanding $1,094,731,964
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in capital $1,094,821,655
Accumulated net realized loss on investments (89,691)
- --------------------------------------------------------------------------------
Total $1,094,731,964
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE
PER SHARE $ 1.00
================================================================================
See notes to financial statements
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1998
- --------------------------------------------------------------------------------
INTEREST INCOME (Note 1B): $38,342,958
EXPENSES:
Administrative fees (Note 4A) $2,634,965
Shareholder Servicing Agents' fees (Note 4B) 2,634,965
Investment Advisory fees (Note 3) 2,107,972
Distribution fees (Note 5) 1,053,986
Custody and fund accounting fees 276,833
Registration fees 45,384
Shareholder reports 42,368
Trustees' fees 38,614
Audit fees 28,700
Transfer agent fees 16,084
Legal fees 11,832
Miscellaneous 35,595
- --------------------------------------------------------------------------------
Total expenses 8,927,298
Less aggregate amounts waived by Investment
Adviser, Administrator, and Distributor
(Notes 3, 4A, and 5) (2,071,553)
Less fees paid indirectly (Note 1E) (6,564)
- --------------------------------------------------------------------------------
Net expenses 6,849,181
- --------------------------------------------------------------------------------
Net investment income 31,493,777
NET REALIZED GAIN ON INVESTMENTS 6,011
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $31,499,788
================================================================================
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
CITIFUNDS NEW YORK TAX FREE RESERVES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
--------------------------------
1998 1997
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 31,493,777 $ 28,370,732
Net realized gain (loss) on investments 6,011 (72,184)
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 31,499,788 28,298,548
- --------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (31,493,777) (28,370,732)
- --------------------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST AT NET ASSET
VALUE OF 1.00 PER SHARE (Note 6):
Proceeds from sale of shares 1,419,667,585 945,401,701
Net asset value of shares issued to shareholders
from reinvestment of dividends 14,122,083 13,827,379
Cost of shares repurchased (1,316,023,080) (923,889,022)
- --------------------------------------------------------------------------------------------
Net increase in net assets from transactions in shares
of beneficial interest 117,766,588 35,340,058
- --------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 117,772,599 35,267,874
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 976,959,365 941,691,491
- --------------------------------------------------------------------------------------------
End of period $1,094,731,964 $ 976,959,365
============================================================================================
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
CITIFUNDS NEW YORK TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
YEAR ENDED AUGUST 31,
-------------------------------------------------------------
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
Net investment income 0.02991 0.02949 0.02936 0.03136 0.01954
Dividends from net investment income (0.02991) (0.02949) (0.02936) (0.03136) (0.01954)
- -----------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
- -----------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $1,094,732 $976,959 $941,691 $767,129 $684,687
Ratio of expenses to average net assets 0.65% 0.65% 0.65% 0.65% 0.65%
Ratio of net investment income to average net assets 2.99% 2.95% 2.92% 3.15% 1.96%
Total return 3.03% 2.99% 2.98% 3.18% 1.97%
Note: If agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the periods
indicated and the expenses were not reduced for fees paid indirectly for the years after August 31, 1995, the net
investment income per share and ratios would have been as follows:
Net investment income per share $0.02791 $0.02739 $0.02725 $0.02917 $0.01715
RATIOS:
Expenses to average net assets 0.85% 0.86% 0.86% 0.87% 0.88%
Net investment income to average net assets 2.79% 2.74% 2.71% 2.93% 1.72%
======================================================================================================================
See notes to financial statements
</TABLE>
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies CitiFunds New York Tax Free Reserves (the
"Fund") is a separate non-diversified series of CitiFunds Multi-State Tax Free
Trust (the "Trust") which is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end,
management investment company. Effective January 2, 1998 the Landmark New York
Tax Free Reserves changed its name to CitiFunds New York Tax Free Reserves. The
Trust also changed its name from Landmark Multi-State Tax Free Funds to
CitiFunds Multi-State Tax Free Trust. The Investment Adviser of the Fund is
Citibank, N.A. ("Citibank"). CFBDS, Inc. ("CFDBS", formerly Landmark Funds
Broker-Dealer Services, Inc.) acts as the Trust's Administrator and Distributor.
Citibank also serves as Sub-Administrator and makes Fund shares available to
customers through various Shareholder Servicing Agents. Citibank is a
wholly-owned subsidiary of Citicorp. Citicorp announced its intention to merge
with The Travelers Group. The merger is expected to occur on or about October 8,
1998.
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. VALUATION OF INVESTMENTS Money market instruments are valued at amortized
cost, which the Trustees have determined in good faith constitutes fair value.
The Fund's use of amortized cost is subject to the Fund's compliance with
certain conditions as specified under Rule 2a-7 of the Investment Company Act of
1940.
B. INTEREST INCOME Interest income consists of interest accrued and accretion
of market discount less the amortization of any premium on the investments of
the Fund.
C. FEDERAL TAXES The Fund's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies and to
distribute to shareholders all of its net investment income. Accordingly, no
provision for federal income or excise tax is necessary. At August 31, 1998, the
Fund, for federal income tax purposes, had a capital loss carryover of $89,691,
$5,031 of which will expire on August 31, 1999, $18,487 will expire on August
31, 2005 and $66,173 will expire on August 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 distributions to shareholders which
would otherwise be necessary to relieve the Fund of any liability for federal
income tax. Dividends paid by the Fund from net interest received on tax-exempt
money market instruments are not includable by shareholders as gross income for
federal income tax purposes because the Fund intends to meet certain
requirements of the Internal Revenue Code applicable to regulated investment
companies which will enable the Fund to pay exempt-interest dividends. The
portion of such interest, if any, earned on private activity bonds issued after
August 7, 1986 may be considered a tax preference item to shareholders.
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 in the 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.
E. FEES PAID INDIRECTLY The Fund's custodian bank calculates its fees based
on the Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the Fund.
This amount is shown as a reduction of expenses on the Statement of Operations.
F. OTHER Purchases, maturities and sales of money market instruments are
accounted for on the date of the transaction.
2. DIVIDENDS The net income of the Fund is determined once daily, as of 12:00
noon, Eastern time, and all of the net income of the Fund so determined is
declared as a dividend to shareholders of record at the time of such
determination. Dividends are distributed in the form of additional shares of the
Fund or, at the election of the shareholder, in cash (subject to the policies of
the shareholder's Shareholder Servicing Agent), on or prior to the last business
day of the month.
3. INVESTMENT ADVISORY FEES The investment advisory fee paid to Citibank, as
compensation for overall investment management services, amounted to $2,107,972
of which $791,241 was voluntarily waived for the year ended August 31, 1998. The
investment advisory fee is computed at the annual rate of 0.20% of the Fund's
average daily net assets.
4. ADMINISTRATIVE SERVICES PLAN The Trust has adopted an Administrative Services
Plan (the "Administrative Services Plan") which provides that the Trust on
behalf of each Fund may obtain the services of an Administrator, one or more
Shareholder Servicing Agents and other Servicing Agents and may enter into
agreements providing for the payment of fees for such services. Under the
Administrative Services Plan, the aggregate of the fee paid to the Administrator
from the Fund, the fees paid to the Shareholder Servicing Agents from the Fund
under such Plan and the Basic Distribution Fee paid from the Fund to the
Distributor under the Distribution Plan may not exceed 0.60% of the Fund's
average daily net assets on an annualized basis for the Fund's then-current
fiscal year. For the year ended August 31, 1998, Management agreed to
voluntarily limit Fund expenses to 0.65%.
A. ADMINISTRATIVE FEES Under the terms of an Administrative Services
Agreement, the administrative fee paid to the Administrator, as compensation for
overall administrative services and general office facilities, is computed at
the annual rate of 0.25% of the Fund's average daily net assets. The
Administrative fees amounted to $2,634,965 of which $762,460 was voluntarily
waived for the year ended August 31, 1998. Citibank acts as Sub-Administrator
and performs such duties and receives such compensation from CFBDS as from time
to time is agreed to by CFBDS and Citibank. The Fund pays no compensation
directly to any Trustee or any officer who is affiliated with the Administrator,
all of whom receive remuneration for their services to the Fund from the
Administrator or its affiliates. Certain of the officers and a Trustee of the
Fund are officers or a director of the Administrator or its affiliates.
B. SHAREHOLDER SERVICING AGENTS FEES The Trust on behalf of the Fund has
entered into shareholder servicing agreements with each Shareholder Servicing
Agent pursuant to which that Shareholder Servicing Agent acts as an agent for
its customers and provides other related services. For their services, each
Shareholder Servicing Agent receives fees from the Fund, which may be paid
periodically, but may not exceed, on an annualized basis, an amount equal to
0.25% of the average daily net assets of the Fund represented by shares owned
during the period by investors for whom such Shareholder Servicing Agent
maintains a servicing relationship. Shareholder Servicing Agents fees amounted
to $2,634,965 for the period ended August 31, 1998.
5. DISTRIBUTION FEES The Trust has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended, in which the
Fund compensates the Distributor at an annual rate not to exceed 0.10% of the
Fund's average daily net assets. The Distribution fees amounted to $1,053,986 of
which $517,852 was voluntarily waived for the period ended August 31, 1998. The
Distributor may also receive an additional fee from the Fund at an annual rate
not to exceed 0.10% of the Fund's average daily net assets in anticipation of,
or as reimbursement for, advertising expenses incurred by the Distributor in
connection with the sale of shares of the Fund. The additional fee has not been
assessed through August 31, 1998.
6. 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).
7. INVESTMENT TRANSACTIONS Purchases, and maturities and sales, of money market
instruments aggregated $2,568,055,436 and $2,412,363,480, respectively, for the
year ended August 31, 1998.
8. FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES The cost of investment
securities owned at August 31, 1998, for federal income tax purposes, amounted
to $1,133,360,812.
9. LINE OF CREDIT The Fund, along with other CitiFunds, entered into an
agreement with a bank which allows the Funds collectively to borrow up to $60
million for temporary or emergency purposes. Interest on borrowings, if any, is
charged to the specific fund 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 year ended
August 31, 1998, the commitment fee allocated to the Fund was $3,599. Since the
line of credit was established, there have been no borrowings.
<PAGE>
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS OF
CITIFUNDS NEW YORK TAX FREE RESERVES:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of CitiFunds New York Tax Free Reserves,
a separate series of CitiFunds Multi-State Tax Free Trust (the "Trust") (a
Massachusetts business trust), as of August 31, 1998, the related statement of
operations for the year then ended, the statement of changes in net assets for
the years ended August 31, 1998 and 1997 and the financial highlights for each
of the years in the five-year period ended August 31, 1998. These financial
statements and financial highlights are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
August 31, 1998, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of CitiFunds New York
Tax Free Reserves at August 31, 1998, the results of its operations, the changes
in its net assets, and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 6, 1998
<PAGE>
TRUSTEES AND OFFICERS
C. Oscar Morong, Jr., Chairman
Philip W. Coolidge*, President
Elliott J. Berv
Mark T. Finn
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Walter E. Robb, III
E. Kirby Warren
William S. Woods, Jr.
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
*Affiliated Person of Administrator and Distributor
INVESTMENT ADVISER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND 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
Deloitte & Touche LLP
125 Summer 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 Intermediate Income Portfolio
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio*
o CitiFunds National 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.
*Purchase orders will be accepted beginning November 2, 1998.
For more information contact your Service Agent or call
1-800-625-4554
CitiFunds are made available by CFBDS, Inc. as distributor.
(C)1998 Citicorp [Recycle Logo] Printed on recycled paper CFA/RNY/898
<PAGE>
Annual Report August 31, 1998
[LOGO](SM)
California
Tax Free Reserves
[Graphic Omitted]
MONEY MARKETS
-----------------------------------------------------
INVESTMENT PRODUCTS:
NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
-----------------------------------------------------
<PAGE>
TABLE OF CONTENTS
CITIFUNDS CALIFORNIA TAX FREE RESERVES
Letter to Our Shareholders 1
..............................................................................
Portfolio Environment and Outlook 2
..............................................................................
Fund Facts 3
..............................................................................
Fund Performance 4
..............................................................................
Portfolio of Investments 5
..............................................................................
Statement of Assets and Liabilities 9
..............................................................................
Statement of Operations 10
..............................................................................
Statement of Changes in Net Assets 11
..............................................................................
Financial Highlights 12
..............................................................................
Notes to Financial Statements 13
..............................................................................
Independent Auditors' Report 16
..............................................................................
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
The 12-month period ended August 31, 1998 saw a continuation of the positive
economic conditions that have prevailed over the past three years. Late in the
period, however, heightened volatility caused the stock market to retrace its
gains for the year.
Such volatility suggests that tax-exempt money market securities may once
again be poised to demonstrate their true value as relatively safer investments
where investors seek to protect their principal and earn interest that is free
from federal income taxes. In our view, CitiFunds(SM) California Tax Free
Reserves can play a valuable role in investors' diversified investment
portfolios.
As you have probably heard, Citicorp announced its intention to merge with The
Travelers Group. The merger is expected to occur on or about October 8, 1998. As
necessary, we will provide you with information that specifically affects the
fund.
Thank you for your continued confidence and participation.
Sincerely,
/s/ Philip W. Coolidge
Philip W. Coolidge
President
September 21, 1998
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
YIELDS ON MONEY MARKET INSTRUMENTS ENDED THE 12-MONTH REPORTING PERIOD LOWER
THAN WHERE THEY BEGAN, reflecting the general trend of short-term interest
rates. That decline was interrupted, however, during the first quarter of 1998,
which saw an increase in short-term interest rates amid uncertainty over the
economic effects of the financial crisis in Asia. When evidence emerged early in
the year that U.S. economic growth was stronger than most analysts expected,
interest rates rose in anticipation of a move by the Federal Reserve Board to a
more restrictive monetary policy.
Such a move never took place, however, because of the absence of inflationary
pressures. During the second and third quarters of 1998, it became clearer that
the Asian crisis was, in fact, negatively affecting U.S. corporate earnings and
dampening U.S. economic growth. In effect, lower demand for U.S. goods from
overseas markets and improved competitive positions for Asian companies
constrained sales and earnings of U.S. exporters. As a result, fixed-income
investors became more confident that the Federal Reserve would maintain
short-term interest rates at current levels, and money market yields settled
back to their previous lows.
In this economic environment, yields of short-term municipal securities from
California issuers generally tracked the movements of yields of comparable U.S.
Treasury bills. However, the market also responded to its own unique influences,
most notably changes in the supply of newly issued securities. While issuance of
longer-term municipal securities increased, the short end of the market saw a
reduction of supply relative to one year ago. Favorable economic conditions,
attractive rates in the longer end of the market and improved fiscal operations
appear to have reduced the need for California municipalities to finance their
operating and capital needs with short-term debt. As a result, the diminished
supply of new municipal notes that came to market in 1998 was quickly absorbed
by tax-exempt money market funds.
The relative shortage of short-term municipal notes was offset by the
increased issuance of tax-exempt variable-rate demand notes (VRDNs), which are
securitized and issued by investment banks. As these "floaters" saturated the
market, they became the most attractive alternative for investors seeking
competitive yields from short-term tax-exempt securities.
The portfolio participated in the market for variable-rate demand notes, which
featured higher yields than conventional notes. As notes already in the
portfolio matured, we reinvested the proceeds in VRDNs to take advantage of
higher yields. By mid-1998, VRDNs comprised approximately 70% of the portfolio,
with the remainder allocated among conventional notes and commercial paper. In
July, when calls and redemptions of many tax-exempt notes made more cash
available for reinvestment, increased demand for higher yielding tax-exempt
money market securities caused rates to decline further. This reduced the yield
advantage of longer-dated money market securities over shorter term securities.
Accordingly, we found no reason to extend the average maturity of the portfolio
by buying longer-dated notes.
WE BELIEVE SHORT-TERM INTEREST RATES ARE LIKELY TO REMAIN NEAR CURRENT LEVELS
FOR THE REMAINDER OF THE YEAR. If economic growth continues to moderate in the
fourth quarter of 1998, as we expect, the Federal Reserve Board will have little
reason to raise short-term interest rates, which they might otherwise do to
forestall a reacceleration of inflation. In our opinion, the opposite is the
more likely scenario: if the economy continues to slow, the Federal Reserve
Board may eventually reduce short-term interest rates modestly in order to
provide an economic stimulus.
In the meantime, we remain encouraged by the strength of the short-term
municipal securities market. In our analysis, California municipalities are more
fiscally sound. The state appears to have contained the problems that
contributed to a severe recession earlier this decade, when defense spending
cut-backs produced an enormous loss of jobs in California. The state has since
regained those jobs and more. What's more, those new jobs are spread across a
number of different industries -- including high technology, entertainment and
aerospace -- reducing the state's vulnerability to economic downturns. If this
favorable credit environment continues, it should help us continue to deliver
competitive after-tax returns consistent with capital preservation to our
shareholders.
FUND FACTS
FUND OBJECTIVE
To provide its shareholders with high levels of current income exempt from both
Federal and California personal income taxes,* preservation of capital and
liquidity.
INVESTMENT ADVISER DIVIDENDS
Citibank, N.A. Declared daily, paid monthly
COMMENCEMENT OF OPERATIONS CAPITAL GAINS
March 10, 1992 Distributed annually, if any
NET ASSETS AS OF 8/31/98 BENCHMARKS
$285.6 million o Lipper California Tax Exempt
Money Funds Average
o IBC California Tax Free Money
Funds Average
* A portion of the income may be subject to the Federal Alternative Minimum Tax
(AMT). Consult your personal tax advisor.
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
SINCE
MARCH 10,
ONE FIVE 1992
ALL PERIODS ENDING AUGUST 31, 1998 YEAR YEARS* INCEPTION*
- --------------------------------------------------------------------------------
CitiFunds California Tax Free Reserves 2.97% 2.97% 2.88%
Lipper California Tax Exempt Money Funds
Average 2.90% 2.85% 2.69%+
* Average Annual Total Return
+ Since 2/29/92
7-DAY YIELDS
Annualized Current 2.63%
Effective 2.67%
The Annualized Current 7-Day Yield reflects the amount of income generated by
the investment during that seven day period and assumes that the income is
generated each week over a 365 day period. The yield is shown as a percentage of
the investment.
The Effective 7-Day Yield is calculated similarly, but when annualized, the
income earned by the investment during that seven day period is assumed to be
reinvested. The effective yield is slightly higher than the current yield
because of the compounding effect of this assumed reinvestment.
Note: A money market fund's yield more closely reflects the current earnings
of the fund than does the total return.
IMPORTANT TAX INFORMATION -- For the fiscal year ended August 31, 1998, the Fund
paid $0.02928 per share to shareholders from net investment income. For such
period, the Fund designated all dividends paid as exempt-interest dividends.
Thus, 100% of these distributions during this period were exempt from Federal
income tax and 78.8% of dividends earned were also exempt from California
personal income tax. In addition, 8.7% of the dividends were derived from income
earned from certain government obligations which may be subject to the Federal
Alternative Minimum Tax (AMT).
COMPARISON OF 7-DAY YIELDS FOR CITIFUNDS CALIFORNIA TAX FREE
RESERVES VS. IBC CALIFORNIA TAX FREE MONEY FUNDS AVERAGE
As illustrated, CitiFunds California Tax Free Reserves generally provided a
similar annualized seven-day yield to that of a comparable IBC Money Fund
Average, as published in IBC Money Fund Report(TM), for the one-year period.
CitiFunds IBC California
California Tax Free
Tax Free Money Funds
Reserves Average
9/02/97 2.77 2.72
4/11/97 3.01 2.96
1/06/98 3.14 3.12
3/10/98 2.59 2.38
5/12/98 3.12 3.09
7/14/98 2.58 2.36
8/31/98 2.63 2.42
Note: The Fund seeks to maintain a stable $1.00 per share price, although there
is no assurance that this will be so on a continuing basis. Fund shares are not
insured or guaranteed by the U.S. Government. Yields and total returns will
fluctuate and past performance is no guarantee of future results. Total return
figures include reinvestment of dividends. Returns and yields reflect certain
voluntary fee waivers. If the waivers were not in place, the Fund's returns
would have been lower.
<PAGE>
CitiFunds California Tax Free Reserves
PORTFOLIO OF INVESTMENTS August 31, 1998
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
TAX EXEMPT COMMERCIAL PAPER -- 6.7%
- --------------------------------------------------------------------------------
California Pollution Control Finance Authority,
3.50% due 9/04/98 $4,100 $ 4,100,000
Long Beach, CA, Harbor Authority, AMT,
3.30% due 10/08/98 4,000 4,000,000
Sacramento County, CA,
Municipal Utility District Electric Revenue,
3.55% due 9/30/99 5,000 5,000,000
San Diego County, CA, Water Authority,
3.50% due 9/08/98 1,000 1,000,000
San Joaquin County, CA, Transportation Authority,
3.45% due 9/09/98 5,000 5,000,000
------------
19,100,00
------------
ANNUAL AND SEMI-ANNUAL TENDER REVENUE
BONDS AND NOTES (PUTS) -- 9.0%
- -------------------------------------------------------------------------------
California Education Facilities Authority Revenue,
6.50% due 10/01/98 730 731,730
California Health Facilities Finance Authority,
7.63% due 10/01/98 3,000 3,069,892
California University Revenue, 10.00% due 9/01/98 1,000 1,000,000
Cleveland, OH, 3.50% due 9/04/98 3,000 3,000,000
Corona, CA, Community Facilities District,
4.25% due 9/01/98 2,085 2,085,000
Long Beach, CA, 7.10% Revenue, due 5/15/99 2,780 2,850,529
Puerto Rico Electric Power Authority,
7.125% due 7/01/99 5,595 5,845,500
Stanislaus County, CA, Office of Education,
4.50% due 11/04/98 6,590 6,601,014
Turlock, CA, 4.50% due 1/01/99 500 501,047
------------
25,684,71
------------
BOND, REVENUE, TAX, TAX AND REVENUE
ANTICIPATION NOTES AND GENERAL
OBLIGATION BONDS AND NOTES -- 4.6%
- -------------------------------------------------------------------------------
Fremont, CA, Uniondale High School District,
TRANs, 3.90% due 6/30/99 $2,000 $ 2,003,501
Kern County, CA, Board of Education,
TRANs, 4.25% due 6/30/99 3,000 3,015,428
Los Angeles County, CA, Unified School,
TRANs, 4.50% due 6/30/99 4,000 4,026,450
Puerto Rico Commonwealth, G.O 3.65% due 1/14/99 1,000 1,000,000
San Francisco, CA, TRANs, 4.50% due 10/30/98 2,300 2,304,885
Santa Clara County, CA, TRANs, 4.75% due 10/01/98 1,000 1,000,906
------------
13,351,17
------------
VARIABLE RATE DEMAND NOTES* -- 80.3%
- -------------------------------------------------------------------------------
ABN Amro Municipal Trust Receipts due 7/05/06 6,000 6,000,000
Alameda County, CA, Industrial Development
Authority, AMT, due 5/01/27 850 850,000
Allendale County SC, Industry Revenue, due 8/01/01 5,350 5,350,000
California Health Facilities Finance Authority,
due 7/01/05 300 300,000
California Health Facilities Finance Authority,
due 7/01/12 100 100,000
California Health Facilities Finance Authority,
due 12/01/15 500 500,000
California Health Facilities Finance Authority,
due 7/01/16 100 100,000
California Health Facilities Finance Authority,
due 7/01/21 500 500,000
California Health Facilities Finance Authority,
due 7/01/25 100 100,000
California Housing Finance Agency Revenue, AMT,
due 3/12/99 6,000 6,000,000
California Housing Finance Agency Revenue, AMT,
due 8/01/26 3,340 3,340,000
California Pollution Control Finance Authority,
due 9/01/13 1,100 1,100,000
California Pollution Control Finance Authority,
AMT, due 9/01/20 350 350,000
California Pollution Control Finance Authority,
Pacific Gas & Electric, due 11/01/26 100 100,000
California State, General Obligation Bonds,
due 6/01/14 4,300 4,300,000
California State, General Obligation Bonds, AMT,
due 12/01/16 4,000 4,000,000
California Statewide Community Development,
due 9/30/99 6,000 6,000,000
California Statewide Community Development,
due 11/01/15 1,305 1,305,000
California Statewide Community Development,
due 12/01/22 5,000 5,000,000
California Statewide Community Development,
due 8/15/27 400 400,000
California Statewide Community Development,
due 4/01/28 1,800 1,800,000
California Transition Finance Authority,
due 10/01/27 5,000 5,000,000
Carlsbad, CA, Multi-Family Housing Revenue,
due 6/01/11 400 400,000
Central Coast Water Authority Revenue,
due 10/01/16 4,495 4,495,000
Chicago, Il, O' Hare International Airport Revenue,
due 7/01/10 500 500,000
Clark County, NV, Airport Revenue, AMT
due 7/01/28 2,800 2,800,000
Clark County, NV, Industrial Development Revenue,
AMT due 10/01/30 2,000 2,000,000
Clayton County, GA, Housing Authority, due 1/01/21 700 700,000
Clipper, CA, Tax Exempt Trust, due 5/01/06 2,660 2,660,000
Clipper, CA, Tax Exempt Trust, AMT, due 3/01/15 4,645 4,645,000
Cobb County Development Authority, TRANs,
due 8/01/99 690 690,000
Concord, CA, Multi-Family Mortgage Revenue,
due 7/15/18 400 400,000
Contra Costa County, CA, due 11/01/17 13,680 13,680,000
Dublin, CA, Housing Authority, AMT due 6/01/28 1,100 1,100,000
Eastern, CA, Municipal Water District Revenue,
due 7/01/20 1,850 1,850,000
Foothill/Eastern Transportation Toll Authority,
due 1/02/35 200 200,000
Gordon County, GA, Development Authority, AMT,
due 9/01/17 1,000 1,000,000
Hawkins County, TN, Industrial Development Board,
due 10/01/27 1,350 1,350,000
Henderson, NV, Health Care Facility Revenue,
due 7/01/20 2,000 2,000,000
Indianapolis, IN, Industrial Development Revenue,
AMT due 12/01/04 2,000 2,000,000
Inland, FL, Protection Financing Corp.,
due 1/01/04 5,000 5,000,000
Kentucky State Turnpike Authority, due 7/01/03 395 395,000
Los Angeles, CA, due 5/15/20 1,200 1,200,000
Los Angeles, CA, due 6/01/28 9,480 9,480,000
Los Angeles County, CA, Certificates of
Participation, due 11/01/05 300 300,000
Macon Trust Pool, due 3/03/07 13,225 13,225,000
Macon Trust Pool, AMT, due 12/05/30 3,010 3,010,000
Metropolitan Water District, SC, Waterworks
Revenue, due 1/15/99 1,300 1,300,000
Metropolitan Water District, Southern California
Waterworks Revenue, due 6/01/23 990 990,000
Metropolitan Water District, Southern California
Waterworks Revenue, due 7/01/28 7,300 7,300,000
Mississippi Home Corp., AMT, due 6/01/28 300 300,000
Morgan Keegan Municipal Trust Receipts, AMT,
due 5/06/99 2,475 2,475,000
Murray County, GA, Development Authority,
due 9/01/17 1,000 1,000,000
National City, CA, Community Development,
due 4/01/39 500 500,000
New Hampshire Health and Education,
due 6/01/23 1,300 1,300,000
Oakland, CA, due 9/30/99 2,400 2,400,000
Oakland, CA, Economic Development Revenue
due 8/01/27 1,000 1,000,000
Orange County, FL, Health Facilities Authority,
due 10/01/14 4,500 4,500,000
Pinellas County, FL, Health Facility Authority,
due 12/01/15 700 700,000
Pitney Bowes Credit Corp., due 10/10/01 6,768 6,768,109
Pittsburgh, CA, Mortgage Obligation, due 12/30/31 2,400 2,400,000
Puerto Rico Commonwealth, due 7/01/15 10,580 10,580,000
Puerto Rico Commonwealth, due 7/01/20 1,000 1,000,000
Puerto Rico Commonwealth Highway Authority,
due 7/01/28 2,600 2,600,000
Puerto Rico Electric Power Authority, due 7/01/22 8,500 8,500,000
Puerto Rico Industrial Tourist Educational,
due 10/01/21 2,300 2,300,000
Puerto Rico Public Finance Corp., due 6/01/12 2,400 2,400,000
Puerto Rico University Revenue, due 6/01/25 1,875 1,875,000
Puttable Floating Option Tax Exempt, due 10/01/32 10,750 10,750,000
Riverside County, CA, Community Fund,
due 9/01/14 500 500,000
Riverside County, CA, Certificates of
Participation, due 12/01/15 200 200,000
Rockingham County, NC, Industrial Finance, AMT,
due 4/01/18 6,000 6,000,000
Saint Charles Parish, LA, Pollution,
due 3/01/24 1,000 1,000,000
Saline County, NE, Solid Waste Disposal, AMT,
due 10/01/16 1,500 1,500,000
San Antonio, TX, Electric & Gas Revenue,
due 2/01/19 1,100 1,100,000
San Bernardino County, CA, due 8/01/28 2,500 2,500,000
San Diego, CA, Public Finance Facility,
due 5/15/25 1,100 1,100,000
San Francisco, CA, City and County, due 6/15/16 700 700,000
San Joaquin Hills, CA, Transportation Tolls,
due 1/15/29 3,940 3,940,000
Sevier County, TN, Public Building Authority,
due 6/01/09 440 440,000
Sevier County, TN, Public Building Authority,
due 6/01/17 175 175,000
Sevier County, TN, Public Building Authority,
due 6/01/21 600 600,000
Southern California Public Power Project Authority,
due 7/01/12 3,000 3,000,000
Tarrant County, TX, Health Facilities Authority,
due 2/15/17 1,100 1,100,000
Traill County, ND, Solid Waste, AMT, due 12/01/11 2,000 2,000,000
Westminster, CA, Redevelopment Tax Allocation,
due 8/01/27 2,905 2,905,000
------------
229,273,109
------------
TOTAL INVESTMENTS, AT AMORTIZED COST 100.6% 287,408,991
OTHER ASSETS, LESS LIABILITIES (0.6) (1,780,923)
--------------------------
NET ASSETS 100.0% $285,628,068
==========================
AMT -- Subject to Alternative Minimum Tax
* Variable rate demand notes have a demand feature under which the fund could
tender them back to the issuer on no more than 7 day's notice.
See notes to financial statements
<PAGE>
CitiFunds California Tax Free Reserves
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
- -------------------------------------------------------------------------------
Assets:
Investments, at amortized cost (Note 1A) $287,408,991
Cash 13,771
Interest receivable 1,917,293
Receivable for shares of beneficial interest
sold 25,839
- -------------------------------------------------------------------------------
Total assets 289,365,894
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 2,909,194
Dividends payable 515,969
Payable for shares of beneficial interest
repurchased 86,000
Payable to affiliates:
Investment Advisory fee (Note 3) 33,837
Shareholder Servicing Agent's fee (Note 4B) 61,286
Accrued expenses and other liabilities 131,540
- -------------------------------------------------------------------------------
Total liabilities 3,737,826
- -------------------------------------------------------------------------------
NET ASSETS for 285,638,032 shares of beneficial
interest outstanding $285,628,068
===============================================================================
NET ASSETS CONSIST OF:
Paid-in capital $285,638,032
Accumulated net realized loss on investments (9,964)
- -------------------------------------------------------------------------------
Total $285,628,068
===============================================================================
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE $1.00
===============================================================================
See notes to financial statements
<PAGE>
CitiFunds California Tax Free Reserves
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1998
- -------------------------------------------------------------------------------
INTEREST INCOME (Note 1B): $8,854,523
EXPENSES:
Administrative fees (Note 4A) $ 619,577
Shareholder Servicing Agents' fees (Note 4B) 619,577
Investment Advisory fees (Note 3) 495,662
Distribution fees (Note 5) 247,831
Custody and fund accounting fees 98,779
Registration fees 36,637
Audit fees 29,460
Shareholder reports 21,425
Legal fees 15,232
Transfer agent fees 14,099
Trustees' fees 11,694
Miscellaneous 12,948
- -------------------------------------------------------------------------------
Total expenses 2,222,921
Less aggregate amounts waived by Investment
Adviser, Administrator, and Distributor
(Notes 3, 4A and 5) (609,912)
Less fees paid indirectly (Note 1E) (2,443)
- -------------------------------------------------------------------------------
Net expenses 1,610,566
- -------------------------------------------------------------------------------
Net investment income 7,243,957
NET REALIZED LOSS ON INVESTMENTS (2,205)
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,241,752
===============================================================================
See notes to financial statements
<PAGE>
CitiFunds California Tax Free Reserves
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
----------------------------
1998 1997
- -------------------------------------------------------------------------------
Increase (Decrease) in Net Assets from Operations:
Net investment income $ 7,243,957 $ 5,344,451
Net realized gain (loss) on investments (2,205) 990
- -------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 7,241,752 5,345,441
- -------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (7,243,957) (5,344,451)
- -------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST AT
NET ASSET VALUE OF $1.00 PER SHARE (Note 6):
Proceeds from sale of shares 420,217,573 304,389,018
Net asset value of shares issued to
shareholders from reinvestment of dividends 1,145,435 1,106,914
Cost of shares repurchased (343,078,029) (248,708,463)
- -------------------------------------------------------------------------------
Net increase in net assets from transactions
in shares of beneficial interest 78,284,979 56,787,469
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 78,282,774 56,788,459
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 207,345,294 150,556,835
- -------------------------------------------------------------------------------
End of period $285,628,068 $207,345,294
===============================================================================
See notes to financial statements
<PAGE>
<TABLE>
CitiFunds California Tax Free Reserves
FINANCIAL HIGHLIGHTS
<CAPTION>
YEAR ENDED AUGUST 31,
1998 1997 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
Net investment income 0.02928 0.02899 0.03089 0.03434 0.02288
Less dividends from net
investment income (0.02928) (0.02899) (0.03089) (0.03434) (0.02288)
- --------------------------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
==================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $285,628 $207,345 $150,557 $ 51,832 $ 52,863
Ratio of expenses to average
net assets 0.65% 0.65% 0.42% 0.30% 0.25%
Ratio of net investment income
to average net assets 2.92% 2.91% 3.05% 3.43% 2.30%
Total return 2.97% 2.94% 3.13% 3.49% 2.31%
Note: If agents of the Fund had not voluntarily waived all or a portion of their fees from the
Fund for the period indicated and the Administrator had not voluntarily assumed expenses for the
periods before August 31, 1996, and the expenses were not reduced for the fees paid indirectly for
the years after August 31, 1995, the ratios and net investment income per share would have been as
follows:
Net investment income per share $0.02687 $0.02630 $0.02481 $0.02513 $0.01423
RATIOS:
Expenses to average net assets 0.90% 0.92% 1.01% 1.21% 1.12%
Net investment income to
average net assets 2.67% 2.64% 2.45% 2.51% 1.43%
==================================================================================================
See notes to financial statements
</TABLE>
<PAGE>
CitiFunds California Tax Free Reserves
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds California Tax Free Reserves (the
"Fund") is a separate non-diversified series of CitiFunds Multi-State Tax Free
Trust (the "Trust"), which is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end,
management investment company. Effective January 2, 1998 Landmark California Tax
Free Reserves changed its name to CitiFunds California Tax Free Reserves. The
Trust also changed its name from Landmark Multi-State Tax Free Funds to
CitiFunds Multi-State Tax Free Trust. The Investment Adviser of the Fund is
Citibank, N.A. ("Citibank"). CFBDS, Inc. ("CFBDS", formerly Landmark Funds
Broker-Dealer Services, Inc.) acts as the Trust's Administrator and Distributor.
Citibank also serves as Sub-Administrator and makes shares available to
customers through various Shareholder Servicing Agents. Citibank is a
wholly-owned subsidiary of Citicorp. Citicorp announced its intention to merge
with The Travelers Group. The merger is expected to occur on or about October 8,
1998.
The preparation of financial statements in accordance with 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. Valuation of Investments Money market instruments are valued at amortized
cost, which the Trustees have determined in good faith constitutes fair value.
The Fund's use of amortized cost is subject to the Fund's compliance with
certain conditions as specified under Rule 2a-7 of the Investment Company Act of
1940.
B. Interest Income Interest income consists of interest accrued and accretion
of market discount, less the amortization of any premium on the investments of
the Fund.
C. Federal Taxes The Fund's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies and to
distribute to shareholders all of its net investment income. Accordingly, no
provision for federal income or excise tax is necessary. At August 31, 1998, the
Fund, for federal income tax purposes, had a capital loss carryover of $7,774,
of which $5,710 will expire August 31, 2004 and $2,064 will expire August 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
distributions to shareholders which would otherwise be necessary to relieve the
Fund of any liability for federal income tax.
Dividends paid by the Fund from net interest received on tax-exempt money
market instruments are not includable by shareholders as gross income for
federal income tax purposes because the Fund intends to meet certain
requirements of the Internal Revenue Code applicable to regulated investment
companies which will enable the Fund to pay exempt-interest dividends. The
portion of such interest, if any, earned on private activity bonds issued after
August 7, 1986, may be considered a tax preference item to shareholders.
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 in a 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.
E. Fees Paid Indirectly The Fund's custodian bank calculates its fees based on
the Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the Fund.
This amount is shown as a reduction of expenses on the Statement of Operations.
F. Other Purchases, maturities and sales, of money market instruments are
accounted for on the date of the transaction.
2. DIVIDENDS The net income of the Fund is determined once daily, as of 12:00
noon, Eastern standard time, and all of the net income of the Fund so determined
is declared as a dividend to shareholders of record at the time of such
determination. Dividends are distributed in the form of additional shares of the
Fund or, at the election of the shareholder, in cash (subject to the policies of
the shareholder's Shareholder Servicing Agent), on or prior to the last business
day of the month.
3. INVESTMENT ADVISORY FEES The investment advisory fee paid to Citibank, as
compensation for overall investment management services, amounted to $495,662 of
which $203,101 was voluntarily waived for the year ended August 31, 1998. The
investment advisory fee is computed at the annual rate of 0.20% of the Fund's
average daily net assets.
4. ADMINISTRATIVE SERVICES PLAN The Trust has adopted an Administrative Services
Plan (the "Administrative Services Plan") which provides that the Trust, on
behalf of each Fund, may obtain the services of an Administrator, one or more
Shareholder Servicing Agents and other Servicing Agents and may enter into
agreements providing for the payment of fees for such services. Under the
Administrative Services Plan, the aggregate of the fee paid to the Administrator
from the Fund, the fees paid to the Shareholder Servicing Agents from the Fund
under such plan and the Basic Distribution Fee paid from the Fund to the
Distributor under the Distribution Plan may not exceed 0.60% of the Fund's
average daily net assets on an annualized basis for the Fund's then-current
fiscal year. For the year ended August 31, 1998, Management agreed to
voluntarily limit Fund expenses to 0.65%.
A. Administrative Fees Under the terms of an Administrative Services
Agreement, CFBDS is entitled to an administrative fee from the Fund, as
compensation for overall administrative services and general office facilities,
which is computed at the annual rate of 0.25% of the Fund's average daily net
assets. The Administrative fees amounted to $619,577, of which $197,246 was
voluntarily waived for the year ended August 31, 1998. Citibank acts as
Sub-Administrator and performs such duties and receives such compensation from
CFBDS as from time to time is agreed to by CFBDS and Citibank. The Fund pays no
compensation directly to any Trustee or any officer who is affiliated with the
Administrator, all of whom receive remuneration for their services to the Fund
from the Administrator or its affiliates. Certain of the officers and a Trustee
of the Fund are officers and a director of the Administrator or its affiliates.
B. Shareholder Servicing Agent Fees The Trust, on behalf of the Fund, has
entered into shareholder servicing agreements with each Shareholder Servicing
Agent pursuant to which that Shareholder Servicing Agent acts as an agent for
its customers and provides other related services. For their services, each
Shareholder Servicing Agent receives fees from the Fund, which may be paid
periodically, but may not exceed, on an annualized basis, an amount equal to
0.25% of the average daily net assets of the Fund represented by shares owned
during the period by investors for whom such Shareholder Servicing Agent
maintains a servicing relationship. Shareholder Servicing Agent fees amounted to
$619,577 for the year ended August 31, 1998.
5. DISTRIBUTION FEES The Trust has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended, in which the
Fund compensates the Distributor at an annual rate not to exceed 0.10% of the
Fund's average daily net assets. The Distribution fees amounted to $247,831, of
which $209,565 was voluntarily waived for the year ended August 31, 1998. The
Distributor may also receive an additional fee from the Fund at an annual rate
not to exceed 0.10% of the Fund's average daily net assets in anticipation of,
or as reimbursement for, advertising expenses incurred by the Distributor in
connection with the sale of shares of the Fund. The additional fee has not been
assessed through August 31, 1998.
6. 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).
7. INVESTMENT TRANSACTIONS Purchases, and maturities and sales, of money market
instruments aggregated $813,213,970 and $731,444,676, respectively, for the year
ended August 31, 1998.
8. FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES The cost of investment
securities owned at August 31, 1998 for federal income tax purposes, amounted to
$287,408,991.
9. LINE OF CREDIT The Fund, along with other CitiFunds, entered into an
agreement with a bank which allows the Funds collectively to borrow up to $60
million for temporary or emergency purposes. Interest on borrowings, if any, is
charged to the specific fund 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 year ended
August 31, 1998, the commitment fee allocated to the Fund was $846. Since the
line of credit was established there have been no borrowings.
<PAGE>
CitiFunds California Tax Free Reserves
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
CitiFunds California Tax Free Reserves:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of CitiFunds California Tax Free
Reserves, a separate series of CitiFunds Multi-State Tax Free Trust (the
"Trust") (a Massachusetts business trust), as of August 31, 1998, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended August 31, 1998 and 1997, and the financial
highlights of each of the years in the five-year period ended August 31, 1998.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
August 31, 1998 by correspondence with the custodian and brokers; where replies
were not received from brokers, we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of CitiFunds California
Tax Free Reserves at August 31, 1998, the results of its operations, the changes
in its net assets, and its financial highlights for the respective stated
periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 6, 1998
<PAGE>
TRUSTEES AND OFFICERS
C. Oscar Morong, Jr., Chairman
Philip W. Coolidge*, President
Elliott J. Berv
Mark T. Finn
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Walter E. Robb, III
E. Kirby Warren
William S. Woods, Jr.
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
*Affiliated Person of Administrator and Distributor
INVESTMENT ADVISER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND 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
Deloitte & Touche LLP
125 Summer 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 CitiFunds
o 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 Intermediate Income Portfolio
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio*
o CitiFunds National 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.
*Purchase orders will be accepted beginning November 2, 1998.
For more information contact your Service Agent or call
1-800-625-4554
CitiFunds are made available by CFBDS, Inc. as distributor.
(C) 1998 Citicorp [Recycle Logo] Printed on recycled paper CFA/RCT/898
<PAGE>
Annual Report August 31, 1998
[LOGO](SM)
Connecticut
Tax Free Reserves
[Graphic Omitted]
MONEY MARKETS
-----------------------------------------------------
INVESTMENT PRODUCTS:
NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
-----------------------------------------------------
<PAGE>
TABLE OF CONTENTS
CITIFUNDS CONNECTICUT TAX FREE RESERVES
Letter to Our Shareholders 1
................................................................................
Portfolio Environment and Outlook 2
................................................................................
Fund Facts 3
................................................................................
Fund Performance 4
................................................................................
Portfolio of Investments 5
................................................................................
Statement of Assets and Liabilities 8
................................................................................
Statement of Operations 9
................................................................................
Statement of Changes in Net Assets 10
................................................................................
Financial Highlights 11
................................................................................
Notes to Financial Statements 12
................................................................................
Independent Auditors' Report 15
................................................................................
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
The 12-month period ended August 31, 1998 saw a continuation of the positive
economic conditions that have prevailed over the past three years. Late in the
period, however, heightened volatility caused the stock market to retrace its
gains for the year.
Such volatility suggests that tax-exempt money market securities may once
again be poised to demonstrate their true value as relatively safer investments
where investors seek to protect their principal and earn interest that is free
from federal income taxes. In our view, CitiFundsSM Connecticut Tax Free
Reserves can play a valuable role in investors' diversified investment
portfolios.
As you have probably heard, Citicorp announced its intention to merge with
The Travelers Group. The merger is expected to occur on or about October 8,
1998. As necessary, we will provide you with information that specifically
affects the fund.
Thank you for your continued confidence and participation.
Sincerely,
/s/ Philip W. Coolidge
Philip W. Coolidge
President
September 21, 1998
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
YIELDS ON MONEY MARKET INSTRUMENTS ENDED THE 12-MONTH REPORTING PERIOD LOWER
THAN WHERE THEY BEGAN, reflecting the general trend of short-term interest
rates. That decline was interrupted, however, during the first quarter of 1998,
which saw an increase in short-term interest rates amid uncertainty over the
economic effects of the financial crisis in Asia. When evidence emerged early in
the year that U.S. economic growth was stronger than most analysts expected,
interest rates rose in anticipation of a move by the Federal Reserve Board to a
more restrictive monetary policy.
Such a move never took place, however, because of the absence of inflationary
pressures. During the second and third quarters of 1998, it became clearer that
the Asian crisis was, in fact, negatively affecting U.S. corporate earnings and
dampening U.S. economic growth. In effect, lower demand for U.S. goods from
overseas markets and improved competitive positions for Asian companies
constrained sales and earnings of U.S. exporters. As a result, fixed-income
investors became more confident that the Federal Reserve would maintain
short-term interest rates at current levels, and money market yields settled
back to their previous lows.
In this economic environment, yields of short-term municipal securities
generally tracked the movements of yields of comparable U.S. Treasury bills.
However, the market also responded to its own unique influences, most notably
changes in the supply of newly issued securities. Favorable economic conditions,
attractive rates in the longer end of the market and improved fiscal operations
appear to have reduced the need for Connecticut municipalities to finance their
operations with short-term debt.
The relative shortage of short-term municipal notes was offset by increased
issuance of tax-exempt variable-rate demand notes (VRDNs), which are securitized
and issued by investment banks. VRDNs became attractive alternatives for
investors seeking competitive returns from short-term tax-exempt securities.
We increased the portfolio's exposure to VRDNs to take advantage of higher
yields. By mid-1998, VRDNs comprised approximately 67% of the portfolio, with
the remainder allocated to short-term municipal securities from some of the
state's towns. Seasonal issuance of non-rated notes during the first half of
1998 gave us an opportunity to extend the portfolio's average maturity, enabling
us to lock in higher yields than were generally available from conventional
short-term notes.
WE BELIEVE SHORT-TERM INTEREST RATES ARE LIKELY TO REMAIN NEAR CURRENT LEVELS
FOR THE REMAINDER OF THE YEAR. If economic growth continues to moderate in the
fourth quarter of 1998, as we expect, the Federal Reserve Board will have little
reason to raise short-term interest rates, which they might otherwise do to
forestall a reacceleration of inflation. In our opinion, the opposite is the
more likely scenario: if the economy continues to slow, the Federal Reserve
Board may eventually reduce short-term interest rates modestly in order to
provide an economic stimulus.
In the meantime, we remain encouraged by the strength of Connecticut's
short-term municipal securities market. In our analysis, the state and its
municipalities are more fiscally sound than at any other time in recent memory.
The state is currently enjoying a budget surplus, and even cities and towns that
had persistent financial problems just a few years ago, such as Bridgeport,
appear to be economically healthier. If this favorable credit environment
continues, it should help us continue to deliver competitive after-tax returns
consistent with capital preservation to our shareholders.
<PAGE>
FUND FACTS
FUND OBJECTIVE
To provide its shareholders with high levels of current income exempt from both
Federal and Connecticut personal income taxes,* preservation of capital and
liquidity.
INVESTMENT ADVISER DIVIDENDS
Citibank, N.A. Declared daily, paid monthly
COMMENCEMENT OF OPERATIONS CAPITAL GAINS
December 1, 1993 Distributed annually, if any
NET ASSETS AS OF 8/31/98 BENCHMARKS
$156.6 million o Lipper Connecticut Tax Exempt Money
Funds Average
o IBC Connecticut Tax Free Money
Funds Average
* A portion of the income may be subject to the Federal Alternative Minimum Tax
(AMT). Consult your personal tax advisor.
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
SINCE
ONE DECEMBER 1, 1993
ALL PERIODS ENDED AUGUST 31, 1998 YEAR INCEPTION*
- --------------------------------------------------------------------------------
CitiFunds Connecticut Tax Free Reserves 3.01% 3.06%
Lipper Connecticut Tax Exempt Money Funds Average 2.85% 2.77%+
* Average Annual Total Return
+ Since 11/30/93
7-DAY YIELDS
Annualized Current 2.95%
Effective 3.00%
The Annualized Current 7-Day Yield reflects the amount of income generated by
the investment during that seven day period and assumes that the income is
generated each week over a 365 day period. The yield is shown as a percentage of
the investment.
The Effective 7-Day Yield is calculated similarly, but when annualized, the
income earned by the investment during that seven day period is assumed to be
reinvested. The effective yield is slightly higher than the current yield
because of the compounding effect of this assumed reinvestment.
Note: A money market fund's yield more closely reflects the current earnings of
the fund than does the total return.
IMPORTANT TAX INFORMATION -- For fiscal year ended August 31, 1998, the Fund
paid $0.02971 per share to shareholders from net investment income. For such
period, the Fund designated all dividends paid as exempt-interest dividends.
Thus, 100% of these distributions were exempt from Federal income tax and 79.4%
of dividends earned were also exempt from Connecticut personal income tax. In
addition, 1.4% of the dividends were derived from income earned from certain
municipal obligations which may be subject to Federal Alternative Minimum Tax
(AMT).
COMPARISON OF 7-DAY YIELDS FOR CITIFUNDS CONNECTICUT TAX FREE
RESERVES VS. IBC CONNECTICUT TAX FREE MONEY FUNDS AVERAGE
As illustrated, CitiFunds Connecticut Tax Free Reserves provided a similar
annualized seven-day yield to that of a comparable IBC Money Fund Average, as
published in IBC's Money Fund ReportTM, for the one-year period.
CitiFunds IBC Connecticut
Connecticut Tax Free
Tax Free Money Funds
Reserves Average
9/02/97 2.74 2.77
11/04/97 2.98 2.89
1/06/98 3.02 3.01
3/10/98 2.56 2.39
5/12/98 3.10 3.01
7/14/98 2.99 2.52
8/31/98 2.95 2.62
Note: The Fund seeks to maintain a stable $1.00 per share price, although there
is no assurance that this will be so on a continuing basis. Fund shares are not
insured or guaranteed by the U.S. Government. Yields and total returns will
fluctuate and past performance is no guarantee of future results. Total return
figures include reinvestment of dividends. Returns and yields reflect certain
voluntary fee waivers. If the waivers were not in place, the Fund's returns
would have been lower.
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS August 31, 1998
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
TAX EXEMPT COMMERCIAL PAPER -- 1.8%
- -------------------------------------------------------------------------------
Connecticut State Health and Educational
Facilities, 3.50% due 9/10/98 $1,800 $ 1,800,000
Connecticut State Housing Finance Authority,
AMT, 3.65% due 9/10/98 960 960,000
------------
2,760,000
------------
BOND, REVENUE, TAX, TAX AND REVENUE
ANTICIPATION NOTES AND GENERAL OBLIGATION
BONDS AND NOTES -- 9.9%
- -------------------------------------------------------------------------------
Beacon Falls, CT, BANs, 4.125% due 10/21/98 2,500 2,501,402
East Lyme, CT, BANs, 4.25% due 3/01/99 100 100,264
Groton City, CT, BANs, 3.75% due 10/15/98 3,880 3,881,237
Guilford, CT, BANs, 3.75% due 8/17/99 1,000 1,001,846
Ledyard, CT, BANs, 4.00% due 2/04/99 700 700,981
Middlebury, CT, BANs, 3.74% due 3/09/99 630 630,124
Milford, CT, BANs, 3.70% due 11/12/98 1,215 1,215,466
Naugatuck, CT, BANs, 3.74% due 8/11/99 250 250,158
Newtown, CT, BANs, 4.00% due 6/17/99 465 466,240
Oxford, CT, G. O., 5.50% due 2/01/99 1,180 1,189,094
Redding, CT, BANs, 4.10% due 10/22/98 1,000 1,000,538
Stratford, CT, BANs, 4.00% due 6/16/99 2,000 2,006,093
Tolland, CT, BANs 6.00% due 6/01/99 400 407,312
Tolland, CT, BANs 4.10% due 6/10/99 227 227,675
------------
15,578,430
------------
ANNUAL AND SEMI-ANNUAL TENDER REVENUE BONDS
AND NOTES (PUTS) -- 21.6%
- -------------------------------------------------------------------------------
Bristol, CT, 5.40% due 6/15/99 150 151,834
Connecticut State, 4.50% due 10/01/98 6,015 6,020,289
Connecticut State, 5.70% due 3/15/99 2,500 2,526,015
Connecticut State, 5.20% due 5/01/99 2,215 2,240,695
Connecticut State Clean Water Fund, 6.40%
due 1/01/99 200 201,820
Connecticut State Clean Water Fund,
5.25% due 8/01/99 500 508,237
Connecticut State Housing Finance Authority,
6.80% due 11/15/98 2,000 2,012,441
Connecticut State Housing Finance Authority, AMT,
5.55% due 11/15/98 300 301,083
Connecticut State Special Assessment Unemployment,
4.50% due 5/15/99 1,115 1,122,606
Connecticut State Special Tax Obligation,
6.95% due 2/01/99 300 309,730
Connecticut State Special Tax Obligation,
7.15% due 2/01/99 2,600 2,689,718
Connecticut State Special Tax Obligation,
7.20% due 2/01/99 200 206,870
Danbury, CT, 5.50% due 8/01/99 1,120 1,139,454
Hartford, CT, 5.00% due 1/15/99 1,465 1,473,077
Madison, CT, 4.22% due 11/18/98 1,500 1,500,836
Manchester, CT, 4.00% due 7/08/99 637 639,089
Milford, CT, 3.80% due 1/15/99 250 250,221
New Britain, CT, 3.70% due 4/13/99 200 200,093
New Fairfield, CT, 4.40% due 3/15/99 185 185,575
New Haven, CT, 6.90% due 9/15/98 1,000 1,001,297
Puerto Rico Public Buildings Authority Revenue,
6.85% due 7/01/99 1,700 1,745,340
South Central Connecticut Regulation Water
Authority, 4.00% due 7/28/99 3,000 3,011,151
Stamford, CT, 7.00% due 3/15/99 1,325 1,350,374
Weston, CT, 4.40% due 4/15/99 680 683,277
Winchester, CT, 4.00% due 11/04/98 1,775 1,775,914
Windsor Locks, CT, 6.125% due 10/15/98 500 501,362
------------
33,748,398
------------
VARIABLE RATE DEMAND NOTES* -- 67.2%
- -------------------------------------------------------------------------------
Acension River, LA, AMT, due 12/01/27 2,000 2,000,000
Beloit, KS, Industrial Revenue, AMT, due 12/01/16 900 900,000
Burke County, GA, Development Authority
Pollution, due 7/01/24 200 200,000
Chesterfield County, VA, Industrial Development,
due 2/01/03 1,400 1,400,000
Chicago, IL, due 1/01/27 1,100 1,100,000
Columbus, MS, Industrial Revenue, due 5/01/99 535 535,000
Connecticut State, due 3/15/12 1,650 1,650,000
Connecticut State, due 3/15/13 7,000 7,000,000
Connecticut State, due 3/15/14 2,795 2,795,000
Connecticut State Development Authority Revenue,
AMT, due 6/01/13 4,000 4,000,000
Connecticut State Development Authority Revenue, AMT,
due 6/01/18 1,100 1,100,000
Connecticut State Health and Educational Facilities,
due 7/01/13 1,500 1,500,000
Connecticut State Health and Educational Facilities,
due 7/01/22 1,600 1,600,000
Connecticut State Health and Educational Facilities,
due 7/01/27 1,000 1,000,000
Connecticut State Health and Educational Facilities,
due 7/01/29 1,500 1,500,000
Connecticut State Health and Educational Facilities,
due 6/10/30 3,000 3,000,000
Connecticut State Housing Finance Authority,
due 5/15/17 2,495 2,495,000
Connecticut State Housing Finance Authority,
due 5/15/17 1,600 1,600,000
Connecticut State Housing Finance Authority, AMT,
due 11/15/27 1,925 1,925,000
Connecticut State Housing Finance Authority,
due 11/15/28 2,500 2,500,000
Connecticut State Special Tax Obligation,
due 6/30/07 4,000 4,000,000
Hartford, CT, Redevelopment Agency,
due 6/01/20 2,000 2,000,000
Hernando County, FL, Industrial Development Revenue,
due 12/01/04 1,200 1,200,000
Illinois Health Facilities Authority Revenue,
due 8/15/25 200 200,000
Macon Trust Pooled Variable Rate Certificates,
due 3/03/07 3,555 3,555,000
Macon Trust Pooled Variable Rate Certificates, AMT,
due 12/05/30 2,575 2,575,000
Maryland State Community Development Administration,
due 4/01/25 4,160 4,160,000
Massachusetts State Health Educational Facilities,
due 7/01/26 1,360 1,360,000
Mississippi Home Corp., AMT, due 6/01/28 2,110 2,110,000
Morgan Keegan Municipal Trust Receipts, AMT,
due 5/06/99 2,940 2,940,000
Municipal Tax Exempt Trust Receipt, due 10/01/30 6,895 6,895,000
Municipal Tax Exempt Trust Receipt, due 10/01/32 2,970 2,970,000
Municipal Trust Receipts, due 1/01/22 1,400 1,400,000
New York, NY, due 8/01/21 770 770,000
New York State Energy Research and Development,
due 6/01/29 700 700,000
New York State Jobs Development Authority,
due 3/01/05 200 200,000
Panhandle Plains, TX, Higher Education, AMT,
due 10/01/02 1,100 1,100,000
Pinal County, AZ, Pollution Central Revenue,
due 12/01/99 700 700,000
Pinellas County, FL, Health Facilities Authority,
due 12/01/15 100 100,000
Puerto Rico Commonwealth, due 7/01/20 5,755 5,755,000
Puerto Rico Commonwealth Highway, due 7/01/15 1,000 1,000,000
Puerto Rico Electrical Power Authority,
due 7/01/12 4,850 4,850,000
Shelton, CT, Housing Authority Revenue,
due 12/01/30 1,800 1,800,000
South Carolina Jobs Economic Development, AMT,
due 4/01/17 500 500,000
Stamford, CT, Housing Authority Revenue,
due 8/01/24 200 200,000
Stamford, CT, Housing Authority Revenue,
due 12/01/24 1,400 1,400,000
Trail County, ND, Solid Waste, AMT, due 12/01/11 2,700 2,700,000
University of Connecticut, University Revenue,
due 11/15/24 5,650 5,650,000
University of Puerto Rico, University Revenue,
due 6/01/25 2,600 2,600,000
------------
105,190,000
------------
TOTAL INVESTMENTS, AT AMORTIZED COST 100.5% 157,276,828
OTHER ASSETS, LESS LIABILITIES (0.5%) (725,319)
--------------------------
NET ASSETS 100.0% $156,551,509
==========================
AMT -- Subject to Alternative Minimum Tax
* Variable rate demand notes have a demand
feature under which the fund could tender them back to the issuer on no more
than 7 days notice.
See notes to financial statements
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
- -------------------------------------------------------------------------------
ASSETS:
Investments, at amortized cost (Note 1A) $157,276,828
Cash 273,072
Interest receivable 1,551,390
- -------------------------------------------------------------------------------
Total assets 159,101,290
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 1,806,453
Payable for shares of beneficial interest repurchased 293,340
Dividends payable 309,428
Payable to affiliates:
Investment Advisory fees (Note 3) 19,275
Shareholder Servicing Agents' fees (Note 4B) 33,196
Accrued expenses and other liabilities 88,089
- -------------------------------------------------------------------------------
Total liabilities 2,549,781
- -------------------------------------------------------------------------------
NET ASSETS for 156,558,304 shares of beneficial interest
outstanding $156,551,509
- -------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in capital $156,558,304
Accumulated net realized loss on investments (6,795)
- -------------------------------------------------------------------------------
Total $156,551,509
===============================================================================
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE $1.00
===============================================================================
See notes to financial statements
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1998
- -------------------------------------------------------------------------------
INVESTMENT INCOME (Note 1B) $5,472,127
EXPENSES:
Administrative fees (Note 4A) $ 377,316
Shareholder Servicing Agents' fees (Note 4B) 377,316
Investment Advisory fees (Note 3) 301,853
Distribution fees (Note 5) 150,926
Custody and fund accounting fees 71,708
Audit fees 29,800
Shareholder reports 20,923
Legal fees 15,232
Transfer agent fees 13,707
Trustees' fees 9,955
Miscellaneous 10,436
- -------------------------------------------------------------------------------
Total expenses 1,379,172
Less aggregate amounts waived by Investment Adviser,
Administrator, and
Distributor (Notes 3, 4A and 5) (387,665)
Less fees paid indirectly (Note 1E) (10,772)
- -------------------------------------------------------------------------------
Net expenses 980,735
- -------------------------------------------------------------------------------
Net investment income 4,491,392
NET REALIZED GAIN ON INVESTMENTS 2,693
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,494,085
===============================================================================
See notes to financial statements
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
----------------------------
1998 1997
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 4,491,392 $ 4,406,570
Net realized gain (loss) on investments 2,693 (328)
- -------------------------------------------------------------------------------
Net increase in net assets from operations 4,494,085 4,406,242
- -------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (4,491,392) (4,406,570)
- -------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST AT
NET ASSET VALUE OF $1.00 PER SHARE (Note 6):
Proceeds from sale of shares 282,812,520 289,667,461
Net asset value of shares issued to shareholders
from reinvestment of dividends 632,962 744,661
Cost of shares repurchased (296,218,329) (237,115,072)
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets from
transactions in shares of beneficial interest (12,772,847) 53,297,050
- -------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (12,770,154) 53,296,722
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 169,321,663 116,024,941
- -------------------------------------------------------------------------------
End of period $156,551,509 $169,321,663
===============================================================================
See notes to financial statements
<PAGE>
<TABLE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
<CAPTION>
DECEMBER 1, 1993
(COMMENCEMENT
OF OPERATIONS)
YEAR ENDED AUGUST 31, TO
-------------------------------------------------- AUGUST 31,
1998 1997 1996 1995 1994
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning
of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
Net investment income 0.02971 0.02914 0.03135 0.03564 0.01754
Less dividends from net
investment income (0.02971) (0.02914) (0.03135) (0.03564) (0.01754)
- ----------------------------------------------------------------------------------------------------
Net Asset Value, end of
period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
- ----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $156,552 $169,322 $116,025 $ 46,556 $ 15,949
Ratio of expenses to
average net assets (A) 0.66% 0.65% 0.42% 0.22% 0.00%*
Ratio of expenses to
average net assets after
fees paid indirectly(A) 0.65% 0.65% 0.42% 0.22% 0.00%*
Ratio of net investment
income to average net
assets 2.98% 2.92% 3.08% 3.60% 2.61%*
Total return 3.01% 2.95% 3.18% 3.62% 1.75%**
Note: If Agents of the Fund had not voluntarily waived all or a portion of their fees from the
Fund for the period indicated and the Administrator had not voluntarily assumed expenses for
the periods before August 31, 1996, and the expenses were not reduced for the fees paid
indirectly for the years after August 31, 1995, the ratios and net investment income per share
would have been as follows:
Net investment income per
share $0.02712 $0.02615 $0.02504 $0.02732 $0.00128
RATIOS:
Expenses to average net
assets 0.91% 0.95% 1.04% 1.06% 2.42%*
Net investment income to
average net assets 2.72% 2.62% 2.46% 2.76% 0.19%*
==================================================================================================
* Annualized
** Not Annualized
(A) The expense ratios for the year ended August 31, 1996 and the periods thereafter have been
adjusted to reflect a change in reporting requirements. The new report guidelines require the
Fund to increase its expense ratio by the effect of any expense offset arrangements with its
service providers. The expense ratios for the period ended on August 31, 1995 have not been
adjusted to reflect this change.
See notes to financial statements
</TABLE>
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds Connecticut Tax Free Reserves (the
"Fund") is a separate non-diversified series of CitiFunds Multi-State Tax Free
Trust (the "Trust"), which is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end,
management investment company. Effective January 2, 1998, the Landmark
Connecticut Tax Free Reserves changed its name to CitiFunds Connecticut Tax Free
Reserves. The Trust also changed its name from Landmark Multi-State Tax Free
Funds to CitiFunds Multi-State Tax Free Trust. The Investment Adviser of the
Fund is Citibank, N.A. ("Citibank"). CFBDS, Inc. ("CFBDS", formerly Landmark
Funds Broker-Dealer Services, Inc.) acts as the Trust's Administrator and
Distributor. Citibank also serves as Sub-Administrator and makes shares
available to customers through various Shareholder Servicing Agents. Citibank is
a wholly-owned subsidiary of Citicorp. Citicorp announed its intention to merge
with The Travelers Group. The merger is expected to occur on or about October 8,
1998.
The preparation of financial statements in accordance with 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. Valuation of Investments Money market instruments are valued at amortized
cost, which the Trustees have determined in good faith constitutes fair value.
The Fund's use of amortized cost is subject to the Fund's compliance with
certain conditions as specified under Rule 2a-7 of the Investment Company Act of
1940.
B. Interest Income Interest income consists of interest accrued, and
accretion of market discount less the amortization of any premium on the
investments of the Fund.
C. Federal Taxes The Fund's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies and to
distribute to shareholders all of its net investment income. Accordingly, no
provision for federal income or excise tax is necessary. At August 31, 1998, the
Fund, for federal income tax purposes, had a capital loss carryover of $6,795,
of which $2,291 will expire on August 31, 2004 and $4,504 which will expire on
August 31, 2005. 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 distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal income tax. Dividends paid by the
Fund from net interest received on tax-exempt money market instruments are not
includable by shareholders as gross income for federal income tax purposes
because the Fund intends to meet certain requirements of the Internal Revenue
Code applicable to regulated investment companies which will enable the Fund to
pay exempt-interest dividends. The portion of such interest, if any, earned on
private activity bonds issued after August 7, 1986, may be considered a tax
preference item to shareholders.
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 in a 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.
E. Fees Paid Indirectly The Fund's custodian bank calculates its fees based
on the Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the Fund.
This amount is shown as a reduction of expenses on the Statement of Operations.
F. Other Purchases, maturities and sales of money market instruments are
accounted for on the date of the transaction.
2. DIVIDENDS The net income of the Fund is determined once daily, as of 12:00
noon, Eastern standard time, and all of the net income of the Fund so determined
is declared as a dividend to shareholders of record at the time of such
determination. Dividends are distributed in the form of additional shares of the
Fund or, at the election of the shareholder, in cash (subject to the policies of
the shareholder's Shareholder Servicing Agent), on or prior to the last business
day of the month.
3. INVESTMENT ADVISORY FEES The investment advisory fee paid to Citibank, as
compensation for overall investment management services, amounted to $301,853 of
which $128,736 was voluntarily waived for the year ended August 31, 1998. The
investment advisory fee is computed at the annual rate of 0.20% of the Fund's
average daily net assets.
4. ADMINISTRATIVE SERVICES PLAN The Trust has adopted an Administrative Services
Plan (the "Administrative Services Plan") which provides that the Trust, on
behalf of each Fund, may obtain the services of an Administrator, one or more
Shareholder Servicing Agents and other Servicing Agents and may enter into
agreements providing for the payment of fees for such services. Under the
Administrative Services Plan, the aggregate of the fee paid to the Administrator
from the Fund, the fees paid to the Shareholder Servicing Agents from the Fund
under such plan and the Basic Distribution Fee paid from the Fund to the
Distributor under the Distribution Plan may not exceed 0.60% of the Fund's
average daily net assets on an annualized basis for the Fund's then-current
fiscal year. For the year ended August 31, 1998, Management agreed to
voluntarily limit Fund expenses to 0.65%.
A. Administrative Fees Under the terms of an Administrative Services
Agreement, CFBDS is entitled to an administrative fee from the Fund, as
compensation for overall administrative services and general office facilities,
which is computed at the annual rate of 0.25% of the Fund's average daily net
assets. The Administrative fees amounted to $377,316, of which $123,907 was
voluntarily waived for the year ended August 31, 1998. Citibank acts as
Sub-Administrator and performs such duties and receives such compensation from
CFBDS as from time to time is agreed to by CFBDS and Citibank. The Fund pays no
compensation directly to any Trustee or any officer who is affiliated with the
Administrator, all of whom receive remuneration for their services to the Fund
from the Administrator or its affiliates. Certain of the officers and a Trustee
of the Fund are officers and a director of the Administrator or its affiliates.
B. Shareholder Servicing Agent Fees The Trust, on behalf of the Fund, has
entered into shareholder servicing agreements with each Shareholder Servicing
Agent pursuant to which that Shareholder Servicing Agent acts as an agent for
its customers and provides other related services. For their services, each
Shareholder Servicing Agent receives fees from the Fund, which may be paid
periodically, but may not exceed, on an annualized basis, an amount equal to
0.25% of the average daily net assets of the Fund represented by shares owned
during the period by investors for whom such Shareholder Servicing Agent
maintains a servicing relationship. Shareholder Servicing Agent fees amounted to
$377,316 for the year ended August 31, 1998.
5. DISTRIBUTION FEES The Trust has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended, in which the
Fund compensates the Distributor at an annual rate not to exceed 0.10% of the
Fund's average daily net assets. The Distribution fees amounted to $150,926, of
which $135,022 was voluntarily waived for the year ended August 31, 1998. The
Distributor may also receive an additional fee from the Fund at an annual rate
not to exceed 0.10% of the Fund's average daily net assets in anticipation of,
or as reimbursement for, advertising expenses incurred by the Distributor in
connection with the sale of shares of the Fund. The additional fee has not been
assessed through August 31, 1998.
6. 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).
7. INVESTMENT TRANSACTIONS Purchases, and maturities and sales of money market
instruments aggregated $481,489,513 and $493,545,619, respectively, for the year
ended August 31, 1998.
8. FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES The cost of investment
securities owned at August 31, 1998 for federal income tax purposes, amounted to
$157,276,828.
9. LINE OF CREDIT The Fund, along with other CitiFunds, entered into an
agreement with a bank which allows the Funds collectively to borrow up to $60
million for temporary or emergency purposes. Interest on borrowings, if any, is
charged to the specific fund 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 year ended
August 31, 1998, the commitment fee allocated to the Fund was $505. Since the
line of credit was established there have been no borrowings.
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS OF
CITIFUNDS CONNECTICUT TAX FREE RESERVES:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of CitiFunds Connecticut Tax Free
Reserves, a separate series of CitiFunds Multi-State Tax Free Trust (the
"Trust") (a Massachusetts business trust), as of August 31, 1998, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended August 31, 1998 and 1997 and the financial highlights
for each of the years in the four-year period ended August 31, 1998 and for the
period from December 1, 1993 (Commencement of Operations) to August 31, 1994.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
August 31, 1998, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates made
by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Citifunds
Connecticut Tax Free Reserves at August 31, 1998, the results of its operations,
the changes in its net assets, and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 6, 1998
<PAGE>
TRUSTEES AND OFFICERS
C. Oscar Morong, Jr., Chairman
Philip W. Coolidge*, President
Elliott J. Berv
Mark T. Finn
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Walter E. Robb, III
E. Kirby Warren
William S. Woods, Jr.
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
*Affiliated Person of Administrator and Distributor
INVESTMENT ADVISER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND 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
Deloitte & Touche LLP
125 Summer 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 Intermediate Income Portfolio
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio*
o CitiFunds National 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.
*Purchase orders will be accepted beginning November 2, 1998.
For more information contact your Service Agent or call
1-800-625-4554
CitiFunds are made available by CFBDS, Inc. as distributor.
(C)1998 Citicorp [Recycle Logo] Printed on recycled paper CFA/RCT/898
