ANNUAL REPORT o AUGUST 31, 1999
CITIFUNDS SM
- ------------------------
NEW YORK
TAX FREE RESERVES
MONEY MARKETS
INVESTMENT PRODUCTS:
NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
<PAGE>
TABLE OF CONTENTS
CITIFUNDS NEW YORK 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 13
- -------------------------------------------------------------
Statement of Operations 13
- -------------------------------------------------------------
Statement of Changes in Net Assets 14
- -------------------------------------------------------------
Financial Highlights 14
- -------------------------------------------------------------
Notes to Financial Statements 15
- -------------------------------------------------------------
Independent Auditors' Report 19
- -------------------------------------------------------------
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
Despite the volatility of the financial markets over the past twelve months,
money market securities once again provided competitive returns for shareholders
seeking income with capital preservation. Economic conditions during the
reporting period were generally characterized by strong growth coupled with low
inflation. However, many forward-looking investors were alternately concerned
over the past year that the economy might either be deteriorating or growing too
quickly. Those investors who sought the safety of money market funds were
largely unaffected by the volatility of the stock and bond markets caused by
these shifting views.
In this environment, the CitiFunds' investment adviser, Citibank, N.A.,
continued to manage CitiFundsSM New York Tax Free Reserves with the goal of
achieving its investment objectives: providing high levels of current income
exempt from federal, New York State and New York City personal income taxes, and
preservation of capital and liquidity.
This report reviews the Fund's investment activities and performance during
the twelve months ended August 31, 1999, and provides a summary of Citibank's
perspective on and outlook for the tax exempt money market securities
marketplace.
Thank you for your continued confidence and participation.
Sincerely,
/s/Philip W. Coolidge
- -------------------
Philip W. Coolidge
President
September 15, 1999
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
THE PAST YEAR HAS BEEN AN EVENTFUL ONE FOR THE U.S. ECONOMY AND FINANCIAL
MARKETS. Between September 1, 1998 and August 31, 1999, a period that coincides
with CitiFundsSM New York Tax Free Reserves' fiscal year, the U.S. economy
underwent a full interest-rate cycle. When the reporting period began, interest
rates were declining sharply in response to the currency and credit crisis that
began in Asia, spread to Russia and threatened Latin America. Many U.S.
investors were concerned that economic weakness abroad might derail the domestic
economy. In response, the Federal Reserve Board (the "Fed") and other central
banks throughout the world reduced short-term interest rates in an attempt to
stimulate global economic growth. As a result, interest rates and yields of most
money market instruments declined over the last four months of 1998.
However, the first eight months of 1999 reflected dramatically different
economic conditions. When it became apparent early in the year that the worst of
the global financial crisis was over, many investors' concerns about an economic
slowdown eased. In fact, the U.S. economy was actually stronger than most
investment professionals expected, and evidence quickly emerged that it might be
growing at unsustainable rates. This unexpectedly robust growth triggered fears
among fixed-income investors that inflation might accelerate from its prevailing
low levels. Tight labor markets and rising commodities prices lent credence to
this view. In response, the Fed raised short-term interest rates twice during
the summer of 1999, effectively offsetting most of the rate cuts it had
implemented last fall.
In this environment, tax-exempt money market yields generally rose along
with interest rates. However, tax-exempt money market yields tended to rise less
than yields of taxable money market instruments, primarily because of differing
supply-and-demand influences between the two markets. While issuance from
corporations in the taxable market remained robust, the strong economy had
enabled the Empire State and several of its municipalities to improve their
fiscal operations, reducing their need during the reporting period to borrow in
order to cover short-term deficits. Yet demand for tax-exempt money market
instruments remained high from individuals and institutions in New York who were
seeking to minimize their federal, state and local income tax liabilities.
Supply-and-demand conditions for municipal notes make it more important for
the Fund's investment team to take advantage of select opportunities to capture
higher yields whenever they become available. Such opportunities generally arise
during periods of seasonal issuance, when New York State and its municipalities
come to the market simultaneously. Yields tend to rise during these temporary
periods of issuance because municipalities are effectively competing with each
other for investor interest. Accordingly, the Fund's management team purchases
as many issues as possible during these times in order to take advantage of more
competitive yields. At other times, when little new issuance is taking place,
the managers rely primarily on Variable Rate Demand Notes (VRDNs), which are
short-term instruments that are securitized and issued by investment banks.
2
<PAGE>
DURING THE REPORTING PERIOD, THE FUND'S MANAGERS ALLOWED THE FUND'S AVERAGE
MATURITY TO DECREASE GRADUALLY TO AS LOW AS 45 DAYS. This strategy helped free
up cash to take advantage of higher yielding securities when they became
available. Then, by using cash to purchase higher yielding municipal notes
during periods of relatively heavy issuance, the managers increased the Fund's
average maturity to as high as 70 days. This maturity stance enabled the
managers to lock in the higher yields of longer-term securities that had the
potential to "tide them over" until the next period of seasonal issuance.
LOOKING FORWARD, THE FUND'S MANAGEMENT TEAM BELIEVES THAT THE FED'S SHIFT TO
HIGHER INTEREST RATES SHOULD HELP EASE INVESTORS' CONCERNS REGARDING THE
POSSIBILITY OF AN OVERHEATED ECONOMY AND RISING INFLATION. Accordingly, the
managers are watching carefully for opportunities to take advantage of changes
in interest rates.
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 8/31/99 BENCHMARKS**
$1,181.5 million o Lipper New York Tax Exempt Money
Market Funds Average
o IBC Financial Data New York Tax
Free Money Market Funds Average
* A portion of the income may be subject to the Federal Alternative Minimum Tax
(AMT). Consult your personal tax advisor.
** The Lipper Funds Average and IBC Funds Average reflect the performance
(excluding sales charges) of mutual funds with similar objectives.
3
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
FUND PERFORMANCE
TOTAL RETURNS
ONE FIVE TEN
ALL PERIODS ENDED AUGUST 31, 1999 YEAR YEARS* YEARS*
- -------------------------------------------------------------------------------
CitiFunds New York Tax Free Reserves 2.60% 2.96% 3.11%
Lipper New York Tax Exempt Money Market Funds Average 2.56% 2.94% 3.09%
* Average Annual Total Return
7-DAY YIELDS
Annualized Current 2.58%
Effective 2.61%
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, 1999, the Fund
paid $0.02572 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 72.0% of dividends earned were also exempt from New York personal
income tax. In addition, 8.4% 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 FINANCIAL DATA NEW YORK TAX FREE MONEY MARKET FUNDS AVERAGE
<PAGE>
The following plot points represent a chart.
8/25/98 2.82 2.64
2.79 2.66
2.57 2.47
2.74 2.63
3.05 2.96
3.19 3.11
3.00 2.88
10/13/98 2.78 2.66
2.75 2.66
2.67 2.56
2.64 2.56
2.59 2.48
2.67 2.56
2.78 2.64
2.68 2.59
12/8/98 2.49 2.29
2.57 2.47
2.72 2.65
2.90 2.86
3.03 3.01
2.56 2.43
2.45 2.35
1/26/99 2.41 2.30
2.33 2.24
2.04 1.89
2.02 1.88
2.22 2.13
2.37 2.29
2.27 2.20
2.41 2.36
3/23/99 2.44 2.38
2.39 2.35
2.38 2.33
2.24 2.16
2.43 2.42
2.63 2.67
2.91 2.92
2.82 2.81
5/18/99 2.72 2.71
2.63 2.61
2.57 2.57
2.41 2.39
2.48 2.47
2.60 2.59
2.75 2.83
7/6/99 2.67 2.69
2.33 2.20
2.36 2.33
2.49 2.43
2.50 2.46
2.42 2.39
2.55 2.51
2.56 2.52
8/31/99 2.58 2.57
As illustrated, CitiFunds New York Tax Free Reserves generally provided a
similar annualized seven-day yield to that of a comparable IBC Financial Data
Money Funds Average, as published in IBC Money Fund ReportTM, for the one-year
period.
Note: Mutual fund shares are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other government agency. 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 and yields would have been lower.
4
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS August 31, 1999
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
TAX EXEMPT COMMERCIAL PAPER--10.5%
- -------------------------------------------------------------------------------
Metropolitan Transit
Authority, NY,
3.05% due 9/08/99 $ 5,000 $ 5,000,000
Metropolitan Transit
Authority, NY,
3.10% due 9/20/99 15,000 15,000,000
Metropolitan Transit
Authority, NY,
3.30% due 11/10/99 5,000 5,000,000
Metropolitan Transit
Authority, NY,
3.50% due 2/08/00 25,300 25,300,000
Metropolitan Transit
Authority, NY,
3.45% due 2/10/00 15,000 15,000,000
New York City Transitional
Finance Authority
Revenue,
2.90% due 11/01/99 20,000 20,000,000
New York State
Environmental Revenue,
3.25% due 9/09/99 6,500 6,500,000
New York State
Environmental Revenue,
3.00% due 12/08/99 12,000 12,000,000
New York State Power
Authority Revenue,
3.20% due 10/05/99 10,000 10,000,000
New York State Power
Authority Revenue,
3.40% due 10/05/99 1,200 1,200,000
Puerto Rico Government
Development Authority,
3.00% due 11/02/99 5,000 5,000,000
Puerto Rico Government
Development Authority,
3.10% due 11/18/99 3,000 3,000,000
Puerto Rico Government
Development Authority,
3.40% due 2/15/00 1,000 1,000,000
-----------
124,000,000
- -------------------------------------------------------------------------------
REVENUE, TAX, BOND AND TAX
REVENUE ANTICIPATION NOTES AND GENERAL
OBLIGATION BONDS AND NOTES--17.8%
- -------------------------------------------------------------------------------
Albany, NY, City School
District, TANs,
3.50% due 10/21/99 4,900 4,902,283
Albany, NY, City School
District, TANs,
7.10% due 10/01/99 785 810,912
Beacon, NY, BANs,
4.00% due 8/18/00 3,135 3,142,236
Brockport, NY, Central
School District, BANs,
3.50% due 5/19/00 9,200 9,222,897
Carle Place, NY, Union Free
School District, TANs,
4.00% due 6/28/00 3,000 3,011,919
Central Islip, NY, Union Free
School District, TANs,
4.00% due 6/30/00 18,000 18,057,492
City of New York, G.O.,
3.50% due 1/26/00 2,700 2,700,000
Commack, NY, Union Free
School District, BANs,
3.80% due 6/23/00 3,000 3,008,199
East Moriches, NY, Union Free
School District, TANs,
3.80% due 6/23/00 4,500 4,512,298
East Northport, NY, BANs,
3.50% due 9/09/99 5,300 5,300,398
Elmont, NY, Union Free School
District, TANs,
4.00% due 6/29/00 2,000 2,007,172
Erie County, NY, RANs,
4.00% due 10/13/99 4,000 4,004,467
Fallsburg, NY, Central School
District, BANs,
3.50% due 4/27/00 8,350 8,364,777
Fayetteville Manlius, NY,
Central School District,
TANs,
4.00% due 6/21/00 5,100 5,125,727
Hempstead, NY, BANs,
3.50% due 9/15/99 1,890 1,890,281
5
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS (Continued) August 31, 1999
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
Jericho, NY, Union Free School
District, TANs,
3.75% due 6/28/00 $ 1,000 $ 1,002,383
Kenmore Tonawanda, NY,
Union Free School
District, BANs,
3.30% due 5/04/00 3,195 3,197,073
Levittown, NY, Union Free
School District, TANs,
3.80% due 6/21/00 13,000 13,035,272
Livingston County, NY,
BANs, 3.25% due 3/04/00 4,040 4,045,146
Longwood, NY, Central
School District, TANs,
4.00% due 6/30/00 5,000 5,015,959
Massapequa, NY, Union Free
School District, BANs,
3.50% due 10/28/99 3,000 3,001,907
Monroe Woodbury, NY,
Central School District,
BANs, 3.50% due 5/26/00 2,589 2,591,545
North Colonie, NY,
Central School District,
BANs, 3.25% due 10/09/99 4,481 4,482,382
Norwich, NY, BANs,
3.50% due 3/30/00 3,579 3,584,983
Palmyra Macedon, NY,
Central School District,
BANs, 3.50% due 4/20/00 3,265 3,272,409
Plainview-Old Bethpage, NY,
Central School District,
TANs, 4.00% due 6/30/00 10,000 10,037,253
Poughkeepsie, NY,
City School District, TANs,
4.00% due 6/30/00 4,900 4,915,667
Rochester, NY, BANs,
3.50% due 3/08/00 10,000 10,026,563
Rockland County, NY,
BANs, 3.25% due 3/03/00 6,000 6,010,253
Scotia Glenville, NY,
Central School District,
BANs, 4.00% due 7/14/00 1,750 1,754,374
South Country, NY,
Central School District,
TANs, 3.75% due 6/29/00 10,000 10,019,886
South Country, NY,
Central School District,
TANs, 4.25% due 6/29/00 4,000 4,023,896
Southern Cayuga, NY,
Central School District,
BANs, 3.50% due 5/25/00 9,000 9,016,480
Syracuse, NY, RANs,
4.25% due 6/30/00 7,000 7,037,194
Taconic Hills, NY, Central
School District, G.O
4.25% due 6/15/00 650 654,968
Ulster County, NY, BANs,
3.50% due 5/05/00 3,563 3,569,949
Valley Stream, NY, Central
School District, TANs,
4.00% due 6/30/00 7,000 7,025,156
Vestal, NY, Central School
District, BANs,
3.75% due 6/22/00 5,267 5,285,957
Westchester County, NY,
TANs, 2.83% due 12/30/99 12,000 12,000,498
-----------
210,668,211
ANNUAL, SEMI-ANNUAL AND
QUARTERLY TENDER REVENUE
BONDS AND NOTES (PUTS) --7.1%
- -------------------------------------------------------------------------------
Dutchess County, NY,
6.00% due 10/15/99 100 100,335
Huntington, NY,
4.75% due 4/15/00 1,145 1,156,444
Metropolitan Transit
Authority, NY,
6.70% due 1/01/00 375 379,017
Metropolitan Transit
Authority, NY,
7.75% due 7/01/00 1,420 1,490,116
Municipal Assistance
Corp., NY,
5.50% due 7/01/00 1,000 1,018,052
Municipal Security Trust
Certificates,
3.15% due 9/08/99 20,000 20,000,000
Nassau County, NY,
Industrial Development
Agency,
5.13% due 11/01/99 4,385 4,400,833
6
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS August 31, 1999
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
New York City, NY,
Cultural Affairs
(Museum of Modern Art),
5.00% due 1/01/00 $ 4,635 $ 4,664,404
New York City, NY,
4.70% due 10/01/99 500 500,602
New York City, NY,
5.88% due 10/01/99 4,000 4,007,690
New York City, NY,
7.50% due 10/01/99 470 478,656
New York City, NY,
7.50% due 3/15/00 505 516,281
New York City, NY,
6.88% due 12/01/99 2,900 2,926,073
New York City, NY,
8.00% due 3/15/00 840 873,045
New York State Dormitory
Authority Revenue,
7.25% due 5/15/00 1,065 1,116,145
New York State Dormitory
Authority Revenue,
7.70% due 5/15/00 6,405 6,730,112
New York State Dormitory
Authority Revenue,
4.00% due 7/01/00 360 361,896
New York State Dormitory
Authority Revenue,
7.70% due 7/01/00 500 527,971
New York State Dormitory
Authority Revenue,
7.88% due 7/01/00 500 528,681
New York State Housing
Finance Authority,
3.00% due 11/15/99 8,700 8,700,000
New York State Medical Care
Facilities Agency,
7.45% due 2/15/00 6,130 6,368,888
New York State Urban
Development Corporation
Revenue,
7.75% due 1/01/00 9,950 10,300,340
Oneida County, NY,
4.50% due 4/15/00 255 257,084
Suffolk County, NY,
Cooperative Bonds,
4.00% due 9/15/99 250 250,079
Suffolk County, NY,
Cooperative Bonds,
4.10% due 10/15/99 2,440 2,443,016
Triborough Bridge & Tunnel
Authority, NY,
7.00% due 1/01/00 1,500 1,541,826
White Plains, NY,
4.00% due 7/12/00 2,654 2,667,248
-----------
84,304,834
VARIABLE DEMAND NOTES*--64.2%
- -------------------------------------------------------------------------------
Alabama State Public
School & College,
due 11/01/13 1,595 1,595,000
Alaska State Housing
Finance Corp.,
due 6/01/26 3,500 3,500,000
Babylon, NY, Industrial
Development Agency,
AMT, due 7/01/14 600 600,000
Bluffton, IN, Economic
Development Revenue,
AMT, due 9/01/05 1,500 1,500,000
Clark County, NV,
Airport Revenue,
due 7/01/28 1,085 1,085,000
Clark County, NV,
Industrial Development
Revenue, AMT,
due 10/01/30 2,300 2,300,000
Clipper Tax Exempt Trust,
AMT, due 3/01/16 9,010 9,010,000
Columbia County, NY,
Industrial Development
Agency,
due 2/01/11 1,800 1,800,000
Connecticut State Housing
Financial Authority,
due 5/15/18 3,645 3,645,000
Connecticut State Health &
Educational Facilities,
due 6/10/30 5,000 5,000,000
Escambia County, FL,
Industrial Development
Revenue,
due 3/01/22 3,700 3,700,000
7
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS (Continued)August 31, 1999
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
lorida Housing Finance
Agency, AMT,
due 6/01/26 $ 5,000 $ 5,000,000
Fort Wayne, IN, Hospital
Authority Revenue,
due 1/01/16 2,450 2,450,000
Georgia Local Government
Certificates of Participation,
due 6/01/28 200 200,000
Glens Falls, NY, Industrial
Development Agency,
due 12/01/04 1,410 1,410,000
Gulf Coast, Texas, Waste
Disposal Authority, AMT
due 6/01/24 900 900,000
Indianapolis, IN, Industrial
Development Revenue,
AMT, due 12/01/04 2,000 2,000,000
Iowa Industrial Development
Finance Authority
Revenue, AMT,
due 10/01/15 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 1,500 1,500,000
Jefferson Parish, LA,
Home Mortgage
Authority, AMT,
due 12/01/26 1,000 1,000,000
Joplin, MO, Industrial
Development Authority,
due 10/01/01 1,865 1,865,000
Kenton County, KY, Airport
Board Revenue,
due 3/01/06 1,910 1,910,000
Laurens County, GA,
Development Authority,
AMT,
due 5/01/17 1,000 1,000,000
Lewis County, NY,
Industrial Development
Agency,
due 9/01/04 1,300 1,300,000
Lone Star, TX, Airport
Authority,
due 12/01/14 200 200,000
Long Island Power Authority,
NY,
due 12/01/29 1,700 1,700,000
Long Island Power Authority,
NY,
due 5/01/33 25,950 25,950,000
Louisiana Housing Finance
Agency, Mortgage
Revenue,
due 6/01/27 1,760 1,760,000
Macon, GA, Trust
Receipts,
due 3/03/07 45,790 45,790,000
Macon, GA, Trust
Receipts, AMT,
due 2/05/30 1,325 1,325,000
Macon, GA, Trust
Receipts, AMT,
due 12/05/30 1,765 1,765,000
Massachusetts State Housing
Finance Authority, AMT,
due 7/01/19 695 695,000
Mercer County,WV, Industrial
Development Revenue,
due 5/01/01 1,000 1,000,000
Metropolitan Pier and
Exposition Authority, IL,
due 12/15/19 1,400 1,400,000
Metropolitan Transit Authority,
NY,
due 7/01/26 1,000 1,000,000
Mississippi Single Family
Home Corp., AMT,
due 6/01/28 695 695,000
Mississippi Single Family
Home Corp., AMT,
due 11/01/29 3,250 3,250,000
Montgomery County, MD,
Housing Opportunities,
due 7/15/07 2,000 2,000,000
Moorhead, MN, Solid Waste
Disposal, AMT,
due 4/01/12 2,500 2,500,000
8
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS August 31, 1999
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
Morgan County, Utah,
Solid Waste,
due 8/01/31 $ 200 $ 200,000
Municipal Security Trust
Certificates,
due 1/01/03 10,000 10,000,000
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 2/15/03 5,000 5,000,000
New York City, NY,
due 8/01/09 2,100 2,100,000
New York City, NY,
due 8/01/15 3,200 3,200,000
New York City, NY,
due 8/01/16 6,600 6,600,000
New York City, NY,
due 6/01/17 7,175 7,175,000
New York City, NY,
due 8/01/19 3,100 3,100,000
New York City, NY,
due 2/01/20 1,300 1,300,000
New York City, NY,
due 6/01/22 2,000 2,000,000
New York City, NY,
due 8/01/22 1,900 1,900,000
New York City, NY,
Cultural Affairs
(Carnegie Hall),
due 1/01/08 5,495 5,495,000
New York City, NY,
Cultural Affairs
(Carnegie Hall),
due 12/01/10 2,000 2,000,000
New York City, NY,
Municipal Water Finance,
due 6/15/24 2,200 2,200,000
New York City, NY,
Municipal Water Finance,
due 6/15/31 2,700 2,700,000
New York City Health &
Hospital Corp.,
due 2/15/26 40,565 40,565,000
New York City Housing
Development,
due 4/15/07 6,000 6,000,000
New York City Housing
Development,
due 1/15/19 500 500,000
New York City Housing
Development,
due 3/15/25 900 900,000
New York City Housing
Development,
due 10/15/28 1,800 1,800,000
New York City Housing
Development, AMT,
due 11/15/28 25,000 25,000,000
New York City Housing
Development,
due 4/15/29 7,000 7,000,000
New York City Housing
Development, AMT,
due 6/15/29 11,300 11,300,000
New York City Housing
Development,
due 12/01/30 4,300 4,300,000
New York City Housing
Development,
due 7/01/31 4,900 4,900,000
New York City Housing
Development, AMT,
due 8/01/31 2,500 2,500,000
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 1,700 1,700,000
New York City Industrial
Development Agency, AMT,
due 12/01/17 7,300 7,300,000
New York City Industrial
Development Agency, AMT,
due 6/01/22 1,160 1,160,000
New York City Industrial
Development Agency, AMT,
due 11/01/24 7,100 7,100,000
9
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS (Continued) August 31, 1999
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
New York City Transitional
Finance Authority Revenue,
due 8/15/13 $ 7,285 $ 7,285,000
New York City Transitional
Finance Authority Revenue,
due 11/15/21 2,600 2,600,000
New York City Transitional
Finance Authority Revenue,
due 11/15/27 20,200 20,200,000
New York City Transitional
Finance Authority Revenue,
due 11/01/08 17,495 17,495,000
New York Pooled Puttable
Trust, due 10/01/30 505 505,000
New York State,
due 1/01/06 7,840 7,840,000
New York State Dormitory
Authority Revenue,
due 7/01/19 1,855 1,855,000
New York State Dormitory
Authority Revenue,
due 1/15/23 5,000 5,000,000
New York State Dormitory
Authority Revenue,
due 2/15/23 9,000 9,000,000
New York State Dormitory
Authority Revenue,
due 7/01/25 700 700,000
New York State Dormitory
Authority Revenue,
due 8/01/29 10,000 10,000,000
New York State Energy,
Research & Development,
due 12/01/20 3,200 3,200,000
New York State Energy,
Research & Development,
due 12/01/26 2,700 2,700,000
New York State Energy,
Research & Development,
due 10/01/29 1,200 1,200,000
New York State Energy,
Research & Development,
due 5/01/34 12,400 12,400,000
New York State Housing
Finance Authority,
due 11/15/19 4,000 4,000,000
New York State Housing
Finance Authority, AMT,
due 11/01/28 16,000 16,000,000
New York State Housing
Finance Authority,
due 11/01/30 1,000 1,000,000
New York State Housing
Finance Authority, AMT,
due 11/01/30 10,600 10,600,000
New York State Housing
Finance Authority, AMT,
due 11/01/31 3,000 3,000,000
New York State Job
Development Authority,
due 3/01/00 1,520 1,520,000
New York State Job
Development Authority,
AMT,
due 3/01/03 1,175 1,175,000
New York State Job
Development Authority,
due 3/01/07 4,000 4,000,000
New York State Local
Government Assistance
Corp.,
due 4/01/22 24,845 24,845,000
New York State Local
Government Assistance
Corp.,
due 4/01/25 6,000 6,000,000
New York State Local
Government Assistance
Corp.,
due 4/01/25 2,500 2,500,000
New York State Medical Care
Facilities Agency,
due 11/01/08 2,900 2,900,000
New York State Medical Care
Facilities Agency,
due 8/15/14 6,730 6,730,000
New York State Medical Care
Facilities Agency,
due 2/05/29 5,625 5,625,000
New York State Thruway
Authority,
due 4/01/08 10,000 10,000,000
10
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS August 31, 1999
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
New York State Thruway
Authority,
due 4/01/10 $ 2,700 $ 2,700,000
New York State Thruway
Authority,
due 1/01/27 7,300 7,300,000
New York State Thruway
Authority,
due 7/01/27 5,000 5,000,000
North Carolina, Medical Care
Community Hospital
Revenue,
due 10/01/20 100 100,000
Onondaga County, NY,
Industrial Development
Agency,
due 12/01/07 515 515,000
Orange County, FL, Housing
Finance 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, AMT,
due 1/01/01 25,000 25,000,000
Port Authority of New York
& New Jersey,
due 1/01/01 40,000 40,000,000
Port Authority of New York
& New Jersey,
Special Obligation,
due 6/01/20 1,400 1,400,000
Port Authority of New York
& New Jersey,
Special Obligation,
due 8/01/24 200 200,000
Puerto Rico
Commonwealth,
due 12/01/15 7,200 7,200,000
Puerto Rico
Commonwealth,
due 7/01/20 9,155 9,155,000
Puerto Rico
Commonwealth,
due 7/01/24 2,000 2,000,000
Puerto Rico
Commonwealth,
due 7/01/28 2,670 2,670,000
Puerto Rico
Commonwealth
Highway Transportation,
due 7/01/14 4,800 4,800,000
Puerto Rico
Commonwealth
Highway Transportation,
due 7/01/28 7,020 7,020,000
Puerto Rico Electric
Power Authority,
due 1/01/12 2,180 2,180,000
Puerto Rico Electric
Power Authority,
due 7/01/12 4,850 4,850,000
Puerto Rico Electric
Power Authority,
due 7/01/13 600 600,000
Puerto Rico Electric
Power Authority,
due 7/01/22 15,000 15,000,000
Puerto Rico Electric
Power Authority,
due 7/01/23 5,000 5,000,000
Puerto Rico Public
Finance Corp.,
due 6/01/12 5,900 5,900,000
Puerto Rico Public
Finance Corp.,
due 6/01/13 10,640 10,640,000
Puerto Rico Industrial
Tourist Educational
Revenue,
due 10/01/20 2,300 2,300,000
Puerto Rico Public
Buildings Authority,
due 1/01/25 3,500 3,500,000
Puerto Rico Public
Buildings Authority,
due 7/01/21 9,380 9,380,000
11
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS (Continued) August 31, 1999
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
Puerto Rico Public
Buildings Authority,
due 7/01/25 $ 5,830 $ 5,830,000
Red Bay, AL, Industrial
Development Revenue
Board,
due 11/01/10 1,900 1,900,000
Rutherford County, TN,
Industrial Development,
AMT,
due 6/01/03 1,750 1,750,000
Saint Charles Parish, LA,
Pollution,
due 3/01/24 1,325 1,325,000
Schenectady County, NY,
Industrial Development,
due 6/01/09 1,730 1,730,000
Seveir County, TN, Public
Building Authority,
due 6/01/09 465 465,000
Seveir County, TN, Public
Building Authority,
due 6/01/17 1,425 1,425,000
South Carolina Jobs
Economy Development,
AMT,
due 11/01/10 2,320 2,320,000
South Carolina Jobs
Economy Development,
AMT,
due 6/01/15 1,000 1,000,000
Sunrise FL, Utility
System Revenue,
due 10/01/18 3,115 3,115,000
Syracuse NY, Industrial
Development Agency,
due 3/01/23 2,300 2,300,000
Triborough Bridge & Tunnel
Authority, NY,
due 1/01/04 3,100 3,100,000
Triborough Bridge & Tunnel
Authority, NY,
due 1/01/12 6,320 6,320,000
University of Puerto Rico,
University Revenue,
due 6/01/25 3,375 3,375,000
Walton County, GA,
Industrial Building
Authority, AMT,
due 10/01/17 1,600 1,600,000
Washington State Multi-Family
Mortgage Revenue,
due 7/01/25 2,275 2,275,000
Wisconsin Housing &
Economic Development,
AMT,
due 9/01/17 1,675 1,675,000
--------------
757,910,000
--------------
TOTAL INVESTMENTS,
AT AMORTIZED COST 99.6% 1,176,883,045
OTHER ASSETS,
LESS LIABILITIES 0.4 4,641,177
----- --------------
Net Assets 100.0% $1,181,524,222
===== ==============
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
12
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
STATEMENTS OF ASSETS AND LIABILITIES
AUGUST 31, 1999
- -------------------------------------------------------------------------------
ASSETS:
Investments, at amortized cost (Note 1A) $1,176,883,045
Cash 2,061
Interest receivable 6,984,204
- -------------------------------------------------------------------------------
Total assets 1,183,869,310
- -------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 1,549,317
Payable for shares of beneficial interest repurchased 40,000
Payable to affiliates:
Investment advisory fees (Note 3) 108,924
Shareholder servicing agents' fees (Note 4B) 252,956
Accrued expenses and other liabilities 393,891
- -------------------------------------------------------------------------------
Total liabilities 2,345,088
- -------------------------------------------------------------------------------
NET ASSETS for 1,181,568,336 shares of beneficial
interest outstanding $1,181,524,222
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in capital $1,181,568,336
Accumulated net realized loss on investments (44,114)
- -------------------------------------------------------------------------------
Total $1,181,524,222
- -------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE $ 1.00
- -------------------------------------------------------------------------------
CITIFUNDS NEW YORK TAX FREE RESERVES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1999
- --------------------------------------------------------------------------------
INTEREST INCOME (Note 1B): $37,778,570
EXPENSES:
Administrative fees (Note 4A) $2,937,943
Shareholder Servicing Agents' fees (Note 4B) 2,937,943
Investment Advisory fees (Note 3) 2,350,355
Distribution fees (Note 5) 1,175,177
Custody and fund accounting fees 280,474
Trustees' fees 59,991
Shareholder reports 30,644
Legal fees 28,013
Audit fees 26,354
Transfer agent fees 8,238
Registration fees 2,200
Miscellaneous 31,762
- --------------------------------------------------------------------------------
Total expenses 9,869,094
Less aggregate amounts waived by Investment
Adviser, Administrator, and Distributor
(Notes 3, 4A, and 5) (2,219,134)
Less fees paid indirectly (Note 1E) (14,423)
- --------------------------------------------------------------------------------
Net expenses 7,635,537
- --------------------------------------------------------------------------------
Net investment income 30,143,033
NET REALIZED GAIN ON INVESTMENTS 45,577
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $30,188,610
- --------------------------------------------------------------------------------
See notes to financial statements
13
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
----------------------------
1999 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 30,143,033 $ 31,493,777
Net realized gain on investments 45,577 6,011
- --------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 30,188,610 31,499,788
- --------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (30,143,033) (31,493,777)
- --------------------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST AT
NET ASSET VALUE OF $1.00 PER SHARE (NOTE 6):
Proceeds from sale of shares 1,161,019,287 1,419,667,585
Net asset value of shares issued to shareholders
from reinvestment of dividends 11,517,849 14,122,083
Cost of shares repurchased (1,085,790,455) (1,316,023,080)
- --------------------------------------------------------------------------------------------
Net increase in net assets from transactions in shares
of beneficial interest 86,746,681 117,766,588
- --------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 86,792,258 117,772,599
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,094,731,964 976,959,365
- --------------------------------------------------------------------------------------------
End of period $1,181,524,222 $1,094,731,964
- --------------------------------------------------------------------------------------------
CITIFUNDS NEW YORK TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
<CAPTION>
YEAR ENDED AUGUST 31,
--------------------------------------------
1999 1998 1997 1996 1995
- --------------------------------------------------------------------------------------------
<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 0.02572 0.02991 0.02949 0.02936 0.03136
Dividends from net investment income (0,02572) (0.02991) (0.02949) (0.02936) (0.03136)
- --------------------------------------------------------------------------------------------
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) $1,181,524 $1,094,732 $976,959 $941,691 $767,129
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 2.56% 2.99% 2.95% 2.92% 3.15%
Total return 2.60% 3.03% 2.99% 2.98% 3.18%
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 $0.02391 $0.02791 $0.02739 $0.02725 $0.02917
RATIOS:
Expenses to average net assets 0.84% 0.85% 0.86% 0.86% 0.87%
Net investment income to
average net assets 2.38% 2.79% 2.74% 2.71% 2.93%
- --------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
14
<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. The Investment Adviser of the Fund is Citibank,
N.A. ("Citibank"). CFBDS, Inc. ("CFBDS") 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, which in turn is a wholly-owned
subsidiary of Citigroup Inc. Citigroup Inc. was formed as a result of the merger
of Citicorp and Travelers Group, Inc. which was completed on October 8, 1998.
The 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, 1999, the
Fund, for federal income tax purposes, had a capital loss carryover of $44,114,
all of 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.
15
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS
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 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 $2,350,355
of which $913,503 was voluntarily waived for the year ended August 31, 1999. 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, 1999, 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 $2,937,943 of which $750,848 was voluntarily
waived for the
16
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS (Continued)
year ended August 31, 1999. 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 $2,937,943 for the year ended August 31, 1999.
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 $1,175,177 of
which $554,783 was voluntarily waived for the year ended August 31, 1999. 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, 1999.
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 $3,087,504,379 and $3,041,056,504, respectively, for the
year ended August 31, 1999.
8. FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES The cost of investment
securities owned at August 31, 1999, for federal income tax purposes, amounted
to $1,176,883,045.
17
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS
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 $75
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, 1999, the commitment fee allocated to the Fund was $3,207. Since the
line of credit was established, there have been no borrowings.
18
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
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, 1999, the related statement of
operations for the year then ended, the statement of changes in net assets for
the years ended August 31, 1999 and 1998 and the financial highlights for each
of the years in the five-year period ended August 31, 1999. 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, 1999, 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, 1999, 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 4, 1999
19
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
<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
200 Berkeley Street,Boston, MA 02116
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 Value Portfolio
o CitiFunds Small Cap Growth Portfolio
INTERNATIONAL STOCKS
o CitiFunds International Growth & Income Portfolio
o CitiFunds International Growth Portfolio
GROWTH WITH INCOME
o CitiFunds Balanced Portfolio
BONDS
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds Intermediate Income Portfolio
o CitiFunds National Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
MONEY MARKETS
o CitiFunds Cash Reserves
o CitiFunds U.S. Treasury Reserves
o CitiFunds Tax Free Reserves
o CitiFunds California Tax Free Reserves
o CitiFunds Connecticut Tax Free Reserves
o CitiFunds New York Tax Free Reserves
This report is prepared for the information of shareholders of CitiFunds New
York Tax Free Reserves. It is authorized for distribution to prospective
investors only when preceded or accompanied by an effective prospectus of
CitiFunds New York Tax Free Reserves.
Ask for a prospectus (except for CitiFunds New York Tax Free Reserves, which
preceded or accompanies this report) containing more complete information,
including all sales charges (if any), fees and expenses. Please read the
prospectus carefully before you invest or send money.
Although each money market fund seeks to maintain the value of your investment
at $1.00 per share, it is possible to lose money by investing in the funds.
CitiFunds are made available by CFBDS, Inc. as distributor. For more information
contact your Service Agent or call 1-800-625-4554.
(C)1999 Citicorp R Printed on recycled paper CFA/RNY/899
<PAGE>
ANNUAL REPORT o AUGUST 31, 1999
CITIFUNDS SM
- --------------------
CALIFORNIA
TAX FREE RESERVES
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:
Despite the volatility of the financial markets over the past twelve months,
money market securities once again provided competitive returns for shareholders
seeking income with capital preservation. Economic conditions during the
reporting period were generally characterized by strong growth coupled with low
inflation. However, many forward-looking investors were alternately concerned
over the past year that the economy might either be deteriorating or growing too
quickly. Those investors who sought the safety of money market funds were
largely unaffected by the volatility of the stock and bond markets caused by
changing market conditions and shifting investor views.
In this environment, the CitiFunds' investment adviser, Citibank, N.A.,
continued to manage CitiFundssm California Tax Free Reserves with the goal of
achieving its investment objectives: providing high levels of current income
exempt from federal and California personal income taxes, preservation of
capital and liquidity.
This report reviews the Fund's investment activities and performance during
the twelve months ended August 31, 1999, and provides a summary of Citibank's
perspective on and outlook for the tax-exempt money market securities
marketplace.
Thank you for your continued confidence and participation.
Sincerely,
/s/Philip W. Coolidge
- ---------------------
Philip W. Coolidge
President
September 15, 1999
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
THE PAST YEAR HAS BEEN AN EVENTFUL ONE FOR THE U.S. ECONOMY AND FINANCIAL
MARKETS. Between September 1, 1998 and August 31, 1999, a period coinciding with
CitiFunds California Tax Free Reserves' fiscal year, the U.S. economy underwent
a full interest-rate cycle. When the reporting period began, interest rates were
declining sharply in response to the currency and credit crisis that began in
Asia, spread to Russia and threatened Latin America. Many U.S. investors were
concerned that economic weakness abroad might derail the domestic economy. In
response, the Federal Reserve Board (the "Fed") and other central banks
throughout the world reduced short-term interest rates in an attempt to
stimulate global economic growth. As a result, interest rates and yields of most
money market instruments declined over the last four months of 1998.
However, the first eight months of 1999 reflected dramatically different
economic conditions. When it became apparent early in the year that the worst of
the global financial crisis was over, many investors' concerns about an economic
slowdown eased. In fact, the U.S. economy was actually stronger than most
investment professionals expected, and evidence quickly emerged that it might be
growing at unsustainable rates. This unexpectedly robust economic growth
triggered fears among fixed-income investors that inflation might accelerate
from its prevailing low levels. Tight labor markets and rising commodities
prices lent some credence to this view. In response, the Fed raised short-term
interest rates twice during the summer of 1999, effectively offsetting most of
the rate cuts it had implemented last fall.
In this environment, tax-exempt money market yields generally rose along with
interest rates. However, tax-exempt money market yields tend to rise less than
yields of taxable money market instruments, primarily because of differing
supply-and-demand influences in the two markets. While issuance in the taxable
market remained robust, the strong economy allowed California and many of its
municipalities to improve their fiscal operations, thereby reducing their needs
to borrow in order to cover short-term deficits. Yet demand for tax-exempt money
market instruments remained high from individuals and institutions in California
seeking to minimize their federal and state income tax liabilities.
The reduced supply of municipal notes in California during the reporting
period made it necessary for the Fund's management team to take advantage of
opportunities to capture higher yields as they became available. Such
opportunities generally arise during periods of seasonal issuance, when
California and its municipalities come to the market simultaneously. Yields tend
to rise during these temporary periods of issuance because municipalities are
effectively competing with one another for investor interest. Accordingly, the
Fund's managers purchased as much as possible during these times in order to
take advantage of more competitive yields. At other times, when little new
issuance is taking place, the managers rely primarily on Variable Rate Demand
Notes (VRDNs), short-term instruments that are securitized and issued by
investment banks.
2
<PAGE>
By focusing on VRDNs, the managers were able to gradually reduce the Fund's
average maturity to as low as 31 days. In a rising interest-rate environment,
this maturity strategy allows the managers to have access to funds for higher
yielding instruments as they became available. Then, by using cash to purchase
higher yielding municipal notes during periods of relatively heavy issuance, the
managers increased the Fund's average maturity to as high as 69 days. This
maturity stance in turn allowed the Fund to lock in the higher yields of
longer-term securities that had the potential to "tide them over" until the next
period of seasonal issuance.
LOOKING FORWARD, THE FUND'S MANAGEMENT TEAM BELIEVES THAT THE FED'S SHIFT TO
HIGHER INTEREST RATES SHOULD HELP EASE INVESTORS' CONCERNS REGARDING THE
POSSIBILITY OF AN OVERHEATED ECONOMY AND RISING INFLATION. Accordingly, the
Fund's managers are monitoring the markets carefully for opportunities to take
advantage of changes in the interest-rate environment.
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 MANAGER DIVIDENDS
Citibank, N.A Declared daily, paid monthly
COMMENCEMENT OF OPERATIONS CAPITAL GAINS
March 10, 1992 Distributed annually, if any
NET ASSETS AS OF 8/31/99 BENCHMARKS**
$306.0 million o Lipper California Tax
Exempt Money Market Funds Average
o IBC Financial Data California
Tax Free Money Market Funds
Average
* A portion of the income may be subject to the Federal Alternative Minimum Tax
(AMT). Consult your personal tax advisor.
** The Lipper Funds Average and IBCFunds Average reflect the performance
(excluding sales charges) of mutual funds with similar objectives.
3
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
FUND PERFORMANCE
TOTAL RETURNS
SINCE
MARCH 10,
ONE FIVE 1992
ALL PERIODS ENDING AUGUST 31, 1999 YEAR YEARS* INCEPTION*
- -----------------------------------------------------------------------------
CitiFunds California Tax Free Reserves 2.50% 3.01% 2.83%
Lipper California Tax Exempt Money Market
Funds Average 2.47% 2.93% 2.66%+
* Average Annual Total Return
+ Since 2/29/92
7-DAY YIELDS
Annualized Current2.41%
Effective 2.44%
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, 1999, the Fund
paid $0.02473 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 72.2% of dividends earned were also exempt from California
personal income tax. In addition, 6.7% 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
FINANCIAL DATA CALIFORNIA TAX FREE MONEY MARKET FUNDS AVERAGE
<PAGE>
The following plot points represent a chart.
8/25/98 2.63 2.3
2.63 2.42
2.39 2.25
2.59 2.37
2.95 2.75
3.11 2.98
2.92 2.73
10/13/98 2.68 2.49
2.65 2.48
2.59 2.39
2.56 2.40
2.46 2.27
2.56 2.41
2.65 2.51
2.55 2.45
12/8/98 2.34 2.15
2.47 2.35
2.68 2.53
2.89 2.76
3.06 2.99
2.52 2.33
2.37 2.25
1/26/99 2.32 2.15
2.24 2.11
1.91 1.71
1.84 1.72
2.09 1.99
2.24 2.17
2.16 2.06
2.35 2.26
3/23/99 2.37 2.28
2.32 2.26
2.32 2.26
2.22 2.04
2.34 2.35
2.53 2.63
2.74 2.88
2.72 2.77
5/18/99 2.63 2.66
2.55 2.59
2.49 2.52
2.35 2.30
2.39 2.31
2.51 2.47
2.68 2.75
7/6/99 2.58 2.57
2.28 2.06
2.27 2.15
2.37 2.24
2.39 2.32
2.31 2.22
2.40 2.36
2.41 2.37
8/31/99 2.42 2.40
As illustrated, CitiFunds California Tax Free Reserves generally provided a
similar annualized seven-day yield to that of a comparable IBC Financial Data
Money Market Funds Average, as published in IBC Money Fund ReportTM, for the
one-year period.
Note: Mutual fund shares are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other government agency. 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 and yields would have been lower.
4
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS August 31, 1999
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
TAX EXEMPT COMMERCIAL PAPER -- 10.3%
- -------------------------------------------------------------------------------
Government Development
Bank of Puerto Rico, 3.10%
due 11/18/99 $ 7,000 $ 7,000,000
Long Beach, CA, Harbor
Authority, 2.85%
due 9/09/99 3,000 3,000,000
Long Beach, CA, Harbor
Authority, 7.15%
due 5/15/00 2,000 2,052,842
Long Beach, CA, Harbor
Authority, AMT, 3.09%
due 5/15/19 3,510 3,510,000
Modesto, CA, Irrigation
District, 3.05%
due 10/19/99 10,000 10,000,000
San Joaquin County, CA,
Transportation Authority,
3.10% due 10/07/99 6,000 6,000,000
-----------
31,562,842
Annual and Semi-Annual Tender Revenue
Bonds and Notes (Puts) -- 11.8%
- -------------------------------------------------------------------------------
California Pollution Control
Finance Authority
3.10% due 11/15/99 2,100 2,101,056
California State,
3.20% due 6/01/00 2,845 2,845,541
East Bay, CA, Regional Park
District, 8.75%
due 9/01/99 1,045 1,045,000
Golden Empire School
Finance Authority,
3.10% due 2/01/00 6,000 6,000,000
Oakland, CA, 5.10%
due 6/15/00 1,000 1,014,981
Pitney Bowes Credit Corp.,
3.80% due 7/12/00 9,069 9,068,815
Puerto Rico Commonwealth,
7.70% due 7/01/00 6,975 7,371,160
San Bernardino County, CA,
AMT, 5.16% due 6/01/00 1,850 1,876,495
San Francisco, CA, City
Sewer Revenue,
5.50% due 10/01/99 755 756,517
San Francisco, CA, City
Sewer Revenue,
6.50% due 10/01/99 1,000 1,022,772
San Joaquin County, CA,
Certificates of
Participation, 6.75%
due 11/15/99 2,500 2,568,739
Virgin Islands Public Finance
Authority, 6.50%
due 10/01/99 270 $ 270,749
Virgin Islands Public Finance
Authority, 7.65%
due 10/01/99 260 260,962
-----------
36,202,787
-----------
BOND ANTICIPATION NOTES, TAX AND REVENUE
ANTICIPATION NOTES AND GENERAL
OBLIGATION BONDS AND NOTES -- 12.4%
- -------------------------------------------------------------------------------
California Community
College, TRANs, 4.00%
due 6/30/00 2,500 2,518,263
California School Cash
Reserves, TRANs, 4.00%
due 7/03/00 5,000 5,036,478
California Statewide
Community
Development, TRANs,
4.00% due 6/30/00 4,000 4,026,299
Kern County, CA, TRANs,
4.25% due 10/01/99 2,000 2,002,252
Los Angeles County, CA,
Unified School, TRANs,
4.00% due 6/30/00 2,000 2,013,963
North City West, CA,
School Facility, G.O.,
7.85% due 9/01/99 455 464,100
Oakland, CA, Unit School
District, TRANs,
3.25% due 11/09/99 3,000 3,002,480
Placer, CA, Unit High School
District, TRANs, 4.00%
due 9/21/99 2,000 2,000,662
San Diego, CA, TANs, 4.50%
due 9/30/99 4,150 4,153,903
San Diego, CA, TRANs,
4.00% due 6/30/00 3,000 3,020,446
San Diego, CA, Unit High
School District, TRANs,
4.50% due 10/01/99 1,000 1,001,247
Santa Barbara County,
CA, TRANs,
4.50% due 10/01/99 1,000 1,001,247
Santa Clara County, CA, TRANs, 4.50%
due 10/01/99 4,400 4,405,251
Tahoe Truckee, CA, Unit
School District, TRANs,
4.00% due 9/21/99 3,000 3,000,992
5
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS (Continued) August 31, 1999
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
Turlock, CA, Finance Authority,
BANs, 3.75%
due 9/15/00 $ 365 $ 373,873
-----------
38,021,456
-----------
VARIABLE RATE DEMAND NOTES* -- 65.4%
- -------------------------------------------------------------------------------
ABN - Amro Municipal
Trust
Receipts, due 7/05/06 1,000 1,000,000
ABN - Amro Municipal
Trust
Receipts, due 7/04/07 7,000 7,000,000
Alameda County, CA,
Industrial Development
Authority, AMT,
due 4/01/29 900 900,000
Anaheim CA, Housing
Authority, AMT,
due 11/15/28 1,500 1,500,000
California Educational
Facility Authority Revenue,
due 7/01/22 4,300 4,300,000
California Educational
Facility Authority Revenue,
due 11/01/29 3,000 3,000,000
California Health Facilities
Finance Authority,
due 7/01/12 1,700 1,700,000
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 6/01/22 4,300 4,300,000
California Health Facilities
Finance Authority,
due 10/01/22 4,900 4,900,000
California Housing Finance
Agency Revenue,
due 8/01/24 1,740 1,740,000
California Pollution Control
Finance Authority,
due 9/01/13 1,100 1,100,000
California Pollution Control
Finance Authority, AMT,
due 8/01/16 5,000 5,000,000
California Pollution Control
Finance Authority,
due 11/01/26 1,400 1,400,000
California Pollution Control
Finance Authority, AMT,
due 10/01/31 1,000 1,000,000
California State,
due 8/01/15 3,200 3,200,000
California Statewide
Community Development,
due 11/01/15 995 995,000
California Statewide
Community Development,
due 12/01/15 3,100 3,100,000
California Statewide
Community Development,
due 12/01/22 8,900 8,900,000
California Statewide
Community Development,
due 6/01/24 4,080 4,080,000
California Statewide
Community Development,
due 10/01/26 1,700 1,700,000
California Statewide
Community Development,
due 9/01/29 2,000 2,000,000
California Transition
Finance Authority,
due 10/01/27 6,800 6,800,000
Campbell County, VA,
Industrial Development
Authority, AMT,
due 4/01/15 200 200,000
Carlsbad, CA, Multi-Family
Housing Revenue,
due 6/01/11 400 400,000
Clipper Tax Exempt Trust,
Certificates of Participation,
due 5/01/06 2,395 2,395,000
Clipper Tax Exempt Trust,
Certificates of Participation,
AMT, due 3/01/15 3,815 3,815,000
Clipper Tax Exempt Trust,
Certificates of Participation,
AMT, due 8/01/26 3,800 3,800,000
6
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS August 31, 1999
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
Contra Costa County, CA,
due 11/15/22 $ 500 $ 500,000
Covina, CA, Redevelopment
Agency Revenue,
due 12/01/15 700 700,000
Cucamonga, CA, County
Water District,
due 9/01/22 4,350 4,350,000
Gordon County, GA,
Development Authority,
due 9/01/17 1,000 1,000,000
Henderson, NV,
Health Care
Facility Revenue,
due 7/01/20 2,000 2,000,000
Huntington Beach, CA,
due 6/15/20 3,000 3,000,000
Irvine, CA,
due 9/02/21 700 700,000
Irvine, CA, Water
District, due 10/01/00 500 500,000
Kenton County, KY, Revenue,
due 3/01/06 1,000 1,000,000
Kentucky State Turnpike
Authority, due 7/01/03 285 285,000
Kern County, CA,
due 2/01/13 3,800 3,800,000
Los Angeles, CA,
due 9/01/99 510 510,000
Los Angeles, CA,
Housing, due 4/15/28 3,500 3,500,000
Los Angeles, CA, Regional
Airport, due 12/01/25 400 400,000
Metropolitan Pier and
Exploration Oil,
due 12/15/19 1,000 1,000,000
Metropolitan Water District, CA,
Waterworks Revenue,
due 11/10/99 2,000 2,000,000
Metropolitan Water District, CA,
Waterworks Revenue,
due 7/01/28 8,300 8,300,000
Mississippi Home Corp., AMT
due 6/01/28 300 300,000
Missouri State Housing
Development, AMT,
due 3/01/30 2,995 2,995,000
Morgan County, UT, Solid
Waste, AMT, due 8/01/31 700 700,000
National City, CA,
Community
Development,
due 4/01/39 500 500,000
New York Pooled
Puttable Trust,
due 10/01/30 1,590 1,590,000
New York State Thruway
Authority, General Revenue,
due 1/01/27 1,500 1,500,000
Newport Beach, CA,
Revenue, due 10/01/22 2,000 2,000,000
Newport Beach, CA,
Revenue, due 10/01/26 10,300 10,300,000
North Carolina Educational
Facilities Finance,
due 9/01/26 200 200,000
Northern California
Public Power
Project Authority,
due 7/01/28 5,000 5,000,000
Oakland, CA, Economic
Development Revenue,
due 8/01/21 2,200 2,200,000
Orange County, CA,
due 7/01/19 3,395 3,395,000
Pasadena, CA,
due 12/01/16 900 900,000
Pitney Bowes Credit Corp.,
due 10/01/01 5,225 5,225,115
Pittsburgh, CA, Mortgage
Obligation, due 12/30/31 2,400 2,400,000
Puerto Rico
Commonwealth, Highways
& Transportation,
due 7/18/18 3,260 3,260,000
Puerto Rico Commonwealth,
Infrastructure Finance,
due 7/01/28 8,000 8,000,000
Puerto Rico Electric
Power Authority,
due 7/01/13 1,400 1,400,000
Puerto Rico Electric
Power Authority,
due 7/01/22 1,900 1,900,000
Puerto Rico Public
Finance Corp.,
due 6/01/12 815 815,000
Richmond, VA,
Redevelopment and
Housing Authority,
due 11/01/29 100 100,000
7
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS (Continued) August 31, 1999
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
Riverside County, CA,
Certificates of
Participation,
due 9/01/14 $ 500 $ 500,000
Riverside County, CA,
Certificates of
Participation,
due 12/01/15 200 200,000
Sacramento County, CA,
due 7/15/29 3,200 3,200,000
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 Joaquin Hills, CA,
Transportation Tolls,
due 1/15/29 3,940 3,940,000
San Jose, CA,
Redevelopment Tax
Allocation, AMT,
due 8/01/27 3,645 3,645,000
Simi Valley, CA,
Multi-family
Housing, due 7/01/23 2,400 2,400,000
Sevier County, TN,
Public Building Authority,
due 6/01/09 410 410,000
Sevier County, TN,
Public Building Authority,
due 6/01/17 155 155,000
Sevier County, TN,
Public Building Authority,
due 6/01/21 600 600,000
Shawnee, KS,
Private Activity
Revenue, AMT,
due 12/01/16 1,500 1,500,000
Southern California
Public Power
Project Authority,
due 7/01/12 2,100 2,100,000
University of California,
due 3/01/07 2,585 2,585,000
University of Puerto Rico
Revenue, due 6/01/25 1,100 1,100,000
Valley Health System, CA,
Hospital Revenue,
due 5/15/25 695 695,000
Westfield, IN,
Industrial Development, AMT,
due 2/01/02 1,500 1,500,000
Westminster, CA,
Redevelopment Tax
Allocation, due 8/01/27 2,860 2,860,000
-----------
200,040,115
-----------
Total Investments,
at Amortized Cost 99.9% $305,827,200
Other Assets,
Less Liabilities 0.1 206,261
-----------
-----------
Net Assets 100.0% $306,033,461
-----------
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
8
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1999
- --------------------------------------------------------------------------------
ASSETS:
Investments, at amortized cost (Note 1A) $305,827,200
Cash 23,375
Interest receivable 1,694,963
- --------------------------------------------------------------------------------
Total assets 307,545,538
- --------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 520,196
Payable for shares of beneficial interest repurchased 385,365
Payable for investments purchased 373,873
Payable to affiliates:
Investment Advisory fees (Note 3) 32,807
Shareholder Servicing Agents' fees (Note 4B) 64,761
Accrued expenses and other liabilities 135,075
- --------------------------------------------------------------------------------
Total liabilities 1,512,077
- --------------------------------------------------------------------------------
NET ASSETS for 306,026,048 shares of
beneficial interest outstanding $306,033,461
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in capital $306,026,048
Accumulated net realized gain on investments 7,413
- --------------------------------------------------------------------------------
Total $306,033,461
- --------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE $1.00
- --------------------------------------------------------------------------------
See notes to financial statements
9
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1999
- --------------------------------------------------------------------------------
INTEREST INCOME (Note 1B): $9,595,734
EXPENSES
Administrative fees (Note 4A) $ 769,975
Shareholder Servicing Agents' fees (Note 4B) 769,975
Investment Advisory fees (Note 3) 615,980
Distribution fees (Note 5) 307,990
Custody and fund accounting fees 110,697
Legal fees 31,763
Audit fees 30,100
Shareholder reports 28,426
Trustees' fees 17,667
Transfer agent fees 14,000
Registration fees 3,814
Miscellaneous 10,434
- --------------------------------------------------------------------------------
Total expenses 2,710,821
Less aggregate amounts waived by Investment Adviser,
Administrator, and Distributor (Notes 3, 4A and 5) (698,490)
Less fees paid indirectly (Note 1E) (10,763)
- --------------------------------------------------------------------------------
Net expenses 2,001,568
- --------------------------------------------------------------------------------
Net investment income 7,594,166
NET REALIZED GAIN ON INVESTMENTS 17,377
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,611,543
- --------------------------------------------------------------------------------
See notes to financial statements
10
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
-------------------------
1999 1998
- -------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 7,594,166 $ 7,243,957
Net realized gain (loss) on investments 17,377 (2,205)
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 7,611,543 7,241,752
- -------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM:
NET INVESTMENT INCOME (7,594,166) (7,243,957)
- -------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST AT NET ASSET VALUE OF $1.00 PER
SHARE (NOTE 6):
Proceeds from sale of shares 515,988,320 420,217,573
Net asset value of shares issued to shareholders
from reinvestment of dividends 1,049,146 1,145,435
Cost of shares repurchased (496,649,450) (343,078,029)
- -------------------------------------------------------------------------------
Net increase in net assets from transactions in shares of
beneficial interest 20,388,016 78,284,979
- -------------------------------------------------------------------------------
Net Increase in Net Assets 20,405,393 78,282,774
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 285,628,068 207,345,294
- -------------------------------------------------------------------------------
End of period $306,033,461 $285,628,068
- -------------------------------------------------------------------------------
See notes to financial statements
11
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------------------------
1999 1998 1997 1996 1995
- ------------------------------------------------------------------------------------------
<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 0.02473 0.02928 0.02899 0.03089 0.03434
Less dividends from net
investment income (0.02473) (0.02928) (0.02899) (0.03089) (0.03434)
- -------------------------------------------------------------------------------------------
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) $306,033 $285,628 $207,345 $150,557 $51,832
Ratio of expenses to average
net assets 0.65% 0.65% 0.65% 0.42% 0.30%
Ratio of net investment income
to average net assets 2.47% 2.92% 2.91% 3.05% 3.43%
Total return 2.50% 2.97% 2.94% 3.13% 3.49%
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 $0.02243 $0.02687 $0.02630 $0.02481 $0.02513
RATIOS:
Expenses to average net assets 0.88% 0.90% 0.92% 1.01% 1.21%
Net investment income to
average net assets 2.24% 2.67% 2.64% 2.45% 2.51%
- -------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
12
<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. The Investment Adviser of the Fund is Citibank,
N.A. ("Citibank"). CFBDS, Inc. ("CFBDS") 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, which in turn is a wholly-owned
subsidiary of Citigroup Inc. Citigroup Inc. was formed as a result of the merger
of Citicorp and Travelers Group, Inc. which was completed on October 8, 1998.
The 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.
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 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.
13
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS (Continued)
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 $615,980 of
which $232,597 was voluntarily waived for the year ended August 31, 1999. 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, 1999, 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 $769,975 of which $232,597 was
voluntarily waived for the year ended August 31, 1999. 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
14
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS
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 $769,975 for the year ended August 31, 1999.
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 $307,990 of
which $233,296 was voluntarily waived for the year ended August 31, 1999. 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, 1999.
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 $1,111,806,161 and $1,093,387,958, respectively, for the
year ended August 31, 1999.
8. FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES The cost of investment
securities owned at August 31, 1999 for federal income tax purposes, amounted to
$305,827,200.
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 $75
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, 1999, the commitment fee allocated to the Fund was $836. Since the
line of credit was established there have been no borrowings.
15
<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, 1999, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended August 31, 1999 and 1998, and the financial
highlights for each of the years in the five-year period ended August 31, 1999.
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, 1999 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, 1999, 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 4, 1999
16
<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*
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
200 Berkeley Street, Boston, MA 02116
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 Value Portfolio
o CitiFunds Small Cap Growth Portfolio
INTERNATIONAL STOCKS
o CitiFunds International Growth & Income Portfolio
o CitiFunds International Growth Portfolio
GROWTH WITH INCOME
o CitiFunds Balanced Portfolio
BONDS
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds Intermediate Income Portfolio
o CitiFunds National Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
MONEY MARKETS
o CitiFunds Cash Reserves
o CitiFunds U.S. Treasury Reserves
o CitiFunds Tax Free Reserves
o CitiFunds California Tax Free Reserves
o CitiFunds Connecticut Tax Free Reserves
o CitiFunds New York Tax Free Reserves
This report is prepared for the information of shareholders of CitiFunds
California Tax Free Reserves. It is authorized for distribution to prospective
investors only when preceded or accompanied by an effective prospectus of
CitiFunds California Tax Free Reserves.
Ask for a prospectus (except for CitiFunds California Tax Free Reserves, which
preceded or accompanies this report) containing more complete information,
including all sales charges (if any), fees and expenses. Please read the
prospectus carefully before you invest or send money.
Although each money market fund seeks to maintain the value of your investment
at $1.00 per share, it is possible to lose money by investing in the funds.
CitiFunds are made available by CFBDS, Inc. as distributor. For more information
contact your Service Agent or call 1-800-625-4554.
(C)1999 Citicorp R Printed on recycled paper CFA/RCA/899
<PAGE>
ANNUAL REPORT O AUGUST 31, 1999
CITIFUNDS SM
- ------------------------
Connecticut
Tax Free Reserves
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 16
- ---------------------------------------------------------------------------
<PAGE>
Letter To Our Shareholders
Dear Shareholder:
Despite the volatility of the financial markets over the past twelve months,
money market securities once again provided competitive returns for shareholders
seeking income with capital preservation. Economic conditions during the
reporting period were generally characterized by strong growth coupled with low
inflation. However, many forward-looking investors were alternately concerned
over the past year that the economy might either be deteriorating or growing too
quickly. Those investors who sought the safety of money market funds were
largely unaffected by the volatility of the stock and bond markets caused by
changing market conditions and shifting investor views.
In this environment, the CitiFunds' investment adviser, Citibank, N.A.,
continued to manage CitiFundsSM Connecticut Tax Free Reserves with the goal of
achieving its investment objectives: providing high levels of current income
exempt from federal and Connecticut personal income taxes, preservation of
capital and liquidity.
This report reviews the Fund's investment activities and performance during
the twelve months ended August 31, 1999, and provides a summary of Citibank's
perspective on and outlook for the tax-exempt money market securities
marketplace.
Thank you for your continued confidence and participation.
Sincerely,
Philip W. Coolidge
- -------------------
Philip W. Coolidge
President
September 15, 1999
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
THE PAST YEAR HAS BEEN AN EVENTFUL ONE FOR THE U.S. ECONOMY AND FINANCIAL
MARKETS. Between September 1, 1998 and August 31, 1999, the period that
coincides with CitiFunds Connecticut Tax Free Reserves' fiscal year, the U.S.
economy underwent a full interest-rate cycle. When the reporting period began,
interest rates were declining sharply in response to the currency and credit
crisis that began in Asia, spread to Russia and threatened Latin America. Many
U.S. investors were concerned that economic weakness abroad might derail the
domestic economy. In response, the Federal Reserve Board (the "Fed") and other
central banks throughout the world reduced short-term interest rates in an
attempt to stimulate global economic growth. As a result, interest rates and
yields of most money market instruments continued to decline throughout the last
four months of 1998.
However, the first eight months of 1999 reflected dramatically different
economic conditions. When it became apparent early in the year that the worst of
the global financial crisis was over, many investors' concerns about an economic
slowdown eased. In fact, the U.S. economy was actually stronger than many
investment professionals expected, and evidence quickly emerged that it might be
growing at unsustainable rates. This unexpectedly robust growth triggered fears
among fixed-income investors that inflation might accelerate beyond its
prevailing low levels. Tight labor markets and rising commodities prices lent
credence to this view. In response, the Fed raised short-term interest rates
twice during the summer of 1999, effectively offsetting most of the rate cuts it
had implemented last fall.
In this environment, tax-exempt money market yields generally rose along
with interest rates. However, tax-exempt money market yields tend to rise less
than yields of taxable money market instruments, primarily because of different
supply-and-demand influences in the two markets. While issuance in the taxable
market remained robust, there was a relative shortage of tax-exempt instruments.
The strong economy allowed Connecticut and many of its municipalities to improve
their fiscal operations, thereby reducing their need to borrow in order to cover
any short-term deficits. Yet, demand for tax-exempt money market instruments
remained high from individuals and institutions in Connecticut seeking to
minimize their tax liabilities. The combination of low supply and strong demand
helped constrain the rise of tax-exempt yields in Connecticut relative to
taxable yields.
The relative shortage of municipal notes with maturities of less than one
year made it more difficult for CitiFunds Connecticut Tax Free Reserves'
investment team to create a broadly diversified portfolio of high-yielding, high
quality, highly liquid instruments. Yet the managers did identify some
opportunities in Variable Rate Demand Notes (VRDNs), short-term instruments that
are securitized and issued by investment banks. The managers also found some
select opportunities in non-rated short-term securities issued by smaller towns
within the state and deemed equivalent to the highest ratings by their credit
analysts.
The relative shortage of tax-exempt money market securities increased the
Fund's reliance on longer-term municipal notes with maturities of one year. As a
consequence, the Fund's weighted average maturity remained toward the long end
2
<PAGE>
of its range during most of the reporting period. While this maturity stance
enabled the managers to lock in the higher yields that longer-term securities
generally provide, it constrained their ability to capture potentially higher
short-term yields as interest rates rose.
LOOKING FORWARD, THE FUND'S MANAGERS BELIEVE THAT THE FED'S SHIFT TO HIGHER
INTEREST RATES SHOULD HELP EASE INVESTORS' CONCERNS REGARDING THE POSSIBILITY OF
AN OVERHEATED ECONOMY AND RISING INFLATION. Accordingly, management is
monitoring conditions carefully for opportunities to take advantage of any
changes in interest rates.
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 8/31/99 BENCHMARKS**
$162.1 million o Lipper Connecticut Tax Exempt
Money Market Funds Average
o IBC Financial Data Connecticut
Tax Free Money Market Funds Average
* A portion of the income may be subject to the Federal Alternative Minimum Tax
(AMT). Consult your personal tax advisor.
** The Lipper Funds Average and IBC Funds Average reflect the performance
(excluding sales charges) of mutual funds with similar objectives.
3
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
FUND PERFORMANCE
TOTAL RETURNS
SINCE
ONE FIVE DECEMBER 1, 1993
ALL PERIODS ENDED AUGUST 31, 1999 YEAR YEARS* INCEPTION*
- --------------------------------------------------------------------------------
CitiFunds Connecticut Tax Free Reserves 2.58% 3.07% 2.98%
Lipper Connecticut Tax Exempt Money Market
Funds Average 2.42% 2.84% 2.72%+
* Average Annual Total Return
+ Since 11/30/93
7-DAY YIELDS
Annualized Current 2.53%
Effective 2.56%
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, 1999, the Fund
paid $0.02550 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 72.0% of dividends earned were also exempt from Connecticut
personal income tax. In addition, 9.2% 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 Connecticut Tax Free Reserves vs. IBC
Financial Data Connecticut Tax Free Money Market Funds Average
<PAGE>
The following plot points represent a chart.
8/25/98 2.98 2.61
2.95 2.62
2.54 2.39
2.69 2.56
3.01 2.86
3.15 3.03
3.03 2.79
10/13/98 2.83 2.58
2.75 2.57
2.69 2.49
2.67 2.46
2.58 2.39
2.65 2.45
2.75 2.54
2.67 2.44
12/8/98 2.39 2.22
2.53 2.38
2.7 2.52
2.84 2.69
2.99 2.86
2.57 2.37
2.46 2.28
1/26/99 2.44 2.19
2.37 2.14
2.05 1.83
2.01 1.81
2.23 2.03
2.39 2.15
2.27 2.04
2.38 2.18
3/23/99 2.40 2.22
2.38 2.20
2.39 2.19
2.30 2.08
2.41 2.25
2.59 2.46
2.76 2.79
2.73 2.66
5/18/99 2.49 2.56
2.60 2.45
2.55 2.41
2.41 2.25
2.47 2.34
2.57 2.47
2.70 2.65
7/6/99 2.65 2.52
2.33 2.18
2.34 2.21
2.44 2.30
2.45 2.30
2.38 2.24
2.46 2.41
2.50 2.43
8/31/99 2.52 2.45
As illustrated, CitiFunds Connecticut Tax Free Reserves provided a similar
annualized seven-day yield to that of a comparable IBC Financial Data Money
Market Funds Average, as published in IBC's Money Fund ReportTM, for the
one-year period.
Note: Mutual fund shares are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other government agency. 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 and yields would have been lower.
4
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS AUGUST 31, 1999
Principal
Amount
Issuer (000's omitted) Value
- -------------------------------------------------------------------------------
Tax Exempt Commercial Paper--7.1%
- -------------------------------------------------------------------------------
Connecticut State Housing
Financial Authority, AMT,
3.20% due 9/07/99 $ 960 $ 960,000
Government Development
Bank, Puerto Rico,
3.20% due 9/23/99 2,190 2,190,000
Government Development
Bank, Puerto Rico,
3.10% due 11/18/99 2,000 2,000,000
Government Development
Bank, Puerto Rico,
3.40% due 2/15/00 2,836 2,836,000
Guam Power Authority
Revenue,
3.00% due 9/08/99 3,600 3,600,000
-----------
11,586,000
Bond, Revenue, Tax, Tax and Revenue
Anticipation Notes and General
Obligation Bonds and Notes--26.3%
- -------------------------------------------------------------------------------
Branford, CT, BANs,
4.00% due 7/26/00 4,020 4,040,944
Connecticut State, G.O.,
6.80% due 9/15/99 1,000 1,001,515
Connecticut State, G.O.,
5.80% due 11/15/99 245 246,327
Connecticut State, G.O.,
6.00% due 12/01/99 300 301,969
Connecticut State, G.O.,
5.90% due 3/15/00 1,450 1,470,946
Connecticut State, G.O.,
4.50% due 5/15/00 250 252,227
East Hampton, CT, G.O.,
3.75% due 10/15/99 500 500,314
Easton, CT, G.O.,
5.00% due 2/01/00 325 327,729
Ellington, CT, G.O.,
6.00% due 3/15/00 355 360,348
Enfield, CT, BANs,
3.25% due 10/15/99 5,000 5,000,000
Glastonbury, CT, G.O.,
4.00% due 4/01/00 700 704,382
Groton City, CT, BANs,
3.75% due 10/15/99 250 250,163
Guilford, CT, G.O.,
5.10% due 10/15/99 250 250,680
Hartford, CT, G.O.,
6.38% due 10/01/99 600 601,418
Hartford County, CT, G.O.,
4.00% due 8/01/00 1,000 1,004,442
Lebanon, CT, BANs,
3.75% due 12/15/99 1,080 1,081,524
Litchfield, CT, BANs,
3.20% due 10/21/99 1,300 1,300,345
Monroe, CT, BANs,
3.24% due 10/27/99 255 255,053
Monroe, CT, BANs,
3.25% due 10/27/99 1,810 1,810,974
Regional School District
No. 7, CT, BANs,
5.85% due 9/15/99 250 250,241
Regional School District
No. 7, CT, BANs,
3.50% due 3/16/00 3,639 3,644,724
Regional School District
No. 14, CT, BANs,
6.00% due 6/01/00 250 255,023
Regional School District
No. 16, CT, BANs,
4.00% due 4/07/00 4,000 4,011,637
Shelton, CT, BANs,
3.25% due 12/01/99 2,000 2,001,937
Southeastern Connecticut,
Water Authority, G.O.,
3.19% due 3/16/00 773 773,766
Stonington, CT, BANs,
3.50% due 11/15/99 2,675 2,677,029
Tolland, CT, BANs,
3.50% due 6/09/00 667 667,962
Torrington, CT, BANs,
4.00% due 9/23/99 7,000 7,002,039
Torrington, CT, BANs,
5.50% due 10/15/99 200 200,490
Windsor Locks, CT, G.O.,
5.00% due 9/15/99 300 300,194
-----------
42,546,342
Annual and Semi-Annual Tender Revenue
Bonds and Notes (Puts)--16.1%
- -------------------------------------------------------------------------------
Connecticut State Airport
Revenue, due 10/01/99 500 501,725
Connecticut State
Developmental Authority,
3.25% due 12/01/99 3,000 3,000,000
Connecticut State Health
and Educational Facilities,
4.50% due 11/01/99 650 651,244
Connecticut State Health
and Educational Facilities,
7.38% due 7/01/00 2,000 2,103,235
Connecticut State Housing
Finance Authority,
5.40% due 11/15/99 250 253,365
5
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS (Continued) August 31, 1999
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- -------------------------------------------------------------------------------
Connecticut State Special
Assessment Unemployment,
4.50% due11/15/99 $ 550 $ 551,417
Connecticut State Special
Assessment Unemployment,
5.00% due 11/15/99 1,625 1,632,220
Connecticut State Special
Assessment Unemployment,
4.60% due 5/15/00 150 151,232
Connecticut State Special
Tax Obligation,
4.00% due 11/01/99 1,000 1,001,597
Connecticut State Special
Tax Obligation,
5.25% due 10/01/99 1,000 1,001,416
Connecticut State Special
Tax Obligation,
4.25% due 10/01/99 250 250,261
Connecticut State Special
Tax Obligation,
4.25% due 10/01/99 400 400,294
Milford, CT,
4.00% due 11/01/99 145 145,237
Milford, CT,
3.50% due 11/15/99 310 310,310
Montville, CT,
6.00% due 2/15/00 135 136,646
New Hartford, CT,
4.00% due 11/15/99 165 165,330
New London, CT,
5.50% due 2/15/00 225 227,245
New Milford, CT,
6.00% due 1/15/00 1,000 1,010,704
Stamford, CT,
6.25% due 1/15/00 150 151,630
Stamford, CT,
4.50% due 7/15/00 285 287,334
University, CT,
2.95% due 4/01/00 1,450 1,450,000
Watertown, CT,
6.00% due 9/15/99 710 710,704
West Hartford, CT,
4.00% due 9/15/99 900 900,423
West Haven, CT,
3.40% due 10/21/99 4,800 4,801,276
West Haven, CT,
3.25% due 2/01/00 2,305 2,309,021
Westport, CT,
5.88% due 7/15/00 1,795 1,834,150
Woodbridge, CT,
6.00% due 10/15/99 245 245,859
-----------
26,183,875
- -------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES*--49.9%
- -------------------------------------------------------------------------------
Alabama State Public School
and College Revenue,
due 11/01/13 1,900 1,900,000
Beloit, KS, Industrial Revenue,
AMT, due 12/01/16 900 900,000
Clark County, NV, Airport
Revenue, AMT,
due 10/01/30 1,000 1,000,000
Connecticut State,
due 5/15/14 4,000 4,000,000
Connecticut State
Development Authority
Revenue, AMT,
due 6/01/13 3,800 3,800,000
Connecticut State
Development Authority
Revenue, AMT,
due 6/01/18 1,085 1,085,000
Connecticut State
Development Authority
Revenue, due 10/01/23 3,925 3,925,000
Connecticut State Health and
Educational Facilities,
due 7/01/13 1,425 1,425,000
Connecticut State Health and
Educational Facilities,
due 7/01/24 4,500 4,500,000
Connecticut State Health and
Educational Facilities,
due 7/01/27 2,000 2,000,000
Connecticut State Health and
Educational Facilities,
due 7/01/29 8,900 8,900,000
Connecticut State Health and
Educational Facilities,
due 6/10/30 8,200 8,200,000
Connecticut State Housing
Finance Authority,
due 5/15/17 4,095 4,095,000
Connecticut State Housing
Finance Authority, AMT,
due 11/15/27 5,505 5,505,000
Connecticut State Housing
Finance Authority,
due 11/15/28 2,500 2,500,000
Connecticut State Special
Tax Obligation,
due 12/01/10 3,400 3,400,000
Farmington, NM, Pollution
Control Revenue,
due 9/01/24 600 600,000
6
<PAGE>
CitiFunds Connecticut Tax Free Reserves
PORTFOLIO OF INVESTMENTSAugust 31, 1999
Principal
Amount
Issuer (000's omitted) Value
- -------------------------------------------------------------------------------
Gulf Coast, TX, Waste Disposal
Authority, due 6/01/20 $ 500 $ 500,000
Gulf Coast, TX, Waste Disposal
Authority, AMT, due 1/01/26 400 400,000
Gulf Coast, TX, Industrial
Development Authority,
AMT, due 4/01/29 300 300,000
Hartford, CT, Redevelopment
Agency, due 6/01/20 2,000 2,000,000
Kenton County, TX, Airport
Revenue, AMT, due 3/01/15 400 400,000
Macon Trust Pooled Variable
Rate Certificates, AMT,
due 12/05/30 1,980 1,980,000
Maryland State Community
Development Administration,
due 4/01/25 505 505,000
Mississippi Home Corp., AMT,
due 6/01/28 1,395 1,395,000
Morgan County, UT, Solid
Waste, AMT, due 8/01/31 1,800 1,800,000
North Carolina Educational
Facilities, due 9/01/26 100 100,000
Puerto Rico Commonwealth,
due 12/01/15 400 400,000
Puerto Rico Commonwealth,
due 7/01/20 2,400 2,400,000
Puerto Rico Commonwealth
Infrastructure Authority,
due 7/01/28 4,900 4,900,000
Puerto Rico Electrical Power
Authority, due 7/01/22 2,300 2,300,000
Shawnee, KS, Private Activity
Revenue, due 12/01/16 1,000 1,000,000
Shelton, CT, Housing Authority
Revenue, due 12/01/30 1,800 1,800,000
Uinta County, WY,
Pollution Control Revenue,
due 8/15/20 $ 900 $ 900,000
------------
80,815,000
------------
Total Investments,
at Amortized Cost 99.4% 161,131,217
Other Assets,
Less Liabilities 0.6 921,631
----- ------------
------------
Net Assets 100.0% $162,052,848
----- ------------
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
7
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at amortized cost (Note 1A) $161,131,217
Cash 29,050
Interest receivable 1,319,539
Receivable for shares of beneficial interest sold 1,860
- --------------------------------------------------------------------------------------------
Total assets 162,481,666
- --------------------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 282,839
Payable to affiliates:
Investment Advisory fees (Note 3) 16,009
Shareholder Servicing Agents' fees (Note 4B) 34,587
Accrued expenses and other liabilities 95,383
- --------------------------------------------------------------------------------------------
Total liabilities 428,818
- --------------------------------------------------------------------------------------------
NET ASSETS for 162,057,931 shares of beneficial interest outstanding $162,052,848
- --------------------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in capital $162,057,931
Accumulated net realized loss on investments (5,083)
- --------------------------------------------------------------------------------------------
Total $162,052,848
- --------------------------------------------------------------------------------------------
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE $1.00
- --------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
8
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1999
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME (NOTE 1B) $5,245,726
EXPENSES:
Administrative fees (Note 4A) $410,689
Shareholder Servicing Agents' fees (Note 4B) 410,689
Investment Advisory fees (Note 3) 328,552
Distribution fees (Note 5) 164,276
Custody and fund accounting fees 69,901
Audit fees 30,063
Legal fees 29,013
Shareholder reports 20,621
Trustees' fees 11,996
Transfer agent fees 11,000
Registration fees 1,517
Miscellaneous 8,736
- --------------------------------------------------------------------------------------------
Total expenses 1,497,053
Less aggregate amounts waived by Investment Adviser,
Administrator, and Distributor (Notes 3, 4A and 5) (426,465)
Less fees paid indirectly (Note 1E) (3,315)
- --------------------------------------------------------------------------------------------
Net expenses 1,067,273
- --------------------------------------------------------------------------------------------
Net investment income 4,178,453
NET REALIZED GAIN ON INVESTMENTS 1,712
- --------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $4,180,165
- --------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
9
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------
1999 1998
- --------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $4,178,453 $4,491,392
Net realized gain on investments 1,712 2,693
- --------------------------------------------------------------------------------------------
Net increase in net assets from operations 4,180,165 4,494,085
- --------------------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (4,178,453) (4,491,392)
- --------------------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST AT
NET ASSET VALUE OF $1.00 PER SHARE (NOTE 6):
Proceeds from sale of shares 238,697,352 282,812,520
Net asset value of shares issued to shareholders
from reinvestment of dividends 587,434 632,962
Cost of shares repurchased (233,785,159) (296,218,329)
- --------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from
transactions in shares of beneficial interest 5,499,627 (12,772,847)
- --------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 5,501,339 (12,770,154)
- --------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 156,551,509 169,321,663
- --------------------------------------------------------------------------------------------
End of period $162,052,848 $156,551,509
- --------------------------------------------------------------------------------------------
</TABLE>
See notes to financial statements
10
<PAGE>
CitiFunds Connecticut Tax Free Reserves
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------------------------------
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------
<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 0.02550 0.02971 0.02914 0.03135 0.03564
Less dividends from
net investment income (0.02550) (0.02971) (0.02914) (0.03135) (0.03564)
- -------------------------------------------------------------------------------------------
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) $162,053 $156,552 $169,322 $116,025 $46,556
Ratio of expenses to
average net assets (A) 0.65% 0.66% 0.65% 0.42% 0.22%
Ratio of expenses to
average net assets after
fees paid indirectly (A) 0.65% 0.65% 0.65% 0.42% 0.22%
Ratio of net investment income
to average net assets 2.54% 2.98% 2.92% 3.08% 3.60%
Total return 2.58% 3.01% 2.95% 3.18% 3.62%
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 $0.02289 $0.02712 $0.02615 $0.02504 $0.02732
RATIOS:
Expenses to average net assets 0.91% 0.91% 0.95% 1.04% 1.06%
Net investment income to
average net assets 2.28% 2.72% 2.62% 2.46% 2.76%
- ----------------------------------------------------------------------------------------
</TABLE>
(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
11
<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. The Investment Adviser of the Fund is Citibank,
N.A. ("Citibank"). CFBDS, Inc. ("CFBDS") 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, which in turn is a wholly-owned
subsidiary of Citigroup Inc. Citigroup Inc. was formed as a result of the merger
of Citicorp and Travelers Group, Inc. which was completed on October 8, 1998.
The 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, 1999, the
Fund, for federal income tax purposes, had a capital loss carryover of $5,083,
of which $2,291 will expire on August 31, 2004 and $2,792 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.
12
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS
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 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 $328,552 of
which $142,013 was voluntarily waived for the year ended August 31, 1999. 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, 1999, 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
13
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS (Continued)
at the annual rate of 0.25% of the Fund's average daily net assets. The
Administrative fees amounted to $410,689, of which $142,439 was voluntarily
waived for the year ended August 31, 1999. 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
$410,689 for the year ended August 31, 1999.
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 $164,276 of
which $142,013 was voluntarily waived for the year ended August 31, 1999. 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, 1999.
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 $524,663,041 and $520,019,504, respectively, for the year
ended August 31, 1999.
8. FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES The cost of investment
securities owned at August 31, 1999 for federal income tax purposes, amounted to
$161,131,217.
14
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS
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 $75
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, 1999, the commitment fee allocated to the Fund was $450. Since the
line of credit was established there have been no borrowings.
15
<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, 1999, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended August 31, 1999 and 1998 and the financial highlights
for each of the years in the five-year period ended August 31, 1999. 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, 1999, 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
Connecticut Tax Free Reserves at August 31, 1999, 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 4, 1999
16
<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
200 Berkeley Street, Boston, MA 02116
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
THE CITIFUNDS FAMILY
LARGE CAP STOCKS
oCitiFunds Growth & Income Portfolio
oCitiFunds Large Cap Growth Portfolio
SMALL CAP STOCKS
oCitiFunds Small Cap Value Portfolio
oCitiFunds Small Cap Growth Portfolio
INTERNATIONAL STOCKS
oCitiFunds International Growth & Income Portfolio
o CitiFunds International Growth Portfolio
GROWTH WITH INCOME
oCitiFunds Balanced Portfolio
BONDS
oCitiFunds Short-Term U.S. Government Income Portfolio
oCitiFunds Intermediate Income Portfolio
oCitiFunds National Tax Free Income Portfolio
oCitiFunds California Tax Free Income Portfolio
oCitiFunds New York Tax Free Income Portfolio
MONEY MARKETS
oCitiFunds Cash Reserves
oCitiFunds U.S. Treasury Reserves
oCitiFunds Tax Free Reserves
oCitiFunds California Tax Free Reserves
oCitiFunds Connecticut Tax Free Reserves
oCitiFunds New York Tax Free Reserves
This report is prepared for the information of shareholders of CitiFunds
Connecticut Tax Free Reserves. It is authorized for distribution to prospective
investors only when preceded or accompanied by an effective prospectus of
CitiFunds Connecticut Tax Free Reserves.
Ask for a prospectus (except for CitiFunds Connecticut Tax Free Reserves, which
preceded or accompanies this report) containing more complete information,
including all sales charges (if any), fees and expenses. Please read the
prospectus carefully before you invest or send money.
Although each money market fund seeks to maintain the value of
your investment at $1.00 pershare, it is possible to lose money by investing in
the funds.
CitiFunds are made available by CFBDS, Inc. as distributor. For more information
contact your Service agent or call 1-800-625-4554.
(C)1999 Citicorp R Printed on recycled paper CFA/RCT/899
