CITIFUNDS(R)
----------------
CitiFunds
New York
Tax Free
Reserves
ANNUAL REPORT
AUGUST 31, 2000
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INVESTMENT PRODUCTS: NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
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<PAGE>
TABLE OF CONTENTS
CITIFUNDS NEW YORK TAX FREE RESERVES
Letter to Our Shareholders 1
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Portfolio Environment and Outlook 2
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Fund Facts 3
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Fund Performance 4
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Portfolio of Investments 5
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Statement of Assets and Liabilities 13
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Statement of Operations 14
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Statement of Changes in Net Assets 15
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Financial Highlights 16
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Notes to Financial Statements 17
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Independent Auditors' Report 20
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<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
Robust economic growth, inflation concerns and rising interest rates helped
produce generally higher yields for tax-exempt money market instruments during
the reporting period. However, a closer look suggests that most of the
improvement in short-term tax-exempt yields took place during the first six
months of the period. Between March and August 2000, tax-exempt yields actually
declined modestly, primarily in response to supply-and-demand forces that were
unique to the municipal marketplace.
In this environment, the CitiFunds' investment adviser, Citibank, N.A.,
continued to manage CitiFunds New York Tax Free Reserves with the goal of
achieving its investment objective: providing high levels of current income that
are exempt from federal, New York State and New York City income taxes,
preservation of capital and liquidity.
This report reviews the Fund's investment activities and performance during
the twelve months ended August 31, 2000, 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, 2000
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
TAX-EXEMPT MONEY MARKET INSTRUMENTS PROVIDED COMPETITIVE RETURNS AND A
RELATIVELY SAFE HARBOR FOR MANY INVESTORS DURING THE PERIOD. These benefits were
particularly valuable during the second half of the reporting period, when
heightened volatility in the stock market and rising interest rates produced
flat or negative returns for some investment classes, including stock and
longer-term bonds. However, tax-exempt yields on New York securities ended the
reporting period at fairly low levels relative to taxable money market yields.
This was due mainly to a reduction in the issuance of short-term tax-exempt
securities by New York municipalities during the first eight months of 2000
compared to the same period one year ago.
The U.S. economy during most of the reporting period was characterized by
strong growth, rising prices for some important commodities, including oil, and
the lowest levels of unemployment in recent memory. During the first half of the
reporting period, these economic forces were complemented by a rapidly rising
stock market, especially within market sectors expected to benefit from strong
demand for technology and telecommunications services.
BECAUSE THIS COMBINATION OF POSITIVE ECONOMIC CONDITIONS HAS HISTORICALLY LED
TO HIGHER RATES OF INFLATION, THE FEDERAL RESERVE BOARD (THE "FED") CONTINUED TO
MOVE TOWARD A MORE RESTRICTIVE MONETARY POLICY DURING THE PERIOD. In fact, the
Fed raised short-term interest rates four times during the reporting period, for
a total increase of 1.25%, in an effort to relieve inflationary pressures that
might threaten to derail U.S. economic prosperity.
The Fed's actions strongly influenced the tax-exempt money markets during the
first half of the reporting period, causing tax-exempt yields to rise along with
yields in other sectors of the bond markets. During the second half of the
period, however, technical market forces eclipsed interest-rate trends, causing
most tax-exempt yields to fall modestly between March and August 2000. More
specifically, because many municipal issuers in New York enjoyed
higher-than-expected tax revenues during this period of economic strength, they
had less need to borrow in the short-term bond market. Accordingly, issuance of
short-term tax-exempt securities generally fell. At the same time, demand for
money market instruments rose when the stock market began to falter in March and
April and individuals sought to protect some of their gains during a time of
heightened market volatility.
IN THIS ENVIRONMENT, THE MANAGERS MAINTAINED A RELATIVELY SHORT AVERAGE
MATURITY FROM SEPTEMBER 1999 THROUGH MAY 2000. This maturity strategy was
designed to keep assets available for higher-yielding securities if interest
rates rose. When it became apparent that tax-exempt rates had peaked, management
extended the Fund's average maturity in order to lock in prevailing yields for
as long as practical.
FROM A SECURITY SELECTION PERSPECTIVE, MANAGEMENT CONTINUED TO FOCUS
PRIMARILY ON VARIABLE RATE DEMAND NOTES (VRDNS), WHICH ARE SHORT-TERM
INSTRUMENTS THAT ARE SECURITIZED AND ISSUED BY INVESTMENT BANKS. This emphasis
on floating-rate securities enabled the Fund to capture higher yields as they
became available. The managers' focus on VRDNs was also partly the result of the
lack of new municipal notes in the New York marketplace. As of August 31, 2000,
2
<PAGE>
weekly VRDNs comprised about 64% of the portfolio, tax-exempt commercial paper
represented about 15%, and municipal notes accounted for 21%.
AS FOR THE FORESEEABLE FUTURE, MANAGEMENT EXPECTS THAT THE FED WILL NOT MAKE
ANY MORE POLICY DECISIONS UNTIL AFTER THE NOVEMBER PRESIDENTIAL ELECTION. Recent
economic statistics indicate that the Fed's previous rate hikes may have been
effective in slowing the rate of economic growth and forestalling an
acceleration of inflation. Accordingly, management expects to maintain the
current maturity strategy and security selection approach over the next few
months. Of course, management will adjust its strategies as economic and market
conditions change.
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 8/31/00 BENCHMARK**
Class N shares $1,267.7 million o Lipper New York Tax Exempt Money
Cititrade(R) shares $14,243 Market Funds Average
o iMoneyNet, Inc. (formerly 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 adviser.
**The Lipper Funds Average and iMoneyNet, Inc. Funds Average reflect the
performance (excluding sales charges) of mutual funds with similar objectives.
Cititrade is a registered service mark of Citicorp.
3
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
<TABLE>
<CAPTION>
ONE FIVE TEN
ALL PERIODS ENDED AUGUST 31, 2000 YEAR YEARS* YEARS*
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<S> <C> <C> <C>
CitiFunds New York Tax Free Reserves Class N 3.20% 2.96% 2.91%
Lipper New York Tax Exempt Money Market Funds Average 3.22% 2.95% 2.88%
iMoneyNet, Inc. (formerly IBC Financial Data) New York
Tax Free Money Market Funds Average 3.19% 2.91% 2.84%
Cititrade New York Tax Free Reserves -- -- 0.12%**#
</TABLE>
* Average Annual Total Return # Commencement of Operations 8/18/00
** Not Annualized
7-DAY YIELDS CLASS N CITITRADE
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Annualized Current 3.49% 3.15%
Effective 3.55% 3.20%
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, 2000, the
CitiFunds New York Tax Free Reserves Class N Shares paid $0.03156 per share and
Cititrade New York Tax Free Reserves paid $0.00121 per share, respectively, 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 83.9%
of dividends earned were also exempt from New York personal income tax. In
addition, 12.9% 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
CLASS N VS. iMONEYNET, INC. (FORMERLY IBC FINANCIAL DATA) NEW YORK
TAX FREE MONEY MARKET FUNDS AVERAGE
As illustrated, CitiFunds New York Tax Free Reserves Class N generally provided
a similar annualized seven-day yield to that of a comparable iMoneyNet, Inc.
Money Funds Average, as published in iMoneyNet, Inc. Money Fund ReportTM, for
the one-year period.
[The following table represents a chart in the printed piece.]
CitiFunds
New York iMoneyNet, Inc.
Tax Free New York Tax Free
Reserves Money Market
Class N Funds Average
8/31/99 0.0246 0.0241
9/7/99 0.0255 0.0253
9/14/99 0.0257 0.0255
9/21/99 0.0272 0.0273
9/28/99 0.029 0.0295
10/5/99 0.029 0.0292
10/12/99 0.0264 0.0266
10/19/99 0.0269 0.0268
10/26/99 0.0273 0.0271
11/2/99 0.0277 0.0277
11/9/99 0.0274 0.0273
11/16/99 0.029 0.029
11/23/99 0.0301 0.0301
11/30/99 0.0307 0.0308
12/7/99 0.0292 0.029
12/14/99 0.0276 0.0275
12/21/99 0.03 0.0302
12/28/99 0.0344 0.0345
1/4/00 0.0386 0.0389
1/11/00 0.0277 0.0275
1/18/00 0.0254 0.0257
1/25/00 0.0265 0.0265
2/1/00 0.0269 0.0271
2/8/00 0.0257 0.0259
2/15/00 0.0282 0.0282
2/22/00 0.0302 0.0301
2/29/00 0.0302 0.0309
3/7/00 0.03 0.0303
3/14/00 0.0302 0.0301
3/21/00 0.0302 0.0301
3/28/00 0.0303 0.0303
4/4/00 0.031 0.0309
4/11/00 0.0281 0.0281
4/18/00 0.0311 0.0311
4/25/00 0.035 0.0344
5/2/00 0.0388 0.0391
5/9/00 0.043 0.0429
5/16/00 0.044 0.0437
5/23/00 0.0362 0.0364
5/30/00 0.0349 0.0352
6/6/00 0.0332 0.0336
6/13/00 0.0322 0.0325
6/20/00 0.0352 0.0352
6/27/00 0.0371 0.0373
7/4/00 0.0381 0.0376
7/11/00 0.0304 0.0298
7/18/00 0.0324 0.0314
7/25/00 0.0343 0.0342
8/1/00 0.0359 0.0351
8/8/00 0.0334 0.0331
8/15/00 0.0352 0.0346
8/22/00 0.0353 0.0346
8/29/00 0.035 0.0348
Note: Although money market funds seek to maintain the value of your investment
at $1.00 per share, it is possible to lose money by investing in the Fund.
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, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
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TAX-EXEMPT COMMERCIAL PAPER -- 14.8%
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Metropolitan Transit Authority, NY,
4.70% due 9/06/00 $10,000 $ 10,000,000
Metropolitan Transit Authority, NY,
4.10% due 9/07/00 27,300 27,300,000
Metropolitan Transit Authority, NY,
4.00% due 9/11/00 10,000 10,000,000
Metropolitan Transit Authority, NY,
4.10% due 11/01/00 15,000 15,000,000
Metropolitan Transit Authority, NY,
4.20% due 12/12/00 5,000 5,000,000
New York State,
4.40% due 2/08/01 8,700 8,700,000
New York State Power
Authority Revenue,
4.00% due 9/01/00 20,675 20,675,000
New York Thruway
Authority,
4.20% due 11/10/00 10,000 10,000,000
New York Thruway
Authority,
4.20% due 11/16/00 5,000 5,000,000
Long Island Power Authority,
4.15% due 11/07/00 8,000 8,000,000
Port Authority, New York and New Jersey,
4.00% due 10/13/00 3,250 3,250,000
Port Authority, New York and New Jersey,
4.25% due 1/01/01 65,000 65,000,000
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187,925,000
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BOND, REVENUE, TAX, TAX AND REVENUE
ANTICIPATION NOTES AND GENERAL
OBLIGATION BONDS AND NOTES -- 20.5%
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Brewster, NY, Central School District, BANs,
4.90% due 1/22/01 3,000 3,004,550
Carmel, NY, TANs,
5.00% due 6/29/01 4,300 4,320,354
Central Islip, NY, TANs,
5.00% due 6/29/01 5,000 5,021,724
Chautauqua County, NY, TANs,
4.38% due 12/21/00 10,000 10,008,037
Connetquot, NY, Central School District, TANs,
5.00% due 6/29/01 8,000 8,041,280
East Islip, NY, Union Free School district, TANs,
5.00% due 6/28/01 8,500 8,536,785
East Meadow, NY, Union Free School District, TANs,
5.00% due 6/28/01 4,000 4,021,131
East Moriches, NY, Union Free School District, TANs,
5.00% due 6/22/01 5,000 5,016,154
Elmont, NY, Union Free School District, TANs,
5.00% due 6/28/01 8,500 8,540,175
Fairport, NY, Central School District, TANs,
4.50% due 3/15/01 8,000 8,012,266
Goshen, NY, Central School District, TANs,
4.50% due 3/08/01 8,000 8,011,826
Great Neck, NY, Union Free School District, TANs,
4.75% due 6/28/01 8,000 8,028,472
Guilderland, NY, Central School District, TANs,
4.50% due 11/03/00 4,400 4,401,468
Half Hollow Hills, NY, Central School, TANs,
4.75% due 6/29/01 10,000 10,031,618
Hauppauge, NY, Union Free School District, TANs,
5.00% due 6/28/01 2,000 2,008,659
Huntington, NY, BANs,
5.00% due 6/28/01 3,000 3,016,557
Irvington, NY, TANs,
5.00% due 12/15/00 3,890 3,894,888
Irvington, NY, Union Free School District, TANs,
5.00% due 6/15/01 2,000 2,008,293
Islip, NY, TANs,
5.00% due 6/22/01 2,000 2,007,233
Islip, NY, Union Free School District, TANs,
5.00% due 6/28/01 8,700 8,741,087
Levittown, NY, Union Free School District, TANs,
5.00% due 6/20/01 7,400 7,422,620
Longwood, NY, Central School District, TANs,
5.00% due 6/29/01 10,000 10,027,599
5
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS (Continued) August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
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BOND, REVENUE, TAX, TAX AND REVENUE
ANTICIPATION NOTES AND GENERAL
OBLIGATION BONDS AND NOTES -- (CONT'D)
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Massapequa, NY, Union Free School District, TANs,
5.00% due 6/26/01 $ 6,100 $ 6,126,228
Mount Sinai, NY, Union Free School District, BANs,
5.00% due 6/28/01 7,000 7,033,058
Municipal Assistance Corp, NY, BANs,
5.00% due 7/01/01 1,475 1,483,255
Nassau County, NY, BANs,
6.00% due 3/20/01 10,000 10,080,833
New York State Environmental Facilities, BANs,
5.90% due 5/15/01 1,000 1,010,837
New York State Housing Financial Agency, BANs,
8.00% due 11/01/00 2,320 2,380,354
New York State Local Government Assistance, BANs,
7.00% due 4/01/01 5,400 5,589,036
New York State Medical Care Facilities, BANs,
7.50% due 2/15/01 7,615 7,875,593
New York State Urban Development Corp, BANs,
7.50% due 4/01/01 8,520 8,844,099
New York State Urban Development Corp, BANs,
7.60% due 4/01/01 1,000 1,038,257
North Shore, NY, Central School District, BANs,
4.75% due 6/28/01 3,000 3,009,454
Port Chester/Rye, NY, TANs,
5.00% due 3/22/01 3,000 3,009,660
Port Washington, NY,
Union Free School District, TANs,
4.75% due 6/28/01 7,000 7,022,074
Rochester, NY, BANs,
4.75% due 3/07/01 5,000 5,013,999
Rocky Point, NY, Union Free School District, TANs,
5.00% due 6/29/01 2,000 2,009,796
Roslyn, NY, BANs,
5.00% due 6/28/01 7,000 7,038,643
Sayville, NY, Union Free School District, TANs,
5.00% due 6/29/01 8,600 8,647,161
South Country, NY, Central School District, TANs,
5.00% due 6/26/01 2,500 2,508,185
Valley Stream, NY, Central School District, TANs,
4.90% due 6/27/01 2,300 2,307,204
Vestal, NY, Central School District, BANs,
5.00% due 7/20/01 3,065 3,078,126
West Babylon, NY, Union Free School, TANs,
5.00% due 6/28/01 13,000 13,055,155
West Islip, NY, Union Free School District, TANs,
4.75% due 6/29/01 15,000 15,042,577
West Islip, NY, Union Free School District, TANs,
5.00% due 6/29/01 2,000 2,008,678
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259,335,038
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VARIABLE RATE DEMAND NOTES* -- 64.2%
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ABN-AMRO Munitops Certificates Trust,
due 6/27/01 8,260 8,260,000
ABN-AMRO Munitops Certificates Trust,
due 3/07/07 7,561 7,561,000
ABN-AMRO Munitops Certificates Trust,
due 5/02/07 19,305 19,305,000
ABN-AMRO Munitops Certificates Trust,
due 7/04/07 5,000 5,000,000
Alaska State Housing, Finance Corp., AMT,
due 6/01/07 18,000 18,000,000
Babylon, NY, Industrial Development Agency, AMT,
due 7/01/14 600 600,000
Bluffton, IN, Economic Development Revenue, AMT,
due 9/01/05 1,070 1,070,000
Chicago, IL, Board of Education,
due 6/01/21 2,000 2,000,000
Chicago, IL, Board of Education,
due 1/01/23 10,000 10,000,000
6
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
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Clark County, NV, Airport Revenue,
due 7/01/28 $ 970 $ 970,000
Cohasset, MN, Revenue,
due 6/01/13 650 650,000
Cohasset, MN, Revenue,
due 6/01/20 500 500,000
Columbia County, NY, Industrial Development Agency,
due 2/01/11 1,800 1,800,000
Connecticut State,
due 5/15/14 1,800 1,800,000
Connecticut State Housing Financial Authority, AMT,
due 11/15/27 195 195,000
Franklin County, NY, Industrial Development Agency,
due 2/01/03 2,500 2,500,000
Fulton County, GA, Residential Care,
due 1/01/18 1,000 1,000,000
Fulton County, GA, Industrial Development Authority, AMT,
due 6/01/27 3,900 3,900,000
Georgia Local Government Certificates of Participation,
due 6/01/28 200 200,000
Glens Falls, NY, Industrial Development Agency,
due 12/01/04 1,210 1,210,000
Gulf Coast, TX, Waste Disposal Authority, AMT,
due 6/01/24 900 900,000
Hawaii State Housing Development Corp,
due 7/01/29 12,400 12,400,000
Harris County, TX, Health Facilities Development
due 2/15/27 2,000 2,000,000
Harris County, TX, Industrial
Development Corporation, AMT,
due 2/01/23 1,800 1,800,000
Hempstead Town, NY, Industrial Development Agency,
due 12/01/10 7,000 7,000,000
Illinois Health Facilities Authority Revenue,
due 12/01/15 300 300,000
Indiana, Health Facilities Authority Revenue,
due 12/01/02 1,000 1,000,000
Indianapolis, IN, Industrial Development Revenue, AMT,
due 12/01/04 2,000 2,000,000
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 1,250 1,250,000
Jefferson Parish, LA, Home Mortgage Authority, AMT,
due 12/01/26 1,000 1,000,000
Jeffersonville, IN, Economic Development Revenue,
due 10/01/11 4,000 4,000,000
Kansas City Industrial Development Authority,
due 4/01/27 500 500,000
Kansas State Development Finance Authority Revenue,
due 11/15/28 450 450,000
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, Tax Airport Authority,
due 12/01/14 200 200,000
Long Island Power Authority, NY,
due 4/01/10 3,200 3,200,000
Long Island Power Authority, NY,
due 4/01/25 5,000 5,000,000
Long Island Power Authority, NY,
due 4/01/25 1,000 1,000,000
7
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS (Continued) August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
--------------------------------------------------------------------------------
Long Island Power Authority, NY,
due 5/01/33 $ 1,100 $ 1,100,000
Long Island Power Authority, NY,
due 5/01/33 4,500 4,500,000
Louisiana State Health Education Authority Revenue,
due 10/01/17 1,390 1,390,000
Lower Neches Valley Authority, TX, AMT,
due 4/01/29 1,700 1,700,000
Macon, GA Trust Receipts,
due 3/03/07 46,960 46,960,000
Macon, GA Trust Receipts, AMT,
due 2/05/30 1,155 1,155,000
Macon, GA Trust Receipts, AMT,
due 12/05/30 8,480 8,480,000
Marion, IN, Revenue, AMT,
due 11/01/14 2,500 2,500,000
Marlboro County, SC, Solid Waste, AMT,
due 6/01/23 2,000 2,000,000
Massachusetts State Housing Finance Authority, AMT,
due 7/01/19 640 640,000
Mercer County,WV, Industrial Development Revenue,
due 5/01/01 1,000 1,000,000
Metropolitan Transit Authority, NY,
due 7/01/23 10,000 10,000,000
Mississippi Single Family Home Corp., AMT,
due 6/01/28 695 695,000
Missouri State, Health Facilites Revenue,
due 10/01/09 200 200,000
Montgomery County, MD, Housing Opportunities,
due 9/01/29 2,700 2,700,000
Moorhead, MN, Solid Waste Disposal, AMT,
due 4/01/12 2,500 2,500,000
Morgan County, UT, Solid Waste,
due 8/01/31 200 200,000
Municipal Security Trust Certificates,
due 8/01/03 3,500 3,500,000
New Hanover County, NC,
due 3/01/13 2,250 2,250,000
New Rochelle, NY, Industrial Development Agency,
due 12/01/05 5,500 5,500,000
New York City, NY,
due 8/01/03 3,300 3,300,000
New York City, NY,
due 2/15/13 1,000 1,000,000
New York City, NY,
due 8/01/15 800 800,000
New York City, NY,
due 2/15/16 5,800 5,800,000
New York City, NY,
due 6/01/17 7,175 7,175,000
New York City, NY,
due 2/15/18 1,100 1,100,000
New York City, NY,
due 8/01/19 1,400 1,400,000
New York City, NY,
due 2/01/20 1,300 1,300,000
New York City, NY,
due 8/01/20 5,600 5,600,000
New York City, NY,
due 8/01/21 3,300 3,300,000
New York City, NY,
due 10/01/21 2,100 2,100,000
New York City, NY,
due 6/01/22 2,000 2,000,000
New York City, NY,
due 8/01/23 4,250 4,250,000
New York City, NY,
due 8/01/23 3,000 3,000,000
New York City, NY,
due 8/15/24 7,390 7,390,000
New York City, NY, Health & Hospital Corp.,
due 2/15/26 4,835 4,835,000
New York City, NY, Health & Hospital Corp.,
due 2/15/26 5,200 5,200,000
New York City, NY, Housing Development,
due 1/15/19 500 500,000
New York City, NY, Housing Development,
due 1/01/23 2,700 2,700,000
New York City, NY, Housing Development,
due 3/15/25 900 900,000
8
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CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
--------------------------------------------------------------------------------
New York City, NY, Housing Development,
due 10/15/28 $ 1,800 $ 1,800,000
New York City, NY, Housing Development,
due 4/15/29 7,000 7,000,000
New York City, NY, Housing Development,
due 7/01/31 4,900 4,900,000
New York City, NY, Housing Development, AMT,
due 8/01/31 2,500 2,500,000
New York City, NY, Housing Development,
due 9/01/31 4,100 4,100,000
New York City, NY, Housing Development, AMT,
due 1/01/32 5,800 5,800,000
New York City, NY, Housing Development, AMT,
due 6/01/32 3,400 3,400,000
New York City, NY, Industrial Development Agency,
due 12/01/01 1,000 1,000,000
New York City, NY, Industrial Development Agency,
due 6/30/14 1,600 1,600,000
New York City, NY, Industrial Development Agency, AMT,
due 12/01/17 7,300 7,300,000
New York City, NY, Industrial Development Agency, AMT,
due 6/01/22 1,140 1,140,000
New York City, NY, Municipal Water Authority,
due 9/15/08 9,300 9,300,000
New York City, NY, Municipal Water Authority,
due 6/15/31 6,875 6,875,000
New York City, NY, Municipal Water Authority,
due 6/15/33 4,700 4,700,000
New York City, NY, Traditional Cultural Revenue,
due 7/01/01 8,000 8,000,000
New York City, NY, Traditional Cultural Revenue,
due 12/01/10 1,945 1,945,000
New York City, NY, Traditional Cultural Revenue,
due 5/01/14 1,700 1,700,000
New York City, NY, Traditional Cultural Revenue,
due 7/01/29 1,100 1,100,000
New York City, NY, Transitional Finance
Authority Revenue,
due 11/15/21 19,600 19,600,000
New York City, NY, Transitional Finance
Authority Revenue,
due 11/15/22 4,700 4,700,000
New York City, NY, Transitional Finance
Authority Revenue,
due 11/01/26 1,500 1,500,000
New York City, NY, Transitional Finance
Authority Revenue,
due 11/01/27 3,500 3,500,000
New York City, NY, Transitional Finance
Authority Revenue,
due 11/15/27 24,300 24,300,000
New York City, NY, Transitional Finance
Authority Revenue,
due 5/01/28 3,600 3,600,000
New York Pooled
Puttable Trust,
due 12/05/30 5,550 5,550,000
New York State Dormitory Authority Revenue,
due 1/01/06 7,840 7,840,000
New York State Dormitory Authority Revenue,
due 2/01/06 3,900 3,900,000
New York State Dormitory Authority Revenue,
due 2/01/07 3,900 3,900,000
New York State Dormitory Authority Revenue,
due 2/15/08 3,500 3,500,000
New York State Dormitory Authority Revenue,
due 2/15/13 2,200 2,200,000
9
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS (Continued) August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
--------------------------------------------------------------------------------
New York State Dormitory Authority Revenue,
due 5/15/15 $ 5,125 $ 5,125,000
New York State Dormitory Authority Revenue,
due 7/01/19 1,000 1,000,000
New York State Dormitory Authority Revenue,
due 7/01/19 2,700 2,700,000
New York State Dormitory Authority Revenue,
due 1/15/23 5,000 5,000,000
New York State Dormitory Authority Revenue,
due 7/01/25 2,500 2,500,000
New York State Dormitory Authority Revenue,
due 7/01/26 1,800 1,800,000
New York State Dormitory Authority Revenue,
due 7/01/28 8,860 8,860,000
New York State Dormitory Authority Revenue,
due 5/15/29 10,000 10,000,000
New York State Energy, Research & Development,
due 7/01/15 1,400 1,400,000
New York State Energy, Research & Development, AMT,
due 12/01/23 2,000 2,000,000
New York State Energy, Research & Development,
due 12/01/25 600 600,000
New York State Energy, Research & Development,
due 3/01/27 1,100 1,100,000
New York State Energy, Research & Development, AMT,
due 5/01/34 13,000 13,000,000
New York State Energy, Research & Development, AMT,
due 5/01/34 2,500 2,500,000
New York State Housing Finance Authority, AMT,
due 11/01/28 16,000 16,000,000
New York State Housing Finance Authority, AMT,
due 11/01/30 10,000 10,000,000
New York State Housing Finance Authority, AMT,
due 11/01/32 2,700 2,700,000
New York State Housing Finance Authority, AMT,
due 11/01/32 10,000 10,000,000
New York State Job Development
Authority, AMT,
due 3/01/05 1,105 1,105,000
New York State Job Development
Authority, AMT,
due 3/01/07 1,400 1,400,000
New York State Local Government Assistance Corp.,
due 4/01/22 62,585 62,585,000
New York State Local Government Assistance Corp.,
due 4/01/25 5,100 5,100,000
New York State Medical Care Facilities Agency,
due 11/01/08 2,500 2,500,000
New York State Medical Care Facilities Agency,
due 8/15/14 6,640 6,640,000
New York State Medical Care Facilities Agency,
due 2/15/22 7,605 7,605,000
New York State Medical Care Facilities Agency,
due 2/05/29 5,625 5,625,000
New York State Mortgage Agency, AMT,
due 10/01/24 4,300 4,300,000
New York State Mortgage Agency, AMT,
due 10/01/30 10,000 10,000,000
New York State Thruway Authority,
due 4/01/10 2,700 2,700,000
New York State Thruway Authority,
due 1/01/27 1,300 1,300,000
New York State Thruway Authority,
due 7/01/27 5,000 5,000,000
10
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
--------------------------------------------------------------------------------
New York State Urban Development,
due 1/01/29 $ 3,170 $ 3,170,000
North Carolina Medical
Care Community Hospital Revenue,
due 10/01/20 100 100,000
Ohio State Air Quality Development Authority,
due 12/01/15 900 900,000
Onondaga County, NY, Industrial Development Agency,
due 12/01/07 490 490,000
Orange County, FL, Industrial Development Authority,
due 2/01/04 575 575,000
Orange County, FL, Housing Finance Authority,
due 6/01/25 2,250 2,250,000
Philadelphia, PA, Industrial Development
Authority, AMT,
due 5/01/14 2,300 2,300,000
Pitney Bowes Credit Corp. Leasetops,
due 3/16/05 6,883 6,883,210
Port Authority of New York and New Jersey,
Special Obligation,
due 6/01/20 10,000 10,000,000
Port Authority of New York and New Jersey,
Special Obligation, AMT,
due 1/15/27 4,995 4,995,000
Port Authority of New York and New Jersey,
Special Obligation,
due 8/01/33 7,495 7,495,000
Puerto Rico Commonwealth,
due 12/01/15 7,200 7,200,000
Puerto Rico Commonwealth,
due 7/01/24 4,745 4,745,000
Puerto Rico Commonwealth Highway Transportation,
due 7/01/28 800 800,000
Puerto Rico Commonwealth Highway Transportation,
due 7/01/28 1,870 1,870,000
Puerto Rico Commonwealth Infrastructure,
due 7/01/28 3,920 3,920,000
Puerto Rico Electric Power Authority,
due 1/01/12 2,180 2,180,000
Puerto Rico Electric Power Authority,
due 7/01/22 15,000 15,000,000
Puerto Rico Electric Power Authority,
due 7/01/23 1,000 1,000,000
Puerto Rico Industrial Tourist Educational Revenue,
due 10/01/20 2,300 2,300,000
Puerto Rico Public Buildings Authority,
due 7/01/21 9,380 9,380,000
Puerto Rico Public Buildings Authority,
due 1/01/25 3,500 3,500,000
Puerto Rico Public Buildings Authority,
due 7/01/25 1,930 1,930,000
Puerto Rico Public Finance Corp.,
due 6/01/12 5,900 5,900,000
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 Control,
due 3/01/24 1,325 1,325,000
Schenectady County, NY, Industrial Development,
due 6/01/09 1,630 1,630,000
Seveir County, TN, Public Building Authority,
due 6/01/09 430 430,000
Seveir County, TN, Public Building Authority,
due 6/01/17 1,105 1,105,000
11
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS (Continued) August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
--------------------------------------------------------------------------------
Seveir County, TN, Public Building Authority,
due 6/01/19 $ 3,000 $ 3,000,000
Seveir County, TN, Public Building Authority,
due 6/01/27 2,455 2,455,000
South Carolina Jobs Economic Development, AMT,
due 11/01/10 2,320 2,320,000
South Carolina Jobs Economic Development, AMT,
due 12/01/12 475 475,000
South Carolina Jobs Economic Development, AMT,
due 6/01/15 1,000 1,000,000
Southeast, NY, Industrial Development Agency, AMT,
due 12/01/12 2,000 2,000,000
Tennessee Housing Development Agency,
due 7/01/04 7,000 7,000,000
Triborough Bridge and Tunnel Authority, NY,
due 1/01/12 6,240 6,240,000
Triborough Bridge and Tunnel Authority, NY,
due 1/01/19 5,370 5,370,000
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 Housing Finance, AMT,
due 11/01/21 675 675,000
Westside, TX, Calhoun County, AMT,
due 4/01/31 1,800 1,800,000
--------------
814,379,210
--------------
TOTAL INVESTMENTS,
AT AMORTIZED COST 99.5% 1,261,639,248
OTHER ASSETS,
LESS LIABILITIES 0.5 6,087,197
----- --------------
NET ASSETS 100.0% $1,267,726,445
===== ==============
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
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2000
================================================================================
ASSETS:
Investments, at amortized cost (Note 1A) $1,261,639,248
Cash 64,509
Interest receivable 9,222,856
Receivable for shares of beneficial interest sold 734,912
--------------------------------------------------------------------------------
Total assets 1,271,661,525
--------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 2,423,548
Payable for shares of beneficial interest repurchased 769,895
Payable to affiliates:
Investment advisory fees (Note 3) 159,728
Shareholder servicing agents' fees (Note 4B) 266,997
Accrued expenses and other liabilities 314,912
--------------------------------------------------------------------------------
Total liabilities 3,935,080
--------------------------------------------------------------------------------
NET ASSETS $1,267,726,445
================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $1,267,646,070
Accumulated net realized gain on investments 80,375
--------------------------------------------------------------------------------
Total $1,267,726,445
================================================================================
CLASS N SHARES:
Net Asset Value, Offering Price and Redemption Price Per share
($1,267,712,202/1,267,631,828 shares outstanding) $1.00
================================================================================
CITITRADE SHARES:
Net Asset Value, Offering Price and Redemption Price Per share
($14,243/14,242 shares outstanding) $1.00
================================================================================
See notes to financial statements
13
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000
================================================================================
INTEREST INCOME (Note 1B): $48,028,337
EXPENSES:
Administrative fees (Note 4A) $3,154,846
Shareholder Servicing Agents' fees
Class N (Note 4B) 3,153,198
Investment Advisory fees (Note 3) 2,523,877
Distribution fees Class N (Note 5) 1,261,279
Distribution fees Cititrade (Note 5) 2
Custody and fund accounting fees 288,466
Trustees' fees 58,058
Legal fees 51,194
Shareholder reports 39,037
Audit fees 35,200
Registration fees 31,504
Transfer agent fees 14,196
Miscellaneous 41,069
--------------------------------------------------------------------------------
Total expenses 10,651,926
Less aggregate amounts waived by
Investment Adviser,
Administrator, and Distributor
(Notes 3, 4A, and 5)(2,431,957)
Less fees paid indirectly (Note 1E) (16,521)
--------------------------------------------------------------------------------
Net expenses 8,203,448
--------------------------------------------------------------------------------
Net investment income 39,824,889
NET REALIZED GAIN ON INVESTMENTS 124,489
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $39,949,378
================================================================================
See notes to financial statements
14
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
--------------------------------
2000 1999
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 39,824,889 $ 30,143,033
Net realized gain on investments 124,489 45,577
--------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 39,949,378 30,188,610
--------------------------------------------------------------------------------
FROM INVESTMENT ACTIVITIES:
Net investment income, declared as dividends
to shareholders (Note 2):
Class N shares (39,824,878) (30,143,033)
Cititrade shares (12) --
--------------------------------------------------------------------------------
(39,824,890) (30,143,033)
--------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST AT
NET ASSET VALUE OF $1.00 PER SHARE (NOTE 6):
CLASS N SHARES
Proceeds from sale of shares 1,401,709,211 1,161,019,287
Net asset value of shares issued to shareholders
from reinvestment of dividends 13,748,001 11,517,849
Cost of shares repurchased (1,329,393,720) (1,085,790,455)
--------------------------------------------------------------------------------
Total Class N shares 86,063,492 86,746,681
--------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST AT
NET ASSET VALUE OF $1.00 PER SHARE (Note 6):
CITITRADE SHARES*
Proceeds from sale of shares 18,250 --
Net asset value of shares issued to shareholders
from reinvestment of dividends 12 --
Cost of shares repurchased (4,019) --
--------------------------------------------------------------------------------
Total Cititrade shares 14,243 --
--------------------------------------------------------------------------------
Net increase in net assets resulting from
transactions in shares of beneficial interest 86,077,735 86,746,681
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 86,202,223 86,792,258
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,181,524,222 1,094,731,964
--------------------------------------------------------------------------------
End of period $1,267,726,445 $ 1,181,524,222
================================================================================
* August 18, 2000 (Commencement of Operations).
See notes to financial statements
15
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS N SHARES
--------------------------------------------------------
YEAR ENDED AUGUST 31,
--------------------------------------------------------
2000 1999 1998 1997 1996
--------------------------------------------------------
<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 0.03156 0.02572 0.02991 0.02949 0.02936
Dividends from net
investment income (0.03156) (0,02572) (0.02991) (0.02949) (0.02936)
-------------------------------------------------------------------------------------------
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) $1,267,712 $1,181,524 $1,094,732 $976,959 $941,691
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 3.16% 2.56% 2.99% 2.95% 2.92%
Total return 3.20% 2.60% 3.03% 2.99% 2.98%
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 $0.02963 $0.02391 $0.02791 $0.02739 $0.02725
Ratios:
Expenses to average net assets 0.84% 0.84% 0.85% 0.86% 0.86%
Net investment income to
average net assets 2.97% 2.38% 2.79% 2.74% 2.71%
===========================================================================================
</TABLE>
<TABLE>
<CAPTION>
CITITRADE SHARES
----------------------------
FOR THE PERIOD
AUGUST 18, 2000
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 2000
===========================================================================================
<S> <C>
Net Asset Value, beginning of period $1.00000
Net investment income 0.00121
Less dividends from net investment income (0.00121)
-------------------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000
-------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period $14,243
Ratio of expenses to average net assets 1.00%*
Ratio of expenses to average net assets after
fees paid indirectly 1.00%*
Ratio of net investment income to average net assets 2.81%*
Total return 0.12%**
Net investment income per share $0.00121
RATIOS:
Expenses to average net assets 1.19%*
Net investment income to average net assets 2.62%*
===========================================================================================
</TABLE>
*Annualized
**Not Annualized
See notes to financial statements
16
<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 Citigroup Inc.
The Fund as of August 31, 2000, offers Class N shares and Cititrade shares.
The Fund commenced its public offering of Cititrade shares on August 18, 2000.
Expenses of the Fund are borne pro-rata by the holders of each class of shares,
except that each class bears expenses unique to that class (including the Rule
12b-1 service and distribution fees applicable to such class), and votes as a
class only with respect to its own Rule 12b-1 plan. Shares of each class would
receive their pro-rata share of the net assets of the Fund if the Fund were
liquidated. Class N shares have lower expenses than Cititrade shares. Cititrade
shares pay a higher ongoing service fee than Class N shares.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America 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 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.
17
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS (Continued)
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 $2,523,877
of which $859,046 was voluntarily waived for the year ended August 31, 2000. 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, 2000, management agreed to
voluntarily limit Class N expenses to 0.65% and for the period from August 18,
2000 (Commencement of Operations) to August 31, 2000, management agreed to
voluntarily limit Cititrade expenses to 1.00%.
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 $3,154,846 of which $964,616 was voluntarily waived for the year
ended August 31, 2000. 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.
18
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS
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 $3,153,198 for Class N, for the year ended August 31, 2000.
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 Class
N average daily net assets and 0.60% of Cititrade average daily net assets. The
Distribution fees for Class N amounted to $1,261,279 of which $608,295 was
voluntarily waived for the year ended August 31, 2000 and $2 for Cititrade for
the period August 18, 2000 (Commencement of Operations) to August 31, 2000. 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, 2000.
6. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional Shares of Beneficial
Interest (without par value).
7. INVESTMENT TRANSACTIONS Purchases, and maturities and sales, of money market
instruments aggregated $2,972,813,970 and $2,885,700,452, respectively, for the
year ended August 31, 2000.
8. FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES The cost of investment
securities owned at August 31, 2000, for federal income tax purposes, amounted
to $1,261,639,248.
9. LINE OF CREDIT The Fund, along with other funds in the fund family, 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, 2000, the commitment fee allocated to the Fund was $3,742.
Since the line of credit was established, there have been no borrowings.
19
<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, 2000, the related statement of
operations for the year then ended, the statement of changes in net assets for
the years ended August 31, 2000 and 1999 and the financial highlights for each
of the years in the five-year period ended August 31, 2000. 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 auditing standards generally
accepted in the United States of America. 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, 2000, 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, 2000, the results of its operations, the changes
in its net assets, and its financial highlights for the respective stated
periods in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 4, 2000
20
<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
Robert Frenkel**
TREASURER
Linwood Downs*
*AFFILIATED PERSON OF ADMINISTRATOR AND DISTRIBUTOR
**AFFILIATED PERSON OF INVESTMENT ADVISER
***TRUSTEE EMERITUS
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
CitiFiduciary Trust Company
125 Broad Street, New York, NY 10004
SUB-TRANSFER AGENT
PFPC
4400 Computer Drive
West Boro, MA 01581
SUB-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>
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.
(C)2000 Citicorp [Logo] Printed on recycled paper CFA/NYR/800
<PAGE>
CITIFUNDS(R)
---------------
CitiFunds
California
Tax Free
Reserves
ANNUAL REPORT
AUGUST 31, 2000
--------------------------------------------------------------------------------
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 CitiFunds Shareholder:
Robust economic growth, inflation concerns and rising interest rates helped
produce generally higher yields for tax-exempt money market instruments during
the reporting period ended August 31, 2000. However, a closer look suggests that
most of the improvement in short-term tax-exempt yields took place during the
first six months of the period. Between March and August 2000, tax-exempt yields
actually declined modestly, primarily in response to supply-and-demand forces
that were unique to the municipal marketplace.
In this environment, the CitiFunds' investment adviser, Citibank, N.A.,
continued to manage CitiFunds California Tax Free Reserves with the goal of
achieving its investment objective: providing high levels of current income that
are 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, 2000, 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, 2000
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
TAX-EXEMPT MONEY MARKET INSTRUMENTS PROVIDED COMPETITIVE RETURNS AND A
RELATIVELY SAFE HARBOR FOR MANY INVESTORS DURING THE REPORTING PERIOD. These
benefits were particularly valuable during the second half of the period, when
heightened volatility in the stock market and rising interest rates produced
flat or negative returns for some investment classes, including stocks and
longer-term bonds. However, tax-exempt yields on California securities ended the
reporting period at fairly low levels relative to taxable money market yields.
This was due mainly to a reduction in the issuance of short-term tax-exempt
securities by California municipalities during the first eight months of 2000
compared to the same period one year earlier.
The U.S. economy during most of the reporting period was characterized by
strong growth, rising prices for some important commodities, including oil, and
the lowest levels of unemployment in recent memory. During the first half of the
reporting period, these positive economic conditions were enhanced by a rapidly
rising stock market, especially within market sectors expected to benefit from
strong demand for technology and telecommunications services.
BECAUSE THIS COMBINATION OF POSITIVE ECONOMIC FORCES HAS HISTORICALLY LED TO
HIGHER RATES OF INFLATION, THE FEDERAL RESERVE BOARD (THE "FED") CONTINUED TO
MOVE TOWARD A MORE RESTRICTIVE MONETARY POLICY DURING THE PERIOD. In fact, the
Fed raised short-term interest rates four times during the reporting period, for
a total increase of 1.25%, in an effort to relieve inflationary pressures that
might threaten to derail U.S. economic prosperity.
The Fed's actions strongly influenced tax-exempt money markets during the
first half of the reporting period, causing tax-exempt yields to rise along with
yields in other sectors of the bond markets. During the second half of the
period, however, technical market forces eclipsed interest-rate trends, causing
most tax-exempt yields to fall modestly between March and August 2000.
More specifically, because many municipal issuers in California enjoyed
higher-than-expected tax revenues during this period of economic strength, they
had less need to borrow in the short-term bond market. Accordingly, issuance of
short-term tax-exempt securities generally fell. At the same time, demand for
money market instruments rose when the stock market began to falter in March and
April, and individuals sought to protect some of their newly created wealth and
investment gains during a time of heightened market volatility in the
longer-term financial markets.
IN THIS ENVIRONMENT, MANAGEMENT MAINTAINED A RELATIVELY SHORT AVERAGE
MATURITY FROM SEPTEMBER 1999 THROUGH MAY 2000. This maturity strategy was
designed to keep assets available for higher yielding securities should interest
rates rise. When it became apparent that tax-exempt rates had peaked, management
then extended the Fund's average maturity in order to lock in prevailing yields
for as long as practical.
2
<PAGE>
From a security selection perspective, management continued to focus
primarily on Variable Rate Demand Notes (VRDNs), which are short-term
instruments that are securitized and issued by investment banks. This emphasis
on floating-rate securities enabled the Fund to capture higher yields as they
became available. The managers' focus on VRDNs was also partly the result of the
lack of new municipal notes in the California marketplace. As of August 31,
2000, weekly VRDNs comprised about 75% of the Fund's portfolio, and municipal
notes accounted for 25% of the Fund's portfolio. As for the foreseeable future,
management expects that the Fed most likely will not make additional policy
decisions until after the November Presidential election. Recent economic
statistics indicate that the Fed's previous rate hikes may have been effective
in slowing the rate of economic growth and forestalling an acceleration of
inflation. Accordingly, management expects to maintain the current maturity
strategy and security selection approach over the next few months. Of course,
management will adjust its strategies as economic and market conditions change.
FUND FACTS
FUND OBJECTIVE
To provide its shareholders with high levels of current income exempt from both
federal and California personal income taxes*, preservation of capital and
liquidity.
INVESTMENT ADVISER, DIVIDENDS
Citibank, N.A Declared daily, paid monthly
COMMENCEMENT OF OPERATIONS CAPITAL GAINS
March 10, 1992 Distributed annually, if any
NET ASSETS AS OF 8/31/00 BENCHMARK**
Class N shares $313.3 million o Lipper California Tax Exempt Money
Market Funds Average
o iMoneyNet, Inc. (formerly 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 adviser.
** The Lipper Funds Average and iMoneyNet, Inc. Funds Average reflect the
performance (excluding sales charges) of mutual funds with similar
objectives.
3
<PAGE>
FUND PERFORMANCE
Total Returns
<TABLE>
<CAPTION>
SINCE
MARCH 10,
ONE FIVE 1992
ALL PERIODS ENDING AUGUST 31, 2000 YEAR YEARS* INCEPTION*
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CitiFunds California Tax Free Reserves Class N 2.95% 2.90% 2.84%
Lipper California Tax Exempt Money Market Funds Average 2.91% 2.86% 2.69%+
iMoneyNet, Inc. (formerly IBC Financial Data) California
Tax Free Money Market Funds Average 2.86% 2.85% 2.68%+
</TABLE>
* Average Annual Total Return
+ Since 2/29/92
7-DAY YIELDS
Annualized Current 3.19%
Effective 3.24%
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, 2000, CitiFunds
California Tax Free Reserves Class N shares paid $0.02907 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 87.2%
of dividends earned were also exempt from California personal income tax. In
addition, 4.0% 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 CLASS N VS. iMONEYNET, INC. (FORMERLY IBC FINANCIAL DATA)
CALIFORNIA TAX FREE MONEY MARKET FUNDS AVERAGE
As illustrated, CitiFunds California Tax Free Reserves generally provided a
similar annualized seven-day yield to that of a comparable iMoneyNet, Inc.
California Tax Free Money Market Funds Average, as published in iMoneyNet, Inc.
Money Fund ReportTM, for the one-year period.
[The following table represents a chart in the printed piece.]
iMoneyNet, Inc. CitiFunds
California California
Tax Free Tax Free
Money Market Reserves
Funds Average Class N
0.024 0.0236
9/7/99 0.0233 0.0228
0.023 0.0221
0.0259 0.0239
0.027 0.0272
10/5/99 0.0276 0.0271
0.0244 0.0235
0.0248 0.0241
0.0253 0.0247
11/2/99 0.0262 0.0261
0.0259 0.0259
0.0277 0.0275
0.0291 0.0284
0.0296 0.0291
12/7/99 0.0283 0.027
0.0254 0.0252
0.0281 0.0277
0.0338 0.0318
1/4/00 0.0378 0.0357
0.0258 0.0241
0.0223 0.0216
0.0227 0.0227
2/1/00 0.0238 0.0232
0.022 0.0211
0.0234 0.0234
0.0242 0.0218
0.0249 0.0228
3/7/00 0.0263 0.0249
0.027 0.0262
0.0271 0.026
0.0269 0.0259
4/4/00 0.0276 0.0267
0.0243 0.0229
0.0273 0.0264
0.0329 0.032
5/2/00 0.038 0.0369
0.0424 0.0405
0.0436 0.0408
0.0348 0.0332
0.0323 0.0319
6/6/00 0.031 0.0303
0.0288 0.0292
0.0325 0.0324
0.0347 0.0348
7/4/00 0.0354 0.035
0.0275 0.0277
0.029 0.0291
0.0328 0.0326
8/1/00 0.0336 0.0335
0.0308 0.0305
0.033 0.0319
0.0323 0.0317
8/29/00 0.032 0.0314
Note: Although money market funds seek to maintain the value of your investment
at $1.00 per share, it is possible to loss money by investing in the Fund.
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, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
ANNUAL AND SEMI-ANNUAL TENDER REVENUE
BONDS AND NOTES (PUTS) -- 11.9%
--------------------------------------------------------------------------------
California Pollution
Control Finance Authority,
3.80% due 11/15/00 $2,100 $ 2,100,000
California State,
10.50% due 10/01/00 3,000 3,016,649
California State
Department of Water,
5.00% due 12/01/00 2,000 2,005,748
California State
Department of Water,
8.50% due 12/01/00 1,350 1,365,736
Contra Costa
County, CA,
5.50% due 3/01/01 3,495 3,525,309
Kings River Conservation
District of California,
5.50% due 1/20/01 1,000 1,005,676
Peninsula Corridor, CA,
4.80% due 6/07/01 3,000 3,010,991
Peninsula Corridor, CA,
4.40% due 7/25/01 3,000 3,005,148
Pitney Bowes
Credit Corp.,
4.25% due 1/24/01 7,699 7,699,218
Pitney Bowes
Credit Corp.,
4.25% due 10/08/03 6,861 6,860,662
San Diego, CA,
4.25% due 9/29/00 500 500,281
San Diego, CA,
Union School District,
4.60% due 7/01/01 3,270 3,280,509
-----------
37,375,927
-----------
BOND, REVENUE, TAX, TAX AND REVENUE
ANTICIPATION NOTES AND GENERAL
OBLIGATION BONDS AND NOTES -- 12.2%
--------------------------------------------------------------------------------
California State, G.O.,
11.00% due 3/01/01 2,000 2,070,431
California Statewide
Community Development, TRANs,
5.25% due 6/29/01 4,700 4,736,413
California Statewide
Community Development,
TRANs,
3.35% due 4/28/01 5,200 5,200,000
Contra Costa
County, CA, TRANs,
Board of Education,
5.00% due 7/05/01 3,000 3,018,875
Fresno, CA, TRANs,
5.00% due 6/29/01 3,000 3,017,310
Los Angeles County, CA,
5.00% due 6/29/01 4,500 4,530,280
Los Angeles County, CA,
Unified School District,
TRANs,
5.00% due 7/02/01 4,000 4,023,318
Placer, CA,
Unified High School
District, TRANs,
4.13% due 10/01/00 1,000 1,000,378
Pleasanton, CA,
Union High
School District, TRANs,
5.00% due 7/05/01 3,000 3,018,143
San Bernardino
County, CA, TRANs,
3.75% due 9/29/00 2,000 2,000,142
San Bernardino, CA,
Unified School
District, TRANs,
4.25% due 12/07/00 3,000 3,003,556
Turlock, CA,
Public Financing
Authority Sewer
Revenue,
6.25% due 9/15/00 365 365,339
Yucaipa Calimesa Union School, TRANs,
5.00% due 6/29/01 2,000 2,011,857
------------
37,996,042
------------
VARIABLE RATE DEMAND NOTES* -- 75.5%
--------------------------------------------------------------------------------
ABN-Amro Municipal Trust
Receipts,
due 7/05/06 1,000 1,000,000
ABN-Amro Municipal Trust
Receipts,
due 7/04/07 6,000 6,000,000
Anaheim, CA, Housing Authority, AMT,
due 11/15/28 1,500 1,500,000
Brazos River, TX, AMT,
due 4/01/30 100 100,000
California Educational Facility
Authority Revenue,
due 7/01/22 2,700 2,700,000
California Educational Facility
Authority Revenue,
due 11/01/29 3,000 3,000,000
California Health Facilities
Finance Authority,
due 12/01/15 500 500,000
5
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS (Continued) August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
--------------------------------------------------------------------------------
California Health Facilities
Finance Authority,
due 7/01/16 $ 100 $ 100,000
California Housing Finance
Agency Revenue,
due 8/01/24 200 200,000
California Infrastructure Revenue,
due 4/01/09 5,000 5,000,000
California Pollution Control
Finance Authority,
due 9/01/13 1,100 1,100,000
California Pollution Control
Finance Authority,
due 11/01/26 3,000 3,000,000
California Pollution Control
Solid Waste, AMT,
due 8/01/16 5,000 5,000,000
California Pollution Control
Solid Waste,
due 4/01/18 1,400 1,400,000
California Pollution Control
Solid Waste, AMT,
due 10/01/24 2,200 2,200,000
California State,
due 12/01/17 1,000 1,000,000
California State,
due 10/01/29 5,300 5,300,000
California State, Economic
Development, AMT,
due 4/01/20 1,200 1,200,000
California Statewide
Community
Development,
due 7/01/15 2,000 2,000,000
California Statewide
Community
Development,
due 11/01/15 785 785,000
California Statewide
Community
Development,
due 12/01/22 8,800 8,800,000
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 8/15/27 800 800,000
California Statewide
Community
Development,
due 9/01/29 2,000 2,000,000
California Student
Loan Revenue, AMT,
due 6/01/01 2,000 2,000,000
Carlsbad, CA,
Multi-Family
Housing Revenue,
due 6/01/11 400 400,000
Clipper Tax Exempt
Trust, Certificates
of Participation, AMT,
due 3/01/15 3,200 3,200,000
Contra Costa
County, CA,
Multi-Family
Housing,
due 11/15/22 3,700 3,700,000
Cucamonga, CA,
County Water District,
due 9/01/22 3,450 3,450,000
Fresno, CA,
Sewer Revenue,
due 9/01/25 2,000 2,000,000
Golden Empire
School Financial
Authority,
due 8/01/29 6,000 6,000,000
Golden Gate
Bridge Highway
& Transportation,
due 10/05/00 3,000 3,000,000
Gordon County, GA,
Development
Authority, AMT,
due 9/01/17 1,000 1,000,000
Harris County, TX,
Health Facilities
Development,
due 2/15/27 1,000 1,000,000
Huntington Beach, CA,
Multi-Family Housing,
due 6/15/20 3,000 3,000,000
Idaho Health Facilities
Authority Revenue,
due 5/01/22 2,200 2,200,000
Irvine Ranch, CA,
Improvement Bond,
due 9/02/23 800 800,000
6
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
--------------------------------------------------------------------------------
Irvine Ranch, CA,
Water District,
due 5/01/09 $ 2,600 $ 2,600,000
Irvine Ranch, CA,
Water District,
due 9/01/06 3,000 3,000,000
Irvine Ranch, CA,
Water District,
due 4/01/33 3,000 3,000,000
Jeffersonville, IN,
Economic Development,
AMT,
due 10/01/11 4,000 4,000,000
Kenton County, KY,
Revenue,
due 3/01/06 1,000 1,000,000
Kentucky State
Turnpike Authority,
due 7/01/03 185 185,000
Kern County, CA,
High School District,
due 2/01/13 3,800 3,800,000
Livermore, CA,
Multi-Family Revenue,
due 7/15/18 6,100 6,100,000
Los Angeles County, CA,
Redevelopment Agency,
due 12/01/10 4,900 4,900,000
Los Angeles County, CA,
Redevelopment Agency,
due 4/01/30 1,550 1,550,000
Los Angeles, CA,
Department of
Water and Power,
due 2/01/10 2,000 2,000,000
Los Angeles, CA,
Department of
Water and Power,
due 10/15/39 3,200 3,200,000
Los Angeles, CA,
Multi-Family Revenue,
AMT,
due 8/01/19 7,700 7,700,000
Louisiana State,
Health Education
Authority Revenue,
due 10/01/17 1,990 1,990,000
Macon Trust Pooled, AMT,
due 12/05/30 4,390 4,390,000
Massachusetts State
Industrial Financial
Agency,
due 11/01/25 360 360,000
Metropolitan Water
District, SC, Waterworks
Revenue,
due 7/01/28 4,800 4,800,000
Michigan State
Strategic,
due 2/01/09 1,500 1,500,000
Mississippi Home
Corp., AMT
due 6/01/28 300 300,000
Morgan County, UT,
Solid Waste, AMT,
due 8/01/31 700 700,000
Municipal Securities
Trust Certificates, AMT,
due 11/01/06 3,000 3,000,000
National City, CA,
Community
Development, AMT,
due 4/01/39 385 385,000
North Carolina Educational
Facilities Finance Authority,
due 9/01/26 200 200,000
Northern California
Public Power
Project Authority,
due 7/01/28 2,000 2,000,000
Oakland, CA, Joint Powers
Financial Authority,
due 8/01/21 2,100 2,100,000
Orange County, CA,
due 12/01/06 4,000 4,000,000
Orange County, CA,
Recovery Certificates,
due 7/01/19 7,395 7,395,000
Orange County, CA,
Various Sanitation
Districts,
due 8/01/30 2,500 2,500,000
Pasadena, CA,
due 12/01/16 1,120 1,120,000
Pitney Bowes Credit Corp.,
due 10/10/01 4,336 4,336,058
Pittsburgh, CA,
Mortgage Obligation,
due 12/30/31 2,400 2,400,000
Puerto Rico Public
Finance Corp.,
due 7/01/25 900 900,000
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, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
--------------------------------------------------------------------------------
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
Riverside County, CA,
Multi-Family Housing,
due 1/15/27 1,200 1,200,000
Sacramento County, CA,
due 5/01/16 8,800 8,800,000
Sacramento County, CA,
Multi-Family Housing,
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 Diego, CA,
Family Housing Revenue,
due 12/01/15 1,300 1,300,000
San Dimas, CA,
Redevelopment Agency,
due 12/01/05 1,300 1,300,000
San Francisco, CA,
City & County, AMT,
due 7/01/34 5,000 5,000,000
San Jose, CA,
Redevelopment Tax
Allocation, AMT,
due 8/01/27 3,645 3,645,000
Sevier County, TN,
Public Building Authority,
due 6/01/09 380 380,000
Sevier County, TN, Public
Building Authority,
due 6/01/17 145 145,000
Sevier County, TN, Public
Building Authority,
due 6/01/21 600 600,000
Simi Valley, CA,
Multi-Family Housing,
due 7/01/23 2,400 2,400,000
Southern California
Public Power Revenue,
due 7/01/23 7,500 7,500,000
Stockton, CA,
Multi-Family Housing,
due 9/01/18 1,900 1,900,000
University of
Puerto Rico Revenue,
due 6/01/25 1,100 1,100,000
Vacaville, CA,
Multi-Family Housing,
due 5/15/29 4,400 4,400,000
Valley Health System, CA,
Hospital Revenue,
due 5/15/25 2,395 2,395,000
Westminster, CA, Redevelopment Tax Allocation,
due 8/01/27 2,765 2,765,000
Yolo County, CA, Multi-Family Revenue,
due 11/01/27 5,715 5,715,000
------------
236,671,058
------------
TOTAL INVESTMENTS,
AT AMORTIZED COST 99.6% 312,043,027
OTHER ASSETS,
LESS LIABILITIES 0.4 1,249,303
----- ------------
NET ASSETS 100.0% $313,292,330
===== ============
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, 2000
-------------------------------------------------------------------------------
ASSETS:
Investments, at amortized cost (Note 1A) $312,043,027
Cash 178,151
Interest receivable 2,079,045
Receivable for shares of beneficial interest sold 33,000
-------------------------------------------------------------------------------
Total assets 314,333,223
-------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 728,827
Payable for shares of beneficial interest repurchased 107,779
Payable to affiliates:
Investment advisory fees (Note 3) 27,739
Shareholder servicing agents' fees (Note 4B) 66,785
Accrued expenses and other liabilities 109,763
-------------------------------------------------------------------------------
Total liabilities 1,040,893
-------------------------------------------------------------------------------
NET ASSETS $313,292,330
===============================================================================
NET ASSETS CONSIST OF:
Paid-in capital $313,299,117
Accumulated net realized loss on investments (6,787)
-------------------------------------------------------------------------------
Total $313,292,330
-------------------------------------------------------------------------------
CLASS N SHARES:
Net Asset Value, Offering Price and Redemption Price Per Share
($313,292,330/313,299,117 shares outstanding) $1.00
===============================================================================
See notes to financial statements
9
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000
--------------------------------------------------------------------------------
INTEREST INCOME (Note 1B): $ 11,579,979
EXPENSES
Administrative fees (Note 4A) $ 815,516
Shareholder servicing agents' fees Class N (Note 4B) 815,516
Investment advisory fees (Note 3) 652,413
Distribution fees Class N (Note 5) 326,206
Custody and fund accounting fees 104,388
Legal fees 44,873
Audit fees 35,200
Shareholder reports 19,509
Trustees' fees 18,462
Transfer agent fees 15,627
Registration fees 1,921
Miscellaneous 21,555
--------------------------------------------------------------------------------
Total expenses 2,871,186
Less aggregate amounts waived by Investment Adviser,
Administrator, and Distributor (Notes 3, 4A and 5) (738,272)
Less fees paid indirectly (Note 1E) (10,391)
--------------------------------------------------------------------------------
Net expenses 2,122,523
--------------------------------------------------------------------------------
Net investment income 9,457,456
NET REALIZED LOSS ON INVESTMENTS (6,787)
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 9,450,669
================================================================================
See notes to financial statements
10
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
------------------------------
2000 1999
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 9,457,456 $ 7,594,166
Net realized gain (loss) on investments (6,787) 17,377
--------------------------------------------------------------------------------
Net increase in net assets
resulting from operations 9,450,669 7,611,543
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income Class N (9,457,456) (7,594,166)
Net realized gain Class N (7,413) --
-------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (9,464,869) (7,594,166)
--------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST AT
NET ASSET VALUE OF $1.00 PER SHARE (Note 6):
CLASS N SHARES
Proceeds from sale of shares 581,268,301 515,988,320
Net asset value of shares issued to shareholders
from reinvestment of dividends 1,172,733 1,049,146
Cost of shares repurchased (575,167,965) (496,649,450)
--------------------------------------------------------------------------------
Net increase in net assets
from transactions in shares of
beneficial interest 7,273,069 20,388,016
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 7,258,869 20,405,393
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 306,033,461 285,628,068
--------------------------------------------------------------------------------
End of period $ 313,292,330 $ 306,033,461
================================================================================
See notes to financial statements
11
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS N SHARES
----------------------------------------------------
YEAR ENDED AUGUST 31,
----------------------------------------------------
2000 1999 1998 1997 1996
========================================================================================
<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 0.02907 0.02473 0.02928 0.02899 0.03089
Less dividends from net
investment income (0.02907) (0.02473) (0.02928) (0.02899) (0.03089)
----------------------------------------------------------------------------------------
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) $313,292 $306,033 $285,628 $207,345 $150,557
Ratio of expenses to average
net assets 0.65% 0.65% 0.65% 0.65% 0.42%
Ratio of net investment income
to average net assets 2.90% 2.47% 2.92% 2.91% 3.05%
Total return 2.95% 2.50% 2.97% 2.94% 3.13%
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 expenses were not reduced for the fees
paid indirectly, the ratios and net investment income per share would have been as
follows:
Net investment income
per share $0.02680 $0.02243 $0.02687 $0.02630 $0.02481
RATIOS:
Expenses to average net assets 0.88% 0.88% 0.90% 0.92% 1.01%
Net investment income to
average net assets 2.67% 2.24% 2.67% 2.64% 2.45%
========================================================================================
</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 Citigroup Inc.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America 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, 2000, the
Fund, for federal income tax purposes, had a capital loss carryover of $6,787,
all of which will expire on August 31, 2006.
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
13
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS (Continued)
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 $652,413 of
which $246,455 was voluntarily waived for the year ended August 31, 2000. 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 the 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, 2000, management agreed to
voluntarily limit Class N 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 $815,516 of which $245,695 was
voluntarily waived for the year ended August 31, 2000. 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
14
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS
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 $815,516 for the year ended August 31, 2000.
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 for Class N amounted to
$326,206 of which $246,122 was voluntarily waived for the year ended August 31,
2000. 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, 2000.
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 $924,282,592 and $916,828,682 respectively, for the year
ended August 31, 2000.
8. FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES The cost of investment
securities owned at August 31, 2000 for federal income tax purposes, amounted to
$312,043,027.
9. LINE OF CREDIT The Fund, along with other funds in the fund family, 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, 2000, the commitment fee allocated to the Fund was $954. 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, 2000, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended August 31, 2000 and 1999, and the financial
highlights for each of the years in the five-year period ended August 31, 2000.
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 auditing standards generally
accepted in the United States of America. 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, 2000 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 California
Tax Free Reserves at August 31, 2000, the results of its operations, the changes
in its net assets, and its financial highlights for the respective stated
periods in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 4, 2000
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
Robert Frenkel**
TREASURER
Linwood Downs*
* AFFILIATED PERSON OF ADMINISTRATOR AND DISTRIBUTOR
** AFFILIATED PERSON OF INVESTMENT ADVISOR
*** TRUSTEE EMERITUS
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
CitiFiduciary Trust Company
125 Broad Street, New York, NY 10004
SUB-TRANSFER AGENT
PFPC
4400 Computer Drive
West Boro, MA 01581
SUB-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>
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.
(c)2000 Citicorp (Recycle symbol) Printed on recycled paper CFA/RCA/800
<PAGE>
CITIFUNDS(R)
---------------
Connecticut
Tax Free
Reserves
ANNUAL REPORT
AUGUST 31, 2000
CitiFunds
--------------------------------------------------------------------------------
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 13
--------------------------------------------------------------------------------
Independent Auditors' Report 16
--------------------------------------------------------------------------------
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
Robust economic growth, inflation concerns and rising interest rates helped
produce generally higher yields for tax-exempt money market instruments during
the reporting period. However, a closer look suggests that most of the
improvement in short-term tax-exempt yields took place during the first six
months of the period. Between March and August 2000, tax-exempt yields actually
declined modestly, primarily in response to supply-and-demand forces that were
unique to the municipal marketplace.
In this environment, the CitiFunds' investment adviser, Citibank, N.A.,
continued to manage CitiFunds Connecticut Tax Free Reserves with the goal of
achieving its investment objective: providing high levels of current income that
are 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, 2000, 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, 2000
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
TAX-EXEMPT MONEY MARKET INSTRUMENTS PROVIDED HIGHLY COMPETITIVE RETURNS AND
A RELATIVELY SAFE HARBOR FOR MANY INVESTORS DURING THE REPORTING PERIOD. These
benefits were particularly valuable during the second half of the period, when
heightened volatility in the stock market and rising interest rates produced
flat or negative returns for some investment classes, including stocks and
bonds. However, tax-exempt yields on Connecticut securities ended the reporting
period at fairly low levels relative to taxable money market yields. This was
due mainly to a reduction in the issuance of short-term tax-exempt securities by
Connecticut municipalities during the first eight months of 2000 compared to the
same period one year earlier.
The U.S. economy during most of the reporting period was characterized by
strong growth, rising prices for some important commodities, including oil, and
the lowest levels of unemployment in recent memory. During the first half of the
reporting period, these economic forces were complemented by a rapidly rising
stock market, especially within market sectors expected to benefit from strong
demand for technology and telecommunications services.
BECAUSE THIS COMBINATION OF POSITIVE ECONOMIC FORCES HAS HISTORICALLY LED TO
HIGHER RATES OF INFLATION, THE FED CONTINUED TO MOVE TOWARD A MORE RESTRICTIVE
MONETARY POLICY DURING THE PERIOD. In fact, the Fed raised short-term interest
rates four times during the reporting period for a total increase of 1.25%, in
an effort to relieve inflationary pressures that might threaten to derail U.S.
economic prosperity.
The Fed's actions strongly influenced the tax-exempt money markets during
the first half of the reporting period, causing tax-exempt yields to rise along
with yields in other sectors of the bond markets. During the second half of the
period, however, technical market forces eclipsed interest-rate trends, causing
most tax-exempt yields to fall modestly between March and August 2000.
More specifically, because many municipal issuers in Connecticut enjoyed
higher-than-expected tax revenues during this period of economic strength, they
had less need to borrow in the short-term bond market. Accordingly, issuance of
short-term tax-exempt securities generally fell. At the same time, demand for
money market instruments rose when the stock market began to falter in March and
April, and individuals sought to protect some of their newly created wealth and
investment gains during a time of heightened market volatility in the
longer-term financial markets.
IN THIS ENVIRONMENT, MANAGEMENT MAINTAINED A RELATIVELY SHORT AVERAGE
MATURITY FROM SEPTEMBER 1999 THROUGH MAY 2000. This maturity strategy was
designed to keep assets available for higher yielding securities if interest
rates rose. When it became apparent that tax-exempt rates had peaked, management
then extended the Fund's average maturity in order to lock in prevailing yields
for as long as practical.
FROM A SECURITY SELECTION PERSPECTIVE, MANAGEMENT CONTINUED TO FOCUS
PRIMARILY ON VARIABLE RATE DEMAND NOTES (VRDNS), which are short-term
instruments that are securitized and issued by investment banks. This emphasis
on floating-rate securities enabled the Fund to capture higher yields as they
became
2
<PAGE>
available. The managers' focus on VRDNs was also partly the result of the lack
of new municipal notes in the Connecticut marketplace. As of August 31, 2000,
weekly VRDNs comprised about 60% of the Portfolio, and municipal notes accounted
for 38%.
AS FOR THE FORESEEABLE FUTURE, MANAGEMENT EXPECTS THAT THE FED MOST LIKELY
WILL NOT MAKE POLICY DECISIONS UNTIL AFTER THE NOVEMBER PRESIDENTIAL ELECTION.
Recent economic statistics indicate that the Fed's previous rate hikes may have
been effective in slowing the rate of economic growth and forestalling an
acceleration of inflation. Accordingly, management expects to maintain the
current maturity strategy and security selection approach over the next few
months. Of course, management will adjust its strategies as economic and market
conditions change.
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 8/31/00 BENCHMARK**
Class N shares $208.4 million o Lipper Connecticut Tax Exempt
Cititrade(R) shares $1,746 Money Market Funds Average
o iMoneyNet, Inc. (formerly 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 adviser.
** The Lipper Funds Average and iMoneyNet, Inc. Funds Average reflect the
performance (excluding sales charges) of mutual funds with similar
objectives.
Cititrade is a registered service mark of Citicorp.
4
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
<TABLE>
<CAPTION>
SINCE
ONE FIVE DECEMBER 1, 1993
ALL PERIODS ENDED AUGUST 31, 2000 YEAR YEARS* INCEPTION*
==================================================================================================
<S> <C> <C> <C>
CitiFunds Connecticut Tax Free Reserves Class N 3.10% 2.96% 2.99%
Lipper Connecticut Tax Exempt Money
Market Funds Average 3.00% 2.82% 2.76%+
iMoneyNet, Inc. (formerly IBC Financial Data)
Connecticut Tax Free Money Market Funds Average 3.00% 2.82% 2.74%+
Cititrade Connecticut Tax Free Reserves -- -- 0.12%**++
* Average Annual Total Return + Since 11/30/93
** Not Annualized ++ Commencement of Operations 8/18/00
7-DAY YIELDS CLASS N CITITRADE
------- ---------
Annualized Current 3.39% 2.99%
Effective 3.45% 3.03%
</TABLE>
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, 2000, CitiFunds
Connecticut Tax Free Reserves Class N shares paid $0.03052 per share and
Cititrade Connecticut Tax Free Reserves paid $0.00116 per share, respectively,
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 84.5%
of dividends earned were also exempt from Connecticut personal income tax. In
addition, 9.8% of the dividends were derived from income earned from certain
government obligations which may be subject to the Federal Alternative Minimum
Tax (AMT).
COMPARISON OF 7-DAY YIELDS FOR CITIFUNDS CONNECTICUT TAX FREE RESERVES CLASS N
VS. iMONEYNET, INC. (FORMERLY IBC FINANCIAL DATA) CONNECTICUT TAX FREE MONEY
MARKET FUNDS AVERAGE
As illustrated, CitiFunds Connecticut Tax Free Reserves Class N provided a
similar annualized seven-day yield to that of a comparable iMoneyNet, Inc. Money
Market Funds Average, as published in iMoneyNet, Inc. Money Fund ReportTM, for
the one-year period.
[the following represents a chart in the printed piece]
CitiFunds iMoneyNet, Inc.
Connecticut Connecticut
Tax Free Tax Free
Reserves Money Market
Class N Funds Average
2.46 2.41
9/7/99 ............... 2.5 2.4
2.5 2.42
2.59 2.56
9/28/99 .............. 2.79 2.77
2.82 2.75
2.6 2.51
2.6 2.54
10/26/99 ............. 2.65 2.57
2.7 2.62
2.7 2.6
2.78 2.73
2.98 2.84
11/30/99 ............. 3 2.88
2.83 2.73
2.72 2.59
2.93 2.8
12/28/99 ............. 3.32 3.22
3.64 3.61
2.75 2.61
2.48 2.36
1/25/00 .............. 2.48 2.48
2.6 2.53
2.5 2.44
2.73 2.73
2.93 2.78
2/29/00 .............. 2.96 2.85
2.94 2.79
2.93 2.78
2.96 2.83
3/28/00 .............. 2.96 2.9
2.99 2.93
2.85 2.66
3.05 2.94
4/25/00 .............. 3.37 3.25
3.76 3.63
4.01 3.94
4.13 4.04
3.52 3.42
5/30/00 .............. 3.42 3.31
3.21 3.17
3.16 3.07
3.42 3.34
6/27/00 .............. 3.63 3.53
3.56 3.52
3.37 2.82
3.05 2.98
7/25/00 .............. 3.33 3.26
3.38 3.33
3.22 3.16
3.35 3.29
3.38 3.3
8/29/00 .............. 3.38 3.31
Note: Although money market funds seek to maintain the value of your investment
at $1.00 per share, it is possible to lose money by investing in the Fund.
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, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
TAX-EXEMPT COMMERCIAL PAPER -- 2.4%
--------------------------------------------------------------------------------
Government Development Bank,
Puerto Rico,
3.95% due 12/08/00 $ 5,000 $ 5,000,000
--------------------------------------------------------------------------------
ANNUAL AND SEMI-ANNUAL TENDER REVENUE BONDS AND NOTES (PUTS) -- 19.6%
--------------------------------------------------------------------------------
Connecticut State Health and
Educational Facilities,
4.05% due 10/10/00 5,000 5,000,000
Connecticut State Health and
Educational Facilities,
4.10% due 11/01/00 2,435 2,435,000
Connecticut State
Special Assessment Unemployment,
5.50% due 11/15/00 200 200,497
Connecticut State Special
Tax Obligation,
4.00% due 10/01/00 200 199,959
Connecticut State Special
Tax Obligation,
5.50% due 10/01/00 275 275,350
Connecticut State Special
Tax Obligation,
5.70% due 2/15/01 250 251,762
Connecticut State Special
Tax Obligation,
7.13% due 6/01/01 1,000 1,031,495
East Lyme, CT,
7.00% due 1/15/01 350 353,721
East Lyme, CT,
4.40% due 1/19/01 4,000 4,006,738
Farmington, CT,
6.50% due 9/15/00 400 400,407
Hartford, CT,
6.25% due 10/01/00 400 400,750
Middlebury, CT,
4.50% due 3/07/01 1,550 1,554,658
Middletown, CT,
5.00% due 4/15/01 500 502,382
Monroe, CT,
4.35% due 11/01/00 3,000 3,001,207
New Fairfield, CT,
4.75% due 5/01/01 2,930 2,939,984
New York, NY,
4.36% due 8/01/03 4,500 4,500,000
Redding, CT,
6.50% due 10/15/00 660 662,200
Rocky Hill, CT,
4.00% due 12/15/00 6,215 6,217,587
Trumbull, CT,
5.00% due 1/15/01 500 501,791
University, CT,
4.00% due 3/01/01 435 434,781
Virgin Islands Public
Finance Authority,
7.30% due 10/01/00 1,000 1,013,130
West Hartford, CT,
6.00% due 10/15/00 500 501,318
Westport, CT,
4.75% due 9/15/00 400 400,103
Wilton, CT,
4.75% due 7/18/01 4,000 4,018,781
-------------
40,803,601
-------------
BOND, REVENUE, TAX, TAX AND REVENUE
ANTICIPATION NOTES AND GENERAL
OBLIGATION BONDS AND NOTES -- 18.0%
--------------------------------------------------------------------------------
Burlington, CT, BANs,
4.38% due 12/15/00 1,415 1,416,474
Colchester, CT, BANs,
4.75% due 6/15/01 2,100 2,103,148
Connecticut State, G.O.,
5.00% due 3/15/01 1,375 1,381,304
Connecticut State, G.O.,
4.30% due 8/23/01 5,000 5,000,000
Derby, CT, BANs,
4.75% due 6/14/01 2,610 2,613,896
Enfield, CT, BANs,
6.00% due 10/15/00 1,000 1,002,808
North Haven, CT, BANs,
4.38% due 10/25/00 2,100 2,101,130
North Haven, CT, BANs,
4.75% due 1/30/01 3,000 3,002,987
Old Saybrook, CT, BANs,
4.25% due 9/06/00 2,000 2,000,106
Regional School District
No. 7, CT, BANs,
4.50% due 9/14/00 3,712 3,712,642
Regional School District
No. 8, CT, BANs,
4.65% due 5/03/01 6,715 6,730,918
Scotland, CT, BANs,
4.10% due 11/17/00 890 890,269
Stamford, CT, G.O.,
5.25% due 2/15/01 450 452,491
Torrington, CT, BANs,
5.00% due 9/15/00 1,500 1,500,787
Torrington, CT, BANs,
4.30% due 10/15/00 985 985,572
Watertown, CT, G.O.,
6.00% due 9/15/00 350 350,306
Windsor Locks, CT, BANs,
4.25% due 1/18/01 2,350 2,352,569
-------------
37,597,407
-------------
6
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS (Continued) August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- 59.5%
--------------------------------------------------------------------------------
Alaska State Housing Finance Authority
due 6/01/07 $ 2,200 $ 2,200,000
Connecticut State,
due 5/15/14 1,200 1,200,000
Connecticut State,
due 8/01/14 5,280 5,280,000
Connecticut State,
due 6/15/16 450 450,000
Connecticut State
Development Authority
Revenue, AMT,
due 6/01/13 3,600 3,600,000
Connecticut State
Development Authority
Revenue, AMT,
due 6/01/18 1,030 1,030,000
Connecticut State
Development Authority
Revenue, AMT,
due 10/01/23 1,390 1,390,000
Connecticut State Health
and Educational Facilities,
due 7/01/13 1,330 1,330,000
Connecticut State Health
and Educational Facilities,
due 7/01/20 2,500 2,500,000
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 1,000 1,000,000
Connecticut State Health
and Educational Facilities,
due 7/01/27 1,920 1,920,000
Connecticut State Health
and Educational Facilities,
due 7/01/29 5,700 5,700,000
Connecticut State Health
and Educational Facilities,
due 7/01/29 3,600 3,600,000
Connecticut State Health
and Educational Facilities,
due 7/01/30 1,100 1,100,000
Connecticut State Health
and Educational Facilities,
due 7/01/30 3,000 3,000,000
Connecticut State Housing
Finance Authority,
due 5/15/17 300 300,000
Connecticut State Housing
Finance Authority,
due 11/15/24 1,944 1,944,000
Connecticut State Housing
Finance Authority, AMT,
due 11/15/27 1,950 1,950,000
Connecticut State Housing
Finance Authority, AMT,
due 11/15/28 3,900 3,900,000
Connecticut State Housing
Finance Authority,
due 11/15/30 1,000 1,000,000
Connecticut State Housing
Finance Authority,
due 5/15/31 5,000 5,000,000
Connecticut State Special
Tax Obligation,
due 12/01/10 5,200 5,200,000
Connecticut State Special
Tax Obligation,
due 10/01/11 10,000 10,000,000
Eastern Connecticut
Resource Recovery
Authority, AMT,
due 1/01/14 4,995 4,995,000
Fayetteville Air Public
Facilities,
due 9/01/27 15 15,000
Harris County, TX,
Health Facilities,
due 7/01/34 1,300 1,300,000
Kansas City, MO, Industrial
Development Authority,
due 4/01/27 350 350,000
Lehigh County, PA, General
Purpose Authority, AMT,
due 7/01/28 300 300,000
Los Angeles, CA, Regional
Airport Lease,
due 12/01/24 300 300,000
Macon Trust Pooled Variable
Rate Certificates, AMT
due 12/05/30 6,815 6,815,000
Maryland State Community
Development Administration,
due 4/01/25 125 125,000
Michigan State
Strategic Fund,
due 2/15/34 2,000 2,000,000
Morgan County, UT, Solid
Waste, AMT,
due 8/01/31 800 800,000
6
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
PORTFOLIO OF INVESTMENTS August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
--------------------------------------------------------------------------------
Municipal Securities Trust,
due 8/01/03 $ 2,200 $ 2,200,000
North Carolina
Educational Facilities,
due 9/01/26 100 100,000
Ohio State Air Quality
Development Authority,
due 12/01/15 700 700,000
Pitney Bowes Credit
Corp. Leasetops,
due 3/16/05 2,950 2,949,947
Puerto Rico Commonwealth,
due 7/01/23 1,250 1,250,000
Puerto Rico Commonwealth,
due 7/01/24 3,000 3,000,000
Puerto Rico Commonwealth,
due 7/01/27 625 625,000
Puerto Rico Commonwealth,
due 7/01/28 900 900,000
Puerto Rico Commonwealth
Financing Authority,
due 7/01/28 1,150 1,150,000
Puerto Rico Commonwealth
Government Development,
due 12/01/15 4,000 4,000,000
Puerto Rico Electrical
Power Authority,
due 7/01/22 2,300 2,300,000
Puerto Rico Electrical
Power Authority,
due 7/01/23 4,000 4,000,000
Puerto Rico Public
Building Authority Revenue,
due 7/01/25 3,000 3,000,000
Puerto Rico Public
Finance Corp.,
due 6/01/26 1,300 1,300,000
Shelton, CT, Housing
Authority Revenue,
due 12/01/30 1,800 1,800,000
University, CT, Revenue,
due 11/15/25 5,500 5,500,000
University, MI,
University Revenue,
due 12/01/24 2,000 2,000,000
Washington State
Healthcare Facilities,
due 10/01/05 1,000 1,000,000
-------------
123,868,947
-------------
TOTAL INVESTMENTS,
AT AMORTIZED COST 99.5% 207,269,955
OTHER ASSETS,
LESS LIABILITIES 0.5 1,133,101
----- -------------
NET ASSETS 100.0% $208,403,056
===== =============
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, 2000
===============================================================================
ASSETS:
Investments, at amortized cost (Note 1A) $207,269,955
Cash 152,142
Interest receivable 1,692,158
-------------------------------------------------------------------------------
Total assets 209,114,255
-------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 531,159
Payable for shares of beneficial interest repurchased 25,224
Payable to affiliates:
Investment Advisory fees (Note 3) 12,582
Shareholder Servicing Agents' fees (Note 4B) 45,104
Accrued expenses and other liabilities 97,130
-------------------------------------------------------------------------------
Total liabilities 711,199
-------------------------------------------------------------------------------
NET ASSETS $208,403,056
-------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Paid-in capital $208,396,436
Accumulated net realized gain on investments 6,620
-------------------------------------------------------------------------------
Total $208,403,056
===============================================================================
CLASS N SHARES:
Net Asset Value, Offering Price and Redemption Price Per Share
($208,401,310/208,394,690 shares outstanding) $1.00
===============================================================================
CITITRADE SHARES:
Net Asset Value, Offering Price and Redemption Price Per Share
($1,746/1,746 shares outstanding) $1.00
===============================================================================
See notes to financial statements
8
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000
--------------------------------------------------------------------------------
INVESTMENT INCOME (Note 1B) $6,550,002
EXPENSES:
Shareholder Servicing Agents' fees Class N (Note 4B) $440,198
Administrative fees (Note 4A) 440,198
Investment Advisory fees (Note 3) 351,830
Distribution fees Class N (Note 5) 176,079
Distribution fees Cititrade (Note 5) 1
Custody and fund accounting fees 72,110
Legal fees 40,673
Audit fees 35,200
Transfer agent fees 14,600
Shareholder reports 13,362
Trustees' fees 11,890
Registration fees 11,355
Miscellaneous 22,663
--------------------------------------------------------------------------------
Total expenses 1,630,159
Less aggregate amounts waived by Investment Adviser,
Administrator, and Distributor (Notes 3, 4A and 5) (478,885)
Less fees paid indirectly (Note 1E) (7,666)
--------------------------------------------------------------------------------
Net expenses 1,143,608
--------------------------------------------------------------------------------
Net investment income 5,406,394
NET REALIZED GAIN ON INVESTMENTS 11,703
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,418,097
================================================================================
See notes to financial statements
9
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
---------------------------------
2000 1999
------------------------------------------------------------------------------------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 5,406,394 $ 4,178,453
Net realized gain on investments 11,703 1,712
------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 5,418,097 4,180,165
------------------------------------------------------------------------------------------------
FROM INVESTMENT ACTIVITIES:
Net investment income, declared as dividends
to shareholders (Note 2):
Class N shares (5,406,388) (4,178,453)
Cititrade shares (6) --
------------------------------------------------------------------------------------------------
(5,406,394) (4,178,453)
------------------------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST AT
NET ASSET VALUE OF $1.00 PER SHARE (Note 6):
CLASS N SHARES
Proceeds from sale of shares 345,759,629 238,697,352
Net asset value of shares issued to shareholders
from reinvestment of dividends 726,041 587,434
Cost of shares repurchased (300,148,911) (233,785,159)
------------------------------------------------------------------------------------------------
Total Class N shares 46,336,759 5,499,627
------------------------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST AT
NET ASSET VALUE OF $1.00 PER SHARE (Note 6):
CITITRADE SHARES*
Proceeds from sale of shares 10,450 --
Net asset value of shares issued to shareholders
from reinvestment of dividends 6 --
Cost of shares repurchased (8,710) --
------------------------------------------------------------------------------------------------
Total Cititrade shares 1,746 --
------------------------------------------------------------------------------------------------
Total increase in net assets from transactions
in shares of beneficial interest 46,338,505 5,499,627
------------------------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 46,350,208 5,501,339
------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 162,052,848 156,551,509
------------------------------------------------------------------------------------------------
End of period $208,403,056 $162,052,848
================================================================================================
</TABLE>
*August 18, 2000 (Commencement of Operations).
See notes to financial statements
10
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS N SHARES
-----------------------------------------------------------------
YEAR ENDED AUGUST 31,
------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996
------------------------------------------------------------------------------------------------------------
<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 0.03052 0.02550 0.02971 0.02914 0.03135
Less dividends from
net investment income (0.03052) (0.02550) (0.02971) (0.02914) (0.03135)
------------------------------------------------------------------------------------------------------------
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) $208,401 $162,053 $156,552 $169,322 $116,025
Ratio of expenses to
average net assets 0.65% 0.65% 0.66% 0.65% 0.42%
Ratio of expenses to
average net assets after
fees paid indirectly 0.65% 0.65% 0.65% 0.65% 0.42%
Ratio of net investment income
to average net assets 3.08% 2.54% 2.98% 2.92% 3.08%
Total return 3.10% 2.58% 3.01% 2.95% 3.18%
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 expenses were not
reduced for the fees paid indirectly, the ratios and net investment income per
share would have been as follows:
Net investment income
per share $0.02819 $0.02289 $0.02712 $0.02615 $0.02504
RATIOS:
Expenses to average net assets 0.93% 0.91% 0.91% 0.95% 1.04%
Net investment income to
average net assets 2.80% 2.28% 2.72% 2.62% 2.46%
============================================================================================================
</TABLE>
See notes to financial statements
11
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
CITITRADE SHARES
---------------------------
FOR THE PERIOD
AUGUST 18, 2000
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 2000
================================================================================
Net Asset Value, beginning of period $1.00000
Net investment income 0.00116
Less dividends from net investment income (0.00116)
--------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period $1,746
Ratio of expenses to average net assets 1.00%*
Ratio of expenses to average net assets after
fees paid indirectly 1.00%*
Ratio of net investment income to average net assets 2.73%*
Total return 0.12%**
Net investment income per share $0.00116
RATIOS:
Expenses to average net assets 1.28%*
Net investment income to average net assets 2.45%*
================================================================================
* Annualized
** Not Annualized
See notes to financial statements
12
<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 Citigroup Inc.
The Fund, as of August 31, 2000, offers Class N shares and Cititrade
shares. The Fund commenced its public offering of Cititrade shares on August 18,
2000. Expenses of the Fund are borne pro-rata by the holders of each class of
shares, except that each class bears expenses unique to that class (including
the Rule 12b-1 service and distribution fees applicable to such class), and
votes as a class only with respect to its own Rule 12b-1 plan. Shares of each
class would receive their pro-rata share of the net assets of the Fund if the
Fund were liquidated. Class N shares have lower expenses than Cititrade shares.
Cititrade shares pay a higher ongoing service fee than Class N shares.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America 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
13
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS (Continued)
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 $351,830 of
which $163,000 was voluntarily waived for the year ended August 31, 2000. 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, 2000, management agreed to
voluntarily limit Class N expenses to 0.65% and for the period from August 18,
2000 (Commencement of Operations) to August 31, 2000, management agreed to
voluntarily limit Cititrade expenses to 1.00%.
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 $440,198, of which $160,150 was
voluntarily waived for the year ended August 31, 2000. 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
14
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS
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
$440,198 for Class N, for the year ended August 31, 2000.
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 Class
N average daily net assets and 0.60% of Cititrade average daily net assets. The
Distribution fees for Class N amounted to $176,079 of which $155,735 was
voluntarily waived for the year ended August 31, 2000 and $1 for Cititrade for
the period from August 18, 2000 (Commencement of Operations) to August 31, 2000.
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, 2000.
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 $672,983,538 and $626,235,246, respectively, for the year
ended August 31, 2000.
8. FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES The cost of investment
securities owned at August 31, 2000 for federal income tax purposes, amounted to
$207,269,955.
9. LINE OF CREDIT The Fund, along with other funds in the fund family, 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, 2000, the commitment fee allocated to the Fund was $506. 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, 2000, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended August 31, 2000 and 1999, and the financial
highlights for each of the years in the five-year period ended August 31, 2000.
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 auditing standards generally
accepted in the United States of America. 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, 2000, 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, 2000, the results of its operations,
the changes in its net assets, and its financial highlights for the respective
stated periods in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 4, 2000
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
Robert Frenkel**
TREASURER
Linwood Downs*
* AFFILIATED PERSON OF ADMINISTRATOR AND DISTRIBUTOR
** AFFILIATED PERSON OF INVESTMENT ADVISER
*** TRUSTEE EMERITUS
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
CitiFiduciary Trust Company
125 Broad Street, New York, NY 10004
SUB-TRANSFER AGENT
PFPC
4400 Computer Drive
West Boro, MA 01581
SUB-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>
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.
(C)2000 Citicorp [RECYCLE LOGO] Printed on recycled paper CFA/RCT/800
