Annual Report o December 31, 1998
[LOGO} CitiFunds
New York Tax Free
Income Portfolio
[GRAPHIC]
BONDS
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INVESTMENT PRODUCTS:
NOT FDIC INSURED O NO BANK GUARANTEE O MAY LOSE VALUE
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TABLE OF CONTENTS
CitiFunds New York Tax Free Income Portfolio
Letter to Our Shareholders 1
................................................................................
Portfolio Environment and Outlook 2
................................................................................
Fund Facts 4
................................................................................
Portfolio Highlights 4
................................................................................
Fund Performance 5
................................................................................
Portfolio of Investments 6
................................................................................
Statement of Assets and Liabilities 12
................................................................................
Statement of Operations 13
................................................................................
Statement of Changes in Net Assets 14
................................................................................
Financial Highlights 15
................................................................................
Notes to Financial Statements 16
................................................................................
Independent Auditors' Report 20
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<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
This annual report covers the period from January 1, 1998, through December
31, 1998, for the CitiFundsSM New York Tax Free Income Portfolio. Inside, the
CitiFunds' investment manager, Citibank, N.A., discusses the market conditions
it faced, the strategies it employed and its outlook for the future.
Much of the 12-month period saw a continuation of generally positive economic
conditions in the United States. Low inflation and declining interest rates were
generally positive influences on the New York municipal bonds in which the
Portfolio invests.
Other financial markets, however, especially stocks, experienced heightened
turbulence in 1998. In our view, the recent market volatility once again
confirms the benefits of diversification. By allocating your investment assets
among a number of different markets, you may be able to reduce the effects of
volatility on your overall portfolio. In our view, CitiFunds New York Tax Free
Income Portfolio can play a valuable role in such a diversified investment
portfolio.
Thank you for your continued confidence and participation.
Sincerely,
/s/ Philip W. Coolidge
Philip W. Coolidge
President
January 20, 1999
1
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PORTFOLIO ENVIRONMENT AND OUTLOOK
Tax-exempt securities from New York provided good results in 1998. A
slowing economy, persistently low inflation and declining long-term interest
rates helped support a modest increase in the prices of most municipal bonds,
contributing to above-average total rates of return.
However, New York municipal bond prices did not rally as strongly as
taxable U.S. Treasury bond prices during the year. That's because direct
obligations of the federal government benefited from the first federal budget
surplus in recent memory, which reduced the government's need to issue U.S.
Treasury securities. In addition, U.S. Treasury securities were the
beneficiaries of a worldwide "flight to quality" during the second and third
quarters of 1998, when the spreading global currency and credit crisis caused
domestic and foreign investors to flock to the relative "safe haven" of
government bonds. In fact, yields on U.S. Treasury bonds fell to their lowest
levels in more than 30 years.
While New York municipal bonds benefited from the same macroeconomic forces
as U.S. Treasury securities, the two sectors of the bond market were subject to
different supply-and-demand influences. Whereas issuance of U.S. Treasury bonds
declined, issuance of tax-exempt bonds rose when many of New York's
municipalities took advantage of low interest rates to finance new projects and
refinance existing debt. At the same time, demand for longer term municipal
bonds remained moderate during a year in which many individual investors,
attracted by the high recent returns in the stock market, chose equities over
tax-exempt fixed-income securities. Finally, because non-U.S. residents and
institutional investors generally receive no tax advantages from municipal
bonds, there was no additional demand generated from these sources during this
past summer's flight to quality.
As a result of the different influences affecting municipal bonds and their
taxable counterparts, New York municipal bonds became quite inexpensive relative
to their historical relationship with U.S. Treasury securities. During a brief
period in October, some municipal bond yields equaled the yields of comparable
taxable government bonds for the first time since 1986, when tax reform caused
structural dislocations in the fixed-income marketplace. In effect, buyers of
municipal bonds during October received the federal, state and New York City
income-tax exemptions for free! Between October and year-end, municipal bond
yields moderated somewhat relative to U.S. Treasury securities, but they have
remained inexpensive relative to historical averages.
In this environment, we maintained the portfolio's average maturity toward
the long end of its range. This strategy enabled us to lock in higher yields for
a longer period as interest rates fell. Throughout the year, we found value in
high-quality, intermediate-term bonds with protection against "calls," or early
redemption by their issuers. Early in the year, we took advantage of the
relatively high yields provided by municipal bonds issued to finance housing
projects. Later in the year, we focused on general obligation bonds backed by
the general taxation authority of their issuers.
Our outlook for the New York tax-exempt bond market remains positive. In
our analysis, the state's municipalities are more fiscally sound than at any
time
2
<PAGE>
in recent memory. The state has run a budget surplus for the past several years.
Even New York City, which has a relatively long history of financial problems,
appears to be continuing to improve its credit profile. This opinion was
apparently shared by the major bond rating agencies, which upgraded New York
City's credit rating in 1998.
Our economic forecast calls for slow growth, low inflation and an
accommodative monetary policy. In fact, the Federal Reserve Board already
reduced key short-term interest rates three times in the second half of 1998,
their first change in monetary policy since early 1997. If the yield
relationship between municipal bonds and U.S. Treasury securities returns to
levels more consistent with historical averages, as we expect, 1999 may be
another particularly good year for tax-exempt investments from New York issuers.
3
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FUND FACTS
Fund Objective
To generate high levels of current income exempt from federal, New York State
and New York City personal income taxes+ and to preserve the value of its
shareholders' investment through investing in debt obligations consisting
primarily of municipal bonds and notes.
Investment Manager Dividends
Citibank, N.A. Declared daily, paid monthly, if any
Commencement of Operations Capital Gains
September 8, 1986 Distributed semi-annually, if any
Net Assets as of 12/31/98 Benchmarks
$459.6 million o Lipper New York State Municipal
Bond Funds Average
o Lehman Municipal Bond Index
+ A portion of the income may be subject to the Federal Alternative Minimum
Tax.
Consult your personal tax advisor.
PORTFOLIO HIGHLIGHTS
Portfolio Diversification as of December 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
*Short-term ....................................... 7.0%
General Obligation Bonds ......................... 15.0%
Healthcare ....................................... 6.0%
Housing Revenues ................................. 6.0%
Power Revenues ................................... 7.0%
Sales Tax Revenues ............................... 0.04
State Agencies ................................... 22.0%
Transportation Revenue ........................... 24.0%
Water/Sewer Revenues ............................. 6.0%
Other Revenues ................................... 3.0%
*Includes cash and net other assets
4
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FUND PERFORMANCE
Total Returns
One Five Ten
All Periods Ending December 31, 1998 Year Years* Years*
================================================================================
CitiFunds New York Tax Free Income Portfolio 6.89% 5.66% 7.58%
Lipper New York State Municipal Bond Funds Average 5.64% 5.17% 7.57%
Lehman Municipal Bond Index 6.48% 6.22% 8.22%
* Average Annual Total Return
30-Day SEC Yield 4.01%
Income Dividends Per Share $0.499
Growth of a $10,000 Investment
A $10,000 investment in the Fund made ten years ago (12/31/88) would have
grown to $20,773 (as of 12/31/98). The graph shows how this compares to
its benchmark over the same period.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE CHART IN THE PRINTED MATERIAL.]
CitiFunds
New York Lehman
Tax Free Lipper New York Municipal
Income State Municipal Bond Index
Date Portfolio Bond Funds Avg. (unmanaged)
---- ----------- --------------- ----------
12/31/88 10,000 10,000 10,000
1/31/89 10,125 10,143 10,207
2/28/89 9,974 10,054 10,090
3/31/89 10,008 10,039 10,066
4/30/89 10,299 10,295 10,305
5/31/89 10,542 10,490 10,519
6/30/89 10,676 10,629 10,662
7/31/89 10,816 10,739 10,807
8/31/89 10,654 10,634 10,701
9/30/89 10,526 10,586 10,670
10/31/89 10,676 10,677 10,800
11/30/89 10,867 10,841 10,989
12/31/89 10,973 10,928 11,079
1/31/90 10,853 10,813 11,026
2/28/90 10,900 10,904 11,125
3/31/90 10,904 10,877 11,129
4/30/90 10,732 10,741 11,048
5/31/90 11,022 11,017 11,289
6/30/90 11,174 11,147 11,388
7/31/90 11,422 11,355 11,556
8/31/90 11,150 11,121 11,389
9/30/90 11,088 11,075 11,395
10/31/90 11,237 11,185 11,602
11/30/90 11,599 11,440 11,835
12/31/90 11,624 11,478 11,887
1/31/91 11,819 11,634 12,046
2/28/91 11,803 11,698 12,151
3/31/91 11,802 11,741 12,155
4/30/91 11,986 11,924 12,317
5/31/91 12,089 12,017 12,427
6/30/91 12,078 12,005 12,415
7/31/91 12,257 12,199 12,566
8/31/91 12,435 12,375 12,731
9/30/91 12,633 12,561 12,897
10/31/91 12,765 12,681 13,013
11/30/91 12,778 12,699 13,050
12/31/91 13,058 12,961 13,330
1/31/92 13,012 12,889 13,360
2/29/92 13,045 12,937 13,364
3/31/92 13,005 12,979 13,369
4/30/92 13,089 13,116 13,488
5/31/92 13,309 13,308 13,647
6/30/92 13,578 13,583 13,876
7/31/92 14,045 14,080 14,292
8/31/92 13,841 13,866 14,153
9/30/92 13,889 13,908 14,245
10/31/92 13,638 13,677 14,105
11/30/92 13,949 14,012 14,358
12/31/92 14,084 14,191 14,504
1/31/93 14,307 14,366 14,673
2/28/93 14,855 14,935 15,204
3/31/93 14,733 14,782 15,043
4/30/93 14,845 14,945 15,195
5/31/93 14,878 15,050 15,280
6/30/93 15,124 15,303 15,535
7/31/93 15,130 15,298 15,556
8/31/93 15,390 15,631 15,879
9/30/93 15,568 15,805 16,060
10/31/93 15,594 15,835 16,091
11/30/93 15,454 15,658 15,949
12/31/93 15,778 15,986 16,286
1/31/94 15,931 16,156 16,471
2/28/94 15,538 15,750 16,045
3/31/94 14,834 15,042 15,392
4/30/94 14,862 15,057 15,522
5/31/94 14,987 15,204 15,657
6/30/94 14,805 15,098 15,567
7/31/94 15,100 15,363 15,852
8/31/94 15,171 15,414 15,901
9/30/94 14,874 15,118 15,667
10/31/94 14,589 14,789 15,388
11/30/94 14,261 14,386 15,110
12/31/94 14,599 14,785 15,442
1/31/95 15,005 15,202 15,884
2/28/95 15,442 15,691 16,346
3/31/95 15,618 15,825 16,534
4/30/95 15,632 15,844 16,554
5/31/95 16,222 16,354 17,082
6/30/95 15,999 16,135 16,933
7/31/95 16,074 16,235 17,094
8/31/95 16,285 16,418 17,311
9/30/95 16,330 16,504 17,420
10/31/95 16,693 16,771 17,673
11/30/95 17,058 17,093 17,966
12/31/95 17,211 17,269 18,139
1/31/96 17,288 17,347 18,276
2/29/96 17,072 17,201 18,152
3/31/96 16,810 16,917 17,920
4/30/96 16,733 16,846 17,870
5/31/96 16,763 16,844 17,862
6/30/96 16,952 17,023 18,057
7/31/96 17,107 17,185 18,220
8/31/96 17,055 17,143 18,216
9/30/96 17,354 17,409 18,471
10/31/96 17,511 17,583 18,680
11/30/96 17,828 17,900 19,022
12/31/96 17,729 17,809 18,942
1/31/97 17,758 17,803 18,978
2/28/97 17,933 17,963 19,152
3/31/97 17,701 17,732 18,898
4/30/97 17,846 17,886 19,056
5/31/97 18,155 18,152 19,344
6/30/97 18,366 18,336 19,551
7/31/97 18,927 18,895 20,093
8/31/97 18,690 18,676 19,904
9/30/97 18,904 18,889 20,141
10/31/97 19,036 19,000 20,269
11/30/97 19,134 19,105 20,389
12/31/97 19,434 19,408 20,687
1/31/98 19,669 19,597 20,900
2/28/98 19,631 19,589 20,906
3/31/98 19,644 19,593 20,925
4/30/98 19,529 19,438 20,831
5/31/98 19,915 19,788 21,160
6/30/98 19,989 19,863 21,242
7/31/98 19,995 19,891 21,296
8/31/98 20,368 20,223 21,626
9/30/98 20,658 20,476 21,896
10/31/98 20,632 20,396 21,896
11/30/98 20,694 20,457 21,972
12/31/98 20,774 20,498 22,027
The graph assumes all dividends and distributions are reinvested at Net Asset
Value.
Notes: All Fund performance numbers represent past performance, and are no
guarantee of future results. The Fund's share price and investment return will
fluctuate, so that the value of an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns include change in
share price and reinvestment of dividends and distributions, if any. Total
return figures are provided in accordance with SEC guidelines for comparative
purposes for prospective investors. Total returns reflect certain voluntary fee
waivers which may be terminated. If the waivers were not in place, total returns
would be lower.
Total returns and yields do not reflect initial sales charges in effect as of
January 4, 1999. If sales charges had been in effect during periods prior to
December 31, 1998, the Funds' total returns and yields would have been lower.
5
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CitiFunds New York Tax Free Income Portfolio
PORTFOLIO OF INVESTMENTS December 31, 1998
Moody's
Bond Principal
Rating Amount
(Unaudited) Issuer (000's omitted) Value
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MUNICIPAL BONDS -- 92.8%
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General Obligation Bonds -- 14.8%
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Aaa Nassau County, NY,
Series I,
5.00% due 10/01/08 $ 1,410 $ 1,494,656
Aaa Nassau County, NY,
Series Y,
5.00% due 3/01/11 3,650 3,795,453
A3 New York City, NY,
5.375% due 8/01/14 7,555 7,834,988
A3 New York City, NY,
5.50% due 8/15/08 4,180 4,533,503
A3 New York City, NY,
6.25% due 5/15/07 2,020 2,307,709
A3 New York City, NY,
Series A,
6.25% due 8/01/12 3,200 3,568,192
A3 New York City, NY,
Series B,
6.20% due 8/15/06 6,500 7,401,355
A3 New York City, NY,
Series B, Unrefunded,
6.375% due 8/15/11 1,185 1,326,762
A3 New York City, NY,
Series F,
5.25% due 8/01/17 10,250 10,395,755
A3 New York City, NY,
Series F,
6.00% due 8/01/12 2,000 2,198,460
A3 New York City, NY,
Series F, Prerefunded,
7.65% due 2/01/06 2,700 3,038,661
Aaa New York City, NY,
Series F, Prerefunded,
8.40% due 11/15/06 1,825 2,082,818
A2 New York State,
5.25% due 9/15/12 2,000 2,121,540
A2 New York State,
5.25% due 9/15/13 3,000 3,146,190
A2 New York State,
5.25% due 3/01/15 6,115 6,394,761
Aaa Suffolk County, NY,
5.25% due 4/01/11 1,585 1,706,649
Aaa Suffolk County, NY,
5.25% due 4/01/12 1,480 1,592,761
Aaa Suffolk County, NY,
5.25% due 4/01/13 1,230 1,315,411
Aaa Syracuse, NY,
5.25% due 12/01/10 1,565 1,690,184
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67,945,808
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Healthcare -- 6.2%
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Aaa New York State
Dormitory Authority,
Catholic Healthcare
West,
5.125% due 1/15/12 5,000 5,212,150
Aaa New York State
Dormitory Authority,
Hospital,
5.10% due 2/15/12 5,000 5,184,450
Aaa New York State
Dormitory Authority,
Hospital,
5.20% due 2/15/13 2,330 2,415,511
Aaa New York State
Dormitory Authority,
North Shore
University,
5.50% due 11/01/12 2,485 2,733,102
Aaa New York State
Dormitory Authority,
North Shore
University,
5.50% due 11/01/14 4,000 4,344,720
Aaa New York State
Dormitory Authority,
Presbyterian Hospital,
5.50% due 2/01/10 4,835 5,292,488
Aaa New York State
Dormitory Authority,
St. Josephs,
5.25% due 7/01/18 2,000 2,045,320
Aaa New York State
Medical Care
Facilities
6.90% due 8/15/34 1,000 1,168,460
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28,396,201
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Housing Revenue -- 6.4%
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Aaa New York State Housing
Finance Agency, ETM,
5.00% due 11/01/11 2,005 2,077,822
Aaa New York State Housing
Finance Agency, ETM,
5.25% due 9/15/12 2,000 2,082,360
Aaa New York State Housing
Finance Agency, ETM,
5.875% due 9/15/14 4,000 4,259,840
6
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CitiFunds New York Tax Free Income Portfolio
PORTFOLIO OF INVESTMENTS December 31, 1998
Moody's
Bond Principal
Rating Amount
(Unaudited) Issuer (000's omitted) Value
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Aaa New York State Housing
Finance Agency, ETM,
7.90% due 11/01/06 $ 5,750 $ 6,887,695
Aa New York State
Mortgage Agency
Revenue, AMT,
5.25% due 10/01/17 3,000 3,015,390
Aa New York State
Mortgage Agency
Revenue, AMT,
5.35% due 10/01/18 3,200 3,238,336
Aa New York State
Mortgage Agency
Revenue, AMT,
7.25% due 10/01/07 6,075 6,466,412
Aa New York State
Mortgage Agency
Revenue, AMT,
7.75% due 10/01/23 1,420 1,519,471
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29,547,326
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Power Revenue --6.8%
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Aaa Long Island Power
Authority, New York,
5.125% due 04/01/11 3,000 3,155,460
Aaa Long Island Power
Authority, New York,
5.125% due 04/01/12 3,000 3,131,430
Aaa Long Island Power
Authority, New York,
5.125% due 12/01/22 12,420 12,531,532
Aaa Long Island Power
Authority, New York,
5.50% due 12/01/12 4,220 4,666,265
Aaa Puerto Rico Electric
Power Authority,
Series DD,
5.00% due 7/01/11 3,750 3,961,538
Baa1 Puerto Rico Elecric
Power Authority,
Series U,
6.00% due 7/01/14 2,750 3,019,857
Baa1 Puerto Rico Electric
Power Authority,
Series Z, 5.25%
due 7/01/21 1,000 1,010,940
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31,477,022
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Sales Tax Revenue -- 3.7%
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Aa3 New York City NY,
Transitional,
Series A,
4.90% due 8/15/10 2,000 2,078,800
Aa3 New York City NY,
Transitional,
Series A,
5.00% due 8/15/12 5,000 5,157,700
Aa3 New York City NY,
Transitional,
Series A,
5.00% due 8/15/14 1,720 1,751,115
Aa3 New York City NY,
Transitional,
Series A,
5.00% due 8/15/16 2,300 2,314,950
Aa3 New York City NY,
Transitional,
Series A,
5.00% due 5/01/17 1,575 1,583,001
Aa3 New York City NY,
Transitional,
Series A,
5.125% due 8/15/21 4,000 4,011,160
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16,896,726
------------
State Agencies -- 21.6%
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Aaa New York State
Dormitory Authority,
City University,
5.00% due 7/01/20 2,000 1,999,980
Aaa New York State
Dormitory Authority,
City University,
5.60% due 7/01/10 10,550 11,224,884
Aaa New York State
Dormitory Authority,
City University,
5.75% due 7/01/18 3,000 3,358,110
Baa1 New York State
Dormitory Authority,
Court Facilities,
5.25% due 5/15/21 1,000 1,004,220
A3 New York State
Dormitory Authority,
Mental Health Services,
5.00% due 2/15/11 1,485 1,527,025
7
<PAGE>
CitiFunds New York Tax Free Income Portfolio
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
Moody's
Bond Principal
Rating Amount
(Unaudited) Issuer (000's omitted) Value
- --------------------------------------------------------------------------------
A3 New York State
Dormitory Authority,
Mental Health Services,
5.50% due 8/15/17 $ 3,000 $ 3,124,980
A3 New York State
Dormitory Authority,
Mental Health Services,
6.50% due 2/15/11 1,610 1,893,135
Aaa New York State
Dormitory Authority,
New York University,
5.75% due 7/01/11 1,000 1,124,520
Aaa New York State
Dormitory Authority,
New York University,
5.75% due 7/01/27 6,300 7,128,135
Aaa New York State
Dormitory Authority,
State University,
5.00% due 7/01/18 2,000 1,995,040
Aaa New York State
Dormitory Authority,
State University,
5.00% due 5/15/18 5,000 5,012,600
Aaa New York State
Dormitory Authority,
State University,
5.00% due 5/15/20 4,680 4,679,719
A3 New York State
Dormitory Authority,
State University,
5.25% due 5/15/13 2,030 2,141,162
Aaa New York State
Dormitory Authority,
State University,
5.25% due 5/15/14 3,000 3,090,450
A3 New York State
Dormitory Authority,
State University,
5.40% due 5/15/23 1,690 1,719,626
A3 New York State
Local Government
Assistance, Series A,
5.25% due 4/01/19 4,000 4,108,640
A3 New York State
Local Government
Assistance, Series A,
5.375% due 4/01/12 2,475 2,625,604
A3 New York State
Local Government
Assistance, Series E,
6.00% due 4/01/14 2,000 2,296,980
Baa1 New York State
Urban Development
Authority,
5.125% due 4/01/17 7,570 7,620,719
Baa1 New York State
Urban Development
Authority, Community
Enhancement,
5.125% due 4/01/18 1,500 1,521,000
Baa1 New York State
Urban Development
Authority,
Correctional Cap,
5.25% due 1/01/09 3,500 3,776,465
Baa1 New York State
Urban Development
Authority,
Correctional Cap,
5.25% due 1/01/13 2,500 2,585,575
Baa1 New York State
Urban Development
Authority,
Correctional Cap,
5.50% due 1/01/09 1,000 1,082,230
Baa1 New York State
Urban Development
Authority,
Correctional Cap,
5.75% due 1/01/13 14,500 15,501,805
Baa1 New York State
Urban Development
Authority, State
Facilities,
5.50% due 4/01/07 3,000 3,238,620
Baa1 New York State
Urban Development
Authority,
Youth Facilities,
5.875% due 4/01/09 1,245 1,357,735
Aaa St. Lawrence County,
NY, Industrial
Development Authority,
5.625% due 7/01/13 2,185 2,337,710
------------
99,076,669
------------
8
<PAGE>
CitiFunds New York Tax Free Income Portfolio
PORTFOLIO OF INVESTMENTS December 31, 1998
Moody's
Bond Principal
Rating Amount
(Unaudited) Issuer (000's omitted) Value
- --------------------------------------------------------------------------------
Transportation Revenue -- 24.3%
- --------------------------------------------------------------------------------
Baa1 Metropolitan
Transportation
Authority, NY,
5.125% due 7/01/12 $ 4,000 $ 4,173,120
Baa1 Metropolitan
Transportation
Authority, NY,
5.50% due 7/01/12 2,380 2,535,914
Baa1 Metropolitan
Transportation
Authority, NY,
5.75% due 7/01/13 1,000 1,107,190
Baa1 Metropolitan
Transportation
Authority, NY,
5.25% due 7/01/17 3,000 3,043,470
Baa1 Metropolitan
Transportation
Authority, NY,
5.625% due 7/01/25 1,940 2,047,728
Aaa Metropolitan
Transportation
Authority, NY,
5.125% due 7/01/17 2,300 2,336,938
Baa1 Metropolitan
Transportation
Authority, NY,
Series A,
5.25% due 7/01/07 2,000 2,135,360
Baa1 Metropolitan
Transportation
Authority, NY,
Series A,
7.00% due 7/01/06 4,000 4,744,080
Aaa Metropolitan
Transportation
Authority, NY,
Series C
5.125% due 7/01/14 4,000 4,113,400
Baa1 Metropolitan
Transportation
Authority, NY,
Series O,
5.75% due 7/01/13 3,000 3,321,570
Aaa Metropolitan
Transportation
Authority, NY,
Series Q,
5.125% due 7/01/13 2,555 2,644,067
Aaa New York State
Thruway Authority,
Series A,
5.50% due 4/01/07 3,740 4,091,672
Aaa New York State
Thruway Authority,
Series B,
5.25% due 4/01/14 3,000 3,131,880
Aaa New York State
Thruway Authority,
Series C,
5.00% due 4/01/13 2,000 2,048,260
Aaa New York State
Thruway Authority,
Series C,
5.00% due 4/01/16 3,500 3,523,695
Aaa New York State
Thruway Authority,
Series C,
5.25% due 4/01/12 5,000 5,286,400
Aaa New York State
Thruway Authority,
Series C,
5.25% due 4/01/15 2,070 2,146,362
Aa3 New York State
Thruway Authority,
Series E,
5.00% due 1/01/16 5,045 5,101,554
Aaa New York State
Thruway Authority,
Series E,
5.25% due 1/01/12 2,000 2,114,140
Aaa New York State
Thruway Authority,
Series E,
5.25% due 1/01/13 9,500 9,963,315
Aaa New York State
Thruway Authority,
Series E,
5.25% due 1/01/15 5,000 5,183,000
Baa1 New York State
Thruway Authority,
Local Highway,
5.25% due 4/01/10 2,900 3,037,808
9
<PAGE>
CitiFunds New York Tax Free Income Portfolio
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
Moody's
Bond Principal
Rating Amount
(Unaudited) Issuer (000's omitted) Value
- --------------------------------------------------------------------------------
Baa1 New York State
Thruway Authority,
Local Highway,
6.00% due 4/01/07 $ 6,750 $ 7,518,488
Baa1 New York State
Thruway Authority,
Local Highway,
Series A,
5.25% due 4/01/12 5,000 5,286,400
Baa1 New York State
Thruway Authority,
Local Highway,
Series B,
5.25% due 4/01/15 10,000 10,368,900
Baa1 New York State
Thruway Authority,
Local Highway,
Series B,
5.375% due 4/01/13 7,070 7,486,069
Aaa Puerto Rico
Commonwealth
Highway Authority,
5.50% due 7/01/15 1,000 1,095,900
Aaa Triborough Bridge
and Tunnel
Authority, NY,
5.25% due 1/01/13 2,000 2,105,060
------------
111,691,740
------------
Water and Sewer Revenue -- 6.2%
- --------------------------------------------------------------------------------
A1 New York State
Environmental
Facilities,
5.00% due 7/15/12 1,460 1,509,129
A1 New York State
Environmental
Facilities,
5.15% due 10/15/19 3,500 3,549,140
A1 New York State
Environmental
Facilities,
5.25% due 6/15/13 5,000 5,259,400
A1 New York State
Environmental
Facilities,
5.25% due 6/15/14 3,500 3,652,985
Aa New York State
Environmental
Facilities,
5.75% due 6/15/11 5,000 5,615,750
Aa New York State
Environmental
Facilities,
7.00% due 6/15/12 3,250 3,561,545
A1 New York State
Environmental
Facilities,
7.125% due 7/01/12 2,100 2,230,683
Aa New York State
Environmental
Facilities,
7.50% due 6/15/12 3,000 3,212,340
------------
28,590,972
------------
Other Revenue --2.8%
- --------------------------------------------------------------------------------
A1 New York City
Industrial
Development
Authority, Terminal Group
One, AMT,
6.125% due 1/01/24 5,000 5,378,850
Terminal Group
One, AMT,
NR New York City
Industrial
Development Authority,
7.00% due 5/01/08 800 873,568
Aaa Port Authority of
New York and
New Jersey, AMT,
5.125% due 11/15/12 2,660 2,756,824
NR Port Authority of
New York and
New Jersey,
Special Obligation,
6.75% due 10/01/19 3,500 3,888,605
------------
12,897,847
------------
Total Municipal Bonds
(Identified Cost $413,612,768) 426,520,311
------------
10
<PAGE>
CitiFunds New York Tax Free Income Portfolio
PORTFOLIO OF INVESTMENTS December 31, 1998
Moody's
Bond Principal
Rating Amount
(Unaudited) Issuer (000's omitted) Value
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES*
at AMORTIZED COST -- 3.0%
- --------------------------------------------------------------------------------
VMIG1 Faculty Municipal Trust,
5.25% due 01/01/18 $ 1,650 $ 1,650,000
VMIG1 Long Island Power
Authority,
3.80% due 05/01/33 1,200 1,200,000
VMIG1 New York, NY,
5.00% due 08/01/21 2,300 2,300,000
VMIG1 New York City,
NY, Housing
Development Corp.
3.80% due 11/15/19 3,500 3,500,000
VMIG1 New York State
Job Development
Authority,
5.10% due 03/01/07 1,000 1,000,000
VMIG1 New York State
Thruway Authority,
5.20% due 01/01/27 3,900 3,900,000
------------
Variable Rate Demand
Notes at
Amortized Cost
(Identified Cost
$13,550,000) 13,550,000
------------
Total Investments
(Identified Cost
$427,162,768) 95.8% 440,070,311
Other Assets, Less
Liabilities 4.2% 19,521,056
----- ------------
Net Assets 100.0% $459,591,367
===== ============
* Variable rate demand notes have a demand feature, under which the Fund
could tender them back to the issuer on no more than 7 day's notice.
AMT -- Subject to Alternative Minimum Tax
ETM -- -Escrow to Maturity for timely payment of principal.
See notes to financial statements
11
<PAGE>
CitiFunds New York Tax Free Income Portfolio
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998 (Unaudited)
<TABLE>
<S> <C>
Assets:
Investments, at value (Note 1A) (Identified Cost, $427,162,768) $ 440,070,311
Cash 175,785
Interest receivable 7,363,427
Receivable for shares of beneficial interest sold 15,770,848
- ---------------------------------------------------------------------------------------------
Total assets 463,380,371
- ---------------------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 1,517,097
Payable for shares of beneficial interest repurchased 1,469,838
Dividends payable 462,751
Payable to affiliate-- Management fees (Note 2) 182,024
Accrued expenses and other liabilities 157,294
- ---------------------------------------------------------------------------------------------
Total liabilities 3,789,004
- ---------------------------------------------------------------------------------------------
Net Assets for 39,331,201 shares of beneficial interest outstanding $ 459,591,367
=============================================================================================
Net Assets Consist of:
Paid-in capital $ 451,444,996
Accumulated net realized loss on investments (4,822,290)
Unrealized appreciation of investments 12,907,543
Undistributed net investment income 61,118
- ---------------------------------------------------------------------------------------------
Total $ 459,591,367
- ---------------------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption Price Per Share of
Beneficial Interest $11.69
=============================================================================================
</TABLE>
See notes to financial statements
12
<PAGE>
CitiFunds New York Tax Free Income Portfolio
STATEMENT OF OPERATIONS
<TABLE>
For the Year Ended December 31, 1998 (Unaudited)
============================================================================================
<S> <C> <C>
Investment Income (Note 1B):
Interest $ 11,207,089
Expenses:
Management fees (Note 2) $1,666,267
Distribution fees (Note 3) 555,422
Custodian and Fund Accounting fees 76,188
Audit fees 33,100
Trustee fees 20,611
Shareholder reports 25,082
Transfer agent fees 12,500
Legal fees 18,678
Miscellaneous 9,204
- --------------------------------------------------------------------------------------------
Total expenses 2,417,052
Less aggregate amounts waived by Manager (Note 2) (640,046)
- --------------------------------------------------------------------------------------------
Net expenses 1,777,006
- --------------------------------------------------------------------------------------------
Net investment income 9,430,083
- --------------------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain from investment transactions 586,919
Net realized loss on futures transactions (296,500)
Net change in unrealized appreciation 6,020,732
- --------------------------------------------------------------------------------------------
Net realized and unrealized gain on investments 6,311,151
- --------------------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 15,741,234
============================================================================================
</TABLE>
See notes to financial statements
13
<PAGE>
CitiFunds New York Tax Free Income Portfolio
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
===================================================================================================================
<S> <C> <C>
Increase (Decrease) in Net Assets from
Operations:
Net investment income $ 9,430,083 $ 4,134,575
Net realized gain from investments and futures transactions 290,419 480,852
Net change in unrealized appreciation of investments 6,020,732 2,520,074
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 15,741,234 7,135,501
- -------------------------------------------------------------------------------------------------------------------
Dividends Declared to Shareholders from:
Net investment income (9,457,025) (4,078,021)
- -------------------------------------------------------------------------------------------------------------------
Transactions in Shares of Beneficial Interest
(Note 5):
Net proceeds from sale of shares 438,461,762 2,418,539
Net asset value of shares issued to shareholders from
reinvestment of dividends 8,905,232 3,999,235
Cost of shares repurchased (70,037,469) (15,679,627)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from transactions in
shares of beneficial interest 377,329,525 (9,261,853)
- -------------------------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets 383,613,734 (6,204,373)
- -------------------------------------------------------------------------------------------------------------------
Net Assets:
Beginning of period 75,977,633 82,182,006
- -------------------------------------------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $61,118 and $88,060, respectively) $ 459,591,367 $ 75,977,633
===================================================================================================================
</TABLE>
See notes to financial statements
14
<PAGE>
CitiFunds National Tax Free Income Portfolio
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------
1998 1997 1996 1995 1994
=============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period $ 11.42 $ 10.98 $ 11.25 $ 10.09 $ 11.54
- -------------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.487 0.594 0.585 0.607 0.566
Net realized and unrealized
gain (loss) on investments 0.282 0.431 (0.267) 1.153 (1.415)
- -------------------------------------------------------------------------------------------------------------
Total from operations 0.769 1.025 0.318 1.760 (0.849)
- -------------------------------------------------------------------------------------------------------------
Less Dividends From:
Net investment income (0.499) (0.585) (0.588) (0.600) (0.601)
- -------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $ 11.69 $ 11.42 $ 10.98 $ 11.25 $ 10.09
=============================================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(000's omitted) $459,591 $75,978 $82,182 $90,264 $86,399
Ratio of expenses to average
net assets 0.80% 0.80% 0.80% 0.80% 0.80%
Ratio of net investment income to
average net assets 4.24% 5.31% 5.34% 5.62% 5.52%
Portfolio turnover 17% 16% 47% 98% 150%
Total return (A) 6.89% 9.62% 3.01% 17.89% (7.47)%
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 ended after December 31,
1994, the net investment income per share and the ratios would have been as follows:
Net investment income per share $ 0.454 $ 0.540 $ 0.534 $ 0.555 $ 0.508
Ratios:
Expenses to average net assets 1.09% 1.28% 1.27% 1.27% 1.27%
Net investment income to average net assets 3.95% 4.83% 4.87% 5.15% 5.05%
=============================================================================================================
</TABLE>
(A) Total return does not include the maximum sales charges of 4.50% effective
January 4, 1999.
See notes to financial statements
15
<PAGE>
CitiFunds New York Tax Free Income Portfolio
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies CitiFunds New York Tax Free Income Portfolio
(formerly Landmark New York Tax Free Income Fund) (the "Fund") is a separate
non-diversified series of CitiFunds Tax Free Income Trust (the "Trust"), a
Massachusetts business trust. The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Investment Manager of the Fund is Citibank, N.A. ("Citibank"). CFBDS, Inc.
("CFBDS," formerly Landmark Funds Broker Dealer Services, Inc.) acts as the
Fund's Sub-Administrator and Distributor.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Fund are
in conformity with generally accepted accounting principles and are as follows:
A. Investment Security Valuations Debt securities (other than short-term
obligations maturing in 60 days or less) are valued on the basis of valuations
furnished by a pricing service which takes into account appropriate factors such
as institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, and other market data, without exclusive
reliance upon quoted prices or exchange or over-the-counter prices, since such
valuations are believed to reflect more accurately the fair value of the
securities. Short-term obligations (maturing in 60 days or less) are valued at
amortized cost, which approximates market value. Securities, if any, for which
there are no such valuations or quotations are valued at fair value as
determined in good faith by or under guidelines established by the Trustees.
B. Income Interest income is determined on the basis of interest accrued
and discount earned, adjusted for amortization of premium or discount on
long-term debt securities when required for federal income tax purposes.
C. Federal Taxes The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investment transactions. Accordingly, no provision for federal income or
excise tax is necessary. Dividends by the Fund from net interest received on
tax-exempt municipal bonds 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. At
December 31, 1998, the Fund, for federal income tax purposes, had a capital loss
carryover of $4,822,290 which will expire on December 31, 2002. Such capital
loss carryover will reduce the Fund's taxable income arising from future net
realized gain on investment transactions, if any, to the extent permitted by the
Internal Revenue Code, and thus will reduce the
16
<PAGE>
CitiFunds New York Tax Free Income Portfolio
NOTES TO FINANCIAL STATEMENTS
amount of distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal income or excise tax.
D. Distributions The Fund distinguishes between distributions on a tax
basis and a financial reporting basis and requires that only distributions in
excess of tax basis earnings and profits be reported in the financial statements
as a return of capital. Differences in the recognition or classification of
income between the financial statements and tax earnings and profits which
result in temporary over-distributions for financial statement purposes, are
classified as distributions in excess of net investment income or accumulated
net realized gains.
E. Other Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis. Distributions to shareholders and shares issuable to
shareholders electing to receive distributions in shares are recorded on the
ex-dividend date.
F. Fees Paid Indirectly The Fund's custodian bank calculates its fee 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.
G. Expenses The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and CFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund.
H. Futures Contracts The Fund may engage in future transactions. The Fund
may use futures contracts in order to protect the Fund from fluctuations in
interest rates without actually buying or selling debt securities, or to manage
the effective maturity or duration of fixed income securities in the Fund's
portfolio in an effort to reduce potential losses or enhance potential gains.
Buying futures contracts tends to increase the Fund's exposure to the underlying
instrument. Selling futures contracts tends to either decrease the Fund's
exposure to the underlying instrument, or to hedge other fund investments.
Upon entering into a futures contract, the Fund is required to deposit with
the broker an amount of cash or cash equivalents equal to a certain percentage
of the contract amount. This is known as the "initial margin". Subsequent
payments ("variation margin") are made or received by the Fund each day,
depending on the daily fluctuation of the value of the contract. The daily
changes in contract value are recorded as unrealized gains or losses and the
Fund recognizes a realized gain or loss when the contract is closed. Futures
contracts are valued at the settlement price established by the board of trade
or exchange on which they are traded.
17
<PAGE>
CitiFunds New York Tax Free Income Portfolio
NOTES TO FINANCIAL STATEMENTS (Continued)
There are several risks in connection with the use of futures contracts as
a hedging device. The change in the value of futures contracts primarily
corresponds with the value of their underlying instruments, which may not
correlate with the change in the value of the hedged instruments. In addition,
there is the risk the Fund may not be able to enter into a closing transaction
because of an illiquid secondary market. Futures contracts involve, to varying
degrees, risk of loss in excess of the futures variation margin reflected in the
Statement of Assets and Liabilities.
2. Management Fees Citibank is responsible for overall management of the Fund's
business affairs, and has a Management Agreement with the Fund. Citibank also
provides certain administrative services to the Fund. These administrative
services include providing general office facilities and supervising the overall
administration of the Fund. CFBDS acts as Sub-Administrator and performs such
duties and receives such compensation from Citibank as from time to time is
agreed to by Citibank and CFBDS. Citibank is a wholly-owned subsidiary of
Citigroup, Inc.
The management fees paid to Citibank, are accrued daily and payable monthly. The
management fee is computed at the annual rate of 0.75% of the Funds' average
daily net assets. The management fee amounted to $1,666,267 of which $640,046
was voluntarily waived for the year ended December 31, 1998. The Trust pays no
compensation directly to any Trustee or any other officer who is affiliated with
the Sub-Administrator, all of whom receive remuneration for their services to
the Trust from the Sub-Administrator or its affiliates.
3. Distribution Fees The Fund has adopted a Service Plan pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, in which the Fund pays
fees for distribution, sales and marketing and shareholder services at an annual
rate not to exceed 0.25% of the Fund's average daily net assets. The
Distribution fees amounted to $555,422 for the year ended December 31, 1998.
4. Purchases and Sales of Investments Purchases and sales of investments, other
than U.S. Government securities and short-term obligations, aggregated
$382,950,795 and $37,483,660, respectively.
5. Shares of Beneficial Interest The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional Shares of Beneficial
Interest (without par value). Transactions in shares of beneficial interest were
as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1998 December 31, 1997
===============================================================================================
<S> <C> <C>
Shares sold 37,973,237 216,390
Shares issued to shareholders from reinvestment
of dividends 771,454 360,022
Shares repurchased (6,064,886) (1,411,411)
- -----------------------------------------------------------------------------------------------
Net increase (decrease) 32,679,805 (834,999)
===============================================================================================
</TABLE>
18
<PAGE>
CitiFunds New York Tax Free Income Portfolio
NOTES TO FINANCIAL STATEMENTS
6. Federal Income Tax Basis of Investments The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at December 31, 1998,
as computed on a federal income tax basis, are as follows:
Aggregate cost $427,162,768
================================================================================
Gross unrealized appreciation $ 13,116,556
Gross unrealized depreciation (209,013)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 12,907,543
================================================================================
7. Line of Credit The Fund, along with other CitiFunds, entered into an ongoing
agreement with a bank which allows the Funds collectively to borrow up to $60
million for temporary or emergency purposes. Interest on borrowings, if any, is
charged to the specific fund executing the borrowing at the base rate of the
bank. In addition, the committed portion of 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 December 31, 1998, the commitment fee
allocated to the Fund was $586. Since the line of credit was established there
have been no borrowings.
8. Subsequent Event Effective January 4, 1999, the Fund will offer two classes
of shares: Class A and Class B. Shares of the Fund that are outstanding on
January 4, 1999 will be classified as Class A Shares. Investors purchasing
shares of the Fund on or after January 4, 1999 may select Class A or Class B,
with different sales charges and expense levels. The maximum sales load imposed
on purchases of Class A shares will be 4.50% and the maximum deferred sales load
on purchases of Class B will be 4.50%.
19
<PAGE>
CitiFunds New York Tax Free Income Portfolio
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of CitiFunds
New York Tax Free Income Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of CitiFunds New York Tax Free Income
Portfolio, a separate series of CitiFunds Tax Free Income Trust (the "Trust") (a
Massachusetts business trust), as of December 31, 1998, the related statement of
operations for the year then ended, the statement of changes in net assets for
the years ended December 31, 1998 and 1997, and the financial highlights for
each of the years in the five-year period ended December 31, 1998. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
December 31, 1998, by correspondence with the custodian and broker. 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 Income Portfolio at December 31, 1998, the results of its operations,
the changes in its net assets, and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 8, 1999
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
Linda T. Gibson*
Treasurer
John R. Elder*
*Affiliated Person of Sub-Administrator and Distributor
Investment Manager
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
Distributor
CFBDS, Inc.
21 Milk Street, 5th Floor
Boston, MA 02109
(617) 423-1679
Transfer Agent and Custodian
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
Auditors
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
Legal Counsel
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
THE CITIFUNDS FAMILY
Large Cap Stocks
o CitiFunds Growth & Income Portfolio
o CitiFunds Large Cap Growth Portfolio
Small Cap Stocks
o CitiFunds Small Cap Value Portfolio
o CitiFunds Small Cap Growth Portfolio
International Stocks
o CitiFunds International Growth & Income Portfolio
o CitiFunds International Growth Portfolio
Growth with Income
o CitiFunds Balanced Portfolio
Bonds
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds Intermediate Income Portfolio
o CitiFunds National Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
Money Markets
o CitiFunds Cash Reserves
o CitiFunds U.S. Treasury Reserves
o CitiFunds Tax Free Reserves
o CitiFunds California Tax Free Reserves
o CitiFunds Connecticut Tax Free Reserves
o CitiFunds New York Tax Free Reserves
This report is prepared for the information of
shareholders. It is authorized for distribution to
prospective investors only when preceded or
accompanied by an effective prospectus.
For more information contact your Service Agent or
call 1-800-625-4554
CitiFunds are made available by CFBDS, Inc. as
distributor.
(C)1999 Citicorp [LOGO] Printed on recycled paper CFA/NYT/1298
<PAGE>
Annual Report o December 31, 1998
CitiFunds(SM)
National Tax Free
Income Portfolio
[GRAPHIC]
BONDS
- --------------------------------------------------------------------------------
INVESTMENT PRODUCTS:
NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
- --------------------------------------------------------------------------------
<PAGE>
Table of Contents
CitiFunds National Tax Free Income Portfolio
Letter to Our Shareholders 1
- --------------------------------------------------------------------------------
Portfolio Environment and Outlook 2
- --------------------------------------------------------------------------------
Fund Facts 4
- --------------------------------------------------------------------------------
Portfolio Highlights 4
- --------------------------------------------------------------------------------
Fund Performance 5
- --------------------------------------------------------------------------------
Portfolio of Investments 6
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities 10
- --------------------------------------------------------------------------------
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 Shareholders:
This annual report covers the period from January 1, 1998, through December
31, 1998, for the CitiFundsSM National Tax Free Income Portfolio. Inside, the
CitiFunds' investment manager, Citibank, N.A., discusses the market conditions
it faced, the strategies it employed and its outlook for the future.
We were very pleased with your Portfolio's performance last year. Much of
the 12-month period saw a continuation of generally positive economic conditions
in the United States. Low inflation and declining interest rates were generally
positive influences on the municipal bonds in which the Portfolio invests.
Other financial markets, however, especially stocks, experienced heightened
turbulence in 1998. In our view, the recent market volatility once again
confirms the benefits of diversification. By allocating your investment assets
among a number of different markets, you may be able to reduce the effects of
volatility on your overall portfolio. In our view, CitiFunds National Tax Free
Income Portfolio can play a valuable role in such a diversified investment
portfolio.
Thank you for your continued confidence and participation.
Sincerely,
/s/ PHILIP W. COOLIDGE
Philip W. Coolidge
President
January 20, 1999
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
Tax-exempt securities provided good results in 1998. A slowing U.S.
economy, persistently low inflation and declining long-term interest rates
helped support a modest increase in the prices of most municipal bonds,
contributing to above-average total rates of return.
However, municipal bond prices did not rally as strongly as taxable U.S.
Treasury bond prices during the year. That's because direct obligations of the
federal government benefited from the first federal budget surplus in recent
memory, which reduced the government's need to issue U.S. Treasury securities.
In addition, U.S. Treasury securities were the beneficiaries of a worldwide
"flight to quality" during the second and third quarters of 1998, when the
spreading global currency and credit crisis caused domestic and foreign
investors to flock to the relative "safe haven" of government bonds. In fact,
yields on U.S. Treasury bonds fell to their lowest levels in more than 30 years.
While municipal bonds benefited from the same macroeconomic forces as U.S.
Treasury securities, the two sectors of the bond market were subject to
different supply-and-demand influences. Whereas issuance of U.S. Treasury bonds
declined, issuance of tax-exempt bonds rose when municipalities took advantage
of low interest rates to finance new projects and refinance existing debt. At
the same time, demand for longer term municipal bonds remained moderate during a
year in which many individual investors, attracted by high recent returns in the
stock market, chose equities over tax-exempt fixed-income securities. Finally,
because non-U.S. residents and institutional investors generally receive no tax
advantages from municipal bonds, there was no additional demand generated from
these sources during this past summer's flight to quality.
As a result of the different influences affecting municipal bonds and their
taxable counterparts, municipal bonds became quite inexpensive relative to their
historical relationship with U.S. Treasury securities. During a brief period in
October, some municipal bond yields equaled the yields of comparable taxable
government bonds for the first time since 1986, when tax reform caused
structural dislocations in the fixed-income marketplace. In effect, buyers of
municipal bonds during October received the income-tax exemption for free!
Between October and year-end, municipal bond yields moderated somewhat relative
to U.S. Treasury securities, but they remained inexpensive relative to
historical averages.
In this environment, we maintained the portfolio's average duration toward
the long end of its range. This strategy enabled us to lock in higher yields for
a longer period as interest rates fell. Throughout the year, we found value in
high-quality, intermediate-term bonds with protection against "calls," or early
redemption by their issuers. Early in the year, we took advantage of the
relatively high yields provided by municipal bonds issued to finance housing
projects. Later in the year, we focused on general obligation bonds backed by
the overall taxation authority of their issuers.
2
<PAGE>
Our outlook for the tax-exempt bond market remains positive. In our
analysis, the nation's municipalities are more fiscally sound than at any time
in recent memory. Even cities and towns that had persistent financial problems
just a few years ago appear to be economically healthier. At the same time, we
expect economic conditions to remain good. Our forecast calls for slow growth,
low inflation and an accommodative monetary policy. In fact, the Federal Reserve
Board already reduced key short-term interest rates three times in the second
half of 1998, their first change in monetary policy since early 1997. If the
yield relationship between municipal bonds and U.S. Treasury securities returns
to levels more consistent with historical averages, as we expect, 1999 may be
another particularly good year for tax-exempt investments.
3
<PAGE>
FUND FACTS
Fund Objective
To generate high levels of current income exempt from federal income taxes+ and
to preserve the value of its shareholders' investment. The Fund invests
primarily in municipal obligations that pay interest that is exempt from federal
income taxes.
Investment Manager Dividends
Citibank, N.A. Declared daily, paid monthly, if any
Commencement of Operations Capital Gains
August 17, 1995 Distributed semi-annually, if any
Net Assets as of 12/31/98 Benchmarks
$259.4 million Lipper General Municipal
Bond Funds Average
Lehman Municipal 4 Years Plus
Bond Index
+ A portion of the income may be subject to the Federal Alternative Minimum
Tax. Consult your personal tax advisor.
PORTFOLIO HIGHLIGHTS
Portfolio Diversification as of December 31, 1998
[THE FOLLOWING TABLE WAS REPRESENTED BY A PIE CHART IN THE PRINTED MATERIAL.]
*Short-Term 12.0%
General Obligation Bonds 29.0%
Housing 6.0%
Education 3.0%
Healthcare 3.0%
State Agencies 14.0%
Power Revenue 5.0%
Transportation Revenue 24.0%
Water/Sewer Revenue 2.0%
Other Revenue 2.0%
* includes cash and net other assets
4
<PAGE>
FUND PERFORMANCE
Total Returns
Since
One 8/17/95
All Periods Ending December 31, 1998 Year (Inception)*
================================================================================
CitiFunds National Tax Free Income Portfolio 10.05% 9.57%
Lipper General Municipal Bond Funds Average 5.32% 6.10%+
Lehman Municipal 4 Years Plus Bond Index 6.73% 7.83%+
* Average Annual Total Return
+ From 8/31/95
30-Day SEC Yield 4.49%
Income Dividends Per Share $0.540
Capital Gain Distribution Per Share $0.023
Growth of a $10,000 Investment
A $10,000 investment in the Fund made on inception date would have grown to
$13,614 (as of 12/31/98). The graph shows how this compares to its benchmark
over the same period.
[THE FOLLOWING TABLE WAS REPRESENTED BY A LINE GRAPH IN THE PRINTED MATERIAL.]
Lehman Muni CitiFunds
Lipper 4 Years National
General Plus Bond Tax Free
Date Muni Bond Index Income Fund
- ---- --------- ----------- -----------
Aug-95 $10,000 $10,000 $10,190
Sep-95 $10,059 $10,065 $10,248
Oct-95 $10,215 $10,223 $10,456
Nov-95 $10,412 $10,405 $10,636
Dec-95 $10,529 $10,513 $10,743
Jan-96 $10,580 $10,593 $10,840
Feb-96 $10,497 $10,514 $10,712
Mar-96 $10,329 $10,366 $10,491
Apr-96 $10,280 $10,332 $10,434
May-96 $10,284 $10,326 $10,398
Jun-96 $10,381 $10,444 $10,549
Jul-96 $10,472 $10,544 $10,670
Aug-96 $10,466 $10,539 $10,643
Sep-96 $10,617 $10,696 $10,817
Oct-96 $10,732 $10,824 $10,939
Nov-96 $10,920 $11,034 $11,158
Dec-96 $10,873 $10,981 $11,099
Jan-97 $10,873 $10,998 $11,126
Feb-97 $10,968 $11,106 $11,228
Mar-97 $10,825 $10,945 $11,071
Apr-97 $10,914 $11,042 $11,185
May-97 $11,070 $11,219 $11,355
Jun-97 $11,194 $11,346 $11,546
Jul-97 $11,530 $11,687 $11,971
Aug-97 $11,394 $11,564 $11,833
Sep-97 $11,254 $11,710 $12,016
Oct-97 $11,324 $11,788 $12,078
Nov-97 $11,389 $11,862 $12,139
Dec-97 $11,570 $12,051 $12,370
Jan-98 $11,679 $12,183 $12,557
Feb-98 $11,672 $12,183 $12,551
Mar-98 $11,674 $12,192 $12,637
Apr-98 $11,602 $12,129 $12,608
May-98 $11,790 $12,337 $12,856
Jun-98 $11,829 $12,386 $12,954
Jul-98 $11,846 $12,415 $12,971
Aug-98 $12,030 $12,622 $13,222
Sep-98 $12,173 $12,795 $13,486
Oct-98 $12,128 $12,782 $13,492
Nov-98 $12,164 $12,829 $13,545
Dec-98 $12,185 $12,861 $13,614
The graph assumes all dividends and distributions are reinvested at Net Asset
Value.
Notes: All Fund performance numbers represent past performance, and are no
guarantee of future results. The Fund's share price and investment return will
fluctuate, so that the value of an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns include change in
share price and reinvestment of dividends and distributions, if any. Total
return figures are provided in accordance with SEC guidelines for comparative
purposes for prospective investors. Total returns reflect certain voluntary fee
waivers which may be terminated. If the waivers were not in place, total returns
would be lower.
Total returns and yields do not reflect initial sales charges in effect as of
January 4, 1999. If sales charges had been in effect during periods prior to
December 31, 1998, the Fund's total return and yields would have been lower.
5
<PAGE>
CitiFunds National Tax Free Income Portfolio
PORTFOLIO OF INVESTMENTS December 31, 1998
Moody's
Bond Principal
Rating Amount
(Unaudited) Issuer (000's omitted) Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 88.4%
- --------------------------------------------------------------------------------
General Obligation Bond -- 29.7%
- --------------------------------------------------------------------------------
Aa3 Atlanta, Georgia,
5.00% due 12/1/11 $ 3,195 $ 3,339,574
Aa3 Atlanta, Georgia,
5.00% due 12/1/14 2,230 2,277,075
Aaa Branson, Missouri,
School District,
5.25% due 3/1/13 2,200 2,355,474
Aa3 California State,
5.00% due 10/1/11 5,000 5,241,100
Aa3 California State,
5.00% due 10/1/14 1,750 1,795,220
Aa3 California State,
6.25% due 9/1/08 1,340 1,558,380
Aaa Chico, California,
School District,
5.00% due 8/1/12 1,240 1,291,993
Aaa Chico, California,
School District,
5.00% due 8/1/14 1,035 1,060,575
Aaa Clackamas &
Washington Counties,
5.75% due 6/1/09 1,500 1,684,830
Aaa Clark County, Nevada,
School District,
5.50% due 6/15/08 2,575 2,795,549
Aaa Connecticut State,
5.25% due 3/1/14 1,000 1,045,060
Aaa Dallas, Texas,
5.00% due 2/15/12 2,000 2,063,100
Aaa Essex County,
New Jersey,
5.375% due 9/1/10 2,025 2,173,230
Aaa Florida State,
5.75% due 7/1/08 2,500 2,810,825
Aaa Florida State,
Board of Education,
5.25% due 6/1/14 2,185 2,282,888
Aaa Hawaii State,
5.50% due 10/1/10 2,500 2,754,625
Aa3 Larimer County
School District,
5.25% due 12/15/11 3,000 3,200,970
Aaa Marion County,
Oregon,
School District,
5.00% due 11/1/13 3,585 3,729,762
Aaa Miami, Florida,
Dade County
School District,
5.375% due 8/1/10 1,500 1,645,725
Aaa Mountain Metropolitan
District, Colorado,
5.25% due 12/1/13 1,300 1,358,123
Aaa New Jersey State,
5.00% due 6/15/09 3,375 3,518,168
A3 New York, New York,
5.125% due 8/1/10 2,500 2,612,775
A3 New York, New York,
5.25% due 8/1/08 1,120 1,192,766
A3 New York, New York,
5.25% due 8/1/14 2,005 2,055,706
A3 New York, New York,
5.30% due 8/1/12 3,000 3,131,880
A2 New York State,
5.00% due 7/15/1 3,780 3,985,897
A2 New York State,
5.25% due 9/15/13 1,000 1,048,730
Aaa North Slope Boro,
Alaska,
Zero Coupon
due 6/30/09 1,500 936,915
Aaa Ocean City,
New Jersey,
5.00% due 4/1/09 1,400 1,479,184
Aaa Oregon State
Department of
Administration,
6.00% due 11/1/05 2,500 2,795,675
Aaa Parkland, Pennsylvania,
School District,
5.375% due 9/1/14 3,110 3,344,183
Aaa Puerto Rico
Commonwealth,
6.50% due 7/1/14 1,000 1,221,320
Aaa Spokane County,
Washington, School
District No. 35,
5.00% due 12/1/11 2,370 2,447,096
Aaa St. Louis County,
Missouri,
5.00% due 2/1/12 750 787,485
------------
77,021,858
------------
Education -- 3.6%
- --------------------------------------------------------------------------------
Aaa Illinois Educational
Facility Authority,
5.20% due 10/1/12 1,250 1,292,938
6
<PAGE>
CitiFunds National Tax Free Income Portfolio
PORTFOLIO OF INVESTMENTS December 31, 1998
Moody's
Bond Principal
Rating Amount
(Unaudited) Issuer (000's omitted) Value
- --------------------------------------------------------------------------------
Aaa New Hampshire
Higher Education
Authority,
5.55% due 6/1/23 $ 5,775$ $ 5,977,067
Aaa Pennsylvania State
Higher Education
Authority,
5.25% due 4/1/11 1,900 2,014,741
------------
9,284,746
------------
Healthcare -- 2.6%
- --------------------------------------------------------------------------------
A2 California Health
Facilities Authority,
5.25% due 7/1/08 1,750 1,857,363
Aaa Illinois Development
Financial Authority,
5.75% due 5/15/16 1,500 1,610,070
Aaa Medford, Oregon,
Hospital Facilities
Authority,
5.25% due 8/15/11 1,120 1,192,128
Aaa Mesa, Arizona, Industrial
Development
Authority,
5.25% due 1/1/11 2,000 2,097,540
------------
6,757,101
------------
Housing -- 5.9%
- --------------------------------------------------------------------------------
Aaa Alaska State Housing
Finance Corp., AMT,
5.75% due 6/1/24 2,250 2,342,363
Aaa Connecticut State,
Housing Finance
Authority,
4.60% due 11/15/18 1,000 999,950
Aa Georgia State Housing
and Finance Corp.,
4.65% due 12/1/20 1,440 1,440,590
Aaa Massachusetts State
Housing Finance
Agency,
5.375% due 6/1/16 1,185 1,203,628
Aaa Michigan State Housing
Agency Authority,
4.60% due 12/1/28 1,000 1,001,750
Aaa New Jersey State
Housing Finance
Authority,
4.75% due 10/1/17 1,480 1,490,508
Aaa New York State
Housing Finance
Agency,
4.80% due 11/1/09 1,000 1,037,570
Aaa Ohio Housing Finance
Agency, AMT,
5.05% due 9/1/10 1,250 1,280,938
Aaa Tennessee Housing
Development
Authority,
5.00% due 1/1/17 1,895 1,883,876
Aaa Texas State
Department of
Housing,
4.75% due 7/1/09 1,270 1,274,153
Aaa Utah State Housing
Financial Agency,
5.40% due 7/1/16 835 852,894
Aa1 Virginia State Housing
Development
Authority,
5.95% due 5/1/16 400 426,340
------------
15,234,560
------------
Power Revenue -- 5.6%
- --------------------------------------------------------------------------------
Aaa Indiana Municipal Power
Supply System,
4.90% due 1/1/10 1,000 1,018,130
Aaa Jersey City, New Jersey,
Municipal Utilities,
5.25% due 12/1/11 1,480 1,575,149
Aa San Antonio Texas
Electrical and Gas
Authority,
5.25% due 2/1/14 3,000 3,125,250
Aaa Southern California
Public Power
Authority,
5.25% due 7/1/10 1,700 1,838,822
Aaa Southern Minnesota
Municipal Public
Power Agency,
5.00% due 1/1/13 4,715 4,865,314
Aaa Washington State
Public Power Supply,
5.20% due 7/1/12 1,000 1,040,180
Aaa Washington State
Public Power Supply,
5.125% due 7/1/15 1,000 1,011,730
------------
14,474,575
------------
7
<PAGE>
CitiFunds National Tax Free Income Portfolio
PORTFOLIO OF INVESTMENTS (continued) December 31, 1998
Moody's
Bond Principal
Rating Amount
(Unaudited) Issuer (000's omitted) Value
- --------------------------------------------------------------------------------
Redevelopment -- 0.4%
- --------------------------------------------------------------------------------
Aaa Dallas, Texas,
Civic Center,
5.00% due 8/15/14 $ 1,000 $ 1,012,260
------------
State Agencies -- 13.6%
- --------------------------------------------------------------------------------
Aa3 California State Public
Works Board,
5.25% due 10/1/11 3,030 3,244,342
A2 California State Public
Works Board,
5.25% due 11/1/12 2,500 2,667,600
Aaa Detroit, Michigan,
Downtown
Development
Authority,
4.65% due 7/1/10 1,755 1,781,553
Aaa Detroit, Michigan,
Downtown
Development
Authority,
5.25% due 7/1/11 1,500 1,586,370
Aaa Michigan State Agency
Building Authority,
5.25% due 10/15/13 1,500 1,568,880
Aaa New Jersey State
Agency Building
Authority,
5.00% due 3/1/11 4,000 4,182,080
Aaa New York State
Dormitory Authority,
5.125% due 1/15/12 2,880 3,002,198
Baa1 New York State
Dormitory Authority,
5.375% due 7/1/14 1,000 1,036,890
A3 New York State
Dormitory Authority,
5.875% due 5/15/11 2,000 2,250,280
Aaa New York State
Dormitory Authority,
6.00% due 7/1/11 1,110 1,274,602
A3 New York State
Dormitory Authority,
6.50% due 8/15/09 1,780 2,082,511
Aaa New York State,
Local Government
Assistance Corp,
5.00% due 4/1/13 4,000 4,099,760
A3 New York State,
Local Government
Assistance Corp,
6.00% due 4/1/12 1,000 1,151,540
Baa1 New York State Urban
Development Corp.,
5.50% due 1/1/09 1,000 1,082,230
Baa1 New York State Urban
Development Corp.,
5.50% due 1/1/16 1,500 1,555,380
Aaa New York State Urban
Development Corp.,
5.75% due 1/1/13 2,000 2,138,180
Aaa Palm Beach County,
Florida, Criminal
Justice,
5.75% due 6/1/13 500 563,430
---------------
35,267,826
---------------
Transportation Revenue -- 23.8%
- --------------------------------------------------------------------------------
Baa2 Alliance, Texas,
Airport Authority Inc.,
6.375% due 4/1/21 1,450 1,560,345
Aaa Chicago, Illinois, O'Hare
International Airport,
5.625% due 1/1/14 1,000 1,071,700
Baa2 Chicago, Illinois, O'Hare
International Airport,
8.50% due 5/1/18 1,900 2,029,903
Baa Denver, Colorado, City
& County Airport
Revenue,
7.75% due 11/15/21 2,000 2,204,160
Aaa Hawaii State,
Harbor Capital,
6.50% due 7/1/12 560 613,155
Aaa Illinois State Tolls
Highway Prior
Ref Series A,
5.50% due 1/1/13 3,865 4,204,192
Aaa Illinois State Tolls
Highway Prior
Ref Series A,
5.50% due 1/1/14 5,000 5,432,400
Aaa Illinois State Tolls
Highway Prior
Ref Series A,
5.50% due 1/1/15 6,000 6,493,020
Aaa Indiana Transit,
Authority,
5.25% due 12/1/15 1,000 1,030,320
Baa2 Indianapolis
International
Airport Authority
Revenue,
6.50% due 11/15/31 1,500 1,607,205
8
<PAGE>
CitiFunds National Tax Free Income Portfolio
PORTFOLIO OF INVESTMENTS December 31, 1998
Moody's
Bond Principal
Rating Amount
(Unaudited) Issuer (000's omitted) Value
- --------------------------------------------------------------------------------
Baa3 Kenton County,
Kentucky,
Airport Authority,
6.125% due 2/1/22 $ 1,075 $ 1,104,971
Baa3 Kenton County,
Kentucky,
Airport Authority,
7.125% due 2/1/21 1,000 1,078,990
Aaa Massachusetts Bay
Transportation
Authority,
5.25% due 3/1/15 5,000 5,314,350
Aaa Massachusetts Bay
Transportation
Authority,
5.50% due 3/1/11 2,625 2,886,608
Aaa Metropolitan Transit
Authority, New York,
5.50% due 7/1/08 1,900 2,091,615
Aaa Metropolitan Transit
Authority, New York,
5.125% due 7/1/14 4,000 4,113,400
Aaa Metropolitan Transit
Authority, New York,
5.50% due 7/1/12 1,000 1,051,920
Aaa Miami Florida Parking
Facilities Revenue,
5.00% due 10/1/12 1,570 1,643,099
Aaa Minneapolis & St. Paul,
Minnesota,
5.25% due 1/1/14 1,250 1,299,750
Aaa New Mexico Financial
Authority Revenue,
5.25% due 9/1/12 2,350 2,465,973
Aaa New York State Highway
Authority Service,
5.25% due 4/1/15 2,000 2,073,780
Aaa New York State Highway
Authority Service,
5.375% due 4/1/16 2,680 2,802,797
Baa1 New York State Highway
Authority Service,
6.00% due 4/1/07 750 835,388
Aaa Oklahoma State,
5.00% due 6/1/08 1,500 1,600,785
Aaa Portland, Oregon,
Airport Authority,
5.25% due 7/1/17 2,100 2,147,523
Baa1 Tulsa, Oklahoma,
Municipal,
7.375% due 12/1/20 2,850 3,051,638
------------
61,808,987
------------
Water and Sewer Revenue -- 1.8%
- --------------------------------------------------------------------------------
Aaa Beaumont, Texas,
Waterworks and
Sewer System,
5.25% due 9/1/12 1,000 1,072,650
Aaa Dallas, Texas,
Waterworks and
Sewer System,
5.00% due 10/1/12 2,500 2,579,525
Aaa Houston, Texas, Waste
Conveyance System,
6.125% due 12/15/09 1,000 1,155,090
------------
4,807,265
Miscellaneous -- 1.4%
- --------------------------------------------------------------------------------
Aaa Brazos River, Texas,
Authority Revenue,
4.90% due 10/1/15 1,000 1,011,340
Aa2 Lower Neches Valley
Authority, Texas,
Oil Refining Project,
6.35% due 4/1/26 1,000 1,100,160
Aaa New York State,
Municipal Board,
Series A,
5.25% due 3/15/11 1,465 1,575,695
------------
3,687,195
------------
Total Municipal Bonds
(Identified Cost
$227,680,211) 229,356,373
------------
VARIABLE RATE DEMAND NOTES*
at AMORTIZED COST -- 2.0%
- --------------------------------------------------------------------------------
VMIG-1 Municipal Assistance
Corp. of New York,
3.20% due 7/1/08 5,200 5,200,000
------------
Total Investments
(Identified Cost
$232,880,211) 90.4% 234,556,373
Other Assets,
Less Liabilities 9.6 24,890,907
----- ------------
Net Assets 100.0% $259,447,280
----- ------------
- --------------------------------------------------------------------------------
* Variable rate demand notes have a demand feature under which the Fund could
tender them back to the issuer on no more than 7 day's notice.
AMT -- Subject to Alternative Minimum Tax
See notes to financial statements
9
<PAGE>
CitiFunds National Tax Free Income Portfolio
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
================================================================================
Assets:
Investments, at value (Note 1A) (Identified Cost, $232,880,211) $234,556,373
Cash 363,815
Receivable for shares of beneficial interest sold 30,105,491
Interest receivable 2,872,425
- --------------------------------------------------------------------------------
Total assets 267,898,104
- --------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 6,998,907
Payable for shares of beneficial interest repurchased 1,227,831
Dividends payable 224,086
- --------------------------------------------------------------------------------
Total liabilities 8,450,824
- --------------------------------------------------------------------------------
Net Assets for 22,704,765 shares of beneficial
interest outstanding $259,447,280
- --------------------------------------------------------------------------------
Net Assets Consist of:
Paid-in capital $257,612,752
Unrealized appreciation of investments 1,676,162
Accumulated net realized gain on investments 151,119
Undistributed net investment income 7,247
- --------------------------------------------------------------------------------
Total $259,447,280
- --------------------------------------------------------------------------------
Net Asset Value, Offering Price and Redemption Price
Per Share of Beneficial Interest $11.43
================================================================================
CitiFunds National Tax Free Income Portfolio
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
================================================================================
Investment Income (Note 1B):
Interest $ 2,724,659
- --------------------------------------------------------------------------------
Expenses:
Management fees (Note 2) $455,263
Distribution fees (Note 3) 151,754
Registration fees 71,122
Custody and Fund Accounting fees 66,819
Audit fees 25,600
Legal fees 16,118
Shareholder reports 16,080
Trustees fees 12,500
Transfer agent fees 12,000
Miscellaneous 5,000
- --------------------------------------------------------------------------------
Total expenses 832,256
Less aggregate amounts waived by the Manager
and Distributor (Notes 2 and 3) (607,017)
Less fees paid indirectly (Note 1E) (1,782)
Expenses assumed by the Sub-Administrator (Note 7) (223,457)
- --------------------------------------------------------------------------------
Net expenses --
- --------------------------------------------------------------------------------
Net investment income $ 2,724,659
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investment transactions 592,752
Net change in unrealized appreciation of investments 1,540,941
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 2,133,693
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $ 4,858,352
================================================================================
See notes to financial statements
10
<PAGE>
CitiFunds National Tax Free Income Portfolio
STATEMENT OF CHANGES IN NET ASSETS
Year Ended December 31,
-----------------------
1998 1997
================================================================================
Increase (Decrease) in Net Assets from
Operations:
Net investment income $ 2,724,659 $ 105,890
Net realized gain on investment transactions 592,752 18,441
Net change in unrealized
appreciation of investments 1,540,941 81,360
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,858,352 205,691
- --------------------------------------------------------------------------------
Dividends Declared to Shareholders from:
Net investment income (2,720,230) (105,043)
Net realized gains (441,633) --
- --------------------------------------------------------------------------------
Decrease in net assets from distributions
to shareholders (3,161,863) (105,043)
- --------------------------------------------------------------------------------
Transactions in Shares of Beneficial Interest
(Note 5):
Net proceeds from sale of shares 275,004,330 191,319
Net asset value of shares issued to shareholders
from reinvestment of dividends 2,928,727 104,749
Cost of shares repurchased (22,098,909) (540,375)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets from
transactions in shares of beneficial interest 255,834,148 (244,307)
- --------------------------------------------------------------------------------
Net Increase (Decrease) in Net Assets 257,530,637 (143,659)
- --------------------------------------------------------------------------------
Net Assets:
Beginning of period 1,916,643 2,060,302
- --------------------------------------------------------------------------------
End of period (including undistributed net investment
income of $7,247 and $2,938, respectively) $259,447,280 $1,916,643
================================================================================
See notes to financial statements
11
<PAGE>
CitiFunds National Tax Free Income Portfolio
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
August 17, 1995
Year Ended December 31, (Commencement
------------------------------ of Operations) to
1998 1997 1996 December 31, 1995
=============================================================================================
<S> <C> <C> <C> <C>
Net Asset Value, beginning of period $ 10.92 $ 0.34 $10.55 $10.00
-------
Income From Operations:
Net investment income 0.524 0.564 0.562 0.187
Net realized and unrealized
gain (loss) on investments 0.549 0.586 (0.232) 0.551
-------
Total from operations 1.073 1.150 0.330 0.738
Less Dividends From:
Net investment income (0.540) (0.570) (0.540) (0.188)
Net realized gains on investments (0.023) -- -- --
-------
Decrease from distributions (0.563) (0.570) (0.540) (0.188)
Net Asset Value, end of period $ 11.43 $ 10.92 $ 10.34 $ 10.55
-------
Ratios/Supplemental Data:
Net assets, end of period
(000s omitted) $259,447 $ 1,917 $ 2,060 $ 1,306
Ratio of expenses to average
net assets (A) 0% 0.14% 0% 0%
Ratio of expenses to average net assets
after fees paid indirectly (A) 0% 0% 0% 0%
Ratio of net investment income to
average net assets 4.49% 5.45% 5.42% 5.20%*
Portfolio turnover 57% 55% 52% 0%
Total return (B) 10.05% 11.45% 3.31% 7.43%**
</TABLE>
Note: If Agents of the Fund had not voluntarily agreed to waive all of their
fees for the period, the expenses were not reduced for fees paid indirectly, the
Sub-administrator had not voluntarily assumed expenses and had expenses been
limited to that required by certain state securities law in 1995, the net
investment income per share and the ratios would have been as follows:
<TABLE>
<S> <C> <C> <C> <C>
Net investment income (loss)
per share $ 0.364 $(0.229) $(0.291) $ 0.098
Ratios:
Expenses to average net assets 1.37% 7.66% 8.23% 2.50%*
Net investment income (loss) to
average net assets 3.12% (2.21)% (2.81)% 2.70%*
- -------------------------------------------------------------------------------------------
</TABLE>
* Annualized
** Not annualized
(A)The expense ratios for the year ended December 31, 1995 and the periods
thereafter have been adjusted to reflect a change in reporting requirements. The
new reporting guidelines require the Fund to increase its expense ratio by the
effect of any expense offset arrangements with its service providers. (B)Total
return does not include the maximum sales charge of 4.50% effective January 4,
1999.
See notes to financial statements
12
<PAGE>
CitiFunds National Tax Free Income Portfolio
NOTES TO FINANCIAL STATEMENTS (Continued)
1. Significant Accounting Policies The CitiFunds National Tax Free Income
Portfolio (formerly Landmark National Tax Free Income Fund) (the "Fund") is a
separate non-diversified series of CitiFunds Tax Free Income Trust (the
"Trust"), a Massachusetts business trust. The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Investment Manager of the Fund is Citibank, N.A.
("Citibank"). CFBDS, Inc ("CFBDS") acts as the Fund's Sub-Administrator and
Distributor.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Fund are
in conformity with generally accepted accounting principles and are as follows:
A. Investment Security Valuations Debt securities (other than short-term
obligations maturing in 60 days or less) are valued on the basis of valuations
furnished by a pricing service which takes into account appropriate factors such
as institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, and other market data, without exclusive
reliance upon quoted prices or exchange or over-the-counter prices, since such
valuations are believed to reflect more accurately the fair value of the
securities. Short-term obligations (maturing in 60 days or less) are valued at
amortized cost, which approximates market value. Securities, if any, for which
there are no such valuations or quotations are valued at fair value as
determined in good faith by or under guidelines established by the Trustees.
B. Income Interest income is determined on the basis of interest accrued
and discount earned, adjusted for amortization of premium or discount on
long-term debt securities when required for federal income tax purposes.
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 taxable income, including any net realized
gain on investment transactions. Accordingly, no provision for federal income or
excise tax is necessary. Dividends by the Fund from net interest received on
tax-exempt municipal bonds 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. Distributions The Fund distinguishes between distributions on a tax
basis and a financial reporting basis and requires that only distributions in
excess of tax basis earnings and profits be reported in the financial statements
as a return of capital. Differences in the recognition or classification of
income between the financial statements and tax earnings and profits which
result in temporary over-
13
<PAGE>
CitiFunds National Tax Free Income Portfolio
NOTES TO FINANCIAL STATEMENTS (Continued)
distributions for financial statement purposes, are classified as distributions
in excess of net investment income or accumulated net realized gains.
E. Fees Paid Indirectly The Fund's custodian bank calculates its fee 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 expense on the Statement of Operations.
F. Expenses The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and CFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund.
G. Other Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis. Distributions to shareholders and shares issuable to
shareholders electing to receive distributions in shares are recorded on the
ex-dividend date.
2. Management Fees Citibank is responsible for overall management of the
Fund's business affairs, and has a Management Agreement with the Fund. Citibank
also provides certain administrative services to the Fund. These administrative
services include providing general office facilities and supervising the overall
administration of the Fund. CFBDS acts as Sub-Administrator and performs such
duties and receives such compensation from Citibank as from time to time is
agreed to by Citibank and CFBDS. Citibank is a wholly-owned subsidiary of
Citigroup, Inc.
The management fees paid to Citibank, are accrued daily and payable monthly. The
management fee is computed at the annual rate of 0.75% of the Funds' average
daily net assets. The management fee amounted to $455,263 all of which was
voluntarily waived for the year ended December 31, 1998. The Trust pays no
compensation directly to any Trustee or any other officer who is affiliated with
the Sub-Administrator, all of whom receive remuneration for their services to
the Trust from the Sub-Administrator or its affiliates.
3. Distribution Fees The Fund has adopted a Service Plan pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, in which the Fund pays
fees for distribution, sales and marketing and shareholder services at an annual
rate not to exceed 0.25% of the Fund's average daily net assets. The
Distribution fees amounted to $151,754 all of which was voluntarily waived for
the year ended December 31, 1998.
4. Purchases and Sales of Investments Purchases and sales of investments, other
than U.S. Government securities and short-term obligations, aggregated
$260,229,240 and $34,718,400, respectively.
14
<PAGE>
CitiFunds National Tax Free Income Portfolio
NOTES TO FINANCIAL STATEMENTS (Continued)
5. Shares of Beneficial Interest The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional Shares of Beneficial
Interest (without par value). Transactions in shares of beneficial interest were
as follows:
Year Ended December 31,
-----------------------
1998 1997
================================================================================
Shares sold 24,222,960 18,203
Shares issued to shareholders from
reinvestment of dividends 257,479 9,940
Shares repurchased (1,951,231) (51,804)
- --------------------------------------------------------------------------------
Net increase (decrease) 22,529,208 (23,661)
================================================================================
6. Federal Income Tax Basis of Investments The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at December 31, 1998,
as computed on a federal income tax basis, are as follows:
Aggregate cost $232,880,211
================================================================================
Gross unrealized appreciation $ 1,974,933
Gross unrealized depreciation (298,771)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 1,676,162
================================================================================
7. Assumption of Expenses CFBDS has voluntarily agreed to pay the unwaived
expenses of the Fund for the year ended December 31, 1998 which amounted to
$152,335.
8. Line of Credit The Fund, along with other CitiFunds, entered into an ongoing
agreement with a bank which allows the Funds collectively to borrow up to $60
million for temporary or emergency purposes. Interest on borrowings, if any, is
charged to the specific fund executing the borrowing at the base rate of the
bank. The line of credit requires a quarterly payment of a commitment fee based
on the average daily unused portion of the line of credit. For the year ended
December 31, 1998, the commitment fee allocated to the Fund was $111. Since the
line of credit was established there have been no borrowings.
9. Subsequent Event Effective January 4, 1999, the Fund will offer two classes
of shares: Class A and Class B. Shares of the Fund that are outstanding on
January 4, 1999 will be classified as Class A shares. Investors purchasing
shares of the Fund on or after January 4, 1999 may select Class A or Class B,
with different sales charges and expense levels. The maximum sales load imposed
on purchases of Class A shares will be 4.50% and the maximum deferred sales load
on purchases of Class B will be 4.50%.
15
<PAGE>
CitiFunds National Tax Free Income Portfolio
INDEPENDENT AUDITORS' REPORT
To the Trustees and Shareholders of
CitiFunds National Tax Free Income Portfolio
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of CitiFunds National Tax Free Income
Portfolio, a separate series of CitiFunds Tax Free Income Trust (the "Trust") (a
Massachusetts business trust), as of December 31, 1998, the related statement of
operations for the year then ended, the statement of changes in net assets for
the years ended December 31, 1998 and 1997, and the financial highlights for
each of the years in the three-year period ended December 31, 1998 and for the
period August 17, 1995 (Commencement of Operations) to December 31, 1995. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
December 31, 1998 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of CitiFunds National
Tax Free Income Portfolio at December 31, 1998, the results of its operations,
the changes in its net assets, and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 8, 1999
16
<PAGE>
CitiFunds National Tax Free Income Portfolio
NOTES TO FINANCIAL STATEMENTS
Trustees and Officers
C. Oscar Morong, Jr., Chairman
Philip W. Coolidge*, President
Elliott J. Berv
Mark T. Finn
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Walter E. Robb, III
E. Kirby Warren
William S. Woods, Jr.
Secretary
Linda T. Gibson*
Treasurer
John R. Elder*
*Affiliated Person of Sub-Administrator and Distributor
Investment Manager
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
Distributor
CFBDS, Inc.
21 Milk Street, 5th Floor
Boston, MA 02109
(617) 423-1679
Transfer Agent and Custodian
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
Auditors
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
Legal Counsel
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
THE CITIFUNDS FAMILY
Large Cap Stocks
o CitiFunds Growth & Income Portfolio
o CitiFunds Large Cap Growth Portfolio
Small Cap Stocks
o CitiFunds Small Cap Value Portfolio
o CitiFunds Small Cap Growth Portfolio
International Stocks
o CitiFunds International Growth & Income Portfolio
o CitiFunds International Growth Portfolio
Growth with Income
o CitiFunds Balanced Portfolio
Bonds
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds Intermediate Income Portfolio
o CitiFunds National Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
Money Markets
o CitiFunds Cash Reserves
o CitiFunds U.S. Treasury Reserves
o CitiFunds Tax Free Reserves
o CitiFunds California Tax Free Reserves
o CitiFunds Connecticut Tax Free Reserves
o CitiFunds New York Tax Free Reserves
This report is prepared for the information of
shareholders. It is authorized for distribution to
prospective investors only when preceded or accompanied
by an effective prospectus.
For more information contact your Service Agent
or call 1-800-625-4554
CitiFunds are made available by CFBDS, Inc.
as distributor.
(C)1999 Citicorp [LOGO]Printed on recycled paper CFA/NAT/1298
<PAGE>
Annual Report o December 31, 1998
[LOGO} CitiFunds
California Tax Free
Income Portfolio
[GRAPHIC]
BONDS
- --------------------------------------------------------------------------------
INVESTMENT PRODUCTS:
NOT FDIC INSURED O NO BANK GUARANTEE O MAY LOSE VALUE
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
CitiFunds California Tax Free Income Portfolio
Letter to Our Shareholders 1
...............................................................................
Portfolio Environment and Outlook 2
...............................................................................
Fund Facts 3
...............................................................................
Portfolio Highlights 3
...............................................................................
Fund Performance 4
...............................................................................
Portfolio of Investments 5
...............................................................................
Statement of Assets and Liabilities 8
...............................................................................
Statement of Operations 9
...............................................................................
Statement of Changes in Net Assets 10
...............................................................................
Financial Highlights 11
...............................................................................
Notes to Financial Statements 12
...............................................................................
Independent Auditors' Report 15
...............................................................................
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
This annual report covers the period from the Portfolio's inception on
November 2, 1998, through December 31, 1998, for the CitiFunds(SM) California
Tax-Free Income Portfolio. Inside, the CitiFunds' investment manager, Citibank,
N.A., discusses the market conditions it faced, the strategies it employed and
its outlook for the future.
November and December saw a continuation of generally positive economic
conditions in the United States. Low inflation and slower economic growth were
generally positive influences on the California municipal bonds in which the
Portfolio invests.
Earlier in the year, other financial markets, especially stocks,
experienced heightened turbulence. In our view, this market volatility once
again confirmed the benefits of diversification. By allocating your investment
assets among a number of different markets, you may be able to reduce the
effects of volatility on your overall portfolio. In our view, CitiFunds
California Tax Free Income Portfolio can play a valuable role in such a
diversified investment portfolio.
Thank you for your continued confidence and participation.
Sincerely,
/s/Philip W. Coolidge
Philip W. Coolidge
President
January 20, 1999
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
Tax-exempt securities from California issuers provided good results in the
final months of 1998. A slowing economy and persistently low inflation
contributed to attractive total rates of return. California municipal bonds also
benefited from favorable supply-and-demand factors: total issuance of California
securities had declined modestly in 1998, but demand for tax-exempt securities
from high-income residents remained strong.
In addition, municipal bond prices remained inexpensive during November and
December relative to their historical relationship with U.S. Treasury bond
prices. That's because direct obligations of the federal government benefited in
1998 from the first federal budget surplus in recent memory, which reduced the
government's need to issue U.S. Treasury securities. In addition, U.S. Treasury
securities were the beneficiaries of a worldwide "flight to quality" during the
second and third quarters, when the spreading global currency and credit crisis
caused domestic and foreign investors to flock to the relative "safe haven" of
government bonds.
Because of these influences, municipal bond yields were almost equal to the
yields of comparable taxable government bonds when the Fund began operations in
early November. The last time municipal bond yields equaled comparable taxable
yields was in 1986, when tax reform caused structural dislocations in the
fixed-income marketplace. In effect, buyers of California municipal bonds
received the federal and state income-tax exemptions virtually for free! Between
the Fund's inception and year-end, municipal bond yields moderated somewhat
relative to U.S. Treasury securities, but they ended the year still inexpensive
relative to historical averages.
In this environment, we maintained the portfolio's average maturity toward
the long end of its range. This strategy was designed to lock in higher yields
for a longer period as interest rates fell. Throughout the period, we found
value in triple-A-rated, intermediate-term bonds with protection against
"calls," or early redemption by their issuers. We focused primarily on general
obligation bonds backed by the overall taxation authority of their issuers. Our
outlook for the California tax-exempt bond market remains positive. In our
analysis, the state's municipalities are more fiscally sound than at any time in
recent memory. This opinion was apparently shared by the major bond rating
agencies, which upgraded California's credit rating in 1998. Even cities and
towns that had persistent financial problems just a few years ago appear to be
financially healthier.
At the same time, we expect general economic conditions to remain good. Our
forecast calls for slow growth, low inflation and an accommodative monetary
policy. In fact, the Federal Reserve Board already reduced key short-term
interest rates three times in the second half of 1998, their first change in
monetary policy since early 1997. If the yield relationship between municipal
bonds and U.S. Treasury securities returns to levels more consistent with
historical averages, as we expect, 1999 may be another particularly good year
for tax-exempt investments from California issuers.
2
<PAGE>
FUND FACTS
Fund Objective
To provide its shareholders with high levels of current income exempt from both
Federal and California personal income taxes+ and preservation of the value of
its shareholders' investment.
Investment Manager Dividends
Citibank, N.A Declared daily, paid monthly, if any
Commencement of Operations Capital Gains
November 2, 1998 Distributed semi-annually, if any
Net Assets as of 12/31/98 o Benchmarks
$96.7 million o Lipper General Municipal
Bond Funds Average
o Lehman Municipal 4 Years Plus
Bond Index
+ A portion of the income may be subject to the Federal Alternative Minimum Tax
(AMT). Consult your personal tax advisor.
PORTFOLIO HIGHLIGHTS
Portfolio Diversification as of December 31, 1998
[THE FOLLOWING TABLE WAS PRESENTED AS A PIE CHART IN THE PRINTED DOCUMENT]
% of
Type of Investment Portfolio
- ------------------ ---------
Short-term* 6.0%
Redevelopment 8.0%
General Obligation Bonds 15.0%
Housing Revenue 2.0%
Education 12.0%
Healthcare 5.0%
State Agencies 9.0%
Transportation Revenue 17.0%
Utilities 18.0%
Other Revenue 8.0%
*Includes cash and net other assets
3
<PAGE>
FUND PERFORMANCE
Total Returns
Since 11/2/98
(Commencement
of Operations)
The Period Ending to 12/31/98*
===============================================================================
CitiFunds California Tax Free Income Portfolio 1.49%
Lipper General Municipal Bond Funds Average 0.41%+
Lehman Municipal 4 Years Plus Bond Index 0.50%+
* Not Annualized
+ From 10/31/98
30-Day SEC Yield 4.40%
Income Dividends Per Share $0.069
Growth of a $10,000 Investment
A $10,000 investment in the Fund made on inception date would have grown to
$10,149 (as of 12/31/98). The graph shows how this compares to its benchmark
over the same period.
[THE FOLLOWING TABLE WAS PRESENTED AS A LINE GRAPH IN THE PRINTED DOCUMENT]
CitiFunds Lipper Lehman
California Tax Free General Municipal Bonds Municipal 4 Years
Date Income Portfolio Fund Average Plus Bond Index
- ---- ---------------- ----------------------- -----------------
Nov 4, 98 10,000 10,000 10,000
Nov 30, 98 10,125 10,001 10,044
Dec 31, 98 10,149 10,041 10,050
The graph assumes all dividends and distributions are reinvested at Net Asset
Value.
Notes: All Fund performance numbers represent past performance, and are no
guarantee of future results. The Fund's share price and investment return will
fluctuate, so that the value of an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns include change in
share price and reinvestment of dividends and distributions, if any. Total
return figures are provided in accordance with SEC guidelines for comparative
purposes for prospective investors. Total returns reflect certain voluntary fee
waivers which may be terminated. If the waivers were not in place, total returns
would be lower.
Total returns and yields do not reflect initial sales charges in effect as of
January 4, 1999. If sales charges had been in effect during periods prior to
December 31, 1998, the Funds total returns and yield would have been lower.
4
<PAGE>
CitiFunds California Tax Free Income Portfolio
PORTFOLIO OF INVESTMENTS December 31, 1998
Moody's
Bond Principal
Rating Amount
(Unaudited) Issuer (000's omitted) Value
- --------------------------------------------------------------------------------
MUNICIPAL BONDS -- 93.8%
- --------------------------------------------------------------------------------
Certificates of Participation -- 7.0%
- --------------------------------------------------------------------------------
Aaa Los Angeles County,
California Convention,
6.13% due 8/15/11 $1,300 $ 1,515,176
Aaa Modesto City, California,
School District
Certificates,
4.50% due 9/1/11 1,450 1,452,364
Aaa San Diego County,
California Certificates,
5.25% due 5/1/12 3,580 3,812,915
------------
6,780,455
------------
General Obligation Bonds -- 14.6%
- --------------------------------------------------------------------------------
Aaa California State,
6.50% due 2/1/07 1,000 1,165,680
Aa3 California State,
6.50% due 10/1/08 1,000 1,183,930
Aa3 California State,
5.25% due 6/1/11 1,645 1,746,513
Aaa California State,
5.00% due 10/1/14 3,600 3,693,024
Aa3 California State,
5.00% due 2/1/17 2,425 2,442,096
Aaa California State,
AMT,
4.95% due 12/1/8 1,070 1,116,791
Aaa Puerto Rico
Commonwealth,
6.50% due 7/1/10 1,400 1,688,190
Aaa Santa Margarita,
Dana Point,
5.50% due 8/1/10 950 1,049,208
------------
14,085,432
------------
Education -- 11.7%
- --------------------------------------------------------------------------------
Aaa Calaveras, California,
School District,
5.13% due 8/1/18 1,000 1,013,940
Aaa California Educational
Facilities Authority,
6.00% due 10/1/08 1,000 1,148,590
Aaa Chico, California,
School District,
5.00% due 8/1/11 1,000 1,050,610
Aaa Chico, California,
School District,
5.00% due 8/1/13 1,305 1,347,830
Aaa Fallbrook, California,
School District,
5.375% due 9/1/14 555 603,230
Aaa Fremont, California,
School District,
5.00% due 9/1/19 750 748,995
Aaa Los Angeles, California,
School District,
5.00% due 11/1/13 1,815 1,867,145
Aaa Pomona, California University
School District,
5.90% due 2/1/10 1,000 1,141,610
Aaa University of California
Revenue,
5.13% due 9/1/13 2,300 2,394,760
------------
11,316,710
------------
Healthcare -- 4.5%
- --------------------------------------------------------------------------------
A2 California Health
Facilities Authority,
5.25% due 7/1/08 1,625 1,724,694
Aa3 California Statewide
Community
Healthcare System
5.25% due 7/1/10 2,500 2,653,875
------------
4,378,569
------------
Housing -- 2.4%
- --------------------------------------------------------------------------------
Aaa California Housing
Finance Agency, AMT,
4.75% due 8/1/08 1,000 1,021,580
Aaa California Housing Finance
Agency, AMT,
4.95% due 8/1/14 500 501,785
Aaa California Housing
Finance Agency, AMT,
4.40% due 8/1/24 750 750,652
------------
2,274,017
------------
Redevelopment -- 8.2%
- --------------------------------------------------------------------------------
Aaa Coalinga California
Public Finance Authority,
5.85% due 9/15/13 1,595 1,824,521
Aaa San Jose, California,
Redevelopment
Tax Allocation Project,
4.75% due 8/1/11 4,975 5,095,793
Aaa South Poway Community
Facilities District,
4.50% due 2/2/11 1,025 1,039,288
------------
7,959,602
------------
5
<PAGE>
CitiFunds California Tax Free Income Portfolio
PORTFOLIO OF INVESTMENTS (continued) December 31, 1998
Moody's
Bond Principal
Rating Amount
(Unaudited) Issuer (000's omitted) Value
- --------------------------------------------------------------------------------
State Agencies -- 9.1%
- --------------------------------------------------------------------------------
A1 California State Public
Works Board,
5.25% due 10/1/05 $3,000 $ 3,228,510
A1 California State Public
Works Board,
5.25% due 11/1/11 500 537,650
A1 California State Public
Works Board,
5.13% due 10/1/12 1,050 1,098,027
A1 California State Public
Works Board,
5.13% due 10/1/13 1,110 1,151,236
Aa3 Los Angeles County,
California Public
Works Authority,
5.50% due 10/1/11 1,000 1,087,350
Aa Los Angeles County,
California Sanitation
District,
5.38% due 10/1/13 1,645 1,718,005
------------
8,820,778
------------
Sales Tax Revenue -- 1.1%
- --------------------------------------------------------------------------------
Aa Los Angeles County,
California, Sales
Tax Revenue,
6.50% due 7/1/13 1,000 1,079,700
------------
Transportation Revenue -- 16.8%
- --------------------------------------------------------------------------------
Aa Los Angeles County,
California,
Harbor Department
Revenue, AMT,
6.63% due 8/1/19 1,000 1,095,760
Aaa Los Angeles County,
California
Transportation,
6.00% due 7/1/04 1,000 1,108,020
Aa3 Orange County,
California,
Transportation
Tax Authority,
5.75% due 2/15/04 1,000 1,075,940
Aaa Puerto Rico
Commonwealth
Highway &
Transportation
Authority,
5.50% due 7/1/13 1,125 1,238,726
Aaa Sacramento County,
California, Airport
System Authority,
5.00% due 7/1/18 2,000 2,005,180
Aa3 San Francisco,
California,
Transportation
Tax Authority,
5.25% due 7/1/17 2,000 2,068,020
Aaa San Francisco,
California,
International Airport
Revenue, AMT,
6.50% due 5/1/18 3,240 3,637,030
Aaa San Francisco, California,
International Airport
Revenue, AMT,
6.60% due 5/1/20 1,500 1,684,005
Aaa San Mateo County,
California,
Transportation
District,
5.00% due 6/1/14 2,250 2,310,953
------------
16,223,634
------------
Utilities -- 18.4%
- --------------------------------------------------------------------------------
Aa2 California State
Department of
Water Resources,
7.00% due 12/1/11 900 1,131,516
Aa2 California State
Department of
Water Resources,
5.33% due 12/1/12 1,125 1,182,049
Aa2 California State
Department of
Water Resources
5.33% due 12/1/13 1,840 1,917,206
Aaa Central Valley,
California,
Cogeneration,
5.25% due 7/1/12 2,615 2,786,387
Aaa East Bay California
Municipal
Utility District,
5.25% due 6/1/17 1,055 1,089,710
Aaa Fresno, California,
Sewer Revenue,
6.25% due 9/1/14 1,405 1,663,295
Aaa Puerto Rico Electrical
Power Authority,
5.50% due 7/1/07 1,000 1,105,520
6
<PAGE>
CitiFunds California Tax Free Income Portfolio
PORTFOLIO OF INVESTMENTS (continued) December 31, 1998
Moody's
Bond Principal
Rating Amount
(Unaudited) Issuer (000's omitted) Value
- --------------------------------------------------------------------------------
Aaa Puerto Rico Electrical
Power Authority,
5.50% due 7/1/08 $1,800 $ 2,002,374
Aaa Southern California,
Public Power
Transmission
Revenue,
5.25% due 7/1/10 4,580 4,954,003
------------
17,832,060
------------
Total Municipal Bonds
(Identified Cost $90,424,855) 90,750,957
------------
VARIABLE RATE DEMAND NOTES*
at AMORTIZED COST -- 9.8%
- --------------------------------------------------------------------------------
A-1+ Alameda County,
California,
Industrial
Development
Authority, AMT,
3.35% due 7/1/27 1,050 1,050,000
VMIG-1 California
Health Facilities
Finance Authority,
5.10% due 7/1/13 2,160 2,160,000
VMIG-1 California
Health Facilities
Finance Authority,
3.20% due 3/1/20 350 350,000
VMIG-1 California
Pollution Control
Finance Authority,
3.00% due 10/1/09 100 100,000
VMIG-1 California
Pollution Control
Finance Authority,
5.10% due 10/1/11 1,500 1,500,000
VMIG-1 California
Pollution Control
Finance Authority,
AMT,
3.90% due 10/1/31 1,000 1,000,000
VMIG-1 California
State Economic
Development
Finance Authority,
2.80% due 4/1/08 1,500 1,500,000
VMIG-1 California Statewide
Community
Development
Authority,
3.05% due 6/1/26 860 860,000
VMIG-1 California Statewide
Community
Development
Authority,
3.95% due 8/15/27 400 400,000
A-1+ Covina California,
Redevelopment Agency,
2.90% due 12/1/15 500 500,000
------------
Total Variable Rate
Demand Notes at
Amortized Cost 9,420,000
------------
Total Investments
(Identified Cost
$99,844,855) 103.6% $100,170,957
Other Assets,
Less Liabilities (3.6) (3,464,830)
----- ------------
Net Assets 100.0% $ 96,706,127
===== ============
* Variable rate demand notes have a demand feature under which the Fund could
tender them back to the issuer on no more than 7 day's notice.
AMT - Subject to Alternative Minimum Tax
See notes to financial statements
7
<PAGE>
CitiFunds California Tax Free Income Portfolio
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998
================================================================================
Assets:
Investments, at value (Note 1A) (Identified Cost, $99,844,855) $100,170,957
Cash 90,169
Receivable for shares of beneficial interest sold 6,904,736
Interest receivable 1,280,656
- --------------------------------------------------------------------------------
Total assets 108,446,518
- --------------------------------------------------------------------------------
Liabilities:
Payable for investments purchased 11,593,889
Payable for shares of beneficial interest repurchased 48,007
Dividends payable 98,495
- --------------------------------------------------------------------------------
Total liabilities 11,740,391
- --------------------------------------------------------------------------------
Net Assets for 9,593,679 shares of beneficial interest outstanding $96,706,127
================================================================================
Net Assets Consist of:
Paid-in capital $96,380,098
Unrealized appreciation of investments 326,102
Accumulated net realized loss on investments (73)
- --------------------------------------------------------------------------------
Total $96,706,127
================================================================================
Net Asset Value, Offering Price and Redemption Price
Per Share of Beneficial Interest $10.08
================================================================================
See notes to financial statements
8
<PAGE>
CitiFunds California Tax Free Income Portfolio
STATEMENT OF OPERATIONS
For the period November 2, 1998 (Commencement of Operations)
to December 31, 1998
================================================================================
Investment Income (Note 1B):
Interest $451,689
Expenses:
Management fees (Note 2) $ 54,235
Registration fees 33,235
Distribution fees (Note 3) 27,118
Audit fees 26,500
Custody and fund accounting fees 14,000
Shareholder reports 7,000
Transfer agent fees 6,000
Legal fees 3,600
Trustees fees 1,000
Miscellaneous 1,000
- --------------------------------------------------------------------------------
Total expenses 173,688
Less aggregate amounts waived by the Manager
and Distributor (Notes 2 and 3) (81,353)
Expenses assumed by the Sub-Administrator (Note 7) (92,335)
- --------------------------------------------------------------------------------
Net expenses --
- --------------------------------------------------------------------------------
Net investment income 451,689
- --------------------------------------------------------------------------------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized loss on investment transactions (73)
Net unrealized appreciation 326,102
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 326,029
- --------------------------------------------------------------------------------
Net Increase in Net Assets Resulting from Operations $777,718
================================================================================
See notes to financial statements
9
<PAGE>
CitiFunds California Tax Free Income Portfolio
STATEMENT OF CHANGES IN NET ASSETS
For the period November 2, 1998 (Commencement of Operations) to December 31,1998
================================================================================
Increase (Decrease) in Net Assets from
Operations:
Net investment income $ 451,689
Net realized loss on investment transactions (73)
Net change in unrealized appreciation of investments 326,102
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 777,718
- --------------------------------------------------------------------------------
Dividends Declared to Shareholders from:
Net investment income (451,689)
- --------------------------------------------------------------------------------
Transactions in Shares of Beneficial Interest (Note 5):
Net proceeds from sale of shares 96,250,028
Net asset value of shares issued to shareholders from
reinvestment of dividends 353,195
Cost of shares repurchased (223,125)
- --------------------------------------------------------------------------------
Net increase in net assets from transactions
in shares of beneficial interest 96,380,098
- --------------------------------------------------------------------------------
Net Increase in Net Assets 96,706,127
- --------------------------------------------------------------------------------
Net Assets:
Beginning of period --
- --------------------------------------------------------------------------------
End of period $96,706,127
================================================================================
See notes to financial statements
10
<PAGE>
CitiFunds California Tax Free Income Portfolio
FINANCIAL HIGHLIGHTS
November 2, 1998
(Commencement
of Operations) to
December 31, 1998
================================================================================
Net Asset Value, beginning of period $10.00
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.069
Net realized and unrealized
gain (loss) on investments 0.080
- --------------------------------------------------------------------------------
Total from operations 0.149
- --------------------------------------------------------------------------------
Less Dividends From:
Net investment income (0.069)
- --------------------------------------------------------------------------------
Net Asset Value, end of period $10.08
================================================================================
Ratios/Supplemental Data:
Net assets, end of period
(000s omitted) $96,706
Ratio of expenses to average
net assets 0%*
Ratio of net investment income to average
net assets 4.16%*
Portfolio turnover 1%
Total return (A) 1.49%**
Note: If Agents of the Fund had not voluntarily agreed to waive all of their
fees for the period, and the Sub-administrator had not voluntarily assumed
expenses, the net investment income per share and the ratios would have been as
follows:
Net investment income per share $0.042
Ratios:
Expenses to average net assets 1.60%*
Net investment income to
average net assets 2.56%*
================================================================================
* Annualized
** Not annualized
(A) Total Return does not include the maximum sales charge of 4.50% effective
January 4, 1999.
See notes to financial statements
11
<PAGE>
CitiFunds California Tax Free Income Portfolio
NOTES TO FINANCIAL STATEMENTS
1. Significant Accounting Policies The CitiFunds California Tax Free Income
Portfolio (the "Fund") is a separate non-diversified series of CitiFunds Tax
Free Income Trust (the "Trust"), a Massachusetts business trust. The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end,
management investment company. The Investment Manager of the Fund is Citibank,
N.A. ("Citibank"). CFBDS, Inc ("CFBDS") acts as the Fund's Sub-Administrator and
Distributor.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Fund are
in conformity with generally accepted accounting principles and are as follows:
A. Investment Security Valuations Debt securities (other than short-term
obligations maturing in 60 days or less) are valued on the basis of valuations
furnished by a pricing service which takes into account appropriate factors such
as institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, and other market data, without exclusive
reliance upon quoted prices or exchange or over-the-counter prices, since such
valuations are believed to reflect more accurately the fair value of the
securities. Short-term obligations (maturing in 60 days or less) are valued at
amortized cost, which approximates market value. Securities, if any, for which
there are no such valuations or quotations are valued at fair value as
determined in good faith by or under guidelines established by the Trustees.
B. Income Interest income is determined on the basis of interest accrued
and discount earned, adjusted for amortization of premium or discount on
long-term debt securities when required for federal income tax purposes.
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 taxable income, including any net realized
gain on investment transactions. Accordingly, no provision for federal income or
excise tax is necessary. Dividends by the Fund from net interest received on
tax-exempt municipal bonds 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. Distributions The Fund distinguishes between distributions on a tax
basis and a financial reporting basis and requires that only distributions in
excess of tax basis earnings and profits be reported in the financial statements
as a return of capital. Differences in the recognition or classification of
income between the
12
<PAGE>
CitiFunds California Tax Free Income Portfolio
NOTES TO FINANCIAL STATEMENTS
financial statements and tax earnings and profits which result in temporary
over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
E. Expenses The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and CFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund.
F. Other Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis. Distributions to shareholders and shares issuable to
shareholders electing to receive distributions in shares are recorded on the
ex-dividend date.
2. Management Fees Citibank is responsible for overall management of the Fund's
business affairs, and has a Management Agreement with the Fund. Citibank also
provides certain administrative services to the Fund. These administrative
services include providing general office facilities and supervising the overall
administration of the Fund. CFBDS acts as Sub-Administrator and performs such
duties and receives such compensation from Citibank as from time to time is
agreed to by Citibank and CFBDS. Citibank is a wholly-owned subsidiary of
Citigroup, Inc.
The management fees paid to Citibank, are accrued daily and payable
monthly. The management fee is computed at the annual rate of 0.50% of the
Funds' average daily net assets. The management fee amounted to $54,235, all of
which was voluntarily waived for the period November 2, 1998 (Commencement of
Operations) to December 31, 1998. The Trust pays no compensation directly to any
Trustee or any other officer who is affiliated with the Sub-Administrator, all
of whom receive remuneration for their services to the Trust from the
Sub-Administrator or its affiliates.
3. Distribution Fees The Fund has adopted a Service Plan pursuant to Rule 12b-1
under the Investment Company Act of 1940, as amended, in which the Fund pays
fees for distribution, sales and marketing and shareholder services at an annual
rate not to exceed 0.25% of the Fund's average daily net assets. The
Distribution fees amounted to $27,118 all of which was voluntarily waived for
the period November 2, 1998 (Commencement of Operations) to December 31, 1998.
4. Purchases and Sales of Investments Purchases and sales of investments, other
than U.S. Government securities and short-term obligations, aggregated
$91,096,632 and $632,363, respectively.
13
<PAGE>
CitiFunds California Tax Free Income Portfolio
NOTES TO FINANCIAL STATEMENTS (Continued)
5. Shares of Beneficial Interest The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional Shares of Beneficial
Interest (without par value). Transactions in shares of beneficial interest were
as follows:
For the period
November 2, 1998
(Commencement of Operations)
to December 31, 1998
================================================================================
Shares sold 9,580,829
Shares issued to shareholders from
reinvestment of dividends 34,970
Shares repurchased (22,120)
- --------------------------------------------------------------------------------
Net increase 9,593,679
================================================================================
6. Federal Income Tax Basis of Investments The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at December 31, 1998,
as computed on a federal income tax basis, are as follows:
Aggregate cost $99,844,855
================================================================================
Gross unrealized appreciation $ 439,330
Gross unrealized depreciation (113,228)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 326,102
================================================================================
7. Assumption of Expenses CFBDS has voluntarily agreed to pay the unwaived
expenses of the Fund for the period November 2, 1998 (Commencement of
Operations) to December 31, 1998 which amounted to $92,335.
8. Line of Credit The Fund, along with other CitiFunds, entered into an ongoing
agreement with a bank which allows the Funds collectively to borrow up to $60
million for temporary or emergency purposes. Interest on borrowings, if any, is
charged to the specific fund executing the borrowing at the base rate of the
bank. The line of credit requires a quarterly payment of a commitment fee based
on the average daily unused portion of the line of credit. For the period
November 2, 1998 (Commencement of Operations) to December 31, 1998, no
commitment fee was allocated to the Fund. Since the line of credit was
established there have been no borrowings.
9. Subsequent Event Effective January 4, 1999, the Fund will offer two classes
of shares: Class A and Class B. Sharesof the Fund that are outstanding on
January 4, 1999 will be classified as Class A shares. Investors purchasing
shares of the Fund on or after January 4, 1999 may select Class A or Class B,
with different sales charges and expense levels. The maximum sales load imposed
on purchases of Class A shareswill be 4.50% and the maximum deferredsales loadon
purchases of Class B will be 4.50%.
14
<PAGE>
CitiFunds California Tax Free Income Portfolio
Independent Auditors' Report
To the Trustees and Shareholders of
CitiFunds California Tax Free Income Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of CitiFunds California Tax Free Income
Portfolio, a separate series of CitiFunds Tax Free Income Trust (the "Trust") (a
Massachusetts business trust), as of December 31, 1998, the related statement of
operations, the statement of changes in net assets and the financial highlights
for the period November 2, 1998 (Commencement of Operations) to December 31,
1998. These financial statements and financial highlights are the responsibility
of the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
December 31, 1998 by correspondence with the custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides 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 Income Portfolio at December 31, 1998, the results of its operations,
the changes in its net assets, and its financial highlights for the period
November 2, 1998 (Commencement of Operations) to December 31, 1998 in conformity
with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 8, 1999
15
<PAGE>
This page intentionally left blank.
<PAGE>
Trustees and Officers
C. Oscar Morong, Jr., Chairman
Philip W. Coolidge*, President
Elliott J. Berv
Mark T. Finn
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Walter E. Robb, III
E. Kirby Warren
William S. Woods, Jr.
Secretary
Linda T. Gibson*
Treasurer
John R. Elder*
*Affiliated Person of Sub-Administrator and Distributor
Investment Manager
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
Distributor
CFBDS, Inc.
21 Milk Street, 5th Floor
Boston, MA 02109
(617) 423-1679
Transfer Agent and Custodian
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
Auditors
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
Legal Counsel
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
THE CITIFUNDS FAMILY
Large Cap Stocks
o CitiFunds Growth & Income Portfolio
o CitiFunds Large Cap Growth Portfolio
Small Cap Stocks
o CitiFunds Small Cap Value Portfolio
o CitiFunds Small Cap Growth Portfolio
International Stocks
o CitiFunds International Growth & Income Portfolio
o CitiFunds International Growth Portfolio
Growth with Income
o CitiFunds Balanced Portfolio
Bonds
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds Intermediate Income Portfolio
o CitiFunds National Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
Money Markets
o CitiFunds Cash Reserves
o CitiFunds U.S. Treasury Reserves
o CitiFunds Tax Free Reserves
o CitiFunds California Tax Free Reserves
o CitiFunds Connecticut Tax Free Reserves
o CitiFunds New York Tax Free Reserves
This report is prepared for the information of shareholders. It is authorized
for distribution to prospective investors only when preceded or accompanied by
an effective prospectus.
For more information contact your Service Agent or call 1-800-625-4554
CitiFunds are made available by CFBDS, Inc. as distributor.
(C)1999 Citicorp [LOGO] Printed on recycled paper
CFA/CAT/1298
