--------------------------------------------------------------------------------
CitiFunds(SM)
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INTERMEDIATE
INCOME
PORTFOLIO
SEMI-ANNUAL REPORT
APRIL 30, 2000
CitiFunds
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INVESTMENT PRODUCTS: NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
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<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
................................................................................
Portfolio Environment and Outlook 2
................................................................................
Fund Facts 4
................................................................................
Portfolio Highlights 4
................................................................................
Fund Performance 5
................................................................................
CITIFUNDS INTERMEDIATE INCOME PORTFOLIO
Statement of Assets and Liabilities 6
................................................................................
Statement of Operations 7
................................................................................
Statement of Changes in Net Assets 8
................................................................................
Financial Highlights 9
................................................................................
Notes to Financial Statements 11
................................................................................
U.S. FIXED INCOME PORTFOLIO
Portfolio of Investments 15
................................................................................
Statement of Assets and Liabilities 18
................................................................................
Statement of Operations 18
................................................................................
Statement of Changes in Net Assets 19
................................................................................
Financial Highlights 19
................................................................................
Notes to Financial Statements 20
................................................................................
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
During the six months ended April 30, 2000, the U.S. stock and bond markets
were characterized by historic levels of volatility, leaving many investors with
no clear indication of the future direction of the financial markets. Despite
the ongoing strength and expansion of the U.S. and global economies, concerns
regarding inflation and rising interest rates led to wide fluctuations in stock
prices and turbulence in the bond market.
Throughout the reporting period, the CitiFunds' investment adviser, Citibank,
N.A., continued to manage CitiFundsSM Intermediate Income Portfolio with the
goal of achieving its investment objectives of generating a high level of
current income and preserving the value of its shareholders' investment.
This report reviews the Fund's investment activities and performance during
the reporting period and provides a summary of Citibank's perspective on and
outlook for the U.S. bond market. Thank you for your continued confidence and
participation in these challenging times.
Sincerely,
/s/ PHILIP W. COOLIDGE
----------------------
Philip W. Coolidge
President
May 15, 2000
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
MOST SECTORS OF THE U.S. BOND MARKET CONTINUED TO DECLINE OVER THE PAST SIX
MONTHS. The U.S. economy continued to gain momentum, with Gross Domestic Product
("GDP") rising 7.3% during the fourth quarter of 1999 and an estimated 5.4%
during the first quarter of 2000. This high level of economic growth caused
concern among many investors regarding inflation. In an attempt to forestall a
potential reacceleration of inflation, the Fed raised interest rates by 75 basis
points during the reporting period.
HIGHER INTEREST RATES CAUSED MOST SECTORS OF THE U.S. BOND MARKET TO DECLINE.
Many bonds were also affected by changing supply-and-demand influences,
including the federal government's announcement that it intends to buy back
roughly $30 billion of long-term U.S. Treasury bonds. This created an unusual
condition in the bond market called an inverted yield curve. An inverted yield
curve represents an occurrence whereby longer-term bonds offer lower yields than
short-term bonds. In addition, the increased volatility of the stock market
created a "flight to quality" among many risk-averse investors, causing the
yield differences, or spreads, between high-quality and lower-quality bonds to
widen.
In this challenging and dynamic bond market, the Fund's management team
maintained the Portfolio's average duration modestly shorter than the averages.
Duration is a measure of sensitivity to changing interest rates. This defensive
duration management strategy was intended to help management maintain the
flexibility required to capture higher yields as they became available while
interest rates rose.
ADDITIONALLY, THE MANAGERS MAINTAINED AN EMPHASIS ON HIGH-QUALITY CORPORATE
BONDS, MORTGAGE-BACKED SECURITIES AND ASSET-BACKED SECURITIES THROUGHOUT MOST OF
THE REPORTING PERIOD. The Fund, in line with its investment objective, can
invest in U.S. debt securities considered investment grade. Investment grade
securities are those rated Baa3 or better by Moody's or BBB or better by
Standard & Poor's.
The credit ratings assigned to the Portfolio's holdings averaged AA+, helping
the Fund's credit quality to remain quite high throughout the six-month
reporting period. In the view of the investment team, these types of bonds
offered competitive values and the highest yield potential with less risk.
However, please note that there is no guarantee that the Portfolio's average
holding will continue to be rated AA+. Within the Fund's corporate bond
holdings, however, management moved to a more defensive position by selling some
of the holdings with longer-term maturities and reinvesting the proceeds in
high-quality corporate bonds with shorter maturities.
2
<PAGE>
Looking ahead, the Fund's managers remain cautiously optimistic about bond
market opportunities. Despite the recent release of economic statistics that may
suggest increasing inflation, the managers continue to believe that, ultimately,
inflationary pressures should stay under control. In fact, managers anticipate
the Fed is likely to raise interest rates only once or twice again this year.
The managers' most likely strategy under these expectations would be to increase
the Fund's exposure to the higher-yielding sectors of the bond market, subject
to the limitation that the Fund may only purchase debt securities that are
investment grade at the time of purchase, and to extend the Fund's average
duration to lock in prevailing high yields for as long as deemed prudent. And
while no guarantees can be made, the managers are confident that this more
aggressive strategy could benefit the Fund over the long term.
3
<PAGE>
FUND FACTS
FUND OBJECTIVE
To generate a high level of current income and preserve the value of its
shareholders' investments.
INVESTMENT MANAGER DIVIDENDS
U.S. Fixed Income Portfolio Paid monthly
Citibank, N.A.
COMMENCEMENT OF OPERATIONS CAPITAL GAINS
June 25, 1993 Distributed semi-annually, if any
NET ASSETS AS OF 4/30/00 BENCHMARKS
Class A shares o Lipper Intermediate Investment
$40.7 million Grade Funds Average*
Class B shares o Lehman Aggregate Bond Index**
$1.9 million
*The Lipper Intermediate Investment Grade Funds Average reflects the
performance (excluding sales charges) of mutual funds with similar objectives.
**The Lehman Aggregate Bond Index is an unmanaged index of U.S. Government and
corporate bonds representing a broad measure of the performance of taxable
bonds in the U.S. market with maturities of at least one year.
PORTFOLIO HIGHLIGHTS
PORTFOLIO DIVERSIFICATION AS OF APRIL 30, 2000
[Table below represents pie chart in its printed piece.]
Corporate U.S. Preferred *Short- Asset-Backed Mortgage
Bonds Treasury Issues Stock Term Securities Obligations
28% 15% 2% (9%) 26% 38%
*Includes cash and net other assets
4
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
SINCE
SIX ONE FIVE 6/25/93
ALL PERIODS ENDING APRIL 30, 2000 MONTHS** YEAR YEARS* INCEPTION*
-------------------------------------------------------------------------------
CitiFunds Intermediate Income Portfolio
(Class A) without sales charge 0.24% (0.80)% 5.42% 4.58%
Lipper Intermediate Investment Grade
Funds Average 0.84% 0.10% 5.84% 4.71%+
Lehman Aggregate Bond Index 1.41% 1.26% 6.79% 5.84%+
CitiFunds Intermediate Income Portfolio
(Class A) with a maximum sales charge
of 4.50% (4.27)% (5.27)% 4.46% 3.88%
CitiFunds Intermediate Income Portfolio
(Class B) without deferred sales charge (0.01)% (1.29)% -- (1.79)%#
Lipper Intermediate Investment Grade
Funds Average 0.84% 0.10% -- (0.47)%++
Lehman Aggregate Bond Index 1.41% 1.26% -- (0.80)%++
CitiFunds Intermediate Income Portfolio
(Class B) with a maximum deferred sales
charge of 4.50% (4.51)% (5.73)% -- (5.16)%#
* Average Annual Total Return
** Not Annualized
+ From 6/30/93
++ From 12/31/98
# From 1/4/99
30-Day SEC Yield Class A 6.19%
30-Day SEC Yield Class B 5.71%
GROWTH OF A $10,000 INVESTMENT
A $10,000 investment in the Fund made on inception date would have grown to
$12,981 with sales charge (as of 4/30/00). The graph shows how this compares to
its benchmarks over the same period.
[The figures below represent line graph in its printed piece.]
6/25/93 9550
9579 10000 10000
9620 10042 10057
9860 10228 10233
9937 10268 10261
9947 10301 10299
9785 10209 10211
9835 10257 10266
9975 10387 10405
9755 10202 10224
9519 9980 9971
4/30/94 9424 9890 9891
9398 9875 9890
9368 9856 9869
9527 10004 10065
9553 10024 10077
9393 9911 9929
9357 9896 9920
9321 9867 9898
9395 9914 9967
9570 10072 10164
9788 10281 10406
9857 10345 10469
4/30/95 9969 10478 10616
10438 10848 11027
10497 10916 11107
10448 10887 11083
10542 11009 11217
10657 11106 11326
10695 11244 11473
10801 11401 11645
10941 11546 11808
10991 11622 11886
10772 11423 11679
10687 11345 11597
4/30/96 10613 11276 11532
10584 11256 11509
10739 11384 11664
10756 11410 11695
10725 11401 11675
10928 11587 11878
11167 11821 12142
11360 12016 12350
11239 11910 12235
11292 11805 12273
11320 11829 12303
11181 11705 12167
4/30/97 11354 11857 12349
11444 11959 12467
11570 12092 12615
11858 12403 12956
11743 12294 12846
11910 12465 13034
12117 12522 13223
12111 12557 13284
12236 12670 13418
12433 12833 13590
12402 12815 13580
12448 12861 13626
4/30/98 12490 12916 13697
12622 13031 13827
12729 13125 13944
12733 13147 13974
12972 13307 14201
13250 13601 14534
13162 13502 14457
13180 13564 14539
13223 13609 14583
13299 13696 14686
12975 13441 14429
13064 13538 14509
4/30/99 13086 13579 14588
12961 13438 14460
12890 13388 14414
12803 13450 14352
12771 13428 14345
12945 13562 14511
12950 13580 14565
12968 13591 14563
12909 13533 14493
12830 13483 14446
12960 13614 14620
13134 13771 14813
4/30/00 12981 13695 14770
CitiFunds Intermediate Income Fund
Lipper Intermediate Investment Grade Funds Average
Lehman Aggregate Bond Index
The graph includes the initial maximum sales charge on the Fund (no comparable
charge exists for the indices) and assumes all dividends and distributions from
the Fund are reinvested at Net Asset Value.
Notes: All Fund performance numbers represent past performance, and are no
guarantee of future results. The Fund's share price and investment return will
fluctuate, so that the value of an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns include change in
share price and reinvestment of dividends and distributions, if any. Total
return figures "with sales charge" are provided in accordance with SEC
guidelines for comparative purposes for prospective investors. Total returns
reflect certain voluntary fee waivers which may be terminated at any time. If
the waivers were not in place, total returns would be lower. The maximum sales
charge of 4.50% went into effect on January 4, 1999. Investors may not invest
directly in an index.
5
<PAGE>
CITIFUNDS INTERMEDIATE INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (Unaudited)
================================================================================
ASSETS:
Investment in U.S. Fixed Income Portfolio at value (Note 1A) $42,658,288
Receivable from Sub-Administrator 60,396
Receivable for shares of beneficial interest sold 6,001
--------------------------------------------------------------------------------
Total assets 42,724,685
--------------------------------------------------------------------------------
LIABILITIES:
Payable for shares of beneficial interest repurchased 68,519
Dividends payable 22,591
Accrued expenses and other liabilities 59,322
--------------------------------------------------------------------------------
Total liabilities 150,432
--------------------------------------------------------------------------------
NET ASSETS $42,574,253
================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $49,624,363
Accumulated net realized loss (5,449,486)
Unrealized depreciation (1,743,742)
Undistributed net investment income 143,118
--------------------------------------------------------------------------------
Total $42,574,253
================================================================================
COMPUTATION OF
CLASS A SHARES:
Net Asset Value per share ($40,689,857/4,468,938 shares outstanding) $9.11
Offering price per share ($9.11 / 0.955) $9.54*
================================================================================
CLASS B SHARES:
Net Asset Value per share and offering price ($1,884,396/206,477
shares outstanding) $9.13**
================================================================================
* Based upon single purchases of less than $25,000.
** Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charges.
See notes to financial statements
6
<PAGE>
CITIFUNDS INTERMEDIATE INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (Unaudited)
================================================================================
INVESTMENT INCOME (Note 1B):
Interest Income from U.S. Fixed Income Portfolio $ 1,680,881
Dividend Income from U.S. Fixed Income Portfolio 28,831
Allocated Expenses from U.S. Fixed Income Portfolio (96,793)
--------------------------------------------------------------------------------
$ 1,612,919
--------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 84,149
Service fees Class A (Note 3) 57,585
Service fees Class B (Note 3) 7,564
Transfer agent fees 33,642
Custody and fund accounting fees 17,825
Shareholder reports 17,203
Legal fees 12,110
Audit fees 9,342
Trustees fees 8,139
Other 21,623
--------------------------------------------------------------------------------
Total expenses 269,182
Less expenses assumed by the Sub-Administrator (Note 6) (60,396)
Less aggregate amounts waived by the Manager (Note 2) (84,149)
--------------------------------------------------------------------------------
Net expenses 124,637
--------------------------------------------------------------------------------
Net investment income 1,488,282
--------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
FROM U.S. FIXED INCOME PORTFOLIO:
Net realized loss from investment transactions (2,025,193)
Net realized gain on futures transactions 95,366
Unrealized appreciation of
investments and futures contracts 527,856
--------------------------------------------------------------------------------
Net realized and unrealized loss from
U.S. Fixed Income Portfolio (1,401,971)
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 86,311
================================================================================
See notes to financial statements
7
<PAGE>
CITIFUNDS INTERMEDIATE INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31,
(Unaudited) 1999
================================================================================
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 1,488,282 $ 3,896,464
Net realized loss (1,929,827) (1,275,483)
Unrealized appreciation (depreciation) 527,856 (3,954,983)
--------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 86,311 (1,334,002)
--------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (Class A) (1,464,385) (3,638,279)
Net investment income (Class B) (58,760) (80,204)
--------------------------------------------------------------------------------
Decrease in net assets from
distributions to shareholders (1,523,145) (3,718,483)
--------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST (Note 5):
CLASS A
Net proceeds from sale of shares 738,559 26,451,535
Net asset value of shares issued to shareholders
from reinvestment of distributions 1,464,385 3,587,003
Cost of shares repurchased (12,160,417) (49,885,122)
--------------------------------------------------------------------------------
Total Class A (9,957,473) (19,846,584)
--------------------------------------------------------------------------------
CLASS B*
Net proceeds from sale of shares 104,276 3,269,414
Net asset value of shares issued to shareholders
from reinvestment of distributions 50,838 62,923
Cost of shares repurchased (557,505) (850,681)
--------------------------------------------------------------------------------
Total Class B (402,391) 2,481,656
--------------------------------------------------------------------------------
Net decrease in net assets from
transactions in shares of beneficial interest (10,359,864) (17,364,928)
--------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS (11,796,698) (22,417,413)
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 54,370,951 76,788,364
--------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $143,118
and $177,981, respectively) $ 42,574,253 $ 54,370,951
================================================================================
</TABLE>
* January 4, 1999 (Commencement of Operations).
See notes to financial statements
8
<PAGE>
CITIFUNDS INTERMEDIATE INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
-------------------------------------------------------------------
SIX MONTHS TEN
ENDED YEAR MONTHS
APRIL 30, ENDED ENDED YEAR ENDED DECEMBER 31,
2000 OCTOBER 31, OCTOBER 31, ------------------------------
(Unaudited) 1999 1998 1997 1996 1995 1994
===================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period $ 9.38 $10.00 $ 9.72 $9.48 $9.77 $8.91 $9.88
---------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.321 0.508+ 0.447 0.575 0.54 0.57 0.521
Net realized and unrealized
gain (loss) on investments (0.298) (0.666) 0.272 0.239 (0.29) 0.86 (0.959)
---------------------------------------------------------------------------------------------------
Total from operations 0.023 (0.158) 0.719 0.814 0.25 1.43 (0.438)
---------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.293) (0.462) (0.439) (0.574) (0.54) (0.57) (0.516)
Net realized gain on
investments -- -- -- -- -- -- (0.016)
---------------------------------------------------------------------------------------------------
Total distributions (0.293) (0.462) (0.439) (0.574) (0.54) (0.57) (0.532)
---------------------------------------------------------------------------------------------------
Net Asset Value,
end of period $ 9.11 $ 9.38 $10.00 $9.72 $9.48 $9.77 $8.91
===================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $40,690 $52,025 $76,788 $36,702 $43,919 $49,618 $47,582
Ratio of expenses to
average net assets(A) 0.90% 0.90% 0.91%* 0.92% 0.90% 0.90% 0.90%
Ratio of expenses to average
net assets after fees
paid indirectly(A) 0.90%* 0.90% 0.90%* 0.90% 0.90% 0.90% 0.90%
Ratio of net investment income
to average net assets 6.21%* 5.20% 5.30%* 5.92% 5.72% 5.97% 5.52%
Portfolio turnover(B) -- -- 120% 146% 495% 396% 291%
Total return 0.24%** (1.61)% 7.57%** 8.87% 2.73% 16.45% (4.48)%
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion
of their fees for the periods indicated, the net investment income per share and
the ratios would have been as follows:
Net investment income
per share $0.291 $0.467+ $0.412 $0.522 $0.50 $0.52 $0.475
RATIOS:
Expenses to average
net assets(A) 1.50%* 1.32% 1.33%* 1.47% 1.39% 1.42% 1.39%
Net investment income to
average net assets 5.61%* 4.78% 4.88%* 5.37% 5.23% 5.45% 5.03%
===================================================================================================
</TABLE>
* Annualized
** Not Annualized
+ The per share amounts were computed using monthly average of shares during
the period.
(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.
The expense ratios for each of the periods ended before December 31, 1995
have not been adjusted to reflect this change.
(B) Portfolio turnover represents the rate of portfolio activity for the period
while the Fund was making investments directly in securities. The portfolio
turnover rate for the period since the Fund transferred all of its
investable assets to the Portfolio is shown in the Portfolio's financial
statements which are included elsewhere in this report.
See notes to financial statements
9
<PAGE>
CITIFUNDS INTERMEDIATE INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
CLASS B
----------------------------------
SIX MONTHS JANUARY 4, 1999
ENDED (COMMENCEMENT
APRIL 30, 2000 OF OPERATIONS) TO
(Unaudited) OCTOBER 31, 1999
================================================================================
Net Asset Value,
beginning of period $ 9.40 $ 9.95
--------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.348 0.384+
Net realized and unrealized
gain (loss) on investments (0.348) (0.617)
--------------------------------------------------------------------------------
Total from operations -- (0.233)
--------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.270) (0.317)
--------------------------------------------------------------------------------
Net Asset Value,
end of period $ 9.13 $ 9.40
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $1,884 $2,346
Ratio of expenses to average net assets 1.40%* 1.40%*
Ratio of net investment income to average
net assets 5.71%* 4.70%*
Total return (0.01)%** (2.35)%**
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion
of their fees for the periods indicated, the net investment income per share and
the ratios would have been as follows:
Net investment income per share $0.317 $0.343+
RATIOS:
Expenses to average net assets 2.00%* 1.82%*
Net investment income to average net assets 5.11%* 4.28%*
================================================================================
* Annualized
** Not Annualized
+ The per share amounts were computed using monthly average of shares during
the period.
See notes to financial statements
10
<PAGE>
CITIFUNDS INTERMEDIATE INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds Intermediate Income Portfolio (the
"Fund") is a separate diversified series of CitiFunds Fixed Income Trust (the
"Trust") which is organized as a Massachusetts business trust. The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end,
management investment company. The Fund invests all of its investable assets in
U.S. Fixed Income Portfolio (the "Portfolio") a management investment company
for which Citibank, N.A. ("Citibank") serves as Investment Manager. The value of
such investment reflects the Fund's proportionate interest (approximately 20.4%
at April 30, 2000) in the net assets of the Portfolio. The Investment Manager of
the Fund is Citibank, N.A. ("Citibank"). CFBDS, Inc. ("CFBDS") acts as the
Fund's Sub-Administrator and Distributor.
The Fund offers Class A and Class B shares. The Fund commenced its public
offering of Class B shares on January 4, 1999. Class A shares have a front-end,
or initial sales charge effective January 4, 1999. This sales charge may be
reduced or eliminated in certain circumstances. Class B shares have no front-end
sales charge, pay higher ongoing distribution fees than Class A, and are subject
to a deferred sales charge if sold within five years of purchase. Class B shares
automatically convert into Class A shares after eight years. Expenses of the
Fund are borne pro-rata by the holders of each class of shares, except that each
class bears expenses unique to that class (including Rule 12b-1 service and
distribution fees applicable to such class), and votes as a class only with
respect to its own Rule 12b-1 plan. Shares of each class would receive their own
pro-rata share of the net assets of the Fund if the Fund were liquidated. Class
A shares have lower expense ratios than Class B shares. For the six months ended
April 30, 2000, CFBDS, acting as the distributor, received $1,236 from sales of
Class A and $1,280 in deferred sales charges from redemptions of Class B shares.
The financial statements of the Portfolio, including the portfolio of
investments are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The preparation of financial statements in accordance with 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 these estimates.
The significant accounting policies consistently followed by the Fund are in
conformity with generally accepted accounting principles and are as follows:
A. Investment Valuation Valuation of securities by the Portfolio is discussed
in Note 1A of the Portfolio's Notes to Financial Statements, which are included
elsewhere in this report.
B. Investment Income The Fund earns income, net of Portfolio expenses, daily
based on its investment in the Portfolio.
11
<PAGE>
CITIFUNDS INTERMEDIATE INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
C. Federal Taxes The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investment transactions. Accordingly, no provision for federal income or
excise tax is necessary. At October 31, 1999, the Fund, for federal income tax
purposes, had a capital loss carryover of $3,181,151 of which $1,142,935 will
expire on October 31, 2002, $1,075,574 which will expire on October 31, 2004 and
$962,642 which will expire on October 31, 2007. Such capital loss carryover will
reduce the Fund's taxable income arising from future net realized gain on
investment transactions, if any, to the extent permitted by the Internal Revenue
Code, and thus will reduce the amount of the distributions to shareholders which
would otherwise be necessary to relieve the Fund of any liability for federal
income or excise tax.
D. Expenses The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and CFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund.
E. Distributions Distributions to shareholders are recorded on ex-dividend
date. The amount and character of income and net realized gains to be
distributed are determined in accordance with income tax rules and regulations,
which may differ from generally accepted accounting principles. These
differences are attributable to permanent book and tax accounting differences.
Reclassifications are made to the Fund's capital accounts to reflect income and
net realized gains available for distribution (or available capital loss
carryovers) under income tax rules and regulations.
F. Other All the net investment income, realized and unrealized gain and loss
of the Portfolio is allocated pro rata, based on respective ownership interests,
among the Fund and the other investors in the Portfolio at the time of such
determination. Investment transactions are accounted for on the trade date
basis. Realized gains and losses are determined on the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the Fund's
business affairs, and has a Management Agreement with the Fund. Citibank also
provides certain administrative services to the Fund. These administrative
services include providing general office facilities and supervising the overall
administration of the Fund. CFBDS acts as Sub-Administrator and performs 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.
12
<PAGE>
CITIFUNDS INTERMEDIATE INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
The management fees paid to Citibank are accrued daily and payable monthly.
The management fee is computed at the annual rate of 0.35% of the Fund's average
daily net assets. The management fee amounted to $84,149 all of which was
voluntarily waived for the six months ended April 30, 2000.
3. SERVICE FEES The Fund maintains separate Service Plans for Class A and Class
B shares, which have been adopted in accordance with Rule 12b-1 under the 1940
Act. Under the Class A Service Plan, the Fund may pay monthly fees at an annual
rate not to exceed 0.25% of the average daily net assets represented by Class A
shares of the Fund. The Service fees for Class A shares amounted to $57,585 for
the six months ended April 30, 2000. Under the Class B Service Plan, the Fund
may pay a combined monthly distribution and service fee at an annual rate not to
exceed 0.75% of the average daily net assets represented by Class B shares of
the Fund. The Service fees for Class B shares amounted to $7,564 for the six
months ended April 30, 2000. These fees may be used to make payments to the
Distributor for distribution services and to others as compensation for the sale
of shares of the applicable class of the Fund, for advertising, marketing or
other promotional activity, and for preparation, printing and distribution of
prospectuses, statements of additional information and reports for recipients
other than regulators and existing shareholders. The Fund may also make payments
to the Distributor and others for providing personal service or the maintenance
of shareholder accounts.
4. INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in
the Portfolio for the six months ended April 30, 2000, aggregated $838,613 and
$12,883,327, respectively.
13
<PAGE>
CITIFUNDS INTERMEDIATE INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (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:
SIX MONTHS
ENDED YEAR ENDED
APRIL 30, 2000 OCTOBER 31,
(Unaudited) 1999
================================================================================
CLASS A
Shares sold 77,975 2,671,683
Shares issued to shareholders from
reinvestment of distributions 160,042 370,289
Shares repurchased (1,315,979) (5,171,440)
--------------------------------------------------------------------------------
Class A net decrease (1,077,962) (2,129,468)
================================================================================
CLASS B*
Shares sold 11,265 333,168
Shares issued to shareholders from
reinvestment of distributions 5,488 6,600
Shares repurchased (59,900) (90,144)
--------------------------------------------------------------------------------
Class B net increase (decrease) (43,147) 249,624
================================================================================
* January 4, 1999 (Commencement of Operations).
6. ASSUMPTION OF EXPENSES CFBDS has voluntarily agreed to pay a portion of the
unwaived expenses of the Fund for the six months ended April 30, 2000 which
amounted to $60,396.
14
<PAGE>
U.S. FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 2000
(Unaudited)
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
FIXED INCOME -- 107.3%
--------------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 26.4%
--------------------------------------------------------------------------------
Aames Mortgage Trust
6.59% due 6/15/24 $3,389 $3,364,803
Aircraft Financial Trust
8.00% due 5/15/24 5,000 4,573,700
Amresco Residential
Securities
6.245% due 4/25/22 2,973 2,948,849
Asset Securitization Corp.,
Series 95
7.384% due 8/13/29 3,500 3,419,395
Asset Securitization Corp.,
Series 97
6.50% due 2/14/41 2,291 2,248,724
First Union, Lehman
Brothers
6.479% due 3/18/04 3,188 3,120,112
GE Capital Mortgage
Services, Inc.
5.905% due 10/25/13 2,000 1,969,220
7.00% due 10/25/23 1,979 1,857,711
GMAC Commercial
Mortgage Inc.
6.42% due 8/15/08 1,110 1,021,766
6.83% due 12/15/03 3,037 3,023,232
7.724% due 12/15/09 4,500 4,496,096
Green Tree Financial Corp.
6.71% due 8/15/29 3,850 3,573,378
8.05% due 10/15/27 5,000 4,915,600
8.41% due 12/01/30 3,000 2,843,430
IMC Home Equity Loan
Trust
6.16% due 5/20/14 1,441 1,433,937
JP Morgan Commercial
Mortgage Financial Corp.
6.373% due 1/15/30 1,927 1,871,484
Merrill Lynch Mortgage Co.
6.95% due 6/18/29 1,558 1,534,566
Morgan Stanley Capital
Investment Inc.
6.44% due 11/15/02 3,262 3,204,888
Nissan Auto Receivables
Grantor
6.15% due 2/15/03 733 727,402
Nomura Asset
Securitization Corp.
8.15% due 3/04/20 3,000 3,029,340
------------
55,177,633
------------
FOREIGN CORPORATIONS -- 5.4%
--------------------------------------------------------------
Merita Bank PLC
6.50% due 4/01/09 2,415 2,178,378
Pemex Financial Ltd.
9.03% due 2/15/11 2,175 2,215,651
Quebec Province CDA
7.50% due 9/15/29 2,235 2,185,495
Telefonica de Argentina
9.125% due 5/07/08 2,360 2,242,000
YPF Sociedad Anonima
7.25% due 3/15/03 2,425 2,338,859
------------
11,160,383
------------
DOMESTIC CORPORATIONS -- 19.4%
--------------------------------------------------------------------------------
Abitibi Consolidated Inc.
8.50% due 8/01/29 2,660 2,444,088
Ahold Financial U.S.A. Inc.
6.875% due 5/01/29 1,785 1,497,419
BB&T Corp.
6.375% due 6/30/05 2,280 2,129,018
Conseco Inc.
6.40% due 6/15/01 660 468,600
Dayton Hudson Corp.
6.65% due 8/01/28 2,200 1,845,514
Delta Airlines Inc.
8.30% due 12/15/29 3,000 2,683,110
Donaldson, Lufkin & Jenrette
5.875% due 4/01/02 1,885 1,818,064
Dynegy Inc.
7.45% due 7/15/06 2,095 2,001,988
Ford Motor Co.
7.375% due 10/28/09 2,315 2,237,725
Knight Ridder Inc.
6.875% due 3/15/29 2,355 2,043,601
Lehman Brothers
Holdings, Inc.
7.75% due 1/15/05 2,090 2,091,296
Lockheed Martin Corp.
7.95% due 12/01/05 2,175 2,130,543
MCI Communications Corp.
6.50% due 4/15/10 2,300 2,093,943
Morgan Stanley Dean
Witter & Co.
5.625% due 1/20/04 2,350 2,203,477
National Rural Utilities
6.20% due 2/01/08 2,040 1,864,417
Osprey Trust Inc.
8.31% due 1/15/03 2,220 2,201,352
Popular North America, Inc.
6.875% due 6/15/01 2,195 2,171,630
Raytheon Co.
7.90% due 3/01/03 2,255 2,216,124
St. Paul Cos Inc.
7.875% due 4/15/05 2,150 2,104,506
Saks Inc.
8.25% due 11/15/08 2,415 2,179,538
------------
40,425,953
------------
15
<PAGE>
U.S. FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) April 30, 2000
(Unaudited)
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
MORTGAGE OBLIGATIONS -- 38.2%
--------------------------------------------------------------------------------
COLLATERALIZED MORTGAGE
OBLIGATIONS -- 10.0%
--------------------------------------------------------------------------------
Asset Backed
Securitization Corp.,
6.64% due 12/25/27 $ 2,500 $2,267,975
CMC Securitization Corp.,
Series 97
7.00% due 10/25/27 541 536,739
CWMBS Inc., Series 98
6.50% due 7/25/13 2,122 1,961,823
Chase Mortgage Financial
Trust
6.50% due 9/25/13 1,970 1,818,946
Chase Mortgage Financial
Trust
7.25% due 2/25/30 2,500 2,361,675
Credit Suisse First Boston
Mortgage
7.29% due 9/15/09 3,900 3,788,099
Federal Home Loan
Mortgage Corp.
6.00% due 1/15/24 1,000 921,250
6.25% due 6/15/24 3,440 3,245,330
Federal National Mortgage
Association
7.412% due 8/17/21 2,941 2,901,344
Government National
Mortgage Association
7.25% due 10/16/22 848 845,916
Residential Asset
Securitization Trust
7.00% due 2/25/08 272 271,197
------------
20,920,294
------------
MORTGAGE BACKED
SECURITIES/PASSTHROUGHS -- 20.0%
--------------------------------------------------------------------------------
Federal Home Loan
Mortgage Corp.
6.00% due TBA* 1,000 907,188
6.00% due 8/01/00 1,541 1,530,296
7.50% due TBA* 3,700 3,615,011
8.50% due 4/01/01 3 3,401
------------
6,055,896
------------
Federal National
Mortgage Association
5.50% due TBA* 5,000 4,354,688
6.50% due TBA* 7,000 6,531,840
6.50% due 4/01/29 3,818 3,566,195
6.50% due 5/01/29 4,314 4,025,161
7.00% due 6/01/03 168 166,313
7.00% due 7/01/03 273 269,660
7.50% due TBA* 5,700 5,653,716
7.50% due TBA* 11,400 11,154,188
8.00% due 6/01/02 4 4,271
------------
35,726,032
------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION -- 8.2%
--------------------------------------------------------------------------------
6.50% due TBA* 12,400 11,613,375
7.00% due 2/15/24 3,457 3,337,462
8.00% due TBA 2,000 2,004,375
8.00% due 12/15/07 34 34,145
------------
16,989,357
------------
TOTAL MORTGAGE OBLIGATIONS 79,691,579
------------
YANKEE BONDS -- 3.2%
--------------------------------------------------------------------------------
Corporacion Andina
de Fomento
7.75% due 3/01/04 2,180 2,145,033
Empresa Nacional
7.75% due 7/15/08 1,105 1,026,534
Imperial Tobacco Overseas
7.125% due 4/01/09 2,705 2,363,683
TPSA Financial
7.75% due 12/10/08 1,305 1,245,604
------------
6,780,854
------------
UNITED STATES GOVERNMENT
AND OTHER GOVERNMENT
OBLIGATIONS -- 14.7%
--------------------------------------------------------------------------------
UNITED STATES TREASURY
BONDS -- 7.0%
--------------------------------------------------------------------------------
8.125% due 8/15/19 5,415 6,506,447
3.625% due 4/15/28 4,091 3,921,111
3.875% due 4/15/29 2,580 2,585,851
6.125% due 8/15/29 1,575 1,578,685
------------
14,592,094
------------
UNITED STATES TREASURY
NOTES -- 7.7%
--------------------------------------------------------------------------------
5.50% due 12/31/00 110 109,278
6.50% due 5/31/01 1,150 1,149,275
5.875% due 11/15/04 300 292,077
6.875% due 5/15/06 3,480 3,536,550
6.625% due 5/15/07 4,540 4,569,782
6.50% due 2/15/10 6,260 6,384,198
------------
16,041,160
------------
TOTAL UNITED STATES
GOVERNMENT AND OTHER
GOVERNMENT OBLIGATIONS 30,633,254
------------
16
<PAGE>
U.S. FIXED INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS April 30, 2000
(Unaudited)
ISSUER SHARES VALUE
--------------------------------------------------------------------------------
TOTAL FIXED INCOME
(Identified Cost
$231,652,313) $223,869,656
------------
PREFERRED STOCK -- 1.5%
--------------------------------------------------------------------------------
Comed Financing I
(Identified Cost
$3,531,870) 138 3,121,752
------------
SHORT-TERM OBLIGATIONS -- 12.0%
--------------------------------------------------------------------------------
First Union National Bank
Repurchase Agreement
5.84% due 5/01/00
proceeds at maturity
$24,467,902 (collateralized
by $7,250,000 Federal
Home Loan Mortgage
5.88% due 2/10/03,
valued at $7,068,750;
$17,660,000
Federal Home Loan Bank,
6.00% due 11/15/01,
valued at $17,880,750) 24,456,000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
United States Treasury Bills
5.725% due 6/22/00 $ 688 $ 682,311
-----------
Total Short-Term Obligations
(Identified Cost
$25,138,311) 25,138,311
-----------
TOTAL INVESTMENTS
(Identified Cost
$260,322,494) 120.8% 252,129,719
OTHER ASSETS,
LESS LIABILITIES (20.8) (43,408,092)
------ ------------
NET ASSETS 100.0% $208,721,627
====== ============
*TBA's are mortgage-backed securities traded under delayed delivery commitments;
settling after April 30, 2000. Although the unit price for the trade has been
established, the principal value has not been finalized. However, the amount of
the commitment will not fluctuate more than 2% from the principal amount.
Income on TBA's is not earned until the settlement date.
FUTURES CONTRACTS
--------------------------------------------------------------------------------
Futures contracts which were open at April 30, 2000 are as follows :
AGGREGATE
DESCRIPTION/ NUMBER OF FACE VALUE OF EXPIRATION UNREALIZED
POSITION CONTRACTS CONTRACTS DATE GAIN/(LOSS)
--------------------------------------------------------------------------------
U.S. Long Bond (Sell) (40) $ (4,000,000) June 2000 $(12,500)
U.S. Ten Year Note (Sell) (207) (20,700,000) June 2000 (25,875)
--------
$(38,375)
========
See notes to financial statements
17
<PAGE>
U.S. FIXED INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
APRIL 30, 2000 (Unaudited)
================================================================================
ASSETS:
Investments at value (Note 1A) (Identified Cost, $235,184,183) $226,991,408
Short-term obligations at value (Note 1A)
(Identified Cost, $25,138,311) 25,138,311
Cash 942
Interest receivable 2,226,735
Receivable for investments sold 3,148,672
--------------------------------------------------------------------------------
Total assets 257,506,068
--------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 48,601,679
Payable for daily variations on futures contracts 38,375
Payable to affiliates--Management Fee (Note 2) 53,503
Accrued expenses and other liabilities 90,884
--------------------------------------------------------------------------------
Total liabilities 48,784,441
--------------------------------------------------------------------------------
NET ASSETS $208,721,627
================================================================================
REPRESENTED BY:
Paid-in capital for beneficial interests $208,721,627
================================================================================
U.S. FIXED INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 2000 (Unaudited)
================================================================================
INVESTMENT INCOME (Note 1B):
Interest Income $8,629,382
Dividend Income 146,257
--------------------------------------------------------------------------------
$ 8,775,639
--------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 435,080
Custody and fund accounting fees 75,603
Audit fees 23,385
Trustees fees 8,406
Legal fees 6,537
Other 1,243
--------------------------------------------------------------------------------
Total expenses 550,254
Less aggregate amount waived by management (Note 2) (52,974)
--------------------------------------------------------------------------------
Net expenses 497,280
--------------------------------------------------------------------------------
Net investment income 8,278,359
--------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Unrealized appreciation of investments and
futures contracts 2,621,249
Net realized gain from futures and
options transactions 549,362
Net realized loss from investment transactions (10,417,359)
--------------------------------------------------------------------------------
Net realized and unrealized loss on investments (7,246,748)
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 1,031,611
================================================================================
See notes to financial statements
18
<PAGE>
U.S. FIXED INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
SIX MONTHS NOVEMBER 1, 1998
ENDED (COMMENCEMENT OF
APRIL 30, 2000 OPERATIONS) TO
(Unaudited) OCTOBER 31, 1999
================================================================================
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 8,278,359 $11,466,863
Net realized loss from investment and
futures transactions (9,867,997) (5,810,514)
Unrealized appreciation (depreciation)
of investments 2,621,249 (7,440,597)
--------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations 1,031,611 (1,784,248)
--------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions (Note 1) 2,562,211 452,433,828
Value of withdrawals (86,407,793) (159,113,982)
--------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital transactions (83,845,582) 293,319,846
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (82,813,971) 291,535,598
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 291,535,598 --
--------------------------------------------------------------------------------
End of period $208,721,627 $291,535,598
================================================================================
U.S. FIXED INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD
SIX MONTHS NOVEMBER 1, 1998
ENDED (COMMENCEMENT OF
APRIL 30, 2000 OPERATIONS) TO
(Unaudited) OCTOBER 31, 1999
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $208,722 $291,536
Ratio of expenses to average net assets 0.40%* 0.40%
Ratio of net investment income to average
net assets 6.66%* 6.04%
Portfolio turnover 1.58% 253%
Note: If Agents of the Portfolio had not voluntarily waived a portion of their
fees and assumed Portfolio expenses for the periods indicated and had expenses
been limited to that required by certain state securities law for the period
ended December 31, 1995, the ratios would have been as follows:
RATIOS:
Expenses to average net assets 0.44%* --
Net investment income to average net assets 6.62%* --
================================================================================
* Annualized
See notes to financial statements
19
<PAGE>
U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES U.S. Fixed Income Portfolio (the
"Portfolio"), a separate series of The Premium Portfolios (the "Portfolio
Trust"), is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end management investment company which was organized as a
trust under the laws of the State of New York. The Portfolio commenced
operations on November 1, 1998. The Declaration of Trust permits the Trustees to
issue beneficial interests in the Portfolio. The Investment Manager of the
Portfolio is Citibank, N.A. ("Citibank"). Signature Financial Group (Grand
Cayman), Ltd. ("SFG") acts as the Administrator.
On November 1, 1998, CitiFunds Intermediate Income Portfolio transferred all
of its investable assets in the amount of $76,788,364 including $1,683,386 of
unrealized appreciation to the Portfolio in exchange for an interest in the
Portfolio. Also, on May 3, 1999, the Intermediate Income Portfolio transferred
all of its investable assets in the amount of $153,278,329 including $1,000,795
of unrealized depreciation to the Portfolio in exchange for an interest in the
Portfolio. Additionally, on August 1, 1999, the Balanced Portfolio transferred a
portion of its investable assets in the amount of $113,810,272 including
$3,978,434 of unrealized depreciation to the Portfolio in exchange for an
interest in the Portfolio. The total investable assets along with current period
contributions are included in the "Proceeds from contributions" on the Statement
of Changes in Net Assets.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. Investment Security Valuations Debt securities (other than short-term
obligations maturing in sixty days or less) are valued on the basis of
valuations furnished by pricing services, which take into account appropriate
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, and other market data,
without exclusive reliance 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 (maturity in sixty 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 consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on long-term debt securities
when required for U.S. federal income tax purposes. Gain and loss from principal
paydowns are recorded as ordinary income.
20
<PAGE>
U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
C. U.S. Federal Income Taxes The Portfolio is considered a partnership under
the U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary.
D. Expenses The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
Portfolio Trust with respect to any two or more portfolios or series are
allocated in proportion to the average net assets of each portfolio, except when
allocations of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that portfolio.
E. Repurchase Agreements It is the policy of the Portfolio to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase agreements.
Additionally, procedures have been established by the Portfolio to monitor, on a
daily basis, the market value of the repurchase agreement's underlying
investments to ensure the existence of a proper level of collateral.
F. TBA Purchase Commitments The Portfolio enters into "TBA" (to be announced)
purchase commitments to purchase securities for a fixed unit price at a future
date beyond customary settlement time. Although the unit price has been
established, the principal value has not been finalized. However, the amount of
the commitment will not fluctuate more than 2.0% from the principal amount. The
Portfolio holds, and maintains until the settlement date, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price. TBA
purchase commitments may be considered securities in themselves, and involve a
risk of loss if the value of the security to be purchased declines prior to the
settlement date, which risk is in addition to the risk of decline in the value
of the Portfolio's other assets. Unsettled TBApurchase commitments are valued at
the current market value of the underlying securities, generally according to
the procedures described under Note 1A.
Although the Portfolio will generally enter into TBApurchase commitments with
the intention of acquiring securities for its portfolio, the Portfolio may
dispose of a commitment prior to settlement if the Portfolio's Adviser deems it
appropriate to do so.
G. Futures Contracts The Portfolio may engage in futures transactions. The
Portfolio may use futures contracts in order to protect the Portfolio 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 Portfolio's portfolio in an effort to reduce potential losses
or enhance potential gains. Buying futures contracts tends to increase the
Portfolio's exposure to the underlying instrument. Selling futures contracts
tends to either decrease the Portfolio's exposure to the underlying instrument,
or to hedge other fund investments.
21
<PAGE>
U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
Upon entering into a futures contract, the Portfolio 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 Portfolio
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 Portfolio 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.
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.
H. Other Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolio's business affairs, and has a Management Agreement with the Portfolio.
Citibank also provides certain administrative services to the Portfolio. These
administrative services include providing general office facilities and
supervising the overall administration of the Portfolio. 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 amounted to $435,080 of which $52,974
was voluntarily waived for the six months ended April 30, 2000. The management
fees are computed at the annual rate of 0.35% of the Portfolio's average daily
net assets. The Trust pays no compensation directly to any Trustee or any other
officer who is affiliated with the Sub-Administrator, all of whom receive
remuneration for their services to the Trust from the Sub-Administrator or its
affiliates.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $444,017,085 and $537,250,502
respectively, for the six months ended April 30, 2000.
22
<PAGE>
U.S. FIXED INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
4. FEDERAL INCOME TAX BASIS OF INVESTMENTs The cost and unrealized
appreciation (depreciation) in value of the investment securities owned at April
30, 2000, as computed on a federal income tax basis, are as follows:
Aggregate cost $260,322,494
================================================================================
Gross unrealized appreciation $ 187,812
Gross unrealized depreciation (8,380,587)
--------------------------------------------------------------------------------
Net unrealized depreciation $ (8,192,775)
================================================================================
5. LINE OF CREDIT The Portfolio, along with various other portfolios in the
CitiFunds Family, entered into an ongoing agreement with a bank which allows the
Funds collectively to borrow up to $75 million for temporary or emergency
purposes. Interest on the 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 six months ended April 30, 2000,
the commitment fee allocated to the Portfolio was $357. Since the line of credit
was established, there have been no borrowings.
23
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK
<PAGE>
TRUSTEES AND OFFICERS
C. Oscar Morong, Jr., CHAIRMAN
Philip W. Coolidge*, PRESIDENT
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Heath B. McLendon**
Walter E. Robb, III
E. Kirby Warren
William S. Woods, Jr.***
SECRETARY
Robert Frenkel**
TREASURER
Linwood Downs*
*AFFILIATED PERSON OF SUB-ADMINISTRATOR AND DISTRIBUTOR
**AFFILIATED PERSON OF INVESTMENT MANAGER
***TRUSTEE EMERITUS
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
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
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THE CITIFUNDS FAMILY
LARGE CAP STOCKS
CitiFunds Growth & Income Portfolio
CitiFunds Large Cap Growth Portfolio
SMALL CAP STOCKS
CitiFunds Small Cap Growth Portfolio
CitiFunds Small Cap Value Portfolio
INTERNATIONAL STOCKS
CitiFunds International Growth & Income Portfolio
CitiFunds International Growth Portfolio
GROWTH WITH INCOME
CitiFunds Balanced Portfolio
BONDS
CitiFunds Short-Term U.S. Government Income Portfolio
CitiFunds Intermediate Income Portfolio
CitiFunds National Tax Free Income Portfolio
CitiFunds New York Tax Free Income Portfolio
CitiFunds California Tax Free Income Portfolio
MONEY MARKETS
CitiFunds Cash Reserves
CitiFunds U.S. Treasury Reserves
CitiFunds Tax Free Reserves
CitiFunds New York Tax Free Reserves
CitiFunds California Tax Free Reserves
CitiFunds Connecticut Tax Free Reserves
This report is prepared for the information of shareholders of CitiFunds
Intermediate Income Portfolio. It is authorized for distribution to prospective
investors only when preceded or accompanied by an effective prospectus of
CitiFunds Intermediate Income Portfolio.
For more information about any of the CitiFunds listed above, ask for a
prospectus (except for CitiFunds Intermediate Income Portfolio, which preceded
or accompanies this report) containing more complete information, including all
sales charges (if any), fees and expenses. Please read the prospectus carefully
before you invest or send money.
Although each money market fund seeks to maintain the value of your investment
at $1.00 per share, it is possible to lose money by investing in the funds.
Mutual fund shares are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other government agency.
CitiFunds are made available by CFBDS, Inc. as distributor. For more information
contact your Service Agent or call 1-800-625-4554.
(C)2000 Citicorp [GRAPHIC OMITTED] Printed on recycled paper CFS/INI/400
