ANNUAL REPORT O DECEMBER 31, 1999
CITIFUNDS(SM)
Short-Term
U.S. Government
Income Portfolio
- --------------------------------------------------------------------------------
INVESTMENT PRODUCTS:
NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
- --------------------------------------------------------------------------------
BONDS
<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
- --------------------------------------------------------------------------------
Portfolio Environment and Outlook 2
- --------------------------------------------------------------------------------
Fund Facts 3
- --------------------------------------------------------------------------------
Fund Performance 4
- --------------------------------------------------------------------------------
CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
Statement of Assets and Liabilities 5
- --------------------------------------------------------------------------------
Statement of Operations 5
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets 6
- --------------------------------------------------------------------------------
Financial Highlights 7
- --------------------------------------------------------------------------------
Notes to Financial Statements 8
- --------------------------------------------------------------------------------
Independent Auditors' Report 12
- --------------------------------------------------------------------------------
GOVERNMENT INCOME PORTFOLIO
Portfolio of Investments 13
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities 14
- --------------------------------------------------------------------------------
Statement of Operations 14
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets 15
- --------------------------------------------------------------------------------
Financial Highlights 15
- --------------------------------------------------------------------------------
Notes to Financial Statements 16
- --------------------------------------------------------------------------------
Independent Auditors' Report 20
- --------------------------------------------------------------------------------
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
Like the rest of the bond market, the U.S. government securities market had a
challenging year in 1999. Faster-than-expected economic growth in the United
States, coupled with rapid global economic recovery, contributed to sharply
higher interest rates and price erosion for most U.S. bonds. These negative
economic influences were accompanied by adverse supply-and-demand factors, in
which investors' preference for higher yielding securities such as stocks and
corporate bonds offset the positive effects of reduced supply caused by the
federal budget surplus.
Throughout the period, the CitiFunds' investment adviser, Citibank, N.A.,
continued to manage CitiFundsSM Short-Term U.S. Government Income Portfolio
according to its investment objective, which is to generate current income and
preserve the value of its shareholders' investment.
This report reviews the Fund's investment activities and performance for the
year ended December 31, 1999, and provides a summary of Citibank' s perspective
on and outlook for the short-term U.S. government securities market.
Thank you for your continued confidence and participation.
Sincerely,
/s/ Philip W. Coolidge
Philip W. Coolidge
President
January 17, 2000
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
AFTER SEVERAL YEARS OF FALLING YIELDS AND HIGHER PRICES, THE U.S. GOVERNMENT
SECURITIES MARKET DECLINED SHARPLY OVER THE PAST YEAR. While the economic and
market conditions that fueled the bond market's previous rise have remained
largely intact-including positive economic growth characterized by low
inflation-many investors became concerned that inflationary pressures might
resurface. In fact, in an attempt to forestall a potential reacceleration of
inflation, the Federal Reserve Board (the "Fed") raised interest rates three
times during 1999.
These economic conditions are in stark contrast to the environment that
prevailed just before the reporting period began in January 1999. In late 1998,
the Fed completed a series of interest rate cuts intended to stimulate global
economic growth, which was then threatened by the spread of an international
currency and credit crisis, and to help insulate the U.S. economy from the
adverse effects of a global economic slow-down. The Fed's strategy was
apparently effective because many overseas economies began to recover in 1999
and the U.S. economy continued its strong growth.
During the global financial crisis, both domestic and foreign investors
flocked to the relative safety and high liquidity of U.S. Treasury securities.
This surge in demand caused a substantial rally in the prices of U.S. Treasury
securities, while prices of higher yielding but out-of-favor corporate bonds,
mortgage-backed securities and U.S. government agency securities fell sharply.
BOND INVESTOR SENTIMENT CHANGED DRAMATICALLY IN EARLY 1999. Rather than
worrying about a potential economic slowdown, investors became concerned that
U.S. and other economies were growing too strongly. Evidence began to emerge
that troubled overseas economies were on their way to recovery, and economic
growth in the U.S. was stronger than expected. In turn, these conditions led to
fears that long-dormant inflationary pressures might reemerge.
Because inflation causes bond prices to decline, the U.S. bond market
experienced heightened levels of volatility, particularly during the third
quarter of 1999. This volatility reflected investor uncertainty over the
direction and magnitude of monetary policy changes and their effects on interest
rates and bond yields. While no dramatic increase in the inflation rate has yet
to materialize, investors became increasingly concerned by extremely low levels
of unemployment, robust consumer spending and a weakening U.S. dollar relative
to other major currencies.
IN THIS HIGHLY VOLATILE BOND MARKET, THE YIELD DIFFERENCES BETWEEN U.S.
TREASURY SECURITIES AND HIGHER YIELDING BONDS WIDENED SHARPLY, approaching the
levels seen after the near-failure of major hedge funds during the summer of
1998. Accordingly, CitiFunds Short-Term U.S. Government Income Portfolio focused
on capturing the most attractive yields in the U.S. government securities
marketplace. As a result, the Portfolio' s management emphasized U.S. government
agency securities and de-emphasized investments in lower-yielding U.S. Treasury
securities.
DURING THE YEAR, THE INVESTMENT TEAM FOUND THE HIGHEST-YIELDING OPPORTUNITIES
PRIMARILY IN MORTGAGE-BACKED SECURITIES ISSUED BY U.S. GOVERNMENT AGENCIES such
as the Government National Mortgage Association* ("Ginnie
2
<PAGE>
Mae"). The Portfolio's management also maintained a position in "off-the-run"
(OTR) U.S. Treasury securities, which are seasoned Treasury securities yielding
a higher rate versus their newly issued, similar maturity counterparts.
According to management, if the risk premium for owning new issue Treasury
securities moderates from prevailing levels, OTR Treasuries may represent solid
investment opportunities.
As part of their investment strategy, management reduced the Fund's average
duration (i.e., a measure of sensitivity to changing interest rates) by the end
of the period toward the short end of the neutral range. In their view, this
duration change should give them the flexibility they need to upgrade the
Portfolio opportunistically if and when higher yielding securities become
available.
Looking forward, management expects heightened bond market volatility to
continue into 2000. OVER THE LONG TERM, HOWEVER, THEY THINK THERE IS A GOOD
CHANCE THAT U.S. TREASURY SECURITIES MAY RALLY AS SUPPLY-AND-DEMAND INFLUENCES
RETURN TO A MORE NORMAL BALANCE. Management is particularly optimistic about
U.S. Treasury securities because of the federal budget surplus, which may
ultimately cause them to perform well.
* The Government National Mortgage Association (GNMA) is an agency of the U.S.
Department of Housing and Urban Development. GNMA guarantees, with the full
faith and credit of the U.S. Government, full and timely payment of all
monthly principal and interest payments on the mortgage-backed, pass-through
securities of registered holders.
FUND FACTS
FUND OBJECTIVE
To generate current income and preserve the value of its shareholders'
investment.
INVESTMENT ADVISER,
GOVERNMENT INCOME PORTFOLIO
Citibank, N.A.
COMMENCEMENT OF OPERATIONS
September 8, 1986
NET ASSETS AS OF 12/31/99
$31.1 million
DIVIDENDS
Paid monthly, if any
CAPITAL GAINS
Paid semi-annually, if any
BENCHMARKS
o Lipper Short U.S. Government Funds Average
o Lehman Brothers 1-3 Year U.S. Government Index*
* The Lehman Brothers 1-3 Year U.S. Government Index is a broad measure of the
performance of short-term government bonds.
3
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
ONE FIVE TEN
ALL PERIODS ENDED DECEMBER 31, 1999 YEAR YEARS* YEARS*
- -------------------------------------------------------------------------------
CitiFunds Short-Term U.S. Government Income Portfolio
without sales charge 2.07% 5.75% 5.98%
Lipper Short U.S. Government Funds Average 2.50% 5.57% 5.66%
Lehman Brothers 1-3 Year U.S. Government Index 2.97% 6.48% 6.56%
CitiFunds Short-Term U.S. Government Income Portfolio
with a maximum sales charge of 1.50% 0.54% 5.43% 5.82%
* Average Annual Total Return
30-Day SEC Yield 4.86%
GROWTH OF A $10,000 INVESTMENT
A $10,000 investment in the Fund made ten years ago would have grown to $17,604,
including the maximum sales charge (as of 12/31/99). The graph shows how the
Fund compares to its benchmarks over the same period.
[LINE CHART OMITTED]
<TABLE>
<CAPTION>
Date CitiFunds Short Term Lipper Short US Lehman Brothers 1-3 Year
U.S. Government Income Portfolio Government Funds Average U.S. Government Index (unmanaged)
<S> <C> <C> <C>
02/10/1997 9850 10000 10000
9676 9985 10011
03/31/1997 9687 10031 10063
9674 10061 10094
9516 10072 10118
06/30/1997 9832 10222 10273
10001 10326 10381
10144 10447 10507
09/30/1997 9997 10464 10544
10076 10541 10627
10211 10649 10745
12/31/1997 10443 10766 10649
10628 10887 10977
10749 10986 11080
03/31/1998 10810 11048 11151
10852 11109 11226
10960 11211 11334
06/30/1998 11016 11275 11401
10970 11299 11444
11137 11408 11542
09/30/1998 11401 11569 11700
11679 11704 11824
11789 11823 11952
12/31/1998 11852 11935 12075
12094 12136 12258
12013 12064 12241
03/31/1999 12069 12033 12278
12049 11963 12274
12119 12061 12386
06/30/1999 12278 12188 12501
12406 12314 12627
12565 12462 12772
09/30/1999 12648 12564 12876
12760 12667 12996
12640 12569 12922
12/31/1999 12624 12549 12903
12766 12669 13023
12936 12829 13160
13064 12951 13264
13110 12992 13305
13190 13065 13386
13148 13049 13354
13293 13170 13453
13287 13206 13482
13481 13335 13594
13535 13373 13638
13565 13395 13668
13499 13357 13670
13542 13405 13725
13624 13496 13810
13473 13384 13727
13315 13246 13657
13215 13152 13605
13242 13128 13624
13240 13127 13658
13379 13233 13781
13405 13264 13826
13334 13217 13795
13346 13225 13826
13274 13172 13769
13310 13201 13795
13510 13365 13983
13696 13556 14173
13767 13627 14253
13910 13744 14381
14230 14015 14626
14302 14085 14705
14286 14102 14763
14388 14204 14851
14461 14285 14924
14578 14413 15048
14726 14551 15176
14838 14672 15291
14943 14777 15420
14819 14709 15360
14757 14692 15349
14724 14695 15364
14723 14712 15398
14814 14811 15510
14863 14860 15571
14895 14900 15628
15023 15028 15770
15198 15186 15949
15310 15304 16067
15286 15300 16070
15368 15372 16147
15401 15412 16186
15354 15384 16173
15486 15496 16305
15586 15587 16420
15685 15670 16533
15868 15833 16713
15870 15839 16730
15971 15949 16857
16106 16060 16982
16124 16096 17024
16220 16175 17138
16391 16312 17303
16392 16323 17318
16445 16379 17386
16512 16443 17469
16596 16527 17562
16663 16599 17653
16731 16666 17736
16938 16836 17952
17163 17041 18194
17214 17070 18282
</TABLE>
CitiFunds Short-Term U.S. Government Income Portfolio
Lipper Short U.S. Government Funds Average
Lehman Brothers 1-3 Year U.S. Government Index
(unmanaged)
The graph includes the initial sales charge of 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. Returns reflect
certain voluntary fee waivers. If the waivers were not in place, the Fund's
return would have been lower. The maximum sales charge of 1.50% went into effect
on January 4, 1999. Investors may not invest directly in an index.
4
<PAGE>
CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
================================================================================
ASSETS:
Investment in Government Income Portfolio, at value (Note 1A) $31,193,404
Receivable from the Administrator 46,067
- --------------------------------------------------------------------------------
Total assets 31,239,471
- --------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 46,714
Payable for shares of beneficial interest repurchased 42,003
Payable to affiliates--Shareholder Servicing Agents' fees (Note 2B) 6,691
Accrued expenses and other liabilities 34,749
- --------------------------------------------------------------------------------
Total liabilities 130,157
- --------------------------------------------------------------------------------
NET ASSETS for 3,288,197 shares of beneficial interest outstanding $31,109,314
================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $34,690,092
Accumulated net realized loss (2,794,843)
Unrealized depreciation (814,340)
Undistributed net investment income 28,405
- --------------------------------------------------------------------------------
Total $31,109,314
================================================================================
COMPUTATION OF:
Net Asset Value, per share $9.46
Offering Price per share ($9.46 / 0.985) $9.60*
================================================================================
* Based upon single purchases of less than $50,000
CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
================================================================================
INVESTMENT INCOME (Note 1B):
Interest Income from Government Income Portfolio $2,281,512
Allocated Expenses from Government Income Portfolio (137,897)
- --------------------------------------------------------------------------------
$ 2,143,615
EXPENSES:
Administrative fees (Note 2A) $ 97,993
Shareholder Servicing Agents fees (Note 2B) 97,993
Distribution fees (Note 3) 58,796
Legal fees 35,420
Shareholder reports 23,890
Custody and fund accounting fees 17,980
Transfer agent fees 17,250
Audit fees 13,200
Trustee fees 10,672
Registration fee 2,670
Miscellaneous 3,351
- --------------------------------------------------------------------------------
Total expenses 379,215
Less aggregate amount waived by Administrator
and Distributor (Notes 2A and 3) (156,789)
Less Expenses Assumed by the Administrator (Note 6) (46,067)
- --------------------------------------------------------------------------------
Net expenses 176,359
- --------------------------------------------------------------------------------
Net investment income 1,967,256
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED LOSS FROM
GOVERNMENT INCOME PORTFOLIO:
Net realized loss (402,148)
Unrealized depreciation of investments (717,277)
- --------------------------------------------------------------------------------
Net realized and unrealized loss from
Government Income Portfolio (1,119,425)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 847,831
================================================================================
See notes to financial statements
5
<PAGE>
CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
------------------------------
1999 1998
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 1,967,256 $ 1,448,972
Net realized gain (loss) (402,148) 230,601
Unrealized appreciation (depreciation) of investments (717,277) 40,666
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 847,831 1,720,239
- --------------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (1,953,508) (1,442,038)
- --------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 5):
Net proceeds from sale of shares 4,736,314 36,423,583
Net asset value of shares issued to shareholders
from reinvestment of dividends 1,901,282 1,435,786
Cost of shares repurchased (22,456,702) (10,340,734)
- --------------------------------------------------------------------------------
Net increase (decrease) in net assets from transactions
in shares of beneficial interest (15,819,106) 27,518,635
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (16,924,783) 27,796,836
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 48,034,097 20,237,261
- --------------------------------------------------------------------------------
End of period (including undistributed
net investment income of $28,405 and
$14,657, respectively) $31,109,314 $48,034,097
================================================================================
See notes to financial statements
6
<PAGE>
CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
YEAR ENDED DECEMBER 31,
------------------------------------------------
1999 1998 1997 1996 1995
================================================================================
Net Asset Value,
beginning of period $9.73 $9.61 $ 9.55 $ 9.78 $ 9.28
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income 0.473 0.473 0.504 0.516 0.543
Net realized and
unrealized gain (loss) (0.276) 0.121 0.064 (0.232) 0.500
- --------------------------------------------------------------------------------
Total from operations 0.197 0.594 0.568 0.284 1.043
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income (0.467) (0.474) (0.508) (0.514) (0.543)
- --------------------------------------------------------------------------------
Total distributions (0.467) (0.474) (0.508) (0.514) (0.543)
- --------------------------------------------------------------------------------
Net Asset Value,
end of period $9.46 $9.73 $ 9.61 $ 9.55 $ 9.78
================================================================================
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of period
(000's omitted) $31,109 $48,034 $20,237 $26,744 $35,525
Ratio of expenses to
average net assets (A) 0.80% 0.80% 0.80% 0.80% 0.80%
Ratio of net investment
income to average
net assets 5.02% 4.98% 5.20% 5.31% 5.38%
Total return 2.07% 6.33% 6.11% 3.02% 11.48%
Note: If Agents of the Fund for the periods indicated and Agents of Government
Income Portfolio for the periods indicated had not voluntarily waived a portion
of their fees and assumed Fund expenses, the net investment income per share and
the ratios would have been as follows:
Net investment income
per share $0.411 $0.413 $0.442 $0.460 $0.499
RATIOS:
Expenses to average
net assets (A) 1.37% 1.42% 1.43% 1.38% 1.23%
Net investment income to
average net assets 4.45% 4.36% 4.57% 4.73% 4.95%
================================================================================
(A) Includes the Fund's share of Government Income Portfolio allocated expenses
for the periods.
See notes to financial statements
7
<PAGE>
CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds Short-Term U.S. Government Income
Portfolio (the "Fund") is a separate diversified series of CitiFunds Fixed
Income Trust (the "Trust"), a Massachusetts business trust. The Trust is
registered under the Investment Company Act of 1940, as amended, as a
diversified open-end, management investment company. The Fund invests all of its
investable assets in Government Income Portfolio (the "Portfolio"), a management
investment company for which Citibank, N.A. ("Citibank") serves as Investment
Adviser. The value of such investment reflects the Fund's proportionate interest
(49.0% at December 31, 1999) in the net assets of the Portfolio. CFBDS, Inc.
("CFBDS") acts as the Fund's Administrator and Distributor. For the year ended
December 31, 1999, CFBDS, acting as the distributor, received net commissions
paid by investors of $1,649 from the sale of fund shares. Citibank also serves
as Sub-Administrator and makes Fund shares available to customers as Shareholder
Servicing Agent. Citibank is a wholly-owned subsidiary of Citigroup Inc.
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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosure in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Fund 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.
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 December 31, 1999, the Fund, for federal income tax
purposes, had a capital loss carryover of $2,886,806, of which $1,551,556 will
expire on December 31, 2002, $329,508 will expire on December 31, 2003, $367,655
will expire on December 31, 2004, $180,274 will expire on December 31, 2005, and
$457,813 will expire on December 31, 2007. Such capital loss carryover will
reduce the Fund's taxable income arising from future net realized capital 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
8
<PAGE>
CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
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. The Fund's share of the Portfolio's expenses are
charged against and reduce the amount of the Fund's investment in the Portfolio.
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 and 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 a trade date
basis.
2. ADMINISTRATIVE SERVICES PLAN The Trust has adopted an Administrative Services
Plan which provides that the Trust, on behalf of the Fund, may obtain the
services of an Administrator, one or more Shareholder Servicing Agents and other
Servicing Agents and may enter into agreements providing for the payment of fees
for such services. Under the Trust Administrative Services Plan, the aggregate
of the fees paid to the Administrator from the Fund, the fees paid to the
Shareholder Servicing Agents from the Fund under such Plan and the Basic
Distribution Fee paid from the Fund to the Distributor under the Distribution
Plan may not exceed 0.65% of the Fund's average daily net assets on an
annualized basis for the Fund's then current fiscal year.
A. Administrative Fees Under the terms of an Administrative Services
Agreement, the administrative fees paid to the Administrator, as compensation
for overall administrative services and general office facilities, may not
exceed an annual rate of 0.25% of the Fund's average daily net assets. The
Administrative fees amounted to $97,993, all of which was voluntarily waived for
the year ended December 31, 1999. Citibank acts as Sub-Administrator and
performs duties and receives compensation from CFBDS from time to time as agreed
to by CFBDS and Citibank. The Fund pays no compensation directly to any Trustee
or any offi-
9
<PAGE>
CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Continued)
cer who is affiliated with the Administrator, all of whom receive remuneration
for their services to the Fund from the Administrator or its affiliates. Certain
of the officers and a Trustee of the Fund are officers or directors of the
Administrator or its affiliates.
B. Shareholder Servicing Agents' Fees The Trust, on behalf of the Fund, has
entered into shareholder servicing agency agreements with each Shareholder
Servicing Agent pursuant to which that Shareholder Servicing Agent acts as an
agent for its customers and provides other related services. For their services,
each Shareholder Servicing Agent receives fees from the Fund, which may be paid
periodically, which may not exceed, on an annualized basis, an amount equal to
0.25% of the average daily net assets of the Fund represented by shares owned
during the period for which payment is being made by investors for whom such
Shareholder Servicing Agent maintains a servicing relationship. Shareholder
Servicing Agents fees amounted to $97,993 for the year ended December 31, 1999.
3. DISTRIBUTION FEES The Trust has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended, in which the
Fund compensates the Distributor at an annual rate not to exceed 0.15% of the
Fund's average daily net assets. The Distribution fees amounted to $58,796, all
of which was voluntarily waived for the year ended December 31, 1999. The
Distributor may also receive an additional fee from the Fund not to exceed 0.05%
of the Fund's average daily net assets in anticipation of, or as reimbursement
for, advertising expenses incurred by the Distributor in connection with the
sale of shares of the Fund. No payment of such additional fees has been made
during the period. The Distributor voluntarily agreed to waive this fee through
December 31, 1999.
4. INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in
the Portfolio for the year ended December 31, 1999 aggregated $4,003,994 and
$20,701,114, respectively.
10
<PAGE>
CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
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,
---------------------------
1999 1998
================================================================================
Shares sold 491,458 3,752,548
Shares issued to shareholders from
reinvestment of dividends 198,280 148,353
Shares repurchased (2,338,642) (1,068,844)
- --------------------------------------------------------------------------------
Net increase (decrease) (1,648,904) 2,832,057
================================================================================
6. ASSUMPTION OF EXPENSES CFBDS has voluntarily agreed to pay a portion of the
expenses of the Fund for the year ended December 31, 1999, which amounted to
$46,067, to maintain a voluntary expense limitation of 0.80% of average daily
net assets. This voluntary expense limitation may be discontinued at any time.
11
<PAGE>
CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES OF CITIFUNDS FIXED INCOME TRUST (THE "TRUST") AND THE
SHAREHOLDERS OF CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO
In our opinion, the accompanying statement of assets and liabilities, and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
CitiFunds Short-Term U.S. Government Income Portfolio (the "Fund"), a series of
CitiFunds Fixed Income Trust, at December 31, 1999, the results of its
operations, the changes in its net assets and the financial highlights for the
periods indicated in conformity with accounting principles generally accepted in
the United States. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Fund's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments owned at December 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 18, 2000
12