ANNUAL REPORT DECEMBER 31, 1998
CitiFunds(sm)
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International Growth
Portfolio
(Graphic Omitted)
INTERNATIONAL STOCKS
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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 3
................................................................................
Portfolio Highlights 4
................................................................................
Fund Performance 5
................................................................................
CITIFUNDS INTERNATIONAL GROWTH 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 10
................................................................................
Independent Auditors' Report 14
................................................................................
INTERNATIONAL EQUITY PORTFOLIO
Portfolio of Investments 15
................................................................................
Statement of Assets and Liabilities 20
................................................................................
Statement of Operations 20
................................................................................
Statement of Changes in Net Assets 21
................................................................................
Financial Highlights 21
................................................................................
Notes to Financial Statements 22
................................................................................
Independent Auditors' Report 26
................................................................................
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LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
This annual report covers the period from January 1, 1998 through December
31, 1998 for the CitiFundsSM International Growth Portfolio. Inside, the
CitiFunds' investment manager, Citibank, N.A., discusses the market conditions
it faced, the strategies it employed and its outlook for the future.
Much of the 12-month period saw a continuation of generally positive economic
conditions in the United States and Europe. Low inflation and declining interest
rates were generally positive influences on large-capitalization stocks and
high-quality bonds.
However, some financial markets, including international stocks, experienced
heightened turbulence in 1998. In our view, the recent market volatility once
again confirms the benefits of diversification. By allocating your investment
assets among a number of different markets, you may be able to reduce the
effects of volatility on your overall portfolio. In our view, CitiFunds
International Growth Portfolio can play a valuable role in such a diversified
investment portfolio.
Thank you for your continued confidence and participation.
Sincerely,
/s/Philip W. Coolidge
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Philip W. Coolidge
President
January 20, 1999
NOTE:
Subsequent to the date of this letter, effective February 8, 1999, Matthew
Bowyer, a Vice President of Citibank, assumed management of the Portfolio's
assets. Mr. Bowyer is a Senior Portfolio Manager and Cross Border Equity
Strategist who has been responsible for managing global equity and balanced
portfolios at Citibank since mid-1996. Prior to that, he ran a quantitative
research group, providing portfolio and market analyses to Citibank's equity and
fixed income teams in London. Mr. Bowyer joined Citibank in 1985.
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PORTFOLIO ENVIRONMENT AND OUTLOOK
1998 WAS A REWARDING BUT VOLATILE YEAR FOR THE STOCKS IN WHICH CITIFUNDS
INTERNATIONAL GROWTH PORTFOLIO INVESTS. Gains achieved during the first half of
1998 were largely retraced in the third quarter before the international markets
rebounded strongly in the fourth quarter.
The markets' heightened volatility was primarily a response to the currency
and banking crisis that began last year in Southeast Asia. When it became
clearer this past summer that spreading global financial problems would affect
the earnings of multinational companies more than anticipated, investors reacted
by selling investments that they perceived as vulnerable. As a result, many
international companies doing business in global markets experienced steep stock
price declines.
In Europe, Russia's currency devaluation and effective default on its
government debt triggered a "flight to quality" among investors, who generally
avoided all but the largest and most creditworthy markets and investments. The
prices of fundamentally sound growth stocks fell when risk-averse investors
attempted to shift their assets to government bonds. The stock markets recovered
in the fall, however, more than offsetting their third-quarter losses, when
investors realized that Europe's economies remained relatively robust despite
the dampening effects of problems in Asia and Russia.
On the other hand, Asia's developed markets experienced weakness during most
of the year because of severe recessionary conditions in the region. Japan's
economy continued to languish in the midst of a longstanding banking crisis,
while the Hong Kong stock market suffered from currency concerns. Investors were
encouraged in the fourth quarter, however, when Japan announced long-awaited
reforms to its banking system and a program designed to stimulate economic
growth. While the effects of these programs had not yet been realized, the
Japanese stock market showed some signs of strength late in the year.
WE ATTEMPTED TO ADD VALUE IN THIS TURBULENT MARKET ENVIRONMENT BY ADOPTING A
MORE DEFENSIVE POSTURE FOR THE PORTFOLIO. Our strategy included restructuring
the portfolio to more closely match the country allocations of our benchmark,
the Morgan Stanley Capital International Europe, Australasia, Far East (EAFE)
Index. As part of this reallocation of assets, we increased our exposure to
Japanese stocks to about 21% of the Portfolio's total assets as of December 31,
1998. We also established modest positions in Hong Kong during the second
quarter and in Singapore during the third quarter. These moves positioned the
Portfolio to take advantage of the Asian markets' strength that became evident
after the announcement of Japan's banking reforms.
Approximately 74% of the Portfolio's assets were invested in Europe as of
December 31, 1998. Within Europe, we emphasized Italy, Spain and France. We
believe these economies will benefit most from declining interest rates caused
by preparations for European Monetary Union (EMU), which is expected to
transform much of Europe from a group of separate markets, each with its own
currency, into a single marketplace with a single currency, the euro. We have
also adjusted the Portfolio's mix of industries and market sectors to focus on
those expected to benefit most from EMU and lower interest rates. We shifted
assets to companies that
2
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we consider to be positioned most advantageously for the new competitive
environment, including the stocks of consumer-oriented, pharmaceutical and
domestic financial companies.
Looking forward, we are optimistic about the prospects for international
growth stocks. In Europe, many companies are continuing to restructure their
operations to become more profitable, which should help them compete more
effectively in the new markets opened by EMU in 1999. In Asia, we expect Japan
to eventually lead the region out of its severe recession, which should help
improve liquidity and stock prices in the region. In our view, growth-oriented
international stocks may be in an excellent position to lead the global stock
markets higher as these positive trends develop.
FUND FACTS
FUND OBJECTIVE
Long-term capital growth; dividend income, if any, is incidental to this
investment objective.
INVESTMENT ADVISER
INTERNATIONAL EQUITY PORTFOLIO
Citibank, N.A.
COMMENCEMENT OF OPERATIONS
March 1, 1991
NET ASSETS AS OF 12/31/98
$21.1 million
DIVIDENDS
Paid semi-annually, if any
CAPITAL GAINS
Distributed semi-annually, if any
BENCHMARKS
o Lipper International Growth Funds Average
o Morgan Stanley Capital International Europe, Australasia, Far East (MSCI
EAFE(R)) Index
3
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PORTFOLIO HIGHLIGHTS
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TOP TEN EQUITY HOLDINGS AS OF DECEMBER 31, 1998
COMPANY, INDUSTRY % OF NET ASSETS
Toyota Motor Company, Automobiles 2.8%
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Nippon Telegraph & Telephone Co., Telephone Utilities 2.7%
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Novartis AG, Pharmaceuticals and Health 2.3%
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Glaxo Wellcome, Pharmaceuticals and Health 2.1%
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Roche Holdings AGM, Pharmaceuticals and Health 1.9%
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British Petroleum Co., Energy Sources 1.8%
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Allianz AG, Insurance 1.6%
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Daimler/Chrysler AG, Automobiles 1.4%
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Bank of Tokyo Mitsubishi, Banking 1.4%
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Nestle SA, Food & Household Products 1.4%
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PORTFOLIO DIVERSIFICATION AS OF DECEMBER 31, 1998
[The following table represents a pie chart in the printed report.]
Asian Pacific Basin 1%
Short Term 2%*
Japan 21%
South America 1%
Pacific 1%
Europe 74%
*Includes cash and net other assets
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FUND PERFORMANCE
TOTAL RETURNS
SINCE
ONE FIVE 3/1/91
ALL PERIODS ENDED DECEMBER 31, 1998 YEAR YEARS* INCEPTION*
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CitiFunds International Growth Portfolio 17.62% 5.81% 7.20%
Lipper International Growth Funds Average 13.02% 7.69% 8.91%+
MSCI EAFE(R)Index 20.33% 9.50% 8.08%+
*Average Annual Total Return
+Since 2/28/91
Income Dividends Per Share$0.009
Capital Gain Distribution$0.798
GROWTH OF A $10,000 INVESTMENT
A $10,000 investment in the Fund made on inception date would have grown to
$17,244 (as of 12/31/98). The graph shows how the Fund compares to its
benchmarks over the same period.
[The following table represents a bar chart in the printed report.]
Lipper CitiFunds
International MSCI EAFE(R) International
Growth Funds Index Growth
Average (unmanaged) Portfolio
------------ ---------- -------------
12/31/91 10,203 9,834 10,161
1/31/92 10,281 9,629 10,411
2/29/92 10,282 9,290 10,602
3/31/92 9,927 8,682 10,090
4/30/92 10,143 8,728 10,361
5/31/92 10,648 9,318 10,933
6/30/92 10,356 8,882 10,622
7/31/92 9,971 8,661 10,171
8/31/92 10,072 9,210 10,221
9/30/92 9,864 9,034 9,910
10/31/92 9,595 8,566 9,749
11/30/92 9,632 8,651 9,900
12/31/92 9,741 8,701 10,013
1/31/93 9,792 8,706 10,013
2/28/93 10,039 8,974 9,973
3/31/93 10,603 9,762 10,536
4/30/93 11,148 10,693 10,797
5/31/93 11,401 10,924 11,089
6/30/93 11,172 10,756 10,827
7/31/93 11,506 11,134 10,797
8/31/93 12,241 11,738 11,390
9/30/93 12,215 11,476 11,501
10/31/93 12,790 11,832 12,044
11/30/93 12,382 10,800 11,813
12/31/93 13,608 11,582 12,999
1/31/94 14,400 12,564 13,632
2/28/94 14,075 12,532 13,089
3/31/94 13,423 11,994 12,144
4/30/94 13,749 12,506 12,144
5/31/94 13,713 12,437 12,084
6/30/94 13,558 12,616 11,903
7/31/94 13,934 12,740 12,185
8/31/94 14,346 13,045 12,748
9/30/94 13,992 12,636 12,456
10/31/94 14,258 13,060 12,345
11/30/94 13,558 12,435 11,973
12/31/94 13,418 12,516 11,509
1/31/95 12,738 12,038 10,654
2/28/95 12,756 12,006 10,915
3/31/95 13,162 12,759 11,771
4/30/95 13,590 13,243 12,052
5/31/95 13,703 13,088 12,243
6/30/95 13,703 12,861 12,666
7/31/95 14,439 13,665 13,330
8/31/95 14,169 13,147 13,360
9/30/95 14,379 13,408 13,642
10/31/95 14,206 13,051 13,481
11/30/95 14,351 13,418 13,340
12/31/95 14,787 13,961 13,590
1/31/96 15,123 14,021 13,782
2/29/96 15,180 14,072 13,631
3/31/96 15,437 14,374 13,994
4/30/96 15,917 14,795 14,449
5/31/96 15,869 14,526 14,327
6/30/96 15,974 14,612 14,368
7/31/96 15,380 14,188 13,693
8/31/96 15,551 14,222 13,553
9/30/96 15,884 14,603 13,800
10/31/96 15,771 14,457 13,628
11/30/96 16,440 15,036 14,035
12/31/96 16,491 14,846 13,942
1/31/97 16,437 14,329 13,410
2/28/97 16,669 14,567 13,599
3/31/97 16,706 14,624 13,694
4/30/97 16,739 14,705 13,765
5/31/97 17,727 15,665 14,498
6/30/97 18,548 16,533 15,353
7/31/97 19,054 16,804 15,734
8/31/97 17,671 15,552 14,673
9/30/97 18,761 16,426 15,818
10/31/97 17,346 15,168 14,601
11/30/97 17,185 15,016 14,530
12/31/97 17,328 15,151 14,661
1/31/98 17,735 15,848 15,329
2/28/98 18,906 16,869 16,099
3/31/98 19,872 17,392 16,677
4/30/98 20,144 17,533 16,805
5/31/98 20,164 17,452 16,779
6/30/98 20,009 17,588 17,030
7/31/98 20,299 17,771 17,285
8/31/98 17,400 15,573 15,123
9/30/98 16,772 15,099 14,639
10/31/98 18,016 16,677 15,808
11/30/98 18,947 17,536 16,493
12/31/98 19,529 18,232 17,244
The graph assumes all dividends and distributions are reinvested at Net Asset
Value.
Notes: All Fund performance numbers represent past performance, and are no
guarantee of future results. The Fund's share price and investment return will
fluctuate, so that the value of an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns include change in
share price and reinvestment of dividends and distributions, if any. Total
return figures are provided in accordance with SEC guidelines for comparative
purposes for prospective investors.
Total returns and yields do not reflect initial sales charges in effect as of
January 4, 1999. If sales charges had been in effect during periods prior to
December 31, 1998, the Fund's total returns and yield would have been lower.
5
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CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
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ASSETS:
Investment in International Equity Portfolio, at value (Note 1A) $21,001,158
Receivable for shares of beneficial interest 122,893
Other assets 31,879
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Total assets 21,155,930
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LIABILITIES:
Payable for shares of beneficial interest repurchased 10,410
Payable to affiliates--Shareholder servicing agents' fees (Note 2B) 4,397
Accrued expenses and other liabilities 8,890
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Total liabilities 23,697
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NET ASSETS for 1,676,510 shares of beneficial interest outstanding $21,132,233
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NET ASSETS CONSIST OF:
Paid-in capital $18,218,136
Unrealized appreciation 2,630,402
Accumulated net realized gain 302,517
Accumulated net investment loss (18,822)
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Total $21,132,233
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NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE
PER SHARE OF BENEFICIAL INTEREST (Note 7) $12.60
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See notes to financial statements
6
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CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
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INVESTMENT INCOME (Note 1B):
Dividend Income from International Equity Portfolio $ 272,202
Interest Income from International Equity Portfolio 233
Foreign Taxes Reclaimed 32,319
Allocated Expenses from International Equity Portfolio (193,066)
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$111,688
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EXPENSES:
Administrative fees (Note 2A) 58,123
Shareholder Servicing Agents' fees (Note 2B) 48,436
Distribution fees (Note 3) 19,374
Expense fees (Note 6) 19,388
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Total expenses 145,321
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Net investment loss (33,633)
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NET REALIZED AND UNREALIZED GAIN FROM
INTERNATIONAL EQUITY PORTFOLIO:
Net realized gain 743,282
Unrealized appreciation 2,040,966
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Net realized and unrealized gain from
International Equity Portfolio 2,784,248
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $2,750,615
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See notes to financial statements
7
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CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
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INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss) $ (33,633) $ 7,699
Net realized gain 743,282 1,836,248
Unrealized appreciation (depreciation) 2,040,966 (547,538)
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Net increase in net assets resulting
from operations 2,750,615 1,296,409
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DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (11,592) (39,505)
Net realized gain (1,235,787) (1,553,863)
In excess of net income (2,006) --
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Decrease in net assets from distributions
to shareholders (1,249,385) (1,593,368)
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TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
(Note 5):
Net proceeds from sale of shares 7,942,093 4,764,326
Net asset value of shares issued to shareholders
from reinvestment of dividends 1,239,930 1,239,732
Cost of shares repurchased (7,884,305) (19,962,458)
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Net increase (decrease) in net assets resulting from
transactions in shares of beneficial interest 1,297,718 (13,958,400)
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NET INCREASE (DECREASE) IN NET ASSETS 2,798,948 (14,255,359)
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NET ASSETS:
Beginning of period 18,333,285 32,588,644
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End of period (including overdistributed and
undistributed net investment income of
$(18,822) and $11,592, respectively) $21,132,233 $ 18,333,285
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See notes to financial statements
8
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CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
YEAR ENDED DECEMBER 31,
--------------------------------------------------------
1998 1997 1996 1995 1994#
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Net Asset Value, beginning
of period $ 11.42 $ 11.79 $ 13.46 $ 11.44 $ 12.93
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Income From Operations:
Net investment
income (loss) (0.009) 0.004 *0.028 *0.013* 0.001*
Net realized and
unrealized gain (loss) 1.996 0.592* 0.314* 2.055* (1.483)*
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Total from operations 1.987 0.596 0.342 2.068 (1.482)
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Less Distributions From:
Net investment income (0.008) (0.025) (0.021) (0.048) (0.001)
In excess of net
investment income (0.001) -- -- -- (0.007)
Net realized gain on
investments (0.798) (0.941) (1.991) -- --
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Total from
distributions (0.807) (0.966) (2.012) (0.048) (0.008)
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Net Asset Value, end
of period $ 12.60 $ 11.42 $ 11.79 $ 13.46 $ 11.44
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RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $21,132 $18,333 $32,589 $32,159 $28,848
Ratio of expenses to
average net assets (A) 1.75% 1.75% 1.75% 1.75% 1.75%
Ratio of net investment
income (loss) to
average net assets (0.17)% 0.03% 0.18% 0.10% 0.00%
Portfolio turnover (B) -- -- -- -- 5%
Total return (C) 17.62% 5.15% 2.59% 18.08% (11.46)%
Note: If Agents of the Fund for the periods indicated had not voluntarily waived
a portion of their fees and expenses, the net investment income (loss) per share
and the ratios would have been as follows:
Net investment income
(loss) per share $(0.011) $(0.004)* $(0.002)* $0.013* $(0.018)*
RATIOS:
Expenses to average
net assets (A) 1.80% 1.82% 1.94% 1.75% 1.90%
Net investment income
(loss) to average
net assets (0.22)% (0.04)% (0.01)% 0.10% (0.15)%
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* The per share amounts were computed using a monthly average number of shares
outstanding during the period.
(A) Includes the Fund's share of International Equity Portfolio allocated
expenses for the periods subsequent to May 1, 1994.
(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.
(C) Total return does not include the maximum sales charge of 5.00% effective
January 4, 1999.
# On May 1, 1994, the Fund began investing all of its investable assets in
International Equity Portfolio.
See notes to financial statements
9
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CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds International Growth Portfolio
(formerly known as CitiFunds International Equity Portfolio from March 2, 1998
through October 5, 1998) (prior to March 2, 1998, the Fund was known as Landmark
International Equity Fund) (the "Fund") is a separate diversified series of
CitiFunds International 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 International Equity 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 (approximately 56.4% at December 31, 1998) in the net
assets of the Portfolio. CFBDS, Inc. ("CFBDS"), acts as the Fund's Administrator
and Distributor. 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. Citigroup, Inc. was formed as a
result of the merger of Citicorp and Travelers Group, Inc. which was completed
on October 8, 1998.
The preparation of financial statements in accordance with 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 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 significant accounting policies consistently followed by the Fund are as
follows:
A. Investment Valuations 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. All the net investment income,
realized and unrealized gain or 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. Additionally, each fund
reclaims its pro rata portion of recoverable foreign taxes on dividends received
by the Portfolio.
C. Federal Taxes The Fund's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investment transactions.Accordingly, no provision for federal income or
excise tax is required.
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
aver-
10
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CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
age 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. For the year ended December
31, 1998, the Fund reclassified $16,817 to undistributed net investment income,
$18,775 from accumulated gain on investments and $1,958 to paid-in-capital.
2. ADMINISTRATIVE SERVICES PLAN The Fund has adopted an Administrative Services
Plan (the "Administrative Services Plan") which provides that the Fund may
obtain the services of an Administrator, and one or more Shareholder Servicing
Agents and other Servicing Agents, and may enter into agreements providing for
the payment of fees for such services. Under the Administrative Services Plan,
the aggregate of the fee paid to the Administrator by the Fund, the fees paid to
the Shareholder Servicing Agents by the Fund and the Basic Distribution Fee paid
by 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 services fees paid to the Administrator, as
compensation for overall administrative services, including general office
facilities, may not exceed an annual rate of 0.30% of the Fund's average daily
net assets. The Administrative fees amounted to $58,123 for the year ended
December 31, 1998. Citibank acts as Sub-Administrator and performs such duties
and receives certain 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
officer who is affiliated with the Administrator, all of whom receive
remuneration for their services to the Fund from the Administrator or its
affiliates. Certain officers and a Trustee of the Fund are officers and
directors of the Administrator or its affiliates.
B. Shareholder Servicing Agents' Fees The Fund has entered into shareholder
servicing agreements with each Shareholder Servicing Agent pursuant to which the
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 rela-
11
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Continued)
tionship. The Shareholder Servicing Agents' fees, computed at an annual rate of
0.25%, amounted to $48,436, for the year ended December 31, 1998.
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 reimburses the Distributor for expenses incurred or anticipated, in
connection with the sale of shares of the Fund, at an annual rate not to exceed
0.10% of the Fund's average daily net assets for distribution of the Fund's
shares. The Distribution fees amounted to $19,374, for the year ended December
31, 1998. The Distributor may also receive an additional fee from the Fund at an
annual rate 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. The additional
fee has not been assessed through December 31, 1998. The Distributor has
voluntarily agreed to waive this fee through December 31, 1998.
4. INVESTMENT TRANSACTIONS Increase and decrease in the Fund's investment in the
Portfolio for the year ended December 31, 1998 aggregated $7,295,715 and
$7,494,617, respectively.
5. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional Shares of Beneficial
Interest (par value $0.00001). Transactions in shares of beneficial interest
were as follows:
YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31,
1998 1997
- --------------------------------------------------------------------------------
Shares sold 640,142 406,371
Shares issued to shareholders from
reinvestment of dividends 100,100 108,405
Shares repurchased (669,297) (1,672,672)
- --------------------------------------------------------------------------------
Net increase (decrease) 70,945 (1,157,896)
- --------------------------------------------------------------------------------
6. EXPENSE FEES CFBDS has entered into an expense agreement with the Fund. CFBDS
had agreed to pay all of the ordinary operating expenses (excluding interest,
taxes, brokerage commissions, litigation costs or other extraordinary costs or
expenses) of the Fund, other than fees paid under the Administrative Services
Agreement, Distribution Agreement and Shareholder Servicing Agreements and other
than amortization of expenses related to the organization of the Fund. The
Agreement may be terminated by either party upon not less than 30 days nor more
than 60 days written notice.
The Fund has agreed to pay to CFBDS an expense fee, on an annual basis,
accrued daily and paid monthly; provided, however, that such fee shall not
exceed the amount such that immediately after any such payment the aggregate
ordinary operating expenses of the Fund, including expenses allocated from the
Portfolio less expenses waived by the Administrator, would on an annual basis
exceed an agreed upon rate, currently 1.75% of average daily net assets.
12
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
7. SUBSEQUENT EVENT Effective January 4, 1999, the Fund will offer two classes
of shares: Class A and Class B. Shares of the Fund that are outstanding on
January 4, 1999 will be classified as Class A shares. Investors purchasing
shares of the Fund on or after January 4, 1999 may select Class A or Class B,
with different sales charges and expense levels. The maximum sales load imposed
on purchases of Class A shares will be 5.00% and the maximum deferred sales load
on purchases of Class B will be 5.00%.
13
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND THE SHAREHOLDERS OF CITIFUNDS INTERNATIONAL TRUST (THE
TRUST):
CITIFUNDS INTERNATIONAL GROWTH 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 International Growth Portfolio (the "Fund"), a series of CitiFunds
International Trust, at December 31, 1998, the results of its operations, the
changes in its net assets and the financial highlights for the periods indicated
in conformity with generally accepted accounting principles. 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 generally
accepted auditing standards 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, 1998 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 12, 1999
14
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS December 31, 1998
- --------------------------------------------------------------------------------
ISSUER/INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS AND
PREFERRED RIGHTS--98.6%
- --------------------------------------------------------------------------------
AMERICAN DEPOSITORY RECEIPTS/
ADR'S--1.7%
- --------------------------------------------------------------------------------
Lukoil Co.
Energy Sources 3,300 $ 51,975
Magyar Olaj -Es Gazipari
Energy Sources 7,400 204,425
Matav RT
Telecommunications 7,200 214,650
Telecom Argentina SA
Telecommunications 6,700 184,250
--------
655,300
--------
AUSTRALIA--1.1%
- --------------------------------------------------------------------------------
Australia & New Zealand Bank
Banking 6,895 45,124
Brambles Industrial Ltd.
Business Services 2,620 63,818
Broken Hill Proprietary
Energy Sources 4,629 34,093
Colonial Ltd.
Banking 12,192 41,838
Lend Lease Corp.
Real Estate 5,132 69,186
News Corp.
Broadcasting 8,455 55,852
North Ltd.
Non-Ferrous Metals 13,059 21,286
Publishing & Broadcasting Ltd.
Broadcasting 7,486 32,707
Woodside Petroleum Co. Ltd.
Energy Sources 7,316 32,727
--------
396,631
--------
BELGIUM -- 1.0%
- --------------------------------------------------------------------------------
Electrabel
Electric & Gas Utilities 531 231,938
KBC Bankverzekerin NPV
Banking 1,758 138,321
--------
370,259
--------
BRAZIL--0.5%
- --------------------------------------------------------------------------------
Light Servicos de Electricid
Electrical & Gas Utilities 612,000 74,455
Telecommunicacoes
de Sao Paolo
Preferred Rights
Telecommunications 706,407 96,289
Telecommunicacoes
de Sao Paolo
Celular -Preferred B
Telecommunications 674,698 29,650
--------
200,394
--------
FINLAND--1.2%
- --------------------------------------------------------------------------------
Nokia AB
Electrical & Electronics 3,741 454,877
--------
FRANCE--10.3%
- --------------------------------------------------------------------------------
AXA-UAP
Insurance 2,083 301,776
BQE National Paris
Banking 1,890 155,568
Bouygues
Homebuilders 601 123,833
Canal Plus
Broadcasting 637 173,748
Carrefour
Retailing 283 213,553
Casino
Retailing 1,165 121,272
Cie de St Gobain
Containers & Glass 834 117,694
Groupe Danone
Food & Household Products 752 215,203
France Telecom
Telephone Utilities 5,106 405,485
Lafarge
Building Materials 1,536 145,880
Legrand
Electrical & Electronics 497 131,650
L'oreal
Pharmaceuticals & Health 513 370,689
Pinault-Printemps
Retailing 1,174 224,259
Sanofi
Pharmaceuticals & Health 807 132,792
Societe Nationale/Elf Aquitaine
Energy Sources 1,557 179,900
Suez Lyonnaise des Eaux
Business & Public Services 1,273 261,385
Total SA - Class B
Energy Sources 1,886 190,928
Vivendi
Business & Public Services 1,420 368,270
----------
3,833,885
----------
15
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
ISSUER/INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------
GERMANY--9.0%
- --------------------------------------------------------------------------------
Allianz AG
Insurance 1,647 $603,814
Basf AG
Chemicals 2,872 109,600
Bayer AG
Chemicals 3,015 125,821
Bayer Vereinsbank AG
Banking 1,671 130,844
Continental AG
Industrial Components 4,880 134,693
Daimler/Chrysler AG
Automobiles 5,251 518,294
Deutsche Bank AG
Banking 1,598 94,014
Deutsche Telekom AG
Telephone Utilities 13,138 431,995
Mannesmann AG
Telecommunications 1,345 154,143
Muenchener
Rueckversicherungs AG
Insurance 463 224,194
SAP AG -Preferred Rights
Data Processing
& Reproduction 271 129,305
Siemens AG
Electrical Equipment 3,214 207,311
Veba AG
Electrical & Gas Utilities 2,332 139,506
Viag AG
Electrical & Gas Utilities 267 156,522
Volkswagen AG
Automobiles 2,319 185,064
----------
3,345,120
----------
HONG KONG--0.6%
- --------------------------------------------------------------------------------
CLP Holdings
Electrical & Gas Utilities 20,000 99,644
Hutchinson Whampoa Ltd.
Multi-Industry 17,000 120,134
----------
219,778
----------
ITALY--6.0%
- --------------------------------------------------------------------------------
Assicurazioni Generali Spa
Insurance 8,616 359,554
Ente Nazionale Idrocarburi
Energy Sources 21,660 141,479
Italcementi
Building Materials 16,401 180,530
Mediaset
Broadcasting 20,231 163,957
Olivetti Spa*
Telecommunications 55,006 191,288
Rinascente
Retailing 16,172 166,224
San Paolo Imi Spa
Banking 16,755 295,894
Telecom Italia
Telecommunications 40,106 295,923
Telecom Italia Mobile Spa
Telecommunications 23,233 198,122
Unicredito Italian
Banking 37,812 223,997
----------
2,216,968
----------
JAPAN--21.2%
- --------------------------------------------------------------------------------
Advantest
Electronics 1,000 63,335
Alps Electric Co.
Electronics 2,000 36,709
Asahi Breweries
Food & Household
Products 5,000 73,640
Bank of Tokyo Mitsubishi
Banking 49,000 507,121
Bridgestone Corp.
Industrial Components 9,000 204,202
Canon Inc.
Photography 9,000 192,260
Chiyoda Chemical Corp.*
Machinery & Engineering 2,000 3,804
Daiei Inc.
Retailing 7,000 19,009
Daikyo Kanko Inc. *
Real Estate 2,000 2,406
Denso Corp.
Auto Parts 9,000 166,387
East Japan Railway
Railroads & Equipment 41 228,846
Ebara Corp.
Machinery & Engineering 3,000 25,820
Fanuc
Electronics 3,000 102,698
Fujita Kando Inc.
Business & Public Services 1,000 8,872
Fujitsu Ltd.
Data Processing &
Reproduction 20,000 266,254
16
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS December 31, 1998
ISSUER/INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------
Hankyu Corp.
Railroads & Equipment 9,000 $ 39,487
Haseko Corp. *
Homebuilders 4,000 2,017
Hazama Gumi Corp.*
Homebuilders 3,000 1,964
Hirose Electric
Electronics 1,000 69,969
Honda Motor Co. Ltd.
Automobiles 10,000 328,173
Hoya Corp.
Pharmaceuticals & Health 1,000 48,651
Isetan Co.
Retailing 2,000 21,442
Ito Yokado Co.
Retailing 4,000 279,522
Japan Air Lines Co.
Air Travel 19,000 50,084
Japan Metal & Chemical*
Steel 1,000 1,636
Jusco Co.
Retailing 3,000 60,637
Kanebo*
Apparel & Textiles 5,000 4,954
Kao Corp.
Food & Household
Products 7,000 157,895
Kawasaki Heavy Industries
Machinery & Engineering 15,000 35,161
Kinki Nippon Railway
Railroads & Equipment 17,000 90,977
Kumagai Gumi Co.*
Building Materials 7,000 5,387
Kurita Water Industrial
Business Services 1,000 14,666
Minebea Co.
Machinery & Engineering 4,000 45,785
Mitsui Mining & Smelting Co.
Non-Ferrous Metals 5,000 24,635
Mitsukoshi
Retailing 5,000 13,268
Murata Manufacture Co.
Electronics 3,000 124,458
NGK Insulators
Electrical & Electronics 4,000 51,552
Nankai Electrical Railway
Railroads & Equipment 6,000 30,199
Nippon Express Co.
Trucking & Freight 11,000 61,884
Nippon Telegraph &
Telephone Co.
Telephone Utilities 132 1,018,169
Odakyu Electrical Railway
Railroads & Equipment 8,000 27,952
Okuma Corp.
Machinery & Engineering 1,000 5,201
Osaka Gas Co. Ltd.
Electrical & Gas Utilities 26,000 89,465
Rohm Co.
Electronics 1,000 91,022
Sankyo Co. Ltd.
Pharmaceuticals & Health 5,000 109,244
Sanrio Co. *
Retailing 1,000 12,906
Secom Co.
Business Services 1,000 82,795
Seiyu
Apparel & Textiles 2,000 5,874
77th Bank
Banking 4,000 39,982
SMC Corp.
Machinery & Engineering 1,000 79,788
Shimano Inc.
Business & Public Services 1,000 25,785
Shizuoka Bank
Banking 8,000 98,717
Sony Corp.
Household Appliances 4,000 291,199
Sumitomo Chemical
Chemicals 17,000 66,165
Sumitomo Heavy Industries
Machinery & Engineering 6,000 12,525
Sumitomo Marine & Fire
Insurance 7,000 44,334
Taisho Pharmacy Co.
Pharmaceuticals & Health 4,000 110,040
Takeda Chemical Industry
Pharmaceuticals & Health 9,000 346,307
Tobu Railway Co.
Railroads & Equipment 9,000 26,272
Tokyo Electronic Power
Electric & Gas Utilities 14,000 345,511
Tokyo Electronics
Electronics 2,000 75,896
Tokyo Marine & Fire Insurance
Insurance 16,000 191,066
Toyoda Automobile Loom
Machinery & Engineering 3,000 53,047
17
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) December 31, 1998
ISSUER/INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------
Toyota Motor Corp.
Automobiles 39,000 $1,059,089
Uni Charm Corp.
Food & Household
Products 1,000 46,883
Unitika*
Chemicals 5,000 3,450
Yamato Transportation
Trucking & Freight 4,000 55,904
----------
7,880,354
----------
MEXICO--0.0%
- --------------------------------------------------------------------------------
Grupo Carso - Series A
Multi-Industry 3,200 10,869
----------
NETHERLANDS--3.9%
- --------------------------------------------------------------------------------
Ahold NV
Retailing 5,461 201,732
Heineken NV
Beverage & Tobacco 2,269 136,476
ING Groep NV
Financial Services 5,469 333,316
Royal Dutch Petroleum
Energy Sources 9,706 483,052
Unilever NV
Food & Household
Products 3,283 280,471
----------
1,435,047
----------
PORTUGAL--0.8%
- --------------------------------------------------------------------------------
Banco Commercial Portuguese
Banking 5,623 172,952
Cimpor Cimentos
De Portugal
Building Materials 3,386 108,135
----------
281,087
----------
SINGAPORE--0.5%
- --------------------------------------------------------------------------------
Singapore Press Holding
Publishing 9,000 98,122
Singapore Telecomm
Telecommunications 50,000 76,318
----------
174,440
----------
SPAIN--4.7%
- --------------------------------------------------------------------------------
AC Acciona SA
Homebuilders 3,966 323,430
Argentaria Corp. Bancaria
de Espana
Banking 5,289 136,765
BCO Central Hispano
Banking 12,847 152,317
Centros Com Pryca
Retailing 6,522 201,920
Compania Telefonica
Nacional Espana
Telephone Utilities 5,929 263,242
Dragados y Construsion
Homebuilders 4,006 147,420
Endesa
Electric & Gas Utilities 9,328 246,786
Inmobilaria Ubris SA
Real Estate 10,003 155,197
Repsol SA
Energy Sources 2,346 124,959
Telefonica SA
Telecommunications 5,929 5,256
----------
1,757,292
----------
SWEDEN--1.8%
- --------------------------------------------------------------------------------
Ericsson LM - Class B
Electronics 9,620 228,518
Foreningssparbk
Banking 4,883 126,210
Skandia Forsikring AB
Insurance 11,242 171,574
Stora Kopparbergs Series A
Paper 5,819 50,134
Stora Kopparbergs Series R
Paper 10,797 94,352
----------
670,788
----------
SWITZERLAND--9.2%
- --------------------------------------------------------------------------------
Credit Suisse Group
Banking 796 124,583
Nestle SA
Food & Household Products 232 504,972
Novartis AG
Pharmaceuticals & Health 438 860,887
Roche Holdings AGM
Pharmaceuticals & Health 58 707,636
Schweiz Ruckverischerungs
Insurance 108 281,538
Swisscom AG*
Telecommunications 521 218,079
United Bank of Switzerland AG
Banking 1,359 417,484
Zurich Versicherungs
Insurance 416 307,980
----------
3,423,159
----------
THAILAND--0.4%
- --------------------------------------------------------------------------------
Bangkok Bank Public Co. Ltd.
Banking 116,600 166,801
----------
18
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS December 31, 1998
ISSUER/INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------
UNITED KINGDOM--24.7%
- --------------------------------------------------------------------------------
Abbey National Plc.
Banking 6,966 $ 148,949
Allied Irish Banks
Banking 11,341 201,986
BAA
Business & Public Services 10,369 121,796
BG Plc.
Electrical & Gas Utilities 28,013 180,113
BOC Group
Chemicals 10,631 152,427
Barclays Bank Plc.
Banking 5,869 127,248
British American Tobacco
Beverage & Tobacco 14,598 128,542
British Aerospace Plc.
Aerospace &
Military Technology 18,471 157,429
British Petroleum Co.
Energy Sources 45,799 681,773
British Sky Broadcast
Broadcasting 16,326 123,686
British Telecommunications Plc.
Telephone Utilities 33,248 499,355
Cadbury Schweppes
Food & Household
Products 8,220 140,665
Diageo Plc.
Beverage & Tobacco 22,526 249,811
GKN
Machinery & Engineering 14,441 191,939
General Electric Co. Plc.
Electrical & Electronics 30,247 273,876
Glaxo Wellcome
Pharmaceuticals & Health 22,285 767,146
Granada Group Plc.
Business & Public Services 14,058 246,406
Great Universal Stores
Retailing 14,988 158,122
Halifax
Banking 10,787 153,230
Hanson
Construction Materials 17,323 137,859
Hong Kong & Shanghai
Bank Corp. Holdings
Banking 12,430 342,398
IMI Plc.
Multi-Industry 23,752 93,130
Imperial Chemical Industries
Chemicals 10,003 86,668
Kingfisher Plc.
Retailing 24,701 267,570
Lloyds TSB Group Plc.
Banking 29,148 415,016
National Grid Co.
Electrical & Gas Utilities 26,335 210,015
Pearson
Broadcasting 8,646 171,923
Prudential Corp. Plc.
Insurance 19,319 294,702
Railtrack Group
Railroads & Equipment 5,287 137,906
Rentokil Initial
Business & Public Services 20,493 154,915
Rio Tinto
Non-Ferrous Metals 10,313 119,939
Royal Bank of Scotland Group
Banking 13,363 218,461
Royal & Sun Alliance
Insurance 12,908 105,083
Scot & Newcastle
Leisure & Tourism 9,063 105,401
Scottish Power
Electrical & Gas Utilities 21,339 219,807
SmithKline Beecham Plc.
Pharmaceuticals & Health 25,470 357,570
Stagecoach Holdings
Railroads & Equipment 28,815 115,375
TI Group
Multi-Industry 21,940 118,011
Thames Water
Business & Public Services 9,215 177,594
Unilever Plc.
Food & Household Products 16,153 181,684
Vodafone
Telephone Utilities 20,446 332,217
Zeneca
Pharmaceuticals & Health 3,360 146,369
----------
9,214,112
----------
TOTAL INVESTMENTS
(Identified Cost
$32,408,202) 98.6% 36,707,161
OTHER ASSETS
LESS LIABILITIES 1.4 532,396
----- -----------
NET ASSETS 100.0% $37,239,557
===== ===========
* Non income producing securities.
Note: The Portfolio has the following industries over 10%: Banking 13%;
Pharmaceuticals &Health 11%.
See notes to financial statements.
19
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
- --------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) (Identified Cost, $32,408,202) $36,707,161
Foreign currency, at value (Cost, $110,788) 114,791
Cash 419,260
Receivable for investments sold 217,811
Dividends and interest receivable 38,152
- --------------------------------------------------------------------------------
Total assets 37,497,175
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 219,200
Payable to affiliates--Investment advisory fees (Note 2) 30,950
Other liabilities 7,468
- --------------------------------------------------------------------------------
Total liabilities 257,618
- --------------------------------------------------------------------------------
NET ASSETS $37,239,557
- --------------------------------------------------------------------------------
REPRESENTED BY:
Paid-in capital for beneficial interests $37,239,557
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign withholding
tax of $121,862) $503,439
Interest 606
- --------------------------------------------------------------------------------
Total investment income $ 504,045
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 353,752
Administrative fees (Note 3) 17,686
- --------------------------------------------------------------------------------
Total expenses 371,438
Less aggregate amount waived by the
Administrator (Note 3) (17,686)
- --------------------------------------------------------------------------------
Net expenses 353,752
- --------------------------------------------------------------------------------
Net investment income 150,293
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions 1,527,985
Net realized loss on foreign currencies transactions (46,575)
- --------------------------------------------------------------------------------
Net realized gain 1,481,410
- --------------------------------------------------------------------------------
Unrealized appreciation of investments-- 3,853,138
Translation of other assets and liabilities
denominated in foreign currencies--net 2,603
- --------------------------------------------------------------------------------
Total unrealized appreciation of investments 3,855,741
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 5,337,151
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,487,444
- --------------------------------------------------------------------------------
See notes to financial statements
20
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
-------------------------
1998 1997
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 150,293 $ 257,502
Net realized gain on investments and foreign
exchange transactions 1,481,410 3,143,416
Unrealized appreciation (depreciation) of investments
and foreign currency exchange 3,855,741 (968,584)
- --------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 5,487,444 2,432,334
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 9,800,225 7,972,770
Value of withdrawals (11,818,432) (25,691,025)
- --------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions (2,018,207) (17,718,255)
- --------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS: 3,469,237 (15,285,921)
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 33,770,320 49,056,241
- --------------------------------------------------------------------------------
End of period $37,239,557 $33,770,320
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
MAY 1, 1994
(COMMENCEMENT
YEAR ENDED DECEMBER 31, OF OPERATIONS) TO
----------------------------------- DECEMBER 31,
1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
(000's omitted) $37,240 $33,770 $49,056 $40,114 $32,153
Ratio of expenses to
average net assets 1.00% 1.00% 1.11% 1.20% 1.22%*
Ratio of net investment
income to average net
assets 0.42% 0.58% 0.65% 0.59% 0.60%*
Portfolio turnover 118% 99% 109% 51% 25%
Note:If the Agents of the Portfolio had not voluntarily waived a portion of
their fees for the periods indicated, the ratios would have been as follows:
Expenses to average
net assets 1.05% 1.06% 1.13% N/A N/A
Net investment income to
average net assets 0.37% 0.52% 0.63% N/A N/A
- --------------------------------------------------------------------------------
*Annualized
See notes to financial statements
21
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES International Equity 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 Declaration of Trust permits
the Trustees to issue beneficial interests in the Portfolio. The Investment
Adviser of the Portfolio is Citibank N.A. ("Citibank"). Signature Financial
Group (Grand Cayman), Ltd. ("SFG") acts as the Portfolio's Administrator.
Citibank is a wholly owned subsidiary of Citigroup, Inc. Citigroup, Inc. was
formed as a result of the merger of Citicorp and Travelers Group, Inc., which
was completed on October 8, 1998.
The preparation of financial statements in accordance with 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 following significant accounting policies consistently followed by the
Portfolio are as follows:
A. Investment Security Valuations Equity securities in the portfolio are
valued at the last sale price on the exchange on which they are primarily
traded, or at the quoted bid price for securities in which there were no sales
during the day, or for unlisted securities not reported on the NASDAQ system.
Securities listed on a foreign exchange are valued at the last quoted sale price
available. Short-term obligations maturing in sixty days or less, are valued at
amortized cost, which constitutes fair value as determined by the Trustees.
Portfolio securities for which there are no such quotations or valuations are
valued at fair value as determined in good faith by or at the direction of the
Trustees. Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of the New York Stock Exchange
and may also take place on days which the New York Stock Exchange is closed. If
events materially affecting the value of foreign securities occur between the
time when the exchange on which they are traded closes and the time of fund
valuation, such securities will be valued at fair value in accordance with
procedures established by and under the general supervision of the Trustees.
B. Foreign Currency Translation The accounting records of the Portfolio are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the current rate of exchange to determine the value of investments,
assets and liabilities. Purchases and sales of securities, and income and
expenses are translated at the prevailing rate of exchange on the respective
dates of such transactions. The Fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Translation of foreign currency
includes net exchange gains and losses, disposition of foreign currency and the
dif-
22
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
ference between the amount of investment income, expenses and foreign taxes
withheld recorded and the actual amount received or paid.
C. Forward Foreign Currency Exchange Contracts The Portfolio may enter into
forward foreign currency exchange contracts ("contracts") in connection with
planned purchases or sales of securities or to hedge the U.S. dollar value of
portfolio securities denominated in a particular currency. The Portfolio could
be exposed to risks if the counter-parties to the contracts are unable to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. dollar. Forward foreign currency exchange
contracts are adjusted by the daily exchange rate of the underlying currency and
any gains or losses are recorded for financial statement purposes as unrealized
gains or losses until the contract settlement date.
D. Accounting for Investments Securities transactions are accounted for on
the trade date. Realized gains and losses on security transactions are
determined on the identified cost method. Dividend income and other
distributions from portfolio securities are recorded on the ex-dividend date.
Dividend income is recorded net of foreign taxes withheld where recovery of such
taxes is not assured. Interest income is accrued daily.
E. U.S. Federal Income and Other Taxes The Portfolio is considered a
partnership under the U.S. Internal Revenue Code. Accordingly, no provision for
federal income taxes is necessary. The Portfolio may be subject to taxes imposed
by countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated.Taxes are accrued and applied to net
investment income and net realized gains as such income and/or gains are earned.
F. 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.
G. 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.
2. INVESTMENT ADVISORY FEES
The investment advisory fees paid to Citibank, as compensation for overall
investment management services, amounted to $353,752 for the year ended December
31, 1998. The investment advisory fees are computed at the annual rate of 1.00%
of the Portfolio's average daily net assets.
23
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Continued)
3. ADMINISTRATIVE FEES
Under the terms of an Administrative Services Agreement, the administrative
services fees paid to the Administrator, as compensation for overall
administrative services including general office facilities, is computed at an
annual rate of 0.05% of the Portfolio's average daily net assets. The
administrative fees amounted to $17,686, all of which was voluntarily waived for
the year ended December 31, 1998. The Portfolio pays no compensation directly to
any Trustee or any officer who is affiliated with the Administrator, all of whom
receive remuneration for their services to the Portfolio from the Administrator
or its affiliates. Certain officers and a Trustee of the Portfolio are officers
and directors of the Administrator or its affiliates.
4. PURCHASES AND SALES OF INVESTMENTS
For the year ended December 31, 1998, purchases and sales of investment
securities, other than short-term investments, aggregated $40,250,624 and
$40,936,714, respectively.
5. FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation (depreciation) in value of the investment
securities owned at December 31, 1998 as computed on a federal income tax basis,
are as follows:
Aggregate cost $32,518,022
- --------------------------------------------------------------------------------
Gross unrealized appreciation $ 5,638,808
Gross unrealized depreciation (1,449,669)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 4,189,139
- --------------------------------------------------------------------------------
6. EXPENSE FEES
SFG has entered into an expense agreement with the Portfolio. SFG has agreed to
pay all of the ordinary operating expenses (excluding interest, taxes, brokerage
commissions, litigation costs or other extraordinary costs or expenses) of the
Portfolio, other than fees paid under the Advisory Agreement, and Administrative
Services Agreement. The Agreement may be terminated by either party upon not
less than 30 days nor more than 60 days written notice.
The Portfolio has agreed to pay SFG an expense fee, on an annual basis,
accrued daily and paid monthly; provided, however, that such fee shall not
exceed the amount such that immediately after any such payment the aggregate
expenses of the Portfolio less expenses waived by the Administrator would on an
annual basis exceed an agreed upon rate, which as of July 1, 1996 is 1.00% of
average daily net assets.
24
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
7. FINANCIAL INSTRUMENTS
The Portfolio may trade financial instruments with off-balance sheet risk in the
normal course of its investing activities and to assist in managing exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include forward foreign currency exchange contracts.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments and
does not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when related and offsetting transactions are considered. No such instruments
were held at December 31, 1998.
8. LINE OF CREDIT
The Portfolio, along with the other Portfolios in the CitiFunds Family, entered
into an ongoing agreement with a bank which allows the Funds collectively to
borrow up to $60 million for temporary or emergency purposes. Interest on 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 year ended December 31, 1998, the commitment fee allocated to the
Portfolio was $116. Since the line of credit was established, there have been no
borrowings.
25
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND THE INVESTORS OF THE PREMIUM PORTFOLIOS (THE TRUST), WITH
RESPECT TO ITS SERIES, INTERNATIONAL EQUITY PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of International Equity Portfolio (the
"Portfolio"), a series of The Premium Portfolios, as at December 31, 1998, and
the related statements of operations and of changes in net assets and the
financial highlights for the periods indicated. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments owned as
at December 31, 1998 by correspondence with the custodian and brokers, provide a
reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Portfolio as at December 31, 1998, the
results of its operations and the changes in its net assets, and its financial
highlights for the periods indicated in accordance with U.S. generally accepted
accounting principles.
PricewaterhouseCoopers LLP
Chartered Accounts
Toronto, Ontario
February 12, 1999
26
<PAGE>
TRUSTEES AND OFFICERS
Philip W. Coolidge*, PRESIDENT
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
C. OscarMorong Jr.
E.Kirby Warren
William S. Woods Jr.
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
*AFFILIATED PERSON OF ADMINISTRATOR AND DISTRIBUTOR
INVESTMENT ADVISER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND DISTRIBUTOR
CFBDS, Inc.
21 Milk Street, 5th Floor
Boston, MA 02109
(617) 423-1679
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street,Boston, MA 02110
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
THE CITIFUNDS FAMILY
LARGE CAP STOCKS
o CitiFunds Growth & Income Portfolio
o CitiFunds Large Cap Growth Portfolio
SMALL CAP STOCKS
o CitiFunds Small Cap Value Portfolio
o CitiFunds Small Cap Growth Portfolio
INTERNATIONAL STOCKS
o CitiFunds International Growth & Income Portfolio
o CitiFunds International Growth Portfolio
GROWTH WITH INCOME
o CitiFunds Balanced Portfolio
BONDS
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds Intermediate Income Portfolio
o CitiFunds National Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
MONEY MARKETS
o CitiFunds Cash Reserves
o CitiFunds U.S. Treasury Reserves
o CitiFunds Tax Free Reserves
o CitiFunds California Tax Free Reserves
o CitiFunds Connecticut Tax Free Reserves
o CitiFunds New York Tax Free Reserves
This report is prepared for the information of shareholders. It is authorized
for distribution to prospective investors only when preceded or accompanied by
an effective prospectus.
For more information contact your Service Agent
or call 1-800-625-4554
CitiFunds are made available by CFBDS, Inc. as distributor.
(C)1999 Citicorp (R) Printed on recycled paper CFA/IG/1298
