CITIFUNDS [LOGO]
INTERNATIONAL
GROWTH
PORTFOLIO
SEMI-ANNUAL REPORT
JUNE 30, 2000
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INVESTMENT PRODUCTS: NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
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<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
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Portfolio Environment and Outlook 2
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Fund Facts 3
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Portfolio Highlights 4
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Fund Performance 5
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CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
Statement of Assets and Liabilities 6
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Statement of Operations 7
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Statement of Changes in Net Assets 8
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Financial Highlights 9
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Notes to Financial Statements 11
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INTERNATIONAL EQUITY PORTFOLIO
Portfolio of Investments 15
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Statement of Assets and Liabilities 19
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Statement of Operations 19
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Statement of Changes in Net Assets 20
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Financial Highlights 20
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Notes to Financial Statements 21
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<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
During the past six months, both the U.S. stock and bond markets experienced
historic levels of volatility, leaving many investors with little or no clear
indication of the future direction of the financial markets. Despite the ongoing
strength and expansion of both the U.S. and many global economies, investor
concerns regarding inflation and rising interest rates led to wide fluctuations
in stock prices.
This report reviews the Fund's investment activities and performance during
the six months ended June 30, 2000 and provides a summary of Citibank's
perspective on and outlook for international stock markets. Thank you for your
continued confidence and participation.
Sincerely,
/s/ Philip W. Coolidge
----------------------
Philip W. Coolidge
President
July 17, 2000
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
As recently as the fourth quarter of 1999, optimism regarding the future
earnings potential of technology and telecommunications companies helped growth
stocks in most major markets significantly outperform value-oriented stocks.
(Growth stocks are the shares of companies with the potential for faster than
average growth within their industries. Value stocks are the shares of companies
that are inexpensive compared to the stocks of other companies.) SOON AFTER THE
YEAR 2000 BEGAN, HOWEVER, INVESTOR OPTIMISM REGARDING THE "NEW ECONOMY" (SHARES
OF COMPANIES IN THE TECHNOLOGY, MEDIA AND TELECOMMUNICATIONS INDUSTRIES)
DISSIPATED WORLDWIDE, TRIGGERING A DECLINE IN GROWTH STOCKS IN EUROPE, ASIA AND
THE UNITED STATES.
During the first quarter of 2000, the prices of many growth stocks fell when
investors--faced with evidence that economies in the U.S., Europe and Asia were
continuing to gain momentum which reignited inflationary pressures -- had risen
too high relative to their revenues and earnings. As a result, growth stock
prices generally fell during the first half of 2000. In a stark illustration of
worldwide trends, the tech-laden Nasdaq Composite Index* fell more than 35%
between mid-March and the end of April, including a single-day drop of 10% on
April 14, 2000.
THE STOCK MARKET'S HIGHER VOLATILITY TOOK PLACE AGAINST AN ECONOMIC BACKDROP
OF ROBUST ECONOMIC GROWTH AND RISING INTEREST RATES THROUGHOUT THE WORLD.
Strengthening economies worldwide encouraged many investors to think that robust
global and domestic demand for goods and services would in turn fuel rising
revenues and earnings for select global companies. However, higher interest
rates tended to have the opposite effect, dampening investor enthusiasm because
of the adverse effects of higher financing costs on corporate earnings.
In this challenging marketplace, the Fund's manager positioned the Portfolio
on a relatively defensive basis. More specifically, the manager implemented a
sector allocation strategy emphasizing industry groups that historically have
offered better returns than many growth stocks during a period of rising
interest rates. This strategy proved effective, and defensive sectors such as
banking, energy, building materials, commodity producers and consumer durables
provided relatively attractive returns during the period. On the other hand,
technology stocks were negatively impacted as they fell from the lofty
valuations they had achieved by the end of 1999.
The manager also adopted a relatively defensive strategy when selecting
individual stocks within various industry groups. For example, within the
telecommunications sector, the manager favored mobile telephone providers while
avoiding previously state-owned telephone companies. In banking, the manager
focused on insurance companies, especially in Germany, where he believes
proposed regulatory changes may benefit several companies within this sector.
* The Nasdaq Composite Index is a market value-weighted index that measures all
domestic-based securities listed on the NASDAQ stock market.
2
<PAGE>
From a country allocation perspective, the manager began the reporting period
with an emphasis on Europe and less of an emphasis on Japan. This strategy
worked well at the beginning of the reporting period, when the growth sector of
Japan's stock market declined more than 20%. Later in the reporting period,
however, THE MANAGER REVERSED HIS REGIONAL FOCUS, COMMITTING MORE CAPITAL TO
JAPAN AND LESS TO EUROPE.
Throughout the period, because of his valuation concerns, the manager
maintained a relatively light position in Asian markets outside of Japan.
Looking forward, management is cautiously optimistic about international
growth opportunities. Over the near term, the manager expects heightened market
volatility to continue if the world's central banks continue to raise interest
rates. Over the longer term, however, he believes that the recent market
correction has been a generally positive development, taking some of the froth
out of the market and bringing growth-company valuations to what he believes to
be more reasonable levels.
CONSEQUENTLY, THE MANAGER BELIEVES THAT LONG-TERM CONDITIONS REMAIN POSITIVE
FOR MANY INTERNATIONAL GROWTH COMPANIES. While no guarantees can be given, the
manager thinks that these fast-growing businesses may continue to provide a
solid opportunity to participate in some of the world's fastest growing stock
markets, potentially providing competitive returns for investors over time.
FUND FACTS
FUND OBJECTIVE
Long-term capital growth; dividend income, if any, is incidental to this
investment objective.
INVESTMENT MANAGER,
INTERNATIONAL EQUITY PORTFOLIO
Citibank, N.A.
COMMENCEMENT OF OPERATIONS
March 1, 1991
NET ASSETS AS OF 6/30/00
Class A shares $23.8 million
Class B shares $527,297
DIVIDENDS
Paid semi-annually, if any
CAPITAL GAINS
Distributed semi-annually, if any
BENCHMARKS
o Lipper International Equity Funds Average
o Morgan Stanley Capital International Europe, Australasia,
Far East (MSCI EAFE(R)) Growth Index*
* The Morgan Stanley Capital International Europe, Australasia, Far East
(MSCI EAFE(R) Growth Index is an unmanaged capitalization index representing
the industry composition and a sampling of small, medium, and large
capitalization companies from Europe, Australasia and the Far East.
3
<PAGE>
PORTFOLIO HIGHLIGHTS
================================================================================
TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2000
COMPANY, INDUSTRY % OF NET ASSETS
Nokia AB, Communications Equipment 5.2%
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Nippon Telegraph & Telephone Co.,
Diversified Telecommunications Services 3.7%
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L.M. Ericsson Telefon (Series B), Communications Equipment 3.4%
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Novartis AG, Pharmaceuticals 3.3%
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France Telecom, Diversified Telecommunication Services 3.1%
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Deutsche Telecom AG, Diversified Telecommunication Services 2.9%
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AstraZeneca, Pharmaceuticals 2.6%
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British Telecommunications, Diversified Telecommunication Services 2.3%
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Glaxo Wellcome, Pharmaceuticals 1.9%
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Sony Corp., Household Durables 1.9%
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PORTFOLIO DIVERSIFICATION AS OF JUNE 30, 2000
[The following table represents a pie chart in the printed piece.]
Asian Pacific Basin 1%
Short Term 2%*
Japan 29%
Europe 68%
*Includes cash and net other assets
4
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
SINCE
SIX ONE FIVE 3/2/91
ALL PERIODS ENDED JUNE 30, 2000 MONTHS** YEAR YEARS* INCEPTION)*
================================================================================
CitiFunds International Growth Portfolio
(Class A) without sales charge (8.01)% 21.98% 11.18% 8.55%
Lipper International Equity Funds Average (4.55)% 24.48% 13.16% 10.76%+
MSCI EAFE Growth Index (7.85)% 20.67% 10.89% 7.66%+
CitiFunds International Growth Portfolio
(Class A) with a maximum
sales charge of 5.00% (12.61)% 15.88% 10.05% 7.96%
CitiFunds International Growth Portfolio
(Class B) without deferred sales charge (8.32)% 21.16% -- 13.65%#
Lipper International Equity Funds Average (4.55)% 24.48% -- 20.96%++
MSCI EAFE Growth Index (7.85)% 20.67% -- 12.64%++
CitiFunds International Growth Portfolio
(Class B) with a maximum deferred
sales charge of 5.00% (12.90)% 15.10% -- 9.80%#
*Average Annual Total Return
**Not Annualized
+From 2/28/91
++From 12/31/98
#Commencement of Operations 1/4/99
GROWTH OF A $10,000 INVESTMENT
A $10,000 investment in the Fund made on inception date would have grown to
$20,442, including the maximum sales charge (as of 6/30/00). The graph shows how
the Fund compares to its benchmarks over the same period.
[The following table represents a line chart in the printed piece.]
CitiFunds Lipper
International International MSCI
Growth Portfolio Equity EAFE(R) Growth
(Class A) Funds Average Index (unmanaged)
3/1/91 9500 10000 10000
8949 9708 9434
9253 9831 9533
9253 9942 9650
6/30/91 9272 9451 8928
9310 9828 9317
9415 9748 9141
9643 10022 9607
9690 10081 9891
9367 9745 9544
12/31/91 9653 10203 10035
9891 10281 9693
10072 10282 9313
9586 9927 8694
9843 10143 8502
10386 10648 9140
6/30/92 10091 10356 8737
9662 9971 8600
9710 10072 9276
9414 9864 9086
9262 9595 8616
9405 9632 8739
12/31/92 9512 9741 8752
9512 9792 8674
9474 10039 8923
10009 10603 9558
10257 11148 10332
10534 11401 10638
6/30/93 10286 11172 10544
10257 11506 10854
10821 12241 11410
10926 12215 11134
11442 12790 11487
11222 12382 10363
12/31/93 12349 13608 10975
12951 14400 11803
12435 14075 11715
11537 13423 11141
11537 13749 11602
11480 13713 11469
6/30/94 11308 13558 11580
11575 13934 11683
12110 14346 11951
11833 13992 11554
11728 14258 11880
11375 13558 11348
12/31/94 10934 13418 11496
10121 12738 11057
10370 12756 11055
11182 13162 11753
11450 13590 11276
11631 13703 12137
6/30/95 12033 13703 11888
12663 14439 12649
12692 14169 12119
12960 14379 12399
12807 14206 12067
12673 14351 12401
12/31/95 12911 14787 12835
13093 15123 12846
12949 15180 12893
13294 15437 13205
13726 15917 13527
13611 15869 13247
6/30/96 13649 15974 12296
13008 15380 12868
12876 15551 12883
13110 15884 13239
12947 15771 13131
13334 16440 13554
12/31/96 13245 16491 13310
12740 16437 12758
12919 16669 12958
13009 16706 13037
13077 16739 13170
13773 17727 13947
6/30/97 14585 18548 14760
14948 19054 15116
13939 17671 13952
15027 18761 14877
13871 17346 13471
13803 17185 13444
12/31/97 13928 17328 13619
14562 17735 14238
15294 18906 15184
15843 19872 15392
15965 20144 15549
15940 20164 15444
6/30/98 16179 20009 15660
16421 20299 15733
14367 17400 14045
13907 16772 13652
15018 18016 15039
15668 18947 15770
12/31/98 16382 19529 16678
16408 19681 16768
15914 19161 16227
16369 19830 16449
16733 20740 16620
15927 19888 15900
6/30/99 16759 20934 16519
17271 21474 16839
17179 21663 16937
17350 21745 17208
18427 22582 18132
19609 24328 19463
12/31/99 22223 27242 21631
21008 25703 20418
22516 27230 21553
22893 27445 21960
21343 25705 20511
20143 24872 19243
6/30/00 20442 25974 19934
The graph includes the initial sales charge on the Fund (no comparable charge
exists for the other indices) and assumes all dividends and distributions from
the Fund are invested 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 and reflect
certain voluntary fee waivers which may be terminated at any time. If the
waivers were not in place, the Fund's returns would have been lower. The maximum
sales charge of 5.00% went into effect on January 4, 1999. Investors may not
invest directly in an index.
5
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (Unaudited)
==============================================================================
ASSETS:
Investment in International Equity Portfolio, at value (Note 1A) $24,322,941
Receivable for shares of beneficial interest sold 10,821
Other assets 42,104
------------------------------------------------------------------------------
Total assets 24,375,866
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LIABILITIES:
Payable to affiliates--Shareholder Servicing Agents' fees (Note 3) 4,972
Payable for shares of beneficial interest repurchased 4,752
Accrued expenses and other liabilities 14,034
------------------------------------------------------------------------------
Total liabilities 23,758
------------------------------------------------------------------------------
NET ASSETS $24,352,108
==============================================================================
NET ASSETS CONSIST OF:
Paid-in capital $18,474,308
Unrealized appreciation 3,468,559
Accumulated net realized gain 2,498,951
Accumulated net investment loss (89,710)
------------------------------------------------------------------------------
Total $24,352,108
==============================================================================
COMPUTATION OF:
CLASS A SHARES:
Net Asset Value per share ($23,824,811/1,647,084 shares outstanding) $14.46
Offering price per share ($14.46 / 0.95) 15.22*
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CLASS B SHARES:
Net Asset Value and offering price per share
($527,297/36,861 shares outstanding) $14.31**
================================================================================
* Based upon single purchases of less than $25,000.
** Redemption price per share is equal to net asset value less any applicable
contingent deferred sales charge.
See notes to financial statements
6
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Unaudited)
==============================================================================
INVESTMENT INCOME (Note 1B):
Dividend Income from International Equity Portfolio $ 113,211
Foreign Taxes Reclaimed 11,399
Allocated Expenses from International Equity Portfolio (119,975)
------------------------------------------------------------------------------
$ 4,635
EXPENSES:
Administrative fees (Note 2) 36,634
Shareholder Servicing Agents' fees Class A (Note 3) 29,461
Shareholder Servicing Agents' fees Class B (Note 3) 539
Service fees Class A (Note 4) 11,785
Service fees Class B (Note 4) 2,273
Expense fees (Note 7) 25,977
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Total expenses 106,669
Less aggregate amount waived by the Shareholder
Servicing Agent and the Distributor (Note 3 and Note 4) (12,324)
------------------------------------------------------------------------------
Net expenses 94,345
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Net investment loss (89,710)
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NET REALIZED AND UNREALIZED GAIN (LOSS) FROM
INTERNATIONAL EQUITY PORTFOLIO:
Net realized gain 2,230,771
Unrealized depreciation (3,893,024)
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Net realized and unrealized loss from
International Equity Portfolio (1,662,253)
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NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(1,751,963)
==============================================================================
See notes to financial statements
7
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31,
(Unaudited) 1999
===============================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment loss $ (89,710) $ (104,174)
Net realized gain 2,230,771 2,000,083
Unrealized appreciation (depreciation) (3,893,024) 4,731,181
-------------------------------------------------------------------------------
Net increase (decrease) in net assets
resulting from operations (1,751,963) 6,627,090
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DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net realized gain Class A (309,115) (1,577,443)
Net realized gain Class B (6,915) (17,951)
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Decrease in net assets from
distributions to shareholders (316,030) (1,595,394)
-------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 6):
CLASS A
Net proceeds from sale of shares 5,419,067 5,174,767
Net asset value of shares issued to shareholders from
reinvestment of dividends 293,668 1,548,991
Cost of shares repurchased (4,928,869) (7,777,297)
-------------------------------------------------------------------------------
Total Class A 783,866 (1,053,539)
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CLASS B*
Net proceeds from sale of shares 263,613 290,552
Net asset value of shares issued to shareholders from
reinvestment of distributions 6,673 17,012
Cost of shares repurchased (15,180) (36,825)
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Total Class B 255,106 270,739
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Net increase (decrease) in net assets resulting from
transactions in shares of beneficial interest 1,038,972 (782,800)
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NET INCREASE (DECREASE) IN NET ASSETS (1,029,021) 4,248,896
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NET ASSETS:
Beginning of period 25,381,129 21,132,233
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End of period (including accumulated net investment
loss of $89,710 and $0, respectively) $ 24,352,108 $25,381,129
================================================================================
*January 4, 1999 (Commencement of Operations).
See notes to financial statements
8
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 ---------------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
==========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning
of period $15.92 $12.60 $ 11.42 $ 11.79 $ 13.46 $ 11.44
----------------------------------------------------------------------------------------------------------
Income From Operations:
Net investment income (loss) (0.125) (0.077) (0.009) 0.004+ 0.028+ 0.013+
Net realized and unrealized
gain (loss) (1.145) 4.452 1.996 0.592+ 0.314+ 2.055+
----------------------------------------------------------------------------------------------------------
Total from operations (1.270) 4.375 1.987 0.596 0.342 2.068
----------------------------------------------------------------------------------------------------------
Less Distributions From:
Net investment income -- -- (0.008) (0.025) (0.021) (0.048)
In excess of net investment income -- -- (0.001) -- -- --
Net realized gain on investments (0.190) (1.055) (0.798) (0.941) (1.991) --
----------------------------------------------------------------------------------------------------------
Total from distributions (0.190) (1.055) (0.807) (0.966) (2.012) (0.048)
----------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $14.46 $15.92 $ 12.60 $ 11.42 $ 11.79 $ 13.46
==========================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $23,825 $25,058 $21,132 $18,333 $32,589 $32,159
Ratio of expenses to average
net assets (A) 1.75%* 1.75% 1.75% 1.75% 1.75% 1.75%
Ratio of net investment income
(loss) to average net assets (0.71)%* (0.49)% (0.17)% 0.03% 0.18% 0.10%
Total return (B) (8.01)%** 35.66% 17.62% 5.15% 2.59% 18.08%
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 $(0.132) $(0.210) $(0.011) $(0.004)+ $(0.002)+ $0.013+
RATIOS:
Expenses to average net assets (A) 1.85%* 1.90% 1.80% 1.82% 1.94% 1.75%
Net investment income (loss) to
average net assets (0.81)%* (0.64)% (0.22)% (0.04)% (0.01)% 0.10%
==========================================================================================================
+ The per share amounts were computed using a monthly average number of shares
outstanding during the period. * Annualized
** Not Annualized
(A) Includes the Fund's share of International Equity Portfolio allocated
expenses for the periods indicated. (B) Total return does not include the
maximum sales charge of 5.00% effective January 4, 1999.
</TABLE>
See notes to financial statements
9
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS (Continued)
CLASS B
------------------------------------
SIX MONTHS JANUARY 4, 1999
ENDED (COMMENCEMENT OF
JUNE 30, 2000 OPERATIONS) TO
(Unaudited) DECEMBER 31, 1999
================================================================================
Net Asset Value, beginning of period $15.81 $12.87
--------------------------------------------------------------------------------
Income From Operations:
Net investment loss (0.135) (0.095)
Net realized and unrealized
gain (loss) on investments (1.175) 4.090
--------------------------------------------------------------------------------
Total from operations (1.310) 3.995
--------------------------------------------------------------------------------
Less Distributions From:
Net realized gain on investments (0.190) (1.055)
--------------------------------------------------------------------------------
Total distributions (0.190) (1.055)
--------------------------------------------------------------------------------
Net Asset Value, end of period $14.31 $15.81
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $527 $323
Ratio of expenses to average net assets (A) 2.50%* 2.50%*
Ratio of net investment loss to
average net assets (1.46)%* (1.24)%*
Total return (8.32)%** 31.95%**
Note: If Agents of the Fund for the periods indicated had not voluntarily waived
a portion of their fees and expenses, the net investment loss per share and the
ratios would have been as follows:
Net investment loss per share $(0.150) $(0.108)
RATIOS:
Expenses to average net assets (A) 2.60%* 2.70%*
Net investment loss to average net assets (1.56)%* (1.44)%*
--------------------------------------------------------------------------------
* Annualized
** Not Annualized
(A) Includes the Fund's share of International Equity Portfolio allocated
expenses for the periods indicated.
See notes to financial statements
10
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds International Growth Portfolio (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 61.0% at June 30, 2000) 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.
The Fund offers Class A shares and Class B shares. The Fund commenced its
public offering of Class B shares on January 4, 1999. Class A shares have a
front-end, or initial, sales charge effective January 4, 1999. This sales charge
may be reduced or eliminated in certain circumstances. Class B shares have no
front end sales charge, pay a higher ongoing distribution fee than Class A and
are subject to a deferred sales charge if sold within five years of purchase.
Class B shares automatically convert into Class A shares after eight years.
Expenses of the Fund are borne pro-rata by the holders of each class of shares,
except that each class bears expenses unique to that class (including the Rule
12b-1 service and distribution fees applicable to such class), and votes as a
class only with respect to its own Rule 12b-1 plan. Shares of each class would
receive their pro-rata share of the net assets of the Fund, if the Fund were
liquidated. Class A shares have a lower expense ratio than Class B shares. For
the six months ended June 30, 2000, CFBDS, acting as the distributor, received
net commissions paid by investors of $1,829 from sales of Class A shares and
$1,546 in deferred sales charges from redemptions of Class B shares.
The financial statements of the Portfolio, including the portfolio of
investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the 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 own-
11
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
ership 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
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.
2. 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 $36,634 for the six months ended June 30, 2000.
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.
3. 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, 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. The
Shareholder Servicing Agents' fees, computed at an annual rate of 0.25%, for
Class A and 0.15% for Class B, amounted to $29,461 for Class A for the six
months ended June 30, 2000. The
12
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
Shareholder Servicing Agents' fees for Class B amounted to $539, all of which
was voluntarily waived for the six months ended June 30, 2000.
4. DISTRIBUTION/SERVICE FEES The Fund maintains separate Distribution/Service
Plans for Class A and Class B shares, which have been adopted in accordance with
Rule 12b-1 under the 1940 Act. Under the Class A Distribution Plan, the Fund may
pay monthly fees at an annual rate not to exceed 0.10% of the average daily net
assets represented by Class A shares of the Fund. The Distribution fee for Class
A shares amounted to $11,785, all of which was voluntarily waived for the six
months ended June 30, 2000. 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 Class A shares of the
Fund. The additional fee has not been assessed through June 30, 2000.
Under the Class B Service Plan, the Fund may pay a combined monthly
distribution and service fee at an annual rate not to exceed 1.00% of the
average daily net assets represented by Class B shares. The service fees for
Class B shares amounted to $2,273 for the six months ended June 30, 2000.
These fees may be used to make payments to the distributor for distribution
services and to others as compensation for the sale of shares of the applicable
class of the Fund, for advertising, marketing or other promotional activity, and
for preparation, printing and distribution of prospectuses, statements of
additional information and reports for recipients other than regulators and
existing shareholders. The Fund may also make payments to the Distributor and
others for providing personal service of the maintenance of shareholder
accounts.
5. INVESTMENT TRANSACTIONS Increase and decrease in the Fund's investment in the
Portfolio for the six months ended June 30, 2000 aggregated $5,104,655 and
$4,444,693, respectively.
13
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
6. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional Shares of Beneficial
Interest (par value $0.00001). Transactions in shares of beneficial interest
were as follows:
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31,
(Unaudited) 1999
================================================================================
CLASS A:
Shares sold 365,264 383,870
Shares issued to shareholders from
reinvestment of dividends 19,723 107,342
Shares repurchased (311,586) (594,039)
--------------------------------------------------------------------------------
Net increase (decrease) 73,401 (102,827)
================================================================================
CLASS B:*
Shares sold 16,913 21,952
Shares issued to shareholders from
reinvestment of dividends 454 1,179
Shares repurchased (961) (2,676)
--------------------------------------------------------------------------------
Net increase 16,406 20,455
================================================================================
* January 4, 1999 (Commencement of Operations).
7. EXPENSE FEES CFBDS has entered into an expense agreement with the Fund. CFBDS
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 Fund, other than fees paid under the Administrative Services
Agreement, Distribution Agreement and Shareholder Servicing Agreements. 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 Class A and 2.50% of Class B
average daily net assets.
14
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS June 30, 2000
(Unaudited)
ISSUER SHARES VALUE
--------------------------------------------------------------------------------
COMMON STOCKS -- 99.4%
--------------------------------------------------------------------------------
AUSTRALIA -- 0.0%
--------------------------------------------------------------------------------
Australia & New Zealand Bank
Banks 184 $ 1,410
----------
FINLAND -- 5.9%
--------------------------------------------------------------------------------
Nokia AB
Communications
Equipment 40,766 2,080,238
Sonera Yhtyma
Diversified
Telecommunication
Services 5,904 269,145
----------
2,349,383
----------
FRANCE -- 14.5%
--------------------------------------------------------------------------------
Alcatel
Communications
Equipment 6,508 426,846
AXA-UAP
Insurance 1,219 192,024
Bouygues
Construction &
Engineering 565 377,584
Canal Plus
Media 1,364 229,189
Cap Gemini
IT Consulting
& Services 1,703 299,970
Carrefour Supermarche
Food & Drug Retailing 7,887 539,128
Cie de St. Gobain
Building Products 855 115,584
Dassault Systems
Software 1,732 161,551
France Telecom
Diversified Telecommunication
Services 8,900 1,243,936
L'Oreal
Personal Products 280 242,456
Stmicroelectronics
Semiconductor
Equipment & Products 9,586 604,016
Sanofi
Pharmaceuticals 8,030 382,546
Total Fina
Oil & Gas 3,507 537,710
Vivendi
Multi-Utilities 4,924 434,602
----------
5,787,142
----------
GERMANY--7.6%
--------------------------------------------------------------------------------
Allianz AG
Insurance 2,068 742,937
Deutsche Telekom AG
Diversified
Telecommunication
Services 20,534 1,172,308
EON AG
Electric Utilities 3,945 190,198
Muenchener
Ruckversicherungs AG
Insurance 1,457 457,639
Sap AG
Software 2,412 446,040
----------
3,009,122
----------
HONG KONG -- 1.3%
--------------------------------------------------------------------------------
Cable & Wireless
Diversified
Telecommunication
Services 62,693 138,326
Hang Seng Bank
Banks 3,100 29,328
Hutchinson Whampoa
Diversified Financials 27,500 345,712
Johnson Electric Holdings
Electrical Equipment 2,000 18,985
----------
532,351
----------
ITALY -- 4.6%
--------------------------------------------------------------------------------
Assicurazioni Generali Spa
Insurance 14,918 511,296
Saipem
Energy Equipment
& Services 39,823 235,718
Seat Pagine Gialle
Media 31,740 109,694
Telecom Italia Mobile Spa
Wireless
Telecommunication
Services 53,015 541,564
Telecom Italia Spa
Diversified
Telecommunication
Services 30,115 414,011
----------
1,812,283
----------
JAPAN -- 28.7%
--------------------------------------------------------------------------------
Acom Co.
Diversified Financials 2,100 176,542
15
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) June 30, 2000
(Unaudited)
ISSUER SHARES VALUE
--------------------------------------------------------------------------------
Advantest
Semiconductor
Equipment & Products 1,100 $245,182
Bank of Tokyo Mitsubishi
Banks 9,000 108,657
Benesse Corp.
Commercial Services
& Supplies 1,000 69,271
Bridgestone Corp.
Auto Components 9,000 190,425
Canon Inc.
Office Electronics 8,000 398,096
Central Japan Railway
Road & Rail 17 96,131
Daiwa Securities Group Inc.
Diversified Financials 17,000 224,306
Fanuc
Machinery 1,900 193,214
Fujitsu Ltd.
Computers
& Peripherals 21,000 726,356
Furukawa Electric
Electrical Equipment 9,000 187,880
Honda Motor Co. Ltd.
Automobiles 2,000 68,046
Hoya Corp.
Health Care
Equipment & Supplies 2,000 179,068
Kao Corp.
Household Products 5,000 152,679
Kinki Nippon Railway
Road & Rail 21,000 85,104
Konami Co.
Software 1,500 94,718
Kyocera Corp.
Electronic Equipment
& Instruments 1,800 305,188
Mitsubishi Electric
Electrical Equipment 18,000 194,750
Murata Manufacturing Co.
Semiconductor Equipment
& Products 3,000 430,328
NEC Corp.
Computers &
Peripherals 14,000 439,376
Nikon Corp.
Semiconductor
Equipment & Products 2,000 74,078
Nintendo Co.
Leisure Equipment
& Products 1,300 226,907
Nippon Telegraph & Telephone Co.
Diversified
Telecommunication
Services 112 1,488,337
Nitto Denko Corp.
Electrical Equipment 4,000 154,187
Nomura Securities
Diversified Financials 17,000 415,767
Promise Co.
Diversified Financials 1,200 94,774
Rohm Co. Ltd.
Semiconductor
Equipment & Products 1,300 379,812
SMC Corp.
Machinery 300 56,406
Sanrio Co.
Household Durables 2,000 53,249
Secom Co. Ltd.
Commercial Services
& Supplies 2,000 146,082
Sharp Corp.
Household Durables 9,000 159,041
Shimamura Co.
Specialty Retail 500 58,386
Shinetsu Chemical Co.
Chemicals 4,000 202,818
Softbank Corp.
Internet Software
& Services 3,000 407,144
Sony Corp.
Household Durables 8,000 746,430
Sumitomo Bank
Banks 9,000 110,268
Sumitomo Chemical
Chemicals 16,000 96,207
Taisho Pharmacy Co.
Pharmaceuticals 4,000 143,254
Taiyo Yuden Co.
Electronic Equipment
& Instruments 2,000 125,159
Takeda Chemical Industry
Pharmaceuticals 9,000 590,359
Takefuji Corp.
Diversified Financials 1,300 156,948
Terumo Corp.
Health Care
Equipment & Supplies 3,000 101,503
Tokyo Broadcasting
Media 3,000 129,494
Tokyo Electronics
Semiconductor
Equipment & Products 2,000 273,691
Toshiba Corp.
Computers &
Peripherals 17,000 191,782
16
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS June 30, 2000
(Unaudited)
ISSUER SHARES VALUE
--------------------------------------------------------------------------------
Yamanouchi Pharmaceutical
Pharmaceuticals 3,000 $ 163,706
Yamato Transportation
Air Freight & Couriers 5,000 124,169
-----------
11,435,275
-----------
NETHERLANDS -- 4.1%
--------------------------------------------------------------------------------
Aegon NV
Insurance 8,026 285,579
Akzo Nobel NV
Chemicals 3,010 127,877
ASM Lithography
Semiconductor
Equipment
& Products 7,335 315,263
Kon Kpn
Diversified
Telecommunication
Services 10,234 457,743
Unilever NV
Food Products 6,015 275,928
Wolters Kluwer
Media 6,579 175,239
-----------
1,637,629
-----------
PORTUGAL -- 0.5%
--------------------------------------------------------------------------------
Portugal Telecom
Diversified
Telecommunication
Services 16,682 187,293
-----------
SINGAPORE -- 1.1%
--------------------------------------------------------------------------------
Overseas Chinese Bank
Banks 24,500 168,819
Singapore Press Holding
Media 12,000 187,609
Singapore Telecomm
Diversified
Telecommunication
Services 65,000 95,223
-----------
451,651
-----------
SPAIN -- 2.4%
--------------------------------------------------------------------------------
BBVA
Banks 23,377 349,277
Telefonica Publica*
Media 28,366 609,323
-----------
958,600
-----------
SWEDEN -- 4.5%
--------------------------------------------------------------------------------
L.M. Ericsson Telefon (Series B)
Communications
Equipment 68,015 1,345,648
Securitas
Commercial Services
& Supplies 13,158 278,973
Svenska Cellulosa
Paper & Forest
Products 8,120 154,206
-----------
1,778,827
-----------
SWITZERLAND -- 4.1%
--------------------------------------------------------------------------------
Givaudan AG
Personal Products 35 10,653
Novartis AG
Pharmaceuticals 821 1,300,474
Roche Holdings AGM
Pharmaceuticals 35 340,710
-----------
1,651,837
-----------
UNITED KINGDOM -- 20.1%
--------------------------------------------------------------------------------
AstraZeneca
Pharmaceuticals 21,860 1,020,406
British Sky Broadcasting
Media 13,698 267,786
British Telecommunications
Diversified
Telecommunication
Services 71,849 928,424
CRH
Construction Materials 9,677 175,072
Cable & Wireless
Diversified
Telecommunication
Services 21,868 370,260
Cadbury Schweppes
Food Products 29,743 195,318
Carltun Communications
Media 24,895 320,183
Diageo Plc
Beverages 35,569 319,149
Glaxo Wellcome
Pharmaceuticals 26,015 758,531
Imperial Chemical
Industries
Chemicals 18,207 144,495
Kingfisher
Multiline
Retail 15,654 142,472
Lloyds TSB Group Plc
Banks 47,503 448,511
17
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) June 30, 2000
(Unaudited)
ISSUER SHARES VALUE
--------------------------------------------------------------------------------
Logica
IT Consulting Services 4,170 $ 98,683
Marconi
Communications
Equipment 22,099 287,567
National Grid Co.
Electric Utilities 23,093 182,048
Pearson
Media 7,010 222,743
Prudential Corp. Plc
Insurance 19,268 282,215
Reuters Group
Media 16,149 275,383
Royal Bank
Banks 12,496 209,119
SmithKline Beecham Plc
Pharmaceuticals 46,227 605,033
Tesco
Food & Drug Retailing 62,060 192,971
Unilever Plc
Food Products 17,017 102,994
Vodafone
Wireless
Telecommunication
Services 116,257 469,676
-----------
8,019,039
-----------
TOTAL INVESTMENTS
(Identified Cost
$34,555,582) 99.4% 39,611,842
OTHER ASSETS,
LESS LIABILITIES 0.6 252,511
----- -----------
NET ASSETS 100.0% $39,864,353
===== ===========
Note: The Portfolio has the following industries over 10%: Communications
Equipment 10%; Diversified Telecommunication Services 17%; Pharmaceuticals 13%.
*Non-income producing
See notes to financial statements
18
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2000 (Unaudited)
===============================================================================
ASSETS:
Investments at value (Note 1A) (Identified Cost, $34,555,582) $39,611,842
Foreign currency, at value (Cost, $376,464) 378,636
Cash 20,060
Receivable for investments sold 625,336
Dividends receivable 39,526
-------------------------------------------------------------------------------
Total assets 40,675,400
-------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 766,172
Payable to affiliates--Investment Advisory fees (Note 2) 33,644
Other liabilities 11,231
-------------------------------------------------------------------------------
Total liabilities 811,047
-------------------------------------------------------------------------------
NET ASSETS $39,864,353
===============================================================================
REPRESENTED BY:
Paid-in capital for beneficial interests $39,864,353
===============================================================================
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2000 (Unaudited)
===============================================================================
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $47,817) $ 190,747
-------------------------------------------------------------------------------
EXPENSES:
Investment Advisory fees (Note 2) $ 199,941
Administrative fees (Note 3) 9,890
-------------------------------------------------------------------------------
Total expenses 209,831
Less aggregate amount waived by the
Administrator (Note 3) (9,890)
-------------------------------------------------------------------------------
Net expenses 199,941
-------------------------------------------------------------------------------
Net investment loss (9,194)
-------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain on investment transactions 3,623,872
Net realized gain on foreign currencies transactions 13,652
-------------------------------------------------------------------------------
Net realized gain 3,637,524
-------------------------------------------------------------------------------
Unrealized depreciation of investments (6,728,839)
Translation of other assets and liabilities
denominated in foreign currencies--net (5,782)
-------------------------------------------------------------------------------
Total unrealized depreciation of investments (6,734,621)
-------------------------------------------------------------------------------
Net realized and unrealized loss on investments (3,097,097)
-------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(3,106,291)
===============================================================================
See notes to financial statements
19
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 2000 DECEMBER 31,
(Unaudited) 1999
===============================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
Net investment income (loss) $ (9,194) $ 70,282
Net realized gain on investments
and foreign exchange transactions 3,637,524 3,193,288
Unrealized appreciation (depreciation)
of investments and foreign
exchange transactions (6,734,621) 7,484,090
-------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (3,106,291) 10,747,660
-------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 10,444,371 6,143,220
Value of withdrawals (6,778,924) (14,825,240)
-------------------------------------------------------------------------------
Net increase (decrease) in net assets from
capital transactions 3,665,447 (8,682,020)
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS: 559,156 2,065,640
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 39,305,197 37,239,557
--------------------------------------------------------------------------------
End of period $39,864,353 $39,305,197
================================================================================
INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
SIX MONTHS
ENDED YEAR ENDED DECEMBER 31,
JUNE 30, 2000 ------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net Assets,
end of period
(000's omitted) $39,864 $39,305 $37,240 $33,770 $49,056 $40,114
Ratio of expenses
to average
net assets 1.00%* 1.00% 1.00% 1.00% 1.11% 1.20%
Ratio of net investment
income (loss) to
average net assets (0.04)%* 0.20% 0.42% 0.58% 0.65% 0.59%
Portfolio turnover 45% 68% 118% 99% 109% 51%
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:
RATIOS:
Expenses to
average net assets 1.05%* 1.05% 1.05% 1.06% 1.13% N/A
Net investment income
(loss) to average
net assets (0.09)%* 0.15% 0.37% 0.52% 0.63% N/A
================================================================================
* Annualized
See notes to financial statements
20
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES International Equity Portfolio (the
"Port-folio"), 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.
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 on 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
difference between the amount of investment income, expenses and foreign taxes
withheld recorded and the actual amount received or paid.
21
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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 $199,941
for the six months ended June 30, 2000. The investment advisory fees are
computed at the annual rate of 1.00% of the Portfolio's average daily net
assets.
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
22
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
annual rate of 0.05% of the Portfolio's average daily net assets. The
administrative fees amounted to $9,890, all of which was voluntarily waived for
the six months ended June 30, 2000. 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 six months ended June 30, 2000,
purchases and sales of investment securities, other than short-term investments,
aggregated $21,662,289 and $17,508,217, respectively.
5. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at June 30, 2000 as
computed on a federal income tax basis, are as follows:
Aggregate cost $34,555,582
===============================================================================
Gross unrealized appreciation $ 6,741,916
Gross unrealized depreciation (1,685,656)
-------------------------------------------------------------------------------
Net unrealized appreciation $ 5,056,260
================================================================================
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 the
average daily net assets.
For the period ended June 30, 2000, the Fund incurred no expense fees.
23
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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 June 30, 2000.
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 $75 million for temporary or emergency
purposes. Interest on the borrowings, if any, is charged to the specific fund
executing the borrowing at the base rate of the bank. The line of credit
requires a quarterly payment of a commitment fee based on the average daily
unused portion of the line of credit. For the six months ended June 30, 2000,
the commitment fee allocated to the Portfolio was $61. Since the line of credit
was established, there have been no borrowings.
24
<PAGE>
TRUSTEES AND OFFICERS
C. OscarMorong Jr., CHAIRMAN
Philip W. Coolidge*, PRESIDENT
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Heath B. McLendon**
E.Kirby Warren
William S. Woods Jr.***
SECRETARY
Robert Frenkel**
TREASURER
Linwood Downs*
*AFFILIATED PERSON OF ADMINISTRATOR AND DISTRIBUTOR
**AFFILIATED PERSON OF Investment Adviser
***TRUSTEE EMERITUS
INVESTMENT ADVISER
(of International Equity Portfolio)
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
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
This report is prepared for the information of shareholders of CitiFunds
International Growth Portfolio. It is authorized for distribution to prospective
investors only when preceded or accompanied by an effective prospectus of
CitiFunds International Growth Portfolio.
(C)2000 Citicorp [Logo] Printed on recycled paper CFS/IG/600
