{CitiFunds]
TO: Securities and Exchange Commission
Division of Investment Management
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
FROM: CitiFunds International Trust
CitiFunds International Growth Portfolio
(CIK No. 0000866747)
(CCC No. *ugaee7z)
(Registration File Nos. 33-36556; 811-6154)
DATE: February 15, 2000
On behalf of the above-noted registrant, transmitted herewith for filing
pursuant to Rule 30d are the annual financial statements for the period ended
December 31, 1999.
Please call Linda T. Gibson of CFBDS, Inc. at (617) 423-0800 with any comments
or questions relating to this report.
<PAGE>
ANNUAL REPORT O DECEMBER 31, 1999
[Logo] CITIFUNDS(SM)
International Growth
Portfolio
INTERNATIONAL STOCKS
[GRAPHIC]
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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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Independent Auditors' Report 15
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INTERNATIONAL EQUITY PORTFOLIO
Portfolio of Investments 16
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Statement of Assets and Liabilities 20
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Statement of Operations 20
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Statement of Changes in Net Assets 21
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Financial Highlights 21
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Notes to Financial Statements 22
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Independent Auditors' Report 26
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<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
International stock markets generally posted solid returns in 1999. Moderate
economic growth in Europe, coupled with rapid economic recoveries in Japan and
Southeast Asia, contributed to higher prices for many international stocks. In
fact, international growth stocks returned 27.30% for the 12-month period ended
December 31, 1999 as measured by the Morgan Stanley Capital International
Europe, Australasia and Far East (MSCI EAFE) Growth Index.*
This report reviews the Fund's investment activities and performance during
the year ended December 31, 1999, and provides a summary of Citibank's
perspective on and outlook for the international stock markets.
Throughout the period, the CitiFunds' investment adviser, Citibank, N.A.,
continued to manage CitiFunds International Growth Portfolio according to its
investment objective, which is to provide long-term capital appreciation.
Thank you for your continued confidence and participation.
Sincerely,
/s/ Philip W. Coolidge
- --------------------------
Philip W. Coolidge
President
January 17, 2000
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
While 1999 WAS A VERY GOOD YEAR FOR MANY INTERNATIONAL BUSINESSES, growth
companies (i.e., those that appear to have the potential for faster-than-average
growth) fared significantly better than their value-oriented counterparts (i.e.,
those companies whose shares are believed to be undervalued in the market).
According to management, the performance disparity between these two sectors was
largely the result of outstanding returns from technology and telecommunications
stocks in Japan and Europe.
THE STATUS OF THE GLOBAL ECONOMY AT THE END OF THE PERIOD WAS VERY DIFFERENT
FROM THAT OF A YEAR EARLIER. When 1999 began, Asia was in the midst of a severe
currency and credit crisis that had caused its stock markets to fall. Japan was
mired in a long-standing recession. Moreover, Europe was preparing for the
advent of a unified currency, the Euro (the Euro is the single currency of the
European Monetary Union that was adopted by Belgium, Germany, Spain, France,
Ireland, Italy, Luxembourg, the Netherlands, Austria, Portugal and Finland on
January 1, 1999). In November 1998, many of the world' s central banks completed
a series of interest rate cuts that were intended to add liquidity to troubled
financial systems and stimulate global economic growth. The central banks'
strategies were apparently effective, because many international economies began
their strong growth in 1999.
By the end of 1999, many investment professionals believed that the world had
entered a period of synchronized global growth, where the economies of most
developed countries and many emerging ones were growing simultaneously in
response to positive developments throughout the world. In Japan, new government
programs designed to reform its financial system and stimulate economic growth
were viewed favorably by many international investors.
In Europe, despite early problems associated with the introduction of the
Euro and the gradual implementation of a centralized monetary policy, economic
growth continued as many corporations restructured to compete more effectively
in a larger and more competitive global marketplace. Virtually all regions
benefited from the continued growth of the U.S. economy, where robust consumer
and business spending provided a boost for foreign goods and services.
The reporting period began with an emphasis on Japanese stocks, reflecting
management' s belief that the Japanese economy was poised for a potential
turnaround. At the same time, the Fund's exposure to European companies was
reduced. This strategy proved beneficial as Japanese stocks rose sharply early
in the year while European stocks generally languished. Around mid-year, the
Fund's management effectively reversed this strategy, taking profits in some of
their Japanese holdings and redeploying those assets in European growth stocks.
This shift of assets enabled the Portfolio to benefit from the improved
performance of European stocks during the second half of the year. Management
also reduced its holdings in emerging markets in order to focus more closely on
growth opportunities within developed markets.
2
<PAGE>
Early in the year, management increased the Fund's exposure to stocks they
believed were most likely to benefit from economic expansion-such as basic
materials and energy companies-and the team decreased its holdings of relatively
defensive pharmaceutical and insurance stocks. During the second half of the
year, management realigned the Fund away from economically sensitive stocks and
toward growth sectors such as technology and telecommunications.
LOOKING FORWARD, MANAGEMENT CONTINUES TO SEEK COMPANIES WORLDWIDE WITH
ATTRACTIVE GROWTH PROSPECTS. In Europe, continued earnings growth may come from
ongoing corporate restructuring and unrestricted cross-border trade. In Japan,
stocks may continue to rise further if domestic investors commit their capital
alongside foreign investors. Management also believes that the recovery of
markets in Asia should continue as long as exports to developed markets remain
strong. And while no guarantees can be made, management believes this focus on
growth companies worldwide should continue to benefit over the near term.
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 12/31/99
Class A shares $25.1 million
Class B shares $323,332
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*
* The Morgan Stanley Capital International Europe, Australasia and the Far
East (MSCI EAFE) 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 DECEMBER 31, 1999
COMPANY, INDUSTRY % OF NET ASSETS
Nippon Telegraph & Telephone Co., Diversified
Telecommunication Services 4.7%
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Nokia AB, Communication Equipment 4.3%
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British Telecommunications Plc., Diversified Telecommunication Services 3.9%
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Sony Corp., Household Durables 2.6%
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L.M. Ericsson Telefon (Series B), Communications Equipment 2.5%
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Deutsche Telekom AG, Diversified Telecommunication Services 2.3%
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Roche Holdings AGM, Pharmaceuticals 2.2%
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Softbank Corp., Internet Software & Services 2.2%
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Mannesmann AG, Wireless Telecommunication Services 2.0%
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Glaxo Wellcome, Pharmaceuticals 1.9%
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PORTFOLIO DIVERSIFICATION AS OF DECEMBER 31, 1999
[The following table represents a pie chart in the printed piece.]
Europe 67%
Japan 29%
Short Term 2%
Asian Pacific Basin 2%
*Includes cash and net other assets
4
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
SINCE
ONE FIVE 3/2/91
ALL PERIODS ENDED DECEMBER 31, 1999 YEAR YEARS* INCEPTION*
================================================================================
CitiFunds International Growth Portfolio
(Class A) without sales charge 35.66% 15.24% 10.09%
Lipper International Growth Funds Average 40.81% 15.05% 12.00%+
MSCI EAFE Index 27.30% 13.15% 9.99%+
CitiFunds International Growth Portfolio
(Class A) with maximum sales charge of 5.00% 28.87% 14.06% 9.45%
Citifunds International Growth Portfolio
(Class B) without deferred sales charge -- -- 31.95%#**
Lipper International Growth Funds Average -- -- 40.81%++**
MSCI EAFE Index -- -- 27.30%++**
CitiFunds International Growth Portfolio (Class B)
with a maximum deferred sales charge of 5.00% -- -- 25.35%#**
*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
$22,223, including the maximum sales charge (as of 12/31/99). 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 EAFE(R)
Growth Portfolio Growth Funds Index
(Class A) Average (unmanaged)
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9500 10000 10000
8949 9708 9401
9253 9831 9496
9253 9942 9596
9272 9451 8890
9310 9828 9330
9415 9748 9142
9643 10022 9660
9690 10081 9800
9367 9745 9345
9653 10203 9834
9891 10281 9629
10072 10282 9290
9586 9927 8682
9843 10143 8728
10386 10648 9318
10091 10356 8882
9662 9971 8661
9710 10072 9210
9414 9864 9034
9262 9595 8566
9405 9632 8651
9512 9741 8701
9512 9792 8706
9474 10039 8974
10009 10603 9762
10257 11148 10693
10534 11401 10924
10286 11172 10756
10257 11506 11134
10821 12241 11738
10926 12215 11476
11442 12790 11832
11222 12382 10800
12349 13608 11582
12951 14400 12564
12435 14075 12532
11537 13423 11994
11537 13749 12506
11480 13713 12437
11308 13558 12616
11575 13934 12740
12110 14346 13045
11833 13992 12636
11728 14258 13060
11375 13558 12435
10934 13418 12516
10121 12738 12038
10370 12756 12006
11182 13162 12759
11450 13590 13243
11631 13703 13088
12033 13703 12861
12663 14439 13665
12692 14169 13147
12960 14379 13408
12807 14206 13051
12673 14351 13418
12911 14787 13961
13093 15123 14021
12949 15180 14072
13294 15437 14374
13726 15917 14795
13611 15869 14526
13649 15974 14612
13008 15380 14188
12876 15551 14222
13110 15884 14603
12947 15771 14457
13334 16440 15036
13245 16491 14846
12740 16437 14329
12919 16669 14567
13009 16706 14624
13077 16739 14705
13773 17727 15665
14585 18548 16533
14948 19054 16804
13939 17671 15552
15027 18761 16426
13871 17346 15168
13803 17185 15016
13928 17328 15151
14562 17735 15848
15294 18906 16869
15843 19872 17392
15965 20144 17533
15940 20164 17452
16179 20009 17588
16421 20299 17771
14367 17400 15573
13907 16772 15099
15018 18016 16677
15668 18947 17536
16382 19529 18232
16408 19681 18183
15914 19161 17754
16369 19830 18499
16733 20740 19252
15927 19888 18265
16759 20934 18981
17271 21474 19550
17179 21663 19626
17350 21745 19829
18426.5 22582 20576.1
19608.6 24328 21296.3
22222.7 27242 23210.8
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
DECEMBER 31, 1999
================================================================================
ASSETS:
Investment in International Equity Portfolio, at value (Note 1A) $25,331,996
Receivable for shares of beneficial interest sold 62,276
Other assets 35,420
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Total assets 25,429,692
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LIABILITIES:
Payable for shares of beneficial interest repurchased 33,875
Payable to affiliates--Shareholder Servicing Agents' fees (Note 3) 4,906
Accrued expenses and other liabilities 9,782
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Total liabilities 48,563
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Net Assets $25,381,129
================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $17,435,336
Unrealized appreciation 7,361,583
Accumulated net realized gain 584,210
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Total $25,381,129
================================================================================
COMPUTATION OF:
CLASS A SHARES:
Net Asset Value per share ($25,057,797/1,573,683 shares outstanding) $15.92
Offering price per share ($15.92 / 0.95) 16.76*
================================================================================
CLASS B SHARES:
Net Asset Value and offering price per share
($323,332/20,455 shares outstanding) $15.81**
================================================================================
* 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 YEAR ENDED DECEMBER 31, 1999
================================================================================
INVESTMENT INCOME (Note 1B):
Dividend Income from International Equity Portfolio $ 249,418
Interest Income from International Equity Portfolio 1,952
Foreign Taxes Reclaimed 15,953
Allocated Expenses from International Equity Portfolio (211,850)
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$ 55,473
EXPENSES:
Administrative fees (Note 2) 62,978
Shareholder Servicing Agents' fees Class A (Note 3) 52,604
Shareholder Servicing Agents' fees Class B (Note 3) 216
Service fees Class A (Note 4) 20,993
Service fees Class B (Note 4) 1,420
Expense fees (Note 7) 42,645
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Total expenses 180,856
Less aggregate amount waived by the Shareholder
Servicing Agent and the Distributor (Note 3 and Note 4) (21,209)
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Net expenses 59,647
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Net investment loss (104,174)
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NET REALIZED AND UNREALIZED GAINS FROM
INTERNATIONAL EQUITY PORTFOLIO:
Net realized gain 2,000,083
Unrealized appreciation 4,731,181
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Net realized and unrealized gain from
International Equity Portfolio 6,731,264
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $6,627,090
================================================================================
See notes to financial statements
7
<PAGE>
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CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED DECEMBER 31,
-----------------------------
1999 1998
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment loss $ (104,174) $ (33,633)
Net realized gain 2,000,083 743,282
Unrealized appreciation (depreciation) 4,731,181 2,040,966
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Net increase in net assets resulting
from operations 6,627,090 2,750,615
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DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income Class A -- (11,592)
Net realized gain Class A (1,577,443) (1,235,787)
Net realized gain Class B (17,951) --
In excess of net income Class A -- (2,006)
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Decrease in net assets from distributions
to shareholders (1,595,394) (1,249,385)
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TRANSACTIONS IN SHARES OF
BENEFICIAL INTEREST (Note 6):
CLASS A
Net proceeds from sale of shares 5,174,767 7,942,093
Net asset value of shares issued to
shareholders from reinvestment of dividends 1,548,991 1,239,930
Cost of shares repurchased (7,777,297) (7,884,305)
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Total Class A (1,053,539) 1,297,718
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CLASS B*
Net proceeds from sale of shares 290,552 --
Net asset value of shares issued to shareholders
from reinvestment of distributions 17,012 --
Cost of shares repurchased (36,825) --
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Total Class B 270,739 --
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Net increase (decrease) in net assets resulting from
transactions in shares of beneficial interest (782,800) 1,297,718
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NET INCREASE (DECREASE) IN NET ASSETS 4,248,896 2,798,948
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NET ASSETS:
Beginning of period 21,132,233 18,333,285
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End of period (including overdistributed
net investment loss of $0 and
$(18,822), respectively) $25,381,129 $21,132,233
================================================================================
*January 4, 1999 (Commencement of Operations) to December 31, 1999.
See notes to financial statements
8
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
CLASS A
-------------------------------------------
YEAR ENDED DECEMBER 31,
-------------------------------------------
1999 1998 1997 1996 1995
================================================================================
Net Asset Value, beginning
of period $12.60 $ 11.42 $ 11.79 $ 13.46 $ 11.44
- --------------------------------------------------------------------------------
Income From Operations:
Net investment income (loss) (0.077) (0.009) 0.004+ 0.028+ 0.013+
Net realized and unrealized gain 4.452 1.996 0.592+ 0.314+ 2.055+
- --------------------------------------------------------------------------------
Total from operations 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 (1.055) (0.798) (0.941) (1.991) --
- --------------------------------------------------------------------------------
Total from distributions (1.055) (0.807) (0.966) (2.012) (0.048)
- --------------------------------------------------------------------------------
Net Asset Value, end of period $15.92 $ 12.60 $ 11.42 $ 11.79 $ 13.46
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $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%
Ratio of net investment income
(loss) to average net assets (0.49)% (0.17)% 0.03% 0.18% 0.10%
Total return (B) 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 $(0.210) $(0.011) $(0.004)+$(0.002)+ $0.013+
RATIOS:
Expenses to average net assets (A) 1.90% 1.80% 1.82% 1.94% 1.75%
Net investment income (loss) to
average net assets (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.
(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.
See notes to financial statements
9
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS (Continued)
CLASS B
------------------
JANUARY 4, 1999
(COMMENCEMENT OF
OPERATIONS) TO
DECEMBER 31, 1999
================================================================================
Net Asset Value, beginning of period $12.87
- --------------------------------------------------------------------------------
Income From Operations:
Net investment loss (0.095)
Net realized and unrealized gain (loss) on investments 4.090
- --------------------------------------------------------------------------------
Total from operations 3.995
- --------------------------------------------------------------------------------
Less Distributions From:
Net investment income --
Net realized gain on investments (1.055)
- --------------------------------------------------------------------------------
Total distributions (1.055)
- --------------------------------------------------------------------------------
Net Asset Value, end of period $15.81
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $323
Ratio of expenses to average net assets (A) 2.50%*
Ratio of net investment loss to average net assets (1.24)%*
Total return 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 $(0.108)
RATIOS:
Expenses to average net assets (A) 2.70%*
Net investment loss to average net assets (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
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 64.5% at December 31, 1999) 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 period ended December 31, 1999, CFBDS, acting as the distributor, received
net commissions paid by investors $813 from sales of Class A shares and $1,050
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 respec-
11
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Continued)
tive 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
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. For the period ended
December 31, 1999 the Fund reclassified $122,996 from accumulated investment
loss to accumulated net realized gain on investments.
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 $62,978 for the year ended December 31, 1999.
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
12
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
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 $52,604 for Class A. The Shareholder Servicing
Agents' fees for Class B amounted to $216, all of which was voluntarily waived
for the year ended December 31, 1999.
4. DISTRIBUTION/SERVICE FEES The Fund maintains separate Distributions/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 $20,993, all of which was voluntary waived for the year
ended December 31, 1999. 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 December 31, 1999.
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 of the Fund. The service
fees for Class B shares amounted to $1,420 for the year ended December 31, 1999.
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 year ended December 31, 1999 aggregated $5,072,810 and
$7,517,895, respectively.
13
<PAGE>
CITIFUNDS INTERNATIONAL GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (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:
YEAR ENDED DECEMBER 31,
----------------------------
1999 1998
================================================================================
CLASS A:
Shares sold 383,870 640,142
Shares issued to shareholders from
reinvestment of dividends 107,342 100,100
Shares repurchased (594,039) (669,297)
- --------------------------------------------------------------------------------
Net increase (decrease) (102,827) 70,945
================================================================================
CLASS B:*
Shares sold 21,952 --
Shares issued to shareholders from
reinvestment of dividends 1,179 --
Shares repurchased (2,676) --
- --------------------------------------------------------------------------------
Net increase 20,455 --
================================================================================
* January 4, 1999 (Commencement of Operations) to December 31, 1999.
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>
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
high-lights 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, 1999, the results of its operations, the
changes in its net assets and the financial highlights for the periods indicated
in conformity with accounting principles generally accepted in the United
States. These financial statements and financial highlights (hereafter referred
to as "financial statements") are the responsibility of the Fund's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these financial statements in
accordance with auditing standards generally accepted in the United States,
which require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management and evaluating the overall
financial statement presentation. We believe that our audits, which included
confirmation of investments owned at December 31, 1999 by correspondence with
the custodian, provide a reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Boston, Massachusetts
February 23, 2000
15
