--------------------------------------------------------------------------------
CITIFUNDS(R)
---------------
--------------------------------------------------------------------------------
INSTITUTIONAL
LIQUID
RESERVES
ANNUAL REPORT
AUGUST 31, 2000
CitiFunds
--------------------------------------------------------------------------------
INVESTMENT PRODUCTS: NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
--------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
................................................................................
Portfolio Environment and Outlook 2
................................................................................
Fund Facts 3
................................................................................
Fund Performance 4
................................................................................
CITIFUNDS INSTITUTIONAL LIQUID RESERVES
Statement of Assets and Liabilities 5
................................................................................
Statement of Operations 6
................................................................................
Statement of Changes in Net Assets 7
................................................................................
Financial Highlights 8
................................................................................
Notes to Financial Statements 9
................................................................................
Independent Auditors' Report 12
................................................................................
CASH RESERVES PORTFOLIO
Portfolio of Investments 13
................................................................................
Statement of Assets and Liabilities 16
................................................................................
Statement of Operations 16
................................................................................
Statement of Changes in Net Assets 17
................................................................................
Financial Highlights 17
................................................................................
Notes to Financial Statements 18
................................................................................
Independent Auditors' Report 20
................................................................................
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
Robust economic growth, inflation concerns and rising interest rates helped
produce higher yields for most money market instruments during the reporting
period. This trend toward higher interest rates persisted through the summer of
2000, when evidence began to appear that the Federal Reserve Board's (the "Fed")
restrictive monetary policies may have had a moderating effect on U.S. economic
growth.
In this environment, the CitiFunds' investment adviser, Citibank, N.A.,
continued to manage Cash Reserves Portfolio, the portfolio in which the Fund
invests all of its investable assets, with the goal of achieving its investment
objective: providing liquidity and as high a level of current income as is
consistent with the preservation of capital.
This report reviews the Portfolio's investment activities and performance
during the twelve months ended August 31, 2000, and provides a summary of
Citibank's perspective on and outlook for the money market securities
marketplace.
Thank you for your continued confidence and participation.
Sincerely,
/s/ PHILIP W. COOLIDGE
----------------------
Philip W. Coolidge
President
September 15, 2000
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
MONEY MARKET SECURITIES PROVIDED COMPETITIVE RETURNS AND A RELATIVELY SAFE
HARBOR FOR MANY INVESTORS DURING THE REPORTING PERIOD. These benefits were
particularly valuable during the second half of the period, when heightened
volatility in the stock market and rising interest rates produced flat or
negative returns for some investment classes, including stocks and longer-term
bonds.
The U.S. economy during most of the reporting period was characterized by
strong growth, rising prices for some important commodities, including oil, and
the lowest levels of unemployment in recent memory. During the first half of the
reporting period, these economic forces were complemented by a rapidly rising
stock market, especially within market sectors expected to benefit from strong
demand for technology and telecommunications services.
BECAUSE THIS COMBINATION OF POSITIVE ECONOMIC FORCES HAS HISTORICALLY LED TO
HIGHER RATES OF INFLATION, THE FED CONTINUED TO MOVE TOWARD A MORE RESTRICTIVE
MONETARY POLICY DURING THE PERIOD. In fact, the Fed raised short-term interest
rates four times during the reporting period, for a total increase of 1.25%, in
an effort to relieve inflationary pressures that might threaten to derail U.S.
economic prosperity.
IN THIS ENVIRONMENT, MANAGEMENT MAINTAINED A RELATIVELY SHORT AVERAGE
MATURITY from the start of the reporting period into the first quarter of 2000.
This maturity strategy was designed to keep assets available for higher-yielding
securities if interest rates rose. Subsequently, management began to gradually
extend the Fund's average maturity to take advantage of higher yielding
opportunities among money market instruments with moderately longer maturities.
WHEN IT BECAME APPARENT TO THE MANAGERS IN FEBRUARY THAT MOST INVESTORS
EXPECTED THE FED TO RAISE INTEREST RATES AGGRESSIVELY, MANAGEMENT MORE
AGGRESSIVELY EXTENDED THE PORTFOLIO'S AVERAGE MATURITY TO BETWEEN 80 AND 89 DAYS
IN ORDER TO LOCK IN PREVAILING YIELDS for as long as practical. Management
generally maintained a long average maturity for the remainder of the reporting
period.
From a security selection perspective, management has sought to maintain a
well-diversified asset mix. As of August 31, 2000, approximately 30.2% of the
Fund's assets was invested in Yankee CDs, which are U.S. dollar-denominated
certificates of deposit issued by foreign banks on management's approved credit
list. In addition, about 2.2% of the Fund's assets was invested in short-term
securities issued by U.S. government agencies. Because U.S. Treasury bill yields
have been relatively unattractive over the past year very few of these
securities are currently held in the Portfolio.
AS FOR THE FORESEEABLE FUTURE, MANAGEMENT EXPECTS THE FED WILL NOT MAKE
POLICY DECISIONS UNTIL AFTER THE NOVEMBER PRESIDENTIAL ELECTION. Recent economic
statistics indicate that the Fed's previous rate hikes may have been effective
in slowing the rate of economic growth and forestalling an acceleration of
inflation. In addition, management believes that recent labor strikes and U.S.
census-related layoffs may keep inflationary pressures in check. Consequently,
the managers expect that money market yields may eventually begin to decline
from current levels. Of course, management will adjust its strategies as
economic and market conditions change.
2
<PAGE>
FUND FACTS
FUND OBJECTIVE
To provide its shareholders with liquidity and as high a level of current income
as is consistent with the preservation of capital.
INVESTMENT ADVISER, DIVIDENDS
CASH RESERVES PORTFOLIO Declared daily, paid monthly
Citibank, N.A.
COMMENCEMENT OF OPERATIONS BENCHMARK*
October 2, 1992 o Lipper Taxable Institutional Money
Market Funds Average
NET ASSETS AS OF 8/31/00
Class N shares $5,788.2 million o iMoneyNet, Inc. (formerly IBC
SVB Liquid Reserves Financial Data) Institutional
shares $124.4 million Taxable Money Market Funds Average
* The Lipper Funds Average and iMoneyNet, Inc. Funds Average reflect the
performance (excluding sales charges) of mutual funds with similar objectives.
3
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
SINCE
OCTOBER 2,
ONE FIVE 1992
ALL PERIODS ENDED AUGUST 31, 2000 YEAR YEARS* INCEPTION*
================================================================================
CitiFunds Institutional Liquid
Reserves Class N 6.05% 5.63% 5.12%
SVB Liquid Reserves -- -- 2.14%**#
Lipper Taxable Institutional Money
Market Funds Average 5.78% 5.35% 4.81%+
iMoneyNet, Inc. (formerly IBCFinancial Data)
Institutional Taxable Money Market
Funds Average 5.79% 5.39% 4.86%+
* Average Annual Total Return + From 9/30/92
** Not Annualized # Commencement of Operations 4/24/00
7-Day Yields CLASS N CLASS SVB
------- ---------
Annualized Current 6.54% 6.15%
Effective 6.76% 6.33%
The ANNUALIZED CURRENT 7-DAY YIELD reflects the amount of income generated by
the investment during that seven-day period and assumes that the income is
generated each week over a 365-day period. The yield is shown as a percentage of
the investment.
The EFFECTIVE 7-DAY YIELD is calculated similarly, but when annualized the
income earned by the investment during that seven-day period is assumed to be
reinvested. The effective yield is slightly higher than the current yield
because of the compounding effect of this assumed reinvestment.
Note: A money market fund's yield more closely reflects the current earnings of
the fund than does the total return.
IMPORTANT TAX INFORMATION--For the fiscal year ended August 31, 2000, CitiFunds
Institutional Liquid Reserves Class N shares paid $0.05890 per share and from
Commencement of Operations on April 24, 2000, through August 31, 2000 SVBLiquid
Reserves shares paid $0.02120, respectively, to shareholders from net investment
income. For such periods 1.4% of dividends paid were derived from interest
earned from U.S. Government and U.S. Government agency obligations.
COMPARISON OF 7-DAY YIELDS FOR CITIFUNDS INSTITUTIONAL LIQUID RESERVES CLASS N
VS. iMONEYNET, INC. (FORMERLY IBC FINANCIAL DATA) INSTITUTIONAL TAXABLE MONEY
MARKET FUNDS AVERAGE
As illustrated, CitiFunds Institutional Liquid Reserves Class N generally
provided a higher annualized seven-day yield to that of a comparable iMoneyNet,
Inc. Money Market Funds Average, as published in Money Fund Report(TM), for the
one year period.
[Table below represents line chart in its printed piece]
CitiFunds Institutional iMoneyNet, Inc. Institutional
Liquid Reserves Taxable Money Market
Class N Funds Average
-------------------- -----------------------------
0.0524 0.0492
9/7/99 0.0525 0.0493
9/14/99 0.0525 0.0495
9/21/99 0.0529 0.0498
9/28/99 0.0527 0.0501
10/5/99 0.0532 0.0504
10/12/99 0.0529 0.0504
10/19/99 0.0532 0.0507
10/26/99 0.0533 0.0509
11/2/99 0.0542 0.0514
11/9/99 0.0542 0.0514
11/16/99 0.0545 0.0519
11/23/99 0.0554 0.0526
11/30/99 0.0564 0.0533
12/7/99 0.0561 0.0534
12/14/99 0.0562 0.054
12/21/99 0.0563 0.0546
12/28/99 0.056 0.0549
1/4/00 0.0552 0.0536
1/11/00 0.0563 0.0548
1/18/00 0.0562 0.0547
1/25/00 0.056 0.0542
2/1/00 0.0562 0.0544
2/8/00 0.0565 0.0546
2/15/00 0.0571 0.055
2/22/00 0.0573 0.0551
2/29/00 0.0576 0.0553
3/7/00 0.0577 0.0552
3/14/00 0.0579 0.0554
3/21/00 0.0582 0.0558
3/28/00 0.0592 0.0565
4/4/00 0.0593 0.0571
4/11/00 0.0594 0.0569
4/18/00 0.0597 0.0572
4/25/00 0.0595 0.0572
5/2/00 0.0601 0.0574
5/9/00 0.0601 0.0576
5/16/00 0.0608 0.0584
5/23/00 0.0625 0.0599
5/30/00 0.0632 0.0606
6/6/00 0.0636 0.061
6/13/00 0.0637 0.0613
6/20/00 0.0642 0.0618
6/27/00 0.0643 0.0621
7/4/00 0.0657 0.0628
7/11/00 0.0648 0.0623
7/18/00 0.0648 0.0625
7/25/00 0.0649 0.0626
8/1/00 0.0651 0.0627
8/8/00 0.0647 0.0624
8/15/00 0.0649 0.0626
8/22/00 0.065 0.0626
8/29/00 0.0653 0.0626
Note: Although money market funds seek to maintain the value of your investment
at $1.00 per share, it is possible to lose money by investing in the Fund.
Mutual Fund shares are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other government agency. Yields and total returns
will fluctuate and past performance is no guarantee of future results. Total
return figures include reinvestment of dividends. Returns and yields reflect
certain voluntary fee waivers. If the waivers were not in place, the Fund's
returns and yields would have been lower.
4
<PAGE>
CITIFUNDS INSTITUTIONAL LIQUID RESERVES
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2000
================================================================================
ASSETS:
Investment in Cash Reserves Portfolio, at value (Note 1A) $5,933,117,297
--------------------------------------------------------------------------------
LIABILITIES:
Payable for shares of beneficial interest repurchased 15,178,848
Dividends payable 4,959,869
Accrued expenses and other liabilities 329,263
--------------------------------------------------------------------------------
Total liabilities 20,467,980
--------------------------------------------------------------------------------
NET ASSETS $5,912,649,317
================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $5,912,649,317
================================================================================
CLASS N SHARES:
Net Asset Value, Offering Price and Redemption Price Per Share
($5,788,232,850/5,788,232,850 shares outstanding) $1.00
================================================================================
CLASS SVB SHARES:
Net Asset Value, Offering Price and Redemption Price Per Share
($124,416,467/124,416,467 shares outstanding) $1.00
================================================================================
See notes to financial statements
5
<PAGE>
CITIFUNDS INSTITUTIONAL LIQUID RESERVES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000
================================================================================
INVESTMENT INCOME (Note 1B):
Income from Cash Reserves Portfolio $351,021,741
Allocated expenses from Cash Reserves Portfolio (5,822,139)
--------------------------------------------------------------------------------
$345,199,602
EXPENSES:
Administrative fees (Note 3A) 20,378,344
Shareholder Servicing Agents' fees Class N (Note 3B) 5,807,173
Shareholder Servicing Agents' fees Class SVB(Note 3B) 9,081
Distribution fees Class N (Note 4) 5,807,173
Distribution fees Class SVB (Note 4) 91,265
Trustees' fees 50,909
Legal fees 26,013
Custody and fund accounting fees 22,724
Registration fees 19,218
Shareholder reports 18,901
Audit fees 11,230
Transfer agent fees 11,000
Miscellaneous 26,198
--------------------------------------------------------------------------------
Total expenses 32,279,229
Less aggregate amounts waived or assumed by
Administrator, Shareholder Servicing Agents, and
Distributor (Notes 3A, 3B, and 4) (28,661,063)
--------------------------------------------------------------------------------
Net expenses 3,618,166
--------------------------------------------------------------------------------
Net investment income $341,581,436
================================================================================
See notes to financial statements
6
<PAGE>
CITIFUNDS INSTITUTIONAL LIQUID RESERVES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
---------------------------------
2000 1999
================================================================================
FROM INVESTMENT ACTIVITIES:
Net investment income, declared as dividends
to shareholders (Note 2):
Class N shares $ 340,615,217 $ 234,143,780
Class SVB shares 966,219 --
--------------------------------------------------------------------------------
341,581,436 234,143,780
================================================================================
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
AT NET ASSET VALUE OF $1.00 PER SHARE (NOTE 5):
CLASS N
Proceeds from sale of shares 77,968,165,91 64,269,922,643
Net asset value of shares issued to
shareholders from reinvestment
of dividends 259,090,353 182,380,096
Cost of shares repurchased (78,233,622,852) (62,038,204,029)
--------------------------------------------------------------------------------
Total Class N (6,366,586) 2,414,098,710
================================================================================
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
AT NET ASSET VALUE OF $1.00 PER SHARE (NOTE 5):
CLASS SVB*
Proceeds from sale of shares 207,203,287 --
Net asset value of shares issued to shareholders
from reinvestment of dividends 966,21 --
Cost of shares repurchased (83,753,039) --
--------------------------------------------------------------------------------
Total Class SVB 124,416,467 --
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 118,049,881 2,414,098,710
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 5,794,599,436 3,380,500,726
--------------------------------------------------------------------------------
End of period $ 5,912,649,317 $ 5,794,599,436
================================================================================
*April 24, 2000 (Commencement of Operations)
See notes to financial statements
7
<PAGE>
CITIFUNDS INSTITUTIONAL LIQUID RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS N
---------------------------------------------------------------
YEAR ENDED AUGUST 31,
---------------------------------------------------------------
2000 1999 1998 1997 1996
======================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
Net investment income 0.05890 0.05041 0.05548 0.05459 0.05521
Less dividends from net
investment income (0.05890) (0.05041) (0.05548) (0.05459) (0.05521)
------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
======================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
(000's omitted) $5,788,233 $5,794,599 $3,380,501 $1,967,491 $1,257,134
Ratio of expenses to average
net assets+ 0.16% 0.19% 0.20% 0.18% 0.20%
Ratio of net investment income
to average net assets+ 5.87% 5.04% 5.57% 5.52% 5.52%
Total return 6.05% 5.16% 5.69% 5.60% 5.66%
Note: If agents of the Fund and agents of Cash Reserves Portfolio had not waived all or a portion of
their fees during the period indicated, the net investment income per share and the ratios would have
been as follows:
Net investment income per share $0.05271 $0.04557 $0.04948 $0.04844 $0.04921
RATIOS:
Expenses to average net assets+ 0.78% 0.79% 0.79% 0.80% 0.80%
Net investment income to
average net assets+ 5.25% 4.44% 4.98% 4.90% 4.92%
======================================================================================================
</TABLE>
CLASS SVB
-----------------------------
FOR THE PERIOD APRIL 24, 2000
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 2000
================================================================================
Net Asset Value, beginning of period $1.00000
Net investment income 0.02120
Less dividends from net investment income (0.02120)
--------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted) $124,416
Ratio of expenses to average net assets+ 0.66%*
Ratio of net investment income to average net assets+ 5.35%*
Total return 2.14%**
Note: If agents of the Fund and agents of Cash Reserves Portfolio had not waived
all or a portion of their fees during the periods indicated, the net investment
income per share and the ratios would have been as follows:
Net investment income per share $0.02039
RATIOS:
Expenses to average net assets+ 1.28%*
Net investment income to average net assets+ 4.73%*
================================================================================
+ Includes the Fund's share of Cash Reserves Portfolio's allocated expenses.
* Annualized
** Not Annualized
8 See notes to financial statements
<PAGE>
CITIFUNDS INSTITUTIONAL LIQUID RESERVES
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds Institutional Liquid Reserves (the
"Fund") is a separate diversified series of CitiFunds Institutional Trust (the
"Trust"), a Massachusetts business trust. The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund invests all of its investable assets in Cash Reserves
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 (41.2% at August 31, 2000) in the net
assets of the Portfolio. CFBDS, Inc. ("CFBDS") acts as the Trust's Administrator
and Distributor. Citibank also serves as Sub-Administrator and makes shares
available to customers as Shareholder Servicing Agent.
The Fund, as of August 31, 2000, offered Class N shares and SVB Liquid Reserves
("SVB") shares. Expenses of the Fund are borne pro-rata by the holders of each
class of shares, except that each class bears expenses unique to the 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 assets of the
Fund, if the Fund were liquidated. The Fund commenced its public offering of
SVBshares on April 24, 2000.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The financial statements of the Portfolio, including the portfolio of
investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The significant accounting policies consistently followed by the Fund are as
follows:
A. INVESTMENT VALUATION Valuation of securities by the Portfolio is discussed in
Note 1A of the Portfolio's Notes to Financial Statements, which are included
elsewhere in this report.
B. INVESTMENT INCOME The Fund earns income, net of Portfolio expenses, daily
based on its investment in the Portfolio.
C. FEDERAL TAXES The Fund's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies and to
distribute to shareholders all of its taxable income. Accordingly, no provision
for federal income or excise tax is necessary.
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 in the series are allocated in proportion to
the average net assets of each fund, except where 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 is
charged against and reduces the amount of the Fund's investment in the
Portfolio.
9
<PAGE>
CITIFUNDS INSTITUTIONAL LIQUID RESERVES
NOTES TO FINANCIAL STATEMENTS (continued)
2. DIVIDENDS The net income of the Fund is determined once daily, as of 3:00
p.m. Eastern Time, and all of the net income of the Fund so determined is
declared as a dividend to shareholders of record at the time of such
determination. Dividends are distributed in the form of additional shares of the
Fund or, at the election of the shareholder, in cash (subject to the policies of
the shareholder's Shareholder Servicing Agent) on or prior to the last business
day of the month.
3. ADMINISTRATIVE SERVICES PLAN The Trust has adopted an Administrative Services
Plan which provides that the Trust, on behalf of each Fund, may obtain the
services of an Administrator, one or more Shareholder Servicing Agents, and
other Servicing Agents and may enter into agreements providing for the payment
of fees for such services. Under the Trust's Administrative Services Plan, the
aggregate of the fees paid to the Administrator from the Fund under such Plan
and of the fees paid to the Shareholder Servicing Agents from the Fund may not
exceed 0.45% of the Fund's average daily net assets on an annualized basis for
the Fund's then-current fiscal year. For the year ended August 31, 2000,
management agreed to voluntarily limit Fund expenses to 0.20% of average daily
net assets for Class N inclusive of Portfolio allocated expenses.
A. ADMINISTRATIVE FEES Under the terms of an Administrative Services
Agreement, CFBDS is entitled to an administrative fee from the Fund, as
compensation for overall administrative services and general office facilities,
which is accrued daily and paid monthly at an annual rate of 0.35% of the Fund's
average daily net assets. The Administrative fees amounted to $20,378,344 of
which $16,999,021 was voluntarily waived for the year ended August 31, 2000.
Citibank acts as Sub-Administrator and performs certain duties and receives
compensation from CFBDS from time to time as agreed to by CFBDS and Citibank.
Citibank is a wholly-owned subsidiary of Citigroup Inc.
The Fund pays no compensation directly to any Trustee or to 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 of the
officers and a Trustee of the Fund are officers and a director of the
Administrator or its affiliates.
B. SHAREHOLDER SERVICING AGENTS FEES The Trust, on behalf of the Fund, has
entered into shareholder servicing agreements with each Shareholder Servicing
Agent pursuant to which that Shareholder Servicing Agent acts as an agent for
its customers and provides other related services. For their services, each
Shareholder Servicing Agent receives fees from the Fund, which may be paid
periodically, which may not exceed, on an annualized basis, an amount equal to
0.10% of the average daily net assets of the Fund represented by shares owned
during the period for which payment has been made by investors for whom such
Shareholder Servicing Agent maintains a servicing relationship. The Shareholder
Servicing Agents fees amounted to $5,807,173 for Class N, all of which were
contractually waived for the year ended August 31, 2000, and $9,081 for Class
SVB, all of which was voluntarily waived for the period April 24, 2000 to August
31, 2000. The contractual fee waivers terminate on December 31, 2000 for Class
N.
10
<PAGE>
CITIFUNDS INSTITUTIONAL LIQUID RESERVES
NOTES TO FINANCIAL STATEMENTS
4. DISTRIBUTION FEES The Trust has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended, in which the
Fund reimburses the Distributor for expenses incurred in connection with the
sale of shares of the Fund, at an annual rate not to exceed 0.10% of the Fund's
average daily net assets for Class N shares and 0.60% of the Fund's average
daily net assets for SVB shares of the Fund's average daily net assets of the
Fund. The Distribution fees for Class N amounted to $5,807,173, all of which
were contractually waived and $91,265 for Class SVB, of which $47,696 was
voluntarily waived for the year ended August 31, 2000. The contractual fee
waivers terminate on December 31, 2000 for Class N. The Distributor has
contractually agreed to assume all Class N distribution expenses through August
31, 2000.
5. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest ($0.00001 par value).
6. INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in
the Portfolio aggregated $27,430,529,212 and $27,643,510,462, respectively, for
the year ended August 31, 2000.
11
<PAGE>
CITIFUNDS INSTITUTIONAL LIQUID RESERVES
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES OF CITIFUNDS INSTITUTIONAL TRUST (THE TRUST)
AND THE SHAREHOLDERS OF CITIFUNDS INSTITUTIONAL LIQUID RESERVES:
In our opinion, the accompanying statement of assets and liabilities, and
the related statements of operations and of changes in net assets and the
financial highlights present fairly, in all material respects, the financial
position of CitiFunds Institutional Liquid Reserves (the "Fund"), a series of
CitiFunds Institutional Trust, at August 31,2000 and 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 of America. 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 of America 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
August 31, 2000 by correspondence with the custodian, provide a reasonable basis
for our opinion.
PricewaterhouseCoopers LLP
Boston, Massachusetts
October 12, 2000
12
<PAGE>
CASH RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
ASSET BACKED -- 9.1%
--------------------------------------------------------------------------------
Lincs-Ser,*
6.63% due 7/07/01 $100,000 $99,991,260
Restructured Asset Securities,*
6.64% due 6/22/01 65,000 65,000,000
Steers,
6.86% due 10/02/00 365,000 365,028,521
Strategic Money Market
Trust Receipts,*
6.78% due 9/13/003 50,000 350,001,796
6.64% due 12/13/00 320,000 320,000,000
Strats Trust,
6.65% due 8/20/01 100,000 100,000,000
--------------
1,300,021,577
--------------
BANK NOTES -- 3.9%
--------------------------------------------------------------------------------
BankAmerica,
6.46% due 11/09/00 100,000 100,000,000
6.48% due 11/20/00 50,000 50,000,000
6.90% due 12/13/00 100,000 100,000,000
6.93% due 1/16/01 100,000 100,000,000
6.98% due 3/30/01 110,000 110,000,000
7.18% due 6/14/01 100,000 100,000,000
--------------
560,000,000
--------------
CERTIFICATES OF DEPOSIT (EURO) -- 9.3%
--------------------------------------------------------------------------------
Bayerische Hypo,
6.52% due 12/28/00 173,000 172,905,328
Commerzbank,
6.88% due 4/30/01 110,000 109,986,240
Credit Agricole
Indosuez,
7.00% due 7/09/01 100,000 100,000,000
6.89% due 8/24/01 100,000 99,976,832
Credit Suisse First
Boston,
6.78% due 10/02/00 100,000 100,007,905
Landesbank Hessen Thuringen,
7.01% due 11/24/00 57,000 57,001,521
Merrill Lynch & Co. Inc.,
6.67% due 3/02/01 500,000 499,950,137
Morgan Stanley Dean Witter Discover,
6.69% due 3/16/01 200,000 200,000,000
--------------
1,339,827,963
--------------
CERTIFICATES OF DEPOSIT (YANKEE) -- 30.2%
--------------------------------------------------------------------------------
Abbey National
Treasury Services,*
6.46% due 12/28/00 89,000 88,988,273
6.51% due 12/28/00 100,000 100,018,313
6.92% due 4/24/01 200,000 200,000,000
7.09% due 5/03/01 150,000 150,009,486
Bank Austria,
5.93% due 9/07/00 100,000 99,999,214
6.71% due 2/12/01 135,000 134,976,984
Bank of Nova Scotia,
6.71% due 2/05/01 150,000 149,975,518
6.74% due 2/16/01 40,000 40,007,427
Bayerische Landesbank,
5.86% due 9/27/00 94,000 93,995,838
6.77% due 2/22/01 62,000 62,000,199
6.55% due 6/04/01 135,000 134,954,653
Bear Stearns Cos. Inc.,
6.75% due 2/20/01 250,000 250,000,000
Branch Bank & Trust,
6.68% due 2/16/01 300,000 299,946,364
Commerzbank,
6.67% due 3/01/01 100,000 99,976,469
6.80% due 4/17/01 80,175 80,189,255
7.17% due 6/28/01 150,000 149,959,226
7.15% due 6/29/01 125,000 125,106,330
6.88% due 8/10/01 100,000 99,977,738
Credit Suisse
First Boston,
6.75% due 3/05/01 250,000 249,974,796
Deutsche Bank,
6.20% due 10/18/00 100,000 99,993,862
6.45% due 1/08/01 100,000 99,983,197
6.89% due 8/20/01 167,000 166,954,111
Dexia Bank,
6.98% due 7/18/01 55,000 55,006,000
Dresdner Bank,
7.12% due 6/18/01 100,000 99,984,982
Giro Funding
U.S. Corp.,
6.54% due 2/21/01 103,727 100,467,033
Nord Deutsche Landesbank,
6.28% due 9/01/00 50,000 50,000,000
Rabobank Nederland,
6.13% due 10/31/00 50,000 49,489,583
6.47% due 1/18/01 100,000 99,981,895
6.52% due 1/25/01 140,000 139,973,389
6.85% due 4/06/01 100,000 99,983,095
7.18% due 6/13/01 50,000 49,987,090
13
<PAGE>
CASH RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (YANKEE) -- (CONT'D)
--------------------------------------------------------------------------------
Societe Generale,
6.56% due 1/16/01 $108,000 $ 107,980,750
6.80% due 4/10/01 50,000 49,994,258
6.81% due 4/17/01 50,000 50,008,132
6.75% due 4/18/01 110,000 109,979,522
Toronto Dominion
Bank,
6.71% due 2/07/01 90,000 89,990,686
UBS AG Stamford,
5.93% due 10/02/00 50,000 49,980,604
6.24% due 12/06/00 50,000 49,990,603
6.23% due 12/07/00 120,000 119,980,247
--------------
4,349,765,122
--------------
COMMERCIAL PAPER -- 30.8%
--------------------------------------------------------------------------------
ABN-Amro Bank,
6.03% due 10/10/00 100,000 99,346,750
Associates Corp.
North America,
6.66% due 9/01/00 200,000 200,000,000
Associates First
Capital Corp.,
6.66% due 9/01/00 110,000 110,000,000
BankAmerica Corp.,
6.18% due 11/22/00 100,000 98,592,333
Brahms Funding Corp.,
6.64% due 9/22/00 105,000 104,593,178
6.61% due 10/25/00 350,000 346,529,750
British Telecommunications Plc.,
6.68% due 11/08/00 97,500 96,269,767
6.69% due 11/08/00 50,000 49,368,167
6.18% due 11/17/00 100,000 98,678,166
6.30% due 12/15/00 60,000 58,897,500
6.32% due 12/18/00 50,000 49,052,000
Cregem North
America Inc.,
5.99% due 10/10/00 100,000 99,351,083
Den Danske Bank,
6.03% due 10/10/00 50,000 49,673,375
Four Winds
Funding Corp.,
6.52% due 9/11/00 147,550 147,282,771
6.52% due 9/15/00 100,000 99,746,444
General Electric
Capital Corp.,
6.52% due 2/02/01 150,000 145,816,333
Goldman Sachs Corp.,
6.81% due 9/14/00 300,000 300,000,000
International Nederland,
6.18% due 11/17/00 100,000 98,678,167
6.39% due 12/26/00 100,000 97,941,000
Lone Star,
6.52% due 9/14/00 252,845 252,249,691
Moat Funding,
6.56% due 10/06/00 275,000 273,246,111
Morgan Stanley Dean Witter Discover,
6.68% due 11/24/00 350,000 350,000,000
Moriarty Ltd.,
6.10% due 9/06/00 100,000 99,915,278
6.67% due 11/22/00 50,000 49,240,361
6.77% due 11/22/00 50,000 49,229,542
6.54% due 2/16/01 200,000 193,896,000
6.55% due 2/28/01 150,000 145,087,500
Santander Financial,
6.65% due 12/13/00 100,000 98,097,361
Sigma Finance Corp.,
6.77% due 11/20/00 90,000 88,647,000
6.20% due 11/21/00 75,000 73,954,593
6.55% due 2/08/01 38,000 36,893,778
6.87% due 4/09/01 100,000 100,000,000
Surrey Funding Corp.,
6.53% due 9/18/00 271,000 270,164,981
--------------
4,430,438,980
--------------
MEDIUM TERM NOTES -- 2.6%
--------------------------------------------------------------------------------
Abbey National
Treasury Services,
6.19% due 10/18/00 100,000 99,992,635
E.I. Du Pont
de Nemours & Co.,
6.69% due 3/13/01 53,000 53,000,000
Credit Suisse
First Boston,
6.66% due 5/10/01 225,000 224,984,527
--------------
377,977,162
--------------
TIME DEPOSITS -- 10.8%
--------------------------------------------------------------------------------
Barclays Bank Plc.,
6.63% due 9/01/00 394,171 394,171,000
Branch Bank & Trust,
6.63% due 9/01/00 200,000 200,000,000
Harris Trust &Savings,
6.66% due 9/01/00 242,218 242,218,000
Key Bank National Association,
6.63% due 9/01/00 150,000 150,000,000
Societe Generale,
6.66% due 9/01/00 66,000 66,000,000
Suntrust Grand
Cayman,
6.63% due 9/01/00 500,000 500,000,000
--------------
1,552,389,000
--------------
14
<PAGE>
CASH RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
UNITED STATES GOVERNMENT AGENCY -- 1.5%
--------------------------------------------------------------------------------
Federal Home Loan Bank,
5.97% due 12/01/00 $ 100,000 $ 99,964,445
Federal Home Loan Bank Consumer
Discount Notes,
6.45% due 7/09/01 100,000 94,427,917
Federal Home Loan Mortgage
Discount Notes,
6.84% due 7/25/01 20,000 19,995,054
---------------
214,387,416
---------------
UNITED STATES TREASURY BILLS -- 0.7%
--------------------------------------------------------------------------------
United States Treasury Bills,
5.21% due 11/09/00 15,000 14,850,213
5.28% due 11/09/00 30,000 29,696,400
5.62% due 11/09/00 60,000 59,389,062
---------------
103,935,675
---------------
TOTAL INVESTMENTS, AT AMORTIZED COST 98.9% 14,228,742,895
OTHER ASSETS, LESS LIABILITIES 1.1 163,597,739
----- ---------------
NET ASSETS 100.0% $14,392,340,634
===== ===============
* Variable interest rate -- subject to periodic change.
See notes to financial statements
15
<PAGE>
CASH RESERVES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2000
================================================================================
ASSETS:
Investments at value (Note 1A) $14,228,742,895
Cash 278
Interest receivable 164,714,620
--------------------------------------------------------------------------------
Total assets 14,393,457,793
--------------------------------------------------------------------------------
LIABILITIES:
Payable to affiliate--Investment Advisory fee (Note 2A) 875,881
Accrued expenses and other liabilities 241,278
--------------------------------------------------------------------------------
Total liabilities 1,117,159
--------------------------------------------------------------------------------
NET ASSETS $14,392,340,634
================================================================================
REPRESENTED BY:
Paid-in capital for beneficial interests $14,392,340,634
================================================================================
CASH RESERVES PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000
================================================================================
INTEREST INCOME (NOTE 1B) $897,863,487
EXPENSES:
Investment Advisory fees (Note 2A) $ 22,344,495
Administrative fees (Note 2B) 7,448,165
Custody and fund accounting fees 3,354,601
Trustees' fees 75,590
Audit fees 40,770
Legal fees 32,452
Other 49,563
--------------------------------------------------------------------------------
Total expenses 33,345,636
Less aggregate amounts waived by Investment Adviser
and Administrator (Notes 2A, and 2B) (18,433,019)
Less fees paid indirectly (Note 1F) (8,375)
--------------------------------------------------------------------------------
Net expenses 14,904,242
--------------------------------------------------------------------------------
Net investment income $882,959,245
================================================================================
See notes to financial statements
16
<PAGE>
CASH RESERVES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
-------------------------------------
2000 1999
================================================================================
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 882,959,245 $ 628,439,104
--------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 58,289,540,600 47,581,662,450
Value of withdrawals (59,709,503,859) (42,086,666,522)
--------------------------------------------------------------------------------
Net increase (decrease) in net assets
from capital transactions (1,419,963,259) 5,494,995,928
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (537,004,014) 6,123,435,032
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 14,929,344,648 8,805,909,616
--------------------------------------------------------------------------------
End of period $ 14,392,340,634 $ 14,929,344,648
================================================================================
CASH RESERVES PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-----------------------------------------------------------------------
2000 1999 1998 1997 1996
=========================================================================================================
<S> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets (000's omitted) $14,392,341 $14,929,345 $ 8,805,910 $ 7,657,400 $ 4,442,187
Ratio of expenses to average
net assets 0.10% 0.10% 0.10% 0.10% 0.10%
Ratio of net investment income
to average net assets 5.93% 5.13% 5.65% 5.57% 5.64%
Note: If 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 0.22% 0.22% 0.22% 0.23% 0.23%
Net investment income to
average net assets 5.81% 5.01% 5.53% 5.44% 5.50%
=========================================================================================================
</TABLE>
See notes to financial statements
17
<PAGE>
CASH RESERVES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES Cash Reserves Portfolio (the "Portfolio") is
registered under the U.S. Investment Company Act of 1940, as amended, as a
no-load, 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. Signature
Financial Group (Grand Cayman), Ltd. ("SFG") acts as the Portfolio's
Administrator and Citibank, N.A. ("Citibank") acts as the Investment Adviser.
Citibank is a wholly-owned subsidiary of Citigroup Inc.
The preparation of financial statements in accordance with United States of
America generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. VALUATION OF INVESTMENTS Money market instruments are valued at amortized
cost, in accordance with Rule 2a-7 of the Investment Company Act of 1940, as
amended (1940 Act). This method involves valuing a portfolio security at its
cost and thereafter assuming a constant amortization to maturity of any discount
or premium. The Portfolio's use of amortized cost is subject to the Portfolio's
compliance with certain conditions as specified under Rule 2a-7 of the U.S.
Investment Company Act of 1940.
B. INTEREST INCOME AND EXPENSES Interest income consists of interest accrued
and discount earned (including both original issue and market discount) on the
investments of the Portfolio, accrued ratably to the date of maturity, plus or
minus net realized gain or loss, if any, on investments. Expenses of the
Portfolio are accrued daily. The Portfolio bears all costs of its operations
other than expenses specifically assumed by Citibank and SFG.
C. U.S. FEDERAL INCOME TAXES The Portfolio is considered a partnership under
the U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary.
D. 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 agreement
investments. 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.
E. OTHER Purchases, maturities and sales of money market instruments are
accounted for on the date of the transaction.
F. FEES PAID INDIRECTLY The Portfolio's custodian calculates its fees based
on the Portfolio's average daily net assets. The fee is reduced according to a
fee arrangement, whic provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the
Portfolio. This amount is shown as a reduction of expenses on the Statement of
Operations.
18
<PAGE>
CASH RESERVE PORTFOLIOS
NOTES TO FINANCIAL STATEMENTS
2. INVESTMENT ADVISORY FEES AND ADMINISTRATIVE FEES
A. INVESTMENT ADVISORY FEE The investment advisory fees paid to Citibank, as
compensation for overall investment management services, amounted to $22,344,495
of which $10,984,854 was voluntarily waived for the year ended August 31, 2000.
The investment advisory fees are computed at an annual rate of 0.15% of the
Portfolio's average daily net assets.
B. ADMINISTRATIVE FEES Under the terms of an Administrative Services
Agreement, the administrative fee paid to the Administrator, as compensation for
overall administrative services and general office facilities, is computed at
the annual rate of 0.05% of the Portfolio's average daily net assets. The
Administrative fees amounted to $7,448,165, all of which were voluntarily waived
for the year ended August 31, 2000. The Portfolio pays no compensation directly
to any Trustee or to 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 of the officers and a Trustee of the
Portfolio are officers and a director of the Administrator or its affiliates.
3. INVESTMENT TRANSACTIONS Purchases, maturities and sales of money market
instruments aggregated $470,947,921,224 and $471,853,812,341, respectively, for
the year ended August 31, 2000.
4. LINE OF CREDIT The Portfolio, along with other funds in the fund family,
entered into an agreement with a bank which allows the funds collectively to
borrow up to $75 million for temporary or emergency purposes. Interest on
borrowings, if any, is charged to the specific fund executing the borrowing at
the base rate of the bank. The line of credit requires a quarterly payment of a
commitment fee based on the average daily unused portion of the line of credit.
For the year ended August 31, 2000, the commitment fee allocated to the
Portfolio was $43,206. Since the line of credit was established, there have been
no borrowings.
19
<PAGE>
CASH RESERVES PORTFOLIO
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND THE INVESTORS OF CASH RESERVES PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments of Cash Reserves Portfolio (the
"Portfolio") as at August 31, 2000 and the related statements of operations and
of changes in net assets and the financial highlights for the periods indicated.
These financial statements and financial highlights (hereafter referred to as
"financial statements") are the responsibility of the Portfolio's management.
Our responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits of these financial statements in accordance with
auditing standards generally accepted in the United States of America. Those
standards require that we plan and perform the audit to obtain reasonable
assurance whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments owned at August 31, 2000 by
correspondence with the custodian, provide a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Portfolio as at August 31, 2000, the
results of its operations and the changes in its net assets and the financial
highlights for the periods indicated in accordance with U.S. generally accepted
accounting principles.
PricewaterhouseCoopers LLP
Chartered Accountants
Toronto, Ontario
October 12, 2000
20
<PAGE>
TRUSTEES AND OFFICERS
Philip W. Coolidge*, President
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
SECRETARY
Robert Frenkel**
TREASURER
Linwood Downs*
*AFFILIATED PERSON OF ADMINISTRATOR AND DISTRIBUTOR
**AFFILIATED PERSON OF INVESTMENT ADVISER
INVESTMENT ADVISER
(OF CASH RESERVES 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
CitiFiduciary Trust Company
125 Broad Street, New York, NY 10004
SUB-TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street, Boston, MA 02110
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
This report is prepared for the information of shareholders of CitiFunds
Institutional Liquid Reserves. It is authorized for distribution to prospective
investors only when preceded or accompanied by an effective prospectus of
CitiFunds Institutional Liquid Reserves.
(R) 2000 Citicorp [RECYCLE LOGO] Printed on recycled paper CFA/INS.LI/800
<PAGE>
--------------------------------------------------------------------------------
CITIFUNDS(R)
---------------
--------------------------------------------------------------------------------
INSTITUTIONAL
U.S. TREASURY
RESERVES
ANNUAL REPORT
AUGUST 31, 2000
CitiFunds
--------------------------------------------------------------------------
Investment products: Not FDIC Insured o No Bank Guarantee o May Lose Value
--------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
--------------------------------------------------------------------------------
Portfolio Environment and Outlook 2
--------------------------------------------------------------------------------
Fund Facts 3
--------------------------------------------------------------------------------
Fund Performance 4
--------------------------------------------------------------------------------
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
Statement of Assets and Liabilities 5
--------------------------------------------------------------------------------
Statement of Operations 6
--------------------------------------------------------------------------------
Statement of Changes in Net Assets 7
--------------------------------------------------------------------------------
Financial Highlights 8
--------------------------------------------------------------------------------
Notes to Financial Statements 9
--------------------------------------------------------------------------------
Independent Auditors' Report 12
--------------------------------------------------------------------------------
U.S. TREASURY RESERVES PORTFOLIO
Portfolio of Investments 13
--------------------------------------------------------------------------------
Statement of Assets and Liabilities 14
--------------------------------------------------------------------------------
Statement of Operations 15
--------------------------------------------------------------------------------
Statement of Changes in Net Assets 16
--------------------------------------------------------------------------------
Financial Highlights 17
--------------------------------------------------------------------------------
Notes to Financial Statements 18
--------------------------------------------------------------------------------
Independent Auditors' Report 20
--------------------------------------------------------------------------------
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
Robust economic growth, inflation concerns and rising interest rates helped
produce generally higher yields for most money market instruments, including
U.S. Treasury bills, during the reporting period. A closer look suggests that
most of the improvement in U.S. Treasury bill yields took place during the first
eight months of the period. Between May and August, Treasury bill yields
actually declined modestly, primarily in response to evidence that the Federal
Reserve Board's (the "Fed") restrictive monetary policies were having a
moderating effect on U.S. economic growth.
In this environment, the CitiFunds' investment adviser, Citibank, N.A.,
continued to manage U.S. Treasury Reserves Portfolio, the portfolio in which the
Fund invests all of its investable assets, with the goal of achieving its
investment objectives: providing liquidity and as high a level of current income
from U.S. government obligations as is consistent with the preservation of
capital.
This report reviews the Fund's investment activities and performance during
the twelve months ended August 31, 2000, and provides a summary of Citibank's
perspective on and outlook for the money market securities marketplace.
Thank you for your continued confidence and participation.
Sincerely,
/s/ PHILIP W. COOLIDGE
----------------------
Philip W. Coolidge
President
September 15, 2000
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
U.S. TREASURY BILLS PROVIDED POSITIVE RETURNS AND A SAFE HARBOR FOR MANY
INVESTORS DURING THE REPORTING PERIOD. These benefits were particularly valuable
during the second half of the period, when heightened volatility in the stock
market and rising interest rates produced flat or negative returns for some
investment classes, including stocks and longer-term bonds. This market
volatility, which included a sharp correction in formerly high-flying technology
stocks, helped create a flight to quality among many investors.
This increase in demand for high-quality money market securities, combined
with early signs of slower economic growth and an absence of new-issue Cash
Management bills, caused U.S. Treasury bill yields to decline between May and
August 2000. As a result, U.S. Treasury bill yields ended the reporting period
at relatively low levels compared to other taxable money market instruments.
The U.S. economy during most of the reporting period was characterized by
strong growth, rising prices for some important commodities, including oil, and
the lowest levels of unemployment in recent memory. During the first half of the
reporting period, these positive economic conditions were enhanced by a rapidly
rising stock market, especially within market sectors expected to benefit from
strong demand for technology and telecommunications services.
BECAUSE THIS COMBINATION OF POSITIVE ECONOMIC FORCES HAS HISTORICALLY LED TO
HIGHER RATES OF INFLATION, THE FED CONTINUED TO MOVE TOWARD A MORE RESTRICTIVE
MONETARY POLICY DURING THE PERIOD. In fact, the Fed raised short-term interest
rates four times during the reporting period, for a total increase of 1.25%, in
an effort to relieve inflationary pressures that might threaten to derail U.S.
economic prosperity.
IN THIS ENVIRONMENT, MANAGEMENT MAINTAINED A RELATIVELY SHORT AVERAGE
MATURITY from the start of the reporting period through the second quarter of
2000. This strategy was designed to keep assets available for higher yielding
securities should interest rates rise. When it became apparent that Treasury
bill yields had peaked, management then extended the Fund's average maturity in
order to lock in prevailing yields for as long as practical. Management
subsequently reduced the Portfolio's average maturity in anticipation of the
issuance of Cash Management bills, scheduled for late August. As of August 31,
2000, the Portfolio's average maturity was 50 days, which is somewhat shorter
than the Portfolio's maximum average maturity of 60 days.
AS FOR THE FORESEEABLE FUTURE, MANAGEMENT EXPECTS THAT THE FED MOST LIKELY
WILL NOT MAKE POLICY DECISIONS UNTIL AFTER THE NOVEMBER PRESIDENTIAL ELECTION.
Recent economic statistics indicate that the Fed's previous rate hikes may have
been effective in slowing the rate of economic growth and forestalling an
acceleration of inflation. Consequently, management expects that short-term bond
yields will eventually begin to decline from current levels. Management is
prepared to extend the Fund's average maturity if and when this occurs. Of
course, management will adjust its strategies if economic and market conditions
change.
2
<PAGE>
FUND FACTS
FUND OBJECTIVE
To provide liquidity and as high a level of current income from U.S. government
obligations as is consistent with the preservation of capital.
INVESTMENT ADVISER, DIVIDENDS
U.S. TREASURY RESERVES PORTFOLIO Declared daily, paid monthly
Citibank, N.A.
COMMENCEMENT OF OPERATIONS BENCHMARK*
October 2, 1992 o Lipper S&P AAA rated Taxable
Institutional U.S. Treasury
NET ASSETS AS OF 8/31/00 Money Market Funds Average
$694.5 million
o iMoneyNet, Inc.
(formerly IBC Financial Data)
Institutional 100% U.S. Treasury
Rated Money Market Funds Average
* The Lipper Funds Average and iMoneyNet, Inc. Funds Average reflect the
performance (excluding sales charges) of mutual funds with similar
objectives.
3
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
SINCE
ONE FIVE OCTOBER 2, 1992
ALL PERIODS ENDED AUGUST 31, 2000 YEAR YEARS* INCEPTION*
================================================================================
CitiFunds Institutional U.S.
Treasury Reserves 5.38% 5.05% 4.63%
Lipper S&P AAA rated Taxable
Institutional U.S. Treasury
Money Market Funds Average 5.50% 5.15% 4.65%+
iMoneyNet, Inc. (formerly IBC
Financial Data) 100% AAA-rated
Institutional U.S. Treasury
Money Market Funds Average 5.22% 4.91% 4.54%+
* Average Annual Total Return
+ From 9/30/92
7-DAY YIELDS
Annualized Current 5.83%
Effective 6.00%
The ANNUALIZED CURRENT 7-DAY YIELD reflects the amount of income generated by
the investment during the seven-day period and assumes that the income is
generated each week over a 365-day period. The yield is shown as a percentage of
the investment.
The EFFECTIVE 7-DAY YIELD is calculated similarly, but when annualized the
income earned by the investment during the seven-day period is assumed to be
reinvested. The effective yield is slightly higher than the current yield
because of the compounding effect of this assumed reinvestment.
Note: A money market fund's yield more closely reflects the current earnings of
the fund than does the total return.
IMPORTANT TAX INFORMATION -- For the fiscal year ended August 31, 2000 the Fund
paid $0.05249 per share to shareholders from net investment income. For such
period, 100% of income dividends paid were derived from interest earned from
U.S. Treasury Bills, Notes and Bonds.
Note: Although money market funds seek to maintain the value of your investment
at $1.00 per share, it is possible to lose money by investing in the Fund.
Mutual fund shares are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other government agency. Yields and total returns
will fluctuate and past performance is no guarantee of future results. Total
return figures include reinvestment of dividends. Returns and yields reflect
certain voluntary fee waivers. If the waivers were not in place, the Fund's
returns and yields would have been lower.
4
<PAGE>
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2000
================================================================================
ASSETS:
Investments in U.S. Treasury Reserves Portfolio, at value (Note 1) $694,178,290
Receivable for shares of beneficial interests sold 1,000,000
--------------------------------------------------------------------------------
Total Assets 695,178,290
--------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 535,271
Payable for shares of beneficial interest repurchased 16,500
Accrued expenses and other liabilities 149,660
--------------------------------------------------------------------------------
Total liabilities 701,431
--------------------------------------------------------------------------------
NET ASSETS for 694,476,859 shares of beneficial
interest outstanding $694,476,859
================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $694,476,859
================================================================================
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE $1.00
================================================================================
See notes to financial statements
5
<PAGE>
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000
================================================================================
INVESTMENT INCOME (Note 1A):
Income from U.S. Treasury Reserves Portfolio $34,309,929
Allocated expenses from
U.S. Treasury Reserves Portfolio (622,836)
--------------------------------------------------------------------------------
$33,687,093
EXPENSES:
Administrative fees (Note 3A) 2,173,447
Shareholder Servicing Agents' fees (Note 3B) 620,985
Distribution fees (Note 4) 620,985
Registration fees 32,247
Legal fees 18,984
Custody and fund accounting fees 18,561
Audit fees 17,491
Shareholder reports 17,454
Transfer agent fees 12,000
Trustees' fees 8,855
Miscellaneous 17,481
--------------------------------------------------------------------------------
Total expenses 3,558,490
Less aggregate amounts waived by Administrator,
Shareholder Servicing Agent and Distributor
(Notes 3A, 3B and 4) (2,626,168)
--------------------------------------------------------------------------------
Net expenses 932,322
--------------------------------------------------------------------------------
Net investment income $32,754,771
================================================================================
See notes to financial statements
6
<PAGE>
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
---------------------------------
2000 1999
================================================================================
FROM INVESTMENT ACTIVITIES:
Net investment income, declared as dividends
to shareholders (Note 2): $ 32,754,771 $ 12,928,883
================================================================================
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST AT NET ASSET VALUE OF
$1.00 PER SHARE (NOTE 5):
Proceeds from sale of shares 1,729,123,528 1,598,993,736
Net asset value of shares issued to
shareholders from reinvestment
of dividends 29,421,828 11,328,224
Cost of shares repurchased (1,669,432,987) (1,269,093,377)
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 89,112,369 341,228,583
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 605,364,490 264,135,907
--------------------------------------------------------------------------------
End of period $ 694,476,859 $ 605,364,490
================================================================================
See notes to financial statements
7
<PAGE>
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
---------------------------------------------------------
2000 1999 1998 1997 1996
==========================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning
of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
Net investment income 0.05249 0.04395 0.05001 0.04994 0.05051
Less dividends from net
investment income (0.05249) (0.04395) (0.05001) (0.04994) (0.05051)
------------------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
==========================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $694,477 $605,364 $264,136 $306,350 $213,395
Ratio of expenses to
average net assets+ 0.25% 0.25% 0.25% 0.25% 0.25%
Ratio of net investment income
to average net assets+ 5.27% 4.40% 5.00% 5.01% 5.03%
Total return 5.38% 4.48% 5.12% 5.11% 5.17%
Note: If Agents of the Fund and agents of U.S. Treasury Reserves Portfolio had not waived
all or a portion of their fees during the periods indicated, the net investment income per
share and the ratios would have been as follows:
Net investment income per share $0.04753 $0.03806 $0.04431 $0.04416 $0.04428
RATIOS:
Expenses to average net assets+ 0.80% 0.84% 0.82% 0.83% 0.87%
Net investment income to
average net assets+ 4.72% 3.81% 4.43% 4.43% 4.41%
==========================================================================================
</TABLE>
+ Includes the Fund's share of U.S. Treasury Reserves Portfolio's allocated
expenses.
See notes to financial statements
8
<PAGE>
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds Institutional U.S. Treasury
Reserves (the "Fund") is a diversified separate series of CitiFunds
Institutional Trust (the "Trust"), a Massachusetts business trust. The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company. The Fund invests all of its investable assets in
U.S. Treasury Reserves Portfolio (the "Portfolio"), an open-end, diversified
management investment company for which Citibank, N.A. ("Citibank") serves as
Investment Adviser. The value of such investment reflects the Fund's
proportionate interest (52.4% at August 31, 2000) in the net assets of the
Portfolio. CFBDS, Inc. ("CFBDS"), acts as the Trust's Administrator and
Distributor. Citibank also serves as Sub-Administrator and makes shares
available to customers through various Shareholder Servicing Agents. Citibank is
a wholly-owned subsidiary of Citigroup Inc.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America 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 in
conformity with generally accepted accounting principles and are as follows:
A. INVESTMENT INCOME The Fund earns income, net of Portfolio expenses, daily
on its investment in the Portfolio.
B. 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. Accordingly, no provision
for federal income or excise tax is necessary.
C. 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 in a series are allocated in proportion to the
average net assets of each Fund, except where allocations of direct expenses to
each Fund can otherwise be made fairly. Expenses directly attributable to a Fund
are charged to that Fund.
D. OTHER All the net investment income of the Portfolio is allocated pro
rata, based on respective ownership interests, among the Fund and other
investors in the Portfolio at the time of such determination.
2. DIVIDENDS The net income of the Fund is determined once daily, as of 12:00
noon Eastern Standard Time, and all of the net income of the Fund so determined
is declared as a dividend to shareholders of record at the time of such
determination. Dividends are distributed in the form of additional shares of the
Fund or, at the election of the shareholder, in cash (subject to the policies of
the shareholder's Shareholder Servicing Agent) on or prior to the last business
day of the month.
9
<PAGE>
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
NOTES TO FINANCIAL STATEMENTS (Continued)
3. ADMINISTRATIVE SERVICES PLAN The Trust has adopted an Administrative Services
Plan which provides that the Trust, on behalf of each Fund, may obtain the
services of an Administrator, one or more Shareholder Servicing Agents, and
other Servicing Agents and may enter into agreements providing for the payment
of fees for such services. Under the Trust's Administrative Services Plan, the
aggregate of the fee paid to the Administrator from the Fund and of the fees
paid to the Shareholder Servicing Agents from the Fund under such plan may not
exceed 0.45% of the Fund's average daily net assets on an annualized basis for
the Fund's then-current fiscal year. For the year ended August 31, 2000,
management agreed to voluntarily limit Fund expenses to 0.25%.
A. ADMINISTRATIVE FEES Under the terms of an Administrative Services
Agreement, CFBDS is entitled to an administrative fee from the Fund, as
compensation for overall administrative services and general office facilities,
which is accrued daily and paid monthly at the annual rate of 0.35% of the
Fund's average daily net assets. The Administrative fees amounted to $2,173,447,
of which $1,384,198 was contractually waived for the year ended August 31, 2000.
The contractual fee waivers of 0.20% terminates on December 31, 2000. Citibank
acts as Sub-Administrator and performs such duties and receives such
compensation from CFBDS as from time to time is agreed to by CFBDS and Citibank.
The Fund pays no compensation directly to any Trustee or to 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 of the
officers and a Trustee of the Fund are officers and a director of the
Administrator or its affiliates.
B. SHAREHOLDER SERVICING AGENT FEES The Trust, on behalf of 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, but may not exceed, on an annualized basis, an amount equal to
0.10% of the average daily net assets of the Fund represented by shares owned
during the period for which payment is being made by investors for whom such
Shareholder Servicing Agent maintains a servicing relationship. The Shareholder
Servicing Agent fees amounted to $620,985, all of which were contractually
waived for the year ended August 31, 2000. The contractual fee waivers terminate
on December 31, 2000.
4. DISTRIBUTION FEES The Trust has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended, in which the
Fund reimburses the Distributor for expenses incurred or anticipated in
connection with the sale of shares of the Fund, limited to an annual rate of
0.10% of the average daily net assets of the Fund. The Distribution fees
amounted to $620,985, all of which was contractually waived for the year ended
August 31, 2000. The contractual fee waivers terminate on December 31, 2000. The
Distributor has contractually agreed to assume all distribution expenses through
August 31, 2000.
10
<PAGE>
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
NOTES TO FINANCIAL STATEMENTS
5. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest ($0.00001 par value).
6. INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in
the Portfolio aggregated $2,244,623,419 and $2,189,759,139, respectively, for
the year ended August 31, 2000.
11
<PAGE>
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS OF
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES:
We have audited the accompanying statement of assets and liabilities of
CitiFunds Institutional U.S. Treasury Reserves, a separate series of CitiFunds
Institutional Trust (the "Trust") (a Massachusetts business trust), as of August
31, 2000, the related statement of operations for the year then ended, the
statement of changes in net assets for the years ended August 31, 2000 and 1999,
and the financial highlights for each of the years in the five-year period ended
August 31, 2000. These financial statements and financial highlights are the
responsibility of the Trust's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights represent
fairly, in all material respects, the financial position of CitiFunds
Institutional U.S. Treasury Reserves at August 31, 2000, the results of its
operations, the changes in its net assets, and its financial highlights for the
respective stated periods in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 4, 2000
12
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
U.S. TREASURY BILLS -- 100.0%
--------------------------------------------------------------------------------
United States Treasury Bill,
due 9/14/00 $ 80,000 $ 79,836,561
due 9/21/00 96,601 96,292,622
due 9/28/00 222,426 221,438,693
due 10/05/00 197,894 196,795,914
due 10/26/00 262,430 260,028,976
due 11/02/00 113,078 111,898,507
due 11/09/00 239,856 237,061,552
due 11/30/00 123,346 121,478,030
--------------
TOTAL INVESTMENTS, AT AMORTIZED COST 100.0% 1,324,830,855
OTHER ASSETS, LESS LIABILITIES 0.0 (142,567)
----- ---------------
Net Assets 100.0% $1,324,688,288
===== ==============
See notes to financial statements
13
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2000
================================================================================
ASSETS:
Investments, at amortized cost (Note 1A) $1,324,830,855
Cash 292
--------------------------------------------------------------------------------
Total assets 1,324,831,147
--------------------------------------------------------------------------------
LIABILITIES:
Payable to affiliate - Investment advisory fees (Note 2A) 89,641
Accrued expenses and other liabilities 53,218
--------------------------------------------------------------------------------
Total liabilities 142,859
--------------------------------------------------------------------------------
NET ASSETS $1,324,688,288
================================================================================
REPRESENTED BY:
Paid-in capital for beneficial interests $1,324,688,288
================================================================================
See notes to financial statements
14
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000
================================================================================
INVESTMENT INCOME (Note 1B) $ 68,115,709
EXPENSES:
Investment Advisory fees (Note 2A) $ 1,855,394
Administrative fees (Note 2B) 618,465
Custody and fund accounting fees 284,473
Legal fees 32,160
Audit fees 21,500
Trustees' fees 15,733
Miscellaneous 24,986
--------------------------------------------------------------------------------
Total expenses 2,852,711
Less aggregate amounts waived by Investment Adviser
and Administrator (Notes 2A and 2B) (1,615,405)
Less fees paid indirectly (Note 1D) (21)
--------------------------------------------------------------------------------
Net expenses 1,237,285
--------------------------------------------------------------------------------
Net investment income $ 66,878,424
================================================================================
See notes to financial statements
15
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
----------------------------------
2000 1999
================================================================================
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 66,878,424 $ 40,398,488
--------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 4,524,590,945 3,426,724,559
Value of withdrawals (4,455,407,592) (3,190,341,131)
--------------------------------------------------------------------------------
Net increase in net assets from
capital transactions 69,183,353 236,383,428
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 136,061,777 276,781,916
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,188,626,511 911,844,595
--------------------------------------------------------------------------------
End of period $ 1,324,688,288 $ 1,188,626,511
================================================================================
See notes to financial statements
16
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------------------------------------------
2000 1999 1998 1997 1996
=========================================================================================================
<S> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
(000's omitted) $ 1,324,688 $ 1,188,627 $ 911,845 $ 907,910 $ 767,804
Ratio of expenses to
average net assets 0.10% 0.10% 0.10% 0.10% 0.10%
Ratio of net investment income
to average net assets 5.41% 4.55% 5.14% 5.15% 5.20%
Note: If the agents of the Portfolio had not voluntarily waived a portion of their fees for the periods
indicated and the expenses were not reduced for fees paid indirectly, the ratios would have been as
follows:
RATIOS:
Expenses to average net assets 0.23% 0.23% 0.23% 0.24% 0.25%
Net investment income to
average net assets 5.28% 4.42% 5.01% 5.01% 5.05%
=========================================================================================================
</TABLE>
See notes to financial statements
17
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES U.S. Treasury Reserves Portfolio (the
"Portfolio") is registered under the Investment Company Act of 1940, as amended,
as a no-load, 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.
CFBDS, Inc ("CFBDS"), acts as the Portfolio's Administrator. Citibank N.A.
("Citibank") acts as the Investment Adviser. Citibank is a wholly-owned
subsidiary of Citigroup Inc.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. VALUATION OF INVESTMENTS Money market instruments are valued at amortized
cost, which the Trustees have determined in good faith constitutes fair value.
The Portfolio's use of amortized cost is subject to the Portfolio's compliance
with certain conditions as specified under Rule 2a-7 of the Investment Company
Act of 1940.
B. INVESTMENT INCOME AND EXPENSES Investment income consists of interest
accrued and discount earned (including both original issue and market discount),
adjusted for amortization of premium, on the investments of the Portfolio,
accrued ratably to the date of maturity, plus or minus net realized gain or
loss, if any, on investments. Expenses of the Portfolio are accrued daily.
C. FEDERAL INCOME TAXES The Portfolio's policy is to comply with the
applicable provisions of the Internal Revenue Code. Accordingly, no provision
for federal income taxes is necessary.
D. FEES PAID INDIRECTLY The Portfolio's custodian calculates its fees based
on the Portfolio's average daily net assets. The fee is reduced according to a
fee arrangement, which provides for custody fees to be reduced based on a
formula developed to measure the value of cash deposited with the custodian by
the Portfolio. This amount is shown as a reduction of expenses on the Statement
of Operations.
E. OTHER Purchases, maturities and sales of money market instruments are
accounted for on the date of the transaction.
2. INVESTMENT ADVISORY FEES AND ADMINISTRATIVE FEES
A. INVESTMENT ADVISORY FEE The Investment advisory fees paid to Citibank, as
compensation for overall investment management services, amounted to $1,855,394
of which $996,940 was voluntarily waived for the year ended August 31, 2000. The
investment advisory fee is computed at an annual rate of 0.15% of the
Portfolio's average daily net assets.
18
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
B. ADMINISTRATIVE FEES Under the terms of an Administrative Services
Agreement, the administrative fee paid to the Administrator, as compensation for
overall administrative services and general office facilities, is accrued daily
and paid monthly at the annual rate of 0.05% of the Portfolio's average daily
net assets. The Administrative fees amounted to $618,465, all of which was
contractually waived for the year ended August 31, 2000. The contractual fee
waivers terminate on December 31, 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 of the officers and a Trustee of the
Portfolio are officers and a director of the Administrator or its affiliates.
3. INVESTMENT TRANSACTIONS Purchases, maturities and sales of U.S. Treasury
obligations, aggregated $9,785,486,816 and $9,712,033,716, respectively, for the
year ended August 31, 2000.
4. LINE OF CREDIT The Portfolio, along with other funds in the fund family,
entered into an agreement with a bank which allows the funds collectively to
borrow up to $75 million for temporary or emergency purposes. Interest on
borrowings, if any, is charged to the specific fund executing the borrowing at
the base rate of the bank. The line of credit requires a quarterly payment of a
commitment fee based on the average daily unused portion of the line of credit.
For the year ended August 31, 2000, the commitment fee allocated to the
Portfolio was $3,755. Since the line of credit was established, there have been
no borrowings.
19
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND INVESTORS OF
U.S. TREASURY RESERVES PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of U.S. Treasury Reserves Portfolio (a
New York Trust) as of August 31, 2000, the related statement of operations for
the year then ended, the statement of changes in net assets for the years ended
August 31, 2000 and 1999, and the financial highlights for each of the years in
the five-year period ended August 31, 2000. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
the securities owned as of August 31, 2000, by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of U.S. Treasury
Reserves Portfolio at August 31, 2000, the results of its operations, the
changes in its net assets, and its financial highlights for the respective
stated periods in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 4, 2000
20
<PAGE>
This report is prepared for the information of shareholders of CitiFunds
Institutional U.S. Treasury Reserves. It is authorized for distribution to
prospective investors only when preceded or accompanied by an effective
prospectus of CitiFunds Institutional U.S. Treasury Reserves.
(C) 2000 Citicorp [RECYCLE LOGO] Printed on recycled paper CFA/INS.US/800
<PAGE>
--------------------------------------------------------------------------------
CITIFUNDS(R)
---------------
--------------------------------------------------------------------------------
Institutional
Tax Free
Reserves
ANNUAL REPORT
AUGUST 31, 2000
CitiFunds
--------------------------------------------------------------------------
INVESTMENT PRODUCTS: NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
--------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
--------------------------------------------------------------------------------
Portfolio Environment and Outlook 2
--------------------------------------------------------------------------------
Fund Facts 3
--------------------------------------------------------------------------------
Fund Performance 4
--------------------------------------------------------------------------------
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
Statement of Assets and Liabilities 5
--------------------------------------------------------------------------------
Statement of Operations 6
--------------------------------------------------------------------------------
Statement of Changes in Net Assets 7
--------------------------------------------------------------------------------
Financial Highlights 8
--------------------------------------------------------------------------------
Notes to Financial Statements 9
--------------------------------------------------------------------------------
Independent Auditors' Report 12
--------------------------------------------------------------------------------
TAX FREE RESERVES PORTFOLIO
Portfolio of Investments 13
--------------------------------------------------------------------------------
Statement of Assets and Liabilities 20
--------------------------------------------------------------------------------
Statement of Operations 20
--------------------------------------------------------------------------------
Statement of Changes in Net Assets 21
--------------------------------------------------------------------------------
Financial Highlights 21
--------------------------------------------------------------------------------
Notes to Financial Statements 22
--------------------------------------------------------------------------------
Independent Auditors' Report 24
--------------------------------------------------------------------------------
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
Robust economic growth, inflation concerns and rising interest rates helped
produce generally higher yields for tax-exempt money market instruments during
the reporting period. However, a closer look suggests that most of the
improvement in short-term tax-exempt yields took place during the first six
months of the period. Between March and August 2000, tax-exempt yields actually
declined modestly, primarily in response to supply-and-demand forces that were
unique to the municipal marketplace.
In this environment, the CitiFunds' investment adviser, Citibank, N.A.,
continued to manage Tax Free Reserves Portfolio, the portfolio in which the Fund
invests all of its investable assets, with the goal of achieving its investment
objective: providing high levels of current income that are exempt from federal
income taxes, preservation of capital and liquidity.
This annual report reviews the Fund's investment activities and performance
during the twelve months ended August 31, 2000, and provides a summary of
Citibank's perspective on and outlook for the tax-exempt money market securities
marketplace.
Thank you for your continued confidence and participation.
Sincerely,
/s/ PHILIP W. COOLIDGE
----------------------
Philip W. Coolidge
President
September 15, 2000
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
TAX-EXEMPT MONEY MARKET INSTRUMENTS PROVIDED COMPETITIVE RETURNS AND A SAFE
HARBOR FOR MANY INVESTORS DURING THE REPORTING PERIOD. These benefits were
particularly valuable during the second half of the period, when heightened
volatility in the stock market and rising interest rates produced flat or
negative returns for some investment classes, including many stocks and
longer-term bonds. However, tax-exempt yields ended the reporting period at
fairly low levels relative to taxable money market yields. This was due mainly
to a reduction in the issuance of short-term tax-exempt securities by
municipalities during the first eight months of 2000 compared to the same period
one year ago.
The U.S. economy during most of the reporting period was characterized by
strong growth, rising prices for some important commodities, including oil, and
the lowest levels of unemployment in recent memory. During the first half of the
reporting period, these economic conditions were enhanced by a rapidly rising
stock market, especially within market sectors expected to benefit from strong
demand for technology and telecommunications services.
BECAUSE THIS COMBINATION OF POSITIVE ECONOMIC FORCES HAS HISTORICALLY LED TO
HIGHER RATES OF INFLATION, THE FED CONTINUED TO MOVE TOWARD A MORE RESTRICTIVE
MONETARY POLICY DURING THE PERIOD. In fact, the Fed raised short-term interest
rates four times during the reporting period, for a total increase of 1.25%, in
an effort to relieve inflationary pressures that might threaten to derail U.S.
economic prosperity.
The Fed's actions strongly influenced tax-exempt money markets during the
first half of the reporting period, causing tax-exempt yields to rise along with
yields in other sectors of the bond markets. DURING THE SECOND HALF OF THE
PERIOD, HOWEVER, TECHNICAL MARKET FORCES ECLIPSED INTEREST-RATE TRENDS, CAUSING
TAX-EXEMPT YIELDS TO FALL MODESTLY BETWEEN MARCH AND AUGUST. More specifically,
because many municipal issuers enjoyed higher-than-expected tax revenues during
this period of economic strength, they had less need to borrow in the short-term
bond market. Accordingly, issuance of short-term tax-exempt securities fell. At
the same time, demand for money market instruments rose when the stock market
began to falter in March and April, and individuals sought to protect some of
their gains during a time of heightened market volatility.
IN THIS ENVIRONMENT, MANAGEMENT MAINTAINED A RELATIVELY SHORT AVERAGE
MATURITY FROM SEPTEMBER 1999 THROUGH MAY 2000. This strategy was designed to
keep assets available for higher yielding securities if interest rates rose.
When it became apparent in May that tax-exempt rates had peaked, management then
extended the Fund's average maturity in order to lock in prevailing yields for
as long as practical.
FROM A SECURITY SELECTION PERSPECTIVE, MANAGEMENT CONTINUED TO FOCUS
PRIMARILY ON VARIABLE RATE DEMAND NOTES (VRDNS), WHICH ARE SHORT-TERM
INSTRUMENTS THAT ARE SECURITIZED AND ISSUED BY INVESTMENT BANKS. This emphasis
on floating-rate securities enabled the Fund to capture higher yields more
quickly as they became available. The managers' focus on VRDNs was also partly
the result of the lack of new municipal notes in the marketplace. As of August
31, 2000,
2
<PAGE>
weekly VRDNs comprised about 76% of the Fund's portfolio, and municipal notes
and bonds accounted for 24%.
AS FOR THE FORESEEABLE FUTURE, MANAGEMENT EXPECTS THAT THE FED MOST LIKELY WILL
NOT MAKE POLICY DECISIONS UNTIL AFTER THE NOVEMBER PRESIDENTIAL ELECTION. Recent
economic statistics indicate that the Fed's previous rate hikes may have been
effective in slowing the rate of economic growth and forestalling an
acceleration of inflation. Accordingly, management expects to maintain the
current maturity strategy and security selection approach over the next few
months. Of course, management may adjust its strategies as economic and market
conditions change.
FUND FACTS
FUND OBJECTIVE
Provide high levels of current income which is exempt from federal income
taxes*, preservation of capital and liquidity.
INVESTMENT ADVISER, DIVIDENDS
TAX FREE RESERVES PORTFOLIO Declared daily, paid monthly
Citibank, N.A.
COMMENCEMENT OF OPERATIONS CAPITAL GAINS
May 21, 1997 Distributed annually, if any
NET ASSETS AS OF 8/31/00 BENCHMARK**
$176.0 million o Lipper Institutional Tax Exempt
Money Market Funds Average
o iMoneyNet, Inc. (formerly
IBC Financial Data) Institutional Tax
Free Money Market Funds Average
* A portion of the income may be subject to the Federal Alternative Minimum Tax
(AMT). Consult your personal tax adviser.
** The Lipper Funds Average and iMoneyNet, Inc. Funds Average reflect the
performance (excluding sales charges) of mutual funds with similar
objectives.
3
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
SINCE
ONE MAY 21, 1997
ALL PERIODS ENDED AUGUST 31, 2000 YEAR INCEPTION*
================================================================================
CitiFunds Institutional Tax Free Reserves 3.74% 3.44%
Lipper Institutional Tax Exempt Money Market
Funds Average 3.56% 3.26%+
iMoneyNet, Inc. (formerly IBCFinancial Data)
Institutional Tax Free Money Market Funds Average 3.55% 3.27%+
* Average Annual Total Return
+ From 5/31/97
7-DAY YIELDS
Annualized Current 4.05%
Effective 4.13%
The ANNUALIZED CURRENT 7-DAY YIELD reflects the amount of income generated by
the investment during that seven-day period and assumes that the income is
generated each week over a 365-day period. The yield is shown as a percentage of
the investment.
The EFFECTIVE 7-DAY YIELD is calculated similarly, but when annualized the
income earned by the investment during that seven-day period is assumed to be
reinvested. The effective yield is slightly higher than the current yield
because of the compounding effect of this assumed reinvestment.
Note: A money market fund's yield more closely reflects the current earnings of
the fund than does the total return.
IMPORTANT TAX INFORMATION--For the fiscal year ended August 31, 2000 the Fund
paid $0.03182 per share to shareholders from net investment income. For such
period, the Fund designated all dividends paid as exempt-interest dividends.
Thus, 100% of these distributions were exempt from Federal income tax. In
addition, 14.8% of the dividends were derived from income earned from certain
government obligations which may be subject to the Federal Alternative Minimum
Tax (AMT).
COMPARISON OF 7-DAY YIELDS FOR CITIFUNDS INSTITUTIONAL TAX FREE RESERVES VS.
iMONEYNET, INC. (FORMERLY IBC FINANCIAL DATA) INSTITUTIONAL TAX FREE MONEY
MARKET FUNDS AVERAGE
[Table below represents line chart in its printed piece]
CitiFunds Institutional iMoneyNet, Inc. Institutional Tax Free
Tax Free Reserves Money Market Funds Average
----------------------- ---------------------------------------
8/31/99 5.07 4.96
5.08 4.97
5.09 4.99
5.13 5.01
5.17 5.04
5.22 5.08
10/12/99 5.23 5.07
5.27 5.09
5.27 5.1
5.38 5.16
5.36 5.15
5.36 5.21
5.41 5.28
11/30/99 5.51 5.36
5.57 5.37
5.56 5.43
5.61 5.5
5.64 5.52
5.51 5.4
5.71 5.53
1/18/00 5.7 5.5
5.67 5.45
5.71 5.48
5.67 5.49
5.68 5.53
5.69 5.54
2/29/00 5.65 5.57
5.67 5.55
5.7 5.57
5.74 5.61
5.88 5.68
5.95 5.75
5.89 5.72
4/18/00 5.9 5.76
5.87 5.76
5.91 5.8
6.03 5.85
5.97 5.85
6.24 6
5/30/00 6.29 6.08
6.32 6.18
6.34 6.24
6.37 6.26
6.39 6.27
6.49 6.29
6.37 6.24
7/18/00 6.39 6.25
6.43 6.27
6.46 6.28
6.45 6.24
6.43 6.26
6.43 6.26
8/29/00 6.45 6.27
As illustrated, CitiFunds Institutional Tax Free Reserves provided a similar
annualized seven-day yield to that of a com-parable iMoneyNet, Inc. Money Market
Funds Average, as published in iMoneyNet, Inc. Money Fund Report(TM), for the
one year period.
Note: Although money market funds seek to maintain the value of your investment
at $1.00 per share, it is possible to lose money by investing in the Fund.
Mutual fund shares are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other government agency. Yields and total returns
will fluctuate and past performance is no guarantee of future results. Total
return figures include reinvestment of dividends. Returns and yields reflect
certain voluntary fee waivers. If the waivers were not in place, the Fund's
returns and yields would have been lower.
4
<PAGE>
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2000
================================================================================
ASSETS:
Investment in Tax Free Reserves Portfolio, at value (Note 1) $176,389,803
--------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 371,371
Accrued expenses and other liabilities 42,259
--------------------------------------------------------------------------------
Total liabilities 413,630
--------------------------------------------------------------------------------
NET ASSETS for 175,973,253 shares of beneficial
interest outstanding $175,976,173
================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $175,973,253
Accumulated net realized gain 2,920
--------------------------------------------------------------------------------
Total $175,976,173
================================================================================
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE $1.00
================================================================================
See notes to financial statements
5
<PAGE>
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000
================================================================================
INVESTMENT INCOME (Note 1A):
Income from Tax Free Reserves Portfolio $5,517,603
Allocated expenses from Tax Free Reserves Portfolio (209,743)
--------------------------------------------------------------------------------
$5,307,860
EXPENSES:
Administrative fees (Note 3A) 487,803
Shareholder Servicing Agents' fees (Note 3B) 139,373
Distribution fees (Note 4) 139,373
Legal fees 39,344
Custody and fund accounting fees 18,132
Audit fees 16,200
Shareholder reports 11,915
Transfer agent fees 11,000
Trustees' fees 4,155
Registration fees 2,802
Miscellaneous 5,213
--------------------------------------------------------------------------------
Total expenses 875,310
Less aggregate amounts waived by Administrator,
Shareholder Servicing Agents, and Distributor
(Notes 3A, 3B and 4) (735,955)
--------------------------------------------------------------------------------
Net expenses 139,355
--------------------------------------------------------------------------------
Net investment income 5,168,505
NET REALIZED LOSS ON INVESTMENTS FROM TAX FREE RESERVES PORTFOLIO (5,510)
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,162,995
================================================================================
See notes to financial statements
6
<PAGE>
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
------------------------------
2000 1999
================================================================================
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 5,168,505 $ 6,430,629
Net realized gain (loss) on investments (5,510) 5,181
--------------------------------------------------------------------------------
Net increase in net assets from operations 5,162,995 6,435,810
--------------------------------------------------------------------------------
DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (5,168,505) (6,430,629)
--------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
AT NET ASSET VALUE OF $1.00 PER SHARE
(Note 5):
Proceeds from sale of shares 753,893,610 849,251,536
Net asset value of shares issued to
shareholders from reinvestment
of dividends 1,432,200 1,824,220
Cost of shares repurchased (745,069,645) (892,666,594)
--------------------------------------------------------------------------------
Net increase (decrease) in net assets
from transactions in shares of
beneficial interest 10,256,165 (41,590,838)
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 10,250,655 (41,585,657)
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 165,725,518 207,311,175
--------------------------------------------------------------------------------
End of period $175,976,173 $165,725,518
================================================================================
See notes to financial statements
7
<PAGE>
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
MAY 21, 1997
(COMMENCEMENT
YEAR ENDED AUGUST 31, OF OPERATIONS)
-------------------------------- TO AUGUST 31,
2000 1999 1998 1997
================================================================================
Net Asset Value,
beginning of period $1.00000 $1.00000 $1.00000 $1.00000
Net investment income 0.03182 0.03026 0.03440 0.00984
Less dividends from
net investment income (0.03182) (0.03026) (0.03440) (0.00984)
--------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000 $1.00000 $1.00000 $1.00000
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $175,976 $165,726 $207,311 $ 60,048
Ratio of expenses to average
net assets+ 0.25% 0.25% 0.25% 0.25%*
Ratio of net investment
income to average
net assets+ 3.71% 3.02% 3.43% 3.47%*
Total return 3.74% 3.07% 3.49% 0.99%**
Note: If agents of the Fund and agents of Tax Free Reserves Portfolio had not
waived all or a portion of their fees and the Administrator had not voluntarily
assumed expenses during the periods indicated, the net investment income per
share and the ratios would have been as follows:
Net investment income per share $0.02737 $0.02395 $0.02718 $0.00729
RATIOS:
Expenses to average net assets+ 0.91% 0.88% 0.97% 1.15%*
Net investment income to
average net assets+ 3.05% 2.39% 2.71% 2.57%*
================================================================================
+ Includes the Fund's share of Tax Free Reserves Portfolio's allocated expenses
* Annualized
** Not Annualized
See notes to financial statements
8
<PAGE>
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds Institutional Tax Free Reserves
(the "Fund") is a separate non-diversified series of CitiFunds Institutional
Trust (the "Trust"), a Massachusetts business trust. The Trust is registered
under the Investment Company Act of 1940, as amended, as an open-end management
investment company. The Fund invests all of its investable assets in Tax Free
Reserves 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 26.1% at
August 31, 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 preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
The financial statements of the Portfolio, including the portfolio of
investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The significant accounting policies consistently followed by the Fund are in
conformity with generally accepted accounting principles and are as follows:
A. INVESTMENT INCOME The Fund earns income, net of Portfolio expenses, daily
on its investment in the Portfolio.
B. 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 net investment income. Accordingly, no
provision for federal income or excise tax is necessary. Dividends paid by the
Fund from net interest received on tax-exempt money market instruments are not
includable by shareholders as gross income for federal income tax purposes
because the Fund intends to meet certain requirements of the Internal Revenue
Code applicable to regulated investment companies which will enable the Fund to
pay exempt-interest dividends. The portion of such interest, if any, earned on
private activity bonds issued after August 7, 1986, may be considered a tax
preference item to shareholders.
C. 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 in a series are allocated in proportion to the
average net assets of each fund, except where allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund.
2. DIVIDENDS The net income of the Fund is determined once daily, as of 12:00
noon Eastern Standard Time, and all of the net income of the Fund so determined
is declared as a dividend to shareholders of record at the time of such
determination. Dividends are distributed in the form of additional shares of the
Fund or, at the election of the
9
<PAGE>
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS (Continued)
shareholder, in cash (subject to the policies of the shareholder's Shareholder
Servicing Agent) on or prior to the last business day of the month.
3. ADMINISTRATIVE SERVICES PLAN The Fund has adopted an Administrative Services
Plan which provides that the Trust, on behalf of each Fund, may obtain the
services of an Administrator, one or more Shareholder Servicing Agents, and
other Servicing Agents, and may enter into agreements providing for the payment
of fees for such services. Under the Trust's Administrative Services Plan, the
aggregate of the fee paid to the Administrator from the Fund and the fees paid
to the Shareholder Servicing Agents from the Fund may not exceed 0.45% of the
Fund's average daily net assets on an annualized basis for the Fund's
then-current fiscal year. For the year ended August 31, 2000, management agreed
to voluntarily limit Fund expenses to 0.25%.
A. ADMINISTRATIVE FEES Under the terms of an Administrative Services
Agreement, CFBDS is entitled to an administrative fee, as compensation for
overall administrative services and general office facilities, which is computed
at the annual rate of 0.35% of the Fund's average daily net assets.
Administrative fees amounted to $487,803, of which $457,209 was contractually
waived for the year ended August 31, 2000. The contractual fee waiver of 0.25%
terminates on December 31, 2000. Citibank acts as Sub-Administrator and performs
such duties and receives such compensation from CFBDS as from time to time is
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 of the officers and a Trustee of the Fund are officers
and a director of the Administrator or its affiliates.
B. SHAREHOLDER SERVICING AGENT FEES The Trust, on behalf of the Fund, has
entered into shareholder servicing agreements with each Shareholder Servicing
Agent pursuant to which that Shareholder Servicing Agent acts as an agent for
its customers and provides other related services. For their services, each
Shareholder Servicing Agent receives a fee from the Fund, which may be paid
periodically, but may not exceed, on an annualized basis, an amount equal to
0.10% of the average daily net assets of the Fund represented by shares owned
during the period for which payment is being made by investors for whom such
Shareholder Servicing Agent maintains a servicing relationship. The Shareholder
Servicing Agent fees amounted to $139,373 all of which was contractually waived
for the year ended August 31, 2000. The contractual fee waiver terminates on
December 31, 2000.
4. DISTRIBUTION FEE The Trust has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended, in which the
Fund reimburses the Distributor for expenses incurred or anticipated in
connection with the sale of shares of the Fund, at an annual rate not to exceed
0.10% of the Fund's average daily net assets of the Fund. The distribution fees
amounted to $139,373, all of which was contractually waived for the year ended
August 31, 2000. The contractual fee waiver terminates on December 31, 2000.
10
<PAGE>
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS
5. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional Shares of Beneficial
Interest (without par value).
6. INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in
the Portfolio aggregated $863,427,542 and $858,421,311, respectively, for the
year ended August 31, 2000.
11
<PAGE>
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS OF
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES:
We have audited the accompanying statement of assets and liabilities of
CitiFunds Institutional Tax Free Reserves, a separate series of CitiFunds
Institutional Trust (the "Trust") (a Massachusetts business trust), as of August
31, 2000, the related statement of operations for the year then ended, the
statement of changes in net assets for the years ended August 31, 2000 and 1999,
and the financial highlights for the years ended August 31, 2000, 1999, 1998 and
for the period from May 21, 1997 (commencement of operations) to August 31,
1997. The financial statements and financial highlights are the responsibility
of the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of CitiFunds
Institutional Tax Free Reserves at August 31, 2000, the results of its
operations, the changes in its net assets, and its financial highlights for the
respective stated periods in conformity with accounting principles generally
accepted in the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 4, 2000
12
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
TAX-EXEMPT COMMERCIAL PAPER -- 1.8%
--------------------------------------------------------------------------------
Phoenix City, Alabama, Environmental
Revenue, AMT,
4.15% due 9/05/00 $ 7,000 $ 7,000,000
Sullivan Pollution Control Revenue, Indiana,
4.20% due 9/11/00 5,000 5,000,000
------------
12,000,000
------------
GENERAL OBLIGATION BONDS
AND NOTES -- 2.9%
--------------------------------------------------------------------------------
Dallas, Texas,
5.60% due 2/15/01 4,000 4,023,719
Minneapolis, Minnesota,
4.15% due 1/24/01 2,000 2,000,000
South Carolina State,
5.75% due 3/01/01 1,000 1,007,792
South Carolina State,
6.00% due 5/01/01 1,000 1,010,376
Utah State,
5.00% due 7/01/01 4,900 4,926,716
Washington State,
5.50% due 1/01/01 6,315 6,343,547
------------
19,312,150
------------
ANNUAL AND SEMI-ANNUAL TENDER REVENUE
BONDS AND NOTES (PUTS) -- 18.0%
--------------------------------------------------------------------------------
Anchorage, Alaska, Telephone
Utility Revenue,
4.25% due 12/01/00 2,000 2,001,681
Baltimore, Maryland,
7.00% due 10/15/00 1,000 1,003,115
Bayonne, New Jersey,
5.00% due 7/12/01 7,000 7,028,803
Brazos, Texas, Higher Education
Authority, AMT,
5.85% due 6/01/01 2,000 2,013,628
California Student
Loan, AMT,
4.70% due 6/01/01 3,000 3,000,000
Chicago, Illinois,
4.00% due 10/26/00 1,000 1,000,000
Cobb County, Georgia, School District,
4.38% due 12/29/00 5,000 5,006,390
Douglas County Colorado,
School District No 1,
5.00% due 6/29/01 3,000 3,016,224
Everett, Massachusetts,
6.00% due 12/15/00 1,130 1,135,749
Grand Prairie, Texas,
6.90% due 2/15/01 355 358,982
Gulf Coast Waste Disposal Authority,
Texas, AMT,
4.20% due 10/01/00 4,000 4,000,000
Indianapolis, Indiana,
Public Improvement,
5.00% due 1/08/01 7,475 7,493,036
Iowa School Corporation,
5.50% due 6/22/01 12,000 12,093,371
Memphis, Tennessee,
Electric System,
5.50% due 1/01/01 1,000 1,003,227
Mercer County, North Dakota,
Solid Waste Disposal Authority, AMT,
4.80% due 12/01/00 3,400 3,400,000
Michigan Municipal Bond Authority,
4.75% due 4/26/01 4,000 4,012,449
Michigan Municipal Bond Authority,
4.30% due 8/23/01 2,500 2,516,361
Michigan Municipal Bond Authority,
5.00% due 7/02/01 2,600 2,613,485
Milwaukee, Wisconsin,
Metropolitan Sewer District,
4.25% due 10/01/00 1,510 1,510,173
New Hampshire State,
4.50% due 10/01/00 2,000 2,000,711
Ohio Housing Finance Agency Mortgage
Revenue, AMT,
4.05% due 9/01/00 3,000 3,000,000
Oklahoma State Water Resource Board
State Loan Revenue,
4.05% due 9/01/00 8,500 8,500,000
Panhandle Plains, Texas,
Higher Education Loan,
4.80% due 9/01/00 845 845,000
Pennsylvania State,
5.70% due 11/15/00 1,000 1,003,084
Putnam County, Florida,
4.35% due 12/15/00 2,500 2,500,000
Salt Lake County, Utah,
5.00% due 1/01/01 600 600,952
Texas State,
5.25% due 8/31/01 15,000 15,141,987
13
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
ANNUAL AND SEMI-ANNUAL TENDER REVENUE
BONDS AND NOTES (PUTS) -- (CONT'D)
--------------------------------------------------------------------------------
University, Michigan, University Revenue,
5.25% due 6/29/01 $ 2,000 $ 2,014,225
Washington State Public Power Supply,
5.25% due 7/01/01 2,000 2,014,916
Washington State Single Family Mortgage,
4.88% due 9/01/00 5,815 5,815,000
Western, Michigan, University Revenue,
6.50% due 7/15/01 2,475 2,568,505
Yoakum County, Texas,
4.30% due 11/01/00 3,000 3,000,000
York County, South Carolina,
Pollution Control Revenue,
4.05% due 9/15/00 8,645 8,645,000
------------
121,856,054
------------
BOND, REVENUE, TAX AND TAX AND
REVENUE ANTICIPATION NOTES -- 1.6%
--------------------------------------------------------------------------------
De Kalb County, Georgia, TANs,
4.40% due 8/01/01 1,500 1,500,000
Spokane Washington, Trans,
4.75% due 4/02/01 2,000 2,005,594
West Jordan, Utah, TRANs,
4.75% due 6/29/01 6,950 6,963,700
------------
10,469,294
------------
VARIABLE RATE DEMAND NOTES* -- 75.8%
--------------------------------------------------------------------------------
ABN -- Amro Leasetops Certificates Trust,
due 10/01/04 3,609 3,609,000
ABN -- Amro Munitops Certificates Trust,
due 3/07/07 4,000 4,000,000
ABN -- Amro Munitops Certificates Trust, AMT,
due 4/05/06 5,000 5,000,000
ABN -- Amro Munitops Certificates Trust, AMT,
due 7/05/06 9,000 9,000,000
ABN -- Amro Munitops Certificates Trust, AMT,
due 5/07/08 15,000 15,000,000
Adams County, Colorado,
Industrial Development Revenue,
due 12/01/15 2,000 2,000,000
Alaska State Housing Finance Corp., AMT,
due 6/01/07 5,795 5,795,000
Arapahoe County, Colorado, Revenue Authority,
due 7/01/07 1,585 1,585,000
Ascension, Louisiana, Revenue, AMT,
due 12/01/27 2,000 2,000,000
Ashe County, North Carolina,
Industrial Facilities and Pollution,
due 7/01/10 2,100 2,100,000
Beloit, Kansas, Industrial Development
Authority, AMT,
due 12/01/16 1,100 1,100,000
Beaver County,
Pennsylvania, Pollution Control Revenue,
due 12/01/20 1,500 1,500,000
Bexar County, Texas,
Housing Finance Authority,
due 9/15/26 1,900 1,900,000
Brazos River, Texas, Utility Authority,
due 4/01/30 300 300,000
Brooks County, Georgia, Development
Authority Revenue,
due 3/01/18 2,000 2,000,000
California State,
due 12/01/23 1,200 1,200,000
Carrollton, Georgia,
Payroll Development Authority,
due 3/01/15 1,550 1,550,000
Carthage, Missouri,
Industrial Development Authority Revenue,
due 4/01/07 2,000 2,000,000
Carthage, Missouri, Industrial Development
Authority Revenue, AMT,
due 9/01/30 2,000 2,000,000
Castle Pines, North Metro District, Colorado,
due 12/01/28 5,195 5,195,000
14
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
--------------------------------------------------------------------------------
Chesterfield County, Virginia,
Industrial Development,
due 2/01/03 $ 1,400 $ 1,400,000
Chicago, Illinois,
due 1/01/23 15,847 15,847,000
Chicago, Illinois, Board of Education,
due 6/01/21 3,000 3,000,000
Chicago, Illinois, Gas Supply Revenue,
due 3/01/30 5,000 5,000,000
Chicago, Illinois, O'Hare International
Airport Revenue,
due 7/01/10 500 500,000
Chicago, Illinois, Water Revenue,
due 11/01/30 2,300 2,300,000
Clarksville, Arizona, Industrial Development
Revenue, AMT,
due 8/01/13 1,500 1,500,000
Clarksville, Tennessee,
Public Building Authority,
due 6/01/29 1,700 1,700,000
Clipper Tax Exempt Trust, AMT,
due 3/01/15 765 765,000
Clipper Tax Exempt Trust, AMT,
due 3/01/16 6,430 6,430,000
Coastal Bend, Texas,
Health Facilities Development,
due 8/15/28 1,000 1,000,000
Cobb County, Georgia, Housing Authority,
due 9/15/26 2,800 2,800,000
Colorado Health Facilities Authority Revenue,
due 6/01/21 9,865 9,865,000
Colorado Springs Utility Revenue,
due 11/15/26 6,520 6,520,000
Columbus, Georgia, Housing Authority Revenue,
due 11/01/17 750 750,000
Connecticut State, Housing Finance Authority,
due 5/15/18 3,545 3,545,000
Connecticut State,
Health and Education Facilities,
due 7/01/27 1,500 1,500,000
Davidson County, North Carolina,
Industrial Facilities,
due 7/01/20 2,140 2,140,000
De Kalb County, Georgia,
Industrial Development Revenue,
due 2/01/18 1,100 1,100,000
De Kalb County, Georgia,
Multi-Family Housing Revenue,
due 6/15/25 2,400 2,400,000
Denver, Colorado, City and County Airport Revenue,
due 12/01/20 2,300 2,300,000
Detroit, Michigan, Economic Development Corp.,
due 5/01/09 3,000 3,000,000
Director State, Nevada,
Department of Business, AMT,
due 8/01/20 820 820,000
District of Columbia, Revenue,
due 10/01/15 500 500,000
Emmaus, Pennsylvania,
General Authority Revenue,
due 3/01/24 13,000 13,000,000
Facilities Municipal Trust,
due 12/15/14 8,315 8,315,000
Fayetteville, Arkansas,
Industrial Development, AMT,
due 12/01/04 1,100 1,100,000
Fayetteville, Arkansas, Public Facilities Board,
due 9/01/27 100 100,000
Floyd County, Georgia, Development Authority,
due 9/01/26 1,080 1,080,000
Forsyth County, Georgia,
Industrial Development Revenue,
due 1/01/07 2,000 2,000,000
Fulton County, Georgia,
Development Authority Revenue,
due 12/01/12 2,000 2,000,000
Fulton County, Georgia,
Development Authority Revenue,
due 2/01/18 2,000 2,000,000
15
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
--------------------------------------------------------------------------------
Gila County, Arizona,
Industrial Development Authority,
due 11/01/25 $ 1,585 $ 1,585,000
Gordon County, Georgia,
Industrial Development Authority Revenue,
due 8/01/17 1,000 1,000,000
Gulf Breeze, Florida, Revenue,
due 3/31/21 1,445 1,445,000
Gulf Coast, Texas, Waste Disposal Authority,
due 6/01/20 890 890,000
Gwinett County, Georgia,
Industrial Development Revenue,
due 3/01/17 310 310,000
Harris County, Texas,
due 8/01/15 2,700 2,700,000
Harris County, Texas,
Health Facilities Development,
due 2/15/27 1,500 1,500,000
Harris County, Texas,
Health Facilities Development,
due 10/01/29 3,000 3,000,000
Hawaii State, Housing Financial &
Development Corp.,
due 7/01/29 9,945 9,945,000
Hawkins County,
Tennessee, Industrial Development Board,
due 10/01/27 1,450 1,450,000
Hays, Texas, Mental Health Development Facilities,
due 11/15/14 1,000 1,000,000
Henrico County, Virginia,
Industrial Development Authority,
due 8/01/23 180 180,000
Hillsborough County, Florida, School Board,
due 1/01/12 7,000 7,000,000
Huntington, Tennessee, Industrial
Development, AMT,
due 5/01/20 4,000 4,000,000
Illinois Educational Facilities
Authority Revenue,
due 12/01/25 700 700,000
Illinois Health Facilities Authority Revenue,
due 1/01/20 100 100,000
Illinois Health Facilities Authority Revenue,
due 1/01/16 3,000 3,000,000
Irvine Ranch, California, Water District,
due 9/01/06 800 800,000
Jackson County, Mississippi,
Industrial Development Revenue,
due 12/01/15 2,650 2,650,000
Jacksonville, Florida,
Health Facilities Revenue,
due 12/01/23 1,900 1,900,000
Jefferson Parish, Louisiana, Home Mortgage,
due 12/01/26 1,690 1,690,000
Jefferson Parish, Louisiana, Industrial
Development, AMT,
due 6/01/24 1,600 1,600,000
Kansas City, Missouri,
Industrial Development Authority,
due 4/01/27 800 800,000
Knox County, Tennessee,
Health Educational Hospital Facilities,
due 12/01/27 8,000 8,000,000
Knox County, Tennessee,
Industrial Development Board Revenue, AMT,
due 10/01/00 500 500,000
Koch Certificates Trust,
due 12/13/02 4,636 4,636,000
Lone Star Texas Airport Authority,
due 12/01/14 900 900,000
Long Island Power Authority,
due 4/01/25 4,200 4,200,000
Long Island Power Authority,
due 5/01/33 1,000 1,000,000
Los Angeles County, California,
Housing Authority,
due 6/15/28 5,000 5,000,000
Lower County River Authority,
due 9/14/00 3,000 3,000,000
16
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
--------------------------------------------------------------------------------
Macon Trust Pooled Variable Rate Certificates
due 3/03/07 $13,825 $ 13,825,000
Madison, Wisconsin,
Community Development Authority,
due 6/01/22 1,055 1,055,000
Maine Health and Higher Educational Facilities,
due 7/01/19 3,000 3,000,000
Maricopa County, Arizona, Pollution Control,
due 5/01/29 4,100 4,100,000
Marshfield, Wisconsin,
Industrial Development Revenue,
due 12/01/14 2,500 2,500,000
Maryland State Community Development,
due 4/01/25 465 465,000
Mason County, Kentucky, Pollution Control,
due 10/15/14 2,800 2,800,000
Massachusetts Municipal WHSL Electric Co.,
due 7/01/19 6,600 6,600,000
Massachusetts State Industrial Finance Agency,
due 11/01/25 2,000 2,000,000
Mecklenburg County, North Carolina,
Industrial Facilities,
due 9/01/14 2,000 2,000,000
Metro Atlanta, Rapid Transportation,
due 7/01/20 5,000 5,000,000
Metropolitan Pier & Exposition Authority, Illinois,
due 6/15/21 165 165,000
Miami Dade County, Florida, Aviation,
due 10/01/29 9,500 9,500,000
Michigan State Strategic Funding,
due 2/15/34 3,000 3,000,000
Minneapolis, Minnesota,
due 3/01/12 2,000 2,000,000
Missouri State Health and
Educational Facilities Revenue,
due 7/01/18 3,700 3,700,000
Missouri State Health and
Educational Facilities Revenue,
due 6/01/26 15 15,000
Missouri State Housing and Development
Common Mortgage,
due 3/01/30 5,995 5,995,000
Moorhead, Minnesota, Solid Waste Disposal, AMT,
due 4/01/12 3,000 3,000,000
Montana State, Health Facility Authority Revenue,
due 12/01/15 1,150 1,150,000
Montgomery County, Tennessee,
Public Building Authority,
due 9/01/29 1,400 1,400,000
Morristown, Tennessee,
Industrial Development Board,
due 2/01/15 4,250 4,250,000
Municipal Securities Trust Certificates,
due 8/01/03 4,100 4,100,000
Nash County, North Carolina,
due 12/01/14 1,000 1,000,000
New Hampshire Higher Educational and Health,
due 6/01/23 1,300 1,300,000
New Hanover County, North Carolina,
due 3/01/14 2,250 2,250,000
New Hanover County, North Carolina,
due 3/01/15 2,250 2,250,000
New Hanover County, North Carolina,
due 3/01/16 2,250 2,250,000
New York, New York,
due 8/01/03 10,200 10,200,000
New York Pooled
Puttable Trust,
due 12/05/30 7,410 7,410,000
New York State Energy Research and Development,
due 10/01/29 500 500,000
New York State Local Government Assistance,
due 4/01/19 500 500,000
17
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
--------------------------------------------------------------------------------
New York State Local Government Assistance,
due 4/01/25 $ 7,450 $ 7,450,000
North Carolina Educational Facilities,
due 9/01/26 200 200,000
North Cent. Texas, Health Facility Development,
due 12/01/15 4,130 4,130,000
Ohio State, Air Quality Development Authority,
due 12/01/15 900 900,000
Oklahoma Finance Authority Revenue,
due 1/01/30 4,000 4,000,000
Orange County, Florida,
Industrial Development Authority,
due 1/01/11 375 375,000
Orlando, Florida, Special Assessment Revenue,
due 10/01/21 3,200 3,200,000
Peoria, Illinois, Health Care Facilities Revenue,
due 5/01/17 1,120 1,120,000
Piedmont, South Carolina, Municipal Power Agency,
due 1/01/22 1,000 1,000,000
Pima County, Arizona,
Industrial Development Authority,
due 12/01/22 10,000 10,000,000
Pinal County, Arizona, Pollution Control Revenue,
due 12/01/11 2,500 2,500,000
Pitney Bowes Credit Corp. Leasetops,
due 11/13/02 1,013 1,013,459
Pitney Bowes Credit Corp. Leasetops,
due 3/15/05 4,060 4,059,718
Pitney Bowes Credit Corp. Leasetops,
due 3/16/05 11,625 11,624,764
Port Arthur, Texas, Navigation District,
due 10/01/24 600 600,000
Port Vancouver, Washington, Revenue,
due 12/01/09 6,100 6,100,000
Puerto Rico Public Finance Corp.,
due 6/01/12 1,115 1,115,000
Puerto Rico Commonwealth,
due 7/01/27 2,750 2,750,000
Puerto Rico Electric Power Authority,
due 7/01/22 1,900 1,900,000
Red Bay, Alabama,
Industrial Development Board Revenue,
due 11/01/10 3,400 3,400,000
Rhode Island Health and Educational Building,
due 12/01/29 1,000 1,000,000
Rhode Island Health and Educational Building,
due 3/01/30 1,500 1,500,000
Rhode Island State
Industrial Facilities Corp.,
due 5/01/05 1,250 1,250,000
Rhode Island State
Industrial Facilities Corp.,
due 11/01/05 3,180 3,180,000
Roswell, Georgia,
Multi-Family Housing Authority,
due 8/01/27 2,500 2,500,000
Saint Charles Parish, Louisiana,
Pollution Control Revenue,
due 3/01/24 7,500 7,500,000
San Antonio Texas, Water Revenue,
due 5/15/26 7,000 7,000,000
Savannah, Illinois,
Industrial Development Revenue,
due 6/01/04 600 600,000
Seattle, Washington,
Municipal Lighting & Power Revenue,
due 11/01/10 4,995 4,995,000
Seattle, Washington,
Municipal Lighting & Power Revenue,
due 11/01/18 900 900,000
Sevier County, Tennessee,
Public Building Authority,
due 6/01/17 2,940 2,940,000
Sevier County, Tennessee,
Public Building Authority,
due 6/01/19 10,000 10,000,000
18
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES* -- (CONT'D)
--------------------------------------------------------------------------------
Southeastern Oklahoma Industrial
Development Authority,
due 6/01/16 $ 3,400 $ 3,400,000
Syracuse Industrial Economic
Development Revenue,
due 12/01/05 585 585,000
Tarrant County, Texas,
Health Facilities Development,
due 11/15/26 945 945,000
Texas State Department
of Housing and Community,
due 3/01/17 1,995 1,995,000
Tipton, Indiana, Economic Development Revenue,
due 7/01/22 1,000 1,000,000
Traill County, North
Dakota, Industrial Development, AMT,
due 12/01/11 1,000 1,000,000
Traill County, North
Dakota, Industrial Development, AMT,
due 12/11/11 1,000 1,000,000
University Michigan, University Revenue,
due 12/01/24 2,300 2,300,000
Utah State Board of Regents,
due 11/01/25 900 900,000
Valdez, Alaska, Marine Terminal Revenue,
due 8/01/25 4,000 4,000,000
Valdez, Alaska, Marine Terminal Revenue,
due 10/01/25 900 900,000
Valley, California, Health & Hospital System
Revenue,
due 5/15/25 1,600 1,600,000
Vermont Industrial Development
Authority Revenue, AMT,
due 12/01/11 700 700,000
Volusia County, Florida, Health Facilities
Authority,
due 11/01/15 990 990,000
Walton County, Georgia,
Industrial Building Authority,
due 10/01/17 700 700,000
Washington State Health Care Facilities Revenue,
due 10/01/05 2,000 2,000,000
Watertown, South Dakota,
Industrial Development Revenue,
due 8/01/14 1,145 1,145,000
Winchester, Kentucky, Industrial Building,
AMT,
due 10/01/18 2,400 2,400,000
Wyoming Community Development
Authority Housing Revenue, AMT,
due 12/01/15 7,120 7,120,000
Yolo County, California, Multi-Family Revenue,
due 11/01/27 6,000 6,000,000
------------
512,354,941
------------
TOTAL INVESTMENTS,
AT AMORTIZED COST 100.1% 675,992,439
OTHER ASSETS,
LESS LIABILITIES (0.1) (500,139)
----- ------------
NET ASSETS 100.0% $675,492,300
===== ============
AMT -- Subject to Alternative Minimum Tax
* Variable rate demand notes have a demand feature under which the Fund could
tender them back to the issuer on no more than 7 days notice.
See notes to financial statements
19
<PAGE>
TAX FREE RESERVES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2000
================================================================================
ASSETS:
Investments, at amortized cost and value (Note 1A) $675,992,439
Cash 33,133
Interest receivable 4,639,778
--------------------------------------------------------------------------------
Total assets 680,665,350
--------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 5,047,069
Payable to affiliate - Investment advisory fees (Note 2A) 72,735
Accrued expenses and other liabilities 53,246
--------------------------------------------------------------------------------
Total liabilities 5,173,050
--------------------------------------------------------------------------------
NET ASSETS $675,492,300
================================================================================
REPRESENTED BY:
Paid-in capital for beneficial interests $675,492,300
================================================================================
TAX FREE RESERVES PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000
================================================================================
INTEREST INCOME (Note 1B) $25,214,816
EXPENSES:
Investment Advisory fees (Note 2A) $1,285,870
Administrative fees (Note 2B) 321,468
Custody and fund accounting fees 182,490
Legal fees 22,051
Audit fees 21,500
Trustees' fees 13,064
Miscellaneous 2,212
--------------------------------------------------------------------------------
Total expenses 1,848,655
Less aggregate amounts waived by Investment Adviser
and Administrator (Notes 2A and 2B) (860,853)
Less fees paid indirectly (Note 1D) (23,492)
--------------------------------------------------------------------------------
Net expenses 964,310
--------------------------------------------------------------------------------
Net investment income 24,250,506
NET REALIZED LOSS ON INVESTMENTS (23,055)
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $24,227,451
================================================================================
See notes to financial statements
20
<PAGE>
TAX FREE RESERVES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
----------------------------
2000 1999
================================================================================
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income $ 24,250,506 $ 22,768,275
Net realized gain (loss) on investments (23,055) 16,677
--------------------------------------------------------------------------------
Increase in net assets from operations 24,227,451 22,784,952
--------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 2,196,552,821 3,367,197,193
Value of withdrawals (2,202,408,291) (3,456,720,231)
--------------------------------------------------------------------------------
Net decrease in net assets
from capital transactions (5,855,470) (89,523,038)
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 18,371,981 (66,738,086)
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 657,120,319 723,858,405
--------------------------------------------------------------------------------
End of period $ 675,492,300 $ 657,120,319
================================================================================
TAX FREE RESERVES PORTFOLIO
FINANCIAL HIGHLIGHTS
YEAR ENDED AUGUST 31,
----------------------------------------------------
2000 1999 1998 1997 1996
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
(000's omitted) $675,492 $657,120 $723,858 $483,630 $372,171
Ratio of expenses to
average net assets 0.15% 0.15% 0.15% 0.19% 0.30%
Ratio of net investment
income to average
net assets 3.77% 3.11% 3.53% 3.46% 3.31%
Note: If Agents of the Portfolio had not voluntarily waived a portion of their
fees during the periods indicated and the expenses were not reduced for fees
paid indirectly, the ratios would have been as follows:
RATIOS:
Expenses to average
net assets 0.29% 0.29% 0.29% 0.31% 0.32%
Net investment income to
average net assets 3.63% 2.98% 3.39% 3.35% 3.29%
================================================================================
See notes to financial statements
21
<PAGE>
TAX FREE RESERVES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES Tax Free Reserves Portfolio (the "Portfolio")
is registered under the Investment Company Act of 1940, as amended, as a
no-load, nondiversified, 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.
CFBDS, Inc. ("CFBDS"), acts as the Portfolio's Administrator. Citibank, N.A.
("Citibank") acts as the Investment Adviser. Citibank is a wholly-owned
subsidiary of Citigroup Inc.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. VALUATION OF INVESTMENTS Money market instruments are valued at amortized
cost, which the Trustees have determined in good faith constitutes fair value.
The Portfolio's use of amortized cost is subject to the Portfolio's compliance
with certain conditions as specified under Rule 2a-7 of the Investment Company
Act of 1940.
B. INVESTMENT INCOME AND EXPENSES Investment income consists of interest
accrued and discount earned (including both original issue and market discount),
adjusted for amortization of premium, on the investments of the Portfolio.
Expenses of the Portfolio are accrued daily.
C. FEDERAL INCOME TAXES The Portfolio's policy is to comply with the
applicable provisions of the Internal Revenue Code. Accordingly, no provision
for federal income taxes is necessary.
D. FEES PAID INDIRECTLY The Portfolio's custodian calculates its fees based
on the Portfolio's average daily net assets. The fee is reduced according to a
fee arrangement, which provides for custody fees to be reduced based on a
formula developed to measure the value of cash deposited with the custodian by
the Portfolio. This amount is shown as a reduction of expenses on the Statement
of Operations.
E. OTHER Purchases, maturities and sales, of money market instruments are
accounted for on the date of the transaction.
2. INVESTMENT ADVISORY FEE AND ADMINISTRATIVE FEE
A. INVESTMENT ADVISORY FEE The investment advisory fee paid to Citibank, as
compensation for overall investment management services, amounted to $1,285,870,
of which $539,386 was voluntarily waived for the year ended August 31, 2000. The
investment advisory fee is computed at the annual rate of 0.20% of the
Portfolio's average daily net assets.
B. ADMINISTRATIVE FEE Under the terms of an Administrative Services
Agreement, the administrative fee payable to the Administrator, as compensation
for overall administrative services and general office facilities, is computed
at the annual rate of 0.05% of the Portfolio's average daily net assets and
amounted to $321,467, all of which was voluntarily waived for the year ended
August 31, 2000. The Portfolio pays
22
<PAGE>
TAX FREE RESERVES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
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 of the officers and
a Trustee of the Portfolio are officers and a director of the Administrator or
its affiliates.
3. INVESTMENT TRANSACTIONS Purchases, and maturities and sales of money market
instruments, exclusive of securities purchased subject to repurchase agreements,
aggregated $2,521,124,431 and $2,509,477,347, respectively, for the year ended
August 31, 2000.
4. FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES The cost of investment
securities owned at August 31, 2000, for federal income tax purposes, amounted
to $675,992,439.
5. LINE OF CREDIT The Portfolio, along with other funds in the fund family,
entered into an agreement with a bank which allows the Funds collectively to
borrow up to $75 million for temporary or emergency purposes. Interest on
borrowings, if any, is charged to the specific fund executing the borrowing at
the base rate of the bank. The line of credit requires a quarterly payment of a
commitment fee based on the average daily unused portion of the line of credit.
For the year ended August 31, 2000, the commitment fee allocated to the
Portfolio was $1,833. Since the line of credit was established, there have been
no borrowings.
23
<PAGE>
TAX FREE RESERVES PORTFOLIO
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND INVESTORS OF
TAX FREE RESERVES PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Tax Free Reserves Portfolio (a New
York Trust) as of August 31, 2000, the related statement of operations for the
year then ended, the statement of changes in net assets for the years ended
August 31, 2000 and 1999, and the financial highlights for each of the years in
the five-year period ended August 31, 2000. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
the securities owned as of August 31, 2000, by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Tax Free Reserves
Portfolio at August 31, 2000, the results of its operations, the changes in its
net assets, and its financial highlights for the respective stated periods in
conformity with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 4, 2000
24
<PAGE>
TRUSTEES AND OFFICERS
Philip W. Coolidge*, President
Rilley C. Gilley
Diana R. Harrington
Susan B. Kerley
SECRETARY
Robert Frenkel**
TREASURER
Linwood Downs*
*AFFILIATED PERSON OF ADMINISTRATOR AND DISTRIBUTOR
**AFFILIATED PERSON OF INVESTMENT ADVISER
INVESTMENT ADVISER
(OF TAX FREE RESERVES 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
CitiFiduciary Trust Company
125 Broad Street, New York, NY 10004
SUB-TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
Deloitte & Touche LLP
200 Berkeley Street, Boston, MA 02116
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
This report is prepared for the information of shareholders of CitiFunds
Institutional Tax Free Reserves. It is authorized for distribution to
prospective investors only when preceded or accompanied by an effective
prospectus of CitiFunds Institutional Tax Free Reserves.
(c) 2000 Citicorp [Recycle Logo] Printed on recycled paper CFA/INS TF/800
<PAGE>
--------------------------------------------------------------------------------
CITIFUNDS(R)
---------------
--------------------------------------------------------------------------------
Institutional
Cash Reserves
ANNUAL REPORT
AUGUST 31, 2000
CitiFunds
--------------------------------------------------------------------------
INVESTMENT PRODUCTS: NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
--------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
CITIFUNDS INSTITUTIONAL CASH RESERVES
Letter to Our Shareholders 1
--------------------------------------------------------------------------------
Portfolio Environment and Outlook 2
--------------------------------------------------------------------------------
Fund Facts 3
--------------------------------------------------------------------------------
Fund Performance 4
--------------------------------------------------------------------------------
Portfolio of Investments 5
--------------------------------------------------------------------------------
Statement of Assets and Liabilities 6
--------------------------------------------------------------------------------
Statement of Operations 6
--------------------------------------------------------------------------------
Statement of Changes in Net Assets 7
--------------------------------------------------------------------------------
Financial Highlights 8
--------------------------------------------------------------------------------
Notes to Financial Statements 9
--------------------------------------------------------------------------------
Independent Auditors' Report 12
--------------------------------------------------------------------------------
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
Robust economic growth, inflation concerns and rising interest rates helped
produce higher yields for most money market instruments during the reporting
period. This trend toward higher interest rates persisted through the summer of
2000, when evidence began to appear that the Federal Reserve Board's (the "Fed")
restrictive monetary policies may have had a moderating effect on U.S. economic
growth.
In this environment, the CitiFunds' investment adviser, Citibank, N.A.,
continued to manage CitiFunds Institutional Cash Reserves with the goal of
achieving its investment objective: providing liquidity and as high a level of
current income as is consistent with the preservation of capital.
This report reviews the Fund's investment activities and performance during
the twelve months ended August 31, 2000, and provides a summary of Citibank's
perspective on and outlook for the money market securities marketplace.
Thank you for your continued confidence and participation.
Sincerely,
/s/ PHILIP W. COOLIDGE
----------------------
Philip W. Coolidge
President
September 15, 2000
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
MONEY MARKET SECURITIES PROVIDED COMPETITIVE RETURNS AND A RELATIVELY SAFE
HARBOR FOR MANY INVESTORS DURING THE REPORTING PERIOD. These benefits were
particularly valuable during the second half of the period, when heightened
volatility in the stock market and rising interest rates produced flat or
negative returns for some investment classes, including stocks and bonds.
This market volatility, which included a sharp correction in formerly
high-flying technology stocks, helped create a flight to quality among many
investors seeking to protect newly created wealth and their previous investment
gains.
The U.S. economy during most of the reporting period was characterized by
strong growth, rising prices for some important commodities, including oil, and
the lowest levels of unemployment in recent memory. During the first half of the
reporting period, these economic forces were complemented by a rapidly rising
stock market, especially within market sectors expected to benefit from strong
demand for technology and telecommunications services.
BECAUSE THIS COMBINATION OF POSITIVE ECONOMIC CONDITIONS HAS HISTORICALLY LED
TO HIGHER RATES OF INFLATION, THE FED CONTINUED TO MOVE TOWARD A MORE
RESTRICTIVE MONETARY POLICY DURING THE PERIOD. In fact, the Fed raised
short-term interest rates four times during the reporting period, for a total
increase of 1.25%, in an effort to relieve inflationary pressures that might
threaten to derail U.S. economic prosperity.
In this environment, the manager maintained a relatively short average
maturity from the start of the reporting period through August 31, 2000. This
maturity strategy was designed to keep assets available for higher yielding
securities if interest rates rose. When it became apparent that the economy was
beginning to slow and the Fed was unlikely to raise interest rates again over
the near term, management extended the Fund's average maturity in order to lock
in prevailing yields for as long as deemed practical.
FROM A SECURITY SELECTION PERSPECTIVE, MANAGEMENT HAS SOUGHT TO MAINTAIN A
WELL-DIVERSIFIED ASSET MIX. As of August 31, 2000, approximately 23% of the
Fund's assets were invested in Yankee CDs, which are U.S. dollar-denominated
certificates of deposit issued by foreign banks on management's approved credit
list. In addition, about 55% of the Fund's assets were invested in commercial
paper, and about 3% was invested in short-term U.S. government securities.
AS FOR THE FORESEEABLE FUTURE, MANAGEMENT EXPECTS THAT THE FED WILL NOT MAKE
POLICY DECISIONS UNTIL AFTER THE NOVEMBER PRESIDENTIAL ELECTION. Recent economic
statistics indicate that the Fed's previous rate hikes may have been effective
in slowing the rate of economic growth and forestalling an acceleration of
inflation. In addition, management believes that recent labor strikes and U.S.
census-related layoffs should keep inflationary pressures in check.
Consequently, management expects that money market yields may eventually begin
to decline from current levels. Of course, management will adjust its strategies
as market and economic conditions change.
2
<PAGE>
FUND FACTS
FUND OBJECTIVE
To provide its shareholders with liquidity and as high a level of current income
as is consistent with the preservation of capital.
INVESTMENT MANAGER, DIVIDENDS
Citibank, N.A. Declared daily, paid monthly
COMMENCEMENT OF OPERATIONS CAPITAL GAINS
October 17, 1997 Class L shares Distributed annually, if any
October 6, 1999 Class S shares
NET ASSETS AS OF 8/31/00 BENCHMARKS*
Class L shares $496.1 million o Lipper S&P AAA-rated
Class S shares $96.4 million Institutional Money Market
Funds Average
o iMoneyNet, Inc. (formerly IBC
Financial Data)
S&P AAA-rated Institutional Taxable
Money Market Funds Average
* The Lipper Funds Average and iMoneyNet, Inc. Funds Average reflect the
performance (excluding sales charges) of mutual funds with similar
objectives.
3
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
SINCE
ONE 10/17/97
FOR THE PERIODS ENDED AUGUST 31, 2000 YEAR (INCEPTION)*
================================================================================
CitiFunds Institutional Cash Reserves Class L 5.98% 5.53%
CitiFunds Institutional Cash Reserves Class S 5.83% 5.37%**#
Lipper S&P AAA-rated Institutional
Money Market Funds Average 5.87% 5.42%+
iMoneyNet, Inc. (formerly IBC Financial Data)
S&P AAA-rated Institutional Taxable Money Market
Funds Average 5.81% 5.42%+
* Average Total Return + From 10/31/97
** Not Annualized # Commencement of Operations 10/6/99
7-DAY YIELDS CLASS L CLASS S
Annualized Current 6.46% 6.31%
Effective 6.67% 6.51%
The ANNUALIZED CURRENT 7-DAY YIELD reflects the amount of income generated by
the investment during that seven-day period and assumes that the income is
generated each week over a 365 day period. The yield is shown as a percentage of
the investment.
The EFFECTIVE 7-DAY YIELD is calculated similarly, but when annualized the
income earned by the investment during that seven-day period is assumed to be
reinvested. The effective yield is slightly higher than the current yield
because of the compounding effect of this assumed reinvestment.
Note: A money market fund's yield more closely reflects the current earnings of
the fund than does the total return.
IMPORTANT TAX INFORMATION--For the fiscal year ended August 31, 2000, CitiFunds
Institutional Cash Reserves Class L paid $0.05827 per share and CitiFunds
Institutional Cash Reserves Class S paid $0.05202 per share to shareholders from
net investment income. For such period 0.2% of dividends paid were derived from
interest earned from U.S. Government and U.S.Government agency obligations.
COMPARISON OF 7-DAY YIELDS FOR CITIFUNDS INSTITUTIONAL CASH RESERVES CLASS L VS.
iMONEYNET, INC. (FORMERLY IBC FINANCIAL DATA) S&P AAA-RATED INSTITUTIONAL
TAXABLE MONEY MARKET FUNDS AVERAGE
As illustrated, CitiFunds Institutional Cash Reserves Class L generally provided
a higher annualized seven-day yield to that of a comparable iMoneyNet, Inc.
Money Market Funds Average, as published in iMoneyNet, Inc. Money Fund
Report(TM), for the one-year period.
[Table below represents line chart in its printed piece]
iMoneyNet, Inc. S&P AAA-rated
CitiFunds Institutional Institutional Taxable
Cash Reserves Class L Money Market Funds Average
--------------------- --------------------------
8/31/99 5.07 4.96
9/7/99 5.08 4.97
9/14/99 5.09 4.99
9/21/99 5.13 5.01
9/28/99 5.17 5.04
10/5/99 5.22 5.08
10/12/99 5.23 5.07
10/19/99 5.27 5.09
10/26/99 5.27 5.1
11/2/99 5.38 5.16
11/9/99 5.36 5.15
11/16/99 5.36 5.21
11/23/99 5.41 5.28
11/30/99 5.51 5.36
12/7/99 5.57 5.37
12/14/99 5.56 5.43
12/21/99 5.61 5.5
12/28/99 5.64 5.52
1/4/00 5.51 5.4
1/11/00 5.71 5.53
1/18/00 5.7 5.5
1/25/00 5.67 5.45
2/1/00 5.71 5.48
2/8/00 5.67 5.49
2/15/00 5.68 5.53
2/22/00 5.69 5.54
2/29/00 5.65 5.57
3/7/00 5.67 5.55
3/14/00 5.7 5.57
3/21/00 5.74 5.61
3/28/00 5.88 5.68
4/4/00 5.95 5.75
4/11/00 5.89 5.72
4/18/00 5.9 5.76
4/25/00 5.87 5.76
5/2/00 5.91 5.8
5/9/00 6.03 5.85
5/16/00 5.97 5.85
5/23/00 6.24 6
5/30/00 6.29 6.08
6/6/00 6.32 6.18
6/13/00 6.34 6.24
6/20/00 6.37 6.26
6/27/00 6.39 6.27
7/4/00 6.49 6.29
7/11/00 6.37 6.24
7/18/00 6.39 6.25
7/25/00 6.43 6.27
8/1/00 6.46 6.28
8/8/00 6.45 6.24
8/15/00 6.43 6.26
8/22/00 6.43 6.26
8/29/00 6.45 6.27
Note: Although money market funds seek to maintain the value of your investment
at $1.00 per share, it is possible to lose money by investing in the Fund.
Mutual fund shares are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other government agency. Yields and total returns
will fluctuate and past performance is no guarantee of future results. Total
return figures include reinvestment of dividends. Returns and yields reflect
certain voluntary fee waivers. If the waivers were not in place, the Fund's
returns and yields would have been lower.
4
<PAGE>
CITIFUNDS INSTITUTIONAL CASH RESERVES
PORTFOLIO OF INVESTMENTS August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
CERTIFICATES OF DEPOSIT (DOMESTIC) -- 5.1%
--------------------------------------------------------------------------------
BankAmerica,
6.64% due 11/03/00 $20,000 $ 20,000,000
Restructured Asset,
6.64% due 6/22/01 10,000 10,000,000
------------
30,000,000
------------
CERTIFICATES OF DEPOSIT (YANKEE) -- 23.1%
--------------------------------------------------------------------------------
Australia & New Zealand Banking,
6.67% due 9/06/00 15,000 14,999,931
Barclays Bank Plc.,
5.90% due 10/02/00 17,000 16,984,368
Bayerische Hypo,
6.52% due 9/29/00 20,000 20,000,155
Bayerische Landesbank,
6.54% due 10/11/00 20,000 20,000,220
Canadian Imperial Bank,
6.55% due 12/29/00 20,000 20,000,000
Credit Suisse First Boston,
6.62% due 9/11/00 10,000 10,000,151
Kredietbank,
6.70% due 2/15/01 15,000 14,966,949
Toronto Dominion Bank,
6.63% due 10/20/00 20,000 20,000,268
------------
136,952,042
------------
COMMERCIAL PAPER -- 55.2%
--------------------------------------------------------------------------------
Allianz of America Finance,
6.50% due 11/13/00 18,000 17,762,750
Asset Portfolio Funding Corp.,
6.62% due 9/18/00 12,000 11,962,487
AT&T Corp.,
6.61% due 10/02/00 10,301 10,242,367
6.55% due 1/31/01 10,000 9,723,444
Atlantis One Funding Corp.,
6.59% due 12/14/00 6,000 5,885,773
Brahms Funding Corp.,
6.64% due 9/22/00 15,000 14,941,882
Cregem North America,
6.54% due 2/06/01 12,000 11,655,560
E. I. Du Pont de
Nemours & Co.,
6.46% due 9/28/00 20,000 19,903,100
General Electric Capital Corp.,
6.48% due 9/15/00 20,000 19,949,600
K2 USA,
6.58% due 12/01/00 9,000 8,850,305
6.53% due 2/15/01 14,000 13,575,913
Marsh USA Inc.,
6.57% due 1/16/01 15,000 14,624,962
Moriarty Ltd.,
6.56% due 12/11/00 10,000 9,815,956
Motorola Inc.,
6.47% due 9/29/00 16,756 16,671,680
National Rural Utilities,
6.62% due 9/14/00 15,000 14,964,142
Oesterreichische,
6.66% due 11/16/00 14,675 14,468,669
Province de Quebec,
6.60% due 10/23/00 15,000 14,857,000
Reed Elsevier,
6.50% due 9/14/00 20,000 19,953,056
Santander Finance,
6.55% due 1/31/01 20,000 19,446,889
Sigma Finance Inc.,
6.52% due 2/28/01 10,000 9,674,000
Trident Capital Finance Inc.,
6.51% due 9/06/00 16,050 16,035,488
Wal-Mart Stores Inc.,
6.48% due 9/26/00 12,500 12,443,750
Wisconsin Electric
Power Co.,
6.48% due 9/21/00 20,000 19,928,000
------------
327,336,773
------------
FLOATING RATE NOTES -- 3.4%
--------------------------------------------------------------------------------
Steers,
6.86% due 10/02/00 10,000 10,000,000
Strategic Money Market Fund,
6.75% due 1/25/01 10,000 10,000,000
------------
20,000,000
------------
TIME DEPOSITS -- 10.0%
--------------------------------------------------------------------------------
Branch Banking & Trust,
6.56% due 9/01/00 29,542 29,542,000
Wachovia Bank & Trust,
6.56% due 9/01/00 29,542 29,542,000
------------
59,084,000
------------
UNITED STATES GOVERNMENT AGENCY -- 3.3%
--------------------------------------------------------------------------------
Federal Home Loan Mortgage Discount Notes,
6.45% due 9/26/00 20,000 19,910,417
------------
TOTAL INVESTMENTS,
AT AMORTIZED COST 100.1% 593,283,232
OTHER ASSETS,
LESS LIABILITIES (0.1) (856,735)
----- ------------
NET ASSETS 100.0% $592,426,497
===== ============
See notes to financial statements
5
<PAGE>
CITIFUNDS INSTITUTIONAL CASH RESERVES
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2000
================================================================================
ASSETS:
Investments, at amortized cost (Note 1A) $593,283,232
Cash 278
Interest receivable 2,418,309
--------------------------------------------------------------------------------
Total assets 595,701,819
--------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 3,057,619
Payable to affiliate - Management fees (Note 3) 48,521
Accrued expenses and other liabilities 169,182
--------------------------------------------------------------------------------
Total liabilities 3,275,322
--------------------------------------------------------------------------------
NET ASSETS $592,426,497
================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $592,426,497
================================================================================
CLASS L SHARES:
Net Asset Value, Offering Price and Redemption Price Per Share
($496,067,731/496,067,731 shares outstanding) $1.00
================================================================================
CLASS S SHARES:
Net Asset Value, Offering Price and Redemption Price Per Share
($96,358,766/96,358,766 shares outstanding) $1.00
================================================================================
CITIFUNDS INSTITUTIONAL CASH RESERVES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000
================================================================================
INVESTMENT INCOME (Note 1B) $ 25,624,067
EXPENSES:
Management fees (Note 3) $ 824,464
Distribution fees Class L (Note 4) 375,743
Distribution fees Class S (Note 4) 91,249
Custody and fund accounting fees 151,357
Transfer agent fees 58,941
Registration fees 56,535
Legal fees 49,994
Audit fees 33,200
Shareholder reports 22,698
Trustees' fees 8,873
Miscellaneous 23,580
--------------------------------------------------------------------------------
Total expenses 1,696,634
Less aggregate amounts waived by
the Manager and Distributor
(Notes 3 and 4) (596,603)
--------------------------------------------------------------------------------
Net expenses 1,100,031
--------------------------------------------------------------------------------
Net investment income $ 24,524,036
================================================================================
See notes to financial statements
6
<PAGE>
CITIFUNDS INSTITUTIONAL CASH RESERVES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
----------------------------------
2000 1999
================================================================================
INCREASE (DECREASE) IN NET ASSETS
FROM OPERATIONS:
Net investment income, declared as
dividends to shareholders (Note 2) $ 24,524,036 $ 14,341,228
================================================================================
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST AT NET ASSET VALUE OF
$1.00 PER SHARE (Note 5):
CLASS L
Proceeds from sale of shares 4,240,314,846 2,452,254,402
Net asset value of shares issued
to shareholders from reinvestment
of dividends 566,658 817
Cost of shares repurchased (4,133,752,454) (2,308,836,048)
--------------------------------------------------------------------------------
Total Class L 107,129,050 143,419,171
--------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL
INTEREST AT NET ASSET VALUE OF
$1.00 PER SHARE (Note 5):
CLASS S*
Proceeds from sale of shares 343,195,716 --
Net asset value of shares issued
to shareholders from reinvestment
of dividends 432,868 --
Cost of shares repurchased (247,269,818) --
--------------------------------------------------------------------------------
Total Class S 96,358,766 --
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 203,487,816 143,419,171
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 388,938,681 245,519,510
--------------------------------------------------------------------------------
End of period $ 592,426,497 $ 388,938,681
================================================================================
* October 6, 1999 (Commencement of Operations) to August 31, 2000
See notes to financial statements
7
<PAGE>
CITIFUNDS INSTITUTIONAL CASH RESERVES
FINANCIAL HIGHLIGHTS
CLASS L
---------------------------------------------
FOR THE PERIOD
OCTOBER 17, 1997+
YEAR ENDED AUGUST 31, TO
------------------------ AUGUST 31,
2000 1999 1998
================================================================================
Net Asset Value, beginning
of period $1.00000 $1.00000 $1.00000
Net investment income 0.05827 0.04930 0.04736
Less dividends from net
investment income (0.05827) (0.04930) (0.04736)
--------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000 $1.00000 $1.00000
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
(000's omitted) $496,068 $388,939 $245,520
Ratio of expenses to average
net assets 0.25% 0.25% 0.25%*
Ratio of net investment income to
average net assets 5.93% 4.97% 5.47%*
Total return 5.98% 5.04% 4.84%**
Note: If agents of the Fund had not voluntarily waived all or a portion of their
fees from the Fund for the periods indicated and the expenses were not reduced
for the fees paid indirectly, the ratios and net investment income per share
would have been as follows:
Net investment income per share $0.05680 $0.04791 $0.04571
RATIOS:
Expenses to average net assets 0.40% 0.40% 0.44%*
Net investment income to
average net assets 5.78% 4.83% 5.28%*
================================================================================
CLASS S
------------------
FOR THE PERIOD
OCTOBER 6, 1999+
TO AUGUST 31, 2000
================================================================================
Net Asset Value, beginning of period $1.00000
Net investment income 0.05202
Less dividends from net investment income (0.05202)
--------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted) $ 96,359
Ratio of expenses to average net assets 0.40%*
Ratio of net investment income to average net assets 5.78%*
Total return 5.83%**
Note: If agents of the Fund had not waived all or a portion of their fees during
the period indicated, the net investment income per share and the ratios would
have been as follows:
Net investment income per share $0.05074
RATIOS:
Expenses to average net assets 0.55%*
Net investment income to average net assets 5.63%*
================================================================================
+ Commencement of Operations
* Annualized
** Not Annualized
See notes to financial statements
8
<PAGE>
CITIFUNDS INSTITUTIONAL CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds Institutional Cash Reserves (the
"Fund") is a separate non-diversified series of CitiFunds Institutional Trust
(the "Trust"), which is organized as a Massachusetts business trust and is
registered under the Investment Company Act of 1940, as amended, as an open-end,
management investment company. The Investment Manager of the Fund is Citibank,
N.A. ("Citibank"). CFBDS, Inc. ("CFBDS"), acts as the Fund's Sub-Administrator
and Distributor. Citibank is a wholly-owned subsidiary of Citigroup Inc.
The Fund offers Class L and Class S shares. The Fund commenced its public
offering of Class S shares on October 6, 1999. Each class has different
eligibility requirements and its own combination of charges and fees. 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 assets of the Fund, if the Fund were liquidated.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America 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 in
conformity with generally accepted accounting principles and are as follows:
A. VALUATION OF INVESTMENTS Money market instruments are valued at amortized
cost, which the Trustees have determined in good faith constitutes fair value.
This method involves valuing a Fund security at its cost and thereafter assuming
a constant amortization to maturity of any discount or premium. The Fund's use
of amortized cost is subject to the Fund's compliance with certain conditions as
specified under Rule 2a-7 of the Investment Company Act of 1940.
B. INTEREST INCOME AND EXPENSES Interest income consists of interest
accrued and discount earned (including both original issue and market discount)
on the investments of the Fund, accrued ratably to the date of maturity, plus or
minus net realized gain or loss, if any, on investments. Expenses of the Fund
are accrued daily.
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 net investment income. Accordingly, no
provision for federal income or excise tax is necessary.
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 in a series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund.
E. REPURCHASE AGREEMENTS It is the policy of the Fund to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry
9
<PAGE>
CITIFUNDS INSTITUTIONAL CASH RESERVES
NOTES TO FINANCIAL STATEMENTS (Continued)
System or to have segregated within the custodian bank's vault, all securities
held as collateral in support of repurchase agreement investments. Additionally,
procedures have been established by the Fund to monitor, on a daily basis, the
market value of the repurchase agreement's underlying investments to ensure the
existence of a proper level of collateral.
F. OTHER Purchases, and maturities and sales of money market instruments are
accounted for on the date of the transaction.
2. DIVIDENDS The net income of the Fund is determined once daily, as of 5:00 pm
Eastern Standard Time, and all of the net income of the Fund so determined is
declared as a dividend to shareholders of record at the time of such
determination. Dividends are distributed in the form of additional shares of the
Fund or, at the election of the shareholder, in cash on or prior to the last
business day of the month.
3. MANAGEMENT FEES Citibank is responsible for overall management of the Fund's
business affairs, and has a Management Agreement with the Fund. Citibank also
provides certain administrative services to the Fund. These administrative
services include providing general office facilities and supervising the overall
administration of the Fund. CFBDS acts as Sub-Administrator and performs such
duties and receives such compensation from Citibank as from time to time is
agreed to by Citibank and CFBDS. 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 of the officers and a Trustee of the Fund are officers
and a director of the Administrator or its affiliates.
The management fees paid to Citibank, as compensation for overall investment
management services amounted to $824,464 of which $404,260 was voluntarily
waived for the year ended August 31, 2000. The management fees are computed at
an annual rate of 0.20% of the Fund's average daily net assets.
4. DISTRIBUTION FEES The Fund has adopted a Service Plan for Class L and Class S
pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, in
which the Fund pays fees for distribution, sales, marketing and shareholder
services at an annual rate not to exceed 0.10% and 0.25% of the Fund's Class L
and Class S average daily net assets, respectively. The Distribution fee
amounted to $375,743 of which $192,343 was voluntarily waived for Class L, and
$91,249 for Class S for the year ended August 31, 2000.
5. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional Shares of Beneficial
Interest (without par value).
6. INVESTMENT TRANSACTIONS Purchases, and maturities and sales of money market
instruments aggregated $16,646,856,306 and $16,472,088,297, respectively, for
the year ended August 31, 2000.
10
<PAGE>
CITIFUNDS INSTITUTIONAL CASH RESERVES
NOTES TO FINANCIAL STATEMENTS
7. FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES The cost of investment
securities owned at August 31, 2000, for federal income tax purposes, amounted
to $593,283,232.
8. LINE OF CREDIT The Fund, along with other CitiFunds, entered into an
agreement with a bank which allows the Funds collectively to borrow up to $75
million for temporary or emergency purposes. Interest on borrowings, if any, is
charged to the specific fund executing the borrowing at the base rate of the
bank. The line of credit requires a quarterly payment of a commitment fee based
on the average daily unused portion of the line of credit. For the year ended
August 31, 2000, the commitment fee allocated to the Fund was $1,070. Since the
line of credit was established, there have been no borrowings.
11
<PAGE>
CITIFUNDS INSTITUTIONAL CASH RESERVES
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS OF
CITIFUNDS INSTITUTIONAL CASH RESERVES:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of CitiFunds Institutional Cash
Reserves, a separate series of CitiFunds Institutional Trust (the "Trust") (a
Massachusetts business trust), as of August 31, 2000, the related statement of
operations for the year then ended, the statement of changes in net assets for
the years ended August 31, 2000 and 1999 and the financial highlights for the
years ended August 31, 2000 and 1999 and for the period from October 17, 1997
(commencement of operations) to August 31, 1998. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
the securities owned as of August 31, 2000, by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of CitiFunds
Institutional Cash Reserves at August 31, 2000, the results of its operations,
the changes in its net assets, and its financial highlights for the respective
stated periods in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 4, 2000
12
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TRUSTEES AND OFFICERS
Philip W. Coolidge*, President
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Heath B. McLendon**
SECRETARY
Robert Frenkel**
TREASURER
Linwood Downs*
* AFFILIATED PERSON OF ADMINISTRATOR AND DISTRIBUTOR
** AFFILIATED PERSON OF INVESTMENT MANAGER
INVESTMENT MANAGER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
DISTRIBUTOR
CFBDS, Inc.
21 Milk Street 5th Floor, Boston, MA 02109
(617) 423-1679
TRANSFER AGENT
CitiFiduciary Trust Company
125 Broad Street, New York, NY 10004
SUB-TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
Deloitte & Touche LLP
200 Berkeley Street, Boston, MA 02116
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
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This report is prepared for the information of shareholders of CitiFunds
Institutional Cash Reserves. It is authorized for distribution to prospective
investors only when preceded or accompanied by an effective prospectus of
CitiFunds Institutional Cash Reserves.
(C) 2000 Citicorp [RECYCLE LOGO] Printed on recycled paper CFA/INS.CR/800
