-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NVUmJZjRy0LTatSJvHWrr81jgRlelfqIMZHcjLMdFNflfR9yFiV9hfmxsggQ7f7Y yTlrm5rz2sMBEV8Z7xkihQ== 0000930413-99-001003.txt : 19990820 0000930413-99-001003.hdr.sgml : 19990820 ACCESSION NUMBER: 0000930413-99-001003 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990819 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CITIFUNDS FIXED INCOME TRUST CENTRAL INDEX KEY: 0000795808 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: SEC FILE NUMBER: 811-05033 FILM NUMBER: 99695792 BUSINESS ADDRESS: STREET 1: 21 MILK STREET STREET 2: 5TH FLOOR CITY: BOSTON STATE: MA ZIP: 02109 BUSINESS PHONE: 6174231679 FORMER COMPANY: FORMER CONFORMED NAME: LANDMARK FIXED INCOME FUNDS/ DATE OF NAME CHANGE: 19931117 FORMER COMPANY: FORMER CONFORMED NAME: LANDMARK FIXED INCOME FUNCS/DE DATE OF NAME CHANGE: 19931115 FORMER COMPANY: FORMER CONFORMED NAME: LANDMARK U S GOVERNMENT INCOME FUND DATE OF NAME CHANGE: 19920703 N-30B-2 1 SHORT TERM U.S. GOV'T INC. PORT. (SAR) SEMI-ANNUAL REPORT o JUNE 30, 1999 CITIFUNDS(sm) - -------------- Short-Term U.S. Government Income Portfolio - -------------------------------------------------------------------------------- INVESTMENT PRODUCTS: NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE - -------------------------------------------------------------------------------- BONDS TABLE OF CONTENTS Letter to Our Shareholders 1 - -------------------------------------------------------------------------------- Portfolio Environment and Outlook 2 - -------------------------------------------------------------------------------- Fund Facts 3 - -------------------------------------------------------------------------------- Fund Performance 4 - -------------------------------------------------------------------------------- CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO Statement of Assets and Liabilities 5 - -------------------------------------------------------------------------------- Statement of Operations 6 - -------------------------------------------------------------------------------- Statement of Changes in Net Assets 7 - -------------------------------------------------------------------------------- Financial Highlights 8 - -------------------------------------------------------------------------------- Notes to Financial Statements 9 - -------------------------------------------------------------------------------- GOVERNMENT INCOME PORTFOLIO Portfolio of Investments 13 - -------------------------------------------------------------------------------- Statement of Assets and Liabilities 14 - -------------------------------------------------------------------------------- Statement of Operations 14 - -------------------------------------------------------------------------------- Statement of Changes in Net Assets 15 - -------------------------------------------------------------------------------- Financial Highlights 15 - -------------------------------------------------------------------------------- Notes to Financial Statements 16 - -------------------------------------------------------------------------------- LETTER TO OUR SHAREHOLDERS Dear CitiFunds Shareholder: This semi-annual report covers the period from January 1, 1999 through June 30, 1999, for the CitiFundsSM Short-Term U.S. Government Income Portfolio. Inside, the CitiFunds' investment manager, Citibank, N.A., discusses the market conditions it faced, the strategies it employed and its outlook for the future. The past six months have been a study in contrasts for investor sentiment and the financial markets. When the period began, investors were primarily concerned that economic weakness overseas might constrain growth in the United States. As a result, they favored bonds and stocks with predictable earnings growth. When the period ended, investors were mainly worried that the economy might be growing too fast, potentially awakening long-dormant inflation pressures. In this environment, they avoided bonds and favored stocks that are sensitive to changes in the economic cycle. Thank you for your continued confidence and participation. Sincerely, /s/Philip W. Coolidge - --------------------- Philip W. Coolidge President July 23, 1999 1 PORTFOLIO ENVIRONMENT AND OUTLOOK THE FIRST SIX MONTHS OF 1999 EXPERIENCED STRONGER-THAN-EXPECTED ECONOMIC GROWTH BOTH IN THE UNITED STATES AND IN KEY OVERSEAS MARKETS, INCLUDING JAPAN, SOUTHEAST ASIA AND LATIN AMERICA. As a result, fears regarding the potentially adverse effects of overseas recessions on U.S. economic growth, which prevailed at the end of 1998, quickly faded. Instead, investors grew concerned that global economic strength might become unsustainable, triggering a reacceleration of inflation. To forestall a potential resurgence of inflation, the Federal Reserve Board ("Fed") increased key short-term interest rates modestly on June 30, effectively offsetting a portion of last fall's rate cuts. IN THIS ENVIRONMENT, PRICES OF U.S. TREASURY SECURITIES DECLINED SHARPLY. IN FACT, TREASURIES DECLINED MORE SHARPLY THAN VIRTUALLY ANY OTHER SECTOR OF THE U.S. FIXED-INCOME MARKETPLACE. That's partly because these direct obligations of the federal government performed extremely well in the second half of 1998, when domestic and foreign investors flocked to them in droves as a safe haven amid global economic turmoil. When it became clearer in 1999 that the world's economic crisis was abating, investors became more comfortable with riskier, higher yielding investments, and they shifted assets away from U.S. Treasury securities. As a result, 30-year U.S. Treasury bonds declined over the first six months of 1999. During the first three months of the reporting period, mortgage-backed securities received some of the assets flowing out of the U.S. Treasury market. It is also partly because modestly higher interest rates helped alleviate the likelihood that homeowners might refinance their mortgages. When mortgage prepayments occur at a higher-than-expected rate, principal may be returned to investors and must be reinvested at a lower yield than it had earned previously. In the second quarter, while higher interest rates hurt the performance of mortgage-backed securities, they continued to offer more attractive returns than U.S. Treasuries. IN THIS ENVIRONMENT, MANAGEMENT SHIFTED ASSETS BETWEEN THE DIFFERENT SECTORS OF THE U.S. GOVERNMENT SECURITIES MARKET IN AN ATTEMPT TO CAPTURE HIGHER YIELDS WHENEVER POSSIBLE. Accordingly, as of June 30, approximately 20% of the Short-Term U.S. Government Income Portfolio was allocated to mortgage-backed securities, 64% of the Portfolio was composed of U.S. Treasury securities, and 16% constituted cash awaiting reinvestment. Within the U.S. Treasury securities portion of the portfolio, the Portfolio's manager emphasized "off the run" (OTR) Treasuries. OTR Treasuries are securities that were issued before the most recent Treasury auction. Because many investors prefer to invest in the most recent issues, OTR Treasuries are considered less liquid and, therefore, they tend to offer higher yields. Over the past six months, OTR Treasuries provided higher total returns than current issues as the yield differences between the two types of bonds narrowed, which helped the Portfolio's performance. On the other hand, the Portfolio's slightly long duration, a measure of sensitivity to changing interest rates, constrained returns modestly. Because the longer term securities within the Portfolio's range provided higher yields than shorter 2 term securities, it maintained some positions in bonds with maturities of three years or more. These longer term holdings effectively extended the Portfolio's average duration toward the long end of neutral. When short-term interest rates rose, this position limited the Portfolio's ability to quickly purchase higher yielding securities as they became available. According to the portfolio managers, the outlook for the short-term U.S. government securities market is cautiously optimistic. Their forecast calls for a continuation of positive growth and low inflation. While it is possible that the Fed may continue to raise short-term interest rates modestly to prevent inflation pressures from taking root, management believes that the fixed-income markets have already incorporated an incrementally tighter monetary policy into bond prices. Accordingly, they intend to maintain the Portfolio's current sector allocation and duration management strategies until prevailing economic conditions change. That means that management will continue to emphasize higher yielding U.S. government securities, including mortgage-backed securities and OTR Treasuries. Also, they expect to maintain the Portfolio's neutral-to-long average duration, potentially enabling the Portfolio to maintain higher yields longer if interest rates decline. Of course, if conditions change, the manager is prepared to reposition the Portfolio to attempt to capture the opportunities that the future may present. FUND FACTS FUND OBJECTIVE To generate current income and preserve the value of its shareholders' investment. INVESTMENT ADVISER, GOVERNMENT INCOME PORTFOLIO Citibank, N.A. COMMENCEMENT OF OPERATIONS September 8, 1986 NET ASSETS AS OF 06/30/99 $37.9 million DIVIDENDS Paid monthly, if any CAPITAL GAINS Paid semi-annually, if any BENCHMARKS o Lipper Short U.S. Government Funds Average o Lehman Brothers 1-3 Year U.S. Government Index* o The Lehman Brothers 1-3 year U.S. Government Index is a broad measure of the performance of short-term government bonds. 3 FUND Performance TOTAL RETURNS
ALL PERIODS ENDED JUNE 30, 1999 SIX ONE FIVE TEN (UNAUDITED) MONTHS** YEAR YEARS* YEARS* ===================================================================================================== CitiFunds Short-Term U.S. Government Income Portfolio without sales charge 0.58% 4.10% 5.55% 6.26% Lipper Short U.S. Government Funds Average 1.02% 4.17% 5.54% 5.97% Lehman Brothers 1-3 Year U.S. Government Index 1.15% 5.05% 6.31% 6.83% CitiFunds Short-Term U.S. Government Income Portfolio with a maximum sales charge of 1.50% (0.93)% 2.54% 5.23% 6.10%
* Average Annual Total Return ** Not Annualized 30-Day SEC Yield 4.86% Income Dividends Per Share $0.216 GROWTH OF A $10,000 INVESTMENT A $10,000 investment in the Fund made ten years ago would have grown to $18,072 with sales charge (as of 6/30/99). The graph shows how the Fund compares to its benchmarks over the same period. [The following table represents a chart in the printed material] Lipper Short Lehman 1-3 Year CitiFunds Short-Term U.S. Government U.S. Government U.S. Government Date Income Funds Avg. Index (unmanaged) Income Portfolio - -------------------------------------------------------------------------------- 6/30/89 10000 10000 9850 7/31/89 10142 10147 10039 8/31/89 10070 10088 9850 9/30/89 10119 10146 9878 10/31/89 10283 10304 10156 11/30/89 10369 10397 10246 12/31/89 10409 10437 10262 1/31/90 10393 10448 10081 2/28/90 10441 10504 10092 3/31/90 10473 10535 10078 4/30/90 10484 10560 9915 5/31/90 10640 10722 10244 6/30/90 10749 10835 10419 7/31/90 10875 10966 10568 8/31/90 10892 11006 10415 9/30/90 10973 11092 10497 10/31/90 11085 11215 10638 11/30/90 11206 11324 10880 12/31/90 11332 11457 11073 1/31/91 11435 11565 11198 2/28/91 11500 11639 11262 3/31/91 11564 11717 11306 4/30/91 11670 11829 11419 5/31/91 11736 11900 11477 6/30/91 11761 11944 11429 7/31/91 11875 12047 11603 8/31/91 12043 12212 11878 9/30/91 12182 12341 12168 10/31/91 12307 12475 12282 11/30/91 12423 12603 12348 12/31/91 12632 12794 12600 1/31/92 12558 12777 12515 2/29/92 12525 12815 12574 3/31/92 12452 12811 12553 4/30/92 12554 12928 12626 5/31/92 12686 13048 12791 6/30/92 12818 13179 12925 7/31/92 12972 13331 13090 8/31/92 13078 13439 13177 9/30/92 13186 13565 13294 10/31/92 13083 13487 13169 11/30/92 13062 13467 13153 12/31/92 13187 13593 13300 1/31/93 13353 13735 13477 2/28/93 13480 13844 13610 3/31/93 13523 13887 13658 4/30/93 13599 13972 13742 5/31/93 13583 13938 13698 6/30/93 13709 14042 13849 7/31/93 13746 14072 13843 8/31/93 13881 14189 14045 9/30/93 13920 14234 14102 10/31/93 13943 14266 14133 11/30/93 13903 14268 14063 12/31/93 13953 14325 14109 1/31/94 14048 14414 14194 2/28/94 13931 14327 14037 3/31/94 13788 14254 13872 4/30/94 13690 14200 13768 5/31/94 13665 14219 13796 6/30/94 13664 14255 13794 7/31/94 13775 14383 13938 8/31/94 13806 14431 13966 9/30/94 13758 14398 13891 10/31/94 13766 14431 13905 11/30/94 13711 14371 13829 12/31/94 13741 14399 13867 1/31/95 13912 14595 14075 2/28/95 14111 14793 14269 3/31/95 14184 14877 14343 4/30/95 14306 15010 14492 5/31/95 14588 15266 14825 6/30/95 14661 15348 14900 7/31/95 14678 15409 14883 8/31/95 14785 15501 14990 9/30/95 14870 15577 15066 10/31/95 15002 15706 15188 11/30/95 15146 15840 15343 12/31/95 15272 15959 15459 1/31/96 15382 16094 15568 2/29/96 15311 16032 15440 3/31/96 15293 16020 15374 4/30/96 15296 16036 15341 5/31/96 15314 16072 15339 6/30/96 15417 16188 15434 7/31/96 15468 16252 15485 8/31/96 15509 16312 15518 9/30/96 15643 16460 15651 10/31/96 15807 16646 15833 11/30/96 15930 16769 15951 12/31/96 15925 16773 15926 1/31/97 16000 16853 16011 2/28/97 16042 16894 16046 3/31/97 16013 16880 15997 4/30/97 16130 17019 16134 5/31/97 16225 17138 16238 6/30/97 16311 17256 16342 7/31/97 16481 17444 16532 8/31/97 16487 17461 16534 9/30/97 16601 17594 16639 10/31/97 16717 17724 16780 11/30/97 16754 17769 16799 12/31/97 16836 17888 16899 1/31/98 16979 18059 17076 2/28/98 16991 18076 17078 3/31/98 17049 18146 17133 4/30/98 17115 18233 17203 5/31/98 17203 18330 17290 6/30/98 17278 18425 17360 7/31/98 17348 18512 17431 8/31/98 17524 18738 17647 9/30/98 17738 18991 17882 10/31/98 17768 19084 17934 11/30/98 17765 19065 17914 12/31/98 17816 19137 17968 1/31/99 17902 19210 18016 2/28/99 17832 19123 17916 3/31/99 17937 19253 18020 4/30/99 18007 19313 18087 5/31/99 17991 19300 18042 6/30/99 17998 19356 18072 The graph includes the initial sales charge on the Fund (no comparable charge exists for the other indices) and assumes all dividends and distributions from the Fund are reinvested at Net Asset Value. Notes: All Fund performance numbers represent past performance, and are no guarantee of future results. The Fund's share price and investment return will fluctuate, so that the value of an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns include change in share price and reinvestment of dividends and distributions, if any. Total return figures are provided in accordance with SEC guidelines for comparative purposes for prospective investors. Returns reflect certain voluntary fee waivers. If the waivers were not in place, the Fund's return would have been lower. The maximum sales charge of 1.50% went into effect on January 4, 1999. Investors may not invest directly in an index. 4 CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 (Unaudited) ================================================================================ ASSETS: Investment in Government Income Portfolio, at value (Note 1A) $37,993,232 Receivable for shares of beneficial interest sold 11,667 Receivable from the Administrator 24,541 - -------------------------------------------------------------------------------- Total assets 38,029,440 - -------------------------------------------------------------------------------- LIABILITIES: Payable for shares of beneficial interest repurchased 52,900 Payable to affiliates--Shareholder Servicing Agents' fees (Note 2B) 7,895 Accrued expenses and other liabilities 73,756 - -------------------------------------------------------------------------------- Total liabilities 134,551 - -------------------------------------------------------------------------------- Net Assets for 3,958,326 shares of beneficial interest outstanding $37,894,889 ================================================================================ NET ASSETS CONSIST OF: Paid-in capital $41,083,628 Accumulated net realized loss (2,367,683) Unrealized depreciation (888,756) Undistributed net investment income 67,700 - -------------------------------------------------------------------------------- Total $37,894,889 ================================================================================ COMPUTATION OF: Net Asset Value, per share $9.57 Offering Price per share ($9.57 / 0.985) $9.72* ================================================================================ * Based upon single purchases of less than $50,000 5 CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 (Unaudited) ================================================================================ INVESTMENT INCOME (Note 1B): Interest Income from Government Income Portfolio $1,268,248 Allocated Expenses from Government Income Portfolio (77,178) - -------------------------------------------------------------------------------- $ 1,191,070 - -------------------------------------------------------------------------------- EXPENSES: Administrative fees (Note 2A) $ 54,771 Shareholder Servicing Agents fees (Note 2B) 54,771 Distribution fees (Note 3) 32,862 Shareholder reports 14,998 Custody and fund accounting fees 9,956 Audit fees 8,100 Trustee fees 5,686 Transfer agent fees 3,000 Legal fees 2,102 Miscellaneous 3,573 - -------------------------------------------------------------------------------- Total expenses 189,819 Less aggregate amount waived by Administrator and Distributor (Notes 2A and 3) (87,633) Less Expenses Assumed by the Administrator (Note 6) (3,598) - -------------------------------------------------------------------------------- Net expenses 98,588 - -------------------------------------------------------------------------------- Net investment income 1,092,482 - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN FROM GOVERNMENT INCOME PORTFOLIO: Net realized gain 25,012 Unrealized depreciation of investments (791,693) - -------------------------------------------------------------------------------- Net realized and unrealized loss from Government Income Portfolio (766,681) - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 325,801 ================================================================================ See notes to financial statements 6 CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED JUNE 30, 1999 DECEMBER 31, (Unaudited) 1998 ========================================================================================================== INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS: Net investment income $ 1,092,482 $ 1,448,972 Net realized gain 25,012 230,601 Unrealized appreciation (depreciation) of investments (791,693) 40,666 - ---------------------------------------------------------------------------------------------------------- Net increase in net assets resulting from operations 325,801 1,720,239 - ---------------------------------------------------------------------------------------------------------- DISTRIBUTION TO SHAREHOLDERS FROM: Net investment income (1,039,439) (1,442,038) - ---------------------------------------------------------------------------------------------------------- TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 5): Net proceeds from sale of shares 3,557,454 36,423,583 Net asset value of shares issued to shareholders from reinvestment of dividends 1,000,707 1,435,786 Cost of shares repurchased (13,983,731) (10,340,734) - ---------------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets from transactions in shares of beneficial interest (9,425,570) 27,518,635 - ---------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (10,139,208) 27,796,836 - ---------------------------------------------------------------------------------------------------------- NET ASSETS: Beginning of period 48,034,097 20,237,261 - ---------------------------------------------------------------------------------------------------------- End of period (including undistributed net investment income of $67,700 and $14,657, respectively) $ 37,894,889 $ 48,034,097 ========================================================================================================== See notes to financial statements
7 CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO FINANCIAL HIGHLIGHTS
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, 1999 ------------------------------------------------------------------- (Unaudited) 1998 1997 1996 1995 1994+ ================================================================================================================================== Net Asset Value, beginning of period $9.73 $9.61 $9.55 $9.78 $9.28 $9.91 - ---------------------------------------------------------------------------------------------------------------------------------- Income From Operations: Net investment income 0.230 0.473 0.504 0.516 0.543 0.466 Net realized and unrealized gain (loss) (0.174) 0.121 0.064 (0.232) 0.500 (0.635) - ---------------------------------------------------------------------------------------------------------------------------------- Total from operations 0.056 0.594 0.568 0.284 1.043 (0.169) - ---------------------------------------------------------------------------------------------------------------------------------- Less Distributions From: Net investment income (0.216) (0.474) (0.508) (0.514) (0.543) (0.461) - ---------------------------------------------------------------------------------------------------------------------------------- Total distributions (0.216) (0.474) (0.508) (0.514) (0.543) (0.461) - ---------------------------------------------------------------------------------------------------------------------------------- Net Asset Value, end of period $9.57 $9.73 $9.61 $9.55 $9.78 $9.28 ================================================================================================================================== RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's omitted) $37,895 $48,034 $20,237 $26,744 $35,525 $52,933 Ratio of expenses to average net assets (A) 0.80%* 0.80% 0.80% 0.80% 0.80% 0.80% Ratio of net investment income to average net assets 4.99%* 4.98% 5.20% 5.31% 5.38% 4.72% Portfolio turnover (B) -- -- -- -- -- 22% Total return 0.58%** 6.33% 6.11% 3.02% 11.48% (1.72)% Note: If Agents of the Fund for the periods indicated and Agents of Government Income Portfolio for the periods after May 1, 1994 had not voluntarily waived a portion of their fees and assumed Fund expenses, the net investment income per share and the ratios would have been as follows: Net investment income per share $0.207 $0.413 $0.442 $0.460 $0.499 $0.421 RATIOS: Expenses to average net assets (A) 1.27%* 1.42% 1.43% 1.38% 1.23% 1.26% Net investment income to average net assets 4.52%* 4.36% 4.57% 4.73% 4.95% 4.26% =================================================================================================================================
(A) Includes the Fund's share of Government Income Portfolio allocated expenses for the periods subsequent to May 1, 1994. (B) Portfolio turnover represents the rate of portfolio activity for the period while the Fund was making investments directly in securities. The portfolio turnover rate for the period since the Fund transferred all of its investable assets to the Portfolio is shown in the Portfolio's financial statements which are included elsewhere in this report. + On May 1, 1994, the Fund began investing all its investable assets in Government Income Portfolio. * Annualized ** Not Annualized See notes to financial statements 8 CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES The CitiFunds Short-Term U.S. Government Income Portfolio (the "Fund") is a separate diversified series of CitiFunds Fixed Income Trust (the "Trust"), a Massachusetts business trust. The Trust is registered under the Investment Company Act of 1940, as amended, as a diversified open-end, management investment company. The Fund invests all of its investable assets in Government Income Portfolio (the "Portfolio"), a management investment company for which Citibank, N.A. ("Citibank") serves as Investment Adviser. The value of such investment reflects the Fund's proportionate interest (60.6% at June 30, 1999) in the net assets of the Portfolio. CFBDS, Inc. ("CFBDS") acts as the Fund's Administrator and Distributor. Citibank also serves as Sub-Administrator and makes Fund shares available to customers as Shareholder Servicing Agent. Citibank is a wholly-owned subsidiary of Citicorp, which in turn, is a wholly-owned subsidiary of Citigroup Inc. The financial statements of the Portfolio, including the portfolio of investments, are contained elsewhere in this report and should be read in conjunction with the Fund's financial statements. The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosure in the financial statements. Actual results could differ from those estimates. The significant accounting policies consistently followed by the Fund are as follows: A. Investment Valuation Valuation of securities by the Portfolio is discussed in Note 1A of the Portfolio's Notes to Financial Statements, which are included elsewhere in this report. B. Investment Income The Fund earns income, net of Portfolio expenses, daily based on its investment in the Portfolio. C. Federal Taxes The Fund's policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders all of its taxable income, including any net realized gain on investment transactions. Accordingly, no provision for federal income or excise tax is necessary. At December 31, 1998, the Fund, for federal income tax purposes, had a capital loss carryover of $2,428,993, of which $1,551,556 will expire on December 31, 2002, $329,508 will expire on December 31, 2003, $367,655 will expire on December 31, 2004, and $180,274 will expire on December 31, 2005. Such capital loss carryover will reduce the Fund's taxable income arising from future net realized capital gain on investment transactions, if any, to the extent permitted by the Internal Revenue Code, and thus will reduce the amount of the 9 CITIFUNDS SHORT TERM U.S. GOVERNMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income or excise tax. D. Expenses The Fund bears all costs of its operations other than expenses specifically assumed by Citibank and CFBDS. Expenses incurred by the Trust with respect to any two or more funds or series are allocated in proportion to the average net assets of each fund, except when allocations of direct expenses to each fund can otherwise be made fairly. Expenses directly attributable to a fund are charged to that fund. The Fund's share of the Portfolio's expenses are charged against and reduce the amount of the Fund's investment in the Portfolio. E. Distributions Distributions to shareholders are recorded on ex-dividend date. The amount and character of income and net realized gains to be distributed are determined in accordance with income tax rules and regulations, which may differ from generally accepted accounting principles. These differences are attributable to permanent book and tax accounting differences. Reclassifications are made to the Fund's capital accounts to reflect income and net realized gains available for distribution (or available capital loss carryovers) under income tax rules and regulations. F. Other All the net investment income and realized and unrealized gain and loss of the Portfolio is allocated pro rata, based on respective ownership interests, among the Fund and the other investors in the Portfolio at the time of such determination. Investment transactions are accounted for on a trade date basis. 2. ADMINISTRATIVE SERVICES PLAN The Trust has adopted an Administrative Services Plan which provides that the Trust, on behalf of the Fund, may obtain the services of an Administrator, one or more Shareholder Servicing Agents and other Servicing Agents and may enter into agreements providing for the payment of fees for such services. Under the Trust Administrative Services Plan, the aggregate of the fees paid to the Administrator from the Fund, the fees paid to the Shareholder Servicing Agents from the Fund under such Plan and the Basic Distribution Fee paid from the Fund to the Distributor under the Distribution Plan may not exceed 0.65% of the Fund's average daily net assets on an annualized basis for the Fund's then current fiscal year. A. Administrative Fees Under the terms of an Administrative Services Agreement, the administrative fees paid to the Administrator, as compensation for overall administrative services and general office facilities, may not exceed an annual rate of 0.25% of the Fund's average daily net assets. The Administrative fees amounted to $54,771, all of which was voluntarily waived for the six months ended June 30, 1999. Citibank acts as Sub-Administrator and performs duties and receives compensation from CFBDS from time to time as agreed to by CFBDS and Citibank. The Fund pays no compensation directly to any Trustee or any offi- 10 CITIFUNDS SHORT-TERM U.S. GOVERNMENT INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (Unaudited) cer who is affiliated with the Administrator, all of whom receive remuneration for their services to the Fund from the Administrator or its affiliates. Certain of the officers and a Trustee of the Fund are officers or directors of the Administrator or its affiliates. B. Shareholder Servicing Agents' Fees The Trust, on behalf of the Fund, has entered into shareholder servicing agreements with each Shareholder Servicing Agent pursuant to which that Shareholder Servicing Agent acts as an agent for its customers and provides other related services. For their services, each Shareholder Servicing Agent receives fees from the Fund, which may be paid periodically, which may not exceed, on an annualized basis, an amount equal to 0.25% of the average daily net assets of the Fund represented by shares owned during the period for which payment is being made by investors for whom such Shareholder Servicing Agent maintains a servicing relationship. Shareholder Servicing Agents fees amounted to $54,771, for the six months ended June 30, 1999. 3. DISTRIBUTION FEES The Trust has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, in which the Fund compensates the Distributor at an annual rate not to exceed 0.15% of the Fund's average daily net assets. The Distribution fees amounted to $32,862, all of which was voluntarily waived for the six months ended June 30, 1999. The Distributor may also receive an additional fee from the Fund not to exceed 0.05% of the Fund's average daily net assets in anticipation of, or as reimbursement for, advertising expenses incurred by the Distributor in connection with the sale of shares of the Fund. No payment of such additional fees has been made during the period. The Distributor has voluntarily agreed to waive this fee through June 30, 1999. 4. INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in the Portfolio for the six months ended June 30, 1999 aggregated $3,346,024 and $12,643,515, respectively. 11 CITIFUNDS SHORT TERM U.S. GOVERNMENT PORTFOLIO NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) 5. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). Transactions in shares of beneficial interest were as follows: SIX MONTHS ENDED YEAR ENDED JUNE 30, 1999 DECEMBER 31, (Unaudited) 1998 ================================================================================ Shares sold 368,038 3,752,548 Shares issued to shareholders from reinvestment of dividends 103,797 148,353 Shares repurchased (1,450,610) (1,068,844) - -------------------------------------------------------------------------------- Net increase (decrease) (978,775) 2,832,057 ================================================================================ 6. ASSUMPTION OF EXPENSES CFBDS has voluntarily agreed to pay a portion of the expenses of the Fund for the six months ended June 30, 1999, which amounted to $3,598. 12 GOVERNMENT INCOME PORTFOLIO PORTFOLIO OF INVESTMENTS June 30, 1999 (Unaudited) PRINCIPAL AMOUNT ISSUER (000'S OMITTED) VALUE - -------------------------------------------------------------------------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 19.2% - -------------------------------------------------------------------------------- 6.50%, 2009 $ 168 $ 166,989 6.50%, 2011 3,089 3,062,557 6.50%, 2019 610 612,194 7.00%, 2008 735 733,361 7.00%, 2009 2,000 2,015,612 7.00%, 2013 4,568 4,605,609 7.25%, 2022 194 194,765 8.00%, 2006 100 102,354 8.00%, 2007 112 115,555 8.00%, 2017 116 119,366 8.00%, 2021 127 131,446 8.00%, 2022 75 77,731 9.50%, 2016 1 1,140 9.50%, 2017 35 37,850 9.50%, 2018 23 25,397 9.50%, 2019 25 27,618 9.50%, 2020 27 28,601 ---------- TOTAL GOVERNMENT NATIONAL MORTGAGE ASSOCIATION 12,058,145 ---------- U.S. & OTHER GOVERNMENT OBLIGATIONS -- 64.2% - -------------------------------------------------------------------------------- Israel State U.S. Government Guaranteed Notes, 5.70% due 2/15/03 5,000 4,915,750 ---------- United States Treasury Notes, 6.875% due 3/31/00 4,500 4,554,135 5.375% due 6/30/00 5,000 5,003,100 4.625% due 11/30/00 4,500 4,451,490 4.875% due 3/31/01 2,000 1,979,680 5.00% due 4/30/01 2,000 1,983,120 5.625% due 11/30/00 3,500 3,509,310 6.50% due 08/31/01 5,000 5,093,750 6.625% due 04/30/02 8,500 8,725,760 ---------- 35,300,345 ---------- TOTAL U.S. & OTHER GOVERNMENT OBLIGATIONS 40,216,095 ---------- SHORT-TERM OBLIGATIONS -- 15.8% - -------------------------------------------------------------------------------- Dresdner Bank Repurchase Agreement 4.60% due 7/01/99 proceeds at maturity $5,000,639 (collateralized by $ 4,930,000 U.S. Treasury Note 6.25% due 2/15/07, valued at $5,043,236) $ 5,000,000 ----------- Westdeutsche Landesbank Repurchase Agreement 4.75% due 7/01/99 proceeds at maturity $4,866,642 (collateralized by $ 4,630,000 U.S. Treasury Note 7.875% due 8/15/01, valued at $4,963,473) 4,866,000 ----------- TOTAL SHORT-TERM OBLIGATIONS AT AMORTIZED COST 9,866,000 ----------- TOTAL INVESTMENTS (Identified Cost $63,298,321) 99.2% 62,140,240 OTHER ASSETS LESS LIABILITIES 0.8 518,513 ----- ----------- NET ASSETS 100.0% $62,658,753 ===== =========== See notes to financial statements 13 GOVERNMENT INCOME PORTFOLIO STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999 (Unaudited) ================================================================================ ASSETS: Investments at value (Note 1A) (Identified Cost, $63,298,321) $62,140,240 Cash 788 Interest receivable 535,740 - -------------------------------------------------------------------------------- Total assets 62,676,768 - -------------------------------------------------------------------------------- LIABILITIES: Payable to affiliates-Investment advisory fees (Note 2) 18,015 - -------------------------------------------------------------------------------- NET ASSETS $62,658,753 ================================================================================ REPRESENTED BY: Paid-in capital for beneficial interests $62,658,753 ================================================================================ GOVERNMENT INCOME PORTFOLIO STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999 (Unaudited) - -------------------------------------------------------------------------------- INVESTMENT INCOME: (Note 1B): $ 1,867,131 EXPENSES: Investment advisory fees (Note 2) $ 113,679 Administrative fees (Note 3) 16,240 - -------------------------------------------------------------------------------- Total expenses 129,919 Less aggregate amount waived by the Administrator (Note 3) (16,240) - -------------------------------------------------------------------------------- Net expenses 113,679 - -------------------------------------------------------------------------------- Net investment income 1,753,452 - -------------------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from investment transactions 41,850 Unrealized depreciation of investments (1,173,575) - -------------------------------------------------------------------------------- Net realized and unrealized loss on investments (1,131,725) - -------------------------------------------------------------------------------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $ 621,727 - -------------------------------------------------------------------------------- See notes to financial statements 14 GOVERNMENT INCOME PORTFOLIO STATEMENT OF CHANGES IN NET ASSETS SIX MONTHS ENDED YEAR ENDED JUNE 30, 1999 DECEMBER 31, (Unaudited) 1998 ================================================================================ INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS: Net investment income $ 1,753,452 $ 3,701,589 Net realized gain on investment transactions 41,850 495,657 Unrealized appreciation (depreciation) of investments (1,173,575) 134,572 - -------------------------------------------------------------------------------- Net increase in net assets resulting from operations 621,727 4,331,818 - -------------------------------------------------------------------------------- CAPITAL TRANSACTIONS: Proceeds from contributions 12,457,544 48,935,387 Value of withdrawals (34,567,302) (30,418,418) - -------------------------------------------------------------------------------- Net increase (decrease) in net assets from capital transactions (22,109,758) 18,516,969 - -------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN NET ASSETS (21,488,031) 22,848,787 - -------------------------------------------------------------------------------- NET ASSETS: Beginning of period 84,146,784 61,297,997 - -------------------------------------------------------------------------------- End of period $62,658,753 $84,146,784 ================================================================================ GOVERNMENT INCOME PORTFOLIO FINANCIAL HIGHLIGHTS
FOR THE PERIOD MAY 1, 1994 SIX MONTHS (COMMENCEMENT ENDED YEAR ENDED DECEMBER 31, OF OPERATIONS) TO JUNE 30, 1999 ----------------------------------- DECEMBER 31, (Unaudited) 1998 1997 1996 1995 1994 ========================================================================================================= RATIOS/SUPPLEMENTAL DATA: Net Assets, end of period (000's omitted) $62,659 $84,147 $61,298 $53,499 $53,145 $55,673 Ratio of expenses to average net assets 0.35%* 0.35% 0.35% 0.35% 0.36% 0.43%* Ratio of net investment income to average net assets 5.40%* 5.49% 5.65% 5.75% 5.80% 5,27%* Portfolio turnover 60% 288% 126% 100% 284% 40% Note: If Agents of the Portfolio had not voluntarily waived a portion of their fees during the periods indicated, the ratios would have been as follows: RATIOS: Expenses to average net assets 0.40%* 0.40% 0.41% 0.40% 0.40% 0.44%* Net investment income to average net assets 5.35%* 5.44% 5.59% 5.70% 5.76%* 5.26%* ==========================================================================================================
*Annualized See notes to financial statements 15 GOVERNMENT INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. SIGNIFICANT ACCOUNTING POLICIES The Government Income Portfolio (the "Portfolio"), a separate series of The Premium Portfolios (the "Portfolio Trust"), is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end management investment company which was organized as a trust under the laws of the State of New York. The Declaration of Trust permits the Trustees to issue beneficial interests in the Portfolio. The Investment Adviser of the Portfolio is Citibank, N.A. ("Citibank"). Signature Financial Group (Grand Cayman), Ltd. ("SFG") acts as the Portfolio's Administrator. Citibank is a wholly- owned subsidiary of Citicorp, which in turn, is a wholly owned subsidiary of Citigroup, Inc. The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The significant accounting policies consistently followed by the Portfolio are as follows: A. Investment Security Valuations Debt securities (other than short-term obligations maturing in 60 days or less) are valued on the basis of valuations furnished by pricing services approved by the Board of Trustees, which take into account appropriate factors such as institutional-size trading in similar groups of securities, yield, quality, coupon rate, maturity, type of issue, and other market data, without exclusive reliance on quoted prices or exchange or over-the counter prices. Short-term obligations maturing in 60 days or less are valued at amortized cost, which approximates market value. Securities, if any, for which there are no such valuations or quotations are valued at fair value as determined in good faith by or under guidelines established by the Trustees. B. Income Interest income consists of interest accrued and discount earned, adjusted for amortization of premium or discount on long-term debt securities when required for U.S. federal income tax purposes. Gain and loss from principal paydowns are recorded as income. 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. Expenses The Portfolio bears all costs of its operations other than expenses specifically assumed by Citibank and SFG. Expenses incurred by the Portfolio Trust with respect to any two or more portfolios or series are allocated in proportion to the average net assets of each portfolio, except when allocations of direct expenses to each portfolio can otherwise be made fairly. Expenses directly attributable to a portfolio are charged to that portfolio. 16 GOVERNMENT INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) E. Repurchase Agreements It is the policy of the Portfolio to require the custodian bank to take possession, to have legally segregated in the Federal Reserve Book Entry System or to have segregated within the custodian bank's vault, all securities held as collateral in support of repurchase agreements. Additionally, procedures have been established by the Portfolio to monitor, on a daily basis, the market value of the repurchase agreement's underlying investments to ensure the existence of a proper level of collateral. F. TBA Purchase Commitments The Portfolio enters into "TBA" (to be announced) purchase commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However, the amount of the commitment will not fluctuate more than 2.0% from the principal amount. The Portfolio holds, and maintains until the settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the Portfolio's other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, generally according to the procedures described under Note 1A. Although the Portfolio will generally enter into TBA purchase commitments with the intention of acquiring securities for its portfolio, the Portfolio may dispose of a commitment prior to settlement if the Portfolio's Adviser deems it appropriate to do so. G. Futures contracts The Portfolio may engage in futures transactions.The Portfolio may use futures contracts in order to protect the Portfolio from fluctuation in interest rates without actually buying or selling debt securities, or to manage the effective maturity or duration of fixed income securities in the Portfolio in an effort to reduce potential losses or enhance potential gains. Buying futures contracts tends to increase the Portfolio's exposure to the underlying instrument.Selling futures contracts tends to either decrease the Portfolio's exposure to the underlying instrument, or to hedge other Portfolio investments. Upon entering into a futures contract, the Portfolio is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the "initial margin". Subsequent payments ("variation margin") are made or received by the Portfolio each day, depending on the daily fluctuation of the value of the contract.The daily changes in contract value are recorded as unrealized gains or losses and the Portfolio recognizes a realized gain or loss when the contract is closed. Futures contracts are valued at the settlement price established by the board of trade or exchange on which they are traded. 17 GOVERNMENT INCOME PORTFOLIO Notes to Financial StatementS (Unaudited) There are several risks in connection with the use of futures contracts as a hedging device. The change in the value of futures contracts primarily corresponds with the value of their underlying instruments, which may not correlate with the change in the value of the hedged instruments. In addition, there is the risk the Portfolio may not be able to enter into a closing transaction because of an illiquid secondary market. Futures contracts involve, to varying degrees, risk of loss in excess of the futures variation margin reflected in the Statement of Assets and Liabilities. No such instruments were held at June 30, 1999. H. Other Investment transactions are accounted for on the date the investments are purchased or sold. Realized gains and losses are determined on the identified cost basis. 2. INVESTMENT ADVISORY FEES The investment advisory fees paid to Citibank, as compensation for overall investment management services, amounted to $113,679, for the six months ended June 30, 1999. The investment advisory fees are computed at the annual rate of 0.35% of the Portfolio's average daily net assets. 3. ADMINISTRATIVE FEES Under the terms of an Administrative Services Agreement, the administrative fees paid to the Administrator, as compensation for overall administrative services and general office facilities, are computed at the annual rate of 0.05% of the Portfolio's average daily net assets. The Administrative fees amounted to $16,240, all of which was voluntarily waived, for the six months ended June 30, 1999. Citibank acts as Sub-Administrator and performs certain duties and receives such compensation from SFG from time to time is agreed to by SFG and Citibank. 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 or directors of the Administrator or its affiliates. 4. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of U.S. Government securities, other than short-term obligations, aggregated $34,448,850 and $56,215,871, respectively, for the six months ended June 30, 1999. 5. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation (depreciation) in value of the investment securities owned at June 30, 1999, as computed on a federal income tax basis, are as follows: Aggregate cost $63,298,321 =============================================================================== Gross unrealized appreciation $ 27,259 Gross unrealized depreciation (1,185,340) - -------------------------------------------------------------------------------- Net unrealized depreciation $(1,158,081) =============================================================================== 18 GOVERNMENT INCOME PORTFOLIO NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued) 6. EXPENSE FEES SFG has entered into an expense agreement with the Portfolio. SFG has agreed to pay all of the ordinary operating expenses (excluding interest, taxes, brokerage commissions, litigation costs or other extraordinary costs or expenses) of the Portfolio, other than fees paid under the Advisory Agreement and Administrative Services Agreement. The Agreement may be terminated by either party upon not less than 30 days nor more than 60 days written notice. The Portfolio has agreed to pay SFG an expense fee on an annual basis, accrued daily and paid monthly; provided, however, that such fee shall not exceed the amount such that immediately after any such payment the aggregate ordinary expenses of the Portfolio less expenses waived by the Administrator would, on an annual basis, exceed an agreed upon rate, currently 0.35% of the Portfolio's average daily net assets. 7. LINE OF CREDIT The Portfolio, along with various other Portfolios in the CitiFunds family, entered into an ongoing agreement with a bank which allows the Portfolios collectively to borrow up to $75 million for temporary or emergency purposes. Interest on borrowings, if any, is charged to the specific Portfolio executing the borrowing at the base rate of the bank. The line of credit requires a quarterly payment of a commitment fee based on the average daily unused portion of the line of credit. For the six months ended June 30, 1999, the commitment fee allocated to the Portfolio was $83. Since the line of credit was established, there have been no borrowings. 19 This page intentionally left blank. TRUSTEES AND OFFICERS C. OscarMorong, Jr., CHAIRMAN Philip W. Coolidge*, PRESIDENT Riley C. Gilley Diana R. Harrington Susan B. Kerley Heath B. McLendon** Walter E. Robb, III E.Kirby Warren William S. Woods, Jr. SECRETARY Linda T. Gibson* TREASURER John R. Elder* * AFFILIATED PERSON OF ADMINISTRATOR AND DISTRIBUTOR ** AFFILIATED PERSON OF INVESTMENT ADVISER INVESTMENT ADVISER (OF GOVERNMENT INCOME PORTFOLIO) Citibank, N.A. 153 East 53rd Street, New York, NY 10043 ADMINISTRATOR AND DISTRIBUTOR CFBDS, Inc. 21 Milk Street, 5th Floor Boston, MA 02109 (617) 423-1679 TRANSFER AGENT AND CUSTODIAN State Street Bank and Trust Company 225 Franklin Street, Boston, MA 02110 AUDITORS PricewaterhouseCoopers LLP 160 Federal Street,Boston, MA 02110 LEGAL COUNSEL Bingham Dana LLP 150 Federal Street, Boston, MA 02110 THE CITIFUNDS FAMILY LARGE CAP STOCKS o CitiFunds Growth & Income Portfolio o CitiFunds Large Cap Growth Portfolio SMALL CAP STOCKS o CitiFunds Small Cap Growth Portfolio o CitiFunds Small Cap Value Portfolio INTERNATIONAL STOCKS o CitiFunds International Growth & Income Portfolio o CitiFunds International Growth Portfolio GROWTH WITH INCOME o CitiFunds Balanced Portfolio BONDS o CitiFunds Short-Term U.S. Government Income Portfolio o CitiFunds Intermediate Income Portfolio o CitiFunds National Tax Free Income Portfolio o CitiFunds New York Tax Free Income Portfolio o CitiFunds California Tax Free Income Portfolio MONEY MARKETS o CitiFunds Cash Reserves o CitiFunds U.S. Treasury Reserves o CitiFunds Tax Free Reserves o CitiFunds New York Tax Free Reserves o CitiFunds California Tax Free Reserves o CitiFunds Connecticut Tax Free Reserves This report is prepared for the information of shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by an effective prospectus. For more information contact your Service Agent or call 1-800-625-4554 CitiFunds are made available by CFBDS, Inc. as distributor. (C)1999 Citicorp R Printed on recycled paper CFS/USG/699 -----END PRIVACY-ENHANCED MESSAGE-----