UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-05813 LIQUID RESERVES PORTFOLIO (FORMERLY CASH RESERVES PORTFOLIO) (Exact name of registrant as specified in charter) 125 Broad Street, New York, NY 10004 (Address of principal executive offices) (Zip code) Robert I. Frenkel, Esq. Smith Barney Fund Management LLC 300 First Stamford Place Stamford, CT 06902 (Name and address of agent for service) Registrant's telephone number, including area code: (800) 451-2010 Date of fiscal year end: AUGUST 31 Date of reporting period: FEBRUARY 29, 2004ITEM 1. REPORT TO STOCKHOLDERS. The SEMI-ANNUAL Report to Stockholders is filed herewith.
Liquid Reserves Portfolio | ||
S C H E D U L E O F I N V E S T M E N T S | February 29, 2004 | |
(Unaudited) |
Principal | ||||||
Amount | ||||||
Issuer | (000 ’ s omitted) | Value | ||||
Asset Backed — 12.0% | ||||||
K2 USA LLC,* | ||||||
1.07% due 04/07/04 | $ | 140,000 | $ | 139,998,596 | ||
1.07% due 04/26/04 | 156,500 | 156,496,418 | ||||
1.07% due 05/18/04 | 75,000 | 74,996,891 | ||||
1.05% due 09/28/04 | 150,000 | 149,978,499 | ||||
Links Finance Corp.,* | ||||||
1.06% due 03/15/04 | 200,000 | 199,999,164 | ||||
1.06% due 06/16/04 | 100,000 | 99,991,230 | ||||
1.05% due 07/15/04 | 400,000 | 399,970,273 | ||||
1.05% due 01/18/05 | 250,000 | 249,956,233 | ||||
Premier Asset Coll | ||||||
Entity Ltd.,* | ||||||
1.06% due 04/26/04 | 100,000 | 99,998,474 | ||||
1.06% due 05/17/04 | 125,000 | 124,997,385 | ||||
Sigma Finance Corp.,* | ||||||
1.07% due 04/05/04 | 500,000 | 499,995,192 | ||||
1.06% due 04/28/04 | 100,000 | 99,997,622 | ||||
1.07% due 04/30/04 | 250,000 | 249,993,852 | ||||
1.05% due 07/15/04 | 373,000 | 372,965,350 | ||||
1.06% due 08/17/04 | 250,000 | 249,970,902 | ||||
1.05% due 01/18/05 | 175,000 | 174,969,363 | ||||
1.05% due 01/21/05 | 100,000 | 99,977,793 | ||||
Stanfield Victoria | ||||||
Finance Ltd.,* | ||||||
1.07% due 05/04/04 | 100,000 | 99,998,266 | ||||
1.06% due 05/20/04 | 100,000 | 99,996,681 | ||||
1.06% due 06/15/04 | 100,000 | 99,996,270 | ||||
1.07% due 06/15/04 | 100,000 | 99,995,645 | ||||
Whistlejacket | ||||||
Capital Ltd.,* | ||||||
1.05% due 06/28/04 | 50,000 | 49,996,766 | ||||
1.05% due 12/15/04 | 111,000 | 110,977,800 | ||||
White Pine | ||||||
Finance LLC, * | ||||||
1.05% due 09/15/04 | 100,000 | 99,986,475 | ||||
1.05% due 09/28/04 | 108,000 | 107,984,312 | ||||
1.05% due 10/25/04 | 118,000 | 117,984,569 | ||||
4,331,170,021 | ||||||
Bank Notes — 1.4% | ||||||
Bank America | ||||||
1.07% due 06/09/04 | 500,000 | 500,000,000 | ||||
Certificates of Deposit (Euro) — 13.2% | ||||||
Barclays Bank, | ||||||
1.12% due 03/17/04 | 119,000 | 119,001,025 | ||||
Credit Lyonnais | ||||||
Grand Cayman, | ||||||
1.11% due 04/02/04 | 150,000 | 150,000,663 | ||||
Depfa Bank, PLC, | ||||||
1.14% due 06/14/04 | 500,000 | 500,000,000 | ||||
1.08% due 06/16/04 | 300,000 | 300,000,000 | ||||
1.11% due 07/13/04 | 200,000 | 200,000,000 | ||||
1.12% due 08/24/04 | 110,000 | 110,000,000 |
HBOS, | ||||||
1.13% due 03/22/04 | $ | 164,000 | $ | 164,000,953 | ||
HBOS London, | ||||||
1.11% due 05/06/04 | 200,000 | 200,003,641 | ||||
1.11% due 05/10/04 | 350,000 | 350,003,390 | ||||
1.11% due 05/24/04 | 100,000 | 100,002,324 | ||||
San Paulo Imi Spa, | ||||||
1.10% due 05/10/04 | 350,000 | 350,000,000 | ||||
Unicredito Italiano, | ||||||
1.11% due 03/12/04 | 200,000 | 200,001,777 | ||||
1.08% due 03/16/04 | 200,000 | 200,000,000 | ||||
1.09% due 03/24/04 | 100,000 | 100,000,000 | ||||
1.13% due 04/05/04 | 100,000 | 100,002,900 | ||||
1.08% due 04/07/04 | 150,000 | 150,000,000 | ||||
1.15% due 04/30/04 | 150,000 | 150,000,000 | ||||
Westdeutsche | ||||||
Landesbank, | ||||||
1.13% due 04/08/04 | 1,300,000 | 1,300,013,645 | ||||
4,743,030,318 | ||||||
Certificates of Deposit (Yankee) — 13.9% | ||||||
Canadian Imperial Bank, | ||||||
1.06% due 03/11/04 | 200,000 | 199,999,244 | ||||
Credit Agricole, | ||||||
1.12% due 06/30/04 | 250,000 | 250,000,000 | ||||
Credit Lyonnias, | ||||||
1.12% due 03/05/04 | 100,000 | 99,999,779 | ||||
1.09% due 04/26/04 | 300,000 | 300,000,000 | ||||
1.09% due 08/25/04 | 300,000 | 300,000,000 | ||||
Danske Bank | ||||||
1.08% due 08/31/04 | 300,000 | 300,000,000 | ||||
Dexia Bank NY, | ||||||
1.08% due 08/31/04 | 250,000 | 250,000,000 | ||||
Landesbank Baden, | ||||||
1.10% due 04/26/04 | 480,000 | 480,003,720 | ||||
Nationwide | ||||||
Building Soc., | ||||||
1.11% due 03/10/04 | 100,000 | 100,000,725 | ||||
1.09% due 08/17/04 | 189,000 | 188,032,897 | ||||
1.09% due 08/23/04 | 100,000 | 99,470,138 | ||||
Nordeka Bank Finland, | ||||||
1.07% due 06/30/04 | 117,000 | 117,000,000 | ||||
Norddeutchse | ||||||
Landesbank, | ||||||
1.10% due 03/15/04 | 150,000 | 149,935,833 | ||||
1.10% due 04/16/04 | 150,000 | 149,789,167 | ||||
1.10% due 04/19/04 | 125,000 | 125,000,847 | ||||
Norddeutchse | ||||||
Landesbank Giro, | ||||||
1.08% due 06/23/04 | 150,000 | 150,000,000 | ||||
1.09% due 06/23/04 | 300,000 | 300,004,728 | ||||
Svenska | ||||||
Handelsbabken AB, | ||||||
1.06% due 06/30/04 | 340,000 | 340,000,000 | ||||
1.09% due 08/23/04 | 500,000 | 500,000,000 |
11
Liquid Reserves Portfolio | |
S C H E D U L E O F I N V E S T M E N T S (Continued) | February 29, 2004 |
(Unaudited) |
Principal | |||||
Amount | |||||
Issuer | (000’s omitted) | Value | |||
Certificates of Deposit | |||||
(Yankee) — (cont’d) | |||||
Toronto Dominion Bank, | |||||
1.09% due 03/16/04 | $ | 250,000 | $ | 250,000,000 | |
1.06% due 03/26/04 | 100,000 | 100,000,000 | |||
1.11% due 04/06/04 | 100,000 | 100,001,468 | |||
1.07% due 06/29/04 | 139,000 | 139,000,000 | |||
4,988,238,546 | |||||
Commercial Paper — 37.1% | |||||
ABSC Capital Corp, | |||||
1.08% due 03/12/04 | 100,000 | 99,967,000 | |||
Amstel Funding Corp., | |||||
1.12% due 03/15/04 | 191,846 | 191,762,440 | |||
1.15% due 04/07/04 | 102,111 | 101,990,310 | |||
1.10% due 04/15/04 | 291,000 | 290,599,875 | |||
1.15% due 04/28/04 | 200,000 | 199,629,444 | |||
1.11% due 05/28/04 | 100,000 | 99,728,667 | |||
1.17% due 06/16/04 | 74,069 | 73,811,425 | |||
1.18% due 06/18/04 | 179,801 | 179,161,333 | |||
1.09% due 07/27/04 | 221,081 | 221,085,830 | |||
ANZ Delware Inc., | |||||
1.10% due 04/19/04 | 189,500 | 189,217,566 | |||
Asset Portfolio Funding, | |||||
1.10% due 03/10/04 | 116,774 | 116,741,887 | |||
Atlantis One | |||||
Funding Corp., | |||||
1.10% due 04/07/04 | 150,008 | 149,838,408 | |||
Atomium Funding Corp., | |||||
1.12% due 03/15/04 | 128,372 | 128,316,087 | |||
1.11% due 03/16/04 | 107,000 | 106,950,513 | |||
1.11% due 03/17/04 | 120,735 | 120,675,437 | |||
1.06% due 04/20/04 | 120,098 | 119,921,189 | |||
1.05% due 05/11/04 | 102,813 | 102,600,091 | |||
1.07% due 05/21/04 | 186,534 | 186,084,919 | |||
1.08% due 06/03/04 | 75,000 | 74,788,500 | |||
BankAmerica Corp, | |||||
1.05% due 05/07/04 | 300,000 | 299,413,750 | |||
CANCARRA, | |||||
1.11% due 03/10/04 | 96,882 | 96,855,115 | |||
Crown Point Cap Co., | |||||
1.13% due 03/03/04 | 100,385 | 100,359,792 | |||
1.12% due 03/11/04 | 250,906 | 250,827,940 | |||
1.06% due 05/13/04 | 253,256 | 252,711,640 | |||
1.13% due 08/10/04 | 100,000 | 99,491,500 | |||
Danske Corp Disc., | |||||
1.08% due 08/23/04 | 200,000 | 198,950,000 | |||
1.08% due 08/27/04 | 232,000 | 230,754,160 | |||
Depfa Bank Europe, | |||||
1.11% due 04/01/04 | 105,712 | 105,610,957 | |||
Edison Asset Securitization | |||||
1.08% due 07/01/04 | 192,474 | 191,769,545 |
GE Capital Corp, | ||||
1.10% due 08/09/04 $ | 200,000 | $ | 199,016,111 | |
GE Capital International | ||||
Funding Inc., | ||||
1.09% due 08/17/04 | 200,000 | 198,976,611 | ||
1.09% due 08/18/04 | 200,000 | 198,970,556 | ||
Georgetown Funding, | ||||
1.14% due 03/16/04 | 607,973 | 607,684,213 | ||
1.06% due 04/15/04 | 220,000 | 219,708,500 | ||
Giro Balanced Funding, | ||||
1.05% due 05/20/04 | 124,309 | 124,018,946 | ||
Grampian Funding Ltd., | ||||
1.10% due 03/05/04 | 155,000 | 154,981,056 | ||
1.10% due 03/29/04 | 519,000 | 518,555,967 | ||
1.07% due 06/02/04 | 147,000 | 146,593,668 | ||
1.09% due 07/16/04 | 129,000 | 128,464,901 | ||
1.10% due 08/09/04 | 128,000 | 127,370,311 | ||
1.10% due 08/10/04 | 233,000 | 231,846,650 | ||
1.08% due 08/23/04 | 129,000 | 128,322,750 | ||
Hannover, | ||||
1.05% due 03/03/04 | 123,001 | 122,993,825 | ||
1.06% due 04/28/04 | 216,821 | 216,450,718 | ||
HBOS Treasury | ||||
Services PLC, | ||||
1.10% due 03/10/04 | 150,000 | 149,958,750 | ||
1.10% due 03/12/04 | 100,000 | 99,966,389 | ||
1.10% due 03/18/04 | 200,000 | 199,896,583 | ||
1.10% due 03/22/04 | 200,000 | 199,872,250 | ||
1.10% due 04/16/04 | 100,000 | 99,859,444 | ||
KBC Financial | ||||
Products | ||||
International, | ||||
1.07% due 07/21/04 | 150,000 | 149,366,917 | ||
Mica Funding LLC, | ||||
1.12% due 03/05/04 | 250,000 | 249,968,889 | ||
1.15% due 03/10/04 | 100,000 | 99,971,250 | ||
1.08% due 04/22/04 | 200,000 | 199,688,000 | ||
1.06% due 05/24/04 | 100,000 | 99,752,667 | ||
1.08% due 06/10/04 | 112,000 | 111,660,640 | ||
Moat Funding LLC, | ||||
1.13% due 03/11/04 | 100,000 | 99,968,611 | ||
1.13% due 03/12/04 | 100,000 | 99,965,473 | ||
Nyala Funding LLC, | ||||
1.13% due 03/15/04 | 114,929 | 114,878,495 | ||
1.07% due 06/15/04 | 130,000 | 129,590,428 | ||
Perry Global Fund, | ||||
1.13% due 03/17/04 | 106,557 | 106,503,485 | ||
1.13% due 03/25/04 | 186,042 | 185,901,848 | ||
1.14% due 05/14/04 | 100,000 | 99,765,667 | ||
Regency Markets LLC, | ||||
1.05% due 05/20/04 | 156,193 | 155,828,550 | ||
Saint Germain Holdings, | ||||
1.15% due 03/23/04 | 130,000 | 129,908,639 |
12
Liquid Reserves Portfolio | |
S C H E D U L E O F I N V E S T M E N T S (Continued) | February 29, 2004 |
(Unaudited) |
Principal | |||||
Amount | |||||
Issuer | (000’s omitted) | Value | |||
Commercial Paper — (cont’d) | |||||
Santander, | |||||
1.10% due 04/01/04 | $ | 249,000 | $ | 248,764,142 | |
1.10% due 04/16/04 | 425,000 | 424,404,237 | |||
1.08% due 08/16/04 | 100,000 | 99,496,000 | |||
Scaldis, | |||||
1.10% due 03/26/04 | 80,415 | 80,353,572 | |||
Silver Tower | |||||
US Funding, | |||||
1.08% due 04/13/04 | 130,000 | 129,832,300 | |||
1.07% due 04/23/04 | 100,000 | 99,842,473 | |||
Special Purpose Accounts, | |||||
1.08% due 04/01/04 | 149,000 | 149,000,000 | |||
1.08% due 04/13/04 | 200,000 | 200,000,000 | |||
Spintab Mortgage, | |||||
1.11% due 03/15/04 | 195,000 | 194,915,825 | |||
1.11% due 03/25/04 | 128,000 | 127,905,280 | |||
1.12% due 04/07/04 | 248,000 | 247,715,799 | |||
Stadshypotek Del Inc., | |||||
1.13% due 03/12/04 | 100,000 | 99,965,472 | |||
Tulip Funding Inc., | |||||
1.14% due 03/01/04 | 350,000 | 350,000,000 | |||
Victory Receivable Corp., | |||||
1.05% due 03/24/04 | 200,588 | 200,453,439 | |||
13,338,491,617 | |||||
Corporate Notes — 8.3% | |||||
Brahms Funding Corp., | |||||
1.09% due 03/01/04 | 500,811 | 500,811,000 | |||
Fenway Funding, | |||||
1.10% due 03/05/04 | 124,370 | 124,354,799 | |||
1.08% due 03/26/04 | 128,616 | 128,519,538 | |||
1.08% due 03/29/04 | 150,000 | 149,874,000 | |||
1.08% due 03/30/04 | 200,359 | 200,184,688 | |||
1.08% due 04/07/04 | 100,126 | 100,014,860 | |||
Foxboro Funding Ltd., | |||||
1.08% due 03/11/04 | 100,000 | 99,970,000 | |||
1.09% due 03/17/04 | 167,632 | 167,550,793 | |||
1.11% due 03/19/04 | 119,792 | 119,725,515 | |||
1.09% due 03/24/04 | 101,744 | 101,673,147 | |||
Harwood Funding Corp., | |||||
1.17% due 03/18/04 | 300,000 | 299,834,250 | |||
Main Street, | |||||
1.18% due 03/09/04 | 100,000 | 99,973,778 | |||
1.10% due 03/15/04 | 100,000 | 99,957,222 | |||
1.09% due 03/18/04 | 165,000 | 164,915,071 | |||
1.09% due 03/24/04 | 150,000 | 149,895,542 | |||
1.09% due 03/26/04 | 276,050 | 275,841,042 | |||
Mittens, | |||||
1.08% due 04/26/04 | 100,000 | 99,832,000 | |||
Park Granada LLC, | |||||
1.06% due 03/02/04 | 99,800 | 99,797,061 | |||
2,982,724,306 | |||||
Master Notes — 2.9% | ||||||
Merrill Lynch, | ||||||
1.21% due 03/01/04 | $ | 202,800 | $ | 202,800,000 | ||
Morgan Stanley, | ||||||
1.26% due 03/01/04 | 850,000 | 850,000,000 | ||||
1,052,800,000 | ||||||
Medium Term Notes — 6.4% | ||||||
Blue Heron Funding,* | ||||||
1.12% due 03/19/04 | 200,000 | 200,000,000 | ||||
1.12% due 05/19/04 | 438,750 | 438,750,000 | ||||
1.12% due 05/28/04 | 180,000 | 180,000,000 | ||||
1.12% due 10/15/04 | 500,000 | 500,000,000 | ||||
1.12% due 12/17/04 | 175,000 | 175,000,000 | ||||
Cit Group Inc.,* | ||||||
1.25% due 12/01/04 | 150,000 | 150,000,000 | ||||
Credit Suisse | ||||||
First Boston,* | ||||||
1.08% due 09/20/04 | 270,000 | 270,000,000 | ||||
Merrill Lynch & Co. Inc.,* | ||||||
1.10% due 02/03/09 | 385,000 | 385,000,000 | ||||
2,298,750,000 | ||||||
Promissory Note — 3.0% | ||||||
Goldman Sachs, | ||||||
1.21% due 09/27/04 | 1,100,000 | 1,100,000,000 | ||||
Time Deposits — 1.0% | ||||||
National City Bank | ||||||
Grand Cayman, | ||||||
1.04% due 03/01/04 | 352,608 | 352,608,000 | ||||
United States | ||||||
Government Agencies — 0.7% | ||||||
Federal National | ||||||
Mortgage Association,* | ||||||
1.06% due 07/20/04 | 250,093 | 250,046,870 | ||||
Total Investments, | ||||||
at Amortized | ||||||
Cost | 99.9 | % | 35,937,859,678 | |||
Other Assets, | ||||||
Less Liabilities | 0.1 | 20,645,654 | ||||
Net Assets | 100.0 | % | $ | 35,958,505,332 | ||
* | Variable interest rates—subject to periodic change | |||||
. | ||||||
See notes to financial statements |
13
Liquid Reserves Portfolio | |
S T A T E M E N T O F A S S E T S A N D L I A B I L I T I E S | |
February 29, 2004 (Unaudited) | ||
Assets: | ||
Investments at value (Note 1A) | 35,937,859,678 | |
Interest receivable | 25,315,870 | |
Total assets | 35,963,175,548 | |
Liabilities: | ||
Accrued expenses and other liabilities | 2,538,057 | |
Management fees payable (Note 2) | 2,132,159 | |
Total liabilities | 4,670,216 | |
Net Assets | $ | 35,958,505,332 |
Represented by: | ||
Paid-in capital for beneficial interests | $ | 35,958,505,332 |
See notes to financial statements |
14
Liquid Reserves Portfolio
S T A T E M E N T O F O P E R A T I O N S
For the Six Months Ended February 29, 2004 (Unaudited) | |||||
Interest Income (Note 1B): | 221,037,665 | ||||
Expenses: | |||||
Management fees (Note 2) | $ | 29,466,742 | |||
Custody and fund accounting fees | 4,165,353 | ||||
Trustees’ fees | 220,515 | ||||
Legal fees | 70,055 | ||||
Audit fees | 21,925 | ||||
Other | 27,556 | ||||
Total expenses | 33,972,146 | ||||
Less: aggregate amounts waived by the Manager (Note 2) | (14,290,787 | ) | |||
Less: fees paid indirectly (Note 1F) | (291 | ) | |||
Net expenses | 19,681,068 | ||||
Net investment income | 201,356,597 | ||||
Net Realized Gain on Investments | 2,456,400 | ||||
Net Increase in Net Assets Resulting from Operations | $ | 203,812,997 | |||
See notes to financial statements |
15
Liquid Reserves Portfolio
S T A T E M E N T S O F C H A N G E S I N N E T A S S E T S
Six Months Ended | ||||||
February 29, 2004 | Year Ended | |||||
(Unaudited) | August 31, 2003 | |||||
Increase (Decrease) in Net Assets | ||||||
from Operations: | ||||||
Net investment income | $ | 201,356,597 | $ | 619,131,302 | ||
Net realized gain on investments | 2,456,400 | — | ||||
Net increase in net assets from operations | 203,812,997 | 619,131,302 | ||||
Capital Transactions: | ||||||
Proceeds from contributions | 43,419,689,427 | 95,248,125,837 | ||||
Value of withdrawals | (47,112,090,932 | ) | (101,427,035,864 | ) | ||
Net decrease in net assets from | ||||||
capital transactions | (3,692,401,505 | ) | (6,178,910,027 | ) | ||
Net Decrease in Net Assets | (3,488,588,508 | ) | (5,559,778,725 | ) | ||
Net Assets: | ||||||
Beginning of period | 39,447,093,840 | 45,006,872,565 | ||||
End of period | $ | 35,958,505,332 | $ | 39,447,093,840 | ||
See notes to financial statements |
16
Liquid Reserves Portfolio
N O T E S TO F I N A N C I A L S T A T E M E N T S (Unaudited)
1. Significant Accounting Policies Cash Reserves Portfolio changed its name to Liquid Reserves Portfolio (the “Portfolio”) on February 27, 2004. The Portfolio is registered under the U.S. Investment Company Act of 1940, as amended (the “1940 Act”), 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. Citi Fund Management Inc. (the “Manager”) acts as the Investment Manager.
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 finan-cial 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 under the 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 its compliance with certain conditions as specified under Rule 2a-7 of the 1940 Act.
B. Interest Income and Expenses Interest 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. The Portfolio bears all costs of its operations other than expenses specifically assumed by the Manager.
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 to monitor, on a daily basis, the market value of the repurchase agreements’ 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, 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.
17
Liquid Reserves Portfolio
N O T E S TO F I N A N C I A L S T A T E M E N T S (Unaudited) (Continued)
2. Management Fees The Manager is responsible for overall management of the Portfolio’s business affairs, and has a Management Agreement with the Portfolio. The Manager or an affiliate also provides certain administrative services to the Portfolio. These administrative services include providing general office facilities and supervising the overall administration of the Portfolio.
The management fees paid to the Manager are accrued daily and payable monthly. The management fee is computed at an annual rate of 0.15% of the Funds’ average daily net assets. The management fee amounted to $29,466,742 of which $14,290,787 was voluntarily waived for the six months ended February 29, 2004. The Portfolio pays no compensation directly to any Trustee or any officer who is affiliated with the Manager, all of whom receive remuneration for their services to the Portfolio from the Manager or its affiliates. Certain of the officers and a Trustee of the Portfolio are offi-cers and a director of the Manager or its affiliates.
3. Investment Transactions Purchases, maturities and sales of money market instruments aggregated $410,444,885,757 and $414,040,957,601, respectively, for the six months ended February 29, 2004.
4.Trustee Retirement Plan The Trustees of the Fund have adopted a Retirement Plan for all Trustees who are not “interested persons” of the Fund, within the meaning of the 1940 Act. Under the Plan, all Trustees are required to retire from the Board as of the last day of the calendar year in which the applicable Trustee attains age 75 (certain Trustees who had already attained age 75 when the Plan was adopted were required to retire effective December 31, 2003). Trustees may retire under the Plan before attaining the mandatory retirement age. Trustees who have served as Trustee of the Trust or any of the investment companies associated with Citigroup for at least ten years when they retire are eligible to receive the maximum retirement benefit under the Plan. The maximum retirement benefit is an amount equal to five times the amount of retainer and regular meeting fees payable to a Trustee during the calendar year ending on or immediately prior to the applicable Trustee’s retirement. Amounts under the Plan may be paid in installments or in a lump sum (discounted to present value). The Fund’s allocable share of the expenses of the Plan for the six months ended February 29, 2004 and the related liability at February 29, 2004 was not material.
5. Additional Information The Portfolio has received the following information from Citigroup Asset Management (“CAM”), the Citigroup business unit which includes the Portfolio's Investment Manager and other investment advisory companies, all of which are indirect, wholly-owned subsidiaries of Citigroup. CAM is reviewing its entry, through an affiliate, into the transfer agent business in the period 1997-1999. As CAM currently understands the facts, at the time CAM decided to enter the transfer agent business, CAM sub-contracted for a period of five years certain of the transfer agency services to a third party and also concluded a revenue guarantee agreement with this sub-contractor providing that the sub-contractor would guarantee certain benefits to CAM or its affiliates (the “Revenue Guarantee
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Liquid Reserves Portfolio
N O T E S TO F I N A N C I A L S T A T E M E N T S (Unaudited) (Continued)
Agreement”). In connection with the subsequent purchase of the sub-contractor’s business by an affiliate of the current sub-transfer agent (PFPC Inc.) used by CAM on many of the funds it manages, this Revenue Guarantee Agreement was amended eliminating those benefits in exchange for arrangements that included a one-time payment from the sub-contractor.
The Boards of CAM-managed funds (the “Boards”) were not informed of the Revenue Guarantee Agreement with the sub-contractor at the time the Boards considered and approved the transfer agent agreements. Nor were the Boards informed of the subsequent amendment to the Revenue Guarantee Agreement when that occurred.
CAM has begun to take corrective actions. CAM will pay to the applicable funds approximately $17 million (plus interest) that CAM and its affiliates received from the Revenue Guarantee Agreement and its amendment. CAM also plans an independent review to verify that the transfer agency fees charged by CAM were fairly priced as compared to competitive alternatives. CAM is instituting new procedures and making changes designed to ensure no similar arrangements are entered into in the future.
CAM has briefed the SEC, the New York State Attorney General and other regulators with respect to this matter, as well as the U.S. Attorney who is investigating the matter. CAM is cooperating with governmental authorities on this matter, the ultimate outcome of which is not yet determinable.
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Liquid Reserves Portfolio
F I N A N C I A L H I G H L I G H T S
Six Months Ended | Year Ended August 31, | ||||||||||||||||||||||||
February 29, 2004 | |||||||||||||||||||||||||
(Unaudited) | 2003 | 2002 | 2001 | 2000 | 1999 | ||||||||||||||||||||
Ratios/Supplemental Data: | |||||||||||||||||||||||||
Net assets | |||||||||||||||||||||||||
(000’s omitted) | $ | 35,958,505 | $ | 39,447,094 | $ | 45,006,873 | $ | 32,073,343 | $ | 14,392,341 | $ | 14,929,345 | |||||||||||||
Ratio of expenses to | |||||||||||||||||||||||||
average net assets | 0.10 | %* | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | |||||||||||||
Ratio of net investment | |||||||||||||||||||||||||
income to average | |||||||||||||||||||||||||
net assets | 1.04 | %* | 1.39 | % | 2.29 | % | 5.27 | % | 5.93 | % | 5.13 | % | |||||||||||||
Total return | 0.92 | %** | 1.49 | % | 2.36 | % | N/A | N/A | N/A | ||||||||||||||||
Note: If agents of the Portfolio had not voluntarily waived a portion of their fees for the years indicated, | |||||||||||||||||||||||||
the ratios would have been as follows: | |||||||||||||||||||||||||
Ratios: | |||||||||||||||||||||||||
Expenses to average | |||||||||||||||||||||||||
net assets | 0.17 | %* | 0.17 | % | 0.19 | % | 0.22 | % | 0.22 | % | 0.22 | % | |||||||||||||
Net investment income | |||||||||||||||||||||||||
to average net assets | 0.97 | %* | 1.32 | % | 2.20 | % | 5.15 | % | 5.81 | % | 5.01 | % | |||||||||||||
* | Annualized | ||||||||||||||||||||||||
** | Not Annualized | ||||||||||||||||||||||||
See notes to financial statements |
20
ITEM 2. CODE OF ETHICS. Not applicable. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. Not applicable. Item 4. Principal Accountant Fees and Services Not applicable ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS. Not applicable. ITEM 6. [RESERVED] ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 8. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANIES. Not applicable. ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No changes. ITEM 10. CONTROLS AND PROCEDURES. (a) The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a- 3(c) under the Investment Company Act of 1940, as amended (the "1940 Act")) are effective as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the disclosure controls and procedures required by Rule 30a-3(b) under the 1940 Act and 15d-15(b) under the Securities Exchange Act of 1934 (b) There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that have materially affected, or are likely to materially affect the registrant's internal control over financial reporting. ITEM 11. EXHIBITS. (a)(2) Attached hereto. Exhibit 99.CERT Certifications pursuant to section 302 of theSarbanes-Oxley Act of 2002 (b) Furnished. Exhibit 99.906CERT Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this Report to be signed on its behalf by the undersigned, there unto duly authorized. LIQUID RESERVES PORTFOLIO (FORMERLY CASH RESERVES PORTFOLIO) By: /s/ R. Jay Gerken R. Jay Gerken Chief Executive Officer of LIQUID RESERVES PORTFOLIO (FORMERLY CASH RESERVES PORTFOLIO) Date: May 5, 2004 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By: /s/ R. Jay Gerken (R. Jay Gerken) Chief Executive Officer of LIQUID RESERVES PORTFOLIO (FORMERLY CASH RESERVES PORTFOLIO) Date: May 5, 2004 By: /s/ Andrew B. Shoup Chief Administrative Officer of LIQUID RESERVES PORTFOLIO (FORMERLY CASH RESERVES PORTFOLIO) Date: May 5, 2004