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 811-5812 CITIFUNDS PREMIUM TRUST (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: AUGUST 31, 2004ITEM 1. REPORT TO STOCKHOLDERS. The Annual Report to Stockholders is filed herewith.
CitiSM Premium Liquid Reserves August 31, 2004 |
INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE |
T A B L E O F C O N T E N T S | ||
Letter from the Chairman | 1 | |
Manager Overview | 3 | |
Fund Facts | 5 | |
Portfolio at a Glance — Liquid Reserves Portfolio | 6 | |
Fund Expenses | 7 | |
Fund Performance | 9 | |
Citi Premium Liquid Reserves | ||
Statement of Assets and Liabilities | 10 | |
Statement of Operations | 11 | |
Statements of Changes in Net Assets | 12 | |
Financial Highlights | 13 | |
Notes to Financial Statements | 14 | |
Report of Independent Registered Public Accounting Firm | 18 | |
Additional Information | 19 | |
Liquid Reserves Portfolio | ||
Schedule of Investments | 25 | |
Statement of Assets and Liabilities | 28 | |
Statement of Operations | 28 | |
Statements of Changes in Net Assets | 29 | |
Financial Highlights | 30 | |
Notes to Financial Statements | 31 | |
Report of Independent Registered Public Accounting Firm | 35 | |
Additional Information | 36 | |
L E T T E R F R O M T H E C H A I R M A N
Dear Shareholder, The Federal Reserve Bank’s (“Fed”) monetary policy committee pushed short-term interest rates higher over the 12 months ending August 31, 2004. It raised its federal funds ratei target from a four-decade low of 1.00% at the start of the period to 1.25% in June, and to 1.50% in August. The Fed further increased the target rate by 0.25% to 1.75% on September 21, 2004, following the end of the fund’s reporting period. Rising interest rates can act as a brake on robust economic growth, helping to maintain a balance between that growth and the inflation that generally can accompany it. Inflation and job growth picked up during the year. Earlier in the period, the rate of gross domestic product (“GDP”)ii growth rose significantly from its levels in early 2003. | R. JAY GERKEN, CFA Chairman, President and |
Although GDP growth tapered off toward the end of the period versus prior levels within the past year, it remained above its quarterly rate during the first half of last year. Money market yields fluctuated during the fund’s fiscal year.
Please read on for a more detailed look at prevailing economic and market conditions during the fund’s fiscal year and to learn how those conditions and have affected fund performance.
Information About Your Fund
In recent months several issues in the mutual fund industry have come under the scrutiny of federal and state regulators. The fund’s Adviser and some of its affil-iates have received requests for information from various government regulators regarding market timing, late trading, fees, and other mutual fund issues in connection with various investigations. The regulators appear to be examining, among other things, the fund’s response to market timing and shareholder exchange activity, including compliance with prospectus disclosure related to these subjects. The fund has been informed that the Adviser and its affiliates are responding to those information requests, but are not in a position to predict the outcome of these requests and investigations.
In November 2003, Citigroup Asset Management (“CAM”) disclosed an investigation by the Securities and Exchange Commission (“SEC”) and the U.S. Attorney relating to CAM’s entry into the transfer agency business during 1997-1999. Citigroup has disclosed that the Staff of the SEC is considering recommending a civil injunctive action and/or an administrative proceeding against certain advisory and transfer agent entities affiliated with Citigroup, the former CEO of CAM, a former employee and a current employee of CAM, relating to the creation, opera-
1
tion and fees of its internal transfer agent unit that serves various CAM-managed funds. Citigroup is cooperating with the SEC and will seek to resolve this matter in discussion with the SEC Staff. Although there can be no assurance, Citigroup does not believe that this matter will have a material adverse effect on the fund.
As always thank you for your confidence in our stewardship of your assets. We look forward to helping you continue to meet your financial goals.
Sincerely,
R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
September 21, 2004
2
M A N A G E R O V E R V I E W
Performance Review As of August 31, 2004, the seven-day current yield for Citi Premium Liquid Reserves was 1.18% and its seven-day effective yield, which reflects compounding, was 1.19% . Both yields include a voluntary waiver of the management fee. This waiver may be reduced or terminated at any time. If the full management fee had been included, the seven-day current yield would have been 1.08% and the seven-day effective yield would have been 1.09% . The seven-day effective yield is calculated similarly to the seven-day current yield but, when annualized, the income earned by an investment in the fund is assumed to be reinvested. The effective yield typically will be slightly higher than the current yield because of the compounding effect of the assumed reinvestment. Please note that the performance represents past performance and is no guarantee of future results and yields will vary. In addition, your investment is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. | KEVIN KENNEDY Portfolio Manager |
When the period began, evidence of an improved economy was already unfolding. However, market participants believed the Fed’s policymaking committee would maintain its target interest rate at low levels to help sustain the recovery. This policy stance would help forestall potential deflationary forces as well as keep money market yields near their lows.
In early 2004, broader-based economic indicators continued to reflect a favorable overall outlook though geopolitical concerns remained at the forefront of the U.S.
CITISM PREMIUM LIQUID RESERVES | ||
YIELDS AS OF AUGUST 31, 2004 (Unaudited) | ||
Seven-day current yield | 1.18 | % |
Seven-day effective yield | 1.19 | % |
The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors’ shares, when redeemed, may be worth more or less than their original cost.
The fund’s yields will vary and performance of other share classes may differ. Please note that your investment is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
Both yields include a voluntary waiver of the management fee. This waiver may be reduced or terminated at any time. If the full management fee had been included, the seven-day current yield would have been 1.08% and the seven-day effective yield would have been 1.09% .
3
political agenda and added an element of uncertainty to the fixed income markets. Short-term interest rates steadied and the Federal Reserve remained “patient in removing its policy accommodation.”iii Treasury prices benefited from both the Fed’s restraint in raising rates and from demand by foreign central banks.
As the year progressed, rising corporate profits and improved balanced sheets set the groundwork for a sustained recovery. Renewed corporate and consumer spending led to robust output growth and encouraged businesses to hire additional workers. Both consumer and producer prices started to inch higher and earlier fears of deflation slowly began to subside. Strong domestic and global demand also put additional upward pressure on commodity prices. Against this backdrop Fed monetary policy was seen as highly accommodative and would need to start moving to a more neutral setting. Recently, Treasury bill yields have moved higher as the recovery has progressed. Supply remains ample, offering investors the opportunity to buy short paper in anticipation of more attractive rates ahead.
In response to the strong economic growth, and in anticipation of the Federal Reserve moving to a more neutral policy, we maintained a cautious maturity stance in the fund. The Fed raised its target for the federal funds rate by 0.25% to 1.25% in June and to 1.50% in August as a countermeasure to the resilient strength of the economy. These were the first rate increases in over four years and were widely anticipated by market participants. The Fed indicated that going forward rates would need to rise at a “measured pace.” At their September meeting, the Fed again raised interest rates by 0.25% to 1.75%, forecasting that the recent softness in the economy was temporary in nature.
Thank you for your investment in CitiSM Premium Liquid Reserves. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the fund’s investment goals.
Sincerely,Kevin Kennedy
Portfolio Manager
September 21, 2004
The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice.Views expressed may differ from those of the firm as a whole.
RISKS: An investment in a money market fund is neither insured nor guaranteed by the FDIC or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
i | The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve district bank charge other banks that need overnight loans. |
ii | Gross domestic product is a market value of goods and services produced by labor and property in a given country. |
iii | Federal Reserve Board (FOMC Statement) March 16, 2004. |
4
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 |
Citi Fund Management Inc. | Declared daily, paid monthly |
Commencement of Operations | Benchmark* |
May 3, 1990 | • iMoneyNet, Inc. 1st Tier Taxable |
Money Market Funds Average | |
Net Assets as of 8/31/04 | |
$949.5 million |
* | The iMoneyNet, Inc. Funds Average reflects the performance (excluding sales charges) of mutual funds with similar objectives. |
Citi is a service mark of Citicorp. | |
5
L I Q U I D R E S E R V E S P O R T F O L I O
PORTFOLIO AT A GLANCE (Unaudited)
Investment Breakdown†
February 29, 2004
August 31, 2004
† As a percentage of total investments. Please note that Portfolio holdings are subject to change.
6
F U N D E X P E N S E S (Unaudited)
Example
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees; and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This Example is based on an investment of $1,000 invested on March 1, 2004 and held for the six months ended August 31, 2004.
Actual Expenses
The table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.
Based on Actual Total Return(1) | ||||||||||
Beginning | Ending | Annualized | Expenses | |||||||
Actual | Account | Account | Expense | Paid During | ||||||
Total Return(2) | Value | Value | Ratio | the Period(3) | ||||||
Class A | 0.42 | % | $ | 1,000.00 | $ | 1,004.20 | 0.40 | % | $ | 2.02 |
(1) | For the six months ended August 31, 2004. |
(2) | Assumes reinvestment of all dividends and capital gains distributions, if any, at net asset value. |
(3) | Expenses (net of voluntary waiver) are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in most recent fiscal half-year, then divided by 366. |
7
F U N D E X P E N S E S (Unaudited) (Continued)
Hypothetical Example for Comparison Purposes
The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Based on Hypothetical Total Return(1) | ||||||||
Hypothetical | Beginning | Ending | Annualized | Expenses | ||||
Annualized | Account | Account | Expense | Paid During | ||||
Total Return | Value | Value | Ratio | the Period(2) | ||||
Class A | 5.00% | $1,000.00 | $ | 1,023.13 | 0.40 | % | $ | 2.03 |
(1) | For the six months ended August 31, 2004. |
(2) | Expenses (net of voluntary waiver) are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in most recent fiscal half-year, then divided by 366. |
8
Total Returns (Unaudited)
One | Five | Ten | |||||||
All Periods Ended August 31, 2004 | Year | Years* | Years* | ||||||
Citi Premium Liquid Reserves | 0.79 | % | 3.00 | % | 4.18 | % | |||
iMoneyNet, Inc. 1st Tier Taxable Money | |||||||||
Market Funds Average | 0.70 | % | 2.62 | % | 3.83 | % | |||
* Average Annual Total Return |
7-Day Yields | ||
Annualized Current | 1.18 | % |
Effective | 1.19 | % |
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.
Comparison of 7-Day Yields for Citi Premium Liquid Reserves vs. iMoneyNet, Inc. 1st Tier Taxable Money Market Funds Average
As illustrated, Citi Premium Liquid Reserves generally provided a higher annualized seven-day yield to that of the iMoneyNet, Inc. 1st Tier Taxable Money Market Funds Average, as published in iMoneyNet, Inc. Money Market Funds ReportTM, 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.
9
Citi Premium Liquid Reserves | ||
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 | ||
August 31, 2004 | ||
ASSETS: | ||
Investment in Liquid Reserves Portfolio, at value (Note 1A) | $ | 950,450,685 |
Receivable for shares of beneficial interest sold | 441,605 | |
Prepaid registration | 10,784 | |
Total Assets | 950,903,074 | |
LIABILITIES: | ||
Payable for shares of beneficial interest repurchased | 694,600 | |
Dividends payable | 380,086 | |
Management fee payable (Note 3) | 147,619 | |
Distribution/Service fee payable (Note 4) | 80,305 | |
Accrued expenses and other liabilities | 100,185 | |
Total Liabilities | 1,402,795 | |
Total Net Assets for 949,500,279 shares of beneficial interest outstanding | $ | 949,500,279 |
NET ASSETS: | ||
Par value of shares of beneficial interest | ||
($.00001 par value, unlimited shares authorized) | 9,495 | |
Capital paid in excess of par value | 949,490,784 | |
Total Net Assets | $ | 949,500,279 |
Net Asset Value, Offering Price and Redemption Price Per Share | $1.00 | |
See Notes to Financial Statements. |
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Citi Premium Liquid Reserves | |||||
S T A T E M E N T O F O P E R A T I O N S | |||||
For the Year Ended August 31, 2004 | |||||
INVESTMENT INCOME (Note 1B): | |||||
Income from Liquid Reserves Portfolio | $ | 13,393,198 | |||
Allocated net expenses from Liquid Reserves Portfolio | (1,148,433 | ) | |||
Total Investment Income | $ | 12,244,765 | |||
EXPENSES: | |||||
Management fees (Note 3) | 2,290,486 | ||||
Distribution/Service fees (Note 4) | 1,145,243 | ||||
Transfer agency services | 143,074 | ||||
Audit and legal | 75,379 | ||||
Shareholder communications | 37,293 | ||||
Trustees fees | 32,379 | ||||
Blue Sky fees | 17,708 | ||||
Custody and fund accounting fees | 9,327 | ||||
Other | 20,352 | ||||
Total Expenses | 3,771,241 | ||||
Less: management fee waived (Note 3) | (338,944 | ) | |||
Net Expenses | 3,432,297 | ||||
Net Investment Income | 8,812,468 | ||||
Net Realized Gain on Investments From Liquid Reserves Portfolio | 100,868 | ||||
Increase in Net Assets From Operations | $ | 8,913,336 | |||
See Notes to Financial Statements. |
11
Citi Premium Liquid Reserves | ||||||
S T A T E M E N T O F C H A N G E S I N N E T A S S E T S | ||||||
Years Ended August 31, | ||||||
2004 | 2003 | |||||
OPERATIONS: | ||||||
Net investment income | $ | 8,812,468 | $ | 17,051,365 | ||
Net realized gain | 100,868 | — | ||||
Increase in Net Assets From Operations | 8,913,336 | 17,051,365 | ||||
DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||
Net investment income | (8,812,468 | ) | (17,051,365 | ) | ||
Net realized gain | (100,868 | ) | — | |||
Decrease in Net Assets From Distributions | ||||||
to Shareholders | (8,913,336 | ) | (17,051,365 | ) | ||
TRANSACTIONS IN SHARES OF BENEFICIAL | ||||||
INTEREST AT NET ASSET VALUE OF $1.00 | ||||||
PER SHARE (NOTE 5): | ||||||
Net proceeds from sale of shares | 2,864,080,058 | 5,367,770,797 | ||||
Net asset value of shares issued for | ||||||
reinvestment of distributions | 4,903,382 | 9,551,660 | ||||
Cost of shares repurchased | (3,451,449,570 | ) | (5,157,988,773 | ) | ||
Increase (Decrease) in Net Assets From | ||||||
Transactions in Shares of Beneficial Interest | (582,466,130 | ) | 219,333,684 | |||
NET ASSETS: | ||||||
Beginning of year | 1,531,966,409 | 1,312,632,725 | ||||
End of year | $ | 949,500,279 | $ | 1,531,966,409 | ||
See Notes to Financial Statements. |
12
Citi Premium Liquid Reserves
F I N A N C I A L H I G H L I G H T S
Years Ended August 31, | |||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||
Net Asset Value, | |||||||||||||||
Beginning of Year | $ | 1.00000 | $ | 1.00000 | $ | 1.00000 | $ | 1.00000 | $ | 1.00000 | |||||
Net investment income | 0.00784 | ‡ | (0.01076 | 0.02037 | 0.05258 | 0.05653 | |||||||||
Distributions from net | |||||||||||||||
investment income | (0.00784 | )‡ | (0.01076 | ) | (0.02037 | ) | (0.05258 | ) | (0.05653 | ) | |||||
Net Asset Value, End of Year | $ | 1.00000 | $ | 1.00000 | $ | 1.00000 | $ | 1.00000 | $ | 1.00000 | |||||
Ratios/Supplemental Data: | |||||||||||||||
Net Assets, End of Year | |||||||||||||||
(000’s omitted) | $ | 949,500 | $ | 1,531,966 | $ | 1,312,633 | $ | 1,303,206 | $ | 997,828 | |||||
Ratios to Average Net Assets: | |||||||||||||||
Expenses†# | 0.40 | % | 0.40 | % | 0.40 | % | 0.40 | % | 0.40 | % | |||||
Net investment income† | 0.78 | % | 1.07 | % | 2.03 | % | 5.17 | % | 5.69 | % | |||||
Total Return | 0.79 | % | 1.09 | % | 2.06 | % | 5.39 | % | 5.80 | % | |||||
Note: If the Manager of the Fund and Managers of Liquid Reserves Portfolio had not voluntarily | |||||||||||||||
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 | $ | 0.00661 | ‡ | $ | 0.00978 | $ | 0.01831 | $ | 0.04898 | $ | 0.05274 | ||||
Ratios to Average Net Assets: | |||||||||||||||
Expenses† | 0.50 | % | 0.50 | % | 0.59 | % | 0.80 | % | 0.79 | % | |||||
Net investment income† | 0.68 | % | 0.97 | % | 1.84 | % | 4.77 | % | 5.30 | % | |||||
† | Includes the Fund’s share of Liquid Reserves Portfolio’s allocated expenses. | |
‡ | Includes $0.00009 of short-term capital gains. | |
# | The ratio of expenses to average net asset will not exceed 0.40% as a result of a voluntary expense | |
limitation, which may be terminated at any time. |
See Notes to Financial Statements.
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N O T E S T O F I N A N C I A L S T A T E M E N T S
1. Organization and Significant Accounting Policies
Citi Premium Liquid Reserves (the “Fund”) is a separate diversified series of Citi-Funds Premium Trust (the “Trust”), a Massachusetts business trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Fund invests all of its investable assets in Liquid Reserves Portfolio (the “Portfolio”), formerly known as Cash Reserves Portfolio, a management investment company for which Citi Fund Management Inc. (the “Manager”) serves as Investment Manager. The value of such investment reflects the Fund’s proportionate interest (2.5% at August 31, 2004) in the net assets of the Portfolio. Citigroup Global Markets Inc. (“CGM”) is the Fund’s Distributor (the “Distributor”). Citicorp Trust Bank, fsb. (“CTB”), a subsidiary of Citigroup acts as the Fund’s transfer agent.
The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) 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 following are significant accounting policies consistently followed by the Fund and are in conformity with GAAP:
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 the Manager. 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 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 is charged against and reduces the amount of the Fund’s investment in the Portfolio.
E. Method of Allocation. 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.
14
Citi Premium Liquid Reserves
N O T E S T O F I N A N C I A L S T A T E M E N T S (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 Servicing Agent) on or prior to the last business day of the month.
3. Management FeesThe management fees are computed at an annual rate of 0.20% of the Fund’s average daily net assets. The management fees paid to the Manager amounted to $2,290,486, of which $338,944 was voluntarily waived for the year ended August 31, 2004. Such waiver is voluntary and can be terminated at any time at the discretion of the Manager.
The Trust pays no compensation directly to any Trustee or any officer who is affili-ated with the Manager, all of whom receive remuneration for their services to the Fund from the Manager or its affiliates. Certain of the officers and a Trustee of the Trust are officers and a director of the Manager or its affiliates.
4. Distribution/Service FeesThe Fund adopted a Service Plan pursuant to Rule l2b-1 under the 1940 Act. The Service Plan allows the Fund to pay a monthly fee not to exceed 0.10% of the average daily net assets. The Service fees paid amounted to $1,145,243 for the year ended August 31, 2004. These fees may be used to make payments to the Distributor and to Service Agents or others as compensation for the sale of Fund shares or for advertising, marketing or other promotional activity, and for preparation, printing and distribution of prospectuses, statements of additional information and reports for recipients other than regulators and existing shareholders. The Fund may also make payments to the Distributor and others for providing personal service or the maintenance of shareholder accounts.
5. Shares of Beneficial InterestThe Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (par value $0.00001 per share).
6. Income Tax Information and Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended August 31, were as follows:
2004 | 2003 | |||
Ordinary income | $ | 8,913,336 | $ | 17,051,365 |
As of August 31, 2004, there were no significant differences between the book and tax components of net assets.
15
Citi Premium Liquid Reserves
N O T E S T O F I N A N C I A L S T A T E M E N T S (Continued)
7.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). Three former Trustees are currently receiving payments under the plan. In addition two other former Trustees received a lump sum payment under the plan during this period. The Fund’s allocable share of the expenses of the Plan for the year ended August 31, 2004 and the related liability at August 31, 2004 was not material.
8. Additional InformationIn connection with an investigation previously disclosed by Citigroup, the Staff of the Securities and Exchange Commission (“SEC”) has notified Citigroup Asset Management (“CAM”), the Citigroup business unit that includes the Fund’s investment manager and other investment advisory companies; Citicorp Trust Bank (“CTB”), an affiliate of CAM; Thomas W. Jones, the former CEO of CAM; and two other individuals, one of whom is an employee and the other of whom is a former employee of CAM, that the SEC Staff is considering recommending a civil injunctive action and/or an administrative proceeding against each of them relating to the creation and operation of an internal transfer agent unit to serve various CAM-managed funds.
In 1999, CTB entered the transfer agent business. CTB hired an unaffiliated subcontractor to perform some of the transfer agent services. The subcontractor, in exchange, had signed a separate agreement with CAM in 1998 that guaranteed investment management revenue to CAM and investment banking revenue to a CAM affiliate. The sub-contractor’s business was later taken over by PFPC Inc., and at that time the revenue guarantee was eliminated and a one-time payment was made by the subcontractor to a CAM affiliate.
CAM did not disclose the revenue guarantee when the boards of various CAM-managed funds hired CTB as transfer agent. Nor did CAM disclose to the boards of the various CAM-managed funds the one-time payment received by the CAM affiliate when it was made.
In addition, the SEC Staff has indicated that it is considering recommending action based on the adequacy of the disclosures made to the fund boards that approved the
16
N O T E S T O F I N A N C I A L S T A T E M E N T S (Continued)
transfer agency arrangement, CAM’s initiation and operation of, and compensation for, the transfer agent business and CAM’s retention of, and agreements with, the subcontractor.
Citigroup is cooperating fully in the investigation and will seek to resolve the matter in discussions with the SEC Staff. Although there can be no assurance, Citigroup does not believe that this matter will have a material adverse effect on the Fund. As previously disclosed, CAM has already agreed to pay the applicable funds, primarily through fee waivers, a total of approximately $17 million (plus interest) that is the amount of the revenue received by Citigroup relating to the revenue guarantee. The Fund did not implement the contractual arrangement described above and therefore will not receive any portion of such payment.
17
R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C
A C C O U N T I N G F I R M
To the Trustees of CitiFunds Premium Trust (the Trust)
and Shareholders of Citi Premium 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 Citi Premium Liquid Reserves (the “Fund”), a series of CitiFunds Premium Trust, at August 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the finan-cial highlights for each of the five years in the period then ended, 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
New York, New York
October 22, 2004
18
A D D I T I O N A L I N F O R M A T I O N (Unaudited)
Information about Trustees and Officers The business and affairs of the Citi Premium Liquid Reserves (the “Fund”) are managed under the direction of the Fund’s Board of Trustees. Information pertaining to the Trustees and officers of the Fund is set forth below. Each Trustee and officer holds office for his or her lifetime, unless that individual resigns, retires or is otherwise removed. The Statement of Additional Information includes additional information about Fund Trustees and is available, without charge, upon request by calling 1-800-451-2010.
Number of | Other Board | ||||||||||
Principal | Portfolios In | Memberships | |||||||||
Position(s) | Length | Occupation(s) | Fund Complex | Held by | |||||||
Held with | of Time | During Past | Overseen by | Trustee During | |||||||
Name, Address and Age | Fund | Served | Five Years | Trustee | Past Five Years | ||||||
NON-INTERESTED | |||||||||||
TRUSTEES: | |||||||||||
Elliott J. Berv | Trustee | Since 2001 | President and Chief Operations | 36 | Board | ||||||
c/o R. Jay Gerken | Officer, Landmark City (real | Member, | |||||||||
Citigroup Asset | estate development) (since | American | |||||||||
Management (“CAM”) | 2002); Executive Vice | Identity Corp. | |||||||||
399 Park Avenue | President and Chief Operations | (doing | |||||||||
New York, NY 10022 | Officer, DigiGym Systems | business as | |||||||||
Age 61 | (on-line personal training | Morpheus | |||||||||
systems) (since 2001); Chief | Technologies) | ||||||||||
Executive Officer, Motocity | (biometric | ||||||||||
USA (motorsport racing) | information | ||||||||||
(since 2004) Enterprises | management) | ||||||||||
(internet service company) | (since 2001; | ||||||||||
(from 2000 to 2001); | consultant | ||||||||||
Consultant, Catalyst | since 1999); | ||||||||||
(consulting) (since 1984). | Director, | ||||||||||
Lapoint | |||||||||||
Industries | |||||||||||
(industrial fil- | |||||||||||
ter company) | |||||||||||
(since 2002); | |||||||||||
Director, | |||||||||||
Alzheimer’s | |||||||||||
Association | |||||||||||
(New England | |||||||||||
Chapter) | |||||||||||
(since 1998). | |||||||||||
Donald M. Carlton | Trustee | Since 2001 | Consultant, URS Corporation | 31 | Director, | ||||||
c/o R. Jay Gerken | (engineering) (since 1999); | Temple-Inland | |||||||||
CAM | former Chief Executive Officer, | (forest | |||||||||
399 Park Avenue | Radian International LLC | products) | |||||||||
New York, NY 10022 | (engineering) (from 1996 to | (since 2003); | |||||||||
Age 67 | 1998), Member of Management | Director, | |||||||||
Committee, Signature Science | American | ||||||||||
(research and development) | Electric Power | ||||||||||
(since 2000). | (electric | ||||||||||
utility) (since | |||||||||||
1999); | |||||||||||
Director, | |||||||||||
Valero Energy | |||||||||||
(petroleum | |||||||||||
refining) | |||||||||||
(1999-2003); | |||||||||||
Director, | |||||||||||
National | |||||||||||
Instruments | |||||||||||
Corp. (tech- | |||||||||||
nology) (since | |||||||||||
1994). | |||||||||||
19
A D D I T I O N A L I N F O R M A T I O N (Unaudited) (Continued)
Number of | Other Board | ||||||||||
Principal | Portfolios In | Memberships | |||||||||
Position(s) | Length | Occupation(s) | Fund Complex | Held by | |||||||
Held with | of Time | During Past | Overseen by | Trustee During | |||||||
Name, Address and Age | Fund | Served | Five Years | Trustee | Past Five Years | ||||||
A. Benton Cocanougher | Trustee | Since 2001 | Interim Chancellor, Texas | 31 | Former Direc- | ||||||
c/o R. Jay Gerken | A&M University System | tor, Randall’s | |||||||||
CAM | (since 2003); former Special | Food Markets, | |||||||||
399 Park Avenue | Advisor to the President, Texas | Inc. (from | |||||||||
New York, NY 10022 | A&M University (2002-2003); | 1990 to 1999); | |||||||||
Age 66 | former Dean Emeritus and | former Direc- | |||||||||
Wiley Professor, Texas A&M | tor, First | ||||||||||
University (since 2001); | American | ||||||||||
former Dean and Professor of | Bank and | ||||||||||
Marketing, College and | First American | ||||||||||
Graduate School of Business | Savings Bank | ||||||||||
of Texas A & M University | (from 1994 to | ||||||||||
(from 1987 to 2001). | 1999). | ||||||||||
Mark T. Finn | Trustee | Since 2001 | Adjunct Professor, College of | 36 | None | ||||||
c/o R. Jay Gerken | William & Mary (since 2002); | ||||||||||
CAM | Principal/Member, | ||||||||||
399 Park Avenue | Balvan Partners (since 2002); | ||||||||||
New York, NY 10022 | Chairman (investment | ||||||||||
Age 61 | management) Chief Executive | ||||||||||
Officer and Owner, Vantage | |||||||||||
Consulting Group, Inc. | |||||||||||
(investment advisory and | |||||||||||
consulting firm) (since 1988); | |||||||||||
former Vice Chairman and | |||||||||||
Chief Operating Officer, | |||||||||||
Lindner Asset Management | |||||||||||
Company (mutual fund | |||||||||||
company) (1999-2001); | |||||||||||
Former President and | |||||||||||
Director, Delta Financial. Inc. | |||||||||||
(investment advisory firm) | |||||||||||
(from 1983 to 1999). | |||||||||||
former General | |||||||||||
Partner and Shareholder, | |||||||||||
Greenwich Ventures, LLC | |||||||||||
(investment partnership) | |||||||||||
(from 1996 to 2001); former | |||||||||||
President, Secretary, and | |||||||||||
Owner, Phoenix Trading Co. | |||||||||||
(commodity trading advisory | |||||||||||
firm) (from 1997 to 2000). | |||||||||||
20
A D D I T I O N A L I N F O R M A T I O N (Unaudited) (Continued)
Number of | Other Board | ||||||||||
Principal | Portfolios In | Memberships | |||||||||
Position(s) | Length | Occupation(s) | Fund Complex | Held by | |||||||
Held with | of Time | During Past | Overseen by | Trustee During | |||||||
Name, Address and Age | Fund | Served | Five Years | Trustee | Past Five Years | ||||||
Stephen Randolph Gross | Trustee | Since 2001 | Partner, Capital Investment | 31 | Director, | ||||||
c/o R. Jay Gerken | Advisory Partners (consulting) | United Telesis, | |||||||||
CAM | (since January 2000); former | Inc. (telecom- | |||||||||
399 Park Avenue | Chief Operating Officer, | munications) | |||||||||
New York, NY 10022 | General Media | (since 1997); | |||||||||
Age 57 | Communications (from March | Director, | |||||||||
2003 to August 2003); | eBank.com, | ||||||||||
former Managing Director, | Inc. (since | ||||||||||
Fountainhead Ventures, LLC | 1997); Direc- | ||||||||||
(consulting) (from 1998 to | tor, Andersen | ||||||||||
2002); former Secretary, | Calhoun, Inc. | ||||||||||
Carint N.A. (manufacturing) | (assisted | ||||||||||
(1988–2002); former Treasurer, | living) (since | ||||||||||
Hank Aaron Enterprises (fast | 1987); former | ||||||||||
food franchise) (from 1985 to | Director, | ||||||||||
2001); Chairman, HLB Gross | Charter Bank, | ||||||||||
Collins P.C. (accounting firm) | Inc. (from | ||||||||||
(since 1979); Treasurer, | 1987 to 1997); | ||||||||||
Coventry Limited, Inc. | former Direc- | ||||||||||
(since 1985). | tor, Yu Save, | ||||||||||
Inc. (internet | |||||||||||
company) | |||||||||||
(from 1998 to | |||||||||||
2000); former | |||||||||||
Director, Hot- | |||||||||||
palm, Inc. | |||||||||||
(wireless | |||||||||||
applications) | |||||||||||
(from 1998 to | |||||||||||
2000). | |||||||||||
Diana R. Harrington | Trustee | Since 1992 | Professor, Babson College | 36 | None | ||||||
c/o R. Jay Gerken | (since 1993). | ||||||||||
CAM | |||||||||||
399 Park Avenue | |||||||||||
New York, NY 10022 | |||||||||||
Age 64 | |||||||||||
Susan B. Kerley | Trustee | Since 1992 | Consultant, Strategic | 36 | Director, | ||||||
c/o R. Jay Gerken | Management Advisors, | Eclipse Funds | |||||||||
CAM | LLC (investment consulting) | (currently | |||||||||
399 Park Avenue | (since 1990). | supervises 12 | |||||||||
New York, NY10022 | investment | ||||||||||
Age 53 | companies | ||||||||||
in fund com- | |||||||||||
plex) (since | |||||||||||
1990). | |||||||||||
21
A D D I T I O N A L I N F O R M A T I O N (Unaudited) (Continued)
Number of | Other Board | ||||||||||
Principal | Portfolios In | Memberships | |||||||||
Position(s) | Length | Occupation(s) | Fund Complex | Held by | |||||||
Held with | of Time | During Past | Overseen by | Trustee During | |||||||
Name, Address and Age | Fund | Served | Five Years | Trustee | Past Five Years | ||||||
Alan G. Merten | Trustee | Since 2001 | President, George Mason | 31 | former | ||||||
c/o R. Jay Gerken | University (since 1996). | Director, | |||||||||
CAM | Comshare, Inc. | ||||||||||
399 Park Avenue | (information | ||||||||||
New York, NY 10022 | technology) | ||||||||||
Age 63 | (from 1985 to | ||||||||||
2003); | |||||||||||
Director, | |||||||||||
Digital Net | |||||||||||
Holdings, Inc. | |||||||||||
(since 2003). | |||||||||||
R. Richardson Pettit | Trustee | Since 2001 | Professor of Finance, | 31 | None | ||||||
c/o R. Jay Gerken | University of Houston | ||||||||||
CAM | (from 1977 to 2002); | ||||||||||
399 Park Avenue | independent consultant | ||||||||||
New York, NY 10022 | (since 1984). | ||||||||||
Age 62 | |||||||||||
INTERESTED | |||||||||||
TRUSTEE: | |||||||||||
R. Jay Gerken, CFA* | Chairman, | Since 2002 | Managing Director of | Chairman | N/A | ||||||
CAM | President, | Citigroup Global Markets | of the | ||||||||
399 Park Avenue | and Chief | (“CGM”) (since 1996); | Board, | ||||||||
New York, NY 10022 | Executive | Chairman, President, and | Trustee or | ||||||||
Age 53 | Officer | Chief Executive Officer of | Director | ||||||||
Smith Barney Fund | of 220 | ||||||||||
Management LLC (“SBFM”), | |||||||||||
Travelers Investment | |||||||||||
Advisers, Inc. (“TIA”) and | |||||||||||
Citi Fund Management Inc. | |||||||||||
(“CFM”); President and Chief | |||||||||||
Executive Officer of certain | |||||||||||
mutual funds associated with | |||||||||||
Citigroup Inc. (“Citigroup”); | |||||||||||
formerly, Portfolio Manager | |||||||||||
of Smith Barney Allocation | |||||||||||
Series Inc. (from 1996 to | |||||||||||
2001) and Smith Barney | |||||||||||
Growth and Income Fund | |||||||||||
(from 1996 to 2000). | |||||||||||
22
A D D I T I O N A L I N F O R M A T I O N (Unaudited) (Continued)
Number of | Other Board | |||||||||
Principal | Portfolios In | Memberships | ||||||||
Position(s) | Length | Occupation(s) | Fund Complex | Held by | ||||||
Held with | of Time | During Past | Overseen by | Trustee During | ||||||
Name, Address and Age | Fund | Served | Five Years | Trustee | Past Five Years | |||||
OFFICERS: | ||||||||||
Andrew B. Shoup | Senior | Since 2003 | Director of CAM; Chief | N/A | N/A | |||||
CAM | Vice | Administrative Officer of | ||||||||
125 Broad Street | President | mutual funds associated with | ||||||||
New York, NY 10004 | and | Citigroup; Head of | ||||||||
Age 47 | Chief | International Funds | ||||||||
Adminis- | Administration of CAM (from | |||||||||
trative | 2001 to 2003); Director of | |||||||||
Officer | Global Funds Administration | |||||||||
of CAM (from 2000 to 2001); | ||||||||||
Head of U.S. Citibank Funds | ||||||||||
Administration of CAM | ||||||||||
(from 1998 to 2000). | ||||||||||
Frances M. Guggino | Chief | Since 2004 | Vice President of CGM; | N/A | N/A | |||||
CAM | Financial | Chief Financial Officer and | ||||||||
125 Broad Street | Officer | Treasurer of certain mutual | ||||||||
New York, NY 10004 | and | funds associated with | ||||||||
Age 46 | Treasurer | Citigroup; Controller of | ||||||||
certain mutual funds | ||||||||||
associated with Citigroup | ||||||||||
(from 2002 to 2004). | ||||||||||
Andrew Beagley | Chief | Since 2002 | Director of CGM (since 2000); | N/A | N/A | |||||
CAM | Anti- | Director of Compliance, North | ||||||||
399 Park Avenue | Money | America, CAM (since 2000); | ||||||||
4th Floor | Laundring | Chief Anti-Money Laundering | ||||||||
New York, NY 10022 | Compliance | Compliance Officer, Chief | ||||||||
Age 40 | Officer | Compliance Officer and Vice | ||||||||
President of certain mutual | ||||||||||
Chief | Since 2004 | funds associated with Citigroup; | ||||||||
Compliance | Director of Compliance, Europe, | |||||||||
Officer | the Middle East and Africa, | |||||||||
Citigroup Asset Management | ||||||||||
(from 1999 to 2000); Com- | ||||||||||
pliance Officer, Salomon | ||||||||||
Brothers Asset Management | ||||||||||
Limited, Smith Barney Global | ||||||||||
Capital Management Inc., | ||||||||||
Salomon Brothers Asset | ||||||||||
Management Asia Pacific | ||||||||||
Limited (from 1997 to 1999). | ||||||||||
Wendy S. Setnicka | Controller | Since 2004 | Vice President of CGM; | N/A | N/A | |||||
CAM | Controller of certain mutual | |||||||||
125 Broad Street | funds associated with | |||||||||
New York, NY 10004 | Citigroup; Assistant Controller | |||||||||
Age 40 | of CAM (from 2002 to 2004). | |||||||||
23
A D D I T I O N A L I N F O R M A T I O N (Unaudited) (Continued)
Number of | Other Board | |||||||||
Principal | Portfolios In | Memberships | ||||||||
Position(s) | Length | Occupation(s) | Fund Complex | Held by | ||||||
Held with | of Time | During Past | Overseen by | Trustee During | ||||||
Name, Address and Age | Fund | Served | Five Years | Trustee | Past Five Years | |||||
OFFICERS: | ||||||||||
Robert I. Frenkel | Secretary | Since 2000 | Managing Director and | N/A | N/A | |||||
CAM | General Counsel, Global | |||||||||
300 First Stamford Place | Chief | Since 2003 | Mutual Funds for CAM (since | |||||||
Stamford, CT 06902 | Legal | 1994); Secretary of certain | ||||||||
Age 48 | Officer | mutual funds associated | ||||||||
with Citigroup; Chief Legal | ||||||||||
Officer of mutual funds | ||||||||||
associated with Citigroup Inc. | ||||||||||
* | Mr. Gerken is a Trustee who is an “interested person” of the Fund as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Manager and certain of its affiliates. |
24
Liquid Reserves Portfolio | ||
S C H E D U L E O F I N V E S T M E N T S | August 31, 2004 |
Principal | |||||
Amount | |||||
Issuer | (000’s omitted) | Value | |||
Asset Backed — 4.8% | |||||
Blue Heron Financial | |||||
Corp.,* | $ | 500,000 | |||
1.63% due 10/15/04 | $ | 500,000,000 | |||
1.63% due 12/17/04 | 175,000 | 175,000,000 | |||
1.64% due 3/18/05 | 200,000 | 200,000,000 | |||
1.63% due 5/18/05 | 438,750 | 438,750,000 | |||
Restructured Asset | |||||
Securitization,* | |||||
1.61% due 12/22/04 | 500,000 | 500,000,000 | |||
1,813,750,000 | |||||
Certificates of Deposit (Domestic) — 3.1% | |||||
Harris Trust & Savings, | |||||
1.71% due 12/27/04 | 193,000 | 193,000,000 | |||
Washington Mutual Fin. Corp., | |||||
1.65% due 11/12/04 | 300,000 | 300,017,124 | |||
Wells Fargo Bank and Co., | |||||
1.52% due 9/8/04 | 400,000 | 400,000,000 | |||
1.53% due 9/15/04 | 269,000 | 269,000,000 | |||
1,162,017,124 | |||||
Certificates of Deposit (Euro) — 9.3% | |||||
Barclays Bank PLC, | |||||
1.11% due 9/9/04 | 100,000 | 100,000,110 | |||
BNP Paribas, | |||||
1.75% due 12/31/04 | 450,000 | 450,000,000 | |||
1.80% due 2/11/05 | 500,000 | 500,000,000 | |||
Credit Agricole SA, | |||||
1.07% due 9/21/04 | 100,000 | 99,999,442 | |||
Credit Lyonnais SA, | |||||
1.09% due 9/20/04 | 395,000 | 395,001,037 | |||
Depfa Bank PLC, | |||||
1.50% due 9/21/04 | 200,000 | 200,000,000 | |||
Fortis Bank, | |||||
1.51% due 9/7/04 | 500,000 | 500,000,000 | |||
HBOS Treasury | |||||
Services PLC, | |||||
1.49% due 9/21/04 | 750,000 | 750,000,000 | |||
Nationwide Building | |||||
Society, | |||||
1.09% due 9/9/04 | 100,000 | 100,000,215 | |||
UBS AG, | |||||
1.75% due 12/31/04 | 150,000 | 150,000,000 | |||
Unicredito Italiano SPA, | |||||
1.08% due 9/20/04 | 250,000 | 250,000,000 | |||
3,495,000,804 | |||||
Certificates of Deposit (Yankee) — 6.9% | |||||
Caylon, | |||||
1.78% due 12/28/04 | 133,900 | 133,900,000 | |||
1.70% due 12/30/04 | 500,000 | 500,000,000 | |||
1.75% due 12/31/04 | 150,000 | 150,000,000 | |||
Credit Suisse First | |||||
Boston USA, | |||||
1.71% due 12/31/04 | $ | 300,000 | $ | 300,000,000 | |
1.75% due 12/31/04 | 400,000 | 400,006,669 | |||
Deutsche Bank AG, | |||||
1.73% due 12/30/04 | 200,000 | 199,972,792 | |||
HBOS Treasury | |||||
Services PLC, | |||||
1.08% due 9/27/04 | 300,000 | 300,000,000 | |||
1.73% due 12/31/04 | 300,000 | 300,000,000 | |||
Toronto Dominion | |||||
Bank, | |||||
1.53% due 9/13/04 | 200,000 | 200,000,000 | |||
Unicredito Italiano SPA, | |||||
1.56% due 10/6/04 | 100,000 | 100,005,327 | |||
2,583,884,788 | |||||
Commercial Paper — 36.7% | |||||
Amstel Funding Corp., | |||||
1.08% due 9/16/04 | 200,000 | 199,910,417 | |||
1.77% due 2/1/05 | 588,310 | 583,884,438 | |||
Atlantis One | |||||
Funding Corp., | |||||
1.07% due 9/1/04 | 154,189 | 154,189,000 | |||
1.78% due 12/8/04 | 104,452 | 103,945,872 | |||
1.80% due 12/15/04 | 100,000 | 99,475,000 | |||
Atomium Funding | |||||
Corp., | |||||
1.09% due 9/2/04 | 49,290 | 49,288,508 | |||
1.09% due 9/8/04 | 21,123 | 21,118,523 | |||
1.11% due 9/17/04 | 113,696 | 113,640,163 | |||
1.56% due 9/22/04 | 100,161 | 100,069,853 | |||
1.55% due 10/5/04 | 80,113 | 79,995,723 | |||
Banco Santander, | |||||
1.55% due 9/22/04 | 88,483 | 88,402,997 | |||
BankAmerica Corp, | |||||
1.75% due 2/4/05 | 450,000 | 446,587,500 | |||
Beethoven Funding | |||||
Corp., | |||||
1.55% due 9/7/04 | 328,464 | 328,379,147 | |||
1.55% due 9/10/04 | 364,716 | 364,574,673 | |||
1.57% due 9/15/04 | 261,152 | 260,992,552 | |||
1.57% due 9/17/04 | 131,701 | 131,609,102 | |||
1.56% due 9/20/04 | 154,581 | 154,453,727 | |||
1.60% due 9/27/04 | 103,759 | 103,639,100 | |||
Caisse Nationale | |||||
Des Caisses, | |||||
1.48% due 9/14/04 | 150,000 | 149,919,833 | |||
Cobbler Funding Ltd., | |||||
1.55% due 9/15/04 | 156,290 | 156,195,792 | |||
Crown Point | |||||
Capital Co. LLC, | |||||
1.07% due 9/10/04 | 182,993 | 182,944,049 | |||
1.80% due 2/8/05 | 151,409 | 150,197,728 | |||
Curzon Funding LLC, | |||||
1.56% due 9/14/04 | 100,000 | 99,943,667 |
25
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) | August 31, 2004 |
Principal | |||||
Amount | |||||
Issuer | (000’s omitted) | Value | |||
Commercial Paper — (cont’d.) | |||||
Depfa Bank PLC, | |||||
1.47% due 9/17/04 | $ | 157,000 | $ | 156,897,775 | |
1.50% due 10/6/04 | 194,000 | 193,717,083 | |||
Falcon Asset | |||||
Securitization, | |||||
1.50% due 9/8/04 | 201,541 | 201,482,217 | |||
Georgetown Funding, | |||||
1.58% due 9/2/04 | 100,429 | 100,424,592 | |||
1.54% due 9/7/04 | 100,000 | 99,974,333 | |||
1.50% due 9/16/04 | 284,710 | 284,532,056 | |||
1.50% due 9/20/04 | 382,095 | 381,792,510 | |||
1.58% due 9/21/04 | 100,000 | 99,912,222 | |||
1.62% due 9/27/04 | 100,000 | 99,883,000 | |||
1.62% due 9/30/04 | 137,989 | 137,808,924 | |||
1.58% due 10/15/04 | 500,000 | 499,034,444 | |||
Giro Balanced Funding, | |||||
1.60% due 9/30/04 | 110,000 | 109,858,222 | |||
Grampian Funding LLC, | |||||
1.71% due 12/20/04 | 130,000 | 129,320,750 | |||
1.72% due 12/30/04 | 200,000 | 198,853,333 | |||
Hannover Funding Co. LLC, | |||||
1.51% due 9/2/04 | 76,592 | 76,588,787 | |||
1.55% due 9/7/04 | 123,289 | 123,257,150 | |||
1.55% due 9/9/04 | 60,082 | 60,061,305 | |||
1.55% due 9/20/04 | 115,000 | 114,905,923 | |||
Jupiter Securitization Corp., | |||||
1.50% due 9/2/04 | 140,000 | 139,994,167 | |||
Legacy Capital LLC, | |||||
1.89% due 2/16/05 | 146,479 | 145,187,055 | |||
Mane Funding Corp., | |||||
1.54% due 9/17/04 | 100,000 | 99,931,555 | |||
Mica Funding LLC, | |||||
1.56% due 9/13/04 | 207,000 | 206,892,360 | |||
1.50% due 9/20/04 | 127,000 | 126,899,458 | |||
1.53% due 9/20/04 | 400,000 | 399,677,000 | |||
1.53% due 10/1/04 | 300,000 | 299,617,500 | |||
1.55% due 10/7/04 | 150,000 | 149,767,500 | |||
1.57% due 10/7/04 | 100,000 | 99,843,000 | |||
Nationwide Building | |||||
Society, | |||||
1.09% due 9/10/04 | 100,000 | 99,972,750 | |||
1.48% due 9/17/04 | 297,000 | 296,804,639 | |||
Nyala Funding LLC, | |||||
1.08% due 9/15/04 | 133,347 | 133,290,994 | |||
1.65% due 10/15/04 | 100,000 | 99,798,333 | |||
PACE Receivables | |||||
Funding, | |||||
1.50% due 9/3/04 | 118,436 | 118,426,130 | |||
Paradigm Funding LLC, | |||||
1.52% due 9/7/04 | 221,000 | 220,944,013 | |||
Perry Global Funding LLC, | |||||
1.07% due 9/2/04 | 251,645 | 251,637,521 | |||
1.07% due 9/7/04 | 147,133 | 147,106,761 | |||
Polonius Inc., | |||||
1.55% due 9/15/04 | 129,000 | 128,922,242 | |||
Regency Markets LLC, | |||||
1.55% due 9/17/04 | $ | 103,805 | $ | 103,733,490 | |
1.50% due 9/20/04 | 196,606 | 196,450,355 | |||
1.60% due 9/30/04 | 80,000 | 79,896,889 | |||
Saint Germain | |||||
Holdings, | |||||
1.48% due 9/15/04 | 186,000 | 185,892,947 | |||
1.56% due 9/16/04 | 100,000 | 99,935,000 | |||
1.60% due 9/27/04 | 220,000 | 219,745,777 | |||
Scaldis Capital Ltd., | |||||
1.08% due 9/22/04 | 105,000 | 104,933,850 | |||
1.60% due 9/28/04 | 161,975 | 161,780,630 | |||
Sierra Madre | |||||
Funding Ltd., | |||||
1.60% due 9/14/04 | 170,000 | 169,901,778 | |||
Solitaire Funding Ltd., | |||||
1.55% due 9/7/04 | 190,110 | 190,060,888 | |||
1.60% due 9/23/04 | 108,780 | 108,673,637 | |||
Spintab AB, | |||||
1.49% due 9/15/04 | 112,000 | 111,935,103 | |||
Surrey Funding Corp., | |||||
1.60% due 9/29/04 | 120,000 | 119,850,667 | |||
Ticonderoga | |||||
1.53% due 9/7/04 | 185,431 | 185,383,715 | |||
1.55% due 9/22/04 | 110,242 | 110,142,323 | |||
Tulip Funding Corp., | |||||
1.62% due 9/30/04 | 400,000 | �� | 399,478,000 | ||
1.80% due 11/26/04 | 100,000 | 99,570,000 | |||
Victory Receivables | |||||
Corp., | |||||
1.53% due 9/2/04 | 100,000 | 99,995,750 | |||
1.55% due 9/9/04 | 100,320 | 100,285,445 | |||
1.57% due 9/21/04 | 124,274 | 124,165,605 | |||
Wal Mart Funding Corp., | |||||
1.55% due 9/20/04 | 100,000 | 99,918,194 | |||
Windmill Funding | |||||
Corp., | |||||
1.50% due 9/9/04 | 175,000 | 174,941,667 | |||
Yorktown Capital LLC, | |||||
1.48% due 9/17/04 | 185,101 | 184,979,244 | |||
13,788,025,922 | |||||
Corporate Notes -— 16.1% | |||||
Brahms Funding Corp., | |||||
1.55% due 9/7/04 | 346,880 | 346,790,194 | |||
1.59% due 9/21/04 | 398,227 | 397,875,231 | |||
1.60% due 9/22/04 | 107,427 | 107,326,735 | |||
1.63% due 9/27/04 | 110,000 | 109,870,506 | |||
1.64% due 9/28/04 | 266,917 | 266,588,692 | |||
Fenway Funding LLC, | |||||
1.55% due 9/7/04 | 438,912 | 438,798,614 | |||
1.55% due 9/10/04 | 110,153 | 110,110,316 | |||
1.59% due 9/16/04 | 146,727 | 146,629,793 | |||
1.62% due 9/27/04 | 119,637 | 119,497,025 | |||
Foxboro Funding Ltd., | |||||
1.61% due 9/9/04 | 80,369 | 80,340,246 |
26
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) | August 31, 2004 |
Principal | |||||
Amount | |||||
Issuer | (000’s omitted) | Value | |||
Corporate Notes -— (cont’d.) | |||||
Harwood Street Funding LLC, | |||||
1.59% due 9/1/04 | $ | 96,500 | $ | 96,500,000 | |
1.57% due 9/13/04 | 187,275 | 187,176,993 | |||
1.57% due 9/23/04 | 187,364 | 187,184,235 | |||
Main Street, | |||||
1.57% due 9/1/04 | 100,000 | 100,000,000 | |||
1.57% due 9/3/04 | 46,095 | 46,090,979 | |||
1.58% due 9/9/04 | 348,000 | 347,877,813 | |||
1.60% due 9/10/04 | 100,000 | 99,960,000 | |||
1.60% due 9/16/04 | 232,000 | 231,845,335 | |||
1.60% due 9/17/04 | 100,000 | 99,928,889 | |||
1.60% due 9/21/04 | 115,000 | 114,897,778 | |||
1.62% due 9/22/04 | 160,000 | 159,848,800 | |||
1.64% due 9/29/04 | 100,000 | 99,872,442 | |||
1.69% due 10/7/04 | 206,000 | 205,651,860 | |||
1.69% due 10/12/04 | 150,000 | 149,711,292 | |||
Mica Funding LLC, | |||||
1.59% due 9/20/04 | 375,000 | 374,685,315 | |||
Nyala Funding LLC, | |||||
1.72% due 11/18/04 | 151,000 | 150,437,273 | |||
Park Granada LLC, | |||||
1.52% due 9/7/04 | 350,000 | 349,911,625 | |||
1.53% due 9/8/04 | 252,382 | 252,306,916 | |||
1.60% due 9/20/04 | 129,800 | 129,690,391 | |||
1.58% due 9/21/04 | 100,000 | 99,912,222 | |||
1.58% due 9/23/04 | 350,000 | 349,662,054 | |||
1.63% due 9/28/04 | 110,000 | 109,865,525 | |||
6,066,845,089 | |||||
Master Notes — 3.2% | |||||
Merrill Lynch & Co. Inc.,* | |||||
1.71% due 9/1/04 | 371,300 | 371,300,000 | |||
Morgan Stanley,* | |||||
1.76% due 9/1/04 | 850,000 | 850,000,000 | |||
1,221,300,000 | |||||
Medium Term Notes — 7.9% | |||||
K2 USA LLC,* | |||||
1.50% due 9/20/04 | 100,500 | 100,420,438 | |||
1.60% due 9/28/04 | 150,000 | 149,997,250 | |||
Links Finance Corp.,* | |||||
1.56% due 1/18/05 | 250,000 | 249,981,165 | |||
Merrill Lynch & | |||||
Co. Inc.,* | |||||
1.51% due 10/1/05 | 385,000 | 385,000,000 | |||
Premier Asset | |||||
Collection Entity Ltd.,* | |||||
1.57% due 4/25/05 | 100,000 | 99,980,460 | |||
1.57% due 7/15/05 | 100,000 | 99,986,937 | |||
Sigma Finance Inc.,* | |||||
1.56% due 1/18/05 | 175,000 | 174,986,816 | |||
1.57% due 1/21/05 | 100,000 | 99,990,327 | |||
1.56% due 5/16/05 | 250,000 | 249,955,872 | |||
1.56% due 7/19/05 | 300,000 | 299,920,850 | |||
1.56% due 7/25/05 | 200,000 | 199,946,540 | |||
Stanfield Victoria | |||||
Funding LLC,* | |||||
1.56% due 7/20/05 | $ | 100,000 | $ | 99,969,485 | |
1.57% due 8/1/05 | 100,000 | 99,976,935 | |||
1.56% due 8/22/05 | 100,000 | 99,952,027 | |||
Tango Finance Corp.,* | |||||
1.58% due 8/15/05 | 122,000 | 121,994,168 | |||
Whistlejacket | |||||
Capital LLC,* | |||||
1.56% due 12/15/04 | 111,000 | 110,993,597 | |||
White Pine | |||||
Finance LLC,* | |||||
1.56% due 9/15/04 | 100,000 | 99,999,044 | |||
1.60% due 9/28/04 | 108,000 | 107,997,992 | |||
1.58% due 10/25/04 | 118,000 | 117,996,499 | |||
2,969,046,402 | |||||
Promissory Note — 2.9% | |||||
Goldman Sachs | |||||
Group Inc. | |||||
1.72% due 2/24/05 | 1,100,000 | 1,100,000,000 | |||
Time Deposits — 2.4% | |||||
Dexia Bank | |||||
1.58% due 9/1/04 | 578,000 | 578,000,000 | |||
Svenska Handelsbanken | |||||
1.55% due 9/1/04 | 324,311 | 324,311,000 | |||
902,311,000 | |||||
United States | |||||
Government Agencies — 6.6% | |||||
Federal Home | |||||
Loan Bank* | |||||
1.49% due 9/17/04 | 100,000 | 99,933,777 | |||
1.49% due 10/19/04 | 250,000 | 249,503,333 | |||
1.89% due 3/15/05 | 200,000 | 197,952,500 | |||
Federal National | |||||
Mortgage | |||||
Association,* | |||||
1.48% due 10/13/04 | 670,000 | 668,843,134 | |||
1.49% due 10/13/04 | 775,578 | 774,234,822 | |||
1.72% due 2/2/05 | 100,000 | 99,264,222 | |||
1.75% due 5/23/05 | 100,000 | 100,000,000 | |||
1.49% due 7/6/05 | 275,000 | 274,886,517 | |||
2,464,618,305 | |||||
Total Investments, | |||||
at Amortized Cost | 99.9 | % | 37,566,799,434 | ||
Other Assets, | |||||
Less Liabilities | 0.1 | 19,843,328 | |||
Net Assets | 100.0 | % | $ | 37,586,642,762 | |
* | The coupon rate listed for floating or adjustable rate securities represent the rate at period end.The due dates on these securities reflect the next interest rate reset date or, when applicable, the maturity date. |
See Notes to Financial Statements.
27
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 | ||||||
August 31, 2004 | ||||||
ASSETS: | ||||||
Investments at value (Note 1A) | $ | 37,566,799,434 | ||||
Cash | 498 | |||||
Interest receivable | 23,744,982 | |||||
Total Assets | 37,590,544,914 | |||||
LIABILITIES: | ||||||
Management fee payable (Note 2) | 2,448,052 | |||||
Accrued expenses and other liabilities | 1,454,100 | |||||
Total Liabilities | 3,902,152 | |||||
Total Net Assets | $ | 37,586,642,762 | ||||
Represented by: | ||||||
Capital paid in excess of par value | $ | 37,586,642,762 | ||||
S T A T E M E N T O F O P E R AT I O N S | ||||||
For the Year Ended August 31, 2003 | ||||||
INTEREST (NOTE 1): | $ | 435,706,091 | ||||
EXPENSES: | ||||||
Management fee (Note 2) | $ | 55,561,429 | ||||
Custody and fund accounting fees | 7,496,410 | |||||
Trustees’ fees | 579,480 | |||||
Audit and legal | 279,939 | |||||
Other | 30,699 | |||||
Total Expenses | 63,947,957 | |||||
Less: management fee waived (Note 2) | (26,870,821 | ) | ||||
fees paid indirectly (Note 1F) | (297 | ) | ||||
Net Expenses | 37,076,839 | |||||
Net Investment Income | 398,629,252 | |||||
Net Realized Gain on Investment | 3,202,155 | |||||
Increase in Net Assets From Operations | $ | 401,831,407 | ||||
See Notes to Financial Statements. |
28
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 | ||||||
Years Ended August 31, | ||||||
2004 | 2003 | |||||
OPERATIONS: | ||||||
Net investment income | $ | 398,629,252 | $ | 619,131,302 | ||
Net realized gain on investments | 3,202,155 | — | ||||
Increase in Net Assets From Operations | 401,831,407 | 619,131,302 | ||||
CAPITAL TRANSACTIONS: | ||||||
Proceeds from contributions (Note 1) | 86,116,419,663 | 95,248,125,837 | ||||
Value of withdrawals | (88,378,702,148 | ) | (101,427,035,864 | ) | ||
Decrease in Net Assets From | ||||||
Capital Transactions | (2,262,282,485 | ) | (6,178,910,027 | ) | ||
Decrease in Net Assets | (1,860,451,078 | ) | (5,559,778,725 | ) | ||
NET ASSETS: | ||||||
Beginning of year | 39,447,093,840 | 45,006,872,565 | ||||
End of year | $ | 37,586,642,762 | $ | 39,447,093,840 | ||
See Notes to Financial Statements. |
29
Liquid Reserves Portfolio | |||||||||||||||
F I N A N C I A L H I G H L I G H T S | |||||||||||||||
Years Ended August 31, | |||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||
Ratios/Supplemental Data: | |||||||||||||||
Net assets (000’s omitted) | $ | 37,586,643 | $ | 39,447,094 | $ | 45,006,873 | $ | 32,073,343 | $ | 14,392,341 | |||||
Ratios to Average Net Assets: | |||||||||||||||
Expenses# | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | |||||
Net investment income | 1.09 | % | 1.39 | % | 2.29 | % | 5.27 | % | 5.93 | % | |||||
Total Return | 1.09 | % | 1.49 | % | 2.36 | % | N/A | N/A | |||||||
Note: If agents of the Portfolio had not voluntarily waived all or a portion of their fees for the years | |||||||||||||||
indicated, the ratios would have been as follows: | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||
Expenses | 0.17 | % | 0.17 | % | 0.19 | % | 0.22 | % | 0.22 | % | |||||
Net investment income | 1.02 | % | 1.32 | % | 2.20 | % | 5.15 | % | 5.81 | % | |||||
# | The ratio of expenses to average net assets will not exceed 0.10% as a result of a voluntary expense limitation, which may be terminated at any time. |
See Notes to Financial Statements.
30
N O T E S T O F I N A N C I A L S T A T E M E N T S
1. Organization and Significant Accounting Policies
Liquid Reserves Portfolio formerly known as Cash Reserves Portfolio, (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. At August 31, 2004, all investors in the Portfolio were funds advised by the Manager and or its affiliates.
The preparation of financial statements in accordance with U.S. generally accepted accounting principles (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
The following are significant accounting policies consistently followed by the Portfolio and are in conformity with GAAP:
A. Valuation of Investments Money market instruments are valued at amortized cost, in accordance with Rule 2a-7 under the 1940 Act, which approximates market value. 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. Expenses of the Portfolio are accrued daily. The Portfolio bears all costs of its operations other than expenses specifically assumed by the Manager.
C. Income Taxes The Portfolio is classified as a partnership for Federal income tax purposes. As such, each investor in the Portfolio is treated as owner of its proportionate share of the net assets, income, expenses and realized and unrealized gains and losses of the Portfolio. Therefore, no Federal income tax provision is required. It is intended that the Portfolio’s assets will be managed so an investor in the Portfolio can satisfy the requirements of the subchapter M of the Internal Revenue Code.
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.
31
N O T E S T O F I N A N C I A L S T A T E M E N T S (Continued)
E. Other Purchases, maturities and sales of money market instruments are accounted for on the date of the transaction. Realized gains and losses are calculated on the identified cost basis.
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.
2. Management FeesThe 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 $55,561,429 of which $26,870,821 was voluntarily waived for the year ended August 31, 2004. Such waiver is voluntary and can be terminated at any time at the discretion of the Manager. 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 officers and a director of the Manager or its affiliates.
3. Investment TransactionsPurchases, maturities and sales of money market instruments aggregated $814,948,110,606 and $812,036,318,664, respectively, for the year ended August 31, 2004.
4. Federal Income Tax Basis of Investment Securities
The tax cost of investment securities owned at August 31, 2004, for federal income tax purposes, amounted to $37,566,799,434.
5. Trustee Retirement PlanThe 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
32
N O T E S T O F I N A N C I A L S T A T E M E N T S (Continued)
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). Three former Trustees are currently receiving payments under the plan. In addition two other former Trustees received a lump sum payment under the plan during this period. The Fund’s allocable share of the expenses of the Plan for the year ended August 31, 2004 and the related liability at August 31, 2004 was not material.
6. Additional InformationIn connection with an investigation previously disclosed by Citigroup, the Staff of the Securities and Exchange Commission (“SEC”) has notified Citigroup Asset Management (“CAM”), the Citigroup business unit that includes the Portfolio’s investment manager and other investment advisory companies; Citicorp Trust Bank (“CTB”), an affiliate of CAM; Thomas W. Jones, the former CEO of CAM; and two other individuals, one of whom is an employee and the other of whom is a former employee of CAM, that the SEC Staff is considering recommending a civil injunctive action and/or an administrative proceeding against each of them relating to the creation and operation of an internal transfer agent unit to serve various CAM-managed funds.
In 1999, CTB entered the transfer agent business. CTB hired an unaffiliated subcontractor to perform some of the transfer agent services. The subcontractor, in exchange, had signed a separate agreement with CAM in 1998 that guaranteed investment management revenue to CAM and investment banking revenue to a CAM affiliate. The sub-contractor’s business was later taken over by PFPC Inc., and at that time the revenue guarantee was eliminated and a one-time payment was made by the subcontractor to a CAM affiliate.
CAM did not disclose the revenue guarantee when the boards of various CAM-managed funds hired CTB as transfer agent. Nor did CAM disclose to the boards of the various CAM-managed funds the one-time payment received by the CAM affiliate when it was made.
In addition, the SEC Staff has indicated that it is considering recommending action based on the adequacy of the disclosures made to the fund boards that approved the transfer agency arrangement, CAM’s initiation and operation of, and compensation for, the transfer agent business and CAM’s retention of, and agreements with, the subcontractor.
Citigroup is cooperating fully in the investigation and will seek to resolve the matter in discussions with the SEC Staff. Although there can be no assurance,
33
N O T E S T O F I N A N C I A L S T A T E M E N T S (Continued)
Citigroup does not believe that this matter will have a material adverse effect on the Portfolio. As previously disclosed, CAM has already agreed to pay the applicable funds, primarily through fee waivers, a total of approximately $17 million (plus interest) that is the amount of the revenue received by Citigroup relating to the revenue guarantee.
The Portfolio did not implement the contractual arrangement described above and therefore will not receive any portion of such payment.
34
R E P O R T O F I N D E P E N D E N T R E G I S T E R E D P U B L I C
A C C O U N T I N G F I R M
To the Trustees and Investors of
Liquid Reserves Portfolio:
In our opinion, the accompanying statement of assets and liabilities, including the schedule of investments, 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 Liquid Reserves Portfolio (the “Portfolio”) at August 31, 2004, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the five years in the period then ended, 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 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 the standards of the Public Company Accounting Oversight Board (United States). Those standards 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 securities at August 31, 2004 by correspondence with the custodian and brokers, provide a reasonable basis for our opinion.
PricewaterhouseCoopers LLPNew York, New York
October 22, 2004
35
Liquid Reserves Portfolio
A D D I T I O N A L I N F O R M A T I O N (Unaudited)
Information about the Trustees and Officers of the Portfolio can be found on pages 19 through 24 of this report.
36
INVESTMENT MANAGER | TRUSTEES | |||
(OF LIQUID RESERVES | Elliott J. Berv | |||
PORTFOLIO) | Donald M. Carlton | |||
Citi Fund Management Inc. | A. Benton Cocanougher | |||
100 First Stamford Place | Mark T. Finn | |||
Stamford, CT 06902 | R. Jay Gerken, CFA* | |||
Chairman | ||||
DISTRIBUTOR | Stephen Randolph Gross | |||
Citigroup Global Markets Inc. | Diana R. Harrington | |||
Susan B. Kerley | ||||
TRANSFER AGENT | Alan G. Merten | |||
Citicorp Trust Bank, fsb. | R. Richardson Pettit | |||
125 Broad Street, 11th Floor | ||||
New York, NY 10004 | OFFICERS* | |||
R. Jay Gerken, CFA | ||||
SUB-TRANSFER AGENT | President and | |||
PFPC Inc. | Chief Executive Officer | |||
P.O. Box 9699 | ||||
Providence, RI | Andrew B. Shoup | |||
02940-9699 | Senior Vice President and | |||
Chief Administrative Officer | ||||
SUB-TRANSFER AGENT | ||||
AND CUSTODIAN | Frances M. Guggino | |||
State Street Bank and Trust Company | Chief Financial Officer | |||
225 Franklin Street | and Treasurer | |||
Boston, MA 02110 | ||||
Andrew Beagley | ||||
INDEPENDENT REGISTERED | Chief Anti-Money Laundering | |||
PUBLIC ACCOUNTING FIRM | Compliance Officer and | |||
PricewaterhouseCoopers LLP | Chief Compliance Officer | |||
300 Madison Avenue | ||||
New York, New York 10017 | Wendy S. Setnicka | |||
Controller | ||||
LEGAL COUNSEL | Robert I. Frenkel | |||
Bingham McCutchen LLP | Secretary and | |||
150 Federal Street | Chief Legal Officer | |||
Boston, MA 02110 | ||||
*Affiliated Person of Investment Manager | ||||
CitiFunds Premium Trust
CitiSM Premium Liquid Reserves
The funds are separate investment funds of CitiFunds Premium Trust, a Massachusetts business trust.
The Fund files its complete schedule of portfolio holdings with Securities Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q from the Fund, shareholders can call 1-800-625-4554.
Information on how the fund voted proxies relating to portfolio securities during the 12 month period ending June 30, 2004 and a description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling 1-800-625-4554, (2) on the fund’s website at www.citigroupAM.com and (3) on the SEC’s website at www.sec.gov.
This report is submitted for the general information of the shareholders of Citi Premium Liquid Reserves.
©2004 Citicorp | Citicorp Global Markets Inc. | |
CFA/PLR/804 | ||
04-7262 |
CitiSM Premium | |
U.S. Treasury Reserves | |
August 31, 2004 |
INVESTMENT PRODUCTS: NOT FDIC INSURED • NO BANK GUARANTEE • MAY LOSE VALUE |
TA B L E O F C O N T E N T S | ||
Letter from the Chairman | 1 | |
Manager Overview | 3 | |
Fund Facts | 5 | |
Portfolio at a Glance – U.S. Treasury Reserves Portfolio | 6 | |
Fund Expenses | 7 | |
Fund Performance | 9 | |
Citi Premium U.S. Treasury Reserves | ||
Statement of Assets and Liabilities | 10 | |
Statement of Operations | 11 | |
Statements of Changes in Net Assets | 12 | |
Financial Highlights | 13 | |
Notes to Financial Statements | 14 | |
Report of Independent Registered Public Accounting Firm | 18 | |
Additional Information | 19 | |
Tax Information | 25 | |
U.S. Treasury Reserves Portfolio | ||
Schedule of Investments | 26 | |
Statement of Assets and Liabilities | 27 | |
Statement of Operations | 28 | |
Statements of Changes in Net Assets | 29 | |
Financial Highlights | 30 | |
Notes to Financial Statements | 31 | |
Report of Independent Registered Public Accounting Firm | 34 | |
Additional Information | 35 | |
Dear Shareholder, The Federal Reserve Bank’s (“Fed”) monetary policy committee pushed short-term interest rates higher over the 12 months ending August 31, 2004. It raised its federal funds ratei target from a four-decade low of 1.00% at the start of the period to 1.25% in June, and to 1.50% in August. The Fed further increased the target rate by an additional 0.25% to 1.75% on September 21, following the end of the fund’s reporting period. Rising interest rates can act as a brake on robust economic growth, helping to maintain a balance between that growth and the inflation that generally can accompany it. Inflation and job growth picked up during the year. Earlier in the period, the rate of gross domestic product (“GDP”)ii growth rose significantly from its levels in early 2003. Although GDP growth tapered off toward the end of the period versus prior levels within the past year, it remained above its quarterly rate during the first half of last year. Money market yields fluctuated during the year. |
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Please read on for a more detailed look at prevailing economic and market conditions during the fund’s fiscal year and to learn how those conditions have affected fund performance.
Information About Your Fund
In recent months several issues in the mutual fund industry have come under the scrutiny of federal and state regulators. The fund’s Adviser and some of its affiliates have received requests for information from various government regulators regarding market timing, late trading, fees, and other mutual fund issues in connection with various investigations. The regulators appear to be examining, among other things, the fund’s response to market timing and shareholder exchange activity, including compliance with prospectus disclosure related to these subjects. The fund has been informed that the Adviser and its affiliates are responding to those information requests, but are not in a position to predict the outcome of these requests and investigations.
In November 2003, Citigroup Asset Management (“CAM”) disclosed an investigation by the Securities and Exchange Commission (“SEC”) and the U.S. Attorney relating to CAM’s entry into the transfer agency business during 1997-1999. Citigroup has disclosed that the Staff of the SEC is considering recommending a civil injunctive action and/or an administrative proceeding against certain advisory and transfer agent entities affiliated with Citigroup, the former CEO of CAM, a former employee and a current employee of CAM, relating to the creation, operation and fees of its internal transfer agent unit that serves various CAM-managed funds.
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Citigroup is cooperating with the SEC and will seek to resolve this matter in discussion with the SEC Staff. Although there can be no assurance, Citigroup does not believe that this matter will have a material adverse effect on the fund.
As always thank you for your confidence in our stewardship of your assets. We look forward to helping you continue to meet your financial goals.
Sincerely,R. Jay Gerken, CFA
Chairman, President and Chief Executive Officer
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M A N A G E R O V E R V I E W
Performance Review
As of August 31, 2004, the seven-day current yield for Citi Premium U.S. Treasury Reserves was 0.92% and its seven-day effective yield, which reflects compounding, was 0.92% . These numbers are the same due to rounding.
Both yields include a voluntary waiver of the management fee. This waiver may be reduced or terminated at any time. If the full management fee had been included, the seven-day current yield would have been 0.84% and the seven-day effective yield would have been 0.84% . These numbers are the same due to rounding. The seven-day effective yield is calculated similarly to the seven-day current yield but, when annualized, the income earned by an investment in the fund is assumed to be reinvested. The effective yield typically will be slightly higher than the current yield because of the compounding effect of the assumed reinvestment. Please note that the performance represents past performance and is no guarantee of future results and yields will vary. In addition, your investment is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
When the period began, evidence of an improved economy was already unfolding. However, market participants believed the Fed’s policymaking committee would maintain its target interest rate at low levels to help sustain the recovery. This policy stance would help forestall potential deflationary forces as well as keep money market yields near their lows.
In early 2004, broader-based economic indicators continued to reflect a favorable overall outlook though geopolitical concerns remained at the forefront of the U.S. political agenda and added an element of uncertainty to the fixed income markets. Short-term interest rates steadied and the Federal Reserve remained “patient in
CITISM PREMIUM U.S.TREASURY RESERVESYIELDS AS OF AUGUST 31, 2004 (Unaudited)
Seven-day current yield | 0.92 | % | |
Seven-day effective yield | 0.92 | % |
The performance shown represents past performance. Past performance is no guarantee of future results and current performance may be higher or lower than the performance shown above. Principal value and investment returns will fluctuate and investors’ shares, when redeemed may be worth more or less than their original cost. The fund’s yields will vary and performance of other share classes may differ. Please note that your investment is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) or any other government agency.Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund.
Both yields include a voluntary waiver of the management fee. This waiver may be reduced or terminated at any time. If the full management fee had been included, the seven-day current yield would have been 0.84% and the seven-day effective yield would have been 0.84% .These numbers are the same due to rounding.
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removing its policy accommodation.”iii Treasury prices benefited from both the Fed’s restraint in raising rates and from demand by foreign central banks.
As the year progressed, rising corporate profits and improved balanced sheets set the groundwork for a sustained recovery. Renewed corporate and consumer spending led to robust output growth and encouraged businesses to hire additional workers. Both consumer and producer prices started to inch higher and earlier fears of deflation slowly began to subside. Strong domestic and global demand also put additional upward pressure on commodity prices. Against this backdrop Fed monetary policy was seen as highly accommodative and would need to start moving to a more neutral setting. Recently, Treasury bill yields have moved higher as the recovery has progressed. Supply remains ample, offering investors the opportunity to buy short paper in anticipation of more attractive rates ahead.
In response to the strong economic growth, and in anticipation of the Fed moving to a more neutral policy, we maintained a moderate maturity stance in the fund. The Fed raised its target for the federal funds rate by 0.25% to 1.25% in June and to 1.50% in August as a countermeasure to the resilient strength of the economy. These were the first rate increases in over four years and were widely anticipated by market participants. The Fed indicated that going forward rates would need to rise at a “measured pace.” At their September meeting, the Fed again raised interest rates by 0.25% to 1.75%, forecasting that the recent softness in the economy was temporary in nature.
Thank you for your investment in CitiSM Premium U.S. Treasury Reserves. As ever, we appreciate that you have chosen us to manage your assets and we remain focused on achieving the fund’s investment goals.
Denise Guetta
Portfolio Manager
September 15, 2004
The information provided is not intended to be a forecast of future events, a guarantee of future results or investment advice.Views expressed may differ from those of the firm as a whole.
RISKS: An investment in a money market fund is neither insured nor guaranteed by the FDIC or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00, it is possible to lose money by investing in the fund.
i | The federal funds rate is the interest rate that banks with excess reserves at a Federal Reserve dis- trict bank charge other banks that need overnight loans. |
ii | Gross domestic product is a market value of goods and services produced by labor and property in a given country. |
iii | Federal Reserve Board (FOMC Statement) March 16, 2004. |
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F U N D F A C T S
Fund Objective
To provide its shareholders with liquidity and as high a level of current income from U.S. government obligations as is consistent with the preservation of capital.
Investment Manager | Dividends | |
Citi Fund Management Inc. | Declared daily, paid monthly | |
Commencement of Operations | Benchmark* | |
March 1, 1991 | • iMoneyNet, Inc. | |
100% U.S. Treasury Rated | ||
Net Assets as of 8/31/04 | Money Market Funds Average | |
$390.8 million | ||
* | The iMoneyNet, Inc. Funds Average reflects the performance (excluding sales charges) of mutual funds with similar objectives. |
Citi is a service mark of Citicorp. | |
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U .S. T R E A S U RY R E S E R V E S P O R T F O L I O
PORTFOLIO AT A GLANCE (Unaudited)
Investment Breakdown †
August 31, 2004
† As a percentage of total investments. Please note that Portfolio holdings are subject to change.
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Example
As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested on March 1, 2004 and held for the six months ended August 31, 2004.
Actual ExpensesThe table below titled “Based on Actual Total Return” provides information about actual account values and actual expenses. You may use the information provided in this table, together with the amount you invested, to estimate the expenses that you paid over the period. To estimate the expenses you paid on your account, divide your ending account value by $1,000 (for example, an $8,600 ending account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled “Expenses Paid During the Period”.
Based on Actual Total Return(1) | ||||||||||||||||
Actual | Beginning | Ending | Annualized | Expenses | ||||||||||||
Total | Account | Account | Expenses | Paid During | ||||||||||||
Return(2) | Value | Value | Ratio | the Period(3) | ||||||||||||
Citi Premium | ||||||||||||||||
U.S. Treasury Reserves | 0.32% | $1,000.00 | $1,003.20 | 0.45% | $2.27 | |||||||||||
(1) | For the six months ended August 31, 2004. |
(2) | Assumes reinvestment of all dividends and capital gain distributions, if any, at net asset value. |
(3) | Expenses (net of voluntary waiver) are equal to the Fund’s annualized expense ratio, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year divided by 366. |
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F U N D E X P E N S E S (Unaudited) (Continued)
Hypothetical Example for Comparison Purposes
The table below titled “Based on Hypothetical Total Return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use the information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table below are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transaction costs were included, your costs would have been higher.
Based on Hypothetical Total Return(1) | ||||||||||
Hypothetical | Beginning | Ending | Annualized | Expenses | ||||||
Annualized | Account | Account | Expense | Paid During | ||||||
Total Return | Value | Value | Ratios | the Period(2) | ||||||
Citi Premium | ||||||||||
U.S. Treasury Reserves | 5.00% | $1,000.00 | $1,022.87 | 0.45% | $2.29 | |||||
(1) | For the six months ended August 31, 2004. |
(2) | Expenses (net of voluntary waiver) are equal to the Fund’s annualized expense ratio of 0.45%, multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year, divided by 366. |
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F U N D P E R F O R M A N C E | |||||||||
Total Returns (Unaudited) | |||||||||
One | Five | Ten | |||||||
All Periods Ended August 31, 2004 | Year | Years* | Years* | ||||||
Citi Premium U.S.Treasury Reserves | 0.57% | 2.62% | 3.72% | ||||||
iMoneyNet, Inc. 100% U.S.Treasury Rated Money Market Funds Average | 0.41% | 2.48% | 3.63% | ||||||
*Average Annual Total Return | |||||||||
7-Day Yields | |||||||||
Annualized Current | 0.92% | ||||||||
Effective | 0.92% |
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 that seven-day period is assumed to be reinvested. The effective yield may be 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.
Comparison of 7-Day Yields for Citi Premium U.S. Treasury Reserves vs. iMoneyNet, Inc. 100% U.S. Treasury Rated Money Market Funds Average
As illustrated, Citi Premium U.S. Treasury Reserves generally provided an annualized seven-day yield comparable to the iMoneyNet, Inc. 100% U.S. Treasury Rated Money Market Funds Average, as published in iMoneyNet, Inc. Money Fund Report™, 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.
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Citi Premium U.S. Treasury Reserves | ||
S TAT 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 | ||
August 31, 2004 | ||
ASSETS: | ||
Investment in U.S.Treasury Reserves Portfolio, at value (Note 1) | $ | 391,356,970 |
LIABILITIES: | ||
Dividends payable | 172,983 | |
Payable for Fund shares purchased | 100,000 | |
Management fees payable (Note 3) | 66,938 | |
Distribution/Service fees payable (Note 4) | 33,469 | |
Accrued expenses and other liabilities | 136,732 | |
Total Liabilities | 510,122 | |
Total Net Assets for 390,846,724 shares of beneficial interest outstanding | $ | 390,846,848 |
NET ASSETS: | ||
Par value of shares of beneficial interest | ||
($0.00001 par value, unlimited shares authorized) | $ | 3,908 |
Capital paid in excess of par value | 390,842,816 | |
Accumulated net gain from investment transactions | 124 | |
Total Net Assets | $ | 390,846,848 |
Net Asset Value, Offering Price, and Redemption Price Per Share | $1.00 | |
See Notes to Financial Statements. |
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Citi Premium U.S. Treasury Reserves | ||||
S TAT E M E N T O F O P E R AT I O N S | ||||
For the Year Ended August 31, 2004 | ||||
INVESTMENT INCOME (NOTE 1): | ||||
Income from U.S.Treasury Reserves Portfolio | $ | 3,998,369 | ||
Allocated net expenses from U.S.Treasury Reserves Portfolio | (394,395 | |||
Total Investment Income | $ | 3,603,974 | ||
EXPENSES: | ||||
Management fees (Note 3) | 789,703 | |||
Distribution/Service fees (Note 4) | 394,851 | |||
Audit and legal | 59,431 | |||
Transfer agency services | 51,269 | |||
Blue Sky fees | 36,815 | |||
Shareholder communications | 24,409 | |||
Trustees’ fees | 8,872 | |||
Custody and fund accounting fees | 6,687 | |||
Other | 10,416 | |||
Total Expenses | 1,382,453 | |||
Net Investment Income | 2,221,521 | |||
Net Realized Gain on Investments From | ||||
U.S.Treasury Reserves Portfolio | 45,746 | |||
Increase in Net Assets From Operations | $ | 2,267,267 | ||
See Notes to Financial Statements. |
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Citi Premium U.S. Treasury Reserves | ||||||
S TAT 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 | ||||||
Years Ended August 31, | ||||||
2004 | 2003 | |||||
OPERATIONS: | ||||||
Net investment income | $ | 2,221,521 | $ | 4,740,467 | ||
Net realized gain | 45,746 | 106,350 | ||||
Increase in Net Assets From Operations | 2,267,267 | 4,846,817 | ||||
DISTRIBUTIONS TO SHAREHOLDERS FROM: | ||||||
Net investment income | (2,221,521 | ) | (4,740,467 | ) | ||
Net realized gain | (45,686 | ) | (106,286 | ) | ||
Decrease in Net Assets From Distributions | ||||||
to Shareholders (Note 2) | (2,267,207 | ) | (4,846,753 | ) | ||
TRANSACTIONS IN SHARES OF BENEFICIAL | ||||||
INTEREST AT NET ASSET VALUE OF $1.00 | ||||||
PER SHARE (NOTE 5): | ||||||
Net proceeds from sale of shares | 1,700,468,500 | 2,714,513,499 | ||||
Net asset value of shares issued for | ||||||
reinvestment of distributions | 1,017,664 | 3,053,119 | ||||
Cost of shares repurchased | (1,683,462,146 | ) | (3,068,852,406 | ) | ||
Increase (Decrease) in Net Assets From | ||||||
Transactions in Shares of Beneficial Interest | 18,024,018 | (351,285,788 | ) | |||
Increase (Decrease) in Net Assets | 18,024,078 | (351,285,724 | ) | |||
NET ASSETS: | ||||||
Beginning of year | 372,822,770 | 724,108,494 | ||||
End of year | $ | 390,846,848 | $ | 372,822,770 | ||
See Notes to Financial Statements. |
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Citi Premium U.S. Treasury Reserves | |||||||||||||||
F I N A N C I A L H I G H L I G H T S | |||||||||||||||
Years Ended August 31, | |||||||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | |||||||||||
Net Asset Value, Beginning of Year | $ | 1.00000 | $ | 1.00000 | $ | 1.00000 | $ | 1.00000 | $ | 1.00000 | |||||
Net investment income and | |||||||||||||||
net realized gain | 0.00571 | 0.00848 | 0.01689 | 0.04778 | 0.05049 | ||||||||||
Distributions from net investment | |||||||||||||||
income and net realized gain | (0.00571 | ) | (0.00848 | ) | (0.01689 | ) | (0.04778 | ) | (0.05049 | ) | |||||
Net Asset Value, End of Year | $ | 1.00000 | $ | 1.00000 | $ | 1.00000 | $ | 1.00000 | $ | 1.00000 | |||||
Ratios/Supplemental Data: | |||||||||||||||
Net Assets, End of Year | |||||||||||||||
(000's omitted) | $ | 390,847 | $ | 372,823 | $ | 724,108 | $ | 420,757 | $ | 340,433 | |||||
Ratios to Average Net Assets: | |||||||||||||||
Expenses†# | 0.45 | % | 0.45 | % | 0.45 | % | 0.45 | % | 0.45 | % | |||||
Net investment income† | 0.56 | % | 0.91 | % | 1.67 | % | 4.76 | % | 5.12 | % | |||||
Total Return | 0.57 | % | 0.85 | % | 1.70 | % | 4.88 | % | 5.17 | % | |||||
Note: If the Fund’s Manager and the Manager of U.S. Treasury Reserves Portfolio had not voluntarily waived all or a portion of their fees from the Fund, net investment income per share and ratios would have been as follows: | |||||||||||||||
Net Investment Income Per Share | $ | 0.00488 | $ | 0.00732 | $ | 0.01564 | $ | 0.04438 | $ | 0.04678 | |||||
Ratios to Average Net Assets: | |||||||||||||||
Expenses† | 0.53 | % | 0.53 | % | 0.64 | % | 0.84 | % | 0.83 | % | |||||
Net investment income† | 0.48 | % | 0.83 | % | 1.49 | % | 4.37 | % | 4.74 | % | |||||
† Includes the Fund's share of U.S.Treasury Reserves Portfolio's allocated expenses. |
# | The ratio of expenses to average net assets will not exceed 0.45% as a result of a voluntary expense limitation, which may be terminated at any time. |
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Citi Premium U.S. Treasury Reserves
N OT E S TO F I N A N C I A L S TAT E M E N T S
1. Organization and Accounting Policies
Citi Premium U.S. Treasury Reserves (the “Fund”) is a separate diversified series of CitiFunds Premium Trust (the “Trust”), a Massachusetts business trust. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), 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 Citi Fund Management Inc. (the “Manager”) serves as Investment Manager. The value of such investment reflects the Fund’s proportionate interest (25.1% at August 31, 2004) in the net assets of the Portfolio. Citigroup Global Markets Inc. (“CGM”) is the Fund’s Distributor (“Distributor”). Citicorp Trust Bank, fsb. (“CTB”), a subsidiary of Citigroup, acts as the Fund’s transfer agent.
The financial statements of the Portfolio, including the schedule of investments, are contained elsewhere in this report and should be read in conjunction with the Fund’s financial statements.
The following are significant accounting policies consistently followed by the Fund and are in conformity with U.S. generally accepted accounting principals (“GAAP”):
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 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 the Manager. 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.
E. Use of Estimates. The preparation of financial statements in accordance with GAAP 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.
F. Method of Allocation. 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. DividendsThe net income of the Fund is determined once daily, as of 2:00 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
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Citi Premium U.S. Treasury Reserves | ||
N OT E S TO F I N A N C I A L S TAT E M E N T S (Continued) |
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 Servicing Agent) on or prior to the last business day of the month.
3. Management FeesThe management fees are computed at an annual rate of 0.20% of the Fund’s average daily net assets. The management fees paid to the Manager amounted to $789,703 for the year ended August 31, 2004. The Manager also serves as the Manager for the Portfolio and receives management fees, before any waivers at an annual rate of 0.15% of the Portfolio’s average daily net assets.
The Trust 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 Fund from the Manager or its affiliates. Certain of the officers and a Trustee of the Trust are officers and a director of the Manager or its affiliates.
4. Distribution/Service FeesThe Fund has adopted a Service Plan pursuant to Rule 12b-1 under the 1940 Act. The Service Plan allows the Fund to pay monthly fees at an annual rate not to exceed 0.10% of the average daily net assets. The Service fees paid amounted to $394,851 for the year ended August 31, 2004. These fees may be used to make payments to the Distributor and to Service Agents or others as compensation for the sale of Fund shares or for advertising, marketing or other promotional activity, and for preparation, printing and distribution of prospectuses, statements of additional information and reports for recipients other than regulators and existing shareholders. The Fund may also make payments to the Distributor and others for providing personal service or the maintenance of shareholder accounts.
5. Shares of Beneficial InterestThe Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (par value $0.00001 per share).
6. Income Tax Information and Distributions to Shareholders
The tax character of distributions paid during the fiscal years ended August 31, were as follows:
2004 | 2003 | |||||||
Ordinary Income | $ | 2,267,207 | $ | 4,846,753 | ||||
As of August 31, 2004, there were no significant differences between the book and tax components of net assets.
7.Trustee Retirement PlanThe 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 cal-
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Citi Premium U.S. Treasury Reserves
N OT E S TO F I N A N C I A L S TAT E M E N T S (Continued)
endar 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). Benefits under the plan are unfunded. Two former Trustees are currently receiving payments under the plan. In addition, two other former Trustees received a lump sum payment under the plan during this period. The Fund’s allocable share of the expenses of the Plan for the year ended August 31, 2004 was $300.
8.Additional InformationIn connection with an investigation previously disclosed by Citigroup, the Staff of the Securities and Exchange Commission (“SEC”) has notified Citigroup Asset Management (“CAM”), the Citigroup business unit that includes the Fund’s investment manager and other investment advisory companies; Citicorp Trust Bank (“CTB”), an affiliate of CAM; Thomas W. Jones, the former CEO of CAM; and two other individuals, one of whom is an employee and the other of whom is a former employee of CAM, that the SEC Staff is considering recommending a civil injunctive action and/or an administrative proceeding against each of them relating to the creation and operation of an internal transfer agent unit to serve various CAM-managed funds.
In 1999, CTB entered the transfer agent business. CTB hired an unaffiliated subcontractor to perform some of the transfer agent services. The subcontractor, in exchange, had signed a separate agreement with CAM in 1998 that guaranteed investment management revenue to CAM and investment banking revenue to a CAM affiliate. The sub-contractor’s business was later taken over by PFPC Inc., and at that time the revenue guarantee was eliminated and a one-time payment was made by the subcontractor to a CAM affiliate.
CAM did not disclose the revenue guarantee when the boards of various CAM-managed funds hired CTB as transfer agent. Nor did CAM disclose to the boards of the various CAM-managed funds the one-time payment received by the CAM affiliate when it was made.
In addition, the SEC Staff has indicated that it is considering recommending action based on the adequacy of the disclosures made to the fund boards that approved the transfer agency arrangement, CAM’s initiation and operation of, and compensation for, the transfer agent business and CAM’s retention of, and agreements with, the subcontractor.
16
Citi Premium U.S. Treasury Reserves
N OT E S TO F I N A N C I A L S TAT E M E N T S (Continued)
Citigroup is cooperating fully in the investigation and will seek to resolve the matter in discussions with the SEC Staff. Although there can be no assurance, Citigroup does not believe that this matter will have a material adverse effect on the Fund. As previously disclosed, CAM has already agreed to pay the applicable funds, primarily through fee waivers, a total of approximately $17 million (plus interest) that is the amount of the revenue received by Citigroup relating to the revenue guarantee.
The Fund did not implement the contractual arrangement described above and therefore will not receive any portion of such payment.
17
Citi Premium U.S. Treasury Reserves
R E P O RT O F I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M
To the Trustees and Shareholders of Citi Premium U.S. Treasury Reserves:
We have audited the accompanying statement of assets and liabilities of Citi Premium U.S. Treasury Reserves of CitiFunds Premium Trust (the “Trust”) (a Massachusetts business trust) as of August 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two year period then ended, and the financial highlights for each of the years in the four year period then ended. 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. The financial highlights for the year ended August 31, 2000 were audited by other auditors whose report thereon, dated October 4, 2000, expressed an unqualified opinion on the financial highlights.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Citi Premium U.S. Treasury Reserves of CitiFunds Premium Trust as of August 31, 2004, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two year period then ended, and the financial highlights for each of the years in the four year period then ended, in conformity with U.S. generally accepted accounting Principles.
October 22, 2004
18
Citi Premium U.S. Treasury Reserves | ||
A D D I T I O N A L I N F O R M AT I O N (Unaudited) |
Information about Trustees and Officers The business and affairs of the Citi Premium U.S. Treasury Reserves (the “Fund”) are managed under the direction of the Fund’s Board of Trustees. Information pertaining to the Trustees and officers of the Fund is set forth below. Each Trustee and officer holds office for his or her lifetime, unless that individual resigns, retires or is otherwise removed. The Statement of Additional Information includes additional information about Fund Trustees and is available, without charge, upon request by calling 1-800-451-2010.
Number of | Other Board | ||||||||||
Principal | Portfolios In | Memberships | |||||||||
Position(s) | Length | Occupation(s) | Fund Complex | Held by | |||||||
Held with | of Time | During Past | Overseen by | Trustee During | |||||||
Name, Address and Age | Fund | Served | Five Years | Trustee | Past Five Years | ||||||
NON-INTERESTED | |||||||||||
TRUSTEES: | |||||||||||
Elliott J. Berv | Trustee | Since 2001 | President and Chief Operations | 36 | Board | ||||||
c/o R. Jay Gerken | Officer, Landmark City (real | Member, | |||||||||
Citigroup Asset | estate development) (since | American | |||||||||
Management (“CAM”) | 2002); Executive Vice | Identity Corp. | |||||||||
399 Park Avenue | President and Chief Operations | (doing | |||||||||
New York, NY 10022 | Officer, DigiGym Systems | business as | |||||||||
Age 61 | (on-line personal training | Morpheus | |||||||||
systems) (since 2001); Chief | Technologies) | ||||||||||
Executive Officer, Rocket City | (biometric | ||||||||||
Enterprises (internet service | information | ||||||||||
company) (from 2000 to | management) | ||||||||||
2001); President, Catalyst | (since 2001; | ||||||||||
(consulting) (since 1984). | consultant | ||||||||||
since 1999); | |||||||||||
Director, | |||||||||||
Lapoint | |||||||||||
Industries | |||||||||||
(industrial fil- | |||||||||||
ter company) | |||||||||||
(since 2002); | |||||||||||
Director, | |||||||||||
Alzheimer’s | |||||||||||
Association | |||||||||||
(New England | |||||||||||
Chapter) | |||||||||||
(since 1998). | |||||||||||
Donald M. Carlton | Trustee | Since 2001 | Consultant, URS Corporation | 31 | Director, | ||||||
c/o R. Jay Gerken | (engineering) (since 1999); | American | |||||||||
CAM | former Chief Executive Officer, | Electric Power | |||||||||
399 Park Avenue | Radian International LLC | (electric | |||||||||
New York, NY 10022 | (engineering) (from 1996 to | utility) (since | |||||||||
Age 67 | 1998), Member of Management | 1999); | |||||||||
Committee, Signature Science | Director, | ||||||||||
(research and development) | Valero Energy | ||||||||||
(since 2000). | (petroleum | ||||||||||
refining) | |||||||||||
(since 1999); | |||||||||||
Director, | |||||||||||
National | |||||||||||
Instruments | |||||||||||
Corp. tech- | |||||||||||
nology) (since | |||||||||||
1994). | |||||||||||
19
Citi Premium U.S. Treasury Reserves | |||||||||||
A D D I T I O N A L I N F O R M AT I O N (Unaudited) (Continued) | |||||||||||
Number of | Other Board | ||||||||||
Principal | Portfolios In | Memberships | |||||||||
Position(s) | Length | Occupation(s) | Fund Complex | Held by | |||||||
Held with | of Time | During Past | Overseen by | Trustee During | |||||||
Name, Address and Age | Fund | Served | Five Years | Trustee | Past Five Years | ||||||
A. Benton Cocanougher | Trustee | Since 2001 | Interim Chancellor, Texas | 31 | Former Direc- | ||||||
c/o R. Jay Gerken | A&M University System | tor, Randall’s | |||||||||
CAM | (since 2003); former Special | Food Markets, | |||||||||
399 Park Avenue | Advisor to the President, Texas | Inc. (from | |||||||||
New York, NY 10022 | A&M University (2002-2003); | 1990 to 1999); | |||||||||
Age 66 | former Dean Emeritus and | former Direc- | |||||||||
Wiley Professor, Texas A&M | tor, First | ||||||||||
University (since 2001); | American | ||||||||||
former Dean and Professor of | Bank and | ||||||||||
Marketing, College and | Savings Bank | ||||||||||
Graduate School of Business | (from 1994 to | ||||||||||
of Texas A & M University | 1999). | ||||||||||
(from 1987 to 2001). | |||||||||||
Mark T. Finn | Trustee | Since 2001 | Adjunct Professor, College of | 36 | None | ||||||
c/o R. Jay Gerken | William & Mary (since 2002); | ||||||||||
CAM | Principal/member, Balvan | ||||||||||
399 Park Avenue | Partners (investment manage- | ||||||||||
New York, NY 10022 | ment) (since 2002); Chair- | ||||||||||
Age 61 | man, Chief Executive Officer | ||||||||||
and Owner, Vantage Consult- | |||||||||||
ing Group, Inc. (investment | |||||||||||
advisory and consulting firm) | |||||||||||
(since 1988); former Vice | |||||||||||
Chairman and Chief Operating | |||||||||||
Officer, Lindner Asset Man- | |||||||||||
agement Company (mutual | |||||||||||
fund company) (1999 to 2001); | |||||||||||
former President and Director, | |||||||||||
Delta Financial, Inc. (invest- | |||||||||||
ment advisory firm) (from | |||||||||||
1983 to 1999); former General | |||||||||||
Partner and Shareholder, | |||||||||||
Greenwich Ventures, LLC | |||||||||||
(investment partnership) (1996 | |||||||||||
to 2001); former President, | |||||||||||
Secretary and Owner, Phoenix | |||||||||||
Trading Co. (commodity | |||||||||||
trading advisory firm) (from | |||||||||||
1997 to 2000). | |||||||||||
20
Citi Premium U.S. Treasury Reserves | |||||||||||
A D D I T I O N A L I N F O R M A T I O N (Unaudited) (Continued) | |||||||||||
Number of | Other Board | ||||||||||
Principal | Portfolios In | Memberships | |||||||||
Position(s) | Length | Occupation(s) | Fund Complex | Held by | |||||||
Held with | of Time | During Past | Overseen by | Trustee During | |||||||
Name, Address and Age | Fund | Served | Five Years | Trustee | Past Five Years | ||||||
Stephen Randolph Gross | Trustee | Since 2001 | Partner, Capital Investment | 31 | Director, | ||||||
c/o R. Jay Gerken | Advisory Partners (consulting) | United Telesis, | |||||||||
CAM | (since January 2000); former | Inc. (telecom- | |||||||||
399 Park Avenue | Chief Operations Officer, | munications) | |||||||||
New York, NY 10022 | General Media Communications | (since 1997); | |||||||||
Age 57 | (from March 2003 to August | Director, | |||||||||
2003); former Managing | eBank.com, | ||||||||||
Director, Fountainhead | Inc. (since | ||||||||||
Ventures, LLC (consulting) | 1997); Direc- | ||||||||||
(from 1998 to 2002); former | tor, Andersen | ||||||||||
Secretary, Carint N.A. | Calhoun, Inc. | ||||||||||
(manufacturing) (1988-2002); | (assisted | ||||||||||
former Treasurer, Hank Aaron | living) (since | ||||||||||
Enterprises (fast food franchise) | 1987); former | ||||||||||
(from 1985 to 2001); Chairman, | Director, | ||||||||||
Gross, Collins PC HLB | Charter Bank, | ||||||||||
(accounting firm) (since 1979); | Inc. (from | ||||||||||
Treasurer, Coventry Limited, | 1987 to 1997); | ||||||||||
Inc. (since 1985). | former Direc- | ||||||||||
tor, Yu Save, | |||||||||||
Inc. (internet | |||||||||||
company) | |||||||||||
(from 1998 to | |||||||||||
2000); former | |||||||||||
Director, | |||||||||||
Hotpalm, Inc. | |||||||||||
(wireless | |||||||||||
applications) | |||||||||||
(from 1998 to | |||||||||||
2000). | |||||||||||
Diana R. Harrington | Trustee | Since 1992 | Professor, Babson College | 36 | None | ||||||
c/o R. Jay Gerken | (since 1993). | ||||||||||
CAM | |||||||||||
399 Park Avenue | |||||||||||
New York, NY 10022 | |||||||||||
Age 64 | |||||||||||
Susan B. Kerley | Trustee | Since 1992 | Consultant, Strategic | 36 | Director, | ||||||
c/o R. Jay Gerken | Management Advisors, | Eclipse Funds | |||||||||
CAM | LLC (investment consulting) | (currently | |||||||||
399 Park Avenue | (since 1990). | supervises 12 | |||||||||
New York, NY10022 | investment | ||||||||||
Age 53 | companies | ||||||||||
in fund com- | |||||||||||
plex) (since | |||||||||||
1990). |
21
Citi Premium U.S. Treasury Reserves | |||||||||||
A D D I T I O N A L I N F O R M AT I O N (Unaudited) (Continued) | |||||||||||
Number of | Other Board | ||||||||||
Principal | Portfolios In | Memberships | |||||||||
Position(s) | Length | Occupation(s) | Fund Complex | Held by | |||||||
Held with | of Time | During Past | Overseen by | Trustee During | |||||||
Name, Address and Age | Fund | Served | Five Years | Trustee | Past Five Years | ||||||
Alan G. Merten | Trustee | Since 2001 | President, George Mason | 31 | Former | ||||||
c/o R. Jay Gerken | University (since 1996). | Director, | |||||||||
CAM | Comshare, Inc. | ||||||||||
399 Park Avenue | (information | ||||||||||
New York, NY 10022 | technology) | ||||||||||
Age 63 | (from 1985 to | ||||||||||
2003); | |||||||||||
Director, | |||||||||||
Digital Net | |||||||||||
Holdings, Inc. | |||||||||||
(since 2003). | |||||||||||
R. Richardson Pettit | Trustee | Since 2001 | Professor of Finance, | 31 | None | ||||||
c/o R. Jay Gerken | University of Houston | ||||||||||
CAM | (from 1977 to 2002); | ||||||||||
399 Park Avenue | independent consultant | ||||||||||
New York, NY 10022 | (since 1984). | ||||||||||
Age 62 | |||||||||||
INTERESTED | |||||||||||
TRUSTEE: | |||||||||||
R. Jay Gerken, CFA* | Chairman, | Since 2002 | Managing Director of | Chairman | N/A | ||||||
CAM | President, | Citigroup Global Markets | of the | ||||||||
399 Park Avenue | and Chief | (“CGM”) (since 1996); | Board, | ||||||||
New York, NY 10022 | Executive | Chairman, President, and | Trustee or | ||||||||
Age 53 | Officer | Chief Executive Officer of | Director | ||||||||
Smith Barney Fund | of 220 | ||||||||||
Management LLC (“SBFM”), | |||||||||||
Travelers Investment | |||||||||||
Advisers, Inc. (“TIA”) and | |||||||||||
Citi Fund Management Inc. | |||||||||||
(“CFM”); President and Chief | |||||||||||
Executive Officer of certain | |||||||||||
mutual funds associated with | |||||||||||
Citigroup Inc. (“Citigroup”); | |||||||||||
formerly, Portfolio Manager | |||||||||||
of Smith Barney Allocation | |||||||||||
Series Inc. (from 1996 to | |||||||||||
2001) and Smith Barney | |||||||||||
Growth and Income Fund | |||||||||||
(from 1996 to 2000). | |||||||||||
22
Citi Premium U.S. Treasury Reserves | ||||||||||
A D D I T I O N A L I N F O R M AT I O N (Unaudited) (Continued) | ||||||||||
Number of | Other Board | |||||||||
Principal | Portfolios In | Memberships | ||||||||
Position(s) | Length | Occupation(s) | Fund Complex | Held by | ||||||
Held with | of Time | During Past | Overseen by | Trustee During | ||||||
Name, Address and Age | Fund | Served | Five Years | Trustee | Past Five Years | |||||
OFFICERS: | ||||||||||
Andrew B. Shoup | Senior | Since 2003 | Director of CAM; Chief | N/A | N/A | |||||
CAM | Vice | Administrative Officer of | ||||||||
125 Broad Street | President | mutual funds associated with | ||||||||
New York, NY 10004 | and | Citigroup; Head of | ||||||||
Age 47 | Chief | International Funds | ||||||||
Adminis- | Administration of CAM (from | |||||||||
trative | 2001 to 2003); Director of | |||||||||
Officer | Global Funds Administration | |||||||||
of CAM (from 2000 to 2001); | ||||||||||
Head of U.S. Citibank Funds | ||||||||||
Administration of CAM | ||||||||||
(from 1998 to 2000). | ||||||||||
Frances M. Guggino | Chief | Since 2004 | Vice President of CGM; | N/A | N/A | |||||
CAM | Financial | Chief Financial Officer and | ||||||||
125 Broad Street | Officer | Treasurer of certain mutual | ||||||||
New York, NY 10004 | and | funds associated with | ||||||||
Age 46 | Treasurer | Citigroup; Controller of | ||||||||
certain mutual funds | ||||||||||
associated with Citigroup | ||||||||||
(from 2002 to 2004). | ||||||||||
Andrew Beagley | Chief | Since 2002 | Director of CGM (since 2000); | N/A | N/A | |||||
CAM | Anti- | Director of Compliance, North | ||||||||
399 Park Avenue | Money | America, CAM (since 2000); | ||||||||
4th Floor | Laundering | Chief Anti-Money Laundering | ||||||||
New York, NY 10022 | Compliance | Compliance Officer, Chief | ||||||||
Age 40 | Officer | Compliance Officer and Vice | ||||||||
President of certain mutual | ||||||||||
Chief | Since 2004 | funds associated with Citigroup; | ||||||||
Compliance | Director of Compliance, Europe, | |||||||||
Officer | the Middle East and Africa, | |||||||||
Citigroup Asset Management | ||||||||||
(from 1999 to 2000); Com- | ||||||||||
pliance Officer, Salomon | ||||||||||
Brothers Asset Management | ||||||||||
Limited, Smith Barney Global | ||||||||||
Capital Management Inc., | ||||||||||
Salomon Brothers Asset | ||||||||||
Management Asia Pacific | ||||||||||
Limited (from 1997 to 1999). | ||||||||||
Wendy S. Setnicka | Controller | Since 2004 | Vice President of CGM; | N/A | N/A | |||||
CAM | Controller of certain mutual | |||||||||
125 Broad Street | funds associated with Citigroup; | |||||||||
New York, NY 10004 | Assistant Controller of CAM | |||||||||
Age 40 | (from 2002 to 2004). | |||||||||
23
Citi Premium U.S. Treasury Reserves
A D D I T I O N A L I N F O R M AT I O N (Unaudited) (Continued)
Number of | Other Board | |||||||||
Principal | Portfolios In | Memberships | ||||||||
Position(s) | Length | Occupation(s) | Fund Complex | Held by | ||||||
Held with | of Time | During Past | Overseen by | Trustee During | ||||||
Name, Address and Age | Fund | Served | Five Years | Trustee | Past Five Years | |||||
OFFICERS: | ||||||||||
Robert I. Frenkel | Secretary | Since 2000 | Managing Director and | N/A | N/A | |||||
CAM | General Counsel, Global | |||||||||
300 First Stamford Place | Chief | Since 2003 | Mutual Funds for CAM (since | |||||||
Stamford, CT 06902 | Legal | 1994); Secretary of certain | ||||||||
Age 48 | Officer | mutual funds associated | ||||||||
with Citigroup; Chief Legal | ||||||||||
Officer of mutual funds | ||||||||||
associated with Citigroup Inc. | ||||||||||
* | Mr. Gerken is a Trustee who is an “interested person” of the fund as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Manager and certain of its affiliates. |
24
TA X I N F O R M AT I O N (Unaudited)
Of the ordinary income distributions paid monthly by the Fund during the taxable year ended August 31, 2004, 97.98% was attributable to Federal obligation.
The law varies in each state as to whether and what percentage of dividend income attributable to Federal obligations is exempt from state income tax. We recommend that you consult with your tax adviser to determine if any portion of the dividends you received is exempt from state income taxes.
Please retain this information for your records.
25
U.S. Treasury Reserves Portfolio
S C H E D U L E O F I N V E S T M E N T S August 31, 2004
Principal | |||||||
Amount | |||||||
Issuer | (000’s omitted) | Value | |||||
U.S.Treasury Bills — 98.4% | |||||||
United States Treasury Bill, | |||||||
due 9/2/04 | $ | 137,502 | $ | 137,497,435 | |||
due 9/9/04 | 175,641 | 175,586,444 | |||||
due 9/16/04 | 322,557 | 322,374,239 | |||||
due 9/23/04 | 75,000 | 74,937,514 | |||||
due 10/7/04 | 269,841 | 269,510,275 | |||||
due 10/21/04 | 100,000 | 99,828,698 | |||||
due 11/4/04 | 150,000 | 149,668,444 | |||||
due 11/18/04 | 50,000 | 49,857,000 | |||||
due 1/6/05 | 50,000 | 49,717,557 | |||||
due 2/3/05 | 210,196 | 208,747,084 | |||||
1,537,724,690 | |||||||
U.S.Treasury Note — 1.6% | |||||||
United States Treasury Note, | |||||||
due 9/30/04 | 25,000 | 25,011,698 | |||||
Total Investments, | |||||||
at Amortized | |||||||
Cost | 100.0 | % | 1,562,736,388 | ||||
Other Assets | |||||||
Less Liabilities | 0.0 | (24,982 | ) | ||||
Net Assets | 100.0 | % | $ | 1,562,711,406 | |||
See Notes to Financial Statements. |
26
U.S. Treasury Reserves Portfolio | ||
S TAT 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 | ||
August 31, 2004 | ||
ASSETS: | ||
Investments, at amortized cost and value (Note 1A) | $ | 1,562,736,388 |
Interest receivable | 197,234 | |
Total Assets | 1,562,933,622 | |
LIABILITIES: | ||
Management fees payable (Note 2) | 101,245 | |
Accrued expenses and other liabilities | 120,971 | |
Total Liabilities | 222,216 | |
Total Net Assets | $ | 1,562,711,406 |
REPRESENTED BY: | ||
Capital paid in excess of beneficial interests | $ | 1,562,711,406 |
See Notes to Financial Statements. |
27
U.S Treasury Reserves Portfolio | |||||
S TAT E M E N T O F O P E R A T I O N S | |||||
For the Year Ended August 31, 2004 | |||||
INVESTMENT INCOME | $ | 15,922,362 | |||
EXPENSES: | |||||
Management fees (Note 2) | $ | 2,355,567 | |||
Custody and fund accounting fees | 347,623 | ||||
Audit and Legal | 74,577 | ||||
Trustees’ fees | 20,401 | ||||
Other | 46,916 | ||||
Total Expenses | 2,845,084 | ||||
Less: management fee waived (Note 2) | (1,277,723 | ) | |||
fees paid indirectly (Note 1D) | (11 | ) | |||
Net Expenses | 1,567,350 | ||||
Net Investment Income | 14,355,012 | ||||
Net Realized Gain on Investments | 184,470 | ||||
Increase in Net Assets From Operations | $ | 14,539,482 | |||
See Notes to Financial Statements. |
28
U.S. Treasury Reserves Portfolio | ||||||
S TAT 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 | ||||||
Years Ended August 31, | ||||||
2004 | 2003 | |||||
OPERATIONS: | ||||||
Net investment income | $ | 14,355,012 | $ | 21,614,666 | ||
Net realized gain | 184,470 | 345,124 | ||||
Increase Net Assets From Operations | 14,539,482 | 21,959,790 | ||||
CAPITAL TRANSACTIONS: | ||||||
Proceeds from contributions | 5,330,944,721 | 7,288,135,094 | ||||
Value of withdrawals | (5,241,122,172 | ) | (7,804,910,366 | ) | ||
Increase (Decrease) in Net Assets From | ||||||
Capital Transactions | 89,822,549 | (516,775,272 | ) | |||
Increase (Decrease) in Net Assets | 104,362,031 | (494,815,482 | ) | |||
NET ASSETS: | ||||||
Beginning of year | 1,458,349,375 | 1,953,164,857 | ||||
End of year | 1,562,711,406 | $ | 1,458,349,375 | |||
See Notes to Financial Statements. |
29
U.S. Treasury Reserves Portfolio
F I N A N C I A L H I G H L I G H T S
Years Ended August 31, | ||||||||||
2004 | 2003 | 2002 | 2001 | 2000 | ||||||
Ratios/Supplemental Data: | ||||||||||
Net Assets, End of Year | ||||||||||
(000’s omitted) | $1,562,711 | $1,458,349 | $1,953,165 | $1,387,171 | $1,324,688 | |||||
Ratios to Average Net Assets: | ||||||||||
Expenses† | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % | 0.10 | % |
Net investment income | 0.91 | % | 1.22 | % | 2.00 | % | 5.13 | % | 5.41 | % |
Total Return | 0.92 | % | 1.20 | % | 2.06 | % | 5.24 | % | 5.53 | % |
Note: If the Portfolio’s Manager had not voluntarily waived a portion of its fees from the Portfolio, the ratios would have been as follows: | ||||||||||
Ratios to Average Net Assets: | ||||||||||
Expenses | 0.18 | % | 0.18 | % | 0.20 | % | 0.23 | % | 0.23 | % |
Net investment income | 0.83 | % | 1.14 | % | 1.90 | % | 5.00 | % | 5.28 | % |
† The ratio of expenses to average net assets will not exceed 0.10% as a result of a voluntaryexpense limitation, which may be terminated at any time.
See Notes to Financial Statements.
30
N OT E S TO F I N A N C I A L S TAT E M E N T S
1. Organization and Significant Accounting Policies
U.S. Treasury Reserves Portfolio (the “Portfolio”) is registered under the 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 following are significant accounting policies consistently followed by the Portfolio and are in conformity with GAAP:
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 the 1940 Act.
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. Income Taxes. The Portfolio is classified as a partnership for Federal income tax purposes. As such, each investor in the Portfolio is treated as an owner of its proportionate share of the net assets, income, expenses and realized gains and losses of the Portfolio. Therefore, no Federal income tax provision is required. It is intended that the Portfolio’s assets will be managed so that an investor in the Portfolio can satisfy the requirements of subchapter M of the Internal Revenue Code.
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. Use of Estimates. The preparation of financial statements in accordance with GAAP 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.
F. Other. Purchases, maturities and sales of money market instruments are accounted for on the date of the transaction.
2. Management FeesThe 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 the annual rate of 0.15% of the Funds’ average daily net assets. The management fee amounted to $2,355,567 of which $1,277,723
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N OT E S TO F I N A N C I A L S TAT E M E N T S (Continued)
was voluntarily waived for the year ended August 31, 2004. Such waiver is voluntary and may be terminated at any time at the discretion of the manager.
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 Fund from the Manager or its affiliates. Certain of the officers and a Trustee of the Portfolio are officers and a director of the Manager or its affiliates.
3. Investment TransactionsPurchases, maturities and sales of U.S. Treasury obligations, aggregated $13,001,957,800 and $12,912,860,314, respectively, for the year ended August 31, 2004.
4. Federal Income Tax Basis of Investment Securities
The Tax Cost of investment securities owned at August 31, 2004, for federal income tax purposes, amounted to $1,562,736,388.
5. Trustee Retirement PlanThe Trustees of the Portfolio have adopted a Retirement Plan for all Trustees who are not “interested persons” of the Portfolio, 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). Benefits under the plan are unfunded. Two former Trustees are currently receiving payments under the plan. In addition, two other former Trustees received a lump sum payment under the plan during this period. The Portfolio’s allocable share of the expenses of the Plan for the year ended August 31, 2004 was $6,396.
6.Additional InformationIn connection with an investigation previously disclosed by Citigroup, the Staff of the Securities and Exchange Commission (“SEC”) has notified Citigroup Asset Management (“CAM”), the Citigroup business unit that includes the Portfolio’s investment manager and other investment advisory companies; Citicorp Trust Bank (“CTB”), an affiliate of CAM; Thomas W. Jones, the former CEO of CAM; and two other individuals, one of whom is an employee and the other of whom is a former employee of CAM, that the SEC Staff is considering recommending a civil injunctive action and/or an administrative proceeding against each of them relating to the creation and operation of an internal transfer agent unit to serve various CAM-managed funds.
In 1999, CTB entered the transfer agent business. CTB hired an unaffiliated subcontractor to perform some of the transfer agent services. The subcontractor, in
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N OT E S TO F I N A N C I A L S TAT E M E N T S (Continued)
exchange, had signed a separate agreement with CAM in 1998 that guaranteed investment management revenue to CAM and investment banking revenue to a CAM affiliate. The sub-contractor’s business was later taken over by PFPC Inc., and at that time the revenue guarantee was eliminated and a one-time payment was made by the subcontractor to a CAM affiliate.
CAM did not disclose the revenue guarantee when the boards of various CAM-managed funds hired CTB as transfer agent. Nor did CAM disclose to the boards of the various CAM-managed funds the one-time payment received by the CAM affiliate when it was made.
In addition, the SEC Staff has indicated that it is considering recommending action based on the adequacy of the disclosures made to the fund boards that approved the transfer agency arrangement, CAM’s initiation and operation of, and compensation for, the transfer agent business and CAM’s retention of, and agreements with, the subcontractor.
Citigroup is cooperating fully in the investigation and will seek to resolve the matter in discussions with the SEC Staff. Although there can be no assurance, Citigroup does not believe that this matter will have a material adverse effect on the Portfolio. As previously disclosed, CAM has already agreed to pay the applicable funds, primarily through fee waivers, a total of approximately $17 million (plus interest) that is the amount of the revenue received by Citigroup relating to the revenue guarantee.
The Portfolio did not implement the contractual arrangement described above and therefore will not receive any portion of such payment.
33
R E P O RT O F I N D E P E N D E N T R E G I S T E R E D P U B L I C A C C O U N T I N G F I R M
To the Trustees and Investors ofU.S. Treasury Reserves Portfolio:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of U.S. Treasury Reserves Portfolio (a New York Trust) as of August 31, 2004, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two year period then ended, and the financial highlights for each of the years in the four year period then ended. 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. The financial highlights for the year ended August 31, 2000 were audited by other auditors whose report thereon, dated October 4, 2000, expressed an unqualified opinion on the financial highlights.
We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). 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 securities owned as of August 31, 2004 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, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of U.S. Treasury Reserves Portfolio as of August 31, 2004, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two year period then ended, and the financial highlights for each of the years in the four year period then ended, in conformity with U.S. generally accepted accounting principles.
October 22, 2004
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U.S. Treasury Reserves Portfolio
A D D I T I O N A L I N F O R M AT I O N (Unaudited)
Information about the Trustees and Officers of the Portfolio can be found on pages 19 through 24 of this report.
35
INVESTMENT MANAGER | TRUSTEES | |
(OF U.S.TREASURY RESERVES | Elliott J. Berv | |
PORTFOLIO) | Donald M. Carlton | |
Citi Fund Management Inc. | A. Benton Cocanougher | |
100 First Stamford Place | Mark T. Finn | |
Stamford, CT 06902 | R. Jay Gerken, CFA* | |
Chairman | ||
DISTRIBUTOR | Stephen Randolph Gross | |
Citigroup Global Markets Inc. | Diana R. Harrington | |
Susan B. Kerley | ||
TRANSFER AGENT | Alan G. Merten | |
Citicorp Trust Bank, fsb. | R. Richardson Pettit | |
125 Broad Street, 11th Floor | ||
New York, NY 10004 | OFFICERS* | |
R. Jay Gerken, CFA | ||
SUB-TRANSFER AGENT | President and | |
AND CUSTODIAN | Chief Executive Officer | |
State Street Bank and Trust Company | Andrew B. Shoup | |
225 Franklin Street | Senior Vice President | |
Boston, MA 02110 | and Chief Administrative Officer | |
INDEPENDENT REGISTERED | Frances M. Guggino | |
PUBLIC ACCOUNTING FIRM | Chief Financial Officer | |
KPMG LLP | and Treasurer | |
757 Third Ave | ||
New York, NY 10017 | Andrew Beagley | |
Chief Anti-Money Laundering | ||
LEGAL COUNSEL | Compliance Officer and | |
Bingham McCutchen LLP | Chief Compliance Officer | |
150 Federal Street | ||
Boston, MA 02110 | Wendy S. Setnicka | |
Controller | ||
Robert I. Frenkel | ||
Secretary and Chief Legal Officer | ||
* Affiliated Person of Investment Manager |
CitiFunds Premium Trust
Citi Premium U.S. Treasury Reserves
The fund is a separate investment fund of CitiFunds Premium Trust, a Massachusetts business trust.
The Fund files its complete schedule of portfolio holdings with Securities Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Forms N-Q are available on the Commission’s website at www.sec.gov. The Fund’s Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington D.C., and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. To obtain information on Form N-Q from the Fund, shareholders can call 1-800-625-4554.Information on how the fund voted proxies relating to portfolio securities during the 12 month period ending June 30, 2004 and a description of the policies and procedures that the fund uses to determine how to vote proxies relating to portfolio securities is available (1) without charge, upon request, by calling 1-800-625-4554, (2) on the fund’s website at www.citigroupAM.com and (3) on the SEC’s website at www.sec.gov.
This report is submitted for the general information of the shareholders of Citi Premium U.S. Treasury Reserves.
©2004 Citicorp | Citigroup Global Markets Inc. | |
CFA/PUS/804 | ||
04-7259 |
ITEM 2. CODE OF ETHICS. The registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller. ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT. The Board of Trustees of the registrant has determined that Jane F. Dasher, the Chairman of the Board's Audit Committee, possesses the technical attributes identified in Instruction 2(b) of Item 3 to Form N-CSR to qualify as an "audit committee financial expert," and has designated Ms. Dasher as the Audit Committee's financial expert. Ms. Dasher is an "independent" Trustee pursuant to paragraph (a)(2) of Item 3 to Form N-CSR. Item 4. Principal Accountant Fees and Services (a) Audit Fees for the CitiFunds Premium Trust of $25,750 and $25,750 for the years ended 8/31/04 and 8/31/03. (b) Audit-Related Fees for the CitiFunds Premium Trust of $0 and $0 for the years ended 8/31/04 and 8/31/03. (c) Tax Fees for CitiFunds Premium Trust of $3,700 and $3,700 for the years ended 8/31/04 and 8/31/03. These amounts represent aggregate fees paid for tax compliance, tax advice and tax planning services, which include (the filing and amendment of federal, state and local income tax returns, timely RIC qualification review and tax distribution and analysis planning) rendered by the Accountant to CitiFunds Premium Trust (d) All Other Fees for CitiFunds Premium Trust of $0 and $0 for the years ended 8/31/04 and 8/31/03. (e) (1) Audit Committee's pre-approval policies and procedures described in paragraph (c) (7) of Rule 2-01 of Regulation S-X. The Charter for the Audit Committee (the "Committee") of the Board of each registered investment company (the "Fund") advised by Smith Barney Fund Management LLC or Salomon Brothers Asset Management Inc or one of their affiliates (each, an "Adviser") requires that the Committee shall approve (a) all audit and permissible non-audit services to be provided to the Fund and (b) all permissible non-audit services to be provided by the Fund's independent auditors to the Adviser and any Covered Service Providers if the engagement relates directly to the operations and financial reporting of the Fund. The Committee may implement policies and procedures by which such services are approved other than by the full Committee. The Committee shall not approve non-audit services that the Committee believes may impair the independence of the auditors. As of the date of the approval of this Audit Committee Charter, permissible non-audit services include any professional services (including tax services), that are not prohibited services as described below, provided to the Fund by the independent auditors, other than those provided to the Fund in connection with an audit or a review of the financial statements of theFund. Permissible non-audit services may not include: (i) bookkeeping or other services related to the accounting records or financial statements of the Fund; (ii) financial information systems design and implementation; (iii) appraisal or valuation services, fairness opinions or contribution-in-kind reports; (iv) actuarial services; (v) internal audit outsourcing services; (vi) management functions or human resources; (vii) broker or dealer, investment adviser or investment banking services; (viii) legal services and expert services unrelated to the audit; and (ix) any other service the Public Company Accounting Oversight Board determines, by regulation, is impermissible. Pre-approval by the Committee of any permissible non-audit services is not required so long as: (i) the aggregate amount of all such permissible non-audit services provided to the Fund, the Adviser and any service providers controlling, controlled by or under common control with the Adviser that provide ongoing services to the Fund ("Covered Service Providers") constitutes not more than 5% of the total amount of revenues paid to the independent auditors during the fiscal year in which the permissible non-audit services are provided to (a) the Fund, (b) the Adviser and (c) any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Fund during the fiscal year in which the services are provided that would have to be approved by the Committee; (ii) the permissible non-audit services were not recognized by the Fund at the time of the engagement to be non-audit services; and (iii) such services are promptly brought to the attention of the Committee and approved by the Committee (or its delegate(s)) prior to the completion of the audit. (2) For the CitiFunds Premium Trust , the percentage of fees that were approved by the audit committee, with respect to: Audit-Related Fees were 100% and 100% for the years ended 8/31/04 and 8/31/03; Tax Fees were 100% and 100% for the years ended 8/31/04 and 8/31/03; and Other Fees were 100% and 100% for the years ended 8/31/04 and 8/31/03. (f) N/A (g) Non-audit fees billed by the Accountant for services rendered to CitiFunds Premium Trust and CAM and any entity controlling, controlled by, or under common control with CAM that provides ongoing services to CitiFunds Premium Trust were $2.8 million and $6.4 million for the years ended 8/31/04 and 8/31/03. (h) Yes. The CitiFunds Premium Trust's Audit Committee has considered whether the provision of non-audit services that were rendered to Service Affiliates which were not pre-approved(not requiring pre-approval) is compatible with maintaining the Auditor's independence. All services provided by the Accountant to the CitiFunds Premium Trust or to Service Affiliates which were required to be pre-approved as required. 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. [RESERVED] ITEM 9. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. Not applicable. 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)(1) Code of Ethics attached hereto. Exhibit 99.CODE ETH (a)(2) Attached hereto. Exhibit 99.CERT Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (b) Furnished Exhibit 99.906CERT Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 SIGNATURES 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. CITIFUNDS PREMIUM TRUST By: /s/ R. Jay Gerken (R. Jay Gerken) Chief Executive Officer of CITIFUNDS PREMIUM TRUST Date: November 9, 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 CITIFUNDS PREMIUM TRUST Date: November 9, 2004 By: /s/ FRANCES M. GUGGINO (FRANCES M. GUGGINO) Chief Financial Officer of CITIFUNDS PREMIUM TRUST Date: November 9, 2004