SEMI-ANNUAL REPORT o FEBRUARY 28, 1999
CITFUNDS (SM)
PREMIUM
LIQUID RESERVES
MONEY MARKETS
--------------------------------------------------------------
INVESTMENT PRODUCTS:
NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
--------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
................................................................................
Portfolio Environment and Outlook 2
................................................................................
Fund Facts 3
................................................................................
Fund Performance 4
................................................................................
CITIFUNDS PREMIUM LIQUID RESERVES
Statement of Assets and Liabilities 5
................................................................................
Statement of Operations 5
................................................................................
Statement of Changes in Net Assets 6
................................................................................
Financial Highlights 6
................................................................................
Notes to Financial Statements 7
................................................................................
CASH RESERVES PORTFOLIO
Portfolio of Investments 10
................................................................................
Statement of Assets and Liabilities 13
................................................................................
Statement of Operations 13
................................................................................
Statement of Changes in Net Assets 14
................................................................................
Financial Highlights 14
................................................................................
Notes to Financial Statements 15
................................................................................
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
The 6-month period ended February 28, 1999, was a good one for the U.S. economy
and short-term money market securities. Early in the period, concerns about the
potential spread of the Asian currency and credit crisis to Latin America
contributed to the Federal Reserve Board's decision to reduce key short-term
interest rates three times between September and November. While this easing of
monetary policy caused short-term money market yields to decline, very low
inflation continued to support above-average REAL returns, which are nominal
yields less the rate of inflation.
In contrast, longer term fixed-income securities did not fare as well as
money market securities. That's because longer term yields rose in response to
reports of robust U.S. economic growth in the fourth quarter of 1998 and the
first two months of 1999. When yields of longer term securities rise, their
prices decline. Accordingly, money market funds such as CitiFunds Premium Liquid
Reserves generally performed better than longer term bond funds over the
six-month period.
Thank you for your continued confidence and participation.
Sincerely,
/s/ Philip W. Coolidge
- -----------------------------
Philip W. Coolidge
President
March 22, 1999
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
LOW INFLATION IN THE U.S. AND RECESSIONARY CONDITIONS IN SOME OVERSEAS ECONOMIES
CONTRIBUTED TO LOWER YIELDS on taxable money market securities. The financial
crisis that began in Southeast Asia in mid-1997 spread to other emerging markets
during the third quarter of 1998. Russia was forced by the credit crunch to
devalue its currency and effectively defaulted on its government bonds.
Similarly, the flight of foreign capital from Latin America adversely affected
Brazil, which devalued its currency in January, 1999.
Why did events overseas affect the U.S. money markets? A major reason is that
the U.S. Federal Reserve Board became concerned that the problems in Asia and
Latin America might curtail exports of U.S. companies, which could, in turn,
dampen domestic economic growth. To help stop the further spread of the Asian
crisis and promote continued U.S. economic growth, the Federal Reserve Board
reduced key short-term interest rates in three steps between September and
November.
In anticipation of the Federal Reserve Board's action, WE BEGAN THE REPORTING
PERIOD WITH THE PORTFOLIO'S AVERAGE MATURITY TOWARD THE LONG END OF ITS RANGE.
This strategy enabled us to capture higher yields for as long as practical while
short-term interest rates fell.
In addition, we primarily focused our investments on high-quality bank
obligations and commercial paper during the six-month period. That's because, in
our opinion, bank obligations and commercial paper offered more attractive
values than other short-term money market instruments. For example, the
difference in yields between bank obligations and U.S. Treasury bills was
unusually wide. That's primarily because the federal budget surplus reduced the
government's need to borrow, limiting the supply of Treasury bills available to
investors. Yet, demand for these direct obligations of the federal government
surged in the third quarter of 1998 when U.S. and foreign investors sought a
safe haven amid the turmoil in Asia, Russia and Latin America.
As our holdings matured during the period, we reinvested the proceeds in
money market instruments with modestly shorter maturities. Consequently, THE
PORTFOLIO'S AVERAGE MATURITY GRADUALLY DECLINED OVER THE SIX MONTHS, enabling us
to respond faster to opportunities for higher yields. Such opportunities arose
in February, 1999, for example, when reports of surprisingly strong U.S.
economic growth caused yields of longer term bonds to rise. In this new
environment, we modestly extended the Portfolio's average maturity to capture
the higher yields provided by longer-dated securities.
Looking forward, we expect the U.S. economic expansion to continue throughout
1999. Yet, persistently low inflation should, in our view, prevent the Federal
Reserve Board from raising short-term interest rates in 1999 in an attempt to
forestall inflationary pressures. If our outlook is correct, money market yields
should remain relatively stable over the foreseeable future, while longer term
yields may rise moderately. We intend to continue to monitor global economic
influences carefully, with an eye toward adjusting our investment strategy in a
way that attempts to capture the opportunities and reduce the risks of
prevailing market conditions.
2
<PAGE>
FUND FACTS
FUND OBJECTIVE
To provide its shareholders with liquidity and as high a level of current income
as is consistent with the preservation of capital.
INVESTMENT ADVISER, DIVIDENDS
CASH RESERVES PORTFOLIO Declared daily, paid monthly
Citibank, N.A.
COMMENCEMENT OF OPERATIONS BENCHMARKS
May 3, 1990 o Lipper Taxable Money
Funds Average
NET ASSETS AS OF 2/28/99 o IBC 1st Tier Taxable Money
$773.9 million Funds Average
3
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
<TABLE>
<CAPTION>
SINCE
SIX ONE FIVE MAY 3, 1990
ALL PERIODS ENDED FEBRUARY 28, 1999 (Unaudited) MONTHS** YEAR YEARS* INCEPTION*
========================================================================================
<S> <C> <C> <C> <C>
CitiFunds Premium Liquid Reserves 2.48% 5.26% 5.28% 5.09%
Lipper Taxable Money Funds Average 2.24% 4.76% 4.84% 4.68%+
</TABLE>
** Average Annual Total Return
** Not Annualized
+ From 5/31/90
7-DAY YIELDS
Annualized Current 4.70%
Effective 4.81%
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 CITIFUNDS PREMIUM LIQUID RESERVES VS. IBC 1ST
TIER TAXABLE MONEY FUNDS AVERAGE
As illustrated, CitiFunds Premium Liquid Reserves generally provided a higher
annualized seven-day yield to that of a comparable IBC Money Fund Average, as
published in IBC Money Fund ReportTM, for the one year period.
[The following table represents a chart in the printed piece.]
IBC 1st Tier CitiFunds
Date Taxable Money Avg. Premium Liquid Reserve
- ---- ------------------ ----------------------
3/3/98 4.96% 5.37%
3/10/98 4.93% 5.30%
3/17/98 4.92% 5.32%
3/24/98 4.92% 5.29%
3/31/98 4.93% 5.34%
4/7/98 4.92% 5.32%
4/14/98 4.92% 5.32%
4/21/98 4.92% 5.29%
4/28/98 4.90% 5.28%
5/5/98 4.90% 5.27%
5/12/98 4.90% 5.23%
5/19/98 4.92% 5.33%
5/26/98 4.90% 5.28%
6/2/98 4.92% 5.35%
6/9/98 4.91% 5.28%
6/16/98 4.92% 5.32%
6/23/98 4.91% 5.29%
6/30/98 4.94% 5.34%
7/7/98 4.91% 5.42%
7/14/98 4.91% 5.28%
7/21/98 4.91% 5.30%
7/28/98 4.92% 5.30%
8/4/98 4.92% 5.33%
8/11/98 4.91% 5.28%
8/18/98 4.92% 5.31%
8/25/98 4.91% 5.29%
9/1/98 4.92% 5.32%
9/8/98 4.90% 5.28%
9/15/98 4.92% 5.30%
9/22/98 4.89% 5.27%
9/29/98 4.87% 5.26%
10/6/98 4.83% 5.24%
10/13/98 4.76% 5.10%
10/20/98 4.71% 5.09%
10/27/98 4.64% 5.00%
11/3/98 4.67% 5.02%
11/10/98 4.62% 4.95%
11/17/98 4.62% 4.95%
11/24/98 4.55% 4.82%
12/1/98 4.56% 4.90%
12/8/98 4.53% 4.83%
12/15/98 4.55% 4.89%
12/22/98 4.54% 4.88%
12/29/98 4.52% 4.89%
1/5/99 4.55% 4.84%
1/12/99 4.47% 4.79%
1/19/99 4.44% 4.78%
1/26/99 4.37% 4.69%
2/2/99 4.34% 4.74%
2/9/99 4.31% 4.71%
2/16/99 4.28% 4.70%
2/23/99 4.34% 4.69%
Note: Mutual Fund shares are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
maintain the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund. Yields and total returns will fluctuate and past
performance is no guarantee of future results. Total return figures include
reinvestment of dividends. Returns and yields reflect certain voluntary fee
waivers. If the waivers were not in place, the Fund's returns and yields would
have been lower.
4
<PAGE>
CITIFUNDS PREMIUM LIQUID RESERVES
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999 (Unaudited)
================================================================================
ASSETS:
Investment in Cash Reserves Portfolio, at value (Note 1A) $777,092,228
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for shares of beneficial interest repurchased 1,405,738
Dividends payable 1,561,948
Payable to affiliate-Shareholder servicing agents' fees (Note 3B) 60,297
Accrued expenses and other liabilities 175,081
- --------------------------------------------------------------------------------
Total liabilities 3,203,064
- --------------------------------------------------------------------------------
NET ASSETS for 773,889,164 shares of beneficial
interest outstanding $773,889,164
================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $773,889,164
================================================================================
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE $1.00
================================================================================
CITIFUNDS PREMIUM LIQUID RESERVES
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1999 (Unaudited)
================================================================================
INVESTMENT INCOME (Note 1B):
Income from Cash Reserves Portfolio $18,771,556
Allocated expenses from Cash Reserves Portfolio (350,925)
- --------------------------------------------------------------------------------
$18,420,631
EXPENSES:
Administrative fees (Note 3A) 1,220,847
Shareholder Servicing Agents' fees (Note 3B) 348,813
Distribution fees (Note 4) 348,813
Registration fees 9,721
Shareholder reports 8,645
Custody and fund accounting fees 7,822
Legal fees 7,088
Audit fees 6,800
Trustees' fees 5,934
Transfer agent fees 4,179
Miscellaneous 8,566
- --------------------------------------------------------------------------------
Total expenses 1,977,228
Less aggregate amount waived or assumed by
Administrator and Distributor (Notes 3A and 4) (923,208)
- --------------------------------------------------------------------------------
Net expenses 1,054,020
- --------------------------------------------------------------------------------
Net investment income $17,366,611
================================================================================
See notes to financial statements
5
<PAGE>
CITIFUNDS PREMIUM LIQUID RESERVES
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
FEBRUARY 28, 1999 YEAR ENDED
(Unaudited) AUGUST 31, 1998
================================================================================
FROM INVESTMENT ACTIVITIES:
Net investment income, declared as dividends
to shareholders (Note 2) $17,366,611 $27,588,113
- -------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
AT NET ASSET VALUE OF $1.00 PER
SHARE (Note 5):
Proceeds from sale of shares $2,051,800,115 $3,151,376,399
Net asset value of shares issued to
shareholders from reinvestment of
dividends 8,037,581 13,821,096
Cost of shares repurchased (1,897,218,131) (2,941,837,920)
- -------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 162,619,565 223,359,575
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 611,269,599 387,910,024
- -------------------------------------------------------------------------------
End of period $773,889,164 $611,269,599
================================================================================
CITIFUNDS PREMIUM LIQUID RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1999 ----------------------------------------------
(Unaudited) 1998 1997 1996 1995
==============================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
Net investment income 0.02457 0.05348 0.05240 0.05322 0.05465
Less dividends from net investment
income (0.02457) (0.05348) (0.05240) (0.05322) (0.05465)
- --------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
==============================================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted) $773,889 $611,270 $387,910 $380,303 $423,992
Ratio of expenses to average net assets+ 0.40%* 0.40% 0.40% 0.40% 0.40%
Ratio of net investment income to average
net assets+ 4.98%* 5.39% 5.25% 5.35% 5.47%
Total return 2.48%** 5.48% 5.37% 5.45% 5.60%
Note: If agents of the Fund and agents of Cash Reserves Portfolio had not waived all or a portion of
their fees during the periods indicated, the net investment income per share and the ratios would
have been as follows:
Net investment income per share $0.02236 $0.04950 $0.04833 $0.04911 $0.05047
RATIOS:
Expenses to average net assets+ 0.79%* 0.80% 0.81% 0.82% 0.83%
Net investment income to average
net assets+ 4.59%* 4.99% 4.84% 4.93% 5.04%
==============================================================================================================
</TABLE>
+ Includes the Fund's share of Cash Reserves Portfolio's allocated expenses.
* Annualized
** Not Annualized
See notes to financial statements
6
<PAGE>
CITIFUNDS PREMIUM LIQUID RESERVES
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds Premium Liquid 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, as an open-end management investment
company. The Fund invests all of its investable assets in Cash Reserves
Portfolio (the "Portfolio"), a management investment company for which Citibank,
N.A. ("Citibank") serves as Investment Adviser. The value of such investment
reflects the Fund's proportionate interest (6.6% at February 28, 1999) in the
net assets of the Portfolio. CFBDS, Inc. ("CFBDS") acts as the Trust's
Administrator and Distributor. Citibank also serves as Sub-Administrator and
makes Fund shares available to customers as Shareholder Servicing Agent.
Citibank is a wholly-owned subsidiary of Citigroup Inc. Citigroup Inc. was
formed as a result of the merger of Citicorp and Travelers Group, Inc. which was
completed on October 8, 1998.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The financial statements of the Portfolio, including the portfolio of
investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The significant accounting policies consistently followed by the Fund are as
follows:
A. INVESTMENT VALUATION Valuation of securities by the Portfolio is discussed
in Note 1A of the Portfolio's Notes to Financial Statements, which are included
elsewhere in this report.
B. INVESTMENT INCOME The Fund earns income, net of Portfolio expenses, daily
based on its investment in the Portfolio.
C. FEDERAL TAXES The Fund's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies and to
distribute to shareholders all of its taxable income. Accordingly, no provision
for federal income or excise tax is necessary.
D. EXPENSES The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and CFBDS. Expenses incurred by the Trust with
respect to any two or more funds in the series are allocated in proportion to
the average net assets of each fund, except when allocations of direct expenses
to each fund can otherwise be made fairly. Expenses directly attributable to a
fund are charged to that fund. The Fund's share of the Portfolio's expenses are
charged against and reduce the amount of the Fund's investment in the Portfolio.
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
7
<PAGE>
CITIFUNDS PREMIUM LIQUID RESERVES
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
of the shareholder, in cash (subject to the policies of the shareholder's
Shareholder Servicing Agent) on or prior to the last business day of the month.
3. ADMINISTRATIVE SERVICES PLAN The Trust has adopted an Administrative Services
Plan which provides that the Trust, on behalf of each Fund, may obtain the
services of an Administrator, one or more Shareholder Servicing Agents, and
other Servicing Agents, and may enter into agreements providing for the payment
of fees for such services. Under the Trust's Administrative Services Plan, the
aggregate of the fees paid to the Administrator from the Fund under such Plan
and of the fees paid to the Shareholder Servicing Agents from the Fund may not
exceed 0.45% of the Fund's average daily net assets on an annualized basis for
the Fund's then-current fiscal year. For the six months ended February 28, 1999,
Management agreed to voluntarily limit Fund expenses to 0.40%.
A. ADMINISTRATIVE FEES Under the terms of an Administrative Services
Agreement, CFBDS is entitled to an administrative fee from the Fund, as
compensation for overall administrative services and general office facilities,
which is accrued daily and paid monthly at an annual rate of 0.35% of the Fund's
average daily net assets. The Administrative fees amounted to $1,220,847 of
which $574,395 was voluntarily waived for the six months ended February 28,
1999. Citibank acts as Sub-Administrator and performs certain duties and
receives compensation from CFBDS from time to time as agreed to by CFBDS and
Citibank. The Fund pays no compensation directly to any Trustee or any officer
who is affiliated with the Administrator, all of whom receive remuneration for
their services to the Fund from the Administrator or its affiliates. Certain of
the officers and a Trustee of the Fund are officers and a director of the
Administrator or its affiliates.
B. SHAREHOLDER SERVICING AGENTS FEES The Trust, on behalf of the Fund, has
entered into shareholder servicing agreements with each Shareholder Servicing
Agent pursuant to which that Shareholder Servicing Agent acts as an agent for
its customers and provides other related services. For their services, each
Shareholder Servicing Agent receives fees from the Fund, which may be paid
periodically, which may not exceed, on an annualized basis, an amount equal to
0.10% of the average daily net assets of the Fund represented by shares owned
during the period for which payment has been made by investors for whom such
Shareholder Servicing Agent maintains a servicing relationship. The Shareholder
Servicing Agents fees amounted to $348,813 for the six months ended February 28,
1999.
4. DISTRIBUTION FEES The Trust has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended, in which the
Fund reimburses the Distributor for expenses incurred or anticipated, in
connection with the sale of shares of the Fund, at an annual rate not to exceed
of 0.10% of the Fund's average daily net assets. Distribution fees amounted to
$348,813 all of which was voluntarily waived for the six months ended February
28, 1999. The
8
<PAGE>
CITIFUNDS PREMIUM LIQUID RESERVES
NOTES TO FINANCIAL STATEMENTS (Unaudited)
Distributor has voluntarily agreed to assume all distribution expenses through
February 28, 1999.
5. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest (without par value).
6. INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in
the Portfolio aggregated $1,277,067,788 and $1,130,960,233, respectively, for
the six months ended February 28, 1999.
9
<PAGE>
TRUSTEES AND OFFICERS
Philip W. Coolidge*, PRESIDENT
Mark T. Finn
Riley C. Gilley
William S. Woods, Jr.
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
*AFFILIATED PERSON OF ADMINISTRATOR AND DISTRIBUTOR
INVESTMENT ADVISER
(OF CASH RESERVES PORTFOLIO)
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND DISTRIBUTOR
CFBDS, Inc.
21 Milk Street, 5th Floor, Boston, MA 02109
(617) 423-1679
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
PricewaterhouseCoopers LLP
160 Federal Street,Boston, MA 02110
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
THE CITIFUNDS FAMILY
LARGE CAP STOCKS
o CitiFunds Growth & Income Portfolio
o CitiFunds Large Cap Growth Portfolio
SMALL CAP STOCKS
o CitiFunds Small Cap Value Portfolio
o CitiFunds Small Cap Growth Portfolio
INTERNATIONAL STOCKS
o CitiFunds International Growth & Income Portfolio
o CitiFunds International Growth Portfolio
GROWTH WITH INCOME
o CitiFunds Balanced Portfolio
BONDS
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds Intermediate Income Portfolio
o CitiFunds National Tax Free Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio
MONEY MARKETS
o CitiFunds Cash Reserves
o CitiFunds U.S. Treasury Reserves
o CitiFunds Tax Free Reserves
o CitiFunds California Tax Free Reserves
o CitiFunds Connecticut Tax Free Reserves
o CitiFunds New York Tax Free Reserves
PREMIUM MONEY MARKETS
o CitiFunds Premium Liquid Reserves
o CitiFunds Premium U.S. Treasury Reserves
INSTITUTIONAL MONEY MARKETS
o CitiFunds Institutional Liquid Reserves
o CitiFunds Institutional U.S. Treasury Reserves
o CitiFunds Institutional Tax Free Reserves
o CitiFunds Institutional Cash Reserves
This report is prepared for the information of shareholders. It is authorized
for distribution to prospective investors only when preceded or accompanied by
an effective prospectus.
For more information contact your Service Agent
or call 1-800-625-4554
CitiFunds are made available by CFBDS, Inc. as distributor.
(C)1999 Citicorp R Printed on recycled paper CFS/PLR/299
<PAGE>
SEMI-ANNUAL REPORT O FEBRUARY 28, 1999
CITIFUNDS(TM)
- --------------
PREMIUM
U.S. TREASURY RESERVES
MONEY MARKETS
------------------------------------------------------------
INVESTMENT PRODUCTS:
NOT FDIC INSURED O NO BANK GUARANTEE O MAY LOSE VALUE
------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
................................................................................
Portfolio Environment and Outlook 2
................................................................................
Fund Facts 3
................................................................................
Fund Performance 4
CITIFUNDS PREMIUM U.S. TREASURY RESERVES
Statement of Assets and Liabilities 5
................................................................................
Statement of Operations 6
................................................................................
Statement of Changes in Net Assets 7
................................................................................
Financial Highlights 8
................................................................................
Notes to Financial Statements 9
................................................................................
U.S. TREASURY RESERVES PORTFOLIO
Portfolio of Investments 12
................................................................................
Statement of Assets and Liabilities 13
................................................................................
Statement of Operations 13
................................................................................
Statement of Changes in Net Assets 14
................................................................................
Financial Highlights 14
................................................................................
Notes to Financial Statements 15
................................................................................
<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
While the 6-month period ended February 28, 1999, was a good one for the U.S.
economy, yields on short-term U.S. Treasury bills were unusually low relative to
other money market instruments. Early in the period, concerns about the
potential spread of the Asian currency and credit crisis to Latin America caused
a surge in demand for U.S. Treasury securities from domestic and foreign
investors seeking a safe haven.
At the same time, events overseas contributed to the U.S. Federal Reserve
Board's decision to reduce key short-term interest rates three times between
September and November. While this easing on monetary policy caused short-term
U.S. Treasury yields to decline, longer term fixed-income securities did not
fare as well as money market securities. That's because longer term yields rose
in response to reports of robust U.S. economic growth in the fourth quarter of
1998 and the first two months of 1999. When yields of longer term securities
rise, their prices decline. Accordingly, money market funds such as CitiFunds
Premium U.S. Treasury Reserves generally performed better than longer term bond
funds over the six-month period.
Thank you for your continued confidence and participation.
Sincerely,
/s/ Philip W. Coolidge
- ---------------------------
Philip W. Coolidge
President
March 22, 1999
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
LOW INFLATION IN THE U.S. AND RECESSIONARY CONDITIONS IN SOME OVERSEAS
ECONOMIES CONTRIBUTED TO LOWER YIELDS on U.S. Treasury bills. The financial
crisis that began in Southeast Asia in mid-1997 spread to other emerging markets
during the third quarter of 1998. Russia was forced by the credit crunch to
devalue its currency and effectively defaulted on its government bonds.
Similarly, the flight of foreign capital from Latin America adversely affected
Brazil, which devalued its currency in January, 1999.
Why did events overseas affect money market yields in the United States? A
major reason is that the Federal Reserve Board became concerned that the
problems in Asia and Latin America might curtail exports of U.S. companies,
which could, in turn, dampen domestic economic growth. To help stop the further
spread of the Asian crisis and promote continued U.S. economic growth, the
Federal Reserve reduced key short-term interest rates in three steps between
September and November.
In anticipation of the Federal Reserve Board's action, WE BEGAN THE REPORTING
PERIOD WITH THE PORTFOLIO'S AVERAGE MATURITY TOWARD THE LONG END OF ITS RANGE.
This strategy enabled us to capture higher yields for as long as practical while
short-term interest rates fell.
Of course, consistent with our charter, we focused exclusively on U.S.
Treasury securities. However, it is important to note that yields on U.S.
Treasury securities were unusually low during the six-month period relative to
other money market securities, such as high-quality bank obligations and
commercial paper. That's because the federal budget surplus reduced the
government's need to borrow, limiting the supply of Treasury bills available to
investors. Yet, demand for these direct obligations of the federal government
surged when U.S. and foreign investors sought a safe haven amid the turmoil in
Asia, Russia and Latin America.
As our holdings matured during the period, we reinvested the proceeds in U.S.
Treasury securities with modestly shorter maturities, including Cash Management
Bills issued by the U.S. Treasury to finance temporary cash flow needs. As we
opportunistically allowed the Portfolio's average maturity to gradually decline
at various times over the six months, WE WERE ABLE TO RESPOND FASTER TO HIGHER
YIELDS AS THEY BECAME AVAILABLE. Such opportunities arose in February, 1999, for
example, when reports of surprisingly strong U.S. economic growth caused yields
of longer term bonds to rise. In this new environment, we extended the
Portfolio's average maturity to capture the higher yields provided by slightly
longer-dated securities. In addition, we took advantage of changing
supply-and-demand factors to capture higher yields.
Looking forward, we expect the U.S. economic expansion to continue throughout
1999. Yet, persistently low inflation should, in our view, prevent the Federal
Reserve from raising short-term interest rates in 1999 in an attempt to
forestall inflationary pressures. If our outlook is correct, yields on U.S.
Treasury bills should remain relatively stable over the foreseeable future,
while longer term yields may rise modestly. We intend to continue to monitor
global economic influences carefully, with an eye toward adjusting our
investment strategy in a way that takes full advantage of prevailing market
conditions.
2
<PAGE>
FUND FACTS
FUND OBJECTIVE
To provide liquidity and as high a level of current income from U.S. Government
obligations as is consistent with the preservation of capital.
INVESTMENT ADVISER,
U.S. TREASURY RESERVES PORTFOLIO DIVIDENDS
Citibank, N.A Declared daily, paid monthly
COMMENCEMENT OF OPERATIONS BENCHMARK
March 1, 1991 o Lipper S&P AAA rated U.S.
Treasury Money Funds Average
NET ASSETS AS OF 2/28/99
$273.5 million
3
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
<TABLE>
<CAPTION>
SINCE
MARCH 1,
ALL PERIODS ENDING FEBRUARY 28, 1999 SIX ONE FIVE 1991
(Unaudited) **MONTHS** YEAR *YEARS* *INCEPTION*
============================================================================================
<S> <C> <C> <C> <C>
CitiFunds Premium U.S. Treasury Reserves 2.12% 4.61% 4.75% 4.38%
Lipper S&P AAA rated U.S. Treasury
Money Funds Average 2.14% 4.63% 4.68%+ 4.26%+
</TABLE>
* Average Annual Total Return
** Not Annualized
+ From 2/28/91
7-DAY YIELDS
Annualized Current4.00%
Effective 4.08%
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 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.
Note: Mutual fund shares are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
maintain the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund. Yields and total returns will fluctuate and past
performance is no guarantee of future results. Total return figures include
reinvestment of dividends. Returns and yields reflect certain voluntary fee
waivers. If the waivers were not in place, the Fund's returns and yields would
have been lower.
4
<PAGE>
CITIFUNDS PREMIUM U.S. TREASURY RESERVES
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1999 (Unaudited)
================================================================================
ASSETS:
Investment in U.S. Treasury Reserves Portfolio, at value (Note 1) $273,999,651
- --------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 332,060
Payable for shares of beneficial interest repurchased 44,185
Payable to affiliate--Shareholder servicing agents' fees (Note 3B) 21,811
Accrued expenses and other liabilities 73,327
- --------------------------------------------------------------------------------
Total liabilities 471,383
- --------------------------------------------------------------------------------
NET ASSETS For 273,528,268 shares of beneficial
interest outstanding $273,528,268
================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $273,528,268
================================================================================
NET ASSET VALUE, OFFERING PRICE, AND REDEMPTION PRICE PER SHARE $1.00
================================================================================
See notes to financial statements
5
<PAGE>
CITIFUNDS PREMIUM U.S. TREASURY RESERVES
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1999 (Unaudited)
================================================================================
INVESTMENT INCOME (Note 1A):
Income from U.S. Treasury Reserves Portfolio $6,677,583
Allocated expenses from U.S. Treasury Reserves Portfolio (142,130)
- --------------------------------------------------------------------------------
$6,535,453
EXPENSES:
Administrative fees (Note 3A) 494,876
Shareholder Servicing Agents' fees (Note 3B) 141,393
Distribution fees (Note 4) 141,393
Custody and fund accounting fees 6,830
Audit fees 4,500
Legal fees 4,121
Trustees' fees 3,665
Transfer agent fees 1,310
- --------------------------------------------------------------------------------
Total expenses 798,088
Less aggregate amounts waived by
Administrator and Distributor (Notes 3A and 4) (302,724)
- --------------------------------------------------------------------------------
Net expenses 495,364
- --------------------------------------------------------------------------------
Net investment income $6,040,089
================================================================================
See notes to financial statements
6
<PAGE>
CITIFUNDS PREMIUM U.S. TREASURY RESERVES
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED
FEBRUARY 28, 1999 AUGUST 31,
(Unaudited) 1998
================================================================================
FROM INVESTMENT ACTIVITIES:
Net investment income, declared as
dividends to shareholders (Note 2) $ 6,040,089 $ 13,299,575
===============================================================================
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST AT
NET ASSET VALUE OF $1.00 PER SHARE (Note 5):
Proceeds from sale of shares $296,028,875 $629,448,550
Net asset value of shares issued to shareholders
from reinvestment of dividends 3,630,217 8,429,748
Cost of shares repurchased (351,868,708) (551,581,566)
- -------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (52,209,616) 86,296,732
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 325,737,884 239,441,152
- -------------------------------------------------------------------------------
End of period $273,528,268 $325,737,884
================================================================================
See notes to financial statements
7
<PAGE>
CITIFUNDS PREMIUM U.S. TREASURY RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Six Months Ended
February 28, 1999 Year Ended August 31
(Unaudited) 1998 1997 1996 1995 1994
===========================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
- ---------------------------------------------------------------------------------------------------------------------------
Net investment income 0.02104 0.04802 0.04794 0.04851 0.04999 0.03087
Less dividends from net
investment income (0.02104) (0.04802) (0.04794) (0.04851) (0.04999) (0.03087)
- ---------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $273,528 $325,738 $239,441 $235,271 $317,312 $252,458
Ratio of expenses to
average net assets+ 0.45%* 0.45% 0.45% 0.45% 0.45% 0.45%
Ratio of net investment income
to average net assets+ 4.27%* 4.81% 4.80% 4.88% 5.02% 3.09%
Total return 2.12%** 4.91% 4.90% 4.96% 5.12% 3.13%
Note: If Agents of the Fund and agents of U.S. Treasury Reserves Portfolio had not waived all or a portion of
their fees during the periods indicated, the net investment income per share and the ratios would have been as
follows:
Net investment income per share $0.01932 $0.04433 $0.04414 $0.04463 $0.04601 $0.02667
RATIOS:
Expenses to average net assets +0.80% *0.82% 0.83% 0.85% 0.84% 0.87%
Net investment income to
average net assets+ 3.92%* 4.44% 4.42% 4.49% 4.62% 2.67%
============================================================================================================================
</TABLE>
+ Includes the Fund's share of U.S. Treasury Reserves Portfolio's allocated
expenses.
* Annualized
** Not Annualized
See notes to financial statements
8
<PAGE>
CITIFUNDS PREMIUM U.S. TREASURY RESERVES
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds Premium U.S. Treasury Reserves (the
"Fund") is a diversified separate series of CitiFunds Premium Trust (the
"Trust"), a Massachusetts business trust. The Trust is registered under the
Investment Company Act of 1940, as amended, as an open-end management investment
company. The Fund invests all of its investable assets in U.S. Treasury Reserves
Portfolio (the "Portfolio"), an open-end, diversified management investment
company for which Citibank, N.A. ("Citibank") serves as Investment Adviser. The
value of such investment reflects the Fund's proportionate interest (34.1% at
February 28, 1999) in the net assets of the Portfolio. CFBDS, Inc. ("CFBDS"),
acts as the Trust's Administrator and Distributor. Citibank also serves as
Sub-Administrator and makes shares available to customers through various
Shareholder Servicing Agents. Citibank is a wholly owned subsidiary of Citigroup
Inc. Citigroup Inc. was formed as a result of the merger of Citicorp and
Travelers Group, Inc. which was completed on October 8, 1998.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
The financial statements of the Portfolio, including the portfolio of
investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements. The significant accounting
policies consistently followed by the Fund are as follows:
A. INVESTMENT INCOME The Fund earns income, net of Portfolio expenses, daily
on its investment in the Portfolio.
B. FEDERAL TAXES The Fund's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies and to
distribute to shareholders all of its taxable income. Accordingly, no provision
for federal income or excise tax is necessary.
C. EXPENSES The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and CFBDS. Expenses incurred by the Trust with
respect to any two or more Funds in a series are allocated in proportion to the
average net assets of each Fund, except where allocations of direct expenses to
each Fund can otherwise be made fairly.
Expenses directly attributable to a Fund are charged to that Fund.
D. OTHER All the net investment income of the Portfolio is allocated pro
rata, based on respective ownership interests, among the Fund and other
investors in the Portfolio at the time of such determination.
2. DIVIDENDS The net income of the Fund is determined once daily, as of 12:00
noon, Eastern standard time, and all of the net income of the Fund so determined
is declared as a dividend to shareholders of record at the time of such
determination. Dividends are distributed in the form of additional shares of the
Fund or, at
9
<PAGE>
CITIFUNDS PREMIUM U.S. TREASURY RESERVES
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
the election of the shareholder, in cash (subject to the policies of the
shareholder's Shareholder Servicing Agent) on or prior to the last business day
of the month.
3. ADMINISTRATIVE SERVICES PLAN The Trust has adopted an Administrative Services
Plan which provides that the Trust, on behalf of each Fund, may obtain the
services of an Administrator, one or more Shareholder Servicing Agents, and
other Servicing Agents and may enter into agreements providing for the payment
of fees for such services. Under the Trust's Administrative Services Plan, the
aggregate of the fee paid to the Administrator from the Fund and of the fees
paid to the Shareholder Servicing Agents from the Fund under such plan may not
exceed 0.45% of the Fund's average daily net assets on an annualized basis for
the Fund's then-current fiscal year. For the six months ended February 28, 1999,
Management agreed to voluntarily limit Fund expenses to 0.45%.
A. ADMINISTRATIVE FEES Under the terms of an Administrative Services
Agreement, CFBDS is entitled to an administrative fee from the Fund, as
compensation for overall administrative services and general office facilities
which is accrued daily and paid monthly at the annual rate of 0.35% of the
Fund's average daily net assets. The Administrative fees amounted to $494,876,
of which $161,331 was voluntarily waived for the six months ended February 28,
1999. Citibank acts as Sub-Administrator and performs such duties and receives
such compensation from CFBDS as from time to time is agreed to by CFBDS and
Citibank. The Fund pays no compensation directly to any Trustee or to any
officer who is affiliated with the Administrator, all of whom receive
remuneration for their services to the Fund from the Administrator or its
affiliates. Certain of the officers and a Trustee of the Fund are officers and a
director of the Administrator or its affiliates.
B. SHAREHOLDER SERVICING AGENT FEES The Trust, on behalf of the Fund, entered
into shareholder servicing agreements with each Shareholder Servicing Agent
pursuant to which the Shareholder Servicing Agent acts as an agent for its
customers and provides other related services. For their services, each
Shareholder Servicing Agent receives fees from the Fund, which may be paid
periodically, but may not exceed, on an annualized basis, an amount equal to
0.10% of the average daily net assets of the Fund represented by shares owned
during the period for which payment is being made by investors for whom such
Shareholder Servicing Agent maintains a servicing relationship. The Shareholder
Servicing Agent fees amounted to $141,393 for the six months ended February 28,
1999.
4. DISTRIBUTION FEES The Trust adopted a Plan of Distribution pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended, in which the Fund
reimburses the Distributor for expenses incurred or anticipated in connection
with the sale of shares of the Fund, limited to an annual rate of 0.10% of the
average daily net assets of the Fund. The Distribution fees amounted to
$141,393, all of which was voluntarily waived for the six months ended February
28, 1999. The
10
<PAGE>
CITIFUNDS PREMIUM U.S. TREASURY RESERVES
NOTES TO FINANCIAL STATEMENTS (Unaudited)
Distributor has voluntarily agreed to assume all distribution expenses through
February 28, 1999.
5. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest ($0.00001 par value).
6. INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in
the Portfolio aggregated $344,871,019 and $403,781,178, respectively, for the
six months ended February 28, 1999.
11
<PAGE>
TRUSTEES AND OFFICERS
Philip W. Coolidge*, PRESIDENT
MARK T. FINN
Riley C. Gilley
William S. Woods, Jr.
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
*AFFILIATED PERSON OF ADMINISTRATOR AND DISTRIBUTOR
INVESTMENT ADVISER
(OF U.S. TREASURY RESERVES PORTFOLIO)
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND DISTRIBUTOR
CFBDS, Inc.
21 Milk Street, 5th Floor, Boston, MA 02109
(617) 423-1679
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
THE CITIFUNDS FAMILY
LARGE CAP STOCKS
o CitiFunds Growth & Income Portfolio
o CitiFunds Large Cap Growth Portfolio
SMALL CAP STOCKS
o CitiFunds Small Cap Value Portfolio
o CitiFunds Small Cap Growth Portfolio
INTERNATIONAL STOCKS
o CitiFunds International Growth & Income Portfolio
o CitiFunds International Growth Portfolio
GROWTH WITH INCOME
o CitiFunds Balanced Portfolio
BONDS
o CitiFunds Short-Term U.S. Government Income Portfolio
o CitiFunds Intermediate Income Portfolio
o CitiFunds National Tax Free Income Portfolio
o CitiFunds New York Tax Free Income Portfolio
o CitiFunds California Tax Free Income Portfolio
MONEY MARKETS
o CitiFunds Cash Reserves
o CitiFunds U.S. Treasury Reserves
o CitiFunds Tax Free Reserves
o CitiFunds California Tax Free Reserves
o CitiFunds Connecticut Tax Free Reserves
o CitiFunds New York Tax Free Reserves
PREMIUM MONEY MARKETS
o CitiFunds Premium Liquid Reserves
o CitiFunds Premium U.S. Treasury Reserves
INSTITUTIONAL MONEY MARKETS
o CitiFunds Institutional Liquid Reserves
o CitiFunds Institutional U.S. Treasury Reserves
o CitiFunds Institutional Tax Free Reserves
o CitiFunds Institutional Cash Reserves
This report is prepared for the information of shareholders. It is authorized
for distribution to prospective investors only when preceded or accompanied by
an effective prospectus.
For more information contact your Service Agent
or call 1-800-625-4554
CitiFunds are made available by CFBDS, Inc.
as distributor.
(C)1999 Citicorp R Printed on recycled paper CFS/PUS/299
