--------------------------------------------------------------------------------
CITIFUNDS(R)
---------------
--------------------------------------------------------------------------------
CitiFunds
U.S. Treasury
Reserves
ANNUAL REPORT
AUGUST 31, 2000
--------------------------------------------------------------------------
INVESTMENT PRODUCTS: NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
--------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
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Portfolio Environment and Outlook 2
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Fund Facts 3
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Fund Performance 4
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CITIFUNDS U.S. TREASURY RESERVES
Statement of Assets and Liabilities 5
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Statement of Operations 6
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Statement of Changes in Net Assets 7
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Financial Highlights 8
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Notes to Financial Statements 9
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Independent Auditors' Report 12
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U.S. TREASURY RESERVES PORTFOLIO
Portfolio of Investments 13
--------------------------------------------------------------------------------
Statement of Assets and Liabilities 14
--------------------------------------------------------------------------------
Statement of Operations 15
--------------------------------------------------------------------------------
Statement of Changes in Net Assets 16
--------------------------------------------------------------------------------
Financial Highlights 17
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Notes to Financial Statements 18
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Independent Auditors' Report 20
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<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear CitiFunds Shareholder:
Robust economic growth, inflation concerns and rising interest rates helped
produce generally higher yields for most money market instruments, including
U.S. Treasury bills, during the reporting period. A closer look suggests that
most of the improvement in U.S. Treasury bill yields took place during the first
eight months of the period. Between May and August, Treasury bill yields
actually declined modestly, primarily in response to evidence that the Federal
Reserve Board's (the "Fed") restrictive monetary policies were having a
moderating effect on U.S. economic growth.
In this environment, the CitiFunds' investment adviser, Citibank, N.A.,
continued to manage U.S. Treasury Reserves Portfolio, the portfolio in which the
Fund invests all of its investable assets, with the goal of achieving its
investment objectives: providing liquidity and as high a level of current income
from U.S. government obligations as is consistent with the preservation of
capital.
This report reviews the Fund's investment activities and performance during
the twelve months ended August 31, 2000, and provides a summary of Citibank's
perspective on and outlook for the money market securities marketplace.
Thank you for your continued confidence and participation.
Sincerely,
/s/ PHILIP W. COOLIDGE
----------------------
Philip W. Coolidge
President
September 15, 2000
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
U.S. TREASURY BILLS PROVIDED POSITIVE RETURNS AND A SAFE HARBOR FOR MANY
INVESTORS DURING THE REPORTING PERIOD. These benefits were particularly valuable
during the second half of the period, when heightened volatility in the stock
market and rising interest rates produced flat or negative returns for some
investment classes, including stocks and longer-term bonds. This market
volatility, which included a sharp correction in formerly high-flying technology
stocks, helped create a flight to quality among many investors.
This increase in demand for high-quality money market securities, combined
with early signs of slower economic growth and an absence of new-issue Cash
Management bills, caused U.S. Treasury bill yields to decline between May and
August 2000. As a result, U.S. Treasury bill yields ended the reporting period
at relatively low levels compared to other taxable money market instruments.
The U.S. economy during most of the reporting period was characterized by
strong growth, rising prices for some important commodities, including oil, and
the lowest levels of unemployment in recent memory. During the first half of the
reporting period, these positive economic conditions were enhanced by a rapidly
rising stock market, especially within market sectors expected to benefit from
strong demand for technology and telecommunications services.
BECAUSE THIS COMBINATION OF POSITIVE ECONOMIC FORCES HAS HISTORICALLY LED TO
HIGHER RATES OF INFLATION, THE FED CONTINUED TO MOVE TOWARD A MORE RESTRICTIVE
MONETARY POLICY DURING THE PERIOD. In fact, the Fed raised short-term interest
rates four times during the reporting period, for a total increase of 1.25%, in
an effort to relieve inflationary pressures that might threaten to derail U.S.
economic prosperity.
IN THIS ENVIRONMENT, MANAGEMENT MAINTAINED A RELATIVELY SHORT AVERAGE
MATURITY from the start of the reporting period through the second quarter of
2000. This strategy was designed to keep assets available for higher yielding
securities should interest rates rise. When it became apparent that Treasury
bill yields had peaked, management then extended the Fund's average maturity in
order to lock in prevailing yields for as long as practical. Management
subsequently reduced the Portfolio's average maturity in anticipation of the
issuance of Cash Management bills, scheduled for late August. As of August 31,
2000, the Portfolio's average maturity was 50 days, which is somewhat shorter
than the Portfolio's maximum average maturity of 60 days.
AS FOR THE FORESEEABLE FUTURE, MANAGEMENT EXPECTS THAT THE FED MOST LIKELY
WILL NOT MAKE POLICY DECISIONS UNTIL AFTER THE NOVEMBER PRESIDENTIAL ELECTION.
Recent economic statistics indicate that the Fed's previous rate hikes may have
been effective in slowing the rate of economic growth and forestalling an
acceleration of inflation. Consequently, management expects that short-term bond
yields will eventually begin to decline from current levels. Management is
prepared to extend the Fund's average maturity if and when this occurs. Of
course, management will adjust its strategies if economic and market conditions
change.
2
<PAGE>
FUND FACTS
FUND OBJECTIVE
To provide liquidity and as high a level of current income from U.S. government
obligations as is consistent with the preservation of capital.
INVESTMENT ADVISER, DIVIDENDS
U.S. TREASURY RESERVES PORTFOLIO Declared daily, paid monthly
Citibank, N.A.
COMMENCEMENT OF OPERATIONS BENCHMARK*
May 3, 1991 o Lipper S&P AAA rated U.S.
Treasury Money Market
NET ASSETS AS OF 8/31/00 Funds Average
Class N shares $288.4 million o iMoneyNet, Inc. (formerly IBC
Cititrade(R) shares $6,220 Financial Data) 100% U.S.
Treasury Rated Money Market
Funds Average
* The Lipper Funds Average and iMoneyNet, Inc. Funds Average reflect the
performance (excluding sales charges) of mutual funds with similar
objectives.
Cititrade is a registered service mark of Citicorp.
3
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
SINCE
ONE FIVE MAY 3, 1991
ALL PERIODS ENDED AUGUST 31, 2000 YEAR YEARS* INCEPTION*
================================================================================
CitiFunds U.S. Treasury Reserves Class N 4.90% 4.58% 4.17%
Lipper S&P AAA rated U.S. Treasury
Money Market Funds Average 5.13% 4.78% 4.32%+
iMoneyNet, Inc. (formerly IBC Financial
Data) 100% U.S. Treasury AAA-Rated
Money Market Funds Average 4.94% 4.64% 4.32%+
Cititrade U.S. Treasury Reserves -- -- 0.19%#**
* Average Annual Total Return
** Not Annualized
+ Since April 30, 1991
# Commencement of Operations 8/18/00
7-DAY YIELDS CLASS N CITITRADE
------- ---------
Annualized Current 5.38% 5.21%
Effective 5.52% 5.21%
The ANNUALIZED CURRENT 7-DAY YIELD reflects the amount of income generated by
the investment during the seven-day period and assumes that the income is
generated each week over a 365-day period. The yield is shown as a percentage of
the investment.
The EFFECTIVE 7-DAY YIELD is calculated similarly, but when annualized the
income earned by the investment during the seven-day period is assumed to be
reinvested. The effective yield is slightly higher than the current yield
because of the compounding effect of this assumed reinvestment.
Note: A money market fund's yield more closely reflects the current earnings of
the fund than does the total return.
IMPORTANT TAX INFORMATION--For the fiscal year ended August 31, 2000 CitiFunds
U.S. Treasury Reserves Class N shares paid $0.04797 per share and Cititrade U.S.
Treasury Reserves paid $0.00193 per share, respectively, to shareholders from
net investment income. For such period, 100% of income dividends paid were
derived from interest earned from U.S. Treasury Bills, Notes and Bonds.
Note: Although money market funds seek to maintain the value of your investment
at $1.00 per share, it is possible to lose money by investing in the Fund.
Mutual fund shares are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other government agency. Yields and total returns
will fluctuate and past performance is no guarantee of future results. Total
return figures include reinvestment of dividends. Returns and yields reflect
certain voluntary fee waivers. If the waivers were not in place, the Fund's
returns and yields would have been lower.
4
<PAGE>
CITIFUNDS U.S. TREASURY RESERVES
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2000
================================================================================
ASSETS:
Investment in U.S. Treasury Reserves Portfolio, at value (Note 1) $288,857,931
Receivable for shares of beneficial interest sold 689,896
--------------------------------------------------------------------------------
Total assets 289,547,827
--------------------------------------------------------------------------------
LIABILITIES:
Dividends payable 767,617
Payable for shares of beneficial interest repurchased 161,100
Payable to affiliate--Shareholder servicing agents' fees (Note 3B) 61,630
Accrued expenses and other liabilities 104,314
--------------------------------------------------------------------------------
Total liabilities 1,094,661
--------------------------------------------------------------------------------
NET ASSETS $288,453,166
================================================================================
NET ASSETS CONSIST OF:
Paid-in capital $288,453,166
================================================================================
CLASS N SHARES:
Net Asset Value, Offering Price and Redemption Price Per Share
($288,446,946/288,446,946 shares outstanding) $1.00
================================================================================
CITITRADE SHARES:
Net Asset Value, Offering Price and Redemption Price Per Share
($6,220/6,220 shares outstanding) $1.00
================================================================================
See notes to financial statements
5
<PAGE>
CITIFUNDS U.S. TREASURY RESERVES
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000
================================================================================
INVESTMENT INCOME (Note 1A)
Income from U.S. Treasury Reserves Portfolio $17,364,419
Allocated expenses from U.S. Treasury
Reserves Portfolio (317,983)
--------------------------------------------------------------------------------
$17,046,436
EXPENSES:
Administrative fees (Note 3A) 1,112,514
Shareholder Servicing Agents' fees Class N (Note 3B) 795,597
Distribution fees Class N (Note 4) 318,239
Distribution fees Cititrade (Note 4) 1
Legal fees 37,562
Shareholder reports 21,410
Custody and fund accounting fees 17,932
Transfer agent fees 12,495
Audit fees 12,087
Trustees' fees 6,429
Miscellaneous 29,831
--------------------------------------------------------------------------------
Total expenses 2,364,097
Less aggregate amounts waived by
Administrator and Distributor
(Notes 3A and 4) (450,983)
--------------------------------------------------------------------------------
Net expenses 1,913,114
--------------------------------------------------------------------------------
Net investment income $15,133,322
================================================================================
See notes to financial statements
6
<PAGE>
CITIFUNDS U.S. TREASURY RESERVES
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
------------------------------
2000 1999
================================================================================
FROM INVESTMENT ACTIVITIES:
Net investment income, declared as dividends
to shareholders (Note 2) $ 15,133,322 $ 12,931,115
--------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
AT NET ASSET VALUE OF $1.00 PER SHARE (Note 5):
CLASS N SHARES
Net proceeds from sale of shares 1,080,056,269 914,468,035
Net asset value of shares issued to shareholders
from reinvestment of dividends 5,963,213 5,724,238
Cost of shares repurchased (1,141,068,128) (896,627,173)
--------------------------------------------------------------------------------
Total Class N shares (55,048,646) 23,565,100
--------------------------------------------------------------------------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST
AT NET ASSET VALUE OF $1.00 PER SHARE (Note 5):
CITITRADE SHARES*
Net proceeds from sale of shares 10,650 --
Net asset value of shares issued to shareholders
from reinvestment of dividends 12 --
Cost of shares repurchased (4,442) --
--------------------------------------------------------------------------------
Total Cititrade shares 6,220 --
--------------------------------------------------------------------------------
Total increase (decrease) in net assets
from transactions in shares of
beneficial interest (55,042,426) 23,565,100
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS (55,042,426) 23,565,100
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 343,495,592 319,930,492
--------------------------------------------------------------------------------
End of period $ 288,453,166 $ 343,495,592
================================================================================
* August 18, 2000 (Commencement of Operations)
See notes to financial statements
7
<PAGE>
CITIFUNDS U.S. TREASURY RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS N SHARES
------------------------------------------------------------
YEAR ENDED AUGUST 31,
------------------------------------------------------------
2000 1999 1998 1997 1996
========================================================================================================
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
Net investment income 0.04797 0.03947 0.04552 0.04547 0.04602
Less dividends from net
investment income (0.04797) (0.03947) (0.04552) (0.04547) (0.04602)
--------------------------------------------------------------------------------------------------------
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) $288,447 $343,496 $319,930 $360,717 $317,996
Ratio of expenses to
average net assets+ 0.70% 0.70% 0.70% 0.70% 0.70%
Ratio of net investment income
to average net assets+ 4.76% 3.96% 4.55% 4.57% 4.61%
Total return 4.90% 4.02% 4.65% 4.64% 4.70%
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 $0.04523 $0.03678 $0.04292 $0.04278 $0.04313
RATIOS:
Expenses to average net assets+ 0.97% 0.97% 0.96% 0.97% 1.00%
Net investment income to
average net assets+ 4.49% 3.69% 4.29% 4.30% 4.32%
========================================================================================================
</TABLE>
CITITRADE SHARES
----------------------------
FOR THE PERIOD
AUGUST 18, 2000
(COMMENCEMENT OF OPERATIONS)
TO AUGUST 31, 2000
================================================================================
Net Asset Value, beginning of period $1.00000
Net investment income 0.00193
Less dividends from net investment income (0.00193)
--------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period $ 6,220
Ratio of expenses to average net assets+ 1.00%*
Ratio of net investment income to average net assets+ 4.46%*
Total return 0.19%**
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 period, the net investment
income per share and the ratios would have been as follows:
Net investment income per share $0.00193
RATIOS:
Expenses to average net assets+ 1.27%*
Net investment income to average net assets+ 4.19%*
================================================================================
+ 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 U.S. TREASURY RESERVES
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds U.S. Treasury Reserves (the "Fund")
is a separate diversified series of CitiFunds Trust III (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 (21.8% at
August 31, 2000) in the net assets of the Portfolio. CFBDS, Inc. ("CFBDS") acts
as the Trust's Administrator and Distributor. Citibank also serves as
Sub-Administrator and makes shares available to customers through various
Shareholder Servicing Agents. Citibank is a wholly-owned subsidiary of Citigroup
Inc.
The Fund, as of August 31, 2000, offers Class N shares and Cititrade shares.
The fund commenced its public offering of Cititrade shares on August 18, 2000.
Expenses of the Fund are borne pro-rata by the holders of each class of shares,
except that each class bears expenses unique to that class (including the Rule
12b-1 service and distribution fees applicable to such class), and votes as a
class only with respect to its own Rule 12b-1 plan. Shares of each class would
receive their pro-rata share of the net assets of the Fund if the Fund were
liquidated. Class N shares have lower expenses than Cititrade shares. Cititrade
shares pay a higher ongoing service fee than Class N shares.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
The financial statements of the Portfolio, including the portfolio of
investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The significant accounting policies consistently followed by the Fund are 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.
9
<PAGE>
CITIFUNDS U.S. TREASURY RESERVES
NOTES TO FINANCIAL STATEMENTS (Continued)
D. OTHER All the net investment income of the Portfolio is allocated pro
rata, based on respective ownership interests, among the fund and other
investors in the Portfolio at the time of such determination.
2. DIVIDENDS The net income of the Fund is determined once daily, as of 12:00
noon Eastern Standard Time, and all of the net income of the Fund so determined
is declared as a dividend to shareholders of record at the time of such
determination. Dividends are distributed in the form of additional shares of the
Fund or, at the election of the shareholder, in cash (subject to the policies of
the shareholder's Shareholder Servicing Agent), on or prior to the last business
day of the month.
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, the fees paid to
the Shareholder Servicing Agents from the Fund under such plan and the Basic
Distribution Fee paid from the Fund to the Distributor under the Distribution
Plan may not exceed 0.70% of the Fund's average daily net assets on an
annualized basis for the Fund's then-current fiscal year. For the year ended
August 31, 2000, management agreed to voluntarily limit Class N expenses to
0.70% and for the period from August 18, 2000, (Commencement of Operations) to
August 31, 2000, Management agreed to voluntarily limit Cititrade expenses to
1.00%.
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 average
daily net assets of the Fund. The Administrative fees amounted to $1,112,514, of
which $300,688 was voluntarily waived for the year ended August 31, 2000.
Citibank acts as Sub-Administrator and performs such duties and receives such
compensation from CFBDS as from time to time is agreed to by CFBDS and Citibank.
The Fund pays no compensation directly to any Trustee or to any officer who is
affiliated with the Administrator, all of whom receive remuneration for their
services to the Fund from the Administrator or its affiliates. Certain of the
officers and a Trustee of the Fund are officers and a director of the
Administrator or its affiliates.
B. SHAREHOLDER SERVICING AGENT FEES The Trust, on behalf of the Fund, has
entered into shareholder servicing agreements with each Shareholder Servicing
Agent pursuant to which the Shareholder Servicing Agent acts as an agent for its
customers and provides other related services. For their services, each
Shareholder Servicing Agent receives fees from the Fund, which may be paid
periodically, but may not exceed, on an annualized basis, an amount equal to
0.25% of the average daily net assets of the Fund represented by shares owned
during the period for which payment is being made
10
<PAGE>
CITIFUNDS U.S. TREASURY RESERVES
NOTES TO FINANCIAL STATEMENTS
by investors for whom such Shareholder Servicing Agent maintains a servicing
relationship. The Shareholder Servicing Agent fees amounted to $795,597 for
Class N, for the year ended August 31, 2000.
4. DISTRIBUTION FEES The Trust has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended, in which the
Fund compensates the Distributor at an annual rate of 0.10% of Class N average
daily net assets and 0.60% of Cititrade average daily net assets. The
Distribution fees for Class N amounted to $318,239, of which $150,295 was
voluntarily waived for the year ended August 31, 2000 and $1 for Cititrade for
the period from August 18, 2000 (Commencement of Operations) to August 31, 2000.
The Distributor may also receive an additional fee from the Fund at an annual
rate not to exceed 0.10% of the Fund's average daily net assets in anticipation
of, or as reimbursement for, advertising expenses incurred by the Distributor in
connection with the sale of shares of the Fund. The additional fee has not been
assessed through August 31, 2000.
5. SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees
to issue an unlimited number of full and fractional shares of beneficial
interest (without par value).
6. INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in
the Portfolio aggregated $1,049,520,502 and $1,122,775,198, respectively, for
the year ended August 31, 2000.
11
<PAGE>
CITIFUNDS U.S. TREASURY RESERVES
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND SHAREHOLDERS OF
CITIFUNDS U.S. TREASURY RESERVES:
We have audited the accompanying statement of assets and liabilities of
CitiFunds U.S. Treasury Reserves, a separate series of CitiFunds Trust III (the
"Trust") (a Massachusetts business trust), as of August 31, 2000, the related
statement of operations for the year then ended, the statement of changes in net
assets for the years ended August 31, 2000 and 1999, and the financial
highlights for each of the years in the five-year period ended August 31, 2000.
These financial statements and financial highlights are the responsibility of
the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of CitiFunds U.S.
Treasury Reserves at August 31, 2000, the results of its operations, the changes
in its net assets, and its financial highlights for the respective stated
periods in conformity with accounting principles generally accepted in the
United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 4, 2000
12
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS August 31, 2000
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
--------------------------------------------------------------------------------
U.S. TREASURY BILLS -- 100.0%
--------------------------------------------------------------------------------
United States Treasury Bill,
due 9/14/00 $ 80,000 $ 79,836,561
due 9/21/00 96,601 96,292,622
due 9/28/00 222,426 221,438,693
due 10/05/00 197,894 196,795,914
due 10/26/00 262,430 260,028,976
due 11/02/00 113,078 111,898,507
due 11/09/00 239,856 237,061,552
due 11/30/00 123,346 121,478,030
--------------
TOTAL INVESTMENTS,
AT AMORTIZED COST 100.0% 1,324,830,855
OTHER ASSETS,
LESS LIABILITIES 0.0 (142,567)
----- --------------
NET ASSETS 100.0% $1,324,688,288
===== ==============
See notes to financial statements
13
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 2000
================================================================================
ASSETS:
Investments, at amortized cost (Note 1A) $1,324,830,855
Cash 292
--------------------------------------------------------------------------------
Total assets 1,324,831,147
--------------------------------------------------------------------------------
LIABILITIES:
Payable to affiliate - Investment advisory fees (Note 2A) 89,641
Accrued expenses and other liabilities 53,218
--------------------------------------------------------------------------------
Total liabilities 142,859
--------------------------------------------------------------------------------
NET ASSETS $1,324,688,288
================================================================================
REPRESENTED BY:
Paid-in capital for beneficial interests $1,324,688,288
================================================================================
See notes to financial statements
14
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 2000
================================================================================
INVESTMENT INCOME (Note 1B) $68,115,709
EXPENSES:
Investment Advisory fees (Note 2A) $ 1,855,394
Administrative fees (Note 2B) 618,465
Custody and fund accounting fees 284,473
Legal fees 32,160
Audit fees 21,500
Trustees' fees 15,733
Miscellaneous 24,986
--------------------------------------------------------------------------------
Total expenses 2,852,711
Less aggregate amounts waived by Investment Adviser
and Administrator (Notes 2A and 2B) (1,615,405)
Less fees paid indirectly (Note 1D) (21)
--------------------------------------------------------------------------------
Net expenses 1,237,285
--------------------------------------------------------------------------------
Net investment income $66,878,424
================================================================================
See notes to financial statements
15
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
----------------------------------
2000 1999
================================================================================
INCREASE IN NET ASSETS FROM OPERATIONS:
Net investment income $ 66,878,424 $ 40,398,488
--------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 4,524,590,945 3,426,724,559
Value of withdrawals (4,455,407,592) (3,190,341,131)
--------------------------------------------------------------------------------
Net increase in net assets from
capital transactions 69,183,353 236,383,428
--------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 136,061,777 276,781,916
--------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 1,188,626,511 911,844,595
--------------------------------------------------------------------------------
End of period $ 1,324,688,288 $ 1,188,626,511
================================================================================
See notes to financial statements
16
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
------------------------------------------------------------------
2000 1999 1998 1997 1996
====================================================================================================
<S> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
(000's omitted) $1,324,688 $1,188,627 $ 911,845 $ 907,910 $ 767,804
Ratio of expenses to
average net assets 0.10% 0.10% 0.10% 0.10% 0.10%
Ratio of net investment income
to average net assets 5.41% 4.55% 5.14% 5.15% 5.20%
Note: If the agents of the Portfolio had not voluntarily waived a portion of their fees for the
periods indicated and the expenses were not reduced for fees paid indirectly, the ratios would have
been as follows:
RATIOS:
Expenses to average net assets 0.23% 0.23% 0.23% 0.24% 0.25%
Net investment income to
average net assets 5.28% 4.42% 5.01% 5.01% 5.05%
====================================================================================================
</TABLE>
See notes to financial statements
17
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES U.S. Treasury Reserves Portfolio (the
"Portfolio") is registered under the Investment Company Act of 1940, as amended,
as a no-load, diversified, open-end management investment company which was
organized as a trust under the laws of the State of New York. The Declaration of
Trust permits the Trustees to issue beneficial interests in the Portfolio.
CFBDS, Inc ("CFBDS"), acts as the Portfolio's Administrator. Citibank N.A.
("Citibank") acts as the Investment Adviser. Citibank is a wholly-owned
subsidiary of Citigroup Inc.
The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. VALUATION OF INVESTMENTS Money market instruments are valued at amortized
cost, which the Trustees have determined in good faith constitutes fair value.
The Portfolio's use of amortized cost is subject to the Portfolio's compliance
with certain conditions as specified under Rule 2a-7 of the Investment Company
Act of 1940.
B. INVESTMENT INCOME AND EXPENSES Investment income consists of interest
accrued and discount earned (including both original issue and market discount),
adjusted for amortization of premium, on the investments of the Portfolio,
accrued ratably to the date of maturity, plus or minus net realized gain or
loss, if any, on investments. Expenses of the Portfolio are accrued daily.
C. FEDERAL INCOME TAXES The Portfolio's policy is to comply with the
applicable provisions of the Internal Revenue Code. Accordingly, no provision
for federal income taxes is necessary.
D. FEES PAID INDIRECTLY The Portfolio's custodian calculates its fees based
on the Portfolio's average daily net assets. The fee is reduced according to a
fee arrangement, which provides for custody fees to be reduced based on a
formula developed to measure the value of cash deposited with the custodian by
the Portfolio. This amount is shown as a reduction of expenses on the Statement
of Operations.
E. OTHER Purchases, maturities and sales of money market instruments are
accounted for on the date of the transaction.
2. INVESTMENT ADVISORY FEES AND ADMINISTRATIVE FEES
A. INVESTMENT ADVISORY FEE The Investment advisory fees paid to Citibank, as
compensation for overall investment management services, amounted to $1,855,394
of which $996,940 was voluntarily waived for the year ended August 31, 2000. The
investment advisory fee is computed at an annual rate of 0.15% of the
Portfolio's average daily net assets.
18
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
B. ADMINISTRATIVE FEES Under the terms of an Administrative Services
Agreement, the administrative fee paid to the Administrator, as compensation for
overall administrative services and general office facilities, is accrued daily
and paid monthly at the annual rate of 0.05% of the Portfolio's average daily
net assets. The Administrative fees amounted to $618,465, all of which was
contractually waived for the year ended August 31, 2000. The contractual fee
waivers terminate on December 31, 2000. The Portfolio pays no compensation
directly to any Trustee or any officer who is affiliated with the Administrator,
all of whom receive remuneration for their services to the Portfolio from the
Administrator or its affiliates. Certain of the officers and a Trustee of the
Portfolio are officers and a director of the Administrator or its affiliates.
3. INVESTMENT TRANSACTIONS Purchases, maturities and sales of U.S. Treasury
obligations, aggregated $9,785,486,816 and $9,712,033,716, respectively, for the
year ended August 31, 2000.
4. LINE OF CREDIT The Portfolio, along with other funds in the fund family,
entered into an agreement with a bank which allows the funds collectively to
borrow up to $75 million for temporary or emergency purposes. Interest on
borrowings, if any, is charged to the specific fund executing the borrowing at
the base rate of the bank. The line of credit requires a quarterly payment of a
commitment fee based on the average daily unused portion of the line of credit.
For the year ended August 31, 2000, the commitment fee allocated to the
Portfolio was $3,755. Since the line of credit was established, there have been
no borrowings.
19
<PAGE>
U.S. TREASURY RESERVES PORTFOLIO
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND INVESTORS OF
U.S. TREASURY RESERVES PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of U.S. Treasury Reserves Portfolio (a
New York Trust) as of August 31, 2000, the related statement of operations for
the year then ended, the statement of changes in net assets for the years ended
August 31, 2000 and 1999, and the financial highlights for each of the years in
the five-year period ended August 31, 2000. These financial statements and
financial highlights are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
the securities owned as of August 31, 2000, by correspondence with the
custodian. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of U.S. Treasury
Reserves Portfolio at August 31, 2000, the results of its operations, the
changes in its net assets, and its financial highlights for the respective
stated periods in conformity with accounting principles generally accepted in
the United States of America.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
October 4, 2000
20
<PAGE>
TRUSTEES AND OFFICERS
C. Oscar Morong, Jr., Chairman
Philip W. Coolidge*, President
E. Kirby Warren
William S. Woods, Jr.***
SECRETARY
Robert Frenkel**
TREASURER
Linwood Downs*
* AFFILIATED PERSON OF ADMINISTRATOR AND DISTRIBUTOR
** AFFILIATED PERSON OF INVESTMENT ADVISER
*** TRUSTEE EMERITUS
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
CitiFiduciary Trust Company
125 Broad Street, New York, NY 10004
SUB-TRANSFER AGENT
PFPC
4400 Computer Drive
West Boro, MA 01581
SUB-TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
Deloitte & Touche LLP
200 Berkeley Street, Boston, MA 02116
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
<PAGE>
This report is prepared for the information of shareholders of CitiFunds U.S.
Treasury Reserves. It is authorized for distribution to prospective investors
only when preceded or accompanied by an effective prospectus of CitiFunds U.S.
Treasury Reserves.
(C) 2000 Citicorp [RECYCLE LOGO] Printed on recycled paper CFA/RUS/800
