CITIFUNDS(SM)
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TAX FREE RESERVES
SEMI-ANNUAL REPORT
FEBRUARY 29, 2000
CITIFUNDS
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INVESTMENT PRODUCTS: NOT FDIC INSURED o NO BANK GUARANTEE o MAY LOSE VALUE
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<PAGE>
TABLE OF CONTENTS
Letter to Our Shareholders 1
................................................................................
Portfolio Environment and Outlook 2
................................................................................
Fund Facts 3
................................................................................
Fund Performance 4
................................................................................
CITIFUNDS TAX FREE 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
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TAX FREE RESERVES PORTFOLIO
Portfolio of Investments 12
................................................................................
Statement of Assets and Liabilities 20
................................................................................
Statement of Operations 20
................................................................................
Statement of Changes in Net Assets 21
Financial Highlights 21
................................................................................
Notes to Financial Statements 22
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<PAGE>
LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
Rising interest rates during the reporting period have benefited tax-exempt
money market investors, who earned higher yields while preserving capital. The
Federal Reserve Board (the "Fed") raised interest rates three times in 1999 and
most recently on February 2, 2000 for a total increase of 100 basis points. (A
basis point is .01% or one one-hundredth of a percent.) The Fed's actions were
implemented to forestall a reacceleration of inflation, a potential consequence
of the continued robust growth of the U.S. economy.
In this environment, the CitiFunds' investment adviser, Citibank, N.A.,
continued to manage CitiFunds Tax Free Reserves with the goal of achieving its
investment objective: providing high levels of current income that are exempt
from federal income taxes, preservation of capital and liquidity.
This report reviews the Fund's investment activities and performance during
the six months ended February 29, 2000, and provides a summary of Citibank's
perspective on and outlook for the tax-exempt money market securities
marketplace.
Thank you for your continued confidence and participation.
Sincerely,
/s/ Philip W. Coolidge
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Philip W. Coolidge
President
March 15, 2000
1
<PAGE>
PORTFOLIO ENVIRONMENT AND OUTLOOK
THE PAST SIX MONTHS HAVE BEEN GENERALLY REWARDING FOR MANY MONEY MARKET
INVESTORS. Yields on tax-exempt money market securities ended the six-month
reporting period higher than where they began, reflecting the general trend of
short-term interest rates in a period of rising interest rates.
The economic conditions that led to higher rates during the reporting period
included strong U.S. economic growth, low inflation, robust consumer spending
and rising demand for U.S. exports. As a result of these factors, many investors
became concerned that unsustainable economic growth might cause inflationary
pressures to resurface. In an attempt to forestall a potential reacceleration of
inflation, the Fed raised interest rates in three 25-basis point increments
during 1999 and raised them an additional 25 basis points on February 2, 2000.
DESPITE THE POSITIVE EFFECTS OF HIGHER INTEREST RATES, HOWEVER, THE
TAX-EXEMPT MONEY MARKET'S RETURNS WERE CONSTRAINED BY ADVERSE CHANGES IN THE
BALANCE BETWEEN SUPPLY AND DEMAND. Issuance of short-term municipal securities
generally fell during the reporting period because the strong U.S. economy
enabled many states and municipalities to improve their fiscal operations,
reducing their need to borrow in order to cover short-term deficits. At the same
time, demand rose from individuals seeking competitive tax-exempt yields.
Because of this imbalance between supply and demand, tax-exempt money market
yields tended to rise less than the yields of taxable money market instruments.
THE FUND'S MANAGERS' STRATEGY DURING THE SIX-MONTH PERIOD WAS TO MAINTAIN A
RELATIVELY SHORT AVERAGE MATURITY, which was designed to enhance liquidity and
keep assets available for higher yielding securities as they became available.
As of February 29, 2000, the Fund's average maturity was 33 days. (Maturity is
the date on which the principal amount of a note, draft, acceptance bond or
other debt instrument becomes due and payable.)
IN ADDITION, THE MANAGERS ACTIVELY MANAGED THE MIX OF MONEY MARKET
INSTRUMENTS WITHIN THE FUND'S PORTFOLIO DURING THE REPORTING PERIOD. A relative
shortage of municipal notes made it more difficult to find high-yielding
opportunities in high-quality, highly liquid instruments. Instead, opportunities
were located primarily in Variable Rate Demand Notes (VRDNs), which are
short-term instruments that are securitized and issued by investment banks..
At the end of 1999, daily and weekly VRDNs comprised about 69% of the Fund's
portfolio. This highly liquid asset mix was designed to protect the Fund from
potential Y2K-related problems that have not surfaced. By the end of the
reporting period, VRDNs comprised approximately 67% of the Fund's portfolio,
with the remainder allocated among municipal notes and tax-exempt commercial
paper.
Looking forward, the Fund's managers expect interest rates to remain near or
slightly above current levels if the Fed continues to move toward a more
restrictive monetary policy. However, THE MANAGERS BELIEVE THAT OVER THE LONGER
TERM, INTEREST RATES MAY BEGIN TO DECLINE IF THE ECONOMY BEGINS TO SHOW EVIDENCE
THAT IT IS MODERATING. Accordingly, the managers are carefully looking for
opportunities to take advantage of changes in interest rates, including possibly
extending the Fund's average maturity to lock in higher yields in the near term.
2
<PAGE>
FUND FACTS
FUND OBJECTIVE
Provide high levels of current income which is exempt from Federal income
taxes*, preservation of capital and liquidity.
INVESTMENT ADVISER DIVIDENDS
TAX FREE RESERVES PORTFOLIO Declared daily, paid monthly
Citibank, N.A.
COMMENCEMENT OF OPERATIONS CAPITAL GAINS
August 31, 1984 Distributed annually, if any
NET ASSETS AS OF 2/29/00 BENCHMARKS**
$533.4 million o Lipper Tax Exempt Money Market
Funds Average
o IBC Financial Data General Tax Free
Money Market Funds Average
* A portion of the income may be subject to the Federal Alternative Minimum Tax
(AMT). Consult your personal tax adviser.
** The Lipper Funds Average and IBC Funds Average reflect the performance
(excluding sales charges) of mutual funds with similar objectives.
3
<PAGE>
FUND PERFORMANCE
TOTAL RETURNS
ALL PERIODS ENDED FEBRUARY 29, 2000 SIX ONE FIVE TEN
(Unaudited) MONTHS** YEAR YEARS* YEARS*
================================================================================
CitiFunds Tax Free Reserves 1.48% 2.81% 3.00% 3.13%
Lipper Tax Exempt Money Market Funds Average 1.45% 2.77% 3.00% 3.11%
IBC Financial Data General
Tax Free Money Market Funds Average 1.48% 2.81% 3.02% 3.14%
* Average Annual Total Return
** Not Annualized
7-DAY YIELDS
Annualized Current 3.23%
Effective 3.28%
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 TAX FREE RESERVES VS.
IBC FINANCIAL DATA GENERAL TAX FREE MONEY MARKET FUNDS AVERAGE
As illustrated, CitiFunds Tax Free Reserves generally provided a similar
annualized seven-day yield to that of a comparable IBC Financial Data Money
Market Funds Average, as published in IBC Money Fund Report(TM), for tHE
one-year period.
[The figures below represent the chart in the printed piece]
CitiFunds Inst IBC Financial S&P
3/2/99 0.0244 0.0242
3/9/99 0.0232 0.0229
3/16/99 0.0246 0.0244
3/23/99 0.0251 0.0247
3/30/99 0.0249 0.0245
4/6/99 0.0243 0.0243
4/13/99 0.0232 0.0225
4/20/99 0.0251 0.0251
4/27/99 0.0271 0.0274
5/4/99 0.0291 0.0299
5/11/99 0.0286 0.0289
5/18/99 0.0277 0.0281
5/25/99 0.0267 0.027
6/1/99 0.0263 0.0266
6/8/99 0.0249 0.0248
6/15/99 0.0256 0.0255
6/22/99 0.0267 0.0267
6/29/99 0.0282 0.0291
7/6/99 0.0276 0.0276
7/13/99 0.0239 0.0234
7/20/99 0.0244 0.0244
7/27/99 0.0256 0.0255
8/3/99 0.0255 0.0256
8/10/99 0.0247 0.0247
8/17/99 0.0256 0.0259
8/24/99 0.0261 0.026
8/31/99 0.0265 0.0265
9/7/99 0.026 0.0262
9/14/99 0.0262 0.0264
9/21/99 0.0281 0.0282
9/28/99 0.0303 0.0301
10/5/99 0.0302 0.03
10/12/99 0.0275 0.0275
10/19/99 0.0278 0.0278
10/26/99 0.0278 0.028
11/2/99 0.0284 0.0286
11/9/99 0.0282 0.0281
11/16/99 0.0297 0.0296
11/23/99 0.0307 0.0308
11/30/99 0.0313 0.0315
12/7/99 0.0295 0.0296
12/14/99 0.0277 0.0282
12/21/99 0.0311 0.0309
12/28/99 0.0367 0.0357
1/4/00 0.0409 0.0397
1/11/00 0.0285 0.0288
1/18/00 0.0261 0.0266
1/25/00 0.0271 0.0273
2/1/00 0.028 0.028
2/8/00 0.027 0.0268
2/15/00 0.0296 0.0293
2/22/00 0.0317 0.031
2/29/00 0.0323 0.0319
Note: 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 TAX FREE RESERVES
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 2000 (Unaudited)
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ASSETS:
Investment in Tax Free Reserves Portfolio, at value (Note 1) $534,713,766
Receivable for shares of beneficial interest sold 70,155
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Total assets 534,783,921
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LIABILITIES:
Dividends payable 1,051,947
Payable to affiliate-Shareholder servicing agents' fees (Note 3B) 102,972
Payable for shares of beneficial interest repurchased 62,316
Accrued expenses and other liabilities 126,362
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Total liabilities 1,343,597
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NET ASSETS for 533,450,633 shares of beneficial interest
outstanding $533,440,324
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NET ASSETS CONSIST OF:
Paid-in capital $533,450,633
Accumulated net realized loss on investments (10,309)
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Total $533,440,324
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NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PRICE PER SHARE $1.00
================================================================================
See notes to financial statements
5
<PAGE>
CITIFUNDS TAX FREE RESERVES
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2000 (Unaudited)
================================================================================
INTEREST INCOME (Note 1A):
Income from Tax Free Reserves Portfolio $8,908,011
Allocated expenses from Tax Free Reserves Portfolio (370,188)
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$8,537,823
EXPENSES
Shareholder Servicing Agents' fees (Note 3B) 615,900
Administrative fees (Note 3A) 615,900
Distribution fees (Note 4) 246,360
Shareholder reports 16,358
Legal fees 16,051
Registration 12,054
Audit fees 11,142
Custody and fund accounting fees 9,832
Transfer agent fees 7,000
Trustees' fees 5,067
Miscellaneous 5,435
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Total expenses 1,561,099
Less aggregate amounts waived by Administrator and
Distributor (Notes 3A and 4) (330,423)
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Net expenses 1,230,676
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Net investment income 7,307,147
NET REALIZED LOSS ON INVESTMENTS FROM TAX FREE RESERVES PORTFOLIO (7,919)
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $7,299,228
================================================================================
See notes to financial statements
6
<PAGE>
CITIFUNDS TAX FREE RESERVES
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
FEBRUARY 29, 2000 YEAR ENDED
(Unaudited) AUGUST 31, 1999
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 7,307,147 $ 13,543,126
Net realized gain (loss) on investments (7,919) 11,496
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Net increase in net assets from operations 7,299,228 13,554,622
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DIVIDENDS TO SHAREHOLDERS FROM:
Net investment income (7,307,147) (13,543,126
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TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST AT
NET ASSET VALUE OF $1.00 PER SHARE (NOTE 5):
Proceeds from sale of shares 388,628,051 771,192,000
Net asset value of shares issued to shareholders
from reinvestment of dividends 1,101,632 2,080,452
Cost of shares repurchased (346,161,906) (798,174,036)
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Net increase (decrease) in net assets from
transactionsin shares of beneficial interest 43,567,777 (24,901,584)
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NET INCREASE (DECREASE) IN NET ASSETS 43,559,858 (24,890,088)
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NET ASSETS:
Beginning of period 489,880,466 514,770,554
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End of period $533,440,324 $489,880,466
================================================================================
See notes to financial statements
7
<PAGE>
CITIFUNDS TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 29, 2000 -----------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
==================================================================================================
<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 0.01476 0.02626 0.03042 0.03004 0.02973 0.03197
Less dividends from net
investment income (0.01476) (0.02626) (0.03042) (0.03004) (0.02973) (0.03197)
- --------------------------------------------------------------------------------------------------
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) $533,440 $489,880 $514,771 $422,483 $371,349 $392,172
Ratio of expenses to average
net assets+ 0.65%* 0.65% 0.65% 0.65% 0.65% 0.65%
Ratio of net investment income
to average net assets+ 2.97%* 2.62% 3.04% 3.01% 2.97% 3.22%
Total return 1.48%** 2.66% 3.08% 3.05% 3.01% 3.24%
Note: If agents of the Fund and agents of Tax Free 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 $0.01342 $0.02365 $0.02782 $0.02715 $0.02693 $0.02929
Ratios:
Expenses to average net assets+ 0.92%* 0.91% 0.92% 0.94% 0.93% 0.92%
Net investment income to
average net assets+ 2.70%* 2.36% 2.77% 2.72% 2.69% 2.95%
==================================================================================================
</TABLE>
+ Includes the Fund's share of Tax Free Reserves Portfolio's allocated
expenses.
* Annualized.
** Not Annualized.
See notes to financial statements
8
<PAGE>
CITIFUNDS TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES CitiFunds Tax Free Reserves (the "Fund") is
organized as a Massachusetts business trust and is registered under the
Investment Company Act of 1940, as amended, as a non-diversified, open-end,
management investment company. The Fund invests all of its investable assets in
Tax Free 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 (approximately 80.1%
at February 29, 2000) in the net assets of the Portfolio. CFBDS, Inc. ("CFBDS")
acts as the Fund's Administrator and Distributor. Citibank also serves as
Sub-Administrator and makes Fund shares available to customers as Shareholder
Servicing Agent. Citibank is a wholly-owned subsidiary of Citigroup Inc.
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 net investment income. Accordingly, no
provision for federal income or excise tax is necessary. At August 31, 1999, the
Fund, for federal income tax purposes, had a capital loss carryover of $2,390,
all of which will expire on August 31, 2005. Such capital loss carryover will
reduce the Fund's taxable income arising from future net realized gain on
investment transactions, if any, to the extent permitted by the Internal Revenue
Code, and thus will reduce the amount of distributions to shareholders which
would otherwise be necessary to relieve the Fund of any liability for federal
income tax. Dividends paid by the Fund from net interest received on tax-exempt
money market instruments are not includeable by shareholders as gross income for
federal income tax purposes because the Fund intends to meet certain
requirements of the Internal Revenue Code applicable to regulated investment
companies which will enable the Fund to pay exempt-interest dividends. The
portion of such interest, if any, earned on private activity bonds issued after
August 7, 1986, may be considered a tax preference item to shareholders.
C. Expenses The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and CFBDS.
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
9
<PAGE>
CITIFUNDS TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
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 Fund has adopted an Administrative Services
Plan which provides that the Fund may obtain the services of an Administrator,
one or more Shareholder Servicing Agents, and other Servicing Agents, and may
enter into agreements providing for the payment of fees for such services. Under
the Fund'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 0.60% 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 29, 2000, management
agreed to voluntarily limit Fund expenses to 0.65%.
A. Administrative Fees Under the terms of an Administrative Services
Agreement, CFBDS is entitled to an administrative fee, as compensation for
overall administrative services and general office facilities, which is computed
at the annual rate of 0.25% of the Fund's average daily net assets.
Administrative fees amounted to $615,900, of which $220,338 was voluntarily
waived for the six months ended February 29, 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 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 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 a fee 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 by investors for whom such Shareholder Servicing Agent
maintains a servicing relationship. Shareholder Servicing Agent fees amounted to
$615,900 for the six months ended February 29, 2000.
4. DISTRIBUTION FEE The Fund has adopted a Plan of Distribution pursuant to Rule
12b-1 under the Investment Company Act of 1940, as amended, in which the Fund
compensates the Distributor at an annual rate not to exceed 0.10% of the Fund's
average daily net assets. 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.
No payments of such additional fees have been made during the period.
Distribution fees amounted to $246,360, of which $110,085 was voluntarily waived
for the six months ended February 29, 2000.
10
<PAGE>
CITIFUNDS TAX FREE RESERVES
NOTES TO FINANCIAL STATEMENTS (Unaudited)
5. SHARE 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 $735,687,303 and $700,542,539 respectively, for the six
months ended February 29, 2000.
11
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS February 29, 2000
(Unaudited)
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
TAX-EXEMPT COMMERCIAL PAPER -- 3.9%
- --------------------------------------------------------------------------------
Minnesota Water Pollution Control Revenue,
4.50% due 3/01/00 $1,000 $1,000,000
Phenix City, Alabama, Environmental Revenue, AMT,
3.80% due 4/06/00 7,000 7,000,000
Seattle, Washington,
4.50% due 3/01/00 1,500 1,500,000
Sullivan Pollution Control Revenue, Indiana,
3.80% due 4/13/00 5,000 5,000,000
Sunshine State, Florida, Government Finance,
3.75% due 3/07/00 4,000 4,000,000
Sunshine State, Florida, Government Finance,
3.50% due 3/08/00 7,465 7,465,000
--------------
25,965,000
--------------
GENERAL OBLIGATION BONDS
AND NOTES -- 3.5%
- --------------------------------------------------------------------------------
Baltimore County, Maryland,
3.09% due 4/01/00 2,380 2,433,824
Delaware State,
6.13% due 4/01/00 1,465 1,468,716
Georgia State,
4.38% due 7/01/00 3,190 3,193,754
Houston, Texas,
3.50% due 3/09/00 5,000 5,000,000
Ohio State Building Authority,
4.50% due 5/15/00 1,000 1,002,596
South Carolina State,
5.75% due 3/01/01 1,000 1,015,713
Virginia State,
5.00% due 6/01/00 2,000 2,006,477
Washington State,
5.00% due 1/01/01 6,315 6,386,601
Wisconsin State,
5.00% due 5/01/00 250 250,670
Wisconsin State,
5.75% due 5/01/00 600 602,364
--------------
23,360,715
--------------
ANNUAL AND SEMI-ANNUAL TENDER REVENUE
BONDS AND NOTES (PUTS) -- 22.9%
- --------------------------------------------------------------------------------
Aiken County, South Carolina, School District,
5.00% due 4/01/00 1,900 1,902,821
Anderson County, South Carolina, School District,
6.00% due 5/01/00 355 356,558
Anchorage, Alaska, Telephone Utility Revenue,
4.25% due 12/01/00 2,000 2,005,081
Arizona Educational Loan Marketing,
6.70% due 3/01/00 1,000 1,000,000
Arizona Educational Loan Marketing,
6.90% due 3/01/00 500 500,000
Austin, Texas, Utility System Revenue,
10.75% due 5/15/00 2,250 2,283,963
Baltimore, Maryland, Water Utility Revenue,
6.50% due 7/01/00 5,000 5,039,201
Camden County, Georgia, School District,
4.75% due 4/01/00 1,000 1,001,255
Charlotte, North Carolina,
4.90% due 6/01/00 975 978,942
Chicago, Illinois,
4.00% due 10/26/00 1,000 1,000,000
Clark County, Kentucky, Pollution Control Revenue,
3.70% due 4/15/00 2,110 2,110,000
Clark County, Nevada,
5.10% due 7/01/00 1,000 1,003,248
Clark County, Nevada, School District,
5.50% due 6/15/00 2,000 2,013,000
Cobb County, Georgia, School District,
4.38% due 12/29/00 5,000 5,016,271
Collin County, Texas,
4.15% due 3/01/00 2,725 2,725,000
Custer County, Indiana, Pollution Control Revenue,
3.70% due 4/01/00 4,000 4,000,000
Everett, Massachusetts,
6.00% due 12/15/00 1,130 1,145,825
Grand Prairie, Texas,
6.90% due 2/15/01 355 363,225
Illinois State Development Finance
Authority Revenue,
3.75% due 3/08/00 5,000 5,000,000
Illinois State Sales Tax Revenue,
5.75% due 6/15/00 125 125,808
Indianapolis, Indiana,
4.50% due 7/10/00 2,600 2,605,463
12
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS February 29, 2000
(Unaudited)
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
Jefferson County, Kentucky, Capital Projections,
5.40% due 4/01/00 $ 670 $ 671,160
Jefferson Parish, Louisiana, Home Mortgage
Authority Revenue,
3.65% due 6/01/00 2,000 2,000,000
Jordan, Utah, School District,
5.00% due 6/15/00 3,130 3,141,234
Kentucky State Turnpike Authority
Economical Development,
7.25% due 5/15/00 145 148,290
Knoxville, Tennesee,
5.00% due 5/01/00 1,000 1,002,845
Lancaster, Pennsylvania, School District,
4.00% due 5/15/00 1,300 1,301,736
Madison, Wisconsin,
4.00% due 5/01/00 2,050 2,052,493
Maricopa County, Arizona, School District,
6.00% due 7/01/00 1,600 1,609,953
Mercer County, North Dakota, Solid Waste
Disposal Authority, AMT,
3.95% due 6/01/00 3,400 3,400,000
Michigan State Strategic Limited Obligation,
9.40% due 5/15/00 10,500 10,821,923
Milwaukee, Wisconsin, Metropolitan Sewer District,
4.25% due 10/01/00 1,510 1,511,234
Murray County, Utah, Hospital Revenue,
4.50% due 5/15/00 500 501,149
New Hampshire State,
4.50% due 10/01/00 2,000 2,005,070
New Mexico State Severance Tax,
5.00% due 7/01/00 110 110,249
North Carolina State,
4.50% due 4/01/00 3,000 3,003,625
Ohio Housing Finance Agency Mortgage Revenue, AMT,
4.05% due 9/01/00 3,000 3,000,000
Oklahoma State Water Resource Board State
Loan Revenue,
3.60% due 3/01/00 9,005 9,005,000
Oklahoma State Water Resource Board State
Loan Revenue,
3.60% due 9/01/00 8,500 8,500,000
Oregon State Housing and Community Services
Development, AMT,
3.20% due 4/13/00 2,810 2,810,000
<PAGE>
Panhandle Plains, Texas, Higher Education Loan,
4.80% due 9/01/00 845 845,000
Phoenix, Arizona,
5.90% due 7/01/00 3,830 3,853,264
Rhode Island State, Health and Educational Revenue,
8.38% due 4/01/00 1,000 1,024,213
San Antonio, Texas, Water Revenue,
5.90% due 5/15/00 1,300 1,306,754
Stevens Point, Wisconsin,
3.50% due 5/01/00 300 300,097
Tallahassee, Florida, Municipal Electric Revenue,
10.10% due 4/01/00 4,150 4,296,454
Tennesee State School Board Authority,
5.00% due 5/01/00 1,700 1,704,044
Texas State,
7.13% due 4/01/00 1,000 1,022,827
Vermont Housing Finance Agency, AMT,
3.15% due 4/28/00 4,255 4,255,000
Virginia State,
6.00% due 7/01/00 3,000 3,021,893
Washington State,
6.10% due 6/01/00 750 755,225
Washington State,
5.00% due 7/01/00 2,250 2,255,768
Washington State Public Power Supply,
7.75% due 7/01/00 3,130 3,230,889
Washington State Single Family Mortgage,
5.00% due 3/01/00 16,615 16,615,000
York County, South Carolina,
Pollution Control Revenue,
3.30% due 3/15/00 10,000 10,000,000
--------------
153,258,050
--------------
REVENUE, TAX, BOND AND TAX
REVENUE ANTICIPATION NOTES -- 3.1%
- --------------------------------------------------------------------------------
Arapahoe County, Colorado, TAN's,
4.25% due 6/30/00 3,000 3,005,122
13
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) February 29, 2000
(Unaudited)
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
De Kalb County, Georgia, TAN's,
4.25% due 12/28/00 $10,000 $10,021,458
West Jordan, Utah, TRAN's,
4.00% due 6/30/00 7,350 7,364,083
--------------
20,390,663
--------------
VARIABLE RATE DEMAND NOTES* -- 67.1%
- --------------------------------------------------------------------------------
ABN-Amro Munitops Certificates Trust,
due 4/05/06 5,000 5,000,000
ABN-Amro Munitops Certificates Trust, AMT,
due 7/05/06 9,000 9,000,000
Adams County, Colorado, Industrial
Development Revenue,
due 12/01/15 2,000 2,000,000
Alabama State Public School & College,
due 11/01/13 1,595 1,595,000
Alaska State Housing Finance Corp., AMT,
due 6/01/07 5,795 5,795,000
Alexandria, Virginia, Industrial
Development Authority,
due 7/01/26 1,200 1,200,000
Allegheny County, Pennsylvania, Industrial
Development Authority Revenue,
due 7/01/27 970 970,000
Arapahoe County, Colorado, Revenue Authority,
due 7/01/07 1,775 1,775,000
Ascension, Louisiana, Revenue, AMT,
due 12/01/27 2,000 2,000,000
Ashe County, North Carolina, Industrial
Facilities and Pollution,
due 7/01/10 2,100 2,100,000
Atlanta, Metropolitan Rapid Transit Tax,
due 7/01/20 5,000 5,000,000
Beloit, Kansas, Industrial Development
Authority, AMT,
due 12/01/16 1,100 1,100,000
Beaver County, Pennsylvania, Pollution
Control Revenue,
due 12/01/20 1,500 1,500,000
Bexar County, Texas, Housing Finance Authority,
due 9/15/26 1,900 1,900,000
Brazos River, Texas, Utility Authority,
due 4/01/30 300 300,000
Brooks County, Georgia, Development
Authority Revenue,
due 3/01/18 2,000 2,000,000
Carrollton, Georgia, Payroll Development Authority,
due 3/01/15 1,650 1,650,000
Carthage, Missouri, Industrial Development
Authority Revenue,
due 4/01/07 2,000 2,000,000
Carthage, Missouri, Industrial Development
Authority Revenue, AMT,
due 9/01/30 2,000 2,000,000
Castle Pines, Colorado, North
Metropolitan District,
due 12/01/28 5,195 5,195,000
Cherokee County, South Carolina, Industrial
Revenue, AMT,
due 8/01/19 200 200,000
Chesterfield County, Virginia, Industrial
Development,
due 2/01/03 1,400 1,400,000
Chicago, Illinois, Board of Education,
due 6/01/21 3,000 3,000,000
Chicago, Illinois, O'Hare International
Airport Revenue,
due 7/01/10 500 500,000
Chicago, Illinois, Public Building
Community Revenue,
due 12/01/17 5,000 5,000,000
Clarksville, Tennessee, Public Building Authority,
due 10/01/25 765 765,000
Clarksville, Tennessee, Public Building Authority,
due 6/01/29 1,700 1,700,000
Clipper Tax Exempt Trust, AMT,
due 3/01/15 765 765,000
Clipper Tax Exempt Trust, AMT,
due 3/01/16 7,120 7,120,000
14
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS February 29, 2000
(Unaudited)
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
Coastal Bend, Texas, Health
Facilities Development,
due 8/15/28 $1,000 $1,000,000
Cohasset, Minnesota, Revenue,
due 6/01/20 1,200 1,200,000
Colorado Health Facilities Authority Revenue,
due 6/01/21 9,935 9,935,000
Colorado Springs Utility Revenue,
due 11/15/28 12,500 12,500,000
Columbus, Georgia, Housing Authority Revenue,
due 11/01/17 750 750,000
Connecticut State,
due 5/15/14 1,200 1,200,000
Connecticut State, Health & Educational Facilities,
due 7/01/27 1,500 1,500,000
Connecticut State, Housing Finance Authority,
due 5/15/18 3,645 3,645,000
Davidson County, North Carolina, Industrial
Facilities,
due 7/01/20 2,140 2,140,000
De Kalb County, Georgia, Industrial
Development Revenue,
due 8/01/01 1,500 1,500,000
De Kalb County, Georgia, Industrial
Development Revenue,
due 2/01/18 1,100 1,100,000
De Kalb County, Georgia, Multifamily
Housing Revenue,
due 6/15/25 2,400 2,400,000
Denver, Colorado, City and County Airport Revenue,
due 12/01/20 2,000 2,000,000
Detroit, Michigan, Economic Development Corp. ,
due 5/01/09 3,000 3,000,000
Director State, Nevada,
Department of Business, AMT,
due 8/01/20 865 865,000
District of Columbia, Revenue,
due 10/01/15 500 500,000
East Baton Rouge, Louisiana, Pollution
Control Revenue,
due 6/01/11 1,400 1,400,000
Emmaus, Pennsylvannia, General Authority Revenue,
due 3/01/24 4,100 4,100,000
Facilities Municipal Trust,
due 12/15/14 8,315 8,315,000
Fayetteville, Arkansas, Industrial
Development , AMT,
due 12/01/04 1,100 1,100,000
Fayetteville, Arkansas, Public Facilities Board,
due 9/01/27 3,000 3,000,000
Floyd County, Georgia, Development Authority,
due 9/01/26 1,080 1,080,000
Forsyth County, Georgia, Industrial
Development Revenue,
due 1/01/07 2,000 2,000,000
Fort Wayne Indiana, Hospital Authority Revenue,
due 1/01/16 3,000 3,000,000
Fulton County, Georgia, Development
Authority Revenue,
due 12/01/12 2,000 2,000,000
Fulton County, Georgia, Development
Authority Revenue,
due 2/01/18 2,000 2,000,000
Fulton County, Georgia, Industrial
Development Authority, AMT,
due 6/01/27 3,900 3,900,000
Gila County, Arizona, Industrial
Development Authority,
due 11/01/25 1,655 1,655,000
Gordon County, Georgia, Industrial
Development Authority Revenue,
due 8/01/17 1,000 1,000,000
Gulf Breeze, Florida, Revenue,
due 3/31/21 1,485 1,485,000
Gwinett County, Georgia, Industrial
Development Revenue,
due 3/01/17 385 385,000
Harris County, Texas,
due 8/01/15 2,800 2,800,000
15
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) February 29, 2000
(Unaudited)
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
Harris County, Texas, Industrial
Development Corp., AMT,
due 2/01/23 $2,800 $2,800,000
Hawkins County, Tennessee, Industrial
Development Board,
due 10/01/27 1,450 1,450,000
Hays, Texas, Mental Health Development Facilities,
due 11/15/14 1,000 1,000,000
Heard County, Georgia, Pollution
Development Revenue,
due 9/01/26 1,800 1,800,000
Henderson, Nevada, Health Care Facilities Revenue,
due 7/01/20 700 700,000
Henrico County, Virginia, Industrial
Development Authority,
due 8/01/23 180 180,000
Illinois Educational Facilities Authority Revenue,
due 12/01/25 700 700,000
Illinois Health Facilities Authority Revenue,
due 11/01/20 1,675 1,675,000
Illinois Health Facilities Authority Revenue,
due 12/01/15 3,300 3,300,000
Jackson County, Mississippi, Industrial
Development Revenue,
due 12/01/15 2,650 2,650,000
Jackson County, Mississippi,
Pollution Control Revenue,
due 12/01/16 1,500 1,500,000
Jacksonville, Florida, Health Facilities Revenue,
due 12/01/23 1,400 1,400,000
Jefferson Parish, Louisiana, Home Mortgage,
due 12/01/26 1,690 1,690,000
Kansas City, Missouri, Industrial
Development Authority,
due 4/01/27 2,400 2,400,000
Kansas State Finance Authority Revenue,
due 11/15/28 1,000 1,000,000
Kenton County, Kentucky, Board Revenue, AMT,
due 3/01/15 1,800 1,800,000
Knox County, Tennessee, Health Educational
Hospital Facilities,
due 12/01/27 8,000 8,000,000
Knox County, Tennessee, Industrial Development
Board Revenue, AMT,
due 10/01/00 500 500,000
Koch Certificates of Trust,
due 12/13/02 5,000 5,000,000
Koch Certificates of Trust,
due 10/06/03 11,000 11,000,000
Lone Star Texas Authority,
due 12/01/14 400 400,000
Long Island Power Authority,
due 4/01/25 4,200 4,200,000
Long Island Power Authority,
due 5/01/33 1,500 1,500,000
Louisa County, Virginia, Industrial
Development Authority,
due 1/01/20 680 680,000
Macon Trust Pooled Receipts,
due 3/03/07 24,090 24,090,000
Madison, Wisconsin, Community
Development Authority,
due 6/01/22 1,070 1,070,000
Marshfield, Wisconsin, Industrial
Development Revenue,
due 12/01/14 2,500 2,500,000
Maryland State,
due 8/01/12 2,115 2,115,000
Maryland State Community Development,
due 4/01/25 1,410 1,410,000
Mason County, Kentucky, Pollution Control,
due 10/15/14 2,800 2,800,000
Massachusetts State Industrial Finance Agency,
due 11/01/25 2,000 2,000,000
Massachusetts State Water Pollution
Control Revenue,
due 8/01/23 3,600 3,600,000
Mecklenburg County, North Carolina,
Industrial Facilities,
due 9/01/14 2,000 2,000,000
16
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS February 29, 2000
(Unaudited)
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
Metropolitan Pier & Exposition
Authority, Illinois,
due 12/15/19 $1,330 $1,330,000
Metropolitan Pier & Exposition
Authority, Illinois,
due 6/15/21 165 165,000
Metropolitan Pier & Exposition
Authority, Illinois,
due 6/15/28 5,125 5,125,000
Nashville, Tennessee Metropolitan
Government, Industrial,
due 12/01/18 1,000 1,000,000
Minneapolis St. Paul,
due 8/15/25 700 700,000
Missouri State Health and Educational
Facilities Revenue,
due 7/01/18 3,700 3,700,000
Missouri State Health and Educational
Facilities Revenue,
due 6/01/26 1,100 1,100,000
Missouri State Housing and Development
Common Mortgage,
due 3/01/30 4,000 4,000,000
Mobile, Alabama, Airport Authority Revenue,
due 10/01/02 2,000 2,000,000
Mobile, Alabama, Airport Authority Revenue,
due 10/01/14 9,975 9,975,000
Moorhead, Minnesota, Solid Waste
Disposal, AMT,
due 4/01/12 3,000 3,000,000
Montgomery County, Tennessee, Public
Building Authority,
due 9/01/29 1,400 1,400,000
Multi-State Municipal Securities
Trust Certificates,
due 3/01/01 9,140 9,140,000
Multi-State Municipal Securities
Trust Certificates,
due 12/01/03 8,380 8,380,000
Multi-State Municipal Securities
Trust Certificates,
due 2/25/07 5,000 5,000,000
Nash County, North Carolina,
due 12/01/14 1,000 1,000,000
New Hampshire Higher Educational and Health,
due 6/01/23 1,300 1,300,000
New Hanover County, North Carolina,
due 3/01/14 2,250 2,250,000
New Hanover County, North Carolina,
due 3/01/15 2,250 2,250,000
New Hanover County, North Carolina,
due 3/01/16 2,250 2,250,000
<PAGE>
New York State Housing Finance
Agency Revenue, AMT,
due 11/01/32 2,600 2,600,000
New York State Thruway Authority Revenue,
due 1/01/27 2,105 2,105,000
North Carolina Educational Facilities,
due 9/01/26 200 200,000
Ohio State Air Quality Development Authority,
due 5/01/26 1,755 1,755,000
Oklahoma Finance Authority Revenue,
due 1/01/30 4,000 4,000,000
Orange County, Florida, Industrial
Development Authority,
due 1/01/11 375 375,000
Oregon State Health Educational
Housing Revenue,
due 1/01/31 2,700 2,700,000
Orlando, Florida, Special Assessment Revenue,
due 10/01/21 3,200 3,200,000
Peoria, Illinois, Health Care
Facilities Revenue,
due 5/01/17 1,190 1,190,000
Person County, North Carolina,
Pollution Control Authority,
due 11/01/19 3,000 3,000,000
Piedmont, South Carolina,
Municipal Power Agency,
due 1/01/22 1,000 1,000,000
Piedmont, South Carolina,
Municipal Power Agency,
due 1/01/25 5,189 5,189,000
17
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) February 29, 2000
(Unaudited)
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
Pinal County, Arizona, Pollution Control Revenue,
due 12/01/11 $2,500 $2,500,000
Pitney Bowes Credit Corp. Leasetops,
due 11/13/02 1,355 1,354,576
Pitney Bowes Credit Corp. Leasetops,
due 3/16/05 4,840 4,840,021
Port Arthur, Texas, Navigation District,
due 10/01/24 600 600,000
Puerto Rico Public Finance Corp.,
due 6/01/12 300 300,000
Puerto Rico Commonwealth,
due 7/01/20 1,200 1,200,000
Puttable Floating Option Tax Receipts,
due 10/11/30 595 595,000
Puttable Floating Option Tax Receipts, AMT,
due 12/05/30 6,980 6,980,000
Red Bay, Alabama, Industrial Development
Board Revenue,
due 11/01/10 3,400 3,400,000
Rhode Island Health and Educational Building,
due 12/01/29 1,000 1,000,000
Rhode Island State Industrial Facilities Corp.,
due 5/01/05 1,500 1,500,000
Rhode Island State Industrial Facilities Corp.,
due 11/01/05 3,180 3,180,000
Roswell, Georgia, Multifamily Housing Authority,
due 8/01/27 2,500 2,500,000
Saint Charles Parish, Louisiana, Pollution
Control Revenue,
due 3/01/24 7,500 7,500,000
Savannah, Illinois, Industrial
Development Revenue,
due 6/01/04 600 600,000
Seattle, Washington, Municipal
Lighting & Power Revenue,
due 11/01/18 900 900,000
Seattle, Washington, Municipal
Lighting & Power Revenue,
due 10/01/23 7,000 7,000,000
Sevier County, Tennessee, Public
Building Authority,
due 6/01/17 3,105 3,105,000
Sevier County, Tennessee, Public
Building Authority,
due 6/01/18 10,000 10,000,000
Sevier County, Tennessee, Public
Building Authority,
due 6/01/19 10,000 10,000,000
Southeastern Oklahoma Industrial
Development Authority,
due 6/01/16 3,400 3,400,000
<PAGE>
Syracuse Industrial Economic
Development Revenue,
due 12/01/05 585 585,000
Tarrant County, Texas, Health
Facilities Development,
due 11/15/26 945 945,000
Texas State Department of
Housing and Community,
due 3/01/17 1,995 1,995,000
Tipton, Indiana, Economic Development Revenue,
due 7/01/22 1,025 1,025,000
Traill County, North Dakota,
Industrial Development, AMT,
due 12/01/11 1,000 1,000,000
Traill County, North Dakota,
Industrial Development, AMT,
due 12/11/11 1,000 1,000,000
Utah State Board of Regents,
due 11/01/25 900 900,000
Valdez, Alaska, Marine Terminal Revenue,
due 8/01/25 4,000 4,000,000
Valdez, Alaska, Marine Terminal Revenue,
due 10/01/25 2,000 2,000,000
Valdez, Alaska, Marine Terminal Revenue,
due 12/01/33 800 800,000
Valley, California, Health & Hospital
System Revenue,
due 5/15/25 1,600 1,600,000
Vermont Industrial Development
Authority Revenue, AMT,
due 12/01/11 700 700,000
18
<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) February 29, 2000
(Unaudited)
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
Volusia County, Florida, Health
Facilities Authority,
due 11/01/15 $ 990 $ 990,000
Walton County, Georgia, Industrial
Building Authority,
due 10/01/17 700 700,000
Washington State Health Care
Facilities Revenue,
due 10/01/05 1,600 1,600,000
Washington State Health Care
Facilities Revenue,
due 1/01/23 200 200,000
Washington State Housing Finance Authority,
due 12/01/29 1,775 1,775,000
Watertown, South Dakota,
Industrial Development Revenue,
due 8/01/14 1,195 1,195,000
Winchester, Kentucky,
Industrial Building, AMT,
due 10/01/18 2,400 $ 2,400,000
--------------
448,138,597
--------------
TOTAL INVESTMENTS,
AT AMORTIZED COST 100.5% $671,113,025
OTHER ASSETS,
LESS LIABILITIES (0.5) (3,123,587)
----- --------------
NET ASSETS 100.0% $667,989,438
===== ==============
AMT-Subject to Alternative Minimum Tax
* Variable rate demand notes have a demand feature under which the fund could
tender them back to the issuer on no more than 7 days notice.
See notes to financial statements
19
<PAGE>
TAX FREE RESERVES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 29, 2000 (Unaudited)
================================================================================
ASSETS:
Investments, at amortized cost and value (Note 1A) $671,113,025
Cash 576,629
Interest receivable 5,282,133
- --------------------------------------------------------------------------------
Total assets 676,971,787
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 8,865,675
Payable to affiliate - Investment advisory fees (Note 2A) 101,589
Accrued expenses and other liabilities 15,085
- --------------------------------------------------------------------------------
Total liabilities 8,982,349
- --------------------------------------------------------------------------------
NET ASSETS $667,989,438
================================================================================
REPRESENTED BY:
Capital paid-in for beneficial interests $667,989,438
================================================================================
TAX FREE RESERVES PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 29, 2000 (Unaudited)
================================================================================
INTEREST INCOME (Note 1B): $11,086,865
EXPENSES
Investment Advisory fees (Note 2A) $615,240
Administrative fees (Note 2B) 153,810
Custody and fund accounting fees 87,099
Legal fees 16,051
Audit fees 11,300
Trustees' fees 6,029
Miscellaneous 955
- --------------------------------------------------------------------------------
Total expenses 890,484
Less aggregate amounts waived by Investment Adviser
and Administrator (Notes 2A and 2B) (415,946)
Less fees paid indirectly (Note 1D) (13,203)
- --------------------------------------------------------------------------------
Net expenses 461,335
- --------------------------------------------------------------------------------
Net investment income 10,625,530
NET REALIZED LOSS ON INVESTMENTS (9,853)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $10,615,677
================================================================================
See notes to financial statements
20
<PAGE>
TAX FREE RESERVES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS ENDED
FEBRUARY 29, 2000 YEAR ENDED
(Unaudited) AUGUST 31, 1999
====================================================================================================
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
Net investment income $ 10,625,530 $ 22,768,275
Net realized gain (loss) on investments (9,853) 16,677
- ----------------------------------------------------------------------------------------------------
Increase in net assets from operations 10,615,677 22,784,952
- ----------------------------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 1,188,175,398 3,367,197,193
Value of withdrawals (1,187,921,956) (3,456,720,231)
- ----------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets from capital transactions 253,442 (89,523,038)
- ----------------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS 10,869,119 (66,738,086)
- ----------------------------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 657,120,319 723,858,405
- ----------------------------------------------------------------------------------------------------
End of period $ 667,989,438 $ 657,120,319
====================================================================================================
</TABLE>
TAX FREE RESERVES PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 29, 2000 --------------------------------------------------
(Unaudited) 1999 1998 1997 1996 1995
======================================================================================================
<S> <C> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
(000's omitted) $667,989 $657,120 $723,858 $483,630 $372,171 $394,222
Ratio of expenses to
average net assets 0.15%* 0.15% 0.15% 0.19% 0.30% 0.32%
Ratio of net investment income
to average net assets 3.45%* 3.11% 3.53% 3.46% 3.31% 3.55%
Note: If Agents of the Portfolio had not voluntarily waived a portion of their
fees during the periods indicated and the expenses were not reduced for fees
paid indirectly for the years after August 31, 1995, the ratios would have been
as follows:
RATIOS:
Expenses to average net assets 0.29%* 0.29% 0.29% 0.31% 0.32% 0.32%
Net investment income to average
net assets 3.31%* 2.98% 3.39% 3.35% 3.29% 3.55%
======================================================================================================
</TABLE>
* Annualized
See notes to financial statements
21
<PAGE>
TAX FREE RESERVES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES Tax Free Reserves Portfolio (the "Portfolio")
is registered under the Investment Company Act of 1940, as amended, as a
no-load, nondiversified, 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 generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. 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.
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 FEE AND ADMINISTRATIVE FEE
A. Investment Advisory Fee The investment advisory fee paid to Citibank, as
compensation for overall investment management services, amounted to $615,240,
of which $262,136 was voluntarily waived for the six months ended February 29,
2000. The investment advisory fee is computed at the annual rate of 0.20% of the
Portfolio's average daily net assets.
B. Administrative Fee Under the terms of an Administrative Services
Agreement, the administrative fee payable to the Administrator, as compensation
for overall administrative services and general office facilities, is computed
at the annual rate of 0.05% of the Portfolio's average daily net assets and
amounted to $153,810, all of which was voluntarily waived for the six months
ended February 29, 2000. The Port-
22
<PAGE>
TAX FREE RESERVES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
folio 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, and maturities and sales of money market
instruments, exclusive of securities purchased subject to repurchase agreements,
aggregated $1,251,850,907 and $1,245,096,446, respectively, for the six months
ended February 29, 2000.
4. FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES The cost of investment
securities owned at February 29, 2000, for federal income tax purposes, amounted
to $671,113,025.
5. LINE OF CREDIT The Portfolio, along with other CitiFunds, 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 six months
ended February 29, 2000, the commitment fee allocated to the Portfolio was $814.
Since the line of credit was established, there have been no borrowings.
23
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<PAGE>
TRUSTEES AND OFFICERS
C. Oscar Morong, Jr., Chairman
Philip W. Coolidge*, President
Walter E. Robb, III
E. Kirby Warren
SECRETARY
Linda T. Gibson*
TREASURER
Linwood Downs*
*AFFILIATED PERSON OF ADMINISTRATOR AND DISTRIBUTOR
INVESTMENT ADVISER
(OF TAX FREE 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
200 Barkeley Street, Boston, MA 02116
LEGAL COUNSEL
Bingham Dana LLP 150 Federal Street, Boston, MA 02110
<PAGE>
THE CITIFUNDS FAMILY
LARGE CAP STOCKS
CitiFunds Growth & Income Portfolio
CitiFunds Large Cap Growth Portfolio
SMALL CAP STOCKS
CitiFunds Small Cap Growth Portfolio
CitiFunds Small Cap Value Portfolio
INTERNATIONAL STOCKS
CitiFunds International Growth & Income Portfolio
CitiFunds International Growth Portfolio
GROWTH WITH INCOME
CitiFunds Balanced Portfolio
BONDS
CitiFunds Short-Term U.S. Government Income Portfolio
CitiFunds Intermediate Income Portfolio
CitiFunds National Tax Free Income Portfolio
CitiFunds New York Tax Free Income Portfolio
CitiFunds California Tax Free Income Portfolio
MONEY MARKETS
CitiFunds Cash Reserves
CitiFunds U.S. Treasury Reserves
CitiFunds Tax Free Reserves
CitiFunds New York Tax Free Reserves
CitiFunds California Tax Free Reserves
CitiFunds Connecticut Tax Free Reserves
This report is prepared for the information of shareholders of CitiFunds Tax
Free Reserves. It is authorized for distribution to prospective investors only
when preceded or accompanied by an effective prospectus of CitiFunds Tax Free
Reserves.
For more information about any of the CitiFunds listed above, ask for a
prospectus (except for CitiFunds Tax Free Reserves, which preceded or
accompanies this report) containing more complete information, including all
sales charges (if any), fees and expenses. Please read the prospectus carefully
before you invest or send money.
Although each money market fund seeks to maintain the value of your investment
at $1.00 per share, it is possible to lose money by investing in the funds.
Mutual fund shares are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other government agency.
CitiFunds are made available by CFBDS, Inc. as distributor. For more information
contact your Service Agent or call 1-800-625-4554.
(c)2000 Citicorp [GRAPHIC OMITTED] Printed on recycled paper CFS/RTF/200
