<PAGE>
As filed with the Securities and Exchange Commission on December 23, 1997
File Nos. 33-39538*
811-4052
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 10*
AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 29
LANDMARK FUNDS III
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 617-423-1679
PHILIP W. COOLIDGE, 6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
ROGER P. JOSEPH, BINGHAM DANA LLP, 150 FEDERAL STREET,
BOSTON, MASSACHUSETTS 02110
It is proposed that this filing will become effective on January 2, 1998
pursuant to paragraph (b) of Rule 485.
Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio have executed
this Registration Statement.
- ------------------------------------------------------------------------------
*Pursuant to Rule 429 under the Securities Act of 1933, this Post-Effective
Amendment also serves as Post-Effective Amendment No. 22 to Registrant's
Registration Statement under the Securities Act of 1933 at File No. 2-91556.
<PAGE>
LANDMARK FUNDS III
(LANDMARK CASH RESERVES AND
LANDMARK U.S. TREASURY RESERVES)
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
N-1A
ITEM NO. N-1A ITEM LOCATION
- -------- --------- --------
PART A PROSPECTUS
- ------ ----------
Item 1. Cover Page............................ Cover Page
Item 2. Synopsis.............................. Expense Summary
Item 3. Condensed Financial Information....... Condensed Financial
Information
Item 4. General Description of Registrant..... Investment Information;
General Information; Appendix
Item 5. Management of the Fund................ Management; Expenses
Item 5A. Management's Discussion of Fund
Performance........................... Not Applicable
Item 6. Capital Stock and Other Securities.... General Information; Voting
and Other Rights; Purchases;
Exchanges; Redemptions; Net
Income and Distributions; Tax
Matters
Item 7. Purchase of Securities Being Offered.. Purchases; Exchanges;
Redemptions
Item 8. Redemption or Repurchase.............. Purchases; Exchanges;
Redemptions
Item 9. Pending Legal Proceedings............. Not Applicable
STATEMENT OF
ADDITIONAL
PART B INFORMATION
Item 10. Cover Page............................ Cover Page
Item 11. Table of Contents..................... Cover Page
Item 12. General Information and History....... The Funds
Item 13. Investment Objectives and Policies.... Investment Objectives,
Policies and Restrictions
Item 14. Management of the Fund................ Management
Item 15. Control Persons and Principal Holders
of Securities......................... Management
Item 16. Investment Advisory and Other Services Management
Item 17. Brokerage Allocation and Other
Practices ............................ Portfolio Transactions
Item 18. Capital Stock and Other Securities.... Description of Shares,
Voting Rights and Liabilities
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered.............. Description of Shares,
Voting Rights and
Liabilities; Determination
of Net Asset Value
Item 20. Tax Status............................ Certain Additional Tax
Matters
Item 21. Underwriters.......................... Management
Item 22. Calculation of Performance Data....... Performance Information
Item 23. Financial Statements.................. Independent Accountants and
Financial Statements
<PAGE>
PART C Information required to be included in Part C is set forth under the
- ------ appropriate Item, so numbered, in Part C to this Registration
Statement.
<PAGE>
Prospectus January 2, 1998
CitiFundsSM Cash Reserves
CitiFundsSM U.S. Treasury Reserves
CitiFundsSM Tax Free Reserves
CitiFundsSM California Tax Free Reserves
CitiFundsSM Connecticut Tax Free Reserves
CitiFundsSM New York Tax Free Reserves
This Prospectus describes six money market mutual funds in the CitiFundsSM
family of funds: CitiFundsSM Cash Reserves, CitiFundsSM U.S. Treasury Reserves,
CitiFundsSM Tax Free Reserves, CitiFundsSM California Tax Free Reserves,
CitiFundsSM Connecticut Tax Free Reserves and CitiFundsSM New York Tax Free
Reserves. Each Fund has its own investment objective and policies.
Citibank, N.A. is the investment adviser.
Unlike other mutual funds which directly acquire and manage their own portfolios
of securities, CitiFunds Cash Reserves, CitiFunds U.S. Treasury Reserves and
CitiFunds Tax Free Reserves seek their investment objective by investing all of
their investable assets in a portfolio with the same investment objective and
policies. See "Special Information Concerning Investment Structure" on page 21.
INVESTMENTS IN THE FUNDS ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. EACH FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE; HOWEVER, THERE CAN BE NO ASSURANCE THAT ANY FUND WILL BE ABLE TO DO
SO.
EACH OF CALIFORNIA TAX FREE RESERVES, CONNECTICUT TAX FREE RESERVES AND NEW YORK
TAX FREE RESERVES INVESTS PRIMARILY IN THE MUNICIPAL OBLIGATIONS OF A SINGLE
STATE; AS A RESULT, AN INVESTMENT IN THESE FUNDS MAY BE RISKIER THAN AN
INVESTMENT IN A MORE DIVERSIFIED MONEY MARKET FUND.
This Prospectus concisely sets forth information about the Funds that a
prospective investor should know before investing. Separate Statements of
Additional Information dated January 2, 1998 (and incorporated by reference in
this Prospectus) have been filed with the Securities and Exchange Commission.
Copies of the Statements of Additional Information may be obtained without
charge, and further inquiries about the Funds may be made by contacting the
investor's Shareholder Servicing Agent or by calling 1-800-625-4554.
- ------------------------------------------------------------------------------
REMEMBER THAT SHARES OF THE FUNDS:
o ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY;
o ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
CITIBANK OR ANY OF ITS AFFILIATES;
o ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
TABLE OF CONTENTS
Prospectus Summary 3
..............................................................................
Expense Summary 6
..............................................................................
Condensed Financial Information 8
..............................................................................
Investment Information 14
..............................................................................
Risk Considerations 17
..............................................................................
Valuation of Shares 22
..............................................................................
Purchases 23
..............................................................................
Exchanges 24
..............................................................................
Redemptions 24
..............................................................................
Net Income and Distributions 25
..............................................................................
Management 26
..............................................................................
Tax Matters 30
..............................................................................
Performance Information 32
..............................................................................
General Information 33
..............................................................................
Appendix A -- Permitted Investments and Investment Practices 36
..............................................................................
Appendix B -- Ratings of Municipal Obligations 39
..............................................................................
Appendix C -- Taxable Equivalent Yield Tables 43
..............................................................................
<PAGE>
PROSPECTUS SUMMARY
See the body of the Prospectus for more information on the topics discussed in
this summary.
THE FUNDS: This Prospectus describes six money market mutual funds: CitiFunds
Cash Reserves, CitiFunds U.S. Treasury Reserves, CitiFunds Tax Free Reserves,
CitiFunds California Tax Free Reserves, CitiFunds Connecticut Tax Free Reserves
and CitiFunds New York Tax Free Reserves. Cash Reserves and U.S. Treasury
Reserves are diversified; the other Funds are non-diversified. Each Fund has its
own investment objective and policies. There can be no assurance that any Fund
will achieve its objective.
Each of Cash Reserves, U.S. Treasury Reserves and Tax Free Reserves seeks its
objective by investing its investable assets in a Portfolio having the same
investment objective and policies as that Fund. Because these Funds invest
through their corresponding Portfolios, all references to these Funds include
the Portfolios, unless otherwise noted.
INVESTMENT OBJECTIVES AND POLICIES: CitiFunds Cash Reserves. To provide its
shareholders with liquidity and as high a level of current income as is
consistent with the preservation of capital. Through Cash Reserves Portfolio,
the Fund invests in U.S. dollar-denominated money market obligations with
maturities of 397 days or less issued by U.S. and non-U.S. issuers.
CitiFunds U.S. Treasury Reserves. To provide its shareholders with liquidity
and as high a level of current income from U.S. Government obligations as is
consistent with the preservation of capital. Through U.S. Treasury Reserves
Portfolio, the Fund invests in obligations issued by the U.S. Government with
maturities of 397 days or less.
CitiFunds Tax Free Reserves. To provide its shareholders with high levels of
current income exempt from federal income taxes, preservation of capital and
liquidity. Through Tax Free Reserves Portfolio, the Fund invests primarily in
short-term, high quality fixed rate and variable rate obligations issued by or
on behalf of states and municipal governments or their authorities, agencies,
instrumentalities and political subdivisions and by other qualifying issuers,
the interest on which is exempt from federal income taxes ("Municipal
Obligations").
CitiFunds California Tax Free Reserves. To provide its shareholders with high
levels of current income exempt from both federal and California personal income
taxes, preservation of capital and liquidity. The Fund invests primarily in
short-term, high quality Municipal Obligations, including obligations of the
State of California and its political subdivisions.
CitiFunds Connecticut Tax Free Reserves. To provide its shareholders with high
levels of current income exempt from both federal and Connecticut personal
income taxes, preservation of capital and liquidity. The Fund invests primarily
in short-term, high quality Municipal Obligations, including obligations of the
State of Connecticut and its political subdivisions.
CitiFunds New York Tax Free Reserves. To provide its shareholders with high
levels of current income exempt from federal, New York State and New York City
personal income taxes, preservation of capital and liquidity. The Fund invests
primarily in short-term, high quality Municipal Obligations, including
obligations of the State of New York and its political subdivisions.
INVESTMENT ADVISER AND DISTRIBUTOR: Citibank, N.A. ("Citibank" or the
"Adviser"), a wholly-owned subsidiary of Citicorp, is the investment adviser
of each Fund. Citibank and its affiliates manage more than $88 billion in
assets worldwide. CFBDS, Inc. ("CFBDS" or the "Distributor") is the
distributor of shares of each Fund. See "Management."
PURCHASES AND REDEMPTIONS: Customers may purchase and redeem shares of the
Funds on any day the New York Stock Exchange is open for trading. See
"Purchases" and "Redemptions."
PRICING: Shares of the Funds are purchased and redeemed at net asset value
(normally $1.00 per share) without a sales load or redemption fees. While
there are no sales loads, shares of each Fund are subject to a distribution
fee. See "Purchases" and "Management -- Distribution Arrangements."
EXCHANGES: Shares may be exchanged for shares of certain other mutual funds
managed or advised by Citibank, if such shares are offered for sale in a
shareholder's place of residence. See "Exchanges."
DIVIDENDS: Declared daily and distributed monthly. Shares begin accruing
dividends on the day they are purchased. See "Net Income and Distributions."
REINVESTMENT: Dividends may be received either in cash or in Fund shares at
net asset value, subject to the policies of a shareholder's Shareholder
Servicing Agent. See "Net Income and Distributions."
WHO SHOULD INVEST: Each Fund is designed for investors seeking liquidity,
preservation of capital and current income, and for whom growth of capital is
not a consideration.
Cash Reserves also is designed for investors seeking a convenient means of
accumulating an interest in a professionally managed, diversified portfolio
consisting of short-term U.S. dollar-denominated money market obligations
issued by U.S. and non-U.S. issuers.
U.S. Treasury Reserves also is designed for investors seeking a convenient
means of accumulating an interest in a professionally managed, diversified
portfolio consisting of short-term U.S. Government obligations.
Tax Free Reserves also is designed for investors seeking income exempt from
federal income taxes.
California Tax Free Reserves also is designed for investors seeking income
exempt from federal and California personal income taxes and who are willing to
bear the increased risk of an investment portfolio which is concentrated in
obligations of the State of California and its political subdivisions.
Connecticut Tax Free Reserves also is designed for investors seeking income
exempt from federal and Connecticut personal income taxes and who are willing to
bear the increased risk of an investment portfolio which is concentrated in
obligations of the State of Connecticut and its political subdivisions.
New York Tax Free Reserves also is designed for investors seeking income exempt
from federal and New York State and New York City personal income taxes and who
are willing to bear the increased risk of an investment portfolio which is
concentrated in obligations of the State of New York and its political
subdivisions.
Each of Tax Free Reserves, California Tax Free Reserves, Connecticut Tax Free
Reserves and New York Tax Free Reserves is referred to as a "Tax Free Fund."
See "Investment Information."
RISK FACTORS: There can be no assurance that any Fund will achieve its
investment objective. In addition, while each Fund intends to maintain a stable
net asset value of $1.00 per share, there can be no assurance that any Fund will
be able to do so. Investments in high quality, short-term instruments may, in
many circumstances, result in a lower yield than would be available from
investments with a lower quality or a longer term.
Investors in Cash Reserves should be able to assume the special risks of
investing in non-U.S. securities, which include possible adverse political,
social and economic developments abroad, differing regulations to which non-
U.S. issuers are subject and different characteristics of non-U.S. economies
and markets. In addition, the prices of securities of non-U.S. issuers may be
more volatile than those of comparable U.S. issuers.
Each of the Tax Free Funds is a non-diversified mutual fund, which means that it
is not subject to any statutory restrictions under the Investment Company Act of
1940 limiting the investment of its assets in one or relatively few issuers
(although certain diversification requirements are imposed by the Internal
Revenue Code). Each of these Funds may therefore invest a relatively high
percentage of its assets in the obligations of a limited number of issuers.
Also, each of these Funds may invest 25% or more of its assets in securities of
issuers in similar or related industries or issuers located in the same state.
Under normal circumstances, California Tax Free Reserves invests primarily in
obligations of the State of California and its political subdivisions,
Connecticut Tax Free Reserves invests primarily in obligations of the State of
Connecticut and its political subdivisions and New York Tax Free Reserves
invests primarily in obligations of the State of New York and its political
subdivisions. Each of the Tax Free Funds is more susceptible to any single
economic, political or regulatory occurrence than a more diversified fund.
Certain investment practices also may entail special risks. Prospective
investors should read "Risk Considerations" for more information about risk
factors.
<PAGE>
EXPENSE SUMMARY
The following table summarizes estimated shareholder transaction and annual
operating expenses for each Fund and, for each of Cash Reserves, U.S. Treasury
Reserves and Tax Free Reserves, its corresponding Portfolio.* For more
information on costs and expenses, see "Management" -- page 26 and "General
Information-Expenses" -- page 34.
<TABLE>
<CAPTION>
U.S. CALIFORNIA CONNECTICUT NEW YORK
CASH TREASURY TAX FREE TAX FREE TAX FREE TAX FREE
RESERVES RESERVES RESERVES RESERVES RESERVES RESERVES
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES: None None None None None None
ANNUAL FUND
OPERATING EXPENSES,
AFTER FEE WAIVERS AND
REIMBURSEMENTS (AS A
PERCENTAGE OF AVERAGE
NET ASSETS):
Management Fee (1) 0.07% 0.06% 0.20% 0.16% 0.16% 0.16%
12b-1 Fees (1)(2) 0.08% 0.05% 0.03% 0.09% 0.09% 0.03%
Other Expenses
Administrative
Services Fees (1) 0.25% 0.27% 0.08% 0.03% 0.00% 0.15%
Shareholder Servicing
Agent Fees 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Operating
Expenses 0.05% 0.07% 0.09% 0.12% 0.15% 0.06%
- -----------------------------------------------------------------------------------------------------------------------
Total Fund Operating
Expenses (1) 0.70% 0.70% 0.65% 0.65% 0.65% 0.65%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
*This table is intended to assist investors in understanding the various
costs and expenses that a shareholder of a Fund will bear, either directly
or indirectly. The table shows the fees paid to various service providers
after giving effect to expected voluntary partial fee waivers. There can be
no assurance that the fee waivers and reimbursements reflected in the table
will continue at their present levels.
(1) Absent fee waivers and reimbursements, management fees, 12b-1 fees,
administrative services fees and total fund operating expenses would be as
follows:
Cash Reserves: 0.15%, 0.20%, 0.40%, and 1.05%
U.S. Treasury Reserves: 0.15%, 0.20%, 0.40%, and 1.07%
Tax Free Reserves: 0.20%, 0.20%, 0.30%, and 1.04%
California Tax Free Reserves: 0.20%, 0.20%, 0.25%, and 1.02%
Connecticut Tax Free Reserves: 0.20%, 0.20%, 0.25%, and 1.05%
New York Tax Free Reserves: 0.20%, 0.20%, 0.25%, and 0.96%
(2) Fees under the 12b-1 distribution plans are asset-based sales charges.
Long-term shareholders in a Fund could pay more in sales charges than the
economic equivalent of the maximum front-end sales charges permitted by the
National Association of Securities Dealers, Inc.
EXAMPLE: A shareholder would pay the following expenses on a $1,000
investment, assuming a 5% annual return and redemption at the end of each
period indicated below:
<TABLE>
<CAPTION>
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH RESERVES $ 7 $22 $39 $87
U.S. TREASURY RESERVES $ 7 $22 $39 $87
TAX FREE RESERVES $ 7 $21 $36 $81
CALIFORNIA TAX FREE RESERVES $ 7 $21 $36 $81
CONNECTICUT TAX FREE RESERVES $ 7 $21 $36 $81
NEW YORK TAX FREE RESERVES $ 7 $21 $36 $81
</TABLE>
The Example assumes that all dividends are reinvested, and expenses are based on
each Fund's fiscal year ended August 31, 1997, after waivers and reimbursements.
If waivers and reimbursements were not in place, the amounts in the Example
would be as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Cash Reserves: $11 $34 $58 $130
U.S. Treasury Reserves: $11 $34 $59 $132
Tax Free Reserves: $11 $33 $58 $129
California Tax Free Reserves: $10 $33 $57 $126
Connecticut Tax Free Reserves: $11 $34 $58 $130
New York Tax Free Reserves: $10 $31 $53 $119
</TABLE>
The assumption of a 5% annual return is required by the Securities and Exchange
Commission for all mutual funds, and is not a prediction of any Fund's future
performance. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OF ANY FUND. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
CONDENSED FINANCIAL INFORMATION
The following tables provide condensed financial information about the Funds for
the periods indicated. This information should be read in conjunction with the
financial statements appearing in each Fund's Annual Report to Shareholders,
which are incorporated by reference in each Fund's Statement of Additional
Information. The financial statements and notes, as well as the tables below,
covering the fiscal periods through August 31, 1997 have been audited by Price
Waterhouse LLP, independent accountants, on behalf of CitiFunds Cash Reserves
(formerly Landmark Cash Reserves), and by Deloitte & Touche LLP, independent
accountants, on behalf of CitiFunds U.S. Treasury Reserves (formerly Landmark
U.S. Treasury Reserves), CitiFunds Tax Free Reserves (formerly Landmark Tax Free
Reserves), CitiFunds California Tax Free Reserves (formerly Landmark California
Tax Free Reserves), CitiFunds Connecticut Tax Free Reserves (formerly Landmark
Connecticut Tax Free Reserves) and CitiFunds New York Tax Free Reserves
(formerly Landmark New York Tax Free Reserves). The accountants' reports are
included in the applicable Fund's Annual Report. Copies of the Annual Reports
may be obtained without charge from an investor's Shareholder Servicing Agent or
by calling 1-800-625-4554.
<PAGE>
CITIFUNDS CASH RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
beginning of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
Net investment
income 0.04940 0.05039 0.05174 0.03137 0.02671 0.04010 0.06606 0.07785 0.08354 0.06483
Less dividends from
net investment
income (0.04940) (0.05039) (0.05174) (0.03137) (0.02671) (0.04010) (0.06606) (0.07785) (0.08354) (0.06483)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end
of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's
omitted) $1,827,181 $1,468,177 $931,886 $445,600 $470,758 $498,447 $580,052 $413,756 $322,469 $264,728
Ratio of expenses to
average net assets* 0.70% 0.69% 0.69% 0.69% 0.69% 0.67% 0.61% 0.73% 0.80% 0.81%
Ratio of net
investment income
to average net
assets 4.96% 5.02% 5.17% 3.12% 2.67% 4.05% 6.48% 7.80% 8.39% 6.48%
Total return 5.05% 5.16% 5.30% 3.18% 2.70% 4.13% 6.81% 8.04% 8.66% 6.62%
Note: If certain agents of the Fund and agents of Cash Reserves Portfolio had
not waived all or a portion of their fees during the periods indicated, the
net investment income per share and the ratios would have been as follows:
Net investment
income per share $0.04697 $0.04766 $0.04895 $0.02840 $0.02381 $0.03753 $0.06025 $0.07466 $0.08195 $0.06323
RATIOS:
Expenses to average
net assets* 0.95% 0.96% 0.97% 0.99% 0.98% 0.93% 0.94% 0.97% 0.96% 0.97%
Net investment
income to average
net assets 4.71% 4.75% 4.89% 2.82% 2.38% 3.79% 5.91% 7.48% 8.23% 6.32%
</TABLE>
*Includes the Fund's share of Cash Reserves Portfolio's allocated expenses after
May 4, 1990 (date of the Fund's investment of all of its assets in the
Portfolio).
<PAGE>
CITIFUNDS U.S. TREASURY RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
EIGHT MONTHS
ENDED YEAR EBDED
YEAR ENDED AUGUST 31, AUGUST 31, DECENBER 31,
1997 1996 1995 1994 1993*** 1992 1991+
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
Net investment income 0.04547 0.04602 0.04751 0.02837 0.01662 0.03117 0.03411
Less dividends from
net investment
income (0.04547) (0.04602 (0.04751) (0.02837) (0.01662) (0.03117) (0.03411)
- --------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
end of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
- ---------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net Assets,
end of period
(000's omitted) $360,717 $317,996 $256,452 $203,400 $249,466 $338,719 $548,722
Ratio of expenses
to average net
assets* 0.70% 0.70% 0.70% 0.70% 0.66%** 0.70% 0.53%**
Ratio of net
investment income
to average net
assets 4.57% 4.61% 4.77% 2.81% 2.49%** 3.19% 4.89%**
Total return 4.64% 4.70% 4.86% 2.87% 2.53%** 3.16% 3.46%**
Note: If certain 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 $0.04278 $0.04313 $0.04452 $0.02514 $0.01455 $0.02853 $0.03076
RATIOS:
Expenses to average
net assets* 0.97% 1.00% 1.00% 1.02% 0.97%** 0.96% 1.02%**
Net investment
income to average
net assets 4.30% 4.32% 4.47% 2.49% 2.18%** 2.92% 4.41%**
</TABLE>
*Includes the Fund's share of U.S. Treasury Reserves Portfolio's allocated
expenses.
**Annualized.
***On April 15, 1993, the Fund changed its fiscal year end from December 31 to
August 31.
+For the period from the commencement of operations, May 3, 1991, to December
31, 1991.
<PAGE>
CITIFUNDS TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
Net investment
income 0.03004 0.02973 0.03197 0.02002 0.02014 0.03125 0.04667 0.05488 0.05604 0.04356
Less dividends from
net investment
income (0.03004) (0.02973) (0.03197) (0.02002) (0.02014) (0.03125) (0.04667) (0.05488) (0.05604) (0.04356
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
end of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's
omitted) $422,483 $371,349 $392,172 $232,333 $227,296 $211,978 $200,002 $151,356 $126,462 $140,886
Ratio of expenses to
average net
assets* 0.65% 0.65% 0.65% 0.65% 0.65% 0.65% 0.65% 0.65% 0.80% 0.81%
Ratio of net
investment income
to average net
assets 3.01% 2.97% 3.22% 1.99% 2.01% 3.10% 4.62% 5.49% 5.60% 4.35%
Total return 3.05% 3.01% 3.24% 2.02% 2.03% 3.17% 4.77% 5.62% 5.74% 4.43%
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 $0.02715 $0.02693 $0.02929 $0.01730 $0.01723 $0.02813 $0.04364 $0.05158 $0.05404 $0.04236
RATIOS:
Expenses to average
net assets* 0.94% 0.93% 0.92% 0.92% 0.94% 0.97% 0.95% 0.98% 1.00% 0.93%
Net investment
income to average
net assets 2.72% 2.69% 2.95% 1.72% 1.72% 2.79% 4.32% 5.16% 5.40% 4.23%
</TABLE>
*Includes the Fund's share of Tax Free Reserves Portfolio's allocated
expenses.
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1997 1996 1995 1994 1993 1992+
- --------------------------------------------------------------------------------------------------------------------------
<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 0.02899 0.03089 0.03434 0.02288 0.02467 0.01304
Less dividends from net investment income (0.02899) (0.03089) (0.03434) (0.02288) (0.02467) (0.01304)
- --------------------------------------------------------------------------------------------------------------------------
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) $207,345 $150,557 $51,832 $52,863 $37,808 $16,295
Ratio of expenses to average net assets 0.65% 0.42% 0.30% 0.25% 0.00% 0.00%*
Ratio of net investment income to
average net assets 2.91% 3.05% 3.43% 2.30% 2.42% 2.71%*
Total return 2.94% 3.13% 3.49% 2.31% 2.50% 2.75%*
Note: If agents of the Fund had not voluntarily waived all or a portion of their
fees from the Fund and the Administrator had not voluntarily assumed expenses
for the periods before August 31, 1996, and the expenses were not reduced for
the fees paid indirectly for the years after August 31, 1995, the ratios and net
investment income per share would have been as follows:
Net investment income per share $0.02630 $0.02481 $0.02513 $0.01423 $0.01121 $0.00279
RATIOS:
Expenses to average net assets 0.92% 1.01% 1.21% 1.12% 1.32% 2.13%*
Net investment income to
average net assets 2.64% 2.45% 2.51% 1.43% 1.10% 0.58%*
</TABLE>
*Annualized.
+For the period from the commencement of operations, March 10, 1992, to
August 31, 1992.
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1997 1996 1995 1994+
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of period $1.00000 $1.00000 $1.00000 $1.00000
Net investment income 0.02914 0.03135 0.03564 0.01754
Less dividends from net investment
income (0.02914) (0.03135) (0.03564) (0.01754)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000 $1.00000 $1.00000 $1.00000
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's
omitted) $169,322 $116,025 $46,556 $15,949
Ratio of expenses to average net
assets 0.65% 0.42% 0.22% 0.00%*
Ratio of net investment income to
average net assets 2.92% 3.08% 3.60% 2.61%*
Total return 2.95% 3.18% 3.62% 1.75%**
Note: If certain agents of the Fund had not voluntarily waived all or a portion
of their fees from the Fund for the period indicated and the Administrator had
not voluntarily assumed expenses for the periods before August 31, 1996, and the
expenses were not reduced for fees paid indirectly for the years after August
31, 1995, the ratios and net investment income per share would have been as
follows:
Net investment income per share $0.02615 $0.02504 $0.02732 $0.00128
RATIOS:
Expenses to average net assets 0.95% 1.04% 1.06% 2.42%*
Net investment income to average net
assets 2.62% 2.46% 2.76% 0.19%*
</TABLE>
*Annualized.
**Not annualized.
+For the period from the commencement of operations, December 1, 1993, to
August 31, 1994.
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
- ------------------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
beginning of
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
Net investment
income 0.02949 0.02936 0.03136 0.01954 0.01858 0.02914 0.04211 0.05187 0.05012 0.03969
Less dividends
from net
investment income (0.02949) (0.02936) (0.03136) (0.01954) (0.01858) (0.02914) (0.04211) (0.05187) (0.05012) (0.03969)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value,
end of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
- ------------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's
omitted) $976,959 $941,691 $767,129 $684,687 $607,992 $675,238 $586,720 $622,820 $380,539 $349,677
Ratio of expenses to
average net assets 0.65% 0.65% 0.65% 0.65% 0.65% 0.65% 0.64% 0.66% 0.80% 0.80%
Ratio of net
investment income
to average net
assets 2.95% 2.92% 3.15% 1.96% 1.86% 2.88% 4.21% 5.18% 5.09% 3.97%
Total return 2.99% 2.98% 3.18% 1.97% 1.87% 2.94% 4.29% 5.29% 5.17% 4.03%
Note: If agents of the Fund had not voluntarily waived all or a portion of their
fees for the periods indicated and the expenses were not reduced for fees paid
indirectly for the years after August 31, 1995, the ratios and net investment
income per share would have been as follows:
Net investment
income per share $0.02739 $0.02725 $0.02917 $0.01715 $0.01628 $0.02691 $0.04001 $0.04947 $0.04914 $0.03889
RATIOS:
Expenses to average
net assets 0.86% 0.86% 0.87% 0.88% 0.88% 0.87% 0.85% 0.89% 0.90% 0.88%
Net investment
income to average
net assets 2.74% 2.71% 2.93% 1.72% 1.63% 2.66% 4.00% 4.94% 4.99% 3.89%
</TABLE>
<PAGE>
INVESTMENT INFORMATION
INVESTMENT OBJECTIVES: The investment objective of Cash Reserves is to provide
its shareholders with liquidity and as high a level of current income as is
consistent with the preservation of capital.
The investment objective of U.S. Treasury Reserves is to provide its
shareholders with liquidity and as high a level of current income from U.S.
Government obligations as is consistent with the preservation of capital.
The investment objectives of Tax Free Reserves are to provide its shareholders
with high levels of current income exempt from federal income taxes,
preservation of capital and liquidity.
The investment objectives of California Tax Free Reserves are to provide its
shareholders with high levels of current income exempt from both federal and
California personal income taxes, preservation of capital and liquidity.
The investment objectives of Connecticut Tax Free Reserves are to provide its
shareholders with high levels of current income exempt from both federal and
Connecticut personal income taxes, preservation of capital and liquidity.
The investment objectives of New York Tax Free Reserves are to provide its
shareholders with high levels of current income exempt from federal, New York
State and New York City personal income taxes, preservation of capital and
liquidity.
The investment objective of each Fund may be changed by its Trustees without
approval by that Fund's shareholders, but shareholders will be given written
notice at least 30 days before any change is implemented. Of course, there can
be no assurance that any Fund will achieve its investment objective.
INVESTMENT POLICIES: Cash Reserves seeks its objective by investing in high
quality U.S. dollar-denominated money market instruments. These instruments
include short-term obligations of the U.S. Government and repurchase agreements
covering these obligations, bank obligations (such as certificates of deposit,
bankers' acceptances and fixed time deposits) of U.S. and non-U.S. banks and
obligations issued or guaranteed by the governments of Western Europe,
Scandinavia, Australia, Japan and Canada. The U.S. Government obligations in
which the Fund invests include U.S. Treasury bills, notes and bonds, and
instruments issued by U.S. Government agencies or instrumentalities. Some
obligations of U.S. Government agencies and instrumentalities are supported by
the "full faith and credit" of the United States, others by the right of the
issuer to borrow from the U.S. Treasury and others only by the credit of the
agency or instrumentality. For more information regarding the Fund's permitted
investments and investment practices, see Appendix A -- Permitted Investments
and Investment Practices on page 36.
U.S. Treasury Reserves seeks its objective by investing in U.S. Treasury bills,
notes and bonds, and instruments issued by U.S. Government agencies or
instrumentalities which are supported by the "full faith and credit" of the
United States. The Fund will not enter into repurchase agreements. For more
information regarding the Fund's permitted investments and investment practices,
see Appendix A -- Permitted Investments and Investment Practices on page 36.
ALTHOUGH THE FUND INVESTS IN U.S. GOVERNMENT OBLIGATIONS, AN INVESTMENT IN THE
FUND IS NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.
Tax Free Reserves, California Tax Free Reserves, Connecticut Tax Free Reserves
and New York Tax Free Reserves seek their objectives by investing primarily in
Municipal Obligations. As a fundamental policy, each of these Funds invests at
least 80% of its assets, under normal circumstances, in the following types of
Municipal Obligations and in participation interests in these obligations issued
by banks, insurance companies or other financial institutions ("Participation
Interests"):
(1) Municipal bonds that at the date of purchase are rated Aa or better by
Moody's Investors Service, Inc. ("Moody's") or AA or better by Standard &
Poor's Ratings Group ("S&P") or Fitch IBCA, Inc. ("Fitch"), or are unrated
but are of comparable quality as determined by the Adviser on the basis of
a credit evaluation of the obligor, or of the bank issuing the
Participation Interest or guarantee of the bonds, or of any insurance
issued in support of the bonds or the Participation Interest;
(2) Municipal notes that at the date of purchase are rated MIG 2/VMIG 2 or
better by Moody's, SP-2 or better by S&P or F-2 or better by Fitch, or are
unrated but are of comparable quality as determined by the Adviser; and
(3) Municipal commercial paper that at the date of purchase is rated Prime-2
or better by Moody's, A-2 or better by S&P or F-2 or better by Fitch, or
is unrated but is of comparable quality as determined by the Adviser.
See Appendix A for an explanation of Municipal Obligations and Appendix B for an
explanation of ratings of Municipal Obligations.
Under normal circumstances, California Tax Free Reserves invests at least 65% of
its assets in Municipal Obligations the interest on which is exempt from both
federal and California personal income taxes ("California Municipal
Obligations"). California Municipal Obligations include Municipal Obligations of
the State of California and its political subdivisions, Puerto Rico, other U.S.
territories and their political subdivisions and other qualifying issuers. To
the extent that acceptable California Municipal Obligations are not available to
the Fund, the Fund may purchase Municipal Obligations issued by issuers in other
states. The interest on these securities will be subject to California personal
income taxes. Because California Tax Free Reserves invests primarily in
California Municipal Obligations, an investment in this Fund may be riskier than
an investment in a more diversified money market fund.
Under normal circumstances, Connecticut Tax Free Reserves invests at least 65%
of its assets in Municipal Obligations the interest on which is exempt from both
federal and Connecticut personal income taxes ("Connecticut Municipal
Obligations"). Connecticut Municipal Obligations include Municipal Obligations
issued by or on behalf of the State of Connecticut, its political subdivisions
and public entities created under Connecticut law, Puerto Rico and other U.S.
territories and their political subdivisions and other qualifying issuers. To
the extent that acceptable Connecticut Municipal Obligations are not available
to the Fund, the Fund may purchase Municipal Obligations issued by issuers in
other states. The interest on these securities will be subject to Connecticut
personal income taxes. Because Connecticut Tax Free Reserves invests primarily
in Connecticut Municipal Obligations, an investment in this Fund may be riskier
than an investment in a more diversified money market fund.
Under normal circumstances, New York Tax Free Reserves invests at least 65% of
its assets in Municipal Obligations the interest on which is exempt from
federal, New York State and New York City personal income taxes ("New York
Municipal Obligations"). This Fund is a "triple tax-exempt money market fund."
New York Municipal Obligations include Municipal Obligations of the State of New
York and its political subdivisions, Puerto Rico and other U.S. territories and
their political subdivisions and other qualifying issuers. To the extent that
acceptable New York Municipal Obligations are not available to the Fund, the
Fund may purchase Municipal Obligations issued by issuers in other states. The
interest on these securities will be subject to New York State and New York City
personal income taxes. Because New York Tax Free Reserves invests primarily in
New York Municipal Obligations, an investment in this Fund may be riskier than
an investment in a more diversified money market fund.
Although each of the Tax Free Funds attempts to invest all of its assets in
Municipal Obligations, each of these Funds may invest up to 20% of its assets in
taxable securities (such as U.S. Government obligations or certificates of
deposit of domestic banks). Any taxable securities in which the Fund invests are
of comparable quality to the Municipal Obligations in which it invests.
In determining the tax status of interest on Municipal Obligations, the Adviser
relies on opinions of bond counsel who may be counsel to the issuer.
CERTAIN ADDITIONAL INVESTMENT POLICIES:
$1.00 Net Asset Value. Each Fund employs specific investment policies and
procedures designed to maintain a constant net asset value of $1.00 per share.
There can be no assurance, however, that a constant net asset value will be
maintained on a continuing basis. See "Net Income and Distributions."
90-day Average Maturity. All of the Funds' investments either mature in 397 days
or less from the date of purchase, have a variable rate of interest adjusted no
less frequently than every 397 days, or are purchased pursuant to a repurchase
agreement which provides for repurchase by the seller within 397 days from the
date of purchase (except that U.S. Treasury Reserves does not enter into
repurchase agreements). The average maturity of each Fund's investments (on a
dollar-weighted basis) is 90 days or less. All of the Funds' investments are
"eligible securities" within the meaning of Rule 2a-7 under the 1940 Act, and
are determined by the Adviser to present minimal credit risks. Investment in
high quality, short-term instruments may, in many circumstances, result in a
lower yield than would be available from investment in instruments with a lower
quality or a longer term.
Cash Reserves and U.S. Treasury Reserves invest only in "first tier securities."
To be a first tier security, a security must be rated in the highest rating
category for short-term obligations by at least two nationally recognized
statistical rating organizations (each, an "NRSRO") assigning a rating to the
security or issuer or, if only one NRSRO assigns a rating, that NRSRO or, in the
case of an investment which is not rated, of comparable quality as determined by
the Adviser.
Permitted Investments. Uninvested cash reserves may be held temporarily for each
Fund pending investment. For more information regarding permitted investments
and investment practices, see Appendix A -- Permitted Investments and Investment
Practices on page 36. The Funds will not necessarily invest or engage in each of
the investments and investment practices in the Appendix but reserve the right
to do so.
Investment in Another Investment Company. Each of California Tax Free Reserves,
Connecticut Tax Free Reserves and New York Tax Free Reserves may, in the future,
seek its investment objectives by investing all of its investable assets in an
open-end management investment company having the same investment objectives and
policies and substantially the same investment restrictions as that Fund. This
investment would be made only if a Fund's Trustees believe that the aggregate
per share expenses of the Fund and such other investment company would be less
than or approximately equal to the expenses which the Fund would incur if the
assets of the Fund were to continue to be invested directly in portfolio
securities. Prior shareholder approval would not be required, except for New
York Tax Free Reserves.
Investment Restrictions. The Statements of Additional Information contain a list
of specific investment restrictions which govern the investment policies of the
Funds including a limitation that each Fund may borrow money from banks in an
amount not to exceed 1/3 of the Fund's net assets for extraordinary or emergency
purposes (e.g., to meet redemption requests). Except as otherwise indicated, the
Funds' investment objectives and policies may be changed without shareholder
approval. If a percentage or rating restriction (other than a restriction as to
borrowing) is adhered to at the time an investment is made, a later change in
percentage or rating resulting from changes in the Funds' securities will not be
a violation of policy.
Brokerage Transactions. The primary consideration in placing the Funds'
securities transactions with broker-dealers for execution is to obtain and
maintain the availability of execution at the most favorable prices and in the
most effective manner possible.
RISK CONSIDERATIONS
The risks of investing in each Fund vary depending upon the nature of the
securities held, and the investment practices employed, on its behalf. Certain
of these risks are described below.
"Concentration" in Bank Obligations. Cash Reserves invests at least 25% of its
assets, and may invest up to 100% of its assets, in bank obligations. This
concentration policy is fundamental, and may not be changed without shareholder
approval. Banks are subject to extensive governmental regulation which may limit
both the amounts and types of loans and other financial commitments which may be
made and interest rates and fees which may be charged. The profitability of this
industry is largely dependent upon the availability and cost of capital funds
for the purpose of financing lending operations under prevailing money market
conditions. Also, general economic conditions play an important part in the
operation of this industry and exposure to credit losses arising from possible
financial difficulties of borrowers might affect a bank's ability to meet its
obligations.
Non-U.S. Securities. Investors in Cash Reserves should be aware that
investments in non-U.S. securities involve risks relating to political, social
and economic developments abroad, as well as risks resulting from the
differences between the regulations to which U.S. and non-U.S. issuers and
markets are subject. These risks may include expropriation, confiscatory
taxation, withholding taxes on dividends and interest, limitations on the use
or transfer of Portfolio assets and political or social instability. In
addition, non-U.S. companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there may be less
public information about their operations. Non-U.S. markets may be less liquid
and more volatile than U.S. markets, and may offer less protection to
investors such as the Fund.
Non-diversified Status. Each of the Tax Free Funds is a non-diversified mutual
fund. This means that these Funds are not subject to any statutory restrictions
under the 1940 Act limiting the investment of their assets in one or relatively
few issuers (although certain diversification requirements are imposed by the
Internal Revenue Code). Since each of these Funds may invest a relatively high
percentage of its assets in the obligations of a limited number of issuers, the
value of shares of these Funds may be more susceptible to any single economic,
political or regulatory occurrence than the value of shares of a diversified
mutual fund would be. Each Tax Free Fund also may invest 25% or more of its
assets in securities the issuers of which are located in the same state or the
interest on which is paid from revenues of similar type projects or that are
otherwise related in such a way that a single economic, business or political
development or change affecting one of the securities would also affect other
securities. Investors should consider the greater risk inherent in these
policies when compared with a more diversified mutual fund.
"Concentration" in Participation Interests. Each of the Tax Free Funds may
invest more than 25% of its assets in Participation Interests in Municipal
Obligations which are secured by bank letters of credit or guarantees. Banks are
subject to extensive governmental regulation which may limit both the amounts
and types of loans and other financial commitments which may be made and
interest rates and fees which may be charged. The profitability of this industry
is largely dependent upon the availability and cost of capital funds for the
purpose of financing lending operations under prevailing money market
conditions. Also, general economic conditions play an important part in the
operation of this industry and exposure to credit losses arising from possible
financial difficulties of borrowers might affect a bank's ability to meet its
obligations under a letter of credit or guarantee. For additional information
concerning variable rate instruments and Participation Interests, see Appendix
A.
Investment Practices. Certain of the investment practices employed for the
Funds may entail certain risks. See Appendix A -- Permitted Investments and
Investment Practices on page 36.
Risks Affecting Investments in State Municipal Obligations. California Tax Free
Reserves intends to invest a high proportion of its assets in California
Municipal Obligations. Payment of interest and principal of these Municipal
Obligations is dependent on the continuing ability of issuers in California and
obligors of state, municipal and public authority debt obligations to meet their
obligations. Investors in the Fund should consider the greater risks inherent in
the Fund's concentration in these obligations when compared with the safety that
comes with a less geographically concentrated investment portfolio.
Investors should be aware of special economic factors affecting California
before investing in the Fund. While these factors are summarized below, a more
detailed description is set forth in the Fund's Statement of Additional
Information and the Appendix thereto (see "Investment Objectives, Policies and
Restrictions -- Risk Factors Affecting Investment in California Municipal
Obligations" in the Statement of Additional Information). The information below
and in the Statement of Additional Information is a summary of certain
information contained in official statements of issuers of California Municipal
Obligations and does not purport to be complete. The Fund is not responsible for
the accuracy or timeliness of this information.
The State of California and other issuers of California Municipal Obligations
have experienced severe financial difficulties. From 1990-1993, the State
suffered through a severe recession, the worst since the 1930's, heavily
influenced by large cutbacks in the defense/aerospace industries and military
base closures and a major drop in real estate construction. In December, 1994,
Orange County, California and its pooled investment funds filed for protection
under the federal Bankruptcy Code. Orange County's financial difficulties could
continue to adversely affect other issues and issuers of California Municipal
Obligations. Since the start of 1994, California's economy has been recovering
and growing steadily stronger, to the point where the State's economic growth is
outpacing the rest of the nation. After having been downgraded in 1994 as the
result of the financial difficulties of the State of California, the credit
ratings of certain of the State's obligations have been upgraded by certain
rating agencies. There can be no assurance that the State's economic growth will
continue or that credit ratings on obligations of the State of California and
other California Municipal Obligations will not be downgraded again. Many of the
Fund's Municipal Obligations are likely to be obligations of California
governmental issuers which rely in whole or in part, directly or indirectly, on
real property taxes as a source of revenue.
"Proposition Thirteen" and similar California constitutional and statutory
amendments and initiatives in recent years have restricted the ability of
California taxing entities to increase real property tax revenues. Other
initiative measures approved by California voters in recent years, through
limiting various other taxes, have resulted in a substantial reduction in state
revenues. Decreased state revenues may result in reductions in allocations of
state revenues to local governments.
Connecticut Tax Free Reserves intends to invest a high proportion of its assets
in Connecticut Municipal Obligations. Payment of interest and principal of these
Municipal Obligations is dependent on the continuing ability of issuers in
Connecticut and obligors of state, municipal and public authority debt
obligations to meet their obligations. Investors in the Fund should consider the
greater risks inherent in the Fund's concentration in these obligations when
compared with the safety that comes with a less geographically concentrated
investment portfolio.
Investors should be aware of special economic factors affecting Connecticut
before investing in the Fund. While these factors are summarized below, a more
detailed description is set forth in the Fund's Statement of Additional
Information and the Appendix thereto (see "Investment Objectives, Policies and
Restrictions -- Risk Factors Affecting Investment in Connecticut Municipal
Obligations" in the Statement of Additional Information). The information below
and in the Statement of Additional Information is a summary of certain
information contained in official statements of issuers of Connecticut Municipal
Obligations and does not purport to be complete. The Fund is not responsible for
the accuracy or timeliness of this information.
As a result of recurring budgetary problems, certain rating agencies downgraded
Connecticut's general obligation bonds in 1990 and 1991. Since that time,
certain rating agencies have further downgraded certain of the State's
obligations. There can be no assurance that credit ratings on Connecticut
Municipal Obligations will not be downgraded again. Many of the Fund's Municipal
Obligations are likely to be obligations of Connecticut governmental issuers
which rely in whole or in part, directly or indirectly, on real property taxes
as a source of revenue.
New York Tax Free Reserves intends to invest a high proportion of its assets in
New York Municipal Obligations. Payment of interest and principal of these
Municipal Obligations is dependent on the continuing ability of issuers in New
York and obligors of state, municipal and public authority debt obligations to
meet their obligations. Investors in the Fund should consider the greater risks
inherent in the Fund's concentration in these obligations when compared with the
safety that comes with a less geographically concentrated investment portfolio.
Investors should be aware of special economic factors affecting New York before
investing in the Fund. While these factors are summarized below, a more detailed
description is set forth in the Fund's Statement of Additional Information and
the Appendix thereto (see "Investment Objectives, Policies and Restrictions --
Risk Factors Affecting Investment in New York Municipal Obligations" in the
Statement of Additional Information). The information below and in the Statement
of Additional Information is a summary of certain information contained in
official statements of issuers of New York Municipal Obligations and does not
purport to be complete. The Fund is not responsible for the accuracy or
timeliness of this information.
New York State and other issuers of New York Municipal Obligations over the past
several years have experienced financial difficulties, which caused the credit
ratings of certain of their obligations to be downgraded by certain rating
agencies. Although the steady growth that has characterized the New York economy
recently continued during the first half of 1997, there can be no assurance that
it will continue or that credit ratings on obligations of New York State, New
York City and other New York Municipal Obligations will not be downgraded again.
The Adviser believes that by maintaining each Tax Free Fund's investment
portfolio in liquid, short-term high quality Municipal Obligations, including
Participation Interests and other variable rate instruments that have high
quality credit support from banks, insurance companies or other financial
institutions, the Funds are somewhat insulated from the credit risks that may
exist for long-term Municipal Obligations, including Municipal Obligations of
issuers in a single state.
Investors in California Tax Free Reserves, Connecticut Tax Free Reserves and New
York Tax Free Reserves also should compare the yield available on a portfolio of
single state issues with the yield of a more diversified portfolio including
other state issues before making an investment decision. For a comparison of
yields on Municipal Obligations and taxable securities, see Appendix C.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE: Cash Reserves, U.S.
Treasury Reserves and Tax Free Reserves do not invest directly in securities.
Instead, these Funds invest all of their investable assets in their
corresponding Portfolios, which are mutual funds having the same investment
objectives and policies as the Funds. The Portfolios, in turn, buy, hold and
sell securities in accordance with these objectives and policies. Of course,
there can be no assurance that the Funds or the Portfolios will achieve their
objectives.
The Trustees of each Fund believe that the aggregate per share expenses of that
Fund and its corresponding Portfolio will be less than or approximately equal to
the expenses that the Fund would incur if the assets of the Fund were invested
directly in the types of securities held by its Portfolio. Each Fund may
withdraw its investment in its Portfolio at any time, and will do so if the
Fund's Trustees believe it to be in the best interest of the Fund's
shareholders. If a Fund were to withdraw its investment in its Portfolio the
Fund could either invest directly in securities in accordance with the
investment policies described above or invest in another mutual fund or pooled
investment vehicle having the same investment objectives and policies. If a Fund
were to withdraw, the Fund could receive securities from the Portfolio instead
of cash, causing the Fund to incur brokerage, tax and other charges or leaving
it with securities which may or may not be readily marketable or widely
diversified.
Each Portfolio may change its investment objective and certain of its investment
policies and restrictions without approval by its investors, but the Portfolio
will notify its corresponding Fund (which in turn will notify its shareholders)
and its other investors at least 30 days before implementing any change in its
investment objective. A change in investment objective, policies or restrictions
may cause a Fund to withdraw its investment in its Portfolio.
Certain investment restrictions of each Portfolio cannot be changed without
approval by the investors in that Portfolio. These policies are described in the
Statement of Additional Information. When a Fund is asked to vote on matters
concerning its Portfolio (other than a vote to continue the Portfolio following
the withdrawal of an investor), the Fund will hold a shareholder meeting and
vote in accordance with shareholder instructions. Of course, the Fund could be
outvoted, or otherwise adversely affected, by other investors in its Portfolio.
The Portfolios may sell interests to investors in addition to the Funds. These
investors may be mutual funds which offer shares to their shareholders with
different costs and expenses than the Funds. Therefore, the investment returns
for all investors in funds investing in a Portfolio may not be the same. These
differences in returns are also present in other mutual fund structures.
Information about other holders of interests in the Portfolios is available from
the Funds' distributor, CFBDS (6 St. James Avenue, Boston, MA 02116, (617)
423-1679).
VALUATION OF SHARES
Net asset value per share of each Fund is determined each day the New York Stock
Exchange is open for trading (a "Business Day"). This determination is normally
made once each day as of 3:00 p.m., Eastern time, for Cash Reserves, and 12:00
noon, Eastern time, for the other Funds by adding the market value of all
securities and other assets of a Fund (including, where applicable, its interest
in its Portfolio), then subtracting the liabilities charged to the Fund, and
then dividing the result by the number of outstanding shares of the Fund. The
amortized cost method of valuing portfolio securities is used in order to
stabilize the net asset value of shares of each Fund at $1.00; however, there
can be no assurance that a Fund's net asset value will always remain at $1.00
per share. The net asset value per share is effective for orders received and
accepted by the Distributor prior to its calculation. On days when the financial
markets in which the Funds invest close early, each Fund's net asset value is
determined as of the close of these markets if such time is earlier than the
time at which the net asset value is normally calculated.
The amortized cost method involves valuing a security at its cost and thereafter
assuming a constant amortization to maturity of any discount or premium.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the stated value of a security is higher or lower
than the price the Fund would receive if the security were sold.
PURCHASES
Shares of the Funds are offered continuously and may be purchased on any
Business Day without a sales load at the shares' net asset value (normally $1.00
per share) next determined after an order is transmitted to and accepted by the
Distributor. Shares may be purchased either through a securities broker which
has a sales agreement with the Distributor or through a bank or other financial
institution which has an agency agreement with the Distributor. Shares of the
Funds are being offered exclusively to customers of a Shareholder Servicing
Agent (i.e., a financial institution, such as a federal or state-chartered bank,
trust company, savings and loan association or savings bank, or a securities
broker, that has entered into a shareholder servicing agreement concerning a
Fund). Each Fund and the Distributor reserve the right to reject any purchase
order and to suspend the offering of Fund shares for a period of time.
While there is no sales load imposed on shares of the Funds, the Distributor
receives fees from each Fund pursuant to a Distribution Plan. See "Management
- -- Distribution Arrangements."
Each shareholder's account is established and maintained by his or her
Shareholder Servicing Agent, which will be the shareholder of record of the
Fund. Each Shareholder Servicing Agent may offer services to its customers such
as pre-authorized or automatic purchase and redemption programs and "sweep"
checking programs, and may establish its own terms, conditions and charges with
respect to services it offers to its customers. Charges for these services may
include fixed annual fees and account maintenance fees. The effect of any such
fees will be to reduce the net return on the investment of customers of that
Shareholder Servicing Agent.
Shareholder Servicing Agents will not transmit purchase orders to the
Distributor until they have received the purchase price in federal or other
immediately available funds. If Fund shares are purchased by check, there will
be a delay (usually not longer than two business days) in transmitting the
purchase order until the check is converted into federal funds.
From time to time the Distributor may make payments for distribution and/or
shareholder servicing activities out of its past profits and other sources
available to it. The Distributor may also make payments for marketing,
promotional or related expenses to dealers who engage in marketing efforts on
behalf of the Funds. The amounts of these payments will be determined by CFBDS
in its sole discretion and may vary among different dealers.
EXCHANGES
Shares of each Fund may be exchanged for shares of certain other mutual funds
managed or advised by Citibank that are made available by a shareholder's
Shareholder Servicing Agent or service agent, as the case may be, or may be
acquired through an exchange of shares of those funds.
Shareholders must place exchange orders through their Shareholder Servicing
Agents, and may do so by telephone if their account applications so permit. For
more information on telephone transactions see "Redemptions." All exchanges will
be effected based on the relative net asset values per share next determined
after the exchange order is received by the Distributor. See "Valuation of
Shares." Shares of the Funds may be exchanged only after payment in federal
funds for the shares has been made.
This exchange privilege may be modified or terminated at any time, upon at least
60 days' notice when such notice is required by SEC rules, and is available only
in those jurisdictions where such exchanges legally may be made. See the
Statements of Additional Information for further details. Before making any
exchange, shareholders should contact their Shareholder Servicing Agents to
obtain more information and prospectuses of the funds to be acquired through the
exchange.
REDEMPTIONS
Fund shares may be redeemed at their net asset value (normally $1.00 per share)
next determined after a redemption request in proper form is received by a
shareholder's Shareholder Servicing Agent. Shares of each Fund may be redeemed
without a sales charge. Shareholders may redeem shares of a Fund only by
authorizing their Shareholder Servicing Agents to redeem such shares on their
behalf through the Distributor.
Redemptions by Mail. Shareholders may redeem Fund shares by sending written
instructions in proper form (as determined by a shareholder's Shareholder
Servicing Agent) to their Shareholder Servicing Agents. Shareholders are
responsible for ensuring that a request for redemption is in proper form.
Redemptions by Telephone. Shareholders may redeem or exchange Fund shares by
telephone, if their account applications so permit, by calling their Shareholder
Servicing Agents. During periods of drastic economic or market changes or severe
weather or other emergencies, shareholders may experience difficulties
implementing a telephone exchange or redemption. In such an event, another
method of instruction, such as a written request sent via an overnight delivery
service, should be considered. The Funds and each Shareholder Servicing Agent
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. These procedures may include recording of the telephone
instructions and verification of a caller's identity by asking for the
shareholder's name, address, telephone number, Social Security number, and
account number. If these or other reasonable procedures are not followed, the
Fund or the Shareholder Servicing Agent may be liable for any losses to a
shareholder due to unauthorized or fraudulent instructions. Otherwise, the
shareholder will bear all risk of loss relating to a redemption or exchange by
telephone.
Payment of Redemptions. The proceeds of a redemption are paid in federal funds
normally on the Business Day the redemption is effected, but in any event within
seven days. If a shareholder requests redemption of shares which were purchased
recently, a Fund may delay payment until it is assured that good payment has
been received. In the case of purchases by check, this can take up to ten days.
See "Determination of Net Asset Value" in each Statement of Additional
Information regarding the Funds' right to pay the redemption price in kind with
securities (instead of cash).
Questions about redemption requirements should be referred to the shareholder's
Shareholder Servicing Agent. The right of any shareholder to receive payment
with respect to any redemption may be suspended or the payment of the redemption
price postponed during any period in which the New York Stock Exchange is closed
(other than weekends or holidays) or trading on the Exchange is restricted or if
an emergency exists.
NET INCOME AND DISTRIBUTIONS
The net income of each Fund is determined each Business Day (and on such other
days as is necessary in order to comply with the 1940 Act). This determination
is normally made once during each such day as of 3:00 p.m., Eastern time, for
Cash Reserves and 12:00 noon, Eastern time, for the other Funds. All or
substantially all of each Fund's net income of each Fund is declared as a
dividend to shareholders of record at the time of such determination. Shares
begin accruing dividends on the day they are purchased, and accrue dividends up
to and including the day prior to redemption. Dividends are distributed monthly
on or prior to the last Business Day of each month. Unless a shareholder elects
to receive dividends in cash (subject to the policies of the shareholder's
Shareholder Servicing Agent), dividends are distributed in the form of full and
fractional additional shares of the applicable Fund at the rate of one share of
the Fund for each one dollar of dividend income. On days when the financial
markets in which the Funds invest close early, each Fund's net income is
determined as of the close of these markets if such time is earlier than the
time at which the net income is normally calculated.
Since the net income of each Fund is declared as a dividend each time the net
income of the Fund is determined, the net asset value per share of each Fund is
expected to remain at $1.00 per share immediately after each such determination
and dividend declaration. Any increase in the value of a shareholder's
investment in a Fund, representing the reinvestment of dividend income, is
reflected by an increase in the number of shares of the Fund in the
shareholder's account.
Because of the short-term maturities of the portfolio investments of each Fund,
the Funds do not expect to realize long-term capital gains or losses. Any net
realized short-term capital gains will be declared and distributed to the Funds'
shareholders annually after the close of each Fund's fiscal year. Distributions
of short-term capital gains are taxable to shareholders as described in "Tax
Matters." Any realized short-term capital losses will be offset against
short-term capital gains or, to the extent possible, utilized as capital loss
carryover. Each Fund may distribute short-term capital gains more frequently
than annually, reduce shares to reflect capital losses or make distributions of
capital if necessary in order to maintain the Fund's net asset value of $1.00
per share.
It is expected that each Fund will have a positive net income at the time of
each determination thereof. If for any reason a Fund's net income is a negative
amount, which could occur, for instance, upon default by an issuer of a
portfolio security, the Fund would first offset the negative amount with respect
to each shareholder account from the dividends declared during the month with
respect to those accounts. If and to the extent that negative net income exceeds
declared dividends at the end of the month, the Fund would reduce the number of
outstanding Fund shares by treating each shareholder as having contributed to
the capital of the Fund that number of full and fractional shares in the
shareholder's account which represents the shareholder's share of the amount of
such excess. Each shareholder would be deemed to have agreed to such
contribution in these circumstances by investment in the Fund.
MANAGEMENT
TRUSTEES AND OFFICERS: Each Fund and each Portfolio is supervised by a Board of
Trustees. In each case, a majority of the Trustees are not affiliated with the
Adviser. In addition, a majority of the disinterested Trustees of the Funds are
different from a majority of the disinterested Trustees of their corresponding
Portfolios. More information on the Trustees and officers of the Funds and the
Portfolios appears under "Management" in the Statements of Additional
Information.
INVESTMENT ADVISER: CITIBANK. Each Fund draws on the strength and experience of
Citibank. Citibank offers a wide range of banking and investment services to
customers across the United States and throughout the world, and has been
managing money since 1822. Its portfolio managers are responsible for investing
in money market, equity and fixed income securities. Citibank and its affiliates
manage more than $88 billion in assets worldwide. Citibank is a wholly-owned
subsidiary of Citicorp.
Citibank manages the assets of each Fund pursuant to separate Investment
Advisory Agreements. Subject to policies set by the Trustees, Citibank makes
investment decisions for the Funds.
Advisory Fees. For its services under the Investment Advisory Agreements, the
Adviser receives investment advisory fees, which are accrued daily and paid
monthly, of 0.15% of Cash Reserves' and U.S. Treasury Reserves' average daily
net assets and 0.20% of each Tax Free Fund's average daily net assets, in each
case on an annualized basis for the Fund's then-current fiscal year. The Adviser
has voluntarily agreed to waive a portion of its investment advisory fee.
For the fiscal year ended August 31, 1997, the investment advisory fees paid to
Citibank, after waivers, were the following percentages of each Fund's average
daily net assets for that fiscal year:
Cash Reserves .................................................. 0.07%
U.S. Treasury Reserves ......................................... 0.06%
Tax Free Reserves .............................................. 0.12%
California Tax Free Reserves ................................... 0.10%
Connecticut Tax Free Reserves .................................. 0.09%
New York Tax Free Reserves ......................................0.12%
Banking Relationships. Citibank and its affiliates may have deposit, loan and
other relationships with the issuers of securities purchased on behalf of the
Funds, including outstanding loans to such issuers which may be repaid in whole
or in part with the proceeds of securities so purchased. Citibank has informed
the Funds that, in making its investment decisions, it does not obtain or use
material inside information in the possession of any division or department of
Citibank or in the possession of any affiliate of Citibank.
Bank Regulatory Matters. The Glass-Steagall Act prohibits certain financial
institutions, such as Citibank, from underwriting securities of open-end
investment companies, such as the Funds. Citibank believes that its services
under the Investment Advisory Agreements and the activities performed by it or
its affiliates as Shareholder Servicing Agents and sub-administrator are not
underwriting and are consistent with the Glass-Steagall Act and other relevant
federal and state laws. However, there is no controlling precedent regarding the
performance of the combination of investment advisory, shareholder servicing and
sub-administrative activities by banks. State laws on this issue may differ from
applicable federal law and banks and financial institutions may be required to
register as dealers pursuant to state securities laws. Changes in either federal
or state statutes or regulations, or in their interpretations, could prevent
Citibank or its affiliates from continuing to perform these services. If
Citibank or its affiliates were to be prevented from acting as the Adviser,
sub-administrator or a Shareholder Servicing Agent, the Funds or Portfolios
would seek alternative means for obtaining these services. The Funds do not
expect that shareholders would suffer any adverse financial consequences as a
result of any such occurrence.
ADMINISTRATIVE SERVICES PLANS: The Funds and Portfolios have Administrative
Services Plans which provide that the applicable Fund or Portfolio may obtain
the services of an administrator, a transfer agent, a custodian, a fund
accountant, and, in the case of the Funds, one or more Shareholder Servicing
Agents, and may enter into agreements providing for the payment of fees for such
services. Under each Fund's Administrative Services Plan, the total of the fees
paid to each Fund's Administrator and Shareholder Servicing Agents and the
distribution fee paid to the Distributor (other than any fee concerning
electronic or other media advertising) may not exceed 0.70% of a Fund's average
daily net assets (0.60% for each Tax Free Fund) on an annualized basis for the
Fund's then-current fiscal year. Within this overall limitation, individual fees
may vary. Under each Portfolio's Administrative Services Plan, fees paid to the
Portfolio's Administrator may not exceed 0.05% of the Portfolio's average daily
net assets on an annualized basis for the Portfolio's then-current fiscal year.
See "Administrators," "Shareholder Servicing Agents" and "Transfer Agent,
Custodian and Fund Accountant."
ADMINISTRATORS: CFBDS provides certain administrative services to the Funds,
U.S. Treasury Reserves Portfolio and Tax Free Reserves Portfolio, and Signature
Financial Group (Cayman) Ltd. ("SFG") provides certain administrative services
to Cash Reserves Portfolio, in each case under administrative services
agreements. These administrative services include providing general office
facilities, supervising the overall administration of the Funds and Portfolios,
and providing persons satisfactory to the Boards of Trustees to serve as
Trustees and officers of the Funds and Portfolios. These Trustees and officers
may be directors, officers or employees of CFBDS, SFG or their affiliates.
For these services, the Administrators receive fees accrued daily and paid
monthly of 0.35% of the average daily net assets of each Fund (0.25% for each
Tax Free Fund) and 0.05% of the assets of each Portfolio, in each case on an
annualized basis for the Fund's or the Portfolio's then-current fiscal year.
However, each of the Administrators may voluntarily agree to waive a portion of
the fees payable to it.
CFBDS and SFG are wholly-owned subsidiaries of Signature Financial Group, Inc.
SUB-ADMINISTRATOR: Pursuant to sub-administrative services agreements, Citibank
performs such sub-administrative duties for the Funds and Portfolios as from
time to time are agreed upon by Citibank and CFBDS or SFG. Citibank's
compensation as sub-administrator is paid by CFBDS or SFG.
SHAREHOLDER SERVICING AGENTS: The Funds have entered into separate shareholder
servicing agreements with each Shareholder Servicing Agent pursuant to which
that Shareholder Servicing Agent provides shareholder services, including
answering customer inquiries, assisting in processing purchase, exchange and
redemption transactions and furnishing Fund communications to shareholders. For
these services, each Shareholder Servicing Agent receives a fee from each Fund
at an annual rate of 0.25% of the average daily net assets of the Fund
represented by shares owned by investors for whom such Shareholder Servicing
Agent maintains a servicing relationship.
Some Shareholder Servicing Agents may impose certain conditions on their
customers in addition to or different from those imposed by the Funds, such as
requiring a minimum initial investment or charging their customers a direct fee
for their services. Each Shareholder Servicing Agent has agreed to transmit to
its customers who are shareholders of a Fund appropriate prior written
disclosure of any fees that it may charge them directly and to provide written
notice at least 30 days prior to imposition of any transaction fees.
TRANSFER AGENT, CUSTODIAN AND FUND ACCOUNTANT: State Street Bank and Trust
Company acts as transfer agent and dividend disbursing agent for each Fund.
State Street acts as the custodian of each Fund's and each Portfolio's assets.
Securities held for a Fund or Portfolio may be held by a sub-custodian bank
approved by the Fund's or Portfolio's Trustees. State Street (or its affiliate
State Street Canada, Inc.) also provides fund accounting services to the Funds
and the Portfolios and calculates the daily net asset value for the Funds and
the Portfolios.
DISTRIBUTION ARRANGEMENTS: CFBDS is the distributor of each Fund's shares and
also serves as distributor for other mutual funds managed or advised by Citibank
and as a Shareholder Servicing Agent for certain investors. CFBDS receives
distribution fees from the Funds pursuant to Distribution Plans adopted in
accordance with Rule 12b-1 under the 1940 Act. In those states where CFBDS is
not a registered broker-dealer, shares of the Funds are sold through Signature
Broker-Dealer Services, Inc., as dealer.
Under the Distribution Plans, the Funds pay the Distributor a fee at an annual
rate not to exceed 0.10% of the average daily net assets of each Fund. However,
the Distributor has agreed to waive a portion of these fees on a month-to-month
basis. The Distribution Plans also permit the Funds to pay the Distributor an
additional fee (not to exceed 0.10% of the average daily net assets of the
applicable Fund) in anticipation of or as reimbursement for print or electronic
media advertising expenses incurred in connection with the sale of the shares.
The Funds did not make any payments under this provision during their fiscal
years ended August 31, 1997 and do not anticipate doing so during the current
fiscal year.
The Distributor uses the distribution fees to offset each Fund's marketing
costs, such as preparation of sales literature, advertising, and printing and
distributing prospectuses and other shareholder materials to prospective
investors. In addition, the Distributor may use the distribution fees to pay
costs related to distribution activities, including employee salaries, bonuses
and other overhead expenses. The Funds and the Distributor provide to the
Trustees quarterly a written report of amounts expended pursuant to the
Distribution Plans and the purposes for which the expenditures were made.
During the period they are in effect, the Distribution Plans and related
Distribution Agreements obligate the Funds to pay distribution fees to CFBDS as
compensation for its distribution activities, not as reimbursement for specific
expenses incurred. Thus, even if CFBDS's expenses exceed its distribution fees
for any Fund, the Fund will not be obligated to pay more than those fees and, if
CFBDS's expenses are less than such fees, it will retain its full fees and
realize a profit. Each Fund will pay the distribution fees to CFBDS until either
its Distribution Plan or Distribution Agreement is terminated or not renewed. In
that event, CFBDS's expenses in excess of distribution fees received or accrued
through the termination date will be CFBDS's sole responsibility and not
obligations of the Fund.
TAX MATTERS
This discussion of taxes is for general information only. Investors should
consult their own tax advisers about their particular situations.
Each Fund intends to meet requirements of the Internal Revenue Code applicable
to regulated investment companies so that it will not be liable for any federal
income or excise taxes.
FEDERAL INCOME TAXES: With respect to Cash Reserves and U.S. Treasury Reserves,
shareholders are required to pay federal income tax on any dividends and other
distributions received. Generally, distributions from a Fund's net investment
income and short-term capital gains will be taxed as ordinary income.
Distributions from long-term net capital gains will be taxed as such regardless
of how long the shares of a Fund have been held. Dividends and distributions are
treated in the same manner for federal tax purposes whether they are paid in
cash or as additional shares. Distributions derived from interest on U.S.
Government obligations may be exempt from certain state and local taxes.
With respect to Tax Free Reserves, California Tax Free Reserves, Connecticut Tax
Free Reserves and New York Tax Free Reserves, each Fund expects that most of its
net income will be attributable to interest on Municipal Obligations and as a
result most of each Fund's dividends to shareholders will be excludable from
shareholders' gross income. However, each Fund may invest from time to time in
taxable securities, and certain Fund dividends may be subject to the federal
alternative minimum tax. It is also possible, but not intended, that a Fund may
realize short-term or long-term capital gains or losses. Generally,
distributions from a Fund's short-term capital gains will be taxed as ordinary
income, and distributions from long-term net capital gains will be taxed as such
regardless of how long the shares of the Fund have been held. Dividends and
distributions are treated in the same manner for federal tax purposes whether
they are paid in cash or as additional shares.
Fund dividends of tax-exempt income are taken into account in determining the
amount of a shareholder's social security and railroad retirement benefits that
may be subject to federal income tax. No deduction may be claimed for interest
on indebtedness incurred or continued for the purpose of purchasing or carrying
Fund shares. Investors who are, or who are related to, "substantial users" of
facilities financed by private activity bonds should consult their tax advisers
before buying Fund shares.
Early each year, each Fund will notify its shareholders of the amount and tax
status of distributions paid to shareholders for the preceding year.
The account application asks each new shareholder to certify that the
shareholder's Social Security or taxpayer identification number is correct and
that the shareholder is not subject to 31% backup withholding for failing to
report income to the IRS. A Fund may be required to withhold (and pay over to
the IRS for the shareholder's credit) 31% of certain distributions paid to
shareholders who fail to provide this information or otherwise violate IRS
regulations.
STATE AND LOCAL TAXES: Except as noted below, Fund dividends that are excludable
from shareholders' gross income for federal income tax purposes may not
necessarily be exempt from the income or other tax laws of any state or local
taxing authority. Investors should consult their own tax advisers in this
regard.
California Tax Free Reserves: Under existing California law, as long as at the
end of each quarter of the Fund's fiscal year the Fund continues to qualify for
the special federal income tax treatment afforded regulated investment companies
and at least 50% of the value of the Fund's assets consists of California
Municipal Obligations, shareholders of the Fund will be able to exclude from
income, for California personal income tax purposes, dividends received from the
Fund which are derived from income (less related expenses) from the California
Municipal Obligations of the Fund. These dividends must be designated as such by
the Fund by written notice to shareholders within 60 days after the close of
that fiscal year.
The foregoing description is a general, abbreviated summary that relates solely
to the taxation of shareholders subject to California personal income tax.
Accordingly, potential investors, including, in particular, investors who may be
subject to California corporate franchise tax or California corporate income
tax, should consult with their own tax advisers.
Connecticut Tax Free Reserves: Under existing law, the Fund expects that
shareholders will not be subject to the Connecticut personal income tax on
exempt-interest dividends received from the Fund to the extent that such
distributions are derived from interest on Connecticut Municipal Obligations.
Capital-gain dividends derived from Connecticut Municipal Obligations other than
obligations of U.S. territories or possessions and their political subdivisions
are also free from this tax. Other distributions from the Fund, including
exempt-interest dividends attributable to obligations of issuers in other
states, other long-term capital gains and all short-term capital gains, will not
be exempt from the Connecticut personal income tax. Moreover, distributions by
the Fund derived from interest income, other than interest on Connecticut
Municipal Obligations, that are treated as a preference item for federal income
tax purposes may be subject to the net Connecticut minimum tax in the case of
any shareholder subject to the Connecticut personal income tax and required to
pay the federal alternative minimum tax.
New York Tax Free Reserves: To the extent that dividends received from the Fund
are derived from interest on New York Municipal Obligations, the dividends will
also be excluded from the gross income of individual shareholders who are New
York residents for New York State and New York City personal income tax
purposes. Dividends from the Fund are not excluded in determining New York State
or New York City franchise taxes on corporations and financial institutions.
FOREIGN SHAREHOLDERS: Each Fund will withhold U.S. federal income tax payments
at the rate of 30% (or any lower applicable treaty rate) on taxable dividends
and other payments subject to withholding taxes that are made to persons who are
not citizens or residents of the United States. Distributions received from a
Fund by non-U.S. persons also may be subject to tax under the laws of their own
jurisdictions.
PERFORMANCE INFORMATION
Fund performance may be quoted in advertising, shareholder reports and other
communications in terms of yield, effective yield, tax equivalent yield, total
rate of return or tax equivalent total rate of return. All performance
information is historical and is not intended to indicate future performance.
Yields and total rates of return fluctuate in response to market conditions and
other factors.
Each Fund may provide its period and average annualized "total rates of return"
and U.S. Treasury Reserves and each Tax Free Fund may also provide "tax
equivalent total rates of return." The "total rate of return" refers to the
change in the value of an investment in a Fund over a stated period and is
compounded to include the value of any shares purchased with any dividends or
capital gains declared during such period. Period total rates of return may be
"annualized." An "annualized" total rate of return assumes that the period total
rate of return is generated over a one-year period. The "tax equivalent total
rate of return" refers to the total rate of return that a fully taxable money
market fund would have to generate in order to produce an after-tax total rate
of return equivalent to that of a Fund. The use of a tax equivalent total rate
of return allows investors to compare the total rates of return of a Fund, the
dividends from which may be exempt from federal or state personal income taxes,
with the total rates of return of funds the dividends from which are not tax
exempt.
Each Fund may provide annualized "yield" and "effective yield" quotations, and
U.S. Treasury Reserves and each Tax Free Fund may also provide "tax equivalent
yield" quotations. The "yield" of a Fund refers to the income generated by an
investment in the Fund over a seven-day period (which period is stated in any
such advertisement or communication). This income is then annualized; that is,
the amount of income generated by the investment over that period is assumed to
be generated each week over a 365-day period and is shown as a percentage of the
investment. The "effective 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 yield because of
the compounding effect of this assumed reinvestment. The "tax equivalent yield"
refers to the yield that a fully taxable money market fund would have to
generate in order to produce an after-tax yield equivalent to that of a Fund.
The use of a tax equivalent yield allows investors to compare the yield of the
Fund, the dividends from which may be exempt from federal or state personal
income tax, with yields of funds the dividends from which are not tax exempt. A
Fund may also provide yield, effective yield and tax equivalent yield quotations
for longer periods.
Of course, any direct fees charged by a shareholder's Shareholder Servicing
Agent will reduce that shareholder's net return on his or her investment. See
the Statement of Additional Information for more information concerning the
calculation of yield and total rate of return quotations for the Funds.
GENERAL INFORMATION
ORGANIZATION: Cash Reserves and U.S. Treasury Reserves are diversified series of
CitiFunds Trust III. Prior to January 2, 1998, Cash Reserves and U.S. Treasury
Reserves were called Landmark Cash Reserves and Landmark U.S. Treasury Reserves,
respectively, and CitiFunds Trust III was called Landmark Funds III. CitiFunds
Trust III is a Massachusetts business trust which was organized on June 28,
1985; the Trust also is an open-end management investment company registered
under the 1940 Act.
Under the 1940 Act, a diversified series or diversified investment company must
invest at least 75% of its assets in cash and cash items, U.S. Government
securities, investment company securities and other securities limited as to any
one issuer to not more than 5% of the total assets of the investment company and
not more than 10% of the voting securities of the issuer.
Tax Free Reserves is a non-diversified, open-end management investment company
which was organized as a Massachusetts business trust on June 21, 1985. The Fund
is registered under the 1940 Act. Prior to January 2, 1998, the Fund was called
Landmark Tax Free Reserves. The Fund is the successor to the business of The
Landmark Funds Tax Free Reserves, Inc., which was incorporated in Maryland in
1983.
California Tax Free Reserves, Connecticut Tax Free Reserves and New York Tax
Free Reserves are non-diversified series of CitiFunds Multi-State Tax Free
Trust. CitiFunds Multi-State Tax Free Trust is a Massachusetts business trust
which was organized on August 30, 1985. Prior to January 2, 1998, these Funds
were called Landmark California Tax Free Reserves, Landmark Connecticut Tax Free
Reserves and Landmark New York Tax Free Reserves, respectively, and CitiFunds
Multi-State Tax Free Trust was called Landmark Multi-State Tax Free Funds.
CitiFunds Multi-State Tax Free Trust is a non-diversified, open-end management
investment company registered under the 1940 Act.
Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the trust's
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the trust itself was unable to meet its
obligations.
"CitiFunds" is a service mark of Citicorp.
Each Portfolio is a separate trust organized under the laws of the State of New
York. The Declaration of Trust of each Portfolio provides that a Fund and other
entities investing in a Portfolio are each liable for all obligations of that
Portfolio. However, it is not expected that the liabilities of a Portfolio would
ever exceed its assets.
VOTING AND OTHER RIGHTS: Each of CitiFunds Trust III, CitiFunds Multi-State Tax
Free Trust and CitiFunds Tax Free Reserves may issue an unlimited number of
shares, may create new series of shares and may divide shares in each series
into classes. Each share of each Fund gives the shareholder one vote in Trustee
elections and other matters submitted to shareholders for vote. All shares ofr
each series have equal voting rights except that, in matters affecting only a
particular series or class, only shares of that particular series or class are
entitled to vote.
At any meeting of shareholders of a Fund, a Shareholder Servicing Agent may vote
any shares of which it is the holder of record and for which it does not receive
voting instructions proportionately in accordance with instructions it receives
for all other shares of which that Shareholder Servicing Agent is the holder of
record.
As Massachusetts business trusts, the Trusts are not required to hold annual
shareholder meetings. Shareholder approval will usually be sought only for
changes in a Fund's or Portfolio's fundamental investment restrictions and for
the election of Trustees under certain circumstances. Trustees may be removed by
shareholders under certain circumstances. Each share of each Fund is entitled to
participate equally in dividends and other distributions and the proceeds of any
liquidation of that Fund.
CERTIFICATES: The Funds' Transfer Agent maintains a share register for
shareholders of record, i.e., Shareholder Servicing Agents. Share certificates
are not issued.
RETIREMENT PLANS: Investors in Cash Reserves and U.S. Treasury Reserves may be
able to establish new accounts in these Funds under one of several tax-sheltered
plans. Such plans include IRAs, Keogh or Corporate Profit-Sharing and
Money-Purchase Plans, 403(b) Custodian Accounts, and certain other qualified
pension and profit-sharing plans. Investors should consult with their
Shareholder Servicing Agents and tax and retirement advisers.
EXPENSES: For the fiscal year ended August 31, 1997, total operating expenses
of the Funds, after allocating to each applicable Fund its share of its
Portfolio's expenses and after giving effect to fee waivers or reimbursements,
were as follows: for Cash Reserves, 0.70% of the Fund's average daily net
assets for that fiscal year; for U.S. Treasury Reserves, 0.70% of the Fund's
average daily net assets for that fiscal year; and for each Tax Free Fund,
0.65% of each Fund's average daily net assets for that fiscal year. All fee
waivers and reimbursements are voluntary and may be reduced or terminated at
any time.
- --------------------------------------------------------------------------------
The separate Statements of Additional Information dated the date hereof contain
more detailed information about the Funds, including information related to (i)
investment policies and restrictions, (ii) the Trustees, officers, Adviser and
Administrators, (iii) securities transactions, (iv) the Funds' shares, including
rights and liabilities of shareholders, (v) the method used to calculate
performance information and (vi) the determination of net asset value.
No person has been authorized to give any information or make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by rthe Funds
or their distributor. This Prospectus does not constitute an offering by the
Funds or their distributor in any jurisdiction in which such offering may not
lawfully be made.
<PAGE>
APPENDIX A
PERMITTED INVESTMENTS AND
INVESTMENT PRACTICES
Repurchase Agreements. Each Fund (other than U.S. Treasury Reserves) may enter
into repurchase agreements. Repurchase agreements are transactions in which an
institution sells the Fund a security at one price, subject to the Fund's
obligation to resell and the selling institution's obligation to repurchase that
security at a higher price normally within a seven day period. There may be
delays and risks of loss if the seller is unable to meet its obligation to
repurchase.
Treasury Receipts. Cash Reserves and U.S. Treasury Reserves may each invest in
Treasury Receipts, which are unmatured interest coupons of U.S. Treasury bonds
and notes which have been separated and resold in a custodial receipt program
administered by the U.S. Treasury.
Commercial Paper. Cash Reserves may invest in commercial paper, which is
unsecured debt of corporations usually maturing in 270 days or less from its
date of issuance.
Asset-Backed Securities. Cash Reserves may invest in asset-backed securities,
which represent fractional interests in underlying pools of assets, such as car
installment loans or credit card receivables. The rate of return on asset-
backed securities may be affected by prepayment of the underlying loans or
receivables. Reinvestment of principal may occur at higher or lower rates than
the original yield.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements and in order to generate additional income, each Fund may lend its
portfolio securities to broker-dealers and other institutional borrowers. Such
loans must be callable at any time and continuously secured by collateral (cash
or U.S. Government securities) in an amount not less than the market value,
determined daily, of the securities loaned. It is intended that the value of
securities loaned by a Fund would not exceed 33 1/3% of the Fund's net assets.
In the event of the bankruptcy of the other party to a securities loan or a
repurchase agreement, a Fund could experience delays in recovering either the
securities lent or cash. To the extent that, in the meantime, the value of the
securities lent have increased or the value of the securities purchased have
decreased, the Fund could experience a loss.
Private Placements and Illiquid Investments. Each Fund may invest up to 10% of
its net assets in securities for which there is no readily available market.
These illiquid securities may include privately placed restricted securities for
which no institutional market exists. The absence of a trading market can make
it difficult to ascertain a market value for illiquid investments. Disposing of
illiquid investments may involve time-consuming negotiation and legal expenses,
and it may be difficult or impossible for a Fund to sell them promptly at an
acceptable price.
Additional Permitted Investments and Investment Practices for the Tax Free
Funds:
Municipal Bonds. Municipal bonds are debt obligations of states, cities,
municipalities and municipal agencies and authorities which generally have a
maturity at the time of issuance of one year or more and which are issued to
raise funds for various public purposes, such as construction of a wide range of
public facilities, refunding outstanding obligations or obtaining funds for
institutions and facilities. The two principal classifications of municipal
bonds are "general obligation" and "revenue" bonds. General obligation bonds are
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. The principal of and interest on revenue
bonds are payable from the income of specific projects or authorities and
generally are not supported by the issuer's general power to levy taxes. In some
cases, revenues derived from specific taxes are pledged to support payments on a
revenue bond.
In addition, certain kinds of private activity bonds ("IDBs") are issued by or
on behalf of public authorities to provide funding for various privately
operated industrial facilities, such as warehouse, office, plant and store
facilities and environmental and pollution control facilities. IDBs are, in most
cases, revenue bonds. The payment of the principal and interest on IDBs usually
depends solely on the ability of the user of the facilities financed by the
bonds or other guarantor to meet its financial obligations and, in certain
instances, the pledge of real and personal property as security for payment.
Many IDBs may not be readily marketable; however, the IDBs or the participation
certificates in IDBs purchased by a Fund will have liquidity because they
generally will be supported by demand features to "high quality" banks,
insurance companies or other financial institutions.
Municipal Notes. There are four major varieties of state and municipal notes:
Tax and Revenue Anticipation Notes ("TRANs"); Tax Anticipation Notes ("TANs");
Revenue Anticipation Notes ("RANs"); and Bond Anticipation Notes ("BANs").
TRANs, TANs and RANs are issued by states, municipalities and other tax-exempt
issuers to finance short-term cash needs or, occasionally, to finance
construction. Many TRANs, TANs and RANs are general obligations of the issuing
entity payable from taxes or designated revenues, respectively, expected to be
received within the related fiscal period. BANs are issued with the expectation
that their principal and interest will be paid out of proceeds from renewal
notes or bonds to be issued prior to the maturity of the BANs. BANs are issued
most frequently by both general obligation and revenue bond issuers usually to
finance such items as land acquisition, facility acquisition and/or construction
and capital improvement projects.
Variable Rate Instruments and Participation Interests. Variable rate instruments
provide for a periodic adjustment in the interest rate paid on the instrument
and usually permit the holder to receive payment of principal and accrued
interest upon a specified number of day's notice. Variable rate instruments in
which a Fund may invest include participation interests in Municipal Obligations
owned by a bank, insurance company or other financial institution or affiliated
organization ("Participation Interests"). A variable rate instrument or a
Participation Interest may be backed by an irrevocable letter of credit or
guarantee of, or a right to put to, a bank, or an insurance policy of an
insurance company. See "Stand-by Commitments." Purchase of a Participation
Interest may involve the risk that the Fund will not be deemed to be the owner
of the underlying Municipal Obligation for purposes of the ability to claim tax
exemption of interest paid on that Municipal Obligation. If interest rates rise
or fall, the rates payable on variable rate instruments will generally be
readjusted. As a result variable rate instruments do not offer the same
opportunity for capital appreciation or loss as fixed rate instruments.
Stand-by Commitments. When a Fund purchases Municipal Obligations it may also
acquire stand-by commitments from banks with respect to such Municipal
Obligations. A Fund also may acquire stand-by commitments from broker-dealers.
Under a stand-by commitment, a bank or broker-dealer agrees to purchase at the
Fund's option a specified Municipal Obligation at a specified price. A stand-by
commitment is the equivalent of a "put" option with respect to a particular
Municipal Obligation. Each Fund intends to acquire stand-by commitments solely
to facilitate liquidity. Stand-by commitments are subject to certain risks,
which include the ability of the issuer of the commitment to pay for the
Municipal Obligations at the time the commitment is exercised, the fact that the
commitment is not marketable, and that the maturity of the underlying security
will generally be different from that of the commitment.
"When-Issued" Securities. In order to ensure the availability of suitable
securities, a Fund may purchase securities on a "when-issued" or on a "forward
delivery" basis, which means that the securities would be delivered to the Fund
at a future date beyond customary settlement time. Under normal circumstances,
the Fund takes delivery of the securities. In general, the purchaser does not
pay for the securities until received and does not start earning interest until
the contractual settlement date. While awaiting delivery of the securities, the
Fund establishes a segregated account consisting of cash, cash equivalents or
high quality debt securities equal to the amount of the Fund's commitments to
purchase "when-issued" securities. An increase in the percentage of a Fund's
assets committed to the purchase of securities on a "when-issued" basis may
increase the volatility of its net asset value.
<PAGE>
APPENDIX B
RATINGS OF MUNICIPAL OBLIGATIONS*
The ratings of Moody's Investors Service, Inc., Standard & Poor's Ratings Group
and Fitch IBCA, Inc. represent their opinions as to the quality of various debt
obligations. It should be emphasized, however, that ratings are not absolute
standards of quality. Consequently, Municipal Obligations with the same
maturity, coupon and rating may have different yields while Municipal
Obligations of the same maturity and coupon with different ratings may have the
same yield.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
TWO HIGHEST LONG-TERM DEBT RATINGS:
Aaa -- Bonds which are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and generally are referred to as
"gilt edged". Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
Note: Those bonds in the Aa group which Moody's believes possess the
strongest investment attributes are designated by the symbol Aa1.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S TWO HIGHEST RATINGS OF STATE
AND MUNICIPAL NOTES:
Moody's ratings for state and municipal short-term obligations are designated
Moody's Investment Grade ("MIG"). Issues or the features associated with MIG or
VMIG ratings are identified by date of issue, date of maturity or maturities or
rating expiration date and description to distinguish each rating from other
ratings. Each rating designation is unique with no implication as to any other
similar issue of the same obligor. MIG ratings terminate at the retirement of
the obligation while VMIG rating expiration will be a function of each issue's
specific structural or credit features. Symbols used are as follows:
MIG 1/VMIG 1 -- This designation denotes best quality. There is presently strong
protection by established cash flows, superior liquidity support or demonstrated
broad-based access to the market for refinancing.
- ----------
*As described by the rating agencies. Ratings are generally given to securities
at the time of issuance. While the rating agencies may from time to time revise
such ratings, they undertake no obligation to do so.
MIG 2/VMIG 2 -- This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
TWO HIGHEST SHORT-TERM DEBT RATINGS:
Moody's short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations. These obligations have an original maturity
not exceeding one year.
Issuers rated Prime-1 (or supporting institutions) have a superior ability for
repayment of senior short-term debt obligations. Prime-1 repayment ability will
often be evidenced by many of the following characteristics: (1) leading market
positions in well established industries; (2) high rates of return on funds
employed; (3) conservative capitalization structure with moderate reliance on
debt and ample asset protection; (4) broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and (5) well established
access to a range of financial markets and assured sources of alternate
liquidity.
Issuers rated Prime-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S
TWO HIGHEST LONG-TERM DEBT RATINGS:
AAA -- An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitments on the
obligation is extremely strong.
AA -- An obligation rated AA differs from the highest rated obligations only in
small degree. The obligor's capacity to meet its financial obligations is very
strong.
Plus (+) or Minus (-): The AA rating may be modified by the addition of a plus
or minus sign to show relative standing within the AA rating category.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S TWO HIGHEST RATINGS OF STATE
AND MUNICIPAL NOTES:
A Standard & Poor's note rating reflects the liquidity factors and market access
risks unique to notes. Notes maturing in three years or less will likely receive
a note rating. Notes maturing beyond three years will most likely receive a
long-term debt rating. The following criteria will be used in making that
assessment:
-- Amortization schedule -- the larger the final maturity relative to other
maturities, the more likely the issue is to be treated as a note.
-- Source of payment -- the more dependent the issue is on the market for its
refinancing, the more likely it will be treated as a note.
Note rating symbols and definitions are as follows:
SP-1 -- Strong capacity to pay principal and interest. Issues determined to
possess very strong characteristics are given a plus (+) designation.
SP-2 -- Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S
TWO HIGHEST COMMERCIAL PAPER RATINGS:
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days.
A-1 -- A short-term obligation rated A-1 is rated in the highest category by
Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.
A-2 -- A short-term obligation rated A-2 is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligation is satisfactory.
DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S
RATINGS OF TAX-EXEMPT DEMAND BONDS:
Standard & Poor's assigns "dual" ratings to all debt issues that have a put
option or demand feature as part of their structure.
The first rating addresses the likelihood of repayment of principal and interest
as due, and the second rating addresses only the demand feature. The long-term
debt rating symbols are used for bonds to denote the long-term maturity and the
commercial paper rating symbols for the put option (for example, "AAA/A-1+").
With short-term demand debt, Standard & Poor's rating symbols are used with the
commercial paper rating symbols (for example, "SP-1+/A-1+").
DESCRIPTION OF FITCH IBCA, INC.'S
TWO HIGHEST INTERNATIONAL LONG-TERM CREDIT RATINGS:
When assigning ratings, Fitch IBCA considers the historical and prospective
financial condition, quality of management, and the operating performance of the
issuer and of any quarantor, any special features of a specific issue or
guarantee, the issue's relationship to other obligations of the issuer, as well
as developments in the economic and political environment that might affect the
issuer's financial strength and credit quality.
Variable rate demand obligations and other securities which contain a demand
feature will have a dual rating, such as "AAA/F1+". The first rating denotes
long-term ability to make principal and interest payments. The second rating
denotes ability to meet a demand feature in full and on time.
AAA -- Highest credit quality. "AAA" ratings denote the lowest expectation of
credit risk. They are assigned only in the case of exceptionally strong capacity
for timely payment of financial commitments. This capacity is highly unlikely to
be adversely affected by foreseeable events.
AA -- Very high credit quality. "AA" ratings denote a very low expectation of
credit risk. They indicate very strong capacity for timely payment of financial
commitments. This capacity is not significantly vulnerable to foreseeable
events.
Plus (+) or Minus (-): "+" or "-" may be appended to a rating of "AA" to denote
relative status within the rating category.
DESCRIPTION OF FITCH IBCA, INC.'S
TWO HIGHEST INTERNATIONAL SHORT-TERM CREDIT RATINGS:
A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial commitments
in a timely manner.
F-1 -- Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" denote any exceptionally
strong credit feature.
F-2 -- Good Credit Quality. A satisfactory capacity for timely payment of
financial commitments, but the margin of safety is not as great as in the case
of the higher ratings.
<PAGE>
APPENDIX C
TAXABLE EQUIVALENT YIELD TABLES
RATES FOR 1997 UNDER FEDERAL PERSONAL INCOME TAX LAW
The table below shows the approximate taxable bond yields which are equivalent
to tax-exempt bond yields under 1997 federal personal income tax laws. SUCH
YIELDS MAY DIFFER UNDER THE LAWS APPLICABLE TO SUBSEQUENT YEARS IF THE EFFECT OF
ANY SUCH LAW IS TO CHANGE ANY TAX BRACKET OR THE AMOUNT OF TAXABLE INCOME WHICH
IS APPLICABLE TO A TAX BRACKET. Separate calculations, showing the applicable
taxable income brackets, are provided for investors who file joint returns and
for investors who file individual returns. While it is expected that a
substantial portion of the dividends paid to shareholders of the Fund will be
exempt from federal personal income taxes, portions of such dividends from time
to time may be subject to federal income taxes.
FEDERAL TABLE
<TABLE>
<CAPTION>
TAXABLE INCOME* FEDERAL TAX-EXEMPT YIELD
- ---------------------------------------------------------------------------------------------------------------------------------
INCOME
TAX
SINGLE RETURN JOINT RETURN BRACKET 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
BUT BUT
OVER NOT OVER OVER NOT OVER EQUIVALENT TAXABLE YIELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 $ 24,650 $ 0 $ 41,200 15.00% 2.35% 2.94% 3.53% 4.12% 4.71% 5.29% 5.88% 6.47% 7.06% 7.65%
$ 24,650 $ 59,750 $ 41,200 $ 99,600 28.00% 2.78% 3.47% 4.17% 4.86% 5.56% 6.25% 6.94% 7.64% 8.33% 9.03%
$ 59,750 $124,650 $ 99,600 $151,750 31.00% 2.90% 3.62% 4.35% 5.07% 5.80% 6.52% 7.25% 7.97% 8.70% 9.42%
$124,650 $271,050 $151,750 $271,050 36.00% 3.13% 3.91% 4.69% 5.47% 6.25% 7.03% 7.81% 8.59% 9.38% 10.16%
271,051 $271,051 39.60% 3.31% 4.14% 4.97% 5.79% 6.62% 7.45% 8.28% 9.11% 9.93% 10.76%
</TABLE>
*Net amount subject to federal income tax after deductions and exemptions.
<PAGE>
CITIFUNDS CALIFORNIA TAX FREE RESERVES
RATES FOR 1997 UNDER FEDERAL AND CALIFORNIA PERSONAL INCOME TAX LAWS
The table below shows the approximate taxable bond yields which are equivalent
to tax-exempt bond yields under 1997 federal and California personal income tax
laws. SUCH YIELDS MAY DIFFER UNDER THE LAWS APPLICABLE TO SUBSEQUENT YEARS IF
THE EFFECT OF ANY SUCH LAW IS TO CHANGE ANY TAX BRACKET OR THE AMOUNT OF TAXABLE
INCOME WHICH IS APPLICABLE TO A TAX BRACKET. Separate calculations, showing the
applicable taxable income brackets, are provided for investors who file joint
returns and for investors who file individual returns. While it is expected that
a substantial portion of the dividends paid to shareholders of the Fund will be
exempt from federal and California personal income taxes, portions of such
dividends from time to time may be subject to federal income taxes and/or
California personal income taxes.
FEDERAL AND CALIFORNIA STATE TABLE
<TABLE>
<CAPTION>
TAXABLE INCOME* TAX-EXEMPT YIELD
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME
TAX
SINGLE RETURN JOINT RETURN BRACKET** 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
BUT BUT
OVER NOT OVER OVER NOT OVER EQUIVALENT TAXABLE YIELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 $ 24,650 17.81% 2.43% 3.04% 3.65% 4.26% 4.87% 5.48% 6.08% 6.69% 7.30% 7.91%
$ 0 $ 41,200 17.36% 2.42% 3.03% 3.63% 4.24% 4.84% 5.45% 6.05% 6.66% 7.26% 7.87%
$ 24,650 $ 59,750 34.42% 3.05% 3.81% 4.57% 5.34% 6.10% 6.86% 7.62% 8.39% 9.15% 9.91%
$ 41,200 $ 99,600 34.03% 3.03% 3.79% 4.55% 5.31% 6.06% 6.82% 7.58% 8.34% 9.10% 9.85%
$ 59,750 $124,650 37.42% 3.20% 3.99% 4.79% 5.59% 6.39% 7.19% 7.99% 8.79% 9.59% 10.39%
$ 99,600 $151,750 37.42% 3.20% 3.99% 4.79% 5.59% 6.39% 7.19% 7.99% 8.79% 9.59% 10.39%
$124,650 $271,050 41.95% 3.45% 4.31% 5.17% 6.03% 6.89% 7.75% 8.61% 9.47% 10.34% 11.20%
$151,750 $271,050 41.95% 3.45% 4.31% 5.17% 6.03% 6.89% 7.75% 8.61% 9.47% 10.34% 11.20%
$271,051 $271,051 45.22% 3.65% 4.56% 5.48% 6.39% 7.30% 8.21% 9.13% 10.04% 10.95% 11.87%
</TABLE>
*Net amount subject to federal and California personal income tax after
deductions and exemptions.
**Effective combined federal and state tax bracket. State tax rate based on the
average state rate for the federal tax bracket. Combined Federal and
California rate assumes itemization of state tax deduction.
<PAGE>
CITIFUNDS CONNECTICUT TAX FREE RESERVES
RATES FOR 1997 UNDER FEDERAL AND CONNECTICUT PERSONAL INCOME TAX LAWS
The table below shows the approximate taxable bond yields which are equivalent
to tax-exempt bond yields under 1997 federal and Connecticut personal income tax
laws. SUCH YIELDS MAY DIFFER UNDER THE LAWS APPLICABLE TO SUBSEQUENT YEARS IF
THE EFFECT OF ANY SUCH LAW IS TO CHANGE ANY TAX BRACKET OR THE AMOUNT OF TAXABLE
INCOME WHICH IS APPLICABLE TO A TAX BRACKET. Separate calculations, showing the
applicable taxable income brackets, are provided for investors who file joint
returns and for investors who file individual returns. While it is expected that
a substantial portion of the dividends paid to shareholders of the Fund will be
exempt from federal and Connecticut personal income taxes, portions of such
dividends from time to time may be subject to federal income taxes and/or
Connecticut personal income taxes.
FEDERAL AND CONNECTICUT TABLE
<TABLE>
<CAPTION>
TAXABLE INCOME* TAX-EXEMPT YIELD
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME
TAX
SINGLE RETURN JOINT RETURN BRACKET** 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
BUT BUT
OVER NOT OVER OVER NOT OVER EQUIVALENT TAXABLE YIELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 $ 24,650 18.59% 2.46% 3.07% 3.69% 4.30% 4.91% 5.53% 6.14% 6.76% 7.37% 7.98%
$ 0 $ 41,200 18.55% 2.46% 3.07% 3.68% 4.30% 4.91% 5.52% 6.14% 6.75% 7.37% 7.98%
$ 24,650 $ 59,750 $ 41,200 $ 96,600 31.24% 2.91% 3.64% 4.36% 5.09% 5.82% 6.54% 7.27% 8.00% 8.73% 9.45%
$ 59,750 $124,650 $ 99,600 $151,750 34.11% 3.04% 3.79% 4.55% 5.31% 6.07% 6.83% 7.59% 8.35% 9.11% 9.86%
$124,650 $271,050 $151,750 $271,050 38.88% 3.27% 4.09% 4.91% 5.73% 6.54% 7.36% 8.18% 9.00% 9.82% 10.63%
$271,051 $271,051 42.32% 3.47% 4.33% 5.20% 6.07% 6.93% 7.80% 8.67% 9.54% 10.40% 11.27%
</TABLE>
*Net amount subject to federal and Connecticut personal income tax after
deductions and exemptions.
**Effective combined federal and state tax bracket. State tax rate based on the
average state rate for the federal tax bracket. Combined Federal and
Connecticut rate assumes itemization of state tax deduction.
<PAGE>
CITIFUNDS NEW YORK TAX FREE RESERVES
RATES FOR 1997 UNDER FEDERAL AND NEW YORK PERSONAL INCOME TAX LAWS
The tables below show the approximate taxable bond yields which are equivalent
to tax-exempt bond yields under 1997 federal and New York personal income tax
laws. SUCH YIELDS MAY DIFFER UNDER THE LAWS APPLICABLE TO SUBSEQUENT YEARS IF
THE EFFECT OF ANY SUCH LAW IS TO CHANGE ANY TAX BRACKET OR THE AMOUNT OF TAXABLE
INCOME WHICH IS APPLICABLE TO A TAX BRACKET. Separate calculations, showing the
applicable taxable income brackets, are provided for investors who file joint
returns and for investors who file individual returns. While it is expected that
a substantial portion of the dividends paid to shareholders of the Fund will be
exempt from federal, New York State and New York City personal income taxes,
portions of such dividends from time to time may be subject to federal income
taxes and/or New York State and New York City personal income taxes.
FEDERAL AND NEW YORK STATE TABLE
<TABLE>
<CAPTION>
TAXABLE INCOME* TAX-EXEMPT YIELD
- -----------------------------------------------------------------------------------------------------------------------------------
INCOME
TAX
SINGLE RETURN JOINT RETURN BRACKET** 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
BUT BUT
OVER NOT OVER OVER NOT OVER EQUIVALENT TAXABLE YIELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 $ 24,650 19.45% 2.48% 3.10% 3.72% 4.35% 4.97% 5.59% 6.21% 6.83% 7.45% 8.07%
$ 0 $ 41,200 19.18% 2.47% 3.09% 3.71% 4.33% 4.95% 5.57% 6.19% 6.81% 7.42% 8.04%
$ 24,650 $ 59,750 32.93% 2.98% 3.73% 4.47% 5.22% 5.96% 6.71% 7.45% 8.20% 8.95% 9.69%
$ 41,200 $ 99,600 32.93% 2.98% 3.73% 4.47% 5.22% 5.96% 6.71% 7.45% 8.20% 8.95% 9.69%
$ 59,750 $124,650 35.73% 3.11% 3.89% 4.67% 5.45% 6.22% 7.00% 7.78% 8.56% 9.34% 10.11%
$ 99,600 $151,750 35.73% 3.11% 3.89% 4.67% 5.45% 6.22% 7.00% 7.78% 8.56% 9.34% 10.11%
$124,650 $271,050 $151,750 $271,050 40.38% 3.35% 4.19% 5.03% 5.87% 6.71% 7.55% 8.39% 9.23% 10.06% 10.90%
$271,051 $271,051 43.74% 3.55% 4.44% 5.33% 6.22% 7.11% 8.00% 8.89% 9.78% 10.66% 11.55%
</TABLE>
*Net amount subject to federal and New York personal income tax after
deductions and exemptions.
**Effective combined federal and state tax bracket. State tax rate based on the
average state rate for the federal income tax bracket and 1997 State Tax
rates.
<PAGE>
FEDERAL, NEW YORK STATE AND NEW YORK CITY TABLE
<TABLE>
<CAPTION>
TAXABLE INCOME* TAX-EXEMPT YIELD
- ------------------------------------------------------------------------------------------------------------------------------------
INCOME
TAX
SINGLE RETURN JOINT RETURN BRACKET** 2.00% 2.50% 3.00% 3.50% 4.00% 4.50% 5.00% 5.50% 6.00% 6.50%
BUT BUT
OVER NOT OVER OVER NOT OVER EQUIVALENT TAXABLE YIELD
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
$ 0 $ 24,650 22.71% 2.59% 3.23% 3.88% 4.53% 5.18% 5.82% 6.47% 7.12% 7.76% 8.41%
$ 0 $ 41,200 22.41% 2.58% 3.22% 3.87% 4.51% 5.16% 5.80% 6.44% 7.09% 7.73% 8.38%
$ 24,650 $ 59,750 36.11% 3.13% 3.91% 4.70% 5.48% 6.26% 7.04% 7.83% 8.61% 9.39% 10.17%
$ 41,200 $ 99,600 36.11% 3.13% 3.91% 4.70% 5.48% 6.26% 7.04% 7.83% 8.61% 9.39% 10.17%
$ 59,750 $124,650 38.80% 3.27% 4.08% 4.90% 5.72% 6.54% 7.35% 8.17% 8.99% 9.80% 10.62%
$ 99,600 $151,750 38.80% 3.27% 4.08% 4.90% 5.72% 6.54% 7.35% 8.17% 8.99% 9.80% 10.62%
$124,650 $271,050 $151,750 $271,050 43.24% 3.52% 4.40% 5.29% 6.17% 7.05% 7.93% 8.81% 9.69% 10.57% 11.45%
$271,051 $271,051 46.43% 3.73% 4.67% 5.60% 6.53% 7.47% 8.40% 9.33% 10.27% 11.20% 12.13%
</TABLE>
*Net amount subject to federal and New York State personal income tax after
deductions and exemptions.
**Effective combined federal, state, and city tax bracket. State tax rate based
on the average rate for the federal income tax bracket and 1997 State tax
rates including surcharges.
<PAGE>
CFCP/RET 198 [RECYCLE LOGO] Printed on recycled paper
<PAGE>
Statement of
Additional Information
January 2, 1998
CITIFUNDSSM CASH RESERVES
CITIFUNDSSM U.S. TREASURY RESERVES
(Members of the CitiFunds (SM) Family of Funds)
CitiFunds(SM) Cash Reserves ("Cash Reserves") and CitiFunds(SM) U.S.
Treasury Reserves ("U.S. Treasury Reserves" and together with Cash Reserves, the
"Funds") are each separate series of CitiFunds Trust III (the "Trust"). The
address and telephone number of the Trust are 6 St. James Avenue, Boston,
Massachusetts 02116, (617) 423-1679. The Trust invests all of the investable
assets of Cash Reserves and U.S. Treasury Reserves in, respectively, Cash
Reserves Portfolio and U.S. Treasury Reserves Portfolio (the "Portfolios"). The
address of Cash Reserves Portfolio is Elizabethan Square, George Town, Grand
Cayman, British West Indies. The address and telephone number of U.S. Treasury
Reserves Portfolio are 6 St. James Avenue, Boston, Massachusetts 02116, (617)
423-1679.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, CITIBANK, N.A. OR ANY OF ITS AFFILIATES, ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
TABLE OF CONTENTS PAGE
1. The Funds ............................................................. 2
2. Investment Objectives, Policies and Restrictions ...................... 2
3. Performance Information ............................................... 9
4. Determination of Net Asset Value ...................................... 10
5. Management ............................................................ 11
6. Portfolio Transactions ................................................ 17
7. Description of Shares, Voting Rights and Liabilities .................. 17
8. Certain Additional Tax Matters ........................................ 19
9. Independent Accountants and Financial Statements ...................... 19
This Statement of Additional Information sets forth information which may be
of interest to investors but which is not necessarily included in the Funds'
Prospectus, dated January 2, 1998. This Statement of Additional Information
should be read in conjunction with the Prospectus, a copy of which may be
obtained by an investor without charge by contacting the Funds' Distributor (see
back cover for address and phone number).
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY
AN EFFECTIVE PROSPECTUS.
<PAGE>
1. THE FUNDS
The Trust is a no-load, diversified, open-end management investment company
which was organized as a business trust under the laws of the Commonwealth of
Massachusetts on June 28, 1985 and is the successor to the business of The
Landmark Funds Cash Reserves, Inc., which was incorporated under the laws of the
State of Maryland in 1984. Prior to January 2, 1998, the Trust was called
Landmark Funds III.All references in this Statement of Additional Information to
the Trust's activities are intended to include those of the Trust and its
predecessor, unless the context indicates otherwise. Shares of the Trust are
divided into two separate series, CitiFunds Cash Reserves and CitiFunds U.S.
Treasury Reserves, which are described in this Statement of Additional
Information. Prior to January 2, 1998, Cash Reserves and U.S. Treasury Reserves
were called Landmark Cash Reserves and Landmark U.S. Treasury Reserves,
respectively. References in this Statement of Additional Information to the
Prospectus are to the Prospectus, dated January 2, 1998, of the Funds by which
shares of the Funds are offered.
Each of the Funds is a type of mutual fund commonly referred to as a "money
market fund." The net asset value of each of the Funds' shares is expected to
remain constant at $1.00, although there can be no assurance that this will be
so on a continuing basis. (See "Determination of Net Asset Value.")
The Trust seeks the investment objectives of the Funds by investing all the
investable assets of Cash Reserves and U.S. Treasury Reserves in, respectively,
Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio. Each of the
Portfolios is a diversified open-end management investment company. Each
Portfolio has the same investment objectives and policies as its corresponding
Fund.
Citibank, N.A. ("Citibank" or the "Adviser") is the investment adviser to
each of the Portfolios. The Adviser manages the investments of each Portfolio
from day to day in accordance with the investment objectives and policies of
that Portfolio. The selection of investments for each Portfolio, and the way
they are managed, depend on the conditions and trends in the economy and the
financial marketplaces.
CFBDS, Inc. ("CFBDS" or the "Administrator") supervises the overall
administration of the Trust and U.S. Treasury Reserves Portfolio. Signature
Financial Group (Cayman) Ltd., ("SFG") supervises the overall administration of
Cash Reserves Portfolio. The Boards of Trustees of the Trust and the Portfolios
provide broad supervision over the affairs of the Trust and of the Portfolios,
respectively. Shares of each Fund are continuously sold by CFBDS, the Funds'
distributor (the "Distributor"), only to investors who are customers of a
financial institution, such as a federal or state-chartered bank, trust company,
savings and loan association or savings bank, or a securities broker, that has
entered into a shareholder servicing agreement with the Trust with respect to
that Fund (collectively, "Shareholder Servicing Agents"). Although shares of the
Funds are sold without a sales load, CFBDS may receive fees from the Funds
pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act").
2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES
The investment objectives of CASH RESERVES are to provide shareholders of
the Fund with liquidity and as high a level of current income as is consistent
with the preservation of capital.
The investment objectives of U.S. TREASURY RESERVES are to provide
shareholders of the Fund with liquidity and as high a level of current income
from U.S. Government obligations as is consistent with the preservation of
capital.
The investment objectives of each Fund may be changed without approval by
that Fund's shareholders. Of course, there can be no assurance that either Fund
will achieve its investment objectives.
INVESTMENT POLICIES
The Trust seeks the investment objectives of the Funds by investing all of
the investable assets of Cash Reserves and U.S. Treasury Reserves in,
respectively, Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio, each
of which has the same investment objectives and policies as its corresponding
Fund. The Prospectus contains a discussion of the various types of securities in
which each Portfolio may invest and the risks involved in such investments. The
following supplements the information contained in the Prospectus concerning the
investment objectives, policies and techniques of each Fund and each Portfolio.
Since the investment characteristics of each Fund will correspond directly to
those of the Portfolio in which it invests, the following is a supplementary
discussion with respect to each Portfolio.
The Trust may withdraw the investment of either Fund from its corresponding
Portfolio at any time, if the Board of Trustees of the Trust determines that it
is in the best interests of the Fund to do so. Upon any such withdrawal, a
Fund's assets would be invested in accordance with the investment policies
described below with respect to its corresponding Portfolio. Except for the
concentration policy of Cash Reserves with respect to bank obligations described
in paragraph (1) below, which is fundamental and may not be changed without the
approval of Cash Reserves' shareholders, the approval of a Fund's shareholders
would not be required to change any of that Fund's investment policies.
Likewise, except for the concentration policy of Cash Reserves Portfolio with
respect to bank obligations described in paragraph (1) below, which is
fundamental and may not be changed without the approval of Cash Reserves
Portfolio's investors, the approval of the investors in a Portfolio would not be
required to change that Portfolio's investment objectives or any of that
Portfolio's investment policies discussed below, including those concerning
securities transactions.
CASH RESERVES PORTFOLIO
Cash Reserves Portfolio seeks its investment objectives through investments
limited to the following types of high quality U.S. dollar-denominated money
market instruments. All investments by Cash Reserves Portfolio mature or are
deemed to mature within 397 days from the date of acquisition, and the average
maturity of the investments held by the Portfolio (on a dollar-weighted basis)
is 90 days or less. All investments by the Portfolio are in "high quality"
securities (i.e., securities rated in the highest rating category for short-term
obligations by at least two nationally recognized statistical rating
organizations (each, an "NRSRO") assigning a rating to the security or issuer
or, if only one NRSRO assigns a rating, that NRSRO or, in the case of an
investment which is not rated, of comparable quality as determined by the
Adviser) and are determined by the Adviser to present minimal credit risks.
Investments in high quality, short term instruments may, in many circumstances,
result in a lower yield than would be available from investments in instruments
with a lower quality or a longer term. Under the 1940 Act, Cash Reserves and
Cash Reserves Portfolio are each classified as "diversified," although in the
case of Cash Reserves, all of its investable assets are invested in the
Portfolio. A "diversified investment company" must invest at least 75% of its
assets in cash and cash items, U.S. Government securities, investment company
securities (e.g., interests in the Portfolio) and other securities limited as to
any one issuer to not more than 5% of the total assets of the investment company
and not more than 10% of the voting securities of the issuer.
(1) Bank obligations -- Cash Reserves Portfolio invests at least 25% of
its investable assets, and may invest up to 100% of its assets, in bank
obligations. These obligations include, but are not limited to, negotiable
certificates of deposit, bankers' acceptances and fixed time deposits. Cash
Reserves Portfolio limits its investments in U.S. bank obligations
(including their non-U.S. branches) to banks having total assets in excess
of $1 billion and which are subject to regulation by an agency of the U.S.
Government. The Portfolio may also invest in certificates of deposit issued
by banks the deposits in which are insured by the Federal Deposit Insurance
Corporation ("FDIC"), through either the Bank Insurance Fund or the Savings
Association Insurance Fund, having total assets of less than $1 billion,
provided that the Portfolio at no time owns more than $100,000 principal
amount of certificates of deposit (or any higher principal amount which in
the future may be fully insured by FDIC insurance) of any one of those
issuers. Fixed time deposits are obligations which are payable at a stated
maturity date and bear a fixed rate of interest. Generally, fixed time
deposits may be withdrawn on demand by the Portfolio, but they may be
subject to early withdrawal penalties which vary depending upon market
conditions and the remaining maturity of the obligation. Although fixed time
deposits do not have a market, there are no contractual restrictions on the
Portfolio's right to transfer a beneficial interest in the deposit to a
third party. This concentration policy is fundamental and may not be changed
without the approval of the investors in Cash Reserves Portfolio.
U.S. banks organized under federal law are supervised and examined by
the Comptroller of the Currency and are required to be members of the
Federal Reserve System and to be insured by the FDIC. U.S. banks organized
under state law are supervised and examined by state banking authorities
and are members of the Federal Reserve System only if they elect to join.
However, state banks which are insured by the FDIC are subject to federal
examination and to a substantial body of federal law and regulation. As a
result of federal and state laws and regulations, U.S. branches of U.S.
banks, among other things, are generally required to maintain specified
levels of reserves, and are subject to other supervision and regulation
designed to promote financial soundness.
Cash Reserves Portfolio limits its investments in non-U.S. bank
obligations (i.e., obligations of non-U.S. branches and subsidiaries of
U.S. banks, and U.S. and non-U.S. branches of non-U.S. banks) to U.S.
dollar-denominated obligations of banks which at the time of investment
are branches or subsidiaries of U.S. banks which meet the criteria in the
preceding paragraphs or are branches of non-U.S. banks which (i) have more
than $10 billion, or the equivalent in other currencies, in total assets;
(ii) in terms of assets are among the 75 largest non-U.S. banks in the
world; (iii) have branches or agencies in the United States; and (iv) in
the opinion of the Adviser, are of an investment quality comparable with
obligations of U.S. banks which may be purchased by the Portfolio. These
obligations may be general obligations of the parent bank, in addition to
the issuing branch or subsidiary, but the parent bank's obligations may be
limited by the terms of the specific obligation or by governmental
regulation. The Portfolio also limits its investments in non-U.S. bank
obligations to banks, branches and subsidiaries located in Western Europe
(United Kingdom, France, Germany, Belgium, the Netherlands, Italy,
Switzerland), Scandinavia (Denmark, Norway, Sweden), Australia, Japan, the
Cayman Islands, the Bahamas and Canada. Cash Reserves Portfolio does not
purchase any bank obligation of the Adviser or an affiliate of the
Adviser.
Since Cash Reserves Portfolio may hold obligations of non-U.S.
branches and subsidiaries of U.S. banks, and U.S. and non-U.S. branches of
non-U.S. banks, an investment in Cash Reserves involves certain additional
risks. Such investment risks include future political and economic
developments, the possible imposition of non-U.S. withholding taxes on
interest income payable on such obligations held by the Portfolio, the
possible seizure or nationalization of non-U.S. deposits and the possible
establishment of exchange controls or other non-U.S. governmental laws or
restrictions applicable to the payment of the principal of and interest on
certificates of deposit or time deposits that might affect adversely such
payment on such obligations held by the Portfolio. In addition, there may
be less publicly-available information about a non-U.S. branch or
subsidiary of a U.S. bank or a U.S. or non-U.S. branch of a non-U.S. bank
than about a U.S. bank and such branches and subsidiaries may not be
subject to the same or similar regulatory requirements that apply to U.S.
banks, such as mandatory reserve requirements, loan limitations and
accounting, auditing and financial record-keeping standards and
requirements.
The provisions of federal law governing the establishment and
operation of U.S. branches do not apply to non-U.S. branches of U.S.
banks. However, Cash Reserves Portfolio may purchase obligations only of
those non-U.S. branches of U.S. banks which were established with the
approval of the Board of Governors of the Federal Reserve System (the
"Board of Governors"). As a result of such approval, these branches are
subject to examination by the Board of Governors and the Comptroller of
the Currency. In addition, such non-U.S. branches of U.S. banks are
subject to the supervision of the U.S. bank and creditors of the non-U.S.
branch are considered general creditors of the U.S. bank subject to
whatever defenses may be available under the governing non-U.S. law and to
the terms of the specific obligation. Nonetheless, Cash Reserves Portfolio
generally will be subject to whatever risk may exist that the non-U.S.
country may impose restrictions on payment of certificates of deposit or
time deposits.
U.S. branches of non-U.S. banks are subject to the laws of the state
in which the branch is located or to the laws of the United States. Such
branches are therefore subject to many of the regulations, including
reserve requirements, to which U.S. banks are subject. In addition, Cash
Reserves Portfolio may purchase obligations only of those U.S. branches of
non-U.S. banks which are located in states which impose the additional
requirement that the branch pledge to a designated bank within the state
an amount of its assets equal to 5% of its total liabilities.
Non-U.S. banks in whose obligations Cash Reserves Portfolio may invest
may not be subject to the laws and regulations referred to in the
preceding two paragraphs.
(2) Obligations of, or guaranteed by, non-U.S. governments. Cash
Reserves Portfolio limits its investments in non-U.S. government obligations
to obligations issued or guaranteed by the governments of Western Europe
(United Kingdom, France, Germany, Belgium, the Netherlands, Italy,
Switzerland), Scandinavia (Denmark, Norway, Sweden), Australia, Japan and
Canada. Generally, such obligations may be subject to the additional risks
described in paragraph (1) above in connection with the purchase of non-U.S.
bank obligations.
(3) Commercial paper rated Prime-1 by Moody's Investors Service, Inc.
("Moody's") or A-1 by Standard & Poor's Ratings Group ("Standard & Poor's")
or, if not rated, determined to be of comparable quality by the Adviser,
such as unrated commercial paper issued by corporations having an
outstanding unsecured debt issue currently rated Aaa by Moody's or AAA by
Standard & Poor's.
(4) Obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities. These include issues of the U.S. Treasury, such as
bills, certificates of indebtedness, notes and bonds, and issues of agencies
and instrumentalities established under the authority of an Act of Congress.
Some of the latter category of obligations are supported by the full faith
and credit of the United States, others are supported by the right of the
issuer to borrow from the U.S. Treasury, and still others are supported only
by the credit of the agency or instrumentality. Examples of each of the
three types of obligations described in the preceding sentence are (i)
obligations guaranteed by the Export-Import Bank of the United States, (ii)
obligations of the Federal Home Loan Mortgage Corporation, and (iii)
obligations of the Student Loan Marketing Association, respectively.
(5) Repurchase agreements, providing for resale within 397 days or less,
covering obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities which may have maturities in excess of 397 days. A
repurchase agreement arises when a buyer purchases an obligation and
simultaneously agrees with the vendor to resell the obligation to the vendor
at an agreed-upon price and time, which is usually not more than seven days
from the date of purchase. The resale price of a repurchase agreement is
greater than the purchase price, reflecting an agreed-upon market rate which
is effective for the period of time the buyer's funds are invested in the
obligation and which is not related to the coupon rate on the purchased
obligation. Obligations serving as collateral for each repurchase agreement
are delivered to the Portfolio's custodian either physically or in book
entry form and the collateral is marked to the market daily to ensure that
each repurchase agreement is fully collateralized at all times. A buyer of a
repurchase agreement runs a risk of loss if, at the time of default by the
issuer, the value of the collateral securing the agreement is less than the
price paid for the repurchase agreement. If the vendor of a repurchase
agreement becomes bankrupt, Cash Reserves Portfolio might be delayed, or may
incur costs or possible losses of principal and income, in selling the
collateral. The Portfolio may enter into repurchase agreements only with a
vendor which is a member bank of the Federal Reserve System or which is a
"primary dealer" (as designated by the Federal Reserve Bank of New York) in
U.S. Government obligations. The Portfolio will not enter into any
repurchase agreements with the Adviser or an affiliate of the Adviser. The
restrictions and procedures described above which govern the Portfolio's
investment in repurchase agreements are designed to minimize the Portfolio's
risk of losses in making those investments.
(6) Asset-backed securities, which may include securities such as
Certificates for Automobile Receivables ("CARS") and Credit Card Receivable
Securities ("CARDS"), as well as other asset-backed securities that may be
developed in the future. CARS represent fractional interests in pools of car
installment loans, and CARDS represent fractional interests in pools of
revolving credit card receivables. The rate of return on asset-backed
securities may be affected by early prepayment of principal on the
underlying loans or receivables. Prepayment rates vary widely and may be
affected by changes in market interest rates. It is not possible to
accurately predict the average life of a particular pool of loans or
receivables. Reinvestment of principal may occur at higher or lower rates
than the original yield. Therefore, the actual maturity and realized yield
on asset-backed securities will vary based upon the prepayment experience of
the underlying pool of loans or receivables. (See "Asset-Backed
Securities.")
Cash Reserves Portfolio does not purchase securities which the Portfolio
believes, at the time of purchase, will be subject to exchange controls or
non-U.S. withholding taxes; however, there can be no assurance that such laws
may not become applicable to certain of the Portfolio's investments. In the
event exchange controls or non-U.S. withholding taxes are imposed with respect
to any of the Portfolio's investments, the effect may be to reduce the income
received by the Portfolio on such investments.
ASSET-BACKED SECURITIES
As set forth above, Cash Reserves Portfolio may purchase asset-backed
securities that represent fractional interests in pools of retail installment
loans, both secured (such as CARS) and unsecured, or leases or revolving credit
receivables, both secured and unsecured (such as CARDS). These assets are
generally held by a trust and payments of principal and interest or interest
only are passed through monthly or quarterly to certificate holders and may be
guaranteed up to certain amounts by letters of credit issued by a financial
institution affiliated or unaffiliated with the trustee or originator of the
trust.
Underlying automobile sales contracts, leases or credit card receivables are
subject to prepayment, which may reduce the overall return to certificate
holders. Nevertheless, principal repayment rates tend not to vary much with
interest rates and the short-term nature of the underlying loans, leases or
receivables tends to dampen the impact of any change in the prepayment level.
Certificate holders may also experience delays in payment on the certificates if
the full amounts due on underlying loans, leases or receivables are not realized
by the Portfolio because of unanticipated legal or administrative costs of
enforcing the contracts or because of depreciation or damage to the collateral
(usually automobiles) securing certain contracts, or other factors. If
consistent with its investment objectives and policies, Cash Reserves Portfolio
may invest in other asset-backed securities that may be developed in the future.
U.S. TREASURY RESERVES PORTFOLIO
U.S. Treasury Reserves Portfolio seeks its investment objectives by
investing in obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities including issues of the U.S. Treasury, such as bills,
certificates of indebtedness, notes and bonds, and issues of agencies and
instrumentalities established under the authority of an Act of Congress which
are supported by the full faith and credit of the United States. U.S. Treasury
Reserves Portfolio will not enter into repurchase agreements.
LENDING OF SECURITIES
Consistent with applicable regulatory requirements and in order to generate
income, each of the Portfolios may lend its securities to broker-dealers and
other institutional borrowers. Such loans will usually be made only to member
banks of the U.S. Federal Reserve System and to member firms of the New York
Stock Exchange (and subsidiaries thereof). Loans of securities would be secured
continuously by collateral in cash, cash equivalents, or U.S. Treasury
obligations maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The cash collateral would be invested in
high quality short-term instruments. Either party has the right to terminate a
loan at any time on customary industry settlement notice (which will not usually
exceed three business days). During the existence of a loan, a Portfolio would
continue to receive the equivalent of the interest or dividends paid by the
issuer on the securities loaned and with respect to cash collateral would also
receive compensation based on investment of the collateral (subject to a rebate
payable to the borrower). Where the borrower provides a Portfolio with
collateral consisting of U.S. Treasury obligations, the borrower is also
obligated to pay the Portfolio a fee for use of the borrowed securities. The
Portfolio would not, however, have the right to vote any securities having
voting rights during the existence of the loan, but would call the loan in
anticipation of an important vote to be taken among holders of the securities or
of the giving or withholding of their consent on a material matter affecting the
investment. As with other extensions of credit, there are risks of delay in
recovery or even loss of rights in the collateral should the borrower fail
financially. However, the loans would be made only to entities deemed by the
Adviser to be of good standing, and when, in the judgment of the Adviser, the
consideration which can be earned currently from loans of this type justifies
the attendant risk. In addition, a Portfolio could suffer loss if the borrower
terminates the loan and the Portfolio is forced to liquidate investments in
order to return the cash collateral to the buyer. If the Adviser determines to
make loans, it is not intended that the value of the securities loaned by a
Portfolio would exceed 33 1/3 the value of its net assets.
INVESTMENT RESTRICTIONS
The Trust, on behalf of the Funds, and the Portfolios have each adopted the
following policies which may not be changed without approval by holders of a
"majority of the outstanding shares" of the applicable Fund or Portfolio, which
as used in this Statement of Additional Information means the vote of the lesser
of (i) 67% or more of the outstanding voting securities of the Fund or Portfolio
present at a meeting, if the holders of more than 50% of the outstanding "voting
securities" of the Fund or Portfolio are present or represented by proxy, or
(ii) more than 50% of the outstanding "voting securities" of the Fund or the
Portfolio. The term "voting securities" as used in this paragraph has the same
meaning as in the 1940 Act. Whenever the Trust is requested to vote on a change
in the investment restrictions of a Portfolio (or, in the case of Cash Reserves
Portfolio, its concentration policy described in paragraph (1) under "Investment
Policies"), the Trust will hold a meeting of the corresponding Fund's
shareholders and will cast its vote as instructed by the shareholders. Each Fund
will vote the shares held by its shareholders who do not give voting
instructions in the same proportion as the shares of that Fund's shareholders
who do give voting instructions. Shareholders of the Funds who do not vote will
have no effect on the outcome of these matters.
CASH RESERVES
The Trust, on behalf of Cash Reserves, may not:
(1) Invest in equity securities (e.g., common stock, preferred stock,
options, warrants, puts, calls), voting securities, restricted securities,
corporate debt securities (e.g., bonds, debentures) other than those bank
securities and commercial paper referred to under "Investment Policies,"
local or state government securities (e.g., municipal bonds, state bonds),
commodities or commodity contracts, real estate, or securities of other
investment companies, except that the Trust may invest all or a portion of
the Fund's assets in a diversified, open-end management investment company
with substantially the same investment objective, policies and restrictions
as the Fund. The Trust, on behalf of the Fund, will not sell securities
short, write put or call options, engage in underwriting, or invest in
companies for the purpose of exercising control. The Trust, on behalf of the
Fund, will not make loans to other persons except that it may acquire debt
securities as discussed under "Investment Policies;'"
(2) Purchase securities or obligations of any one issuer (other than
securities issued by the U.S. Government, its agencies and instrumentalities
and repurchase agreements covering such securities) if immediately after
such purchase more than 5% of the value of its assets would be invested in
that issuer except that the Trust may invest all or a portion of the Fund's
assets in a diversified, open-end management investment company with
substantially the same investment objective, policies and restrictions as
the Fund;
(3) Borrow money except from banks as a temporary measure for
extraordinary or emergency purposes (not for leveraging) or in order to meet
unexpectedly heavy redemption requests in an amount not exceeding 15% of the
value of the Fund's assets and will not purchase any securities at any time
when the Fund's total outstanding borrowings from banks exceed 5% of the
Fund's gross assets. The Trust, on behalf of the Fund, will not pledge its
assets except to secure borrowings. While the Trust, on behalf of the Fund,
may borrow from its Custodian for the foregoing purposes, any borrowing from
the Custodian will be on terms no less favorable to the Fund than those
offered by the Custodian to comparable borrowers and on terms which the
Trust believes are not less favorable than those readily obtainable
elsewhere;
(4) Concentrate the Fund's investments in any particular industry, but
if it is deemed appropriate to the achievement of the Fund's investment
objective, up to 25% of the assets of the Fund (taken at market value at the
time of each investment) may be invested in any one industry, provided that,
if the Trust withdraws the Fund's investment from an open-end management
investment company with substantially the same investment objective,
policies and restrictions as the Fund, it will invest at least 25%, and may
invest up to 100%, of the assets of the Fund in bank obligations; and
provided, further, that nothing in this Investment Restriction is intended
to affect the Trust's ability to invest 100% of the Fund's assets in a
diversified, open-end management investment company with substantially the
same investment objective, policies and restrictions as the Fund;
(5) There is no limitation on investing in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities, or
repurchase agreements covering those securities, except that the Trust, on
behalf of the Fund, will not acquire securities that are not readily
marketable or repurchase agreements calling for resale within more than 7
days if, as a result thereof, more than 10% of the value of its net assets
would be invested in such securities. The Trust, on behalf of the Fund, may
not invest in fixed time deposits maturing in more than seven calendar days,
and fixed time deposits maturing from two business days through seven
calendar days may not exceed 10% of the Fund's net assets.
Cash Reserves Portfolio may not:
(1) borrow money, except that as a temporary measure for extraordinary
or emergency purposes the Portfolio may borrow from banks in an amount not
to exceed 1/3 of the value of the net assets of the Portfolio, including the
amount borrowed (moreover, the Portfolio may not purchase any securities at
any time at which borrowings exceed 5% of its total assets (taken at market
value))(it is intended that the Portfolio would borrow money only from banks
and only to accommodate requests for the withdrawal of all or a portion of a
beneficial interest in the Portfolio while effecting an orderly liquidation
of securities);
(2) purchase any security or evidence of interest therein on margin,
except that the Portfolio may obtain such short term credit as may be
necessary for the clearance of purchases and sales of securities;
(3) underwrite securities issued by other persons, except insofar as the
Portfolio may technically be deemed an underwriter under the Securities Act
of 1933 in selling a security;
(4) make loans to other persons except (a) through the lending of
securities held by the Portfolio, but not in excess of 33 1/3% of the
Portfolio's net assets, (b) through the use of fixed time deposits or
repurchase agreements or the purchase of short term obligations, or (c) by
purchasing all or a portion of an issue of debt securities of types commonly
distributed privately to financial institutions; for purposes of this
paragraph 4 the purchase of short term commercial paper or a portion of an
issue of debt securities which are part of an issue to the public shall not
be considered the making of a loan;
(5) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities or commodity
contracts in the ordinary course of business (the Portfolio reserves the
freedom of action to hold and to sell real estate acquired as a result of
the ownership of securities by the Portfolio);
(6) concentrate its investments in any particular industry, but if it is
deemed appropriate for the achievement of its investment objective, up to
25% of the assets of the Portfolio (taken at market value at the time of
each investment) may be invested in any one industry, except that the
Portfolio will invest at least 25% of its assets and may invest up to 100%
of its assets in bank obligations; or
(7) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, except as appropriate to evidence a debt
incurred without violating Investment Restriction (1) above.
U.S. TREASURY RESERVES
Neither the Trust, on behalf of U.S. Treasury Reserves, nor U.S. Treasury
Portfolio may:
(1) borrow money, except that as a temporary measure for extraordinary
or emergency purposes either the Trust or the Portfolio may borrow from
banks in an amount not to exceed 1/3 of the value of the net assets of the
Fund or the Portfolio, respectively, including the amount borrowed
(moreover, neither the Trust (on behalf of the Fund) nor the Portfolio may
purchase any securities at any time at which borrowings exceed 5% of the
total assets of the Fund or the Portfolio, respectively (taken in each case
at market value)) (it is intended that the Fund and the Portfolio would
borrow money only from banks and only to accommodate requests for the
repurchase of shares of the Fund or the withdrawal of all or a portion of a
beneficial interest in the Portfolio while effecting an orderly liquidation
of securities);
(2) purchase any security or evidence of interest therein on margin,
except that either the Trust, on behalf of the Fund, or the Portfolio may
obtain such short term credit as may be necessary for the clearance of
purchases and sales of securities;
(3) underwrite securities issued by other persons, except that all the
assets of the Fund may be invested in the Portfolio and except insofar as
either the Trust or the Portfolio may technically be deemed an underwriter
under the Securities Act of 1933 in selling a security;
(4) make loans to other persons except (a) through the lending of
securities held by either the Fund or the Portfolio, but not in excess of 33
1/3% of the Fund's or the Portfolio's net assets, as the case may be, (b)
through the use of repurchase agreements or the purchase of short term
obligations, or (c) by purchasing all or a portion of an issue of debt
securities of types commonly distributed privately to financial
institutions; for purposes of this paragraph 4 the purchase of a portion of
an issue of debt securities which is part of an issue to the public shall
not be considered the making of a loan;
(5) purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities or commodity
contracts in the ordinary course of business (the Fund and the Portfolio
reserve the freedom of action to hold and to sell real estate acquired as a
result of the ownership of securities by the Fund or the Portfolio);
(6) concentrate its investments in any particular industry; provided,
that nothing in this Investment Restriction is intended to affect the
ability to invest 100% of the Fund's assets in the Portfolio; or
(7) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, except as appropriate to evidence a debt
incurred without violating Investment Restriction (1) above.
If a percentage restriction or a rating restriction (other than a
restriction as to borrowing) on investment or utilization of assets set forth
above or referred to in the Prospectus is adhered to at the time an investment
is made or assets are so utilized, a later change in percentage resulting from
changes in the value of the securities held by a Fund or a Portfolio or a later
change in the rating of a security held by a Fund or a Portfolio is not
considered a violation of policy.
3. PERFORMANCE INFORMATION
Any current yield quotation of a Fund which is used in such a manner as to
be subject to the provisions of Rule 482(d) under the Securities Act of 1933, as
amended, consists of an annualized historical yield, carried at least to the
nearest hundredth of one percent, based on a specific seven calendar day period
and is calculated by dividing the net change in the value of an account having a
balance of one share at the beginning of the period by the value of the account
at the beginning of the period and multiplying the quotient by 365/7. For this
purpose the net change in account value would reflect the value of additional
shares purchased with dividends declared on the original share and dividends
declared on both the original share and any such additional shares, but would
not reflect any realized gains or losses as a result of the Fund's investment in
the Portfolio or any unrealized appreciation or depreciation on portfolio
securities. In addition, any effective yield quotation of a Fund so used shall
be calculated by compounding the current yield quotation for such period by
multiplying such quotation by 7/365, adding 1 to the product, raising the sum to
a power equal to 365/7, and subtracting 1 from the result.
Any tax equivalent yield quotation of a Fund is calculated as follows: If
the entire current yield quotation for such period is tax-exempt, the tax
equivalent yield will be the current yield quotation divided by 1 minus a stated
income tax rate or rates. If a portion of the current yield quotation is not
tax-exempt, the tax equivalent yield will be the sum of (a) that portion of the
yield which is tax-exempt divided by 1 minus a stated income tax rate or rates
and (b) the portion of the yield which is not tax-exempt.
A total rate of return quotation for a Fund is calculated for any period by
(a) dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of shares
purchasable with dividends and capital gains distributions declared during such
period with respect to a share held at the beginning of such period and with
respect to shares purchased with such dividends and capital gains distributions,
by (ii) the public offering price on the first day of such period, and (b)
subtracting 1 from the result. Any annualized total rate of return quotation is
calculated by (x) adding 1 to the period total rate of return quotation
calculated above, (y) raising such sum to a power which is equal to 365 divided
by the number of days in such period, and (z) subtracting 1 from the result.
Any tax equivalent total rate of return quotation of a Fund is calculated as
follows: If the entire current total rate of return quotation for such period is
tax-exempt, the tax equivalent total rate of return will be the current total
rate of return quotation divided by 1 minus a stated income tax rate or rates.
If a portion of the current total rate of return quotation is not tax-exempt,
the tax equivalent total rate of return will be the sum of (a) that portion of
the total rate of return which is tax-exempt divided by 1 minus a stated income
tax rate or rates and (b) the portion of the total rate of return which is not
tax-exempt.
Set forth below is total rate of return information, assuming that dividends
and capital gains distributions, if any, were reinvested, for each Fund for the
periods indicated, at the beginning of which periods no sales charges were
applicable to purchases of shares of the Funds.
[CAPTION]
REDEEMABLE VALUE
ANNUALIZED OF A HYPOTHETICAL
TOTAL $1,000 INVESTMENT
PERIOD RATE OF RETURN AT THE END OF THE PERIOD
- ------ -------------- ------------------------
CASH RESERVES
Ten years ended August 31, 1997 ..... 5.55% $1,715.99
Five years ended August 31, 1997 .... 4.27% $1,232.71
One year ended August 31, 1997 ...... 5.05% $1,050.53
U.S. TREASURY RESERVES
May 3, 1991 (commencement
of operations)
to August 31, 1997 ................ 4.01% $1,282.55
Five years ended August 31, 1997 .... 3.92% $1,211.92
One year ended August 31, 1997 ...... 4.64% $1,046.43
The annualized yield of Cash Reserves for the seven-day period ended August
31, 1997 was 5.10%. The effective compound annualized yield of Cash Reserves for
such period was 5.23%. The annualized yield of U.S. Treasury Reserves for the
seven-day period ended August 31, 1997 was 4.57%. The effective compound
annualized yield of U.S. Treasury Reserves for such period was 4.68% and the
annualized tax equivalent yield of U.S. Treasury Reserves for such period was
5.07% (assuming a combined state and local tax rate of 12.051% for New York City
residents).
4. DETERMINATION OF NET ASSET VALUE
The net asset value of each share of Cash Reserves is determined on each day
on which the New York Stock Exchange is open for trading. This determination is
normally made once during each such day as of 3:00 p.m., Eastern time, for Cash
Reserves and 12:00 noon, Eastern time, for U.S. Treasury Reserves, by dividing
the value of the Fund's net assets (i.e., the value of its investment in
Portfolio and other assets less its liabilities, including expenses payable or
accrued) by the number of the Fund's shares outstanding at the time the
determination is made. On days when the financial markets in which the Funds
invest close early, each Fund's net asset value is determined as of the close of
these markets if such time is earlier than the time at which the net asset value
is normally calculated. As of the date of this Statement of Additional
Information, the Exchange is open for trading every weekday except for the
following holidays (or the days on which they are observed): New Year's Day,
Martin Luther King Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It is
anticipated that the net asset value of each share of each Fund will remain
constant at $1.00 and, although no assurance can be given that they will be able
to do so on a continuing basis, as described below, the Funds and Portfolios
employ specific investment policies and procedures to accomplish this result.
The value of a Portfolio's net assets (i.e., the value of its securities and
other assets less its liabilities, including expenses payable or accrued) is
determined at the same time and on the same days as the net asset value per
share of the corresponding Fund is determined. The net asset value of a Fund's
investment in the corresponding Portfolio is equal to the Fund's pro rata share
of the total investment of the Fund and of other investors in the Portfolio less
the Fund's pro rata share of the Portfolio's liabilities.
The securities held by a Fund or Portfolio are valued at their amortized
cost. Amortized cost valuation involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium. If fluctuating interest rates cause the market value of the securities
held by the Fund or Portfolio to deviate more than 1/2 of 1% from their value
determined on the basis of amortized cost, the Fund or Portfolio's Board of
Trustees will consider whether any action should be initiated, as described in
the following paragraph. Although the amortized cost method provides certainty
in valuation, it may result in periods during which the stated value of an
instrument is higher or lower than the price the Fund or Portfolio would receive
if the instrument were sold.
Pursuant to the rules of the Securities and Exchange Commission ("SEC"), the
Trust's and the Portfolios' Boards of Trustees have established procedures to
stabilize the value of the Funds' and Portfolios' net assets within 1/2 of 1% of
the value determined on the basis of amortized cost. These procedures include a
review of the extent of any such deviation of net asset value, based on
available market rates. Should that deviation exceed 1/2 of 1% for a Fund or a
Portfolio, the Trust's or Portfolio's Board of Trustees will consider whether
any action should be initiated to eliminate or reduce material dilution or other
unfair results to investors in the Fund or Portfolio. Such action may include
withdrawal in kind, selling securities prior to maturity and utilizing a net
asset value as determined by using available market quotations. The Funds and
Portfolios maintain a dollar-weighted average maturity of 90 days or less, do
not purchase any instrument with a remaining maturity greater than 397 days or
(in the case of Cash Reserves and Cash Reserves Portfolio) subject to a
repurchase agreement having a duration of greater than 397 days, limit their
investments, including repurchase agreements, to those U.S. dollar-denominated
instruments that are determined by the Adviser to present minimal credit risks
and comply with certain reporting and recordkeeping procedures. The Trust and
Portfolios also have established procedures to ensure that securities purchased
by the Funds and Portfolios meet high quality criteria. (See "Investment
Objectives, Policies and Restrictions -- Investment Policies.")
Subject to compliance with applicable regulations, the Trust and the
Portfolios have each reserved the right to pay the redemption price of shares of
the Funds or beneficial interests in the Portfolios, either totally or
partially, by a distribution in kind of readily marketable securities (instead
of cash). The securities so distributed would be valued at the same amount as
that assigned to them in calculating the net asset value for the shares or
beneficial interests being sold. If a holder of shares or beneficial interests
received a distribution in kind, such holder could incur brokerage or other
charges in converting the securities to cash.
The Trust or the Portfolios may suspend the right of redemption or postpone
the date of payment for shares of a Fund or beneficial interests in a Portfolio
more than seven days during any period when (a) trading in the markets the Fund
or Portfolio normally utilizes is restricted, or an emergency, as defined by the
rules and regulations of the SEC, exists making disposal of the Fund's or
Portfolio's investments or determination of its net asset value not reasonably
practicable; (b) the New York Stock Exchange is closed (other than customary
weekend and holiday closings); or (c) the SEC has by order permitted such
suspension.
5. MANAGEMENT
The Trustees and officers of the Trust and the Portfolios, their ages and
their principal occupations during the past five years are set forth below.
Their titles may have varied during that period. Asterisks indicate that those
Trustees and officers are "interested persons" (as defined in the 1940 Act) of
the Trust or a Portfolio. Unless otherwise indicated below, the address of each
Trustee and officer is 6 St. James Avenue, Boston, Massachusetts. The address of
Cash Reserves Portfolio is Elizabethan Square, George Town, Grand Cayman,
British West Indies. The address of U.S. Treasury Reserves Portfolio is 6 St.
James Avenue, Boston, Massachusetts.
TRUSTEES OF THE TRUST
PHILIP W. COOLIDGE; 46* -- President of the Trust and the Portfolios; Chief
Executive Officer and President, Signature Financial Group, Inc. and CFBDS.
C. OSCAR MORONG, JR.; 62 -- Chairman of the Board of Trustees of the Trust;
Managing Director, Morong Capital Management (since February, 1993); Senior Vice
President and Investment Manager, CREF Investments, Teachers Insurance & Annuity
Association (retired January, 1993). His address is 1385 Outlook Drive
West, Mountainside, New Jersey.
E. KIRBY WARREN; 63 -- Professor of Management, Graduate School of Business,
Columbia University (since 1987). Samuel Bronfman Professor of Democratic
Business Enterprise (1978 to 1987). His address is Columbia University, Graduate
School of Business, 725 Uris Hall, New York, New York.
WILLIAM S. WOODS, JR.; 77 -- Vice President - Investments, Sun Company, Inc.
(retired, April, 1984). His address is 35 Colwick Road, Cherry Hill, New
Jersey.
TRUSTEES OF THE PORTFOLIOS
ELLIOTT J. BERV; 54 -- Chairman and Director, Catalyst, Inc. (Management
Consultants) (since June, 1992); President, Chief Operating Officer and
Director, Deven International, Inc. (International Consultants) (June, 1991 to
June, 1992); President and Director, Elliott J. Berv & Associates (Management
Consultants) (since May, 1984). His address is 15 Stornoway Drive, Cumberland
Foreside, Maine.
PHILIP W. COOLIDGE; 46* -- President of the Trust and the Portfolios; Chief
Executive Officer and President, Signature Financial Group, Inc. and CFBDS.
MARK T. FINN; 54 -- President and Director, Delta Financial, Inc. (since June,
1983); Chairman of the Board and Chief Executive Officer, FX 500 Ltd.
(Commodity Trading Advisory Firm) (since April, 1990); Director, Vantage
Consulting Group, Inc. (since October, 1988). His address is 3500 Pacific
Avenue, P.O. Box 539, Virginia Beach, Virginia.
WALTER E. ROBB, III; 71 -- President, Benchmark Consulting Group (since 1991);
Principal, Robb Associates (Corporate Financial Advisors ) (since 1978);
President, Benchmark Advisors, Inc. (Corporate Financial Advisors) (since
1989); Trustee of certain registered investment companies in the MFS Family of
Funds. His address is 35 Farm Road, Sherborn, Massachusetts.
OFFICERS OF THE TRUST AND PORTFOLIOS
PHILIP W. COOLIDGE; 46* -- President of the Trust and the Portfolios; Chief
Executive Officer and President, Signature Financial Group, Inc., and CFBDS.
CHRISTINE A. DRAPEAU; 27* -- Assistant Secretary and Assistant Treasurer of
Trust and the Portfolios; Assistant Vice President, Signature Financial Group,
Inc. (since January, 1996); Paralegal and Compliance Officer, various financial
companies (July, 1992 to January, 1996); Graduate Student, Bentley College
(prior to December, 1994).
JOHN R. ELDER; 49* -- Treasurer of the Trust and the Portfolios; Vice
President, Signature Financial Group, Inc. (since April, 1995); Treasurer,
CFBDS (since April 1995); Treasurer, Phoenix Family of Mutual Funds (Phoenix
Home Life Mutual Insurance Company) (1983 to March, 1995).
LINDA T. GIBSON; 32* -- Secretary of the Trust and the Portfolios; Vice
President, Signature Financial Group, Inc. (since May, 1992); Assistant
Secretary, CFBDS (since October, 1992).
JOAN R. GULINELLO; 42* -- Assistant Secretary and Assistant Treasurer of the
Trust and the Portfolios; Vice President, Signature Financial Group, Inc.
(since October, 1993); Secretary, CFBDS (since October, 1995); Vice President
and Assistant General Counsel, Massachusetts Financial Services Company (prior
to October, 1993).
JAMES E. HOOLAHAN; 50* -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolios; Senior Vice President, Signature
Financial Group, Inc.
SUSAN JAKUBOSKI; 33* -- Vice President, Assistant Treasurer and Assistant
Secretary of the Trust and the Portfolios; Vice President, Signature Financial
Group (Cayman) Ltd. (since August, 1994); Fund Compliance Administrator, Concord
Financial Group (November, 1990 to August, 1994). Her address is Suite 193, 12
Church St., Hamilton HM11, Bermuda.
MOLLY S. MUGLER; 46* -- Assistant Secretary and Assistant Treasurer of the
Trust and the Portfolios; Vice President, Signature Financial Group, Inc.;
Assistant Secretary, CFBDS.
SHARON M. WHITSON; 49* -- Assistant Secretary and Assistant Treasurer of the
Trust and the Portfolios; Assitant Vice President, Signature Financial Group,
Inc.
JULIE J. WYETZNER; 38* -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolios; Vice President, Signature Financial
Group, Inc.
The Trustees and officers of the Trust and the Portfolios also hold
comparable positions with certain other funds for which CFBDS or an affiliate
serves as the distributor or administrator.
<TABLE>
<CAPTION>
TRUSTEES COMPENSATION TABLE
AGGREGATE AGGREGATE
COMPENSATION COMPENSATION TOTAL COMPENSATION
FROM CITIFUNDS FROM CITIFUNDS U.S. FROM THE
TRUSTEE CASH RESERVES(1) TREASURY RESERVES(1) TRUSTS AND COMPLEX(2)
- ------- --------------- ------------------- ---------------------
<S> <C> <C> <C>
Philip W. Coolidge ........................................ 0 0 0
C. Oscar Morong, Jr. ...................................... $14,576.84 $4,047.16 $70,000.00
E. Kirby Warren ........................................... 8,190.12 2,635.42 50,000.00
William S. Woods, Jr. ..................................... 0 2,857.80 50,000.00
- ------------
(1) For the fiscal year ended August 31, 1997.
(2) Information relates to the fiscal year ended August 31, 1997. Messrs. Coolidge, Morong, Warren and Woods are trustees of
51, 25, 25 and 27 Funds, respectively, of the family of open-end registered investment companies advised or managed by
Citibank.
</TABLE>
As of December 15, 1997, all Trustees and officers as a group owned less
than 1% of each Fund's outstanding shares. As of the same date, more than 95% of
the outstanding shares of each Fund were held of record by Citibank or an
affiliate, as a Shareholder Servicing Agent of the Funds, for the accounts of
their respective clients.
The Declaration of Trust of each of the Trust and the Portfolios provides
that the Trust or such Portfolio, as the case may be, will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust or such Portfolio, as the case may be, unless, as to liability to the
Trust or such Portfolio or its respective investors, it is finally adjudicated
that they engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in their offices, or unless with
respect to any other matter it is finally adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best
interests of the Trust or such Portfolio, as the case may be. In the case of
settlement, such indemnification will not be provided unless it has been
determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination, based upon a review of readily
available facts, by vote of a majority of disinterested Trustees of the Trust or
such Portfolio, or in a written opinion of independent counsel, that such
officers or Trustees have not engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of their duties.
ADVISER
Citibank manages the assets of each Portfolio pursuant to separate
investment advisory agreements (the "Advisory Agreements"). Subject to such
policies as the Board of Trustees of the Portfolio may determine, the Adviser
manages the securities of each Portfolio and makes investment decisions for each
Portfolio. The Adviser furnishes at its own expense all services, facilities and
personnel necessary in connection with managing each Portfolio's investments and
effecting securities transactions for each Portfolio. Each of the Advisory
Agreements will continue in effect as long as such continuance is specifically
approved at least annually by the Board of Trustees of the applicable Portfolio
or by a vote of a majority of the outstanding voting securities of the
applicable Portfolio, and, in either case, by a majority of the Trustees of the
applicable Portfolio who are not parties to such Advisory Agreement or
interested persons of any such party, at a meeting called for the purpose of
voting on the Advisory Agreements.
Each of the Advisory Agreements provides that the Adviser may render
services to others. Each Advisory Agreement is terminable without penalty on not
more than 60 days' nor less than 30 days' written notice by the applicable
Portfolio when authorized either by a vote of a majority of the outstanding
voting securities of the applicable Portfolio or by a vote of a majority of the
Board of Trustees of the applicable Portfolio, or by the Adviser on not more
than 60 days' nor less than 30 days' written notice, and will automatically
terminate in the event of its assignment. Each Advisory Agreement provides that
neither the Adviser nor its personnel shall be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the execution of security transactions for the applicable
Portfolio, except for willful misfeasance, bad faith or gross negligence or
reckless disregard of its or their obligations and duties under the Advisory
Agreement.
The Prospectus contains a description of the fees payable to the Adviser for
services under the Advisory Agreements.
CASH RESERVES PORTFOLIO: For the fiscal years ended August 31, 1995, 1996
and 1997, the fees paid to Citibank under the Advisory Agreement, after waivers,
were $1,791,693, $2,713,691 and $4,395,286, respectively.
U.S. TREASURY RESERVES PORTFOLIO: For the fiscal years ended August 31,
1995, 1996 and 1997, the fees paid to Citibank under the Advisory Agreement,
after waivers, were $395,313, $373,944 and $494,339, respectively.
ADMINISTRATORS
Pursuant to Administrative Services Agreements (the "Administrative Services
Agreements"), CFBDS provides the Trust and U.S. Treasury Reserves Portfolio, and
SFG provides Cash Reserves Portfolio, with general office facilities, and CFBDS
supervises the overall administration of the Trust and U.S. Treasury Reserves
Portfolio and SFG supervises the overall administration of Cash Reserves
Portfolio, including, among other responsibilities, the negotiation of contracts
and fees with, and the monitoring of performance and billings of, the
independent contractors and agents of the Trust and the Portfolios; the
preparation and filing of all documents required for compliance by the Trust and
the Portfolios with applicable laws and regulations; and arranging for the
maintenance of books and records of the Trust and the Portfolios. CFBDS and SFG
provide persons satisfactory to the Board of Trustees of the Trust and the
Portfolios to serve as Trustees and officers of the Trust and the Portfolios.
Such Trustees and officers may be directors, officers or employees of CFBDS, SFG
or their affiliates.
The Prospectus contains a description of the fees payable to CFBDS and SFG
under the Administrative Services Agreements.
CASH RESERVES: For the fiscal years ended August 31, 1995, 1996 and 1997,
the fees paid to CFBDS from the Fund under the Administrative Services
Agreement, after waivers, were $1,566,336, $3,176,058 and $4,429,870,
respectively. For the fiscal year ended August 31, 1995, the fee paid to SFG
under the Administrative Services Agreement with Cash Reserves Portfolio was
$1,365,951. For the fiscal years ended August 31, 1996 and 1997, all fees
payable to SFG under the Administrative Services Agreement were voluntarily
waived.
U.S. TREASURY RESERVES: For the fiscal years ended August 31, 1995, 1996 and
1997, the fees paid to CFBDS from the Fund under the Administrative Services
Agreement with the Trust, after waivers, were $561,420, $747,957 and $897,971,
respectively. For the fiscal years ended August 31, 1995, 1996 and 1997, the
fees payable to CFBDS under the Administrative Services Agreement with the
Portfolio were voluntarily waived.
By Agreement, the Trust acknowledges that the name CitiFunds is the property
of Citicorp and provides that if Citibank ceases to serve as the Adviser of the
Trust, the Trust and the Funds will change their respective names so as to
delete the word CitiFunds. The Agreement with the Trust also provides that
Citibank may permit other investment companies in addition to the Trust to use
the word "CitiFunds" in their names.
The Administrative Services Agreement with the Trust continues in effect as
to a Fund if such continuance is specifically approved at least annually by the
Trust's Board of Trustees or by a vote of a majority of the outstanding voting
securities of such Fund and, in either case, by a majority of the Trustees of
the Trust who are not interested parties of the Trust or CFBDS. The
Administrative Services Agreement with the Trust terminates automatically if it
is assigned and may be terminated as to a Fund by the Trust without penalty by
vote of a majority of the outstanding voting securities of the Fund or by either
party on not more than 60 days' nor less than 30 days' written notice. The
Administrative Services Agreement with the Trust also provides that neither
CFBDS nor its personnel shall be liable for any error of judgment or mistake of
law or for any act or omission in the administration or management of the Trust,
except for willful misfeasance, bad faith or gross negligence in the performance
of its or their duties or by reason of reckless disregard of its or their
obligations and duties under the Administrative Services Agreement.
CFBDS has agreed to reimburse the Funds for their operating expenses
(exclusive of interest, taxes, brokerage, and extraordinary expenses) which in
any year exceed the limits prescribed by any state in which the Funds' shares
are qualified for sale. The expenses incurred by the Funds for distribution
purposes pursuant to the Trust's Distribution Plans are included within such
operating expenses only to the extent required by any state in which the Funds'
shares are qualified for sale. The Trust may elect not to qualify the Funds'
shares for sale in every state. The Trust believes that currently the most
restrictive expense ratio limitation imposed by any state is 2 1/2% of the first
$30 million of a Fund's average net assets for its then-current fiscal year, 2%
of the next $70 million of such assets, and 1 1/2% of such assets in excess of
$100 million. For the purpose of this obligation to reimburse expenses, the
Funds' annual expenses are estimated and accrued daily, and any appropriate
estimated payments will be made by CFBDS. Subject to the obligation of CFBDS to
reimburse the Funds for their excess expenses as described above, the Trust has,
under its Administrative Services Agreement, confirmed its obligation for
payment of all other expenses of the Funds.
The Administrative Services Agreements with the Portfolios provide that
CFBDS or SFG, as the case may be, may render administrative services to others.
The Administrative Services Agreement with each of the Portfolios terminates
automatically if it is assigned and may be terminated without penalty by a vote
of a majority of the outstanding voting securities of the Portfolio or by either
party on not more than 60 days' nor less than 30 days' written notice. The
Administrative Services Agreement with each of the Portfolios also provides that
neither CFBDS or SFG, as the case may be, nor its personnel shall be liable for
any error of judgment or mistake of law or for any act or omission in the
administration or management of the Portfolio, except for willful misfeasance,
bad faith or gross negligence in the performance of its or their duties or by
reason of reckless disregard of its or their obligations and duties under the
Administrative Services Agreement.
CFBDS and SFG are wholly-owned subsidiaries of Signature Financial Group,
Inc.
Pursuant to Sub-Administrative Services Agreements (the "Sub- Administrative
Agreements"), Citibank performs such sub-administrative duties for the Trust and
the Portfolios as are from time to time agreed upon by Citibank and, as the case
may be, CFBDS or SFG. Citibank's sub-administrative duties may include providing
equipment and clerical personnel necessary for maintaining the organization of
the Trust and the Portfolios, participation in preparation of documents required
for compliance by the Trust and the Portfolios with applicable laws and
regulations, preparation of certain documents in connection with meetings of
Trustees and shareholders of the Trust and Portfolios, and other functions which
would otherwise be performed by CFBDS as set forth above. For performing such
sub-administrative services, Citibank receives such compensation as is from time
to time agreed upon by Citibank and, as the case may be, CFBDS or SFG not in
excess of the amount paid to CFBDS or SFG for its services under the applicable
Administrative Services Agreement. All such compensation is paid by CFBDS or
SFG, as the case may be.
DISTRIBUTOR
The Trust has adopted a Distribution Plan (the "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act after having concluded that there
is a reasonable likelihood that the Distribution Plan will benefit the Funds and
their shareholders. The Distribution Plan provides that the Trust shall pay a
distribution fee to the Distributor at an annual rate not to exceed 0.10% the
average daily net assets of each Fund (exclusive of any advertising expenses
incurred by the Distributor in connection with the sale of shares of each Fund).
The Distributor may use all or any portion of such fee to pay for Fund expenses
of printing prospectuses and reports used for sales purposes, expenses of the
preparation and printing of sales literature and other distribution-related
expenses.
The Distribution Plan also permits each Fund to pay the Distributor an
additional fee (not to exceed 0.10% per annum of the average daily net assets)
in anticipation of, or as reimbursement for, print or electronic media
advertising expenses incurred in connection with the sale of Fund shares. No
payments under the Distribution Plan are made to Shareholder Servicing Agents
although Shareholder Servicing Agents receive payments under the Administrative
Services Plan referred to below.
The Distribution Plan continues in effect if such continuance is
specifically approved at least annually by a vote of both a majority of the
Trust's Trustees and a majority of the Trust's Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the Distribution Plan or in any agreement related to the Plan
("Qualified Trustees"). The Distribution Plan requires that the Trust and the
Distributor shall provide to the Board of Trustees, and the Board of Trustees
shall review, at least quarterly, a written report of the amounts expended (and
the purposes therefor) under the Distribution Plan. The Distribution Plan
further provides that the selection and nomination of the Qualified Trustees is
committed to the discretion of the disinterested Trustees (as defined in the
1940 Act) then in office. The Distribution Plan may be terminated with respect
to any Fund at any time by a vote of a majority of the Trust's Qualified
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund. The Distribution Plan may not be amended to increase materially the amount
of a Fund's permitted expenses thereunder without the approval of a majority of
the outstanding voting securities of that Fund and may not be materially amended
in any case without a vote of the majority of both the Trustees and the
Qualified Trustees. The Distributor will preserve copies of any plan, agreement
or report made pursuant to the Distribution Plan for a period of not less than
six years from the date of the Plan, and for the first two years the Distributor
will preserve such copies in an easily accessible place.
As contemplated by the Distribution Plan, CFBDS acts as the agent of the
Funds in connection with the offering of shares of the Funds pursuant to a
Distribution Agreement (the "Distribution Agreement"). After the prospectus and
periodic reports have been prepared, set in type and mailed to existing
shareholders, the Distributor pays for the printing and distribution of copies
of the prospectuses and periodic reports which are used in connection with the
offering of shares of the each of the Funds to prospective investors. The
Prospectus contains a description of fees payable to the Distributor under the
Distribution Agreement.
CASH RESERVES: For the fiscal years ended August 31, 1995, 1996 and 1997,
the fees paid from the Fund to the Distributor under the Distribution Agreement,
after waivers, were $313,267, $663,261 and $996,309, respectively, and none of
which was applicable to print or electronic media advertising.
U.S. TREASURY RESERVES: For the fiscal years ended August 31, 1995, 1996 and
1997, the fees paid from the Fund to the Distributor under the Distribution
Agreement, after waivers, were $104,484, $152,890 and $194,657, respectively,
and none of which was applicable to print or electronic media advertising.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
The Trust has adopted an Administrative Services Plan (the "Administrative
Plan") which provides that the Trust may obtain the services of an
administrator, a transfer agent, a custodian and one or more Shareholder
Servicing Agents, and may enter into agreements providing for the payment of
fees for such services. Under the Administrative Plan, the total of the fees
paid to the Administrator and Shareholder Servicing Agents from each Fund and
the distribution fee paid to the Distributor from each Fund (other than any fee
concerning electronic or other media advertising) may not exceed 0.70% of that
Fund's average daily net assets on an annualized basis for the Fund's
then-current fiscal year. Within this overall limitation, individual fees may
vary. The Administrative Plan continues in effect if such continuance is
specifically approved at least annually by a vote of both a majority of the
Trust's Trustees and a majority of the Trust's Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the Administrative Plan or in any agreement related to such
Plan ("Qualified Trustees"). The Administrative Plan requires that at least
quarterly the Trust provide to the Trust's Board of Trustees and the Trust's
Board of Trustees review a written report of the amounts expended (and the
purposes therefor) under the Administrative Plan. The Administrative Plan may be
terminated with respect to a Fund at any time by a vote of a majority of the
Trust's Qualified Trustees or by a vote of a majority of the outstanding voting
securities of the Fund. The Administrative Plan may not be amended to increase
materially the amount of a Fund's permitted expenses thereunder without the
approval of a majority of the outstanding voting securities of the Fund and may
not be materially amended in any case without a vote of the majority of both the
Trust's Trustees and the Trust's Qualified Trustees.
The Trust has entered into a shareholder servicing agreement (a "Servicing
Agreement") with each Shareholder Servicing Agent and a Transfer Agency and
Service Agreement and a Custodian Agreement with State Street Bank and Trust
Company ("State Street") pursuant to which State Street (or its affiliate State
Street Canada, Inc.) acts as transfer agent and custodian for the Trust. For
additional information, including a description of fees paid to the Shareholder
Servicing Agents under the Servicing Agreements, see "Shareholder Servicing
Agents" and "Transfer Agent, Custodian and Fund Accountant" in the Prospectus.
For the fiscal years ended August 31, 1995, 1996 and 1997, aggregate fees paid
from Cash Reserves to Shareholder Servicing Agents under the Servicing
Agreements, after waivers, were $1,566,336, $3,083,893 and $4,065,240,
respectively. For the fiscal years ended August 31, 1995, 1996 and 1997,
aggregate fees paid from U.S. Treasury Reserves to Shareholder Servicing Agents
under the Servicing Agreement, after waivers, were $561,420, $737,500 and
$848,485, respectively.
The Portfolios have also adopted Administrative Services Plans (the
"Portfolio Administrative Plans") which provide that the Portfolios may obtain
the services of an administrator, a transfer agent and a custodian, and may
enter into agreements providing for the payment of fees for such services. Under
the Portfolio Administrative Plans, the administrative services fee payable to
either CFBDS or SFG, as the case may be, may not exceed 0.05% of a Portfolio's
average daily net assets on an annualized basis for its then-current fiscal
year. Each Portfolio Administrative Plan continues in effect if such continuance
is specifically approved at least annually by a vote of both a majority of the
applicable Portfolio's Trustees and a majority of the Portfolio's Trustees who
are not "interested persons" of the Portfolio and who have no direct or indirect
financial interest in the operation of the Portfolio Administrative Plan or in
any agreement related to such Plan ("Qualified Trustees"). Each Portfolio
Administrative Plan requires that the applicable Portfolio provide to its Board
of Trustees and the Board of Trustees review, at least quarterly, a written
report of the amounts expended (and the purposes therefor) under the Portfolio
Administrative Plan. Each Portfolio Administrative Plan may be terminated at any
time by a vote of a majority of the Portfolio's Qualified Trustees or by a vote
of a majority of the outstanding voting securities of the applicable Portfolio.
Neither Portfolio Administrative Plan may be amended to increase materially the
amount of permitted expenses thereunder without the approval of a majority of
the outstanding voting securities of the applicable Portfolio and may not be
materially amended in any case without a vote of the majority of both the
Portfolio's Trustees and the Portfolio's Qualified Trustees.
Each Portfolio has entered into a Transfer Agency and Service Agreement and
a Custodian Agreement with State Street pursuant to which State Street (or its
affiliate State Street Canada, Inc.) acts as transfer agent and custodian and
performs fund accounting services for the Portfolios.
6. PORTFOLIO TRANSACTIONS
The Portfolios' purchases and sales of portfolio securities usually are
principal transactions. Portfolio securities are normally purchased directly
from the issuer or from an underwriter or market maker for the securities. There
usually are no brokerage commissions paid for such purchases. The Portfolios do
not anticipate paying brokerage commissions. Any transaction for which a
Portfolio pays a brokerage commission will be effected at the best price and
execution available. Purchases from underwriters of portfolio securities include
a commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market makers include the spread between the bid and
asked price.
Allocation of transactions, including their frequency, to various dealers is
determined by the Adviser in its best judgment and in a manner deemed to be in
the best interest of investors in the applicable Portfolio rather than by any
formula. The primary consideration is prompt execution of orders in an effective
manner at the most favorable price.
Investment decisions for each Portfolio will be made independently from
those for any other account, series or investment company that is or may in the
future become managed by the Adviser or its affiliates. If, however, a Portfolio
and other investment companies, series or accounts managed by the Adviser are
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by the Portfolio or the size of the position obtainable for the
Portfolio. In addition, when purchases or sales of the same security for a
Portfolio and for other investment companies or series managed by the Adviser
occur contemporaneously, the purchase or sale orders may be aggregated in order
to obtain any price advantages available to large denomination purchases or
sales.
Portfolio transactions may be executed with the Adviser, or with any
affiliate of the Adviser, acting either as principal or as broker, subject to
applicable law. No commissions on portfolio transactions were paid by any
Portfolio during the fiscal year ended August 31, 1997 to the Adviser or any
affiliate of the Adviser.
7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust's Declaration of Trust permits the Trust's Board of Trustees to
issue an unlimited number of full and fractional shares of beneficial interest
(without par value) of each series and to divide or combine the shares of any
series into a greater or lesser number of shares of that series without thereby
changing the proportionate beneficial interests in that series. Currently, the
Funds are the only two series of shares of the Trust. Each share of each Fund
represents an equal proportionate interest in the Fund with each other share of
such Fund. Upon liquidation or dissolution of a Fund, the Fund's shareholders
are entitled to share pro rata in the Fund's net assets available for
distribution to its shareholders. The Trust reserves the right to create and
issue additional series and classes of shares. Shares of each series participate
equally in the earnings, dividends and distribution of net assets of the
particular series upon the liquidation or dissolution. Shares of each series are
entitled to vote separately to approve advisory agreements or changes in
investment policy, but shares of all series may vote together in the election or
selection of Trustees and accountants for the Trust. In matters affecting only a
particular series or class, only shares of that particular series or class are
entitled to vote.
Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. Shareholders in the Trust do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of the Trust may elect all of the Trustees of the Trust if
they choose to do so and in such event the other shareholders in the Trust would
not be able to elect any Trustee. The Trust is not required and has no current
intention to hold annual meetings of shareholders but the Trust will hold
special meetings of a Fund's shareholders when in the judgment of the Trust's
Trustees it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have under certain circumstances (e.g., upon application and
submission of certain specified documents to the Trustees by a specified number
of shareholders) the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Trustees. Shareholders also have the right to remove one or more Trustees
without a meeting by a declaration in writing by a specified number of
shareholders. No material amendment may be made to the Trust's Declaration of
Trust without the affirmative vote of the holders of a majority of its
outstanding shares.
The Trust's Declaration of Trust provides that, at any meeting of
shareholders of the Trust or of any series of the Trust, a Shareholder Servicing
Agent may vote any shares of which it is the holder of record and for which it
does not receive voting instructions proportionately in accordance with the
instructions it receives for all other shares of which it is the holder of
record. Shares have no preference, pre-emptive, conversion or similar rights.
Shares, when issued, are fully paid and non-assessable, except as set forth
below.
The Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets (or all or substantially all of the assets
belonging to any series of the Trust), if approved by the vote of the holders of
two-thirds of the Trust's outstanding shares voting as a single class, or of the
affected series of the Trust, as the case may be, except that if the Trustees of
the Trust recommend such sale of assets, merger or consolidation, the approval
by vote of the holders of a majority of the Trust's or the affected series'
outstanding shares would be sufficient. The Trust or any series of the Trust, as
the case may be, may be terminated (i) by a vote of a majority of the
outstanding voting securities of the Trust or the affected series or (ii) by the
Trustees by written notice to the shareholders of the Trust or the affected
series. If not so terminated, the Trust will continue indefinitely.
Share certificates will not be issued.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Trust
and provides for indemnification and reimbursement of expenses out of Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Declaration of Trust also provides that the Trust shall maintain
appropriate insurance (e.g., fidelity bonding and errors and omissions
insurance) for the protection of the Trust, its shareholders, Trustees,
officers, employees and agents covering possible tort and other liabilities.
Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the property
of the Trust and that the Trustees will not be liable for any action or failure
to act, but nothing in the Declaration of Trust protects a Trustee against any
liability to which he or she would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his or her office.
Each Portfolio is organized as a trust under the laws of the State of New
York. Each Portfolio's Declaration of Trust provides that investors in the
Portfolio (e.g., other investment companies (including the corresponding Fund),
insurance company separate accounts and common and commingled trust funds) are
each liable for all obligations of the Portfolio. However, the risk of a Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the applicable
Portfolio itself was unable to meet its obligations. It is not expected that the
liabilities of either Portfolio would ever exceed its assets.
Each investor in a Portfolio, including the corresponding Fund, may add to
or reduce its investment in the Portfolio on each business day. At 3:00 p.m.,
Eastern time, for Cash Reserves Portfolio, and 12:00 noon, Eastern time, for
U.S. Treasury Reserves Portfolio, on each such business day, the value of each
investor's interest in the Portfolio is determined by multiplying the net asset
value of the Portfolio by the percentage representing that investor's share of
the aggregate beneficial interests in the Portfolio effective for that day. Any
additions or withdrawals, which are to be effected on that day, are then
effected. The investor's percentage of the aggregate beneficial interests in the
Portfolio is then re-computed as the percentage equal to the fraction (i) the
numerator of which is the value of such investor's investment in the Portfolio
as of 3:00 p.m. Eastern time, for Cash Reserves Portfolio, and 12:00 noon,
Eastern time, for U. S. Treasury Reserves Portfolio, on such day plus or minus,
as the case may be, the amount of any additions to or withdrawals from the
investor's investment in the Portfolio effected on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of
3:00 p.m., Eastern time, for Cash Reserves Portfolio, and 12:00 noon, Eastern
time, for U.S. Treasury Reserves Portfolio, on such day plus or minus, as the
case may be, the amount of the net additions to or withdrawals from the
aggregate investments in the Portfolio by all investors in the Portfolio. The
percentage so determined is then applied to determine the value of the
investor's interest in the Portfolio as of 3:00 p.m., Eastern time, for Cash
Reserves Portfolio, and 12:00 noon, Eastern time, for U.S. Treasury Reserves
Portfolio, on the following business day of the Portfolio.
8. CERTAIN ADDITIONAL TAX MATTERS
Each of the Funds has elected to be treated and intends to qualify each year
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions and the composition of the Fund's
portfolio assets. Provided all such requirements are met and all of a Fund's net
investment income and realized capital gains are distributed to shareholders in
accordance with the timing requirements imposed by the Code, no federal income
or excise taxes generally will be required to be paid by the Fund. If a Fund
should fail to qualify as a regulated investment company for any year, the Fund
would incur a regular corporate federal income tax upon its taxable income and
Fund distributions would generally be taxable as ordinary dividend income to
shareholders. Each of the Portfolios believes that it will not be required to
pay any federal income or excise taxes.
Investment income received by Cash Reserves from non-U.S. investments may be
subject to foreign income taxes withheld at the source; Cash Reserves does not
expect to be able to pass through to shareholders any foreign tax credits or
deductions with respect to those foreign taxes. The United States has entered
into tax treaties with many foreign countries that may entitle Cash Reserves to
a reduced rate of tax or an exemption from tax on these investments. It is not
possible to determine Cash Reserves' effective rate of foreign tax in advance
since that rate depends upon the proportion of the Cash Reserves Portfolio's
assets ultimately invested within various countries.
Because each Fund expects to earn primarily interest income, it is expected
that no Fund distributions will qualify for the dividends received deduction for
corporations.
9. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Price Waterhouse LLP and Price Waterhouse are the independent and chartered
accountants for Cash Reserves and Cash Reserves Portfolio, respectively,
providing audit services and assistance and consultation with respect to the
preparation of filings with the SEC. Deloitte & Touche LLP were the independent
accountants for Cash Reserves and Cash Reserves Portfolio through August 31,
1993. There was no disagreement between the Fund, the Portfolio and Deloitte &
Touche LLP with respect to the accounting and audit services provided by such
firm. Deloitte & Touche LLP are the independent accountants for U.S. Treasury
Reserves and U.S. Treasury Reserves Portfolio, providing audit services and
assistance and consultation with respect to the preparation of filings with the
SEC.
The audited financial statements of Cash Reserves (Statement of Assets and
Liabilities at August 31, 1997, Statement of Operations for the year ended
August 31, 1997, Statement of Changes in Net Assets for the years ended August
31, 1997 and 1996, Financial Highlights for each of the years in the five-year
period ended August 31, 1997, Notes to Financial Statements and Independent
Auditors' Report) and of Cash Reserves Portfolio (Portfolio of Investments at
August 31, 1997, Statement of Assets and Liabilities at August 31, 1997,
Statement of Operations for the year ended August 31, 1997, Statement of Changes
in Net Assets for the years ended August 31, 1997 and August 31, 1996, Financial
Highlights for each of the years in the five-year period ended August 31, 1997,
Notes to Financial Statements and Independent Auditors' Report), each of which
is included in the Annual Report to Shareholders of Cash Reserves, are
incorporated by reference into this Statement of Additional Information and have
been so incorporated in reliance upon the reports of Price Waterhouse LLP and
Price Waterhouse, as experts in accounting and auditing.
The audited financial statements of U.S. Treasury Reserves (Statement of
Assets and Liabilities at August 31, 1997, Statement of Operations for the year
ended August 31, 1997, Statement of Changes in Net Assets for the years ended
August 31, 1997 and 1996, Financial Highlights for each of the years in the
four-year period ended August 31, 1997, the eight months ended August 31, 1993
and the year ended December 31, 1992, and the Notes to Financial Statements and
Independent Auditors' Report) and of U.S. Treasury Reserves Portfolio (Portfolio
of Investments at August 31, 1997, Statement of Assets and Liabilities at August
31, 1997, Statement of Operations for the year ended August 31, 1997, Statement
of Changes in Net Assets for the years ended August 31, 1997 and 1996, and the
Financial Highlights for each of the years in the four-year period ended August
31, 1997, the eight months ended August 31, 1993 and the year ended December 31,
1992, the Notes to Financial Statements and Independent Auditors' Report), each
of which is included in the Annual Report to Shareholders of U.S. Treasury
Reserves, are incorporated by reference into this Statement of Additional
Information and have been so incorporated in reliance upon the report of
Deloitte & Touche LLP, independent accountants, as experts in accounting and
auditing.
A copy of each of the Annual Reports accompanies this Statement of
Additional Information.
<PAGE>
SHAREHOLDER SERVICING AGENTS
FOR CITIBANK NEW YORK RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CUSTOMERS:
Citibank, N.A.
450 West 33rd Street, New York, NY 10001
(212) 564-3456 or (800) 846-5300
FOR CITIGOLD CLIENTS:
Citigold
P.O. Box 5130, New York, NY 10126-5130
Call Your Citigold Executive or in NY or CT (800) 285-1701,
or for all other states, (800) 285-1707
FOR PRIVATE BANKING CLIENTS:
Citibank, N.A.
The Citibank Private Bank
153 East 53rd Street, New York, NY 10043
Call Your Citibank Private Banking Account Officer,
Registered Representative or (212) 559-5959
FOR CITIBANK GLOBAL ASSET MANAGEMENT CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY l0043
(212) 559-7117
FOR NORTH AMERICAN INVESTOR SERVICES CLIENTS:
Citibank, N.A.
111 Wall Street, New York, NY 10043
Call Your Account Manager or (212) 657-9100
FOR CITICORP INVESTMENT SERVICES CUSTOMERS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200
(212) 736-8170 in New York City
<PAGE>
CITIFUNDS(SM) CASH RESERVES
CITIFUNDS(SM) U.S. TREASURY RESERVES
TRUSTEES AND OFFICERS
C. Oscar Morong, Jr., Chairman
Philip W. Coolidge, President*
E. Kirby Warren
William S. Woods, Jr.
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
*Affiliated Person of Administrator and Distributor
- ----------------------------------------------
INVESTMENT ADVISER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND DISTRIBUTOR
CFBDS, Inc.
6 St. James Avenue, Boston, MA 02116
(617) 423-1679
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
(FOR CITIFUNDS(SM) CASH RESERVES)
Price Waterhouse LLP
160 Federal Street, Boston, MA 02110
(FOR CITIFUNDS(SM) U.S. TREASURY RESERVES)
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
- ----------------------------------------------
SHAREHOLDER SERVICING AGENTS
(See Inside of Cover)
<PAGE>
PART C
Item 24. Financial Statements and Exhibits.
(a) FINANCIAL STATEMENTS INCLUDED IN PART A:
(i) Landmark Cash Reserves
Condensed Financial Information - Financial Highlights for each
of the years in the ten-year period ended August 31, 1997.
(ii) Landmark U.S. Treasury Reserves
Condensed Financial Information - Financial Highlights for the
period from May 3, 1991 (commencement of operations) to
December 31, 1991, the year ended December 31, 1992, the
eight months ended August 31, 1993 and the years ended August
31, 1994, August 31, 1995, August 31, 1996 and August 31,
1997.
FINANCIAL STATEMENTS INCLUDED IN PART B:
(i) Landmark Cash Reserves
Statement of Assets and Liabilities at August 31, 1997*
Statement of Operations for the year ended August 31, 1997*
Statement of Changes in Net Assets for the years ended
August 31, 1997 and August 31, 1996*
Financial Highlights for each of the years in the five-year
period ended August 31, 1997*
(ii) Cash Reserves Portfolio
Portfolio of Investments at August 31, 1997*
Statement of Assets and Liabilities at August 31, 1997*
Statement of Operations for year ended August 31, 1997*
Statement of Changes in Net Assets for the years ended
August 31, 1997 and August 31, 1996*
Financial Highlights for each of the years in the five-year
period ended August 31, 1997*
(iii) Landmark U.S. Treasury Reserves
Statement of Assets and Liabilities at August 31, 1997**
Statement of Operations for the year ended August 31, 1997**
Statement of Changes in Net Assets for the years ended
August 31, 1997 and August 31, 1996**
Financial Highlights for the year ended December 31, 1992,
the eight months ended August 31, 1993 and the years ended
August 31, 1994, August 31, 1995, August 31, 1996 and August
31, 1997**
(iv) U.S. Treasury Reserves Portfolio
Portfolio of Investments at August 31, 1997**
Statement of Assets and Liabilities at August 31, 1997**
Statement of Operations for the year ended August 31, 1997**
Statement of Changes in Net Assets for the years ended August
31, 1997 and August 31, 1996**
Financial Highlights for the year ended December 31, 1992, the
eight months ended August 31, 1993 and the years ended August
31, 1994, August 31, 1995, August 31, 1996 and August 31,
1997**
- ------------------
*Incorporated by reference to the Registrant's Annual Report to Shareholders of
Landmark Cash Reserves for the fiscal year ended August 31, 1997, filed with
the Securities and Exchange Commission on the EDGAR system on October 28,
1997 (Accession Number 0000747576-97-000005).
**Incorporated by reference to the Registrant's Annual Report to Shareholders of
Landmark U.S. Treasury Reserves for the fiscal year ended August 31, 1997,
filed with the Securities and Exchange Commission on the EDGAR system on
October 28, 1997 (Accession Number 0000747576-97-000005).
(b) Exhibits
*1(a) Declaration of Trust of the Registrant
*1(b) Amendments to Declaration of Trust of the
Registrant
*2(a) Amended and Restated By-Laws of the Registrant
*and filed 2(b) Amendments to Amended and Restated By-Laws of
herein
the Registrant
** 4(a) Form of Certificate representing ownership of
Class A shares of Landmark Cash Reserves
** 4(c) Form of Certificate representing ownership of
a share of Landmark U.S. Treasury Reserves
*6(a) Distribution Agreement between the Registrant
and CFBDS, Inc. (formerly known as The Landmark
Funds Broker-Dealer Services, Inc.) ("CFBDS"),
as distributor, with respect to Class A shares
of Landmark Cash Reserves and shares of
Landmark U.S. Treasury Reserves
*7 Custodian Contract between the Registrant and
State Street Bank and Trust Company ("State
Street"), as custodian, and amendment thereto
*9(a) Amended and Restated Administrative Services
Plan of the Registrant
*9(b) Administrative Services Agreement between the
Registrant and CFBDS, as administrator
*9(c) Sub-Administrative Services Agreement between
Citibank, N.A. and CFBDS
*9(d)(i) Form of Shareholder Servicing Agreement between
the Registrant and Citibank, N.A., as
shareholder servicing agent
*9(d)(ii) Form of Shareholder Servicing Agreement between
the Registrant and a federal savings bank, as
shareholder servicing agent
*9(d)(iii) Form of Shareholder Servicing Agreement between
the Registrant and CFBDS, as shareholder
servicing agent
*9(e) Transfer Agency and Service Agreement between
the Registrant and State Street, as transfer
agent, and amendment thereto
*9(f) Amended and Restated Exchange Privilege
Agreement between the Registrant, certain other
investment companies and CFBDS, as distributor
*10 Opinion and Consent of Counsel
11 Consents of Deloitte & Touche LLP, Price
Waterhouse LLP and Price Waterhouse,
independent auditors of the Registrant,
U.S. Treasury Reserves Portfolio and Cash
Reserves Portfolio
*15(a) Amended and Restated Distribution Plan of the
Registrant with respect to Class A shares of
Landmark Cash Reserves and shares of Landmark
U.S. Treasury Reserves
**** 25(a) Powers of Attorney for the Registrant
**** 25(b) Powers of Attorney for U.S. Treasury Reserves
Portfolio
*** 25(c) Powers of Attorney for Cash Reserves Portfolio
and
****
27 Financial data schedule
- ---------------------
* Incorporated herein by reference to Post-Effective Amendment No. 8 to the
Registrant's Registration Statement on Form N-1A (File No. 33-39538) as
filed with the Securities and Exchange Commission on August 29, 1996 and
Post-Effective Amendment No. 20 to the Registrant's Registration Statement
of Form N-1A (File No. 2-91556) as filed with the Securities and Exchange
Commission on August 29, 1996.
** Information defining the rights of shareholders is contained in the
Registrant's Declaration of Trust, as amended, incorporated herein by
reference as Exhibits No. 1(a) and 1(b).
*** Incorporated herein by reference to Post-Effective Amendment No. 7 to the
Registrant's Registration Statement on Form N-1A (File No. 33-39538) as
filed with the Securities and Exchange Commission on December 28, 1995 and
Post-Effective Amendment No. 19 to the Registrant's Registration Statement
of Form N-1A (File No. 2-91556) as filed with the Securities and Exchange
Commission on December 28, 1995.
**** Incorporated herein by reference to Post-Effective Amendment No. 9 to the
Registrant's Registration Statement on Form N-1A (File No. 33-39538) as
filed with the Securities and Exchange Commission on December 17, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant.
Not applicable.
Item 26. Number of Holders of Securities.
Title of Class Number of Record Holders
As of December 19, 1997
Shares of Beneficial Interest
(without par value)
Landmark Cash Reserves 6
Landmark U.S. Treasury Reserves 6
Item 27. Indemnification.
Reference is hereby made to (a) Article V of the Registrant's
Declaration of Trust, incorporated by reference herein as an Exhibit to the
Registrant's Registration Statement on Form N-1A; (b) Section 4 of the
Distribution Agreement between the Registrant and CFBDS incorporated by
reference herein as an Exhibit to the Registrant's Registration Statement on
Form N-1A; and (c) the undertaking of the Registrant regarding indemnification
set forth in its Registration Statement on Form N-1A.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
Item 28. Business and Other Connections of Investment Adviser.
Citibank, N.A. ("Citibank") is a commercial bank offering a wide range
of banking and investment services to customers across the United States and
around the world. Citibank is a wholly-owned subsidiary of Citicorp, a
registered bank holding company. Citibank also serves as investment adviser to
the following registered investment companies (or series thereof): Asset
Allocation Portfolios (Large Cap Value Portfolio, Small Cap Value Portfolio,
International Portfolio, Foreign Bond Portfolio, Short-Term Portfolio and
Intermediate Income Portfolio), The Premium Portfolios (Balanced Portfolio,
Large Cap Growth Portfolio, Government Income Portfolio, International Equity
Portfolio, Emerging Asian Markets Equity Portfolio and Small Cap Growth
Portfolio), Tax Free Reserves Portfolio, Landmark Multi-State Tax Free Funds
(Landmark New York Tax Free Reserves, Landmark Connecticut Tax Free Reserves and
Landmark California Tax Free Reserves), Landmark Fixed Income Funds (Landmark
Intermediate Income Fund), Landmark Tax Free Income Funds (Landmark National Tax
Free Income Fund and Landmark New York Tax Free Income Fund), CitiFunds
Institutional Trust (CitiFunds Institutional Cash Reserves) and Variable Annuity
Portfolios (CitiSelect(R) VIP Folio 200, CitiSelect(R) VIP Folio 300,
CitiSelect(R) VIP Folio 400, CitiSelect(R) VIP Folio 500 and Landmark Small Cap
Equity VIP Fund). Citibank and its affiliates manage assets in excess of $88
billion worldwide. The principal place of business of Citibank is located at 399
Park Avenue, New York, New York 10043.
John S. Reed is the Chairman of the Board and a Director of Citibank.
The following are Vice Chairmen of the Board and Directors of Citibank: Paul J.
Collins and William R. Rhodes. Other Directors of Citibank are D. Wayne
Calloway, former Chairman and Chief Executive Officer, PepsiCo, Inc.; John M.
Deutch, Institute Professor, Massachusetts Institute of Technology; Reuben Mark,
Chairman and Chief Executive Officer, Colgate-Palmolive Company; Richard D.
Parsons, President, Time Warner, Inc.; Rozanne L. Ridgway, Former Assistant
Secretary of State for Europe and Canada; Robert B. Shapiro, Chairman, President
and Chief Executive Officer, Monsanto Company; Frank A. Shrontz, Chairman
Emeritus, The Boeing Company; and Franklin A. Thomas, former President, The Ford
Foundation.
Each of the individuals named above is also a Director of Citicorp. In
addition, the following persons have the affiliations indicated:
D. Wayne Calloway Director, Exxon Corporation
Director, General Electric Company
Director, Retired Chairman and Chief Executive
Officer, PepsiCo, Inc.
Paul J. Collins Director, Kimberly-Clark Corporation
John M. Deutch Director, Ariad Pharmaceuticals, Inc.
Director, CMS Energy
Director, Cummins Engine Company, Inc.
Director, Schlumberger, Ltd.
Reuben Mark Director, Chairman and Chief Executive Officer
Colgate-Palmolive Company
Director, New York Stock Exchange
Director, Time Warner, Inc.
Non-Executive Director, Pearson, PLC
Richard D. Parsons Director, Federal National Mortgage Association
Director, Philip Morris Companies Incorporated
Member, Board of Representatives, Time Warner
Entertainment Company, L.P.
Director and President, Time Warner, Inc.
John S. Reed Director, Monsanto Company
Director, Philip Morris Companies Incorporated
William R. Rhodes Director, Private Export Funding Corporation
Rozanne L. Ridgway Director, 3M
Director, Bell Atlantic Corporation
Director, Boeing Company
Director, Emerson Electric Company
Member-International Advisory Board, New Perspective
Fund, Inc.
Director, RJR Nabisco, Inc.
Director, Sara Lee Corporation
Director, Union Carbide Corporation
Robert B. Shapiro Director, Chairman and Chief Executive Officer,
Monsanto Company
Director, Silicon Graphics
Frank A. Shrontz Director, 3M
Director, Baseball of Seattle, Inc.
Director and Chairman Emeritus, Boeing Company
Director, Boise Cascade Corp.
Director, Chevron Corporation
Franklin A. Thomas Director, Aluminum Company of America
Director, Cummins Engine Company, Inc.
Director, Lucent Technologies
Director, PepsiCo, Inc.
Item 29. Principal Underwriters.
(a) CFBDS, the Registrant's Distributor, is also the distributor for
Landmark International Equity Fund, Landmark Emerging Asian Markets Equity Fund,
Premium U.S. Treasury Reserves, Premium Liquid Reserves, Landmark Institutional
Liquid Reserves, Landmark Institutional U.S. Treasury Reserves, Landmark
Institutional Tax Free Reserves, CitiFunds(SM) Institutional Cash Reserves,
Landmark Tax Free Reserves, Landmark New York Tax Free Reserves, Landmark
California Tax Free Reserves, Landmark Connecticut Tax Free Reserves, Landmark
U.S. Government Income Fund, Landmark Intermediate Income Fund, Landmark
Balanced Fund, Landmark Equity Fund, Landmark Small Cap Equity Fund, Landmark
National Tax Free Income Fund, Landmark New York Tax Free Income Fund,
CitiSelect(R) VIP Folio 200, CitiSelect(R) VIP Folio 300, CitiSelect(R) VIP
Folio 400, CitiSelect(R) VIP Folio 500, Landmark Small Cap Equity VIP Fund,
CitiSelect(R) Folio 200, CitiSelect(R) Folio 300, CitiSelect(R) Folio 400 and
CitiSelect(R) Folio 500. CFBDS is also the placement agent for International
Equity Portfolio, Balanced Portfolio, Large Cap Growth Portfolio, Small Cap
Growth Portfolio, Government Income Portfolio, Emerging Asian Markets Equity
Portfolio, Tax Free Reserves Portfolio, Large Cap Value Portfolio, Small Cap
Value Portfolio, International Portfolio, Foreign Bond Portfolio, Short-Term
Portfolio and Intermediate Income Portfolio.
(b) The information required by this Item 29 with respect to each
director and officer of CFBDS is incorporated by reference to Schedule A of Form
BD filed by CFBDS pursuant to the Securities and Exchange Act of 1934 (File No.
8-32417).
(c) Not applicable.
Item 30. Location of Accounts and Records.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
CFBDS, Inc. (administrator and distributor) 6 St. James Avenue
Boston, MA 02116
State Street Bank and Trust Company 1776 Heritage Drive
(custodian and transfer agent) North Quincy, MA 02171
Citibank, N.A. 153 East 53rd Street
(investment adviser) New York, NY 10043
SHAREHOLDER SERVICING AGENTS
Citibank, N.A. 450 West 33rd Street
New York, NY 10001
Citibank, N.A. -- Citigold Citicorp Mortgage Inc. - Citigold
15851 Clayton Road
Ballwin, MO 63011
Citibank, N.A. -- The Citibank 153 East 53rd Street
Private Bank New York, NY 10043
Citibank, N.A. -- Citibank Global 153 East 53rd Street
Asset Management New York, NY 10043
Citibank, N.A. -- North American 111 Wall Street
Investor Services New York, NY 10094
Citicorp Investment Services One Court Square
Long Island City, NY 11120
CFBDS, Inc. 6 St. James Avenue
Boston, MA 02116
</TABLE>
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) The Registrant undertakes to furnish to each person to whom a
prospectus of Landmark Cash Reserves and Landmark U.S. Treasury
Reserves is delivered with a copy of the Funds' latest Annual
Reports to Shareholders, upon request without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this
Post-Effective Amendment to its Registration Statement on Form N-1A meets all of
the requirements for effectiveness pursuant to Rule 485(b) under the Securities
Act of 1933 and that the Registrant has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and Commonwealth
of Massachusetts on the 19th day of December, 1997.
LANDMARK FUNDS III
By: Philip W. Coolidge
-------------------
Philip W. Coolidge
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated below on December 19, 1997.
Signature Title
--------- -----
Philip W. Coolidge President, Principal Executive Officer and Trustee
- --------------------------
Philip W. Coolidge
John R. Elder Principal Accounting and Financial Officer
- --------------------------
John R. Elder
C. Oscar Morong, Jr.* Trustee
- --------------------------
C. Oscar Morong, Jr.
E. Kirby Warren* Trustee
- --------------------------
E. Kirby Warren
William S. Woods, Jr.* Trustee
- --------------------------
William S. Woods, Jr.
*By: Philip W. Coolidge
--------------------
Philip W. Coolidge
Executed by Philip W. Coolidge on behalf of those indicated pursuant to
Powers of Attorney.
<PAGE>
SIGNATURES
U.S. Treasury Reserves Portfolio has duly caused this Post-Effective
Amendment to the Registration Statement on Form N-1A of Landmark Funds III to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Boston and Commonwealth of Massachusetts on the 19th day of December, 1997.
U.S. TREASURY RESERVES PORTFOLIO
By: Philip W. Coolidge
-----------------------------
Philip W. Coolidge, President
This Post-Effective Amendment to the Registration Statement on Form
N-1A of Landmark Funds III has been signed by the following persons in the
capacities indicated on December 19, 1997.
Signature Title
--------- -----
Philip W. Coolidge President, Principal Executive Officer and Trustee
- --------------------------
Philip W. Coolidge
John R. Elder Principal Accounting and Financial Officer
- --------------------------
John R. Elder
Elliott J. Berv* Trustee
- --------------------------
Elliott J. Berv
Mark T. Finn* Trustee
- --------------------------
Mark T. Finn
Walter E. Robb, III* Trustee
- --------------------------
Walter E. Robb, III
*By: Philip W. Coolidge
-------------------
Philip W. Coolidge
Executed by Philip W. Coolidge on behalf of those indicated pursuant to
Powers of Attorney.
<PAGE>
SIGNATURES
Cash Reserves Portfolio has duly caused this Post-Effective Amendment
to the Registration Statement on Form N-1A of Landmark Funds III to be signed on
its behalf by the undersigned, thereunto duly authorized, in Hamilton, Bermuda
on the 19th day of December, 1997.
CASH RESERVES PORTFOLIO
By: Susan Jakuboski
---------------------------------------
Susan Jakuboski, Assistant Treasurer of
Cash Reserves Portfolio
This Post-Effective Amendment to the Registration Statement on Form
N-1A of Landmark Funds III has been signed by the following persons in the
capacities indicated on December 19, 1997.
Signature Title
--------- -----
Philip W. Coolidge* President, Principal Executive Officer and Trustee
- --------------------------
Philip W. Coolidge
John R. Elder* Principal Accounting and Financial Officer
- --------------------------
John R. Elder
Elliott J. Berv* Trustee
- --------------------------
Elliott J. Berv
Mark T. Finn* Trustee
- --------------------------
Mark T. Finn
Walter E. Robb, III* Trustee
- --------------------------
Walter E. Robb, III
*By: Susan Jakuboski
-------------------
Susan Jakuboski
Executed by Susan Jakuboski on behalf of those indicated pursuant to
Powers of Attorney.
<PAGE>
EXHIBIT INDEX
Exhibit
No.: Description:
- ------- ------------
2(b) Amendment to the Amended and Restated By-Laws of the Registrant
11 Consents of Deloitte & Touche LLP, Price Waterhouse LLP and
Price Waterhouse, independent auditors of the Registrant, U.S.
Treasury Reserves Portfolio and Cash Reserves Portfolio
27 Financial data schedule
<PAGE>
Exhibit 2(b)
AMENDMENT TO THE BY-LAWS OF LANDMARK FUNDS I, LANDMARK FUNDS II, LANDMARK
INTERNATIONAL FUNDS, LANDMARK FIXED INCOME FUNDS, LANDMARK TAX FREE INCOME
FUNDS, LANDMARK FUNDS III, LANDMARK PREMIUM FUNDS, LANDMARK MULTI-STATE TAX FREE
FUNDS, LANDMARK INSTITUTIONAL TRUST, LANDMARK TAX FREE RESERVES AND VARIABLE
ANNUITY PORTFOLIOS - AS ADOPTED BY THE BOARDS OF TRUSTEES ON AUGUST 8,
1997:
VOTED: That Article III, Section 4 of the By-Laws of the Trust be and hereby
is amended in its entirety to read as follows*:
Section 4. Proxies. At any meeting of Shareholders, any holder of
Shares entitled to vote thereat may vote by proxy, provided that no proxy
shall be voted at any meeting unless it shall have been placed on file
with the Secretary, or with such other officer or agent of the Trust as
the Secretary may direct, for verification prior to the time at which such
vote shall be taken. [Any Shareholder may give authorization through
telephonic or telegraphic methods of communication for another person to
execute his or her proxy.] Pursuant to a vote of a majority of the
Trustees, proxies may be solicited in the name of one or more Trustees or
one or more of the officers of the Trust. Only Shareholders of record
shall be entitled to vote. Each full Share shall be entitled to one vote
and fractional Shares shall be entitled to a vote of such fraction. When
any Share is held jointly by several persons, any one of them may vote at
any meeting in person or by proxy in respect of such Share, but if more
than one of them shall be present at such meeting in person or by proxy,
and such joint owners or their proxies so present disagree as to any vote
to be cast, such vote shall not be received in respect of such Share. A
proxy purporting to be executed by or on behalf of a Shareholder shall be
deemed valid unless challenged at or prior to its exercise, and the burden
of proving invalidity shall rest on the challenger. If the holder of any
such Share is a minor or a person of unsound mind, and subject to
guardianship or to the legal control of any other person as regards the
charge or management of such Share, such Share may be voted by such
guardian or such other person appointed or having such control, and such
vote may be given in person or by proxy. [Unless otherwise specifically
limited by their terms, proxies shall entitle the holder thereof to vote
at any adjournment of a meeting.]
*New language is in [brackets].
<PAGE>
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post Effective Amendment
No. 10 to Registration Statement No. 33-39538 of CitiFunds Trust III (formerly
known as Landmark Funds III) of our reports each dated October 6, 1997 appearing
in the annual report to shareholders for the year ended August 31, 1997 of
CitiFunds U.S. Treasury Reserves (a series of CitiFunds Trust III) and U.S.
Treasury Reserves Portfolio, and to the references to us under the headings
"Condensed Financial Information" in the Prospectus and "Independent Accountants
and Financial Statements" in the Statement of Additional Information, both of
which are part of such Registration Statement.
Deloitte & Touche LLP
Boston, Massachusetts
December 23, 1997
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 21 to the registration statement on Form N-1A (the "Registration
Statement") of CitiFunds Trust III (formerly Landmark Funds III) of our report
dated October 6, 1997, relating to the financial statements and financial
highlights of CitiFunds Cash Reserves (formerly Landmark Cash Reserves)
appearing in the August 31, 1997 Annual Report of CitiFunds Cash Reserves
(formerly Landmark Cash Reserves), which are also incorporated by reference into
the Registration Statement. We also consent to the references to us under the
heading "Condensed Financial Information" in the Prospectus and under the
heading "Independent Accountants and Financial Statements" in the Statement of
Additional Information.
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Boston, Massachusetts
December 23, 1997
<PAGE>
EXHIBIT 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting parts of this Post-Effective Amendment No.
21 to the registration statement on Form N-1A (the "Registration Statement") of
CitiFunds Trust III (formerly Landmark Funds III) of our report dated October 6,
1997, relating to the financial statements and financial highlights of Cash
Reserves Portfolio appearing in the August 31, 1997 Annual Report of CitiFunds
Cash Reserves (formerly Landmark Cash Reserves), which are also incorporated by
reference into the Registration Statement. We also consent to the reference to
us under the heading "Independent Accountants and Financial Statements" in the
Statement of Additional Information.
/s/ Price Waterhouse
Chartered Accountants
Toronto, Ontario
December 23, 1997
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000747576
<NAME> LANDMARK CASH RESERVES
<SERIES>
<NUMBER> 1
<NAME> LANDMARK FUNDS III
<S> <C>
<PERIOD-TYPE> 1 YEAR
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 1,834,362,105
<INVESTMENTS-AT-VALUE> 1,834,362,105
<RECEIVABLES> 4,450
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1,834,366,555
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 7,185,859
<TOTAL-LIABILITIES> 7,185,859
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 1,827,180,696
<SHARES-COMMON-STOCK> 1,827,180,696
<SHARES-COMMON-PRIOR> 1,468,176,906
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 1,827,180,696
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 92,001,139
<OTHER-INCOME> 0
<EXPENSES-NET> 11,404,121
<NET-INVESTMENT-INCOME> 80,597,018
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 80,597,018
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (80,597,018)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,774,468,339
<NUMBER-OF-SHARES-REDEEMED> (1,431,754,345)
<SHARES-REINVESTED> 16,289,796
<NET-CHANGE-IN-ASSETS> 359,003,790
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 13,295,373
<AVERAGE-NET-ASSETS> 1,627,181,455
<PER-SHARE-NAV-BEGIN> 1.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.05)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 1.00
<EXPENSE-RATIO> 0.70
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
