<PAGE>
TAX FREE RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS February 28, 1998
(Unaudited)
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
TAX-EXEMPT COMMERCIAL PAPER -- 1.8%
- --------------------------------------------------------------------------------
Dallas, Texas,
3.50% due 4/07/98 $ 3,806 $ 3,806,000
Houston, Texas,
Airport System Revenue,
AMT, 3.60% due 6/08/98 3,000 3,000,000
Venango, Pennsylvania,
3.65% due 4/06/98 1,300 1,300,000
Venango, Pennsylvania,
Industrial Development
Revenue,
3.65% due 4/06/98 2,000 2,000,000
------------
10,106,000
------------
GENERAL OBLIGATION BONDS
AND NOTES -- 6.0%
- --------------------------------------------------------------------------------
California School Cash
Reserve Notes,
4.75% due 7/02/98 4,000 4,011,578
Chicago, Illinois,
3.55% due 10/29/98 3,900 3,900,000
Chicago, Illinois,
3.55% due 2/04/99 3,000 3,000,000
Joshua, Texas Independent
School District,
6.125% due 2/15/99 4,710 4,822,329
State of Utah General
Obligations,
3.10% due 3/10/98 2,000 2,000,000
State of Utah General
Obligations,
3.30% due 3/11/98 2,750 2,750,000
State of Utah General
Obligations, AMT,
3.61% due 7/01/22 3,330 3,330,000
Texas State,
3.50% due 4/01/20 9,440 9,440,100
------------
33,254,007
------------
ANNUAL AND SEMI-ANNUAL TENDER REVENUE
BONDS AND NOTES (PUTS) -- 18.7%
- --------------------------------------------------------------------------------
Alabama State,
5.70% due 3/01/98 1,000 1,000,000
Anchorage, Alaska,
6.80% due 7/01/98 1,000 1,009,773
Chicago, Illinois, Metropolitan
Water Reclamation District,
7.25% due 1/01/99 1,200 1,234,314
Clackmas County, Oregon,
Hospital Facilities Authority,
3.75 % due 4/01/98 3,200 3,199,967
Clark County, Kentucky,
Pollution Control Revenue,
3.70% due 4/15/98 2,400 2,400,000
Fort Smith, Arizona,
Sales and Use Tax,
4.00% due 12/01/98 480 480,000
Hawaii State Department
of Budget and Finance
Revenue,
3.75% due 3/01/98 4,100 4,100,000
Kentucky Assets and Liabilities,
3.55% due 6/04/98 3,000 3,000,000
Lower Colorado River
Authority,
3.45% due 5/21/98 3,300 3,300,000
Maryland State Department
of Transportation
Construction,
6.375% due 11/01/98 2,000 2,036,910
Michigan State, Michigan,
4.50% due 9/30/98 2,500 2,511,260
Michigan State,
Housing Development
Authority, AMT,
3.625% due 3/09/98 4,000 4,000,000
Milwaukee, Wisconsin, Metro
Sewer District,
6.50% due 10/01/98 1,000 1,016,422
Minnesota Water Pollution
Control Revenue,
5.00% due 3/01/99 2,170 2,199,584
Nashville, Tennessee, Health
and Educational Facilities,
3.75% due 1/15/99 4,000 4,000,000
New Berlin, Wisconsin,
4.50% due 12/01/98 1,105 1,111,019
Nevada State,
9.70% due 5/01/98 2,800 2,827,208
Newport News, Virginia,
6.875 % due 12/01/98 1,700 1,778,744
Oklahoma State Water
Resource Board State
Loan Revenue,
3.75% due 3/02/98 12,700 12,700,000
Ohio State Public Facilities
Authority,
4.50% due 11/01/98 5,000 5,029,188
Ohio State Public Facilities
Authority,
5.00% due 11/01/98 1,000 1,008,438
Port Seattle, Washington,
4.60% due 4/01/98 1,000 1,000,669
Reno, Nevada,
Hospital Revenue,
7.10% due 7/01/98 500 505,479
Rhode Island State
Resource Recovery,
4.25% due 7/31/98 1,000 1,001,195
San Antonio, Texas
6.20% due 2/01/99 2,000 2,046,896
San Antonio, Texas
7.00% due 2/01/99 2,000 2,060,905
Scottsdale, Arizona,
Water and Sewer Revenue,
7.25% due 7/01/98 425 429,463
Sikeston, Missouri,
Electric Revenue Authority,
3.60% due 6/17/98 10,098 10,098,000
South Dakota Education
Loans Inc., AMT,
3.70% due 5/06/98 5,000 5,000,000
Texas State,
8.10% due 6/01/98 1,000 1,010,471
Texas State,
3.60 % due 6/17/98 4,950 4,950,000
Utah State Building
Ownership Authority,
7.50% due 8/15/98 1,000 1,017,108
Virginia State,
5.80% due 5/15/98 1,165 1,169,874
Virginia State,
6.60% due 6/01/98 1,800 1,848,030
Washington State,
Housing Finance
Community, AMT,
3.90% due 12/15/98 1,000 1,000,000
Wichita, Kansas,
4.25% due 8/27/98 4,000 4,011,580
York County, South Carolina,
Pollution Control,
3.70% due 3/15/98 5,900 5,899,982
------------
102,992,479
------------
REVENUE, TAX, BOND AND TAX
REVENUE ANTICIPATION NOTES--17.7%
- --------------------------------------------------------------------------------
Butts County, Georgia,
School District,
3.85% due 9/01/98 1,390 1,390,000
Charlotte, North Carolina,
5.50% due 5/01/98 1,000 1,002,903
Charlotte, North Carolina,
Certificates of Participation,
4.00% due 9/01/98 1,000 1,002,201
Chicago, Illinois, Public Building
Commercial Revenue,
7.75% due 1/01/99 1,530 1,608,341
Colorado Springs, Colorado,
Utilities Revenue,
5.40% due 11/15/98 1,315 1,330,817
East Stroudsburg, Pennsylvania,
4.50% due 11/15/98 1,000 1,005,950
Fairfax County, Virginia,
5.375% due 4/01/98 3,750 3,755,493
Fairfax County, Virginia,
5.90% due 4/01/98 830 831,465
Fairfax County, Virginia,
5.00% due 6/01/98 2,000 2,006,131
Georgia State,
5.80% due 3/01/98 1,980 1,980,000
Hamilton, Ohio,
Electric System Revenue,
8.00% due 10/15/98 400 418,497
Harris County, Texas,
7.50% due 3/01/98 1,000 1,000,000
Honolulu, Hawaii,
6.00% due 4/01/98 1,000 1,001,771
Houston, Texas,
6.50% due 2/01/99 1,000 1,026,163
Idaho State, Tax Anticipation Notes,
4.625% due 6/30/98 1,500 1,503,536
Inland, Florida,
Protection Financing Corp.,
3.55% due 6/12/98 4,320 4,320,000
Inland, Florida,
Protn. Financing Corp.,
4.00% due 7/01/98 4,000 4,006,396
Iowa State School Cash
Anticipation Program,
4.50% due 6/26/98 3,000 3,006,426
Iowa State School Cash
Anticipation Program,
4.25% due 1/28/99 5,970 6,005,688
Jonesboro, Arkansas,
Sale and Use Tax,
3.80% due 5/15/98 4,000 4,000,000
Jonesboro, Arkansas, Sale
and Use Tax,
3.90% due 11/15/98 1,000 1,000,000
Lafayette, Louisiana,
Public Import Sales Tax,
8.00% due 3/01/98 2,000 2,040,000
Louisiana Public Facilities
Authority,
4.40% due 12/10/98 4,000 4,017,011
Maine State,
4.00% due 6/29/98 3,000 3,004,888
Maine State,
4.50% due 7/01/98 2,000 2,004,893
Massachusetts State Health
and Educational Facilities,
7.75% due 6/01/98 725 746,199
Mecklenburg County,
North Carolina,
6.20% due 1/01/99 1,000 1,021,128
Minnesota State,
6.80% due 8/01/98 2,000 2,027,581
Montana State,
Tax and Revenue
Anticipation Notes,
4.25% due 6/30/98 1,000 1,002,436
Montana State, Tax and
Revenue Anticipation
Notes, 4.50% due 6/30/98 3,000 3,006,529
New Mexico State,
4.50% due 6/30/98 1,750 1,755,220
New Mexico State Severance
Tax, 5.375% due 7/01/98 4,800 4,829,517
Rio Grande City, Texas,
Construction Industrial
Development,
4.50% due 8/15/98 435 435,974
Salem, Ohio, City School
District, Bond Anticipation
Notes, 4.00% due 3/05/98 1,350 1,350,010
St. Joseph County, Indiana,
Hospital Revenue,
4.25% due 8/15/98 1,565 1,569,563
Texas State,
7.20% due 8/01/98 1,000 1,014,843
Texas State, Tax and Revenue
Anticipation Notes,
4.75% due 8/31/98 5,300 5,328,651
University of Missouri,
4.25% due 6/30/98 7,000 7,014,946
Virginia State Transportation
Board Revenue,
7.80% due 3/01/98 1,315 1,341,300
Virginia State Transportation
Board Revenue,
6.00% due 5/15/98 2,370 2,427,441
Wake County, North Carolina,
4.40% due 3/01/98 150 150,000
Washington State,
4.20% due 8/01/98 3,000 3,005,420
Washington Suburban
Sanitation District,
7.00% due 12/01/98 2,500 2,582,942
Western Minnesota
Municipal Power Agency
Supply, 10.25% due 1/01/99 600 631,684
Wisconsin State,
6.20% due 5/01/98 1,000 1,003,904
Wisconsin State,
7.10% due 5/01/98 590 598,922
------------
97,112,780
------------
VARIABLE RATE DEMAND NOTES* -- 55.0%
- --------------------------------------------------------------------------------
Alexandria, Virginia, Industrial
Development Authority,
due 7/01/26 1,400 1,400,000
Arapahoe County, Colorado,
Revenue Authority,
due 7/01/07 2,125 2,125,000
Beloit, Kansas, Industrial
Development Authority,
due 12/01/16 4,000 4,000,000
Bexar County, Texas, Health
Facilities Development,
due 7/11/11 960 960,000
Bexar County, Texas, Housing
Finance Authority,
due 9/15/26 1,900 1,900,000
Capital Projects Financial
Authority Revenue,
due 8/01/17 1,700 1,700,000
Capital Projects Financial
Authority Revenue,
due 7/01/27 3,300 3,300,000
Carrollton, Georgia, Payroll
Development Authority,
due 3/01/15 1,750 1,750,000
Carthage, Missouri, Industrial
Development Authority
Revenue, due 4/01/07 2,000 2,000,000
Carthage, Missouri, Industrial
Development Authority
Revenue, AMT,
due 9/01/30 2,000 2,000,000
Cherokee County, South
Carolina, Industrial Revenue,
AMT, due 8/01/19 200 200,000
Chicago, Illinois, Industrial
Development Revenue,
due 8/01/09 2,500 2,500,000
Clarksville, Tennessee,
Public Building Authority,
due 10/01/25 1,000 1,000,000
Clayton County, Georgia,
Housing Authority,
due 1/01/21 865 865,000
Clipper Tax Exempt Trust,
AMT, due 3/01/15 3,400 3,400,000
Clipper Tax Exempt Trust,
AMT, due 3/01/16 3,500 3,500,000
Colorado Housing Finance
Authority, due 2/15/28 2,000 2,000,000
Columbus, Georgia,
Housing Authority Revenue,
due 11/01/17 850 850,000
Columbus, Indiana,
Economic Development
Revenue, AMT,
due 1/01/00 1,040 1,040,000
Connecticut State, Housing
Finance Authority,
due 5/15/18 500 500,000
Crossett, Arizona,
Pollution Control Revenue,
due10/01/98 3,500 3,500,000
Dauphin County, Pennsylvania,
General Authority Revenue,
due 10/01/27 5,000 5,000,000
De Kalb County, Georgia,
Multifamily Housing Revenue,
due 6/01/25 4,300 4,300,000
Director State, Nevada,
Department Of Business,
AMT, due 8/01/20 955 955,000
District of Columbia, Revenue,
due 10/01/15 500 500,000
East Baton Rouge, Louisiana,
Pollution Control Revenue,
due 10/01/99 2,200 2,200,000
Effingham County, Georgia,
Development Authority,
due 4/01/37 400 400,000
Eloy, Arizona, Industrial
Development Authority
Revenue, AMT,
due 8/01/20 1,000 1,000,000
Farmington, New Mexico,
Pollution Control Revenue,
due 6/01/23 10,995 10,995,000
Fayetteville, Arkansas,
Industrial Development,
AMT, due 12/01/04 1,100 1,100,000
Forsyth County, Georgia,
Industrial Development
Revenue, due 1/01/07 2,000 2,000,000
Fort Wayne, Indiana,
Economic Development
Revenue, due 12/01/03 1,000 1,000,000
Fort Wayne, Indiana,
Hospital Authority Revenue,
due 1/01/16 1,000 1,000,000
Fox Lake, Wisconsin,
Redevelopment Authority
Revenue, AMT,
due 6/01/09 1,760 1,760,000
Fulton County, Georgia,
Development Authority,
due 12/01/12 5,000 5,000,000
Fulton County, Georgia,
Development Authority
Revenue, due 2/01/18 2,000 2,000,000
Fulton County, Georgia,
Industrial Development
Authority, AMT,
due 6/01/27 500 500,000
Gage County, Nevada,
Industrial Development
Revenue, AMT,
due 10/10/17 1,000 1,000,000
Georgia State Hospital
Finance Authority Revenue,
due 3/01/01 2,748 2,748,000
Germantown, Wisconsin,
Industrial Development
Authority, due 8/01/11 955 955,000
Gila County, Arizona, Industrial
Development Authority,
due 11/01/25 1,800 1,800,000
Gordon County, Georgia,
Industrial Development
Authority Revenue,
due 8/01/17 1,000 1,000,000
Grant Parish, Louisiana,
Industrial Development
Revenue, AMT,
due 10/01/21 1,000 1,000,000
Green River, Wyoming,
Pollution Control Revenue,
AMT, due 10/01/18 400 400,000
Gulf Coast, Texas, Industrial
Development Authority,
AMT, due 5/01/24 300 300,000
Gwinett County, Georgia,
Industrial Development
Revenue, due 6/01/05 1,500 1,500,000
Gwinett County, Georgia,
Industrial Development
Revenue, due 3/01/17 1,000 1,000,000
Harris County, Texas, Health
Facilities Development,
due 2/15/27 2,200 2,200,000
Houston, Texas, Water and
Sewer Revenue,
due 12/01/25 3,535 3,535,000
Illinois Health Facilities
Authority Revenue,
due 5/01/11 2,700 2,700,000
Illinois Development,
due 11/01/17 2,725 2,725,000
Jackson, Mississippi, Industrial
Development Revenue,
due 12/01/15 2,650 2,650,000
Jackson County, Mississippi,
Pollution Control Revenue,
due 6/01/23 1,200 1,200,000
Jefferson Parish, Louisiana,
Hospital District 2,
due 12/01/15 2,700 2,700,000
Kentucky State Turnpike
Authority Resource
Recovery, due 7/01/98 6,000 6,000,000
Kohler, Wisconsin, Industrial
Sewer Facilities, AMT,
due 9/01/17 4,000 4,000,000
Louisa County, Virginia,
Industrial Development
Authority, due 1/01/20 900 900,000
Macon, Trust Receipts Pooled
Certificates, due 10/01/32 5,000 5,000,000
Macon, Trust Receipts Pooled
Variable Rate, AMT,
due 2/05/30 2,695 2,695,000
Macon, Trust Receipts Pooled
Variable Rate, AMT,
due 12/15/30 700 700,000
Madison, Wisconsin,
Community Development
Authority, due 6/01/22 1,125 1,125,000
Mason County, Kentucky,
Pollution Control,
due 10/15/14 2,950 2,950,000
Massachusetts State Turnpike
Authority, due 1/01/17 10,800 10,800,000
Mississippi Home Corporation,
Single Family, due 11/01/29 3,305 3,305,000
Mississippi Home Corporation,
Single Family, AMT,
due 6/01/28 3,500 3,500,000
Moorhead, Minnesota, Solid
Waste Disposal, AMT,
due 4/01/12 3,000 3,000,000
Morgan Keegan Municipal
Productions, AMT
due 12/03/98 3,000 3,000,000
Morgan Keegan Municipal
Trust Receipts, AMT
due 5/01/29 2,900 2,900,000
Morgan Keegan Municipal
Trust Receipts, AMT
due 5/01/30 800 800,000
Morton, Illinois, Industrial
Development, AMT,
due 4/01/16 970 970,000
Murray County, Georgia,
Development Revenue,
AMT, due 9/01/17 1,000 1,000,000
Nash County, North Carolina,
due 12/01/14 1,000 1,000,000
Nashville, Tennessee,
due 5/15/25 6,450 6,450,000
New Hampshire State
Industrial Development
Authority, AMT,
due 1/01/18 1,325 1,325,000
New Hampshire Highway,
Educational and Health
Facilities, due 6/01/23 5,945 5,945,000
New Hanover County, North
Carolina, due 3/01/14 2,250 2,250,000
New Jersey Economic
Development Authority,
AMT, due 12/15/98 6,000 6,000,000
New York State Medical Care
Facilities Finance Authority,
due 8/15/22 4,400 4,400,000
New York State Thruway
Authority, General Revenue,
due 1/01/27 700 700,000
North Carolina Medical Care
Hospital Authority,
due 10/01/13 200 200,000
North Little Rock, Arkansas,
Health Facilities,
due 12/01/21 8,400 8,400,000
Oak Creek, Wisconsin,
Industrial Development
Authority, due 12/01/07 1,700 1,700,000
Ohio Housing Finance Agency
Revenue, AMT,
due 3/01/99 6,000 6,000,000
Orange County, Florida,
Industrial Development
Authority, due 1/01/11 450 450,000
Ossian, Indiana, Economic
Development Revenue,
AMT, due 12/01/23 200 200,000
Peoria, Illinois, Health Care
Facilities Revenue,
due 5/01/17 1,440 1,440,000
Person County, North
Carolina, Pollution Control
Authority, due 11/01/19 3,000 3,000,000
Philadelphia, Pennsylvania,
Airport Revenue,
due 6/15/10 3,915 3,915,000
Port Arthur, Texas, Navigation
District, due 10/01/24 300 300,000
Puttable Floating Option Tax
Exempt, due 10/01/32 17,185 17,185,000
Regional Transportation
District of Co.,
due 12/01/17 5,000 5,000,000
Rhode Island State Industrial
Facilities Corp.,
due 11/01/05 4,240 4,240,000
Rhode Island State Industrial
Facilities Corp., AMT,
due 6/01/05 4,400 4,400,000
Roswell, Georgia, Multifamily
Housing Authority,
due 8/01/27 2,500 2,500,000
Rutherford County, Tennessee,
Industrial Development,
AMT, due 12/01/03 1,500 1,500,000
Saline County, Nebraska,
Industrial Development
Revenue, AMT,
due 10/01/11 1,000 1,000,000
Savannah, Illinois, Industrial
Development Revenue,
due 6/01/04 600 600,000
Seattle, Washington, Municipal
Lighting and Power Revenue,
due 11/01/18 900 900,000
Sevier County, Tennessee, Public
Building Authority,
due 6/01/17 1,500 1,500,000
Sevier County, Tennessee,
Public Building Authority,
due 6/01/21 4,000 4,000,000
Shelby County, Tennessee,
due 12/01/10 11,725 11,725,000
South Carolina Jobs
Economic Development,
due 4/01/17 700 700,000
Southeastern Oklahoma
Industrial Development
Authority, due 6/01/16 3,400 3,400,000
St. Charles County, Missouri,
Industrial Development
Authority, due 12/01/07 1,000 1,000,000
St. Charles Parish, Louisiana,
Pollution Revenue,
due 3/01/24 2,400 2,400,000
Tarrant County,Texas, Health
Facilities Development,
due 2/15/17 6,300 6,300,000
Tarrant County,Texas, Health
Facilities Development,
due 11/15/26 980 980,000
Texas State, Department of
Housing and Community,
due 3/01/17 1,995 1,995,000
Texas State, Turnpike Authority,
due 1/01/23 3,000 3,000,000
Thornton, Colorado, Industrial
Development Revenue,
due 12/15/99 1,000 1,000,000
Tipton, Indiana, Economic
Development Revenue,
due 7/01/22 1,065 1,065,000
Traill County, North Dakota,
Industrial Development,
AMT, due 12/01/11 1,000 1,000,000
Traill County, North Dakota,
Industrial Development,
AMT, due 12/11/11 1,000 1,000,000
Uinta County, Wyoming,
Pollution Control Revenue,
due 12/01/22 700 700,000
Utah State Board of Regents,
due 11/01/25 900 900,000
Utah State Board of Regents,
AMT, due 11/01/31 500 500,000
Vermont Industrial
Development Authority,
AMT, due 12/01/11 800 800,000
Walton County, Georgia,
Industrial Building Authority,
due 10/01/00 1,050 1,050,000
Walton County, Georgia,
Industrial Building Authority,
due 10/01/02 1,080 1,080,000
Washington State Health Care
Facilities Revenue,
due 10/01/05 500 500,000
Washington State Health Care
Facilities Revenue,
due 1/01/23 200 200,000
Whitfield County, Georgia,
Development Authority
Revenue, AMT,
due 11/01/17 1,000 1,000,000
Winchester, Kentucky, Industrial
Building, due 10/01/18 1,700 1,700,000
------------
302,753,000
------------
TOTAL INVESTMENTS AT
AMORTIZED COST 99.2% 546,218,266
OTHER ASSETS, LESS
LIABILITIES 0.8 4,134,878
----- ------------
NET ASSETS 100.0% $550,353,144
----- ------------
AMT-Subject to Alternative Minimum Tax
* Variable rate demand notes have a demand feature under which the fund could
tender them back to the issuer on no more than 7 day's notice.
See notes to financial statements
<PAGE>
TAX FREE RESERVES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
FEBRUARY 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments, at amortized cost and value (Note 1A) $546,218,266
Cash 101,330
Interest receivable 5,146,006
- --------------------------------------------------------------------------------
Total assets 551,465,602
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 1,007,075
Payable to affiliate--Investment Advisory fees (Note 2A) 42,307
Accrued expenses and other liabilities 63,076
- --------------------------------------------------------------------------------
Total liabilities 1,112,458
- --------------------------------------------------------------------------------
Net Assets 550,353,144
- --------------------------------------------------------------------------------
REPRESENTED BY:
Capital paid-in for beneficial interests $550,353,144
- --------------------------------------------------------------------------------
TAX FREE RESERVES PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED FEBRUARY 28, 1998 (Unaudited)
- --------------------------------------------------------------------------------
INVESTMENT INCOME (Note 1B) $9,402,995
- --------------------------------------------------------------------------------
EXPENSES:
Investment Advisory fees (Note 2A) $ 503,609
Administrative fees (Note 2B) 125,902
Custodian fees 94,671
Auditing fees 10,200
Trustee fees 6,631
Legal fees 5,480
Miscellaneous 8,787
- --------------------------------------------------------------------------------
Total expenses 755,280
Less aggregate amounts waived by Investment
Advisor and Administrator (Notes 2A and 2B) (373,406)
Less fees paid indirectly (Note 1D) (1,850)
- --------------------------------------------------------------------------------
NET EXPENSES 380,024
- --------------------------------------------------------------------------------
Net investment income $9,022,971
NET REALIZED GAIN ON INVESTMENTS 10,547
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $9,033,518
- --------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
TAX FREE RESERVES PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS SIX MONTHS ENDED
FEBRUARY 28, 1998 YEAR ENDED
(Unaudited) AUGUST 31, 1997
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $9,022,971 $14,529,341
Net realized gain on investments 10,547 4,286
- --------------------------------------------------------------------------------
Increase in net assets from operations 9,033,518 14,533,627
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 362,470,690 574,845,460
Value of withdrawals (304,780,838) (477,920,393)
- --------------------------------------------------------------------------------
Net increase in net assets from capital
transactions 57,689,852 96,925,067
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 66,723,370 111,458,694
NET ASSETS:
Beginning of period 483,629,774 372,171,080
- --------------------------------------------------------------------------------
End of period $550,353,144 $483,629,774
- --------------------------------------------------------------------------------
TAX FREE RESERVES PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED AUGUST 31,
FEBRUARY 28, 1998 ------------------------------------------------------------
(Unaudited) 1997 1996 1995 1994 1993
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
(000's omitted) $550,353 $483,630 $372,171 $394,222 $233,108 $277,593
Ratio of expenses to
average net assets 0.15%+ 0.19% 0.30% 0.32% 0.31% 0.31%
Ratio of net investment income to
average net assets 3.57%+ 3.46% 3.31% 3.55% 2.33% 2.35%
- -----------------------------------------------------------------------------------------------------------
Note: If Agents of the Portfolio had not voluntarily waived a portion of their fees during the periods indicated and the
expenses were not reduced for fees paid indirectly for the years after August 31, 1995, the ratios would have been as
follows:
RATIOS:
Expenses to average net assets 0.30%+ 0.31% 0.32% 0.32% 0.32% 0.33%
Net investment income
to average net assets 3.42%+ 3.35% 3.29% 3.55% 2.32% 2.32%
- -----------------------------------------------------------------------------------------------------------
+ Annualized
</TABLE>
See notes to financial statements
<PAGE>
TAX FREE RESERVES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
1. SIGNIFICANT ACCOUNTING POLICIES Tax Free Reserves Portfolio (the "Portfolio")
is registered under the Investment Company Act of 1940, as amended, as a
no-load, non-diversified, open-end management investment company which was
organized as a trust under the laws of the State of New York. The Declaration of
Trust permits the Trustees to issue beneficial interests in the Portfolio.
CFBDS, Inc. ("CFBDS"), (formerly Landmark Funds Broker-Dealer Services, Inc.)
acts as the Portfolio's Administrator. Citibank, N.A. ("Citibank") acts as the
Investment Adviser.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are as follows:
A. Valuation of Investments Money market instruments are valued at amortized
cost, which the Trustees have determined in good faith constitutes fair value.
The Portfolio's use of amortized cost is subject to the Portfolio's compliance
with certain conditions as specified under Rule 2a-7 of the Investment Company
Act of 1940.
B. Investment Income and Expenses Investment income consists of interest
accrued and discount earned (including both original issue and market discount),
adjusted for amortization of premium, on the investments of the Portfolio.
Expenses of the Portfolio are accrued daily.
C. Federal Income Taxes The Portfolio's policy is to comply with the
applicable provisions of the Internal Revenue Code. Accordingly, no provision
for federal income taxes is necessary.
D. Fees Paid Indirectly The Fund's custodian bank calculates its fees based
on the Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the Fund.
This amount is shown as a reduction of expenses on the Statement of Operations.
E. Other Purchases, maturities and sales, of money market instruments are
accounted for on the date of the transaction.
2. INVESTMENT ADVISORY FEE AND ADMINISTRATIVE FEE
A. Investment Advisory Fee The investment advisory fee paid to Citibank, as
compensation for overall investment management services, amounted to $503,609,
of which $247,504 was voluntarily waived for the six months ended February 28,
1998. The investment advisory fee is computed at the annual rate of 0.20% of the
Portfolio's average daily net assets.
B. Administrative Fee Under the terms of an Administrative Services
Agreement, the administrative fee payable to the Administrator, as compensation
for overall administrative services and general office facilities, is computed
at the annual rate of 0.05% of the Portfolio's average daily net assets and
amounted to $125,902, all of which was voluntarily waived for the six months
ended February 28, 1998. The Portfolio pays no compensation directly to any
Trustee or any officer who is affiliated with the Administrator, all of whom
receive remuneration for their services to the Portfolio from the Administrator
or its affiliates. Certain of the officers and a Trustee of the Portfolio are
officers and a director of the Administrator or its affiliates.
3. INVESTMENT TRANSACTIONS Purchases, and maturities and sales of money market
instruments, exclusive of securities purchased subject to repurchase agreements,
aggregated $859,113,045 and $815,200,804, respectively, for the six months ended
February 28, 1998.
4. FEDERAL INCOME TAX BASIS OF INVESTMENT SECURITIES The cost of investment
securities owned at February 28, 1998, for federal income tax purposes, amounted
to $546,218,266.
5. LINE OF CREDIT The Portfolio, along with other CitiFunds, entered into an
agreement with a bank which allows the Funds collectively to borrow up to $60
million for temporary or emergency purposes. Interest on borrowings, if any, is
charged to the specific fund executing the borrowing at the base rate of the
bank. The line of credit requires a quarterly payment of a commitment fee based
on the average daily unused portion of the line of credit. For the six months
ended February 28, 1998, the commitment fee allocated to the Portfolio was $899.
Since the line of credit was established, there have been no borrowings.
