<PAGE>
As filed with the Securities and Exchange Commission on December 23, 1997
File Nos. 33-49552*
811-6740
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE
AMENDMENT NO. 11*+
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 17
CITIFUNDS INSTITUTIONAL TRUST
(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, U.S. Treasury Reserves Portfolio and Tax Free
Reserves Portfolio have executed this Registration Statement.
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* Pursuant to Rule 429 under the Securities Act of 1933, this Post-Effective
Amendment also serves as Post-Effective Amendment No. 11 to Registrant's
Registration Statement under the Securities Act of 1933 at File No. 33-49554.
+ This filing relates to Landmark Institutional Liquid Reserves, Landmark
Institutional U.S. Treasury Reserves and Landmark Institutional Tax Free
Reserves.
<PAGE>
CITIFUNDS INSTITUTIONAL TRUST
(LANDMARK INSTITUTIONAL LIQUID RESERVES, LANDMARK
INSTITUTIONAL U.S. TREASURY RESERVES AND LANDMARK
INSTITUTIONAL TAX FREE RESERVES)
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A
ITEM NO. N-1A ITEM LOCATION
PART A PROSPECTUS
<S> <C> <C>
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
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.
</TABLE>
<PAGE>
Prospectus January 2, 1998
CitiFunds(SM) Institutional Liquid Reserves
CitiFunds(SM) Institutional U.S. Treasury Reserves
CitiFunds(SM) Institutional Tax Free Reserves
This Prospectus describes three money market mutual funds in the CitiFunds(SM)
family of funds: CitiFunds(SM) Institutional Liquid Reserves, CitiFunds(SM)
Institutional U.S. Treasury Reserves and CitiFunds(SM) Institutional Tax Free
Reserves. Each Fund has its own investment objectives and policies. Shares of
the Funds are sold primarily to institutional investors. Citibank, N.A. is the
investment adviser.
Unlike other mutual funds which directly acquire and manage their own portfolios
of securities, each Fund seeks its investment objectives by investing all of its
investable assets in a portfolio with the same investment objectives and
policies. See "Special Information Concerning Investment Structure" on page 13.
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.
This Prospectus concisely sets forth information about the Funds that a
prospective investor should know before investing. A Statement of Additional
Information dated January 2, 1998 (and incorporated by reference in this
Prospectus) has been filed with the Securities and Exchange Commission. Copies
of the Statement 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.
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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
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Expense Summary 5
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Condensed Financial Information 7
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Investment Information 10
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Risk Considerations 12
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Valuation of Shares 14
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Purchases 15
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Exchanges 16
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Redemptions 16
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Net Income and Distributions 17
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Management 18
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Tax Matters 21
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Performance Information 22
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General Information 23
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Appendix A -- Permitted Investments and Investment Practices 26
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Appendix B -- Ratings of Municipal Obligations 29
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Appendix C -- Taxable Equivalent Yield Table 33
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<PAGE>
PROSPECTUS SUMMARY
See the body of the Prospectus for more information on the topics discussed in
this summary.
THE FUNDS: This Prospectus describes three money market mutual funds: CitiFunds
Institutional Liquid Reserves, CitiFunds Institutional U.S. Treasury Reserves
and CitiFunds Institutional Tax Free Reserves. Each Fund has its own investment
objectives and policies. Each Fund seeks its objectives by investing its
investable assets in a Portfolio having the same investment objectives and
policies as that Fund. There can be no assurance that any Fund will achieve its
objectives.
INVESTMENT OBJECTIVES AND POLICIES: Institutional Liquid 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.
Institutional 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.
Institutional 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 obligations issued by state and municipal governments
and by other qualifying issuers, the interest on which is exempt from federal
income taxes ("Municipal Obligations"). The Fund is a tax-exempt money market
mutual fund.
INVESTMENT ADVISER AND DISTRIBUTOR: Citibank, N.A. ("Citibank" or the
"Adviser"), a wholly-owned subsidiary of Citicorp, is the investment adviser
of each Portfolio. 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 of Shareholder Servicing Agents 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.
EXCHANGES: Shares may be exchanged for shares of certain other mutual funds
managed or advised by Citibank if shares of those funds are offered for sale
in the investor'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. Institutional Liquid Reserves 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.
Institutional U.S. Treasury Reserves 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.
Institutional Tax Free Reserves is designed for investors seeking money market
returns which are exempt from federal income taxes. See "Investment
Information."
RISK FACTORS: There can be no assurance that any Fund or its corresponding
Portfolio will achieve its investment objectives. 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 Institutional Liquid 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.
Institutional Tax Free Reserves 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). The Fund may therefore invest a relatively high
percentage of its assets in the obligations of a limited number of issuers.
Also, the Fund may invest 25% or more of its assets in securities of issuers in
similar or related industries or issuers located in the same state. As a result,
the Fund is more susceptible to any single economic, political or regulatory
occurrence.
Certain investment practices also may entail special risks. Prospective
investors should read "Risk Considerations" for more information about risk
factors.
EXPENSE SUMMARY
The following table summarizes estimated shareholder transaction and annual
operating expenses for each Fund and for its corresponding Portfolio.* For more
information on costs and expenses, see "Management" and "General Information --
Expenses."
<TABLE>
<CAPTION>
INSTITUTIONAL INSTITUTIONAL INSTITUTIONAL
LIQUID U.S TREASURY TAX FREE
RESERVES RESERVES RESERVES(1)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES None None None
ANNUAL FUND OPERATING EXPENSES, AFTER FEE
WAIVERS AND REIMBURSEMENTS (AS A
PERCENTAGE OF AVERAGE NET ASSETS):
Management Fee (2) 0.07% 0.06% 0.12%
12b-1 Fees (2)(3) 0.00% 0.00% 0.00%
Other Expenses
Administrative Services Fees (2) 0.08% 0.11% 0.00%
Shareholder Servicing Agent Fees (2) 0.00% 0.00% 0.00%
Other Operating Expenses 0.05% 0.08% 0.13%
- ------------------------------------------------------------------------------------------------------
Total Fund Operating Expenses (2) 0.20% 0.25% 0.25%
- ------------------------------------------------------------------------------------------------------
* 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) Because this Fund is newly organized, all amounts in the table and the example are estimated for
the current fiscal year.
(2) Absent fee waivers and reimbursements, management fees, 12b-1 fees, administrative services fees,
shareholder servicing agent fees and total fund operating expenses would be 0.15%, 0.10%, 0.40%
0.10% and 0.80% for Institutional Liquid Reserves, 0.15%, 0.10%, 0.40% 0.10% and 0.83% for
Institutional U.S. Treasury Reserves and 0.20%, 0.10%, 0.40% 0.10% and 1.15% for Institutional
Tax Free Reserves.
(3) Fees under the 12b-1 distribution plan 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.
</TABLE>
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:
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
- ------------------------------------------------------------------------------
INSTITUTIONAL LIQUID RESERVES $2 $6 $11 $26
INSTITUTIONAL U.S. TREASURY RESERVES $3 $8 $14 $32
INSTITUTIONAL TAX FREE RESERVES (1) $3 $8 $14 $32
- ------------------------------------------------------------------------------
The Example assumes that all dividends are reinvested, and except as noted
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 $8, $26, $44, and $99 for Institutional Liquid
Reserves, $8, $27, $46, and $103 for Institutional U.S. Treasury Reserves and
$12, $37, $63, and $140 for Institutional Tax Free Reserves. 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.
<PAGE>
CONDENSED FINANCIAL INFORMATION
The following tables provide condensed financial information about each Fund 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 the 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 Institutional Liquid
Reserves (formerly Landmark Institutional Liquid Reserves), and by Deloitte &
Touche LLP, independent accountants, on behalf of CitiFunds Institutional U.S.
Treasury Reserves (formerly Landmark Institutional U.S. Treasury Reserves) and
CitiFunds Institutional Tax Free Reserves (formerly Landmark Institutional 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.
<TABLE>
<CAPTION>
CITIFUNDS INSTITUTIONAL LIQUID RESERVES
FINANCIAL HIGHLIGHTS
YEAR ENDED AUGUST 31,
1997 1996 1995 1994 1993*
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<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning
of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
Net investment income 0.05459 0.05521 0.05698 0.03603 0.02871
Less dividends from net
investment income (0.05459) (0.05521) (0.05698) (0.03603) (0.02871)
- -----------------------------------------------------------------------------------------------------------------------------------
Net Asset Value, end of
period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
- -----------------------------------------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $1,967,491 $1,257,134 $1,480,097 $470,041 $ 83,519
Ratio of expenses to
average net assets** 0.18% 0.20% 0.17% 0.23% 0.23%+
Ratio of net investment
income to average net
assets 5.52% 5.52% 5.70% 3.62% 3.13%+
Total return 5.60% 5.66% 5.85% 3.66% 3.21%+
Note: If agents of the Fund and agents of Cash Reserves Portfolio had not waived all or a portion of their fees during the periods
indicated, the net investment income per share and the ratios would have been as follows:
Net investment income per
share $0.04844 $0.04921 $0.05050 $0.03094 $0.02339
RATIOS:
Expenses to average net
assets** 0.80% 0.80% 0.84% 0.86% 0.81%+
Net investment income to
average net assets 4.90% 4.92% 5.03% 2.98% 2.55%+
*For the period from the start of business, October 2, 1992, to August 31, 1993.
**Includes the Fund's share of Cash Reserves Portfolio's allocated expenses.
+Annualized.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
FINANCIAL HIGHLIGHTS
EIGHT
MONTHS
ENDED YEAR ENDED
YEAR ENDED AUGUST 31, AUGUST 31, DECEMBER 31,
1997 1996 1995 1994 1993** 1992***
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<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 0.04994 0.05051 0.05200 0.03312 0.01974 0.00736
Less dividends from net
investment income (0.04994) (0.05051) (0.05200) (0.03312) (0.01974) (0.00736)
- -----------------------------------------------------------------------------------------------------------------------------------
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) $306,350 $213,395 $120,731 $150,911 $ 48,475 $ 13,594
Ratio of expenses to
average net assets* 0.25% 0.25% 0.25% 0.23% 0.20%+ 0.20%+
Ratio of net investment
income to average net
assets 5.01% 5.03% 5.23% 3.40% 2.99%+ 3.20%+
Total return 5.11% 5.17% 5.33% 3.36% 3.01%+ 3.19%+
Note: If agents of the Fund and agents of U.S. Treasury Reserves Portfolio had not waived all or a portion of their fees during
the periods indicated, the net investment income per share and the ratios would have been as follows:
Net investment income
per share $0.04416 $0.04428 $0.04593 $0.02679 $0.01208 $0.00359
RATIOS:
Expenses to average net
assets* 0.83% 0.87% 0.85% 0.88% 1.36%+ 1.85%+
Net investment income to
average net assets 4.43% 4.41% 4.62% 2.75% 1.83%+ 1.56%+
* Includes the Fund's share of U.S. Treasury Reserves Portfolio's allocated expenses.
** 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, October 2, 1992, to December 31, 1992.
+ Annualized.
</TABLE>
<PAGE>
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
FINANCIAL HIGHLIGHTS
MAY 21, 1997
(COMMENCEMENT OF
OPERATIONS) TO
AUGUST 31, 1997
- ------------------------------------------------------------------------------
Net Asset Value, beginning of period $1.00000
Net investment income 0.00984
Less dividends from net investment income (0.00984)
- ------------------------------------------------------------------------------
Net Asset Value, end of period $1.00000
- ------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $60,048
Ratio of expenses to average net assets* 0.25%+
Ratio of net investment income to average net assets 3.47%+
Total return 0.99%++
Note: If agents of the Fund and agents of Tax Free Reserves Portfolio had not
waived all or a portion of their fees and the Administrator had not voluntarily
assumed expenses during the period indicated, the net investment income per
share and the ratios would have been as follows:
Net investment income per share $0.00729
RATIOS:
Expenses to average net assets* 1.15%+
Net investment income to average net assets 2.57%+
*Includes the Fund's share of Tax Free Reserves Portfolio's allocated
expenses.
+Annualized.
++Not Annualized.
<PAGE>
INVESTMENT INFORMATION
INVESTMENT OBJECTIVES: The investment objective of Institutional Liquid 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 Institutional 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 Institutional 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 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: Institutional Liquid Reserves seeks its objective by
investing all of its investable assets in Cash Reserves Portfolio. Cash Reserves
Portfolio seeks the same objective as the Fund 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
Portfolio 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 Portfolio's permitted
investments and investment practices, see Appendix A -- Permitted Investments
and Investment Practices on page 26.
Institutional U.S. Treasury Reserves seeks its objective by investing all of its
investable assets in U.S. Treasury Reserves Portfolio. U.S. Treasury Reserves
Portfolio seeks the same objective as the Fund 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. U.S. Treasury Reserves Portfolio will not enter into repurchase
agreements. For more information regarding the Portfolio's permitted investments
and investment practices, see Appendix A -- Permitted Investments and Investment
Practices on page 26. ALTHOUGH THE PORTFOLIO INVESTS IN U.S. GOVERNMENT
OBLIGATIONS, NEITHER AN INVESTMENT IN THE FUND NOR AN INVESTMENT IN THE
PORTFOLIO IS INSURED OR GUARANTEED BY THE U.S. GOVERNMENT.
Institutional Tax Free Reserves seeks its investment objectives by investing all
of its investable assets in Tax Free Reserves Portfolio. Tax Free Reserves
Portfolio seeks the same objectives as the Fund by investing primarily in
short-term, high quality fixed rate and variable rate obligations issued by or
on behalf of states and municipal governments and their authorities, agencies,
instrumentalities and political subdivisions and other qualifying issuers, the
interest on which is exempt from federal income taxes (these securities are
referred to as "Municipal Obligations"). As a fundamental policy, the Portfolio
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. or AA or better by Standard & Poor's Ratings
Group or Fitch IBCA, Inc., 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. For a comparison of yields on
Municipal Obligations and taxable securities see Appendix C on page 33.
Although Tax Free Reserves Portfolio attempts to invest all of its assets in
Municipal Obligations, the Portfolio 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 Portfolio
invests are of comparable quality to the Municipal Obligations in which the
Portfolio 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."
Maturity and Quality. All of the Portfolios' investments mature or are deemed to
mature within 397 days from the date of acquisition, and the average maturity of
the investments held by each Portfolio (on a dollar-weighted basis) is 90 days
or less. All of the Portfolios' investments are in high quality securities which
have been determined by the Adviser to present minimal credit risks. To meet a
Portfolio's high quality standards a security must be rated in the highest
rating category (one of the two highest rating categories for Tax Free Reserves
Portfolio) 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. 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.
Permitted Investments. Uninvested cash reserves may be held temporarily for a
Fund pending investment. Each Fund may borrow from banks up to 10% of its total
assets for temporary or emergency purposes. For more information regarding
permitted investments and investment practices, see Appendix A -- Permitted
Investments and Investment Practices on page 26. The Funds will not necessarily
invest or engage in each of the investments and investment practices in Appendix
A but reserve the right to do so.
Investment Restrictions. The Statement of Additional Information contains a list
of specific investment restrictions which govern the investment policies of the
Funds and the Portfolios. Except as otherwise indicated, the Funds' and
Portfolios' 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 Portfolios'
securities will not be a violation of policy.
Brokerage Transactions. The primary consideration in placing the Portfolios'
security 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 Portfolio invests more than
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 the
consent of the Portfolio's investors. 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.
Non-U.S. Securities. Investors in Institutional Liquid 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
Cash Reserves Portfolio.
Non-Diversified Status. Institutional Tax Free Reserves and Tax Free Reserves
Portfolio are non-diversified mutual funds. This means that they 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 Tax Free Reserves
Portfolio may invest a relatively high percentage of its assets in the
obligations of a limited number of issuers, the value of shares of Institutional
Tax Free Reserves may be more susceptible to any single economic, political or
regulatory occurrence than the value of shares of a diversified mutual fund
would be. Tax Free Reserves Portfolio 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. Tax Free Reserves Portfolio invests
more than 25% of its assets in Participation Interests in Municipal Obligations
which are secured by bank letters of credit or guarantees. See "Concentration"
in Bank Obligations above for information about banks and the banking industry.
For additional information concerning variable rate instruments and
Participation Interests, see Appendix A.
Investment Practices. Certain of the investment practices employed for the
Portfolios may entail certain risks. See Appendix A -- Permitted Investments
and Investment Practices on page 26.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE: The Funds do not invest
directly in securities. Instead, the 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
Statements 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 (see back cover for address and phone number).
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 Institutional Liquid
Reserves and as of 12:00 noon, Eastern time, for Institutional U.S. Treasury
Reserves and Institutional Tax Free Reserves, by adding the market value of all
securities and other assets of a Fund (including its interest in its Portfolio),
then subtracting the Fund's liabilities, and then dividing the result by the
number of the Fund's outstanding shares. The amortized cost method of valuing
Portfolio securities is used in order to attempt 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 a Portfolio 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 the shareholder's
Shareholder Servicing Agent, which will be the shareholder of record of the
Fund. Each Shareholder Servicing Agent 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 CFBDS may make payments for distribution and/or shareholder
servicing activities out of its past profits or any other sources available to
it. The Distributor also may 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 the Distributor 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 and 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. No initial sales charge
is imposed on shares being acquired through an exchange unless the shares being
acquired are subject to a sales charge.
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
Statement 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 mutual 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. 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 or taxpayer
identification 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 the 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
Institutional Liquid Reserves and 12:00 noon, Eastern time, for Institutional
U.S. Treasury Reserves and Institutional Tax Free Reserves. All the 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 the Funds,
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
applicable Fund's shareholders annually after the close of the 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 a Fund.
MANAGEMENT
TRUSTEES AND OFFICERS: Each Fund is supervised by the Board of Trustees of
CitiFunds Institutional Trust. Each Portfolio is supervised by its own 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 Statement 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 Portfolio pursuant to separate Investment
Advisory Agreements. Subject to policies set by the Portfolios' Trustees,
Citibank makes investment decisions for the Portfolios.
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% (0.20% for Tax Free Reserves Portfolio) of each Portfolio's
average daily net assets on an annualized basis for the Portfolio'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 from Cash Reserves Portfolio, U.S. Treasury Reserves Portfolio and Tax
Free Reserves Portfolio, after waivers, were 0.07%, 0.06% and 0.12%,
respectively, of the applicable Portfolio's average daily net assets for that
fiscal year.
Banking Relationships. Citibank and its affiliates may have deposit, loan and
other relationships with the issuers of securities purchased on behalf of the
Portfolios, 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 and the Portfolios 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 or the Portfolios. 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 the Funds' Administrative Services Plan, the total of the fees
paid to each Fund's Administrator and Shareholder Servicing Agents may not
exceed 0.45% of the Fund's average daily net assets on an annualized basis for
the Fund's then-current fiscal year. 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 the
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 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
has voluntarily agreed 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 0.10% 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 (or its affiliate State Street Canada, Inc.) 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 Portfolio may be
held by a sub-custodian bank approved by the Portfolio's Trustees. State Street
(or State Street Canada) 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 certain other mutual funds advised or managed by
Citibank and as a Shareholder Servicing Agent for certain investors. As
Distributor, CFBDS bears the cost of compensating personnel involved in the sale
of shares of the Funds and bears all costs of travel, office expenses (including
rent and overhead) and equipment. 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 a Plan of Distribution adopted in accordance with Rule 12b-1 under the
1940 Act, each Fund pays the Distributor a fee at an annual rate not to exceed
0.10% of the average daily net assets of the Fund in anticipation of, or as
reimbursement for, expenses incurred by the Distributor in connection with the
sale of shares, such as advertising expenses and the expenses of printing
(excluding typesetting) and distributing prospectuses and reports used for sales
purposes, expenses of preparing and printing sales literature and other
distribution-related expenses. However, the Distributor has agreed to waive a
portion of these fees for each Fund.
The Funds and the Distributor provide to the Trustees quarterly a written report
of amounts expended pursuant to the Plan and the purposes for which the
expenditures were made.
TAX MATTERS
This discussion of taxes is for general information only. Investors should
consult their own tax advisers about their particular situations.
Federal Income Taxes. 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.
Shareholders of Institutional Liquid Reserves and Institutional U.S. Treasury
Reserves are required to pay federal income tax on any dividends and other
distributions received. Institutional Tax Free Reserves expects that most of its
net income will be attributable to interest on Municipal Obligations and as a
result most of the Fund's dividends to shareholders will be excludable from
shareholders' gross income. However, the 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 and long-term capital gains or losses. Generally,
distributions from a Fund's net investment income which are subject to tax 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.
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 extended 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 shares of Institutional Tax Free Reserves.
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.
Early each year, each Fund will notify its shareholders of the amount and tax
status of distributions paid to shareholders for the preceding year.
State and Local Taxes. Distributions derived from interest on U.S. Government
obligations may be exempt from certain state and local taxes. Fund dividends
that are excluded 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.
Foreign Shareholders. The 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 the 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 Institutional U.S. Treasury Reserves and Institutional Tax Free Reserves 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 the 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 the applicable Fund. The
use of a tax equivalent total rate of return allows investors to compare the
total rates of return of Institutional U.S. Treasury Reserves and Institutional
Tax Free Reserves, the dividends from which may be exempt from federal and state
personal income taxes, respectively, with the total rates of return of funds the
dividends from which are not so tax exempt.
Each Fund may provide annualized "yield" and "effective yield" quotations, and
Institutional U.S. Treasury Reserves and Institutional Tax Free Reserves 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 the applicable Fund. The use of a tax equivalent
yield allows investors to compare the yield of Institutional Tax Free Reserves
and Institutional U.S. Treasury Reserves, the dividends from which may be exempt
from federal and state personal income tax, respectively, with yields of funds
the dividends from which are not so tax exempt. A Fund may also provide yield,
effective yield and tax equivalent yield quotations for longer periods.
Of course, any fees charged by a shareholder's Shareholder Servicing Agent will
reduce that shareholder's net return on its 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: Institutional Liquid Reserves and Institutional U.S. Treasury
Reserves are diversified series, and Institutional Tax Free Reserves is a
non-diversified series, of CitiFunds Institutional Trust, which is a
Massachusetts business trust which was organized on July 8, 1992. Prior to
September 1997, the Trust was called Landmark Institutional Trust. Prior to
January 2, 1998, the Funds were called Landmark Institutional Liquid Reserves,
Landmark Institutional U.S. Treasury Reserves and Landmark Institutional Tax
Free Reserves, respectively. Each Fund 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. See "Risk
Considerations" for information about non-diversified series and investment
companies.
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: CitiFunds Institutional Trust 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 of each series of the Trust 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 a Massachusetts business trust, the Trust is 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 Institutional Liquid Reserves and Institutional
U.S. Treasury Reserves may be able to establish new accounts in a Fund 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 Fund its share of its Portfolio's expenses
and after giving effect to fee waivers or reimbursements, were as follows: for
Institutional Liquid Reserves, 0.20% of the Fund's average daily net assets for
that fiscal year; for Institutional U.S. Treasury Reserves, 0.25% of the Fund's
average daily net assets for that fiscal year; and for Institutional Tax Free
Reserves, 0.25% of the Fund's average daily net assets for that fiscal year. All
fee waivers are voluntary and may be reduced or terminated at any time.
- -------------------------------------------------------------------------------
The Statement of Additional Information dated the date hereof contains more
detailed information about the Funds and the Portfolios, 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 the 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
Treasury Receipts. Each Portfolio may 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 Portfolio 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 Portfolio 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.
Repurchase Agreements. Cash Reserves Portfolio may enter into repurchase
agreements. Repurchase agreements are transactions in which an institution sells
the Portfolio a security at one price, subject to the Portfolio'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.
Lending of Portfolio Securities. Consistent with applicable regulatory
requirements and in order to generate additional income, each Portfolio 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 Portfolio would not exceed 33 1/3% of the Portfolio's
net assets.
In the event of the bankruptcy of the other party to a securities loan or a
repurchase agreement, the Portfolio 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 Portfolio could experience a loss.
Private Placements and Illiquid Investments. Each Portfolio 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 the Portfolio to sell them promptly at
an acceptable price.
Restricted Securities. Tax Free Reserves Portfolio may purchase restricted
securities that are not registered for sale to the general public. Provided that
a dealer or institutional trading market in such securities exists, these
restricted securities are not treated as illiquid securities for purposes of the
Portfolio's investment limitations. Institutional trading in restricted
securities is relatively new, and the liquidity of the Portfolio's investments
could be impaired if trading does not develop or declines.
Municipal Bonds. Tax Free Reserves Portfolio may invest in municipal bonds,
which are debt obligations of states, cities, municipalities and municipal
agencies and authorities which generally have a maturity at the time of issue 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 industrial development 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 the Portfolio will have liquidity because they
generally will be supported by demand features to "high quality" banks,
insurance companies or other financial institutions.
Municipal Notes. Tax Free Reserves Portfolio may invest in 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. Most
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 principal and
interest of the maturing notes will be paid out of proceeds from notes or bonds
to be issued concurrently or at a later date. 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 days' notice. Variable rate instruments in
which Tax Free Reserves Portfolio 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 Portfolio 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 Tax Free Reserves Portfolio purchases Municipal
Obligations it may also acquire stand-by commitments from banks with respect to
such Municipal Obligations. The Portfolio also may acquire stand-by commitments
from broker-dealers. Under a stand-by commitment, a bank or broker-dealer agrees
to purchase at the Portfolio'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. The Portfolio 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, Tax Free Reserves Portfolio may purchase securities on a "when-
issued" or on a "forward delivery" basis, which means that the securities would
be delivered to the Portfolio at a future date beyond customary settlement time.
Under normal circumstances, the Portfolio 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 Portfolio establishes a segregated account
consisting of cash, cash equivalents or high quality debt securities equal to
the amount of the Portfolio's commitments to purchase "when-issued" securities.
An increase in the percentage of the Portfolio'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 then 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 symbols 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 present 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 commitment on the
obligation is extremely strong.
AA -- An obligation rated AA differs from the highest rated obligations only in
a small degree. The obligor's capacity to meet its financial commitment 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 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 note 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 guarantor, 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 (+) 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 month's 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 "+" to 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 TABLE
(RATES FOR 1997 UNDER FEDERAL PERSONAL INCOME TAX LAW)
The table below shows the approximate taxable 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.
<TABLE>
<CAPTION>
FEDERAL TABLE
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%
*Net amount subject to Federal personal income tax after deductions and exemptions.
</TABLE>
<PAGE>
CFCP/INS 198 [Recycle symbol] Printed on recycled paper
<PAGE>
Statement of
Additional Information
January 2, 1998
CITIFUNDS(SM) INSTITUTIONAL LIQUID RESERVES
CITIFUNDS(SM) INSTITUTIONAL U.S. TREASURY RESERVES
CITIFUNDS(SM) INSTITUTIONAL TAX FREE RESERVES
(Members of the CitiFunds(SM) Family of Funds)
CitiFunds(SM) Institutional Liquid Reserves ("Liquid Reserves"), CitiFunds
(SM) Institutional U.S. Treasury Reserves ("U.S. Treasury Reserves") and
CitiFunds(SM) Institutional Tax Free Reserves ("Tax Free Reserves" and
together with Liquid Reserves and U.S. Treasury Reserves, the "Funds") are
each separate series of CitiFunds(SM) Institutional Trust (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 Liquid Reserves, U.S. Treasury Reserves and Tax Free Reserves in,
respectively, Cash Reserves Portfolio, U.S. Treasury Reserves Portfolio and
Tax Free 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
and Tax Free 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 ............................................... 13
4. Determination of Net Asset Value ...................................... 14
5. Management ............................................................ 15
6. Portfolio Transactions ................................................ 21
7. Description of Shares, Voting Rights and Liabilities .................. 22
8. Certain Additional Tax Matters ........................................ 23
9. Independent Accountants and Financial Statements ...................... 24
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, by which shares of the Funds are offered.
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, open-end management investment company which was
organized as a business trust under the laws of the Commonwealth of
Massachusetts on July 8, 1992. Prior to September 1997, the Trust was called
Landmark Institutional Trust. Shares of the Trust are divided into separate
series, including CitiFunds Institutional Liquid Reserves, CitiFunds
Institutional U.S. Treasury Reserves and CitiFunds Institutional Tax Free
Reserves, which are described in this Statement of Additional Information. Prior
to January 2, 1998, Liquid Reserves, U.S. Treasury Reserves and Tax Free
Reserves were called Landmark Instititutional Liquid Reserves, Landmark
Institutional U.S. Treasury Reserves and Landmark Institutional Tax Free
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." Tax Free Reserves is a "tax-exempt 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 Liquid Reserves, U.S. Treasury Reserves and Tax Free
Reserves in, respectively, Cash Reserves Portfolio, U.S. Treasury Reserves
Portfolio and Tax Free Reserves Portfolio. Each of the Portfolios is an open-end
management investment company. Each Portfolio has the same investment objectives
and policies as its corresponding Fund. Cash Reserves Portfolio and U.S.
Treasury Reserve Portfolio are diversified; Tax Free Reserves Portfolio is
non-diversified.
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, U.S. Treasury Reserves Portfolio and Tax Free
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 INSTITUTIONAL LIQUID 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 INSTITUTIONAL 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 INSTITUTIONAL 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 each Fund may be changed without approval by
that Fund's shareholders. Of course, there can be no assurance that any 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 Liquid Reserves, U.S. Treasury Reserves and Tax Free
Reserves in, respectively, Cash Reserves Portfolio, U.S. Treasury Reserves
Portfolio and Tax Free 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 any 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 Liquid Reserves with respect to bank obligations
described in paragraph (1) below for Cash Reserves Portfolio, which is
fundamental and may not be changed without the approval of Liquid Reserves'
shareholders, and except for the policy of Tax Free Reserves with respect to
municipal obligations described in paragraph (1) below for Tax Free Reserves
Portfolio, which is fundamental and may not be changed without the approval of
Tax Free 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 for Cash Reserves Portfolio, which
is fundamental and may not be changed without the approval of Cash Reserves
Portfolio's investors, and except for the policy of Tax Free Reserves Portfolio
with respect to municipal obligations described in paragraph (1) below for Tax
Free Reserve Portfolio, which is fundamental and may not be changed without the
approval of Tax Free Reserves' 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 acquisitions 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, Liquid Reserves and
Cash Reserves Portfolio are each classified as "diversified," although in the
case of Liquid 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 Liquid 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, 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.
TAX FREE RESERVES PORTFOLIO
Tax Free Reserves Portfolio seeks its investment objectives by investing
primarily in short-term, high quality fixed rate and variable rate obligations
issued by or on behalf of states and municipal governments and their
authorities, agencies, instrumentalities and political subdivisions and by other
qualifying issuers, the interest on which is exempt from federal income taxes,
including participation interests in such obligations issued by banks, insurance
companies or other financial institutions. (These securities, whether or not the
interest thereon is subject to the federal alternative minimum tax, are referred
to herein as "Municipal Obligations.") 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. Although the Portfolio will attempt to invest 100% of
its assets in Municipal Obligations, the Portfolio reserves the right to invest
up to 20% of the value of its total assets in securities, the interest income on
which is subject to federal, state and local income tax or the federal
alternative minimum tax. The Portfolio invests more than 25% of its assets in
participation certificates issued by banks in industrial development bonds and
other Municipal Obligations. In view of this "concentration" in these bank
participation certificates, an investment in Fund shares should be made with an
understanding of the characteristics of the banking industry and the risks which
such an investment may entail. (See "Variable Rate Instruments and Participation
Interests" below.) The Portfolio may hold uninvested cash reserves pending
investment. The Portfolio's investments may include "when- issued" or "forward
delivery" Municipal Obligations, stand-by commitments and taxable repurchase
agreements.
For a general discussion of Municipal Obligations and an explanation of the
ratings of Municipal Obligations by Moody's, Standard & Poor's and Fitch IBCA,
Inc. ("Fitch"), see Appendix B to the Prospectus. For a comparison of yields on
such Municipal Obligations and taxable securities, see Appendix C to the
Prospectus.
All investments by Tax Free Reserves Portfolio mature or are deemed to
mature within 397 days from the date of acquisition and the average maturity of
the Portfolio's securities (on a dollar-weighted basis) is 90 days or less. The
maturities of variable rate instruments held by the Portfolio are deemed to be
the longer of the notice period, or the period remaining until the next interest
rate adjustment, although the stated maturities may be in excess of 397 days.
(See "Variable Rate Instruments and Participation Interests" below.) All
investments by the Portfolio are "eligible securities" (rated in one of the two
highest rating categories for short-term obligations by at least two nationally
recognized statistical rating organizations (each a "NRSRO") assigning a rating
to the security or issuer or, if only one NRSRO assigned a rating, that NRSRO,
or, in the case of an investment which is not rated, of comparable quality as
determined by or on behalf of the Portfolio's Board of Trustees on the basis of
its credit evaluation of the obligor or of the bank issuing a participation
interest, letter of credit or guarantee, or insurance issued in support of the
Municipal Obligations or participation interests). (See "Variable Rate
Instruments and Participation Interests" below.) Such instruments may produce a
lower yield than would be available from less highly rated instruments. The
Portfolio's Board of Trustees has determined that Municipal Obligations which
are backed by the full faith and credit of the U.S. Government are considered to
have a rating equivalent to Moody's Aaa. (See Appendix B to the Prospectus.)
As a fundamental policy, the investments of the Portfolio will be made
primarily (i.e., at least 80% of its assets under normal circumstances) in:
(1) Municipal bonds with remaining maturities of one year or less that
are rated within the Aaa or Aa categories at the date of purchase by Moody's
or within the AAA or AA categories by Standard & Poor's or Fitch or, if not
rated by these rating agencies, are of comparable quality as determined by
the Adviser on the basis of the credit evaluation of the obligor on the
bonds or of the bank issuing a participation interest or guarantee or of any
insurance issued in support of the bonds or the participation interests.
(2) Municipal notes with remaining maturities of one year or less that
at the date of purchase are rated MIG-1/VMIG 1 or MIG-2/VMIG 2 by Moody's,
SP-1!, SP-1 or SP-2 by Standard & Poor's or F-1 or F-2 by Fitch or, if not
rated by these rating agencies, are of comparable quality as determined by
the Adviser. The principal kinds of municipal notes are tax and revenue
anticipation notes, tax anticipation notes, bond anticipation notes and
revenue anticipation notes. Notes sold in anticipation of collection of
taxes, a bond sale or receipt of other revenues are usually general
obligations of the issuing municipality or agency.
(3) Municipal commercial paper that is rated Prime-1 or Prime-2 by
Moody's, A-1!, A-1 or A-2 by Standard & Poor's or F-1 or F-2 by Fitch or, if
not rated by these rating agencies, is of comparable quality as determined
by the Adviser. Issues of municipal commercial paper typically represent
very short-term, unsecured, negotiable promissory notes. These obligations
are often issued to meet seasonal working capital needs of municipalities or
to provide interim construction financing and are paid from general revenues
of municipalities or are refinanced with long-term debt. In most cases
municipal commercial paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions which may be called upon in the event
of default by the issuer of the commercial paper.
Subsequent to its purchase by Tax Free Reserves Portfolio, a rated Municipal
Obligation may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Portfolio. Neither event requires sale of such
Municipal Obligation by the Portfolio (other than variable rate instruments
which must be sold if they are not "high quality"), but the Adviser considers
such event in determining whether the Portfolio should continue to hold the
Municipal Obligation. To the extent that the ratings given to the Municipal
Obligations or other securities held by the Portfolio are altered due to changes
in any of the Moody's, Standard & Poor's or Fitch ratings systems, the Adviser
adopts such changed ratings as standards for its future investments in
accordance with the investment policies contained herein. Certain Municipal
Obligations issued by instrumentalities of the U.S. Government are not backed by
the full faith and credit of the U.S. Treasury but only by the creditworthiness
of the instrumentality. The Portfolio's Board of Trustees has determined that
any Municipal Obligation that depends directly, or indirectly through a
government insurance program or other guarantee, on the full faith and credit of
the U.S. Government is considered to have a rating in the highest category.
Where necessary to ensure that the Municipal Obligations are "eligible
securities" (i.e., within the two highest ratings assigned by Moody's, Standard
& Poor's or Fitch), or where the obligations are not freely transferable, the
Portfolio will require that the obligation to pay the principal and accrued
interest be backed by an unconditional irrevocable bank letter of credit, a
guarantee, insurance policy or other comparable undertaking of an approved
financial institution.
The Portfolio may invest 25% or more of its assets in securities that are
related in such a way that an economic, business or political development or
change affecting one of the securities would also affect the other securities
including, for example, securities the interest upon which is paid from revenues
of similar type projects, or securities the issuers of which are located in the
same state.
VARIABLE RATE INSTRUMENTS AND PARTICIPATION INTERESTS
Variable rate instruments that Tax Free Reserves Portfolio may purchase are
tax-exempt Municipal Obligations (including municipal notes and municipal
commercial paper) that provide for a periodic adjustment in the interest rate
paid on the instrument and permit the holder to receive payment upon a specified
number of days' notice of the unpaid principal balance plus accrued interest
either from the issuer or by drawing on a bank letter of credit, a guarantee or
an insurance policy issued with respect to such instrument or by tendering or
"putting" such instrument to a third party.
The variable rate instruments in which Tax Free Reserves Portfolio's assets
may be invested are payable upon a specified period of notice which may range
from one day up to one year. The terms of the instruments provide that interest
rates are adjustable at intervals ranging from daily to up to one year and the
adjustments are based upon the prime rate of a bank or other appropriate
interest rate adjustment index as provided in the respective instruments. The
Portfolio will decide which variable rate instruments it will purchase in
accordance with procedures prescribed by its Board of Trustees to minimize
credit risks. An unrated variable rate instrument may be determined to meet the
Portfolio's high quality criteria if it is backed by a letter of credit or
guarantee or a right to tender or put the instrument to a third party or is
insured by an insurer that meets the high quality criteria for the Portfolio
discussed above or on the basis of a credit evaluation of the underlying
obligor. If the credit of the obligor is of "high quality," no credit support
from a bank or other financial institution will be necessary. Each unrated
variable rate instrument will be evaluated on a quarterly basis to determine
that it continues to meet the Portfolio's high quality criteria. If an
instrument is ever deemed to be of less than high quality, the Portfolio either
will sell it in the market or exercise the liquidity feature described below.
Variable rate instruments in which Tax Free Reserves Portfolio's assets may
be invested include participation interests in variable rate, tax-exempt
Municipal Obligations owned by a bank, insurance company or other financial
institution or affiliated organizations. Although the rate of the underlying
Municipal Obligations may be fixed, the terms of the participation interest may
result in the Portfolio receiving a variable rate on its investment. A
participation interest gives the Portfolio an undivided interest in the
Municipal Obligation in the proportion that the Portfolio's participation bears
to the total principal amount of the Municipal Obligation and provides the
liquidity feature. Each participation may be backed by an irrevocable letter of
credit or guarantee of, or a right to put to, a bank (which may be the bank
issuing the participation interest, a bank issuing a confirming letter of credit
to that of the issuing bank, or a bank serving as agent of the issuing bank with
respect to the possible repurchase of the participation interest) or insurance
policy of an insurance company that has been determined by or on behalf of the
Board of Trustees of the Portfolio to meet the prescribed quality standards of
the Portfolio. The Portfolio has the right to sell the participation interest
back to the institution or draw on the letter of credit or insurance after a
specified period of notice, for all or any part of the full principal amount of
the Portfolio's participation in the security, plus accrued interest. The
Portfolio intends to exercise the liquidity feature only (1) upon a default
under the terms of the bond documents, (2) as needed to provide liquidity to the
Portfolio in order to facilitate withdrawals from the Portfolio, or (3) to
maintain a high quality investment portfolio. In some cases, this liquidity
feature may not be exercisable in the event of a default on the underlying
Municipal Obligations; in these cases, the underlying Municipal Obligations must
meet the Portfolio's high quality credit standards at the time of purchase of
the participation interest. Issuers of participation interests will retain a
service and letter of credit fee and a fee for providing the liquidity feature,
in an amount equal to the excess of the interest paid on the instruments over
the negotiated yield at which the participations were purchased on behalf of the
Portfolio. The total fees generally range from 5% to 15% of the applicable prime
rate or other interest rate index. With respect to insurance, the Portfolio will
attempt to have the issuer of the participation interest bear the cost of the
insurance, although the Portfolio retains the option to purchase insurance if
necessary, in which case the cost of insurance will be an expense of the
Portfolio subject to the expense limitation of 2 1/2% of the first $30 million
of the Portfolio's average net assets, 2% of the next $70 million and 1 1/2% of
the Portfolio's average net assets in excess of $100 million. The Adviser has
been instructed by the Portfolio's Board of Trustees to monitor continually the
pricing, quality and liquidity of the variable rate instruments held by the
Portfolio, including the participation interests, on the basis of published
financial information and reports of the rating agencies and other bank
analytical services to which the Portfolio may subscribe. Although participation
interests may be sold, the Portfolio intends to hold them until maturity, except
under the circumstances stated above.
In view of the "concentration" of Tax Free Reserves Portfolio in bank
participation interests in Municipal Obligations secured by bank letters of
credit or guarantees, an investment in the Portfolio should be made with an
understanding of the characteristics of the banking industry and the risks which
such an investment may entail. Banks are subject to extensive governmental
regulations 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 operations 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.
Periods of high inflation and periods of economic slowdown, together with
the fiscal measures adopted to attempt to deal with them, have brought wide
fluctuations in interest rates. When interest rates rise, the value of fixed
income securities generally falls; and vice versa. While this is true for
variable rate instruments generally, the variable rate nature of the underlying
instruments should minimize these changes in value. Accordingly, as interest
rates decrease or increase, the potential for capital appreciation and the risk
of potential capital depreciation is less than would be the case with a
portfolio of fixed income securities. Because the adjustment of interest rates
on the variable rate instruments is made in relation to movements of various
interest rate adjustment indices, the variable rate instruments are not
comparable to long-term fixed rate securities. Accordingly, interest rates on
the variable rate instruments may be higher or lower than current market rates
for fixed rate obligations of comparable quality with similar maturities.
Because of the variable rate nature of the instruments, when prevailing
interest rates decline the Portfolio's yield will decline and its shareholders
will forgo the opportunity for capital appreciation. On the other hand, during
periods when prevailing interest rates increase, the Portfolio's yield will
increase and its shareholders will have reduced risk of capital depreciation.
For purposes of determining whether a variable rate instrument held by the
Portfolio matures within 397 days from the date of its acquisition, the maturity
of the instrument will be deemed to be the longer of (1) the period required
before the Portfolio is entitled to receive payment of the principal amount of
the instrument after notice or (2) the period remaining until the instrument's
next interest rate adjustment. The maturity of a variable rate instrument will
be determined in the same manner for purposes of computing the Portfolio's
dollar-weighted average portfolio maturity.
"WHEN-ISSUED" SECURITIES
New issues of certain Municipal Obligations frequently are offered on a
"when-issued" or "forward delivery" basis. The payment obligation and the
interest rate that will be received on the Municipal Obligations are each fixed
at the time the buyer enters into the commitment although settlement, i.e.,
delivery of and payment for the Municipal Obligations, takes place beyond
customary settlement time (but normally within 45 days after the date of Tax
Free Reserves Portfolio's commitment to purchase). Although the Portfolio will
only make commitments to purchase "when-issued" or "forward delivery" Municipal
Obligations with the intention of actually acquiring them, the Portfolio may
sell these securities before the settlement date if deemed advisable by the
Adviser.
Municipal Obligations purchased on a "when-issued" or "forward delivery"
basis and the securities held by the Portfolio are subject to changes in value
(both generally changing in the same way, that is, both experiencing
appreciation when interest rates decline and depreciation when interest rates
rise) based upon the public's perception of the creditworthiness of the issuer
and changes, real or anticipated, in the level of interest rates. Purchasing
Municipal Obligations on a "when-issued" or "forward delivery" basis can involve
a risk that the yields available in the market on the settlement date may
actually be higher or lower than those obtained in the transaction itself. A
separate account of the Portfolio consisting of cash or liquid debt securities
equal to the amount of the "when-issued" or "forward delivery" commitments will
be established at the Portfolio's custodian bank. For the purpose of determining
the adequacy of the securities in the account, the deposited securities will be
valued at market value. If the market value of such securities declines,
additional cash or highly liquid securities will be placed in the account daily
so that the value of the account will equal the amount of the Portfolio's
commitments. On the settlement date of the "when- issued" or "forward delivery"
securities, the Portfolio's obligations will be met from then-available cash
flow, sale of securities held in the separate account, sale of other securities
or, although not normally expected, from sale of the "when-issued" or "forward
delivery" securities themselves (which may have a value greater or lesser than
the Portfolio's payment obligations). Sale of securities to meet such
obligations may result in the realization of capital gains or losses, which are
not exempt from federal income tax.
STAND-BY COMMITMENTS
When Tax Free Reserves Portfolio purchases Municipal Obligations it may also
acquire stand-by commitments from banks with respect to such Municipal
Obligations. The Portfolio also may acquire stand-by commitments from
broker-dealers. Under the stand-by commitment, a bank or broker-dealer agrees to
purchase at the Portfolio's option a specified Municipal Obligation at a
specified price. A stand-by commitment is the equivalent of a "put" option
acquired by the Portfolio with respect to a particular Municipal Obligation held
in the Portfolio's portfolio.
The amount payable to Tax Free Reserves Portfolio upon the exercise of a
stand-by commitment normally would be (1) the acquisition cost of the Municipal
Obligation (excluding any accrued interest paid on the acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Portfolio owned the security, plus (2) all interest
accrued on the security since the last interest payment date during the period
the security was owned by the Portfolio. Absent unusual circumstances relating
to a change in market value, the Portfolio would value the underlying Municipal
Obligation at amortized cost. Accordingly, the amount payable by a bank or
dealer during the time a stand-by commitment is exercisable would be
substantially the same as the market value of the underlying Municipal
Obligation. The Portfolio values stand-by commitments at zero for purposes of
computing the value of its net assets.
The stand-by commitments that Tax Free Reserves Portfolio may enter into are
subject to certain risks, which include the ability of the issuer of the
commitment to pay for the securities at the time the commitment is exercised and
the fact that the commitment is not marketable by the Portfolio and the maturity
of the underlying security will generally be different from that of the
commitment.
TAXABLE SECURITIES
Although Tax Free Reserves Portfolio attempts to invest 100% of its net
assets in tax-exempt Municipal Obligations, the Portfolio may invest up to 20%
of the value of the Portfolio's net assets in securities of the kind described
below, the interest income on which is subject to federal income tax.
Circumstances in which the Portfolio may invest in taxable securities include
the following: }a{ pending investment in the type of securities described above;
}b{ to maintain liquidity for the purpose of meeting anticipated withdrawals;
and }c{ when, in the opinion of the Adviser, it is advisable to do so because of
adverse market conditions affecting the market for Municipal Obligations. The
kinds of taxable securities in which the Portfolio's assets may be invested are
limited to the following short-term, fixed-income securities (maturing in 397
days or less from the time of purchase): (1) obligations of the U.S. Government
or its agencies, instrumentalities or authorities; (2) commercial paper rated
Prime-1 or Prime-2 by Moody's, A-1!, A-1 or A-2 by Standard & Poor's or F-1 or
F-2 by Fitch; (3) certificates of deposit of U.S. banks with assets of $1
billion or more; and (4) repurchase agreements with respect to any Municipal
Obligations or other securities which the Portfolio is permitted to own. The
Portfolio's assets may also be invested in Municipal Obligations which are
subject to an alternative minimum tax.
REPURCHASE AGREEMENTS
Tax Free Reserves Portfolio may invest assets in instruments subject to
repurchase agreements only with member banks of the Federal Reserve System or
"primary dealers" (as designated by the Federal Reserve Bank of New York) in
U.S. Government securities. Under the terms of a typical repurchase agreement,
the Portfolio would acquire an underlying debt instrument for a relatively short
period (usually not more than one week) subject to an obligation of the seller
to repurchase and the Portfolio to resell the instrument at a fixed price and
time, thereby determining the yield during the Portfolio's holding period. This
results in a fixed rate of return insulated from market fluctuations during such
period. A repurchase agreement is subject to the risk that the seller may fail
to repurchase the security. Repurchase agreements may be deemed to be loans
under the 1940 Act. All repurchase agreements entered into by the Portfolio
shall be fully collateralized at all times during the period of the agreement in
that the value of the underlying security shall be at least equal to the amount
of the loan, including the accrued interest thereon, and the Portfolio or its
custodian or sub-custodian shall have possession of the collateral, which the
Portfolio's Board of Trustees believes will give it a valid, perfected security
interest in the collateral. Whether a repurchase agreement is the purchase and
sale of a security or a collateralized loan has not been definitively
established. This might become an issue in the event of the bankruptcy of the
other party to the transaction. In the event of default by the seller under a
repurchase agreement construed to be a collateralized loan, the underlying
securities are not owned by the Portfolio but only constitute collateral for the
seller's obligation to pay the repurchase price. Therefore, the Portfolio may
suffer time delays and incur costs in connection with the disposition of the
collateral. The Portfolio's Board of Trustees believes that the collateral
underlying repurchase agreements may be more susceptible to claims of the
seller's creditors than would be the case with securities owned by the
Portfolio. Repurchase agreements will give rise to income which will not qualify
as tax-exempt income when distributed by the Portfolio. The Portfolio will not
invest in a repurchase agreement maturing in more than seven days if any such
investment together with illiquid securities held by the Portfolio exceed 10% of
the Portfolio's total net assets. Repurchase agreements are also subject to the
same risks described herein with respect to stand-by commitments.
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% of 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-Cash Reserves Portfolio" or, in the case of Tax Free Reserves
Portfolio, its policy with respect to municipal obligations described in
paragraph (1) under "Investment Policies -- Tax Free Reserves Portfolio"), 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.
Neither the Trust, on behalf of a Fund, nor a 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, in the case of Liquid
Reserves, Cash Reserves Portfolio and Tax Free Reserves Portfolio, fixed
time deposits) 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 (and in the case of Tax Free Reserves, Tax
Free Reserves Portfolio, Liquid Reserves and Cash Reserves Portfolio, short
term commercial paper) 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 Trust on behalf of each
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) in the case of Liquid Reserves and Cash Reserves Portfolio, purchase
securities of any one issuer (other than obligations of the U.S. Government,
its agencies or instrumentalities, which may be purchased without
limitation) if immediately after such purchase more than 5% of the value of
its assets would be invested in the securities of such issuer (provided,
however, that the Trust may invest, on behalf of Liquid Reserves, all of its
assets in a diversified, open-end management investment company with
substantially the same investment objectives, policies and restrictions as
the Fund);
(7) in the case of U.S. Treasury Reserves and U.S. Treasury Reserves
Portfolio, concentrate its investment in any particular industry; provided
that nothing in this Investment Restriction is intended to affect the
ability to invest 100% of U.S. Treasury Reserves' assets in U.S. Treasury
Reserves Portfolio;
(8) in the case of Tax Free Reserves, Tax Free Reserves Portfolio,
Liquid Reserves and Cash Reserves Portfolio, 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 Tax Free
Reserves, Tax Free Reserves Portfolio, Liquid Reserves or Cash Reserves
Portfolio, respectively (taken at market value at the time of each
investment) may be invested in any one industry, except that each of Tax
Free Reserves Portfolio and Cash Reserves Portfolio will invest at least 25%
of its assets and may invest up to 100% of its assets in bank obligations;
provided that, if the Trust withdraws the investment of Tax Free Reserves
from Tax Free Reserves Portfolio or Liquid Reserves from Cash Reserves
Portfolio, the Trust will invest the assets of the applicable Fund in bank
obligations to the same extent and with the same reservation as its
corresponding Portfolio; and provided, further that nothing in this
Investment Restriction is intended to affect Tax Free Reserves' ability to
invest 100% of its assets in Tax Free Reserves Portfolio or Liquid Reserves'
ability to invest 100% of its assets in Cash Reserves Portfolio; or
(9) 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.
For purposes of Investment Restriction (8) above, "bank obligations," when
used with respect to Tax Free Reserves and Tax Free Reserve Portfolio, shall
include bank participation interests in Municipal Obligations.
DESIGNATION OF ISSUER OF SECURITIES
For purposes of the investment restrictions described above for Tax Free
Reserves and Tax Free Reserves Portfolio, the issuer of a tax-exempt security is
deemed to be the entity (public or private) ultimately responsible for the
payment of principal of and interest on the security. When the assets and
revenues of an agency, authority, instrumentality or other political subdivision
are separate from those of the government creating the issuing entity and a
security is backed only by the assets and revenues of the entity, the entity
would be deemed to be the sole issuer of the security. Similarly, in the case of
an industrial development bond, if that bond is backed only by the assets and
revenues of the non-governmental user, then such non-governmental user would be
deemed to be the sole issuer. If, however, in either case, the creating
government or some other entity, such as an insurance company or other corporate
obligor, guarantees a security or a bank issues a letter of credit, such a
guarantee or letter of credit may, in accordance with applicable Securities and
Exchange Commission ("SEC") rules, be considered a separate security and could
be treated as an issue of such government, other entity or bank.
PERCENTAGE AND RATING RESTRICTIONS
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 the Fund or the 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.
<TABLE>
<CAPTION>
REDEEMABLE VALUE
ANNUALIZED OF A HYPOTHETICAL
TOTAL $1,000 INVESTMENT
PERIOD RATE OF RETURN AT THE END OF THE PERIOD
LIQUID RESERVES
October 2, 1992 (commencement of operations) to August 31,
<S> <C> <C>
1997 .................................................... 4.81% $1,259.91
One year ended August 31, 1997 ............................ 5.60% $1,055.97
U.S. TREASURY RESERVES
October 2, 1992 (commencement of operations) to August 31,
1997 .................................................... 4.41% $1,236.47
One year ended August 31, 1997 ............................ 5.11% $1,051.10
TAX FREE RESERVES
May 21, 1997 (commencement of operations) to
August 31, 1997 ......................................... N/A $1,009.87
</TABLE>
The annualized yield of Liquid Reserves for the seven-day period ended
August 31, 1997 was 5.60%. The effective compound annualized yield of Liquid
Reserves for such period was 5.76%. The annualized yield of U.S. Treasury
Reserves for the seven-day period ended August 31, 1997 was 5.02%. The effective
compound annualized yield of U.S. Treasury Reserves for such period was 5.15%.
The annualized yield of Tax Free Reserves for the seven-day period ended August
31, 1997 was 3.21%. The effective compounded annualized yield of Tax Free
Reserves for such period was 3.26%.
4. DETERMINATION OF NET ASSET VALUE
The net asset value of each of the shares of each Fund 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
Liquid Reserves, and 12:00 noon, Eastern time, for U.S. Treasury Reserves and
Tax Free Reserves, by dividing the value of the Fund's net assets (i.e., the
value of its investment in its 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's 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 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 of the applicable Fund or Portfolio will consider whether any
action should be initiated to eliminate or reduce material dilution or other
unfair results to the 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 Liquid 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 and Tax
Free Reserves Portfolio is 6 St. James Avenue, Boston, Massachusetts.
TRUSTEES OF THE TRUST
PHILIP W. COOLIDGE; aged 46* -- President of the Trust and the Portfolios;
Chief Executive Officer and President, Signature Financial Group, Inc. and
CFBDS.
RILEY C. GILLEY; aged 71 -- Vice President and General Counsel, Corporate
Property Investors (November, 1988 to December, 1991); Partner, Breed, Abbott &
Morgan (Attorneys) (retired, December, 1987). His address is 4041 Gulf Shore
Boulevard North, Naples, Florida.
DIANA R. HARRINGTON; aged 57 -- Professor, Babson College (since September,
1993); Visiting Professor, Kellogg Graduate School of Management, Northwestern
University (September, 1992 to September, 1993); Professor, Darden Graduate
School of Business, University of Virginia (September, 1978 to September, 1993);
Trustee, The Highland Family of Funds (since March, 1997). Her address is 120
Goulding Street, Holliston, Massachusetts.
SUSAN B. KERLEY; aged 46 -- President, Global Research Associates, Inc.
(Investment Research) (since August, 1990); Manager, Rockefeller & Co. (March,
1988 to July, 1990); Trustee, Mainstay Institutional Funds (since December,
1990). Her address is P.O. Box 9572, New Haven, Connecticut.
TRUSTEES OF THE PORTFOLIOS
ELLIOTT J. BERV; aged 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; aged 46* -- President of the Trust and the Portfolios;
Chief Executive Officer and President, Signature Financial Group, Inc. and
CFBDS.
MARK T. FINN; aged 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; aged 71-- President, Benchmark Consulting Group, Inc.
(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 THE PORTFOLIOS
PHILIP W. COOLIDGE; aged 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 the
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; aged 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; aged 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; aged 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; aged 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; Assistant 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.
TRUSTEES COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE AGGREGATE
COMPENSATION COMPENSATION COMPENSATION TOTAL COMPENSATION
FROM FROM U.S. FROM TAX FROM THE TRUSTS
TRUSTEE CASH RESERVES(1) TREASURY RESERVES(1) FREE RESERVES(1) AND COMPLEX(2)
- ------- ---------------- -------------------- ---------------- --------------
<S> <C> <C> <C> <C>
Philip W. Coolidge .......................... 0 0 0 0
Riley C. Gilley ............................. $ 8,657.45 $2,396.72 0 $50,000.00
Diana R. Harrington ......................... $12,577.41 $2,965.26 0 $55,000.00
Susan B. Kerley ............................. $12,577.41 $2,965.26 0 $55,000.00
</TABLE>
- ----------
(1) For the fiscal year ended August 31, 1997.
(2) Information relates to the fiscal year ended August 31, 1997. Messrs.
Coolidge and Gilley and Mses. Harrington and Kerley are trustees of 51, 28,
26 and 26 Funds, respectively, of the family of open-end registered
investment companies advised or managed by Citibank.
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 Liquid Reserves and U.S. Treasury Reserves were held
of record by Citibank or an affiliate, as a Shareholder Servicing Agent of the
Funds, for the accounts of their respective clients, and no shares of Tax Free
Reserves were outstanding.
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 a Portfolio may determine, the Adviser
manages the securities of the Portfolio and makes investment decisions for the
Portfolio. The Adviser furnishes at its own expense all services, facilities and
personnel necessary in connection with managing the Portfolios' 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 party to the Advisory Agreements, at a meeting called
for the purpose of voting on the Advisory Agreement.
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 from Cash Reserves Portfolio 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 from U.S. Treasury Reserves Portfolio to
Citibank under the Advisory Agreement, after waivers, were $395,313, $373,944
and $494,339, respectively.
TAX FREE 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 $613,607, $737,021 and $506,142, respectively.
ADMINISTRATORS
Pursuant to Administrative Services Agreements (the "Administrative Services
Agreements"), CFBDS provides the Trust, Tax Free Reserves Portfolio 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, Tax Free Reserves Portfolio 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.
LIQUID RESERVES: For the fiscal years ended August 31, 1995, 1996 and 1997,
the fees paid to CFBDS from Liquid Reserves under the Administrative Services
Agreement, after waivers, were $100,383, $976,156 and $1,080,704, respectively.
For Cash Reserves Portfolio's fiscal years ended August 31, 1995, the fee paid
to SFG under the Administrative Services Agreement was $1,365,951. For the
fiscal years ended August 31, 1996 and 1997, the 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 from U.S. Treasury Reserves to CFBDS under the
Administrative Services Agreement, after waivers, were $134,345, $121,689 and
$321,940, respectively. For the fiscal years ended August 31, 1995, 1996 and
1997, the fees payable to CFBDS under the Administrative Services Agreement with
U.S. Treasury Reserves Portfolio were voluntarily waived).
TAX FREE RESERVES: For the fiscal period ended August 31, 1997, the fees
payable to CFBDS under the Administrative Services Agreement were voluntarily
waived. For the fiscal years ended August 31, 1995, 1996 and 1997, the fees
payable to CFBDS under the Administrative Services Agreement with Tax Free
Reserves Portfolio were $153,402, $180,025 and $79,252, respectively.
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 or SFG 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 Distributor receives
a fee from each Fund at an annual rate not to exceed 0.10% of the Fund's average
daily net assets in anticipation of, or as reimbursement for, expenses incurred
in connection with the sale of shares of the Fund, such as advertising expenses
and the expenses of printing (excluding typesetting) and distributing
prospectuses and reports used for sales purposes, expenses of preparing and
printing sales literature and other distribution related expenses.
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 such Plan
("Qualified Trustees"). The Distribution Plan requires that at least quarterly
the Trust and the Distributor provide to the Board of Trustees and the Board of
Trustees review 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 Trust's Qualified Trustees is committed
to the discretion of the Trust's disinterested Trustees then in office. The
Distribution Plan may be terminated with respect to the applicable 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 that Fund. The Distribution
Plan may not be amended to increase materially the amount of the Funds'
permitted expenses thereunder without the approval of a majority of the
outstanding voting securities of the applicable 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 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 Distribution 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 Funds to prospective investors. The Prospectus
contains a description of fees payable to the Distributor under the Distribution
Agreement.
LIQUID RESERVES: For the fiscal years ended August 31, 1995, 1996 and 1997,
all fees payable from Liquid Reserves to the Distributor under the Distribution
Agreement were voluntarily waived.
U.S. TREASURY RESERVES: For the fiscal years ended August 31, 1995 and 1996,
the fees paid from U.S. Treasury Reserves to the Distributor under the
Distribution Agreement, after waivers, were $1,220 and $4,223. For the fiscal
year ended August 31, 1997 all fees payable from U.S. Treasury Reserves to the
Distributor under the Distribution Agreement were voluntarily waived.
TAX FREE RESERVES: For the fiscal period ended August 31, 1997, the fees
payable from Tax Free Reserves to the Distributor under the Distribution
Agreement were voluntarily waived.
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 aggregate of the fee
paid to the Administrator from each Fund and the fees paid to the Shareholder
Servicing Agents from each Fund may not exceed 0.45% of the applicable Fund's
average daily net assets on an annualized basis for the Fund's then-current
fiscal year. 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 the Trust
provide to the Trust's Board of Trustees and the Trust's Board of Trustees
review, at least quarterly, a written report of the amounts expended (and the
purposes therefor) under the Administrative Plan. The Administrative Plan may be
terminated at any time with respect to a Fund 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 permitted expenses thereunder without the approval of a
majority of the outstanding voting securities of a 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 "Management- Shareholder
Servicing Agents" in the Prospectus. For the fiscal years ended August 31, 1995,
1996 and 1997, the aggregate fees payable from Liquid Reserves to Shareholder
Servicing Agents under the Servicing Agreement were voluntarily waived. For the
fiscal years ended August 31, 1995, 1996 and 1997, the aggregate fees payable
from U.S. Treasury Reserves to Shareholder Servicing Agents under the Servicing
Agreements were voluntarily waived. For the fiscal period ended August 31, 1997,
all aggregate fees payable from Tax Free Reserves to Shareholder Servicing
Agents under the Servicing Agreement were voluntarily waived.
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 Fund,
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
($0.00001 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. Each share
represents an equal proportionate interest in a Fund with each other share. 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
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 of the series. 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, only
shares of that series 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 present
intention of holding 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 may 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 12:00 noon,
Eastern time, in the case of Tax Free Reserves Portfolio and U.S. Treasury
Reserves Portfolio, and 3:00 p.m., Eastern time, in the case of Cash 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 12:00 noon,
Eastern time, for Tax Free Reserves Portfolio and U.S. Treasury Reserves
Portfolio, and 3:00 p.m., Eastern time, for Cash 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
12:00 noon, Eastern time, for Tax Free Reserves Portfolio and U.S. Treasury
Reserves Portfolio, and 3:00 p.m., Eastern time, for Cash 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 12:00 noon, Eastern
time, for Tax Free Reserves Portfolio and U.S. Treasury Reserves Portfolio, and
3:00 p.m., Eastern time, for Cash 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 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 and state 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 and state income or excise taxes.
The portion of Tax Free Reserves' distributions of net investment income
that is attributable to interest from tax-exempt securities will be designated
by the Fund as an "exempt-interest dividend" under the Code and will generally
be exempt form federal income tax in the hands of shareholders so long as at
least 50% of the total value of the Fund's assets consists of tax-exempt
securities at the close of each quarter of the Fund's taxable year.
Distributions of tax-exempt interest earned from certain securities may,
however, be treated as an item of tax preference for shareholders under the
federal alternative minimum tax, and all exempt-interest dividends may increase
a corporate shareholder's alternative minimum tax. Unless the Fund provides
shareholders with actual monthly percentage breakdowns, the percentage of income
designated as tax-exempt will be applied uniformly to all distributions by the
Fund of net investment income made during each fiscal year of the Fund and may
differ from the percentage of distributions consisting of tax-exempt interest in
any particular month. Shareholders are required to report exempt-interest
dividends received from the Fund on their federal income tax returns.
Investment income received by Liquid Reserves from non-U.S. investments may
be subject to foreign income taxes withheld at the source; Liquid 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 Liquid Reserves
to a reduced rate of tax or an exemption from tax on these investments. It is
not possible to determine Liquid 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 Liquid 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 are the independent
certified public accountants for Tax Free Reserves, Tax Free Reserves Portfolio,
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 Liquid 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 the four years ended August 31, 1997
and the period from October 2, 1992 (commencement of operations) to August 31,
1993, 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 each of 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), each of which is included in the Annual Report to
Shareholders of Liquid Reserves, are incorporated by reference into this
Statement of Additional Information and have been so incorporated in reliance
upon the report 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 period October 2, 1992 (commencement of operations) to December 31,
1992, the Notes to Financial Statements and the 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, 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 the 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.
The audited financial statements of Tax Free Reserves (Statement of Assets
and Liabilities at August 31, 1997, Statement of Operations and Statement of
Changes in Net Assets for the period from May 21, 1997 (commencement of
operations to August 31, 1997), Financial Highlights for the period from May 21,
1997 (commencement of operations to August 31, 1997). Notes to Financial
Statements and Independent Auditors' Reoprt) and of Tax Free 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, 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 the Fund, 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 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
<PAGE>
CITIFUNDS(SM) INSTITUTIONAL LIQUID RESERVES
CITIFUNDS(SM) INSTITUTIONAL U.S. TREASURY RESERVES
CITIFUNDS(SM) INSTITUTIONAL TAX FREE RESERVES
TRUSTEES AND OFFICERS
Philip W. Coolidge, President*
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
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 INSTITUTIONAL LIQUID RESERVES)
Price Waterhouse LLP 160 Federal Street, Boston, MA 02110
(FOR CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES AND
CITIFUNDS INSTITUTIONAL TAX FREE 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 Institutional Liquid Reserves
Condensed Financial Information - Financial Highlights for the
period from October 2, 1992 (commencement of operations) to
August 31, 1993, and the years ended August 31, 1994, August
31, 1995, August 31, 1996, and August 31, 1997.
(ii) Landmark Institutional U.S. Treasury Reserves
Condensed Financial Information - Financial Highlights for the
period from October 2, 1992 (commencement of operations) to
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.
(iii) Landmark Institutional Tax Free Reserves
Condensed Financial Information - Financial Highlights for the
period from May 21, 1997 (commencement of operations) to
August 31, 1997
FINANCIAL STATEMENTS INCLUDED IN PART B:
(i) Landmark Institutional Liquid 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 period from October 2, 1992
(commencement of operations) to August 31, 1993 and for the
years ended August 31, 1994, August 31, 1995, August 31, 1996
and 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 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*
(iii) Landmark Institutional U.S. Treasury Reserves
Statement of Assets and Liabilities at August 31, 1997**
Statement of Operations for the year ended August 13, 1997**
Statement of Changes in Net Assets for the years ended August
31, 1997 and August 31, 1996**
Financial Highlights for the years ended August 31, 1997, August
31, 1996, August 31, 1995 and August 31, 1994, the eight
months ended August 31, 1993 and the period from October 2,
1992 (commencement of operations) to December 31, 1992**
(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 years ended August 31, 1997, August
31, 1996, August 31, 1995 and August 31, 1994, for the eight
months ended August 31, 1993, and for the year ended December
31, 1992
(v) Landmark Institutional Tax Free Reserves
Statement of Assets and Liabilities at August 31, 1997***
Statement of Operations for the period May 21, 1997
(commencement of operations) to August 31, 1997***
Statement of Changes in Net Assets for the period May 21, 1997
(commencement of operations) to August 31, 1997***
Financial Highlights for the period May 21, 1997 (commencement
of operations) to August 31, 1997***
(vi) Tax Free 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***
- ------------------
*Incorporated by reference to the Registrant's Annual Report to Shareholders
of Landmark Institutional Liquid Reserves for the fiscal year ended August
31, 1997, filed with the Securities and Exchange Commission on the EDGAR
system on or about October 28, 1997 (Accession Number 0000889512-97-000004).
**Incorporated by reference to the Registrant's Annual Report to Shareholders
of Landmark Institutional U.S. Treasury Reserves for the fiscal year ended
August 31, 1997, filed with the Securities and Exchange Commission on the
EDGAR System on or about October 28, 1997 (Accession Number
0000889512-97-000004).
***Incorporated by reference to the Registrant's Annual Report to Shareholders
of Landmark Institutional Tax Free Reserves for the fiscal year ended August
31, 1997, filed with the Securities and Exchange Commission on the EDGAR
system on or about October 28, 1997 (Accession Number 0000889512-97-000004).
(b) Exhibits
* 1(a) Declaration of Trust of the Registrant
*, ** 1(b) Amendments to Declaration of Trust of the Registrant
and ***
* 2(a) Amended and Restated By-Laws of the Registrant
* and *** 2(b) Amendments to Amended and Restated By-Laws of the
Registrant
**** 4 Form of Certificate representing ownership of a share
of beneficial interest of the Registrant
*** 5 Management Agreement between the Registrant, with
respect to CitiFunds Institutional Cash Reserves, and
Citibank, N.A., as investment manager and administrator
* 6(a) Distribution Agreement between the Registrant and CFBDS,
Inc. (formerly known as The Landmark Funds Broker-Dealer
Services, Inc.) ("CFBDS"), as distributor
***** 6(b) Form of Amended and Restated Distribution
Agreement, with respect to Class A Shares of Landmark
Institutional Liquid Reserves, between the Registrant
and CFBDS, as distributor
***** 6(c) Form of Distribution Agreement, with respect to
Class C Shares of Landmark Institutional Liquid
Reserves, between the Registrant and CFBDS, as
distributor
***** 6(d) Form of Distribution Agreement, with respect to
Class D Shares of Landmark Institutional Liquid
Reserves, between the Registrant and CFBDS, as
distributor
*** 6(e) Distribution Agreement between the Registrant, with
respect to CitiFunds Institutional Cash Reserves, and
CFBDS, as distributor
* 8 Custodian Contract between the Registrant and State
Street Bank and Trust Company ("State Street"), as
custodian
* 9(a) Amended and Restated Administrative Services Plan of
the Registrant with respect to Landmark Institutional
U.S. Treasury Reserves and Landmark Institutional Tax
Free Reserves
***** 9(b) Form of Amended and Restated Administrative Services
Plan of the Registrant, with respect to Class A Shares
of Landmark Institutional Liquid Reserves
* 9(c) Administrative Services Agreement between the
Registrant and CFBDS, as administrator
* 9(d) Form of Sub-Administrative Services Agreement between
Citibank, N.A. and CFBDS
***** 9(e)(1) Form of Amendment to Shareholder Servicing Agreement
* 9(e)(2) Form of Shareholder Servicing Agreement
* 9(e)(3) Form of Shareholder Servicing Agreement between the
Registrant and a federal savings bank, as shareholder
servicing agent
* 9(e)(4) Form of Shareholder Servicing Agreement between the
Registrant and CFBDS, as shareholder servicing agent
* 9(f) Transfer Agency and Servicing Agreement between the
Registrant and State Street, as transfer agent
* 9(g) Amended and Restated Exchange Privilege Agreement
between the Registrant, certain other investment
companies and CFBDS, as distributor
*** 9(h) Sub-Administrative Services Agreement between
Citibank, N.A. and CFBDS with respect to CitiFunds
Institutional Cash Reserves
* 9(i) Transfer Agency and Servicing Agreement between the
Registrant and State Street, as transfer agent for
CitiFunds Institutional Cash Reserves
* 10(a) Opinion and Consent of Counsel
*** 10(b) Opinion and Consent of Counsel with respect to
CitiFunds Institutional Cash Reserves
11 Consents of Deloitte & Touche LLP, Price Waterhouse LLP
and Price Waterhouse, independent auditors of the
Registrant, Cash Reserves Portfolio, U.S. Treasury
Reserves Portfolio and Tax Free Reserves Portfolio
* 15(a) Amended and Restated Distribution Plan of the
Registrant, with respect to Landmark Institutional
U.S. Treasury Reserves and Landmark Institutional Tax
Free Reserves
***** 15(b) Form of Amended and Restated Distribution Plan of the
Registrant, with respect to Class A Shares of Landmark
Institutional Liquid Reserves
***** 15(c) Form of Service Plan of the Registrant, with respect
to Class C Shares of Landmark Institutional Liquid
Reserves
***** 15(d) Form of Service Plan of the Registrant, with respect
to Class D Shares of Landmark Institutional Liquid
Reserves
*** 15(e) Service Plan of the Registrant with respect to
CitiFunds Institutional Cash Reserves
***** 18 Multiple Class Plan with respect to Landmark
Institutional Liquid Reserves
****** 25(a) Powers of Attorney for the Registrant
and
*******
****** 25(b) Powers of Attorney U.S. Treasury Reserves Portfolio
****** 25(c) Powers of Attorney Cash Reserves Portfolio
and
********
****** 25(d) Powers of Attorney Tax Free Reserves Portfolio
27 Financial Data Schedules
- ---------------------
* Incorporated herein by reference to the Registrant's Registration
Statement on Form N-1A (File No. 33-49552) as filed with the Securities
and Exchange Commission on August 28, 1996 and to the Registrant's
Registration Statement on Form N-1A (File No. 33-49554) as filed with
the Securities and Exchange Commission on August 28, 1996 as filed with
the Securities and Exchange Commission on October 1, 1996
** Incorporated herein by reference to the Registrant's Registration
Statement on Form N-1A (File No. 33-49552) as filed with the Securities
and Exchange Commission on October 1, 1996 and to the Registrant's
Registration Statement on Form N-1A (File No. 33-49554) as filed with
the Securities and Exchange Commission on October 1, 1996
*** Incorporated herein by reference to the Registrant's Registration
Statement on Form N-1A (File No. 33-49552) as filed with the Securities
and Exchange Commission on September 24, 1997 and to the Registrant's
Registration Statement on Form N-1A (File No. 33-49554) as filed with
the Securities and Exchange Commission on September 24, 1997
**** Information defining the rights of shareholders is contained in the
Registrant's Declaration of Trust, as amended, incorporated herein by
reference
***** Incorporated herein by reference to the Registrant's Registration
Statement on Form N-1A (File No. 33-49552) as filed with the Securities
and Exchange Commission on June 14, 1996
****** Incorporated herein by reference to the Registrant's Registration
Statement on Form N-1A (File No. 33-49552) as filed with the Securities
and Exchange Commission on December 18, 1996 and to the Registrant's
Registration Statement on Form N-1A (File No. 33-49554) as filed with
the Securities and Exchange Commission on December 18, 1996
******* Incorporated herein by reference to the Registrant's Registration
Statement on Form N-1A (File No. 33-49552) as filed with the Securities
and Exchange Commission on July 17, 1997 and to the Registrant's
Registration Statement on Form N-1A (File No. 33-49554) as filed with
the Securities and Exchange Commission on July 17, 1997
******** Incorporated herein by reference to the Registrant's Registration
Statement on Form N-1A (File No. 33-49552) as filed with the Securities
and Exchange Commission on December 29, 1995 and to the Registrant's
Registration Statement on Form N-1A (File No. 33-49554) as filed with
the Securities and Exchange Commission on December 29, 1995
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
-------------- ------------------------
Shares of Beneficial Interest As of December 19, 1997
($0.00001 par value)
Landmark Institutional Liquid Reserves 3
Landmark Institutional U.S. Treasury 3
Reserves
Landmark Institutional Tax Free Reserves 3
CitiFunds Institutional Cash Reserves 3
Item 27. Indemnification.
Reference is hereby made to (a) Article V of the Registrant's Declaration
of Trust, filed as an Exhibit to the Registrant's Registration Statement on Form
N-1A; (b) Section 6 of the Distribution Agreement between the Registrant and
CFBDS, filed 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, U.S. Treasury Reserves Portfolio, Cash 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), 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,
Landmark U.S. Treasury Reserves, Landmark Cash Reserves, Premium U.S. Treasury
Reserves, Premium Liquid Reserves, Landmark Tax Free Reserves, Landmark
California Tax Free Reserves, Landmark Connecticut Tax Free Reserves, Landmark
New York 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, Cash Reserves Portfolio, U.S.
Treasury 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:
NAME ADDRESS
CFBDS, Inc. 6 St. James Avenue
(distributor and administrator) 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 manager and administrator) New York, NY 10043
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 CitiFunds Institutional Cash Reserves, Landmark Institutional
Liquid Reserves, Landmark Institutional U.S. Treasury Reserves and Landmark
Institutional Tax Free Reserves is delivered with a copy of the respective
Fund's latest Annual Report 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
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.
CITIFUNDS INSTITUTIONAL TRUST
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
Riley C. Gilley* Trustee
---------------------------
Riley C. Gilley
Diana R. Harrington* Trustee
---------------------------
Diana R. Harrington
Susan B. Kerley* Trustee
---------------------------
Susan B. Kerley
*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 CitiFunds Institutional
Trust 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 CitiFunds Institutional Trust has been signed below 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 CitiFunds Institutional Trust 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 Secretary
This Post-Effective Amendment to the Registration Statement on Form N-1A
of CitiFunds Institutional Trust has been signed below 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>
SIGNATURES
Tax Free Reserves Portfolio has duly caused this Post-Effective Amendment
to the Registration Statement on Form N-1A of CitiFunds Institutional Trust 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.
TAX FREE RESERVES PORTFOLIO
By: Philip W. Coolidge
-------------------------------
Philip W. Coolidge, President
This Post-Effective Amendment to the Registration Statement on Form N-1A
of CitiFunds Institutional Trust has been signed below 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>
EXHIBIT INDEX
Exhibit
No.: Description:
------- -----------
11 Consents of Deloitte & Touche LLP, Price Waterhouse LLP and
Price Waterhouse, independent auditors of the Registrant,
Cash Reserves Portfolio, U.S. Treasury Reserves Portfolio and
Tax Free Reserves Portfolio
27 Financial Data Schedules
<PAGE>
EXHIBIT 11
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post Effective Amendment
No. 11 to Registration Statement No. 33-49554 of CitiFunds Institutional Trust
(formerly known as Landmark Institutional Trust) of our reports each dated
October 6, 1997 appearing in the annual reports to shareholders for the year
ended August 31, 1997 of CitiFunds Institutional U.S. Treasury Reserves (a
separate series of CitiFunds Institutional Trust) and U.S. Treasury Reserves
Portfolio, and CitiFunds Institutional Tax Free Reserves (a separate series of
CitiFunds Institutional Trust) and Tax Free 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. 11 to the registration statement on Form N-1A (the "Registration
Statement") of CitiFunds Institutional Trust (formerly Landmark Institutional
Trust) of our report dated October 6, 1997, relating to the financial statements
and financial highlights of CitiFunds Institutional Liquid Reserves (formerly
Landmark Institutional Liquid Reserves) appearing in the August 31, 1997 Annual
Report to CitiFunds Institutional Liquid Reserves (formerly Landmark
Institutional Liquid 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 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 part of this Post-Effective Amendment No. 11
to the registration statement on Form N-1A (the "Registration Statement") of
CitiFunds Institutional Trust (formerly Landmark Institutional Trust) 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 Institutional Liquid Reserves (formerly Landmark
Institutional Liquid Reserves) which are also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
heading "Independent Accountants and Financial Statement" 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.
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<NAME> LANDMARK INSTITUTIONAL TAX FREE RESERVES
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<NAME> LANDMARK INSTITUTIONAL TRUST
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<PERIOD-TYPE> 4-MOS
<FISCAL-YEAR-END> AUG-31-1997
<PERIOD-END> AUG-31-1997
<INVESTMENTS-AT-COST> 60,120,462
<INVESTMENTS-AT-VALUE> 60,120,462
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 60,120,462
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 72,821
<TOTAL-LIABILITIES> 72,821
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60,047,641
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<ACCUMULATED-NII-CURRENT> 0
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 129,951,030
<NUMBER-OF-SHARES-REDEEMED> (70,208,596)
<SHARES-REINVESTED> 305,207
<NET-CHANGE-IN-ASSETS> 60,047,641
<ACCUMULATED-NII-PRIOR> 0
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<OVERDISTRIB-NII-PRIOR> 0
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