CITIFUNDS INSTITUTIONAL TRUST, 497, 2000-01-05

CITIFUNDS INSTITUTIONAL TRUST
497, 2000-01-05

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<PAGE>
Rule 497(c) File Nos. 33-49554 and 811-6740

----------
PROSPECTUS
----------

DECEMBER 31, 1999

CitiFunds(SM)
Institutional Money
Market Funds

CITIBANK, N.A., INVESTMENT ADVISER

CITIFUNDS(SM) INSTITUTIONAL LIQUID RESERVES
CITIFUNDS(SM) INSTITUTIONAL U.S. TREASURY RESERVES
CITIFUNDS(SM) INSTITUTIONAL TAX FREE RESERVES

The Securities and Exchange Commission has not approved or disapproved
these securities or passed upon the accuracy of this prospectus, and
any representation to the contrary is a criminal offense.
<PAGE>

Table of Contents

FUNDS AT A GLANCE ....................................................... 3
CITIFUNDS INSTITUTIONAL LIQUID RESERVES .............................. 4
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES........................ 12
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES............................. 19

YOUR CITIFUNDS ACCOUNT .................................................. 27
HOW TO BUY SHARES .................................................... 27
HOW THE PRICE OF YOUR SHARES IS CALCULATED ........................... 27
HOW TO SELL SHARES ................................................... 28
EXCHANGES ............................................................ 29
DIVIDENDS ............................................................ 30
TAX MATTERS .......................................................... 30

MANAGEMENT OF THE FUNDS ................................................. 33
INVESTMENT ADVISER ................................................... 33
ADVISORY FEES ........................................................ 33
DISTRIBUTION ARRANGEMENTS ............................................ 34

MORE ABOUT THE FUNDS .................................................... 35
PRINCIPAL INVESTMENT STRATEGIES ...................................... 35

FINANCIAL HIGHLIGHTS .................................................... A-1
<PAGE>

-----------------
FUNDS AT A GLANCE
-----------------

Funds at a Glance

Each of the Funds described in this prospectus is a money
market fund. Money market funds must follow strict rules about
the quality, maturity and other features of securities they
purchase. The Funds also try to maintain a share price of
$1.00 while paying income to shareholders. However, no money
market fund guarantees that you will receive your money back.

Each Fund has its own goals and investment strategies, and
each offers a different mix of investments. Of course, there
is no assurance that any Fund will achieve its investment
goals.
<PAGE>
---------------------------------------
CitiFunds Institutional Liquid Reserves
---------------------------------------

CitiFunds Institutional Liquid Reserves

This summary briefly describes CitiFunds Institutional Liquid
Reserves and the principal risks of investing in it. For more
information, see MORE ABOUT THE FUNDS on page 35.

FUND GOAL

The Fund's goal is to provide shareholders with liquidity and
as high a level of current income as is consistent with
preservation of capital. Of course, there is no assurance that
the Fund will achieve its goal.

MAIN INVESTMENT STRATEGIES

CitiFunds Institutional Liquid Reserves invests only in high
quality, short-term money market instruments denominated in
U.S. dollars. These may include:

o obligations of U.S. and non-U.S. banks;

o commercial paper and asset backed securities;

o short-term obligations of the U.S. government and its agencies and
instrumentalities, and repurchase agreements for these obligations;
and

o obligations issued or guaranteed by the governments of Western
Europe, Australia, Japan and Canada.

The Fund invests at least 25%, and may invest up to 100%, of
its assets in bank obligations, such as certificates of
deposit, fixed time deposits and bankers' acceptances.

Please note that the Fund invests in securities through an
underlying mutual fund.

MAIN RISKS

Investing in a mutual fund involves risk. Although CitiFunds
Institutional Liquid Reserves seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose
money by investing in this Fund. Please remember that an
investment in the Fund is not a deposit of Citibank and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.

The principal risks of investing in the Fund are described
below. Please note that there are many other factors that
could adversely affect your investment, and that could prevent
the Fund from achieving its goals, which are not described
here. More information about risks appears in the Funds'
Statement of Additional Information. Before investing, you
should carefully consider the risks that you will assume.

YIELD FLUCTUATION. The Fund invests in short term money market
instruments. As a result, the amount of income paid to you by
the Fund will go up or down depending on day-to-day variations
in short term interest rates. Investing in high quality,
short-term instruments may result in a lower yield (the income
on your investment) than investing in lower quality or longer-
term instruments.

CREDIT RISK. The Fund invests in debt securities that are
rated, when the Fund buys them, in the highest short term
rating category by nationally recognized rating agencies or,
in Citibank's opinion, are of comparable quality. However, it
is possible that some issuers will be unable to make the
required payments on debt securities held by the Fund. Debt
securities also go up or down in value based on the perceived
creditworthiness of issuers. A default on an investment held
by the Fund could cause the value of your investment in the
Fund to decline.

INTEREST RATE AND MARKET RISK. A major change in interest
rates or a significant decline in the market value of a Fund
investment, or other market event could cause the value of
your investment in the Fund, or its yield, to decline.

FOREIGN SECURITIES. You should be aware that investments in
foreign 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 of assets, confiscatory taxation,
withholding taxes on dividends and interest paid on fund
investments, fluctuations in currency exchange rates, currency
exchange controls and other limitations on the use or transfer
of assets by the Fund or issuers of securities, and political
or social instability. In addition, foreign 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. Foreign markets may be
less liquid and more volatile than U.S. markets. As a result,
there may be rapid changes in the value of foreign securities.
Foreign markets also may offer less protection to investors
such as the Fund.

CONCENTRATION IN THE BANKING INDUSTRY. CitiFunds Institutional
Liquid Reserves concentrates in bank obligations. This means
that an investment in the Fund is particularly susceptible to
adverse events affecting the banking industry. Banks are
highly regulated. Decisions by regulators may limit the loans
banks make and the interest rates and fees they charge, and
may reduce bank profitability. Banks also depend on being able
to obtain funds at reasonable costs to finance their lending
operations. This makes them sensitive to changes in money
market and general economic conditions. When a bank's
borrowers get in financial trouble, their failure to repay the
bank will also affect the bank's financial situation.

YEAR 2000 RISK. The Fund could be adversely affected if the
computer systems used by the Fund or its service providers
have not been programmed to process information accurately on
or after January 1, 2000. The Fund, and its service providers,
have made efforts to resolve any potential Year 2000 problems.
While it is likely these efforts will be successful, the
failure to implement any necessary modifications could have an
adverse impact on the Fund. The Fund also could be adversely
affected if the issuers of securities held by the Fund or the
markets on which those securities are traded do not solve
their Year 2000 problems, or if it costs them large amounts of
money to do so.
<PAGE>

$1.00 NET ASSET VALUE. In order to maintain a $1.00 per share
net asset value, the Fund could reduce the number of its
outstanding shares. The Fund could do this if there were a
default on an investment held by the Fund, or if the
investment declined significantly in value. If this happened,
you would own fewer shares. By investing in the Fund, you
agree to this reduction should it become necessary.
<PAGE>

Fund Performance

The following bar chart and table can help you evaluate the
risks and performance of the Fund. The bar chart shows the
Fund's total returns for the calendar years indicated. The
table compares the average annual returns for the Fund to the
performance of the IBC Financial Data 1st Tier Institutional
Money Market Funds Average. When you consider this
information, please remember that the Fund's past performance
is not necessarily an indication of how it will perform in the
future. The Fund's performance reflects certain fee waivers or
reimbursements. If these are reduced or eliminated, the Fund's
performance may go down. For current yield information, please
call 800-625-4554 toll free, or contact your account
representative.
- --------------------------------------------------------------------------------
CITIFUNDS INSTITUTIONAL LIQUID RESERVES
ANNUAL TOTAL RETURNS

1993 3.17%
1994 4.34%
1995 6.12%
1996 5.51%
1997 5.67%
1998 5.58%

As of September 30, 1999, the Fund had a year-to-date return of 3.78%.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FUND'S HIGHEST AND LOWEST RETURNS
FOR CALENDAR QUARTERS COVERED BY THE BAR CHART
................................................................................
Quarter Ending
................................................................................
Highest 1.54% June 30, 1995
................................................................................
Lowest 0.76% March 31, 1993
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1998
..............................................................................
Life of
Fund Since
1 Year 5 Years October 2, 1992
................................................................................
CITIFUNDS INSTITUTIONAL LIQUID
RESERVES 5.58% 5.44% 4.98%
................................................................................
IBC Financial Data 1st Tier Institutional
Money Market Funds Average 5.33% 5.16% *
- --------------------------------------------------------------------------------

*Information regarding performance for this period is not available.
<PAGE>

Fund Fees and Expenses

This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.

- --------------------------------------------------------------------------------
CITIFUNDS INSTITUTIONAL LIQUID RESERVES
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
SHAREHOLDER FEES
FEES PAID DIRECTLY FROM YOUR INVESTMENT
................................................................................
Maximum Sales Charge (Load) Imposed on Purchases None
................................................................................
Maximum Deferred Sales Charge (Load) None
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1)
EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
................................................................................
Management Fees 0.15%
................................................................................
Distribution (12b-1) Fees 0.10%
................................................................................
Other Expenses (administrative, shareholder
servicing and other expenses) 0.54%
................................................................................
Total Annual Fund Operating Expenses 0.79%
................................................................................
Less Amount of Contractual Fee Waiver* 0.45%
................................................................................
Net Annual Fund Operating Expenses* 0.34%
- --------------------------------------------------------------------------------

* In addition to the contractual fee waivers which terminate on
December 31, 2000, certain of the Fund's service providers are
voluntarily waiving fees or reimbursing expenses such that
current net annual operating expenses are: 0.19%

These voluntary fee waivers and reimbursements may be reduced or terminated
at any time. The Fund's service providers will consider renewal of the
contractual arrangements each year.

(1) The Fund invests in securities through an underlying mutual fund, Cash
Reserves Portfolio. This table reflects the expenses of both the Fund
and Cash Reserves Portfolio.
- --------------------------------------------------------------------------------
<PAGE>

EXAMPLE

This example is intended to help you compare the cost of
investing in the Fund to the cost of investing in other mutual
funds. The example assumes that:

o you invest $10,000 in the Fund for the time periods indicated;

o you reinvest all dividends;

o you then sell all of your shares at the end of those periods;

o your investment has a 5% return each year -- the assumption of a 5%
return is required by the SEC for the purpose of this example and
is not a prediction of the Fund's future performance; and

o the Fund's operating expenses as shown in the table remain the same
-- the example includes contractual fee waivers for the one year
period, but does not include voluntary waivers and fee
reimbursements.

Although your actual costs may be higher or lower, based on
these assumptions your costs would be:

- --------------------------------------------------------------------------------
CITIFUNDS INSTITUTIONAL LIQUID RESERVES
..............................................................................
1 Year 3 Years 5 Years 10 Years
..............................................................................
$35 $252 $439 $978
- --------------------------------------------------------------------------------
<PAGE>

----------------------------------------------
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
----------------------------------------------

CitiFunds Institutional U.S. Treasury Reserves

This summary briefly describes CitiFunds Institutional U.S.
Treasury Reserves and the principal risks of investing in it.
For more information, see MORE ABOUT THE FUNDS on page 35.

FUND GOAL

The Fund's goal 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.
Of course, there is no assurance that the Fund will achieve
its goal.

MAIN INVESTMENT STRATEGIES

Institutional U.S. Treasury Reserves may invest in:

o U.S. Treasury bills, notes and bonds;

o Treasury receipts; and

o securities issued by U.S. government agencies and instrumentalities
that are backed by the full faith and credit of the U.S.
government.

Please note that the Fund invests in securities through an
underlying mutual fund.

MAIN RISKS

Investing in a mutual fund involves risk. Although CitiFunds
Institutional U.S. Treasury Reserves seeks to preserve the
value of your investment at $1.00 per share, it is possible to
lose money by investing in this Fund. Please remember that an
investment in the Fund is not a deposit of Citibank and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.

The principal risks of investing in the Fund are described
below. Please note that there are many other factors that
could adversely affect your investment, and that could prevent
the Fund from achieving its goals, which are not described
here. More information about risks appears in the Fund's
Statement of Additional Information. Before investing, you
should carefully consider the risks that you will assume.

YIELD FLUCTUATION. The Fund invests in short term money
market instruments. As a result, the amount of income paid to
you by the Fund will go up or down depending on day-to-day
variations in short term interest rates. Investing in high
quality, short-term instruments may result in a lower yield
(the income on your investment) than investing in lower
quality or longer-term instruments.

Fund Performance

The following bar chart and table can help you evaluate the
risks and performance of the Fund. The bar chart shows the
Fund's total returns for the calendar years indicated. The
table compares the average annual returns for the Fund to the
performance of the IBC Financial Data Institutional 100% U.S.
Treasury Rated Money Market Funds Average. When you consider
this information, please remember that the Fund's past
performance is not necessarily an indication of how the Fund
will perform in the future. The Fund's performance reflects
certain fee waivers or reimbursements. If these are reduced or
eliminated, the Fund's performance may go down. For current
yield information, please call 800-625-4554 toll free, or
contact your account representative.

- --------------------------------------------------------------------------------
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
ANNUAL TOTAL RETURNS

1993 3.03%
1994 3.91%
1995 5.56%
1996 5.06%
1997 5.11%
1998 4.97%

As of September 30, 1999, the Fund had a year-to-date return of 3.29%.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FUND'S HIGHEST AND LOWEST RETURNS
FOR CALENDAR QUARTERS COVERED BY THE BAR CHART
................................................................................
Quarter Ending
................................................................................
Highest 1.42% June 30, 1995
................................................................................
Lowest 0.73% June 30, 1993
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1998
................................................................................
Life of Fund
Since
1 Year 5 Years October 2, 1992
................................................................................
CITIFUNDS INSTITUTIONAL U.S.
TREASURY RESERVES 4.97% 4.92% 4.54%
................................................................................
IBC Financial Data Institutional
100% U.S. Treasury Rated
Money Market Funds Average 4.89% 4.85% *
- --------------------------------------------------------------------------------

*Information regarding performance for this period is not available.
<PAGE>

Fund Fees and Expenses

This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.

- --------------------------------------------------------------------------------
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1)
EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
................................................................................
Management Fees 0.15%
................................................................................
Distribution (12b-1) Fees 0.10%
................................................................................
Other Expenses (administrative, shareholder
servicing and other expenses) 0.59%
................................................................................
Total Annual Fund Operating Expenses 0.84%
................................................................................
Less Amount of Contractual Fee Waiver* 0.45%
................................................................................
Net Annual Fund Operating Expenses* 0.39%
- --------------------------------------------------------------------------------

These voluntary fee waivers and reimbursements may be reduced or terminated
at any time. The Fund's service providers will consider renewal of the
contractual arrangements each year.

(1) The Fund invests in securities through an underlying mutual fund, U.S.
Treasury Reserves Portfolio. This table reflects the expenses of both
the Fund and U.S. Treasury Reserves Portfolio.
- --------------------------------------------------------------------------------
<PAGE>

EXAMPLE

This example is intended to help you compare the cost of
investing in the Fund to the cost of investing in other mutual
funds. The example assumes that:

o you invest $10,000 in the Fund for the time periods indicated;

o you reinvest all dividends;

o you then sell all of your shares at the end of those periods;

o your investment has a 5% return each year -- the assumption of a 5%
return is required by the SEC for the purpose of this example and
is not a prediction of the Fund's future performance; and

Although your actual costs may be higher or lower, based on
these assumptions your costs would be:

- --------------------------------------------------------------------------------
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
................................................................................
1 Year 3 Years 5 Years 10 Years
................................................................................
$40 $268 $466 $1,037
- --------------------------------------------------------------------------------
<PAGE>

-----------------------------------------
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
-----------------------------------------

CitiFunds Institutional Tax Free Reserves

This summary briefly describes CitiFunds Institutional Tax
Free Reserves and the principal risks of investing in it. For
more information, see MORE ABOUT THE FUNDS on page 35.

FUND GOALS

The Fund's goals are to provide its shareholders with high
levels of current income exempt from federal income taxes,
preservation of capital and liquidity. Of course, there is no
assurance that the Fund will achieve its goals.

MAIN INVESTMENT STRATEGIES

o Under normal market conditions, Institutional Tax Free Reserves
invests at least 80% of its assets in high quality municipal
obligations and in participation interests in these obligations
issued by banks, insurance companies and other financial
institutions. Municipal obligations are debt securities issued by
states, cities and towns and other public entities or qualifying
issuers. The interest paid on these debt securities is free from
federal income tax but is generally lower than the interest paid on
taxable securities.

o The Fund invests at least 25% of its assets in participation
interests in municipal obligations that are secured by bank letters
of credit or guarantees.

o The Fund may invest up to 20% of its assets in high quality
securities that pay interest that is subject to federal income tax
or federal alternative minimum tax.

Please note that the Fund invests in securities through an
underlying mutual fund.

MAIN RISKS

Investing in a mutual fund involves risk. Although CitiFunds
Institutional Tax Free Reserves seeks to preserve the value of
your investment at $1.00 per share, it is possible to lose
money by investing in this Fund. Please remember that an
investment in the Fund is not a deposit of Citibank and is not
insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency.

YIELD FLUCTUATION. The Fund invests in short term money
market instruments. As a result, the amount of income paid to
you by the Fund will go up or down depending on day-to-day
variations in short term interest rates. Investing in high
quality, short-term instruments may result in a lower yield
(the income on your investment) than investing in lower
quality or longer-term instruments.

CREDIT RISK. The Fund invests in high quality debt securities,
meaning securities that are rated, when the Fund buys them, in
one of the two highest short term rating categories by
nationally recognized rating agencies or, in Citibank's
opinion, are of comparable quality. However, it is possible
that some issuers will be unable to make the required payments
on debt securities held by the Fund. Debt securities also go
up or down in value based on the perceived creditworthiness of
issuers. A default on an investment held by the Fund could
cause the value of your investment in the Fund to decline.

NON-DIVERSIFIED STATUS. CitiFunds Instutitional Tax Free
Reserves is a non-diversified mutual fund. This means that it
may invest a relatively high percentage of its assets in the
obligations of a limited number of issuers. Institutional Tax
Free Reserves also may invest 25% or more of its assets in
securities of issuers that are located in the same state, that
derive income from similar type projects or that are otherwise
related. As a result, many securities held by the Fund may be
adversely affected by a particular single economic, business,
regulatory or political event. You should consider the
potential risk inherent in these policies when you compare the
Fund with a more diversified mutual fund.

CONCENTRATION IN THE BANKING INDUSTRY. CitiFunds Instutitional
Tax Free Reserves concentrates in participation interests in
municipal obligations that are issued by banks and secured by
bank letters of credit or guarantees. This means that an
investment in the Fund is particularly susceptible to adverse
events affecting the banking industry. Banks are highly
regulated. Decisions by regulators may limit the loans banks
make and the interest rates and fees they charge, and may
reduce bank profitability. Banks also depend on being able to
obtain funds at reasonable costs to finance their lending
operations. This makes them sensitive to changes in money
market and general economic conditions. When a bank's
borrowers get in financial trouble, their failure to repay the
bank will also affect the bank's financial situation.

Fund Performance

The following bar chart and table can help you evaluate the
risks and performance of the Fund. The bar chart shows the
Fund's total returns for the calendar year indicated. The
table compares the average annual returns for the Fund to the
performance of the IBC Institutional Tax Free Money Funds
Average. When you consider this information, please remember
that the Fund's past performance is not necessarily an
indication of how it will perform in the future. The Fund's
performance reflects certain fee waivers or reimbursements. If
these are reduced or eliminated, the Fund's performance may go
down. For current yield information, please call 800-625-4554
toll free, or contact your account representative.

- --------------------------------------------------------------------------------
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
ANNUAL TOTAL RETURNS

1998 3.37%

As of September 30, 1999, the Fund had a year-to-date return of 2.24%.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
FUND'S HIGHEST AND LOWEST RETURNS
FOR CALENDAR QUARTERS COVERED BY THE BAR CHART
..............................................................................
Quarter Ending
..............................................................................
Highest 0.89% June 30, 1998
..............................................................................
Lowest 0.80% December 31, 1998
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
AS OF DECEMBER 31, 1998
..............................................................................
Life of Fund
Since
1 Year May 21, 1997
..............................................................................
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES 3.37% 3.46%
..............................................................................
IBC Institutional Tax Free Money
Funds Average 3.13% *
- --------------------------------------------------------------------------------

*Information regarding performance for this period is not available.
<PAGE>

Fund Fees and Expenses

This table describes the fees and expenses that you may pay if
you buy and hold shares of the Fund.

- --------------------------------------------------------------------------------
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
ANNUAL FUND OPERATING EXPENSES(1)
EXPENSES THAT ARE DEDUCTED FROM FUND ASSETS
................................................................................
Management Fees 0.20%
................................................................................
Distribution (12b-1) Fees 0.10%
................................................................................
Other Expenses (administrative, shareholder
servicing and other expenses) 0.58%
................................................................................
Total Annual Fund Operating Expenses 0.88%
................................................................................
Less Amount of Contractual Fee Waiver* 0.45%
................................................................................
Net Annual Fund Operating Expenses* 0.43%
- --------------------------------------------------------------------------------

These voluntary fee waivers and reimbursements may be reduced or terminated
at any time. The Fund's service providers will consider renewal of the
contractual arrangements each year.

(1) The Fund invests in securities through an underlying mutual fund, Tax
Free Reserves Portfolio. This table reflects the expenses of both the
Fund and Tax Free Reserves Portfolio.
- --------------------------------------------------------------------------------
<PAGE>

EXAMPLE

This example is intended to help you compare the cost of
investing in the Fund to the cost of investing in other mutual
funds. The example assumes that:

o you invest $10,000 in the Fund for the time periods indicated;

o you reinvest all dividends;

o you sell all of your shares at the end of those periods;

o your investment has a 5% return each year -- the assumption of a 5%
return is required by the SEC for the purpose of this example and
is not a prediction of the Fund's future performance; and

Although your actual costs may be higher or lower, based on
these assumptions your costs would be:

- --------------------------------------------------------------------------------
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
..............................................................................
1 Year 3 Years 5 Years 10 Years
..............................................................................
$44 $281 $488 $1,084
- --------------------------------------------------------------------------------
<PAGE>

----------------------
YOUR CITIFUNDS ACCOUNT
----------------------

Your CitiFunds Account

HOW TO BUY SHARES

Shares of the Funds are offered continuously and purchases may
be made Monday through Friday, except on certain holidays.
Shares may be purchased from the Funds' distributor or a
broker-dealer or financial institution that has an agreement
with the distributor. You must be a customer of a Shareholder
Servicing Agent to purchase shares. Shareholder Servicing
Agents are financial institutions that have entered into
shareholder servicing agreements concerning the Funds. You pay
no sales charge (load) to invest in the Funds. Each Fund and
its distributor have the right to reject any purchase order or
cease offering Fund shares at any time.

Shares are purchased at net asset value (normally $1.00 per
share) the next time it is calculated after your order is
received and accepted by the distributor.

Your Shareholder Servicing Agent will not transmit your
purchase order for Fund shares until it receives the purchase
price in federal or other immediately available funds. If you
pay by check, the Shareholder Servicing Agent transmits the
order when the check clears, usually within two business days.

If you hold your shares through a Shareholder Servicing Agent,
your Shareholder Servicing Agent will establish and maintain
your account and be the shareholder of record. If you wish to
transfer your account, you may only transfer it to another
financial institution that acts as a Shareholder Servicing
Agent, or you may set up an account directly with the Fund's
transfer agent.

HOW THE PRICE OF YOUR SHARES IS CALCULATED

Each Fund calculates its net asset value (NAV) every day the
New York Stock Exchange is open for trading. Institutional
Liquid Reserves calculates its NAV at 3:00 p.m. Eastern time,
and the other Funds calculate their NAVs at 12:00 noon Eastern
time. On days when the financial markets in which the Funds
invest close early, NAV may be calculated as of the earlier
close of those markets. The Funds' securities are valued at
amortized cost, which is approximately equal to market value.

HOW TO SELL SHARES

You may sell your shares on any business day. The price will
be the NAV (normally $1.00 per share) the next time it is
calculated after your redemption request has been received by
your Shareholder Servicing Agent. You may contact your
Shareholder Servicing Agent in writing or, if your Shareholder
Servicing Agent permits, by telephone. All redemption requests
must be in proper form, as determined by your Shareholder
Servicing Agent.

You will receive your redemption proceeds in federal funds
normally on the business day on which you sell your shares but
in any event within seven days. Your redemption proceeds may
be delayed for up to ten days if your purchase was made by
check. Your redemption proceeds may also be delayed, or your
right to receive redemption proceeds suspended, if the New
York Stock Exchange is closed (other than on weekends or
holidays) or trading is restricted, or if an emergency exists.
The Funds have the right to pay your redemption proceeds by
giving you securities instead of cash. In that case, you may
incur costs (such as brokerage commissions) converting the
securities into cash. You should be aware that you may have to
pay taxes on your redemption proceeds.

Your Shareholder Servicing Agent may impose a minimum account
balance requirement. If so, your Shareholder Servicing Agent
reserves the right to close your account if it falls below the
required minimum balance. You will have 60 days to make an
additional investment. If you do not increase your balance,
your Shareholder Servicing Agent may close your account and
send the proceeds to you. Your shares will be sold at net
asset value (normally $1.00 per share) on the day your account
was closed. Please consult your Shareholder Servicing Agent
for more information.

EXCHANGES

You may exchange your shares of the Funds for shares of
certain CitiFunds or other funds managed by Citibank. Your
Shareholder Servicing Agent can provide you with more
information, including a prospectus for any fund to be
acquired through an exchange. If your account application
allows, you may arrange the exchange by telephone.

Generally, there is no sales charge on shares you get through
an exchange. However, if you are exchanging shares of a Fund
for shares of another fund that are subject to an initial
sales charge, and if the initial sales charge for the shares
being exchanged into is greater than the sales charge, if any,
you paid to acquire the Fund shares being exchanged, you will
have to pay an initial sales charge at a rate equal to the
difference.

If you exchange your shares of a Fund for shares subject to an
initial sales charge, you may qualify for reduction or
elimination of the sales charge if you meet any of the
following conditions:

o You held the Fund shares being exchanged as of January 4, 1999.

o The Fund shares being exchanged were purchased with a sales charge
or acquired through a previous exchange from shares purchased with
a sales charge.

o The Fund shares being exchanged represent capital appreciation or
the reinvestment of dividends or capital gains distributions.

To qualify for this reduction or elimination of the sales
charge, you must notify your Shareholder Servicing Agent at
the time of exchange. You may need to provide documentation to
confirm your entitlement to the sales charge reduction or
elimination.

The exchange privilege may be changed or terminated at any
time. You should be aware that you may have to pay taxes on
your exchange.

DIVIDENDS

Each Fund calculates its net income each business day when it
calculates its NAV, and declares dividends for all of its
shareholders of record. Shares begin to accrue dividends on
the day they are purchased. You will not receive dividends for
the day on which you redeem your shares. Dividends are
distributed once a month, on or before the last business day
of the month. Unless you choose to receive your dividends in
cash, you will receive them as full and fractional additional
Fund shares.

TAX MATTERS

This discussion of taxes is for general information only. You
should consult your own tax adviser about your particular
situation.

TAXATION OF DISTRIBUTIONS: For Institutional Liquid Reserves
and Institutional U.S. Treasury Reserves, you normally will
have to pay federal income tax on any distributions you
receive from a Fund, whether you take distributions in cash or
reinvest them in shares. Distributions designated as capital
gain dividends are taxable as long-term capital gains. Other
distributions are generally taxable as ordinary income. Some
dividends paid in January may be taxable as if they had been
paid the previous December.

For Institutional Tax Free Reserves, the Fund expects that
most of its net income will be attributable to interest on
municipal obligations. As a result most of the Fund's
dividends to you will not be subject to federal income tax.
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 the Fund may realize short-term or long-term
capital gains or losses. As a result, the Fund may designate
some distributions as income or short-term capital gain
dividends, generally taxable to you as ordinary income, or
capital gains dividends, taxable to you as long-term capital
gains, whether you take distributions in cash or reinvest them
in additional shares.

Fund dividends which Institutional Tax Free Reserves
designates as not taxable are taken into account in
determining the amount of your social security and railroad
retirement benefits, if any, that may be subject to federal
income tax. In addition, you may not claim a deduction for
interest on indebtedness you incurred or continued for the
purpose of owning Fund shares. Shareholders who are, or who
are related to, "substantial users" of facilities financed by
private activity bonds should consult their tax advisers
before buying Fund shares.

STATE AND LOCAL TAXES: Generally, you will have to pay state
or local taxes on Fund dividends and other distributions,
although distributions derived from interest on U.S.
government obligations may be exempt from certain state and
local taxes. Fund dividends that are not taxable to you for
federal income tax purposes may still be taxable to you under
the income or other tax laws of any state or local taxing
authority.

TAXATION OF TRANSACTIONS: If you sell your shares of a Fund,
or exchange them for shares of another fund, it is considered
a taxable event. Depending on your purchase price and the
sales price of the shares you sell or exchange, you may have a
gain or loss on the transaction. You are responsible for any
tax liabilities generated by your transaction.

BACKUP WITHHOLDING: The account application asks each new
investor to certify that the investor'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 your credit) 31% of
certain distributions it pays you if you fail to provide this
information or otherwise violate IRS regulations.

FOREIGN SHAREHOLDERS: Each Fund will withhold U.S. federal
income tax payments at the rate of 30% (or any lower
applicable treaty rate) on taxable dividends and other
payments subject to withholding taxes that are made to persons
who are not citizens or residents of the United States.
Distributions received from a Fund by non-U.S. persons also
may be subject to tax under the laws of their own
jurisdictions.
<PAGE>

-----------------------
MANAGEMENT OF THE FUNDS
-----------------------

Management of the Funds

INVESTMENT ADVISER

Each Fund draws on the strength and experience of Citibank.
Citibank is the investment adviser of each Fund, and subject
to policies set by the Funds' Trustees, Citibank makes
investment decisions. Citibank has been managing money since
1822. With its affiliates, it currently manages more than $351
billion in assets worldwide.

Citibank, with its headquarters at 153 East 53rd Street, New
York, New York, is a wholly-owned subsidiary of Citigroup Inc.
"CitiFunds" is a service mark of Citicorp.

Citibank and its affiliates may have banking and investment
banking relationships with the issuers of securities that are
held in the Funds. However, in making investment decisions for
the Funds, Citibank does not obtain or use material inside
information acquired by any division, department or affiliate
of Citibank in the course of those relationships. Citibank and
its affiliates may have loans outstanding that are repaid with
proceeds of securities purchased by the Funds.

ADVISORY FEES

For the Funds' fiscal year ended August 31, 1999 Citibank
received the following fees:

- --------------------------------------------------------------------------------
Fee, as percentage of
average
daily net assets,
Fund after waivers
..............................................................................
INSTITUTIONAL LIQUID RESERVES 0.08%
..............................................................................
INSTITUTIONAL U.S. TREASURY RESERVES 0.07%
..............................................................................
INSTITUTIONAL TAX FREE RESERVES 0.11%
- --------------------------------------------------------------------------------

DISTRIBUTION ARRANGEMENTS

The Funds do not charge any sales loads, deferred sales loads
or other fees in connection with the purchase of shares.

The Funds have adopted distribution plans under rule 12b-1
under the Investment Company Act of 1940. The plans allow each
Fund to use up to 0.10% per year of its average daily net
assets to compensate the Funds' distributor for its
distribution activities. Because fees under the plans are paid
out of Fund assets, over time these fees will increase the
cost of your investment and may cost you more than paying
other types of sales charges. The distributor currently waives
a portion of these fees on a voluntary basis. This fee waiver
may be terminated or reduced at any time.

The distributor may make payments for distribution and/or
shareholder servicing activities out of its past profits and
other available sources. The distributor may also make
payments for marketing, promotional or related expenses to
dealers. The amount of these payments is determined by the
distributor and may vary. Citibank may make similar payments
under similar arrangements.

--------------------
More About the Funds
--------------------

More About the Funds

The Funds' goals, principal investments and risks are
summarized in FUNDS AT A GLANCE. More information on
investments and investment strategies appears below.

PRINCIPAL INVESTMENT STRATEGIES

The Funds' principal investment strategies are the strategies
that, in the opinion of Citibank, are most likely to be
important in trying to achieve each Fund's investment goals.
Of course, there can be no assurance that any Fund will
achieve its goals. Please note that each Fund may also use
strategies and invest in securities that are not described
below but that are described in the Statement of Additional
Information. A Fund may not use all of the strategies and
techniques or invest in all of the types of securities
described in the Prospectus or in the Statement of Additional
Information.

Each Fund has specific investment policies and procedures
designed to maintain a constant net asset value of $1.00 per
share. Each Fund also complies with industry regulations that
apply to money market funds. These regulations require that
each Fund's investments mature or be deemed to mature within
397 days from the date purchased and that the average maturity
of each Fund's investments (on a dollar-weighted basis) be 90
days or less. In addition, all of the Funds' investments must
be in U.S. dollar-denominated high quality securities which
have been determined by Citibank to present minimal credit
risks. To be high quality, a security (or its issuer) must be
rated in one of the two highest short-term rating categories
by nationally recognized rating agencies, such as Moody's or
Standard & Poor's, or, in Citibank's opinion, be of comparable
quality. Investors should note that within these two rating
categories there may be sub-categories or gradations
indicating relative quality. If the credit quality of a
security deteriorates after a Fund buys it, Citibank will
decide whether the security should be held or sold.

- --------------------------------------------------------------------------------
WHAT ARE MONEY MARKET INSTRUMENTS?
A MONEY MARKET INSTRUMENT is a short-term IOU issued by banks
or other corporations, or the U.S. or a foreign government and
state or local governments. Money market instruments have
maturity dates of 13 months or less. Money market instruments
may include CERTIFICATES OF DEPOSIT, BANKERS' ACCEPTANCES,
VARIABLE RATE DEMAND NOTES (where the interest rate is reset
periodically and the holder may demand payment from the issuer
at any time), FIXED-TERM OBLIGATIONS, COMMERCIAL PAPER (short
term unsecured debt of corporations), ASSET-BACKED SECURITIES
(which are backed by pools of accounts receivable such as car
installment loans or credit card receivables) and REPURCHASE
AGREEMENTS. In a repurchase agreement, the seller sells a
security and agrees to buy it back at a later date (usually
within seven days) and at a higher price, which reflects an
agreed upon interest rate.
- --------------------------------------------------------------------------------

CitiFunds Institutional Liquid Reserves invests in high
quality U.S. dollar-denominated money market instruments of
U.S. and non-U.S. issuers. These obligations include U.S.
government obligations, obligations of U.S. and non-U.S.
banks, obligations issued or guaranteed by the governments of
Western Europe, Australia, Japan and Canada, commercial paper,
asset backed securities and repurchase agreements. The Fund's
U.S. government obligations may include U.S. Treasury bills,
bonds and notes and obligations of U.S. government agencies
and instrumentalities that may, but need not, be backed by the
full faith and credit of the United States. While the Fund can
invest in all of these types of obligations, the Fund invests
at least 25% of its assets, and may invest all of its assets
in bank obligations, including certificates of deposit, fixed
time deposits and bankers' acceptances. Except for this
concentration policy, the Fund's investment goals and policies
may be changed without a shareholder vote.

CitiFunds Institutional Liquid Reserves invests only in "first
tier" securities. These securities are rated in the highest
short-term rating category by nationally recognized rating
agencies or, in Citibank's opinion, are of comparable quality.

CitiFunds Institutional U.S. Treasury Reserves invests in U.S.
Treasury bills, bonds, notes and receipts. Treasury receipts
are interest coupons on other U.S. Treasury obligations. This
Fund may also invest in short-term obligations of U.S.
government agencies and instrumentalities, but only if the
obligations are backed by the full faith and credit of the
United States. The Fund's investment goals and policies may be
changed without a shareholder vote. ALTHOUGH THE FUND INVESTS
IN U.S. GOVERNMENT OBLIGATIONS, AN INVESTMENT IN THE FUND IS
NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT.

CitiFunds Institutional Tax Free Reserves invests primarily in
high quality municipal obligations, including municipal money
market instruments, and in participation interests in
municipal obligations. Under normal market conditions, the
Fund invests at least 80% of its assets in municipal
obligations and participation interests. This policy cannot be
changed without a shareholder vote.

Municipal obligations bought by the Fund must be rated in the
highest two rating categories of nationally recognized rating
agencies or determined by Citibank to be of comparable
quality.

- --------------------------------------------------------------------------------
WHAT ARE MUNICIPAL OBLIGATIONS?
Municipal obligations are fixed and variable rate obligations
issued by or on behalf of states and municipal governments,
Puerto Rico and other U.S. territories, and their authorities,
agencies, instrumentalities and political subdivisions, and by
other qualifying issuers. The interest on these obligations is
exempt from federal income tax.

Longer term municipal obligations (municipal bonds) generally
are issued to raise funds for construction or to retire
previous debt. Short term obligations (municipal notes or
commercial paper) may be issued to finance short term cash
needs in anticipation of receipt of tax and other revenues.
- --------------------------------------------------------------------------------

CitiFunds Institutional Tax Free Reserves may invest in both
"general obligation" securities, which are backed by the full
faith, credit and taxing power of the issuer, and in "revenue"
securities, which are payable only from revenues from a
specific project or another revenue source. The Fund also may
invest in private activity bonds, which fund privately
operated industrial facilities. Payment on these bonds
generally is made from payments by the operators of the
facilities and is not backed by the taxing authority of the
issuing municipality. The Fund may invest in municipal lease
obligations, which are undivided interests issued by a state
or municipality in a lease or installment purchase which
generally relates to equipment or facilities. In some cases
payments under municipal leases do not have to be made unless
money is specifically approved for that purpose by an
appropriate legislative body.

CitiFunds Institutional Tax Free Reserves may purchase
municipal obligations under arrangements (called stand-by
commitments) where it can sell the securities at an agreed-
upon price and date under certain circumstances. The Fund can
also purchase securities under arrangements (called when-
issued or forward-delivery basis) where the securities will
not be delivered immediately. The Fund will set aside the
assets to pay for these securities at the time of the
agreement.

CitiFunds Institutional Tax Free Reserves concentrates in
participation interests issued by banks and other financial
institutions and secured by bank letters of credit or
guarantees. This means that the Fund will invest more than 25%
of its assets in participation interests backed by banks. In a
participation interest, the bank sells undivided interests in
a municipal obligation it owns. These interests may be
supported by a bank letter of credit or guarantee. The
interest rate generally is adjusted periodically, and the
holder can sell back to the issuer after a specified notice
period. If interest rates rise or fall, the rates on
participation interests and other variable rate instruments
generally will be readjusted.

CitiFunds Institutional Tax Free Reserves may also invest in
taxable money market instruments, particularly if the after-
tax return on those securities is greater than the return on
municipal money market instruments. The Fund's taxable
investments will be comparable in quality to their municipal
investments. Under normal circumstances, not more than 20% of
the Fund's assets are invested in taxable instruments. Except
for its policy to invest in municipal obligations, the Fund's
investment goals and policies may be changed without a
shareholder vote.

CitiFunds Institutional Tax Free Reserves may, from time to
time, take temporary defensive positions that are inconsistent
with the Fund's principal investment strategies in attempting
to respond to adverse market, political or other conditions.
When doing so, the Fund may invest without limit in high
quality taxable money market instruments, and may not be
pursuing its investment objectives.

INVESTMENT STRUCTURE. The Funds do not invest directly in
securities but instead invest through an underlying mutual
fund having the same goals and strategies. Unless otherwise
indicated, references to these Funds in this Prospectus
include the underlying fund. Each Fund may stop investing in
its corresponding underlying fund at any time, and will do so
if the Fund's Trustees believe that to be in the shareholders'
best interests. The Fund could then invest in another mutual
fund or pooled investment vehicle, or could invest directly in
securities.

MANAGEMENT STYLE. Managers of mutual funds use different
styles when selecting securities to purchase. Citibank's
portfolio managers use a "top-down" approach when selecting
securities for the Funds. When using a "top-down" approach,
the portfolio manager looks first at broad economic factors
and market conditions, such as prevailing and anticipated
interest rates. On the basis of those factors and conditions,
the manager selects optimal interest rates and maturities and
chooses certain sectors or industries within the overall
market. The manager then looks at individual companies within
those sectors or industries to select securities for the
investment portfolio.

Since the Funds maintain a weighted average maturity of no
more than 90 days, many of their investments are held until
maturity. The manager may sell a security before maturity when
it is necessary to do so to meet redemption requests. The
manager may also sell a security if the manager believes the
issuer is no longer as creditworthy, or in order to adjust the
average weighted maturity of a Fund's portfolio (for example,
to reflect changes in the manager's expectations concerning
interest rates), or when the manager believes there is
superior value in other market sectors or industries.

<PAGE>

--------------------
FINANCIAL HIGHLIGHTS
--------------------

Financial Highlights

The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned on an investment in the
Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by PricewaterhouseCoopers LLP, whose report,
along with the Fund's financial statements, is included in the annual report
which is available upon request.

<TABLE>
CITIFUNDS INSTITUTIONAL LIQUID RESERVES
<CAPTION>
Year Ended August 31,
-----------------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
..............................................................................................................................
<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 0.05041 0.05548 0.05459 0.05521 0.05698
Less dividends from net
investment income (0.05041) (0.05548) (0.05459) (0.05521) (0.05698)
..............................................................................................................................
Net asset value, end of
period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
..............................................................................
Total return 5.16% 5.69% 5.60% 5.66% 5.85%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(in thousands) $5,794,599 $3,380,501 $1,967,491 $1,257,134 $1,480,097
Ratio of expenses to
average net assets+ 0.19% 0.20% 0.18% 0.20% 0.17%
Ratio of net investment
income to average net
assets+ 5.04% 5.57% 5.52% 5.52% 5.70%

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 $0.04557 $0.04948 $0.04844 $0.04921 $0.05050
RATIOS:
Expenses to average net
assets+ 0.79% 0.79% 0.80% 0.80% 0.84%
Net investment income to
average net assets+ 4.44% 4.98% 4.90% 4.92% 5.03%

+ Includes the Fund's share of the allocated expenses of Cash Reserves Portfolio, the underlying fund in which the Fund invests
its assets.
</TABLE>

<PAGE>

Financial Highlights -- Continued

The financial highlights table is intended to help you understand the Fund's
financial performance for the past 5 years. Certain information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that an investor would have earned on an investment in the
Fund (assuming reinvestment of all dividends and distributions). This
information has been audited by Deloitte & Touche LLP, whose report, along
with the Fund's financial statements, is included in the annual report which
is available upon request.

<TABLE>
CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES
<CAPTION>
Year Ended August 31,
---------------------------------------------------------------------------------------
1999 1998 1997 1996 1995
..............................................................................................................................
<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 0.04395 0.05001 0.04994 0.05051 0.05200
Less dividends from net investment
income (0.04395) (0.05001) (0.04994) (0.05051) (0.05200)
..............................................................................................................................
Net asset value, end of period $1.00000 $1.00000 $1.00000 $1.00000 $1.00000
..............................................................................................................................
Total return 4.48% 5.12% 5.11% 5.17% 5.33%
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in
thousands) $605,364 $264,136 $306,350 $213,395 $120,731
Ratio of expenses to average net
assets+ 0.25% 0.25% 0.25% 0.25% 0.25%
Ratio of net investment income to
average net assets+ 4.40% 5.00% 5.01% 5.03% 5.23%

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 $0.03806 $0.04431 $0.04416 $0.04428 $0.04593
RATIOS:
Expenses to average net assets+ 0.84% 0.82% 0.83% 0.87% 0.85%
Net investment income to average net
assets+ 3.81% 4.43% 4.43% 4.41% 4.62%

+ Includes the Fund's share of the allocated expenses of U.S. Treasury Reserves Portfolio, the underlying fund in which the Fund
invests its assets.
</TABLE>

<PAGE>

Financial Highlights -- Continued

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal years ended August 31, 1999 and 1998 and
for the period May 21, 1997 (commencement of operations) to August 31, 1997.
Certain information reflects financial results for a single Fund share. The
total returns in the table represent the rate that an investor would have
earned on an investment in the Fund (assuming reinvestment of all dividends
and distributions). This information has been audited by Deloitte & Touche
LLP, whose report, along with the Fund's financial statements, is included in
the annual report which is available upon request.

<TABLE>
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES
<CAPTION>
May 21, 1997
Year Ended August 31, (Commencement
--------------------------------------- of Operations) to
1999 1998 August 31, 1997
..........................................................................................................................
<S> <C> <C> <C>
Net asset value, beginning of period $1.00000 $1.00000 $1.00000
Net investment income 0.03026 0.03440 0.00984
Less dividends from net investment income (0.03026) (0.03440) (0.00984)
..........................................................................................................................
Net asset value, end of period $1.00000 $1.00000 $1.00000
..........................................................................................................................
Total return 3.07% 3.49% 0.99%**
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (in thousands) $165,726 $207,311 $ 60,048
Ratio of expenses to average net assets+ 0.25% 0.25% 0.25%*
Ratio of net investment income to average net assets+ 3.02% 3.43% 3.47%*

Note: If agents of the Fund and agents of Tax Free Reserves Portfolio had not waived all or a portion of their fees and
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 $0.02395 $0.02718 $0.00729
RATIOS:
Expenses to average net assets+ 0.88% 0.97% 1.15%*
Net investment income to average net assets+ 2.39% 2.71% 2.57%*

+ Includes the Fund's share of the allocated expenses of Tax Free Reserves Portfolio, the underlying fund in which the
Fund invests its assets.
* Annualized.
** Not annualized.
</TABLE>

<PAGE>

The Statement of Additional Information (SAI) provides more
details about the Funds and their policies. The SAI is
incorporated by reference into this Prospectus and is legally
part of it.

Additional information about each Fund's investments is
available in that Funds' Annual and Semi-Annual Reports to
Shareholders. In each Fund's Annual Report, you will find a
discussion of the market conditions and investment strategies
that significantly affected that Fund's performance.

To obtain free copies of the SAI and the Annual and Semi-
Annual Reports or to make other inquiries, please call
1-800-625-4554 toll-free, or your account representative.

The SAI is also available from the Securities and Exchange
Commission. You can find it on the SEC Internet site at http:/
/www.sec.gov. Information about the Funds (including the SAI)
can also be reviewed and copied at the SEC's Public Reference
Room in Washington, DC. You can get information on the
operation of the Public Reference Room by calling the SEC at:
1-800-SEC-0330. Copies may also be obtained upon payment of a
duplicating fee by electronic request to [email protected],
or by writing to the SEC's Public Reference Section,
Washington, DC 20549-6009.

- ---------------
SEC File Number: 811-6740 INST 1299

<PAGE>
Rule 497(c) File Nos. 33-49554 and 811-6740

Statement of
Additional Information
December 31, 1999

CITIFUNDS(SM) INSTITUTIONAL LIQUID RESERVES
CITIFUNDS(SM) INSTITUTIONAL U.S. TREASURY RESERVES
CITIFUNDS(SM) INSTITUTIONAL TAX FREE RESERVES

This Statement of Additional Information sets forth information which may be
of interest to investors but which is not necessarily included in the
Prospectus, dated December 31, 1999, for CitiFunds(SM) Institutional Liquid
Reserves, CitiFunds (SM) Institutional U.S. Treasury Reserves and CitiFunds(SM)
Institutional Tax Free Reserves (the foregoing, collectively, the "Funds"). This
Statement of Additional Information should be read in conjunction with the
Prospectus. This Statement of Additional Information incorporates by reference
the financial statements described on page 28 hereof. These financial statements
can be found in the Funds' Annual Reports to Shareholders. An investor may
obtain copies of the Funds' Prospectuses and Annual Reports without charge by
contacting the Funds' Distributor (see back cover for address and phone number).

The Funds are each separate series of CitiFunds(SM) Institutional Trust
(the "Trust"). The address and telephone number of the Trust are 21 Milk
Street, Boston, Massachusetts 02109, (617) 423-1679. The Trust invests all of
the investable assets of Liquid Reserves, U.S. Treasury Reserves and Tax Free
Reserves in Cash Reserves Portfolio, U.S. Treasury Reserves Portfolio and Tax
Free Reserves Portfolio (collectively, the "Portfolios"), respectively. The
address and telephone number of Cash Reserves Portfolio are Elizabethan
Square, George Town, Grand Cayman, British West Indies, (345) 945-1824. The
address and telephone number of U.S. Treasury Reserves Portfolio and Tax Free
Reserves Portfolio are 21 Milk Street, Boston, Massachusetts 02109, (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 ..................... 3
3. Performance Information .............................................. 15
4. Determination of Net Asset Value ..................................... 17
5. Management ........................................................... 19
6. Dealer Commissions and Concessions ................................... 25
7. Portfolio Transactions ............................................... 25
8. Description of Shares, Voting Rights and Liabilities ................. 26
9. Certain Additional Tax Matters ....................................... 27
10. Independent Accountants and Financial Statements ..................... 28
Appendix -- Ratings of Municipal Obligations ............................. 30

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 Institutional 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 December 31, 1999, 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 Cash Reserves Portfolio, U.S. Treasury Reserves Portfolio and Tax
Free Reserves Portfolio, respectively. 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.

The Trustees of the Trust believe that the aggregate per share expenses of
Liquid Reserves, U.S. Treasury Reserves and Tax Free Reserves and their
corresponding Portfolios will be less than or approximately equal to the
expenses that each 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 below 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 a
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.

The Portfolios, as New York trusts, are not required to hold and have no
intention of holding annual meetings of investors. However, when a Portfolio
is required to do so by law, or in the judgment of Trustees it is necessary or
desirable to do so, the Portfolio will submit matters to its investors for a
vote. When a Fund is asked to vote on matters concerning its corresponding
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, or otherwise act in accordance
with applicable law. Of course, the Fund could be outvoted, or otherwise
adversely affected, by other investors in the 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, Inc. ("CFBDS"), 21 Milk Street,
Boston, Massachusetts 02109, (617) 423-1679.

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, the Funds' administrator (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, each Fund's
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 objective of INSTITUTIONAL LIQUID RESERVES is to provide
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 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 Cash Reserves Portfolio, U.S. Treasury Reserves Portfolio and Tax
Free Reserves Portfolio, respectively, each of which has the same investment
objectives and policies as its corresponding Fund. The Prospectus contains a
discussion of the principal investment strategies of each Fund and certain
risks of investing in each Fund. The following supplements the information
contained in the Prospectus concerning the investment objectives, policies and
techniques of each Fund and Portfolio, and contains more information about the
various types of securities in which each Fund and each Portfolio may invest
and the risks involved in such investments. Since the investment
characteristics of Liquid Reserves, U.S. Treasury Reserves and Tax Free
Reserves 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 and for the policy of Tax Free Reserves with
respect to investing in municipal obligations described below, which may not
be changed without the approval of Liquid Reserves' or Tax Free Reserves'
shareholders, as applicable, the approval of a Fund's shareholders would not
be required to change that Fund's investment objectives or any of its
investment policies. Likewise, except for the concentration policy of Cash
Reserves Portfolio with respect to bank obligations described in paragraph (1)
below and for the policy of Tax Free Reserves Portfolio with respect to
investing in municipal obligations described below, which may not be changed
without the approval of Cash Reserves Portfolio's or Tax Free Reserves
Portfolio's investors, as applicable, the approval of the investors in a
Portfolio would not be required to change that Portfolio's investment
objectives or any of its investment policies discussed below, including those
concerning securities transactions. Each Portfolio would, however, give
written notice to its investors at least 30 days prior to implementing any
change in its investment objectives.

CASH RESERVES PORTFOLIO

Cash Reserves Portfolio seeks its investment objective through investments
limited to the following types of high quality U.S. dollar-denominated money
market instruments. All investments by Cash Reserves Portfolio mature or are
deemed to mature within 397 days from the date of acquisition, and the average
maturity of the investments held by the Portfolio (on a dollar-weighted basis)
is 90 days or less. All investments by the Portfolio are in "first tier"
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. Cash
Reserves Portfolio may hold uninvested cash reserves pending investment. Under
the 1940 Act, Cash Reserves and Cash Reserves Portfolio are each classified as
"diversified," although in the case of Cash Reserves, all of its investable
assets are invested in the Portfolio. A "diversified investment company" must
invest at least 75% of its assets in cash and cash items, U.S. government
securities, investment company securities (e.g., interests in the Portfolio)
and other securities limited as to any one issuer to not more than 5% of the
total assets of the investment company and not more than 10% of the voting
securities of the issuer.

(1) Bank obligations -- Cash Reserves Portfolio invests at least 25%
of its investable assets, and may invest up to 100% of its assets, in bank
obligations. This concentration policy is fundamental and may not be
changed without the approval of the investors in Cash Reserves Portfolio.
Bank 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"), 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.

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, Denmark, Norway, Sweden), Australia, Japan, the Cayman
Islands, the Bahamas and Canada. Cash Reserves Portfolio does not purchase
any bank obligation of the Adviser or an affiliate of the Adviser.

Since Cash Reserves Portfolio may hold obligations of non-U.S.
branches and subsidiaries of U.S. banks, and U.S. and non-U.S. branches of
non-U.S. banks, an investment in Cash Reserves involves certain additional
risks. Such investment risks include future political and economic
developments, the possible imposition of non-U.S. withholding taxes on
interest income payable on such obligations held by the Portfolio, the
possible seizure or nationalization of non-U.S. deposits and the possible
establishment of exchange controls or other non-U.S. governmental laws or
restrictions applicable to the payment of the principal of and interest on
certificates of deposit or time deposits that might affect adversely such
payment on such obligations held by the Portfolio. In addition, there may
be less publicly-available information about a non-U.S. branch or
subsidiary of a U.S. bank or a U.S. or non-U.S. branch of a non-U.S. bank
than about a U.S. bank and such branches and subsidiaries may not be
subject to the same or similar regulatory requirements that apply to U.S.
banks, such as mandatory reserve requirements, loan limitations and
accounting, auditing and financial record-keeping standards and
requirements.

The provisions of federal law governing the establishment and
operation of U.S. branches do not apply to non-U.S. branches of U.S.
banks. However, Cash Reserves Portfolio may purchase obligations only of
those non-U.S. branches of U.S. banks which were established with the
approval of the Board of Governors of the Federal Reserve System (the
"Board of Governors"). As a result of such approval, these branches are
subject to examination by the Board of Governors and the Comptroller of
the Currency. In addition, such non-U.S. branches of U.S. banks are
subject to the supervision of the U.S. bank and creditors of the non-U.S.
branch are considered general creditors of the U.S. bank subject to
whatever defenses may be available under the governing non-U.S. law and to
the terms of the specific obligation. Nonetheless, Cash Reserves Portfolio
generally will be subject to whatever risk may exist that the non-U.S.
country may impose restrictions on payment of certificates of deposit or
time deposits.

U.S. branches of non-U.S. banks are subject to the laws of the state
in which the branch is located or to the laws of the United States. Such
branches are therefore subject to many of the regulations, including
reserve requirements, to which U.S. banks are subject. In addition, Cash
Reserves Portfolio may purchase obligations only of those U.S. branches of
non-U.S. banks which are located in states which impose the additional
requirement that the branch pledge to a designated bank within the state
an amount of its assets equal to 5% of its total liabilities.

Non-U.S. banks in whose obligations Cash Reserves Portfolio may invest
may not be subject to the laws and regulations referred to in the
preceding two paragraphs.

(2) Obligations of, or guaranteed by, non-U.S. governments. Cash
Reserves Portfolio limits its investments in non-U.S. government
obligations to obligations issued or guaranteed by the governments of
Western Europe (United Kingdom, France, Germany, Belgium, the Netherlands,
Italy, Switzerland, 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. Commercial paper is unsecured debt of corporations
usually maturing in 270 days or less from its date of issuance.

(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, bonds and 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, 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 or a
subcustodian 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. (See "Repurchase Agreements.")

(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.
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 or to prevent the Portfolio from
receiving any value in U.S. dollars from its investment in non-U.S.
securities.

ASSET-BACKED SECURITIES

As set forth above, Cash Reserves Portfolio may purchase asset-backed
securities that represent fractional interests in pools of retail installment
loans, both secured (such as CARS) and unsecured, or leases or revolving
credit receivables, both secured and unsecured (such as CARDS). These assets
are generally held by a trust and payments of principal and interest or
interest only are passed through monthly or quarterly to certificate holders
and may be guaranteed up to certain amounts by letters of credit issued by a
financial institution affiliated or unaffiliated with the trustee or
originator of the trust.

Underlying automobile sales contracts, leases or credit card receivables
are subject to prepayment, which may reduce the overall return to certificate
holders. Reinvestment of principal may occur at higher or lower rates than the
original yield. 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.

U.S. TREASURY RESERVES PORTFOLIO

U.S. Treasury Reserves Portfolio seeks its investment objective 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, bonds and 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, and in 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. All investments by the Portfolio are in
"first tier" securities (i.e., securities rated in the highest rating category
for short-term obligations by at least two NRSRO's 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. U.S.
Treasury Reserves Portfolio may hold uninvested cash reserves pending
investment.

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 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 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 bank participation certificates, an investment in
Tax Free Reserves 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.) Tax Free Reserves Portfolio may hold uninvested cash reserves pending
investment. Tax Free Reserves Portfolio's investments may include "when-
issued" or "forward delivery" Municipal Obligations, stand-by commitments and
taxable repurchase agreements.

As a non-diversified investment company, Tax Free Reserves Portfolio is
not subject to any statutory restrictions under the 1940 Act with respect to
limiting the investment of its assets in one or relatively few issuers. This
concentration may present greater risks than in the case of a diversified
company. However, the Fund intends to qualify as a "regulated investment
company" under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"). In order so to qualify under current law, at the close of each
quarter of the Fund's taxable year, at least 50% of the value of the Fund's
total assets must be represented by cash, U.S. goverment securities,
investment company securities and other securities limited in respect of any
one issuer (or related issuers) to not more than 5% in value of the total
assets of the Fund and not more than 10% of the outstanding voting securities
of such issuer. In addition, and again under current law, at the close of each
quarter of its taxable year, not more than 25% in value of the Fund's total
assets may be invested in securities, other than U.S. government securities,
of one issuer (or related issuers).

Tax Free Reserves 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.

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 Tax Free Reserves
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 Tax Free Reserves
Portfolio are "eligible securities," that is, rated in one of the two highest
rating categories for short-term obligations by at least two NRSROs 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 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. (See "Ratings of Municipal
Obligations" in the Appendix to this Statement of Additional Information.)

The Portfolio's fundamental policy to invest at least 80% of its assets,
under normal circumstances, in certain Municipal Obligations is described
below in "Municipal Obligations."

MUNICIPAL OBLIGATIONS

As a fundamental policy, Tax Free Reserves Portfolio invests 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
IBCA, Inc. ("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 Tax Free
Reserves Portfolio are altered due to changes in any of the Moody's, Standard
& Poor's or Fitch ratings systems (see the Appendix to this Statement of
Additional Information for an explanation of these rating systems), the
Adviser adopts such changed ratings as standards for its future investments in
accordance with the investment policies contained above and in the Prospectus.
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. Tax Free Reserves
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" (e.g., within the two
highest ratings assigned by Moody's, Standard & Poor's or Fitch or, if not
rated, are of comparable quality as determined by the Adviser), or where the
obligations are not freely transferable, Tax Free Reserves 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.

MUNICIPAL BONDS. Municipal bonds are debt obligations of states, cities,
municipalities and municipal agencies and authorities which generally have a
maturity at the time of issuance of one year or more and which are issued to
raise funds for various public purposes, such as construction of a wide range
of public facilities, refunding outstanding obligations or obtaining funds for
institutions and facilities. The two principal classifications of municipal
bonds are "general obligation" and "revenue" bonds. General obligation bonds
are secured by the issuer's pledge of its full faith, credit and taxing power
for the payment of principal and interest. The principal of and interest on
revenue bonds are payable from the income of specific projects or authorities
and generally are not supported by the issuer's general power to levy taxes.
In some cases, revenues derived from specific taxes are pledged to support
payments on a revenue bond.

In addition, certain kinds of private activity bonds ("IDBs") are issued
by or on behalf of public authorities to provide funding for various privately
operated industrial facilities, such as warehouse, office, plant and store
facilities and environmental and pollution control facilities. IDBs are, in
most cases, revenue bonds. The payment of the principal and interest on IDBs
usually depends solely on the ability of the user of the facilities financed
by the bonds or other guarantor to meet its financial obligations and, in
certain instances, the pledge of real and personal property as security for
payment. Many IDBs may not be readily marketable; however, it is expected that
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 bonds may be issued as "zero coupon" obligations. Zero-coupon
bonds are issued at a significant discount from their principal amount in lieu
of paying interest periodically. Because zero-coupon bonds do not pay current
interest in cash, their value is subject to greater fluctuation in response to
changes in market interest rates than bonds that pay interest currently. Zero-
coupon bonds allow an issuer to avoid the need to generate cash to meet
current interest payments. Accordingly, such bonds may involve greater credit
risks than bonds paying interest currently in cash. Tax Free Reserves
Portfolio is required to accrue interest income on such investments and to
distribute such amounts at least annually to shareholders even though zero-
coupon bonds do not pay current interest in cash. Thus, it may be necessary at
times for the Portfolio to liquidate investments in order to satisfy its
dividend requirements.

MUNICIPAL NOTES. There are four major varieties of state and municipal
notes: Tax and Revenue Anticipation Notes ("TRANs"); Tax Anticipation Notes
("TANs"); Revenue Anticipation Notes ("RANs"); and Bond Anticipation Notes
("BANs"). TRANs, TANs and RANs are issued by states, municipalities and other
tax-exempt issuers to finance short-term cash needs or, occasionally, to
finance construction. Many TRANs, TANs and RANs are general obligations of the
issuing entity payable from taxes or designated revenues, respectively,
expected to be received within the related fiscal period. BANs are issued with
the expectation that their principal and interest will be paid out of proceeds
from renewal notes or bonds to be issued prior to the maturity of the BANs.
BANs are issued most frequently by both general obligation and revenue bond
issuers usually to finance such items as land acquisition, facility
acquisition and/or construction and capital improvement projects.

For an explanation of the ratings of Municipal Obligations by Moody's,
Standard & Poor's and Fitch, see the Appendix to this Statement of Additional
Information.

MUNICIPAL LEASE OBLIGATIONS. Participations in municipal leases are
undivided interests in a portion of a lease or installment purchase issued by
a state or local government to acquire equipment or facilities. Municipal
leases frequently have special risks not normally associated with general
obligation bonds or revenue bonds. Many leases include "non-appropriation"
clauses that provide that the governmental issuer has no obligation to make
future payments under the lease or contract unless money is appropriated for
such purpose by the appropriate legislative body on a yearly or other periodic
basis. Although the obligations will be secured by the leased equipment or
facilities, the disposition of the property in the event of non-appropriation
or foreclosure might, in some cases, prove difficult. Municipal lease
obligations are deemed to be illiquid unless otherwise determined by the Board
of Trustees.

VARIABLE RATE INSTRUMENTS AND PARTICIPATION INTERESTS

Tax Free Reserves Portfolio may purchase variable rate instruments and
participation interests. Variable rate instruments that the 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. 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 Tax Free Reserves Portfolio's high quality criteria.

Variable rate instruments in which Tax Free Reserves Portfolio may invest
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 Tax Free Reserves 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 the Adviser to meet the prescribed quality standards of Tax Free Reserves
Portfolio. Tax Free Reserves 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. Tax Free Reserves 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 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 Tax Free Reserves Portfolio. With
respect to insurance, Tax Free Reserves Portfolio will attempt to have the
issuer of the participation interest bear the cost of the insurance, although
the Portfolio may also purchase insurance, in which case the cost of insurance
will be an expense of the Portfolio. The Adviser has been instructed by the
Trust's Board of Trustees to monitor continually the pricing, quality and
liquidity of the variable rate instruments held by Tax Free Reserves
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, Tax Free Reserves Portfolio intends to
hold them until maturity, except under the circumstances stated above.
Participation interests may include municipal lease obligations. 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.

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 interest rate 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 Tax Free Reserves 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, Tax Free
Reserves 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 Tax
Free Reserves 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, except that an
instrument issued or guaranteed by the U.S. government or any agency thereof
shall be deemed to have a maturity equal to the period remaining until the
next adjustment of the interest rate. 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.

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 Tax Free Reserves 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 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.

"WHEN-ISSUED" SECURITIES

Tax Free Reserves Portfolio may purchase securities on a "when-issued" or
"forward delivery" basis. 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 the Portfolio's commitment to
purchase). Although Tax Free Reserves 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 in Tax Free Reserves Portfolio's portfolio are
subject to changes in value based upon the market's perception of the credit-
worthiness of the issuer and changes, real or anticipated, in the level of
interest rates. The value of these Municipal Obligations and securities
generally change in the same way, that is, both experience appreciation when
interest rates decline and depreciation when interest rates rise. 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 segregated account of Tax Free Reserves 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, Tax Free Reserves 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. 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.

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. Tax Free Reserves 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 Tax Free Reserves 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. Tax Free Reserves 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.

REPURCHASE AGREEMENTS

Tax Free Reserves Portfolio may invest its assets in instruments subject
to repurchase agreements. Repurchase agreements are described in more detail
below. (See "Repurchase Agreements.")

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 its net assets in securities of the kind described below, the
interest income on which is subject to federal income tax. Circumstances in
which Tax Free Reserves 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 Portfolio's investment 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 Tax Free
Reserves Portfolios' 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+, 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 obligations of the U.S. governmentt or its agencies,
instrumentalities, or authorities. Tax Free Reserves Portfolio's assets may
also be invested in Municipal Obligations which are subject to an alternative
minimum tax.

REPURCHASE AGREEMENTS

Each of the Funds and Portfolios (other than U.S. Treasury Reserves and
U.S. Treasury Reserves Portfolio, which may not invest in repurchase
agreements) may invest its assets in 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 Fund 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 Fund to resell
the instrument at a fixed price and time, thereby determining the yield during
the Fund'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 Funds 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 Fund or its custodian or subcustodian shall
have control of the collateral, which the Adviser 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 Fund but only constitute
collateral for the seller's obligation to pay the repurchase price. Therefore,
a Fund may suffer time delays and incur costs in connection with the
disposition of the collateral. The Adviser 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 Funds.
Repurchase agreements will give rise to income which will not qualify as tax-
exempt income when distributed by the Funds. A Fund will not invest in a
repurchase agreement maturing in more than seven days if any such investment
together with illiquid securities held by the Fund exceed 10% of the Fund'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 Funds and 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 Fund or 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 Fund or Portfolio with collateral
consisting of U.S. Treasury obligations, the borrower is also obligated to pay
the Fund or Portfolio a fee for use of the borrowed securities. The Fund or
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 Fund or Portfolio could
suffer loss if the borrower terminates the loan and the Fund or 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 Fund or Portfolio would exceed 33 1/3% of
the value of its net assets.

PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS

Each Fund and 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 a Fund or Portfolio to
sell them promptly at an acceptable price.

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 or fundamental policies of a Portfolio in which a Fund invests,
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

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.

From time to time, in reports or other communications to shareholders or
in advertising or sales materials, performance of Fund shares may be compared
with current or historical performance of other mutual funds or classes of
shares of other mutual funds, as listed in the rankings prepared by Lipper
Analytical Services, Inc. or similar independent services that monitor the
performance of mutual funds, financial indices such as the S&P 500 Index or
other industry or financial publications, including, but not limited to, Bank
Rate Monitor, IBC Donaghue's Money Fund Report, Morningstar, Inc. and Thomson
Financial Bank Watch. A Fund may also present statistics on current and
historical rates of Money Market Deposit Accounts and Statement Savings,
Certificates of Deposit (CDs) and other bank or depository products prepared
by outside services such as Bank Rate Monitor, Inc., and compare this
performance to the current or historical performance of the Fund. Any given
"performance" or performance comparison should not be considered as
representative of any performance in the future. In addition, there may be
differences between a Fund and the various indexes and products which may be
compared to the Fund. In particular, mutual funds differ from bank deposits or
other bank products in several respects. For example, a fund may offer greater
liquidity or higher potential returns than CDs, but a fund does not guarantee
your principal or your returns, and fund shares are not FDIC insured.

Each Fund may provide annualized yield and effective 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. 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 a Fund's investment in a Portfolio or from the sale of securities or
any unrealized appreciation or depreciation on portfolio securities. 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. 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.

U.S. Treasury Reserves and Tax Free Reserves may provide tax equivalent
yield quotations. The tax equivalent yield refers to the yield that a fully
taxable money market fund would have to generate in order to produce an after-
tax yield equivalent to that of a Fund. The use of a tax equivalent yield
allows investors to compare the yield of the Fund, the dividends from which
may be exempt from federal or state personal income tax, with yields of funds
the dividends from which are not tax exempt. 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 Fund also may provide yield,
effective yield and tax equivalent yield quotations for longer periods.

Each Fund may provide its period and average annualized total rates of
return. The total rate of return refers to the change in the value of an
investment in a Fund over a stated period and is compounded to include the
value of any shares purchased with any dividends or capital gains declared
during such period. 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. Period
total rate 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. 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.

U.S. Treasury Reserves and Tax Free Reserves may provide tax equivalent
total rates of return. The tax equivalent total rate of return refers to the
total rate of return that a fully taxable money market fund would have to
generate in order to produce an after-tax total rate of return equivalent to
that of a Fund. The use of a tax equivalent total rate of return allows
investors to compare the total rates of return of a Fund, the dividends from
which may be exempt from federal or state personal income taxes, with the
total rates of return of funds the dividends from which are not tax exempt.
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. Performance results include any applicable fee waivers or
expense subsidies in place during the time period, which may cause the results
to be more favorable than they would otherwise have been.

REDEEMABLE VALUE
OF A HYPOTHETICAL
ANNUALIZED $1,000 INVESTMENT
TOTAL AT THE END OF
PERIOD RATE OF RETURN THE PERIOD
- ------ -------------- ----------
LIQUID RESERVES
October 2, 1992 (commencement of
operations) to August 31, 1999 ...... 4.99% $1,400.27
Five Years ended August 31, 1999 ...... 5.59% $1,312.61
One year ended August 31, 1999 ........ 5.16% $1,051.55

U.S. TREASURY RESERVES
October 2, 1992 (commencement of
operations) to August 31, 1999 ...... 4.53% $1,358.03
Five Years ended August 31, 1999 ...... 5.04% $1,278.78
One year ended August 31, 1999 ........ 4.48% $1,044.84

TAX FREE RESERVES
May 21, 1997 (commencement of
operations) to August 31, 1999 ...... 3.32% $1,077.23
One year ended August 31, 1999 ........ 3.07% $1,030.68

The annualized yield of Liquid Reserves for the seven-day period ended
August 31, 1999 was 5.24%. The effective compound annualized yield of Liquid
Reserves for such period was 5.37%. The annualized yield of U.S. Treasury
Reserves for the seven-day period ended August 31, 1999 was 4.44%. The
effective compound annualized yield of U.S. Treasury Reserves for such period
was 4.54%, and the annualized tax equivalent yield of U.S. Treasury Reserves
for such period was 5.01% (assuming a combined state and local tax rate of
11.307% for New York City residents). The annualized yield of Tax Free
Reserves for the seven-day period ended August 31, 1999 was 3.06%. The
effective compounded annualized yield of Tax Free Reserves for such period was
3.10%, and the annualized tax equivalent yield of U.S. Tax Free Reserves for
such period was 5.07% (assuming a federal tax bracket of 39.60%).

4. DETERMINATION OF NET ASSET VALUE

The net asset value of each share of the Funds 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 the other Funds, by dividing
the value of each Fund's net assets (i.e., the value of its assets, including
its investment in a Portfolio, 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 Trust's or
applicable 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 Portfolio, the Trust's or
applicable Portfolio's Board of Trustees will consider whether any action
should be initiated to eliminate or reduce material dilution or other unfair
results to investors in the Fund or Portfolio. Such action may include
withdrawal in kind, selling securities prior to maturity and utilizing a net
asset value as determined by using available market quotations. The Funds and
Portfolios maintain a dollar-weighted average maturity of 90 days or less, do
not purchase any instrument with a remaining maturity greater than 397 days or
(in the case of all Funds and Portfolios other than U.S. Treasury Reserves and
U.S. Treasury Reserves Portfolio which may not invest in repurchase
agreements) 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.")

Because of the short-term maturities of the portfolio investments of each
Fund, the Funds do not expect to realize any material long-term capital gains
or losses. Any net realized short-term capital gains will be declared and
distributed to the Funds' shareholders annually after the close of each Fund's
fiscal year. Distributions of short-term capital gains are taxable to
shareholders as described in "Certain Additional 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 then annually, reduce
shares to reflect capital losses or make distributions of capital if necessary
in order to maintain the Fund's net asset value of $1.00 per share.

It is expected that each Fund will have a positive net income at the time
of each determination thereof. If for any reason a Fund's net income is a
negative amount, which could occur, for instance, upon default by an issuer of
a portfolio security, the Fund would first offset the negative amount with
respect to each shareholder account from the dividends declared during the
month with respect to those accounts. If and to the extent that negative net
income exceeds declared dividends at the end of the month, the Fund would
reduce the number of outstanding Fund shares by treating each shareholder as
having contributed to the capital of the Fund that number of full and
fractional shares in the shareholder's account which represents the
shareholder's share of the amount of such excess. Each shareholder would be
deemed to have agreed to such contribution in these circumstances by
investment in the Fund.

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 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.

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.

Shareholders may redeem or exchange Fund shares by telephone, if their
account applications so permit, by calling their Shareholder Servicing Agents.
During periods of drastic economic or market changes or severe weather or
other emergencies, shareholders may experience difficulties implementing a
telephone exchange or redemption. In such an event, another method of
instruction, such as a written request sent via an overnight delivery service,
should be considered. The Funds and each Shareholder Servicing Agent will
employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. These procedures may include recording of the telephone
instructions and verification of a caller's identity by asking for the
shareholder's name, address, telephone number, Social Security number, and
account number. If these or other reasonable procedures are not followed, the
Fund or the Shareholder Servicing Agent may be liable for any losses to a
shareholder due to unauthorized or fraudulent instructions. Otherwise, the
shareholders will bear all risk of loss relating to a redemption or exchange
by telephone.

The Trust and 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

Each Fund and Portfolio is supervised by a Board of Trustees. In each
case, a majority of the Trustees are not affiliated with the Adviser. In
addition, a majority of the disinterested Trustees of the Funds are different
from a majority of the disinterested Trustees of their corresponding
Portfolios.

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 21 Milk Street, 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 21 Milk Street, Boston, Massachusetts.

TRUSTEES OF THE TRUST

PHILIP W. COOLIDGE; 48* -- President of the Trust and the Portfolios; Chief
Executive Officer and President, Signature Financial Group, Inc. and CFBDS.

RILEY C. GILLEY; 73 -- 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; 59 -- Professor, Babson College (since 1994); Trustee,
The Highland Family of Funds (March, 1997 to March, 1998). Her address is 120
Goulding Street, Holliston, Massachusetts.

SUSAN B. KERLEY; 48 -- President, Global Research Associates, Inc. (Investment
Research) (since September, 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; 56 -- President and Chief Executive Officer, Catalyst, Inc.
(Management Consultants) (since June, 1992); President and Director, Elliott
J. Berv & Associates (Management Consultants) (since May, 1984). His address
is 24 Atlantic Drive, Scarborough, Maine.

PHILIP W. COOLIDGE; 48* -- President of the Trust and the Portfolios; Chief
Executive Officer and President, Signature Financial Group, Inc. and CFBDS.

WALTER E. ROBB, III; 73-- President, Benchmark Consulting Group, Inc. (since
1991); Principal, Robb Associates (Corporate Financial Advisors) (since 1978);
President and Treasurer, Benchmark Advisors, Inc. (Corporate Financial
Advisors) (since 1989); Trustee of certain registered investment companies in
the MFS Family of Funds (since 1985). His address is 35 Farm Road, Sherborn,
Massachusetts.

OFFICERS OF THE TRUST AND THE PORTFOLIOS

PHILIP W. COOLIDGE; 48* -- President of the Trust and the Portfolios; Chief
Executive Officer and President, Signature Financial Group, Inc. and CFBDS.

CHRISTINE D. DORSEY; 29* -- Assistant Secretary and Assistant Treasurer of the
Trust and the Portfolios; Vice President, Signature Financial Group, Inc.
(since January, 1996); Paralegal and Compliance Officer, various financial
companies (July, 1992 to January, 1996).

LINWOOD C. DOWNS; 38* -- Assistant Treasurer of the Trusts and the Portfolio;
Chief Financial Officer and Senior Vice President of Signature Financial
Group, Inc.; Treasurer CFBDS.

TAMIE EBANKS-CUNNINGHAM; 27* -- Assistant Secretary of the Trust and the
Portfolios; Office Manager, Signature Financial Group (Cayman) Ltd. (Since
April 1995); Administrator, Cayman Islands Primary School (prior to April
1995). Her address is P.O. Box 2494, Elizabethan Square, George Town, Grand
Cayman, Cayman Islands, B.W.I.

LINDA T. GIBSON; 34* -- Secretary of the Trust and the Portfolios; Senior Vice
President, Signature Financial Group, Inc.; Secretary, CFBDS.

SUSAN JAKUBOSKI; 35* -- Vice President, Assistant Treasurer and Assistant
Secretary of the Trust and the Portfolios; Vice President, Signature Financial
Group (Cayman) Ltd. (since July 1994).

MOLLY S. MUGLER; 48* -- Assistant Secretary and Assistant Treasurer of the
Trust and the Portfolios; Vice President, Signature Financial Group, Inc.;
Assistant Secretary, CFBDS.

JULIE J. WYETZNER; 40* -- 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

AGGREGATE AGGREGATE AGGREGATE TOTAL
COMPENSATION COMPENSATION COMPENSATION COMPENSATION
FROM FROM U.S. FROM FROM THE
LIQUID TREASURY TAX FREE TRUST AND
TRUSTEE RESERVES(1) RESERVES(1) RESERVES(1) COMPLEX(1)(2)
- ------- ----------- ----------- ----------- -------------
Philip W. Coolidge . $ 0 $ 0 $ 0 $ 0
Riley C. Gilley .... $ 7,751 $ 1,785 $ 1,654 $62,250
Diana R. Harrington $19,407 $ 2,520 $ 2,206 $71,250
Susan B. Kerley .... $18,739 $ 2,467 $ 2,169 $69,750
- ------------
(1) For the fiscal year ended August 31, 1999.
(2) Messrs. Coolidge and Gilley and Mses. Harrington and Kerley are trustees
of 49, 33, 28 and 28 Funds, respectively, of the family of open-end
registered investment companies advised or managed by Citibank.

As of December 13, 1999, 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, U.S. Treasury Reserves and Tax
Free 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.

As of December 13, 1999, the following shareholders were known by the
Advisor to own 5% or more of the outstanding voting securities of CitiFunds
Institutional Liquid Reserves: Continental Grain Company, 277 Park Avenue, New
York, NY 10172-0003 (6.53%); Sun Micorsystems, Inc., 2550 Garcia Avenue,
Mountain View CA 94043-1100 (5.31%); Hewlett-Packard, 3000 Hanover Street,
Palo Alto CA 94394-1112 (7.29%); Westvaco Corporation, 299 Park Avenue, New
York, NY 10171-0002 (5.81%). Also as of December 13, 1999, the following
shareholders were known by the Advisor to own 5% or more of the outstanding
voting securities of CitiFunds Institutional U.S. Treasury Reserves: Beth
Israel Deaconess Medical Center, 330 Brookline Avenue, Boston, MA 02215-5400
(9.08%); Helmsley Enterprises Inc., 230 Park Avenue, New York, NY 10169-0699
(36.45%). A shareholder who beneficially owns, directly or indirectly, more
than 25% of a Fund's voting securities may be deemed a "control person" (as
defined in the 1940 Act) of the Fund.

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.

For its services under the Advisory Agreements, the Adviser receives
investment advisory fees, which are accrued daily and paid monthly, of 0.15%
of Cash Reserves Portfolio's and U.S. Treasury Reserves Portfolio's average
daily net assets and 0.20% of Tax Free Reserves Portfolio's average daily net
assets, in each case 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.

CASH RESERVES PORTFOLIO: For the fiscal years ended August 31, 1997, 1998
and 1999, the fees paid from Cash Reserves Portfolio to Citibank under the
Advisory Agreement, after waivers, were $4,395,286, $6,739,206 and $9,422,276,
respectively.

U.S. TREASURY RESERVES PORTFOLIO: For the fiscal years ended August 31,
1997, 1998 and 1999, the fees paid from U.S. Treasury Reserves Portfolio to
Citibank under the Advisory Agreement, after waivers, were $494,339, $578,350
and $614,718, respectively.

TAX FREE RESERVES PORTFOLIO: For the fiscal years ended August 31, 1997,
1998 and 1999, the fees paid to Citibank under the Advisory Agreement, after
waivers, were $506,142, $659,288 and $824,462, respectively.

Citibank and its affiliates may have deposit, loan and other relationships
with the issuers of securities purchased on behalf of the Funds, including
outstanding loans to such issuers which may be repaid in whole or in part with
the proceeds of securities so purchased. Citibank has informed the Funds that,
in making its investment decisions, it does not obtain or use material inside
information in the possession of any division or department of Citibank or in
the possession of any affiliate of Citibank.

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.

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. For the period September 1, 1999
through December 31, 2000, CFBDS, each Fund's Administrator, has agreed to
partially waive its fees payable under the Trust's Administrative Services
Agreement with respect to the Funds such that, after such waiver, its fee will
be, on a annualized basis, equal to 0.10% of the average daily assets of each
Fund. In addition, each of the Administrators may voluntarily agree to waive a
portion of the fees payable to it.

LIQUID RESERVES: For the fiscal years ended August 31, 1997, 1998 and
1999, the fees paid to CFBDS from Liquid Reserves under the Administrative
Services Agreement, after waivers, were $1,080,704, $2,731,366 and $3,286,986,
respectively. For the fiscal years ended August 31, 1997, 1998 and 1999, the
fees payable to SFG from Cash Reserves Portfolio under the Administrative
Services Agreement were voluntarily waived.

U.S. TREASURY RESERVES: For the fiscal years ended August 31, 1997, 1998
and 1999, the fees paid from U.S. Treasury Reserves to CFBDS under the
Administrative Services Agreement, after waivers, were $321,940, $299,208 and
$269,434, respectively. For the fiscal years ended August 31, 1997, 1998 and
1999, 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 from Tax Free Reserves to CFBDS under the Administrative Services
Agreement were voluntarily waived. For the fiscal years ended August 31, 1998
and 1999, all fees payable from Tax Free Reserves to CFBDS under the
Administrative Services Agreement were voluntarily waived. For the fiscal
years ended August 31, 1997 and 1999, the fee paid to CFBDS under the
Administrative Services Agreement with Tax Free Reserves Portfolio, after
waivers, were $79,252 and $128,688, respectively. For the fiscal year ended
August 31, 1998, all fees payable to CFBDS under the Administrative Services
Agreement with Tax Free Reserves Portfolio were voluntarily waived.

By Agreement, the Trust acknowledges that the name "CitiFunds" is the
property of Citigroup Inc. 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 Service Agreements with the Trust and the Portfolios
provide that CFBDS or SFG, as the case may be, may render administrative
services to others. The Administrative Services Agreements with the Trust and
the Portfolios continue in effect as to a Fund or Portfolio, as applicable, if
such continuance is specifically approved at least annually by the Trust's or
the applicable Portfolio's Board of Trustees or by a vote of a majority of the
outstanding voting securities of the applicable Fund or Portfolio and, in
either case, by a majority of the Trustees of the Trust or Portfolio who are
not interested parties of the Trust, Portfolio or CFBDS. The Administrative
Services Agreements with the Trust and the Portfolios terminate automatically
if they are assigned and may be terminated as to a Fund or Portfolio by the
Trust or the applicable Portfolio without penalty by vote of a majority of the
outstanding voting securities of the Fund or Portfolio, as applicable, or by
either party thereto on not more than 60 days' nor less than 30 days' written
notice. The Administrative Services Agreements with the Trust and the
Portfolios also provide that neither CFBDS not 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 or the Portfolios, 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 Service Agreements.

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.

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 (as defined in the 1940 Act) 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 Qualified Trustees then in office who are not interested
Trustees of the Trust. 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. During the period they are in effect, the Distribution
Plan and Distribution Agreement obligate the applicable Funds to pay
distribution fees to CFBDS as compensation for its distribution activities,
not as reimbursement for specific expenses incurred. Thus, even if CFBDS's
expenses exceed its distribution fees for any Fund, the Fund will not be
obligated to pay more than those fees and, if CFBDS's expenses are less than
such fees, it will retain its full fees and realize a profit. Each Fund will
pay the distribution fees to CFBDS until either its Distribution Plan or
Distribution Agreement is terminated or not renewed. In that event, CFBDS's
expenses in excess of distribution fees received or accrued through the
termination date will be CFBDS's sole responsibility and not obligations of
the Fund. For the period September 1, 1999 through December 31, 2000, CFBDS
has agreed to waive all fees payable to it under the Distribution Agreement
with respect to the Funds.

LIQUID RESERVES: For the fiscal years ended August 31, 1997, 1998 and
1999, 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, 1997, 1998
and 1999, 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 and the
fiscal years ended August 31, 1998 and 1999, 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 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 services
provided under each Servicing Agreement, each Shareholder Servicing Agent
receives fees 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. For the fiscal
years ended August 31, 1997, 1998 and 1999, 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, 1997, 1998 and
1999, 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 and the fiscal years ended August 31,
1998 and 1999, all aggregate fees payable from Tax Free Reserves to
Shareholder Servicing Agents under the Servicing Agreement were voluntarily
waived. For the period September 1, 1999 through December 31, 2000, each of
the Fund's Shareholder Service Agents have agreed to waive all fees payable
under the Servicing Agreements with respect to the Funds.

The Trust and each Portfolio has entered into 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 and performs
fund accounting services. State Street (or its affiliate State Street Canada,
Inc.) calculates the daily net asset value for the Funds and the Portfolios.
Securities held for a Fund or Portfolio may be held by a sub-custodian bank
approved by the Trust's or Portfolio's Trustees.

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.

6. DEALER COMMISSIONS AND CONCESSIONS

From time to time, the Funds' Distributor or Citibank, at its expense, may
provide additional commissions, compensation or promotional incentives
("concessions") to dealers that sell or arrange for the sale of shares of the
Funds. Such concessions provided by the Funds' Distributor or Citibank may
include financial assistance to dealers in connection with preapproved
conferences or seminars, sales or training programs for invited registered
representatives and other employees, payment for travel expenses, including
lodging, incurred by registered representatives and other employees for such
seminars or training programs, seminars for the public, advertising and sales
campaigns regarding one or more Funds, and/or other dealer-sponsored events.
From time to time, the Funds' Distributor or Citibank may make expense
reimbursements for special training of a dealer's registered representatives
and other employees in group meetings or to help pay the expenses of sales
contests. Other concessions may be offered to the extent not prohibited by
state laws or any self-regulatory agency, such as the NASD.

7. 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, 1999 to the Adviser or any
affiliate of the Adviser.

8. 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. In
addition to the Funds, there is currently one other series of the Trust,
CitiFunds Institutional Cash Reserves. 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 any 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.

9. 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 from 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.

10. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS

PricewaterhouseCoopers LLP 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, 1999, Statement of Operations for the year ended
August 31, 1999, Statement of Changes in Net Assets for the years ended August
31, 1999 and 1998, Financial Highlights each of the years in the five-year
period ended August 31, 1999, Notes to Financial Statements and Independent
Auditors' Report) and of Cash Reserves Portfolio (Portfolio of Investments at
August 31, 1999, Statement of Assets and Liabilities at August 31, 1999,
Statement of Operations for the year ended August 31, 1999, Statement of
Changes in Net Assets for the years ended August 31, 1999 and 1998, Financial
Highlights for each of the years in the five-year period ended August 31,
1999, 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 reports of
PricewaterhouseCoopers LLP as experts in accounting and auditing.

The audited financial statements of U.S. Treasury Reserves (Statement of
Assets and Liabilities at August 31, 1999, Statement of Operations for the
year ended August 31, 1999, Statement of Changes in Net Assets for the years
ended August 31, 1999 and 1998, Financial Highlights for each of the years in
the five-year period ended August 31, 1999, Notes to Financial Statements and
Independent Auditors' Report) and of U.S. Treasury Reserves Portfolio
(Portfolio of Investments at August 31, 1999, Statement of Assets and
Liabilities at August 31, 1999, Statement of Operations for the year ended
August 31, 1999, Statement of Changes in Net Assets for the years ended August
31, 1999 and 1998, Financial Highlights for each of the years in the five-year
period ended August 31, 1999, Notes to Financial Statements and Independent
Auditors' Report), each of which is included in the Annual Report to
Shareholders of U.S. Treasury Reserves, are incorporated by reference into
this Statement of Additional Information and have been so incorporated in
reliance upon the report of Deloitte & Touche LLP, independent accountants, as
experts in accounting and auditing.

The audited financial statements of Tax Free Reserves (Statement of Assets
and Liabilities at August 31, 1999, Statement of Operations for the year ended
August 31, 1999, Statement of Changes in Net Assets for the years ended August
31, 1999 and 1998, Financial Highlights for the years ended August 31, 1999
and 1998 and the period from May 21, 1997 (commencement of operations) to
August 31, 1997, Notes to Financial Statements and Independent Auditors'
Report) and of Tax Free Reserves Portfolio (Portfolio of Investments at August
31, 1999, Statement of Assets and Liabilities at August 31, 1999, Statement of
Operations for the year ended August 31, 1999, Statement of Changes in Net
Assets for the years ended August 31, 1999 and 1998, Financial Highlights for
each of the years in the five-year period ended August 31, 1999, Notes to
Financial Statements and Independent Auditors' Report), each of which is
included in the Annual Report to Shareholders of Tax Free Reserves, are
incorporated by reference into this Statement of Additional Information and
have been so incorporated in reliance upon the report of Deloitte & Touche
LLP, independent accountants, as experts in accounting and auditing.

A copy of each of the Annual Reports accompanies this Statement of
Additional Information.
<PAGE>

APPENDIX

RATINGS OF MUNICIPAL OBLIGATIONS*

The ratings of Moody's Investors Service, Inc., Standard & Poor's Ratings
Group and Fitch IBCA, Inc. represent their opinions as to the quality of
various debt obligations. It should be emphasized, however, that ratings are
not absolute standards of quality. Consequently, Municipal Obligations with
the same maturity, coupon and rating may have different yields while Municipal
Obligations of the same maturity and coupon with different ratings may have
the same yield.

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC'S TWO HIGHEST LONG-TERM DEBT
RATINGS:

Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and generally are referred
to as "gilt edged". Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized
are most unlikely to impair the fundamentally strong position of such issues.

Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in Aaa securities, or fluctuation of
protective elements may be of greater amplitude, or there may be other
elements present which make the long-term risks appear somewhat larger than
the Aaa securities.

Note: Moody's applies numerical modifiers 1, 2, and 3 in the generic
rating classification Aa. The modifier 1 indicates that the obligation ranks
in the higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.

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.

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.

MIG 2/VMIG 2 -- This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.

- ------------
*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.

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, unless explicitly noted.

Issuers rated Prime-1 (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment ability
will often be evidenced by many of the following characteristics: (1) leading
market positions in well established industries; (2) high rates of return on
funds employed; (3) conservative capitalization structure with moderate
reliance on debt and ample asset protection; (4) broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and (5)
well established access to a range of financial markets and assured sources of
alternate liquidity.

Issuers rated Prime-2 (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be
more affected by external conditions. Ample alternate liquidity is maintained.

DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S TWO HIGHEST LONG-TERM DEBT
RATINGS:

AAA -- An obligation rated AAA has the highest rating assigned by Standard
& Poor's. The obligor's capacity to meet its financial commitments on the
obligation is extremely strong.

AA -- An obligation rated AA differs from the highest-rated obligations
only in small degree. The obligor's capacity to meet its financial obligations
is very strong.

Plus (+) or Minus (-): The AA rating may be modified by the addition of a
plus or minus sign to show relative standing within the AA rating category.

DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S TWO HIGHEST RATINGS OF STATE
AND MUNICIPAL NOTES:

A Standard & Poor's note rating reflects the liquidity factors and market
access risks unique to notes. Notes maturing in three years or less will
likely receive a note rating. Notes maturing beyond three years will most
likely receive a long-term debt rating. The following criteria will be used in
making that assessment:

-- Amortization schedule -- the larger the final maturity relative to
other maturities, the more likely the issue is to be treated as a note.

-- Source of payment -- the more dependent the issue is on the market for
its refinancing, the more likely it will be treated as a note.

Note rating symbols and definitions are as follows:

SP-1 -- Strong capacity to pay principal and interest. Issues determined
to possess very strong characteristics are given a plus (+) designation.

SP-2 -- Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.

DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S TWO HIGHEST COMMERCIAL PAPER
RATINGS:

A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more
than 365 days.

A-1 -- A short-term obligation rated A-1 is rated in the highest category
by Standard & Poor's. The obligor's capacity to meet its financial commitment
on the obligation is strong. Within this category, certain obligations are
designated with a plus sign (+). This indicates that the obligor's capacity to
meet its financial commitment on these obligations is extremely strong.

A-2 -- A short-term obligation rated A-2 is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to
meet its financial commitment on the obligation is satisfactory.

DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S RATINGS OF TAX-EXEMPT DEMAND
BONDS:

Standard & Poor's assigns "dual" ratings to all debt issues that have a
put option or demand feature as part of their structure.

The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, "AAA/A-1+"). With short-term demand debt, Standard & Poor's rating
symbols are used with the commercial paper rating symbols (for example,
"SP-1+/A-1+").

DESCRIPTION OF FITCH IBCA, INC.'S TWO HIGHEST INTERNATIONAL LONG-TERM CREDIT
RATINGS:

When assigning ratings, Fitch IBCA considers the historical and
prospective financial condition, quality of management, and the operating
performance of the issuer and of any 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 (+) or Minus (-): "+" or "-" may be appended to a rating of "AA" to
denote relative status within the rating category.

DESCRIPTION OF FITCH IBCA, INC.'S TWO HIGHEST INTERNATIONAL SHORT-TERM CREDIT
RATINGS:

A short-term rating has a time horizon of less than 12 months for most
obligations, or up to three years for U.S. public finance securities, and thus
places greater emphasis on the liquidity necessary to meet financial
commitments in a timely manner.

F1 -- Highest credit quality. Indicates the strongest capacity for timely
payment of financial commitments; may have an added "+" to denote any
exceptionally strong credit feature.

F2 -- 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>

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*

ASSISTANT TREASURER
Linwood C. Downs*

*Affiliated Person of Administrator and Distributor
- ----------------------------------------------

INVESTMENT ADVISER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043

ADMINISTRATOR AND DISTRIBUTOR
CFBDS, Inc.
21 Milk Street, Boston, MA 02109
(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)
PricewaterhouseCoopers LLP
160 Federal Street, Boston, MA 02110

(FOR CITIFUNDS INSTITUTIONAL U.S. TREASURY RESERVES AND
CITIFUNDS INSTITUTIONAL TAX FREE RESERVES)
Deloitte & Touche LLP
200 Berkeley Street, Boston, MA 02116

LEGAL COUNSEL
Bingham Dana LLP
150 Federal Street, Boston, MA 02110
- ----------------------------------------------

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
<PAGE>

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.
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Call Your Account Manager or (212) 657-9100

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