Administrator and Distributor of the Fund
Signature Broker-Dealer Services, Inc.
6 St. James Avenue
Boston, MA 02116
(617) 423-0800
Investment Adviser of the Portfolio
Citibank, N.A.
153 East 53rd Street
New York, NY 10043
Supplemental Investment Manager
and Transfer Agent of the Fund
United States Trust Company of New York
114 West 47th Street
New York, NY 10036
Custodian and Transfer Agent
of the Portfolio
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110
Sub-Transfer Agent to the Fund
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
Independent Accountants of the Fund
Price Waterhouse LLP
160 Federal Street
Boston, MA 02110
USTEXIMS96
LOGO
INSTITUTIONAL
MONEY FUND
SEMI-ANNUAL REPORT
FEBRUARY 29, 1996
<PAGE>
- -----------------------------------------------------------------------------
A Letter To Our Shareholders
Dear Shareholder:
Consistent with the economic environment during the first half of the
Fund's fiscal year, the six-month period ended February 29, 1996 was
characterized by modest economic growth, low inflation and declining interest
rates. While this combination of economic influences was a recipe for
above-average gains in stocks and bonds, shareholders of money market funds
saw yields decline along with interest rates. Yet, money market funds
remained an excellent investment vehicle for earning competitive returns on
assets available for short-term investments. The Fund's annualized current
7-day yield for the six months ended February 29, 1996 was 5.28% and for the
same period the Fund's annualized effective 7-day yield was 5.42% after
taking into account the effect of compounding.*
Throughout the period, the Cash Reserves Portfolio's (the "Portfolio")
Investment adviser, Citibank N.A., managed the Portfolio in a manner
consistent with the objective stated in the Fund's prospectus: providing
liquidity and as high a level of current income as is consistent with the
preservation of capital. Through its investment in the Portfolio, the Fund
seeks to offer an attractive yield and a competitive expense ratio by
investing in a high-quality portfolio of short-term domestic and foreign
dollar denominated money market instruments.
This Semi-Annual Report reviews the Fund and Portfolio's investment
activities and performance over the past six months. On behalf of the Board
of Trustees and staff of Excelsior Funds, I want to extend our sincere
appreciation to all of our shareholders. We thank you for your confidence and
participation and we look forward to continuing to help you achieve your
financial goals.
Philip W. Coolidge
President
April 8, 1996
*Annualized effective yield is based upon dividends declared daily and
reinvested monthly.
The shares of the Fund are neither insured nor guaranteed by the U.S.
Government. While the Fund seeks to maintain a stable net asset value of
$1.00 per share, there can be no assurance that it will be able to do so on a
continuing basis.
SHARES OF THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND THE SHARES ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, BANK INSURANCE FUND, FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENTAL AGENCY, AND INVOLVE POSSIBLE RISK TO
PRINCIPAL.
<PAGE>
Excelsior Institutional Money Fund
Statement Of Assets And Liabilities
February 29, 1996 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets: ...................................................................
Investments in Cash Reserves Portfolio (the "Portfolio"), at value (Note 1) . $508,112,023
Deferred organization expenses (Note 1) ................................... 114,283
--------------
Total assets ............................................................. 508,226,306
--------------
Liabilities: ..............................................................
Dividends payable ......................................................... 2,710,989
Shareholder servicing fees payable (Note 2) ............................... 337,762
Organization expenses payable (Note 1) .................................... 36,540
Sub-transfer agent fees payable (Note 2) .................................. 7,071
Administration fees payable (Note 2) ...................................... 4,495
Other accrued expenses .................................................... 26,535
--------------
Total liabilities ........................................................ 3,123,392
--------------
Net Assets for 505,102,914 shares of beneficial interest outstanding ...... $505,102,914
==============
Represented by: ...........................................................
Paid-in capital ........................................................... $505,102,914
==============
Net Asset Value, Offering Price and Redemption Price Per Share ............ $ 1.00
==============
</TABLE>
Excelsior Institutional Money Fund
Statement Of Operations
For the Six Months Ended February 29, 1996 (unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Interest Income from Portfolio (Note 1): ..............
Interest income (includes $66,075 of net realized gains) $16,365,229
Allocated expenses .................................... (274,424)
-------------
Net investment income from Portfolio ................. 16,090,805
Expenses (Note 1): ....................................
Shareholder servicing fees (Note 2) ................... $1,063,367
Registration fees ..................................... 34,785
Administration fees (Note 2) .......................... 26,279
Amortization of organization expenses (Note 1) ........ 21,159
Sub-transfer ageent fees (Note 2) ..................... 15,345
Trustees' fees and expenses (Note 2) .................. 9,214
Miscellaneous expenses ................................ 5,425
------------
Total expenses ................................... 1,175,574
Less: Waiver of shareholder servicing fees (Note 2) (761,914)
------------
Net expenses ..................................... 413,660
-------------
Net investment income ................................. $15,677,145
=============
</TABLE>
See notes to financial statements
<PAGE>
Excelsior Institutional Money Fund
Statement Of Changes In Net Assets
<TABLE>
<CAPTION>
Six Months Ended For the Year
February 29, 1996 Ended
(unaudited) August 31,1995
----------------- ---------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Net investment income from operations .......................... $ 15,677,145 $ 26,505,092
----------------- ---------------
Dividends to shareholders from net investment income ........... (15,677,145) (26,505,092)
----------------- ---------------
Transactions in Shares of Beneficial Interest
($1.00 Per Share) .............................................
Net proceeds from shares sold .................................. 5,082,894,000 8,171,328,156
Reinvestment of dividends ...................................... 5,650,413 4,745,191
Cost of shares redeemed ........................................ (5,221,552,360) (8,308,620,124)
----------------- ---------------
Net increase (decrease) in net assets resulting from transactions
in shares of beneficial interest .......................... (133,007,947) (132,546,777)
----------------- ---------------
Total increase (decrease) in net assets ...................... (133,007,947) (132,546,777)
Net Assets: ....................................................
Beginning of period ............................................ 638,110,861 770,657,638
----------------- ---------------
End of period .................................................. $ 505,102,914 $ 638,110,861
================= ===============
</TABLE>
Excelsior Institutional Money Fund
Financial Highlights
<TABLE>
<CAPTION>
For the period
November 8, 1993
Six Months Ended (commencement of
February 29, 1996 For the Year Ended operations) to
(unaudited) August 31, 1995 August 31, 1994
----------------- ------------------ ----------------
<S> <C> <C> <C>
Net Asset Value, beginning of period .......... $1.00 $1.00 $1.00
Net investment income from operations ......... 0.0283 0.0579 0.0308
Dividends from net investment income .......... (0.0283) (0.0579) (0.0308)
----------------- ------------------ ----------------
Net Asset Value, end of period ................ $1.00 $1.00 $1.00
================= ================== ================
Total Return .................................. 5.76%(2) 5.95% 3.87%(2)
Ratios: .......................................
Net investment income to average net assets (1) . 5.75%(2) 5.59% 4.39%(2)
Expenses to average net assets (1) ............ 0.25%(2) 0.25% 0.19%(2)
Total net assets, end of period (000's omitted) . $505,103 $638,111 $770,658
(1) Reflects the Fund's proportionate share of the Portfolio's expenses as well as voluntary fee waivers by agents
of the Portfolio and the Trust. If the voluntary fee waivers had not been in place, the ratios of net investment
income and expenses to average net assets would have been as follows:
Net investment income to average net assets ... 5.34%(2) 5.16% 4.28%(2)
Expenses to average net assets ................ 0.67%(2) 0.68% 0.31%(2)
(2) Annualized.
</TABLE>
See notes to financial statements
<PAGE>
Excelsior Institutional Money Fund
Notes to Financial Statements (unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES
Excelsior Institutional Money Fund (the "Fund") is a series of Excelsior
Funds (the "Trust") and is registered under the Investment Company Act of
1940 as an open-end diversified management investment company. Signature
Broker-Dealer Services, Inc., ("Signature") serves as administrator and
distributor to the Fund.
It is the Fund's policy, to the extent possible, to maintain a continuous
net asset value per share of $1.00; the Fund has adopted certain investment,
valuation, dividend and distribution policies to enable it to do so.
The Fund invests all of its investable assets in Cash Reserves Portfolio
(the "Portfolio"), an open-end diversified management investment company for
which Citibank, N.A. serves as Investment Advisor. The value of such
investment reflects the Fund's proportionate interest in the net assets of
the Portfolio (11.2% at February 29, 1996).
The financial statements of the Portfolio, including the Portfolio of
Investments, are included elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
A. Investment Valuation -- Valuation of securities by the Portfolio is
discussed in Note 1A of the Portfolio's Notes to Financial Statements, which
are included elsewhere in this report.
B. Investment Income -- The Fund earns interest income, net of Portfolio
expenses, daily on its investment in the Portfolio. Realized gain and loss
from securities transactions are recorded by the Portfolio on the identified
cost basis, when recognized, and allocated to the Fund, along with net
investment income, based on its investment in the Portfolio.
C. Dividends to Shareholders -- Dividends from net investment income are
declared daily and paid monthly. Distributions from net realized gains or
losses, if any, are declared daily as income and paid monthly.
D. Federal Income Taxes -- It is the policy of the Fund to qualify as a
regulated investment company, if such qualification is in the best interest
of the shareholders, by complying with the requirements of the Internal
Revenue Code applicable to regulated investment companies, and by
distributing substantially all of its taxable earnings to its shareholders.
E. Expenses -- The Fund bears all costs of its operations other than
expenses specifically assumed by Signature.
F. Deferred Organization Expenses -- Organization expenses have been
deferred and are being amortized on a straight-line basis over a period not
to exceed five years beginning with the commencement of operations of the
Fund. The amount paid by the Fund on any redemption of the Fund's Initial
Shares, will be reduced by the pro rata portion of any unamortized
organization expenses which the number of Initial Shares redeemed bears to
the total number of Initial Shares outstanding immediately prior to such
redemption.
G. Other -- All the net income of the Portfolio is allocated pro rata
among the Fund and the other investors in the Portfolio at the time of such
determination.
(2) ADMINISTRATION FEE AND OTHER TRANSACTIONS WITH AFFILIATES
A. Pursuant to an Administrative Services Agreement ("the Agreement"),
Signature provides management and administrative services necessary for the
operations of the Trust and furnishes office facilities required for
conducting the business of the Trust. Certain officers of Signature serve as
officers of the Trust and are compensated by Signature. For its services
under the Agreement, Signature receives a fee, payable monthly, at an annual
rate of 0.01% of the average daily net assets of the Fund, subject to an
annual minimum payment of $20,000. For the six months ended February 29,
1996, the Fund accrued administration fees totaling $26,279. Signature
receives no compensation from the Fund in its capacity as distributor of the
Fund's shares.
<PAGE>
Pursuant to a Supplemental Advisory Agreement, United States Trust Company
of New York ("U.S. Trust") reviews certain investment and custody processes.
U.S. Trust receives no compensation for its services under this agreement.
For the six months ended February 29, 1996, Chase Global Funds Services
Company ("CGFSC"), received fees amounting to $15,345, for providing
sub-transfer agency services to the Fund. CGFSC may from time to time perform
certain sub- administrative duties for the Fund and is entitled to receive
compensation for its services. All such compensation will be paid by
Signature. For the six months ended February 29, 1996, CGFSC received no
compensation from Signature for sub-administrative services.
B. The Trust, on behalf of the Fund, has entered into shareholder servicing
agreements with U.S. Trust, UST Distributors, Inc. and Mid Atlantic Capital
Group Inc. (the "Shareholder Servicing Agents") pursuant to which each
Shareholder Servicing Agent, as agent for its customers, provides shareholder
servicing. For its services, each Shareholder Servicing Agent may receive a fee
from the Fund, which may not exceed, on an annualized basis, when combined with
any administration fees paid, an amount equal to 0.40% of the average daily net
assets of Fund shares owned by customers of the Shareholder Servicing Agent. For
the six months ended February 29, 1996, the Shareholder Servicing Agents
received fees amounting to $301,453, net of $761,914 which was voluntarily
waived, for providing shareholder servicing to the Fund.
C. Independent Trustees receive an annual retainer of $4,000 and an
additional $250 for each meeting of the Board of Trustees attended. In
addition, the Trust reimburses independent Trustees for reasonable expenses
incurred when acting in their capacity as Trustees.
(3) INVESTMENT TRANSACTIONS
Additions and reductions in the Fund's investment in the Portfolio
aggregated $5,082,894,000, and $5,230,993,676 respectively.
<PAGE>
Cash Reserves Portfolio
Portfolio of Investments
February 29, 1996 (unaudited)
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000's omitted) Value
BANK NOTES--11.0%
<S> <C> <C>
Bank America, Illinois ........
5.70%, due 11/01/96 .......... $100,000 $100,031,608
J.P. Morgan & Co., Inc. .......
6.50%, due 05/06/96 .......... 50,000 49,997,915
6.20%, due 05/13/96 .......... 82,000 82,055,683
Nationsbank N.A., Carolinas ...
5.60%, due 07/08/96 .......... 100,000 100,000,000
Nationsbank, Texas ............
5.55%, due 11/08/96 .......... 65,000 64,969,825
Wachovia Bank, North Carolina .
5.25%, due 03/18/96 .......... 50,000 50,000,000
WestDeusche LandsBank .........
6.85%, due 03/01/96 .......... 50,000 50,000,000
--------------
497,055,031
--------------
CERTIFICATES OF DEPOSIT
(EURODOLLARS)--3.4% .........................................................
Commerzbank AG, N.Y. ..........
6.76%, due 04/04/96 .......... 50,000 50,002,653
Deutsche Bank .................
5.75%, due 10/30/96 .......... 35,000 35,010,965
Mitsubishi Bank, Japan ........
5.47%, due 05/01/96 .......... 70,000 70,004,681
--------------
155,018,299
--------------
CERTIFICATES OF DEPOSIT
(YANKEE)--14.8% .............................................................
Dai Ichi Kangyo Bank, New York .
5.30%, due 05/15/96 .......... 50,000 50,003,868
5.28%, due 06/19/96 .......... 50,000 50,001,498
Mitsubishi Bank, New York .....
5.31% due 05/07/96 ........... 30,000 30,000,551
5.18%, due 08/06/96 .......... 150,000 150,000,000
Sanwa Bank, New York ..........
5.61%, due 04/04/96 .......... 100,000 100,000,931
5.61%, due 04/12/96 .......... 100,000 100,001,150
Sumitomo Bank Ltd. ............
5.75%, due 04/02/96 .......... 40,000 40,005,198
5.61%, due 04/05/96 .......... 150,000 150,000,000
--------------
670,013,196
--------------
COMMERCIAL PAPER--9.9% ......................................................
Associates Corp. ..............
5.55%, due 03/01/96 .......... $150,000 $150,000,000
Canadian Imperial Holdings Inc. .
5.202%, due 03/27/96 ......... 200,000 199,248,600
Morgan Stanley Group Inc. .....
5.221%, due 03/15/96 ......... 100,000 99,796,961
--------------
449,045,561
--------------
FLOATING RATE NOTES--39.8%
Bank One, Dayton ..............
6.22%, due 08/30/96 .......... 70,000 69,979,581
6.23%, due 02/12/97 .......... 100,000 99,953,410
Bank One, Milwaukee ...........
6.24%, due 08/28/96 .......... 76,000 75,985,158
Bankers Trust Corp. ...........
6.30%, due 04/08/96 .......... 130,000 130,000,000
Bayerische Landsbank ..........
5.183%, due 01/15/97 ......... 200,000 199,875,946
Beneficial Corp. ..............
6.32%, due 06/17/96 .......... 100,000 100,000,000
6.23%, due 08/26/96 .......... 100,000 99,975,749
FCC National Bank, Delaware ...
6.24%, due 11/06/96 .......... 100,000 99,946,721
6.25%, due 12/02/96 .......... 80,000 79,961,711
Federal National Mortgage Association .................
5.163, due 08/16/96 .......... 100,000 99,973,230
5.17%, due 10/15/96 .......... 200,000 199,913,560
Key Bank, N.Y. ................
5.24%, due 09/06/96 .......... 150,000 149,947,560
Merrill Lynch & Co., Inc. .....
6.345%, due 12/04/96 ......... 150,000 149,994,303
SMM Trust .....................
5.333%, due 06/14/96 ......... 30,000 30,000,000
5.30%, due 11/15/96 .......... 37,500 37,500,000
5.313%, due 12/16/96 ......... 75,000 74,994,074
Wachovia Bank, North Carolina .
5.219%, due 02/12/97 ......... 100,000 99,929,991
--------------
1,797,930,994
--------------
</TABLE>
<PAGE>
Cash Reserves Portfolio
Portfolio of Investments
February 29, 1996 (unaudited) continued
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000's omitted) Value
<S> <C> <C>
MEDIUM-TERM NOTES--3.3% .....................................................
General Electric Capital Corp. .
6.55%, due 03/25/96 .......... $ 50,000 $ 49,997,057
5.715%, due 10/16/96 ......... 50,000 49,977,659
5.26%, due 1/17/97 ........... 50,000 49,982,404
--------------
149,957,120
--------------
TIME DEPOSIT--3.3% ..........................................................
First Union Nation Bank, North Carolina .....................................
5.50%, due 03/01/96 .......... 146,595 146,595,000
--------------
UNITED STATES GOVERNMENT--5.4% ..............................................
United States Treasury Bills ..
5.55%, due 08/22/96 .......... 50,000 48,658,750
4.79%, due 02/06/97 .......... 50,000 47,724,750
4.825%, due 02/06/97 ......... 50,000 47,708,125
United States Treasury Notes ..
6.875%, due 02/28/97 ......... 100,000 101,747,642
--------------
245,839,267
--------------
UNITED STATES GOVERNMENT
AGENCY--8.3% ................................................................
Federal Farm Credit Bank ......
5.75%, due 08/01/96 .......... $100,000 $ 99,982,443
Federal National Mortgage
Association ..................
5.76%, due 09/03/96 .......... 100,000 99,975,739
5.47%, due 11/14/96 .......... 100,000 99,895,099
5.37%, due 12/18/96 .......... 75,000 74,908,092
--------------
374,761,373
--------------
Total Investments
at Amortized Cost ............ 99.2% 4,486,215,841
Other Assets, Less Liabilities . 0.8% 36,789,961
--------------- --------------
Net Assets .................... 100.0% $4,523,005,802
=============== ==============
</TABLE>
See notes to financial statements
<PAGE>
Cash Reserves Portfolio
Statement Of Assets And Liabilities
February 29, 1996 (unaudited)
<TABLE>
<CAPTION>
<S> <C>
Assets: ...............................................
Investments at value (Note 1A) ........................ $4,486,215,841
Cash .................................................. 676
Interest receivable ................................... 37,315,539
--------------
Total assets ......................................... $4,523,532,056
--------------
Liabilities: ..........................................
Payable to affiliate--investment advisory fee (Note 2A) . 310,509
Accrued expenses and other liabilities ................ 215,745
--------------
Total liabilities .................................... 526,254
--------------
Net Assets ............................................ $4,523,005,802
==============
Represented by: .......................................
Paid-in capital for beneficial interests .............. $4,523,005,802
==============
</TABLE>
Cash Reserves Portfolio
Statement Of Operations
For the Six Months Ended February 29, 1996 (unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
Interest Income (Note 1B) ........................... $122,576,191
Expenses: ...........................................
Investment advisory fees (Note 2A) .................. $ 3,087,245
Administrative fees (Note 2B) ....................... 1,029,082
Custodian fees ...................................... 599,033
Auditing fees ....................................... 24,700
Legal fees .......................................... 9,703
Trustees' fees ...................................... 1,271
Miscellaneous ....................................... 63,826
--------------
Total expenses ................................. 4,814,860
Less aggregate amount waived by Investment Adviser
and
Administrator (Notes 2A and 2B) .............. (2,756,620)
Less fees paid indirectly (Note 1E) ............ (76)
--------------
Net expenses ................................... 2,058,164
--------------
Net investment income .......................... $120,518,027
==============
</TABLE>
See notes to financial statements
<PAGE>
Cash Reserves Portfolio
Statement Of Changes In Net Assets
<TABLE>
<CAPTION>
Six Months Ended
February 29, 1996 Year Ended
(unaudited) August 31,1995
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets from Operations:
Net investment income ......................................... $ 120,518,027 $ 160,543,199
----------------- -----------------
Capital Transactions: .........................................
Proceeds from contributions ................................... 13,881,468,652 23,437,948,762
Value of withdrawals .......................................... (14,244,386,982 ) (20,980,446,443 )
----------------- -----------------
Net increase (decrease) in net assets from capital transactions . (362,918,330) 2,457,502,319
----------------- -----------------
Net Increase (Decrease) in Net Assets ......................... (242,400,303 ) 2,618,045,518
Net Assets: ...................................................
Beginning of period ........................................... 4,765,406,105 2,147,360,587
----------------- -----------------
End of period ................................................. $ 4,523,005,802 $ 4,765,406,105
================= =================
</TABLE>
Cash Reserves Portfolio
Financial Highlights
<TABLE>
<CAPTION>
Six Months Ended
February 29, 1996 Year Ended August 31,
-----------------------------------------------------------------
(unaudited) 1995 1994 1993 1992 1991
----------------- ------------ ------------ ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Ratios/Supplemental Data: ..............
Net assets (000's omitted) ............. $4,523,006 $4,765,406 $2,147,361 $781,470 $901,024 $847,811
Ratio of expenses to average net assets . 0.10% + 0.10% 0.11% 0.20% 0.25% 0.25%
Ratio of net investment income to average
net assets ............................ 5.86% + 5.88% 3.87% 3.15% 4.42% 6.75%
Note: If agents of the Portfolio had not voluntarily waived a portion of their fees for the periods indicated, the ratios would
have been as follows:
Ratios: ................................
Expenses to average net assets ......... 0.23% + 0.23% 0.24% 0.25% 0.25% 0.25%
Net investment income to average net assets 5.73% + 5.75% 3.74% 3.10% 4.42% 6.75%
</TABLE>
See notes to financial statements
+Annualized.
<PAGE>
Cash Reserves Portfolio
Notes to Financial Statements (unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES
Cash Reserves Portfolio (the "Portfolio") is registered under the U.S.
Investment Company Act of 1940, as amended, as a no-load, diversified,
open-end management investment company which was organized as a trust under
the laws of the State of New York. The Declaration of Trust permits the
Trustees to issue beneficial interests in the Portfolio. Signature Financial
Group (Grand Cayman), Ltd. ("SFG") acts as the Portfolio's Administrator and
Citibank, N.A. ("Citibank") acts as the Investment Adviser.
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Portfolio
are in conformity with U.S. generally accepted accounting principles and are
as follows:
A. Valuation of Investments -- Money market instruments are valued at
amortized cost, which the Trustees have determined in good faith constitutes
fair value. This method involves valuing a portfolio security at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium. The Portfolio's use of amortized cost is subject to the Portfolio's
compliance with certain conditions as specified under Rule 2a-7 of the
Investment Company Act of 1940.
B. Interest Income and Expenses -- Interest income consists of interest
accrued and discount earned (including both original issue and market
discount) on the investments of the Portfolio, accrued ratably to the date of
maturity, plus or minus net realized gain or loss, if any, on investments.
Expenses of the Portfolio are accrued daily. The Portfolio bears all costs of
its operations other than expenses specifically assumed by Citibank and SFG.
C. U.S. Federal Income Taxes -- The Portfolio is considered a partnership
under the U.S. Internal Revenue Code. Accordingly, no provision for federal
income taxes is necessary.
D. Repurchase Agreements -- It is the policy of the Portfolio to require
the custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated within the custodian
bank's vault, all securities held as collateral in support of repurchase
agreement investments. Additionally, procedures have been established by the
Portfolio to monitor, on a daily basis, the market value of the repurchase
agreement's underlying investments to ensure the existence of a proper level
of collateral.
E. Fees Paid Indirectly -- The Portfolio's custodian bank calculates its
fees based on the Portfolio's average daily net assets. The fees are reduced
according to a fee arrangement, which provides for custody fees to be reduced
based on a formula developed to measure the value of cash deposited with the
custodian by the Portfolio. This amount is shown as a reduction of expenses
on the Statement of Operations.
F. Other -- Purchases, maturities and sales of money market instruments
are accounted for on the date of the transaction.
(2) INVESTMENT ADVISORY FEES AND
ADMINISTRATIVE FEES
A. Investment Advisory Fee -- The investment advisory fees paid to
Citibank, as compensation for overall investment management services,
amounted to $3,087,245, of which $1,727,538 was voluntarily waived for the
six months ended February 29, 1996. The investment advisory fees are computed
at an annual rate of 0.15% of the Portfolio's average daily net assets.
<PAGE>
B. Administrative Fees -- Under the terms of an Administrative Services
Agreement, the administrative fee paid to the Administrator, as compensation
for overall administrative services and general office facilities, are
computed at the annual rate of 0.05% of the Portfolio's average daily net
assets. The administrative fees amounted to $1,029,082, all of which were
voluntarily waived for the six months ended February 29, 1996. The Portfolio
pays no compensation directly to any Trustee or to any officer who is
affiliated with the Administrator, all of whom receive remuneration for their
services to the Portfolio from the Administrator or its affiliates. Certain
of the officers and a Trustee of the Portfolio are officers and a director of
the Administrator or its affiliates.
(3) INVESTMENT TRANSACTIONS
Purchases, maturities and sales of money market instruments aggregated
$54,671,611,380 and $55,248,999,164, respectively, for the six months ended
February 29, 1996.
(4) LINE OF CREDIT
The Portfolio, along with other Landmark Funds, entered into an agreement
with a bank which allows the Funds collectively to borrow up to $40 million
for temporary or emergency purposes. Interest on borrowings, if any, is
charged to the specific fund executing the borrowing at the base rate of the
bank. In addition, the $15 million committed portion of the line of credit
requires a quarterly payment of a commitment fee based on the average daily
unused portion of the line of credit. For the six months ended February 29,
1996, the commitment fee allocated to the Portfolio was $11,214. Since the
line of credit was established, there have been no borrowings.
