<PAGE>
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Cash Reserves Portfolio
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PORTFOLIO OF INVESTMENTS August 31, 1997
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PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
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BANK NOTES--3.5%
Australia & New Zealand Bank
5.645%, due 2/19/98 .......................... $65,000 $ 64,986,601
Morgan Guaranty Trust Co.
5.85%, due 3/16/98 ........................... 100,000 99,972,340
5.93%, due 8/31/98 ........................... 100,000 99,961,876
------------
264,920,817
------------
CERTIFICATES OF DEPOSIT
(EURODOLLARS)--1.3%
Sumitomo Bank
5.69%, due 12/22/97 .......................... 100,000 100,003,052
------------
CERTIFICATES OF DEPOSIT
(YANKEE)--47.5%
ABN Amro Bank NV
5.68%, due 12/19/97 .......................... 100,000 99,988,293
6.14%, due 5/01/98 ........................... 90,000 89,986,209
Bank America National Association
5.67%, due 6/30/98 ........................... 200,000 199,855,388
Bank America of Chicago
5.85%, due 3/13/98 ........................... 100,000 99,942,394
Bank of Tokyo Mitsubishi New York
5.69%, due 12/19/97 .......................... 185,000 185,000,000
5.78%, due 12/29/97 .......................... 150,000 150,013,155
Barclays Bank of New York
5.84%, due 3/11/98 ........................... 100,000 99,984,982
Bayeriche Landesbank
5.86%, due 7/17/98 ........................... 100,000 99,953,330
Canadian Imperial Bank
5.94%, due 3/17/98 ........................... 100,000 99,984,515
5.86%, due 8/10/98 ........................... 70,000 69,967,878
5.91%, due 8/28/98 ........................... 46,000 45,973,903
Credit Suisse
5.84%, due 3/11/98 ........................... 100,000 99,984,977
5.745%, due 7/21/98 .......................... 100,000 99,970,089
Dai Ichi Kangyo Bank
5.68%, due 10/28/97 .......................... 100,000 100,001,561
5.67%, due11/04/97 ........................... 131,000 131,005,534
5.73%, due 12/29/97 .......................... 100,000 100,006,793
Deutsche Bank AG
6.20%, due 4/08/98 ........................... 50,000 49,989,987
Key Bank National Association
5.68%, due 7/02/98 ........................... 100,000 99,934,952
5.69%, due 7/07/98 ........................... 100,000 99,942,162
Landesbank Hessen Thuringen
6.13%, due 4/01/98 ........................... 50,000 49,964,438
Morgan Guaranty Trust Co.
5.71%, due 1/06/98 ........................... 100,000 99,986,666
Morgan Stanley Group, Inc.
5.79%, due 5/18/98 ........................... 75,000 75,000,000
Natwest BankCorp
5.933%, due 6/26/98 .......................... 100,000 99,947,329
Rabobank Nederland
6.18%, due 5/01/98 ........................... 100,000 99,987,351
Royal Bank of Canada
5.58%, due 12/11/97 .......................... 100,000 99,972,997
6.08%, due 5/27/98 ........................... 100,000 99,971,952
5.78%, due 7/31/98 ........................... 55,000 54,980,784
Sanwa Bank
5.76%, due 9/19/97 ........................... 300,000 300,001,478
5.72%, due 10/17/97 .......................... 50,000 50,000,630
Societe Generale Bank
5.87%, due 3/03/98 ........................... 125,000 124,976,020
6.35%, due 4/15/98 ........................... 175,000 174,984,028
5.86%, due 7/21/98 ........................... 50,000 49,983,068
Sumitomo Bank
5.74%, due 9/08/97 ........................... 195,000 195,000,000
5.69%, due 10/14/97 .......................... 40,000 40,000,000
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3,636,242,843
------------
ASSET BACKED--4.1%
Asset Backed Securities
Investment Trust
5.652%, due 6/15/98 .......................... 157,000 156,974,733
Asset Backed Trust
5.662%, due 1/15/98 .......................... 157,000 156,994,150
------------
313,968,883
------------
COMMERCIAL PAPER--12.5%
Barton Capital Corp.
5.52%, due 9/18/97 ........................... 70,000 69,817,533
CIT Group Holdings Inc.
5.55%, due 9/02/97 ........................... 100,000 99,984,583
Electronic Data System Corp.
5.50%, due 10/03/97 .......................... 60,000 59,706,667
Korea Development Bank
5.80%, due 9/18/97 ........................... 50,000 49,863,056
5.80%, due 9/22/97 ........................... 80,000 79,729,333
Pooled Accounts Receivable
Capital Corp.
5.53%, due 9/16/97 ........................... 150,275 149,928,741
5.52%, due 9/19/97 ........................... 181,542 181,040,944
Receivables Capital Corp.
5.52%, due 9/18/97 ........................... 64,549 64,380,742
5.50%, due 9/22/97 ........................... 126,168 125,763,211
5.51%, due 9/22/97 ........................... 76,403 76,157,428
------------
956,372,238
------------
FLOATING RATE NOTES--14.8%
Abbey National Treasury Services
6.00%, due 6/17/98 ........................... 100,000 99,969,738
Bank One, Columbus
5.64%, due 5/14/98 ........................... 75,000 74,964,527
Bank One, Indianapolis
5.66%, due 2/05/98 ........................... 150,000 149,961,646
FCC National Bank
5.73%, due 4/07/98 ........................... 200,000 199,953,854
5.67%, due 7/02/98 ........................... 100,000 99,926,840
First USA Bank
5.809%, due 4/29/98 .......................... 100,000 100,078,329
Merrill Lynch & Co., Inc.
5.77%, due 10/07/97 .......................... 20,000 19,999,506
5.765%, due 11/12/97 ......................... 100,000 99,995,070
5.75%, due 1/09/98 ........................... 150,000 149,984,453
Strats Trust
5.652%, due 12/15/97 ......................... 139,500 139,491,411
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1,134,325,374
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TIME DEPOSIT--15.4%
Fleet Bank
5.563%, due 9/02/97 .......................... 100,000 100,000,000
Keybank National Association
5.625%, due 9/02/97 .......................... 150,000 150,000,000
Royal Bank of Canada
5.50%, due 9/02/97 ........................... 100,000 100,000,000
Sun Trust
5.438%, due 9/02/97 .......................... 131,299 131,299,000
Svenska Grand Cayman
5.625%, due 9/02/97 .......................... 250,000 250,000,000
Wells Fargo & Co.
5.531%, due 9/02/97 .......................... 200,000 200,000,000
Westdeutsche Landesbank
5.656%, due 9/02/97 .......................... 250,000 250,000,000
------------
1,181,299,000
------------
TOTAL INVESTMENTS
AT AMORTIZED COST ............................ 99.1% 7,587,132,207
OTHER ASSETS, LESS LIABILITIES ............... 0.9 70,267,733
------- --------------
NET ASSETS ................................... 100.0% $7,657,399,940
===== ==============
See notes to financial statements
<PAGE>
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Cash Reserves Portfolio
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STATEMENT OF ASSETS AND LIABILITIES August 31, 1997
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ASSETS:
Investments at value (Note 1A) ................................ $7,587,132,207
Cash .......................................................... 188
Interest receivable ........................................... 70,969,862
--------------
Total assets ................................................. 7,658,102,257
--------------
LIABILITIES:
Payable to affiliate--investment advisory fee (Note 2A) ....... 345,435
Accrued expenses and other liabilities ........................ 356,882
--------------
Total liabilities ............................................ 702,317
--------------
NET ASSETS .................................................... $7,657,399,940
==============
REPRESENTED BY:
Paid-in capital for beneficial interests ...................... $7,657,399,940
==============
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Cash Reserves Portfolio
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STATEMENT OF OPERATIONS
For the Year Ended August 31, 1997
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<TABLE>
<CAPTION>
<S> <C> <C>
INTEREST INCOME (Note 1B) ............................................. $345,707,841
EXPENSES:
Investment advisory fees (Note 2A) .................................... $ 9,148,204
Administrative fees (Note 2B) ......................................... 3,049,401
Custodian fees ........................................................ 1,513,346
Auditing fees ......................................................... 48,003
Trustees' fees ........................................................ 43,104
Legal fees ............................................................ 21,171
Other ................................................................. 83,464
-----------
Total expenses .................................................... 13,906,693
Less aggregate amount waived by Investment
Adviser and Administrator (Notes 2A and 2B) ..................... (7,802,319)
Less fees paid indirectly (Note 1E) ............................... (659)
-----------
Net expenses ...................................................... 6,103,715
------------
Net investment income ............................................. $339,604,126
============
</TABLE>
See notes to financial statements
<PAGE>
Cash Reserves Portfolio
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STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
---------------------------------------
1997 1996
------------ ------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
<S> <C> <C>
Net investment income ......................... $ 339,604,126 $ 230,781,560
--------------- ---------------
CAPITAL TRANSACTIONS:
Proceeds from contributions ................... 33,685,999,190 24,522,122,636
Value of withdrawals .......................... (30,810,390,668) (25,076,123,009)
--------------- ---------------
Net increase (decrease) in net assets
from capital transactions 2,875,608,522 (554,000,373)
--------------- ---------------
NET INCREASE (DECREASE) IN NET ASSETS ......... 3,215,212,648 (323,218,813)
NET ASSETS:
Beginning of period ........................... 4,442,187,292 4,765,406,105
--------------- ---------------
End of period ................................. $ 7,657,399,940 $ 4,442,187,292
=============== ===============
</TABLE>
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Cash Reserves Portfolio
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FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31,
-------------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
RATIOS/SUPPLEMENTAL DATA:
<S> <C> <C> <C> <C> <C>
Net assets (000's omitted) ............................. $7,657,400 $4,442,187 $4,765,406 $2,147,361 $781,470
Ratio of expenses to average net assets ................ 0.10% 0.10% 0.10% 0.11% 0.20%
Ratio of net investment income to
average net assets ..................................... 5.57% 5.64% 5.88% 3.87% 3.15%
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% 0.23% 0.24% 0.25%
Net investment income to average net assets ............ 5.44% 5.50% 5.75% 3.74% 3.10%
</TABLE>
See notes to financial statements
<PAGE>
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Cash Reserves Portfolio
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NOTES TO FINANCIAL STATEMENTS
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(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
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 U.S. 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 $9,148,204,
of which $4,752,918 was voluntarily waived for the year ended August 31, 1997.
The investment advisory fees are computed at an annual rate of 0.15% of the
Portfolio's average daily net assets.
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 $3,049,401, all of which were voluntarily waived
for the year ended August 31, 1997. 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
$407,817,667,716 and $404,668,761,218, respectively, for the year ended August
31, 1997.
(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 $60 million for
temporary or emergency purposes. Interest on borrowings, if any, is charged to
the specific fund executing the borrowing at the base rate of the bank. 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 year ended August 31, 1997, the commitment fee
allocated to the Portfolio was $23,449. Since the line of credit was
established, there have been no borrowings.
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Cash Reserves Portfolio
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------
TO THE TRUSTEES AND THE INVESTORS OF CASH RESERVES PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments of Cash Reserves Portfolio (the "Portfolio") as at
August 31, 1997 and the related statements of operations and of changes in net
assets and the financial highlights for the periods indicated. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Portfolio's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments owned at
August 31, 1997 by correspondence with the custodian, provide a reasonable basis
for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Portfolio as at August 31, 1997, the
results of its operations and the changes in its net assets and the financial
highlights for the periods indicated in accordance with U.S. generally accepted
accounting principles.
PRICE WATERHOUSE
Chartered Accountants
Toronto, Ontario
October 6, 1997
