<PAGE>
CASH RESERVES PORTFOLIO
PORTFOLIO OF INVESTMENTS August 31, 1998
PRINCIPAL
AMOUNT
ISSUER (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
ASSET BACKED -- 11.0%
- --------------------------------------------------------------------------------
Sigma Finance Corp.*
5.64% due 8/27/99 $197,000 $ 196,990,868
Steers*
5.641% due 10/15/98 160,000 160,000,000
5.652% due 11/10/98 191,000 190,992,928
5.648% due 3/25/99 78,069 78,069,058
Strategic Money Market
Trust Receipts*
5.656% due 3/05/99 213,000 213,000,000
Strats Trust*
5.663% due 12/15/98 130,000 130,000,000
--------------
969,052,854
--------------
BANK NOTES -- 4.8%
- --------------------------------------------------------------------------------
Bank of New York
5.50% due 2/17/99 100,000 99,968,885
First Union Bank
5.49% due 9/01/99 75,000 75,000,000
FCC National Bank
5.68% due 6/03/99 50,000 49,974,737
5.86% due 10/02/98 100,000 99,995,126
Nationsbank
5.57% due 6/25/99 100,000 99,960,129
--------------
424,898,877
--------------
CERTIFICATES OF DEPOSIT (DOMESTIC) -- 1.8%
- --------------------------------------------------------------------------------
Chase Manhattan Bank
5.74% due 5/10/99 57,000 56,977,486
Morgan Guaranty
Trust Co.
5.55% due 2/02/99 100,000 100,000,000
--------------
156,977,486
--------------
CERTIFICATES OF DEPOSIT (EURO) -- 1.1%
- --------------------------------------------------------------------------------
Barclays Bank
5.58% due 12/29/98 100,000 100,003,242
CERTIFICATES OF DEPOSIT (YANKEE) -- 32.4%
- --------------------------------------------------------------------------------
ABN Amro Bank
5.62% due 4/14/99 75,000 74,977,837
Bank of Nova Scotia
5.65% due 3/29/99 38,000 37,969,974
5.59% due 8/24/99 25,000 24,997,654
Bank of Tokyo Mitsubishi
5.73% due 9/08/98 400,000 400,000,000
Barclays Bank
5.82% due 10/05/98 125,000 124,994,431
5.53% due 2/23/99 100,000 99,972,398
5.70% due 3/30/99 100,000 99,966,931
Bayeriche Landesbank
5.70% due 1/07/99 60,000 59,991,936
5.65% due 7/23/99 50,000 49,954,213
Credit Agricole Indosuez
5.74% due 4/26/99 75,000 74,961,397
Credit Communal
de Belgique
5.62% due 3/19/99 45,000 44,975,420
Credit Suisse First Boston
5.69% due 7/06/99 100,000 100,000,000
Deutsche Bank
5.62% due 2/26/99 100,000 99,976,622
5.65% due 3/02/99 100,000 99,976,103
5.65% due 8/06/99 100,000 99,951,040
Rabobank Nederland
5.60% due 3/17/99 50,000 49,986,831
5.71% due 6/11/99 100,000 99,962,179
5.69% due 6/30/99 75,000 74,990,829
5.64% due 7/30/99 103,000 102,979,080
Societe Generale Bank
5.75% due 4/06/99 150,000 149,960,148
5.76% due 4/16/99 75,000 74,982,134
Societe Generale Bank*
5.563% due 5/20/99 175,800 175,714,046
Svenska Handelsbanken
5.75% due 5/04/99 57,000 56,981,681
5.76% due 5/25/99 75,000 74,968,617
5.74% due 6/01/99 77,000 76,960,883
Swiss Bank Corp.
5.715% due 6/14/99 100,000 99,969,983
Toronto Dominion Bank
5.71% due 6/15/99 100,000 99,969,868
5.71% due 6/23/99 85,000 84,973,674
5.54% due 8/18/99 135,000 134,898,090
--------------
2,849,963,999
--------------
COMMERCIAL PAPER -- 5.0%
- --------------------------------------------------------------------------------
Aspen Funding Corp.
5.88% due 9/01/98 140,000 140,000,000
General Electric Capital Corp.
5.92% due 9/01/98 100,000 100,000,000
5.44% due 9/09/98 40,000 39,951,645
J. P. Morgan & Co., Inc.
5.376% due 12/11/98 25,000 24,622,933
Newport Funding Corp.
5.875% due 9/01/98 140,000 140,000,000
--------------
444,574,578
--------------
CORPORATE NOTES -- 23.0%
- --------------------------------------------------------------------------------
Associates Corp. of
North America*
5.61% due 1/04/99 200,000 199,959,365
5.53% due 6/29/99 150,000 149,903,404
Bank One, Wisconsin*
5.65% due 10/23/98 100,000 99,988,872
Bear Stearns*
5.62% due 6/04/99 225,000 225,000,000
Credit Suisse*
5.63% due 10/07/98 200,000 200,000,000
5.63% due 11/09/98 125,000 125,000,000
J. P. Morgan & Co., Inc.*
5.57% due 7/07/99 210,000 209,896,991
Key Bank National
Association*
5.555% due 9/28/98 200,000 199,989,284
5.585% due 5/12/99 88,000 87,956,661
Merrill Lynch & Co., Inc.*
5.76% due 10/05/98 100,000 100,013,442
PNC Bank National
Association*
5.60% due 10/02/98 230,000 229,986,663
Royal Bank of Canada*
5.54% due 2/16/99 200,000 199,937,000
--------------
2,027,631,682
--------------
MEDIUM TERM NOTES -- 7.7%
- --------------------------------------------------------------------------------
Abbey National Treasury
Services
5.54% due 1/20/99 125,000 124,991,658
5.525% due 1/26/99 100,000 99,982,606
5.476% due 6/15/99 100,000 99,914,519
5.58% due 8/25/99 100,000 99,961,541
Norwest Financial Inc.
5.55% due 8/31/99 100,000 99,971,291
Sigma Finance Corp.
5.94% due 11/17/98 150,000 150,000,000
--------------
674,821,615
--------------
PROMISSORY NOTES -- 4.0%
- --------------------------------------------------------------------------------
Goldman Sachs Group*
5.699% due 11/13/98 350,000 350,000,000
Time Deposits -- 6.1%
- --------------------------------------------------------------------------------
Dresdner Bank
6.00% due 9/01/98 135,084 135,084,000
Harris Trust &
Savings Bank
5.938% due 9/01/98 150,000 150,000,000
ING Bank
5.938% due 9/01/98 75,000 75,000,000
Norddeutsche Landesbank
6.00% due 9/01/98 76,200 76,200,000
Westdeutsche Landesbank
5.938% due 9/01/98 100,000 100,000,000
--------------
536,284,000
--------------
REPURCHASE AGREEMENTS -- 2.8%
- --------------------------------------------------------------------------------
First Union Bank
Repurchase Agreement
5.83% due 9/01/98
(collateralized by $48,468,000
Federal National Mortgage
Association, Zero coupon due 12/14/98,
valued at $48,475,849; $41,929,000,
6.96% due 4/02/07, valued at
$41,935,790; $46,763,000,
5.50% due 2/25/00, valued at
$46,770,573; $10,517,000, 6.65% due
11/14/07, valued at $10,518,703;
$47,285,000 Federal Home Loan Mortgage
Association, 5.98% due 6/18/08, valued
at $47,292,658; $31,716,000, 6.28% due
8/19/05, valued at $31,721,136; and
$23,322,000, 6.51% due 8/18/808,
valued at $23,325,777) 250,000,000
--------------
TOTAL INVESTMENTS AT
AMORTIZED COST 99.7% 8,784,208,333
OTHER ASSETS,
LESS LIABILITIES 0.3 21,701,283
------ --------------
NET ASSETS 100.0% $8,805,909,616
====== ==============
* Variable interest rate - subject to periodic change.
See notes to financial statements
<PAGE>
CASH RESERVES PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
AUGUST 31, 1998
- --------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) $8,784,208,333
Interest receivable 97,556,173
- --------------------------------------------------------------------------------
Total assets 8,881,764,506
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investment purchased 75,000,000
Payable to affiliate--Investment Advisory fee (Note 2A) 635,623
Accrued expenses and other liabilities 219,267
- --------------------------------------------------------------------------------
Total liabilities 75,854,890
- --------------------------------------------------------------------------------
Net Assets $8,805,909,616
================================================================================
REPRESENTED BY:
Paid-in capital for beneficial interests $8,805,909,616
================================================================================
CASH RESERVES PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED AUGUST 31, 1998
- --------------------------------------------------------------------------------
INTEREST INCOME (Note 1B): $513,556,789
EXPENSES:
Investment advisory fees (Note 2A) $13,394,307
Administrative fees (Note 2B) 4,464,769
Custody and fund accounting fees 1,969,190
Audit fees 39,700
Trustees' fees 37,966
Legal fees 31,427
Miscellaneous 112,193
- --------------------------------------------------------------------------------
Total expenses 20,049,552
Less aggregate amounts waived by Investment
Adviser and Administrator (Notes 2A, and 2B) (11,119,870)
Less fees paid indirectly (Note 1E) (797)
- --------------------------------------------------------------------------------
Net expenses 8,928,885
- --------------------------------------------------------------------------------
Net investment income $504,627,904
================================================================================
See notes to financial statements
<PAGE>
Cash Reserves Portfolio
STATEMENT OF CHANGES IN NET ASSETS
YEAR ENDED AUGUST 31,
-------------------------------------
1998 1997
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM
OPERATIONS:
Net investment income $ 504,627,904 $ 339,604,126
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 30,335,511,897 33,685,999,190
Value of withdrawals (29,691,630,125) (30,810,390,668)
- --------------------------------------------------------------------------------
Net increase in net assets from
capital transactions 643,881,772 2,875,608,522
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 1,148,509,676 3,215,212,648
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 7,657,399,940 4,442,187,292
- --------------------------------------------------------------------------------
End of period $ 8,805,909,616 $ 7,657,399,940
================================================================================
<TABLE>
CASH RESERVES PORTFOLIO
FINANCIAL HIGHLIGHTS
<CAPTION>
YEAR ENDED AUGUST 31,
--------------------------------------------------------------------------
1998 1997 1996 1995 1994
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net assets (000's omitted) $8,805,910 $7,657,400 $4,442,187 $4,765,406 $2,147,361
Ratio of expenses to average net assets 0.10% 0.10% 0.10% 0.10% 0.11%
Ratio of net investment income
to average net assets 5.65% 5.57% 5.64% 5.88% 3.87%
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 0.22% 0.23% 0.23% 0.23% 0.24%
Net investment income to
average net assets 5.53% 5.44% 5.50% 5.75% 3.74%
=======================================================================================================================
See notes to financial statements
</TABLE>
<PAGE>
CASH RESERVES PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
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.
Citibank is a wholly-owned subsidiary of Citicorp. Citicorp announced its
intention to merge with The Travelers Group. The merger is expected to occur on
or about October 8, 1998.
The preparation of financial statements in accordance with U.S. 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
$13,394,307, of which $6,655,101 was voluntarily waived for the year ended
August 31, 1998. 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 $4,464,769, all of which were voluntarily waived
for the year ended August 31, 1998. 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 $346,656,360,128 and $345,459,284,002, respectively, for
the year ended August 31, 1998.
4. LINE OF CREDIT The Portfolio, along with other CitiFunds, entered into an
agreement with a bank which allows the Funds collectively to borrow up to $60
million for temporary or emergency purposes. Interest on borrowings, if any, is
charged to the specific fund executing the borrowing at the base rate of the
bank. The line of credit requires a quarterly payment of a commitment fee based
on the average daily unused portion of the line of credit. For the year ended
August 31, 1998, the commitment fee allocated to the Portfolio was $29,660.
Since the line of credit was established, there have been no borrowings.
<PAGE>
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, 1998 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, 1998 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, 1998, 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.
PricewaterhouseCoopers
Chartered Accountants
Toronto, Ontario
October 6, 1998
