<PAGE>
- --------------------------------------------------------------------------------
A Letter To Our Shareholders
Dear Shareholder:
The 12 month period ended August 31, 1998 saw a continuation of the
positive economic and market conditions that have prevailed over the past three
years. Late in the period, however, both equity and bond markets started to
experience higher levels of volatility.
Such volatility suggests that money market securities may once again be
poised to demonstrate their true value as relatively safer investments where
investors seek to protect their principal and earn interest. Through its
investment in the Cash Reserves Portfolio the Excelsior Institutional Money
Fund can play a valuable role in investors' diversified investment portfolios.
Excelsior Institutional Money Fund's annualized current 7-day yield for
the period ended August 31, 1998 was 5.47% and for the same period the Fund's
annualized effective 7-day yield was 5.62% after taking into account the effect
of compounding.*
This Annual Report reviews the Fund and Portfolio's investment activities
and performance over the past year. 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.
/s/ Frederick S. Wonham
- -----------------------------------
Frederick S. Wonham
Chairman of the Board and President
October 22, 1998
*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 OR
GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE BANK INSURANCE FUND, THE FEDERAL
RESERVE BOARD, OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND IS
SUBJECT TO INVESTMENT RISK, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT
INVESTED.
<PAGE>
Excelsior Institutional Money Fund
- --------------------------------------------------------------------------------
Statement Of Assets And Liabilities August 31, 1998
<TABLE>
<S> <C>
Assets:
Investments in Cash Reserves Portfolio (the "Portfolio"), at value (Note 1) .... $ 174,145,038
Deferred organization expenses (Note 1) ........................................ 8,021
-------------
Total assets .................................................................. 174,153,059
-------------
Liabilities:
Dividends payable .............................................................. 492,177
Payable for fund shares redeemed ............................................... 1,500,000
Shareholder servicing fees payable (Note 2) .................................... 311,954
Administration service fees payable (Note 2) ................................... 2,335
Transfer agent fees payable (Note 2) ........................................... 2,128
Other accrued expenses ......................................................... 25,309
-------------
Total liabilities ............................................................. 2,333,903
-------------
Net Assets for 171,819,156 shares of beneficial interest outstanding ........... $ 171,819,156
=============
Represented by:
Paid-in capital ................................................................ $ 171,819,156
=============
Net Asset Value, Offering Price and Redemption Price Per Share ................. $ 1.00
=============
</TABLE>
Excelsior Institutional Money Fund
- --------------------------------------------------------------------------------
Statement Of Operations
For the year ended August 31, 1998
<TABLE>
<S> <C> <C>
Investment Income from Portfolio (Note 1):
Interest income (includes $17,160 of net realized gains) ....... $ 10,776,590
Allocated expenses ............................................. (187,207)
------------
10,589,383
Expenses (Note 1):
Shareholder servicing fees (Note 2) ............................ $ 747,297
Administration service fees (Note 2) ........................... 186,824
Professional fees .............................................. 50,542
Amortization of organization expenses (Note 1) ................. 42,435
Registration fees .............................................. 36,045
Prospectus and shareholders' reports ........................... 26,003
Transfer agent fees (Note 2) ................................... 24,745
Trustees' fees and expenses (Note 2) ........................... 19,750
Miscellaneous expenses ......................................... 171
----------
Total expenses ................................................ 1,133,812
Less: Waiver of shareholder servicing fees (Note 2) ........... (725,026)
Less: Waiver of administration service fees (Note 2) .......... (128,164)
----------
Net expenses .................................................. 280,622
------------
Net investment income from operations .......................... $ 10,308,761
============
</TABLE>
See notes to financial statements
<PAGE>
Excelsior Institutional Money Fund
- --------------------------------------------------------------------------------
Statement Of Changes In Net Assets
<TABLE>
<CAPTION>
For the Year Ended August 31,
1998 1997
------------------- -------------------
<S> <C> <C>
Increase (Decrease) in Net Assets:
Net investment income from operations ...................... $ 10,308,761 $ 16,949,906
---------------- ----------------
Dividends to shareholders from net investment income ....... (10,308,761) (16,949,906)
---------------- ----------------
Transactions in Shares of Beneficial Interest
($1.00 Per Share)
Net proceeds from shares sold .............................. 2,050,291,956 4,074,986,293
Reinvestment of dividends .................................. 3,681,052 6,115,286
Cost of shares redeemed .................................... (2,197,914,554) (4,058,630,393)
---------------- ----------------
Net increase (decrease) in net assets resulting from
transactions in shares of beneficial interest ........... (143,941,546) 22,471,186
---------------- ----------------
Total increase (decrease) in net assets ................... (143,941,546) 22,471,186
Net Assets:
Beginning of year .......................................... 315,760,702 293,289,516
---------------- ----------------
End of year ................................................ $ 171,819,156 $ 315,760,702
================ ================
</TABLE>
Excelsior Institutional Money Fund
- --------------------------------------------------------------------------------
Financial Highlights
<TABLE>
<CAPTION>
For the period
November 8, 1993
(commencement of
For the Year ended August 31, operations) to
1998 1997 1996 1995 August 31, 1994
------------- ------------- ------------- ------------ ------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period ............... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Net investment income from operations .............. 0.0551 0.0543 0.0547 0.0579 0.0308
Dividends from net investment income ............... (0.0551) (0.0543) (0.0547) (0.0579) (0.0308)
--------- --------- --------- --------- ------------
Net Asset Value, end of period ..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
========= ========= ========= ========= ============
Total Return ....................................... 5.65% 5.57% 5.61% 5.95% 3.87%(2)
========= ========= ========= ========= ============
Ratios:
Net investment income to average net assets (1) 5.52% 5.40% 5.55% 5.59% 4.39%(2)
Expenses to average net assets (1) ................ 0.25% 0.25% 0.25% 0.25% 0.19%(2)
Total Net Assets, end of period (000's omitted) .... $171,819 $315,761 $293,290 $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 ..... 4.94% 4.92% 5.11% 5.16% 4.28%(2)
Expenses to average net assets .................. 0.83% 0.74% 0.69% 0.68% 0.31%(2)
(2) Annualized
</TABLE>
See notes to financial statements
<PAGE>
Excelsior Institutional Money Fund
- --------------------------------------------------------------------------------
Notes To Financial Statements
(1) Significant Accounting Policies
Excelsior Institutional Money Fund (the "Fund") is a series of Excelsior Funds
(the "Trust"), an open-end diversified management investment company registered
under the Investment Company Act of 1940.
U.S. Trust Company of Connecticut ("U.S. Trust Connecticut"), Chase Global
Funds Services Company ("CGFSC"), a corporate affiliate of The Chase Manhattan
Bank, and Federated Administrative Services ("FAS"), a wholly-owned subsidiary
of Federated Investors, Inc. (collectively, the "Administrators"), serve as
Administrators of the Trust. U.S. Trust Connecticut is a wholly-owned
subsidiary of U.S. Trust Corporation ("U.S. Trust"), a registered bank holding
company. Edgewood Services, Inc. ("Edgewood"), a wholly-owned subsidiary of
Federated Investors, Inc. serves as distributor to the Fund.
It is the Fund's policy, to the extent possible, to maintain a continuous net
asset value of $1.00 per share; 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 the 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
(2.0% at August 31, 1998).
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 performance of the Fund is directly affected by the performance of the
Portfolio. 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 continue to qualify
as a regulated investment company, if such qualification is in the best
interest of its 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 the Administrators.
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 share, 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 of 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.
<PAGE>
Excelsior Institutional Money Fund
- --------------------------------------------------------------------------------
Notes To Financial Statements continued
(2) Administration Fee and Other
Transactions With Affiliates
A. Administration Fee -- For services provided to the Fund, the Administrators
are entitled jointly to an annual fee, payable monthly, at a maximum annual
rate of 0.10% of the average daily net assets of the Fund. For the year ended
August 31, 1998, administration fees totaling $158,800 were charged by U.S.
Trust Connecticut, of which $128,164 were waived.
For the year ended August 31, 1998, the Fund paid FAS administration fees
totaling $28,024. Edgewood receives no compensation from the Fund in its
capacity as distributor of the Fund's shares.
For the year ended August 31, 1998, CGFSC received fees amounting to $24,745,
for providing transfer agency services to the Fund.
B. Shareholder Servicing Fee -- The Trust, on behalf of the Fund, has entered
into shareholder servicing agreements with United States Trust Company of New
York, a wholly-owned subsidiary of U.S. Trust, BISYS and Mid Atlantic Capital
Group Inc. (the "Service Organizations") pursuant to which each Service
Organization, as agent for its customers, provides administrative support
services. For its services, each Service Organization may receive a fee from
the Fund, which may not exceed, on an annual basis, an amount equal to 0.40% of
the average daily net assets of Fund shares owned by customers of the Service
Organization. For the year ended August 31, 1998, the Service Organizations
received fees amounting to $22,271, which is net of $725,026 which was
voluntarily waived, for providing shareholder servicing the Fund.
C. Other -- 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.
<PAGE>
- --------------------------------------------------------------------------------
Excelsior Institutional Money Fund
- --------------------------------------------------------------------------------
Report of Independent Accountants
To the Trustees and the Shareholders of
Excelsior Funds (the Trust):
Excelsior Institutional Money Fund
In our opinion, the accompanying statement of assets and liabilities, and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Excelsior Institutional Money Fund (the "Fund"), a series of the Excelsior
Funds, at August 31, 1998 and the results of its operations, the changes in its
net assets and the financial highlights for the periods indicated in conformity
with generally accepted accounting principles. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about 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, assessing
the accounting principles used and significant estimates made by management and
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 the opinion
expressed above.
PricewaterhouseCoopers LLP
Boston Massachusetts
October 27, 1998
- --------------------------------------------------------------------------------
Important Tax Information unaudited
For the year ended August 31, 1998, 1.5% of the income dividends paid were
derived from interest earned from U.S. Government and U.S. Government agency
obligations.
<PAGE>
Cash Reserves Portfolio
- --------------------------------------------------------------------------------
Portfolio Of Investments August 31, 1998
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000's omitted) Value
- --------------------------------------------------------------------------------
<S> <C> <C>
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
-------------
<PAGE>
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
</TABLE>
<TABLE>
<CAPTION>
Principal
Amount
Issuer (000's omitted) Value
- ---------------------------------------------------------------------------------
<S> <C> <C>
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
</TABLE>
<PAGE>
Cash Reserves Portfolio
- --------------------------------------------------------------------------------
Portfolio Of Investments August 31, 1998 continued
Principal
Amount
Issuer (000's omitted) Value
- --------------------------------------------------------------------------------
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
--------------
<PAGE>
Principal
Amount
Issuer (000's omitted) Value
- --------------------------------------------------------------------------------
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
<TABLE>
<S> <C>
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
==============
</TABLE>
Cash Reserves Portfolio
- --------------------------------------------------------------------------------
Statement of Operations
For the Year Ended August 31, 1998
<TABLE>
<S> <C> <C>
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
============
</TABLE>
See notes to financial statements
<PAGE>
Cash Reserves Portfolio
- --------------------------------------------------------------------------------
Statement Of Changes In Net Assets
<TABLE>
<CAPTION>
Year Ended August 31,
-------------------------------------------
1998 1997
-------------------- --------------------
<S> <C> <C>
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
<TABLE>
<CAPTION>
Year Ended August 31,
--------------------------------
1998 1997
--------------- ---------------
<S> <C> <C>
Ratios/Supplemental Data:
Net assets (000's omitted) ........................ $ 8,805,910 $ 7,657,400
Ratio of expenses to average net assets ........... 0.10% 0.10%
Ratio of net investment income to average net
assets ........................................... 5.65% 5.57%
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%
Net investment income to average net assets ....... 5.53% 5.44%
<CAPTION>
Year Ended August 31,
-------------------------------------------------
1996 1995 1994
--------------- --------------- ---------------
<S> <C> <C> <C>
Ratios/Supplemental Data:
Net assets (000's omitted) ........................ $ 4,442,187 $ 4,765,406 $ 2,147,361
Ratio of expenses to average net assets ........... 0.10% 0.10% 0.11%
Ratio of net investment income to average net
assets ........................................... 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 .................... 0.23% 0.23% 0.24%
Net investment income to average net assets ....... 5.50% 5.75% 3.74%
</TABLE>
See notes to financial statements
<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 Portfolios 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
Portfolios use of amortized cost is subject to the Portfolios 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 con-sidered 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 banks
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 agreements
underlying investments to ensure the existence of a proper level of collateral.
E. Fees Paid Indirectly -- The Portfolios custodian bank calculates its fees
based on the Portfolios 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 Portfolios 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 Portfolios average daily net assets. The
<PAGE>
Cash Reserves Portfolio
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Notes To Financial Statements continued
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.
- --------------------------------------------------------------------------------
Cash Reserves Portfolio
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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 Portfolios 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
<PAGE>
Administrators of the Fund
U.S. Trust Company of Connecticut
225 High Ridge Road
Stamford, CT 06905
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
(617) 557-8000
Federated Administrative Services
Federated Investment Tower
1001 Liberty Avenue
Pittsburgh, PA 15222
Investment Adviser of the Portfolio
Citibank, N.A.
153 East 53rd Street
New York, NY 10043
Transfer Agent of the Fund
Chase Global Funds Services Company
73 Tremont Street
Boston, MA 02108
(800) 909-1989
Custodian and Transfer Agent
of the Portfolio
State Street Bank & Trust Company
225 Franklin Street
Boston, MA 02110
Distributor of the Fund
Edgewood Services, Inc.
Clearing Operations
P.O. Box 897
Pittsburgh, PA 15230
Independent Accountants of the Fund
PricewaterhouseCoopers LLP
160 Federal Street
Boston, MA 02110
USTEXIMA98
<PAGE>
EXCELSIOR
FUNDS
Institutional
Money Fund
Annual Report
August 31, 1998
