<PAGE>
THE PALLADIAN TRUST
STATEMENTS OF ASSETS AND LIABILITIES (UNAUDITED)
FROM THE PERIOD FROM FEBRUARY 1, 1996
(COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1996
<TABLE>
<CAPTION>
Global Global
International Strategic Interactive /
Value Growth Growth Income Telecomm
Portfolio Portfolio Portfolio Portfolio Portfolio Total
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Investments:
At identified cost . . . . . $709,090 $31,224 $42,607 $821,819 $527,213 $2,131,953
--------- -------- ---------- ----------- --------- ----------
--------- -------- ---------- ----------- --------- ----------
At value . . . . . . . . . . $787,246 $33,600 $45,321 $783,730 $533,216 $2,183,113
Cash . . . . . . . . . . . . . 0 51,023 19,442 307,619 40,481 418,565
Receivables:
Interest and dividends . . . 601 117 60 29,138 1,014 30,930
Investments sold . . . . . . 0 4,228 0 0 0 4,228
Forward foreign exchange
contracts to buy . . . . . . ---- ---- ---- 302,204 ---- 302,204
Shares of beneficial
interest sold. . . . . . . . 0 0 0 0 0 0
Expense reimbursements . . . 26,972 18,803 17,317 32,983 24,205 120,280
Unamortized organization costs 21,858 21,858 22,493 21,857 21,857 109,923
Prepaid Insurance. . . . . . . 2,209 2,208 2,202 2,210 2,210 11,039
--------- -------- ---------- ----------- --------- ----------
Total Assets . . . . . . . . $838,886 $131,837 $106,835 $1,479,741 $622,983 $3,180,282
--------- -------- ---------- ----------- --------- ----------
LIABILITIES
Payables:
Investments purchased. . . . $0 $0 $0 $101,166 $0 $101,166
Due Custodian. . . . . . . . 47,987 ---- ---- ---- ---- 47,987
Forward foreign exchange
contracts to buy. . . . . . ---- ---- ---- 300,810 ---- 300,810
Shares of beneficial
interest purchased. . . . . 0 0 0 0 0 0
Accrued expenses . . . . . . 39,453 38,628 37,602 42,308 39,014 197,005
--------- -------- ---------- ----------- --------- ----------
Total Liabilities. . . . . . $87,440 $38,628 $37,602 $444,284 $39,014 $646,968
--------- -------- ---------- ----------- --------- ----------
NET ASSETS . . . . . . . . . . $751,446 $93,209 $69,233 $1,035,457 $583,969 $2,533,314
--------- -------- ---------- ----------- --------- ----------
--------- -------- ---------- ----------- --------- ----------
NET ASSETS Consist of:
Undistributed net
investment income / (loss). . $370 $9 $314 $13,253 ($462) $13,484
Unrealized appreciation
(depreciation) of
investments. . . . . . . . . 78,155 2,377 2,715 (42,527) 6,003 46,723
Accumulated net realized
gain / (loss). . . . . . . . 1,376 3,056 630 (1,161) 2,736 6,637
Capital shares at par value. . 671,545 87,767 65,574 1,065,892 575,692 2,466,470
--------- -------- ---------- ----------- --------- ----------
Total Net Assets . . . . . . $751,446 $93,209 $69,233 $1,035,457 $583,969 $2,533,314
--------- -------- ---------- ----------- --------- ----------
--------- -------- ---------- ----------- --------- ----------
Shares of beneficial
interest outstanding. . . . 66,564 8,022 6,397 106,555 57,479
--------- -------- ---------- ----------- ---------
--------- -------- ---------- ----------- ---------
NET ASSET VALUE, offering
price and redemption price
per share of beneficial
interest outstanding. . . . . $11.29 $11.62 $10.82 $9.72 $10.16
--------- -------- ---------- ----------- ---------
--------- -------- ---------- ----------- ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
1
<PAGE>
THE PALLADIAN TRUST
STATEMENTS OF OPERATIONS (UNAUDITED)
FROM THE PERIOD FROM FEBRUARY 1, 1996
(COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1996
<TABLE>
<CAPTION>
Global Global
International Strategic Interactive /
Value Growth Growth Income Telecomm
Portfolio Portfolio Portfolio Portfolio Portfolio Total
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
INVESTMENT INCOME
Dividends (Net of foreign withholding taxes of $11,$59
and $139 for the Value, International Growth and Global $2,552 $13 $336 $0 $2,300 $5,201
Interactive / Telecomm) portfolio.....................
Interest ............................................... 1,707 437 246 21,982 1,678 26,050
------- -------- --------- ------- --------- -------
Total Investment Income .............................. $4,259 $450 $582 $21,982 $3,978 $31,251
------- -------- --------- ------- --------- -------
EXPENSES
Amortization of organization costs...................... $1,780 $1,780 $1,145 $1,780 $1,780 $8,265
Auditing fees .......................................... 4,977 302 271 8,170 4,167 17,887
Custodian fees ......................................... 2,385 3,422 2,451 4,454 2,304 15,016
Insurance .............................................. 1,797 1,800 1,806 1,797 1,797 8,997
Legal fees ............................................. 3,321 204 181 5,454 2,779 11,939
Management & advisory fees (Note 5)..................... 1,983 112 90 3,379 1,722 7,286
Other .................................................. 21 1 1 34 17 74
Portfolio accounting fees .............................. 11,404 11,425 11,467 11,404 11,404 57,104
Registration & filing fees ............................. 689 43 37 1,130 577 2,476
Shareholders' expenses ................................. 125 8 7 205 105 450
Trustees' fees and expenses............................. 2,379 147 129 3,905 1,993 8,553
------- -------- --------- ------- --------- -------
Total Expenses ....................................... $30,861 $19,244 $17,585 $41,712 $28,645 $138,047
Less expense reimbursements (Note 5).................... $26,972 $18,803 $17,317 $32,983 $24,205 $120,280
------- -------- --------- ------- --------- -------
Net Expenses ......................................... 3,889 441 268 8,729 4,440 17,767
------- -------- --------- ------- --------- -------
NET INVESTMENT INCOME .................................. $370 $9 $314 $13,253 ($462) $13,484
------- -------- --------- ------- --------- -------
REALIZED and UNREALIZED GAIN /
(LOSS) on INVESTMENTS:
Net realized gain / (loss) from:
Security transactions ................................ $1,376 $3,056 $0 ($615) $2,658 $6,475
Forward foreign exchange contracts ................... ---- ---- (210) (1,299) ---- (1,509)
Forward currency transactions ........................ ---- ---- 840 754 77 1,671
Net change in unrealized appreciation / (depreciation) on:
Security transactions ................................ $78,155 $2,377 $2,715 ($38,089) $6,003 $51,161
Forward foreign exchange contracts ................... 0 0 0 (5,274) 0 (5,274)
Forward currency transactions ........................ 0 0 0 837 0 837
Net realized and unrealized gain / (loss) on investments $79,531 $5,433 $3,345 ($43,686) $8,738 $53,361
------- -------- --------- ------- --------- --------
NET INCREASE / (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ........................ $79,901 $5,442 $3,659 ($30,433) $8,276 $66,845
------- -------- --------- ------- --------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
<TABLE>
<CAPTION>
THE PALLADIAN TRUST
STATEMENTS OF CHANGE IN NET ASSETS (UNAUDITED)
FROM THE PERIOD FROM FEBRUARY 1, 1996 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1996
GLOBAL GLOBAL
INTERNATIONAL STRATEGIC INTERACTIVE /
VALUE GROWTH GROWTH INCOME TELECOMM
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
OPERATIONS:
Net investment income/ (loss). . . . . . . . $370 $9 $314 $13,253 ($462)
Net realized gain / (loss) on securities,
forward foreign exchange contracts and
foreign currency transactions. . . . . . . 1,376 3,056 630 (1,160) 2,735
Net unrealized gain / (loss) on securities,
forward foreign exchange contracts and
other assets and liabilities denominated
in foreign currencies. . . . . . . . . . . 78,155 2,377 2,715 (42,526) 6,003
-------- ------- ------- ---------- --------
Net increase / (decrease) in net assets
resulting from operations. . . . . . . . . $79,901 $5,442 $3,659 ($30,433) $8,276
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income. . . . . . . . . . . $0 $0 $0 $0 $0
Net realized gains on investments. . . . . 0 0 0 0 0
NET INCREASE/ (DECREASE) IN NET
ASSETS FROM SHARES OF BENEFICIAL
INTEREST TRANSACTIONS. . . . . . . . . . . $671,545 $87,767 $65,574 $1,065,892 $575,692
-------- ------- ------- ---------- --------
Net increase / (decrease) in net assets. . . 751,446 93,209 69,233 1,035,459 583,968
NET ASSETS:
Beginning of period. . . . . . . . . . . . . 0 0 0 0 0
-------- ------- ------- ---------- --------
End of period. . . . . . . . . . . . . . . . $751,446 $93,209 $69,233 $1,035,457 $583,969
-------- ------- ------- ---------- --------
-------- ------- ------- ---------- --------
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
THE PALLADIAN TRUST
FINANCIAL HIGHLIGHTS (UNAUDITED)
FROM THE PERIOD FROM FEBRUARY 1, 1996 (COMMENCEMENT OF OPERATIONS) TO JUNE 30, 1996
Global Global
International Strategic Interactive/
Value Growth Growth Income Telecomm
Portfolio Portfolio Portfolio Portfolio Portfolio
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, commencement
of operations ........................ $10.00 $10.00 $10.00 $10.00 $10.00
-------- -------- -------- -------- --------
INCOME / (LOSS) FROM INVESTMENT
OPERATIONS:
Net investment income .................. 0.01 0.00 0.06 0.12 (0.01)
Net realized and unrealized gain /
(loss) on investments .................. 1.28 1.62 0.76 (0.41) 0.17
-------- -------- -------- -------- --------
Total from investment operations ....... 1.29 1.62 0.82 (0.28) 0.16
-------- -------- -------- -------- --------
LESS DISTRIBUTIONS:
Dividends from net investment
income ............................... 0.00 0.00 0.00 0.00 0.00
Distributions from capital gains ....... 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- --------
Total distributions .................... 0.00 0.00 0.00 0.00 0.00
-------- -------- -------- -------- --------
Net asset value, end of year ........... $11.29 $11.62 $10.82 $9.72 $10.16
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Total Return ........................... 12.89% 16.19% 8.23% -2.82% 1.60%
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
RATIOS TO AVERAGE NET ASSETS /
SUPPLEMENTAL DATA:
Net assets, end of reporting period .... $751,984 $93,692 $69,545 $1,036,183 $584,444
Ratio of operating expenses to
average net assets ................... 1.53% 2.25% 1.77% 2.23% 2.10%
Ratio of net investment income
to average net assets ................ 0.15% 0.05% 1.59% 3.39% -0.22%
Portfolio turnover rate ................ 23.15% 490.77% 0.00% 76.14% 23.55%
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
THE VALUE PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1996
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- --------------------------------------------------------------------------------
<C> <S> <C>
COMMON STOCKS - 104.8%
Advertising - 3.6%
1,000 Ackerly Communications, Inc........................... 27,250
--------
AEROSPACE & DEFENSE - 6.3%
300 Boeing Company......................................... 26,138
500 Precision Castparts Corp.. ............................ 21,500
--------
47,638
--------
AUTOMOTIVE EQUIPMENT & SUPPLIES - 9.2%
600 Echlin Inc............................................. 22,725
1,000 Kollmorgen ............................................ 14,750
1,000 Standard Motor Products ............................... 17,875
500 Wynn's International, Inc. ............................ 14,125
--------
69,475
BEVERAGES - 5.0%
1,000 Celestial Seasonings, Inc. ............................ 20,500
500 Seagrams. ............................................. 16,812
--------
37,312
--------
BROADCASTING & CABLE - 11.9%
2,000 Citicasters, Inc. ..................................... 62,500
309 Chris-Craft Industries, Inc. .......................... 13,596
500 Liberty Media Group .................................. 13,250
--------
89,346
--------
COMMUNICATION SERVICES - 5.4%
500 Comsat Corp. .......................................... 13,000
2,000 Loral Space & Communications........................... 27,250
--------
40,250
--------
DEPARTMENT STORES - 3.6%
1,000 Nieman Marcus Group, Inc. ............................. 27,000
--------
DIVERSIFIED - 1.6%
500 Rollins, Inc. ......................................... 11,750
--------
ELECTRICAL EQUIPMENT & SUPPLIES - 4.9%
500 Westinghouse Electric ................................. 9,375
500 Moog Inc. ............................................. 12,250
1,000 Katy Industries, Inc. ................................. 15,000
--------
36,625
--------
FOOD - 5.3%
600 Quaker Oats Co. ....................................... 20,475
1,000 Archer Daniels Midland ............................... 19,125
--------
39,600
--------
GROCERY STORES - 8.5%
1,000 Giant Food Inc. ....................................... 35,875
2,000 Bruno's Inc. . ........................................ 27,750
--------
63,625
--------
INDUSTRIAL INORGANIC CHEMICALS - 2.8%
1,000 Church & Dwight Co., Inc. ............................. 20,875
--------
INDUSTRIAL EQUIPMENT & SUPPLIES - 8.5%
2,000 AMPCO - Pittsburgh Corp. .............................. 23,250
1,000 Goulds Pumps .......................................... 25,625
300 Sequa Corp. ........................................... 15,000
--------
63,875
--------
LABORATORY APPARATUS - 2.9%
1,000 Ametek Inc. ........................................... 21,750
--------
NEWSPAPERS / PUBLISHING - 10.8%
500 Lee Enterprises, Inc. ................................. 11,812
500 Media General Inc. .................................... 18,625
500 Meredith Corp. ........................................ 20,875
500 Pulitzer Publishing .................................. 29,625
--------
80,937
--------
NON-DURABLE GOODS - 4.0%
500 Culbro Corporation .................................... 29,813
--------
OIL & GAS - 1.5%
1,000 RPC Inc................................................ 11,500
--------
PAPER & PLASTIC PRODUCTS - 3.9%
500 Ferro Corp ............................................ 13,250
500 Grief Bros. Corp ...................................... 16,000
--------
29,250
--------
TELECOMMUNICATIONS - 5.2%
1,000 Centennial Cellular Corp. ............................ 16,875
500 Telephone & Data Systems .............................. 22,500
--------
39,375
--------
TOTAL INVESTMENTS (Cost $709,090) 104.8% 787,246
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (Net) -4.8% (35,800)
- --------------------------------------------------------------------------------
NET ASSETS 100.0% 751,446
- --------------------------------------------------------------------------------
</TABLE>
<PAGE>
The Growth Portfolio
Portfolio of Investments June 30, 1996
Value
Shares (Note 1)
- -------------------------------------------------------------------------
COMMON STOCKS - 36.0%
Automotive Services - 1.2%
50 Olympic Financial,Inc............................. 1,151
--------
Banks & Financial Services - 1.8%
25 Bank of New York - Warrants ...................... 1,035
50 Mercury Financial Co.............................. 637
--------
1,672
--------
Building Residential & Commercial - 0.5%
20 Contl. Homes Holding Corp. ....................... 430
--------
Business Services - 1.3%
50 Personnel Group of America, Inc. ................. 1,232
--------
Communication Services - 1.2%
50 Brite Voice Systems, Inc. ........................ 1,075
--------
Computers & Data Processing - 3.0%
10 Hewlett Packard Company .......................... 996
50 PC Docs Group Intl., Inc. ........................ 993
100 Sunriver Corporation ............................ 787
--------
2,776
--------
Entertainment - 1.2%
110 Quintel Entertainment, Inc. ...................... 1,156
--------
Environmental Scvs.& Waste Disposal - 2.7%
40 USA Waste Services, Inc. ......................... 1,185
40 United Waste Systems, Inc. ....................... 1,291
--------
2,476
--------
Health Services - 1.0%
100 Neurocrine Biosciences, Inc. .................... 887
--------
Industrial Equipment - 1.8%
50 Platinum Technology, Inc. ........................ 756
100 Starsight Telecast, Inc. ......................... 912
--------
1,668
--------
Machinery - 1.5%
100 Figgie International ............................. 1,425
Medical Supplies - 3.6%
40 Safeskin Corp. .................................. 1,661
50 Ameridata Technologies,Inc. ..................... 794
50 Bacou USA, Inc.................................... 887
--------
3,342
--------
Miscellaneous - 0.6%
100 Geographics, Inc. ............................... 568
--------
Oil & Gas Services - 0.4%
25 Digicon, Inc....................................... 418
--------
Restaurants - 7.4%
50 CKE Restaurants ................................... 1,275
100 Cooker Restaurant Corp............................. 1,337
30 Lone Star Steakhouse & Saloon...................... 1,132
40 Manhattan Bagel Company ........................... 590
50 Landry's Seafood Restaurants ...................... 1,237
50 Dave & Buster's, Inc............................... 1,337
--------
6,908
--------
Restaurant Equipment - 1.6%
100 Turbochef, Inc. .................................. 1,476
--------
Retail - 3.4%
40 Friedman's Inc. ................................... 1,020
50 Renters Choice .................................... 1,276
10 Fila Holdings Spa, ADR ............................ 862
--------
3,158
Semiconductor Capital Equipment - 0.7%
50 Advanced Technology Material ...................... 675
--------
Telecommunications - 1.2%
20 Worldcom, Inc. ................................... 1,107
--------
TOTAL INVESTMENTS (Cost $31,224) 36.0% 33,600
- ------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (Net) 64.0% 59,609
- ------------------------------------------------------------------------
NET ASSETS 100.0% 93,209
- ------------------------------------------------------------------------
<PAGE>
THE INTERNATIONAL GROWTH PORTFOLIO
- --------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS JUNE 30, 1996
- --------------------------------------------------------------------
<TABLE>
<CAPTION>
VALUE
SHARES (NOTE 1)
- ----------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 65.5%
SWITZERLAND - 14.0%
10 Stratec Holding . . . . . . . . . . . . . . . . 9,713
--------
FINLAND - 11.9%
500 Benefon . . . . . . . . . . . . . . . . . . . . 8,261
--------
FRANCE - 15.2%
75 Axime (Ex Segin). . . . . . . . . . . . . . . . 10,504
--------
HONG KONG - 10.9%
22,500 Joyce Boutique . . . . . . . . . . . . . . . . 7,556
--------
SWEDEN - 13.4%
500 Nobel Biocare . . . . . . . . . . . . . . . . 9,287
--------
TOTAL INVESTMENTS (Cost $42,607) 65.5% 45,321
- ----------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (Net) 34.5% 23,912
- ----------------------------------------------------------------------
NET ASSETS 100.0% 69,233
- ----------------------------------------------------------------------
- ----------------------------------------------------------------------
</TABLE>
<PAGE>
THE GLOBAL STRATEGIC INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1996
Value
Face Value (Note 1)
- --------------------------------------------------------------------------------
UNITED STATES DOLLAR BOND - 41.5%
450,000 U.S. Treasury Note 429,609
5.250% due 1/31/01
GERMAN DEUTSCHE MARK BOND - 24.4%
350,000 Deutschland Republic
8.000% due 7/22/02 $253,094
JAPANESE YEN BOND - 9.8%
11,400,000 JAPAN - 184 (10 Year Issue)
2.900% due 12/20/05 101,026
TOTAL INVESTMENTS (Cost $821,819) 75.7% 783,729
- --------------------------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (Net) 24.3% 251,728
- --------------------------------------------------------------------------------
NET ASSETS 100.0% 1,035,457
- --------------------------------------------------------------------------------
SCHEDULE OF FORWARD FOREIGN EXCHANGE CONTRACTS
Contract Market
Value Value
Date (Note 1)
- --------------------------------------------------------------------------------
FORWARD FOREIGN EXCHANGE CONTRACTS TO BUY
121,456 German Deutsche Mark....... 07/22/96 $79,982
15,499,998 Japanese Yen............... 07/22/96 142,298
3,800,000 Spanish Peseta............. 07/22/96 29,646
77,199,998 Italian Lira .............. 07/22/96 50,278
- --------------------------------------------------------------------------------
TOTAL FORWARD FOREIGN EXCHANGE CONTRACTS TO BUY
(Contract amount $300,810) $302,204
- --------------------------------------------------------------------------------
<PAGE>
THE GLOBAL INTERACTIVE / TELECOMM PORTFOLIO
- --------------------------------------------------------------------------------
Portfolio of Investments June 30, 1996
- --------------------------------------------------------------------------------
Value
Shares (Note 1)
- --------------------------------------------------------------------------------
COMMON STOCKS - 91.3%
Canada - 1.7%
500 British Columbia Telecomm...................................... 9,725
Great Britain - 2.7%
2,000 Flextech PLC................................................... 15,779
-------
Foreign - 7.0%
1,000 Grupo Televisa, GDS............................................ 30,750
500 Havas S.A. Spons, ADR.......................................... 10,222
-------
40,972
-------
UNITED STATES - 79.9%
BROADCASTING, MEDIA & RADIO - 12.6%
1,000 Multi-Market Radio, Class A.................................... 10,937
500 The News Corporation, Ltd., ADR................................ 11,750
500 Time Warner, Inc............................................... 19,626
1,000 Citicasters, Inc., Class A..................................... 31,250
-------
73,563
-------
Computer Software - 2.1%
100 Microsoft Corporation ......................................... 12,012
CABLE - 12.3%
500 Cablevision Systems Corp....................................... 23,125
1,000 Home Shopping Network.......................................... 12,000
1,000 Tele-Communications, Inc....................................... 18,125
1,000 Comcast Corp, Class A.......................................... 18,375
-------
71,625
-------
COMMUNICATION SERVICES - 6.2%
500 Comsat Corp. .................................................. 13,000
1,000 Loral Space & Communications .................................. 13,625
1,000 Rogers Communications, Class B................................. 9,376
-------
36,001
-------
DIVERSIFIED - 11.7%
1,000 Westinghouse Electric.......................................... 18,750
300 Sony Corp., ADR................................................ 19,838
1,050 Gaylord Entertainment.......................................... 29,662
-------
68,250
-------
ENTERTAINMENT - 3.2%
1,000 Intl. Family Entertainment..................................... 18,500
MISCELLANEOUS - 5.2%
700 Santa Anita Realty Entertainment............................... 8,837
1,000 United International Holding, Class A.......................... 13,751
300 Liberty Media Group, Class A................................... 7,950
-------
30,538
-------
Telecommunications - 26.8%
500 Airtouch Communications, Inc................................... 14,125
500 BCE, Inc....................................................... 19,750
300 Bell Atlantic.............................. ................... 19,125
500 Cable & Wireless, plc., ADR.................................... 9,876
500 Century Telephone Enterprises.................................. 15,937
1,000 New World Communications Group................................. 14,625
300 NYNEX Corp..................................................... 14,250
1,500 Rogers Cantel Mobile, Class B.................................. 35,062
300 Telephone Data Systems......................................... 13,501
-------
156,251
-------
TOTAL INVESTMENTS (Cost $527,213) 91.3% 533,216
OTHER ASSETS AND LIABILITIES (Net) 8.7% 50,753
NET ASSETS 100.0% 583,969
- --------------------------------------------------------------------------------
<PAGE>
The Palladian Trust
Notes to Financial Statements
1. ORGANIZATION
The Palladian Trust (the "Trust") is registered under the Investment Company Act
of 1940, as amended, (the "Act") as an open-end management investment company
organized as a Massachusetts business trust. As of the date of this report the
Trust offered six managed investment Portfolios: Value Portfolio, Growth
Portfolio, Balanced Portfolio, International Growth Portfolio, Global Strategic
Income Portfolio and Global Interactive / Telecomm Portfolio. The Trust is
intended to serve as an investment medium for (i) variable life insurance
policies and variable annuity contracts offered by insurance companies, (ii)
certain qualified pension and retirement plans, as permitted by Treasury
Regulations; and (iii) and advisers to the Portfolios and their affiliates.
2. SIGNIFICANT ACCOUNTING POLICIES
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 financial statements. Actual
results could differ from those estimates. The following is a summary of
significant accounting policies consistently followed by the Portfolios in the
preparation of their financial statements.
PORTFOLIO VALUATION: Domestic and foreign portfolio securities, except as noted
below, for which market quotations are readily available are stated at market
value. Market value is determined on the basis of the last reported sales price
in the principal market where such securities are traded or, if no sales are
reported, the mean between representative bid and asked quotations obtained from
a quotation reporting system or from established market makers.
Long-term debt securities, including those to be purchased under firm commitment
agreements, are normally valued on the basis of quotes obtained from brokers and
dealers or pricing services, which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics, and other market
data. Under certain circumstances, long-term debt securities having a maturity
of sixty days or less may be valued at amortized cost. Debt securities with a
maturity date at time of purchase of 60 days or less are valued at amortized
cost which approximates fair value.
Securities for which market quotations are not readily available are valued at
fair market value as determined in good faith by, or under the direction of the
Board of Trustees.
FOREIGN CURRENCY. The books and records of the Portfolios are maintained in
U.S. dollars. Foreign currencies, investments and other assets and liabilities
are translated into
<PAGE>
U.S. dollars at the exchange rates prevailing at the end of the period, and
purchases and sales of investment securities, income and expenses are translated
on the respective dates of such transactions. It is not practicable to isolate
that portion of the results of operations arising as a result of changes in the
foreign exchange rates from the portion that arises from in market prices of
investment during the period. Accordingly, all such changes have been reflected
as net gain/(loss) on security transactions in the Statement of Operations.
Unrealized gains and losses, not relating to securities, which result from
changes in foreign currency exchange rates have been included in unrealized
appreciation/(depreciation) of foreign currency transactions. Unrealized gains
and losses of securities, which result from changes in forward currency exchange
rates as well as changes in market prices of securities, have been included in
unrealized appreciation / (depreciation) of securities. Net realized foreign
currency gains and losses resulting from changes in exchange rates include
foreign currency gains and losses between trade date and settlement date on
investment securities transactions, gains and losses on foreign currency
transactions and the difference between the amounts of interest and dividends
recorded on the books of the Portfolios and the amount actually received. The
portion of foreign currency gains and losses related to fluctuations in exchange
rates between the initial purchase trade date and subsequent sale trade is
included in realized gain/(loss) from investment securities sold.
FORWARD FOREIGN CURRENCY CONTRACTS. All portfolios may enter into forward
foreign currency contracts. Foreign currency contracts are agreements to
exchange one currency for another at a future date and at a specified price.
The Portfolios may use forward foreign currency contracts to facilitate
transactions in foreign securities and to manage the Portfolios' foreign
currency exposure. The U.S. dollar market value, contract value and the foreign
currencies the Portfolios have committed to buy or sell are shown in the
Portfolio of Investments under the caption "Schedule of Forward Foreign Currency
Contracts." These amounts represent the aggregate exposure to each foreign
currency the Portfolios have acquired or hedged through currency contracts at
June 30, 1996. Forward foreign currency contracts that have been offset with
different counterparties are reflected as both a forward foreign currency
contract to buy and a forward foreign currency contract to sell. Forward
foreign currency contracts to buy generally are used to acquire exposure to
foreign currencies, while forward foreign currency contracts to sell are used to
hedge the Portfolios' investments against currency fluctuations. Also, a
forward foreign currency contract to buy or sell can offset a previously
acquired opposite forward foreign currency contract.
Forward foreign currency contracts are marked-to-market daily using foreign
currency exchange rates supplied by an independent pricing service. The change
in a contract's market value is recorded by the Portfolios as an unrealized gain
or loss. When the contract is closed or delivery is taken, the Portfolios
record a realized gain or loss equal to the difference between the value of the
contract at the time it was opened and the value at the time it was closed.
<PAGE>
The use of forward foreign currency contracts does not eliminate fluctuations in
the underlying prices of the Portfolio's securities, but it does establish a
rate of exchange that can be achieved in the future. Although forward foreign
currency contracts used for hedging purposes limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential gain
that might result should the value of the currency increase. In addition, the
Portfolios could be exposed to risks if the counterparties to the contracts are
unable to meet the terms of their contracts.
FEDERAL INCOME TAXES. Each Portfolio of the Trust is a separate entity for
Federal income tax purposes. No provision for Federal income taxes has been
made since each Portfolio of the Trust has complied and intends to continue to
comply with provisions of the Internal Revenue Code available to regulated
investment companies and to distribute its taxable income to shareholders
sufficient to relieve it from all or substantially all federal income taxes.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME. Investment transactions are
recorded on trade date. Dividend income and distributions to shareholders are
recorded on the ex-dividend date. Interest income (including amortization of
premium and discount on securities) and expenses are accrued daily. Realized
gains and losses from investment transactions are recorded on an identified cost
basis which is the same basis the Trust uses for Federal income tax purposes.
Purchases of securities under agreements to resell are carried at cost, and the
related accrued interest is included in interest receivable.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. Dividends from net investment
income are declared and paid quarterly for all portfolios. Net realized capital
gains, if any, are distributed at least annually.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting principles.
Permanent book and tax basis differences relating to shareholder distributions
will result in reclassifications to paid in capital. Undistributed net
investment income may include temporary book and tax basis differences which
will reverse in a subsequent period.
EXPENSES. The Trust accounts separately for the assets, liabilities and
operations of each Portfolio. Expenses directly attributable to a Portfolio are
charged to a Portfolio, while expenses which are attributable to more than one
Portfolio of the Trust are allocated among the respective Portfolios based upon
the relative net assets of each Portfolio.
ORGANIZATION EXPENSE. Organization expense were deferred and are being
amortized by each Portfolio on a straight-line basis over a five-year period
from commencement of operations. Each Portfolio's organizational fees payable
includes fees and expenses payable to Palladian Advisors, Inc. ("PAI") of
$141,828.00. The amount paid by the Trust on any redemption by PAI or, any
other then-current holder of the organizational seed capital shares ("Initial
Shares") of the Portfolio, will be reduced by a portion of any
<PAGE>
unamortized organization expenses of the Portfolio determined by the proportion
of the number of the Initial Shares of the Portfolio redeemed to the number of
the Initial Shares of the Portfolio outstanding after into account any prior
redemptions of the Initial Shares of the Portfolio.
TRUSTEES. Each Trustee who is not an "interested person" (as defined in the
Act) of the Trust, receives $1,500 per meeting attended, as well as
reimbursement for reasonable out-of-pocket expenses, from the Trust. For the
quarter ending June 30, 1996 the Trust incurred $9,000 in Trustee fees, which
was prorated to each portfolio.
3. MANAGER, PORTFOLIO ADVISOR, PORTFOLIO MANAGERS, ADMINISTRATION FEES AND
OTHER TRANSACTIONS.
Palladian Advisors, Inc. ("PAI") serves as overall Manager of the Trust and is
responsible for general investment supervisory services to the Portfolios. PAI
evaluates and recommends to the Trust registered investment advisors to be
retained by the Trust on behalf of each of the Portfolios as Portfolio Managers
and monitors and assesses their performance and makes periodic reports to the
Trust. In performing these responsibilities, the Manager will rely on the
services of Tremont Partners, Inc., which has been retained as Portfolio
Advisor.
As Portfolio Advisor, Tremont provides research concerning registered investment
advisors to be retained by the Trust as Portfolio Managers, monitors and assists
PAI with the periodic reevaluation of existing Portfolio Managers and makes
periodic reports to PAI and the Trust. PAI, not the Trust, pays the fees of the
Portfolio Advisor.
The Trust and PAI have entered into portfolio management agreements with various
Portfolio Managers. The Portfolio Managers for the Portfolios are as follows:
GAMCO Investors, Inc. serves as the Portfolio Manager for The Value Portfolio
and The Global Interactive/Telecomm Portfolio; Stonehill Capital Management,
Inc. serves as the Portfolio Managers of The Growth Portfolio; Bee & Associates
Incorporated serves as the Portfolio Managers of The International Growth
Portfolio and Fischer Francis Trees & Watts serves as the Portfolio Manager of
The Global Strategic Income Portfolio.
Each Portfolio pays an overall management fee, computed and accrued daily and
paid monthly, based on its average daily net assets. For the first twelve
months of operations, the management fee is .80% of average net assets. After
that time, the base fee will be 2.0%, but may vary between 0% and 4% depending
on the performance of a Portfolio compared to that of an appropriate benchmark.
Each Portfolio Manager will receive 80% of the fee, and PAI will receive the
remaining 20%. PAI is responsible for paying the fee of Tremont, which equals
32.5% of the fee received by PAI.
On August 8, 1996, under the terms approved by the Board of Trustees of the
Portfolios, Palladian Advisors, Inc. (PAI) agreed for a one year period,
effective at the commencement of operations, to limit the expenses for each
Portfolio and reimburse
<PAGE>
expenses to the extent that each Portfolios aggregate expenses (excluding
management fees) exceed the expense limitation for that Portfolio. The
Portfolios will not pay PAI its advisory fee while a receivable is due to the
Portfolios as a result of the expense limitations, except that the portion of
the advisory fee that PAI is obligated to pay Tremont Partners, Inc. will be
paid. The expense limitations for each of the Portfolio's as a percentage of
average daily net assets are as follows:
Portfolio Limitations/other expenses
Value 0.70%
Growth 0.70%
International Growth 1.20%
Global Strategic Income 1.20%
Global Interactive / Telecomm 1.20%
PAI, if agreed to by the Board, may continue the voluntary expense limitation
past February 1, 1997. Thereafter, each Portfolio is required to reimburse PAI
for any fees it waived or expenses it reimbursed pursuant to the expense
limitations, provided that such reimbursement would not cause the Portfolios
expense ratio to exceed the expense limitations set forth above.
The amount of the fees waived or expenses reimbursed are reflected in the
financial statements as a receivable from PAI with a credit reflected as a
contra-expense account. As of and for the period ended June 30, 1996, the total
expenses waived and reimbursed by PAI for each Portfolio were as follows:
Portfolio Amount
Value $27,509.90
Growth $19,286.35
International Growth $17,628.90
Global Strategic Income $33,709.15
Global Telecomm / Interactive $24,679.66
PAI has acknowledged that, upon termination of the Investment Management
Agreement between PAI and the Portfolios, the Portfolios would not be liable to
PAI for any waived or reimbursed fees which have not been reimbursed. Under the
terms of the Agreement, the Board of Trustees or the Portfolios' shareholders
may terminate the Agreement at any time upon 60 days notice. Since the amounts
due PAI are dependent upon future events and the Agreement is terminable, the
amount of the total obligation cannot be reasonably estimated. The repayment to
PAI will be recorded in future years as an expense and a liability at each net
asset value determination date to the extent that such repayment does not cause
the Portfolio to exceed the expense limitation. As of June 30, 1996 the
<PAGE>
maximum potential liability would be limited to the total amount of the expenses
waived and reimbursed above.
Investors Bank & Trust Company provides transfer agency, portfolio accounting
and custody services for the Trust. The transfer agency and portfolio
accounting fees are the greater of $40,000 or .05% of net assets for the first
$600 million and .03% of the net assets in excess of $600 million. Custody fees
are separated between domestic and global.
Western Capital Financial Group (the "Distributor") serves as the principle
underwriter and distributor of the shares of the Trust. The Distributor has
voluntarily waived any fees associated with servicing the Trust.
Certain officers of the Trust are also officers of PAI and the Distributor.
An individual, together with certain affiliated entities, owns a majority
interest in the parent company of Tremont. The individual is also an officer of
GAMCO Investors, Inc. selected by Tremont to provide investment advisory
services to two Portfolios of the Trust.
An officer of the Distributor is also an officer of PAI, and a trustee and
officer of the Trust. An officer of PAI is also a trustee and officer of the
Trust.
4. PURCHASES AND SALES OF SECURITIES. The aggregate cost of purchases and
proceeds from sales of securities, excluding U.S. Government and short-term
investments, for the quarter ending June 30, 1996 were as follows:
Purchases Sales
Value $832,199 $123,109
Growth $141,823 $102,964
International Growth $32,910 -----
Global Strategic Income $860,611 $489,214
Global Telecomm / Interactive $625,940 $98,727
The aggregate cost of purchases and proceeds from sales of long-term U.S.
Government Securities, excluding short-term investments, for the quarter ending
June 30, 1996 were as follows:
Purchases Sales
Global Strategic Income $451,688 -----
<PAGE>
5. SHARES OF BENEFICIAL INTEREST. Each Portfolio of the Trust may issue an
unlimited number of shares of beneficial interest without par value.
MONTH ENDED
6/30/96
----------------------
SHARES AMOUNT
- ------------------------------------------------------------------------
VALUE PORTFOLIO:
Sold....................................... 65,599 $671,930
Issued as reinvestment of dividends........ 0 0
Redeemed................................... (35) (385)
-------- --------
Net increase............................... 66,564 $671,545
-------- --------
-------- --------
MONTH ENDED
6/30/96
------------------------
SHARES AMOUNT
- -------------------------------------------------------------------------
GROWTH PORTFOLIO:
Sold....................................... 8,029 $87,857
Issued as reinvestment of dividends........ 0 0
Redeemed................................... (7) (90)
-------- --------
Net increase............................... 8,022 $87,767
-------- --------
-------- --------
MONTH ENDED
6/30/96
------------------------
SHARES AMOUNT
- -------------------------------------------------------------------------
INTERNATIONAL GROWTH PORTFOLIO:
Sold...................................... 6,397 $ 65,574
Issued as reinvestment of dividends....... 0 0
Redeemed.................................. 0 0
-------- --------
Net increase.............................. 6,397 $ 65,574
-------- --------
-------- --------
MONTH ENDED
6/30/96
-----------------------
SHARES AMOUNT
- -------------------------------------------------------------------------
GLOBAL STRATEGIC INCOME PORTFOLIO:
Sold...................................... 141,138 $1,399,125
Issued as reinvestment of dividends....... 0 0
Redeemed.................................. (34,583) (333,233)
--------- ------------
Net increase.............................. 106,555 $1,065,892
--------- ------------
--------- ------------
<PAGE>
MONTH ENDED
6/30/96
-------------------------
SHARES AMOUNT
- -------------------------------------------------------------------------
GLOBAL INTERACTIVE / TELECOMM PORTFOLIO:
Sold...................................... 106,555 $575,692
Issued as reinvestment of dividends....... 0 0
Redeemed.................................. 0 0
-------- --------
Net increase................................ 106,555 $575,692
-------- --------
-------- --------
