<PAGE>
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Balanced Portfolio
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PORTFOLIO OF INVESTMENTS June 30, 1995 (unaudited)
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ISSUER SHARES VALUE
- - ---------------------------------------------------------------
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COMMON STOCKS -- 51.8%
- - ---------------------------------------------------------------
COMMERCIAL SERVICES - 2.8%
American Express......... 75,000 $ 3,637,500
Sysco Corp. ............. 100,000 2,950,000
------------
6,587,500
------------
COMMODITIES - 3.7%
Air Products & Chemicals Inc. 75,000 4,181,250
EI Dupont De Nemours & Co. Inc. 36,600 2,516,250
Lubrizol Corp............ 60,000 2,122,500
------------
8,820,000
------------
CONSUMER DURABLES - 3.2%
Eastman Kodak Co......... 62,000 3,758,750
General Motors Corp...... 84,000 3,937,500
------------
7,696,250
------------
CONSUMER NON-DURABLES - 3.1%
PepsiCo Inc.............. 62,500 2,851,563
Philip Morris Comp Cos Inc. 43,000 3,198,125
RJR Nabisco Holdings Group 48,000 1,338,000
------------
7,387,688
------------
CONSUMER SERVICES - 2.8%
Carnival Corp............ 96,500 2,255,688
McDonald's Corp.......... 86,000 3,364,750
Mirage Resorts Inc....... 35,500 1,087,188
------------
6,707,626
------------
ELECTRONIC/TECHNOLOGICAL SERVICES - 6.0%
Cisco Systems, Inc....... 55,000 2,780,938
Computer Associates Intl. Inc. 33,300 2,256,075
DSC Communications....... 48,000 2,232,000
General Motors Corp. Class "E" 65,000 2,827,500
Loral Corp. ............. 34,900 1,806,075
Silicon Graphics Inc.*... 60,000 2,392,500
------------
14,295,088
------------
ENERGY/MINERALS - 6.9%
Amoco Corp............... 62,000 4,130,750
Exxon Corp............... 59,100 4,173,938
Kerr-McGee Corp.......... 75,000 4,021,875
Royal Dutch Petroleum Co.
ADRs................... 35,000 4,265,625
------------
16,592,188
------------
FINANCE - 4.9%
American International Group Inc. 28,000 3,192,000
BankAmerica Corp......... 60,000 3,157,500
Federal National Mortgage
Association............ 40,000 3,775,000
State Street Boston Corp. 44,300 1,633,563
------------
11,758,063
------------
HEALTH SERVICES/TECHNOLOGY - 3.6%
Community Health Systems. 35,500 1,202,563
Johnson & Johnson ....... 49,000 3,313,625
Pfizer Inc............... 32,000 2,956,000
United Health Care Corp.. 5,600 231,700
Value Health Inc......... 35,300 1,138,425
------------
8,842,313
------------
INDUSTRIAL SERVICES - 3.0%
Fluor Corp. ............. 45,000 2,340,000
Schlumberger LTD......... 27,000 1,677,375
WMX Technologies Inc. ... 108,800 3,087,200
------------
7,104,575
------------
PRODUCER MANUFACTURING - 5.0%
Danaher Corp............. 54,500 1,648,625
Emerson Electric Co...... 35,000 2,502,500
General Electric Co...... 85,000 4,791,875
Xerox Corp............... 26,500 3,107,125
------------
12,050,125
------------
RETAIL TRADE - 2.7%
Limited Inc.............. 65,000 1,430,000
Nine West Group Inc...... 31,700 1,157,050
Toys "R" Us Inc.*........ 80,000 2,340,000
Wal-Mart Stores Inc...... 58,000 1,551,500
------------
6,478,550
------------
TRANSPORTATION - 1.3%
Norfolk Southern Co...... 45,000 3,031,873
------------
UTILITIES - 2.8%
FPL Group Inc............ 73,000 2,819,625
GTE Corp................. 82,000 2,798,250
Texas Utilities.......... 30,000 1,031,250
------------
6,649,125
------------
TOTAL COMMON STOCKS
(Identified Cost $106,128,255) 124,000,964
------------
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FOREIGN CLOSED END FUNDS -- 1.4%
- - ---------------------------------------------------------------
Emerging Germany Fund, Inc. 23,100 167,473
Emerging Tiger Fund, Inc. 34,600 458,450
First Australia Fund, Inc. 8,500 66,937
First Philippine Fund.... 11,400 190,950
France Growth Fund....... 9,400 96,350
Global Privatization Fund 13,100 168,663
Growth Fund of Spain..... 20,000 200,000
Malaysia Fund............ 19,600 379,750
Pakistan Investment Fund. 34,100 230,175
Thai Capital Fund........ 18,500 321,437
The India Fund, Inc...... 30,000 307,500
The New Germany Fund..... 28,600 346,775
The Thai Fund, Inc....... 14,100 373,650
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TOTAL FOREIGN CLOSED END FUNDS
(Identified Cost $3,751,452) 3,308,110
------------
<PAGE>
PRINCIPAL
ISSUER AMOUNT VALUE
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FIXED INCOME -- 40.4%
- - ---------------------------------------------------------------
ASSET BACKED - 6.4%
Contimortgage Home Equity Loan
7.95 %, due 5/01/25..... $2,800,000 $ 2,859,668
Equitable Capital Credit
8.95 %, due 10/15/06.... 3,000,000 3,143,438
First USA Credit Card
6.265 %, due 10/15/01... 3,000,000 3,002,517
General Motors Acceptance Corp.
5.95 %, due 2/15/97..... 120,826 120,826
GMAC 1992 E Grantor Trust,
4.75 %, due 8/15/97..... 228,318 226,176
Household Finance Corp.
6.663 %, due 5/20/08.... 3,275,000 3,288,297
United Companies Financial Corp.
7.25 %, due 12/10/20.... 2,800,000 2,789,500
------------
15,430,422
------------
MORTGAGE OBLIGATIONS - 8.0%
COLLATERALIZED MORTGAGE OBLIGATIONS - 6.3%
Federal National
Mortgage Association
5.00 %, due 11/25/21.... 2,000,000 1,626,860
6.50 %, due 11/25/21.... 3,000,000 2,853,750
Nomura Asset Corp.
7.268 %, due 7/07/03.... 2,567,323 2,624,071
8.15 %, due 3/04/20..... 3,000,000 3,244,688
Resolution Trust Corp.
6.675 %, due 6/25/26.... 2,847,535 2,847,535
Structured Asset Securities Corp.
7.375 %, due 2/25/24.... 1,944,974 1,944,974
------------
15,141,878
------------
MORTGAGE BACKED SECURITIES - 0.1%
Federal Home Loan Mortgage Corp.
8.50 % , due 6/1/01..... $ 40,726 $ 41,922
9.50 % , due 2/1/01..... 22,379 23,232
Federal National Mortgage
Association
9.00 %, due 11/1/01..... 30,366 31,703
------------
96,857
------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION - 1.6%
7.00 %, due 6/20/25..... 2,940,000 2,990,069
8.25 %, due 7/15/05..... 864,769 883,145
------------
3,873,214
------------
TOTAL MORTGAGE OBLIGATIONS 19,111,949
------------
DOMESTIC CORPORATE BONDS - 2.5%
K Mart
12.50 %, due 3/01/05.... 2,100,000 2,801,736
8.125 % due 12/01/06.... 3,000,000 3,093,060
------------
5,894,796
------------
YANKEE BONDS - 2.1%
Midland Bank
7.65 %, due 5/01/25..... 2,800,000 2,959,684
Province of Newfoundland
7.32 %, due 10/13/23.... 2,000,000 1,977,020
------------
4,936,704
------------
UNITED STATES
GOVERNMENT OBLIGATIONS - 21.4%
UNITED STATES TREASURY NOTES - 17.2%
7.375 %, due 11/15/97... 3,600,000 3,717,000
6.75 %, due 4/30/00..... 3,000,000 3,090,930
6.25 %, due 5/31/00..... 33,000,000 33,350,460
7.50%, due 2/15/05...... 1,000,000 1,088,910
------------
41,247,300
------------
UNITED STATES TREASURY BONDS - 4.2%
United States Treasury Bond
7.625 %, due 2/15/25.... $ 9,000,000 $ 10,164,330
------------
TOTAL UNITED STATES
GOVERNMENT OBLIGATIONS 51,411,630
------------
TOTAL FIXED INCOME
(Identified Cost $95,288,944) 96,785,501
------------
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SHORT-TERM OBLIGATIONS -- 4.4%
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Chase Manhattan Repurchase Agreement
6.125 %, due 7/03/95, proceeds at
maturity $10,618,417 (secured by
$10,836,945 U.S. Treasury Notes
6.125 %, due 7/31/96).... 10,613,000
------------
TOTAL INVESTMENTS........ 98.0% 234,707,575
(Identified Cost $215,781,651)
OTHER ASSETS
LESS LIABILITIES........ 2.0 4,923,828
----------- ------------
NET ASSETS............... 100.0% $239,631,403
=========== ============
*Non-income producing security
See notes to financial statements
<PAGE>
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Balanced Portfolio
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STATEMENT OF ASSETS AND LIABILITIES June 30, 1995 (unaudited)
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ASSETS:
Investments at value (Note 1A) (Identified Cost, $215,781,651).. $234,707,575
Cash............................................................ 616
Receivable for investments sold................................. 8,898,390
Dividends and interest receivable............................... 1,136,648
------------
Total assets................................................ 244,743,229
------------
LIABILITIES:
Payable for investments purchased............................... 5,002,895
Payable to affiliates--Investment advisory fee (Note 2)......... 78,966
Accrued expenses and other liabilities.......................... 29,965
------------
Total liabilities........................................... 5,111,826
------------
NET ASSETS ..................................................... $239,631,403
============
REPRESENTED BY:
Paid-in capital for beneficial interests........................ $239,631,403
============
See notes to financial statements
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Balanced Portfolio
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STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1995 (unaudited)
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INVESTMENT INCOME:
Interest........................................... $ 3,604,813
Dividends.......................................... 1,345,331
-----------
Total Income..................................... $ 4,950,144
EXPENSES
Investment advisory fees (Note 2).................. 464,216
Administrative fees (Note 3)....................... 58,027
Expense fees (Note 6).............................. 59,047
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Total expenses................................... 581,290
-----------
Net investment income............................ 4,368,854
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) from
investment transactions.......................... 7,140,181
Unrealized appreciation (depreciation) of investments--
Beginning of period............................... 1,535,684
End of period..................................... 18,925,924
-----------
Net change in unrealized appreciation
(depreciation)................................... 17,390,240
-----------
Net realized and unrealized gain
(loss) on investments............................ 24,530,421
-----------
NET INCREASE IN NET ASSETS RESULTING
FROM OPERATIONS................................... $28,899,275
===========
See notes to financial statements
<PAGE>
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Balanced Portfolio
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STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
MAY 1, 1994
SIX MONTHS ENDED (COMMENCEMENT
JUNE 30, 1995 OF OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1994
-------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
Operations:
Net investment income............................................... $ 4,368,854 $ 5,659,198
Net realized loss on investment transactions........................ 7,140,181 (6,675,580)
Net change in unrealized depreciation of investments................ 17,390,240 4,422,530
------------ ------------
Net increase in net assets resulting from operations............ 28,899,275 3,406,148
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from contributions......................................... 2,777,773 251,032,858
Value of withdrawals................................................ (20,993,608) (25,491,043)
------------ ------------
Net increase (decrease) in net assets from capital transactions. (18,215,835) 225,541,815
------------ ------------
NET INCREASE IN NET ASSETS ......................................... 10,683,440 228,947,963
Net Assets:
Beginning of period................................................. 228,947,963 --
------------ ------------
End of period....................................................... $239,631,403 $228,947,963
============ ============
See notes to financial statements
</TABLE>
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Balanced Portfolio
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FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
MAY 1, 1994
SIX MONTHS ENDED (COMMENCEMENT
JUNE 30, 1995 OF OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1994
-------------- ---------------
RATIOS/SUPPLEMENTAL DATA:
<S> <C> <C>
Net Assets, end of period (000 omitted)............................. $239,631 $228,948
Ratio of expenses to average net assets............................. 0.50%* 0.51%*
Ratio of net investment income to average net assets................ 3.76%* 3.53%*
Portfolio turnover.................................................. 127% 105%
* Annualized
</TABLE>
See notes to financial statements
<PAGE>
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Balanced Portfolio
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NOTES TO FINANCIAL STATEMENTS (unaudited)
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(1) SIGNIFICANT ACCOUNTING POLICIES
Balanced Portfolio (the "Portfolio"), a separate series of The Premium
Portfolios (the "Portfolio Trust"), is registered under the Investment Company
Act of 1940, as amended, as a 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.
The significant accounting policies consistently followed by the Portfolio are
in conformity with generally accepted accounting principles and are as follows:
A. INVESTMENT SECURITY VALUATIONS -- Equity securities listed on securities
exchanges or reported through the NASDAQ system are valued at last sale prices.
Unlisted securities or listed securities for which last sales prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations maturing in sixty days or less), are valued on the basis
of valuations furnished by 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, and other market data,
without exclusive reliance on quoted prices or exchange or over-the-counter
prices, since such valuations are believed to reflect more accurately the fair
value of the securities. Short-term obligations, maturing in sixty days or less,
are valued at amortized cost, which approximates market value. Securities, if
any, for which there are no such valuations or quotations are valued at fair
value as determined in good faith by or under guidelines established by the
Trustees.
B. INCOME -- Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on long-term debt securities
when required for federal income tax purposes. Gain and loss from principal
paydowns are recorded as interest income. Dividend income is recorded on the
ex-dividend date.
C. U.S. FEDERAL TAXES -- The Portfolio is considered a partnership under the
U.S. Internal Revenue Code. Accordingly, no provision for federal income or
excise tax is necessary.
D. EXPENSES -- The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
Portfolio Trust with respect to any two or more portfolios or series are
allocated in proportion to the average net assets of each portfolio, except when
allocations of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that portfolio.
E. 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.
F. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis.
(2) INVESTMENT ADVISORY FEES
The investment advisory fee paid to Citibank, as compensation for overall
investment management services, amounted to $464,216 for the six months ended
June 30, 1995. The investment advisory fee is computed at the annual rate of
0.40% of the Portfolio's average daily net assets.
(3) ADMINISTRATIVE FEE
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, is computed at an annual rate of 0.05% of the
Portfolio's average daily net assets. The administrative fee amounted to $58,027
for the six months ended June 30, 1995. Citibank acts as Sub-Administrator and
performs such duties and receives such compensation from SFG as from time to
time is agreed to by SFG and Citibank. The Portfolio pays no compensation
directly 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 or directors of the Administrator or its affiliates.
(4) PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than short-term obligations,
aggregated $282,149,022 and $296,870,614, respectively, for the six months ended
June 30, 1995.
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation (depreciation) in value of the investment
securities owned at June 30, 1995, as computed on a federal income tax basis,
are as follows:
Aggregate cost...................... $215,781,651
===========
Gross unrealized appreciation....... $ 21,179,674
Gross unrealized depreciation....... (2,253,750)
-----------
Net unrealized appreciation......... $ 18,925,924
==========
(6) EXPENSE FEE
SFG has entered into an expense agreement with the Portfolio. SFG has agreed to
pay all of the ordinary operating expenses (excluding interest, taxes, brokerage
commissions litigation costs or other extraordinary costs or expenses) of the
Portfolio, other than fees paid under the Advisory Agreement and Administrative
Services Agreement. The Agreement may be terminated by either party upon not
less than 30 days nor more than 60 days written notice.
The Portfolio has agreed to pay SFG an expense fee on an annual basis, accrued
daily and paid monthly; provided, however, that such fee shall not exceed the
amount such that immediately after any such payment the aggregate ordinary
expenses of the Portfolio would, on an annual basis, exceed an agreed upon rate,
currently 0.55% of average daily net assets.
(7) LINE OF CREDIT
The Portfolio, along with the other Landmark Funds, entered into an ongoing
agreement with a bank which allows the Funds collectively to borrow up to $40
million for temporary or emergency purposes. Interest on the borrowings, if any,
is charged to the specific fund executing the borrowing at the base rate of the
bank. In addition, the $15 million committed portion of the line of credit
requires a quarterly payment of a commitment fee based on the average daily
unused portion of the line of credit. For the six months ended June 30, 1995,
the commitment fee allocated to the Portfolio was $928. Since the line of credit
was established, there have been no borrowings.
<PAGE>
