BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS June 30, 1999
(Unaudited)
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 61.3%
- --------------------------------------------------------------------------------
BASIC INDUSTRIES -- 15.6%
- --------------------------------------------------------------------------------
Abbott Labs 72,000 $ 3,276,000
Alcoa Inc. 56,000 3,465,000
Bristol Meyers Squibb Co. 59,000 4,155,813
Dow Chemical Co. 14,000 1,776,250
E.I. du Pont
De Nemours & Co. 50,000 3,415,625
Emerson Electric Co. 70,000 4,401,250
General Electric Co. 45,000 5,085,000
Honeywell Inc. 34,500 3,997,688
International Paper Co. 64,000 3,232,000
Pharmacia & Upjohn Inc. 63,000 3,579,188
Union Pacific Corp. 60,000 3,498,750
Unumprovident Corp. 28,000 1,533,000
----------
41,415,564
----------
CONSUMER DURABLES -- 6.1%
- --------------------------------------------------------------------------------
American Home
Products Corp. 86,000 4,945,000
Dana Corp. 60,000 2,763,750
Delphi Automotive Systems Corp. 12,580 233,516
Ford Motor Co. 35,000 1,975,312
General Motors Corp. 18,000 1,188,000
Goodyear Tire and Rubber 30,000 1,764,375
Masco Corp. 115,000 3,320,625
----------
16,190,578
----------
CONSUMER NON-DURABLES -- 3.2%
- --------------------------------------------------------------------------------
Avon Products Inc. 59,000 3,274,500
H.J. Heinz Co. 35,000 1,754,375
Pepsico Inc. 95,000 3,675,312
----------
8,704,187
----------
CONSUMER SERVICES-- 13.3%
- --------------------------------------------------------------------------------
AT&T Corp. 85,000 4,744,062
Bell Atlantic Corp. 48,200 3,151,075
Duke Energy Co. 75,000 4,078,125
Enron Corp. 69,000 5,640,750
McGraw HillCompanies Inc. 43,000 2,319,312
SBC Communications Inc. 78,000 4,524,000
Sprint Corp. 60,000 3,168,750
Unicom Corp. 85,000 3,277,812
Williams Companies Inc. 105,000 4,469,063
----------
35,372,949
----------
FINANCE -- 14.2%
- --------------------------------------------------------------------------------
Bank One Corp. 70,000 4,169,375
BankAmerica Corp. 42,600 3,123,112
Chase Manhattan Corp. 60,000 5,197,500
Chubb Corp. 45,000 3,127,500
Cigna Corp. 42,500 3,782,500
Hartford Financial Services Group 59,000 3,440,438
J. P. Morgan Co. Inc. 22,000 3,091,000
Marsh & McLennan Companies Inc. 48,000 3,624,000
Mellon Bank Corp. 90,000 3,273,750
Pitney Bowes Inc. 75,000 4,818,750
----------
37,647,925
----------
PRODUCER MANUFACTURING -- 6.2%
- --------------------------------------------------------------------------------
BP Amoco PLC 29,000 3,146,500
Chevron Corp. 33,000 3,141,188
Exxon Corp. 19,200 1,480,800
Halliburton Co. 46,100 2,086,025
Mobil Corp. 49,700 4,920,300
Royal Dutch Petroleum Co. 27,000 1,626,750
----------
16,401,563
----------
MISCELLANEOUS-- 2.7%
- --------------------------------------------------------------------------------
Raytheon Co. 43,570 3,066,239
Xerox Corp. 70,000 4,134,375
----------
7,200,614
----------
Total Common Stock
(Identified Cost $151,263,115) 162,933,380
===========
15
<PAGE>
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1999
(Unaudited)
PRINCIPAL
ISSUER AMOUNT VALUE
- --------------------------------------------------------------------------------
FIXED INCOME -- 44.5%
- --------------------------------------------------------------------------------
ASSET BACKED SECURITIES -- 11.2%
- --------------------------------------------------------------------------------
Aames Mortgage Trust
6.59% due 6/15/24 $1,040,000 $1,044,170
Aircraft Financial Trust
8.00% due 5/15/24 1,500,000 1,426,406
Asset Securitization Corp.
Series 95 7.10% due 8/13/29 508,489 513,253
7.384% due 8/13/29 2,500,000 2,562,200
Asset Securitization Corp.
Series 97 6.85% due 2/14/41 600,000 587,982
Commercial Mortgage Acceptance Corp.
5.80% due 5/15/06 520,075 507,177
Contimortgage Home Equity Loan
6.13% due 3/15/13 1,100,000 1,095,523
Criimi Mae Commercial Mortgage
7.00% due 11/2/11 600,000 460,219
Ford Credit Auto Owner Trust
6.16% due 8/15/03 2,000,000 1,982,500
GMAC Commercial Mortgage
6.42% due 8/15/08 1,100,000 1,063,227
6.83% due 12/15/03 1,634,232 1,650,362
Green Tree Financial Corp.
6.71% due 8/15/29 1,050,000 1,018,342
8.05% due 10/15/27 3,500,000 3,557,960
IMC Home Equity Loan
6.16% due 5/20/14 2,000,000 1,999,340
J. P. Morgan Co. Inc.
6.373% due 1/15/30 666,859 661,130
Lehman Brothers/First Union
6.479% due 3/18/04 798,300 796,120
Merrill Lynch Mortgage Co.
6.95% due 6/18/29 1,297,406 1,312,689
Morgan Stanley Capital Investment Inc.
6.44% due 11/15/02 1,105,000 1,101,862
Nomura Asset Securitization Corp.
8.15% due 3/04/20 2,000,000 2,105,680
PNC Mortgage Securitization Corp.
6.392% due 9/25/13 1,610 1,537
Peco Energy Transportation Trust
6.05% due 3/01/09 1,100,000 1,053,591
Residential Funding Mortgage
Securitization Corp.
7.00% due 2/25/08 432,799 433,609
Sears Credit Account Master Trust II
5.25% due 10/16/08 1,110,000 1,060,050
Structured Asset Securities Corp.
6.79% due 6/12/04 1,827,180 1,843,971
-----------
29,838,900
-----------
DOMESTIC CORPORATIONS -- 10.7%
- --------------------------------------------------------------------------------
Ahold Financial USA Inc.
6.875% due 5/01/29 1,130,000 1,045,126
American Financial Group Inc.
7.125% due 4/15/09 1,045,000 972,341
Associates Corp.
6.95% due 11/01/18 1,365,000 1,315,178
BB&T Corp.
6.375% due 6/30/05 1,470,000 1,432,633
Bank One Corp.
5.625% due 2/17/04 1,050,000 1,004,346
Century Telecommunications
Enterprises Inc.
6.30% due 1/15/08 1,000,000 952,180
Conoco Inc.
5.90% due 4/15/04 1,150,000 1,122,147
Conseco Inc.
6.40% due 6/15/01 850,000 832,720
Dayton Hudson Corp.
6.65% due 8/01/28 1,120,000 1,021,787
Equitable Life Assurance
6.95% due 12/01/05 1,050,000 1,047,984
Ford Motor Co.
6.625% due 10/01/28 1,285,000 1,156,731
General Motors Acceptance Corp.
6.15% due 4/05/07 1,040,000 990,319
Household Financial Corp.
6.50% due 11/15/08 1,050,000 1,001,186
Imperial TOB Overseas
7.125% due 4/01/09 1,070,000 1,020,769
Knight Ridder Inc.
6.875% due 3/15/29 770,000 712,554
7.15% due 11/01/27 170,000 163,333
Lehman Brothers Holdings Inc.
6.40% due 8/30/00 1,030,000 1,031,082
7.00% due 5/15/03 830,000 823,527
MCI Communications Corp.
6.50% due 4/15/10 1,425,000 1,365,720
16
<PAGE>
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) June 30, 1999
(Unaudited)
PRINCIPAL
ISSUER AMOUNT VALUE
- --------------------------------------------------------------------------------
Mattel Inc.
6.00% due 7/15/03 $ 765,000 $ 745,734
Merita Bank Plc
6.50% due 4/01/09 1,030,000 975,863
Morgan Stanley Group Inc.
5.625% due 1/20/04 1,150,000 1,108,416
National Rural Utilities
6.20% due 2/01/08 1,260,000 1,214,905
Nordstrom Inc.
5.625% due 1/15/09 880,000 799,515
Petroleum Geographical
Services
6.625% due 3/30/08 735,000 691,878
Popular Inc.
6.20% due 4/30/01 725,000 718,272
6.875% due 6/15/01 690,000 689,427
Provident Companies Inc.
7.00% due 7/15/18 525,000 502,231
Raytheon Co.
6.30% due 3/15/05 1,000,000 981,450
TPSA Financial BV
7.75% due 12/10/08 1,075,000 1,043,677
----------
28,483,031
----------
MORTGAGE OBLIGATIONS -- 10.7%
- --------------------------------------------------------------------------------
MORTGAGE BACKED SECURITIES/PASSTHROUGHS -- 7.1%
- --------------------------------------------------------------------------------
Federal Home Loan Mortgage Corp.
6.00% due 12/31/99 1,000,000 940,470
6.25% due 6/15/24 860,000 837,194
7.00% due 12/31/99 2,000,000 2,001,250
8.50% due 6/01/01 6,685 6,767
9.50% due 2/01/01 3,382 3,426
Federal National
Mortgage Association
5.50% due 12/31/99 5,000,000 4,559,375
6.50% due 12/01/99 2,000,000 1,970,620
6.50% due 12/01/99 1,840,000 1,775,011
6.50% due 05/01/29 2,467,231 2,380,088
7.349% due 8/17/21 600,000 611,208
7.50% due 10/01/25 120,157 121,358
7.50% due 11/01/25 1,687,981 1,704,861
7.50% due 7/01/29 2,000,000 2,022,500
9.00% due 11/01/01 5,922 6,074
----------
18,940,202
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 3.6%
- --------------------------------------------------------------------------------
6.50% due 12/15/99 $ 1,100,000 $ 1,057,892
6.50% due 12/31/99 2,000,000 1,918,750
7.00% due 12/31/99 4,300,000 4,242,208
7.00% due 2/15/24 1,088,443 1,077,221
7.25% due 10/16/22 1,259,676 1,265,975
----------
9,562,046
----------
TOTAL MORTGAGE OBLIGATIONS 28,502,248
----------
YANKEE BONDS -- 1.1%
- --------------------------------------------------------------------------------
Corporacion Andina de Fomento
7.75% due 3/01/04 1,050,000 1,022,788
Korea Development Bank
7.128% due 4/22/04 1,030,000 1,005,646
Manitoba Province, Canada
5.50% due 10/01/08 1,050,000 968,394
---------
2,996,828
---------
UNITED STATES GOVERNMENT & AGENCY OBLIGATIONS -- 10.8%
- --------------------------------------------------------------------------------
United States Treasury Bonds -- 4.8%
- --------------------------------------------------------------------------------
8.125% due 8/15/19 5,300,000 6,401,393
3.625% due 4/15/28 996,510 940,296
5.25% due 11/15/28 500,000 443,205
3.875% due 4/15/29 5,053,750 4,987,420
----------
12,772,314
----------
United States Treasury Notes -- 3.9%
- --------------------------------------------------------------------------------
5.75% due 11/30/02 550,000 551,116
4.25% due 11/15/03 2,000,000 1,888,440
5.875% due 2/15/04 2,125,000 2,138,621
6.875% due 5/15/06 560,000 589,574
6.625% due 5/15/07 1,300,000 1,353,833
3.875% due 1/15/09 1,420,000 1,403,130
5.50% due 5/15/09 2,390,000 2,334,719
----------
10,259,433
----------
17
<PAGE>
BALANCED PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) June 30, 1999
(Unaudited)
PRINCIPAL
ISSUER AMOUNT VALUE
- --------------------------------------------------------------------------------
United States Agency Obligations-- 2.1%
- --------------------------------------------------------------------------------
Federal National
Mortgage Association
5.49% due 8/18/00 $ 3,800,000 $ 3,794,072
Tennessee Valley Authority
5.88% due 4/01/36 1,750,000 1,715,945
-----------
5,510,017
-----------
Total United States
Government & Agency Obligations 28,541,764
-----------
Total Fixed Income
(Identified Cost $121,209,260) 118,362,771
-----------
SHORT-TERM OBLIGATIONS
AT AMORTIZED COST -- 0.1%
United States Treasury Bills
4.59% due 9/23/99
Total Short-Term Obligations
(Identified Cost $158,286) 158,298
-----------
Total Investments
(Identified Cost $272,630,661) 105.9% $ 281,454,449
Other Assets,Less Liabilities (5.9) (15,634,241)
---- -----------
NET ASSETS 100.0% $ 265,820,208
===== =============
FUTURES CONTRACTS
- --------------------------------------------------------------------------------
Futures contracts which were open at June 30, 1999 are as follows:
Aggregate
Number of Face Value Expiration Unrealized
Contracts Of Contracts Date Gain/loss
- --------------------------------------------------------------------------------
U. S. T-notes
2Yr 9/99
Sept. (Long) 20 $2,000,000 1999 $4,537
U. S. T-notes
10Yr 9/99
Sept. (Short) (65) (6,500,000) 1999 ($77,675)
U. S. T-bond 9/99
Sept. (Short) (25) (2,500,000) 1999 ($9,563)
--------
($82,701)
========
See notes to financial statements
18
<PAGE>
Balanced Portfolio
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1999 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) (Identified Cost, $272,630,661) $281,454,449
Cash 7,746
Receivable for investments sold 9,790,437
Dividends and interest receivable 1,462,302
- --------------------------------------------------------------------------------
Total assets 292,714,934
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 26,623,445
Payable to affiliates-Investment advisory fees (Note 2) 42,599
Accrued expenses and other liabilities 159,463
Payable for daily variation on futures contracts 69,219
- --------------------------------------------------------------------------------
Total liabilities 26,894,726
- --------------------------------------------------------------------------------
NET ASSETS $265,820,208
================================================================================
REPRESENTED BY:
Paid-in capital for beneficial interests $265,820,208
================================================================================
BALANCED PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1999 (Unaudited)
INVESTMENT INCOME:
Interest $3,439,858
Dividends 1,417,791
- --------------------------------------------------------------------------------
$4,857,649
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 530,594
Custody and fund accounting fees 93,677
Administrative fees (Note 3) 66,324
Legal fees 15,000
Audit fees 13,750
Trustee fees 3,954
Other 6,282
- --------------------------------------------------------------------------------
Total expenses 729,581
- --------------------------------------------------------------------------------
Net investment income 4,128,068
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from investment transactions 21,520,534
Net realized gain from futures contracts 387,719
Unrealized depreciation of investments and
futures contracts (4,199,546)
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments
and futures contracts 17,708,707
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $21,836,775
================================================================================
See notes to financial statements
19
<PAGE>
BALANCED PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1999 DECEMBER 31,
(Unaudited) 1998
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 4,128,068 $ 7,943,643
Net realized gain from investment
transactions and futures contracts 21,908,253 29,726,471
Unrealized depreciation of investments
and futures contracts (4,199,546) (17,148,033)
- --------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 21,836,775 20,522,081
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 5,082,500 17,030,280
Value of withdrawals (26,222,931) (23,622,833)
- --------------------------------------------------------------------------------
Net decrease in net assets from
capital transactions (21,140,431) (6,592,553)
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS 696,344 13,929,528
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 265,123,864 251,194,336
- --------------------------------------------------------------------------------
End of period $ 265,820,208 $ 265,123,864
================================================================================
BALANCED PORTFOLIO
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS MAY 1, 1994
ENDED (COMMENCEMENT
JUNE 30, YEAR ENDED DECEMBER 31, OF OPERATIONS) TO
1999 ------------------------------------------ DECEMBER 31,
(Unaudited) 1998 1997 1996 1995 1994
======================================================================================================
Ratios/Supplemental Data:
Net Assets, end of period
<S> <C> <C> <C> <C> <C> <C>
(000's omitted) $265,820 $265,124 $251,194 $247,526 $251,519 $228,948
Ratio of expenses to
average net assets 0.55%* 0.55% 0.55% 0.55% 0.53% 0.51%*
Ratio of net
investment income
to average net assets 3.11%* 3.08% 2.90% 3.50% 3.69% 3.53%*
Portfolio turnover 88% 133% 134% 241% 210% 105%
======================================================================================================
* Annualized
</TABLE>
See notes to financial statements
20
<PAGE>
BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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. The Investment Adviser of the Portfolio
is Citibank, N.A. ("Citibank"). Signature Financial Group (Grand Cayman), Ltd.
("SFG") acts as the Portfolio's Administrator. Citibank is a wholly-owned
subsidiary of Citicorp, which in turn, is a wholly-owned subsidiary of Citigroup
Inc. Citigroup Inc. was formed as a result of the merger of Citicorp and
Travelers Group, Inc. which was completed on 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. 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 approved by the Board of Trustees
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. 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
21
<PAGE>
BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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. TBA PURCHASE COMMITMENTS The Portfolio enters into "TBA" (to be
announced) purchase commitments to purchase securities for a fixed unit price
at a future date beyond customary settlement time. Although the unit price has
been established, the principal value has not been finalized. However, the
amount of the commitment will not fluctuate more than 2.0% from the principal
amount. The Portfolio holds, and maintains until the settlement date, cash or
high-grade debt obligations in an amount sufficient to meet the purchase
price. TBA purchase commitments may be considered securities in themselves, and
involve a risk of loss if the value of the security to be purchased declines
prior to the settlement date, which risk is in addition to the risk of decline
in the value of the Portfolio's other assets. Unsettled TBA purchase commitments
are valued at the current market value of the underlying securities,
generally according to the procedures described under Note 1A.
Although the Portfolio will generally enter into TBA purchase commitments
with the intention of acquiring securities for its portfolio, the Portfolio may
dispose of a commitment prior to settlement if the Portfolio's Adviser deems it
appropriate to do so.
G. FUTURES CONTRACTS The Portfolio may engage in futures transactions. The
Portfolio may use futures contracts in order to protect the Portfolio from
fluctuation in interest rates without actually buying or selling debt
securities, or to manage the effective to maturity or duration of fixed income
securities in the Portfolio in an effort to reduce potential losses or enhance
potential gains. The underlying value of a futures contract is incorporated
within unrealized appreciation/depreciation in the Portfolio of Investments
under the caption "Futures Contracts". Buying futures contracts tends to
increase the Portfolio's exposure to the underlying instrument. Selling
futures contracts tends to either decrease the Portfolio's exposure to the
underlying instrument, or to hedge other Portfolio investments.
Upon entering into a futures contract, the Portfolio is required to deposit
with the broker an amount of cash or cash equivalents equal to a certain
percentage of the contract amount. This is known as the "initial margin".
Subsequent payments ("variation margin") are made or received by the Portfolio
each day, depending on the daily fluctuation of the value of the contract. The
daily changes in contract
22
<PAGE>
BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
value are recorded as unrealized gains or losses and the Portfolio recognizes
a realized gain or loss when the contract is closed. Futures contracts are
valued at the settlement price established by the board of trade or exchange on
which they are traded.
There are several risks in connection with the use of futures contracts as
a hedging device. The change in the value of futures contracts primarily
corresponds with the value of their underlying instruments, which may not
correlate with the change in the value of the hedged instruments. In addition,
there is the risk the Portfolio may not be able to enter into a closing
transaction because of an illiquid secondary market. Futures contracts
involve, to varying degrees, risk of loss in excess of the futures variation
margin reflected in the Statement of Assets and Liabilities.
H. 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 advisory fee paid to Citibank, amounted to
$530,594 for the six months ended June 30, 1999. Advisory fees are computed at
the annual rate of 0.40% of the Portfolio's average daily net assets less the
aggregate amount (if any) payable by the Portfolio Trust pursuant to the
Sub-Adviser Agreement with the Subadviser. Effective May, 1999 Citibank
delegated the daily advisory of the Equity portion of the Portfolio to SSBC Fund
Management, Inc., an affiliate of Citibank (the "Subadviser"). The Portfolio
pays the Subadviser the following fees, which are accrued daily and payable
monthly and are at the annual rates equal to a percentage of the aggregate
assets of the Portfolio allocated to the Subadviser: 0.65% on the first $10
million, 0.50% on the next $10 million, 0.40% on the next $10 million, 0.30% on
remaining assets.
The advisory fees paid to the Subadviser amounted to $65,904 for the period
ended June 30, 1999.
3. ADMINISTRATIVE FEES Under the terms of an Administrative Services Agreement,
the administrative fees 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
fees amounted to $66,324 for the six months ended June 30, 1999. Citibank acts
as Sub-Administrator and performs certain duties and receives compensation from
SFG from time to time as 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.
23
<PAGE>
BALANCED PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
4. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $262,542,663 and $238,574,503
respectively, for the six months ended June 30, 1999. Purchases and sales of
U.S. Government securities aggregated to $92,411,000 and $97,697,440,
respectively.
5. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized
appreciation (depreciation) in value of the investment securities owned at June
30, 1999, as computed on a federal income tax basis, are as follows:
Aggregate cost $272,630,661
================================================================================
Gross unrealized appreciation $ 15,600,693
Gross unrealized depreciation (6,776,905)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 8,823,788
================================================================================
6. LINE OF CREDIT The Portfolio, along with the other Portfolios in the
CitiFunds Family, has entered into an ongoing agreement with a bank which allows
the Funds collectively to borrow up to $75 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. 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, 1999,
the commitment fee allocated to the Portfolio was $337. Since the line of credit
was established, there have been no borrowings.
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