<PAGE>
- --------------------------------------------------------------------------------
INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS - 96.9%
- --------------------------------------------------------------------------------
AMERICAN DEPOSITORY RECEIPTS/ADR'S - 1.7%
Empressa ICA Sociedad*
Building & Construction .................. 2,891 $ 46,437
Gazprom*
Energy Resources ......................... 2,000 33,500
Lukoil Oil Co.
Energy Resources ......................... 4,000 309,000
Mosenergo*
Electrical & Gas Utilities 2,700 112,050
Surgutneftegaz
Energy Resources .......................... 1,500 79,875
Telefonos de Mexico
Telephone Utilities ....................... 1,970 94,068
Trade House Gum
Retailing ................................ 400 32,000
Vimpel Communications SPAD*
Telephone Utilities ...................... 2,500 95,000
---------
801,930
---------
GLOBAL DEPOSITORY RECEIPTS/GDR'S - 0.1%
Samsung Electronics Co. Ltd.
Electrical & Electronics ................ 231 13,282
---------
AUSTRALIA - 1.8%
Australia & New Zealand Bank
Banking ................................. 14,100 105,740
Broken Hill Proprietary
Energy Sources .......................... 10,500 154,962
Centaur Mining & Exploration Ltd.*
Gold Mines .............................. 57,000 73,402
C.S.R. Ltd.
Multi-Industry .......................... 21,400 83,160
Mayne Nickless Ltd.
Multi-Industry .......................... 10,700 62,573
News Corp. Ltd.
Business & Public ....................... 20,011 96,256
North Limited
Non-Ferrous Metals ...................... 21,500 82,245
Pacific Dunlop
Multi-Industry .......................... 31,000 92,051
Woodside Petroleum Ltd.
Energy Sources .......................... 12,500 107,944
---------
858,333
---------
BRAZIL - 2.6%
Aracruz Celulose*
Forest Products & Paper ................. 29,001 58,724
Banco Bradesco S.A. *
Banking ................................ 5,668,591 57,128
CIA Cervejaria Brahma
Beverages & Tobacco ..................... 66,181 50,408
CIA Energetica de Minas
Electrical & Gas Utilities ............. 1,039,347 53,580
CIA Vale do Rio Doce Convertible*
Steel .................................. 2,476 23
CIA Vale do Rio Doce Preferred*
Steel .................................. 2,476 54,759
Electrobras*
Electrical & Gas Utilities ............. 133,000 74,369
Light Servicos de Electrci
Electrical & Gas Utilities ............. 142,000 70,663
Petroleo Brasileiro S.A.
Energy Sources ......................... 348,015 96,657
Telecommunicacoes Brasileiras
Telephone Utilities .................... 3,530,000 535,434
Telecommunicacoes de
Sao Preferred*
Telephone Utilities .................... 262,915 85,962
Uniminas*
Steel .................................. 4,583,236 51,044
White Martins S.A.*
Energy Sources ......................... 18,318 53,596
----------
1,242,347
----------
CANADA - 0.2%
Alliance Forest Products International*
Forest Products & Paper ................ 3,000 73,205
MacMillan Bloee Ltd.
Forest Products & Paper ................ 27 370
St. Lauren Paperboard Inc.*
Forest Products & Paper ................ 1,005 15,645
---------
89,220
---------
DENMARK - 1.3%
Bang & Olufsen Holding B
Instruments & Components ............... 550 33,994
Carli Gry International AS
Textiles ............................... 2,740 154,896
Falck AS
Multi-lndustry ......................... 2,450 129,268
Jyske Bank AS
Banking ................................ 800 68,984
Kobenhavns Lufthavne
Airlines ............................... 1,225 130,080
Novo-Nordisk AS
Pharmaceuticals & Health ............... 945 103,140
---------
620,362
---------
FRANCE - 6.0%
Accor French Ord
Leisure & Tourism ....................... 999 149,675
Alcatel Alsthom
Electrical & Electronics ................ 3,400 426,049
AXA Company
Insurance ............................... 3,274 203,736
Axime (Ex Segin)
Financial Services ...................... 1,472 174,178
BIC
Household Appliances .................... 933 152,653
Carrefour Supermarche
Retailing ............................... 354 257,236
Compagnie de Saint Gobain
Multi-Industry .......................... 1,061 154,811
Louis Vuitton-Moet Hennesy
Beverages & Tobacco ..................... 775 208,479
Pechiney S.A. A
Non-Ferrous Metals ...................... 2,122 83,638
Printemps
Retailing ............................... 403 193,764
Rhone Polenc
Chemicals ............................... 4,422 180,690
Sanofi S..A.
Pharmaceuticals & Health 1,648 161,616
Societe National Elf-Aqita
Energy Sources .......................... 1,414 152,630
Total S.A.--SERIES B
Energy Sources .......................... 3,230 326,657
---------
2,825,812
---------
GERMANY - 11.6%
Bayer AG
Chemicals ............................... 9,050 348,030
Bayerische Vereinsbank AG
Banking ................................. 8,880 363,302
Buderus
Machinery & Engineering 432 237,969
Daimler-Benz AG*
Automobiles ............................. 6,380 518,015
Dresdner Bank AG
Banking ................................. 8,490 293,759
Dyckerhoff
Building Materials ...................... 624 225,575
Iwka
Machinery & Engineering 1,115 324,376
Metro AG
Retailing ............................... 1,370 150,227
Preussag AG
Multi-Industry .......................... 1,502 439,978
Rhoen-Klinikum
Pharmaceuticals & Health ................ 2,420 319,380
Schering AG
Pharmaceuticals & Health ................ 4,094 437,766
SGL Carbon AG
Non-Ferrous Metals ...................... 1,344 184,161
Suedezucker AG - Vorzug
Food & Household Products ............... 562 301,517
Tarkett International AG
Food & Household Products ............... 1 25
Veba AG
Electrical & Gas Utilities .............. 11,200 629,809
Volkswagen AG
Automobiles ............................. 1,154 647,604
---------
58,618 5,421,493
---------
ITALY - 3.5%
Assicurazione Generali Itl
Insurance ............................... 7,152 129,841
Eni Spa
Energy Sources .......................... 69,755 394,314
Fiat Spa
Automobiles ............................. 28,843 103,674
Instituto Banc San Paolo Torina
Banking ................................. 43,115 311,140
Instituto Finanz Industriale
Multi-Industry .......................... 6,139 77,329
Italgas
Electrical & Gas Utilities 17,697 56,302
Mediaset Spa
Business & Public ....................... 17,489 73,872
Stet D Risp
Telephone Utilities ..................... 23,556 81,567
Telecom Italia Mobile
Telephone Utilities ..................... 100,617 323,601
Unicem Spa
Building Materials ...................... 12,000 84,206
---------
1,635,846
---------
JAPAN - 30.2%
Canon Inc.
Electrical & Electronics ................ 16,000 436,001
Chugai Pharm Co.
Pharmaceuticals & Health ................ 35,000 314,860
Dai-Ichi Kangyo Bank
Banking ................................. 20,000 272,500
Dai Nippon Printing Co. Ltd.
Multi-Industry .......................... 10,000 226,210
Ebaba Corporation
Machinery & Engineering ................. 16,000 240,359
Fanuc Co.
Machinery & Engineering ................. 12,000 461,155
Fuji Bank
Banking ................................. 20,000 300,449
Fujitsu Ltd.
Instruments & Components ................ 33,000 458,273
Hitachi Ltd.
Electrical & Electronics ................ 25,000 279,488
Honda Motor Co. Ltd.
Automobiles ............................. 14,000 421,852
Industrial Bank of Japan
Banking ................................. 360 5,596
Japan Tobacco Inc.
Beverages & Tobacco ..................... 56 442,640
Kawasaki Steel
Steel ................................... 110,000 358,357
Marubeni Corp.
International Trade ..................... 73,000 331,543
Mitsubishi Heavy
Machinery & Engineering ................. 70,000 537,404
Mitsubishi Trust
Financial Services ...................... 21,000 331,980
Mitsui Fudosan
Real Estate ............................. 35,000 482,991
Mitsui Mining & Smelting
Non-Ferrous ............................. 32,000 142,260
Nippon Oil Co.
Energy Sources .......................... 45,000 246,430
Nippon Paper Industries Co.
Forest Products & Paper ................. 50,000 289,533
Nippon Telegraph & Telephone Co.
Telephone Utilities ..................... 53 509,193
NKK Corporation
Steel ................................... 100,000 214,857
Nomura Securities Co. Ltd.
Financial Services ...................... 36,000 496,791
NTT Data Comm Systems Corp.
Telephone Utilities ..................... 70 270,842
Ohbayashi-Gumi Corp.
Building & Construction ................. 60,000 401,939
Osaka Gas Co. Ltd.
Electrical & Gas Utilities .............. 100,000 287,349
Sankyo Co. Ltd.
Pharmaceuticals & Health ................ 14,000 470,764
Seven Eleven Japan Ltd.
Retailing ............................... 7,000 529,457
Sharp Corp.
Electrical & Electronics ................ 16,000 220,796
Shin-Etsu Chemical Co.
Chemicals ............................... 16,800 446,064
Sony Corp.
Electrical & Electronics ................ 5,000 436,264
Sumitomo Bank
Banking ................................. 20,000 328,399
Sumitomo Electric Industries
Industrial Components ................... 26,000 436,002
TDK Corp.
Instruments & Components ................ 5,000 367,265
The Bank of Tokyo Mitsubishi
Banking ................................. 23,050 463,033
Tokio Marine & Fire
Insurance ............................... 36,000 471,636
Tokyo Electron Ltd.
Multi-Industry .......................... 8,800 421,189
Toray Inds Inc.
Textiles ................................ 22,000 156,985
Toyota Motor Co.
Automobiles ............................. 16,000 472,335
Yamato Transport Co. Ltd.
Road & Rail Transport ................... 11,000 137,385
----------
14,118,426
==========
MEXICO - 0.9%
AIFA S.A. A*
Multi-Industry .......................... 12,948 88,178
Apasco S.A.*
Building Materials ...................... 6,000 42,900
Cemex S.A.*
Building Materials ...................... 22,441 97,459
CIFRA C
Retailing ............................... 17,220 27,529
CIFRA S.A. DE CV A
Retailing ............................... 2,106 3,891
Desc S.A. Series C
Multi-Industry .......................... 84 605
Desc Sociedad De Fomento In
Multi-Industry .......................... 8,394 61,285
Grupo Carso S.A.
Multi-Industry .......................... 7,200 50,120
Hylsamex S.A.
Steel ................................... 5,263 27,096
Kimberly Clark Mex
Pharmaceuticals & Health ................ 5,610 22,562
----------
421,625
----------
NETHERLANDS - 6.4%
Akzo Dutch
Chemicals ............. ................. 2,020 277,022
Baan Company NV*
Data Processing & Reproduction ......... 2,344 158,935
BeSemiconductor Ind*
Instruments & Components ................ 6,970 100,561
Elsevier
Business & Public ....................... 17,918 299,622
ING Groep NV
Insurance ............................... 8,473 390,928
Philips Electronics NV
Industrial Components ................... 5,235 375,243
Royal Dutch Petroleum Co. ADRs
Energy Sources .......................... 14,508 755,170
Unilever
Food & Household Products ............... 733 154,410
Vedior NV*
Retailing ............................... 622 $16,457
Vendex International NV
Retailing ............................... 4,450 244,211
Verenigde Nederlandse
Business & Public ....................... 10,212 225,949
----------
2,998,508
----------
SPAIN - 5.2%
Acerinox SA
Multi-Industry .......................... 523 98,039
Asturiana de Zinc*
Non-Ferrous Metals ...................... 7,523 159,357
Banco Central Hispano
Banking ................................. 5,071 185,570
Banco De Santander
Banking ................................. 12,162 374,875
Bankinter-Banco Interc Es
Banking ................................. 1,201 212,004
Centros Comerciales Pryca
Retailing ............................... 5,372 116,347
Corp Financiera Reunida*
Financial Services ...................... 23,453 98,723
Cortefiel SA
Retailing ............................... 1,789 78,100
Empresa Nac de Electricidad
Electrical & Gas Utilities .............. 3,790 318,300
Sol Melia S.A.
Leisure & Tourism ....................... 2,667 109,550
Telefonica
Telephone Utilities ..................... 18,399 532,145
Vallehermoso S.A.
Real Estate ............................. 4,680 126,301
----------
2,409,311
----------
SWEDEN - 0.7%
Electrolux
Household Appliances .................... 1,586 114,479
Ericsson AB
Electrical & Electronics ................ 293 11,541
Kinnevik AB
Machinery & Engineering ................. 283 7,890
Pharmacia & UpJohn
Pharmaceuticals & Health ................ 2,237 75,525
Skandia Forsakrings AB
Insurance ............................... 2,729 100,609
----------
310,044
----------
SWITZERLAND - 6.9%
Credit Suisse Group-Reg
Banking ................................. 3,100 398,309
Holderbank Finan Glaris-B
Building Materials ...................... 440 415,789
Nestle
Food & Household Products ............... 401 529,244
Roche Holding AG-Genussch
Pharmaceuticals & Health ................ 87 787,251
Schweizerische Bankverein-R
Banking ................................. 1,566 419,052
Sulzer AG
Instruments & Components ................ 299 256,116
Zurich Versicherungs-Reg
Insurance ............................... 1,091 434,366
----------
3,240,127
----------
UNITED KINGDOM - 17.8%
Abbey National
Banking ................................. 17,211 234,989
Avis Europe PLC
Road & Rail Transport ................... 58,101 132,051
BAT Industries
Multi-Industries ........................ 25,916 231,938
BG PLC
Electrical & Gas Utilities .............. 50,049 184,168
British Aerospace PLC
Aerospace & Defense ..................... 8,693 193,450
British Petroleum Co. PLC
Energy Sources .......................... 48,218 599,330
British Telecommunications PLC
Telephone Utilities ..................... 95,792 711,363
Cable & Wireless
Telephone Utilities ..................... 24,330 223,823
Caradon PLC
Miscellaneous Materials ................. 36,000 120,783
Centra
Electrical & Gas Utilities .............. 77,049 93,973
Commercial Union Assurance
Insurance ............................... 16,800 176,649
Courtaulds PLC
Chemicals ............................... 28,498 160,383
General Electric PLC
Electrical & Electronics ................ 34,241 204,676
Glaxo Wellcome PLC
Pharmaceuticals & Health ................ 24,267 501,031
Hillsdown Holdings PLC
Food & Household Products ............... 51,000 143,511
HSBC Holdings PLC
Banking ................................. 10,165 312,863
Kingfisher PLC
Retailing ............................... 20,201 229,396
Ladbroke Group
Leisure & Tourism ....................... 56,792 222,219
Lloyds TSB Group PLC
Banking ................................. 73,184 750,627
Logica PLC
Business & Public ....................... 19,514 225,005
London International Group
Pharmaceuticals & Health ................ 88,086 253,735
Marks & Spencer PLC
Retailing ............................... 33,525 277,987
National Power PLC
Electrical & Gas Utilities .............. 24,500 212,944
Prudential Corp.
Insurance ............................... 34,058 329,758
RMC Group PLC
Building Materials ...................... 11,000 178,669
Royal & Sun Alliance Ins.
Insurance ............................... 30,647 226,058
Sainsbury (J) PLC
Retailing ............................... 33,982 206,241
Severn Trent ORD
Electrical & Gas Utilities .............. 11,194 144,914
Smiths Industries PLC
Machinery & Engineering ................. 5,978 76,594
Tomkins PLC
Multi-Industry .......................... 51,041 220,964
Unilever Limited
Food & Household Products ............... 6,000 171,983
Zeneca Group PLC
Pharmaceuticals & Health ................ 10,726 354,686
----------
8,306,761
----------
TOTAL COMMON STOCKS
(Identified Cost $40,216,180) 45,313,427
==========
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SHORT-TERM OBLIGATIONS - 2.7%
- --------------------------------------------------------------------------------
Salomon Repurchase Agreement
5.90% due 7/01/97 proceeds at
maturity $1,297,521 (collateralized
by $366,322 U.S. Treasury Note
8.75% due 8/15/20, $655,925
U.S. Treasury Note 9.125% due 5/15/18,
$216,565 U.S. Treasury Note 9.00%
due 11/15/18 and $82,996 U.S.
Treasury Bond 7.50% due 11/15/16) 1,297,323
-----------
TOTAL INVESTMENTS
(Identified Cost $41,513,503) 99.6% 46,610,750
OTHER ASSETS,
LESS LIABILITIES ......................... 0.4 173,230
----- -----------
NET ASSETS ................................ 100.0% $46,783,980
===== ===========
Forward currency contracts which were open at June 30, 1997 are as follows:
DELIVERY
MARKET AGGREGATE DATE OF UNREALIZED
CURRENCY COUNTRY VALUE FACE VALUE CONTRACTS APPRECIATION
-------- ------- ----- ---------- --------- ------------
Deutsche Mark
(Sell) ... Germany $ 843,966 $ 850,000 Dec-97 $ 6,034
Franc (Sell) France 449,198 450,000 Dec-97 802
Franc (Sell) Switzerland 157,730 160,000 Dec-97 2,270
Guilder (Sell) Netherlands 382,190 385,000 Dec-97 2,810
Yen (Sell) Japan 1,762,170 1,775,000 Dec-97 12,830
-------
$24,746
=======
*Non income producing
See notes to financial statements
<PAGE>
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INTERNATIONAL EQUITY PORTFOLIO
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STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1997 (UNAUDITED)
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INVESTMENT INCOME:
ASSETS:
Investments at value (Note 1A) (Identified Cost, $41,513,503) ... $46,610,750
Cash ............................................................ 402
Receivable for forward contracts ................................ 24,746
Receivable for investments sold ................................. 952,968
Dividends and interest receivable ............................... 177,966
-----------
Total assets ................................................... 47,766,832
-----------
LIABILITIES:
Payable for securities purchased ................................ 945,355
Payable to affiliates--Investment advisory fees (Note 2) ........ 35,035
Other liabilities ............................................... 2,462
-----------
Total liabilities .............................................. 982,852
-----------
NET ASSETS ...................................................... $46,783,980
===========
REPRESENTED BY:
Paid-in capital for beneficial interests ........................ $46,783,980
===========
See notes to financial statements
<PAGE>
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INTERNATIONAL EQUITY PORTFOLIO
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STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED)
- --------------------------------------------------------------------------------
Dividends (net of foreign withholding tax of $113,630) $ 445,172
Interest .............................................. 34,569
---------
Total investment income .............................. $ 479,741
EXPENSES:
Investment advisory fees (Note 2) ..................... 228,303
Administrative fees (Note 3) .......................... 11,415
Expense fees (Note 6) ................................. 4,813
---------
Total expenses ....................................... 244,531
Less aggregate amount waived by Investment Adviser
and Administrator (Note 2 and 3) (13,915) 230,616
--------- -----------
Net investment income ................................ 249,125
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from investment transactions . 503,054
Net realized loss on foreign exchange
currencies transactions .............................. (109,223)
---------
Net realized gain (loss) ............................. 393,831
----------
Unrealized appreciation (depreciation) of investments--
Beginning of period .................................. 1,419,174
End of period ........................................ 5,097,247 3,678,073
---------
Translation of other assets and liabilities denominated
in foreign currencies--net ......................... (115,525)
----------
Net change in unrealized appreciation (depreciation) . 3,562,548
----------
Net realized and unrealized gain on investments ...... 3,956,379
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .. $4,205,504
==========
See notes to financial statements
<PAGE>
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INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
---------- -----------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
<S> <C> <C>
Net investment income ........................................... $ 249,125 $ 306,984
Net realized gain on investments and foreign exchange transactions 393,831 3,632,070
Net change in unrealized appreciation (depreciation) of investments and
foreign currency exchange ...................................... 3,562,548 (2,379,237)
----------- -----------
Net increase in net assets resulting from operations ........... 4,205,504 1,559,817
----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from contributions ..................................... 6,484,332 28,377,160
Value of withdrawals ............................................ (12,962,097) (20,994,299)
---------- -----------
Net increase (decrease) in net assets from capital transactions (6,477,765) 7,382,861
---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS: .......................... (2,272,261) 8,942,678
NET ASSETS:
Beginning of period ............................................. 49,056,241 40,113,563
---------- -----------
End of period ................................................... $46,783,980 $49,056,241
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
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INTERNATIONAL EQUITY PORTFOLIO
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FINANCIAL HIGHLIGHTS
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<TABLE>
<CAPTION>
SIX MONTHS MAY 1, 1994
ENDED YEAR ENDED DECEMBER 31, (COMMENCEMENT
JUNE 30, 1997 ---------------------- OF OPERATIONS) OF
(UNAUDITED) 1996 1995 DECEMBER 31, 1994
---------- -------- -------- ---------------
RATIOS / SUPPLEMENTAL DATA:
<S> <C> <C> <C> <C>
Net Assets, end of period (000's omitted) .... $46,784 $49,056 $40,114 $32,153
Ratio of expenses to average net assets ...... 1.00%* 1.11% 1.20% 1.22%*
Ratio of net investment income
to average net assets ....................... 1.08* 0.65% 0.59% 0.60%*
Portfolio turnover ........................... 58% 109% 51% 25%
Average commission rate per share (A) ........ $0.0013 $0.0321 N/A N/A
Note: If the Agents of the Portfolio had not voluntarily waived a portion of their fees for the periods
indicated, the ratios would have been as follows:
Expenses to average net assets ............... 1.06%* 1.13% N/A N/A
Net investment income to average net assets .. 1.02%* 0.63% N/A N/A
</TABLE>
*Annualized
(A)The average commission rate paid is applicable for Funds that invest
greater than 10% of average net assets in equity transactions on which
commissions are charged. This disclosure is required for fiscal periods
beginning on or after September 1, 1995.
See notes to financial statements
<PAGE>
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INTERNATIONAL EQUITY PORTFOLIO
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
International Equity 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. 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 following significant accounting policies consistently
followed by the Portfolio are as follows
A. INVESTMENT SECURITY VALUATIONS -- Equity securities in the portfolio are
valued at the last sale price on the exchange on which they are primarily
traded, or at the quoted bid price for securities in which there were no sales
during the day, or for unlisted securities not reported on the NASDAQ system.
Securities listed on a foreign exchange are valued at the last quoted sale price
available. Bonds and other fixed income securities (other than short-term
obligations maturing in sixty days or less) in the portfolio are valued on the
basis of valuations furnished by a pricing service approved by the Board of
Trustees, the use of which has been approved by the Trustees. In making such
valuations, the pricing service utilizes both dealer-supplied valuations and
electronic data processing techniques 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, without exclusive reliance upon quoted prices or
exchanges or over-the-counter prices. Short-term obligations maturing in sixty
days or less, are valued at amortized cost, which constitutes fair value as
determined by the Trustees. Portfolio securities for which there are no such
quotations or valuations are valued at fair value as determined in good faith by
or at the direction of the Trustees. Trading in securities on most foreign
exchanges and over-the-counter markets is normally completed before the close of
the New York Stock Exchange and may also take place on days which the New York
Stock Exchange is closed. If events materially affecting the value of foreign
securities occur between the time when the exchange on which they are traded
closes and the time of fund valuation, such securities will be valued at fair
value in accordance with procedures established by and under the general
supervision of the Trustees.
B. FOREIGN CURRENCY TRANSLATION -- The accounting records of the Portfolio are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the current rate of exchange to determine the value of investments,
assets and liabilities. Purchases and sales of securities, and income and
expenses are translated at the prevailing rate of exchange on the respective
dates of such transactions. The Fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments. Translation of foreign currency
includes net exchange gains and losses, disposition of foreign currency and the
difference between the amount of investment income, expenses and foreign taxes
withheld recorded and the actual amount received or paid.
C. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Portfolio may enter into
forward foreign currency exchange contracts ("contracts") in connection with
planned purchases or sales of securities or to hedge the U.S. dollar value of
portfolio securities denominated in a particular currency. The Portfolio could
be exposed to risks if the counter-parties to the contracts are unable to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. Dollar. Forward foreign currency exchange
contracts are adjusted by the daily exchange rate of the underlying currency and
any gains or losses are recorded for financial statement purposes as unrealized
gains or losses until the contract settlement date.
D. ACCOUNTING FOR INVESTMENTS -- Securities transactions are accounted for on
the trade date. Realized gains and losses on security transactions are
determined on the identified cost method. Dividend income and other
distributions from portfolio securities are recorded on the ex-dividend date.
Dividend income is recorded net of foreign taxes withheld where recovery of such
taxes is not assured. Interest income is accrued daily.
E. U.S. FEDERAL INCOME AND OTHER TAXES -- The Portfolio is considered a
partnership under the U.S. Internal Revenue Code. Accordingly, no provision for
federal income taxes is necessary. The Portfolio may be subject to taxes imposed
by countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued and applied to net
investment income and net realized gains as such income and/or gains are earned.
F. 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.
G. 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 agreements.
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.
(2) INVESTMENT ADVISORY FEES
The investment advisory fees paid to Citibank, as compensation for overall
investment management services, amounted to $228,303, of which $2,500 was
voluntarily waived, for the six months ended June 30, 1997. The investment
advisory fees are computed at the annual rate of 1.00% of the Portfolio's
average daily net assets.
(3) ADMINISTRATIVE FEES
Under the terms of an Administrative Services Agreement, the administrative
services fees paid to the Administrator, as compensation for overall
administrative services including 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 $11,415 all of which was voluntarily waived, for
the six months ended June 30, 1997. The Portfolio pays no compensation directly
to any Trustee or 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 officers and a Trustee of the Portfolio
are officers and directors of the Administrator or its affiliates.
(4) PURCHASES AND SALES OF INVESTMENTS
For the six months ended June 30, 1997, purchases and sales of investment
securities, other than short-term investments, aggre-gated $25,742,675 and
$30,562,895, respectively.
(5) FEDERAL INCOME TAX BASIS
OF INVESTMENTS
The cost and unrealized appreciation/(depreciation) in value of the investment
securities owned at June 30, 1997 as computed on a federal income tax basis, are
as follows:
Aggregate cost ..................... $41,513,503
===========
Gross unrealized appreciation ...... $ 6,090,246
Gross unrealized depreciation ...... (992,999)
-----------
Net unrealized appreciation ........ $ 5,097,247
===========
(6) EXPENSE FEES
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 expenses of
the Portfolio less expenses waived by the Administrator would on an annual basis
exceed an agreed upon rate, which as of July 1, 1996 is 1.00% of average daily
net assets.
(7) FINANCIAL INSTRUMENTS
The Portfolio may trade financial instruments with off-balance sheet risk in the
normal course of its investing activities and to assist in managing exposure to
market risks such as interest rates and foreign currency exchange rates. These
financial instruments include forward foreign currency exchange contracts. The
notional or contractual amounts of these instruments represent the investment
the Portfolio has in particular classes of financial instruments and does not
necessarily represent the amounts potentially subject to risk. The measurement
of the risks associated with these instruments is meaningful only when related
and offsetting transactions are considered.
(8) LINE OF CREDIT
The Portfolio, along with the other Landmark Funds, entered into an ongoing
agreement with a bank which allows the Landmark Funds collectively to borrow up
to $60 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,
1997, the commitment fee allocated to the Portfolio was $102. Since the line of
credit was established, there have been no borrowings.
