<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
PORTFOLIO OF INVESTMENTS JUNE 30, 1998 (Unaudited)
ISSUER/INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS AND RIGHTS--95.3%
- --------------------------------------------------------------------------------
AMERICAN DEPOSITORY RECEIPTS/ADR'S--1.9%
- --------------------------------------------------------------------------------
Magyar Olaj-Es Gazipari
Integrated Oil 7,400 $ 199,800
Matav RT
Telecommunications 7,200 211,950
Lukoil Co.
Energy Sources 3,300 108,900
Telecom Argentina SA
Telecommunications 6,700 199,744
-----------
720,394
-----------
AUSTRALIA--1.7%
- --------------------------------------------------------------------------------
Australia & New Zealand Bank
Banking 14,794 102,303
Broken Hill Proprietary
Energy Sources 10,500 88,969
C.S.R. Ltd.
Building Materials 21,400 61,904
Centaur Mining & Exploration Ltd.*
Gold Mines 57,000 19,814
Mayne Nickless
Multi-lndustry 11,119 59,013
News Corp.
Business & Public
Services 20,095 164,407
North Ltd.
Non-Ferrous Metals 21,500 44,309
Pacific Dunlop Ltd.
Multi-lndustry 31,000 50,225
Woodside Petroleum
Co. Ltd.
Energy Sources 12,500 62,540
- --------------------------------------------------------------------------------
653,484
-----------
BRAZIL--1.1%
- --------------------------------------------------------------------------------
Light Servicos de Electricid
Electrical & Gas Utilities 612,000 187,852
Telecommunicacoes de Sao
Paolo Celular--
Preferred B
Telecommunications 674,698 56,004
Telecommunicacoes de Sao
Paolo S/A--Preferred
Telecommunications 674,698 158,677
Telecommunicacoes Sao
Paolo--Preferred Rights
Telecommunications 31,709 507
-----------
403,040
-----------
FINLAND--1.2%
- --------------------------------------------------------------------------------
Nokia AB
Telephone Utilities 4,451 327,670
UPM Kymmene Corp.
Forest Products & Paper 4,979 137,169
----- -----------
464,839
-----------
FRANCE--12.3%
- --------------------------------------------------------------------------------
AXA-UAP
Insurance 2,106 236,876
Accor French
Leisure & Tourism 1,007 281,827
Alcatel Alsthom
Electrical & Electronics 1,063 216,444
BNP
Banking 1,769 144,547
Carrefour
Retailing 329 208,152
Casino (Etabl
Economiques du)
Retailing 1,834 146,460
France Telecom SA
Telephone Utilities 4,587 316,387
Groupe Danone
Food & Household
Products 1,049 289,244
Lafarge
Building Materials 1,566 161,892
L'oreal
Pharmaceuticals & Health 263 146,297
Paribas
Banking 1,408 150,682
Peugeot SA
Automobiles 1,689 363,184
Pinault-Printemps
Retailing 373 312,186
Rhone Poulenc
Pharmaceuticals & Health 2,989 168,591
Schneider SA
Machinery & Engineering 1,901 151,591
Societe Generale
Banking 1,849 384,436
Societe Nationale
Elf Aquitaine
Energy Sources 1,706 239,856
Suez Lyonnaise des Eaux
Business & Public Services 1,166 191,900
Total SA--Class B
Energy Sources 1,461 189,944
Vivendi
Electrical & Gas Utilities 1,470 313,904
----- -----------
4,614,400
-----------
GERMANY--10.1%
- --------------------------------------------------------------------------------
Adidas-Salomon AG
Household Appliances 748 130,442
Allianz AG
Insurance 1,174 391,561
Allianz AG--Preferred
Insurance 66 21,830
Basf AG
Chemicals 3,384 160,902
Bayer AG
Chemicals 3,474 179,917
Bayerische Vereinsbank
Banking 3,482 295,404
Continental AG
Industrial Components 4,439 139,561
Daimler Benz
Automobiles 2,763 271,941
Daimler Benz--Rights
Automobiles 2,500 2,772
Deutsche Bank AG
Banking 1,560 132,000
Deutsche Telekom
Telephone Utilities 6,844 187,470
Dresdner Bank AG
Banking 2,653 143,429
Lufthansa
Airlines 6,050 152,470
Mann AG
Machinery & Engineering 358 139,750
Mannesmann AG
Machinery & Engineering 2,720 279,775
Muenchener
Rueckversicherungs AG
Insurance 547 271,764
Preussag
Multi-Industry 486 174,086
SAP--Preferred
Data Processing &
Reproduction 587 398,722
Siemens AG
Automobiles 1,702 103,955
Veba AG
Electrical & Gas Utilities 2,958 199,037
-----------
3,776,788
HONG KONG--0.5%
- --------------------------------------------------------------------------------
CLP Holdings
Energy Sources 20,000 91,121
Hutchinson Whampoa Ltd.
Multi-Industry 17,000 89,739
-----------
180,860
ITALY--4.8%
- --------------------------------------------------------------------------------
Assicurazioni Generali Spa
Insurance 8,996 292,652
Banca Commerciale Italiana
Banking 24,196 144,761
Credito Italiano
Banking 23,302 122,035
Ente Nazionale
Idrocarburi
Energy Sources 40,062 262,683
IMI
Banking 8,345 131,510
Instituto Bancario Sao Paulo
Banking 9,092 131,255
Rinascente
Retailing 14,636 145,804
Telecom Italia
Telephone Utilities 32,800 241,558
Telecom Italia Mobile
Telephone Utilities 50,369 308,153
- --------------------------------------------------------------------------------
1,780,411
-----------
JAPAN--19.4%
- --------------------------------------------------------------------------------
Aoyama Trading Co.
Retailing 6,200 153,352
Asahi Chemical Industry
Co. Ltd.
Chemicals 48,000 173,573
Bank of Tokyo Mitsubishi
Banking 18,050 191,766
Citizen Watch Co. Ltd.
Household Appliances 32,000 264,989
DDI Corp.
Telephone Utilities 64 223,563
Dai-Ichi Kangyo Bank
Banking 16,000 94,308
Dai Nippon Printing
Multi-Industry 8,000 128,155
Daiwa Securities Co. Ltd.
Financial Services 60,000 259,058
Fuji Photo Film Co. Ltd.
Household Appliances 2,000 69,863
Fujitsu Ltd.
Data Processing &
Reproduction 26,000 274,535
Honda Motor Co. Ltd.
Automobiles 9,000 321,545
Ines Corp.
Business & Public
Services 19,000 130,542
Japan Tobacco
Beverages & Tobacco 44 298,807
Kawasaki Steel Corp.
Steel 89,000 160,917
Mitsubishi Heavy Industries
Machinery & Engineering 51,000 193,274
Mitsubishi Trust & Banking
Banking 16,000 136,429
Mitsui Mining & Smelting Co.
Non-Ferrous Metals 24,000 99,978
Nippon Oil Co. Ltd.
Energy Sources 35,000 113,401
Nippon Paper Industries
Forest Products & Paper 39,000 163,029
Nippon Telegraph &
Telephone Co.
Telephone Utilities 76 632,097
Nomura Securities Ltd.
Financial Services 17,000 198,561
Osaka Gas Co. Ltd.
Electrical & Gas Utilities 79,000 203,399
Osaka Sanso
Chemicals 45,000 92,753
Ryohin Keikaku Co. Ltd.
Food & Household
Products 3,600 346,279
Sakura Bank Ltd.
Banking 56,000 145,802
Sankyo Co. Ltd.
Pharmaceuticals & Health 11,000 251,392
Shin-Etsu Chemical Co. Ltd.
Chemicals 13,800 239,531
Sony Corp.
Household Appliances 4,000 345,701
Sumitomo Bank Ltd.
Banking 34,000 331,959
Sumitomo Electric Industries
Industrial Components 21,000 213,083
TDK Corp.
Automobiles 4,000 296,522
Tokio Marine & Fire Insurance
Insurance 28,000 288,768
Toyota Motor Corp.
Automobiles 9,000 233,673
-----------
7,270,604
-----------
MEXICO--0.1%
- --------------------------------------------------------------------------------
Grupo Carso
Multi-Industry 3,200 13,463
-----------
NETHERLANDS--4.8%
- --------------------------------------------------------------------------------
ABN AMRO Holdings NV
Banking 4,532 106,124
Akzo Nobel NV
Chemicals 792 176,186
Elsevier NV
Business & Public Services 9,776 147,644
ING Groep NV
Financial Services 4,075 267,023
Philips Electronics NV
Household Appliances 2,171 182,630
Royal Dutch Petroleum
Energy Sources 11,444 635,043
Unilever NA
Food & Household
Products 3,580 284,250
-----------
1,798,900
PORTUGAL--1.2%
- --------------------------------------------------------------------------------
Banco Commercial Portuguese
Banking 5,895 167,493
Cimpor Cimentos De
Portugal S.G.P.S
Building Materials 3,386 119,042
Jeronimo Martins
Food & Household
Products 3,658 175,846
-----------
462,381
SPAIN--4.6%
- --------------------------------------------------------------------------------
Argentaria Corp Bancariade
Espana
Banking 5,952 133,517
Banco Bilbao Vizcaya SA
Banking 5,212 267,482
Banco Santandar SA
Banking 10,422 266,752
Compania Telefonica
Nacional Espana
Telephone Utilities 6,348 293,494
Endesa (Emp. Nac. De
Electricidad)
Electric & Gas Utilities 4,290 93,857
Grupo Acciona
Building & Construction 661 157,243
Repsol SA
Energy Sources 2,371 130,649
Urbis SA*
Building & Construction 18,245 254,609
Viscofan Envoltura
Miscellaneous Materials 3,060 142,474
-----------
1,740,077
-----------
SWEDEN--2.4%
- --------------------------------------------------------------------------------
ABB AB
Machinery & Engineering 9,142 129,519
A B Volvo
Automobiles 4,253 126,641
Astra AB--Class A
Pharmaceuticals & Health 8,574 175,221
Ericsson LM--Class B
Electrical & Electronics 10,541 307,930
Skandia Forsikring AB
Insurance 11,547 165,040
-----------
904,351
-----------
SWITZERLAND--7.2%
- --------------------------------------------------------------------------------
Credit Suisse Group
Banking 1,371 305,562
Nestle SA
Food & Household
Products 200 428,713
Novartis AG
Pharmaceuticals & Health 353 588,372
Roche Holdings AGM
Pharmaceuticals & Health 33 324,596
Schweiz Ruckverischerungs
Insurance 109 276,117
United Bank of
Switzerland AG
Banking 1,316 490,143
Zurich Versicherungs
Insurance 411 262,727
-----------
2,676,230
-----------
THAILAND--0.3%
- --------------------------------------------------------------------------------
Bangkok Bank Public
Co. Ltd.
Banking 116,600 120,192
UNITED KINGDOM--21.7%
- --------------------------------------------------------------------------------
Abbey National PLC
Banking 11,857 210,845
Allied Irish Banks
Banking 12,677 184,151
Barclays Bank PLC
Banking 10,325 297,901
Bass PLC
Beverage & Tobacco 9,880 185,257
B.A.T. Industries PLC
Multi-Industry 14,289 143,150
BG PLC
Electrical & Gas Utilities 22,716 131,424
British Aerospace PLC
Airlines 16,881 129,375
British Petroleum Co.
Energy Sources 32,020 467,274
British
Telecommunications PLC
Telephone Utilities 36,591 452,110
Cable & Wireless PLC
Telephone Utilities 14,020 170,419
Cadbury Schweppes
Food & Household
Products 8,780 135,971
Centrica PLC.*
Electrical & Gas Utilities 61,149 103,377
CRH PLC
Building Materials 19,483 276,512
Diageo PLC
Beverage & Tobacco 25,158 298,245
GKN
Machinery & Engineering 14,068 179,341
General Electric Co. PLC
Electrical & Electronics 21,715 187,270
Glaxo Wellcome
Pharmaceuticals & Health 17,834 535,696
Granada Group PLC
Business & Public
Services 13,065 240,397
Great Universal Stores
Retailing 13,484 177,862
Guardian Royal Exchange
Insurance 21,416 125,512
Hong Kong & Shanghai
Bank Corp. Holdings
Banking 12,824 325,680
Imi PLC
Machinery & Engineering 14,839 91,921
Imperial Chemical Industries
Chemicals 7,385 118,622
Kingfisher PLC
Retailing 11,130 179,333
Ladbroke Group PLC
Leisure & Tourism 23,736 130,389
Lloyds TSB Group PLC
Banking 28,227 395,190
National Power
Electrical & Gas Utilities 13,179 124,108
Orange PLC.*
Telephone Utilities 26,642 282,474
Prudential Corp. PLC
Insurance 14,163 186,701
Royal Bank of Scotland
Group
Banking 12,554 217,999
Royal & Sun Alliance
Insurance 10,864 112,375
Scottish Power
Electrical & Gas Utilities 14,613 128,096
SmithKline Beecham Plc
Real Estate 35,803 437,293
Unilever Plc
Food & Household
Products 16,879 179,807
Vodafone
Telephone Utilities 27,478 348,917
Zeneca
Pharmaceuticals & Health 5,280 226,748
-----------
8,117,742
-----------
TOTAL COMMON STOCKS 35,698,156
TOTAL INVESTMENTS
(Identified Cost
$32,357,836) 95.3% 35,698,156
OTHER ASSETS
LESS LIABILITIES 4.7 1,771,088
----- -----------
NET ASSETS 100.0% $37,469,244
===== ===========
* Non income producing securities.
See notes to financial statements
<PAGE>
Forward contracts which were open at June 30, 1998 are as follows:
<TABLE>
<CAPTION>
UNREALIZED
MARKET AGGREGATE DELIVERY DATE APPRECIATION
CURRENCY COUNTRY VALUE FACE VALUE OF CONTRACTS (DEPRECIATION)
-------- ------- ----- ---------- ------------ --------------
<S> <C> <C> <C> <C>
Lira (Sell) ...... Italy $115,040 $114,338 July-1998 $(702)
Pound (Buy) ...... Great Britain 69,805 69,568 July-1998 237
-----
$(465)
=====
</TABLE>
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 1998 (Unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) (Identified Cost, $32,357,836) $35,698,156
Foreign currency, at value (Cost, $223,239) 219,562
Cash 1,569,863
Receivable for investments sold 329,604
Receivable for forward contracts 237
Dividends and interest receivable 64,776
- --------------------------------------------------------------------------------
Total assets 37,882,198
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for securities purchased 371,735
Payable to affiliates--Investment advisory fees (Note 2) 29,927
Payable for forward contracts 702
Other liabilities 10,590
- --------------------------------------------------------------------------------
Total liabilities 412,954
- --------------------------------------------------------------------------------
NET ASSETS $37,469,244
- --------------------------------------------------------------------------------
REPRESENTED BY:
Paid-in capital for beneficial interests $37,469,244
- --------------------------------------------------------------------------------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1998 (UNAUDITED)
- --------------------------------------------------------------------------------
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $87,627) $ 324,271
Interest 2,573
- --------------------------------------------------------------------------------
Total investment income $ 326,844
- --------------------------------------------------------------------------------
EXPENSES:
Investment advisory fees (Note 2) 173,525
Administrative fees (Note 3) 8,676
- --------------------------------------------------------------------------------
Total expenses 182,201
Less aggregate amount waived by the Administrator
(Note 3) (8,676)
- --------------------------------------------------------------------------------
Net expenses 173,525
- --------------------------------------------------------------------------------
Net investment income 153,319
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions 2,131,344
Net realized gain on foreign exchange currencies
transactions 9,802
- --------------------------------------------------------------------------------
Net realized gain 2,141,146
- --------------------------------------------------------------------------------
Unrealized appreciation (depreciation) on investments--
Beginning of period 454,843
End of period 3,341,664 2,886,821
- --------------------------------------------------------------------------------
Translation of other assets and liabilities denominated
in foreign currencies--net 2,013
- --------------------------------------------------------------------------------
Net change in unrealized appreciation 2,888,834
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 5,029,980
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $5,183,299
- --------------------------------------------------------------------------------
See notes to financial statements
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
SIX MONTHS
ENDED
JUNE 30, 1998 YEAR ENDED
(Unaudited) DECEMBER 31, 1997
- --------------------------------------------------------------------------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 153,319 $ 257,502
Net realized gain on investments and foreign
exchange transactions 2,141,146 3,143,416
Net change in unrealized appreciation
(depreciation) of investments and foreign
currency exchange 2,888,834 (968,584)
- ------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 5,183,299 2,432,334
- ------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 3,074,024 7,972,770
Value of withdrawals (4,558,399) (25,691,025)
- ------------------------------------------------------------------------------
Net decrease in net assets from capital
transactions (1,484,375) (17,718,255)
- ------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS: 3,698,924 (15,285,921)
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 33,770,320 49,056,241
- ------------------------------------------------------------------------------
End of period $37,469,244 $33,770,320
- ------------------------------------------------------------------------------
<PAGE>
INTERNATIONAL EQUITY PORTFOLIO
FINANCIAL HIGHLIGHTS
MAY 1, 1994
SIX MONTHS (COMMENCEMENT
ENDED YEAR ENDED DECEMBER 31, OF OPERATIONS) TO
JUNE 30, 1998 ----------------------- DECEMBER 31,
(Unaudited) 1997 1996 1995 1994
- --------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
(000's omitted) $37,469 $33,770 $49,056 $40,114 $32,153
Ratio of expenses to average
net assets 1.00%* 1.00% 1.11% 1.20% 1.22%*
Ratio of net investment income to
average net assets 0.88%* 0.58% 0.65% 0.59% 0.60%*
Portfolio turnover 54% 99% 109% 51% 25%
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 1.05%* 1.06% 1.13% N/A N/A
Net investment income to
average net assets 0.83%* 0.52% 0.63% N/A N/A
- --------------------------------------------------------------------------------
* Annualized
See notes to financial statements
<PAGE>
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.
Citibank is a wholly owned subsidiary of Citicorp. Citicorp recently announced
its intention to merge with The Travelers Group. Completion of its merger is
subject to the satisfaction of certain conditions.
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 $173,525 for the six months ended
June 30, 1998. 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 $8,676, all of which was voluntarily waived for
the six months ended June 30, 1998. 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, 1998, purchases and sales of investment
securities, other than short-term investments, aggregated $18,117,716 and
$19,417,336, respectively.
5. FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/(depreciation) in value of the investment
securities owned at June 30, 1998 as computed on a federal income tax basis, are
as follows:
Aggregate cost $32,357,836
- --------------------------------------------------------------------------------
Gross unrealized appreciation $ 5,956,633
Gross unrealized depreciation (2,616,313)
- --------------------------------------------------------------------------------
Net unrealized appreciation $ 3,340,320
- --------------------------------------------------------------------------------
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. No such instruments
were held at June 30, 1998.
8. LINE OF CREDIT
The Portfolio, along with the other CitiFunds, entered into an ongoing agreement
with a bank which allows the 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. 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, 1998, the commitment fee allocated to the Portfolio was $73. Since the
line of credit was established, there have been no borrowings.
