<PAGE>
Equity Portfolio
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited)
ISSUER SHARES VALUE
COMMERCIAL SERVICES - 4.1%
Interpublic Group Inc. 105.000 $ 4,921,875
Sysco Corp. ................... 205,800 7,048,650
------------
11,970,525
------------
COMMODITIES & PROCESSING - 4.4%
Praxair Inc. ................. 174,000 7,351,500
Sigma Aldrich Corp. .......... 101,215 5,415,001
------------
12,766,501
------------
CONSUMER-DURABLES - 1.9%
Mattel Inc. .................. 199,375 5,707,109
------------
CONSUMER-NON DURABLES - 9.3%
Colgate-Palmolive Co. ........ 79,600 6,746,100
Gillette Co. ................. 47,000 2,931,624
PepsiCo Inc. ................. 192,000 6,792,000
Procter & Gamble Co. ......... 63,500 5,754,688
Sara Lee Corp. ............... 148,500 4,807,688
------------
27,032,100
------------
CONSUMER SERVICES -3.6%
Carnival Corp. ............... 185,500 5,356,313
McDonald's Corp. ............. 112,000 5,236,000
------------
10,592,313
============
ELECTRONICS/TECHNICAL SERVICES - 16.3%
Affiliated Computer Services*. 26,900 1,264,299
Andrew Corporation*........... 100,000 5,375,000
Applied Materials Inc. ....... 68,700 2,095,350
Cisco Systems, Inc.* ......... 111,100 6,291,036
Computer Associates Intl. Inc. 86,550 6,166,688
Electronic Data Systems Corp. 125,000 6,718,750
First Data Corp. ............. 72,317 5,758,241
Oracle Corp.*. ............... 84,150 3,318,666
Parametric Technology Corp.* . 72,800 3,157,700
Solectron Corp. .............. 97,600 3,696,600
Sungard Data Systems, Inc.* .. 77,800 3,121,725
------------
46,964,055
------------
ENERGY/MINERALS - 7.0%
Amoco Corp. .................. 74,700 5,406,413
Exxon Corp. .................. 65,400 5,681,625
Mobil Corp. .................. 22,000 2,466,750
Royal Dutch Petroleum Co.
ADRs. ....................... 43,900 6,749,625
------------
20,304,413
------------
FINANCE - 5.7%
American International
Group Inc. ................. 52,500 5,177,813
Federal National Mortgage
Association ................ 80,000 6,030,000
State Street Boston Corp. .... 104,000 5,304,000
------------
16,511,813
------------
HEALTH SERVICES/TECHNOLOGY - 12.0%
Cardinal Health Inc. ......... 55,700 4,017,363
Health Management Associates*. 243,450 4,929,863
Johnson & Johnson ............ 126,000 6,237,000
Manor Care Inc. .............. 142,000 5,591,250
Pacificare Health Systems .... 25,275 1,712,381
Pfizer Inc. .................. 130,900 9,342,988
Schein Henry Inc.* ........... 77,000 2,945,250
------------
34,776,095
------------
INDUSTRIAL SERVICES - 3.0%
Fluor Corp. .................. 93,800 6,132,175
WMX Technologies Inc. ........ 80,000 2,620,000
------------
8,752,175
------------
PRODUCER MANUFACTURING - 9.1%
Danaher Corp. ................ 124,000 5,394,000
Emerson Electric Co. ......... 63,100 5,702,663
Federal Signal Corp. ......... 189,400 4,450,900
General Electric Co. ......... 51,000 4,411,500
Xerox Corp. .................. 114,900 6,147,150
------------
26,106,213
------------
RETAIL TRADE - 12.4%
Autozone Inc.* ............... 154,500 5,368,875
Gap stores Inc. .............. 90,000 2,891,250
Hannaford Brothers Co. ....... 40,800 1,331,100
Home Depot ................... 105,200 5,680,800
Kohls Corporation* ........... 146,800 5,376,550
Nine West Group Inc.* ........ 110,000 5,623,750
Viking Office Products Inc.* . 137,800 4,323,475
Walgreen Co. ................. 116,900 3,916,150
------------
34,511,950
------------
TRANSPORTATION - 1.8%
Wisconsin Central Transport*.. 160,000 5,200,000
------------
UTILITIES - 6.8%
FPL Group Inc. ............... 102,800 4,728,800
GTE Corp. .................... 111,000 4,967,250
Pacificorp ................... 264,000 5,874,000
Texas Utilities Company ...... 95,700 4,091,175
------------
19,661,225
------------
TOTAL COMMON STOCK
(Identified Cost $218,560,629) 280,856,487
------------
SHORT-TERM OBLIGATIONS AT
AMORTIZED COST -- 2.6%
Lehman Brothers Repurchase Agreement
5.25% due 7/01/96,
Proceeds at maturity $7,523,290
(Collateralized by $6,685,000 U.S. Treasury
Bond 8.125% due 8/15/19) $ 7,520,000
------------
TOTAL INVESTMENTS ............ 100.0% 288,376,487
(Identified Cost $226,080,629)
OTHER ASSETS,
LESS LIABILITIES ............ 0.0% (55,274)
------ ------------
NET ASSETS ................... 100.0% $288,321,213
====== ============
ADRs -- American Depositary Receipts
*Non-income producing
See notes to financial statements
<PAGE>
Equity Portfolio
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STATEMENT OF ASSETS AND LIABILITIES June 30, 1996 (unaudited)
ASSETS:
Investments at value (Note 1A) (Identified Cost, $226,080,629).... $288,376,487
Cash.............................................................. 982
Receivable for investments sold................................... 3,129,596
Dividends and interest receivable................................. 329,606
------------
Total assets.................................................. 291,836,671
------------
LIABILITIES:
Payable for investments purchased................................. 3,372,935
Payable to affiliates--Investment advisory fees (Note 2).......... 117,360
Accrued expenses and other liabilities............................ 25,163
------------
Total liabilities............................................. 3,515,458
------------
NET ASSETS ....................................................... $288,321,213
============
REPRESENTED BY:
Paid-in capital for beneficial interests.......................... $288,321,213
============
See notes to financial statements
<PAGE>
Equity Portfolio
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STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (unaudited)
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $40,158). $2,277,931
Interest.............................................. 368,917
-----------
Total Income........................................ $ 2,646,848
EXPENSES:
Investment advisory fees (Note 2)..................... 669,901
Administrative fees (Note 3).......................... 66,990
Expense fees (Note 6)................................. 67,073
-----------
Total expenses...................................... 803,964
-----------
Net investment income............................... 1,842,884
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from investment transactions. 6,198,948
Unrealized appreciation (depreciation) of investments--
Beginning of period................................ 46,522,076
End of period...................................... 62,295,858
-----------
Net change in unrealized appreciation (depreciation). 15,773,782
-----------
Net realized and unrealized gain (loss)
on investments.................................... 21,972,730
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS.. $23,815,614
===========
See notes to financial statements
<PAGE>
Equity Portfolio
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STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS
ENDED
JUNE 30, 1996 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1995
---------------- -----------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income .................... $ 1,842,884 $ 3,620,844
Net realized gain on investment
transactions............................. 6,198,948 7,439,032
Net change in unrealized appreciation
(depreciation) of investments ........... 15,773,782 41,047,263
------------ ------------
Net increase in net assets resulting
from operations...................... 23,815,614 52,107,139
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from contributions............... 38,951,429 43,731,563
Value of withdrawals...................... (20,604,176) (36,365,840)
------------ ------------
Net increase in net assets from
capital transactions................. 18,347,253 7,365,723
------------ ------------
NET INCREASE IN NET ASSETS: .............. 42,162,867 59,472,862
NET ASSETS:
Beginning of period....................... 246,158,346 186,685,484
------------ ------------
End of period............................. $288,321,213 $246,158,346
============ ============
See notes to financial statements
Equity Portfolio
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FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS MAY 1, 1994
ENDED (COMMENCEMENT
JUNE 30, 1996 YEAR ENDED OF OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1995 DECEMBER 31, 1994
------------- ----------------- -----------------
<S> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted) ........................ $288,321 $246,158 $186,685
Ratio of expenses to average net assets .......................... 0.60%* 0.60% 0.60%*
Ratio of net investment income to average net assets ............. 1.38%* 1.73% 1.81%*
Portfolio turnover................................................ 38% 67% 35%
Average Commission rate per share (A) ............................ $0.058 N/A N/A
* 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.
</TABLE>
See notes to financial statements
<PAGE>
Equity Portfolio
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NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES
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 generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosure in the financial statements.
Actual results could differ from those estimates.
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 approved by 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 U.S. federal income tax purposes. Dividend income is
recorded on the ex-dividend date.
C. U.S. FEDERAL INCOME TAXES -- The Portfolio is considered a partnership
under the U.S. Internal Revenue Code. Accordingly, no provision for federal
income taxes is necessary.
D. 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.
E. 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.
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 fees paid to Citibank, as compensation for overall
investment management services, amounted to $669,901 for the six months ended
June 30, 1996. The investment advisory fees are computed at the annual rate of
0.50% of the Portfolio's average daily net assets.
(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
$66,990 for the six months ended June 30, 1996. 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 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 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 $124,361,243 and $97,882,358, respectively, for the six months ended
June 30, 1996.
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation (depreciation) in value of the
investment securities owned at June 30, 1996, as computed on a federal income
tax basis, are as follows:
Aggregate cost ........................................ $ 226,080,629
=============
Gross unrealized appreciation ......................... $ 65,346,880
Gross unrealized depreciation ......................... (3,051,022)
-------------
Net unrealized appreciation ........................... $ 62,295,858
=============
(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 ordinary
expenses of the Portfolio and expenses waived by the Administrator would, on an
annual basis, exceed an agreed upon rate, currently 0.60% 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, 1996,
the commitment fee allocated to the Portfolio was $723. Since the line of credit
was established, there have been no borrowings.
