<PAGE>
Small Cap Equity Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited)
Issuer Shares Value
- --------------------------------------------------------------------------------
AUTOS AND TRANSPORT - 1.8%
Eagle USA AirFreight Inc.* ................... 8,600 $ 318,200
----------
CONSUMER SERVICES - 22.3%
Activision Inc.* ............................. 22,600 293,800
Bally Entertainment Corp.* ................... 8,800 374,000
Casino Data Systems* ......................... 18,750 283,594
Forensic Technologies* ....................... 35,000 323,750
Gadzooks Inc.* ............................... 9,100 293,475
Heftel Broadcasting Corp. .................... 13,200 391,050
Neostar Retail Group Inc.* ................... 74,000 379,250
Regal Cinemas* ............................... 6,400 292,800
Sports & Recreation Inc.* .................... 31,500 287,438
Suburban Lodges America* ..................... 7,500 173,438
The Men's Warehouse Inc.* .................... 9,200 296,700
Whittmann-Hart Inc.* ......................... 7,800 280,800
Wyndham HotelCorp.* .......................... 10,200 212,925
----------
3,883,020
----------
CONSUMER STAPLES - 5.1%
Performance Food Group Co.* .................. 11,800 306,800
Pete's Brewing Company* ...................... 16,600 249,000
Worthington Foods Inc. ....................... 19,000 327,750
----------
883,550
----------
FINANCIAL SERVICES - 17.2%
Affiliated Computer Services* .................. 6,400 300,800
First Empire State Corp. ....................... 1,300 313,300
Interwest Bancorp Inc. ......................... 12,900 307,988
Investors Financial Services Corp.* ............ 13,900 323,175
Meadowbrook Insurance Group .................... 9,200 282,900
Olympic Financial Inc.* ........................ 13,000 299,000
Roosevelt Financial Group ...................... 14,100 271,425
Sirrom Capital Corp. ........................... 10,000 272,500
Susquehanna Bancshares Inc. .................... 11,200 299,600
Texas Regional Bank Shares "A" ................. 12,700 317,500
---------
2,988,188
---------
HEALTH CARE - 16.6%
American HomePatient* ........................ 8,100 358,425
Cytyc Corporation* ........................... 12,100 313,088
Eclipse Surgical Tech* ....................... 20,800 286,000
ESC Medical Systems Ltd.* .................... 11,275 318,519
Imagyn Medical Inc.* ......................... 22,800 250,800
Interneuron Pharmaceuticals* ................. 10,000 300,000
NCS Healthcare Inc. Class "A"* ............... 10,700 323,675
Sunrise Assisted Living* ..................... 15,200 364,798
Vivus Inc.* .................................. 11,300 370,075
---------
2,885,380
---------
INTEGRATED OILS - 3.6%
Giant Industries Inc. ........................ 22,100 320,450
KCS Energy Inc. .............................. 10,800 310,500
---------
630,950
---------
MATERIALS & PROCESSING - 3.6%
Carbide/Graphite Group* ........................ 16,000 300,000
Intertape Polymer Group ........................ 16,400 332,100
---------
632,100
---------
OTHER ENERGY - 5.2%
Belco Oil & Gas Corporation .................... 8,550 303,525
Input/Output Inc.* ............................. 8,200 265,475
Lomak Petroleum Inc. ........................... 24,000 342,000
---------
911,000
---------
PRODUCER DURABLES - 9.1%
American Homestar Corp.* ....................... 13,100 340,600
Blount International Inc. Class "A" ............ 9,800 308,700
Dupont Photomasks* ............................. 16,700 342,350
Hardings Inc. .................................. 9,900 314,325
Polycom Inc.* .................................. 40,000 280,000
---------
1,585,975
---------
TECHNOLOGY - 9.9%
Insignia Solutions Adv* .................... 36,000 306,000
Logal Educational Software* ................ 36,700 243,138
Network General Corporation* ............... 12,400 266,600
Phoenix Technology Ltd.* ................... 17,800 298,150
Silicon Valley Research Inc.* .............. 46,150 271,131
State of the Art Inc.* ..................... 17,800 329,299
------------
1,714,318
------------
UTILITIES - 3.6%
Atlantic Tele-Network* ..................... 10,000 240,000
Petersburg Long Distance Inc. ADRs* ........ 48,100 393,819
------------
633,819
------------
TOTAL COMMON STOCK
(Identified Cost $14,523,812) ............. 17,066,500
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SHORT-TERM OBLIGTIONS, AT AMORTIZED COST -- 1.1%
Salomon Repurchase Agreement,
4.98% due 7/01/96 proceeds at
maturity $196,784 (collateralized by
$29,589 US Teasury Note
6.375% due 6/30/97,
$16,491 US Teasury Note
7.50% due 10/31/99,
$59,959 US Teasury Note
7.25% due 8/15/20,
$26,261 US Teasury Note
7.50% due 1/31/97 and
$69,569 US Treasury Note
11.25% due 2/15/15) ...................... 196,757
------------
TOTAL INVESTMENTS .......................... 99.1% 17,263,257
(Identified Cost $14,720,569)
OTHER ASSETS,
LESS LIABILITIES........................... 0.9 153,332
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NET ASSETS ................................. 100.0% $17,416,589
===== ===========
ADRs American Depositary Receipts
* Non income producing
See notes to financial statements
<PAGE>
Small Cap Equity Portfolio
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STATEMENT OF ASSETS AND LIABILITIES June 30, 1996 (unaudited)
ASSETS:
Investments at value (Note 1A) (Identified Cost, $14,720,569) ... $17,263,257
Cash ............................................................ 223,546
Interest receivable and other assets ............................ 4,636
-----------
Total assets ................................................ 17,491,439
-----------
LIABILITIES:
Payable for investments purchased ............................... 74,850
-----------
NET ASSETS ...................................................... $17,416,589
-----------
REPRESENTED BY:
Paid-in capital for beneficial interests ........................ $17,416,589
===========
See notes to financial statements
<PAGE>
Small Cap Equity Portfolio
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STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1996 (unaudited)
INVESTMENT INCOME:
Dividend Income ................................. $ 22,728
Interest Income ................................. 20,269 $ 42,997
----------
EXPENSES:
Investment advisory fees (Note 2) ................. 40,898
Auditing fees ..................................... 12,500
Custodian fees .................................... 10,180
Legal fees ........................................ 2,800
Administrative fees (Note 3) ...................... 2,727
Trustee fees ...................................... 1,500
Miscellaneous ..................................... 1,100
---------
Total expenses .................................. 71,705
Less expense assumed by the Administrator: ........ (28,080)
Less aggregate amount waived by Investment
Adviser and Administrator (Notes 2 and 3) ........ (43,625)
---------
Net Expenses .................................... -0-
----------
Net investment income ........................... 42,997
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON
INVESTMENTS:
Net realized gain (loss) from investment
transactions .................................... 1,336,654
Unrealized appreciation (depreciation) of
investments--
Beginning of period............................. 725,820
End of period................................... 2,542,688
---------
Net change in unrealized appreciation
(depreciation)............................ 1,816,868
----------
Net realized and unrealized gain (loss)
on investments ........................ 3,153,522
----------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS ............................... $3,196,519
==========
See notes to financial statements
<PAGE>
Small Cap Equity Portfolio
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SIX MONTHS JUNE 21, 1995
ENDED (COMMENCEMENT
JUNE 30, 1996 OF OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1995
----------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income ...................................................... $ 42,997 $ 16,583
Net realized gain on investment transactions ............................... 1,336,654 288,385
Net change in unrealized appreciation of investments ....................... 1,816,868 725,820
------------ ----------
Net increase in net assets resulting from operations ................... 3,196,519 1,030,788
------------ ----------
CAPITAL TRANSACTIONS:
Proceeds from contributions ................................................ 11,455,045 4,044,649
Value of withdrawals ....................................................... (2,224,397) (86,015)
------------ ----------
Net increase in net assets from capital transactions ................... 9,230,648 3,958,634
------------ ----------
NET INCREASE IN NET ASSETS: ................................................ 12,427,167 4,989,422
NET ASSETS:
Beginning of period ........................................................ 4,989,422 --
------------ ----------
End of period .............................................................. $ 17,416,589 $4,989,422
============ ==========
</TABLE>
See notes to financial statements
Small Cap Equity Portfolio
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FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
SIX MONTHS JUNE 21, 1995
ENDED (COMMENCEMENT
JUNE 30, 1996 OF OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1995
------------- -----------------
<S> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted) .............................................. $17,417 $4,989
Ratio of expenses to average net assets ................................................ -0- -0-
Ratio of net investment income to average net assets ................................... 0.79%* 1.22%*
Portfolio turnover ..................................................................... 39% 41%
Average commission rate per share (A) .................................................. $0.046 N/A
Note: If Agents of the Portfolio had not voluntarily waived all of their fees
and assumed Fund expenses for the period indicated and had expenses been
limited to that required by certain state securities law, the ratios would
have been as follows:
RATIOS:
Expenses to average net assets.......................................................... 1.31%* 2.50%*
Net investment income to average net assets............................................. (0.52%)* (1.28%)*
(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 begining on or
after September 1, 1995.
* Annualized
</TABLE>
See notes to financial statements
<PAGE>
Small Cap Equity Portfolio
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NOTES TO FINANCIAL STATEMENTS (unaudited)
(1) SIGNIFICANT ACCOUNTING POLICIES
Small Cap 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 require 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 in conformity with generally accepted accounting principles and are as
follows:
A. INVESTMENT SECURITY VALUATIONS -- Equity securities listed on securities
exchanges or reported through the NASDAQ system are valued at last sale
prices. Unlisted securities or listed securities for which last sales prices
are not available are valued at last quoted bid prices. Debt securities
(other than short-term obligations maturing in sixty days or less), are
valued on the basis of valuations furnished by pricing services which take
into account appropriate factors such as institutional-size trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, and other market data, without exclusive reliance on quoted prices or
exchange or over-the-counter prices, since such valuations are believed to
reflect more accurately the fair value of the securities. Short-term
obligations, maturing in sixty days or less, are valued at amortized cost,
which approximates market value. Securities, if any, for which there are no
such valuations or quotations are valued at fair value as determined in good
faith by or under guidelines established by the Trustees.
B. INCOME -- Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on long-term debt securities
when required for 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. EXPENSES -- The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
Portfolio Trust with respect to any two or more portfolios or series are
allocated in proportion to the average net assets of each portfolio, except
when allocations of direct expenses to each portfolio can otherwise be made
fairly. Expenses directly attributable to a portfolio are charged to that
portfolio.
E. REPURCHASE AGREEMENTS -- It is the policy of the Portfolio to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase 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.
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 $40,898 all of which was
voluntarily waived for the six months ended June 30, 1996. The investment
advisory fees are computed at the annual rate of 0.75% 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 $2,727 all of which was voluntarily waived 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 $15,944,923 and $4,069,874, 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 ......................................... $14,720,569
===========
Gross unrealized appreciation .......................... $ 2,878,463
Gross unrealized depreciation .......................... (335,775)
-----------
Net unrealized appreciation ............................ $ 2,542,688
===========
(6) 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 was allocated to the Portfolio was $20. Since the
line of credit was established, there have been no borrowings.
(7) ASSUMPTION OF EXPENSES
SFG has voluntarily agreed to pay a portion of the unwaived expenses of the
Portfolio for the six months ended June 30, 1996, which amounted to $28,080.
