<PAGE>
Small Cap Equity Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited)
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS -- 93.9%
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES - 20.1%
Abacus Direct Corp.* ..................... 39,900 $ 1,296,750
Lamar Advertising Co.* ................... 39,550 1,008,525
Melita International Corp.* .............. 30,200 377,500
Metris Companies Inc.* ................... 14,500 475,781
Metro Networks Inc.* ..................... 34,500 836,625
NFO Research Inc.* ....................... 18,800 465,300
Profit Recovery Group Intl* .............. 15,000 208,125
Rental Services Corp.* ................... 39,600 1,039,500
Snyder Communications Inc.* .............. 32,000 862,000
Suiza Foods Corp.* ....................... 29,900 1,225,900
Tower Automotive* ........................ 15,500 666,500
Wilmar Industries Inc.* .................. 19,500 475,313
-----------
8,937,819
-----------
COMMODITIES & PROCESSING - 1.4%
Om Group Inc. ............................ 18,800 622,750
-----------
CONSUMER NON-DURABLES - 4.4%
General Cigar Holdings Inc.* ............. 2,900 85,369
Performance Food Group Co.* .............. 41,900 879,900
Worthington Foods Inc. ................... 40,700 997,150
-----------
1,962,419
-----------
CONSUMER SERVICES - 14.8%
Activision Inc.* ......................... 64,000 920,000
Central Parking Corp. .................... 18,200 633,588
Equity Corp. Intl. * ..................... 40,600 982,012
Gray Communication Systems ............... 4,000 83,500
Heftel Broadcasting Corp.* ............... 17,000 939,250
Premier Parks Inc.* ...................... 28,100 1,036,186
Regal Cinemas* ........................... 31,350 1,034,550
Suburban Lodges America* ................. 46,000 966,000
-----------
6,595,086
-----------
ELECTRONICS/TECHNOLOGICAL SERVICES - 13.4 %
Claremont Technology Group Inc.* 39,200 931,000
E Trade Group Inc.* ...................... 36,400 714,350
Iona Technologies ADRs* .................. 29,800 588,550
Periphonics Corp.* ....................... 36,000 774,000
Pure Atria Corp.* ........................ 43,100 608,788
Registry Inc.* ........................... 19,700 906,200
Whittman-Hart Inc.* ...................... 31,500 885,937
Xionics Document Technology Inc.* ........ 37,600 554,600
-----------
5,963,425
-----------
ENERGY/MINERAL - 6.0%
Dawson Production* ....................... 71,500 1,001,000
Forcenergy Gas Exploration* .............. 29,000 880,875
Lomak Petroleum Inc. ..................... 44,300 789,093
-----------
2,670,968
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FINANCE - 11.6%
Allied Group ............................. 21,000 798,000
Executive Risk Inc. ...................... 16,700 868,400
Investors Financial Services Co. ......... 20,000 950,000
Sirrom Capital Corp. ..................... 22,000 759,000
Texas Regional Bank Shares A ............. 21,800 915,600
WestAmerica Bancorp ...................... 11,700 889,200
-----------
5,180,200
-----------
HEALTH SERVICES/TECHNOLOGY - 13.7%
Cytyc Corp.* ............................. 35,000 949,375
Henry Schein Inc.* ....................... 27,000 843,750
Human Genome Sciences Inc.* .............. 15,600 518,700
Integrated Living Community* ............. 93,300 1,072,950
Occusystems Inc.* ........................ 26,500 768,500
Parexel International Corp.* ............. 31,800 1,009,650
Renal Treatment Center* .................. 35,300 948,687
-----------
6,111,612
-----------
MISCELLANEOUS - .1 %
Pierce Leahy Corp* ....................... 1,000 18,000
-----------
PRODUCER/MANUFACTURING - 3.9%
Hardinge Inc. ............................ 31,800 930,150
Miller Industries Inc./Tenn.* ............ 37,200 595,200
Synthetic Industries Inc.* ............... 11,300 238,713
-----------
1,764,063
-----------
RETAIL TRADE - 2.4%
CDW Computer Center Inc.* ................ 11,300 599,608
Men's Wearhouse Inc.* .................... 15,000 472,500
-----------
1,072,108
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TRANSPORTATION - 2.1 %
Eagle USA Airfreight Inc.* ............... 34,000 922,250
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TOTAL COMMON STOCK
(Identified Cost $34,130,546) ........... 41,820,700
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SHORT TERM--4.7%
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U.S. Treasury Bill
5.085% due 9/04/97 ...................... 990,678
Salomon Repurchase Agreement
5.50% due 7/01/97 proceeds at maturity
$1,129,217 (collateralized by
$318,727 U.S. Treasury Note 8.75% due 8/15/20,
$570,844 U.S. Treasury Note 9.125% due 5/15/18,
$188,473 U.S. Treasury Note 9.00% due 11/15/18 and
$72,230 U.S. Treasury Bond 7.50% due 12/15/16) 1,129,044
-----------
2,119,722
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TOTAL INVESTMENTS
(Identified Cost $36,250,268) ........... 98.6% 43,940,422
OTHER ASSETS
LESS LIABILITIES ........................ 1.4 621,104
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NET ASSETS ............................... 100.0% $44,561,526
===== ===========
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, 1997 (unaudited)
- --------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) (Identified Cost, $36,250,268) .... $43,940,422
Receivable for securities sold ................................... 772,627
Dividend and interest receivable ................................. 3,433
-----------
Total assets ................................................. 44,716,482
-----------
LIABILITIES:
Payable for investments purchased ................................ 90,937
Payable to affiliates - Investment advisory fees (Note 2) ........ 26,632
Accrued expenses and other liabilities ........................... 37,387
-----------
Total liabilities ............................................ 154,956
-----------
NET ASSETS ....................................................... $44,561,526
===========
REPRESENTED BY:
Paid-in capital for beneficial interests ......................... $44,561,526
===========
See notes to financial statements
<PAGE>
Small Cap Equity Portfolio
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STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (unaudited)
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<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Dividend Income ..................................................... $ 74,819
Interest Income ..................................................... 39,282 $ 114,101
---------
EXPENSES:
Investment advisory fees (Note 2) ..................................... 161,509
Custodian fees ........................................................ 47,933
Administrative fees (Note 3) .......................................... 10,767
Auditing fees ......................................................... 8,400
Legal fees ............................................................ 5,938
Trustee fees .......................................................... 412
Miscellaneous ......................................................... 926
---------
Total expenses ...................................................... 235,885
Less aggregate amount waived by Investment
Adviser and Administrator (Notes 2 and 3) ............................ (52,841)
---------
Net expenses ........................................................ 183,044
----------
Net investment loss ................................................. (68,943)
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized loss from investment transactions ........................ (2,197,428)
Unrealized appreciation of investments--
Beginning of period ................................................ 2,242,702
End of period ...................................................... 7,690,154
---------
Net change in unrealized appreciation ................................ 5,447,452
----------
Net realized and unrealized gain (loss) on investments ............. 3,250,024
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS .................. $3,181,081
==========
</TABLE>
See notes to financial statements
<PAGE>
Small Cap Equity Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income (loss) ...................................... $ (68,943) $ 28,536
Net realized gain (loss) on investment transactions ............... (2,197,428) 1,063,995
Net change in unrealized appreciation of investments .............. 5,447,452 1,516,882
----------- ------------
Net increase in net assets resulting from operations .......... 3,181,081 2,609,413
----------- ------------
CAPITAL TRANSACTIONS:
Proceeds from contributions ....................................... 12,043,732 45,631,942
Value of withdrawals .............................................. (17,805,609) (6,088,455)
----------- ------------
Net increase (decrease) in net assets from capital transactions (5,761,877) 39,543,487
----------- ------------
NET INCREASE (DECREASE) IN NET ASSETS: ............................ (2,580,796) 42,152,900
NET ASSETS:
Beginning of period ............................................... 47,142,322 4,989,422
----------- ------------
End of period ..................................................... $44,561,526 $ 47,142,322
=========== ============
</TABLE>
See notes to financial statements
<PAGE>
Small Cap Equity Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
JUNE 21, 1995
SIX MONTHS ENDED (COMMENCEMENT
JUNE 30, 1997 YEAR ENDED OF OPERATIONS) TO
(UNAUDITED) DECEMBER 31, 1996 DECEMBER 31, 1995
-------------- ---------------- -----------------
<S> <C> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted) .... $44,562 $47,142 $4,989
Ratio of expenses to average net assets ...... 0.85%* 0.61% 0
Ratio of net investment income (loss) to
average net assets ......................... (0.32)%* 0.15% 1.22%*
Portfolio turnover ........................... 66% 89% 41%
Average commission rate per share (A) ........ $0.0489 $0.0467 N/A
Note: If Agents of the Portfolio had not voluntarily waived a portion of their fees and assumed Portfolio expenses
for the periods indicated and had expenses been limited to that required by certain state securities law for the
period ended June 30, 1997, the ratios would have been as follows:
RATIOS:
Expenses to average net assets ............... 1.10%* 1.17% 2.50%*
Net investment loss to average net assets .... (0.57)%* (0.41)% (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 beginning
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)
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(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 U.S. 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
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 $161,509 of which $42,074 was
voluntarily waived for the six months ended June 30, 1997. 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
$10,767 all of which was voluntarily waived for the six months ended June 30,
1997. 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 $28,137,162 and $38,040,989, respectively, for the six months ended
June 30, 1997.
(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 ..................... $36,250,268
===========
Gross unrealized appreciation ...... $ 8,159,474
Gross unrealized depreciation ...... (469,320)
-----------
Net unrealized appreciation ........ $ 7,690,154
===========
(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 $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, 1997, the commitment fee allocated to the Portfolio was $93.
Since the line of credit was established, there have been no borrowings.
