<PAGE>
- - --------------------------------------------------------------------------------
Balanced Portfolio
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS December 31, 1994
- - --------------------------------------------------------------------------------
Issuer Shares Value
- - --------------------------------------------------------------------------------
COMMON STOCKS -- 56.1%
- - --------------------------------------------------------------------------------
COMMODITIES - 3.3%
Air Products & Chemicals Inc. ............ 75,000 $ 3,346,875
Lubrizol Corp. ........................... 60,000 2,032,500
Nucor Corp. .............................. 41,200 2,286,600
------------
7,665,975
------------
CYCLICALS - DURABLES - 2.9%
Cooper Tire & Rubber Co. ................. 13,700 323,663
Ford Motor Co. ........................... 96,000 2,688,000
General Motors Corp. ..................... 84,000 3,549,000
------------
6,560,663
------------
CYCLICALS - NON DURABLES - 1.3%
Eastman Kodak Co. ........................ 62,000 2,960,500
------------
ELECTRONIC - 5.5%
Emerson Electric Co. ..................... 35,000 2,187,500
General Electric Co. ..................... 105,000 5,355,000
Hewlett Packard Co. ...................... 20,000 1,997,500
Texas Instruments, Inc. .................. 40,200 3,009,975
------------
12,549,975
------------
ENERGY - 3.6%
Royal Dutch Petroleum
Co. ADR's .............................. 35,000 3,762,500
Schlumberger LTD ......................... 27,000 1,360,125
Unocal Corp. ............................. 111,000 3,024,750
------------
8,147,375
------------
ENTERTAINMENT/MEDIA - 1.0%
Carnival Corp. ........................... 26,100 554,625
Gaylord Entertainment Co. ................ 12,000 273,000
Tele-Communications Inc.
Class "A" .............................. 65,000 1,413,750
------------
2,241,375
------------
FINANCE BANKS - 2.9%
BankAmerica Corp. ........................ 60,000 2,370,000
First Fidelity Bancorp ................... 47,000 2,109,125
Signet Banking Corp. ..................... 76,000 2,175,500
------------
6,654,625
------------
FINANCE - NON BANKS - 7.4%
American Express Co. ..................... 100,000 4,262,500
American International
Group Inc. ............................. 28,000 2,744,000
Asia Tigers Fund ......................... 28,300 265,313
Avalon Properties Inc. ................... 75,000 1,725,000
Chile Fund ............................... 11,600 535,050
Emerging Germany Fund, Inc. .............. 23,100 170,363
Emerging Tiger Fund, Inc. ................ 34,600 393,575
Federal National
Mortgage Association ................... 40,000 2,915,000
First Australia Fund, Inc. ............... 8,500 75,438
France Growth Fund ....................... 12,300 112,238
Future Germany Fund ...................... 11,700 168,188
Irish Investment Fund, Inc. .............. 3,300 28,463
Malaysia Fund ............................ 19,600 338,100
Pakistan Investment Fund ................. 34,100 306,900
Thai Capital Fund ........................ 18,500 307,563
The India Fund, Inc. ..................... 42,000 446,250
The New Germany Fund ..................... 28,600 328,900
The Thai Fund, Inc. ...................... 14,100 315,485
Travelers Inc. ........................... 38,000 1,235,000
United Kingdom Fund, Inc. ................ 16,100 175,088
------------
16,848,414
------------
GROWTH STAPLES - 3.2%
McDonald's Corp. ......................... 86,000 2,515,500
PepsiCo Inc. ............................. 62,500 2,265,625
Sysco Corp. .............................. 100,000 2,575,000
------------
7,356,125
------------
HEALTH CARE - 5.8%
Abbott Laboratories ...................... 77,000 2,512,125
Coastal Healthcare Group ................. 52,600 1,439,925
Community Health Systems ................. 35,500 967,375
FHP Group ................................ 56,000 1,442,000
Johnson & Johnson ........................ 49,000 2,682,750
Pfizer Inc. .............................. 32,000 2,472,000
United Health Care Co. ................... 11,500 518,938
Value Health Inc. ........................ 35,300 1,314,925
------------
13,350,038
------------
<PAGE>
- - --------------------------------------------------------------------------------
Balanced Portfolio
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS December 31, 1994 continued
- - --------------------------------------------------------------------------------
Issuer Shares Value
- - --------------------------------------------------------------------------------
INFORMATION PROCESSING - 7.8%
American Telephone &
Telegraph Co. ........................... 66,000 $ 3,316,500
Cisco Systems, Inc. ...................... 70,000 2,458,750
DSC Communications ....................... 48,000 1,722,000
General Motors Corp. Class "E" ........... 85,000 3,272,500
Silicon Graphics Inc.* ................... 60,000 1,852,500
Stratus Computer Inc.* ................... 68,000 2,584,000
Xerox Corp. .............................. 26,500 2,623,500
------------
17,829,750
------------
MACHINERY - 3.2%
Cooper Industries Inc. ................... 46,000 1,569,750
Deere & Co. .............................. 30,000 1,987,500
Fluor Corp. .............................. 45,000 1,940,623
WMX Technologies Inc. .................... 71,000 1,863,750
------------
7,361,623
------------
RETAIL SALES - 4.2%
Home Depot Inc. .......................... 50,000 2,300,000
Limited Inc. ............................. 65,000 1,178,125
May Department Stores Co. ................ 70,000 2,362,500
Toys "R" Us Inc.* ........................ 80,000 2,440,000
Wal-Mart Stores Inc. ..................... 58,000 1,232,500
------------
9,513,125
------------
TRANSPORTATION - 2.7%
Consolidated Rail Inc. ................... 70,000 3,535,000
Norfolk Southern Co. ..................... 45,000 2,728,125
------------
6,263,125
------------
UTILITIES - 1.3%
FPL Group Inc. ........................... 38,000 1,334,750
Telefonos de Mexico ADR's ................ 42,700 1,750,700
------------
3,085,450
------------
TOTAL COMMON STOCK
(Identified Cost $120,023,280) 128,388,138
------------
- - --------------------------------------------------------------------------------
FIXED INCOME -- 39.0%
- - --------------------------------------------------------------------------------
Principal
Issuer Amount Value
- - --------------------------------------------------------------------------------
ASSET BACKED - 1.9%
Carco
7.875% , due 7/15/99 .................... $3,000,000 $2,960,625
General Motors Acceptance Corp.,
5.95%, due 2/15/97 ...................... 276,188 276,099
GMAC 1992 E Grantor Trust,
4.75%, due 8/15/97 ...................... 333,484 325,564
Merrill Lynch Asset Backed Co. ...........
5.125%, due 7/15/98 ..................... 730,712 715,410
------------
4,277,698
------------
MORTGAGE OBLIGATIONS - 13.4%
COLLATERALIZED MORTGAGE
OBLIGATIONS - 9.4%
Banc One Credit
7.55%, due 12/15/99 .................... 3,000,000 2,959,800
Equitable Capital Credit.
8.95%, due 10/15/06 ..................... 3,000,000 3,028,800
Federal Home Loan
Mortgage Corp.
6.00%, due 3/15/09 ...................... 3,000,000 2,388,687
6.00%, due 3/15/09 ...................... 2,496,985 1,987,972
Federal National
Mortgage Association
6.50%, due 9/17/09 ...................... 2,800,000 2,359,000
HFCHC
6.725%, due 5/20/08 ..................... 3,275,000 3,269,858
Nomura Asset Corp.
7.265%, due 7/07/03 ..................... 2,578,498 2,635,225
Resolution Trust Corp.
5.6125%, due 9/25/24 .................... 2,961,725 2,954,321
------------
21,583,663
------------
<PAGE>
- - --------------------------------------------------------------------------------
Balanced Portfolio
- - --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS December 31, 1994 continued
- - --------------------------------------------------------------------------------
Principal
Issuer Amount Value
- - --------------------------------------------------------------------------------
MORTGAGE BACKED SECURITIES - 0.1%
Federal Home Loan Mortgage Corp.
8.50%, due 6/1/01 ....................... $ 44,837 $ 44,473
9.50%, due 2/1/01 ....................... 25,915 26,539
Federal National Mortgage Assoc
9.00%, due 11/1/01 ...................... 43,316 43,926
------------
114,938
------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION - 3.9%
6.50%, due 1/15/25 TBA .................. 3,000,000 2,599,680
7.50%, due 1/15/25 ...................... 3,000,000 2,783,430
8.25%, due 7/15/05 TBA .................. 891,347 849,837
6.50%, due 1/15/10 TBA .................. 3,000,000 2,741,250
------------
8,974,197
------------
TOTAL MORTGAGE OBLIGATIONS ............... 30,672,798
------------
DOMESTIC CORPORATE BONDS - 2.9%
Caterpillar Inc.
9.00%, due 4/15/06 ...................... 2,300,000 2,363,250
General Motors Acceptance Corp.
8.70%, due 3/15/95 ...................... 1,450,000 1,454,843
5.15% due 9/14/95 ....................... 1,600,000 1,572,192
Grand Met. Investment Corp.,
Zero Coupon Bond,
due 6/1/04 .............................. 2,800,000 1,316,140
------------
6,706,425
------------
YANKEE BONDS - 1.8%
Aegon, NV
8.00%, due 8/15/06 ...................... 2,800,000 2,682,876
Phillips Electronics, NV
8.375%, due 9/15/06 ..................... 1,500,000 1,468,953
------------
4,151,829
------------
UNITED STATES
GOVERNMENT OBLIGATIONS - 19.0%
United States Government Agency - 2.1%
Federal National Mortgage Association
6.28%, due 2/3/04 ....................... 2,800,000 2,463,748
6.14%, due 1/21/04 ...................... 2,800,000 2,428,048
------------
4,891,796
------------
UNITED STATES TREASURY NOTES - 15.7%
7.25 %, due 11/30/96 ..................... $ 5,600,000 $ 5,557,104
7.37 %, due 11/15/97 ..................... 16,000,000 15,829,920
7.75 %, due 11/30/99 ..................... 5,000,000 4,981,250
7.50%, due 11/15/24 ...................... 10,000,000 9,565,600
------------
35,933,874
------------
UNITED STATES TREASURY STRIPPED BONDS - 1 2%
United States Treasury Stripped,
Zero Coupon Bond
due 8/15/03 ............................. 2,800,000 1,434,412
due 2/l5/04 ............................. 2,800,000 1,379,196
------------
2,813,608
------------
TOTAL UNITED STATES
GOVERNMENT OBLIGATIONS 43,639,278
------------
TOTAL FIXED INCOME
(Identified Cost $96,277,202) 89,448,028
------------
- - --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS -- 11.5%
- - --------------------------------------------------------------------------------
Salomon Repurchase Agreement,
6.00 %, due 1/03/95, proceeds at
maturity $26,259,495
(secured by $29,340,000
U.S. Treasury Note 4.75%
due 9/30/98) ............................ 26,242,000
------------
TOTAL INVESTMENTS ........................ 106.6% 244,078,166
(Identified Cost $242,542,482)
OTHER LIABILITIES
LESS ASSETS ............................. (6.6)% (15,130,203)
------------ ------------
NET ASSETS ............................... 100.0% $228,947,963
============ ============
* Non-income producing security
** TBA's are mortgage-backed securities traded under delayed delivery
commitments, settling after December 31, 1994. Although the unit price for
the trade has been established, the principal value has not been finalized.
However, the amount of the commitment will not fluctuate more than 2% from
the principal amount. Income on TBA's is not earned until settlement date.
See notes to financial statements
<PAGE>
- - --------------------------------------------------------------------------------
Balanced Portfolio
- - --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES December 31, 1994
- - --------------------------------------------------------------------------------
Assets:
Investments at value (Note 1A)
(Identified Cost, $242,542,482) ......................... $244,078,166
Cash ...................................................... 200
Receivable for investments sold ........................... 1,869,272
Dividends and interest receivable ......................... 1,253,943
------------
Total assets .......................................... 247,201,581
------------
Liabilities:
Payable for investments purchased ......................... 18,166,074
Payable to affiliates--Investment
advisory fee (Note 2) ................................... 77,408
Accrued expenses and other liabilities .................... 10,136
------------
Total liabilities ..................................... 18,253,618
------------
Net Assets ................................................ $228,947,963
============
Represented by:
Paid-in capital for
beneficial interests .................................... $228,947,963
============
See notes to financial statements
<PAGE>
- - --------------------------------------------------------------------------------
Balanced Portfolio
- - --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Period May 1, 1994 (Commencement of Operations) to December 31, 1994
- - --------------------------------------------------------------------------------
Investment Income:
Interest .................................. $ 4,161,173
Dividends ................................. 2,320,775
-----------
Total Income $ 6,481,948
Expenses:
Investment advisory fees (Note 2) ......... 640,795
Administrative fees (Note 3) .............. 80,099
Expense reimbursement fees (Note 6) ....... 101,856
-----------
Total expenses .......................... 822,750
-----------
Net investment income ................... 5,659,198
-----------
Net Realized and Unrealized Gain
(Loss) on Investments:
Net realized loss from investment
transactions ............................ (6,675,580)
Unrealized appreciation
(depreciation) of investments--
Beginning of period ..................... --
End of period ........................... 1,535,684
Plus unrealized depreciation
acquired in connection with Landmark
Balanced Fund contribution (Note 1) ..... 2,886,846
-----------
Net change in unrealized
appreciation (depreciation) ............. 4,422,530
-----------
Net realized and unrealized
loss on investments ..................... (2,253,050)
-----------
Net Increase in Net Assets
Resulting from Operations ............... $ 3,406,148
===========
See notes to financial statements
<PAGE>
- - --------------------------------------------------------------------------------
Balanced Portfolio
- - --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
May 1, 1994
(Commencement
of Operations) to
December 31, 1994
-----------------
Increase (Decrease) in Net Assets from:
Operations:
Net investment income ..................................... $ 5,659,198
Net realized loss on investment transactions .............. (6,675,580)
Net change in unrealized depreciation of investments ...... 4,422,530
-------------
Net increase in net assets resulting from operations .. 3,406,148
-------------
Capital Transactions:
Proceeds from contributions ............................... 251,032,858
Value of withdrawals ...................................... (25,491,043)
-------------
Net increase in net assets from capital transactions .. 225,541,815
-------------
Net Increase in Net Assets ................................ 228,947,963
Net Assets:
Beginning of period ....................................... --
-------------
End of period ............................................. $ 228,947,963
=============
<PAGE>
- - --------------------------------------------------------------------------------
Balanced Portfolio
- - --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------
May 1, 1994
(Commencement
of Operations) to
December 31, 1994
---------------
Ratios/Supplemental Data:
Net Assets, end of period (000 omitted) ................... $228,948
Ratio of expenses to average net assets ................... 0.51%*
Ratio of net investment income to average net assets ...... 3.53%*
Portfolio turnover ........................................ 105%
* Annualized
See notes to financial statements
<PAGE>
- - --------------------------------------------------------------------------------
Balanced Portfolio
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
Balanced 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. Signature Financial Group (Grand Cayman), Ltd. ("SFG") acts as
the Portfolio's Administrator. On May 1, 1994 (commencement of operations of the
Portfolio) the Landmark Balanced Fund transferred all of its investable assets
($246,231,647 including $2,886,846 unrealized depreciation), to the Portfolio in
exchange for an interest in the Portfolio.
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 federal income tax purposes. Gain and loss from principal
paydowns are recorded as interest income. Dividend income is recorded on the
ex-dividend date.
C. U.S. FEDERAL TAXES -- The Portfolio is considered a partnership under the
U.S. Internal Revenue Code. Accordingly, no provision for federal income or
excise tax 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 agreement
investments. 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. TBA PURCHASE COMMITMENTS -- The Portfolio enters into "TBA" (to be announced)
purchase commitments to purchase securities for a fixed unit price at a future
date beyond customary settlement time. Although the unit price has been
established, the principal value has not been finalized. However, the amount of
the commitment will not fluctuate more than 2.0% from the principal amount. The
Portfolio holds, and maintains until the settlement date, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price. TBA
purchase commitments may be considered securities in themselves, and involve a
risk of loss if the value of the security to be purchased declines prior to the
settlement date, which risk is in addition to the risk of decline in the value
of the Portfolio's other assets. Unsettled TBA purchase commitments are valued
<PAGE>
- - --------------------------------------------------------------------------------
Balanced Portfolio
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS continued
- - --------------------------------------------------------------------------------
at the current market value of the underlying securities, generally according to
the procedures described under Note 1A.
Although the Portfolio will generally enter into TBA purchase commitments with
the intention of acquiring securities for its portfolio, the Portfolio may
dispose of a commitment prior to settlement if the Portfolio's Adviser deems it
appropriate to do so.
G. 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 fee paid to Citibank, as compensation for overall
investment management services, amounted to $640,795 for the period May 1, 1994
(commencement of operations) to December 31, 1994. The investment advisory fee
is computed at the annual rate of 0.40% of the Portfolio's average daily net
assets.
(3) ADMINISTRATIVE FEE
Under the terms of an Administrative Services Agreement, the administrative fee
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 fee amounted to $80,099
for the period May 1, 1994 (commencement of operations) to December 31, 1994.
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 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 $247,513,662 and $265,784,549, respectively, which include purchases
and sales of U.S. Government securities amounting to $86,400,594 and
$83,287,426, respectively, for the period May 1, 1994 (commencement of
operations) to December 31, 1994.
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation (depreciation) in value of the investment
securities owned at December 31, 1994, as computed on a federal income tax
basis, are as follows:
Aggregate cost ........................................ $ 242,542,482
=============
Gross unrealized appreciation ......................... $ 9,570,964
Gross unrealized depreciation ......................... (8,035,280)
-------------
Net unrealized appreciation ........................... $ 1,535,684
=============
(6) EXPENSE REIMBURSEMENT FEE
SFG has entered into an expense reimbursement 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 shall terminate on April
30, 2004, unless sooner terminated by either party upon not less than 30 days
nor more than a 60 days written notice to the other party.
The Portfolio Trust has agreed to pay SFG an expense reimbursement fee from the
Portfolio, in addition to the administrative fee, 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 would, on an annual basis, exceed an agreed upon rate, currently 0.55%
of average daily net assets.
<PAGE>
- - --------------------------------------------------------------------------------
Balanced Portfolio
- - --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS continued
- - --------------------------------------------------------------------------------
(7) LINE OF CREDIT
As of May 1, 1994 the Portfolio, along with the other Landmark Funds, entered
into an 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 period May 1, 1994
(commencement of operations) to December 31, 1994, the commitment fee allocated
to the Portfolio was $1,060. Since the line of credit was established, there
have been no borrowings.
<PAGE>
- - --------------------------------------------------------------------------------
Balanced Portfolio
- - --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- - --------------------------------------------------------------------------------
TO THE TRUSTEES AND THE INVESTORS OF THE PREMIUM PORTFOLIOS (THE TRUST), WITH
RESPECT TO ITS SERIES, BALANCED PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Balanced Portfolio (the "Portfolio"),
a series of The Premium Portfolios, as at December 31, 1994 and the related
statements of operations and of changes in net assets and the financial
highlights for the period May 1, 1994 (commencement of operations) to December
31, 1994. These financial statements and financial highlights (hereafter
referred to as "financial statements") are the responsibility of the Portfolio's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit, which included confirmation of investments owned at
December 31, 1994, by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provides a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Portfolio as at December 31, 1994, the
results of its operations and the changes in its net assets and the financial
highlights for the period May 1, 1994 (commencement of operations) to December
31, 1994 in accordance with U.S. generally accepted accounting principles.
PRICE WATERHOUSE
Chartered Accountants
Toronto, Ontario
February 3, 1995
