<PAGE>
International Equity Portfolio
- -----------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS December 31, 1995
ISSUER/INDUSTRY SHARES VALUE
- -----------------------------------------------------------------------------
COMMON STOCKS - 81.2%
AMERICAN DEPOSITARY RECEIPTS (ADR) - 10.5%
Amway Asia Pacific Ltd.*
Telecommunications..... 20,000 $ 712,500
Belize Holdings Inc.
Basic Goods............ 25,297 398,436
EK Chor China
Motorcycle Co. Ltd.
Retailing.............. 35,000 406,875
Fila Holdings S.P.A.*
Merchandising.......... 30,000 1,365,000
Iochphe Maxion
Machinery & Engineering 33,000 89,975
Luxottica Group S.P.A.
Pharmaceuticals & Health 15,000 877,500
Petersburg Long Distance*
Telecommunications..... 76,000 361,000
Turkiye Garanti Bankasi
Financial Services..... 1,800 15,300
-----------
4,226,586
-----------
GLOBAL DEPOSITARY RECEIPTS (GDR) - 3.4%
Samsung Electronics Co. Ltd.
Electronics 144A....... 10,000 635,000
Samsung Electronics Co. Ltd. Wts.
Electronics 144A....... 10 635
Samsung Electronics Co. Ltd. Rts.
Electronics 144A....... 148 9,398
Samsung Electronics Co. Ltd.
(Preferred Shares)
Electronics 144A....... 1,979 206,806
Turkiye Garanti Bankasi
Financial Services..... 60,000 510,000
-----------
1,361,839
-----------
AUSTRALIA - 2.8%
Amcor Limited
Miscellaneous Materials 71,250 503,087
News Corp.
Business & Public...... 100,480 536,216
News Corp. (Preferred Shares)
Business & Public...... 20,325 95,020
-----------
1,134,323
-----------
CANADA - 0.5%
Future Shop Ltd.*
Retailing.............. 20,900 225,824
-----------
FRANCE - 6.7%
AXA Company
Insurance.............. 4,200 283,030
Castorama Dubois Investisse
Retailing.............. 1,667 273,011
Credit Commercial de France
Financial Services..... 5,200 265,362
Credit Local de France
Financial Services..... 3,300 264,162
Groupe Danone
Food & Household Products 1,600 263,998
Lafarge Coppee French
Building & Construction 1,900 122,412
Louis Vitton-Moet Hennesy
Beverages & Tobacco.... 1,400 291,607
Pinault Printemps Redoute SA
Retailing.............. 1,300 259,363
Promodes
Retailing.............. 1,100 258,546
Usinor Sacilor
Steel.................. 9,000 119,000
Valeo
Industrial Components.. 5,800 268,622
-----------
2,669,113
-----------
GERMANY - 6.2%
Commerzbank AG
Banking................ 2,300 543,534
Deutsche Bank AG
Banking................ 5,700 270,079
Karstadt AG
Retailing.............. 600 244,685
Mannesmann AG
Machinery & Engineering 1,300 413,879
Rhoen-Klinikum
Pharmaceuticals & Health 2,000 197,978
SAP AG VORZUG (Preferred Shares)
Data Processing........ 1,700 257,164
Tarkett International
Food & Household Products 7,000 151,273
Volkswagen AG
Automobiles............ 1,200 401,199
-----------
2,479,791
-----------
HONG KONG - 1.2%
Swire Pacific Ltd. "A"
Multi-Industry......... 60,000 465,567
-----------
INDONESIA - 3.9%
PT Hanjaya Mandala Sampoerna
Beverages & Tobacco.... 150,000 1,561,338
-----------
JAPAN - 16.5%
Amway Japan Ltd.
Merchandising.......... 20,000 844,552
Autobacs Seven
Automobiles............ 6,000 498,596
DDI Corporation
Telecommunications..... 100 774,818
Fanuc Company
Machinery & Engineering 13,000 562,809
Ito Yokado Ltd.
Retailing.............. 15,000 923,971
Marui Co.
Multi-Industry......... 50,000 1,041,162
Rohm Co. Ltd.
Multi-Industry......... 8,000 451,719
Secom Co. Ltd.
Business & Public...... 10,000 695,400
Shohkoh Fund
Financial Services..... 4,500 845,521
-----------
6,638,548
-----------
MALAYSIA - 2.3%
Leader Universal Holdings Ltd
Industrial Components.. 116,000 264,913
United Engineers
Machinery & Engineering 100,000 637,871
-----------
902,784
-----------
NETHERLANDS - 1.9%
Hunter Douglas NV
Machinery & Engineering 860 39,873
International Nederlanden Group
Insurance.............. 1,800 120,247
Philips Electronics NV
Industrial Components.. 4,200 151,804
Royal Dutch Petroleum Co.
Energy Sources......... 2,000 279,429
Vendex International NV
Retailing.............. 1,400 41,615
Verenigde Nederlandse
Business & Public...... 1,000 137,284
-----------
770,252
-----------
SPAIN - 3.0%
Alba Corp. Finance
Financial Services..... 1,200 73,899
Auto Pistas del Mari Nostro
Building & Construction 5,500 71,641
Banco de Santander S.A.
Banking................ 6,500 326,340
Banco Popular Espanola
Banking................ 1,400 258,186
Fomento Const. & Contra
Building & Construction 1,150 88,170
Gas Natural SDG S.A.
Utilities.............. 500 77,906
Iberdrola I S.A.
Utilities.............. 12,000 109,810
Sevillana de Electricidad
Utilities.............. 11,000 85,425
Telefonica de Espana
Telecommunications..... 8,000 110,800
-----------
1,202,177
-----------
SWEDEN - 1.9%
Astra AB
Pharmaceuticals & Health 5,000 198,354
Atlas Copco AB
Machinery & Engineering 5,000 75,420
Ericcson AB
Electronics............ 12,000 235,310
Hennes & Mauritz
Retailing.............. 1,000 55,811
Sparbanken Sverige AB
Banking................ 9,000 114,714
Volvo Aktiebolag
Automobiles............ 3,000 61,543
-----------
741,152
-----------
SWITZERLAND - 4.0%
BBC Brown Boveri & CIE
Instruments & Components 140 162,635
Ciba-Geigy AG-R
Chemicals.............. 466 410,048
CS Holdings
Banking................ 2,300 235,782
Sandoz AG
Pharmaceuticals & Health 450 411,964
Schweizerischer Bankverein
Banking................ 503 205,386
Zurich Versicherunges
Insurance.............. 650 194,408
-----------
1,620,223
-----------
THAILAND - 1.7%
Bangkok Bank Co. Ltd.
Banking................ 6,000 72,886
Bangkok Bank Public Co. Ltd.
Banking................ 70,000 600,233
-----------
673,119
-----------
UNITED KINGDOM - 14.7%
Bass PLC
Beverages & Tobacco.... 16,000 178,533
British Aerospace PLC
Aeorspace & Defense.... 14,000 173,022
Burmah Castrol PLC
Energy Sources......... 11,000 159,470
Cable & Wireless
Telecommunications..... 26,000 185,739
Dixons Group PLC
Retailing.............. 27,000 187,222
Glaxo Wellcome PLC
Pharmaceuticals & Health 17,000 241,569
Glynwed International PLC
Machinery & Engineering 34,000 168,438
Kwik Save Discount Group PLC
Retailing.............. 19,000 147,535
Lloyds TSB Group PLC
Banking................ 37,000 190,196
Logica PLC
Business & Public...... 24,000 169,588
London International Group
Pharmaceuticals & Health 96,000 192,324
MFI Furniture Group PLC
Retailing.............. 70,000 173,936
Pilkington Brothers
Building & Construction 57,000 178,813
Royal Bank of Scotland Group PLC
Banking................ 30,000 273,017
Securicor Group PLC "A"
Telecommunications..... 10,000 137,441
Severn Trent Water Co.
Utilities.............. 17,000 181,507
Smith (D.S.) Holdings
Forest Products & Paper 46,000 202,170
Smith and Nephew Associated
Pharmaceuticals & Health 58,000 168,438
Smiths Industries PLC
Machinery & Engineering 19,000 187,665
Standard Chartered PLC
Banking................ 27,000 229,782
Storehouse PLC
Retailing.............. 40,000 207,481
Sun Alliance Group
Insurance.............. 55,000 319,025
Thorn EMI PLC
Leisure & Tourism...... 7,000 164,859
Tomkins PLC
Multi-Industry......... 202,197 883,944
Whitbread & Co. Class "A"
Beverages & Tobacco.... 17,000 179,659
Wolseley PLC
Building & Construction 29,000 203,117
Zeneca Group PLC
Pharmaceuticals & Health 11,000 212,769
-----------
5,897,259
-----------
TOTAL COMMON STOCKS
(Identified Cost $28,641,933) 32,569,895
-----------
CORPORATE BONDS - 3.3%
PRINCIPAL
AMOUNT
-------
Industrial Credit & Investment
of India 2.50% due 4/03/00 $750,000$ 566,250
Sampo Corporation
2.625% due 11/23/01.... 700,000 773,500
-----------
TOTAL CORPORATE BONDS
(Identified Cost $1,460,000) 1,339,750
-----------
SHORT-TERM OBLIGATIONS - 6.5%
Salomon Repurchase Agreement
5.375% due 1/2/96, proceeds
at maturity $2,601,553
(secured by $2,422,886
US Treasury Bill 5.15%
due 6/13/96 and $236,366
and $236,366 US Treasury
Bill 5.15% due 6/6/96.... 2,600,000
-------
TOTAL INVESTMENTS
(Identified Cost $32,701,933) 91.0% 36,509,645
OTHER ASSETS,
LESS LIABILITIES....... 9.0% 3,603,918
----- -----------
NET ASSETS............... 100.0% $40,113,563
===== ===========
* Non-income producing security
Rule 144A securities -- These securities are traded under SEC Rule 144A among
qualified institutional buyers. At December 31, 1995 these securities were at
$851,839 or 2% of net assets.
See notes to financial statements.
<PAGE>
International Equity Portfolio
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STATEMENT OF ASSETS AND LIABILITIES December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (Note 1A) (Identified Cost, $32,701,933)....................... $ 36,509,645
Foreign currency, at value (Cost, $245,107)......................................... 242,747
Cash................................................................................ 2,572,488
Receivable for investments sold .................................................... 748,616
Dividends and interest receivable................................................... 80,562
--------------
Total assets.................................................................... 40,154,058
--------------
LIABILITIES:
Payable to affiliates--Investment advisory fees (Note 2)............................ 33,746
Accrued expenses and other liabilities.............................................. 6,749
--------------
Total liabilities............................................................... 40,495
--------------
NET ASSETS ......................................................................... $ 40,113,563
==============
REPRESENTED BY:
Paid-in capital for beneficial interests............................................ $ 40,113,563
==============
See notes to financial statements
<CAPTION>
International Equity Portfolio
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STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $97,005).................. $ 496,059
Interest............................................................... 121,452
----------
Total investment income.............................................. $ 617,511
EXPENSES:
Investment advisory fees (Note 2)...................................... 345,632
Administrative fees (Note 3)........................................... 17,281
Expense fees (Note 6).................................................. 51,863
----------
Total expenses....................................................... 414,776
------------
Net investment income................................................ 202,735
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from investment transactions.................. 3,667,021
Net realized gain on foreign exchange transactions..................... 112,731
----------
Net realized gain.................................................... 3,779,752
------------
Unrealized appreciation (depreciation) of investments--
Beginning of period................................................. 1,928,747
End of period....................................................... 3,807,712
------------
Translation of other assets and liabilities denominated
in foreign currencies--net........................................... (367)
------------
Net change in unrealized appreciation (depreciation)................ 1,878,598
------------
Net realized and unrealized gain on investments..................... 5,658,350
------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $ 5,861,085
============
See notes to financial statements
</TABLE>
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International Equity Portfolio
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STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR MAY 1, 1994
ENDED (COMMENCEMENT
DECEMBER 31, OF OPERATIONS) TO
1995 DECEMBER 31, 1994
--------------- ------------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income............................................. $ 202,735 $ 130,501
Net realized gain (loss) on investments and foreign exchange transactions 3,779,752 (535,968)
Net change in unrealized appreciation (depreciation) of investments 1,878,598 (1,277,393)
----------- -----------
Net increase (decrease) in net assets resulting from operations 5,861,085 (1,682,860)
----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from contributions....................................... 14,645,582 40,565,403
Value of withdrawals.............................................. (12,545,928) (6,729,719)
----------- -----------
Net increase in net assets from capital transactions.......... 2,099,654 33,835,684
----------- -----------
NET INCREASE IN NET ASSETS: ...................................... 7,960,739 32,152,824
NET ASSETS:
Beginning of period............................................... 32,152,824 --
----------- -----------
End of period..................................................... $40,113,563 $32,152,824
=========== ===========
See notes to financial statements
</TABLE>
International Equity Portfolio
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FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR MAY 1, 1994
ENDED (COMMENCEMENT
DECEMBER 31, OF OPERATIONS) TO
1995 DECEMBER 31, 1994
--------------- ----------------
<S> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted)......................... $40,114 $32,153
Ratio of expenses to average net assets........................... 1.20% 1.22%*
Ratio of net investment income to average net assets.............. 0.59% 0.60%*
Portfolio turnover................................................ 51% 25%
*Annualized
See notes to financial statements
</TABLE>
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International Equity Portfolio
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NOTES TO FINANCIAL STATEMENTS
(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 Fund'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 following 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 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, 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 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, 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. The 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,
except, if the ex-dividend date has passed, certain dividends from foreign
securities are recorded as soon as the Portfolio is informed of 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 TAXES -- The Portfolio is considered a partnership under
the U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary.
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 custidian 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 $345,632 for the year ended December
31, 1995. 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 $17,281 for the year ended December 31, 1995.
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 year ended December 31, 1995, purchases and sales of investment
securities, other than short-term investments, aggre-gated $16,354,320 and
$19,831,485, respectively.
(5) FEDERAL INCOME TAX BASIS
OF INVESTMENTS
The cost and unrealized appreciation/(depreciation) in value of the investment
securities owned at December 31, 1995, as com puted on a federal income tax
basis, are as follows:
Aggregate cost...................... $ 32,701,933
============
Gross unrealized appreciation....... $ 5,877,260
Gross unrealized depreciation....... (2,069,548)
------------
Net unrealized appreciation......... $ 3,807,712
============
(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 would on an annual basis exceed an agreed upon rate, currently
1.20% 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 December 31, 1995.
(8) LINE OF CREDIT
The Portfolio, along with the other Landmark Funds, entered into an ongoing
agreement with a bank which allows the Landmark 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 year ended December 31,
1995, the commitment fee allocated to the Portfolio was $235. Since the line of
credit was established, there have been no borrowings.
<PAGE>
International Equity Portfolio
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND THE INVESTORS OF THE PREMIUM PORTFOLIOS (THE TRUST), WITH
RESPECT TO ITS SERIES, INTERNATIONAL EQUITY PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of International Equity Portfolio (the
"Portfolio"), a series of The Premium Portfolios, as at December 31, 1995 and
the related statements of operations and of changes in net assets and the
financial highlights for the periods indicated. 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 audits.
We conducted our audits 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 audits, which included confirmation of investments owned as
at December 31, 1995 by correspondence with the custodian, provide 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, 1995, the
results of its operations and the changes in its net assets and the financial
highlights for the periods indicated in accordance with U.S. generally accepted
accounting principles.
PRICE WATERHOUSE
Chartered Accountants
Toronto, Ontario
February 7, 1996
