GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1998
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.0%
- --------------------------------------------------------------------------------
BASIC INDUSTRIES -- 6.5%
Barrick Gold Corp. ADR's 51,100 $ 1,092,263
E. I. du Pont
de Nemours & Co. 11,400 655,500
Martin Marietta
Materials Inc. 34,000 1,668,125
Mead Corp. 36,200 1,144,825
-----------
4,560,713
-----------
CONSUMER BASICS -- 2.9%
- --------------------------------------------------------------------------------
Philip Morris Co., Inc. 40,000 2,045,000
-----------
CONSUMER DURABLE -- 7.0%
- --------------------------------------------------------------------------------
Dana Corp. 42,600 1,781,213
Goodyear Tire & Rubber 20,300 1,093,663
Meritor Automotive Inc. 84,000 1,569,750
Sunbeam Corp. 73,900 498,825
-----------
4,943,451
-----------
CONSUMER SERVICES -- 3.7%
- --------------------------------------------------------------------------------
McDonalds Corp. 22,600 1,511,375
Walt Disney Co. 41,850 1,127,334
-----------
2,638,709
-----------
ENERGY -- 15.6%
- --------------------------------------------------------------------------------
Amerada Hess Corp. 27,300 1,508,325
Burlington Resources Inc. 40,300 1,659,856
Diamond Offshore
Drilling, Inc. 35,500 1,089,406
Exxon Corp. 29,800 2,123,249
Halliburton Co. 50,100 1,800,469
Mobil Corp. 26,700 2,020,856
Transocean Offshore Inc. 21,900 808,931
-----------
11,011,092
-----------
FINANCE -- 23.4%
- --------------------------------------------------------------------------------
Bank One Corp. 44,400 2,170,049
Bankamerica Corp. 31,000 1,780,563
Bankers Trust Corp. 10,900 684,656
Chase Manhattan
Bank Corp. 41,100 2,334,993
Everest Reinsurance
Holdings 34,400 1,184,650
Franklin Resources Inc. 19,700 744,906
J.P. Morgan & Co., Inc. 16,300 1,536,275
Morgan Stanley
Dean Witter & Co. 39,230 2,540,142
Safeco Corp. 51,400 2,226,262
Washington Mutual Inc. 36,700 1,373,956
-----------
16,576,452
-----------
HEALTHCARE SERVICES -- 5.8%
- --------------------------------------------------------------------------------
American Home
Products Corp. 33,400 1,628,250
Oxford Health Plans 105,400 1,245,038
Wellpoint Health
Networks Inc. 16,700 1,229,538
-----------
4,102,826
-----------
INDUSTRIAL SERVICES -- 1.7%
- --------------------------------------------------------------------------------
Waste Management Inc. 25,900 1,168,738
-----------
RETAIL -- 3.5%
- --------------------------------------------------------------------------------
Federated Department
Stores Inc.* 16,200 622,688
Premark International Inc. 15,700 497,494
Tommy Hilfiger Corp.* 16,700 775,506
Toys "R" Us Inc.* 27,800 543,838
-----------
2,439,526
-----------
TECHNOLOGY -- 9.4%
- --------------------------------------------------------------------------------
Compaq Computer Corp. 27,800 879,175
Hewlett Packard Co. 12,900 776,419
Honeywell Inc. 17,900 1,429,763
International Business
Machines 7,000 1,039,063
Raytheon Corp. 31,700 1,840,581
Sun Microsystems Inc.* 11,600 675,700
-----------
6,640,701
-----------
TRANSPORTATION -- 2.4%
- --------------------------------------------------------------------------------
Union Pacific Corp. 35,400 1,685,925
-----------
UTILITIES -- 15.1%
- --------------------------------------------------------------------------------
American Electric
Power Inc. 18,600 910,238
American Telephone
& Telegraph Corp. 54,900 3,417,524
Bell Atlantic Corp. 26,100 1,386,563
Cinergy Corp. 28,700 990,150
Entergy Corp. 32,800 943,000
13
<PAGE>
GROWTH & INCOME PORTFOLIO
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1998
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
Public Service
Enterprise Group 17,000 $ 646,000
SBC Communications Inc. 37,000 1,713,563
Texas Utilities Co. 14,600 638,750
-----------
10,645,788
-----------
TOTAL COMMON
STOCKS
(Identified Cost
$73,461,059) $68,458,921
-----------
SHORT-TERM OBLIGATIONS
AT AMORTIZED COST -- 0.9%
- --------------------------------------------------------------------------------
Federal Home Loan Bank
5.35% due 11/02/98 610,909
-----------
TOTAL INVESTMENTS
(Identified Cost
$74,071,968) 97.9% 69,069,830
OTHER ASSETS,
LESS LIABILITIES 2.1 1,514,870
----- -----------
NET ASSETS 100.0% $70,584,700
===== ===========
ADRs -- American Depositary Receipts
* Non income producing securities
See notes to financial statements
14
<PAGE>
GROWTH & INCOME PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
================================================================================
ASSETS:
Investments at value (Note 1A) (Identified Cost, $74,071,968) $69,069,830
Cash 37,340
Receivable for investments sold 2,039,939
Dividends and interest receivable 102,917
- --------------------------------------------------------------------------------
Total assets 71,250,026
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investment purchased 575,524
Payable to affiliate--Management fee (Note 2) 39,907
Accrued expenses and other liabilities 49,895
- --------------------------------------------------------------------------------
Total liabilities 665,326
- --------------------------------------------------------------------------------
NET ASSETS $70,584,700
================================================================================
REPRESENTED BY:
Paid-in capital for beneficial interests $70,584,700
================================================================================
GROWTH & INCOME PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 2, 1998 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998
================================================================================
INVESTMENT INCOME:
Dividend income (net of foreign tax of $8,756) $822,900
Interest income 130,277
- --------------------------------------------------------------------------------
$953,177
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 329,723
Custody and fund accounting fees 64,163
Audit fees 27,500
Legal fees 11,869
Trustees fees 2,039
Other 1,401
- --------------------------------------------------------------------------------
Total expenses 436,695
Less aggregate amounts waived by the Manager (83,501)
- --------------------------------------------------------------------------------
Net expense 353,194
- --------------------------------------------------------------------------------
Net investment income 599,983
Net realized loss from investment transactions (4,352,369)
Unrealized depreciation of investments (5,002,138)
- --------------------------------------------------------------------------------
Net realized and unrealized loss on investments (9,354,507)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ($8,754,524)
================================================================================
See notes to financial statements
15
<PAGE>
GROWTH & INCOME PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD MARCH 2, 1998 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $599,983
Net realized loss on investment transactions (4,352,369)
Unrealized depreciation of investments (5,002,138)
- --------------------------------------------------------------------------------
Net decrease in net assets resulting from operations (8,754,524)
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions 89,328,025
Value of withdrawals (9,988,801)
- --------------------------------------------------------------------------------
Net increase in net assets from capital transactions 79,339,224
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS: 70,584,700
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- --------------------------------------------------------------------------------
End of period $70,584,700
================================================================================
GROWTH & INCOME PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD MARCH 2, 1998 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31, 1998
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $70,585
Ratio of expenses to average net assets 0.75%*
Ratio of net investment income to average net assets 1.27%*
Portfolio turnover 59%
Note: If Agents of the Portfolio had not voluntarily waived a portion of their
fees during the period indicated, the ratios would have been as follows:
RATIOS:
Expenses to average net assets 0.93%*
Net investment income to average net assets 1.09%*
================================================================================
* Annualized
See notes to financial statements
16
<PAGE>
GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES Growth & Income 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 Portfolio commenced
operations on March 2, 1998. The Declaration of Trust permits the Trustees to
issue beneficial interests in the Portfolio. The Investment Manager of the
Portfolio is Citibank, N.A. ("Citibank"). Signature Financial Group (Grand
Cayman), Ltd. ("SFG") acts as the Portfolio's Sub-Administrator.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires 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 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 constitutes fair value as
determined by the Trustees. 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.
17
<PAGE>
GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Continued)
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. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolio's business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolio. SFG acts
as Sub-Administrator and performs certain duties and receives compensation from
Citibank as from time to time are agreed to by Citibank and SFG. Citibank is a
wholly-owned subsidiary of Citigroup, Inc. Citigroup, Inc. was formed as a
result of the merger of Citicorp and Travelers Group, Inc. which was completed
on October 8, 1998.
The management fees paid to Citibank, amounted to $329,723, of which $83,501
was voluntarily waived for the period March 2, 1998 (Commencement of Operations)
to October 31, 1998. The management fees are computed at the annual rate of
0.70% of the Portfolio's average daily net assets.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Sub-Administrator, all of whom receive remuneration
for their services to the Trust from the Sub-Administrator or its affiliates.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $118,582,038 and $40,768,610,
respectively, for the period March 2, 1998 (Commencement of Operations) to
October 31, 1998.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at October 31, 1998,
as computed on a federal income tax basis, are as follows:
Aggregate cost $74,235,391
================================================================================
Gross unrealized appreciation $ 2,514,044
Gross unrealized depreciation (7,679,605)
- --------------------------------------------------------------------------------
Net unrealized depreciation $(5,165,561)
================================================================================
18
<PAGE>
GROWTH & INCOME PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
5. LINE OF CREDIT The Portfolio, along with various other Portfolios in the
CitiFunds family, 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 period March 2, 1998 (Commencement
of Operations) to October 31, 1998, the commitment fee was allocated to the
Portfolio was $168. Since the line of credit was established, there have been no
borrowings.
19
<PAGE>
GROWTH & INCOME PORTFOLIO
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND THE INVESTORS OF THE PREMIUM PORTFOLIOS (THE TRUST), WITH
RESPECT TO ITS SERIES, GROWTH &INCOME PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Growth &Income Portfolio (the
"Portfolio"), a series of The Premium Portfolios, as at October 31, 1998, and
the related statements of operations and of changes in net assets and the
financial highlights for the period March 2, 1998 (Commencement of Operations)
through October 31, 1998. 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 as
at October 31, 1998 by correspondence with the custodian and brokers, 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 October 31, 1998, the
results of its operations and the changes in its net assets and the financial
highlights for the period March 2, 1998 (Commencement of Operations) through
October 31, 1998, in accordance with U.S. generally accepted accounting
principles.
PricewaterhouseCoopers LLP
Chartered Accountants
Toronto, Ontario
December 14, 1998
20
<PAGE>
SMALL CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1998
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 96.4%
- --------------------------------------------------------------------------------
COMMERCIAL SERVICES -- 23.9%
- --------------------------------------------------------------------------------
AHL Services Inc.* 125,595 $ 4,238,831
Abacus Direct Corp.* 129,950 6,335,063
Cultural Access
Worldwide * 136,765 1,162,502
Lamar Advertising Co.* 167,900 5,241,628
Metzler Group Inc.* 100,085 4,203,570
NFO Worldwide Inc.* 191,595 1,796,203
Probusiness
Services Inc.* 146,482 5,355,748
Profit Recovery Group
International Inc.* 200,005 6,137,653
Rental Service Corp.* 188,710 4,198,798
Romac International Inc.* 168,950 2,956,625
Sylan Learning
System Inc.* 60,900 1,922,346
Wilmar Industries Co.* 121,190 2,999,453
- --------------------------------------------------------------------------------
46,548,420
- --------------------------------------------------------------------------------
COMMODITIES & PROCESSING -- 2.7%
- --------------------------------------------------------------------------------
OM Group Inc. 115,795 3,777,812
Synthetic Industries Inc.* 102,390 1,446,259
- --------------------------------------------------------------------------------
5,224,071
- --------------------------------------------------------------------------------
CONSUMER DURABLE -- 2.1%
- --------------------------------------------------------------------------------
Tower Automotive Inc.* 186,165 4,142,171
- --------------------------------------------------------------------------------
CONSUMER NON-DURABLES -- 2.8%
- --------------------------------------------------------------------------------
Beringer Wine Estate
Holdings * 78,240 3,550,140
Horizon Organic
Holding Corp. 80,030 1,010,379
Natrol Inc. 81,010 931,615
- --------------------------------------------------------------------------------
5,492,134
- --------------------------------------------------------------------------------
CONSUMER SERVICES -- 12.3%
- --------------------------------------------------------------------------------
Central Packing Corp. 111,155 4,661,563
DeVry Inc. 82,875 1,823,250
Gray Communications
Systems Inc.* 163,792 2,272,614
Heftel Broadcasting
Corp.* 118,293 4,864,800
Metro Networks Inc.* 83,275 3,049,947
Premier Parks Inc.* 206,415 4,579,833
SFX Entertainment Inc. 83,600 2,643,850
- --------------------------------------------------------------------------------
23,895,857
- --------------------------------------------------------------------------------
ELECTRONICS/TECHNICAL SERVICES -- 21.0%
- --------------------------------------------------------------------------------
Aspect Development Inc. 44,700 $ 1,412,241
CDW Computer
Centers Inc.* 60,430 4,528,473
Engineering
Animation Inc.* 37,000 1,621,062
Harbinger Corp.* 175,250 1,161,031
Inacom Corp.* 117,930 2,284,894
Legato Systems Inc. 52,295 2,046,042
Lernout & Hauspie
Speech Products* 112,460 4,456,227
Lycos Inc.* 90,000 3,656,250
Micron Electronics Inc. 122,805 2,571,230
Network Appliance Inc. 35,620 1,950,195
PC Connection Inc.* 118,835 1,812,234
Sapient Corp.* 70,385 3,171,724
Sipex Corp.* 158,675 4,403,231
Tekelec Inc.* 75,900 1,337,281
Whittman Hart Inc.* 220,140 4,375,283
- --------------------------------------------------------------------------------
40,787,398
- --------------------------------------------------------------------------------
ENERGY MINERALS -- 2.5%
- -------------------------------------------------------------------------------
Forcenergy Inc.* 156,880 931,475
Petroleum Geo.
Services* 110,600 2,364,075
Range Resources Corp. 261,995 1,490,096
- --------------------------------------------------------------------------------
4,785,646
- --------------------------------------------------------------------------------
FINANCE -- 7.6%
- --------------------------------------------------------------------------------
Cullen Frost Bankers Inc. 57,730 3,074,122
Centura Banks Inc. 27,000 1,863,000
Executive Risk Inc. 84,415 4,009,712
First Republic Bank
of San Francisco* 121,225 3,000,319
Peoples Heritage
Financial Group 154,590 2,782,620
- --------------------------------------------------------------------------------
14,729,773
- --------------------------------------------------------------------------------
HEALTH SERVICES/TECHNOLOGY -- 11.4%
- --------------------------------------------------------------------------------
Andrx Corp.* 24,600 956,202
Barr Labs Inc.* 63,700 2,177,744
Concentra Managed
Care Inc.* 88,315 905,229
Human Genome
Sciences Inc.* 52,000 1,800,500
Parexel International
Corp.* 156,785 $ 3,459,069
Professional Detailing Inc. 110,470 2,582,236
Steris Corp. 92,515 2,127,845
Total Renal Care
Holdings Inc. 203,768 4,992,316
Viropharma Inc.* 181,365 3,287,241
- --------------------------------------------------------------------------------
22,288,382
- --------------------------------------------------------------------------------
INDUSTRIAL SERVICES -- 2.1%
- --------------------------------------------------------------------------------
Service Experts Inc.* 86,905 2,623,445
Waste Connections Inc. 78,500 1,491,500
- --------------------------------------------------------------------------------
4,114,945
- --------------------------------------------------------------------------------
13
<PAGE>
PRODUCER MANUFACTURING -- 1.8%
- --------------------------------------------------------------------------------
Aptargroup Inc. 34,200 959,604
Ha Lo Industrial Inc. 91,745 2,591,796
- --------------------------------------------------------------------------------
3,551,400
- --------------------------------------------------------------------------------
RETAIL -- 3.2%
- --------------------------------------------------------------------------------
Men's Wearhouse Inc.* 93,757 2,273,607
Wholesales Foods
Market Inc.* 98,545 3,947,959
- --------------------------------------------------------------------------------
6,221,566
- --------------------------------------------------------------------------------
TRANSPORTATION -- 3.0%
- --------------------------------------------------------------------------------
Eagle U.S.A.
Airfreight Inc.* 159,755 2,046,861
Hub Group Inc.* 57,040 1,026,720
United Road
Services Inc. 178,525 2,856,400
- --------------------------------------------------------------------------------
5,929,981
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Identified Cost $181,875,215) 187,711,744
- --------------------------------------------------------------------------------
ISSUER VALUE
SHORT-TERM OBLIGATIONS AT AMORTIZED COST -- 4.1%
- --------------------------------------------------------------------------------
Aubrey G. Lanston
Government
Repurchase Agreement
5.45% due 11/02/98
proceeds at
maturity $7,890,582
(collateralized by
$7,528,000 U.S.
Treasury Note
5.625% due 12/31/02
valued at $8,045,550) $ 7,887,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Identified Cost
$189,762,215) 100.5% 195,598,744
OTHER ASSETS,
LESS LIABILITIES (0.5) (927,501)
- --------------------------------------------------------------------------------
NET ASSETS 100.0% $194,671,243
- --------------------------------------------------------------------------------
*Non income producing securities
See notes to financial statements
14
<PAGE>
SMALL CAP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1998
================================================================================
ASSETS:
Investments at value (Note 1A) (Identified Cost, $189,762,215) $195,598,744
Cash 884
Receivable for securities sold 4,504,213
Interest receivable 2,388
- --------------------------------------------------------------------------------
Total assets 200,106,229
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 5,175,433
Payable to affiliates-- Management fees (Note 2) 110,621
Accrued expenses and other liabilities 148,932
- --------------------------------------------------------------------------------
Total liabilities 5,434,986
- --------------------------------------------------------------------------------
NET ASSETS $194,671,243
- --------------------------------------------------------------------------------
REPRESENTED BY:
Paid-in capital for beneficial interests $194,671,243
- --------------------------------------------------------------------------------
SMALL CAP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1998
================================================================================
INVESTMENT INCOME:
Dividend income $395,671
Interest income 444,717
- --------------------------------------------------------------------------------
$840,388
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 1,673,322
Custody and fund accounting fees 151,541
Audit fees 29,300
Legal fees 27,037
Shareholder reports 5,970
Trustees fees 5,049
Other 71,065
- --------------------------------------------------------------------------------
Total expenses 1,963,284
- --------------------------------------------------------------------------------
Net investment loss (1,122,896)
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Unrealized depreciation of investments (2,606,875)
Less unrealized appreciation from contributed assets (Note 1) 25,188,211
- --------------------------------------------------------------------------------
Unrealized depreciation of investments (27,795,086)
Net realized loss from investment transactions (9,691,394)
- --------------------------------------------------------------------------------
Net realized and unrealized (loss) on investments (37,486,480)
- --------------------------------------------------------------------------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ($38,609,376)
- --------------------------------------------------------------------------------
See notes to financial statements
15
<PAGE>
SMALL CAP GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
TEN MONTHS
YEAR ENDED ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, 1997 DECEMBER 31,
1998 (Note 1F) 1996
================================================================================
INCREASE (DECREASE) IN NET
ASSETS FROM:
OPERATIONS:
Net investment income gain (loss)$ (1,122,896) $ (139,259) $ 28,536
Net realized gain (loss)
on investment transactions (9,691,394) 785,204 1,063,995
Unrealized appreciation
(depreciation)of investments (27,795,086) 6,200,702 1,516,882
- --------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting
from operations (38,609,376) 6,846,647 2,609,413
- --------------------------------------------------------------------------------
CAPITAL TRANSACTIONS:
Proceeds from contributions
(Note 1) 260,666,527 18,404,723 45,631,942
Value of withdrawals (76,983,925) (22,795,675) (6,088,455)
- --------------------------------------------------------------------------------
Net increase (decrease)
in net assets from
capital transactions 183,682,602 (4,390,952) 39,543,487
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS: 145,073,226 2,455,695 42,152,900
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 49,598,017 47,142,322 4,989,422
- --------------------------------------------------------------------------------
End of period $194,671,243 $49,598,017 $47,142,322
- --------------------------------------------------------------------------------
SMALL CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
TEN MONTHS JUNE 21, 1995
ENDED (COMMENCEMENT
YEAR ENDED OCTOBER 31, YEAR ENDED OF OPERATIONS)
OCTOBER 31, 1997 DECEMBER 31, TO DECEMBER 31,
1998 (Note 1F) 1996 1995
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period
(000's omitted) $194,671 $49,598 $47,142 $4,989
Ratio of expenses to
average net assets 0.88% 0.85%* 0.61% 0.00%*
Ratio of net investment
income (loss) to average
net assets (0.50)% (0.37)%* 0.15% 1.22%*
Portfolio turnover 51% 108% 89% 41%
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 December 31, 1995, the ratios would have been as follows:
RATIOS:
Expenses to average net assets 0.88% 1.04%* 1.17% 2.50%*
Net investment loss to average
net assets (0.50)% (0.56)%* (0.41)% (1.28)%*
- --------------------------------------------------------------------------------
* Annualized
See notes to financial statements
16
<PAGE>
SMALL CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES Small Cap Growth Portfolio (the
"Portfolio"), (formerly Small Cap Equity 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 Manager of the Portfolio is Citibank
N.A., ("Citibank"). Signature Financial Group (Grand Cayman), Ltd. ("SFG") acts
as the Portfolio's Sub-Administrator.
On November 1, 1997 CitiSelect Folio 200, CitiSelect Folio 300, CitiSelect
Folio 400 and CitiSelect Folio 500 each transferred a portion of their
investable assets in the amount of $15,439,632, $38,272,468, $75,166,816 and
$37,432,299 including $2,166,532, $5,841,516, $11,815,501 and $5,364,662,
respectively of unrealized appreciation to the Portfolio in exchange for an
interest in the Portfolio. The total investable assets, along with current year
contributions are included in the "Proceeds from contributions" on the Statement
of Changes in Net Assets. 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 approved by the 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
constitutes fair value as determined by the Trustees. 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.
17
<PAGE>
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. CHANGE IN FISCAL YEAR END During fiscal year 1997, the Portfolio changed
its fiscal year end from December 31 to October 31.
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. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolios' business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolio. SFG acts
as Sub-Administrator and performs certain duties and receives compensation from
Citibank as from time to time are agreed to by Citibank and SFG. Citibank is a
wholly-owned subsidiary of Citigroup Inc. Citigroup Inc. was formed as a result
of the merger of Citicorp and Travelers Group, Inc. which was completed on
October 8, 1998.
The management fees paid to Citibank, amounted to $1,673,322 for the period
ended October 31, 1998. The management fees are computed at the annual rate of
0.75% of the Portfolio's average daily net assets.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $103,419,429 and $127,921,527,
respectively, for the year ended October 31, 1998.
18
<PAGE>
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at October 31, 1998,
as computed on a federal income tax basis, are as follows:
Aggregate cost $189,825,40
- --------------------------------------------------------------------------------
Gross unrealized appreciation $30,096,256
Gross unrealized depreciation (24,322,913)
- --------------------------------------------------------------------------------
Net unrealized appreciation $5,773,343
- --------------------------------------------------------------------------------
5. LINE OF CREDIT The Portfolio, along with various other Portfolios in the
CitiFunds family, 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 year ended October 31, 1998, the
commitment fee allocated to the Portfolio was $765. Since the line of credit was
established, there have been no borrowings.
19
<PAGE>
SMALL CAP GROWTH PORTFOLIO
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND THE INVESTORS OF THE PREMIUM PORTFOLIOS (THE TRUST), WITH
RESPECT TO ITS SERIES, SMALL CAP GROWTH PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Small Cap Growth Portfolio (the
"Portfolio"), a series of The Premium Portfolios, as at October 31, 1998, 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 October 31, 1998 by correspondence with the custodian and brokers, 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 October 31, 1998, 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.
PricewaterhouseCoopers LLP
Chartered Accountants
Toronto, Ontario
December 14, 1998
20
<PAGE>
LARGE CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS OCTOBER 31, 1998
ISSUER SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS -- 97.4%
- --------------------------------------------------------------------------------
CAPITAL GOODS -- 6.4%
- --------------------------------------------------------------------------------
General Electric Co. 450,000 $ 39,375,000
-------------
COMMERCIAL SERVICES -- 4.0%
- --------------------------------------------------------------------------------
Interpublic Group
Companies Inc. 214,200 12,530,700
Paychex Inc. 233,800 11,631,550
-------------
24,162,250
-------------
CONSUMER DURABLES -- 3.2%
- --------------------------------------------------------------------------------
Danaher Corp. 265,000 10,583,437
Leggett & Platt Inc. 239,500 5,598,312
SafeskinCorp 156,500 3,462,562
-------------
19,644,311
-------------
CONSUMER NON-DURABLES -- 10.5%
- --------------------------------------------------------------------------------
Cintas Corp. 184,500 9,870,750
Clorox Co. 124,000 13,547,000
Coca Cola Co. 167,000 11,293,375
Gillette Co. 192,000 8,628,000
Procter & Gamble Co. 231,000 20,530,125
-------------
63,869,250
-------------
CONSUMER SERVICES -- 1.2%
- --------------------------------------------------------------------------------
Clear Channel
Communications* 162,400 7,399,350
-------------
FINANCE -- 9.7%
- --------------------------------------------------------------------------------
American International
Group Inc. 80,350 6,849,838
Federal National
Mortgage Association 268,000 18,977,750
Fifth Third Bancorp 120,200 7,963,250
Finova Group Inc. 139,000 6,776,250
Star Banc Cor 90,300 6,828,938
Zions Bancorp 226,000 11,992,125
-------------
59,388,151
-------------
HEALTHCARE -- 12.4%
- --------------------------------------------------------------------------------
Cardinal Health Inc. 135,800 12,841,588
HBO & Co. 299,500 7,861,875
HealthManagement
Associates Inc. 430,000 7,659,375
Issuer Shares Value
Lincare Holdings Inc.* 213,600 8,530,650
Medtronic Inc. 209,500 13,617,500
Schering Plough Corp. 200,000 20,575,000
Steris Corp. 191,800 4,411,400
-------------
75,497,388
-------------
RETAIL -- 7.4%
- --------------------------------------------------------------------------------
Home Depot 203,900 8,869,650
Kohls Corp.* 104,900 5,015,531
Wal Mart Stores Inc. 325,500 22,459,500
Walgreen Co. 181,400 8,831,913
-------------
45,176,594
-------------
PHARMACEUTICAL -- 16.9%
- --------------------------------------------------------------------------------
Elan Corp. PLC 84,000 5,885,250
Eli Lilly & Co. 265,000 21,448,438
Johnson & Johnson 220,000 17,930,000
Merck & Co. 142,000 19,205,500
Pfizer Inc. 200,000 21,462,500
Warner Lambert Co. 224,000 17,556,000
-------------
103,487,688
-------------
TECHNOLOGY -- 23.6%
- --------------------------------------------------------------------------------
Automatic Data
Processing Inc. 153,400 11,936,438
BMC Software Inc.* 147,200 7,074,800
Cisco Systems Inc.* 255,150 16,074,450
Compaq Computer
Corp.* 288,700 9,130,137
Compuware Corp.* 124,400 6,740,925
EMC Corp.* 193,600 12,463,000
Intel Corp. 229,000 20,423,937
Microsoft Corp.* 379,500 40,179,562
Solectron Corp.* 133,600 7,648,600
SunGard
Data Systems* 377,000 12,723,750
-------------
144,395,599
-------------
UTILITIES -- 2.1%
- --------------------------------------------------------------------------------
Ameritech Corp. 239,300 12,907,244
-------------
Total Common Stocks
(Identified Cost
$477,491,908) 595,302,825
-------------
13
<PAGE>
LARGE CAP GROWTH PORTFOLIO
PORTFOLIO OF INVESTMENTS (Continued) OCTOBER 31, 1998
ISSUER VALUE
- --------------------------------------------------------------------------------
SHORT-TERM OBLIGATIONS
AT AMORTIZED COST -- 5.6%
- --------------------------------------------------------------------------------
Aubrey G. Lanston Repurchase
Agreement 5.45%
due 11/02/98 proceeds
at maturity $17,123,774
(Collateralized by $16,184,000
U.S.Treasury Note, 6.625%
due 03/31/02, valued at
$17,458,490) $ 17,116,000
HSBC Repurchase Agreement
5.40% due 11/02/98 proceeds
at maturity $17,123,702
(Collateralized by $11,917,000
U.S. Treasury Note, 9.25%
due 02/15/16, valued at
$17,179,547) 17,116,000
TOTAL SHORT-TERM OBLIGATIONS 34,232,000
TOTAL INVESTMENTS
(Identified Cost
$511,723,908) 103.0% 629,534,825
OTHER ASSETS,
LESS LIABILITIES (3.0) (18,630,358)
----- -------------
Net Assets 100.0% $610,904,467
===== =============
* Non income producing securities
See notes to financial statements
14
<PAGE>
LARGE CAP GROWTH PORTFOLIO
STATEMENT OF ASSETS AND LIABILITIES
October 31, 1998
================================================================================
ASSETS:
Investments at value (Note 1A) (Identified Cost, $511,723,908) $629,534,825
Cash 340
Dividends and interest receivable 281,880
- --------------------------------------------------------------------------------
Total assets 629,817,045
- --------------------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 18,272,508
Payable to affiliates--Management fees (Note 2) 286,281
Accrued expenses and other liabilities 353,789
- --------------------------------------------------------------------------------
Total liabilities 18,912,578
- --------------------------------------------------------------------------------
NET ASSETS $610,904,467
================================================================================
REPRESENTED BY:
Paid-in capital for beneficial interests $610,904,467
================================================================================
LARGE CAP GROWTH PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED OCTOBER 31, 1998
================================================================================
INVESTMENT INCOME:
Dividend income $ 3,787,649
Interest income 1,185,975
- --------------------------------------------------------------------------------
$ 4,973,624
- --------------------------------------------------------------------------------
EXPENSES:
Management fees (Note 2) 3,167,841
Custody and fund accounting fees 342,809
Legal fees 34,064
Audit fees 31,200
Trustees fees 5,561
Other 167,111
- --------------------------------------------------------------------------------
Total expenses 3,748,586
- --------------------------------------------------------------------------------
Net investment income 1,225,038
- --------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Unrealized appreciation of investments 65,314,684
Less unrealized appreciation from
contributed assets (Note 1) 10,248,832
- --------------------------------------------------------------------------------
Unrealized appreciation of investments 55,065,852
Net realized gain from investment transactions 61,181,518
- --------------------------------------------------------------------------------
Net realized and unrealized gain on investments 116,247,370
- --------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS $117,472,408
================================================================================
See notes to financial statements
15
<PAGE>
LARGE CAP GROWTH PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
YEAR TEN MONTHS
ENDED ENDED YEAR ENDED
OCTOBER 31, OCTOBER 31, 1997 DECEMBER 31,
1998 (NOTE 1F) 1996
================================================================================
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $ 1,225,038 $ 1,639,995 $ 3,049,790
Net realized gain on investment
transactions 61,181,518 60,297,277 28,518,761
Unrealized appreciation of
investments 55,065,852 1,141,934 4,832,223
- --------------------------------------------------------------------------------
Net increase in net assets resulting
from operations 117,472,408 63,079,206 36,400,774
- --------------------------------------------------------------------------------
Capital Transactions:
Proceeds from contributions
(Note 1) 369,790,712 38,002,991 61,756,061
Value of withdrawals (201,271,389) (64,731,733) (55,752,909)
- --------------------------------------------------------------------------------
Net increase (decrease)
in net assets from capital
transactions 168,519,323 (26,728,742) 6,003,152
- --------------------------------------------------------------------------------
Net Increase in Net Assets: 285,991,731 36,350,464 42,403,926
- --------------------------------------------------------------------------------
Net Assets:
Beginning of period 324,912,736 288,562,272 246,158,346
- --------------------------------------------------------------------------------
End of period $610,904,467 $324,912,736 $288,562,272
- --------------------------------------------------------------------------------
LARGE CAP GROWTH PORTFOLIO
FINANCIAL HIGHLIGHTS
MAY 1, 1994
TEN MONTHS (COMMENCEMENT OF
YEAR ENDED YEAR ENDED OPERATIONS) TO
ENDED OCTOBER 31, DECEMBER 31, DECEMBER 31,
OCTOBER 31, 1997 -------------------------------------
1998 (NOTE 1F) 1996 1995 1994
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) $610,904 $324,913 $288,562 $246,158 $186,685
Ratio of expenses to
average net assets 0.71% 0.60%* 0.60% 0.60% 0.60%*
Ratio of net investment
income to average net
assets 0.23% 0.62%* 1.10% 1.73% 1.81%*
Portfolio turnover 53% 103% 90% 67% 35%
================================================================================
* Annualized
See notes to financial statements
16
<PAGE>
LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES Large Cap Growth Portfolio (the "Portfolio"),
(formerly Equity Portfolio), a separate series of The Premium Portfolios (the
"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
Manager of the Portfolio is Citibank, N.A. ("Citibank"). Signature Financial
Group (Grand Cayman), Ltd. ("SFG") acts as the Portfolio's Sub-Administrator.
On November 1, 1997 CitiSelect Folio 200, CitiSelect Folio 300, CitiSelect
Folio 400 and CitiSelect Folio 500 each transferred a portion of their
investable assets in the amount of $12,183,616, $34,554,616, $38,508,816 and
$16,346,503 including $1,107,028, $3,598,984, $4,092,260 and $1,450,560,
respectively of unrealized appreciation to the Portfolio in exchange for an
interest in the Portfolio. The total investable assets along with current year
contributions are included in the "Proceeds from contributions" on the Statement
of Changes in Net Assets.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires 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 approved by the 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 constitutes fair value as
determined by the Trustees. 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
17
<PAGE>
LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
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. Change in Fiscal Year End During the fiscal year 1997, the Portfolio
changed its fiscal year end from December 31 to October 31.
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. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolio's business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolio. SFG acts
as Sub-Administrator and performs certain duties and receives compensation from
Citibank as from time to time are agreed to by Citibank and SFG. Citibank is a
wholly-owned subsidiary of Citigroup, Inc. Citigroup, Inc. was formed as a
result of the merger of Citicorp and Travelers Group, Inc., which was completed
on October 8, 1998.
The management fees paid to Citibank, amounted to $3,167,841 for the year
ended October 31, 1998. Management fees are computed at the annual rate of 0.60%
of the Portfolio's average daily net assets.
The Trust pays no compensation directly to any Trustee or any other officer
who is affiliated with the Sub-Administrator, all of whom receive remuneration
for their services to the Trust from the Sub-Administrator or its affiliates.
3. PURCHASES AND SALES OF INVESTMENTS Purchases and sales of investments, other
than short-term obligations, aggregated $262,967,294 and $456,978,747,
respectively, for the year ended October 31, 1998.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at October 31, 1998,
as computed on a federal income tax basis, are as follows:
Aggregate cost $511,980,788
================================================================================
Gross unrealized appreciation $126,276,678
Gross unrealized depreciation (8,722,641)
- --------------------------------------------------------------------------------
Net unrealized appreciation $117,554,037
================================================================================
18
<PAGE>
LARGE CAP GROWTH PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
5. LINE OF CREDIT The Portfolio, along with various other Portfolios in the
CitiFunds Family, 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 year ended October 31, 1998, the
commitment fee allocated to the Portfolio was $1,788. Since the line of credit
was established, there have been no borrowings.
19
<PAGE>
LARGE CAP GROWTH PORTFOLIO
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND THE INVESTORS OF THE PREMIUM PORTFOLIOS (THE TRUST), WITH
RESPECT TO ITS SERIES, LARGE CAP GROWTH PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Large Cap Growth Portfolio (the
"Portfolio"), a series of The Premium Portfolios, as at October 31, 1998, 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 October 31, 1998 by correspondence with the custodian and brokers, 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 October 31, 1998, 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.
PricewaterhouseCoopers LLP
Chartered Accountants
Toronto, Ontario
December 14, 1998
20
