<PAGE>
Emerging Asian Markets Equity Portfolio
- ---------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS December 31, 1995
ISSUER/INDUSTRY SHARES VALUE
- ---------------------------------------------------------------------------
INDONESIA - 12.5%
Kalbe Farma
Pharmaceuticals.......................... 49,500 $ 167,778
PT Hanjaya Mandala Sampoerna
Consumer................................. 5,000 52,045
PT Hero Mini Supermarke
Consumer................................. 46,500 99,650
PT Indocement Tugnnal Parka
Building Materials....................... 15,000 50,350
PT Jaya Real Property
Real Estate.............................. 16,000 43,035
PT Semen Gresik
Building Materials....................... 16,000 44,784
PT Telecomunikasion
Telecommunications....................... 220,000 288,651
----------
746,293
----------
MALAYSIA - 45.5%
Arab-Malaysian Merchant Bank
Finance................................... 22,000 251,211
Commerce Asset Held Berhad
Banking................................... 8,000 40,320
DCB Holdings Berhad
Banking................................... 29,000 84,498
Edaran Otomobile Nasional BH
Motor Vehicles & Equipment................ 9,000 67,685
Faber Group Berhad*
Hotels, Tourist Courts & Motels.......... 40,000 34,177
Genting Berhad
Amusement & Recreation................... 18,000 150,254
Hong Leong Bank
Banking.................................. 38,000 104,737
Hong Leong Bank-Warrants
Banking.................................. 5,700 1,436
IOI Properties Berhad
Real Estate.............................. 88,000 220,025
Kedah Cement Berhad
Building Materials....................... 57,000 97,854
Kuala Lumpar Kepong Berhad
Plantation............................... 4,000 12,679
Malayan Banking Berhad
Banking.................................. 24,000 202,229
Malaysian Airline System BH
Air Transportation....................... 10,000 32,484
Malaysian Intern Shipping
Water Transport of Freight............... 40,000 104,737
MBF Capital Berhad
Finance.................................. 50,000 50,597
Multi-Purpose Holdings
Miscellaneous............................ 70,000 102,532
Public Bank-BHD
Banking.................................. 42,000 80,372
Public Finance Berhad
Finance.................................. 36,000 77,962
Resorts World Berhad
Amusement & Recreation................... 31,000 166,004
Selangor Properties Berhad
Real Estate.............................. 71,000 67,933
Sime Darby Berhad
Miscellaneous............................ 17,000 45,183
Systems Telekom Malaysia
Telecommunications....................... 36,000 280,663
Technology Resources*
Telecommunications....................... 28,000 82,687
Tenaga Nasional Berhad
Public Utilities......................... 67,000 263,810
UMW Holdings Berhad
Motor Vehicles & Equipment............... 15,000 40,162
United Engineers
Infrastructure........................... 8,000 51,030
----------
2,713,261
----------
PHILIPPINES - 8.4%
C&P Homes
Real Estate.............................. 170,000 $ 124,762
Petron Corp.
Utilities................................ 90,000 46,321
Philippine Long Distance TE
Telecommunications....................... 1,300 70,625
Philippine National Bank
Banking.................................. 4,200 46,435
San Miguel Corp. Class B
Miscellaneous............................ 8,000 27,297
SM Prime Holdings
Real Estate.............................. 640,000 182,997
----------
498,437
----------
THAILAND - 29.9%
Advanced Info Services
Telecommunications....................... 11,100 194,768
Bangkok Bank Co. Ltd.
Banking.................................. 26,200 318,269
Dhana Siam Finance
Finance.................................. 37,100 212,083
Finance One Co. LTD
Finance.................................. 15,300 106,292
Krung Thai Bank LTD
Banking.................................. 39,500 163,081
Land & House PLC
Real Estate.............................. 6,500 106,828
Phatra Thanakit Co.
Finance.................................. 16,000 $ 137,197
PTT Expl. & Production Public
Natural Gas.............................. 5,400 56,595
Siam Cement Co.
Building Materials....................... 2,000 110,838
Siam Commercial Bank
Banking.................................. 8,600 113,347
Thai Telephone & Telecomm
Telecommunications....................... 6,800 36,983
Thai Farmers Bank
Banking.................................. 22,700 228,891
----------
1,785,172
----------
TOTAL COMMON STOCKS
(Identified Cost, $5,457,018)............ 5,743,163
----------
SHORT-TERM OBLIGATIONS -- 3.6%
Saloman Repurchase Agreement, 5.375% due
1/2/96 proceeds at maturity $217,646
(secured by $202,672 US Treasury Bill
5.15% due 6/13/96 and $19,771 US
Treasury Bill 5.15% due 6/6/96........... 217,518
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TOTAL INVESTMENTS
(Identified Cost, $5,674,536) 99.9% 5,960,681
OTHER ASSETS,
LESS LIABILITIES......................... 0.1 2,792
----- ----------
NET ASSETS.................... 100.0% $ 5,963,473
===== ===========
*Non-income producing
See notes to financial statements
<PAGE>
Emerging Asian Markets Equity Portfolio
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STATEMENT OF ASSETS AND LIABILITIES December 31, 1995
ASSETS:
Investments at value (Note 1A) (Identified Cost, $5,674,536)... $5,960,681
Foreign currency, at value (Cost, $1,922)...................... 1,927
Dividends and interest receivable.............................. 2,301
----------
Total assets............................................... 5,964,909
----------
LIABILITIES:
Payable for investments purchased.............................. 1,436
----------
NET ASSETS .................................................... $5,963,473
==========
REPRESENTED BY:
Paid-in capital for beneficial interests....................... $5,963,473
==========
See notes to financial statements
<PAGE>
Emerging Asian Markets Equity Portfolio
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STATEMENT OF OPERATIONS
For the Period August 23, 1995 (Commencement of Operations)
to December 31, 1995
INVESTMENT INCOME:
Interest........................................ $ 14,841
Dividends (net of foreign withholding tax
of $1,573).................................... 4,143
---------
Total investment income....................... $ 18,984
EXPENSES:
Investment advisory fees (Note 2)............... 12,307
Administrative fees (Note 3).................... 615
---------
Total expenses................................ 12,922
Less aggregate amount waived by Investment
Adviser and Administrator (Notes 2 and 3)..... (12,922)
---------
Net Expenses.................................... --
--------
Net investment income......................... 18,984
--------
NET REALIZED AND UNREALIZED GAIN (LOSS)
ON INVESTMENTS:
Net realized gain (loss) from investment
transactions................................ --
Net realized gain (loss) on foreign exchange
transactions................................ (6,799)
---------
Net realized gain (loss).................... (6,799)
--------
Unrealized appreciation (depreciation)
of investments--
Beginning of period........................ --
End of period.............................. 286,145 286,145
---------
Translation of other assets and liabilitie
denominated in foreign currencies--net..... (5)
--------
Net change in unrealized appreciation
(depreciation)............................ 286,140
--------
Net realized and unrealized gain on
investments............................... 279,341
--------
NET INCREASE IN NET ASSETS RESULTING FROM
OPERATIONS.................................. $298,325
========
See notes to financial statements
<PAGE>
Emerging Asian Markets Equity Portfolio
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STATEMENT OF CHANGES IN NET ASSETS
AUGUST 23, 1995
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31, 1995
----------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income..................................... $ 18,984
Net realized gain (loss) on investments and foreign
exchange transactions.................................... (6,799)
Net change in unrealized appreciation (depreciation)
of investments........................................... 286,140
----------
Net increase in net assets resulting from operations.. 298,325
----------
CAPITAL TRANSACTIONS:
Proceeds from contributions............................... 5,779,224
Value of withdrawals...................................... (114,076)
----------
Net increase (decrease) in net assets from capital
transactions........................................ 5,665,148
----------
Net Increase in Net Assets: .............................. 5,963,473
Net Assets:
Beginning of period....................................... --
----------
End of period............................................. $5,963,473
==========
See notes to financial statements
<PAGE>
Emerging Asian Markets Equity Portfolio
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FINANCIAL HIGHLIGHTS
AUGUST 23, 1995
(COMMENCEMENT
OF OPERATIONS) TO
DECEMBER 31, 1995
----------------
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted)................ $5,963
Ratio of expenses to average net assets.................. 0%
Ratio of net investment income to average net assets..... 1.53%*
Portfolio turnover....................................... 0%
Note: If Agents of the Portfolio had no voluntarily waived all of their
fees for the periods indicated, the ratio would have been as follows:
Ratios:
Expenses to average net assets........................ 1.05%*
Net investment income to average net assets........... 0.48%
*Annualized
See notes to financial statements
<PAGE>
Emerging Asian Markets Equity Portfolio
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NOTES TO FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES
Emerging Asian 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 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 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, 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, since such valuations and techniques are believed to
reflect more accurately the fair value of such securities. 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 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.
(2) INVESTMENT ADVISORY FEES
The investment advisory fees paid to Citibank, as compensation for overall
investment management services, amounted to $12,307, all of which was
voluntarily waived, for the period August 23, 1995 to 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 Portfolio
accrued fees aggregating $615 for these services for the period August 23, 1995
to December 31, 1995, all of which was voluntarily waived. 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 period ended December 31, 1995, purchases and sales of investment
securities, other than short-term investments, aggre-gated 5,457,018 and -0-,
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 computed on a federal income tax
basis, are as follows:
Aggregate cost...................... $5,674,536
==========
Gross unrealized appreciation....... $ 376,734
Gross unrealized depreciation....... (90,589)
----------
Net unrealized appreciation......... $ 286,145
==========
(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 period August 23, 1995 to
December 31, 1995, there was no commitment fee allocated to the Portfolio. Since
the line of credit was established, there have been no borrowings.
<PAGE>
Emerging Asian Markets Equity Portfolio
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INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES OF THE PREMIUM PORTFOLIOS (THE TRUST) AND THE SHAREHOLDERS OF
EMERGING ASIAN MARKETS EQUITY PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Emerging Asian Markets 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 period August 23, 1995
(commencement of operations) to December 31, 1995. 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 December 31, 1995, 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, 1995, the
results of its operations and the changes in its net assets and the financial
highlights for the period August 23, 1995 (commencement of operations) to
December 31, 1995 in accordance with U.S. generally accepted accounting
principles.
PRICE WATERHOUSE
Chartered Accountants
Toronto, Ontario
February 7, 1996
