<PAGE>
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Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS December 31, 1996
- --------------------------------------------------------------------------------
ISSUER/INDUSTRY SHARES VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
COMMON STOCKS--97.7%
- --------------------------------------------------------------------------------
INDONESIA - 17.8%
Bank International Indonesia
Banking........................... 75,000 $ 73,826
PT Astra International
Automobile........................ 73,000 200,889
PT Bank Bali
Banking........................... 41,000 102,414
PT Bank Dagang Nasional Ind
Banking........................... 72,000 73,158
PT Bank Negara Indonesia
Banking........................... 120,000 63,505
PT Darya Varia Laboratoria
Consumer.......................... 25,500 41,024
PT Daya Guna Samudera
Miscellaneous..................... 60,000 69,857
PT Gudang Garam
Consumer.......................... 99,000 427,519
PT Hm Sampoerna
Consumer.......................... 18,000 96,021
PT Indofood Sukses Makmur
Consumer.......................... 24,000 47,756
PT Indostat
Telecommunications................ 43,500 119,707
PT Semen Gresik
Building Materials................ 16,000 51,482
PT Telecomunikasion
Telecommunications................ 385,000 664,214
-----------
2,031,372
-----------
MALAYSIA - 52.7%
ACP Industries Berhad
Building Materials................ 18,000 113,334
Arab-Malaysian Merchant Bank
Banking........................... 30,000 251,852
Bright Packaging Industries Berhad
Miscellaneous..................... 5,000 27,522
Commerce Asset Holdings Berhad
Finance/Securities................ 18,000 135,430
Country Heights Holdings Berhad
Property/Hotel.................... 21,000 58,211
DCB Holdings Berhad
Banking........................... 29,000 99,335
Edaran Otomobile Nasional Berhad
Automobile........................ 9,000 89,990
Gamuda Berhad
Construction/Engineer............. 6,666 28,248
Gamuda Berhad-Rights
Construction/Engineer............. 10,000 20,281
Genting Berhad
Gaming............................ 4,000 27,562
Hong Leong Bank
Banking........................... 30,000 104,542
Hong Leong Bank-Warrants
Banking........................... 75,700 123,503
Intria Berhad
Construction/Engineer............. 34,000 85,494
IOI Properties Berhad
Property/Hotel.................... 68,000 220,805
Jaya Tiasa
Timber............................ 6,000 31,837
Kedah Cement Berhad
Building Materials................ 42,000 83,158
KFC Holdings Berhad
Consumer.......................... 75,360 310,356
KFC Holdings Berhad-Warrants
Consumer.......................... 32,000 38,268
Konsortium Perkapalan Berhad
Transport......................... 22,000 148,102
Kuala Lumpur Kepong Berhad
Plantations....................... 46,000 116,580
Landmarks Berhad
Property/Hotel.................... 15,000 19,959
Larut Consolidated
Property/Hotel.................... 30,000 42,293
Malayan Banking Berhad
Banking........................... 49,800 552,172
Malaysian Resources Corp.
Property/Hotel.................... 27,000 106,383
MBF Capital Berhad
Finance/Securities................ 100,000 162,356
Multi-Purpose Holdings-Rights
Miscellaneous..................... 266,000 258,068
Oriental Holdings Berhad
Automobile........................ 14,000 95,355
Oyl Industries Berhad
Manufacturing..................... 5,000 52,470
Pan Pacific Asia Berhad
Timber............................ 12,000 35,402
Perusahaan Otomobil Nasional
Automobile........................ 24,000 152,062
Public Bank Berhad
Finance/Securities................ 36,999 78,386
Public Finance Berhad
Finance/Securities................ 44,400 77,361
Rashid Hussein Berhad
Finance/Securities................ 23,000 152,101
Renong Berhad
Miscellaneous..................... 40,000 70,961
Resorts World Berhad
Gaming............................ 31,000 141,172
Sime Darby Berhad
Property/Hotel.................... 64,000 252,168
S P Setia Berhad
Property/Hotel.................... 10,000 27,720
Star Publications Malaysia
Media............................. 84,000 330,970
Systems Telekom Malaysia
Media............................. 36,000 320,754
TA Enterprise Berhad-Warrants
Finance/Securities................ 150,000 110,481
Technology Resources Inds.
Telecommunications................ 21,000 41,413
Tenaga Nasional Berhad
Utilities......................... 96,000 459,985
UMW Holdings Berhad
Automobile........................ 24,000 112,145
UMW Holdings Berhad-Warrants
Automobile........................ 3,000 7,543
United Engineers Malaysia
Construction/Engineer............. 26,040 235,105
-----------
6,009,195
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PHILIPPINES - 14.0%
Ayala Land Inc. "B"
Property.......................... 136,500 155,703
C&P Homes
Property.......................... 255,000 130,893
DMCI Holdings, Inc...................
Construction...................... 85,000 55,751
Empire East Land Holdings, Inc.
Property.......................... 120,000 54,752
Filinvest Land Inc.
Property.......................... 332,000 103,513
Manila Electric
Utility........................... 14,500 118,537
Metro Bank &Trust
Banking........................... 10,875 268,774
Metro Pacific Corp.
Utilities......................... 400,000 98,859
Petron Corp.
Utilities........................ 97,500 32,994
Philippine Long Distance Telephone
Telecommunications............... 3,850 211,531
Philippine National Bank
Banking.......................... 13,700 162,786
SM Prime Holdings
Property......................... 768,000 198,571
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1,592,664
-----------
THAILAND - 13.2%
Advanced Info Services
Telecommunications............... 15,400 130,905
Bangkok Bank Co. Ltd.
Banking.......................... 33,200 321,049
Co-Generation Public Co.
Utilities........................ 25,200 93,839
Dhana Siam Finance
Finance/Securities............... 38,000 90,385
Electricity General
Utilities ....................... 30,000 81,884
Phatra Thanakit Co.
Finance/Securities............... 16,000 45,543
PTT Exploration & Production Public
Miscellaneous.................... 13,900 200,539
Shinawatra Computer Co.
Telecommunications............... 3,000 36,262
Siam Cement Co. Ltd.
Building Materials .............. 2,000 62,699
Siam Commercial Bank
Banking.......................... 29,000 210,327
Thai Farmers Bank
Banking.......................... 36,337 226,698
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1,500,130
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TOTAL COMMON STOCK
(Identified Cost $10,283,600) 11,133,361
-----------
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SHORT TERM OBLIGATIONS--1.7%
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Morgan Stanley Repurchase Agreement
5.90% due 1/02/97 proceeds at
maturity $194,616 (collateralized by
$83,787 U.S. Treasury Note 10.625%
due 8/15/15, $85,015 U.S. Treasury
Note 12.00% due 8/15/13 and
$29,913 U.S. Treasury Note 9.125%
due 5/15/18)..................... $ 194,616
-----------
TOTAL INVESTMENTS
(Identified Cost, $10,478,216) .... 99.4% 11,327,977
OTHER ASSETS
LESS LIABILITIES................... 0.6 64,783
----- -----------
NET ASSETS.......................... 100.0% $11,392,760
===== ===========
See notes to financial statements
<PAGE>
Emerging Asian Markets Equity Portfolio
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STATEMENT OF ASSETS AND LIABILITIES December 31, 1996
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ASSETS:
Investments at value (Note 1A) (Identified Cost, $10,478,216)... $11,327,977
Foreign currency, at value (Cost, $70,700)...................... 71,387
Dividends and interest receivable............................... 3,748
-----------
Total assets................................................ 11,403,112
-----------
LIABILITIES:
Accrued expenses and other liabilities.......................... 10,352
-----------
NET ASSETS ..................................................... $11,392,760
===========
REPRESENTED BY:
Paid-in capital for beneficial interests........................ $11,392,760
===========
See notes to financial statements
<PAGE>
Emerging Asian Markets Equity Portfolio
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STATEMENT OF OPERATIONS
For the Year Ended December 31, 1996
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<TABLE>
<CAPTION>
INVESTMENT INCOME:
<S> <C> <C>
Dividends (net of foreign withholding tax of $24,710)...... $ 107,891
Interest................................................... 19,795
---------
Total investment income.................................. $ 127,686
EXPENSES:
Investment advisory fees (Note 2).......................... 109,575
Administrative fees (Note 3)............................... 5,478
Expense fees (Note 6)...................................... 1,577
---------
Total expenses........................................... 116,630
Less aggregate amount waived by Investment Adviser
and Administrator (Notes 2 and 3)........................ (54,347)
---------
Net expenses............................................... 62,283
------------
Net investment income.................................... 65,403
------------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from investment transactions...... (995,885)
Net realized gain (loss) on foreign currency
exchange transactions.................................... (30,602)
---------
Net realized gain (loss)................................. (1,026,487)
------------
Unrealized appreciation (depreciation) of investments--
Beginning of period..................................... 286,145
End of period........................................... 849,761 563,616
---------
Translation of other assets and liabilities denominated
in foreign currencies--net.............................. (691)
------------
Net change in unrealized appreciation (depreciation).... 562,925
------------
Net realized and unrealized loss on investments......... (463,562)
------------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS....... $ (398,159)
============
</TABLE>
See notes to financial statements
<PAGE>
Emerging Asian Markets Equity Portfolio
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STATEMENT OF CHANGES IN NET ASSETS
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YEAR AUGUST 23, 1995
ENDED (COMMENCEMENT OF
DECEMBER 31, OPERATIONS) TO
1996 DECEMBER 31, 1995
------------ -----------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income..................... $ 65,403 $ 18,984
Net realized gain (loss) on investments
and foreign exchange transactions........ (1,026,487) (6,799)
Net change in unrealized appreciation
(depreciation) of investments and
foreign currency exchange................ 562,925 286,140
----------- ----------
Net increase (decrease) in net
assets resulting from operations ... (398,159) 298,325
----------- ----------
CAPITAL TRANSACTIONS:
Proceeds from contributions............... 8,854,217 5,779,224
Value of withdrawals...................... (3,026,771) (114,076)
----------- ----------
Net increase (decrease) in net
assets from capital transactions ... 5,827,446 5,665,148
----------- ----------
NET INCREASE IN NET ASSETS: .............. 5,429,287 5,963,473
NET ASSETS:
Beginning of period....................... 5,963,473 --
----------- ----------
End of period............................. $11,392,760 $5,963,473
=========== ==========
See notes to financial statements
Emerging Asian Markets Equity Portfolio
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FINANCIAL HIGHLIGHTS
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YEAR AUGUST 23, 1995
ENDED (COMMENCEMENT OF
DECEMBER 31, OPERATIONS) TO
1996 DECEMBER 31, 1995
------------ -----------------
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted).. $11,393 $5,963
Ratio of expenses to average net assets.... 0.56% 0%
Ratio of net investment income to
average net assets........................ 0.60% 1.53%*
Portfolio turnover......................... 73% 0%
Average commission rate per share (A)...... $0.019 N/A
Note: If Agents of the Portfolio had not voluntarily waived a portion of
their fees for the periods indicated, the ratios would have been as follows:
Ratios:
Expenses to average net assets.......... 1.06% 1.05%*
Net investment income to average
net assets............................ 0.10% 0.48%*
*Annualized
(A)The average commission rate paid is applicable for Funds that invest greater
than 10% of average net assets in equity transactions on which commissions
are charged. This disclosure is required for fiscal periods beginning on or
after September 1, 1995.
See notes to financial statements
<PAGE>
Emerging Asian Markets Equity Portfolio
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NOTES TO FINANCIAL STATEMENTS
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(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 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 following significant accounting policies consistently followed by the
Portfolio 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 and the time of fund valuation, 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 or 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. 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.
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 AND OTHER TAXES -- The Portfolio is considered a
partnership under the U.S. Internal Revenue Code. Accordingly, no provision for
federal income taxes is necessary. The Portfolio may be subject to taxes imposed
by countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued and applied to net
investment income and net realized gains as such income and/or gains are earned.
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 $109,575, of which $49,394 was
voluntarily waived, for the year ended December 31, 1996. 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 $5,478 for these services for the year ended December
31, 1996, of which $4,953 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 year ended December 31, 1996, purchases and sales of investment
securities, other than short-term investments, aggregated $12,479,567 and
$7,561,714, respectively.
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/(depreciation) in value of the investment
securities owned at December 31, 1996, as computed on a federal income tax
basis, are as follows:
Aggregate cost........................................ $10,539,001
===========
Gross unrealized appreciation......................... $ 1,531,505
Gross unrealized depreciation......................... (742,529)
-----------
Net unrealized appreciation........................... $ 788,976
===========
(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 less expenses waived by the Administrator would on an annual basis
exceed an agreed upon rate, currently 1.00% 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, 1996.
(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, 1996
the commitment fee allocated to the Portfolio was $47. Since the line of credit
was established, there have been no borrowings.
<PAGE>
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
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, 1996 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, 1996 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, 1996 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 4, 1997
