<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Portfolio Of Investments December 31, 1997
- --------------------------------------------------------------------------------
Issuer/Industry Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK--87.9%
Indonesia-15.3%
Pt Bimanatra Citra
Multi-Industry ............................... 71,500 $ 13,650
Pt Daya Guna Samudera
Consumer ..................................... 130,000 98,682
Pt Gudang Garam
Consumer ..................................... 11,000 16,750
Pt Indah Kiat Paper
Resource/Paper ............................... 71,000 12,586
Pt Matahari
Consumer ..................................... 78,000 6,382
Pt Ramayana Lestari Santosa
Consumer ..................................... 51,000 47,986
Pt Semen Gresik
Building Materials ........................... 36,500 21,402
Pt Telecomunikasion
Telecommunications ........................... 360,000 191,455
----------
408,893
----------
Malaysia-45.4%
Berjaya Group Berhad
Multi-Industry ............................... 177,000 35,951
Berjaya Sports
Leisure & Tourism ............................ 8,000 20,465
Commerce Asset Holdings Berhad
Banking ...................................... 26,200 12,529
Gamuda Berhad-Warrants*
Construction/Engineering ..................... 1,667 73
Genting Berhad
Leisure & Tourism ............................ 2,400 6,016
IOI Corp.
Plantations .................................. 114,000 36,930
KFC Holdings Berhad
Consumer ..................................... 32,000 51,832
KFC Holdings Berhad-Warrants*
Consumer ..................................... 32,000 3,291
Kian Joo Can Fact
Manufacturing ................................ 2,000 1,779
Kuala Lumpur Kepong Berhad
Plantations .................................. 19,000 40,789
Magnum Corp. Berhad
Leisure & Tourism ............................ 115,000 69,186
Malayan Banking Berhad
Banking ...................................... 32,800 95,292
Malaysia Mining Corp.
Construction/Engineering ..................... 77,000 30,289
Malaysia Pacific
Building Materials ........................... 7,000 16,827
Malaysian International Shipping
Transport .................................... 35,000 51,292
Oriental Holdings Berhad
Automobile ................................... 12,800 15,665
Perusahaan Otomobil Nasional
Automobile ................................... 18,000 17,586
Petronas Gas Berhad
Utilities .................................... 19,000 43,232
RHB Capital Berhad
Finance/Securities ........................... 33,000 15,951
Rashid Hussein Berhad
Finance/Securities ........................... 11,000 8,541
Rashid Hussein Berhad-Rights
Finance/Securities ........................... 1,857 344
Resorts World Berhad
Leisure & Tourism ............................ 26,000 43,785
Rothmans Pall Mall
Consumer ..................................... 3,000 23,332
Sime Darby Berhad
Property/Hotel ............................... 64,000 61,540
Star Publications Malaysia
Media ........................................ 49,000 55,935
Tan Chong Motor Holdings Berhad
Automobile ................................... 39,000 17,046
Technical Research Industries Berhad
Telecommunications ........................... 23,000 13,601
Telekom Malaysia
Utilities .................................... 66,000 195,141
Tenaga Nasional Berhad
Utilities .................................... 107,000 228,333
----------
1,212,573
----------
13
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Portfolio Of Investments December 31, 1997 continued
- --------------------------------------------------------------------------------
Issuer/Industry Shares Value
- --------------------------------------------------------------------------------
Philippines-10.7%
Ayala Land Inc
Property ..................................... 189,375 $ 74,815
Manila Electric
Utility ...................................... 19,190 63,493
Metro Pacific Corp.
Multi-Industry ............................... 106,260 2,938
Philippine Long Distance Telephone
Telecommunications ........................... 3,420 74,311
SM Prime Holdings
Property ..................................... 471,000 69,778
----------
285,335
----------
Thailand-16.5%
Advanced Information Services
Telecommunications ........................... 18,100 86,459
Bangkok Bank Co. Ltd.
Banking ...................................... 29,200 72,773
Co-Generation Public Co.*
Utilities .................................... 50,400 29,832
Electricity General
Utilities .................................... 15,000 28,037
Ind Fin Thailand
Banking ...................................... 29,000 4,457
Land & House
Property ..................................... 10,000 1,994
Ptt Exploration & Products
Energy ....................................... 11,300 130,014
Phatra Thanakit Co.
Finance ...................................... 3,800 2,111
Siam Commercial Bank
Banking ...................................... 22,100 24,556
Telecom Asia Local
Telecommunications ........................... 200 38
Thai Farmers Bank
Banking ...................................... 34,100 61,968
Thai Farmers Bank-Warrants *
Banking ...................................... 2,837 300
----------
442,539
----------
Principal
Issuer/Industry Amount Value
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Identified Cost $4,725,199) ................. $2,349,340
----------
FIXED INCOME--0.1%
AMMB
7.50% due 5/08/02 ............................ 30,000 2,005
----------
TOTAL FIXED INCOME
(Identified Cost $12,000)
SHORT-TERM OBLIGATION--10.7%
State Street Bank Repurchase Agreement
2.00% due 1/02/98 proceeds at maturity
$286,000 (Collateralized by $235,000
U.S. Treasury Bond valued at $297,241
8.125%, due 5/15/21) .......................... 286,000
----------
Total Investments
(Identified Cost $5,023,199) ................... 98.7% 2,637,345
Other Assets
Less Liabilities ............................... 1.3 34,839
------- ----------
Net Assets ...................................... 100.0% $2,672,184
======= ==========
* Non-income producing
See notes to financial statements
14
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Statement Of Assets And Liabilities December 31, 1997
- --------------------------------------------------------------------------------
Assets:
Investments at value (Note 1A) (Identified Cost, $4,737,199) ..... $2,351,345
Repurchase agreement at value (Identified Cost, $286,000) ........ 286,000
Cash ............................................................. 953
Foreign currency, at value (Cost, $41,429) ....................... 29,255
Dividends and interest receivable ................................ 9,822
----------
Total assets ................................................. 2,677,375
----------
Liabilities:
Payable to affiliates--Investment advisory fees (Note 2) ......... 2,592
Accrued expenses and other liabilities ........................... 2,599
----------
Total liabilities .............................................. 5,191
----------
Net Assets ....................................................... $2,672,184
==========
Represented by:
Paid-in capital for beneficial interests ......................... $2,672,184
==========
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Statement Of Operations
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends (net of foreign withholding tax of $29,686) ..... $ 83,612
Interest .................................................. 43,996
-----------
Total investment income ................................. $ 127,608
Expenses:
Investment advisory fees (Note 2) ......................... 83,978
Administrative fees (Note 3) .............................. 4,200
Expense fees (Note 6) ..................................... 2,500
Interest expense .......................................... 9,846
-----------
Total expenses .......................................... 100,524
Less aggregate amount waived by Investment Adviser
and Administrator (Notes 2 and 3) ....................... (6,700)
-----------
Net expenses .............................................. 93,824
-----------
Net investment income ................................... 33,784
-----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized loss on investment transactions .............. (2,920,220)
Net realized loss on foreign currency exchange transactions (95,345)
-----------
Net realized loss ....................................... (3,015,565)
-----------
Unrealized appreciation (depreciation) of investments--
Beginning of period .................................... 849,761
End of period .......................................... (2,398,027) (3,247,788)
-----------
Translation of other assets and liabilities denominated
in foreign currencies--net ............................. 187
-----------
Net change in unrealized appreciation (depreciation) ... (3,247,601)
-----------
Net realized and unrealized loss on investments ........ (6,263,166)
-----------
Net Decrease in Net Assets Resulting from Operations ...... $(6,229,382)
===========
</TABLE>
See notes to financial statements
16
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Statement Of Changes In Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996
----- ----
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations:
Net investment income ................................................ $ 33,784 $ 65,403
Net realized loss on investments and foreign exchange transactions ... (3,015,565) (1,026,487)
Net change in unrealized appreciation (depreciation)
of investments and foreign currency exchange ....................... (3,247,601) 562,925
------------ ------------
Net decrease in net assets resulting from operations ............. (6,229,382) (398,159)
------------ ------------
Capital Transactions:
Proceeds from contributions .......................................... 2,061,677 8,854,217
Value of withdrawals ................................................. (4,552,871) (3,026,771)
------------ ------------
Net increase (decrease) in net assets from capital transactions .. (2,491,194) 5,827,446
------------ ------------
Net Increase (Decrease) in Net Assets: ............................... (8,720,576) 5,429,287
Net Assets:
Beginning of period .................................................. 11,392,760 5,963,473
------------ ------------
End of period ........................................................ $ 2,672,184 $ 11,392,760
============ ============
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
August 23, 1995
Year Ended December 31, (Commencement of
------------------------ Operations) to
1997 1996 December 31, 1995
----- ----- -----------------
<S> <C> <C> <C>
Ratios/Supplemental Data:
Net Assets, end of period (000's omitted) ............ $2,672 $11,393 $5,963
Ratio of expenses to average net assets ............... 1.12%+ 0.56% 0%
Ratio of net investment income to average net assets .. 0.40% 0.60% 1.53%*
Portfolio turnover .................................... 72% 73% 0%
Average commission rate per share (A) ................. $0.006 $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......................... 1.20% 1.06% 1.05%*
Net investment income to average net assets............ 0.32% 0.10% 0.48%*
</TABLE>
* Annualized
+ Ratio of expenses to average net assets excluding interest expense would
be 1.00%.
(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
16
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Notes To Financial Statements
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies
Emerging Asian Markets 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. Reclaim of recoverable foreign taxes are the
responsibility of the qualified investors. Interest income is accrued daily.
Interest expense is related to expenses incurred on cash over drafts.
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.
17
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Notes To Financial Statements continued
- --------------------------------------------------------------------------------
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 $83,978, of which $2,500 was
voluntarily waived, for the year ended December 31, 1997. The investment
advisory fees are computed at the annual rate of 1.00% of the Portfolio's
average daily net assets.
(3) Administrative Fees
Under the terms of an Administrative Services Agreement, the administrative
services fees paid to the Administrator, as compensation for overall
administrative services including general office facilities, is computed at an
annual rate of 0.05% of the Portfolio's average daily net assets. The
administrative fees amounted to $4,200, all of which was voluntarily waived, for
the year ended December 31, 1997. 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, 1997, purchases and sales of investment
securities, other than short-term investments, aggregated $5,274,543 and
$7,861,363, respectively.
(5) Federal Income Tax Basis Of Investments
The cost and unrealized appreciation/(depreciation) in value of the investment
securities owned at December 31, 1997, as computed on a federal income tax
basis, are as follows:
Aggregate cost...................... $5,250,592
==========
Gross unrealized appreciation....... $ 11,581
Gross unrealized depreciation....... (2,624,828)
----------
Net unrealized depreciation......... $(2,613,247)
==========
(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 on December 31, 1997.
(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 $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. 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, 1997
the commitment fee allocated to the Portfolio was $40. Since the line of credit
was established, there have been no borrowings.
18
<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, 1997 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, 1997 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, 1997 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 2, 1998
19
