-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RBlQE87wHYJtLhnpsQC9Z9Zv02JUuppW6u6IkuY35GyBi9Z+b6oo4QgIjwwYUKYV j1+gASz3NIzmPyrRmmKugw== 0000950156-96-000288.txt : 19960308 0000950156-96-000288.hdr.sgml : 19960308 ACCESSION NUMBER: 0000950156-96-000288 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960307 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: LANDMARK FIXED INCOME FUNDS /MA/ CENTRAL INDEX KEY: 0000795808 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MA FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: N-30B-2 SEC ACT: 1940 Act SEC FILE NUMBER: 811-05033 FILM NUMBER: 96532118 BUSINESS ADDRESS: STREET 1: 6ST JAMES AVE 9TH FL CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6174231679 FORMER COMPANY: FORMER CONFORMED NAME: LANDMARK FIXED INCOME FUNDS/ DATE OF NAME CHANGE: 19931117 FORMER COMPANY: FORMER CONFORMED NAME: LANDMARK FIXED INCOME FUNCS/DE DATE OF NAME CHANGE: 19931115 FORMER COMPANY: FORMER CONFORMED NAME: LANDMARK U S GOVERNMENT INCOME FUND DATE OF NAME CHANGE: 19920703 N-30B-2 1 LANDMARK FIXED INCOME FUND TRUSTEES AND OFFICERS Philip W. Coolidge*, President H. B. Alvord Riley C. Gilley Diana R. Harrington Susan B. Kerley C. Oscar Morong, Jr. Donald B. Otis E. Kirby Warren William S. Woods, Jr. SECRETARY Thomas M. Lenz* TREASURER John R. Elder* *Affiliated Person of Administrator and Distributor - -------------------------------------------------------------------------------- INVESTMENT ADVISER Citibank, N.A. 153 East 53rd Street, New York, NY 10043 ADMINISTRATOR AND DISTRIBUTOR The Landmark Funds Broker-Dealer Services, Inc. 6 St. James Avenue, Boston, MA 02116 (617) 423-1679 TRANSFER AGENT AND CUSTODIAN State Street Bank and Trust Company 225 Franklin Street, Boston, MA 02110 AUDITORS Deloitte & Touche LLP 125 Summer Street, Boston, MA 02110 LEGAL COUNSEL Bingham, Dana & Gould 150 Federal Street, Boston, MA 02110 - -------------------------------------------------------------------------------- SHAREHOLDER SERVICING AGENTS (See Inside Cover) This report is prepared for the information of shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by an effective prospectus. FI/INTI/A/95 Printed on Recycled Paper LANDMARK(SM) FUNDS ADVISED BY CITIBANK, N.A. LANDMARK INTERMEDIATE INCOME FUND ANNUAL REPORT December 31, 1995 - ------------------------------------------------------------------------------- A Letter To Our Shareholders - ------------------------------------------------------------------------------- Dear Shareholder: 1995 was an excellent year for the U.S. bond markets. Contrary to many investors' expectations at the end of 1994, this year was characterized by modest economic growth, low inflation and declining interest rates. This combination of economic influences was a recipe for above-average gains in the financial markets, and investors who exercised patience and discipline during 1994's difficult market conditions reaped the rewards provided by stronger markets in 1995. The Landmark Funds' investment adviser, Citibank, N.A., manages the Landmark Intermediate Income Fund to generate a high level of current income and preserve the value of it shareholders' investment. The Fund seeks to provide an attractive yield from a high-quality investment portfolio consisting primarily of intermediate-term securities from a number of fixed-income market sectors. This Annual Report reviews the Fund's investment activities and performance and provides a summary of Citibank's perspective on and outlook for the U.S. financial markets. On behalf of the Board of Trustees of the Landmark Funds, I want to thank you for your confidence and participation. We look forward to serving you in the months and years ahead. /s/ Philip W. Coolidge - --------------------------------------- Philip W. Coolidge President January 20, 1996 Remember that Mutual Fund Shares: o Are not bank deposits or FDIC insured o Are not obligations of or guaranteed by Citibank or Citicorp Investment Services o Are subject to investment risks, including possible loss of the principal amount invested. TABLE OF CONTENTS 1 Letter to Shareholders - ------------------------------------------------------------------------------- 2 Market Environment Fund Snapshot - ------------------------------------------------------------------------------- 3 Portfolio Manager The Portfolio Manager Responds Fund Quotes - ------------------------------------------------------------------------------- 4 Strategy and Outlook Landmark Intermediate Income Fund--by the Numbers - ------------------------------------------------------------------------------- 5 Fund Data Performance Highlights - ------------------------------------------------------------------------------- 6 Portfolio of Investments - ------------------------------------------------------------------------------- 8 Statement of Assets and Liabilities - ------------------------------------------------------------------------------- 9 Statement of Operations - ------------------------------------------------------------------------------- 10 Statement of Changes in Net Assets - ------------------------------------------------------------------------------- 11 Financial Highlights - ------------------------------------------------------------------------------- 12 Notes to Financial Statements - ------------------------------------------------------------------------------- 14 Independent Auditors' Report - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- MARKET ENVIRONMENT - ------------------------------------------------------------------------------- As 1995 began, most investors in the U.S. bond market were quite cautious in an environment of rising interest rates and declining security prices. Investors were especially concerned about the possibility of higher inflation, which erodes the principal value of fixed-income securities. In an effort to rein in a strong economy and prevent an acceleration of inflation, the Federal Reserve increased key short-term interest rates six times in 1994 and once again in February, 1995. By Spring it was apparent that the Federal Reserve's tight monetary policy was causing the economy to slow down. As the rate of economic growth moderated, investors' fears of inflation diminished. Accordingly, bond yields declined as investors became convinced that the Federal Reserve would begin to lower interest rates in order to avoid the possibility of a recession. Lower interest rates drove bond prices higher, producing a strong rally in virtually every sector of the fixed-income market. - ------------------------------------------------------------------------------- FUND SNAPSHOT - ------------------------------------------------------------------------------- COMMENCEMENT OF OPERATIONS June 25, 1993 NET ASSETS AS OF 12/31/95 $49.6 million FUND OBJECTIVE To generate a high level of current income and preserve the value of its shareholders' investments DIVIDENDS Paid monthly CAPITAL GAINS Distributed annually, if any BENCHMARKS o Lehman Government/Corporate Bond Index o Lipper Intermediate Investment Grade Funds Average INVESTMENT ADVISER Citibank, N.A. - ------------------------------------------------------------------------------- PORTFOLIO MANAGER - ------------------------------------------------------------------------------- MARK LINDBLOOM Vice President, Citibank, N.A. Mr. Lindbloom has been responsible for managing the Landmark Intermediate Income Fund since its inception in June 1993. He also manages the fixed income portion of the Balanced Portfolio and intermediate maturity fixed income portfolios for investment advisory and institutional accounts at Citibank. Prior to joining Citibank in 1986, Mr. Lindbloom was employed by Brown Brothers Harriman & Company, where he managed discretionary corporate portfolios, holding fixed income assets. - ------------------------------------------------------------------------------- THE PORTFOLIO MANAGER RESPONDS - ------------------------------------------------------------------------------- The Fund was managed primarily through changes in average duration, a measure of the portfolio's sensitivity to interest rate changes, and through sector rotation, changes in the amount of assets invested in different areas of the bond market. As the year began, we maintained a longer-than-average duration in order to realize greater appreciation of portfolio holdings and to capture higher yields for a longer period as interest rates fell. At some points during the first half of 1995, the portfolio's average duration was as much as 120% of its "neutral" position. When it appeared at mid-year that most interest rate declines were behind us, we reduced the portfolio's duration back to the neutral range. While we may have sacrificed some yield by doing so, we reduced the risk that adverse conditions would erode the value of the portfolio. During the year, the majority of the Fund's assets were invested in U.S. Treasury securities to avoid the risks associated with mortgage-backed securities when interest rates decline. In a low interest rate environment, mortgage holders often prepay their loans in order to refinance at more favorable terms. The resulting return of principal to owners of mortgage securities must then be reinvested at the lower, prevailing interest rate. As the year progressed, we gradually increased our exposure to mortgage securities to capture the higher yields they provide. - ------------------------------------------------------------------------------- FUND QUOTES FROM THE PORTFOLIO MANAGER - ------------------------------------------------------------------------------- "1995's bond market was fantastic, more similar to the market we saw in `93 than the one we saw in `94." "During the latter part of the year, we've been adding incrementally to mortgage positions, which tend to perform well as interest rates stabilize or rise." "We expect economic conditions to remain positive for bonds over the longer term as inflation remains low and economic growth remains moderate." - ------------------------------------------------------------------------------- STRATEGY AND OUTLOOK - ------------------------------------------------------------------------------- While we do not expect the bond market in 1996 to match its 1995 performance, our long term outlook is optimistic. We believe that inflation will remain relatively low, economic growth will be moderate for most of the coming year and Federal Reserve policy will remain accommodative. We believe that these factors should help create a positive environment for fixed-income securities. Our strategy looking forward remains unchanged. We will continue to actively manage the portfolio through changes in average duration and sector rotation in order to generate competitive levels of income and preserve capital for our shareholders. - ------------------------------------------------------------------------------- LANDMARK INTERMEDIATE INCOME FUND - ------------------------------------------------------------------------------- By The Numbers - ------------------------------------------------------------------------------- CHANGES IN PORTFOLIO COMPOSITION Portfolio of Investments as of 12/31/95 Cash/Short Asset-Backed Mortgage Corporate U.S. Treasury Term/Other Securities Obligations Bonds Issues 6% 4% 38% 5% 47% Compared to 12/31/94 Cash/Short Asset-Backed Mortgage Corporate U.S. Treasury Term/Other Securities Obligations Bonds Yankees Yankees (9)% 19% 29% 9% 4% 48% - ------------------------------------------------------------------------------- FUND DATA All Periods Ending December 31, 1995 - -------------------------------------------------------------------------------
Total Returns ------------------ Since One 6/25/93 Year (Inception)* ----- ------- Landmark Intermediate Income Fund without Sales Charge............................ 16.45% 5.55% Lipper Intermediate Investment Grade Funds Average................................ 16.62% 5.93%+ Lehman Government/Corporate Bond Index............................................ 19.24% 6.31%+ Landmark Intermediate Income Fund with Maximum Sales Charge of 4.00%.................................................................. 11.80% 3.84% * Average Annual Total Return + From 6/30/93 30-Day SECYield 5.17% Income Dividends Per Share $0.570
- ------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS - ------------------------------------------------------------------------------- A $10,000 investment in the Fund made on inception date would have grown to $10,998 with sales charge (as of 12/31/95). The graph shows how this compares to our benchmarks over the same period. The graph includes the initial sales charge on the Fund (no comparable charge exists for the other indices) and assumes all dividends and distributions from the Fund are reinvested at Net Asset Value. INTERMEDIATE INCOME Landmark Intermediate Landmark Lipper Income Intermediate Intermediate Fund - Income Investment Lehman Without Fund - With Grade Aggregate Sales Sales Funds Bond Index Charge Charge Average (Unmanaged) $10,000 $9,600 $10,000 $10,000 Jun-93 $10,030 $9,629 $10,000 $10,000 Jul-93 $10,073 $9,670 $10,042 $10,057 Aug-93 $10,325 $9,912 $10,228 $10,233 Sep-93 $10,406 $9,989 $10,268 $10,261 Oct-93 $10,416 $9,999 $10,301 $10,299 Nov-93 $10,246 $9,836 $10,209 $10,211 Dec-93 $10,299 $9,887 $10,257 $10,266 Jan-94 $10,445 $10,027 $10,387 $10,405 Feb-94 $10,215 $9,806 $10,202 $10,224 Mar-94 $9,968 $9,569 $9,980 $9,971 Apr-94 $9,868 $9,473 $9,890 $9,891 May-94 $9,841 $9,447 $9,875 $9,890 Jun-94 $9,810 $9,417 $9,856 $9,869 Jul-94 $9,976 $9,577 $10,004 $10,065 Aug-94 $10,003 $9,603 $10,024 $10,077 Sep-94 $9,836 $9,442 $9,911 $9,929 Oct-94 $9,798 $9,406 $9,896 $9,920 Nov-94 $9,760 $9,370 $9,867 $9,898 Dec-94 $9,838 $9,445 $9,915 $9,967 Jan-95 $10,021 $9,620 $10,072 $10,164 Feb-95 $10,249 $9,839 $10,282 $10,406 Mar-95 $10,322 $9,909 $10,346 $10,469 Apr-95 $10,439 $10,021 $10,479 $10,616 May-95 $10,930 $10,492 $10,849 $11,027 Jun-95 $10,992 $10,552 $10,917 $11,107 Jul-95 $10,941 $10,503 $10,888 $11,083 Aug-95 $11,039 $10,597 $11,010 $11,217 Sep-95 $11,159 $10,713 $11,107 $11,326 Oct-95 $11,199 $10,751 $11,244 $11,473 Nov-95 $11,310 $10,857 $11,402 $11,645 Dec-95 $11,456 $10,998 $11,547 $11,808 Notes: All Fund performance numbers represent past performance, and are no guarantee of future results. The Fund's share price and investment return will fluctuate, so that the value of an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns include change in share price and reinvestment of dividends and distributions, if any. Total return figures "with sales charge" are provided in accordance with SEC guidelines for comparative purposes for prospective investors. - ------------------------------------------------------------------------------- Landmark Intermediate Income Fund - ------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS December 31, 1995 - ------------------------------------------------------------------------------- PRINCIPAL AMOUNT ISSUER (000's OMITTED) VALUE - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- FIXED-INCOME - 94.2% - ------------------------------------------------------------------------------- ASSET BACKED SECURITIES--4.3% First USA Credit Card 6.078% due 10/15/01 .................... $ 2,000 $1,998,740 GMAC 1992 E Grantor Trust 4.75% due 8/15/97 ...................... 116 115,293 ---------- 2,114,033 ---------- MORTGAGE OBLIGATIONS--38.5% COLLATERALIZED MORTGAGE OBLIGATIONS--14.0% Asset Securitization Corp. Series 95 7.384% due 8/13/29 ..................... 1,000 1,042,500 Federal Home Mortgage Corp. 6.00% due 12/15/08 ..................... 1,700 1,599,063 Lehman Brothers Mortgage Trust 7.144% due 8/25/04 ..................... 1,995 2,075,273 Nomura Asset Securities Corp. 8.15% due 4/4/27........................ 2,000 2,215,625 ---------- 6,932,461 ---------- MORTGAGE BACKED SECURITIES--15.6% Federal Home Loan Mortgage Association 8.50% due 4/01/01....................... 45 46,266 Federal National Mortgage Association 6.00% due 9/01/00....................... 1,723 1,725,506 8.00% due 6/01/02....................... 23 23,953 6.50% due 8/01/25....................... 1,225 1,210,685 6.50% due 9/01/25....................... 722 713,223 Federal Home Mortgage Corp (TBA) 6.50% due 11/01/08...................... 4,000 4,021,240 ---------- 7,740,873 ---------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--8.9% 8.25% due 7/15/05...................... $ 676 $ 702,688 8.00% due 12/15/07..................... 120 127,131 8.00% due 1/15/25...................... 2 1,736 6.50% due 10/20/25 (TBA)............... 1,563 1,591,877 6.00% due 1/15/99 (TBA)................ 2,000 2,018,125 ---------- 4,441,557 ---------- TOTAL MORTGAGE OBLIGATIONS 19,114,891 ----------- DOMESTIC CORPORATE BONDS--4.8% K-mart Corp. 12.50% due 1/3/05...................... 400 349,540 US West Capital Funding Inc. 6.31% due 1/11/05...................... 2,000 2,043,140 ---------- 2,392,680 ---------- UNITED STATES GOVERNMENT OBLIGATIONS--46.6% UNITED STATES TREASURY BONDS--7.4% 7.625% due 2/15/25..................... 3,000 3,668,430 ---------- UNITED STATES TREASURY NOTES--39.2% 4.00% due 1/31/96......................... 125 124,882 6.125% due 7/31/00........................ 6,500 6,690,905 6.25% due 8/31/00......................... 5,000 5,172,650 6.50% due 5/15/05......................... 5,000 5,319,550 6.50% due 8/15/05......................... 2,000 2,130,620 ---------- 19,438,607 ---------- TOTAL UNITED STATES GOVERNMENT OBLIGATIONS 23,107,037 ---------- TOTAL FIXED INCOME (Identified Cost $45,714,010) $46,728,641 ----------- - ------------------------------------------------------------------------------- SHORT TERM OBLIGATIONS--17.1% - ------------------------------------------------------------------------------- Dresdner Bank Repurchase Agreement 5.93% due 1/2/96, proceeds at maturity $1,635,077 (secured by $1,020,000 U.S. Treasury Bond 11.25% due 2/15/15) $ 1,634,000 United States Treasury Bill 5.025% due 6/13/96 ....................... $7,000 6,839,758 ----------- TOTAL SHORT-TERM OBLIGATIONS AT AMORTIZED COST 8,473,758 ----------- TOTAL INVESTMENTS (Identified Cost $54,187,768)............. 111.3% $55,202,399 OTHER ASSETS - LESS LIABILITIES ............. (11.3%) (5,584,577) ------ ------------ NET ASSETS ..................... 100.0% $49,617,822 ===== =========== TBA's are mortgage-backed securities traded under delayed delivery commitments, settling after December 31, 1995. Although the unit price for the trade has been established, the principal value has not been finalized. However, the amount of the commitment will not fluctuate more than 2% from the principal amount. Income on TBA's is not earned until settlement date. See notes to financial statements. - ------------------------------------------------------------------------------- Landmark Intermediate Income Fund - ------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES December 31, 1995 - -------------------------------------------------------------------------------
ASSETS: Investments, at value (Note 1A)(Identified Cost, $54,187,768).............. $55,202,399 Cash....................................................................... 262 Interest receivable and other assets....................................... 570,634 ----------- Total assets........................................................... 55,773,295 ----------- LIABILITIES: Payable for securities purchased........................................... 6,015,000 Payable for shares of beneficial interest repurchased...................... 68,153 Payable to affiliates: Investment advisory fee (Note 2)......................................... $ 3,270 Shareholder Servicing Agents' fee (Note 3B).............................. 10,495 13,765 Accrued expenses and other liabilities..................................... ------- 58,555 ----------- Total liabilities...................................................... 6,155,473 ----------- NET ASSETS for 5,079,977 shares of beneficial interest outstanding......... $49,617,822 =========== NET ASSETS CONSIST OF: Paid-in capital............................................................ $51,013,521 Accumulated net realized loss on investments............................... (2,429,023) Unrealized appreciation of investments..................................... 1,014,631 Undistributed net investment income........................................ 18,693 ----------- Total.................................................................. $49,617,822 =========== NET ASSET VALUE AND REDEMPTION PRICE PER SHARE OF BENEFICIAL INTEREST...... $ 9.77 ====== COMPUTATION OF OFFERING PRICE: Maximum Offering Price per share based on a 4.00% sales charge ($9.77 / 0.96) $10.18 ====== See notes to financial statements
- ------------------------------------------------------------------------------- Landmark Intermediate Income Fund - ------------------------------------------------------------------------------- STATEMENT OF OPERATIONS For the Year Ended December 31, 1995 - -------------------------------------------------------------------------------
INVESTMENT INCOME (Note 1B)................................................ $3,360,077 EXPENSES: Shareholder servicing agents' fees (Note 3B)............................... $195,673 Investment advisory fees (Note 2).......................................... 171,213 Administrative fees (Note 3A).............................................. 97,836 Shareholder reports........................................................ 43,156 Custodian fees............................................................. 65,340 Auditing services.......................................................... 32,800 Legal services............................................................. 22,795 Distribution fees (Note 4)................................................. 24,459 Trustees fees.............................................................. 18,434 Transfer agent fees........................................................ 12,000 Miscellaneous.............................................................. 10,422 ------- Total expenses.................................................... 694,128 Less aggregate amount waived by Investment Adviser, Administrator, Shareholder Servicing Agents and Distributor (Notes 2, 3A, 3B, and 4)..... (251,648) Less fees paid indirectly (Note 1G)........................................ (2,225) ------- Net expenses....................................................... 440,255 ---------- Net investment income.............................................. 2,919,822 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from investment transactions............................. 2,369,867 Unrealized appreciation (depreciation) of investments: Beginning of period.................................................. (1,108,185) End of period........................................................ 1,014,631 ---------- Net change in unrealized appreciation (depreciation) of investments........ 2,122,816 ---------- Net realized and unrealized gain (loss) on investments..................... 4,492,683 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $7,412,505 ==========
See notes to financial statements - ------------------------------------------------------------------------------- Landmark Intermediate Income Fund - ------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------
Year Ended December 31, --------------------------- 1995 1994 -------- --------- INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS: Net investment income..................................................... $ 2,919,822 $ 2,940,876 Net realized gain (loss) from investment transactions..................... 2,369,867 (4,798,890) Net change in unrealized appreciation (depreciation) of investments....... 2,122,816 (730,406) ----------- ----------- Net increase (decrease) in net assets resulting from operations... 7,412,505 (2,588,420) ----------- ----------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS FROM: Net investment income..................................................... (2,928,567) (2,912,776) Net realized gain on investments.......................................... -- (90,585) ----------- ----------- Decrease in net assets from distributions declared to shareholders (2,928,567) (3,003,361) ----------- ----------- TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 6): Net proceeds from sale of shares.......................................... 902,835 1,241,851 Net asset value of shares issued to shareholders from reinvestment of distributions......................... 2,894,283 2,973,424 Cost of shares repurchased................................................ (6,244,911) (12,224,541) ---------- ----------- Net decrease in net assets from transactions in shares of beneficial interest (2,447,793) (8,009,266) ---------- ----------- NET INCREASE (DECREASE) IN NET ASSETS .................................... 2,036,145 (13,601,047) NET ASSETS: Beginning of period....................................................... 47,581,677 61,182,724 ---------- ---------- End of period (including undistributed net investment income of $18,693 and $28,100, respectively)...................................... $49,617,822 $47,581,677 =========== =========== See notes to financial statements
Landmark Intermediate Income Fund - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
For the Period Year Ended June 25, 1993 December 31, (Commencement of --------------------------- Operations) to 1995 1994 December 31, 1993 ------ ------- ------------------- Net Asset Value, beginning of period........... $ 8.91 $ 9.88 $10.00 ------ ------ ------ Income From Operations: Net investment income.......................... 0.57 0.521 0.261 Net realized and unrealized gain (loss) on investments 0.86 (0.959) 0.037 ------ ------ ------ Total from operations.................. 1.43 (0.438) 0.298 ------ ------ ------ Less Distributions From: Net investment income...................... (0.57) (0.516) (0.261) In excess of net investment income......... -- -- (0.006) Net realized gain on investments........... -- (0.016) (0.151) ----- ----- ----- Total distributions........................ (0.57) (0.532) (0.418) ----- ----- ----- Net Asset Value, end of period............. $ 9.77 $ 8.910 $ 9.880 ====== ======= ======= RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's omitted)...... $49,618 $47,582 $61,183 Ratio of expenses to average net assets........ 0.90% 0.90% 0.90%* Ratio of net investment income to average net assets 5.97% 5.52% 4.95%* Portfolio turnover............................. 396% 291% 103% Total return................................... 16.45% (4.48)% 2.99%+ Note: If Agents of the Fund had not voluntarily agreed to waive a portion of their fees for the periods indicated and the expenses were not reduced for fees paid indirectly for the fiscal year ended December 31, 1995, the net investment income per share and the ratios would have been as follows: Net investment income per share................ $0.52 $0.475 $ 0.236 Ratios: Expenses to average net assets................. 1.42% 1.39% 1.38%* Net investment income to average net assets.... 5.45% 5.03% 4.47%* *Annualized +Not annualized
See notes to financial statements - ------------------------------------------------------------------------------- Landmark Intermediate Income Fund - ------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES Landmark Intermediate Income Fund (the "Fund") is a separate diversified series of Landmark Fixed Income Funds (the "Trust") which is organized as a Massachusetts business trust and is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Investment Adviser of the Fund is Citibank, N.A. ("Citibank"). The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS") acts as the Fund's Administrator and Distributor. Citibank also serves as Sub-Administrator and makes Fund shares available to customers as Shareholder Servicing Agent. The significant accounting policies consistently followed by the Fund are in conformity with generally accepted accounting principles and are as follows: A. INVESTMENT SECURITY VALUATIONS -- Debt securities (other than short-term obligations maturing in 60 days or less) are valued on the basis of valuations furnished by a pricing service, which takes 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 upon quoted prices or exchange or over-the-counter prices, since such valuations are believed to reflect more accurately the fair value of the securities. Short-term obligations (maturing in 60 days or less) are valued at amortized cost, which approximates market value. 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 is determined on the basis of interest accrued and discount earned, adjusted for amortization of premium or discount on long-term debt securities when required for Federal income tax purposes. Gain and loss from principal paydowns are recorded as ordinary income. C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders all of its taxable income, including any net realized gain on investment transactions. Accordingly, no provision for federal income or excise tax is necessary. At December 31, 1995, the Fund, for federal income tax purposes, had a capital loss carryover of $2,182,200, which will expire December 31, 2002. Such capital loss carryover will reduce the Fund's taxable income arising from future net realized gain on investment transactions, if any, to the extent permitted by the Internal Revenue Code, and thus will reduce the amount of the distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income or excise tax. D. EXPENSES -- The Fund bears all costs of its operations other than expenses specifically assumed by Citibank and LFBDS. Expenses incurred by the Trust with respect to any two or more funds or series are allocated in proportion to the average net assets of each fund, except when allocations of direct expenses to each fund can otherwise be made fairly. Expenses directly attributable to a fund are charged to that fund. E. DISTRIBUTIONS -- The Fund distinguishes between distributions on a tax basis and a financial reporting basis and requires that only distributions in excess of tax basis earnings and profits be reported in the financial statements as a return of capital. Differences in the recognition or classification of income between the financial statements and tax earnings and profits which result in temporary over-distributions for financial statement purposes, are classified as distributions in excess of net investment income or accumulated net realized gains. 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. Distributions to shareholders and shares issuable to shareholders electing to receive distributions in shares are recorded on the ex-dividend date. G. FEES PAID INDIRECTLY -- The Fund's custodian bank calculates its fees based on the Fund's average daily net assets. The fee is reduced according to a fee arrangement, which provides for custody fees to be reduced based on a formula developed to measure the value of cash deposited with the custodian by the Fund. This amount is shown as a reduction of expense on the Statement of Operations. (2) INVESTMENT ADVISORY FEES The investment advisory fee paid to Citibank, as compensation for overall investment management services, amounted to $171,213, of which $115,475 was voluntarily waived for the year ended December 31, 1995. The investment advisory fee is computed at the annual rate of 0.35% of average daily net assets. (3) ADMINISTRATIVE SERVICES PLAN The Trust has adopted an Administrative Services Plan (the "Administrative Services Plan") which provides that the Trust on behalf of the Fund may obtain the services of an Administrator, one or more Shareholder Servicing Agents and other Servicing Agents, and may enter into agreements providing for the payment of fees for such services. Under the Administrative Services Plan, the aggregate of the fee paid to the Administrator from the Fund, the fees paid to the Shareholder Servicing Agents from the Fund under such Plan and the Basic Distribution Fee paid from the Fund to the Distributor under the Distribution Plan may not exceed 0.65% of the Fund's average daily net assets on an annualized basis for the Fund's then current fiscal year. A. ADMINISTRATIVE FEES -- Under the terms of an Administrative Services Agreement, the administrative services fee payable to the Administrator, as compensation for overall administrative services and general office facilities, is computed at an annual rate of 0.25% of the Fund's average daily net assets, provided that the aggregate of any such fees paid to the Administrator and the basic distribution fees paid to the Distributor may not exceed an amount equal to 0.25% of the Fund's average daily net assets. The Administrator received fees, computed at an annual rate of 0.20% of the Fund's average daily net assets which amounted to $97,836, of which $38,337 was voluntarily waived for the year ended December 31, 1995. Citibank acts as Sub-Administrator and performs such duties and receives such compensation from LFBDS as from time to time is agreed to by LFBDS and Citibank. The Fund 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 Fund from the Administrator or its affiliates. Certain of the officers and a Trustee of the Fund are officers or directors of the Administrator or its affiliates. B. SHAREHOLDER SERVICING AGENTS FEES -- The Fund has entered into shareholder servicing agreements with each Shareholder Servicing Agent pursuant to which the Shareholder Servicing Agent acts as an agent for its customers and provides other related services. For their services, each Shareholder Servicing Agent receives fees from the Fund, which may be paid periodically, but may not exceed, on an annualized basis, an amount equal to 0.40% of the average daily net assets of the Fund represented by shares owned during the period by investors for whom such Shareholder Servicing Agent maintains a servicing relationship. Shareholder Servicing Agents' fees amounted to $195,673, of which $73,377 was voluntarily waived for the year ended December 31, 1995. (4) DISTRIBUTION FEES The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, under which the Fund reimburses the Distributor for expenses incurred or anticipated in connection with sales of shares of the Fund, at an annual rate not to exceed 0.15% of the Fund's average daily net assets for distribution of the Fund's shares. The Distributor may also receive an additional fee from the Fund not to exceed 0.05% of the Fund's average daily net assets in anticipation of, or as reimbursement for, advertising expenses incurred by the Distributor in connection with the sale of shares of the Fund. No payment of such additional fees has been made during the period. Under the Administrative Services Plan, the distribution fees were computed at an annual rate of 0.05% of the Fund's average daily net assets, and amounted to $24,459, all of which was voluntarily waived for the year ended December 31, 1995. (5) PURCHASES AND SALES OF INVESTMENTS Purchases and sales of securities, other than short-term obligations, aggregated $191,463,517 and $200,113,412, respectfully, for the year ended December 31, 1995. (6) SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). Transactions in shares of beneficial interest were as follows: Year Ended December 31, --------------------- 1995 1994 ------ -------- Shares sold 94,442 129,167 Shares issued to shareholders from reinvestment of distributions 306,199 322,052 Shares repurchased (662,943) (1,304,223) ------- --------- Net decrease (262,302) (853,004) ======= ======== (7) 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 $54,218,706 =========== Gross unrealized appreciation $ 1,180,221 Gross unrealized depreciation (165,590) ----------- Net unrealized appreciation $ 1,014,631 =========== (8) LINE OF CREDIT The Fund, along with other Landmark Funds entered into an ongoing agreement with a bank which allows the Funds collectively to borrow up to $40 million for temporary or emergency purposes. Interest on borrowings, if any, is charged to the specific fund executing the borrowing at the base rate of the bank. In addition, the $15 million committed portion of the line of credit requires a quarterly payment of a commitment fee based on the average daily unused portion of the line of credit. For the year ended December 31, 1995, the commitment fee allocated to the Fund was $263. Since the line of credit was established there have been no borrowings. - -------------------------------------------------------------------------------- Landmark Intermediate Income Fund - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- TO THE TRUSTEES AND SHAREHOLDERS OF LANDMARK INTERMEDIATE INCOME FUND: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Landmark Intermediate Income Fund (the "Fund"), a separate series of Landmark Fixed Income Funds (the "Trust") (a Massachusetts business trust), as of December 31, 1995, and the related statement of operations for the year then ended, and the statement of changes in net assets for the years ended December 31, 1995 and 1994 and the financial highlights for the two years ended December 31, 1995 and 1994 and for the period from June 25, 1993 (Commencement of Operations) to December 31, 1993. These financial statements and financial highlights are the responsibility of the Trust's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of the securities owned as of December 31, 1995, by correspondence with the Custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. 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 provide a reasonable basis for our opinion. In our opinion, such financial statements and financial highlights present fairly, in all material respects, the financial position of Landmark Intermediate Income Fund at December 31, 1995, the results of its operations, the changes in its net assets, and its financial highlights for the respective stated periods in conformity with generally accepted accounting principles. DELOITTE & TOUCHE LLP Boston, Massachusetts February 1, 1996 - ------------------------------------------------------------------------------- SHAREHOLDER SERVICING AGENTS - ------------------------------------------------------------------------------- FOR CITIBANK NEW YORK RETAIL BANKING AND BUSINESS AND PROFESSIONAL CUSTOMERS: Citibank, N.A. 450 West 33rd Street, New York, NY 10001 (212) 564-3456 or (800) 846-5300 FOR CITIGOLD CUSTOMERS: Citibank, N.A. Citigold P.O. Box 5130, New York, NY 10150-5130 Call Your Citigold Executive or, in NY or CT, (800) 285-1701 For all other states, (800) 285-1707 FOR PRIVATE BANKING CLIENTS: Citibank, N.A. The Citibank Private Bank 153 East 53rd Street, New York, NY 10043 Call Your Citibank Private Banking Account Officer, Registered Representative or (212) 559-5959 FOR CITIBANK GLOBAL ASSET MANAGEMENT CLIENTS: Citibank, N.A. Citibank Global Asset Management 153 East 53rd Street, New York, NY 10043 (212) 559-7117 FOR NORTH AMERICAN INVESTOR SERVICES CLIENTS: Citibank, N.A. 111 Wall Street, New York, NY 10043 Call Your Account Manager or (212) 657-9100 FOR CITICORP INVESTMENT SERVICES CUSTOMERS: Citicorp Investment Services One Court Square, Long Island City, NY 11120 Call Your Investment Consultant or (800) 846-5200 (212) 736-8170 in New York City LANDMARK FUNDS MONEY MARKET FUNDS: Cash Reserves Premium Liquid Reserves Institutional Liquid Reseves U.S. Treasury Reserves Premium U.s. Treasury Reserves Institutional U.S. Treasury Reserves Tax Free Reserves California Tax Free Reserves Connecticut Tax Free Reserves New York Tax Free Reserves STOCK & BOND FUNDS: U.S. Government Income Fund Intermediate Income Funds National Tax Free Income Fund New York Tax Free Income Fund Balanced Fund Equity Fund International Equity Fund Small Cap Equity Fund Emerging Asian Markets Equity Fund TRUSTEES AND OFFICERS Philip W. Coolidge*, President H. B. Alvord Riley C. Gilley Diana R. Harrington Susan B. Kerley C. Oscar Morong, Jr. Donald B. Otis E. Kirby Warren William S. Woods, Jr. SECRETARY Thomas M. Lenz* TREASURER John R. Elder* *Affiliated Person of Administrator and Distributor - -------------------------------------------------------------------------------- INVESTMENT ADVISER (OF GOVERNMENT INCOME PORTFOLIO) Citibank, N.A. 153 East 53rd Street, New York, NY 10043 ADMINISTRATOR AND DISTRIBUTOR The Landmark Funds Broker-Dealer Services, Inc. 6 St. James Avenue, Boston, MA 02116 (617) 423-1679 TRANSFER AGENT State Street Bank and Trust Company 225 Franklin Street, Boston, MA 02110 CUSTODIAN Investors Bank and Trust Company One Lincoln Plaza, Boston, MA 02111 AUDITORS Price Waterhouse LLP 160 Federal Street, Boston, MA 02110 LEGAL COUNSEL Bingham, Dana & Gould 150 Federal Street, Boston, MA 02110 - -------------------------------------------------------------------------------- SHAREHOLDER SERVICING AGENTS (See Inside Cover) This report is prepared for the information of shareholders. It is authorized for distribution to prospective investors only when preceded or accompanied by an effective prospectus. FI/USG/A/95 Printed on Recycled Paper LANDMARK(SM) FUNDS ADVISED BY CITIBANK, N.A. LANDMARK U.S. GOVERNMENT INCOME FUND ANNUAL REPORT December 31, 1995 - -------------------------------------------------------------------------------- A LETTER TO OUR SHAREHOLDERS - -------------------------------------------------------------------------------- Dear Shareholder: 1995 was an excellent year for the U.S. bond market. Contrary to many investors' expectations at the end of 1994, this year was characterized by modest economic growth, low inflation and declining interest rates. This combination of economic influences was a recipe for above-average gains in the financial markets, and investors who exercised patience and discipline during 1994's difficult market conditions reaped the rewards provided by stronger markets in 1995. The Landmark Funds' investment adviser, Citibank, N.A., manages the Landmark U.S. Government Income Fund to generate current income and to preserve the value of its shareholders' investment. Through its investment in Government Income Portfolio, the Fund seeks to provide an attractive yield, a competitive expense ratio and a high-quality investment portfolio consisting solely of securities backed by the full faith and credit of the U.S. government. This Annual Report reviews the Portfolio's investment activities and performance and provides a summary of Citibank's perspective on and outlook for the U.S. financial markets. On behalf of the Board of Trustees of the Landmark Funds, I want to thank you for your confidence and participation. We look forward to serving you in the months and years ahead. Philip W. Coolidge /s/ Philip W. Coolidge President January 20, 1996 Remember that Mutual Fund Shares: o Are not bank deposits or FDIC insured o Are not obligations of or guaranteed by Citibank or Citicorp Investment Services o Are subject to investment risks, including possible loss of the principal amount invested - --------------------------------------------------------------------------- TABLE OF CONTENTS 1 Letter to Shareholders - --------------------------------------------------------------------------- 2 Market Environment Fund Snapshot - --------------------------------------------------------------------------- 3 Portfolio Manager The Portfolio Manager Responds - --------------------------------------------------------------------------- 4 Fund Quotes Strategy and Outlook - --------------------------------------------------------------------------- 5 Fund Data Performance Highlights - --------------------------------------------------------------------------- 6 Statement of Assets and Liabilities - --------------------------------------------------------------------------- 7 Statement of Operations - --------------------------------------------------------------------------- 8 Statement of Changes in Net Assets - --------------------------------------------------------------------------- 9 Financial Highlights - --------------------------------------------------------------------------- 10 Notes to Financial Statements - --------------------------------------------------------------------------- 12 Independent Auditors' Report Fund Quotes LANDMARK U.S. GOVERNMENT INCOME FUND GOVERNMENT INCOME PORTFOLIO - --------------------------------------------------------------------------- 13 Portfolio of Investments - --------------------------------------------------------------------------- 14 Statement of Assets and Liabilities Statement of Operations - --------------------------------------------------------------------------- 15 Statement of Changes in Net Assets Financial Highlights - --------------------------------------------------------------------------- 16 Notes to Financial Statements - --------------------------------------------------------------------------- 18 Independent Auditors' Report - --------------------------------------------------------------------------- - -------------------------------------------------------------------------------- MARKET ENVIRONMENT - -------------------------------------------------------------------------------- As 1995 began, most investors in the U.S. bond market were quite cautious in an environment of rising interest rates and declining security prices. Investors were especially concerned about the possibility of higher inflation, which erodes the principal value of fixed-income securities. In an effort to rein in a strong economy and prevent an acceleration of inflation, the Federal Reserve increased key short-term interest rates six times in 1994 and once again in February, 1995. By Spring it was apparent that the Federal Reserve's tight monetary policy had caused the economy to slow down. As the rate of economic growth moderated, investors' fears of inflation diminished. Accordingly, bond yields declined as investors became convinced that the Federal Reserve would begin to lower interest rates in order to avoid the possibility of a recession. Lower interest rates drove bond prices higher, producing a strong rally in virtually every sector of the fixed-income market. - -------------------------------------------------------------------------------- FUND SNAPSHOT - -------------------------------------------------------------------------------- COMMENCEMENT OF OPERATIONS September 8, 1986 NET ASSETS AS OF 12/31/95 $35.3 million FUND OBJECTIVE To generate current income and preserve the value of its shareholders' investment. DIVIDENDS Paid monthly, if any CAPITAL GAINS Paid annually, if any BENCHMARKS o Lipper Short U.S. Government Funds Average o Lehman 1-5 Year U.S. Treasury Index INVESTMENT ADVISER, GOVERNMENT INCOME PORTFOLIO Citibank, N.A. - -------------------------------------------------------------------------------- PORTFOLIO MANAGER - -------------------------------------------------------------------------------- THOMAS HALLEY Vice President, Citibank, N.A. Mr. Halley has been responsible for managing the Portfolio since its inception after serving as the manager of the Fund since December 1988. He also manages other commingled investment funds at Citibank as well as institutional insurance portfolios. Mr. Halley authors the commentary on economic trends for Citibank Global Asset Management publications. Prior to joining Citibank in 1988, Mr. Halley was a Senior Fixed Income Portfolio Manager with Brown Brothers Harriman & Company. He has more than 20 years of experience in the management of taxable fixed income investments. - -------------------------------------------------------------------------------- THE PORTFOLIO MANAGER RESPONDS - -------------------------------------------------------------------------------- The Fund was managed primarily through changes in average duration, a measure of the portfolio's sensitivity to interest rate changes, and through sector rotation, changes in the amount of assets invested in different areas of the bond market. As the year began, we maintained a longer-than-average duration in order to maintain higher yields for a longer period as interest rates fell. When it became apparent at mid-year that most interest-rate declines were behind us, we reduced the Portfolio's duration to the neutral range. While we may have sacrificed some yield by doing so, we reduced the risk that adverse conditions would erode the value of the Portfolio. When the year began, the majority of the Portfolio's assets were invested in U.S. Treasury securities to avoid the risks associated with mortgage-backed securities when interest rates decline. In a low interest rate environment, mortgage holders often prepay their loans in order to refinance at more favorable terms. The resulting return of principal to owners of mortgage securities must then be reinvested at the lower, prevailing interest rate. As the year progressed, however, and we became convinced that most interest-rate declines were already incorporated into the market, we gradually increased our exposure to mortgage securities backed by the Government National Mortgage Association (GNMA) in order to capture the higher yields they typically provide. - -------------------------------------------------------------------------------- FUND QUOTES FROM THE PORTFOLIO MANAGER - -------------------------------------------------------------------------------- "To say that the bond market had a heck of a year in 1995 is an understatement." "As the U.S. dollar improved, the market started to see inflows from Japan. Plus, the prospect of a balanced federal budget would allow the Fed to ease monetary policy. These factors culminated in a dramatic decline in interest rates." "In mid-year, we began to increase our exposure to mortgage securities because they offered good value compared to U.S. Treasury securities." - -------------------------------------------------------------------------------- STRATEGY AND OUTLOOK - -------------------------------------------------------------------------------- We do not expect the bond market in 1996 to match its 1995 performance. In fact, our near-term outlook suggests caution until data reveal more about the economy's direction. In addition, as of year-end 1995, unresolved negotiations between Congress and the White House regarding a deficit-reduction package have created some uncertainty in the market. Over the longer term, however, we are optimistic. We believe that inflation will remain relatively low, economic growth will be moderate for most of the coming year and Federal Reserve policy will remain accommodative. In our judgement, these factors should help create a positive environment for fixed-income securities. Our strategy looking forward remains unchanged. We will continue to actively manage the portfolio through changes in average duration and sector rotation in order to generate competitive levels of income and preserve capital for our shareholders. - -------------------------------------------------------------------------------- FUND DATA All Periods ended December 31, 1995 - -------------------------------------------------------------------------------- TOTAL RETURNS ------------------------ SINCE ONE FIVE 9/8/86 YEAR YEARS* INCEPTION* ---- ----- ---------- Landmark U.S. Government Income Fund without Sales Charge.......................... 11.48% 6.90% 6.63% Lipper Short U.S. Government Funds Average...... 11.25% 6.61% 6.70%+ Lehman 1-5 Year U.S. Treasury Index............. 12.71% 7.58% 7.66%+ Landmark U.S. Government Income Fund with Maximum Sales Charge of 1.50%.......... 9.81% 6.58% 6.46% *Average Annual Total Return. +From 8/31/86 30-Day SEC Yield 4.96% Income Dividends Per Share $0.543 - ------------------------------------------------------------------------------- Performance Highlights - ------------------------------------------------------------------------------- A $10,000 investment in the Fund made on inception date would have grown to $17,925 with sales charge (as of 12/31/95). The graph shows how this compares to our benchmarks over the same period. The graph includes the initial sales charge on the Fund (no comparable charge exists for the other indices) and assumes all dividends and distributions from the Fund are reinvested at Net Asset Value. Notes: All Fund performance numbers represent past performance, and are no guarantee of future results. The Fund's share price and investment return will fluctuate, so that the value of an investor's shares, when redeemed, may be worth more or less than their original cost. Total returns include change in share price and reinvestment of dividends and distributions, if any. Total return figures "with sales charge" are provided in accordance with SEC guidelines for comparative purposes for prospective investors. US GOVT. INCOME FUND Landmark U.S. Landmark Government U.S. Income Government Lipper Short Lehman 1-5 Fund - Income Term US Yr. US Without Fund - With Government Treasury Sales Sales Funds Index Charge Charge Average (Unmanaged) $10,000 $9,850 $10,000 $10,000 Sep-86 $9,660 $9,515 $9,975 $9,958 Oct-86 $9,682 $9,537 $10,085 $10,064 Nov-86 $9,847 $9,700 $10,193 $10,135 Dec-86 $9,881 $9,733 $10,225 $10,156 Jan-87 $9,982 $9,832 $10,322 $10,233 Feb-87 $10,053 $9,902 $10,383 $10,283 Mar-87 $9,985 $9,835 $10,373 $10,289 Apr-87 $9,792 $9,646 $10,208 $10,176 May-87 $9,788 $9,641 $10,212 $10,178 Jun-87 $9,909 $9,761 $10,325 $10,293 Jul-87 $9,904 $9,755 $10,353 $10,338 Aug-87 $9,866 $9,718 $10,348 $10,339 Sep-87 $9,655 $9,511 $10,263 $10,266 Oct-87 $9,965 $9,816 $10,492 $10,502 Nov-87 $10,025 $9,874 $10,555 $10,572 Dec-87 $10,151 $9,999 $10,634 $10,653 Jan-88 $10,479 $10,322 $10,860 $10,851 Feb-88 $10,619 $10,459 $10,965 $10,950 Mar-88 $10,523 $10,365 $10,953 $10,946 Apr-88 $10,495 $10,337 $10,956 $10,948 May-88 $10,455 $10,298 $10,938 $10,921 Jun-88 $10,633 $10,473 $11,060 $11,053 Jul-88 $10,592 $10,433 $11,062 $11,044 Aug-88 $10,574 $10,415 $11,079 $11,056 Sep-88 $10,744 $10,583 $11,222 $11,208 Oct-88 $10,869 $10,706 $11,341 $11,337 Nov-88 $10,780 $10,618 $11,294 $11,278 Dec-88 $10,785 $10,624 $11,314 $11,292 Jan-89 $10,922 $10,758 $11,413 $11,386 Feb-89 $10,818 $10,656 $11,407 $11,366 Mar-89 $10,856 $10,693 $11,452 $11,413 Apr-89 $11,044 $10,878 $11,606 $11,624 May-89 $11,305 $11,136 $11,781 $11,806 Jun-89 $11,595 $11,421 $11,995 $12,063 Jul-89 $11,818 $11,641 $12,165 $12,277 Aug-89 $11,596 $11,422 $12,079 $12,155 Sep-89 $11,628 $11,453 $12,138 $12,221 Oct-89 $11,955 $11,776 $12,335 $12,442 Nov-89 $12,061 $11,880 $12,437 $12,556 Dec-89 $12,080 $11,899 $12,486 $12,600 US GOVT. INCOME FUND Landmark U.S. Landmark Government U.S. Income Government Lipper Short Lehman 1-5 Fund - Income Term US Yr. US Without Fund - With Government Treasury Sales Sales Funds Index Charge Charge Average (Unmanaged) Jan-90 $11,867 $11,689 $12,467 $12,570 Feb-90 $11,880 $11,702 $12,524 $12,627 Mar-90 $11,864 $11,686 $12,562 $12,652 Apr-90 $11,671 $11,496 $12,576 $12,653 May-90 $12,059 $11,878 $12,763 $12,880 Jun-90 $12,265 $12,081 $12,893 $13,030 Jul-90 $12,441 $12,254 $13,044 $13,205 Aug-90 $12,260 $12,077 $13,065 $13,219 Sep-90 $12,357 $12,172 $13,162 $13,219 Oct-90 $12,523 $12,336 $13,296 $13,498 Nov-90 $12,807 $12,615 $13,442 $13,654 Dec-90 $13,034 $12,839 $13,593 $13,830 Jan-91 $13,183 $12,985 $13,716 $13,964 Feb-91 $13,258 $13,059 $13,795 $14,048 Mar-91 $13,309 $13,110 $13,870 $14,135 Apr-91 $13,442 $13,240 $13,998 $14,279 May-91 $13,510 $13,307 $14,078 $14,363 Jun-91 $13,454 $13,252 $14,107 $14,398 Jul-91 $13,659 $13,454 $14,244 $14,542 Aug-91 $13,982 $13,772 $14,445 $14,780 Sep-91 $14,324 $14,109 $14,613 $14,981 Oct-91 $14,459 $14,242 $14,762 $15,157 Nov-91 $14,535 $14,317 $14,902 $15,328 Dec-91 $14,833 $14,610 $15,152 $15,624 Jan-92 $14,733 $14,512 $15,063 $15,544 Feb-92 $14,802 $14,580 $15,024 $15,584 Mar-92 $14,777 $14,555 $14,937 $15,547 Apr-92 $14,863 $14,640 $15,059 $15,698 May-92 $15,058 $14,832 $15,217 $15,889 Jun-92 $15,215 $14,987 $15,375 $16,096 Jul-92 $15,410 $15,179 $15,560 $16,347 Aug-92 $15,512 $15,279 $15,687 $16,512 Sep-92 $15,649 $15,414 $15,816 $16,709 Oct-92 $15,502 $15,270 $15,693 $16,541 Nov-92 $15,483 $15,251 $15,668 $16,485 Dec-92 $15,657 $15,422 $15,818 $16,670 Jan-93 $15,866 $15,628 $16,017 $16,933 Feb-93 $16,022 $15,781 $16,170 $17,131 Mar-93 $16,078 $15,837 $16,221 $17,190 Apr-93 $16,177 $15,934 $16,312 $17,320 May-93 $16,125 $15,883 $16,293 $17,261 Jun-93 $16,303 $16,059 $16,444 $17,448 Jul-93 $16,295 $16,051 $16,488 $17,479 Aug-93 $16,534 $16,286 $16,650 $17,689 Sep-93 $16,600 $16,351 $16,697 $17,747 Oct-93 $16,637 $16,387 $16,725 $17,790 Nov-93 $16,555 $16,307 $16,677 $17,751 Dec-93 $16,609 $16,359 $16,737 $17,822 US GOVT. INCOME FUND Landmark U.S. Landmark Government U.S. Income Government Lipper Short Lehman 1-5 Fund - Income Term US Yr. US Without Fund - With Government Treasury Sales Sales Funds Index Charge Charge Average (Unmanaged) Jan-94 $16,709 $16,458 $16,850 $17,970 Feb-94 $16,524 $16,276 $16,711 $17,786 Mar-94 $16,330 $16,085 $16,538 $17,612 Apr-94 $16,208 $15,965 $16,421 $17,510 May-94 $16,240 $15,997 $16,391 $17,529 Jun-94 $16,238 $15,995 $16,390 $17,555 Jul-94 $16,408 $16,162 $16,523 $17,747 Aug-94 $16,441 $16,194 $16,561 $17,802 Sep-94 $16,353 $16,108 $16,503 $17,706 Oct-94 $16,369 $16,123 $16,512 $17,729 Nov-94 $16,280 $16,036 $16,446 $17,640 Dec-94 $16,324 $16,079 $16,483 $17,681 Jan-95 $16,569 $16,320 $16,687 $17,949 Feb-95 $16,797 $16,545 $16,926 $18,253 Mar-95 $16,884 $16,631 $17,014 $18,355 Apr-95 $17,060 $16,804 $17,160 $18,544 May-95 $17,452 $17,190 $17,498 $18,971 Jun-95 $17,540 $17,277 $17,586 $19,084 Jul-95 $17,520 $17,258 $17,607 $19,126 Aug-95 $17,646 $17,381 $17,735 $19,256 Sep-95 $17,735 $17,469 $17,836 $19,364 Oct-95 $17,879 $17,611 $17,995 $19,552 Nov-95 $18,061 $17,790 $18,168 $19,755 Dec-95 $18,198 $17,925 $18,319 $19,927 - ------------------------------------------------------------------------------- Landmark U.S. Government Income Fund - ------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES December 31, 1995 - ------------------------------------------------------------------------------- ASSETS: Investment in Government Income Portfolio, at value (Note 1)..... $35,532,114 Receivable for shares of beneficial interest sold................ 1,946 Receivable from the Administrator................................ 14,062 ----------- Total assets................................................. 35,548,122 ----------- LIABILITIES: Payable for shares of beneficial interest repurchased............ 222,344 Accrued expenses and other liabilities........................... 394 ----------- Total liabilities............................................ 222,738 ----------- NET ASSETS for 3,611,187 shares of beneficial interest outstanding............................................ $35,325,384 =========== NET ASSETS CONSIST OF: Paid-in capital.................................................. $38,254,911 Accumulated net realized loss.................................... (2,914,890) Unrealized depreciation.......................................... (33,446) Undistributed net investment income.............................. 18,809 ----------- Total........................................................ $35,325,384 =========== NET ASSET VALUE AND REDEMPTION PRICE PER SHARE OF BENEFICIAL INTEREST ........................................ $9.78 ===== COMPUTATION OF OFFERING PRICE: Maximum Offering Price per share based on a 1.50% sales charge ($9.78/0.985)...................................... $9.93 ===== See notes to financial statements - ------------------------------------------------------------------------------- Landmark U.S. Government Income Fund - ------------------------------------------------------------------------------- STATEMENT OF OPERATIONS December 31, 1995 For the year Ended December 31, 1995 - ------------------------------------------------------------------------------- INVESTMENT INCOME (Note 1B): Interest Income from Government Income Portfolio........ $2,789,786 Allocated Expenses from Government Income Portfolio..... (165,068) ---------- Net investment income from Government Income Portfolio..................................... $2,624,718 EXPENSES: Shareholder Servicing Agents' fees (Note 2B)............ 180,611 Administrative fees (Note 2A)........................... 72,047 Distribution fees (Note 3).............................. 22,576 Legal fees.............................................. 20,701 Shareholder reports..................................... 18,360 Trustees' fees.......................................... 13,067 Transfer agent fees..................................... 12,000 Auditing fees........................................... 14,050 Custodian fees.......................................... 8,850 Miscellaneous........................................... 10,751 ------- Total expenses...................................... 373,013 Less aggregate amount waived by Administrator, Shareholder Servicing Agents, and Distributor (Notes 2A, 2B and 3)................................... (162,353) Expenses Assumed by the Administrator (Note 6)...... (14,062) -------- Net expenses........................................ 196,598 ---------- Net investment income............................... 2,428,120 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) FROM GOVERNMENT INCOME PORTFOLIO: Net realized gain (loss)................................ 696,470 Net change in unrealized appreciation (depreciation).... 2,013,487 ---------- Net realized and unrealized gain (loss) from Government Income Portfolio ................ 2,709,957 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $5,138,077 ========== See notes to financial statements - -------------------------------------------------------------------------------- Landmark U.S. Government Income Fund - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - --------------------------------------------------------------------------------
Year Ended Year Ended December 31, 1995 December 31, 1994 ----------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS: Net investment income........................................ $ 2,428,120 $ 3,219,042 Net realized gain (loss)..................................... 696,470 (2,780,042) Net change in unrealized appreciation (depreciation)......... 2,013,487 (1,924,684) ----------- ----------- Net increase (decrease) in net assets resulting from operations .......................................... 5,138,077 (1,485,684) ----------- ----------- DISTRIBUTION TO SHAREHOLDERS FROM: Net investment income........................................ (2,440,326) (3,193,045) ----------- ----------- TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 5): Net proceeds from sale of shares............................. 3,008,033 20,093,238 Net asset value of shares issued to shareholders from reinvestment of dividends............................. 2,420,954 3,182,428 Cost of shares repurchased................................... (25,734,586) (44,969,764) ----------- ----------- Net decrease in net assets from transactions in shares of beneficial interest........................................ (20,305,599) (21,694,098) ----------- ----------- NET DECREASE IN NET ASSETS .................................. (17,607,848) (26,372,827) NET ASSETS: Beginning of period.......................................... 52,933,232 79,306,059 ----------- ----------- End of period (including undistributed net investment income of $18,809 and $31,015, respectively)............... $35,325,384 $52,933,232 =========== ===========
See notes to financial statements - ------------------------------------------------------------------------------- Landmark U.S. Government Income Fund - ------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------
FOUR MONTHS YEAR ENDED ENDED DECEMBER 31, DECEMBER 31, YEAR ENDED AUGUST 31, ------------- 1993++ ------------------------- 1995 1994++ (Note 1F) 1993++ 1992++ 1991++ ---- ---- ---------- ---- ---- ---- Net Asset Value, beginning of period......... $ 9.28 $ 9.91 $ 10.01 $ 9.85 $ 9.42 $ 8.93 ------- ------- ------- ------ ------- ------ Income From Operations: Net investment income........................ 0.543 0.466 0.183 0.448 0.591 0.710 Net realized and unrealized gain (loss)...... 0.500 (0.635) (0.138) 0.183 0.413 0.499 ------- ------- ------- ------ ------- ------ Total from operations................... 1.043 (0.169) 0.045 0.631 1.004 1.209 ------- ------- ------- ------ ------- ------ Less Distributions From: Net investment income...................... (0.543) (0.461) (0.145) (0.464) (0.574) (0.719) In excess of net investment income......... -- -- -- (0.007) -- -- ------- ------- ------- ------ ------- ------ Total from distributions............... (0.543) (0.461) (0.145) (0.471) (0.574) (0.719) ------- ------- ------- ------ ------- ------ Net Asset Value, end of period............... $ 9.78 $ 9.28 $ 9.91 $10.01 $ 9.85 $ 9.42 ======= ======= ======= ====== ======= ====== RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's omitted).... $35,325 $52,933 $79,306 $82,114 $56,159 $25,556 Ratio of expenses to average net assets...... 0.80%(A) 0.80%(A) 0.80%+ 0.80% 0.51% 0.97% Ratio of net investment income to average net assets................................. 5.38% 4.72% 4.34%+ 4.46% 6.03% 7.71% Portfolio turnover (B)....................... -- 22% 26% 111% 161% 42% Total return................................. 11.48% (1.72)% 0.45%** 6.59% 10.94% 14.04% Note: If Agents of the Fund for the periods indicated and Agents of Government Income Portfolio for the period May 1, 1994 to December 31, 1994 and for the year ended December 31, 1995 had not voluntarily waived a portion of their fees and assumed Fund expenses, the net investment income per share and the ratios would have been as follows: Net investment income per share.............. $0.499 $0.421 $0.164 $0.400 $ 0.503 $ 0.659 Ratios: Expenses to average net assets............... 1.23%(A) 1.26%(A) 1.27%+ 1.27% 1.41% 1.52% Net investment income to average net assets.......................... 4.95% 4.26% 3.88%+ 3.98% 5.13% 7.16% ** Not annualized + Annualized (A) Includes the Fund's share of Government Income Portfolio allocated expenses for the periods subsquent to May, 1 1994. (B) Portfolio turnover represents the rate of portfolio activity for the period while the Fund was making investments directly in securities. The portfolio turnover rate for the period since the Fund transferred all of its investable assets to the Portfolio is shown in the Portfolio's financial statements which are included elsewhere in this report. ++ On May 1, 1994, the Fund began investing all its investable assets in Government Income Portfolio.
See notes to financial statements - ------------------------------------------------------------------------------- Landmark U.S. Government Income Fund - ------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - ------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES The Landmark U.S. Government Income Fund (the "Fund") is a separate diversified series of Landmark Fixed Income Funds (the "Trust"), a Massachusetts business trust. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end, management investment company. The Fund invests all of its investable assets in Government Income Portfolio (the "Portfolio"), a management investment company for which Citibank, N.A. ("Citibank") serves as Investment Adviser. Landmark Funds Broker-Dealer Services, Inc. ("LFBDS") acts as the Trust's Administrator and Distributor. Citibank also serves as Sub-Administrator and makes Fund shares available to customers as Shareholder Servicing Agent. The Trust seeks to achieve the Fund's investment objective to provide shareholders with monthly dividends, as well as to protect the value of the investment of shareholders by investing all of its investable assets in the Portfolio, an open-end, diversified management investment company having the same investment objective and policies and substantially the same investment restrictions as the Fund. The value of such investment reflects the Fund's proportionate interest (66.9% at December 31, 1995) in the net assets of the Portfolio. The financial statements of the Portfolio, including the portfolio of investments, are contained elsewhere in this report and should be read in conjunction with the Fund's financial statements. 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 disclosure in the financial statements. Actual results could differ from those estimates. The significant accounting policies consistently followed by the Fund are in conformity with generally accepted accounting principles and are as follows: A. Investment Valuation -- Valuation of securities by the Portfolio is discussed in Note 1A of the Portfolio's Notes to Financial Statements, which are included elsewhere in this report. B. Investment Income -- The Fund earns income, net of Portfolio expenses, daily based on its investment in the Portfolio. C. Federal Taxes -- The Fund's policy is to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute to shareholders all of its taxable income, including any net realized gain on investment transactions. Accordingly, no provision for federal income or excise tax is necessary. At December 31, 1995, the Fund, for federal income tax purposes, had a capital loss carryover of $2,906,093, of which $835,037 will expire on December 31, 1996, $1,741,548 will expire on December 31, 2002 and $329,508 will expire on December 31, 2003. Such capital loss carryover will reduce the Fund's taxable income arising from future net realized capital gain on investment transactions, if any, to the extent permitted by the Internal Revenue Code, and thus will reduce the amount of the distributions to shareholders which would otherwise be necessary to relieve the Fund of any liability for federal income or excise tax. D. Expenses -- The Fund bears all costs of its operations other than expenses specifically assumed by Citibank and LFBDS. Expenses incurred by the Trust with respect to any two or more funds or series are allocated in proportion to the average net assets of each fund, except when allocations of direct expenses to each fund can otherwise be made fairly. Expenses directly attributable to a fund are charged to that fund. The Fund's share of the Portfolio's expenses are charged against and reduce the amount of the Fund's investment in the Portfolio. E. Distributions -- Distributions to shareholders are recorded on ex-dividend date. The amount and character of income and net realized gains to be distributed are determined in accordance with income tax rules and regulations, which may differ from generally accepted accounting principles. These differences are attributable to permanent book and tax accounting differences. Reclassifications are made to the Fund's capital accounts to reflect income and net realized gains available for distribution (or available capital loss carryovers) under income tax rules and regulations. For the year ended December31,1995, the fund reclassed $730,266 to accumulated net realized loss on investments from paid-in capital. F. Change in Fiscal Year End -- Effective September 1, 1993, the Fund changed its fiscal year end from August 31 to December 31. G. Other -- All the net investment income and realized and unrealized gain and loss of the Portfolio is allocated pro rata, based on respective ownership interests, among the Fund and the other investors in the Portfolio at the time of such determination. Investment transactions are accounted for on a trade date basis. (2) ADMINISTRATIVE SERVICES PLAN The Trust has adopted an Administrative Services Plan which provides that the Trust, on behalf of the Fund, may obtain the services of an Administrator, one or more Shareholder Servicing Agents and other Servicing Agents and may enter into agreements providing for the payment of fees for such services. Under the Trust Administrative Services Plan, the aggregate of the fees paid to the Administrator from the Fund and the Portfolio, the fees paid to the Shareholder Servicing Agents from the Fund under such Plan and the Basic Distribution Fee paid from the Fund to the Distributor under the Distribution Plan may not exceed 0.65% of the Fund's average daily net assets on an annualized basis for the Fund's then-current fiscal year. A. Administrative Fees -- Under the terms of an Administrative Services Agreement, the administrative fees paid to the Administrator, as compensation for overall administrative services and general office facilities, may not exceed an annual rate of 0.20% of the Fund's average daily net assets and 0.05% of the Portfolio's average daily net assets. For the year ended December 31, 1995, under the Administrative Services Plan the Administrator received fees computed at an annual rate of 0.15% of the Fund's average daily net assets which amounted to $72,047, all of which was voluntarily waived. Citibank acts as Sub-Administrator and performs such duties and receives such compensation from LFBDS as from time to time is agreed to by LFBDS and Citibank. The Fund 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 Fund from the Administrator or its affiliates. Certain of the officers and a Trustee of the Fund are officers or directors of the Administrator or its affiliates. B. Shareholder Servicing Agents' Fees -- The Trust, on behalf of the Fund, has entered into shareholder servicing agreements with each Shareholder Servicing Agent pursuant to which that Shareholder Servicing Agent acts as an agent for its customers and provides other related services. For their services, each Shareholder Servicing Agent receives fees from the Fund, which may be paid periodically, which may not exceed, on an annualized basis, an amount equal to 0.40% of the average daily net assets of the Fund represented by shares owned during the period for which payment is being made by investors for whom such Shareholder Servicing Agent maintains a servicing relationship. Shareholder Servicing Agents fees amounted to $180,611, of which $67,730 was voluntarily waived for the year ended December 31, 1995. (3) DISTRIBUTION FEES The Trust has adopted a Plan of Distribution pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended, in which the Fund reimburses the Distributor for expenses incurred or anticipated in connection with sales of shares of the Fund, at an annual rate not to exceed 0.15% of the Fund's average daily net assets. The Distributor may also receive an additional fee from the Fund not to exceed 0.05% of the Fund's average daily net assets in anticipation of, or as reimbursement for, advertising expenses incurred by the Distributor in connection with the sale of shares of the Fund. No payment of such additional fees has been made during the period. Under the Administrative Services Plan, the distribution fees were computed at an annual rate of 0.05% of the Fund's average daily net assets which amounted to $22,576, all of which was voluntarily waived for the year ended December 31, 1995. (4) INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in the Portfolio for the year ended December 31, 1995 aggregated $3,012,665 and $26,134,522, respectively. (5) SHARES OF BENEFICIAL INTEREST The Declaration of Trust permits the Trustees to issue an unlimited number of full and fractional shares of beneficial interest (without par value). Transactions in shares of beneficial interest were as follows: Year Ended December 31, ----------------- 1995 1994 ------- ------- Shares sold......................................... 311,521 2,047,894 Shares issued to shareholders from reinvestment of dividends ......................... 251,882 333,897 Shares repurchased.................................. (2,655,041) (4,683,580) ---------- ---------- Net decrease........................................ (2,091,638) (2,301,789) ========== ========== 6) ASSUMPTION OF EXPENSES LFBDS has voluntarily agreed to pay a portion of the unwaived expenses of the Fund for the period ended December 31, 1995, which amounted to $14,062. - -------------------------------------------------------------------------------- Landmark U.S. Government Income Fund - -------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT - -------------------------------------------------------------------------------- TO THE TRUSTEES AND THE SHAREHOLDERS OF LANDMARK FIXED INCOME FUNDS (THE TRUST): LANDMARK U.S. GOVERNMENT INCOME FUND In our opinion, the accompanying statement of assets and liabilities, and the related statements of operations and of changes in net assets and the financial highlights present fairly, in all material respects, the financial position of Landmark U.S. Government Income Fund (the "Fund"), a series of Landmark Fixed Income Funds, at December 31, 1995, the results of its operations, the changes in its net assets and the financial highlights for the periods indicated, in conformity with generally accepted accounting principles. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Fund's management; our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these financial statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned at December 31, 1995 by correspondence with the custodian, provide a reasonable basis for the opinion expressed above. PRICE WATERHOUSE LLP Boston, Massachusetts February 7, 1996 - ------------------------------------------------------------------------------- Government Income Portfolio - ------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS December 31, 1995 - ------------------------------------------------------------------------------- PRINCIPAL AMOUNT ISSUER (000 OMITTED) VALUE - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 15.4% - ------------------------------------------------------------------------------- 8.00%, 2006............. $ 294 $ 306,531 8.00%, 2007............. 249 259,424 8.00%, 2017............. 578 602,840 8.00%, 2021............. 291 302,866 8.00%, 2022............. 253 263,274 9.50%, 2016............. 3 3,663 9.50%, 2017............. 69 74,445 9.50%, 2018............. 65 70,017 9.50%, 2019............. 80 85,901 9.50%, 2020............. 76 81,469 6.00%, 2026 TBA......... 1,000 1,009,530 7.50%, 2025 TBA......... 5,000 5,143,750 --------- 8,203,710 --------- PRINCIPAL AMOUNT ISSUER (000 OMITTED) VALUE - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS - 78.8% - ------------------------------------------------------------------------------- United States Treasury Notes, 4.625%, 2/15/96.......................... $ 2,064 $ 2,062,700 7.25%, 8/31/96........................... 6,605 6,685,515 6.125%, 5/31/97.......................... 8,350 8,451,786 6.00%, 12/31/97.......................... 8,000 8,123,760 5.375%, 5/31/98.......................... 1,675 1,680,494 6.875%, 3/31/00.......................... 14,100 14,895,381 ----------- $41,899,636 ----------- SHORT-TERM OBLIGATIONS - 15.9% Saloman Repurchase Agreement 5.375% due 2/1/96 proceeds at maturity $523,805 (secured by $487,763 U.S. Treasury Bill 5.15% due 6/13/96 and $47,583 U.S. Treasury Bill 5.15% due 6/6/96.)........................ 523 523,492 United States Treasury Bill 4.85%, 3/28/96........................... 8,000 7,903,000 ----------- 8,426,492 ----------- TOTAL INVESTMENTS (Identified Cost $58,474,163)............. 110.1% 58,529,838 OTHER ASSETS LESS LIABILITIES.......................... (10.1) (5,384,545) ------ ----------- NET ASSETS................................. 100.0% $53,145,293 ====== =========== *TBA's are mortgage-backed securities traded under delayed delivery commitments, settling after December 31, 1995. Although the unit price for the trade has been established, the principal value has not been finalized. However, the amount of the commitment will not fluctuate more than 2% from the principal amount. Income on TBA's is not earned until settlement date. See notes to financial statements - ------------------------------------------------------------------------------- Government Income Portfolio - ------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES December 31, 1995 - ------------------------------------------------------------------------------- ASSETS: Investments at value (Note 1A) (Identified Cost, $58,474,163).. $58,529,838 Interest receivable............................................ 753,762 ----------- Total assets............................................... 59,283,600 ----------- LIABILITIES: Payable for securities purchased............................... 6,122,656 Payable to affiliates--Investment advisory fees (Note 2)....... 15,651 ----------- Total Liabilities.......................................... 6,138,307 ----------- NET ASSETS .................................................... $53,145,293 =========== REPRESENTED BY: Paid-in capital for beneficial interests....................... $53,145,293 =========== See notes to financial statements - ------------------------------------------------------------------------------- Government Income Portfolio - ------------------------------------------------------------------------------- STATEMENT OF OPERATIONS For the Year Ended December 31, 1995 - ------------------------------------------------------------------------------- INTEREST INCOME (Note 1B):...................... ... $3,159,360 EXPENSES: Investment advisory fees (Note 2).................. $179,525 Administrative fees (Note 3)....................... 25,646 Expense fees (Note 6).............................. 500 -------- Total expenses................................... 205,671 Less aggregate amount waived by the Investment Adviser and Administrator (Note 2 and Note 3)............................... (19,276) -------- Net Expense........................................ 186,395 ---------- Net investment income............................ 2,972,965 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized gain from investment transactions..... 883,687 Unrealized appreciation (depreciation) of investments-- Beginning of period............................. (2,077,668) End of period................................... 55,675 ---------- Net change in unrealized appreciation (depreciation) of investments................... 2,133,343 ---------- Net realized and unrealized gain on investments. 3,017,030 ---------- NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS........................ $5,989,995 ========== See notes to financial statements - ------------------------------------------------------------------------------- Government Income Portfolio - ------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS - -------------------------------------------------------------------------------
MAY 1, 1994 (COMMENCEMENT YEAR ENDED OF OPERATIONS) TO DECEMBER 31, 1995 DECEMBER 31, 1994 ----------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS: Net investment income.................................................. $ 2,972,965 $ 2,240,079 Net realized gain (loss) on investment transactions................... 883,687 (2,084,009) Net change in unrealized appreciation (depreciation) of investments.... 2,133,343 443,611 ----------- ----------- Net increase (decrease) in net assets resulting from operations.... 5,989,995 599,681 ----------- ----------- CAPITAL TRANSACTIONS: Proceeds from contributions............................................ 18,686,471 80,362,853 Value of withdrawals................................................... (27,204,245) (25,289,462) ----------- ----------- Net increase (decrease) in net assets from capital transactions.... (8,517,774) 55,073,391 ----------- ----------- NET INCREASE (DECREASE) IN NET ASSETS: ................................ (2,527,779) 55,673,072 NET ASSETS: Beginning of period.................................................... 55,673,072 -- ----------- ----------- End of period.......................................................... $53,145,293 $55,673,072 =========== ===========
See notes to financial statements - -------------------------------------------------------------------------------- Government Income Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS - --------------------------------------------------------------------------------
FOR THE PERIOD MAY 1, 1994 (COMMENCEMENT OF YEAR ENDED OPERATIONS) TO DECEMBER 31, 1995 DECEMBER 31, 1994 ----------------- ----------------- RATIOS/SUPPLEMENTAL DATA: Net Assets, end of period (000's omitted).............................. $53,145 $55,673 Ratio of expenses to average net assets................................ 0.36% 0.43%* Ratio of net investment income to average net assets................... 5.80% 5.27%* Portfolio turnover..................................................... 284% 40% 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......................................... 0.40% 0.44%* Net investment income to average net assets............................ 5.76% 5.26%* * Annualized
See notes to financial statements - -------------------------------------------------------------------------------- Government Income Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS - -------------------------------------------------------------------------------- (1) SIGNIFICANT ACCOUNTING POLICIES Government 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 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 Portfolio'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 to and disclosure in the financial statements. Actual results could differ from those estimates. The significant accounting policies consistently followed by the Portfolio are in conformity with generally accepted accounting principles and are as follows: A. INVESTMENT SECURITY VALUATIONS -- Debt securities (other than short-term obligations maturing in 60 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 60 days or less are valued at amortized cost, which approximates market value. 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. Gain and loss from principal paydowns are recorded as income. 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. TBA PURCHASE COMMITMENTS -- The Portfolio enters into "TBA" (to be announced) purchase commitments to purchase securities for a fixed unit price at a future date beyond customary settlement time. Although the unit price has been established, the principal value has not been finalized. However, the amount of the commitment will not fluctuate more than 2.0% from the principal amount. The Portfolio holds, and maintains until the settlement date, cash or high-grade debt obligations in an amount sufficient to meet the purchase price. TBA purchase commitments may be considered securities in themselves, and involve a risk of loss if the value of the security to be purchased declines prior to the settlement date, which risk is in addition to the risk of decline in the value of the Portfolio's other assets. Unsettled TBA purchase commitments are valued at the current market value of the underlying securities, generally according to the procedures described under Note 1A. Although the Portfolio will generally enter into TBA purchase commitments with the intention of acquiring securities for its portfolio, the Portfolio may dispose of a commitment prior to settlement if the Portfolio's Adviser deems it appropriate to do so. 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) INVESTMENT ADVISORY FEES The investment advisory fees paid to Citibank, as compensation for overall investment management services, amounted to $179,525, of which $1,055 was voluntarily waived for the year ended December 31, 1995. The investment advisory fees are computed at the annual rate of 0.35% of the Portfolio's average daily net assets. (3) ADMINISTRATIVE FEES Under the terms of an Administrative Services Agreement, the administrative fees paid to the Administrator, as compensation for overall administrative services and general office facilities, are computed at the annual rate of 0.05% of the Portfolio's average daily net assets. The administrative fees amounted to $25,646 of which $18,221 was voluntarily waived, for the year ended December 31, 1995. Citibank acts as Sub-Administrator and performs such duties and receives such compensation from SFG as from time to time is agreed to by SFG and Citibank. 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 of the officers and a Trustee of the Portfolio are officers or directors of the Administrator or its affiliates. (4) PURCHASES AND SALES OF INVESTMENTS Purchases and sales of U.S. Government securities, other than short-term obligations, aggregated $141,154,161 and $148,131,092, respectively, for the year ended December 31, 1995. (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...................... $58,474,163 =========== Gross unrealized appreciation....... $ 274,473 Gross unrealized depreciation....... (218,798) ----------- Net unrealized appreciation......... $ 55,675 =========== (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 ordinary expenses of the Portfolio would, on an annual basis, exceed an agreed upon rate, currently 0.40% of the Portfolio's average daily net assets. (7) LINE OF CREDIT The Portfolio, along with other Landmark Funds entered into an ongoing agreement with a bank which allows the Funds collectively to borrow up to $40 million for temporary or emergency purposes. Interest on borrowings, if any, is charged to the specific fund executing the borrowing at the base rate of the bank. In addition, the $15 million committed portion of the line of credit requires a quarterly payment of a commitment fee based on the average daily unused portion of the line of credit. For the year ended December 31, 1995 the commitment fee allocated to the Portfolio was $366. Since the line of credit was established, there have been no borrowings. - ------------------------------------------------------------------------------- Government Income Portfolio - ------------------------------------------------------------------------------- INDEPENDENT AUDITORS' REPORT - ------------------------------------------------------------------------------- TO THE TRUSTEES AND THE INVESTORS OF THE PREMIUM PORTFOLIOS (THE TRUST), WITH RESPECT TO ITS SERIES, GOVERNMENT INCOME PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Government Income Portfolio (the "Portfolio"), a series of The Premium Portfolios, as at December 31, 1995 and the related statements of operations and of changes in net assets and the financial highlights for the periods indicated. These financial statements and financial highlights (hereafter referred to as "financial statements") are the responsibility of the Portfolio's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits, which included confirmation of investments owned as at December 31, 1995 by correspondence with the custodian and brokers and the application of alternative auditing procedures where confirmation from brokers were not received, provide a reasonable basis for our opinion. In our opinion, these financial statements present fairly, in all material respects, the financial position of the Portfolio as at December 31, 1995, the results of its operations and the changes in its net assets and the financial highlights for the periods indicated in accordance with U.S. generally accepted accounting principles. PRICE WATERHOUSE Chartered Accountants Toronto, Ontario February 7, 1996 - ------------------------------------------------------------------------------- SHAREHOLDER SERVICING AGENTS - ------------------------------------------------------------------------------- FOR CITIBANK NEW YORK RETAIL BANKING AND BUSINESS AND PROFESSIONAL CUSTOMERS: Citibank, N.A. 450 West 33rd Street, New York, NY 10001 (212) 564-3456 or (800) 846-5300 FOR CITIGOLD CUSTOMERS: Citibank, N.A. Citigold P.O. Box 5130, New York, NY 10126-5130 Call Your Citigold Executive or, in NY or CT, (800) 285-1701, For all other States, (800) 285-1707 FOR PRIVATE BANKING CLIENTS: Citibank, N.A. The Citibank Private Bank 153 East 53rd Street, New York, NY 10043 Call Your Citibank Private Banking Account Officer, Registered Representative or (212) 559-5959 FOR CITIBANK GLOBAL ASSET MANAGEMENT CLIENTS: Citibank, N.A. Citibank Global Asset Management 153 East 53rd Street, New York, NY 10043 (212) 559-7117 FOR NORTH AMERICAN INVESTOR SERVICES CLIENTS: Citibank, N.A. 111 Wall Street, New York, NY 10043 Call Your Account Manager or (212) 657-9100 FOR CITICORP INVESTMENT SERVICES CUSTOMERS: Citicorp Investment Services One Court Square, Long Island City, NY 11120 Call Your Investment Consultant or (800) 846-5200 (212) 736-8170 in New York City LANDMARK FUNDS MONEY MARKET FUNDS: Cash Reserves Premium Liquid Reserves Institutional Liquid Reserves U.S. Treasury Reserves Premium U.S. Treasury Reserves Institutional U.S. Treasury Reserves Tax Free Reserves California Tax Free Reserves Connecticut Tax Free Reserves New York Tax Free Reserves STOCK & BOND FUNDS: U.S. Government Income Fund Intermediate Income Fund National Tax Free Income Fund New York Tax Free Income Fund Balanced Fund Equity Fund International Equity Fund Small Cap Equity Fund Emerging Asian Markets Equity Fund -----END PRIVACY-ENHANCED MESSAGE-----