-----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, T6EQ/8NNsdqGX5ERIFPR/n62d90mSA4n/5BOZ+Exg2M9+xLELCntVyATZPcr3Lmq HxQEA4n5VjFB1Pfe7TiNsg== 0000950156-96-000690.txt : 19960829 0000950156-96-000690.hdr.sgml : 19960829 ACCESSION NUMBER: 0000950156-96-000690 CONFORMED SUBMISSION TYPE: N-30B-2 PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960828 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: 96621887 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 FUNDS - -------------------------------------------------------------------------------- A LETTER TO OUR SHAREHOLDERS Dear Shareholder: The first half of 1996 represented a difficult time for the U.S. bond markets. Stronger-than-expected economic growth produced fear among fixed-income investors that the rate of inflation might accelerate, causing them to bid down prices of most bonds. Shorter term fixed-income investments such as those in which Government Income Portfolio invests, however, were less severely affected by inflation fears, making them a relatively safe haven in a turbulent market. As described in the Fund's prospectus, 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 a higher level of current income than is generally available from money market funds by investing in a high-quality investment portfolio of securities backed as to the timely payment of principal and interest by the full faith and credit of the U.S. government. This Semi-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. /s/ Philip W. Coolidge Philip W. Coolidge President July 19, 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 Quotes From the Portfolio Manager Strategy and Outlook - ---------------------------------------- 5 Fund Data Performance Highlights LANDMARK U.S. GOVERNMENT INCOME FUND - ---------------------------------------- 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 - ---------------------------------------- GOVERNMENT INCOME PORTFOLIO - ---------------------------------------- 12 Portfolio of Investments - ---------------------------------------- 13 Statement of Assets and Liabilities - ---------------------------------------- 14 Statement of Operations - ---------------------------------------- 15 Statement of Changes in Net Assets Financial Highlights - ---------------------------------------- 16 Notes to Financial Statements - -------------------------------------------------------------------------------- MARKET ENVIRONMENT When the year began, many market-watchers, including Citibank, called for slow economic growth during the first half of 1996. We expected inflation pressures to remain low, giving the officials at the Federal Reserve the elbow-room they needed to lower short-term interest rates further. As a result, long-term bond yields were expected to fall slightly, creating a positive environment for both stocks and bonds. The consensus forecast proved inaccurate. The economy grew faster than we expected, fueled by higher spending among both businesses and consumers. In addition, stronger-than-expected employment figures caused concern that the rate of inflation would accelerate. As a result, the yield on the 30-year U.S. Treasury bond, considered a benchmark for long-term interest rates, rose during the period from around 6.0% to almost 6.9%. However, because of their shorter lives, the short- and intermediate-term securities in which the Portfolio invests were less severely affected by adverse economic conditions than their long-term counterparts. While prices on U.S. Treasury securities with 10-year maturities fell more than eight points, two-year U.S. Treasury prices fell only about 2.5 points. - -------------------------------------------------------------------------------- FUND SNAPSHOT COMMENCEMENT OF OPERATIONS September 8, 1986 NET ASSETS AS OF 6/30/96 $28.9 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 1-3 Year U.S. Government 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 We actively managed Government Income Portfolio to take advantage of changing market conditions. Although we maintained the Portfolio's average duration (a measure of sensitivity to changes in interest rates) on the longer end of neutral for most of the period in anticipation of a bond market rally, we offset some of the effects of higher interest rates by shifting assets to the better performing sectors of the U.S. government securities marketplace. We increased our investments in government-guaranteed mortgage-backed securities during the period, reducing our holdings of U.S. Treasury securities commensurately. As a result, mortgage-backed securities such as those issued by the Government National Mortgage Association (Ginnie Mae) increased from approximately 10% of the Portfolio in January to about 15% in June. This shift benefitted the Portfolio because mortgage-backed securities tend to outperform U.S. Treasury securities when interest rates are stable or rise modestly. - -------------------------------------------------------------------------------- QUOTES FROM THE PORTFOLIO MANAGER "Despite the recent strength of the economy, there is little evidence that the underlying structural rate of inflation is rising." "Our emphasis on mortgage-backed securities benefitted the Portfolio when short- and intermediate-term interest rates rose." "If the rate of economic growth continues to rise, chances are good that the Federal Reserve will raise key short-term interest rates later this year." - -------------------------------------------------------------------------------- STRATEGY AND OUTLOOK We expect a relatively strong rate of economic growth to persist through the second half of 1996. These conditions should continue to fuel concerns about rising inflation among economists and bond investors and cause the Federal Reserve to reverse direction and raise short-term interest rates sooner rather than later this year. If such a change in monetary policy occurs, bond yields -- including those of shorter term bonds -- should rise from current levels. However, the dramatic rise in yields that has already occurred this year has left bonds fairly valued, which should limit the risk of further declines even if the Federal Reserve begins to raise short-term interest rates. In anticipation of these influences, we are reducing the average duration of the Portfolio toward the short end of neutral. In addition, we will continue to shift funds between Treasuries and mortgage-backed securities in order to participate in those with the most promising prospects in the prevailing economic environment. Indeed, we strongly believe that such active management of conservative fixed-income investments makes Landmark U.S. Government Income Fund an excellent alternative for those who require competitive levels of income and capital preservation regardless of changes in the economic environment. - -------------------------------------------------------------------------------- FUND DATA All Periods Ended June 30, 1996
TOTAL RETURNS ---------------------------------------------------- SINCE SIX ONE FIVE 9/8/86 MONTHS** YEAR YEARS* INCEPTION* -------- ---- ------ ---------- Landmark U.S. Government Income Fund without Sales Charge ....................... (0.16)% 3.59% 6.19% 6.27% Lipper Short U.S. Government Funds Average ... 0.96% 4.72% 5.52% 6.45%+ Lehman 1-3 Year U.S. Government Index ........ 1.43% 5.47% 6.27% 7.09%+ Landmark U.S. Government Income Fund with Maximum Sales Charge of 1.50% ......... (1.66)% 2.03% 5.87% 6.11% * Average Annual Total Return. ** Not Annualized + From 8/31/86 30-Day SEC Yield 5.41% Income Dividends Per Share $0.234
- -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS A $10,000 investment in the Fund made on inception date would have grown to $17,896 with sales charge (as of 6/30/96). 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. Landmark U.S. Landmark Government U.S. Lipper Income Government Short Term Lehman 1-3 Fund - Income US Yr. US Without Fund - Government Government Sales With Sales Funds Index Charge Charge Average (Unmanaged) --------- ---------- ---------- ---------- Aug-86 $10,000 $9,850 $10,000 $10,000 Sep-86 $9,660 $9,515 $9,975 $9,987 Oct-86 $9,682 $9,537 $10,085 $10,074 Nov-86 $9,847 $9,700 $10,193 $10,134 Dec-86 $9,881 $9,733 $10,225 $10,157 Jan-87 $9,982 $9,832 $10,322 $10,228 Feb-87 $10,053 $9,902 $10,383 $10,274 Mar-87 $9,985 $9,835 $10,373 $10,295 Apr-87 $9,792 $9,646 $10,208 $10,223 May-87 $9,788 $9,641 $10,212 $10,238 Jun-87 $9,909 $9,761 $10,325 $10,351 Jul-87 $9,904 $9,755 $10,353 $10,408 Aug-87 $9,866 $9,718 $10,348 $10,424 Sep-87 $9,655 $9,511 $10,263 $10,385 Oct-87 $9,965 $9,816 $10,492 $10,596 Nov-87 $10,025 $9,874 $10,555 $10,665 Dec-87 $10,151 $9,999 $10,634 $10,737 Jan-88 $10,479 $10,322 $10,860 $10,897 Feb-88 $10,619 $10,459 $10,965 $10,991 Mar-88 $10,523 $10,365 $10,953 $11,014 Apr-88 $10,495 $10,337 $10,956 $11,026 May-88 $10,455 $10,298 $10,938 $11,020 Jun-88 $10,633 $10,473 $11,060 $11,130 Jul-88 $10,592 $10,433 $11,062 $11,135 Aug-88 $10,574 $10,415 $11,079 $11,163 Sep-88 $10,744 $10,583 $11,222 $11,293 Oct-88 $10,869 $10,706 $11,341 $11,407 Nov-88 $10,780 $10,618 $11,294 $11,378 Dec-88 $10,785 $10,624 $11,314 $11,403 Jan-89 $10,922 $10,758 $11,413 $11,493 Feb-89 $10,818 $10,656 $11,407 $11,495 Mar-89 $10,856 $10,693 $11,452 $11,543 Apr-89 $11,044 $10,878 $11,606 $11,731 May-89 $11,305 $11,136 $11,781 $11,896 Jun-89 $11,595 $11,421 $11,995 $12,118 Jul-89 $11,818 $11,641 $12,165 $12,296 Aug-89 $11,596 $11,422 $12,079 $12,223 Sep-89 $11,628 $11,453 $12,138 $12,294 Oct-89 $11,955 $11,776 $12,335 $12,485 Nov-89 $12,061 $11,880 $12,437 $12,597 Dec-89 $12,080 $11,899 $12,486 $12,645 Jan-90 $11,867 $11,689 $12,467 $12,659 Feb-90 $11,880 $11,702 $12,524 $12,726 Mar-90 $11,864 $11,686 $12,562 $12,764 Apr-90 $11,671 $11,496 $12,576 $12,795 May-90 $12,059 $11,878 $12,763 $12,992 Jun-90 $12,265 $12,081 $12,893 $13,128 Jul-90 $12,441 $12,254 $13,044 $13,287 Aug-90 $12,260 $12,077 $13,065 $13,335 Sep-90 $12,357 $12,172 $13,162 $13,440 Oct-90 $12,523 $12,336 $13,296 $13,589 Nov-90 $12,807 $12,615 $13,442 $13,721 Dec-90 $13,034 $12,839 $13,593 $13,883 Jan-91 $13,183 $12,985 $13,716 $14,014 Feb-91 $13,258 $13,059 $13,795 $14,103 Mar-91 $13,309 $13,110 $13,870 $14,198 Apr-91 $13,442 $13,240 $13,998 $14,334 May-91 $13,510 $13,307 $14,078 $14,420 Jun-91 $13,454 $13,252 $14,107 $14,474 Jul-91 $13,659 $13,454 $14,244 $14,598 Aug-91 $13,982 $13,772 $14,445 $14,798 Sep-91 $14,324 $14,109 $14,613 $14,955 Oct-91 $14,459 $14,242 $14,762 $15,116 Nov-91 $14,535 $14,317 $14,902 $15,272 Dec-91 $14,833 $14,610 $15,152 $15,504 Jan-92 $14,733 $14,512 $15,063 $15,484 Feb-92 $14,802 $14,580 $15,024 $15,530 Mar-92 $14,777 $14,555 $14,937 $15,526 Apr-92 $14,863 $14,640 $15,059 $15,667 May-92 $15,058 $14,832 $15,217 $15,813 Jun-92 $15,215 $14,987 $15,375 $15,973 Jul-92 $15,410 $15,179 $15,560 $16,156 Aug-92 $15,512 $15,279 $15,687 $16,287 Sep-92 $15,649 $15,414 $15,816 $16,440 Oct-92 $15,502 $15,270 $15,693 $16,346 Nov-92 $15,483 $15,251 $15,668 $16,322 Dec-92 $15,657 $15,422 $15,818 $16,474 Jan-93 $15,866 $15,628 $16,017 $16,647 Feb-93 $16,022 $15,781 $16,170 $16,780 Mar-93 $16,078 $15,837 $16,221 $16,832 Apr-93 $16,177 $15,934 $16,312 $16,935 May-93 $16,125 $15,883 $16,293 $16,894 Jun-93 $16,303 $16,059 $16,444 $17,021 Jul-93 $16,295 $16,051 $16,488 $17,058 Aug-93 $16,534 $16,286 $16,650 $17,200 Sep-93 $16,600 $16,351 $16,697 $17,255 Oct-93 $16,637 $16,387 $16,725 $17,293 Nov-93 $16,555 $16,307 $16,677 $17,296 Dec-93 $16,609 $16,359 $16,737 $17,365 Jan-94 $16,709 $16,458 $16,850 $17,473 Feb-94 $16,524 $16,276 $16,711 $17,366 Mar-94 $16,330 $16,085 $16,538 $17,278 Apr-94 $16,208 $15,965 $16,421 $17,212 May-94 $16,240 $15,997 $16,391 $17,236 Jun-94 $16,238 $15,995 $16,390 $17,279 Jul-94 $16,408 $16,162 $16,523 $17,435 Aug-94 $16,441 $16,194 $16,561 $17,492 Sep-94 $16,353 $16,108 $16,503 $17,452 Oct-94 $16,369 $16,123 $16,512 $17,492 Nov-94 $16,280 $16,036 $16,446 $17,419 Dec-94 $16,324 $16,079 $16,483 $17,452 Jan-95 $16,569 $16,320 $16,687 $17,689 Feb-95 $16,797 $16,545 $16,926 $17,930 Mar-95 $16,884 $16,631 $17,014 $18,030 Apr-95 $17,060 $16,804 $17,160 $18,191 May-95 $17,452 $17,190 $17,498 $18,502 Jun-95 $17,540 $17,277 $17,586 $18,602 Jul-95 $17,520 $17,258 $17,607 $18,676 Aug-95 $17,646 $17,381 $17,735 $18,788 Sep-95 $17,735 $17,469 $17,836 $18,880 Oct-95 $17,879 $17,611 $17,995 $19,037 Nov-95 $18,061 $17,790 $18,168 $19,199 Dec-95 $18,198 $17,925 $18,319 $19,345 Jan-96 $18,327 $18,052 $18,450 $19,509 Feb-96 $18,175 $17,902 $18,366 $19,433 Mar-96 $18,098 $17,827 $18,343 $19,417 Apr-96 $18,059 $17,788 $18,347 $19,437 May-96 $18,056 $17,786 $18,369 $19,480 Jun-96 $18,169 $17,896 $18,492 $19,622 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 U.S. Government Income Fund - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES June 30, 1996 (unaudited) ASSETS: Investment in Government Income Portfolio, at value (Note 1) ............... $28,954,575 Receivable for shares of beneficial interest sold .......................... 100 Receivable from the Administrator .......................................... 58,675 ----------- Total assets ........................................................... 29,013,350 ----------- LIABILITIES: Payable for shares of beneficial interest repurchased ...................... 129,540 Accrued expenses and other liabilities ..................................... 26,063 ----------- Total liabilities ...................................................... 155,603 ----------- NET ASSETS for 3,027,913 shares of beneficial interest outstanding ......... $28,857,747 =========== NET ASSETS CONSIST OF: Paid-in capital ............................................................ $32,606,609 Accumulated net realized loss .............................................. (2,959,167) Unrealized depreciation .................................................... (877,237) Undistributed net investment income ........................................ 87,542 ----------- Total .................................................................. $28,857,747 =========== NET ASSET VALUE AND REDEMPTION PRICE PER SHARE OF BENEFICIAL INTEREST ...... $9.53 ===== COMPUTATION OF OFFERING PRICE: Maximum Offering Price per share based on a 1.50% sales charge ($9.53/0.985) $9.68 ===== See notes to financial statements
Landmark U.S. Government Income Fund - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS For the Six Months Ended June 30, 1996 (unaudited) INVESTMENT INCOME (Note 1B): Interest Income from Government Income Portfolio ............ $958,550 Allocated Expenses from Government Income Portfolio ......... (55,076) -------- Net investment income from Government Income Portfolio .. $ 903,474 EXPENSES: Shareholder Servicing Agents' fees (Note 2B) ................ 39,223 Administrative fees (Note 2A) ............................... 39,223 Distribution fees (Note 3) .................................. 23,534 Shareholder reports ......................................... 12,787 Auditing fees ............................................... 11,200 Legal fees .................................................. 8,500 Trustees' fees .............................................. 6,753 Custodian fees .............................................. 3,000 Transfer agent fees ......................................... 2,000 Miscellaneous ............................................... 5,416 -------- Total expenses .......................................... 151,636 Less aggregate amount waived by Administrator and Distributor (Notes 2A and 3) (62,757) Expenses Assumed by the Administrator (Note 6) .......... (18,275) -------- Net expenses ............................................ 70,604 --------- Net investment income ................................... 832,870 --------- NET REALIZED AND UNREALIZED GAIN (LOSS) FROM GOVERNMENT INCOME PORTFOLIO: Net realized gain (loss) .................................... $ (44,277) Net change in unrealized appreciation (depreciation) ........ (843,791) --------- Net realized and unrealized gain (loss) from Government Income Portfolio ..................................... (888,068) --------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ........ $ (55,198) ========= See notes to financial statements
Landmark U.S. Government Income Fund - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED YEAR ENDED JUNE 30, 1996 DECEMBER 31, (UNAUDITED) 1995 --------------- --------------- INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS: Net investment income ........................................... $ 832,870 $ 2,428,120 Net realized gain (loss) ........................................ (44,277) 696,470 Net change in unrealized appreciation (depreciation) ............ (843,791) 2,013,487 ----------- ----------- Net increase (decrease) in net assets resulting from operations (55,198) 5,138,077 ----------- ----------- DISTRIBUTION TO SHAREHOLDERS FROM: Net investment income ........................................... (764,137) (2,440,326) ----------- ----------- TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 5): Net proceeds from sale of shares ................................ 1,443,847 3,008,033 Net asset value of shares issued to shareholders from reinvestment of dividends ................................ 754,504 2,420,954 Cost of shares repurchased ...................................... (7,846,653) (25,734,586) ----------- ----------- Net decrease in net assets from transactions in shares of beneficial interest ........................................... (5,648,302) (20,305,599) ----------- ----------- NET DECREASE IN NET ASSETS ...................................... (6,467,637) (17,607,848) NET ASSETS: Beginning of period ............................................. 35,325,384 52,933,232 ----------- ----------- End of period (including undistributed net investment income of $87,542 and $18,809, respectively) .................. $28,857,747 $35,325,384 =========== =========== See notes to financial statements
Landmark U.S. Government Income Fund - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
FOUR MONTHS SIX MONTHS YEAR ENDED ENDED ENDED DECEMBER 31, DECEMBER 31, YEAR ENDED AUGUST 31, JUNE 30, 1996 -------------------- 1993++ -------------------------- (UNAUDITED) 1995 1994++ (NOTE 1F) 1993++ 1992++ 1991++ ------------- ---- ------ -------- ------ ------- ------ Net Asset Value, beginning of period ...... $ 9.78 $ 9.28 $ 9.91 $10.01 $ 9.85 $ 9.42 $ 8.93 ------ ------ ------ ------ ------ ------ ------ Income From Operations: Net investment income ..................... 0.258 0.543 0.466 0.183 0.448 0.591 0.710 Net realized and unrealized gain (loss) ... (0.274) 0.500 (0.635) (0.138) 0.183 0.413 0.499 ------ ------ ------ ------ ------ ------ ------ Total from operations ................ (0.016) 1.043 (0.169) 0.045 0.631 1.004 1.209 ------ ------ ------ ------ ------ ------ ------ Less Distributions From: Net investment income ................... (0.234) (0.543) (0.461) (0.145) (0.464) (0.574) (0.719) In excess of net investment income ...... -- -- -- -- (0.007) -- -- ------ ------ ------ ------ ------ ------ ------ Total from distributions ............ (0.234) (0.543) (0.461) (0.145) (0.471) (0.574) (0.719) ------ ------ ------ ------ ------ ------ ------ Net Asset Value, end of period ............ $ 9.53 $ 9.78 $ 9.28 $ 9.91 $10.01 $ 9.85 $ 9.42 ====== ====== ====== ====== ====== ====== ====== RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's omitted) . $28,858 $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%(A) 0.80%+ 0.80% 0.51% 0.97% Ratio of net investment income to average net assets .............................. 5.31%+ 5.38% 4.72% 4.34%+ 4.46% 6.03% 7.71% Portfolio turnover (B) .................... -- -- 22% 26% 111% 161% 42% Total return .............................. (0.16)%** 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, for the year ended December 31, 1995 and for the six months ended June 30, 1996 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 ........... $0.231 $0.499 $0.421 $0.164 $0.400 $0.503 $0.659 Ratios: Expenses to average net assets ............ 1.32%(A)+ 1.23%(A) 1.26%(A) 1.27%+ 1.27% 1.41% 1.52% Net investment income to average net assets 4.79%+ 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 (UNAUDITED) (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 (56.4% at June 30, 1996) 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 December 31, 1995, the fund reclassified $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, 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 0.25% of the Fund's average daily net assets. The Administrative fees amounted to $39,223, all of which was voluntarily waived for the six months ended June 30, 1996. 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 0.25% 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 $39,223, for the six months ended June 30, 1996. (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 distribution fees amounted to $23,534, all of which was voluntarily waived for the six months ended June 30, 1996. 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. (4) INVESTMENT TRANSACTIONS Increases and decreases in the Fund's investment in the Portfolio for the six months ended June 30, 1996 aggregated $1,446,444 and $8,039,390, 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: SIX MONTHS ENDED YEAR ENDED JUNE 30, 1996 DECEMBER 31, (UNAUDITED) 1995 -------- ---------- Shares sold ........................ 149,958 311,521 Shares issued to shareholders from reinvestment of dividends ... 78,438 51,882 Shares repurchased ................. (811,670) (2,655,041) -------- ---------- Net decrease ....................... (583,274) (2,091,638) ======== ========== (6) ASSUMPTION OF EXPENSES LFBDS has voluntarily agreed to pay a portion of the unwaived expenses of the Fund for the six months ended June 30, 1996 which amounted to $18,275. Government Income Portfolio - -------------------------------------------------------------------------------- PORTFOLIO OF INVESTMENTS June 30, 1996 (unaudited) PRINCIPAL AMOUNT ISSUER (000 OMITTED) VALUE - -------------------------------------------------------------------------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--15.9% 6.50%, 2009 ........................ $ 285 $ 265,143 6.50%, 2011 ........................ 4,732 4,597,048 6.50%, 2019 ........................ 1,545 1,501,529 8.00%, 2006 ........................ 250 256,506 8.00%, 2007 ........................ 241 247,113 8.00%, 2017 ........................ 568 573,113 8.00%, 2021 ........................ 261 263,255 8.00%, 2022 ........................ 202 203,833 9.50%, 2016 ........................ 3 3,140 9.50%, 2017 ........................ 63 67,454 9.50%, 2018 ........................ 49 52,509 9.50%, 2019 ........................ 65 69,432 9.50%, 2020 ........................ 59 63,240 ----------- 8,163,315 ----------- U.S. GOVERNMENT OBLIGATIONS--77.4% United States Treasury Notes, 7.25% due 8/31/96 .................. $ 6,605 $ 6,622,569 5.125% due 2/28/98 ................. 8,000 7,882,480 6.125% due 5/15/98 ................. 8,000 8,000,000 5.375% due 5/31/98 ................. 1,675 1,652,756 6.875% due 3/31/00 ................. 14,100 14,304,873 5.875% due 11/15/05 ................ 1,400 1,318,842 ----------- 39,781,520 ----------- SHORT-TERM OBLIGATIONS--5.4% United States Treasury Bill due 8/29/96 ....................... 55 54,300 United States Treasury Bill due 9/12/96 ....................... 55 54,302 United States Treasury Bill due 9/19/96 ....................... 2,681 2,649,723 ----------- 2,758,325 ----------- TOTAL INVESTMENTS (Identified Cost $52,161,236) ..... 98.7% 50,703,160 OTHER ASSETS LESS LIABILITIES .................. 1.3 673,931 ------ ----------- NET ASSETS ......................... 100.0% $51,377,091 ===== =========== FUTURES CONTRACTS UNDERLYING FACE EXPIRATION AMOUNT AT UNREALIZED DATE VALUE GAIN/LOSS ---------- ---------- ---------- Purchased 200 U.S. Treasury Note ............. Sept 96 7,826,813 $ 2,375 100 U.S. Treasury Note ............. Sept 96 3,762,500 (83,125) -------- $(80,750) ======== See notes to financial statements Government Income Portfolio - -------------------------------------------------------------------------------- STATEMENT OF ASSETS AND LIABILITIES June 30, 1996 (unaudited) Assets: Investments at value (Note 1A) (Identified Cost, $52,161,236) ... $50,703,160 Cash ............................................................ 60,515 Interest receivable ............................................. 670,571 ----------- Total assets ................................................ 51,434,246 ----------- LIABILITIES: Payable to affiliates--Investment advisory fees (Note 2) ........ 16,127 Payable for daily variation on futures contracts ................ 41,028 ----------- Total Liabilities ............................................. 57,155 ----------- NET ASSETS ...................................................... $51,377,091 =========== REPRESENTED BY: Paid-in capital for beneficial interests ........................ $51,377,091 =========== See notes to financial statements Government Income Portfolio - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS For the Six Months Ended June 30, 1996 (unaudited) INTEREST INCOME (Note 1B): $1,719,905 EXPENSES: Investment advisory fees (Note 2) .......................... $ 98,581 Administrative fees (Note 3) ............................... 14,106 Expense fees (Note 6) ...................................... 1,000 --------- Total expenses ........................................... 113,687 Less aggregate amount waived by the Investment Adviser and Administrator (Note 2 and Note 3) ........................ (14,945) --------- Net Expense ............................................... 98,742 ---------- Net investment income .................................... 1,621,163 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss from investment transactions and futures contracts ........................................ (69,631) Unrealized appreciation (depreciation) of investments and futures contracts-- Beginning of period .................................... 55,675 End of period ........................................... (1,538,826) --------- Net change in unrealized appreciation (depreciation) of investments and futures contracts ...................... (1,594,501) ---------- Net realized and unrealized loss on investments and futures contracts ...................................... (1,664,132) ---------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ....... $ (42,969) ========== See notes to financial statements
Government Income Portfolio - -------------------------------------------------------------------------------- STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 1995 YEAR ENDED (UNAUDITED) DECEMBER 31, 1995 ---------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS: Net investment income ................................................... $ 1,621,163 $ 2,972,965 Net realized gain (loss) on investment transactions and futures contracts (69,631) 883,687 Net change in unrealized appreciation (depreciation) of investments and futures contracts ...................................................... (1,594,501) 2,133,343 ----------- ----------- Net increase (decrease) in net assets resulting from operations (42,969) 5,989,995 ----------- ----------- CAPITAL TRANSACTIONS: Proceeds from contributions ............................................. 14,736,415 18,686,471 Value of withdrawals .................................................... (16,461,648) (27,204,245) ----------- ----------- Net increase (decrease) in net assets from capital transactions ..... (1,725,233) (8,517,774) ----------- ----------- NET DECREASE IN NET ASSETS: ............................................. (1,768,202) (2,527,779) NET ASSETS: Beginning of period ..................................................... 53,145,293 55,673,072 ----------- ----------- End of period ........................................................... $51,377,091 $53,145,293 =========== =========== See notes to financial statements
Government Income Portfolio - -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
FOR THE PERIOD MAY 1, 1994 SIX MONTHS ENDED (COMMENCMENT OF JUNE 30, 1995 YEAR ENDED OPERATIONS) TO (UNAUDITED) DECEMBER 31, 1995 DECEMBER 31, 1994 -------------- ----------------- ----------------- RATIOS/SUPPLEMENTAL DATA: Net Assets, end of period (000's omitted) .................. $51,377 $53,145 55,673 Ratio of expenses to average net assets .................... 0.35%* 0.36% 0.43%* Ratio of net investment income to average net assets ....... 5.75%* 5.80% 5.27%* Portfolio turnover ......................................... 67% 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%* 0.40% 0.44%* Net investment income to average net assets ................ 5.70%* 5.76% 5.26%* * Annualized See notes to financial statements
Government Income Portfolio - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (unaudited) (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. FUTURES CONTRACTS -- The Portfolio may engage in futures transactions.The Portfolio may use futures contracts in order to protect the Portfolio from fluctuation in interest rates without actually buying or selling debt securities, or to manage the effective maturity or duration of fixed income securities in the Portfolio in an effort to reduce potential losses or enhance potential gains. The underlying value of a futures contract is incorporated within unrealized appreciation/depreciation in the Portfolio of Investments under the caption "Futures Contracts" The Portfolio had open futures contracts at June 30, 1996 with an unrealized depreciation of $80,750. Buying futures contracts tends to increase the Portfolio's exposure to the underlying instrument.Selling futures contracts tends to either decrease the Portfolio's exposure to the underlying instrument, or to hedge other fund investments. Upon entering into a futures contract, the Portfolio is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the "initial margin". Subsequent payments ("variation margin") are made or received by the Portfolio each day, depending on the daily fluctuation of the value of the contract.The daily changes in contract value are recorded as unrealized gains or losses and the Portfolio recognizes a realized gain or loss when the contract is closed. Futures contracts are valued at the settlement price established by the board of trade or exchange on which they are traded. There are several risks in connection with the use of futures contracts as a hedging device. The change in the value of futures contracts primarily corresponds with the value of their underlying instruments, which may not correlate with the change in the value of the hedged instruments. In addition, there is the risk the Portfolio may not be able to enter into a closing transaction because of an illiquid secondary market. Futures contracts involve, to varying degrees, risk of loss in excess of the futures variation margin reflected in the Statement of Assets and Liabilities. H. 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 $98,581, of which $1,479 was voluntarily waived for the six months ended June 30, 1996. 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 $14,106 of which $13,466 was voluntarily waived, for the six months ended June 30, 1996. 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 $32,813,985 and $33,145,469, respectively, for the six months ended June 30, 1996. (5) FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation (depreciation) in value of the investment securities owned at June 30, 1996, as computed on a federal income tax basis, are as follows: Aggregate cost $52,161,236 =========== Gross unrealized appreciation $ 25,194 Gross unrealized depreciation (1,483,270) ----------- Net unrealized depreciation $(1,458,076) =========== (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 and expenses waived by the Administrator 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 six months ended June 30, 1996 the commitment fee allocated to the Portfolio was $157. Since the line of credit was established, there have been no borrowings. - -------------------------------------------------------------------------------- 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 [LOGO] 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 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/S/96 Printed on Recycled Paper [symbol] [LOGO] LANDMARK(SM) FUNDS Advised by Citibank, N.A. LANDMARK U.S. GOVERNMENT INCOME FUND SEMI-ANNUAL REPORT June 30, 1996 - -------------------------------------------------------------------------------- A LETTER TO OUR SHAREHOLDERS Dear Shareholder: The first half of 1996 represented a difficult time for the U.S. bond markets. Stronger-than-expected economic growth produced fear among fixed-income investors that the rate of inflation might accelerate, causing them to bid down prices of most bonds. Intermediate and long-term bonds, such as those in which the Landmark Intermediate Income Fund invests, were among the most significantly affected. As the Fund's prospectus describes, 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 its 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 Semi-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 July 19, 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 - ------------------------------------------ Portfolio Manager 3 The Portfolio Manager Responds Quotes from the Portfolio Manager - ------------------------------------------ Strategy and Outlook 4 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 - ------------------------------------------------------------------------------- MARKET ENVIRONMENT When the year began, many market-watchers, including Citibank, called for slow economic growth during the first half of 1996. We expected inflation pressures to remain low, giving the officials at the Federal Reserve the elbow-room they needed to lower short-term interest rates further. As a result, long-term bond yields were expected to fall slightly, creating a positive environment for both stocks and bonds. The consensus forecast proved inaccurate. The economy grew faster than we expected, fueled by higher spending among both businesses and consumers. In addition, stronger-than-expected employment figures caused concern among fixed-income investors that the rate of inflation would accelerate. As a result, the yield on the 30-year U.S. Treasury bond, considered a benchmark for long-term interest rates, rose during the period from around 6.0% to almost 6.9%. Prices of the intermediate and long-term bonds in which the Fund invests were among the most severely affected by higher interest rates. Prices of U.S. Treasury securities with 10-year maturities fell about eight points and prices of 30-year Treasury bonds fell more than 13 points, significantly more than the 2.5 point decrease in prices of two-year U.S. Treasuries. - -------------------------------------------------------------------------------- FUND SNAPSHOT COMMENCEMENT OF OPERATIONS June 25, 1993 NET ASSETS AS OF 6/30/96 $46.0 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 Lipper Intermediate Investment Grade Funds Average o Lehman Aggregate Bond Index 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 We actively managed the Intermediate Income Fund to take advantage of changing market conditions. Although we maintained the Fund's average duration (a measure of sensitivity to changes in interest rates) on the longer end of neutral for most of the period in anticipation of a bond market rally, we offset some of the effects of higher long-term interest rates by shifting assets to the better performing sectors of the overall bond market. We reduced our investments in U.S. Treasury securities and corporate bonds in favor of mortgage-backed and asset-backed securities, enabling us to capture incrementally higher yields in a rising interest-rate environment. We reduced our corporate bond holdings as the difference in yields between corporate bonds and U.S. Treasury securities narrowed to the point at which we are no longer adequately compensated for the greater risks corporate bonds entail. In addition, the shift toward asset-backed and mortgage-backed securities benefitted the Fund as these securitized investments tend to outperform U.S. Treasury securities when interest rates are stable or rise modestly. - -------------------------------------------------------------------------------- QUOTES FROM THE PORTFOLIO MANAGER "Despite the recent strength of the economy, there is little evidence that the underlying structural rate of inflation is rising." "Our emphasis on mortgage-backed and asset-backed securities helped the Portfolio when long-term interest rates rose." "If the rate of economic growth continues to rise, chances are good that the Federal Reserve will raise key short-term interest rates later this year." - -------------------------------------------------------------------------------- STRATEGY AND OUTLOOK We expect a relatively strong rate of economic growth to persist through the second half of 1996. These conditions should continue to fuel concerns about rising inflation among economists and bond investors and may cause the Federal Reserve to reverse direction and raise short-term interest rates sooner rather than later this year. If such a change in monetary policy occurs, bond yields -- including those of intermediate and long-term bonds -- should rise from current levels. However, the dramatic rise in yields that has already occurred this year has left bonds fairly valued, which should limit the risk of further declines even if the Federal Reserve begins to raise short-term interest rates. In anticipation of these influences, we are reducing the average duration of the Portfolio toward the short end of neutral. In addition, we will continue to shift funds among the various types of assets in the Portfolio in order to participate in those with the most promising prospects in the prevailing economic environment. Landmark Intermediate Income Fund - -------------------------------------------------------------------------------- BY THE NUMBERS Portfolio of Investments as of 6/30/96 ... Compared to 12/31/95 Cash/Short Term/Other (3)% Cash/Short Term/Other 6% Asset-Backed Securities 4% Asset-Backed Securities 4% Mortgage Obligations 66% Mortgage Obligations 38% Yankees 1% Corporate Bonds 5% U.S. Treasury Issues 32% U.S. Treasury Issues 47% - ------------------------------------------------------------------------------------------------------------------------------------ FUND DATA All Periods Ending June 30, 1996 (unaudited)
TOTAL RETURNS ------------------------------ SINCE SIX ONE 6/25/93 MONTHS** YEAR (INCEPTION)* -------- ---- ------------ Landmark Intermediate Income Fund without Sales Charge ................ (1.84)% 2.31% 3.97% Lipper Intermediate Investment Grade Funds Average .................... (1.40)% 4.27% 4.42%+ Lehman Aggregate Bond Index ........................................... (1.21)% 5.02% 5.69%+ Landmark Intermediate Income Fund with Maximum Sales Charge of 4.00% .. (5.77)% (1.78)% 2.57% * Average Annual Total Return ** Not Annualized + From 6/30/93
30-Day SEC Yield 5.86% Income Dividends Per Share $0.27 - -------------------------------------------------------------------------------- PERFORMANCE HIGHLIGHTS A $10,000 investment in the Fund made on inception date would have grown to $10,796 with sales charge (as of 6/30/96). 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. Landmark Landmark Lipper Intermediate Intermediate Intermediate Income Fund - Income Fund - Investment Lehman Aggregate Without Sales With Sales Grade Funds Bond Index Charge Charge Average (Unmanaged) ------------- ------------- ------------ --------------- 5/31/93 10,000.00 9,600.00 10,000.00 10,000.00 6/30/93 10,030.00 9,629.00 10,000.00 10,000.00 7/31/93 10,073.00 9,670.00 10,042.00 10,064.00 8/31/93 10,325.00 9,912.00 10,228.00 10,295.00 9/30/93 10,406.00 9,989.00 10,268.00 10,332.00 10/31/93 10,416.00 9,999.00 10,301.00 10,374.00 11/30/93 10,246.00 9,836.00 10,209.00 10,251.00 12/31/93 10,299.00 9,887.00 10,257.00 10,295.00 1/31/94 10,445.00 10,027.00 10,387.00 10,451.00 2/28/94 10,215.00 9,806.00 10,202.00 10,223.00 3/31/94 9,968.00 9,569.00 9,980.00 9,973.00 4/30/94 9,868.00 9,473.00 9,890.00 9,890.00 5/31/94 9,841.00 9,447.00 9,875.00 9,871.00 6/30/94 9,810.00 9,417.00 9,856.00 9,847.00 7/31/94 9,976.00 9,577.00 10,004.00 10,044.00 8/31/94 10,003.00 9,603.00 10,024.00 10,048.00 9/30/94 9,836.00 9,442.00 9,911.00 9,897.00 10/31/94 9,798.00 9,406.00 9,896.00 9,886.00 11/30/94 9,760.00 9,370.00 9,867.00 9,709.00 12/31/94 9,838.00 9,445.00 9,915.00 9,773.00 1/31/95 10,021.00 9,620.00 10,072.00 9,960.00 2/28/95 10,249.00 9,839.00 10,282.00 10,191.00 3/31/95 10,322.00 9,909.00 10,346.00 10,260.00 4/30/95 10,439.00 10,021.00 10,479.00 10,403.00 5/31/95 10,930.00 10,492.00 10,849.00 10,839.00 6/30/95 10,992.00 10,552.00 10,917.00 10,926.00 7/31/95 10,941.00 10,503.00 10,888.00 10,883.00 8/31/95 11,039.00 10,597.00 11,010.00 11,023.00 9/30/95 11,159.00 10,713.00 11,107.00 11,135.00 10/31/95 11,199.00 10,751.00 11,244.00 11,299.00 11/30/95 11,310.00 10,857.00 11,402.00 11,485.00 12/31/95 11,456.00 10,998.00 11,547.00 11,654.00 1/31/96 11,509.00 11,049.00 11,623.00 11,726.00 2/29/96 11,279.00 10,828.00 11,424.00 11,478.00 3/31/96 11,190.00 10,743.00 11,346.00 11,381.00 4/30/96 11,113.00 10,668.00 11,277.00 11,303.00 5/31/96 11,083.00 10,639.00 11,257.00 11,284.00 6/30/96 11,245.00 10,796.00 11,385.00 11,434.00 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 June 30, 1996 (unaudited) PRINCIPAL AMOUNT ISSUER (000'S OMITTED) VALUE - -------------------------------------------------------------- FIXED INCOME--102.4% ASSET BACKED SECURITIES -- 3.6% Contimortgage Home Equity Loan 6.95% due 4/15/14 .................... $1,700 $1,646,609 ----------- MORTGAGE OBLIGATIONS -- 65.6% COLLATERALIZED MORTGAGE OBLIGATIONS -- 14.2% Asset Securitization Corp. Series 95 7.384% due 8/13/29 ................... 1,000 973,750 Bank America Manufactured Housing 7.55% due 10/10/26 ................... 1,500 1,500,000 Lehman Brothers Mortgage Trust Series 95 7.144% due 8/25/04 ......... 1,981 1,970,210 Nomura Asset Securities Corp. 8.15% due 4/04/27 .................... 2,000 2,084,375 ----------- 6,528,335 ----------- MORTGAGE BACKED SECURITIES -- 38.2% Federal Home Loan Mortgage Association 8.50% due 4/01/01 .................... 37 37,487 Federal Home Loan Mortgage Corp. 8.00% due 8/15/06 .................... 2,000 2,076,860 6.50% due 4/01/11 .................... 274 264,964 6.50% due 5/01/11 .................... 713 690,069 Federal National Mortgage Association Remic, 5.00% due 10/25/21 ........... 2,300 1,908,264 Federal National Mortgage Association (TBA) 8.00% due 1/1/99 .............. 1,500 1,511,250 Federal National Mortgage Association 5.50% due 3/01/11 ................... 768 710,865 5.50% due 4/01/11 ................... 356 329,901 5.50% due 5/01/11 ................... 888 821,789 6.50% due 12/1/23 ................... 3,498 3,283,072 7.00% due 12/1/25 ................... 712 685,176 7.00% due 5/01/03 .................... 2,779 2,676,394 7.00% due 6/01/03 .................... 189 281,918 7.00% due 4/01/26 .................... 158 152,155 7.00% due 5/01/26 .................... 134 128,501 7.50% due 10/1/25 .................... 1,708 1,685,142 7.50% due 5/01/26 .................... 252 248,849 7.50% due 6/01/26 .................... 57 56,613 8.00% due 6/01/02 .................... 20 20,815 ----------- 17,570,084 ----------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION -- 13.2% 6.50% due 9/15/25 .................... 750 698,204 6.50% due 4/15/26 .................... 249 231,547 7.50% due 9/15/25 .................... 2,467 2,431,262 7.50% due 5/15/26 .................... 1,998 1,969,622 8.00% due 12/15/07 ................... 95 97,433 8.25% due 7/15/05 .................... 653 656,786 ----------- 6,084,854 ----------- TOTAL MORTGAGE OBLIGATIONS 30,183,273 ----------- YANKEES -- 1.0% Midland Bank, PLC 6.95% due 3/15/11 .................... 500 469,005 ----------- UNITED STATES GOVERNMENT OBLIGATIONS -- 30.0% UNITED STATES TREASURY BONDS -- 10.2% 6.25% due 8/15/23 .................... 3,000 2,719,680 6.875% due 8/15/25 ................... 2,000 1,979,680 ----------- 4,699,360 ----------- UNITED STATES TREASURY NOTES -- 19.8% 5.625% due 1/31/98 ................... 2,800 2,782,948 5.125% due 2/28/98 ................... 1,400 1,379,434 6.25% due 4/30/01 .................... 5,000 4,952,350 ----------- 9,114,732 ----------- TOTAL UNITED STATES GOVERNMENT OBLIGATIONS 13,814,092 ----------- UNITED STATES AGENCY OBLIGATIONS -- 2.2% Tennessee Valley Authority 1996 Ser A, 5.98% due 4/01/36 .................... $1,000 1,002,630 ----------- TOTAL INVESTMENTS (Identified Cost $47,314,329) ........ 102.4% 47,115,609 OTHER ASSETS, LESS LIABILITIES ........ (2.4) (1,119,855) ----- ----------- TOTAL NET ASSETS ...................... 100.0% $45,995,754 ===== =========== TBA's are mortgage-backed securities traded under delayed delivery commitments, settling after June 30, 1996. 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 June 30, 1996 (unaudited) ASSETS: Investments, at value (Note 1A)(Identified Cost, $47,314,329) ............... $47,115,609 Cash ........................................................................ 110,037 Receivable for securities sold .............................................. 2,437,500 Interest receivable ......................................................... 464,300 ----------- Total assets ............................................................ 50,127,446 ----------- LIABILITIES: Payable for securities purchased ............................................ 3,933,555 Payable for shares of beneficial interest repurchased ....................... 131,658 Payable to affiliates: Investment advisory fee (Note 2) .......................................... $7,156 Shareholder Servicing Agents' fee (Note 3B) ............................... 9,383 16,539 ------ Accrued expenses and other liabilities ...................................... 49,940 ----------- Total liabilities ....................................................... 4,131,692 ----------- NET ASSETS for 4,933,583 shares of beneficial interest outstanding .......... $45,995,754 =========== NET ASSETS CONSIST OF: Paid-in capital ............................................................. $49,637,154 Accumulated net realized loss on investments ................................ (3,377,427) Unrealized depreciation of investments ...................................... (198,720) Distributions in excess of net investment income ............................ (65,253) ----------- Total $45,995,754 =========== NET ASSET VALUE AND REDEMPTION PRICE PER SHARE OF BENEFICIAL INTEREST ....... $9.32 ===== COMPUTATION OF OFFERING PRICE: Maximum Offering Price per share based on a 4.00% sales charge ($9.32 / 0.96) $9.71 ===== See notes to financial statements
Landmark Intermediate Income Fund - -------------------------------------------------------------------------------- STATEMENT OF OPERATIONS For the Six Months Ended June 30,1996 (unaudited) INVESTMENT INCOME (Note 1B) ............................................ $1,482,247 EXPENSES: Investment advisory fees (Note 2) ...................................... $ 82,792 Administrative fees (Note 3A) .......................................... 59,137 Shareholder servicing agents' fees (Note 3B) ........................... 59,137 Distribution fees (Note 4) ............................................. 35,482 Custodian fees ......................................................... 34,382 Auditing services ...................................................... 15,200 Shareholder reports .................................................... 11,492 Legal services ......................................................... 9,845 Trustees fees .......................................................... 10,302 Transfer agent fees .................................................... 6,000 Miscellaneous .......................................................... 2,139 --------- Total expenses ................................................ 325,908 Less aggregate amount waived by Investment Adviser, Administrator, and Distributor (Notes 2, 3A, and 4) .................................. (112,184) Less fees paid indirectly (Note 1H) .................................... (818) --------- Net expenses ................................................... 212,906 ---------- Net investment income .......................................... 1,269,341 ---------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS: Net realized loss from investment transactions and futures contracts ... (948,404) Unrealized appreciation (depreciation) of investments: Beginning of period .............................................. 1,014,631 End of period .................................................... (198,720) --------- Net change in unrealized appreciation (depreciation) of investments .... (1,213,351) ---------- Net realized and unrealized gain (loss) on investments and futures contracts ............................................. (2,161,755) ---------- NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ................... $ (892,414) ========== See notes to financial statements
Landmark Intermediate Income Fund - ------------------------------------------------------------------------------------------------------------------------------------ STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, 1996 YEAR ENDED (UNAUDITED) DECEMBER 31, 1995 ------------- ----------------- INCREASE (DECREASE) IN NET ASSETS FROM: OPERATIONS: Net investment income ..................................................... $(41,269,341 $ 2,919,822 Net realized gain (loss) from investment transactions and futures contracts (948,404) 2,369,867 Net change in unrealized appreciation (depreciation) of investments ....... (1,213,351) 2,122,816 ------------ ----------- Net increase (decrease) in net assets resulting from operations ... (892,414) 7,412,505 ------------ ----------- DISTRIBUTIONS DECLARED TO SHAREHOLDERS FROM: Net investment income ..................................................... (1,353,287) (2,928,567) Net realized gain on investments .......................................... -- -- ------------ ----------- Decrease in net assets from distributions declared to shareholders (1,353,287) (2,928,567) ------------ ----------- TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 6): Net proceeds from sale of shares .......................................... 1,383,393 902,835 Net asset value of shares issued to shareholders from reinvestment of distributions ......................... 1,142,589 2,894,283 Cost of shares repurchased ................................................ (3,902,349) (6,244,911) ------------ ----------- Net decrease in net assets from transactions in shares of beneficial interest ............................................. (1,376,367) (2,447,793) ------------ ----------- NET INCREASE (DECREASE) IN NET ASSETS ..................................... (3,622,068) 2,036,145 NET ASSETS: Beginning of period ....................................................... 49,617,822 47,581,677 ------------ ----------- End of period (including undistributed (distributions in excess of) net investment income of $(65,253) and $18,693, respectively) ........... $ 45,995,754 $49,617,822 ======== ======== ============ =========== See notes to financial statements
Landmark Intermediate Income Fund - ----------------------------------------------------------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS
FOR THE PERIOD SIX MONTHS YEAR ENDED JUNE 25, 1993 ENDED DECEMBER 31, (COMMENCEMENT OF JUNE 30, 1996 --------------------- OPERATIONS) TO (UNAUDITED) 1995 1994 DECEMBER 31, 1993 ------------- ------ ------- ------------------- Net Asset Value, beginning of period ................. $ 9.77 $ 8.91 $ 9.880 $10.000 ------ ------ ------- ------- Income From Operations: Net investment income ................................ 0.26 0.57 0.521 0.261 Net realized and unrealized gain (loss) on investments (0.44) 0.86 (0.959) 0.037 ------ ------ ------- ------- Total from operations ........................ (0.18) 1.43 (0.438) 0.298 ------ ------ ------- ------- Less Distributions From: Net investment income ............................ (0.27) (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 .............................. (0.27) (0.57) (0.532) (0.418) ------ ------ ------- ------- Net Asset Value, end of period ................... $ 9.32 $ 9.77 $ 8.91 $ 9.88 ====== ====== ======= ======= RATIOS/SUPPLEMENTAL DATA: Net assets, end of period (000's omitted) ............ $45,996 $49,618 $47,582 $61,183 Ratio of expenses to average net assets .............. 0.90%* 0.90% 0.90% 0.90%* Ratio of net investment income to average net assets . 5.37%* 5.97% 5.52% 4.95%* Portfolio turnover ................................... 300% 396% 291% 103% Total return ......................................... (1.84)%+ 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 and six months ended June 30, 1996, the net investment income per share and the ratios would have been as follows: Net investment income per share ...................... $0.23 $0.52 $0.475 $0.236 Ratios: Expenses to average net assets ....................... 1.38%* 1.42% 1.39% 1.38%* Net investment income to average net assets .......... 4.89%* 5.45% 5.03% 4.47%* *Annualized +Not annualized See notes to financial statements
Landmark Intermediate Income Fund - -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS (unaudited) (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 preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates. 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. FUTURES CONTRACTS: -- The Fund may engage in futures transactions. The Funds may use futures contracts in order to protect the Fund from fluctuation in interest rates without actually buying or selling debt securities, or to manage the effective maturity or duration of fixed income securities in the Fund's Portfolio in an effort to reduce potential losses or enhance potential gains. The underlying value of a futures contract is incorporated within unrealized appreciation/depreciation in the Portfolio of Investments under the caption "Futures Contracts". The Fund had no open Futures Contracts at June 30, 1996. Buying futures contracts tends to increase the Fund's exposure to the underlying instrument. Selling futures contracts tends to either decrease the Fund's exposure to the underlying instrument, or to hedge other fund investments. Upon entering into a futures contract, the Fund is required to deposit with the broker an amount of cash or cash equivalents equal to a certain percentage of the contract amount. This is known as the "initial margin". Subsequent payments ("variation margin") are made or received by the Fund each day, depending on the daily fluctuation of the value of the contract. The daily changes in contract value are recorded as unrealized gains or losses and the Fund recognizes a realized gain or loss when the contract is closed. Futures contracts are valued at the settlement price established by the board of trade or exchange on which they are traded. There are several risks in connection with the use of futures contracts as a hedging device. The change in the value of futures contracts primarily corresponds with the value of their underlying instruments, which may not correlate with the change in the value of the hedged instruments. In addition, there is the risk the Fund may not be able to enter into a closing transaction because of an illiquid secondary market. Futures contracts involve, to varying degrees, risk of loss in excess of the futures variation margin reflected in the Statement of Assets and Liabilities. 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. Distributions to shareholders and shares issuable to shareholders electing to receive distributions in shares are recorded on the ex-dividend date. H. 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 $82,792, of which $42,698 was voluntarily waived for the six months ended June 30, 1996. 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. The Administrator fees amounted to $59,137, of which $35,701 was voluntarily waived for six months ended June 30, 1996. 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 0.25% 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 $59,137 for the six months ended June 30, 1996. (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. The Distribution fees amounted to $35,482, of which $33,785 was voluntarily waived for the six months ended June 30, 1996. (5) PURCHASES AND SALES OF INVESTMENTS Purchases and sales of securities, other than short-term obligations, aggregated $138,651,636 and $135,863,940, respectively, for the six months ended June 30, 1996. (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: SIX MONTHS YEAR ENDED ENDED JUNE 30, 1996 DECEMBER 31, (UNAUDITED) 1995 ------------- ------------ Shares sold ...................... 147,055 94,442 Shares issued to shareholders from reinvestment of distributions .. 120,695 306,199 Shares repurchased ............... (414,144) (662,943) -------- -------- Net decrease ..................... (146,394) (262,302) ======== ======== (7) FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation (depreciation) in value of the investment securities owned at June 30, 1996, as computed on a federal income tax basis, are as follows: Aggregate cost ................... $47,314,329 =========== Gross unrealized appreciation .... $ 145,405 Gross unrealized depreciation .... (344,125) ----------- Net unrealized depreciation .. $ (198,720) =========== (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 six months ended June 30, 1996, the commitment fee allocated to the Fund was $137. Since the line of credit was established there have been no borrowings. - --------------------------------------------------------------------- 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 [LOGO] 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 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 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/S/96 Printed on Recycled Paper [symbol] [LOGO] LANDMARK(SM) FUNDS Advised by Citibank, N.A. LANDMARK INTERMEDIATE INCOME FUND SEMI-ANNUAL REPORT June 30, 1996 -----END PRIVACY-ENHANCED MESSAGE-----