<PAGE>
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 BALANCED 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.
EQ/BL/A/95 Printed on Recycled Paper [logo]
LANDMARK(SM) FUNDS
Advised by Citibank, N.A.
LANDMARK
BALANCED FUND
ANNUAL
REPORT
December 31, 1995
<PAGE>
- --------------------------------------------------------------------------------
A LETTER TO OUR SHAREHOLDERS
Dear Shareholder:
1995 was an excellent year for the U.S. stock and bond markets. Contrary to
many investors' expectations at the end of 1994, this year was characterized by
modest economic growth, low inflation and declining interest rates. This
combination of economic influences was a recipe for above-average gains in the
financial markets, and investors who exercised patience and discipline during
1994's difficult market conditions reaped the rewards provided by stronger
markets in 1995.
The Landmark Funds' investment adviser, Citibank, N.A., manages the
Landmark Balanced Fund to earn high current income by investing in a broad range
of securities, to preserve capital and to provide growth potential with reduced
risk. Through its investment in Balanced Portfolio, the Fund invests in a
broadly diversified portfolio of income-producing securities, including common
and preferred stocks and bonds.
As of December 29, 1995, Portfolio Manager Dwight Hyde has retired from
Citibank. We are pleased to announce that his management duties for the
Portfolio's equity component have been assumed by Grant Hobson and Richard
Goldman, both of whom are experienced investment managers and longstanding
members of Mr. Hyde's equity management team. The fixed-income portion of the
Portfolio continues to be managed by Mark Lindbloom. We wish Dwight the very
best in his retirement, and we congratulate Grant and Rich on their new
responsibilities.
This Annual Report reviews the Portfolio's investment activities and
performance and provides a summary of Citibank's perspective on and outlook for
the U.S. financial markets. On behalf of the Board of Trustees of the Landmark
Funds, I want to thank you for your confidence and participation. We look
forward to serving you in the months and years ahead.
/s/ Philip W. Coolidge
Philip W. Coolidge
President
January 20, 1996
- --------------------------------------------------------------------------------
Remember that Mutual Fund Shares:
o Are not bank deposits or FDIC insured
o Are not obligations of or guaranteed by Citibank or Citicorp Investment
Services
o Are subject to investment risks, including possible loss of the principal
amount invested
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
1 Letter to Shareholders
- --------------------------------------------------------------------------------
Market Environment
2 Fund Snapshot
Fund Quotes
- --------------------------------------------------------------------------------
3 Portfolio Managers
The Portfolio Managers Respond
- --------------------------------------------------------------------------------
4 Strategy and Outlook
Balanced Portfolio by the Numbers
- --------------------------------------------------------------------------------
5 Fund Data
Performance Highlights
LANDMARK BALANCED FUND
- --------------------------------------------------------------------------------
6 Statement of Assets and Liabilities
Statement of Operations
- --------------------------------------------------------------------------------
7 Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
8 Financial Highlights
- --------------------------------------------------------------------------------
9 Notes to Financial Statements
- --------------------------------------------------------------------------------
10 Independent Auditors' Report
- --------------------------------------------------------------------------------
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
12 Portfolio of Investments
- --------------------------------------------------------------------------------
15 Statement of Assets and Liabilities
Statement of Operations
- --------------------------------------------------------------------------------
16 Statement of Changes in Net Assets
Financial Highlights
- --------------------------------------------------------------------------------
17 Notes to Financial Statements
- --------------------------------------------------------------------------------
19 Independent Auditors' Report
<PAGE>
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
As 1995 began, most investors in the U.S. stock and bond markets were
cautious in an environment of rising interest rates and declining security
prices. The Federal Reserve increased key short-term interest rates six times in
1994 and once again in February, 1995, in an effort to rein in a strong economy
and prevent an acceleration of inflation.
By Spring it was apparent that the Federal Reserve's tight monetary policy
had caused the economy to slow down. As the rate of economic growth moderated,
investors' fears of inflation diminished. Accordingly, yields on fixed-income
investments declined rapidly as investors became convinced that the Federal
Reserve would begin to lower interest rates in order to avoid the possibility of
a recession. Lower interest rates drove equity valuations higher, producing a
strong rally in the stocks of high-quality companies.
These economic conditions proved to be quite positive for both stocks and
bonds. Lower interest rates, benign inflation and increased demand for U.S.
securities from domestic and overseas investors produced above-average bond
market returns at the same time that broad measures of stock market performance
set several new records during the year.
- --------------------------------------------------------------------------------
FUND SNAPSHOT
COMMENCEMENT OF OPERATIONS
October 19, 1990
NET ASSETS AS OF 12/31/95
$246.0 million
FUND OBJECTIVE
To earn high current income by investing in a broad range of securities, to
preserve capital and to provide growth potential with reduced risk.
DIVIDENDS
Paid quarterly, if any
CAPITAL GAINS
Distributed annually, if any
BENCHMARKS
o Standard & Poor's 500 Index
o Lehman Government/Corporate Bond Index
o Lipper Balanced Funds Average
INVESTMENT ADVISER,
BALANCED PORTFOLIO
Citibank, N.A.
- --------------------------------------------------------------------------------
FUND QUOTES FROM THE PORTFOLIO MANAGERS
"1995's bond market was fantastic, more similar to the market we saw in `93 than
the one we saw in `94."
"We do not take excessive risks and we want to minimize volatility as much as
possible."
"It's been an excellent year for the stock market: lower interest rates, low
inflation, good earnings and funds flowing into equities as people plan for
long-term goals."
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGERS
GRANT HOBSON
Vice President, Citibank, N.A.
RICHARD GOLDMAN
Vice President, Citibank, N.A.
MARK LINDBLOOM
Vice President, Citibank, N.A.
Grant D. Hobson, Richard Goldman and Mark Lindbloom are the managers of the
Balanced Fund. Mr. Hobson and Mr. Goldman manage the equity portion of the
portfolio. Mr. Hobson is responsible for managing U.S. equity portfolios for
trust and pension accounts of Citibank Global Asset Management and currently
manages more than $1 billion of total assets at Citibank. Prior to joining
Citibank in 1993, Mr. Hobson was a Sector Portfolio Manager for Axe Houghton,
formerly a division of USF&G, where he was responsible for equity investments
for pension accounts and mutual funds. Mr. Goldman is responsible for managing
approximately $600 million of total assets and for quantitative equity research
for the U.S. institutional business of Citibank Global Asset Management. He
joined Citicorp's Investment Management Division in 1985 and from 1988 to 1994
was responsible for running Citicorp's Institutional Investor Relations
Department. Mr. Lindbloom manages the fixed income portion of the portfolio. He
came to Citibank in 1986 from Brown Brothers Harriman & Co., where he managed
fixed income assets for discretionary corporate portfolios.
- --------------------------------------------------------------------------------
THE PORTFOLIO MANAGERS RESPOND
The fixed-income portion of the Portfolio was managed through changes in
average duration, a measure of the Portfolio's sensitivity to interest rate
changes, and through sector rotation, changes in the amount invested in
different areas of the bond market. As the year began, we maintained a
longer-than-average duration in order to realize greater appreciation of
Portfolio holdings and to capture higher yields for a longer period as interest
rates fell. When it appeared at mid-year that most bond market gains were behind
us, we reduced the Portfolio's duration to the neutral range. Similarly, the
majority of the Portfolio's assets were invested in U.S. Treasury securities
during the year to avoid the risks associated with mortgage-backed securities
when interest rates decline. As the year progressed, we gradually increased our
exposure to mortgage backed securities to capture the higher yields they
provide.
In the equity portion of the Portfolio, we focused on well established
growth companies with strong cash flows, seasoned management teams and
reasonable valuations. While out of favor early in the year, this approach paid
off later as market leadership shifted to large, well managed growth companies.
For example, we maintained diversified positions in the health care industry, a
sector that offered excellent values as the year began and performed quite well
in the second half of the year. We also favored consumer companies with growing
worldwide markets as well as companies that are expected to benefit from the
outsourcing of corporate services and data processing.
- --------------------------------------------------------------------------------
STRATEGY AND OUTLOOK
Our long-term outlook for stocks and bonds is positive. In light of recent
data suggesting economic weakness, we believe that interest rates will continue
to decline modestly, the rate of inflation will remain relatively low and
investors in the U.S. and overseas will continue to find U.S. investments
attractive. In addition, progress in Washington toward a balanced federal budget
should influence the markets positively.
However, 1996 probably will not produce the magnitude of returns we saw in
1995. In the bond market, interest rate declines should be more limited than
they were in 1995. And as slower economic growth restrains the recent rise in
corporate earnings, it is possible that the stock market could experience a
temporary correction. In our view, any such declines should be viewed as
opportunities to buy well managed companies at attractive prices. Whatever the
future brings, we will continue to actively manage your investment to generate
competitive levels of income, preserve capital and take advantage of the
potential for long-term growth.
BALANCED PORTFOLIO
- --------------------------------------------------------------------------------
By The Numbers
TOP TEN EQUITY HOLDINGS OF THE PORTFOLIO
(As of 12/31/95)
- --------------------------------------------------------------------------------
NAME INDUSTRY SECTOR % OF NET ASSETS
Johnson & Johnson Health Services/Technology 1.67%
American Express Electronics/Technological Services 1.65%
Pfizer Inc. Health Services/Technology 1.60%
McDonald's Corp. Consumer Services 1.54%
Xerox Corp. Producer Manufacturing 1.44%
GTE Corp. Utilities 1.43%
Royal Dutch Petroleum Co. ADRsEnergy/Minerals 1.42%
General Electric Co. Producer Manufacturing 1.39%
PepsiCo Inc. Consumer Non-Durables 1.39%
Kerr-McGee Corp Energy/Minerals 1.37%
CHANGES IN PORTFOLIO ASSET ALLOCATION
Portfolio of investments as of 12/31/95
CASH/SHORT TERM/OTHER 4%
STOCKS 51%
TREASURIES 29%
OTHER BONDS 16%
...Compared to 12/31/94
CASH/SHORT TERM/OTHER 5%
STOCKS 56%
TREASURIES 19%
OTHER BONDS 20%
- --------------------------------------------------------------------------------
FUND DATA All Periods Ended December 31, 1995
<TABLE>
<CAPTION>
TOTAL RETURNS
--------------------------------------
SINCE
ONE FIVE 10/19/90
YEAR YEARS* INCEPTION*
-------- -------- ----------
<S> <C> <C> <C>
Landmark Balanced Fund without Sales Charge................ 22.66% 12.53% 13.29%
Lipper Balanced Funds Average.............................. 25.16% 13.04% 13.55%+
Standard & Poor's 500 Index................................ 37.53% 16.56% 18.06%+
Lehman Government/Corporate Bond Index..................... 19.24% 9.80% 10.16%+
Landmark Balanced Fund with Maximum Sales Charge of 4.75%.. 16.84% 11.44% 12.24%
* Average Annual Total Return.
+ From 10/31/90
</TABLE>
30-Day SEC Yield 2.98%
Income Dividends Per Share $0.495
Capital Gain Distribution $0.341
IMPORTANT TAX INFORMATION
The Fund designates for income tax purposes $2,738,721 of its capital gains
distributions as long term capital gains.
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.
- --------------------------------------------------------------------------------
PERFORMANCE HIGHLIGHTS
A $10,000 investment in the Fund made on inception date would have grown to
$18,235 with sales charge (as of 12/31/95). The graph shows how the Fund
compares to our benchmarks for the period October 31, 1990 to December 31, 1995.
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.
<TABLE>
<CAPTION>
LANDMARK BALANCED
Landmark Landmark Lehman
Balanced Balanced Lipper Government/
Without With Balanced S&P 500 Corporate
Sales Sales Funds Index Bond Index Balanced
Charge Charge Average (Unmanaged) (Unmanaged) Composite
<S> <C> <C> <C> <C> <C> <C>
$10,000 $9,525
Oct-90 $9,826 $9,359 $10,000 $10,000 $10,000 $10,000
Nov-90 $10,369 $9,877 $10,435 $10,646 $10,133 $10,475
Dec-90 $10,609 $10,106 $10,677 $10,943 $10,354 $10,713
Jan-91 $11,105 $10,578 $11,034 $11,420 $10,510 $11,042
Feb-91 $11,673 $11,119 $11,520 $12,237 $10,628 $11,553
Mar-91 $11,816 $11,255 $11,724 $12,533 $10,719 $11,753
Apr-91 $11,827 $11,265 $11,752 $12,563 $10,793 $11,824
May-91 $12,264 $11,681 $12,098 $13,104 $10,917 $12,152
Jun-91 $11,837 $11,275 $11,725 $12,504 $10,969 $11,813
Jul-91 $12,403 $11,814 $12,122 $13,087 $10,957 $12,203
Aug-91 $12,886 $12,274 $12,433 $13,397 $11,095 $12,488
Sep-91 $12,713 $12,109 $12,449 $13,173 $11,350 $12,468
Oct-91 $12,945 $12,330 $12,632 $13,350 $11,587 $12,612
Nov-91 $12,723 $12,119 $12,353 $12,812 $11,690 $12,358
Dec-91 $13,751 $13,098 $13,357 $14,277 $11,807 $13,372
Jan-92 $13,496 $12,855 $13,241 $14,012 $12,205 $13,144
Feb-92 $13,698 $13,048 $13,400 $14,194 $12,024 $13,274
Mar-92 $13,530 $12,887 $13,202 $13,917 $12,088 $13,090
Apr-92 $13,583 $12,938 $13,322 $14,326 $12,022 $13,352
May-92 $13,658 $13,009 $13,460 $14,397 $12,094 $13,495
Jun-92 $13,417 $12,780 $13,315 $14,182 $12,328 $13,454
Jul-92 $13,868 $13,210 $13,712 $14,762 $12,510 $13,922
Aug-92 $13,664 $13,015 $13,582 $14,460 $12,830 $13,800
Sep-92 $13,910 $13,249 $13,753 $14,630 $12,944 $13,973
Oct-92 $14,115 $13,445 $13,754 $14,681 $13,120 $13,917
Nov-92 $14,569 $13,877 $14,094 $15,182 $12,919 $14,196
Dec-92 $14,690 $13,992 $14,355 $15,369 $12,908 $14,399
Jan-93 $14,798 $14,095 $14,548 $15,498 $13,130 $14,597
Feb-93 $14,776 $14,075 $14,644 $15,709 $13,416 $14,837
Mar-93 $15,288 $14,562 $14,920 $16,040 $13,694 $15,045
Apr-93 $15,091 $14,375 $14,736 $15,652 $13,741 $14,873
May-93 $15,331 $14,603 $14,978 $16,071 $13,846 $15,109
Jun-93 $15,326 $14,598 $15,146 $16,118 $13,839 $15,273
Jul-93 $15,206 $14,484 $15,170 $16,054 $14,153 $15,275
Aug-93 $15,688 $14,943 $15,628 $16,662 $14,244 $15,763
Sep-93 $15,677 $14,933 $15,681 $16,534 $14,571 $15,712
Oct-93 $15,809 $15,059 $15,822 $16,876 $14,622 $15,933
Nov-93 $15,644 $14,901 $15,591 $16,716 $14,682 $15,767
Dec-93 $15,935 $15,178 $15,867 $16,918 $14,508 $15,909
Jan-94 $16,282 $15,509 $16,253 $17,494 $14,571 $16,329
Feb-94 $15,958 $15,200 $15,934 $17,020 $14,791 $15,922
Mar-94 $15,350 $14,621 $15,348 $16,277 $14,469 $15,349
Apr-94 $15,440 $14,707 $15,377 $16,486 $14,114 $15,416
May-94 $15,643 $14,899 $15,449 $16,756 $13,997 $15,556
Jun-94 $15,282 $14,556 $15,167 $16,346 $13,971 $15,312
Jul-94 $15,702 $14,957 $15,509 $16,882 $13,937 $15,736
Aug-94 $16,020 $15,259 $15,906 $17,574 $14,216 $16,126
Sep-94 $15,590 $14,849 $15,618 $17,149 $14,222 $15,794
Oct-94 $15,818 $15,067 $15,711 $17,546 $14,007 $16,007
Nov-94 $15,430 $14,697 $15,324 $16,902 $13,991 $15,540
Dec-94 $15,607 $14,866 $15,453 $17,151 $13,741 $15,718
Jan-95 $15,804 $15,053 $15,644 $17,595 $13,832 $16,083
Feb-95 $16,300 $15,526 $16,115 $18,280 $14,097 $16,608
Mar-95 $16,602 $15,813 $16,391 $18,819 $14,424 $16,946
Apr-95 $16,811 $16,012 $16,691 $19,372 $14,521 $17,340
May-95 $17,450 $16,621 $17,228 $20,145 $14,724 $18,046
Jun-95 $17,624 $16,787 $17,550 $20,613 $15,341 $18,355
Jul-95 $17,847 $16,999 $17,954 $21,295 $15,464 $18,691
Aug-95 $17,835 $16,988 $18,109 $21,348 $15,404 $18,814
Sep-95 $18,233 $17,367 $18,512 $22,249 $15,601 $19,367
Oct-95 $18,256 $17,389 $18,468 $22,169 $15,760 $19,439
Nov-95 $18,892 $17,995 $19,033 $23,140 $15,991 $20,079
Dec-95 $19,144 $18,235 $19,292 $23,586 $16,255 $20,429
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.
</TABLE>
<PAGE>
Landmark Balanced Fund
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investment in Balanced Portfolio, at value (Note 1A).................... $246,329,696
Receivable for shares of beneficial interest sold....................... 49,308
------------
Total assets........................................................ 246,379,004
------------
LIABILITIES:
Payable for shares of beneficial interest repurchased................... 280,004
Payable to affiliates--Shareholder servicing agents' fees (Note 2B)..... 52,073
Accrued expenses and other liabilities.................................. 45,322
------------
Total liabilities................................................... 377,399
------------
NET ASSETS for 15,661,914 shares of beneficial interest outstanding..... $246,001,605
============
NET ASSETS CONSIST OF:
Paid-in capital......................................................... 216,096,522
Unrealized appreciation of investments.................................. 29,856,833
Accumulated net realized gain........................................... 48,250
------------
Total............................................................... $246,001,605
============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE OF BENEFICIAL INTEREST... $15.71
======
COMPUTATION OF OFFERING PRICE:
Maximum Offering Price per share based on a 4.75% sales charge
($15.71 / 0.9525)..................................................... $16.49
======
</TABLE>
See notes to financial statements
<PAGE>
Landmark Balanced Fund
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME (Note 1B):
Interest Income from Balanced Portfolio.................................... $7,300,744
Dividend Income from Balanced Portfolio.................................... 2,671,429
Other Income Foreign Tax reclaim........................................... 18,837
Allocated Expenses from Balanced Portfolio................................. (1,244,574) $8,746,436
----------
EXPENSES:
Shareholder Servicing Agents' fees (Note 2B)............................... 944,624
Administrative fees (Note 2A).............................................. 354,234
Distribution fees (Note 3)................................................. 118,077
Expense fees (Note 6)...................................................... 103,747
----------
Total expenses......................................................... 1,520,682
Less aggregate amount waived by Shareholder
Servicing Agents (Note 2B)............................................... (354,234)
----------
Net expenses.......................................................... 1,166,448
-----------
Net investment income................................................. 7,579,988
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM BALANCED PORTFOLIO:
Net realized gain (loss)................................................... 12,126,490
Net change in unrealized appreciation (depreciation)....................... 28,313,715
-----------
Net realized and unrealized gain (loss) from Balanced Portfolio....... 40,440,205
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $48,020,193
===========
</TABLE>
See notes to financial statements
<PAGE>
Landmark Balanced Fund
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income........................................ $ 7,579,988 $ 6,897,273
Net realized gain (loss)..................................... 12,126,490 (6,869,492)
Net change in unrealized appreciation (depreciation)......... 28,313,715 (5,321,496)
------------ ------------
Net increase (decrease) in net assets resulting from
operations .............................................. 48,020,193 (5,293,715)
============ ============
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income........................................ (7,683,860) (6,810,013)
Net realized gain............................................ (5,178,062) (527,276)
------------ ------------
Decrease in net assets from distributions to shareholders.. (12,861,922) (7,337,289)
------------ ------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (NOTE 5):
Net proceeds from sale of shares............................. 4,172,040 9,407,740
Net asset value of shares issued to shareholders
from reinvestment of distributions......................... 12,859,063 7,330,858
Cost of shares repurchased................................... (33,496,565) (42,014,602)
------------ ------------
Net decrease in net assets from
transactions in shares of beneficial interest............ (16,465,462) (25,276,004)
------------ ------------
NET INCREASE (DECREASE) IN NET ASSETS........................ 18,692,809 (37,907,008)
NET ASSETS:
Beginning of period.......................................... 227,308,796 265,215,804
------------ ------------
End of period (including undistributed net investment
income of -0- and $202,535, respectively).................. $246,001,605 $227,308,796
============ ============
</TABLE>
See notes to financial statements
<PAGE>
Landmark Balanced Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------------------
1995 1994++ 1993++ 1992++ 1991++
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period... $ 13.52 $ 14.24 $ 13.54 $ 12.93 $ 10.27
------- ------- ------- ------- -------
Income From Operations:
Net investment income.................. 0.486 0.399 0.336** 0.266 0.336
Net realized and unrealized gain (loss) 2.540 (0.695) 0.803** 0.600 2.665
------- ------- ------- ------- -------
Total from operations............. 3.026 (0.296) 1.139 0.866 3.001
------- ------- ------- ------- -------
Less Distributions From:
Net investment income................ (0.495) (0.394) (0.319) (0.256) (0.341)
Net realized gain.................... (0.341) (0.030) (0.120) -- --
------- ------- ------- ------- -------
Total from distributions......... (0.836) (0.424) (0.439) (0.256) (0.341)
------- ------- ------- ------- -------
Net Asset Value, end of period......... $ 15.71 $ 13.52 $ 14.24 $ 13.54 $ 12.93
======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) $246,002 $227,309 $265,216 $15,296 $10,239
Ratio of expenses to average net assets 1.02%(A) 1.02%(A) 1.04% 1.40% 1.40%
Ratio of net investment income to average
net assets........................... 3.21% 2.82% 2.46% 2.07% 2.88%
Portfolio turnover (B)................. -- 29% 101% 102% 117%
Total return........................... 22.66% (2.06)% 8.48% 6.82% 29.61%
Note: If Agents of the Fund for the periods indicated had not voluntarily
waived a portion of their fees and had expenses been limited to that required
by certain state securities laws, the net investment income per share and the
ratios would have been as follows:
Net investment income per share........ $0.463 $0.378 $0.310** $0.148 $0.211
Ratios:
Expenses to average net assets......... 1.17%(A) 1.17%(A) 1.23% 2.32% 2.47%
Net investment income to
average net assets................... 3.06% 2.67% 2.27% 1.15% 1.81%
** The per share amounts were computed using a monthly average number of shares outstanding during the year.
(A) Includes the Fund's share of Balanced Portfolio allocated expenses for the period May 1, 1994 to December
31, 1994 and for the period indicated.
(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 of its investable assets in Balanced Portfolio.
</TABLE>
See notes to financial statements
<PAGE>
Landmark Balanced Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES
The Landmark Balanced Fund (the "Fund") is a separate diversified series of
Landmark Funds I (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
Balanced Portfolio (the "Portfolio"), a management investment company for which
Citibank, N.A. ("Citibank") serves as Investment Adviser. 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 Trust seeks to achieve the Fund's investment objectives of earning high
current income, preservation of capital and providing growth potential with
reduced risk by investing all of its investable assets in the Portfolio, an
open-end, diversified management investment company having the same investment
objectives and policies and substantially the same investment restrictions as
the Fund. The value of such investment reflects the Fund's proportionate
interest (97.9% at December 31, 1995) in the net assets of the Portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires magement to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
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 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.
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 reclassed $4,351 to paid-in capital, $103,014 to accumulated
net gain on investment and $98,663 from undistributed net investment income.
F. OTHER -- All the net investment income, 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 the trade date
basis. Realized gains and losses are determined on the identified cost basis.
(2) 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 Trust Administrative Services Plan, the
aggregate of the fee paid to the Administrator from the Fund and the Portfolio,
the fees paid to the Shareholder Servicing Agents from the Fund under such Plan
and the Basic Distribution Fee paid from the Fund to the Distributor under the
Distribution Plan may not exceed 0.65% of the Fund's average daily net assets on
an annualized basis for the Fund's then current fiscal year.
A. ADMINISTRATIVE FEES -- Under the terms of an Administrative Services
Agreement, the administrative fees paid to the Administrator, as compensation
for overall administrative services and general office facilities, may not
exceed an annual rate of 0.20% of the Fund's average daily net assets and 0.05%
of the Portfolio's average daily net assets. For the year ended December 31,
1995, under the Administrative Services Plan the Administrator received fees
computed at an annual rate of 0.15% of the Fund's average daily net assets which
amounted to $354,234. 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 officer
who is affiliated with the Administrator, all of whom receive remuneration for
their services to the Fund from the Administrator or its affiliates. Certain of
the officers and a Trustee of the Fund are officers or directors of the
Administrator or its affiliates.
B. SHAREHOLDER SERVICING AGENTS' FEES -- The Trust, on behalf of the Fund, has
entered into shareholder servicing agreements with each Shareholder Servicing
Agent pursuant to which that Shareholder Servicing Agent acts as an agent for
its customers and provides other related services. For their services, each
Shareholder Servicing Agent receives fees from the Fund, which may be paid
periodically, which may not exceed, on an annualized basis, an amount equal to
0.40% of the average daily net assets of the Fund represented by shares owned
during the period for which payment is being made by investors for whom such
Shareholder Servicing Agent maintains a servicing relationship. Shareholder
Servicing Agents' fees amounted to $944,624, of which $354,234 was voluntarily
waived for the year ended December 31, 1995.
(3) DISTRIBUTION FEES
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, in which the Fund reimburses the
Distributor for expenses incurred or anticipated in connection with sales of
shares of the Fund, at an annual rate not to exceed 0.15% of the Fund's average
daily net assets. The Distributor may also receive an additional fee from the
Fund at an annual rate 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 fee has been made during the period. Under the
Administrative Services Plan distribution fees were computed at an annual rate
of 0.05% of the Fund's average daily net assets, which amounted to $118,077 for
the year ended December 31, 1995.
(4) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio for the year
ended December 31, 1995 aggregated $4,270,819 and $34,894,729, respectively.
(5) SHARES OF BENEFICIAL INTEREST
the Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares of beneficial interest were as follows:
Year Ended Year Ended
December 31, December 31,
1995 1994
----------- -----------
Shares sold.......................... 278,541 671,065
Shares issued to shareholders from
reinvestment of distribution....... 843,462 539,598
Shares repurchased.................... (2,270,911) (3,026,611)
---------- ----------
Net decrease.......................... (1,148,908) (1,815,948)
========== ==========
<PAGE>
(6) EXPENSE FEES
LFBDS has entered into an expense agreement with the Fund. LFBDS 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
Fund, other than fees paid under the Administrative Services Agreement,
Distribution Agreement, and the Shareholder Servicing Agreements. The Agreement
may be terminated by either party upon not less than 30 days nor more than 60
days written notice.
The Fund has agreed to pay LFBDS an expense fee on an annual basis, accrued
daily and paid monthly; provided, however, that such fee shall not exceed the
amount such that immediately after any such payment the aggregate expenses of
the Fund including expenses allocated from the Portfolio would, on an annual
basis, exceed an agreed upon rate, currently 1.02% of average daily net assets.
Landmark Balanced Fund
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND THE SHAREHOLDERS OF LANDMARK FUNDS I (THE TRUST): LANDMARK
BALANCED FUND
In our opinion, the accompanying statement of assets and liabilities, and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Landmark Balanced Fund (the "Fund"), a series of Landmark Funds I, at December
31, 1995, and the results of its operations, the changes in its net assets and
the financial highlights for the periods indicated in conformity with generally
accepted accounting principles. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Fund's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these financial statements in accordance with generally accepted
auditing standards which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments owned at December 31, 1995 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 7, 1996
<PAGE>
Balanced Portfolio
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS December 31, 1995
ISSUER SHARES VALUE
- ----------------------------------------------------------
__________________________________________________________
COMMON STOCKS--50.6%
__________________________________________________________
COMMERCIAL SERVICES - 1.3%
Sysco Corp............... 100,000 $ 3,250,000
------------
COMMODITIES - 3.2%
Air Products & Chemicals Inc. 45,000 2,373,750
EI Dupont De Nemours & Co. Inc. 36,600 2,557,425
Monsanto Co.............. 12,500 1,531,250
Temple Inland Inc........ 35,800 1,579,675
------------
8,042,100
------------
CONSUMER DURABLES - 1.8%
Eastman Kodak Co......... 44,000 2,948,000
General Motors Corp...... 33,500 1,771,312
------------
4,719,312
------------
CONSUMER NON-DURABLES - 4.7%
Colgate-Palmolive Co..... 34,500 2,423,625
Kimberly Clark Corp...... 31,590 2,614,073
PepsiCo Inc.............. 62,500 3,492,187
Philip Morris Comp Cos Inc. 36,000 3,258,000
------------
11,787,885
------------
CONSUMER SERVICES - 3.3%
Capital Cities/ABC Inc... 16,000 1,974,000
Carnival Corp............ 96,500 2,352,188
McDonald's Corp.......... 86,000 3,880,750
------------
8,206,938
------------
ELECTRONICS/TECHNOLOGICAL SERVICES - 6.7%
American Express......... 75,000 4,162,500
Cisco Systems, Inc....... 30,000 2,238,750
Computer Associates Intl. Inc. 46,650 2,653,219
DSC Communications....... 48,000 1,770,000
General Motors Corp. Class "E" 55,000 2,860,000
Intel Corp............... 9,600 544,800
LSI Logic Corp........... 28,400 930,100
Silicon Graphics Inc.*... 57,000 1,567,500
------------
16,726,869
------------
ENERGY/MINERALS - 6.2%
Amoco Corp............... 44,600 $ 3,205,625
Exxon Corp............... 42,600 3,413,325
Kerr-McGee Corp.......... 54,100 3,435,350
Mobil Corp............... 19,300 2,161,600
Royal Dutch Petroleum Co.
ADRs................... 25,300 3,570,462
------------
15,786,362
------------
FINANCE - 5.0%
American International Group Inc. 31,100 2,876,750
BankAmerica Corp......... 40,000 2,590,000
Federal National Mortgage
Association............ 27,000 3,351,375
State Street Boston Corp. 44,300 1,993,500
USF & G Corp............. 104,700 1,766,812
------------
12,578,437
------------
HEALTH SERVICES/TECHNOLOGY - 3.8%
Community Health Systems. 35,500 1,264,688
Johnson & Johnson........ 49,000 4,195,625
Pfizer Inc............... 64,000 4,032,000
------------
9,492,313
------------
INDUSTRIAL SERVICES - 2.3%
Fluor Corp............... 45,000 2,970,000
WMX Technologies Inc..... 91,800 2,742,525
------------
5,712,525
------------
PRODUCER MANUFACTURING - 4.7%
Danaher Corp............. 54,500 1,730,375
Emerson Electric Co...... 35,000 2,861,250
General Electric Co...... 48,700 3,506,400
Xerox Corp............... 26,500 3,630,499
------------
11,728,524
------------
RETAIL TRADE - 2.1%
Limited Inc.............. 65,000 1,129,375
Nine West Group Inc...... 31,700 1,188,750
Toys "R" Us Inc.*........ 80,000 1,740,000
Wal-Mart Stores Inc...... 58,000 1,297,750
------------
5,355,875
------------
TRANSPORTATION - 1.0%
Norfolk Southern Co...... 33,000 2,619,375
------------
UTILITIES - 4.5%
FPL Group Inc............ 73,000 3,385,375
GTE Corp................. 82,000 3,608,000
Pacificorp............... 115,000 2,443,750
Texas Utilities.......... 43,100 1,772,488
------------
11,209,613
------------
TOTAL COMMON STOCKS
(Identified Cost $99,038,313) 127,216,128
------------
__________________________________________________________
FIXED INCOME--45.4%
__________________________________________________________
PRINCIPAL
AMOUNT
-------
ASSET BACKED - 1.2%
First USA Credit Card (+)
6.14%, due 10/15/01..... $3,000,000 $ 2,999,037
GMAC 1992 E Grantor Trust
4.75%, due 8/15/97...... 141,533 140,913
------------
3,139,950
------------
MORTGAGE OBLIGATIONS - 13.6%
COLLATERALIZED MORTGAGE OBLIGATIONS - 5.7%
Asset Securitization Corp. Series 95
7.384%, due 8/13/29..... 2,500,000 2,606,250
Federal Home Loan Mortgage
Association
6.00%, due 12/15/08..... 3,348,331 3,149,524
Lehman Brothers Mortgage Trust
Series 95
7.144%, due 9/25/25..... 4,988,638 5,188,184
Nomura Asset Securities Corp.
8.15%, due 3/04/20...... 3,000,000 3,323,438
------------
14,267,396
------------
PRINCIPAL
ISSUER AMOUNT VALUE
- ----------------------------------------------------------
MORTGAGE BACKED SECURITIES - 3.5%
Federal Home Loan Mortgage Corp.
8.50%, due 6/01/01...... $ 34,570 $ 35,835
9.50%, due 2/01/01...... 19,307 20,213
Federal National Mortgage
Association
6.00%, due 9/01/00...... 2,679,933 2,684,120
9.00%, due 11/01/01..... 27,318 28,761
Federal Home
Mortgage Corp. (TBA)
6.50%, due 1/01/11...... 6,000,000 6,031,860
------------
8,800,789
------------
GOVERNMENT NATIONAL
MORTGAGE ASSOCIATION - 4.4%
8.25%, due 7/15/05...... 837,040 869,995
6.50%, due 10/20/25..... 2,931,619 2,986,587
6.00%, due 1/15/26...... 3,000,000 3,028,590
7.50%, due 1/15/26 (TBA) 4,000,000 4,115,000
------------
11,000,172
------------
TOTAL MORTGAGE OBLIGATIONS 34,068,357
------------
DOMESTIC CORPORATE BONDS - 1.9%
K-Mart
12.50%, due 3/01/05..... 2,100,000 1,835,085
US West Capital Funding Inc.
6.31%, due 11/01/05..... 3,000,000 3,050,685
------------
4,885,770
------------
UNITED STATES
GOVERNMENT OBLIGATIONS - 28.7%
UNITED STATES TREASURY BONDS - 7.9%
6.50%, due 8/15/05...... 10,000,000 10,653,100
7.625%, due 2/15/25..... 7,500,000 9,171,075
------------
19,824,175
------------
UNITED STATES TREASURY NOTES - 20.8%
7.375%, due 11/15/97.... $ 3,600,000 3,736,117
6.75%, due 4/30/00...... 3,000,000 3,157,020
6.125%, due 7/31/00..... 13,500,000 13,896,495
6.25%, due 8/31/00...... 8,000,000 8,276,240
5.625%, due 11/30/00.... 5,000,000 5,045,300
6.50%, due 5/15/05...... 17,000,000 18,086,470
------------
52,197,642
------------
TOTAL UNITED STATES
GOVERNMENT OBLIGATIONS.. 72,021,817
------------
TOTAL FIXED INCOME
(Identified Cost $112,131,083) 114,115,894
------------
<PAGE>
__________________________________________________________
SHORT-TERM OBLIGATIONS--8.6%
__________________________________________________________
Dresdner Repurchase Agreement
5.93%, due 1/02/96, proceeds at
maturity $7,005,613
(secured by $7,164,116
U.S. Treasury Bond 11.25%,
due 2/15/15)............ $ 7,001,000 $ 7,001,000
United States Treasury Bill
5.20%, due 6/13/96...... 15,000,000 14,663,850
------------
TOTAL SHORT-TERM OBLIGATIONS,
(Identified Cost $21,647,156) 21,664,850
TOTAL INVESTMENTS........ 104.6% 262,996,872
(Identified Cost $232,816,552)
OTHER ASSETS
LESS LIABILITIES....... (4.6) (11,478,106)
----- ------------
NET ASSETS............... 100.0% $251,518,766
===== ============
*Non-income producing
**TBA's are mortgage-backed securities traded under delayed delivery
commitments, settling after December 31, 1995. Although the unit price for the
trade has been established, the principal value has not been finalized. However,
the amount of the commitment will not fluctuate more than 2% from the principal
amount. Income on TBA's is not earned until settlement date.
+Floating rate note.
See notes to financial statements
<PAGE>
Balanced Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES December 31, 1995
<TABLE>
<CAPTION>
<S> <C>
ASSETS:
Investments at value (Note 1A) (Identified Cost, $232,816,552)...................... $262,996,872
Cash................................................................................ 802
Dividends and interest receivable................................................... 1,751,953
------------
Total assets.................................................................... 264,749,627
------------
LIABILITIES:
Payable for investments purchased................................................... 13,113,125
Payable to affiliates--Investment advisory fees (Note 2)............................ 85,131
Accrued expenses and other liabilities.............................................. 32,605
------------
Total liabilities............................................................... 13,230,861
------------
NET ASSETS.......................................................................... $251,518,766
============
REPRESENTED BY:
Paid-in capital for beneficial interests............................................ $251,518,766
============
</TABLE>
See notes to financial statements
Balanced Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................................... $ 7,377,539
Dividends.............................................................. 2,700,016
-----------
Total Income......................................................... $ 10,077,555
EXPENSES:
Investment advisory fees (Note 2)...................................... 956,408
Administrative fees (Note 3)........................................... 119,551
Expense fees (Note 6).................................................. 182,028
-----------
Total expenses....................................................... 1,257,987
-----------
Net investment income................................................ 8,819,568
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from investment transactions.................. 12,205,642
Unrealized appreciation (depreciation) of investments--
Beginning of period................................................... 1,535,684
End of period......................................................... 30,180,320
-----------
Net change in unrealized appreciation (depreciation) of investments... 28,644,636
-----------
Net realized and unrealized gain (loss) on investments................ 40,850,278
-----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS................... $49,669,846
===========
</TABLE>
See notes to financial statements
<PAGE>
Balanced Portfolio
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
MAY 1, 1994
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income............................................... $ 8,819,568 $ 5,659,198
Net realized gain (loss) from investment transactions............... 12,205,642 (6,675,580)
Net change in unrealized appreciation (depreciation) of investments. 28,644,636 4,422,530
------------ ------------
Net increase in net assets resulting from operations............ 49,669,846 3,406,148
------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from contributions......................................... 8,144,524 251,032,858
Value of withdrawals................................................ (35,243,567) (25,491,043)
------------ ------------
Net increase (decrease) in net assets from capital transactions. (27,099,043) 225,541,815
------------ ------------
NET INCREASE IN NET ASSETS.......................................... 22,570,803 228,947,963
NET ASSETS:
Beginning of period................................................. 228,947,963 --
------------ ------------
End of period....................................................... $251,518,766 $228,947,963
============ ============
</TABLE>
See notes to financial statements
Balanced Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
MAY 1, 1994
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
<S> <C> <C>
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000's omitted)........................... $251,519 $228,948
Ratio of expenses to average net assets............................. 0.53% 0.51%*
Ratio of net investment income to average net assets................ 3.69% 3.53%*
Portfolio turnover.................................................. 210% 105%
* Annualized
</TABLE>
See notes to financial statements
<PAGE>
Balanced Portfolio
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
(1) SIGNIFICANT ACCOUNTING POLICIES
Balanced 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. Signature Financial Group (Grand Cayman), Ltd. ("SFG") acts as
the Portfolio's Administrator.
The preparation of financial statements in accordence 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 differfrom 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 -- Equity securities listed on securities
exchanges or reported through the NASDAQ system are valued at last sale prices.
Unlisted securities or listed securities for which last sales prices are not
available are valued at last quoted bid prices. Debt securities (other than
short-term obligations maturing in sixty 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 sixty
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 federal income tax purposes. Gain and loss from principal
paydowns are recorded as interest income. Dividend income is recorded on the
ex-dividend date.
C. U.S. FEDERAL TAXES -- The Portfolio is considered a partnership under the
U.S. Internal Revenue Code. Accordingly, no provision for federal income or
excise tax 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 agreement
investments. Additionally, procedures have been established by the Portfolio to
monitor, on a daily basis, the market value of the repurchase agreement's
underlying investments to ensure the existence of a proper level of collateral.
F. TBA PURCHASE COMMITMENTS -- The Portfolio enters into "TBA" (to be announced)
purchase commitments to purchase securities for a fixed unit price at a future
date beyond customary settlement time. Although the unit price has been
established, the principal value has not been finalized. However, the amount of
the commitment will not fluctuate more than 2.0% from the principal amount. The
Portfolio holds, and maintains until the settlement date, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price. TBA
purchase commitments may be considered securities in themselves, and involve a
risk of loss if the value of the security to be purchased declines prior to the
settlement date, which risk is in addition to the risk of decline in the value
of the Portfolio's other assets. Unsettled TBA purchase commitments are valued
at the current market value of the underlying securities, generally according to
the procedures described under Note 1A.
Although the Portfolio will generally enter into TBA purchase commitments with
the intention of acquiring securities for its portfolio, the Portfolio may
dispose of a commitment prior to settlement if the Portfolio's Adviser deems it
appropriate to do so.
G. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis.
(2) INVESTMENT ADVISORY FEES
The investment advisory fees paid to Citibank, as compensation for overall
investment management services, amounted to $956,408 for the year ended December
31, 1995. The investment advisory fees are computed at the annual rate of 0.40%
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, is computed at an annual rate of 0.05% of the
Portfolio's average daily net assets. The administrative fees amounted to
$119,551 for the year ended December 31, 1995. Citibank acts as Sub-
Administrator and performs such duties and receives such compensation from
SFG as from time to time is agreed to by SFG and Citibank. The Portfolio pays no
compensation directly to any 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 investments, other than short-term obligations,
aggregated $477,966,488 and $479,120,404, respectively, for the year ended
December 31, 1995. Purchases and sales of U.S. Government securities aggregated
to $220,444,584 and $194,692,103, respectively.
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation (depreciation) in value of the investment
securities owned at December 31, 1995, as computed on a federal income tax
basis, are as follows:
Aggregate cost...................... $232,816,552
============
Gross unrealized appreciation....... $ 33,453,208
Gross unrealized depreciation....... (3,272,888)
------------
Net unrealized appreciation......... $ 30,180,320
============
(6) EXPENSE FEES
SFG has entered into an expense agreement with the Portfolio. SFG has agreed to
pay all of the ordinary operating expenses (excluding interest, taxes, brokerage
commissions litigation costs or other extraordinary costs or expenses) of the
Portfolio, other than fees paid under the Advisory Agreement and Administrative
Services Agreement. The Agreement may be terminated by either party upon not
less than 30 days nor more than 60 days written notice.
The Portfolio has agreed to pay SFG an expense fee on an annual basis, accrued
daily and paid monthly; provided, however, that such fee shall not exceed the
amount such that immediately after any such payment the aggregate ordinary
expenses of the Portfolio would, on an annual basis, exceed an agreed upon rate,
currently 0.55% of average daily net assets.
(7) LINE OF CREDIT
The Portfolio, along with the 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 the borrowings, if any,
is charged to the specific fund executing the borrowing at the base rate of the
bank. In addition, the $15 million committed portion of the line of credit
requires a quarterly payment of a commitment fee based on the average daily
unused portion of the line of credit. For the year ended December 31, 1995, the
commitment fee allocated to the Portfolio was $1,642. Since the line of credit
was established, there have been no borrowings.
<PAGE>
Balanced Portfolio
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INDEPENDENT AUDITORS' REPORT
TO THE TRUSTEES AND THE INVESTORS OF THE PREMIUM PORTFOLIOS (THE TRUST), WITH
RESPECT TO ITS SERIES, BALANCED PORTFOLIO:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Balanced Portfolio (the "Portfolio"),
a series of The Premium Portfolios, as at December 31, 1995 and the related
statements of operations and of changes in net assets and the financial
highlights for the periods indicated. These financial statements and financial
highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments owned as
at December 31, 1995 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmations from brokers
were not received, provide a reasonable basis for our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Portfolio as at December 31, 1995, the
results of its operations and the changes in its net assets and the financial
highlights for the periods indicated in accordance with U.S. generally accepted
accounting principles.
PRICE WATERHOUSE
Chartered Accountants
Toronto, Ontario
February 7, 1996
<PAGE>
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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) 9285-1701, 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
