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[LOGO]LANDMARK(SM) FUNDS
Advised by Citibank, N.A.
Landmark
Intermediate
Income Fund
ANNUAL
REPORT
December 31, 1994
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A LETTER TO OUR SHAREHOLDERS
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Dear Shareholder:
1994 was a difficult year for financial markets. A stronger-than-expected
economy and higher interest rates adversely affected most types of investments,
especially the bond market, where prices declined almost 10% since the beginning
of 1994. The stock market fell just over 8% from its highs in the first half of
the year, but later recouped those losses on the strength of strong corporate
earnings and finished the year with a small gain.
Throughout the period, the Landmark Funds' investment adviser, Citibank,
N.A., managed the Landmark Intermediate Income Fund in a manner consistent with
the objective stated in the Fund's prospectus: to provide a high level of
monthly income with consideration also given to safety of principal. The Fund
seeks to provide an attractive yield from a high quality investment portfolio
consisting primarily of intermediate-term securities from a number of
fixed-income market sectors.
This Annual Report for the period ended December 31, 1994 reviews the
Fund's investment activities and performance over the past twelve months, and
provides a summary of Citibank's perspective on the financial markets and
outlook for the foreseeable future. On behalf of the Board of Trustees of the
Landmark Funds, I want to thank our shareholders for their participation and
support. We look forward to serving you in the months and years ahead.
/s/ Philip W. Coolidge
Philip W. Coolidge
President
January 20, 1995
Remember that Mutual Fund Shares:
* Are not bank deposits or FDIC insured
* Are not obligations of or guaranteed by Citibank or Citicorp Investment
Services
* Are subject to investment risks, including possible loss of the principal
amount invested.
Table of Contents
1 Letter to Shareholders
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2 Market Environment
Fund Snapshot
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3 Portfolio Manager
The Portfolio Responds
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4 Fund Quotes
Strategy and Outlook
Landmark Intermediate
Income Fund--by the Numbers
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5 Fund Data
Performance Highlights
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6 Portfolio of Investments
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8 Statement of Assets and Liabilities
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9 Statement of Operations
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10 Statement of Changes in Net Assets
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11 Financial Highlights
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12 Notes to Financial Statements
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15 Independent Auditors' Report
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MARKET ENVIRONMENT
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1994 saw the largest bond market declines in approximately 20 years, with
the 5-year U.S. Treasury note producing -4.26% total return while the 30-year
U.S. Treasury bond delivered a -11.99% total return over the same time horizon.
We attribute the fixed-income market's poor performance to several different
economic influences.
First, economic growth was stronger than expected, fueling fears of
inflation. Despite the Federal Reserve Board's efforts to forestall higher
inflation by raising key short-term interest rates six times in 1994 from 3% to
5.5%, many fixed-income investors chose to view tighter monetary policy as a
sign of impending inflationary pressure rather than as an indication of the
Federal Reserve's inflation-fighting resolve. Yet, at year-end, the economy
showed few signs that inflation is about to accelerate significantly--prices
increased by only about 3% during 1994.
Second, a weak dollar relative to other currencies, especially the Japanese
yen, caused many foreign investors to move their capital from the U.S. bond
market to other nations. This was exacerbated by surging demand for capital from
emerging markets in Latin America and Asia.
Finally, problems associated with some investors' highly leveraged
fixed-income positions placed additional selling pressure on bonds as some
institutional investors were forced to sell their holdings to repay their loans.
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FUND SNAPSHOT
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COMMENCEMENT OF OPERATIONS
June 25, 1993
NET ASSETS AS OF 12/31/94
$47.6 million
FUND OBJECTIVE
To provide a high level of monthly income with
consideration also given to safety of principal
DIVIDENDS
Paid monthly
CAPITAL GAINS
Distributed annually, if any
BENCHMARKS
* Lehman Government/Corporate Bond Index
* Lipper Intermediate Investment Grade Funds Average
INVESTMENT ADVISER
Citibank, N.A.
2
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PORTFOLIO MANAGER
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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.
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THE PORTFOLIO RESPONDS
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This Fund's underperformance relative to its benchmark is a result of the
dramatic increase in interest rates early in the year. Because we did not expect
rates to rise as soon or as rapidly as they did, we had maintained a
longer-than-average duration for the Fund, a strategy designed to increase the
Portfolio's sensitivity to declining interest rates.
In the wake of these surprising economic developments, we gradually reduced
the Fund's average duration to a more neutral position. We adopted a "barbell"
approach in which short-term investments are balanced by longer term
investments, producing a portfolio with an average duration in the intermediate
range. Investments in longer term corporate bonds, mortgage-backed securities
and U.S. Treasury bonds helped us generate competitive levels of income. At the
same time, investments in short-term corporate notes, asset-backed securities
and commercial mortgage securities were intended to enhance the portfolio's
overall stability.
In addition, we actively managed the Fund with an eye toward maintaining
shareholder value by managing the mix of investment types in the portfolio, a
strategy known as sector rotation. The mix of investment types within the
portfolio changed significantly over the 12-month period. At the beginning of
the year, 15% of the portfolio was invested in U.S. Treasury securities, 33% in
government-backed mortgage securities and 19% in dollar denominated bonds issued
in the U.S. by foreign banks/ governments and corporations, known as Yankees. At
the end of the year, those proportions were 48%, 29% and 4%, respectively. This
allocation change primarily reflected fundamental developments in the fixed
income markets. As of December 31, 1994, all securities held by the Fund were
rated investment-grade or its equivalent, including 88% in AAA-rated bonds.
3
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FUND QUOTES FROM THE PORTFOLIO MANAGER
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"All of the countries of the world, no matter where they are in the economic
cycle, have experienced just about as much as the U.S. in terms of rising yields
and lower bond prices."
"The characteristics of the fixed-income market are far different than they were
a year ago. A slower pace of economic growth should benefit bonds."
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STRATEGY AND OUTLOOK
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We believe that the bond market's problems in 1994 have set the stage for
better fixed-income returns in 1995. If the Federal Reserve is successful in its
efforts to dampen economic growth and prevent a rise of inflation, as we expect,
inflation fears should subside and intermediate- and long-term interest rates
should decline from year-end 1994 levels. The result would be higher bond prices
and the possibility of capital appreciation for Fund shareholders.
We also expect the new Republican-controlled Congress to be positive for
the financial markets, including bonds. If initiatives such as a capital-gains
tax cut and the balanced budget amendment are successful, capital should flow
into financial assets, driving prices higher. Perhaps most significantly,
deficit-reduction measures should help shore up the dollar relative to other
currencies, making the U.S. bond market more attractive to overseas investors.
Although we expect the combination of moderate economic growth, low
inflation, lower taxes on capital gains and foreign investment to be a powerful
foundation for bond market gains by year-end 1995, we remain cautious regarding
the market's prospects during the early part of the year. Accordingly, we have
positioned the Fund defensively to preserve shareholder value, and stand ready
to take advantage of rising bond prices as they become available.
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LANDMARK INTERMEDIATE INCOME FUND
BY THE NUMBERS
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[THE FOLLOWING DATA IS PRESENTED AS A PIE CHART IN THE PRINTED REPORT]
Changes in Portfolio Composition
Portfolio of Investments
as of 12/31/94
Asset-Backed Securities ............... 19%
Cash/Short Term/Other ................. (9)%
Corporate Bonds ....................... 9%
Mortgage Obligations .................. 29%
U.S. Treasury Issues .................. 48%
Yankees ............................... 4%
Compared to 12/31/93
Asset-Backed Securities ............... 8%
Cash/Short Term/Other ................. 16%
Corporate Bonds ....................... 9%
Mortgage Obligations .................. 33%
U.S. Treasury Issues .................. 15%
Yankees ............................... 19%
4
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FUND DATA All Periods Ending December 31, 1994
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Total Returns
--------------------
Since
One 6/25/93
Year (Inception)
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Landmark Intermediate Income Fund without Sales Charge ... (4.48)% (1.07)%
Lipper Intermediate Investment Grade Funds Average ....... (3.36)% (0.56)%*
Lehman Government/Corporate Bond Index ................... (3.51)% (0.41)%*
Landmark Intermediate Income Fund with Maximum
Sales Charge of 4.00% .................................. (8.30)% (3.70)%
*From 6/30/93
30-Day SEC Yield 6.57%
Income Dividends Per Share $0.516
Capital Gain Distribution $0.016
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PERFORMANCE HIGHLIGHTS
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A $10,000 investment in the Fund made on inception date would have declined to
$9,444 with sales charge (as of 12/31/94). The graph below 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 Income Investment Lehman
Without With Grade Gov/Corp.
Sales Sales Funds Index
Charge Charge Average (Unmanaged)
------------ ------------ ------------ ----------
June 93 $10,000 $ 9,600 $10,000 $10,000
$10,030 $ 9,629 $10,000 $10,000
$10,073 $ 9,670 $10,042 $10,064
$10,325 $ 9,912 $10,228 $10,295
$10,405 $ 9,989 $10,288 $10,332
$10,416 $ 9,999 $10,301 $10,374
$10,246 $ 9,836 $10,209 $10,251
- - -----------------------------------------------------------------
Dec. 93 $10,298 $ 9,886 $10,257 $10,295
$10,444 $10,026 $10,387 $10,451
$10,214 $ 9,805 $10,202 $10,223
$ 9,967 $ 9,589 $ 9,980 $ 9,973
$ 9,867 $ 9,472 $ 9,890 $ 9,890
$ 9,840 $ 9,447 $ 9,875 $ 9,871
$ 9,809 $ 9,417 $ 9,856 $ 9,847
$ 9,975 $ 9,576 $10,004 $10,044
$10,003 $ 9,602 $10,024 $10,048
$ 9,835 $ 9,442 $ 9,911 $ 9,897
$ 9,797 $ 9,405 $ 9,896 $ 9,888
$ 9,759 $ 9,369 $ 9,867 $ 9,709
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Dec. 94 $ 9,837 $ 9,444 $ 9,915 $ 9,773
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.
5
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Landmark Intermediate Income Fund
PORTFOLIO OF INVESTMENTS December 31, 1994
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Principal
Amount
Issuer (000 omitted) Value
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FIXED INCOME--109.0%
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ASSET BACKED SECURITIES - 18.7%
Bank One Credit Card
7.55% due 12/15/99 ....................... $2,000 $ 1,971,860
Carco Auto Loan Master Trust
7.875% due 7/15/99 ....................... 2,000 1,985,000
EQCC Home Equity Loan Trust
8.95% due 10/15/06 ....................... 2,000 2,018,800
General Motors Acceptance Corp. ............
5.95% due 2/15/97 ........................ 73 72,658
GMAC 1992 E Grantor Trust
4.75% due 8/15/97 ........................ 273 266,371
Household Finance
6.725% due 5/20/08 ....................... 2,000 1,996,860
Merrill Lynch Asset Backed Corp. ...........
5.125% due 7/15/98 ....................... 589 576,944
-----------
8,888,493
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MORTGAGE OBLIGATIONS - 29.1%
Collateralized Mortgage Obligations - 15.7%
Federal Home Loan
Mortgage Corp. ...........................
6.00% due 3/15/09 ........................ 3,387 2,703,485
Federal National
Mortgage Association
6.50% due 9/17/09 ........................ 1,700 1,432,250
Nomura Securities
7.625% due 7/7/03 ........................ 1,337 1,372,095
Resolution Trust Corp. .....................
6.55% due 6/25/26 ........................ 1,974 1,969,547
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7,477,377
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Mortgage Backed Securities - 0.2%
Federal Home Loan
Mortgage Association
8.50% due 4/1/01 ......................... $ 60 $ 59,900
Federal National
Mortgage Association
8.0% due 6/1/02 .......................... 28 27,533
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87,433
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Government National
Mortgage Association - 13.2%
6.50% due 1/15/25 ........................ 2,000 1,733,120
6.50% due 2/15/10 ........................ 2,000 1,827,500
7.50% due 1/15/25 ........................ 2,000 1,855,620
8.00% due 12/15/07 ....................... 163 160,714
8.25% due 7/15/05 ........................ 720 686,407
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6,263,361
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Total Mortgage Obligations 13,828,171
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DOMESTIC CORPORATE BONDS - 8.7%
Caterpillar Inc. ...........................
9.00% due 4/15/06 ........................ 1,200 1,233,000
General Motors Acceptance Corp. ............
8.70% due 3/15/95 ........................ 1,100 1,103,674
5.15% due 9/14/95 ........................ 1,000 982,620
Grand Met. Investment
Corp., Zero Coupon
Bond due 1/6/04 .......................... 1,700 799,085
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4,118,379
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6
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Landmark Intermediate Income Fund
PORTFOLIO OF INVESTMENTS December 31, 1994 continued
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Principal
Amount
Issuer (000 omitted) Value
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DOMESTIC CORPORATE BONDS - continued
YANKEES - 4.0%
Aegon, NV
8.00% due 8/15/06 ........................ 1,500 1,437,255
Phillips Electronics, NV
8.375% due 9/15/06 ....................... 500 489,155
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1,926,410
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UNITED STATES GOVERNMENT
OBLIGATIONS - 48.5%
United States Government Agency - 6.2%
Federal National
Mortgage Association
6.14% due 1/21/04 ........................ $1,700 $ 1,474,172
6.28% due 2/3/04 ......................... 1,700 1,495,847
-----------
2,970,019
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United States Treasury Bonds - 10.0%
7.50% due 11/15/24 ....................... 5,000 4,782,800
-----------
United States Treasury Notes - 28.7%
7.25% due 11/30/96 ....................... 3,300 3,274,722
7.375% due 11/15/97 ...................... 7,500 7,420,275
7.75% due 11/30/99 ....................... 3,000 2,988,750
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13,683,747
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United States Treasury Stripped Bonds - 3.6%
Zero Coupon Bond
due 8/15/03 .............................. 1,700 870,893
Zero Coupon Bond
due 2/15/04 .............................. 1,700 837,369
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1,708,262
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Total United States
Government Obligations ................... $23,144,828
-----------
Total Fixed Income
(Identified Cost $53,014,466) ............ 51,906,281
-----------
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SHORT TERM OBLIGATION -- 5.9%
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Repurchase Agreement, Salomon
6.00% due 1/3/95, proceeds
at maturity $2,793,861
(secured by $2,895,000
U.S. Treasury Note
5.50% due 4/30/96) ....................... 2,792,000
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Total Investments
(Identified Cost $55,806,466) ............ 114.9% 54,698,281
Other Assets, Less
Liabilities .............................. (14.9) (7,116,604)
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Net Assets ................................. 100.0% $47,581,677
===== ===========
See notes to financial statements
7
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Landmark Intermediate Income Fund
STATEMENT OF ASSETS AND LIABILITIES December 31, 1994
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Assets:
Investments, at value (Note 1A) (Identified Cost,
$55,806,466) ........................................ $ 54,698,281
Cash ................................................... 725
Receivable for investment sold ......................... 951,094
Receivable for shares of beneficial interest sold ...... 29,011
Interest receivable .................................... 448,602
------------
Total assets ....................................... 56,127,713
------------
Liabilities:
Payable for investment purchased ....................... 8,370,543
Payable for shares of beneficial interest repurchased .. 94,527
Payable to affiliates:
Investment advisory fee (Note 2) ................... $ 5,074
Shareholder servicing agents' fee (Note 3B) ........ 10,127 15,201
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Accrued expenses and other liabilities ................. 65,765
------------
Total liabilities .................................. 8,546,036
------------
Net Assets for 5,342,279 shares of beneficial
interest outstanding ................................. $ 47,581,677
============
Net Assets Consist of:
Paid-in capital ........................................ $ 53,425,583
Undistributed net realized loss on investments ......... (4,763,821)
Unrealized depreciation of investments ................. (1,108,185)
Undistributed net investment income .................... 28,100
------------
Total .............................................. $ 47,581,677
============
Net Asset Value and Redemption Price Per Share of
Beneficial Interest .................................. $8.91
=====
Computation of Offering Price:
Maximum Offering Price per share based on a 4.00%
sales charge ($8.91 / 0.96) .......................... $9.28
=====
See notes to financial statements
8
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Landmark Intermediate Income Fund
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1994
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Interest Income (Note 1B) ............................. $ 3,419,926
Expenses:
Shareholder servicing agents' fees (Note 3B) .......... $ 212,916
Investment advisory fees (Note 2) ..................... 186,301
Administrative fees (Note 3A) ......................... 106,458
Legal services ........................................ 55,501
Custodian fees ........................................ 55,144
Shareholder reports ................................... 39,789
Auditing services ..................................... 27,677
Distribution fees (Note 4) ............................ 26,614
Trustees fees ......................................... 16,797
Transfer agent fees ................................... 7,000
Miscellaneous ......................................... 8,134
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Total expenses .................................... 742,331
Less aggregate amount waived by Investment Adviser,
Administrator, Shareholder Servicing Agents and
Distributor (Notes 2, 3A, 3B, and 4) ................ (263,281)
-----------
Net expenses ...................................... 479,050
-----------
Net investment income ............................. 2,940,876
-----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized loss from investment transactions ........ (4,798,890)
Unrealized appreciation (depreciation) of investments:
Beginning of period ................................ (377,779)
End of period ...................................... (1,108,185)
-----------
Net change in unrealized appreciation
(depreciation) .................................. (730,406)
-----------
Net realized and unrealized gain (loss)
on investments .................................. (5,529,296)
-----------
Net Decrease in Net Assets Resulting from Operations .. $(2,588,420)
===========
See notes to financial statements
9
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Landmark Intermediate Income Fund
STATEMENT OF CHANGES IN NET ASSETS
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<TABLE>
<CAPTION>
For the Period
June 25, 1993
(Commencement
Year Ended of Operations) to
December 31, 1994 December 31, 1993
----------------- -----------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations:
Net investment income .................................................................. $ 2,940,876 $ 1,627,455
Net realized gain (loss) on investments ................................................ (4,798,890) 1,047,679
Net change in unrealized depreciation of investments ................................... (730,406) (815,824)
----------- -----------
Net increase (decrease) in net assets resulting from operations ...................... (2,588,420) 1,859,310
----------- -----------
Distributions Declared to Shareholders from:
Net investment income .................................................................. (2,912,776) (1,627,455)
In excess of net investment income (Note 1E) ........................................... -- (35,732)
Net realized gain on investments ....................................................... (90,585) (922,025)
----------- -----------
Decrease in net assets from distributions declared to shareholders ................... (3,003,361) (2,585,212)
----------- -----------
Transactions in Shares of Beneficial Interest (Note 6):
Net proceeds from sale of shares ....................................................... 1,241,851 1,313,456
Net asset value of shares issued to shareholders
from reinvestment of distributions ................................................... 2,973,424 2,585,043
Net asset value of shares issued in connection with the
acquisition of Income Portfolio (Note 9) ............................................. -- 63,709,288
Cost of shares repurchased ............................................................. (12,224,541) (5,699,161)
----------- -----------
Net increase (decrease) in net assets from
transactions in shares of beneficial interest ...................................... (8,009,266) 61,908,626
----------- -----------
Net Increase (Decrease) in Net Assets .................................................. (13,601,047) 61,182,724
Net Assets:
Beginning of period .................................................................... 61,182,724 --
----------- -----------
End of period (including undistributed net investment
income of $28,100 and $0, respectively) .............................................. $47,581,677 $61,182,724
=========== ===========
</TABLE>
See notes to financial statement
10
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Landmark Intermediate Income Fund
FINANCIAL HIGHLIGHTS
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For the Period
June 25, 1993
(Commencement of
Year Ended Operations) to
December 31,1994 December 31,1993
---------------- ----------------
Net Asset Value, beginning of period ........... $ 9.88 $ 10.00
--------- ---------
Income From Operations:
Net investment income .......................... 0.521 0.261
Net realized and unrealized gain (loss)
on investments ............................... (0.959) 0.037
--------- ---------
Total from operations ..................... (0.438) 0.298
--------- ---------
Less Distributions From:
Net investment income ........................ (0.516) (0.261)
In excess of net investment income ........... -- (0.006)
Net realized gain on investments ............. (0.016) (0.151)
--------- ---------
Total distributions ...................... (0.532) (0.418)
--------- ---------
Net Asset Value, end of period ................. $ 8.91 $ 9.88
========= =========
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) ...... $47,582 $61,183
Ratio of expenses to average net assets ........ 0.90% 0.90%*
Ratio of net investment income to
average net assets .......................... 5.52% 4.95%*
Portfolio turnover ............................. 291% 103%
Total return ................................... (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, the net investment income per
share and the ratios would have been as follows:
Net investment income per share ........... $ 0.475 $ 0.236
Ratios:
Expenses to average net assets ............ 1.39% 1.38%*
Net investment income to average net assets 5.03% 4.47%*
* Annualized
+ Not annualized.
See notes to financial statements
11
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Landmark Intermediate Income Fund
NOTES TO FINANCIAL STATEMENTS
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1) SIGNIFICANT ACCOUNTING POLICIES
Landmark Intermediate Income Fund (the "Fund") is a separate diversified series
of Landmark Fixed Income Funds (the "Trust") which is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as an open-end, management investment company. The
Investment Adviser of the Fund is Citibank, N.A. ("Citibank"). The Landmark
Funds Broker-Dealer Services, Inc. ("LFBDS") acts as the Fund's Administrator
and Distributor. Citibank also serves as Sub-Administrator and makes Fund shares
available to customers as Shareholder Servicing Agent.
The significant accounting policies consistently followed by the Fund are in
conformity with generally accepted accounting principles and are as follows:
A. INVESTMENT SECURITY VALUATIONS -- Debt securities (other than short-term
obligations maturing in 60 days or less) are valued on the basis of valuations
furnished by a pricing service, which 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 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.
D. EXPENSES -- The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and LFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund.
E. DISTRIBUTIONS -- The Fund distinguishes between distributions on a tax basis
and a financial reporting basis and requires that only distributions in excess
of tax basis earnings and profits be reported in the financial statements as a
return of capital. Differences in the recognition or classification of income
between the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
F. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis. Distributions to shareholders and shares issuable to
shareholders electing to receive distributions in shares are recorded on the
ex-dividend date.
(2) INVESTMENT ADVISORY FEES
The investment advisory fee paid to Citibank, as compensation for overall
investment management services amounted to $186,301, of which $120,645 was
voluntarily waived for the year ended December 31, 1994. The investment advisory
fee is computed at the annual rate of 0.35% of average daily net assets.
12
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Landmark Intermediate Income Fund
NOTES TO FINANCIAL STATEMENTS continued
- - --------------------------------------------------------------------------------
(3) ADMINISTRATIVE SERVICES PLAN
The Trust has adopted an Administrative Services Plan (the "Administrative
Services Plan") which provides that the Trust on behalf of the Fund may obtain
the services of an Administrator, one or more Shareholder Servicing Agents and
other Servicing Agents, and may enter into agreements providing for the payment
of fees for such services. Under the Administrative Services Plan, the aggregate
of the fee paid to the Administrator from the Fund, the fees paid to the
Shareholder Servicing Agents from the Fund under such Plan and the Basic
Distribution Fee paid from the Fund to the Distributor under the Distribution
Plan may not exceed 0.65% of the Fund's average daily net assets on an
annualized basis for the Fund's then current fiscal year.
A. ADMINISTRATIVE FEES -- Under the terms of an Administrative Services
Agreement, the administrative services fee payable to the Administrator, as
compensation for overall administrative services and general office facilities,
is computed at an annual rate of 0.25% of the Fund's average daily net assets,
provided that the aggregate of any such fees paid to the Administrator and the
basic distribution fees paid to the Distributor may not exceed an amount equal
to 0.25% of the Fund's average daily net assets. The Administrator received
fees, computed at an annual rate of 0.20% of the Fund's average daily net assets
which amounted to $106,458, of which $37,176 was voluntarily waived for the year
ended December 31, 1994. 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, 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 by
investors for whom such Shareholder Servicing Agent maintains a servicing
relationship. Shareholder Servicing Agents' fees amounted to $212,916, of which
$79,843 was voluntarily waived for the year ended December 31, 1994.
(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 sale of
shares of the Fund, at an annual rate not to exceed 0.15% of the Fund's average
daily net assets for distribution of the Fund's shares. The Distributor may also
receive an additional fee from the Fund not to exceed 0.05% of the Fund's
average daily net assets in anticipation of, or as reimbursement for,
advertising expenses incurred by the Distributor in connection with the sale of
shares of the Fund. No payment of such additional fees has been made during the
period. Under the Administrative Services Plan, the distribution fees were
computed at an annual rate of 0.05% of the Fund's average daily net assets,
which amounted to $26,614, of which $25,617 was voluntarily waived for the year
ended December 31, 1994.
(5) PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of securities, other than U.S. Government securities and
short-term obligations, aggregated $87,469,516 and $91,138,873, respectively,
for the year ended December 31, 1994. Purchases and sales of U.S. Government
securities aggregated $74,324,414 and $63,756,688, respectively.
13
<PAGE>
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Landmark Intermediate Income Fund
NOTES TO FINANCIAL STATEMENTS continued
- - --------------------------------------------------------------------------------
(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:
For the Period
June 25, 1993
(Commencement
Year Ended of Operations) to
December 31, 1994 December 31, 1993
----------------- -----------------
Shares sold ............................ 129,167 128,616
Shares issued to shareholders from
reinvestment of distributions ........ 322,052 258,711
Shares issued in connection with the
acquisition of Income Portfolio
(Note 9) ............................. -- 6,370,929
Shares repurchased ..................... (1,304,223) (562,973)
---------- ---------
Net increase (decrease) ................ (853,004) 6,195,283
========== =========
(7) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation (depreciation) in value of the investment
securities owned at December 31, 1994, as computed on a federal income tax
basis, are as follows:
Aggregate cost ......................................... $ 55,806,466
============
Gross unrealized appreciation .......................... $ 33,100
Gross unrealized depreciation .......................... (1,141,285)
------------
Net unrealized depreciation ............................ $ (1,108,185)
------------
(8) LINE OF CREDIT
The Fund, along with other Landmark Funds entered into an agreement with a bank
which allows the Funds collectively to borrow up to $40 million for temporary or
emergency purposes. Interest on borrowings, if any, is charged to the specific
fund executing the borrowing at the base rate of the bank. In addition, the $15
million committed portion of the line of credit requires a quarterly payment of
a commitment fee based on the average daily unused portion of the line of
credit. For the year ended December 31, 1994, the commitment fee allocated to
the Fund was $386. Since the line of credit was established there have been no
borrowings.
(9) ACQUISITION OF INCOME PORTFOLIO
On June 25, 1993, the Fund acquired all of the net assets of the Income
Portfolio of the Collective Investment Trust for Citibank IRAs pursuant to an
Agreement and Plan of Reorganization approved by Income Portfolio participants
on February 18, 1993. The acquisition was accomplished by a tax-free exchange of
6,370,929 shares of the Fund (valued at $63,709,288) in exchange for the Income
Portfolio's net assets on June 25, 1993. The Income Portfolio's net assets at
that date were $63,709,288, which included $438,045 of unrealized appreciation.
The aggregate net assets of the Fund after the acquisition were $63,709,288.
14
<PAGE>
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Landmark Intermediate Income Fund
INDEPENDENT AUDITORS' REPORT
- - --------------------------------------------------------------------------------
To the Trustees and Shareholders of Landmark Intermediate Income Fund:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Landmark Intermediate Income Fund
(the "Fund"), a separate series of Landmark Fixed Income Funds (the "Trust") (a
Massachusetts business trust), as of December 31, 1994, and the related
statement of operations for the year then ended, and the statement of changes in
net assets and the financial highlights for the year ended December 31, 1994 and
for the period from June 25, 1993 (Commencement of Operations) to December 31,
1993. These financial statements and financial highlights are the responsibility
of the Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
December 31, 1994, by correspondence with the Custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Landmark
Intermediate Income Fund at December 31, 1994, the results of its operations,
the changes in its net assets, and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
Boston, Massachusetts
February 1, 1995
15
<PAGE>
- - --------------------------------------------------------------------------------
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 (212) 974-0900 or (800) 285-1701
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,
Investment Specialist 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
16
<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 AND TREASURER
James B. Craver*
ASSISTANT TREASURER
Barbara M. O'Dette*
ASSISTANT SECRETARY
Molly S. Mugler*
*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.
This Report is Prepared & Printed on Recycled Paper [graphic omitted]
FI/INTI/A/94
