LANDMARK FIXED INCOME FUNDS /MA/, N-30B-2, 1996-03-07

LANDMARK FIXED INCOME FUNDS /MA/
N-30B-2, 1996-03-07

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TRUSTEES AND OFFICERS
Philip W. Coolidge*, President
H. B. Alvord
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
C. Oscar Morong, Jr.
Donald B. Otis
E. Kirby Warren
William S. Woods, Jr.

SECRETARY
Thomas M. Lenz*

TREASURER
John R. Elder*
*Affiliated Person of Administrator and Distributor

- --------------------------------------------------------------------------------

INVESTMENT ADVISER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043

ADMINISTRATOR AND DISTRIBUTOR
The Landmark Funds Broker-Dealer Services, Inc.
6 St. James Avenue, Boston, MA 02116
(617) 423-1679

TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110

AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110

LEGAL COUNSEL
Bingham, Dana & Gould
150 Federal Street, Boston, MA 02110
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENTS
(See Inside Cover)

This report is prepared for the information of shareholders. It is authorized
for distribution to prospective investors only when preceded or accompanied
by an effective prospectus.

FI/INTI/A/95 Printed on Recycled Paper

LANDMARK(SM) FUNDS
ADVISED BY CITIBANK, N.A.

LANDMARK
INTERMEDIATE
INCOME FUND

ANNUAL
REPORT

December 31, 1995

<PAGE>
- -------------------------------------------------------------------------------
A Letter To Our Shareholders
- -------------------------------------------------------------------------------

Dear Shareholder:

1995 was an excellent year for the U.S. bond markets. Contrary to many
investors' expectations at the end of 1994, this year was characterized by
modest economic growth, low inflation and declining interest rates. This
combination of economic influences was a recipe for above-average gains in the
financial markets, and investors who exercised patience and discipline during
1994's difficult market conditions reaped the rewards provided by stronger
markets in 1995.

The Landmark Funds' investment adviser, Citibank, N.A., manages the
Landmark Intermediate Income Fund to generate a high level of current income and
preserve the value of it shareholders' investment. The Fund seeks to provide an
attractive yield from a high-quality investment portfolio consisting primarily
of intermediate-term securities from a number of fixed-income market sectors.

This Annual Report reviews the Fund's investment activities and performance
and provides a summary of Citibank's perspective on and outlook for the U.S.
financial markets. On behalf of the Board of Trustees of the Landmark Funds, I
want to thank you for your confidence and participation. We look forward to
serving you in the months and years ahead.

/s/ Philip W. Coolidge
- ---------------------------------------
Philip W. Coolidge
President
January 20, 1996

Remember that Mutual Fund Shares:
o Are not bank deposits or FDIC insured
o Are not obligations of or guaranteed by Citibank or Citicorp Investment
Services
o Are subject to investment risks, including possible loss of the principal
amount invested.

TABLE OF CONTENTS

1 Letter to Shareholders
- -------------------------------------------------------------------------------
2 Market Environment
Fund Snapshot
- -------------------------------------------------------------------------------
3 Portfolio Manager
The Portfolio Manager Responds
Fund Quotes
- -------------------------------------------------------------------------------
4 Strategy and Outlook
Landmark Intermediate
Income Fund--by the Numbers
- -------------------------------------------------------------------------------
5 Fund Data
Performance Highlights
- -------------------------------------------------------------------------------
6 Portfolio of Investments
- -------------------------------------------------------------------------------
8 Statement of Assets and Liabilities
- -------------------------------------------------------------------------------
9 Statement of Operations
- -------------------------------------------------------------------------------
10 Statement of Changes in Net Assets
- -------------------------------------------------------------------------------
11 Financial Highlights
- -------------------------------------------------------------------------------
12 Notes to Financial Statements
- -------------------------------------------------------------------------------
14 Independent Auditors' Report
- -------------------------------------------------------------------------------
<PAGE>
- -------------------------------------------------------------------------------
MARKET ENVIRONMENT
- -------------------------------------------------------------------------------

As 1995 began, most investors in the U.S. bond market were quite cautious
in an environment of rising interest rates and declining security prices.
Investors were especially concerned about the possibility of higher inflation,
which erodes the principal value of fixed-income securities. In an effort to
rein in a strong economy and prevent an acceleration of inflation, the Federal
Reserve increased key short-term interest rates six times in 1994 and once again
in February, 1995.

By Spring it was apparent that the Federal Reserve's tight monetary policy
was causing the economy to slow down. As the rate of economic growth moderated,
investors' fears of inflation diminished. Accordingly, bond yields declined as
investors became convinced that the Federal Reserve would begin to lower
interest rates in order to avoid the possibility of a recession. Lower interest
rates drove bond prices higher, producing a strong rally in virtually every
sector of the fixed-income market.

- -------------------------------------------------------------------------------
FUND SNAPSHOT
- -------------------------------------------------------------------------------

COMMENCEMENT OF OPERATIONS
June 25, 1993

NET ASSETS AS OF 12/31/95
$49.6 million

FUND OBJECTIVE
To generate a high level of current income and preserve the value of its
shareholders' investments

DIVIDENDS
Paid monthly

CAPITAL GAINS
Distributed annually, if any

BENCHMARKS
o Lehman Government/Corporate Bond Index
o Lipper Intermediate Investment Grade Funds Average

INVESTMENT ADVISER
Citibank, N.A.

- -------------------------------------------------------------------------------
PORTFOLIO MANAGER
- -------------------------------------------------------------------------------

MARK LINDBLOOM
Vice President, Citibank, N.A.

Mr. Lindbloom has been responsible for managing the Landmark Intermediate Income
Fund since its inception in June 1993. He also manages the fixed income portion
of the Balanced Portfolio and intermediate maturity fixed income portfolios for
investment advisory and institutional accounts at Citibank. Prior to joining
Citibank in 1986, Mr. Lindbloom was employed by Brown Brothers Harriman
& Company, where he managed discretionary corporate portfolios, holding fixed
income assets.

- -------------------------------------------------------------------------------
THE PORTFOLIO MANAGER RESPONDS
- -------------------------------------------------------------------------------

The Fund was managed primarily through changes in average duration, a
measure of the portfolio's sensitivity to interest rate changes, and through
sector rotation, changes in the amount of assets invested in different areas of
the bond market.

As the year began, we maintained a longer-than-average duration in order to
realize greater appreciation of portfolio holdings and to capture higher yields
for a longer period as interest rates fell. At some points during the first half
of 1995, the portfolio's average duration was as much as 120% of its "neutral"
position. When it appeared at mid-year that most interest rate declines were
behind us, we reduced the portfolio's duration back to the neutral range. While
we may have sacrificed some yield by doing so, we reduced the risk that adverse
conditions would erode the value of the portfolio.

During the year, the majority of the Fund's assets were invested in U.S.
Treasury securities to avoid the risks associated with mortgage-backed
securities when interest rates decline. In a low interest rate environment,
mortgage holders often prepay their loans in order to refinance at more
favorable terms. The resulting return of principal to owners of mortgage
securities must then be reinvested at the lower, prevailing interest rate. As
the year progressed, we gradually increased our exposure to mortgage securities
to capture the higher yields they provide.

- -------------------------------------------------------------------------------
FUND QUOTES FROM THE PORTFOLIO MANAGER
- -------------------------------------------------------------------------------

"1995's bond market was fantastic, more similar to the market we saw in `93 than
the one we saw in `94."

"During the latter part of the year, we've been adding incrementally to mortgage
positions, which tend to perform well as interest rates stabilize or rise."

"We expect economic conditions to remain positive for bonds over the longer term
as inflation remains low and economic growth remains moderate."

- -------------------------------------------------------------------------------
STRATEGY AND OUTLOOK
- -------------------------------------------------------------------------------

While we do not expect the bond market in 1996 to match its 1995
performance, our long term outlook is optimistic. We believe that inflation will
remain relatively low, economic growth will be moderate for most of the coming
year and Federal Reserve policy will remain accommodative. We believe that these
factors should help create a positive environment for fixed-income securities.

Our strategy looking forward remains unchanged. We will continue to
actively manage the portfolio through changes in average duration and sector
rotation in order to generate competitive levels of income and preserve capital
for our shareholders.

- -------------------------------------------------------------------------------
LANDMARK INTERMEDIATE INCOME FUND
- -------------------------------------------------------------------------------
By The Numbers
- -------------------------------------------------------------------------------
CHANGES IN PORTFOLIO COMPOSITION

Portfolio of Investments
as of 12/31/95

Cash/Short Asset-Backed Mortgage Corporate U.S. Treasury
Term/Other Securities Obligations Bonds Issues
6% 4% 38% 5% 47%

Compared to 12/31/94

Cash/Short Asset-Backed Mortgage Corporate U.S. Treasury
Term/Other Securities Obligations Bonds Yankees Yankees
(9)% 19% 29% 9% 4% 48%

<PAGE>
- -------------------------------------------------------------------------------
FUND DATA All Periods Ending December 31, 1995
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total Returns
------------------
Since
One 6/25/93
Year (Inception)*
----- -------
<S> <C> <C>
Landmark Intermediate Income Fund without Sales Charge............................ 16.45% 5.55%
Lipper Intermediate Investment Grade Funds Average................................ 16.62% 5.93%+
Lehman Government/Corporate Bond Index............................................ 19.24% 6.31%+
Landmark Intermediate Income Fund with Maximum Sales
Charge of 4.00%.................................................................. 11.80% 3.84%

* Average Annual Total Return
+ From 6/30/93
30-Day SECYield 5.17%
Income Dividends Per Share $0.570
</TABLE>

- -------------------------------------------------------------------------------
PERFORMANCE HIGHLIGHTS
- -------------------------------------------------------------------------------

A $10,000 investment in the Fund made on inception date would have grown to
$10,998 with sales charge (as of 12/31/95). The graph shows how this compares to
our benchmarks over the same period.

The graph includes the initial sales charge on the Fund (no comparable charge
exists for the other indices) and assumes all dividends and distributions from
the Fund are reinvested at Net Asset Value.

<PAGE>

INTERMEDIATE INCOME

Landmark
Intermediate Landmark Lipper
Income Intermediate Intermediate
Fund - Income Investment Lehman
Without Fund - With Grade Aggregate
Sales Sales Funds Bond Index
Charge Charge Average (Unmanaged)

$10,000 $9,600 $10,000 $10,000
Jun-93 $10,030 $9,629 $10,000 $10,000
Jul-93 $10,073 $9,670 $10,042 $10,057
Aug-93 $10,325 $9,912 $10,228 $10,233
Sep-93 $10,406 $9,989 $10,268 $10,261
Oct-93 $10,416 $9,999 $10,301 $10,299
Nov-93 $10,246 $9,836 $10,209 $10,211
Dec-93 $10,299 $9,887 $10,257 $10,266
Jan-94 $10,445 $10,027 $10,387 $10,405
Feb-94 $10,215 $9,806 $10,202 $10,224
Mar-94 $9,968 $9,569 $9,980 $9,971
Apr-94 $9,868 $9,473 $9,890 $9,891
May-94 $9,841 $9,447 $9,875 $9,890
Jun-94 $9,810 $9,417 $9,856 $9,869
Jul-94 $9,976 $9,577 $10,004 $10,065
Aug-94 $10,003 $9,603 $10,024 $10,077
Sep-94 $9,836 $9,442 $9,911 $9,929
Oct-94 $9,798 $9,406 $9,896 $9,920
Nov-94 $9,760 $9,370 $9,867 $9,898
Dec-94 $9,838 $9,445 $9,915 $9,967
Jan-95 $10,021 $9,620 $10,072 $10,164
Feb-95 $10,249 $9,839 $10,282 $10,406
Mar-95 $10,322 $9,909 $10,346 $10,469
Apr-95 $10,439 $10,021 $10,479 $10,616
May-95 $10,930 $10,492 $10,849 $11,027
Jun-95 $10,992 $10,552 $10,917 $11,107
Jul-95 $10,941 $10,503 $10,888 $11,083
Aug-95 $11,039 $10,597 $11,010 $11,217
Sep-95 $11,159 $10,713 $11,107 $11,326
Oct-95 $11,199 $10,751 $11,244 $11,473
Nov-95 $11,310 $10,857 $11,402 $11,645
Dec-95 $11,456 $10,998 $11,547 $11,808

Notes: All Fund performance numbers represent past performance, and are no
guarantee of future results. The Fund's share price and investment return will
fluctuate, so that the value of an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns include change in
share price and reinvestment of dividends and distributions, if any. Total
return figures "with sales charge" are provided in accordance with SEC
guidelines for comparative purposes for prospective investors.

<PAGE>

- -------------------------------------------------------------------------------
Landmark Intermediate Income Fund
- -------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS December 31, 1995
- -------------------------------------------------------------------------------

PRINCIPAL
AMOUNT
ISSUER (000's OMITTED) VALUE
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
FIXED-INCOME - 94.2%
- -------------------------------------------------------------------------------

ASSET BACKED SECURITIES--4.3%
First USA Credit Card
6.078% due 10/15/01 .................... $ 2,000 $1,998,740

GMAC 1992 E Grantor Trust
4.75% due 8/15/97 ...................... 116 115,293
----------
2,114,033
----------
MORTGAGE OBLIGATIONS--38.5%
COLLATERALIZED MORTGAGE OBLIGATIONS--14.0%
Asset Securitization Corp. Series 95
7.384% due 8/13/29 ..................... 1,000 1,042,500
Federal Home Mortgage Corp.
6.00% due 12/15/08 ..................... 1,700 1,599,063
Lehman Brothers Mortgage Trust
7.144% due 8/25/04 ..................... 1,995 2,075,273
Nomura Asset Securities Corp.
8.15% due 4/4/27........................ 2,000 2,215,625
----------
6,932,461
----------
MORTGAGE BACKED SECURITIES--15.6%
Federal Home Loan Mortgage Association
8.50% due 4/01/01....................... 45 46,266
Federal National Mortgage Association
6.00% due 9/01/00....................... 1,723 1,725,506
8.00% due 6/01/02....................... 23 23,953
6.50% due 8/01/25....................... 1,225 1,210,685
6.50% due 9/01/25....................... 722 713,223
Federal Home Mortgage Corp (TBA)
6.50% due 11/01/08...................... 4,000 4,021,240
----------
7,740,873
----------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION--8.9%
8.25% due 7/15/05...................... $ 676 $ 702,688
8.00% due 12/15/07..................... 120 127,131
8.00% due 1/15/25...................... 2 1,736
6.50% due 10/20/25 (TBA)............... 1,563 1,591,877
6.00% due 1/15/99 (TBA)................ 2,000 2,018,125
----------
4,441,557
----------
TOTAL MORTGAGE OBLIGATIONS 19,114,891
-----------
DOMESTIC CORPORATE BONDS--4.8%
K-mart Corp.
12.50% due 1/3/05...................... 400 349,540
US West Capital Funding Inc.
6.31% due 1/11/05...................... 2,000 2,043,140
----------
2,392,680
----------
UNITED STATES GOVERNMENT
OBLIGATIONS--46.6%

UNITED STATES TREASURY BONDS--7.4%
7.625% due 2/15/25..................... 3,000 3,668,430
----------

UNITED STATES TREASURY NOTES--39.2%
4.00% due 1/31/96......................... 125 124,882
6.125% due 7/31/00........................ 6,500 6,690,905
6.25% due 8/31/00......................... 5,000 5,172,650
6.50% due 5/15/05......................... 5,000 5,319,550
6.50% due 8/15/05......................... 2,000 2,130,620
----------
19,438,607
----------
TOTAL UNITED STATES
GOVERNMENT OBLIGATIONS 23,107,037
----------
TOTAL FIXED INCOME
(Identified Cost $45,714,010) $46,728,641
-----------
- -------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS--17.1%
- -------------------------------------------------------------------------------
Dresdner Bank Repurchase Agreement
5.93% due 1/2/96, proceeds
at maturity $1,635,077
(secured by $1,020,000 U.S.
Treasury Bond 11.25% due 2/15/15) $ 1,634,000
United States Treasury Bill
5.025% due 6/13/96 ....................... $7,000 6,839,758
-----------

TOTAL SHORT-TERM OBLIGATIONS
AT AMORTIZED COST 8,473,758
-----------

TOTAL INVESTMENTS
(Identified Cost $54,187,768)............. 111.3% $55,202,399
OTHER ASSETS -
LESS LIABILITIES ............. (11.3%) (5,584,577)
------ ------------
NET ASSETS ..................... 100.0% $49,617,822
===== ===========

TBA's are mortgage-backed securities traded under delayed delivery commitments,
settling after December 31, 1995. Although the unit price for the trade has been
established, the principal value has not been finalized. However, the amount of
the commitment will not fluctuate more than 2% from the principal amount. Income
on TBA's is not earned until settlement date.

See notes to financial statements.

<PAGE>

- -------------------------------------------------------------------------------
Landmark Intermediate Income Fund
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES December 31, 1995
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C>
Investments, at value (Note 1A)(Identified Cost, $54,187,768).............. $55,202,399
Cash....................................................................... 262
Interest receivable and other assets....................................... 570,634
-----------
Total assets........................................................... 55,773,295
-----------
LIABILITIES:
Payable for securities purchased........................................... 6,015,000
Payable for shares of beneficial interest repurchased...................... 68,153
Payable to affiliates:
Investment advisory fee (Note 2)......................................... $ 3,270
Shareholder Servicing Agents' fee (Note 3B).............................. 10,495 13,765
Accrued expenses and other liabilities..................................... ------- 58,555
-----------
Total liabilities...................................................... 6,155,473
-----------
NET ASSETS for 5,079,977 shares of beneficial interest outstanding......... $49,617,822
===========

NET ASSETS CONSIST OF:
Paid-in capital............................................................ $51,013,521
Accumulated net realized loss on investments............................... (2,429,023)
Unrealized appreciation of investments..................................... 1,014,631
Undistributed net investment income........................................ 18,693
-----------
Total.................................................................. $49,617,822
===========

NET ASSET VALUE AND REDEMPTION PRICE PER SHARE OF BENEFICIAL INTEREST...... $ 9.77
======

COMPUTATION OF OFFERING PRICE:
Maximum Offering Price per share based on a 4.00% sales
charge ($9.77 / 0.96) $10.18
======

See notes to financial statements
</TABLE>

<PAGE>

- -------------------------------------------------------------------------------
Landmark Intermediate Income Fund
- -------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1995
- -------------------------------------------------------------------------------

<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME (Note 1B)................................................ $3,360,077

EXPENSES:
Shareholder servicing agents' fees (Note 3B)............................... $195,673
Investment advisory fees (Note 2).......................................... 171,213
Administrative fees (Note 3A).............................................. 97,836
Shareholder reports........................................................ 43,156
Custodian fees............................................................. 65,340
Auditing services.......................................................... 32,800
Legal services............................................................. 22,795
Distribution fees (Note 4)................................................. 24,459
Trustees fees.............................................................. 18,434
Transfer agent fees........................................................ 12,000
Miscellaneous.............................................................. 10,422
-------
Total expenses.................................................... 694,128

Less aggregate amount waived by Investment Adviser, Administrator,
Shareholder Servicing Agents and Distributor (Notes 2, 3A, 3B, and 4)..... (251,648)
Less fees paid indirectly (Note 1G)........................................ (2,225)
-------
Net expenses....................................................... 440,255
----------
Net investment income.............................................. 2,919,822
----------

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from investment transactions............................. 2,369,867
Unrealized appreciation (depreciation) of investments:
Beginning of period.................................................. (1,108,185)
End of period........................................................ 1,014,631
----------
Net change in unrealized appreciation (depreciation) of investments........ 2,122,816
----------
Net realized and unrealized gain (loss) on investments..................... 4,492,683
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS....................... $7,412,505
==========
</TABLE>

See notes to financial statements
<PAGE>

- -------------------------------------------------------------------------------
Landmark Intermediate Income Fund
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
December 31,
---------------------------
1995 1994
-------- ---------
INCREASE (DECREASE) IN NET ASSETS FROM:

OPERATIONS:
<S> <C> <C>
Net investment income..................................................... $ 2,919,822 $ 2,940,876
Net realized gain (loss) from investment transactions..................... 2,369,867 (4,798,890)
Net change in unrealized appreciation (depreciation) of investments....... 2,122,816 (730,406)
----------- -----------
Net increase (decrease) in net assets resulting from operations... 7,412,505 (2,588,420)
----------- -----------

DISTRIBUTIONS DECLARED TO SHAREHOLDERS FROM:
Net investment income..................................................... (2,928,567) (2,912,776)
Net realized gain on investments.......................................... -- (90,585)
----------- -----------
Decrease in net assets from distributions declared to shareholders (2,928,567) (3,003,361)
----------- -----------

TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 6):
Net proceeds from sale of shares.......................................... 902,835 1,241,851
Net asset value of shares issued to
shareholders from reinvestment of distributions......................... 2,894,283 2,973,424
Cost of shares repurchased................................................ (6,244,911) (12,224,541)
---------- -----------
Net decrease in net assets from transactions in
shares of beneficial interest (2,447,793) (8,009,266)
---------- -----------
NET INCREASE (DECREASE) IN NET ASSETS .................................... 2,036,145 (13,601,047)

NET ASSETS:
Beginning of period....................................................... 47,581,677 61,182,724
---------- ----------
End of period (including undistributed net investment income of
$18,693 and $28,100, respectively)...................................... $49,617,822 $47,581,677
=========== ===========

See notes to financial statements
</TABLE>

<PAGE>

Landmark Intermediate Income Fund
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For the Period
Year Ended June 25, 1993
December 31, (Commencement of
--------------------------- Operations) to
1995 1994 December 31, 1993
------ ------- -------------------

<S> <C> <C> <C>
Net Asset Value, beginning of period........... $ 8.91 $ 9.88 $10.00
------ ------ ------
Income From Operations:
Net investment income.......................... 0.57 0.521 0.261
Net realized and unrealized gain (loss) on investments 0.86 (0.959) 0.037
------ ------ ------
Total from operations.................. 1.43 (0.438) 0.298
------ ------ ------
Less Distributions From:
Net investment income...................... (0.57) (0.516) (0.261)
In excess of net investment income......... -- -- (0.006)
Net realized gain on investments........... -- (0.016) (0.151)
----- ----- -----
Total distributions........................ (0.57) (0.532) (0.418)
----- ----- -----
Net Asset Value, end of period............. $ 9.77 $ 8.910 $ 9.880
====== ======= =======

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted)...... $49,618 $47,582 $61,183
Ratio of expenses to average net assets........ 0.90% 0.90% 0.90%*
Ratio of net investment income to average net assets 5.97% 5.52% 4.95%*
Portfolio turnover............................. 396% 291% 103%
Total return................................... 16.45% (4.48)% 2.99%+

Note: If Agents of the Fund had not voluntarily agreed to waive a portion of
their fees for the periods indicated and the expenses were not reduced for
fees paid indirectly for the fiscal year ended December 31, 1995, the net
investment income per share and the ratios would have been as follows:

Net investment income per share................ $0.52 $0.475 $ 0.236
Ratios:
Expenses to average net assets................. 1.42% 1.39% 1.38%*
Net investment income to average net assets.... 5.45% 5.03% 4.47%*

*Annualized
+Not annualized
</TABLE>

See notes to financial statements

<PAGE>
- -------------------------------------------------------------------------------
Landmark Intermediate Income Fund
- -------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------

(1) SIGNIFICANT ACCOUNTING POLICIES
Landmark Intermediate Income Fund (the "Fund") is a separate diversified series
of Landmark Fixed Income Funds (the "Trust") which is organized as a
Massachusetts business trust and is registered under the Investment Company Act
of 1940, as amended, as an open-end, management investment company. The
Investment Adviser of the Fund is Citibank, N.A. ("Citibank"). The Landmark
Funds Broker-Dealer Services, Inc. ("LFBDS") acts as the Fund's Administrator
and Distributor. Citibank also serves as Sub-Administrator and makes Fund shares
available to customers as Shareholder Servicing Agent.

The significant accounting policies consistently followed by the Fund are in
conformity with generally accepted accounting principles and are as follows:

A. INVESTMENT SECURITY VALUATIONS -- Debt securities (other than short-term
obligations maturing in 60 days or less) are valued on the basis of valuations
furnished by a pricing service, which takes into account appropriate factors
such as institutional-size trading in similar groups of securities, yield,
quality, coupon rate, maturity, type of issue, and other market data, without
exclusive reliance upon quoted prices or exchange or over-the-counter prices,
since such valuations are believed to reflect more accurately the fair value of
the securities. Short-term obligations (maturing in 60 days or less) are valued
at amortized cost, which approximates market value. Securities, if any, for
which there are no such valuations or quotations are valued at fair value as
determined in good faith by or under guidelines established by the Trustees.

B. INCOME -- Interest income is determined on the basis of interest accrued and
discount earned, adjusted for amortization of premium or discount on long-term
debt securities when required for Federal income tax purposes. Gain and loss
from principal paydowns are recorded as ordinary income.

C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investment transactions. Accordingly, no provision for federal income or
excise tax is necessary. At December 31, 1995, the Fund, for federal income tax
purposes, had a capital loss carryover of $2,182,200, which will expire December
31, 2002. Such capital loss carryover will reduce the Fund's taxable income
arising from future net realized gain on investment transactions, if any, to the
extent permitted by the Internal Revenue Code, and thus will reduce the amount
of the distributions to shareholders which would otherwise be necessary to
relieve the Fund of any liability for federal income or excise tax.

D. EXPENSES -- The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and LFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund.

E. DISTRIBUTIONS -- The Fund distinguishes between distributions on a tax basis
and a financial reporting basis and requires that only distributions in excess
of tax basis earnings and profits be reported in the financial statements as a
return of capital. Differences in the recognition or classification of income
between the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.

F. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis. Distributions to shareholders and shares issuable to
shareholders electing to receive distributions in shares are recorded on the
ex-dividend date.

G. FEES PAID INDIRECTLY -- The Fund's custodian bank calculates its fees based
on the Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the Fund.
This amount is shown as a reduction of expense on the Statement of Operations.

(2) INVESTMENT ADVISORY FEES
The investment advisory fee paid to Citibank, as compensation for overall
investment management services, amounted to $171,213, of which $115,475 was
voluntarily waived for the year ended December 31, 1995. The investment advisory
fee is computed at the annual rate of 0.35% of average daily net assets.

(3) ADMINISTRATIVE SERVICES PLAN
The Trust has adopted an Administrative Services Plan (the "Administrative
Services Plan") which provides that the Trust on behalf of the Fund may obtain
the services of an Administrator, one or more Shareholder Servicing Agents and
other Servicing Agents, and may enter into agreements providing for the payment
of fees for such services. Under the Administrative Services Plan, the aggregate
of the fee paid to the Administrator from the Fund, the fees paid to the
Shareholder Servicing Agents from the Fund under such Plan and the Basic
Distribution Fee paid from the Fund to the Distributor under the Distribution
Plan may not exceed 0.65% of the Fund's average daily net assets on an
annualized basis for the Fund's then current fiscal year.

A. ADMINISTRATIVE FEES -- Under the terms of an Administrative Services
Agreement, the administrative services fee payable to the Administrator, as
compensation for overall administrative services and general office facilities,
is computed at an annual rate of 0.25% of the Fund's average daily net assets,
provided that the aggregate of any such fees paid to the Administrator and the
basic distribution fees paid to the Distributor may not exceed an amount equal
to 0.25% of the Fund's average daily net assets. The Administrator received
fees, computed at an annual rate of 0.20% of the Fund's average daily net assets
which amounted to $97,836, of which $38,337 was voluntarily waived for the year
ended December 31, 1995. Citibank acts as Sub-Administrator and performs such
duties and receives such compensation from LFBDS as from time to time is agreed
to by LFBDS and Citibank. The Fund pays no compensation directly to any Trustee
or any officer who is affiliated with the Administrator, all of whom receive
remuneration for their services to the Fund from the Administrator or its
affiliates. Certain of the officers and a Trustee of the Fund are officers or
directors of the Administrator or its affiliates.

B. SHAREHOLDER SERVICING AGENTS FEES -- The Fund has entered into shareholder
servicing agreements with each Shareholder Servicing Agent pursuant to which the
Shareholder Servicing Agent acts as an agent for its customers and provides
other related services. For their services, each Shareholder Servicing Agent
receives fees from the Fund, which may be paid periodically, but may not exceed,
on an annualized basis, an amount equal to 0.40% of the average daily net assets
of the Fund represented by shares owned during the period by investors for whom
such Shareholder Servicing Agent maintains a servicing relationship. Shareholder
Servicing Agents' fees amounted to $195,673, of which $73,377 was voluntarily
waived for the year ended December 31, 1995.

(4) DISTRIBUTION FEES
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, under which the Fund reimburses the
Distributor for expenses incurred or anticipated in connection with sales of
shares of the Fund, at an annual rate not to exceed 0.15% of the Fund's average
daily net assets for distribution of the Fund's shares. The Distributor may also
receive an additional fee from the Fund not to exceed 0.05% of the Fund's
average daily net assets in anticipation of, or as reimbursement for,
advertising expenses incurred by the Distributor in connection with the sale of
shares of the Fund. No payment of such additional fees has been made during the
period. Under the Administrative Services Plan, the distribution fees were
computed at an annual rate of 0.05% of the Fund's average daily net assets, and
amounted to $24,459, all of which was voluntarily waived for the year ended
December 31, 1995.

(5) PURCHASES AND SALES OF INVESTMENTS

Purchases and sales of securities, other than short-term obligations, aggregated
$191,463,517 and $200,113,412, respectfully, for the year ended December 31,
1995.

(6) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares of beneficial interest were as follows:

Year Ended
December 31,
---------------------
1995 1994
------ --------
Shares sold 94,442 129,167
Shares issued to shareholders from
reinvestment of distributions 306,199 322,052
Shares repurchased (662,943) (1,304,223)
------- ---------
Net decrease (262,302) (853,004)
======= ========

(7) FEDERAL INCOME TAX BASIS OF INVESTMENTS

The cost and unrealized appreciation (depreciation) in value of the investment
securities owned at December 31, 1995, as computed on a federal income tax
basis, are as follows:

Aggregate cost $54,218,706
===========
Gross unrealized appreciation $ 1,180,221
Gross unrealized depreciation (165,590)
-----------
Net unrealized appreciation $ 1,014,631
===========

(8) LINE OF CREDIT
The Fund, along with other Landmark Funds entered into an ongoing agreement with
a bank which allows the Funds collectively to borrow up to $40 million for
temporary or emergency purposes. Interest on borrowings, if any, is charged to
the specific fund executing the borrowing at the base rate of the bank. In
addition, the $15 million committed portion of the line of credit requires a
quarterly payment of a commitment fee based on the average daily unused portion
of the line of credit. For the year ended December 31, 1995, the commitment fee
allocated to the Fund was $263. Since the line of credit was established there
have been no borrowings.

<PAGE>
- --------------------------------------------------------------------------------
Landmark Intermediate Income Fund
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------

TO THE TRUSTEES AND SHAREHOLDERS OF LANDMARK
INTERMEDIATE INCOME FUND:

We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Landmark Intermediate Income Fund
(the "Fund"), a separate series of Landmark Fixed Income Funds (the "Trust") (a
Massachusetts business trust), as of December 31, 1995, and the related
statement of operations for the year then ended, and the statement of changes in
net assets for the years ended December 31, 1995 and 1994 and the financial
highlights for the two years ended December 31, 1995 and 1994 and for the period
from June 25, 1993 (Commencement of Operations) to December 31, 1993. These
financial statements and financial highlights are the responsibility of the
Trust's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
December 31, 1995, by correspondence with the Custodian and brokers; where
replies were not received from brokers, we performed other auditing procedures.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Landmark
Intermediate Income Fund at December 31, 1995, the results of its operations,
the changes in its net assets, and its financial highlights for the respective
stated periods in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

Boston, Massachusetts
February 1, 1996

<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, in NY or CT, (800) 285-1701
For all other states, (800) 285-1707

FOR PRIVATE BANKING CLIENTS:
Citibank, N.A.
The Citibank Private Bank
153 East 53rd Street, New York, NY 10043
Call Your Citibank Private Banking Account Officer,
Registered Representative or (212) 559-5959

FOR CITIBANK GLOBAL ASSET MANAGEMENT CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY 10043
(212) 559-7117

FOR NORTH AMERICAN INVESTOR SERVICES CLIENTS:
Citibank, N.A.
111 Wall Street, New York, NY 10043
Call Your Account Manager or (212) 657-9100

FOR CITICORP INVESTMENT SERVICES CUSTOMERS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200
(212) 736-8170 in New York City

<PAGE>
LANDMARK
FUNDS

MONEY MARKET FUNDS:

Cash Reserves
Premium Liquid Reserves
Institutional Liquid Reseves

U.S. Treasury Reserves
Premium U.s. Treasury Reserves
Institutional U.S. Treasury Reserves

Tax Free Reserves
California Tax Free Reserves
Connecticut Tax Free Reserves
New York Tax Free Reserves

STOCK & BOND FUNDS:

U.S. Government Income Fund
Intermediate Income Funds
National Tax Free Income Fund
New York Tax Free Income Fund

Balanced Fund
Equity Fund
International Equity Fund
Small Cap Equity Fund
Emerging Asian Markets Equity Fund

<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

- --------------------------------------------------------------------------------
<PAGE>

INVESTMENT ADVISER
(OF GOVERNMENT INCOME
PORTFOLIO)
Citibank, N.A.
153 East 53rd Street, New York, NY 10043

ADMINISTRATOR AND DISTRIBUTOR
The Landmark Funds Broker-Dealer Services, Inc.
6 St. James Avenue, Boston, MA 02116
(617) 423-1679

TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110

CUSTODIAN
Investors Bank and Trust Company
One Lincoln Plaza, Boston, MA 02111

AUDITORS
Price Waterhouse LLP
160 Federal Street, Boston, MA 02110

This report is prepared for the information of shareholders. It is authorized
for distribution to prospective investors only when preceded or accompanied
by an effective prospectus.

FI/USG/A/95 Printed on Recycled Paper

LANDMARK(SM) FUNDS
ADVISED BY CITIBANK, N.A.

LANDMARK
U.S. GOVERNMENT
INCOME FUND

ANNUAL
REPORT

December 31, 1995

<PAGE>

- --------------------------------------------------------------------------------
A LETTER TO OUR SHAREHOLDERS
- --------------------------------------------------------------------------------

Dear Shareholder:

1995 was an excellent year for the U.S. bond market. Contrary to many
investors' expectations at the end of 1994, this year was characterized by
modest economic growth, low inflation and declining interest rates. This
combination of economic influences was a recipe for above-average gains in the
financial markets, and investors who exercised patience and discipline during
1994's difficult market conditions reaped the rewards provided by stronger
markets in 1995.

The Landmark Funds' investment adviser, Citibank, N.A., manages the
Landmark U.S. Government Income Fund to generate current income and to preserve
the value of its shareholders' investment. Through its investment in Government
Income Portfolio, the Fund seeks to provide an attractive yield, a competitive
expense ratio and a high-quality investment portfolio consisting solely of
securities backed by the full faith and credit of the U.S. government.

This Annual Report reviews the Portfolio's investment activities and
performance and provides a summary of Citibank's perspective on and outlook for
the U.S. financial markets. On behalf of the Board of Trustees of the Landmark
Funds, I want to thank you for your confidence and participation. We look
forward to serving you in the months and years ahead.

Philip W. Coolidge

/s/ Philip W. Coolidge

President
January 20, 1996

- ---------------------------------------------------------------------------
TABLE OF CONTENTS
1 Letter to Shareholders
- ---------------------------------------------------------------------------
2 Market Environment
Fund Snapshot
- ---------------------------------------------------------------------------
3 Portfolio Manager
The Portfolio Manager Responds
- ---------------------------------------------------------------------------
4 Fund Quotes
Strategy and Outlook
- ---------------------------------------------------------------------------
5 Fund Data
Performance Highlights
- ---------------------------------------------------------------------------
6 Statement of Assets and Liabilities
- ---------------------------------------------------------------------------
7 Statement of Operations
- ---------------------------------------------------------------------------
8 Statement of Changes in Net Assets
- ---------------------------------------------------------------------------
9 Financial Highlights
- ---------------------------------------------------------------------------
10 Notes to Financial Statements
- ---------------------------------------------------------------------------
12 Independent Auditors' Report
Fund Quotes

LANDMARK U.S. GOVERNMENT
INCOME FUND

GOVERNMENT INCOME PORTFOLIO
- ---------------------------------------------------------------------------
13 Portfolio of Investments
- ---------------------------------------------------------------------------
14 Statement of Assets and Liabilities
Statement of Operations
- ---------------------------------------------------------------------------
15 Statement of Changes in Net Assets
Financial Highlights
- ---------------------------------------------------------------------------
16 Notes to Financial Statements
- ---------------------------------------------------------------------------
18 Independent Auditors' Report
- ---------------------------------------------------------------------------

<PAGE>

- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
- --------------------------------------------------------------------------------

By Spring it was apparent that the Federal Reserve's tight monetary policy
had caused the economy to slow down. As the rate of economic growth moderated,
investors' fears of inflation diminished. Accordingly, bond yields declined as
investors became convinced that the Federal Reserve would begin to lower
interest rates in order to avoid the possibility of a recession. Lower interest
rates drove bond prices higher, producing a strong rally in virtually every
sector of the fixed-income market.

- --------------------------------------------------------------------------------
FUND SNAPSHOT
- --------------------------------------------------------------------------------

COMMENCEMENT OF OPERATIONS
September 8, 1986

NET ASSETS AS OF 12/31/95
$35.3 million

FUND OBJECTIVE
To generate current income and preserve the value of its shareholders'
investment.

DIVIDENDS
Paid monthly, if any

CAPITAL GAINS
Paid annually, if any

BENCHMARKS
o Lipper Short U.S. Government Funds Average
o Lehman 1-5 Year U.S. Treasury Index

INVESTMENT ADVISER,
GOVERNMENT INCOME PORTFOLIO
Citibank, N.A.

- --------------------------------------------------------------------------------
PORTFOLIO MANAGER
- --------------------------------------------------------------------------------

THOMAS HALLEY
Vice President, Citibank, N.A.

Mr. Halley has been responsible for managing the Portfolio since its inception
after serving as the manager of the Fund since December 1988. He also manages
other commingled investment funds at Citibank as well as institutional insurance
portfolios.

Mr. Halley authors the commentary on economic trends for Citibank Global Asset
Management publications. Prior to joining Citibank in 1988, Mr. Halley was a
Senior Fixed Income Portfolio Manager with Brown Brothers Harriman & Company. He
has more than 20 years of experience in the management of taxable fixed income
investments.

- --------------------------------------------------------------------------------
THE PORTFOLIO MANAGER RESPONDS
- --------------------------------------------------------------------------------

As the year began, we maintained a longer-than-average duration in order to
maintain higher yields for a longer period as interest rates fell. When it
became apparent at mid-year that most interest-rate declines were behind us, we
reduced the Portfolio's duration to the neutral range. While we may have
sacrificed some yield by doing so, we reduced the risk that adverse conditions
would erode the value of the Portfolio.

When the year began, the majority of the Portfolio's assets were invested
in U.S. Treasury securities to avoid the risks associated with mortgage-backed
securities when interest rates decline. In a low interest rate environment,
mortgage holders often prepay their loans in order to refinance at more
favorable terms. The resulting return of principal to owners of mortgage
securities must then be reinvested at the lower, prevailing interest rate. As
the year progressed, however, and we became convinced that most interest-rate
declines were already incorporated into the market, we gradually increased our
exposure to mortgage securities backed by the Government National Mortgage
Association (GNMA) in order to capture the higher yields they typically provide.

- --------------------------------------------------------------------------------
FUND QUOTES FROM THE PORTFOLIO MANAGER
- --------------------------------------------------------------------------------

"To say that the bond market had a heck of a year in 1995 is an understatement."

"As the U.S. dollar improved, the market started to see inflows from Japan.
Plus, the prospect of a balanced federal budget would allow the Fed to ease
monetary policy. These factors culminated in a dramatic decline in interest
rates."

"In mid-year, we began to increase our exposure to mortgage securities
because they offered good value compared to U.S. Treasury securities."

- --------------------------------------------------------------------------------
STRATEGY AND OUTLOOK
- --------------------------------------------------------------------------------

We do not expect the bond market in 1996 to match its 1995 performance. In
fact, our near-term outlook suggests caution until data reveal more about the
economy's direction. In addition, as of year-end 1995, unresolved negotiations
between Congress and the White House regarding a deficit-reduction package have
created some uncertainty in the market. Over the longer term, however, we are
optimistic. We believe that inflation will remain relatively low, economic
growth will be moderate for most of the coming year and Federal Reserve policy
will remain accommodative. In our judgement, these factors should help create a
positive environment for fixed-income securities.

- --------------------------------------------------------------------------------
FUND DATA All Periods ended December 31, 1995
- --------------------------------------------------------------------------------
TOTAL RETURNS
------------------------
SINCE
ONE FIVE 9/8/86
YEAR YEARS* INCEPTION*
---- ----- ----------
Landmark U.S. Government Income Fund
without Sales Charge.......................... 11.48% 6.90% 6.63%
Lipper Short U.S. Government Funds Average...... 11.25% 6.61% 6.70%+
Lehman 1-5 Year U.S. Treasury Index............. 12.71% 7.58% 7.66%+
Landmark U.S. Government Income Fund
with Maximum Sales Charge of 1.50%.......... 9.81% 6.58% 6.46%

*Average Annual Total Return.
+From 8/31/86

30-Day SEC Yield 4.96%
Income Dividends Per Share $0.543

- -------------------------------------------------------------------------------
Performance Highlights
- -------------------------------------------------------------------------------

A $10,000 investment in the Fund made on inception date would have grown to
$17,925 with sales charge (as of 12/31/95). The graph shows how this compares to
our benchmarks over the same period.

US GOVT. INCOME FUND

Landmark
U.S. Landmark
Government U.S.
Income Government Lipper Short Lehman 1-5
Fund - Income Term US Yr. US
Without Fund - With Government Treasury
Sales Sales Funds Index
Charge Charge Average (Unmanaged)

$10,000 $9,850 $10,000 $10,000
Sep-86 $9,660 $9,515 $9,975 $9,958
Oct-86 $9,682 $9,537 $10,085 $10,064
Nov-86 $9,847 $9,700 $10,193 $10,135
Dec-86 $9,881 $9,733 $10,225 $10,156
Jan-87 $9,982 $9,832 $10,322 $10,233
Feb-87 $10,053 $9,902 $10,383 $10,283
Mar-87 $9,985 $9,835 $10,373 $10,289
Apr-87 $9,792 $9,646 $10,208 $10,176
May-87 $9,788 $9,641 $10,212 $10,178
Jun-87 $9,909 $9,761 $10,325 $10,293
Jul-87 $9,904 $9,755 $10,353 $10,338
Aug-87 $9,866 $9,718 $10,348 $10,339
Sep-87 $9,655 $9,511 $10,263 $10,266
Oct-87 $9,965 $9,816 $10,492 $10,502
Nov-87 $10,025 $9,874 $10,555 $10,572
Dec-87 $10,151 $9,999 $10,634 $10,653
Jan-88 $10,479 $10,322 $10,860 $10,851
Feb-88 $10,619 $10,459 $10,965 $10,950
Mar-88 $10,523 $10,365 $10,953 $10,946
Apr-88 $10,495 $10,337 $10,956 $10,948
May-88 $10,455 $10,298 $10,938 $10,921
Jun-88 $10,633 $10,473 $11,060 $11,053
Jul-88 $10,592 $10,433 $11,062 $11,044
Aug-88 $10,574 $10,415 $11,079 $11,056
Sep-88 $10,744 $10,583 $11,222 $11,208
Oct-88 $10,869 $10,706 $11,341 $11,337
Nov-88 $10,780 $10,618 $11,294 $11,278
Dec-88 $10,785 $10,624 $11,314 $11,292
Jan-89 $10,922 $10,758 $11,413 $11,386
Feb-89 $10,818 $10,656 $11,407 $11,366
Mar-89 $10,856 $10,693 $11,452 $11,413
Apr-89 $11,044 $10,878 $11,606 $11,624
May-89 $11,305 $11,136 $11,781 $11,806
Jun-89 $11,595 $11,421 $11,995 $12,063
Jul-89 $11,818 $11,641 $12,165 $12,277
Aug-89 $11,596 $11,422 $12,079 $12,155
Sep-89 $11,628 $11,453 $12,138 $12,221
Oct-89 $11,955 $11,776 $12,335 $12,442
Nov-89 $12,061 $11,880 $12,437 $12,556
Dec-89 $12,080 $11,899 $12,486 $12,600
<PAGE>
US GOVT. INCOME FUND

Jan-90 $11,867 $11,689 $12,467 $12,570
Feb-90 $11,880 $11,702 $12,524 $12,627
Mar-90 $11,864 $11,686 $12,562 $12,652
Apr-90 $11,671 $11,496 $12,576 $12,653
May-90 $12,059 $11,878 $12,763 $12,880
Jun-90 $12,265 $12,081 $12,893 $13,030
Jul-90 $12,441 $12,254 $13,044 $13,205
Aug-90 $12,260 $12,077 $13,065 $13,219
Sep-90 $12,357 $12,172 $13,162 $13,219
Oct-90 $12,523 $12,336 $13,296 $13,498
Nov-90 $12,807 $12,615 $13,442 $13,654
Dec-90 $13,034 $12,839 $13,593 $13,830
Jan-91 $13,183 $12,985 $13,716 $13,964
Feb-91 $13,258 $13,059 $13,795 $14,048
Mar-91 $13,309 $13,110 $13,870 $14,135
Apr-91 $13,442 $13,240 $13,998 $14,279
May-91 $13,510 $13,307 $14,078 $14,363
Jun-91 $13,454 $13,252 $14,107 $14,398
Jul-91 $13,659 $13,454 $14,244 $14,542
Aug-91 $13,982 $13,772 $14,445 $14,780
Sep-91 $14,324 $14,109 $14,613 $14,981
Oct-91 $14,459 $14,242 $14,762 $15,157
Nov-91 $14,535 $14,317 $14,902 $15,328
Dec-91 $14,833 $14,610 $15,152 $15,624
Jan-92 $14,733 $14,512 $15,063 $15,544
Feb-92 $14,802 $14,580 $15,024 $15,584
Mar-92 $14,777 $14,555 $14,937 $15,547
Apr-92 $14,863 $14,640 $15,059 $15,698
May-92 $15,058 $14,832 $15,217 $15,889
Jun-92 $15,215 $14,987 $15,375 $16,096
Jul-92 $15,410 $15,179 $15,560 $16,347
Aug-92 $15,512 $15,279 $15,687 $16,512
Sep-92 $15,649 $15,414 $15,816 $16,709
Oct-92 $15,502 $15,270 $15,693 $16,541
Nov-92 $15,483 $15,251 $15,668 $16,485
Dec-92 $15,657 $15,422 $15,818 $16,670
Jan-93 $15,866 $15,628 $16,017 $16,933
Feb-93 $16,022 $15,781 $16,170 $17,131
Mar-93 $16,078 $15,837 $16,221 $17,190
Apr-93 $16,177 $15,934 $16,312 $17,320
May-93 $16,125 $15,883 $16,293 $17,261
Jun-93 $16,303 $16,059 $16,444 $17,448
Jul-93 $16,295 $16,051 $16,488 $17,479
Aug-93 $16,534 $16,286 $16,650 $17,689
Sep-93 $16,600 $16,351 $16,697 $17,747
Oct-93 $16,637 $16,387 $16,725 $17,790
Nov-93 $16,555 $16,307 $16,677 $17,751
Dec-93 $16,609 $16,359 $16,737 $17,822
<PAGE>
US GOVT. INCOME FUND

Jan-94 $16,709 $16,458 $16,850 $17,970
Feb-94 $16,524 $16,276 $16,711 $17,786
Mar-94 $16,330 $16,085 $16,538 $17,612
Apr-94 $16,208 $15,965 $16,421 $17,510
May-94 $16,240 $15,997 $16,391 $17,529
Jun-94 $16,238 $15,995 $16,390 $17,555
Jul-94 $16,408 $16,162 $16,523 $17,747
Aug-94 $16,441 $16,194 $16,561 $17,802
Sep-94 $16,353 $16,108 $16,503 $17,706
Oct-94 $16,369 $16,123 $16,512 $17,729
Nov-94 $16,280 $16,036 $16,446 $17,640
Dec-94 $16,324 $16,079 $16,483 $17,681
Jan-95 $16,569 $16,320 $16,687 $17,949
Feb-95 $16,797 $16,545 $16,926 $18,253
Mar-95 $16,884 $16,631 $17,014 $18,355
Apr-95 $17,060 $16,804 $17,160 $18,544
May-95 $17,452 $17,190 $17,498 $18,971
Jun-95 $17,540 $17,277 $17,586 $19,084
Jul-95 $17,520 $17,258 $17,607 $19,126
Aug-95 $17,646 $17,381 $17,735 $19,256
Sep-95 $17,735 $17,469 $17,836 $19,364
Oct-95 $17,879 $17,611 $17,995 $19,552
Nov-95 $18,061 $17,790 $18,168 $19,755
Dec-95 $18,198 $17,925 $18,319 $19,927
<PAGE>
- -------------------------------------------------------------------------------
Landmark U.S. Government Income Fund
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES December 31, 1995
- -------------------------------------------------------------------------------

ASSETS:
Investment in Government Income Portfolio, at value (Note 1)..... $35,532,114
Receivable for shares of beneficial interest sold................ 1,946
Receivable from the Administrator................................ 14,062
-----------
Total assets................................................. 35,548,122
-----------
LIABILITIES:
Payable for shares of beneficial interest repurchased............ 222,344
Accrued expenses and other liabilities........................... 394
-----------
Total liabilities............................................ 222,738
-----------
NET ASSETS for 3,611,187 shares of beneficial
interest outstanding............................................ $35,325,384
===========

NET ASSETS CONSIST OF:
Paid-in capital.................................................. $38,254,911
Accumulated net realized loss.................................... (2,914,890)
Unrealized depreciation.......................................... (33,446)
Undistributed net investment income.............................. 18,809
-----------
Total........................................................ $35,325,384
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
OF BENEFICIAL INTEREST ........................................ $9.78
=====
COMPUTATION OF OFFERING PRICE:
Maximum Offering Price per share based on a 1.50%
sales charge ($9.78/0.985)...................................... $9.93
=====

See notes to financial statements

<PAGE>

INVESTMENT INCOME (Note 1B):
Interest Income from Government Income Portfolio........ $2,789,786
Allocated Expenses from Government Income Portfolio..... (165,068)
----------
Net investment income from Government
Income Portfolio..................................... $2,624,718

EXPENSES:
Shareholder Servicing Agents' fees (Note 2B)............ 180,611
Administrative fees (Note 2A)........................... 72,047
Distribution fees (Note 3).............................. 22,576
Legal fees.............................................. 20,701
Shareholder reports..................................... 18,360
Trustees' fees.......................................... 13,067
Transfer agent fees..................................... 12,000
Auditing fees........................................... 14,050
Custodian fees.......................................... 8,850
Miscellaneous........................................... 10,751
-------
Total expenses...................................... 373,013

Less aggregate amount waived by Administrator,
Shareholder Servicing Agents, and Distributor
(Notes 2A, 2B and 3)................................... (162,353)
Expenses Assumed by the Administrator (Note 6)...... (14,062)
--------
Net expenses........................................ 196,598
----------
Net investment income............................... 2,428,120
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) FROM
GOVERNMENT INCOME PORTFOLIO:
Net realized gain (loss)................................ 696,470
Net change in unrealized appreciation (depreciation).... 2,013,487
----------
Net realized and unrealized gain (loss)
from Government Income Portfolio ................ 2,709,957
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ... $5,138,077
==========

See notes to financial statements
<PAGE>

- --------------------------------------------------------------------------------
Landmark U.S. Government Income Fund
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------

<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1995 December 31, 1994
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
<S> <C> <C>
Net investment income........................................ $ 2,428,120 $ 3,219,042
Net realized gain (loss)..................................... 696,470 (2,780,042)
Net change in unrealized appreciation (depreciation)......... 2,013,487 (1,924,684)
----------- -----------
Net increase (decrease) in net assets resulting
from operations .......................................... 5,138,077 (1,485,684)
----------- -----------
DISTRIBUTION TO SHAREHOLDERS FROM:
Net investment income........................................ (2,440,326) (3,193,045)
----------- -----------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 5):
Net proceeds from sale of shares............................. 3,008,033 20,093,238
Net asset value of shares issued to shareholders
from reinvestment of dividends............................. 2,420,954 3,182,428
Cost of shares repurchased................................... (25,734,586) (44,969,764)
----------- -----------
Net decrease in net assets from transactions in shares of
beneficial interest........................................ (20,305,599) (21,694,098)
----------- -----------
NET DECREASE IN NET ASSETS .................................. (17,607,848) (26,372,827)

NET ASSETS:
Beginning of period.......................................... 52,933,232 79,306,059
----------- -----------
End of period (including undistributed net investment
income of $18,809 and $31,015, respectively)............... $35,325,384 $52,933,232
=========== ===========
</TABLE>

See notes to financial statements

<PAGE>

- -------------------------------------------------------------------------------
Landmark U.S. Government Income Fund
- -------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOUR MONTHS
YEAR ENDED ENDED
DECEMBER 31, DECEMBER 31, YEAR ENDED AUGUST 31,
------------- 1993++ -------------------------
1995 1994++ (Note 1F) 1993++ 1992++ 1991++
---- ---- ---------- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period......... $ 9.28 $ 9.91 $ 10.01 $ 9.85 $ 9.42 $ 8.93
------- ------- ------- ------ ------- ------

Income From Operations:
Net investment income........................ 0.543 0.466 0.183 0.448 0.591 0.710
Net realized and unrealized gain (loss)...... 0.500 (0.635) (0.138) 0.183 0.413 0.499
------- ------- ------- ------ ------- ------
Total from operations................... 1.043 (0.169) 0.045 0.631 1.004 1.209
------- ------- ------- ------ ------- ------
Less Distributions From:

Net investment income...................... (0.543) (0.461) (0.145) (0.464) (0.574) (0.719)
In excess of net investment income......... -- -- -- (0.007) -- --
------- ------- ------- ------ ------- ------
Total from distributions............... (0.543) (0.461) (0.145) (0.471) (0.574) (0.719)
------- ------- ------- ------ ------- ------
Net Asset Value, end of period............... $ 9.78 $ 9.28 $ 9.91 $10.01 $ 9.85 $ 9.42
======= ======= ======= ====== ======= ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted).... $35,325 $52,933 $79,306 $82,114 $56,159 $25,556
Ratio of expenses to average net assets...... 0.80%(A) 0.80%(A) 0.80%+ 0.80% 0.51% 0.97%
Ratio of net investment income to average
net assets................................. 5.38% 4.72% 4.34%+ 4.46% 6.03% 7.71%
Portfolio turnover (B)....................... -- 22% 26% 111% 161% 42%
Total return................................. 11.48% (1.72)% 0.45%** 6.59% 10.94% 14.04%

Note: If Agents of the Fund for the periods indicated and Agents of Government Income Portfolio for the
period May 1, 1994 to December 31, 1994 and for the year ended December 31, 1995 had not voluntarily waived
a portion of their fees and assumed Fund expenses, the net investment income per share and the ratios would
have been as follows:

Net investment income per share.............. $0.499 $0.421 $0.164 $0.400 $ 0.503 $ 0.659
Ratios:
Expenses to average net assets............... 1.23%(A) 1.26%(A) 1.27%+ 1.27% 1.41% 1.52%
Net investment income to
average net assets.......................... 4.95% 4.26% 3.88%+ 3.98% 5.13% 7.16%
** Not annualized
+ Annualized
(A) Includes the Fund's share of Government Income Portfolio allocated expenses for the periods subsquent to May, 1 1994.
(B) Portfolio turnover represents the rate of portfolio activity for the period while the Fund was making investments directly in
securities. The portfolio turnover rate for the period since the Fund transferred all of its investable assets to the Portfolio
is shown in the Portfolio's financial statements which are included elsewhere in this report.
++ On May 1, 1994, the Fund began investing all its investable assets in Government Income Portfolio.
</TABLE>

See notes to financial statements

<PAGE>

(1) SIGNIFICANT ACCOUNTING POLICIES
The Landmark U.S. Government Income Fund (the "Fund") is a separate diversified
series of Landmark Fixed Income Funds (the "Trust"), a Massachusetts business
trust. The Trust is registered under the Investment Company Act of 1940, as
amended, as an open-end, management investment company. The Fund invests all of
its investable assets in Government Income Portfolio (the "Portfolio"), a
management investment company for which Citibank, N.A. ("Citibank") serves as
Investment Adviser. Landmark Funds Broker-Dealer Services, Inc. ("LFBDS") acts
as the Trust's Administrator and Distributor. Citibank also serves as
Sub-Administrator and makes Fund shares available to customers as Shareholder
Servicing Agent.

The Trust seeks to achieve the Fund's investment objective to provide
shareholders with monthly dividends, as well as to protect the value of the
investment of shareholders by investing all of its investable assets in the
Portfolio, an open-end, diversified management investment company having the
same investment objective and policies and substantially the same investment
restrictions as the Fund. The value of such investment reflects the Fund's
proportionate interest (66.9% at December 31, 1995) in the net assets of the
Portfolio.

The financial statements of the Portfolio, including the portfolio of
investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosure in the financial statements. Actual
results could differ from those estimates.

The significant accounting policies consistently followed by the Fund are in
conformity with generally accepted accounting principles and are as follows:

A. Investment Valuation -- Valuation of securities by the Portfolio is discussed
in Note 1A of the Portfolio's Notes to Financial Statements, which are included
elsewhere in this report.

B. Investment Income -- The Fund earns income, net of Portfolio expenses, daily
based on its investment in the Portfolio.

C. Federal Taxes -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investment transactions. Accordingly, no provision for federal income or
excise tax is necessary. At December 31, 1995, the Fund, for federal income tax
purposes, had a capital loss carryover of $2,906,093, of which $835,037 will
expire on December 31, 1996, $1,741,548 will expire on December 31, 2002 and
$329,508 will expire on December 31, 2003. Such capital loss carryover will
reduce the Fund's taxable income arising from future net realized capital gain
on investment transactions, if any, to the extent permitted by the Internal
Revenue Code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal income or excise tax.

D. Expenses -- The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and LFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund. The Fund's share of the Portfolio's expenses are
charged against and reduce the amount of the Fund's investment in the Portfolio.

E. Distributions -- Distributions to shareholders are recorded on ex-dividend
date. The amount and character of income and net realized gains to be
distributed are determined in accordance with income tax rules and regulations,
which may differ from generally accepted accounting principles. These
differences are attributable to permanent book and tax accounting differences.

Reclassifications are made to the Fund's capital accounts to reflect income and
net realized gains available for distribution (or available capital loss
carryovers) under income tax rules and regulations. For the year ended
December31,1995, the fund reclassed $730,266 to accumulated net realized loss on
investments from paid-in capital.

F. Change in Fiscal Year End -- Effective September 1, 1993, the Fund changed
its fiscal year end from August 31 to December 31.

G. Other -- All the net investment income and realized and unrealized gain and
loss of the Portfolio is allocated pro rata, based on respective ownership
interests, among the Fund and the other investors in the Portfolio at the time
of such determination. Investment transactions are accounted for on a trade date
basis.

(2) ADMINISTRATIVE SERVICES PLAN
The Trust has adopted an Administrative Services Plan which provides that the
Trust, on behalf of the Fund, may obtain the services of an Administrator, one
or more Shareholder Servicing Agents and other Servicing Agents and may enter
into agreements providing for the payment of fees for such services. Under the
Trust Administrative Services Plan, the aggregate of the fees paid to the
Administrator from the Fund and the Portfolio, the fees paid to the Shareholder
Servicing Agents from the Fund under such Plan and the Basic Distribution Fee
paid from the Fund to the Distributor under the Distribution Plan may not exceed
0.65% of the Fund's average daily net assets on an annualized basis for the
Fund's then-current fiscal year.

A. Administrative Fees -- Under the terms of an Administrative Services
Agreement, the administrative fees paid to the Administrator, as compensation
for overall administrative services and general office facilities, may not
exceed an annual rate of 0.20% of the Fund's average daily net assets and 0.05%
of the Portfolio's average daily net assets. For the year ended December 31,
1995, under the Administrative Services Plan the Administrator received fees
computed at an annual rate of 0.15% of the Fund's average daily net assets which
amounted to $72,047, all of which was voluntarily waived. Citibank acts as
Sub-Administrator and performs such duties and receives such compensation from
LFBDS as from time to time is agreed to by LFBDS and Citibank. The Fund pays no
compensation directly to any Trustee or any officer who is affiliated with the
Administrator, all of whom receive remuneration for their services to the Fund
from the Administrator or its affiliates. Certain of the officers and a Trustee
of the Fund are officers or directors of the Administrator or its affiliates.

B. Shareholder Servicing Agents' Fees -- The Trust, on behalf of the Fund, has
entered into shareholder servicing agreements with each Shareholder Servicing
Agent pursuant to which that Shareholder Servicing Agent acts as an agent for
its customers and provides other related services. For their services, each
Shareholder Servicing Agent receives fees from the Fund, which may be paid
periodically, which may not exceed, on an annualized basis, an amount equal to
0.40% of the average daily net assets of the Fund represented by shares owned
during the period for which payment is being made by investors for whom such
Shareholder Servicing Agent maintains a servicing relationship. Shareholder
Servicing Agents fees amounted to $180,611, of which $67,730 was voluntarily
waived for the year ended December 31, 1995.

(3) DISTRIBUTION FEES
The Trust has adopted a Plan of Distribution pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended, in which the Fund reimburses the
Distributor for expenses incurred or anticipated in connection with sales of
shares of the Fund, at an annual rate not to exceed 0.15% of the Fund's average
daily net assets. The Distributor may also receive an additional fee from the
Fund not to exceed 0.05% of the Fund's average daily net assets in anticipation
of, or as reimbursement for, advertising expenses incurred by the Distributor in
connection with the sale of shares of the Fund. No payment of such additional
fees has been made during the period. Under the Administrative Services Plan,
the distribution fees were computed at an annual rate of 0.05% of the Fund's
average daily net assets which amounted to $22,576, all of which was voluntarily
waived for the year ended December 31, 1995.

(4) INVESTMENT TRANSACTIONS
Increases and decreases in the Fund's investment in the Portfolio for the year
ended December 31, 1995 aggregated $3,012,665 and $26,134,522, respectively.

(5) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares of beneficial interest were as follows:

Year Ended
December 31,
-----------------
1995 1994
------- -------
Shares sold......................................... 311,521 2,047,894
Shares issued to shareholders from
reinvestment of dividends ......................... 251,882 333,897
Shares repurchased.................................. (2,655,041) (4,683,580)
---------- ----------
Net decrease........................................ (2,091,638) (2,301,789)
========== ==========

6) ASSUMPTION OF EXPENSES
LFBDS has voluntarily agreed to pay a portion of the unwaived expenses of the
Fund for the period ended December 31, 1995, which amounted to $14,062.

<PAGE>
- --------------------------------------------------------------------------------
Landmark U.S. Government Income Fund
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
- --------------------------------------------------------------------------------

TO THE TRUSTEES AND THE SHAREHOLDERS OF LANDMARK FIXED INCOME FUNDS (THE TRUST):
LANDMARK U.S. GOVERNMENT INCOME FUND

In our opinion, the accompanying statement of assets and liabilities, and the
related statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
Landmark U.S. Government Income Fund (the "Fund"), a series of Landmark Fixed
Income Funds, at December 31, 1995, the results of its operations, the changes
in its net assets and the financial highlights for the periods indicated, in
conformity with generally accepted accounting principles. These financial
statements and financial highlights (hereafter referred to as "financial
statements") are the responsibility of the Fund's management; our responsibility
is to express an opinion on these financial statements based on our audits. We
conducted our audits of these financial statements in accordance with generally
accepted auditing standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of investments owned at December 31, 1995 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.

PRICE WATERHOUSE LLP

Boston, Massachusetts
February 7, 1996

PRINCIPAL
AMOUNT
ISSUER (000 OMITTED) VALUE
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 15.4%
- -------------------------------------------------------------------------------

8.00%, 2006............. $ 294 $ 306,531
8.00%, 2007............. 249 259,424
8.00%, 2017............. 578 602,840
8.00%, 2021............. 291 302,866
8.00%, 2022............. 253 263,274
9.50%, 2016............. 3 3,663
9.50%, 2017............. 69 74,445
9.50%, 2018............. 65 70,017
9.50%, 2019............. 80 85,901
9.50%, 2020............. 76 81,469
6.00%, 2026 TBA......... 1,000 1,009,530
7.50%, 2025 TBA......... 5,000 5,143,750
---------
8,203,710
---------

PRINCIPAL
AMOUNT
ISSUER (000 OMITTED) VALUE
- -------------------------------------------------------------------------------

- -------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 78.8%
- -------------------------------------------------------------------------------
United States Treasury Notes,
4.625%, 2/15/96.......................... $ 2,064 $ 2,062,700
7.25%, 8/31/96........................... 6,605 6,685,515
6.125%, 5/31/97.......................... 8,350 8,451,786
6.00%, 12/31/97.......................... 8,000 8,123,760
5.375%, 5/31/98.......................... 1,675 1,680,494
6.875%, 3/31/00.......................... 14,100 14,895,381
-----------
$41,899,636
-----------
SHORT-TERM OBLIGATIONS - 15.9%
Saloman Repurchase Agreement
5.375% due 2/1/96 proceeds
at maturity $523,805
(secured by $487,763 U.S. Treasury
Bill 5.15% due 6/13/96 and $47,583
U.S. Treasury Bill
5.15% due 6/6/96.)........................ 523 523,492

United States Treasury Bill
4.85%, 3/28/96........................... 8,000 7,903,000
-----------
8,426,492
-----------
TOTAL INVESTMENTS
(Identified Cost $58,474,163)............. 110.1% 58,529,838

OTHER ASSETS
LESS LIABILITIES.......................... (10.1) (5,384,545)
------ -----------
NET ASSETS................................. 100.0% $53,145,293
====== ===========

*TBA's are mortgage-backed securities traded under delayed delivery commitments,
settling after December 31, 1995. Although the unit price for the trade has been
established, the principal value has not been finalized. However, the amount of
the commitment will not fluctuate more than 2% from the principal amount. Income
on TBA's is not earned until settlement date.

See notes to financial statements

<PAGE>
- -------------------------------------------------------------------------------
Government Income Portfolio
- -------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES December 31, 1995
- -------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) (Identified Cost, $58,474,163).. $58,529,838
Interest receivable............................................ 753,762
-----------
Total assets............................................... 59,283,600
-----------
LIABILITIES:
Payable for securities purchased............................... 6,122,656
Payable to affiliates--Investment advisory fees (Note 2)....... 15,651
-----------
Total Liabilities.......................................... 6,138,307
-----------
NET ASSETS .................................................... $53,145,293
===========
REPRESENTED BY:
Paid-in capital for beneficial interests....................... $53,145,293
===========

See notes to financial statements

INTEREST INCOME (Note 1B):...................... ... $3,159,360

EXPENSES:
Investment advisory fees (Note 2).................. $179,525
Administrative fees (Note 3)....................... 25,646
Expense fees (Note 6).............................. 500
--------
Total expenses................................... 205,671

Less aggregate amount waived by the
Investment Adviser and Administrator
(Note 2 and Note 3)............................... (19,276)
--------
Net Expense........................................ 186,395
----------
Net investment income............................ 2,972,965
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain from investment transactions..... 883,687
Unrealized appreciation (depreciation) of investments--
Beginning of period............................. (2,077,668)
End of period................................... 55,675
----------
Net change in unrealized appreciation
(depreciation) of investments................... 2,133,343
----------
Net realized and unrealized gain on investments. 3,017,030
----------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS........................ $5,989,995
==========

See notes to financial statements
<PAGE>

- -------------------------------------------------------------------------------
Government Income Portfolio
- -------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MAY 1, 1994
(COMMENCEMENT
YEAR ENDED OF OPERATIONS) TO
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
<S> <C> <C>
Net investment income.................................................. $ 2,972,965 $ 2,240,079
Net realized gain (loss) on investment transactions................... 883,687 (2,084,009)
Net change in unrealized appreciation (depreciation) of investments.... 2,133,343 443,611
----------- -----------
Net increase (decrease) in net assets resulting from operations.... 5,989,995 599,681
----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from contributions............................................ 18,686,471 80,362,853
Value of withdrawals................................................... (27,204,245) (25,289,462)
----------- -----------
Net increase (decrease) in net assets from capital transactions.... (8,517,774) 55,073,391
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS: ................................ (2,527,779) 55,673,072
NET ASSETS:
Beginning of period.................................................... 55,673,072 --
----------- -----------
End of period.......................................................... $53,145,293 $55,673,072
=========== ===========
</TABLE>
See notes to financial statements

- --------------------------------------------------------------------------------
Government Income Portfolio
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1, 1994
(COMMENCEMENT OF
YEAR ENDED OPERATIONS) TO
DECEMBER 31, 1995 DECEMBER 31, 1994
----------------- -----------------
RATIOS/SUPPLEMENTAL DATA:

<S> <C> <C>
Net Assets, end of period (000's omitted).............................. $53,145 $55,673
Ratio of expenses to average net assets................................ 0.36% 0.43%*
Ratio of net investment income to average net assets................... 5.80% 5.27%*
Portfolio turnover..................................................... 284% 40%
Note: If Agents of the Portfolio had not voluntarily waived a portion of their fees during the period indicated,
the ratios would have been as follows:

RATIOS:
Expenses to average net assets......................................... 0.40% 0.44%*
Net investment income to average net assets............................ 5.76% 5.26%*
* Annualized
</TABLE>

See notes to financial statements

<PAGE>

(1) SIGNIFICANT ACCOUNTING POLICIES
Government Income Portfolio (the "Portfolio"), a separate series of The Premium
Portfolios (the "Portfolio Trust"), is registered under the Investment Company
Act of 1940, as amended, as a diversified, open-end management investment
company which was organized as a trust under the laws of the State of New York.
The Declaration of Trust permits the Trustees to issue beneficial interests in
the Portfolio. The Investment Adviser of the Portfolio is Citibank, N.A.
("Citibank"). Signature Financial Group (Grand Cayman), Ltd. ("SFG") acts as the
Portfolio's Administrator.

The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts to and disclosure in the financial statements.
Actual results could differ from those estimates.

The significant accounting policies consistently followed by the Portfolio are
in conformity with generally accepted accounting principles and are as follows:

A. INVESTMENT SECURITY VALUATIONS -- Debt securities (other than short-term
obligations maturing in 60 days or less) are valued on the basis of valuations
furnished by pricing services approved by the Board of Trustees, which take into
account appropriate factors such as institutional-size trading in similar groups
of securities, yield, quality, coupon rate, maturity, type of issue, and other
market data, without exclusive reliance on quoted prices or exchange or over-the
counter prices. Short-term obligations maturing in 60 days or less are valued at
amortized cost, which approximates market value. Securities, if any, for which
there are no such valuations or quotations are valued at fair value as
determined in good faith by or under guidelines established by the Trustees.

B. INCOME -- Interest income consists of interest accrued and discount earned,
adjusted for amortization of premium or discount on long-term debt securities
when required for U.S. federal income tax purposes. Gain and loss from principal
paydowns are recorded as income.

C. U.S. FEDERAL INCOME TAXES -- The Portfolio is considered a partnership under
the U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary.

D. EXPENSES -- The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG. Expenses incurred by the
Portfolio Trust with respect to any two or more portfolios or series are
allocated in proportion to the average net assets of each portfolio, except when
allocations of direct expenses to each portfolio can otherwise be made fairly.
Expenses directly attributable to a portfolio are charged to that portfolio.

E. REPURCHASE AGREEMENTS -- It is the policy of the Portfolio to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase agreements.
Additionally, procedures have been established by the Portfolio to monitor, on a
daily basis, the market value of the repurchase agreement's underlying
investments to ensure the existence of a proper level of collateral.

F. TBA PURCHASE COMMITMENTS -- The Portfolio enters into "TBA" (to be announced)
purchase commitments to purchase securities for a fixed unit price at a future
date beyond customary settlement time. Although the unit price has been
established, the principal value has not been finalized. However, the amount of
the commitment will not fluctuate more than 2.0% from the principal amount. The
Portfolio holds, and maintains until the settlement date, cash or high-grade
debt obligations in an amount sufficient to meet the purchase price. TBA
purchase commitments may be considered securities in themselves, and involve a
risk of loss if the value of the security to be purchased declines prior to the
settlement date, which risk is in addition to the risk of decline in the value
of the Portfolio's other assets. Unsettled TBA purchase commitments are valued
at the current market value of the underlying securities, generally according to
the procedures described under Note 1A.

Although the Portfolio will generally enter into TBA purchase commitments with
the intention of acquiring securities for its portfolio, the Portfolio may
dispose of a commitment prior to settlement if the Portfolio's Adviser deems it
appropriate to do so.

G. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis.

(2) INVESTMENT ADVISORY FEES
The investment advisory fees paid to Citibank, as compensation for overall
investment management services, amounted to $179,525, of which $1,055 was
voluntarily waived for the year ended December 31, 1995. The investment advisory
fees are computed at the annual rate of 0.35% of the Portfolio's average daily
net assets.

(3) ADMINISTRATIVE FEES
Under the terms of an Administrative Services Agreement, the administrative fees
paid to the Administrator, as compensation for overall administrative services
and general office facilities, are computed at the annual rate of 0.05% of the
Portfolio's average daily net assets. The administrative fees amounted to
$25,646 of which $18,221 was voluntarily waived, for the year ended December 31,
1995. Citibank acts as Sub-Administrator and performs such duties and receives
such compensation from SFG as from time to time is agreed to by SFG and
Citibank. The Portfolio pays no compensation directly to any Trustee or any
officer who is affiliated with the Administrator, all of whom receive
remuneration for their services to the Portfolio from the Administrator or its
affiliates. Certain of the officers and a Trustee of the Portfolio are officers
or directors of the Administrator or its affiliates.

(4) PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of U.S. Government securities, other than short-term
obligations, aggregated $141,154,161 and $148,131,092, respectively, for the
year ended December 31, 1995.

(5) FEDERAL INCOME TAX BASIS
OF INVESTMENTS
The cost and unrealized appreciation (depreciation) in value of the investment
securities owned at December 31, 1995, as computed on a federal income tax
basis, are as follows:

Aggregate cost...................... $58,474,163
===========
Gross unrealized appreciation....... $ 274,473
Gross unrealized depreciation....... (218,798)
-----------
Net unrealized appreciation......... $ 55,675
===========

(6) EXPENSE FEES
SFG has entered into an expense agreement with the Portfolio. SFG has agreed to
pay all of the ordinary operating expenses (excluding interest, taxes, brokerage
commissions, litigation costs or other extraordinary costs or expenses) of the
Portfolio, other than fees paid under the Advisory Agreement and Administrative
Services Agreement. The Agreement may be terminated by either party upon not
less than 30 days nor more than 60 days written notice.

The Portfolio has agreed to pay SFG an expense fee on an annual basis, accrued
daily and paid monthly; provided, however, that such fee shall not exceed the
amount such that immediately after any such payment the aggregate ordinary
expenses of the Portfolio would, on an annual basis, exceed an agreed upon rate,
currently 0.40% of the Portfolio's average daily net assets.

(7) LINE OF CREDIT
The Portfolio, along with other Landmark Funds entered into an ongoing agreement
with a bank which allows the Funds collectively to borrow up to $40 million for
temporary or emergency purposes. Interest on borrowings, if any, is charged to
the specific fund executing the borrowing at the base rate of the bank. In
addition, the $15 million committed portion of the line of credit requires a
quarterly payment of a commitment fee based on the average daily unused portion
of the line of credit. For the year ended December 31, 1995 the commitment fee
allocated to the Portfolio was $366. Since the line of credit was established,
there have been no borrowings.

TO THE TRUSTEES AND THE INVESTORS OF THE PREMIUM PORTFOLIOS (THE TRUST), WITH
RESPECT TO ITS SERIES, GOVERNMENT INCOME PORTFOLIO:

We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Government Income Portfolio (the
"Portfolio"), a series of The Premium Portfolios, as at December 31, 1995 and
the related statements of operations and of changes in net assets and the
financial highlights for the periods indicated. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Portfolio's management. Our responsibility is to express
an opinion on these financial statements based on our audits.

We conducted our audits in accordance with U.S. generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits, which included confirmation of investments owned as
at December 31, 1995 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmation from brokers
were not received, provide a reasonable basis for our opinion.

In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Portfolio as at December 31, 1995, the
results of its operations and the changes in its net assets and the financial
highlights for the periods indicated in accordance with U.S. generally accepted
accounting principles.

PRICE WATERHOUSE
Chartered Accountants

Toronto, Ontario
February 7, 1996

<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 10126-5130
Call Your Citigold Executive or, in NY or CT, (800) 285-1701,
For all other States, (800) 285-1707

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

<PAGE>

LANDMARK
FUNDS

MONEY MARKET FUNDS:
Cash Reserves
Premium Liquid Reserves
Institutional Liquid Reserves

U.S. Treasury Reserves
Premium U.S. Treasury Reserves
Institutional U.S. Treasury Reserves

Tax Free Reserves
California Tax Free Reserves
Connecticut Tax Free Reserves
New York Tax Free Reserves

STOCK & BOND FUNDS:
U.S. Government Income Fund
Intermediate Income Fund
National Tax Free Income Fund
New York Tax Free Income Fund

Balanced Fund
Equity Fund
International Equity Fund
Small Cap Equity Fund
Emerging Asian Markets Equity Fund