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[LOGO] LANDMARK(SM) FUNDS
Advised by Citibank, N.A.
Landmark
International
Equity Fund
ANNUAL
REPORT
December 31, 1994
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A LETTER TO OUR SHAREHOLDERS
- - --------------------------------------------------------------------------------
Dear Shareholder:
1994 was a difficult year for financial markets including virtually all of
the world's major stock markets. A stronger-than-expected economy and higher
interest rates adversely affected many types of investments, especially the U.S.
bond market, where prices declined almost 10% since the beginning of 1994. The
U.S. stock market fell just over 8% from its highs in the first half of the
year, but later recouped those losses on the strength of strong corporate
earnings and finished the year with a small gain.
Throughout the period, the Landmark Funds' investment adviser, Citibank,
N.A., managed the underlying International Equity Portfolio in a manner
consistent with the objective stated in the Landmark International Equity Fund's
prospectus: to provide long-term growth of capital. The Portfolio participates
in the ownership of common stocks of companies organized in countries outside
the United States. The Landmark International Equity Fund is designed to help
its shareholders participate in growth opportunities around the world and is
most suitable for long-term investors.
This Annual Report for the period ended December 31, 1994 reviews the
Fund's investment activities and performance over the past twelve months and
provides a summary of Citibank's perspective on the financial markets and
outlook for the foreseeable future. On behalf of the Board of Trustees of the
Landmark Funds, we want to thank our shareholders for their participation and
support. We look forward to serving you in the months and years ahead.
/s/ Philip Coolidge
Philip W. Coolidge
President
January 20, 1995
- - ---------------------------------
Remember that Mutual Fund Shares:
* Are not bank deposits or FDIC insured
* Are not obligations of or guaranteed by Citibank or Citicorp Investment
Services
* Are subject to investment risks, including possible loss of the principal
amount invested
TABLE OF CONTENTS
1 Letter to Shareholders
- - ----------------------------------------------
Market Environment
2 Fund Snapshot
Portfolio Manager
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The Portfolio Responds
3 Fund Quotes
Strategy and Outlook
- - ----------------------------------------------
4 International Equity Portfolio
by the Numbers
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Fund Data
5 Performance Highlights
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Landmark International Equity Fund
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6 Statement of Assets and Liabilities
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7 Statement of Operations
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8 Statement of Changes in Net Assets
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9 Financial Highlights
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10 Notes to Financial Statements
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13 Independent Auditors' Report
- - ----------------------------------------------
International Equity Portfolio
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14 Portfolio of Investments
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17 Statement of Assets and Liabilities
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18 Statement of Operations
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Statement of Changes in Net Assets
19 Financial Highlights
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20 Notes to Financial Statements
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22 Independent Auditors' Report
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PAGE>
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MARKET ENVIRONMENT
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1994 was an unusually difficult year for virtually all of the world's major
stock markets. Despite steady economic growth after a long period of recession
in Europe and Japan and despite robust growth in developing markets in Asia and
Latin America, international equity markets generally failed to reflect higher
corporate earnings expectations in their share prices.
We believe there were two primary reasons for the year's lackluster
returns: first, higher 1994 earnings may already have been incorporated in 1993
performance--which, at a gain of more than 30%, was more than two times as high
as the long-term historical average. A period of relative underperformance was
to be expected after such a dramatic rise.
Second, many international stock markets were adversely affected by a
nearly 10% decline in the U.S. bond market. We believe that this unusual linkage
between U.S. bonds and international stocks is evidence of globalization, the
growing interdependence among the world's financial markets. In 1994, the U.S.
Federal Reserve raised its target for short-term interest rates six times, from
3.0% to 5.5%, causing U.S. Treasury bonds to decline almost 10% from their
highs. The speed and magnitude of the Federal Reserve's actions caught certain
highly leveraged institutional investors, particularly hedge funds, off guard
and they were forced to liquidate their positions in international stocks and
bonds to meet their credit obligations. Such large-scale liquidations placed
selling pressure on almost all international securities, which constrained
returns in otherwise healthy markets.
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FUND SNAPSHOT
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COMMENCEMENT OF OPERATIONS
March 1, 1991
NET ASSETS AS OF 12/31/94
$28.8 million
FUND OBJECTIVE
Long-term capital growth through investing primarily in foreign common stocks
DIVIDENDS
Paid semi-annually, if any
CAPITAL GAINS
Distributed annually, if any
BENCHMARKS
* Lipper International Equity Funds Average
* Morgan Stanley Capital International-Europe
Australia Far East (MSCI EAFE) Index
INVESTMENT ADVISER,
INTERNATIONAL EQUITY PORTFOLIO
Citibank, N.A.
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PORTFOLIO MANAGER
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HENRY B. W. DE VISMES
Vice President, Citibank, N.A.
Mr. de Vismes has been responsible for managing the Portfolio since its
inception after serving as the manager of the Fund since its inception in March
1991. He also manages individual international portfolios and has responsibility
for international equity strategy, global asset allocation and global stock
selection for Citibank. Prior to joining Citibank in 1991, Mr. de Vismes managed
a U.S.-based international equity fund for 19 years at London-based merchant
bank Kleinwort Benson Group.
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THE PORTFOLIO RESPONDS
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We maintained our conservative growth-oriented investment style and
long-term investment perspective during 1994's difficult market environment.
Because we analyze potential investments according to a time horizon of 24 to 30
months, we were not unduly concerned about short-term price fluctuations or
temporary economic events. Indeed, we regarded recent market weakness as an
opportunity to acquire the stocks of growing companies at excellent prices.
Therefore, we focused primarily on finding such opportunities during the year.
As always, we emphasized reasonably priced companies that we believe will
achieve high levels of long-term earnings growth relative to local market
averages.
As of year-end, the International Equity Portfolio contained 56 companies
from 22 nations. 45% of the companies in the Portfolio are based in Europe, 48%
are in the Pacific Basin and 7% are in Latin America and Canada. In addition, we
have found particularly attractive opportunities in the media, merchandising and
telecommunications industries of various nations.
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FUND QUOTES FROM THE PORTFOLIO MANAGER
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"Although overseas economies are recovering nicely, stock markets outside of the
U.S. have not had the benefit of falling interest rates, as the U.S. market
had when it emerged from recession a few years ago."
"We expect international equities to rise significantly when 1994 corporate
earnings are reported during the first half of 1995."
"Weak markets provided opportunities for value. We found several companies that
met our growth criteria and were selling at attractive levels."
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STRATEGY AND OUTLOOK
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We expect the international markets to return to a more normal state of
affairs in 1995, producing gains in line with historical averages. The problems
associated with highly leveraged hedge funds, mentioned earlier, should largely
be behind us. Higher U.S. interest rates and tighter monetary policy, while
still possible, should not have as significant an effect on international
equities as they did in 1994. And perhaps most important, local economies and
corporate earnings are expected to continue to grow steadily in industrialized
nations and robustly in developing areas.
Once global investors are comfortable that earnings are rising, interest
rates are stable and inflation remains low, funds should flow back into the
world's equity markets, driving stock prices higher. The key to overseas
performance, as it is in the U.S., is for economies to grow at a sustainable
pace, neither too slow to risk recession nor too fast to trigger higher
inflation.
As for the International Equity Portfolio, we expect the investments we
acquired in 1994 to rise to levels commensurate with their earnings prospects,
which should create positive returns for our shareholders. At the same time, we
will continue to look for fundamentally strong companies that we believe will do
well over the long term, regardless of short-term fluctuations in the financial
markets.
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INTERNATIONAL EQUITY PORTFOLIO
________________________________________________________________________________
BY THE NUMBERS
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TOP TEN HOLDINGS OF THE PORTFOLIO
(As of 12/31/94)
Name Nation % of Net Assets
Marui Co. Japan 2.84%
DDI Corporation Japan 2.69%
Astra AB Sweden 2.62%
Ito Yokado Co. Ltd. Japan 2.50%
Barco NV Belgium 2.47%
Louis Vuitton-Moet Henney France 2.46%
Turkiye Garanti Bankasi A.S. GDR 2.45%
Banco de Santander S.A. Spain 2.38%
East Japan Rail Japan 2.33%
Castorama Dubois France 2.33%
- - --------------------------------------------------------------------------------
% BY INDUSTRIES OF THE PORTFOLIO
Industries % of Common Stocks
-------- ------------------
Banks & Finance 5.3%
Basic Goods 1.3%
Basic Industries 1.6%
Business Services 5.9%
Construction Materials 2.8%
Consumer Products 11.9%
Diversified Financial Holding Company 7.2%
Electronics 8.0%
Financial Services 3.7%
Food Retail--Merchandising 3.6%
Health & Personal Care 9.9%
Machinery 4.1%
Media--Publishing 5.1%
Merchandising 18.5%
Paper Goods 1.7%
Real Estate 1.0%
Telecommunications 6.0%
Tobacco 2.4%
CHANGES IN PORTFOLIO ASSET ALLOCATION
Portfolio of investments as of 12/31/94
Europe ..................................... 44%
Japan ...................................... 22%
Pacific Basin .............................. 26%
Latin America .............................. 6%
North America .............................. 2%
Compared to 12/31/93
Europe ..................................... 50%
Japan ...................................... 12%
Pacific Basin .............................. 24%
Latin America .............................. 14%
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FUND DATA All Periods Ending December 31, 1994
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Total Returns
-------------------------------
Since
3/1/91
Inception
Year (annualized)
--------- ----------
Landmark International Equity Fund
without Sales Charge ............................. (11.46)% 3.73%
Lipper International Equity Funds Average ......... (0.71)% 7.43%*
MSCI EAFE Index ................................... 8.06% 5.90%*
Landmark International Equity Fund
with Maximum Sales Charge of 4.75% .............. (15.67)% 2.42%
*Since 2/28/91.
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PERFORMANCE HIGHLIGHTS
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A $10,000 investment in the Fund made on inception date would have grown to
$10,962 with sales charge (as of 12/31/94). The graph below shows how this
compares to our benchmarks over the same period.
The graph includes the initial sales charge on the Fund (no comparable charge
exists for the other indices) and assumes all dividends and distributions from
the Fund are reinvested at Net Asset Value.
Landmark Landmark
International International Lipper MSCI
Equity -- Equity -- International EAFE
Without With Equity Funds Index
Sales Charge Sales Charge Average (Unmanaged)
------------ ------------ ------------ -----------
Landmark Landmark Lipper Inte MSCI EA
Mar. 91 $10,000 $ 9,525 $10,000 $10,000
$ 9,420 $ 8,973 $ 9,708 $ 9,400
$ 9,740 $ 9,277 $ 9,831 $ 9,495
$ 9,740 $ 9,277 $ 9,942 $ 9,595
$ 9,760 $ 9,296 $ 9,451 $ 8,889
$ 9,800 $ 9,335 $ 9,828 $ 9,329
$ 9,910 $ 9,439 $ 9,479 $ 9,141
$10,050 $ 9,668 $10,023 $ 9,659
$10,200 $ 9,716 $10,082 $ 9,798
$ 9,860 $ 9,392 $ 9,746 $ 9,344
- - --------------------------------------------------------------------------------
Dec 91 $10,161 $ 9,678 $10,240 $ 9,832
$10,411 $ 9,917 $10,282 $ 9,628
$10,602 $10,098 $10,283 $ 9,289
$10,090 $ 9,611 $ 9,928 $ 8,681
$10,361 $ 9,869 $10,144 $ 8,728
$10,933 $10,414 $10,650 $ 9,317
$10,622 $10,118 $10,358 $ 8,881
$10,171 $ 9,688 $ 9,972 $ 8,660
$10,221 $ 9,735 $10,073 $ 9,209
$ 9,910 $ 9,439 $ 9,865 $ 9,033
$ 9,749 $ 9,286 $ 9,595 $ 8,565
$ 9,900 $ 9,430 $ 9,633 $ 8,650
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Dec. 92 $10,013 $ 9,537 $ 9,742 $ 8,700
$10,013 $ 9,537 $ 9,792 $ 8,705
$ 9,973 $ 9,499 $10,039 $ 8,973
$10,536 $10,035 $10,603 $ 9,761
$10,797 $10,284 $11,148 $10,692
$11,089 $10,562 $11,401 $10,923
$10,827 $10,313 $11,172 $10,755
$10,797 $10,284 $11,506 $11,133
$11,390 $10,849 $12,241 $11,737
$11,501 $10,955 $12,216 $11,475
$12,044 $11,472 $12,791 $11,831
$11,813 $11,251 $12,383 $10,799
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Dec. 93 $12,999 $12,381 $13,609 $11,581
$13,632 $12,985 $14,401 $12,563
$13,089 $12,468 $14,076 $12,530
$12,144 $11,567 $13,424 $11,993
$12,144 $11,567 $13,750 $12,505
$12,084 $11,510 $13,714 $12,436
$11,903 $11,338 $13,559 $12,615
$12,185 $11,606 $13,946 $12,739
$12,748 $12,142 $14,347 $13,043
$12,456 $11,864 $13,993 $12,635
$12,345 $11,759 $14,259 $13,058
$11,973 $11,405 $13,559 $12,434
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Dec. 94 $11,509 $10,962 $13,419 $12,515
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. The maximum sales
charge of 4.75% went into effect on July 1, 1994.
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Landmark International Equity Fund
STATEMENT OF ASSETS AND LIABILITIES December 31, 1994
- - --------------------------------------------------------------------------------
Assets:
Investments in International Equity Portfolio,
at value (Note 1A) ................................. $28,973,390
Receivable for shares of beneficial interest sold ..... 6,171
Deferred organization expenses (Note 1D) .............. 26,385
Other assets .......................................... 31,431
-----------
Total assets ...................................... 29,037,377
-----------
Liabilities:
Payable for shares of beneficial interest repurchased 176,675
Payable to affiliates --
Shareholder servicing agents' fee (Note 3B) ........ 6,338
Accrued expenses....................................... 6,120
-----------
Total liabilities ................................. 189,133
-----------
Net Assets for 2,522,471 shares of
beneficial interest outstanding .................... $28,848,244
-----------
Net Assets Consist of:
Paid-in capital ....................................... $28,302,036
Unrealized appreciation of investments and
foreign currency translations ...................... 2,061,593
Accumulated net realized loss on investments
and foreign currency transactions .................. (1,506,409)
Distributions in excess of net investment income ...... (8,976)
------------
Total ............................................. $28,848,244
============
Net Asset Value and Redemption Price Per Share
of Beneficial Interest ............................ $11.44
======
Computation of Offering Price:
Maximum Offering Price per share based
on a 4.75% sales charge ($11.44/0.9525) ........... $12.01
======
See notes to financial statements
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<TABLE>
<CAPTION>
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Landmark International Equity Fund
__________________________________________________________________________________________________________________________________
STATEMENT OF OPERATIONS
For the Year Ended December 31, 1994
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Investment Income (Note 1B):
Dividends ............................................................................. $ 137,883
Interest .............................................................................. 12,220 $ 150,103
-----------
Dividend Income from International Equity Portfolio ................................... 353,003
Interest Income from International Equity Portfolio ................................... 35,137
Other Income Foreign Tax Reclaim ...................................................... 15,535
Allocated Expenses from International Equity Portfolio ................................ (257,886) 145,789
----------- -----------
295,892
Expenses:
Investment advisory fees (Note 2) ..................................................... 103,552
Shareholder Servicing Agents' fees (Note 3B) .......................................... 126,215
Administrative fees (Note 3A) ......................................................... 38,077
Distribution fees (Note 4) ............................................................ 31,590
Amortization of organization expenses (Note 1D) ....................................... 10,290
Expense reimbursement fees (Note 7) ................................................... 33,226
-----------
Total expenses .................................................................... 342,950
Less aggregate amount waived by Distributor (Note 4)
and Shareholder Servicing Agents (Note 3B) ........................................... (49,121)
-----------
Net expenses ..................................................................... 293,829
-----------
Net investment income ............................................................ 2,063
-----------
Net Realized and Unrealized Gain (Loss) on Investments
and foreign currency transactions:
Net realized gain (loss) from investment transactions
and foreign currency transactions .................................................... (216,066)
Net change in unrealized appreciation (depreciation)
of investments and foreign currency .................................................. (3,691,345)
------------
Net realized and unrealized gain (loss) on investments
and foreign currency transactions ................................................... (3,907,411)
------------
Net Decrease in Net Assets Resulting from Operations .................................. $(3,905,348)
============
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
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Landmark International Equity Fund
__________________________________________________________________________________________________________________________________
STATEMENT OF CHANGES IN NET ASSETS
- - ----------------------------------------------------------------------------------------------------------------------------------
Year Ended December 31,
-----------------------------------
1994 1993
<S> <C> <C>
-------- --------
Increase (Decrease) in Net Assets from:Operations:
Net investment income (loss) ......................................................... $ 2,063 $ (3,407)
----------- -----------
Net realized gain (loss) on investments and foreign exchange transactions ............ (216,066) (829,180)
Net change in unrealized appreciation (depreciation) of
investments and foreign currency transactions ....................................... (3,691,345) 5,427,406
----------- -----------
Net increase (decrease) in net assets resulting from operations ...................... (3,905,348) 4,594,819
----------- -----------
Equalization (Note 1F) ............................................................... -- 156,172
----------- -----------
Distributions to Shareholders from:
Net investment income ................................................................ (2,063) --
- - --In excess of net investment income ................................................. (18,560) --
------------ -----------
Total distributions to shareholders ................................................. (20,623) --
----------- -----------
Transactions in Shares of Beneficial Interest (Note 6):
Net proceeds from sale of shares ..................................................... 16,309,543 21,422,918
Net asset value of shares issued to shareholders from reinvestment of dividends ...... 18,998 --
Cost of shares repurchased ........................................................... (11,641,920) (4,796,984)
------------ ------------
Net increase in net assets resulting from transactions in shares
of beneficial interest ............................................................ 4,686,621 16,625,934
----------- -----------
Net Increase in Net Assets ........................................................... 760,650 21,376,925
Net Assets:Beginning of period ....................................................... 28,087,594 6,710,669
----------- ------------
End of period (including distributions in excess of net investment
income of $8,976 and undistributed net investment income of
$167,475, respectively) ............................................................ $28,848,244 $28,087,594
=========== ===========
</TABLE>
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
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Landmark International Equity Fund
__________________________________________________________________________________________________________________________________
FINANCIAL HIGHLIGHTS
- - ----------------------------------------------------------------------------------------------------------------------------------
March 1, 1991
(Commencement of
Year Ended December 31, Operations) to
1994 1993 1992 December 31, 1991
------------------------------------------ ------------------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of period ...................... $ 12.93 $ 9.96 $ 10.13 $ 10.00
------- -------- ------- -------
Income From Operations:
Net investment income (loss) .............................. 0.001<F2> (0.003)<F2> 0.052 0.098
Net realized and unrealized gain (loss)
on investments .......................................... (1.483) 2.973 (0.199) 0.062
------- -------- ------- -------
Total from investment operations ..................... (1.482) 2.970 (0.147) 0.160
------- -------- ------- -------
Less Distributions:
From net investment income .............................. (0.001) -- (0.023) (0.030)
In excess of net investment income .................... (0.007) -- -- --
------- -------- ------- -------
Total from distributions ............................ (0.008) -- -- --
======= ======== ======= =======
Net Asset Value, end of period ............................ $ 11.44 $ 12.93 $ 9.96 $ 10.13
======= ======== ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) ................. $28,848 $28,088 $6,711 $ 4,031
Ratio of expenses to average net assets ................... 1.75%<F4> 1.75% 1.75% 1.75%<F1>
Ratio of net investment income (loss) to
average net assets ..................................... 0.00% (0.02%) 0.57% 1.03%<F1>
Portfolio turnover ........................................ 5%<F5> 36% 42% 29%
Total return .............................................. (11.46)% 29.82% (1.45)% 1.61%<F3>
Note: If Agents of the Fund for the periods indicated and Agents of International Equity Portfolio for the period May 1, 1994 to
December 31, 1994 had not waived a portion of their fees, the Administrator had not agreed to pay certain operating expenses of
the Fund, an expense reimbursement agreement had not been in effect during the periods indicated, and expenses had not been
limited to that required by certain state securities law, the net investment income (loss) per share and the ratios would have
been as follows:
<S> <C> <C> <C> <C>
Net investment income per share ........................... $ (0.018)<F2> $ (0.116)<F2> $ (0.016) $ 0.028
Ratios:
Expenses to average net assets ............................ 1.90%<F4> 2.50% 2.50% 2.50%<F1>
Net investment income (loss) to
average net assets ....................................... (0.15)% (0.77)% (0.18)% 0.29%<F1>
<FN>
<F1>Annualized
<F2>Computed using a monthly average number of shares outstanding during the year.
<F3>Not annualized
<F4>Includes the Fund's share of International Equity Portfolio allocated expenses for the period May 1, 1994 to December 31,
1994.
<F5>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.
See notes to financial statements
</TABLE>
<PAGE>
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Landmark International Equity Fund
________________________________________________________________________________
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
(1) Significant Accounting Policies
Landmark International Equity Fund (the "Fund") is organized as a
Massachusetts business trust. The Fund is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end, management
investment company. On May 1, 1994, the Fund began investing all of its
investable assets in International Equity Portfolio (the "Portfolio"), a
management investment company for which Citibank, N.A. ("Citibank") serves as
Investment Adviser. The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS")
acts as the Fund's Administrator and Distributor. Citibank also serves as
Sub-Administrator and makes Fund shares available to customers as Shareholder
Servicing Agent.
The Trust seeks to achieve the Fund's investment objective of long-term
growth of capital 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
(approximately 90.1% at December 31, 1994) 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 following significant accounting policies consistently followed by the
Fund are in conformity with generally accepted accounting principles and are as
follows:
A. Investment Valuations -- 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. Accounting for Investments -- The Fund earns income, net of Portfolio
expenses, daily based on its investment in the Portfolio. All the net investment
income, realized and unrealized gain or 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. Prior to the
Fund's investment in the Portfolio, the Fund held its investments directly. For
investments which were held directly, realized gains and losses on security
transactions were determined on the identified cost method. Dividend income and
other distributions from portfolio securities were recorded on the ex-dividend
date, except, if the ex-dividend date has passed, certain dividends from foreign
securities were recorded as the Fund is informed of the ex-dividend date.
Dividend income was recorded net of foreign taxes withheld where recovery of
such taxes is not assured. Interest income was accrued daily.
C. Federal Taxes -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code available 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 required. At December 31, 1994, the Fund, for federal income tax
purposes, had a capital loss carryover of $1,105,553 of which $568,161 will
expire on December 31, 2002 and $162,546 will expire on December 31, 2001 and of
which $374,846 will expire on December 31, 2000. Such capital loss carryover
will reduce the Fund's net realized capital gains 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.
D. Deferred Organization Expenses -- Expenses incurred by the Fund in connection
with its organization have been deferred and are being amortized on a
straightline basis through 1996.
E. 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.
<PAGE>
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Landmark International Equity Fund
________________________________________________________________________________
NOTES TO FINANCIAL STATEMENTS continued
- - --------------------------------------------------------------------------------
F. Distributions -- Distributions to shareholders are recorded on ex-dividend
date. The amount and character of income and net realized gains to be
distributed are determined in accordance with income tax rules and regulations,
which may differ from generally accepted accounting principles. These
differences are attributable to permanent book and tax accounting differences.
Reclassifications are made to the Fund's capital accounts to reflect income and
net realized gains available for distribution (or available capital loss
carryovers) under income tax rules and regulations. For the year ended December
31, 1994, the Fund reclassed $9,584 to undistributed net investment income,
$13,561 to paid-in-capital and $23,145 from accumulated loss on investments.
Prior to January 1, 1994, the Fund followed equalization accounting by which a
portion of the proceeds from sales cost of repurchases of Fund shares was
credited or charged to undistributed net investment income on the date of the
transaction so that undistributed net investment income per share was unaffected
by Fund shares sold or repurchased. The Fund discontinued equalization
accounting as of January 1, 1994 and reclassified net equalization credits in
the amount of $167,475 from accumulated net investment income to paid-in
capital. In management's opinion, discontinuance of equalization accounting will
result in less distortion of undistributed net investment income as compared to
income available for distribution for federal income tax purposes. This change
has no effect on the Fund's net assets, results of operations of net asset value
per share, and did not have a material effect on the per share amounts in the
Financial Highlights.
(2) Investment Advisory Fees
Prior to May 1, 1994 (when the Fund transferred all of its investable
assets to the Portfolio in exchange for an interest in the Portfolio), the Fund
retained Citibank, as its Investment Adviser. The investment advisory fee paid
to Citibank as compensation for overall investment management services amounted
to $103,552 for the four months ended April 30, 1994. The investment advisory
fee was computed at the annual rate of 1.00% of average daily net assets. The
Portfolio has engaged Citibank to render investment advisory services. See Note
2 of the Portfolio's Notes to Financial Statements which are included elsewhere
in this report.
(3) Administrative Services Plan
The Fund has adopted an Administrative Services Plan (the "Administrative
Services Plan") which provides that the Fund may obtain the services of an
Administrator, and 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 by the Fund, the fees paid to the Shareholder Servicing
Agents by the Fund and the Basic Distribution Fee paid by 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 fees paid to Administrator, as
compensation for overall administrative services, including general office
facilities, may not exceed an annual rate of 0.15% of the Fund's average daily
net assets. Prior to May 1, 1994 (when the Fund transferred all of its
investable assets to the Portfolio in exchange for an interest in the
Portfolio), the Administrator received fees computed at the annualized rate of
0.15% of the Fund's average daily net assets which amounted to $15,533 for the
four months ended April 30, 1994. For the period May 1, 1994 to December 31,
1994, under the Administrative Services Plan the Administrator received fees
computed at an annual rate of 0.10% of the Fund's average daily net assets which
amounted to $22,544. 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 officers and a Trustee of the Fund are officers and
directors of the Administrator or its affiliates.
<PAGE>
- - --------------------------------------------------------------------------------
Landmark International Equity Fund
________________________________________________________________________________
NOTES TO FINANICAL STATEMENTS continued
- - --------------------------------------------------------------------------------
B. Shareholder Servicing Agents Fees -- The Fund has entered into shareholder
servicing agreements with each Shareholder Servicing Agent pursuant to which the
Shareholder Servicing Agent acts as an agent for its customers and provides
other related services. For their services, each Shareholder Servicing Agent
receives fees from the Fund, which may be paid periodically, which may not
exceed, on an annualized basis, an amount equal to 0.40% of the average daily
net assets of the Fund represented by shares owned during the period for which
payment is being made by investors for whom such Shareholder Servicing Agent
maintains a servicing relationship. The Shareholder Servicing Agents' fees
amounted to $126,215, of which $47,241 was voluntarily waived for the year ended
December 31, 1994.
(4) 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 the sale of
shares of the Fund, at an annual rate not to exceed 0.10% of the Fund's average
daily net assets for distribution of the Fund's shares. Distribution fees
amounted to $31,590 for the year ended December 31, 1994 of which $1,880 was
voluntarily waived. The Distributor may also receive an additional fee from the
Fund at an annual rate not to exceed 0.05% of the Fund's average daily net
assets in anticipation of, or as reimbursement for, advertising expenses
incurred by the Distributor in connection with the sale of shares of the Fund.
No payment of such additional fee has been made during the period.
(5) Investment Transactions
On May 1, 1994 the Fund transferred all of its investable assets
($32,298,219) to the Portfolio in exchange for an interest in the Portfolio.
Increase and decrease in the Fund's investment in the Portfolio for the period
May 1, 1994 to December 31, 1994 aggregated $4,401,946 and $6,217,840,
respectively. During the period from January 1, 1994 to April 30, 1994,
purchases and sales of investment securities, other than short-term investments,
aggregated $8,440,279 and $1,411,569, respectively.
(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 (par value $0.00001).
Transactions in shares of beneficial interest were as follows:
Year Ended
December 31,
-------------------------------
1994 1993
---------- ----------
Shares sold ............................ 1,288,330 1,960,999
Shares repurchased ..................... (937,614) (463,044)
---------- ----------
Net increase ........................... 350,716 1,497,955
========== ==========
(7) Expenses Reimbursement Fee
LFBDS had entered into an expense reimbursement agreement with the Fund.
LFBDS had agreed to pay all of the ordinary operating expenses (excluding
interest, taxes, brokerage commissions, litigation costs or other extraordinary
costs or expenses) of the Fund, other than fees paid under the Administrative
Services Agreement, Distribution Agreement and Shareholder Servicing Agreements
and other than amortization of expenses related to the organization of the Fund.
The Agreement shall terminate on August 31, 2000, unless sooner terminated by
either party upon not less than 30 days nor more than 60 days notice to the
other party.
The Fund has agreed to pay to LFBDS an expense reimbursement fee, in
addition to the administrative and distribution fees, accrued daily and paid
monthly; provided, however, that such fee shall not exceed the amount such that
immediately after any such payment the aggregate expenses of the Fund would on
an annual basis exceed an agreed upon rate, currently 1.75% of average daily net
assets.
<PAGE>
- - --------------------------------------------------------------------------------
Landmark International Equity Fund
________________________________________________________________________________
INDEPENDENT AUDITORS' REPORT
- - --------------------------------------------------------------------------------
TO THE TRUSTEES AND THE SHAREHOLDERS OF LANDMARK INTERNATIONAL EQUITY 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 International Equity Fund (the "Fund") at December 31, 1994, and the
results of its operations, the changes in its net assets and the financial
highlights for the year then ended 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 audit. We conducted our audit 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 audit, which included
confirmation of investments owned at December 31, 1994, provides a reasonable
basis for the opinion expressed above. The statement of changes in net assets
for the period ended December 31, 1993 and the financial highlights for each of
the periods then ended were audited by other independent accountants whose
report dated February 2, 1994 expressed an unqualified opinion on those
statements.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 3, 1995
<PAGE>
- - --------------------------------------------------------------------------------
Landmark International Equity Fund
________________________________________________________________________________
PORTFOLIO OF INVESTMENTS December 31, 1994
- - --------------------------------------------------------------------------------
Issuer/Industry Shares Value
- - --------------------------------------------------------------------------------
COMMON STOCK -- 95.1%
AMERICAN DEPOSITORY RECEIPTS (ADR) - 13.8%
Amway Asia Pacific Ltd.*
Merchandising .................................. 20,000 $ 650,000
Banco Frances Del Rio La Plata*
Financial Services ............................. 20,000 427,500
Belize Holdings Inc.*
Basic Goods .................................... 25,000 390,625
Cemex S.A
Construction Materials ......................... 25,311 269,294
EK Chor China Motorcycle Co. Ltd
Machinery ...................................... 25,000 340,625
Fila Holdings S.P.A.*
Merchandising .................................. 30,000 592,500
Grupo Mexicano De Desarrol*
Construction Materials ......................... 34,446 305,708
Iochphe-Maxion
Machinery ...................................... 30,000 522,441
Luxottica Group S.P.A
Health & Personal Care ......................... 15,000 511,875
Petersburg Long Distance*
Telecommunications ............................. 70,000 446,250
-------------
4,456,818
-------------
GLOBAL DEPOSITORY RECEIPTS (GDR) - 4.2%
Samsung Electronics Co. Ltd
Electronics .................................... 10,000 507,500
Samsung Electronics Co. Ltd
Electronics--Warrants .......................... 506 25,680
Samsung Electronics Co. Ltd
Electronics--Rights ............................ 434 16,614
Turkiye Garanti Bankasi A.S.*
Financial Services ............................. 300,000 787,500
-------------
1,337,294
-------------
Issuer/Industry Shares Value
- - --------------------------------------------------------------------------------
AUSTRALIA - 4.5%
Amcor Ltd.
Paper Goods .................................... 71,250 $ 514,938
News Corp
Media-Publishing ............................... 120,058 460,660
West Australian Newspaper Holding Ltd
Media-Publishing ............................... 175,000 474,968
-------------
1,450,566
-------------
AUSTRIA - 0.9%
Maculan Holdings AG
Construction ................................... 3,400 280,541
-------------
BELGIUM - 2.5%
Barco NV*
Electronics .................................... 10,109 794,482
-------------
CANADA - 2.4%
Future Shop Ltd.*
Merchandising .................................. 25,000 378,720
Royal Plastics Group Ltd
Machinery ...................................... 50,000 392,085
-------------
770,805
-------------
FINLAND - 2.3%
Nokia AB
Telecommunications ............................. 5,000 736,893
-------------
FRANCE - 4.8%
Castorama DuBois
Merchandising .................................. 6,000 749,789
Louis Vuitton-Moet Henney
Consumer Products .............................. 5,000 789,696
-------------
1,539,485
-------------
GREECE - 1.3%
Hellenic Bottling Company
Food Retail-Merchandising ...................... 12,000 424,823
-------------
<PAGE>
- - --------------------------------------------------------------------------------
International Equity Portfolio
________________________________________________________________________________
PORTFOLIO OF INVESTMENTS December 31, 1994 continued
- - --------------------------------------------------------------------------------
Issuer/Industry Shares Value
- - --------------------------------------------------------------------------------
HONG KONG - 3.6%
Citic Pacific Ltd.
Diversified Financial Holding
Company ....................................... 200,000 $ 482,060
Sun Hung Kai Properties Ltd
Real Estate .................................... 50,000 298,545
Swire Pacific Limited "A"
Diversified Financial Holding
Company ....................................... 60,000 373,764
-------------
1,154,369
-------------
INDONESIA - 2.3%
PT Hanjaya Mandala Sampoerna
Tobacco ........................................ 150,000 737,040
-------------
JAPAN - 21.5%
Amway Japan Ltd
Merchandising .................................. 20,000 689,100
DDI Corporation
Consumer Products .............................. 100 863,887
East Japan Rail
Consumer Products .............................. 150 750,377
Ito Yokado Co. Ltd
Merchandising .................................. 15,000 803,114
Marui Co.
Merchandising .................................. 50,000 914,115
Rohm Co. Ltd
Electronics .................................... 8,000 339,126
Secom Co. Ltd
Business Services .............................. 10,000 622,803
Shohkoh Fund
Diversified Financial Holding
Company ....................................... 3,300 682,873
Shimachu Co. Ltd
Merchandising .................................. 12,000 432,748
Ten Allied Co. Ltd
Merchandising .................................. 15,000 421,899
Issuer/Industry Shares Value
- - --------------------------------------------------------------------------------
Uniden Corp.
Electronics .................................... 15,000 $ 378,203
-------------
6,898,245
-------------
MALAYSIA - 2.7%
Leader Universal Holdings Ltd.
Electronics .................................... 116,667 374,652
United Engineering
Basic Industries ............................... 100,000 493,440
-------------
868,092
-------------
MEXICO - 0.9%
Group Financiero Banamex-Accival S.A
Banks & Finance ................................ 100,000 289,447
-------------
NETHERLANDS - 3.9%
Ahold NV
Food Retail-Merchandising ...................... 20,604 637,789
Elsevier NV
Media-Publishing ............................... 60,000 626,010
-------------
1,263,799
-------------
PHILIPPINES - 2.1%
JG Summit Holdings Inc.*
Diversified Financial Holding
Company ........................................ 1,800,000 663,933
-------------
SPAIN - 3.1%
Banco de Santander S.A
Banks & Finance ................................ 20,000 765,811
Telefonica de Espana
Telecommunications ............................. 20,000 236,278
-------------
1,002,089
-------------
SWEDEN - 4.5%
Astra AB
Health & Personal Care ......................... 33,000 841,764
Securitas AB*
Business Services .............................. 23,000 619,190
-------------
1,460,954
-------------
<PAGE>
- - --------------------------------------------------------------------------------
International Equity Portfolio
________________________________________________________________________________
PORTFOLIO OF INVESTMENTS December 31, 1994 continued
- - --------------------------------------------------------------------------------
Issuer/Industry Shares Value
- - --------------------------------------------------------------------------------
SWITZERLAND - 5.3 %
BBC Brown Boveri & CIE
Health & Personal Care ......................... 500 $ 430,646
Roche Holdings AG
Health & Personal Care ......................... 150 726,213
Societe Generale de Surveillance
Business Services .............................. 400 553,305
-------------
1,710,164
-------------
THAILAND - 1.8 %
Bangkok Bank Ltd
Banks & Finance ................................ 70,000 574,385
-------------
UNITED KINGDOM - 6.7 %
Medeva PLC
Health & Personal Care ......................... 201,526 517,398
Powerscreen International*
Diversified Consumer Products .................. 150,000 551,835
Issuer/Industry Shares Value
- - --------------------------------------------------------------------------------
Tompkins PLC
Diversified Consumer Products .................. 200,000 $ 695,080
Vodafone Group
Telecommunications ............................. 120,936 401,374
-------------
2,165,687
-------------
TOTAL COMMON STOCK
(Identified Cost, $28,451,789) ................. 30,579,911
-------------
- - --------------------------------------------------------------------------------
CORPORATE BONDS--3.9%
- - --------------------------------------------------------------------------------
Industrial Credit & Investment of
India, 2.50%, due 4/3/00 ...................... $750,000 560,625
Sampo Corporation, 2.625%,
due 11/23/01 .................................. 700,000 700,000
-------------
TOTAL CORPORATE BONDS ........................... 1,260,625
-------------
(Identified Cost, $1,460,000)
TOTAL INVESTMENTS
(Identified Cost, $29,911,789) ................. 99.0% 31,840,536
Other Assets, Less Liabilities .................. 1.0% 312,288
-------- -------------
NET ASSETS ...................................... 100.0% $ 32,152,824
======== =============
* Non-income producing security
See notes to financial statements
<PAGE>
- - --------------------------------------------------------------------------------
International Equity Portfolio
________________________________________________________________________________
STATEMENT OF ASSETS AND LIABILITIES December 31, 1994
- - --------------------------------------------------------------------------------
ASSETS:
Investments at value (Note 1A) (Identified Cost, $29,911,789) ..... $31,840,536
Foreign currency, at value (Cost, $173,457) ....................... 168,590
Cash .............................................................. 45,014
Receivable for investments sold ................................... 339,814
Dividends and interest receivable ................................. 41,147
-----------
Total assets .................................................. 32,435,101
-----------
LIABILITIES:
Payable for investments purchased ................................. 248,863
Payable to affiliates--Investment advisory fee (Note 2) ........... 27,845
Accrued expenses and other liabilities ............................ 5,569
-----------
Total liabilities ............................................. 282,277
-----------
NET ASSETS ........................................................ $32,152,824
===========
REPRESENTED BY:
Paid-in capital for beneficial interests .......................... $32,152,824
===========
See notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
- - ----------------------------------------------------------------------------------------------------------------------------------
International Equity Portfolio
__________________________________________________________________________________________________________________________________
STATEMENT OF OPERATIONS
For the Period May 1, 1994 (Commencement of Operations) to December 31, 1994
- - ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding tax of $79,071) ............................... $ 360,575
Interest ............................................................................ 36,745
-----------
Total investment income ........................................................... $ 397,320
EXPENSES:
Investment advisory fees (Note 2) ................................................... 218,950
Administrative fees (Note 3) ........................................................ 10,948
Expense reimbursement fees (Note 6) ................................................. 36,921
-----------
Total expenses .................................................................... 266,819
-----------
Net investment income ............................................................. 130,501
-----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain (loss) from investment transactions ............................... (515,520)
Net realized loss on foreign exchange transactions .................................. (20,448)
-----------
Net realized loss ................................................................. (535,968)
-----------
Unrealized appreciation (depreciation) of investments--
Beginning of period .............................................................. --
End of period .................................................................... 1,928,747
Less unrealized appreciation acquired in connection with the
Landmark International Equity Fund contribution (Note 1) ......................... 3,199,032 (1,270,285)
-----------
Translation of other assets and liabilities denominated
in foreign currencies--net ....................................................... (7,108)
-----------
Net change in unrealized appreciation (depreciation) ............................. (1,277,393)
-----------
Net realized and unrealized loss on investments .................................. (1,813,361)
-----------
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ $(1,682,860)
===========
</TABLE>
See notes to financial statements
<PAGE>
- - --------------------------------------------------------------------------------
International Equity Portfolio
________________________________________________________________________________
STATEMENT OF CHANGES IN NET ASSETS
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 1, 1994
(Commencement
of Operations) to
December 31, 1994
-----------------
<S> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
Operations:
Net investment income........................................................... $ 130,501
Net realized loss on investments and foreign exchange transactions.............. (535,968)
Net change in unrealized depreciation of investments............................ (1,277,393)
------------
Net decrease in net assets resulting from operations........................... (1,682,860)
------------
CAPITAL TRANSACTIONS:
Proceeds from contributions .................................................... 40,565,403
Value of withdrawals ........................................................... (6,729,719)
------------
Net increase in net assets from capital transactions........................ 33,835,684
------------
NET INCREASE IN NET ASSETS:..................................................... 32,152,824
NET ASSETS:
Beginning of period............................................................. --
------------
End of period................................................................... $ 32,152,824
============
</TABLE>
- - --------------------------------------------------------------------------------
International Equity Portfolio
________________________________________________________________________________
FINANCIAL HIGHLIGHTS
- - --------------------------------------------------------------------------------
May 1, 1994
(Commencement
of Operations) to
December 31, 1994
-----------------
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000 omitted) ...................... $32,153
Ratio of expenses to average net assets ...................... 1.22%*
Ratio of net investment income to average net assets ......... 0.60%*
Portfolio turnover ........................................... 25%
*Annualized
See notes to financial statements
<PAGE>
- - --------------------------------------------------------------------------------
International Equity Portfolio
________________________________________________________________________________
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
International Equity 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 Fund's Administrator. On May 1, 1994 (commencement of operations) the
Landmark International Equity Fund transferred all of its investable assets
($32,298,219 including $3,199,032 unrealized appreciation) to the Portfolio in
exchange for an interest in the Portfolio.
The following significant accounting policies consistently followed by the
Portfolio are in conformity with generally accepted accounting principles and
are as follows:
A. INVESTMENT SECURITY VALUATIONS -- Equity securities in the portfolio are
valued at the last sale price on the exchange on which they are primarily
traded, or on the quoted bid price for securities in which there were no sales
during the day, or for unlisted securities not reported on the NASDAQ system.
Securities listed on a foreign exchange are valued at the last quoted sale price
available before the time when net assets are valued. Bonds and other fixed
income securities (other than short-term obligations maturing in sixty days or
less) in the portfolio are valued on the basis of valuations furnished by a
pricing service, the use of which has been approved by the Trustees. In making
such valuations, the pricing service utilizes both dealer-supplied valuations
and electronic data processing techniques which take into account appropriate
factors such as institutional-size trading in similar groups of securities,
yield, quality, coupon rate, maturity, type of issue, trading characteristics
and other market data, without exclusive reliance upon quoted prices or
exchanges or over-the-counter prices, since such valuations are believed to
reflect more accurately the fair value of such securities. Short-term
obligations maturing in sixty days or less, are valued at amortized cost, which
constitutes fair value as determined by the Trustees. Portfolio securities for
which there are no such quotations or valuations are valued at fair value as
determined in good faith by or at the direction of the Trustees. Trading in
securities on most foreign exchanges and over-the-counter markets is normally
completed before the close of the New York Stock Exchange and may also take
place on days which the New York Stock Exchange is closed. If events materially
affecting the value of foreign securities occur between the time when the
exchange on which they are traded closes and the time when the Portfolio's net
asset value is calculated, such securities will be valued at fair value in
accordance with procedures established by and under the general supervision of
the Trustees.
B. FOREIGN CURRENCY TRANSLATION -- The accounting records of the Portfolio are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S.
dollars at the current rate of exchange to determine the value of investments,
assets and liabilities. Purchases and sales of securities, and income and
expenses are translated at the prevailing rate of exchange on the respective
dates of such transactions. The Fund does not isolate that portion of the
results of operations resulting from changes in foreign exchange rates on
investments from the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
C. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS -- The Portfolio may enter into
forward foreign currency exchange contracts ("contracts") in connection with
planned purchases or sales of securities, to hedge the U.S. dollar value of
portfolio securities denominated in a particular currency. The Portfolio could
be exposed to risks if the counter-parties to the contracts are unable to meet
the terms of their contracts and from unanticipated movements in the value of a
foreign currency relative to the U.S. Dollar. The forward foreign currency
exchange contracts are adjusted by the daily exchange rate of the underlying
currency and any gains or losses are recorded for financial statement purposes
as unrealized gains or losses until the contract settlement date.
D. ACCOUNTING FOR INVESTMENTS -- Securities transactions are accounted for on
the trade date. Realized gains and losses on security transactions are
determined on the identified cost method. Dividend income and other
distributions from portfolio securities are recorded on the ex-dividend date,
except, if the ex-dividend date has passed, certain dividends from foreign
securities are recorded as the Portfolio is informed of the ex-dividend date.
Dividend income is recorded net of foreign taxes withheld where recovery of such
taxes is not assured. Interest income is accrued daily.
<PAGE>
- - --------------------------------------------------------------------------------
International Equity Portfolio
________________________________________________________________________________
NOTES TO FINANCIAL STATEMENTS continued
- - --------------------------------------------------------------------------------
E. U.S. FEDERAL INCOME TAXES -- The Portfolio's policy considered a partnership
under the U.S. Internal Revenue Code. Accordingly, no provision for federal
income taxes is necessary.
F. 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.
(2) INVESTMENT ADVISORY FEES
The investment advisory fee paid to Citibank, as compensation for overall
investment management services, amounted to $218,950 for the period May 1, 1994
(commencement of operations) to December 31, 1994. The investment advisory fee
is computed at the annual rate of 1.00% of the Portfolio's average daily net
assets.
(3) ADMINISTRATIVE FEE
Under the terms of an Administrative Services Agreement, the administrative
services fees paid to the Administrator, as compensation for overall
administrative services including general office facilities, is computed at an
annual rate of 0.05% of the Portfolio's average daily net assets. The Portfolio
accrued fees aggregating $10,948 for these services for the Portfolio for the
period May 1, 1994 (commencement of operations) to December 31, 1994. 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
officers and a Trustee of the Portfolio are officers and directors of the
Administrator or its affiliates.
(4) PURCHASES AND SALES OF INVESTMENTS
During the period May 1, 1994 (commencement of operations) to December 31, 1994,
purchases and sales of investment securities, other than short-term investments,
aggregated $9,659,287 and $8,308,335, respectively.
(5) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation/(depreciation) in value of the investment
securities owned at December 31, 1994, as computed on a federal income tax
basis, are as follows:
Aggregate cost ......................................... $ 29,911,789
============
Gross unrealized appreciation .......................... $ 3,875,068
Gross unrealized depreciation .......................... (1,946,321)
------------
Net unrealized appreciation ............................ $ 1,928,747
============
(6) EXPENSE REIMBURSEMENT FEE
SFG has entered into an expense reimbursement 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 shall terminate on April
30, 2004, unless sooner terminated by either party upon not less than 30 days
nor more than 60 days written notice to the other party.
The Portfolio Trust has agreed to pay SFG an expense reimbursement fee, in
addition to the administrative fees, accrued daily and paid monthly; provided,
however, that such fee shall not exceed the amount such that immediately after
any such payment the aggregate expenses of the Portfolio would on an annual
basis exceed an agreed upon rate, currently 1.20% of average daily net assets.
(7) FINANCIAL INSTRUMENTS
The Portfolio may trade financial instruments with off-balance sheet risk
in the normal course of its investing activities and to assist in managing
exposure to market risks such as interest rates and foreign currency exchange
rates. These financial instruments include forward foreign currency exchange
contracts.
The notional or contractual amounts of these instruments represent the
investment the Portfolio has in particular classes of financial instruments and
does not necessarily represent the amounts potentially subject to risk. The
measurement of the risks associated with these instruments is meaningful only
when related and offsetting transactions are considered. No such instruments
were held at December 31, 1994.
- - --------------------------------------------------------------------------------
International Equity Portfolio
________________________________________________________________________________
NOTES TO FINANCIAL STATEMENTS continued
- - --------------------------------------------------------------------------------
(8) LINE OF CREDIT
As of May 1, 1994 the Portfolio, along with the other Landmark Funds,
entered into an agreement with a bank which allows the Landmark Funds
collectively to borrow up to $40 million for temporary or emergency purposes.
Interest on the borrowings, if any, is charged to the specific fund executing
the borrowing at the base rate of the bank. In addition, the $15 million
committed portion of the line of credit requires a quarterly payment of a
commitment fee based on the average daily unused portion of the line of credit.
For the period May 1, 1994 (commencement of operations) to December 31, 1994,
the commitment fee allocated to the Portfolio was $141. Since the line of credit
was established, there have been no borrowings.
- - --------------------------------------------------------------------------------
International Equity Portfolio
________________________________________________________________________________
INDEPENDENT AUDITORS' REPORT
- - --------------------------------------------------------------------------------
TO THE TRUSTEES AND THE INVESTORS OF THE PREMIUM PORTFOLIOS (THE TRUST), WITH
RESPECT TO ITS SERIES, INTERNATIONAL EQUITY PORTFOLIO:
We have audited the accompanying statement of assets and liabilities
including the portfolio of investments, of International Equity Portfolio (the
"Portfolio"), a series of The Premium Portfolios, as at December 31, 1994 and
the related statements of operations and of changes in net assets and the
financial highlights for the period May 1, 1994 (commencement of operations) to
December 31, 1994. 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 audit.
We conducted our audit 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 audit, which included confirmation of investments owned at
December 31, 1994 by correspondence with the custodian and brokers and the
application of alternative auditing procedures where confirmation from brokers
were not received, provides 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, 1994, the
results of its operations and the changes in its net assets and the financial
highlights for the period May 1, 1994 (commencement of operations) to December
31, 1994 in accordance with U.S. generally accepted accounting principles.
PRICE WATERHOUSE
Chartered Accountants
Toronto, Ontario
February 3, 1995
<PAGE>
- - --------------------------------------------------------------------------------
SHAREHOLDER
SERVICING AGENTS
- - --------------------------------------------------------------------------------
For Citibank New York Retail Banking and
Business and Professional Customers:
Citibank, N.A.
450 West 33rd Street, New York, NY 10001
(212) 564-3456 or (800) 846-5300
For Citigold Customers:
Citibank, N.A.
Citigold
P.O. Box 5130, New York, NY 10150-5130
Call Your Citigold Executive or (212) 974-0900 or (800) 285-1701
For Private Banking Clients:
Citibank, N.A.
The Citibank Private Bank
153 East 53rd Street, New York, NY 10043
Call Your Citibank Private Banking Account Officer,
Investment Specialist or (212) 559-5959
For Citibank Global Asset Management Clients:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY 10043
(212) 559-7117
For North American Investor Services Clients:
Citibank, N.A.
111 Wall Street, New York, NY 10043
Call Your Account Manager or (212) 657-9100
For Citicorp Investment Services Customers:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200
(212) 736-8170 in New York City
- - --------------------------------------------------------------------------------
[LOGO] Landmark
Funds
Money Market Funds:
Cash Reserves
Premium Liquid Reserves
Institutional Liquid Reserves
U.S. Treasury Reserves
Premium U.S. Treasury Reserves
Institutional U.S. Treasury Reserves
Tax Free Reserves
California Tax Free Reserves
Connecticut Tax Free Reserves
New York Tax Free Reserves
Stock & Bond Funds:
U.S. Government Income Fund
Intermediate Income Fund
New York Tax Free Income Fund
Balanced Fund
Equity Fund
International 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 AND TREASURER
James B. Craver*
ASSISTANT TREASURER
Barbara M. O'Dette*
ASSISTANT SECRETARY
Molly S. Mugler*
*Affiliated Person of Administrator and Distributor
- - --------------------------------------------------------------------------------
INVESTMENT ADVISER
(OF INTERNATIONAL
EQUITY PORTFOLIO)
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND DISTRIBUTOR
The Landmark Funds Broker-Dealer Services, Inc.
6 St. James Avenue, Boston, MA 02116
(617) 423-1679
TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
CUSTODIAN
Investors Bank and Trust Company
One Lincoln Plaza, Boston, MA 02111
AUDITORS
Price Waterhouse LLP
160 Federal Street, Boston, MA 02110
LEGAL COUNSEL
Bingham, Dana & Gould
150 Federal Street, Boston, MA 02110
- - --------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENTS
(See Inside Cover)
This report is prepared for the information of shareholders. It is authorized
for distribution to prospective investors only when preceded or accompanied by
an effective prospectus.
This Report is Prepared & Printed on Recycled Paper (GRAPHIC OMITTED)
INTL/IE/A/94
