TRUSTEES AND OFFICERS
C. Oscar Morong, Jr., Chairman
Philip W. Coolidge*, President
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
E. Kirby Warren
William S. Woods, Jr.
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
*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
CFBDS, 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
Price Waterhouse LLP
160 Federal Street, Boston, MA 02110
LEGAL COUNSEL
Bingham Dana LLP
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.
INTL/IE/A/97 Printed on Recycled Paper [RECYCLED LOGO]
[LOGO] LANDMARK(SM) FUNDS
Advised by Citibank, N.A.
Landmark
International
Equity Fund
--------------------
ANNUAL
REPORT
December 31, 1997
---------------------
<PAGE>
- --------------------------------------------------------------------------------
A Letter To Our Shareholders
- --------------------------------------------------------------------------------
Dear Shareholder:
The year was an extraordinarily volatile one for the world's stock markets,
including a remarkable divergence in the performance of markets in different
regions of the world. European markets rose in the midst of an economic recovery
and in anticipation of the advent of the European Monetary Union. In contrast,
Asian markets plummeted as a currency crisis exposed fundamental weaknesses in
the region's financial system.
In this volatile environment, the Portfolio's investment adviser, Citibank,
N.A., managed the Landmark International Equity Fund in accordance with its
investment objective: long-term capital growth. Through its investment in
International Equity Portfolio, the Fund invests primarily in common stocks of
non-U.S. issuers, including issuers in developing countries, with an emphasis on
established companies with medium to large capitalizations and seasoned
management teams.
This report reviews the Portfolio's investment activities and performance
during the 12-month period ended December 31, 1997, and provides a summary of
Citibank's perspective on and outlook for the international stock markets.
Please note that effective March 2, 1998, the name of the Fund will be
changed to CitiFunds(SM) International Equity Portfolio.
On behalf of the Board of Trustees of the Funds, I want to thank you for
your confidence and participation.
/s/ Philip W. Coolidge
Philip W. Coolidge
President
January 20, 1998
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
1 A Letter to Our Shareholders
- --------------------------------------------------------------------------------
Market Environment
2 Fund Snapshot
Portfolio Manager
- --------------------------------------------------------------------------------
The Portfolio Manager Responds
3 Quotes from the Portfolio Manager
Strategy and Outlook
- --------------------------------------------------------------------------------
4 International Equity Portfolio
By The Numbers
- --------------------------------------------------------------------------------
5 Fund Data
Performance Highlights
Landmark International Equity Fund
- --------------------------------------------------------------------------------
6 Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
7 Statement of Operations
- --------------------------------------------------------------------------------
8 Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
9 Financial Highlights
- --------------------------------------------------------------------------------
10 Notes to Financial Statements
- --------------------------------------------------------------------------------
12 Independent Auditors' Report
- --------------------------------------------------------------------------------
International Equity Portfolio
- --------------------------------------------------------------------------------
13 Portfolio of Investments
- --------------------------------------------------------------------------------
19 Statement of Assets and Liabilities
Statement of Operations
- --------------------------------------------------------------------------------
20 Statement of Changes in Net Assets
Financial Highlights
- --------------------------------------------------------------------------------
21 Notes to Financial Statements
- --------------------------------------------------------------------------------
23 Independent Auditors' Report
- --------------------------------------------------------------------------------
Remember that Mutual Fund Shares:
o Are not bank deposits or FDIC insured
o Are not obligations of or guaranteed by Citibank or any of its affiliates
o Are subject to investment risks, including possible loss of the principal
amount invested
1
<PAGE>
- --------------------------------------------------------------------------------
Market Environment
- --------------------------------------------------------------------------------
1997 was an extraordinarily difficult year for some of the world's stock
markets and an excellent year for others. Consequently, investors were rewarded
handsomely for exposure to certain markets, and punished severely for
participation in others. During the year, returns varied from a 60% drop in
Malaysia to a 33% rise in Switzerland.
On the negative side of the ledger, the Asian markets did very poorly. In
Japan, a prolonged economic recession, tight fiscal policy and persistent
problems in their financial system interrupted a market rally early in the year
and kept stock prices depressed. The emerging markets of Southeast Asia declined
sharply between July and October, the result of a currency crisis brought on by
a number of economic factors. The Asian declines had a ripple effect throughout
the world, affecting Latin America's emerging markets as well.
In contrast, European markets provided attractive returns, the result of
increased investor confidence in the early stages of an economic recovery.
Another major theme driving European markets has been corporate restructuring,
which is taking place as companies prepare for the start of the European
Monetary Union on January 1, 1999. When barriers to trade and commerce are
eliminated, European companies will find themselves competing in one market
consisting of 375 million consumers. Companies are restructuring to compete
effectively in that marketplace, and they are creating shareholder value as a
result.
- --------------------------------------------------------------------------------
Fund Snapshot
- --------------------------------------------------------------------------------
Commencement of Operations
March 1, 1991
Net Assets as of 12/31/97
$18.3 million
Fund Objective
Long-term capital growth; dividend income, if any, is incidental to this
investment objective.
Dividends
Paid semi-annually, if any
Capital Gains
Distributed semi-annually, if any
Benchmarks
o Lipper International Equity Funds Average
o Morgan Stanley Capital International Europe-
Australia-Far East (MSCI EAFE) Index
Investment Adviser,
International Equity Portfolio
Citibank, N.A.
- --------------------------------------------------------------------------------
Portfolio Manager
- --------------------------------------------------------------------------------
Trevor Forbes
Vice President, Citibank, N.A.
Mr. Forbes is based in Citibank's London office, and is manager of the
International Equity Portfolio. He is the head of Citibank's International
Equity Department in London and the senior portfolio manager of global, non-
U.S. equity and European equity portfolios for institutional accounts. Before
joining Citibank in 1991, Mr. Forbes managed the investment business of Abbey
Life. The selection of specific securities is made by committees of Citibank
investment personnel specializing in investments in the countries selected by
Mr. Forbes.
<PAGE>
- --------------------------------------------------------------------------------
The Portfolio Manager Responds
- --------------------------------------------------------------------------------
Throughout the year, the Portfolio's investment adviser, Citibank, N.A.,
worked to reduce the volatility of the Portfolio. This was accomplished by
structuring the Portfolio to more closely mirror that of the major international
equity index, the Morgan Stanley Europe, Australia, Far East (EAFE) Index. Using
the EAFE Index as a benchmark, we aim to outperform the averages by
overweighting or underweighting the individual geographic sectors that comprise
the Index.
We underweighted our exposure to Japan relative to the EAFE Index, and we
shifted more of the Portfolio's assets to the markets of continental Europe.
Within the European markets, we focused on Italy, Spain and Germany: three
economies that are expected to benefit from the trend toward corporate
restructuring. On the other hand, we were defensive in such markets as France,
where restructuring is taking longer to become established, and the U.K., where
rising interest rates may adversely affect corporate earnings. We tended to
favor companies that manufacture products for export, because a rising U.S.
dollar made these goods more attractively priced for U.S. consumers. We also
held the stocks of several European finance companies that we expect to benefit
from the recent surge in mergers and acquisitions activity.
In Japan, we focused on large exporters, particularly companies with
well-established markets in the U.S. We believe that these companies should be
able to avoid the effects of Japan's domestic economic troubles and benefit from
economic growth in overseas markets.
- --------------------------------------------------------------------------------
Quotes From The Portfolio Manager
- --------------------------------------------------------------------------------
"1997 represented a turning point in international market cycles and economies,
which helped produce some of the heightened volatility we saw during the year."
"We have reduced the Portfolio's exposure to Southeast Asia and adjusted its
allocations to the more developed markets to help protect shareholders from the
more volatile markets."
"We are seeing positive developments in Europe, where companies are
restructuring in preparation for the European Monetary Union."
- --------------------------------------------------------------------------------
Strategy And Outlook
- --------------------------------------------------------------------------------
During the last few months of 1997, we began to detect a shift in the
forces affecting certain international markets, and we repositioned the
Portfolio accordingly. These changes appear to be taking place primarily within
markets rather than among them. Consequently, our exposure to the various
geographic regions relative to the EAFE Index remains basically unchanged; we
continue to expect European markets to perform better than Asian markets.
However, in Europe we have shifted some assets out of export companies and into
companies with a more domestic orientation. This shift is a response to the
repercussions of the Asian crisis, which may negatively affect exporters. In
contrast, economic expansion within Europe and preparations for the European
Monetary Union should benefit companies serving domestic markets.
We have maintained a cautious stance toward Japan and the rest of Asia. In
Japan, we are encouraged by recent developments suggesting that there may be a
resolution to the country's economic problems. Yet, we would like to see more
evidence of financial reform before increasing our holdings there. As for the
emerging markets of Asia, we intend to avoid the region for the foreseeable
future because of the risk of new negative developments.
3
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
- --------------------------------------------------------------------------------
By The Numbers
- --------------------------------------------------------------------------------
TOP TEN HOLDINGS OF THE PORTFOLIO
(As of 12/31/97)
Name Nation % of Net Assets
Allianz AG Germany 1.7%
Honda Motor Co. Ltd. Japan 1.5%
Seven-Eleven Japan Ltd. Japan 1.5%
Nomura Securities Ltd. Japan 1.4%
Bayerische Vereinsbank AG Germany 1.4%
Royal Dutch Petroleum Co. Netherlands 1.4%
Toyota Motor Corp. Japan 1.4%
Nippon Telegraph & Telephone Co. Japan 1.4%
Fanuc Co. Japan 1.3%
Sony Corp. Japan 1.3%
===================================================================
INDUSTRIES AS A % OF THE PORTFOLIO
Industries % of Common Stocks
---------- ------------------
Banking 14.1%
Telephone Utilities 8.5%
Insurance 7.3%
Multi-Industry 6.7%
Energy Sources 6.5%
Pharmaceuticals & Health 5.6%
Retailing 5.3%
Electrical & Gas Utilities 4.9%
Instruments & Components 4.1%
Chemicals 3.9%
Financial Services 3.5%
Electrical & Electronics 3.4%
Food & Household Products 3.4%
Automobiles 3.2%
Machinery & Engineering 3.0%
Business & Public Services 2.6%
Beverages & Tobacco 2.0%
Building & Construction 1.2%
Industrial Components 1.2%
Leisure & Tourism 1.2%
Non-Ferrous Metals 1.2%
Real Estate 1.2%
Steel 1.2%
Building Materials 0.9%
Road & Rail Transport 0.8%
Textiles 0.8%
Forest Products & Paper 0.7%
Data Processing & Reproduction 0.5%
International Trade 0.4%
Aerospace & Defense 0.2%
Household Appliances 0.2%
Materials 0.2%
Gold Mines 0.1%
- -------------------------------------
CHANGES IN PORTFOLIO ASSET ALLOCATION
Portfolio of Investments
as of 12/31/97
[The following table was originally a pie chart in the printed materials.]
Europe 62%
Japan 32%
South America 3%
Pacific Basin 2%
Central America 1%
...Compared to 12/31/96
[The following table was originally a pie chart in the printed materials.]
Europe 58%
Japan 35%
Pacific Basin 4%
North America 3%
- -------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
Fund Data All Periods Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total Returns
------------------------------------
Since
One Five 3/1/91
Year Years* Inception*
--------- ---------- ----------
<S> <C> <C> <C>
Landmark International Equity Fund
without Sales Charge................................. 5.15% 7.92% 5.75%
Lipper International Equity Funds Average............. 5.44% 12.10% 8.36%+
MSCI EAFE Index....................................... 2.06% 11.71% 6.26%+
Landmark International Equity Fund
with Maximum Sales Charge of 4.75%................... 0.16% 6.88% 5.00%
</TABLE>
*Average Annual Total Return
+Since 2/28/91
Income Dividends Per Share $0.025
Capital Gain Distribution $0.941
- --------------------------------------------------------------------------------
Performance Highlights
- --------------------------------------------------------------------------------
A $10,000 investment in the Fund made on inception date would have grown to
$13,965 with sales charge (as of 12/31/97). The graph shows how this compares to
our benchmarks over the same period.
[The following table was originally a line graph in the printed materials.]
Landmark Landmark
International International Lipper
Equity Fund - Equity Fund - International MSCI EAFE
Without Sales With Sales Equity Funds Index
Charge Charge Average (unmanaged)
2/28/91 10,000 9,525 10,000 10,000
3/31/91 9,420 8,973 9,708 9,401
4/30/91 9,740 9,277 9,831 9,496
5/31/91 9,740 9,277 9,942 9,596
6/30/91 9,760 9,296 9,451 8,890
7/31/91 9,800 9,335 9,828 9,330
8/31/91 9,910 9,439 9,748 9,142
9/30/91 10,150 9,668 10,022 9,660
10/31/91 10,200 9,716 10,081 9,800
11/30/91 9,860 9,392 9,745 9,345
12/31/91 10,161 9,678 10,203 9,834
1/31/92 10,411 9,917 10,281 9,629
2/29/92 10,602 10,098 10,282 9,290
3/31/92 10,090 9,611 9,927 8,682
4/30/92 10,361 9,869 10,143 8,728
5/31/92 10,933 10,414 10,648 9,318
6/30/92 10,622 10,118 10,356 8,882
7/31/92 10,171 9,688 9,971 8,661
8/31/92 10,221 9,735 10,072 9,210
9/30/92 9,910 9,439 9,864 9,034
10/31/92 9,749 9,286 9,595 8,566
11/30/92 9,900 9,430 9,632 8,651
12/31/92 10,013 9,537 9,741 8,701
1/31/93 10,013 9,537 9,792 8,706
2/28/93 9,973 9,499 10,039 8,974
3/31/93 10,536 10,035 10,603 9,762
4/30/93 10,797 10,284 11,148 10,693
5/31/93 11,089 10,562 11,401 10,924
6/30/93 10,827 10,313 11,172 10,756
7/31/93 10,797 10,284 11,506 11,134
8/31/93 11,390 10,849 12,241 11,738
9/30/93 11,501 10,955 12,215 11,476
10/31/93 12,044 11,472 12,790 11,832
11/30/93 11,813 11,251 12,382 10,800
12/31/93 12,999 12,381 13,608 11,582
1/31/94 13,632 12,985 14,400 12,564
2/28/94 13,089 12,468 14,075 12,532
3/31/94 12,144 11,567 13,423 11,994
4/30/94 12,144 11,567 13,749 12,506
5/31/94 12,084 11,510 13,713 12,437
6/30/94 11,903 11,338 13,558 12,616
7/31/94 12,185 11,606 13,934 12,740
8/31/94 12,748 12,142 14,346 13,045
9/30/94 12,456 11,864 13,992 12,636
10/31/94 12,345 11,759 14,258 13,060
11/30/94 11,973 11,405 13,558 12,435
12/31/94 11,509 10,962 13,418 12,516
1/31/95 10,654 10,148 12,738 12,038
2/28/95 10,915 10,397 12,756 12,006
3/31/95 11,771 11,211 13,162 12,759
4/30/95 12,052 11,480 13,590 13,243
5/31/95 12,243 11,662 13,703 13,088
6/30/95 12,666 12,064 13,703 12,861
7/31/95 13,330 12,697 14,439 13,665
8/31/95 13,360 12,726 14,169 13,147
9/30/95 13,642 12,994 14,379 13,408
10/31/95 13,481 12,840 14,206 13,051
11/30/95 13,340 12,706 14,351 13,418
12/31/95 13,590 12,945 14,787 13,961
1/31/96 13,782 13,127 15,123 14,021
2/29/96 13,631 12,983 15,180 14,072
3/31/96 13,994 13,329 15,437 14,374
4/30/96 14,449 13,762 15,917 14,795
5/31/96 14,327 13,647 15,869 14,526
6/30/96 14,368 13,685 15,974 14,612
7/31/96 13,693 13,042 15,380 14,188
8/31/96 13,553 12,909 15,551 14,222
9/30/96 13,800 13,144 15,884 14,603
10/31/96 13,628 12,981 15,771 14,457
11/30/96 14,035 13,369 16,440 15,036
12/31/96 13,942 13,280 16,491 14,846
1/31/97 13,410 12,773 16,437 14,329
2/28/97 13,599 12,953 16,669 14,567
3/31/97 13,694 13,044 16,706 14,624
4/30/97 13,765 13,111 16,739 14,705
5/31/97 14,498 13,809 17,727 15,665
6/30/97 15,353 14,623 18,548 16,533
7/31/97 15,734 14,987 19,054 16,804
8/31/97 14,673 13,976 17,671 15,552
9/30/97 15,818 15,066 18,761 16,426
10/31/97 14,601 13,908 17,346 15,168
11/30/97 14,530 13,839 17,185 15,016
12/31/97 14,661 13,965 17,328 15,151
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.
- --------------------------------------------------------------------------------
Notes: All Fund performance numbers represent past performance, and are no
guarantee of future results. The Fund's share price and investment return will
fluctuate, so that the value of an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns include change in
share price and reinvestment of dividends and distributions, if any. Total
return figures "with sales charge" are provided in accordance with SEC
guidelines for comparative purposes for prospective investors.
5
<PAGE>
- --------------------------------------------------------------------------------
Landmark International Equity Fund
- --------------------------------------------------------------------------------
Statement Of Assets And Liabilities December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in International Equity Portfolio, at value (Note 1A) ................ $18,337,228
Receivable for shares of beneficial interest .................................... 2,144
Other assets .................................................................... 30,872
-----------
Total assets ................................................................ 18,370,244
-----------
Liabilities:
Payable to affiliates--Shareholder servicing agents' fees (Note 2B) ............. 4,068
Payable for shares of beneficial interest repurchased ........................... 25,599
Accrued expenses and other liabilities .......................................... 7,292
-----------
Total liabilities ........................................................... 36,959
-----------
Net Assets for 1,605,565 shares of beneficial interest outstanding .............. $18,333,285
===========
Net Assets Consist of:
Paid-in capital ................................................................. $16,918,460
Unrealized appreciation on investments and foreign currency transactions ........ 589,436
Accumulated net realized gain on investments .................................... 813,797
Undistributed net investment income ............................................. 11,592
-----------
Total ....................................................................... $18,333,285
===========
Net Asset Value and Redemption Price Per Share of Beneficial Interest ........... $11.42
======
Computation of Offering Price:
Maximum Offering Price per share based on a 4.75% sales charge ($11.42/0.9525) .. $11.99
======
</TABLE>
See notes to financial statements
6
<PAGE>
- --------------------------------------------------------------------------------
Landmark International Equity Fund
- --------------------------------------------------------------------------------
Statement Of Operations
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income (Note 1B):
Dividend Income from International Equity Portfolio ....................... $ 410,947
Interest Income from International Equity Portfolio ....................... 23,216
Foreign Taxes Reclaimed ................................................... 49,233
Allocated Expenses from International Equity Portfolio .................... (272,325) $ 211,071
---------
Expenses:
Administrative fees (Note 2A) ............................................. 81,363
Shareholder Servicing Agents' fees (Note 2B) .............................. 67,802
Distribution fees (Note 3) ................................................ 27,121
Expense fees (Note 6) ..................................................... 29,404
---------
Total expenses .......................................................... 205,690
Less aggregate amount waived by Administrator (Note 2A) ................. (2,318)
---------
Net Expenses ............................................................ 203,372
-----------
Net investment income ................................................... 7,699
-----------
Net Realized and Unrealized Gain (Loss) on investments and foreign exchange
currency transactions from International Equity Portfolio:
Net realized gain ......................................................... 1,836,248
Net change in unrealized depreciation ..................................... (547,538)
-----------
Net realized and unrealized gain from International Equity Portfolio ...... 1,288,710
-----------
Net Increase in Net Assets Resulting from Operations ...................... $ 1,296,409
===========
</TABLE>
See notes to financial statements
7
<PAGE>
- --------------------------------------------------------------------------------
Landmark International Equity Fund
- --------------------------------------------------------------------------------
Statement Of Changes In Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
------------------------
1997 1996
------ ------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations:
Net investment income .......................................... $ 7,699 $ 59,031
Net realized gain .............................................. 1,836,248 3,355,063
Net change in unrealized depreciation .......................... (547,538) (2,347,696)
------------ ------------
Net increase in net assets resulting from operations ........... 1,296,409 1,066,398
------------ ------------
Distributions to Shareholders from:
Net investment income .......................................... (39,505) (50,630)
Net realized gain .............................................. (1,553,863) (4,844,487)
------------ ------------
Total distributions to shareholders ........................... (1,593,368) (4,895,117)
------------ ------------
Transactions in Shares of Beneficial Interest (Note 5):
Net proceeds from sale of shares ............................... 4,764,326 18,623,948
Net asset value of shares issued to shareholders from
reinvestment of dividends ..................................... 1,239,732 4,137,524
Cost of shares repurchased ..................................... (19,962,458) (18,503,357)
------------ ------------
Net increase (decrease) in net assets resulting from
transactions in shares of beneficial interest ................. (13,958,400) 4,258,115
------------ ------------
Net Increase (Decrease) in Net Assets .......................... (14,255,359) 429,396
Net Assets:
Beginning of period ............................................ 32,588,644 32,159,248
------------ ------------
End of period (including undistributed net investment income
of $11,592 and $0) ............................................ $ 18,333,285 $ 32,588,644
============ ============
</TABLE>
See notes to financial statements
8
<PAGE>
- --------------------------------------------------------------------------------
Landmark International Equity Fund
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
---------------------------------------------------------------
1997 1996 1995 1994# 1993#
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period ....... $ 11.79 $ 13.46 $ 11.44 $ 12.93 $ 9.96
------- ------- ------- ------- -------
Income From Operations:
Net investment income (loss) ............... 0.004* 0.028* 0.013* 0.001* (0.003)*
Net realized and unrealized gain (loss) .... 0.592* 0.314* 2.055* (1.483)* 2.973*
------- ------- ------- ------- -------
Total from investment operations ...... 0.596 0.342 2.068 (1.482) 2.970
------- ------- ------- ------- -------
Less Distributions From:
Net investment income ................. (0.025) (0.021) (0.048) (0.001) --
In excess of net investment income .... -- -- -- (0.007) --
Net realized gain on investments ...... (0.941) (1.991) -- -- --
------- ------- ------- ------- -------
Total from distributions .............. (0.966) (2.012) (0.048) (0.008) --
------- ------- ------- ------- -------
Net Asset Value, end of period ............. $ 11.42 $ 11.79 $ 13.46 $ 11.44 $ 12.93
======= ======= ======= ======= =======
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) .. $18,333 $32,589 $32,159 $28,848 $28,088
Ratio of expenses to average net assets .... 1.75%(A) 1.75%(A) 1.75%(A) 1.75%(A) 1.75%
Ratio of net investment income (loss) to
average net assets ...................... 0.03% 0.18% 0.10% 0.00% (0.02)%
Portfolio turnover (B) ..................... -- -- -- 5% 36%
Total return ............................... 5.15% 2.59% 18.08% (11.46)% 29.82%
Note: If Agents of the Fund for the periods indicated had not voluntarily
waived a portion of their fees and expenses had been limited to that required
by certain state securities laws for the years ended December 31, 1993 and
1992, the net investment income (loss) per share and the ratios would have
been as follows:
Net investment income (loss) per share ..... $(0.004)* $(0.002)* $ 0.013* $(0.018)* $(0.116)*
Ratios:
Expenses to average net assets ............. 1.82%(A) 1.94%(A) 1.75%(A) 1.90%(A) 2.50%
Net investment income (loss) to
average net assets ........................ (0.04)% (0.01)% 0.10% (0.15)% (0.77)%
</TABLE>
* The per share amounts were computed using a monthly average number of
shares outstanding during the period.
(A) Includes the Fund's share of International Equity Portfolio allocated
expenses for the periods subsequent 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 of its investable assets in
International Equity Portfolio.
See notes to financial statements
9
<PAGE>
- --------------------------------------------------------------------------------
Landmark International Equity Fund
- --------------------------------------------------------------------------------
Notes To Financial Statements
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies
Landmark International Equity Fund (the "Fund") is a separate diversified series
of Landmark International Funds (the "Trust"), a Massachusetts business trust.
The Trust is registered under the Investment Company Act of 1940, as amended, as
a diversified, open-end, management investment company. The Fund invests all of
its investable assets in International EquityPortfolio (the "Portfolio"), a
management investment company for which Citibank, N.A. ("Citibank") serves as
Investment Adviser. CFBDS, Inc. ("CFBDS", formerly Landmark Funds Broker-Dealer
Services, Inc.) 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 54.3% at December 31, 1997) in the net assets of the Portfolio.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
The financial statements of the Portfolio, including the portfolio of
investments, are contained elsewhere in this report and should be read in
conjunction with the Fund's financial statements.
The significant accounting policies consistently followed by the Fund are 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. Additionally, each
fund reclaims its pro rata portion of recoverable foreign taxes on dividends
received by the Portfolio.
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.
D. Expenses -- The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and CFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund. The Fund's share of the Portfolio's expenses are
charged against and reduce the amount of the Fund's investment in the Portfolio.
E. Distributions -- Distributions to shareholders are recorded on ex-dividend
date. The amount and character of income and net realized gains to be
distributed are determined in accordance with income tax rules and regulations,
which may differ from generally accepted accounting principles. These
differences are attributable to permanent book and tax accounting differences.
Reclassifications are made to the Fund's capital accounts to reflect income and
net realized gains available for distribution (or available capital loss
carryovers) under income tax rules and regulations. For the year ended December
31, 1997, the Fund reclassified $43,398 to undistributed net investment income,
$298,611 to accumulated gain on investments and $342,009 from paid-in-capital.
10
<PAGE>
- --------------------------------------------------------------------------------
Landmark International Equity Fund
- --------------------------------------------------------------------------------
Notes To Financial Statements continued
- --------------------------------------------------------------------------------
(2) 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 the Administrator, as
compensation for overall administrative services, including general office
facilities, may not exceed an annual rate of 0.30% of the Fund's average daily
net assets. The Administrative fees amounted to $81,363 of which $2,318 was
voluntarily waived for the year ended December 31, 1997. Citibank acts as
Sub-Administrator and performs such duties and receives such compensation from
CFBDS as from time to time is agreed to by CFBDS 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.
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 0.25% of the average daily
net assets of the Fund represented by shares owned during the period for which
payment is being made by investors for whom such Shareholder Servicing Agent
maintains a servicing relationship. The Shareholder Servicing Agents' fees,
computed at an annual rate of 0.25%, amounted to $67,802 for the year ended
December 31, 1997.
(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 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. 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. The Distribution fees amounted to $27,121 for the year ended December
31, 1997.
(4) Investment Transactions
Increase and decrease in the Fund's investment in the Portfolio for the year
ended December 31, 1997 aggregated $4,828,582 and $21,871,327, 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 (par value $0.00001).
Transactions in shares of beneficial interest were as follows:
Years Ended December 31,
-----------------------
1997 1996
---------- ----------
Shares sold ................. 406,371 1,410,053
Shares issued to shareholders
from reinvestment of
dividends ................. 108,405 339,891
Shares repurchased .......... (1,672,672) (1,376,401)
---------- ----------
Net increase (decrease) .. (1,157,896) 373,543
========== ==========
11
<PAGE>
- --------------------------------------------------------------------------------
Landmark International Equity Fund
- --------------------------------------------------------------------------------
Notes To Financial Statements continued
- --------------------------------------------------------------------------------
(6) Expense Fees
CFBDS has entered into an expense agreement with the Fund. CFBDS 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
may be terminated by either party upon not less than 30 days nor more than 60
days written notice.
The Fund has agreed to pay to CFBDS 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
operating expenses of the Fund, including expenses allocated from the Portfolio
less expenses waived by the Administrator, would on an annual basis exceed an
agreed upon rate, currently 1.75% of average daily net assets.
(7) Subsequent Event
Effective March 2, 1998, the name of the Fund will be changed to CitiFundsSM
International Equity Portfolio, and the Trust will change its name to CitiFundSM
International Trust.
- --------------------------------------------------------------------------------
Landmark International Equity Fund
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Trustees of Landmark International Funds (the Trust) 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, 1997, 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, 1997 by correspondence with
the custodian, provide a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 2, 1998
12
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
- --------------------------------------------------------------------------------
Portfolio Of Investments December 31, 1997
- --------------------------------------------------------------------------------
Issuer/Industry Shares Value
- --------------------------------------------------------------------------------
COMMON STOCKS--94.7%
- --------------------------------------------------------------------------------
American Depository Receipts/ ADR's-1.2%
Empressa ICA Sociedad
Building & Construction ................... 2,891 $ 47,521
Lukoil Oil Co.
Energy Sources ............................ 2,200 202,400
Surgutneftegaz
Energy Sources ............................ 7,500 75,975
Telefonos de Mexico
Telephone Utilities ....................... 1,370 76,805
----------
402,701
----------
Australia-2.0%
Australia & New Zealand Bank Corp.
Banking ................................... 14,417 95,278
Broken Hill Proprietary
Energy Sources ............................ 10,500 97,518
C.S.R. Ltd.
Multi-Industry ............................ 21,400 72,527
Centaur Mining &
Exploration Ltd.*
Gold Mines ................................ 57,000 20,061
Mayne Nickless Ltd.
Multi-Industry ............................ 10,912 57,677
News Corp. Ltd.
Business & Public Services ................ 20,063 110,754
North Ltd.
Non-Ferrous Metals ........................ 21,500 56,639
Pacific Dunlop Ltd.
Multi-Industry ............................ 31,000 65,664
Woodside Petroleum Ltd.
Energy Sources ............................ 12,500 88,149
----------
664,267
----------
Brazil-2.7%
Aracruz Celulos SA
Forest Products & Paper ................... 29,001 40,018
Banco Bradesco SA-Preferred
Banking ................................... 5,910,953 56,740
CIA Cervejaria Brahma
Beverages & Tobacco ....................... 66,181 44,474
CIA Energetica de Minas
Electrical & Gas Utilities ................ 1,039,347 45,157
CIA Vale do Rio
Doce-Preferred Steel ...................... 4,952 49,806
Light Servicos de Electrcid
Electrical & Gas Utilities ................ 142,000 59,161
Petroleo Brasileiro SA
Energy Sources ............................ 348,015 81,387
Telecommunicacoes Brasileiras
Telephone Utilities ....................... 3,530,000 402,642
Telecommunicacoes
de Sao-Preferred
Telephone Utilities ....................... 251,937 67,043
Telecommunicacoes
de Sao-Rights
Telephone Utilities ....................... 10,561 2,810
Usiminas
Steel ..................................... 4,583 27,103
White Martins SA
Chemicals ................................. 18,318 26,754
----------
903,095
----------
Denmark-1.9%
Carli Gry International AS
Textiles .................................. 2,740 153,957
Den Danske Bank
Banking ................................... 1,000 133,248
Falck AS
Multi-Industry ............................ 1,450 67,189
Jyske Bank AS
Banking ................................... 800 97,491
Novo-Nordisk AS-Class B
Pharmaceuticals & Health .................. 1,245 178,068
----------
629,953
----------
Finland-0.5%
Nokia AB
Telephone Utilities ....................... 2,372 168,404
----------
13
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
- --------------------------------------------------------------------------------
Portfolio Of Investments December 31, 1997 continued
- --------------------------------------------------------------------------------
Issuer/Industry Shares Value
- --------------------------------------------------------------------------------
France-8.6%
AXA-UAP
Insurance ................................. 2,234 $ 172,863
Accor French
Leisure & Tourism ......................... 939 174,585
Alcatel Alsthom
Electrical & Electronics .................. 1,504 191,171
Atos SA (Ex Axime)
Financial Services ........................ 1,396 179,994
BNP
Banking ................................... 3,184 169,238
CIE Fin Paribas
Financial Services ........................ 2,061 179,098
CIE Generale Des Eaux
Electrical & Gas Utilities ................ 1,332 185,907
Canal Plus
Business & Public Services ................ 1,034 192,248
Compagnie de Saint Gobain
Multi-Industry ............................ 1,273 180,845
France Telecom
Multi-Industry ............................ 3,945 143,091
Pinault-Printemps
Retailing ................................. 350 186,733
Rhone Poulenc
Chemicals ................................. 3,964 177,568
Sanofi SA
Pharmaceuticals & Health .................. 1,707 190,029
Societe Fonciere Lyonnaise
Multi-Industry ............................ 1,743 204,752
Societe Nationale Elf Aquitaine
Energy Sources ............................ 2,415 280,884
Total SA-Class B
Energy Sources ............................ 841 91,527
----------
2,900,533
----------
Germany-9.1%
Allianz AG
Insurance ................................. 2,266 586,985
Bayer AG
Chemicals ................................. 7,200 $ 268,957
Bayerische Vereinsbank AG
Banking ................................... 7,260 475,000
Dresdner Bank AG
Banking ................................... 7,316 336,485
Metro AG
Retailing ................................. 4,892 175,399
Preussag AG
Multi-Industry ............................ 610 186,159
Rhoen-Klinikum
Pharmaceuticals & Health .................. 1,214 118,771
SGL Carbon AG
Non-Ferrous Metals ........................ 1,173 151,275
Siemens AG
Instruments & Components .................. 4,000 236,805
Suedzucker AG
Food & Household Products ................. 244 119,359
Veba AG
Electrical & Gas Utilities ................ 6,342 431,860
----------
3,087,055
----------
Italy-4.4%
Assicurazioni Generali Spa
Insurance ................................. 8,551 210,029
Banca Commerciale Italiana
Banking ................................... 65,276 226,935
Ente Natzionale Idrocarburi
Energy Sources ............................ 38,455 218,035
Fiat Spa
Automobiles ............................... 18,462 53,695
IMI
Banking ................................... 11,676 138,607
Instituto Bancario San Paulo
Banking ................................... 15,463 147,725
Mediaset SPA
Business & Public Services ................ 17,489 85,913
Telecom Italia Mobile Spa
Telephone Utilities ....................... 72,417 334,248
14
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
- --------------------------------------------------------------------------------
Portfolio Of Investments December 31, 1997 continued
- --------------------------------------------------------------------------------
Issuer/Industry Shares Value
- --------------------------------------------------------------------------------
Unicem
Building Materials ........................ 9,000 $ 73,491
----------
1,488,678
----------
Japan-29.8%
Aoyama Trading Co.
Retailing ................................. 6,200 110,638
Bank of Tokyo Mitsubishi
Banking ................................... 23,050 317,762
Canon Inc.
Electrical & Electronics .................. 16,000 372,520
Dai-Ichi Kangyo Bank
Banking ................................... 20,000 117,944
Dai Nippon Printing
Multi-Industry ............................ 10,000 187,639
Fanuc Co.
Machinery & Engineering ................... 12,000 454,009
Fuji Bank
Banking ................................... 20,000 80,876
Fuji Photo Film Co.
Household Appliances ...................... 2,000 76,587
Fujitsu Ltd.
Instruments & Components .................. 33,000 353,833
Honda Motor Co. Ltd.
Automobiles ............................... 14,000 513,594
Industrial Bank of Japan
Banking ................................... 360 2,564
Japan Tobacco
Beverages & Tobacco ....................... 56 397,151
Kawasaki Steel Corp.
Steel ..................................... 110,000 149,958
Marubeni Corp.
International Trade ....................... 73,000 128,031
Mitsubishi Heavy Industries
Machinery & Engineering ................... 70,000 291,644
Mitsubishi Trust & Banking
Financial Services ........................ 21,000 210,692
Mitsui Mining & Smelting Co.
Non-Ferrous Metals ........................ 32,000 128,422
NTT Data Comm Systems Corp.
Telephone Utilities ....................... 7 376,886
Nippon Kokan K.K
Steel ..................................... 100,000 79,651
Nippon Oil Co.
Energy Sources ............................ 45,000 116,145
Nippon Paper Industries
Forest Products & Paper ................... 50,000 196,063
Nippon Telegraph & Telephone Co.
Telephone Utilities ....................... 53 454,622
Nomura Securities Ltd.
Financial Services ........................ 36,000 479,743
Obayashi
Building & Construction ................... 60,000 204,028
Osaka Gas Co. Ltd.
Electrical & Gas Utilities ................ 100,000 228,230
Ryohin Keikaku Co.
Food & Household Products ................. 1,600 105,384
Sankyo Co. Ltd.
Pharmaceuticals & Health .................. 14,000 316,305
Seven-Eleven Japan Ltd.
Retailing ................................. 7,000 495,366
Shin-Etsu Chemical Co.
Chemicals ................................. 16,800 320,380
Sony Corp.
Electrical & Electronics .................. 5,000 444,206
Sumitomo Bank Ltd.
Banking ................................... 20,000 228,230
Sumitomo Electric Industries
Industrial Components ..................... 26,000 354,446
TDK Corp.
Instruments & Components .................. 5,000 376,809
Tokio Marine & Fire Insurance
Insurance ................................. 36,000 408,057
Tokyo Electron Ltd.
Instruments & Components .................. 8,800 281,719
Toray Industries Inc.
Textiles .................................. 22,000 98,568
15
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
- --------------------------------------------------------------------------------
Portfolio Of Investments December 31, 1997 continued
- --------------------------------------------------------------------------------
Issuer/Industry Shares Value
- --------------------------------------------------------------------------------
Toyota Motor Corp.
Automobiles ............................... 16,000 $ 458,298
Yamato Transport Co. Ltd.
Road & Rail Transport ..................... 11,000 147,431
----------
10,064,431
----------
Mexico-1.1%
Alfa SA
Multi-Industry ............................ 7,848 53,192
Apasco SA
Building Materials ........................ 6,000 41,633
Cemex SA
Building Materials ........................ 14,941 67,666
CIFRA-Class C
Retailing ................................. 17,220 38,620
CIFRA SA
Retailing ................................. 1,357 3,346
Desc SA-Class B
Multi-Industry ............................ 4,794 45,799
Desc SA-Class C
Multi-Industry ............................ 84 791
Grupo Carso
Multi-Industry ............................ 7,200 48,175
Hylsamex SA
Steel ..................................... 5,263 30,976
Kimberly Clark
Pharmaceuticals & Health .................. 5,610 27,457
----------
357,655
----------
Netherlands-5.5%
Akzo Nobel
Chemicals ................................. 1,112 191,727
Baan Company NV*
Data Processing &
Reproduction .............................. 5,234 171,399
Benckiser NV
Food & Household Products ................. 2,191 90,659
BeSemiconductor Industries*
Instruments & Components .................. 6,970 68,750
Elsevier NV
Business & Public Services ................ 11,503 186,077
ING Groep NV
Insurance ................................. 6,807 286,695
Philips Electronics NV
Industrial Components ..................... 600 35,983
Royal Dutch Petroleum Co.
Energy Sources ............................ 8,544 468,990
Vendex International NV
Retailing ................................. 3,542 195,472
Ver Ned Uitgevers
Business & Public Services ................ 5,949 167,821
----------
1,863,573
----------
Spain-4.9%
Argentina Corp.
Banking ................................... 5,966 363,012
Banco Bilbao Vizcaya
Banking ................................... 5,882 190,340
Banco Central Hispano
Banking ................................... 8,552 208,257
Corp Financiera Reunida*
Financial Services ........................ 15,722 84,105
Fomento Const Y Contra
Building & Construction ................... 2,419 92,092
Gas Natural SDG SA
Electrical & Gas Utilities ................ 4,663 241,796
Telefonica Nacional Espana
Telephone Utilities ....................... 10,569 301,773
Vallehermoso SA
Real Estate ............................... 2,801 85,859
Viscofan Envoltura
Food & Household Products ................. 3,619 90,861
----------
1,658,095
----------
Switzerland-6.3%
Ciba Specialty Chemicals
Chemicals ................................. 2,097 249,711
Credit Suisse Group
Banking ................................... 2,261 349,703
16
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
- --------------------------------------------------------------------------------
Portfolio Of Investments December 31, 1997 continued
- --------------------------------------------------------------------------------
Issuer Shares Value
- --------------------------------------------------------------------------------
Nestle SA
Food & Household Products ................. 279 $ 417,965
Novartis AG
Pharmaceuticals & Health .................. 170 275,733
Rieter Holdings Ltd.
Machinery & Engineering ................... 470 200,712
Union Bank of Switzerland
Multi-Industry ............................ 282 407,599
Zurich Versicherungs
Insurance ................................. 467 222,442
----------
2,123,865
----------
United Kingdom-16.7%
Avis Europe
Road & Rail Transport ..................... 30,045 85,867
B.A.T. Industries
Multi-Industry ............................ 13,784 125,698
BTR
Multi-Industry ............................ 59,700 180,425
Barclays Bank
Banking ................................... 7,586 201,951
British Aerospace
Aerospace & Defense ....................... 2,369 67,510
British Petroleum Co.
Energy Sources ............................ 24,275 321,123
British Telecommunications
Telephone Utilities ....................... 28,863 227,428
Cable & Wireless
Telephone Utilities ....................... 15,889 139,623
Caradon
Miscellaneous Materials ................... 20,889 60,729
Centrica
Electrical & Gas Utilities ................ 46,149 67,841
Diageo
Beverages & Tobacco ....................... 22,800 208,591
General Electric
Electrical & Electronics .................. 14,562 94,357
Glaxo Wellcome
Pharmaceuticals & Health .................. 17,931 427,485
Hillsdown Holdings
Food & Household Products ................. 55,483 134,874
HSBC Holdings
Banking ................................... 8,089 209,922
Kingfisher
Retailing ................................. 10,008 139,724
Ladbroke Group
Leisure & Tourism ......................... 43,610 189,102
Lloyds TSB Group
Banking ................................... 27,932 363,384
Logica
Business & Public Services ................ 8,001 152,837
London International Group
Pharmaceuticals & Health .................. 37,838 99,438
Marks & Spencer
Retailing ................................. 12,357 122,202
National Power
Electrical & Gas Utilities ................ 12,839 126,528
Prudential Corp.
Insurance ................................. 20,058 244,253
RMC Group
Building Materials ........................ 8,098 114,654
Reed International
Business & Public Services ................ 11,272 107,383
Royal & Sun Alliance
Insurance ................................. 20,419 205,589
Sainsbury
Retailing ................................. 25,834 217,678
Severn Trent Water
Electrical & Gas Utilities ................ 10,745 172,604
SmithKline Beecham
Real Estate ............................... 29,797 307,108
Tomkins
Multi-Industry ............................ 24,978 118,156
17
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
- --------------------------------------------------------------------------------
Portfolio Of Investments December 31, 1997 continued
- --------------------------------------------------------------------------------
Issuer Shares Value
- --------------------------------------------------------------------------------
Unilever
Food & Household Products ................. 13,306 $ 114,455
Vodafone
Telephone Utilities ....................... 23,908 172,782
Zeneca
Pharmaceuticals & Health .................. 4,080 144,519
----------
5,665,820
----------
Issuer Value
- --------------------------------------------------------------------------------
Total Investments
(Identified Cost $31,526,723) ............. 94.7% $31,978,125
Other Assets,
Less Liabilities .......................... 5.3 1,792,195
------- -----------
Net Assets .................................. 100% $33,770,320
======= ===========
*Non income producing.
See notes to financial statements.
18
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
- --------------------------------------------------------------------------------
Statement Of Assets And Liabilities December 31, 1997
- --------------------------------------------------------------------------------
Assets:
Investments at value (Note 1A) (Identified Cost, $31,526,723) .... $31,978,125
Foreign currency, at value (Cost, $276,199) ...................... 274,619
Cash ............................................................. 1,343,321
Receivable for investments sold .................................. 175,695
Dividends and interest receivable ................................ 34,419
-----------
Total assets ................................................. 33,806,179
-----------
Liabilities:
Payable for securities purchased ................................. 1,012
Payable to affiliates--Investment advisory fees (Note 2) ......... 29,466
Other liabilities ................................................ 5,381
-----------
Total liabilities ............................................ 35,859
-----------
Net Assets ....................................................... $33,770,320
===========
Represented by:
Paid-in capital for beneficial interests ......................... $33,770,320
===========
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
- --------------------------------------------------------------------------------
Statement Of Operations For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends (net of foreign withholding tax of $158,000) ...... $ 663,153
Interest .................................................... 34,845
----------
Total investment income ................................... $ 697,998
----------
Expenses:
Investment advisory fees (Note 2) ........................... 440,517
Administrative fees (Note 3) ................................ 22,029
Expense fees (Note 6) ....................................... 2,479
----------
Total expenses ............................................ 465,025
Less aggregate amount waived by the Investment Advisor and
the Administrator (Note 2 and Note 3) ................... (24,529) 440,496
---------- ----------
Net investment income ..................................... 257,502
----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investment transactions ................ 3,048,556
Net realized gain on foreign exchange currencies transactions 94,860
----------
Net realized gain ......................................... 3,143,416
----------
Unrealized appreciation (depreciation) on investments--
Beginning of period ...................................... 1,419,174
End of period ............................................ 454,843 (964,331)
----------
Translation of other assets and liabilities denominated
in foreign currencies--net ............................... (4,253)
----------
Net change in unrealized appreciation (depreciation) ..... (968,584)
----------
Net realized and unrealized gain on investments .......... 2,174,832
----------
Net Increase in Net Assets Resulting from Operations ........ $2,432,334
==========
</TABLE>
See notes to financial statements
19
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
- --------------------------------------------------------------------------------
Statement Of Changes In Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations:
Net investment income ................................................. $ 257,502 $ 306,984
Net realized gain on investments and foreign exchange transactions .... 3,143,416 3,632,070
Net change in unrealized depreciation of investments and
foreign currency exchange ........................................... (968,584) (2,379,237)
------------ ------------
Net increase in net assets resulting from operations .............. 2,432,334 1,559,817
------------ ------------
Capital Transactions:
Proceeds from contributions ........................................... 7,972,770 28,377,160
Value of withdrawals .................................................. (25,691,025) (20,994,299)
------------ ------------
Net increase (decrease) in net assets from capital transactions ... (17,718,255) 7,382,861
------------ ------------
Net Increase (Decrease) in Net Assets: ................................ (15,285,921) 8,942,678
Net Assets:
Beginning of period ................................................... 49,056,241 40,113,563
------------ ------------
End of period ......................................................... $ 33,770,320 $ 49,056,241
============ ============
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
May 1, 1994
Year Ended December 31, (Commencement
----------------------------- of Operations) of
1997 1996 1995 December 31, 1994
------- ------- ------- -----------------
<S> <C> <C> <C> <C>
Ratios/Supplemental Data:
Net Assets, end of period (000's omitted) ............. $33,770 $49,056 $40,114 $32,153
Ratio of expenses to average net assets ............... 1.00% 1.11% 1.20% 1.22%*
Ratio of net investment income to average net assets .. 0.58% 0.65% 0.59% 0.60%*
Portfolio turnover .................................... 99% 109% 51% 25%
Average commission rate per share (A) ................. $0.0418 $0.0321 N/A N/A
Note: If the Agents of the Portfolio had not voluntarily waived a portion of
their fees for the periods indicated, the ratios would have been as follows:
Expenses to average net assets......................... 1.06% 1.13% N/A N/A
Net investment income to average net assets............ 0.52% 0.63% N/A N/A
</TABLE>
* Annualized
(A) The average commission rate paid is applicable for Funds that invest
greater than 10% of average net assets in equity transactions on which
commissions are charged. This disclosure is required for fiscal periods
beginning on or after September 1, 1995.
See notes to financial statements
20
<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 Portfolio's Administrator.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The following significant accounting policies consistently followed by the
Portfolio 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 at 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. 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 approved by the Board of
Trustees, 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. 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 of fund valuation, 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. Translation of foreign currency
includes net exchange gains and losses, disposition of foreign currency and the
difference between the amount of investment income, expenses and foreign taxes
withheld recorded and the actual amount received or paid.
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 or 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. 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.
Dividend income is recorded net of foreign taxes withheld where recovery of such
taxes is not assured. Interest income is accrued daily.
E. U.S. Federal Income and Other Taxes -- The Portfolio is considered a
partnership under the U.S. Internal Revenue Code. Accordingly, no provision for
federal income taxes is necessary. The Portfolio may be subject to taxes imposed
by countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated.Taxes are accrued and applied to net
investment income and net realized gains as such income and/or gains are earned.
F. Expenses -- The Portfolio bears all costs of its operations other than
expenses specifically assumed by Citibank and SFG.
21
<PAGE>
- --------------------------------------------------------------------------------
International Equity Portfolio
- --------------------------------------------------------------------------------
Notes To Financial Statements continued
- --------------------------------------------------------------------------------
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.
G. 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.
(2) Investment Advisory Fees
The investment advisory fees paid to Citibank, as compensation for overall
investment management services, amounted to $440,517 of which $2,500 was
voluntarily waived for the year ended December 31, 1997. The investment advisory
fees are computed at the annual rate of 1.00% of the Portfolio's average daily
net assets.
(3) Administrative Fees
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
administrative fees amounted to $22,029, all of which was voluntarily waived for
the year ended December 31, 1997. 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
For the year ended December 31, 1997, purchases and sales of investment
securities, other than short-term investments, aggregated $42,085,219 and
$58,852,525, respectively.
(5) Federal Income Tax Basis Of Investments
The cost and unrealized appreciation/(depreciation) in value of the investment
securities owned at December 31, 1997 as com puted on a federal income tax
basis, are as follows:
Aggregate cost...................... $31,580,776
===========
Gross unrealized appreciation....... $ 3,966,685
Gross unrealized depreciation....... (3,569,336)
-----------
Net unrealized appreciation......... $ 397,349
===========
(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 expenses of
the Portfolio less expenses waived by the Administrator would on an annual basis
exceed an agreed upon rate, which as of July 1, 1996 is 1.00% 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, 1997.
(8) Line of Credit
The Portfolio, along with the other Landmark Funds, entered into an ongoing
agreement with a bank which allows the Landmark Funds collectively to borrow up
to $60 million for temporary or emergency purposes. Interest on the borrowings,
if any, is charged to the specific fund executing the borrowing at the base rate
of the bank. In addition, the $15 million committed portion of the line of
credit requires a quarterly payment of a commitment fee based on the average
daily unused portion of the line of credit. For the year ended December 31,
1997, the commitment fee allocated to the Portfolio was $189. Since the line of
credit was established, there have been no borrowings.
22
<PAGE>
- --------------------------------------------------------------------------------
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, 1997 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, 1997 by correspondence with the custodian
and brokers and the application of alternative auditing procedures where
confirmations from brokers were not received, provide a reasonable basis for our
opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Portfolio as at December 31, 1997, 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 2, 1998
23
<PAGE>
TRUSTEES AND OFFICERS
C. Oscar Morong, Jr., Chairman
Philip W. Coolidge*, President
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
E. Kirby Warren
William S. Woods, Jr.
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
*Affiliated Person of Administrator and Distributor
INVESTMENT ADVISER
(OF EMERGING ASIAN MARKETS
EQUITY PORTFOLIO)
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND DISTRIBUTOR
CFBDS, 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
Price Waterhouse LLP
160 Federal Street, Boston, MA 02110
LEGAL COUNSEL
Bingham Dana LLP
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.
INTL/EAE/A/97 Printed on Recycled Paper [RECYCLED LOGO]
[LOGO] LANDMARK(SM) FUNDS
Advised by Citibank, N.A.
Landmark
Emerging
Asian Markets
Equity Fund
--------------------
ANNUAL
REPORT
December 31, 1997
---------------------
<PAGE>
- --------------------------------------------------------------------------------
A Letter To Our Shareholders
- --------------------------------------------------------------------------------
Dear Shareholder:
The stock markets of Southeast Asia suffered sharp declines during 1997,
the repercussions of which were felt worldwide. Between July and November,
economic crises spread throughout the region, largely the result of the region's
policy of pegging their currencies to the U.S. dollar. As the value of the U.S.
dollar strengthened against most other currencies, the region's exports became
more expensive for overseas consumers. Consequently, the region's business
managers were unable to sustain the rate of growth on which they based their
revenue and profit projections. As the region's growth slowed, several nations
were forced to devalue their currencies. Many companies incurred severe losses
in foreign exchange markets and could no longer meet their debt obligations.
The Portfolio's investment adviser, Citibank, N.A., managed the Landmark
Emerging Asian Markets Equity Fund in accordance with its investment objective:
long-term capital growth. Through its investment in the Emerging Asian Markets
Equity Portfolio, the Fund invests primarily in equity securities of companies
in Asian countries with emerging markets and developing economies.
This report reviews the Portfolio's investment activities and performance
for the 12-month period ended December 31, 1997, and provides a summary of
Citibank's perspective on and outlook for the emerging Asian financial markets.
Please note that effective March 2, 1998, the name of the Fund will be
changed to CitiFunds(SM) Emerging Asian Markets Equity Portfolio.
On behalf of the Board of Trustees of the Funds, I want to thank you for
your confidence and participation.
/s/ Philip W. Coolidge
Philip W. Coolidge
President
January 20, 1998
- --------------------------------------------------------------------------------
TABLE OF CONTENTS
1 A Letter to Our Shareholders
- --------------------------------------------------------------------------------
Market Environment
2 Fund Snapshot
Portfolio Manager
- --------------------------------------------------------------------------------
Quotes from the Portfolio Manager
3 The Portfolio Manager Responds
Strategy and Outlook
- --------------------------------------------------------------------------------
4 Emerging Asian Markets Equity
Portfolio by the Numbers
- --------------------------------------------------------------------------------
5 Fund Data
Performance Highlights
Landmark Emerging Asian Markets Equity Fund
- --------------------------------------------------------------------------------
6 Statement of Assets and Liabilities
Statement of Operations
- --------------------------------------------------------------------------------
7 Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
8 Financial Highlights
- --------------------------------------------------------------------------------
9 Notes to Financial Statements
- --------------------------------------------------------------------------------
12 Independent Auditors' Report
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
13 Portfolio of Investments
- --------------------------------------------------------------------------------
15 Statement of Assets and Liabilities
Statement of Operations
- --------------------------------------------------------------------------------
16 Statement of Changes in Net Assets
Financial Highlights
- --------------------------------------------------------------------------------
17 Notes to Financial Statements
- --------------------------------------------------------------------------------
19 Independent Auditors' Report
- --------------------------------------------------------------------------------
Remember that Mutual Fund Shares:
o Are not bank deposits or FDIC insured
o Are not obligations of or guaranteed by Citibank or any of its affiliates
o Are subject to investment risks, including possible loss of the principal
amount invested
1
<PAGE>
- --------------------------------------------------------------------------------
Market Environment
- --------------------------------------------------------------------------------
The economic events of 1997 created severe problems for the region's
equity markets. Stock markets in Thailand, Malaysia, Indonesia and the
Philippines all lost more than 40% of their value during the year. These
declines were even worse for those who paid for their investments in U.S.
dollars. Devaluations of local currencies created adverse exchange-rate
movements, which exacerbated the region's poor stock market performance for U.S.
investors. In U.S. dollar terms, the stock market declines measured 60% or more.
These events were largely triggered by the devaluation of Thailand's
currency, the Thai baht, in early July. This devaluation created enormous
problems for businesses that had borrowed in U.S. dollars to finance their
operations and growth, but had not hedged their positions against adverse
fluctuations in currency exchange rates. When the devaluation occurred, the cost
of these loans in local currency terms immediately skyrocketed. And as exports
from the region slowed, companies found themselves unable to pay interest and
repay principal in a timely manner.
It soon became apparent that the systemic problems that caused the initial
crisis in Thailand were present in neighboring countries as well. When large
amounts of unhedged, U.S. dollar-denominated debt were found in Malaysia, the
Philippines and Indonesia, these countries experienced their own set-backs. Even
countries with fundamentally sound economies, such as Hong Kong, Australia and
New Zealand, were negatively affected by the region's problems. The ultimate
result: defaulted loans, plunging revenues, bankrupt businesses and an economic
quagmire of sizeable proportions.
- --------------------------------------------------------------------------------
Fund Snapshot
- --------------------------------------------------------------------------------
Commencement of Operations
August 23, 1995
Net Assets as of 12/31/97
$1.7 million
Fund Objective
Long-term capital growth; dividend income, if any, is incidental to this
investment objective.
Dividends
Paid semi-annually, if any
Capital Gains
Distributed annually, if any
Benchmarks
o Lipper Pacific (Ex-Japan) Funds Average
o MSCI EMFFar East Index (excluding Korea)
Investment Adviser,
Emerging Asian Markets Equity Portfolio
Citibank, N.A.
- --------------------------------------------------------------------------------
Portfolio Manager
- --------------------------------------------------------------------------------
Shern Liang Tan
Vice President
Mr. Tan is a Portfolio Manager for the Citibank Private Bank's Singapore
investment unit. His responsibilities include managing both Asian equity mutual
funds and portfolios for high net worth investors. His comprehensive expertise
includes the emerging as well as developed markets of Asia.
Mr. Tan has six years of experience managing investments in Asian
equities. He specializes in industrialized and emerging opportunities in Hong
Kong, Thailand, the Philippines, and New Zealand. He also covers the equity
markets in Australia, Singapore and Indonesia.
Mr. Tan graduated with Distinction from the University of Michigan, Ann
Arbor, and is a Certified Financial Analyst.
- --------------------------------------------------------------------------------
2
<PAGE>
- --------------------------------------------------------------------------------
Quotes From The Portfolio Manager
- --------------------------------------------------------------------------------
"The devaluation of the Thai baht triggered a currency crisis that quickly
spread throughout the region."
"We positioned the portfolio defensively early in the year, raising cash and
avoiding economically sensitive industries."
"We remain cautious regarding the near-term future of Southeast Asia; over the
longer term, how ever, we are more optimistic."
- --------------------------------------------------------------------------------
The Portfolio Manager Responds
- --------------------------------------------------------------------------------
The Funds, investment adviser, Citibank, N.A., was quick to adopt a
defensive position in the second quarter of this year, raising the cash position
of the Portfolio to between 10% and 15% of assets. In hindsight, we recognize
that an even larger cash position would have been warranted. Nonetheless, our
defensive posture helped shelter the Portfolio from the full force of Southeast
Asia's market declines.
In addition, we actively managed the allocation of the Portfolio's assets
among the region's markets according to our view of their short and long-term
prospects. Before Thailand's currency crisis in July, we underweighted the Thai
market relative to our "neutral" position. After Thailand's market suffered its
declines, we began to increase our exposure to carefully selected companies that
we believe were undervalued as a result of the crisis. For example, we found
some opportunities in Thailand's financial industry after the currency crisis
had caused roughly half of the nation's finance companies to close their doors.
The finance companies in which we invested were, in our opinion, the strongest
of the strong, and they should prosper as Thailand's economy recovers.
We also found opportunities throughout the region in industries that
should do relatively well even in an economic slowdown. For example, we have
invested in a variety of energy-related businesses that tend to generate
high-quality earnings. We also hold the stocks of companies that produce basic
necessities, such as food, that may also do relatively well in a recessionary
environment. At the same time, we have avoided interest rate sensitive stocks
such as most banks, real estate and construction companies. We are currently
invested in securities in the countries of Malaysia, Thailand, Indonesia and the
Philippines.
- --------------------------------------------------------------------------------
Strategy And Outlook
- --------------------------------------------------------------------------------
We remain cautious regarding the near-term future of Southeast Asia. We
expect 1998 to be a difficult year for most of the region as the impacts of
higher interest rates and devalued currencies work their way through the
troubled economies. Corporate earnings will remain uncertain until the economic
picture clears.
Over the longer term, however, we are more optimistic. We believe that the
swift market declines exposed most of the region's economic and financial
weaknesses, many of which will be rectified in the years ahead. That's not to
say that we believe the recovery will be swift and sure; far from it. The next
several years are likely to be difficult ones for local businesses and
residents. But, just as Latin America solved its systemic problems earlier in
the decade, we expect Southeast Asia to emerge from these difficulties.
Our strategy in this difficult environment is to complement our top-down
economic and market analyses with an intent focus on individual stock selection.
By remaining defensive in terms of our market allocations, industry weightings
and stock selection, we believe we can help shareholders benefit from the best
Southeast Asia has to offer as it recovers from the crises of 1997.
3
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
By The Numbers
- --------------------------------------------------------------------------------
TOP TEN EQUITY HOLDINGS OF THE PORTFOLIO
(As of 12/31/97)
Name Nation % of Net Assets
Tenaga Nasional Berhad Malaysia 8.5%
Telekom Malaysia Malaysia 7.3%
Pt Telecomunikasion Indonesia 7.2%
Ptt Exploration & Products Thailand 4.9%
Pt Daya Guna Samudera Indonesia 3.7%
Malayan Banking Berhad Malaysia 3.6%
Advanced Information Services Thailand 3.2%
Ayala Land Inc. Philippines 2.8%
Philippine Long Distance Telephone Philippines 2.8%
Bangkok Bank Co. Ltd. Thailand 2.7%
===================================================================
INDUSTRIES AS A % OF THE PORTFOLIO
Industries % of Common Stocks
---------- ------------------
Utilities 25.0%
Telecommunications 15.6%
Banking 11.6%
Consumer 10.6%
Property 6.2%
Leisure & Tourism 5.9%
Energy 5.5%
Plantations 3.3%
Property/Hotel 2.6%
Media 2.4%
Multi-Industry 2.2%
Transport 2.2%
Automobile 2.1%
Building Materials 1.6%
Construction/Engineering 1.3%
Finance/Securities 1.2%
Resource/Paper 0.6%
Manufacturing 0.1%
CHANGES IN PORTFOLIO
ASSET ALLOCATION
Portfolio of Investments
as of 12/31/97
[The following table was originally a pie chart in the printed materials.]
Malaysia 52%
Thailand 19%
Indonesia 17%
Philippines 12%
...Compared to 12/31/96
[The following table was originally a pie chart in the printed materials.]
Malaysia 54%
Indonesia 18%
Thailand 14%
Philippines 14%
4
<PAGE>
- --------------------------------------------------------------------------------
Fund Data All Periods Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Total Returns
---------------------------
Since
One 8/23/95
Year Inception*
------- --------
<S> <C> <C>
Landmark Emerging Asian Markets Equity Fund without Sales Charge ... (63.91)% (34.62)%
Lipper Pacific (Ex-Japan) Funds Average............................. (35.45)% (15.06)%+
MSCI EMF/Far East Index (excluding Korea)........................... (70.08)% (39.22)%+
Landmark Emerging Asian Markets Equity Fund
with Maximum Sales Charge of 4.75%................................. (65.62)% (35.96)%
</TABLE>
*Average Annual Total Return.
+From 8/31/95
- --------------------------------------------------------------------------------
Performance Highlights
- --------------------------------------------------------------------------------
A $10,000 investment in the Fund made on inception date would have decreased to
$3,495 with sales charge (as of 12/31/97). The graph shows how this compares to
our benchmarks over the same period.
[The following table was originally a line graph in the printed materials.]
Landmark Emerging Landmark Lipper
Asian Markets Emerging Asian Pacific MSCI EMF Far
Equity Fund - Markets Equity (Ex-Japan) East Index
Without Sales Fund - With Funds (excluding Korea)
Charge Sales Charge Average (unmanaged)
08/31/95 9,870 9,401 10,000 10,000
09/30/95 9,600 9,144 10,025 9,808
10/31/95 9,380 8,934 9,847 9,436
11/30/95 9,200 8,763 9,626 9,175
12/31/95 10,026 9,550 10,025 9,791
01/31/96 10,949 10,429 10,823 10,496
02/29/96 10,838 10,324 10,899 10,516
03/31/96 11,109 10,582 10,834 10,731
04/30/96 11,590 11,040 11,150 11,255
05/31/96 11,410 10,868 11,089 11,087
06/30/96 11,029 10,505 10,879 10,920
07/31/96 10,016 9,541 10,157 9,917
08/31/96 10,337 9,846 10,424 10,301
09/30/96 10,548 10,047 10,542 10,492
10/31/96 9,926 9,455 10,367 9,998
11/30/96 10,407 9,913 10,894 10,526
12/31/96 10,167 9,684 10,972 10,443
01/31/97 10,608 10,104 11,136 10,673
02/28/97 10,758 10,247 11,223 10,760
03/31/97 10,207 9,722 10,686 10,212
04/30/97 9,204 8,767 10,504 9,184
05/31/97 9,485 9,034 11,166 9,327
06/30/97 9,415 8,968 11,486 9,122
07/31/97 8,552 8,146 11,633 8,431
08/31/97 5,765 5,491 9,844 5,634
09/30/97 5,735 5,463 9,784 5,522
10/31/97 4,853 4,622 7,654 4,353
11/30/97 4,051 3,858 7,216 3,559
12/31/97 3,670 3,495 7,002 3,124
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.
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. Returns reflect
certain voluntary fee waivers. If the waivers were not in place, the Fund's
return would have been lower.
5
<PAGE>
- --------------------------------------------------------------------------------
Landmark Emerging Asian Markets Equity Fund
- --------------------------------------------------------------------------------
Statement Of Assets And Liabilities December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Assets:
Investment in Emerging Asian Markets Equity Portfolio, at value (Note 1A) ..... $ 1,678,519
Receivable for shares of beneficial interest sold ............................. 5,000
Other assets .................................................................. 103
-----------
Total assets ................................................................ 1,683,622
-----------
Liabilities:
Payable to affiliates-Shareholder Servicing Agents' fee (Note 2B) ............. 431
Accrued expenses and other liabilities ........................................ 1,138
-----------
Total liabilities ........................................................... 1,569
-----------
Net Assets for 459,156 shares of beneficial interest outstanding .............. $ 1,682,053
===========
Net Assets Consist of:
Paid-in capital ............................................................... $ 6,487,254
Unrealized depreciation on investments and foreign currency translations ...... (1,656,543)
Accumulated net investment loss ............................................... (29,064)
Accumulated net realized loss on investments .................................. (3,119,594)
-----------
Total ..................................................................... $ 1,682,053
===========
Net Asset Value and Redemption Price Per Share of Beneficial Interest ......... $ 3.66
===========
Computation of Offering Price:
Maximum Offering Price per share based on a 4.75% sales charge ($3.66/.9525) .. $ 3.84
===========
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Landmark Emerging Asian Markets Equity Fund
- --------------------------------------------------------------------------------
Statement Of Operations
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income (Note 1B):
Dividend Income from Emerging Asian Markets Equity Portfolio ................. $ 72,974
Interest Income from Emerging Asian Markets Equity Portfolio ................. 35,632
Allocated Expenses from Emerging Asian Markets Equity Portfolio .............. (76,855) $ 31,751
--------
Expenses:
Administrative fees (Note 2A) ................................................ 21,035
Shareholder Servicing Agents' fees (Note 2B) ................................. 17,529
Distribution fees (Note 3) ................................................... 7,011
Expense fees (Note 6) ........................................................ 14,018
--------
Net expenses ............................................................. 59,593
-----------
Net investment loss ...................................................... (27,842)
-----------
Net Realized and Unrealized Gain (Loss) on Investments and Foreign Exchange
Currency Translations from Emerging Asian Markets Equity Portfolio:
Net realized loss ............................................................ (2,194,588)
Net change in unrealized depreciation ........................................ (2,510,458)
-----------
Net realized and unrealized loss ............................................. (4,705,046)
-----------
Net Decrease in Net Assets Resulting from Operations ......................... $(4,732,888)
===========
</TABLE>
See notes to financial statements
6
<PAGE>
- --------------------------------------------------------------------------------
Landmark Emerging Asian Markets Equity Fund
- --------------------------------------------------------------------------------
Statement Of Changes In Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996
---- ----
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations:
Net investment income (loss) .......................... $ (27,842) $ 17,584
Net realized loss ..................................... (2,194,588) (1,018,770)
Net change in unrealized appreciation (depreciation) .. (2,510,458) 567,775
------------ ------------
Net decrease in net assets resulting
from operations ...................................... (4,732,888) (433,411)
------------ ------------
Transactions in Shares of
Beneficial Interest (Note 5):
Net proceeds from sale of shares ...................... 180,599 8,041,081
Cost of shares repurchased ............................ (4,350,476) (2,991,470)
------------ ------------
Net increase (decrease) in net assets resulting from
transactions in shares of beneficial interest ........ (4,169,877) 5,049,611
------------ ------------
Net Increase (Decrease) in Net Assets ................. (8,902,765) 4,616,200
Net Assets:
Beginning of period ................................... 10,584,818 5,968,618
------------ ------------
End of period (Accumulated net investment loss of
$29,064 and $7,157) .................................. $ 1,682,053 $ 10,584,818
============ ============
</TABLE>
See notes to financial statements
7
<PAGE>
- --------------------------------------------------------------------------------
Landmark Emerging Asian Markets Equity Fund
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
August 23, 1995
(Commencement of
Year Ended December 31, Operations) to
----------------------- December 31,
1997 1996 1995
---- ---- --------------
<S> <C> <C> <C>
Net Asset Value, beginning of period ........ $10.14 $10.00 $10.00
------ ------- ------
Income From Operations:
Net investment income (loss) ................ (0.056) 0.010(+) 0.026
Net realized and unrealized gain (loss) ..... (6.424) 0.130(+)(++) --
------ ------- ------
Total from investment operations ....... (6.48) 0.140 0.026
------ ------- ------
Less Distributions:
From net investment income ................ -- -- (0.026)
------ ------- ------
Total from distributions .............. -- -- (0.026)
------ ------- ------
Net Asset Value, end of period .............. $ 3.66 $10.14 $10.00
====== ======= ======
Ratios/Supplemental Data:
Net assets, end of period (000's omitted) ... $1,682 $10,585 $5,969
Ratio of expenses to average net assets(A) .. 1.95%# 1.01% 0%
Ratio of net investment income (loss) to
average net assets ....................... (0.40)% 0.16% 1.50%*
Total return ................................ (63.91)% 1.40% 0.26%**
Note: If Agents of the Fund and Portfolio for the periods indicated had not
voluntarily waived a portion of their fees and had the expense fees agreement
been in effect the entire period, the net investment income (loss) per share
and the ratios would have been as follows:
Net investment loss per share................ $(0.067) $(0.024)(+) $(0.046)
Ratios:
Expenses to average net assets(A)............ 2.03% 1.85% 1.85%*
Net investment loss to
average net assets.......................... (0.48)% (0.68)% (0.35)%*
</TABLE>
* Annualized.
** Not annualized.
# Ratio of expenses to average net assets excluding interest expense would
be 1.85%.
+ The per share amounts were computed using a monthly average number of
shares outstanding during the period.
++ The amount shown for a share outstanding does not correspond with the
aggregate net realized and unrealized gain (loss) on investments for the
period ended due to the timing of sales of Fund shares in relation to
fluctuating market values of the investments in the Fund.
(A) Includes the Fund's share of Emerging Asian Markets Equity Portfolio
allocated expenses for the periods indicated.
See notes to financial statements
8
<PAGE>
- --------------------------------------------------------------------------------
Landmark Emerging Asian Markets Equity Fund
- --------------------------------------------------------------------------------
Notes To Financial Statements
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies
Landmark Emerging Asian Markets Equity Fund (the "Fund") is a separate
diversified series of Landmark International Funds (the "Trust"), a
Massachusetts business trust. The Trust is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end, management
investment company. The Fund invests all of its investable assets in Emerging
Asian Markets Equity Portfolio (the "Portfolio"), a management investment
company for which Citibank, N.A. ("Citibank") serves as Investment Adviser.
CFBDS, Inc. ("CFBDS", formerly Landmark Funds Broker-Dealer Services, Inc.) 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 63% at December 31, 1997) 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 U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The significant accounting policies consistently followed by the Fund 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. Additionally each
Fund reclaims its pro rata portion of recoverable foreign taxes or dividends
received by the Portfolio.
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, 1997, the Fund, for federal income tax
purposes, had a capital loss carryover of $2,187,244 of which $660,370 will
expire on December 31, 2004 and $1,526,874 will expire on December 31, 2005.
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 CFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund. The Fund's share of the Portfolio's expenses are
charged against and reduce the amount of the Fund's investment in the Portfolio.
E. Distributions -- Distributions to shareholders are recorded on ex-dividend
date. The amount and character of income and net realized gains to be
distributed are determined in accordance with income tax rules and regulations,
which may differ from generally accepted accounting principles. These
differences are attributable to permanent book and tax accounting differences.
Reclassifications are made to the Fund's capital accounts to reflect income and
net realized gains available for distribution (or available capital loss
carryovers) under income tax rules and regulations. For the year ended December
31, 1997, the Fund reclassified $5,935 to accumu-
9
<PAGE>
- --------------------------------------------------------------------------------
Landmark Emerging Asian Markets Equity Fund
- --------------------------------------------------------------------------------
Notes To Financial Statements continued
- --------------------------------------------------------------------------------
lated net investment loss, $63,566 to accumulated net realized loss on
investments and $69,501 from paid-in-capital.
(2) 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 fees 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 the Administrator, as
compensation for overall administrative services, including general office
facilities, may not exceed an annual rate of 0.30% of the Fund's average daily
net assets. The Administrative fees amounted to $21,035 for the year ended
December 31, 1997. Citibank acts as Sub-Administrator and performs such duties
and receives such compensation from CFBDS as from time to time is agreed to by
CFBDS 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.
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 0.25% of the average daily
net assets of the Fund represented by shares owned during the period for which
payment is being made by investors for whom such Shareholder Servicing Agent
maintains a servicing relationship. The Shareholder Servicing Agents' fees,
computed at an annual rate of 0.25%, amounted to $17,529, for the year ended
December 31, 1997.
(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 compensates the
Distributor at an annual rate not to exceed 0.10% of the Fund's average daily
net assets for distribution of the Fund's shares. The Distribution fees amounted
to $7,011, for the year ended December 31, 1997. 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. The Distributor has voluntarily agreed to waive this fee through
December 31, 1997.
(4) Investment Transactions
Increase and decrease in the Fund's investment in the Portfolio for the year
ended December 31, 1997 aggregated $157,783 and $4,398,447, 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 (par value $0.00001).
Transactions in shares of beneficial interest were as follows:
Year Ended December 31,
------------------------
1997 1996
---- ----
Shares sold.......... 23,139 732,376
Shares repurchased... (607,588) (285,360)
------- -------
Net increase
(decrease)......... (584,449) 447,016
======== =======
10
<PAGE>
- --------------------------------------------------------------------------------
Landmark Emerging Asian Markets Equity Fund
- --------------------------------------------------------------------------------
Notes To Financial Statements continued
- --------------------------------------------------------------------------------
(6) Expense Fees
CFBDS has entered into an expense agreement with the Fund. CFBDS 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
may be terminated by either party upon not less than 30 days nor more than 60
days written notice.
The Fund has agreed to pay to CFBDS an expense fee, commencing July 1, 1996, 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 operating expenses of the Fund, including expenses allocated
from the Portfolio less expenses waived by the Administrator and Distributor
would, on an annual basis exceed an agreed upon rate, currently 1.85% of average
daily net assets.
(7) Subsequent Event
Effective March 2, 1998, the name of the Fund will be changed to CitiFunds(SM)
Emerging Asian Markets Equity Portfolio and the Trust will change its name to
CitiFunds(SM) International Trust.
11
<PAGE>
- --------------------------------------------------------------------------------
Landmark Emerging Asian Markets Equity Fund
- --------------------------------------------------------------------------------
Independent Auditors' Report
- --------------------------------------------------------------------------------
To the Trustees of Landmark International Funds (the Trust) and the Shareholders
of Landmark Emerging Asian Markets 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 Emerging Asian Markets Equity Fund (the "Fund", a series of Landmark
International Funds) at December 31, 1997, 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, 1997 by correspondence with the custodian, provide a reasonable
basis for the opinion expressed above.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 2, 1998
12
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Portfolio Of Investments December 31, 1997
- --------------------------------------------------------------------------------
Issuer/Industry Shares Value
- --------------------------------------------------------------------------------
COMMON STOCK--87.9%
Indonesia-15.3%
Pt Bimanatra Citra
Multi-Industry ............................... 71,500 $ 13,650
Pt Daya Guna Samudera
Consumer ..................................... 130,000 98,682
Pt Gudang Garam
Consumer ..................................... 11,000 16,750
Pt Indah Kiat Paper
Resource/Paper ............................... 71,000 12,586
Pt Matahari
Consumer ..................................... 78,000 6,382
Pt Ramayana Lestari Santosa
Consumer ..................................... 51,000 47,986
Pt Semen Gresik
Building Materials ........................... 36,500 21,402
Pt Telecomunikasion
Telecommunications ........................... 360,000 191,455
----------
408,893
----------
Malaysia-45.4%
Berjaya Group Berhad
Multi-Industry ............................... 177,000 35,951
Berjaya Sports
Leisure & Tourism ............................ 8,000 20,465
Commerce Asset Holdings Berhad
Banking ...................................... 26,200 12,529
Gamuda Berhad-Warrants*
Construction/Engineering ..................... 1,667 73
Genting Berhad
Leisure & Tourism ............................ 2,400 6,016
IOI Corp.
Plantations .................................. 114,000 36,930
KFC Holdings Berhad
Consumer ..................................... 32,000 51,832
KFC Holdings Berhad-Warrants*
Consumer ..................................... 32,000 3,291
Kian Joo Can Fact
Manufacturing ................................ 2,000 1,779
Kuala Lumpur Kepong Berhad
Plantations .................................. 19,000 40,789
Magnum Corp. Berhad
Leisure & Tourism ............................ 115,000 69,186
Malayan Banking Berhad
Banking ...................................... 32,800 95,292
Malaysia Mining Corp.
Construction/Engineering ..................... 77,000 30,289
Malaysia Pacific
Building Materials ........................... 7,000 16,827
Malaysian International Shipping
Transport .................................... 35,000 51,292
Oriental Holdings Berhad
Automobile ................................... 12,800 15,665
Perusahaan Otomobil Nasional
Automobile ................................... 18,000 17,586
Petronas Gas Berhad
Utilities .................................... 19,000 43,232
RHB Capital Berhad
Finance/Securities ........................... 33,000 15,951
Rashid Hussein Berhad
Finance/Securities ........................... 11,000 8,541
Rashid Hussein Berhad-Rights
Finance/Securities ........................... 1,857 344
Resorts World Berhad
Leisure & Tourism ............................ 26,000 43,785
Rothmans Pall Mall
Consumer ..................................... 3,000 23,332
Sime Darby Berhad
Property/Hotel ............................... 64,000 61,540
Star Publications Malaysia
Media ........................................ 49,000 55,935
Tan Chong Motor Holdings Berhad
Automobile ................................... 39,000 17,046
Technical Research Industries Berhad
Telecommunications ........................... 23,000 13,601
Telekom Malaysia
Utilities .................................... 66,000 195,141
Tenaga Nasional Berhad
Utilities .................................... 107,000 228,333
----------
1,212,573
----------
13
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Portfolio Of Investments December 31, 1997 continued
- --------------------------------------------------------------------------------
Issuer/Industry Shares Value
- --------------------------------------------------------------------------------
Philippines-10.7%
Ayala Land Inc
Property ..................................... 189,375 $ 74,815
Manila Electric
Utility ...................................... 19,190 63,493
Metro Pacific Corp.
Multi-Industry ............................... 106,260 2,938
Philippine Long Distance Telephone
Telecommunications ........................... 3,420 74,311
SM Prime Holdings
Property ..................................... 471,000 69,778
----------
285,335
----------
Thailand-16.5%
Advanced Information Services
Telecommunications ........................... 18,100 86,459
Bangkok Bank Co. Ltd.
Banking ...................................... 29,200 72,773
Co-Generation Public Co.*
Utilities .................................... 50,400 29,832
Electricity General
Utilities .................................... 15,000 28,037
Ind Fin Thailand
Banking ...................................... 29,000 4,457
Land & House
Property ..................................... 10,000 1,994
Ptt Exploration & Products
Energy ....................................... 11,300 130,014
Phatra Thanakit Co.
Finance ...................................... 3,800 2,111
Siam Commercial Bank
Banking ...................................... 22,100 24,556
Telecom Asia Local
Telecommunications ........................... 200 38
Thai Farmers Bank
Banking ...................................... 34,100 61,968
Thai Farmers Bank-Warrants *
Banking ...................................... 2,837 300
----------
442,539
----------
Principal
Issuer/Industry Amount Value
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK
(Identified Cost $4,725,199) ................. $2,349,340
----------
FIXED INCOME--0.1%
AMMB
7.50% due 5/08/02 ............................ 30,000 2,005
----------
TOTAL FIXED INCOME
(Identified Cost $12,000)
SHORT-TERM OBLIGATION--10.7%
State Street Bank Repurchase Agreement
2.00% due 1/02/98 proceeds at maturity
$286,000 (Collateralized by $235,000
U.S. Treasury Bond valued at $297,241
8.125%, due 5/15/21) .......................... 286,000
----------
Total Investments
(Identified Cost $5,023,199) ................... 98.7% 2,637,345
Other Assets
Less Liabilities ............................... 1.3 34,839
------- ----------
Net Assets ...................................... 100.0% $2,672,184
======= ==========
* Non-income producing
See notes to financial statements
14
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Statement Of Assets And Liabilities December 31, 1997
- --------------------------------------------------------------------------------
Assets:
Investments at value (Note 1A) (Identified Cost, $4,737,199) ..... $2,351,345
Repurchase agreement at value (Identified Cost, $286,000) ........ 286,000
Cash ............................................................. 953
Foreign currency, at value (Cost, $41,429) ....................... 29,255
Dividends and interest receivable ................................ 9,822
----------
Total assets ................................................. 2,677,375
----------
Liabilities:
Payable to affiliates--Investment advisory fees (Note 2) ......... 2,592
Accrued expenses and other liabilities ........................... 2,599
----------
Total liabilities .............................................. 5,191
----------
Net Assets ....................................................... $2,672,184
==========
Represented by:
Paid-in capital for beneficial interests ......................... $2,672,184
==========
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Statement Of Operations
For the Year Ended December 31, 1997
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Investment Income:
Dividends (net of foreign withholding tax of $29,686) ..... $ 83,612
Interest .................................................. 43,996
-----------
Total investment income ................................. $ 127,608
Expenses:
Investment advisory fees (Note 2) ......................... 83,978
Administrative fees (Note 3) .............................. 4,200
Expense fees (Note 6) ..................................... 2,500
Interest expense .......................................... 9,846
-----------
Total expenses .......................................... 100,524
Less aggregate amount waived by Investment Adviser
and Administrator (Notes 2 and 3) ....................... (6,700)
-----------
Net expenses .............................................. 93,824
-----------
Net investment income ................................... 33,784
-----------
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized loss on investment transactions .............. (2,920,220)
Net realized loss on foreign currency exchange transactions (95,345)
-----------
Net realized loss ....................................... (3,015,565)
-----------
Unrealized appreciation (depreciation) of investments--
Beginning of period .................................... 849,761
End of period .......................................... (2,398,027) (3,247,788)
-----------
Translation of other assets and liabilities denominated
in foreign currencies--net ............................. 187
-----------
Net change in unrealized appreciation (depreciation) ... (3,247,601)
-----------
Net realized and unrealized loss on investments ........ (6,263,166)
-----------
Net Decrease in Net Assets Resulting from Operations ...... $(6,229,382)
===========
</TABLE>
See notes to financial statements
16
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Statement Of Changes In Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31,
-----------------------
1997 1996
----- ----
<S> <C> <C>
Increase (Decrease) in Net Assets from:
Operations:
Net investment income ................................................ $ 33,784 $ 65,403
Net realized loss on investments and foreign exchange transactions ... (3,015,565) (1,026,487)
Net change in unrealized appreciation (depreciation)
of investments and foreign currency exchange ....................... (3,247,601) 562,925
------------ ------------
Net decrease in net assets resulting from operations ............. (6,229,382) (398,159)
------------ ------------
Capital Transactions:
Proceeds from contributions .......................................... 2,061,677 8,854,217
Value of withdrawals ................................................. (4,552,871) (3,026,771)
------------ ------------
Net increase (decrease) in net assets from capital transactions .. (2,491,194) 5,827,446
------------ ------------
Net Increase (Decrease) in Net Assets: ............................... (8,720,576) 5,429,287
Net Assets:
Beginning of period .................................................. 11,392,760 5,963,473
------------ ------------
End of period ........................................................ $ 2,672,184 $ 11,392,760
============ ============
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
August 23, 1995
Year Ended December 31, (Commencement of
------------------------ Operations) to
1997 1996 December 31, 1995
----- ----- -----------------
<S> <C> <C> <C>
Ratios/Supplemental Data:
Net Assets, end of period (000's omitted) ............ $2,672 $11,393 $5,963
Ratio of expenses to average net assets ............... 1.12%+ 0.56% 0%
Ratio of net investment income to average net assets .. 0.40% 0.60% 1.53%*
Portfolio turnover .................................... 72% 73% 0%
Average commission rate per share (A) ................. $0.006 $0.019 N/A
Note: If Agents of the Portfolio had not voluntarily waived a portion of their
fees for the periods indicated, the ratios would have been as follows:
Ratios:
Expenses to average net assets......................... 1.20% 1.06% 1.05%*
Net investment income to average net assets............ 0.32% 0.10% 0.48%*
</TABLE>
* Annualized
+ Ratio of expenses to average net assets excluding interest expense would
be 1.00%.
(A) The average commission rate paid is applicable for Funds that invest
greater than 10% of average net assets in equity transactions on which
commissions are charged. This disclosure is required for fiscal periods
beginning on or after September 1, 1995.
See notes to financial statements
16
<PAGE>
- --------------------------------------------------------------------------------
Emerging Asian Markets Equity Portfolio
- --------------------------------------------------------------------------------
Notes To Financial Statements
- --------------------------------------------------------------------------------
(1) Significant Accounting Policies
Emerging Asian Markets 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.
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the financial
statements. Actual results could differ from those estimates.
The following significant accounting policies consistently followed by the
Portfolio 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 at 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. 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 and techniques 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 of fund valuation, 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. Translation of foreign currency
includes net exchange gains and losses, disposition of foreign currency and the
difference between the amount of investment income and foreign taxes withheld
recorded and the actual amount received or paid.
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 or 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. 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.
Dividend income is recorded net of foreign taxes withheld where recovery of such
taxes is not assured. Reclaim of recoverable foreign taxes are the
responsibility of the qualified investors. Interest income is accrued daily.
Interest expense is related to expenses incurred on cash over drafts.
E. U.S. Federal Income and Other Taxes -- The Portfolio is considered a
partnership under the U.S. Internal Revenue Code. Accordingly, no provision for
federal income taxes is necessary. The Portfolio may be subject to taxes imposed
by countries in which it invests. Such taxes are generally based on income
and/or capital gains earned or repatriated. Taxes are accrued and applied to net
investment income and net realized gains as such income and/or gains are earned.
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Emerging Asian Markets Equity Portfolio
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Notes To Financial Statements continued
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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.
G. 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.
(2) Investment Advisory Fees
The investment advisory fees paid to Citibank, as compensation for overall
investment management services, amounted to $83,978, of which $2,500 was
voluntarily waived, for the year ended December 31, 1997. The investment
advisory fees are computed at the annual rate of 1.00% of the Portfolio's
average daily net assets.
(3) Administrative Fees
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
administrative fees amounted to $4,200, all of which was voluntarily waived, for
the year ended December 31, 1997. 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
For the year ended December 31, 1997, purchases and sales of investment
securities, other than short-term investments, aggregated $5,274,543 and
$7,861,363, respectively.
(5) Federal Income Tax Basis Of Investments
The cost and unrealized appreciation/(depreciation) in value of the investment
securities owned at December 31, 1997, as computed on a federal income tax
basis, are as follows:
Aggregate cost...................... $5,250,592
==========
Gross unrealized appreciation....... $ 11,581
Gross unrealized depreciation....... (2,624,828)
----------
Net unrealized depreciation......... $(2,613,247)
==========
(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 expenses of
the Portfolio less expenses waived by the Administrator would on an annual basis
exceed an agreed upon rate, currently 1.00% 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 on December 31, 1997.
(8) Line of Credit
The Portfolio, along with the other Landmark Funds, entered into an ongoing
agreement with a bank which allows the Landmark Funds collectively to borrow up
to $60 million for temporary or emergency purposes. Interest on the borrowings,
if any, is charged to the specific fund executing the borrowing at the base rate
of the bank. In addition, the $15 million committed portion of the line of
credit requires a quarterly payment of a commitment fee based on the average
daily unused portion of the line of credit for the year ended December 31, 1997
the commitment fee allocated to the Portfolio was $40. Since the line of credit
was established, there have been no borrowings.
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Emerging Asian Markets Equity Portfolio
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Independent Auditors' Report
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To the Trustees of The Premium Portfolios (the Trust) and the Shareholders of
Emerging Asian Markets Equity Portfolio:
We have audited the accompanying statement of assets and liabilities,
including the portfolio of investments, of Emerging Asian Markets Equity
Portfolio (the "Portfolio"), a series of The Premium Portfolios, as at December
31, 1997 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, 1997 by correspondence with the custodian,
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, 1997 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 2, 1998
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