Rule 497(E)-FILE Nos. 2-90518 and 811-4006
2-90519 and 811-4007
Statement of
Additional Information
LANDMARK BALANCED FUND April 3, 1995
LANDMARK EQUITY FUND AS AMENDED JANUARY 2, 1996
LANDMARK SMALL CAP EQUITY FUND
(Members of the LandmarkSM Family of Funds) CLASS A AND B SHARES
Landmark Balanced Fund is a series of Landmark Funds I ("Trust I"), and
Landmark Equity Fund and Landmark Small Cap Equity Fund (the "Equity Funds" and
together with Landmark Balanced Fund, the "Funds") are each a series of Landmark
Funds II ("Trust II" and together with Trust I, the "Trusts"). The address and
telephone number of the Trusts are 6 St. James Avenue, Boston, Massachusetts
02116, (617) 423-1679. The Trusts invest all of the investable assets of the
Funds in, respectively, the Balanced Portfolio, the Equity Portfolio and the
Small Cap Equity Portfolio (the "Portfolios"), which are separate series of The
Premium Portfolios (the "Portfolio Trust"). The address of the Portfolio Trust
is Elizabethan Square, George Town, Grand Cayman, British West Indies.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, CITIBANK,
N.A. OR ANY OF ITS AFFILIATES, ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
Table of Contents
Page
The Funds 2
Investment Objectives, Policies and Restrictions 3
Performance Information 18
Determination of Net Asset Value; Valuation of
Securities; Additional Purchase and Redemption
Information 20
Management 23
Portfolio Transactions 33
Description of Shares, Voting Rights and Liabilities 34
Certain Additional Tax Matters 37
Independent Accountants and Financial Statements 39
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the Funds'
Prospectus, dated April 3, 1995, by which shares of the Funds are offered. This
Statement of Additional Information should be read in conjunction with the
Prospectus, a copy of which may be obtained by an investor without charge by
contacting the Funds' Distributor (see inside back cover for address and phone
number).
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
<PAGE>
1. THE FUNDS
Landmark Funds I ("Trust I") and Landmark Funds II ("Trust II" and together
with Trust I, the "Trusts") are each an open-end management investment company
that was organized as a business trust under the laws of the Commonwealth of
Massachusetts on April 13, 1984. This Statement of Additional Information
describes shares of the Landmark Balanced Fund, which is a diversified series of
Trust I, and Landmark Equity Fund and Landmark Small Cap Equity Fund, which are
diversified series of Trust II. References in this Statement of Additional
Information to the "Prospectus" are to the Prospectus, dated April 3, 1995, of
the Trusts by which shares of the Funds are offered.
The Trusts seek the investment objectives of the Funds by investing all of
their investable assets in, respectively, the Balanced Portfolio, the Equity
Portfolio and the Small Cap Equity Portfolio (the "Portfolios"). The Portfolios
are series of The Premium Portfolios (the "Portfolio Trust") and are open-end,
diversified management investment companies. Each Portfolio has the same
investment objectives and policies as the Fund that invests in it. Because each
of the Funds invests through its corresponding Portfolio, all references in this
Statement of Additional Information to each Fund include such Fund's
corresponding Portfolio, except as otherwise noted. In addition, references to
the Trusts also include the Portfolio Trust, except as otherwise noted.
Citibank, N.A. ("Citibank" or the "Adviser") is investment adviser to each
of the Portfolios. The Adviser manages the investments of the Portfolios from
day to day in accordance with each Portfolio's investment objectives and
policies. The selection of investments for the Portfolios and the way they are
managed depend on the conditions and trends in the economy and the financial
marketplaces.
The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS" or the
"Administrator"), the administrator of each Fund (the "Administrator"), and
Signature Financial Group (Cayman) Ltd. ("SFG"), either directly or through a
wholly-owned subsidiary, the administrator of each Portfolio (the "Portfolio
Administrator"), supervise the overall administration of each Fund and each
Portfolio, respectively. The Boards of Trustees of each Trust and the Portfolio
Trust provide broad supervision over the affairs of the Funds and the
Portfolios, respectively. Shares of the Funds are continuously sold by LFBDS,
the Funds' distributor (the "Distributor"), only to investors who are customers
of a financial institution, such as a federal or state-chartered bank, trust
company, savings and loan association or savings bank, or a securities broker,
that has entered into a shareholder servicing agreement with the Trusts
(collectively, "Shareholder Servicing Agents"). Shares of each Fund are sold at
net asset value, plus, in the case of Class A Shares, a sales charge that may be
reduced on purchases involving substantial amounts and that may be eliminated in
certain circumstances. LFBDS receives a distribution fee from each Fund pursuant
to a Distribution Plan adopted with respect to each class of shares of the Funds
in accordance with Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act"). LFBDS also receives a service fee from the assets of
each Fund represented by Class B shares pursuant to the Distribution Plan
adopted with respect to Class B shares of the Funds.
2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES
The investment objectives of the LANDMARK BALANCED FUND Are to earn high
current income by investing in a broad range of securities, to preserve capital,
and to provide growth potential with reduced risk.
The investment objective of the LANDMARK EQUITY FUND And the LANDMARK SMALL
CAP EQUITY FUND is long-term capital growth. Dividend income, if any, is
incidental to this investment objective.
The investment objectives of each Fund may be changed without approval by
that Fund's shareholders, but shareholders will be given written notice at least
30 days before any change is implemented. Of course, there can be no assurance
that any Fund will achieve its investment objectives.
INVESTMENT POLICIES
The Prospectus contains a discussion of the various types of securities in
which each Fund may invest and the risks involved in such investments. The
following supplements the information contained in the Prospectus concerning the
investment objectives, policies and techniques of each Fund.
Balanced Fund's policy is to invest its assets, under normal circumstances,
in a broadly diversified portfolio of income-producing securities, including
common and preferred stocks, bonds and short-term obligations. Under normal
circumstances, at least 25% of the Fund's total assets is invested in fixed
income securities.
While it is the policy of each of Equity Fund and Small Cap Equity Fund to
invest its assets in a broadly diversified portfolio of equity securities
consisting mainly of common stocks of U.S. issuers, each Fund may also invest in
other types of securities such as fixed income securities and convertible and
non-convertible bonds.
The Trusts have also adopted the following policies with respect to each
Fund's investments in (i) warrants and (ii) securities of issuers with less than
three years' continuous operation. Each Trust's purchases of warrants for each
Fund will not exceed 5% of the Fund's net assets. Included within that amount,
but not exceeding 2% of its net assets, may be warrants which are not listed on
the New York Stock Exchange or the American Stock Exchange. Any such warrants
will be valued at their market value except that warrants which are attached to
securities at the time such securities are acquired for a Fund will be deemed to
be without value for the purpose of this restriction. The Trusts will not invest
more than 5% of each Fund's assets in companies which, including their
respective predecessors, have a record of less than three years' continuous
operation.
The Trusts may withdraw the investment of any Fund from its corresponding
Portfolio at any time, if the Board of Trustees of that Trust determines that it
is in the best interests of the Fund to do so. Upon any such withdrawal, the
Fund's assets would continue to be invested in accordance with the investment
policies described herein with respect to that Fund. The policies described
above and those described below are not fundamental and may be changed without
shareholder approval.
FUTURES CONTRACTS
A futures contract is an agreement between two parties for the purchase or
sale for future delivery of securities or for the payment or acceptance of a
cash settlement based upon changes in the value of the securities or of an index
of securities. A "sale" of a futures contract means the acquisition of a
contractual obligation to deliver the securities called for by the contract at a
specified price, or to make or accept the cash settlement called for by the
contract, on a specified date. A "purchase" of a futures contract means the
acquisition of a contractual obligation to acquire the securities called for by
the contract at a specified price, or to make or accept the cash settlement
called for by the contract, on a specified date. Futures contracts have been
designed by exchanges which have been designated "contract markets" by the
Commodity Futures Trading Commission ("CFTC") and must be executed through a
futures commission merchant, or brokerage firm, which is a member of the
relevant contract market. Futures contracts trade on these markets, and the
exchanges, through their clearing organizations, guarantee that the contracts
will be performed as between the clearing members of the exchange.
While futures contracts based on debt securities do provide for the
delivery and acceptance of securities, such deliveries and acceptances are very
seldom made. Generally, a futures contract is terminated by entering into an
offsetting transaction. Brokerage fees will be incurred when a Fund purchases or
sells a futures contracts. At the same time such a purchase or sale is made, the
Fund must provide cash or securities as a deposit ("initial deposit") known as
"margin". The initial deposit required will vary, but may be as low as 1% or
less of a contract's face value. Daily thereafter, the futures contract is
valued through a process known as "marking to market", and the Fund may receive
or be required to pay additional "variation margin" as the futures contract
becomes more or less valuable. At the time of delivery of securities pursuant to
such a contract, adjustments are made to recognize differences in value arising
from the delivery of securities with a different interest rate than the specific
security that provides the standard for the contract. In some (but not many)
cases, securities called for by a futures contract may not have been issued when
the contract was entered into.
A Fund may purchase or sell futures contracts to attempt to protect the
Fund from fluctuations in interest rates, or to manage the effective maturity or
duration of the Fund's portfolio in an effort to reduce potential losses or
enhance potential gain, without actually buying or selling debt securities. For
example, if interest rates were expected to increase, the Fund might enter into
futures contracts for the sale of debt securities. Such a sale would have much
the same effect as if the Fund sold bonds that it owned, or as if the Fund sold
longer-term bonds and purchased shorter-term bonds. If interest rates did
increase, the value of the Fund's debt securities would decline, but the value
of the futures contracts would increase, thereby keeping the net asset value of
the Fund from declining as much as it otherwise would have. Similar results
could be accomplished by selling bonds, or by selling bonds with longer
maturities and investing in bonds with shorter maturities. However, by using
futures contracts, the Fund avoids having to sell its securities.
Similarly, when it is expected that interest rates may decline, a Fund
might enter into futures contracts for the purchase of debt securities. Such a
transaction would be intended to have much the same effect as if the Fund
purchased bonds, or as if the Fund sold shorter-term bonds and purchased
longer-term bonds. If interest rates did decline, the value of the futures
contracts would increase.
Although the use of futures for hedging should tend to minimize the risk of
loss due to a decline in the value of the hedged position (e.g., if a Fund sells
a futures contract to protect against losses in the debt securities held by the
Fund), at the same time the futures contracts limit any potential gain which
might result from an increase in value of a hedged position.
In addition, the ability effectively to hedge all or a portion of a Fund's
investments through transactions in futures contracts depends on the degree to
which movements in the value of the debt securities underlying such contracts
correlate with movements in the value of the Fund's securities. If the security
underlying a futures contract is different than the security being hedged, they
may not move to the same extent or in the same direction. In that event, the
Fund's hedging strategy might not be successful and the Fund could sustain
losses on these hedging transactions which would not be offset by gains on the
Fund's other investments or, alternatively, the gains on the hedging transaction
might not be sufficient to offset losses on the Fund's other investments. It is
also possible that there may be a negative correlation between the security
underlying a futures contract and the securities being hedged, which could
result in losses both on the hedging transaction and the securities. In these
and other instances, the Fund's overall return could be less than if the hedging
transactions had not been undertaken. Similarly, even where a Fund enters into
futures transactions other than for hedging purposes, the effectiveness of its
strategy may be affected by lack of correlation between changes in the value of
the futures contracts and changes in value of the securities which the Fund
would otherwise buy and sell.
The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close out futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, there is the potential that the liquidity of the
futures market may be lacking. Prior to expiration, a futures contract may be
terminated only by entering into a closing purchase or sale transaction, which
requires a secondary market on the contract market on which the futures
contracts was originally entered into. While a Fund will establish a futures
position only if there appears to be a liquid secondary market therefor, there
can be no assurance that such a market will exist for any particular futures
contract at any specific time. In that event, it may not be possible to close
out a position held by the Fund, which could require the Fund to purchase or
sell the instrument underlying the futures contract or to meet ongoing variation
margin requirements. The inability to close out futures positions also could
have an adverse impact on the ability effectively to use futures transactions
for hedging or other purposes.
The liquidity of a secondary market in a futures contract may be adversely
affected by "daily price fluctuation limits" established by the exchanges, which
limit the amount of fluctuation in the price of a futures contract during a
single trading day and prohibit trading beyond such limits once they have been
reached. The trading of futures contracts also is subject to the risk of trading
halts, suspensions, exchange or clearing house equipment failures, government
intervention, insolvency of a brokerage firm or clearing house or other
disruptions of normal trading activity, which could at times make it difficult
or impossible to liquidate existing positions or to recover excess variation
margin payments.
Investments in futures contracts also entail the risk that if the Adviser's
investment judgment about the general direction of interest rates is incorrect,
the Fund's overall performance may be poorer than if any such contract had not
been entered into. For example, if a Fund hedged against the possibility of an
increase in interest rates which would adversely affect the price of the Fund's
bonds and interest rates decrease instead, part or all of the benefit of the
increased value of the Fund's bonds which were hedged will be lost because the
Fund will have offsetting losses in its futures positions. Similarly, if a Fund
purchases futures contracts expecting a decrease in interest rates and interest
rates instead increased, the Fund will have losses in its futures positions
which will increase the amount of the losses on the securities in its portfolio
which will also decline in value because of the increase in interest rates. In
addition, in such situations, if the Fund has insufficient cash, the Fund may
have to sell bonds from its investments to meet daily variation margin
requirements, possibly at a time when it may be disadvantageous to do so.
Each contract market on which futures contracts are traded has established
a number of limitations governing the maximum number of positions which may be
held by a trader, whether acting alone or in concert with others. The Adviser
does not believe that these trading and position limits would have an adverse
impact on a Fund's strategies involving futures.
CFTC regulations require compliance with certain limitations in order to
assure that the Fund is not deemed to be a "commodity pool" under such
regulations. In particular, CFTC regulations prohibit the Fund from purchasing
or selling futures contracts (other than for bona fide hedging transactions) if,
immediately thereafter, the sum of the amount of initial margin required to
establish the Fund's non-hedging futures positions would exceed 5% of the Fund's
net assets.
Each Fund that is authorized to enter into futures contracts (as set forth
in the Fund's Prospectus) will comply with this CFTC requirement, and each such
Fund currently intends to adhere to the additional policies described below.
First, an amount of cash or cash equivalents will be maintained by each Fund in
a segregated account with the Fund's custodian so that the amount so segregated,
plus the initial margin held on deposit, will be approximately equal to the
amount necessary to satisfy the Fund's obligations under the futures contract.
The second is that a Fund will not enter into a futures contract if immediately
thereafter the amount of initial margin deposits on all the futures contracts
held by the Fund would exceed approximately 5% of the net assets of the Fund.
The third is that the aggregate market value of the futures contracts held by a
Fund not generally exceed 50% of the market value of the Fund's total assets
other than its futures contracts. For purposes of this third policy, "market
value" of a futures contract is deemed to be the amount obtained by multiplying
the number of units covered by the futures contract times the per unit price of
the securities covered by that contract.
The ability of a Fund to engage in futures transactions may be limited by
the current federal income tax requirement that less than 30% of a Fund's gross
income be derived from the sale or other disposition of stock or securities held
for less than three months. In addition, the use of futures contracts may
increase the amount of taxable income of a Fund and may affect the amount,
timing and character of a Fund's income for tax purposes, as more fully
discussed herein in the section entitled "Certain Additional Tax Matters".
REPURCHASE AGREEMENTS
Each of the Funds may invest in repurchase agreements collateralized by
securities in which that Fund may otherwise invest. Repurchase agreements are
agreements by which a Fund purchases a security and simultaneously commits to
resell that security to the seller (which is usually a member bank of the U.S.
Federal Reserve System or a member firm of the New York Stock Exchange (or a
subsidiary thereof)) at an agreed-upon date within a number of days (usually not
more than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed-upon market rate of interest which is unrelated to
the coupon rate or maturity of the purchased security. A repurchase agreement
involves the obligation of the seller to pay the agreed upon price, which
obligation is in effect secured by the value of the underlying security, usually
U.S. Government or Government agency issues. Under the 1940 Act, repurchase
agreements may be considered to be loans by the buyer. A Fund's risk is limited
to the ability of the seller to pay the agreed-upon amount on the delivery date.
If the seller defaults, the underlying security constitutes collateral for the
seller's obligation to pay although that Fund may incur certain costs in
liquidating this collateral and in certain cases may not be permitted to
liquidate this collateral. All repurchase agreements entered into by the Funds
are fully collateralized, with such collateral being marked to market daily.
<PAGE>
SECURITIES OF NON-U.S. ISSUERS
Each of the Funds may invest in securities of non-U.S. issuers. Investing
in securities issued by companies whose principal business activities are
outside the United States may involve significant risks not present in U.S.
investments. For example, the value of such securities fluctuates based on the
relative strength of the U.S. dollar. In addition, there is generally less
publicly available information about non-U.S. issuers, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Non-U.S. issuers are generally not bound by uniform accounting, auditing
and financial reporting requirements comparable to those applicable to U.S.
issuers. Investments in securities of non-U.S. issuers also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of a Fund, political or financial instability or diplomatic and
other developments which would affect such investments. Further, economies of
other countries or areas of the world may differ favorably or unfavorably from
the economy of the U.S.
It is anticipated that in most cases the best available market for
securities of non-U.S. issuers would be on exchanges or in over-the-counter
markets located outside the U.S. Non-U.S. securities markets, while growing in
volume and sophistication, are generally not as developed as those in the U.S.,
and securities of some non-U.S. issuers (particularly those located in
developing countries) may be less liquid and more volatile than securities of
comparable U.S. companies. Non-U.S. security trading practices, including those
involving securities settlement where a Fund's assets may be released prior to
receipt of payments, may expose the Funds to increased risk in the event of a
failed trade or the insolvency of a non-U.S. broker-dealer. In addition,
non-U.S. brokerage commissions are generally higher than commissions on
securities traded in the U.S. and may be non-negotiable. In general, there is
less overall governmental supervision and regulation of non-U.S. securities
exchanges, brokers and listed companies than in the U.S.
Investments in closed-end investment companies which primarily hold
securities of non-U.S. issuers may entail the risk that the market value of such
investments may be substantially less than their net asset value and that there
would be duplication of investment management and other fees and expenses.
American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs") and other forms of depositary
receipts for securities of non-U.S. issuers provide an alternative method for
the Funds to make non-U.S. investments. These securities are not usually
denominated in the same currency as the securities into which they may be
converted. Generally, ADRs, in registered form, are designed for use in U.S.
securities markets and EDRs and GDRs, in bearer form, are designed for use in
European and global securities markets. ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities.
EDRs and GDRs are European and global receipts, respectively, evidencing a
similar arrangement. ADRs, EDRs and GDRs are subject to many of the same risks
that apply to other investments in non-U.S. securities.
The Funds may invest in securities of non-U.S. issuers that impose
restrictions on transfer within the United States or to United States persons.
Although securities subject to such transfer restrictions may be marketable
abroad, they may be less liquid than securities of non-U.S. issuers of the same
class that are not subject to such restrictions.
CURRENCY EXCHANGE TRANSACTIONS
Because each of the Funds may buy and sell securities denominated in
currencies other than the U.S. dollar, and receive interest, dividends and sale
proceeds in currencies other than the U.S. dollar, the Funds may enter into
currency exchange transactions to convert U.S. currency to non-U.S. currency and
non-U.S. currency to U.S. currency, as well as convert one non-U.S. currency to
another non-U.S. currency. A Fund either enters into these transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the currency exchange
markets, or uses forward contracts to purchase or sell non-U.S. currencies. The
Funds may also enter into currency hedging transactions in an attempt to protect
the value of their assets as measured in U.S. dollars from unfavorable changes
in currency exchange rates and control regulations. (Although each Fund's assets
are valued daily in terms of U.S. dollars, the Trusts do not intend to convert a
Fund's holdings of non-U.S. currencies into U.S. dollars on a daily basis.) It
is not currently intended that the Funds speculate in currency exchange rates or
forward contracts.
The Funds may convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion. Although currency
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference (the "spread") between the prices at which they are
buying and selling various currencies. Thus, a dealer may offer to sell a
currency at one rate, while offering a lesser rate of exchange should a Fund
desire to resell that currency to the dealer.
A forward contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract, agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirement, and no fees or
commissions are charged at any stage for trades.
When a Fund enters into a contract for the purchase or sale of a security
denominated in a non-U.S. currency, it may desire to "lock in" the U.S. dollar
price of the security. By entering into a forward contract for the purchase or
sale, for a fixed amount of U.S. dollars, of the amount of non-U.S. currency
involved in the underlying security transaction, the Fund will be able to
protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the non-U.S. currency during the period
between the date the security is purchased or sold and the date on which payment
is made or received.
When the Adviser believes that the currency of a particular country may
suffer a substantial decline against the U.S. dollar, a Fund may enter into a
forward contract to sell, for a fixed amount of U.S. dollars, the amount of
non-U.S. currency approximating the value of some or all of the Fund's
securities denominated in such non-U.S. currency. The precise matching of the
forward contract amounts and the value of the securities involved is not
generally possible since the future value of such securities in non-U.S.
currencies changes as a consequence of market movements in the value of those
securities between the date the forward contract is entered into and the date it
matures. The projection of a short-term hedging strategy is highly uncertain.
The Funds do not enter into such forward contracts or maintain a net exposure to
such contracts where the consummation of the contracts obligates a Fund to
deliver an amount of non-U.S. currency in excess of the value of the Fund's
securities or other assets denominated in that currency. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated in the investment decisions made with regard to overall
diversification strategies. However, the Adviser believes that it is important
to have the flexibility to enter into such forward contracts when it determines
that the best interests of a Fund will be served.
The Funds generally would not enter into a forward contract with a term
greater than one year. At the maturity of a forward contract, a Fund will either
sell the security and make delivery of the non-U.S. currency, or retain the
security and terminate its contractual obligation to deliver the non-U.S.
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
non-U.S. currency. If a Fund retains the security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If a Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the non-U.S. currency. Should forward prices decline
during the period between the date a Fund enters into a forward contract for the
sale of the non-U.S. currency and the date it enters into an offsetting contract
for the purchase of such currency, the Fund will realize a gain to the extent
the selling price of the currency exceeds the purchase price of the currency.
Should forward prices increase, the Fund will suffer a loss to the extent that
the purchase price of the currency exceeds the selling price of the currency.
It is impossible to forecast with precision the market value of a Fund's
securities at the expiration of a forward contract. Accordingly, it may be
necessary for a Fund to purchase additional non-U.S. currency on the spot market
if the market value of the security is less than the amount of non-U.S. currency
the Fund is obligated to deliver and if a decision is made to sell the security
and make delivery of such currency. Conversely, it may be necessary to sell on
the spot market some of the non-U.S. currency received upon the sale of the
security if its market value exceeds the amount of such currency the Fund is
obligated to deliver.
Each of the Funds may also purchase put options on a non-U.S. currency in
order to protect against currency rate fluctuations. If a Fund purchases a put
option on a non-U.S. currency and the value of the U.S. currency declines, the
Fund will have the right to sell the non-U.S. currency for a fixed amount in
U.S. dollars and will thereby offset, in whole or in part, the adverse effect on
the Fund which otherwise would have resulted. Conversely, where a rise in the
U.S. dollar value of another currency is projected, and where a Fund anticipates
investing in securities traded in such currency, the Fund may purchase call
options on the non-U.S. currency.
The purchase of such options could offset, at least partially, the effects
of adverse movements in exchange rates. However, the benefit to each Fund from
purchases of non-U.S. currency options will be reduced by the amount of the
premium and related transaction costs. In addition, where currency exchange
rates do not move in the direction or to the extent anticipated, a Fund could
sustain losses on transactions in non-U.S. currency options which would require
it to forgo a portion or all of the benefits of advantageous changes in such
rates.
The Funds may write options on non-U.S. currencies for hedging purposes or
otherwise to achieve their investment objectives. For example, where a Fund
anticipates a decline in the value of the U.S. dollar value of a non-U.S.
security due to adverse fluctuations in exchange rates it could, instead of
purchasing a put option, write a call option on the relevant currency. If the
expected decline occurs, the option will most likely not be exercised, and the
diminution in value of the security held by the Fund will be offset by the
amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the cost of a non-U.S. security to be acquired because
of an increase in the U.S. dollar value of the currency in which the underlying
security is primarily traded, a Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will expire unexercised
and allow the Fund to hedge such increased cost up to the amount of the premium.
However, the writing of a currency option will constitute only a partial hedge
up to the amount of the premium, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at a loss which
may not be offset by the amount of the premium. Through the writing of options
on currencies, a Fund also may be required to forgo all or a portion of the
benefits which might otherwise have been obtained from favorable movements in
exchange rates.
Put and call options on non-U.S. currencies written by a Fund will be
covered by segregation of cash, short-term money market instruments or high
quality debt securities in an account with the custodian in an amount sufficient
to discharge the Fund's obligations with respect to the option, by acquisition
of the non-U.S. currency or of a right to acquire such currency (in the case of
a call option) or the acquisition of a right to dispose of the currency (in the
case of a put option), or in such other manner as may be in accordance with the
requirements of any exchange on which, or the counterparty with which, the
option is traded and applicable laws and regulations.
Investing in ADRs presents many of the same risks regarding currency
exchange rates as investing directly in securities denominated in currencies
other than the U.S. dollar. Because the securities underlying ADRs are traded
primarily in non-U.S. currencies, changes in currency exchange rates will affect
the value of ADRs. For example, a decline in the U.S. dollar value of another
currency in which securities are primarily traded will reduce the U.S. dollar
value of such securities, even if their value in the other currency remains
constant, and thus will reduce the value of the ADRs covering such securities. A
Fund may employ any of the above described non-U.S. currency hedging techniques
to protect the value of its assets invested in ADRs.
The Funds' dealings in non-U.S. currency contracts are limited to the
transactions described above. Of course, a Fund is not required to enter into
such transactions and does not do so unless deemed appropriate by the Adviser.
It should also be realized that these methods of protecting the value of a
Fund's securities against a decline in the value of a currency do not eliminate
fluctuations in the underlying prices of the securities. Additionally, although
such contracts tend to minimize the risk of loss due to a decline in the value
of the hedged currency, they also tend to limit any potential gain which might
result should the value of such currency increase.
Each Fund has established procedures consistent with policies of the
Securities and Exchange Commission (the "SEC") concerning forward contracts.
Since those policies currently recommend that an amount of a Fund's assets equal
to the amount of the purchase be held aside or segregated to be used to pay for
the commitment, each Fund is expected always to have cash, cash equivalents or
high quality debt securities available sufficient to cover any commitments under
these contracts or to limit any potential risk.
SHORT SALES "AGAINST THE BOX"
In a short sale, a Fund sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. Each of the Funds, in
accordance with applicable investment restrictions, may engage in short sales
only if at the time of the short sale it owns or has the right to obtain, at no
additional cost, an equal amount of the security being sold short. This
investment technique is known as a short sale "against the box."
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. If a Fund engages in a short sale, the collateral for the short position
is maintained for the Fund by the custodian or qualified sub-custodian. While
the short sale is open, an amount of securities equal in kind and amount to the
securities sold short or securities convertible into or exchangeable for such
equivalent securities are maintained in a segregated account for the Fund. These
securities constitute the Fund's long position.
The Funds do not engage in short sales against the box for investment
purposes. A Fund may, however, make a short sale against the box as a hedge,
when it believes that the price of a security may decline, causing a decline in
the value of a security owned by the Fund (or a security convertible or
exchangeable for such security), or when the Fund wants to sell the security at
an attractive current price, but also wishes to defer recognition of gain or
loss for federal income tax purposes or for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code. In
such case, any future losses in the Fund's long position should be reduced by a
gain in the short position. Conversely, any gain in the long position should be
reduced by a loss in the short position. The extent to which such gains or
losses are reduced depends upon the amount of the security sold short relative
to the amount the Fund owns. There are certain additional transaction costs
associated with short sales against the box, but the Funds endeavor to offset
these costs with the income from the investment of the cash proceeds of short
sales.
The Adviser does not expect that more than 40% of each Fund's total assets
would be involved in short sales against the box. The Adviser does not currently
intend to engage in such sales.
LENDING OF SECURITIES
Consistent with applicable regulatory requirements and in order to generate
income, each of the Funds may lend its securities to broker-dealers and other
institutional borrowers. Such loans will usually be made only to member banks of
the U.S. Federal Reserve System and to member firms of the New York Stock
Exchange (and subsidiaries thereof). Loans of securities would be secured
continuously by collateral in cash, cash equivalents or U.S. Treasury
obligations maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The cash collateral would be invested in
high quality short-term instruments. A Fund would have the right to call a loan
and obtain the securities loaned at any time on customary industry settlement
notice (which will not usually exceed five days). During the existence of a
loan, a Fund would continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities loaned and would also receive
compensation based on investment of the collateral. The Fund would not, however,
have the right to vote any securities having voting rights during the existence
of the loan, but would call the loan in anticipation of an important vote to be
taken among holders of the securities or of the giving or withholding of their
consent on a material matter affecting the investment. As with other extensions
of credit, there are risks of delay in recovery or even loss of rights in the
collateral should the borrower fail financially. However, the loans would be
made only to entities deemed by the Adviser to be of good standing, and when, in
the judgment of the Adviser, the consideration which can be earned currently
from loans of this type justifies the attendant risk. If the Adviser determines
to make loans, it is not intended that the value of the securities loaned by a
Fund would exceed 33 1/3% of the value of its total assets.
<PAGE>
WHEN-ISSUED SECURITIES
Each of the Funds may purchase securities on a "when-issued" or on a
"forward delivery" basis. It is expected that, under normal circumstances, the
applicable Fund would take delivery of such securities. When a Fund commits to
purchase a security on a "when-issued" or on a "forward delivery" basis, it sets
up procedures consistent with SEC policies. Since those policies currently
require that an amount of a Fund's assets equal to the amount of the purchase be
held aside or segregated to be used to pay for the commitment, the Fund will
always have cash, cash equivalents or high quality debt securities sufficient to
cover any commitments or to limit any potential risk. However, even though the
Funds do not intend to make such purchases for speculative purposes and intend
to adhere to the provisions of SEC policies, purchases of securities on such
bases may involve more risk than other types of purchases. For example, a Fund
may have to sell assets which have been set aside in order to meet redemptions.
Also, if the Adviser determines it is advisable as a matter of investment
strategy to sell the "when-issued" or "forward delivery" securities, a Fund
would be required to meet its obligations from the then available cash flow or
the sale of securities, or, although it would not normally expect to do so, from
the sale of the "when-issued" or "forward delivery" securities themselves (which
may have a value greater or less than the Fund's payment obligation).
RULE 144A SECURITIES
Each of the Funds may purchase securities that are not registered ("Rule
144A securities") under the Securities Act of 1933 (the "Securities Act"), but
can be offered and sold to "qualified institutional buyers" under Rule 144A
under the Securities Act. However, none of the Funds invests more than 15% of
its net assets in illiquid investments, which includes securities for which
there is no readily available market, securities subject to contractual
restrictions on resale and Rule 144A securities, unless the Trustees of the
Trusts determine, based on the trading markets for the specific Rule 144A
security, that it is liquid. The Trustees may adopt guidelines and delegate to
the Adviser the daily function of determining and monitoring liquidity of Rule
144A securities. The Trustees, however, retain oversight and are ultimately
responsible for the determinations.
Since it is not possible to predict with assurance exactly how the market
for Rule 144A securities will develop, the Trustees will carefully monitor each
Fund's investments in Rule 144A securities, focusing on such factors, among
others, as valuation, liquidity and availability of information. The liquidity
of investments in Rule 144A securities could be impaired if trading in Rule 144A
securities does not develop or if qualified institutional buyers become for a
time uninterested in purchasing Rule 144A securities.
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS
The Trusts, on behalf of the Funds, and the Portfolio Trust, on behalf of
the Portfolios, have each adopted the following policies which may not be
changed with respect to any Fund or Portfolio without approval by holders of a
majority of the outstanding voting securities of that Fund or Portfolio, which
as used in this Statement of Additional Information means the vote of the lesser
of (i) 67% or more of the outstanding voting securities of the Fund or Portfolio
present at a meeting at which the holders of more than 50% of the outstanding
voting securities of the Fund or Portfolio are present or represented by proxy,
or (ii) more than 50% of the outstanding voting securities of the Fund or
Portfolio. The term "voting securities" as used in this paragraph has the same
meaning as in the 1940 Act.
None of the Funds or Portfolios may:
(1) Borrow money, except that as a temporary measure for extraordinary or
emergency purposes it may borrow in an amount not to exceed 1/3 of the current
value of its net assets, including the amount borrowed (nor purchase any
securities at any time at which borrowings exceed 5% of the total assets of the
Fund or Portfolio, taken at market value). It is intended that a Fund or
Portfolio would borrow money only from banks and only to accommodate requests
for the repurchase of shares of the Fund or beneficial interests in the
Portfolio while effecting an orderly liquidation of portfolio securities.
(2) Make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loans not exceed 30% of the
Fund's or Portfolio's total assets (taken at market value), (b) through the use
of repurchase agreements or the purchase of short-term obligations or (c) by
purchasing all or a portion of an issue of debt securities of types commonly
distributed privately to financial institutions. The purchase of short-term
commercial paper or a portion of an issue of debt securities which is part of an
issue to the public shall not be considered the making of a loan.
(3) Purchase securities of any issuer if such purchase at the time thereof
would cause with respect to 75% of the total assets of the Fund or Portfolio
more than 10% of the voting securities of such issuer to be held by the Fund or
Portfolio, except that, with respect to each Fund, the applicable Trust may
invest all or substantially all of the Fund's assets in another registered
investment company having the same investment objectives and policies and
substantially the same investment restrictions as those with respect to the Fund
(a "Qualifying Portfolio").
(4) Purchase securities of any issuer if such purchase at the time thereof
would cause as to 75% of the Fund's or Portfolio's total assets more than 5% of
the Fund's or Portfolio's assets (taken at market value) to be invested in the
securities of such issuer (other than securities or obligations issued or
guaranteed by the United States, any state or political subdivision thereof, or
any political subdivision of any such state, or any agency or instrumentality of
the United States or of any state or of any political subdivision of any state),
except that, with respect to each Fund, the applicable Trust may invest all or
substantially all of the Fund's assets in a Qualifying Portfolio.
(5) Concentrate its investments in any particular industry, but if it is
deemed appropriate for the achievement of the Fund's or Portfolio's investment
objectives, up to 25% of its assets, at market value at the time of each
investment, may be invested in any one industry.
In addition, neither the Small Cap Equity Fund nor the Small Cap Equity
Portfolio may:
(6) Underwrite securities issued by other persons, except that all the
assets of the Fund may be invested in a Qualifying Portfolio and except insofar
as the Fund or Portfolio may technically be deemed an underwriter under the 1933
Act in selling a security.
(7) Purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein), interests
in oil, gas or mineral leases, commodities or commodity contracts in the
ordinary course of business (each of the Fund and the Portfolio reserves the
freedom of action to hold and to sell real estate acquired as a result of the
ownership of securities by the Fund or the Portfolio).
(8) Issue any senior security (as that term is defined in the 1940 Act) if
such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, except as appropriate to evidence a debt
incurred without violating Investment Restriction (1) above.
NON-FUNDAMENTAL RESTRICTION
The Trusts, on behalf of the Balanced Fund and the Equity Fund, and the
Portfolio Trust, on behalf of the Balanced Portfolio and the Equity Portfolio,
have each adopted the following non-fundamental restriction, which may be
changed by the Trusts with respect to either such Fund or the Portfolio Trust
with respect to either such Portfolio without the approval of shareholders or
holders of beneficial interests, as the case may be:
None of the Balanced Fund and the Equity Fund or the Balanced Portfolio and
the Equity Portfolio may knowingly invest in securities which are subject to
legal or contractual restrictions on resale (other than repurchase agreements
maturing in not more than seven days and other than securities which may be
resold pursuant to Rule 144A under the 1933 Act if the Board of Trustees of the
applicable Trust or of the Portfolio Trust determines that a liquid market
exists for such securities) if, as a result thereof, more than 15% of such a
Fund's or Portfolio's net assets (taken at market value) would be so invested
(including repurchase agreements maturing in more than seven days), except that
a Trust may invest all or substantially all of either such Fund's assets in a
Qualifying Portfolio.
<PAGE>
STATE AND FEDERAL RESTRICTIONS
In order to comply with certain state and federal statutes and policies
each Fund and each Portfolio does not as a matter of operating policy:
(i) borrow money for any purpose in excess of 10% of the net assets of the
Fund or Portfolio (taken at cost) (moreover, the Fund or Portfolio will not
purchase any securities for the Fund or Portfolio at any time at which
borrowings exceed 5% of the total assets of the Fund or Portfolio (taken at
market value)),
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10% of
the net assets of the Fund or Portfolio (taken at market value),
(iii) sell any security which the Fund or Portfolio does not own unless by
virtue of the ownership of other securities there is at the time of sale a right
to obtain securities, without payment of further consideration, equivalent in
kind and amount to the securities sold and provided that if such right is
conditional the sale is made upon the same conditions,
(iv) invest for the purpose of exercising control or management, except
that all of the assets of the Fund may be invested in a Qualifying Portfolio,
(v) purchase securities issued by any registered investment company, except
that all of the assets of the Fund may be invested in a Qualifying Portfolio and
except by purchase in the open market where no commission or profit to a sponsor
or dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open market, is
part of a plan of merger or consolidation; provided, however, that the Fund or
Portfolio will not purchase the securities of any registered investment company
if such purchase at the time thereof would cause more than 10% of the total
assets of the Fund or Portfolio (taken in each case at the greater of cost or
market value) to be invested in the securities of such issuers or would cause
more than 3% of the outstanding voting securities of any such issuer to be held
for the Fund or Portfolio (for purposes of this clause (v) securities of
non-U.S. banks shall be treated as investment company securities, except that
debt securities and non-voting preferred stock of non-U.S. banks are not subject
to the 10% limitation described herein),
(vi) invest more than 15% of the net assets of the Fund or Portfolio in
securities that are not readily marketable, including debt securities for which
there is no established market and fixed time deposits and repurchase agreements
maturing in more than seven days, except that all the assets of the Fund may be
invested in a Qualifying Portfolio,
(vii) purchase or retain any securities issued by an issuer any of whose
officers, directors, trustees or security holders is an officer or Trustee of
the Trusts or of the Portfolio Trust, or is an officer or director of the
Adviser, if after the purchase of the securities of such issuer by the Fund or
Portfolio, one or more of such persons owns beneficially more than 1/2 of 1% of
the shares or securities, or both, all taken at market value, of such issuer,
and such persons owning more than 1/2 of 1% of such shares or securities
together own beneficially more than 5% of such shares or securities, or both,
all taken at market value,
(viii) write, purchase or sell any put or call option or any combination
thereof or enter into any futures contract, except that this restriction shall
not prevent the Fund or Portfolio from entering into transactions involving
futures contracts and non-U.S. currencies as described in the Prospectus and
this Statement of Additional Information,
(ix) make short sales of securities or maintain a short position in
securities, unless at all times when a short position is open it owns an equal
amount of such securities or securities convertible into or exchangeable,
without payment of any further consideration, for securities of the same issue
as, and equal in amount to, the securities sold short, and unless not more than
10% of the net assets of the Fund or Portfolio (taken at market value) is held
as collateral for such sales at any one time (the Funds and Portfolios do not
presently intend to make such short sales for investment purposes).
These policies are not fundamental and may be changed by each Fund or
Portfolio without the approval of its shareholders or holders of beneficial
interests in response to changes in the various state and federal requirements.
PERCENTAGE AND RATING RESTRICTIONS
If a percentage or rating restriction on investment or utilization of
assets set forth above or referred to in the Prospectus is adhered to at the
time an investment is made or assets are so utilized, a later change in
percentage resulting from changes in the value of the securities or a later
change in the rating of the securities held for a Fund will not be considered a
violation of policy.
3. PERFORMANCE INFORMATION
A total rate of return quotation for a Fund is calculated for any period by
(a) dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of shares
purchasable with dividends and capital gains distributions declared during such
period with respect to a share held at the beginning of such period and with
respect to shares purchased with such dividends and capital gains distributions,
by (ii) the public offering price per share on the first day of such period, and
(b) subtracting 1 from the result. Any annualized total rate of return quotation
is calculated by (x) adding 1 to the period total rate of return quotation
calculated above, (y) raising such sum to a power which is equal to 365 divided
by the number of days in such period, and (z) subtracting 1 from the result.
Total rates of return may also be calculated on investments at various sales
charge levels or at net asset value. Any performance data which is based on a
reduced sales charge or net asset value per share would be reduced if the
maximum sales charge were taken into account.
Any current yield quotation for a Fund consists of an annualized historical
yield, carried at least to the nearest hundredth of one percent, based on a 30
calendar day or one month period and is calculated by (a) raising to the sixth
power the sum of 1 plus the quotient obtained by dividing the Fund's net
investment income earned during the period by the product of the average daily
number of shares outstanding during the period that were entitled to receive
dividends and the maximum public offering price per share on the last day of the
period, (b) subtracting 1 from the result, and (c) multiplying the result by 2.
Set forth below is total rate of return information for the Class A shares
of the Balanced Fund and the Equity Fund for the periods indicated, assuming
that dividends and capital gains distributions, if any, were reinvested, and
that at the beginning of such periods the maximum sales charge of 4.75% had been
applicable to purchases of shares of the Fund.
BALANCED FUND
(CLASS A SHARES)
REDEEMABLE VALUE
ANNUALIZED OF A HYPOTHETICAL
TOTAL RATE of $1,000 INVESTMENT
PERIOD RETURN AT THE END OF THE PERIOD
October 19, 1990 9.89% $1,486.51
(commencement of
operations) to December
31, 1994
One Year Ended (6.71)% $932.80
December 31, 1994
EQUITY FUND
REDEEMABLE VALUE
ANNUALIZED OF A HYPOTHETICAL
TOTAL RATE OF $1,000 INVESTMENT
PERIOD RETURN AT THE END OF THE PERIOD
October 19, 1990 11.47% $1,578.10
(commencement of
operations) to December
31, 1994
One Year Ended (5.15)% $948.52
December 31, 1994
The annualized yields of the Class A shares of the Balanced Fund and the
Equity Fund for the 30-day period ended on December 31, 1994 were, respectively,
3.17% and 1.40%. The Small Cap Equity Fund is newly formed, and therefore does
not have any yields for 1994.
Comparative performance information may be used from time to time in
advertising shares of each Fund, including data from Lipper Analytical Services,
Inc. and other industry sources and publications. From time to time each Fund
may compare its performance against inflation with the performance of other
instruments against inflation, such as FDIC-insured bank money market accounts.
In addition, advertising for each Fund may indicate that investors should
consider diversifying their investment portfolios in order to seek protection of
the value of their assets against inflation. From time to time, advertising
materials for each Fund may refer to or discuss current or past economic or
financial conditions, developments and events. Each Fund's advertising materials
also may refer to the integration of the world's securities markets, discuss the
investment opportunities available worldwide and mention the increasing
importance of an investment strategy including non-U.S. investments.
4. DETERMINATION OF NET ASSET VALUE; VALUATION OF
SECURITIES; ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The net asset value of each share of each class of each Fund is determined
each day during which the New York Stock Exchange is open for trading ("Business
Day"). As of the date of this Statement of Additional Information, the New York
Stock Exchange is open for trading every weekday except for the following
holidays (or the days on which they are observed): New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. This determination is made once each day as of the close of
regular trading on the Exchange (currently 4:00 p.m. Eastern time) by adding the
market value of all securities and other assets attributable to a class of a
Fund (including its interest in its Portfolio), then subtracting the liabilities
charged to the class, and then dividing the result by the number of outstanding
shares of the class. Per share net asset value of each class of a Fund's shares
can be expected to differ because the Class B shares bear higher expenses than
Class A shares. The net asset value per share of each class of shares is
effective for orders received and accepted by the Distributor prior to its
calculation.
The value of each Portfolio's net assets (i.e., the value of its securities
and other assets less its liabilities, including expenses payable or accrued) is
determined at the same time and on the same days as the net asset value per
share of its corresponding Fund is determined. The net asset value of each
Fund's investment in the Portfolio in which it invests is equal to the Fund's
pro rata share of the net assets of the Portfolio.
For purposes of calculating net asset value per share, all assets and
liabilities initially expressed in non-U.S. currencies will be converted into
U.S. dollars at the prevailing market rates at the time of valuation. Equity
securities are valued at the last sale price on the exchange on which they are
primarily traded or on the NASDAQ system for unlisted national market issues, or
at the last 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 non-U.S. exchange are valued at the last quoted sale price available
before the time when net assets are valued. Bonds and other fixed income
securities (other than short-term obligations) are valued on the basis of
valuations furnished by a pricing service, use of which has been approved by the
Board of Trustees of each Trust. In making such valuations, the pricing service
utilizes both dealer-supplied valuations and electronic data processing
techniques that 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 exchange or over-the-counter prices, since such
valuations are believed to reflect more accurately the fair value of such
securities. Short-term obligations (maturing in 60 days or less) are valued at
amortized cost, which constitutes fair value as determined by the Board of
Trustees of each Trust. Futures contracts are normally valued at the settlement
price on the exchange on which they are traded. Securities for which there are
no such valuations are valued at fair value as determined in good faith by or at
the direction of the Board of Trustees of each Trust.
Trading in securities on most non-U.S. exchanges and over-the-counter
markets is normally completed before the close of regular trading on the New
York Stock Exchange and may also take place on days on which the New York Stock
Exchange is closed. If events materially affecting the value of non-U.S.
securities occur between the time when the exchange on which they are traded
closes and the time when a Fund's net asset value is calculated, such securities
will be valued at fair value in accordance with procedures established by and
under the general supervision of the Board of Trustees of each Trust.
Interest income on long-term obligations held for a Fund is determined on
the basis of interest accrued plus amortization of "original issue discount"
(generally, the difference between issue price and stated redemption price at
maturity) and premiums (generally, the excess of purchase price over stated
redemption price at maturity). Interest income on short-term obligations is
determined on the basis of interest accrued less amortization of any premium.
Subject to compliance with applicable regulations, the Trusts and the
Portfolio Trust have each reserved the right to pay the redemption price of
shares of the Fund or beneficial interests in the Portfolio, either totally or
partially, by a distribution in kind of readily marketable securities (instead
of cash). The securities so distributed would be valued at the same amount as
that assigned to them in calculating the net asset value for the shares or
beneficial interests being sold. If a holder of shares or beneficial interests
received a distribution in kind, such holder could incur brokerage or other
charges in converting the securities to cash.
Each Trust or the Portfolio Trust may suspend the right of redemption or
postpone the date of payment for shares of a Fund or beneficial interests in a
Portfolio more than seven days during any period when (a) trading in the markets
the Fund or Portfolio normally utilizes is restricted, or an emergency, as
defined by the rules and regulations of the SEC exists making disposal of a
Fund's or Portfolio's investments or determination of its net asset value not
reasonably practicable; (b) the New York Stock Exchange is closed (other than
customary weekend and holiday closings); or (c) the SEC has by order permitted
such suspension.
LETTER OF INTENT
If an investor anticipates purchasing $25,000 or more of Class A shares of
a Fund alone or in combination with Class B shares of the Fund or any of the
classes of other Landmark Funds within a 13-month period, the investor may
obtain such shares at the same reduced sales charge as though the total quantity
were invested in one lump sum by completing a Letter of Intent on the terms
described below. Subject to acceptance by the Distributor and the conditions
mentioned below, each purchase will be made at a public offering price
applicable to a single transaction of the dollar amount specified in the Letter
of Intent. The shareholder or his or her Shareholder Servicing Agent must inform
the Distributor that the Letter of Intent is in the effect each time shares are
purchased. The shareholder makes no commitment to purchase additional shares,
but if his or her purchases within 13 months plus the value of shares credited
toward completion of the Letter of Intent do not total the sum specified, an
increased sales charge will apply as described below. A purchase not originally
made pursuant to a Letter of Intent may be included under a subsequent Letter of
Intent executed within 90 days of such purchase if the Distributor is informed
in writing of this intent within such 90-day period. The value of shares of a
Fund presently held, at cost or maximum offering price (whichever is higher), on
the date of the first purchase under the Letter of Intent, may be included as a
credit toward the completion of such Letter, but the reduced sales charge
applicable to the amount covered by such Letter is applied only to new
purchases. Instructions for issuance of shares in the name of a person other
than the person signing the Letter of Intent must be accompanied by a written
statement from the Shareholder Servicing Agent stating that the shares were paid
for by the person signing such Letter. Neither income dividends nor capital gain
distributions taken in additional shares will apply toward the completion of the
Letter of Intent. The value of any shares redeemed or otherwise disposed of by
the purchaser prior to termination or completion of the Letter of Intent are
deducted from the total purchases made under such Letter of Intent.
If the investment specified in the Letter of Intent is not completed
(either prior to or by the end of the 13-month period), the Shareholder
Servicing Agent will redeem, within 20 days of the expiration of the Letter of
Intent, an appropriate number of the shares in order to realize the difference
between the reduced sales charge that would apply if the investment under the
Letter of Intent had been completed and the sales charge that would normally
apply to the number of shares actually purchased. By completing and signing the
Letter of Intent, the shareholder irrevocably appoints the Shareholder Servicing
Agent his or her attorney to surrender for redemption any or all shares
purchased under the Letter of Intent with full power of substitution in the
premises.
RIGHT OF ACCUMULATION
A shareholder qualifies for cumulative quantity discounts on the purchase
of Class A shares when his or her new investment, together with the current
offering price value of all holdings of that shareholder in the Landmark Funds,
reaches a discount level. See "Purchases" in the Prospectus for the sales
charges on quantity discounts. For example, if a Balanced Fund shareholder owns
shares valued at $25,000 and purchases an additional $25,000 of Class A shares
of a Fund, the sales charge for the $25,000 purchase would be at the rate of
4.00% (the rate applicable to single transactions of $50,000). A shareholder
must provide the Shareholder Servicing Agent with information to verify that the
quantity sales charge discount is applicable at the time the investment is made.
5. MANAGEMENT
The Trustees and officers of the Trusts and the Portfolio Trust and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate that those
Trustees and officers are "interested persons" (as defined in the 1940 Act) of
the Trusts or the Portfolio Trust. Unless otherwise indicated below, the address
of each Trustee and officer is 6 St. James Avenue, Boston, Massachusetts. The
address of the Portfolio Trust is Elizabethan Square, George Town, Grand Cayman,
British West Indies.
TRUSTEES OF THE TRUSTS
H.B. ALVORD -- Treasurer-Tax Collector, County of Los Angeles (retired,
March, 1984); Chairman, certain registered investment companies in the 59 Wall
Street funds group. His address is P.O. Box 1812, Pebble Beach, California.
PHILIP W. COOLIDGE* -- President of the Trusts and the Portfolio Trust;
Chief Executive Officer, Signature Financial Group, Inc. and The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).
RILEY C. GILLEY -- Vice President and General Counsel, Corporate Property
Investors (November, 1988 to December, 1991); Partner, Breed, Abbott & Morgan
(Attorneys) (retired, December, 1987). His address is 4041 Gulf Shore Boulevard
North, Naples, Florida.
DIANA R. HARRINGTON -- Professor, Babson College (since September, 1993);
Visiting Professor, Kellogg Graduate School of Management, Northwestern
University (September, 1992 to September, 1993); Professor, Darden Graduate
School of Business, University of Virginia (September, 1978 to September, 1993);
Consultant to PanAgora Asset Management (since 1994). Her address is 120
Goulding Street, Holliston, Massachusetts.
SUSAN B. KERLEY -- President, Global Research Associates, Inc. (Investment
Research) (since August, 1990); Manager, Rockefeller & Co. (March, 1988 to July,
1990); Trustee, Mainstay Institutional Funds (since December, 1990). Her address
is P.O. Box 9572, New Haven, Connecticut.
C. OSCAR MORONG, JR. -- Managing Director, Morong Capital Management (since
February, 1993); Senior Vice President and Investment Manager, CREF Investments,
Teachers Insurance & Annuity Association (retired January, 1993); Director,
Indonesia Fund; Director, MAS Funds. His address is 1385 Outlook Drive West,
Mountainside, New Jersey.
DONALD B. OTIS -- Director of Investor Relations, International Business
Machines Corporation (retired February, 1982). His address is 6300 Midnight Pass
Road, Sarasota, Florida.
E. KIRBY WARREN -- Professor of Management, Graduate School of Business,
Columbia University (since 1987); Samuel Bronfman Professor of Democratic
Business Enterprise (1978-1987). His address is Columbia University, Graduate
School of Business, 725 Uris Hall, New York, New York.
WILLIAM S. WOODS, JR. -- Vice President-Investments, Sun Company, Inc.
(retired, April, 1984). His address is 35 Colwick Road, Cherry Hill, New Jersey.
TRUSTEES OF THE PORTFOLIO TRUST
ELLIOTT J. BERV -- Chairman and Director, Catalyst, Inc. (Management
Consultants)(since June, 1992); President, Chief Operating Officer and Director,
Deven International, Inc. (International Consultants)(June, 1991 to June 1992);
President and Director, Elliott J. Berv & Associates (Management
Consultants)(since May, 1984). His address is 15 Stornoway Drive, Cumberland
Foreside, Maine.
PHILIP W. COOLIDGE* -- President of the Trusts and the Portfolio Trust;
Chief Executive Officer, Signature Financial Group, Inc. and The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).
MARK T. FINN -- President and Director, Delta Financial, Inc. (since June,
1983); Chairman of the Board and Chief Executive Officer, FX 500 Ltd. (Commodity
Trading Advisory Firm)(since April, 1990); Director, Vantage Consulting Group,
Inc. (since October, 1988). His address is 3500 Pacific Avenue, P.O. Box 539,
Virginia Beach, Virginia.
WALTER E. ROBB, III -- President, Benchmark Consulting Group, Inc. (since
1991); Principal, Robb Associates (corporate financial advisers) (since 1978);
President, Benchmark Advisors, Inc. (Corporate Financial Advisors)(since 1989);
Trustee of certain registered investment companies in the MFS Family of Funds.
His address is 35 Farm Road, Sherborn, Massachusetts.
OFFICERS OF THE TRUSTS AND THE PORTFOLIO TRUST
PHILIP W. COOLIDGE* -- President of the Trusts and the Portfolio Trust;
Chief Executive Officer, Signature Financial Group, Inc. and The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).
DAVID G. DANIELSON* -- Assistant Treasurer of the Trusts and the Portfolio
Trust; Assistant Manager, Signature Financial Group, Inc. (since May, 1991);
Graduate Student, Northeastern University (April, 1990 to March, 1991).
JOHN R. ELDER* -- Treasurer of the Trusts and the Portfolio Trust; Vice
President, Signature Financial Group, Inc. (since April, 1995); Treasurer of the
Phoenix Family of Mutual Funds, Phoenix Home Life Mutual Insurance Company (1983
to March, 1995).
LINDA T. GIBSON* -- Assistant Secretary of the Trusts and the Portfolio
Trust; Legal Counsel, Signature Financial Group, Inc. (since June, 1991); Law
Student, Boston University School of Law (September, 1989 to May, 1992); Product
Manager, Signature Financial Group, Inc. (January, 1989 to September, 1989).
SUSAN JAKUBOSKI* -- Vice President, Assistant Treasurer and Assistant
Secretary of the Portfolio Trust (since August, 1994); Manager, Signature
Financial Group (Cayman) Ltd. (since August, 1994); Senior Fund Administrator,
Signature Financial Group, Inc. (since August, 1994); Assistant Treasurer,
Signature Broker-Dealer Services, Inc. (since September, 1994); Fund Compliance
Administrator, Concord Financial Group (November, 1990 to August, 1994); Senior
Fund Accountant, Neuberger & Berman Management, Inc. (from February, 1988 to
November, 1990); Customer Service Representative, I.B.J. Schroder (prior to
1988). Her address is Elizabethan Square, George Town, Grand Cayman, Cayman
Islands, BWI.
JAMES S. LELKO, JR.* -- Assistant Treasurer of the Trusts and the Portfolio
Trust; Assistant Manager, Signature Financial Group, Inc. (since January, 1993);
Senior Tax Compliance Accountant, the Putnam Companies (September, 1988 to
December, 1992).
THOMAS M. LENZ* -- Secretary of the Trusts and the Portfolio Trust; Vice
President and Associate General Counsel, Signature Financial Group, Inc. (since
November, 1989); Assistant Secretary, Signature Broker-Dealer Services, Inc.
(since February, 1991); Attorney, Ropes & Gray (September, 1984 to November,
1989).
MOLLY S. MUGLER* -- Assistant Secretary of the Trusts and the Portfolio
Trust; Legal Counsel and Assistant Secretary, Signature Financial Group, Inc.
(since December, 1988); Assistant Secretary, The Landmark Funds Broker-Dealer
Services, Inc. (since December, 1988).
BARBARA M. O'DETTE* -- Assistant Treasurer of the Trusts and the Portfolio
Trust; Assistant Treasurer, Signature Financial Group, Inc. and The Landmark
Funds Broker-Dealer Services, Inc. (since December, 1988).
ANDRES E. SALDANA* -- Assistant Secretary of the Trusts and the Portfolio Trust;
Legal Counsel and Assistant Secretary, Signature Financial Group, Inc. (since
November, 1992); Attorney, Ropes & Gray (September, 1990 to November, 1992).
DANIEL E. SHEA* -- Assistant Treasurer of the Trusts and the Portfolio
Trust; Assistant Manager of Fund Administration, Signature Financial Group, Inc.
(since November, 1993); Supervisor and Senior Technical Advisor, Putnam
Investments (prior to 1990).
As of February 28, 1995, all Trustees and officers as a group owned less
than 1% of the outstanding shares of the Balanced Fund and the Equity Fund. As
of the same date, more than 95% of the outstanding shares of the Balanced Fund
and the Equity Fund were held of record by Citibank, N.A. or its affiliates as
Shareholder Servicing Agents of the Fund for the accounts of their respective
clients. As of the date of this Statement of Additional Information, there are
no shareholders of the Small Cap Equity Fund.
The Declaration of Trust of each of the Trusts and the Portfolio Trust
provides that each of the Trusts and the Portfolio Trust, respectively, will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Trusts or the Portfolio Trust, as the case may be, unless, as
to liability to the Trusts, the Portfolio Trust or their respective investors,
it is finally adjudicated that they engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in their offices,
or unless with respect to any other matter it is finally adjudicated that they
did not act in good faith in the reasonable belief that their actions were in
the best interests of the Trusts or the Portfolio Trust, as the case may be. In
the case of settlement, such indemnification will not be provided unless it has
been determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination, based upon a review of readily
available facts, by vote of a majority of disinterested Trustees of the Trusts
or the Portfolio Trust, or in a written opinion of independent counsel, that
such officers or Trustees have not engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of their duties.
ADVISER
Citibank manages the assets of each Portfolio pursuant to separate
investment advisory agreements (the "Advisory Agreements"). Subject to such
policies as the Board of Trustees of the Portfolio Trust may determine, the
Adviser manages the securities of each Portfolio and makes investment decisions
for each Portfolio. The Adviser furnishes at its own expense all services,
facilities and personnel necessary in connection with managing each Portfolio's
investments and effecting securities transactions for each Portfolio. Each of
the Advisory Agreements will continue in effect until August 19, 1996 and
thereafter as long as such continuance is specifically approved at least
annually by the Board of Trustees of the Portfolio Trust or by a vote of a
majority of the outstanding voting securities of the applicable Portfolio, and,
in either case, by a majority of the Trustees of the Portfolio Trust who are not
parties to the Advisory Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on the Advisory Agreement.
Each of the Advisory Agreements provides that the Adviser may render
services to others. Each Advisory Agreement is terminable without penalty on not
more than 60 days' nor less than 30 days' written notice by the Portfolio Trust
when authorized either by a vote of a majority of the outstanding voting
securities of the applicable Portfolio or by a vote of a majority of the Board
of Trustees of the Portfolio Trust, or by the Adviser on not more than 60 days'
nor less than 30 days' written notice, and will automatically terminate in the
event of its assignment. Each Advisory Agreement provides that neither the
Adviser nor its personnel shall be liable for any error of judgment or mistake
of law or for any loss arising out of any investment or for any act or omission
in the execution of security transactions for the applicable Portfolio, except
for willful misfeasance, bad faith or gross negligence or reckless disregard of
its or their obligations and duties under the Advisory Agreement.
The Prospectus contains a description of the fees payable to the Adviser
for services under the Advisory Agreements. For the fiscal years ended December
31, 1992 and December 31, 1993 and for the four months ended April 30, 1994, the
fees paid to Citibank under a prior investment advisory agreement between the
Balanced Fund and Citibank were $53,821, $575,229 and $340,160, respectively.
For the period from May 1, 1994 to December 31, 1994 the fee paid to Citibank
under the Advisory Agreement with respect to the Balanced Portfolio was
$640,795.
For the fiscal years ended December 31, 1992 and December 31, 1993 and for
the four months ended April 30, 1994, the fees paid or payable to Citibank under
a prior investment advisory agreement between the Equity Fund and Citibank were
$50,399, $532,148 (of which amount $100,942 was voluntarily waived) and $326,242
(of which $62,569 was voluntarily waived), respectively. For the period from May
1, 1994 to December 31, 1994 the fee paid to Citibank under the Advisory
Agreement with respect to the Equity Portfolio was $639,933.
ADMINISTRATOR
Pursuant to administrative services agreements (the "Administrative
Services Agreements"), LFBDS and SFG provide the Trusts and the Portfolio Trust,
respectively, with general office facilities and LFBDS and SFG supervise the
overall administration of the Trusts or the Portfolio Trust, including, among
other responsibilities, the negotiation of contracts and fees with, and the
monitoring of performance and billings of, each Trust's or the Portfolio Trust's
independent contractors and agents; the preparation and filing of all documents
required for compliance by the Trusts or the Portfolio Trust with applicable
laws and regulations; and arranging for the maintenance of books and records of
the Trusts or the Portfolio Trust. The Administrator and the Portfolio
Administrator provide persons satisfactory to the Board of Trustees of the
Trusts or the Portfolio Trust to serve as Trustees and officers of the Trusts
and the Portfolio Trust, respectively. Such Trustees and officers, as well as
certain other employees and Trustees of the Trusts and the Portfolio Trust, may
be directors, officers or employees of LFBDS, SFG or their affiliates.
The Prospectus contains a description of the fees payable to the
Administrator and the Portfolio Administrator under the Administrative Services
Agreements. For the fiscal years ended December 31, 1992, December 31, 1993 and
December 31, 1994, the fees paid by the Balanced Fund to LFBDS under the
Administrative Services Agreement and a prior administrative services agreement
with respect to the Balanced Fund were $10,080, $212,727 and $409,258,
respectively. For the fiscal years ended December 31, 1992, December 31, 1993
and December 31, 1994, the fees paid by the Equity Fund to LFBDS under the
Administrative Services Agreement and a prior administrative services agreement
with respect to the Equity Fund were $13,455, $287,615 and $320,872 (of which
$126,917 was voluntarily waived), respectively. For the period from May 1, 1994
through December 31, 1994, the Portfolio Trust paid the Portfolio Administrator
$80,099 and $63,999 under the Administrative Services Agreement with respect to
the Balanced Portfolio and the Equity Portfolio, respectively.
The Administrative Services Agreement with each Trust acknowledges that the
names "Landmark" and "Landmark Funds" are the property of the Administrator and
provides that if LFBDS ceases to serve as the Administrator of each Trust, the
Trust would change its name and the name of the Fund so as to delete the word
"Landmark" or the words "Landmark Funds". The Administrative Services Agreements
with the Trusts also provide that LFBDS may render administrative services to
others and may permit other investment companies to use the word "Landmark" or
the words "Landmark Funds" in their names.
The Administrative Services Agreement with each Trust continues in effect
with respect to each Fund if such continuance is specifically approved at least
annually by the Board of Trustees of each Trust or by a vote of a majority of
the outstanding voting securities of each Trust and, in either case, by a
majority of the Trustees who are not parties to the Administrative Services
Agreement or interested persons of any such party. The Administrative Services
Agreement with each Trust terminates automatically if it is assigned and may be
terminated without penalty by vote of a majority of the outstanding voting
securities of each Trust or by either party on not more than 60 days' nor less
than 30 days' written notice. The Administrative Services Agreement with each
Trust also provides that neither LFBDS, as the Administrator, nor its personnel
shall be liable for any error of judgment or mistake of law or for any act or
omission in the administration or management of the Trust, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties or by reason of reckless disregard of its or their obligations and duties
under the Trust's Administrative Services Agreement.
The Administrative Services Agreement with the Portfolio Trust provides
that SFG may render administrative services to others. The Administrative
Services Agreement with the Portfolio Trust terminates automatically if it is
assigned and may be terminated without penalty by a vote of a majority of the
outstanding voting securities of the Portfolio Trust or by either party on not
more than 60 days' nor less than 30 days' written notice. The Administrative
Services Agreement with the Portfolio Trust also provides that neither SFG, as
the Portfolio Administrator, nor its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the administration or
management of the Portfolio Trust, except for willful misfeasance, bad faith or
gross negligence in the performance of its or their duties or by reason of
reckless disregard of its or their obligations and duties under the Portfolio
Trust's Administrative Services Agreement.
LFBDS and SFG are wholly-owned subsidiaries of Signature Financial Group,
Inc. SFG is a company organized under the laws of the Cayman Islands. Its
principal place of business is in George Town, Grand Cayman, British West
Indies.
Pursuant to a sub-administrative services agreement, Citibank performs such
sub-administrative duties for each Trust and the Portfolio Trust as from time to
time are agreed upon by Citibank and, respectively, LFBDS or SFG. Citibank's
sub-administrative duties may include providing equipment and clerical personnel
necessary for maintaining each Trust's and the Portfolio Trust's organization,
participation in the preparation of documents required for compliance by each
Trust and the Portfolio Trust with applicable laws and regulations, the
preparation of certain documents in connection with meetings of Trustees and
shareholders, and other functions which would otherwise be performed by the
Administrator. For performing such sub-administrative services, Citibank
receives compensation as from time to time is agreed upon by LFBDS or SFG, not
in excess of the amount paid to LFBDS or SFG for its services under the
Administrative Services Agreements with the Trusts and the Portfolio Trust. All
such compensation is paid by LFBDS or SFG.
DISTRIBUTOR
LFBDS serves as the Distributor of each Fund's shares pursuant to
Distribution Agreements with each Trust with respect to each class of shares of
each Fund. Unless otherwise terminated, each Distribution Agreement remains in
effect until August 19, 1996, and thereafter will continue from year to year
upon annual approval by each Trust's Board of Trustees, or by the vote of a
majority of the outstanding voting securities of each Trust and by the vote of a
majority of the Board of Trustees of each Trust who are not parties to the
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. Each Agreement will terminate
in the event of its assignment, as defined in the 1940 Act.
Each Trust has adopted a Distribution Plan (the "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act with respect to each class of
shares of the Funds constituting series of the Trust after concluding that there
is a reasonable likelihood that the Distribution Plans will benefit each such
Fund and its shareholders. Each Distribution Plan with respect to Class A shares
provides that each Fund shall pay a distribution fee to the Distributor at an
annual rate not to exceed 0.15% of each Fund's average daily net assets
represented by the Class A shares. Each Distribution Plan with respect to Class
B shares provides that each Fund will pay the Distributor a distribution fee at
annual rate not to exceed 0.75% of the average daily net assets represented by
the Class B shares. The Distributor receives the distribution fees for its
services under the Distribution Agreements in connection with the distribution
of each Fund's shares of each class (exclusive of any advertising expenses
incurred by the Distributor in connection with the sale of Class A shares of
each Fund). The Distributor may use all or any portion of such distribution fee
to pay for expenses of printing prospectuses and reports used for sales
purposes, expenses of the preparation and printing of sales literature,
commissions to dealers who sell shares of the applicable class of the Fund and
other such distribution-related expenses.
Each Fund is also permitted to pay the Distributor a service fee with
respect to the Class A shares at an annual rate not to exceed 0.25% of each
Fund's average daily net assets represented by the Class A shares and an
additional service fee with respect to the Class B shares at an annual rate not
to exceed 0.25% of each Fund's average daily net assets represented by the Class
B shares.
Each Distribution Plan with respect to the Class A Shares also permits the
Fund to pay the Distributor an additional fee (not to exceed 0.05% of the
average daily net assets of the Class A shares) in anticipation of or as
reimbursement for print or electronic media advertising expenses incurred in
connection with the sale of Class A shares.
The Distribution Plans continue in effect if such continuance is
specifically approved at least annually by a vote of both a majority of each
Trust's Trustees and a majority of the Trustees who are not "interested persons"
of each Trust and who have no direct or indirect financial interest in the
operation of the Distribution Plans or in any agreement related to the Plans
(for purposes of this paragraph "Qualified Trustees"). Each Distribution Plan
requires that the respective Trust and the Distributor provide to the Board of
Trustees, and the Board of Trustees review, at least quarterly, a written report
of the amounts expended (and the purposes therefor) under the Distribution Plan.
Each Distribution Plan further provides that the selection and nomination of the
Qualified Trustees is committed to the discretion of the disinterested Trustees
(as defined in the 1940 Act) then in office. The Distribution Plans may be
terminated with respect to any class of shares of any Fund at any time by a vote
of a majority of the respective Trust's Qualified Trustees or by a vote of a
majority of the outstanding voting securities of that class of shares of the
Fund. The Distribution Plan applicable to a class of shares of any Fund may not
be amended to increase materially the amount of a Fund's permitted expenses
thereunder without the approval of a majority of the outstanding securities of
that class of shares of that Fund and may not be materially amended in any case
without a vote of a majority of both the Trustees and Qualified Trustees. The
Distributor will preserve copies of any plan, agreement or report made pursuant
to each Distribution Plan for a period of not less than six years from the date
of the Plan, and for the first two years the Distributor will preserve such
copies in an easily accessible place.
As contemplated by the Distribution Plans, LFBDS acts as the agent of each
Trust in connection with the offering of shares of the Funds pursuant to the
Distribution Agreements. After the prospectuses and periodic reports of the
Funds have been prepared, set in type and mailed to existing shareholders, the
Distributor pays for the printing and distribution of copies thereof which are
used in connection with the offering of shares of the Funds to prospective
investors. The Prospectus contains a description of fees payable to the
Distributor under the Distribution Agreement. For the fiscal years ended
December 31, 1992, December 31, 1993 and December 31, 1994 the fees paid to
LFBDS under the Distribution Agreement with respect to the Balanced Fund were
$20,183, $71,904 and $122,246, respectively, no portion of which was applicable
to reimbursement for expenses incurred in connection with print or electronic
media advertising. For the fiscal years ended December 31, 1992, December 31,
1993 and December 31, 1994, the fees paid to LFBDS under the Distribution
Agreement with respect to the Equity Fund were $15,120, $53,215 and $96,083,
respectively, no portion of which was applicable to reimbursement for expenses
incurred in connection with print or electronic media advertising.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
Each Trust has adopted an administrative services plan (the "Administrative
Services Plan") after having concluded that there is a reasonable likelihood
that the Administrative Services Plan will benefit the Funds and their
shareholders. The Administrative Services Plans provide that each Trust may
obtain the services of an administrator, a transfer agent, a custodian and one
or more Shareholder Servicing Agents, and may enter into agreements providing
for the payment of fees for such services. Under each Trust's Administrative
Services Plan, the total of the fees paid from a Fund to the Trust's
Administrator and Shareholder Servicing Agents 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. Any distribution fees or service fees (other than any
fee concerning electronic or other media advertising) payable under the
Distribution Plans for the Class A shares of the Balanced and Equity Funds are
included in this percentage limitation for those shares. This limitation with
respect to the Class A shares of the Small Cap Equity Fund and for the Class B
shares of each Fund, does not include any amounts payable under the Distribution
Plans for such shares. Each Administrative Services Plan continues in effect if
such continuance is specifically approved at least annually by a vote of both a
majority of the Trustees and a majority of the Trustees who are not "interested
persons" of the respective Trust and who have no direct or indirect financial
interest in the operation of the Administrative Services Plan or in any
agreement related to such Plan (for purposes of this paragraph "Qualified
Trustees"). Each Administrative Services Plan requires that the respective Trust
provide to its Board of Trustees and the Board of Trustees review, at least
quarterly, a written report of the amounts expended (and the purposes therefor)
under the Administrative Services Plan. Each Administrative Services Plan may be
terminated at any time by a vote of a majority of the Qualified Trustees of the
respective Trust or as to each Fund by a vote of a majority of the outstanding
voting securities of the Fund. Each Administrative Services Plan may not be
materially amended in any case without a vote of the majority of both the
Trustees and the Qualified Trustees.
Each Trust has entered into a shareholder servicing agreement (a "Servicing
Agreement") with each Shareholder Servicing Agent and a Transfer Agency and
Service Agreement with State Street Bank and Trust Company ("State Street")
pursuant to which State Street (or its affiliate State Street Canada, Inc.) acts
as transfer agent for each Fund. Each Trust has entered into a Custodian
Agreement with Investors Bank & Trust Company ("IBT") and a Fund Accounting
Agreement with Signature Financial Services, Inc. ("SFSI") pursuant to which
custodial and fund accounting services, respectively, are provided for each
Fund. See "Shareholder Servicing Agents" and "Transfer Agent, Custodian and Fund
Accountant" in the Prospectus for additional information, including a
description of fees paid to the Shareholder Servicing Agents under the Servicing
Agreements. For the fiscal years ended December 31, 1993 and December 31, 1994,
the aggregate fees payable to Shareholder Servicing Agents under the
Administrative Services Plan with respect to the Balanced Fund were $575,229 (of
which $215,711 was voluntarily waived) and $977,967 (of which $366,738 was
voluntarily waived), respectively. For the fiscal years ended December 31, 1993
and December 31, 1994, the aggregate fees payable to Shareholder Servicing
Agents under the Administrative Services Plan with respect to the Equity Fund
were $425,718 (of which $159,645 was voluntarily waived) and $768,306 (of which
$287,894 was voluntarily waived), respectively.
The Portfolio Trust has also adopted an administrative services plan (the
"Portfolio Administrative Plan"), which provides that the Portfolio Trust may
obtain the services of an administrator, a transfer agent and a custodian and
may enter into agreements providing for the payment of fees for such services.
Under the Portfolio Administrative Plan, the administrative services fee payable
to the Portfolio Administrator from a Portfolio may not exceed 0.05% of the
Portfolio's average daily net assets on an annualized basis for its then-current
fiscal year.
The Portfolio Administrative Plan continues in effect if such continuance
is specifically approved at least annually by a vote of both a majority of the
Portfolio Trust's Trustees and a majority of the Portfolio Trust's Trustees who
are not "interested persons" of the Portfolio and who have no direct or indirect
financial interest in the operation of the Portfolio Administrative Plan or in
any agreement related to such Plan (for purposes of this paragraph "Qualified
Trustees"). The Portfolio Administrative Plan requires that the Portfolio Trust
provide to the Board of Trustees and the Board of Trustees review, at least
quarterly, a written report of the amounts expended (and the purposes therefor)
under the Portfolio Administrative Plan. The Portfolio Administrative Plan may
not be amended to increase materially the amount of permitted expenses
thereunder without the approval of a majority of the outstanding voting
securities of the Portfolio Trust and may not be materially amended in any case
without a vote of the majority of both the Portfolio Trust's Trustees and the
Portfolio Trust's Qualified Trustees.
The Portfolio Trust, on behalf of the Portfolios, has entered into
Custodian Agreements with IBT pursuant to which IBT acts as custodian for each
Portfolio. The Portfolio Trust, on behalf of the Portfolios, has entered into
Fund Accounting Agreements with SFSI pursuant to which SFSI provides fund
accounting services for each Portfolio. Pursuant to separate Transfer Agency and
Service Agreements with the Portfolio Trust, on behalf of the Portfolios, SFSI
provides transfer agency services to each Portfolio. See "Shareholder Servicing
Agents" and "Transfer Agent, Custodian and Fund Accountant" in the Prospectus
for additional information.
The principal business address of IBT is One Lincoln Plaza, Boston,
Massachusetts 02111. The principal business address of SFSI is 6 St. James
Avenue, Boston, Massachusetts 02116.
AUDITORS
Price Waterhouse LLP are the independent certified public accountants for
the Trusts, providing audit services and assistance and consultation with
respect to the preparation of filings with the SEC. The address of Price
Waterhouse LLP is 160 Federal Street, Boston, Massachusetts 02110. Price
Waterhouse are the chartered accountants for the Portfolio Trust. The address of
Price Waterhouse is Suite 3000, 1 First Canadian Place, Toronto, Ontario M5X
1H7, Canada.
6. PORTFOLIO TRANSACTIONS
Each Trust trades securities for a Fund if it believes that a transaction
net of costs (including custodian charges) will help achieve the Fund's
investment objectives. Changes in the Fund's investments are made without regard
to the length of time a security has been held, or whether a sale would result
in the recognition of a profit or loss. Therefore, the rate of turnover is not a
limiting factor when changes are appropriate. The turnover rate for the common
stock portion of the Balanced Fund is expected to be approximately 100%
annually. The turnover rate for the Equity Fund is not expected to exceed 100%
annually. The turnover rate for the Small Cap Equity Fund is not expected to
exceed 200% annually. Specific decisions to purchase or sell securities for each
Fund are made by a portfolio manager who is an employee of the Adviser and who
is appointed and supervised by its senior officers. The portfolio manager may
serve other clients of the Adviser in a similar capacity.
The primary consideration in placing portfolio securities transactions with
broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of each Fund and other clients
of the Adviser on the basis of their professional capability, the value and
quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Adviser normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time, soliciting dealer fees are available to the Adviser on the tender of a
Fund's securities in so-called tender or exchange offers. Such soliciting dealer
fees are in effect recaptured for the Fund by the Adviser. At present no other
recapture arrangements are in effect.
Under the Advisory Agreements, in connection with the selection of such
brokers or dealers and the placing of such orders, the Adviser is directed to
seek for each Fund in its best judgment, prompt execution in an effective manner
at the most favorable price. Subject to this requirement of seeking the most
favorable price, securities may be bought from or sold to broker-dealers who
have furnished statistical, research and other information or services to the
Adviser or the Funds, subject to any applicable laws, rules and regulations.
The investment advisory fee that each Fund pays to the Adviser will not be
reduced as a consequence of the Adviser's receipt of brokerage and research
services. While such services are not expected to reduce the expenses of the
Adviser, the Adviser would, through the use of the services, avoid the
additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff.
In certain instances there may be securities that are suitable as an
investment for a Fund as well as for one or more of the Adviser's other clients.
Investment decisions for each Fund and for the Adviser's other clients are made
with a view to achieving their respective investment objectives. It may develop
that a particular security is bought or sold for only one client even though it
might be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling the same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could adversely affect the price of or the size of the
position obtainable in a security for a Fund. When purchases or sales of the
same security for a Fund and for other portfolios managed by the Adviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large volume purchases or sales.
For the fiscal years ended December 31, 1992 and December 31, 1993, the
Balanced Fund paid brokerage commissions in the amounts of $24,930 and $97,999,
respectively; for the period January 1, 1994 to April 30, 1994, the Balanced
Fund paid brokerage commissions of $8,940 and for the period May 1, 1994 to
December 31, 1994, the Balanced Portfolio paid brokerage Commissions of
$280,300. For the fiscal years ended December 31, 1992 and December 31, 1993,
the Equity Fund paid brokerage commissions in the amounts of $28,867 and
$124,360, respectively; for the period January 1, 1994 to April 30, 1994, the
Equity Fund paid brokerage commissions of $9,780 and for the period May 1, 1994
to December 31, 1994, the Equity Portfolio paid brokerage Commissions of
$342,356.
7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Each Trust's Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional Shares of Beneficial Interest (without
par value) of each series and to divide or combine the shares of any series into
a greater or lesser number of shares of that series without thereby changing the
proportionate beneficial interests in that series. While there are at present no
series of Trust I other than the Balanced Fund, and one series of Trust II other
than the Equity and Small Cap Equity Funds, each Trust has reserved the right to
create and issue additional series and classes of shares. Each share of each
class of each Fund represents an equal proportionate interest in the Fund with
each other share of that class. Shares of each series participate equally in the
earnings, dividends and distribution of net assets of the particular series upon
liquidation or dissolution (except for any differences among classes of shares
in a series). Shares of each series are entitled to vote separately to approve
advisory agreements or changes in investment policy, but shares of all series
may vote together in the election or selection of Trustees and accountants for
the Trusts. In matters affecting only a particular Fund or class, only shares of
that particular Fund or class are entitled to vote.
Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. Shareholders in each Trust do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of each Trust may elect all of the Trustees of the Trust if
they choose to do so and in such event the other shareholders in the Trust would
not be able to elect any Trustee. Each Trust is not required to hold, and has no
present intention of holding, annual meetings of shareholders but each Trust
will hold special meetings of shareholders when in the judgment of the Trustees
it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have, under certain circumstances (e.g., upon the application and
submission of certain specified documents to the Trustees by a specified number
of shareholders), the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Trustees. Shareholders also have under certain circumstances the right to
remove one or more Trustees without a meeting by a declaration in writing by a
specified number of shareholders. No material amendment may be made to each
Trust's Declaration of Trust without the affirmative vote of the holders of a
majority of the outstanding shares of each series affected by the amendment.
(See "Investment Objectives, Policies and Restrictions--Investment
Restrictions".) At any meeting of shareholders of any Fund, a Shareholder
Servicing Agent may vote any shares of which it is the holder of record and for
which it does not receive voting instructions proportionately in accordance with
the instructions it received for all other shares of which that Shareholder
Servicing Agent is the holder of record. Shares have no preference, pre-emptive,
conversion or similar rights. Shares, when issued, are fully paid and
non-assessable, except as set forth below.
Each Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets (or all or substantially all of the assets
belonging to any series of the Trust), if approved by a vote of the holders of
two-thirds of the Trust's outstanding shares, voting as a single class, or of
the affected series of the Trust, as the case may be, except that if the
Trustees of each Trust recommend such sale of assets, merger or consolidation,
the approval by vote of the holders of a majority of the Trust's outstanding
shares would be sufficient. Each Trust or any series of each Trust, as the case
may be, may be terminated (i) by a vote of a majority of the outstanding voting
securities of the Trust or the affected series or (ii) by the Trustees by
written notice to the shareholders of the Trust or the affected series. If not
so terminated, each Trust will continue indefinitely.
Share certificates will not be issued.
Each Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust of each Trust
contains an express disclaimer of shareholder liability for acts or obligations
of the Trust and provides for indemnification and reimbursement of expenses out
of Trust property for any shareholder held personally liable for the obligations
of the Trust. The Declaration of Trust of each Trust also provides that the
Trust may maintain appropriate insurance (e.g., fidelity bonding and errors and
omissions insurance) for the protection of the Trust, its shareholders,
Trustees, officers, employees and agents covering possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
Each Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the property
of the Trust and that the Trustees will not be liable for any action or failure
to act, but nothing in the Declaration of Trust of each Trust protects a Trustee
against any liability to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.
By virtue of the combined Prospectus for the Funds, a Fund organized as a
series of one of the Trusts might share in liabilities, if any, arising under
federal and state securities laws with respect to disclosure in the Prospectus
concerning another Fund organized as a series of the other Trust.
The Portfolios are series of the Portfolio Trust, organized as a trust
under the laws of the State of New York. The Portfolio Trust's Declaration of
Trust provides that investors in the Portfolios (e.g., other investment
companies (including the corresponding Funds), insurance company separate
accounts and common and commingled trust funds) are each liable for all
obligations of the Portfolios. However, the risk of any Fund that invests
through a Portfolio incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance existed and the
applicable Portfolio itself was unable to meet its obligations. It is not
expected that the liabilities of any Portfolio would ever exceed its assets.
Each investor in a Portfolio, including the corresponding Fund, may add to
or withdraw from its investment in the applicable Portfolio on each Business
Day. As of the close of regular trading on each Business Day, the value of each
investor's beneficial interest in each Portfolio is determined by multiplying
the net asset value of the Portfolio by the percentage, effective for that day,
that represents that investor's share of the aggregate beneficial interests in
the Portfolio. Any additions or withdrawals that are to be effected on that day
are then effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio is then re-computed as the percentage equal to the
fraction (i) the numerator of which is the value of such investor's investment
in the Portfolio as of the close of regular trading on such day plus or minus,
as the case may be, the amount of any additions to or withdrawals from the
investor's investment in the Portfolio effected on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
close of regular trading on such day plus or minus, as the case may be, the
amount of the net additions to or withdrawals from the aggregate investments in
the Portfolio by all investors in the Portfolio. The percentage so determined is
then applied to determine the value of the investor's interest in the Portfolio
as of the close of regular trading on the next following Business Day.
8. CERTAIN ADDITIONAL TAX MATTERS
Each Fund has elected to be treated, and intends to qualify each year, as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition and holding period
of the Fund's portfolio assets. Provided all such requirements are met, no U.S.
federal income or excise taxes generally will be required to be paid by the
Funds, although non-U.S. source income earned by each Fund may be subject to
non-U.S. withholding taxes. If a Fund should fail to qualify as a "regulated
investment company" for any year, the Fund would incur a regular corporate
federal income tax upon its taxable income and Fund distributions would
generally be taxable as ordinary income to shareholders. The Portfolio Trust
believes the Portfolios also will not be required to pay any U.S. federal income
or excise taxes on their income.
The portion of each Fund's ordinary income dividends attributable to
dividends received in respect of equity securities of U.S. issuers is normally
eligible for the dividends received deduction for corporations subject to U.S.
federal income taxes. Availability of the deduction for particular shareholders
is subject to certain limitations, and deducted amounts may be subject to the
alternative minimum tax and result in certain basis adjustments. Any Fund
dividend that is declared in October, November or December of any calendar year,
that is payable to shareholders of record in such a month, and that is paid the
following January will be treated as if received by the shareholders on December
31 of the year in which the dividend is declared.
In general, any gain or loss realized upon a taxable disposition of shares
of a Fund by a shareholder that holds such shares as a capital asset will be
treated as a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise as a short-term capital gain or loss.
However, any loss realized upon a disposition of shares in a Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon a disposition of shares may also be disallowed under rules
relating to wash sales. Gain may be increased (or loss reduced) upon a
redemption of shares of a Fund within 90 days after their purchase followed by
any purchase (including purchases by exchange or by reinvestment) of shares of
that Fund or of another Landmark Fund without payment of any additional sales
charge.
Each Fund's transactions in forward contracts will be subject to special
tax rules that may affect the amount, timing and character of Fund income and
distributions to shareholders. For example, certain positions held by each Fund
on the last business day of each taxable year will be marked to market (i.e.,
treated as if closed out) on that day, and any gain or loss associated with the
positions will be treated as 60% long-term and 40% short-term capital gain or
loss. Certain positions held by a Fund that substantially diminish its risk of
loss with respect to other positions in its portfolio may constitute
"straddles," and may be subject to special tax rules that would cause deferral
of Fund losses, adjustments in the holding periods of Fund securities, and
conversion of short-term into long-term capital losses. Certain tax elections
exist for straddles that may alter the effects of these rules. Each Fund will
limit its activities in forward contracts to the extent necessary to meet the
requirements of Subchapter M of the Code.
Any Fund distribution will have the effect of reducing the per share net
asset value of shares in the Fund by the amount of the distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
Special tax considerations apply with respect to non-U.S. investments of
the Funds. Use of non-U.S. currencies for non-hedging purposes may be limited in
order to avoid a tax on the Funds. Investment by a Fund in certain "passive
foreign investment companies" may also be limited in order to avoid a tax on the
Fund. Investment income received by a Fund from non-U.S. securities may be
subject to non-U.S. income taxes withheld at the source. The United States has
entered into tax treaties with many other countries that may entitle a Fund to a
reduced rate of tax or an exemption from tax on such income. The Funds intend to
qualify for treaty reduced rates where available. It is not possible, however,
to determine the Funds' effective rate of non-U.S. tax in advance since the
amount of the Funds' respective assets to be invested within various countries
is not known. Shareholders will not be able to claim any deduction or credit for
any part of the foreign taxes paid by the Funds.
9. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Price Waterhouse LLP are the independent certified public accountants for
the Funds, providing audit services and assistance and consultation with respect
to the preparation of filings with the Securities and Exchange Commission. Price
Waterhouse are the chartered accountants for the Portfolio Trust. Deloitte &
Touche LLP were the independent certified public accountants for the Balanced
Fund and the Equity Fund through December 31, 1993. The selection of Price
Waterhouse LLP was based on management's decision with respect to certain areas
of expertise and service capabilities. There was no disagreement between the
Funds and Deloitte & Touche LLP with respect to the accounting and audit
services provided by such firm.
The audited financial statements of the Balanced Fund and the Equity Fund
(Statement of Assets and Liabilities at December 31, 1994, Statement of
Operations for the year ended December 31, 1994, Statement of Changes in Net
Assets for each of the years in the two-year period ended December 31, 1994,
Financial Highlights for each of the years in the four year period ended
December 31, 1994 and for the period October 19, 1990 to December 31, 1990,
Notes to Financial Statements and Independent Auditors' Report), each of which
is included in the respective Annual Reports to Shareholders of the Balanced
Fund and the Equity Fund, are incorporated by reference into this Statement of
Additional Information and have been so incorporated in reliance upon the
reports of Price Waterhouse LLP (for the fiscal year ended December 31, 1994)
and Deloitte & Touche LLP (for periods prior to the fiscal year ended December
31, 1994), independent certified public accountants, on behalf of the Balanced
Fund and the Equity Fund.
The audited financial statements of the Balanced Portfolio and the Equity
Portfolio (Portfolio of Investments at December 31, 1994, Statement of Assets
and Liabilities at December 31, 1994, Statement of Operations for the period May
1, 1994 (commencement of operations) to December 31, 1994, Statement of Changes
in Net Assets for the period May 1, 1994 (commencement of operations) to
December 31, 1994, Financial Highlights for the period May 1, 1994 (commencement
of operations) to December 31, 1994, Notes to Financial Statements and
Independent Auditors' Report), each of which is included in the Annual Reports
to Shareholders of the Balanced Fund and the Equity Fund, are incorporated by
reference into this Statement of Additional Information and have been so
incorporated in reliance upon the reports of Price Waterhouse, chartered
accountants, on behalf of the Balanced Portfolio and the Equity Portfolio.
Copies of the Annual Reports for the Balanced Fund and the Equity Fund
accompany this Statement of Additional Information.
<PAGE>
SHAREHOLDER SERVICING AGENTS
FOR CITIBANK NEW YORK RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CUSTOMERS:
Citibank, N.A.
450 West 33rd Street, New York, NY 10001
(212) 564-3456 or (800) 846-5300
FOR CITIGOLD CUSTOMERS:
Citigold
666 Fifth Avenue, New York, NY 10150-5130
Call Your Account Officer or (212) 974-0900 or (800) 285-1701
FOR PRIVATE BANKING CLIENTS:
Citibank, N.A.
The Citibank Private Bank
153 East 53rd Street, New York, NY 10043
Call Your Citibank Private Banking Account Officer,
Investment Specialist or (212) 559-5959
FOR CITIBANK GLOBAL ASSET MANAGEMENT CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY 10043
(212) 559-7117
FOR NORTH AMERICAN INVESTOR SERVICES CLIENTS:
Citibank, N.A.
111 Wall Street, New York, NY 10043
Call Your Account Manager or (212) 657-9100
FOR CITICORP INVESTMENT SERVICES CUSTOMERS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200,
(212) 736-8170 in New York City
<PAGE>
LANDMARK BALANCED FUND
LANDMARK EQUITY FUND
LANDMARK SMALL CAP EQUITY FUND
TRUSTEES AND OFFICERS
Philip W. Coolidge
President*
H.B. Alvord
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
C. Oscar Morong, Jr.
Donald B. Otis
E. Kirby Warren
William S. Woods, Jr.
SECRETARY AND TREASURER
Thomas M. Lenz*
*Affiliated Person of Administrator and Distributor
- ----------------------------------------------------------------------------
INVESTMENT ADVISER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND DISTRIBUTOR
The Landmark Funds Broker-Dealer Services, Inc.
6 St. James Avenue, Boston, MA 02116
(617) 423-1679
TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
CUSTODIAN
Investors Bank & Trust Company
One Lincoln Plaza, Boston, MA 02111
AUDITORS
Price Waterhouse LLP
160 Federal Street, Boston, MA 02110
LEGAL COUNSEL
Bingham, Dana & Gould
150 Federal Street, Boston, MA 02110
