As filed with the Securities and Exchange Commission on July 3, 1996
File Nos. 2-90518
811-4006
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 19
AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 20
LANDMARK FUNDS I *
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 617-423-1679
PHILIP W. COOLIDGE, 6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
ROGER P. JOSEPH, BINGHAM, DANA & GOULD LLP, 150 FEDERAL STREET,
BOSTON, MASSACHUSETTS 02110
It is proposed that this filing will become effective on August 5, 1996
pursuant to paragraph (b) of Rule 485.
Asset Allocation Portfolios has also executed this Registration
Statement.
Pursuant to Rule 24f-2, Registrant has registered an indefinite number of
its Shares of Beneficial Interest (without par value) under the Securities Act
of 1933 and filed a Rule 24f-2 Notice on February 28, 1996 for Registrant's
fiscal year ended December 31, 1995.
- -------------------------------------------------------------------------------
*This filing relates only to shares of CitiSelectSM Folio 200, CitiSelectSM
Folio 300, CitiSelectSM Folio 400 and CitiSelectSM Folio 500.
<PAGE>
LANDMARK FUNDS I
(CITISELECTSM FOLIO 200, CITISELECTSM FOLIO 300, CITISELECTSM FOLIO 400
AND CITISELECTSM FOLIO 500)
REGISTRATION STATEMENT ON FORM N-1A
<TABLE>
<CAPTION>
CROSS REFERENCE SHEET
N-1A N-1A ITEM LOCATION
ITEM NO.
PART A PROSPECTUS
<S> <C> <C>
Item 1. Cover Page................................. Cover Page
Item 2. Synopsis................................... Not Applicable
Item 3. Condensed Financial Information............ Not Applicable
Item 4. General Description of Registrant.......... Investment Information; General
Information; Appendix
Item 5. Management of the Fund..................... Management; Expenses
Item 5A. Management's Discussion of Fund
Performance................................ Not Applicable
Item 6. Capital Stock and Other Securities......... General Information; Purchases;
Redemptions; Dividends and
Distributions; Tax Matters
Item 7. Purchase of Securities Being Offered....... Purchases; Redemptions
Item 8. Redemption or Repurchase................... Purchases; Redemptions
Item 9. Pending Legal Proceedings.................. Not Applicable
STATEMENT OF
ADDITIONAL
PART B INFORMATION
Item 10. Cover Page................................. Cover Page
Item 11. Table of Contents.......................... Cover Page
Item 12. General Information and History............ The Trust
Item 13. Investment Objectives and Policies......... Investment Objectives and Policies;
Description of Permitted
Investments and Investment
Practices; Investment Restrictions
Item 14. Management of the Fund..................... Management
Item 15. Control Persons and Principal Holders of
Securities................................. Management
Item 16. Investment Advisory and Other Services..... Management
Item 17. Brokerage Allocation and Other Practices... Portfolio Transactions
Item 18. Capital Stock and Other Securities......... Description of Shares, Voting Rights
and Liabilities
Item 19. Purchase, Redemption and Pricing of
Securities Being Offered................... Description of Shares, Voting Rights
and Liabilities; Determination of Net
Asset Value; Valuation of Securities;
Additional Redemption Information
Item 20. Tax Status................................. Certain Additional Tax Matters
Item 21. Underwriters............................... Management
Item 22. Calculation of Performance Data............ Performance Information and
Advertising
Item 23. Financial Statements....................... Not Applicable
</TABLE>
<PAGE>
PART C Information required to be included in Part C is
set forth under the appropriate Item, so
numbered, in Part C to this Registration
Statement.
<PAGE>
Prospectus
August 5, 1996
CitiSelectSM Folio 200
CitiSelectSM Folio 300
CitiSelectSM Folio 400
CitiSelectSM Folio 500
Class A and Class C Shares
This Prospectus describes four diversified mutual funds managed by
Citibank, N.A.: CitiSelectSM Folio 200, CitiSelectSM Folio 300, CitiSelectSM
Folio 400 and CitiSelectSM Folio 500. Each Fund has its own investment
objective and policies. The Funds are asset allocation funds that offer
investors a convenient way to own a professionally managed portfolio tailored
to specific investment goals.
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIOS OF SECURITIES, THE FUNDS SEEK THEIR INVESTMENT OBJECTIVES BY
INVESTING ALL OF THEIR INVESTABLE ASSETS IN DIFFERENT SERIES OF ASSET
ALLOCATION PORTFOLIOS. EACH PORTFOLIO HAS THE SAME INVESTMENT OBJECTIVE AND
POLICIES AS ITS CORRESPONDING FUND. SEE "SPECIAL INFORMATION CONCERNING
INVESTMENT STRUCTURE" ON PAGE __.
REMEMBER THAT SHARES OF THE FUNDS:
o ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY
o ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, CITIBANK OR ANY OF ITS AFFILIATES
o ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF
THE PRINCIPAL AMOUNT INVESTED
This Prospectus concisely sets forth information about the Funds that a
prospective investor should know before investing. A Statement of Additional
Information dated August 5, 1996 (and incorporated by reference in this
Prospectus) has been filed with the Securities and Exchange Commission. Copies
of the Statement of Additional Information may be obtained without charge, and
further inquiries about the Funds may be made, by calling 1-800-846-5200
(customers in New York City may call 212-820-2380).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Investors should read this Prospectus and retain it for future reference.
<PAGE>
TABLE OF CONTENTS
Page
Prospectus Summary
Expense Summary
Investment Information
Risk Considerations
Valuation of Shares
Classes of Shares
Purchases
Exchanges
Redemptions
Dividends and Distributions
Management
Tax Matters
Performance Information
General Information
Appendix A -- Permitted Investments
and Investment Practices
Appendix B -- Sales Charge and Purchase
Program Information
<PAGE>
PROSPECTUS SUMMARY
See the body of the Prospectus for more information on the topics
discussed in this summary.
THE FUNDS: This Prospectus describes four diversified mutual funds: CitiSelect
Folio 200, CitiSelect Folio 300, CitiSelect Folio 400 and CitiSelect Folio 500.
Each Fund has its own investment objective and policies. There can be no
assurance that any Fund will achieve its objective. Because each Fund invests
through a Portfolio, all references in this Prospectus to a Fund include its
corresponding Portfolio, except as otherwise noted.
INVESTMENT OBJECTIVES:
CitiSelect Folio 200: high total return over time consistent with a
primary emphasis on income and a secondary emphasis on capital
appreciation.
CitiSelect Folio 300: high total return over time consistent with a
balanced emphasis on income and capital appreciation.
CitiSelect Folio 400: high total return over time consistent with a
primary emphasis on capital appreciation and a secondary emphasis on
income for risk reduction purposes.
CitiSelect Folio 500: highest total return over time consistent with a
primary emphasis on capital appreciation and a secondary emphasis on
income for risk reduction purposes.
PRINCIPAL INVESTMENTS: Each Fund is a carefully selected and professionally
managed diversified mix of equity, fixed income and money market investments
that are structured to achieve specific risk and return objectives. CITISELECT
FOLIO 200 invests primarily in fixed income and money market securities.
CITISELECT FOLIO 300 emphasizes both equity securities and fixed income
securities. CITISELECT FOLIO 400 and CITISELECT FOLIO 500 invest primarily in
equity securities. Current income is not a primary consideration for these
Funds.
INVESTMENT MANAGER: Citibank, N.A., a wholly-owned subsidiary of Citicorp,
is the investment manager. Citibank and its affiliates manage more than $83
billion in assets worldwide. See "Management."
PURCHASES AND REDEMPTIONS: Investors may purchase and redeem shares of the
Funds through a Service Agent on any Business Day. See "Purchases" and
"Redemptions."
PRICING: Investors may select Class A or Class C shares, with different
expense levels and sales charges. See "Classes of Shares," "Purchases" and
"Management -- Distribution Arrangements."
CLASS A SHARES. Class A shares of each Fund are offered at net asset
value plus any applicable sales charge (the maximum is 4.00% of the public
offering price), and are subject to a fee of up to 0.50% per annum of the
Fund's average daily net assets represented by Class A shares for distribution,
sales and marketing and shareholder services. Purchases of $1,000,000 or more
are not subject to an initial sales charge, but are subject to a 1.00%
contingent deferred sales charge in the event of certain redemptions within 12
months following purchase.
<PAGE>
The sales charge on Class A shares may be reduced or eliminated through
the following programs:
Letter of Intent
Right of Accumulation
Reinstatement privilege
See "Purchases" and "Management -- Distribution Arrangements."
CLASS C SHARES. Class C shares of each Fund are offered at net asset
value, and are subject to a fee of up to 1.00% per annum of the Fund's average
daily net assets represented by Class C shares for distribution, sales and
marketing and shareholder services.
EXCHANGES: Shares may be exchanged for shares of the same class of each
other Fund, without a sales charge. See "Exchanges."
DIVIDENDS: Dividends are declared and paid monthly for CitiSelect Folio
200, quarterly for CitiSelect Folio 300 and annually for CitiSelect Folio 400
and CitiSelect Folio 500. Net capital gains, if any, are distributed annually.
See "Dividends and Distributions."
REINVESTMENT: All dividends and capital gains distributions may be
received either in cash or in Fund shares of the same class, which are not
subject to a sales charge. See "Dividends and Distributions."
WHO SHOULD INVEST: The Funds are asset allocation funds. Asset allocation funds
are a basic tool of investment professionals and are differentiated by the use
of investment management strategies and techniques that range from the least
aggressive to the most aggressive. The Funds offer a convenient way to own a
diversified professionally managed portfolio tailored to specific investment
goals and expectations of risk and return. While time horizon is a factor, it
is not necessarily the determinative factor in choosing to invest in one of the
Funds. Investment goals, such as buying a home, educating children or saving
for retirement, all determine the appropriate asset allocation and amount of
risk that an investor seeks. "Investment Information" and "Risk
Considerations."
CITISELECT FOLIO 200 is expected to be the least volatile of the four
Funds and is designed for the investor who is seeking lower risk provided by
substantial investments in income-producing securities, but who also seeks some
capital growth. CITISELECT FOLIO 300 offers a blend of capital appreciation and
income for the investor seeking a balanced approach by emphasizing stocks for
their higher capital appreciation potential but retaining a significant income
component to temper volatility. CITISELECT FOLIO 400 and CITISELECT FOLIO 500
are designed for the investor willing and able to take higher risks in the
pursuit of long-term capital appreciation. CitiSelect Folio 500 is expected to
be the most volatile of the four Funds and is designed for investors who can
withstand greater market swings to seek potential long-term rewards. CitiSelect
Folio 400 is designed for investors seeking long-term rewards, but with less
volatility.
RISK FACTORS: There can be no assurance that any Fund will achieve its
investment objective, and each Fund's net asset value will fluctuate based on
changes in the values of the underlying portfolio securities. Equity securities
fluctuate in value based on many factors, including actual and anticipated
earnings, changes in management, political and economic developments and the
potential for takeovers and acquisitions. The value of debt securities
generally fluctuates based on changes in the actual and perceived
creditworthiness of issuers. Also, the value of debt securities generally goes
down when interest rates go up, and vice versa. As a result, shares may be
worth more or less at redemption than at the time of purchase.
<PAGE>
Each Fund may invest a portion of its assets in securities of companies
with small market capitalizations, which may have more risks than the
securities of other companies. Small cap companies may be more susceptible to
market downturns or setbacks because they may have limited product lines,
markets, distribution channels, and financial and management resources. There
is often less publicly available information about small cap companies than
about more established companies. As a result of these and other factors, the
prices of securities issued by small cap companies may be volatile. Shares of
the Funds, therefore, may be subject to greater fluctuation in value than
shares of an equity fund with more of its investments in securities of larger
more established companies.
Each Fund may invest a portion of its assets in non-U.S. securities. The
special risks of investing in non-U.S. securities include possible adverse
political, social and economic developments abroad, differing regulations to
which non-U.S. issuers are subject and different characteristics of non-U.S.
economies and markets. The Funds' non-U.S. securities often will trade in
non-U.S. currencies, which can be volatile and may be subject to governmental
controls or intervention. In addition, securities of non-U.S. issuers may be
less liquid and their prices more volatile than those of comparable U.S.
issuers.
Each Fund may invest in securities of issuers in developing countries.
Investors in the Funds should be able to assume the heightened risks and
volatility associated with investment in developing countries, including
greater risks of expropriation, confiscatory taxation and nationalization and
less social, political and economic stability; smaller (and, in many cases,
new) markets resulting in price volatility and illiquidity; national policies
which may restrict investment opportunities; and the absence of developed legal
structures.
Certain investment practices, such as the use of forward non-U.S.
currency exchange contracts, also may entail special risks. See "Risk
Considerations" and Appendix A for more information.
EXPENSE SUMMARY
The following table summarizes estimated shareholder transaction and
annual operating expenses for Class A and Class C shares of each Fund. Each
Fund invests all of its investable assets in its corresponding Portfolio. The
Trustees of the Funds believe the aggregate per share expenses of the Funds and
their corresponding Portfolios will be less than or approximately equal to the
expenses that the Funds would incur if their assets were invested directly in
the types of securities held by their corresponding Portfolios. For more
information on costs and expenses, see "Management" -- page __ and "General
Information -- Expenses" -- page __.*
<PAGE>
<TABLE>
<CAPTION>
CitiSelect CitiSelect CitiSelect CitiSelect
Folio 200 Folio 300 Folio 400 Folio 500
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Class A Class C Class A Class C Class A Class C Class A Class C
- ----------------------------------------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION
EXPENSES:
Maximum Sales Load Imposed on 4.00% None 4.00% None 4.00% None 4.00% None
Purchases (as a percentage of
offering price)...............
Maximum Contingent Deferred Sales
Charge (as a percentage of See None See None See None See None
original purchase price or below below below below
redemption proceeds, (1) (1) (1) (1)
whichever is less)...........
ANNUAL FUND OPERATING
EXPENSES AFTER FEE WAIVERS
(AS A PERCENTAGE OF NET ASSETS):
Management Fee ................. 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75% 0.75%
12b-1 Fees (including service
fees)(2)...................... 0.50% 1.00% 0.50% 1.00% 0.50% 1.00% 0.50% 1.00%
Other Expenses (3).............. 0.25% 0.25% 0.25% 0.25% 0.50% 0.50% 0.50% 0.50%
----- ----- ----- ----- ----- ----- ----- -----
Total Fund Operating
Expenses (3).................. 1.50% 2.00% 1.50% 2.00% 1.75% 2.25% 1.75% 2.25%
</TABLE>
(1) Purchases of $1,000,000 or more are not subject to an initial sales charge,
but are subject to a contingent deferred sales charge of 1.00% in the event
of redemptions within 12 months following purchase. See "Classes of Shares"
and "Purchases" for more information and for exceptions to the imposition
of the contingent deferred sales charge.
(2) Includes fees for distribution and shareholder servicing.
(3) After reimbursement. Absent reimbursement, "Other Expenses" and "Total Fund
Operating Expenses" would have been 1.07% and 2.32% for CitiSelect Folio
200 -- Class A and 1.07% and 2.82% for CitiSelect Folio 200 -- Class C,
1.08% and 2.33% for CitiSelect Folio 300 -- Class A and 1.08% and 2.83% for
CitiSelect Folio 300 -- Class C, 2.00% and 3.25% for CitiSelect Folio 400
-- Class A and 2.00% and 3.75% for CitiSelect Folio 400 -- Class C, and
2.15% and 3.40% for CitiSelect Folio 500 -- Class A and 2.15% and 3.90% for
CitiSelect Folio 500 -- Class C.
* This table is intended to assist investors in understanding the
various costs and expenses that a shareholder of a Fund will bear,
either directly or indirectly. Because the Funds are newly
organized, Other Expenses in the table are based on estimated
amounts for the current fiscal year. There can be no assurance that
the fee waivers reflected in the table will continue. Long-term
shareholders in a Fund could pay more in sales charges than the
economic equivalent of the maximum front-end sales charges permitted
by the National Association of Securities Dealers, Inc.
EXAMPLE: A shareholder would pay the following expenses on a $1,000
investment, assuming, except as otherwise noted, redemption at the end of each
period indicated below:
One Year Three Years
CitiSelect Folio 200
Class A shares (1) $64 $86
Class C shares $20 $63
<PAGE>
CitiSelect Folio 300
Class A shares (1) $64 $86
Class C shares $20 $63
CitiSelect Folio 400
Class A shares $67 $93
Class C shares $23 $70
CitiSelect Folio 500
Class A shares (1) $67 $93
Class C shares $23 $70
(1) Assumes deduction at the time of purchase of the maximum 4.00% sales load.
The Example assumes that all dividends are reinvested and reflects certain
voluntary expense reimbursements. If expense reimbursements were not made, the
amounts in the example would be $72 and $110 for CitiSelect Folio 200 -- Class
A and $29 and $87 for CitiSelect Folio 200 -- Class C, $72 and $110 for
CitiSelect Folio 300 -- Class A and $29 and $88 for CitiSelect Folio 300 --
Class C, $81 and $136 for CitiSelect Folio 400 -- Class A and $38 and $115 for
CitiSelect Folio 400 -- Class C, and $83 and $140 for CitiSelect Folio 500 --
Class A and $39 and $119 for CitiSelect Folio 500 -- Class C. Expenses are
estimated because the Funds are newly organized. The assumption of a 5% annual
return is required by the Securities and Exchange Commission for all mutual
funds, and is not a prediction of any Fund's future performance. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RETURNS
OF ANY FUND. ACTUAL EXPENSES AND RETURNS MAY BE GREATER OR LESS THAN THOSE
SHOWN.
INVESTMENT INFORMATION
INVESTMENT OBJECTIVES:
The investment objective of CITISELECT FOLIO 200 is high total return
over time consistent with a primary emphasis on income and a secondary emphasis
on capital appreciation. This Fund invests all of its investable assets in
Asset Allocation Portfolio 200.
The investment objective of CITISELECT FOLIO 300 is high total return
over time consistent with a balanced emphasis on income and capital
appreciation. This Fund invests all of its investable assets in Asset
Allocation Portfolio 300.
The investment objective of CITISELECT FOLIO 400 is high total return
over time consistent with a primary emphasis on capital appreciation and a
secondary emphasis on income for risk reduction purposes. This Fund invests all
of its investable assets in Asset Allocation Portfolio 400.
The investment objective of CITISELECT FOLIO 500 is highest total return
over time consistent with a primary emphasis on capital appreciation and a
secondary emphasis on income for risk reduction purposes. This Fund invests all
of its investable assets in Asset Allocation Portfolio 500.
The investment objective of each Fund may be changed by its Trustees
without approval by that Fund's shareholders, but shareholders will be given
<PAGE>
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 objective.
INVESTMENT POLICIES:
THE FUNDS
The Funds are asset allocation funds. Asset allocation funds are a basic
tool of investment professionals and are differentiated by the use of
investment management strategies and techniques that range from the least
aggressive to the most aggressive. The Funds offer a convenient way to own a
diversified professionally managed portfolio tailored to specific investment
goals and expectations of risk and return. While time horizon is a factor, it
is not necessarily the determinative factor in choosing to invest in one of the
Funds. Investment goals, such as buying a home, educating children or saving
for retirement, all determine the appropriate asset allocation and amount of
risk that an investor seeks. See "Investment Information" and "Risk
Considerations."
CITISELECT FOLIO 200 is expected to be the least volatile of the four
Funds and is designed for the investor who is seeking lower risk provided by
substantial investments in income-producing securities, but who also seeks some
capital growth. CITISELECT FOLIO 300 offers a blend of capital appreciation and
income for the investor seeking a balanced approach by emphasizing stocks for
their higher capital appreciation potential but retaining a significant income
component to temper volatility. CITISELECT FOLIO 400 and CITISELECT FOLIO 500
are designed for the investor willing and able to take higher risks in the
pursuit of long-term capital appreciation. CitiSelect Folio 500 is expected to
be the most volatile of the four Funds, and is designed for investors who can
withstand greater market swings to seek potential long-term rewards. CitiSelect
Folio 400 is designed for investors seeking long-term rewards, but with less
volatility.
INVESTMENT STRATEGY
Each Fund is a carefully selected and professionally managed diversified
mix of equity, fixed income and money market investments that are structured to
achieve certain risk and return objectives. Citibank allocates each Fund's
assets among the equity class of investments, the fixed income class of
investments and the money market class of investments. In making asset
allocations, Citibank considers long-term performance and valuation measures
within and between asset classes and the effects of market and economic
variables on those relationships. It uses this information to determine the
overall mix of each Fund's assets among the three general asset classes. Each
Fund's allocation or asset mix is determined by Citibank to be an optimal
combination of stocks, bonds and money market instruments that reduces risk and
maximizes potential return for that Fund's distinct investment objective.
The Funds' asset allocations generally correlate to different levels of
investment risk and return. Equity securities have the potential to outperform
fixed income securities over the long term. Equity securities have the greatest
potential for growth of capital, yet are generally the most volatile of the
three asset types. Fixed income and money market securities sometimes move in
the opposite direction of equity securities and may provide investment balance
to a Fund. The risks of each asset class will vary.
Citibank expects that, in general, each Fund's assets will be allocated
among the equity, fixed income and money market classes as provided in the
following chart. However, cash flows of a Fund or changes in market valuations
could produce different results. Citibank will review each Fund's asset
allocation quarterly and expects, in general, to rebalance the Fund's
<PAGE>
investments, if necessary, at that time. Rebalancing may be accomplished over a
period of time and may be limited by tax and regulatory requirements.
CitiSelect CitiSelect CitiSelect CitiSelect
Folio Folio Folio Folio
200 300 400 500
Asset Class Range Range Range Range
Equity 25-45% 40-60% 55-85% 70-95%
Fixed Income 35-55 35-55 15-35 5-20
Money Market 10-30 1-10 1-10 1-10
Each asset class includes other investments described in Appendix A or
elsewhere in this prospectus that are deemed related to the management of that
asset class. Percentage ranges shown for the equity and fixed income classes
include investment positions that seek equivalent asset class exposure or to
enhance income for that asset class. When money market instruments are used in
connection with these positions they will be counted towards the assets of the
applicable asset class and not towards the money market class.
Citibank will diversify the equity class of each Fund by allocating the
Fund's portfolio of equity securities among large capitalization securities,
small capitalization securities and international securities. Citibank will
diversify the fixed income class of each Fund by allocating the Fund's
portfolio of fixed income securities among U.S. and foreign government and
corporate bonds. There is no requirement that Citibank allocate a Fund's assets
among all of the foregoing types of equity and fixed income securities at all
times. These types of securities have been selected because Citibank believes
that this additional level of asset diversification will provide each Fund with
the potential for higher returns with lower overall volatility.
From time to time Citibank may employ Subadvisers to perform the daily
management of a particular asset class for the Funds or of specific types of
securities within a particular asset class. Citibank will monitor and supervise
the activities of the Subadvisers and may terminate the services of any
Subadviser at any time. See "Management." In allocating each Fund's investments
among various asset classes and in supervising the Subadvisers, Citibank
employs a multi-style and multi-manager diversification strategy. Citibank
believes that there are periods when securities with particular
characteristics, or an investment style, outperform other types of securities
in the same asset class. For example, at certain times, equity securities with
growth characteristics outperform equities with income characteristics, and
vice versa. Citibank will seek to take advantage of this by blending asset
classes and investment styles on a complementary basis in an effort to maximize
the consistency of returns over longer time periods, and to reduce volatility.
In supervising the Subadvisers, Citibank will also be taking into account
the expertise they have demonstrated in particular areas and the historical
results they have achieved within selected asset classes or investment styles.
By combining these attributes with selected asset classes and styles, Citibank
will seek to increase returns.
Citibank has delegated the responsibility for the daily management of the
following kinds of securities to the following Subadvisers: large
capitalization value securities, Miller Anderson & Sherrerd LLP; small
capitalization value securities, Franklin Advisory Services, Inc.;
international equity securities, Hotchkis & Wiley; and foreign government
securities, Pacific Investment Management Company. Citibank is responsible for
<PAGE>
the daily management of all other kinds of securities of the Funds, including
large capitalization growth securities, small capitalization growth securities,
fixed income securities and money market securities.
INITIAL ASSET ALLOCATIONS
Initially one or more of the Funds may be of such a size that it is not
practicable for the Fund to invest in all of the above-mentioned asset classes
and types of securities. Until in Citibank's judgment a Fund has sufficient
assets to fully employ an investment strategy, Citibank may allocate assets
across fewer of the asset classes and fewer of the types of securities
identified above than it otherwise would. As a Fund's asset size increases,
Citibank will add asset classes and types of securities until the desired asset
allocation is reached. There may also be a delay in investing in asset classes
or types of securities due to market conditions and availability of suitable
investments.
THE EQUITY CLASS
Equity securities include common stocks, securities convertible into
common stocks, preferred stocks, warrants for the purchase of stock and
depositary receipts (receipts which represent the right to receive the
securities of non-U.S. issuers deposited in a U.S. or correspondent bank).
While equity securities historically have experienced a higher level of
volatility risk than fixed income securities, they also historically have
produced higher levels of total return. Longer term, investors with diversified
equity portfolios have a higher probability of achieving their investment goals
with lower levels of volatility than those who have not diversified.
Each Fund will diversify its equity portfolio by investing those assets
which are allocated to the equity class among equity securities issued by large
capitalization issuers, small capitalization issuers and international issuers.
The mix of equity securities will vary from Fund to Fund. For example, the
equity class of CitiSelect Folio 400 will emphasize securities of small cap
issuers. The equity class of CitiSelect Folio 300 will emphasize securities of
large cap and small cap issuers. There is no requirement that each Fund invest
in each type of equity security.
Large Cap Issuers. Large cap issuers are those with market
capitalizations typically of $1 billion or more. In the selection of equity
securities of large cap issuers, securities issued by established companies
with stable operating histories are emphasized.
Small Cap Issuers. Small cap issuers are those with market
capitalizations below the top 1,000 stocks that comprise the large and midrange
capitalization sector of the equity market. These stocks are comparable to, but
not limited to, the stocks comprising the Russell 2000 Index, an index of small
capitalization stocks. Small cap companies are generally represented in new or
rapidly changing industries. They may offer more profit opportunity in growing
industries and during certain economic conditions than do large and medium
sized companies. However, small cap companies also involve special risks.
Often, liquidity and overall business stability of a small cap company may be
less than that associated with larger capitalized companies. Small cap stocks
frequently involve smaller, rapidly growing companies with high growth rates,
negligible dividend yields and extremely high levels of volatility.
International Issuers. International issuers are those based outside the
United States. In the selection of equity securities of international issuers,
securities included in the Morgan Stanley Capital International Europe,
Australia and Far East Index (called the EAFE Index) are emphasized. The EAFE
Index contains approximately 1,100 equity securities of companies located in
Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong,
<PAGE>
Ireland, Italy, Japan, Malaysia, The Netherlands, Norway, Singapore, Spain,
Sweden, Switzerland and the United Kingdom. In addition, securities of issuers
located in emerging markets may be selected. The U.S. investor may benefit from
exposure to international equity securities and foreign economies, which may be
influenced by distinctly different factors impacting a country's rate of
economic growth, interest rate structure, currency, industry and local stock
market environment. In addition, investments in the non-U.S. equity markets
allow for further diversification as many countries and regions have
risk/reward characteristics and market performance that are not highly
correlated to each other or to the U.S. market. International investments,
however, particularly in emerging countries, are subject to special risks not
generally present in domestic equity investments.
See "Risk Considerations" for certain risks associated with investing in
equity securities.
THE FIXED INCOME CLASS
Fixed income securities include bonds and short-term obligations. Fixed
income securities, in general, offer a fixed stream of cash flow and may
provide good to moderate relative total return benefits over time. Most bond
investments focus on generating income, while the potential for capital
appreciation is a secondary objective. The bond markets provide diversification
benefits to a holder of equity securities depending upon the characteristics of
the bonds comprising the fixed income class of each Fund. The value of fixed
income securities generally fluctuates inversely with changes in interest
rates, and also fluctuates based on other market and credit factors as well.
Each Fund will diversify its fixed income portfolio by investing those
assets which are allocated to the fixed income class among investment grade
corporate debt obligations and securities issued by the U.S. Government and its
agencies and instrumentalities and by foreign governments. Investment grade
securities are those rated Baa or better by Moody's Investors Service, Inc. or
BBB or better by Standard & Poor's Rating Group or securities which are not
rated by these rating agencies, but which Citibank or a Subadviser believes to
be of comparable quality. Securities rated Baa or BBB and securities of
comparable quality may have speculative characteristics.
The mix of fixed income securities may vary from Fund to Fund. There is
no requirement that each Fund invest in each type of fixed income security. The
Funds may invest in securities with all maturities, including long bonds (10+
years), intermediate notes (3 to 10 years) and short-term notes (1 to 3 years).
Government Securities. U.S. Government securities may provide
opportunities for income with minimal credit risk. U.S. Treasury securities are
considered the safest of all government securities. U.S. Government securities
are high quality instruments issued or guaranteed as to principal and interest
by the U.S. Government or by an agency or instrumentality of the U.S.
Government. Securities issued or guaranteed as to principal and interest by
foreign governments or agencies or instrumentalities of foreign governments
(which include securities of supranational agencies) also may provide
opportunities for income with minimal credit risk. Government securities are,
however, not immune from the market risk of principal fluctuation associated
with changing interest rates.
Corporate Bonds. Investment in bonds of U.S. and foreign corporate
issuers may provide relatively higher levels of current income. These bonds are
used by U.S. and foreign corporate issuers to borrow money from investors, and
may have varying maturities. Corporate bonds have varying degrees of quality
and varying degrees of sensitivity to changes in interest rates. The value of
<PAGE>
these investments fluctuates based on changes in interest rates and in the
underlying credit quality of the bond issuers represented in the portfolio.
See "Risk Considerations" for certain risks associated with investing in
fixed income securities.
THE MONEY MARKET CLASS
Each Fund will invest those assets which are allocated to the money
market class in cash and in U.S. dollar-denominated high quality money market
and short-term instruments. These instruments include short-term obligations of
the U.S. Government and repurchase agreements covering these obligations,
commercial paper of U.S. and foreign issuers, bank obligations (such as
certificates of deposit, bankers' acceptances and fixed time deposits) of U.S.
and non-U.S. banks and obligations issued or guaranteed by the governments of
Western Europe, Scandinavia, Australia, Japan and Canada. These investments
provide opportunities for income with low credit risk, and may result in a
lower yield than would be available from investments with a lower quality or a
longer term.
CERTAIN ADDITIONAL INVESTMENT POLICIES:
FUTURES. Each of the Funds may use financial futures in order to protect
the Fund from fluctuations in interest rates (sometimes called "hedging")
without actually buying or selling debt securities, or to manage the effective
maturity or duration of fixed income securities in the Fund's portfolio in an
effort to reduce potential losses or enhance potential gain. The Funds also may
purchase stock index and foreign currency futures in order to protect against
declines in the value of portfolio securities or increases in the cost of
securities or other assets to be acquired and, subject to applicable law, to
enhance potential gain. Futures contracts provide for the future sale by one
party and purchase by another party of a specified amount of a security at a
specified future time and price, or for making payment of a cash settlement
based on changes in the value of a security, an index of securities or other
assets. In many cases, the futures contracts that may be purchased by the Funds
are standardized contracts traded on commodities exchanges or boards of trade.
See Appendix A for more information.
TEMPORARY INVESTMENTS. During periods of unusual economic or market
conditions or for temporary defensive purposes or liquidity, each Fund may
invest without limit in cash and in U.S. dollar-denominated high quality money
market and short-term instruments. These investments may result in a lower
yield than would be available from investments with a lower quality or longer
term.
OTHER PERMITTED INVESTMENTS. For more information regarding the Funds'
permitted investments and investment practices, see Appendix A -- Permitted
Investments and Investment Practices on page __. The Funds will not necessarily
invest or engage in each of the investments and investment practices in
Appendix A but reserve the right to do so.
INVESTMENT RESTRICTIONS. The Statement of Additional Information contains
a list of specific investment restrictions which govern the investment policies
of the Funds, including a limitation that each Fund may borrow money from banks
in an amount not to exceed 1/3 of the Fund's net assets for extraordinary or
emergency purposes (e.g., to meet redemption requests). Except as otherwise
indicated, the Funds' investment objectives and policies may be changed without
shareholder approval. If a percentage or rating restriction (other than a
restriction as to borrowing) is adhered to at the time an investment is made, a
later change in percentage or rating resulting from changes in a Fund's
securities will not be a violation of policy.
<PAGE>
PORTFOLIO TURNOVER. Securities of each Fund will be sold whenever it is
appropriate to do so in light of the Fund's investment objective, without
regard to the length of time a particular security may have been held. The
turnover rates for CitiSelect Folio 200 and CitiSelect Folio 300 are not
expected to exceed 175% annually; the turnover rates for CitiSelect Folio 400
and CitiSelect Folio 500 are not expected to exceed 100% annually. The amount
of brokerage commissions and realization of taxable capital gains will tend to
increase as the level of portfolio activity increases.
BROKERAGE TRANSACTIONS. In connection with the selection of brokers or
dealers for securities transactions for the Funds and the placing of such
orders, brokers or dealers may be selected who also provide brokerage and
research services to the Funds or the other accounts over which Citibank, the
Subadvisers or their affiliates exercise investment discretion. Citibank and
the Subadvisers are authorized to pay a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for a Fund which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if Citibank
or the applicable Subadviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer.
RISK CONSIDERATIONS
The risks of investing in each Fund vary depending upon the nature of the
securities held, and the investment practices employed, on its behalf. Certain
of these risks are described below.
CHANGES IN NET ASSET VALUE. Each Fund's net asset value will fluctuate
based on changes in the values of the underlying portfolio securities. This
means that an investor's shares may be worth more or less at redemption than at
the time of purchase. Equity securities fluctuate in response to general market
and economic conditions and other factors, including actual and anticipated
earnings, changes in management, political developments and the potential for
takeovers and acquisitions. During periods of rising interest rates the value
of debt securities generally declines, and during periods of falling rates the
value of these securities generally increases. Changes by recognized rating
agencies in the rating of any debt security, and actual or perceived changes in
an issuer's ability to make principal or interest payments, also affect the
value of these investments.
CREDIT RISK OF DEBT SECURITIES. Investors should be aware that securities
offering above average yields may at times involve above average risks.
Securities rated Baa by Moody's or BBB by S&P and equivalent securities may
have speculative characteristics. Adverse economic or changing circumstances
are more likely to lead to a weakened capacity to make principal and interest
payments than is the case for higher grade obligations.
NON-U.S. SECURITIES. Investments in non-U.S. securities involve risks
relating to political, social and economic developments abroad, as well as
risks resulting from the differences between the regulations to which U.S. and
non-U.S. issuers and markets are subject. These risks may include
expropriation, confiscatory taxation, withholding taxes on dividends and
interest, limitations on the use or transfer of portfolio assets and political
or social instability. Enforcing legal rights may be difficult, costly and slow
in non-U.S. countries, and there may be special problems enforcing claims
against non-U.S. governments. In addition, non-U.S. companies may not be
subject to accounting standards or governmental supervision comparable to U.S.
companies, and there may be less public information about their operations.
Non-U.S. markets may be less liquid and more volatile than U.S. markets, and
<PAGE>
may offer less protection to investors such as the Funds. Prices at which a
Fund may acquire securities may be affected by trading by persons with material
non-public information and by securities transactions by brokers in
anticipation of transactions by the Fund.
Because non-U.S. securities often are denominated in currencies other
than the U.S. dollar, changes in currency exchange rates will affect a Fund's
net asset value, the value of dividends and interest earned and gains and
losses realized on the sale of securities. In addition, some non-U.S. currency
values may be volatile and there is the possibility of governmental controls on
currency exchanges or governmental intervention in currency markets.
The Funds may invest in issuers located in developing countries, which are
generally defined as countries in the initial stages of their industrialization
cycles with low per capita income. All of the risks of investing in non-U.S.
securities are heightened by investing in developing countries. Shareholders
should be aware that investing in the equity and fixed income markets of
developing countries involves exposure to economic structures that are
generally less diverse and mature, and to political systems which can be
expected to have less stability, than those of developed countries. Historical
experience indicates that the markets of developing countries have been more
volatile than the markets of developed countries with more mature economies;
such markets often have provided higher rates of return, and greater risks, to
investors. These heightened risks include (i) greater risks of expropriation,
confiscatory taxation and nationalization, and less social, political and
economic stability; (ii) the small current size of markets for securities of
issuers based in developing countries and the currently low or non-existent
volume of trading, resulting in a lack of liquidity and in price volatility;
(iii) certain national policies which may restrict a Fund's investment
opportunities including restrictions on investing in issuers or industries
deemed sensitive to relevant national interests; and (iv) the absence of
developed legal structures. Such characteristics can be expected to continue in
the future.
Equity securities traded in certain foreign countries may trade at
price-earnings multiples higher than those of comparable companies trading on
securities markets in the United States, which may not be sustainable. Rapid
increases in money supply in certain countries may result in speculative
investment in equity securities which may contribute to volatility of trading
markets.
The costs attributable to non-U.S. investing, such as the costs of
maintaining custody of securities in non-U.S. countries, frequently are higher
than those involved in U.S. investing. As a result, the operating expense
ratios of the Funds may be higher than those of investment companies investing
exclusively in U.S. securities.
SMALL CAP COMPANIES. Investors in the Funds should be aware that the
securities of companies with small market capitalizations may have more risks
than the securities of other companies. Small cap companies may be more
susceptible to market downturns or setbacks because they may have limited
product lines, markets, distribution channels, and financial and management
resources. Further, there is often less publicly available information about
small cap companies than about more established companies. As a result of these
and other factors, the prices of securities issued by small cap companies may
be volatile. Shares of the Funds, therefore, may be subject to greater
fluctuation in value than shares of an equity fund with more of its investments
in securities of larger, more established companies.
INVESTMENT PRACTICES. Certain of the investment practices employed for
the Funds may entail certain risks. These risks are in addition to the risks
<PAGE>
described above and are described in Appendix A. See Appendix A -- Permitted
Investments and Investment Practices on page __.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE. Unlike other mutual
funds which directly acquire and manage their own portfolio securities, each of
the Funds seeks its investment objective by investing all of its investable
assets in its corresponding Portfolio, a registered investment company. Each of
the Portfolios has the same investment objective and policies as its
corresponding Fund. In addition to selling a beneficial interest to a Fund, a
Portfolio may sell beneficial interests to other mutual funds, collective
investment vehicles, or institutional investors. Such investors will invest in
the Portfolio on the same terms and conditions and will pay a proportionate
share of the Portfolio's expenses. However, the other investors investing in
the Portfolio are not required to sell their shares at the same public offering
price as the Fund due to variations in sales commissions and other operating
expenses. Therefore, investors in a Fund should be aware that these differences
may result in differences in returns experienced by investors in the different
funds that invest in that Portfolio. Such differences in returns are also
present in other mutual fund structures. Information concerning other holders
of interests in the Portfolios is available from the Funds' distributor. See
"Management."
The investment objective of each of the Funds may be changed by its
Trustees without the approval of the Fund's shareholders, but shareholders will
be given written notice at least 30 days before any change is implemented. If
there is a change in a Fund's investment objective, shareholders should
consider whether the Fund remains an appropriate investment in light of their
then current financial positions and needs. The investment objective of each of
the Portfolios may also be changed without the approval of the investors in the
Portfolio, but not without written notice thereof to the investors in the
Portfolio (and, if a Fund is then invested in the Portfolio, notice to Fund
shareholders) at least 30 days prior to implementing the change. There can, of
course, be no assurance that the investment objective of either a Fund or its
Portfolio will be achieved. See "Investment Restrictions" in the Statement of
Additional Information for a description of the fundamental policies of each
Fund and its Portfolio that cannot be changed without approval by the holders
of a "majority of the outstanding voting securities" (as defined in the
Investment Company Act of 1940) of the Fund or Portfolio. Except as stated
otherwise, all investment guidelines, policies and restrictions described
herein and in the Statement of Additional Information are non-fundamental.
Certain changes in a Portfolio's investment objectives, policies or
restrictions or a failure by a Fund's shareholders to approve a change in the
Portfolio's investment objectives or restrictions, may preclude the Fund from
investing its investable assets in the Portfolio or require the Fund to
withdraw its interest in the Portfolio. Any such withdrawal could result in an
"in kind" distribution of securities (as opposed to a cash distribution) from
the Portfolio which may or may not be readily marketable. If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. The in kind distribution may result in the Fund having
a less diversified portfolio of investments or adversely affect the liquidity
of the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing. The absence of substantial
experience with this investment structure could have an adverse effect on an
investment in the Funds.
Smaller funds investing in a Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may subsequently
experience higher pro rata operating expenses, thereby producing lower returns.
Additionally, because the Portfolio would become smaller, it may become less
diversified, resulting in increased portfolio risk; however, these
possibilities exist for traditionally structured funds which have large or
institutional investors who may withdraw from a fund. Also, funds with a
<PAGE>
greater pro rata ownership in the Portfolio could have effective voting control
of the operations of the Portfolio. If a Fund is requested to vote on matters
pertaining to its Portfolio (other than a vote by the Fund to continue the
operation of the Portfolio upon the withdrawal of another investor in the
Portfolio), the Fund will hold a meeting of its shareholders and will cast all
of its votes proportionately as instructed by its shareholders who vote at the
meeting. Shareholders of the Fund who do not vote will have no effect on the
outcome of such matters.
Each of the Funds may withdraw its investment from its Portfolio at any
time, if the Fund's Board of Trustees determines that it is in the best
interest of the Fund to do so. Upon any such withdrawal, the Board of Trustees
would consider what action might be taken, including the investment of all of
the investable assets of the Fund in another pooled investment entity having
the same investment objective as the Fund or the retaining of an investment
adviser to manage the Fund's assets in accordance with the investment policies
described above. In the event the Fund's Trustees were unable to find a
substitute investment company in which to invest the Fund's assets or were
unable to secure directly the services of an investment adviser, the Trustees
would determine the best course of action.
For a description of the management of the Portfolios, see "Management"
- -- page __. For descriptions of the expenses of the Portfolios, see
"Management" and "General Information -- Expenses" -- page __. For a
description of the investment objectives, policies and restrictions of the
Portfolios, see "Investment Information" -- page _.
VALUATION OF SHARES
Net asset value per share of each class of each Fund is determined each
day the New York Stock Exchange is open for trading (a "Business Day"). This
determination is made once each day as of the close of regular trading on the
Exchange (normally 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 the
Fund's interest in its Portfolio), then subtracting the liabilities charged to
that class, and then dividing the result by the number of outstanding shares of
the class. The net asset value per share is effective for orders received and
accepted by the Transfer Agent prior to its calculation.
Portfolio securities and other assets are valued primarily on the basis of
market quotations, or if quotations are not available, by a method believed to
accurately reflect fair value. Non-U.S. securities are valued based on
quotations from the primary market in which they are traded and are translated
from the local currency into U.S. dollars using current exchange rates. In
light of the non-U.S. nature of some of each Fund's investments, trading may
take place in securities held by the Funds on days which are not Business Days
and on which it will not be possible to purchase or redeem shares of the Funds.
CLASSES OF SHARES
DIFFERENCES BETWEEN THE CLASSES. Each Fund offers two classes of shares,
Class A shares and Class C shares. The primary differences between the classes
are their sales charge structures and ongoing expenses. This information is
summarized in the following chart.
<PAGE>
Annual 12b-1 Fees
(as a percentage of
Sales Charge average daily net assets)
Class A Maximum initial sales 0.50%
charge of 4.00% of the
public offering price*
Class C None 1.00%
*The initial sales charge is waived or reduced for certain purchases. A
contingent deferred sales charge may apply in certain instances where the
initial sales charge is waived.
Class A and Class C shares of a Fund represent interests in the same
portfolio of investments and have the same rights, except as noted. Each class
has a separate exchange privilege. Each class has exclusive voting rights with
respect to its Rule 12b-1 Service Plan. Dividends and other distributions paid
by each Fund with respect to its Class A and Class C shares are calculated in
the same manner and at the same time. The per share dividends on Class C shares
of a Fund will be lower than those on Class A shares of that Fund as a result
of the higher fees for distribution, sales and marketing and shareholder
services applicable to Class C shares.
FACTORS TO CONSIDER. In selecting which class of shares to purchase,
investors should consider sales charges and ongoing expenses, as well as any
other relevant facts and circumstances.
SALES CHARGES AND EXPENSES. Class A shares are sold at net asset value
plus an initial sales charge of up to 4.00% of the public offering price
(except that for purchases of $1 million or more, no initial sales charge is
imposed and a contingent deferred sales charge may be imposed instead). Because
of this initial sales charge, not all of a Class A shareholder's purchase price
is invested in a Fund. Class A shares currently bear a fee for distribution,
sales and marketing and shareholder services at an annual rate of up to 0.50%
of the Fund's average daily net assets attributable to Class A shares. Class C
shares are sold with no initial sales charge, so the entire amount of a Class C
shareholder's purchase price is immediately invested in a Fund. Class C shares
bear a higher fee for distribution, sales and marketing and shareholder
services than Class A shares, currently at an annual rate of up to 1.00% of the
Fund's average daily net assets attributable to Class C shares.
Class A shares may be purchased at reduced initial sales charges under
certain circumstances. In certain other circumstances, the entire initial sales
charge on Class A shares is waived. However, a 1.00% contingent deferred sales
charge is imposed on certain redemptions of Class A shares on which no initial
sales charge was assessed. Because Class A shares bear lower ongoing annual
expenses than Class C shares, in most cases investors eligible for reduced
initial sales charges should purchase Class A shares.
CHOOSING A CLASS. Over time, the cumulative expense of the 1.00% annual
fee of the Class C shares will approximate or exceed the expense of the
applicable 4.00% maximum initial sales charge plus the 0.50% annual fee of the
Class A shares. Investors should consider how long they expect to maintain an
investment in a Fund, and whether they qualify for a reduced sales charge, when
selecting a particular class. Class C investors enjoy the benefit of permitting
all their dollars to work from the time the investments are made. Any positive
<PAGE>
investment return on this additional invested amount would partially or wholly
offset the higher annual expenses borne by Class C shares. Because the timing
and amount of the Funds' future returns cannot be predicted, however, there can
be no assurance that such a positive return will be achieved.
OTHER INFORMATION. See "Purchases," "Redemptions" and "Management --
Distribution Arrangements" for a more complete description of the sales charges
and distribution fees for each class of shares of each Fund. By purchasing
shares an investor agrees to the imposition of initial and deferred sales
charges as described in this Prospectus.
PURCHASES
General. Each Fund offers two classes of shares, Class A shares and Class
C shares. See "Classes of Shares" for more information. WHEN PLACING PURCHASE
ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR CLASS A OR CLASS C
SHARES. ALL SHARE PURCHASE ORDERS THAT FAIL TO SPECIFY A CLASS AUTOMATICALLY
WILL BE INVESTED IN CLASS A SHARES.
Shares of the Funds are offered continuously and may be purchased on any
Business Day at the public offering price. Shares may be purchased through
certain financial institutions (which may include banks), securities dealers
and other industry professionals (called Service Agents) that have entered into
service agreements with the Distributor. Customers of Citicorp Investment
Services (CIS), a Service Agent, will purchase shares through an account with
CIS and should contact CIS at 1-800-846-5200 (customers in New York City may
call 212-820-2380) for details. Customers of other Service Agents should
contact those Service Agents for information on purchases. Each Service Agent
may establish its own terms, conditions and charges with respect to services it
offers to its customers. Charges for these services may include fixed annual
fees and account maintenance fees. The effect of any such fees will be to
reduce the net return on the investment of customers of that Service Agent.
Each Service Agent has agreed to transmit to its customers who are shareholders
of a Fund appropriate prior written disclosure of any fees that it may charge
them directly.
The public offering price of shares of each Fund is the net asset value
next determined after an order in proper form is received and accepted by the
Transfer Agent, plus any applicable sales charge for Class A shares as provided
below. Each Fund and the Transfer Agent reserve the right to reject any
purchase order and to suspend the offering of Fund shares for a period of time.
Each Service Agent is responsible for transmitting promptly orders of its
customers.
PURCHASING CLASS A SHARES. Initial Sales Charge. The public offering
price of Class A shares of each Fund is the next determined net asset value,
plus any applicable sales charge, which will vary with the size of the purchase
as shown in the following table:
<PAGE>
Sales Charge As
Percentage of the Service Agent
Commission
Public Net As Percentage
Amount of Purchase at Offering Amount of the Public
Public Offering Price Price Invested Offering Price
- -------------------------------------------------------------------------------
Less than $100,000................... 4.00% 4.17% 3.56%
$100,000 to less than $250,000....... 3.50% 3.63% 3.12%
$250,000 to less than $500,000....... 2.50% 2.56% 2.23%
$500,000 to less than $1,000,000..... 2.00% 2.04% 1.78%
$1,000,000 or more................... none* none* 0.50%
----------------------
*A contingent deferred sales charge may apply in certain instances.
Elimination of Initial Sales Charge. Class A shares of the Funds are
available without an initial sales charge through exchanges for Class A shares
of the other Funds. See "Exchanges." The initial sales charge also does not
apply to Class A shares acquired through the reinvestment of dividends and
capital gains distributions. In addition, Class A shares may be purchased
without an initial sales charge in certain circumstances. See Appendix B.
Reduced Sales Charge Programs. Class A shares of the Funds may be
purchased at reduced initial sales charges in certain circumstances. See
Appendix B.
Waivers of Contingent Deferred Sales Charge. The contingent deferred
sales charge for Class A shares may be waived in certain circumstances. See
Appendix B.
PURCHASING CLASS C SHARES. The public offering price of Class C shares of
each Fund is the next determined net asset value. No initial or contingent
deferred sales charges are imposed.
Securities dealers and other financial institutions may receive different
compensation with respect to sales of Class A and Class C shares. Service
Agents which are banks or financial institutions will receive transaction fees
that are equal to the commissions paid to securities brokers. The Distributor,
at its expense, may from time to time provide additional promotional incentives
to brokers who sell shares of a Fund. In some instances, these incentives may
be offered to certain brokers who have sold or may sell significant numbers of
shares of a Fund. From time to time the Distributor may make payments for
distribution and/or shareholder servicing activities out of its past profits
and any other sources available to it.
EXCHANGES
Shares of each Fund may be exchanged for shares of the same class of each
other Fund without charge. Shareholders may place exchange orders through the
Transfer Agent or, if they are customers of a Service Agent, through their
Service Agent, and may do so by telephone if their account applications so
permit. For more information on telephone transactions see "Redemptions." All
exchanges will be effected based on the relative net asset values per share
next determined after the exchange order in proper form is received by the
Transfer Agent. See "Valuation of Shares." Shares of the Funds may be exchanged
only after payment in federal funds for the shares has been received by the
Transfer Agent. This exchange privilege may be modified or terminated at any
time, upon at least 60 days' notice when such notice is required by SEC rules,
<PAGE>
and is available only in those jurisdictions where such exchanges legally may
be made. See the Statement of Additional Information for further details. An
exchange is treated as a sale of the shares exchanged and could result in
taxable gain or loss to the shareholder making the exchange.
REDEMPTIONS
Fund shares may be redeemed at their net asset value next determined
after a redemption request in proper form is received by the Transfer Agent. If
a redeeming shareholder owns shares of more than one class, Class C shares will
be redeemed first unless the shareholder specifically requests otherwise. Each
Service Agent is responsible for the prompt transmission of redemption orders
to the Funds on behalf of its customers. A Service Agent may establish
requirements or procedures regarding submission of redemption requests by its
customers that are different from those described below. Investors should
consult their Service Agents for details. A redemption is treated as a sale of
the shares redeemed and could result in taxable gain or loss to the shareholder
making the redemption.
Redemptions by Mail. Shareholders may redeem Fund shares by sending
written instructions in proper form (as determined by the Transfer Agent or a
shareholder's Service Agent) to the Transfer Agent or, if shareholders are
customers of a Service Agent, their Service Agent. Shareholders are responsible
for ensuring that a request for redemption is in proper form.
Redemptions by Telephone. Shareholders may redeem or exchange Fund shares
by telephone, if their account applications so permit, by calling the Transfer
Agent or, if they are customers of a Service Agent, their Service Agent. During
periods of drastic economic or market changes or severe weather or other
emergencies, shareholders may experience difficulties implementing a telephone
exchange or redemption. In such an event, another method of instruction, such
as a written request sent via an overnight delivery service, should be
considered. The Funds, the Transfer Agent and each Service Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These procedures may include recording of the telephone
instructions and verification of a caller's identity by asking for his or her
name, address, telephone number, Social Security number, and account number. If
these or other reasonable procedures are not followed, the Fund, the Transfer
Agent or the Service Agent may be liable for any losses to a shareholder due to
unauthorized or fraudulent instructions. Otherwise, the shareholder will bear
all risk of loss relating to a redemption or exchange by telephone.
Payment of Redemptions. The proceeds of a redemption are paid in federal
funds normally on the next Business Day, but in any event within seven days. If
a shareholder requests redemption of shares which were purchased recently, a
Fund may delay payment until it is assured that good payment has been received.
In the case of purchases by check, this can take up to ten days. See
"Determination of Net Asset Value; Valuation of Securities; Additional Purchase
and Redemption Information" in the Statement of Additional Information
regarding the Funds' right to pay the redemption price in kind with securities
(instead of cash).
Reinstatement Privilege. Shareholders who have redeemed Class A shares
may reinstate their Fund account without a sales charge up to the dollar amount
redeemed (with a credit for any contingent deferred sales charge paid) by
purchasing Class A shares of the same Fund within 30 days after the redemption.
To take advantage of this reinstatement privilege, shareholders must notify the
Transfer Agent or, if they are customers of a Service Agent, their Service
Agent in writing at the time the privilege is exercised.
<PAGE>
Questions about redemption requirements should be referred to the
Transfer Agent or, for customers of a Service Agent, their Service Agent. The
right of any shareholder to receive payment with respect to any redemption may
be suspended or the payment of the redemption price postponed during any period
in which the New York Stock Exchange is closed (other than weekends or
holidays) or trading on the Exchange is restricted or if an emergency exists.
DIVIDENDS AND DISTRIBUTIONS
Substantially all of each Fund's net income from dividends and interest is
paid to its shareholders of record as a dividend as follows:
For CITISELECT FOLIO 200, monthly on or about the last day of each MONTH.
For CITISELECT FOLIO 300, quarterly on or about the last day of each
MARCH, JUNE, SEPTEMBER and DECEMBER.
For CITISELECT FOLIO 400 and CITISELECT FOLIO 500, annually on or about
the last day of each DECEMBER.
Each Fund's net realized short-term and long-term capital gains, if any,
will be distributed to the Fund's shareholders at least annually, in December.
Each Fund may also make additional distributions to its shareholders to the
extent necessary to avoid the application of the 4% non-deductible excise tax
on certain undistributed income and net capital gains of mutual funds.
A shareholder may elect to receive dividends and capital gains
distributions in either cash or additional shares of the same class issued at
net asset value. Distributions paid by each Fund with respect to Class A shares
generally will be higher than those paid with respect to Class C shares because
expenses attributable to Class C shares generally will be higher.
MANAGEMENT
TRUSTEES AND OFFICERS: Each Fund is supervised by the Board of Trustees of
Landmark Funds I. The Portfolios are supervised by the Board of Trustees of
Asset Allocation Portfolios. In each case, a majority of the Trustees are not
affiliated with Citibank. In addition, a majority of the disinterested Trustees
of the Funds are different from a majority of the disinterested Trustees of the
Portfolios. More information on the Trustees and officers of the Funds and the
Portfolios appears under "Management" in the Statement of Additional
Information.
INVESTMENT MANAGER: Each Fund draws on the strength and experience of
Citibank. Citibank offers a wide range of banking and investment services to
customers across the United States and throughout the world, and has been
managing money since 1822. Its portfolio managers are responsible for investing
in money market, equity and fixed income securities. Citibank and its
affiliates manage more than $83 billion in assets worldwide. Citibank is a
wholly-owned subsidiary of Citicorp. Citibank also serves as investment adviser
to other registered investment companies. Citibank's address is 153 East 53rd
Street, New York, New York 10043.
Subject to policies set by the Trustees, Citibank is responsible for
overall management of the Funds' business affairs, and has a separate
Management Agreement with each Fund. Citibank also provides certain
administrative services to the Funds. These administrative services include
providing general office facilities and supervising the overall administration
<PAGE>
of the Funds. Pursuant to sub-administrative services agreements, the
Distributor performs such sub-administrative duties for the Funds as from time
to time are agreed upon by Citibank and the Distributor. The Distributor's
compensation as sub-administrator is paid by Citibank.
Lawrence P. Keblusek, U.S. Chief Investment Officer of Citibank, has been
the overall portfolio manager of the Funds since their inception and is
responsible for determining asset allocations, supervising and monitoring the
performance of the Citibank personnel described below who are responsible for
the Funds' securities, and supervising and monitoring the performance of the
Subadvisers. Mr. Keblusek's investment experience is discussed below.
The following individuals at Citibank are responsible for daily management
of the following kinds of securities of each Fund (and related investments).
Large capitalization growth securities Lawrence P. Keblusek, U.S.
Chief Investment Officer,
has been responsible for
the daily management of
large cap growth securities
since the Funds'
inception. Mr. Keblusek,
who has 25 years experience
in the investment
management industry, was
most recently Senior Vice
President and Director of
Portfolio Management for
The Northern Trust Company
with responsibility for
investment performance in
the organization's High Net
Worth, Corporate and
Institutional and Mutual
Fund Group. Earlier in his
career, Mr. Keblusek held
senior investment positions
with Maryland National Bank
and the National Bank of
Washington.
Small capitalization growth securities David N. Pearl, Vice
President, has been
responsible for the daily
management of small cap
growth securities since the
Funds' inception. Mr.
Pearl is a portfolio
manager of U.S. equity
assets for institutional
clients, and joined
Citibank in 1994. Prior to
joining Citibank he worked
as a portfolio manager at
Fleming Capital Management
and Bankers Trust Company.
<PAGE>
Domestic fixed income securities Mark Lindbloom, Vice
President, has been
responsible for the daily
management of domestic
fixed income securities
since the Funds'
inception. Mr. Lindbloom
has more than 12 years of
investment management
experience. Prior to
joining Citibank in 1986,
Mr. Lindbloom was a Fixed
Income Portfolio Manager
with Brown Brothers
Harriman & Co., where he
managed fixed income assets
for discretionary corporate
portfolios.
Money market securities Kevin Kennedy, Vice
President, has been
responsible for the daily
management of money market
securities since the Funds'
inception. Mr. Kennedy is
responsible for managing
the Liquidity Management
Unit of the U.S. Fixed
Income Department of
Citibank Global Asset
Management. Prior to
joining Citibank in March
1993, Mr. Kennedy was with
the Metropolitan Life
Insurance Company as the
Managing Trader of the
Treasurer's Division. He
was responsible for the
management of more than $9
billion in short duration
fixed income assets. Mr.
Kennedy has more than 15
years of fixed income
management experience.
Citibank has delegated the daily management of the following kinds of
securities of each Fund (and related investments) to the following Subadvisers.
Citibank pays all Subadviser compensation.
Large capitalization value securities Miller Anderson & Sherrerd
LLP, One Tower Bridge, West
Conshohocken, Pennsylvania
19428. Miller Anderson has
been a registered
investment adviser since
1974. Robert Marcin, CFA,
Partner, has been
responsible for the daily
management of large cap
value securities since the
Funds' inception. Mr.
Marcin has been with Miller
Anderson since 1988.
<PAGE>
Small capitalization value securities Franklin Advisory Services,
Inc., 777 Mariners Island
Blvd., San Mateo,
California 94404. Franklin
Advisory Services, a
wholly-owned subsidiary of
Franklin Resources, Inc.,
is a registered investment
adviser. William P.
Lippman, senior vice
president of Franklin
Advisory Services or its
predecessor since June,
1988, has been responsible
for the daily management of
small capitalization value
securities since the Funds'
inception. Prior to
joining Franklin Advisory
Services, Mr. Lippman was
president of L.F.
Rothschild Fund Management,
Inc.
International equity securities Hotchkis & Wiley, 800 West
Sixth Street, Fifth Floor,
Los Angeles, California
90017. Hotchkis & Wiley is
a registered investment
adviser founded in 1980.
Hotchkis & Wiley, a limited
partnership has entered
into a Purchase Agreement
with Merrill Lynch & Co.,
Inc. a Delaware corporation
("Merrill Lynch"), pursuant
to which Merrill Lynch,
subject to a number of
contingencies, will acquire
the partnership interests
in Hotchkis & Wiley. If
the purchase occurs, the
Sub-Management Agreement by
and among the Funds,
Citibank and Hotchkis &
Wiley would automatically
terminate due to its
"assignment" (as that term
is defined in the 1940 Act)
resulting from the change
in control of ownership of
Hotchkis & Wiley. In order
to ensure that Hotchkis &
Wiley will continue to
provide sub-investment
management services to the
Funds in the same manner as
they are currently, the
Fund's Board of Trustees
and shareholders will be
asked to approve a new
Sub-Management Agreement.
<PAGE>
Harry W. Hartford and Sarah
H. Ketterer have been
responsible for the daily
management of international
equity securities since the
Funds' inception. Mr.
Hartford and Ms. Ketterer
manage international equity
accounts and are also
responsible for
international investment
research. Each serves on
the Investment Policy
Committee at Hotchkis &
Wiley. Prior to joining
Hotchkis & Wiley, Mr.
Hartford was with The
Investment Bank of Ireland,
where he gained 10 years of
experience in both
international and global
equity management. Prior
to joining Hotchkis &
Wiley, Ms. Ketterer was an
associate with Bankers
Trust and an analyst at
Dean Witter.
Foreign government securities Pacific Investment
Management Company, 840
Newport Center Drive, Suite
360, P.O. Box 6430, Newport
Beach, California
92658-9030. PIMCO is a
registered investment
adviser. Lee R. Thomas,
III, Senior International
Portfolio Manager, has been
responsible for the daily
management of foreign
government securities since
the Funds' inception. He
joined PIMCO in 1995.
Previously he was a member
of Investcorp's Management
Committee, where he was
responsible for global
securities and foreign
exchange trading. Prior to
Investcorp, he was
associated with Goldman
Sachs, where he was an
Executive Director in the
fixed income division of
the London office.
Management Fees. For its services under the Management Agreements,
Citibank receives a fee, which is accrued daily and paid monthly, of 0.75% of
each Fund's average daily net assets on an annualized basis for that Fund's
then-current fiscal year. This fee is higher than the management fee paid by
most mutual funds. Citibank may voluntarily agree to waive a portion of its
management fee from any Fund.
For their services to the Funds, Citibank pays the Subadvisers the
following fees, which are accrued daily and payable monthly and are at the
annual rates equal to the percentages specified below of the aggregate assets
of the Funds allocated to the particular Subadviser:
<PAGE>
Miller Anderson & Sherrerd LLP 0.625% on first $25 million
0.375% on next $75 million
0.250% on next $400 million
0.20% on assets in excess
of $500 million
Franklin Advisory Services, Inc. 0.55% on first $250 million
0.50% on remaining assets
Hotchkis & Wiley 0.60% on first $10 million
0.55% on next $40 million
0.45% on next $100 million
0.35% on next $150 million
0.30% on remaining assets
PIMCO 0.35% on first $200 million
0.30% on remaining assets
Banking Relationships. Citibank and its affiliates may have deposit, loan
and other relationships with the issuers of securities purchased on behalf of
the Funds, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Citibank has
informed the Funds that, in making its investment decisions, it does not obtain
or use material inside information in the possession of any division or
department of Citibank or in the possession of any affiliate of Citibank.
Bank Regulatory Matters. The Glass-Steagall Act prohibits certain
financial institutions, such as Citibank, from underwriting securities of
open-end investment companies, such as the Funds. Citibank believes that its
services under the Management Agreements and the activities performed by it or
its affiliates as Service Agents are not underwriting and are consistent with
the Glass-Steagall Act and other relevant federal and state laws. However,
there is no controlling precedent regarding the performance of the combination
of investment advisory, shareholder servicing and administrative activities by
banks. State laws on this issue may differ from applicable federal law, and
banks and financial institutions may be required to register as dealers
pursuant to state securities laws. Changes in either federal or state statutes
or regulations, or in their interpretations, could prevent Citibank or its
affiliates from continuing to perform these services. If Citibank or its
affiliates were to be prevented from acting as the investment manager or a
Service Agent, the Funds would seek alternative means for obtaining these
services. The Funds do not expect that shareholders would suffer any adverse
financial consequences as a result of any such occurrence.
TRANSFER AGENT, CUSTODIAN AND FUND ACCOUNTANT: State Street Bank and
Trust Company acts as transfer agent, dividend disbursing agent and custodian
for each Fund. Securities may be held by a sub-custodian bank approved by the
Trustees. State Street also provides certain fund accounting services and
calculates the daily net asset value for the Funds. The principal business
address of State Street is 225 Franklin Street, Boston, Massachusetts 02110.
DISTRIBUTION ARRANGEMENTS: The Landmark Funds Broker-Dealer Services,
Inc., 6 St. James Avenue, Boston, MA 02116 (telephone: (617)423-1679), is the
distributor of shares of each Fund. Under Service Plans which have been adopted
in accordance with Rule 12b-1 under the 1940 Act, the Funds may pay monthly
fees at an annual rate not to exceed 0.50% of the average daily net assets
attributable to Class A shares of each Fund and 1.00% of the average daily net
assets attributable to Class C shares of each Fund. Such fees may be used to
make payments to the Distributor for distribution services, and to Service
<PAGE>
Agents and others in respect of the sale of the respective classes of shares of
the Funds, and to make payments for advertising, marketing or other promotional
activity, and payments for preparation, printing, and distribution of
prospectuses, statements of additional information and reports for recipients
other than regulators and existing shareholders. The Funds also may make
payments to the Distributor, Service Agents and others for providing personal
service or the maintenance of shareholder accounts. The Funds and the
Distributor provide to the Trustees quarterly a written report of amounts
expended pursuant to each Service Plan and the purposes for which the
expenditures were made.
During the period they are in effect, the Service Plans and related
Distribution Agreements obligate the Funds to pay fees to the Distributor,
Service Agents and others as compensation for their services, not as
reimbursement for specific expenses incurred. Thus, even if their expenses
exceed the fees provided for under a particular Service Plan for any Fund, the
Fund will not be obligated to pay more than those fees and, if their expenses
are less than the fees paid to them, they will realize a profit. Each Fund will
pay the fees to the Distributor, Service Agents and others until the applicable
Service Plan or Distribution Agreement is terminated or not renewed. In that
event, the Distributor's or Service Agent's expenses in excess of fees received
or accrued through the termination date will be the Distributor's or Service
Agent's sole responsibility and not obligations of the Fund. In their annual
consideration of the continuation of each Service Plan for each Fund, the
Trustees will review the Plan and the expenses for each Fund separately.
Each class of shares of each Fund has exclusive voting rights with
respect to the Service Plan for that class.
TAX MATTERS
This discussion of taxes is for general information only. Investors should
consult their own tax advisers about their particular situations.
Each Fund intends to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies so that it will not be liable for
any federal income or excise taxes. Each Fund may pay withholding or other
taxes to foreign governments during the year, however, and these taxes will
reduce those Funds' dividends.
Fund dividends and capital gains distributions are subject to federal
income tax and may also be subject to state and local taxes. Dividends and
distributions are treated in the same manner for federal tax purposes whether
they are paid in cash or as additional shares. Generally, distributions from a
Fund's net investment income and short-term capital gains will be taxed as
ordinary income. A portion of distributions from net investment income may be
eligible for the dividends-received deduction available to corporations.
Distributions of long-term net capital gains will be taxed as such regardless
of how long the shares of a Fund have been held.
Fund distributions will reduce the distributing Fund's net asset value per
share. Shareholders who buy shares just before a Fund makes a 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.
Early each year, each Fund will notify its shareholders of the amount and
tax status of distributions paid to shareholders for the preceding year.
Investors should consult their own tax advisers regarding the status of their
accounts under state and local laws.
<PAGE>
PERFORMANCE INFORMATION
Fund performance may be quoted in advertising, shareholder reports and
other communications in terms of total rate of return. All performance
information is historical and is not intended to indicate future performance.
Total rates of return fluctuate in response to market conditions and other
factors, and the value of a Fund's shares when redeemed may be more or less
than their original cost.
Each Fund may provide its period and average annualized "total rates of
return." The "total rate of return" refers to the change in the value of an
investment in the Fund over a stated period and reflects any change in net
asset value per share and is compounded to include the value of any shares
purchased with any dividends or capital gains declared during such period.
Period total rates of return may be "annualized." An "annualized" total rate of
return assumes that the period total rate of return is generated over a
one-year period.
Of course, any fees charged by a shareholder's Service Agent will reduce
that shareholder's net return on investment. See the Statement of Additional
Information for more information concerning the calculation of total rate of
return quotations for the Funds.
GENERAL INFORMATION
ORGANIZATION: Each Fund is a series of Landmark Funds I. Landmark Funds I
is a Massachusetts business trust which was organized on April 13,1984; it also
is an open-end management investment company registered under the 1940 Act.
Landmark Funds I currently has five active series.
Each Fund is a diversified mutual fund. Under the 1940 Act, a diversified
mutual fund must invest at least 75% of its assets in cash and cash items, U.S.
Government securities, investment company securities and other securities
limited as to any one issuer to not more than 5% of the total assets of the
mutual fund and not more than 10% of the voting securities of the issuer.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the trust's
obligations. However, 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 Portfolio is a series of Asset Allocation Portfolios, a New York
trust. The Declaration of Trust of Asset Allocation Portfolios provides that a
Fund and other entities investing in a Portfolio are each liable for all
obligations of that Portfolio. It is not expected that the liabilities of a
Portfolio would ever exceed its assets.
VOTING AND OTHER RIGHTS: Landmark Funds I may issue an unlimited number of
shares, may create new series of shares and may divide shares in each series
into classes. Each share of each Fund gives the shareholder one vote in Trustee
elections and other matters submitted to shareholders for vote. All shares of
each series of Landmark Funds I have equal voting rights except that, in
matters affecting only a particular Fund or class, only shares of that
particular Fund or class are entitled to vote.
At any meeting of shareholders of any Fund, a Service Agent may vote any
shares of which it is the holder of record and for which it does not receive
<PAGE>
voting instructions proportionately in accordance with the instructions it
receives for all other shares of which that Service Agent is the holder of
record.
Each Fund's activities are supervised by Landmark Funds I's Board of
Trustees. Because Landmark Funds I is a Massachusetts business trust, the Funds
are not required to hold annual shareholder meetings. Shareholder approval will
usually be sought only for changes in a Fund's or Portfolio's fundamental
investment restrictions and for the election of Trustees under certain
circumstances. Trustees may be removed by shareholders under certain
circumstances. Each share of each Fund is entitled to participate equally in
dividends and other distributions and the proceeds of any liquidation of that
Fund except that, due to the differing expenses borne by each class, dividends
and proceeds generally will be lower for Class C shares than for Class A
shares.
CERTIFICATES: The Funds' Transfer Agent maintains a share register for
shareholders of record. Share certificates are not issued.
RETIREMENT PLANS: Investors may be able to establish new accounts in a
Fund under one of several tax-sheltered plans. Such plans include IRAs, Keogh
or Corporate Profit-Sharing and Money-Purchase Plans, 403(b) Custodian
Accounts, and certain other qualified pension and profit-sharing plans.
Investors should consult with their Service Agent and their tax and retirement
advisers.
EXPENSES: In addition to amounts payable under its Management Agreement
and the Service Plan, each Fund is responsible for its own expenses, including,
among other things, the costs of securities transactions, the compensation of
Trustees that are not affiliated with Citibank, government fees, taxes,
accounting and legal fees, expenses of communicating with shareholders,
interest expense, and insurance premiums.
All fee waivers are voluntary and may be reduced or terminated at any
time.
COUNSEL AND INDEPENDENT AUDITORS: Bingham, Dana & Gould LLP, Boston,
Massachusetts, is counsel for each Fund. Price Waterhouse LLP, Boston,
Massachusetts, serves as independent auditor for each Fund.
-------------------------------
The Statement of Additional Information dated the date hereof contains
more detailed information about the Funds and the Portfolios, including
information relating to (i) investment policies and restrictions, (ii) the
Trustees, officers and investment manager, (iii) securities transactions, (iv)
the Funds' shares, including rights and liabilities of shareholders, (v) the
method used to calculate performance information, (vi) programs for the
purchase of shares, and (vii) the determination of net asset value.
No person has been authorized to give any information or make any
representations not contained in this Prospectus or the Statement of Additional
Information in connection with the offering made by this Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Funds or their distributor. This Prospectus does
not constitute an offering by the Funds or their distributor in any
jurisdiction in which such offering may not lawfully be made.
<PAGE>
APPENDIX A
PERMITTED INVESTMENTS AND
INVESTMENT PRACTICES
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements in
order to earn a return on temporarily available cash. Repurchase agreements are
transactions in which an institution sells the Fund a security at one price,
subject to the Fund's obligation to resell and the selling institution's
obligation to repurchase that security at a higher price normally within a
seven day period. There may be delays and risks of loss if the seller is unable
to meet its obligation to repurchase.
REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into reverse repurchase
agreements. Reverse repurchase agreements involve the sale of securities held
by the Fund and the agreement by the Fund to repurchase the securities at an
agreed-upon price, date and interest payment. When a Fund enters into reverse
repurchase transactions, securities of a dollar amount equal in value to the
securities subject to the agreement will be maintained in a segregated account
with the Fund's custodian. The segregation of assets could impair the Fund's
ability to meet its current obligations or impede investment management if a
large portion of the Fund's assets are involved. Reverse repurchase agreements
are considered to be a form of borrowing.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements and in order to generate additional income, each Fund may lend its
portfolio securities to broker-dealers and other institutional borrowers. Such
loans must be callable at any time and continuously secured by collateral (cash
or U.S. Government securities) in an amount not less than the market value,
determined daily, of the securities loaned. It is intended that the value of
securities loaned by a Fund would not exceed 30% of the Fund's total assets.
In the event of the bankruptcy of the other party to a securities loan,
repurchase agreement or a reverse repurchase agreement, a Fund could experience
delays in recovering either the securities lent or cash. To the extent that, in
the meantime, the value of the securities lent has increased or the value of
the securities purchased has decreased, the Fund could experience a loss.
RULE 144A SECURITIES. Each Fund may purchase restricted securities that
are not registered for sale to the general public if it is determined that
there is a dealer or institutional market in the securities. In that case, the
securities will not be treated as illiquid for purposes of the Fund's
investment limitations. The Trustees will review these determinations. These
securities are known as "Rule 144A securities," because they are traded under
SEC Rule 144A among qualified institutional buyers. Institutional trading in
Rule 144A securities is relatively new, and the liquidity of these investments
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.
PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS. Each Fund may invest up to
10% of its net assets in securities for which there is no readily available
market. These illiquid securities may include privately placed restricted
securities for which no institutional market exists. The absence of a trading
market can make it difficult to ascertain a market value for illiquid
investments. Disposing of illiquid investments may involve time-consuming
negotiation and legal expenses, and it may be difficult or impossible for a
Fund to sell them promptly at an acceptable price.
<PAGE>
"WHEN-ISSUED" SECURITIES. In order to ensure the availability of suitable
securities, each Fund may purchase securities on a "when-issued" or on a
"forward delivery" basis, which means that the securities would be delivered to
the Fund at a future date beyond customary settlement time. Under normal
circumstances, the Fund takes delivery of the securities. In general, the Fund
does not pay for the securities until received and does not start earning
interest until the contractual settlement date. While awaiting delivery of the
securities, the Fund establishes a segregated account consisting of cash, cash
equivalents or high quality debt securities equal to the amount of the Fund's
commitments to purchase "when-issued" securities. An increase in the percentage
of the Fund's assets committed to the purchase of securities on a "when-issued"
basis may increase the volatility of its net asset value.
COMMERCIAL PAPER. Each Fund may invest in commercial paper, which is
unsecured debt of corporations usually maturing in 270 days or less from its
date of issuance.
DEPOSITARY RECEIPTS FOR SECURITIES. 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 a Fund to make non-U.S. investments. These securities
are not usually traded 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.
OTHER INVESTMENT COMPANIES. Subject to applicable statutory and regulatory
limitations, assets of each Fund may be invested in shares of other investment
companies. Each Fund may invest up to 5% of its assets in closed-end investment
companies which primarily hold securities of non-U.S. issuers.
CURRENCY EXCHANGE CONTRACTS. Forward currency exchange contracts may be
entered into for each Fund for the purchase or sale of non-U.S. currency to
hedge against adverse rate changes or otherwise to achieve the Fund's
investment objectives. A currency exchange contract allows a definite price in
dollars to be fixed for securities of non-U.S. issuers that have been purchased
or sold (but not settled) for the Fund. Entering into such exchange contracts
may result in the loss of all or a portion of the benefits which otherwise
could have been obtained from favorable movements in exchange rates. In
addition, entering into such contracts means incurring certain transaction
costs and bearing the risk of incurring losses if rates do not move in the
direction anticipated.
SECURITIES RATED Baa or BBB. Each Fund may purchase securities rated Baa
by Moody's or BBB by S&P, which may have poor protection of payment of
principal and interest. These securities are often considered to be speculative
and involve greater risk of default or price changes than securities assigned a
higher quality rating due to changes in the issuer's creditworthiness. The
market prices of these securities may fluctuate more than higher-rated
securities and may decline significantly in periods of general economic
difficulty which may follow periods of rising interest rates.
ASSET-BACKED SECURITIES. Each Fund may invest in corporate asset-backed
securities. These securities, issued by trusts and special purpose
corporations, are backed by a pool of assets, such as credit card or automobile
loan receivables, representing the obligations of a number of different
parties. Corporate asset-backed securities present certain risks. For instance,
in the case of credit card receivables, these securities may not have the
benefit of any security interest in the related collateral.
<PAGE>
Each Fund also may purchase mortgage-backed securities issued or
guaranteed as to payment of principal and interest by the U.S. Government or
one of its agencies and backed by the full faith and credit of the U.S.
Government, including direct pass-through certificates of GNMA, as well as
mortgage-backed securities for which principal and interest payments are backed
by the credit of particular agencies of the U.S. Government. Mortgage-backed
securities are generally backed or collateralized by a pool of mortgages. These
securities are sometimes called collateralized mortgage obligations or CMOs.
Even if the U.S. Government or one of its agencies guarantees principal
and interest payments of a mortgage-backed security, the market price of a
mortgage-backed security is not insured and may be subject to market
volatility. When interest rates decline, mortgage-backed securities experience
higher rates of prepayment, because the underlying mortgages are refinanced to
take advantage of the lower rates. Thus the prices of mortgage-backed
securities may not increase as much as prices of other debt obligations when
interest rates decline, and mortgage-backed securities may not be an effective
means of locking in a particular interest rate. In addition, any premium paid
for a mortgage-backed security may be lost when it is prepaid.
FUTURES. Because the value of a futures contract changes based on the
price of the underlying security or other asset, futures contracts are commonly
referred to as "derivatives". Futures contracts are a generally accepted part
of modern portfolio management and are regularly utilized by many mutual funds
and other institutional investors. When a Fund purchases or sells a futures
contract, it is required to make an initial margin deposit. Although the amount
may vary, initial margin can be as low as 1% or less of the face amount of the
contract. Additional margin may be required as the contract fluctuates in
value. Since the amount of margin is relatively small compared to the value of
the securities covered by a futures contract, the potential for gain or loss on
a futures contract is much greater than the amount of a Fund's initial margin
deposit. None of the Funds currently intends to enter into a futures contract
if, as a result, the initial margin deposits on all of that Fund's futures
contracts would exceed approximately 5% of the Fund's net assets. Also, each
Fund intends to limit its futures contracts so that the value of the securities
covered by its futures contracts would not generally exceed 50% of the Fund's
other assets and to segregate sufficient assets to meet its obligations under
outstanding futures contracts.
The ability of a Fund to utilize futures contracts successfully will
depend on Citibank's or a Subadviser's ability to predict interest rate, stock
price or currency movements, which cannot be assured. In addition to general
risks associated with any investment, the use of futures contracts entails the
risk that, to the extent Citibank's or the Subadviser's view as to interest
rate, stock price or currency movements is incorrect, the use of futures
contracts, even for hedging purposes, could result in losses greater than if
they had not been used. This could happen, for example, if there is a poor
correlation between price movements of futures contracts and price movements in
a Fund's related portfolio position. Also, the futures markets may not be
liquid in all circumstances. As a result, in certain markets, a Fund might not
be able to close out a transaction without incurring substantial losses, if at
all. When futures contracts are used for hedging, even if they are successful
in minimizing the risk of loss due to a decline in the value of the hedged
position, at the same time they limit any potential gain which might result
from an increase in value of such position. As noted, each Fund may also enter
into transactions in futures contracts for other than hedging purposes (subject
to applicable law), including speculative transactions, which involve greater
risk. In particular, in entering into such transactions, a Fund may experience
losses which are not offset by gains on other portfolio positions, thereby
<PAGE>
reducing its gross income. In addition, the markets for such instruments may be
extremely volatile from time to time, which could increase the risks incurred
by the Fund in entering into such transactions.
The use of futures contracts potentially exposes a Fund to the effects of
"leveraging," which occurs when futures are used so that the Fund's exposure to
the market is greater than it would have been if the Fund had invested directly
in the underlying securities. "Leveraging" increases a Fund's potential for
both gain and loss. As noted above, each of the Funds intends to adhere to
certain policies relating to the use of futures contracts, which should have
the effect of limiting the amount of leverage by the Fund.
OPTIONS. Each Fund may write (sell) covered call and put options and
purchase call and put options on securities. A Fund will write options on
securities for the purpose of increasing its return on such securities and/or
to protect the values of its portfolio. In particular, where the Fund writes an
option which expires unexercised or is closed out by the Fund at a profit, it
will retain the premium paid for the option which will increase its gross
income and will offset in part the reduced value of the portfolio security
underlying the option, or the increased cost of portfolio securities to be
acquired. If the price of the underlying security moves adversely to the Fund's
position, the option may be exercised and the Fund will be required to purchase
or sell the underlying security at a disadvantageous price, which may only be
partially offset by the amount of the premium.
By writing a call option on a security, a Fund limits its opportunity to
profit from any increase in the market value of the underlying security, since
the holder will usually exercise the call option when the market value of the
underlying security exceeds the exercise price of the call. However, the Fund
retains the risk of depreciation in value of securities on which it has written
call options.
Each of the Funds also may purchase 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 the Fund
anticipates investing in securities traded in such currency, the Fund may
purchase call options on the non-U.S. currency. Each Fund also may buy and
write options on stock indices.
Each Fund may purchase and write options to buy or sell interest rate
futures contracts and options on stock index futures contracts. Such investment
strategies will be used for hedging and non-hedging purposes, subject to
applicable law. Put and call options on futures contracts may be traded by a
Fund in order to protect against declines in values of portfolio securities or
against increases in the cost of securities to be acquired. Purchase of options
on futures contracts may present less risk in hedging the portfolio of a Fund
than the purchase or sale of the underlying futures contracts since the
potential loss is limited to the amount of the premium plus related transaction
costs. The writing of such options, however, does not present less risk than
the trading of futures contracts and will constitute only a partial hedge, up
to the amount of the premium received. In addition, if an option is exercised,
the Fund may suffer a loss on the transaction.
Each Fund may enter into forward foreign currency contracts for the
purchase or sale of a fixed quantity of a foreign currency at a future date at
a price set at the time of the contract. A Fund may enter into forward
contracts for hedging and non-hedging purposes including transactions entered
into for the purpose of profiting from anticipated changes in foreign currency
exchange rates. Each Fund has established procedures consistent with statements
<PAGE>
of the Securities and Exchange Commission and its staff regarding the use of
forward contracts by registered investment companies, which requires use of
segregated assets or "cover" in connection with the purchase and sale of such
contracts.
Forward contracts are traded over-the-counter, and not on organized
commodities or securities exchanges. As a result, such contracts operate in a
manner distinct from exchange-traded instruments, and their use involves
certain risks beyond those associated with transactions in the futures and
options contracts described herein.
Transactions in options may be entered into on U.S. exchanges regulated by
the SEC, in the over-the-counter market and on foreign exchanges, while forward
contracts may be entered into only in the over-the-counter market. Futures
contracts and options on futures contracts may be entered into on U.S.
exchanges regulated by the Commodity Futures Trading Commission and on foreign
exchanges. The securities underlying options and futures contracts traded by a
Fund may include domestic as well as foreign securities. Investors should
recognize that transactions involving foreign securities or foreign currencies,
and transactions entered into in foreign countries, may involve considerations
and risks not typically associated with investing in U.S. markets.
Transactions in options, futures contracts, options on futures contracts
and forward contracts entered into for non-hedging purposes involve greater
risk and could result in losses which are not offset by gains on other
portfolio assets. For example, a Fund may sell futures contracts on an index of
securities in order to profit from any anticipated decline in the value of the
securities comprising the underlying index. In such instances, any losses on
the futures transactions will not be offset by gains on any portfolio
securities comprising such index, as might occur in connection with a hedging
transaction.
DOLLAR ROLLS. The Funds also may enter into "dollar rolls." A dollar roll
is a transaction pursuant to which a Fund sells mortgage-backed securities for
delivery in the current month and simultaneously contracts to repurchase
substantially similar (same type, coupon and maturity) securities on a
specified future date. During the roll period, the Fund foregoes principal and
interest paid on the mortgage-backed securities. The Fund is compensated by the
difference between the current sales price and the lower forward price for the
future purchase (often referred to as the "drop") as well as by the interest
earned on the cash proceeds of the initial sale. A "covered roll" is a specific
type of dollar roll for which a Fund establishes a segregated account with
liquid high grade debt securities equal in value to the securities subject to
repurchase by the Fund. The Funds will invest only in covered rolls.
<PAGE>
APPENDIX B
SALES CHARGE AND PURCHASE PROGRAM
INFORMATION
Elimination of Initial Sales Charge for Class A Shares. Class A shares of
each Fund may be purchased without an initial sales charge by:
(i) tax exempt organizations under Section 501(c)(3-13) of the
Internal Revenue Code (the "Code"),
(ii) trust accounts for which Citibank or any subsidiary or affiliate of
Citibank (a "Citibank Affiliate") acts as trustee and exercises
discretionary investment management authority,
(iii) accounts purchasing shares through the Private Client Division of
Citicorp Investment Services (CIS) or through other programs accessed
through the Private Client Division of CIS, or the private banking
division of either Citibank, N.A., Citibank FSB or Citicorp Trust, N.A.,
(iv) accounts for which Citibank or any Citibank Affiliate performs
investment advisory services,
(v) accounts for which Citibank or any Citibank Affiliate charges fees
for acting as custodian,
(vi) trustees of any investment company for which Citibank or any Citibank
Affiliate serves as the manager, investment adviser or as a shareholder
servicing agent,
(vii) any affiliated person of a Fund, Citibank, the Distributor or any Service
Agent,
(viii)shareholder accounts established through a reorganization or similar
form of business combination approved by a Fund's Board of Trustees or by
the Board of Trustees of any other mutual fund advised or managed by
Citibank the terms of which entitle those shareholders to purchase shares
of a Fund at net asset value without a sales charge,
(ix) employee benefit plans qualified under Section 401 of the Code, including
salary reduction plans qualified under Section 401(k) of the Code,
subject to such minimum requirements as may be established by the
Distributor with respect to the number of employees or amount of
purchase; currently, these criteria require that (a) the employer
establishing the qualified plan have at least 25 eligible employees or
(b) the amount invested by such qualified plan in a Fund or in any
combination of Funds totals a minimum of $500,000,
(x) investors purchasing $1,000,000 or more of Class A shares. However, for
investors not purchasing shares under number (iii) above, a contingent
deferred sales charge will be imposed on such investments in the event
of certain share redemptions within 12 months following the share
purchase, at the rate of 1.00% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividends and capital gains
distributions) or the total cost of such shares. In determining whether
a contingent deferred sales charge on Class A shares is payable, and if
so, the amount of the charge, it is assumed that shares not subject to
the contingent deferred sales charge are the first redeemed followed by
other shares held for the longest period of time. All investments made
during a calendar month will age one month on the last day of the month
and each subsequent month. Any applicable contingent deferred sales
charge will be deferred upon an exchange of Class A shares for Class A
shares of another Fund and deducted from the redemption proceeds when
<PAGE>
such exchanged shares are subsequently redeemed (assuming the contingent
deferred sales charge is then payable). The holding period of shares so
acquired through an exchange will be aggregated with the period during
which the original shares were held. The contingent deferred sales
charge will be waived under certain circumstances as provided below.
Any applicable contingent deferred sales charges will be paid to the
Distributor,
(xi) subject to appropriate documentation, investors where the amount invested
represents redemption proceeds from a mutual fund (other than a Fund) if:
(i) the redeemed Class A shares were subject to an initial sales charge
or a deferred sales charge (whether or not actually imposed); and (ii)
such redemption has occurred no more than 90 days prior to the purchase
of Class A shares of the Fund, or
(xii) an investor who has a business relationship with an investment consultant
or other registered representative who joined a broker-dealer which has a
sales agreement with the Distributor from another investment firm within
six months prior to the date of purchase by such investor, if (a) the
investor redeems shares of another mutual fund sold through the
investment firm that previously employed that investment consultant or
other registered representative, and either paid an initial sales charge
or was at some time subject to, but did not actually pay, a deferred
sales charge or redemption fee with respect to the redemption proceeds,
(b) the redemption is made within 60 days prior to the investment in a
Fund, and (c) the net asset value of the Class A shares of the Fund sold
to that investor without a sales charge does not exceed the proceeds of
such redemption.
Reduced Sales Charge Programs for Class A Shares. An individual who is a
member of a qualified group may purchase Class A shares of a Fund at the
reduced initial sales charge applicable to the group as a whole. The sales
charge is based upon the aggregate dollar value of Class A shares previously
purchased and still owned by the group, plus the amount of the purchase. A
"qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring Fund shares at a discount, and
(iii) satisfies uniform criteria which enable the Distributor to realize
economies of scale in its costs of distributing shares. A qualified group must
have more than ten members, must be available to arrange for group meetings
between representatives of the Fund and the members, must agree to include
sales and other materials related to the Fund in its publications and mailings
to members at reduced or no cost to the Distributor, and must seek to arrange
for payroll deduction or other bulk transmission of investments to the Fund.
Reduced initial sales charges on Class A shares also may be achieved
through a RIGHT OF ACCUMULATION or a LETTER OF INTENT. Under a RIGHT OF
ACCUMULATION eligible investors are permitted to purchase Class A shares of a
Fund at the public offering price applicable to the total of (a) the dollar
amount then being purchased, plus (b) an amount equal to the then-current net
asset value or cost (whichever is higher) of the purchaser's combined holdings
in the Funds. The Right of Accumulation may be amended or terminated at any
time.
If an investor anticipates purchasing $100,000 or more of Class A shares
of a Fund alone or in combination with Class A shares of the other 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,
subject to the appointment of an attorney for redemptions of shares if the
intended purchases are not completed, by completing a LETTER OF INTENT.
Investors should consult "Determination of Net Asset Value; Valuation of
Securities; Additional Purchase and Redemption Information" in the Statement of
Additional Information and their Service Agents for more information about
Rights of Accumulation and Letters of Intent.
<PAGE>
Waivers of Contingent Deferred Sales Charge for Class A Shares. The
contingent deferred sales charge for Class A shares will be waived for a total
or partial redemption made within one year of the death of the shareholder.
This waiver is available where the deceased shareholder is either the sole
shareholder or owns the shares with his or her spouse as a joint tenant with
right of survivorship, and applies only to redemption of shares held at the
time of death. The contingent deferred sales charge also will be waived in
connection with:
(i) a lump sum or other distribution in the case of an Individual Retirement
Account ("IRA"), a self-employed individual retirement plan (so-called
"Keogh Plan") or a custodian account under Section 403(b) of the Code, in
each case following attainment of age 59 1/2,
(ii) a total or partial redemption resulting from any distribution following
retirement in the case of a tax-qualified retirement plan, and
(iii) a redemption resulting from a tax-free return of an excess contribution
to an IRA.
Contingent deferred sales charge waivers will be granted subject to
confirmation of the shareholder's status or holdings, as the case may be.
<PAGE>
Statement of
Additional Information
August 5, 1996
CITISELECTSM FOLIO 200
CITISELECTSM FOLIO 300
CITISELECTSM FOLIO 400
CITISELECTSM FOLIO 500
Class A and Class C Shares
Landmark Funds I (the "Trust") is an investment company which was
organized as a business trust under the laws of the Commonwealth of
Massachusetts on April 13, 1984. The Trust offers shares of CitiSelectSM Folio
200, CitiSelectSM Folio 300, CitiSelectSM Folio 400, and CitiSelectSM Folio 500
(collectively, the "Funds"), to which this Statement of Additional Information
relates, as well as shares of one other series. The address and telephone
number of the Trust are 6 St. James Avenue, Boston, Massachusetts 02116, (617)
423-1679. The Trust invests all of the investable assets of the Funds in,
respectively, Asset Allocation Portfolio 200, Asset Allocation Portfolio 300,
Asset Allocation Portfolio 400 and Asset Allocation Portfolio 500 (the
"Portfolios"), which are separate series of Asset Allocation 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 OR ENDORSED
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 Trust B-3
Investment Objectives and Policies B-3
Description of Permitted Investments and
Investment Practices B-4
Investment Restrictions B-18
Performance Information and Advertising B-21
Determination of Net Asset Value; Valuation of
Securities; Additional Redemption Information B-21
Management B-22
Portfolio Transactions B-29
Description of Shares, Voting Rights and Liabilities B-30
Certain Additional Tax Matters B-32
Financial Statements B-34
<PAGE>
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Trust's Prospectus, dated August 5, 1996. 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 calling 1-800-846-5200
(customers in New York City may call 212-820-2380).
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 TRUST
Landmark Funds I (the "Trust") is an investment company organized as a
business trust under the laws of the Commonwealth of Massachusetts on April 13,
1984. This Statement of Additional Information relates to four funds offered by
the Trust -- CitiSelect Folio 200, CitiSelect Folio 300, CitiSelect Folio 400
and CitiSelect Folio 500 (collectively, the "Funds").
The Trust seeks the investment objectives of the Funds by investing all
of their investable assets in, respectively, Asset Allocation Portfolio 200,
Asset Allocation Portfolio 300, Asset Allocation Portfolio 400 and Asset
Allocation Portfolio 500 (the "Portfolios"). The Portfolios are series of Asset
Allocation Portfolios (the "Portfolio Trust") and are open-end, diversified
management investment companies. Each Portfolio has the same investment
objective 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 Trust also include the Portfolio Trust, except as otherwise noted.
Citibank, N.A. ("Citibank" or the "Manager") is investment adviser and
also provides certain administrative services to each of the Portfolios and the
Trust. Citibank manages the investments of the Portfolios from day to day in
accordance with each Portfolio's investment objective 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 Boards of Trustees of the 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 The Landmark Funds Broker-Dealer
Services, Inc., the Funds' distributor ("LFBDS" or the "Distributor"). Shares
of each Fund are sold at net asset value plus 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 Service Plan adopted with respect to shares of the Funds in
accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended
(the "1940 Act").
2. INVESTMENT OBJECTIVES AND POLICIES
The investment objective of CitiSelect Folio 200 is high total return
over time consistent with a primary emphasis on income and a secondary emphasis
on capital appreciation.
The investment objective of CitiSelect Folio 300 is high total return
over time consistent with a balanced emphasis on income and capital
appreciation.
The investment objective of CitiSelect Folio 400 is high total return
over time consistent with a primary emphasis on capital appreciation and a
secondary emphasis on income for risk reduction purposes.
The investment objective of CitiSelect Folio 500 is highest total return
over time consistent with a primary emphasis on capital appreciation and a
secondary emphasis on income for risk reduction purposes.
The investment objective of each Fund may be changed by its Trustees
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 objective.
<PAGE>
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 objective, policies and techniques of each Fund.
The Funds are asset allocation funds. Asset allocation funds are a basic
tool of investment professionals and are differentiated by the use of
investment management strategies and techniques that range from the least
aggressive to the most aggressive. The Funds offer a convenient way to own a
diversified professionally managed portfolio tailored to specific investment
goals and expectations of risk and return. While time horizon is a factor, it
is not necessarily the determinative factor in choosing to invest in one of the
Funds. Investment goals, such as buying a home, educating children or saving
for retirement all determine the appropriate asset allocation and amount of
risk that an investor seeks.
CitiSelect Folio 200 is expected to be the least volatile of the four
Funds and is designed for the investor who is seeking lower risk provided by
substantial investments in income-producing securities, but who also seeks some
capital growth. CitiSelect Folio 300 offers a blend of capital appreciation and
income for the investor seeking a balanced approach by emphasizing stocks for
their higher capital appreciation potential but retaining a significant income
component to temper volatility. CitiSelect Folio 400 and CitiSelect Folio 500
are designed for the investor willing and able to take higher risks in the
pursuit of long-term capital appreciation. CitiSelect Folio 500 is expected to
be the most volatile of the four Funds, and is designed for investors who can
withstand greater market swings to seek potential long-term rewards. CitiSelect
Folio 400 is designed for investors seeking long-term rewards, but with less
volatility.
The Trust has 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. The 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 Trust
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 Trust may withdraw the investment of any Fund from its corresponding
Portfolio at any time if the Board of Trustees of the 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.
3. DESCRIPTION OF PERMITTED INVESTMENTS
AND INVESTMENT PRACTICES
BANK OBLIGATIONS
Each of the Funds may invest in bank obligations, i.e., certificates of
deposit, time deposits (including Eurodollar time deposits) and bankers'
acceptances and other short-term debt obligations issued by domestic banks,
foreign subsidiaries or foreign branches of domestic banks, domestic and
foreign branches of foreign banks, domestic savings and loan associations and
other banking institutions. A bankers' acceptance is a bill of exchange or time
draft drawn on and accepted by a commercial bank. It is used by corporations to
finance the shipment and storage of goods and to furnish dollar exchange.
Maturities are generally six months or less. A certificate of deposit is a
negotiable interest-bearing instrument with a specific maturity. Certificates
<PAGE>
of deposit are issued by banks and savings and loan institutions in exchange
for the deposit of funds and normally can be traded in the secondary market
prior to maturity. A time deposit is a non-negotiable receipt issued by a bank
in exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot
be traded in the secondary market. Time deposits with a withdrawal penalty are
considered to be illiquid securities.
MORTGAGE-BACKED SECURITIES
Each of the Funds may invest in mortgage-backed securities, which are
securities representing interests in pools of mortgage loans. Interests in
pools of mortgage-related securities differ from other forms of debt securities
which normally provide for periodic payment of interest in fixed amounts with
principal payments at maturity or specified call dates. Instead, these
securities provide a monthly payment which consists of both interest and
principal payments. In effect, these payments are a "pass-through" of the
monthly payments made by the individual borrowers on their mortgage loans, net
of any fees paid to the issuer or guarantor of such securities. Additional
payments are caused by prepayments of principal resulting from the sale,
refinancing or foreclosure of the underlying property, net of fees or costs
which may be incurred. The market value and interest yield of these instruments
can vary due to market interest rate fluctuations and early prepayments of
underlying mortgages.
The principal governmental issuers or guarantors of mortgage-backed
securities are the Government National Mortgage Association ("GNMA"), Federal
National Mortgage Association ("FNMA"), and Federal Home Loan Mortgage
Corporation ("FHLMC"). Obligations of GNMA are backed by the full faith and
credit of the United States Government while obligations of FNMA and FHLMC are
supported by the respective agency only. Although GNMA certificates may offer
yields higher than those available from other types of U.S. Government
securities, GNMA certificates may be less effective than other types of
securities as a means of "locking in" attractive long-term rates because of the
prepayment feature. For instance, when interest rates decline, the value of a
GNMA certificate likely will not rise as much as comparable debt securities due
to the prepayment feature. In addition, these prepayments can cause the price
of a GNMA certificate originally purchased at a premium to decline in price to
its par value, which may result in a loss.
Each Fund may also invest a portion of its assets in collateralized
mortgage obligations or "CMOs," a type of mortgage-backed security. CMOs are
securities collateralized by mortgages, mortgage pass-through certificates,
mortgage pay-through bonds (bonds representing an interest in a pool of
mortgages where the cash flow generated from the mortgage collateral pool is
dedicated to bond repayment), and mortgage-backed bonds (general obligations of
the issuers payable out of the issuers' general funds and additionally secured
by a first lien on a pool of single family detached properties). Many CMOs are
issued with a number of classes or series which have different maturities and
are retired in sequence.
Investors purchasing such CMOs in the shortest maturities receive or are
credited with their pro rata portion of the scheduled payments of interest and
principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obligation. Until that
portion of such CMO obligations is repaid, investors in the longer maturities
receive interest only. Accordingly, the CMOs in the longer maturity series are
less likely than other mortgage pass-through certificates to be prepaid prior
to their stated maturity. Although some of the mortgages underlying CMOs may be
supported by various types of insurance, and some CMOs may be backed by GNMA
certificates or other mortgage pass-through certificates issued or guaranteed
by U.S. Government agencies or instrumentalities, the CMOs themselves are not
generally guaranteed.
<PAGE>
MORTGAGE "DOLLAR ROLL" TRANSACTIONS
As described in the Prospectus, the Funds may enter into mortgage "dollar
roll" transactions pursuant to which they sell mortgage-backed securities for
delivery in the future and simultaneously contract to repurchase substantially
similar securities on a specified future date. During the roll period, a Fund
foregoes principal and interest paid on the mortgage-backed securities. The
Fund is compensated for the lost principal and interest by the difference
between the current sales price and the lower price for the future purchase
(often referred to as the "drop") as well as by the interest earned on the cash
proceeds of the initial sale. The Fund may also be compensated by receipt of a
commitment fee.
CORPORATE ASSET-BACKED SECURITIES
Each of the Funds may invest in corporate asset-backed securities. These
securities, issued by trusts and special purpose corporations, are backed by a
pool of assets, such as credit card and automobile loan receivables,
representing the obligations of a number of different parties.
Corporate asset-backed securities present certain risks. For instance, in
the case of credit card receivables, these securities may not have the benefit
of any security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicers to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there
is the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities. The underlying
assets (e.g., loans) are also subject to prepayments which shorten the
securities' weighted average life and may lower their return.
Corporate asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through insurance policies or
letters of credit obtained by the issuer or sponsor from third parties. A Fund
will not pay any additional or separate fees for credit support. The degree of
credit support provided for each issue is generally based on historical
information respecting the level of credit risk associated with the underlying
assets. Delinquency or loss in excess of that anticipated or failure of the
credit support could adversely affect the return on an investment in such a
security.
RULE 144A SECURITIES
Consistent with applicable investment restrictions, each of the Funds may
purchase securities that are not registered ("restricted 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 10% of its net assets in illiquid
investments, which include securities for which there is no readily available
market, securities subject to contractual restrictions on resale and restricted
<PAGE>
securities, unless the Board of Trustees of the Trust determine, based on the
trading markets for the specific restricted security, that it is liquid. The
Trustees may adopt guidelines and delegate to the Manager or to a Subadviser
the daily function of determining and monitoring liquidity of restricted
securities. The Trustees, however, retain sufficient oversight and are
ultimately responsible for the determinations.
Since it is not possible to predict with assurance exactly how the market
for restricted securities sold and offered under Rule 144A will develop, the
Trust's Trustees will carefully monitor each Fund's investments in these
securities, focusing on such factors, among others, as valuation, liquidity and
availability of information.
SECURITIES OF NON-U.S. ISSUERS
Each of the Funds may invest in securities of non-U.S. issuers. Investing
in securities of foreign issuers may involve significant risks not present in
domestic investments. For example, the value of such securities fluctuates
based on the relative strength on the U.S. dollar. In addition, there is
generally less publicly available information about foreign 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 domestic 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 the 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. stock 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 the Fund's assets may be released prior
to receipt of payments, may expose the Fund to increased risk in the event of a
failed trade or the insolvency of a non-U.S. broker-dealer. In addition,
foreign 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.
<PAGE>
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.
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.
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 three business 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 cash collateral or a fee from
the borrower in the event the collateral consists of securities. 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 Manager or a Subadviser
to be of good standing, and when, in the judgment of the Manager or a
Subadviser, the consideration which can be earned currently from loans of this
type justifies the attendant risk. If the Manager or a Subadviser determines to
make loans, it is not intended that the value of the securities loaned would
exceed 30% of the value of the respective Fund's total assets.
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
<PAGE>
sets up procedures consistent with Securities and Exchange Commission 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 respective Fund expects always to 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 Securities and Exchange Commission 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 Manager or a Subadviser determines it is
advisable as a matter of investment strategy to sell the "when-issued" or
"forward delivery" securities, the 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).
FOREIGN 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
foreign currency exchange transactions to convert United States currency to
foreign currency and foreign currency to United States currency, as well as
convert foreign currency to other foreign currencies. A Fund either enters into
these transactions on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or uses forward contracts to purchase or
sell foreign currencies. The Funds may also enter into foreign currency hedging
transactions in an attempt to protect the value of the assets of the respective
Fund 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 Trust does not intend to convert a Fund's holdings
of other currencies into U.S. dollars on a daily basis.)
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 the 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
<PAGE>
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 Manager or a Subadviser 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 Manager believes that it is important
to have the flexibility to enter into such forward contracts when it determines
that the best interests of the 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 Fund
securities at the expiration of the 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 the 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 the adverse movements in exchange rates. However, the benefit to the
Fund from purchases of foreign 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, the
Fund could sustain losses on transactions in foreign currency options which
would require it to forgo a portion or all of the benefits of advantageous
changes in such rates.
<PAGE>
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 foreign
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 foreign 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 and other depositary receipts presents many of the same
risks regarding currency exchange rates as investing directly in securities
traded 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 these receipts. For example,
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 non-U.S. currency remains constant, and thus will
reduce the value of the receipts covering such securities. A Fund may employ
any of the above described foreign currency hedging techniques to protect the
value of its assets invested in depositary receipts.
Of course, a Fund is not required to enter into the transactions
described above and does not do so unless deemed appropriate by the Manager or
a Subadviser. It should also be realized that this method of protecting the
value of a Fund's securities against a decline in the value of a currency does
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 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 expects to always have cash, cash equivalents or high
quality debt securities available sufficient to cover any commitments under
these contracts or to limit any potential risk.
<PAGE>
OPTIONS
Each of the Funds may write covered call and put options and purchase
call and put options on securities. Call and put options written by a Fund may
be covered in the manner set forth below.
A call option written by a Fund is "covered" if the Fund owns the
security underlying the call or has an absolute and immediate right to acquire
that security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if a Fund holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
a Fund in cash, short-term money market instruments or high quality debt
securities in a segregated account with its custodian. A put option written by
a Fund is "covered" if the Fund maintains cash, short term money market
instruments or high quality debt securities with a value equal to the exercise
price in a segregated account with its custodian, or else holds a put on the
same security and in the same principal amount as the put written where the
exercise price of the put held is equal to or greater than the exercise price
of the put written or where the exercise price of the put held is less than the
exercise price of the put written if the difference is maintained by the Fund
in cash, short-term money market instruments or high quality debt securities in
a segregated account with its custodian. Put and call options written by a Fund
may also be covered in such other manner as may be in accordance with the
requirements of the exchange on which, or the counter party with which, the
option is traded, and applicable laws and regulations. If the writer's
obligation is not so covered, it is subject to the risk of the full change in
value of the underlying security from the time the option is written until
exercise.
Each of the Funds may purchase options for hedging purposes or to
increase the Fund's return. Put options may be purchased to hedge against a
decline in the value of portfolio securities. If such decline occurs, the put
options will permit a Fund to sell the securities at the exercise price, or to
close out the options at a profit. By using put options in this way, the Fund
will reduce any profit it might otherwise have realized in the underlying
security by the amount of the premium paid for the put option and by
transaction costs.
Each of the Funds may purchase call options to hedge against an increase
in the price of securities that the Fund anticipates purchasing in the future.
If such increase occurs, the call option will permit the Fund to purchase the
securities at the exercise price, or to close out the options at a profit. The
premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by the Fund upon exercise of the option, and, unless
the price of the underlying security rises sufficiently, the option may expire
worthless to the Fund.
Each of the Funds may write (sell) covered call and put options and
purchase call and put options on stock indices. In contrast to an option on a
security, an option on a stock index provides the holder with the right, but
not the obligation, to make or receive a cash settlement upon exercise of the
option, rather than the right to purchase or sell a security. The amount of
this settlement is equal to (i) the amount, if any, by which the fixed exercise
price of the option exceeds (in the case of a call) or is below (in the case of
a put) the closing value of the underlying index on the date of exercise,
multiplied by (ii) a fixed "index multiplier."
Each of the Funds may cover call options on stock indices by owning
securities whose price changes, in the opinion of the Manager or a Subadviser,
are expected to be similar to those of the underlying index, or by having an
absolute and immediate right to acquire such securities without additional cash
consideration (or for additional cash consideration held in a segregated
account by its custodian) upon conversion or exchange of other securities in
<PAGE>
its portfolio. Where a Fund covers a call option on a stock index through
ownership of securities, such securities may not match the composition of the
index and, in that event, the Fund will not be fully covered and could be
subject to risk of loss in the event of adverse changes in the value of the
index. A Fund may also cover call options on stock indices by holding a call on
the same index and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the exercise price
of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash, short-term money
market instruments or high quality debt securities in a segregated account with
its custodian. A Fund may cover put options on stock indices by maintaining
cash, short-term money market instruments or high quality debt securities with
a value equal to the exercise price in a segregated account with its custodian,
or by holding a put on the same stock index and in the same principal amount as
the put written where the exercise price of the put held is equal to or greater
than the exercise price of the put written or where the exercise price of the
put held is less than the exercise price of the put written if the difference
is maintained by the Fund in cash, short-term money market instruments or high
quality debt securities in a segregated account with its custodian. Put and
call options on stock indices may also be covered in such other manner as may
be in accordance with the rules of the exchange on which, or the counterparty
with which, the option is traded and applicable laws and regulations.
A Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised
or is closed out at a profit. If the value of an index on which a Fund has
written a call option falls or remains the same, the Fund will realize a profit
in the form of the premium received (less transaction costs) that could offset
all or a portion of any decline in the value of the securities it owns. If the
value of the index rises, however, the Fund will realize a loss in its call
option position, which will reduce the benefit of any unrealized appreciation
in the Fund's stock investments. By writing a put option, a Fund assumes the
risk of a decline in the index. To the extent that the price changes of
securities owned by a Fund correlate with changes in the value of the index,
writing covered put options on indices will increase the Fund's losses in the
event of a market decline, although such losses will be offset in part by the
premium received for writing the option.
Each of the Funds may also purchase put options on stock indices to hedge
the Fund's investments against a decline in value. By purchasing a put option
on a stock index, a Fund will seek to offset a decline in the value of
securities it owns through appreciation of the put option. If the value of the
Fund's investments does not decline as anticipated, or if the value of the
option does not increase, the Fund's loss will be limited to the premium paid
for the option plus related transaction costs. The success of this strategy
will largely depend on the accuracy of the correlation between the changes in
value of the index and the changes in value of the Fund's security holdings.
The purchase of call options on stock indices may be used by a Fund to
attempt to reduce the risk of missing a broad market advance, or an advance in
an industry or market segment, at a time when the Fund holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options
for this purpose, a Fund will also bear the risk of losing all or a portion of
the premium paid if the value of the index does not rise. The purchase of call
options on stock indices when a Fund is substantially fully invested is a form
of leverage, up to the amount of the premium and related transaction costs, and
involves risks of loss and of increased volatility similar to those involved in
purchasing calls on securities the Fund owns.
Each of the Funds may purchase and write options on foreign currencies in
a manner similar to that in which futures contracts on foreign currencies, or
forward contracts, will be utilized.
<PAGE>
FUTURES CONTRACTS
Each of the Funds may enter into interest rate futures contracts, stock
index futures contracts and/or foreign currency futures contracts. Such
investment strategies will be used for hedging purposes and for nonhedging
purposes, subject to applicable law.
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 contract. 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
purchase 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.
<PAGE>
Each of the Funds may purchase and sell foreign currency futures
contracts to attempt to protect its current or intended investments from
fluctuations in currency exchange rates. Such fluctuations could reduce the
dollar value of portfolio securities denominated in foreign currencies, or
increase the cost of foreign-denominated securities to be acquired, even if the
value of such securities in the currencies in which they are denominated
remains constant. A Fund may sell futures contracts on a foreign currency, for
example, where it holds securities denominated in such currency and it
anticipates a decline in the value of such currency relative to the dollar. In
the event such decline occurs, the resulting adverse effect on the value of
foreign-denominated securities may be offset, in whole or in part, by gains on
the futures contracts.
Conversely, the Fund could protect against a rise in the dollar cost of
foreign-denominated securities to be acquired by purchasing futures contracts
on the relevant currency, which could offset, in whole or in part, the
increased cost of such securities resulting from a rise in the dollar value of
the underlying currencies. Where the Fund purchases futures contracts under
such circumstances, however, and the prices of securities to be acquired
instead decline, the Fund will sustain losses on its futures position which
could reduce or eliminate the benefits of the reduced cost of portfolio
securities to be acquired.
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 contract limits 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
contract 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
<PAGE>
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
Manager's or a Subadviser'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 Manager does not believe that these trading and position limits would have
an adverse impact on a Fund's hedging strategies.
CFTC regulations require compliance with certain limitations in order to
assure that a Fund is not deemed to be a "commodity pool" under such
regulations. In particular, CFTC regulations prohibit a 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 that Fund's non-hedging futures positions would exceed 5% of that
Fund's net assets.
Each Fund will comply with this CFTC requirement, and each 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 exceed approximately 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
<PAGE>
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."
OPTIONS ON FUTURES CONTRACTS
Each of the Funds may purchase and write options to buy or sell futures
contracts in which the Fund may invest. Such investment strategies will be used
for hedging purposes and for non-hedging purposes, subject to applicable law.
An option on a futures contract provides the holder with the right to
enter into a "long" position in the underlying futures contract, in the case of
a call option, or a "short" position in the underlying futures contract, in the
case of a put option, at a fixed exercise price up to a stated expiration date
or, in the case of certain options, on such date. Upon exercise of the option
by the holder, the contract market clearinghouse establishes a corresponding
short position for the writer of the option, in the case of a call option, or a
corresponding long position in the case of a put option. In the event that an
option is exercised, the parties will be subject to all the risks associated
with the trading of futures contracts, such as payment of initial and variation
margin deposits. In addition, the writer of an option on a futures contract,
unlike the holder, is subject to initial and variation margin requirements on
the option position.
A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series, (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's
profits or loss on the transaction.
Options on futures contracts that are written or purchased by a Fund on
U.S. exchanges are traded on the same contract market as the underlying futures
contract, and, like futures contracts, are subject to regulation by the CFTC
and the performance guarantee of the exchange clearinghouse. In addition,
options on futures contracts may be traded on foreign exchanges.
Each of the Funds may cover the writing of call options on futures
contracts (a) through purchases of the underlying futures contract, (b) through
ownership of the instrument, or instruments included in the index, underlying
the futures contract, or (c) through the holding of a call on the same futures
contract and in the same principal amount as the call written where the
exercise price of the call held (i) is equal to or less than the exercise price
of the call written or (ii) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash or securities in a
segregated account with its custodian. A Fund may cover the writing of put
options on futures contracts (a) through sales of the underlying futures
contract, (b) through segregation of cash, short-term money market instruments
or high quality debt securities in an amount equal to the value of the security
or index underlying the futures contract, (c) through the holding of a put on
the same futures contract and in the same principal amount as the put written
where the exercise price of the put held is equal to or greater than the
exercise price of the put written or where the exercise price of the put held
is less than the exercise price of the put written if the difference is
maintained by a Fund in cash, short-term money market instruments or high
quality debt securities in a segregated account with its custodian. Put and
call options on futures contracts may also be covered in such other manner as
may be in accordance with the rules of the exchange on which the option is
traded and applicable laws and regulations. Upon the exercise of a call option
on a futures contract written by a Fund, the Fund will be required to sell the
underlying futures contract which, if the Fund has covered its obligation
through the purchase of such contract, will serve to liquidate its futures
position. Similarly, where a put option on a futures contract written by a Fund
is exercised, the Fund will be required to purchase the underlying futures
contract which, if the Fund has covered its obligation through the sale of such
contract, will close out its futures position.
<PAGE>
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the securities deliverable on exercise of the
futures contract. A Fund will receive an option premium when it writes the
call, and, if the price of the futures contract at expiration of the option is
below the option exercise price, the Fund will retain the full amount of this
option premium, which provides a partial hedge against any decline that may
have occurred in the Fund's security holdings. Similarly, the writing of a put
option on a futures contract constitutes a partial hedge against increasing
prices of the securities deliverable upon exercise of the futures contract. If
a Fund writes an option on a futures contract and that option is exercised, the
Fund may incur a loss, which loss will be reduced by the amount of the option
premium received, less related transaction costs. A Fund's ability to hedge
effectively through transactions in options on futures contracts depends on,
among other factors, the degree of correlation between changes in the value of
securities held by the Fund and changes in the value of its futures positions.
This correlation cannot be expected to be exact, and the Fund bears a risk that
the value of the futures contract being hedged will not move in the same
amount, or even in the same direction, as the hedging instrument. Thus it may
be possible for a Fund to incur a loss on both the hedging instrument and the
futures contract being hedged.
Each of the Funds may purchase options on futures contracts for hedging
purposes instead of purchasing or selling the underlying futures contracts. For
example, where a decrease in the value of portfolio securities is anticipated
as a result of a projected market-wide decline or changes in interest or
exchange rates, a Fund could, in lieu of selling futures contracts, purchase
put options thereon. In the event that such decrease occurs, it may be offset,
in whole or part, by a profit on the option. Conversely, where it is projected
that the value of securities to be acquired by a Fund will increase prior to
acquisition, due to a market advance or changes in interest or exchange rates,
the Fund could purchase call options on futures contracts, rather than
purchasing the underlying futures contracts.
4. INVESTMENT RESTRICTIONS
The Trust, 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
<PAGE>
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 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.
(6) Underwrite securities issued by other persons, except that all the
assets of the Fund may be invested in a Qualifying Portfolio and except in so
far as the Fund or Portfolio may technically be deemed an underwriter under the
Securities 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, provided that collateral arrangements with
respect to options, futures contracts, and options on futures contracts,
including deposits of initial and variation margin, are not considered to be
the issuance of a senior security for purposes of this restriction and except
as appropriate to evidence a debt incurred without violating Investment
Restriction (1) above.
NON-FUNDAMENTAL RESTRICTIONS
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),
<PAGE>
(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 (provided that
this limitation shall not prevent the Fund or Portfolio from entering into
futures contracts or options thereon),
(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 Trust or of the Portfolio Trust, or is an officer or director of the
Manager, 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) make short sales of securities or maintain a short position,
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.
PERCENTAGE AND RATING RESTRICTIONS
If a percentage or rating restriction on investment or utilization of
assets set forth above or referred to in this Registration Statement 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 the Fund will not be considered
a violation of policy.
<PAGE>
5. PERFORMANCE INFORMATION AND ADVERTISING
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 would be reduced if
the maximum sales charge were taken into account.
From time to time, advertising and marketing material of any of the Funds
may include charts showing the historical performance of hypothetical
portfolios comprised of classes of assets similar to those in which the Funds
invest. The classes of assets will be represented by the historical performance
of specific unmanaged indices. The information contained in such charts should
not be viewed as a projection of results of any of the Funds or as the
historical performance of any of the Funds. In addition, the past performance
illustrated by such charts should not be viewed as a guarantee of future
results.
6. DETERMINATION OF NET ASSET VALUE; VALUATION OF
SECURITIES; ADDITIONAL 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, such 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 of net asset value of
shares of each class of a Fund is made once each day as of the close of regular
trading on such Exchange by adding the market value of all securities and other
assets attributable to a class of a Fund (including the Fund's interest in its
Portfolio), then subtracting the liabilities of that class, and then dividing
the result by the number of outstanding shares of the class. The net asset
value per share is effective for orders received and accepted by the
Distributor prior to its calculation.
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 foreign exchange are valued at the last quoted sale
price available before the time when net assets are valued. Bonds and other
fixed income securities (other than short-term obligations) are valued on the
basis of valuations furnished by a pricing service, use of which has been
approved by the Board of Trustees of the Trust. In making such valuations, the
pricing service utilizes both dealer-supplied valuations and electronic data
processing techniques which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon quoted prices or exchange or
over-the-counter prices, since such valuations are believed to reflect more
<PAGE>
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 the 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 the Trust.
Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of regular trading on the
Exchange and may also take place on days on which the Exchange is closed. If
events materially affecting the value of foreign securities occur between the
time when the exchange on which they are traded closes and the time when 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 the 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 plus amortization of premiums.
Subject to compliance with applicable regulations, the Trust has reserved
the right to pay the redemption or repurchase price of shares of the Funds,
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.
The Trust may suspend the right of redemption or postpone the date of
payment for shares of a Fund more than seven days during any period when (a)
trading in the markets a Fund normally utilizes is restricted, or an emergency,
as defined by the rules and regulations of the Securities and Exchange
Commission (the "SEC"), exists making disposal of a Fund'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.
7. MANAGEMENT
TRUSTEES
The Trustees and officers of the Trust 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 Trust 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 TRUST
H.B. ALVORD (aged 73) -- 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.
<PAGE>
PHILIP W. COOLIDGE* (aged 44) -- President of the Trust 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 (aged 70) -- 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 (aged 56) -- 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 (aged 44) -- 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. (aged 61) -- 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 (aged 77) -- Director of Investor Relations, International
Business Machines Corporation (retired February, 1982). His address is 6300
Midnight Pass Road, Sarasota, Florida.
E. KIRBY WARREN (aged 61) -- 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. (aged 76) -- 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 (aged 53) -- 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* (aged 44) -- President of the Trust and the Portfolio
Trust; Chairman, Chief Executive Officer and President, Signature Financial
Group, Inc. and The Landmark Funds Broker-Dealer Services, Inc. (since
December, 1988).
MARK T. FINN (aged 53) -- 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.
<PAGE>
WALTER E. ROBB, III (aged 69) -- 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 TRUST AND THE PORTFOLIO TRUST
PHILIP W. COOLIDGE* (aged 44) -- President of the Trust and the Portfolio
Trust; Chairman, Chief Executive Officer and President, Signature Financial
Group, Inc. and The Landmark Funds Broker-Dealer Services, Inc. (since
December, 1988).
DAVID G. DANIELSON* (aged 31) -- Assistant Treasurer of the Trust and the
Portfolio Trust; Assistant Manager, Signature Financial Group, Inc. (since May,
1991).
JOHN R. ELDER* (aged 47) -- Treasurer of the Trust 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* (aged 30) -- Assistant Secretary of the Trust 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* (aged 32) -- Assistant Secretary of the Trust and Vice
President, Assistant Treasurer and Assistant Secretary of the Portfolio Trust;
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.
THOMAS M. LENZ* (aged 37) -- Secretary of the Trust 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* (aged 44) -- Assistant Secretary of the Trust 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* (aged 36) -- Assistant Treasurer of the Trust and the
Portfolio Trust; Assistant Treasurer, Signature Financial Group, Inc. and The
Landmark Funds Broker-Dealer Services, Inc. (since December, 1988).
ANDRES E. SALDANA* (aged 33) -- Assistant Secretary of the Trust 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* (aged 34) -- Assistant Treasurer of the Trust 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 November, 1993).
<PAGE>
The Trustees and officers of the Trust and the Portfolio Trust also hold
comparable positions with certain other funds for which The Landmark Funds
Broker-Dealer Services, Inc., Signature Financial Group, Inc. or their
affiliates serve as the distributor or administrator.
As of the date of this Statement of Additional Information, there are no
shareholders of any of the Funds.
The Trustees of the Trust (with the exception of Mr. Coolidge, who
received no remuneration from the Trust or the Portfolio Trust) received the
following remuneration from the Trust during its fiscal year ended December 31,
1995:
<TABLE>
<CAPTION>
TOTAL
PENSION OR COMPENSATION
AGGREGATE RETIREMENT FROM REGISTRANT
COMPENSATION BENEFITS ACCRUED ESTIMATED ANNUAL AND FUND
NAME OF PERSON, FROM AS PART OF FUND BENEFITS UPON COMPLEX PAID
POSITION REGISTRANT EXPENSES RETIREMENT TO TRUSTEES
<S> <C> <C> <C> <C>
H.B. ALVORD $ 3,198.55 NONE NONE $40,000.00
RILEY C. GILLEY $ 4,352.29 NONE NONE $44,000.00
DIANA R. HARRINGTON $ 3,921.20 NONE NONE $40,000.00
SUSAN B. KERLEY $ 3,921.20 NONE NONE $40,000.00
C. OSCAR MORONG, JR. $ 3,606.47 NONE NONE $44,500.00
DONALD B. OTIS $ 7,758.16 NONE NONE $40,000.00
E. KIRBY WARREN $ 3,606.47 NONE NONE $44,500.00
WILLIAM S. WOODS, JR. $ 4,582.57 NONE NONE $44,000.00
</TABLE>
(1) Information relates to the fiscal year ended December 31, 1995.
Messrs. Alvord, Coolidge, Gilley, Morong, Otis, Warren and Woods and Mses.
Harrington and Kerley are trustees of 16, 32, 15, 16, 11, 16, 15, 15 and 15
funds, respectively, of the Landmark Family of Funds.
The Declaration of Trust of the Trust and the Portfolio Trust provide
that the Trust 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
Trust or the Portfolio Trust, as the case may be, unless, as to liability to
the Trust, 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 Trust 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 Trust
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.
MANAGER
Citibank manages the assets of each Portfolio and provides certain
administrative services to the Trust and the Portfolio Trust pursuant to
separate management agreements (the "Management Agreements"). Subject to such
policies as the Board of Trustees of the Portfolio Trust may determine,
Citibank manages the securities of each Portfolio and makes investment
decisions for each Portfolio. Citibank furnishes at its own expense all
<PAGE>
services, facilities and personnel necessary in connection with managing each
Portfolio's investments and effecting securities transactions for each
Portfolio. The Management Agreement with the Portfolio Trust provides that
Citibank may delegate the daily management of the securities of each Portfolio
to one or more Subadvisers. The Management Agreement with the Portfolio Trust
will continue in effect until February 9, 1998 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 Management
Agreement or interested persons of any such party, at a meeting called for the
purpose of voting on the Management Agreement. The Management Agreement with
the Trust will continue in effect until February 9, 1998 and thereafter as long
as such continuance is specifically approved at least annually by the Board of
Trustees of the Trust or by a vote of a majority of the outstanding voting
securities of the applicable Fund, and, in either case, by a majority of the
Trustees of the Trust who are not parties to the Management Agreement or
interested persons of any such party, at a meeting called for the purpose of
voting on the Management Agreement.
Citibank provides the Trust and the Portfolio Trust with general office
facilities and supervises the overall administration of the Trust and the
Portfolio Trust, including, among other responsibilities, the negotiation of
contracts and fees with, and the monitoring of performance and billings of, the
Trust's or the Portfolio Trust's independent contractors and agents; the
preparation and filing of all documents required for compliance by the Trust or
the Portfolio Trust with applicable laws and regulations; and arranging for the
maintenance of books and records of the Trust or the Portfolio Trust. Trustees,
officers, and investors in the Trust and the Portfolio Trust are or may be or
may become interested in Citibank, as directors, officers, employees, or
otherwise and directors, officers and employees of Citibank are or may become
similarly interested in the Trust and the Portfolio Trust.
Each Management Agreement provides that Citibank may render services to
others. Each Management Agreement is terminable without penalty on not more
than 60 days' nor less than 30 days' written notice by the Portfolio Trust or
the Trust, as the case may be, when authorized either by a vote of a majority
of the outstanding voting securities of the applicable Portfolio or Fund or by
a vote of a majority of the Board of Trustees of the Portfolio Trust or the
Trust, or by Citibank on not more than 60 days' nor less than 30 days' written
notice, and will automatically terminate in the event of its assignment. The
Management Agreement with the Portfolio Trust provides that neither Citibank
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 Management Agreement with the
Portfolio Trust. The Management Agreement with the Trust provides that neither
Citibank nor its personnel shall be liable for any error of judgment or mistake
of law or for any omission in the administration or management of the Trust or
the performance of its duties under the Management Agreement, except for
willful misfeasance, bad faith or gross negligence or reckless disregard of its
or their obligations and duties under the Management Agreement with the Trust.
The Prospectus contains a description of the fees payable to Citibank for
services under each of the Management Agreements. Citibank, if required by
state law, will reimburse the Funds and Portfolios or waive all or a portion of
its management fees to the extent that the expenses of a Fund and its
corresponding Portfolio exceed the expense limitation prescribed by any state
in which that Fund is qualified for offer or sale.
Pursuant to a sub-administrative services agreement with Citibank, LFBDS
performs such sub-administrative duties for the Trust and the Portfolio Trust
as from time to time are agreed upon by Citibank and LFBDS. For performing such
sub-administrative services, LFBDS receives compensation as from time to time
<PAGE>
is agreed upon by Citibank, not in excess of the amount paid to Citibank for
its services under the Management Agreements with the Trust and the Portfolio
Trust. All such compensation is paid by Citibank.
Citibank has entered into separate Submanagement Agreements with the
Subadvisers listed below for the kinds of assets of each Fund noted opposite
the Subadvisers' names. Each Subadviser's compensation is described in the
Prospectus and is payable by Citibank.
Large cap value securities Miller Anderson & Sherrerd LLP
Small cap value securities Franklin Advisory Services, Inc.
International equity securities Hotchkis & Wiley
Foreign government securities Pacific Investment Management Company
It is the responsibility of the Subadviser to make the day-to-day
investment decisions for their allocated assets of the Funds, and to place the
purchase and sales orders for securities transactions concerning those assets,
subject in all cases to the general supervisions of Citibank. Each Subadviser
furnishes at its own expense all services, facilities and personnel necessary
in connection with managing the assets of the Funds allocated to it and
effecting securities transactions concerning those assets.
Each Submanagement Agreement will continue in effect as to each
applicable Portfolio until February 9, 1998 and thereafter as long as such
continuance is specifically approved at least annually by the Board of Trustees
of the Portfolio Trust as to that Portfolio or by a vote of a majority of the
outstanding voting securities of that Portfolio, and, in either case, by a
majority of the Trustees of the Portfolio Trust who are not parties to the
Submanagement Agreement or interested persons of any such party, at a meeting
called for the purpose of voting on the Submanagement Agreement.
Each Submanagement Agreement provides that the applicable Subadviser may
render services to others. Each Submanagement Agreement is terminable as to any
Portfolio 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
Citibank on not more than 60 days' nor less than 30 days' written notice, and
will automatically terminate in the event of its assignment. Each Submanagement
Agreement may be terminated by the applicable Subadviser on not less than 90
days' written notice. Each Submanagement Agreement provides that neither the
Subadviser 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 any Portfolio, except
for willful misfeasance, bad faith or gross negligence or reckless disregard of
its or their obligations and duties under the Submanagement Agreement.
DISTRIBUTOR
LFBDS, 6 St. James Avenue, Boston, MA 02116, serves as the Distributor of
each Fund's shares pursuant to Distribution Agreements with the Trust for each
class of shares of the Funds (the "Distribution Agreements"). Unless otherwise
terminated each Distribution Agreement remains in effect until ___________,
1997, and thereafter will continue from year to year upon annual approval by
the Trust's Board of Trustees, or by the vote of a majority of the outstanding
voting securities of the class of shares of a particular Fund to which such
Distribution Agreement relates and by the vote of a majority of the Board of
Trustees of the Trust who are not parties to the Distribution Agreement or
<PAGE>
interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval. Each Distribution Agreement will
terminate in the event of its assignment, as defined in the 1940 Act.
Under separate Service Plans for each class of shares of the Funds (each,
a "Service Plan") which have been adopted in accordance with Rule 12b-1 under
the 1940 Act, the Funds may pay monthly fees at an annual rate not to exceed
0.50% of the average daily net assets attributable to Class A shares of each
Fund and 1.00% of the average daily net assets attributable to Class C shares
of each Fund. Such fees may be used to make payments to the Distributor for
distribution services, to securities dealers and other industry professionals
(called Service Agents) that have entered into service agreements with the
Distributor and others in respect of the sale of shares of the Funds, and to
other parties in respect of the sale of shares of the Funds, and to make
payments for advertising, marketing or other promotional activity, and payments
for preparation, printing, and distribution of prospectuses, statements of
additional information and reports for recipients other than regulators and
existing shareholders. The Funds also may make payments to the Distributor,
Service Agents and others for providing personal service or the maintenance of
shareholder accounts. The Funds and the Distributor provide to the Trustees
quarterly a written report of amounts expended pursuant to each Service Plan
and the purposes for which the expenditures were made.
Each Distribution Agreement obligates the Funds to pay fees to the
Distributor, Service Agents and others as compensation for their services, not
as reimbursement for specific expenses incurred. Thus, even if their expenses
exceed the fees provided for under a particular Distribution Agreement for any
Fund, the Fund will not be obligated to pay more than those fees and, if their
expenses are less than the fees paid to them, they will realize a profit. Each
Fund will pay the fees to the Distributor, Service Agents and others until the
applicable Service Plan or Distribution Agreement is terminated or not renewed.
In that event, the Distributor's or Service Agent's expenses in excess of fees
received or accrued through the termination date will be the Distributor's or
Service Agent's sole responsibility and not obligations of the Fund. In their
annual consideration of the continuation of each Service Plan for each Fund,
the Trustees will review the Service Plan and the expenses for each Fund
separately.
From time to time the Distributor may make payments for distribution out
of its past profits or any other sources available to it.
Each Service Plan continues in effect if such continuance is specifically
approved at least annually by a vote of both a majority of the 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
Service Plan or in any agreement related to the Plan (for purposes of this
paragraph "Qualified Trustees"). Each Service Plan requires that the 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 Service Plan. Each Service 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. Each Service Plan may be terminated with respect to the particular
class of any Fund at any time by a vote of a majority of that class of the
Trust's Qualified Trustees or by a vote of a majority of the outstanding voting
securities of that class of that Fund. The Service Plan 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 the
particular class 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 a Service Plan for a period of not less than six years, and for the first
two years the Distributor will preserve such copies in an easily accessible
place.
<PAGE>
As contemplated by each Service Plan, LFBDS acts as the agent of the
Trust in connection with the offering of shares of the Funds pursuant to the
Distribution Agreement. The Prospectus contains a description of fees payable
to the Distributor under the Distribution Agreement.
The Distributor may enter into agreements with Service Agents and may pay
compensation to such Service Agents for accounts for which the Service Agents
are holders of record. Payments may be made to the Service Agents out of the
distribution fees received by the Distributor and out of the Distributor's past
profits.
TRANSFER AGENT AND CUSTODIAN
The Trust has entered into a Transfer Agency and Service Agreement with
State Street Bank and Trust Company ("State Street") pursuant to which State
Street acts as transfer agent for each Fund. The Trust also has entered into a
Custodian Agreement and a Fund Accounting Agreement with State Street, pursuant
to which custodial and fund accounting services, respectively, are provided for
each Fund. See "Transfer Agent, Custodian and Fund Accountant" in the
Prospectus for additional information.
The Portfolio Trust, on behalf of the Portfolios, has entered into
Custodian Agreements with State Street pursuant to which State Street acts as
custodian for each Portfolio. The Portfolio Trust, on behalf of the Portfolios,
also has entered into Fund Accounting Agreements with State Street pursuant to
which State Street provides fund accounting services for each Portfolio.
Pursuant to separate Transfer Agency and Service Agreements with the Portfolio
Trust, on behalf of the Portfolios, Signature Financial Services, Inc. provides
transfer agency services to each Portfolio.
The principal business address of State Street is 225 Franklin Street,
Boston, Massachusetts 02110. The principal business address of Signature
Financial Services, Inc. is 6 St. James Avenue, Boston, Massachusetts 02116.
AUDITORS
Price Waterhouse LLP are the independent certified public accountants for
the Trust, 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 3300, 1 First Canadian Place, Toronto, Ontario M5X
1H7, Canada.
8. PORTFOLIO TRANSACTIONS
The 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 objective. 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. Specific decisions to purchase
or sell securities for each Fund are made by a portfolio manager who is an
employee of Citibank and who is appointed and supervised by its senior officers
or by a Subadviser. The portfolio manager or Subadviser may serve other clients
of Citibank in a similar capacity.
In connection with the selection of brokers or dealers and the placing of
portfolio securities transactions, brokers or dealers may be selected who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to a Fund and/or the other
accounts over which the Manager, the Subadvisers or their affiliates exercise
investment discretion. The Manager and the Subadvisers are authorized to pay a
<PAGE>
broker or dealer who provides such brokerage and research services a commission
for executing a portfolio transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if the Manager or the applicable Subadviser determines in good
faith that such amount of commission is reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer. This
determination may be viewed in terms of either that particular transaction or
the overall responsibilities which the Manager, the Subadvisers and their
affiliates have with respect to accounts over which they exercise investment
discretion. The Trustees of the Trust shall periodically review the commissions
paid by the Fund to determine if the commissions paid over representative
periods of time were reasonable in relation to the benefits to the Fund.
The investment advisory fee that each Fund pays to Citibank will not be
reduced as a consequence of Citibank's receipt of brokerage and research
services. While such services are not expected to reduce the expenses of
Citibank, Citibank 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 or obtain such services independently.
In certain instances there may be securities that are suitable as an
investment for a Fund as well as for one or more of Citibank's or a
Subadviser's other clients. Investment decisions for each Fund and for
Citibank's and the Subadvisers' 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 Citibank or a
Subadviser occur contemporaneously, the purchase or sale orders may be
aggregated in order to obtain any price advantages available to large volume
purchases or sales.
9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust's Declaration of the Trust permits the Trustees to issue an
unlimited number of full and fractional shares of beneficial interest (without
par value) of each series, 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 and to divide such shares
into classes. Each Fund currently has two classes of shares, Class A shares and
Class C shares. While there are at present no series of the Trust other than
the Funds and Landmark Balanced Fund, the Trust has reserved the right to
create and issue additional series and classes of shares. Each share of each
Fund represents an equal proportionate interest in that Fund with each other
share of that Fund. Shares of each series participate equally in the earnings,
dividends and distribution of net assets of the particular series upon
liquidation or dissolution except that, due to the differing expenses borne by
each class, dividends and proceeds generally will be lower for Class C shares
than Class A shares. Shares of each series are entitled to vote separately to
approve management 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 Trust. 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 the Trust do not have
cumulative voting rights, and shareholders owning more than 50% of the
<PAGE>
outstanding shares of the 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. The Trust is not required to hold, and
has no present intention of holding, annual meetings of shareholders but the
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 the 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 Restrictions.")
The 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 the 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. The Trust or any series of the 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, the Trust will continue indefinitely.
Share certificates will not be issued.
The 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 the 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 the 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.
The 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 the 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.
The Portfolios are series of the Portfolio Trust, which is organized as a
New York trust. 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.
<PAGE>
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.
10. CERTAIN ADDITIONAL TAX MATTERS
Each Fund is treated as a separate entity for federal income tax purposes
under the Internal Revenue Code of 1986, as amended (the "Code"). Each Fund has
elected to be treated, and intends to qualify each year, as a "regulated
investment company" under Subchapter M of 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 or other 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.
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.
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)
<PAGE>
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.
Any investment by a Fund in zero coupon bonds, deferred interest bonds,
payment-in-kind bonds, certain stripped securities, and certain securities
purchased at a market discount will cause the Fund to recognize income prior to
the receipt of cash payments with respect to those securities. In order to
distribute this income and avoid a tax on the Fund, the Fund may be required to
liquidate portfolio securities that it might otherwise have continued to hold,
potentially resulting in additional taxable gain or loss to the Fund.
Each Fund's transactions in options, futures and 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 intends to limit its activities in options, futures and
forward contracts to the extent necessary to meet the requirements of
Subchapter M of the Code.
An investment by a Fund in residual interests of a CMO that has elected
to be treated as a real estate mortgage investment conduit, or "REMIC," can
create complex tax problems, especially if the Fund has state or local
governments or other tax-exempt organizations as shareholders.
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.
If a Fund holds more than 50% of its assets in foreign stock and
securities at the close of its taxable year, the Fund may elect to "pass
through" to the Fund's shareholders foreign income taxes paid. If the Fund so
elects, shareholders will be required to treat their pro rata portion of the
foreign income taxes paid by the Fund as part of the amounts distributed to
them by the Fund and thus includable in their gross income for federal income
tax purposes. Shareholders who itemize deductions would then be allowed to
claim a deduction or credit (but not both) on their federal income tax returns
for such amounts, subject to certain limitations. Shareholders who do not
itemize deductions would (subject to such limitations) be able to claim a
credit but not a deduction. No deduction for such amounts will be permitted to
individuals in computing their alternative minimum tax liability. If a Fund
does not qualify or elect to "pass through" to the Fund's shareholders foreign
income taxes paid by it, shareholders will not be able to claim any deduction
or credit for any part of the foreign taxes paid by the Fund.
The Funds will withhold tax payments at a rate of 30% (or any lower
applicable tax treaty rate) on taxable dividends and other payments subject to
<PAGE>
withholding taxes that are made to persons who are not citizens or residents of
the United States. Distributions received from the Funds by non-U.S. persons
also may be subject to tax under the laws of their own jurisdiction.
The account application asks each new shareholder to certify that the
shareholder's Social Security or taxpayer identification number is correct and
that the shareholder is not subject to 31% backup withholding for failing to
report income to the IRS. The Funds may be required to withhold (and pay over
to the IRS for the shareholder's credit) 31% of certain distributions and
redemption proceeds paid to shareholders who fail to provide this information
or who otherwise violate IRS regulations.
11. FINANCIAL STATEMENTS
Not applicable.
<PAGE>
PART C
<TABLE>
<CAPTION>
Item 24. Financial Statements and Exhibits.
(a) Financial Statements Included in Part A:
Not applicable.
Financial Statements Included in Part B:
Not applicable.
(b) Exhibits
<S> <C> <C>
* 1(a) Amended and Restated Declaration of Trust of the Registrant
****,*****, 1(b) Amendment to Amended and Restated Declaration of Trust of the
*******, Registrant
*********
* 2(a) Amended and Restated By-Laws of the Registrant
**** 2(b) Amendment to Amended and Restated By-Laws of the Registrant
****** 5(a) Form of Management Agreement between Asset Allocation
Portfolios and Citibank, N.A., as investment manager and
administrator
******, 5(b) Forms of Sub Management Agreements
********
********* 6(a) Form of Amended and Restated Distribution Agreement, with
respect to Class A Shares, between the Registrant and The
Landmark Funds Broker-Dealer Services, Inc. ("LFBDS"), as
distributor
********* 6(b) Form of Distribution Agreement, with respect to Class C Shares,
between the Registrant and LFBDS, as distributor
**** 7 Form of Custodian Agreement between the Registrant, on behalf
of the Funds, and Investors Bank & Trust Company ("IBT"), as
custodian
****** 9(a) Form of Management Agreement between the Registrant and
Citibank, N.A., as administrator
* 9(b) Form of Transfer Agency and Service Agreement between the
Registrant and State Street Bank and Trust Company, as transfer
agent
********* 15(a) Form of Amended and Restated Service Plan of the Registrant
with respect to Class A Shares
********* 15(b) Form of Service Plan of the Registrant with respect to Class C
Shares
********* 18 Form of Multiple Class Plan
*,**,***,*******, 25 Powers of Attorney for the Registrant
********
</TABLE>
- ---------------------
* Incorporated by reference to Post-Effective Amendment No. 8 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518)
as filed with the Securities and Exchange Commission on
March 2,1992.
<PAGE>
** Incorporated by reference to Post-Effective Amendment No. 9 to the
Registrant's Registration Statement on Form N-1A
(File No. 2-90518) as filed with the Securities and
Exchange Commission on April 13, 1993.
*** Incorporated by reference to Post-Effective Amendment No. 10
to the Registrant's Registration Statement on Form N-1A
(File No. 2-90518) as filed with the Securities and
Exchange Commission on December 30, 1993.
**** Incorporated by reference to Post-Effective Amendment No. 12
to the Registrant's Registration Statement on Form N-1A
(File No. 2-90518) as filed with the Securities and
Exchange Commission on October 14, 1994.
***** Incorporated by reference to Post-Effective Amendment No. 14
to the Registrant's Registration Statement on Form N-1A
(File No. 2-90518) as filed with the Securities and
Exchange Commission on March 3, 1995.
****** Incorporated by reference to Post-Effective Amendment No. 15
to the Registrant's Registration Statement on Form N-1A
(File No. 2-90518) as filed with the Securities and
Exchange Commission on December 15, 1995.
******* Incorporated by reference to Post-Effective Amendment No. 16
to the Registrant's Registration Statement on Form N-1A
(File No. 2-90518) as filed with the Securities and
Exchange Commission on February 5, 1996.
******** Incorporated by reference to Post-Effective Amendment No. 17
to the Registrant's Registration Statement on Form N-1A
(File No. 2-90518) as filed with the Securities and
Exchange Commission on February 16, 1996.
********* Incorporated by reference to Post-Effective Amendment No. 18
to the Registrant's Registration Statement on Form N-1A
(File No. 2-90518) as filed with the Securities and
Exchange Commission on May 10, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant.
Not applicable.
Item 26. Number of Holders of Securities.
Title of Class Number of Record Holders
Shares of Beneficial Interest As of July 2, 1996
(without par value)
CitiSelectSM Folio 200
Class A __
Class C 0
CitiSelectSM Folio 300
Class A __
Class C 0
CitiSelectSM Folio 400
Class A __
Class C 0
CitiSelectSM Folio 500
Class A 0
Class C 0
<PAGE>
Item 27. Indemnification.
Reference is hereby made to (a) Article V of the Registrant's Declaration
of Trust, filed as an Exhibit to Post-Effective Amendment No. 8 to its
Registration Statement on Form N-1A; (b) Section 6 of the Service Agreement
between the Registrant and LFBDS, filed as an Exhibit to Post-Effective
Amendment No. 15 to its Registration Statement on Form N-1A; and (c) the
undertaking of the Registrant regarding indemnification set forth in its
Registration Statement on Form N-1A.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
Item 28. Business and Other Connections of Investment Advisers.
Citibank, N.A. ("Citibank") is a commercial bank offering a wide range of
banking and investment services to customers across the United States and
around the world. Citibank is a wholly-owned subsidiary of Citicorp, a
registered bank holding company. Citibank also serves as investment adviser to
the following registered investment companies (or series thereof): The Premium
Portfolios (Balanced Portfolio, Equity Portfolio, Government Income Portfolio,
International Equity Portfolio, Emerging Asian Markets Equity Portfolio and
Small Cap Equity Portfolio), Tax Free Reserves Portfolio, U.S. Treasury
Reserves Portfolio, Cash Reserves Portfolio, Landmark Multi-State Tax Free
Funds (Landmark New York Tax Free Reserves, Landmark Connecticut Tax Free
Reserves and Landmark California Tax Free Reserves), Landmark Fixed Income
Funds (Landmark Intermediate Income Fund), Landmark Tax Free Income Funds
(Landmark National Tax Free Income Fund and Landmark New York Tax Free Income
Fund) and Landmark VIP Funds (Landmark VIP U.S. Government Portfolio, Landmark
VIP Balanced Portfolio, Landmark VIP Equity Portfolio and Landmark VIP
International Equity Portfolio). As of December 31, 1995, Citibank and its
affiliates managed assets in excess of $83 billion worldwide. The principal
place of business of Citibank is located at 399 Park Avenue, New York, New York
10043.
The Chairman of the Board and a Director of Citibank is John S. Reed. The
following are Vice Chairmen of the Board and Directors of Citibank: Paul J.
Collins, William R. Rhodes and H. Onno Ruding. Other Directors of Citibank are
D. Wayne Calloway, Chairman and Chief Executive Officer, PepsiCo, Inc.,
Purchase, New York; Colby H. Chandler, Former Chairman and Chief Executive
Officer, Eastman Kodak Company; Pei-yuan Chia, Director, Baxter International,
Inc.; Kenneth T. Derr, Chairman and Chief Executive Officer, Chevron
Corporation; H.J. Haynes, Senior Counselor, Bechtel Group, Inc., San Francisco,
California; Rozanne L. Ridgway, President, The Atlantic Council of the United
States; Robert B. Shapiro, President and Chief Operating Officer, Monsanto
Company; Frank A. Shrontz, Chairman and Chief Executive Officer, The Boeing
Company, Seattle, Washington; Roger B. Smith, Former Chairman and Chief
Executive Officer, General Motors Corporation; Franklin A. Thomas, President,
The Ford Foundation, New York, New York; and Edgar S. Woolard, Jr., Chairman
and Chief Executive Officer, E.I. DuPont De Nemours & Company.
Each of the individuals named above is also a Director of Citicorp. In
addition, the following persons have the affiliations indicated:
<PAGE>
D. Wayne Calloway Director, Exxon Corporation
Director, General Electric Company
Director, Pepsico, Inc.
Colby H. Chandler Director, Digital Equipment Corporation
Director, Ford Motor Company
Director, J.C. Penney Company, Inc.
Pei-yuan Chia Director, Baxter International, Inc.
Paul J. Collins Director, Kimberly-Clark Corporation
Kenneth T. Derr Director, American Telephone and Telegraph, Co.
Director, Chevron Corporation
Director, Potlatch Corporation
H.J. Haynes Director, Bechtel Group, Inc.
Director, Boeing Company
Director, Fremont Group, Inc.
Director, Hewlett-Packard Company
Director, Paccar Inc.
Director, Saudi Arabian Oil Company
John S. Reed Director, Monsanto Company
Director, Philip Morris Companies
Incorporated
Stockholder, Tampa Tank & Welding, Inc.
William R. Rhodes Director, Private Export Funding
Corporation
Rozanne L. Ridgway Director, 3M
Director, Bell Atlantic Corporation
Director, Boeing Company
Director, Emerson Electric Company
Member-International Advisory Board,
New Perspective Fund, Inc.
Director, RJR Nabisco, Inc.
Director, Sara Lee Corporation
Director, Union Carbide Corporation
H. Onno Ruding Member, Board of Supervisory Directors,
Amsterdam Trustee's Kantoor
Board Member, Corning, Incorporated
Advisor, Intercena (C&A) (Netherlands)
Member, Board of Supervisory Directors,
Pechiney Nederland N.V.
Member, Board of Advisers, Robeco N.V.
Advisory Director, Unilever N.V.
Advisory Director, Unilever PLC
<PAGE>
Robert B. Shapiro Director, G.D. Searle & Co.
Director, Silicon Graphics
Director, Monsanto Company
Director, The Nutrasweet Company
Frank A. Shrontz Director, 3M
Director, Baseball of Seattle, Inc.
Director, Boeing Company
Director, Boise Cascade Corp.
Roger B. Smith Director, International Paper Company
Director, Johnson & Johnson
Director, Pepsico, Inc.
Franklin A. Thomas Director, Aluminum Company of America
Director, American Telephone and Telegraph, Co.
Director, Cummins Engine Company, Inc.
Director, Pepsico, Inc.
Edgar S. Woolard, Jr. Director, E.I. DuPont De Nemours &
Company
Franklin Advisory Services, Inc. ("Franklin"), a sub-adviser of the
Registrant, maintains its principal office at 777 Mariners Island Blvd., San
Mateo, California 94404. Franklin, a California corporation incorporated in
1985, is a registered investment adviser under the Investment Company Act of
1940 and is a wholly-owned subsidiary of Franklin Resources, Inc., a publicly
owned holding company. Franklin is an investment adviser to various open-end
and closed-end investment companies.
William P. Lippman has been senior vice president of Franklin since June,
1988. Prior to joining Franklin, Mr. Lippman was president of L.F. Rothschild
Fund Management, Inc. He is president and director of Franklin Managed Trust,
which includes Franklin Rising Dividends Fund, Franklin Corporate Qualified
Dividend Fund, Franklin Investment Grade Income Fund and Franklin MicroCap
Value Fund. Mr. Lippman also manages Franklin Balance Sheet Investment Fund and
the Franklin Valuemark Rising Dividends Fund.
<PAGE>
Each of the individuals named below is an officer and/or Director of
Franklin and has the affiliations indicated:
<TABLE>
<CAPTION>
Name: Affiliations:
<S> <C>
Charles Bartlett Johnson President and Director, Franklin Resources, Inc.
Chairman of the Board Director, Templeton Worldwide, Inc.
Chairman of Board, Franklin/Templeton Distributors,
Inc.
Director, Franklin Management, Inc.
Director, Franklin Institutional Services Corporation
Director, Franklin Templeton Trust Company
Director, Franklin/Templeton Investor Services, Inc.
Director, Property Resources, Inc.
Director, Franklin Bank
Director, Franklin Capital Corporation
Director, FCC Receivables Corporation
President and Chairman of Board, Franklin/
Templeton Travel, Inc.
Director, F.S. Capital Group
Director, F.S. Properties
Director, Franklin Agency, Inc.
Director, Templeton Global Investors, Inc.
President and Chairman of Board, T.G.H. Holdings, Ltd.
Director, Templeton, Galbraith & Hansberger Ltd.
Chairman of Board, Franklin Asset Management
Systems (1982-95)
President & Director, Franklin Energy Corporation
(1983-95)
Rupert Harris Johnson, Jr. Executive Vice President and Director, Franklin
President and Director Resources, Inc.
Director, Templeton Worldwide, Inc.
Executive Vice President and Director,
Franklin/Templeton Distributors, Inc.
Chairman of Board, Franklin Management, Inc.
Chairman of Board, Franklin Institutional Services
Corporation
Executive Vice President, Senior Investment Officer
and Director, Franklin Templeton Trust Company
Director, Franklin/Templeton Investor Services, Inc.
Director, Property Resources, Inc.
Director, Franklin Properties, Inc.
Director, Franklin Real Estate Management, Inc.
Director, Franklin Bank
Director, Franklin Capital Corporation
Director, FCC Receivables Corporation
Executive Vice President and Director,
Franklin/Templeton Travel, Inc.
Director, Franklin Agency, Inc.
Director, Templeton Global Investors
<PAGE>
President, Templeton International, Inc.
Vice President and Director, Franklin Asset
Management Systems (1982-95)
Director, Franklin Energy Corporation (1983-95)
Harmon Evan Burns Executive Vice President - Legal and Secretary,
Executive Vice President Franklin Resources, Inc.
Director, Templeton Worldwide, Inc.
Executive Vice President and Director, Franklin/
Templeton Distributors, Inc.
Secretary, Franklin Management, Inc. (1980-93)
Director, Franklin/Templeton Investor Services, Inc.
Director, Franklin Institutional Services Corporation
Director, Franklin Templeton Trust Company
Director, Franklin Properties, Inc.
Director, Franklin Real Estate Management, Inc.
Director, Franklin Bank
Director, Franklin Capital Corporation
Director, FCC Receivables Corporation
Executive Vice President and Director, Franklin/
Templeton Travel, Inc.
Director, F.S. Capital Group
Director, F.S. Properties
Secretary, Franklin Agency, Inc.
Director, Templeton Global Investors, Inc.
Executive Vice President and Director, Templeton/
Franklin Investment Services, Inc.
Secretary and Treasurer, Franklin Asset Management
Systems (1982-95)
Executive Vice President, Franklin Energy Corporation
(1983-95)
Kenneth Vernon Domingues Senior Vice President, Franklin Resources, Inc.
Senior Vice President Senior Vice President, Franklin/Templeton
Distributors, Inc.
Director, F.S. Capital Group
Director, F.S. Properties
Treasurer, Franklin Asset Management Systems (1989-
95)
Treasurer, Franklin Management, Inc. (1987-93)
Treasurer, Franklin Institutional Services Corporation
(1991-93)
Treasurer, Franklin Trust Company (1989-93)
Martin Lawrence Flanagan Senior Vice President, Chief Financial Officer and
Senior Vice President and Treasurer, Franklin Resources, Inc.
Treasurer Executive Vice President and Director, Templeton
Worldwide, Inc.
Treasurer, Franklin Management, Inc.
Senior Vice President and Treasurer, Franklin
Institutional Services Corporation
<PAGE>
Treasurer, Franklin Templeton Trust Company
Senior Vice President, Franklin/Templeton Investor
Services, Inc.
Vice President and Chief Financial Officer, Property
Resources, Inc.
Vice President and Chief Financial Officer, Franklin
Properties, Inc.
Vice President and Chief Financial Officer, Franklin
Real Estate Management, Inc.
Treasurer, Franklin Capital Corporation
President, FCC Receivables Corporation
Vice President and Treasurer, Franklin/Templeton
Travel, Inc.
Senior Vice President, Franklin Agency, Inc.
President, Chief Executive Officer and Chairman of
Board, Templeton Global Investors, Inc.
Executive Vice President, Chief Operating Officer
and Director, Templeton International, Inc.
Director, Templeton Quantitative Advisors, Inc.
Director, Templeton/Franklin Investment Services, Inc.
Director, Templeton Funds Trust Company
Director and Treasurer, Templeton Funds Annuity
Company
Executive Vice President, Chief Operating Officer and
Director, Templeton Investment Counsel, Inc.
Director, Templeton Management Ltd.
Director, Templeton Investment Management (Hong
Kong), Ltd.
Director, Templeton Investment Management
(Singapore) Plc. Ltd.
Managing Director, Templeton Global Investors, Ltd.
Chairman of Board, Templeton Global Strategic
Services, S.A.
Director, Templeton Management (Lux) S.A.
Executive Vice President, Chief Operating Officer and
Director, T.G.H. Holdings, Ltd.
Director, Templeton Heritage, LTD.
Director, Templeton Investment Management, Ltd.
Director, Templeton Unit Trust Managers, Ltd.
Director, Templeton Holdings Ltd.
Director, Templeton/National Bank of Greece
Management (Lux) S.A.
Executive Vice President and Director, Templeton,
Galbraith and Hansberger Ltd. (Bahamian Corp.)
Senior Vice President and Treasurer, Franklin/
Templeton Distributors, Inc. (1993-95)
Treasurer, Franklin Energy Corporation (1994-95)
Director, Templeton Life Assurance Ltd. (1990-94)
Director, Templeton Funds Management, Inc. (1992-94)
Director, Templeton Funds Distributor, Inc. (1992-93)
Director, The DAIS Group, Inc. (1990-93)
<PAGE>
Vice-Chairman of Board, Templeton Global Bond
Managers, Inc. (1990-93)
Edward Burton Jamieson Portfolio Manager, Franklin Institutional Services
Senior Vice President Corporation
Thomas Joseph Kenny None
Senior Vice
President and
Director of Municipal
Development
Leslie Michael Kratter Vice President and Assistant Secretary, Franklin
Secretary Resources, Inc.
Secretary, Templeton Worldwide, Inc.
Secretary, Franklin/Templeton Distributors, Inc.
Secretary, Franklin Management, Inc.
Vice President and Secretary, Franklin Institutional
Services Corporation
Secretary, Franklin/Templeton Investor Services, Inc.
Secretary, FCC Receivables Corporation
President and Director, Franklin/Templeton Travel,
Inc.
Secretary, Franklin Agency, Inc.
Secretary, Templeton Global Investors
Secretary, Templeton International, Inc.
Secretary, Templeton/Franklin Investment Services,
Inc.
Secretary, Franklin Energy Corporation (1994-95)
Executive Vice President, International Air Service Co.
Ltd. (1979-92)
Jack Henry Lemein Employee, Franklin Resources, Inc.
Senior Vice President Vice President, Franklin/Templeton Distributors, Inc.
Vice President, Franklin Management, Inc.
Portfolio Manager, Franklin Institutional Services
Corporation
William Jennings Lippman Senior Vice President, Franklin Resources, Inc.
Senior Vice President Senior Vice President, Franklin/Templeton
Distributors, Inc.
Senior Vice President, Franklin Management, Inc.
Portfolio Manager, Franklin Institutional Services
Corporation
Rico Martin Wiskemann Employee, Franklin/Templeton Distributors, Inc.
Senior Vice President and Senior Vice President, Franklin Management, Inc.
Director Vice President, Treasurer and Director, ILA Financial
Services, Inc.
Vice President and Director, Arizona Life Insurance
Company of America
</TABLE>
<PAGE>
Pacific Investment Management Company ("PIMCO"), a sub-adviser of the
Registrant, maintains its principal office at 840 Newport Center Drive, Suite
360, P.O. Box 6480, Newport Beach, California 92658-9030. PIMCO is a registered
investment adviser under the Investment Company Act of 1940.
Lee R. Thomas, III joined PIMCO in 1995 and is the Senior International
Portfolio Manager at PIMCO. Previously he was a member of Investcorp's
Management Committee, where he was responsible for global securities and
foreign exchange trading. Prior to Investcorp, he was associated with Goldman
Sachs, where he was an Executive Director in the fixed income division of their
London office.
Each of the individuals named below is a Managing Director of PIMCO and
has the affiliations indicated:
Name and Position: Other Affiliations:
William H. Gross, CFA None
Senior Fixed Income Portfolio
Manager
David H. Edington None
Senior Fixed Income Portfolio
Manager
John L. Hague None
Senior Fixed Income Portfolio
Manager
Brent R. Harris, CFA None
Director of Marketing
Dean S. Meiling, CFA None
Account Manager
James F. Muzzy, CFA None
Account Manager
William F. Podlich, III None
William C. Powers None
Senior Fixed Income Portfolio
Manager
Frank B. Rabinovitch None
Senior Fixed Income Portfolio
Manager
<PAGE>
William S. Thompson Director, Spieker Properties Inc.
Chief Executive Officer
Hotchkis & Wiley ("Hotchkis"), a sub-adviser of the Registrant, maintains
its principal office at 800 West Sixth Street, Fifth Floor, Los Angeles,
California 90017. Hotchkis is a registered investment adviser founded in 1980.
Harry Hartford and Sarah Ketterer will be responsible for the daily management
of international equity securities of the Registrant. Mr. Hartford and Ms.
Ketterer manage international equity accounts and is also responsible for
international investment research. Each serves on the Investment Policy
Committee at Hotchkis. Prior to joining Hotchkis, Mr. Hartford was with the
Investment Bank of Ireland, where he gained 10 years of experience in both
international and global equity management. Prior to joining Hotchkis, Ms.
Ketterer was an associate with Bankers Trust and an analyst at Dean Witter.
Each of the individuals named below is a Managing Director and general
partner of Hotchkis and has the affiliations indicated:
Name and Position: Other Affiliations:
Gail L. Bardin None
Portfolio Manager
Michael F. Baxter None
Portfolio Manager
George H. Davis, Jr. None
Portfolio Manager
Dr. Roger DeBard Executive Vice President, Hotchkis and
Portfolio Manager Wiley Funds
John F. Hotchkis Trustee, Hotchkis and Wiley Funds
Portfolio Manager Governor, The Music Center
Director and Treasurer, The Music Center
Foundation
Director, Los Angeles World Affairs Council
Director, Los Angeles Philharmonic Orchestra
Director, Big Brothers of Greater
Los Angeles
Director, Executive Service Corps of
Southern California
Director, KCET
Trustee, The Lawrenceville School
Trustee, Robert Louis Stevenson School
Director, Fountainhead Water Company, Inc.
George Wiley Trustee, Hotchkis and Wiley Funds
Portfolio Manager
Miller Anderson & Sherrerd, LLP ("MAS"), a sub-adviser of the Registrant,
maintains its principal office at One Tower Bridge, West Conshohocken,
Pennsylvania 19428. MAS has been a registered investment adviser under the
Investment Company Act of 1940 since 1974. MAS serves as the Fund Administrator
for the MAS Funds and is also the parent company of MAS Fund Distribution, Inc.
<PAGE>
("MASDI"), a registered limited purpose broker-dealer that was formed in 1992
solely to distribute shares of the MAS Funds. All registered representatives of
MASDI are also employees of MAS. MAS Fixed Income Partnership I, L.P. ("MAS I")
and MAS Fixed Income Partnership II, L.P. ("MAS II") are investment
partnerships established by MAS. MAS has established MAS Fixed Income I,
L.L.C., MAS Fixed Income II, L.L.C., MAS Management, Inc., and MAS Investors I,
LLP to administer and manage the investment partnerships. MAS also participates
in a joint venture with LTCB Capital Markets, Inc. that owns LTCB-MAS
Investment Management, Inc., a registered investment company.
The primary portfolio managers for MAS's Value Portfolio are A. Morris
Williams, Jr., CFA and Robert J. Marcin, CFA. Richard M. Behler is the most
recent addition to the value team. All other members of the MAS equity
investment management department serve as analyst resources for the value team
in the management of the portfolio while maintaining responsibility for other
MAS equity related portfolios. Each of the individuals named below is a member
of the MAS equity investment management team and has the affiliations
indicated:
Name: Other Affiliations:
A. Morris Williams, Jr., CFA See below
Dean Williams See below
Gary G. Schlarbaum, CFA See below
Arden C. Armstrong, CFA See below
Nicholas J. Kovich, CFA See below
Robert J. Marcin, CFA See below
Horacio A. Valeiras, CFA See below
Richard M. Behler Moore Capital Management, Portfolio
Equity Portfolio Manager Manager, 1992-95
Timothy G. Connors, CFA CoreStates Investment Advisers, 1980-94
Equity Portfolio Manager Senior Vice President and Managing
Director, 1986
Boykin Curry None
International Equity Analyst
Bradley S. Daniels, CFA None
Equity Portfolio Manager
Hassan Elmasry Mitchell Hutchins Asset Management, 1987-95
International Equity Portfolio First Vice President & International
Manager Equity Portfolio Manager, 1989-95
Family Support Center of Brooklyn, Board
Member
<PAGE>
Gary D. Hanbold, CFA Wood, Struthers & Winthrop, 1986-93
Equity Portfolio Portfolio Manager, 1989-93
Manager Senior Vice President, 1993
James Jolinger Oppenheimer Capital, Equity Analyst, 1987-94
Equity Analyst Assistant Vice President, 1992-94
Vice President, 1994
Abbi Y. Kanitkar Newbold's Asset Management, 1993
Equity Analyst Investment Analyst - International Banks
James M. Oiness None
International Equity Analyst
Each of the individuals named below is a partner of MAS and has the
affiliations indicated:
Name: Other Affiliations:
A. Morris Williams, Jr., CFA C.A.R.E. Council of Trustees
Duke University, Trustee
The Salvation Army Advisory Board of
Greater Philadelphia
Philadelphia Scholars Fund Advisory
Committee, Chairman
Philadelphia Schools Collaborative, Board
of Directors
Richard B. Worley University of Pennsylvania, Trustee
Medical Center of the University of
Pennsylvania, Trustee
Pennsylvania Academy of Fine Arts, Trustee
Thomas L. Bennett, CFA MAS Funds, Chairman
Robert L. Hagin Society of Quantitative Analysts, Advisory
Board
T. Dean Williams International Society of Financial Analysts,
Board of Governors
Shanghai Dazhong Co., Director
Kenneth B. Dunn Journal of Fixed Income, Associate Editor
Institute for the Study of Security Markets,
Board of Directors
Ellen D. Harvey, CFA St. Timothy's School, Trustee, 1985-94
Investment Chairman
Bryn Mawr Rehabilitation Hospital, Trustee
Main Line Health System, Trustee
Owosso Corporation, Director
<PAGE>
Gary G. Schlarbaum, CFA Coe College, Trustee
James D. Schmid None
Manager, Service Core &
Administration
Arden C. Armstrong, CFA American Friends Service Committee,
Investment Committee
Wharton Fellow's Fund, Board of Overseers
Stephen F. Esser, CFA None
J. David Germany None
Nicholas J. Kovich None
Robert J. Marcin, CFA None
Mary Ann Milias Financial Executives Institute, Education
Committee
California Pacific Medical Center
Foundation, Director
Schools of the Sacred Heart, Trustee
Sisters of the Presentation - Investment
Advisory Committee
Marin Community Foundation - Investment
Advisory Committee
Scott F. Richard Journal of Portfolio Management, Associate
Editor
Journal of Fixed Income, Associate Editor
Horacio A. Valeiras, CFA None
Glenn E. Becker Germantown Academy, Education Committee
The Salvation Army Advisory Board of Greater
Philadelphia
Philadelphia Leadership Foundation, Director
Steven K. Kreider, CFA Lehigh University, Investment Committee
Item 29. Principal Underwriters.
(a) The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS"), the
Registrant's Distributor, is also the distributor for Landmark International
Equity Fund, Landmark Emerging Asian Markets Equity Fund, Landmark U.S.
Treasury Reserves, Landmark Cash Reserves, Premium U.S. Treasury Reserves,
Premium Liquid Reserves, Landmark Institutional U.S. Treasury Reserves,
Landmark Institutional Liquid Reserves, Landmark Tax Free Reserves, Landmark
California Tax Free Reserves, Landmark Connecticut Tax Free Reserves, Landmark
New York Tax Free Reserves, Landmark U.S. Government Income Fund, Landmark
Intermediate Income Fund, Landmark Balanced Fund, Landmark Equity Fund,
Landmark Small Cap Equity Fund, Landmark National Tax Free Income Fund,
<PAGE>
Landmark New York Tax Free Income Fund, and Landmark VIP Funds (Landmark VIP
U.S. Government Portfolio, Landmark VIP Balanced Portfolio, Landmark VIP Equity
Portfolio and Landmark VIP International Equity Portfolio). LFBDS is also the
placement agent for International Equity Portfolio, Balanced Portfolio, Equity
Portfolio, Small Cap Equity Portfolio, Government Income Portfolio, Emerging
Asian Markets Equity Portfolio, Tax Free Reserves Portfolio, Cash Reserves
Portfolio, and U.S. Treasury Reserves Portfolio.
(b) The information required by this Item 29 with respect to each
director and officer of LFBDS is incorporated by reference to Schedule A of
Form BD filed by LFBDS pursuant to the Securities and Exchange Act of 1934
(File No. 8-32417).
(c) Not applicable.
Item 30. Location of Accounts and Records.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
NAME ADDRESS
The Landmark Funds Broker-Dealer Services, Inc. 6 St. James Avenue
(distributor) Boston, MA 02116
Investors Bank & Trust Company One Lincoln Plaza
(custodian) Boston, MA 02111
State Street Bank and Trust Company 1776 Heritage Drive
(transfer agent) North Quincy, MA 02171
Citibank, N.A. 153 East 53rd Street
(investment manager) New York, NY 10043
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) The Registrant hereby undertakes to file a post-effective amendment
to this Registration Statement, containing reasonably current financial
statements that need not be certified, within four to six months following the
commencement of operations of the Funds.
(b) The Registrant hereby undertakes to call a meeting of shareholders
for the purpose of voting upon the question of removal of one or more of the
Trust's Trustees when requested in writing to do so by the holders of at least
10% of the Registrant's outstanding shares, and in connection therewith to
comply with the provisions of Section 16(c) of the Investment Company Act of
1940 relating to shareholder communication.
<PAGE>
(c) The Registrant undertakes to furnish to each person to whom a
prospectus of CitiSelectSM Folio 200, CitiSelectSM Folio 300, CitiSelectSM
Folio 400 and CitiSelect SM Folio 500 is delivered with a copy of its latest
Annual Report to Shareholders, upon request without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
requirements for effectiveness of this Post-Effective Amendment to this
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Boston and
Commonwealth of Massachusetts on the 2nd day of July, 1996.
LANDMARK FUNDS I
By: Philip W. Coolidge
Philip W. Coolidge
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to this Registration Statement has been signed below
by the following persons in the capacities indicated below on July 2, 1996.
Signature Title
Philip W. Coolidge President, Principal Executive Officer and
Philip W. Coolidge Trustee
John R. Elder Principal Financial Officer and Principal
John R. Elder Accounting Officer
H.B. Alvord* Trustee
H.B. Alvord
Riley C. Gilley* Trustee
Riley C. Gilley
Diana R. Harrington* Trustee
Diana R. Harrington
Susan B. Kerley* Trustee
Susan B. Kerley
C. Oscar Morong, Jr.* Trustee
C. Oscar Morong, Jr.
Donald B. Otis* Trustee
Donald B. Otis
E. Kirby Warren* Trustee
Kirby Warren
William S. Woods, Jr.* Trustee
William S. Woods, Jr.
*By: Philip W. Coolidge
Philip W. Coolidge
Executed by Philip W. Coolidge on behalf of
those indicated pursuant to Powers of
Attorney.
<PAGE>
SIGNATURES
Asset Allocation Portfolios has duly caused this Post-Effective Amendment
to the Registration Statement on Form N-1A of Landmark Funds I to be signed on
its behalf by the undersigned, thereunto duly authorized, in George Town, Grand
Cayman, Cayman Islands, BWI on the 2nd day of July, 1996.
ASSET ALLOCATION PORTFOLIOS
By: Susan Jakuboski
Susan Jakuboski
Assistant Treasurer
This Post-Effective Amendment to the Registration Statement on Form N-1A
of Landmark Funds I has been signed by the following persons in the capacities
indicated on July 2, 1996.
Signature Title
Philip W. Coolidge* President, Principal Executive Officer and
Philip W. Coolidge Trustee
John R. Elder* Principal Accounting and Financial Officer
John R. Elder
Elliott J. Berv* Trustee
Elliott J. Berv
Mark T. Finn* Trustee
Mark T. Finn
Walter E. Robb, III* Trustee
Walter E. Robb, III
*By: Susan Jakuboski
Susan Jakuboski
Executed by Susan Jakuboski on behalf of
those indicated pursuant to Powers of
Attorney.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C> <C>
* 1(a) Amended and Restated Declaration of Trust of the Registrant
****,*****, 1(b) Amendment to Amended and Restated Declaration of Trust of the
*******, Registrant
*********
* 2(a) Amended and Restated By-Laws of the Registrant
**** 2(b) Amendment to Amended and Restated By-Laws of the Registrant
****** 5(a) Form of Management Agreement between Asset Allocation
Portfolios and Citibank, N.A., as investment manager and
administrator
******, 5(b) Forms of Sub Management Agreements
********
********* 6(a) Form of Amended and Restated DistributionAgreement, with
respect to Class A Shares, between the Registrant and The
Landmark Funds Broker-Dealer Services, Inc. ("LFBDS"), as
distributor
********* 6(b) Form of Distribution Agreement, with respect to Class C Shares,
between the Registrant and LFBDS, as distributor
**** 7 Form of Custodian Agreement between the Registrant, on behalf
of the Funds, and Investors Bank & Trust Company ("IBT"), as
custodian
****** 9(a) Form of Management Agreement between the Registrant and
Citibank, N.A., as administrator
* 9(b) Form of Transfer Agency and Service Agreement between the
Registrant and State Street Bank and Trust Company, as transfer
agent
********* 15(a) Form of Amended and Restated Service Plan of the Registrant
with respect to Class A Shares
********* 15(b) Form of Service Plan of the Registrant with respect to Class C
Shares
********* 18 Form of Multiple Class Plan
*,**,***,*******, 25 Powers of Attorney for the Registrant
********
</TABLE>
- ---------------------
* Incorporated by reference to Post-Effective Amendment No. 8 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518)
as filed with the Securities and Exchange Commission on
March 2, 1992.
** Incorporated by reference to Post-Effective Amendment No. 9 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518)
as filed with the Securities and Exchange Commission on
April 13, 1993.
*** Incorporated by reference to Post-Effective Amendment No. 10 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518)
as filed with the Securities and Exchange Commission on
December 30, 1993.
**** Incorporated by reference to Post-Effective Amendment No. 12 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518)
as filed with the Securities and Exchange Commission on
October 14, 1994.
***** Incorporated by reference to Post-Effective Amendment No. 14 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518)
as filed with the Securities and Exchange Commission on
March 3, 1995.
<PAGE>
****** Incorporated by reference to Post-Effective Amendment No. 15 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518)
as filed with the Securities and Exchange Commission on
December 15, 1995.
******* Incorporated by reference to Post-Effective Amendment No. 16 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518)
as filed with the Securities and Exchange Commission on
February 5, 1996.
******** Incorporated by reference to Post-Effective Amendment No. 17 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518)
as filed with the Securities and Exchange Commission on
February 16, 1996.
********* Incorporated by reference to Post-Effective Amendment No. 18 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90518)
as filed with the Securities and Exchange Commission on
May 10, 1996.
