<PAGE>
As filed with the Securities and Exchange Commission on January 7, 1997
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. 21
AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 22
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 January 7,
1997 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 will file a Rule 24f-2 Notice on or before February 28, 1997 for
Registrant's fiscal year ended December 31, 1996.
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*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
CROSS REFERENCE SHEET
<TABLE>
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N-1A
ITEM NO. N-1A ITEM LOCATION
PART A PROSPECTUS
<S> <C> <C>
Item 1. Cover Page............................................ Cover Page
Item 2. Synopsis.............................................. Expense Summary
Item 3. Condensed Financial Information....................... Condensed Financial Information
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.................................. Financial Statements
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.
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<PAGE>
PROSPECTUS
---------------
JANUARY 2, 1997
- ------------------------ ------------------------
CITISELECT(SM) FOLIO 200 CITISELECT(SM) FOLIO 400
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CITISELECT(SM) FOLIO 300 CITISELECT(SM) FOLIO 500
- ------------------------ ------------------------
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.
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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 12.
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REMEMBER THAT SHARES OF THE FUNDS:
[] ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY
[] ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, CITIBANK
OR ANY OF ITS AFFILIATES
[] 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 January 2, 1997 (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).
TABLE OF CONTENTS
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Prospectus Summary ...................................................... 2
Expense Summary ......................................................... 4
Condensed Financial Information ......................................... 5
Investment Information .................................................. 6
Risk Considerations ..................................................... 11
Valuation of Shares ..................................................... 13
Purchases ............................................................... 13
Exchanges ............................................................... 14
Redemptions ............................................................. 14
Dividends and Distributions ............................................. 15
Management .............................................................. 15
Tax Matters ............................................................. 18
Performance Information ................................................. 19
General Information ..................................................... 19
Appendix -- Permitted Investments and Investment Practices .............. 21
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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>
PROSPECTUS SUMMARY
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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: Shares of the Funds are purchased and redeemed at net asset value,
without a sales load or redemption fees. Shares of each Fund are subject to a
fee of up to 0.50% per annum of the Fund's average daily net assets for
distribution, sales and marketing and shareholder services. See "Purchases"
and "Management -- Distribution Arrangements."
EXCHANGES: Shares may be exchanged for shares of each other Fund. 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 at net asset value. 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. 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.
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.
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 the Appendix for more information.
<PAGE>
EXPENSE SUMMARY
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The following table summarizes estimated shareholder transaction and annual
operating expenses for each Fund and for its corresponding Portfolio.* For more
information on costs and expenses, see "Management" -- page 15 and "General
Information -- Expenses" -- page 20.
<TABLE>
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CITISELECT CITISELECT CITISELECT CITISELECT
FOLIO 200 FOLIO 300 FOLIO 400 FOLIO 500
---------- ---------- ---------- ----------
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SHAREHOLDER TRANSACTION EXPENSES .................. None None None None
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS
(AS A PERCENTAGE OF NET ASSETS):
Management Fee .................................... 0.75% 0.75% 0.75% 0.75%
12b-1 Fees (including service fees)(1) ............ 0.50% 0.50% 0.50% 0.50%
Other Expenses(2) ................................. 0.25% 0.25% 0.50% 0.50%
Total Fund Operating Expenses(2) .................. 1.50% 1.50% 1.75% 1.75%
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</TABLE>
(1) Includes fees for distribution and shareholder servicing.
(2) After reimbursement. Absent reimbursement, "Other Expenses" and "Total Fund
Operating Expenses" would have been 1.07% and 2.32% for CitiSelect Folio
200, 1.08% and 2.33% for CitiSelect Folio 300, 2.00% and 3.25% for
CitiSelect Folio 400 and 2.15% and 3.40% for CitiSelect Folio 500.
* 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 .............................. $64 $86
CITISELECT FOLIO 300 .............................. $64 $86
CITISELECT FOLIO 400 .............................. $67 $93
CITISELECT FOLIO 500 .............................. $67 $93
The Example assumes a 5% annual return and 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, $72 and $110 for CitiSelect Folio 300, $81 and $136 for CitiSelect
Folio 400 and $83 and $140 for CitiSelect Folio 500. 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.
<PAGE>
CONDENSED FINANCIAL INFORMATION
- ------------------------------------------------------------------------------
The following table provides condensed financial information about the Funds
for the periods indicated. This information is unaudited and should be read in
conjunction with the financial statements and notes thereto which are
incorporated by reference in the Statement of Additional Information.
<TABLE>
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FINANCIAL HIGHLIGHTS (UNAUDITED)
CITISELECT CITISELECT CITISELECT CITISELECT
FOLIO 200+ FOLIO 300+ FOLIO 400+ FOLIO 500(++)
---------- ---------- ---------- ------------
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NET ASSET VALUE, BEGINNING OF PERIOD ......................... $ 10.00 $ 10.00 $ 10.00 $ 10.00
------- ------- ------- -------
INCOME FROM OPERATIONS:
Net investment income ........................................ 0.12 0.09 0.04 0.02
Net realized and unrealized gain (loss) on investments ....... 0.57 0.72 0.85 0.67
------- ------- ------- -------
Total from operations ....................................... 0.69 0.81 0.89 0.69
------- ------- ------- -------
LESS DISTRIBUTIONS FROM:
Net investment income ........................................ (0.11) (0.04) -- --
------- ------- ------- -------
Net realized gain on investments ............................. -- -- -- --
------- ------- ------- -------
Total distributions ......................................... (0.11) (0.04) -- --
------- ------- ------- -------
Net Asset Value, end of period ............................... $ 10.58 $ 10.77 $ 10.89 $ 10.69
======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) .................... $93,966 $176,147 $222,767 $70,941
Ratio of expenses to average net assets (A) .................. 1.50%* 1.50%* 1.75%* 1.75%*
Ratio of net investment income to average net assets ......... 2.94%* 2.52%* 1.54%* 1.50%*
Total return ................................................. 6.84%** 8.07%** 8.90%** 6.90%**
Note: If Agents of the Funds and the Agents of Asset Allocation Portfolios had not voluntarily agreed to waive a portion of their
fees, the sub-administrator not assumed expenses and had expenses been limited to that required by certain state securities laws,
for the periods indicated, the net inve stment income per share and the ratios would have been as follows:
Net investment income per share .............................. $ 0.12 $ 0.08 $ 0.05 $ 0.02
Ratios:
Expenses to average net assets (A) ........................... 2.50%* 2.25%* 1.93%* 2.50%*
Net investment income to average net assets .................. 1.94%* 1.77%* 1.36%* 0.75%*
- -----------------------------------------------------------------------------------------------------------------------------------
(A) Includes the Fund's share of its corresponding Portfolio's allocated expenses.
+ For the period June 17, 1996 (commencement of operations) to November 30, 1996.
(++) For the period September 3, 1996
(commencement of operations) to November 30, 1996.
* Annualized.
** Not annualized.
</TABLE>
<PAGE>
INVESTMENT INFORMATION
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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 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
investments, if necessary, at that time. Rebalancing may be accomplished over a
period of time and may be limited by tax and regulatory requirements.
ASSET CLASS RANGE
-------------------------------------------
FIXED MONEY
EQUITY INCOME MARKET
- ------------------------------------------------------------------------------
CITISELECT FOLIO 200 25-45% 35-55% 10-30%
CITISELECT FOLIO 300 40-60% 35-55% 1-10%
CITISELECT FOLIO 400 55-85% 15-35% 1-10%
CITISELECT FOLIO 500 70-95% 5-20% 1-10%
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Each asset class includes other investments described in the Appendix 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 and Wiley; and foreign government securities, Pacific Investment
Management Company. Citibank is responsible for 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,
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 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 the Appendix 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 the Appendix -- Permitted Investments
and Investment Practices on page 21. The Funds will not necessarily invest or
engage in each of the investments and investment practices in the Appendix 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.
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
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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 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 described
above and are described in the Appendix. See the Appendix -- Permitted
Investments and Investment Practices on page 21.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE. The Funds do not invest
directly in securities. Instead, the Funds invest all of their investable assets
in their corresponding Portfolios, which are mutual funds having the same
investment objectives and policies as the Funds. The Portfolios, in turn, buy,
hold and sell securities in accordance with these objectives and policies. Of
course, there can be no assurance that the Funds or the Portfolios will achieve
their objectives. The Trustees of the Funds believe that the aggregate per share
expenses of each Fund and its corresponding Portfolio will be less than or
approximately equal to the expenses that the Fund would incur if the assets of
the Fund were invested directly in the types of securities held by its
Portfolio. Each Fund may withdraw its investment in its Portfolio at any time,
and will do so if the Trustees believe it to be in the best interest of the
Fund's shareholders. If a Fund were to withdraw its investment in its Portfolio,
the Fund could either invest directly in securities in accordance with the
investment policies described above or invest in another mutual fund or pooled
investment vehicle having the same investment objectives and policies. If a Fund
were to withdraw, the Fund could receive securities from the Portfolio instead
of cash, causing the Fund to incur brokerage, tax and other charges or leaving
it with securities which may or may not be readily marketable or widely
diversified.
Each Portfolio may change its investment objective and certain of its
investment policies and restrictions without approval by its investors, but the
Portfolio will notify its corresponding Fund (which in turn will notify its
shareholders) and its other investors at least 30 days before implementing any
change in its investment objective. A change in investment objective, policies
or restrictions may cause a Fund to withdraw its investment in its Portfolio.
Certain investment restrictions of each Portfolio cannot be changed without
approval by the investors in that Portfolio. These policies are described in the
Statement of Additional Information. When a Fund is asked to vote on matters
concerning its Portfolio (other than a vote to continue the Portfolio following
the withdrawal of an investor), the Fund will hold a shareholder meeting and
vote in accordance with shareholder instructions. Of course, the Fund could be
outvoted, or otherwise adversely affected, by other investors in its Portfolio.
The Portfolios may sell interests to investors in addition to the Funds.
These investors may be mutual funds which offer shares to their shareholders
with different costs and expenses than the Funds. Therefore, the investment
returns for all investors in funds investing in a Portfolio may not be the same.
These differences in returns are also present in other mutual fund structures.
Information about other holders of interests in the Portfolios is
available from the Funds' distributor (telephone: (617) 423-1679).
VALUATION OF SHARES
- ------------------------------------------------------------------------------
Net asset value per share 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 of a Fund (including the Fund's interest in its Portfolio), then
subtracting the liabilities charged to that Fund, and then dividing the result
by the number of outstanding shares of the Fund. 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.
PURCHASES
- ------------------------------------------------------------------------------
Shares of the Funds are offered continuously and may be purchased on any
Business Day without a sales load at the shares' net value next determined after
an order in proper form is received and accepted by the Transfer Agent. 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.
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. Each Service Agent is responsible for
transmitting promptly orders of its customers.
The Distributor, at its expense, may from time to time provide 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 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, 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. 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).
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 Fund issued at net asset value.
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 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.
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. Morgan Stanley Asset Management Holdings, Inc., an indirect
wholly-owned subsidiary of Morgan Stanley Group Inc., owns 95% of the interests
in Miller Anderson. 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.
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 and Wiley, 800 West Sixth Street, Fifth Floor, Los Angeles, California
90017. Hotchkis and Wiley, a division of Merrill Lynch Asset Management, Inc.,
is a registered investment adviser. 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 and Wiley. Prior to
joining Hotchkis and 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 and 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 and is a subsidiary partnership of PIMCO Advisors L.P. A majority
interest of PIMCO Advisors L.P. is held by PIMCO Partners, G.P., a general
partnership between Pacific Investment Management Company, a California
corporation and indirect wholly-owned subsidiary of Pacific Mutual Life
Insurance Company, and PIMCO Partners, L.L.C., a limited liability company
controlled by the Managing Directors of PIMCO. 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:
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 and 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 a Service Plan which has 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 of each
Fund. These fees may be used to make payments to the Distributor for
distribution services, and to Service Agents and others 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.
During the period they are in effect, the Service Plan and related
Distribution Agreement 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 the 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 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 the Service Plan for each Fund, the Trustees will review the
Plan and the expenses for each Fund separately.
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.
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
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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, only shares of that particular Fund 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
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.
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
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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.
"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.
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.
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.
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 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 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.
<PAGE>
STATEMENT OF
ADDITIONAL INFORMATION
JANUARY 2, 1997
CITISELECT(SM) FOLIO 200
CITISELECT(SM) FOLIO 300
CITISELECT(SM) FOLIO 400
CITISELECT(SM) FOLIO 500
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 CitiSelect(SM)
Folio 200, CitiSelect(SM) Folio 300, CitiSelect(SM) Folio 400, and
CitiSelect(SM) 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>
<CAPTION>
TABLE OF CONTENTS PAGE
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<S> <C>
The Trust .................................................................................................................. B-2
Investment Objectives and Policies ......................................................................................... B-2
Description of Permitted Investments and Investment Practices .............................................................. B-3
Investment Restrictions .................................................................................................... B-13
Performance Information and Advertising .................................................................................... B-14
Determination of Net Asset Value; Valuation of Securities; Additional Redemption Information ............................... B-15
Management ................................................................................................................. B-16
Portfolio Transactions ..................................................................................................... B-21
Description of Shares, Voting Rights and Liabilities ....................................................................... B-22
Certain Additional Tax Matters ............................................................................................. B-23
Financial Statements ....................................................................................................... B-24
</TABLE>
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 January 2, 1997. 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.
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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 that 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. 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.
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 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.
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. 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. When interest rates
go up, mortgage-backed securities experience lower rates of prepayment. This
has the effect of lengthening the expected maturity of a mortgage-backed
security. As a result, prices of mortgage-backed securities may decrease more
than prices of other debt obligations when interest rates go up.
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
forgoes 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 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.
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
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
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.
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.
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
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.
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.
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 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 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.
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 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),
(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.
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 net asset value.
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 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 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 of a Fund (including the Fund's
interest in its Portfolio), then subtracting the liabilities of that Fund, and
then dividing the result by the number of outstanding shares of the Fund. 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 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 1450 Oleada Road, Pebble Beach,
California.
PHILIP W. COOLIDGE* (aged 45) -- 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 45) -- 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.
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 45) -- 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.
WALTER E. ROBB, III (aged 70) -- 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 45) -- 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).
SAMANTHA M. BURGESS* (aged 27) -- Assistant Secretary and Assistant Treasurer
of the Trust and the Portfolio Trust; Assistant Vice President, Signature
Financial Group, Inc. (since November, 1995); Graduate Student, Loyola
University (prior to August, 1995).
CHRISTINE A. DRAPEAU* (aged 26) -- Assistant Secretary and Assistant Treasurer
of the Trust and the Portfolio Trust; Assistant Vice President, Signature
Financial Group, Inc. (since January, 1996); Paralegal and Compliance Officer,
various financial companies (July, 1992 to January, 1996); Graduate Student,
Bentley College (prior to December, 1994).
JOHN R. ELDER* (aged 48) -- 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 31) -- Secretary of the Trust and the Portfolio Trust;
Vice President, Signature Financial Group, Inc. (since May, 1992); Assistant
Secretary, The Landmark Funds Broker-Dealer Services, Inc. (since October,
1992); law student, Boston University School of Law (September, 1989 to May,
1992).
JOAN R. GULINELLO* (aged 41) -- Assistant Secretary and Assistant Treasurer of
the Trust and the Portfolio Trust; Vice President, Signature Financial Group,
Inc. (since October, 1993); Secretary, The Landmark Funds Broker-Dealer
Services, Inc. (since October, 1995); Vice President and Assistant General
Counsel, Massachusetts Financial Services Company (prior to October, 1993).
JAMES E. HOOLAHAN* (aged 49) -- Vice President, Assistant Secretary and
Assistant Treasurer of the Trust and the Portfolio Trust; Senior Vice
President, Signature Financial Group, Inc.
SUSAN JAKUBOSKI* (aged 32) -- Assistant Secretary and Assistant Treasurer of
the Trust and the Portfolio Trust; Vice President, 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). Her
address is Elizabethan Square, George Town, Grand Cayman, Cayman Islands, BWI.
MOLLY S. MUGLER* (aged 45) -- Assistant Secretary and Assistant Treasurer of
the Trust and the Portfolio Trust; Vice President, Signature Financial Group,
Inc.; Assistant Secretary, The Landmark Funds Broker-Dealer Services, Inc.
(since December, 1988).
KARYN A. NOKE* (aged 25) -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolio Trust; Vice President, Signature
Financial Group (Cayman), Ltd. (since September, 1996); Assistant Vice
President, Signature Financial Group, Inc. (May, 1993 to August, 1996);
Student, University of Massachusetts (prior to May, 1993).
SHARON M. WHITSON* (aged 48) -- Assistant Secretary and Assistant Treasurer of
the Trust and the Portfolio Trust; Assistant Vice President, Signature
Financial Group, Inc. (since November, 1992); Associate Trader, Massachusetts
Financial Services Company (prior to November, 1992).
JULIE J. WYETZNER* (aged 37) -- Vice President, Assistant Secretary and
Assistant Treasurer of the Trust and the Portfolio Trust; Vice President,
Signature Financial Group, Inc.
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.
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
FROM AS PART OF FUND BENEFITS UPON COMPLEX PAID
NAME OF PERSON, POSITION REGISTRANT EXPENSES RETIREMENT TO TRUSTEES (1)
------------------------ ------------ ---------------- ---------------- ---------------
<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(2) .................... $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. As of that
date, Messrs. Alvord, Coolidge, Gilley, Morong, Otis, Warren and Woods and
Mses. Harrington and Kerley were trustees of 16, 32, 15, 16, 11, 16, 15,
15 and 15 funds, respectively, of the Landmark Family of Funds.
(2) Mr. Otis retired as a Trustee as of August 31, 1996.
As of July 31, 1996 all Trustees and officers as a group owned less than
1% of each Fund's outstanding shares. As of the same date, more than 95% of
the outstanding shares of each Fund were held of record by Citibank, N.A. or
its affiliates as Service Agents of the Fund for the accounts of their
respective clients.
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
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 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 and 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 supervision 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 a Distribution Agreement with the Trust for
shares of the Funds (the "Distribution Agreement"). Unless otherwise
terminated the Distribution Agreement remains in effect until February 9,
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 particular Fund and by the vote of a majority of the
Board of Trustees of the Trust who are not parties to the Distribution
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. The Distribution Agreement
will terminate in the event of its assignment, as defined in the 1940 Act.
Under a Service Plan for shares of the Funds (the "Service Plan") which
has 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 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
Service Plan and the purposes for which the expenditures were made.
The 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 the 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 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 the 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.
The 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"). The 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. The 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. The Service Plan may be terminated with respect
to any Fund at any time by a vote of a majority of the Trust's Qualified
Trustees or by a vote of a majority of the outstanding voting securities 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 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 the 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.
As contemplated by the 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
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. 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. 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
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.
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) 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
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.
<PAGE>
11. FINANCIAL STATEMENTS
The attached unaudited financial information for the Funds and the
Portfolios for the period ended November 30, 1996 has been provided by
management of the Funds.
LANDMARK FUNDS I
CITISELECT FOLIO 200
PERIOD ENDED NOVEMBER 30, 1996
STATEMENT OF ASSETS AND LIABILITIES
ASSETS
Investment $92,394,590
Cash (domestic and foreign) --
Receivable for securities Sold --
Receivable for Capital Stock sold 2,020,742
Dividend receivable --
Interest receivable --
Other receivable 1,465
Other assets --
-----------
Total assets 94,416,797
-----------
LIABILITIES
Payable for Securities Purchased --
Other payables 388,082
Other liabilities 62,220
-----------
Total Liabilities 450,302
-----------
Net Assets 93,966,495
-----------
CAPITAL SECTION
Paid-in Capital 90,031,458
Undistributed Net Realized gain (loss) on Investments 136,398
Unrealized appreciation (depreciation) of Investments and
foreign currency translations 3,693,753
Undistributed net Investment Income 104,886
-----------
Total Capital $93,966,495
-----------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 200
PERIOD ENDED NOVEMBER 30, 1996
STATEMENT OF OPERATIONS
INVESTMENT INCOME
Interest Income $ 843,408
Dividend Income 137,298
Other Income 52,849
----------
Total Income 1,033,555
----------
EXPENSES
Investment advisory fees 6,490
Interest expense --
Other expenses 386,831
----------
Gross expenses 393,321
Less: Waivers and Subsidies (40,220)
----------
Net expenses 353,101
----------
Net investment income 680,454
----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain/(loss) from investment transactions 136,398
Net change in unrealized appreciation/(depreciation) 3,693,751
----------
Net realized and unrealized gain/(loss) on investments 3,830,149
----------
Net Increase/(Decrease) in Net Assets resulting from Operations $4,510,603
----------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 200
PERIOD ENDED NOVEMBER 30, 1996
STATEMENT OF CHANGES IN NET ASSETS
INCREASE/(DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income $ 680,454
Net realized gain/(loss) on investments 136,398
Net change in unrealized appreciation/(depreciation)
of investments 3,693,751
-----------
Net increase/(decrease) in net assets resulting from
operations 4,510,603
-----------
DISTRIBUTION TO SHAREHOLDERS
Net Investment Income (575,568)
Capital gains --
Return of Capital (Income) --
Return of Capital (Capital) --
-----------
Total Distribution to Shareholders (575,568)
-----------
CAPITAL STOCK TRANSACTIONS
Net proceeds from sale of shares 93,920,477
Cost of shares repurchased (4,461,440)
Dividend and/or Distribution 572,423
-----------
90,031,460
-----------
Net increase/(decrease) in Net Assets 93,966,495
-----------
Net Assets --
Beginning of Period --
-----------
End of Period $93,966,495
-----------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 200
PERIOD ENDED NOVEMBER 30, 1996
MISCELLANEOUS INFORMATION
SHARES
Prior --
Subs 9,272,056
Redemptions (448,293)
Reinvested 56,120
-----------
Current Shares 8,879,883
-----------
UNDISTRIBUTED INCOME
Prior undistributed $ --
Net investment income 680,454
Return of Capital --
Income Distribution (575,568)
-----------
Current undistributed income 104,886
-----------
UNDISTRIBUTED CAPITAL GAIN
Prior undistributed --
Net Capital Gain/(Loss) 136,398
Return of Capital --
Capital Gain Distribution --
-----------
Current undistributed income 136,398
-----------
Average Net Assets $84,836,443
-----------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 200
PERIOD ENDED NOVEMBER 30, 1996
FINANCIAL HIGHLIGHTS
Net Asset Value, Beginning of period $10.00
------
Income from Operations
Net Investment Income 0.08
Net realized and unrealized gain/(loss) on investments 0.61
------
Total from operations 0.69
------
Less distribution from:
Net investment income (0.11)
Net realized gain on investments --
Return of Capital --
------
Total distributions (0.11)
------
Net Asset Value, end of period $10.58
------
Expense Ratio 1.50
------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 300
PERIOD ENDED NOVEMBER 30, 1996
STATEMENT OF ASSETS AND LIABILITIES
ASSETS
Investment $172,740,021
Cash (domestic and foreign) --
Receivable for securities Sold --
Receivable for Capital Stock sold 3,810,135
Dividend receivable --
Interest receivable --
Other receivable 4,843
Other assets --
------------
Total assets $176,554,999
------------
LIABILITIES
Payable for Securities Purchased --
Other payables 274,388
Other liabilities 133,540
------------
Total Liabilities 407,928
------------
Net Assets 176,147,071
------------
CAPITAL SECTION
Paid-in Capital 165,922,027
Undistributed Net Realized gain (loss) on Investments 316,320
Unrealized appreciation (depreciation) of Investments and
foreign currency translations 9,145,859
Undistributed net Investment Income 762,865
------------
Total Capital $176,147,071
------------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 300
PERIOD ENDED NOVEMBER 30, 1996
STATEMENT OF OPERATIONS
INVESTMENT INCOME
Interest Income $ 1,356,564
Dividend Income 404,795
Other Income 76,286
-----------
Total Income 1,837,645
-----------
EXPENSES
Investment advisory fees 44,878
Interest expense --
Other expenses 686,097
-----------
Gross expenses 730,975
Less: Waivers and Subsidies (38,256)
-----------
Net expenses 692,719
-----------
Net investment income 1,144,926
-----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain/(loss) from investment transactions 316,320
Net change in unrealized appreciation/(depreciation) 9,145,858
-----------
Net realized and unrealized gain/(loss) on investments 9,462,178
-----------
Net Increase/(Decrease) in Net Assets resulting from Operations $10,607,104
-----------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 300
PERIOD ENDED NOVEMBER 30, 1996
STATEMENT OF CHANGES IN NET ASSETS
INCREASE/(DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income $ 1,144,926
Net realized gain/(loss) on investments 316,320
Net change in unrealized appreciation/(depreciation)
of investments 9,145,858
------------
Net increase/(decrease) in net assets resulting from
operations 10,607,104
------------
DISTRIBUTION TO SHAREHOLDERS
Net Investment Income (382,061)
Capital gains --
Return of Capital (Income) --
Return of Capital (Capital) --
------------
Total Distribution to Shareholders (382,061)
------------
CAPITAL STOCK TRANSACTIONS
Net proceeds from sale of shares 171,987,007
Cost of shares repurchased (6,447,040)
Dividend and/or Distribution 382,061
------------
165,922,028
------------
Net increase/(decrease) in Net Assets 176,147,071
------------
Net Assets --
Beginning of Period --
------------
End of Period $176,147,071
------------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 300
PERIOD ENDED NOVEMBER 30, 1996
MISCELLANEOUS INFORMATION
SHARES
Prior --
Subs 16,955,478
Redemptions (636,863)
Reinvested 37,347
------------
Current Shares 16,355,962
------------
UNDISTRIBUTED INCOME
Prior undistributed $ --
Net investment income 1,144,926
Return of Capital --
Income Distribution (382,061)
------------
Current undistributed income 762,865
------------
UNDISTRIBUTED CAPITAL GAIN
Prior undistributed --
Net Capital Gain/(Loss) 316,320
Return of Capital --
Capital Gain Distribution --
------------
Current undistributed income 316,320
------------
Average Net Assets $100,768,073
------------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 300
PERIOD ENDED NOVEMBER 30, 1996
FINANCIAL HIGHLIGHTS
Net Asset Value, Beginning of period $10.00
------
Income from Operations
Net Investment Income 0.07
Net realized and unrealized gain/(loss) on investments 0.78
------
Total from operations 0.85
------
Less distribution from:
Net investment income (0.08)
Net realized gain on investments --
Return of Capital --
------
Total distributions (0.08)
------
Net Asset Value, end of period $10.77
------
Expense Ratio 1.50
------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 400
PERIOD ENDED NOVEMBER 30, 1996
STATEMENT OF ASSETS AND LIABILITIES
ASSETS
Investment $216,004,351
Cash (domestic and foreign) --
Receivable for securities Sold --
Receivable for Capital Stock sold 7,440,623
Dividend receivable --
Interest receivable --
Other receivable 12,097
Other assets --
------------
Total assets $223,457,071
------------
LIABILITIES
Payable for Securities Purchased --
Other payables 396,327
Other liabilities 293,287
------------
Total Liabilities 689,614
------------
Net Assets 222,767,457
------------
CAPITAL SECTION
Paid-in Capital 207,535,166
Undistributed Net Realized gain (loss) on Investments 616,369
Unrealized appreciation (depreciation) of Investments and
foreign currency translations 13,710,783
Undistributed net Investment Income 905,138
------------
Total Capital $222,767,456
------------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 400
PERIOD ENDED NOVEMBER 30, 1996
STATEMENT OF OPERATIONS
INVESTMENT INCOME
Interest Income $ 1,057,158
Dividend Income 775,386
Other Income 113,755
-----------
Total Income 1,946,299
-----------
EXPENSES
Investment advisory fees 15,216
Interest expense --
Other expenses 1,083,828
-----------
Gross expenses 1,099,044
Less: Waivers and Subsidies (57,883)
-----------
Net expenses 1,041,161
-----------
Net investment income 905,138
-----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain/(loss) from investment transactions 616,369
Net change in unrealized appreciation/(depreciation) 13,710,783
-----------
Net realized and unrealized gain/(loss) on investments 14,327,152
-----------
Net Increase/(Decrease) in Net Assets resulting from Operations $15,232,290
-----------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 400
PERIOD ENDED NOVEMBER 30, 1996
STATEMENT OF CHANGES IN NET ASSETS
INCREASE/(DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income $ 905,138
Net realized gain/(loss) on investments 616,369
Net change in unrealized appreciation/(depreciation)
of investments 13,710,783
------------
Net increase/(decrease) in net assets resulting from
operations 15,232,290
------------
DISTRIBUTION TO SHAREHOLDERS
Net Investment Income --
Capital gains --
Return of Capital (Income) --
Return of Capital (Capital) --
------------
Total Distribution to Shareholders --
------------
CAPITAL STOCK TRANSACTIONS
Net proceeds from sale of shares 218,740,237
Cost of shares repurchased (11,205,071)
Dividend and/or Distribution --
------------
207,535,166
------------
Net increase/(decrease) in Net Assets 222,767,456
------------
Net Assets --
Beginning of Period --
------------
End of Period $222,767,456
------------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 400
PERIOD ENDED NOVEMBER 30, 1996
MISCELLANEOUS INFORMATION
SHARES
Prior --
Subs 21,578,549
Redemptions (1,123,825)
Reinvested --
------------
Current Shares 20,454,724
------------
UNDISTRIBUTED INCOME
Prior undistributed $ --
Net investment income 905,138
Return of Capital --
Income Distribution --
------------
Current undistributed income 905,138
------------
UNDISTRIBUTED CAPITAL GAIN
Prior undistributed --
Net Capital Gain/(Loss) 616,369
Return of Capital --
Capital Gain Distribution --
------------
Current undistributed income 616,369
------------
Average Net Assets $129,969,863
------------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 400
PERIOD ENDED NOVEMBER 30, 1996
FINANCIAL HIGHLIGHTS
Net Asset Value, Beginning of period $10.00
------
Income from Operations
Net Investment Income 0.05
Net realized and unrealized gain/(loss) on investments 0.84
------
Total from operations 0.89
------
Less distribution from:
Net investment income --
Net realized gain on investments --
Return of Capital --
------
Total distributions --
------
Net Asset Value, end of period $10.89
------
Expense Ratio 1.75
------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 500
PERIOD ENDED NOVEMBER 30, 1996
STATEMENT OF ASSETS AND LIABILITIES
ASSETS
Investment $ 69,097,665
Cash (domestic and foreign) --
Receivable for securities Sold --
Receivable for Capital Stock sold 2,021,909
Dividend receivable --
Interest receivable --
Other receivable 4,093
Other assets --
------------
Total assets $ 71,123,667
------------
LIABILITIES
Payable for Securities Purchased --
Other payables 115,194
Other liabilities 67,496
------------
Total Liabilities 182,690
------------
Net Assets 70,940,977
------------
CAPITAL SECTION
Paid-in Capital 67,839,050
Undistributed Net Realized gain (loss) on Investments (811)
Unrealized appreciation (depreciation) of Investments and
foreign currency translations 2,949,783
Undistributed net Investment Income 152,955
------------
Total Capital $ 70,940,977
------------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 500
PERIOD ENDED NOVEMBER 30, 1996
STATEMENT OF OPERATIONS
INVESTMENT INCOME
Interest Income $ 147,457
Dividend Income 192,071
Other Income -
----------
Total Income 339,528
----------
EXPENSES
Investment advisory fees 4,707
Interest expense --
Other expenses 191,789
----------
Gross expenses 196,496
Less: Waivers and Subsidies (9,923)
----------
Net expenses 186,573
----------
Net investment income 152,955
----------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS
Net realized gain/(loss) from investment transactions (811)
Net change in unrealized appreciation/(depreciation) 2,949,783
----------
Net realized and unrealized gain/(loss) on investments 2,948,972
----------
Net Increase/(Decrease) in Net Assets resulting from Operations $3,101,927
----------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 500
PERIOD ENDED NOVEMBER 30, 1996
STATEMENT OF CHANGES IN NET ASSETS
INCREASE/(DECREASE) IN NET ASSETS FROM:
OPERATIONS
Net investment income $ 152,955
Net realized gain/(loss) on investments (811)
Net change in unrealized appreciation/(depreciation)
of investments 2,949,783
-----------
Net increase/(decrease) in net assets resulting from
operations 3,101,927
-----------
DISTRIBUTION TO SHAREHOLDERS
Net Investment Income --
Capital gains --
Return of Capital (Income) --
Return of Capital (Capital) --
-----------
Total Distribution to Shareholders --
-----------
CAPITAL STOCK TRANSACTIONS
Net proceeds from sale of shares 69,704,929
Cost of shares repurchased (1,865,879)
Dividend and/or Distribution --
-----------
67,839,050
-----------
Net increase/(decrease) in Net Assets 70,940,977
-----------
Net Assets --
Beginning of Period --
-----------
End of Period $70,940,977
-----------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 500
PERIOD ENDED NOVEMBER 30, 1996
MISCELLANEOUS INFORMATION
SHARES
Prior --
Subs 6,816,811
Redemptions (180,863)
Reinvested --
-----------
Current Shares 6,635,948
-----------
UNDISTRIBUTED INCOME
Prior undistributed $ --
Net investment income 152,955
Return of Capital --
Income Distribution --
-----------
Current undistributed income 152,955
-----------
UNDISTRIBUTED CAPITAL GAIN
Prior undistributed --
Net Capital Gain/(Loss) (811)
Return of Capital --
Capital Gain Distribution --
-----------
Current undistributed income (811)
-----------
Average Net Assets $42,726,860
-----------
<PAGE>
LANDMARK FUNDS I
CITISELECT FOLIO 500
PERIOD ENDED NOVEMBER 30, 1996
FINANCIAL HIGHLIGHTS
Net Asset Value, Beginning of period $10.00
------
Income from Operations
Net Investment Income 0.02
Net realized and unrealized gain/(loss) on investments 0.67
------
Total from operations 0.69
------
Less distribution from:
Net investment income --
Net realized gain on investments --
Return of Capital --
------
Total distributions --
------
Net Asset Value, end of period $10.69
------
Expense Ratio 1.75
------
<PAGE>
PART C
Item 24. Financial Statements and Exhibits.
(a) Financial Statements Included in Part A:
(i)CitiSelectSM Folio 200
Condensed Financial Information - Financial
Highlights for the period from June 17, 1996
(commencement of operations) to November 30, 1996.
(ii)CitiSelectSM Folio 300
Condensed Financial Information - Financial
Highlights for the period from June 17, 1996
(commencement of operations) to November 30, 1996.
(iii)CitiSelectSM Folio 400
Condensed Financial Information - Financial
Highlights for the period from June 17, 1996
(commencement of operations) to November 30, 1996.
(iv)CitiSelectSM Folio 500
Condensed Financial Information - Financial
Highlights for the period from September 3, 1996
(commencement of operations) to November 30, 1996.
Financial Statements Included in Part B:
(i)CitiSelectSM Folio 200
Statement of Assets and Liabilities at
November 30, 1996
Statement of Operations for the period from June 17,
1996 (commencement of operations) to November 30,
1996
Statement of Changes in Net Assets for the period from
June 17, 1996 (commencement of operations) to
November 30, 1996
Financial Highlights for the period from June 17, 1996
(commencement of operations) to November 30, 1996
(ii)CitiSelectSM Folio 300
Statement of Assets and Liabilities at
November 30, 1996
Statement of Operations for the period from June 17,
1996 (commencement of operations) to November 30,
1996
Statement of Changes in Net Assets for the period from
June 17, 1996 (commencement of operations) to
November 30, 1996
Financial Highlights for the period from June 17, 1996
(commencement of operations) to November 30, 1996
(iii)CitiSelectSM Folio 400
Statement of Assets and Liabilities at
November 30, 1996
Statement of Operations for the period from June 17,
1996 (commencement of operations) to November 30,
1996
Statement of Changes in Net Assets for the period from
June 17, 1996 (commencement of operations) to
November 30, 1996
Financial Highlights for the period from June 17, 1996
(commencement of operations) to November 30, 1996
(iv)CitiSelectSM Folio 500
Statement of Assets and Liabilities at
November 30, 1996
Statement of Operations for the period from September
3, 1996 (commencement of operations) to November 30,
1996
Statement of Changes in Net Assets for the period from
September 3, 1996 (commencement of operations) to
November 30, 1996
Financial Highlights for the period from September 3,
1996 (commencement of operations) to November 30,
1996
(b) Exhibits
******** 1 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
******** 7 Form of Custodian Agreement between the
Registrant, on behalf of the Funds, and State
Street Bank and Trust Company, 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
25(a)
Powers of Attorney for the Registrant
******** 25(b) Powers of Attorney for Asset Allocation
Portfolios
27 Financial Data Schedule
- ---------------------
* 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. 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. 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.
******** Incorporated by reference to Post-Effective Amendment No. 20 to
the Registrant's Registration Statement on Form N-1A (File No.
2-90518) as filed with the Securities and Exchange Commission on
December 31, 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 November 22, 1996
(without par value)
CitiSelectSM Folio 200 2,802
CitiSelectSM Folio 300 7,176
CitiSelectSM Folio 400 10,457
CitiSelectSM Folio 500 3,499
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 Distribution
Agreements between the Registrant and LFBDS, filed as Exhibits to Post-Effective
Amendment No. 18 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), Landmark VIP Funds
(Landmark VIP U.S. Government Portfolio, Landmark VIP Balanced Portfolio,
Landmark VIP Equity Portfolio and Landmark VIP International Equity Portfolio)
and Variable Annuity Portfolios (CitiSelectSM VIP Folio 200, CitiSelectSM VIP
Folio 300, CitiSelectSM VIP Folio 400, CitiSelectSM VIP Folio 500 and Landmark
Small Cap Equity VIP Fund). 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; 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:
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.
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
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.
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 Resources, Inc.
President and Director 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
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, Franklin
Executive Vice President 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 Treasurer,
Senior Vice President and 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
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)
Vice-Chairman of Board, Templeton Global Bond Managers, Inc.
(1990-93)
Edward Burton Jamieson Portfolio Manager, Franklin Institutional Services Corporation
Senior Vice President
Thomas Joseph Kenny None
Senior Vice President and
Director of Municipal
Development
Leslie Michael Kratter Vice President and Assistant Secretary, Franklin Resources, Inc.
Secretary
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>
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
William S. Thompson Director, Spieker Properties Inc.
Chief Executive Officer
Hotchkis and Wiley, a division of the Capital Management Group of
Merrill Lynch Asset Management, L.P. ("Hotchkis"), a sub-adviser of the
Registrant, maintains its principal office at 800 West Sixth Street, Fifth
Floor, Los Angeles, California 90017. 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 are 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.
Hotchkis became a division of the Capital Management Group of Merrill
Lynch Asset Management, L.P. upon the completion of the sale by Hotchkis and
Wiley, a Delaware Limited Liability Company and the general partner of Hotchkis
& Wiley, a California limited partnership, of all of the partnership interests
in Hotchkis & Wiley to Merrill Lynch & Co., Inc., a Delaware corporation, in
November of 1996.
<TABLE>
<CAPTION>
Name and Position: Other Affiliations:
<S> <C>
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 Wiley Funds
Portfolio Manager
John F. Hotchkis Trustee, Hotchkis and Wiley Funds
Portfolio Manager Governor, The Music Center
Chairman 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.
Michael L. Quinn, Head of Merrill Lynch Capital Management Group
Chief Executive Officer
George Wiley None
Special advisor to Merrill Lynch
Capital Management Group
</TABLE>
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
Investment Adviser and Fund Administrator for the MAS Funds and is also the
parent company of MAS Fund Distribution, Inc. ("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.
MAS is a Pennsylvania limited liability partnership and became an
indirect wholly-owned subsidiary of Morgan Stanley Group Inc., the global
financial services firm, upon the completion of Morgan Stanley Asset
Management's acquisition of MAS in January of 1996. MAS's general partner and
the owner of 95% of the MAS partnership interests is Morgan Stanley Asset
Management Holdings, Inc. ("MSAMH"), a direct wholly-owned subsidiary of Morgan
Stanley Asset Management Inc. MSAMH is also one of MAS's three limited partners.
The other two limited partners of MAS are MSL Incorporated and MS Holdings
Incorporated, which are both holding companies within Morgan Stanley's corporate
structure and own the remaining 3% and 2% of MAS's partnership interests,
respectively.
<TABLE>
<CAPTION>
Following are the officers and directors of Morgan Stanley Asset Management Holdings, Inc.
Name and Position: Affiliations:
<S> <C>
James M. Allwin Director and Managing Director of Morgan Stanley Asset
President and Director Management Inc. since 1993 and President since
1995;
Employee of Morgan Stanley & Co. Incorporated since
1976 and Managing Director since 1985;
President of Morgan Stanley Realty, Inc. since 1988;
Member of the Board of Overseers, Dartmouth College;
Member of the Executive Board, The National Realty
Committee;
Trustee, The Urban Land Institute;
Chairman, Cities in Schools, Inc.
Barton M. Biggs Chairman and Director of Morgan Stanley Asset
Chairman of the Board Management Inc. since 1980;
and Director Chairman and Director of Morgan Stanley Asset
Management Limited;
Managing Director of Morgan Stanley & Co. Incorporated
since 1973;
Director of Morgan Stanley Group Inc. since 1991;
Member of the Investment Advisory Council of The
Thailand Fund;
Director, The Rand McNally Company;
Member, Yale Development Board;
Director and officer of various investment companies
managed by Morgan Stanley Asset Management Inc.
Harold J. Schaaff, Jr. Principal of Morgan Stanley & Co. Incorporated;
Secretary and Director General Counsel and Secretary of Morgan Stanley Asset
Management Inc. since 1989;
Officer of various investment companies managed by
Morgan Stanley Asset Management Inc.
Debra M. Aaron Employee of Morgan Stanley & Co. Incorporated since
Vice President 1984, Vice President since 1986 and a Principal
since 1989
Bruce R. Sandberg Employee of Morgan Stanley & Co. Incorporated since
Vice President 1981, Vice President since 1988 and a Principal
since 1992
Eileen Murray Employee of Morgan Stanley & Co. Incorporated since
Treasurer 1984;
Treasurer and Managing Director of Morgan Stanley
Asset Management Inc. and Morgan Stanley & Co.
Incorporated since June of 1996
Madeline D. Barkhorn Employee of Morgan Stanley & Co. Incorporated since
Assistant Secretary 1994 and of Morgan Stanley Asset Management Inc.
since 1988
Charlene R. Herzer Employee of Morgan Stanley & Co. Incorporated since
Assistant Secretary 1990 and Vice President since 1995
</TABLE>
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 former partner of MAS and has
the affiliations indicated:
<TABLE>
<CAPTION>
Name: Other Affiliations:
<S> <C>
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
John D. Connolly, CFA Financial Analysts of Philadelphia, President, 1994-95
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, 1994-present
Bryn Mawr Rehabilitation Hospital, Trustee
Main Line Health System, Trustee
Owosso Corporation, Director
Gary G. Schlarbaum, CFA Coe College, Trustee
James D. Schmid MAS Funds, President
Head of Mutual Funds MAS Fund Distribution, Inc., Director
The Minerva Fund, Inc., Chairman of the Board of
Directors
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 California Pacific Medical Center Foundation,
Trustee
Schools of the Sacred Heart, Trustee
Sisters of the Presentation - Investment Advisory
Committee
Marin Community Foundation - Investment Advisory
Committee
Scott F. Richard 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
Marna C. Whittington Rohm & Haas Company, Director
Tower Hill School, Trustee
Upland Country Day School, Trustee
The Philadelphia Contributionship, Director
Federated Department Stores, Inc., Director
Berwind Group, Director
</TABLE>
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 Institutional Tax Free 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,
Landmark New York Tax Free Income Fund, Landmark VIP Funds (Landmark VIP U.S.
Government Portfolio, Landmark VIP Balanced Portfolio, Landmark VIP Equity
Portfolio and Landmark VIP International Equity Portfolio) and Variable Annuity
Portfolios (CitiSelectSM VIP Folio 200, CitiSelectSM VIP Folio 300, CitiSelectSM
VIP Folio 400, CitiSelectSM VIP Folio 500 and Landmark Small Cap Equity VIP
Fund). 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
State Street Bank and Trust Company 1776 Heritage Drive
(transfer agent and custodian) 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 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.
(b) 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 6th day of January, 1997.
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 January 6, 1997.
Signature Title
Philip W. Coolidge President, Principal Executive Officer
Philip W. Coolidge and 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.
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 6th day of January, 1997.
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 January 6, 1997.
Signature Title
Philip W. Coolidge* President, Principal Executive Officer
Philip W. Coolidge and 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>
EXHIBIT INDEX
Exhibit
No.: Description:
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000744388
<NAME> CITISELECT FOLIO 200
<SERIES>
<NUMBER> 002
<NAME>LANDMARK FUNDS I
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 92,394,590
<RECEIVABLES> 2,022,207
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 94,416,797
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 90,031,458
<SHARES-COMMON-STOCK> 8,879,883
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 104,886
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 136,398
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,693,753
<NET-ASSETS> 93,966,495
<DIVIDEND-INCOME> 137,298
<INTEREST-INCOME> 843,408
<OTHER-INCOME> 52,849
<EXPENSES-NET> 353,101
<NET-INVESTMENT-INCOME> 680,454
<REALIZED-GAINS-CURRENT> 136,398
<APPREC-INCREASE-CURRENT> 3,693,751
<NET-CHANGE-FROM-OPS> 4,510,603
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (575,568)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 93,920,477
<NUMBER-OF-SHARES-REDEEMED> (4,461,440)
<SHARES-REINVESTED> 572,423
<NET-CHANGE-IN-ASSETS> 93,966,495
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 6,490
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 393,321
<AVERAGE-NET-ASSETS> 84,836,443
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.08
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.11)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.58
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000744388
<NAME> CITISELECT FOLIO 300
<SERIES>
<NUMBER> 003
<NAME> LANDMARK FUNDS I
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 172,740,021
<RECEIVABLES> 3,814,978
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 176,554,999
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 165,922,027
<SHARES-COMMON-STOCK> 16,355,962
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 762,865
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 316,320
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9,145,859
<NET-ASSETS> 176,147,071
<DIVIDEND-INCOME> 404,795
<INTEREST-INCOME> 1,356,564
<OTHER-INCOME> 76,286
<EXPENSES-NET> 692,719
<NET-INVESTMENT-INCOME> 1,144,926
<REALIZED-GAINS-CURRENT> 316,320
<APPREC-INCREASE-CURRENT> 9,145,858
<NET-CHANGE-FROM-OPS> 10,607,104
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (382,061)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 171,987,007
<NUMBER-OF-SHARES-REDEEMED> (6,447,040)
<SHARES-REINVESTED> 382,061
<NET-CHANGE-IN-ASSETS> 176,147,071
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 44,878
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 730,975
<AVERAGE-NET-ASSETS> 100,768,073
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.08)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.77
<EXPENSE-RATIO> 1.50
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000744388
<NAME> CITISELECT FOLIO 400
<SERIES>
<NUMBER> 004
<NAME> LANDMARK FUNDS I
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 216,004,351
<RECEIVABLES> 7,452,720
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 223,457,071
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 207,535,166
<SHARES-COMMON-STOCK> 20,454,724
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 905,138
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 616,369
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 13,710,783
<NET-ASSETS> 222,767,457
<DIVIDEND-INCOME> 775,386
<INTEREST-INCOME> 1,057,158
<OTHER-INCOME> 113,755
<EXPENSES-NET> 1,041,161
<NET-INVESTMENT-INCOME> 905,138
<REALIZED-GAINS-CURRENT> 616,369
<APPREC-INCREASE-CURRENT> 13,710,783
<NET-CHANGE-FROM-OPS> 15,232,290
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 218,740,237
<NUMBER-OF-SHARES-REDEEMED> (11,205,071)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 222,767,456
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 15,216
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,099,044
<AVERAGE-NET-ASSETS> 129,969,863
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.05
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.89
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000744388
<NAME> CITISELECT FOLIO 500
<SERIES>
<NUMBER> 004
<NAME> LANDMARK FUNDS I
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> NOV-30-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 69,097,665
<RECEIVABLES> 2,026,002
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 71,123,667
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 67,839,050
<SHARES-COMMON-STOCK> 6,635,948
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 152,955
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (811)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 2,949,783
<NET-ASSETS> 70,940,977
<DIVIDEND-INCOME> 192,071
<INTEREST-INCOME> 147,457
<OTHER-INCOME> 0
<EXPENSES-NET> 186,573
<NET-INVESTMENT-INCOME> 152,955
<REALIZED-GAINS-CURRENT> (811)
<APPREC-INCREASE-CURRENT> 2,949,783
<NET-CHANGE-FROM-OPS> 3,101,927
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 69,704,929
<NUMBER-OF-SHARES-REDEEMED> (1,865,879)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 70,940,977
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 4,707
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 196,496
<AVERAGE-NET-ASSETS> 42,726,860
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> 0.02
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.69
<EXPENSE-RATIO> 1.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
