LANDMARK FUNDS I, 497, 1997-05-05

LANDMARK FUNDS I
497, 1997-05-05

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<PAGE>
497(c) File Nos. 2-90518 and 811-4006

PROSPECTUS
- --------------------------------------------------------------------------------
MAY 1, 1997

LANDMARK BALANCED FUND
LANDMARK EQUITY FUND
LANDMARK SMALL CAP EQUITY FUND
(Members of the Landmark(SM) Family of Funds)
Class A and B Shares

This Prospectus describes three diversified mutual funds in the Landmark
Family of Funds: Landmark Balanced Fund, Landmark Equity Fund, and Landmark
Small Cap Equity Fund. Each Fund has its own investment objectives and
policies. Citibank, N.A. is the investment adviser.
- --------------------------------------------------------------------------------
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIOS OF SECURITIES, EACH FUND SEEKS ITS INVESTMENT OBJECTIVES BY
INVESTING ALL OF ITS INVESTABLE ASSETS IN A PORTFOLIO WITH THE SAME INVESTMENT
OBJECTIVES AND POLICIES. SEE "SPECIAL INFORMATION CONCERNING INVESTMENT
STRUCTURE" ON PAGE 11.
- --------------------------------------------------------------------------------

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 May 1, 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 contacting the investor's Shareholder
Servicing Agent (see inside back cover for address and phone number).

TABLE OF CONTENTS

2 Prospectus Summary
- --------------------------------------------------------------------------------
4 Expense Summary
- --------------------------------------------------------------------------------
6 Condensed Financial Information
- --------------------------------------------------------------------------------
9 Investment Information
- --------------------------------------------------------------------------------
10 Risk Considerations
- --------------------------------------------------------------------------------
12 Valuation of Shares
Classes of Shares
- --------------------------------------------------------------------------------
14 Purchases
- --------------------------------------------------------------------------------
17 Exchanges
- --------------------------------------------------------------------------------
18 Redemptions
Dividends and Distributions
- --------------------------------------------------------------------------------
19 Management
- --------------------------------------------------------------------------------
22 Tax Matters
Performance Information
- --------------------------------------------------------------------------------
23 General Information
- --------------------------------------------------------------------------------
25 Appendix -- Permitted Investments
and Investment Practices
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
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 REP-
RESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
- --------------------------------------------------------------------------------

INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>

PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------

See the body of the Prospectus for more information on the topics
discussed in this summary.

THE FUNDS: This Prospectus describes three diversified mutual funds: Landmark
Balanced Fund, Landmark Equity Fund, and Landmark Small Cap Equity Fund. Each
Fund has its own investment objectives and policies. There can be no assurance
that any Fund will achieve its objectives. 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 AND POLICIES:
LANDMARK BALANCED FUND. The Fund's objectives are to earn high current income
by investing in a broad range of securities, to preserve capital, and to
provide growth potential with reduced risk. Through Balanced Portfolio, the
Fund invests in a broadly diversified portfolio of income-producing
securities, including common and preferred stocks and bonds. In selecting
common stocks for Balanced Portfolio, the Adviser emphasizes securities issued
by established companies with medium to large capitalizations, i.e., $750
million or more, and seasoned management teams ("Established Companies").

LANDMARK EQUITY FUND. The Fund's objective is long-term capital growth;
dividend income, if any, is incidental to this investment objective. Through
Equity Portfolio, the Fund invests primarily in common stocks of U.S. issuers,
with an emphasis on Established Companies.

LANDMARK SMALL CAP EQUITY FUND. The Fund's objective is long-term capital
growth; dividend income, if any, is incidental to this investment objective.
Through Small Cap Equity Portfolio, the Fund invests primarily in stocks of
U.S. issuers that have small market capitalizations (i.e., $750 million or
less). In addition, the Fund may invest in companies that are believed to be
emerging companies relative to their potential markets.

INVESTMENT ADVISER AND DISTRIBUTOR: Citibank, N.A. ("Citibank" or the
"Adviser"), a wholly-owned subsidiary of Citicorp, is the investment adviser.
Citibank and its affiliates manage more than $81 billion in assets worldwide.
The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS" or the "Distributor")
is the distributor of shares of each Fund. See "Management."

PURCHASES AND REDEMPTIONS: Customers of Shareholder Servicing Agents may
purchase and redeem shares of the Funds on any Business Day. See "Purchases"
and "Redemptions."

PRICING: Investors may select Class A or Class B shares, with different
expense levels and sales charges (if available through the investors'
Shareholder Servicing Agents). See "Classes of Shares," "Purchases" and
"Management -- Distribution Arrangements."

CLASS A SHARES. Offered at net asset value plus any applicable initial sales
charge (maximum of 4.75% of the public offering price) and subject to a
distribution fee at the annual rate of 0.05% of the average daily net assets
represented by Class A shares. Purchases of $1 million or more are not subject
to an initial sales charge, but are subject to a 1.00% contingent deferred
sales charge in the event of certain redemptions within 12 months following
purchase.

The sales charge on Class A shares may be reduced or eliminated through
the following programs:
Letter of Intent
Right of Accumulation
Reinstatement Privilege
See "Purchases" and "Redemptions."

CLASS B SHARES. Offered at net asset value (a maximum contingent deferred
sales charge of 5.00% of the lesser of the shares' net asset value at
redemption or their original purchase price is imposed on certain redemptions
made within six years of the date of purchase) and subject to a distribution
fee at the annual rate of 0.75% of the average daily net assets represented by
Class B shares and a service fee at the annual rate of 0.05% of the average
daily net assets represented by Class B shares. Class B shares automatically
convert into Class A shares (which have a lower distribution fee)
approximately eight years after purchase.

EXCHANGES: Shares may be exchanged for shares of the corresponding class of
most other Landmark Funds. See "Exchanges."

DIVIDENDS: Dividends are declared and paid quarterly for the Balanced Fund.
Dividends, if any, are declared and paid semi-annually for the Equity Fund and
the Small Cap Equity Fund (together, the "Equity Funds"). Net capital gains
are distributed annually. See "Dividends and Distributions."

REINVESTMENT: All dividends and capital gains distributions may be received
either in cash or in Fund shares of the same class at net asset value, subject
to the policies of a shareholder's Shareholder Servicing Agent. See "Dividends
and Distributions."

WHO SHOULD INVEST: Each Fund has its own suitability considerations and risk
factors, as summarized below and described in more detail in "Investment
Information" and "Risk Considerations." No single Fund is intended to provide
a complete investment program.

BALANCED FUND. Investing in a broadly diversified portfolio of income-
producing securities, the Fund is designed for investors seeking high current
income with preservation of capital, and growth potential with reduced risk.

EQUITY FUNDS. Investing primarily in common stock of U.S. issuers, the Equity
Funds are designed for investors seeking long-term capital growth and for whom
current income is not a primary consideration. The Equity Funds are designed
for long-term investors who are willing to accept the risks of potential loss
associated with opportunities for above-average growth, who can tolerate
substantial changes in the value of their investment and who do not require
current income from their investment.

RISK FACTORS: There can be no assurance that any Fund will achieve its
investment objectives, 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, an
investor's shares may be worth more or less at redemption than at the time of
purchase.

Investors in the Funds, particularly the Small Cap Equity Fund, 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
investing primarily 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, and all of these risks are increased for investments in issuers in
developing countries.

Certain investment practices, such as the use of forward non-U.S. currency
exchange contracts, also may entail special risks. Investors should read "Risk
Considerations" for more information about risk factors.
<PAGE>

EXPENSE SUMMARY

The following table summarizes estimated shareholder transaction and annual
operating expenses for Class A and B shares of each Fund and for that Fund's
corresponding Portfolio. For more information on costs and expenses, see
"Management" -- page 19 and "General Information -- Expenses" -- page 24.*

<TABLE>
<CAPTION>
--------------------------------------------------------
SMALL CAP
BALANCED FUND EQUITY FUND EQUITY FUND
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) .... 4.75% None 4.75% None 4.75% None
Maximum Contingent Deferred Sales Charge
(as a percentage of original purchase
price or redemption proceeds, whichever See See See
is less) .............................. Below(1) 5.00% Below(1) 5.00% Below(1) 5.00%
ANNUAL FUND OPERATING EXPENSES AFTER FEE
WAIVERS (AS A PERCENTAGE OF AVERAGE NET
ASSETS):
Investment Management Fee ................ .40% .40% .50% .50% .65%(2) .65%(2)
12b-1 Fees (including service fees for
Class B shares)(2)(3) .................. .05% .80% .05% .80% .05% .80%
Other Expenses
Administrative Services Fees(2) ........ .25% .25% .15% .15% .15% .15%
Shareholder Servicing Agent Fees ....... .25% .25% .25% .25% .25% .25%
Other Operating Expenses(4) ............ .07% .07% .10% .10% .25%(2) .25%(2)
Total Fund Operating Expenses(2) ......... 1.02% 1.77% 1.05% 1.80% 1.35% 2.10%
</TABLE>

* 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 Class B shares were not offered during the most
recent fiscal year of the Funds, certain figures in the table are based on
estimated amounts for the current fiscal year. The table shows the fees
paid to various service providers after giving effect to expected
voluntary partial fee waivers and reimbursements. There can be no
assurance that the fee waivers and reimbursements reflected in the table
will continue at these levels.
(1) Purchases of $1 million or more are not subject to an initial sales
charge; however, a contingent deferred sales charge of 1.00% will be
imposed in the event of certain redemptions within 12 months following
purchase. See "Classes of Shares" and "Purchases."
(2) Absent fee waivers and reimbursements, administrative services fees, 12b-1
fees and total fund operating expenses would be .30%, .20% and 1.22% for
Landmark Balanced Fund -- Class A, .30%, .95% and 1.97% for Landmark
Balanced Fund -- Class B, .30%, .20% and 1.35% for Landmark Equity Fund --
Class A and .30%, .95% and 2.10% for Landmark Equity Fund -- Class B.
Absent fee waivers and reimbursements, investment management fees,
administrative services fees, 12b-1 fees, other operating expenses and
total fund operating expenses would be .75%, .30%, .20%, .38% and 1.88%
for Landmark Small Cap Equity Fund -- Class A and .75%, .30%, .95%, .38%
and 2.63% for Landmark Small Cap Equity Fund -- Class B. The foregoing
12b-1 fees for Class A shares assume a 0.05% charge for print or
electronic media expenses.
(3) 12b-1 distribution fees are asset-based sales charges. 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. The figures for Class B
shares include service fees, which are payable at the annual rate of 0.05%
of the average daily net assets represented by Class B shares.
(4) LFBDS has agreed to pay the ordinary operating expenses of the Balanced
Fund and the Equity Fund, subject to certain exceptions. LFBDS receives a
fee from each of these Funds. See "General Information -- Expenses."
<PAGE>

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 FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------
BALANCED FUND
Class A shares(1) ................. $57 $78 $101 $166
Class B shares:
Assuming complete redemption at
end of period(2)(3) ............ $68 $86 $116 $188
Assuming no redemption(3) ....... $18 $56 $ 96 $188

EQUITY FUND
Class A shares(1) ................. $58 $79 $103 $170
Class B shares:
Assuming complete redemption at
end of period(2)(3) ............ $68 $87 $117 $192
Assuming no redemption(3) ....... $18 $57 $ 97 $192
SMALL CAP EQUITY FUND
Class A shares(1) ................. $61 $88 $118 $202
Class B shares:
Assuming complete redemption at
end of period(2)(3) ............ $71 $96 $133 $220
Assuming no redemption(3) ....... $21 $66 $113 $220

(1) Assumes deduction at the time of purchase of the maximum 4.75% sales load.
(2) Assumes deduction at the time of redemption of the maximum applicable
contingent deferred sales charge.
(3) Ten-year figures assume conversion of Class B shares to Class A shares
approximately eight years after purchase.

The Example assumes a 5% annual return and that all dividends are reinvested
and reflects certain voluntary fee waivers. If waivers were not in place, the
amounts in the example would be $59, $84, $111 and $188 for Balanced Fund --
Class A; $70, $92, $126 and $206 for Balanced Fund -- Class B (assuming
complete redemption at the end of each period); $61, $88, $118 and $202 for
Equity Fund -- Class A; $71, $96, $133 and $220 for Equity Fund -- Class B
(assuming complete redemption at the end of each period); $66, $104, $144 and
$257 for Small Cap Equity Fund -- Class A and $77, $112, $160 and $274 for
Small Cap Equity Fund -- Class B (assuming complete redemption at the end of
each period). Expenses for Class A shares are based on each Fund's fiscal year
ended December 31, 1996. Expenses for Class B shares are estimated, because
Class B shares were not offered during the fiscal year ended December 31,
1996. 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 OF ANY FUND. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
<PAGE>

CONDENSED FINANCIAL INFORMATION

The following tables provide condensed financial information about the Funds
for the periods indicated. The information below should be read in conjunction
with the financial statements appearing in the Funds' Annual Reports to
Shareholders, which are incorporated by reference in the Statement of
Additional Information. The financial statements and notes, as well as the
tables below, have been audited by Price Waterhouse LLP, independent
accountants. The report of Price Waterhouse LLP is included in each Fund's
Annual Report. Copies of the Annual Reports may be obtained without charge
from an investor's Shareholder Servicing Agent (see inside of back cover for
address and phone number).

<TABLE>
-----------------------------------------------------------------------------------------------------------
BALANCED FUND
FINANCIAL HIGHLIGHTS
CLASS A SHARES
(No Class B shares were outstanding during these periods.)

<CAPTION>
OCTOBER 19, 1990
(COMMENCEMENT OF
YEAR ENDED DECEMBER 31, OPERATIONS) TO
1996 1995 1994++ 1993 1992 1991 DECEMBER 31, 1990
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period ... $15.71 $13.52 $14.24 $13.54 $12.93 $10.27 $ 9.75
------ ------ ------ ------ ------ ------ ------
Income from Operations:
Net investment income .. 0.497 0.486 0.399 0.336** 0.266 0.336 0.081
Net realized and
unrealized gain (loss)
on investments ........ 0.680 2.540 (0.695) 0.803** 0.600 2.665 0.513
------ ------ ------ ------ ------ ------ ------
Total from
operations ........ 1.177 3.026 (0.296) 1.139 0.866 3.001 0.594
------ ------ ------ ------ ------ ------ ------
Less Dividends and
Distributions From:
Net investment income (0.497) (0.495) (0.394) (0.319) (0.256) (0.341) (0.074)
Net realized gain on
investments ......... (0.780) (0.341) (0.030) (0.120) -- -- --
------ ------ ------ ------ ------ ------ ------
Total from dividends
and distributions . (1.277) (0.836) (0.424) (0.439) (0.256) (0.341) (0.074)
------ ------ ------ ------ ------ ------ ------
Net Asset Value, end of
period ................ $15.61 $15.71 $13.52 $14.24 $13.54 $12.93 $10.27
====== ====== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's omitted). $230,382 $246,002 $227,309 $265,216 $15,296 $10,239 $6,855
Ratio of expenses to
average net assets .... 1.02%(A) 1.02%(A) 1.02%(A) 1.04% 1.40% 1.40% 1.40%*
Ratio of net investment
income to average net
assets ................ 3.04% 3.21% 2.82% 2.46% 2.07% 2.88% 4.06%*
Portfolio turnover(B) .. -- -- 29% 101% 102% 117% 12%
Total return ........... 7.59% 22.66% (2.06)% 8.48% 6.82% 29.61% 6.09%+

Note: If agents of the Fund for the periods indicated had not waived a portion
of their fees and had expenses been limited as required by certain state
securities laws for the period ended December 31, 1990, the net investment
income per share and the ratios would have been as follows:

Net investment income
per share .............. $ 0.464 $ 0.463 $ 0.378 $0.310** $0.148 $0.211 $0.059
RATIOS:
Expenses to average net
assets ................. 1.22%(A) 1.17%(A) 1.17%(A) 1.23% 2.32% 2.47% 2.50%*
Net investment income to
average net assets ..... 2.84% 3.06% 2.67% 2.27% 1.15% 1.81% 2.96%*

* Annualized.
** The per share amounts were computed using a monthly average number of shares outstanding during the year.
(A) Includes the Fund's share of Balanced Portfolio's allocated expenses for the periods subsequent to May 1, 1994.
(B) Represents the rate of portfolio activity for the period while the Fund was making investments directly in
securities. The portfolio turnover rates for the fiscal years ended December 31, 1995 and 1996 are included under
"Investment Information -- Certain Additional Investment Policies."
+ Not Annualized.
++ On May 1, 1994 the Fund began investing all of its investable assets in Balanced Portfolio.
</TABLE>
<PAGE>

<TABLE>
---------------------------------------------------------------------------------------------------------------
EQUITY FUND
FINANCIAL HIGHLIGHTS
CLASS A SHARES
(No Class B shares were outstanding during these periods.)
<CAPTION>
OCTOBER 19, 1990
(COMMENCEMENT OF
YEAR ENDED DECEMBER 31, OPERATIONS) TO
1996 1995 1994+ 1993 1992 1991 DECEMBER 31, 1990
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period ... $17.20 $14.13 $14.80 $13.23 $12.36 $ 9.57 $ 9.14
------ ------ ------ ------ ------ ------ ------
Income from Operations:
Net investment income .. 0.122 0.211 0.173 0.071** 0.065 0.126 0.065
Net realized and
unrealized gain (loss)
on investments ........ 2.250 3.651 (0.245) 1.550 0.868 2.797 0.423
------ ------ ------ ------ ------ ------ ------
Total from
operations ........ 2.372 3.862 (0.072) 1.621 0.933 2.923 0.488
------ ------ ------ ------ ------ ------ ------
Less Dividends and
Distributions From:
Net investment income (0.118) (0.210) (0.169) (0.051) (0.063) (0.133) (0.058)
Net realized gain on
investments ......... (1.204) (0.582) (0.429) -- -- -- --
------ ------ ------ ------ ------ ------ ------
Total from dividends
and distributions ... (1.322) (0.792) (0.598) (0.051) (0.063) (0.133) (0.058)
------ ------ ------ ------ ------ ------ ------
Net Asset Value, end of
period ................ $18.25 $17.20 $14.13 $14.80 $13.23 $12.36 $ 9.57
====== ====== ====== ====== ====== ====== ======

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000's omitted). $228,954 $213,729 $183,975 $200,903 $10,973 $9,181 $6,026
Ratio of expenses to
average net assets .... 1.05%(A) 1.05%(A) 1.05%(A) 1.07% 1.40% 1.40% 1.40%*
Ratio of net investment
income to average
net assets ............ 0.67% 1.30% 1.15% 0.52% 0.53% 1.12% 3.48%*
Portfolio turnover (B) . -- -- 1% 23% 79% 68% 0%
Total return ........... 13.84% 27.55% (0.41%) 12.26% 7.60% 30.73% 5.34%

Note: If agents of the Fund for the periods indicated had not waived a portion
of their fees and had expenses been limited as required by certain state
securities laws for periods before December 31, 1992, the net investment
income (loss) per share and the ratios would have been as follows:

Net investment income $
(loss) per share ....... $ 0.067 $ 0.170 $ 0.136 $0.029** (0.070) $0.002 $0.044
RATIOS:
Expenses to average net
assets ................ 1.35%(A) 1.30%(A) 1.29%(A) 1.37% 2.50% 2.50% 2.50%*
Net investment income
(loss) to average
net assets ............ 0.37% 1.05% 0.91% 0.21% (0.57)% 0.02% 2.38%*

* Annualized.
** The per share amounts were computed using a monthly average number of shares outstanding during the year.
(A) Includes the Fund's share of Equity Portfolio's allocated expenses for periods subsequent to May 1, 1994.
(B) Portfolio turnover represents the rate of portfolio activity for the period while the Fund was making investments
directly in securities. The portfolio turnover rates for the fiscal years ended December 31, 1995 and 1996 are
included under "Investment Information -- Certain Additional Investment Policies."
+ On May 1, 1994 the Fund began investing all of its investable assets in Equity Portfolio.
</TABLE>
<PAGE>

------------------------------------
SMALL CAP EQUITY FUND
FINANCIAL HIGHLIGHTS
CLASS A SHARES
(No Class B shares were outstanding
during these periods.)

JUNE 21,
1995
(COMMENCEMENT OF
OPERATIONS)
YEAR ENDED TO
DECEMBER 31, DECEMBER 31,
1996 1995
- -----------------------------------------------------------------------------
Net Asset Value, beginning- of period .......... $14.32 $10.00
------ ------
Income from Operations:
0.05

Net investment income .......................... (0.016)
4.42

Net realized and unrealized gain ............... 5.407
------ ------
Total from operations ...................... 5.391 4.47
------ ------
Less Distributions From:

Net investment income ........................ -- (0.05)
Net realized gain ............................ (1.501) (0.10)
------ ------
Total from distributions ................... (1.501) (0.15)
------ ------
Net Asset Value, end of period ................. $18.21 $14.32
====== ======
RATIOS/SUPPLEMENTAL DATA:
$5,148

Net assets, end of period (000's omitted) ...... $24,311
Ratio of expenses to average net assets (A) .... 0.88% 0%
Ratio of net investment income (loss) to average 1.21%*
net assets .................................... (0.13)%
Total return ................................... 37.80% 44.78%**

Note: If agents of the Fund and of Small Cap Equity Portfolio had not
voluntarily waived a portion of their fees or assumed Fund expenses and had
expenses been limited to that required by certain state securities laws for
the period ended December 31, 1995, the net investment income (loss) per share
and the ratios would have been as follows:

Net investment income per share ................ $(0.133) $(0.288)
RATIOS:
Expenses to average net assets (A) ............. 1.83% 2.50%*
Net investment income (loss) to average net (1.29)%*
assets ........................................ (1.08)%

* Annualized.
** Not annualized.
(A) Includes the Fund's share of Small Cap Equity Portfolio's allocated
expenses.
<PAGE>

INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVES: The investment objectives of the BALANCED FUND are
to earn high current income by investing in a broad range of securities, to
preserve capital, and to provide growth potential with reduced risk.

The investment objective of the EQUITY FUND and the SMALL CAP EQUITY FUND
is long-term capital growth. Dividend income, if any, is incidental to this
investment objective.

The investment objectives of each Fund may be changed 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
objectives.

INVESTMENT POLICIES: The BALANCED FUND seeks its objectives by investing,
under normal circumstances, in a broadly diversified portfolio of income-
producing securities, including common and preferred stocks, bonds and short-
term obligations. Under normal circumstances, at least 25% of the Fund's total
assets is invested in fixed income securities. The Adviser determines the mix
of investments among equity and fixed income securities based on its analysis
of current economic and market conditions and underlying securities values.

The Adviser selects equity securities that, in the Adviser's judgment,
offer the prospect for above-average growth. Equity securities include common
stocks, preferred stocks and warrants for the purchase of stock. In selecting
common stocks the Adviser emphasizes securities issued by established
companies with medium to large market capitalizations, i.e., $750 million or
more, and seasoned management teams ("Established Companies"). The Fund's
fixed income investments include corporate bonds and notes, preferred
securities and government obligations. All of the Fund's long-term non-
convertible debt investments are investment grade securities (rated Baa or
better by Moody's Investors Service, Inc. ("Moody's") or BBB or better by
Standard & Poor's Rating Services ("S&P")) or securities which the Adviser
believes to be of comparable quality. Less than 5% of the Fund's investments
consist of securities rated Baa by Moody's or BBB by S&P. Securities with
these ratings may have speculative characteristics.

The EQUITY FUND seeks its objective by investing in a broadly diversified
portfolio of equity securities consisting mainly of common stocks of U.S.
issuers. Under normal circumstances, at least 65% of the Fund's total assets
is invested in equity securities.

In selecting equity securities the Adviser emphasizes securities issued by
Established Companies which the Adviser believes possess above-average
prospects for growth. The Adviser may also select other securities which it
believes provide an opportunity for appreciation, such as fixed income
securities and convertible and non-convertible bonds, preferred stocks and
warrants. All of the Fund's long-term non-convertible debt investments are
investment grade securities or securities which the Adviser believes to be of
comparable quality. Less than 5% of the Fund's investments consist of
securities rated Baa by Moody's or BBB by S&P.

The SMALL CAP EQUITY FUND seeks its objective by investing in a
diversified portfolio consisting primarily of equity securities of U.S.
companies that have small market capitalizations. Under normal circumstances,
at least 65% of the Fund's total assets is invested in equity securities of
these companies. Small market capitalization companies are those with market
capitalizations of $750 million or less at the time of the Fund's investment.
In addition, the Fund may invest in companies that are believed to be emerging
companies relative to their potential markets.

The Adviser may also select other securities for the Fund that it believes
provide an opportunity for appreciation, such as fixed income securities and
convertible and non-convertible bonds. Most of the Fund's long-term non-
convertible debt investments are investment grade securities, and less than 5%
of the Fund's investments consist of securities rated Baa by Moody's or BBB by
S&P.

CERTAIN ADDITIONAL INVESTMENT POLICIES: NON-U.S. SECURITIES. While the Funds
emphasize U.S. securities, each Fund may invest a portion of its assets in
non-U.S. equity and debt securities, including depository receipts. None of
the Funds intends to invest more than 25% of its assets in non-U.S.
securities, including sponsored American Depositary Receipts, which represent
the right to receive securities of non-U.S. issuers deposited in a U.S. or
correspondent bank. Each Fund may invest up to 5% of its assets in closed-end
investment companies which primarily hold non-U.S. securities.

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 25. 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 33 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 the
Adviser believes it is appropriate to do so in light of the Fund's investment
objectives, without regard to the length of time a particular security may
have been held. For the fiscal years ended December 31, 1995 and 1996, the
turnover rates for Balanced Portfolio were 210% and 241%, respectively. For
the fiscal years ended December 31, 1995 and 1996, the turnover rates for
Equity Portfolio were 67% and 90%, respectively. For the period June 21, 1995
(commencement of operations) to December 31, 1995 and for the fiscal year
ended December 31, 1996, the turnover rates for Small Cap Equity Portfolio
were 41% and 89%, respectively. The amount of brokerage commissions and
realization of taxable capital gains will tend to increase as the level of
portfolio activity increases.

BROKERAGE TRANSACTIONS. The primary consideration in placing each Fund's
security transactions with broker-dealers for execution is to obtain and
maintain the availability of execution at the most favorable prices and in the
most effective manner possible.

RISK CONSIDERATIONS
- --------------------------------------------------------------------------------

The risks of investing in each Fund vary depending upon the nature of the
securities held, and the investment practices employed, on its behalf. Certain
of these risks are described below.

CHANGES IN NET ASSET VALUE. Each Fund's net asset value will fluctuate
based on changes in the values of the underlying portfolio securities. This
means that an investor's shares may be worth more or less at redemption than
at the time of purchase. Equity securities fluctuate in response to general
market and economic conditions and other factors, including actual and
anticipated earnings, changes in management, political developments and the
potential for takeovers and acquisitions. During periods of rising interest
rates the value of debt securities generally declines, and during periods of
falling rates the value of these securities generally increases. Changes by
recognized rating agencies in the rating of any debt security, and actual or
perceived changes in an issuer's ability to make principal or interest
payments, also affect the value of these investments.

CREDIT RISK OF DEBT SECURITIES. Investors should be aware that securities
offering above average yields may at times involve above average risks.
Securities rated Baa by Moody's or BBB by S&P and equivalent securities may
have speculative characteristics. Adverse economic or changing circumstances
are more likely to lead to a weakened capacity to make principal and interest
payments than is the case for higher grade obligations.

SMALL CAP COMPANIES. Investors in the Funds, particularly the Small Cap
Equity Fund, 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 investing primarily in securities of larger, more established
companies.

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.

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 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 attributable to 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.

Each Fund may invest in securities of issuers in developing countries, and
all of these risks are increased for investments in issuers in developing
countries.

INVESTMENT PRACTICES. Certain of the investment practices employed for the
Funds may entail certain risks. These risks are in addition to risks described
above and are described in the Appendix. See the Appendix -- Permitted
Investments and Investment Practices on page 25.

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 each Fund believe
that the aggregate per share expenses of that 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 Fund's 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, 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. The 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, LFBDS at (617) 423-1769.

VALUATION OF SHARES
- --------------------------------------------------------------------------------

Net asset value per share of each class of shares of each Fund is
determined each day the New York Stock Exchange is open for trading (a
"Business Day"). This determination is made once each day as of the close of
regular trading on the Exchange (normally 4:00 p.m. Eastern time) by adding
the market value of all securities and other assets attributable to a class of
a Fund (including the Fund's interest in its Portfolio), then subtracting the
liabilities charged to the class, and then dividing the result by the number
of outstanding shares of the class. Per share net asset value of each class of
a Fund's shares may differ because Class B shares bear higher expenses than
Class A shares. The net asset value per share is effective for orders received
and accepted by the Distributor prior to its calculation.

Portfolio securities and other assets are valued primarily on the basis of
market quotations, or if quotations are not available, by a method believed to
accurately reflect fair value. Non-U.S. securities are valued based on
quotations from the primary market in which they are traded and are translated
from the local currency into U.S. dollars using current exchange rates. In
light of the non-U.S. nature of some of each Fund's investments, trading may
take place in securities held by the Funds on days which are not Business Days
and on which it will not be possible to purchase or redeem shares of the
Funds.

CLASSES OF SHARES
- --------------------------------------------------------------------------------

DIFFERENCES BETWEEN THE CLASSES: Class A and B shares of a Fund represent
interests in the same mutual fund. The primary distinctions between the
classes are their initial and contingent deferred sales charge structures and
their ongoing expenses, including service fees and asset-based sales charges
in the form of distribution fees. These differences are summarized in the
following table. Each class has distinct advantages and disadvantages for
different investors, and investors may choose the class that best suits their
circumstances and objectives.

<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A PERCENTAGE OF
SALES CHARGE AVERAGE DAILY NET ASSETS) OTHER INFORMATION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge of Distribution fee of 0.05% Initial sales charge waived or reduced for
4.75% of the public offering price certain purchases; a contingent deferred
sales charge may apply in certain instances
where the initial sales charge is waived
CLASS B Maximum contingent deferred sales Distribution fee of 0.75%. Shares convert to Class A shares
charge of 5.00% of the lesser of Service fee of 0.05%. approximately eight years after issuance
redemption proceeds or original
purchase price; declines to zero
after six years
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES: In deciding which class of
shares to purchase, investors should consider the cost of sales charges
together with the cost of the ongoing annual expenses described below, as well
as any other relevant facts and circumstances.

SALES CHARGES. Class A shares are sold at net asset value plus an initial
sales charge of up to 4.75% of the public offering price (except that for
purchases of $1 million or more, no initial sales charge is imposed and a
contingent deferred sales charge may be imposed instead). Because of this
initial sales charge, not all of a Class A shareholder's purchase price is
invested in a Fund. Class B shares are sold with no initial sales charge, so
the entire amount of a Class B shareholder's purchase price is immediately
invested in a Fund. A contingent deferred sales charge (up to 5.00% of the
lesser of the shares' net asset value at redemption or their original purchase
price) applies to redemptions made within six years of purchase.

WAIVERS AND REDUCTIONS OF SALES CHARGES. Class A share purchases of at
least $25,000 and Class A share purchases made under a Fund's reduced sales
charge plan may be made at a reduced sales charge. In considering the combined
cost of sales charges and ongoing annual expenses, investors should take into
account any reduced sales charges on Class A shares for which they may be
eligible.

The entire initial sales charge on Class A shares is waived for certain
eligible purchasers. However, a 1.00% contingent deferred sales charge is
imposed on certain redemptions of Class A shares on which no initial sales
charge was assessed. Because Class A shares bear lower ongoing annual expenses
than Class B shares, in most cases investors eligible for reduced initial
sales charges should purchase Class A shares.

The contingent deferred sales charge may be waived upon redemption of
certain Class B shares. See "Purchases."

ONGOING ANNUAL EXPENSES. Class A shares pay an annual 12b-1 distribution
fee of 0.05% of average daily net assets. Class B shares pay an annual 12b-1
distribution fee of 0.75% of average daily net assets. In addition, Class B
shares are subject to a service fee at the annual rate of 0.05% of the average
daily net assets represented by Class B shares. Annual 12b-1 distribution fees
are a form of asset-based sales charge.

CONVERSION OF CLASS B SHARES: A shareholder's Class B shares will
automatically convert to Class A shares in the same Fund approximately eight
years after the date of issuance, together with a pro rata portion of all
Class B shares representing dividends and other distributions paid in
additional Class B shares. The conversion will be effected at the relative net
asset values per share of the two classes on the first Business Day of the
month in which the eighth anniversary of the issuance of the Class B shares
occurs. If a shareholder effects one or more exchanges among Class B shares of
the Landmark Funds during the eight-year period, the holding periods for the
shares so exchanged will be counted toward the eight-year period. Because the
per share net asset value of the Class A shares may be higher than that of the
Class B shares at the time of conversion, a shareholder may receive fewer
Class A shares than the number of Class B shares converted, although the
dollar value will be the same. See "Valuation of Shares." The conversion of
Class B shares to Class A shares is subject to the continuing availability of
a ruling from the Internal Revenue Service or an opinion of counsel that the
conversion will not constitute a taxable event for federal tax purposes. There
can be no assurance that such a ruling or opinion will be available, and the
conversion of Class B shares to Class A shares will not occur if such ruling
or opinion is not available. In that event, Class B shares would continue to
be subject to higher expenses than Class A shares for an indefinite period.

OTHER INFORMATION: See "Purchases," "Redemptions" and "Management --
Distribution Arrangements" for a more complete description of the initial and
contingent deferred sales charges and distribution fees for each class of
shares of each Fund. By purchasing shares an investor agrees to the imposition
of initial and deferred sales charges as described in this Prospectus.

PURCHASES
- --------------------------------------------------------------------------------

Each Fund offers two classes of shares, Class A and B shares, with
different expense levels and sales charges. See "Classes of Shares" for more
information. WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER
THE ORDER IS FOR CLASS A OR CLASS B SHARES. ALL SHARE PURCHASE ORDERS THAT
FAIL TO SPECIFY A CLASS AUTOMATICALLY WILL BE INVESTED IN CLASS A SHARES.

Shares of the Funds are offered continuously and may be purchased on any
Business Day at the public offering price either through a securities broker
which has a sales agreement with the Distributor or through a bank or other
financial institution which has an agency agreement with the Distributor. Such
a bank or financial institution will receive transaction fees that are equal
to the commissions paid to securities brokers. Shares of the Funds are being
offered exclusively to customers of a Shareholder Servicing Agent (i.e., a
financial institution, such as a federal or state-chartered bank, trust
company, savings and loan association or savings bank, or a securities broker,
that has entered into a shareholder servicing agreement concerning a Fund). A
securities broker may receive both commissions and shareholder servicing fees.
An investor's Shareholder Servicing Agent may not make available both classes
of shares. The public offering price is the net asset value next determined
after an order is transmitted to and accepted by the Distributor, plus any
applicable sales charge for Class A shares. Each Shareholder Servicing Agent
is required to promptly forward orders for Fund shares to the Distributor.
Each Fund and the Distributor reserve the right to reject any purchase order
and to suspend the offering of Fund shares for a period of time.

Each shareholder's account is established and maintained by his or her
Shareholder Servicing Agent, which will be the shareholder of record of the
Fund. Each Shareholder Servicing 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 Shareholder Servicing Agent.

Shareholder Servicing Agents will not transmit purchase orders to the
Distributor unless they are in proper form.

PURCHASING CLASS A SHARES: INITIAL SALES CHARGE -- CLASS A SHARES. Each Fund's
public offering price of Class A shares is the net asset value next determined
after an order is transmitted to and accepted by the Distributor, plus any
applicable sales charge, which will vary with the size of the purchase as
shown in the following table:

SALES CHARGE AS
PERCENTAGE OF THE BROKER
----------------------- COMMISSION
PUBLIC NET AS PERCENTAGE
AMOUNT OF PURCHASE AT THE OFFERING AMOUNT OF THE PUBLIC
PUBLIC OFFERING PRICE PRICE INVESTED OFFERING PRICE
- -------------------------------------------------------------------------------
Less than $25,000 ................. 4.75% 4.99% 4.23%
$25,000 to less than $50,000 ...... 4.50% 4.71% 4.01%
$50,000 to less than $100,000 ..... 4.00% 4.17% 3.56%
$100,000 to less than $250,000 .... 3.50% 3.63% 3.12%
$250,000 to less than $500,000 .... 2.50% 2.56% 2.23%
$500,000 to less than $1,000,000 .. 2.00% 2.04% 1.78%
$1,000,000 or more ................ none* none* none
------------
*A contingent deferred sales charge may apply in certain instances.
- ----------------------------------------------------------------------------

SALES CHARGE ELIMINATION -- CLASS A SHARES. Class A shares of the Funds
are available without a sales charge through exchanges for Class A shares of
most other Landmark Funds. See "Exchanges." Also, the sales charge does not
apply to Class A shares acquired through the reinvestment of dividends and
capital gains distributions. Class A shares may be purchased without a sales
charge by:

(i) tax exempt organizations under Section 501(c)(3-13) of the Internal
Revenue Code (the "Code"),
(ii) trust accounts for which Citibank or any subsidiary or affiliate of
Citibank (a "Citibank Affiliate") acts as trustee and exercises
discretionary investment management authority,
(iii) accounts purchasing shares through the Private Client Division of
Citicorp Investment Services or through other programs accessed through
the Private Client Division of Citicorp Investment Services, or the
private banking division of either Citibank, N.A., Citibank FSB or
Citicorp Trust, N.A.,
(iv) accounts for which Citibank or any Citibank Affiliate performs
investment advisory services,
(v) accounts for which Citibank or any Citibank Affiliate charges fees for
acting as custodian,
(vi) trustees of any investment company for which Citibank or any Citibank
Affiliate serves as the investment adviser or as a shareholder
servicing agent,
(vii) any affiliated person of a Fund, the Adviser, the Distributor, the
Administrator or any Shareholder Servicing Agent,
(viii) shareholder accounts established through a reorganization or similar
form of business combination approved by a Fund's Board of Trustees or
by the Board of Trustees of any other Landmark Fund the terms of which
entitle those shareholders to purchase shares of a Fund or any other
Landmark Fund at net asset value without a sales charge,
(ix) employee benefit plans qualified under Section 401 of the Code,
including salary reduction plans qualified under Section 401(k) of the
Code, subject to such minimum requirements as may be established by the
Distributor with respect to the number of employees or amount of
purchase; currently, these criteria require that (a) the employer
establishing the qualified plan have at least 50 eligible employees or
(b) the amount invested by such qualified plan in a Fund or in any
combination of Landmark Funds totals a minimum of $500,000,
(x) investors purchasing $1 million or more of Class A shares. However, a
contingent deferred sales charge will be imposed on such investments in
the event of certain share redemptions within 12 months following the
share purchase, at the rate of 1.00% of the lesser of the value of the
shares redeemed (exclusive of reinvested dividends and capital gains
distributions) or the total cost of such shares. In determining whether
a contingent deferred sales charge on Class A shares is payable, and if
so, the amount of the charge, it is assumed that shares not subject to
the contingent deferred sales charge are the first redeemed followed by
other shares held for the longest period of time. All investments made
during a calendar month will age one month on the last day of the month
and each subsequent month. Any applicable contingent deferred sales
charge will be deferred upon an exchange of Class A shares for Class A
shares of another Landmark Fund and deducted from the redemption
proceeds when such exchanged shares are subsequently redeemed (assuming
the contingent deferred sales charge is then payable). The holding
period of Class A shares so acquired through an exchange will be
aggregated with the period during which the original Class A shares
were held. The contingent deferred sales charge on Class A shares will
be waived under the same circumstances as the contingent deferred sales
charge on Class B shares will be waived. See "Sales Charge Waivers --
Class B Shares." Any applicable contingent deferred sales charges will
be paid to the Distributor,
(xi) subject to appropriate documentation, investors where the amount
invested represents redemption proceeds from a mutual fund (other than
a Landmark Fund) if: (i) the redeemed shares were subject to an initial
sales charge or a deferred sales charge (whether or not actually
imposed); and (ii) such redemption has occurred no more than 90 days
prior to the purchase of Class A shares of the Fund, or
(xii) an investor who has a business relationship with an investment
consultant or other registered representative who joined a broker-
dealer which has a sales agreement with the Distributor from another
investment firm within six months prior to the date of purchase by such
investor, if (a) the investor redeems shares of another mutual fund
sold through the investment firm that previously employed that
investment consultant or other registered representative, and either
paid an initial sales charge or was at some time subject to, but did
not actually pay, a deferred sales charge or redemption fee with
respect to the redemption proceeds, (b) the redemption is made within
60 days prior to the investment in a Fund, and (c) the net asset value
of the shares of the Fund sold to that investor without a sales charge
does not exceed the proceeds of such redemption.

REDUCED SALES CHARGE PLANS -- CLASS A SHARES. An individual who is a
member of a qualified group may purchase Class A shares of a Fund at the
reduced sales charge applicable to the group as a whole. The sales charge is
based upon the aggregate dollar value of Class A shares previously purchased
and still owned by the group, plus the amount of the purchase. A "qualified
group" is one which (i) has been in existence for more than six months, (ii)
has a purpose other than acquiring Fund shares at a discount, and (iii)
satisfies uniform criteria which enable the Distributor to realize economies
of scale in its costs of distributing shares. A qualified group must have more
than ten members, must be available to arrange for group meetings between
representatives of the Fund and the members, must agree to include sales and
other materials related to the Fund in its publications and mailings to
members at reduced or no cost to the Distributor, and must seek to arrange for
payroll deduction or other bulk transmission of investments to the Fund.

Reduced initial sales charges on Class A shares also may be achieved
through a RIGHT OF ACCUMULATION or a LETTER OF INTENT. Under a RIGHT OF
ACCUMULATION eligible investors are permitted to purchase Class A shares of a
Fund at the public offering price applicable to the total of (a) the dollar
amount then being purchased, plus (b) an amount equal to the then-current net
asset value or cost (whichever is higher) of the purchaser's combined holdings
in the Landmark Funds. The Right of Accumulation may be amended or terminated
at any time.

PURCHASING CLASS B SHARES: CONTINGENT DEFERRED SALES CHARGE -- CLASS B SHARES.
Each Fund's public offering price of Class B shares is the net asset value
next determined after an order is transmitted to and accepted by the
Distributor, and no initial sales charge is imposed. A contingent deferred
sales charge, however, is imposed upon certain redemptions of Class B shares.

Class B shares of a Fund that are redeemed will not be subject to a
contingent deferred sales charge to the extent that the value of such shares
represents (i) capital appreciation of Fund assets, (ii) reinvestment of
dividends or capital gains distributions or (iii) shares redeemed more than
six years after their purchase. Otherwise, redemptions of Class B shares will
be subject to a contingent deferred sales charge. The amount of any applicable
contingent deferred sales charge will be calculated by multiplying the lesser
of net asset value of such shares at the time of redemption or their original
purchase price by the applicable percentage shown in the following table.

CONTINGENT
DEFERRED
REDEMPTION DURING SALES CHARGE
- ------------------------------------------------------
lst Year Since Purchase ............ 5.00%
2nd Year Since Purchase ............ 4.00%
3rd Year Since Purchase ............ 3.00%
4th Year Since Purchase ............ 3.00%
5th Year Since Purchase ............ 2.00%
6th Year Since Purchase ............ 1.00%
7th Year (or Later) Since Purchase . None
- ------------------------------------------------------
In determining the applicability and rate of any contingent deferred sales
charge, it will be assumed that a redemption is made first of Class B shares
representing capital appreciation, next of shares representing the
reinvestment of dividends and capital gains distributions and finally of other
shares held by the shareholder for the longest period of time. The holding
period of Class B shares of a Fund acquired through an exchange with another
Landmark Fund will be calculated from the date that the Class B shares were
initially acquired in one of the other Landmark Funds, and Class B shares
being redeemed will be considered to represent, as applicable, capital
appreciation or dividend and capital gains distribution reinvestments in such
other funds. This will result in any contingent deferred sales charge being
imposed at the lowest possible rate. For federal income tax purposes, the
amount of the contingent deferred sales charge will reduce the gain or
increase the loss, as the case may be, on the amount realized on redemption.
Any contingent deferred sales charges will be paid to the Distributor.

SALES CHARGE WAIVERS -- CLASS B SHARES. The contingent deferred sales
charge will be waived for exchanges. In addition, the contingent deferred
sales charge will be waived for a total or partial redemption made within one
year of the death of the shareholder. This waiver is available where the
deceased shareholder is either the sole shareholder or owns the shares with
his or her spouse as a joint tenant with right of survivorship, and applies
only to redemption of shares held at the time of death. The contingent
deferred sales charge also will be waived in connection with:

(i) a lump sum or other distribution in the case of an Individual Retirement
Account ("IRA"), a self-employed individual retirement plan (so-called
"Keogh Plan") or a custodian account under Section 403(b) of the Code,
in each case following attainment of age 59 1/2,
(ii) a total or partial redemption resulting from any distribution following
retirement in the case of a tax-qualified retirement plan, and
(iii) a redemption resulting from a tax-free return of an excess contribution
to an IRA.

Contingent deferred sales charge waivers will be granted subject to
confirmation by a shareholder's Shareholder Servicing Agent of the
shareholder's status or holdings, as the case may be.

Securities dealers and other financial institutions may receive different
compensation with respect to sales of Class A and Class B shares. Shareholder
Servicing Agents which are banks or financial institutions may receive
transaction fees that are equal to the commissions paid to securities brokers.
From time to time the Distributor may make payments for distribution and/or
shareholder servicing activities out of its past profits and other sources
available to it. The Distributor also may make payments for marketing,
promotional or related expenses to dealers who engage in marketing efforts on
behalf of the Funds. The amounts of these payments will be determined by the
Distributor in its sole discretion and may vary among different dealers.

EXCHANGES
- --------------------------------------------------------------------------------

Shares of each Fund may be exchanged for shares of the same class of other
Landmark Funds that are made available by a shareholder's Shareholder
Servicing Agent, or may be acquired through an exchange of shares of the same
class of those funds. No initial sales charge is imposed on shares being
acquired through an exchange unless Class A shares are being acquired and the
sales charge of the fund being exchanged into is greater than the current
sales charge of the Fund (in which case an initial sales charge will be
imposed at a rate equal to the difference). No contingent deferred sales
charge is imposed on shares being disposed of through an exchange.

Shareholders must place exchange orders through their Shareholder
Servicing Agents, 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 is received and accepted by the
Distributor. See "Valuation of Shares."

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. Before
making any exchange, shareholders should contact their Shareholder Servicing
Agents to obtain more information and prospectuses of the Landmark Funds to be
acquired through the exchange.

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 a shareholder's Shareholder
Servicing Agent (subject to any applicable contingent deferred sales charge).
Shareholders may redeem shares of a Fund only by authorizing their Shareholder
Servicing Agents to redeem such shares on their behalf through the
Distributor. If a redeeming shareholder owns shares of more than one class,
Class A shares will be redeemed first unless the shareholder specifically
requests otherwise.

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 a shareholder's
Shareholder Servicing Agent) to their Shareholder Servicing Agents.
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 their
Shareholder Servicing Agents. 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 and each
Shareholder Servicing 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 or the Shareholder Servicing Agent may be liable
for any losses to a shareholder due to unauthorized or fraudulent
instructions. Otherwise, the shareholder will bear all risk of loss relating
to a redemption or exchange by telephone.

PAYMENT OF REDEMPTIONS. The proceeds of a redemption are paid in federal
funds normally on the next Business Day, but in any event within seven days.
If a shareholder requests redemption of shares which were purchased recently,
a Fund may delay payment until it is assured that good payment has been
received. In the case of purchases by check, this can take up to ten days. See
"Determination of Net Asset Value; Valuation of Securities; Additional
Purchase and Redemption Information" in the Statement of Additional
Information regarding the Funds' right to pay the redemption price in kind
with securities (instead of cash).

REINSTATEMENT PRIVILEGE. Shareholders who have redeemed Class A shares may
reinstate their Fund account without a sales charge up to the dollar amount
redeemed (with a credit for any contingent deferred sales charge paid) by
purchasing Class A shares of the same Fund within 30 days after the
redemption. To take advantage of this reinstatement privilege, shareholders
must notify their Shareholder Servicing Agents in writing at the time the
privilege is exercised.

Questions about redemption requirements should be referred to the
shareholder's Shareholder Servicing 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,
if any, is paid to its shareholders of record as a dividend as follows:

For the BALANCED FUND, QUARTERLY on or about the last day of each MARCH,
JUNE, SEPTEMBER and DECEMBER.

For the EQUITY FUND and SMALL CAP EQUITY FUND, SEMIANNUALLY on or about
the last day of each JUNE and 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.

Subject to the policies of the shareholder's Shareholder Servicing Agent,
a shareholder may elect to receive dividends and capital gains distributions
in either cash or additional shares of the same class issued at net asset
value without a sales charge. Distributions paid by each Fund with respect to
Class A shares generally will be higher than those paid with respect to Class
B shares because expenses attributable to Class B shares generally will be
higher.

MANAGEMENT
- --------------------------------------------------------------------------------

TRUSTEES AND OFFICERS: Each Fund is supervised by a Board of Trustees. The
Portfolios are also supervised by a Board of Trustees. In each case, a
majority of the Trustees are not affiliated with the Adviser. In addition, a
majority of the disinterested Trustees of each of the Funds are different from
a majority of the disinterested Trustees of their corresponding Portfolios.
More information on the Trustees and officers of the Funds and the Portfolios
appears under "Management" in the Statement of Additional Information.

INVESTMENT ADVISER: CITIBANK. 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 $81 billion in assets worldwide. Citibank is a
wholly-owned subsidiary of Citicorp. Citibank's address is 153 East 53rd
Street, New York, New York 10043.

Citibank manages the Funds' assets pursuant to separate Investment
Advisory Agreements. Subject to policies set by the Trustees, Citibank makes
investment decisions.

BALANCED FUND. Grant D. Hobson, Richard Goldman and Mark Lindbloom are the
managers of the Balanced Fund. Mr. Hobson and Mr. Goldman have managed the
equity portion of the portfolio since January 1996. Mr. Hobson is responsible
for managing U.S. equity portfolios for mutual funds, trust and pension
accounts of Citibank Global Asset Management and currently manages, or co-
manages, more than $1 billion of total assets at Citibank. Prior to joining
Citibank in 1993, Mr. Hobson was a securities analyst and sector manager for
pension accounts and mutual funds for Axe Houghton, formerly a division of
USF&G. Mr. Goldman is responsible for managing U.S. equity portfolios for
mutual funds and institutional accounts, and for quantitative equity research
for the U.S. institutional business of Citibank Global Asset Management. He
currently manages, or co-manages, approximately $500 million of total assets
at Citibank. He joined Citicorp's Investment Management Division in 1985 and
from 1988 to 1994 was responsible for running Citicorp's Institutional
Investor Relations Department. Mr. Lindbloom has managed the fixed income
portion of the portfolio since June 1993. He came to Citibank in 1986 from
Brown Brothers Harriman & Co., where he managed fixed income assets for
discretionary corporate portfolios.

EQUITY FUND. Mr. Hobson and Mr. Goldman have managed the Equity Fund since
January 1996. Their investment management experience is described above.

SMALL CAP EQUITY FUND. Linda J. Intini has managed the Small Cap Equity
Fund since February 1997. Ms. Intini has over nine years of experience
specializing in the management of small cap equities, including over $300
million of Citibank's small cap portfolios for trusts and individuals. Prior
to joining Citibank in 1992, she was a Portfolio Manager and Research Analyst
with Manufacturers Hanover in the Special Equity area. She also specialized in
equity research at Eberstadt Fleming.
----------------

Management's discussion of each Fund's performance is included in the
Fund's Annual Report to Shareholders, which investors may obtain without
charge by contacting their Shareholder Servicing Agents.

ADVISORY FEES. For its services under the Investment Advisory Agreements,
the Adviser receives the following investment advisory fees, which are accrued
daily and paid monthly, expressed as a percentage of the applicable Fund's
average daily net assets on an annualized basis for that Fund's then-current
fiscal year:

Balanced Fund 0.40%
Equity Fund 0.50%
Small Cap Equity Fund 0.75%

The investment advisory fees of the Small Cap Equity Fund are higher than
those paid by most investment companies. The Adviser may voluntarily agree to
waive a portion of its investment advisory fees.

For the fiscal year ended December 31, 1996, the investment advisory fees
paid to Citibank were 0.40% of the Balanced Fund's average daily net assets,
0.50% of the Equity Fund's average daily net assets and 0.24% of the Small Cap
Equity Fund's average daily net assets, in each case for that fiscal year.

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 Investment Advisory Agreements and the activities performed
by it or its affiliates as Shareholder Servicing Agents and sub-administrator
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 sub-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 Adviser, sub-administrator or a Shareholder
Servicing 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.

ADMINISTRATIVE SERVICES PLANS: The Funds and the Portfolios have
Administrative Services Plans which provide that the Funds and the Portfolios
may obtain the services of an administrator, a transfer agent, a custodian,
and, in the case of the Funds, one or more Shareholder Servicing Agents, and
may enter into agreements providing for the payment of fees for such services.
Under the Funds' Administrative Services Plans, the total of the fees paid to
the Funds' Administrator and Shareholder Servicing Agents may not exceed 0.65%
of each Fund's average daily net assets on an annualized basis for the Fund's
then-current fiscal year. Any distribution fees or service fees (other than
any fee concerning electronic or other media advertising) payable under the
Distribution Plans for the Class A shares of the Balanced and Equity Funds are
included in this percentage limitation for those shares. This limitation does
not include any amounts payable under the Distribution Plans for the Class A
shares of the Small Cap Equity Fund and for the Class B shares of each Fund.
Within this overall limitation, individual fees may vary. Under the
Portfolios' Administrative Services Plan, fees paid to the Portfolios'
Administrator may not exceed 0.05% of each Portfolio's average daily net
assets on an annualized basis for the Portfolio's then-current fiscal year.
See "Administrators," "Shareholder Servicing Agents" and "Transfer Agent,
Custodian and Fund Accountant."

ADMINISTRATORS: LFBDS and Signature Financial Group (Cayman) Ltd. ("SFG")
provide certain administrative services to the Funds and the Portfolios under
administrative services agreements. These administrative services include
providing general office facilities, supervising the overall administration of
the Funds and the Portfolios, and providing persons satisfactory to the Boards
of Trustees to serve as Trustees and officers of the Funds and Portfolios.
These Trustees and officers may be directors, officers or employees of LFBDS,
SFG or their affiliates.

For these services, the Administrators receive fees accrued daily and paid
monthly of 0.25% of the average daily net assets of each Fund and 0.05% of the
assets of each Portfolio, in each case on an annualized basis for the Fund's
or the Portfolio's then-current fiscal year. However, each of the
Administrators has voluntarily agreed to waive a portion of the fees payable
to it as necessary to maintain the projected rate of total operating expenses.
LFBDS has agreed to pay certain ordinary operating expenses of the Balanced
Fund and the Equity Fund. See "General Information -- Expenses."

LFBDS and SFG are wholly-owned subsidiaries of Signature Financial Group,
Inc. "Landmark" is a service mark of LFBDS.

SUB-ADMINISTRATOR: Pursuant to sub-administrative services agreements,
Citibank performs such sub-administrative duties for the Funds and Portfolios
as from time to time are agreed upon by Citibank and LFBDS or SFG. Citibank's
compensation as sub-administrator is paid by LFBDS or SFG.

SHAREHOLDER SERVICING AGENTS: The Funds have entered into separate shareholder
servicing agreements with each Shareholder Servicing Agent pursuant to which
that Shareholder Servicing Agent provides shareholder services, including
answering customer inquiries, assisting in processing purchase, exchange and
redemption transactions and furnishing Fund communications to shareholders.
For these services, each Shareholder Servicing Agent receives a fee from each
Fund at an annual rate of 0.25% of the average daily net assets of the Fund
represented by shares owned by investors for whom such Shareholder Servicing
Agent maintains a servicing relationship.

Some Shareholder Servicing Agents may impose certain conditions on their
customers in addition to or different from those imposed by the Funds, such as
requiring a minimum initial investment or charging their customers a direct
fee for their services. Each Shareholder Servicing 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 and to provide
written notice at least 30 days prior to imposition of any transaction fees.

TRANSFER AGENT, CUSTODIAN AND FUND ACCOUNTANT: State Street Bank and Trust
Company acts as transfer agent and dividend disbursing agent for each Fund.
The principal business address of State Street Bank and Trust Company is 225
Franklin Street, Boston, Massachusetts 02110. Investors Bank & Trust Company
acts as the custodian of each Fund's and each Portfolio's assets. Securities
may be held by a sub-custodian bank approved by the Trustees. Investors Bank &
Trust Company also provides fund accounting services and calculates the daily
net asset value for the Funds.

DISTRIBUTION ARRANGEMENTS: LFBDS, 6 St. James Avenue, Boston, MA 02116, (617)
423-1769, is the distributor of shares of each Fund and also serves as
distributor for each of the other Landmark Funds and as a Shareholder
Servicing Agent for certain investors. LFBDS receives distribution fees from
the Funds pursuant to Distribution Plans adopted in accordance with Rule
12b-1 under the 1940 Act. LFBDS also collects the sales charges imposed on
purchases of Class A shares and collects any contingent deferred sales charges
imposed on redemptions of Class A and Class B shares. In those states where
LFBDS is not a registered broker-dealer, shares of the Funds are sold through
Signature Broker-Dealer Services, Inc., as dealer.

The Funds maintain separate Distribution Plans pertaining to Class A
shares and Class B shares. The Class A Plans provide that the Funds may pay
the Distributor a monthly distribution fee and a monthly service fee at annual
rates not to exceed, respectively, 0.15% and 0.25% of the average daily net
assets represented by Class A shares. However, none of the Funds has entered
into any agreement to pay this service fee to the Distributor. The Class A
Plans also permit the Funds to pay the Distributor an additional fee (not to
exceed 0.05% of the average daily net assets represented by Class A shares) in
anticipation of or as reimbursement for print or electronic media advertising
expenses incurred in connection with the sale of Class A shares. The Funds did
not pay anything under this provision during 1996, and do not anticipate doing
so during the current fiscal year.

The Class B Plans provide that the Funds will pay the Distributor a
monthly distribution fee and a monthly service fee at annual rates not to
exceed, respectively, 0.75% and 0.25% of the average daily net assets
represented by Class B shares. The Funds have agreed that they will not pay
service fees in an amount in excess of 0.20% of the average daily net assets
represented by Class B shares during the 1997 fiscal year. Currently, the
service fee for Class B shares is 0.05% per annum of the average daily net
assets represented by Class B shares.

The Distributor uses the distribution fees under the Plans to offset each
Fund's marketing costs attributable to the classes, such as preparation of
sales literature, advertising, and printing and distributing prospectuses and
other shareholder materials to prospective investors. In addition, the
Distributor may use the distribution fees to pay costs related to distribution
activities, including employee salaries, bonuses and other overhead expenses.
The Distributor also uses the distribution fees under the Class B Plans to
offset the commissions it pays to brokers and other institutions for selling
the Funds' Class B shares. The Funds and the Distributor provide to the
Trustees quarterly a written report of amounts expended pursuant to the Plans
and the purposes for which the expenditures were made.

During the period they are in effect, the Plans and related Distribution
Agreements pertaining to each class of shares obligate the Funds to pay
distribution fees to LFBDS as compensation for its distribution activities,
not as reimbursement for specific expenses incurred. Thus, even if LFBDS's
expenses exceed its distribution fees for any Fund, the Fund will not be
obligated to pay more than those fees and, if LFBDS's expenses are less than
such fees, it will retain its full fees and realize a profit. Each Fund will
pay the distribution fees to LFBDS until either the applicable Plan or
Distribution Agreement is terminated or not renewed. In that event, LFBDS's
expenses in excess of distribution fees received or accrued through the
termination date will be LFBDS's sole responsibility and not obligations of
the Fund. In their annual consideration of the continuation of the Plans for
each Fund, the Trustees will review each Plan and LFBDS's expenses for each
class separately.

Each class of shares of each Fund has exclusive voting rights with respect
to the Plan for that class.

TAX MATTERS
- --------------------------------------------------------------------------------

This discussion of taxes is for general information only. Investors should
consult their own tax advisers about their particular situations.

Each Fund intends to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies so that it will not be liable for
any federal income or excise taxes. Each Fund may pay withholding or other
taxes to foreign governments during the year, however, and these taxes will
reduce those Funds' dividends.

Fund dividends and capital gains distributions are subject to federal
income tax and may also be subject to state and local taxes. Dividends and
distributions are treated in the same manner for federal tax purposes whether
they are paid in cash or as additional shares. Generally, distributions from a
Fund's net investment income and short-term capital gains will be taxed as
ordinary income. A portion of distributions from net investment income may be
eligible for the dividends-received deduction available to corporations.
Distributions of long-term net capital gains will be taxed as such regardless
of how long the shares of a Fund have been held.

Fund distributions will reduce the distributing Fund's net asset value per
share. Shareholders who buy shares just before a Fund makes a distribution may
thus pay the full price for the shares and then effectively receive a portion
of the purchase price back as a taxable distribution.

By January 31 of 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 yield, effective yield or total rate of
return. All performance information is historical and is not intended to
indicate future performance. Yields and 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 which was made at the maximum
public offering price 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. These
total rate of return quotations may be accompanied by quotations which do not
reflect the reduction in value of the investment due to the initial or
contingent deferred sales charges, and which are thus higher.

Each Fund may provide annualized "yield" and "effective yield" quotations.
The "yield" of a Fund refers to the income generated by an investment in the
Fund over a 30-day or one-month period (which period is stated in any such
advertisement or communication). This income is then annualized; that is, the
amount of income generated by the investment over that period is assumed to be
generated each month over a one-year period and is shown as a percentage of
the maximum public offering price on the last day of that period. The
"effective yield" is calculated similarly, but when annualized the income
earned by the investment during that 30-day or one-month period is assumed to
be reinvested. The effective yield is slightly higher than the yield because
of the compounding effect of this assumed reinvestment. A "yield" quotation,
unlike a total rate of return quotation, does not reflect changes in net asset
value.

Each Fund will include performance data for each class of Fund shares in
any advertisements, reports or communications including Fund performance data.
Of course, any fees charged by a shareholder's Shareholder Servicing Agent
will reduce that shareholder's net return on his or her investment. See the
Statement of Additional Information for more information concerning the
calculation of yield and total rate of return quotations for the Funds.

GENERAL INFORMATION
- --------------------------------------------------------------------------------

ORGANIZATION: The Balanced Fund is a series of Landmark Funds I; each of the
Equity Funds is a series of Landmark Funds II. Landmark Funds I and Landmark
Funds II are Massachusetts business trusts which were organized on April 13,
1984; they also are open-end management investment companies registered under
the Investment Company Act of 1940.

Each Fund is a diversified mutual fund. Under the 1940 Act, a diversified
series or 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 The Premium Portfolios, a trust organized
under the laws of the State of New York. The Declaration of Trust of The
Premium 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: Each of Landmark Funds I and Landmark Funds II (in
this section called the "Trusts") 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 a Trust have equal voting rights except that, in matters affecting
only a particular Fund or class, only shares of that particular Fund or class
are entitled to vote.

At any meeting of shareholders of any Fund, a Shareholder Servicing Agent
may vote any shares of which it is the holder of record and for which it does
not receive voting instructions proportionately in accordance with the
instructions it receives for all other shares of which that Shareholder
Servicing Agent is the holder of record.

As Massachusetts business trusts, the Funds are not required to hold
annual shareholder meetings. Shareholder approval will usually be sought only
for changes in a Fund's or Portfolio's fundamental investment restrictions and
for the election of Trustees under certain circumstances. Trustees may be
removed by shareholders under certain circumstances. Each share of each Fund
is entitled to participate equally in dividends and other distributions and
the proceeds of any liquidation of that Fund except that, due to the differing
expenses borne by each class, dividends and proceeds generally will be lower
for Class B shares than for Class A shares.

CERTIFICATES: The Funds' Transfer Agent maintains a share register for
shareholders of record, i.e., Shareholder Servicing Agents. 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 Shareholder Servicing Agents and tax and retirement
advisers.

EXPENSES: LFBDS has agreed to pay the ordinary operating expenses of the
Balanced Fund and the Equity Fund (excluding interest, taxes, brokerage
commissions, litigation costs or other extraordinary costs or expenses and
except for the fees paid under the Fund's Investment Advisory Agreement,
Administrative Services Agreement, Distribution Agreement and Shareholder
Servicing Agreements). LFBDS receives a fee from each of the Balanced Fund and
the Equity Fund, in addition to the administrative services and distribution
fees, estimated and accrued daily and paid monthly in an amount such that
immediately after any such payment the aggregate ordinary operating expenses
of the Fund would not on a per annum basis exceed an agreed upon rate,
currently 1.02% of the Balanced Fund's average daily net assets and 1.05% of
the Equity Fund's average daily net assets. For the fiscal year ended December
31, 1996, LFBDS paid expenses in the amount in the left column of the
following table with respect to the Balanced and Equity Funds, and the
Balanced and Equity Funds paid LFBDS under this agreement the amount in the
center column. The expenses paid by LFBDS are expressed as a percentage of
average daily net assets in the right column. For the fiscal year ended
December 31, 1996, total expenses for Class A shares of the Balanced Fund and
the Equity Fund were 1.02% and 1.05%, respectively, of average daily net
assets for that period attributable to Class A shares.

EXPENSES AS
PERCENTAGE
EXPENSES FUND'S OF AVERAGE
PAID BY PAYMENT DAILY
LFBDS TO LFBDS NET ASSETS
- ----------------------------------------------------------------------------
Balanced Fund ............. $148,149 $ 47,421 .06%
Equity Fund ............... $136,014 $224,619 .06%
- ----------------------------------------------------------------------------

The agreement of LFBDS to pay the ordinary operating expenses of the
Balanced Fund and the Equity Fund, as well as the obligation of these Funds to
pay the fee to LFBDS, may be terminated by either LFBDS or the applicable Fund
upon not less than 30 days nor more than 60 days written notice.

In addition to amounts payable under its Investment Advisory Agreement,
Administrative Services Plans and Distribution Plans, the Small Cap Equity
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 the Adviser or the Distributor, government fees, taxes,
accounting and legal fees, expenses of communicating with shareholders,
interest expense, and insurance premiums. For the fiscal year ended December
31, 1996, total expenses for Class A shares of the Fund were 0.88% of the
Fund's average daily net assets for that period attributable to Class A
shares.

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, located at 160
Federal Street, Boston, MA 02110, serves as independent auditors for each of
the Funds.
----------------

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, Adviser and Administrators, (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.

APPENDIX
- --------------------------------------------------------------------------------
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, a
repurchase agreement or a reverse repurchase agreement, the Fund could
experience delays in recovering either the securities or cash. To the extent
that, in the meantime, the value of the securities loaned or sold 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 the Adviser determines
that there is a dealer or institutional market in the securities, 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
15% 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.

FUTURES CONTRACTS. The Balanced Fund 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.
Each of the Funds may purchase stock index 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. 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 market value of the
Fund's total assets other than its futures contracts 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 the Adviser's ability to predict interest rate or stock price
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 the Adviser's view as to interest rate or stock price 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. The use
of futures contracts may increase the amount of taxable income of a Fund and
may affect in other ways the amount, timing and character of a Fund's income
for tax purposes, as more fully discussed in the section entitled "Certain
Additional Tax Matters" in the Statement of Additional Information.

The use of futures by the Funds and some of their risks are described more
fully in the Statement of Additional Information.

SECURITIES OF ISSUERS 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. 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.

CURRENCY EXCHANGE CONTRACTS. Forward currency exchange contracts may be
entered into for each Fund for the purchase or sale of non-U.S. currency for
hedging purposes 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.

LOWER-RATED DEBT SECURITIES. Each Fund may purchase lower-rated securities
(those rated Baa or better by Moody's or BBB or better 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.

SHORT SALES "AGAINST THE BOX." In a short sale, a Fund sells a borrowed
security and has a corresponding obligation to the lender to return the
identical security. Each Fund may engage in short sales only if at the time of
the short sale it owns or has the right to obtain, at no additional cost, an
equal amount of the security being sold short. This investment technique is
known as a short sale "against the box." A Fund may make a short sale as a
hedge, when it believes that the value of a security owned by the Fund (or a
security convertible or exchangeable for such security) may decline, or when
the Fund wants to sell the security at an attractive current price but wishes
to defer recognition of gain or loss for tax purposes. Not more than 40% of a
Fund's total assets would be involved in short sales "against the box."

ASSET-BACKED SECURITIES. The Balanced Fund 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. 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.
<PAGE>

SHAREHOLDER
SERVICING AGENTS
- --------------------------------------------------------------------------------

FOR CITIBANK RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CUSTOMERS:
Citibank, N.A.
111 Wall Street, New York, NY 10043
(212) 820-2383 or (800) 846-5300

FOR CITIGOLD CLIENTS:
Citigold
P.O. Box 5130, New York, NY 10126-5130
Call Your Citigold Executive or, in NY or CT (800) 285-1701,
or for all other states, (800) 285-1707

FOR CITIBANK PRIVATE BANKING CLIENTS:
Citibank, N.A.
The Citibank Private Bank
153 East 53rd Street, New York, NY 10043
Call Your Citibank Private Banking Account Officer,
Investment Specialist or (212) 559-5959

FOR CITIBANK GLOBAL ASSET MANAGEMENT CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY l0043
(212) 559-7117

FOR CITIBANK NORTH AMERICAN INVESTOR SERVICES CLIENTS:
Citibank, N.A.
Master Trust Accounts
111 Wall Street, New York, NY 10043
Call Your Account Manager or (212) 657-9659

FOR CITICORP INVESTMENT SERVICES CLIENTS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200,
(212) 820-2380 in New York City

[LOGO] LANDMARK
FUNDS

MONEY MARKET FUNDS:
Cash Reserves
Premium Liquid Reserves
Institutional Liquid Reserves

U.S. Treasury Reserves
Premium U.S. Treasury Reserves
Institutional U.S. Treasury Reserves

Tax Free Reserves
Institutional Tax Free Reserves

California Tax Free Reserves
Connecticut Tax Free Reserves
New York Tax Free Reserves

STOCK & BOND FUNDS:
U.S. Government Income Fund
Intermediate Income Fund
National Tax Free Income Fund
New York Tax Free Income Fund

Balanced Fund
Equity Fund
International Equity Fund
Small Cap Equity Fund
Emerging Asian Markets Equity Fund
<PAGE>
[logo] LANDMARK(SM) FUNDS
Advised by Citibank, N.A.

- --------------------------------
LANDMARK
BALANCED FUND
- --------------------------------
LANDMARK
EQUITY FUND
- --------------------------------
LANDMARK
SMALL CAP
EQUITY FUND
- --------------------------------

PROSPECTUS
May 1, 1997

EQ/P.1/97/PB Printed on Recycled Paper [Recycle Logo]
<PAGE>

497(c) File Nos. 2-90518 and 811-4006

Statement of
LANDMARK BALANCED FUND Additional Information
LANDMARK EQUITY FUND May 1, 1997
LANDMARK SMALL CAP EQUITY FUND
(Members of the Landmark(SM) Family of Funds) CLASS A AND B SHARES

Landmark Balanced Fund is a series of Landmark Funds I ("Trust I"), and
Landmark Equity Fund and Landmark Small Cap Equity Fund (the "Equity Funds" and
together with Landmark Balanced Fund, the "Funds") are each a series of Landmark
Funds II ("Trust II" and together with Trust I, the "Trusts"). The address and
telephone number of the Trusts are 6 St. James Avenue, Boston, Massachusetts
02116, (617) 423-1679. The Trusts invest all of the investable assets of the
Funds in, respectively, Balanced Portfolio, Equity Portfolio and Small Cap
Equity Portfolio (the "Portfolios"), which are separate series of The Premium
Portfolios (the "Portfolio Trust"). The address of the Portfolio Trust is
Elizabethan Square, George Town, Grand Cayman, British West Indies.

FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
CITIBANK, N.A. OR ANY OF ITS AFFILIATES, ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.

TABLE OF CONTENTS PAGE
1. The Funds ............................................................. 2
2. Investment Objectives, Policies and Restrictions ...................... 2
3. Performance Information ............................................... 12
4. Determination of Net Asset Value; Valuation of Securities;
Additional Purchase and Redemption Information ........................ 13
5. Management ............................................................ 15
6. Portfolio Transactions ................................................ 22
7. Description of Shares, Voting Rights and Liabilities .................. 23
8. Certain Additional Tax Matters ........................................ 25
9. Independent Accountants and Financial Statements ...................... 26

This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Funds' Prospectus, dated May 1, 1997, by which shares of the Funds are
offered. This Statement of Additional Information should be read in
conjunction with the Prospectus, a copy of which may be obtained by an
investor without charge by contacting the Funds' distributor, The Landmark
Funds Broker-Dealer Services, Inc., at 6 St. James Avenue, Boston, MA 02116,
(617) 423-1679.

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.

<PAGE>

1. THE FUNDS

Landmark Funds I ("Trust I") and Landmark Funds II ("Trust II" and
together with Trust I, the "Trusts") are each an open-end management
investment company that was organized as a business trust under the laws of
the Commonwealth of Massachusetts on April 13, 1984. This Statement of
Additional Information describes shares of Landmark Balanced Fund, which is a
diversified series of Trust I, and Landmark Equity Fund and Landmark Small Cap
Equity Fund, which are diversified series of Trust II. References in this
Statement of Additional Information to the "Prospectus" are to the Prospectus,
dated May 1, 1997, of the Trusts by which shares of the Funds are offered.

The Trusts seek the investment objectives of the Funds by investing all of
their investable assets in, respectively, Balanced Portfolio, Equity Portfolio
and Small Cap Equity Portfolio (the "Portfolios"). The Portfolios are series
of The Premium Portfolios (the "Portfolio Trust") and are open-end,
diversified management investment companies. Each Portfolio has the same
investment objectives and policies as the Fund that invests in it. Because
each of the Funds invests through its corresponding Portfolio, all references
in this Statement of Additional Information to each Fund include such Fund's
corresponding Portfolio, except as otherwise noted. In addition, references to
the Trusts include the Portfolio Trust, except as otherwise noted.

Citibank, N.A. ("Citibank" or the "Adviser") is investment adviser to each
of the Portfolios. The Adviser manages the investments of the Portfolios from
day to day in accordance with each Portfolio's investment objectives and
policies. The selection of investments for the Portfolios and the way they are
managed depend on the conditions and trends in the economy and the financial
marketplaces.

The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS" or the
"Administrator"), the administrator of each Fund (the "Administrator"), and
Signature Financial Group (Cayman) Ltd. ("SFG"), the administrator of each
Portfolio (the "Portfolio Administrator"), supervise the overall
administration of each Fund and each Portfolio, respectively. The Boards of
Trustees of each Trust and the Portfolio Trust provide broad supervision over
the affairs of the Funds and the Portfolios, respectively. Shares of the Funds
are continuously sold by LFBDS, the Funds' distributor (the "Distributor"),
only to investors who are customers of a financial institution, such as a
federal or state-chartered bank, trust company, savings and loan association
or savings bank, or a securities broker, that has entered into a shareholder
servicing agreement with the Trusts (collectively, "Shareholder Servicing
Agents"). Shares of each Fund are sold at net asset value, plus, in the case
of Class A shares, a sales charge that may be reduced on purchases involving
substantial amounts and that may be eliminated in certain circumstances. LFBDS
receives a distribution fee from each Fund pursuant to a Distribution Plan
adopted with respect to each class of shares of the Funds in accordance with
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"). LFBDS also receives a service fee from the assets of each Fund
represented by Class B shares pursuant to the Distribution Plan adopted with
respect to Class B shares of the Funds.

2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

INVESTMENT OBJECTIVES

The investment objectives of the LANDMARK BALANCED FUND are to earn high
current income by investing in a broad range of securities, to preserve
capital, and to provide growth potential with reduced risk.

The investment objective of the LANDMARK EQUITY FUND and the LANDMARK
SMALL CAP EQUITY FUND is long-term capital growth. Dividend income, if any, is
incidental to this investment objective.

The investment objectives of each Fund may be changed without approval by
that Fund's shareholders, but shareholders will be given written notice at
least 30 days before any change is implemented. Of course, there can be no
assurance that any Fund will achieve its investment objectives.

INVESTMENT POLICIES

The Prospectus contains a discussion of the various types of securities in
which each Fund may invest and the risks involved in such investments. The
following supplements the information contained in the Prospectus concerning
the investment objectives, policies and techniques of each Fund.

The Balanced Fund's policy is to invest its assets, under normal
circumstances, in a broadly diversified portfolio of income-producing
securities, including common and preferred stocks, bonds and short-term
obligations. Under normal circumstances, at least 25% of the Fund's total
assets is invested in fixed income securities.

While it is the policy of each of the Equity Fund and Small Cap Equity
Fund to invest its assets in a broadly diversified portfolio of equity
securities consisting mainly of common stocks of U.S. issuers, each Fund may
also invest in other types of securities such as fixed income securities and
convertible and non-convertible bonds.

The Trusts have also adopted the following policies with respect to each
Fund's investments in (i) warrants and (ii) securities of issuers with less
than three years' continuous operation. Each Trust's purchases of warrants for
each Fund will not exceed 5% of the Fund's net assets. Included within that
amount, but not exceeding 2% of its net assets, may be warrants which are not
listed on the New York Stock Exchange or the American Stock Exchange. Any such
warrants will be valued at their market value except that warrants which are
attached to securities at the time such securities are acquired for a Fund
will be deemed to be without value for the purpose of this restriction. The
Trusts will not invest more than 5% of each Fund's assets in companies which,
including their respective predecessors, have a record of less than three
years' continuous operation.

The Trusts may withdraw the investment of any Fund from its corresponding
Portfolio at any time, if the Board of Trustees of that Trust determines that
it is in the best interests of the Fund to do so. Upon any such withdrawal,
the Fund's assets would continue to be invested in accordance with the
investment policies described herein with respect to that Fund. The policies
described above and those described below are not fundamental and may be
changed without shareholder approval.

FUTURES CONTRACTS

The Balanced Fund may enter into interest rate futures contracts and each
of the Funds may enter into stock index futures contracts. These 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 securities. For
example, if interest rates were expected to increase, the Balanced Fund might
enter into futures contracts for the sale of debt securities. Such a sale
would have much the same effect as if the Balanced 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 Balanced 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
Balanced Fund avoids having to sell its securities.

Similarly, when it is expected that interest rates may decline, the
Balanced 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 enter into stock index futures contracts to gain
stock market exposure while holding cash available for investments and
redemptions.

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 the
Balanced Fund sells a futures contract to protect against losses in the debt
securities held by the Fund), at the same time the futures contracts 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 securities underlying such contracts
correlate with movements in the value of the Fund's securities. If the
security underlying a futures contract is different than the security being
hedged, they may not move to the same extent or in the same direction. In that
event, the Fund's hedging strategy might not be successful and the Fund could
sustain losses on these hedging transactions which would not be offset by
gains on the Fund's other investments or, alternatively, the gains on the
hedging transaction might not be sufficient to offset losses on the Fund's
other investments. It is also possible that there may be a negative
correlation between the security underlying a futures contract and the
securities being hedged, which could result in losses both on the hedging
transaction and the securities. In these and other instances, the Fund's
overall return could be less than if the hedging transactions had not been
undertaken. Similarly, even where a Fund enters into futures transactions
other than for hedging purposes, the effectiveness of its strategy may be
affected by lack of correlation between changes in the value of the futures
contracts and changes in value of the securities which the Fund would
otherwise buy and sell.

The ordinary spreads between prices in the cash and futures markets, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit
and variation margin requirements. Rather than meeting additional variation
margin requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship between
the cash and futures markets. Second, there is the potential that the
liquidity of the futures market may be lacking. Prior to expiration, a futures
contract may be terminated only by entering into a closing purchase or sale
transaction, which requires a secondary market on the contract market on which
the futures contracts was originally entered into. While a Fund will establish
a futures position only if there appears to be a liquid secondary market
therefor, there can be no assurance that such a market will exist for any
particular futures contract at any specific time. In that event, it may not be
possible to close out a position held by the Fund, which could require the
Fund to purchase or sell the instrument underlying the futures contract or to
meet ongoing variation margin requirements. The inability to close out futures
positions also could have an adverse impact on the ability effectively to use
futures transactions for hedging or other purposes.

The liquidity of a secondary market in a futures contract may be adversely
affected by "daily price fluctuation limits" established by the exchanges,
which limit the amount of fluctuation in the price of a futures contract
during a single trading day and prohibit trading beyond such limits once they
have been reached. The trading of futures contracts also is subject to the
risk of trading halts, suspensions, exchange or clearing house equipment
failures, government intervention, insolvency of a brokerage firm or clearing
house or other disruptions of normal trading activity, which could at times
make it difficult or impossible to liquidate existing positions or to recover
excess variation margin payments.

Investments in futures contracts also entail the risk that if the
Adviser's investment judgment about the general direction of interest rates or
the market is incorrect, the Fund's overall performance may be poorer than if
any such contract had not been entered into. For example, if the Balanced 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 the Balanced 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 a Fund has insufficient cash, the Fund may
have to sell bonds from its investments to meet daily variation margin
requirements, possibly at a time when it may be disadvantageous to do so.

Each contract market on which futures contracts are traded has established
a number of limitations governing the maximum number of positions which may be
held by a trader, whether acting alone or in concert with others. The Adviser
does not believe that these trading and position limits would have an adverse
impact on a Fund's 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 the 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 the Fund to engage in futures transactions may be limited
by the current federal income tax requirement that less than 30% of the Fund's
gross income be derived from the sale or other disposition of stock or
securities held for less than three months. In addition, the use of futures
contracts may increase the amount of taxable income of a Fund and may affect
the amount, timing and character of a Fund's income for tax purposes, as more
fully discussed herein in the section entitled "Certain Additional Tax
Matters."

REPURCHASE AGREEMENTS

Each of the Funds may invest in repurchase agreements collateralized by
securities in which that Fund may otherwise invest. Repurchase agreements are
agreements by which a Fund purchases a security and simultaneously commits to
resell that security to the seller (which is usually a member bank of the U.S.
Federal Reserve System or a member firm of the New York Stock Exchange (or a
subsidiary thereof)) at an agreed-upon date within a number of days (usually
not more than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed-upon market rate of interest which is unrelated
to the coupon rate or maturity of the purchased security. A repurchase
agreement involves the obligation of the seller to pay the agreed upon price,
which obligation is in effect secured by the value of the underlying security,
usually U.S. Government or Government agency issues. Under the 1940 Act,
repurchase agreements may be considered to be loans by the buyer. A Fund's
risk is limited to the ability of the seller to pay the agreed-upon amount on
the delivery date. If the seller defaults, the underlying security constitutes
collateral for the seller's obligation to pay although that Fund may incur
certain costs in liquidating this collateral and in certain cases may not be
permitted to liquidate this collateral. All repurchase agreements entered into
by the Funds are fully collateralized, with such collateral being marked to
market daily.

SECURITIES OF NON-U.S. ISSUERS

Each of the Funds may invest in securities of non-U.S. issuers. Investing
in securities issued by companies whose principal business activities are
outside the United States may involve significant risks not present in U.S.
investments. For example, the value of such securities fluctuates based on the
relative strength of the U.S. dollar. In addition, there is generally less
publicly available information about non-U.S. issuers, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Non-U.S. issuers are generally not bound by uniform accounting, auditing
and financial reporting requirements comparable to those applicable to U.S.
issuers. Investments in securities of non-U.S. issuers also involve the risk
of possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of a Fund, political or financial instability or diplomatic and
other developments which would affect such investments. Further, economies of
other countries or areas of the world may differ favorably or unfavorably from
the economy of the U.S.

It is anticipated that in most cases the best available market for
securities of non-U.S. issuers would be on exchanges or in over-the-counter
markets located outside the U.S. Non-U.S. securities markets, while growing in
volume and sophistication, are generally not as developed as those in the
U.S., and securities of some non-U.S. issuers (particularly those located in
developing countries) may be less liquid and more volatile than securities of
comparable U.S. companies. Non-U.S. securities trading practices, including
those involving securities settlement where a Fund's assets may be released
prior to receipt of payments, may expose the Funds to increased risk in the
event of a failed trade or the insolvency of a non-U.S. broker-dealer. In
addition, non-U.S. brokerage commissions are generally higher than commissions
on securities traded in the U.S. and may be non-negotiable. In general, there
is less overall governmental supervision and regulation of non-U.S. securities
exchanges, brokers and listed companies than in the U.S.

Investments in closed-end investment companies which primarily hold
securities of non-U.S. issuers may entail the risk that the market value of
such investments may be substantially less than their net asset value and that
there would be duplication of investment management and other fees and
expenses.

American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs") and other forms of depositary
receipts for securities of non-U.S. issuers provide an alternative method for
the Funds to make non-U.S. investments. These securities are not usually
denominated in the same currency as the securities into which they may be
converted. Generally, ADRs, in registered form, are designed for use in U.S.
securities markets and EDRs and GDRs, in bearer form, are designed for use in
European and global securities markets. ADRs are receipts typically issued by
a U.S. bank or trust company evidencing ownership of the underlying
securities. EDRs and GDRs are European and global receipts, respectively,
evidencing a similar arrangement. ADRs, EDRs and GDRs are subject to many of
the same risks that apply to other investments in non-U.S. securities.

The Funds may invest in securities of non-U.S. issuers that impose
restrictions on transfer within the United States or to United States persons.
Although securities subject to such transfer restrictions may be marketable
abroad, they may be less liquid than securities of non-U.S. issuers of the
same class that are not subject to such restrictions.

CURRENCY EXCHANGE TRANSACTIONS

Because each of the Funds may buy and sell securities denominated in
currencies other than the U.S. dollar, and receive interest, dividends and
sale proceeds in currencies other than the U.S. dollar, the Funds may enter
into currency exchange transactions to convert U.S. currency to non-U.S.
currency and non-U.S. currency to U.S. currency, as well as convert one non-
U.S. currency to another non-U.S. currency. A Fund either enters into these
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
currency exchange markets, or uses forward contracts to purchase or sell non-
U.S. currencies. The Funds may also enter into currency hedging transactions
in an attempt to protect the value of their assets as measured in U.S. dollars
from unfavorable changes in currency exchange rates and control regulations.
(Although each Fund's assets are valued daily in terms of U.S. dollars, the
Trusts do not intend to convert a Fund's holdings of non-U.S. currencies into
U.S. dollars on a daily basis.) It is not currently intended that the Funds
speculate in currency exchange rates or forward contracts.

The Funds may convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion. Although
currency exchange dealers do not charge a fee for conversion, they do realize
a profit based on the difference (the "spread") between the prices at which
they are buying and selling various currencies. Thus, a dealer may offer to
sell a currency at one rate, while offering a lesser rate of exchange should a
Fund desire to resell that currency to the dealer.

A forward contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract, agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
fees or commissions are charged at any stage for trades.

When a Fund enters into a contract for the purchase or sale of a security
denominated in a non-U.S. currency, it may desire to "lock in" the U.S. dollar
price of the security. By entering into a forward contract for the purchase or
sale, for a fixed amount of U.S. dollars, of the amount of non-U.S. currency
involved in the underlying security transaction, the Fund may be able to
protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the non-U.S. currency during the
period between the date the security is purchased or sold and the date on
which payment is made or received.

When the Adviser believes that the currency of a particular country may
suffer a substantial decline against the U.S. dollar, a Fund may enter into a
forward contract to sell, for a fixed amount of U.S. dollars, the amount of
non-U.S. currency approximating the value of some or all of the Fund's
securities denominated in such non-U.S. currency. The precise matching of the
forward contract amounts and the value of the securities involved is not
generally possible since the future value of such securities in non-U.S.
currencies changes as a consequence of market movements in the value of those
securities between the date the forward contract is entered into and the date
it matures. The projection of a short-term hedging strategy is highly
uncertain. The Funds do not enter into such forward contracts or maintain a
net exposure to such contracts where the consummation of the contracts
obligates a Fund to deliver an amount of non-U.S. currency in excess of the
value of the Fund's securities or other assets denominated in that currency.
Under normal circumstances, consideration of the prospect for currency
parities will be incorporated in the investment decisions made with regard to
overall diversification strategies. However, the Adviser believes that it is
important to have the flexibility to enter into such forward contracts when it
determines that the best interests of a Fund will be served.

The Funds generally would not enter into a forward contract with a term
greater than one year. At the maturity of a forward contract, a Fund will
either sell the security and make delivery of the non-U.S. currency, or retain
the security and terminate its contractual obligation to deliver the non-U.S.
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
non-U.S. currency. If a Fund retains the security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If a Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the non-U.S. currency. Should forward prices decline
during the period between the date a Fund enters into a forward contract for
the sale of the non-U.S. currency and the date it enters into an offsetting
contract for the purchase of such currency, the Fund will realize a gain to
the extent the selling price of the currency exceeds the purchase price of the
currency. Should forward prices increase, the Fund will suffer a loss to the
extent that the purchase price of the currency exceeds the selling price of
the currency.

It is impossible to forecast with precision the market value of a Fund's
securities at the expiration of a forward contract. Accordingly, it may be
necessary for a Fund to purchase additional non-U.S. currency on the spot
market if the market value of the security is less than the amount of non-U.S.
currency the Fund is obligated to deliver and if a decision is made to sell
the security and make delivery of such currency. Conversely, it may be
necessary to sell on the spot market some of the non-U.S. currency received
upon the sale of the security if its market value exceeds the amount of such
currency the Fund is obligated to deliver.

Each of the Funds may also purchase put options on a non-U.S. currency in
order to protect against currency rate fluctuations. If a Fund purchases a put
option on a non-U.S. currency and the value of the U.S. currency declines, the
Fund will have the right to sell the non-U.S. currency for a fixed amount in
U.S. dollars and will thereby offset, in whole or in part, the adverse effect
on the Fund which otherwise would have resulted. Conversely, where a rise in
the U.S. dollar value of another currency is projected, and where a Fund
anticipates investing in securities traded in such currency, the Fund may
purchase call options on the non-U.S. currency.

The purchase of such options could offset, at least partially, the effects
of adverse movements in exchange rates. However, the benefit to each Fund from
purchases of non-U.S. currency options will be reduced by the amount of the
premium and related transaction costs. In addition, where currency exchange
rates do not move in the direction or to the extent anticipated, a Fund could
sustain losses on transactions in non-U.S. currency options which would
require it to forgo a portion or all of the benefits of advantageous changes
in such rates.

The Funds may write options on non-U.S. currencies for hedging purposes or
otherwise to achieve their investment objectives. For example, where a Fund
anticipates a decline in the value of the U.S. dollar value of a non-U.S.
security due to adverse fluctuations in exchange rates it could, instead of
purchasing a put option, write a call option on the relevant currency. If the
expected decline occurs, the option will most likely not be exercised, and the
diminution in value of the security held by the Fund will be offset by the
amount of the premium received.

Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the cost of a non-U.S. security to be acquired because
of an increase in the U.S. dollar value of the currency in which the
underlying security is primarily traded, a Fund could write a put option on
the relevant currency which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased cost up to the
amount of the premium. However, the writing of a currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may
be exercised and the Fund would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium.
Through the writing of options on currencies, a Fund also may be required to
forgo all or a portion of the benefits which might otherwise have been
obtained from favorable movements in exchange rates.

Put and call options on non-U.S. currencies written by a Fund will be
covered by segregation of cash, short-term money market instruments or high
quality debt securities in an account with the custodian in an amount
sufficient to discharge the Fund's obligations with respect to the option, by
acquisition of the non-U.S. currency or of a right to acquire such currency
(in the case of a call option) or the acquisition of a right to dispose of the
currency (in the case of a put option), or in such other manner as may be in
accordance with the requirements of any exchange on which, or the counterparty
with which, the option is traded and applicable laws and regulations.

Investing in ADRs and other depositary receipts presents many of the same
risks regarding currency exchange rates as investing directly in securities
denominated in currencies other than the U.S. dollar. Because the securities
underlying these receipts are traded primarily in non-U.S. currencies, changes
in currency exchange rates will affect the value of these receipts. For
example, a decline in the U.S. dollar value of another currency in which
securities are primarily traded will reduce the U.S. dollar value of such
securities, even if their value in the other currency remains constant, and
thus will reduce the value of the receipts covering such securities. A Fund
may employ any of the above described non-U.S. currency hedging techniques to
protect the value of its assets invested in depositary receipts.

The Funds' dealings in non-U.S. currency contracts are limited to the
transactions described above. Of course, a Fund is not required to enter into
such transactions and does not do so unless deemed appropriate by the Adviser.
It should also be realized that these methods of protecting the value of a
Fund's securities against a decline in the value of a currency do not
eliminate fluctuations in the underlying prices of the securities.
Additionally, although such contracts tend to minimize the risk of loss due to
a decline in the value of the hedged currency, they also tend to limit any
potential gain which might result should the value of such currency increase.

Each Fund has established procedures consistent with policies of the
Securities and Exchange Commission (the "SEC") concerning forward contracts.
Since those policies currently recommend that an amount of a Fund's assets
equal to the amount of the purchase be held aside or segregated to be used to
pay for the commitment, each Fund is expected always to have cash, cash
equivalents or high quality debt securities available sufficient to cover any
commitments under these contracts or to limit any potential risk.

SHORT SALES "AGAINST THE BOX"

In a short sale, a Fund sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. Each of the Funds,
in accordance with applicable investment restrictions, may engage in short
sales only if at the time of the short sale it owns or has the right to
obtain, at no additional cost, an equal amount of the security being sold
short. This investment technique is known as a short sale "against the box."

In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. If a Fund engages in a short sale, the collateral for the short
position is maintained for the Fund by the custodian or qualified sub-
custodian. While the short sale is open, an amount of securities equal in kind
and amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities are maintained in a segregated
account for the Fund. These securities constitute the Fund's long position.

The Funds do not engage in short sales against the box for investment
purposes. A Fund may, however, make a short sale against the box as a hedge,
when it believes that the price of a security may decline, causing a decline
in the value of a security owned by the Fund (or a security convertible or
exchangeable for such security), or when the Fund wants to sell the security
at an attractive current price, but also wishes to defer recognition of gain
or loss for federal income tax purposes or for purposes of satisfying certain
tests applicable to regulated investment companies under the Internal Revenue
Code. In such case, any future losses in the Fund's long position should be
reduced by a gain in the short position. Conversely, any gain in the long
position should be reduced by a loss in the short position. The extent to
which such gains or losses are reduced depends upon the amount of the security
sold short relative to the amount the Fund owns. There are certain additional
transaction costs associated with short sales against the box, but the Funds
endeavor to offset these costs with the income from the investment of the cash
proceeds of short sales.

The Adviser does not expect that more than 40% of each Fund's total assets
would be involved in short sales against the box. The Adviser does not
currently intend to engage in such sales.

LENDING OF SECURITIES

Consistent with applicable regulatory requirements and in order to
generate income, each of the Funds may lend its securities to broker-dealers
and other institutional borrowers. Such loans will usually be made only to
member banks of the U.S. Federal Reserve System and to member firms of the New
York Stock Exchange (and subsidiaries thereof). Loans of securities would be
secured continuously by collateral in cash, cash equivalents or U.S. Treasury
obligations maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The cash collateral would be invested
in high quality short-term instruments. Either party has the right to
terminate a loan 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 with respect to cash
collateral would also receive compensation based on investment of the
collateral (subject to a rebate payable to the borrower). Where the borrower
provides a Fund with collateral consisting of U.S. Treasury obligations, the
borrower is also obligated to pay the Fund a fee for use of the borrowed
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 Adviser to be of good standing, and when, in the judgment of the
Adviser, the consideration which can be earned currently from loans of this
type justifies the attendant risk. In addition, a Fund could suffer loss if
the borrower terminates the loan and the Fund is forced to liquidate
investments in order to return the cash collateral to the buyer. If the
Adviser determines to make loans, it is not intended that the value of the
securities loaned by a Fund would exceed 30% of the value of its 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 SEC policies. Since those policies
currently require that an amount of a Fund's assets equal to the amount of the
purchase be held aside or segregated to be used to pay for the commitment, the
Fund 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 SEC policies,
purchases of securities on such bases may involve more risk than other types
of purchases. For example, a Fund may have to sell assets which have been set
aside in order to meet redemptions. Also, if the Adviser determines it is
advisable as a matter of investment strategy to sell the "when-issued" or
"forward delivery" securities, a Fund would be required to meet its
obligations from the then available cash flow or the sale of securities, or,
although it would not normally expect to do so, from the sale of the "when-
issued" or "forward delivery" securities themselves (which may have a value
greater or less than the Fund's payment obligation).

RULE 144A SECURITIES

Each of the Funds may purchase securities that are not registered ("Rule
144A securities") under the Securities Act of 1933 (the "Securities Act"), but
can be offered and sold to "qualified institutional buyers" under Rule 144A
under the Securities Act. However, none of the Funds invests more than 15% of
its net assets in illiquid investments, which includes securities for which
there is no readily available market, securities subject to contractual
restrictions on resale and Rule 144A securities, unless the Trustees of the
Trusts determine, based on the trading markets for the specific Rule 144A
security, that it is liquid. The Trustees may adopt guidelines and delegate to
the Adviser the daily function of determining and monitoring liquidity of Rule
144A securities. The Trustees, however, retain oversight and are ultimately
responsible for the determinations.

Since it is not possible to predict with assurance exactly how the market
for Rule 144A securities will develop, the Trustees will carefully monitor
each Fund's investments in Rule 144A securities, focusing on such factors,
among others, as valuation, liquidity and availability of information. The
liquidity of investments in Rule 144A securities could be impaired if trading
in Rule 144A securities does not develop or if qualified institutional buyers
become for a time uninterested in purchasing Rule 144A securities.

INVESTMENT RESTRICTIONS

FUNDAMENTAL RESTRICTIONS

The Trusts, on behalf of the Funds, and the Portfolio Trust, on behalf of
the Portfolios, have each adopted the following policies which may not be
changed with respect to any Fund or Portfolio without approval by holders of a
majority of the outstanding voting securities of that Fund or Portfolio, which
as used in this Statement of Additional Information means the vote of the
lesser of (i) 67% or more of the outstanding voting securities of the Fund or
Portfolio present at a meeting at which the holders of more than 50% of the
outstanding voting securities of the Fund or Portfolio are present or
represented by proxy, or (ii) more than 50% of the outstanding voting
securities of the Fund or Portfolio. The term "voting securities" as used in
this paragraph has the same meaning as in the 1940 Act.

None of the Funds or Portfolios may:

(1) Borrow money, except that as a temporary measure for extraordinary
or emergency purposes it may borrow in an amount not to exceed 1/3 of the
current value of its net assets, including the amount borrowed (nor
purchase any securities at any time at which borrowings exceed 5% of the
total assets of the Fund or Portfolio, taken at market value). It is
intended that a Fund or Portfolio would borrow money only from banks and
only to accommodate requests for the repurchase of shares of the Fund or
beneficial interests in the Portfolio while effecting an orderly
liquidation of portfolio securities.

(2) Make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loans not exceed 30% of
the Fund's or Portfolio's total assets (taken at market value), (b)
through the use of repurchase agreements or the purchase of short-term
obligations or (c) by purchasing all or a portion of an issue of debt
securities of types commonly distributed privately to financial
institutions. The purchase of short-term commercial paper or a portion of
an issue of debt securities which is part of an issue to the public shall
not be considered the making of a loan.

(3) Purchase securities of any issuer if such purchase at the time
thereof would cause with respect to 75% of the total assets of the Fund or
Portfolio more than 10% of the voting securities of such issuer to be held
by the Fund or Portfolio, except that, with respect to each Fund, the
applicable Trust may invest all or substantially all of the Fund's assets
in another registered investment company having the same investment
objectives and policies and substantially the same investment restrictions
as those with respect to the Fund (a "Qualifying Portfolio").

(4) Purchase securities of any issuer if such purchase at the time
thereof would cause as to 75% of the Fund's or Portfolio's total assets
more than 5% of the Fund's or Portfolio's assets (taken at market value)
to be invested in the securities of such issuer (other than securities or
obligations issued or guaranteed by the United States, any state or
political subdivision thereof, or any political subdivision of any such
state, or any agency or instrumentality of the United States or of any
state or of any political subdivision of any state), except that, with
respect to each Fund, the applicable Trust may invest all or substantially
all of the Fund's assets in a Qualifying Portfolio.

(5) Concentrate its investments in any particular industry, but if it
is deemed appropriate for the achievement of the Fund's or Portfolio's
investment objectives, up to 25% of its assets, at market value at the
time of each investment, may be invested in any one industry.

In addition, neither the Small Cap Equity Fund nor the Small Cap Equity
Portfolio may:

(6) Underwrite securities issued by other persons, except that all the
assets of the Fund may be invested in a Qualifying Portfolio and except
insofar as the Fund or Portfolio may technically be deemed an underwriter
under the 1933 Act in selling a security.

(7) Purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities or
commodity contracts in the ordinary course of business (each of the Fund
and the Portfolio reserves the freedom of action to hold and to sell real
estate acquired as a result of the ownership of securities by the Fund or
the Portfolio).

(8) Issue any senior security (as that term is defined in the 1940
Act) if such issuance is specifically prohibited by the 1940 Act or the
rules and regulations promulgated thereunder, except as appropriate to
evidence a debt incurred without violating Investment Restriction (1)
above.

NON-FUNDAMENTAL 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,

(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,

(vi) knowingly invest in securities which are not readily marketable
or which are subject to legal or contractual restrictions on resale (other
than repurchase agreements maturing in not more than seven days and other
than securities which may be resold pursuant to Rule 144A under the 1933
Act if the Board of Trustees of the applicable Trust or of the Portfolio
Trust determines that a liquid market exists for such securities) if, as a
result thereof, more than 15% of such a Fund's or Portfolio's net assets
(taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days), except that a Trust may
invest all or substantially all of either such Fund's assets in a
Qualifying Portfolio,

(vii) purchase or retain any securities issued by an issuer any of
whose officers, directors, trustees or security holders is an officer or
Trustee of the Trusts or of the Portfolio Trust, or is an officer or
director of the Adviser, if after the purchase of the securities of such
issuer by the Fund or Portfolio, one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities, or both,
all taken at market value, of such issuer, and such persons owning more
than 1/2 of 1% of such shares or securities together own beneficially more
than 5% of such shares or securities, or both, all taken at market value,

(viii) write, purchase or sell any put or call option or any
combination thereof or enter into any futures contract, except that this
restriction shall not prevent the Fund or Portfolio from entering into
transactions involving futures contracts and non-U.S. currencies as
described in the Prospectus and this Statement of Additional Information,

(ix) make short sales of securities or maintain a short position in
securities, unless at all times when a short position is open it owns an
equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities
of the same issue as, and equal in amount to, the securities sold short,
and unless not more than 10% of the net assets of the Fund or Portfolio
(taken at market value) is held as collateral for such sales at any one
time (the Funds and Portfolios do not presently intend to make such short
sales for investment purposes).

These policies are not fundamental and may be changed by each Fund or
Portfolio without the approval of its shareholders or holders of beneficial
interests.

PERCENTAGE AND RATING RESTRICTIONS

If a percentage or rating restriction on investment or utilization of
assets set forth above or referred to in the Prospectus is adhered to at the
time an investment is made or assets are so utilized, a later change in
percentage resulting from changes in the value of the securities or a later
change in the rating of the securities held for a Fund will not be considered
a violation of policy.

3. PERFORMANCE INFORMATION

A total rate of return quotation for a Fund is calculated for any period
by (a) dividing (i) the sum of the net asset value per share on the last day
of the period and the net asset value per share on the last day of the period
of shares purchasable with dividends and capital gains distributions declared
during such period with respect to a share held at the beginning of such
period and with respect to shares purchased with such dividends and capital
gains distributions, by (ii) the public offering price per share on the first
day of such period, and (b) subtracting 1 from the result. Any annualized
total rate of return quotation is calculated by (x) adding 1 to the period
total rate of return quotation calculated above, (y) raising such sum to a
power which is equal to 365 divided by the number of days in such period, and
(z) subtracting 1 from the result. Total rates of return may also be
calculated on investments at various sales charge levels or at net asset
value. Any performance data which is based on a reduced sales charge or net
asset value per share would be reduced if the maximum sales charge were taken
into account.

Any current yield quotation for a Fund consists of an annualized
historical yield, carried at least to the nearest hundredth of one percent,
based on a 30 calendar day or one month period and is calculated by (a)
raising to the sixth power the sum of 1 plus the quotient obtained by dividing
the Fund's net investment income earned during the period by the product of
the average daily number of shares outstanding during the period that were
entitled to receive dividends and the maximum public offering price per share
on the last day of the period, (b) subtracting 1 from the result, and (c)
multiplying the result by 2.

Set forth below is total rate of return information for the Class A shares
of each Fund for the periods indicated, assuming that dividends and capital
gains distributions, if any, were reinvested, and that at the beginning of
such periods the maximum sales charge of 4.75% had been applicable to
purchases of shares of the Fund. No Class B shares were outstanding during
such periods.

<TABLE>
<CAPTION>
REDEEMABLE VALUE
OF A HYPOTHETICAL
ANNUALIZED $1,000 INVESTMENT
TOTAL RATE AT THE END OF
BALANCED FUND OF RETURN THE PERIOD
- ------------- --------- ------------------
<S> <C> <C>
October 19, 1990 (commencement of operations) to December 31, 1996 ........ 11.47% $1,962
Five Years Ended December 31, 1996 ........................................ 7.37% $1,427
One Year Ended December 31, 1996 .......................................... 2.48% $1,025

REDEEMABLE VALUE
OF A HYPOTHETICAL
ANNUALIZED $1,000 INVESTMENT
TOTAL RATE AT THE END OF
EQUITY FUND OF RETURN THE PERIOD
- ------------- --------- ------------------
October 19, 1990 (commencement of operations) to December 31, 1996 ........ 14.30% $2,292
Five Years Ended December 31, 1996 ........................................ 10.72% $1,664
One Year Ended December 31, 1996 .......................................... 8.43% $1,084

REDEEMABLE VALUE
OF A HYPOTHETICAL
$1,000 INVESTMENT
TOTAL RATE AT THE END OF
SMALL CAP EQUITY FUND OF RETURN THE PERIOD
- ------------- --------- ------------------
June 21, 1995 (commencement of operations) to December 31, 1996............ 52.07% $1,900
One Year Ended December 31, 1996 .......................................... 31.25% $1,313
</TABLE>
- ----------

The annualized yields of the Class A shares of the Balanced Fund and the
Equity Fund for the 30-day period ended on December 31, 1996 were,
respectively, 2.76% and 0.29%.

Comparative performance information may be used from time to time in
advertising shares of each Fund, including data from Lipper Analytical
Services, Inc. and other industry sources and publications. From time to time
each Fund may compare its performance against inflation with the performance
of other instruments against inflation, such as FDIC-insured bank money market
accounts. In addition, advertising for each Fund may indicate that investors
should consider diversifying their investment portfolios in order to seek
protection of the value of their assets against inflation. From time to time,
advertising materials for each Fund may refer to or discuss current or past
economic or financial conditions, developments and events. Each Fund's
advertising materials also may refer to the integration of the world's
securities markets, discuss the investment opportunities available worldwide
and mention the increasing importance of an investment strategy including non-
U.S. investments.

4. DETERMINATION OF NET ASSET VALUE; VALUATION OF
SECURITIES; ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

The net asset value of each share of each class of each Fund is determined
each day during which the New York Stock Exchange (the "Exchange") is open for
trading ("Business Day"). As of the date of this Statement of Additional
Information, the Exchange is open for trading every weekday except for the
following holidays (or the days on which they are observed): New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. This determination is made once each day
as of the close of regular trading on the Exchange (normally 4:00 p.m. Eastern
time) by adding the market value of all securities and other assets
attributable to a class of a Fund (including its interest in its Portfolio),
then subtracting the liabilities charged to the class, and then dividing the
result by the number of outstanding shares of the class. Per share net asset
value of each class of a Fund's shares can be expected to differ because Class
B shares bear higher expenses than Class A shares. The net asset value per
share is effective for orders received and accepted by the Distributor prior
to its calculation.

The value of each Portfolio's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable
or accrued) is determined at the same time and on the same days as the net
asset value per share of its corresponding Fund is determined. The net asset
value of each Fund's investment in the Portfolio in which it invests is equal
to the Fund's pro rata share of the net assets of the Portfolio.

For purposes of calculating net asset value per share, all assets and
liabilities initially expressed in non-U.S. currencies will be converted into
U.S. dollars at the prevailing market rates at the time of valuation. Equity
securities are valued at the last sale price on the exchange on which they are
primarily traded or on the NASDAQ system for unlisted national market issues,
or at the last quoted bid price for securities in which there were no sales
during the day or for unlisted securities not reported on the NASDAQ system.
Securities listed on a non-U.S. exchange are valued at the last quoted sale
price available before the time when net assets are valued. Bonds and other
fixed income securities (other than short-term obligations) are valued on the
basis of valuations furnished by a pricing service, use of which has been
approved by the Board of Trustees of each Trust. In making such valuations,
the pricing service utilizes both dealer-supplied valuations and electronic
data processing techniques that take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon quoted prices or exchange or over-the-
counter prices, since such valuations are believed to reflect more accurately
the fair value of such securities. Short-term obligations (maturing in 60 days
or less) are valued at amortized cost, which constitutes fair value as
determined by the Board of Trustees of each Trust. Futures contracts are
normally valued at the settlement price on the exchange on which they are
traded. Securities for which there are no such valuations are valued at fair
value as determined in good faith by or at the direction of the Board of
Trustees of each Trust.

Trading in securities on most non-U.S. exchanges and over-the-counter
markets is normally completed before the close of regular trading on the
Exchange and may also take place on days on which the Exchange is closed. If
events materially affecting the value of non-U.S. securities occur between the
time when the exchange on which they are traded closes and the time when a
Fund's net asset value is calculated, such securities will be valued at fair
value in accordance with procedures established by and under the general
supervision of the Board of Trustees of each Trust.

Interest income on long-term obligations held for a Fund is determined on
the basis of interest accrued plus amortization of "original issue discount"
(generally, the difference between issue price and stated redemption price at
maturity) and premiums (generally, the excess of purchase price over stated
redemption price at maturity). Interest income on short-term obligations is
determined on the basis of interest accrued less amortization of any premium.

Subject to compliance with applicable regulations, the Trusts and the
Portfolio Trust have each reserved the right to pay the redemption price of
shares of the Fund or beneficial interests in the Portfolio, either totally or
partially, by a distribution in kind of readily marketable securities (instead
of cash). The securities so distributed would be valued at the same amount as
that assigned to them in calculating the net asset value for the shares or
beneficial interests being sold. If a holder of shares or beneficial interests
received a distribution in kind, such holder could incur brokerage or other
charges in converting the securities to cash.

Each Trust or the Portfolio Trust may suspend the right of redemption or
postpone the date of payment for shares of a Fund or beneficial interests in a
Portfolio more than seven days during any period when (a) trading in the
markets the Fund or Portfolio normally utilizes is restricted, or an
emergency, as defined by the rules and regulations of the SEC, exists making
disposal of a Fund's or Portfolio's investments or determination of its net
asset value not reasonably practicable; (b) the Exchange is closed (other than
customary weekend and holiday closings); or (c) the SEC has by order permitted
such suspension.

LETTER OF INTENT

If an investor anticipates purchasing $25,000 or more of Class A shares of
a Fund alone or in combination with Class B shares of the Fund or any of the
classes of other Landmark Funds within a 13-month period, the investor may
obtain such shares at the same reduced sales charge as though the total
quantity were invested in one lump sum by completing a Letter of Intent on the
terms described below. Subject to acceptance by the Distributor and the
conditions mentioned below, each purchase will be made at a public offering
price applicable to a single transaction of the dollar amount specified in the
Letter of Intent. The shareholder or his or her Shareholder Servicing Agent
must inform the Distributor that the Letter of Intent is in the effect each
time shares are purchased. The shareholder makes no commitment to purchase
additional shares, but if his or her purchases within 13 months plus the value
of shares credited toward completion of the Letter of Intent do not total the
sum specified, an increased sales charge will apply as described below. A
purchase not originally made pursuant to a Letter of Intent may be included
under a subsequent Letter of Intent executed within 90 days of such purchase
if the Distributor is informed in writing of this intent within such 90-day
period. The value of shares of a Fund presently held, at cost or maximum
offering price (whichever is higher), on the date of the first purchase under
the Letter of Intent, may be included as a credit toward the completion of
such Letter, but the reduced sales charge applicable to the amount covered by
such Letter is applied only to new purchases. Instructions for issuance of
shares in the name of a person other than the person signing the Letter of
Intent must be accompanied by a written statement from the Shareholder
Servicing Agent stating that the shares were paid for by the person signing
such Letter. Neither income dividends nor capital gain distributions taken in
additional shares will apply toward the completion of the Letter of Intent.
The value of any shares redeemed or otherwise disposed of by the purchaser
prior to termination or completion of the Letter of Intent are deducted from
the total purchases made under such Letter of Intent.

If the investment specified in the Letter of Intent is not completed
(either prior to or by the end of the 13-month period), the Shareholder
Servicing Agent will redeem, within 20 days of the expiration of the Letter of
Intent, an appropriate number of the shares in order to realize the difference
between the reduced sales charge that would apply if the investment under the
Letter of Intent had been completed and the sales charge that would normally
apply to the number of shares actually purchased. By completing and signing
the Letter of Intent, the shareholder irrevocably appoints the Shareholder
Servicing Agent his or her attorney to surrender for redemption any or all
shares purchased under the Letter of Intent with full power of substitution in
the premises.

RIGHT OF ACCUMULATION

A shareholder qualifies for cumulative quantity discounts on the purchase
of Class A shares when his or her new investment, together with the current
offering price value of all holdings of that shareholder in the Landmark
Family of Funds, reaches a discount level. See "Purchases" in the Prospectus
for the sales charges on quantity discounts. For example, if a Balanced Fund
shareholder owns shares valued at $25,000 and purchases an additional $25,000
of Class A shares of a Fund, the sales charge for the $25,000 purchase would
be at the rate of 4.00% (the rate applicable to single transactions of
$50,000). A shareholder must provide the Shareholder Servicing Agent with
information to verify that the quantity sales charge discount is applicable at
the time the investment is made.

5. MANAGEMENT

The Trustees and officers of the Trusts and the Portfolio Trust, their
ages and their principal occupations during the past five years are set forth
below. Their titles may have varied during that period. Asterisks indicate
that those Trustees and officers are "interested persons" (as defined in the
1940 Act) of the Trusts or the Portfolio Trust. Unless otherwise indicated
below, the address of each Trustee and officer is 6 St. James Avenue, Boston,
Massachusetts. The address of the Portfolio Trust is Elizabethan Square,
George Town, Grand Cayman, British West Indies.

TRUSTEES OF THE TRUSTS

H.B. ALVORD; 74 -- 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.
Mr. Alvord has announced that he intends to retire as a Trustee on May 31,
1997.

PHILIP W. COOLIDGE*; 45 -- President of the Trusts 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).

RILEY C. GILLEY; 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; 57 -- 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);
Trustee, The Highland Family of Funds (since March 1997). Her address is 120
Goulding Street, Holliston, Massachusetts.

SUSAN B. KERLEY; 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.; 62 -- 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; 62 -- Professor of Management, Graduate School of Business,
Columbia University (since 1987); Samuel Bronfman Professor of Democratic
Business Enterprise (1978 to 1987). His address is Columbia University,
Graduate School of Business, 725 Uris Hall, New York, New York.

WILLIAM S. WOODS, JR.; 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; 54 -- 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.

MARK T. FINN; 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; 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 TRUSTS AND THE PORTFOLIO TRUST

SAMANTHA M. BURGESS*; 27 -- Assistant Secretary and Assistant Treasurer of the
Trusts 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*; 26 -- Assistant Secretary and Assistant Treasurer of
the Trusts and the Portfolio Trust; Assistant Vice President, Signature
Financial Group, Inc. 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*; 48 -- Treasurer of the Trusts and the Portfolio Trust; Vice
President, Signature Financial Group, Inc. (since April 1995); Treasurer of
the Phoenix Family of Mutual Funds, Phoenix Home Life Mutual Insurance Company
(1983 to March 1995).

LINDA T. GIBSON*; 31 -- Secretary of the Trusts 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*; 41 -- Assistant Secretary and Assistant Treasurer of the
Trusts 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*; 49 -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trusts and the Portfolio Trust; Senior Vice President,
Signature Financial Group, Inc.

SUSAN JAKUBOSKI*; 33 -- Assistant Treasurer and Assistant Secretary of the
Portfolio Trust (since August 1994); Manager, Signature Financial Group
(Cayman) Ltd. (since August 1994); Senior Fund Administrator, Signature
Financial Group, Inc. (since August 1994); Assistant Treasurer, Signature
Broker-Dealer Services, Inc. (since September 1994); Fund Compliance
Administrator, Concord Financial Group (November 1990 to August 1994). Her
address is Elizabethan Square, George Town, Grand Cayman, Cayman Islands, BWI.

MOLLY S. MUGLER*; 45 -- Assistant Secretary of the Trusts 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*; 26 -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trusts 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*; 48 -- Assistant Secretary and Assistant Treasurer of the
Trusts 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*; 37 -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trusts and the Portfolio Trust; Vice President, Signature
Financial Group, Inc.

The following table shows Trustee compensation for the periods indicated.

<TABLE>
TRUSTEE COMPENSATION TABLE

AGGREGATE
AGGREGATE AGGREGATE COMPENSATION TOTAL
COMPENSATION COMPENSATION FROM THE COMPENSATION
FROM THE FROM THE SMALL CAP FROM TRUST AND
TRUSTEE BALANCED FUND(1) EQUITY FUND(1) EQUITY FUND(1) COMPLEX(2)
- ------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
H.B. Alvord .................................... $2,613 $2,483 $1,404 $44,000
Philip W. Coolidge ............................. $ 0 $ 0 $ 0 $ 0
Riley C. Gilley ................................ $3,138 $2,943 $1,355 $46,000
Diana R. Harrington ............................ $3,317 $3,120 $1,435 $47,250
Susan B. Kerley ................................ $3,162 $2,980 $1,429 $45,250
C. Oscar Morong, Jr. ........................... $3,593 $3,365 $1,439 $58,875
Donald B. Otis(3) .............................. $6,754 $6,164 $1,138 $38,000
E. Kirby Warren ................................ $2,843 $2,686 $1,410 $47,375
William S. Woods, Jr. .......................... $3,723 $3,470 $1,442 $47,000
</TABLE>
- ----------
(1) For the fiscal year ended December 31, 1996.
(2) Information relates to the fiscal year ended December 31, 1996. Messrs.
Alvord, Coolidge, Gilley, Morong, Warren and Woods, and Mses. Harrington
and Kerley are Trustees of 23, 46, 25, 23, 23, 25, 23 and 23 funds and
portfolios, respectively, in the Landmark Family of Funds.
(3) Mr. Otis retired as a Trustee on August 31, 1996.

As of April 9, 1997, all Trustees and officers as a group owned less than
1% of the outstanding shares of each Fund. 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 Shareholder Servicing Agents of the Fund for the accounts
of their respective clients.

The Declaration of Trust of each of the Trusts and the Portfolio Trust
provides that each of the Trusts and the Portfolio Trust, respectively, will
indemnify its Trustees and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with the Trusts or the Portfolio Trust, as the case may be, unless, as
to liability to the Trusts, the Portfolio Trust or their respective investors,
it is finally adjudicated that they engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in their
offices, or unless with respect to any other matter it is finally adjudicated
that they did not act in good faith in the reasonable belief that their
actions were in the best interests of the Trusts or the Portfolio Trust, as
the case may be. In the case of settlement, such indemnification will not be
provided unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination, based upon
a review of readily available facts, by vote of a majority of disinterested
Trustees of the Trusts or the Portfolio Trust, or in a written opinion of
independent counsel, that such officers or Trustees have not engaged in
willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.

ADVISER

Citibank manages the assets of each Portfolio pursuant to separate
investment advisory agreements (the "Advisory Agreements"). Subject to such
policies as the Board of Trustees of the Portfolio Trust may determine, the
Adviser manages the securities of each Portfolio and makes investment
decisions for each Portfolio. The Adviser furnishes at its own expense all
services, facilities and personnel necessary in connection with managing each
Portfolio's investments and effecting securities transactions for each
Portfolio. Each of the Advisory Agreements will continue as long as such
continuance is specifically approved at least annually by the Board of
Trustees of the Portfolio Trust or by a vote of a majority of the outstanding
voting securities of the applicable Portfolio, and, in either case, by a
majority of the Trustees of the Portfolio Trust who are not parties to the
Advisory Agreement or interested persons of any such party, at a meeting
called for the purpose of voting on the Advisory Agreement.

Each of the Advisory Agreements provides that the Adviser may render
services to others. Each Advisory Agreement is terminable without penalty on
not more than 60 days' nor less than 30 days' written notice by the Portfolio
Trust when authorized either by a vote of a majority of the outstanding voting
securities of the applicable Portfolio or by a vote of a majority of the Board
of Trustees of the Portfolio Trust, or by the Adviser on not more than 60
days' nor less than 30 days' written notice, and will automatically terminate
in the event of its assignment. Each Advisory Agreement provides that neither
the Adviser nor its personnel shall be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the execution of security transactions for the applicable
Portfolio, except for willful misfeasance, bad faith or gross negligence or
reckless disregard of its or their obligations and duties under the Advisory
Agreement.

The Prospectus contains a description of the fees payable to the Adviser
for services under the Advisory Agreements. For the four months ended April
30, 1994, the fee paid to Citibank under a prior investment advisory agreement
between the Balanced Fund and Citibank was $340,160. For the period from May
1, 1994 to December 31, 1994 and for the fiscal years ended December 31, 1995
and 1996, the fees paid to Citibank under the Advisory Agreement with respect
to the Balanced Portfolio were $640,795, $956,408 and $996,840, respectively.

For the four months ended April 30, 1994, the fee payable to Citibank
under a prior investment advisory agreement between the Equity Fund and
Citibank was $326,242 (of which $62,569 was voluntarily waived). For the
period from May 1, 1994 to December 31, 1994 and for the fiscal years ended
December 31, 1995 and 1996, the fees paid to Citibank under the Advisory
Agreement with respect to the Equity Portfolio were $639,933, $1,049,008 and
$1,387,227, respectively.

For the period June 21, 1995 (commencement of operations) to December 31,
1995 and for the fiscal year ended December 31, 1996, the fees payable to
Citibank under the Advisory Agreement with respect to the Small Cap Equity
Portfolio were $10,222 (all of which was voluntarily waived) and $147,259 (of
which $100,088 was voluntarily waived).

ADMINISTRATOR

Pursuant to administrative services agreements (the "Administrative
Services Agreements"), LFBDS and SFG provide the Trusts and the Portfolio
Trust, respectively, with general office facilities and LFBDS and SFG
supervise the overall administration of the Trusts or the Portfolio Trust,
including, among other responsibilities, the negotiation of contracts and fees
with, and the monitoring of performance and billings of, each Trust's or the
Portfolio Trust's independent contractors and agents; the preparation and
filing of all documents required for compliance by the Trusts or the Portfolio
Trust with applicable laws and regulations; and arranging for the maintenance
of books and records of the Trusts or the Portfolio Trust. The Administrator
and the Portfolio Administrator provide persons satisfactory to the Board of
Trustees of the Trusts or the Portfolio Trust to serve as Trustees and
officers of the Trusts and the Portfolio Trust, respectively. Such Trustees
and officers, as well as certain other employees and Trustees of the Trusts
and the Portfolio Trust, may be directors, officers or employees of LFBDS, SFG
or their affiliates.

The Prospectus contains a description of the fees payable to the
Administrator and the Portfolio Administrator under the Administrative
Services Agreements. For the fiscal years ended December 31, 1994, 1995 and
1996, the fees payable by the Balanced Fund to LFBDS under the Administrative
Services Agreement and a prior administrative services agreement with respect
to the Balanced Fund were $409,258, $944,624 (of which $354,234 was
voluntarily waived) and $592,565 (of which $237,026 was voluntarily waived),
respectively. For the fiscal years ended December 31, 1994, 1995 and 1996, the
fees payable by the Equity Fund to LFBDS under the Administrative Services
Agreement and a prior administrative services agreement with respect to the
Equity Fund were $320,872 (of which $126,917 was voluntarily waived), $294,337
(of which $196,224 was voluntarily waived) and $561,584 (of which $449,267 was
voluntarily waived), respectively. For the period June 21, 1995 (commencement
of operations) to December 31, 1995 and for the fiscal year ended December 31,
1996, the fees payable by the Small Cap Equity Fund to LFBDS under the
Administrative Services Agreement were $2,063 (all of which was voluntarily
waived) and $39,957 (all of which was voluntarily waived). For the period from
May 1, 1994 through December 31, 1994 and the fiscal years ended December 31,
1995 and 1996, the Portfolio Trust paid the Portfolio Administrator $80,099,
$119,551 and $124,605, respectively, with respect to the Balanced Portfolio
and, $63,999, $104,901 and $138,723, respectively, with respect to the Equity
Portfolio under the Portfolio Trust's Administrative Services Agreement. For
the period June 21, 1995 (commencement of operations) to December 31, 1995 and
for the fiscal year ended December 31, 1996, the Portfolio Trust was obligated
to pay the Portfolio Administrator $682 (all of which was voluntarily waived)
and $9,817 (all of which was voluntarily waived), respectively, under the
Administrative Services Agreement with respect to the Small Cap Equity
Portfolio.

The Administrative Services Agreement with each Trust acknowledges that
the names "Landmark" and "Landmark Funds" are the property of the
Administrator and provides that if LFBDS ceases to serve as the Administrator
of each Trust, the Trust would change its name and the name of the Fund so as
to delete the word "Landmark" or the words "Landmark Funds." The
Administrative Services Agreements with the Trusts also provide that LFBDS may
render administrative services to others and may permit other investment
companies to use the word "Landmark" or the words "Landmark Funds" in their
names.

The Administrative Services Agreement with each Trust continues in effect
with respect to each Fund if such continuance is specifically approved at
least annually by the Board of Trustees of each Trust or by a vote of a
majority of the outstanding voting securities of each Trust and, in either
case, by a majority of the Trustees who are not parties to the Administrative
Services Agreement or interested persons of any such party. The Administrative
Services Agreement with each Trust terminates automatically if it is assigned
and may be terminated without penalty by vote of a majority of the outstanding
voting securities of each Trust or by either party on not more than 60 days'
nor less than 30 days' written notice. The Administrative Services Agreement
with each Trust also provides that neither LFBDS, as the Administrator, nor
its personnel shall be liable for any error of judgment or mistake of law or
for any act or omission in the administration or management of the Trust,
except for willful misfeasance, bad faith or gross negligence in the
performance of its or their duties or by reason of reckless disregard of its
or their obligations and duties under the Trust's Administrative Services
Agreement.

The Administrative Services Agreement with the Portfolio Trust provides
that SFG may render administrative services to others. The Administrative
Services Agreement with the Portfolio Trust terminates automatically if it is
assigned and may be terminated without penalty by a vote of a majority of the
outstanding voting securities of the Portfolio Trust or by either party on not
more than 60 days' nor less than 30 days' written notice. The Administrative
Services Agreement with the Portfolio Trust also provides that neither SFG, as
the Portfolio Administrator, nor its personnel shall be liable for any error
of judgment or mistake of law or for any act or omission in the administration
or management of the Portfolio Trust, except for willful misfeasance, bad
faith or gross negligence in the performance of its or their duties or by
reason of reckless disregard of its or their obligations and duties under the
Portfolio Trust's Administrative Services Agreement.

LFBDS and SFG are wholly-owned subsidiaries of Signature Financial Group,
Inc. SFG is a company organized under the laws of the Cayman Islands. Its
principal place of business is in George Town, Grand Cayman, British West
Indies.

Pursuant to a sub-administrative services agreement, Citibank performs
such sub-administrative duties for each Trust and the Portfolio Trust as from
time to time are agreed upon by Citibank and, respectively, LFBDS or SFG.
Citibank's sub-administrative duties may include providing equipment and
clerical personnel necessary for maintaining each Trust's and the Portfolio
Trust's organization, participation in the preparation of documents required
for compliance by each Trust and the Portfolio Trust with applicable laws and
regulations, the preparation of certain documents in connection with meetings
of Trustees and shareholders, and other functions which would otherwise be
performed by the Administrator. For performing such sub-administrative
services, Citibank receives compensation as from time to time is agreed upon
by LFBDS or SFG, not in excess of the amount paid to LFBDS or SFG for its
services under the Administrative Services Agreements with the Trusts and the
Portfolio Trust. All such compensation is paid by LFBDS or SFG.

DISTRIBUTOR

LFBDS serves as the Distributor of each Fund's shares pursuant to
Distribution Agreements with each Trust with respect to each class of shares
of each Fund. Unless otherwise terminated, each Distribution Agreement will
continue from year to year upon annual approval by each Trust's Board of
Trustees or by the vote of a majority of the outstanding voting securities of
each Trust, and by the vote of a majority of the Board of Trustees of each
Trust who are not parties to the Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. Each Agreement will terminate in the event of its assignment, as
defined in the 1940 Act.

Each Trust has adopted a Distribution Plan (the "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act with respect to each class of
shares of the Funds after concluding that there is a reasonable likelihood
that the Distribution Plans will benefit each such Fund and its shareholders.
Each Distribution Plan with respect to Class A shares provides that each Fund
shall pay a distribution fee to the Distributor at an annual rate not to
exceed 0.15% of each Fund's average daily net assets represented by Class A
shares. Each Distribution Plan with respect to Class B shares provides that
each Fund will pay the Distributor a distribution fee at annual rate not to
exceed 0.75% of the average daily net assets represented by Class B shares.
The Distributor receives the distribution fees for its services under the
Distribution Agreements in connection with the distribution of each Fund's
shares of each class (exclusive of any advertising expenses incurred by the
Distributor in connection with the sale of Class A shares of each Fund). The
Distributor may use all or any portion of such distribution fee to pay for
expenses of printing prospectuses and reports used for sales purposes,
expenses of the preparation and printing of sales literature, commissions to
dealers who sell shares of the applicable class of the Fund and other such
distribution-related expenses.

Each Fund is also permitted to pay the Distributor a service fee with
respect to the Class A shares at an annual rate not to exceed 0.25% of each
Fund's average daily net assets represented by Class A shares and a service
fee with respect to the Class B shares at an annual rate not to exceed 0.25%
of each Fund's average daily net assets represented by Class B shares.

Each Distribution Plan with respect to the Class A Shares also permits the
Fund to pay the Distributor an additional fee (not to exceed 0.05% of the
average daily net assets of the Class A shares) in anticipation of or as
reimbursement for print or electronic media advertising expenses incurred in
connection with the sale of Class A shares.

The Distribution Plans continue in effect if such continuance is
specifically approved at least annually by a vote of both a majority of each
Trust's Trustees and a majority of the Trustees who are not "interested
persons" of each Trust and who have no direct or indirect financial interest
in the operation of the Distribution Plans or in any agreement related to the
Plans (for purposes of this paragraph "Qualified Trustees"). Each Distribution
Plan requires that the respective Trust and the Distributor provide to the
Board of Trustees, and the Board of Trustees review, at least quarterly, a
written report of the amounts expended (and the purposes therefor) under the
Distribution Plan. Each Distribution Plan further provides that the selection
and nomination of the Qualified Trustees is committed to the discretion of the
disinterested Trustees (as defined in the 1940 Act) then in office. The
Distribution Plans may be terminated with respect to any class of shares of
any Fund at any time by a vote of a majority of the respective Trust's
Qualified Trustees or by a vote of a majority of the outstanding voting
securities of that class of shares of the Fund. The Distribution Plan
applicable to a class of shares of any Fund may not be amended to increase
materially the amount of a Fund's permitted expenses thereunder without the
approval of a majority of the outstanding securities of that class of shares
of that Fund and may not be materially amended in any case without a vote of a
majority of both the Trustees and Qualified Trustees. The Distributor will
preserve copies of any plan, agreement or report made pursuant to each
Distribution Plan for a period of not less than six years from the date of the
Plan, and for the first two years the Distributor will preserve such copies in
an easily accessible place.

As contemplated by the Distribution Plans, LFBDS acts as the agent of each
Trust in connection with the offering of shares of the Funds pursuant to the
Distribution Agreements. After the prospectuses and periodic reports of the
Funds have been prepared, set in type and mailed to existing shareholders, the
Distributor pays for the printing and distribution of copies thereof which are
used in connection with the offering of shares of the Funds to prospective
investors. The Prospectus contains a description of fees payable to the
Distributor under the Distribution Agreement. For the fiscal years ended
December 31, 1994, 1995 and 1996 the fees payable to LFBDS under the
Distribution Agreement with respect to the Balanced Fund were $122,246,
$118,077 and $355,539 (of which $237,026 was voluntarily waived),
respectively, no portion of which was applicable to reimbursement for expenses
incurred in connection with print or electronic media advertising. For the
fiscal years ended December 31, 1994, 1995 and 1996, the fees payable to LFBDS
under the Distribution Agreement with respect to the Equity Fund were $96,083,
$98,112 and $336,950 (of which $224,633 was voluntarily waived), respectively,
no portion of which was applicable to reimbursement for expenses incurred in
connection with print or electronic media advertising. For the period June 21,
1995 (commencement of operations) to December 31, 1995 and for the fiscal year
ended December 31, 1996, the fees payable to LFBDS under the Distribution
Agreement with respect to the Small Cap Equity Fund were $687 and $23,974 (all
of which was voluntarily waived), respectively, no portion of which was
applicable to reimbursement for expenses incurred in connection with print or
electronic media advertising.

SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN

Each Trust has adopted an administrative services plan (the
"Administrative Services Plan") after having concluded that there is a
reasonable likelihood that the Administrative Services Plan will benefit the
Funds and their shareholders. The Administrative Services Plans provide that
each Trust may obtain the services of an administrator, a transfer agent, a
custodian and one or more Shareholder Servicing Agents, and may enter into
agreements providing for the payment of fees for such services. Under each
Trust's Administrative Services Plan, the total of the fees paid from a Fund
to the Trust's Administrator and Shareholder Servicing Agents may not exceed
0.65% of the Fund's average daily net assets on an annualized basis for the
Fund's then-current fiscal year. Any distribution fees or service fees (other
than any fee concerning electronic or other media advertising) payable under
the Distribution Plans for the Class A shares of the Balanced and Equity Funds
are included in this percentage limitation for those shares. This limitation
with respect to the Class A shares of the Small Cap Equity Fund and for the
Class B shares of each Fund, does not include any amounts payable under the
Distribution Plans for such shares. Each Administrative Services Plan
continues in effect if such continuance is specifically approved at least
annually by a vote of both a majority of the Trustees and a majority of the
Trustees who are not "interested persons" of the respective Trust and who have
no direct or indirect financial interest in the operation of the
Administrative Services Plan or in any agreement related to such Plan (for
purposes of this paragraph "Qualified Trustees"). Each Administrative Services
Plan requires that the respective Trust provide to its Board of Trustees and
the Board of Trustees review, at least quarterly, a written report of the
amounts expended (and the purposes therefor) under the Administrative Services
Plan. Each Administrative Services Plan may be terminated at any time by a
vote of a majority of the Qualified Trustees of the respective Trust or as to
each Fund by a vote of a majority of the outstanding voting securities of the
Fund. Each Administrative Services Plan may not be materially amended in any
case without a vote of the majority of both the Trustees and the Qualified
Trustees.

Each Trust has entered into a shareholder servicing agreement (a
"Servicing Agreement") with each Shareholder Servicing Agent and a Transfer
Agency and Service Agreement with State Street Bank and Trust Company ("State
Street") pursuant to which State Street (or its affiliate State Street Canada,
Inc.) acts as transfer agent for each Fund. Each Trust has entered into a
Custodian Agreement and a Fund Accounting Agreement with Investors Bank &
Trust Company ("IBT") pursuant to which custodial and fund accounting
services, respectively, are provided for each Fund. See "Shareholder Servicing
Agents" and "Transfer Agent, Custodian and Fund Accountant" in the Prospectus
for additional information, including a description of fees paid to the
Shareholder Servicing Agents under the Servicing Agreements. For the fiscal
years ended December 31, 1994, 1995 and 1996, the aggregate fees payable to
Shareholder Servicing Agents with respect to the Balanced Fund were $977,967
(of which $366,738 was voluntarily waived), $944,624 (of which $354,234 was
voluntarily waived) and $592,565, respectively. For the fiscal years ended
December 31, 1994, 1995 and 1996, the aggregate fees payable to Shareholder
Servicing Agents with respect to the Equity Fund were $768,306 (of which
$287,894 was voluntarily waived), $784,529 (of which $293,968 was voluntarily
waived) and $561,584, respectively. For the period June 21, 1995 (commencement
of operations) to December 31, 1995 and for the fiscal year ended December 31,
1996, the aggregate fees payable to Shareholder Servicing Agents with respect
to the Small Cap Equity Fund were $5,497 (all of which was voluntarily waived)
and $39,957 (of which $13,831 was voluntarily waived), respectively.

The Portfolio Trust has also adopted an administrative services plan (the
"Portfolio Administrative Plan"), which provides that the Portfolio Trust may
obtain the services of an administrator, a transfer agent and a custodian and
may enter into agreements providing for the payment of fees for such services.
Under the Portfolio Administrative Plan, the administrative services fee
payable to the Portfolio Administrator from a Portfolio may not exceed 0.05%
of the Portfolio's average daily net assets on an annualized basis for its
then-current fiscal year.

The Portfolio Administrative Plan continues in effect if such continuance
is specifically approved at least annually by a vote of both a majority of the
Portfolio Trust's Trustees and a majority of the Portfolio Trust's Trustees
who are not "interested persons" of the Portfolio and who have no direct or
indirect financial interest in the operation of the Portfolio Administrative
Plan or in any agreement related to such Plan (for purposes of this paragraph
"Qualified Trustees"). The Portfolio Administrative Plan requires that the
Portfolio Trust provide to the Board of Trustees and the Board of Trustees
review, at least quarterly, a written report of the amounts expended (and the
purposes therefor) under the Portfolio Administrative Plan. The Portfolio
Administrative Plan may not be amended to increase materially the amount of
permitted expenses thereunder without the approval of a majority of the
outstanding voting securities of the Portfolio Trust and may not be materially
amended in any case without a vote of the majority of both the Portfolio
Trust's Trustees and the Portfolio Trust's Qualified Trustees.

The Portfolio Trust, on behalf of the Portfolios, has entered into
Custodian Agreements and Fund Accounting Agreements with IBT pursuant to which
IBT acts as custodian for each Portfolio and 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. ("SFSI") provides transfer agency services to each
Portfolio. See "Shareholder Servicing Agents" and "Transfer Agent, Custodian
and Fund Accountant" in the Prospectus for additional information.

The principal business address of IBT is One Lincoln Plaza, Boston,
Massachusetts 02111. The principal business address of SFSI is 6 St. James
Avenue, Boston, Massachusetts 02116.

AUDITORS

Price Waterhouse LLP are the independent accountants for the Trusts,
providing audit services and assistance and consultation with respect to the
preparation of filings with the SEC. The address of Price Waterhouse LLP is
160 Federal Street, Boston, Massachusetts 02110. Price Waterhouse are the
chartered accountants for the Portfolio Trust. The address of Price Waterhouse
is Suite 3000, 1 First Canadian Place, Toronto, Ontario M5X 1H7, Canada.

COUNSEL

Bingham, Dana & Gould LLP, 150 Federal Street, Boston, MA 02110, acts as
counsel for the Funds.

6. PORTFOLIO TRANSACTIONS

Each Trust trades securities for a Fund if it believes that a transaction
net of costs (including custodian charges) will help achieve the Fund's
investment objectives. Changes in the Fund's investments are made without
regard to the length of time a security has been held, or whether a sale would
result in the recognition of a profit or loss. Therefore, the rate of turnover
is not a limiting factor when changes are appropriate. Specific decisions to
purchase or sell securities for each Fund are made by a portfolio manager who
is an employee of the Adviser and who is appointed and supervised by its
senior officers. The portfolio manager may serve other clients of the Adviser
in a similar capacity.

The primary consideration in placing portfolio securities transactions
with broker-dealers for execution is to obtain and maintain the availability
of execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting broker-
dealers to execute transactions on behalf of each Fund and other clients of
the Adviser on the basis of their professional capability, the value and
quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Adviser normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere.
In the case of securities purchased from underwriters, the cost of such
securities generally includes a fixed underwriting commission or concession.
From time to time, soliciting dealer fees are available to the Adviser on the
tender of a Fund's securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Fund by the Adviser.
At present no other recapture arrangements are in effect.

Under the Advisory Agreements, in connection with the selection of such
brokers or dealers and the placing of such orders, the Adviser is directed to
seek for each Fund in its best judgment, prompt execution in an effective
manner at the most favorable price. Subject to this requirement of seeking the
most favorable price, securities may be bought from or sold to broker-dealers
who have furnished statistical, research and other information or services to
the Adviser or the Funds, subject to any applicable laws, rules and
regulations.

The investment advisory fee that each Fund pays to the Adviser will not be
reduced as a consequence of the Adviser's receipt of brokerage and research
services. While such services are not expected to reduce the expenses of the
Adviser, the Adviser would, through the use of the services, avoid the
additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff 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 the Adviser's other
clients. Investment decisions for each Fund and for the Adviser's other
clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for
only one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more clients are selling the same security. Some simultaneous
transactions are inevitable when several clients receive investment advice
from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or
more clients are simultaneously engaged in the purchase or sale of the same
security, the securities are allocated among clients in a manner believed to
be equitable to each. It is recognized that in some cases this system could
adversely affect the price of or the size of the position obtainable in a
security for a Fund. When purchases or sales of the same security for a Fund
and for other portfolios managed by the Adviser occur contemporaneously, the
purchase or sale orders may be aggregated in order to obtain any price
advantages available to large volume purchases or sales.

For the period May 1, 1994 to December 31, 1994 and for the fiscal years
ended December 31, 1995 and 1996, the Balanced Portfolio paid brokerage
commissions of $280,300, $248,710 and $283,659, respectively. For the period
May 1, 1994 to December 31, 1994 and for the fiscal years ended December 31,
1995 and 1996, the Equity Portfolio paid brokerage commissions of $342,356,
$418,145 and $586,248, respectively. For the period June 21, 1995
(commencement of operations) to December 31, 1995 and for the fiscal year
ended December 31, 1996, the Small Cap Equity Portfolio paid brokerage
commissions in the amount of $6,544 and $84,320, respectively.

7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

Each Trust's Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional Shares of Beneficial Interest (without
par value) of each series and to divide or combine the shares of any series
into a greater or lesser number of shares of that series without thereby
changing the proportionate beneficial interests in that series. Trust I has
six series, including the Balanced Fund. Trust II has three series including
the Equity and Small Cap Equity Funds. Each Trust has reserved the right to
create and issue additional series and classes of shares. Each share of each
class of each Fund represents an equal proportionate interest in the Fund with
each other share of that class. Shares of each series participate equally in
the earnings, dividends and distribution of net assets of the particular
series upon liquidation or dissolution (except for any differences among
classes of shares in a series). Shares of each series are entitled to vote
separately to approve advisory agreements or changes in investment policy, but
shares of all series may vote together in the election or selection of
Trustees and accountants for the Trusts. In matters affecting only a
particular Fund or class, only shares of that particular Fund or class are
entitled to vote.

Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. Shareholders in each Trust do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of each Trust may elect all of the Trustees of the Trust if
they choose to do so and in such event the other shareholders in the Trust
would not be able to elect any Trustee. Each Trust is not required to hold,
and has no present intention of holding, annual meetings of shareholders but
each Trust will hold special meetings of shareholders when in the judgment of
the Trustees it is necessary or desirable to submit matters for a shareholder
vote. Shareholders have, under certain circumstances (e.g., upon the
application and submission of certain specified documents to the Trustees by a
specified number of shareholders), the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees. Shareholders also have under certain
circumstances the right to remove one or more Trustees without a meeting by a
declaration in writing by a specified number of shareholders. No material
amendment may be made to each Trust's Declaration of Trust without the
affirmative vote of the holders of a majority of the outstanding shares of
each series affected by the amendment. (See "Investment Objectives, Policies
and Restrictions -- Investment Restrictions".) At any meeting of shareholders
of any Fund, a Shareholder Servicing Agent may vote any shares of which it is
the holder of record and for which it does not receive voting instructions
proportionately in accordance with the instructions it received for all other
shares of which that Shareholder Servicing Agent is the holder of record.
Shares have no preference, pre-emptive, conversion or similar rights. Shares,
when issued, are fully paid and non-assessable, except as set forth below.

Each Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets (or all or substantially all of the assets
belonging to any series of the Trust), if approved by a vote of the holders of
two-thirds of the Trust's outstanding shares, voting as a single class, or of
the affected series of the Trust, as the case may be, except that if the
Trustees of each Trust recommend such sale of assets, merger or consolidation,
the approval by vote of the holders of a majority of the Trust's (or the
affected series) outstanding shares would be sufficient. Each Trust or any
series of each Trust, as the case may be, may be terminated
(i) by a vote of a majority of the outstanding voting securities of the Trust
or the affected series or (ii) by the Trustees by written notice to the
shareholders of the Trust or the affected series. If not so terminated, each
Trust will continue indefinitely.

Share certificates will not be issued.

Each Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business
trust may, under certain circumstances, be held personally liable as partners
for its obligations and liabilities. However, the Declaration of Trust of each
Trust contains an express disclaimer of shareholder liability for acts or
obligations of the Trust and provides for indemnification and reimbursement of
expenses out of Trust property for any shareholder held personally liable for
the obligations of the Trust. The Declaration of Trust of each Trust also
provides that the Trust may maintain appropriate insurance (e.g., fidelity
bonding and errors and omissions insurance) for the protection of the Trust,
its shareholders, Trustees, officers, employees and agents covering possible
tort and other liabilities. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which both inadequate insurance existed and the Trust itself was unable to
meet its obligations.

Each Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the
property of the Trust and that the Trustees will not be liable for any action
or failure to act, but nothing in the Declaration of Trust of each Trust
protects a Trustee against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.

By virtue of the combined Prospectus for the Funds, a Fund organized as a
series of one of the Trusts might share in liabilities, if any, arising under
federal and state securities laws with respect to disclosure in the Prospectus
concerning another Fund organized as a series of the other Trust.

The Portfolios are series of the Portfolio Trust, organized as a trust
under the laws of the State of New York. The Portfolio Trust's Declaration of
Trust provides that investors in the Portfolios (e.g., other investment
companies (including the corresponding Funds), insurance company separate
accounts and common and commingled trust funds) are each liable for all
obligations of the Portfolios. However, the risk of any Fund that invests
through a Portfolio incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance existed and the
applicable Portfolio itself was unable to meet its obligations. It is not
expected that the liabilities of any Portfolio would ever exceed its assets.

Each investor in a Portfolio, including the corresponding Fund, may add to
or withdraw from its investment in the applicable Portfolio on each Business
Day. As of the close of regular trading on each Business Day, the value of
each investor's beneficial interest in each Portfolio is determined by
multiplying the net asset value of the Portfolio by the percentage, effective
for that day, that represents that investor's share of the aggregate
beneficial interests in the Portfolio. Any additions or withdrawals that are
to be effected on that day are then effected. The investor's percentage of the
aggregate beneficial interests in the Portfolio is then re-computed as the
percentage equal to the fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of the close of regular trading
on such day plus or minus, as the case may be, the amount of any additions to
or withdrawals from the investor's investment in the Portfolio effected on
such day, and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the close of regular trading on such day plus or minus,
as the case may be, the amount of the net additions to or withdrawals from the
aggregate investments in the Portfolio by all investors in the Portfolio. The
percentage so determined is then applied to determine the value of the
investor's interest in the Portfolio as of the close of regular trading on the
next following Business Day.

8. CERTAIN ADDITIONAL TAX MATTERS

Each Fund has elected to be treated, and intends to qualify each year, as
a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), by meeting all applicable requirements
of Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition and holding
period of the Fund's portfolio assets. Provided all such requirements are met,
no U.S. federal income or excise taxes generally will be required to be paid
by the Funds, although non-U.S. source income earned by each Fund may be
subject to non-U.S. withholding taxes. If a Fund should fail to qualify as a
"regulated investment company" for any year, the Fund would incur a regular
corporate federal income tax upon its taxable income and Fund distributions
would generally be taxable as ordinary income to shareholders. The Portfolio
Trust believes the Portfolios also will not be required to pay any U.S.
federal income or excise taxes on their income.

The portion of each Fund's ordinary income dividends attributable to
dividends received in respect of equity securities of U.S. issuers is normally
eligible for the dividends received deduction for corporations subject to U.S.
federal income taxes. Availability of the deduction for particular
shareholders is subject to certain limitations, and deducted amounts may be
subject to the alternative minimum tax and result in certain basis
adjustments. Any Fund dividend that is declared in October, November or
December of any calendar year, that is payable to shareholders of record in
such a month, and that is paid the following January will be treated as if
received by the shareholders on December 31 of the year in which the dividend
is declared.

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 Class A shares of a Fund within 90 days after their purchase
followed by any purchase without payment of an additional sales charge
(including purchases by exchange or by reinvestment) of Class A shares of that
Fund or shares of another Landmark Fund generally sold subject to a sales
charge.

Each Fund's transactions in options, futures contracts 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 will limit its activities in options,
futures contracts and forward contracts to the extent necessary to meet the
requirements of Subchapter M of the Code.

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 in certain "passive foreign
investment companies" may also be limited in order to avoid a tax on the
Funds. Investment income received by a Fund from non-U.S. securities may be
subject to non-U.S.taxes. 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 rates of non-U.S. tax in advance since the amount of the
Funds' respective assets to be invested within various countries is not known.
Shareholders will not be able to claim any deduction or credit for any part of
the foreign taxes paid by the Funds.

The Fund will withhold tax payments at the rate of 30% (or any lower rate
permitted under an applicable treaty) 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.

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. If a shareholder fails to provide this information,
or otherwise violates IRS regulations, the Fund may be required to withhold
tax at the rate of 31% on certain distributions and redemption proceeds paid
to that shareholder.

9. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS

Price Waterhouse LLP are the independent accountants for the Funds,
providing audit services and assistance and consultation with respect to the
preparation of filings with the Securities and Exchange Commission. Price
Waterhouse are the chartered accountants for the Portfolio Trust.

The audited financial statements of the Balanced Fund and the Equity Fund
(Statement of Assets and Liabilities at December 31, 1996, Statement of
Operations for the year ended December 31, 1996, Statement of Changes in Net
Assets for each of the years in the two-year period ended December 31, 1996,
Financial Highlights for each of the years in the five-year period ended
December 31, 1996 and for the period October 19, 1990 (commencement of
operations) to December 31, 1990, Notes to Financial Statements and
Independent Auditors' Report), each of which is included in the respective
Annual Reports to Shareholders of the Balanced Fund and the Equity Fund, are
incorporated by reference into this Statement of Additional Information and
have been so incorporated in reliance upon the reports of Price Waterhouse
LLP, independent accountants, on behalf of the Funds.

The audited financial statements of the Balanced Portfolio and the Equity
Portfolio (Portfolio of Investments at December 31, 1996, Statement of Assets
and Liabilities at December 31, 1996, Statement of Operations for the fiscal
year ended December 31, 1996, Statement of Changes in Net Assets for the
fiscal years ended December 31, 1996 and 1995, Financial Highlights for the
fiscal years ended December 31, 1996 and 1995 and for the period May 1, 1994
(commencement of operations) to December 31, 1994, Notes to Financial
Statements and Independent Auditors' Report), each of which is included in the
Annual Reports to Shareholders of the Balanced Fund and the Equity Fund, are
incorporated by reference into this Statement of Additional Information and
have been so incorporated in reliance upon the reports of Price Waterhouse,
chartered accountants, on behalf of the Portfolios.

The audited financial statements of the Small Cap Equity Fund (Statement
of Assets and Liabilities at December 31, 1996, Statement of Operations for
the year ended December 31, 1996, Statement of Changes in Net Assets for the
fiscal year ended December 31, 1996 and for the period June 21, 1995
(commencement of operations) to December 31, 1995, Financial Highlights for
the fiscal year ended December 31, 1996 and for the period June 21, 1995
(commencement of operations) to December 31, 1995, Notes to Financial
Statements and Independent Auditors' Report), each of which is included in the
Annual Report to Shareholders, are incorporated by reference into this
Statement of Additional Information and have been so incorporated in reliance
upon the reports of Price Waterhouse LLP, independent accountants, on behalf
of the Fund.

The audited financial statements of the Small Cap Equity Portfolio
(Portfolio of Investments at December 31, 1996, Statement of Assets and
Liabilities at December 31, 1996, Statement of Operations for the year ended
December 31, 1996, Statement of Changes in Net Assets for the fiscal year
ended December 31, 1996 and for the period June 21, 1995 (commencement of
operations) to December 31, 1995, Financial Highlights for the fiscal year
ended December 31, 1996 and for the period June 21, 1995 (commencement of
operations) to December 31, 1995, Notes to Financial Statements and
Independent Auditors' Report), each of which is included in the Annual Report
to Shareholders of the Small Cap Equity Portfolio, are incorporated by
reference into this Statement of Additional Information and have been so
incorporated in reliance upon the reports of Price Waterhouse, chartered
accountants, on behalf of the Portfolio.

Copies of the Annual Reports for each Fund accompany this Statement of
Additional Information.

<PAGE>

SHAREHOLDER SERVICING AGENTS

FOR CITIBANK RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CUSTOMERS:
Citibank, N.A.
111 Wall Street, New York, NY 10094
(212) 820-2383 or (800) 846-5300

FOR CITIGOLD CUSTOMERS:
Citigold
P.O. Box 5130, New York, NY 10126-5130
Call Your Citigold Executive or, in NY or CT, (800) 285-1701
or for all other states, (800) 285-1707

FOR CITIBANK GLOBAL ASSET MANAGEMENT
CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY 10043
(212) 559-7117

FOR CITIBANK NORTH AMERICAN INVESTOR SERVICES CLIENTS:
Citibank, N.A.
Master Trust Accounts
111 Wall Street, New York, NY 10094
Call Your Account Manager or (212) 657-9659

FOR CITICORP INVESTMENT SERVICES CUSTOMERS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200,
(212) 820-2380 in New York City