<PAGE>
Rule 497(c)
File Nos. 2-90519 and 811-4007
PROSPECTUS
April 3, 1995
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 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.
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UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIOS OF SECURITIES, THE FUNDS SEEK THEIR INVESTMENT OBJECTIVES BY
INVESTING ALL OF THEIR INVESTABLE ASSETS IN DIFFERENT SERIES OF THE PREMIUM
PORTFOLIOS. EACH PORTFOLIO HAS THE SAME INVESTMENT OBJECTIVES AND POLICIES AS
ITS CORRESPONDING FUND. SEE "SPECIAL INFORMATION CONCERNING INVESTMENT
STRUCTURE" ON PAGE 10.
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REMEMBER THAT SHARES OF THE FUNDS:
* ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY
* ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, CITIBANK
OR ANY OF ITS AFFILIATES
* ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED
This Prospectus concisely sets forth information about the Funds that a
prospective investor should know before investing. A Statement of Additional
Information dated April 3, 1995 (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).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
TABLE OF CONTENTS
2 Prospectus Summary
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4 Expense Summary
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6 Condensed Financial Information
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8 Investment Information
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9 Risk Considerations
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11 Valuation of Shares
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12 Classes of Shares
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13 Purchases
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17 Exchanges
Redemptions
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18 Dividends and Distributions
Management
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22 Tax Matters
Performance Information
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23 General Information
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24 Appendix -- Permitted Investments
and Investment Practices
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<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 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 any Fund include its corresponding Portfolio,
except as otherwise noted.
INVESTMENT OBJECTIVES AND POLICIES:
LANDMARK BALANCED FUND. 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 market capitalizations, i.e., $750 million or more, and seasoned
management teams ("Established Companies").
LANDMARK EQUITY FUND. 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. 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 this Prospectus these
companies are called "small cap companies." 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 $73 billion in assets worldwide.
The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS") is the distributor of
shares of each Fund (the "Distributor"). 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 made available by 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 the 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 the 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
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The following table summarizes estimated shareholder transaction and annual
operating expenses for Class A and B shares of each Fund. Each Fund invests all
of its investable assets in its corresponding Portfolio. The Trustees of the
Funds believe the aggregate per share expenses of the Funds and their
corresponding Portfolios will be less than or approximately equal to the
expenses that the Funds would incur if their assets were invested directly in
the types of securities held by their corresponding Portfolios. For more
information on costs and expenses, see "Management" -- page 18 and "General
Information -- Expenses" -- page 23.*
<TABLE>
<CAPTION>
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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 See See See
proceeds, whichever is less) ........................ Below<F1> 5.00% Below<F1> 5.00% Below<F1> 5.00%
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS
(AS A PERCENTAGE OF AVERAGE NET ASSETS):
Investment Management Fee<F2>........................ .40% .40% .48% .48% .65% .65%
12b-1 Fees (including service fees for Class B
shares)<F2><F3>.................................... .05% .80% .05% .80% .05% .80%
Other Expenses
Administrative Services Fees<F2> ................... .20% .20% .13% .13% .15% .15%
Shareholder Servicing Agent Fees<F2> ............... .25% .25% .25% .25% .25% .25%
Other Operating Expenses<F2><F4> ................... .12% .12% .14% .14% .25% .25%
Total Fund Operating Expenses<F5> .................... 1.02% 1.77% 1.05% 1.80% 1.35% 2.10%
<F1> Purchases of $1 million or more are not subject to an intial 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."
<F2> After fee waivers.
<F3> 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.
<F4> 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 the Balanced Fund and the Equity Fund. See "General
Information -- Expenses."
<F5> Absent fee waivers, "Total Fund Operating Expenses" would have been:
--------------------------------------------------------------------------------------
SMALL CAP
BALANCED FUND EQUITY FUND EQUITY FUND
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
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1.22% 2.12% 1.34% 2.24% 1.70% 2.60%
</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 Balanced Fund and Equity Fund and the Small Cap Equity Fund
is newly organized, Other Operating Expenses in the table with respect to Class
B shares of the Balanced Fund and Equity Fund, and all shares of the Small Cap
Equity Fund, are based on estimated amounts for the current fiscal year. There
can be no assurance that the fee waivers reflected in the table will continue
at their present levels.
More complete descriptions of the following expenses of the Funds and the
Portfolios are set forth on the following pages: (i) investment management fees
- -- page 19, (ii) distribution and service fees -- page 21, (iii) administrative
services fees -- page 20, and (iv) shareholder servicing agent fees -- page 20.
<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
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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) ........ $62 $ 93
Class B shares:
Assuming complete
redemption at end of
period(2) ............. $73 $100
Assuming no
redemption ............ $23 $ 70
(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 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; $72, $96, $134
and $222 for Balanced Fund -- Class B (assuming complete redemption at the end
of each period); $60, $88, $117 and $201 for Equity Fund -- Class A; $73, $100,
$140 and $234 for Equity Fund -- Class B (assuming complete redemption at the
end of each period); $64 and $99 for Small Cap Equity Fund -- Class A and $76
and $111 for Small Cap Equity Fund -- Class B (assuming complete redemption at
the end of each period). For the Class A shares of the Balanced Fund and Equity
Fund expenses are based on each Fund's fiscal year ended December 31, 1994, and
for the Class A shares of the Small Cap Equity Fund expenses are estimated since
this Fund had no assets during its fiscal year ended December 31, 1994. Expenses
for Class B shares are estimated, because Class B shares were not offered during
the fiscal year ended December 31, 1994. 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 Balanced
Fund and the Equity Fund for the periods indicated. The Small Cap Equity Fund is
newly organized and therefore has not issued financial statements. The
information below should be read in conjunction with the financial statements
appearing in the Annual Reports to Shareholders of the Balanced Fund and the
Equity Fund, 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 (for the year ended December 31, 1994)
and Deloitte & Touche LLP (for periods prior to the year ended December 31,
1994), independent certified public 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>
<CAPTION>
BALANCED FUND
FINANCIAL HIGHLIGHTS
CLASS A SHARES
(No Class B shares were outstanding during these periods.)
OCTOBER 19, 1990
(COMMENCEMENT OF
YEAR ENDED DECEMBER 31, OPERATIONS) TO
1994 1993 1992 1991 DECEMBER 31, 1990
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period ............................. $14.24 $13.54 $12.93 $10.27 $ 9.75
------ ------ ------ ------ ------
Income from Operations:
Net investment income ............................................ 0.399 0.336<F2> 0.266 0.336 0.081
Net realized and unrealized gain (loss) on investments ........... (0.695) 0.803 0.600 2.665 0.513
------ ------ ------ ------ ------
Total from operations ........................................ (0.296) 1.139 0.866 3.001 0.594
------ ------ ------ ------ ------
Less Dividends and Distributions From:
Net investment income .......................................... (0.394) (0.319) (0.256) (0.341) (0.074)
Net realized gain on investments ............................... (0.030) (0.120) -- -- --
------ ------ ------ ------ ------
Total from dividends and distributions ....................... (0.424) (0.439) (0.256) (0.341) (0.074)
------ ------ ------ ------ ------
Net Asset Value, end of period ................................... $13.52 $14.24 $13.54 $12.93 $10.27
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) ........................ $227,309 $265,216 $15,296 $10,239 $6,855
Ratio of expenses to average net assets .......................... 1.02%<F4> 1.04% 1.40% 1.40% 1.40%<F1>
Ratio of net investment income to average net assets ............. 2.82% 2.46% 2.07% 2.88% 4.06%<F1>
Portfolio turnover ............................................... 29%<F5> 101% 102% 117% 12%
Total return ..................................................... (2.06%) 8.48% 6.82% 6.09%<F3>
Note: If certain agents of the Balanced Fund for the periods indicated and
certain agents of Balanced Portfolio for the period May 1, 1994 to December 31,
1994 had not waived a portion of their fees and an expense reimbursement
agreement had not been in effect and had expenses been limited as required by
certain state securities laws, the net investment income per share and the
ratios would have been as follows:
Net investment income per share .................................. $ 0.378 $0.310<F2>$0.148 $0.211 $0.059
RATIOS:
Expenses to average net assets ................................... 1.17%<F4> 1.23% 2.32% 2.47% 2.50%<F1>
Net investment income to average net assets ...................... 2.67% 2.27% 1.15% 1.81% 2.96%<F1>
<FN>
<F1>Annualized.
<F2>Because of the significant increase in Fund shares outstanding during the
year ended December 31, 1993, the per share amount for net investment income
was computed using a monthly average number of shares outstanding during the
year.
<F3>Not Annualized
<F4>Includes the Balanced Fund's share of Equity Portfolio allocated expenses
for the period May 1, 1994 to December 31, 1994.
<F5>Portfolio turnover represents the rate of portfolio activity for the period
while the Balanced Fund was making investments directly in securities. The
portfolio turnover rate for May 1, 1994 to December 31, 1994, the period
since the Balanced Fund transferred all of its investable assets to Balanced
Portfolio, was 105%.
</TABLE>
<PAGE>
<TABLE>
EQUITY FUND
FINANCIAL HIGHLIGHTS
CLASS A SHARES
(No Class B shares were outstanding during these periods.)
OCTOBER 19, 1990
(COMMENCEMENT OF
YEAR ENDED DECEMBER 31, OPERATIONS) TO
1994 1993 1992 1991 DECEMBER 31, 1990
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period ............................. $14.80 $13.23 $12.36 $ 9.57 $ 9.14
------ ------ ------ ------ ------
Income from Operations:
Net investment income ............................................ 0.173 0.071<F2> 0.065 0.126 0.065
Net realized and unrealized gain (loss) on investments ........... (0.245) 1.550 0.868 2.797 0.423
------ ------ ------ ------ ------
Total from operations ........................................ (0.072) 1.621 0.933 2.923 0.488
------ ------ ------ ------ ------
Less Dividends and Distributions From:
Net investment income .......................................... (0.169) (0.051) (0.063) (0.133) (0.058)
Net realized gain on investments ............................... (0.429) -- -- -- --
------ ------ ------ ------ ------
Total from dividends and distributions ....................... (0.598) (0.051) (0.063) (0.133) (0.058)
------ ------ ------ ------ ------
Net Asset Value, end of period ................................... $14.13 $14.80 $13.23 $12.36 $ 9.57
====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) ........................$183,975 $200,903 $10,973 $9,181 $6,026
Ratio of expenses to average net assets .......................... 1.05%<F3> 1.07% 1.40% 1.40% 1.40%<F1>
Ratio of net investment income to average net assets ............. 1.15% 0.52% 0.53% 1.12% 3.48%<F1>
Portfolio turnover ............................................... 1%<F4> 23% 79% 68% 0%
Total return ..................................................... (0.41%) 12.26% 7.60% 30.73% 5.34%
Note: If certain agents of the Equity Fund for the periods indicated and certain
agents of Equity Portfolio for the period May 1, 1994 to December 31, 1994 had
not waived a portion of their fees and an expense reimbursement agreement had
not been in effect and had expenses been limited as required by certain state
securities laws, the net investment income (loss) per share and the ratios would
have been as follows:
Net investment income (loss) per share ...........................$ 0.136 $ 0.029<F2> $(0.070) $0.002 $0.044
RATIOS:
Expenses to average net assets ................................... 1.29%(A) 1.37% 2.50% 2.50% 2.50%*
Net investment income (loss) to average net assets ............... 0.91% 0.21% (0.57)% 0.02% 2.38%*
<FN>
<F1>Annualized.
<F2>Because of the significant increase in Equity Fund shares outstanding during
the year ended December 31, 1993, the per share amount for net investment
income was computed using a monthly average number of shares outstanding
during the year.
<F3>Includes the Equity Fund's share of Equity Portfolio allocated expenses for
the period May 1, 1994 to December 31, 1994.
<F4>Portfolio turnover represents the rate of portfolio activity for the period
while the Equity Fund was making investments directly in securities. The
portfolio turnover rate for May 1, 1994 to December 31, 1994, the period
since the Equity Fund transferred all of its investable assets to Equity
Portfolio, was 35%.
</TABLE>
<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
(together, the "Equity Funds") 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 Ratings Group ("S&P")) or
unrated securities which the Adviser believes to be of comparable quality. Less
than 5% of the Portfolio'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 unrated 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 24. 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). Certain of these
specific restrictions may not be changed without shareholder approval. 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. The turnover rate for the common stock portion of the Balanced Fund
is expected to be approximately 100% annually; for the fiscal year ended
December 31, 1993, the turnover rate for the entire Balanced Fund was 101%; for
the period January 1, 1994 to April 30, 1994, the turnover rate for the entire
Balanced Fund was 29% and for the period May 1, 1994 to December 31, 1994, the
turnover rate for the entire Balanced Portfolio was 105%. The turnover rate for
the Equity Fund is not expected to exceed 100% annually; for the fiscal year
ended December 31, 1993, this rate was 23%; for the period January 1, 1994 to
April 30, 1994 the turnover rate for the Equity Fund was 1% and for the period
May 1, 1994 to December 31, 1994 the turnover rate for the Equity Portfolio was
35%. The turnover rate for the Small Cap Equity Fund is not expected to exceed
200% annually. The amount of brokerage commissions and realization of taxable
capital gains will tend to increase as the level of portfolio activity
increases.
BROKERAGE TRANSACTIONS. 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 unrated 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. See the Appendix -- Permitted Investments and
Investment Practices on page 24.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE: Unlike other mutual funds
which directly acquire and manage their own portfolio securities, each of the
Funds seeks its investment objectives by investing all of its investable assets
in its corresponding Portfolio, a registered investment company. Each of the
Portfolios has the same investment objectives and policies as its corresponding
Fund. In addition to selling a beneficial interest to a Fund, a Portfolio may
sell beneficial interests to other mutual funds, collective investment vehicles,
or institutional investors. Such investors will invest in the Portfolio on the
same terms and conditions and will pay a proportionate share of the Portfolio's
expenses. However, the other investors investing in the Portfolio are not
required to sell their shares at the same public offering price as the Fund due
to variations in sales commissions and other operating expenses. Therefore,
investors in a Fund should be aware that these differences may result in
differences in returns experienced by investors in the different funds that
invest in that Portfolio. Such differences in returns are also present in other
mutual fund structures. Information concerning other holders of interests in the
Portfolios is available from the Funds' distributor, LFBDS, at the address and
telephone number indicated on the back cover of this Prospectus.
The investment objective of each of the Funds may be changed by its Trustees
without the approval of the Fund's shareholders, but shareholders will be given
written notice at least 30 days before any change is implemented. If there is a
change in a Fund's investment objective, shareholders should consider whether
the Fund remains an appropriate investment in light of their then current
financial positions and needs. The investment objective of each of the
Portfolios may also be changed without the approval of the investors in the
Portfolio, but not without written notice thereof to the investors in the
Portfolio (and, if a Fund is then invested in the Portfolio, notice to Fund
shareholders) at least 30 days prior to implementing the change. There can, of
course, be no assurance that the investment objective of either a Fund or its
Portfolio will be achieved. See "Investment Objective, Policies and Restrictions
- - Investment Restrictions" in the Statement of Additional Information for a
description of the fundamental policies of each Fund and its Portfolio that
cannot be changed without approval by the holders of a "majority of the
outstanding voting securities" (as defined in the Investment Company Act of 1940
(the "1940 Act")) of the Fund or Portfolio. Except as stated otherwise, all
investment guidelines, policies and restrictions described herein and in the
Statement of Additional Information are non-fundamental.
Certain changes in a Portfolio's investment objectives, policies or
restrictions or a failure by a Fund's shareholders to approve a change in the
Portfolio's investment objectives or restrictions, may preclude the Fund from
investing its investable assets in the Portfolio or require the Fund to withdraw
its interest in the Portfolio. Any such withdrawal could result in an "in kind"
distribution of securities (as opposed to a cash distribution) from the
Portfolio which may or may not be readily marketable. If securities are
distributed, the Fund could incur brokerage, tax or other charges in converting
the securities to cash. The in kind distribution may result in the Fund having a
less diversified portfolio of investments or adversely affect the liquidity of
the Fund. Notwithstanding the above, there are other means for meeting
shareholder redemption requests, such as borrowing. The absence of substantial
experience with this investment structure could have an adverse effect on an
investment in the Funds.
Smaller funds investing in a Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large fund
withdraws from the Portfolio, the remaining funds may subsequently experience
higher pro rata operating expenses, thereby producing lower returns.
Additionally, because the Portfolio would become smaller, it may become less
diversified, resulting in increased portfolio risk; however, these possibilities
exist for traditionally structured funds which have large or institutional
investors who may withdraw from a fund. Also, funds with a greater pro rata
ownership in the Portfolio could have effective voting control of the operations
of the Portfolio. If a Fund is requested to vote on matters pertaining to its
Portfolio (other than a vote by the Fund to continue the operation of the
Portfolio upon the withdrawal of another investor in the Portfolio), the Fund
will hold a meeting of its shareholders and will cast all of its votes
proportionately as instructed by its shareholders who vote at the meeting.
Shareholders of the Fund who do not vote will have no effect on the outcome of
such matters.
Each of the Funds may withdraw its investment from its Portfolio at any
time, if the Fund's Board of Trustees determines that it is in the best interest
of the Fund to do so. Upon any such withdrawal, the Board of Trustees would
consider what action might be taken, including the investment of all of the
investable assets of the Fund in another pooled investment entity having the
same investment objective as the Fund or the retaining of an investment adviser
to manage the Fund's assets in accordance with the investment policies described
above. In the event the Fund's Trustees were unable to find a substitute
investment company in which to invest the Fund's assets or were unable to secure
directly the services of an investment adviser, the Trustees would determine the
best course of action.
For a description of the management of the Portfolios, see "Management" --
page 18. For descriptions of the expenses of the Portfolios, see "Management"
and "General Information -- Expenses" -- page 23. For a description of the
investment objectives, policies and restrictions of the Portfolios, see
"Investment Information" -- page 8.
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 (currently 4:00 p.m. Eastern time) by adding the market value of
all securities and other assets attributable to a class of a Fund (including 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 each Fund's shares may
differ because Class B shares bear higher expenses than Class A shares. The net
asset value per share of each class of shares is effective for orders received
and accepted by the Distributor prior to its calculation.
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 AMONG THE CLASSES: Class A and B shares of a Fund represent
interests in the same mutual fund. The primary distinctions between the classes
of each Fund's shares 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 table below. 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 approximately
charge of 5.00% of the lesser of Service fee of 0.05%. 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, but 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. Thus, the entire amount of a
Class B shareholder's purchase price is immediately invested in a Fund.
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. An investor should consider both ongoing
annual expenses and initial or contingent deferred sales charges in estimating
the costs of investing in the different classes of Fund shares over various time
periods.
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). 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 until they have received the purchase price in federal or other
immediately available funds. If Fund shares are purchased by check, there will
be a delay (usually not longer than two business days) in transmitting the
purchase order until the check is converted into federal funds.
PURCHASING CLASS A SHARES: INITIAL SALES CHARGE -- CLASS A SHARES. Each Fund's
public offering price of Class A shares is the next determined net asset value,
plus any applicable sales charge, which will vary with the size of the purchase
as shown in the following table:
<PAGE>
SALES CHARGE AS
PERCENTAGE OF THE 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.
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, subject to the appointment of an attorney for
redemptions of shares if the intended purchases are not completed, by completing
a LETTER OF INTENT. Investors should consult "Determination of Net Asset Value;
Valuation of Securities; Additional Purchase and Redemption Information" in the
Statement of Additional Information and their Shareholder Servicing Agents for
more information about Rights of Accumulation and Letters of Intent.
PURCHASING CLASS B SHARES: CONTINGENT DEFERRED SALES CHARGE -- CLASS B SHARES.
Each Fund's public offering price of Class B shares is the next determined net
asset value, 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. The
Distributor, at its expense, may from time to time provide additional
promotional incentives to brokers who sell shares of a Fund. In some instances,
these incentives may be offered to certain brokers who have sold or may sell
significant numbers of shares of a Fund.
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; however, contingent deferred sales charges may
apply to redemptions of Class B shares acquired 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 by the Distributor. See "Valuation of
Shares." Shares of the Funds may be exchanged only after payment in federal
funds for the shares has been made.
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 $73 billion in assets worldwide. Citibank is a wholly-owned
subsidiary of Citicorp. Citibank also serves as investment adviser to 11 other
Landmark Funds or portfolios.
Citibank manages the Funds' assets pursuant to separate investment advisory
agreements ("Advisory Agreements"). Subject to policies set by the Trustees,
Citibank makes investment decisions. Citibank's address is 153 East 53rd Street,
New York, New York 10043.
BALANCED FUND. A. Dwight Hyde, Jr. and Mark Lindbloom have served as
managers of the Balanced Fund since January 1993 and March 1993, respectively.
Mr. Hyde manages the equity portion of the portfolio. In addition, he manages
over $2 billion of other assets at Citibank. Prior to joining Citibank in
1980, he was Chief Investment Officer at Dean Witter Asset Management and
Paribas Asset Management. Mr. Lindbloom manages the fixed income portion of
the portfolio. He came to Citibank in 1986 from Brown Brothers Harriman & Co.,
where he managed fixed income assets for discretionary corporate portfolios.
EQUITY FUND. A. Dwight Hyde, Jr. has served as manager of the Equity Fund
since January 1993. Mr. Hyde's investment management experience is described
above.
SMALL CAP EQUITY FUND. David N. Pearl, Linda J. Intini and Marguerite H.
Wagner were appointed as the managers of the Small Cap Equity Fund. Mr. Pearl is
a portfolio manager of U.S. equity assets for institutional clients, and came to
Citibank in 1994. Prior to coming to Citibank, he worked as a portfolio manager
at both Fleming Capital Management and Bankers Trust Company. Ms. Intini is a
portfolio manager with Citibank's Special Equity Team, and she came to Citibank
in 1992. She most recently held the position of Portfolio Manager and Research
Analyst for five years with Manufacturers Hanover Trust in their special equity
area. Ms. Wagner is also a portfolio manager and research analyst with
Citibank's Special Equity Team. She joined Citibank in 1985 and has previously
managed a balanced portfolio for The Citibank Private Bank.
Management's discussion of performance of the Balanced Fund and the Equity
Fund is included in the Annual Reports to Shareholders of those Funds, which
investors may obtain without charge by contacting their Shareholder Servicing
Agents. The Small Cap Equity Fund is newly organized and therefore has not
issued any reports to shareholders.
ADVISORY FEES. For its services under the 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, 1994, the investment advisory fees
paid to Citibank were: for the Balanced Fund, $980,955 (0.40% of the Fund's
average daily net assets for that fiscal year); and for the Equity Fund,
$966,230, of which $62,569 was voluntarily waived (after the waiver, .03% of the
Fund's average daily net assets 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 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 (the "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. For the Class A shares of the Small Cap Equity Fund and for the Class B
shares of each Fund, this limitation does not include any amounts payable under
the Distribution Plans for those shares. 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., either
directly or through a wholly-owned subsidiary ("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 0.20% 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 0.40% 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. However, each Shareholder Servicing
Agent voluntarily has agreed to waive a portion of its fee.
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. Signature Financial
Services, Inc. provides fund accounting services and calculates the daily net
asset value for the Funds.
DISTRIBUTION ARRANGEMENTS: LFBDS 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 plans of distribution pertaining to Class A
shares and Class B shares (collectively "Plans"). 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
Balanced Fund and the Equity Fund did not pay anything under this provision
during 1994, and the Funds 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. 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 ("Distribution Agreements")
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.
From time to time LFBDS may make payments for distribution and/or
shareholder servicing activities out of its past profits or any other sources
available to it.
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 net long-term capital gains will be taxed as such regardless of
how long the shares of a Fund have been held.
Fund distributions will reduce the distributing Fund's net asset value per
share. Shareholders who buy shares just before a Fund makes a distribution may
thus pay the full price for the shares and then effectively receive a portion of
the purchase price back as a taxable distribution.
Early each year, each Fund will notify its shareholders of the amount and
tax status of distributions paid to shareholders for the preceding year.
Investors should consult their own tax advisers regarding the status of
their accounts under state and local laws.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
Fund performance may be quoted in advertising, shareholder reports and other
communications in terms of 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 share- holder'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 1940 Act.
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.
Each Fund's activities are supervised by its Board of Trustees. 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 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, 1994, 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.
EXPENSES AS
PERCENTAGE
EXPENSES FUND'S OF AVERAGE
PAID BY PAYMENT DAILY
LFBDS TO LFBDS NET ASSETS
---------------------------------------------------------------------------
Balanced Fund .......... $378,106 $191,943 1.02%
Equity Fund ............ $336,928 $222,126 1.05%
---------------------------------------------------------------------------
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 the Advisory Agreements, the
Administrative Services Plans and the 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, government fees, taxes, accounting and legal fees,
expenses of communicating with shareholders, interest expense, and insurance
premiums.
All fee waivers are voluntary and may be reduced or terminated at any time.
----------------
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
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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 lent or cash. To the
extent that, in the meantime, the value of the securities lent has increased or
the value of the securities purchased has decreased, the Fund could experience a
loss.
RULE 144A SECURITIES. Each Fund may purchase restricted securities that are
not registered for sale to the general public if the Adviser determines that
there is a dealer or institutional market in the securities. In that case, the
securities will not be treated as illiquid for purposes of the Fund's investment
limitations. The Trustees will review these determinations. These securities are
known as "Rule 144A securities", because they are traded under SEC Rule 144A
among qualified institutional buyers. Institutional trading in Rule 144A
securities is relatively new, and the liquidity of these investments could be
impaired if trading in Rule 144A securities does not develop or if qualified
institutional buyers become, for a time, uninterested in purchasing Rule 144A
securities.
PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS. Each Fund may invest up to 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.
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 governing private or non-U.S.
investment and private property. 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.
<PAGE>
SHAREHOLDER
SERVICING AGENTS
- -------------------------------------------------------------------------------
FOR CITIBANK NEW YORK RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CUSTOMERS:
Citibank, N.A.
450 West 33rd Street, New York, NY 10001
(212) 564-3456 or (800) 846-5300
FOR CITIGOLD CUSTOMERS:
Citigold
666 Fifth Avenue, New York, NY 10150-5130
Call Your Account Officer or (212) 974-0900 or (800) 285-1701
FOR PRIVATE BANKING CLIENTS:
Citibank, N.A.
The Citibank Private Bank
153 East 53rd Street, New York, NY 10043
Call Your Citibank Private Banking Account Officer,
Investment Specialist or (212) 559-5959
FOR CITIBANK GLOBAL ASSET
MANAGEMENT CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY 10043
(212) 559-7117
FOR NORTH AMERICAN INVESTOR
SERVICES CLIENTS:
Citibank, N.A.
111 Wall Street, New York, NY 10094
Call Your Account Manager or (212) 657-9100
FOR CITICORP INVESTMENT SERVICES CUSTOMERS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200
(212) 736-8170 in New York City
[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
California Tax Free Reserves
Connecticut Tax Free Reserves
New York Tax Free Reserves
STOCKS & 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
<PAGE>
TRUSTEES AND OFFICERS
Philip W. Coolidge*, President
H. B. Alvord
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
C. Oscar Morong, Jr.
Donald B. Otis
E. Kirby Warren
William S. Woods, Jr.
SECRETARY AND TREASURER
James B. Craver*
ASSISTANT TREASURER
Barbara M. ODette*
ASSISTANT SECRETARY
Molly S. Mugler*
*Affiliated Person of Administrator and Distributor
INVESTMENT ADVISER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND DISTRIBUTOR
The Landmark Funds Broker-Dealer Services, Inc.
6 St. James Avenue, Boston, MA 02116
(617) 423-1679
TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
CUSTODIAN
Investors Bank & Trust Company
One Lincoln Plaza, Boston, MA 02111
AUDITORS
Price Waterhouse LLP
160 Federal Street, Boston, MA 02110
LEGAL COUNSEL
Bingham, Dana & Gould
150 Federal Street, Boston, MA 02110
SHAREHOLDER SERVICING AGENTS
(See Inside of Cover)
EQ/P.1/95 Printed on Recycled Paper
[Logo] LANDMARK(SM) FUNDS
Advised by Citibank, N.A.
LANDMARK
BALANCED FUND
LANDMARK
EQUITY FUND
LANDMARK
SMALL CAP
EQUITY FUND
PROSPECTUS
April 3, 1995
Rule 497(c)
File Nos. 2-90518 and 811-4006
Statement of
Additional Information
LANDMARK BALANCED FUND April 3, 1995
LANDMARK EQUITY FUND
LANDMARK SMALL CAP EQUITY FUND
(Members of the LandmarkSM Family of Funds) CLASS A AND B SHARES
Landmark Balanced Fund is a series of Landmark Funds I ("Trust I"), and
Landmark Equity Fund and Landmark Small Cap Equity Fund (the "Equity Funds" and
together with Landmark Balanced Fund, the "Funds") are each a series of Landmark
Funds II ("Trust II" and together with Trust I, the "Trusts"). The address and
telephone number of the Trusts are 6 St. James Avenue, Boston, Massachusetts
02116, (617) 423-1679. The Trusts invest all of the investable assets of the
Funds in, respectively, the Balanced Portfolio, the Equity Portfolio and the
Small Cap Equity Portfolio (the "Portfolios"), which are separate series of The
Premium Portfolios (the "Portfolio Trust"). The address of the Portfolio Trust
is Elizabethan Square, George Town, Grand Cayman, British West Indies.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
CITIBANK, N.A. OR ANY OF ITS AFFILIATES, ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
Table of Contents
Page
The Funds 2
Investment Objectives, Policies and Restrictions 3
Performance Information 15
Determination of Net Asset Value; Valuation of
Securities; Additional Purchase and Redemption
Information 16
Management 19
Portfolio Transactions 29
Description of Shares, Voting Rights and Liabilities 30
Certain Additional Tax Matters 33
Independent Accountants and Financial Statements 35
This Statement of Additional Information sets forth information which
may be of interest to investors but which is not necessarily included in the
Funds' Prospectus, dated April 3, 1995, by which shares of the Funds are
offered. This Statement of Additional Information should be read in conjunction
with the Prospectus, a copy of which may be obtained by an investor without
charge by contacting the Funds' Distributor (see inside back cover for address
and phone number).
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
<PAGE>
1. THE FUNDS
Landmark Funds I ("Trust I") and Landmark Funds II ("Trust II" and
together with Trust I, the "Trusts") are each an open-end management investment
company that was organized as a business trust under the laws of the
Commonwealth of Massachusetts on April 13, 1984. This Statement of Additional
Information describes shares of the Landmark Balanced Fund, which is a
diversified series of Trust I, and Landmark Equity Fund and Landmark Small Cap
Equity Fund, which are diversified series of Trust II. References in this
Statement of Additional Information to the "Prospectus" are to the Prospectus,
dated April 3, 1995, of the Trusts by which shares of the Funds are offered.
The Trusts seek the investment objectives of the Funds by investing all
of their investable assets in, respectively, the Balanced Portfolio, the Equity
Portfolio and the Small Cap Equity Portfolio (the "Portfolios"). The Portfolios
are series of The Premium Portfolios (the "Portfolio Trust") and are open-end,
diversified management investment companies. Each Portfolio has the same
investment objectives and policies as the Fund that invests in it. Because each
of the Funds invests through its corresponding Portfolio, all references in this
Statement of Additional Information to each Fund include such Fund's
corresponding Portfolio, except as otherwise noted. In addition, references to
the Trusts also include the Portfolio Trust, except as otherwise noted.
Citibank, N.A. ("Citibank" or the "Adviser") is investment adviser to
each of the Portfolios. The Adviser manages the investments of the Portfolios
from day to day in accordance with each Portfolio's investment objectives and
policies. The selection of investments for the Portfolios and the way they are
managed depend on the conditions and trends in the economy and the financial
marketplaces.
The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS" or the
"Administrator"), the administrator of each Fund (the "Administrator"), and
Signature Financial Group (Cayman) Ltd. ("SFG"), either directly or through a
wholly-owned subsidiary, the administrator of each Portfolio (the "Portfolio
Administrator"), supervise the overall administration of each Fund and each
Portfolio, respectively. The Boards of Trustees of each Trust and the Portfolio
Trust provide broad supervision over the affairs of the Funds and the
Portfolios, respectively. Shares of the Funds are continuously sold by LFBDS,
the Funds' distributor (the "Distributor"), only to investors who are customers
of a financial institution, such as a federal or state-chartered bank, trust
company, savings and loan association or savings bank, or a securities broker,
that has entered into a shareholder servicing agreement with the Trusts
(collectively, "Shareholder Servicing Agents"). Shares of each Fund are sold at
net asset value, plus, in the case of Class A Shares, a sales charge that may be
reduced on purchases involving substantial amounts and that may be eliminated in
certain circumstances. LFBDS receives a distribution fee from each Fund pursuant
to a Distribution Plan adopted with respect to each class of shares of the Funds
in accordance with Rule 12b-1 under the Investment Company Act of 1940, as
amended (the "1940 Act"). LFBDS also receives a service fee from the assets of
each Fund represented by Class B shares pursuant to the Distribution Plan
adopted with respect to Class B shares of the Funds.
2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES
The investment objectives of the LANDMARK BALANCED FUND are to earn
high current income by investing in a broad range of securities, to preserve
capital, and to provide growth potential with reduced risk.
The investment objective of the LANDMARK EQUITY FUND and the LANDMARK
SMALL CAP EQUITY FUND is long-term capital growth. Dividend income, if any, is
incidental to this investment objective.
The investment objectives of each Fund may be changed without approval
by that Fund's shareholders, but shareholders will be given written notice at
least 30 days before any change is implemented. Of course, there can be no
assurance that any Fund will achieve its investment objectives.
INVESTMENT POLICIES
The Prospectus contains a discussion of the various types of securities
in which each Fund may invest and the risks involved in such investments. The
following supplements the information contained in the Prospectus concerning the
investment objectives, policies and techniques of each Fund.
Balanced Fund's policy is to invest its assets, under normal
circumstances, in a broadly diversified portfolio of income-producing
securities, including common and preferred stocks, bonds and short-term
obligations. Under normal circumstances, at least 25% of the Fund's total assets
is invested in fixed income securities.
While it is the policy of each of Equity Fund and Small Cap Equity Fund
to invest its assets in a broadly diversified portfolio of equity securities
consisting mainly of common stocks of U.S. issuers, each Fund may also invest in
other types of securities such as fixed income securities and convertible and
non-convertible bonds.
The Trusts have also adopted the following policies with respect to
each Fund's investments in (i) warrants and (ii) securities of issuers with less
than three years' continuous operation. Each Trust's purchases of warrants for
each Fund will not exceed 5% of the Fund's net assets. Included within that
amount, but not exceeding 2% of its net assets, may be warrants which are not
listed on the New York Stock Exchange or the American Stock Exchange. Any such
warrants will be valued at their market value except that warrants which are
attached to securities at the time such securities are acquired for a Fund will
be deemed to be without value for the purpose of this restriction. The Trusts
will not invest more than 5% of each Fund's assets in companies which, including
their respective predecessors, have a record of less than three years'
continuous operation.
The Trusts may withdraw the investment of any Fund from its
corresponding Portfolio at any time, if the Board of Trustees of that Trust
determines that it is in the best interests of the Fund to do so. Upon any such
withdrawal, the Fund's assets would continue to be invested in accordance with
the investment policies described herein with respect to that Fund. The policies
described above and those described below are not fundamental and may be changed
without shareholder approval.
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. security trading practices, including those
involving securities settlement where a Fund's assets may be released prior to
receipt of payments, may expose the Funds to increased risk in the event of a
failed trade or the insolvency of a non-U.S. broker-dealer. In addition,
non-U.S. brokerage commissions are generally higher than commissions on
securities traded in the U.S. and may be non-negotiable. In general, there is
less overall governmental supervision and regulation of non-U.S. securities
exchanges, brokers and listed companies than in the U.S.
Investments in closed-end investment companies which primarily hold
securities of non-U.S. issuers may entail the risk that the market value of such
investments may be substantially less than their net asset value and that there
would be duplication of investment management and other fees and expenses.
American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs") and other forms of depositary
receipts for securities of non-U.S. issuers provide an alternative method for
the Funds to make non-U.S. investments. These securities are not usually
denominated in the same currency as the securities into which they may be
converted. Generally, ADRs, in registered form, are designed for use in U.S.
securities markets and EDRs and GDRs, in bearer form, are designed for use in
European and global securities markets. ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities.
EDRs and GDRs are European and global receipts, respectively, evidencing a
similar arrangement. ADRs, EDRs and GDRs are subject to many of the same risks
that apply to other investments in non-U.S. securities.
The Funds may invest in securities of non-U.S. issuers that impose
restrictions on transfer within the United States or to United States persons.
Although securities subject to such transfer restrictions may be marketable
abroad, they may be less liquid than securities of non-U.S. issuers of the same
class that are not subject to such restrictions.
CURRENCY EXCHANGE TRANSACTIONS
Because each of the Funds may buy and sell securities denominated in
currencies other than the U.S. dollar, and receive interest, dividends and sale
proceeds in currencies other than the U.S. dollar, the Funds may enter into
currency exchange transactions to convert U.S. currency to non-U.S. currency and
non-U.S. currency to U.S. currency, as well as convert one non-U.S. currency to
another non-U.S. currency. A Fund either enters into these transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the currency exchange
markets, or uses forward contracts to purchase or sell non-U.S. currencies. The
Funds may also enter into currency hedging transactions in an attempt to protect
the value of their assets as measured in U.S. dollars from unfavorable changes
in currency exchange rates and control regulations. (Although each Fund's assets
are valued daily in terms of U.S. dollars, the Trusts do not intend to convert a
Fund's holdings of non-U.S. currencies into U.S. dollars on a daily basis.) It
is not currently intended that the Funds speculate in currency exchange rates or
forward contracts.
The Funds may convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion. Although currency
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference (the "spread") between the prices at which they are
buying and selling various currencies. Thus, a dealer may offer to sell a
currency at one rate, while offering a lesser rate of exchange should a Fund
desire to resell that currency to the dealer.
A forward contract involves an obligation to purchase or sell a
specific currency at a future date, which may be any fixed number of days from
the date of the contract, agreed upon by the parties, at a price set at the time
of the contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no fees
or commissions are charged at any stage for trades.
When a Fund enters into a contract for the purchase or sale of a
security denominated in a non-U.S. currency, it may desire to "lock in" the U.S.
dollar price of the security. By entering into a forward contract for the
purchase or sale, for a fixed amount of U.S. dollars, of the amount of non-U.S.
currency involved in the underlying security transaction, the Fund will be able
to protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the non-U.S. currency during the period
between the date the security is purchased or sold and the date on which payment
is made or received.
When the Adviser believes that the currency of a particular country may
suffer a substantial decline against the U.S. dollar, a Fund may enter into a
forward contract to sell, for a fixed amount of U.S. dollars, the amount of
non-U.S. currency approximating the value of some or all of the Fund's
securities denominated in such non-U.S. currency. The precise matching of the
forward contract amounts and the value of the securities involved is not
generally possible since the future value of such securities in non-U.S.
currencies changes as a consequence of market movements in the value of those
securities between the date the forward contract is entered into and the date it
matures. The projection of a short-term hedging strategy is highly uncertain.
The Funds do not enter into such forward contracts or maintain a net exposure to
such contracts where the consummation of the contracts obligates a Fund to
deliver an amount of non-U.S. currency in excess of the value of the Fund's
securities or other assets denominated in that currency. Under normal
circumstances, consideration of the prospect for currency parities will be
incorporated in the investment decisions made with regard to overall
diversification strategies. However, the Adviser believes that it is important
to have the flexibility to enter into such forward contracts when it determines
that the best interests of a Fund will be served.
The Funds generally would not enter into a forward contract with a term
greater than one year. At the maturity of a forward contract, a Fund will either
sell the security and make delivery of the non-U.S. currency, or retain the
security and terminate its contractual obligation to deliver the non-U.S.
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
non-U.S. currency. If a Fund retains the security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If a Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the non-U.S. currency. Should forward prices decline
during the period between the date a Fund enters into a forward contract for the
sale of the non-U.S. currency and the date it enters into an offsetting contract
for the purchase of such currency, the Fund will realize a gain to the extent
the selling price of the currency exceeds the purchase price of the currency.
Should forward prices increase, the Fund will suffer a loss to the extent that
the purchase price of the currency exceeds the selling price of the currency.
It is impossible to forecast with precision the market value of a
Fund's securities at the expiration of a forward contract. Accordingly, it may
be necessary for a Fund to purchase additional non-U.S. currency on the spot
market if the market value of the security is less than the amount of non-U.S.
currency the Fund is obligated to deliver and if a decision is made to sell the
security and make delivery of such currency. Conversely, it may be necessary to
sell on the spot market some of the non-U.S. currency received upon the sale of
the security if its market value exceeds the amount of such currency the Fund is
obligated to deliver.
Each of the Funds may also purchase put options on a non-U.S. currency
in order to protect against currency rate fluctuations. If a Fund purchases a
put option on a non-U.S. currency and the value of the U.S. currency declines,
the Fund will have the right to sell the non-U.S. currency for a fixed amount in
U.S. dollars and will thereby offset, in whole or in part, the adverse effect on
the Fund which otherwise would have resulted. Conversely, where a rise in the
U.S. dollar value of another currency is projected, and where a Fund anticipates
investing in securities traded in such currency, the Fund may purchase call
options on the non-U.S. currency.
The purchase of such options could offset, at least partially, the
effects of adverse movements in exchange rates. However, the benefit to each
Fund from purchases of non-U.S. currency options will be reduced by the amount
of the premium and related transaction costs. In addition, where currency
exchange rates do not move in the direction or to the extent anticipated, a Fund
could sustain losses on transactions in non-U.S. currency options which would
require it to forgo a portion or all of the benefits of advantageous changes in
such rates.
The Funds may write options on non-U.S. currencies for hedging purposes
or otherwise to achieve their investment objectives. For example, where a Fund
anticipates a decline in the value of the U.S. dollar value of a non-U.S.
security due to adverse fluctuations in exchange rates it could, instead of
purchasing a put option, write a call option on the relevant currency. If the
expected decline occurs, the option will most likely not be exercised, and the
diminution in value of the security held by the Fund will be offset by the
amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the cost of a non-U.S. security to be acquired because
of an increase in the U.S. dollar value of the currency in which the underlying
security is primarily traded, a Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will expire unexercised
and allow the Fund to hedge such increased cost up to the amount of the premium.
However, the writing of a currency option will constitute only a partial hedge
up to the amount of the premium, and only if rates move in the expected
direction. If this does not occur, the option may be exercised and the Fund
would be required to purchase or sell the underlying currency at a loss which
may not be offset by the amount of the premium. Through the writing of options
on currencies, a Fund also may be required to forgo all or a portion of the
benefits which might otherwise have been obtained from favorable movements in
exchange rates.
Put and call options on non-U.S. currencies written by a Fund will be
covered by segregation of cash, short-term money market instruments or high
quality debt securities in an account with the custodian in an amount sufficient
to discharge the Fund's obligations with respect to the option, by acquisition
of the non-U.S. currency or of a right to acquire such currency (in the case of
a call option) or the acquisition of a right to dispose of the currency (in the
case of a put option), or in such other manner as may be in accordance with the
requirements of any exchange on which, or the counterparty with which, the
option is traded and applicable laws and regulations.
Investing in ADRs presents many of the same risks regarding currency
exchange rates as investing directly in securities denominated in currencies
other than the U.S. dollar. Because the securities underlying ADRs are traded
primarily in non-U.S. currencies, changes in currency exchange rates will affect
the value of ADRs. For example, a decline in the U.S. dollar value of another
currency in which securities are primarily traded will reduce the U.S. dollar
value of such securities, even if their value in the other currency remains
constant, and thus will reduce the value of the ADRs covering such securities. A
Fund may employ any of the above described non-U.S. currency hedging techniques
to protect the value of its assets invested in ADRs.
The Funds' dealings in non-U.S. currency contracts are limited to the
transactions described above. Of course, a Fund is not required to enter into
such transactions and does not do so unless deemed appropriate by the Adviser.
It should also be realized that these methods of protecting the value of a
Fund's securities against a decline in the value of a currency do not eliminate
fluctuations in the underlying prices of the securities. Additionally, although
such contracts tend to minimize the risk of loss due to a decline in the value
of the hedged currency, they also tend to limit any potential gain which might
result should the value of such currency increase.
Each Fund has established procedures consistent with policies of the
Securities and Exchange Commission (the "SEC") concerning forward contracts.
Since those policies currently recommend that an amount of a Fund's assets equal
to the amount of the purchase be held aside or segregated to be used to pay for
the commitment, each Fund is expected always to have cash, cash equivalents or
high quality debt securities available sufficient to cover any commitments under
these contracts or to limit any potential risk.
SHORT SALES "AGAINST THE BOX"
In a short sale, a Fund sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. Each of
the Funds, in accordance with applicable investment restrictions, may engage in
short sales only if at the time of the short sale it owns or has the right to
obtain, at no additional cost, an equal amount of the security being sold short.
This investment technique is known as a short sale "against the box."
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. If a Fund engages in a short sale, the collateral for the short position
is maintained for the Fund by the custodian or qualified sub-custodian. While
the short sale is open, an amount of securities equal in kind and amount to the
securities sold short or securities convertible into or exchangeable for such
equivalent securities are maintained in a segregated account for the Fund. These
securities constitute the Fund's long position.
The Funds do not engage in short sales against the box for investment
purposes. A Fund may, however, make a short sale against the box as a hedge,
when it believes that the price of a security may decline, causing a decline in
the value of a security owned by the Fund (or a security convertible or
exchangeable for such security), or when the Fund wants to sell the security at
an attractive current price, but also wishes to defer recognition of gain or
loss for federal income tax purposes or for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code. In
such case, any future losses in the Fund's long position should be reduced by a
gain in the short position. Conversely, any gain in the long position should be
reduced by a loss in the short position. The extent to which such gains or
losses are reduced depends upon the amount of the security sold short relative
to the amount the Fund owns. There are certain additional transaction costs
associated with short sales against the box, but the Funds endeavor to offset
these costs with the income from the investment of the cash proceeds of short
sales.
The Adviser does not expect that more than 40% of each Fund's total
assets would be involved in short sales against the box. The Adviser does not
currently intend to engage in such sales.
<PAGE>
LENDING OF SECURITIES
Consistent with applicable regulatory requirements and in order to
generate income, each of the Funds may lend its securities to broker-dealers and
other institutional borrowers. Such loans will usually be made only to member
banks of the U.S. Federal Reserve System and to member firms of the New York
Stock Exchange (and subsidiaries thereof). Loans of securities would be secured
continuously by collateral in cash, cash equivalents or U.S. Treasury
obligations maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The cash collateral would be invested in
high quality short-term instruments. A Fund would have the right to call a loan
and obtain the securities loaned at any time on customary industry settlement
notice (which will not usually exceed five days). During the existence of a
loan, a Fund would continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities loaned and would also receive
compensation based on investment of the collateral. The Fund would not, however,
have the right to vote any securities having voting rights during the existence
of the loan, but would call the loan in anticipation of an important vote to be
taken among holders of the securities or of the giving or withholding of their
consent on a material matter affecting the investment. As with other extensions
of credit, there are risks of delay in recovery or even loss of rights in the
collateral should the borrower fail financially. However, the loans would be
made only to entities deemed by the Adviser to be of good standing, and when, in
the judgment of the Adviser, the consideration which can be earned currently
from loans of this type justifies the attendant risk. If the Adviser determines
to make loans, it is not intended that the value of the securities loaned by a
Fund would exceed 33 1/3% of the value of its total assets.
WHEN-ISSUED SECURITIES
Each of the Funds may purchase securities on a "when-issued" or on a
"forward delivery" basis. It is expected that, under normal circumstances, the
applicable Fund would take delivery of such securities. When a Fund commits to
purchase a security on a "when-issued" or on a "forward delivery" basis, it sets
up procedures consistent with SEC policies. Since those policies currently
require that an amount of a Fund's assets equal to the amount of the purchase be
held aside or segregated to be used to pay for the commitment, the Fund will
always have cash, cash equivalents or high quality debt securities sufficient to
cover any commitments or to limit any potential risk. However, even though the
Funds do not intend to make such purchases for speculative purposes and intend
to adhere to the provisions of SEC policies, purchases of securities on such
bases may involve more risk than other types of purchases. For example, a Fund
may have to sell assets which have been set aside in order to meet redemptions.
Also, if the Adviser determines it is advisable as a matter of investment
strategy to sell the "when-issued" or "forward delivery" securities, a Fund
would be required to meet its obligations from the then available cash flow or
the sale of securities, or, although it would not normally expect to do so, from
the sale of the "when-issued" or "forward delivery" securities themselves (which
may have a value greater or less than the Fund's payment obligation).
RULE 144A SECURITIES
Each of the Funds may purchase securities that are not registered
("Rule 144A securities") under the Securities Act of 1933 (the "Securities
Act"), but can be offered and sold to "qualified institutional buyers" under
Rule 144A under the Securities Act. However, none of the Funds invests more than
15% of its net assets in illiquid investments, which includes securities for
which there is no readily available market, securities subject to contractual
restrictions on resale and Rule 144A securities, unless the Trustees of the
Trusts determine, based on the trading markets for the specific Rule 144A
security, that it is liquid. The Trustees may adopt guidelines and delegate to
the Adviser the daily function of determining and monitoring liquidity of Rule
144A securities. The Trustees, however, retain oversight and are ultimately
responsible for the determinations.
Since it is not possible to predict with assurance exactly how the
market for Rule 144A securities will develop, the Trustees will carefully
monitor each Fund's investments in Rule 144A securities, focusing on such
factors, among others, as valuation, liquidity and availability of information.
The liquidity of investments in Rule 144A securities could be impaired if
trading in Rule 144A securities does not develop or if qualified institutional
buyers become for a time uninterested in purchasing Rule 144A securities.
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS
The Trusts, on behalf of the Funds, and the Portfolio Trust, on behalf
of the Portfolios, have each adopted the following policies which may not be
changed with respect to any Fund or Portfolio without approval by holders of a
majority of the outstanding voting securities of that Fund or Portfolio, which
as used in this Statement of Additional Information means the vote of the lesser
of (i) 67% or more of the outstanding voting securities of the Fund or Portfolio
present at a meeting at which the holders of more than 50% of the outstanding
voting securities of the Fund or Portfolio are present or represented by proxy,
or (ii) more than 50% of the outstanding voting securities of the Fund or
Portfolio. The term "voting securities" as used in this paragraph has the same
meaning as in the 1940 Act.
None of the Funds or Portfolios may:
(1) Borrow money, except that as a temporary measure for extraordinary
or emergency purposes it may borrow in an amount not to exceed 1/3 of the
current value of its net assets, including the amount borrowed (nor purchase any
securities at any time at which borrowings exceed 5% of the total assets of the
Fund or Portfolio, taken at market value). It is intended that a Fund or
Portfolio would borrow money only from banks and only to accommodate requests
for the repurchase of shares of the Fund or beneficial interests in the
Portfolio while effecting an orderly liquidation of portfolio securities.
(2) Make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loans not exceed 30% of the
Fund's or Portfolio's total assets (taken at market value), (b) through the use
of repurchase agreements or the purchase of short-term obligations or (c) by
purchasing all or a portion of an issue of debt securities of types commonly
distributed privately to financial institutions. The purchase of short-term
commercial paper or a portion of an issue of debt securities which is part of an
issue to the public shall not be considered the making of a loan.
(3) Purchase securities of any issuer if such purchase at the time
thereof would cause with respect to 75% of the total assets of the Fund or
Portfolio more than 10% of the voting securities of such issuer to be held by
the Fund or Portfolio, except that, with respect to each Fund, the applicable
Trust may invest all or substantially all of the Fund's assets in another
registered investment company having the same investment objectives and policies
and substantially the same investment restrictions as those with respect to the
Fund (a "Qualifying Portfolio").
(4) Purchase securities of any issuer if such purchase at the time
thereof would cause as to 75% of the Fund's or Portfolio's total assets more
than 5% of the Fund's or Portfolio's assets (taken at market value) to be
invested in the securities of such issuer (other than securities or obligations
issued or guaranteed by the United States, any state or political subdivision
thereof, or any political subdivision of any such state, or any agency or
instrumentality of the United States or of any state or of any political
subdivision of any state), except that, with respect to each Fund, the
applicable Trust may invest all or substantially all of the Fund's assets in a
Qualifying Portfolio.
(5) Concentrate its investments in any particular industry, but if it
is deemed appropriate for the achievement of the Fund's or Portfolio's
investment objectives, up to 25% of its assets, at market value at the time of
each investment, may be invested in any one industry.
In addition, neither the Small Cap Equity Fund nor the Small Cap Equity
Portfolio may:
(6) Underwrite securities issued by other persons, except that all the
assets of the Fund may be invested in a Qualifying Portfolio and except insofar
as the Fund or Portfolio may technically be deemed an underwriter under the 1933
Act in selling a security.
(7) Purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts in
the ordinary course of business (each of the Fund and the Portfolio reserves the
freedom of action to hold and to sell real estate acquired as a result of the
ownership of securities by the Fund or the Portfolio).
(8) Issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, except as appropriate to evidence a debt
incurred without violating Investment Restriction (1) above.
NON-FUNDAMENTAL RESTRICTION
The Trusts, on behalf of the Balanced Fund and the Equity Fund, and the
Portfolio Trust, on behalf of the Balanced Portfolio and the Equity Portfolio,
have each adopted the following non-fundamental restriction, which may be
changed by the Trusts with respect to either such Fund or the Portfolio Trust
with respect to either such Portfolio without the approval of shareholders or
holders of beneficial interests, as the case may be:
None of the Balanced Fund and the Equity Fund or the Balanced Portfolio
and the Equity Portfolio may knowingly invest in securities which are subject to
legal or contractual restrictions on resale (other than repurchase agreements
maturing in not more than seven days and other than securities which may be
resold pursuant to Rule 144A under the 1933 Act if the Board of Trustees of the
applicable Trust or of the Portfolio Trust determines that a liquid market
exists for such securities) if, as a result thereof, more than 15% of such a
Fund's or Portfolio's net assets (taken at market value) would be so invested
(including repurchase agreements maturing in more than seven days), except that
a Trust may invest all or substantially all of either such Fund's assets in a
Qualifying Portfolio.
STATE AND FEDERAL RESTRICTIONS
In order to comply with certain state and federal statutes and policies
each Fund and each Portfolio does not as a matter of operating policy:
(i) borrow money for any purpose in excess of 10% of the net assets of
the Fund or Portfolio (taken at cost) (moreover, the Fund or Portfolio will not
purchase any securities for the Fund or Portfolio at any time at which
borrowings exceed 5% of the total assets of the Fund or Portfolio (taken at
market value)),
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10%
of the net assets of the Fund or Portfolio (taken at market value),
(iii) sell any security which the Fund or Portfolio does not own unless
by virtue of the ownership of other securities there is at the time of sale a
right to obtain securities, without payment of further consideration, equivalent
in kind and amount to the securities sold and provided that if such right is
conditional the sale is made upon the same conditions,
(iv) invest for the purpose of exercising control or management, except
that all of the assets of the Fund may be invested in a Qualifying Portfolio,
(v) purchase securities issued by any registered investment company,
except that all of the assets of the Fund may be invested in a Qualifying
Portfolio and except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase, though not made in
the open market, is part of a plan of merger or consolidation; provided,
however, that the Fund or Portfolio will not purchase the securities of any
registered investment company if such purchase at the time thereof would cause
more than 10% of the total assets of the Fund or Portfolio (taken in each case
at the greater of cost or market value) to be invested in the securities of such
issuers or would cause more than 3% of the outstanding voting securities of any
such issuer to be held for the Fund or Portfolio (for purposes of this clause
(v) securities of non-U.S. banks shall be treated as investment company
securities, except that debt securities and non-voting preferred stock of
non-U.S. banks are not subject to the 10% limitation described herein),
(vi) invest more than 15% of the net assets of the Fund or Portfolio in
securities that are not readily marketable, including debt securities for which
there is no established market and fixed time deposits and repurchase agreements
maturing in more than seven days, except that all the assets of the Fund may be
invested in a Qualifying Portfolio,
(vii) purchase or retain any securities issued by an issuer any of
whose officers, directors, trustees or security holders is an officer or Trustee
of the Trusts or of the Portfolio Trust, or is an officer or director of the
Adviser, if after the purchase of the securities of such issuer by the Fund or
Portfolio, one or more of such persons owns beneficially more than 1/2 of 1% of
the shares or securities, or both, all taken at market value, of such issuer,
and such persons owning more than 1/2 of 1% of such shares or securities
together own beneficially more than 5% of such shares or securities, or both,
all taken at market value,
(viii) write, purchase or sell any put or call option or any
combination thereof or enter into any futures contract, except that this
restriction shall not prevent the Fund or Portfolio from entering into
transactions involving 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,
unless at all times when a short position is open it owns an equal amount of
such securities or securities convertible into or exchangeable, without payment
of any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 10% of the net
assets of the Fund or Portfolio (taken at market value) is held as collateral
for such sales at any one time (the Funds and Portfolios do not presently intend
to make such short sales for investment purposes).
These policies are not fundamental and may be changed by each Fund or
Portfolio without the approval of its shareholders or holders of beneficial
interests in response to changes in the various state and federal requirements.
PERCENTAGE AND RATING RESTRICTIONS
If a percentage or rating restriction on investment or utilization of
assets set forth above or referred to in the Prospectus is adhered to at the
time an investment is made or assets are so utilized, a later change in
percentage resulting from changes in the value of the securities or a later
change in the rating of the securities held for a Fund will not be considered a
violation of policy.
3. PERFORMANCE INFORMATION
A total rate of return quotation for a Fund is calculated for any
period by (a) dividing (i) the sum of the net asset value per share on the last
day of the period and the net asset value per share on the last day of the
period of shares purchasable with dividends and capital gains distributions
declared during such period with respect to a share held at the beginning of
such period and with respect to shares purchased with such dividends and capital
gains distributions, by (ii) the public offering price per share on the first
day of such period, and (b) subtracting 1 from the result. Any annualized total
rate of return quotation is calculated by (x) adding 1 to the period total rate
of return quotation calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting 1
from the result. Total rates of return may also be calculated on investments at
various sales charge levels or at net asset value. Any performance data which is
based on a reduced sales charge or net asset value per share would be reduced if
the maximum sales charge were taken into account.
Any current yield quotation for a Fund consists of an annualized
historical yield, carried at least to the nearest hundredth of one percent,
based on a 30 calendar day or one month period and is calculated by (a) raising
to the sixth power the sum of 1 plus the quotient obtained by dividing the
Fund's net investment income earned during the period by the product of the
average daily number of shares outstanding during the period that were entitled
to receive dividends and the maximum public offering price per share on the last
day of the period, (b) subtracting 1 from the result, and (c) multiplying the
result by 2.
Set forth below is total rate of return information for the Class A
shares of the Balanced Fund and the Equity Fund for the periods indicated,
assuming that dividends and capital gains distributions, if any, were
reinvested, and that at the beginning of such periods the maximum sales charge
of 4.75% had been applicable to purchases of shares of the Fund.
BALANCED FUND
(CLASS A SHARES)
REDEEMABLE VALUE
ANNUALIZED TOTAL OF A HYPOTHETICAL
RATE OF RETURN $1,000 INVESTMENT
PERIOD AT THE END OF THE PERIOD
October 19, 1990 9.89% $1,486.51
(commencement of
operations) to December 31, 1994
One Year Ended (6.71)% $932.80
December 31, 1994
EQUITY FUND
REDEEMABLE VALUE
ANNUALIZED TOTAL OF A HYPOTHETICAL
RATE OF RETURN $1,000 INVESTMENT
PERIOD AT THE END OF THE PERIOD
October 19, 1990 11.47% $1,578.10
(commencement of
operations) to December 31, 1994
One Year Ended (5.15)% $948.52
December 31, 1994
The annualized yields of the Class A shares of the Balanced Fund and
the Equity Fund for the 30-day period ended on December 31, 1994 were,
respectively, 3.17% and 1.40%. The Small Cap Equity Fund is newly formed, and
therefore does not have any yields for 1994.
Comparative performance information may be used from time to time in
advertising shares of each Fund, including data from Lipper Analytical Services,
Inc. and other industry sources and publications. From time to time each Fund
may compare its performance against inflation with the performance of other
instruments against inflation, such as FDIC-insured bank money market accounts.
In addition, advertising for each Fund may indicate that investors should
consider diversifying their investment portfolios in order to seek protection of
the value of their assets against inflation. From time to time, advertising
materials for each Fund may refer to or discuss current or past economic or
financial conditions, developments and events. Each Fund's advertising materials
also may refer to the integration of the world's securities markets, discuss the
investment opportunities available worldwide and mention the increasing
importance of an investment strategy including non-U.S. investments.
4. DETERMINATION OF NET ASSET VALUE; VALUATION OF
SECURITIES; ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The net asset value of each share of each class of each Fund is
determined each day during which the New York Stock Exchange is open for trading
("Business Day"). As of the date of this Statement of Additional Information,
the New York Stock Exchange is open for trading every weekday except for the
following holidays (or the days on which they are observed): New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. This determination is made once each day as
of the close of regular trading on the Exchange (currently 4:00 p.m. Eastern
time) by adding the market value of all securities and other assets attributable
to a class of a Fund (including its interest in its Portfolio), then subtracting
the liabilities charged to the class, and then dividing the result by the number
of outstanding shares of the class. Per share net asset value of each class of a
Fund's shares can be expected to differ because the Class B shares bear higher
expenses than Class A shares. The net asset value per share of each class of
shares is effective for orders received and accepted by the Distributor prior to
its calculation.
The value of each Portfolio's net assets (i.e., the value of its
securities and other assets less its liabilities, including expenses payable or
accrued) is determined at the same time and on the same days as the net asset
value per share of its corresponding Fund is determined. The net asset value of
each Fund's investment in the Portfolio in which it invests is equal to the
Fund's pro rata share of the net assets of the Portfolio.
For purposes of calculating net asset value per share, all assets and
liabilities initially expressed in non-U.S. currencies will be converted into
U.S. dollars at the prevailing market rates at the time of valuation. Equity
securities are valued at the last sale price on the exchange on which they are
primarily traded or on the NASDAQ system for unlisted national market issues, or
at the last quoted bid price for securities in which there were no sales during
the day or for unlisted securities not reported on the NASDAQ system. Securities
listed on a non-U.S. exchange are valued at the last quoted sale price available
before the time when net assets are valued. Bonds and other fixed income
securities (other than short-term obligations) are valued on the basis of
valuations furnished by a pricing service, use of which has been approved by the
Board of Trustees of each Trust. In making such valuations, the pricing service
utilizes both dealer-supplied valuations and electronic data processing
techniques that take into account appropriate factors such as institutional-size
trading in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics and other market data, without exclusive
reliance upon quoted prices or exchange or over-the-counter prices, since such
valuations are believed to reflect more accurately the fair value of such
securities. Short-term obligations (maturing in 60 days or less) are valued at
amortized cost, which constitutes fair value as determined by the Board of
Trustees of each Trust. Futures contracts are normally valued at the settlement
price on the exchange on which they are traded. Securities for which there are
no such valuations are valued at fair value as determined in good faith by or at
the direction of the Board of Trustees of each Trust.
Trading in securities on most non-U.S. exchanges and over-the-counter
markets is normally completed before the close of regular trading on the New
York Stock Exchange and may also take place on days on which the New York Stock
Exchange is closed. If events materially affecting the value of non-U.S.
securities occur between the time when the exchange on which they are traded
closes and the time when a Fund's net asset value is calculated, such securities
will be valued at fair value in accordance with procedures established by and
under the general supervision of the Board of Trustees of each Trust.
Interest income on long-term obligations held for a Fund is determined
on the basis of interest accrued plus amortization of "original issue discount"
(generally, the difference between issue price and stated redemption price at
maturity) and premiums (generally, the excess of purchase price over stated
redemption price at maturity). Interest income on short-term obligations is
determined on the basis of interest accrued less amortization of any premium.
Subject to compliance with applicable regulations, the Trusts and the
Portfolio Trust have each reserved the right to pay the redemption price of
shares of the Fund or beneficial interests in the Portfolio, either totally or
partially, by a distribution in kind of readily marketable securities (instead
of cash). The securities so distributed would be valued at the same amount as
that assigned to them in calculating the net asset value for the shares or
beneficial interests being sold. If a holder of shares or beneficial interests
received a distribution in kind, such holder could incur brokerage or other
charges in converting the securities to cash.
Each Trust or the Portfolio Trust may suspend the right of redemption
or postpone the date of payment for shares of a Fund or beneficial interests in
a Portfolio more than seven days during any period when (a) trading in the
markets the Fund or Portfolio normally utilizes is restricted, or an emergency,
as defined by the rules and regulations of the SEC exists making disposal of a
Fund's or Portfolio's investments or determination of its net asset value not
reasonably practicable; (b) the New York Stock Exchange is closed (other than
customary weekend and holiday closings); or (c) the SEC has by order permitted
such suspension.
LETTER OF INTENT
If an investor anticipates purchasing $25,000 or more of Class A shares
of a Fund alone or in combination with Class B shares of the Fund or any of the
classes of other Landmark Funds within a 13-month period, the investor may
obtain such shares at the same reduced sales charge as though the total quantity
were invested in one lump sum by completing a Letter of Intent on the terms
described below. Subject to acceptance by the Distributor and the conditions
mentioned below, each purchase will be made at a public offering price
applicable to a single transaction of the dollar amount specified in the Letter
of Intent. The shareholder or his or her Shareholder Servicing Agent must inform
the Distributor that the Letter of Intent is in the effect each time shares are
purchased. The shareholder makes no commitment to purchase additional shares,
but if his or her purchases within 13 months plus the value of shares credited
toward completion of the Letter of Intent do not total the sum specified, an
increased sales charge will apply as described below. A purchase not originally
made pursuant to a Letter of Intent may be included under a subsequent Letter of
Intent executed within 90 days of such purchase if the Distributor is informed
in writing of this intent within such 90-day period. The value of shares of a
Fund presently held, at cost or maximum offering price (whichever is higher), on
the date of the first purchase under the Letter of Intent, may be included as a
credit toward the completion of such Letter, but the reduced sales charge
applicable to the amount covered by such Letter is applied only to new
purchases. Instructions for issuance of shares in the name of a person other
than the person signing the Letter of Intent must be accompanied by a written
statement from the Shareholder Servicing Agent stating that the shares were paid
for by the person signing such Letter. Neither income dividends nor capital gain
distributions taken in additional shares will apply toward the completion of the
Letter of Intent. The value of any shares redeemed or otherwise disposed of by
the purchaser prior to termination or completion of the Letter of Intent are
deducted from the total purchases made under such Letter of Intent.
If the investment specified in the Letter of Intent is not completed
(either prior to or by the end of the 13-month period), the Shareholder
Servicing Agent will redeem, within 20 days of the expiration of the Letter of
Intent, an appropriate number of the shares in order to realize the difference
between the reduced sales charge that would apply if the investment under the
Letter of Intent had been completed and the sales charge that would normally
apply to the number of shares actually purchased. By completing and signing the
Letter of Intent, the shareholder irrevocably appoints the Shareholder Servicing
Agent his or her attorney to surrender for redemption any or all shares
purchased under the Letter of Intent with full power of substitution in the
premises.
RIGHT OF ACCUMULATION
A shareholder qualifies for cumulative quantity discounts on the
purchase of Class A shares when his or her new investment, together with the
current offering price value of all holdings of that shareholder in the Landmark
Funds, reaches a discount level. See "Purchases" in the Prospectus for the sales
charges on quantity discounts. For example, if a Balanced Fund shareholder owns
shares valued at $25,000 and purchases an additional $25,000 of Class A shares
of a Fund, the sales charge for the $25,000 purchase would be at the rate of
4.00% (the rate applicable to single transactions of $50,000). A shareholder
must provide the Shareholder Servicing Agent with information to verify that the
quantity sales charge discount is applicable at the time the investment is made.
5. MANAGEMENT
The Trustees and officers of the Trusts and the Portfolio Trust and
their principal occupations during the past five years are set forth below.
Their titles may have varied during that period. Asterisks indicate that those
Trustees and officers are "interested persons" (as defined in the 1940 Act) of
the Trusts or the Portfolio Trust. Unless otherwise indicated below, the address
of each Trustee and officer is 6 St. James Avenue, Boston, Massachusetts. The
address of the Portfolio Trust is Elizabethan Square, George Town, Grand Cayman,
British West Indies.
TRUSTEES OF THE TRUSTS
H.B. ALVORD -- Treasurer-Tax Collector, County of Los Angeles (retired, March,
1984); Chairman, certain registered investment companies in the 59 Wall Street
funds group. His address is P.O. Box 1812, Pebble Beach, California.
PHILIP W. COOLIDGE* -- President of the Trusts and the Portfolio Trust; Chief
Executive Officer, Signature Financial Group, Inc. and The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).
RILEY C. GILLEY -- Vice President and General Counsel, Corporate Property
Investors (November, 1988 to December, 1991); Partner, Breed, Abbott & Morgan
(Attorneys) (retired, December, 1987). His address is 4041 Gulf Shore Boulevard
North, Naples, Florida.
DIANA R. HARRINGTON -- Professor, Babson College (since September, 1993);
Visiting Professor, Kellogg Graduate School of Management, Northwestern
University (September, 1992 to September, 1993); Professor, Darden Graduate
School of Business, University of Virginia (September, 1978 to September, 1993);
Consultant to PanAgora Asset Management (since 1994). Her address is 120
Goulding Street, Holliston, Massachusetts.
SUSAN B. KERLEY -- President, Global Research Associates, Inc. (Investment
Research) (since August, 1990); Manager, Rockefeller & Co. (March, 1988 to July,
1990); Trustee, Mainstay Institutional Funds (since December, 1990). Her address
is P.O. Box 9572, New Haven, Connecticut.
C. OSCAR MORONG, JR. -- Managing Director, Morong Capital Management (since
February, 1993); Senior Vice President and Investment Manager, CREF Investments,
Teachers Insurance & Annuity Association (retired January, 1993); Director
Indonesia Fund; Director, MAS Funds. His address is 1385 Outlook Drive West,
Mountainside, New Jersey.
DONALD B. OTIS -- Director of Investor Relations, International Business
Machines Corporation (retired February, 1982). His address is 6300 Midnight Pass
Road, Sarasota, Florida.
E. KIRBY WARREN -- Professor of Management, Graduate School of Business,
Columbia University (since 1987); Samuel Bronfman Professor of Democratic
Business Enterprise (1978-1987). His address is Columbia University, Graduate
School of Business, 725 Uris Hall, New York, New York.
WILLIAM S. WOODS, JR. -- Vice President-Investments, Sun Company, Inc. (retired,
April, 1984). His address is 35 Colwick Road, Cherry Hill, New Jersey.
TRUSTEES OF THE PORTFOLIO TRUST
ELLIOTT J. BERV -- Chairman and Director, Catalyst, Inc. (Management
Consultants)(since June, 1992); President, Chief Operating Officer and Director,
Deven International, Inc. (International Consultants)(June, 1991 to June 1992);
President and Director, Elliott J. Berv & Associates (Management Consultants)
(since May, 1984). His address is 15 Stornoway Drive, Cumberland Foreside,
Maine.
PHILIP W. COOLIDGE* -- President of the Trusts and the Portfolio Trust; Chief
Executive Officer, Signature Financial Group, Inc. and The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).
MARK T. FINN -- President and Director, Delta Financial, Inc. (since June,
1983); Chairman of the Board and Chief Executive Officer, FX 500 Ltd. (Commodity
Trading Advisory Firm)(since April, 1990); Director, Vantage Consulting Group,
Inc. (since October, 1988). His address is 3500 Pacific Avenue, P.O. Box 539,
Virginia Beach, Virginia.
WALTER E. ROBB, III -- President, Benchmark Consulting Group, Inc. (since 1991);
Principal, Robb Associates (corporate financial advisers) (since 1978);
President, Benchmark Advisors, Inc. (Corporate Financial Advisors)(since 1989);
Trustee of certain registered investment companies in the MFS Family of Funds.
His address is 35 Farm Road, Sherborn, Massachusetts.
OFFICERS OF THE TRUSTS AND THE PORTFOLIO TRUST
PHILIP W. COOLIDGE* -- President of the Trusts and the Portfolio Trust; Chief
Executive Officer, Signature Financial Group, Inc. and The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).
JAMES B. CRAVER* -- Secretary and Treasurer of the Trusts and the Portfolio
Trust; Senior Vice President and General Counsel, Signature Financial Group,
Inc. and The Landmark Funds Broker-Dealer Services, Inc. (since January, 1991);
Partner, Baker & Hostetler (Attorneys) (prior to January, 1991).
SUSAN JAKUBOSKI* -- Vice President, Assistant Treasurer and Assistant Secretary
of the Portfolio Trust (since August, 1994); Manager, Signature Financial Group
(Cayman) Ltd. (since August, 1994); Senior Fund Administrator, Signature
Financial Group, Inc. (since August, 1994); Assistant Treasurer, Signature
Broker-Dealer Services, Inc. (since September, 1994); Fund Compliance
Administrator, Concord Financial Group (November, 1990 to August, 1994); Senior
Fund Accountant, Neuberger & Berman Management, Inc. (from February, 1988 to
November, 1990); Customer Service Representative, I.B.J. Schroder (prior to
1988). Her address is Elizabethan Square, George Town, Grand Cayman, Cayman
Islands, BWI.
MOLLY S. MUGLER* -- Assistant Secretary of the Trusts and the Portfolio Trust;
Legal Counsel and Assistant Secretary, Signature Financial Group, Inc. (since
December, 1988); Assistant Secretary, The Landmark Funds Broker-Dealer Services,
Inc. (since December, 1988).
BARBARA M. O'DETTE* -- Assistant Treasurer of the Trusts and the Portfolio
Trust; Assistant Treasurer, Signature Financial Group, Inc. and The Landmark
Funds Broker-Dealer Services, Inc. (since December, 1988).
The Trustees and officers of the Trusts and the Portfolio Trust also
hold comparable positions with certain other funds for which LFBDS, SFG or their
affiliates serve as the distributor or administrator.
As of February 28, 1995, all Trustees and officers as a group owned
less than 1% of the outstanding shares of the Balanced Fund and the Equity Fund.
As of the same date, more than 95% of the outstanding shares of the Balanced
Fund and the Equity Fund were held of record by Citibank, N.A. or its affiliates
as Shareholder Servicing Agents of the Fund for the accounts of their respective
clients. As of the date of this Statement of Additional Information, there are
no shareholders of the Small Cap Equity Fund.
The Declaration of Trust of each of the Trusts and the Portfolio Trust
provides that each of the Trusts and the Portfolio Trust, respectively, will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection with litigation in which they may be involved because of their
offices with the Trusts or the Portfolio Trust, as the case may be, unless, as
to liability to the Trusts, the Portfolio Trust or their respective investors,
it is finally adjudicated that they engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in their offices,
or unless with respect to any other matter it is finally adjudicated that they
did not act in good faith in the reasonable belief that their actions were in
the best interests of the Trusts or the Portfolio Trust, as the case may be. In
the case of settlement, such indemnification will not be provided unless it has
been determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination, based upon a review of readily
available facts, by vote of a majority of disinterested Trustees of the Trusts
or the Portfolio Trust, or in a written opinion of independent counsel, that
such officers or Trustees have not engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of their duties.
ADVISER
Citibank manages the assets of each Portfolio pursuant to separate
investment advisory agreements (the "Advisory Agreements"). Subject to such
policies as the Board of Trustees of the Portfolio Trust may determine, the
Adviser manages the securities of each Portfolio and makes investment decisions
for each Portfolio. The Adviser furnishes at its own expense all services,
facilities and personnel necessary in connection with managing each Portfolio's
investments and effecting securities transactions for each Portfolio. Each of
the Advisory Agreements will continue in effect until August 19, 1996 and
thereafter as long as such continuance is specifically approved at least
annually by the Board of Trustees of the Portfolio Trust or by a vote of a
majority of the outstanding voting securities of the applicable Portfolio, and,
in either case, by a majority of the Trustees of the Portfolio Trust who are not
parties to the Advisory Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on the Advisory Agreement.
Each of the Advisory Agreements provides that the Adviser may render
services to others. Each Advisory Agreement is terminable without penalty on not
more than 60 days' nor less than 30 days' written notice by the Portfolio Trust
when authorized either by a vote of a majority of the outstanding voting
securities of the applicable Portfolio or by a vote of a majority of the Board
of Trustees of the Portfolio Trust, or by the Adviser on not more than 60 days'
nor less than 30 days' written notice, and will automatically terminate in the
event of its assignment. Each Advisory Agreement provides that neither the
Adviser nor its personnel shall be liable for any error of judgment or mistake
of law or for any loss arising out of any investment or for any act or omission
in the execution of security transactions for the applicable Portfolio, except
for willful misfeasance, bad faith or gross negligence or reckless disregard of
its or their obligations and duties under the Advisory Agreement.
The Prospectus contains a description of the fees payable to the
Adviser for services under the Advisory Agreements. For the fiscal years ended
December 31, 1992 and December 31, 1993 and for the four months ended April 30,
1994, the fees paid to Citibank under a prior investment advisory agreement
between the Balanced Fund and Citibank were $53,821, $575,229 and $340,160,
respectively. For the period from May 1, 1994 to December 31, 1994 the fee paid
to Citibank under the Advisory Agreement with respect to the Balanced Portfolio
was $640,795.
For the fiscal years ended December 31, 1992 and December 31, 1993 and
for the four months ended April 30, 1994, the fees paid or payable to Citibank
under a prior investment advisory agreement between the Equity Fund and Citibank
were $50,399, $532,148 (of which amount $100,942 was voluntarily waived) and
$326,242 (of which $62,569 was voluntarily waived), respectively. For the period
from May 1, 1994 to December 31, 1994 the fee paid to Citibank under the
Advisory Agreement with respect to the Equity Portfolio was $639,933.
ADMINISTRATOR
Pursuant to administrative services agreements (the "Administrative
Services Agreements"), LFBDS and SFG provide the Trusts and the Portfolio Trust,
respectively, with general office facilities and LFBDS and SFG supervise the
overall administration of the Trusts or the Portfolio Trust, including, among
other responsibilities, the negotiation of contracts and fees with, and the
monitoring of performance and billings of, each Trust's or the Portfolio Trust's
independent contractors and agents; the preparation and filing of all documents
required for compliance by the Trusts or the Portfolio Trust with applicable
laws and regulations; and arranging for the maintenance of books and records of
the Trusts or the Portfolio Trust. The Administrator and the Portfolio
Administrator provide persons satisfactory to the Board of Trustees of the
Trusts or the Portfolio Trust to serve as Trustees and officers of the Trusts
and the Portfolio Trust, respectively. Such Trustees and officers, as well as
certain other employees and Trustees of the Trusts and the Portfolio Trust, may
be directors, officers or employees of LFBDS, SFG or their affiliates.
The Prospectus contains a description of the fees payable to the
Administrator and the Portfolio Administrator under the Administrative Services
Agreements. For the fiscal years ended December 31, 1992, December 31, 1993 and
December 31, 1994, the fees paid by the Balanced Fund to LFBDS under the
Administrative Services Agreement and a prior administrative services agreement
with respect to the Balanced Fund were $10,080, $212,727 and $409,258,
respectively. For the fiscal years ended December 31, 1992, December 31, 1993
and December 31, 1994, the fees paid by the Equity Fund to LFBDS under the
Administrative Services Agreement and a prior administrative services agreement
with respect to the Equity Fund were $13,455, $287,615 and $320,872 (of which
$126,917 was voluntarily waived), respectively. For the period from May 1, 1994
through December 31, 1994, the Portfolio Trust paid the Portfolio Administrator
$80,099 and $63,999 under the Administrative Services Agreement with respect to
the Balanced Portfolio and the Equity Portfolio, respectively.
The Administrative Services Agreement with each Trust acknowledges that
the names "Landmark" and "Landmark Funds" are the property of the Administrator
and provides that if LFBDS ceases to serve as the Administrator of each Trust,
the Trust would change its name and the name of the Fund so as to delete the
word "Landmark" or the words "Landmark Funds". The Administrative Services
Agreements with the Trusts also provide that LFBDS may render administrative
services to others and may permit other investment companies to use the word
"Landmark" or the words "Landmark Funds" in their names.
The Administrative Services Agreement with each Trust continues in
effect with respect to each Fund if such continuance is specifically approved at
least annually by the Board of Trustees of each Trust or by a vote of a majority
of the outstanding voting securities of each Trust and, in either case, by a
majority of the Trustees who are not parties to the Administrative Services
Agreement or interested persons of any such party. The Administrative Services
Agreement with each Trust terminates automatically if it is assigned and may be
terminated without penalty by vote of a majority of the outstanding voting
securities of each Trust or by either party on not more than 60 days' nor less
than 30 days' written notice. The Administrative Services Agreement with each
Trust also provides that neither LFBDS, as the Administrator, nor its personnel
shall be liable for any error of judgment or mistake of law or for any act or
omission in the administration or management of the Trust, except for willful
misfeasance, bad faith or gross negligence in the performance of its or their
duties or by reason of reckless disregard of its or their obligations and duties
under the Trust's Administrative Services Agreement.
The Administrative Services Agreement with the Portfolio Trust provides
that SFG may render administrative services to others. The Administrative
Services Agreement with the Portfolio Trust terminates automatically if it is
assigned and may be terminated without penalty by a vote of a majority of the
outstanding voting securities of the Portfolio Trust or by either party on not
more than 60 days' nor less than 30 days' written notice. The Administrative
Services Agreement with the Portfolio Trust also provides that neither SFG, as
the Portfolio Administrator, nor its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the administration or
management of the Portfolio Trust, except for willful misfeasance, bad faith or
gross negligence in the performance of its or their duties or by reason of
reckless disregard of its or their obligations and duties under the Portfolio
Trust's Administrative Services Agreement.
LFBDS and SFG are wholly-owned subsidiaries of Signature Financial
Group, Inc. SFG is a company organized under the laws of the Cayman Islands. Its
principal place of business is in George Town, Grand Cayman, British West
Indies.
Pursuant to a sub-administrative services agreement, Citibank performs
such sub-administrative duties for each Trust and the Portfolio Trust as from
time to time are agreed upon by Citibank and, respectively, LFBDS or SFG.
Citibank's sub-administrative duties may include providing equipment and
clerical personnel necessary for maintaining each Trust's and the Portfolio
Trust's organization, participation in the preparation of documents required for
compliance by each Trust and the Portfolio Trust with applicable laws and
regulations, the preparation of certain documents in connection with meetings of
Trustees and shareholders, and other functions which would otherwise be
performed by the Administrator. For performing such sub-administrative services,
Citibank receives compensation as from time to time is agreed upon by LFBDS or
SFG, not in excess of the amount paid to LFBDS or SFG for its services under the
Administrative Services Agreements with the Trusts and the Portfolio Trust. All
such compensation is paid by LFBDS or SFG.
DISTRIBUTOR
LFBDS serves as the Distributor of each Fund's shares pursuant to
Distribution Agreements with each Trust with respect to each class of shares of
each Fund. Unless otherwise terminated, each Distribution Agreement remains in
effect until August 19, 1996, and thereafter will continue from year to year
upon annual approval by each Trust's Board of Trustees, or by the vote of a
majority of the outstanding voting securities of each Trust and by the vote of a
majority of the Board of Trustees of each Trust who are not parties to the
Agreement or interested persons of any such party, cast in person at a meeting
called for the purpose of voting on such approval. Each Agreement will terminate
in the event of its assignment, as defined in the 1940 Act.
Each Trust has adopted a Distribution Plan (the "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act with respect to each class of
shares of the Funds constituting series of the Trust after concluding that there
is a reasonable likelihood that the Distribution Plans will benefit each such
Fund and its shareholders. Each Distribution Plan with respect to Class A shares
provides that each Fund shall pay a distribution fee to the Distributor at an
annual rate not to exceed 0.15% of each Fund's average daily net assets
represented by the Class A shares. Each Distribution Plan with respect to Class
B shares provides that each Fund will pay the Distributor a distribution fee at
annual rate not to exceed 0.75% of the average daily net assets represented by
the Class B shares. The Distributor receives the distribution fees for its
services under the Distribution Agreements in connection with the distribution
of each Fund's shares of each class (exclusive of any advertising expenses
incurred by the Distributor in connection with the sale of Class A shares of
each Fund). The Distributor may use all or any portion of such distribution fee
to pay for expenses of printing prospectuses and reports used for sales
purposes, expenses of the preparation and printing of sales literature,
commissions to dealers who sell shares of the applicable class of the Fund and
other such distribution-related expenses.
Each Fund is also permitted to pay the Distributor a service fee with
respect to the Class A shares at an annual rate not to exceed 0.25% of each
Fund's average daily net assets represented by the Class A shares and an
additional service fee with respect to the Class B shares at an annual rate not
to exceed 0.25% of each Fund's average daily net assets represented by the Class
B shares.
Each Distribution Plan with respect to the Class A Shares also permits
the Fund to pay the Distributor an additional fee (not to exceed 0.05% of the
average daily net assets of the Class A shares) in anticipation of or as
reimbursement for print or electronic media advertising expenses incurred in
connection with the sale of Class A shares.
The Distribution Plans continue in effect if such continuance is
specifically approved at least annually by a vote of both a majority of each
Trust's Trustees and a majority of the Trustees who are not "interested persons"
of each Trust and who have no direct or indirect financial interest in the
operation of the Distribution Plans or in any agreement related to the Plans
(for purposes of this paragraph "Qualified Trustees"). Each Distribution Plan
requires that the respective Trust and the Distributor provide to the Board of
Trustees, and the Board of Trustees review, at least quarterly, a written report
of the amounts expended (and the purposes therefor) under the Distribution Plan.
Each Distribution Plan further provides that the selection and nomination of the
Qualified Trustees is committed to the discretion of the disinterested Trustees
(as defined in the 1940 Act) then in office. The Distribution Plans may be
terminated with respect to any class of shares of any Fund at any time by a vote
of a majority of the respective Trust's Qualified Trustees or by a vote of a
majority of the outstanding voting securities of that class of shares of the
Fund. The Distribution Plan applicable to a class of shares of any Fund may not
be amended to increase materially the amount of a Fund's permitted expenses
thereunder without the approval of a majority of the outstanding securities of
that class of shares of that Fund and may not be materially amended in any case
without a vote of a majority of both the Trustees and Qualified Trustees. The
Distributor will preserve copies of any plan, agreement or report made pursuant
to each Distribution Plan for a period of not less than six years from the date
of the Plan, and for the first two years the Distributor will preserve such
copies in an easily accessible place.
As contemplated by the Distribution Plans, LFBDS acts as the agent of
each Trust in connection with the offering of shares of the Funds pursuant to
the Distribution Agreements. After the prospectuses and periodic reports of the
Funds have been prepared, set in type and mailed to existing shareholders, the
Distributor pays for the printing and distribution of copies thereof which are
used in connection with the offering of shares of the Funds to prospective
investors. The Prospectus contains a description of fees payable to the
Distributor under the Distribution Agreement. For the fiscal years ended
December 31, 1992, December 31, 1993 and December 31, 1994 the fees paid to
LFBDS under the Distribution Agreement with respect to the Balanced Fund were
$20,183, $71,904 and $122,246, respectively, no portion of which was applicable
to reimbursement for expenses incurred in connection with print or electronic
media advertising. For the fiscal years ended December 31, 1992, December 31,
1993 and December 31, 1994, the fees paid to LFBDS under the Distribution
Agreement with respect to the Equity Fund were $15,120, $53,215 and $96,083,
respectively, no portion of which was applicable to reimbursement for expenses
incurred in connection with print or electronic media advertising.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
Each Trust has adopted an administrative services plan (the
"Administrative Services Plan") after having concluded that there is a
reasonable likelihood that the Administrative Services Plan will benefit the
Funds and their shareholders. The Administrative Services Plans provide that
each Trust may obtain the services of an administrator, a transfer agent, a
custodian and one or more Shareholder Servicing Agents, and may enter into
agreements providing for the payment of fees for such services. Under each
Trust's Administrative Services Plan, the total of the fees paid from a Fund to
the Trust's Administrator and Shareholder Servicing Agents may not exceed 0.65%
of the Fund's average daily net assets on an annualized basis for the Fund's
then-current fiscal year. Any distribution fees or service fees (other than any
fee concerning electronic or other media advertising) payable under the
Distribution Plans for the Class A shares of the Balanced and Equity Funds are
included in this percentage limitation for those shares. This limitation with
respect to the Class A shares of the Small Cap Equity Fund and for the Class B
shares of each Fund, does not include any amounts payable under the Distribution
Plans for such shares. Each Administrative Services Plan continues in effect if
such continuance is specifically approved at least annually by a vote of both a
majority of the Trustees and a majority of the Trustees who are not "interested
persons" of the respective Trust and who have no direct or indirect financial
interest in the operation of the Administrative Services Plan or in any
agreement related to such Plan (for purposes of this paragraph "Qualified
Trustees"). Each Administrative Services Plan requires that the respective Trust
provide to its Board of Trustees and the Board of Trustees review, at least
quarterly, a written report of the amounts expended (and the purposes therefor)
under the Administrative Services Plan. Each Administrative Services Plan may be
terminated at any time by a vote of a majority of the Qualified Trustees of the
respective Trust or as to each Fund by a vote of a majority of the outstanding
voting securities of the Fund. Each Administrative Services Plan may not be
materially amended in any case without a vote of the majority of both the
Trustees and the Qualified Trustees.
Each Trust has entered into a shareholder servicing agreement (a
"Servicing Agreement") with each Shareholder Servicing Agent and a Transfer
Agency and Service Agreement with State Street Bank and Trust Company ("State
Street") pursuant to which State Street (or its affiliate State Street Canada,
Inc.) acts as transfer agent for each Fund. Each Trust has entered into a
Custodian Agreement with Investors Bank & Trust Company ("IBT") and a Fund
Accounting Agreement with Signature Financial Services, Inc. ("SFSI") pursuant
to which custodial and fund accounting services, respectively, are provided for
each Fund. See "Shareholder Servicing Agents" and "Transfer Agent, Custodian and
Fund Accountant" in the Prospectus for additional information, including a
description of fees paid to the Shareholder Servicing Agents under the Servicing
Agreements. For the fiscal years ended December 31, 1993 and December 31, 1994,
the aggregate fees payable to Shareholder Servicing Agents under the
Administrative Services Plan with respect to the Balanced Fund were $575,229 (of
which $215,711 was voluntarily waived) and $977,967 (of which $366,738 was
voluntarily waived), respectively. For the fiscal years ended December 31, 1993
and December 31, 1994, the aggregate fees payable to Shareholder Servicing
Agents under the Administrative Services Plan with respect to the Equity Fund
were $425,718 (of which $159,645 was voluntarily waived) and $768,306 (of which
$287,894 was voluntarily waived), respectively.
The Portfolio Trust has also adopted an administrative services plan
(the "Portfolio Administrative Plan"), which provides that the Portfolio Trust
may obtain the services of an administrator, a transfer agent and a custodian
and may enter into agreements providing for the payment of fees for such
services. Under the Portfolio Administrative Plan, the administrative services
fee payable to the Portfolio Administrator from a Portfolio may not exceed 0.05%
of the Portfolio's average daily net assets on an annualized basis for its
then-current fiscal year.
The Portfolio Administrative Plan continues in effect if such
continuance is specifically approved at least annually by a vote of both a
majority of the Portfolio Trust's Trustees and a majority of the Portfolio
Trust's Trustees who are not "interested persons" of the Portfolio and who have
no direct or indirect financial interest in the operation of the Portfolio
Administrative Plan or in any agreement related to such Plan (for purposes of
this paragraph "Qualified Trustees"). The Portfolio Administrative Plan requires
that the Portfolio Trust provide to the Board of Trustees and the Board of
Trustees review, at least quarterly, a written report of the amounts expended
(and the purposes therefor) under the Portfolio Administrative Plan. The
Portfolio Administrative Plan may not be amended to increase materially the
amount of permitted expenses thereunder without the approval of a majority of
the outstanding voting securities of the Portfolio Trust and may not be
materially amended in any case without a vote of the majority of both the
Portfolio Trust's Trustees and the Portfolio Trust's Qualified Trustees.
The Portfolio Trust, on behalf of the Portfolios, has entered into
Custodian Agreements with IBT pursuant to which IBT acts as custodian for each
Portfolio. The Portfolio Trust, on behalf of the Portfolios, has entered into
Fund Accounting Agreements with SFSI pursuant to which SFSI provides fund
accounting services for each Portfolio. Pursuant to separate Transfer Agency and
Service Agreements with the Portfolio Trust, on behalf of the Portfolios, SFSI
provides transfer agency services to each Portfolio. See "Shareholder Servicing
Agents" and "Transfer Agent, Custodian and Fund Accountant" in the Prospectus
for additional information.
The principal business address of IBT is One Lincoln Plaza, Boston,
Massachusetts 02111. The principal business address of SFSI is 6 St. James
Avenue, Boston, Massachusetts 02116.
AUDITORS
Price Waterhouse LLP are the independent certified public accountants
for the Trusts, providing audit services and assistance and consultation with
respect to the preparation of filings with the SEC. The address of Price
Waterhouse LLP is 160 Federal Street, Boston, Massachusetts 02110. Price
Waterhouse are the chartered accountants for the Portfolio Trust. The address of
Price Waterhouse is Suite 3000, 1 First Canadian Place, Toronto, Ontario M5X
1H7, Canada.
6. PORTFOLIO TRANSACTIONS
Each Trust trades securities for a Fund if it believes that a
transaction net of costs (including custodian charges) will help achieve the
Fund's investment objectives. Changes in the Fund's investments are made without
regard to the length of time a security has been held, or whether a sale would
result in the recognition of a profit or loss. Therefore, the rate of turnover
is not a limiting factor when changes are appropriate. The turnover rate for the
common stock portion of the Balanced Fund is expected to be approximately 100%
annually. The turnover rate for the Equity Fund is not expected to exceed 100%
annually. The turnover rate for the Small Cap Equity Fund is not expected to
exceed 200% annually. Specific decisions to purchase or sell securities for each
Fund are made by a portfolio manager who is an employee of the Adviser and who
is appointed and supervised by its senior officers. The portfolio manager may
serve other clients of the Adviser in a similar capacity.
The primary consideration in placing portfolio securities transactions
with broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of each Fund and other clients
of the Adviser on the basis of their professional capability, the value and
quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Adviser normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time, soliciting dealer fees are available to the Adviser on the tender of a
Fund's securities in so-called tender or exchange offers. Such soliciting dealer
fees are in effect recaptured for the Fund by the Adviser. At present no other
recapture arrangements are in effect.
Under the Advisory Agreements, in connection with the selection of such
brokers or dealers and the placing of such orders, the Adviser is directed to
seek for each Fund in its best judgment, prompt execution in an effective manner
at the most favorable price. Subject to this requirement of seeking the most
favorable price, securities may be bought from or sold to broker-dealers who
have furnished statistical, research and other information or services to the
Adviser or the Funds, subject to any applicable laws, rules and regulations.
The investment advisory fee that each Fund pays to the Adviser will not
be reduced as a consequence of the Adviser's receipt of brokerage and research
services. While such services are not expected to reduce the expenses of the
Adviser, the Adviser would, through the use of the services, avoid the
additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff.
In certain instances there may be securities that are suitable as an
investment for a Fund as well as for one or more of the Adviser's other clients.
Investment decisions for each Fund and for the Adviser's other clients are made
with a view to achieving their respective investment objectives. It may develop
that a particular security is bought or sold for only one client even though it
might be held by, or bought or sold for, other clients. Likewise, a particular
security may be bought for one or more clients when one or more clients are
selling the same security. Some simultaneous transactions are inevitable when
several clients receive investment advice from the same investment adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more clients are simultaneously engaged in the
purchase or sale of the same security, the securities are allocated among
clients in a manner believed to be equitable to each. It is recognized that in
some cases this system could adversely affect the price of or the size of the
position obtainable in a security for a Fund. When purchases or sales of the
same security for a Fund and for other portfolios managed by the Adviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large volume purchases or sales.
For the fiscal years ended December 31, 1992 and December 31, 1993, the
Balanced Fund paid brokerage commissions in the amounts of $24,930 and $97,999,
respectively; for the period January 1, 1994 to April 30, 1994, the Balanced
Fund paid brokerage commissions of $8,940 and for the period May 1, 1994 to
December 31, 1994, the Balanced Portfolio paid brokerage Commissions of
$280,300. For the fiscal years ended December 31, 1992 and December 31, 1993,
the Equity Fund paid brokerage commissions in the amounts of $28,867 and
$124,360, respectively; for the period January 1, 1994 to April 30, 1994, the
Equity Fund paid brokerage commissions of $9,780 and for the period May 1, 1994
to December 31, 1994, the Equity Portfolio paid brokerage Commissions of
$342,356.
7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Each Trust's Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional Shares of Beneficial Interest (without
par value) of each series and to divide or combine the shares of any series into
a greater or lesser number of shares of that series without thereby changing the
proportionate beneficial interests in that series. While there are at present no
series of Trust I other than the Balanced Fund, and one series of Trust II other
than the Equity and Small Cap Equity Funds, each Trust has reserved the right to
create and issue additional series and classes of shares. Each share of each
class of each Fund represents an equal proportionate interest in the Fund with
each other share of that class. Shares of each series participate equally in the
earnings, dividends and distribution of net assets of the particular series upon
liquidation or dissolution (except for any differences among classes of shares
in a series). Shares of each series are entitled to vote separately to approve
advisory agreements or changes in investment policy, but shares of all series
may vote together in the election or selection of Trustees and accountants for
the Trusts. In matters affecting only a particular Fund or class, only shares of
that particular Fund or class are entitled to vote.
Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. Shareholders in each Trust do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of each Trust may elect all of the Trustees of the Trust if
they choose to do so and in such event the other shareholders in the Trust would
not be able to elect any Trustee. Each Trust is not required to hold, and has no
present intention of holding, annual meetings of shareholders but each Trust
will hold special meetings of shareholders when in the judgment of the Trustees
it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have, under certain circumstances (e.g., upon the application and
submission of certain specified documents to the Trustees by a specified number
of shareholders), the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Trustees. Shareholders also have under certain circumstances the right to
remove one or more Trustees without a meeting by a declaration in writing by a
specified number of shareholders. No material amendment may be made to each
Trust's Declaration of Trust without the affirmative vote of the holders of a
majority of the outstanding shares of each series affected by the amendment.
(See "Investment Objectives, Policies and Restrictions--Investment
Restrictions".) At any meeting of shareholders of any Fund, a Shareholder
Servicing Agent may vote any shares of which it is the holder of record and for
which it does not receive voting instructions proportionately in accordance with
the instructions it received for all other shares of which that Shareholder
Servicing Agent is the holder of record. Shares have no preference, pre-emptive,
conversion or similar rights. Shares, when issued, are fully paid and
non-assessable, except as set forth below.
Each Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets (or all or substantially all of the assets
belonging to any series of the Trust), if approved by a vote of the holders of
two-thirds of the Trust's outstanding shares, voting as a single class, or of
the affected series of the Trust, as the case may be, except that if the
Trustees of each Trust recommend such sale of assets, merger or consolidation,
the approval by vote of the holders of a majority of the Trust's outstanding
shares would be sufficient. Each Trust or any series of each Trust, as the case
may be, may be terminated (i) by a vote of a majority of the outstanding voting
securities of the Trust or the affected series or (ii) by the Trustees by
written notice to the shareholders of the Trust or the affected series. If not
so terminated, each Trust will continue indefinitely.
Share certificates will not be issued.
Each Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust of each Trust
contains an express disclaimer of shareholder liability for acts or obligations
of the Trust and provides for indemnification and reimbursement of expenses out
of Trust property for any shareholder held personally liable for the obligations
of the Trust. The Declaration of Trust of each Trust also provides that the
Trust may maintain appropriate insurance (e.g., fidelity bonding and errors and
omissions insurance) for the protection of the Trust, its shareholders,
Trustees, officers, employees and agents covering possible tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.
Each Trust's Declaration of Trust further provides that obligations of
the Trust are not binding upon the Trustees individually but only upon the
property of the Trust and that the Trustees will not be liable for any action or
failure to act, but nothing in the Declaration of Trust of each Trust protects a
Trustee against any liability to which he or she would otherwise be subject by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his or her office.
By virtue of the combined Prospectus for the Funds, a Fund organized as
a series of one of the Trusts might share in liabilities, if any, arising under
federal and state securities laws with respect to disclosure in the Prospectus
concerning another Fund organized as a series of the other Trust.
The Portfolios are series of the Portfolio Trust, organized as a trust
under the laws of the State of New York. The Portfolio Trust's Declaration of
Trust provides that investors in the Portfolios (e.g., other investment
companies (including the corresponding Funds), insurance company separate
accounts and common and commingled trust funds) are each liable for all
obligations of the Portfolios. However, the risk of any Fund that invests
through a Portfolio incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance existed and the
applicable Portfolio itself was unable to meet its obligations. It is not
expected that the liabilities of any Portfolio would ever exceed its assets.
Each investor in a Portfolio, including the corresponding Fund, may add
to or withdraw from its investment in the applicable Portfolio on each Business
Day. As of the close of regular trading on each Business Day, the value of each
investor's beneficial interest in each Portfolio is determined by multiplying
the net asset value of the Portfolio by the percentage, effective for that day,
that represents that investor's share of the aggregate beneficial interests in
the Portfolio. Any additions or withdrawals that are to be effected on that day
are then effected. The investor's percentage of the aggregate beneficial
interests in the Portfolio is then re-computed as the percentage equal to the
fraction (i) the numerator of which is the value of such investor's investment
in the Portfolio as of the close of regular trading on such day plus or minus,
as the case may be, the amount of any additions to or withdrawals from the
investor's investment in the Portfolio effected on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
close of regular trading on such day plus or minus, as the case may be, the
amount of the net additions to or withdrawals from the aggregate investments in
the Portfolio by all investors in the Portfolio. The percentage so determined is
then applied to determine the value of the investor's interest in the Portfolio
as of the close of regular trading on the next following Business Day.
8. CERTAIN ADDITIONAL TAX MATTERS
Each Fund has elected to be treated, and intends to qualify each year,
as a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition and holding period
of the Fund's portfolio assets. Provided all such requirements are met, no U.S.
federal income or excise taxes generally will be required to be paid by the
Funds, although non-U.S. source income earned by each Fund may be subject to
non-U.S. withholding taxes. If a Fund should fail to qualify as a "regulated
investment company" for any year, the Fund would incur a regular corporate
federal income tax upon its taxable income and Fund distributions would
generally be taxable as ordinary income to shareholders. The Portfolio Trust
believes the Portfolios also will not be required to pay any U.S. federal income
or excise taxes on their income.
The portion of each Fund's ordinary income dividends attributable to
dividends received in respect of equity securities of U.S. issuers is normally
eligible for the dividends received deduction for corporations subject to U.S.
federal income taxes. Availability of the deduction for particular shareholders
is subject to certain limitations, and deducted amounts may be subject to the
alternative minimum tax and result in certain basis adjustments. Any Fund
dividend that is declared in October, November or December of any calendar year,
that is payable to shareholders of record in such a month, and that is paid the
following January will be treated as if received by the shareholders on December
31 of the year in which the dividend is declared.
In general, any gain or loss realized upon a taxable disposition of
shares of a Fund by a shareholder that holds such shares as a capital asset will
be treated as a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise as a short-term capital gain or loss.
However, any loss realized upon a disposition of shares in a Fund held for six
months or less will be treated as a long-term capital loss to the extent of any
distributions of net capital gain made with respect to those shares. Any loss
realized upon a disposition of shares may also be disallowed under rules
relating to wash sales. Gain may be increased (or loss reduced) upon a
redemption of shares of a Fund within 90 days after their purchase followed by
any purchase (including purchases by exchange or by reinvestment) of shares of
that Fund or of another Landmark Fund without payment of any additional sales
charge.
Each Fund's transactions in forward contracts will be subject to
special tax rules that may affect the amount, timing and character of Fund
income and distributions to shareholders. For example, certain positions held by
each Fund on the last business day of each taxable year will be marked to market
(i.e., treated as if closed out) on that day, and any gain or loss associated
with the positions will be treated as 60% long-term and 40% short-term capital
gain or loss. Certain positions held by a Fund that substantially diminish its
risk of loss with respect to other positions in its portfolio may constitute
"straddles," and may be subject to special tax rules that would cause deferral
of Fund losses, adjustments in the holding periods of Fund securities, and
conversion of short-term into long-term capital losses. Certain tax elections
exist for straddles that may alter the effects of these rules. Each Fund will
limit its activities in forward contracts to the extent necessary to meet the
requirements of Subchapter M of the Code.
Any Fund distribution will have the effect of reducing the per share
net asset value of shares in the Fund by the amount of the distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
Special tax considerations apply with respect to non-U.S. investments
of the Funds. Use of non-U.S. currencies for non-hedging purposes may be limited
in order to avoid a tax on the Funds. Investment by a Fund in certain "passive
foreign investment companies" may also be limited in order to avoid a tax on the
Fund. Investment income received by a Fund from non-U.S. securities may be
subject to non-U.S. income taxes withheld at the source. The United States has
entered into tax treaties with many other countries that may entitle a Fund to a
reduced rate of tax or an exemption from tax on such income. The Funds intend to
qualify for treaty reduced rates where available. It is not possible, however,
to determine the Funds' effective rate of non-U.S. tax in advance since the
amount of the Funds' respective assets to be invested within various countries
is not known. Shareholders will not be able to claim any deduction or credit for
any part of the foreign taxes paid by the Funds.
9. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Price Waterhouse LLP are the independent certified public accountants
for the Funds, providing audit services and assistance and consultation with
respect to the preparation of filings with the Securities and Exchange
Commission. Price Waterhouse are the chartered accountants for the Portfolio
Trust. Deloitte & Touche LLP were the independent certified public accountants
for the Balanced Fund and the Equity Fund through December 31, 1993. The
selection of Price Waterhouse LLP was based on management's decision with
respect to certain areas of expertise and service capabilities. There was no
disagreement between the Funds and Deloitte & Touche LLP with respect to the
accounting and audit services provided by such firm.
The audited financial statements of the Balanced Fund and the Equity
Fund (Statement of Assets and Liabilities at December 31, 1994, Statement of
Operations for the year ended December 31, 1994, Statement of Changes in Net
Assets for each of the years in the two-year period ended December 31, 1994,
Financial Highlights for each of the years in the four year period ended
December 31, 1994 and for the period October 19, 1990 to December 31, 1990,
Notes to Financial Statements and Independent Auditors' Report), each of which
is included in the respective Annual Reports to Shareholders of the Balanced
Fund and the Equity Fund, are incorporated by reference into this Statement of
Additional Information and have been so incorporated in reliance upon the
reports of Price Waterhouse LLP (for the fiscal year ended December 31, 1994)
and Deloitte & Touche LLP (for periods prior to the fiscal year ended December
31, 1994), independent certified public accountants, on behalf of the Balanced
Fund and the Equity Fund.
The audited financial statements of the Balanced Portfolio and the
Equity Portfolio (Portfolio of Investments at December 31, 1994, Statement of
Assets and Liabilities at December 31, 1994, Statement of Operations for the
period May 1, 1994 (commencement of operations) to December 31, 1994, Statement
of Changes in Net Assets for the period May 1, 1994 (commencement of operations)
to December 31, 1994, Financial Highlights for the period May 1, 1994
(commencement of operations) to December 31, 1994, Notes to Financial Statements
and Independent Auditors' Report), each of which is included in the Annual
Reports to Shareholders of the Balanced Fund and the Equity Fund, are
incorporated by reference into this Statement of Additional Information and have
been so incorporated in reliance upon the reports of Price Waterhouse, chartered
accountants, on behalf of the Balanced Portfolio and the Equity Portfolio.
Copies of the Annual Reports for the Balanced Fund and the Equity Fund
accompany this Statement of Additional Information.
<PAGE>
SHAREHOLDER SERVICING AGENTS
FOR CITIBANK NEW YORK RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CUSTOMERS:
Citibank, N.A.
450 West 33rd Street, New York, NY 10001
(212) 564-3456 or (800) 846-5300
FOR CITIGOLD CUSTOMERS:
Citigold
666 Fifth Avenue, New York, NY 10150-5130
Call Your Account Officer or (212) 974-0900 or (800) 285-1701
FOR PRIVATE BANKING CLIENTS:
Citibank, N.A.
The Citibank Private Bank
153 East 53rd Street, New York, NY 10043
Call Your Citibank Private Banking Account Officer,
Investment Specialist or (212) 559-5959
FOR CITIBANK GLOBAL ASSET MANAGEMENT CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY 10043
(212) 559-7117
FOR NORTH AMERICAN INVESTOR SERVICES CLIENTS:
Citibank, N.A.
111 Wall Street, New York, NY 10043
Call Your Account Manager or (212) 657-9100
FOR CITICORP INVESTMENT SERVICES CUSTOMERS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200,
(212) 736-8170 in New York City
<PAGE>
LANDMARK BALANCED FUND
LANDMARK EQUITY FUND
LANDMARK SMALL CAP EQUITY FUND
TRUSTEES AND OFFICERS
Philip W. Coolidge
President*
H.B. Alvord
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
C. Oscar Morong, Jr.
Donald B. Otis
E. Kirby Warren
William S. Woods, Jr.
SECRETARY AND TREASURER
James B. Craver*
ASSISTANT TREASURER
Barbara M. O'Dette*
ASSISTANT SECRETARY
Molly S. Mugler*
*Affiliated Person of Administrator and Distributor
- ----------------------------------------------------------------------------
INVESTMENT ADVISER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND DISTRIBUTOR
The Landmark Funds Broker-Dealer Services, Inc.
6 St. James Avenue, Boston, MA 02116
(617) 423-1679
TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
CUSTODIAN
Investors Bank & Trust Company
One Lincoln Plaza, Boston, MA 02111
AUDITORS
Price Waterhouse LLP
160 Federal Street, Boston, MA 02110
LEGAL COUNSEL
Bingham, Dana & Gould
150 Federal Street, Boston, MA 02110