<PAGE>
As filed with the Securities and Exchange Commission on April 29, 1996
File Nos. 2-90519
811-4007
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 16
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
AMENDMENT NO. 17
LANDMARK FUNDS II
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 617-423-1679
PHILIP W. COOLIDGE, 6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
ROGER P. JOSEPH, BINGHAM, DANA & GOULD LLP, 150 FEDERAL STREET,
BOSTON, MASSACHUSETTS 02110
It is proposed that this filing will become effective on May 1, 1996
pursuant to paragraph (b) of Rule 485.
The Premium Portfolios has also executed this Registration Statement.
Pursuant to Rule 24f-2, Registrant has registered an indefinite number
of its Shares of Beneficial Interest (without par value) under the Securities
Act of 1933 and filed a Rule 24f-2 Notice on February 28, 1996 for Registrant's
fiscal year ended December 31, 1995.
<TABLE>
CALCULATION OF REGISTRATION FEE - LANDMARK EQUITY FUND
- --------------------------------------------------------------------------------------------------------------------------
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING AMOUNT OF SHARES BEING OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED UNDER RULE 24E-2 SHARE* PRICE** FEE
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest
without par value............ 1,689,071.424 $19.09 $290,000 $100
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
*Pursuant to Rule 457(c), this was the maximum offering price per share of the
Registrant's shares at the close of business on April 23, 1996.
**Computed under 17 CFR 270.24e; 1,731,639.593 shares were redeemed or
repurchased during the fiscal year ended December 31, 1995, 57,759.369 of
which were used for reductions in previous filings during the current year
under Rule 24f-2 and 1,673,880.224 of which are being used for reduction in
this Post-Effective Amendment No. 16.
- --------------------------------------------------------------------------------
<PAGE>
LANDMARK FUNDS II
(LANDMARK EQUITY FUND,
LANDMARK EARNINGS GROWTH EQUITY FUND AND
LANDMARK SMALL CAP EQUITY FUND)
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A
ITEM NO. N-1A ITEM LOCATION
- -------- --------- --------
PART A PROSPECTUS
- ------ ----------
<S> <C> <C>
Item 1. Cover Page............................................. Cover Page
Item 2. Synopsis............................................... Expense Summary
Item 3. Condensed Financial Information........................ Condensed Financial Information
Item 4. General Description of Registrant...................... Investment Information; General
Information; Appendix
Item 5. Management of the Fund................................. Management; Expenses
Item 5A. Management's Discussion of Fund Performance............ Not Applicable
Item 6. Capital Stock and Other Securities..................... General Information; Classes of Shares;
Voting and Other Rights; Purchases;
Exchanges; Redemptions; Dividends and
Distributions; Tax Matters
Item 7. Purchase of Securities Being Offered................... Purchases; Exchanges; Redemptions
Item 8. Redemption or Repurchase............................... Purchases; Exchanges; Redemptions
Item 9. Pending Legal Proceedings.............................. Not Applicable
STATEMENT OF
ADDITIONAL
PART B INFORMATION
- ------ -----------
Item 10. Cover Page............................................. Cover Page
Item 11. Table of Contents...................................... Cover Page
Item 12. General Information and History........................ The Funds
Item 13. Investment Objectives and Policies..................... Investment Objectives, Policies and
Restrictions
Item 14. Management of the Fund................................. Management
Item 15. Control Persons and Principal Holders of Securities.... Management
Item 16. Investment Advisory and Other Services................. Management
Item 17. Brokerage Allocation and Other Practices............... Portfolio Transactions
Item 18. Capital Stock and Other Securities..................... Description of Shares, Voting Rights and
Liabilities
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered.......................................... Description of Shares, Voting Rights and
Liabilities; Determination of Net Asset
Value; Valuation of Securities;
Additional Purchase and Redemption
Information
Item 20. Tax Status............................................. Certain Additional Tax Matters
Item 21. Underwriters........................................... Management
Item 22. Calculation of Performance Data........................ Performance Information
Item 23. Financial Statements................................... Independent Accountants and Financial
Statements
PART C Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this
Registration Statement.
</TABLE>
<PAGE>
PROSPECTUS
- --------------------------------------------------------------------------------
MAY 1, 1996
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.
- ------------------------------------------------------------------------------
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 11.
- ------------------------------------------------------------------------------
REMEMBER THAT SHARES OF THE FUNDS:
* ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY
* ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, CITIBANK
OR ANY OF ITS AFFILIATES
* ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED
This Prospectus concisely sets forth information about the Funds that a
prospective investor should know before investing. A Statement of Additional
Information dated May 1, 1996 (and incorporated by reference in this Prospectus)
has been filed with the Securities and Exchange Commission. Copies of the
Statement of Additional Information may be obtained without charge, and further
inquiries about the Funds may be made, by 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 REP- RESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
TABLE OF CONTENTS
2 Prospectus Summary
- ------------------------------------------
4 Expense Summary
- ------------------------------------------
6 Condensed Financial Information
- ------------------------------------------
9 Investment Information
- ------------------------------------------
10 Risk Considerations
- ------------------------------------------
Valuation of Shares
Classes of Shares
- ------------------------------------------
14 Purchases
- ------------------------------------------
18 Exchanges
Redemptions
- ------------------------------------------
19 Dividends and Distributions
Management
- ------------------------------------------
23 Tax Matters
Performance Information
- ------------------------------------------
24 General Information
- ------------------------------------------
25 Appendix -- Permitted Investments and
Investment Practices
<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.
INVESTMENT OBJECTIVES AND POLICIES:
LANDMARK BALANCED FUND. The Fund's objectives are to earn high current income by
investing in a broad range of securities, to preserve capital, and to provide
growth potential with reduced risk. Through Balanced Portfolio, the Fund invests
in a broadly diversified portfolio of income-producing securities, including
common and preferred stocks and bonds. In selecting common stocks for Balanced
Portfolio, the Adviser emphasizes securities issued by established companies
with medium to large capitalizations, i.e., $750 million or more, and seasoned
management teams ("Established Companies").
LANDMARK EQUITY FUND. The Fund's objective is long-term capital growth;
dividend income, if any, is incidental to this investment objective. Through
Equity Portfolio, the Fund invests primarily in common stocks of U.S. issuers,
with an emphasis on Established Companies.
LANDMARK SMALL CAP EQUITY FUND. The Fund's objective is long-term capital
growth; dividend income, if any, is incidental to this investment objective.
Through Small Cap Equity Portfolio, the Fund invests primarily in stocks of U.S.
issuers that have small market capitalizations (i.e., $750 million or less). In
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 $83 billion in assets worldwide.
The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS" or the "Distributor")
is the distributor of shares of each Fund. See "Management."
PURCHASES AND REDEMPTIONS: Customers of Shareholder Servicing Agents may
purchase and redeem shares of the Funds on any Business Day. See "Purchases"
and "Redemptions."
PRICING: Investors may select Class A or Class B shares, with different
expense levels and sales charges (if available through the investors'
Shareholder Servicing Agents). See "Classes of Shares," "Purchases" and
"Management -- Distribution Arrangements."
CLASS A SHARES. Offered at net asset value plus any applicable initial sales
charge (maximum of 4.75% of the public offering price) and subject to a
distribution fee at the annual rate of 0.05% of the average daily net assets
represented by 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
- --------------------------------------------------------------------------------
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 that 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 19 and "General
Information -- Expenses" -- page 24.*
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
SMALL CAP
BALANCED FUND EQUITY FUND EQUITY FUND
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ....................... 4.75% None 4.75% None 4.75% None
Maximum Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds, whichever See See See
is less) ..................................................Below(1) 5.00% Below(1) 5.00% Below(1) 5.00%
ANNUAL FUND OPERATING EXPENSES AFTER FEE WAIVERS (AS A PERCENTAGE OF AVERAGE NET
ASSETS):
Investment Management Fee ................................... .40% .40% .50% .50% .65%(2) .65%(2)
12b-1 Fees (including service fees for Class B shares)(2)(3) .05% .80% .05% .80% .05% .80%
Other Expenses
Administrative Services Fees(2) ........................... .25% .25% .15% .15% .15% .15%
Shareholder Servicing Agent Fees .......................... .25% .25% .25% .25% .25% .25%
Other Operating Expenses(4) ............................... .07% .07% .10% .10% .25%(2) .25%(2)
Total Fund Operating Expenses(2) ............................ 1.02% 1.77% 1.05% 1.80% 1.35% 2.10%
<FN>
* This table is intended to assist investors in understanding the various costs and expenses that a shareholder of a Fund
will bear, either directly or indirectly. Because Class B shares were not offered during the most recent fiscal year of
the Funds, certain figures in the table are based on estimated amounts for the current fiscal year. The table shows the
fees paid to various service providers after giving effect to expected voluntary partial fee waivers.
(1) 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."
(2) Absent fee waivers and reimbursements, administrative services fees, 12b-1 fees and total fund operating expenses would
be .30%, .20% and 1.22% for Landmark Balanced Fund -- Class A and .30%, .95% and 1.97% for Landmark Balanced Fund --
Class B. Absent fee waivers and reimbursements, administrative service fees, 12b-1 fees, and total fund operating
expenses would be .30%, .20% and 1.35% for Landmark Equity Fund -- Class A and .30%, .95% and 2.10% for Landmark Equity
Fund -- Class B. Absent fee waivers and reimbursements, investment management fees, administrative service fees, rule
12b-1 fees, other operating expenses and total fund operating expenses would be .75%, .30%, .20%, 1.00% and 2.50% for
Landmark Small Cap Equity Fund -- Class A; .75%, .30%, .95%, 1.00% and 3.25% for Landmark Small Cap Equity Fund -- Class
B. There can be no assurance that the fee waivers and reimbursements reflected in the table will continue at their
present levels. Under each Fund's administrative services plan, the aggregate of the fee paid to the Administrator, the
fees paid to the Shareholder Servicing Agents and the fee paid to the Distributor under the rule 12b-1 distribution plan
(not including the .05% portion of the fee for Class A shares that may be charged in anticipation of or reimbursements
for print or electronic media advertising, see "Distribution Arrangements" below) may not exceed .65% of each Fund's
average daily net assets on an annualized basis for the then-current fiscal year. Individual components of the aggregate
may vary from time to time.
(3) 12b-1 distribution fees are asset-based sales charges. Long-term shareholders in a Fund could pay more in sales charges
than the economic equivalent of the maximum front-end sales charges permitted by the National Association of Securities
Dealers, Inc. The figures for Class B shares include service fees, which are payable at the annual rate of 0.05% of the
average daily net assets represented by Class B shares.
(4) LFBDS has agreed to pay the ordinary operating expenses of the Balanced Fund and the Equity Fund, subject to certain
exceptions. LFBDS receives a fee from each of these Funds. See "General Information -- Expenses."
</TABLE>
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:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCED FUND
Class A shares(1) ............................................. $57 $78 $101 $166
Class B shares:
Assuming complete redemption at end of period(2)(3) ......... $68 $86 $116 $188
Assuming no redemption(3) ................................... $18 $56 $ 96 $188
EQUITY FUND
Class A shares(1) ............................................. $58 $79 $103 $170
Class B shares:
Assuming complete redemption at end of period(2)(3) ......... $68 $87 $117 $192
Assuming no redemption(3) ................................... $18 $57 $ 97 $192
SMALL CAP EQUITY FUND
Class A shares(1) ............................................. $61 $88 $118 $202
Class B shares:
Assuming complete redemption at end of period(2) ............ $71 $96 $133 $220
Assuming no redemption ...................................... $21 $66 $113 $220
<FN>
(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.
</TABLE>
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; $70, $92, $126
and $206 for Balanced Fund -- Class B (assuming complete redemption at the end
of each period); $61, $88, $118 and $202 for Equity Fund -- Class A; $71, $96,
$133 and $220 for Equity Fund -- Class B (assuming complete redemption at the
end of each period); $72, $122, $174 and $318 for Small Cap Equity Fund -- Class
A and $83, $130, $190 and $334 for Small Cap Equity Fund -- Class B (assuming
complete redemption at the end of each period). Expenses for Class A shares are
based on each Fund's fiscal year ended December 31, 1995. Expenses for Class B
shares are estimated, because Class B shares were not offered during the fiscal
year ended December 31, 1995. The assumption of a 5% annual return is required
by the Securities and Exchange Commission for all mutual funds, and is not a
prediction of any Fund's future performance. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OF ANY FUND. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
CONDENSED FINANCIAL INFORMATION
- -----------------------------------------------------------------------------
The following tables provide condensed financial information about the Funds for
the periods indicated. The information below should be read in conjunction with
the financial statements appearing in the Funds' Annual Reports to Shareholders,
which are incorporated by reference in the Statement of Additional Information.
The financial statements and notes, as well as the tables below, have been
audited by Price Waterhouse LLP, independent accountants. The report of Price
Waterhouse LLP is included in each of the Fund's Annual Reports. 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
YEAR ENDED DECEMBER 31, (COMMENCEMENT OF
OPERATIONS) TO
1995 1994++ 1993 1992 1991 DECEMBER 31, 1990
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period ......... $13.52 $14.24 $13.54 $12.93 $10.27 $ 9.75
------ ------ ------ ------ ------ ------
Income from Operations:
Net investment income ........................ 0.486 0.399 0.336** 0.266 0.336 0.081
2.540 (0.695) 0.803 0.600 2.665 0.513
------ ------ ------ ------ ------ ------
Total from operations .................... 3.026 (0.296) 1.139 0.866 3.001 0.594
------ ------ ------ ------ ------ ------
Less Dividends and Distributions From:
Net investment income ...................... (0.495) (0.394) (0.319) (0.256) (0.341) (0.074)
Net realized gain on investments ........... (0.341) (0.030) (0.120) -- -- --
------ ------ ------ ------ ------ ------
Total from dividends and distributions ... (0.836) (0.424) (0.439) (0.256) (0.341) (0.074)
------ ------ ------ ------ ------ ------
Net Asset Value, end of period ............... $15.71 $13.52 $14.24 $13.54 $12.93 $10.27
====== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) .... $246,002 $227,309 $265,216 $15,296 $10,239 $6,855
Ratio of expenses to average net assets ...... 1.02%(A) 1.02%(A) 1.04% 1.40% 1.40% 1.40%*
Ratio of net investment income to average
net assets 3.21% 2.82% 2.46% 2.07% 2.88% 4.06%*
Portfolio turnover(B) ........................ -- 29% 101% 102% 117% 12%
Total return ................................. 22.66% (2.06)% 8.48% 6.82% 29.61% 6.09%+
Note: If agents of the Balanced Fund for the periods indicated had not waived a portion of their fees and had expenses been limited
as required by certain state securities laws, the net investment income per share and the ratios would have been as follows:
Net investment income per share ............. $0.463 $0.378 $0.310** $0.148 $0.211 $0.059
RATIOS:
Expenses to average net assets .............. 1.17%(A) 1.17%(A) 1.23% 2.32% 2.47% 2.50%*
Net investment income to average net assets . 3.06% 2.67% 2.27% 1.15% 1.81% 2.96%*
<FN>
* Annualized.
** The per share amounts were computed using a monthly average number of shares outstanding during the year. (A) Includes
the Fund's share of Balanced Portfolio's allocated expenses for the periods subsequent to May 1, 1994. (B) Represents
the rate of portfolio activity for the period while the Fund was making investments directly in securities. The
portfolio turnover rate for the period since the Fund transferred all of its investable assets to the Portfolio is
included elsewhere in this Prospectus.
+ Not Annualized.
++ On May 1, 1994 the Fund began investing all of its investable assets in Balanced Portfolio.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------
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
1995 1994+ 1993 1992 1991 DECEMBER 31, 1990
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of period ......... $14.13 $14.80 $13.23 $12.36 $ 9.57 $ 9.14
------ ------ ------ ------ ------ ------
Income from Operations:
Net investment income ........................ 0.211 0.173 0.071** 0.065 0.126 0.065
Net realized and unrealized gain (loss) on
investments ................................ 3.651 (0.245) 1.550 0.868 2.797 0.423
------ ------ ------ ------ ------ ------
Total from operations .................... 3.862 (0.072) 1.621 0.933 2.923 0.488
------ ------ ------ ------ ------ ------
Less Dividends and Distributions From:
Net investment income ...................... (0.210) (0.169) (0.051) (0.063) (0.133) (0.058)
Net realized gain on investments ........... (0.582) (0.429) -- -- -- --
------ ------ ------ ------ ------
Total from dividends and distributions ... (0.792) (0.598) (0.051) (0.063) (0.133) (0.058)
------ ------ ------ ------ ------ ------
Net Asset Value, end of period ............... $17.20 $14.13 $14.80 $13.23 $12.36 $ 9.57
====== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) .... $213,729 $183,975 $200,903 $10,973 $9,181 $6,026
Ratio of expenses to average net assets ...... 1.05%(A) 1.05%(A) 1.07% 1.40% 1.40% 1.40%*
Ratio of net investment income to average
net assets ................................. 1.30% 1.15% 0.52% 0.53% 1.12% 3.48%*
Portfolio turnover (B) ....................... -- 1% 23% 79% 68% 0%
Total return ................................. 27.55% (0.41%) 12.26% 7.60% 30.73% 5.34%
Note: If agents of the Equity Fund for the periods indicated had not waived a portion of their fees and had expenses been limited
as required by certain state securities laws, the net investment income (loss) per share and the ratios would have been as follows:
Net investment income (loss) per share ....... $ 0.170 $ 0.136 $0.029** $(0.070) $0.002 $0.044
RATIOS:
Expenses to average net assets ............... 1.30%(A) 1.29%(A) 1.37% 2.50% 2.50% 2.50%*
Net investment income (loss) to average
net assets ................................. 1.05% 0.91% 0.21% (0.57)% 0.02% 2.38%*
<FN>
* Annualized.
** The per share amounts were computed using a monthly average number of shares outstanding during the year. (A) Includes
the Fund's share of Equity Portfolio's allocated expenses for the periods subsequent to May 1, 1994. (B) Portfolio
turnover represents the rate of portfolio activity for the period while the Fund was making investments directly in
securities. The portfolio turnover rate for the period since the Fund transferred all of its investable assets to the
Portfolio is included elsewhere in this Prospectus.
+ On May 1, 1994 the Fund began investing all of its investable assets in Equity Portfolio.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
SMALL CAP EQUITY FUND
FINANCIAL HIGHLIGHTS
CLASS A SHARES
(No Class B shares were outstanding during these periods.)
JUNE 21, 1995
(COMMENCEMENT OF
OPERATIONS) TO
DECEMBER 31, 1995
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C>
Net Asset Value, beginning- of period ........................... $10.00
------
Income from Operations:
Net investment income ........................................... 0.05
Net realized and unrealized gain ................................ 4.42
------
Total from operations ....................................... 4.47
------
Less Distributions From:
Net investment income ......................................... (0.05)
Net realized gain ............................................. (0.10)
======
Total from distributions .................................... (0.15)
======
Net Asset Value, end of period .................................. $14.32
======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) ....................... $5,148
Ratio of expenses to average net assets (A) ..................... 0%
Ratio of net investment income to average net assets ............ 1.21%*
Total return .................................................... 44.78%**
Note: If Agents of the Fund for the periods indicated and Agents of Small Cap Equity Portfolio for the period June 21, 1995
(commencement of operations) to December 31, 1995 had not voluntarily waived all of their fees, assumed Fund expenses and had
expenses been limited to that required by certain state securities laws, the net investment income (loss) per share and the ratios
would have been as follows:
Net investment income per share ................................. $(0.288)
RATIOS:
Expenses to average net assets (A) .............................. 2.50%*
Net investment income to average net assets ..................... (1.29)%*
<FN>
* Annualized.
** Not annualized.
(A) Includes the Fund's share of Small Cap Equity Portfolio's allocated expenses for the period indicated.
</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 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 25. The Funds will not necessarily
invest or engage in each of the investments and investment practices in the
Appendix but reserve the right to do so.
INVESTMENT RESTRICTIONS. The Statement of Additional Information contains a
list of specific investment restrictions which govern the investment policies of
the Funds, including a limitation that each Fund may borrow money from banks in
an amount not to exceed 33 1/3% of the Fund's net assets for extraordinary or
emergency purposes (e.g., to meet redemption requests). 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. For the period January 1, 1994 to April 30, 1994, the turnover rate
for the Balanced Fund was 29%. For the period May 1, 1994 to December 31, 1994
and for the fiscal year ended December 31, 1995, the turnover rates for Balanced
Portfolio were 105% and 210%, respectively. For the period January 1, 1994 to
April 30, 1994 the turnover rate for the Equity Fund was 1%. For the period May
1, 1994 to December 31, 1994 and for the fiscal year ended December 31, 1995,
the turnover rates for Equity Portfolio were 35% and 67%, respectively. For the
period June 21, 1995 (commencement of operations) to December 31, 1995, the
turnover rate for the Small Cap Equity Portfolio was 41%. 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. These risks are in addition to risks described
above and are described in the Appendix. See the Appendix -- Permitted
Investments and Investment Practices on page 25.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE: 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.
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.
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 19. For descriptions of the expenses of the Portfolios, see "Management"
and "General Information -- Expenses" -- page 24. For a description of the
investment objectives, policies and restrictions of the Portfolios, see
"Investment Information" -- page 9.
VALUATION OF SHARES
- ------------------------------------------------------------------------------
Net asset value per share of each class of shares of each Fund is determined
each day the New York Stock Exchange is open for trading (a "Business Day").
This determination is made once each day as of the close of regular trading on
the Exchange (normally 4:00 p.m. Eastern time) by adding the market value of all
securities and other assets attributable to a class of a Fund (including the
Fund's interest in its Portfolio), then subtracting the liabilities charged to
the class, and then dividing the result by the number of outstanding shares of
the class. Per share net asset value of each class of a Fund's shares may differ
because Class B shares bear higher expenses than Class A shares. The net asset
value per share is effective for orders received and accepted by the Distributor
prior to its calculation.
Portfolio securities and other assets are valued primarily on the basis of
market quotations, or if quotations are not available, by a method believed to
accurately reflect fair value. Non-U.S. securities are valued based on
quotations from the primary market in which they are traded and are translated
from the local currency into U.S. dollars using current exchange rates. In light
of the non-U.S. nature of some of each Fund's investments, trading may take
place in securities held by the Funds on days which are not Business Days and on
which it will not be possible to purchase or redeem shares of the Funds.
CLASSES OF SHARES
- ------------------------------------------------------------------------------
DIFFERENCES 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 following table. Each class has distinct advantages and disadvantages for
different investors, and investors may choose the class that best suits their
circumstances and objectives.
<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A PERCENTAGE OF
SALES CHARGE AVERAGE DAILY NET ASSETS) OTHER INFORMATION
---------------------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C>
CLASS A Maximum initial sales charge of Distribution fee of 0.05% Initial sales charge waived or reduced for
4.75% of the public offering price certain purchases; a contingent deferred
sales charge may apply in certain instances
where the initial sales charge is waived
CLASS B Maximum contingent deferred sales Distribution fee of 0.75%. Shares convert to Class A shares
charge of 5.00% of the lesser of Service fee of 0.05%. approximately eight years after issuance
redemption proceeds or original
purchase price; declines to zero
after six years
- ------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES: In deciding which class of
shares to purchase, investors should consider the cost of sales charges together
with the cost of the ongoing annual expenses described below, as well as any
other relevant facts and circumstances.
SALES CHARGES. Class A shares are sold at net asset value plus an initial
sales charge of up to 4.75% of the public offering price (except that for
purchases of $1 million or more, no initial sales charge is imposed and a
contingent deferred sales charge may be imposed instead). Because of this
initial sales charge, not all of a Class A shareholder's purchase price is
invested in a Fund. Class B shares are sold with no initial sales charge, so the
entire amount of a Class B shareholder's purchase price is immediately invested
in a Fund. A contingent deferred sales charge (up to 5.00% of the lesser of the
shares' net asset value at redemption or their original purchase price) applies
to redemptions made within six years of purchase.
WAIVERS AND REDUCTIONS OF SALES CHARGES. Class A share purchases of at least
$25,000 and Class A share purchases made under a Fund's reduced sales charge
plan may be made at a reduced sales charge. In considering the combined cost of
sales charges and ongoing annual expenses, investors should take into account
any reduced sales charges on Class A shares for which they may be eligible.
The entire initial sales charge on Class A shares is waived for certain
eligible purchasers. However, a 1.00% contingent deferred sales charge is
imposed on certain redemptions of Class A shares on which no initial sales
charge was assessed. Because Class A shares bear lower ongoing annual expenses
than Class B shares, in most cases investors eligible for reduced initial sales
charges should purchase Class A shares.
The contingent deferred sales charge may be waived upon redemption of
certain Class B shares. See "Purchases."
ONGOING ANNUAL EXPENSES. Class A shares pay an annual 12b-1 distribution fee
of 0.05% of average daily net assets. Class B shares pay an annual 12b-1
distribution fee of 0.75% of average daily net assets. In addition, Class B
shares are subject to a service fee at the annual rate of 0.05% of the average
daily net assets represented by Class B shares. Annual 12b-1 distribution fees
are a form of asset-based sales charge.
CONVERSION OF CLASS B SHARES: A shareholder's Class B shares will automatically
convert to Class A shares in the same Fund approximately eight years after the
date of issuance, together with a pro rata portion of all Class B shares
representing dividends and other distributions paid in additional Class B
shares. The conversion will be effected at the relative net asset values per
share of the two classes on the first Business Day of the month in which the
eighth anniversary of the issuance of the Class B shares occurs. If a
shareholder effects one or more exchanges among Class B shares of the Landmark
Funds during the eight-year period, the holding periods for the shares so
exchanged will be counted toward the eight-year period. Because the per share
net asset value of the Class A shares may be higher than that of the Class B
shares at the time of conversion, a shareholder may receive fewer Class A shares
than the number of Class B shares converted, although the dollar value will be
the same. See "Valuation of Shares." The conversion of Class B shares to Class A
shares is subject to the continuing availability of a ruling from the Internal
Revenue Service or an opinion of counsel that the conversion will not constitute
a taxable event for federal tax purposes. There can be no assurance that such a
ruling or opinion will be available, and the conversion of Class B shares to
Class A shares will not occur if such ruling or opinion is not available. In
that event, Class B shares would continue to be subject to higher expenses than
Class A shares for an indefinite period.
OTHER INFORMATION: See "Purchases," "Redemptions" and "Management --
Distribution Arrangements" for a more complete description of the initial and
contingent deferred sales charges and distribution fees for each class of shares
of each Fund. By purchasing shares an investor agrees to the imposition of
initial and deferred sales charges as described in this Prospectus.
PURCHASES
- ------------------------------------------------------------------------------
Each Fund offers two classes of shares, Class A and B shares, with different
expense levels and sales charges. See "Classes of Shares" for more information.
WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER THE ORDER IS FOR
CLASS A OR CLASS B SHARES. ALL SHARE PURCHASE ORDERS THAT FAIL TO SPECIFY A
CLASS AUTOMATICALLY WILL BE INVESTED IN CLASS A SHARES.
Shares of the Funds are offered continuously and may be purchased on any
Business Day at the public offering price either through a securities broker
which has a sales agreement with the Distributor or through a bank or other
financial institution which has an agency agreement with the Distributor. Such a
bank or financial institution will receive transaction fees that are equal to
the commissions paid to securities brokers. Shares of the Funds are being
offered exclusively to customers of a Shareholder Servicing Agent (i.e., a
financial institution, such as a federal or state-chartered bank, trust company,
savings and loan association or savings bank, or a securities broker, that has
entered into a shareholder servicing agreement concerning a Fund). A securities
broker may receive both commissions and shareholder servicing fees. An
investor's Shareholder Servicing Agent may not make available both classes of
shares. The public offering price is the net asset value next determined after
an order is transmitted to and accepted by the Distributor, plus any applicable
sales charge for Class A shares. Each Shareholder Servicing Agent is required to
promptly forward orders for Fund shares to the Distributor. Each Fund and the
Distributor reserve the right to reject any purchase order and to suspend the
offering of Fund shares for a period of time.
Each shareholder's account is established and maintained by his or her
Shareholder Servicing Agent, which will be the shareholder of record of the
Fund. Each Shareholder Servicing Agent may establish its own terms, conditions
and charges with respect to services it offers to its customers. Charges for
these services may include fixed annual fees and account maintenance fees. The
effect of any such fees will be to reduce the net return on the investment of
customers of that Shareholder Servicing Agent.
Shareholder Servicing Agents will not transmit purchase orders to the
Distributor 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:
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 may from time to time make payments for distribution and/or
shareholder servicing activities and provide additional promotional incentives
to brokers who sell shares of a Fund. In some instances, incentives may be
offered to certain brokers who have sold or may sell significant numbers of
shares of a Fund. The Distributor may make these payments out of its past
profits or any other sources available to it.
EXCHANGES
- ------------------------------------------------------------------------------
Shares of each Fund may be exchanged for shares of the same class of other
Landmark Funds that are made available by a shareholder's Shareholder Servicing
Agent, or may be acquired through an exchange of shares of the same class of
those funds. No initial sales charge is imposed on shares being acquired through
an exchange unless Class A shares are being acquired and the sales charge of the
fund being exchanged into is greater than the current sales charge of the Fund
(in which case an initial sales charge will be imposed at a rate equal to the
difference). No contingent deferred sales charge is imposed on shares being
disposed of through an exchange.
Shareholders must place exchange orders through their Shareholder Servicing
Agents, and may do so by telephone if their account applications so permit. For
more information on telephone transactions see "Redemptions." All exchanges will
be effected based on the relative net asset values per share next determined
after the exchange order is received 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
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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 $83 billion in assets worldwide. Citibank is a wholly-owned
subsidiary of Citicorp.
Citibank manages the Funds' assets pursuant to separate Investment 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. Grant D. Hobson, Richard Goldman and Mark Lindbloom are the
managers of the Balanced Fund. Mr. Hobson and Mr. Goldman manage the equity
portion of the portfolio. Mr. Hobson is responsible for managing U.S. equity
portfolios for trust and pension accounts of Citibank Global Asset Management
and currently manages more than $1 billion of total assets at Citibank. Prior
to joining Citibank in 1993, Mr. Hobson was a Sector Portfolio Manager for Axe
Houghton, formerly a division of USF&G, where he was responsible for equity
investments for pension accounts and mutual funds. Mr. Goldman is responsible
for managing approximately $600 million of total assets for quantitative
equity research for the U.S. institutional business of Citibank Global Asset
Management. He joined Citicorp's Investment Management Division in 1985 and
from 1988 to 1994 was responsible for running Citicorp's Institutional
Investor Relations Department. Mr. Lindbloom 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. Mr. Hobson and Mr. Goldman serve as managers of the Equity
Fund. Their investment management experience is described above.
SMALL CAP EQUITY FUND. David N. Pearl manages the Small Cap Equity Fund.
Mr. Pearl is a portfolio manager of U.S. equity assets for institutional
clients, and joined Citibank in 1994. Prior to joining Citibank he worked as a
portfolio manager at both Fleming Capital Management and Bankers Trust
Company.
Management's discussion of each Fund's performance is included in the Fund's
Annual Report to Shareholders, which investors may obtain without charge by
contacting their Shareholder Servicing Agents.
ADVISORY FEES. For its services under the Investment Advisory Agreements,
the Adviser receives the following investment advisory fees, which are accrued
daily and paid monthly, expressed as a percentage of the applicable Fund's
average daily net assets on an annualized basis for that Fund's then-current
fiscal year:
Balanced Fund 0.40%
Equity Fund 0.50%
Small Cap Equity Fund 0.75%
The investment advisory fees of the Small Cap Equity Fund are higher than those
paid by most investment companies. The Adviser may voluntarily agree to waive a
portion of its investment advisory fees.
For the fiscal year ended December 31, 1995, the investment advisory fees
paid to Citibank were: for the Balanced Fund, $956,408 (0.40% of the Fund's
average daily net assets for that fiscal year); for the Equity Fund, $1,049,008,
(.50% of the Fund's average daily net assets for that fiscal year); and for the
Small Cap Equity Fund $10,222, all of which was voluntarily waived.
BANKING RELATIONSHIPS. Citibank and its affiliates may have deposit, loan
and other relationships with the issuers of securities purchased on behalf of
the Funds, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Citibank has
informed the Funds that, in making its investment decisions, it does not obtain
or use material inside information in the possession of any division or
department of Citibank or in the possession of any affiliate of Citibank.
BANK REGULATORY MATTERS. The Glass-Steagall Act prohibits certain financial
institutions, such as Citibank, from underwriting securities of open-end
investment companies, such as the Funds. Citibank believes that its services
under the Investment Advisory Agreements and the activities performed by it or
its affiliates as Shareholder Servicing Agents and sub-administrator are not
underwriting and are consistent with the Glass-Steagall Act and other relevant
federal and state laws. However, there is no controlling precedent regarding the
performance of the combination of investment advisory, shareholder servicing and
sub-administrative activities by banks. State laws on this issue may differ from
applicable federal law, and banks and financial institutions may be required to
register as dealers pursuant to state securities laws. Changes in either federal
or state statutes or regulations, or in their interpretations, could prevent
Citibank or its affiliates from continuing to perform these services. If
Citibank or its affiliates were to be prevented from acting as the Adviser,
sub-administrator or a Shareholder Servicing Agent, the Funds would seek
alternative means for obtaining these services. The Funds do not expect that
shareholders would suffer any adverse financial consequences as a result of any
such occurrence.
ADMINISTRATIVE SERVICES PLANS: The Funds and the Portfolios have Administrative
Services Plans which provide that the Funds and the Portfolios may obtain the
services of an administrator, a transfer agent, a custodian, and, in the case of
the Funds, one or more Shareholder Servicing Agents, and may enter into
agreements providing for the payment of fees for such services. Under the Funds'
Administrative Services Plans, the total of the fees paid to the Funds'
Administrator and Shareholder Servicing Agents may not exceed 0.65% of each
Fund's average daily net assets on an annualized basis for the Fund's
then-current fiscal year. Any distribution fees or service fees (other than any
fee concerning electronic or other media advertising) payable under the
Distribution Plans for the Class A shares of the Balanced and Equity Funds are
included in this percentage limitation for those shares. This limitation does
not include any amounts payable under the Distribution Plans for the Class A
shares of the Small Cap Equity Fund and for the Class B shares of each Fund.
Within this overall limitation, individual fees may vary. Under the Portfolios'
Administrative Services Plan, fees paid to the Portfolios' Administrator may not
exceed 0.05% of each Portfolio's average daily net assets on an annualized basis
for the Portfolio's then-current fiscal year. See "Administrators," "Shareholder
Servicing Agents" and "Transfer Agent, Custodian and Fund Accountant."
ADMINISTRATORS: LFBDS and Signature Financial Group (Cayman) Ltd. ("SFG")
provide certain administrative services to the Funds and the Portfolios under
administrative services agreements. These administrative services include
providing general office facilities, supervising the overall administration of
the Funds and the Portfolios, and providing persons satisfactory to the Boards
of Trustees to serve as Trustees and officers of the Funds and Portfolios. These
Trustees and officers may be directors, officers or employees of LFBDS, SFG or
their affiliates.
For these services, the Administrators receive fees accrued daily and paid
monthly of 0.25% of the average daily net assets of each Fund and 0.05% of the
assets of each Portfolio, in each case on an annualized basis for the Fund's or
the Portfolio's then-current fiscal year. However, each of the Administrators
has voluntarily agreed to waive a portion of the fees payable to it as necessary
to maintain the projected rate of total operating expenses. LFBDS has agreed to
pay certain ordinary operating expenses of the Balanced Fund and the Equity
Fund. See "General Information -- Expenses."
LFBDS and SFG are wholly-owned subsidiaries of Signature Financial Group,
Inc. "Landmark" is a service mark of LFBDS.
SUB-ADMINISTRATOR: Pursuant to sub-administrative services agreements, Citibank
performs such sub-administrative duties for the Funds and Portfolios as from
time to time are agreed upon by Citibank and LFBDS or SFG. Citibank's
compensation as sub-administrator is paid by LFBDS or SFG.
SHAREHOLDER SERVICING AGENTS: The Funds have entered into separate shareholder
servicing agreements with each Shareholder Servicing Agent pursuant to which
that Shareholder Servicing Agent provides shareholder services, including
answering customer inquiries, assisting in processing purchase, exchange and
redemption transactions and furnishing Fund communications to shareholders. For
these services, each Shareholder Servicing Agent receives a fee from each Fund
at an annual rate of 0.25% of the average daily net assets of the Fund
represented by shares owned by investors for whom such Shareholder Servicing
Agent maintains a servicing relationship.
Some Shareholder Servicing Agents may impose certain conditions on their
customers in addition to or different from those imposed by the Funds, such as
requiring a minimum initial investment or charging their customers a direct fee
for their services. Each Shareholder Servicing Agent has agreed to transmit to
its customers who are shareholders of a Fund appropriate prior written
disclosure of any fees that it may charge them directly and to provide written
notice at least 30 days prior to imposition of any transaction fees.
TRANSFER AGENT, CUSTODIAN AND FUND ACCOUNTANT: State Street Bank and Trust
Company acts as transfer agent and dividend disbursing agent for each Fund. The
principal business address of State Street Bank and Trust Company is 225
Franklin Street, Boston, Massachusetts 02110. Investors Bank & Trust Company
acts as the custodian of each Fund's and each Portfolio's assets. Securities may
be held by a sub-custodian bank approved by the Trustees. Signature Financial
Services, Inc. provides fund accounting services and calculates the daily net
asset value for the Funds.
DISTRIBUTION ARRANGEMENTS: LFBDS, 6 St. James Avenue, Boston, MA 02116, (617)
423-1769, is the distributor of shares of each Fund and also serves as
distributor for each of the other Landmark Funds and as a Shareholder Servicing
Agent for certain investors. LFBDS receives distribution fees from the Funds
pursuant to Distribution Plans adopted in accordance with Rule 12b-1 under the
1940 Act. LFBDS also collects the sales charges imposed on purchases of Class A
shares and collects any contingent deferred sales charges imposed on redemptions
of Class A and Class B shares. In those states where LFBDS is not a registered
broker-dealer, shares of the Funds are sold through Signature Broker-Dealer
Services, Inc., as dealer.
The Funds maintain separate Distribution Plans pertaining to Class A shares
and Class B shares. The Class A Plans provide that the Funds may pay the
Distributor a monthly distribution fee and a monthly service fee at annual rates
not to exceed, respectively, 0.15% and 0.25% of the average daily net assets
represented by Class A shares. However, none of the Funds has entered into any
agreement to pay this service fee to the Distributor. The Class A Plans also
permit the Funds to pay the Distributor an additional fee (not to exceed 0.05%
of the average daily net assets represented by Class A shares) in anticipation
of or as reimbursement for print or electronic media advertising expenses
incurred in connection with the sale of Class A shares. The Funds did not pay
anything under this provision during 1995, and do not anticipate doing so during
the current fiscal year.
The Class B Plans provide that the Funds will pay the Distributor a monthly
distribution fee and a monthly service fee at annual rates not to exceed,
respectively, 0.75% and 0.25% of the average daily net assets represented by
Class B shares. The Funds have agreed that they will not pay service fees in an
amount in excess of 0.20% of the average daily net assets represented by Class B
shares during the 1996 fiscal year. Currently, the service fee for Class B
shares is 0.05% per annum of the average daily net assets represented by Class B
shares.
The Distributor uses the distribution fees under the Plans to offset each
Fund's marketing costs attributable to the classes, such as preparation of sales
literature, advertising, and printing and distributing prospectuses and other
shareholder materials to prospective investors. In addition, the Distributor may
use the distribution fees to pay costs related to distribution activities,
including employee salaries, bonuses and other overhead expenses. The
Distributor also uses the distribution fees under the Class B Plans to offset
the commissions it pays to brokers and other institutions for selling the Funds'
Class B shares. The Funds and the Distributor provide to the Trustees quarterly
a written report of amounts expended pursuant to the Plans and the purposes for
which the expenditures were made.
During the period they are in effect, the Plans and related Distribution
RAgreements pertaining to each class of shares obligate the Funds to pay
distribution fees to LFBDS as compensation for its distribution activities, not
as reimbursement for specific expenses incurred. Thus, even if LFBDS's expenses
exceed its distribution fees for any Fund, the Fund will not be obligated to pay
more than those fees and, if LFBDS's expenses are less than such fees, it will
retain its full fees and realize a profit. Each Fund will pay the distribution
fees to LFBDS until either the applicable Plan or Distribution Agreement is
terminated or not renewed. In that event, LFBDS's expenses in excess of
distribution fees received or accrued through the termination date will be
LFBDS's sole responsibility and not obligations of the Fund. In their annual
consideration of the continuation of the Plans for each Fund, the Trustees will
review each Plan and LFBDS's expenses for each class separately.
Each class of shares of each Fund has exclusive voting rights with respect
to the Plan for that class.
TAX MATTERS
- ------------------------------------------------------------------------------
This discussion of taxes is for general information only. Investors should
consult their own tax advisers about their particular situations.
Each Fund intends to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies so that it will not be liable for
any federal income or excise taxes. Each Fund may pay withholding or other taxes
to foreign governments during the year, however, and these taxes will reduce
those Funds' dividends.
Fund dividends and capital gains distributions are subject to federal income
tax and may also be subject to state and local taxes. Dividends and
distributions are treated in the same manner for federal tax purposes whether
they are paid in cash or as additional shares. Generally, distributions from a
Fund's net investment income and short-term capital gains will be taxed as
ordinary income. A portion of distributions from net investment income may be
eligible for the dividends-received deduction available to corporations.
Distributions of long-term net capital gains will be taxed as such regardless of
how long the shares of a Fund have been held.
Fund distributions will reduce the distributing Fund's net asset value per
share. Shareholders who buy shares just before a Fund makes a distribution may
thus pay the full price for the shares and then effectively receive a portion of
the purchase price back as a taxable distribution.
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 shareholder's net return on his or her investment. See the Statement
of Additional Information for more information concerning the calculation of
yield and total rate of return quotations for the Funds.
GENERAL INFORMATION
- ------------------------------------------------------------------------------
ORGANIZATION: The Balanced Fund is a series of Landmark Funds I; each of the
Equity Funds is a series of Landmark Funds II. Landmark Funds I and Landmark
Funds II are Massachusetts business trusts which were organized on April 13,
1984; they also are open-end management investment companies registered under
the 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 Investment Advisory Agreement,
Administrative Services Agreement, Distribution Agreement and Shareholder
Servicing Agreements). LFBDS receives a fee from each of the Balanced Fund and
the Equity Fund, in addition to the administrative services and distribution
fees, estimated and accrued daily and paid monthly in an amount such that
immediately after any such payment the aggregate ordinary operating expenses of
the Fund would not on a per annum basis exceed an agreed upon rate, currently
1.02% of the Balanced Fund's average daily net assets and 1.05% of the Equity
Fund's average daily net assets. For the fiscal year ended December 31, 1995,
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 ............. $161,308 $103,747 1.02%
Equity Fund ............... $144,095 $196,232 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 Investment 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.
COUNSEL AND INDEPENDENT AUDITORS: Bingham, Dana & Gould LLP, Boston,
Massachusetts is counsel for each Fund. Price Waterhouse LLP, located at 160
Federal Street, Boston, MA 02110, serves as independent auditors for each of the
Funds.
----------------
The Statement of Additional Information dated the date hereof contains more
detailed information about the Funds and the Portfolios, including information
relating to (i) investment policies and restrictions, (ii) the Trustees,
officers, Adviser and Administrators, (iii) securities transactions, (iv) the
Funds' shares, including rights and liabilities of shareholders, (v) the method
used to calculate performance information, (vi) programs for the purchase of
shares, and (vii) the determination of net asset value.
No person has been authorized to give any information or make any
representations not contained in this Prospectus or the Statement of Additional
Information in connection with the offering made by this Prospectus and, if
given or made, such information or representations must not be relied upon as
having been authorized by the Funds or their distributor. This Prospectus does
not constitute an offering by the Funds or their distributor in any jurisdiction
in which such offering may not lawfully be made.
APPENDIX
- ------------------------------------------------------------------------------
PERMITTED INVESTMENTS AND
INVESTMENT PRACTICES
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements in
order to earn a return on temporarily available cash. Repurchase agreements are
transactions in which an institution sells the Fund a security at one price,
subject to the Fund's obligation to resell and the selling institution's
obligation to repurchase that security at a higher price normally within a seven
day period. There may be delays and risks of loss if the seller is unable to
meet its obligation to repurchase.
REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into reverse repurchase
agreements. Reverse repurchase agreements involve the sale of securities held by
the Fund and the agreement by the Fund to repurchase the securities at an
agreed-upon price, date and interest payment. When a Fund enters into reverse
repurchase transactions, securities of a dollar amount equal in value to the
securities subject to the agreement will be maintained in a segregated account
with the Fund's custodian. The segregation of assets could impair the Fund's
ability to meet its current obligations or impede investment management if a
large portion of the Fund's assets are involved. Reverse repurchase agreements
are considered to be a form of borrowing.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements and in order to generate additional income, each Fund may lend its
portfolio securities to broker-dealers and other institutional borrowers. Such
loans must be callable at any time and continuously secured by collateral (cash
or U.S. Government securities) in an amount not less than the market value,
determined daily, of the securities loaned. It is intended that the value of
securities loaned by a Fund would not exceed 30% of the Fund's total assets.
In the event of the bankruptcy of the other party to a securities loan, a
repurchase agreement or a reverse repurchase agreement, the Fund could
experience delays in recovering either the securities 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.
FUTURES CONTRACTS. The Balanced Fund may use financial futures in order to
protect the Fund from fluctuations in interest rates (sometimes called
"hedging") without actually buying or selling debt securities, or to manage the
effective maturity or duration of fixed-income securities in the Fund's
portfolio in an effort to reduce potential losses or enhance potential gain.
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a security at a specified future time and
price, or for making payment of a cash settlement based on changes in the value
of a security or an index of securities. Because the value of a futures contract
changes based on the price of the underlying security, futures contracts are
commonly referred to as "derivatives". Futures contracts are a generally
accepted part of modern portfolio management and are regularly utilized by many
mutual funds and other institutional investors. The futures contracts that may
be purchased by the Balanced Fund are standardized contracts traded on
commodities exchanges or boards of trade.
When the Balanced Fund purchases or sells a futures contract, it is required
to make an initial margin deposit. Although the amount may vary, initial margin
can be as low as 1% or less of the face amount of the contract. Additional
margin may be required as the contract fluctuates in value. Since the amount of
margin is relatively small compared to the value of the securities covered by a
futures contract, the potential for gain or loss on a futures contract is much
greater than the amount of the Fund's initial margin deposit. The Balanced Fund
does not currently intend to enter into a futures contract if, as a result, the
initial margin deposits on all of its futures contracts would exceed
approximately 5% of the Fund's net assets. Also, the Balanced Fund intends to
limit its futures contracts so that the value of the securities covered by its
fututes contracts would not generally exceed 50% of the Fund's other assets and
to segregate sufficient assets to meet its obligations under outstanding futures
contracts.
The ability of the Balanced Fund to utilize futures contracts successfully
will depend on the Adviser's ability to predict interest rate movements, which
cannot be assured. In addition to general risks associated with any investment,
the use of futures contracts entails the risk that, to the extent the Adviser's
view as to interest rate movements is incorrect, the use of futures contracts,
even for hedging purposes, could result in losses greater than if they had not
been used. This could happen, for example, if there is a poor correlation
between price movements of futures contracts and price movements in the Fund's
related portfolio position. Also, although the Balanced Fund will purchase only
standardized futures traded on regulated exchanges, the futures markets may not
be liquid in all circumstances. As a result, in certain markets, the Fund might
not be able to close out a transaction without incurring substantial losses, if
at all. When futures contracts are used for hedging, even if they are successful
in minimizing the risk of loss due to a decline in the value of the hedged
position, at the same time they limit any potential gain which might result from
an increase in value of such position.
The use of futures contracts potentially exposes the Balanced Fund to the
effects of "leveraging", which occurs when futures are used so that the Fund's
exposure to the market is greater than it would have been if the Fund had
invested directly in the underlying securities. "Leveraging" increases the
Fund's potential for both gain and loss. As noted above, the Fund intends to
adhere to certain policies relating to the use of futures contracts, which
should have the effect of limiting the amount of leverage by the Fund. The use
of futures contracts may increase the amount of taxable income of the Fund and
may affect in other ways the amount, timing and character of the Fund's income
for tax purposes, as more fully discussed in the section entitled "Certain
Additional Tax Matters" in the Statement of Additional Information.
The use of futures by the Balanced Fund and some of their risks are
described more fully in the Statement of Additional Information.
SECURITIES OF ISSUERS IN DEVELOPING COUNTRIES. Shareholders should be aware
that investing in the equity and fixed income markets of developing countries
involves exposure to economic structures that are generally less diverse and
mature, and to political systems which can be expected to have less stability,
than those of developed countries. Historical experience indicates that the
markets of developing countries have been more volatile than the markets of
developed countries with more mature economies; such markets often have provided
higher rates of return and greater risks. These heightened risks include (i)
greater risks of expropriation, confiscatory taxation and nationalization, and
less social, political and economic stability; (ii) the small current size of
markets for securities of issuers based in developing countries and the
currently low or non-existent volume of trading, resulting in a lack of
liquidity and in price volatility; (iii) certain national policies which may
restrict a Fund's investment opportunities including restrictions on investing
in issuers or industries deemed sensitive to relevant national interests; and
(iv) the absence of developed legal structures. Such characteristics can be
expected to continue in the future.
CURRENCY EXCHANGE CONTRACTS. Forward currency exchange contracts may be
entered into for each Fund for the purchase or sale of non-U.S. currency for
hedging purposes against adverse rate changes or otherwise to achieve the Fund's
investment objectives. A currency exchange contract allows a definite price in
dollars to be fixed for securities of non-U.S. issuers that have been purchased
or sold (but not settled) for the Fund. Entering into such exchange contracts
may result in the loss of all or a portion of the benefits which otherwise could
have been obtained from favorable movements in exchange rates. In addition,
entering into such contracts means incurring certain transaction costs and
bearing the risk of incurring losses if rates do not move in the direction
anticipated.
LOWER-RATED DEBT SECURITIES. Each Fund may purchase lower-rated securities
(those rated Baa or better by Moody's or BBB or better by S&P) which may have
poor protection of payment of principal and interest. These securities are often
considered to be speculative and involve greater risk of default or price
changes than securities assigned a higher quality rating due to changes in the
issuer's creditworthiness. The market prices of these securities may fluctuate
more than higher-rated securities and may decline significantly in periods of
general economic difficulty which may follow periods of rising interest rates.
SHORT SALES "AGAINST THE BOX." In a short sale, a Fund sells a borrowed
security and has a corresponding obligation to the lender to return the
identical security. Each Fund may engage in short sales only if at the time of
the short sale it owns or has the right to obtain, at no additional cost, an
equal amount of the security being sold short. This investment technique is
known as a short sale "against the box." A Fund may make a short sale as a
hedge, when it believes that the value of a security owned by the Fund (or a
security convertible or exchangeable for such security) may decline, or when the
Fund wants to sell the security at an attractive current price but wishes to
defer recognition of gain or loss for tax purposes. Not more than 40% of a
Fund's total assets would be involved in short sales "against the box."
ASSET-BACKED SECURITIES. The Balanced Fund may purchase mortgage-backed
securities issued or guaranteed as to payment of principal and interest by the
U.S. Government or one of its agencies and backed by the full faith and credit
of the U.S. Government, including direct pass-through certificates of GNMA, as
well as mortgage-backed securities for which principal and interest payments are
backed by the credit of particular agencies of the U.S. Government.
Mortgage-backed securities are generally backed or collateralized by a pool of
mortgages. These securities are sometimes called collateralized mortgage
obligations or CMOs.
Even if the U.S. Government or one of its agencies guarantees principal and
interest payments of a mortgage-backed security, the market price of a
mortgage-backed security is not insured and may be subject to market volatility.
When interest rates decline, mortgage-backed securities experience higher rates
of prepayment, because the underlying mortgages are refinanced to take advantage
of the lower rates. Thus the prices of mortgage-backed securities may not
increase as much as prices of other debt obligations when interest rates
decline, and mortgage-backed securities may not be an effective means of locking
in a particular interest rate. In addition, any premium paid for a
mortgage-backed security may be lost when it is prepaid.
<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 CLIENTS:
Citigold
P.O. Box 5130, New York, NY 10126-5130
Call Your Citigold Executive, or in NY or CT (800) 285-1701
or for all other states (800) 285-1707
FOR 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,
Registered Representative or (212) 559-5959
FOR CITIGOLD 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
<PAGE>
[LANDMARK LOGO] LANDMARK(SM) FUNDS
Advised by Citibank, N.A.
- --------------------------------------------------------------------------------
LANDMARK
BALANCED FUND
- --------------------------------------------------------------------------------
LANDMARK
EQUITY FUND
- --------------------------------------------------------------------------------
LANDMARK
SMALL CAP
EQUITY FUND
- --------------------------------------------------------------------------------
PROSPECTUS
May 1, 1996
EQ/P.1/96 Printed on Recycled Paper [recycle logo]
<PAGE>
Statement of
LANDMARK BALANCED FUND Additional Information
LANDMARK EQUITY FUND May 1, 1996
LANDMARK SMALL CAP EQUITY FUND
(Members of the Landmark\S/\M/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 ......................... 2
Performance Information .................................................. 12
Determination of Net Asset Value; Valuation of Securities;
Additional Purchase and Redemption Information ......................... 13
Management ............................................................... 15
Portfolio Transactions ................................................... 22
Description of Shares, Voting Rights and Liabilities ..................... 23
Certain Additional Tax Matters ........................................... 25
Independent Accountants and Financial Statements ......................... 26
This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Funds' Prospectus, dated May 1, 1996, 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 at 6 St. James
Avenue, Boston, MA 02116, (617) 423-1679.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
1. THE FUNDS
Landmark Funds I ("Trust I") and Landmark Funds II ("Trust II" and
together with Trust I, the "Trusts") are each an open-end management
investment company that was organized as a business trust under the laws of
the Commonwealth of Massachusetts on April 13, 1984. This Statement of
Additional Information describes shares of Landmark Balanced Fund, which is a
diversified series of Trust I, and Landmark Equity Fund and Landmark Small Cap
Equity Fund, which are diversified series of Trust II. References in this
Statement of Additional Information to the "Prospectus" are to the Prospectus,
dated May 1, 1996, 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"), the administrator of each
Portfolio (the "Portfolio Administrator"), supervise the overall
administration of each Fund and each Portfolio, respectively. The Boards of
Trustees of each Trust and the Portfolio Trust provide broad supervision over
the affairs of the Funds and the Portfolios, respectively. Shares of the Funds
are continuously sold by LFBDS, the Funds' distributor (the "Distributor"),
only to investors who are customers of a financial institution, such as a
federal or state-chartered bank, trust company, savings and loan association
or savings bank, or a securities broker, that has entered into a shareholder
servicing agreement with the Trusts (collectively, "Shareholder Servicing
Agents"). Shares of each Fund are sold at net asset value, plus, in the case
of Class A Shares, a sales charge that may be reduced on purchases involving
substantial amounts and that may be eliminated in certain circumstances. LFBDS
receives a distribution fee from each Fund pursuant to a Distribution Plan
adopted with respect to each class of shares of the Funds in accordance with
Rule 12b-1 under the Investment Company Act of 1940, as amended (the "1940
Act"). LFBDS also receives a service fee from the assets of each Fund
represented by Class B shares pursuant to the Distribution Plan adopted with
respect to Class B shares of the Funds.
2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES
The investment objectives of the LANDMARK BALANCED FUND are to earn high
current income by investing in a broad range of securities, to preserve
capital, and to provide growth potential with reduced risk.
The investment objective of the LANDMARK EQUITY FUND and the LANDMARK
SMALL CAP EQUITY FUND is long-term capital growth. Dividend income, if any, is
incidental to this investment objective.
The investment objectives of each Fund may be changed without approval by
that Fund's shareholders, but shareholders will be given written notice at
least 30 days before any change is implemented. Of course, there can be no
assurance that any Fund will achieve its investment objectives.
INVESTMENT POLICIES
The Prospectus contains a discussion of the various types of securities in
which each Fund may invest and the risks involved in such investments. The
following supplements the information contained in the Prospectus concerning
the investment objectives, policies and techniques of each Fund.
The Balanced Fund's policy is to invest its assets, under normal
circumstances, in a broadly diversified portfolio of income-producing
securities, including common and preferred stocks, bonds and short-term
obligations. Under normal circumstances, at least 25% of the Fund's total
assets is invested in fixed income securities.
While it is the policy of each of the Equity Fund and Small Cap Equity
Fund to invest its assets in a broadly diversified portfolio of equity
securities consisting mainly of common stocks of U.S. issuers, each Fund may
also invest in other types of securities such as fixed income securities and
convertible and non-convertible bonds.
The Trusts have also adopted the following policies with respect to each
Fund's investments in (i) warrants and (ii) securities of issuers with less
than three years' continuous operation. Each Trust's purchases of warrants for
each Fund will not exceed 5% of the Fund's net assets. Included within that
amount, but not exceeding 2% of its net assets, may be warrants which are not
listed on the New York Stock Exchange or the American Stock Exchange. Any such
warrants will be valued at their market value except that warrants which are
attached to securities at the time such securities are acquired for a Fund
will be deemed to be without value for the purpose of this restriction. The
Trusts will not invest more than 5% of each Fund's assets in companies which,
including their respective predecessors, have a record of less than three
years' continuous operation.
The Trusts may withdraw the investment of any Fund from its corresponding
Portfolio at any time, if the Board of Trustees of that Trust determines that
it is in the best interests of the Fund to do so. Upon any such withdrawal,
the Fund's assets would continue to be invested in accordance with the
investment policies described herein with respect to that Fund. The policies
described above and those described below are not fundamental and may be
changed without shareholder approval.
FUTURES CONTRACTS
The Balanced Fund may invest in futures contracts to the extent provided
in the Prospectus. A futures contract is an agreement between two parties for
the purchase or sale for future delivery of securities or for the payment or
acceptance of a cash settlement based upon changes in the value of the
securities or of an index of securities. A "sale" of a futures contract means
the acquisition of a contractual obligation to deliver the securities called
for by the contract at a specified price, or to make or accept the cash
settlement called for by the contract, on a specified date. A "purchase" of a
futures contract means the acquisition of a contractual obligation to acquire
the securities called for by the contract at a specified price, or to make or
accept the cash settlement called for by the contract, on a specified date.
Futures contracts have been designed by exchanges which have been designated
"contract markets" by the Commodity Futures Trading Commission ("CFTC") and
must be executed through a futures commission merchant, or brokerage firm,
which is a member of the relevant contract market. Futures contracts trade on
these markets, and the exchanges, through their clearing organizations,
guarantee that the contracts will be performed as between the clearing members
of the exchange.
While futures contracts based on debt securities do provide for the
delivery and acceptance of securities, such deliveries and acceptances are
very seldom made. Generally, a futures contract is terminated by entering into
an offsetting transaction. Brokerage fees will be incurred when the Fund
purchases or sells a futures contracts. At the same time such a purchase or
sale is made, the Fund must provide cash or securities as a deposit ("initial
deposit") known as "margin". The initial deposit required will vary, but may
be as low as 1% or less of a contract's face value. Daily thereafter, the
futures contract is valued through a process known as "marking to market", and
the Fund may receive or be required to pay additional "variation margin" as
the futures contract becomes more or less valuable. At the time of delivery of
securities pursuant to such a contract, adjustments are made to recognize
differences in value arising from the delivery of securities with a different
interest rate than the specific security that provides the standard for the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was entered into.
The Fund may purchase or sell futures contracts to attempt to protect the
Fund from fluctuations in interest rates, or to manage the effective maturity
or duration of the Fund's portfolio in an effort to reduce potential losses or
enhance potential gain, without actually buying or selling debt securities.
For example, if interest rates were expected to increase, the Fund might enter
into futures contracts for the sale of debt securities. Such a sale would have
much the same effect as if the Fund sold bonds that it owned, or as if the
Fund sold longer-term bonds and purchased shorter-term bonds. If interest
rates did increase, the value of the Fund's debt securities would decline, but
the value of the futures contracts would increase, thereby keeping the net
asset value of the Fund from declining as much as it otherwise would have.
Similar results could be accomplished by selling bonds, or by selling bonds
with longer maturities and investing in bonds with shorter maturities.
However, by using futures contracts, the Fund avoids having to sell its
securities.
Similarly, when it is expected that interest rates may decline, the Fund
might enter into futures contracts for the purchase of debt securities. Such a
transaction would be intended to have much the same effect as if the Fund
purchased bonds, or as if the Fund sold shorter-term bonds and purchased
longer-term bonds. If interest rates did decline, the value of the futures
contracts would increase.
Although the use of futures for hedging should tend to minimize the risk
of loss due to a decline in the value of the hedged position (e.g., if the
Fund sells a futures contract to protect against losses in the debt securities
held by the Fund), at the same time the futures contracts limit any potential
gain which might result from an increase in value of a hedged position.
In addition, the ability effectively to hedge all or a portion of the
Fund's investments through transactions in futures contracts depends on the
degree to which movements in the value of the debt securities underlying such
contracts correlate with movements in the value of the Fund's securities. If
the security underlying a futures contract is different than the security
being hedged, they may not move to the same extent or in the same direction.
In that event, the Fund's hedging strategy might not be successful and the
Fund could sustain losses on these hedging transactions which would not be
offset by gains on the Fund's other investments or, alternatively, the gains
on the hedging transaction might not be sufficient to offset losses on the
Fund's other investments. It is also possible that there may be a negative
correlation between the security underlying a futures contract and the
securities being hedged, which could result in losses both on the hedging
transaction and the securities. In these and other instances, the Fund's
overall return could be less than if the hedging transactions had not been
undertaken. Similarly, even where the Fund enters into futures transactions
other than for hedging purposes, the effectiveness of its strategy may be
affected by lack of correlation between changes in the value of the futures
contracts and changes in value of the securities which the Fund would
otherwise buy and sell.
The ordinary spreads between prices in the cash and futures markets, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit
and variation margin requirements. Rather than meeting additional variation
margin requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship between
the cash and futures markets. Second, there is the potential that the
liquidity of the futures market may be lacking. Prior to expiration, a futures
contract may be terminated only by entering into a closing purchase or sale
transaction, which requires a secondary market on the contract market on which
the futures contracts was originally entered into. While the Fund will
establish a futures position only if there appears to be a liquid secondary
market therefor, there can be no assurance that such a market will exist for
any particular futures contract at any specific time. In that event, it may
not be possible to close out a position held by the Fund, which could require
the Fund to purchase or sell the instrument underlying the futures contract or
to meet ongoing variation margin requirements. The inability to close out
futures positions also could have an adverse impact on the ability effectively
to use futures transactions for hedging or other purposes.
The liquidity of a secondary market in a futures contract may be adversely
affected by "daily price fluctuation limits" established by the exchanges,
which limit the amount of fluctuation in the price of a futures contract
during a single trading day and prohibit trading beyond such limits once they
have been reached. The trading of futures contracts also is subject to the
risk of trading halts, suspensions, exchange or clearing house equipment
failures, government intervention, insolvency of a brokerage firm or clearing
house or other disruptions of normal trading activity, which could at times
make it difficult or impossible to liquidate existing positions or to recover
excess variation margin payments.
Investments in futures contracts also entail the risk that if the
Adviser's investment judgment about the general direction of interest rates is
incorrect, the Fund's overall performance may be poorer than if any such
contract had not been entered into. For example, if the Fund hedged against
the possibility of an increase in interest rates which would adversely affect
the price of the Fund's bonds and interest rates decrease instead, part or all
of the benefit of the increased value of the Fund's bonds which were hedged
will be lost because the Fund will have offsetting losses in its futures
positions. Similarly, if the Fund purchases futures contracts expecting a
decrease in interest rates and interest rates instead increased, the Fund will
have losses in its futures positions which will increase the amount of the
losses on the securities in its portfolio which will also decline in value
because of the increase in interest rates. In addition, in such situations, if
the Fund has insufficient cash, the Fund may have to sell bonds from its
investments to meet daily variation margin requirements, possibly at a time
when it may be disadvantageous to do so.
Each contract market on which futures contracts are traded has established
a number of limitations governing the maximum number of positions which may be
held by a trader, whether acting alone or in concert with others. The Adviser
does not believe that these trading and position limits would have an adverse
impact on a Fund's strategies involving futures.
CFTC regulations require compliance with certain limitations in order to
assure that the Fund is not deemed to be a "commodity pool" under such
regulations. In particular, CFTC regulations prohibit the Fund from purchasing
or selling futures contracts (other than for bona fide hedging transactions)
if, immediately thereafter, the sum of the amount of initial margin required
to establish the Fund's non-hedging futures positions would exceed 5% of the
Fund's net assets.
The Balanced Fund will comply with this CFTC requirement, and currently
intends to adhere to the additional policies described below. First, an amount
of cash or cash equivalents will be maintained by the Fund in a segregated
account with the Fund's custodian so that the amount so segregated, plus the
initial margin held on deposit, will be approximately equal to the amount
necessary to satisfy the Fund's obligations under the futures contract. The
second is that the Fund will not enter into a futures contract if immediately
thereafter the amount of initial margin deposits on all the futures contracts
held by the Fund would exceed approximately 5% of the net assets of the Fund.
The third is that the aggregate market value of the futures contracts held by
the Fund not generally exceed 50% of the market value of the Fund's total
assets other than its futures contracts. For purposes of this third policy,
"market value" of a futures contract is deemed to be the amount obtained by
multiplying the number of units covered by the futures contract times the per
unit price of the securities covered by that contract.
The ability of the Fund to engage in futures transactions may be limited
by the current federal income tax requirement that less than 30% of the Fund's
gross income be derived from the sale or other disposition of stock or
securities held for less than three months. In addition, the use of futures
contracts may increase the amount of taxable income of the Fund and may affect
the amount, timing and character of a Fund's income for tax purposes, as more
fully discussed herein in the section entitled "Certain Additional Tax
Matters".
REPURCHASE AGREEMENTS
Each of the Funds may invest in repurchase agreements collateralized by
securities in which that Fund may otherwise invest. Repurchase agreements are
agreements by which a Fund purchases a security and simultaneously commits to
resell that security to the seller (which is usually a member bank of the U.S.
Federal Reserve System or a member firm of the New York Stock Exchange (or a
subsidiary thereof)) at an agreed-upon date within a number of days (usually
not more than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed-upon market rate of interest which is unrelated
to the coupon rate or maturity of the purchased security. A repurchase
agreement involves the obligation of the seller to pay the agreed upon price,
which obligation is in effect secured by the value of the underlying security,
usually U.S. Government or Government agency issues. Under the 1940 Act,
repurchase agreements may be considered to be loans by the buyer. A Fund's
risk is limited to the ability of the seller to pay the agreed-upon amount on
the delivery date. If the seller defaults, the underlying security constitutes
collateral for the seller's obligation to pay although that Fund may incur
certain costs in liquidating this collateral and in certain cases may not be
permitted to liquidate this collateral. All repurchase agreements entered into
by the Funds are fully collateralized, with such collateral being marked to
market daily.
SECURITIES OF NON-U.S. ISSUERS
Each of the Funds may invest in securities of non-U.S. issuers. Investing
in securities issued by companies whose principal business activities are
outside the United States may involve significant risks not present in U.S.
investments. For example, the value of such securities fluctuates based on the
relative strength of the U.S. dollar. In addition, there is generally less
publicly available information about non-U.S. issuers, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Non-U.S. issuers are generally not bound by uniform accounting, auditing
and financial reporting requirements comparable to those applicable to U.S.
issuers. Investments in securities of non-U.S. issuers also involve the risk
of possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of a Fund, political or financial instability or diplomatic and
other developments which would affect such investments. Further, economies of
other countries or areas of the world may differ favorably or unfavorably from
the economy of the U.S.
It is anticipated that in most cases the best available market for
securities of non-U.S. issuers would be on exchanges or in over-the-counter
markets located outside the U.S. Non-U.S. securities markets, while growing in
volume and sophistication, are generally not as developed as those in the
U.S., and securities of some non-U.S. issuers (particularly those located in
developing countries) may be less liquid and more volatile than securities of
comparable U.S. companies. Non-U.S. 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 may be able to
protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the non-U.S. currency during the
period between the date the security is purchased or sold and the date on
which payment is made or received.
When the Adviser believes that the currency of a particular country may
suffer a substantial decline against the U.S. dollar, a Fund may enter into a
forward contract to sell, for a fixed amount of U.S. dollars, the amount of
non-U.S. currency approximating the value of some or all of the Fund's
securities denominated in such non-U.S. currency. The precise matching of the
forward contract amounts and the value of the securities involved is not
generally possible since the future value of such securities in non-U.S.
currencies changes as a consequence of market movements in the value of those
securities between the date the forward contract is entered into and the date
it matures. The projection of a short-term hedging strategy is highly
uncertain. The Funds do not enter into such forward contracts or maintain a
net exposure to such contracts where the consummation of the contracts
obligates a Fund to deliver an amount of non-U.S. currency in excess of the
value of the Fund's securities or other assets denominated in that currency.
Under normal circumstances, consideration of the prospect for currency
parities will be incorporated in the investment decisions made with regard to
overall diversification strategies. However, the Adviser believes that it is
important to have the flexibility to enter into such forward contracts when it
determines that the best interests of a Fund will be served.
The Funds generally would not enter into a forward contract with a term
greater than one year. At the maturity of a forward contract, a Fund will
either sell the security and make delivery of the non-U.S. currency, or retain
the security and terminate its contractual obligation to deliver the non-U.S.
currency by purchasing an "offsetting" contract with the same currency trader
obligating it to purchase, on the same maturity date, the same amount of the
non-U.S. currency. If a Fund retains the security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If a Fund
engages in an offsetting transaction, it may subsequently enter into a new
forward contract to sell the non-U.S. currency. Should forward prices decline
during the period between the date a Fund enters into a forward contract for
the sale of the non-U.S. currency and the date it enters into an offsetting
contract for the purchase of such currency, the Fund will realize a gain to
the extent the selling price of the currency exceeds the purchase price of the
currency. Should forward prices increase, the Fund will suffer a loss to the
extent that the purchase price of the currency exceeds the selling price of
the currency.
It is impossible to forecast with precision the market value of a Fund's
securities at the expiration of a forward contract. Accordingly, it may be
necessary for a Fund to purchase additional non-U.S. currency on the spot
market if the market value of the security is less than the amount of non-U.S.
currency the Fund is obligated to deliver and if a decision is made to sell
the security and make delivery of such currency. Conversely, it may be
necessary to sell on the spot market some of the non-U.S. currency received
upon the sale of the security if its market value exceeds the amount of such
currency the Fund is obligated to deliver.
Each of the Funds may also purchase put options on a non-U.S. currency in
order to protect against currency rate fluctuations. If a Fund purchases a put
option on a non-U.S. currency and the value of the U.S. currency declines, the
Fund will have the right to sell the non-U.S. currency for a fixed amount in
U.S. dollars and will thereby offset, in whole or in part, the adverse effect
on the Fund which otherwise would have resulted. Conversely, where a rise in
the U.S. dollar value of another currency is projected, and where a Fund
anticipates investing in securities traded in such currency, the Fund may
purchase call options on the non-U.S. currency.
The purchase of such options could offset, at least partially, the effects
of adverse movements in exchange rates. However, the benefit to each Fund from
purchases of non-U.S. currency options will be reduced by the amount of the
premium and related transaction costs. In addition, where currency exchange
rates do not move in the direction or to the extent anticipated, a Fund could
sustain losses on transactions in non-U.S. currency options which would
require it to forgo a portion or all of the benefits of advantageous changes
in such rates.
The Funds may write options on non-U.S. currencies for hedging purposes or
otherwise to achieve their investment objectives. For example, where a Fund
anticipates a decline in the value of the U.S. dollar value of a non-U.S.
security due to adverse fluctuations in exchange rates it could, instead of
purchasing a put option, write a call option on the relevant currency. If the
expected decline occurs, the option will most likely not be exercised, and the
diminution in value of the security held by the Fund will be offset by the
amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the cost of a non-U.S. security to be acquired because
of an increase in the U.S. dollar value of the currency in which the
underlying security is primarily traded, a Fund could write a put option on
the relevant currency which, if rates move in the manner projected, will
expire unexercised and allow the Fund to hedge such increased cost up to the
amount of the premium. However, the writing of a currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may
be exercised and the Fund would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium.
Through the writing of options on currencies, a Fund also may be required to
forgo all or a portion of the benefits which might otherwise have been
obtained from favorable movements in exchange rates.
Put and call options on non-U.S. currencies written by a Fund will be
covered by segregation of cash, short-term money market instruments or high
quality debt securities in an account with the custodian in an amount
sufficient to discharge the Fund's obligations with respect to the option, by
acquisition of the non-U.S. currency or of a right to acquire such currency
(in the case of a call option) or the acquisition of a right to dispose of the
currency (in the case of a put option), or in such other manner as may be in
accordance with the requirements of any exchange on which, or the counterparty
with which, the option is traded and applicable laws and regulations.
Investing in ADRs and other depositary receipts presents many of the same
risks regarding currency exchange rates as investing directly in securities
denominated in currencies other than the U.S. dollar. Because the securities
underlying these receipts are traded primarily in non-U.S. currencies, changes
in currency exchange rates will affect the value of these receipts. For example,
a decline in the U.S. dollar value of another currency in which securities are
primarily traded will reduce the U.S. dollar value of such securities, even if
their value in the other currency remains constant, and thus will reduce the
value of the receipts covering such securities. A Fund may employ any of the
above described non-U.S. currency hedging techniques to protect the value of its
assets invested in depositary receipts.
The Funds' dealings in non-U.S. currency contracts are limited to the
transactions described above. Of course, a Fund is not required to enter into
such transactions and does not do so unless deemed appropriate by the Adviser.
It should also be realized that these methods of protecting the value of a
Fund's securities against a decline in the value of a currency do not eliminate
fluctuations in the underlying prices of the securities. Additionally, although
such contracts tend to minimize the risk of loss due to a decline in the value
of the hedged currency, they also tend to limit any potential gain which might
result should the value of such currency increase.
Each Fund has established procedures consistent with policies of the
Securities and Exchange Commission (the "SEC") concerning forward contracts.
Since those policies currently recommend that an amount of a Fund's assets equal
to the amount of the purchase be held aside or segregated to be used to pay for
the commitment, each Fund is expected always to have cash, cash equivalents or
high quality debt securities available sufficient to cover any commitments under
these contracts or to limit any potential risk.
SHORT SALES "AGAINST THE BOX"
In a short sale, a Fund sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. Each of the Funds,
in accordance with applicable investment restrictions, may engage in short
sales only if at the time of the short sale it owns or has the right to
obtain, at no additional cost, an equal amount of the security being sold
short. This investment technique is known as a short sale "against the box."
In a short sale, the seller does not immediately deliver the securities sold
and is said to have a short position in those securities until delivery occurs.
If a Fund engages in a short sale, the collateral for the short position is
maintained for the Fund by the custodian or qualified sub-custodian. While the
short sale is open, an amount of securities equal in kind and amount to the
securities sold short or securities convertible into or exchangeable for such
equivalent securities are maintained in a segregated account for the Fund. These
securities constitute the Fund's long position.
The Funds do not engage in short sales against the box for investment
purposes. A Fund may, however, make a short sale against the box as a hedge,
when it believes that the price of a security may decline, causing a decline in
the value of a security owned by the Fund (or a security convertible or
exchangeable for such security), or when the Fund wants to sell the security at
an attractive current price, but also wishes to defer recognition of gain or
loss for federal income tax purposes or for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code. In
such case, any future losses in the Fund's long position should be reduced by a
gain in the short position. Conversely, any gain in the long position should be
reduced by a loss in the short position. The extent to which such gains or
losses are reduced depends upon the amount of the security sold short relative
to the amount the Fund owns. There are certain additional transaction costs
associated with short sales against the box, but the Funds endeavor to offset
these costs with the income from the investment of the cash proceeds of short
sales.
The Adviser does not expect that more than 40% of each Fund's total assets
would be involved in short sales against the box. The Adviser does not currently
intend to engage in such sales.
LENDING OF SECURITIES
Consistent with applicable regulatory requirements and in order to generate
income, each of the Funds may lend its securities to broker-dealers and other
institutional borrowers. Such loans will usually be made only to member banks of
the U.S. Federal Reserve System and to member firms of the New York Stock
Exchange (and subsidiaries thereof). Loans of securities would be secured
continuously by collateral in cash, cash equivalents or U.S. Treasury
obligations maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The cash collateral would be invested in
high quality short-term instruments. 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 30% of the value of its total assets.
WHEN-ISSUED SECURITIES
Each of the Funds may purchase securities on a "when-issued" or on a
"forward delivery" basis. It is expected that, under normal circumstances, the
applicable Fund would take delivery of such securities. When a Fund commits to
purchase a security on a "when-issued" or on a "forward delivery" basis, it sets
up procedures consistent with SEC policies. Since those policies currently
require that an amount of a Fund's assets equal to the amount of the purchase be
held aside or segregated to be used to pay for the commitment, the Fund expects
always to have cash, cash equivalents or high quality debt securities sufficient
to cover any commitments or to limit any potential risk. However, even though
the Funds do not intend to make such purchases for speculative purposes and
intend to adhere to the provisions of SEC policies, purchases of securities on
such bases may involve more risk than other types of purchases. For example, a
Fund may have to sell assets which have been set aside in order to meet
redemptions. Also, if the Adviser determines it is advisable as a matter of
investment strategy to sell the "when-issued" or "forward delivery" securities,
a Fund would be required to meet its obligations from the then available cash
flow or the sale of securities, or, although it would not normally expect to do
so, from the sale of the "when- issued" or "forward delivery" securities
themselves (which may have a value greater or less than the Fund's payment
obligation).
RULE 144A SECURITIES
Each of the Funds may purchase securities that are not registered ("Rule
144A securities") under the Securities Act of 1933 (the "Securities Act"), but
can be offered and sold to "qualified institutional buyers" under Rule 144A
under the Securities Act. However, none of the Funds invests more than 15% of
its net assets in illiquid investments, which includes securities for which
there is no readily available market, securities subject to contractual
restrictions on resale and Rule 144A securities, unless the Trustees of the
Trusts determine, based on the trading markets for the specific Rule 144A
security, that it is liquid. The Trustees may adopt guidelines and delegate to
the Adviser the daily function of determining and monitoring liquidity of Rule
144A securities. The Trustees, however, retain oversight and are ultimately
responsible for the determinations.
Since it is not possible to predict with assurance exactly how the market
for Rule 144A securities will develop, the Trustees will carefully monitor
each Fund's investments in Rule 144A securities, focusing on such factors,
among others, as valuation, liquidity and availability of information. The
liquidity of investments in Rule 144A securities could be impaired if trading
in Rule 144A securities does not develop or if qualified institutional buyers
become for a time uninterested in purchasing Rule 144A securities.
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS
The Trusts, on behalf of the Funds, and the Portfolio Trust, on behalf of
the Portfolios, have each adopted the following policies which may not be
changed with respect to any Fund or Portfolio without approval by holders of a
majority of the outstanding voting securities of that Fund or Portfolio, which
as used in this Statement of Additional Information means the vote of the
lesser of (i) 67% or more of the outstanding voting securities of the Fund or
Portfolio present at a meeting at which the holders of more than 50% of the
outstanding voting securities of the Fund or Portfolio are present or
represented by proxy, or (ii) more than 50% of the outstanding voting
securities of the Fund or Portfolio. The term "voting securities" as used in
this paragraph has the same meaning as in the 1940 Act.
None of the Funds or Portfolios may:
(1) Borrow money, except that as a temporary measure for extraordinary
or emergency purposes it may borrow in an amount not to exceed 1/3 of the
current value of its net assets, including the amount borrowed (nor
purchase any securities at any time at which borrowings exceed 5% of the
total assets of the Fund or Portfolio, taken at market value). It is
intended that a Fund or Portfolio would borrow money only from banks and
only to accommodate requests for the repurchase of shares of the Fund or
beneficial interests in the Portfolio while effecting an orderly
liquidation of portfolio securities.
(2) Make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loans not exceed 30% of
the Fund's or Portfolio's total assets (taken at market value), (b)
through the use of repurchase agreements or the purchase of short-term
obligations or (c) by purchasing all or a portion of an issue of debt
securities of types commonly distributed privately to financial
institutions. The purchase of short-term commercial paper or a portion of
an issue of debt securities which is part of an issue to the public shall
not be considered the making of a loan.
(3) Purchase securities of any issuer if such purchase at the time
thereof would cause with respect to 75% of the total assets of the Fund or
Portfolio more than 10% of the voting securities of such issuer to be held
by the Fund or Portfolio, except that, with respect to each Fund, the
applicable Trust may invest all or substantially all of the Fund's assets
in another registered investment company having the same investment
objectives and policies and substantially the same investment restrictions
as those with respect to the Fund (a "Qualifying Portfolio").
(4) Purchase securities of any issuer if such purchase at the time
thereof would cause as to 75% of the Fund's or Portfolio's total assets
more than 5% of the Fund's or Portfolio's assets (taken at market value)
to be invested in the securities of such issuer (other than securities or
obligations issued or guaranteed by the United States, any state or
political subdivision thereof, or any political subdivision of any such
state, or any agency or instrumentality of the United States or of any
state or of any political subdivision of any state), except that, with
respect to each Fund, the applicable Trust may invest all or substantially
all of the Fund's assets in a Qualifying Portfolio.
(5) Concentrate its investments in any particular industry, but if it
is deemed appropriate for the achievement of the Fund's or Portfolio's
investment objectives, up to 25% of its assets, at market value at the
time of each investment, may be invested in any one industry.
In addition, neither the Small Cap Equity Fund nor the Small Cap Equity
Portfolio may:
(6) Underwrite securities issued by other persons, except that all the
assets of the Fund may be invested in a Qualifying Portfolio and except
insofar as the Fund or Portfolio may technically be deemed an underwriter
under the 1933 Act in selling a security.
(7) Purchase or sell real estate (including limited partnership
interests but excluding securities secured by real estate or interests
therein), interests in oil, gas or mineral leases, commodities or
commodity contracts in the ordinary course of business (each of the Fund
and the Portfolio reserves the freedom of action to hold and to sell real
estate acquired as a result of the ownership of securities by the Fund or
the Portfolio).
(8) Issue any senior security (as that term is defined in the 1940
Act) if such issuance is specifically prohibited by the 1940 Act or the
rules and regulations promulgated thereunder, except as appropriate to
evidence a debt incurred without violating Investment Restriction (1)
above.
NON-FUNDAMENTAL RESTRICTIONS
Each Fund and each Portfolio does not as a matter of operating policy:
(i) borrow money for any purpose in excess of 10% of the net assets of
the Fund or Portfolio (taken at cost) (moreover, the Fund or Portfolio
will not purchase any securities for the Fund or Portfolio at any time at
which borrowings exceed 5% of the total assets of the Fund or Portfolio
(taken at market value)),
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10%
of the net assets of the Fund or Portfolio (taken at market value),
(iii) sell any security which the Fund or Portfolio does not own
unless by virtue of the ownership of other securities there is at the time
of sale a right to obtain securities, without payment of further
consideration, equivalent in kind and amount to the securities sold and
provided that if such right is conditional the sale is made upon the same
conditions,
(iv) invest for the purpose of exercising control or management,
except that all of the assets of the Fund may be invested in a Qualifying
Portfolio,
(v) purchase securities issued by any registered investment company,
except that all of the assets of the Fund may be invested in a Qualifying
Portfolio and except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase, though not
made in the open market, is part of a plan of merger or consolidation;
provided, however, that the Fund or Portfolio will not purchase the
securities of any registered investment company if such purchase at the
time thereof would cause more than 10% of the total assets of the Fund or
Portfolio (taken in each case at the greater of cost or market value) to
be invested in the securities of such issuers or would cause more than 3%
of the outstanding voting securities of any such issuer to be held for the
Fund or Portfolio,
(vi) knowingly invest in securities which are not readily marketable
or which are subject to legal or contractual restrictions on resale (other
than repurchase agreements maturing in not more than seven days and other
than securities which may be resold pursuant to Rule 144A under the 1933
Act if the Board of Trustees of the applicable Trust or of the Portfolio
Trust determines that a liquid market exists for such securities) if, as a
result thereof, more than 15% of such a Fund's or Portfolio's net assets
(taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days), except that a Trust may
invest all or substantially all of either such Fund's assets in a
Qualifying Portfolio,
(vii) purchase or retain any securities issued by an issuer any of
whose officers, directors, trustees or security holders is an officer or
Trustee of the Trusts or of the Portfolio Trust, or is an officer or
director of the Adviser, if after the purchase of the securities of such
issuer by the Fund or Portfolio, one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities, or both,
all taken at market value, of such issuer, and such persons owning more
than 1/2 of 1% of such shares or securities together own beneficially more
than 5% of such shares or securities, or both, all taken at market value,
(viii) write, purchase or sell any put or call option or any
combination thereof or enter into any futures contract, except that this
restriction shall not prevent the Fund or Portfolio from entering into
transactions involving futures contracts and non-U.S. currencies as
described in the Prospectus and this Statement of Additional Information,
(ix) make short sales of securities or maintain a short position in
securities, unless at all times when a short position is open it owns an
equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities
of the same issue as, and equal in amount to, the securities sold short,
and unless not more than 10% of the net assets of the Fund or Portfolio
(taken at market value) is held as collateral for such sales at any one
time (the Funds and Portfolios do not presently intend to make such short
sales for investment purposes).
These policies are not fundamental and may be changed by each Fund or
Portfolio without the approval of its shareholders or holders of beneficial
interests.
PERCENTAGE AND RATING RESTRICTIONS
If a percentage or rating restriction on investment or utilization of
assets set forth above or referred to in the Prospectus is adhered to at the
time an investment is made or assets are so utilized, a later change in
percentage resulting from changes in the value of the securities or a later
change in the rating of the securities held for a Fund will not be considered
a violation of policy.
3. PERFORMANCE INFORMATION
A total rate of return quotation for a Fund is calculated for any period by
(a) dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of shares
purchasable with dividends and capital gains distributions declared during such
period with respect to a share held at the beginning of such period and with
respect to shares purchased with such dividends and capital gains distributions,
by (ii) the public offering price per share on the first day of such period, and
(b) subtracting 1 from the result. Any annualized total rate of return quotation
is calculated by (x) adding 1 to the period total rate of return quotation
calculated above, (y) raising such sum to a power which is equal to 365 divided
by the number of days in such period, and (z) subtracting 1 from the result.
Total rates of return may also be calculated on investments at various sales
charge levels or at net asset value. Any performance data which is based on a
reduced sales charge or net asset value per share would be reduced if the
maximum sales charge were taken into account.
Any current yield quotation for a Fund consists of an annualized historical
yield, carried at least to the nearest hundredth of one percent, based on a 30
calendar day or one month period and is calculated by (a) raising to the sixth
power the sum of 1 plus the quotient obtained by dividing the Fund's net
investment income earned during the period by the product of the average daily
number of shares outstanding during the period that were entitled to receive
dividends and the maximum public offering price per share on the last day of the
period, (b) subtracting 1 from the result, and (c) multiplying the result by 2.
Set forth below is total rate of return information for the Class A shares
of each Fund for the periods indicated, assuming that dividends and capital
gains distributions, if any, were reinvested, and that at the beginning of such
periods the maximum sales charge of 4.75% had been applicable to purchases of
shares of the Fund. No Class B shares were outstanding during such periods.
<PAGE>
BALANCED FUND
(CLASS A SHARES)
<TABLE>
<CAPTION>
REDEEMABLE VALUE
OF A HYPOTHETICAL
ANNUALIZED $1,000 INVESTMENT
TOTAL RATE AT THE END OF
PERIOD OF RETURN THE PERIOD
- ------ ---------- ---------------
<S> <C> <C>
October 19, 1990 (commencement of operations) to December 31, 1995 ........ 12.24% $1,824
Five Years Ended December 31, 1995 ........................................ 11.44% $1,719
One Year Ended December 31, 1995 .......................................... 16.84% $1,168
EQUITY FUND
(CLASS A SHARES)
REDEEMABLE VALUE
OF A HYPOTHETICAL
ANNUALIZED $1,000 INVESTMENT
TOTAL RATE AT THE END OF
PERIOD OF RETURN THE PERIOD
- ------ ---------- -------------
October 19, 1990 (commencement of operations) to December 31, 1995 ........ 14.39% $2,013
Five Years Ended December 31, 1995 ........................................ 13.83% $1,911
One Year Ended December 31, 1995 .......................................... 21.49% $1,215
SMALL CAP EQUITY FUND
(CLASS A SHARES)
REDEEMABLE VALUE
OF A HYPOTHETICAL
$1,000 INVESTMENT
TOTAL RATE AT THE END OF
PERIOD OF RETURN THE PERIOD
- ------ ---------- -------------
June 1, 1995 (commencement of operations) to December 31, 1995 ............ 37.90%* $1,379
- ----------
*Not annualized.
</TABLE>
The annualized yields of the Class A shares of the Balanced Fund, the
Equity Fund and the Small Cap Equity Fund for the 30-day period ended on
December 31, 1995 were, respectively, 2.98%, 1.13% and 1.10%.
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 a 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 (normally 4:00 p.m. Eastern time) by adding the
market value of all securities and other assets attributable to a class of a
Fund (including its interest in its Portfolio), then subtracting the liabilities
charged to the class, and then dividing the result by the number of outstanding
shares of the class. Per share net asset value of each class of a Fund's shares
can be expected to differ because the Class B shares bear higher expenses than
Class A shares. The net asset value per share is effective for orders received
and accepted by the Distributor prior to its calculation.
The value of each Portfolio's net assets (i.e., the value of its securities
and other assets less its liabilities, including expenses payable or accrued) is
determined at the same time and on the same days as the net asset value per
share of its corresponding Fund is determined. The net asset value of each
Fund's investment in the Portfolio in which it invests is equal to the Fund's
pro rata share of the net assets of the Portfolio.
For purposes of calculating net asset value per share, all assets and
liabilities initially expressed in non-U.S. currencies will be converted into
U.S. dollars at the prevailing market rates at the time of valuation. Equity
securities are valued at the last sale price on the exchange on which they are
primarily traded or on the NASDAQ system for unlisted national market issues, or
at the last quoted bid price for securities in which there were no sales during
the day or for unlisted securities not reported on the NASDAQ system. Securities
listed on a non-U.S. exchange are valued at the last quoted sale price available
before the time when net assets are valued. Bonds and other fixed income
securities (other than short-term obligations) are valued on the basis of
valuations furnished by a pricing service, use of which has been approved by the
Board of Trustees of each Trust. In making such valuations, the pricing service
utilizes both dealer-supplied valuations and electronic data processing
techniques that take into account appropriate factors such as institutional-size
trading in similar groups of securities, yield, quality, coupon rate, maturity,
type of issue, trading characteristics and other market data, without exclusive
reliance upon quoted prices or exchange or over-the- counter prices, since such
valuations are believed to reflect more accurately the fair value of such
securities. Short-term obligations (maturing in 60 days or less) are valued at
amortized cost, which constitutes fair value as determined by the Board of
Trustees of each Trust. Futures contracts are normally valued at the settlement
price on the exchange on which they are traded. Securities for which there are
no such valuations are valued at fair value as determined in good faith by or at
the direction of the Board of Trustees of each Trust.
Trading in securities on most non-U.S. exchanges and over-the-counter
markets is normally completed before the close of regular trading on the 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, their ages
and their principal occupations during the past five years are set forth below.
Their titles may have varied during that period. Asterisks indicate that those
Trustees and officers are "interested persons" (as defined in the 1940 Act) of
the Trusts or the Portfolio Trust. Unless otherwise indicated below, the address
of each Trustee and officer is 6 St. James Avenue, Boston, Massachusetts. The
address of the Portfolio Trust is Elizabethan Square, George Town, Grand Cayman,
British West Indies.
TRUSTEES OF THE TRUSTS
H.B. ALVORD; 73 -- Treasurer-Tax Collector, County of Los Angeles (retired,
March, 1984); Chairman, certain registered investment companies in the 59 Wall
Street funds group. His address is P.O. Box 1812, Pebble Beach, California.
PHILIP W. COOLIDGE*; 44 -- President of the Trusts and the Portfolio Trust;
Chairman, Chief Executive Officer and President, Signature Financial Group,
Inc. and The Landmark Funds Broker-Dealer Services, Inc. (since December,
1988).
RILEY C. GILLEY; 69 -- 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; 56 -- Professor, Babson College (since September, 1993);
Visiting Professor, Kellogg Graduate School of Management, Northwestern
University (September, 1992 to September, 1993); Professor, Darden Graduate
School of Business, University of Virginia (September, 1978 to September,
1993); Consultant to PanAgora Asset Management (since 1994). Her address is
120 Goulding Street, Holliston, Massachusetts.
SUSAN B. KERLEY; 44 -- President, Global Research Associates, Inc. (Investment
Research) (since August, 1990); Manager, Rockefeller & Co. (March, 1988 to
July, 1990); Trustee, Mainstay Institutional Funds (since December, 1990). Her
address is P.O. Box 9572, New Haven, Connecticut.
C. OSCAR MORONG, JR.; 61 -- Managing Director, Morong Capital Management
(since February, 1993); Senior Vice President and Investment Manager, CREF
Investments, Teachers Insurance & Annuity Association (retired January, 1993);
Director, Indonesia Fund; Director, MAS Funds. His address is 1385 Outlook
Drive West, Mountainside, New Jersey.
DONALD B. OTIS; 77 -- Director of Investor Relations, International Business
Machines Corporation (retired February, 1982). His address is 6300 Midnight
Pass Road, Sarasota, Florida.
E. KIRBY WARREN; 61 -- Professor of Management, Graduate School of Business,
Columbia University (since 1987); Samuel Bronfman Professor of Democratic
Business Enterprise (1978-1987). His address is Columbia University, Graduate
School of Business, 725 Uris Hall, New York, New York.
WILLIAM S. WOODS, JR.; 75 -- 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; 53 -- Chairman and Director, Catalyst, Inc. (Management
Consultants) (since June, 1992); President, Chief Operating Officer and
Director, Deven International, Inc. (International Consultants) (June, 1991 to
June 1992); President and Director, Elliott J. Berv & Associates (Management
Consultants) (since May, 1984). His address is 15 Stornoway Drive, Cumberland
Foreside, Maine.
PHILIP W. COOLIDGE*; 44 -- President of the Trusts and the Portfolio Trust;
Chairman, Chief Executive Officer and President, Signature Financial Group,
Inc. and The Landmark Funds Broker-Dealer Services, Inc. (since December,
1988).
MARK T. FINN; 52 -- 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; 69 -- President, Benchmark Consulting Group, Inc. (since
1991); Principal, Robb Associates (corporate financial advisers) (since 1978);
President, Benchmark Advisors, Inc. (Corporate Financial Advisors)(since
1989); Trustee of certain registered investment companies in the MFS Family of
Funds. His address is 35 Farm Road, Sherborn, Massachusetts.
OFFICERS OF THE TRUSTS AND THE PORTFOLIO TRUST
PHILIP W. COOLIDGE*; 44 -- President of the Trusts and the Portfolio Trust;
Chairman, Chief Executive Officer and President, Signature Financial Group,
Inc. and The Landmark Funds Broker-Dealer Services, Inc. (since December,
1988).
DAVID G. DANIELSON*; 31 -- Assistant Treasurer of the Trusts and the Portfolio
Trust; Assistant Manager, Signature Financial Group, Inc. (since May, 1991).
JOHN R. ELDER*; 47 -- Treasurer of the Trusts and the Portfolio Trust; Vice
President, Signature Financial Group, Inc. (since April, 1995); Treasurer of
the Phoenix Family of Mutual Funds, Phoenix Home Life Mutual Insurance Company
(1983 to March, 1995).
LINDA T. GIBSON*; 30 -- Assistant Secretary of the Trusts and the Portfolio
Trust; Legal Counsel, Signature Financial Group, Inc. (since June, 1991); Law
Student, Boston University School of Law (September, 1989 to May, 1992);
Product Manager, Signature Financial Group, Inc. (January, 1989 to September,
1989).
SUSAN JAKUBOSKI*; 32 -- 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.
THOMAS M. LENZ*; 37 -- Secretary of the Trusts and the Portfolio Trust; Vice
President and Associate General Counsel, Signature Financial Group, Inc.
(since November, 1989); Assistant Secretary, Signature Broker-Dealer Services,
Inc. (since February, 1991); Attorney, Ropes & Gray (September, 1984 to
November, 1989).
MOLLY S. MUGLER*; 44 -- 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*; 36 -- Assistant Treasurer of the Trusts and the Portfolio
Trust; Assistant Treasurer, Signature Financial Group, Inc. and The Landmark
Funds Broker-Dealer Services, Inc. (since December, 1988).
ANDRES E. SALDANA*; 33 -- Assistant Secretary of the Trusts and the Portfolio
Trust; Legal Counsel and Assistant Secretary, Signature Financial Group, Inc.
(since November, 1992); Attorney, Ropes & Gray (September, 1990 to November,
1992).
DANIEL E. SHEA*; 33 -- Assistant Treasurer of the Trusts and the Portfolio
Trust; Assistant Manager of Fund Administration, Signature Financial Group,
Inc. (since November, 1993); Supervisor and Senior Technical Advisor, Putnam
Investments (prior to November 1993).
The following table shows Trustee compensation for the periods indicated.
<TABLE>
TRUSTEE COMPENSATION TABLE
<CAPTION>
AGGREGATE
AGGREGATE AGGREGATE COMPENSATION TOTAL
COMPENSATION COMPENSATION FROM THE COMPENSATION
FROM THE FROM THE SMALL CAP FROM TRUST AND
TRUSTEE BALANCED FUND(1) EQUITY FUND(1) EQUITY FUND(1) COMPLEX(2)
- ------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
H.B. Alvord .................................... $3,198.55 $2,743.76 $314.59 $40,000.00
Riley C. Gilley ................................ $4,352.29 $3,679.27 $315.45 $44,000.00
Diana R. Harrington ............................ $3,821.20 $3,328.96 $314.96 $40,000.00
Susan B. Kerley ................................ $3,921.20 $3,328.96 $314.96 $40,000.00
C. Oscar Morong, Jr. ........................... $3,606.47 $3,075.64 $315.15 $44,500.00
Donald B. Otis ................................. $7,758.16 $6,454.27 $320.82 $40,000.00
E. Kirby Warren ................................ $3,606.47 $3,075.64 $315.15 $44,500.00
William S. Woods, Jr. .......................... $4,582.57 $3,870.53 $316.59 $44,000.00
- ----------
(1) For the fiscal year ended December 31, 1995.
(2) Information relates to the fiscal year ended December 31, 1995. Messrs.
Alvord, Gilley, Morong, Otis, Warren and Woods, and Mses. Harrington and
Kerley are Trustees of 15, 14, 15, 9, 15, 14, 14 and 14 funds and
portfolios, respectively, in the Landmark Family of Funds.
</TABLE>
As of March 31, 1996, all Trustees and officers as a group owned less than
1% of the outstanding shares of each Fund. As of the same date, more than 95%
of the outstanding shares of each Fund were held of record by Citibank, N.A.
or its affiliates as Shareholder Servicing Agents of the Fund for the accounts
of their respective clients.
The Declaration of Trust of each of the Trusts and the Portfolio Trust
provides that each of the Trusts and the Portfolio Trust, respectively, will
indemnify its Trustees and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with the Trusts or the Portfolio Trust, as the case may be, unless, as
to liability to the Trusts, the Portfolio Trust or their respective investors,
it is finally adjudicated that they engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in their
offices, or unless with respect to any other matter it is finally adjudicated
that they did not act in good faith in the reasonable belief that their
actions were in the best interests of the Trusts or the Portfolio Trust, as
the case may be. In the case of settlement, such indemnification will not be
provided unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination, based upon
a review of readily available facts, by vote of a majority of disinterested
Trustees of the Trusts or the Portfolio Trust, or in a written opinion of
independent counsel, that such officers or Trustees have not engaged in
willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
ADVISER
Citibank manages the assets of each Portfolio pursuant to separate
investment advisory agreements (the "Advisory Agreements"). Subject to such
policies as the Board of Trustees of the Portfolio Trust may determine, the
Adviser manages the securities of each Portfolio and makes investment
decisions for each Portfolio. The Adviser furnishes at its own expense all
services, facilities and personnel necessary in connection with managing each
Portfolio's investments and effecting securities transactions for each
Portfolio. Each of the Advisory Agreements will continue as long as such
continuance is specifically approved at least annually by the Board of
Trustees of the Portfolio Trust or by a vote of a majority of the outstanding
voting securities of the applicable Portfolio, and, in either case, by a
majority of the Trustees of the Portfolio Trust who are not parties to the
Advisory Agreement or interested persons of any such party, at a meeting
called for the purpose of voting on the Advisory Agreement.
Each of the Advisory Agreements provides that the Adviser may render
services to others. Each Advisory Agreement is terminable without penalty on
not more than 60 days' nor less than 30 days' written notice by the Portfolio
Trust when authorized either by a vote of a majority of the outstanding voting
securities of the applicable Portfolio or by a vote of a majority of the Board
of Trustees of the Portfolio Trust, or by the Adviser on not more than 60
days' nor less than 30 days' written notice, and will automatically terminate
in the event of its assignment. Each Advisory Agreement provides that neither
the Adviser nor its personnel shall be liable for any error of judgment or
mistake of law or for any loss arising out of any investment or for any act or
omission in the execution of security transactions for the applicable
Portfolio, except for willful misfeasance, bad faith or gross negligence or
reckless disregard of its or their obligations and duties under the Advisory
Agreement.
The Prospectus contains a description of the fees payable to the Adviser
for services under the Advisory Agreements. For the fiscal year ended 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 $575,229 and $340,160, respectively. For the period from May
1, 1994 to December 31, 1994 and for the fiscal year ended December 31, 1995,
the fees paid to Citibank under the Advisory Agreement with respect to the
Balanced Portfolio were $640,795 and $956,408, respectively.
For the fiscal year ended 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 $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 and for the fiscal year ended December 31, 1995, the fees
paid to Citibank under the Advisory Agreement with respect to the Equity
Portfolio were $639,933 and $1,049,008, respectively.
For the period June 4, 1995 (commencement of operations) to December 31,
1995, the fee payable to Citibank under the Advisory Agreement with respect to
the Small Cap Equity Portfolio was $10,222, all of which was voluntarily
waived.
ADMINISTRATOR
Pursuant to administrative services agreements (the "Administrative
Services Agreements"), LFBDS and SFG provide the Trusts and the Portfolio
Trust, respectively, with general office facilities and LFBDS and SFG
supervise the overall administration of the Trusts or the Portfolio Trust,
including, among other responsibilities, the negotiation of contracts and fees
with, and the monitoring of performance and billings of, each Trust's or the
Portfolio Trust's independent contractors and agents; the preparation and
filing of all documents required for compliance by the Trusts or the Portfolio
Trust with applicable laws and regulations; and arranging for the maintenance
of books and records of the Trusts or the Portfolio Trust. The Administrator
and the Portfolio Administrator provide persons satisfactory to the Board of
Trustees of the Trusts or the Portfolio Trust to serve as Trustees and
officers of the Trusts and the Portfolio Trust, respectively. Such Trustees
and officers, as well as certain other employees and Trustees of the Trusts
and the Portfolio Trust, may be directors, officers or employees of LFBDS, SFG
or their affiliates.
The Prospectus contains a description of the fees payable to the
Administrator and the Portfolio Administrator under the Administrative
Services Agreements. For the fiscal years ended December 31, 1993, 1994 and
1995, 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 $212,727, $409,258 and $944,624 (of which $354,234
was voluntarily waived), respectively. For the fiscal years ended December 31,
1993, 1994 and 1995, 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 $287,615, $320,872 (of which
$126,917 was voluntarily waived) and $294,337 (of which $196,224 was
voluntarily waived), respectively. For the period June 21, 1995 (commencement
of operations) to December 31, 1995, the fee payable by the Small Cap Equity
Portfolio to LFBDS under the Administrative Services Agreement was $2,063 (all
of which was voluntarily waived). For the period from May 1, 1994 through
December 31, 1994 and the fiscal year ended December 31, 1995, the Portfolio
Trust paid the Portfolio Administrator $80,099 and $119,551, respectively,
with respect to the Balanced Portfolio and, $63,999 and $104,901,
respectively, with respect to the Equity Portfolio under each Portfolio
Trust's Administrative Services Agreement. For the period June 21, 1995
(commencement of operations) to December 31, 1995, the Portfolio Trust was
obligated to pay the Portfolio Administrator $682 (all of which was
voluntarily waived) under the Administrative Services Agreement with respect
to the Small Cap Equity Portfolio.
The Administrative Services Agreement with each Trust acknowledges that
the names "Landmark" and "Landmark Funds" are the property of the
Administrator and provides that if LFBDS ceases to serve as the Administrator
of each Trust, the Trust would change its name and the name of the Fund so as
to delete the word "Landmark" or the words "Landmark Funds". The
Administrative Services Agreements with the Trusts also provide that LFBDS may
render administrative services to others and may permit other investment
companies to use the word "Landmark" or the words "Landmark Funds" in their
names.
The Administrative Services Agreement with each Trust continues in effect
with respect to each Fund if such continuance is specifically approved at
least annually by the Board of Trustees of each Trust or by a vote of a
majority of the outstanding voting securities of each Trust and, in either
case, by a majority of the Trustees who are not parties to the Administrative
Services Agreement or interested persons of any such party. The Administrative
Services Agreement with each Trust terminates automatically if it is assigned
and may be terminated without penalty by vote of a majority of the outstanding
voting securities of each Trust or by either party on not more than 60 days'
nor less than 30 days' written notice. The Administrative Services Agreement
with each Trust also provides that neither LFBDS, as the Administrator, nor
its personnel shall be liable for any error of judgment or mistake of law or
for any act or omission in the administration or management of the Trust,
except for willful misfeasance, bad faith or gross negligence in the
performance of its or their duties or by reason of reckless disregard of its
or their obligations and duties under the Trust's Administrative Services
Agreement.
The Administrative Services Agreement with the Portfolio Trust provides
that SFG may render administrative services to others. The Administrative
Services Agreement with the Portfolio Trust terminates automatically if it is
assigned and may be terminated without penalty by a vote of a majority of the
outstanding voting securities of the Portfolio Trust or by either party on not
more than 60 days' nor less than 30 days' written notice. The Administrative
Services Agreement with the Portfolio Trust also provides that neither SFG, as
the Portfolio Administrator, nor its personnel shall be liable for any error
of judgment or mistake of law or for any act or omission in the administration
or management of the Portfolio Trust, except for willful misfeasance, bad
faith or gross negligence in the performance of its or their duties or by
reason of reckless disregard of its or their obligations and duties under the
Portfolio Trust's Administrative Services Agreement.
LFBDS and SFG are wholly-owned subsidiaries of Signature Financial Group,
Inc. SFG is a company organized under the laws of the Cayman Islands. Its
principal place of business is in George Town, Grand Cayman, British West
Indies.
Pursuant to a sub-administrative services agreement, Citibank performs such
sub-administrative duties for each Trust and the Portfolio Trust as from time to
time are agreed upon by Citibank and, respectively, LFBDS or SFG. Citibank's
sub-administrative duties may include providing equipment and clerical personnel
necessary for maintaining each Trust's and the Portfolio Trust's organization,
participation in the preparation of documents required for compliance by each
Trust and the Portfolio Trust with applicable laws and regulations, the
preparation of certain documents in connection with meetings of Trustees and
shareholders, and other functions which would otherwise be performed by the
Administrator. For performing such sub-administrative services, Citibank
receives compensation as from time to time is agreed upon by LFBDS or SFG, not
in excess of the amount paid to LFBDS or SFG for its services under the
Administrative Services Agreements with the Trusts and the Portfolio Trust. All
such compensation is paid by LFBDS or SFG.
DISTRIBUTOR
LFBDS serves as the Distributor of each Fund's shares pursuant to
Distribution Agreements with each Trust with respect to each class of shares
of each Fund. Unless otherwise terminated, each Distribution Agreement will
continue from year to year upon annual approval by each Trust's Board of
Trustees or by the vote of a majority of the outstanding voting securities of
each Trust, and by the vote of a majority of the Board of Trustees of each
Trust who are not parties to the Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval. Each Agreement will terminate in the event of its assignment, as
defined in the 1940 Act.
Each Trust has adopted a Distribution Plan (the "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act with respect to each class of
shares of the Funds after concluding that there is a reasonable likelihood
that the Distribution Plans will benefit each such Fund and its shareholders.
Each Distribution Plan with respect to Class A shares provides that each Fund
shall pay a distribution fee to the Distributor at an annual rate not to
exceed 0.15% of each Fund's average daily net assets represented by 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, 1993, 1994 and 1995 the fees paid to LFBDS under the Distribution
Agreement with respect to the Balanced Fund were $71,904, $122,246 and $118,077,
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, 1993, 1994 and 1995, the fees paid to LFBDS
under the Distribution Agreement with respect to the Equity Fund were $53,215,
$96,083 and $98,112, respectively, no portion of which was applicable to
reimbursement for expenses incurred in connection with print or electronic media
advertising. For the period June 21, 1995 (commencement of operations) to
December 31, 1995, the fee paid to LFBDS under the Distribution Agreement with
respect to the Small Cap Equity Fund was $687, 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, 1994 and 1995, the
aggregate fees payable to Shareholder Servicing Agents with respect to the
Balanced Fund were $575,229 (of which $215,711 was voluntarily waived), $977,967
(of which $366,738 was voluntarily waived) and $944,624 (of which $354,234 was
voluntarily waived), respectively. For the fiscal years ended December 31, 1993,
1994 and 1995, the aggregate fees payable to Shareholder Servicing Agents with
respect to the Equity Fund were $425,718 (of which $159,645 was voluntarily
waived), $768,306 (of which $287,894 was voluntarily waived) and $784,529 (of
which $293,968 was voluntarily waived), respectively. For the period June 21,
1995 (commencement of operations) to December 31, 1995, the aggregate fees
payable to Shareholder Servicing Agents with respect to the Small Cap Equity
Fund were $5,497 (all of which was voluntarily waived).
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 accountants for the Trusts,
providing audit services and assistance and consultation with respect to the
preparation of filings with the SEC. The address of Price Waterhouse LLP is
160 Federal Street, Boston, Massachusetts 02110. Price Waterhouse are the
chartered accountants for the Portfolio Trust. The address of Price Waterhouse
is Suite 3000, 1 First Canadian Place, Toronto, Ontario M5X 1H7, Canada.
COUNSEL
Bingham, Dana & Gould LLP, 150 Federal Street, Boston, MA 02110, acts as
counsel for the Funds.
6. PORTFOLIO TRANSACTIONS
Each Trust trades securities for a Fund if it believes that a transaction
net of costs (including custodian charges) will help achieve the Fund's
investment objectives. Changes in the Fund's investments are made without
regard to the length of time a security has been held, or whether a sale would
result in the recognition of a profit or loss. Therefore, the rate of turnover
is not a limiting factor when changes are appropriate. Specific decisions to
purchase or sell securities for each Fund are made by a portfolio manager who
is an employee of the Adviser and who is appointed and supervised by its
senior officers. The portfolio manager may serve other clients of the Adviser
in a similar capacity.
The primary consideration in placing portfolio securities transactions
with broker-dealers for execution is to obtain and maintain the availability
of execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting broker-
dealers to execute transactions on behalf of each Fund and other clients of
the Adviser on the basis of their professional capability, the value and
quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Adviser normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere.
In the case of securities purchased from underwriters, the cost of such
securities generally includes a fixed underwriting commission or concession.
From time to time, soliciting dealer fees are available to the Adviser on the
tender of a Fund's securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Fund by the Adviser.
At present no other recapture arrangements are in effect.
Under the Advisory Agreements, in connection with the selection of such
brokers or dealers and the placing of such orders, the Adviser is directed to
seek for each Fund in its best judgment, prompt execution in an effective
manner at the most favorable price. Subject to this requirement of seeking the
most favorable price, securities may be bought from or sold to broker-dealers
who have furnished statistical, research and other information or services to
the Adviser or the Funds, subject to any applicable laws, rules and
regulations.
The investment advisory fee that each Fund pays to the Adviser will not be
reduced as a consequence of the Adviser's receipt of brokerage and research
services. While such services are not expected to reduce the expenses of the
Adviser, the Adviser would, through the use of the services, avoid the
additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff or obtain such services
independently.
In certain instances there may be securities that are suitable as an
investment for a Fund as well as for one or more of the Adviser's other
clients. Investment decisions for each Fund and for the Adviser's other
clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for
only one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more clients are selling the same security. Some simultaneous
transactions are inevitable when several clients receive investment advice
from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or
more clients are simultaneously engaged in the purchase or sale of the same
security, the securities are allocated among clients in a manner believed to
be equitable to each. It is recognized that in some cases this system could
adversely affect the price of or the size of the position obtainable in a
security for a Fund. When purchases or sales of the same security for a Fund
and for other portfolios managed by the Adviser occur contemporaneously, the
purchase or sale orders may be aggregated in order to obtain any price
advantages available to large volume purchases or sales.
For the fiscal year ended December 31, 1993, the Balanced Fund paid
brokerage commissions in the amount of $97,999; for the period January 1, 1994
to April 30, 1994, the Balanced Fund paid brokerage commissions of $8,940; for
the period May 1, 1994 to December 31, 1994, the Balanced Portfolio paid
brokerage commissions of $280,300 and for the fiscal year ended December 31,
1995, the Balanced Portfolio paid brokerage commissions of $248,710. For the
fiscal year ended December 31, 1993, the Equity Fund paid brokerage
commissions in the amount of $124,360; for the period January 1, 1994 to April
30, 1994, the Equity Fund paid brokerage commissions of $9,780; for the period
May 1, 1994 to December 31, 1994, the Equity Portfolio paid brokerage
commissions of $342,356 and for the fiscal year ended December 31, 1995, the
Equity Portfolio paid brokerage commissions of $418,145. For the period June
21, 1995 (commencement of operations) to December 31, 1995, the Small Cap
Equity Portfolio paid brokerage commissions in the amount of $6,544.
7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
Each Trust's Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional Shares of Beneficial Interest (without
par value) of each series and to divide or combine the shares of any series
into a greater or lesser number of shares of that series without thereby
changing the proportionate beneficial interests in that series. Trust I has
five series, including the Balanced Fund. Trust II has three series including
the Equity and Small Cap Equity Funds. Each Trust has reserved the right to
create and issue additional series and classes of shares. Each share of each
class of each Fund represents an equal proportionate interest in the Fund with
each other share of that class. Shares of each series participate equally in
the earnings, dividends and distribution of net assets of the particular
series upon liquidation or dissolution (except for any differences among
classes of shares in a series). Shares of each series are entitled to vote
separately to approve advisory agreements or changes in investment policy, but
shares of all series may vote together in the election or selection of
Trustees and accountants for the Trusts. In matters affecting only a
particular Fund or class, only shares of that particular Fund or class are
entitled to vote.
Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. Shareholders in each Trust do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of each Trust may elect all of the Trustees of the Trust if
they choose to do so and in such event the other shareholders in the Trust
would not be able to elect any Trustee. Each Trust is not required to hold,
and has no present intention of holding, annual meetings of shareholders but
each Trust will hold special meetings of shareholders when in the judgment of
the Trustees it is necessary or desirable to submit matters for a shareholder
vote. Shareholders have, under certain circumstances (e.g., upon the
application and submission of certain specified documents to the Trustees by a
specified number of shareholders), the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees. Shareholders also have under certain
circumstances the right to remove one or more Trustees without a meeting by a
declaration in writing by a specified number of shareholders. No material
amendment may be made to each Trust's Declaration of Trust without the
affirmative vote of the holders of a majority of the outstanding shares of
each series affected by the amendment. (See "Investment Objectives, Policies
and Restrictions -- Investment Restrictions".) At any meeting of shareholders
of any Fund, a Shareholder Servicing Agent may vote any shares of which it is
the holder of record and for which it does not receive voting instructions
proportionately in accordance with the instructions it received for all other
shares of which that Shareholder Servicing Agent is the holder of record.
Shares have no preference, pre-emptive, conversion or similar rights. Shares,
when issued, are fully paid and non-assessable, except as set forth below.
Each Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets (or all or substantially all of the assets
belonging to any series of the Trust), if approved by a vote of the holders of
two-thirds of the Trust's outstanding shares, voting as a single class, or of
the affected series of the Trust, as the case may be, except that if the
Trustees of each Trust recommend such sale of assets, merger or consolidation,
the approval by vote of the holders of a majority of the Trust's (or the
affected series) outstanding shares would be sufficient. Each Trust or any
series of each Trust, as the case may be, may be terminated (i) by a vote of a
majority of the outstanding voting securities of the Trust or the affected
series or (ii) by the Trustees by written notice to the shareholders of the
Trust or the affected series. If not so terminated, each Trust will continue
indefinitely.
Share certificates will not be issued.
Each Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business
trust may, under certain circumstances, be held personally liable as partners
for its obligations and liabilities. However, the Declaration of Trust of each
Trust contains an express disclaimer of shareholder liability for acts or
obligations of the Trust and provides for indemnification and reimbursement of
expenses out of Trust property for any shareholder held personally liable for
the obligations of the Trust. The Declaration of Trust of each Trust also
provides that the Trust may maintain appropriate insurance (e.g., fidelity
bonding and errors and omissions insurance) for the protection of the Trust,
its shareholders, Trustees, officers, employees and agents covering possible
tort and other liabilities. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which both inadequate insurance existed and the Trust itself was unable to
meet its obligations.
Each Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the
property of the Trust and that the Trustees will not be liable for any action
or failure to act, but nothing in the Declaration of Trust of each Trust
protects a Trustee against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
By virtue of the combined Prospectus for the Funds, a Fund organized as a
series of one of the Trusts might share in liabilities, if any, arising under
federal and state securities laws with respect to disclosure in the Prospectus
concerning another Fund organized as a series of the other Trust.
The Portfolios are series of the Portfolio Trust, organized as a trust
under the laws of the State of New York. The Portfolio Trust's Declaration of
Trust provides that investors in the Portfolios (e.g., other investment
companies (including the corresponding Funds), insurance company separate
accounts and common and commingled trust funds) are each liable for all
obligations of the Portfolios. However, the risk of any Fund that invests
through a Portfolio incurring financial loss on account of such liability is
limited to circumstances in which both inadequate insurance existed and the
applicable Portfolio itself was unable to meet its obligations. It is not
expected that the liabilities of any Portfolio would ever exceed its assets.
Each investor in a Portfolio, including the corresponding Fund, may add to
or withdraw from its investment in the applicable Portfolio on each Business
Day. As of the close of regular trading on each Business Day, the value of
each investor's beneficial interest in each Portfolio is determined by
multiplying the net asset value of the Portfolio by the percentage, effective
for that day, that represents that investor's share of the aggregate
beneficial interests in the Portfolio. Any additions or withdrawals that are
to be effected on that day are then effected. The investor's percentage of the
aggregate beneficial interests in the Portfolio is then re-computed as the
percentage equal to the fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of the close of regular trading
on such day plus or minus, as the case may be, the amount of any additions to
or withdrawals from the investor's investment in the Portfolio effected on
such day, and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the close of regular trading on such day plus or minus,
as the case may be, the amount of the net additions to or withdrawals from the
aggregate investments in the Portfolio by all investors in the Portfolio. The
percentage so determined is then applied to determine the value of the
investor's interest in the Portfolio as of the close of regular trading on the
next following Business Day.
8. CERTAIN ADDITIONAL TAX MATTERS
Each Fund has elected to be treated, and intends to qualify each year, as
a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), by meeting all applicable requirements
of Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition and holding
period of the Fund's portfolio assets. Provided all such requirements are met,
no U.S. federal income or excise taxes generally will be required to be paid
by the Funds, although non-U.S. source income earned by each Fund may be
subject to non-U.S. withholding taxes. If a Fund should fail to qualify as a
"regulated investment company" for any year, the Fund would incur a regular
corporate federal income tax upon its taxable income and Fund distributions
would generally be taxable as ordinary income to shareholders. The Portfolio
Trust believes the Portfolios also will not be required to pay any U.S.
federal income or excise taxes on their income.
The portion of each Fund's ordinary income dividends attributable to
dividends received in respect of equity securities of U.S. issuers is normally
eligible for the dividends received deduction for corporations subject to U.S.
federal income taxes. Availability of the deduction for particular shareholders
is subject to certain limitations, and deducted amounts may be subject to the
alternative minimum tax and result in certain basis adjustments. Any Fund
dividend that is declared in October, November or December of any calendar year,
that is payable to shareholders of record in such a month, and that is paid the
following January will be treated as if received by the shareholders on December
31 of the year in which the dividend is declared.
The Fund will withhold tax payments at the rate of 30% (or any lower rate
permitted under an applicable treaty) on taxable dividends and other payments
subject to withholding taxes that are made to persons who are not citizens or
residents of the United States.
The account application asks each new shareholder to certify that the
shareholder's Social Security or taxpayer identification number is correct and
that the shareholder is not subject to 31% backup withholding for failing to
report income to the IRS. If a shareholder fails to provide this information,
or otherwise violates IRS regulations, the Fund may be required to withhold
tax at the rate of 31% on certain distributions and redemption proceeds paid
to that shareholder.
Any Fund distribution will have the effect of reducing the per share net
asset value of shares in the Fund by the amount of the distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of shares
of a Fund by a shareholder that holds such shares as a capital asset will be
treated as a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise as a short-term capital gain or loss.
However, any loss realized upon a disposition of shares in a Fund held for six
months or less will be treated as a long-term capital loss to the extent of
any distributions of net capital gain made with respect to those shares. Any
loss realized upon a disposition of shares may also be disallowed under rules
relating to wash sales. Gain may be increased (or loss reduced) upon a
redemption of Class A shares of a Fund within 90 days after their purchase
followed by any purchase without payment of an additional sales charge
(including purchases by exchange or by reinvestment) of Class A shares of that
Fund or shares of another Landmark Fund generally sold subject to a sales
charge.
Each Fund's transactions in options, futures contracts and forward
contracts will be subject to special tax rules that may affect the amount,
timing and character of Fund income and distributions to shareholders. For
example, certain positions held by each Fund on the last business day of each
taxable year will be marked to market (i.e., treated as if closed out) on that
day, and any gain or loss associated with the positions will be treated as 60%
long-term and 40% short-term capital gain or loss. Certain positions held by a
Fund that substantially diminish its risk of loss with respect to other
positions in its portfolio may constitute "straddles," and may be subject to
special tax rules that would cause deferral of Fund losses, adjustments in the
holding periods of Fund securities, and conversion of short-term into long-
term capital losses. Certain tax elections exist for straddles that may alter
the effects of these rules. Each Fund will limit its activities in options,
futures contracts and forward contracts to the extent necessary to meet the
requirements of Subchapter M of the Code.
Special tax considerations apply with respect to non-U.S. investments of
the Funds. Use of non-U.S. currencies for non-hedging purposes may be limited
in order to avoid a tax on the Funds. Investment in certain "passive foreign
investment companies" may also be limited in order to avoid a tax on the
Funds. Investment income received by a Fund from non-U.S. securities may be
subject to non-U.S.taxes. The United States has entered into tax treaties with
many other countries that may entitle a Fund to a reduced rate of tax or an
exemption from tax on such income. The Funds intend to qualify for treaty
reduced rates where available. It is not possible, however, to determine the
Funds' effective rates of non-U.S. tax in advance since the amount of the
Funds' respective assets to be invested within various countries is not known.
Shareholders will not be able to claim any deduction or credit for any part of
the foreign taxes paid by the Funds.
9. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Price Waterhouse LLP are the independent accountants for the Funds,
providing audit services and assistance and consultation with respect to the
preparation of filings with the Securities and Exchange Commission. Price
Waterhouse are the chartered accountants for the Portfolio Trust.
The audited financial statements of the Balanced Fund and the Equity Fund
(Statement of Assets and Liabilities at December 31, 1995, Statement of
Operations for the year ended December 31, 1995, Statement of Changes in Net
Assets for each of the years in the two-year period ended December 31, 1995,
Financial Highlights for each of the years in the five year period ended
December 31, 1995 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, independent accountants, on behalf of the
Funds.
The audited financial statements of the Balanced Portfolio and the Equity
Portfolio (Portfolio of Investments at December 31, 1995, Statement of Assets
and Liabilities at December 31, 1995, Statement of Operations for the period
May 1, 1994 (commencement of operations) to December 31, 1994 and for the
fiscal year ended December 31, 1995, Statement of Changes in Net Assets for
the period May 1, 1994 (commencement of operations) to December 31, 1994 and
for the fiscal year ended December 31, 1995, Financial Highlights for the
period May 1, 1994 (commencement of operations) to December 31, 1994 and for
the fiscal year ended December 31, 1995, Notes to Financial Statements and
Independent Auditors' Report), each of which is included in the Annual Reports
to Shareholders of the Balanced Fund and the Equity Fund, are incorporated by
reference into this Statement of Additional Information and have been so
incorporated in reliance upon the reports of Price Waterhouse, chartered
accountants, on behalf of the Portfolios.
The audited financial statements of the Small Cap Equity Fund (Statement
of Assets and Liabilities at December 31, 1995, Statement of Operations for
the period June 21, 1995 (commencement of operations) to December 31, 1995,
Statement of Changes in Net Assets for the period June 21, 1995 (commencement
of operations) to December 31, 1995, Financial Highlights for the period June
21, 1995 (commencement of operations) to December 31, 1995, Notes to Financial
Statements and Independent Auditors' Report), each of which is included in the
Annual Report to Shareholders, are incorporated by reference into this
Statement of Additional Information and have been so incorporated in reliance
upon the reports of Price Waterhouse LLP, independent accountants, on behalf
of the Fund.
The audited financial statements of the Small Cap Equity Portfolio
(Portfolio of Investments at December 31, 1995, Statement of Assets and
Liabilities at December 31, 1995, Statement of Operations for the period June
21, 1995 (commencement of operations) to December 31, 1995, Statement of
Changes in Net Assets for the period June 21, 1995 (commencement of
operations) to December 31, 1995, Financial Highlights for the period June 21,
1995 (commencement of operations) to December 31, 1995, Notes to Financial
Statements and Independent Auditors' Report), each of which is included in the
Annual Report to Shareholders of the Small Cap Equity Portfolio, are
incorporated by reference into this Statement of Additional Information and
have been so incorporated in reliance upon the reports of Price Waterhouse,
chartered accountants, on behalf of the Portfolio.
Copies of the Annual Reports for each Fund accompany this Statement of
Additional Information.
<PAGE>
SHAREHOLDER SERVICING AGENTS
FOR CITIBANK 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 CLIENTS:
Citigold
P.O. Box 5130, New York, NY 10126-5130
Call Your Citigold Executive, or in NY or CT (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,
Registered Representative 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>
PART C
Item 24. Financial Statements and Exhibits.
(a) Financial Statements Included in Part A:
LANDMARK EQUITY FUND
Condensed Financial Information - Financial Highlights (for
the period from the commencement of operations (October
19, 1990) to December 31, 1990 and for each of the years
in the five-year period ended December 31, 1995)
LANDMARK SMALL CAP EQUITY FUND
Condensed Financial Information - Financial Highlights (for
the period from the commencement of operations (June 21,
1995) to December 31, 1995)
Financial Statements Included in Part B:
LANDMARK EQUITY FUND
Statement of Assets and Liabilities at December 31, 1995*
Statement of Operations for the year ended December 31, 1995*
Statement of Changes in Net Assets for each of the years ended
December 31, 1994 and 1995*
Financial Highlights for each of the years ended December 31,
1991, 1992, 1993, 1994 and 1995*
EQUITY PORTFOLIO
Portfolio of Investments at December 31, 1995*
Statement of Assets and Liabilities at December 31, 1995*
Statement of Operations for the year ended December 31, 1995*
Statement of Changes in Net Assets for the period from May 1,
1994 (commencement of operations) to December 31, 1994 and
for the year ended December 31, 1995*
Financial Highlights for the period from May 1, 1994
(commencement of operations) to December 31, 1994 and for
the year ended December 31, 1995*
LANDMARK SMALL CAP EQUITY FUND
Statement of Assets and Liabilities at December 31, 1995**
Statement of Operations for the period from June 21, 1995
(commencement of operations) to December 31, 1995**
Statement of Changes in Net Assets for the period from June
21, 1995 (commencement of operations) to December 31,
1995**
Financial Highlights for the period from June 21, 1995
(commencement of operations) to December 31, 1995**
SMALL CAP EQUITY PORTFOLIO
Portfolio of Investments at December 31, 1995**
Statement of Assets and Liabilities at December 31, 1995**
Statement of Operations for the period from June 21, 1995
(commencement of operations) to December 31, 1995**
Statement of Changes in Net Assets for the period from June
21, 1995 (commencement of operations) to December 31,
1995**
Financial Highlights for the period from June 21, 1995
(commencement of operations) to December 31, 1995**
------------------
* Financial information is included for Landmark Equity Fund and
Equity Portfolio only and is incorporated by reference to the
Registrant's Annual Report to Shareholders of Landmark Equity Fund
for the fiscal year ended December 31, 1995 (Accession Number
0000950156-96-000284).
** Financial information is included for Landmark Small Cap Equity
Fund and Small Cap Equity Portfolio only and is incorporated by
reference to the Registrant's Annual Report to Shareholders of
Landmark Small Cap Equity Fund for the fiscal year ended December
31, 1995 (Accession Number 0000950156-96-000284).
<PAGE>
(b) Exhibits
* 1(a) Amended and Restated Declaration of Trust of
Registrant
***** 1(b) Amendment to Amended and Restated Declaration of
Trust of Registrant
***** 1(c) Form of Establishment and Designation of Series
of the Registrant
****** 1(d) Amendment to Amended and Restated Declaration of
Trust of Registrant
* 2(a) Amended and Restated By-Laws of Registrant
***** 2(b) Amendment to Amended and Restated By-Laws of
Registrant
***** 4(a) Form of Certificate representing ownership of
Class A shares of the Funds
***** 4(b) Form of Certificate representing ownership of
Class B shares of the Funds
***** 6(a) Form of Amended and Restated Distribution
Agreement between the Registrant and The Landmark
Funds Broker-Dealer Services, Inc. ("LFBDS"), as
distributor, with respect to Class A Shares of
the Funds
***** 6(b) Form of Distribution Agreement between the
Registrant and LFBDS, as distributor, with
respect to Class B Shares of the Funds
***** 7 Form of Custodian Agreement between the
Registrant, on behalf of the Funds, and Investors
Bank & Trust Company, as custodian
***** 9(a)(i) Form of Amended and Restated Administrative
Services Plan of the Registrant
9(a)(ii) Form of Amended and Restated Administrative
Services Plan of the Registrant
*** 9(b) Administrative Services Agreement between the
Registrant and LFBDS, as administrator
*** 9(c) Sub-Administrative Services Agreement between
Citibank, N.A. and LFBDS
**** 9(d)(i) Form of Shareholder Servicing Agreement between
the Registrant and Citibank, N.A., as shareholder
servicing agent
**** 9(d)(ii) Form of Shareholder Servicing Agreement between
the Registrant and a federal savings bank, as
shareholder servicing agent
**** 9(d)(iii) Form of Shareholder Agreement between the
Registrant and LFBDS, as shareholder servicing
agent
9(d)(iv) Form of Shareholder Servicing Agreement between
the Registrant and a national banking association
or subsidiary thereof or state chartered banking
association, as shareholder servicing agent
* 9(e) Transfer Agency and Servicing Agreement between
the Registrant and State Street Bank and Trust
Company, as transfer agent
* 9(f)(i) Expense Reimbursement Agreement between the
Registrant, on behalf of the Funds, and LFBDS, as
administrator
****** 9(f)(ii) Form of Amended Expense Reimbursement Agreement
between the Registrant, on behalf of the Equity
Fund, and LFBDS, as administrator
***** 9(g) Form of Exchange Privilege Agreement between each
of the trusts in the Landmark Family of Funds,
including the Registrant, and LFBDS, as
distributor
11(a) Consent of Price Waterhouse, LLP, independent
auditors of the Registrant
11(b) Consent of Price Waterhouse, independent auditors
of Equity Portfolio and Small Cap Equity
Portfolio
***** 15(a) Form of Amended and Restated Distribution Plan of
the Registrant with respect to Class A Shares of
the Funds
***** 15(b) Form of Distribution Plan of the Registrant with
respect to Class B Shares of the Funds
***** 16 Performance Calculations
*, ** and *** 25(a) Powers of Attorney for the Registrant
***, ***** and 25(b) Powers of Attorney for The Premium Portfolios
******
27 Financial Data Schedule
---------------------
* Incorporated herein by reference to Post-Effective Amendment No. 8 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90519) as
filed with the Securities and Exchange Commission on March 2, 1992.
** Incorporated herein by reference to Post-Effective Amendment No. 9 to the
Registrant's Registration Statement on Form N-1A (File No. 2-90519) as
filed with the Securities and Exchange Commission on April 13, 1993.
*** Incorporated herein by reference to Post-Effective Amendment No. 10 to
the Registrant's Registration Statement on Form N-1A (File No. 2-90519)
as filed with the Securities and Exchange Commission on December 30,
1993.
**** Incorporated herein by reference to Post-Effective Amendment No. 11 to
the Registrant's Registration Statement on Form N-1A (File No. 2-90519)
as filed with the Securities and Exchange Commission on February 28,
1994.
***** Incorporated herein by reference to Post-Effective Amendment No. 12 to
the Registrant's Registration Statement on Form N-1A (File No. 2-90519)
as filed with the Securities and Exchange Commission on October 14, 1994.
***** Incorporated herein by reference to Post-Effective Amendment No. 14 to
the Registrant's Registration Statement on Form N-1A (File No. 2-90519)
as filed with the Securities and Exchange Commission on March 3, 1995.
****** Incorporated herein by reference to Post Effective Amendment No. 15 to
the Registrant's Registration Statement on Form N-1A (File No. 2-90519)
as filed with the Securities and Exchange Commission on February 15,
1996.
Item 25. Persons Controlled by or under Common Control with Registrant.
Not applicable.
Item 26. Number of Holders of Securities.
Title of Class Number of Record Holders
Shares of Beneficial Interest As of April 15, 1996
(without par value)
Landmark Small Cap Equity Fund
Class A 7
Class B 0
Landmark Equity Fund
Class A 7
Class B 0
Landmark Earnings Growth Equity Fund
Class A 0
Class B 0
Item 27. Indemnification.
Reference is hereby made to (a) Article V of the Registrant's
Declaration of Trust, filed as an Exhibit to Post-Effective Amendment No. 8 to
its Registration Statement on Form N-1A (the "Amendment"); (b) Section 4 of the
Distribution Agreement between the Registrant and The Landmark Funds
Broker-Dealer Services, Inc., filed as an Exhibit to Post-Effective Amendment
No. 8; and (c) the undertaking of the Registrant regarding indemnification set
forth in its Registration Statement on Form N-1A.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
Item 28. Business and Other Connections of Investment Adviser.
Citibank, N.A. ("Citibank") is a commercial bank offering a wide range
of banking and investment services to customers across the United States and
around the world. Citibank is a wholly-owned subsidiary of Citicorp, a
registered bank holding company. Citibank also serves as investment adviser to
the following registered investment companies (or series thereof): The Premium
Portfolios (Balanced Portfolio, Equity Portfolio, Government Income Portfolio,
International Equity Portfolio, Emerging Asian Markets Equity Portfolio and
Small Cap Equity Portfolio), Tax Free Reserves Portfolio, U.S. Treasury Reserves
Portfolio, Cash Reserves Portfolio, Asset Allocation Portfolios (Asset
Allocation Portfolio 200, Asset Allocation Portfolio 300, Asset Allocation
Portfolio 400 and Asset Allocation Portfolio 500), Landmark Multi-State Tax Free
Funds (Landmark New York Tax Free Reserves, Landmark Connecticut Tax Free
Reserves and Landmark California Tax Free Reserves), Landmark Fixed Income Funds
(Landmark Intermediate Income Fund), Landmark Tax Free Income Funds (Landmark
National Tax Free Income Fund and Landmark New York Tax Free Income Fund) and
Landmark VIP Funds (Landmark VIP U.S. Government Portfolio, Landmark VIP
Balanced Portfolio, Landmark VIP Equity Portfolio and Landmark VIP International
Equity Portfolio). As of December 31, 1995, Citibank and its affiliates managed
assets in excess of $83 billion worldwide. The principal place of business of
Citibank is located at 399 Park Avenue, New York, New York 10043.
The Chairman of the Board and a Director of Citibank is John S. Reed.
The following are Vice Chairmen of the Board and Directors of Citibank: Paul J.
Collins, William R. Rhodes and H. Onno Ruding. Other Directors of Citibank are
D. Wayne Calloway, Chairman and Chief Executive Officer, PepsiCo, Inc.,
Purchase, New York; Colby H. Chandler, Former Chairman and Chief Executive
Officer, Eastman Kodak Company; Pei-yuan Chia, Director, Baxter International,
Inc.; Kenneth T. Derr, Chairman and Chief Executive Officer, Chevron
Corporation; H.J. Haynes, Senior Counselor, Bechtel Group, Inc., San Francisco,
California; Rozanne L. Ridgway, President, The Atlantic Council of the United
States; Robert B. Shapiro, President and Chief Operating Officer, Monsanto
Company; Frank A. Shrontz, Chairman and Chief Executive Officer, The Boeing
Company, Seattle, Washington; Roger B. Smith, Former Chairman and Chief
Executive Officer, General Motors Corporation; Franklin A. Thomas, President,
The Ford Foundation, New York, New York; and Edgar S. Woolard, Jr., Chairman and
Chief Executive Officer, E.I. DuPont De Nemours & Company.
Each of the individuals named above is also a Director of Citicorp. In
addition, the following persons have the affiliations indicated:
D. Wayne Calloway Director, Exxon Corporation
Director, General Electric Company
Director, Pepsico, Inc.
Colby H. Chandler Director, Digital Equipment Corporation
Director, Ford Motor Company
Director, J.C. Penney Company, Inc.
Pei-yuan Chia Director, Baxter International, Inc.
Paul J. Collins Director, Kimberly-Clark Corporation
Kenneth T. Derr Director, American Telephone and Telegraph, Co.
Director, Chevron Corporation
Director, Potlatch Corporation
H.J. Haynes Director, Bechtel Group, Inc.
Director, Boeing Company
Director, Fremont Group, Inc.
Director, Hewlett-Packard Company
Director, Paccar Inc.
Director, Saudi Arabian Oil Company
John S. Reed Director, Monsanto Company
Director, Philip Morris Companies
Incorporated
Stockholder, Tampa Tank & Welding, Inc.
William R. Rhodes Director, Private Export Funding
Corporation
Rozanne L. Ridgway Director, 3M
Director, Bell Atlantic Corporation
Director, Boeing Company
Director, Emerson Electric Company
Member-International Advisory Board,
New Perspective Fund, Inc.
Director, RJR Nabisco, Inc.
Director, Sara Lee Corporation
Director, Union Carbide Corporation
H. Onno Ruding Member, Board of Supervisory Directors,
Amsterdam Trustee's Kantoor
Board Member, Corning, Incorporated
Advisor, Intercena (C&A) (Netherlands)
Member, Board of Supervisory Directors,
Pechiney Nederland N.V.
Member, Board of Advisers, Robeco N.V.
Advisory Director, Unilever N.V.
Advisory Director, Unilever PLC
Robert B. Shapiro Director, G.D. Searle & Co.
Director, Silicon Graphics
Director, Monsanto Company
Director, The Nutrasweet Company
Frank A. Shrontz Director, 3M
Director, Baseball of Seattle, Inc.
Director, Boeing Company
Director, Boise Cascade Corp.
Roger B. Smith Director, International Paper Company
Director, Johnson & Johnson
Director, Pepsico, Inc.
Franklin A. Thomas Director, Aluminum Company of America
Director, American Telephone and Telegraph, Co.
Director, Cummins Engine Company, Inc.
Director, Pepsico, Inc.
Edgar S. Woolard, Jr. Director, E.I. DuPont De Nemours & Company
Item 29. Principal Underwriters.
(a) The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS"), the
Registrant's Distributor, is also the distributor for Landmark International
Equity Fund, Landmark Emerging Asian Markets Equity Fund, Landmark U.S. Treasury
Reserves, Landmark Cash Reserves, Premium U.S. Treasury Reserves, Premium Liquid
Reserves, Landmark Institutional U.S. Treasury Reserves, Landmark Institutional
Liquid Reserves, Landmark Tax Free Reserves, Landmark California Tax Free
Reserves, Landmark Connecticut Tax Free Reserves, Landmark New York Tax Free
Reserves, Landmark U.S. Government Income Fund, Landmark Intermediate Income
Fund, Landmark Balanced Fund, Landmark Equity Fund, Landmark Small Cap Equity
Fund, Landmark National Tax Free Income Fund, Landmark New York Tax Free Income
Fund, Landmark VIP Funds (Landmark VIP U.S. Government Portfolio, Landmark VIP
Balanced Portfolio, Landmark VIP Equity Portfolio and Landmark VIP International
Equity Portfolio), CitiSelectSM Folio 200, CitiSelectSM Folio 300, CitiSelectSM
Folio 400 and CitiSelectSM Folio 500. LFBDS is also the placement agent for
International Equity Portfolio, Balanced Portfolio, Equity Portfolio, Small Cap
Equity Portfolio, Government Income Portfolio, Emerging Asian Markets Equity
Portfolio, Tax Free Reserves Portfolio, Cash Reserves Portfolio, U.S. Treasury
Reserves Portfolio, Asset Allocation Portfolio 200, Asset Allocation Portfolio
300, Asset Allocation Portfolio 400 and Asset Allocation Portfolio 500.
(b) The information required by this Item 29 with respect to each
director and officer of LFBDS is incorporated by reference to Schedule A of Form
BD filed by LFBDS pursuant to the Securities and Exchange Act of 1934 (File No.
8-32417).
(c) Not applicable.
Item 30. Location of Accounts and Records.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
The Landmark Funds Broker-Dealer Services, Inc. 6 St. James Avenue
(administrator and distributor) Boston, MA 02116
State Street Bank and Trust Company 1776 Heritage Drive
(transfer agent) North Quincy, MA 02171
Investors Bank & Trust Company One Lincoln Plaza
(custodian) Boston, MA 02111
Citibank, N.A. 153 East 53rd Street
(investment adviser) New York, NY 10043
SHAREHOLDER SERVICING AGENTS
Citibank, N.A. 450 West 33rd Street
New York, NY 10001
Citibank, N.A. -- Citigold Citicorp Mortgage Inc. - Citigold
15851 Clayton Road
Ballwin, MO 63011
Citibank, N.A. -- The Citibank 153 East 53rd Street
Private Bank New York, NY 10043
Citibank, N.A. -- Citibank Global 153 East 53rd Street
Asset Management New York, NY 10043
Citibank, N.A. -- North American 111 Wall Street
Investor Services New York, NY 10094
Citicorp Investment Services One Court Square
Long Island City, NY 11120
</TABLE>
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) The Registrant undertakes to file a post-effective amendment,
using financials of the Landmark Earnings Growth Equity Fund,
which need not be certified, within four to six months
following the commencement of operations of this Fund. The
financial statements included in such amendment will be as of
and for the time period ended on a date reasonably close to or
as soon as practicable prior to the date of the filing of the
amendment.
(c) The Registrant hereby undertakes, if requested to do so by the
record holders of not less than 10% of the Registrant's
outstanding shares, to call a meeting of shareholders for the
purpose of voting upon the question of removal of a trustee or
trustees, and to assist in communications with other
shareholders as required by Section 16(c) of the Investment
Company Act of 1940. The Registrant further undertakes to
furnish to each person to whom a prospectus of the Landmark
Equity Fund or the Landmark Small Cap Equity Fund is delivered
with a copy of its latest Annual Report to Shareholders, upon
request without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
requirements for effectiveness of this Post-Effective Amendment to this
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Boston and
Commonwealth of Massachusetts on the 24th day of April, 1996.
<TABLE>
LANDMARK FUNDS II
By: Philip W. Coolidge
Philip W. Coolidge
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to this Registration Statement has been signed below by
the following persons in the capacities indicated below on April 24, 1996.
<CAPTION>
Signature Title
<S> <C>
Philip W. Coolidge President, Principal Executive Officer and Trustee
Philip W. Coolidge
John R. Elder Principal Financial Officer and Principal
John R. Elder Accounting Officer
H.B. Alvord* Trustee
H.B. Alvord
Riley C. Gilley* Trustee
Riley C. Gilley
Diana R. Harrington* Trustee
Diana R. Harrington
Susan B. Kerley* Trustee
Susan B. Kerley
C. Oscar Morong, Jr.* Trustee
C. Oscar Morong, Jr.
Donald B. Otis* Trustee
Donald B. Otis
E. Kirby Warren* Trustee
E. Kirby Warren
William S. Woods, Jr.* Trustee
William S. Woods, Jr.
*By: Philip W. Coolidge
Philip W. Coolidge
</TABLE>
<PAGE>
SIGNATURES
The Premium Portfolios has duly caused this Post-Effective Amendment to
the Registration Statement on Form N-1A of Landmark Funds II to be signed on its
behalf by the undersigned, thereunto duly authorized, in George Town, Grand
Cayman, Cayman Islands, BWI, on the 24th day of April, 1996.
<TABLE>
THE PREMIUM PORTFOLIOS
By: Susan Jakuboski
Susan Jakuboski,
Assistant Treasurer of
The Premium Portfolios
This Post-Effective Amendment to the Registration Statement on Form
N-1A of Landmark Funds II has been signed by the following persons in the
capacities indicated on April 24, 1996.
<CAPTION>
Signature Title
<S> <C>
Philip W. Coolidge* President, Principal Executive Officer and Trustee
Philip W. Coolidge
John R. Elder* Principal Financial Officer and Principal
John R. Elder Accounting Officer
Elliott J. Berv* Trustee
Elliott J. Berv
Mark T. Finn* Trustee
Mark T. Finn
Walter E. Robb, III* Trustee
Walter E. Robb, III
*By: Susan Jakuboski
Susan Jakuboski
Executed by Susan Jakuboski on behalf of those indicated as attorney in
fact.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
<S> <C>
9(a)(ii) Form of Amended and Restated Administrative Services Plan of the Registrant
9(d)(iv) Form of Shareholder Servicing Agreement between the Registrant and a
national banking association or subsidiary thereof or state chartered
banking association, as shareholder servicing agent
11(a) Consent of Price Waterhouse, LLP, independent auditors of the Registrant
11(b) Consent of Price Waterhouse, independent auditors of Equity Portfolio and
Small Cap Equity Portfolio
27 Financial Data Schedule
</TABLE>
<PAGE>
EXHIBIT 99(a)(ii)
AMENDED AND RESTATED
ADMINISTRATIVE SERVICES PLAN
ADMINISTRATIVE SERVICES PLAN, dated as of October 24, 1994, and amended
and restated as of February 9, 1996, of Landmark Funds II, a Massachusetts
business trust (the "Trust".
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is registered under the Investment Company Act of 1940
(collectively with the rules and regulations promulgated thereunder, the "1940
Act"); and
WHEREAS, the Shares of Beneficial Interest of the Trust (the "Shares")
are divided into one or more separate series (together with any series which may
in the future be established, the "Funds"); and
WHEREAS, the Shares of the Funds are divided into classes designated,
respectively, Class A and Class B (together with any classes which may in the
future be established, the "Classes"); and
WHEREAS, the Trust desires to adopt this Administrative Services Plan
(the "Plan") in order to provide for certain administrative services to the
Trust and holders of Shares of each Fund; and
WHEREAS, the Trust desires to enter into a transfer agency agreement
(in such form as may from time to time be approved by the Board of Trustees of
the Trust) with a financial institution, as transfer agent for the Trust (the
"Transfer Agent"), whereby the Transfer Agent will provide transfer agency
services to the Trust (the "Transfer Agency Agreement"); and
WHEREAS, the Trust desires to enter into a custodian agreement (in such
form as may from time to time be approved by the Board of Trustees of the Trust)
with a financial institution, as custodian for the Trust (the "Custodian"),
whereby the Custodian will provide custodial services to the Trust with respect
to each Fund, if any (the "Custodian Agreement"); and
WHEREAS, the Trust desires to enter into an administrative services
agreement (in such form as may from time to time be approved by the Board of
Trustees of the Trust) with The Landmark Funds Broker-Dealer Services, Inc., a
Massachusetts corporation, as administrator of the Trust (the "Administrator"),
whereby the Administrator will provide certain administrative and management
services to the Trust (the "Administrative Services Agreement"); and
WHEREAS, the Trust also desires to enter into shareholder servicing
agreements (in such form as may from time to time be approved by the Board of
Trustees of the Trust) with certain financial institutions, as shareholder
servicing agents ("Shareholder Servicing Agents"), whereby each Shareholder
Servicing Agent will perform certain administrative and service functions (the
"Shareholder Servicing Agreements"); and
WHEREAS, the Board of Trustees of the Trust, in considering whether the
Trust should adopt and implement this Plan, has evaluated such information as it
deemed necessary to an informed determination as to whether this Plan should be
adopted and implemented and has considered such pertinent factors as it deemed
necessary to form the basis for a decision to use assets of each Class of each
Fund for such purposes, and has determined that there is a reasonable likelihood
that the adoption and implementation of this Plan will benefit the Trust and
each Fund and its shareholders of each Class.
NOW, THEREFORE, the Board of Trustees of the Trust hereby adopts this
Plan for the Trust, on the following terms and conditions:
1. As specified in the Transfer Agency Agreement, the Transfer Agent
shall act as dividend disbursing agent for the Trust and perform transfer agency
functions for each Class of Shares of each Fund. The Trust shall pay to the
Transfer Agent such compensation from the assets represented by Shares of each
Class of each Fund as may from time to time be agreed to by the Trust and the
Transfer Agent.
2. As specified in the Custodian Agreement, the Custodian shall
safeguard and control the cash and securities of each Fund, handle receipt and
delivery of securities for each Fund, determine income and collect interest on
the investments of each Fund, maintain books of original entry for Fund and
Trust accounting and other required books and accounts, calculate the daily net
asset value of Shares of each Fund and, in general, act as the custodian of the
assets of the Trust pertaining to each Fund, but the Custodian shall have no
power to determine the investment policies of the Trust or to determine which
securities the Trust will buy or sell on behalf of any Fund. The Trust shall pay
to the Custodian such compensation from the assets of each Fund, as may from
time to time be agreed to by the Trust and the Custodian.
3. As specified in the Administrative Services Agreement, the
Administrator shall perform certain administrative and management services on
behalf of the Trust, including: providing office space, equipment and clerical
personnel necessary for maintaining the organization of the Trust and for
providing the administrative and management services to be performed by the
Administrator; arranging, if desired by the Trust, for Directors, officers and
employees of the Administrator to serve as Trustees, officers or agents of the
Trust if duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law; supervising the
overall administration of the Trust, including negotiation of contracts and fees
with and the monitoring of performance and billings of the Trust's Transfer
Agent, Shareholder Servicing Agents, Custodian and other independent contractors
or agents; preparing and, if applicable, filing all documents required for
compliance by the Trust with applicable laws and regulations, including
registration statements, prospectuses, statements of additional information,
semi-annual and annual reports to shareholders, proxy statements and tax
returns; preparation of agendas and supporting documents for minutes of meetings
of Trustees, committees of Trustees and shareholders; arranging for computation
of performance statistics with respect to each Fund, and arranging for
publication of current price information in newspapers and other publications;
and arranging for maintenance of books and records of the Trust and each Fund.
As consideration for services performed under the Administrative Services
Agreement, the Trust shall, subject to paragraph 5 hereof, periodically pay to
the Administrator such fee from the assets of each Fund as may from time to time
be agreed to by the Trust and the Administrator.
4. As specified in each Shareholder Servicing Agreement, each
Shareholder Servicing Agent shall, with respect to one or more Classes of Shares
of one or more Funds, perform certain administrative and service functions,
which may include, among others: answering customer inquiries or inquiries of
broker/dealers which have entered into sales agreements with the Fund's
Distributor or of banks or other financial institutions which have entered into
agency agreements with a Fund's Distributor (such entities collectively referred
to herein as "Third Party Firms") regarding the manner in which purchases,
exchanges and redemptions of Shares may be effected, and with regard to certain
other matters pertaining to the Trust or such Fund; assisting customers or Third
Party Firms in designating and changing dividend options, account designations
and addresses; providing necessary personnel and facilities to maintain certain
shareholder accounts and records, as specified from time to time by the Trust;
assisting in processing purchase, exchange and redemption transactions;
assisting in or arranging for the wiring of funds; transmitting and receiving
funds or assisting in connection with customer orders to purchase, exchange and
redeem Shares; verifying and guaranteeing shareholder signatures in connection
with redemption orders and transfers and changes in shareholder-designated
accounts; providing periodic statements showing a customer's account balances,
and to the extent practicable, integrating such information with other client
transactions effected with or through the Shareholder Servicing Agent;
furnishing monthly and annual statements and confirmations of purchases,
exchanges and redemptions of Shares in a customer's account; transmitting or
assisting in the transmission of proxy statements, annual reports, updating
prospectuses, statements of additional information and other communications from
the Trust to its shareholders or such Fund's shareholders; and providing such
other related services as the Trust, a Third Par ty Firm or a shareholder may
request. Each Shareholder Servicing Agreement shall provide that the Shareholder
Servicing Agent shall provide all personnel and facilities necessary in order
for it to perform the functions described in the applicable Shareholder
Servicing Agreement with respect to its customers who purchase Shares or the
services it has agreed to provide to Third Party Firms, as applicable. As
consideration for services performed under the Shareholder Servicing Agreements,
the Trust shall, subject to paragraph 5 hereof, periodically pay to each
Shareholder Servicing Agent such fee from the assets represented by Shares of
each such Class of the Trust or each such Fund, if any, as may from time to time
be agreed to by the Trust and such Shareholder Servicing Agent. Each Shareholder
Servicing Agent will be permitted to charge its customers direct fees for the
same or similar services as provided pursuant to a Shareholder Servicing
Agreement.
5. Notwithstanding paragraphs 3 and 4 hereof, with respect to each
Class, the aggregate of (a) the fee payable from the assets of a Fund
represented by Shares of that Class to the Administrator pursuant to the
Administrative Services Agreement and (b) the fees payable from the assets of
the Trust or such Fund represented by Shares of that Class to the Shareholder
Servicing Agents pursuant to the Shareholder Servicing Agreements, together
with, only in the case of Class A shares of such Fund, (c) the Basic
Distribution Fees and Service Fees (as defined in the Trust's Amended and
Restated Distribution Plan with respect to Class A Shares) payable from the
assets of such Fund represented by such Class A Shares to the Distributor
pursuant to such Distribution Plan, may not exceed an amount equal to 40% of
such Fund's average daily net assets represented by Shares of that Class on an
annualized basis for such Fund's then current fiscal year. Fees payable from a
Fund to the Transfer Agent pursuant to paragraph 1 hereof or to Shareholder
Servicing Agents pursuant to paragraph 4 hereof may differ with respect to each
Class of Shares of that Fund.
6. Nothing herein contained shall be deemed to require the Trust to
take any action contrary to its Declaration of Trust or By-Laws or any
applicable statutory or regulatory requirement to which it is subject or by
which it is bound, or to relieve or deprive the Board of Trustees of the Trust
of the responsibility for and control of the conduct of the affairs of the
Trust.
7. This Plan shall become effective upon approval by a vote of the
Board of Trustees of the Trust and a vote of a majority of the Trustees who are
not -interested persons' of the Trust and who have no direct or indirect
financial interest in the operation of the Plan or in any of the agreements
related to the Plan (the "Qualified Trustees"), such votes to be cast in person
at a meeting called for the purpose of voting on this Plan.
8. This Plan shall continue in effect indefinitely, provided that such
continuance is subject to annual approval by a vote of the Board of Trustees of
the Trust and a majority of the Qualified Trustees, such votes to be cast in
person at a meeting called for the purpose of voting on continuance of this
Plan. If such annual approval is not obtained, this Plan shall expire on the
date which is 15 months after the date of the last approval.
9. This Plan may be amended at any time by the Board of Trustees of the
Trust, provided that (a) any amendment to increase materially the amount to be
expended from the assets of the Trust or of any Fund represented by the Class A
Shares of that Fund for the services described herein shall be effective only
upon approval by a vote of a "majority of the outstanding voting securities" of
the Class A Shares of such Fund, and (b) any material amendment of this Plan
shall be effective only upon approval by a vote of the Board of Trustees of the
Trust and a majority of the Qualified Trustees, such votes to be cast in person
at a meeting called for the purpose of voting on such amendment. This Plan may
be terminated at any time with respect to any Class of Shares of any Fund by
vote of a majority of the Qualified Trustees or by a vote of a "majority of the
outstanding voting securities" of such Class of Shares of such Fund.
10. The Treasurer of the Trust shall provide the Board of Trustees of
the Trust, and the Board of Trustees of the Trust shall review, at least
quarterly, a written report of the amounts expended under the Plan and the
purposes for which such expenditures were made.
11. While this Plan is in effect, the selection and nomination of
Qualified Trustees shall be committed to the discretion of the Trustees who are
not "interested persons" of the Trust.
12. For the purposes of this Plan, the terms "interested person" and
"majority of the outstanding voting securities" are used as defined in the 1940
Act. In addition, for purposes of determining the fees payable to the
Administrator and each Shareholder Servicing Agent from the assets of a Fund
represented by a Class of Shares of that Fund, the value of the Fund's net
assets represented by that Class shall be computed in the manner specified in
the Trust's then-current prospectus and statement of additional information
applicable to the Trust or that Fund for the computation of the net asset value
of Shares of that class of that Fund.
13. The Trust shall preserve copies of this Plan, and each agreement
related hereto and each report referred to in paragraph 10 hereof (collectively
the "Records"), for a period of six years from the end of the fiscal year in
which such Record was made and each such Record shall be kept in an easily
accessible place for the first two years of said record-keeping.
14. This Plan shall be construed in accordance with the laws of the
Commonwealth of Massachusetts and the applicable provisions of the 1940 Act.
15. If any provision of this Plan shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Plan shall not
be affected thereby.
<PAGE>
EXHIBIT 99.9(d)(iv)
SHAREHOLDER SERVICING AGREEMENT
THIS AGREEMENT, by and between: (i) each of the trusts listed on the
signature page hereof or which may be added to this Agreement by execution of a
counterpart signature page hereto at a subsequent date pursuant to a vote of
such trust's Trustees (individually, the "Trust") and (ii) each national banking
association or subsidiary thereof or state chartered banking association
(individually, the "Financial Institution") listed on the signature page hereof
or which may be added to this Agreement by execution of a counterpart signature
page hereto at a subsequent date pursuant to appropriate authorization by such
Financial Institution's officers and directors, as a shareholder servicing agent
hereunder (the "Agent");
W I T N E S S E T H:
WHEREAS, the Financial Institution wishes to provide certain
administrative and related services to broker/dealers which have entered into
sales agreements with a Trust's Distributor and to banks or other financial
institutions which have entered into an agency agreement with a Trust's
Distributor (such entities collectively referred to herein as "Third Party
Firms"), with respect to Shares of Beneficial Interest of the Trust or of any
series now existing or later created ("Shares"); and
WHEREAS, it is in the interest of the Trust to make the services of the
Agent available Third Party Firms;
NOW, THEREFORE, the Trust and the Financial Institution hereby agree as
follows:
1. Appointment. The Financial Institution, as Agent, hereby agrees to
perform certain services for Third Party Firms as hereinafter set forth. The
Agent's appointment hereunder is non-exclusive, and the parties recognize and
agree that, from time to time, the Trust may enter into other shareholder
servicing agreements, in writing, with other financial institutions.
2. Service to Be Performed.
2.1 Type of Service. The Agent shall be responsible for performing
administrative and servicing functions, which may include any of the following
without limitation: (a) answering inquiries of Third Party Firms regarding
account status and history, the manner in which purchases, exchanges and
redemptions of the Shares may be effected, and certain other matters pertaining
to the Trust; (b) assisting Third Party Firms or their customers in designating
and changing dividend options, account designations and addresses; (c) assisting
in processing purchases, exchange and redemption transactions; (d) assisting in
arranging for the wiring of funds; (e) assisting Third Party Firms or their
customers in transmitting and receiving funds in connection with customer orders
to purchase, exchange or redeem Shares; (f) assisting Third Party Firms in
transmitting proxy statements, annual reports, updating prospectuses and other
communications from the Trust to customers; and (g) providing such other related
services as the Agent may deem necessary and appropriate hereunder. The Agent
shall provide all personnel and facilities to perform the functions described in
this paragraph with respect to its Customers.
2.2 Standard of Services. All services to be rendered by the Agent
hereunder shall be performed in a professional, competent and timely manner. The
details of the operating standards and procedures to be followed by the Agent in
performance of the services described above shall be determined from time to
time by agreement between the Agent and the Trust. The Trust acknowledges that
the Agent's ability to perform on a timely basis certain of its obligations
under this Agreement depends upon the Trust's timely delivery of certain
materials and/or information to the Agent. The Trust agrees to use its best
efforts to provide such materials to the Agent in a timely manner.
3. Fees. In consideration for the services described in Section 2
hereof and the incurring of expenses in connection therewith, the Agent shall
receive fees to be paid in arrears periodically (but in no event less frequently
than semi-annually) determined by agreement between the Trust and the Agent. For
purposes of determining the fees payable to the Agent hereunder, the value of
the Trust's net assets shall be computed in the manner specified in the Trust's
then-current prospectus for computation of the net asset value of the Trust's
Shares. The above fees constitute all fees to be paid to the Agent by the Trust
with respect to the transactions contemplated hereby.
4. Information Pertaining to the Shares. The Agent and its officers,
employees and agents are not authorized to make any representations concerning
the Trust or the Shares to Third Party Firms, customers or prospective
customers, excepting only accurate communication of any information provided by
or on behalf of any administrator of the Trust or any distributor of the Shares
or any factual information contained in the then current prospectus relating to
the Trust or to any series of the Trust. Advance copies or proofs of all
materials which are generally circulated or disseminated by the Agent to Third
Party Firms, customers or prospective customers which identify or describe the
Trust shall be provided to the Trust at least 10 days prior to such circulation
or dissemination (unless the Trust consents in writing to a shorter period), and
such materials shall not be circulated or disseminated or further circulated or
disseminated at any time after the Trust shall have given written notice within
such 10 day period to the Agent of any objection thereto.
Nothing in this Section 4 shall be construed to make the Trust liable
for the use (as opposed to the accuracy) of any information about the Trust
which is disseminated by the Agent.
5. Use of the Agent's Name. The Trust shall not use the name of the
Agent, (the Financial Institution or any of its affiliates or subsidiaries) in
any prospectus, sales literature or other material relating to the Trust in a
manner not approved by the Agent prior thereto in writing; provided, however,
that the approval of the Agent shall not be required for any use of its name
which merely refers in accurate and factual terms to its appointment hereunder
or which is required by the Securities and Exchange Commission or any state
securities authority or any other appropriate regulatory, governmental or
judicial authority; provided, further, that in no event shall such approval be
unreasonably withheld or delayed.
6. Use of the Trust's Name. The Agent shall not use the name of the
Trust on any checks, bank drafts, bank statements or forms for other than
internal use in a manner not approved by the Trust prior thereto in writing;
provided, however, that the approval of the Trust shall not be required for the
use of the Trust's name in connection with communications permitted by Section 4
hereof or (subject to Section 4, to the extent the same may be applicable) for
any use of the Trust's name which merely refers in accurate and factual terms to
the Trust in connection with the Agent's role hereunder or which is required by
the Securities and Exchange Commission or any state securities authority or any
other appropriate regulatory, governmental or judicial authority; provided,
further, that in no event shall such approval be unreasonably withheld or
delayed.
7. Security. The Agent represents and warrants that to the best of its
knowledge, the various procedures and systems which it has implemented
(including provision for twenty-four hours a day restricted access) with regard
to safeguarding from loss or damage attributable to fire, theft or any other
cause the Agent's records, data, equipment, facilities and other property used
in the performance of its obligations hereunder are adequate and that it will
make such changes therein from time to time as in its judgment are required for
the secure performance of its obligations hereunder. The parties shall review
such systems and procedures on a periodic basis.
8. Compliance with Laws. The Agent shall comply with all applicable
federal and state laws and regulations, including securities laws. The Agent
represents and warrants to the Trust that the performance of all its obligations
hereunder will comply with all applicable laws and regulations, the provisions
of its charter documents and bylaws and all material contractual obligations
binding upon the Agent. The Agent furthermore undertakes that it will promptly,
after the Agent becomes so aware, inform the Trust of any change in applicable
laws or regulations (or interpretations thereof) or in its charter or by-laws or
material contracts which would prevent or impair full performance of any of its
obligations hereunder.
9. Reports. To the extent requested by the Trust from time to time, the
Agent agrees that it will provide the Treasurer of the Trust with a written
report of the amounts expended by the Agent pursuant to this Agreement and the
purposes for which such expenditures were made. Such written reports shall be in
a form satisfactory to the Trust and shall supply all information necessary for
the Trust to discharge its responsibilities under applicable laws and
regulations.
10. Force Majeure. The Agent shall not be liable or responsible for
delays or errors by reason of circumstances beyond its reasonable control,
including, but not limited to, acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdown, flood or
catastrophe, Acts of God, insurrection, war, riots or failure of communication
or power supply.
11. Indemnification.
11.1 Indemnification of the Agent. The Trust will indemnify and hold
the Agent harmless from all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) from any claim, demand, action
or suit (collectively, "Claims") (a) arising in connection with misstatements or
omissions in the Trust's Prospectus, actions or inactions by the Trust or any of
its agents or contractors or the performance of the Agent's obligations
hereunder and (b) not resulting from (i) the bad faith or negligence of the
Agent, its officers, employees or agents, (ii) any breach of applicable law by
the Agent, its officers, employees or agents, or (iii) any action of the Agent,
its officers, employees or agents which exceeds the legal authority of the Agent
or its authority hereunder. Notwithstanding anything herein to the contrary, the
Trust will indemnify and hold the Agent harmless from any and all losses,
claims, damages, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from any claim as a result of its acting in accordance with
any written instructions reasonably believed by the Agent to have been executed
by any person duly authorized by the Trust, or as a result of acting in reliance
upon any instrument or stock certificate reasonably believed by the Agent to
have been genuine and signed, countersigned or executed by a person duly
authorized by the Trust, excepting only the gross negligence or bad faith of the
Agent.
In any case in which the Trust may be asked to indemnify or hold the
Agent harmless, the Trust shall be advised of all pertinent facts concerning the
situation in question and the Agent shall use reasonable care to identify and
notify the Trust promptly concerning any situation which presents or appears
likely to present a claim for indemnification against the Trust. The Trust shall
have the option to defend the Agent against any Claim which may be the subject
of indemnification hereunder. In the event that the Trust elects to defend
against such Claim, the defense shall be conducted by counsel chosen by the
Trust and satisfactory to the Agent. The Agent may retain additional counsel at
its expense. Except with the prior written consent of the Trust, the Agent shall
not confess any Claim or make any compromise in any case in which the Trust will
be asked to indemnify the Agent.
11.2 Indemnification of the Trust. Without limiting the rights of the
Trust under applicable law, the Agent will indemnify and hold the Trust harmless
from all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) from any Claim (a) in connection with the performance
of Agent's obligations hereunder and resulting from (i) the bad faith or
negligence of the Agent, its officers, employees or agents, (ii) any breach of
applicable law by the Agent, its officers, employees or agents, or (iii) any
action of the Agent, its officers, employees or agents which exceeds the legal
authority of the Agent or its authority hereunder, and (b) not resulting from
the Agent's actions in accordance with written instructions reasonably believed
by the Agent to have been executed by any person duly authorized by the Trust,
or in reliance upon any instrument or stock certificate reasonably believed by
the Agent to have been genuine and signed, countersigned or executed by a person
duly authorized by the Trust.
In any case in which the Agent may be asked to indemnify or hold the
Trust harmless, the Agent shall be advised of all pertinent facts concerning the
situation in question and the Trust shall use reasonable care to identify and
notify the Agent promptly concerning any situation which presents or appears
likely to present a claim for indemnification against the Agent. The Agent shall
have the option to defend the Trust against any Claim which may be the subject
of indemnification hereunder. In the event that the Agent elects to defend
against such Claim, the defense shall be conducted by counsel chosen by the
Agent and satisfactory to the Trust. The Trust may retain additional counsel at
its expense. Except with the prior written consent of the Agent, the Trust shall
not confess any Claim or make any compromise in any case in which the Agent will
be asked to indemnify the Trust.
11.3 Survival of Indemnities. The indemnities granted by the parties in
this Section 11 shall survive the termination of this Agreement.
12. Notices. All notices or other communications hereunder to either
party shall be in writing and shall be deemed sufficient if mailed to such party
at the address of such party set forth in the preamble of this Agreement or at
such other address as such party may have designated by written notice to the
other.
13. Further Assurances. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
14. Termination. This Agreement may be terminated by the Trust, without
the payment of any penalty, at any time upon not more than 60 days' nor less
than 30 days' notice, by a vote of a majority of the Board of Trustees of the
Trust who are not "interested persons" of the Trust (as defined in the 1940 Act)
and have no direct or indirect financial interest in the operation of the
Administrative Services Plan (the "Plan"), to which this Agreement is related,
this Agreement or any other agreement related to such Plan, or by "a vote of a
majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Trust. The Agent may terminate this Agreement upon not more than 60 days'
nor less than 30 days' notice to the Trust. The period of prior notice of
termination shall be reduced to the extent necessary to comply with the
effective date of any change in applicable laws or regulations (or
interpretations thereof) which prevents or impairs full performance of the
obligations set forth herein; provided, however, in the event such period of
prior notice is reduced, the terminating party shall give prompt notice of
termination. Notwithstanding anything herein to the contrary, but except as
provided in Section 17 of this Agreement, this Agreement may not be assigned and
shall terminate automatically without notice to either party upon any
assignment. Upon termination hereof, the Trust shall pay such compensation as
may be due the Agent as of the date of such termination.
15. Changes; Amendments. This Agreement may be changed or amended only
by written instrument signed by both parties.
16. Limitation of Shareholder Liability. The Agent hereby agrees that
obligations assumed by the Trust pursuant to this Agreement shall be limited in
all cases to the Trust and its assets and that the Agent shall not seek
satisfaction of any such obligation from the shareholders or any shareholder of
the Trust. It is further agreed that the Agent shall not seek satisfaction of
any such obligations from the Board of Trustees or any individual Trustee of the
Trust.
17. Subcontracting By Agent. The Agent may, with the written approval
of the Trust (such approval not to be unreasonably withheld or delayed),
subcontract for the performance of the Agent's obligations hereunder with any
one or more persons, including but not limited to any one or more persons which
is an affiliate of the Agent; provided, however, that the Agent shall be as
fully responsible to the Trust for the acts and omissions of any subcontractor
as it would be for its own acts or omissions.
18. Compliance with Laws and Policies: Cooperation. The Trust hereby
agrees that it will comply with all laws and regulations applicable to its
operations and the Agent agrees that it will comply with all laws and
regulations applicable to its operations hereunder and each party agrees from
time to time to provide such certificates, information and access to its books,
records and personnel as the other may reasonably request to confirm the
foregoing. Each party understands that the other may from time to time adopt or
modify policies relating to the subject matter of this Agreement, in which case
the party adopting or modifying such a policy shall notify the other thereof and
the parties shall consider the applicability thereof and endeavor to comply
therewith to the extent not impracticable or unreasonably burdensome. Each of
the parties agrees to cooperate with the other in connection with the
performance of this Agreement and the resolution of any problems, questions or
disagreements in connection herewith.
18.1 Audit. The Trust shall maintain or arrange to be maintained
complete and accurate accounting records, in accordance with generally accepted
accounting principles. The Trust shall retain or arrange to be retained such
records for a period of three years from the termination of this Agreement. The
Agent and its designated certified public accountants shall have access to such
records based on reasonable cause and professional judgment during normal
business hours upon reasonable notice to the Trust.
18.2 Annual Financial Reports. At least once a year, the Trust shall
send to the owners of its shares and to the Agent the Trust's audited financial
statements.
18.3 Shareholder Updates. The Trust shall give the Agent advance
written notice of any change in the Trust's place of incorporation, mailing
address, management, investment objectives, fees or redemption rights. The Trust
shall give such advance notice to the owners of its shares to the extent
required by federal securities laws or the rules and regulations of the
Securities and Exchange Commission.
18.4 Annual Certification. At least once a year, the parties shall
certify to each other in writing that the certifying party is conducting its
business in accordance with the terms and conditions of the Agreement and in the
case of the Trust, in accordance with the representations set forth in its then
current prospectus.
19. Scope of Agreement. This Agreement, and the rights, duties,
indemnities and other obligations of the parties hereunder, relate only to the
services to be provided hereunder by the Agent to Third Party Firms, and is not
intended to apply to, or supersede any Shareholder Servicing Agreement between
the Agent and the Trust with respect to, the provision of services by the Agent
with respect to customers of the Agent.
20. Miscellaneous. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the Commonwealth of Massachusetts.
The captions in this Agreement are included for convenience of reference only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument. Although this
Agreement has been executed by multiple parties, it shall be construed and
enforced as a separate agreement between each Trust and each Financial
Institution acting as Agent for such Trust. The terms of this Agreement shall
become effective with respect to each Trust and each Financial Institution
listed on a signature page hereof as of the date set forth thereon.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year set forth below. The
undersigned Trustee of the Trust has executed this Agreement not individually,
but as Trustee under the Trust's Declaration of Trust, as from time to time
amended, and the obligations of this Agreement are not binding upon any of the
Trustees or shareholders of the Trust individually, but bind only the Trust
estate.
Dated as of:_____________________________________
[NAME OF TRUST] [NAME OF FINANCIAL INSTITUTION]
By: _______________________________ By: _______________________________
Name: Philip W. Coolidge Name: _____________________________
Title: President Title: ____________________________
Principal Place of Business: Principal Place of Business:
6 St. James Avenue _______________________________
Boston, Massachusetts 02116 _______________________________
EXHIBIT 99.11(A)
CONSENT OF INDEPENDENT ACCOUNTANT
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting part of this Post-Effective
Amendment No. 16 to the registration statement on Form N-1A (the "Registration
Statement") of Landmark Funds II of our report dated February 7, 1996, relating
to the financial statements and financial highlights of the Landmark Equity Fund
and Landmark Small Cap Equity Fund, appearing in the December 31, 1995 Annual
Report of Landmark Equity Fund and Landmark Small Cap Equity Fund, respectively,
which are also incorporated by reference into the Registration Statement. We
also consent to the references to us under the headings "Auditors" and
"Independent Accountants and Financial Statements" in the Statement of
Additional Information.
Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
April 29, 1996
EXHIBIT 99.11(B)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this Post-Effective Amendment No. 16
to the registration statement on Form N-1A (the "Registration Statement") of
Landmark Funds II of our report dated February 7, 1996, relating to the
financial statements and financial highlights of the Equity Portfolio and the
Small Cap Equity Portfolio, appearing in the December 31, 1995 Annual Report of
Landmark Equity Fund and Landmark Small Cap Equity Fund, respectively, which are
also incorporated by reference into the Registration Statement. We also consent
to the references to us under the headings "Auditors" and "Independent
Accountants and Financial Statements" in the Statement of Additional
Information.
Price Waterhouse
Chartered Accountants
Toronto, Ontario
April 29, 1996
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