497(e) File Nos. 2-91556 and 811-4052
33-39538 and 811-4052
SUPPLEMENT DATED MAY 24, 1995 TO
STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 3, 1995
FOR
LANDMARK CASH RESERVES
LANDMARK U.S. TREASURY RESERVES
PREMIUM LIQUID RESERVES
PREMIUM U.S. TREASURY RESERVES
LANDMARK INSTITUTIONAL LIQUID RESERVES
LANDMARK INSTITUTIONAL U.S. TREASURY RESERVES
The determination of net asset value per share and net income per share of each
of Landmark Cash Reserves, Premium Liquid Reserves and Landmark Institutional
Liquid Reserves shall be made once each day as of 3:00 p.m., Eastern time.
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497(c) - File Nos.2-91556 and 811-4052
33-39538 and 811-4052
STATEMENT OF
ADDITIONAL INFORMATION
January 3, 1995
LANDMARK CASH RESERVES
LANDMARK U.S. TREASURY RESERVES
(Members of the LandmarkSM Family of Funds)
Landmark Cash Reserves ("Cash Reserves") and Landmark U.S. Treasury
Reserves ("U.S. Treasury Reserves" and together with Cash Reserves, the "Funds")
are each separate series of Landmark Funds III (the "Trust"). The address and
telephone number of the Trust are 6 St. James Avenue, Boston, Massachusetts
02116, (617) 423-1679. The Trust invests all of the investable assets of Cash
Reserves and U.S. Treasury Reserves in, respectively, Cash Reserves Portfolio
and U.S. Treasury Reserves Portfolio (the "Portfolios"). The address of Cash
Reserves Portfolio is Elizabethan Square, George Town, Grand Cayman, British
West Indies. The address and telephone number of U.S. Treasury Reserves
Portfolio are 6 St. James Avenue, Boston, Massachusetts 02116, (617) 423-1679.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, CITIBANK, N.A. OR ANY OF ITS AFFILIATES, ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
Table of Contents Page
The Funds 2
Investment Objectives, Policies and
Restrictions 3
Performance Information 15
Determination of Net Asset Value 16
Management 18
Portfolio Transactions 27
Description of Shares, Voting Rights
and Liabilities 28
Certain Additional Tax Matters 30
Independent Accountants and Financial
Statements 31
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 January 3, 1995. This Statement of Additional Information
should be read in conjunction with the Prospectus, a copy of which may be
obtained by an investor without charge by contacting the Funds' Distributor (see
back cover for address and phone number).
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS AUTHORIZED
FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR ACCOMPANIED BY AN
EFFECTIVE PROSPECTUS.
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1. THE FUNDS
The Trust is a no-load, diversified, open-end management investment
company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on June 28, 1985 and is the successor to the
business of The Landmark Funds Cash Reserves, Inc., which was incorporated under
the laws of the State of Maryland in 1984. The Trust was known as "Landmark Cash
Reserves" until its name was changed effective February 1, 1991. All references
in this Statement of Additional Information to the Trust's activities are
intended to include those of the Trust and its predecessor, unless the context
indicates otherwise. Shares of the Trust are divided into two separate series,
Cash Reserves and U.S. Treasury Reserves, which are described in this Statement
of Additional Information. References in this Statement of Additional
Information to the Prospectus are to the Prospectus, dated January 3, 1995, of
the Funds by which shares of the Funds are offered.
Each of the Funds is a type of mutual fund commonly referred to as a
"money market fund." The net asset value of each of the Funds' shares is
expected to remain constant at $1.00, although there can be no assurance that
this will be so on a continuing basis. (See "Determination of Net Asset Value.")
The Trust seeks the investment objectives of the Funds by investing all
the investable assets of Cash Reserves and U.S. Treasury Reserves in,
respectively, Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio. Each
of the Portfolios is a diversified open-end management investment company. Each
Portfolio has the same investment objectives and policies as its corresponding
Fund.
Citibank, N.A. ("Citibank" or the "Adviser") is the investment adviser to
each of the Portfolios. The Adviser manages the investments of each Portfolio
from day to day in accordance with the investment objectives and policies of
that Portfolio. The selection of investments for each Portfolio, 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") supervises the
overall administration of the Trust and U.S. Treasury Reserves Portfolio.
Signature Financial Group (Cayman), Ltd., either directly or through its
wholly-owned subsidiary ("SFG"), supervises the overall administration of Cash
Reserves Portfolio. The Boards of Trustees of the Trust and the Portfolios
provide broad supervision over the affairs of the Trust and of the Portfolios,
respectively. Shares of each Fund 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 Trust with respect to
that Fund (collectively, "Shareholder Servicing Agents"). Although shares of the
Funds are
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sold without a sales load, LFBDS may receive fees from the Funds pursuant to a
Distribution Plan adopted in accordance with Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act").
2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES
The investment objectives of CASH RESERVES are to provide shareholders of
the Fund with liquidity and as high a level of current income as is consistent
with the preservation of capital.
The investment objectives of U.S. TREASURY RESERVES are to provide
shareholders of the Fund with liquidity and as high a level of current income
from U.S. Government obligations as is consistent with the preservation of
capital.
The investment objectives of each of the Funds may be changed without
approval by the Fund's shareholders. Of course, there can be no assurance that
either Fund will achieve its investment objectives.
INVESTMENT POLICIES
The Trust seeks the investment objectives of the Funds by investing all of
the investable assets of Cash Reserves and U.S. Treasury Reserves in,
respectively, Cash Reserves Portfolio and U.S. Treasury Reserves Portfolio, each
of which has the same investment objectives and policies as its corresponding
Fund. The Prospectus contains a discussion of the various types of securities in
which each Portfolio 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 and each Portfolio.
Since the investment characteristics of each Fund will correspond directly to
those of the Portfolio in which it invests, the following is a supplementary
discussion with respect to each Portfolio.
The Trust may withdraw the investment of either Fund from its
corresponding Portfolio at any time, if the Board of Trustees of the Trust
determines that it is in the best interests of the Fund to do so. Upon any such
withdrawal, a Fund's assets would be invested in accordance with the investment
policies described below with respect to its corresponding Portfolio. Except for
the concentration policy of Cash Reserves with respect to bank obligations
described in paragraph (1) below, which is fundamental and may not be changed
without the approval of Cash Reserves' shareholders the approval of a Fund's
shareholders would not be required to change any of that Fund's investment
policies. Likewise, except for the concentration policy of Cash Reserves
Portfolio with respect to bank obligations described in paragraph (1) below,
which is fundamental and may not be changed without the approval of Cash
Reserves Portfolio's investors, the approval of the investors in a Portfolio
would not be required to
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change that Portfolio's investment objectives or any of that Portfolio's
investment policies discussed below, including those concerning securities
transactions.
CASH RESERVES PORTFOLIO
Cash Reserves Portfolio seeks its investment objective through investments
limited to the following types of high quality U.S. dollar-denominated money
market instruments. All investments by Cash Reserves Portfolio mature or are
deemed to mature within 397 days from the date of acquisition and the average
maturity of the investments held by the Portfolio (on a dollar-weighted basis)
is 90 days or less. All investments by the Portfolio are in "high quality"
securities (i.e., securities rated in the highest rating category for short-term
obligations by at least two nationally recognized statistical rating
organizations (each, an "NRSRO") assigning a rating to the security or issuer
or, if only one NRSRO assigns a rating, that NRSRO or, in the case of an
investment which is not rated, of comparable quality as determined by the
Adviser) and are determined by the Adviser to present minimal credit risks.
Investments in high quality, short term instruments may, in many circumstances,
result in a lower yield than would be available from investments in instruments
with a lower quality or a longer term. Under the 1940 Act, Cash Reserves and
Cash Reserves Portfolio are each classified as "diversified", although in the
case of Cash Reserves, all of its investable assets are invested in the
Portfolio. A "diversified investment company" must invest at least 75% of its
assets in cash and cash items, U.S. Government securities, investment company
securities (e.g., interests in the Portfolio) and other securities limited as to
any one issuer to not more than 5% of the total assets of the investment company
and not more than 10% of the voting securities of the issuer.
(1) Bank obligations -- Cash Reserves Portfolio invests at least 25% of its
investable assets, and may invest up to 100% of its assets, in bank
obligations. These obligations include, but are not limited to, negotiable
certificates of deposit, bankers' acceptances and fixed time deposits.
Cash Reserves Portfolio limits its investments in U.S. bank obligations
(including their non-U.S. branches) to banks having total assets in excess
of $1 billion and which are subject to regulation by an agency of the U.S.
Government. The Portfolio may also invest in certificates of deposit
issued by banks the deposits in which are insured by the Federal Deposit
Insurance Corporation ("FDIC"), through either the Bank Insurance Fund or
the Savings Association Insurance Fund, having total assets of less than
$1 billion, provided that the Portfolio at no time owns more than $100,000
principal amount of certificates of deposit (or any higher principal
amount which in the future may be fully insured by FDIC insurance) of any
one of those issuers. Fixed time deposits are obligations which are
payable at a stated maturity date and bear a fixed rate of interest.
Generally, fixed time deposits may be withdrawn on demand by
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the Portfolio, but they may be subject to early withdrawal
penalties which vary depending upon market conditions and the
remaining maturity of the obligation. Although fixed time deposits do
not have a market, there are no contractual restrictions on the
Portfolio's right to transfer a beneficial interest in the deposit
to a third party. This concentration policy is fundamental and may
not be changed without the approval of the investors in Cash
Reserves Portfolio. U.S. banks organized under federal law are
supervised and examined by the Comptroller of the Currency and are
required to be members of the Federal Reserve System and to be
insured by the FDIC. U.S. banks organized under state law are
supervised and examined by state banking authorities and are
members of the Federal Reserve System only if they elect to join.
However, state banks which are insured by the FDIC are subject
to federal examination and to a substantial body of federal law and
regulation. As a result of federal and state laws and regulations,
U.S. branches of U.S. banks, among other things, are generally
required to maintain specified levels of reserves, and are subject
to other supervision and regulation designed to promote financial
soundness.
Cash Reserves Portfolio limits its investments in non-U.S. bank
obligations (i.e., obligations of non-U.S. branches and
subsidiaries of U.S. banks, and U.S. and non-U.S. branches of non-U.S.
banks) to U.S. dollar-denominated obligations of banks which at the
time of investment are branches or subsidiaries of U.S. banks which
meet the criteria in the preceding paragraphs or are branches
of non-U.S. banks which (i) have more than $10 billion, or the
equivalent in other currencies, in total assets; (ii) in terms of
assets are among the 75 largest non-U.S. banks in the world;
(iii) have branches or agencies in the United States; and (iv) in the
opinion of the Adviser, are of an investment quality comparable
with obligations of U.S. banks which may be purchased by the
Portfolio. These obligations may be general obligations of the parent
bank, in addition to the issuing branch or subsidiary, but the parent
bank's obligations may be limited by the terms of the specific
obligation or by governmental regulation. The Portfolio also limits
its investments in non-U.S. bank obligations to banks, branches and
subsidiaries located in Western Europe (United Kingdom, France, Germany,
Belgium, the Netherlands, Italy, Switzerland), Scandinavia (Denmark,
Norway, Sweden), Australia, Japan, the Cayman Islands, the Bahamas
and Canada. Cash Reserves Portfolio does not purchase any bank
obligation of the Adviser or an affiliate of the Adviser.
Since Cash Reserves Portfolio may hold obligations of non-U.S.
branches and subsidiaries of U.S. banks, and U.S. and non-U.S.
branches of non-U.S. banks, an investment in Cash Reserves involves
certain additional risks. Such investment risks include future
political and economic developments, the possible imposition of non-U.S.
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withholding taxes on interest income payable on such obligations held
by the Portfolio, the possible seizure or nationalization of
non-U.S. deposits and the possible establishment of exchange
controls or other non-U.S. governmental laws or restrictions applicable
to the payment of the principal of and interest on certificates of
deposit or time deposits that might affect adversely such payment
on such obligations held by the Portfolio. In addition, there
may be less publicly-available information about a non-U.S. branch
or subsidiary of a U.S. bank or a U.S. or non-U.S. branch of a
non-U.S. bank than about a U.S. bank and such branches and
subsidiaries may not be subject to the same or similar regulatory
requirements that apply to U.S. banks, such as mandatory reserve
requirements, loan limitations and accounting, auditing and financial
record-keeping standards and requirements.
The provisions of federal law governing the establishment and operation
of U.S. branches do not apply to non-U.S. branches of U.S. banks.
However, Cash Reserves Portfolio may purchase obligations only of those
non-U.S.branches of U.S. banks which were established with the approval
of the Board of Governors of the Federal Reserve System (the "Board of
Governors"). As a result of such approval, these branches are subject
to examination by the Board of Governors and the Comptroller of the
Currency. In addition, such non-U.S. branches of U.S. banks are subject
to the supervision of the U.S. bank and creditors of the non-U.S.
branch are considered general creditors of the U.S. bank subject to
whatever defenses may be available under the governing non-U.S. law and
to the terms of the specific obligation. Nonetheless, Cash Reserves
Portfolio generally will be subject to whatever risk may exist that the
non-U.S. country may impose restrictions on payment of certificates of
deposit or time deposits.
U.S. branches of non-U.S. banks are subject to the laws of the state in
which the branch is located or to the laws of the United States.
Such branches are therefore subject to many of the regulations,
including reserve requirements, to which U.S. banks are subject. In
addition, Cash Reserves Portfolio may purchase obligations
only of those U.S. branches of non-U.S. banks which are located in
states which impose the additional requirement that the branch
pledge to a designated bank within the state an amount of its
assets equal to 5% of its total liabilities.
Non-U.S. banks in whose obligations Cash Reserves Portfolio may
invest may not be subject to the laws and regulations referred to in the
preceding two paragraphs.
(2) Obligations of, or guaranteed by, non-U.S. governments. Cash Reserves
Portfolio limits its investments in non-U.S. government obligations to
obligations issued or guaranteed by the governments of Western Europe
<PAGE>
(United Kingdom, France, Germany, Belgium, the Netherlands, Italy,
Switzerland), Scandinavia (Denmark, Norway, Sweden), Australia, Japan and
Canada. Generally, such obligations may be subject to the additional
risks described in paragraph 1 above in connection with the purchase of
non-U.S. bank obligations.
(3) Commercial paper rated Prime-1 by Moody's Investors Service, Inc.
("Moody's") or A-1 by Standard & Poor's Ratings Group ("Standard &
Poor's") or, if not rated, determined to be of comparable quality by the
Adviser, such as unrated commercial paper issued by corporations having an
outstanding unsecured debt issue currently rated Aaa by Moody's or AAA by
Standard & Poor's.
(4) Obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities. These include issues of the U.S. Treasury, such as
bills, certificates of indebtedness, notes and bonds, and issues of
agencies and instrumentalities established under the authority of an Act
of Congress. Some of the latter category of obligations are supported by
the full faith and credit of the United States, others are supported by
the right of the issuer to borrow from the U.S. Treasury, and still others
are supported only by the credit of the agency or instrumentality.
Examples of each of the three types of obligations described in the
preceding sentence are (i) obligations guaranteed by the Export-Import
Bank of the United States, (ii) obligations of the Federal Home Loan
Mortgage Corporation, and (iii) obligations of the Student Loan Marketing
Association, respectively.
(5) Repurchase agreements, providing for resale within 397 days or less,
covering obligations of, or guaranteed by, the U.S. Government, its
agencies or instrumentalities which may have maturities in excess of 397
days. A repurchase agreement arises when a buyer purchases an obligation
and simultaneously agrees with the vendor to resell the obligation to the
vendor at an agreed-upon price and time, which is usually not more than
seven days from the date of purchase. The resale price of a repurchase
agreement is greater than the purchase price, reflecting an agreed-upon
market rate which is effective for the period of time the buyer's funds
are invested in the obligation and which is not related to the coupon rate
on the purchased obligation. Obligations serving as collateral for each
repurchase agreement are delivered to the Portfolio's custodian either
physically or in book entry form and the collateral is marked to the
market daily to ensure that each repurchase agreement is fully
collateralized at all times. A buyer of a repurchase agreement runs a risk
of loss if, at the time of default by the issuer, the value of the
collateral securing the agreement is less than the price paid for the
repurchase agreement. If the vendor of a repurchase agreement becomes
bankrupt, Cash Reserves Portfolio might be delayed, or
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may incur costs or possible losses of principal and income, in selling the
collateral. The Portfolio may enter into repurchase agreements only with a
vendor which is a member bank of the Federal Reserve System or which is a
"primary dealer" (as designated by the Federal Reserve Bank of New York)
in U.S. Government obligations. The Portfolio will not enter into any
repurchase agreements with the Adviser or an affiliate of the Adviser. The
restrictions and procedures described above which govern the Portfolio's
investment in repurchase agreements are designed to minimize the
Portfolio's risk of losses in making those investments.
(6) Asset-backed securities, which may include securities such as Certificates
for Automobile Receivables ("CARS") and Credit Card Receivable Securities
("CARDS"), as well as other asset-backed securities that may be developed
in the future. CARS represent fractional interests in pools of car
installment loans, and CARDS represent fractional interests in pools of
revolving credit card receivables. The rate of return on asset-backed
securities may be affected by early prepayment of principal on the
underlying loans or receivables. Prepayment rates vary widely and may be
affected by changes in market interest rates. It is not possible to
accurately predict the average life of a particular pool of loans or
receivables. Reinvestment of principal may occur at higher or lower rates
than the original yield. Therefore, the actual maturity and realized yield
on asset-backed securities will vary based upon the prepayment experience
of the underlying pool of loans or receivables. (See "Asset-Backed
Securities.")
Cash Reserves Portfolio does not purchase securities which the Portfolio
believes, at the time of purchase, will be subject to exchange controls or
non-U.S. withholding taxes; however, there can be no assurance that such laws
may not become applicable to certain of the Portfolio's investments. In the
event exchange controls or non-U.S. withholding taxes are imposed with respect
to any of the Portfolio's investments, the effect may be to reduce the income
received by the Portfolio on such investments.
ASSET-BACKED SECURITIES
As set forth above, Cash Reserves Portfolio may purchase asset-backed
securities that represent fractional interests in pools of retail installment
loans, both secured (such as Certificates for Automobile Receivables) and
unsecured, or leases or revolving credit receivables, both secured and unsecured
(such as Credit Card Receivable Securities). These assets are generally held by
a trust and payments of principal and interest or interest only are passed
through monthly or quarterly to certificate holders and may be guaranteed up to
certain amounts by letters of credit issued by a financial institution
affiliated or unaffiliated with the trustee or originator of the trust.
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Underlying automobile sales contracts, leases or credit card receivables
are subject to prepayment, which may reduce the overall return to certificate
holders. Nevertheless, principal repayment rates tend not to vary much with
interest rates and the short-term nature of the underlying loans, leases or
receivables tends to dampen the impact of any change in the prepayment level.
Certificate holders may also experience delays in payment on the certificates if
the full amounts due on underlying loans, leases or receivables are not realized
by the Portfolio because of unanticipated legal or administrative costs of
enforcing the contracts or because of depreciation or damage to the collateral
(usually automobiles) securing certain contracts, or other factors. If
consistent with its investment objectives and policies, Cash Reserves Portfolio
may invest in other asset-backed securities that may be developed in the future.
LENDING OF SECURITIES
Consistent with applicable regulatory requirements and in order to
generate income, each of the Portfolios 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 Portfolio 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 Portfolio 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 Portfolio 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 Portfolio would exceed 33 1/3% of the value of its net
assets.
U.S. TREASURY RESERVES PORTFOLIO
U.S. Treasury Reserves Portfolio seeks its investment objective by
investing in obligations of, or guaranteed by, the U.S.
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Government, its agencies or instrumentalities including issues of the U.S.
Treasury, such as bills, certificates of indebtedness, notes and bonds, and
issues of agencies and instrumentalities established under the authority of an
Act of Congress which are supported by the full faith and credit of the United
States. U.S. Treasury Reserves Portfolio will not enter into repurchase
agreements.
INVESTMENT RESTRICTIONS
The Trust, on behalf of the Funds, and the Portfolios have each adopted
the following policies which may not be changed without approval by holders of a
"majority of the outstanding shares" of the applicable 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, if 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 the
Portfolio. The term "voting securities" as used in this paragraph has the same
meaning as in the 1940 Act. Whenever the Trust is requested to vote on a change
in the investment restrictions of a Portfolio (or, in the case of Cash Reserves
Portfolio, its concentration policy described in paragraph (1) under "Investment
Policies"), the Trust will hold a meeting of the corresponding Fund's
shareholders and will cast its vote as instructed by the shareholders. Each Fund
will vote the shares held by its shareholders who do not give voting
instructions in the same proportion as the shares of that Fund's shareholders
who do give voting instructions. Shareholders of the Funds who do not vote will
have no effect on the outcome of these matters.
CASH RESERVES
The Trust, on behalf of Cash Reserves, may not:
(1) Invest in equity securities (e.g., common stock, preferred stock,
options, warrants, puts, calls), voting securities, restricted securities,
corporate debt securities (e.g., bonds, debentures) other than those bank
securities and commercial paper referred to under "Investment Policies", local
or state government securities (e.g., municipal bonds, state bonds), commodities
or commodity contracts, real estate, or securities of other investment
companies, except that the Trust may invest all or a portion of the Fund's
assets in a diversified, open-end management investment company with
substantially the same investment objective, policies and restrictions as the
Fund. The Trust, on behalf of the Fund, will not sell securities short, write
put or call options, engage in underwriting, or invest in companies for the
purpose of exercising control. The Trust, on behalf of the Fund, will not make
loans to other persons except that it may acquire debt securities as discussed
under "Investment Policies".
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(2) Purchase securities or obligations of any one issuer (other than
securities issued by the U.S. Government, its agencies and instrumentalities and
repurchase agreements covering such securities) if immediately after such
purchase more than 5% of the value of its assets would be invested in that
issuer except that the Trust may invest all or a portion of the Fund's assets in
a diversified, open-end management investment company with substantially the
same investment objective, policies and restrictions as the Fund.
(3) Borrow money except from banks as a temporary measure for
extraordinary or emergency purposes (not for leveraging) or in order to meet
unexpectedly heavy redemption requests in an amount not exceeding 15% of the
value of the Fund's assets and will not purchase any securities at any time when
the Fund's total outstanding borrowings from banks exceed 5% of the Fund's gross
assets. The Trust, on behalf of the Fund, will not pledge its assets except to
secure borrowings. While the Trust, on behalf of the Fund, may borrow from its
Custodian for the foregoing purposes, any borrowing from the Custodian will be
on terms no less favorable to the Fund than those offered by the Custodian to
comparable borrowers and on terms which the Trust believes are not less
favorable than those readily obtainable elsewhere.
(4) Concentrate the Fund's investments in any particular industry, but if
it is deemed appropriate to the achievement of the Fund's investment objective,
up to 25% of the assets of the Fund (taken at market value at the time of each
investment) may be invested in any one industry, provided that, if the Trust
withdraws the Fund's investment from an open-end management investment company
with substantially the same investment objective, policies and restrictions as
the Fund, it will invest at least 25%, and may invest up to 100%, of the assets
of the Fund in bank obligations; and provided, further, that nothing in this
Investment Restriction is intended to affect the Trust's ability to invest 100%
of the Fund's assets in a diversified, open-end management investment company
with substantially the same investment objective, policies and restrictions as
the Fund.
(5) There is no limitation on investing in securities issued or guaranteed
by the U.S. Government, its agencies or instrumentalities, or repurchase
agreements covering those securities, except that the Trust, on behalf of the
Fund, will not acquire securities that are not readily marketable or repurchase
agreements calling for resale within more than 7 days if, as a result thereof,
more than 10% of the value of its net assets would be invested in such
securities. The Trust, on behalf of the Fund, may not invest in fixed time
deposits maturing in more than seven calendar days, and fixed time deposits
maturing from two business days through seven calendar days may not exceed 10%
of the Fund's net assets.
Cash Reserves Portfolio may not:
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(1) borrow money, except that as a temporary measure for extraordinary or
emergency purposes the Portfolio may borrow from banks in an amount not to
exceed 1/3 of the value of the net assets of the Portfolio, including the amount
borrowed (moreover, the Portfolio may not purchase any securities at any time at
which borrowings exceed 5% of its total assets (taken at market value))(it is
intended that the Portfolio would borrow money only from banks and only to
accommodate requests for the withdrawal of all or a portion of a beneficial
interest in the Portfolio while effecting an orderly liquidation of securities);
for additional related restrictions, see clause (i) under the caption "State and
Federal Restrictions" below;
(2) purchase any security or evidence of interest therein on margin,
except that the Portfolio may obtain such short term credit as may be necessary
for the clearance of purchases and sales of securities;
(3) underwrite securities issued by other persons, except insofar as the
Portfolio may technically be deemed an underwriter under the Securities Act of
1933 in selling a security;
(4) make loans to other persons except (a) through the lending of
securities held by the Portfolio, but not in excess of 33 1/3% of the
Portfolio's net assets, (b) through the use of fixed time deposits or 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; for purposes of this paragraph 4 the
purchase of short term commercial paper or a portion of an issue of debt
securities which are part of an issue to the public shall not be considered the
making of a loan; for additional related restrictions, see clause (x) under the
caption "State and Federal Restrictions" below;
(5) 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 (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 Portfolio);
(6) concentrate its investments in any particular industry, but if it is
deemed appropriate for the achievement of its investment objective, up to 25% of
the assets of the Portfolio (taken at market value at the time of each
investment) may be invested in any one industry, except that the Portfolio will
invest at least 25% of its assets and may invest up to 100% of its assets in
bank obligations; or
(7) 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
<PAGE>
appropriate to evidence a debt incurred without violating Investment Restriction
(1) above.
U.S. TREASURY RESERVES
Neither the Trust, on behalf of U.S. Treasury Reserves, nor U.S. Treasury
Portfolio may:
(1) borrow money, except that as a temporary measure for extraordinary or
emergency purposes either the Trust or the Portfolio may borrow from banks in an
amount not to exceed 1/3 of the value of the net assets of the Fund or the
Portfolio, respectively, including the amount borrowed (moreover, neither the
Trust (on behalf of the Fund) nor the Portfolio may purchase any securities at
any time at which borrowings exceed 5% of the total assets of the Fund or the
Portfolio, respectively (taken in each case at market value)) (it is intended
that the Fund and the Portfolio would borrow money only from banks and only to
accommodate requests for the repurchase of shares of the Fund or the withdrawal
of all or a portion of a beneficial interest in the Portfolio while effecting an
orderly liquidation of securities); for additional related restrictions, see
clause (i) under the caption "State and Federal Restrictions" below;
(2) purchase any security or evidence of interest therein on margin,
except that either the Trust, on behalf of the Fund, or the Portfolio may obtain
such short term credit as may be necessary for the clearance of purchases and
sales of securities;
(3) underwrite securities issued by other persons, except that all the
assets of the Fund may be invested in the Portfolio and except insofar as either
the Trust or the Portfolio may technically be deemed an underwriter under the
Securities Act of 1933 in selling a security;
(4) make loans to other persons except (a) through the lending of
securities held by either the Fund or the Portfolio, but not in excess of 33
1/3% of the Fund's or the Portfolio's net assets, as the case may be, (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;
for purposes of this paragraph 4 the purchase of 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; for additional related restrictions, see clause (x) under the
caption "State and Federal Restrictions" below;
(5) 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 (the Fund and the Portfolio reserve 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);
<PAGE>
(6) concentrate its investments in any particular industry; provided, that
nothing in this Investment Restriction is intended to affect the ability to
invest 100% of the Fund's assets in the Portfolio; or
(7) 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.
STATE AND FEDERAL RESTRICTIONS
In order to comply with certain state and federal statutes and regulatory
policies, neither the Trust, on behalf of either of the Funds, nor the
corresponding Portfolio will as a matter of operating policy:
(i) borrow money for any purpose in excess of 10% of
the total assets of the Fund or Portfolio (taken in each
case at cost),
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10% of
the net assets of the Fund or Portfolio (taken in each case at market value),
(iii)sell any security which it does not own unless by virtue of its
ownership of other securities it has 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 the corresponding
Portfolio,
(v) purchase securities issued by any registered investment company,
except that all of the assets of the Fund may be invested in the corresponding
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, and except when such purchase, though not made in
the open market, is part of a plan of merger or consolidation; provided,
however, that the Trust (on behalf of the Fund) and the 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
the 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 by the Portfolio;
and provided, further, that the Portfolios shall not purchase securities issued
by any open-end investment company,
<PAGE>
(vi) taken together with any investments described in clause (x) below,
invest more than 10% of the net assets of the Fund or the Portfolio in
securities that are not readily marketable, including debt securities for which
there is no established market (and, in the case of Cash Reserves and Cash
Reserves Portfolio, repurchase agreements maturing in more than seven days),
except that all the assets of the Fund may be invested in the corresponding
Portfolio,
(vii) purchase securities of any issuer if such purchase at the time
thereof would cause it to hold more than 10% of any class of securities of such
issuer, for which purposes all indebtedness of an issuer shall be deemed a
single class, except that all the assets of the Fund may be invested in the
corresponding Portfolio,
(viii) purchase or retain any securities issued by an issuer any of whose
officers, directors, trustees or security holders is an officer or Trustee of
the Trust or the Portfolio, or is an officer or director of the Adviser, if
after the purchase of the securities of such issuer by the Trust, on behalf of
the Fund, or a 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,
(ix) write, purchase or sell any put or call option or
any combination thereof,
(x) taken together with any investments described in clause (vi) above,
invest in securities which are subject to legal or contractual restrictions on
resale (other than, in the case of Cash Reserves and Cash Reserves Portfolio,
repurchase agreements and fixed time deposits maturing in not more than seven
days) if, as a result thereof, more than 10% of the net assets of the Fund or
Portfolio (in each case taken at market value), would be so invested (including,
in the case of Cash Reserves and Cash Reserves Portfolio, repurchase agreements
maturing in more than seven days), except that all the assets of the Fund may be
invested in the Portfolio,
(xi) purchase securities of any issuer if such purchase at the time
thereof would cause more than 10% of the voting securities of such issuer to be
held by the Fund or Portfolio, except that all the assets of the Fund may be
invested in a corresponding Portfolio, or
(xii) make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 10% of the net
assets of the Fund or Portfolio, respectively (in each case taken at market
<PAGE>
value), is held as collateral for such sales at any one
time. (The Portfolios do not presently intend to make such
sales.)
These policies are not fundamental and may be changed by the Trust with
respect to either of the Funds without approval by the Fund's shareholders or by
either of the Portfolios without the approval by the corresponding Fund or its
other investors, in each case in response to changes in the various state and
federal requirements.
PERCENTAGE AND RATING RESTRICTIONS
If a percentage restriction or a rating restriction (other than a
restriction as to borrowing) 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 held by a Fund or a Portfolio or a later
change in the rating of a security held by a Fund or a Portfolio is not
considered a violation of policy.
3. PERFORMANCE INFORMATION
Any current yield quotation of a Fund which is used in such a manner as to
be subject to the provisions of Rule 482(d) under the Securities Act of 1933, as
amended, consists of an annualized historical yield, carried at least to the
nearest hundredth of one percent, based on a specific seven calendar day period
and is calculated by dividing the net change in the value of an account having a
balance of one share at the beginning of the period by the value of the account
at the beginning of the period and multiplying the quotient by 365/7. For this
purpose the net change in account value would reflect the value of additional
shares purchased with dividends declared on the original share and dividends
declared on both the original share and any such additional shares, but would
not reflect any realized gains or losses as a result of the Fund's investment in
the Portfolio or any unrealized appreciation or depreciation on portfolio
securities. In addition, any effective yield quotation of a Fund so used shall
be calculated by compounding the current yield quotation for such period by
multiplying such quotation by 7/365, adding 1 to the product, raising the sum to
a power equal to 365/7, and subtracting 1 from the result.
Any tax equivalent yield quotation of a Fund is calculated as follows: If
the entire current yield quotation for such period is tax-exempt, the tax
equivalent yield will be the current yield quotation divided by 1 minus a stated
income tax rate or rates. If a portion of the current yield quotation is not
tax-exempt, the tax equivalent yield will be the sum of (a) that portion of the
yield which is tax-exempt divided by 1 minus a stated income tax rate or rates
and (b) the portion of the yield which is not tax-exempt.
<PAGE>
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 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.
Any tax equivalent total rate of return quotation of a Fund is calculated
as follows: If the entire current total rate of return quotation for such period
is tax-exempt, the tax equivalent total rate of return will be the current total
rate of return quotation divided by 1 minus a stated income tax rate or rates.
If a portion of the current total rate of return quotation is not tax-exempt,
the tax equivalent total rate of return will be the sum of (a) that portion of
the total rate of return which is tax-exempt divided by 1 minus a stated income
tax rate or rates and (b) the portion of the total rate of return which is not
tax-exempt.
Set forth below is total rate of return information, assuming that
dividends and capital gains distributions, if any, were reinvested, for the
Funds for the periods indicated, at the beginning of which periods no sales
charges were applicable to purchases of shares of the Funds.
REDEEMABLE VALUE OF
A HYPOTHETICAL
$1,000 INVESTMENT
ANNUALIZED TOTAL AT THE END
PERIOD RATE OF RETURN OF THE PERIOD
CASH RESERVES
September 1,1984 (commencement of 6.14% $1,813.53
operations)to August 31, 1994
Five years ended August 31, 1994 4.95% $1,273.14
One year ended August 31, 1994 3.18% $1,031.83
U.S. TREASURY RESERVES
May 3, 1991 (commencement of 3.36% $1,116.41
operations) to August 31, 1994
One year ended August 31, 1994 2.87% $1,028.74
The annualized yield of Cash Reserves for the seven-day period ended
August 31, 1994 was 4.24%. The effective compound annualized yield of Cash
Reserves for such period was 4.33%. The annualized yield of U.S. Treasury
Reserves for the seven-day period ended August 31, 1994 was 3.74%, the effective
compound annualized yield of U.S. Treasury Reserves for such period was 3.81%
and the annualized tax
<PAGE>
equivalent yield of U.S. Treasury Reserves for such period was 4.25% (assuming a
combined state and local tax rate of 12.051% for New York City residents).
4. DETERMINATION OF NET ASSET VALUE
The net asset value of each share of each class of Cash Reserves is
determined on each day on which the New York Stock Exchange is open for trading.
This determination is made once during each such day as of 2:00 p.m., Eastern
time, by dividing the value of Cash Reserves' net assets attributable to a class
(i.e., the value of the Fund's investment in Cash Reserves Portfolio and other
assets attributable to the class less the Fund's liabilities attributable to the
class, including expenses payable or accrued) by the number of shares of that
class outstanding at the time the determination is made. The net asset value of
each share of U.S. Treasury Reserves is determined on each day on which the New
York Stock Exchange is open for trading. This determination is made once during
each such day as of 12:00 noon, Eastern time, by dividing the value of the
Fund's net assets (i.e., the value of its investment in U.S. Treasury Reserves
Portfolio and other assets less its liabilities, including expenses payable or
accrued) by the number of shares of the Fund outstanding at the time the
determination is made. 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. It is anticipated that the net asset
value of each share of each Fund will remain constant at $1.00 and, although no
assurance can be given that they will be able to do so on a continuing basis, as
described below, the Funds and Portfolios employ specific investment policies
and procedures to accomplish this result.
The value of a 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 the corresponding Fund is determined. The net asset value of a Fund's
investment in the corresponding Portfolio is equal to the Fund's pro rata share
of the total investment of the Fund and of other investors in the Portfolio less
the Fund's pro rata share of the Portfolio's liabilities.
The securities held by a Fund or Portfolio are valued at their amortized
cost. Amortized cost valuation involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium. If fluctuating interest rates cause the market value of the securities
held by the Fund or Portfolio to deviate more than 1/2 of 1% from their value
determined on the basis of amortized cost, the Fund or Portfolio's Board of
Trustees will consider whether any action should be initiated, as described in
the following paragraph. Although the amortized cost method provides certainty
in valuation, it may result
<PAGE>
in periods during which the stated value of an instrument is higher or lower
than the price the Fund or Portfolio would receive if the instrument were sold.
Pursuant to the rules of the Securities and Exchange Commission, the
Trust's and the Portfolios' Boards of Trustees have established procedures to
stabilize the value of the Funds' and Portfolios' net assets within 1/2 of 1% of
the value determined on the basis of amortized cost. These procedures include a
review of the extent of any such deviation of net asset value, based on
available market rates. Should that deviation exceed 1/2 of 1% for a Fund or a
Portfolio, the Trust's or Portfolio's Board of Trustees will consider whether
any action should be initiated to eliminate or reduce material dilution or other
unfair results to investors in the Fund or Portfolio. Such action may include
withdrawal in kind, selling securities prior to maturity and utilizing a net
asset value as determined by using available market quotations. The Funds and
Portfolios maintain a dollar-weighted average maturity of 90 days or less, do
not purchase any instrument with a remaining maturity greater than 397 days or
(in the case of Cash Reserves and Cash Reserves Portfolio) subject to a
repurchase agreement having a duration of greater than 397 days, limit their
investments, including repurchase agreements, to those U.S. dollar-denominated
instruments that are determined by the Adviser to present minimal credit risks
and comply with certain reporting and recordkeeping procedures. The Trust and
Portfolios also have established procedures to ensure that securities purchased
by the Funds and Portfolios meet high quality criteria. (See "Investment
Objectives, Policies and Restrictions -- Investment Policies.")
Subject to compliance with applicable regulations, the Trust and the
Portfolios have each reserved the right to pay the redemption price of shares of
the Funds or beneficial interests in the Portfolios, either totally or
partially, by a distribution in kind of readily marketable securities (instead
of cash). The securities so distributed would be valued at the same amount as
that assigned to them in calculating the net asset value for the shares or
beneficial interests being sold. If a holder of shares or beneficial interests
received a distribution in kind, such holder could incur brokerage or other
charges in converting the securities to cash.
The Trust or the Portfolios 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 Securities and Exchange Commission,
exists making disposal of the 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 Securities and Exchange Commission has by order permitted such suspension.
<PAGE>
5. MANAGEMENT
The Trustees and officers of the Trust and the Portfolios and their
principal occupations during the past five years are set forth below. Their
titles may have varied during that period. Asterisks indicate that those
Trustees and officers are "interested persons" (as defined in the 1940 Act) of
the Trust or a Portfolio. Unless otherwise indicated below, the address of each
Trustee and officer is 6 St. James Avenue, Boston, Massachusetts. The address of
Cash Reserves Portfolio is Elizabethan Square, George Town, Grand Cayman,
British West Indies. The address of U.S. Treasury Reserves Portfolio is 6 St.
James Avenue, Boston, Massachusetts.
TRUSTEES OF THE TRUST
H. B. ALVORD -- Treasurer - Tax Collector, County of Los Angeles (retired,
March, 1984); Trustee, The 59 Wall Street Trust and The 59 Wall Street Fund,
Inc. (Registered Investment Companies). His address is P.O. Box 1812, Pebble
Beach, California.
PHILIP W. COOLIDGE* -- President of the Trust and the
Portfolios; Chief Executive Officer, Signature Financial Group, Inc. and The
Landmark Funds Broker-Dealer Services, Inc. (since December, 1988). C. OSCAR
MORONG, JR. -- Managing Director, Morong Capital Management (since February,
1993); Senior Vice President and Investment Manager, CREF Investments, Teachers
Insurance & Annuity Association (retired January, 1993). His address is 1385
Outlook Drive West, Mountainside, New Jersey.
E. KIRBY WARREN -- Professor of Management, Graduate School of Business,
Columbia University (since 1987). His address is Columbia University, Graduate
School of Business, 725 Uris Hall, New York, New York.
TRUSTEES OF THE PORTFOLIOS
ELLIOTT J. BERV -- Chairman and Director, Catalyst, Inc. (Management
Consultants) (since August, 1992); President, Chief Operating Officer and
Director, Deven International, Inc. (International Consultants) (June, 1991 to
July, 1992); President and Director, Elliott J. Berv & Associates (Management
Consultants) (since May, 1984). His address is 15 Stornoway Drive, Cumberland
Foreside, Maine.
MARK T. FINN -- 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,
<PAGE>
Virginia Beach, Virginia.
WALTER E. ROBB, III -- President, Benchmark Advisors, Inc. (Corporate
Financial Advisors) (since 1989); Trustee of certain registered investment
companies in the MFS Family of Funds. His address is 35 Farm Road, Sherborn,
Massachusetts.
OFFICERS OF THE TRUST AND PORTFOLIOS
PHILIP W. COOLIDGE* -- President of the Trust and the Portfolios; Chief
Executive Officer, Signature Financial Group, Inc., and The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).
JAMES B. CRAVER* -- Secretary and Treasurer of the Trust and the
Portfolios; Senior Vice President and General Counsel, Signature Financial
Group, Inc. and The Landmark Funds Broker-Dealer Services, Inc. (since January,
1991); Partner, Baker & Hostetler (Attorneys) (prior to January, 1991).
SUSAN JAKUBOSKI* -- Vice President, Assistant Treasurer and Assistant
Secretary of Cash Reserves Portfolio (since August, 1994); Manager, Signature
Financial Group (Cayman) Ltd. (since August, 1994); Senior Fund Administrator,
Signature Financial Group, Inc. (since August, 1994); Assistant Treasurer,
Signature Broker-Dealer Services, Inc. (since September, 1994); Fund Compliance
Administrator, Concord Financial Group (November, 1990 to August, 1994); Senior
Fund Accountant, Neuberger & Berman Management, Inc. (from February, 1988 to
November, 1990); Customer Service Representative, I.B.J. Schroder (prior to
1988). Her address is Elizabethan Square, George Town, Grand Cayman, Cayman
Islands, BWI.
MOLLY S. MUGLER* -- Assistant Secretary of the Trust and the Portfolios;
Legal Counsel and Assistant Secretary, Signature Financial Group, Inc. (since
December, 1988); Assistant Secretary, The Landmark Funds Broker-Dealer Services,
Inc. (since December, 1988).
BARBARA M. O'DETTE* -- Assistant Treasurer of the Trust and the Portfolios;
Assistant Treasurer, Signature Financial Group, Inc. and The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).
DONALD S. RUMERY* -- Assistant Treasurer of the Trust and the Portfolios;
Vice President and Assistant Treasurer, Signature Financial Group, Inc. and The
Landmark Funds Broker-Dealer Services, Inc. (since March, 1990); Vice President,
Putnam Investor Services (Financial Services Company) (prior to March, 1990).
The Trustees and officers of the Trust and the Portfolios also hold
comparable positions with certain other funds for which LFBDS or an affiliate
serves as the distributor or administrator.
<PAGE>
As of October 31, 1994, all Trustees and officers as a group owned less
than 1% of each Fund's outstanding shares. As of the same date, more than 95% of
the outstanding shares of each Fund were held of record by Citibank, N.A. or an
affiliate, as a Shareholder Servicing Agent of the Funds, for the accounts of
their respective clients.
The Declaration of Trust of each of the Trust and the Portfolios provides
that the Trust or such Portfolio, as the case may be, will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust or such Portfolio, as the case may be, unless, as to liability to the
Trust or such Portfolio or its respective investors, it is finally adjudicated
that they engaged in willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in their offices, or unless with
respect to any other matter it is finally adjudicated that they did not act in
good faith in the reasonable belief that their actions were in the best
interests of the Trust or such Portfolio, as the case may be. In the case of
settlement, such indemnification will not be provided unless it has been
determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination, based upon a review of readily
available facts, by vote of a majority of disinterested Trustees of the Trust or
such Portfolio, 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 may determine, the Adviser
manages the securities of each Portfolio and makes investment decisions for each
Portfolio. The Adviser furnishes at its own expense all services, facilities and
personnel necessary in connection with managing each Portfolio's investments and
effecting securities transactions for each Portfolio. Each of the Advisory
Agreements will continue in effect as long as such continuance is specifically
approved at least annually by the Board of Trustees of the applicable Portfolio
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
applicable Portfolio who are not parties to such Advisory Agreement or
interested persons of any such party, at a meeting called for the purpose of
voting on the Advisory Agreements.
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 applicable
Portfolio when authorized either by a vote of a majority of the outstanding
voting securities of the
<PAGE>
applicable Portfolio or by a vote of a majority of the Board of Trustees of the
applicable Portfolio, 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.
Cash Reserves Portfolio: For the fiscal years ended August 31, 1992, 1993 and
1994, the fees paid to Citibank under the Advisory Agreement were $1,554,940,
$2,108,642 and $1,806,314, respectively (of which $943,419 was voluntarily
waived for the year ended August 31, 1994).
U.S. Treasury Reserves Portfolio: For the fiscal year ended December 31, 1992
and the eight-month period ended August 31, 1993, the fees paid to Citibank
under the Advisory Agreement were $933,117 and $570,108, respectively. For the
fiscal year ended August 31, 1994, the fees paid to Citibank under the Advisory
Agreement were $850,924 (of which $506,109 was voluntarily waived).
ADMINISTRATORS
Pursuant to Administrative Services Agreements (the "Administrative
Services Agreements"), LFBDS provides the Trust and U.S. Treasury Reserves
Portfolio, and SFG provides Cash Reserves Portfolio, with general office
facilities, and LFBDS supervises the overall administration of the Trust and
U.S. Treasury Reserves Portfolio and SFG supervises the overall administration
of Cash Reserves Portfolio, including, among other responsibilities, the
negotiation of contracts and fees with, and the monitoring of performance and
billings of, the independent contractors and agents of the Trust and the
Portfolios; the preparation and filing of all documents required for compliance
by the Trust and the Portfolios with applicable laws and regulations; and
arranging for the maintenance of books and records of the Trust and the
Portfolios. LFBDS and SFG provide persons satisfactory to the Board of Trustees
of the Trust and the Portfolios to serve as Trustees and officers of the Trust
and the Portfolios. Such Trustees and officers may be directors, officers or
employees of LFBDS, SFG or their affiliates.
The Prospectus contains a description of the fees payable to LFBDS and SFG
under the Administrative Services Agreements.
Cash Reserves: For the fiscal years ended August 31, 1992, 1993 and 1994,
the fees paid or payable to LFBDS from the Fund under the Administrative
Services Agreement and a prior administrative services
<PAGE>
agreement with the Trust were $280,436, $701,335 and $1,146,206 (of which
$14,759 was voluntarily waived in 1993 and $52,077 was voluntarily waived in
1994). For the fiscal years ended August 31, 1992, and 1993, the fees paid or
payable to LFBDS under a prior administrative services agreement with Cash
Reserves Portfolio were $518,313, and $702,881) (of which $596,227 was
voluntarily waived in 1993). For the fiscal year ended August 31, 1994, the fees
paid or payable to SFG under the Administrative Services Agreement with Cash
Reserves Portfolio were $602,105 (all of which was voluntarily waived).
U.S. Treasury Reserves: For the fiscal year ended December 31, 1992, the fee
paid to LFBDS from the Fund under a prior administrative services agreement with
the Trust was $246,286. For the eight-month period ended August 31, 1993, the
fee payable to LFBDS from the Fund under the Administrative Services Agreement
and the prior administrative services agreement with the Trust was $302,379 (of
which $34,314 was voluntarily waived). For the fiscal year ended August 31,
1994, the fee paid to LFBDS from the Fund under the Administrative Services
Agreement with the Trust was $577,750 (of which $49,087 was voluntarily waived).
For the fiscal year ended December 31, 1992, the fee payable to LFBDS under the
Administrative Services Agreement with the Portfolio was $311,039 (of which
$72,119 was voluntarily waived). For the eight-month period ended August 31,
1993, the fee payable to LFBDS under the Administrative Services Agreement with
the Portfolio was $190,036 (all of which was voluntarily waived). For the fiscal
year ended August 31, 1994, the fee payable to LFBDS under the Administrative
Services Agreement with the Portfolio was $283,642 (all of which was voluntarily
waived).
The Administrative Services Agreement with the Trust acknowledges that the
names "Landmark" and "Landmark Funds" are the property of LFBDS and provides
that if LFBDS ceases to serve as the administrator of the Trust, the Trust and
the Funds will change their respective names so as to delete the word "Landmark"
or the words "Landmark Funds". The Administrative Services Agreement with the
Trust also provides that LFBDS may render administrative services to others and
may permit other investment companies in addition to the Trust to use the word
"Landmark" or the words "Landmark Funds" in their names.
The Administrative Services Agreement with the Trust continues in effect
as to a Fund if such continuance is specifically approved at least annually by
the Trust's Board of Trustees or by a vote of a majority of the outstanding
voting securities of such Fund and, in either case, by a majority of the
Trustees of the Trust who are not interested parties of the Trust or LFBDS. The
Administrative Services Agreement with the Trust terminates automatically if it
is assigned and may be terminated as to a Fund by the Trust without penalty by
vote of a majority of the outstanding voting securities of the Fund or by either
party on not more than 60 days' nor less than 30 days' written notice. The
Administrative Services Agreement with the Trust also provides that neither
LFBDS nor its personnel shall be
<PAGE>
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
Administrative Services Agreement.
LFBDS has agreed to reimburse the Funds for their operating expenses
(exclusive of interest, taxes, brokerage, and extraordinary expenses) which in
any year exceed the limits prescribed by any state in which the Funds' shares
are qualified for sale. The expenses incurred by the Funds for distribution
purposes pursuant to the Trust's Distribution Plans are included within such
operating expenses only to the extent required by any state in which the Funds'
shares are qualified for sale. The Trust may elect not to qualify the Funds'
shares for sale in every state. The Trust believes that currently the most
restrictive expense ratio limitation imposed by any state is 2 1/2% of the first
$30 million of a Fund's average net assets for its then-current fiscal year, 2%
of the next $70 million of such assets, and 1 1/2% of such assets in excess of
$100 million. For the purpose of this obligation to reimburse expenses, the
Funds' annual expenses are estimated and accrued daily, and any appropriate
estimated payments will be made by LFBDS. Subject to the obligation of LFBDS to
reimburse the Funds for their excess expenses as described above, the Trust has,
under its Administrative Services Agreement, confirmed its obligation for
payment of all other expenses of the Funds.
The Administrative Services Agreements with the Portfolios provide that
LFBDS or SFG, as the case may be, may render administrative services to others.
The Administrative Services Agreement with each of the Portfolios 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 or by either
party on not more than 60 days' nor less than 30 days' written notice. The
Administrative Services Agreement with each of the Portfolios also provides that
neither LFBDS or SFG, as the case may be, 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, 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
Administrative Services Agreement.
LFBDS and SFG are wholly-owned subsidiaries of Signature Financial Group,
Inc.
Pursuant to Sub-Administrative Services Agreements (the
"Sub-Administrative Agreements"), Citibank performs such sub-administrative
duties for the Trust and the Portfolios as are from time to time agreed upon by
Citibank and, as the case may be, LFBDS or SFG. Citibank's sub-administrative
duties may include providing equipment and clerical personnel necessary for
maintaining the
<PAGE>
organization of the Trust and the Portfolios, participation in preparation of
documents required for compliance by the Trust and the Portfolios with
applicable laws and regulations, preparation of certain documents in connection
with meetings of Trustees and shareholders of the Trust and Portfolios, and
other functions which would otherwise be performed by LFBDS as set forth above.
For performing such sub-administrative services, Citibank receives such
compensation as is from time to time agreed upon by Citibank and, as the case
may be, LFBDS or SFG not in excess of the amount paid to LFBDS or SFG for its
services under the applicable Administrative Services Agreement. All such
compensation is paid by LFBDS or SFG, as the case may be.
DISTRIBUTOR
The Trust has adopted Distribution Plans (the "Distribution Plans") on
behalf of itself and the Funds in accordance with Rule 12b-1 under the 1940 Act
after having concluded that there is a reasonable likelihood that the
Distribution Plans will benefit the Funds and their shareholders. Cash Reserves
has both Class A Shares and Class B Shares. U.S. Treasury Reserves has a single
class of shares. The Distribution Plan with respect to the Class A shares of
Cash Reserves and the shares of U.S. Treasury Reserves provides that the Trust
shall pay a distribution fee to the Distributor at an annual rate not to exceed
0.10% the average daily net assets of U.S. Treasury Reserves and of the average
daily net assets represented by the Class A shares of Cash Reserves (exclusive
of any advertising expenses incurred by the Distributor in connection with the
sale of shares of each Fund). The Distribution Plan with respect to Class B
shares of Cash Reserves provides that the 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 may use all or any
portion of such fee to pay for Fund expenses of printing prospectuses and
reports used for sales purposes, expenses of the preparation and printing of
sales literature and other distribution-related expenses.
The Distribution Plan with respect to the Class A shares of Cash Reserves
and the shares of U.S. Treasury Reserves also permits each Fund to pay the
Distributor an additional fee (not to exceed 0.10% per annum of the average
daily net assets of U.S. Treasury Reserves and of the average daily net assets
represented by the Class A shares of Cash Reserves) in anticipation of, or as
reimbursement for, print or electronic media advertising expenses incurred in
connection with the sale of Class A shares of Cash Reserves and shares of U.S.
Treasury Reserves. The Distribution Plan for Class B shares of Cash Reserves
also provides that Cash Reserves may pay the Distributor a monthly service fee
at an annual rate not to exceed 0.25% of the average daily net assets
represented by the Class B shares. However, Cash Reserves has not entered into
any agreement to pay any such service fee to the Distributor. No payments under
the Distribution Plans are made to Shareholder Servicing Agents although
<PAGE>
Shareholder Servicing Agents receive payments under the Administrative Services
Plan referred to below.
Each Distribution Plan continues in effect if such continuance is
specifically approved at least annually by a vote of both a majority of the
Trust's Trustees and a majority of the Trust's Trustees who are not "interested
persons" of the 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
("Qualified Trustees"). Each Distribution Plan requires that the Trust and the
Distributor shall provide to the Board of Trustees, and the Board of Trustees
shall 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 Fund at any time by a vote of a majority of the Trust's Qualified
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund. The Distribution Plans 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 voting securities of that Fund and may not be
materially amended in any case without a vote of the majority of both the
Trustees and the 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 the
Funds in connection with the offering of shares of the Funds pursuant to
Distribution Agreements (the "Distribution Agreements"). After the prospectus
and periodic reports have been prepared, set in type and mailed to existing
shareholders, the Distributor pays for the printing and distribution of copies
of the prospectuses and periodic reports which are used in connection with the
offering of shares of the each of the Funds to prospective investors. The
Prospectus contains a description of fees payable to the Distributor under the
Distribution Agreements.
Cash Reserves: For the fiscal years ended August 31, 1992, 1993 and 1994, the
fees paid from the Fund to the Distributor under the Distribution Agreement were
$560,872, $233,778 and $229,241, respectively, of which no portion was
applicable to print or electronic media advertising.
U.S. Treasury Reserves: For the fiscal year ended December 31, 1992, the
fee paid from the Fund to the Distributor under the Distribution Agreement was
$436,534 (none of which was applicable to print or electronic media
advertising). For the eight-month period ended August 31, 1993, the fee payable
to the Distributor from the Fund under the Distribution Agreement was $100,793
(none of which was
<PAGE>
applicable to print or electronic media advertising, and of which $3,435 was
voluntarily waived). For the fiscal year ended August 31, 1994, the fee paid
from the Fund to the Distributor under the Distribution Agreement was $115,550
(of which $10,186 was voluntarily waived).
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
The Trust has adopted an Administrative Services Plan (the "Administrative
Plan") which provides that the 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 the Administrative Plan, the total of the fees
paid to the Administrator and Shareholder Servicing Agents from each Fund and
the distribution fee paid to the Distributor from each Fund (other than fees
paid with respect to Class B shares and other than any fee concerning electronic
or other media advertising) may not exceed 0.70% of that Fund's average daily
net assets on an annualized basis for the Fund's then-current fiscal year.
Within this overall limitation, individual fees may vary. The Administrative
Plan continues in effect if such continuance is specifically approved at least
annually by a vote of both a majority of the Trust's Trustees and a majority of
the Trust's Trustees who are not "interested persons" of the Trust and who have
no direct or indirect financial interest in the operation of the Administrative
Plan or in any agreement related to such Plan ("Qualified Trustees"). The
Administrative Plan requires that at least quarterly the Trust provide to the
Trust's Board of Trustees and the Trust's Board of Trustees review a written
report of the amounts expended (and the purposes therefor) under the
Administrative Plan. The Administrative Plan may be terminated with respect to a
Fund at any time by a vote of a majority of the Trust's Qualified Trustees or by
a vote of a majority of the outstanding voting securities of the Fund. The
Administrative Plan may not be amended to increase materially the amount of a
Fund's permitted expenses thereunder without the approval of a majority of the
outstanding voting securities of the Fund and may not be materially amended in
any case without a vote of the majority of both the Trust's Trustees and the
Trust's Qualified Trustees.
The Trust has entered into a shareholder servicing agreement (a "Servicing
Agreement") with each Shareholder Servicing Agent and a Transfer Agency and
Service Agreement and a Custodian 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 and custodian for the Trust. For
additional information, including a description of fees paid to the Shareholder
Servicing Agents under the Servicing Agreements, see "Shareholder Servicing
Agents" and "Transfer Agent, Custodian and Fund Accountant" in the Prospectus.
For the fiscal years ended August 31, 1993 and August 31, 1994, aggregate fees
payable from Cash Reserves and U.S. Treasury Reserves to Shareholder Servicing
Agents under the Servicing
<PAGE>
Agreements were $1,833,930 and $924,400, respectively (of which $687,723 and
$346,650, respectively, were voluntarily waived).
The Portfolios have also adopted Administrative Services Plans (the
"Portfolio Administrative Plans") which provide that the Portfolios 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 Plans, the administrative services fee payable to
either LFBDS or SFG, as the case may be, may not exceed 0.05% of a Portfolio's
average daily net assets on an annualized basis for its then-current fiscal
year. Each Portfolio Administrative Plan continues in effect if such continuance
is specifically approved at least annually by a vote of both a majority of the
applicable Portfolio's Trustees and a majority of the Portfolio'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 ("Qualified Trustees"). Each Portfolio
Administrative Plan requires that the applicable Portfolio 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 Portfolio
Administrative Plan. Each Portfolio Administrative Plan may be terminated at any
time by a vote of a majority of the Portfolio's Qualified Trustees or by a vote
of a majority of the outstanding voting securities of the applicable Portfolio.
Neither Portfolio Administrative Plan may be amended to increase materially the
amount of permitted expenses thereunder without the approval of a majority of
the outstanding voting securities of the applicable Portfolio and may not be
materially amended in any case without a vote of the majority of both the
Portfolio's Trustees and the Portfolio's Qualified Trustees.
Each Portfolio has entered into a Transfer Agency and Service Agreement
and a Custodian Agreement with State Street pursuant to which State Street (or
its affiliate State Street Canada, Inc.) acts as transfer agent and custodian
and performs fund accounting services for the Portfolios.
6. PORTFOLIO TRANSACTIONS
The Portfolios' purchases and sales of portfolio securities usually are
principal transactions. Portfolio securities are normally purchased directly
from the issuer or from an underwriter or market maker for the securities. There
usually are no brokerage commissions paid for such purchases. The Portfolios do
not anticipate paying brokerage commissions. Any transaction for which a
Portfolio pays a brokerage commission will be effected at the best price and
execution available. Purchases from underwriters of portfolio securities include
a commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market makers include the spread between the bid and
asked price.
<PAGE>
Allocation of transactions, including their frequency, to various dealers
is determined by the Adviser in its best judgment and in a manner deemed to be
in the best interest of investors in the applicable Portfolio rather than by any
formula. The primary consideration is prompt execution of orders in an effective
manner at the most favorable price.
Investment decisions for each Portfolio will be made independently from
those for any other account, series or investment company that is or may in the
future become managed by the Adviser or its affiliates. If, however, a Portfolio
and other investment companies, series or accounts managed by the Adviser are
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by the Portfolio or the size of the position obtainable for the
Portfolio. In addition, when purchases or sales of the same security for a
Portfolio and for other investment companies or series managed by the Adviser
occur contemporaneously, the purchase or sale orders may be aggregated in order
to obtain any price advantages available to large denomination purchases or
sales.
No portfolio transactions are executed with the Adviser, or with any
affiliate of the Adviser, acting either as principal or as broker.
7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust's Declaration of Trust permits the Trust's Board of 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. Currently, the
Funds are the only two series of shares of the Trust, one of which, Cash
Reserves, is divided into two classes. Each share of each class of Cash Reserves
represents an equal proportionate interest in the Fund with each other share of
that class. Each share of U.S. Treasury Reserves represents an equal
proportionate interest in the Fund with each other share of U.S. Treasury
Reserves. Upon liquidation or dissolution of a Fund, the Fund's shareholders are
entitled to share pro rata in the Fund's net assets available for distribution
to its shareholders. The Trust reserves the right to create and issue additional
series and classes of shares. Shares of each series participate equally in the
earnings, dividends and distribution of net assets of the particular series upon
the 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 Trust. In matters
<PAGE>
affecting only a particular Fund or class, only shares of that particular Fund
or class are entitled to vote.
Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. Shareholders in the Trust do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of the Trust may elect all of the Trustees of the Trust if
they choose to do so and in such event the other shareholders in the Trust would
not be able to elect any Trustee. The Trust is not required and has no current
intention to hold annual meetings of shareholders but the Trust will hold
special meetings of a Fund's shareholders when in the judgment of the Trust's
Trustees it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have under certain circumstances (e.g., upon 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 the right to remove one or more Trustees
without a meeting by a declaration in writing by a specified number of
shareholders. No material amendment may be made to the Trust's Declaration of
Trust without the affirmative vote of the holders of a majority of its
outstanding shares.
The Trust's Declaration of Trust provides that, at any meeting of
shareholders of the Trust or of any series of the Trust, 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 it 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.
The Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets (or all or substantially all of the assets
belonging to any series of the Trust), if approved by the vote of the holders of
two-thirds of the Trust's outstanding shares voting as a single class, or of the
affected series of the Trust, as the case may be, except that if the Trustees of
the Trust recommend such sale of assets, merger or consolidation, the approval
by vote of the holders of a majority of the Trust's or the affected series'
outstanding shares would be sufficient. The Trust or any series of the Trust, as
the case may be, may be terminated (i) by a vote of a majority of the
outstanding voting securities of the Trust or the affected series or (ii) by the
Trustees by written notice to the shareholders of the Trust or the affected
series. If not so terminated, the Trust will continue indefinitely.
Share certificates will not be issued.
The Trust is an entity of the type commonly known as a
"Massachusetts business trust". Under Massachusetts law,
<PAGE>
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 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
also provides that the Trust shall maintain appropriate insurance (e.g.,
fidelity bonding and errors and omissions insurance) for the protection of the
Trust, its shareholders, Trustees, officers, employees and agents covering
possible tort and other liabilities. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which both inadequate insurance existed and the Trust itself was unable to
meet its obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the property
of the Trust and that the Trustees will not be liable for any action or failure
to act, but nothing in the Declaration of Trust 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.
Each Portfolio is organized as a trust under the laws of the State of New
York. Each Portfolio's Declaration of Trust provides that investors in the
Portfolio (e.g., other investment companies (including the corresponding Fund),
insurance company separate accounts and common and commingled trust funds) are
each liable for all obligations of the Portfolio. However, the risk of a Fund
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 either Portfolio would ever exceed its assets.
Each investor in a Portfolio, including the corresponding Fund, may add to
or reduce its investment in the Portfolio on each business day. At 2:00 p.m.,
Eastern time, for Cash Reserves Portfolio, and 12:00 noon, Eastern time, for
U.S. Treasury Reserves Portfolio, on each such business day, the value of each
investor's interest in the Portfolio is determined by multiplying the net asset
value of the Portfolio by the percentage representing that investor's share of
the aggregate beneficial interests in the Portfolio effective for that day. Any
additions or withdrawals, which 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 2:00 p.m. Eastern time, for Cash Reserves Portfolio, and 12:00 noon,
Eastern time, for U. S. Treasury Reserves Portfolio, on such day plus or minus,
as the case may be, the amount of any additions to or
<PAGE>
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 2:00 p.m., Eastern time, for Cash Reserves Portfolio, and 12:00
noon, Eastern time, for U.S. Treasury Reserves Portfolio, 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 2:00 p.m., Eastern time, for
Cash Reserves Portfolio, and 12:00 noon, Eastern time, for U.S. Treasury
Reserves Portfolio, on the following business day of the Portfolio.
8. CERTAIN ADDITIONAL TAX MATTERS
Each of the Funds 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 and all of a Fund's net investment income and realized capital gains are
distributed to shareholders in accordance with the timing requirements imposed
by the Code, no federal income or excise taxes will be required to be paid by
the Fund. 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
dividend income to shareholders.
Because each Fund expects to earn primarily interest income, it is
expected that no Fund distributions will qualify for the dividends-received
deduction for corporations.
9. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Price Waterhouse LLP and Price Waterhouse are the independent certified
public accountants for Cash Reserves and Cash Reserves Portfolio, respectively,
providing audit services and assistance and consultation with respect to the
preparation of filings with the Securities and Exchange Commission. Deloitte &
Touche LLP were the independent certified public accountants for Cash Reserves
and Cash Reserves Portfolio through December 31, 1993. The selection of Price
Waterhouse LLP and Price Waterhouse was based on management's decision with
respect to certain areas of expertise and service capabilities. There was no
disagreement between the Fund, the Portfolio and Deloitte & Touche LLP with
respect to the accounting and audit services provided by such firm. Deloitte &
Touche LLP are the independent certified public accountants for U.S. Treasury
Reserves and U.S. Treasury Reserves Portfolio, providing audit services and
assistance and consultation with respect to the preparation of filings with the
Securities and Exchange Commission.
<PAGE>
The audited financial statements of Cash Reserves (Statement of Assets and
Liabilities at August 31, 1994, Statement of Operations for the year ended
August 31, 1994, Statement of Changes in Net Assets for the years ended August
31, 1994 and August 31, 1993, Financial Highlights for each of the years in the
five-year period ended August 31, 1994, Notes to Financial Statements and
Independent Auditors' Report) and of Cash Reserves Portfolio (Portfolio of
Investments at August 31, 1994, Statement of Assets and Liabilities at August
31, 1994, Statement of Operations for the year ended August 31, 1994, Statement
of Changes in Net Assets for the years ended August 31, 1994 and August 31,
1993, Financial Highlights for each of the years in the four-year period ended
August 31, 1994 and for the period from May 3, 1990 (commencement of operations)
to August 31, 1990, Notes to Financial Statements and Independent Auditors'
Report), each of which is included in the Annual Report to Shareholders of Cash
Reserves, are incorporated by reference into this Statement of Additional
Information and have been so incorporated in reliance upon the reports of Price
Waterhouse LLP and Price Waterhouse(for the fiscal year ended August 31, 1994)
and Deloitte & Touche LLP (for periods prior to the fiscal year ended August 31,
1994).
The audited financial statements of U.S. Treasury Reserves (Statement of
Assets and Liabilities at August 31, 1994, Statement of Operations for the year
ended August 31, 1994, Statement of Changes in Net Assets for the year ended
August 31, 1994, the eight months ended August 31, 1993 and the year ended
December 31, 1992, Financial Highlights for the year ended August 31, 1994, the
eight months ended August 31, 1993, the year ended December 31, 1992 and the
period from May 3, 1991 (commencement of operations) to December 31, 1991, and
the Notes to Financial Statements and Independent Auditors' Report) and of U.S.
Treasury Reserves Portfolio (Portfolio of Investments at August 31, 1994,
Statement of Assets and Liabilities at August 31, 1994, Statement of Operations
for the year ended August 31, 1994, Statement of Changes in Net Assets for the
year ended August 31, 1994, the eight month period ended August 31, 1993 and the
year ended December 31, 1992, Financial Highlights for the year ended August 31,
1994, the eight months ended August 31, 1993, the year ended December 31, 1992
and the period from March 1, 1991 (commencement of operations) to December 31,
1991, the Notes to Financial Statements and Independent Auditors' Report), each
of which is included in the Annual Report to Shareholders of U.S. Treasury
Reserves, are incorporated by reference into this Statement of Additional
Information and have been so incorporated in reliance upon the report of
Deloitte & Touche LLP, independent certified public accountants, as experts in
accounting and auditing.
A copy of each of the Annual Reports accompanies this Statement of
Additional Information.
<PAGE>
SHAREHOLDER SERVICING AGENTS
FOR CITIBANK NEW YORK RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CUSTOMERS:
Citibank, N.A.
450 West 33rd Street, New York, NY 10001
(212) 564-3456 or (800) 846-5300
FOR CITIGOLD CUSTOMERS:
Citigold
P.O. Box 5130, New York, NY 10126-5130
Call Your Citigold Executive or (212) 974-0900 or (800) 285-1701
FOR PRIVATE BANKING CLIENTS:
Citibank, N.A.
The Citibank Private Bank
153 East 53rd Street, New York, NY 10043
Call Your Citibank Private Banking Account Officer,
Investment Specialist or (212) 559-5959
FOR CITIBANK GLOBAL ASSET MANAGEMENT CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY l0043
(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
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LANDMARK CASH RESERVES
LANDMARK U.S. TREASURY RESERVES
TRUSTEES AND OFFICERS
Philip W. Coolidge
President*
H.B. Alvord
C. Oscar Morong, Jr.
E. Kirby Warren
SECRETARY AND TREASURER
James B. Craver*
ASSISTANT TREASURERS
Barbara M. O'Dette*
Donald S. Rumery*
ASSISTANT SECRETARY
Molly S. Mugler*
*Affiliated Person of Administrator and Distributor
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INVESTMENT ADVISER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND DISTRIBUTOR
The Landmark Funds Broker-Dealer Services, Inc.
6 St. James Avenue, Boston, MA 02116
(617) 423-1679
TRANSFER AGENT AND CUSTODIAN State Street Bank and Trust Company 225 Franklin
Street, Boston, MA 02110
AUDITORS
(LANDMARK CASH RESERVES)
Price Waterhouse LLP
160 Federal Street, Boston, MA 02110
(LANDMARK U.S. TREASURY RESERVES)
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
LEGAL COUNSEL
Bingham, Dana & Gould
150 Federal Street, Boston, MA 02110
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SHAREHOLDER SERVICING AGENTS
(See Inside of Cover)
