`As filed with the Securities and Exchange Commission on April 29, 1996
File Nos. 33-6540
811-5033
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 22
AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 23
LANDMARK FIXED INCOME FUNDS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 617-423-1679
PHILIP W. COOLIDGE, 6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
ROGER P. JOSEPH, BINGHAM, DANA & GOULD LLP, 150 FEDERAL STREET,
BOSTON, MASSACHUSETTS 02110
It is proposed that this filing will become effective on May 1, 1996
pursuant to paragraph (b) of Rule 485. The Premium Portfolios has also executed
this Registration Statement. Pursuant to Rule 24f-2, Registrant has registered
an indefinite number of its Shares of Beneficial Interest (without par value)
under the Securities Act of 1933 and filed Rule 24f-2 Notices on February 28,
1996 for Registrant's fiscal year ended December 31, 1995.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE - LANDMARK U.S. GOVERNMENT INCOME FUND
===============================================================================================================================
AMOUNT OF SHARES BEING PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING REGISTERED UNDER RULE 24E-2 OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED SHARE* PRICE** FEE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest
without par value............ 2,684,911.852 $9.71 $290,000 $100
===============================================================================================================================
</TABLE>
*Pursuant to Rule 457(c), this was the maximum offering price per share of the
Registrant's shares at the close of business on April 23, 1996.
**Computed under 17 CFR 270.24e; 2,655,045.732 shares were redeemed or
repurchased during the fiscal year ended December 31, 1995, none of which
were used for reductions in previous filings during the current year under
Rule 24f-2 and 2,655,045.732 of which are being used for reduction in this
Post-Effective Amendment No. 22.
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE - LANDMARK INTERMEDIATE INCOME FUND
===============================================================================================================================
AMOUNT OF SHARES BEING PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING REGISTERED UNDER RULE 24E-2 OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED SHARE* PRICE** FEE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Shares of Beneficial Interest
without par value............ 692,747.246 $9.73 $290,000 $100
===============================================================================================================================
</TABLE>
*Pursuant to Rule 457(c), this was the maximum offering price per share of the
Registrant's shares at the close of business on April 23, 1996.
**Computed under 17 CFR 270.24e; 662,942.516 shares were redeemed or repurchased
during the fiscal year ended December 31, 1995, none of which were used for
reductions in previous filings during the current year under Rule 24f-2 and
662,942.516 of which are being used for reduction in this Post-Effective
Amendment No. 22.
- -------------------------------------------------------------------------------
+Formerly, Landmark U.S. Government Income Fund.
<PAGE>
LANDMARK FIXED INCOME FUNDS
(LANDMARK U.S. GOVERNMENT INCOME FUND,
LANDMARK INTERMEDIATE INCOME FUND,
LANDMARK LONG-TERM U.S. GOVERNMENT INCOME FUND AND
LANDMARK GLOBAL GOVERNMENTS INCOME FUND)
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A
ITEM NO. N-1A ITEM LOCATION
PART A PROSPECTUS
<S> <C> <C>
Item 1. Cover Page............................................. Cover Page
Item 2. Synopsis............................................... Expense Summary
Item 3. Condensed Financial Information........................ Condensed Financial Information
Item 4. General Description of Registrant...................... Investment Information; General
Information; Appendix
Item 5. Management of the Fund................................. Management; Expenses
Item 5A. Management's Discussion of Fund Performance............ Not Applicable
Item 6. Capital Stock and Other Securities..................... General Information; Classes of Shares;
Voting and Other Rights; Purchases;
Exchanges; Redemptions; Dividends and
Distributions; Tax Matters
Item 7. Purchase of Securities Being Offered................... Purchases; Exchanges; Redemptions
Item 8. Redemption or Repurchase............................... Purchases; Exchanges; Redemptions
Item 9. Pending Legal Proceedings.............................. Not Applicable
STATEMENT OF
ADDITIONAL
PART B INFORMATION
Item 10. Cover Page............................................. Cover Page
Item 11. Table of Contents...................................... Cover Page
Item 12. General Information and History........................ The Funds
Item 13. Investment Objectives and Policies..................... Investment Objectives, Policies and
Restrictions
Item 14. Management of the Fund................................. Management
Item 15. Control Persons and Principal Holders of Securities.... Management
Item 16. Investment Advisory and Other Services................. Management
Item 17. Brokerage Allocation and Other Practices............... Portfolio Transactions
Item 18. Capital Stock and Other Securities..................... Description of Shares, Voting Rights and
Liabilities
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered.......................................... Description of Shares, Voting Rights and
Liabilities; Determination of Net Asset
Value; Valuation of Securities;
Additional Purchase and Redemption
Information
Item 20. Tax Status............................................. Certain Additional Tax Matters
Item 21. Underwriters........................................... Management
Item 22. Calculation of Performance Data........................ Performance Information
Item 23. Financial Statements................................... Independent Accountants and Financial
Statements
PART C Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C to this
Registration Statement.
</TABLE>
<PAGE>
PROSPECTUS
- --------------------------------------------------------------------------------
MAY 1, 1996
LANDMARK U.S. GOVERNMENT INCOME FUND
LANDMARK INTERMEDIATE INCOME FUND
(Members of the Landmark(SM) Family of Funds)
Class A and B Shares
This Prospectus describes two mutual funds in the Landmark Family of
Funds: Landmark U.S. Government Income Fund and Landmark Intermediate Income
Fund. Each Fund has its own investment objectives and policies. Citibank, N.A.
is the investment adviser.
- ------------------------------------------------------------------------------
UNLIKE OTHER MUTUAL FUNDS WHICH DIRECTLY ACQUIRE AND MANAGE THEIR OWN
PORTFOLIOS OF SECURITIES, LANDMARK U.S. GOVERNMENT INCOME FUND SEEKS ITS
INVESTMENT OBJECTIVES BY INVESTING ALL OF ITS INVESTABLE ASSETS IN GOVERNMENT
INCOME PORTFOLIO, A SERIES OF THE PREMIUM PORTFOLIOS. THE PORTFOLIO HAS THE
SAME INVESTMENT OBJECTIVES AND POLICIES AS THE U.S. GOVERNMENT INCOME FUND.
SEE "SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE" ON PAGE 10.
- ------------------------------------------------------------------------------
REMEMBER THAT SHARES OF THE FUNDS:
* ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY
* ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, CITIBANK
OR ANY OF ITS AFFILIATES
* ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED
This Prospectus concisely sets forth information about the Funds that a
prospective investor should know before investing. A Statement of Additional
Information dated May 1, 1996 (and incorporated by reference in this
Prospectus) has been filed with the Securities and Exchange Commission. Copies
of the Statement of Additional Information may be obtained without charge, and
further inquiries about the Funds may be made, by contacting the investor's
shareholder servicing agent (see inside back cover for address and phone
number).
TABLE OF CONTENTS
2 Prospectus Summary
- ------------------------------------------
4 Expense Summary
- ------------------------------------------
6 Condensed Financial Information
- ------------------------------------------
8 Investment Information
- ------------------------------------------
10 Risk Considerations
- ------------------------------------------
12 Valuation of Shares
Classes of Shares
- ------------------------------------------
14 Purchases
- ------------------------------------------
18 Exchanges
Redemptions
- ------------------------------------------
Dividends and Distributions
Management
- ------------------------------------------
Tax Matters
- ------------------------------------------
Performance Information
General Information
- ------------------------------------------
25 Appendix -- Permitted Investments and
Investment Practices
- --------------------------------------------------------------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
PROSPECTUS SUMMARY
- ------------------------------------------------------------------------------
See the body of the Prospectus for more information on the topics
discussed in this summary.
THE FUNDS: This Prospectus describes two mutual funds: Landmark U.S.
Government Income Fund and Landmark Intermediate Income Fund. Each Fund has
its own investment objectives and policies. There can be no assurance that
either Fund will achieve its objectives.
INVESTMENT OBJECTIVES AND POLICIES:
LANDMARK U.S. GOVERNMENT INCOME FUND. The Fund's objectives are to generate
current income and preserve the value of its shareholders' investment. Through
Government Income Portfolio, the Fund invests in debt securities backed by the
full faith and credit of the U.S. Government with a dollar weighted average
maturity that is generally three years or less. Because the Fund invests
through Government Income Portfolio, all references in this Prospectus to the
Fund include the Government Income Portfolio, except as otherwise noted.
LANDMARK INTERMEDIATE INCOME FUND. The Fund's objectives are to generate a
high level of current income and preserve the value of its shareholders'
investment. The Fund invests in a broad range of fixed income securities,
including preferred stock and debt securities issued by U.S. and non-U.S.
companies and debt securities of the U.S. Government and governments of other
countries, including developing countries. Under normal market conditions, the
Fund's dollar weighted average portfolio maturity will be from three to ten
years.
INVESTMENT ADVISER AND DISTRIBUTOR: Citibank, N.A. ("Citibank" or the
"Adviser"), a wholly-owned subsidiary of Citicorp, is the investment adviser.
Citibank and its affiliates manage more than $83 billion in assets worldwide.
The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS" or the "Distributor")
is the distributor of shares of each Fund. See "Management."
PURCHASES AND REDEMPTIONS: Customers of Shareholder Servicing Agents may
purchase and redeem shares of the Funds on any Business Day. See "Purchases"
and "Redemptions."
PRICING: Investors may select Class A or Class B shares, with different
expense levels and sales charges (if available through the investors'
Shareholder Servicing Agents). See "Classes of Shares," "Purchases" and
"Management -- Distribution Arrangements."
CLASS A SHARES. Offered at net asset value plus any applicable initial sales
charge (maximum of 1.50% of the public offering price for the U.S. Government
Income Fund and 4.00% of the public offering price for the Intermediate Income
Fund) and subject to a distribution fee at the annual rate of 0.05% of the
average daily net assets represented by the Class A shares. Purchases of $1
million or more are not subject to an initial sales charge, but are subject to
a 1.00% contingent deferred sales charge in the event of certain redemptions
within 12 months following purchase.
The sales charge on Class A shares may be reduced or eliminated through the
following programs:
Letter of Intent
Right of Accumulation
Reinstatement Privilege
See "Purchases" and "Redemptions."
CLASS B SHARES. Offered at net asset value. A maximum contingent deferred
sales charge of 2.00% for the U.S. Government Income Fund and 5.00% for the
Intermediate Income Fund of the lesser of the shares' net asset value at
redemption or their original purchase price is imposed on certain redemptions
made within four years of the date of purchase for the U.S. Government Income
Fund and six years of the date of purchase for the Intermediate Income Fund.
Class B shares are subject to a distribution fee at the annual rate of 0.45%
for the U.S. Government Income Fund, and 0.75% for the Intermediate Income
Fund, of the average daily net assets represented by the Class B shares. Class
B shares are also subject to a service fee at the annual rate of 0.05% of the
average daily net assets represented by the Class B shares. Class B shares
automatically convert into Class A shares (which have a lower distribution
fee) approximately eight years after purchase.
EXCHANGES: Shares may be exchanged for shares of the corresponding class of
most other Landmark Funds. See "Exchanges."
DIVIDENDS: Dividends are declared and paid monthly for each Fund. Net capital
gains are distributed annually. See "Dividends and Distributions."
REINVESTMENT: All dividend and capital gain distributions may be received
either in cash or in Fund shares of the same class at net asset value, subject
to the policies of a shareholder's Shareholder Servicing Agent. See "Dividends
and Distributions."
WHO SHOULD INVEST: Each Fund has its own suitability considerations and risk
factors, as summarized below and described in more detail in "Investment
Information" and "Risk Considerations." No single Fund is intended to provide
a complete investment program.
U.S. GOVERNMENT INCOME FUND. The Fund is designed for investors seeking a
higher level of current income than is generally available from money market
funds, but who do not want the price fluctuations that are inherent in longer-
term securities. Investors should still be willing to accept fluctuation in
the price of shares of the Fund.
INTERMEDIATE INCOME FUND. The Fund is designed for investors seeking a higher
level of current income than is generally available from shorter-term
securities, and who are willing to accept the greater price fluctuations
associated with higher levels of income.
RISK FACTORS: There can be no assurance that either Fund will achieve its
investment objectives, and each Fund's net asset value will fluctuate based on
changes in the values of the underlying portfolio securities. As a result, an
investor's shares may be worth more or less at redemption than at the time of
purchase.
The value of fixed income securities, including those backed by the U.S.
Government, generally goes down when interest rates go up, and vice versa.
Changes in interest rates will generally cause bigger changes in the prices of
longer-term securities than in the prices of shorter-term securities.
Investors in the Intermediate Income Fund should be aware that prices of
fixed income securities also fluctuate based on changes in the actual and
perceived creditworthiness of issuers. The prices of lower rated securities
often fluctuate more than those of higher rated securities. Also, it is
possible that some issuers will be unable to make required payments on fixed
income securities held by the Intermediate Income Fund. Securities that are
backed by the full faith and credit of the U.S. Government are generally
thought to have minimal credit risk.
The Intermediate Income Fund may invest a portion of its assets in non-U.S.
securities. The special risks of investing in non-U.S. securities include
possible adverse political, social and economic developments abroad, the
difficulties of enforcing legal rights under some non-U.S. legal systems and
against some non-U.S. governments and different characteristics of non-U.S.
economies and markets. Non-U.S. securities often will trade in non-U.S.
currencies, which can be volatile and may be subject to governmental controls
or intervention. In addition, securities of non-U.S. issuers may be less
liquid and their prices more volatile than those of comparable U.S. issuers.
Certain investment techniques, such as repurchase agreements, forward
delivery contracts and loans of securities, also may entail special risks.
Investors should read "Risk Considerations" for more information about risk
factors.
<PAGE>
EXPENSE SUMMARY
- ------------------------------------------------------------------------------
The following table summarizes estimated shareholder transaction and annual
operating expenses for Class A and B shares of each Fund. The U.S. Government
Income Fund invests all of its investable assets in Government Income
Portfolio. The Trustees of the U.S. Government Income Fund believe that the
aggregate per share expenses of the Fund and the Portfolio will be less than
or approximately equal to the expenses that the Fund would incur if its assets
were invested directly in the types of securities held by the Portfolio. For
more information on costs and expenses, see "Management" -- page 19 and
"General Information-Expenses" -- page 24.*
<TABLE>
<CAPTION>
----------------------------------------------------
U.S. GOVERNMENT INTERMEDIATE
INCOME FUND INCOME FUND
CLASS A CLASS B CLASS A CLASS B
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price) ............................................... 1.50% None 4.00% None
Maximum Contingent Deferred Sales Charge (as a percentage of
original purchase price or redemption proceeds, whichever is See See
less) ......................................................... Below(1) 2.00% Below(1) 5.00%
ANNUAL FUND OPERATING EXPENSES, AFTER FEE WAIVERS (AS A
PERCENTAGE OF AVERAGE NET ASSETS):
Investment Management Fee(2) .................................... 0.32% 0.32% 0.11% 0.11%
12b-1 Fees (including service fees for Class B shares)(2)(3) .... 0.05% 0.50% 0.05% 0.80%
Other Expenses
Administrative Services Fees(2) ............................... 0.05% 0.05% 0.12% 0.12%
Shareholder Servicing Agent ................................... 0.25% 0.25% 0.25% 0.25%
Other Operating Expenses ...................................... 0.13% 0.13% 0.37% 0.37%
Total Fund Operating Expenses(2) ................................ 0.80% 1.25% 0.90% 1.65%
<FN>
* This table is intended to assist investors in understanding the various costs and expenses that a shareholder of a
Fund will bear, either directly or indirectly. Because Class B shares were not offered during the most recent fiscal
year of the Funds, certain figures in the table are based on estimated amounts for the current fiscal year. The table
shows the fees paid to various service providers after giving effect to expected voluntary partial fee waivers.
(1) Purchases of $1 million or more are not subject to an intial sales charge; however, a contingent deferred sales charge
of 1.00% will be imposed in the event of certain redemptions within 12 months following purchase. See "Classes of
Shares" and "Purchases."
(2) Absent fee waivers and reimbursements, investment management fees, rule 12b-1 fees, administrative services fees and
total fund operating expenses would be .35%, .20%, .25% and 1.18% for Landmark U.S. Government Income Fund -- Class A
and .35%, .65%, .25% and 1.63% for Landmark U.S. Government Income Fund -- Class B; and .35%, .20%, .25% and 1.42% for
Landmark Intermediate Income Fund -- Class A and .35%, .95%, .25% and 2.17% for Landmark Intermediate Income Fund --
Class B. There can be no assurance that the fee waivers and reimbursements reflected in the table will continue at
their present levels. Under each Fund's administrative services plan, the aggregate of the fee paid to the
Administrator, the fees paid to the Shareholder Servicing Agents and the fee paid to the Distributor under the rule
12b-1 distribution plan (not including the rule 12b-1 fee for Class B shares of each Fund and not including the .05%
portion of the fee that may be charged in anticipation of or reimbursement for print or electronic media advertising,
see "Distribution Arrangements" below) may not exceed .65% of each Fund's average daily net assets on an annualized
basis for the then-current fiscal year. Individual components of the aggregate may vary from time to time.
(3) 12b-1 distribution fees are asset-based sales charges. Long-term shareholders in a Fund could pay more in sales
charges than the economic equivalent of the maximum front-end sales charges permitted by the National Association of
Securities Dealers, Inc. The figures for Class B shares include service fees, which are payable at the annual rate of
0.05% of the average daily net assets represented by Class B shares.
</FN>
<CAPTION>
EXAMPLE: A shareholder would pay the following expenses on a $1,000 investment, assuming, except as otherwise noted,
redemption at the end of each period indicated below:
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
U.S. GOVERNMENT INCOME FUND
Class A shares(1) ............................................. $23 $40 $ 59 $112
Class B shares:
Assuming complete redemption at end of period(2)(3) ......... $33 $50 $ 69 $133
Assuming no redemption(3) ................................... $13 $40 $ 69 $133
INTERMEDIATE INCOME FUND
Class A shares(1) ............................................. $49 $68 $ 88 $146
Class B shares:
Assuming complete redemption at end of period(2)(3) ......... $67 $82 $110 $166
Assuming no redemption(3) ................................... $17 $52 $ 90 $166
<FN>
(1) Assumes deduction at the time of purchase of the maximum sales load, which is 1.50% for U.S. Government Income Fund
and 4.00% for Intermediate Income Fund.
(2) Assumes deduction at the time of redemption of the maximum applicable contingent deferred sales charge.
(3) Ten-year figures assume conversion of Class B shares to Class A shares approximately eight years after purchase.
</TABLE>
The Example assumes that all dividends are reinvested and reflects certain
voluntary fee waivers. If waivers were not in place, the amounts in the
example would be $27, $52, $79 and $156 for U.S. Government Income Fund --
Class A; $37, $61, $89 and $177 for U.S. Government Income Fund -- Class B
(assuming complete redemption at the end of each period); $54, $83, $115 and
$203 for Intermediate Income Fund -- Class A; and $72, $98, $136 and $227 for
Intermediate Income Fund -- Class B (assuming complete redemption at the end
of each period). Expenses for Class A shares are based on the fiscal year
ended December 31, 1995. Expenses for Class B shares are estimated, because
Class B shares were not offered during the fiscal year ended December 31,
1995. The assumption of a 5% annual return is required by the Securities and
Exchange Commission for all mutual funds, and is not a prediction of any
Fund's future performance. THE EXAMPLE SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE EXPENSES OF ANY FUND. ACTUAL EXPENSES MAY BE
GREATER OR LESS THAN THOSE SHOWN.
<PAGE>
CONDENSED FINANCIAL INFORMATION
- ------------------------------------------------------------------------------
The following tables provide condensed financial information about the Funds
for the periods indicated. The information below should be read in conjunction
with the financial statements appearing in the Funds' Annual Reports to
Shareholders, which are incorporated by reference in the Statement of
Additional Information. The financial statements and notes, as well as the
table below, of U.S. Government Income Fund have been audited by Price
Waterhouse LLP, independent accountants. The report of Price Waterhouse LLP is
included in the Fund's Annual Report. The financial statements and notes, as
well as the table below, of Intermediate Income Fund have been audited by
Deloitte & Touche LLP, independent certified public accountants. The report of
Deloitte & Touche is included in the Fund's Annual Report. Copies of the
Annual Reports may be obtained without charge from an investor's Shareholder
Servicing Agent (see inside of back cover for address and phone number).
<TABLE>
<CAPTION>
------------------------------------------------------------------------------------------------
U.S. GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
CLASS A SHARES
(No Class B shares were outstanding during these periods.)
FOUR
MONTHS
ENDED
YEAR ENDED DEC. 31, DEC. 31, YEAR ENDED AUGUST 31,
1995 1994 1993(A) 1993 1992 1991 1990 1989 1988 1987++
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning
of period ...................... $ 9.28 $ 9.91 $10.01 $ 9.85 $ 9.42 $ 8.93 $ 9.08 $ 9.03 $ 9.16 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Operations:
Net investment income ........... 0.543 0.466 0.183 0.448 0.591 0.710 0.653 0.770 0.763 0.739
Net realized and unrealized gain
(loss) on investments .......... 0.500 (0.635) (0.138) 0.183 0.413 0.499 (0.148) 0.052 (0.114) (0.871)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from operations ....... 1.043 (0.169) 0.045 0.631 1.004 1.209 0.505 0.822 0.649 (0.132)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Dividends and Distributions From:
Net investment income ......... (0.543) (0.461) (0.145) (0.464) (0.574) (0.719) (0.655) (0.772) (0.779) (0.708)
In excess of net investment
income ......................... -- -- -- (0.007) -- -- -- -- -- --
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from dividends ........ (0.543) (0.461) (0.145) (0.471) (0.574) (0.719) (0.655) (0.772) (0.779) (0.708)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, end of period .. $ 9.78 $ 9.28 $ 9.91 $10.01 $ 9.85 $ 9.42 $ 8.93 $ 9.08 $ 9.03 $ 9.16
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000's omitted) ................ $35,325 $52,933 $79,306 $82,114 $56,159 $25,556 $21,521 $24,834 $31,733 $46,447
Ratio of expenses to average
net assets ..................... 0.80%(B) 0.80%(B) 0.80%+ 0.80% 0.51% 0.97% 1.88% 1.73% 1.29% 0.62%+
Ratio of net investment income
to average net assets .......... 5.38% 4.72% 4.34%+ 4.46% 6.03% 7.71% 7.19% 8.55% 8.31% 8.45%+
Portfolio turnover (C) .......... -- 22% 26% 111% 161% 42% 14% 151% 283% 411%
Total return .................... 11.48% (1.72%) 0.45%** 6.59% 10.94% 14.04% 5.73% 9.66% 7.18% (1.37%)+
Note: If certain agents of the U.S. Government Income Fund for the periods indicated and certain agents of Government Income
Portfolio for the period May 1, 1994 to December 31, 1994 and for the year ended December 31, 1995 had not waived a portion of their
fees, the net investment income per share and the ratios would have been as follows:
Net investment income per share . $0.499 $0.421 $0.164 $0.400 $0.503 $0.659 $0.648 * $0.762 $0.686
RATIOS:
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
Expenses to average net assets .. 1.23%(B) 1.26%(B) 1.27%+ 1.27% 1.41% 1.52% 1.94% * 1.30% 1.23%+
Net investment income to average
net assets ..................... 4.95% 4.26% 3.88%+ 3.98% 5.13% 7.16% 7.13% * 8.30% 7.84%+
<FN>
* No waivers or assumption of expenses during the period.
** Not annualized.
+ Annualized.
++ For the period from the start of business, September 8, 1986 to August 31, 1987.
(A) Effective September 1, 1993, the U.S. Government Income Fund changed its fiscal year end from August 31 to December 31.
(B) Includes U.S. Government Income Fund's share of Government Income Portfolio's allocated expenses for periods subsequent to
May 1, 1994.
(C) Represents the rate of portfolio activity for the period while the U.S. Government Income Fund was making investments directly
in securities. The portfolio turnover rate for the period since the Fund transferred all of its investable assets to the
Portfolio is included elsewhere in the Prospectus.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
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INTERMEDIATE INCOME FUND
FINANCIAL HIGHLIGHTS
CLASS A SHARES
(No Class B shares were outstanding
during these periods.)
FOR THE PERIOD
JUNE 25, 1993
YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, OPERATIONS) TO
1995 1994 DECEMBER 31, 1993
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Asset Value, beginning of period .......................... $ 8.91 $ 9.88 $10.00
------ ------ ------
Income from Operations:
Net investment income ......................................... 0.57 0.521 0.261
Net realized and unrealized gain (loss) on investments ........ 0.86 (0.959) 0.037
------ ------ ------
Total from operations ..................................... 1.43 (0.438) 0.298
------ ------ ------
Less Dividends and Distributions From:
Net investment income ....................................... (0.57) (0.516) (0.261)
In excess of net investment income .......................... -- -- (0.006)
Net realized gain on investments ............................ -- (0.016) (0.151)
------ ------ ------
Total from dividends and distributions .................... (0.57) (0.532) (0.418)
------ ------ ------
Net Asset Value, end of period ................................ $ 9.77 $ 8.91 $ 9.88
====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) ..................... $49,618 $47,582 $61,183
Ratio of expenses to average net assets ....................... 0.90% 0.90% 0.90%*
Ratio of net investment income to average net assets .......... 5.97% 5.52% 4.95%*
Portfolio turnover ............................................ 396% 291% 103%
Total return .................................................. 16.45% (4.48)% 2.99%+
Note: If certain agents of the Intermediate Income Fund had not voluntarily agreed to waive a portion of their fees for the
periods indicated and expenses were not reduced for fees paid indirectly for the fiscal year ended December 31, 1995, the net
investment income per share and the ratios would have been as follows:
Net investment income per share ............................... $ 0.52 $ 0.475 $0.236
RATIOS:
Expenses to average net assets ................................ 1.42% 1.39% 1.38%*
Net investment income to average net assets ................... 5.45% 5.03% 4.47%*
<FN>
* Annualized.
+ Not annualized.
</TABLE>
<PAGE>
INVESTMENT INFORMATION
- ------------------------------------------------------------------------------
INVESTMENT OBJECTIVES: The investment objectives of the U.S. GOVERNMENT
INCOME FUND are to generate current income and preserve the value of its
shareholders' investment.
The investment objectives of the INTERMEDIATE INCOME FUND are to generate
a high level of current income and preserve the value of its shareholders'
investment.
The investment objectives of each Fund may be changed by its Trustees
without approval by that Fund's shareholders, but shareholders will be given
written notice at least 30 days before any change is implemented. Of course,
there can be no assurance that either Fund will achieve its investment
objectives.
INVESTMENT POLICIES: The U.S. GOVERNMENT INCOME FUND seeks its objectives by
investing in debt securities that are backed, as to timely repayment of
principal and interest, by the full faith and credit of the U.S. Government.
The dollar weighted average maturity of securities held by the Fund is
generally three years or less.
The Fund invests in both direct obligations of the U.S. Treasury and
obligations issued or guaranteed by U.S. Government agencies, including
mortgage-backed securities, that are backed by the full faith and credit of
the U.S. Government as to the timely payment of principal and interest. Up to
80% of the Fund's assets may be invested in direct pass-through certificates
guaranteed by the Government National Mortgage Association ("GNMA"). See "U.S.
Government Securities" and "Asset-Backed Securities."
The Fund is designed to provide a higher level of current income than is
generally available from money market funds. The Fund invests in securities
with prices that tend to vary more than the prices of money market instruments
but less than the prices of intermediate and long-term bonds.
The INTERMEDIATE INCOME FUND seeks its objectives by investing in a broad
range of fixed income securities, including preferred stock and debt issued by
U.S. and non-U.S. companies and debt of the U.S. Government and governments of
other countries. As a non-fundamental policy, under normal circumstances, at
least 65% of the Fund's total assets are invested in fixed income securities,
but the Fund expects that substantially all of its assets generally will be
invested in fixed income securities.
The Fund will invest in debt obligations of U.S. companies only if they
carry at least a Baa rating from Moody's Investors Service, Inc. ("Moody's")
or a BBB rating from Standard & Poor's Ratings Group ("S&P"), or if the
Adviser determines that they are of comparable quality. Securities rated Baa
or BBB have speculative characteristics, and changes in economic conditions or
other circumstances are more likely to lead to a weakened capacity to make
principal and interest payments on bonds rated Baa or BBB than is the case for
higher grade securities. Investors should review Appendix A to the Statement
of Additional Information for a description of these ratings.
The Fund may invest up to 50% of its assets in non-U.S. securities,
including securities of issuers in developing countries. See "Risk
Considerations -- Non-U.S. Securities."
The Fund is designed to provide a higher level of current income than is
generally available from shorter-term securities, but investors should be
willing to accept the greater price fluctuations associated with higher levels
of income. Under normal market conditions, the Fund's dollar weighted average
portfolio maturity will be from three to ten years.
U.S. GOVERNMENT SECURITIES: Each Fund may invest in U.S. Government
securities, including (1) U.S. Treasury obligations, such as Treasury bills,
notes and bonds, which are backed by the full faith and credit of the United
States; and (2) obligations issued or guaranteed by U.S. Government agencies
or instrumentalities that are backed by the full faith and credit of the U.S.
Government. The Intermediate Income Fund may also invest in other obligations
issued by agencies or instrumentalities of the U.S. Government, some of which
are supported by the right of the issuer to borrow from the U.S. Treasury and
some of which are backed only by the credit of the issuer itself.
ASSET-BACKED SECURITIES: Each Fund may purchase mortgage-backed securities
issued or guaranteed as to payment of principal and interest by the U.S.
Government or one of its agencies and backed by the full faith and credit of
the U.S. Government, including direct pass-through certificates of GNMA. The
Intermediate Income Fund may also invest in mortgage-backed securities for
which principal and interest payments are backed by the credit of particular
agencies of the U.S. Government. Mortgage-backed securities are generally
backed or collateralized by a pool of mortgages. These securities are
sometimes called collateralized mortgage obligations or CMOs.
Even if the U.S. Government or one of its agencies guarantees principal
and interest payments of a mortgage-backed security, the market price of a
mortgage-backed security is not insured and may be subject to market
volatility. When interest rates decline, mortgage-backed securities experience
higher rates of prepayment, because the underlying mortgages are refinanced to
take advantage of the lower rates. Thus the prices of mortgage-backed
securities may not increase as much as prices of other debt obligations when
interest rates decline, and mortgage-backed securities may not be an effective
means of locking in a particular interest rate. In addition, any premium paid
for a mortgage-backed security may be lost when it is prepaid.
The Intermediate Income Fund may also invest in corporate asset-backed
securities and collateralized mortgage obligations that are rated no lower
than Baa by Moody's or BBB by S&P, or are judged by the Adviser to be of
comparable quality. These securities are backed by pools of assets, including,
among other things, mortgage loans, automobile loans or credit card
receivables. These securities are not backed by the U.S. Government and have
special risks, including inherent difficulties in enforcing rights against the
underlying assets.
Determinations of average maturity of asset-backed securities take into
account expectations of prepayments, which may change in different interest
rate environments. A Fund will not consider it a violation of policy if its
average maturity deviates from its normal range as a result of actual or
expected changes in prepayments.
ZERO-COUPON OBLIGATIONS: The Intermediate Income Fund may invest up to 15% of
its assets in zero-coupon obligations, such as zero-coupon bonds issued by
companies and securities representing future principal and interest
installments on debt obligations of the U.S. Government and governments of
other countries. Zero-coupon obligations pay no current interest, and as a
result their prices tend to be more volatile than those of securities that
offer regular payments of interest. In order to pay cash distributions
representing income on zero-coupon obligations, the Intermediate Income Fund
may have to sell other securities on unfavorable terms, and these sales may
generate taxable gain for investors.
CERTAIN ADDITIONAL INVESTMENT POLICIES:
TEMPORARY INVESTMENTS. During periods of unusual economic or market
conditions or for temporary defensive purposes or liquidity, each Fund may
invest without limit in cash and in U.S. dollar-denominated high quality money
market and short-term instruments. These investments may result in a lower
yield than would be available from investments with a lower quality or longer
term.
OTHER PERMITTED INVESTMENTS. For more information regarding the Funds'
permitted investments and investment practices, see the Appendix -- Permitted
Investments and Investment Practices on p. 25. The Funds will not necessarily
invest or engage in each of the investments and investment practices in the
Appendix but reserve the right to do so.
INVESTMENT RESTRICTIONS. The Statement of Additional Information contains
a list of specific investment restrictions which govern the investment
policies of the Funds, including a limitation that each Fund may borrow money
from banks in an amount not to exceed 33 1/3% of the Fund's net assets for
extraordinary or emergency purposes (e.g., to meet redemption requests).
Except as otherwise indicated, the Funds' investment objectives and policies
may be changed without shareholder approval. If a percentage or rating
restriction (other than a restriction as to borrowing) is adhered to at the
time an investment is made, a later change in percentage or rating resulting
from changes in a Fund's securities will not be a violation of policy.
PORTFOLIO TURNOVER. Securities of each Fund will be sold whenever the
Adviser believes it is appropriate to do so in light of the Fund's investment
objectives, without regard to the length of time a particular security may
have been held. For the period from January 1, 1994 to April 30, 1994, the
turnover rate for the U.S. Government Income Fund was 22%. For the period from
May 1, 1994 to December 31, 1994 and for the fiscal year ended December 31,
1995, the turnover rates for Government Income Portfolio were 40% and 294%,
respectively. For the fiscal years ended December 31, 1994 and 1995 the
turnover rates for the Intermediate Income Fund were 291% and 396%,
respectively. The amount of transaction costs and realization of taxable
capital gains will tend to increase as the level of portfolio activity
increases.
BROKERAGE TRANSACTIONS. The primary consideration in placing each Fund's
security transactions with broker-dealers for execution is to obtain and
maintain the availability of execution at the most favorable prices and in the
most effective manner possible.
RISK CONSIDERATIONS
- ------------------------------------------------------------------------------
The risks of investing in each Fund vary depending upon the nature of the
securities held, and the investment practices employed, on its behalf. Certain
of these risks are described below.
CHANGES IN NET ASSET VALUE. Each Fund's net asset value will fluctuate
based on changes in the values of the underlying portfolio securities. This
means that an investor's shares may be worth more or less at redemption than
at the time of purchase.
INTEREST RATE RISK. The value of fixed income securities, including those
backed by the U.S. Government, generally goes down when interest rates go up,
and vice versa. Furthermore, the value of fixed income securities may vary
based on anticipated or potential changes in interest rates. Changes in
interest rates will generally cause bigger changes in the prices of longer-
term securities than in the prices of shorter-term securities.
CREDIT RISK. Investors in the Intermediate Income Fund should be aware
that prices of fixed income securities fluctuate based on changes in the
actual and perceived creditworthiness of issuers. The prices of lower rated
securities often fluctuate more than those of higher rated securities. It is
possible that some issuers will be unable to make required payments on fixed
income securities held by the Intermediate Income Fund. Securities that are
backed by the full faith and credit of the U.S. Government are generally
thought to have minimal credit risk.
NON-U.S. SECURITIES. Investors in the Intermediate Income Fund also should
be aware that investments in non-U.S. securities involve risks relating to
political, social and economic developments abroad. These risks may include
expropriation, confiscatory taxation, withholding taxes on dividends and
interest, limitations on the use or transfer of portfolio assets and political
or social instability. Enforcing legal rights may be difficult, costly and
slow in non-U.S. countries, and there may be special problems enforcing claims
against non-U.S. governments. In addition, non-U.S. companies may not be
subject to accounting standards or governmental supervision comparable to U.S.
companies, and there may be less public information about their operations.
Non-U.S. markets may be less liquid and more volatile than U.S. markets, and
may offer less protection to investors such as the Fund. These risks are
increased for investments in issuers in developing countries.
Because non-U.S. securities often are denominated in currencies other than
the U.S. dollar, changes in currency exchange rates will affect the investment
performance of the Intermediate Income Fund. In addition, some non-U.S.
currency values may be volatile and there is the possibility of governmental
controls on currency exchanges or governmental intervention in currency
markets.
The costs attributable to non-U.S. investing, such as the costs of
maintaining custody of securities in non-U.S. countries, frequently are higher
than those of U.S. investing. As a result, the operating expense ratios of the
Intermediate Income Fund may be higher than those of investment companies
investing exclusively in U.S. securities.
INVESTMENT PRACTICES. Certain of the investment practices employed for the
Funds may entail certain risks. These risks are in addition to risks described
above and are described in the Appendix. See the Appendix -- Permitted
Investments and Investment Practices on p. 25.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE: Unlike other mutual funds
which directly acquire and manage their own portfolio securities, the U.S.
Government Income Fund seeks its investment objective by investing all of its
investable assets in the Government Income Portfolio, a registered investment
company. The Portfolio has the same investment objective and policies as the
U.S. Government Income Fund. In addition to selling a beneficial interest to
the U.S. Government Income Fund, the Portfolio may sell beneficial interests
to other mutual funds, collective investment vehicles, or institutional
investors. Such investors will invest in the Portfolio on the same terms and
conditions and will pay a proportionate share of the Portfolio's expenses.
However, the other investors investing in the Portfolio are not required to
sell their shares at the same public offering price as the U.S. Government
Income Fund due to variations in sales commissions and other operating
expenses. Therefore, investors in the U.S. Government Income Fund should be
aware that these differences may result in differences in returns experienced
by investors in the different funds that invest in the Portfolio. Such
differences in returns are also present in other mutual fund structures.
Information concerning other holders of interests in the Portfolio is
available from the Funds' distributor.
The investment objective of each Fund may be changed by its Trustees
without the approval of the Fund's shareholders, but shareholders will be
given written notice at least 30 days before any change is implemented. If
there is a change in the U.S. Government Income Fund's investment objective,
shareholders should consider whether the Fund remains an appropriate
investment in light of their then current financial positions and needs. The
investment objective of the Portfolio may also be changed without the approval
of the investors in the Portfolio, but not without written notice thereof to
the investors in the Portfolio (and, if the U.S. Government Income Fund is
then invested in the Portfolio, notice to Fund shareholders) at least 30 days
prior to implementing the change. There can, of course, be no assurance that
the investment objective of either the U.S. Government Income Fund or the
Portfolio will be achieved. See "Investment Objective, Policies and
Restrictions -- Investment Restrictions" in the Statement of Additional
Information for a description of the fundamental policies of the U.S.
Government Income Fund and the Portfolio that cannot be changed without
approval by the holders of a "majority of the outstanding voting securities"
(as defined in the Investment Company Act of 1940) of the Fund or Portfolio.
Except as stated otherwise, all investment guidelines, policies and
restrictions described herein and in the Statement of Additional Information
are non-fundamental.
Certain changes in the Portfolio's investment objective, policies or
restrictions or a failure by the U.S. Government Income Fund's shareholders to
approve a change in the Portfolio's investment objective or restrictions may
preclude the Fund from investing its investable assets in the Portfolio or
require the Fund to withdraw its interest in the Portfolio. Any such
withdrawal could result in an "in kind" distribution of securities (as
opposed to a cash distribution) from the Portfolio which may or may not be
readily marketable. If securities are distributed, the Fund could incur
brokerage, tax or other charges in converting the securities to cash. The in
kind distribution may result in the Fund having a less diversified portfolio
of investments or adversely affect the liquidity of the Fund. Notwithstanding
the above, there are other means for meeting shareholder redemption requests,
such as borrowing. The absence of substantial experience with this investment
structure could have an adverse effect on an investment in the U.S. Government
Income Fund.
Smaller funds investing in the Portfolio may be materially affected by the
actions of larger funds investing in the Portfolio. For example, if a large
fund withdraws from the Portfolio, the remaining funds may subsequently
experience higher pro rata operating expenses, thereby producing lower
returns. Additionally, because the Portfolio would become smaller, it may
become less diversified, resulting in increased portfolio risk; however, these
possibilities exist for traditionally structured funds which have large or
institutional investors who may withdraw from a fund. Also, funds with a
greater pro rata ownership in the Portfolio could have effective voting
control of the operations of the Portfolio. If the U.S. Government Income Fund
is requested to vote on matters pertaining to the Portfolio (other than a vote
by the Fund to continue the operation of the Portfolio upon the withdrawal of
another investor in the Portfolio), the Fund will hold a meeting of its
shareholders and will cast all of its votes proportionately as instructed by
its shareholders who vote at the meeting. Shareholders of the Fund who do not
vote will have no effect on the outcome of such matters.
The U.S. Government Income Fund may withdraw its investment from the
Portfolio at any time, if the Fund's Board of Trustees determines that it is
in the best interest of the Fund to do so. Upon any such withdrawal, the Board
of Trustees would consider what action might be taken, including the
investment of all of the investable assets of the Fund in another pooled
investment entity having the same investment objective as the Fund or the
retaining of an investment adviser to manage the Fund's assets in accordance
with the investment policies described above. In the event the Fund's Trustees
were unable to find a substitute investment company in which to invest the
Fund's assets or were unable to secure directly the services of an investment
adviser, the Trustees would determine the best course of action.
For a description of the management of the Portfolio, see "Management" --
page 19. For descriptions of the expenses of the Portfolio, see "Management"
and "General Information -- Expenses" -- page 24. For a description of the
investment objective, policies and restrictions of the Portfolio, see
"Investment Information" -- page 8.
The Intermediate Income Fund may at some time invest all or substantially
all of its investable assets in another mutual fund that has the same
investment objectives and policies as that Fund. In that case, some or all of
the considerations described above might also apply.
VALUATION OF SHARES
- ------------------------------------------------------------------------------
Net asset value per share of each class of shares of each Fund is
determined each day the New York Stock Exchange is open for trading (a
"Business Day"). This determination is made once each day as of the close of
regular trading on the Exchange (normally 4:00 p.m. Eastern time) by adding
the market value of all securities and other assets attributable to a class of
a Fund (including, in the case of the U.S. Government Income Fund, its
interest in the Portfolio), then subtracting the liabilities charged to the
class, and then dividing the result by the number of outstanding shares of the
class. Per share net asset value of each class of a Fund's shares may differ
because Class B shares bear higher expenses than Class A shares. The net asset
value per share is effective for orders received and accepted by the
Distributor prior to its calculation.
Portfolio securities and other assets are valued primarily on the basis of
market quotations, or if quotations are not available, by a method believed to
accurately reflect fair value. Non-U.S. securities are valued based on
quotations from the primary market in which they are traded and are translated
from the local currency into U.S. dollars using current exchange rates. In
light of the non-U.S. nature of some investments of the Intermediate Income
Fund, trading may take place in securities held by that Fund on days which are
not Business Days and on which it will not be possible to purchase or redeem
shares of that Fund.
CLASSES OF SHARES
- ------------------------------------------------------------------------------
DIFFERENCES AMONG THE CLASSES: Class A and B shares of a Fund represent
interests in the same mutual fund. The primary distinctions between the
classes of each Fund's shares are their initial and contingent deferred sales
charge structures and their ongoing expenses, including service fees and
asset-based sales charges in the form of distribution fees. These differences
are summarized in the following table. Each class has distinct advantages and
disadvantages for different investors, and investors may choose the class that
best suits their circumstances and objectives.
<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A PERCENTAGE OF
SALES CHARGE AVERAGE DAILY NET ASSETS) OTHER INFORMATION
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge of 1.50% of Distribution fee of 0.05% Initial sales charge waived or reduced for
the public offering price for U.S. certain purchases; a contingent deferred
Government Income Fund and 4.00% of the sales charge may apply in certain
public offering price for Intermediate instances where the initial sales charge
Income Fund is waived
CLASS B Maximum contingent deferred sales charge Distribution fee of 0.45% for Shares convert to Class A shares
of 2.00% for U.S. Government Income U.S. Government Income Fund and approximately eight years after issuance
Fund, and 5.00% for Intermediate Income 0.75% for Intermediate Income
Fund, of the lesser of redemption Fund. Service fee of 0.05%
proceeds or original purchase price;
declines to zero after four years for
U.S. Government Income Fund and six
years for Intermediate Income Fund
</TABLE>
FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES: In deciding which class of
shares to purchase, investors should consider the cost of sales charges
together with the cost of the ongoing annual expenses described below, as well
as any other relevant facts and circumstances.
SALES CHARGES. Class A shares are sold at net asset value plus an initial
sales charge of up to 1.50% of the public offering price for the U.S.
Government Income Fund and up to 4.00% of the public offering price for the
Intermediate Income Fund (except that for purchases of $1 million or more, no
initial sales charge is imposed and a contingent deferred sales charge may be
imposed instead). Because of this initial sales charge, not all of a Class A
shareholder's purchase price is invested in a Fund. Class B shares are sold
with no initial sales charge, so the entire amount of a Class B shareholder's
purchase price is immediately invested in a Fund. A contingent deferred sales
charge (up to 2.00% for the U.S. Government Income Fund and up to 5.00% for
the Intermediate Income Fund of the lesser of the shares' net asset value at
redemption or their original purchase price) applies to redemptions made
within four years of purchase for the U.S. Government Income Fund and six
years of purchase for the Intermediate Income Fund.
WAIVERS AND REDUCTIONS OF SALES CHARGES. Class A share purchases totalling
at least $50,000 for the U.S. Government Income Fund and at least $100,000 for
the Intermediate Income Fund and Class A share purchases made under a Fund's
reduced sales charge plan may be made at a reduced sales charge. In
considering the combined cost of sales charges and ongoing annual expenses,
investors should take into account any reduced sales charges on Class A shares
for which they may be eligible.
The entire initial sales charge on Class A shares is waived for certain
eligible purchasers. However, a 1.00% contingent deferred sales charge is
imposed on certain redemptions of Class A shares on which no initial sales
charge was assessed. Because Class A shares bear lower ongoing annual expenses
than Class B shares, in most cases investors eligible for reduced initial
sales charges should purchase Class A shares.
The contingent deferred sales charge may be waived upon redemption of
certain Class B shares. See "Purchases."
ONGOING ANNUAL EXPENSES. Class A shares pay an annual 12b-1 distribution
fee of 0.05% of average daily net assets. Class B shares pay an annual 12b-1
distribution fee of 0.45% of average daily net assets for the U.S. Government
Income Fund and 0.75% of average daily net assets for the Intermediate Income
Fund. In addition, Class B shares are subject to a service fee at the annual
rate of 0.05% of the average daily net assets represented by Class B shares.
Annual 12b-1 distribution fees are a form of asset-based sales charge.
CONVERSION OF CLASS B SHARES: A shareholder's Class B shares will
automatically convert to Class A shares in the same Fund approximately eight
years after the date of issuance, together with a pro rata portion of all
Class B shares representing dividends and other distributions paid in
additional Class B shares. The conversion will be effected at the relative net
asset values per share of the two classes on the first Business Day of the
month in which the eighth anniversary of the issuance of the Class B shares
occurs. If a shareholder effects one or more exchanges among Class B shares of
the Landmark Funds during the eight-year period, the holding periods for the
shares so exchanged will be counted toward the eight-year period. Because the
per share net asset value of the Class A shares may be higher than that of the
Class B shares at the time of conversion, a shareholder may receive fewer
Class A shares than the number of Class B shares converted, although the
dollar value will be the same. See "Valuation of Shares." The conversion of
Class B shares to Class A shares is subject to the continuing availability of
a ruling from the Internal Revenue Service or an opinion of counsel that the
conversion will not constitute a taxable event for federal tax purposes. There
can be no assurance that such a ruling or opinion will be available, and the
conversion of Class B shares to Class A shares will not occur if such ruling
or opinion is not available. In that event, Class B shares would continue to
be subject to higher expenses than Class A shares for an indefinite period.
OTHER INFORMATION: See "Purchases," "Redemptions" and "Management --
Distribution Arrangements" for a more complete description of the initial and
contingent deferred sales charges and distribution fees for each class of
shares of each Fund. By purchasing shares an investor agrees to the imposition
of initial and deferred sales charges as described in this Prospectus.
PURCHASES
- ------------------------------------------------------------------------------
Each Fund offers two classes of shares, Class A and B shares, with
different expense levels and sales charges. See "Classes of Shares" for more
information. WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER
THE ORDER IS FOR CLASS A OR CLASS B SHARES. ALL SHARE PURCHASE ORDERS THAT
FAIL TO SPECIFY A CLASS AUTOMATICALLY WILL BE INVESTED IN CLASS A SHARES.
Shares of the Funds are offered continuously and may be purchased on any
Business Day at the public offering price either through a securities broker
which has a sales agreement with the Distributor or through a bank or other
financial institution which has an agency agreement with the Distributor. Such
a bank or financial institution will receive transaction fees that are equal
to the commissions paid to securities brokers. Shares of the Funds are being
offered exclusively to customers of a Shareholder Servicing Agent (i.e., a
financial institution, such as a federal or state- chartered bank, trust
company, savings and loan association or savings bank, or a securities broker,
that has entered into a shareholder servicing agreement concerning a Fund). A
securities broker may receive both commissions and shareholder servicing fees.
An investor's Shareholder Servicing Agent may not make available both classes
of shares. The public offering price is the net asset value next determined
after an order is transmitted to and accepted by the Distributor, plus any
applicable sales charge for Class A shares. Each Shareholder Servicing Agent
is required to promptly forward orders for Fund shares to the Distributor.
Each Fund and the Distributor reserve the right to reject any purchase order
and to suspend the offering of Fund shares for a period of time.
Each shareholder's account is established and maintained by his or her
Shareholder Servicing Agent, which will be the shareholder of record of the
Fund. Each Shareholder Servicing Agent may establish its own terms, conditions
and charges with respect to services it offers to its customers. Charges for
these services may include fixed annual fees and account maintenance fees. The
effect of any such fees will be to reduce the net return on the investment of
customers of that Shareholder Servicing Agent.
Shareholder Servicing Agents will not transmit purchase orders to the
Distributor until they have received the purchase price in federal or other
immediately available funds. If Fund shares are purchased by check, there will
be a delay (usually not longer than two business days) in transmitting the
purchase order until the check is converted into federal funds.
PURCHASING CLASS A SHARES: INITIAL SALES CHARGE -- CLASS A SHARES. Each Fund's
public offering price of Class A shares is the next determined net asset
value, plus any applicable sales charge, which will vary with the size of the
purchase as shown in the following table:
U.S. GOVERNMENT INCOME FUND
SALES CHARGE AS
PERCENTAGE OF THE
-----------------
PUBLIC NET BROKER COMMISSION AS
AMOUNT OF PURCHASE AT THE OFFERING AMOUNT PERCENTAGE OF THE
PUBLIC OFFERING PRICE PRICE INVESTED PUBLIC OFFERING PRICE
- ------------------------------------------------------------------------------
Less than $50,000 .............. 1.50% 1.52% 1.34%
$50,000 to less than $100,000 .. 1.25% 1.27% 1.11%
$100,000 to less than $250,000 . 1.00% 1.01% 0.89%
$250,000 to less than $1,000,000 0.50% 0.50% 0.45%
$1,000,000 or more ............. none* none* none
- ------------
*A contingent deferred sales charge may apply in certain instances.
INTERMEDIATE INCOME FUND
SALES CHARGE AS
PERCENTAGE OF THE
-----------------
PUBLIC NET BROKER COMMISSION AS
AMOUNT OF PURCHASE AT THE OFFERING AMOUNT PERCENTAGE OF THE
PUBLIC OFFERING PRICE PRICE INVESTED PUBLIC OFFERING PRICE
- ------------------------------------------------------------------------------
Less than $100,000 ............. 4.00% 4.17% 3.56%
$100,000 to less than $250,000 . 3.25% 3.36% 2.89%
$250,000 to less than $500,000 . 2.50% 2.56% 2.23%
$500,000 to less than $1,000,000 2.00% 2.04% 1.78%
$1,000,000 or more ............. none* none* none
- ------------
*A contingent deferred sales charge may apply in certain instances.
SALES CHARGE ELIMINATION -- CLASS A SHARES. Class A shares of the Funds
are available without a sales charge through exchanges for Class A shares of
most other Landmark Funds. See "Exchanges." Also, the sales charge does not
apply to Class A shares acquired through the reinvestment of dividends and
capital gains distributions. Class A shares may be purchased without a sales
charge by:
(i) tax exempt organizations under Section 501(c)(3-13) of the Internal
Revenue Code (the "Code"),
(ii) trust accounts for which Citibank or any subsidiary or affiliate of
Citibank (a "Citibank Affiliate") acts as trustee and exercises
discretionary investment management authority,
(iii) accounts purchasing shares through the Private Client Division of Citicorp
Investment Services, or through other programs accessed through the
Private Client Division of Citicorp Investment Services, or the private
banking division of either Citibank, N.A., Citibank FSB or Citicorp Trust,
N.A.,
(iv) accounts for which Citibank or any Citibank Affiliate performs investment
advisory services,
(v) accounts for which Citibank or any Citibank Affiliate charges fees for
acting as custodian,
(vi) trustees of any investment company for which Citibank or any Citibank
Affiliate serves as the investment adviser or as a shareholder servicing
agent,
(vii) any affiliated person of a Fund, the Adviser, the Distributor, the
Administrator or any Shareholder Servicing Agent,
(viii)shareholder accounts established through a reorganization or similar form
of business combination approved by a Fund's Board of Trustees or by the
Board of Trustees of any other Landmark Fund the terms of which entitle
those shareholders to purchase shares of a Fund or any other Landmark Fund
at net asset value without a sales charge,
(ix) employee benefit plans qualified under Section 401 of the Code, including
salary reduction plans qualified under Section 401(k) of the Code, subject
to such minimum requirements as may be established by the Distributor with
respect to the number of employees or amount of purchase; currently, these
criteria require that (a) the employer establishing the qualified plan
have at least 50 eligible employees or (b) the amount invested by such
qualified plan in a Fund or in any combination of Landmark Funds totals a
minimum of $500,000,
(x) investors purchasing $1 million or more of Class A shares. However, a
contingent deferred sales charge will be imposed on such investments in
the event of certain share redemptions within 12 months following the
share purchase, at the rate of 1.00% of the lesser of the value of the
shares redeemed (exclusive of reinvested dividends and capital gains
distributions) or the total cost of such shares. In determining whether a
contingent deferred sales charge on Class A shares is payable, and if so,
the amount of the charge, it is assumed that shares not subject to the
contingent deferred sales charge are the first redeemed followed by other
shares held for the longest period of time. All investments made during a
calendar month will age one month on the last day of the month and each
subsequent month. Any applicable contingent deferred sales charge will be
deferred upon an exchange of Class A shares for Class A shares of another
Landmark Fund and deducted from the redemption proceeds when such
exchanged shares are subsequently redeemed (assuming the contingent
deferred sales charge is then payable). The holding period of Class A
shares so acquired through an exchange will be aggregated with the period
during which the original Class A shares were held. The contingent
deferred sales charge on Class A shares will be waived under the same
circumstances as the contingent deferred sales charge on Class B shares
will be waived. See "Sales Charge Waivers -- Class B Shares." Any
applicable contingent deferred sales charges will be paid to the
Distributor,
(xi) subject to appropriate documentation, investors where the amount invested
represents redemption proceeds from a mutual fund (other than a Landmark
Fund) if: (i) the redeemed shares were subject to an initial sales charge
or a deferred sales charge (whether or not actually imposed); and (ii)
such redemption has occurred no more than 90 days prior to the purchase of
Class A shares of the Fund, or
(xii) an investor who has a business relationship with an investment consultant
or other registered representative who joined a broker- dealer which has a
sales agreement with the Distributor from another investment firm within
six months prior to the date of purchase by such investor, if (a) the
investor redeems shares of another mutual fund sold through the investment
firm that previously employed that investment consultant or other
registered representative, and either paid an initial sales charge or was
at some time subject to, but did not actually pay, a deferred sales charge
or redemption fee with respect to the redemption proceeds, (b) the
redemption is made within 60 days prior to the investment in a Fund, and
(c) the net asset value of the shares of the Fund sold to that investor
without a sales charge does not exceed the proceeds of such redemption.
REDUCED SALES CHARGE PLANS -- CLASS A SHARES. An individual who is a
member of a qualified group may purchase Class A shares of a Fund at the
reduced sales charge applicable to the group as a whole. The sales charge is
based upon the aggregate dollar value of Class A shares previously purchased
and still owned by the group, plus the amount of the purchase. A "qualified
group" is one which (i) has been in existence for more than six months, (ii)
has a purpose other than acquiring Fund shares at a discount, and (iii)
satisfies uniform criteria which enable the Distributor to realize economies
of scale in its costs of distributing shares. A qualified group must have more
than ten members, must be available to arrange for group meetings between
representatives of the Fund and the members, must agree to include sales and
other materials related to the Fund in its publications and mailings to
members at reduced or no cost to the Distributor, and must seek to arrange for
payroll deduction or other bulk transmission of investments to the Fund.
Reduced initial sales charges on Class A shares also may be achieved
through a RIGHT OF ACCUMULATION or a LETTER OF INTENT. Under a RIGHT OF
ACCUMULATION, eligible investors are permitted to purchase Class A shares of a
Fund at the public offering price applicable to the total of (a) the dollar
amount then being purchased, plus (b) an amount equal to the then-current net
asset value or cost (whichever is higher) of the purchaser's combined holdings
in the Landmark Funds. The Right of Accumulation may be amended or terminated
at any time.
If an investor anticipates purchasing at least the minimum amount of Class
A shares of a Fund required for a volume discount as described above, either
alone or in combination with Class B shares of the Fund or any of the classes
of other Landmark Funds within a 13-month period, the investor may obtain such
shares at the same reduced sales charge as though the total quantity were
invested in one lump sum, subject to the appointment of an attorney for
redemptions of shares if the intended purchases are not completed, by
completing a LETTER OF INTENT. Investors should consult "Determination of Net
Asset Value; Valuation of Securities; Additional Purchase and Redemption
Information" in the Statement of Additional Information and their Shareholder
Servicing Agents for more information about Rights of Accumulation and Letters
of Intent.
PURCHASING CLASS B SHARES: CONTINGENT DEFERRED SALES CHARGE -- CLASS B SHARES.
Each Fund's public offering price of Class B shares is the next determined net
asset value, and no initial sales charge is imposed. A contingent deferred
sales charge, however, is imposed upon certain redemptions of Class B shares.
Class B shares of a Fund that are redeemed will not be subject to a
contingent deferred sales charge to the extent that the value of such shares
represents (i) capital appreciation of Fund assets, (ii) reinvestment of
dividends or capital gains distributions or (iii) shares redeemed more than
four years after their purchase for the U.S. Government Income Fund or more
than six years after their purchase for the Intermediate Income Fund.
Otherwise, redemptions of Class B shares will be subject to a contingent
deferred sales charge. The amount of any applicable contingent deferred sales
charge will be calculated by multiplying the lesser of net asset value of such
shares at the time of redemption or their original purchase price by the
applicable percentage shown in the following table.
U.S. GOVERNMENT INCOME FUND
CONTINGENT
DEFERRED
REDEMPTION DURING SALES CHARGE
- ----------------------------------------------------
1st Year Since Purchase .............. 2.00%
2nd Year Since Purchase .............. 2.00%
3rd Year Since Purchase .............. 1.00%
4th Year Since Purchase .............. 1.00%
5th Year (or Later) Since Purchase ... None
INTERMEDIATE INCOME FUND
CONTINGENT
DEFERRED
REDEMPTION DURING SALES CHARGE
- ----------------------------------------------------
1st Year Since Purchase .............. 5.00%
2nd Year Since Purchase .............. 4.00%
3rd Year Since Purchase .............. 3.00%
4th Year Since Purchase .............. 3.00%
5th Year Since Purchase .............. 2.00%
6th Year Since Purchase .............. 1.00%
7th Year (or Later) Since Purchase ... None
In determining the applicability and rate of any contingent deferred sales
charge, it will be assumed that a redemption is made first of Class B shares
representing capital appreciation, next of shares representing the
reinvestment of dividends and capital gains distributions and finally of other
shares held by the shareholder for the longest period of time. The holding
period of Class B shares of a Fund acquired through an exchange with another
Landmark Fund will be calculated from the date that the Class B shares were
initially acquired in one of the other Landmark Funds, and Class B shares
being redeemed will be considered to represent, as applicable, capital
appreciation or dividend and capital gains distribution reinvestments in such
other funds. This will result in any contingent deferred sales charge being
imposed at the lowest possible rate. For federal income tax purposes, the
amount of the contingent deferred sales charge will reduce the gain or
increase the loss, as the case may be, on the amount realized on redemption.
Any contingent deferred sales charges will be paid to the Distributor.
SALES CHARGE WAIVERS -- CLASS B SHARES. The contingent deferred sales
charge will be waived for exchanges. In addition, the contingent deferred
sales charge will be waived for a total or partial redemption made within one
year of the death of the shareholder. This waiver is available where the
deceased shareholder is either the sole shareholder or owns the shares with
his or her spouse as a joint tenant with right of survivorship, and applies
only to redemption of shares held at the time of death. The contingent
deferred sales charge also will be waived in connection with:
(i) a lump sum or other distribution in the case of an Individual
Retirement Account ("IRA"), a self-employed individual retirement plan
(so-called "Keogh Plan") or a custodian account under Section 403(b) of
the Code, in each case following attainment of age 59 1/2,
(ii) a total or partial redemption resulting from any distribution following
retirement in the case of a tax-qualified retirement plan, and
(iii) a redemption resulting from a tax-free return of an excess contribution
to an IRA.
Contingent deferred sales charge waivers will be granted subject to
confirmation by a shareholder's Shareholder Servicing Agent of the
shareholder's status or holdings, as the case may be.
Securities dealers and other financial institutions may receive different
compensation with respect to sales of Class A and Class B shares. The
Distributor may from time to time make payments for distribution and/or
shareholder servicing activities and provide additional promotional incentives
to brokers who sell shares of a Fund. In some instances, incentives may be
offered to certain brokers who have sold or may sell significant numbers of
shares of a Fund. The Distributor may make these payments out of its past
profits or any other sources available to it.
EXCHANGES
- ------------------------------------------------------------------------------
Shares of each Fund may be exchanged for shares of the same class of other
Landmark Funds that are made available by a shareholder's Shareholder
Servicing Agent, or may be acquired through an exchange of shares of the same
class of those funds. No initial sales charge is imposed on shares being
acquired through an exchange unless Class A shares are being acquired and the
sales charge of the fund being exchanged into is greater than the current
sales charge of the Fund (in which case an initial sales charge will be
imposed at a rate equal to the difference). No contingent deferred sales
charge is imposed on shares being disposed of through an exchange.
Shareholders must place exchange orders through their Shareholder
Servicing Agents, and may do so by telephone if their account applications so
permit. For more information on telephone transactions see "Redemptions." All
exchanges will be effected based on the relative net asset values per share
next determined after the exchange order is received by the Distributor. See
"Valuation of Shares." Shares of the Funds may be exchanged only after payment
in federal funds for the shares has been made.
This exchange privilege may be modified or terminated at any time, upon at
least 60 days' notice when such notice is required by SEC rules, and is
available only in those jurisdictions where such exchanges legally may be
made. See the Statement of Additional Information for further details. Before
making any exchange, shareholders should contact their Shareholder Servicing
Agents to obtain more information and prospectuses of the Landmark Funds to be
acquired through the exchange.
An exchange is treated as a sale of the shares exchanged and could result
in taxable gain or loss to the shareholder making the exchange.
REDEMPTIONS
- ------------------------------------------------------------------------------
Fund shares may be redeemed at their net asset value next determined after
a redemption request in proper form is received by a shareholder's Shareholder
Servicing Agent (subject to any applicable contingent deferred sales charge).
Shareholders may redeem shares of a Fund only by authorizing their Shareholder
Servicing Agents to redeem such shares on their behalf through the
Distributor. If a redeeming shareholder owns shares of more than one class,
Class A shares will be redeemed first unless the shareholder specifically
requests otherwise.
A redemption is treated as a sale of the shares redeemed and could result
in a taxable gain or loss to the shareholder making the redemption.
REDEMPTIONS BY MAIL. Shareholders may redeem Fund shares by sending
written instructions in proper form (as determined by a shareholder's
Shareholder Servicing Agent) to their Shareholder Servicing Agents.
Shareholders are responsible for ensuring that a request for redemption is in
proper form.
REDEMPTIONS BY TELEPHONE. Shareholders may redeem or exchange Fund shares
by telephone, if their account applications so permit, by calling their
Shareholder Servicing Agents. During periods of drastic economic or market
changes or severe weather or other emergencies, shareholders may experience
difficulties implementing a telephone exchange or redemption. In such an
event, another method of instruction, such as a written request sent via an
overnight delivery service, should be considered. The Funds and each
Shareholder Servicing Agent will employ reasonable procedures to confirm that
instructions communicated by telephone are genuine. These procedures may
include recording of the telephone instructions and verification of a caller's
identity by asking for his or her name, address, telephone number, Social
Security number, and account number. If these or other reasonable procedures
are not followed, the Fund or the Shareholder Servicing Agent may be liable
for any losses to a shareholder due to unauthorized or fraudulent
instructions. Otherwise, the shareholder will bear all risk of loss relating
to a redemption or exchange by telephone.
PAYMENT OF REDEMPTIONS. The proceeds of a redemption are paid in federal
funds normally on the next Business Day, but in any event within seven days.
If a shareholder requests redemption of shares which were purchased recently,
a Fund may delay payment until it is assured that good payment has been
received. In the case of purchases by check, this can take up to ten days. See
"Determination of Net Asset Value; Valuation of Securities; Additional
Purchase and Redemption Information" in the Statement of Additional
Information regarding the Funds' right to pay the redemption price in kind
with securities (instead of cash).
REINSTATEMENT PRIVILEGE. Shareholders who have redeemed Class A shares may
reinstate their Fund account without a sales charge up to the dollar amount
redeemed (with a credit for any contingent deferred sales charge paid) by
purchasing Class A shares of the same Fund within 30 days after the
redemption. To take advantage of this reinstatement privilege, shareholders
must notify their Shareholder Servicing Agents in writing at the time the
privilege is exercised.
Questions about redemption requirements should be referred to the
shareholder's Shareholder Servicing Agent. The right of any shareholder to
receive payment with respect to any redemption may be suspended or the payment
of the redemption price postponed during any period in which the New York
Stock Exchange is closed (other than weekends or holidays) or trading on the
Exchange is restricted or if an emergency exists.
DIVIDENDS AND DISTRIBUTIONS
- ------------------------------------------------------------------------------
Substantially all of each Fund's net income from dividends and interest is
paid to its shareholders of record as a dividend on a monthly basis on or
around the last day of each month.
Each Fund's net realized short-term and long-term capital gains, if any,
will be distributed to the Fund's shareholders at least annually, in December.
Each Fund may also make additional distributions to its shareholders to the
extent necessary to avoid the application of the 4% non-deductible excise tax
on certain undistributed income and net capital gains of mutual funds.
Subject to the policies of the shareholder's Shareholder Servicing Agent,
a shareholder may elect to receive dividends and capital gains distributions
in either cash or additional shares of the same class issued at net asset
value without a sales charge. Distributions paid by each Fund with respect to
Class A shares generally will be higher than those paid with respect to Class
B shares because expenses attributable to Class B shares generally will be
higher.
MANAGEMENT
- ------------------------------------------------------------------------------
TRUSTEES AND OFFICERS: Each Fund is supervised by a Board of Trustees. The
Portfolio is also supervised by a Board of Trustees. In each case, a majority of
the Trustees are not affiliated with the Adviser. In addition, a majority of the
disinterested Trustees of the U.S. Government Income Fund are different from a
majority of the disinterested Trustees of the Portfolio. More information on the
Trustees and officers of the Funds and the Portfolio appears under "Management"
in the Statement of Additional Information.
INVESTMENT ADVISER: CITIBANK. Each Fund draws on the strength and experience
of Citibank. Citibank offers a wide range of banking and investment services
to customers across the United States and throughout the world, and has been
managing money since 1822. Its portfolio managers are responsible for
investing in money market, equity and fixed income securities. Citibank and
its affiliates manage more than $83 billion in assets worldwide. Citibank is a
wholly-owned subsidiary of Citicorp.
Citibank manages the Funds' assets pursuant to separate Investment
Advisory Agreements. Subject to policies set by the Trustees, Citibank makes
investment decisions. Citibank's address is 153 East 53rd Street, New York,
New York 10043.
U.S. GOVERNMENT INCOME FUND. Thomas M. Halley, a Vice President of
Citibank, has served as manager of the U.S. Government Income Fund since
December 1988. He also manages other commingled investment funds at Citibank
as well as institutional insurance portfolios. Prior to joining Citibank in
1988, Mr. Halley was a Senior Fixed Income Portfolio Manager with Brown
Brothers Harriman & Company. He has more than 20 years of experience in the
management of taxable fixed income investments.
INTERMEDIATE INCOME FUND. Mark Lindbloom, a Vice President of Citibank,
has served as manager of the Intermediate Income Fund since June 1993. Mr.
Lindbloom has more than 12 years of investment management experience. Prior to
joining the Adviser in 1986, Mr. Lindbloom was a Fixed Income Portfolio
Manager with Brown Brothers Harriman & Co. where he managed fixed income
assets for discretionary institutional portfolios.
Management's discussion of performance of the Funds is included in the
Funds' Annual Reports to Shareholders, which investors may obtain without
charge by contacting their Shareholder Servicing Agents.
ADVISORY FEES. For its services under the Investment Advisory Agreements,
the Adviser receives the following investment advisory fees, which are accrued
daily and paid monthly, expressed as a percentage of the applicable Fund's
average daily net assets on an annualized basis for that Fund's then-current
fiscal year:
U.S. Government Income Fund 0.35%
Intermediate Income Fund 0.35%
The Adviser has voluntarily agreed to waive a portion of its investment
advisory fee from each Fund on a month-to-month basis.
For the fiscal year ended December 31, 1995, the investment advisory fee
payable to Citibank for the U.S. Government Income Fund was $179,525, of which
$1,055 was voluntarily waived (after the waiver, 0.35% of the Fund's average
daily net assets for that fiscal year).
For the fiscal year ended December 31, 1995, the investment advisory fee
payable to Citibank for the Intermediate Income Fund was $171,213, of which
$115,475 was voluntarily waived (after the waiver, 0.11% of the Fund's average
daily net assets for that fiscal year).
BANKING RELATIONSHIPS. Citibank and its affiliates may have deposit, loan
and other relationships with the issuers of securities purchased on behalf of
the Funds, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Citibank has
informed the Funds that, in making its investment decisions, it does not
obtain or use material inside information in the possession of any division or
department of Citibank or in the possession of any affiliate of Citibank.
BANK REGULATORY MATTERS. The Glass-Steagall Act prohibits certain
financial institutions, such as Citibank, from underwriting securities of
open-end investment companies, such as the Funds. Citibank believes that its
services under the Investment Advisory Agreements and the activities performed
by it or its affiliates as Shareholder Servicing Agents and sub-administrator
are not underwriting and are consistent with the Glass-Steagall Act and other
relevant federal and state laws. However, there is no controlling precedent
regarding the performance of the combination of investment advisory,
shareholder servicing and sub-administrative activities by banks. State laws
on this issue may differ from applicable federal law, and banks and financial
institutions may be required to register as dealers pursuant to state
securities laws. Changes in either federal or state statutes or regulations,
or in their interpretations, could prevent Citibank or its affiliates from
continuing to perform these services. If Citibank or its affiliates were to be
prevented from acting as the Adviser, sub-administrator or a Shareholder
Servicing Agent, the Funds would seek alternative means for obtaining these
services. The Funds do not expect that shareholders would suffer any adverse
financial consequences as a result of any such occurrence.
ADMINISTRATIVE SERVICES PLANS: The Funds and the Portfolio have Administrative
Services Plans which provide that the Funds and the Portfolio may obtain the
services of an administrator, a transfer agent, a custodian, and, in the case
of the Funds, one or more Shareholder Servicing Agents, and may enter into
agreements providing for the payment of fees for such services. Under the
Administrative Services Plan, the total of the fees paid to the Funds'
Administrator and Shareholder Servicing Agents may not exceed 0.65% of each
Fund's average daily net assets on an annualized basis for the Fund's then-
current fiscal year. Any distribution fees (other than any fee concerning
electronic or other media advertising) payable under the Distribution Plan for
Class A shares are included in this expense limitation. This limitation does
not include any amounts payable under the Distribution Plans for Class B
shares. Within this overall limitation, individual fees may vary. Under the
Portfolio's Administrative Services Plan, fees paid to the Portfolio's
Administrator may not exceed 0.05% of the Portfolio's average daily net assets
on an annualized basis for the Portfolio's then-current fiscal year. See
"Administrators," "Shareholder Servicing Agents" and "Transfer Agent,
Custodian and Fund Accountant."
ADMINISTRATORS: LFBDS and Signature Financial Group (Cayman) Ltd. ("SFG")
provide certain administrative services to the Funds and the Portfolio under
administrative services agreements. These administrative services include
providing general office facilities, supervising the overall administration of
the Funds and the Portfolio, and providing persons satisfactory to the Boards
of Trustees to serve as Trustees and officers of the Funds and Portfolio.
These Trustees and officers may be directors, officers or employees of LFBDS,
SFG or their affiliates.
For these services, the Administrators receive fees accrued daily and paid
monthly of 0.25% of the average daily net assets of the Intermediate Income
Fund, 0.20% of the average daily net assets of the U.S. Government Income
Fund, and 0.05% of the average daily net assets of the Government Income
Portfolio, in each case on an annualized basis for the Fund's or the
Portfolio's then-current fiscal year. However, each of the Administrators has
voluntarily agreed to waive a portion of the fees payable to it on a month-to-
month basis. See "General Information -- Expenses."
LFBDS and SFG are wholly-owned subsidiaries of Signature Financial Group,
Inc. "Landmark" is a service mark of LFBDS.
SUB-ADMINISTRATOR: Pursuant to sub-administrative services agreements,
Citibank performs such sub-administrative duties for the Funds and Portfolio
as from time to time are agreed upon by Citibank and LFBDS or SFG. Citibank's
compensation as sub-administrator is paid by LFBDS or SFG.
SHAREHOLDER SERVICING AGENTS: The Funds have entered into separate shareholder
servicing agreements with each Shareholder Servicing Agent pursuant to which
that Shareholder Servicing Agent provides shareholder services, including
answering customer inquiries, assisting in processing purchase, exchange and
redemption transactions and furnishing Fund communications to shareholders.
For these services, each Shareholder Servicing Agent receives a fee from each
Fund at an annual rate of 0.25% of the average daily net assets of the Fund
represented by shares owned by investors for whom such Shareholder Servicing
Agent maintains a servicing relationship.
Some Shareholder Servicing Agents may impose certain conditions on their
customers in addition to or different from those imposed by the Funds, such as
requiring a minimum initial investment or charging their customers a direct
fee for their services. Each Shareholder Servicing Agent has agreed to
transmit to its customers who are shareholders of a Fund appropriate prior
written disclosure of any fees that it may charge them directly and to provide
written notice at least 30 days prior to imposition of any transaction fees.
TRANSFER AGENT, CUSTODIAN AND FUND ACCOUNTANT: State Street Bank and Trust
Company acts as transfer agent and dividend disbursing agent for each Fund and
as the custodian of the Intermediate Income Fund's assets. The principal
business address of State Street Bank and Trust Company is 225 Franklin
Street, Boston, Massachusetts 02110. Investors Bank & Trust Company acts as
the custodian of the U.S. Government Income Fund's assets. Securities may be
held by a sub-custodian bank approved by the Trustees. Signature Financial
Services, Inc. provides fund accounting services and calculates the daily net
asset value for the U.S. Government Income Fund.
DISTRIBUTION ARRANGEMENTS: LFBDS, 6 St. James Avenue, Boston, MA 02116, (617)
423-1679, is the distributor of shares of each Fund and also serves as
distributor for each of the other Landmark Funds and as a Shareholder
Servicing Agent for certain investors. LFBDS receives distribution fees from
the Funds pursuant to Distribution Plans adopted in accordance with Rule 12b-1
under the 1940 Act. LFBDS also collects the sales charges imposed on purchases
of Class A shares and collects any contingent deferred sales charges imposed
on redemptions of Class A and Class B shares. In those states where LFBDS is
not a registered broker-dealer, shares of the Funds are sold through Signature
Broker-Dealer Services, Inc., as dealer.
The Funds maintain separate Distribution Plans pertaining to Class A
shares and Class B shares. The Class A Plan provides that the Funds may pay
the Distributor a monthly distribution fee at an annual rate not to exceed
0.15% of the average daily net assets represented by Class A shares. The Class
A Plan also permits the Funds to pay the Distributor an additional fee not to
exceed 0.05% of the average daily net assets of the Class A shares in
anticipation of or as reimbursement for print or electronic media advertising
expenses incurred in connection with the sale of Class A shares. The Funds did
not pay anything under this provision during 1995 and do not anticipate doing
so during the current fiscal year.
The Class B Plan provides that the Funds may pay the Distributor a monthly
distribution fee at an annual rate not to exceed 0.45% and 0.75% of the
average daily net assets of the U.S. Government Income Fund and the
Intermediate Income Fund, respectively, and a monthly service fee at an annual
rate not to exceed 0.25% of the average daily net assets represented by Class
B shares. The Funds have agreed not to pay service fees in an amount in excess
of 0.20% of the average daily net assets represented by Class B shares during
the 1996 fiscal year. Currently the service fee for Class B shares is 0.05%
per annum of the average daily net assets represented by Class B shares.
The Distributor uses the distribution fees under the Plans to offset each
Fund's marketing costs attributable to the classes, such as preparation of
sales literature, advertising, and printing and distributing prospectuses and
other shareholder materials to prospective investors. In addition, the
Distributor may use the distribution fees to pay costs related to distribution
activities, including employee salaries, bonuses and other overhead expenses.
The Distributor also uses the distribution fees under the Class B Plan to
offset the commissions it pays to brokers and other institutions for selling
the Funds' Class B shares. The Funds and the Distributor provide to the
Trustees quarterly a written report of amounts expended pursuant to the Plans
and the purposes for which the expenditures were made.
During the period they are in effect, the Plans and related Distribution
Agreements pertaining to each class of shares obligate the Funds to pay
distribution fees to LFBDS as compensation for its distribution activities,
not as reimbursement for specific expenses incurred. Thus, even if LFBDS's
expenses exceed its distribution fees for any Fund, the Fund will not be
obligated to pay more than those fees and, if LFBDS's expenses are less than
such fees, it will retain its full fees and realize a profit. Each Fund will
pay the distribution fees to LFBDS until either the applicable Plan or
Distribution Agreement is terminated or not renewed. In that event, LFBDS's
expenses in excess of distribution fees received or accrued through the
termination date will be LFBDS's sole responsibility and not obligations of
the Fund. In their annual consideration of the continuation of the Plans for
each Fund, the Trustees will review each Plan and LFBDS's expenses for each
class separately.
Each class of shares of each Fund has exclusive voting rights with respect
to the Plan for that class.
TAX MATTERS
- ------------------------------------------------------------------------------
This discussion of taxes is for general information only. Investors should
consult their own tax advisers about their particular situations.
Each Fund intends to meet the requirements of the Internal Revenue Code
applicable to regulated investment companies so that it will not be liable for
any federal income or excise taxes.
Fund dividends and capital gains distributions are subject to federal
income tax and may also be subject to state and local taxes. Dividends and
distributions are treated in the same manner for federal tax purposes whether
they are paid in cash or as additional shares. Generally, distributions from a
Fund's net investment income and short-term capital gains will be taxed as
ordinary income. A portion of the Intermediate Income Fund's distributions
from net investment income may be eligible for the dividends-received
deduction available to corporations. Distributions of long-term net capital
gains will be taxed as such regardless of how long the shares of a Fund have
been held.
Fund distributions will reduce the distributing Fund's net asset value per
share. Shareholders who buy shares just before a Fund makes a distribution may
thus pay the full price for the shares and then effectively receive a portion
of the purchase price back as a taxable distribution.
The Intermediate Income Fund may pay withholding or other taxes to foreign
governments during the year. These taxes will reduce that Fund's dividends.
Early each year, each Fund will notify its shareholders of the amount and
tax status of distributions paid to shareholders for the preceding year.
Investors should consult their own tax advisers regarding the status of
their accounts under state and local laws.
PERFORMANCE INFORMATION
- ------------------------------------------------------------------------------
Fund performance may be quoted in advertising, shareholder reports and
other communications in terms of yield, effective yield or total rate of
return. All performance information is historical and is not intended to
indicate future performance. Yields and total rates of return fluctuate in
response to market conditions and other factors, and the value of a Fund's
shares when redeemed may be more or less than their original cost.
Each Fund may provide its period and average annualized "total rates of
return." The "total rate of return" refers to the change in the value of an
investment in the Fund over a stated period which was made at the maximum
public offering price and reflects any change in net asset value per share and
is compounded to include the value of any shares purchased with any dividends
or capital gains declared during such period. Period total rates of return may
be "annualized." An "annualized" total rate of return assumes that the period
total rate of return is generated over a one-year period. These total rate of
return quotations may be accompanied by quotations which do not reflect the
reduction in value of the investment due to the initial or contingent deferred
sales charges, and which are thus higher.
Each Fund may provide annualized "yield" and "effective yield" quotations.
The "yield" of a Fund refers to the income generated by an investment in the
Fund over a 30-day or one-month period (which period is stated in any such
advertisement or communication). This income is then annualized; that is, the
amount of income generated by the investment over that period is assumed to be
generated each month over a one-year period and is shown as a percentage of
the maximum public offering price on the last day of that period. The
"effective yield" is calculated similarly, but when annualized the income
earned by the investment during that 30-day or one-month period is assumed to
be reinvested. The effective yield is slightly higher than the yield because
of the compounding effect of this assumed reinvestment. A "yield" quotation,
unlike a total rate of return quotation, does not reflect changes in net asset
value.
Each Fund will include performance data for each class of Fund shares in
any advertisements, reports or communications including Fund performance data.
Of course, any fees charged by a shareholder's Shareholder Servicing Agent
will reduce that shareholder's net return on his or her investment. See the
Statement of Additional Information for more information concerning the
calculation of yield and total rate of return quotations for the Funds.
GENERAL INFORMATION
- ------------------------------------------------------------------------------
ORGANIZATION: Each Fund is a series of Landmark Fixed Income Funds (the
"Trust"), which is a Massachusetts business trust that was organized on June
23, 1986. The Trust was known as "Landmark U.S. Government Income Fund" until
its name was changed effective June 11, 1992. The Trust is an open-end
management investment company registered under the 1940 Act.
Each Fund is a diversified mutual fund. Under the 1940 Act, a diversified
mutual fund must invest at least 75% of its assets in cash and cash items,
U.S. Government securities, investment company securities and other securities
limited as to any one issuer to not more than 5% of the total assets of the
mutual fund and not more than 10% of the voting securities of the issuer.
Under Massachusetts law, shareholders of a business trust may, under
certain circumstances, be held personally liable as partners for the trust's
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the trust itself was unable to meet its
obligations.
The Portfolio is a series of The Premium Portfolios, a trust organized
under the laws of the State of New York. The Declaration of Trust of The
Premium Portfolios provides that the U.S. Government Income Fund and other
entities investing in the Portfolio are each liable for all obligations of the
Portfolio. It is not expected that the liabilities of the Portfolio would ever
exceed its assets.
VOTING AND OTHER RIGHTS: The Trust may issue an unlimited number of shares,
may create new series of shares and may divide shares in each series into
classes. Each share of each Fund gives the shareholder one vote in Trustee
elections and other matters submitted to shareholders for vote. All shares of
each series of the Trust have equal voting rights except that, in matters
affecting only a particular Fund or class, only shares of that particular Fund
or class are entitled to vote.
At any meeting of shareholders of any Fund, a Shareholder Servicing Agent
may vote any shares of which it is the holder of record and for which it does
not receive voting instructions proportionately in accordance with the
instructions it receives for all other shares of which that Shareholder
Servicing Agent is the holder of record.
Each Fund's activities are supervised by its Board of Trustees. As a
Massachusetts business trust, the Funds are not required to hold annual
shareholder meetings. Shareholder approval will usually be sought only for
changes in a Fund's or Portfolio's fundamental investment restrictions and for
the election of Trustees under certain circumstances. Trustees may be removed
by shareholders under certain circumstances. Each share of each Fund is
entitled to participate equally in dividends and other distributions and the
proceeds of any liquidation of that Fund except that, due to the differing
expenses borne by the each class, dividends and proceeds generally will be
lower for Class B shares than for Class A shares.
CERTIFICATES: The Funds' Transfer Agent maintains a share register for
shareholders of record, i.e., Shareholder Servicing Agents. Share certificates
are not issued.
RETIREMENT PLANS: Investors may be able to establish new accounts in a Fund
under one of several tax-sheltered plans. Such plans include IRAs, Keogh or
Corporate Profit-Sharing and Money-Purchase Plans, 403(b) Custodian Accounts,
and certain other qualified pension and profit-sharing plans. Investors should
consult with their Shareholder Servicing Agents and tax and retirement
advisers.
EXPENSES: In addition to amounts payable as described above under the Advisory
Agreements, the Administrative Services Plans and the Distribution Plans, each
Fund and the Portfolio is responsible for its own expenses, including, among
other things, the costs of securities transactions, the compensation of
Trustees that are not affiliated with the Adviser, government fees, taxes,
accounting and legal fees, expenses of communicating with shareholders,
interest expense, and insurance premiums. All fee waivers are voluntary and
may be reduced or terminated at any time.
COUNSEL AND INDEPENDENT AUDITORS: Bingham, Dana & Gould LLP, Boston,
Massachusetts, is counsel for each Fund. Price Waterhouse LLP, located at 160
Federal Street, Boston, MA 02110, serves as independent auditors for U.S.
Government Income Fund. Deloitte & Touche LLP, located at 125 Summer Street,
Boston, MA 02110, serves as independent auditors for Intermediate Income Fund.
----------------
The Statement of Additional Information dated the date hereof contains
more detailed information about the Funds and the Portfolio, including
information related to (i) investment policies and restrictions, (ii) the
Trustees, officers, Adviser and Administrators, (iii) securities transactions,
(iv) the Funds' shares, including rights and liabilities of shareholders, (v)
the method used to calculate performance information, (vi) programs for the
purchase of shares, and (vii) the determination of net asset value.
No person has been authorized to give any information or make any
representations not contained in this Prospectus or the Statement of
Additional Information in connection with the offering made by this Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Funds or their distributor. This
Prospectus does not constitute an offering by the Funds or their distributor
in any jurisdiction in which such offering may not lawfully be made.
APPENDIX
- ------------------------------------------------------------------------------
PERMITTED INVESTMENTS AND
INVESTMENT PRACTICES
REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements in
order to earn a return on temporarily available cash. The U.S. Government
Income Fund will only enter into repurchase agreements that cover securities
that are backed by the full faith and credit of the U.S. Government.
Repurchase agreements are transactions in which an institution sells the Fund
a security at one price, subject to the Fund's obligation to resell and the
selling institution's obligation to repurchase that security at a higher price
normally within a seven day period. There may be delays and risks of loss if
the seller is unable to meet its obligation to repurchase.
REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into reverse repurchase
agreements. Reverse repurchase agreements involve the sale of securities held
by the Fund and the agreement by the Fund to repurchase the securities at an
agreed-upon price, date and interest payment. When a Fund enters into reverse
repurchase transactions, securities of a dollar amount equal in value to the
securities subject to the agreement will be maintained in a segregated account
with the Fund's custodian. The segregation of assets could impair the Fund's
ability to meet its current obligations or impede investment management if a
large portion of the Fund's assets are involved. Reverse repurchase agreements
are considered to be a form of borrowing.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements and in order to generate additional income, each Fund may lend
its portfolio securities to broker-dealers and other institutional borrowers.
Such loans must be callable at any time and continuously secured by collateral
(cash or U.S. Government securities) in an amount not less than the market
value, determined daily, of the securities loaned. It is intended that the
value of securities loaned by a Fund would not exceed 30% of the Fund's total
assets.
In the event of the bankruptcy of the other party to a securities loan, a
repurchase agreement or a reverse repurchase agreement, the Fund could
experience delays in recovering either the securities lent or cash. To the
extent that, in the meantime, the value of the securities lent has increased
or the value of the securities purchased has decreased, the Fund could
experience a loss.
RULE 144A SECURITIES. Each Fund may purchase restricted securities that
are not registered for sale to the general public if the Adviser determines
that there is a dealer or institutional market in the securities. In that
case, the securities will not be treated as illiquid for purposes of the
Fund's investment limitations. The Trustees will review these determinations.
These securities are known as "Rule 144A securities," because they are traded
under SEC Rule 144A among qualified institutional buyers. Institutional
trading in Rule 144A securities is relatively new, and the liquidity of these
investments could be impaired if trading in Rule 144A securities does not
develop or if qualified institutional buyers become, for a time, uninterested
in purchasing Rule 144A securities.
PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS. Each Fund may invest up to
15% of its net assets (taken at market value) in securities for which there is
no readily available market. These illiquid securities may include privately
placed restricted securities for which no institutional market exists. The
absence of a trading market can make it difficult to ascertain a market value
for illiquid investments. Disposing of illiquid investments may involve time-
consuming negotiation and legal expenses, and it may be difficult or
impossible for a Fund to sell them promptly at an acceptable price.
"WHEN-ISSUED" SECURITIES. In order to ensure the availability of suitable
securities, each Fund may purchase securities on a "when-issued" or on a
"forward delivery" basis, which means that the securities would be delivered
to the Fund at a future date beyond customary settlement time. Under normal
circumstances, the Fund takes delivery of the securities. In general, the Fund
does not pay for the securities until received and does not start earning
interest until the contractual settlement date. While awaiting delivery of the
securities, the Fund establishes a segregated account consisting of cash, cash
equivalents or high quality debt securities equal to the amount of the Fund's
commitments to purchase "when-issued" securities. An increase in the
percentage of the Fund's assets committed to the purchase of securities on a
"when-issued" basis may increase the volatility of its net asset value.
CURRENCY EXCHANGE CONTRACTS. Forward currency exchange contracts may be
entered into for the Intermediate Income Fund for the purchase or sale of non-
U.S. currency for hedging purposes against adverse rate changes or otherwise
to achieve the Fund's investment objectives. A currency exchange contract
allows a definite price in dollars to be fixed for securities of non-U.S.
issuers that have been purchased or sold (but not settled) for the Fund.
Entering into such exchange contracts may result in the loss of all or a
portion of the benefits which otherwise could have been obtained from
favorable movements in exchange rates. In addition, entering into such
contracts means incurring certain transaction costs and bearing the risk of
incurring losses if rates do not move in the direction anticipated.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. Each of the Funds may
use financial futures in order to protect the Fund from fluctuations in
interest rates (sometimes called "hedging") without actually buying or selling
debt securities, or to manage the effective maturity or duration of fixed-
income securities in the Fund's portfolio in an effort to reduce potential
losses or enhance potential gain. Futures contracts provide for the future
sale by one party and purchase by another party of a specified amount of a
security at a specified future time and price, or for making payment of a cash
settlement based on changes in the value of a security or an index of
securities. Because the value of a futures contract changes based on the price
of the underlying security, futures contracts are commonly referred to as
"derivatives". Futures contracts are a generally accepted part of modern
portfolio management and are regularly utilized by many mutual funds and other
institutional investors. The futures contracts that may be purchased by the
Funds are standardized contracts traded on commodities exchanges or boards of
trade.
When a Fund purchases or sells a futures contract, it is required to make
an initial margin deposit. Although the amount may vary, initial margin can be
as low as 1% or less of the face amount of the contract. Additional margin may
be required as the contract fluctuates in value. Since the amount of margin is
relatively small compared to the value of the securities covered by a futures
contract, the potential for gain or loss on a futures contract is much greater
than the amount of a Fund's initial margin deposit. Neither Fund currently
intends to enter into a futures contract if, as a result, the initial margin
deposits on all of that Fund's futures contracts would exceed approximately 5%
of the Fund's net assets. Also, each Fund intends to limit its futures
contracts so that the value of the securities covered by its futures contracts
would not generally exceed 50% of the Fund's other assets and to segregate
sufficient assets to meet its obligations under outstanding futures contracts.
The ability of a Fund to utilize futures contracts successfully will
depend on the Adviser's ability to predict interest rate movements, which
cannot be assured. In addition to general risks associated with any
investment, the use of futures contracts entails the risk that, to the extent
the Adviser's view as to interest rate movements is incorrect, the use of
futures contracts, even for hedging purposes, could result in losses greater
than if they had not been used. This could happen, for example, if there is a
poor correlation between price movements of futures contracts and price
movements in a Fund's related portfolio position. Also, although the Funds
will purchase only standardized futures traded on regulated exchanges, the
futures markets may not be liquid in all circumstances. As a result, in
certain markets, a Fund might not be able to close out a transaction without
incurring substantial losses, if at all. When futures contracts are used for
hedging, even if they are successful in minimizing the risk of loss due to a
decline in the value of the hedged position, at the same time they limit any
potential gain which might result from an increase in value of such position.
The use of futures contracts potentially exposes a Fund to the effects of
"leveraging", which occurs when futures are used so that the Fund's exposure
to the market is greater than it would have been if the Fund had invested
directly in the underlying securities. "Leveraging" increases the Fund's
potential for both gain and loss. As noted above, each of the Funds intends to
adhere to certain policies relating to the use of futures contracts, which
should have the effect of limiting the amount of leverage by the Fund. The use
of futures contracts may increase the amount of taxable income of a Fund and
may affect in other ways the amount, timing and character of a Fund's income
for tax purposes, as more fully discussed in the section entitled "Certain
Additional Tax Matters" in the Statement of Additional Information.
The use of futures by the Funds and some of their risks are described more
fully in the Statement of Additional Information.
SHORT SALES "AGAINST THE BOX." In a short sale, a Fund sells a borrowed
security and has a corresponding obligation to the lender to return the
identical security. Each Fund may engage in short sales only if at the time of
the short sale it owns or has the right to obtain, at no additional cost, an
equal amount of the security being sold short. This investment technique is
known as a short sale "against the box." A Fund may make a short sale as a
hedge, when it believes that the value of a security owned by the Fund (or a
security convertible or exchangeable for such security) may decline, or when
the Fund wants to sell the security at an attractive current price but wishes
to defer recognition of gain or loss for tax purposes. Not more than 40% of a
Fund's total assets would be involved in short sales "against the box."
<PAGE>
SHAREHOLDER
SERVICING AGENTS
- -------------------------------------------------------------------------------
FOR CITIBANK NEW YORK RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CUSTOMERS:
Citibank, N.A.
450 West 33rd Street, New York, NY 10001
(212) 564-3456 or (800) 846 5300
FOR CITIGOLD CLIENTS:
Citigold
P.O. Box 5130, New York, NY 10126-5130
Call Your Citigold Executive, or in NY or CT (800) 285-1701
or for all other states (800) 285-1707
FOR PRIVATE BANKING CLIENTS:
Citibank, N.A.
The Citibank Private Bank
153 East 53rd Street, New York, NY 10043
Call Your Citibank Private Banking Account Officer,
Registered Representative or (212) 559-5959
FOR CITIGOLD GLOBAL ASSET
MANAGEMENT CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY 10043
(212) 559-7117
FOR NORTH AMERICAN INVESTOR
SERVICES CLIENTS:
Citibank, N.A.
111 Wall Street, New York, NY 10094
Call Your Account Manager or (212) 657-9100
FOR CITICORP INVESTMENT SERVICES CUSTOMERS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200
(212) 736-8170 in New York City
<PAGE>
[LOGO] LANDMARK(SM) FUNDS
Advised by Citibank, N.A.
- --------------------------------------------------------------------------------
LANDMARK
U.S. GOVERNMENT
INCOME FUND
- --------------------------------------------------------------------------------
LANDMARK
INTERMEDIATE
INCOME FUND
- --------------------------------------------------------------------------------
PROSPECTUS
May 1, 1996
FI/P.1/96 Printed on Recycled Paper [recycle logo]
<PAGE>
Statement of
Additional Information
May 1, 1996
LANDMARK U.S. GOVERNMENT INCOME FUND
LANDMARK INTERMEDIATE INCOME FUND
(Members of the LandmarkSM Family of Funds) CLASS A AND B SHARES
Each of LANDMARK U.S. GOVERNMENT INCOME FUND (the "Government Income
Fund") and LANDMARK INTERMEDIATE INCOME FUND (the "Intermediate Income Fund",
and together with the Government Income Fund, the "Funds") is a series of
Landmark Fixed Income Funds (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 the Government Income Fund
in the Government Income Portfolio (the "Portfolio"), which is a separate
series of The Premium Portfolios (the "Portfolio Trust"). The address of the
Portfolio Trust is Elizabethan Square, George Town, Grand Cayman, British West
Indies.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY,
CITIBANK, N.A. OR ANY OF ITS AFFILIATES, ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT
RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
TABLE OF CONTENTS PAGE
The Funds ................................................................ 2
Investment Objectives, Policies and Restrictions ......................... 2
Performance Information ................................................... 15
Determination of Net Asset Value; Valuation of Securities;
Additional Purchase and Redemption Information ........................ 16
Management ................................................................ 18
Portfolio Transactions .................................................... 25
Description of Shares, Voting Rights and Liabilities ...................... 26
Certain Additional Tax Matters ............................................ 28
Independent Accountants and Financial Statements .......................... 29
Appendix A ................................................................ 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 May 1, 1996, by which shares of the Funds are
offered. This Statement of Additional Information should be read in
conjunction with the Prospectus, a copy of which may be obtained by an
investor without charge by contacting the Funds' Distributor at 6 St. James
Avenue, Boston, MA 02116, (617) 423-1679.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
1. THE FUNDS
Landmark Fixed Income Funds (the "Trust") is an open-end management
investment company which was organized as a business trust under the laws of
the Commonwealth of Massachusetts on June 23, 1986. The Trust was known as
"Landmark U.S. Government Income Fund" until its name was changed effective
June 11, 1992. This Statement of Additional Information describes Landmark
U.S. Government Income Fund and Landmark Intermediate Income Fund, each of
which is a separate series of the Trust. References in this Statement of
Additional Information to the "Prospectus" are to the Prospectus, dated May 1,
1996, of the Trust by which shares of the Funds are offered.
The Trust seeks the investment objectives of the Government Income Fund by
investing all of its investable assets in Government Income Portfolio (the
"Portfolio"). The Portfolio is a series of The Premium Portfolios (the
"Portfolio Trust") and is an open-end, diversified management investment
company. The Portfolio has the same investment objectives and policies as the
Government Income Fund. Because the Government Income Fund invests through the
Portfolio, all references in this Statement of Additional Information to the
Government Income Fund include the Portfolio, except as otherwise noted. In
addition, references to the Trust, insofar as they relate to the Government
Income Fund, also include the Portfolio Trust, except as otherwise noted.
Citibank, N.A. ("Citibank" or the "Adviser") is investment adviser to the
Intermediate Income Fund and the Portfolio. The Adviser manages the
investments of the Intermediate Income Fund and the Portfolio from day to day
in accordance with such Fund's and the Portfolio's investment objectives and
policies. The selection of investments for the Intermediate Income Fund and
the 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" or the
"Administrator"), the administrator of each Fund, and Signature Financial
Group (Cayman) Ltd. ("SFG"), the administrator of the Portfolio (the
"Portfolio Administrator"), supervise the overall administration of each Fund
and the Portfolio, respectively. The Boards of Trustees of the Trust and the
Portfolio Trust provide broad supervision over the affairs of the Funds and
the Portfolio, respectively. Shares of the Funds are continuously sold by
LFBDS, the Funds' distributor (the "Distributor"), only to investors who are
customers of a financial institution, such as a federal or state-chartered
bank, trust company, savings and loan association or savings bank, or a
securities broker, that has entered into a shareholder servicing agreement
with the Trust (collectively, "Shareholder Servicing Agents"). Shares of each
Fund are sold at net asset value, plus, in the case of Class A Shares, a sales
charge that may be reduced on purchases involving substantial amounts and that
may be eliminated in certain circumstances. LFBDS receives a distribution fee
from each Fund pursuant to a Distribution Plan adopted with respect to each
class of shares of the Funds in accordance with Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"). LFBDS also
receives a service fee from the assets of each Fund represented by Class B
shares pursuant to the Distribution Plan adopted with respect to the Class B
shares of the Funds.
2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVES
The investment objectives of LANDMARK U.S. GOVERNMENT INCOME FUND are to
generate current income and preserve the value of its shareholders'
investment.
The investment objectives of LANDMARK INTERMEDIATE INCOME FUND are to
generate a high level of current income and preserve the value of its
shareholders' investment.
The investment objectives of each Fund may be changed without approval by
the Fund's shareholders, but shareholders will be given written notice at
least 30 days before any change is implemented. Of course, there can be no
assurance that either Fund will achieve its investment objectives.
INVESTMENT POLICIES
The Prospectus contains a discussion of the various types of securities in
which each Fund and the 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.
The Trust may withdraw the investment of Government Income Fund from the
Portfolio at any time, if the Board of Trustees of the Trust determines that
it is in the best interests of the Government Income Fund to do so. Upon any
such withdrawal, the Government Income Fund's assets would continue to be
invested in accordance with the investment policies described herein with
respect to that Fund. The policies described below are not fundamental and may
be changed without shareholder approval.
U.S. GOVERNMENT SECURITIES
Each of the Funds may invest in debt obligations that are backed, as to
the timely payment of interest and principal, by the full faith and credit of
the U.S. Government. The Government Income Fund invests only in debt
obligations that are backed, as to the timely payment of interest and
principal, by the full faith and credit of the U.S. Government.
The debt obligations in which assets of the Funds are invested include (1)
U.S. Treasury obligations, which differ only in their interest rates,
maturities and times of issuance: U.S. Treasury bills (maturities of one year
or less), U.S. Treasury notes (maturities of one to 10 years), and U.S.
Treasury bonds (generally maturities of greater than 10 years); and (2)
obligations issued or guaranteed by U.S. Government agencies, authorities or
instrumentalities. The Government Income Fund may only invest in obligations
issued or guaranteed by U.S. Government agencies if such obligations are
backed, as to the timely payment of interest and principal, by the full faith
and credit of the U.S. Government, e.g., direct pass-through certificates of
the Government National Mortgage Association.
When and if available, U.S. Government obligations may be purchased at a
discount from face value. However, it is not intended that such securities
will be held to maturity for the purpose of achieving potential capital gains,
unless current yields on these securities remain attractive.
Although U.S. Government obligations which are purchased for the Funds may
be backed, as to the timely payment of interest and principal, by the full
faith and credit of the U.S. Government, shares of the Funds are neither
insured nor guaranteed by the U.S. Government or its agencies, authorities or
instrumentalities.
The Adviser intends to fully manage the investments of the Portfolio by
buying and selling U.S. Government obligations, and by entering into
repurchase agreements covering such obligations, as well as by holding
selected obligations to maturity. In managing the Portfolio's investments, the
Adviser seeks to maximize the return for the Portfolio by taking advantage of
market developments and yield disparities, which may include use of the
following strategies:
(1) shortening the average maturity of the Portfolio's securities in
anticipation of a rise in interest rates so as to minimize depreciation of
principal;
(2) lengthening the average maturity of the Portfolio's securities in
anticipation of a decline in interest rates so as to maximize appreciation
of principal;
(3) selling one type of U.S. Government obligation (e.g., Treasury
bonds) and buying another (e.g., GNMA direct pass-through certificates)
when disparities arise in the relative values of each; and
(4) changing from one U.S. Government obligation to an essentially
similar U.S. Government obligation when their respective yields are
distorted due to market factors.
In order to enhance the stability of the value of the beneficial interests in
the Portfolio by reducing volatility resulting from changes in interest rates
and other market conditions, the dollar weighted average maturity of the
Portfolio's investment securities is generally three years or less. These
strategies may result in increases or decreases in the Portfolio's current
income and in the holding for the Portfolio of obligations which sell at
moderate to substantial premiums or discounts from face value. Moreover, if
the Adviser's expectations of changes in interest rates or its valuation of
the normal yield relationship between two obligations proves to be incorrect,
the Portfolio's income, net asset value and potential capital gain may be
decreased or its potential capital loss may be increased.
The Portfolio is managed to provide an income yield that is generally
higher than those offered by money market funds (which have a share price
which is more stable than the value of an investment in the Portfolio and
which have a portfolio of investments with an average maturity which is
shorter than the Portfolio's securities) with a value of an investment in the
Portfolio that is more stable than the share price of other fixed income funds
that have a longer term investment focus. Debt securities with longer
maturities than those in which the assets of the Portfolio are invested
generally tend to produce higher yields and are subject to greater market
fluctuation as a result of changes in interest rates than debt securities with
shorter maturities. At the same time, the securities in which the assets of
the Portfolio are invested tend to produce lower yields and are subject to
lower market fluctuation as a result of changes in interest rates than debt
securities with longer maturities that tend to be purchased by longer term
bond funds than the Portfolio. However, since available yields vary over time,
no specific level of income can be assured. The income derived from an
investment in the Portfolio increases or decreases in relation to the income
received by the Portfolio from its investments, which in any case is reduced
by the Portfolio's expenses.
REPURCHASE AGREEMENTS
Each of the Funds may invest in repurchase agreements collateralized by
securities in which that Fund may otherwise invest. Repurchase agreements are
agreements by which a Fund purchases a security and simultaneously commits to
resell that security to the seller (which is usually a member bank of the U.S.
Federal Reserve System or a member firm of the New York Stock Exchange (or a
subsidiary thereof)) at an agreed-upon date within a number of days (usually
not more than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed-upon market rate of interest which is unrelated
to the coupon rate or maturity of the purchased security. A repurchase
agreement involves the obligation of the seller to pay the agreed upon price,
which obligation is in effect secured by the value of the underlying security,
usually U.S. Government or government agency issues. Under the 1940 Act,
repurchase agreements may be considered to be loans by the buyer. A Fund's
risk is limited to the ability of the seller to pay the agreed-upon amount on
the delivery date. If the seller defaults, the underlying security constitutes
collateral for the seller's obligation to pay although that Fund may incur
certain costs in liquidating this collateral and in certain cases may not be
permitted to liquidate this collateral. All repurchase agreements entered into
by the Funds are fully collateralized, with such collateral being marked to
market daily.
FUTURES CONTRACTS
A futures contract is an agreement between two parties for the purchase or
sale for future delivery of securities or for the payment or acceptance of a
cash settlement based upon changes in the value of the securities or of an
index of securities. A "sale" of a futures contract means the acquisition of a
contractual obligation to deliver the securities called for by the contract at
a specified price, or to make or accept the cash settlement called for by the
contract, on a specified date. A "purchase" of a futures contract means the
acquisition of a contractual obligation to acquire the securities called for
by the contract at a specified price, or to make or accept the cash settlement
called for by the contract, on a specified date. Futures contracts have been
designed by exchanges which have been designated "contract markets" by the
Commodity Futures Trading Commission ("CFTC") and must be executed through a
futures commission merchant, or brokerage firm, which is a member of the
relevant contract market. Futures contracts trade on these markets, and the
exchanges, through their clearing organizations, guarantee that the contracts
will be performed as between the clearing members of the exchange.
While futures contracts based on debt securities do provide for the
delivery and acceptance of securities, such deliveries and acceptances are
very seldom made. Generally, a futures contract is terminated by entering into
an offsetting transaction. Brokerage fees will be incurred when a Fund
purchases or sells a futures contracts. At the same time such a purchase or
sale is made, the Fund must provide cash or securities as a deposit ("initial
deposit") known as "margin". The initial deposit required will vary, but may
be as low as 1% or less of a contract's face value. Daily thereafter, the
futures contract is valued through a process known as "marking to market", and
the Fund may receive or be required to pay additional "variation margin" as
the futures contract becomes more or less valuable. At the time of delivery of
securities pursuant to such a contract, adjustments are made to recognize
differences in value arising from the delivery of securities with a different
interest rate than the specific security that provides the standard for the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was entered into.
A Fund may purchase or sell futures contracts to attempt to protect the
Fund from fluctuations in interest rates, or to manage the effective maturity
or duration of the Fund's portfolio in an effort to reduce potential losses or
enhance potential gain, without actually buying or selling debt securities.
For example, if interest rates were expected to increase, the Fund might enter
into futures contracts for the sale of debt securities. Such a sale would have
much the same effect as if the Fund sold bonds that it owned, or as if the
Fund sold longer-term bonds and purchased shorter-term bonds. If interest
rates did increase, the value of the Fund's debt securities would decline, but
the value of the futures contracts would increase, thereby keeping the net
asset value of the Fund from declining as much as it otherwise would have.
Similar results could be accomplished by selling bonds, or by selling bonds
with longer maturities and investing in bonds with shorter maturities.
However, by using futures contracts, the Fund avoids having to sell its
securities.
Similarly, when it is expected that interest rates may decline, a Fund
might enter into futures contracts for the purchase of debt securities. Such a
transaction would be intended to have much the same effect as if the Fund
purchased bonds, or as if the Fund sold shorter-term bonds and purchased
longer-term bonds. If interest rates did decline, the value of the futures
contracts would increase.
Although the use of futures for hedging should tend to minimize the risk
of loss due to a decline in the value of the hedged position (e.g., if a Fund
sells a futures contract to protect against losses in the debt securities held
by the Fund), at the same time the futures contracts limit any potential gain
which might result from an increase in value of a hedged position.
In addition, the ability effectively to hedge all or a portion of a Fund's
investments through transactions in futures contracts depends on the degree to
which movements in the value of the debt securities underlying such contracts
correlate with movements in the value of the Fund's securities. If the
security underlying a futures contract is different than the security being
hedged, they may not move to the same extent or in the same direction. In that
event, the Fund's hedging strategy might not be successful and the Fund could
sustain losses on these hedging transactions which would not be offset by
gains on the Fund's other investments or, alternatively, the gains on the
hedging transaction might not be sufficient to offset losses on the Fund's
other investments. It is also possible that there may be a negative
correlation between the security underlying a futures contract and the
securities being hedged, which could result in losses both on the hedging
transaction and the securities. In these and other instances, the Fund's
overall return could be less than if the hedging transactions had not been
undertaken. Similarly, even where a Fund enters into futures transactions
other than for hedging purposes, the effectiveness of its strategy may be
affected by lack of correlation between changes in the value of the futures
contracts and changes in value of the securities which the Fund would
otherwise buy and sell.
The ordinary spreads between prices in the cash and futures markets, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit
and variation margin requirements. Rather than meeting additional variation
margin requirements, investors may close out futures contracts through
offsetting transactions which could distort the normal relationship between
the cash and futures markets. Second, there is the potential that the
liquidity of the futures market may be lacking. Prior to expiration, a futures
contract may be terminated only by entering into a closing purchase or sale
transaction, which requires a secondary market on the contract market on which
the futures contracts was originally entered into. While a Fund will establish
a futures position only if there appears to be a liquid secondary market
therefor, there can be no assurance that such a market will exist for any
particular futures contract at any specific time. In that event, it may not be
possible to close out a position held by the Fund, which could require the
Fund to purchase or sell the instrument underlying the futures contract or to
meet ongoing variation margin requirements. The inability to close out futures
positions also could have an adverse impact on the ability effectively to use
futures transactions for hedging or other purposes.
The liquidity of a secondary market in a futures contract may be adversely
affected by "daily price fluctuation limits" established by the exchanges,
which limit the amount of fluctuation in the price of a futures contract
during a single trading day and prohibit trading beyond such limits once they
have been reached. The trading of futures contracts also is subject to the
risk of trading halts, suspensions, exchange or clearing house equipment
failures, government intervention, insolvency of a brokerage firm or clearing
house or other disruptions of normal trading activity, which could at times
make it difficult or impossible to liquidate existing positions or to recover
excess variation margin payments.
Investments in futures contracts also entail the risk that if the
Adviser's investment judgment about the general direction of interest rates is
incorrect, the Fund's overall performance may be poorer than if any such
contract had not been entered into. For example, if a Fund hedged against the
possibility of an increase in interest rates which would adversely affect the
price of the Fund's bonds and interest rates decrease instead, part or all of
the benefit of the increased value of the Fund's bonds which were hedged will
be lost because the Fund will have offsetting losses in its futures positions.
Similarly, if a Fund purchases futures contracts expecting a decrease in
interest rates and interest rates instead increased, the Fund will have losses
in its futures positions which will increase the amount of the losses on the
securities in its portfolio which will also decline in value because of the
increase in interest rates. In addition, in such situations, if the Fund has
insufficient cash, the Fund may have to sell bonds from its investments to
meet daily variation margin requirements, possibly at a time when it may be
disadvantageous to do so.
Each contract market on which futures contracts are traded has established
a number of limitations governing the maximum number of positions which may be
held by a trader, whether acting alone or in concert with others. The Adviser
does not believe that these trading and position limits would have an adverse
impact on a Fund's strategies involving futures.
CFTC regulations require compliance with certain limitations in order to
assure that the Fund is not deemed to be a "commodity pool" under such
regulations. In particular, CFTC regulations prohibit the Fund from purchasing
or selling futures contracts (other than for bona fide hedging transactions)
if, immediately thereafter, the sum of the amount of initial margin required
to establish the Fund's non-hedging futures positions would exceed 5% of the
Fund's net assets.
Each Fund will comply with this CFTC requirement, and each such Fund
currently intends to adhere to the additional policies described below. First,
an amount of cash or cash equivalents will be maintained by each Fund in a
segregated account with the Fund's custodian so that the amount so segregated,
plus the initial margin held on deposit, will be approximately equal to the
amount necessary to satisfy the Fund's obligations under the futures contract.
The second is that a Fund will not enter into a futures contract if
immediately thereafter the amount of initial margin deposits on all the
futures contracts held by the Fund would exceed approximately 5% of the net
assets of the Fund. The third is that the aggregate market value of the
futures contracts held by a Fund not generally exceed 50% of the market value
of the Fund's total assets other than its futures contracts. For purposes of
this third policy, "market value" of a futures contract is deemed to be the
amount obtained by multiplying the number of units covered by the futures
contract times the per unit price of the securities covered by that contract.
The ability of a Fund to engage in futures transactions may be limited by
the current federal income tax requirement that less than 30% of a Fund's
gross income be derived from the sale or other disposition of stock or
securities held for less than three months. In addition, the use of futures
contracts may increase the amount of taxable income of a Fund and may affect
the amount, timing and character of a Fund's income for tax purposes, as more
fully discussed herein in the section entitled "Certain Additional Tax
Matters".
WHEN-ISSUED SECURITIES
Each of the Funds may purchase securities on a "when-issued" or on a
"forward delivery" basis. It is expected that, under normal circumstances, the
applicable Fund would take delivery of such securities. When a Fund commits to
purchase a security on a "when-issued" or on a "forward delivery" basis, it
sets up procedures consistent with Securities and Exchange Commission ("SEC")
policies. Since those policies currently require that an amount of a Fund's
assets equal to the amount of the purchase be held aside or segregated to be
used to pay for the commitment, the Fund expects always to have cash, cash
equivalents or high quality debt securities sufficient to cover any
commitments or to limit any potential risk. However, even though the Funds do
not intend to make such purchases for speculative purposes and intend to
adhere to the provisions of SEC policies, purchases of securities on such
bases may involve more risk than other types of purchases. For example, a Fund
may have to sell assets which have been set aside in order to meet
redemptions. Also, if the Adviser determines it is advisable as a matter of
investment strategy to sell the "when-issued" or "forward delivery"
securities, a Fund would be required to meet its obligations from the then
available cash flow or the sale of securities, or, although it would not
normally expect to do so, from the sale of the "when-issued" or "forward
delivery" securities themselves (which may have a value greater or less than
the Fund's payment obligation).
SECURITIES OF NON-U.S. ISSUERS
The Intermediate Income Fund may invest in securities of non-U.S. issuers.
Investing in securities issued by companies whose principal business
activities are outside the United States may involve significant risks not
present in U.S. investments. For example, the value of such securities
fluctuates based on the relative strength of the U.S. dollar. In addition,
there is generally less publicly available information about non-U.S. issuers,
particularly those not subject to the disclosure and reporting requirements of
the U.S. securities laws. Non-U.S. issuers are generally not bound by uniform
accounting, auditing and financial reporting requirements comparable to those
applicable to U.S. issuers. Investments in securities of non-U.S. issuers also
involve the risk of possible adverse changes in investment or exchange control
regulations, expropriation or confiscatory taxation, limitation on the removal
of funds or other assets of a Fund, political or financial instability or
diplomatic and other developments which would affect such investments.
Further, economies of other countries or areas of the world may differ
favorably or unfavorably from the economy of the U.S.
It is anticipated that in most cases the best available market for
securities of non-U.S. issuers would be on exchanges or in over-the-counter
markets located outside the U.S. Non-U.S. securities markets, while growing in
volume and sophistication, are generally not as developed as those in the
U.S., and securities of some non-U.S. issuers (particularly those located in
developing countries) may be less liquid and more volatile than securities of
comparable U.S. companies. Non-U.S. security trading practices, including
those involving securities settlement where a Fund's assets may be released
prior to receipt of payments, may expose the Fund to increased risk in the
event of a failed trade or the insolvency of a non-U.S. broker-dealer. In
addition, non-U.S. brokerage commissions are generally higher than commissions
on securities traded in the U.S. and may be non-negotiable. In general, there
is less overall governmental supervision and regulation of non-U.S. securities
exchanges, brokers and listed companies than in the U.S.
It is the Trust's policy to invest not more than 5% of the Intermediate
Income Fund's assets in closed-end investment companies which primarily hold
foreign securities. Investments in closed-end investment companies which
primarily hold securities of non-U.S. issuers may entail the risk that the
market value of such investments may be substantially less than their net
asset value and that there would be duplication of investment management and
other fees and expenses. The Trust may invest a portion of the Intermediate
Income Fund's assets in foreign securities that impose restrictions on
transfer within the United States or to United States persons. Although
securities subject to such transfer restrictions may be marketable abroad,
they may be less liquid than foreign securities of the same class that are not
subject to such restrictions.
The Trust's policy is not to invest more than 50% of the Intermediate
Income Fund's assets in the securities of foreign issuers. It is the intention
of the Trust to limit the Intermediate Income Fund's investments in non-U.S.
obligations to securities rated A or better and unrated securities which, in
the opinion of the Adviser, are of comparable quality to such rated
securities.
CURRENCY EXCHANGE TRANSACTIONS
Because the Intermediate Income Fund may buy and sell securities
denominated in currencies other than the U.S. dollar, and receive interest and
sale proceeds in currencies other than the U.S. dollar, that Fund may enter
into currency exchange transactions to convert U.S. currency to non-U.S.
currency and non-U.S. currency to U.S. currency, as well as convert one non-
U.S. currency to another non-U.S. currency. The Intermediate Income Fund
either enters into these transactions on a spot (i.e., cash) basis at the spot
rate prevailing in the currency exchange markets, or uses forward contracts to
purchase or sell non-U.S. currencies. The Intermediate Income Fund may also
enter into currency hedging transactions in an attempt to protect the value of
its assets as measured in U.S. dollars from unfavorable changes in currency
exchange rates and control regulations. (Although the Intermediate Income
Fund's assets are valued daily in terms of U.S. dollars, the Trust does not
intend to convert the Fund's holdings of non-U.S. currencies into U.S. dollars
on a daily basis.) It is not intended that the Intermediate Income Fund
speculate in currency exchange rates or forward contracts.
The Intermediate Income Fund may convert currency on a spot basis from
time to time, and investors should be aware of the costs of currency
conversion. Although currency exchange dealers do not charge a fee for
conversion, they do realize a profit based on the difference (the "spread")
between the prices at which they are buying and selling various currencies.
Thus, a dealer may offer to sell a currency at one rate, while offering a
lesser rate of exchange should the Intermediate Income Fund desire to resell
that currency to the dealer.
A forward contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract, agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded in the interbank market conducted
directly between currency traders (usually large commercial banks) and their
customers. A forward contract generally has no deposit requirement, and no
fees or commissions are charged at any stage for trades.
When the Intermediate Income Fund enters into a contract for the purchase
or sale of a security denominated in a non-U.S. currency, it may desire to
"lock in" the U.S. dollar price of the security. By entering into a forward
contract for the purchase or sale, for a fixed amount of U.S. dollars, of the
amount of non-U.S. currency involved in the underlying security transaction,
the Intermediate Income Fund may be able to protect against a possible loss
resulting from an adverse change in the relationship between the U.S. dollar
and the non-U.S. currency during the period between the date the security is
purchased or sold and the date on which payment is made or received.
When the Adviser believes that the currency of a particular country may
suffer a substantial decline against the U.S. dollar, the Intermediate Income
Fund may enter into a forward contract to sell, for a fixed amount of U.S.
dollars, the amount of non-U.S. currency approximating the value of some or
all of its respective securities denominated in such non-U.S. currency. The
precise matching of the forward contract amounts and the value of the
securities involved is not generally possible since the future value of such
securities in non-U.S. currencies changes as a consequence of market movements
in the value of those securities between the date the forward contract is
entered into and the date it matures. The projection of a short-term hedging
strategy is highly uncertain. The Intermediate Income Fund does not enter into
such forward contracts or maintain a net exposure to such contracts where the
consummation of the contracts obligates the Fund to deliver an amount of non-
U.S. currency in excess of the value of the Fund's securities or other assets
denominated in that currency. Under normal circumstances, consideration of the
prospect for currency parities will be incorporated in the investment
decisions made with regard to overall diversification strategies. However, the
Adviser believes that it is important to have the flexibility to enter into
such forward contracts when it determines that the best interests of the
Intermediate Income Fund will be served.
The Intermediate Income Fund generally would not enter into a forward
contract with a term greater than one year. At the maturity of a forward
contract, the Intermediate Income Fund will either sell the security and make
delivery of the non-U.S. currency, or retain the security and terminate its
contractual obligation to deliver the non-U.S. currency by purchasing an
"offsetting" contract with the same currency trader obligating it to purchase,
on the same maturity date, the same amount of the non-U.S. currency. If the
Fund retains the security and engages in an offsetting transaction, the Fund
will incur a gain or a loss (as described below) to the extent that there has
been movement in forward contract prices. If the Fund engages in an offsetting
transaction, it may subsequently enter into a new forward contract to sell the
non-U.S. currency. Should forward prices decline during the period between the
date the Fund enters into a forward contract for the sale of the non-U.S.
currency and the date it enters into an offsetting contract for the purchase
of such currency, the Fund will realize a gain to the extent the selling price
of the currency exceeds the purchase price of the currency. Should forward
prices increase, the Fund will suffer a loss to the extent that the purchase
price of the currency exceeds the selling price of the currency.
It is impossible to forecast with precision the market value of the
Intermediate Income Fund's securities at the expiration of a forward contract.
Accordingly, it may be necessary for the Intermediate Income Fund to purchase
additional non-U.S. currency on the spot market if the market value of the
security is less than the amount of non-U.S. currency the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of
such currency. Conversely, it may be necessary to sell on the spot market some
of the non-U.S. currency received upon the sale of the security if its market
value exceeds the amount of such currency the Fund is obligated to deliver.
The Intermediate Income Fund may also purchase put options on a non-U.S.
currency in order to protect against currency rate fluctuations. If the Fund
purchases a put option on a non-U.S. currency and the value of the U.S.
currency declines, the Fund will have the right to sell the non-U.S. currency
for a fixed amount in U.S. dollars and will thereby offset, in whole or in
part, the adverse effect on the Fund which otherwise would have resulted.
Conversely, where a rise in the U.S. dollar value of another currency is
projected, and where the Fund anticipates investing in securities traded in
such currency, the Fund may purchase call options on the non-U.S. currency.
The purchase of such options could offset, at least partially, the effects
of adverse movements in exchange rates. However, the benefit to the
Intermediate Income Fund from purchases of non-U.S. currency options will be
reduced by the amount of the premium and related transaction costs. In
addition, where currency exchange rates do not move in the direction or to the
extent anticipated, the Intermediate Income Fund could sustain losses on
transactions in non-U.S. currency options which would require it to forgo a
portion or all of the benefits of advantageous changes in such rates.
The Intermediate Income Fund may write options on non-U.S. currencies for
hedging purposes or otherwise to achieve its investment objectives. For
example, where the Intermediate Income Fund anticipates a decline in the value
of the U.S. dollar value of a non-U.S. security due to adverse fluctuations in
exchange rates it could, instead of purchasing a put option, write a call
option on the relevant currency. If the expected decline occurs, the option
will most likely not be exercised, and the diminution in value of the security
held by the Fund will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the cost of a non-U.S. security to be acquired because
of an increase in the U.S. dollar value of the currency in which the
underlying security is primarily traded, the Intermediate Income Fund could
write a put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow the Fund to hedge such increased
cost up to the amount of the premium. However, the writing of a currency
option will constitute only a partial hedge up to the amount of the premium,
and only if rates move in the expected direction. If this does not occur, the
option may be exercised and the Fund would be required to purchase or sell the
underlying currency at a loss which may not be offset by the amount of the
premium. Through the writing of options on currencies, the Intermediate Income
Fund also may be required to forgo all or a portion of the benefits which
might otherwise have been obtained from favorable movements in exchange rates.
Put and call options on non-U.S. currencies written by the Intermediate
Income Fund will be covered by segregation of cash, short-term money market
instruments or high quality debt securities in an account with the custodian
in an amount sufficient to discharge the Fund's obligations with respect to
the option, by acquisition of the non-U.S. currency or of a right to acquire
such currency (in the case of a call option) or the acquisition of a right to
dispose of the currency (in the case of a put option), or in such other manner
as may be in accordance with the requirements of any exchange on which, or the
counterparty with which, the option is traded and applicable laws and
regulations.
The Intermediate Income Fund's dealings in non-U.S. currency contracts are
limited to the transactions described above. As stated above, the Government
Income Fund will not deal in such contracts. Of course, the Intermediate
Income Fund is not required to enter into such transactions and does not do so
unless deemed appropriate by the Adviser. It should also be realized that
these methods of protecting the value of the Intermediate Income Fund's
securities against a decline in the value of a currency do not eliminate
fluctuations in the underlying prices of the securities. Additionally,
although such contracts tend to minimize the risk of loss due to a decline in
the value of the hedged currency, they also tend to limit any potential gain
which might result should the value of such currency increase.
The Intermediate Income Fund has established procedures consistent with
policies of the SEC concerning forward contracts. Since those policies
currently recommend that an amount of a fund's assets equal to the amount of
the purchase be held aside or segregated to be used to pay for the commitment,
the Intermediate Income Fund is expected always to have cash, cash equivalents
or high quality debt securities available sufficient to cover any commitments
under these contracts or to limit any potential risk.
SHORT SALES "AGAINST THE BOX"
In a short sale, a Fund sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. Each of the Funds,
in accordance with applicable investment restrictions, may engage in short
sales only if at the time of the short sale it owns or has the right to
obtain, at no additional cost, an equal amount of the security being sold
short. This investment technique is known as a short sale "against the box."
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. If a Fund engages in a short sale, the collateral for the short
position is maintained for the Fund by the custodian or qualified sub-
custodian. While the short sale is open, an amount of securities equal in kind
and amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities are maintained in a segregated
account for the Fund. These securities constitute the Fund's long position.
The Funds do not engage in short sales against the box for investment
purposes. A Fund may, however, make a short sale against the box as a hedge,
when it believes that the price of a security may decline, causing a decline in
the value of a security owned by the Fund (or a security convertible or
exchangeable for such security), or when the Fund wants to sell the security at
an attractive current price, but also wishes to defer recognition of gain or
loss for federal income tax purposes or for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code. In
such case, any future losses in the Fund's long position should be reduced by a
gain in the short position. Conversely, any gain in the long position should be
reduced by a loss in the short position. The extent to which such gains or
losses are reduced depends upon the amount of the security sold short relative
to the amount the Fund owns. There are certain additional transaction costs
associated with short sales against the box, but the Funds endeavor to offset
these costs with the income from the investment of the cash proceeds of short
sales.
The Adviser does not expect that more than 40% of each Fund's total assets
would be involved in short sales against the box. The Adviser does not
currently intend to engage in such sales.
CORPORATE ASSET-BACKED SECURITIES
As described in the Prospectus, certain of the Intermediate Income Fund's
assets may be invested in corporate asset-backed securities. These securities,
issued by trusts and special purpose corporations, are backed by a pool of
assets, including but not limited to credit card and automobile loan
receivables, representing the obligations of a number of different parties.
Corporate asset-backed securities present certain risks. For instance, in
the case of credit card receivables, these securities may not have the benefit
of any security interest in the related collateral. Credit card receivables
are generally unsecured and the debtors are entitled to the protection of a
number of state and federal consumer credit laws, many of which give such
debtors the right to set off certain amounts owed on the credit cards, thereby
reducing the balance due. Most issuers of automobile receivables permit the
servicers to retain possession of the underlying obligations. If the servicer
were to sell these obligations to another party, there is a risk that the
purchaser would acquire an interest superior to that of the holders of the
related automobile receivables. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have a
proper security interest in all of the assets backing such receivables.
Therefore, there is the possibility that recoveries on repossessed collateral
may not, in some cases, be available to support payments on these securities.
The underlying assets (e.g., loans) are also subject to prepayments which
shorten the securities, weighted average life and may lower their return.
Corporate asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of
payments on the underlying pool occurs in a timely fashion. Protection against
losses resulting from ultimate default ensures payment through insurance
policies or letters of credit obtained by the issuer or sponsor from third
parties. No additional or separate fees will be paid for credit support. The
degree of credit support provided for each issue is generally based on
historical information respecting the level of credit risk associated with the
underlying assets. Delinquency or loss in excess of that anticipated or
failure of the credit support could adversely affect the return on an
investment in such a security. It is intended that no more than 5% of the
Intermediate Income Fund's total assets would be invested in corporate asset-
backed securities.
COLLATERALIZED MORTGAGE OBLIGATIONS
As described in the Prospectus, a portion of each Fund's assets may be
invested in collateralized mortgage obligations ("CMOs"), which are debt
obligations collateralized by mortgage loans or mortgage pass-through
securities; provided, however, that, in the case of the Government Income
Fund, the CMOs are backed as to the timely payment of interest and principal
by the full faith and credit of the U.S. Government. Typically, CMOs are
collateralized by certificates issued by the Government National Mortgage
Association, the Federal National Mortgage Association or the Federal Home
Loan Mortgage Corporation but also may be collateralized by whole loans or
private mortgage pass-through securities (such collateral collectively
hereinafter referred to as "Mortgage Assets"). Each of the Funds may also
invest a portion of the their assets in multi-class pass-through securities
which are interests in a trust composed of Mortgage Assets; provided, however,
that, in the case of the Government Income Fund, the Mortgage Assets are
backed as to the timely payment of interest and principal by the full faith
and credit of the U.S. Government. CMOs (which include multi-class pass-
through securities) may be issued by agencies, authorities or
instrumentalities of the U.S. Government or by private originators of or
investors in mortgage loans, including savings and loan associations, mortgage
banks, commercial banks, investment banks and special purpose subsidiaries of
the foregoing. Payments of principal of and interest on the Mortgage Assets,
and any reinvestment income thereon, provide the funds to pay debt service on
the CMOs or make scheduled distributions on the multi-class pass-through
securities. In a CMO, a series of bonds or certificates is usually issued in
multiple classes with different maturities. Each class of a CMO, often
referred to as a "tranche", is issued at a specific fixed or floating coupon
rate and has a stated maturity or final distribution date. Principal
prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution
dates, resulting in a loss of all or part of the premium if any has been paid.
Interest is paid or accrues on all classes of the CMOs on a monthly, quarterly
or semiannual basis. The principal of and interest on the Mortgage Assets may
be allocated among the several classes of a series of a CMO in various ways.
In a common structure, payments of principal, including any principal
prepayments, on the Mortgage Assets are applied to the classes of the series
of a CMO in the order of their respective stated maturities or final
distribution dates, so that no payment of principal will be made on any class
of CMOs until all other classes having an earlier stated maturity or final
distribution date have been paid in full.
LENDING OF SECURITIES
Consistent with applicable regulatory requirements and in order to
generate income, each of the Funds may lend its securities to broker-dealers
and other institutional borrowers. Such loans will usually be made only to
member banks of the U.S. Federal Reserve System and to member firms of the New
York Stock Exchange (and subsidiaries thereof). Loans of securities would be
secured continuously by collateral in cash, cash equivalents, or U.S. Treasury
obligations maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The cash collateral would be invested
in high quality short-term instruments. A Fund would have the right to call a
loan and obtain the securities loaned at any time on customary industry
settlement notice (which will not usually exceed five days). During the
existence of a loan, a Fund would continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities loaned and would
also receive compensation based on investment of the collateral. The Fund
would not, however, have the right to vote any securities having voting rights
during the existence of the loan, but would call the loan in anticipation of
an important vote to be taken among holders of the securities or of the giving
or withholding of their consent on a material matter affecting the investment.
As with other extensions of credit, there are risks of delay in recovery or
even loss of rights in the collateral should the borrower fail financially.
However, the loans would be made only to entities deemed by the Adviser to be
of good standing, and when, in the judgment of the Adviser, the consideration
which can be earned currently from loans of this type justifies the attendant
risk. If the Adviser determines to make loans, it is not intended that the
value of the securities loaned by a Fund would exceed 30% of the value of its
total assets.
RULE 144A SECURITIES
Each of the Funds may purchase securities that are not registered ("Rule
144A securities") under the Securities Act of 1933 (the "Securities Act"), but
can be offered and sold to "qualified institutional buyers" under Rule 144A
under the Securities Act. However, each Fund will not invest more than 15% of
its net assets in illiquid investments, which include securities for which
there is no readily available market, securities subject to contractual
restrictions on resale and Rule 144A securities, unless the Trustees of the
Trust determine, based on the trading markets for the specific Rule 144A
security, that it is liquid. The Trustees may adopt guidelines and delegate to
the Adviser the daily function of determining and monitoring liquidity of Rule
144A securities. The Trustees, however, retain oversight and are ultimately
responsible for the determinations.
Since it is not possible to predict with assurance exactly how the market
for Rule 144A securities will develop, the Trustees will carefully monitor
each Fund's investments in Rule 144A securities, focusing on such factors,
among others, as valuation, liquidity and availability of information. The
liquidity of investments in Rule 144A securities could be impaired if trading
in Rule 144A securities does not develop or if qualified institutional buyers
become for a time uninterested in purchasing Rule 144A securities.
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS
The Trust, on behalf of the Funds, and the Portfolio Trust, on behalf of
the Portfolio, have each adopted the following policies which may not be
changed with respect to either Fund or the Portfolio without approval by
holders of a majority of the outstanding voting securities of that Fund or
Portfolio, which as used in this Statement of Additional Information means the
vote of the lesser of (i) 67% or more of the outstanding voting securities of
the respective Fund or Portfolio present at a meeting at which the holders of
more than 50% of the outstanding voting securities of the Fund or Portfolio
are present or represented by proxy, or (ii) more than 50% of the outstanding
voting securities of the respective Fund or Portfolio. The term "voting
securities" as used in this paragraph has the same meaning as in the 1940 Act.
Neither of the Funds nor the Portfolio may:
(1) Borrow money or pledge, mortgage or hypothecate assets of the Fund
or Portfolio, except that as a temporary measure for extraordinary or
emergency purposes it may borrow in an amount not to exceed 1/3 of the
current value of the Fund's or the Portfolio's net assets, including the
amount borrowed, and may pledge, mortgage or hypothecate not more than 1/3
of such assets to secure such borrowings (it is intended that money would
be borrowed for the Fund or Portfolio only from banks and only to
accommodate requests for the repurchase of shares of the Fund or
beneficial interests in the Portfolio while effecting an orderly
liquidation of portfolio securities), provided that collateral
arrangements with respect to futures contracts, including deposits of
initial and variation margin, are not considered a pledge of assets for
purposes of this restriction; for additional related restrictions, see
clause (i) under the caption "State and Federal Restrictions" hereafter.
(2) Purchase any security or evidence of interest therein on margin,
except that such short-term credit may be obtained for the Fund or
Portfolio as may be necessary for the clearance of purchases and sales of
securities and except that deposits of initial and variation margin may be
made for the Fund or Portfolio in connection with the purchase, ownership,
holding or sale of futures contracts.
(3) Write, purchase or sell any put or call option or any combination
thereof, provided that this shall not prevent (i) the writing, purchasing
or selling of puts, calls or combinations thereof with respect to U.S.
Government securities or with respect to futures contracts, or (ii) the
writing, purchase, ownership, holding or sale of futures contracts.
(4) Underwrite securities issued by other persons except insofar as
either the Trust or the Portfolio Trust may technically be deemed an
underwriter under the Securities Act of 1933 in selling a portfolio
security (provided, however, that the Fund may invest all of its assets in
an open-end management investment company with the same investment
objective and policies and substantially the same investment restrictions
as the Fund (a "Qualifying Portfolio")).
(5) Make loans to other persons except (a) through the lending of the
Fund's or Portfolio's securities and provided that any such loans not
exceed 30% of a Fund's or Portfolio's total assets, as the case may be
(taken at market value), (b) through the use of repurchase agreements or
the purchase of short-term obligations (and, in the case of the
Intermediate Income Fund, provided that not more than 15% of the total
assets of the Fund, as the case may be, will be invested in repurchase
agreements maturing in more than seven days), or (c) by purchasing a
portion of an issue of debt securities of types commonly distributed
privately to financial institutions, for which purposes 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.
(6) 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 (except futures contracts) in the ordinary course of
business (the Trust and Portfolio Trust 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 Portfolio).
(7) With respect to the Government Income Fund or the Portfolio,
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 for the Fund or Portfolio, except that all of the assets of the
Government Income Fund may be invested in a Qualifying Portfolio.
(8) With respect to 75% of the assets of the Intermediate Income Fund,
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 for the Fund, except that all of the assets of the Fund may be
invested in a Qualifying Portfolio.
(9) With respect to the Government Income Fund or the Portfolio,
purchase securities of any issuer if such purchase at the time thereof
would cause more than 5% of the assets of the Fund or Portfolio (taken at
market value) to be invested in the securities of such issuer (other than
securities or obligations issued or guaranteed by the United States, any
state or any political subdivision of the United States or any state, or
any agency or instrumentality of the United States or of any state or of
any political subdivision of any state or the United States); provided
that for purposes of this restriction the issuer of a futures contract
shall not be deemed to be the issuer of the security or securities
underlying such contract; and further provided that all of the assets of
the Government Income Fund may be invested in a Qualifying Portfolio.
(10) With respect to 75% of the assets of the Intermediate Income
Fund, purchase securities of any issuer if such purchase at the time
thereof would cause more than 5% of the assets of the Fund (taken at
market value) to be invested in the securities of such issuer (other than
securities or obligations issued or guaranteed by the United States, any
state or any political subdivision of the United States or any state, or
any agency or instrumentality of the United States or of any state or of
any political subdivision of any state or the United States); provided
that for purposes of this restriction the issuer of a futures contract
shall not be deemed to be the issuer of the security or securities
underlying such contract; and further provided that all of the assets of
the Fund may be invested in a Qualifying Portfolio.
(11) Make short sales of securities or maintain a short position,
unless at all times when a short position is open the Fund or Portfolio
owns an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities
of the same issue as, and equal in amount to, the securities sold short,
and unless not more than 10% of the net assets of the Fund or Portfolio
(taken at market value), is held as collateral for such sales at any one
time.
(12) Concentrate its investments in any particular industry, but if it
is deemed appropriate for the achievement of the investment objective of
the Fund or Portfolio up to 25% of its assets, at market value at the time
of each investment, may be invested in any one industry, except that
positions in futures contracts shall not be subject to this restriction
and except that all of the assets of the Fund may be invested in a
Qualifying Portfolio.
(13) Issue any senior security (as that term is defined in the 1940
Act) if such issuance is specifically prohibited by the 1940 Act or the
rules and regulations promulgated thereunder, provided that collateral
arrangements with respect to futures contracts, including deposits of
initial and variation margin, are not considered to be the issuance of a
senior security for purposes of this restriction.
The Trust, with respect to the Government Income Fund, and the Portfolio
Trust, with respect to the Portfolio, have each also adopted a policy which is
fundamental and which provides that all of the assets of the Government Income
Fund or Portfolio will be invested in obligations that are backed by the full
faith and credit of the U.S. Government except that all of the assets of the
Government Income Fund may be invested in a Qualifying Portfolio all of whose
assets will be invested in obligations that are backed by the full faith and
credit of the U.S. Government. This policy is not intended to prohibit the use
of futures contracts on fixed income securities by the Government Income Fund.
Investment Restriction (11) above applies only to short sales of or short
positions in securities, and does not prevent the writing, purchase,
ownership, holding or sale of futures contracts.
NON-FUNDAMENTAL RESTRICTIONS
The Trust, on behalf of each Fund, and the Portfolio Trust, on behalf of
the Portfolio, will not, 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 at cost) (moreover, the Trust or Portfolio
Trust will not purchase any securities for the Fund or Portfolio at any
time at which borrowings exceed 5% of the total assets of the Fund or
Portfolio, as the case may be (taken at market value)),
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10%
of the net assets of the Fund or Portfolio (taken at market value),
provided that collateral arrangements with respect to futures contracts,
including deposits of initial and variation margin, are not considered a
pledge of assets for purposes of this restriction,
(iii) sell any security which the Fund or Portfolio does not own
unless by virtue of the ownership of other securities there is at the time
of sale a right to obtain securities, without payment of further
consideration, equivalent in kind and amount to the securities sold and
provided that if such right is conditional the sale is made upon the same
conditions,
(iv) invest for the purpose of exercising control or management,
except that all of the assets of the Fund may be invested in a Qualifying
Portfolio,
(v) purchase securities issued by any registered investment company,
except that all of the assets of the Fund may be invested in a Qualifying
Portfolio and except by purchase in the open market where no commission or
profit to a sponsor or dealer results from such purchase other than the
customary broker's commission, or except when such purchase, though not
made in the open market, is part of a plan of merger or consolidation;
provided, however, that the Trust, on behalf of the Fund, and the
Portfolio Trust, on behalf of the Portfolio, will not purchase the
securities of any registered investment company (other than a Qualifying
Portfolio in which all the assets of the Fund are invested) if such
purchase at the time thereof would cause more than 10% of the total assets
of the Fund or Portfolio (taken in each case at the greater of cost or
market value) to be invested in the securities of such issuers or would
cause more than 3% of the outstanding voting securities of any such issuer
to be held for the Fund or Portfolio (the Portfolio Trust, on behalf of
the Portfolio, shall not purchase securities issued by any open-end
investment company),
(vi) knowingly invest in securities which are subject to legal or
contractual restrictions on resale (other than repurchase agreements
maturing in not more than seven days) if, as a result thereof, more than
15% of the Fund's or Portfolio's net assets (taken at market value) would
be so invested (including repurchase agreements maturing in more than
seven days),
(vii) purchase securities of any issuer if such purchase at the time
thereof would cause the Fund or Portfolio 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 and all preferred stock of an
issuer shall be deemed a single class, except that all of the assets of
the Fund may be invested in a Qualifying Portfolio and except that Futures
Contracts shall not be subject to this restriction,
(viii) invest more than 5% of the assets of the Fund or Portfolio in
companies which, including predecessors, have a record of less than three
years' continuous operation, except that all of the assets of the Fund may
be invested in a Qualifying Portfolio, or
(ix) purchase or retain any securities issued by an issuer any of
whose officers, directors, trustees or security holders is an officer or
Trustee of the Trust or of the Portfolio Trust, or is an officer or
director of the Adviser, if after the purchase of the securities of such
issuer 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.
These policies are not fundamental and may be changed by the Trust with
respect to a Fund or the Portfolio Trust with respect to the Portfolio without
approval of its shareholders (or holders of beneficial interests).
PERCENTAGE AND RATING RESTRICTIONS
If a percentage restriction on investment or utilization of assets set
forth above or referred to in the Prospectus is adhered to at the time an
investment is made or assets are so utilized, a later change in percentage
resulting from changes in the value of the securities held for a Fund is not
considered a violation of policy.
3. PERFORMANCE INFORMATION
A total rate of return quotation for a Fund is calculated for any period
by (a) dividing (i) the sum of the net asset value per share on the last day
of the period and the net asset value per share on the last day of the period
of shares purchasable with dividends and capital gains distributions declared
during such period with respect to a share held at the beginning of such
period and with respect to shares purchased with such dividends and capital
gains distributions, by (ii) the public offering price per share on the first
day of such period, and (b) subtracting 1 from the result. Any annualized
total rate of return quotation is calculated by (x) adding 1 to the period
total rate of return quotation calculated above, (y) raising such sum to a
power which is equal to 365 divided by the number of days in such period, and
(z) subtracting 1 from the result. Total rates of return may also be
calculated on investments at various sales charge levels or at net asset
value. Any performance data which is based on a reduced sales charge or net
asset value per share would be reduced if the maximum sales charge were taken
into account.
Any current yield quotation for a Fund consists of an annualized
historical yield, carried at least to the nearest hundredth of one percent,
based on a 30 calendar day or one month period and is calculated by (a)
raising to the sixth power the sum of 1 plus the quotient obtained by dividing
the Fund's net investment income earned during the period by the product of
the average daily number of shares outstanding during the period that were
entitled to receive dividends and the maximum public offering price per share
on the last day of the period, (b) subtracting 1 from the result, and (c)
multiplying the result by 2.
Any tax equivalent yield quotation of a Fund is calculated as follows: If
the entire current yield quotation for such period is state tax-exempt, the
tax equivalent yield would 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 state tax-exempt, the tax equivalent yield would be the sum of (a) that
portion of the yield which is state tax-exempt divided by 1 minus a stated
income tax rate or rates and (b) the portion of the yield which is not state
tax-exempt.
Set forth below is total rate of return information for the Class A shares
of the Government Income Fund and the Intermediate Income Fund for the periods
indicated, assuming that dividends and capital gains distributions, if any,
were reinvested, and that at the beginning of such periods the maximum sales
charge of 1.50% had been applicable to purchases of shares of the Government
Income Fund and that the maximum sales charge of 4.00% had been applicable to
purchases of shares of the Intermediate Income Fund. No Class B shares were
outstanding during such periods.
CLASS A SHARES
<TABLE>
<CAPTION>
REDEEMABLE VALUE
ANNUALIZED OF A HYPOTHETICAL
PERIOD TOTAL $1,000 INVESTMENT
GOVERNMENT INCOME FUND RATE OF RETURN AT THE END OF THE PERIOD
<S> <C> <C>
September 8, 1986 (commencement of operations) to December 31, 1995 6.46% $1,793.00
One year ended December 31, 1995 9.81% $1,098.26
Five years ended December 31, 1995 6.58% $1,475.00
INTERMEDIATE INCOME FUND
June 25, 1993 (commencement of operations) to December 31, 1995 3.84% $1,099.79
One year ended December 31, 1995 16.45% $1,118.00
</TABLE>
The annualized yields of the Class A shares of the Government Income Fund
and the Intermediate Income Fund for the 30-day period ended December 31, 1995
were, respectively, 4.96% and 5.17%.
Comparative performance information may be used from time to time in
advertising shares of the Funds, including data from Lipper Analytical
Services, Inc. and other industry sources and publications. From time to time
a Fund may compare its performance against inflation with the performance of
other instruments against inflation, such as FDIC-insured bank money market
accounts. In addition, advertising for the Funds may indicate that investors
should consider diversifying their investment portfolios in order to seek
protection of the value of their assets against inflation. From time to time,
advertising materials for the Funds may refer to or discuss current or past
economic or financial conditions, developments and events. The Intermediate
Income Fund's advertising materials also may refer to the integration of the
world's securities markets, discuss the investment opportunities available
worldwide and mention the increasing importance of an investment strategy
including non-U.S. investments.
4. DETERMINATION OF NET ASSET VALUE; VALUATION OF SECURITIES;
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
The net asset value of each share of a class of a Fund is determined each
day during which the New York Stock Exchange (the "Exchange") is open for
trading. As of the date of this Statement of Additional Information, the
Exchange is open for trading every weekday except for the following holidays
(or the days on which they are observed): New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. This determination is made once each day as of the close of
regular trading on the Exchange (normally 4:00 p.m. Eastern time) by adding
the market value of all securities and other assets attributable to a class of
shares of a Fund (including in the case of Government Income Fund its interest
in the Portfolio), then subtracting the liabilities charged to the class, and
then dividing the result by the number of outstanding shares of the class. Per
share net asset value of each class of each Fund's shares can be expected to
differ because the Class B shares bear higher expenses than Class A shares.
The net asset value per share is effective for orders received and accepted by
the Distributor prior to its calculation.
The value of the 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 Government Income Fund is determined. The net asset value of the
Government Income Fund's investment in the Portfolio is equal to the Fund's
pro rata share of the net assets of the Portfolio.
Bonds and other fixed income securities (other than short-term
obligations) held for each Fund are valued on the basis of valuations
furnished by a pricing service, use of which has been approved by the Board of
Trustees of the Trust. In making such valuations, the pricing service utilizes
both dealer-supplied valuations and electronic data processing techniques
which take into account appropriate factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type
of issue, trading characteristics and other market data, without exclusive
reliance upon quoted prices or exchange or over-the-counter prices, since such
valuations are believed to reflect more accurately the fair value of such
securities. Short-term obligations (maturing in 60 days or less) are valued at
amortized cost, which constitutes fair value as determined by the Board of
Trustees of the Trust. Futures Contracts are normally valued at the settlement
price on the exchange on which they are traded. Securities for which there are
no such valuations are valued at fair value as determined in good faith by or
at the direction of the Board of Trustees of the Trust.
Trading in securities on most non-U.S. exchanges and over-the-counter
markets is normally completed before the close of regular trading on the New
York Stock Exchange and may also take place on days on which the New York
Stock Exchange is closed. If events materially affecting the value of non-U.S.
securities occur between the time when the exchange on which they are traded
closes and the time when a Fund's net asset value is calculated, such
securities will be valued at fair value in accordance with procedures
established by and under the general supervision of the Board of Trustees of
the Trust.
Interest income on long-term obligations held for a Fund is determined on
the basis of interest accrued plus amortization of "original issue discount"
(generally, the difference between issue price and stated redemption price at
maturity) and premiums (generally, the excess of purchase price over stated
redemption price at maturity). Interest income on short-term obligations is
determined on the basis of interest accrued less amortization of any premium.
Subject to compliance with applicable regulations, the Trust and the
Portfolio Trust have each reserved the right to pay the redemption or
repurchase price of shares of the Funds or of beneficial interests in the
Portfolio, either totally or partially, by a distribution in kind of readily
marketable securities (instead of cash). The securities so distributed would
be valued at the same amount as that assigned to them in calculating the net
asset value for the shares or beneficial interests being sold. If a holder of
shares or beneficial interests received a distribution in kind, such holder
could incur brokerage or other charges in converting the securities to cash.
The Trust or the Portfolio Trust may suspend the right of redemption or
postpone the date of payment for shares of a Fund or beneficial interests in
the Portfolio more than seven days during any period when (a) trading in the
markets the Fund or the Portfolio normally utilizes is restricted, or an
emergency, as defined by the rules and regulations of the SEC exists making
disposal of a Fund's or Portfolio's investments or determination of its net
asset value not reasonably practicable; (b) the New York Stock Exchange is
closed (other than customary weekend and holiday closings); or (c) the SEC has
by order permitted such suspension.
LETTER OF INTENT
If an investor anticipates purchasing at least the minimum amount of Class
A shares of any Fund required for a volume discount as described in the
Prospectus, either alone or in combination with Class B shares of the Fund or
any of the classes of other Landmark Funds within a 13-month period, the
investor may obtain such shares at the same reduced sales charge as though the
total quantity were invested in one lump sum by completing a Letter of Intent
on the terms described below. Subject to acceptance by the Distributor and the
conditions mentioned below, each purchase will be made at a public offering
price applicable to a single transaction of the dollar amount specified in the
Letter of Intent. The shareholder or his or her Shareholder Servicing Agent
must inform the Distributor that the Letter of Intent is in effect each time
shares are purchased. The shareholder makes no commitment to purchase
additional shares, but if his or her purchases within 13 months plus the value
of shares credited toward completion of the Letter of Intent do not total the
sum specified, an increased sales charge will apply as described below. A
purchase not originally made pursuant to a Letter of Intent may be included
under a subsequent Letter of Intent executed within 90 days of such purchase
if the Distributor is informed in writing of this intent within such 90-day
period. The value of shares of a Fund presently held, at cost or maximum
offering price (whichever is higher), on the date of the first purchase under
the Letter of Intent, may be included as a credit toward the completion of
such Letter, but the reduced sales charge applicable to the amount covered by
such Letter is applied only to new purchases. Instructions for issuance of
shares in the name of a person other than the person signing the Letter of
Intent must be accompanied by a written statement from the Shareholder
Servicing Agent stating that the shares were paid for by the person signing
such Letter. Neither income dividends nor capital gain distributions taken in
additional shares will apply toward the completion of the Letter of Intent.
The value of any shares redeemed or otherwise disposed of by the purchaser
prior to termination or completion of the Letter of Intent are deducted from
the total purchases made under such Letter of Intent.
If the investment specified in the Letter of Intent is not completed
(either prior to or by the end of the 13-month period), the Shareholder
Servicing Agent will redeem, within 20 days of the expiration of the Letter of
Intent, an appropriate number of the shares in order to realize the difference
between the reduced sales charge that would apply if the investment under the
Letter of Intent had been completed and the sales charge that would normally
apply to the number of shares actually purchased. By completing and signing
the Letter of Intent, the shareholder irrevocably appoints the Shareholder
Servicing Agent his or her attorney to surrender for redemption any or all
shares purchased under the Letter of Intent with full power of substitution in
the premises.
RIGHT OF ACCUMULATION
A shareholder qualifies for cumulative quantity discounts on the purchase
of Class A shares when his or her new investment, together with the current
offering price value of all holdings of that shareholder in the Landmark
Funds, reaches a discount level. See "Purchases" in the Prospectus for the
sales charges on quantity discounts. For example, if a Government Income Fund
shareholder owns shares valued at $50,000 and purchases an additional $50,000
of Class A shares of a Fund, the sales charge for the $50,000 purchase would
be at the rate of 1.00% (the rate applicable to single transactions of
$100,000). A shareholder must provide the Shareholder Servicing Agent with
information to verify that the quantity sales charge discount is applicable at
the time the investment is made.
5. MANAGEMENT
The Trustees and officers of the Trusts and the Portfolio Trust, their
ages and their principal occupations during the past five years are set forth
below. Their titles may have varied during that period. Asterisks indicate
that those Trustees and officers are "interested persons" (as defined in the
1940 Act) of the Trust or the Portfolio Trust. Unless otherwise indicated
below, the address of each Trustee and officer is 6 St. James Avenue, Boston,
Massachusetts. The address of the Portfolio Trust is Elizabethan Square,
George Town, Grand Cayman, British West Indies.
TRUSTEES OF THE TRUST
H.B. ALVORD; 73 -- Treasurer-Tax Collector, County of Los Angeles (retired,
March, 1984); Chairman, certain registered investment companies in the 59 Wall
Street funds group. His address is P.O. Box 1812, Pebble Beach, California.
PHILIP W. COOLIDGE; 44* -- President of the Trust and the Portfolio Trust;
Chairman, Chief Executive Officer and President, Signature Financial Group,
Inc. and The Landmark Funds Broker-Dealer Services, Inc. (since December,
1988).
RILEY C. GILLEY; 69 -- Vice President and General Counsel, Corporate Property
Investors (November, 1988 to December, 1991); Partner, Breed, Abbott & Morgan
(Attorneys) (retired, December, 1987). His address is 4041 Gulf Shore
Boulevard North, Naples, Florida.
DIANA R. HARRINGTON; 56 -- Professor, Babson College (since September, 1993);
Visiting Professor, Kellogg Graduate School of Management, Northwestern
University (September, 1992 to September, 1993); Professor, Darden Graduate
School of Business, University of Virginia (September, 1978 to September,
1993); Consultant to PanAgora Asset Management (since 1994). Her address is
120 Goulding Street, Holliston, Massachusetts.
SUSAN B. KERLEY; 44 -- President, Global Research Associates, Inc. (Investment
Research) (since August, 1990); Manager, Rockefeller & Co. (March, 1988 to
July, 1990); Trustee, Mainstay Institutional Funds (since December, 1990). Her
address is P.O. Box 9572, New Haven, Connecticut.
C. OSCAR MORONG, JR.; 61 -- Chairman of the Board of Trustees of the Trust;
Managing Director, Morong Capital Management (since February, 1993); Senior
Vice President and Investment Manager, CREF Investments, Teachers Insurance &
Annuity Association (retired January, 1993); Director, Indonesia Fund;
Director, MAS Funds. His address is 1385 Outlook Drive West, Mountainside, New
Jersey.
DONALD B. OTIS; 77 -- Director of Investor Relations, International Business
Machines Corporation (retired February, 1982). His address is 6300 Midnight
Pass Road, Sarasota, Florida.
E. KIRBY WARREN; 61 -- Professor of Management, Graduate School of Business,
Columbia University (since 1987); Samuel Bronfman Professor of Democratic
Business Enterprise (1978-1987). His address is Columbia University, Graduate
School of Business, 725 Uris Hall, New York, New York.
WILLIAM S. WOODS, JR.; 75 -- Vice President-Investments, Sun Company, Inc.
(retired, April, 1984). His address is 35 Colwick Road, Cherry Hill, New
Jersey.
TRUSTEES OF THE PORTFOLIO TRUST
ELLIOTT J. BERV; 53 -- Chairman and Director, Catalyst, Inc. (Management
Consultants)(since June, 1992); President, Chief Operating Officer and
Director, Deven International, Inc. (International Consultants)(June, 1991 to
June 1992); President and Director, Elliott J. Berv & Associates (Management
Consultants)(since May, 1984). His address is 15 Stornoway Drive, Cumberland
Foreside, Maine.
PHILIP W. COOLIDGE; 44* -- President of the Trust and the Portfolio Trust;
Chairman, Chief Executive Officer and President, Signature Financial Group,
Inc. and The Landmark Funds Broker-Dealer Services, Inc. (since December,
1988).
MARK T. FINN; 52 -- President and Director, Delta Financial, Inc. (since June,
1983); Chairman of the Board and Chief Executive Officer, FX 500 Ltd.
(Commodity Trading Advisory Firm)(since April, 1990); Director, Vantage
Consulting Group, Inc. (since October, 1988). His address is 3500 Pacific
Avenue, P.O. Box 539, Virginia Beach, Virginia.
WALTER E. ROBB, III; 69 -- President, Benchmark Consulting Group, Inc. (since
1991); Principal, Robb Associates (corporate financial advisers) (since 1978);
President, Benchmark Advisors, Inc. (Corporate Financial Advisors)(since
1989); Trustee of certain registered investment companies in the MFS Family of
Funds. His address is 35 Farm Road, Sherborn, Massachusetts.
OFFICERS OF THE TRUST AND THE PORTFOLIO TRUST
PHILIP W. COOLIDGE; 44* -- President of the Trust and the Portfolio Trust;
Chairman, Chief Executive Officer and President, Signature Financial Group,
Inc. and The Landmark Funds Broker-Dealer Services, Inc. (since December,
1988).
DAVID G. DANIELSON; 31* -- Assistant Treasurer of the Trust and the Portfolio
Trust; Assistant Manager, Signature Financial Group, Inc. (since May, 1991).
JOHN R. ELDER; 47* -- Treasurer of the Trust and the Portfolio Trust; Vice
President, Signature Financial Group, Inc. (since April, 1995); Treasurer of
the Phoenix Family of Mutual Funds, Phoenix Home Life Mutual Insurance Company
(1983 to March, 1995).
LINDA T. GIBSON; 30* -- Assistant Secretary of the Trust and the Portfolio
Trust; Legal Counsel, Signature Financial Group, Inc. (since June, 1991); Law
Student, Boston University School of Law (September, 1989 to May, 1992);
Product Manager, Signature Financial Group, Inc. (January, 1989 to September,
1989).
SUSAN JAKUBOSKI; 32* -- Assistant Treasurer and Assistant Secretary of the
Portfolio Trust (since August, 1994); Manager, Signature Financial Group
(Cayman) Ltd. (since August, 1994); Senior Fund Administrator, Signature
Financial Group, Inc. (since August, 1994); Assistant Treasurer, Signature
Broker-Dealer Services, Inc. (since September, 1994); Fund Compliance
Administrator, Concord Financial Group (November, 1990 to August, 1994);
Senior Fund Accountant, Neuberger & Berman Management, Inc. (from February,
1988 to November, 1990); Customer Service Representative, I.B.J. Schroder
(prior to 1988). Her address is Elizabethan Square, George Town, Grand Cayman,
Cayman Islands, BWI.
THOMAS M. LENZ; 37* -- Secretary of the Trust and the Portfolio Trust; Vice
President and Associate General Counsel, Signature Financial Group, Inc.
(since November, 1989); Assistant Secretary, Signature Broker-Dealer Services,
Inc. (since February, 1991); Attorney, Ropes & Gray (September, 1984 to
November, 1989).
MOLLY S. MUGLER; 44* -- Assistant Secretary of the Trust and the Portfolio
Trust; Legal Counsel and Assistant Secretary, Signature Financial Group, Inc.
(since December, 1988); Assistant Secretary, The Landmark Funds Broker-Dealer
Services, Inc. (since December, 1988).
BARBARA M. O'DETTE; 36* -- Assistant Treasurer of the Trust and the Portfolio
Trust; Assistant Treasurer, Signature Financial Group, Inc. and The Landmark
Funds Broker-Dealer Services, Inc. (since December, 1988).
ANDRES E. SALDANA; 33* -- Assistant Secretary of the Trust and the Portfolio
Trust; Legal Counsel and Assistant Secretary, Signature Financial Group, Inc.
(since November, 1992); Attorney, Ropes & Gray (September, 1990 to November,
1992).
DANIEL E. SHEA; 33* -- Assistant Treasurer of the Trust and the Portfolio
Trust; Assistant Manager of Fund Administration, Signature Financial Group,
Inc. (since November, 1993); Supervisor and Senior Technical Advisor, Putnam
Investments (prior to 1990).
The Trustees and officers of the Trust and the Portfolio Trust also hold
comparable positions with certain other funds for which LFBDS, SFG or their
affiliates serve as the distributor or administrator.
The following table shows Trustee compensation for the periods indicated.
TRUSTEE COMPENSATION TABLE
<TABLE>
<CAPTION>
AGGREGATE AGGREGATE
COMPENSATION COMPENSATION TOTAL
FROM THE FROM THE COMPENSATION
GOVERNMENT INTERMEDIATE FROM TRUST AND
TRUSTEE INCOME FUND (1) INCOME FUND (1) COMPLEX (2)
<S> <C> <C> <C>
H. B. Alvord .............................................. $1,335.13 $1,655.99 $40,000.00
Riley C. Gilley ........................................... $1,600.45 $1,897.55 $44,000.00
Diana R. Harrington ....................................... $1,502.48 $1,807.33 $40,000.00
Susan B. Kerley ........................................... $1,502.48 $1,807.33 $40,000.00
C. Oscar Morong, Jr. ...................................... $1,427.16 $1,741.34 $44,500.00
Donald B. Otis ............................................ $2,382.18 $2,609.92 $40,000.00
E. Kirby Warren ........................................... $1,427.16 $1,741.34 $44,500.00
William S. Woods, Jr. ..................................... $1,845.88 $1,945.51 $44,000.00
- ----------
<FN>
(1) For the fiscal year ended December 31, 1995.
(2) Information relates to the fiscal year ended December 31, 1995. Messrs.
Alvord, Coolidge, Finn, Gilley, Morong, Robb, Warren and Woods, and Mses.
Harrington and Kerley are Trustees of 15, 14, 15, 15, 15, 9, 14, and 14
funds or portfolios, respectively, in the Landmark Family of Funds.
</FN>
</TABLE>
As of March 31, 1996, all Trustees and officers as a group owned less than
1% of the outstanding shares of the Funds. As of the same date, more than 95%
of the outstanding shares of each Fund were held of record by Citibank, N.A.
or its affiliates, as Shareholder Servicing Agents of the Funds for the
accounts of their respective clients.
The Declaration of Trust of each of the Trust and the Portfolio Trust
provides that each of the Trust and the Portfolio Trust, respectively, will
indemnify its Trustees and officers against liabilities and expenses incurred
in connection with litigation in which they may be involved because of their
offices with the Trust or the Portfolio Trust, as the case may be, unless, as
to liability to the Trust, the Portfolio Trust or their respective investors,
it is finally adjudicated that they engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in their
offices, or unless with respect to any other matter it is finally adjudicated
that they did not act in good faith in the reasonable belief that their
actions were in the best interests of the Trust or the Portfolio Trust, as the
case may be. In the case of settlement, such indemnification will not be
provided unless it has been determined by a court or other body approving the
settlement or other disposition, or by a reasonable determination, based upon
a review of readily available facts, by vote of a majority of disinterested
Trustees of the Trust or the Portfolio Trust, or in a written opinion of
independent counsel, that such officers or Trustees have not engaged in
willful misfeasance, bad faith, gross negligence or reckless disregard of
their duties.
ADVISER
Citibank manages the assets of the Intermediate Income Fund and the
Portfolio pursuant to separate investment advisory agreements (the "Advisory
Agreements"). Subject to such policies as the Board of Trustees of the Trust
or the Portfolio Trust, as the case may be, may determine, the Adviser manages
the securities of the Intermediate Income Fund and the Portfolio and makes
investment decisions for the Intermediate Income Fund and the Portfolio. The
Adviser furnishes at its own expense all services, facilities and personnel
necessary in connection with managing the Intermediate Income Fund's and the
Portfolio's investments and effecting securities transactions for the
Intermediate Income Fund and the Portfolio. The Portfolio's Advisory Agreement
will continue in effect as long as such continuance is specifically approved
at least annually by the Board of Trustees of the Portfolio Trust or by a vote
of a majority of the outstanding voting securities of the Portfolio, and, in
either case, by a majority of the Trustees of the Portfolio Trust who are not
parties to the Advisory Agreement or interested persons of any such party, at
a meeting called for the purpose of voting on the Advisory Agreement. The
Advisory Agreement of the Intermediate Income Fund will continue in effect as
long as such continuance is specifically approved at least annually by the
Board of Trustees of the Trust or by a vote of a majority of the outstanding
voting securities of the Intermediate Income Fund, and, in either case, by a
majority of the Trustees of the Trust who are not parties to the Advisory
Agreement or interested persons of any such party, at a meeting called for the
purpose of voting on the Advisory Agreement.
Each of the Advisory Agreements provides that the Adviser may render
services to others. Each Advisory Agreement is terminable without penalty on
not more than 60 days' nor less than 30 days' written notice by the Trust or
the Portfolio Trust, as the case may be, when authorized either by a vote of a
majority of the outstanding voting securities of the Intermediate Income Fund
or Portfolio or by a vote of a majority of the Board of Trustees of the Trust
or Portfolio Trust, as appropriate, 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 and management of the Intermediate Income Fund or
Portfolio, as the case may be, except for willful misfeasance, bad faith or
gross negligence or reckless disregard of its or their obligations and duties
under the Advisory Agreement.
The Prospectus contains a description of the fees payable to the Adviser
for services under the Advisory Agreements. For the fiscal year ended August
31, 1993, the fee payable to the Adviser from the Government Income Fund under
a prior investment advisory agreement between the Government Income Fund and
the Adviser was $213,869 (of which $134,725 was voluntarily waived). For the
four-month period ended December 31, 1993, the fee payable to the Adviser from
the Government Income Fund under the prior advisory agreement was $96,878 (of
which $61,193 was voluntarily waived). For the four month period ended April
30, 1994, the fee payable from the Government Income Fund to the Adviser under
the prior advisory agreement was $93,572 (of which $67,712 was voluntarily
waived). For the period from May 1, 1994 to December 31, 1994, the fee payable
to the Adviser under the Portfolio's Advisory Agreement was $148,797. For the
fiscal year ended December 31, 1995 the fee payable to the Adviser under the
Portfolio's Advisory Agreement was $179,525 (of which $1,055 was voluntarily
waived). For the period June 25, 1993 (commencement of operations) to December
31, 1993 and for the fiscal years ended December 31, 1994 and 1995, the fees
payable from the Intermediate Income Fund to the Adviser under its Advisory
Agreement were $115,175 (of which $53,119 was waived), $186,301 (of which
$120,645 was voluntarily waived) and $171,213 (of which $115,475 was
voluntarily waived), respectively.
ADMINISTRATOR
Pursuant to administrative services agreements (the "Administrative
Services Agreements"), LFBDS and SFG provide the Trust and the Portfolio
Trust, respectively, with general office facilities and LFBDS and SFG
supervise the overall administration of the Trust or the Portfolio Trust,
including, among other responsibilities, the negotiation of contracts and fees
with, and the monitoring of performance and billings of, the Trust's or the
Portfolio Trust's independent contractors and agents; the preparation and
filing of all documents required for compliance by the Trust or the Portfolio
Trust with applicable laws and regulations; and arranging for the maintenance
of books and records of the Trust or the Portfolio Trust. The Administrator
and the Portfolio Administrator provide persons satisfactory to the Board of
Trustees of the Trust or the Portfolio Trust to serve as Trustees and officers
of the Trust and the Portfolio Trust, respectively. Such Trustees and
officers, as well as certain other employees and Trustees of the Trust and the
Portfolio Trust, may be directors, officers or employees of LFBDS, SFG or
their affiliates.
The Prospectus contains a description of the fees payable to the
Administrator and the Portfolio Administrator under the Administrative
Services Agreements. For the fiscal year ended August 31, 1993, the fee
payable to LFBDS from the Government Income Fund under the Administrative
Services Agreement and a prior administrative services agreement with the
Trust was $122,210 (of which $33,344 was voluntarily waived). For the four-
month period ended December 31, 1993, the fee payable to LFBDS from the
Government Income Fund under the Administrative Services Agreement was $55,359
(of which $12,386 was voluntarily waived). For the four month period ended
April 30, 1994, the period from May 1, 1994 to December 31, 1994 and for the
fiscal year ended December 31, 1995, the fees payable to LFBDS from the
Government Income Fund under the Administrative Services Agreement were
$53,470 (of which $15,652 was voluntarily waived), $115,661 (of which $60,059
was voluntarily waived) and $72,047 (all of which was voluntarily waived),
respectively. For the period from May 1, 1994 to December 31, 1994 and for the
fiscal year ended December 31, 1995, the fees payable to SFG from the
Portfolio under the Administrative Services Agreement with the Portfolio Trust
were $21,257 (of which $1,583 was voluntarily waived) and $25,646 (of which
$18,221 was voluntarily waived), respectively. For the period from June 25,
1993 (commencement of operations) to December 31, 1993 and for the fiscal
years ended December 31, 1994 and 1995, the fees payable to LFBDS from the
Intermediate Income Fund were $65,815 (of which $35,202 was voluntarily
waived), $106,458 (of which $37,176 was voluntarily waived) and $97,836 (of
which $38,337 was voluntarily waived), respectively.
The Administrative Services Agreement with the Trust acknowledges that the
names "Landmark" and "Landmark Funds" are the property of the Administrator
and provides that if LFBDS ceases to serve as the Administrator of the Trust,
the Trust would change its name and the name of the Funds 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 to use the word
"Landmark" or the words "Landmark Funds" in their names.
The Administrative Services Agreement with the Trust continues in effect
with respect to each Fund if such continuance is specifically approved at
least annually by the Board of Trustees of the Trust or by a vote of a
majority of the outstanding voting securities of the Trust and, in either
case, by a majority of the Trustees who are not parties to the Administrative
Services Agreement or interested persons of any such party. The Administrative
Services Agreement with the Trust terminates automatically if it is assigned
and may be terminated without penalty by vote of a majority of the outstanding
voting securities of the Trust 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, as the Administrator, nor its
personnel shall be liable for any error of judgment or mistake of law or for
any act or omission in the administration or management of the Trust, except
for willful misfeasance, bad faith or gross negligence in the performance of
its or their duties or by reason of reckless disregard of its or their
obligations and duties under the Administrative Services Agreement.
The Administrative Services Agreement with the Portfolio Trust provides
that SFG may render administrative services to others. The Administrative
Services Agreement with the Portfolio Trust terminates automatically if it is
assigned and may be terminated without penalty by a vote of a majority of the
outstanding voting securities of the Portfolio Trust or by either party on not
more than 60 days' nor less than 30 days' written notice. The Administrative
Services Agreement with the Portfolio Trust also provides that neither SFG, as
the Portfolio Administrator, nor its personnel shall be liable for any error
of judgment or mistake of law or for any act or omission in the administration
or management of the Portfolio Trust, except for willful misfeasance, bad
faith or gross negligence in the performance of its or their duties or by
reason of reckless disregard of its or their obligations and duties under the
Portfolio Trust's Administrative Services Agreement.
LFBDS and SFG are wholly-owned subsidiaries of Signature Financial Group,
Inc. SFG is a company organized under the laws of the Cayman Islands. Its
principal place of business is in George Town, Grand Cayman, British West
Indies.
Pursuant to sub-administrative services agreements, Citibank performs such
sub-administrative duties for the Trust and the Portfolio Trust as from time
to time are agreed upon by Citibank and, respectively, LFBDS or SFG.
Citibank's sub-administrative duties may include providing equipment and
clerical personnel necessary for maintaining the Trust's or the Portfolio
Trust's organization, participation in the preparation of documents required
for compliance by the Trust or the Portfolio Trust with applicable laws and
regulations, the preparation of certain documents in connection with meetings
of Trustees and shareholders, and other functions which would otherwise be
performed by the Administrator. For performing such sub-administrative
services, Citibank receives compensation as from time to time is agreed upon
by Citibank and, respectively, LFBDS or SFG, not in excess of the amount paid
to LFBDS or SFG for its respective services under the Administrative Services
Agreements with the Trust and the Portfolio Trust. All such compensation is
paid by LFBDS or SFG.
DISTRIBUTOR
LFBDS serves as the Distributor of each Fund's shares pursuant to
Distribution Agreements with the Trust with respect to each class of shares of
each Fund. Unless otherwise terminated, the Distribution Agreement remains in
effect from year to year upon annual approval by the Trust's Board of
Trustees, or by the vote of a majority of the outstanding voting securities of
the Trust and by the vote of a majority of the Board of Trustees of the Trust
who are not parties to the Agreement or interested persons of any such party,
cast in person at a meeting called for the purpose of voting on such approval.
The Agreement will terminate in the event of its assignment, as defined in the
1940 Act.
The Trust has adopted a Distribution Plan (each a "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act with respect to each class of
shares of the Funds after concluding that there is a reasonable likelihood
that the Distribution Plans will benefit each Fund and its shareholders. The
Distribution Plan with respect to Class A shares provides that each Fund shall
pay a distribution fee to the Distributor at an annual rate not to exceed
0.15% of each Fund's average daily net assets represented by the Class A
shares. The Distribution Plan with respect to Class B shares provides that
each Fund will pay the Distributor a distribution fee at annual rate not to
exceed 0.75% (0.45% in the case of the Government Income Fund) of the average
daily net assets represented by the Class B shares. The Distributor receives
the distribution fees for its services under the Distribution Agreements in
connection with the distribution of each Fund's shares of each class
(exclusive of any advertising expenses incurred by the Distributor in
connection with the sale of Class A shares of each Fund). The Distributor may
use all or any portion of such distribution fee to pay for expenses of
printing prospectuses and reports used for sales purposes, expenses of the
preparation and printing of sales literature, commissions to dealers who sell
shares of the applicable class of the Fund and other distribution-related
expenses.
Each of the Funds is permitted to pay a service fee with respect to the
Class B shares at an annual rate not to exceed 0.25% of each Fund's average
daily net assets represented by the Class B shares.
Each Distribution Plan with respect to the Class A Shares also permits the
Funds to pay the Distributor an additional fee (not to exceed 0.05% of the
average daily net assets of the Class A shares) in anticipation of or as
reimbursement for print or electronic media advertising expenses incurred in
connection with the sale of Class A shares.
The Distribution Plans continue in effect if such continuance is
specifically approved at least annually by a vote of both a majority of the
Trust's Trustees and a majority of the Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the Distribution Plans or in any agreement related to the
Plans (for purposes of this paragraph "Qualified Trustees"). Each Distribution
Plan requires that the Trust and the Distributor provide to the Board of
Trustees, and the Board of Trustees review, at least quarterly, a written
report of the amounts expended (and the purposes therefor) under the
Distribution Plan. Each Distribution Plan further provides that the selection
and nomination of the Qualified Trustees is committed to the discretion of the
disinterested Trustees (as defined in the 1940 Act) then in office. The
Distribution Plans may be terminated with respect to any class of shares of
any Fund at any time by a vote of a majority of the Trust's Qualified Trustees
or by a vote of a majority of the outstanding voting securities of that class
of shares of the Fund. The Distribution Plan applicable to a class of shares
of any Fund may not be amended to increase materially the amount of a Fund's
permitted expenses thereunder without the approval of a majority of the
outstanding securities of that class of shares of that Fund and may not be
materially amended in any case without a vote of a majority of both the
Trustees and Qualified Trustees. The Distributor will preserve copies of any
plan, agreement or report made pursuant to each Distribution Plan for a period
of not less than six years from the date of the Plan, and for the first two
years the Distributor will preserve such copies in an easily accessible place.
As contemplated by the Distribution Plans, LFBDS acts as the agent of the
Trust in connection with the offering of shares of the Funds pursuant to the
Distribution Agreements. After the prospectuses and periodic reports of the
Funds have been prepared, set in type and mailed to existing shareholders, the
Distributor pays for the printing and distribution of copies thereof which are
used in connection with the offering of shares of the Funds to prospective
investors. The Prospectus contains a description of fees payable to the
Distributor under the Distribution Agreements. For the fiscal year ended
August 31, 1993, for the four-month period ended December 31, 1993 and for the
fiscal years ended December 31, 1994 and 1995, the fees payable to the
Distributor by the Government Income Fund under the Distribution Agreement
were $30,553 (of which $28,974 was voluntarily waived), $13,840 (all of which
was voluntarily waived), $34,098 (all of which was voluntarily waived) and
$22,576 (all of which was voluntarily waived), no portion of which was
applicable to reimbursement for expenses incurred in connection with print or
electronic media advertising. For the period June 25, 1993 (commencement of
operations) to December 31, 1993 and for the fiscal years ended December 31,
1994 and 1995, the fees payable to the Distributor from the Intermediate
Income Fund under the Distribution Plan were $16,454 (all of which was
voluntarily waived), $26,617 (all of which was voluntarily waived) and $24,459
(all of which was voluntarily waived), respectively.
SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN
The Trust has adopted an administrative services plan (the "Administrative
Services Plan") after having concluded that there is a reasonable likelihood
that the Administrative Services Plan will benefit the Funds and their
shareholders. The Administrative Services Plan 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 Trust's Administrative
Services Plan, the total of the fees paid from a Fund to the Trust's
Administrator and Shareholder Servicing Agents may not exceed 0.65% of the
Fund's average daily net assets on an annualized basis for the Fund's then-
current fiscal year. Any distribution fees (other than any fee concerning
electronic or other media advertising) payable under the Distribution Plan for
Class A shares are included in this expense limitation. This limitation does
not include any amounts payable under the Distribution Plans for Class B
shares. The Administrative Services Plan continues in effect if such
continuance is specifically approved at least annually by a vote of both a
majority of the Trustees and a majority of the Trustees who are not
"interested persons" of the Trust and who have no direct or indirect financial
interest in the operation of the Administrative Services Plan or in any
agreement related to such Plan (for purposes of this paragraph "Qualified
Trustees"). The Administrative Services Plan requires that the Trust provide
to its Board of Trustees and the Board of Trustees review, at least quarterly,
a written report of the amounts expended (and the purposes therefor) under the
Administrative Services Plan. The Administrative Services Plan may be
terminated at any time by a vote of a majority of the Qualified Trustees of
the Trust or as to each Fund by a vote of a majority of the outstanding voting
securities of the Fund. The Administrative Services Plan may not be amended to
increase materially the amount of permitted expenses thereunder without the
approval of a majority of the outstanding voting securities of the Funds. The
Administrative Services Plan with respect to each Fund may not be materially
amended in any case without a vote of the majority of both the Trustees and
the 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 with State Street Bank and Trust Company ("State Street")
pursuant to which State Street acts as transfer agent for each Fund. The Trust
has entered into a Custodian Agreement with Investors Bank & Trust Company
("IBT") and a Fund Accounting Agreement with Signature Financial Services,
Inc. ("SFSI") pursuant to which custodial and fund accounting services,
respectively, are provided for the Government Income Fund. The Trust has
entered into a Custodian Agreement with State Street Bank and Trust Company
pursuant to which custodial and fund accounting services are provided for the
Intermediate Income Fund. See "Shareholder Servicing Agents" and "Transfer
Agent, Custodian and Fund Accountant" in the Prospectus for additional
information, including a description of fees paid to the Shareholder Servicing
Agents under the Servicing Agreements. For the fiscal year ended August 31,
1993, aggregate fees payable to Shareholder Servicing Agents by the Government
Income Fund under the Administrative Services Plan were $244,421 (of which
$91,658 was voluntarily waived). For the four-month period ended December 31,
1993, aggregate fees payable to Shareholder Servicing Agents by the Government
Income Fund under the Administrative Services Plan were $110,717 (of which
$41,519 was voluntarily waived). For the fiscal years ended December 31, 1994
and 1995, aggregate fees payable to Shareholder Servicing Agents by the
Government Income Fund under the Administrative Services Plan were $272,783
(of which $102,294 was voluntarily waived) and $180,611 (of which $67,730 was
voluntarily waived), respectively. For the period from June 25, 1993
(commencement of operations) to December 31, 1993 and for the fiscal years
ended December 31, 1994 and 1995, aggregate fees payable to Shareholder
Servicing Agents by the Intermediate Income Fund under the Administrative
Services Plan were $131,629 (of which $51,581 was voluntarily waived),
$212,916 (of which $79,843 was voluntarily waived) and $195,673 (of which
$73,377 was voluntarily waived), respectively.
The Portfolio Trust has also adopted an administrative services plan (the
"Portfolio Administrative Plan"), which provides that the Portfolio Trust may
obtain the services of an administrator, a transfer agent and a custodian and
may enter into agreements providing for the payment of fees for such services.
Under the Portfolio Administrative Plan, the administrative services fee
payable to the Portfolio Administrator from the Portfolio may not exceed 0.05%
of the Portfolio's average daily net assets on an annualized basis for its
then-current fiscal year.
The Portfolio Administrative Plan continues in effect if such continuance
is specifically approved at least annually by a vote of both a majority of the
Portfolio Trust's Trustees and a majority of the Portfolio Trust's Trustees
who are not "interested persons" of the Portfolio and who have no direct or
indirect financial interest in the operation of the Portfolio Administrative
Plan or in any agreement related to such Plan (for purposes of this paragraph
"Qualified Trustees"). The Portfolio Administrative Plan requires that the
Portfolio Trust provide to the Board of Trustees and the Board of Trustees
review, at least quarterly, a written report of the amounts expended (and the
purposes therefor) under the Portfolio Administrative Plan. The Portfolio
Administrative Plan may not be amended to increase materially the amount of
permitted expenses thereunder without the approval of a majority of the
outstanding voting securities of the Portfolio Trust and may not be materially
amended in any case without a vote of the majority of both the Portfolio
Trust's Trustees and the Portfolio Trust's Qualified Trustees.
State Street acts as transfer agent and dividend disbursing agent for each
Fund and as the custodian of Intermediate Income Fund's assets. The Portfolio
Trust, on behalf of the Portfolio has entered into a Custodian Agreement with
IBT pursuant to which IBT acts as custodian for the Portfolio. The Portfolio
Trust, on behalf of the Portfolio has entered into a Fund Accounting Agreement
with SFSI pursuant to which SFSI provides fund accounting services for the
Portfolio. Pursuant to a separate Transfer Agency and Service Agreement with
the Portfolio Trust, SFSI provides transfer agency services to the Portfolio.
See "Shareholder Servicing Agents" and "Transfer Agent, Custodian and Fund
Accountant" in the Prospectus for additional information.
The principal business address of State Street is 225 Franklin Street,
Boston, Massachusetts 02110. The principal business address of IBT is One
Lincoln Plaza, Boston, Massachusetts 02111. The principal business address of
SFSI is 6 St. James Avenue, Boston, Massachusetts 02116.
AUDITORS
Price Waterhouse LLP are the independent certified public accountants for
the Government Income Fund, providing audit services and assistance and
consultation with respect to the preparation of filings with the SEC. The
address of Price Waterhouse LLP is 160 Federal Street, Boston, Massachusetts
02110. Price Waterhouse are the chartered accountants for the Portfolio Trust.
The address of Price Waterhouse is Suite 3000, 1 First Canadian Place,
Toronto, Ontario M5X 1H7, Canada.
Deloitte & Touche LLP are the independent certified public accountants for
the Intermediate Income Fund, providing audit services and assistance and
consultation with respect to the preparation of filings with the SEC. The
address of Deloitte & Touche LLP is 125 Summer Street, Boston, Massachusetts
02110.
COUNSEL
Bingham, Dana & Gould LLP, 150 Federal Street, Boston, MA 02110, acts as
counsel for the Funds.
6. PORTFOLIO TRANSACTIONS
The Trust trades securities for a Fund if it believes that a transaction
net of costs (including custodian charges) will help achieve the Fund's
investment objectives. Changes in each Fund's investments are made without
regard to the length of time a security has been held, or whether a sale would
result in the recognition of a profit or loss. Therefore, the rate of turnover
is not a limiting factor when changes are appropriate. Specific decisions to
purchase or sell securities for each Fund are made by a portfolio manager who
is an employee of the Adviser and who is appointed and supervised by its
senior officers. The portfolio manager may serve other clients of the Adviser
in a similar capacity.
The primary consideration in placing portfolio securities transactions
with broker-dealers for execution is to obtain and maintain the availability
of execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting broker-
dealers to execute transactions on behalf of each Fund and other clients of
the Adviser on the basis of their professional capability, the value and
quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Adviser normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere.
In the case of securities purchased from underwriters, the cost of such
securities generally includes a fixed underwriting commission or concession.
From time to time, soliciting dealer fees are available to the Adviser on the
tender of a Fund's securities in so-called tender or exchange offers. Such
soliciting dealer fees are in effect recaptured for the Fund by the Adviser.
At present no other recapture arrangements are in effect.
Under the Advisory Agreements, in connection with the selection of such
brokers or dealers and the placing of such orders, the Adviser is directed to
seek for each Fund in its best judgment, prompt execution in an effective
manner at the most favorable price. Subject to this requirement of seeking the
most favorable price, securities may be bought from or sold to broker-dealers
who have furnished statistical, research and other information or services to
the Adviser or the Funds, subject to any applicable laws, rules and
regulations.
The investment advisory fee that each Fund pays to the Adviser will not be
reduced as a consequence of the Adviser's receipt of brokerage and research
services. While such services are not expected to reduce the expenses of the
Adviser, the Adviser would, through the use of the services, avoid the
additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff or obtain such services
independently.
In certain instances there may be securities that are suitable as an
investment for a Fund as well as for one or more of the Adviser's other
clients. Investment decisions for each Fund and for the Adviser's other
clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for
only one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more clients are selling the same security. Some simultaneous
transactions are inevitable when several clients receive investment advice
from the same investment adviser, particularly when the same security is
suitable for the investment objectives of more than one client. When two or
more clients are simultaneously engaged in the purchase or sale of the same
security, the securities are allocated among clients in a manner believed to
be equitable to each. It is recognized that in some cases this system could
adversely affect the price of or the size of the position obtainable in a
security for a Fund. When purchases or sales of the same security for a Fund
and for other portfolios managed by the Adviser occur contemporaneously, the
purchase or sale orders may be aggregated in order to obtain any price
advantages available to large volume purchases or sales.
For the fiscal year ended August 31, 1993, for the four month period ended
December 31, 1993 and for the four month period ended April 30, 1994, the
Government Income Fund paid no brokerage commissions. For the period from May
1, 1994 to December 31, 1994 and for the fiscal year ended December 31, 1995,
the Portfolio paid no brokerage commissions. For the period from June 25, 1993
(commencement of operations) to December 31, 1993 and for the fiscal years
ended December 31, 1994 and 1995, the Intermediate Income Fund paid no
brokerage commissions.
7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust's Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional Shares of Beneficial Interest (without
par value) of each series and to divide or combine the shares of any series
into a greater or lesser number of shares of that series without thereby
changing the proportionate beneficial interests in that series. Currently, the
Trust has four series of shares, each divided into two classes. The Trust has
reserved the right to create and issue additional series and classes of
shares. Each share of each class of each Fund represents an equal
proportionate interest in the Fund with each other share of that class. Shares
of each series participate equally in the earnings, dividends and distribution
of net assets of the particular series upon liquidation or dissolution (except
for any differences among classes of shares in a series). Shares of each
series are entitled to vote separately to approve advisory agreements or
changes in investment policy, but shares of all series may vote together in
the election or selection of Trustees and accountants for the Trust. In
matters affecting only a particular Fund or class, only shares of that
particular Fund or class are entitled to vote.
Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. Shareholders in the Trust do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of the Trust may elect all of the Trustees of the Trust if
they choose to do so and in such event the other shareholders in the Trust
would not be able to elect any Trustee. The Trust is not required to hold, and
has no present intention of holding, annual meetings of shareholders but the
Trust will hold special meetings of shareholders when in the judgment of the
Trustees it is necessary or desirable to submit matters for a shareholder
vote. Shareholders have, under certain circumstances (e.g., upon the
application and submission of certain specified documents to the Trustees by a
specified number of shareholders), the right to communicate with other
shareholders in connection with requesting a meeting of shareholders for the
purpose of removing one or more Trustees. Shareholders also have under certain
circumstances the right to remove one or more Trustees without a meeting by a
declaration in writing by a specified number of shareholders. No material
amendment may be made to the Trust's Declaration of Trust without the
affirmative vote of the holders of a majority of the outstanding shares of
each series affected by the amendment. (See "Investment Objectives, Policies
and Restrictions--Investment Restrictions".) At any meeting of shareholders of
any Fund, a Shareholder Servicing Agent may vote any shares of which it is the
holder of record and for which it does not receive voting instructions
proportionately in accordance with the instructions it receives for all other
shares of which that Shareholder Servicing Agent is the holder of record.
Shares have no preference, pre-emptive, conversion or similar rights. Shares,
when issued, are fully paid and non-assessable, except as set forth below.
The Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets (or all or substantially all of the assets
belonging to any series of the Trust), if approved by a vote of the holders of
two-thirds of the Trust's outstanding shares, voting as a single class, or of
the affected series of the Trust, as the case may be, except that if the
Trustees of the Trust recommend such sale of assets, merger or consolidation,
the approval by vote of the holders of a majority of the Trust's (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, shareholders of such a business
trust may, under certain circumstances, be held personally liable as partners
for its obligations and liabilities. However, the Declaration of Trust of the
Trust contains an express disclaimer of shareholder liability for acts or
obligations of the Trust and provides for indemnification and reimbursement of
expenses out of Trust property for any shareholder held personally liable for
the obligations of the Trust. The Declaration of Trust of the Trust also
provides that the Trust may maintain appropriate insurance (e.g., fidelity
bonding and errors and omissions insurance) for the protection of the Trust,
its shareholders, Trustees, officers, employees and agents covering possible
tort and other liabilities. Thus, the risk of a shareholder incurring
financial loss on account of shareholder liability is limited to circumstances
in which both inadequate insurance existed and the Trust itself was unable to
meet its obligations.
The Trust's Declaration of Trust further provides that obligations of the
Trust are not binding upon the Trustees individually but only upon the
property of the Trust and that the Trustees will not be liable for any action
or failure to act, but nothing in the Declaration of Trust of each Trust
protects a Trustee against any liability to which he or she would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of his or her office.
The Portfolio is a series of the Portfolio Trust, organized as a trust
under the laws of the State of New York. The Portfolio Trust's Declaration of
Trust provides that investors in the Portfolio (e.g., other investment
companies (including the Government Income Fund), insurance company separate
accounts and common and commingled trust funds) are each liable for all
obligations of the Portfolio. However, the risk of the Government Income Fund
incurring financial loss on account of such liability is limited to
circumstances in which both inadequate insurance existed and the Portfolio
itself was unable to meet its obligations. It is not expected that the
liabilities of the Portfolio would ever exceed its assets.
Each investor in the Portfolio, including the Government Income Fund, may
add to or withdraw from its investment in the Portfolio on each Business Day.
As of the close of regular trading on each Business Day, the value of each
investor's beneficial interest in the Portfolio is determined by multiplying
the net asset value of the Portfolio by the percentage, effective for that
day, that represents that investor's share of the aggregate beneficial
interests in the Portfolio. Any additions or withdrawals that are to be
effected on that day are then effected. The investor's percentage of the
aggregate beneficial interests in the Portfolio is then re-computed as the
percentage equal to the fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of the close of regular trading
on such day plus or minus, as the case may be, the amount of any additions to
or withdrawals from the investor's investment in the Portfolio effected on
such day, and (ii) the denominator of which is the aggregate net asset value
of the Portfolio as of the close of regular trading on such day plus or minus,
as the case may be, the amount of the net additions to or withdrawals from the
aggregate investments in the Portfolio by all investors in the Portfolio. The
percentage so determined is then applied to determine the value of the
investor's interest in the Portfolio as of the close of regular trading on the
next following Business Day.
8. CERTAIN ADDITIONAL TAX MATTERS
Each Fund has elected to be treated, and intends to qualify each year, as
a "regulated investment company" under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"), by meeting all applicable requirements
of Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition and holding
period of the Fund's portfolio assets. Provided all such requirements are met
and all of a Fund's net investment income and net realized capital gains are
distributed to shareholders in accordance with the timing requirements imposed
by the Code, no federal income or excise taxes generally will be required to
be paid by the Fund, although foreign source income earned by the Fund may be
subject to non-U.S. taxes and the Fund may be required to pay federal income
taxes on certain distributions and realized capital gains from securities in
"passive foreign investment companies." If any 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. The
Portfolio Trust believes the Portfolio also will not be required to pay any
federal income or excise taxes.
Shareholders of a Fund will generally have to pay federal income taxes and
any state or local income taxes on the dividends and capital gain
distributions they receive from the Fund. Dividends from ordinary income and
any distributions from net short-term capital gains are taxable to
shareholders as ordinary income for federal income tax purposes, whether the
distributions are made in cash or in additional shares. Because each Fund
expects to earn primarily interest income, it is expected that no Fund
dividends will qualify for the dividends received deduction for corporations;
however, a portion of the Intermediate Income Fund's ordinary income dividends
may be eligible for this deduction for corporations if the recipient otherwise
qualifies for that deduction with respect to its holding of Fund shares.
Availability of the deduction for particular shareholders is subject to
certain limitations, and deducted amounts may be subject to the alternative
minimum tax or result in certain basis adjustments. Distributions of net
capital gains (i.e., the excess of net long-term capital gains over net short-
term capital losses), whether made in cash or in additional shares, are
taxable to shareholders as long-term capital gains without regard to the
length of time the shareholders have held their shares. Any Fund dividend that
is declared in October, November or December of any calendar year, that is
payable to shareholders of record in such a month, and that is paid the
following January will be treated as if received by the shareholders on
December 31 of the year in which the dividend is declared.
The Fund will withhold tax payments at the rate of 30% (or any lower rate
permitted under an applicable treaty) on taxable dividends and other payments
subject to withholding taxes that are made to persons who are not citizens or
residents of the United States. Distributions received from the Fund by non-
U.S. persons also may be subject to tax under the laws of their own
jurisdiction.
The account application asks each new shareholder to certify that the
shareholder's Social Security or taxpayer identification number is correct and
that the shareholder is not subject to 31% backup withholding for failing to
report income to the IRS. If a shareholder fails to provide this information,
or otherwise violates IRS regulations, the Fund may be required to withhold
tax at the rate of 31% on certain distributions and redemption proceeds paid
to that shareholder.
Any Fund distribution will have the effect of reducing the per share net
asset value of shares in the Fund by the amount of the distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of shares
of a Fund by a shareholder that holds such shares as a capital asset will be
treated as long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise as a short-term capital gain or loss.
However, any loss realized upon a redemption of shares in a Fund held for six
months or less will be treated as a long-term capital loss to the extent of
any distributions of net capital gain made with respect to those shares. Any
loss realized upon a disposition of shares may also be disallowed under rules
relating to wash sales. Gain may be increased (or loss reduced) upon a
redemption of Class A shares of a Fund within 90 days after their purchase
followed by any purchase without payment of an additional sales charge
(including purchases by exchanges or by reinvestment) of Class A shares of the
Fund or another Landmark Fund or any other shares of a Landmark Fund generally
sold subject to a sales charge.
Any investments in zero coupon bonds and certain securities purchased at a
market discount will cause the applicable Fund or Portfolio to recognize
income prior to the receipt of cash payments with respect to those securities.
In order to distribute this income and avoid a tax, the Trust or Portfolio
Trust may be required to liquidate securities of a Fund or Portfolio that it
might otherwise have continued to hold and thereby potentially cause the Fund
or the Portfolio to realize additional taxable gain or loss. An investment in
residual interests of a CMO that has elected to be treated as a real estate
mortgage investment conduit, or "REMIC," may result in a federal tax to the
extent a Fund has tax exempt entities as shareholders.
Each Fund's and the Portfolio's transactions in options, Futures Contracts
and forward contracts will be subject to special tax rules that may affect the
amount, timing, and character of Fund or Portfolio income and distributions to
holders of beneficial interests. For example, certain positions held by a Fund
or the Portfolio on the last business day of each taxable year will be marked
to market (i.e., treated as if closed out) on that day, and any gain or loss
associated with the positions will be treated as 60% long-term and 40% short-
term capital gain or loss. Certain positions held by a Fund or the Portfolio
that substantially diminish its risk of loss with respect to other positions
in its portfolio may constitute straddles, and may be subject to special tax
rules that would cause deferral of Fund or Portfolio losses, adjustments in
the holding periods of securities held by the Fund or the Portfolio and
conversion of short-term into long-term capital losses. Certain tax elections
exist for straddles which may alter the effects of these rules. Each of the
Funds and the Portfolio will limit its investment activities in options,
Futures Contracts and forward contracts to the extent necessary to meet the
requirements of Subchapter M of the Code.
Special tax considerations apply with respect to foreign investments of
the Funds. Foreign exchange gains and losses realized by a Fund will generally
be treated as ordinary income and losses. Each Fund's use of non-U.S.
currencies for non-hedging purposes may be limited in order to avoid a tax on
the Fund. Investment by a Fund in certain "passive foreign investment
companies" may also be limited in order to avoid a tax on the Fund. Investment
income received by a Fund from non-U.S. securities may be subject to foreign
income taxes withheld at the source. The United States has entered into tax
treaties with many other countries that may entitle a Fund to a reduced rate
of tax or an exemption from tax on such income. The Funds intend to qualify
for treaty reduced rates where available. It is not possible, however, to
determine the Funds' effective rate of foreign tax in advance since the amount
of the Funds' respective assets to be invested within various countries is not
known. The Funds generally do not expect to be able to pass through to
shareholders foreign tax credits with respect to any foreign taxes imposed on
non-U.S. investments.
Distributions of a Fund that are derived from interest on obligations of
the U.S. Government and certain of its agencies and instrumentalities (but not
generally from capital gains realized upon the dispositions of such
obligations) may be exempt from state and local taxes. Shareholders are urged
to consult their tax advisers regarding the possible exclusion of such portion
of their dividends for state and local income tax purposes.
9. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Price Waterhouse LLP are the independent accountants for the Government
Income Fund, providing audit services and assistance and consultation with
respect to the preparation of filings with the SEC. Price Waterhouse are the
chartered accountants for the Portfolio Trust. Deloitte & Touche LLP are the
independent certified public accountants for the Intermediate Income Fund.
The audited financial statements of the Government Income Fund (Statement
of Assets and Liabilities at December 31, 1995, Statement of Operations for
the year ended December 31, 1995, Statement of Changes in Net Assets for the
years ended December 31, 1995 and 1994, Financial Highlights for each of the
two years in the period ended December 31, 1995, for the four-month period
ended December 31, 1993 and the year ended August 31, 1993, Notes to Financial
Statements and Independent Auditors' Report), each of which is included in the
Annual Report to Shareholders of the Government Income Fund, are incorporated
by reference into this Statement of Additional Information and have been so
incorporated in reliance upon the report of Price Waterhouse LLP, on behalf of
the Government Income Fund.
The audited financial statements of the Portfolio (Portfolio of
Investments at December 31, 1995, Statement of Assets and Liabilities at
December 31, 1995, Statement of Operations for the year ended December 31,
1995, Statement of Changes in Net Assets for the year ended December 31, 1995
and for the period May 1, 1994 (commencement of operations) to December 31,
1994, Financial Highlights for the fiscal year ended December 31, 1995 and for
the period May 1, 1994 (commencement of operations) to December 31, 1994,
Notes to Financial Statements and Independent Auditors' Report), each of which
is included in the Annual Report to Shareholders of the Government Income
Fund, are incorporated by reference into this Statement of Additional
Information and have been so incorporated in reliance upon the report of Price
Waterhouse, chartered accountants, on behalf of the Portfolio.
The audited financial statements of the Intermediate Income Fund
(Portfolio of Investments at December 31, 1995, Statement of Assets and
Liabilities at December 31, 1995, Statement of Operations for the year ended
December 31, 1995, Statement of Changes in Net Assets for the years ended
December 31, 1995 and 1994, Financial Highlights for each of the two years in
the period ended December 31, 1995 and for the period June 25, 1993
(commencement of operations) to December 31, 1993, Notes to Financial
Statements and Independent Auditors' Report), each of which is included in the
Annual Report to Shareholders of the Intermediate Income Fund, 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, on behalf of the Fund.
Copies of the Annual Reports to Shareholders of each of the Funds
accompany this Statement of Additional Information.
<PAGE>
APPENDIX A
DESCRIPTION OF BOND RATINGS*
The ratings of Moody's Investors Service, Inc. ("Moody's") and Standard &
Poor's Ratings Group ("S&P") represent their opinions as to the quality of
various debt securities. It should be emphasized, however, that ratings are
not absolute standards of quality. Consequently, debt securities with the same
maturity, coupon and rating may have different yields while debt securities of
the same maturity and coupon with different ratings may have the same yield.
MOODY'S INVESTORS SERVICE, INC.
AAA Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and generally are referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
AA Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high
grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in Aaa
securities.
A Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
BAA Bonds which are rated Baa are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Note: Those bonds in the Aa, A and Baa groups which Moody's believes possess
the strongest investment attributes are designated by the symbols Aa 1, A 1
and Baa 1.
STANDARD & POOR'S RATINGS GROUP
AAA Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
A Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
* As described by the rating agencies. Ratings are generally given to
securities at the time of issuance. While the rating agencies may from time to
time revise such ratings, they undertake no obligation to do so.
<PAGE>
SHAREHOLDER SERVICING AGENTS
For Citibank New York Retail Banking and
Business and Professional Customers:
Citibank, N.A.
450 West 33rd Street, New York, NY 10001
(212) 564-3456 or (800) 846-5300
FOR CITIGOLD CLIENTS:
Citigold
P.O. Box 5130, New York, NY 10150-5130
Call Your Citigold Executive, or in NY or CT (800) 285-1701
or for all other states (800) 285-1707
FOR PRIVATE BANKING CLIENTS:
Citibank, N.A.
The Citibank Private Bank
153 East 53rd Street, New York, NY 10043
Call Your Citibank Private Banking Account Officer,
Registered Representative or (212) 559-5959
FOR CITIBANK GLOBAL ASSET MANAGEMENT CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY 10043
(212) 559-7117
FOR NORTH AMERICAN INVESTOR SERVICES CLIENTS:
Citibank, N.A.
111 Wall Street, New York, NY 10043
Call Your Account Manager or (212) 657-9100
FOR CITICORP INVESTMENT SERVICES CUSTOMERS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200,
(212) 736-8170 in New York City
<PAGE>
PART C
Item 24. Financial Statements and Exhibits.
(a) Financial Statements Included in Part A:
Condensed Financial Information - Financial Highlights of
Landmark U.S. Government Income Fund (for the years ended
December 31, 1994 and 1995, for the four months ended
December 31, 1993 and for each of the years in the
seven-year period ended August 31, 1993) and of Landmark
Intermediate Income Fund (for the years ended December 31,
1994 and 1995 and for the period from June 25, 1993
(commencement of operations) to December 31, 1993)
Financial Statements Included in Part B:
LANDMARK U.S. GOVERNMENT INCOME FUND
Statement of Assets and Liabilities at December 31, 1995*
Statement of Operations for the year ended December 31,
1995*
Statement of Changes in Net Assets for the years ended
December 31, 1994 and 1995*
Financial Highlights for the years ended December 31, 1994
and 1995, for the four months ended December 31, 1993
and for each of the years in the three-year period ended
August 31, 1993*
GOVERNMENT INCOME PORTFOLIO
Portfolio of Investments at December 31, 1995*
Statement of Assets and Liabilities at December 31, 1995*
Statement of Operations for the year ended
December 31, 1995*
Statement of Changes in Net Assets for the year ended
December 31, 1995 and the period from May 1, 1994
(commencement of operations) to December 31, 1994*
Financial Highlights for the year ended December 31, 1995
and the period from May 1, 1994 (commencement of
operations) to December 31, 1994*
LANDMARK INTERMEDIATE INCOME FUND
Portfolio of Investments at December 31, 1995*
Statement of Assets and Liabilities at December 31, 1995*
Statement of Operations for the year ended
December 31, 1995*
Statement of Changes in Net Assets for the years ended
December 31, 1994 and 1995*
Financial Highlights for the years ended December 31, 1994
and 1995 and for the period from June 25, 1993
(commencement of operations) to December 31, 1993*
-------------
*Financial Information is included for Landmark U.S. Government Income
Fund, Government Income Portfolio, and Landmark Intermediate
Income Fund only and is incorporated by reference to the
Registrant's Annual Reports to Shareholders of Landmark U.S.
Government Income Fund (Accession Number 0000950156-96-000288) and
Landmark Intermediate Income Fund (Accession Number
0000950156-96-000288) for the fiscal year ended December 31, 1995.
(b) Exhibits
* 1(a) Declaration of Trust of Registrant
*** 1(b) Form of Amendment to Registrant's Declaration of Trust
***** 1(c) Form of Establishment and Designation of Series of the
Registrant
****** 1(d) Amendment to Declaration of Trust of Registrant
* 2(a) Amended and Restated By-Laws of Registrant
***** 2(b) Amendment to Amended and Restated By-Laws of Registrant
***** 4(a) Form of Certificate representing ownership of Class A
shares of the Funds
***** 4(b) Form of Certificate representing ownership of Class
B shares of the Funds
***** 6(a) Form of Amended and Restated Distribution Agreement
between the Registrant and The Landmark Funds Broker-
Dealer Services, Inc. ("LFBDS"), as distributor, with
respect to Class A Shares of the Funds
***** 6(b) Form of Distribution Agreement between the Registrant
and LFBDS, as distributor, with respect to Class B
Shares of the Funds
***** 8 Form of Custodian Agreement between the Registrant, on
behalf of the Funds, and Investors Bank & Trust
Company, as custodian
***** 9(a)(i) Form of Amended and Restated Administrative Services
Plan of the Registrant
9(a)(ii) Form of Amended and Restated Administrative Services
Plan of the Registrant
**** 9(b) Amended and Restated Administrative Services Agreement
between the Registrant and LFBDS, as administrator
* 9(c) Sub-Administrative Services Agreement between Citibank,
N.A. and LFBDS
**** 9(d)(i) Form of Shareholder Servicing Agreement between the
Registrant and Citibank, N.A., as shareholder servicing
agent
**** 9(d)(ii) Form of Shareholder Servicing Agreement between the
Registrant and a federal savings bank, as shareholder
servicing agent
**** 9(d)(iii)Form of Shareholder Agreement between the Registrant
and LFBDS, as shareholder servicing agent
9(d)(iv) Form of Shareholder Servicing Agreement between the
Registrant and a national banking association or
subsidiary thereof or state chartered banking
association, as shareholder servicing agent
* 9(e) Transfer Agency and Servicing Agreement between the
Registrant and State Street Bank and Trust Company, as
transfer agent
***** 9(f) Form of Exchange Privilege Agreement between each of the
trusts in the Landmark Family of Funds, including the
Registrant, and LFBDS, as distributor
**** 9(g) Form of Fund Accounting Agreement between the Registrant
and Signature Financial Services, Inc.
11(a) Consent of Price Waterhouse LLP, independent auditors of
the Landmark U.S. Government Income Fund
11(b) Consent of Price Waterhouse independent auditors of the
Government Income Portfolio
11(c) Consent of Deloitte & Touche LLP, independent auditors
of the Landmark Intermediate Income Fund
***** 15(a) Form of Amended and Restated Distribution Plan of the
Registrant with respect to Class A Shares of the Funds
***** 15(b) Form of Distribution Plan of the Registrant with respect
to Class B Shares of the Funds
***** 16 Performance Calculations
** 25(a) Powers of Attorney for the Registrant
**,25(b) Powers of Attorney for The Premium Portfolios
***** and filed
herewith
27 Financial Data Schedule
- ---------------------
* Incorporated herein by reference to Post-Effective Amendment
No. 8 to the Registrant's Registration Statement on Form N-1A
(File No. 33-6540) as filed with the Securities and Exchange
Commission on November 1, 1991.
** Incorporated herein by reference to Post-Effective Amendment
No. 14 to the Registrant's Registration Statement on Form N-1A
(File No. 33-6540) as filed with the Securities and Exchange
Commission on December 17, 1993.
*** Incorporated herein by reference to Post-Effective Amendment
No. 16 to the Registrant's Registration Statement on form N-1A
(File No. 33-6540) as filed with the Securities and Exchange
Commission on December 29, 1993.
**** Incorporated herein by reference to Post-Effective Amendment No.
18 to the Registrant's Registration Statement on form N-1A (File
No. 33-6540) as filed with the Securities and Exchange Commission
on April 18, 1994.
***** Incorporated herein by reference to Post-Effective Amendment No.
19 to the Registrant's Registration Statement on form N-1A (File
No. 33-6540) as filed with the Securities and Exchange Commission
on October 14, 1994.
****** Incorporated herein by reference to Post-Effective Amendment No.
21 to the Registrant's Registration Statement on Form N-1A (File
No. 33-6540) as filed with the Securities and Exchange Commission
on March 3, 1995.
Item 25. Persons Controlled by or under Common Control with Registrant.
Not applicable.
Item 26. Number of Holders of Securities.
Title of Class Number of Record Holders
Shares of Beneficial Interest As of April 15, 1996
(without par value)
Landmark U.S. Government Income Fund
Class A 7
Class B 0
Landmark Intermediate Income Fund
Class A 7
Class B 0
Landmark Long-Term U.S. Government Income Fund
Class A 0
Class B 0
Landmark Global Governments Income Fund
Class A 0
Class B 0
Item 27. Indemnification.
Reference is hereby made to (a) Article V of the Registrant's
Declaration of Trust, filed as an Exhibit to Post-Effective Amendment No. 8 to
its Registration Statement on Form N-1A (the "Amendment"); (b) Section 4 of the
Distribution Agreement between the Registrant and The Landmark Funds
Broker-Dealer Services, Inc., filed as an Exhibit to Post-Effective Amendment
No. 8; and (c) the undertaking of the Registrant regarding indemnification set
forth in its Registration Statement on Form N-1A.
The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.
Item 28. Business and Other Connections of Investment Adviser.
Citibank, N.A. ("Citibank") is a commercial bank offering a wide range
of banking and investment services to customers across the United States and
around the world. Citibank is a wholly-owned subsidiary of Citicorp, a
registered bank holding company. Citibank also serves as investment adviser to
the following registered investment companies (or series thereof): The Premium
Portfolios (Balanced Portfolio, Equity Portfolio, Government Income Portfolio,
International Equity Portfolio, Emerging Asian Markets Equity Portfolio and
Small Cap Equity Portfolio), Tax Free Reserves Portfolio, U.S. Treasury Reserves
Portfolio, Cash Reserves Portfolio, Asset Allocation Portfolios (Asset
Allocation Portfolio 200, Asset Allocation Portfolio 300, Asset Allocation
Portfolio 400 and Asset Allocation Portfolio 500), Landmark Multi-State Tax Free
Funds (Landmark New York Tax Free Reserves, Landmark Connecticut Tax Free
Reserves and Landmark California Tax Free Reserves), Landmark Fixed Income Funds
(Landmark Intermediate Income Fund), Landmark Tax Free Income Funds (Landmark
National Tax Free Income Fund and Landmark New York Tax Free Income Fund) and
Landmark VIP Funds (Landmark VIP U.S. Government Portfolio, Landmark VIP
Balanced Portfolio, Landmark VIP Equity Portfolio and Landmark VIP International
Equity Portfolio). As of December 31, 1995, Citibank and its affiliates managed
assets in excess of $83 billion worldwide. The principal place of business of
Citibank is located at 399 Park Avenue, New York, New York 10043.
The Chairman of the Board and a Director of Citibank is John S. Reed.
The following are Vice Chairmen of the Board and Directors of Citibank: Paul J.
Collins, William R. Rhodes and H. Onno Ruding. Other Directors of Citibank are
D. Wayne Calloway, Chairman and Chief Executive Officer, PepsiCo, Inc.,
Purchase, New York; Colby H. Chandler, Former Chairman and Chief Executive
Officer, Eastman Kodak Company; Pei-yuan Chia, Director, Baxter International,
Inc.; Kenneth T. Derr, Chairman and Chief Executive Officer, Chevron
Corporation; H.J. Haynes, Senior Counselor, Bechtel Group, Inc., San Francisco,
California; Rozanne L. Ridgway, President, The Atlantic Council of the United
States; Robert B. Shapiro, President and Chief Operating Officer, Monsanto
Company; Frank A. Shrontz, Chairman and Chief Executive Officer, The Boeing
Company, Seattle, Washington; Roger B. Smith, Former Chairman and Chief
Executive Officer, General Motors Corporation; Franklin A. Thomas, President,
The Ford Foundation, New York, New York; and Edgar S. Woolard, Jr., Chairman and
Chief Executive Officer, E.I. DuPont De Nemours & Company.
Each of the individuals named above is also a Director of Citicorp. In
addition, the following persons have the affiliations indicated:
D. Wayne Calloway Director, Exxon Corporation
Director, General Electric Company
Director, Pepsico, Inc.
Colby H. Chandler Director, Digital Equipment Corporation
Director, Ford Motor Company
Director, J.C. Penney Company, Inc.
Pei-yuan Chia Director, Baxter International, Inc.
Paul J. Collins Director, Kimberly-Clark Corporation
Kenneth T. Derr Director, American Telephone and Telegraph, Co.
Director, Chevron Corporation
Director, Potlatch Corporation
H.J. Haynes Director, Bechtel Group, Inc.
Director, Boeing Company
Director, Fremont Group, Inc.
Director, Hewlett-Packard Company
Director, Paccar Inc.
Director, Saudi Arabian Oil Company
John S. Reed Director, Monsanto Company
Director, Philip Morris Companies Incorporated
Stockholder, Tampa Tank & Welding, Inc.
William R. Rhodes Director, Private Export Funding Corporation
Rozanne L. Ridgway Director, 3M
Director, Bell Atlantic Corporation
Director, Boeing Company
Director, Emerson Electric Company
Member-International Advisory Board,
New Perspective Fund, Inc.
Director, RJR Nabisco, Inc.
Director, Sara Lee Corporation
Director, Union Carbide Corporation
H. Onno Ruding Member, Board of Supervisory Directors,
Amsterdam Trustee's Kantoor
Board Member, Corning, Incorporated
Advisor, Intercena (C&A) (Netherlands)
Member, Board of Supervisory Directors,
Pechiney Nederland N.V.
Member, Board of Advisers, Robeco N.V.
Advisory Director, Unilever N.V.
Advisory Director, Unilever PLC
Robert B. Shapiro Director, G.D. Searle & Co.
Director, Silicon Graphics
Director, Monsanto Company
Director, The Nutrasweet Company
Frank A. Shrontz Director, 3M
Director, Baseball of Seattle, Inc.
Director, Boeing Company
Director, Boise Cascade Corp.
Director, Companhia Bozano Simonsen
Comercioe E Industria
Director, Companhia Monteia & Aranha
President, Simposium Consultoria E
Servicos Tecnicos LTDA
Roger B. Smith Director, International Paper Company
Director, Johnson & Johnson
Director, Pepsico, Inc.
Franklin A. Thomas Director, Aluminum Company of America
Director, American Telephone and Telegraph, Co.
Director, Cummins Engine Company, Inc.
Director, Pepsico, Inc.
Edgar S. Woolard, Jr. Director, E.I. DuPont De Nemours & Company
Item 29. Principal Underwriters.
(a) The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS"), the
Registrant's Distributor, is also the distributor for Landmark International
Equity Fund, Landmark Emerging Asian Markets Equity Fund, Landmark U.S. Treasury
Reserves, Landmark Cash Reserves, Premium U.S. Treasury Reserves, Premium Liquid
Reserves, Landmark Institutional U.S. Treasury Reserves, Landmark Institutional
Liquid Reserves, Landmark Tax Free Reserves, Landmark California Tax Free
Reserves, Landmark Connecticut Tax Free Reserves, Landmark New York Tax Free
Reserves, Landmark Balanced Fund, Landmark Equity Fund, Landmark Small Cap
Equity Fund, Landmark National Tax Free Income Fund, Landmark New York Tax Free
Income Fund, Landmark VIP Funds (Landmark VIP U.S. Government Portfolio,
Landmark VIP Balanced Portfolio, Landmark VIP Equity Portfolio and Landmark VIP
International Equity Portfolio), CitiSelectSM Folio 200, CitiSelectSM Folio 300,
CitiSelectSM Folio 400 and CitiSelectSM Folio 500. LFBDS is also the placement
agent for International Equity Portfolio, Balanced Portfolio, Equity Portfolio,
Small Cap Equity Portfolio, Government Income Portfolio, Emerging Asian Markets
Equity Portfolio, Tax Free Reserves Portfolio, Cash Reserves Portfolio, U.S.
Treasury Reserves Portfolio, Asset Allocation Portfolio 200, Asset Allocation
Portfolio 300, Asset Allocation Portfolio 400 and Asset Allocation Portfolio
500.
(b) The information required by this Item 29 with respect to each
director and officer of LFBDS is incorporated by reference to Schedule A of Form
BD filed by LFBDS pursuant to the Securities and Exchange Act of 1934 (File No.
8-32417).
(c) Not applicable.
Item 30. Location of Accounts and Records.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
<TABLE>
<CAPTION>
NAME ADDRESS
<S> <C>
The Landmark Funds Broker-Dealer Services, Inc. 6 St. James Avenue
(administrator and distributor) Boston, MA 02116
State Street Bank and Trust Company 1776 Heritage Drive
(transfer agent and custodian for Intermediate Income Fund) North Quincy, MA 02171
Investors Bank & Trust Company One Lincoln Plaza
(custodian for the Funds other than Intermediate Income Boston, MA 02111
Fund)
Signature Financial Services, Inc. First Canadian Place
Suite 5850, P.O. Box 231
Toronto, Ontario Canada
M5X 1C8
Citibank, N.A. 153 East 53rd Street
(investment adviser) New York, NY 10043
SHAREHOLDER SERVICING AGENTS
Citibank, N.A. 450 West 33rd Street
New York, NY 10001
Citibank, N.A. -- Citigold Citicorp Mortgage Inc. - Citigold
15851 Clayton Road
Ballwin, MO 63011
Citibank, N.A. -- The Citibank 153 East 53rd Street
Private Bank New York, NY 10043
Citibank, N.A. -- Citibank Global 153 East 53rd Street
Asset Management New York, NY 10043
Citibank, N.A. -- North American 111 Wall Street
Investor Services New York, NY 10094
Citicorp Investment Services One Court Square
Long Island City, NY 11120
</TABLE>
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) The Registrant undertakes to file a post-effective amendment,
using financial statements of the Landmark Long-Term U.S.
Government Income Fund and Landmark Global Governments Income
Fund, which need not be certified, within four to six months
following the commencement of operations of these Funds. The
financial statements included in such amendment will be as of
and for the time period ended on a date reasonably close to or
as soon as practicable prior to the date of the filing of the
amendment.
(c) The Registrant hereby undertakes, if requested to do so by the
record holders of not less than 10% of the Registrant's
outstanding shares, to call a meeting of shareholders for the
purpose of voting upon the question of removal of a trustee or
trustees, and to assist in communications with other
shareholders as required by Section 16(c) of the Investment
Company Act of 1940. The Registrant further undertakes to
furnish to each person to whom a prospectus of the Landmark
U.S. Government Income Fund and the Landmark Intermediate
Income Fund is delivered with a copy of each Fund's latest
Annual Report to Shareholders, upon request without charge.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all
requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Boston and
Commonwealth of Massachusetts on the 24th day of April, 1996.
LANDMARK FIXED INCOME FUNDS
By: Philip W. Coolidge
-----------------------------------
Philip W. Coolidge
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated below on April 24, 1996
Signature Title
Philip W. Coolidge President, Principal Executive Officer
- --------------------------------- and Trustee
Philip W. Coolidge
John R. Elder Principal Financial Officer and Principal
- --------------------------------- Accounting Officer
John R. Elder
H.B. Alvord* Trustee
- ---------------------------------
H.B. Alvord
Riley C. Gilley* Trustee
- ---------------------------------
Riley C. Gilley
Diana R. Harrington* Trustee
- ---------------------------------
Diana R. Harrington
Susan B. Kerley* Trustee
- ---------------------------------
Susan B. Kerley
C. Oscar Morong, Jr.* Trustee
- ---------------------------------
C. Oscar Morong, Jr.
Donald B. Otis* Trustee
- ---------------------------------
Donald B. Otis
E. Kirby Warren* Trustee
- ---------------------------------
E. Kirby Warren
William S. Woods, Jr.* Trustee
- ---------------------------------
William S. Woods, Jr.
*By: Philip W. Coolidge
- ---------------------------------
Philip W. Coolidge
Executed by Philip W. Coolidge on behalf of those indicated pursuant to
Powers of Attorney.
<PAGE>
SIGNATURES
The Premium Portfolios has duly caused this Post-Effective Amendment to
the Registration Statement on Form N-1A of Landmark Fixed Income Funds to be
signed on its behalf by the undersigned, thereunto duly authorized, in George
Town, Grand Cayman, Cayman Islands, BWI, on the 24th day of April, 1996.
THE PREMIUM PORTFOLIOS
By: Susan Jakuboski
--------------------------------
Susan Jakuboski,
Assistant Treasurer of
The Premium Portfolios
This Post-Effective Amendment to the Registration Statement on Form
N-1A of Landmark Fixed Income Funds has been signed by the following persons in
the capacities indicated on April 24, 1996.
Signature Title
Philip W. Coolidge* President, Principal Executive Officer
- --------------------------------- and Trustee
Philip W. Coolidge
John R. Elder* Principal Financial Officer and Principal
- --------------------------------- Accounting Officer
John R. Elder
Elliott J. Berv* Trustee
- ---------------------------------
Elliott J. Berv
Mark T. Finn* Trustee
- ---------------------------------
Mark T. Finn
Walter E. Robb, III* Trustee
- ---------------------------------
Walter E. Robb, III
*By: Susan Jakuboski
- ---------------------------------
Susan Jakuboski
Executed by Susan Jakuboski on behalf of those indicated as attorney in
fact.
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
9(a)(ii) Form of Amended and Restated Administrative Services Plan of
the Registrant
9(d)(iv) Form of Shareholder Servicing Agreement between the
Registrant and a national banking association or subsidiary
thereof or state chartered banking association, as
shareholder servicing agent
11(a) Consent of Price Waterhouse LLP, independent auditors of the
Landmark U.S. Government Income Fund
11(b) Consent of Price Waterhouse independent auditors of the
Government Income Portfolio
11(c) Consent of Deloitte & Touche LLP, independent auditors of the
Landmark Intermediate Income Fund
25(b) Powers of Attorney for The Premium Portfolios
27 Financial Data Schedule
EXHIBIT 99.9(a)(ii)
AMENDED AND RESTATED
ADMINISTRATIVE SERVICES PLAN
AMENDED AND RESTATED ADMINISTRATIVE SERVICES PLAN, dated as of June 24,
1986 and amended and restated as of February 9, 1996, of Landmark Fixed Income
Funds, a Massachusetts business trust (the "Trust").
WITNESSETH:
WHEREAS, the Trust is engaged in business as an open-end management
investment company and is registered under the Investment Company Act of 1940
(collectively with the rules and regulations promulgated thereunder, the "1940
Act"); and
WHEREAS, the Shares of Beneficial Interest (without par value) of the
Trust (the "Shares") are divided into one or more separate series (together with
any series which may in the future be established, the "Funds"); and
WHEREAS, the Trust desires to adopt this Amended and Restated
Administrative Services Plan (the "Plan") in order to provide for certain
administrative services to the Trust and holders of Shares of each Fund; and
WHEREAS, the Trust desires to enter into a transfer agency agreement
(in such form as may from time to time be approved by the Board of Trustees of
the Trust) with a financial institution, as transfer agent for the Trust (the
"Transfer Agent"), whereby the Transfer Agent will provide transfer agency
services to the Trust (the "Transfer Agency Agreement"); and
WHEREAS, the Trust desires to enter into a custodian agreement (in such
form as may from time to time be approved by the Board of Trustees of the Trust)
with a financial institution, as custodian for the Trust (the "Custodian"),
whereby the Custodian will provide custodial services to the Trust with respect
to each Fund (the "Custodian Agreement"); and
WHEREAS, the Trust desires to enter into an administrative services
agreement (in such form as may from time to time be approved by the Board of
Trustees of the Trust) with The Landmark Funds Broker-Dealer Services, Inc., a
Massachusetts corporation, as administrator of the Trust (the "Administrator"),
whereby the Administrator will provide certain administrative and management
services to the Trust (the "Administrative Services Agreement"); and
WHEREAS, the Trust also desires to enter into shareholder servicing
agreements (in such form as may from time to time be approved by the Board of
Trustees of the Trust) with certain financial institutions, as shareholder
servicing agents ("Shareholder Servicing Agents"), whereby each Shareholder
Servicing Agent will perform certain administrative and service functions (the
"Shareholder Servicing Agreements"); and
WHEREAS, the Board of Trustees of the Trust, in considering whether the
Trust should adopt and implement this Plan, has evaluated such information as it
deemed necessary to an informed determination as to whether this Plan should be
adopted and implemented and has considered such pertinent factors as it deemed
necessary to form the basis for a decision to use assets of each Fund for such
purposes, and has determined that there is a reasonable likelihood that the
adoption and implementation of this Plan will benefit the Trust and each Fund
and its shareholders.
NOW, THEREFORE, the Board of Trustees of the Trust hereby adopts this
Plan for the Trust, on the following terms and conditions:
1. As specified in the Transfer Agency Agreement, the Transfer
Agent shall act as dividend disbursing agent for the Trust and perform
transfer agency functions for each Fund. The Trust shall pay to the
Transfer Agent such compensation from the assets of each Fund as may
from time to time be agreed to by the Trust and the Transfer Agent.
2. As specified in the Custodian Agreement, the Custodian shall
safeguard and control the cash and securities of each Fund, handle
receipt and delivery of securities for each Fund, determine income and
collect interest on the investments of each Fund, maintain books of
original entry for Fund and Trust accounting and other required books
and accounts, calculate the daily net asset value of Shares of each
Fund and, in general, act as the custodian of the assets of the Trust
pertaining to each Fund, but the Custodian shall have no power to
determine the investment policies of the Trust or to determine which
securities the Trust will buy or sell on behalf of any Fund. The Trust
shall pay to the Custodian such compensation as may from time to time
be agreed to by the Trust and the Custodian.
3. As specified in the Administrative Services Agreement, the
Administrator shall perform certain administrative and management
services on behalf of the Trust, including: providing office space,
equipment and clerical personnel necessary for maintaining the
organization of the Trust and for providing the administrative and
management services to be performed by the Administrator; arranging, if
desired by the Trust, for Directors, officers and employees of the
Administrator to serve as Trustees, officers or agents of the Trust if
duly elected or appointed to such positions and subject to their
individual consent and to any limitations imposed by law; supervising
the overall administration of the Trust, including negotiation of
contracts and fees with and the monitoring of performance and billings
of the Trust's Transfer Agent, Shareholder Servicing Agents, Custodian
and other independent contractors or agents; preparing and, if
applicable, filing all documents required for compliance by the Trust
with applicable laws and regulations, including registration
statements, prospectuses, statements of additional information,
semi-annual and annual reports to shareholders, proxy statements and
tax returns; preparation of agendas and supporting documents for and
minutes of meetings of Trustees, committees of Trustees and
shareholders; arranging for computation of performance statistics with
respect to each Fund and arranging for publication of current price
information in newspapers and other publications; and arranging for
maintenance of books and records of the Trust and each Fund. As
consideration for services performed under the Administrative Services
Agreement, the Trust shall, subject to paragraph 5 hereof, periodically
pay to the Administrator such fee from the assets of each Fund as may
from time to time be agreed to by the Trust and the Administrator.
4. As specified in each Shareholder Servicing Agreement, each
Shareholder Servicing Agent shall, with respect to one or more Funds,
perform certain administrative and service functions, which may
include, among others: answering customer inquiries or inquiries of
broker/dealers which have entered into sales agreements with the Fund's
Distributor or of banks or other financial institutions which have
entered into agency agreements with a Fund's Distributor (such entities
collectively referred to herein as "Third Party Firms") regarding the
manner in which purchases and redemptions of Shares may be effected,
and with regard to certain other matters pertaining to the Trust or
such Fund; assisting customers or Third Party Firms in designating and
changing dividend options, account designations and addresses;
providing necessary personnel and facilities to maintain certain
shareholder accounts and records, as specified from time to time by the
Trust; assisting in processing purchase and redemption transactions;
assisting in or arranging for the wiring of funds; transmitting and
receiving funds or assisting in connection with customer orders to
purchase and redeem Shares; verifying and guaranteeing shareholder
signatures in connection with redemption orders and transfers and
changes in shareholder-designated accounts; furnishing periodic
statements showing customer account balances, and to the extent
practicable, integrating such information with other client
transactions effected with or through the Shareholder Servicing Agent;
furnishing monthly and annual statements and confirmations of purchases
and redemptions of Shares in a customer's account; transmitting or
assisting in the transmission of proxy statements, annual reports,
updating prospectuses, statements of additional information and other
communications from the Trust to shareholders of such Fund; and
providing such other related services as the Trust, a Third Party Firm
or a shareholder may request. Each Shareholder Servicing Agreement
shall provide that the Shareholder Servicing Agent shall provide all
personnel and facilities necessary in order for it to perform the
functions described in the applicable Shareholder Servicing Agreement
with respect to its customers who purchase Shares or the services it
has agreed to provide to Third Party Firms, as applicable. As
consideration for services performed under the Shareholder Servicing
Agreements, the Trust shall, subject to paragraph 5 hereof,
periodically pay to each Shareholder Servicing Agent such fee from the
assets of each such Fund as may from time to time be agreed to by the
Trust and such Shareholder Servicing Agent. Each Shareholder Servicing
Agent will be permitted to charge its customers direct fees for the
same or similar services as provided pursuant to a Shareholder
Servicing Agreement.
5. Notwithstanding paragraphs 3 and 4 hereof, the aggregate of the
fee payable from a Fund to the Administrator pursuant to the
Administrative Services Agreement, the fees payable from such Fund to
the Shareholder Servicing Agents pursuant to the Shareholder Servicing
Agreements and the Basic Distribution Fees (as defined in the Trust's
Distribution Plan) payable from such Fund to the Distributor pursuant
to the Trust's Distribution Plan may not exceed an amount equal to .65%
of such Fund's average daily net assets on an annualized basis for the
Fund's then-current fiscal year.
6. Nothing herein contained shall be deemed to require the Trust
to take any action contrary to its Declaration of Trust or By-Laws or
any applicable statutory or regulatory requirement to which it is
subject or by which it is bound, or to relieve or deprive the Board of
Trustees of the Trust of the responsibility for and control of the
conduct of the affairs of the Trust.
7. This Plan shall become effective upon (a) approval by a vote of
at least a "majority of the outstanding voting securities" of each
Fund, and (b) approval by a vote of the Board of Trustees of the Trust
and vote of a majority of the Trustees who are not "interested persons"
of the Trust and who have no direct or indirect financial interest in
the operation of the Plan or in any of the agreements related to the
Plan (the "Qualified Trustees"), such votes to be cast in person at a
meeting called for the purpose of voting on this Plan.
8. This Plan shall continue in effect indefinitely, provided that
such continuance is subject to annual approval by a vote of the Board
of Trustees of the Trust and a majority of the Qualified Trustees, such
votes to be cast in person at a meeting called for the purpose of
voting on continuance of this Plan. If such annual approval is not
obtained, this Plan shall expire on the date which is 15 months after
the date of the last approval.
9. This Plan may be amended at any time by the Board of Trustees
of the Trust, provided that (a) any amendment to increase materially
the amount to be expended from the assets of any Fund for the services
described herein shall be effective only upon approval by a vote of a
"majority of the outstanding voting securities" of such Fund, and (b)
any material amendment of this Plan shall be effective only upon
approval by a vote of the Board of Trustees of the Trust and a majority
of the Qualified Trustees, such votes to be cast in person at a meeting
called for the purpose of voting on such amendment. This Plan may be
terminated at any time with respect to any Fund by vote of a majority
of the Qualified Trustees or by a vote of a "majority of the
outstanding voting securities" of such Fund.
10. The Treasurer of the Trust shall provide the Board of Trustees
of the Trust, and the Board of Trustees of the Trust shall review, at
least quarterly, a written report of the amounts expended under the
Plan and the purposes for which such expenditures were made.
11. While this Plan is in effect, the selection and nomination of
Qualified Trustees shall be committed to the discretion of the Trustees
who are not "interested persons" of the Trust.
12. For the purposes of this Plan, the terms "interested person"
and "majority of the outstanding voting securities" are used as defined
in the 1940 Act. In addition, for purposes of determining the fees
payable to the Administrator and each Shareholder Servicing Agent, the
value of a Fund's net assets shall be computed in the manner specified
in the Trust's then-current prospectus and statement of additional
information applicable to that Fund for the computation of the net
asset value of Shares of that Fund.
13. The Fund shall preserve copies of this Plan, and each
agreement related hereto and each report referred to in paragraph 10
hereof (collectively the "Records"), for a period of six years from the
end of the fiscal year in which such Record was made and each such
Record shall be kept in an easily accessible place for the first two
years of said record-keeping.
14. This Plan shall be construed in accordance with the laws of
the Commonwealth of Massachusetts and the applicable provisions of the
1940 Act.
15. If any provision of this Plan shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Plan
shall not be affected thereby.
ASP/1996/LFIF
<PAGE>
EXHIBIT 99.9(d)(iv)
SHAREHOLDER SERVICING AGREEMENT
THIS AGREEMENT, by and between: (i) each of the trusts listed on the
signature page hereof or which may be added to this Agreement by execution of a
counterpart signature page hereto at a subsequent date pursuant to a vote of
such trust's Trustees (individually, the "Trust") and (ii) each national banking
association or subsidiary thereof or state chartered banking association
(individually, the "Financial Institution") listed on the signature page hereof
or which may be added to this Agreement by execution of a counterpart signature
page hereto at a subsequent date pursuant to appropriate authorization by such
Financial Institution's officers and directors, as a shareholder servicing agent
hereunder (the "Agent");
W I T N E S S E T H:
WHEREAS, the Financial Institution wishes to provide certain
administrative and related services to broker/dealers which have entered into
sales agreements with a Trust's Distributor and to banks or other financial
institutions which have entered into an agency agreement with a Trust's
Distributor (such entities collectively referred to herein as "Third Party
Firms"), with respect to Shares of Beneficial Interest of the Trust or of any
series now existing or later created ("Shares"); and
WHEREAS, it is in the interest of the Trust to make the services of the
Agent available Third Party Firms;
NOW, THEREFORE, the Trust and the Financial Institution hereby agree as
follows:
1. Appointment. The Financial Institution, as Agent, hereby agrees to
perform certain services for Third Party Firms as hereinafter set forth. The
Agent's appointment hereunder is non-exclusive, and the parties recognize and
agree that, from time to time, the Trust may enter into other shareholder
servicing agreements, in writing, with other financial institutions.
2. Service to Be Performed.
2.1 Type of Service. The Agent shall be responsible for performing
administrative and servicing functions, which may include any of the following
without limitation: (a) answering inquiries of Third Party Firms regarding
account status and history, the manner in which purchases, exchanges and
redemptions of the Shares may be effected, and certain other matters pertaining
to the Trust; (b) assisting Third Party Firms or their customers in designating
and changing dividend options, account designations and addresses; (c) assisting
in processing purchases, exchange and redemption transactions; (d) assisting in
arranging for the wiring of funds; (e) assisting Third Party Firms or their
customers in transmitting and receiving funds in connection with customer orders
to purchase, exchange or redeem Shares; (f) assisting Third Party Firms in
transmitting proxy statements, annual reports, updating prospectuses and other
communications from the Trust to customers; and (g) providing such other related
services as the Agent may deem necessary and appropriate hereunder. The Agent
shall provide all personnel and facilities to perform the functions described in
this paragraph with respect to its Customers.
2.2 Standard of Services. All services to be rendered by the Agent
hereunder shall be performed in a professional, competent and timely manner. The
details of the operating standards and procedures to be followed by the Agent in
performance of the services described above shall be determined from time to
time by agreement between the Agent and the Trust. The Trust acknowledges that
the Agent's ability to perform on a timely basis certain of its obligations
under this Agreement depends upon the Trust's timely delivery of certain
materials and/or information to the Agent. The Trust agrees to use its best
efforts to provide such materials to the Agent in a timely manner.
3. Fees. In consideration for the services described in Section 2
hereof and the incurring of expenses in connection therewith, the Agent shall
receive fees to be paid in arrears periodically (but in no event less frequently
than semi-annually) determined by agreement between the Trust and the Agent. For
purposes of determining the fees payable to the Agent hereunder, the value of
the Trust's net assets shall be computed in the manner specified in the Trust's
then-current prospectus for computation of the net asset value of the Trust's
Shares. The above fees constitute all fees to be paid to the Agent by the Trust
with respect to the transactions contemplated hereby.
4. Information Pertaining to the Shares. The Agent and its officers,
employees and agents are not authorized to make any representations concerning
the Trust or the Shares to Third Party Firms, customers or prospective
customers, excepting only accurate communication of any information provided by
or on behalf of any administrator of the Trust or any distributor of the Shares
or any factual information contained in the then current prospectus relating to
the Trust or to any series of the Trust. Advance copies or proofs of all
materials which are generally circulated or disseminated by the Agent to Third
Party Firms, customers or prospective customers which identify or describe the
Trust shall be provided to the Trust at least 10 days prior to such circulation
or dissemination (unless the Trust consents in writing to a shorter period), and
such materials shall not be circulated or disseminated or further circulated or
disseminated at any time after the Trust shall have given written notice within
such 10 day period to the Agent of any objection thereto.
Nothing in this Section 4 shall be construed to make the Trust liable
for the use (as opposed to the accuracy) of any information about the Trust
which is disseminated by the Agent.
5. Use of the Agent's Name. The Trust shall not use the name of the
Agent, (the Financial Institution or any of its affiliates or subsidiaries) in
any prospectus, sales literature or other material relating to the Trust in a
manner not approved by the Agent prior thereto in writing; provided, however,
that the approval of the Agent shall not be required for any use of its name
which merely refers in accurate and factual terms to its appointment hereunder
or which is required by the Securities and Exchange Commission or any state
securities authority or any other appropriate regulatory, governmental or
judicial authority; provided, further, that in no event shall such approval be
unreasonably withheld or delayed.
6. Use of the Trust's Name. The Agent shall not use the name of the
Trust on any checks, bank drafts, bank statements or forms for other than
internal use in a manner not approved by the Trust prior thereto in writing;
provided, however, that the approval of the Trust shall not be required for the
use of the Trust's name in connection with communications permitted by Section 4
hereof or (subject to Section 4, to the extent the same may be applicable) for
any use of the Trust's name which merely refers in accurate and factual terms to
the Trust in connection with the Agent's role hereunder or which is required by
the Securities and Exchange Commission or any state securities authority or any
other appropriate regulatory, governmental or judicial authority; provided,
further, that in no event shall such approval be unreasonably withheld or
delayed.
7. Security. The Agent represents and warrants that to the best of its
knowledge, the various procedures and systems which it has implemented
(including provision for twenty-four hours a day restricted access) with regard
to safeguarding from loss or damage attributable to fire, theft or any other
cause the Agent's records, data, equipment, facilities and other property used
in the performance of its obligations hereunder are adequate and that it will
make such changes therein from time to time as in its judgment are required for
the secure performance of its obligations hereunder. The parties shall review
such systems and procedures on a periodic basis.
8. Compliance with Laws. The Agent shall comply with all applicable
federal and state laws and regulations, including securities laws. The Agent
represents and warrants to the Trust that the performance of all its obligations
hereunder will comply with all applicable laws and regulations, the provisions
of its charter documents and bylaws and all material contractual obligations
binding upon the Agent. The Agent furthermore undertakes that it will promptly,
after the Agent becomes so aware, inform the Trust of any change in applicable
laws or regulations (or interpretations thereof) or in its charter or by-laws or
material contracts which would prevent or impair full performance of any of its
obligations hereunder.
9. Reports. To the extent requested by the Trust from time to time, the
Agent agrees that it will provide the Treasurer of the Trust with a written
report of the amounts expended by the Agent pursuant to this Agreement and the
purposes for which such expenditures were made. Such written reports shall be in
a form satisfactory to the Trust and shall supply all information necessary for
the Trust to discharge its responsibilities under applicable laws and
regulations.
10. Force Majeure. The Agent shall not be liable or responsible for
delays or errors by reason of circumstances beyond its reasonable control,
including, but not limited to, acts of civil or military authority, national
emergencies, labor difficulties, fire, mechanical breakdown, flood or
catastrophe, Acts of God, insurrection, war, riots or failure of communication
or power supply.
11. Indemnification.
11.1 Indemnification of the Agent. The Trust will indemnify and hold
the Agent harmless from all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees and expenses) from any claim, demand, action
or suit (collectively, "Claims") (a) arising in connection with misstatements or
omissions in the Trust's Prospectus, actions or inactions by the Trust or any of
its agents or contractors or the performance of the Agent's obligations
hereunder and (b) not resulting from (i) the bad faith or negligence of the
Agent, its officers, employees or agents, (ii) any breach of applicable law by
the Agent, its officers, employees or agents, or (iii) any action of the Agent,
its officers, employees or agents which exceeds the legal authority of the Agent
or its authority hereunder. Notwithstanding anything herein to the contrary, the
Trust will indemnify and hold the Agent harmless from any and all losses,
claims, damages, liabilities or expenses (including reasonable counsel fees and
expenses) resulting from any claim as a result of its acting in accordance with
any written instructions reasonably believed by the Agent to have been executed
by any person duly authorized by the Trust, or as a result of acting in reliance
upon any instrument or stock certificate reasonably believed by the Agent to
have been genuine and signed, countersigned or executed by a person duly
authorized by the Trust, excepting only the gross negligence or bad faith of the
Agent.
In any case in which the Trust may be asked to indemnify or hold the
Agent harmless, the Trust shall be advised of all pertinent facts concerning the
situation in question and the Agent shall use reasonable care to identify and
notify the Trust promptly concerning any situation which presents or appears
likely to present a claim for indemnification against the Trust. The Trust shall
have the option to defend the Agent against any Claim which may be the subject
of indemnification hereunder. In the event that the Trust elects to defend
against such Claim, the defense shall be conducted by counsel chosen by the
Trust and satisfactory to the Agent. The Agent may retain additional counsel at
its expense. Except with the prior written consent of the Trust, the Agent shall
not confess any Claim or make any compromise in any case in which the Trust will
be asked to indemnify the Agent.
11.2 Indemnification of the Trust. Without limiting the rights of the
Trust under applicable law, the Agent will indemnify and hold the Trust harmless
from all losses, claims, damages, liabilities or expenses (including reasonable
counsel fees and expenses) from any Claim (a) in connection with the performance
of Agent's obligations hereunder and resulting from (i) the bad faith or
negligence of the Agent, its officers, employees or agents, (ii) any breach of
applicable law by the Agent, its officers, employees or agents, or (iii) any
action of the Agent, its officers, employees or agents which exceeds the legal
authority of the Agent or its authority hereunder, and (b) not resulting from
the Agent's actions in accordance with written instructions reasonably believed
by the Agent to have been executed by any person duly authorized by the Trust,
or in reliance upon any instrument or stock certificate reasonably believed by
the Agent to have been genuine and signed, countersigned or executed by a person
duly authorized by the Trust.
In any case in which the Agent may be asked to indemnify or hold the
Trust harmless, the Agent shall be advised of all pertinent facts concerning the
situation in question and the Trust shall use reasonable care to identify and
notify the Agent promptly concerning any situation which presents or appears
likely to present a claim for indemnification against the Agent. The Agent shall
have the option to defend the Trust against any Claim which may be the subject
of indemnification hereunder. In the event that the Agent elects to defend
against such Claim, the defense shall be conducted by counsel chosen by the
Agent and satisfactory to the Trust. The Trust may retain additional counsel at
its expense. Except with the prior written consent of the Agent, the Trust shall
not confess any Claim or make any compromise in any case in which the Agent will
be asked to indemnify the Trust.
11.3 Survival of Indemnities. The indemnities granted by the parties in
this Section 11 shall survive the termination of this Agreement.
12. Notices. All notices or other communications hereunder to either
party shall be in writing and shall be deemed sufficient if mailed to such party
at the address of such party set forth in the preamble of this Agreement or at
such other address as such party may have designated by written notice to the
other.
13. Further Assurances. Each party agrees to perform such further acts
and execute such further documents as are necessary to effectuate the purposes
hereof.
14. Termination. This Agreement may be terminated by the Trust, without
the payment of any penalty, at any time upon not more than 60 days' nor less
than 30 days' notice, by a vote of a majority of the Board of Trustees of the
Trust who are not "interested persons" of the Trust (as defined in the 1940 Act)
and have no direct or indirect financial interest in the operation of the
Administrative Services Plan (the "Plan"), to which this Agreement is related,
this Agreement or any other agreement related to such Plan, or by "a vote of a
majority of the outstanding voting securities" (as defined in the 1940 Act) of
the Trust. The Agent may terminate this Agreement upon not more than 60 days'
nor less than 30 days' notice to the Trust. The period of prior notice of
termination shall be reduced to the extent necessary to comply with the
effective date of any change in applicable laws or regulations (or
interpretations thereof) which prevents or impairs full performance of the
obligations set forth herein; provided, however, in the event such period of
prior notice is reduced, the terminating party shall give prompt notice of
termination. Notwithstanding anything herein to the contrary, but except as
provided in Section 17 of this Agreement, this Agreement may not be assigned and
shall terminate automatically without notice to either party upon any
assignment. Upon termination hereof, the Trust shall pay such compensation as
may be due the Agent as of the date of such termination.
15. Changes; Amendments. This Agreement may be changed or amended only
by written instrument signed by both parties.
16. Limitation of Shareholder Liability. The Agent hereby agrees that
obligations assumed by the Trust pursuant to this Agreement shall be limited in
all cases to the Trust and its assets and that the Agent shall not seek
satisfaction of any such obligation from the shareholders or any shareholder of
the Trust. It is further agreed that the Agent shall not seek satisfaction of
any such obligations from the Board of Trustees or any individual Trustee of the
Trust.
17. Subcontracting By Agent. The Agent may, with the written approval
of the Trust (such approval not to be unreasonably withheld or delayed),
subcontract for the performance of the Agent's obligations hereunder with any
one or more persons, including but not limited to any one or more persons which
is an affiliate of the Agent; provided, however, that the Agent shall be as
fully responsible to the Trust for the acts and omissions of any subcontractor
as it would be for its own acts or omissions.
18. Compliance with Laws and Policies: Cooperation. The Trust hereby
agrees that it will comply with all laws and regulations applicable to its
operations and the Agent agrees that it will comply with all laws and
regulations applicable to its operations hereunder and each party agrees from
time to time to provide such certificates, information and access to its books,
records and personnel as the other may reasonably request to confirm the
foregoing. Each party understands that the other may from time to time adopt or
modify policies relating to the subject matter of this Agreement, in which case
the party adopting or modifying such a policy shall notify the other thereof and
the parties shall consider the applicability thereof and endeavor to comply
therewith to the extent not impracticable or unreasonably burdensome. Each of
the parties agrees to cooperate with the other in connection with the
performance of this Agreement and the resolution of any problems, questions or
disagreements in connection herewith.
18.1 Audit. The Trust shall maintain or arrange to be maintained
complete and accurate accounting records, in accordance with generally accepted
accounting principles. The Trust shall retain or arrange to be retained such
records for a period of three years from the termination of this Agreement. The
Agent and its designated certified public accountants shall have access to such
records based on reasonable cause and professional judgment during normal
business hours upon reasonable notice to the Trust.
18.2 Annual Financial Reports. At least once a year, the Trust shall
send to the owners of its shares and to the Agent the Trust's audited financial
statements.
18.3 Shareholder Updates. The Trust shall give the Agent advance
written notice of any change in the Trust's place of incorporation, mailing
address, management, investment objectives, fees or redemption rights. The Trust
shall give such advance notice to the owners of its shares to the extent
required by federal securities laws or the rules and regulations of the
Securities and Exchange Commission.
18.4 Annual Certification. At least once a year, the parties shall
certify to each other in writing that the certifying party is conducting its
business in accordance with the terms and conditions of the Agreement and in the
case of the Trust, in accordance with the representations set forth in its then
current prospectus.
19. Scope of Agreement. This Agreement, and the rights, duties,
indemnities and other obligations of the parties hereunder, relate only to the
services to be provided hereunder by the Agent to Third Party Firms, and is not
intended to apply to, or supersede any Shareholder Servicing Agreement between
the Agent and the Trust with respect to, the provision of services by the Agent
with respect to customers of the Agent.
20. Miscellaneous. This Agreement shall be construed and enforced in
accordance with and governed by the laws of the Commonwealth of Massachusetts.
The captions in this Agreement are included for convenience of reference only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, but all of
which taken together shall constitute one and the same instrument. Although this
Agreement has been executed by multiple parties, it shall be construed and
enforced as a separate agreement between each Trust and each Financial
Institution acting as Agent for such Trust. The terms of this Agreement shall
become effective with respect to each Trust and each Financial Institution
listed on a signature page hereof as of the date set forth thereon.
IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year set forth below. The
undersigned Trustee of the Trust has executed this Agreement not individually,
but as Trustee under the Trust's Declaration of Trust, as from time to time
amended, and the obligations of this Agreement are not binding upon any of the
Trustees or shareholders of the Trust individually, but bind only the Trust
estate.
Dated as of:_____________________________________
[NAME OF TRUST] [NAME OF FINANCIAL INSTITUTION]
By: _______________________________ By: _______________________________
Name: Philip W. Coolidge Name: _____________________________
Title: President Title: ____________________________
Principal Place of Business: Principal Place of Business:
6 St. James Avenue _______________________________
Boston, Massachusetts 02116 _______________________________
<PAGE>
EXHIBIT 99.11(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectus and
Statement of Additional Information constituting parts of this Post-Effective
Amendment No. 22 to the registration statement on Form N-1A (the "Registration
Statement") of Landmark Fixed Income Funds of our report dated February 7, 1996,
relating to the financial statements and financial highlights of Landmark U.S.
Government Income Fund, appearing in the December 31, 1995 Annual Report of
Landmark U.S. Government Income Fund, which are also incorporated by reference
into the Registration Statement. We also consent to the references to us under
the heading "Condensed Financial Information" in the Prospectus and under the
headings "Auditors" and "Independent Accountants and Financial Statements" in
the Statement of Additional Information.
Price Waterhouse LLP
PRICE WATERHOUSE LLP
Boston, Massachusetts
April 29, 1996
EXHIBIT 99.11(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the statement of
Additional Information constituting part of this Post-Effective Amendment No. 22
to the registration statement on Form N-1A (the "Registration Statement") of
Landmark Fixed Income Funds of our report dated February 7, 1996, relating to
the financial statements and financial highlights of the Government Income
Portfolio appearing in the December 31, 1995 Annual Report of Landmark U.S.
Government Income Fund, which are also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
headings "Auditors" and "Independent Accountants and Financial Statements" in
the Statement of Additional Information.
Price Waterhouse
Chartered Accountants
Toronto, Ontario
April 29, 1996
EXHIBIT 99.11(c)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post Effective Amendment
No. 22 to Registration Statement No. 33-6540 of Landmark Fixed Income Funds of
our report dated February 1, 1996 appearing in the annual report to shareholders
for the year ended December 31, 1995 of Landmark Intermediate Income Fund, a
series of Landmark Fixed Income Funds, and to the references to us under the
headings "Condensed Financial Information" in the Prospectus and "Independent
Accountants and Financial Statements" in the Statement of Additional
Information, both of which are part of such Registration Statement.
Deloitte & Touche LLP
Boston, Massachusetts
April 24, 1996
<PAGE>
EXHIBIT 99.25(b)
The Premium Portfolios for
LANDMARK INTERNATIONAL FUNDS
LANDMARK FUNDS I
LANDMARK FUNDS II
LANDMARK FIXED INCOME FUNDS
The undersigned hereby constitutes and appoints Philip W. Coolidge, Thomas M.
Lenz, Susan Jakuboski, Molly S. Mugler and Barbara M. O'Dette and each of them,
with full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities the Registration
Statements on Form N-1A, and any and all amendments thereto, filed by Landmark
International Funds (on behalf of its series, Landmark International Equity Fund
and Landmark Emerging Asian Markets Equity Fund), Landmark Funds I (on behalf of
its series, Landmark Balanced Fund), Landmark Funds II (on behalf of its series,
Landmark Equity Fund, Landmark Earnings Growth Equity Fund and Landmark Small
Cap Equity Fund) and Landmark Fixed Income Funds (on behalf of its series,
Landmark U.S. Government Income Fund, Landmark Intermediate Income Fund,
Landmark Long-Term U.S. Government Income Fund and Landmark Global Governments
Income Fund) (the "Registrants") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, and any and all other instruments which such attorneys
and agents, or any of them, deem necessary or advisable to enable the
Registrants to comply with the Securities Act of 1933, as amended and the
Investment Company Act of 1940, as amended, the rules, regulations and
requirements of the Securities and Exchange Commission, and the securities or
Blue Sky laws of any state or other jurisdiction; and the undersigned hereby
ratifies and confirms as his own act and deed any and all that such attorneys
and agents, or any of them, shall do or cause to be done by virtue hereof. Any
one of such attorneys and agents shall have, and may exercise, all of the powers
hereby conferred.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 9th day of
February 1996.
John R. Elder
- ----------------------------------
Signature
Paradise Island, Bahamas
John R. Elder
- ----------------------------------
Print Name
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<INVESTMENTS-AT-VALUE> 55,202,399
<RECEIVABLES> 0
<ASSETS-OTHER> 570,634
<OTHER-ITEMS-ASSETS> 262
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<TOTAL-LIABILITIES> 6,015,000
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 51,013,521
<SHARES-COMMON-STOCK> 5,079,977
<SHARES-COMMON-PRIOR> 5,342,279
<ACCUMULATED-NII-CURRENT> 18,693
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 902,835
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<SHARES-REINVESTED> 2,894,283
<NET-CHANGE-IN-ASSETS> 2,036,145
<ACCUMULATED-NII-PRIOR> 28,100
<ACCUMULATED-GAINS-PRIOR> (4,763,821)
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<GROSS-EXPENSE> 694,128
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<PER-SHARE-NAV-BEGIN> 8.91
<PER-SHARE-NII> 0.57
<PER-SHARE-GAIN-APPREC> 0.86
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