<PAGE>
As filed with the Securities and Exchange Commission on April 18, 1997
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. 23
AND
REGISTRATION STATEMENT UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 24
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, 1997
pursuant to paragraph (b) of Rule 485. The Premium Portfolios, on behalf of
Government Income Portfolio, 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 21, 1997 for Registrant's fiscal
year ended December 31, 1996.
<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 OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED 24E-2 SHARE* PRICE** FEE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares of Beneficial Interest
without par value............ 1,160,834.406 $9.62 $0
- -------------------------------------------------------------------------------------------------------------------------------
*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 14, 1997.
**Computed under 17 CFR 270.24e; 1,160,834.406 shares were redeemed or repurchased during the fiscal year ended December 31, 1996,
none of which were used for reductions in previous filings during the current year under Rule 24f-2 and 1,160,834.406 of which
are being used for reduction in this Post-Effective Amendment No. 23.
<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 OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED 24E-2 SHARE* PRICE** FEE
- -------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares of Beneficial Interest
without par value............ 881,410.350 $9.68 $0
- -------------------------------------------------------------------------------------------------------------------------------
*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 14, 1997.
**Computed under 17 CFR 270.24e; 881,410.350 shares were redeemed or repurchased during the fiscal year ended December 31, 1996,
none of which were used for reductions in previous filings during the current year under Rule 24f-2 and 881,410.350 of which
are being used for reduction in this Post-Effective Amendment No. 23.
</TABLE>
- ------------------------------------------------------------------------------
+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
<C> <S> <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
</TABLE>
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.
<PAGE>
PROSPECTUS
- --------------------------------------------------------------------------------
MAY 1, 1997
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 diversified 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 A PORTFOLIO
WITH THE SAME INVESTMENT OBJECTIVES AND POLICIES. SEE "SPECIAL INFORMATION
CONCERNING INVESTMENT STRUCTURE" ON PAGE 10.
- --------------------------------------------------------------------------------
REMEMBER THAT SHARES OF THE FUNDS:
o ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY
o ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, CITIBANK
OR ANY OF ITS AFFILIATES
o ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED
This Prospectus concisely sets forth information about the Funds that a
prospective investor should know before investing. A Statement of Additional
Information dated May 1, 1997 (and incorporated by reference in this Prospectus)
has been filed with the Securities and Exchange Commission. Copies of the
Statement of Additional Information may be obtained without charge, and further
inquiries about the Funds may be made, by contacting the investor's shareholder
servicing agent (see inside back cover for address and phone number).
TABLE OF CONTENTS
2 Prospectus Summary
- ----------------------------------------------
4 Expense Summary
- ----------------------------------------------
6 Condensed Financial Information
- ----------------------------------------------
8 Investment Information
- ----------------------------------------------
10 Risk Considerations
- ----------------------------------------------
11 Valuation of Shares
- ----------------------------------------------
12 Classes of Shares
- ----------------------------------------------
13 Purchases
- ----------------------------------------------
17 Exchanges
Redemptions
- ----------------------------------------------
18 Dividends and Distributions
- ----------------------------------------------
19 Management
- ----------------------------------------------
22 Tax Matters
Performance Information
- ----------------------------------------------
23 General Information
- ----------------------------------------------
24 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 diversified 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 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 $81 billion in assets worldwide.
The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS" or the "Distributor")
is the distributor of shares of each Fund. See "Management."
PURCHASES AND REDEMPTIONS: Customers of Shareholder Servicing Agents may
purchase and redeem shares of the Funds on any Business Day. See "Purchases"
and "Redemptions."
PRICING: Investors may select Class A or Class B shares, with different expense
levels and sales charges (if available through the investors' Shareholder
Servicing Agents). See "Classes of Shares," "Purchases" and "Management --
Distribution Arrangements."
CLASS A SHARES. Offered at net asset value plus any applicable initial sales
charge (maximum of 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 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 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 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 and, for the U.S.
Government Income Fund, Government Income Portfolio. For more information on
costs and expenses, see "Management" -- page 19 and "General Information-
Expenses" -- page 23.*
<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, See See
whichever is 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%
* This table is intended to assist investors in understanding the various costs and expenses that
a shareholder of a Fund will bear, either directly or indirectly. Because Class B shares were
not offered during the most recent fiscal year of the Funds, certain figures in the table are
based on estimated amounts for the current fiscal year. The table shows the fees paid to various
service providers after giving effect to expected voluntary partial fee waivers and
reimbursements. There can be no assurance that the fee waivers and reimbursements reflected in
the table will continue at these levels.
(1) Purchases of $1 million or more are not subject to an initial sales charge; however, a
contingent deferred sales charge of 1.00% will be imposed in the event of certain redemptions
within 12 months following purchase. See "Classes of Shares" and "Purchases."
(2) Absent fee waivers and reimbursements, investment management fees, 12b-1 fees, administrative
services fees and total fund operating expenses would be .35%, .20%, .30% and 1.23% for Landmark
U.S. Government Income Fund -- Class A; .35%, .65%, .30% and 1.68% for Landmark U.S. Government
Income Fund -- Class B; .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.
(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.
</TABLE>
<PAGE>
EXAMPLE: A shareholder would pay the following expenses on a $1,000
investment, assuming, except as otherwise noted, redemption at the end of each
period indicated below:
ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
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
(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.
The Example assumes a 5% annual return and that all dividends are reinvested and
reflects certain voluntary fee waivers. If waivers were not in place, the
amounts in the example would be $27, $53, $82 and $162 for U.S. Government
Income Fund -- Class A; $37, $63, $91 and $183 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, 1996. Expenses for Class B shares are estimated because
Class B shares were not offered during the fiscal year ended December 31, 1996.
The assumption of a 5% annual return is required by the Securities and Exchange
Commission for all mutual funds, and is not a prediction of any Fund's future
performance. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OF ANY FUND. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
<PAGE>
<TABLE>
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 (for the fiscal years after December 31,
1994) and Deloitte & Touche (for periods prior to the fiscal year ended December 31, 1994). 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).
<CAPTION>
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U.S. GOVERNMENT INCOME FUND
FINANCIAL HIGHLIGHTS
CLASS A SHARES
(No Class B shares were outstanding during these periods.)
FOUR
MONTHS
YEAR ENDED DEC. 31, ENDED YEAR ENDED AUGUST 31,
DEC. 31,
1996 1995 1994 1993(A) 1993 1992 1991 1990 1989 1988 1987++
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period ... $ 9.78 $ 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 ... 0.516 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 ........... (0.232) 0.500 (0.635) (0.138) 0.183 0.413 0.499 (0.148) 0.052 (0.114) (0.871)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from operations 0.284 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 . (0.514) (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 (0.514) (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 ................ $ 9.55 $ 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) ....... $26,744 $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%(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 5.31% 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 ............ 3.02% 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 Fund for the periods indicated and certain agents of Government Income Portfolio for periods after
May 1, 1994 had not waived a portion of their fees and assumed Fund expenses, the net investment income per share and the ratios
would have been as follows:
Net investment income per
share ................. $0.460 $0.499 $0.421 $0.164 $0.400 $0.503 $0.659 $0.648 * $0.762 $0.686
RATIOS:
Expenses to average net
assets ................ 1.38%(B) 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 .... 4.73% 4.95% 4.26% 3.88%+ 3.98% 5.13% 7.16% 7.13% * 8.30% 7.84%+
* 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 Fund changed its fiscal year end from August 31 to December 31.
(B) Includes the 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 Fund was making investments directly in securities. The
portfolio turnover rates for the fiscal years ended December 31, 1995 and 1996 are included
under "Investment Information -- Certain Additional Investment Policies."
</TABLE>
<PAGE>
<TABLE>
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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
(COMMENCEMENT OF
YEAR ENDED DECEMBER 31, OPERATIONS) TO
1996 1995 1994 DECEMBER 31, 1993
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of period .................... $ 9.77 $ 8.91 $ 9.88 $10.00
------ ------ ------ ------
Income from Operations:
Net investment income ................................... 0.54 0.57 0.521 0.261
Net realized and unrealized gain (loss) on investments .. (0.29) 0.86 (0.959) 0.037
------ ------ ------ ------
Total from operations ............................... 0.25 1.43 (0.438) 0.298
------ ------ ------ ------
Less Dividends and Distributions From:
Net investment income ................................. (0.54) (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 .............. (0.54) (0.57) (0.532) (0.418)
------ ------ ------ ------
Net Asset Value, end of period .......................... $ 9.48 $ 9.77 $ 8.91 $ 9.88
====== ====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) ............... $43,919 $49,618 $47,582 $61,183
Ratio of expenses to average net assets ................. 0.90% 0.90% 0.90% 0.90%*
Ratio of net investment income to average net assets .... 5.72% 5.97% 5.52% 4.95%*
Portfolio turnover ...................................... 495% 396% 291% 103%
Total return ............................................ 2.73% 16.45% (4.48)% 2.99%+
Note: If certain agents of the 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 years after December 31, 1994, the net investment income per share and
the ratios would have been as follows:
Net investment income per share ......................... $ 0.50 $ 0.52 $ 0.475 $0.236
RATIOS:
Expenses to average net assets .......................... 1.39% 1.42% 1.39% 1.38%*
Net investment income to average net assets ............. 5.23% 5.45% 5.03% 4.47%*
* 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 Rating Services ("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. When interest rates go
up, mortgage-backed securities experience lower rates of prepayment. This has
the effect of lengthening the expected maturity of a mortgage-backed security.
As a result, prices of mortgage-backed securities may decrease more than prices
of other debt obligations when interest rates go up.
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 page 24. The Funds will not necessarily
invest or engage in each of the investments and investment practices in the
Appendix but reserve the right to do so.
INVESTMENT RESTRICTIONS. The Statement of Additional Information contains a
list of specific investment restrictions which govern the investment policies of
the Funds, including a limitation that each Fund may borrow money from banks in
an amount not to exceed 33 1/3% of the Fund's net assets for extraordinary or
emergency purposes (e.g., to meet redemption requests). Except as otherwise
indicated, the Funds' investment objectives and policies may be changed without
shareholder approval. If a percentage or rating restriction (other than a
restriction as to borrowing) is adhered to at the time an investment is made, a
later change in percentage or rating resulting from changes in a Fund's
securities will not be a violation of policy.
PORTFOLIO TURNOVER. Securities of each Fund will be sold whenever the
Adviser believes it is appropriate to do so in light of the Fund's investment
objectives, without regard to the length of time a particular security may have
been held. For the fiscal years ended December 31, 1995 and 1996, the turnover
rates for Government Income Portfolio were 294% and 100%, respectively. For the
fiscal years ended December 31, 1995 and 1996, the turnover rates for the
Intermediate Income Fund were 396% and 495%, 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 page 24.
SPECIAL INFORMATION CONCERNING INVESTMENT STRUCTURE: The U.S. Government Income
Fund does not invest directly in securities. Instead, the Fund invests all of
its investable assets in Government Income Portfolio, which is a mutual fund
having the same investment objectives and policies as the Fund. The Portfolio,
in turn, buys, holds and sells securities in accordance with these objectives
and policies. Of course, there can be no assurance that the Fund or the
Portfolio will achieve their objectives. The Trustees of the 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 the assets
of the Fund were invested directly in the types of securities held by the
Portfolio. The Fund may withdraw its investment in the Portfolio at any time,
and will do so if the Fund's Trustees believe it to be in the best interest of
the Fund's shareholders. If the Fund were to withdraw its investment in the
Portfolio the Fund could either invest directly in securities in accordance with
the investment policies described above or invest in another mutual fund or
pooled investment vehicle having the same investment objectives and policies. If
the Fund were to withdraw, the Fund could receive securities from the Portfolio
instead of cash causing the Fund to incur brokerage, tax and other charges or
leaving it with securities which may or may not be readily marketable or widely
diversified.
Government Income Portfolio may change its investment objective and certain
of its investment policies and restrictions without approval by its investors,
but the Portfolio will notify the U.S. Government Income Fund (which in turn
will notify its shareholders) and its other investors at least 30 days before
implementing any change in its investment objective. A change in investment
objective, policies or restrictions may cause the Fund to withdraw its
investment in the Portfolio.
Certain investment restrictions of Government Income Portfolio cannot be
changed without approval by the investors in the Portfolio. These policies are
described in the Statement of Additional Information. When the U.S. Government
Income Fund is asked to vote on matters concerning the Portfolio (other than a
vote to continue the Portfolio following the withdrawal of an investor), the
Fund will hold a shareholder meeting and vote in accordance with shareholder
instructions. Of course, the Fund could be outvoted, or otherwise adversely
affected, by other investors in its Portfolio.
Government Income Portfolio may sell interests to investors in addition to
the U.S. Government Income Fund. These investors may be mutual funds which offer
shares to their shareholders with different costs and expenses than the Fund.
Therefore, the investment returns for all investors in funds investing in the
Portfolio may not be the same. The differences in returns are also present in
other mutual funds structures.
Information about other holders of interests in Government Income Portfolio
is available from the Fund's distributor, LFBDS (see back cover for address and
phone numbers).
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 BETWEEN 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% Distribution fee of 0.05% Initial sales charge waived or reduced for certain
of the public offering price for U.S. purchases; a contingent deferred sales charge may
Government Income Fund and 4.00% of the apply in certain instances where the initial sales
public offering price for Intermediate charge is waived
Income Fund
CLASS B Maximum contingent deferred sales charge Distribution fee of 0.45% for Shares convert to Class A shares approximately
of 2.00% for U.S. Government Income U.S. Government Income Fund eight years after issuance
Fund, and 5.00% for Intermediate Income and 0.75% for Intermediate
Fund, of the lesser of redemption Income Fund. Service fee
proceeds or original purchase price; of 0.05%
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 unless they are in proper form.
PURCHASING CLASS A SHARES: INITIAL SALES CHARGE -- CLASS A SHARES. Each Fund's
public offering price of Class A shares is the net asset value next determined
after an order is transmitted to and accepted by the Distributor, plus any
applicable sales charge, which will vary with the size of the purchase as shown
in the following tables:
<TABLE>
<CAPTION>
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
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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.
<CAPTION>
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
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
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.
</TABLE>
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 net asset value next
determined after an order is transmitted to and accepted by the Distributor, and
no initial sales charge is imposed. A contingent deferred sales charge, however,
is imposed upon certain redemptions of Class B shares.
Class B shares of a Fund that are redeemed will not be subject to a
contingent deferred sales charge to the extent that the value of such shares
represents (i) capital appreciation of Fund assets, (ii) reinvestment of
dividends or capital gains distributions or (iii) shares redeemed more than 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. Shareholder
Servicing Agents which are banks or financial institutions will receive
transaction fees that are equal to the commissions paid to securities brokers.
From time to time the Distributor may make payments for distribution and/or
shareholder servicing activities out of its past profits and other sources
available to it. The Distributor also may make payments for marketing,
promotional or related expenses to dealers who engage in marketing efforts on
behalf of the Funds. The amounts of these payments will be determined by the
Distributor in its sole discretion and may vary among different dealers.
EXCHANGES
- --------------------------------------------------------------------------------
Shares of each Fund may be exchanged for shares of the same class of other
Landmark Funds that are made available by a shareholder's Shareholder Servicing
Agent, or may be acquired through an exchange of shares of the same class of
those funds. No initial sales charge is imposed on shares being acquired through
an exchange unless Class A shares are being acquired and the sales charge of the
fund being exchanged into is greater than the current sales charge of the Fund
(in which case an initial sales charge will be imposed at a rate equal to the
difference). No contingent deferred sales charge is imposed on shares being
disposed of through an exchange.
Shareholders must place exchange orders through their Shareholder Servicing
Agents, and may do so by telephone if their account applications so permit. For
more information on telephone transactions see "Redemptions." All exchanges will
be effected based on the relative net asset values per share next determined
after the exchange order is received and accepted by the Distributor. See
"Valuation of Shares."
This exchange privilege may be modified or terminated at any time, upon at
least 60 days' notice when such notice is required by SEC rules, and is
available only in those jurisdictions where such exchanges legally may be made.
See the Statement of Additional Information for further details. Before making
any exchange, shareholders should contact their Shareholder Servicing Agents to
obtain more information and prospectuses of the Landmark Funds to be acquired
through the exchange.
An exchange is treated as a sale of the shares exchanged and could result in
taxable gain or loss to the shareholder making the exchange.
REDEMPTIONS
- --------------------------------------------------------------------------------
Fund shares may be redeemed at their net asset value next determined after a
redemption request in proper form is received by a shareholder's Shareholder
Servicing Agent (subject to any applicable contingent deferred sales charge).
Shareholders may redeem shares of a Fund only by authorizing their Shareholder
Servicing Agents to redeem such shares on their behalf through the Distributor.
If a redeeming shareholder owns shares of more than one class, Class A shares
will be redeemed first unless the shareholder specifically requests otherwise.
A redemption is treated as a sale of the shares redeemed and could result in
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 Government Income 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 $81 billion in assets worldwide. Citibank is a wholly-owned
subsidiary of Citicorp. Citibank's address is 153 East 53rd Street, New York,
New York 10043.
Citibank manages the Funds' assets pursuant to separate Investment Advisory
Agreements. Subject to policies set by the Trustees, Citibank makes investment
decisions for the Funds.
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 investment advisory fees, which are accrued daily and paid
monthly, of 0.35% of each Fund's average daily net assets on an annualized basis
for that Fund's then-current fiscal year. The Adviser has voluntarily agreed to
waive a portion of its investment advisory fee from each Fund.
For the fiscal year ended December 31, 1996, the investment advisory fee
paid to Citibank for the U.S. Government Income Fund, after waivers, was 0.32%
of the Fund's average daily net assets for that fiscal year.
For the fiscal year ended December 31, 1996, the investment advisory fee
paid to Citibank for the Intermediate Income Fund, after waivers, was 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 each 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. 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. Investors Bank & Trust Company
also 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
Investment Company Act of 1940. 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 1996 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 1997 fiscal
year. Currently the service fee for Class B shares is 0.05% per annum of the
average daily net assets represented by Class B shares.
The Distributor uses the distribution fees under the Plans to offset each
Fund's marketing costs attributable to the classes, such as preparation of sales
literature, advertising, and printing and distributing prospectuses and other
shareholder materials to prospective investors. In addition, the Distributor may
use the distribution fees to pay costs related to distribution activities,
including employee salaries, bonuses and other overhead expenses. The
Distributor also uses the distribution fees under the Class B 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.
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.
For the fiscal year ended December 31, 1996, the total expenses for the
Class A shares of the Funds were .80% of the average daily net assets
attributable to Class A shares of the U.S. Government Income Fund and .90% of
the average daily net assets attributable to Class A shares of the Intermediate
Income Fund, in each case for that fiscal year.
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
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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 reverse repurchase agreement, the Fund could experience
delays in recovering either the securities or cash. To the extent that, in the
meantime, the value of the securities loaned or sold has increased or the value
of the securities purchased has decreased, the Fund could experience a loss.
RULE 144A SECURITIES. Each Fund may purchase restricted securities that are
not registered for sale to the general public. If the Adviser determines that
there is a dealer or institutional market in the securities, the securities will
not be treated as illiquid for purposes of the Fund's investment limitations.
The Trustees will review these determinations. These securities are known as
"Rule 144A securities," because they are traded under SEC Rule 144A among
qualified institutional buyers. Institutional trading in Rule 144A securities is
relatively new, and the liquidity of these investments could be impaired if
trading in Rule 144A securities does not develop or if qualified institutional
buyers become, for a time, uninterested in purchasing Rule 144A securities.
PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS. Each Fund may invest up to 15%
of its net assets (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 RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CLIENTS:
Citibank, N.A.
111 Wall Street, New York, NY 10094
(212) 820-2383 or (800) 846-5300
FOR CITIGOLD CLIENTS:
Citigold
P.O. Box 5130, New York, NY 10126-5130
Call Your Citigold Executive or, in NY or CT, (800) 285-1701,
or for all other states, (800) 285-1707
FOR CITIBANK PRIVATE BANKING CLIENTS:
Citibank, N.A.
The Citibank Private Bank
153 East 53rd Street, New York, NY 10043
Call Your Citibank Private Banking Account Officer,
Investment Specialist or (212) 559-5959
FOR CITIBANK GLOBAL ASSET MANAGEMENT CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY 10043
(212) 559-7117
FOR CITIBANK NORTH AMERICAN INVESTOR SERVICES CLIENTS:
Citibank, N.A.
Master Trust Accounts
111 Wall Street, New York, NY 10094
Call Your Account Manager or (212) 657-9659
FOR CITICORP INVESTMENT SERVICES CLIENTS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200,
(212) 820-2380 in New York City
[LOGO] LANDMARK
FUNDS
MONEY MARKET FUNDS:
Cash Reserves
Premium Liquid Reserves
Institutional Liquid Reserves
U.S. Treasury Reserves
Premium U.S. Treasury Reserves
Institutional U.S. Treasury Reserves
Tax Free Reserves
Institutional Tax Free Reserves
California Tax Free Reserves
Connecticut Tax Free Reserves
New York Tax Free Reserves
STOCK & BOND FUNDS:
U.S. Government Income Fund
Intermediate Income Fund
National Tax Free Income Fund
New York Tax Free Income Fund
Balanced Fund
Equity Fund
International Equity Fund
Small Cap Equity Fund
Emerging Asian Markets Equity Fund
<PAGE>
[LOGO] LANDMARK(SM) FUNDS
Advised by Citibank, N.A.
- ------------------------------------
LANDMARK
U.S. GOVERNMENT
INCOME FUND
- ------------------------------------
LANDMARK
INTERMEDIATE
INCOME FUND
- ------------------------------------
PROSPECTUS
May 1, 1997
FI/P.1/97 Printed on Recycled Paper [Recycle Symbol]
<PAGE>
Statement of
Additional Information
May 1, 1997
LANDMARK U.S. GOVERNMENT INCOME FUND
LANDMARK INTERMEDIATE INCOME FUND
(Members of the Landmark(SM) 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
1. The Funds ............................................................. 2
2. Investment Objectives, Policies and Restrictions ...................... 2
3. Performance Information ................................................ 15
4. Determination of Net Asset Value; Valuation of Securities;
Additional Purchase and Redemption Information ..................... 16
5. Management ............................................................. 18
6. Portfolio Transactions ................................................. 25
7. Description of Shares, Voting Rights and Liabilities ................... 26
8. Certain Additional Tax Matters ......................................... 28
9. 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, 1997, by which shares of the Funds are offered. This
Statement of Additional Information should be read in conjunction with the
Prospectus, a copy of which may be obtained by an investor without charge by
contacting the Funds' distributor, The Landmark Funds Broker-Dealer Services,
Inc., at 6 St. James Avenue, Boston, MA 02116, (617) 423-1679.
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
1. THE FUNDS
Landmark 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, 1997, 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, 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 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 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. Either party has the right to call a loan
at any time on customary industry settlement notice (which will not usually
exceed three business days). During the existence of a loan, a Fund would
continue to receive the equivalent of the interest or dividends paid by the
issuer on the securities loaned and with respect to cash collateral would also
receive compensation based on investment of the collateral (subject to a rebate
payable to the borrower). Where the borrower provides a Fund with collateral
consisting of U.S. Treasury obligations, the borrower is also obligated to pay
the Fund a fee for use of the borrowed securities. The Fund would not, however,
have the right to vote any securities having voting rights during the existence
of the loan, but would call the loan in anticipation of an important vote to be
taken among holders of the securities or of the giving or withholding of their
consent on a material matter affecting the investment. As with other extensions
of credit, there are risks of delay in recovery or even loss of rights in the
collateral should the borrower fail financially. However, the loans would be
made only to entities deemed by the Adviser to be of good standing, and when, in
the judgment of the Adviser, the consideration which can be earned currently
from loans of this type justifies the attendant risk. In addition, a Fund could
suffer a loss if the borrower terminates the loan and the Fund is forced to
liquidate investments in order to return the cash collateral to the buyer. If
the Adviser determines to make loans, it is not intended that the value of the
securities loaned by a Fund would exceed 30% of the value of its total assets.
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
"Non-Fundamental 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 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 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.
<TABLE>
<CAPTION>
REDEEMABLE VALUE
ANNUALIZED OF A HYPOTHETICAL
TOTAL $1,000 INVESTMENT
GOVERNMENT INCOME FUND RATE OF RETURN AT THE END OF THE PERIOD
- ---------------------- -------------- ------------------------
<S> <C> <C>
Ten years ended December 31, 1996 6.45% $1,869
Five years ended December 31, 1996 4.48% $1,245
One year ended December 31, 1996 1.47% $1,015
<CAPTION>
INTERMEDIATE INCOME FUND
<S> <C> <C>
June 25, 1993 (commencement of operations) to December 31, 1996 3.53% $1,130
One year ended December 31, 1996 (1.38)% $ 986
</TABLE>
The annualized yields of Class A shares of the Government Income Fund and
the Intermediate Income Fund for the 30-day period ended December 31, 1996 were,
respectively, 5.14% and 5.61%.
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
Exchange and may also take place on days on which the Exchange is closed. If
events materially affecting the value of non-U.S. securities occur between the
time when the exchange on which they are traded closes and the time when a
Fund's net asset value is calculated, such securities will be valued at fair
value in accordance with procedures established by and under the general
supervision of the Board of Trustees of 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 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; 74 -- Treasurer-Tax Collector, County of Los Angeles (retired,
March 1984); Chairman, certain registered investment companies in the 59 Wall
Street funds group. His address is 1450 Oleada Road, Pebble Beach, California.
Mr. Alvord has announced that he intends to resign as a Trustee on May 31,
1997.
PHILIP W. COOLIDGE*; 45 -- 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; 70 -- Vice President and General Counsel, Corporate Property
Investors (November 1988 to December 1991); Partner, Breed, Abbott & Morgan
(Attorneys) (retired, December 1987). His address is 4041 Gulf Shore Boulevard
North, Naples, Florida.
DIANA R. HARRINGTON; 57 -- Professor, Babson College (since September 1993);
Visiting Professor, Kellogg Graduate School of Management, Northwestern
University (September 1992 to September 1993); Professor, Darden Graduate School
of Business, University of Virginia (September 1978 to September 1993); Trustee,
The Highland Family of Funds (since March 1997). Her address is 120 Goulding
Street, Holliston, Massachusetts.
SUSAN B. KERLEY; 45 -- President, Global Research Associates, Inc. (Investment
Research) (since August 1990); Manager, Rockefeller & Co. (March 1988 to July
1990); Trustee, Mainstay Institutional Funds (since December 1990). Her
address is P.O. Box 9572, New Haven, Connecticut.
C. OSCAR MORONG, JR.; 62 -- 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.
E. KIRBY WARREN; 62 -- Professor of Management, Graduate School of Business,
Columbia University (since 1987); Samuel Bronfman Professor of Democratic
Business Enterprise (1978 to 1987). His address is Columbia University, Graduate
School of Business, 725 Uris Hall, New York, New York.
WILLIAM S. WOODS, JR.; 76 -- Vice President-Investments, Sun Company, Inc.
(retired, April 1984). His address is 35 Colwick Road, Cherry Hill, New
Jersey.
TRUSTEES OF THE PORTFOLIO TRUST
ELLIOTT J. BERV; 54 -- Chairman and Director, Catalyst, Inc. (Management
Consultants)(since June 1992); President, Chief Operating Officer and
Director, Deven International, Inc. (International Consultants)(June 1991 to
June 1992); President and Director, Elliott J. Berv & Associates (Management
Consultants)(since May 1984). His address is 15 Stornoway Drive, Cumberland
Foreside, Maine.
PHILIP W. COOLIDGE*; 45 -- 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; 53 -- President and Director, Delta Financial, Inc. (since June
1983); Chairman of the Board and Chief Executive Officer, FX 500 Ltd.
(Commodity Trading Advisory Firm)(since April 1990); Director, Vantage
Consulting Group, Inc. (since October 1988). His address is 3500 Pacific
Avenue, P.O. Box 539, Virginia Beach, Virginia.
WALTER E. ROBB, III; 70 -- President, Benchmark Consulting Group, Inc. (since
1991); Principal, Robb Associates (corporate financial advisers) (since 1978);
President, Benchmark Advisors, Inc. (Corporate Financial Advisors)(since
1989); Trustee of certain registered investment companies in the MFS Family of
Funds. His address is 35 Farm Road, Sherborn, Massachusetts.
OFFICERS OF THE TRUST AND THE PORTFOLIO TRUST
SAMANTHA M. BURGESS*; 27 -- Assistant Secretary and Assistant Treasurer of the
Trust and the Portfolio Trust; Assistant Vice President, Signature Financial
Group, Inc. (since November 1995); Graduate Student, Loyola University (prior
to August 1995).
PHILIP W. COOLIDGE*; 45 -- 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).
CHRISTINE A. DRAPEAU*; 26 -- Assistant Secretary and Assistant Treasurer of the
Trust and the Portfolio Trust; Assistant Vice President, Signature Financial
Group, Inc. (since January 1996); Paralegal and Compliance Officer, various
financial companies (July 1992 to January 1996); Graduate Student, Bentley
College (prior to December 1994).
JOHN R. ELDER*; 48 -- Treasurer of the 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*; 31 -- Secretary of the Trust and the Portfolio Trust; Vice
President, Signature Financial Group, Inc. (since May 1992); Assistant
Secretary, The Landmark Funds Broker-Dealer Services, Inc. (since October
1992); law student, Boston University School of Law (from September 1989 to
May 1992).
JOAN A. GULINELLO*; 41 -- Assistant Secretary and Assistant Treasurer of the
Trust and the Portfolio Trust; Vice President, Signature Financial Group, Inc.
(since October 1993); Secretary, The Landmark Funds Broker-Dealer Services,
Inc. (since October 1995); Vice President and Assistant General Counsel,
Massachusetts Financial Services Company (prior to October 1993).
JAMES E. HOOLAHAN*; 49 -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolio Trust; Senior Vice President,
Signature Financial Group, Inc.
SUSAN JAKUBOSKI*; 33 -- Assistant Treasurer and Assistant Secretary of the
Portfolio Trust (since August 1994); Manager, Signature Financial Group
(Cayman) Ltd. (since August 1994); Senior Fund Administrator, Signature
Financial Group, Inc. (since August 1994); Assistant Treasurer, Signature
Broker-Dealer Services, Inc. (since September 1994); Fund Compliance
Administrator, Concord Financial Group (November 1990 to August 1994). Her
address is Elizabethan Square, George Town, Grand Cayman, Cayman Islands, BWI.
MOLLY S. MUGLER*; 45 -- Assistant Secretary of the Trust and the Portfolio
Trust; Vice President, Signature Financial Group, Inc.; Assistant Secretary,
The Landmark Funds Broker-Dealer Services, Inc. (since December 1988).
KARYN A. NOKE*; 26 -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolio Trust; Vice President, Signature
Financial Group (Cayman) Ltd. (since September 1996); Assistant Vice
President, Signature Financial Group, Inc. (May 1993 to August 1996); Student,
University of Massachusetts (prior to May 1993).
SHARON M. WHITSON*; 48 -- Assistant Secretary and Assistant Treasurer of the
Trust and the Portfolio Trust; Assistant Vice President, Signature Financial
Group, Inc. (since November 1992); Associate Trader, Massachusetts Financial
Services Company (prior to November 1992).
JULIE J. WYETZNER*; 37 -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolio Trust; Vice President, Signature
Financial Group, Inc.
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.
<TABLE>
TRUSTEE COMPENSATION 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 .............................................. $1,488 $2,015 $44,000
Philip W. Coolidge ........................................ $ 0 $ 0 $ 0
Riley C. Gilley ........................................... $1,504 $2,067 $46,000
Diana R. Harrington ....................................... $1,587 $2,159 $47,250
Susan B. Kerley ........................................... $1,567 $2,129 $45,250
C. Oscar Morong, Jr. ...................................... $1,622 $2,211 $58,875
Donald B. Otis(3) ......................................... $1,729 $2,356 $38,000
E. Kirby Warren ........................................... $1,521 $2,062 $47,375
William S. Woods, Jr. ..................................... $1,647 $2,241 $47,000
- ----------
(1) For the fiscal year ended December 31, 1996.
(2) Information relates to the fiscal year ended December 31, 1996. Messrs. Alvord, Coolidge, Gilley, Morong, Warren and Woods,
and Mses. Harrington and Kerley are Trustees of 23, 46, 25, 23, 23, 25, 23, and 23 funds or portfolios, respectively, in
the Landmark Family of Funds.
(3) Mr. Otis retired as a Trustee on August 31, 1996.
</TABLE>
As of April 9, 1997, 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 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 years ended December 31, 1995 and 1996 the fees payable to the Adviser
under the Portfolio's Advisory Agreement were $179,525 (of which $1,055 was
voluntarily waived) and $198,024 (of which $2,044 was voluntarily waived),
respectively. For the fiscal years ended December 31, 1994, 1995 and 1996, the
fees payable from the Intermediate Income Fund to the Adviser under its Advisory
Agreement were $186,301 (of which $120,645 was voluntarily waived), $171,213 (of
which $115,475 was voluntarily waived) and $162,525 (of which $80,994 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 four month period ended April 30, 1994, the period from May
1, 1994 to December 31, 1994 and for the fiscal years ended December 31, 1995
and 1996, 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), $72,047 (all of
which was voluntarily waived) and $74,177 (all of which was voluntarily waived),
respectively. For the period from May 1, 1994 to December 31, 1994 and for the
fiscal years ended December 31, 1995 and 1996, 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), $25,646 (of which $18,221
was voluntarily waived) and $28,289 (of which $27,649 was voluntarily waived),
respectively. For the fiscal years ended December 31, 1994, 1995 and 1996, the
fees payable to LFBDS from the Intermediate Income Fund were $106,458 (of which
$37,176 was voluntarily waived), $97,836 (of which $38,337 was voluntarily
waived) and $116,090 (of which $72,966 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 Class B
shares at an annual rate not to exceed 0.25% of each Fund's average daily net
assets represented by Class B shares.
Each Distribution Plan with respect to the Class A Shares also permits the
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 years ended
December 31, 1994, 1995 and 1996, the fees payable to the Distributor by the
Government Income Fund under the Distribution Agreement were $34,098 (all of
which was voluntarily waived), $22,576 (all of which was voluntarily waived) and
$44,506 (all of which was voluntarily waived), respectively, no portion of which
was applicable to reimbursement for expenses incurred in connection with print
or electronic media advertising. For the fiscal years ended December 31, 1994,
1995 and 1996, the fees payable to the Distributor from the Intermediate Income
Fund under the Distribution Plan were $26,614 (of which $25,617 was voluntarily
waived), $24,459 (all of which was voluntarily waived) and $69,654 (of which
$67,679 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 and a Fund Accounting Agreement with
Investors Bank & Trust Company ("IBT") 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 years ended
December 31, 1994, 1995 and 1996, 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), $180,611 (of
which $67,730 was voluntarily waived) and $74,177, respectively. For the fiscal
years ended December 31, 1994, 1995 and 1996, aggregate fees payable to
Shareholder Servicing Agents by the Intermediate Income Fund under the
Administrative Services Plan were $212,916 (of which $79,843 was voluntarily
waived), $195,673 (of which $73,377 was voluntarily waived), and $116,090,
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 also has entered into a Fund Accounting
Agreement with IBT pursuant to which IBT provides fund accounting services for
the Portfolio. Pursuant to a separate Transfer Agency and Service Agreement with
the Portfolio Trust, Signature Financial Services, Inc. ("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 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 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 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 years ended December 31, 1995 and 1996, the Portfolio
paid no brokerage commissions. For the fiscal years ended December 31, 1994,
1995 and 1996, 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.
Any Fund distribution will have the effect of reducing the per share net
asset value of shares in the Fund by the amount of the distribution.
Shareholders purchasing shares shortly before the record date of any
distribution may thus pay the full price for the shares and then effectively
receive a portion of the purchase price back as a taxable distribution.
In general, any gain or loss realized upon a taxable disposition of shares
of a Fund by a shareholder that holds such shares as a capital asset will be
treated as a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise as a short-term capital gain or loss.
However, any loss realized upon a 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.
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.
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 accountants for the Intermediate Income Fund.
The audited financial statements of the Government Income Fund (Statement of
Assets and Liabilities at December 31, 1996, Statement of Operations for the
year ended December 31, 1996, Statement of Changes in Net Assets for the years
ended December 31, 1996 and 1995, Financial Highlights for each of the years in
the three-year period ended December 31, 1996, for the four-month period ended
December 31, 1993 and the years ended August 31, 1993 and 1992, 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, 1996, Statement of Assets and Liabilities at December 31, 1996,
Statement of Operations for the year ended December 31, 1996, Statement of
Changes in Net Assets for the years ended December 31, 1996 and 1995, Financial
Highlights for the fiscal years ended December 31, 1996 and 1995 and for the
period May 1, 1994 (commencement of operations) to December 31, 1994, Notes to
Financial Statements and Independent Auditors' Report), each of which is
included in the Annual 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, 1996, Statement of Assets and Liabilities at
December 31, 1996, Statement of Operations for the year ended December 31, 1996,
Statement of Changes in Net Assets for the years ended December 31, 1996 and
1995, Financial Highlights for each of the years in the three-year period ended
December 31, 1996 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 accountants, on behalf of the Intermediate
Income 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 Rating Services ("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 Aa1, A1 and Baa1.
STANDARD & POOR'S RATINGS GROUP
AAA An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.
AA An obligation rated AA differs from the highest rated issues only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.
A An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.
BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.
* 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 RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CUSTOMERS:
Citibank, N.A.
111 Wall Street, New York, NY 10094
(212) 820-2383 or (800) 846-5300
FOR CITIGOLD CUSTOMERS:
Citigold
P.O. Box 5130, New York, NY 10126-5130
Call Your Citigold Executive or, in NY or CT, (800) 285-1701
or for all other states, (800) 285-1707
FOR CITIBANK PRIVATE BANKING CLIENTS:
Citibank, N.A.
The Citibank Private Bank
153 East 53rd Street, New York, NY 10043
Call Your Citibank Private Banking Account Officer,
Investment Specialist or (212) 559-5959
FOR CITIBANK GLOBAL ASSET MANAGEMENT CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY 10043
(212) 559-7117
FOR CITIBANK NORTH AMERICAN INVESTOR SERVICES CLIENTS:
Citibank, N.A.
Master Trust Accounts
111 Wall Street, New York, NY 10094
Call Your Account Manager or (212) 657-9659
FOR CITICORP INVESTMENT SERVICES CUSTOMERS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200,
(212) 820-2380 in New York City
<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, 1995 and 1996, 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, 1995 and 1996 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, 1996*
Statement of Operations for the year ended December 31,
1996*
Statement of Changes in Net Assets for the years ended
December 31, 1996 and 1995*
Financial Highlights for the years ended December 31, 1996,
1995 and 1994, for the four months ended December 31,
1993 and for each of the years in the two-year period
ended August 31, 1993*
GOVERNMENT INCOME PORTFOLIO
Portfolio of Investments at December 31, 1996*
Statement of Assets and Liabilities at December 31, 1996*
Statement of Operations for the year ended December 31, 1996*
Statement of Changes in Net Assets for the years ended
December 31, 1996 and 1995*
Financial Highlights for the years ended December 31, 1996
and 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, 1996*
Statement of Assets and Liabilities at December 31, 1996*
Statement of Operations for the year ended December 31, 1996*
Statement of Changes in Net Assets for the years ended
December 31, 1996 and 1995*
Financial Highlights for the years ended December 31, 1996,
1995 and 1994 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 0000795808-97-000001) and
Landmark Intermediate Income Fund (Accession Number
0000795808-97-000001) for the fiscal year ended December 31, 1996.
(b) Exhibits
<TABLE>
<C> <S>
* 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.
******* Incorporated herein by reference to Post-Effective Amendment No. 22 to the Registrant's Registration
Statement on Form N-1A (File No. 33-6540) as filed with the Securities and Exchange Commission on
April 29, 1996.
</TABLE>
Item 25. Persons Controlled by or under Common Control with Registrant.
Not applicable.
Item 26. Number of Holders of Securities.
<TABLE>
<CAPTION>
Title of Class Number of Record Holders
Shares of Beneficial Interest As of April 17, 1997
(without par value)
<S> <C>
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
</TABLE>
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; (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.
<PAGE>
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),
Landmark VIP Funds (Landmark VIP U.S. Government Fund, Landmark VIP Balanced
Fund, Landmark VIP Equity Fund and Landmark VIP International Equity Fund) and
Variable Annuity Portfolios (CitiSelectSM VIP Folio 200, CitiSelectSM VIP Folio
300, CitiSelectSM VIP Folio 400, CitiSelectSM VIP Folio 500 and Landmark Small
Cap Equity VIP Fund). Citibank and its affiliates manage assets in excess of $81
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, former Chairman and Chief Executive Officer, PepsiCo, Inc.,
Purchase, New York; Kenneth T. Derr, Chairman and Chief Executive Officer,
Chevron Corporation; John M. Deutch, Director, CMS Energy; Reuben Marks,
Chairman and Chief Executive Officer, Colgate-Palmolive Company; Richard D.
Parsons, Member, Board of Representatives; 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.
Paul J. Collins Director, Kimberly-Clark Corporation
Kenneth T. Derr Director, American Telephone and Telegraph, Co.
Director, Chevron Corporation
Director, Potlatch Corporation
John M. Deutch Director, CMS Energy
Director, Palomar Medical Technologies, Inc.
Reuben Mark Director, Colgate-Palmolive Company
Director, New York Stock Exchange
Director, Time Warner, Inc.
Non-Executive Director, Pearson, PLC
Richard D. Parsons Director, Federal National Mortgage Association
Director, Philip Morris Companies Incorporated
Member, Board of Representatives, Time Warner
Entertainment Company, L.P.
Director and President, Time Warner, Inc.
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, The 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 Advisers, Pechiney S.A.
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, The Boeing Company
Director, Boise Cascade Corp.
Director, Chevron Corporation
Franklin A. Thomas Director, Aluminum Company of America
Director, Cummins Engine Company, Inc.
Director, Lucent Technologies
Director, Pepsico, Inc.
Edgar S. Woolard, Jr. Director, E.I. DuPont De Nemours & Company
Director, Apple Computer, Inc.
Director, Zurich Holding Company of America, Inc.
Advisory Director, Zurich Insurance Corporation
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 Institutional 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 U.S. Government Fund,
Landmark VIP Balanced Fund, Landmark VIP Equity Fund, Landmark VIP International
Equity Fund, CitiSelectSM VIP Folio 200, CitiSelectSM VIP Folio 300,
CitiSelectSM VIP Folio 400, CitiSelectSM VIP Folio 500, Landmark Small Cap
Equity VIP Fund, 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.
<PAGE>
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 17th day of April, 1997.
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 17, 1997.
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.
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, on behalf of Government Income Portfolio, 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 17th day of April, 1997.
THE PREMIUM PORTFOLIOS
on behalf of Government Income Portfolio
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 17, 1997.
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
- ---- -----------
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
<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. 23 to the registration statement on Form N-1A (the "Registration
Statement") of Landmark Fixed Income Funds of our report dated February 4, 1997,
relating to the financial statements and financial highlights of Landmark U.S.
Government Income Fund, appearing in the December 31, 1996 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 "Condensed Financial Information" and "Counsel and Independent
Auditors" 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 14, 1997
<PAGE>
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. 23
to the registration statement on Form N-1A (the "Registration Statement") of
Landmark Fixed Income Funds of our report dated February 4, 1997, relating to
the financial statements and financial highlights of the Government Income
Portfolio appearing in the December 31, 1996 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 14, 1997
<PAGE>
Exhibit 99.11(c)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Post-Effective Amendment
No. 23 to Registration Statement No. 33-6540 of Landmark Fixed Income Funds of
our report dated January 31, 1997 appearing in the annual report to shareholders
for the year ended December 31, 1996 of Landmark Intermediate Income Fund (a
separate 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 14, 1997
<PAGE>
Exhibit 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, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, 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 and Landmark Small Cap Equity Fund), and Landmark Fixed
Income Funds (on behalf of its series, Landmark U.S. Government 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 8th day of
November, 1996.
/s/ Elliott J. Berv
- -----------------------
Elliott J. Berv
At Southampton, Bermuda
<PAGE>
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, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, 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 and Landmark Small Cap Equity Fund), and Landmark Fixed
Income Funds (on behalf of its series, Landmark U.S. Government 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 8th day of
November, 1996.
/s/ Mark T. Finn
- -----------------------
Mark T. Finn
At Southampton, Bermuda
<PAGE>
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, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, 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 and Landmark Small Cap Equity Fund), and Landmark Fixed
Income Funds (on behalf of its series, Landmark U.S. Government 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 8th day of
November, 1996.
/s/ Walter E. Robb, III
- -----------------------
Walter E. Robb, III
At Southampton, Bermuda
<PAGE>
THE PREMIUM PORTFOLIOS for
LANDMARK INTERNATIONAL FUNDS
LANDMARK FUNDS I
LANDMARK FUNDS II
LANDMARK FIXED INCOME FUNDS
The undersigned hereby constitutes and appoints John R. Elder, Susan Jakuboski,
Molly S. Mugler and Linda T. Gibson, 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 and Landmark Small Cap Equity Fund), and Landmark Fixed Income Funds
(on behalf of its series, Landmark U.S. Government 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 8th day of
November, 1996.
/s/ Philip W. Coolidge
- -----------------------
Philip W. Coolidge
At Southampton, Bermuda
<PAGE>
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, Susan
Jakuboski, Molly S. Mugler and Linda T. Gibson, 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 and Landmark Small Cap Equity Fund), and Landmark Fixed
Income Funds (on behalf of its series, Landmark U.S. Government 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 7th day of
February, 1997.
/s/ John R. Elder
- -----------------------
John R. Elder
Hamilton, Bermuda
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000795808
<NAME> LANDMARK U.S. GOVERNMENT INCOME FUND
<SERIES>
<NUMBER> 001
<NAME> LANDMARK FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 26,852,889
<RECEIVABLES> 126,946
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 26,979,835
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 29,571,338
<SHARES-COMMON-STOCK> 2,799,549
<SHARES-COMMON-PRIOR> 3,611,187
<ACCUMULATED-NII-CURRENT> 21,541
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,516,454)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (332,045)
<NET-ASSETS> 26,744,380
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,811,956
<OTHER-INCOME> 0
<EXPENSES-NET> 237,586
<NET-INVESTMENT-INCOME> 1,574,370
<REALIZED-GAINS-CURRENT> (451,894)
<APPREC-INCREASE-CURRENT> (298,599)
<NET-CHANGE-FROM-OPS> 823,877
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1,571,638)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,803,128
<NUMBER-OF-SHARES-REDEEMED> (11,186,181)
<SHARES-REINVESTED> 1,549,810
<NET-CHANGE-IN-ASSETS> (8,581,004)
<ACCUMULATED-NII-PRIOR> 18,809
<ACCUMULATED-GAINS-PRIOR> (2,914,890)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 74,177
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 395,571
<AVERAGE-NET-ASSETS> 29,670,648
<PER-SHARE-NAV-BEGIN> 9.78
<PER-SHARE-NII> 0.52
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.51)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 9.55
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000795808
<NAME> LANDMARK INTERMEDIATE INCOME FUND
<SERIES>
<NUMBER> 002
<NAME> LANDMARK FIXED INCOME FUND
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 43,083,954
<INVESTMENTS-AT-VALUE> 43,455,269
<RECEIVABLES> 2,508,655
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 182,124
<TOTAL-ASSETS> 46,146,048
<PAYABLE-FOR-SECURITIES> 2,113,438
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 2,113,438
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 46,771,575
<SHARES-COMMON-STOCK> 4,630,939
<SHARES-COMMON-PRIOR> 5,079,977
<ACCUMULATED-NII-CURRENT> 35,684
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (3,259,962)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 371,315
<NET-ASSETS> 43,918,612
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,073,610
<OTHER-INCOME> 0
<EXPENSES-NET> 417,935
<NET-INVESTMENT-INCOME> 2,655,675
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<PER-SHARE-NAV-BEGIN> 9.77
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</TABLE>
