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497(c) File Nos. 33-49552 and 811-6740
PROSPECTUS
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SEPTEMBER 30, 1997
CITIFUNDS INSTITUTIONAL CASH RESERVES
(A MEMBER OF THE CITIFUNDS(SM) FAMILY OF FUNDS)
This Prospectus describes CitiFunds Institutional Cash Reserves, a money market
mutual fund in the CitiFunds Family of Funds. Shares of the Fund are sold
primarily to institutional investors. Citibank, N.A. is the investment
manager.
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REMEMBER THAT SHARES OF THE FUND:
- - ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY
- - ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, CITIBANK
OR ANY OF ITS AFFILIATES
- - ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED
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INVESTMENTS IN THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE; HOWEVER, THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO
SO.
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This Prospectus concisely sets forth information about the Fund that a
prospective investor should know before investing. A Statement of Additional
Information dated September 30, 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 Fund may be made, by calling 1-800-625-4554.
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TABLE OF CONTENTS
Prospectus Summary ..................................................... 2
Expense Summary .........................................................3
Investment Information ..................................................4
Risk Considerations .....................................................5
Valuation of Shares .....................................................5
Purchases ...............................................................5
Exchanges ...............................................................6
Redemptions .............................................................6
Net Income and Distributions ............................................7
Management ..............................................................8
Tax Matters .............................................................9
Performance Information ................................................10
General Information ....................................................10
Appendix A --Permitted Investments and
Investment Practices ......................................13
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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.
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INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
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PROSPECTUS SUMMARY
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See the body of the Prospectus for more information on the topics discussed
in this summary.
THE FUND: This Prospectus describes CitiFunds Institutional Cash Reserves.
INVESTMENT OBJECTIVE AND POLICIES: The Fund's investment objective is to
provide its shareholders with liquidity and as high a level of current income
as is consistent with the preservation of capital. The Fund invests in U.S.
dollar-denominated money market obligations with maturities of 397 days or
less issued by U.S. and non-U.S. issuers.
INVESTMENT MANAGER AND DISTRIBUTOR: Citibank, N.A. ("Citibank" or the
"Manager"), a wholly-owned subsidiary of Citicorp, is the investment manager.
Citibank and its affiliates manage more than $88 billion in assets worldwide.
The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS" or the "Distributor")
is the distributor of shares of the Fund. See "Management."
PURCHASES AND REDEMPTIONS: Investors may purchase and redeem shares of the
Fund through a Service Agent on any Business Day. See "Purchases" and
"Redemptions."
PRICING: Shares of the Fund are purchased and redeemed at net asset value
(normally $1.00 per share), without a sales load or redemption fees. While
there are no sales loads, shares of the Fund are subject to a fee of up to
0.10% per annum of the Fund's average daily net assets for distribution, sales
and marketing and shareholder services. See "Purchases" and "Management --
Distribution Arrangements."
EXCHANGES: Shares may be exchanged for shares of most other CitiFunds. See
"Exchanges."
DIVIDENDS: Declared daily and distributed monthly. Shares begin accruing
dividends on the day they are purchased. See "Net Income and Distributions."
REINVESTMENT: Dividends may be received either in cash or in Fund shares at
net asset value. See "Net Income and Distributions."
WHO SHOULD INVEST: The Fund is designed primarily for institutional investors
for whom growth of capital is not a consideration and who are seeking
liquidity, preservation of capital, current income, and a convenient means of
accumulating an interest in a professionally managed, diversified portfolio
consisting of high-quality, short-term, U.S. dollar-denominated money market
obligations issued by U.S. and non-U.S. issuers. See "Investment Information."
RISK FACTORS: There can be no assurance that the Fund will achieve its
investment objective. In addition, while the Fund intends to maintain a stable
net asset value of $1.00 per share, there can be no assurance that the Fund will
be able to do so. Investments in high quality, short-term instruments may, in
many circumstances, result in a lower yield than would be available from
investments with a lower quality or a longer term.
Investors in the Fund should be able to assume the special risks of
investing in non-U.S. securities, which include possible adverse political,
social and economic developments abroad, differing regulations to which non-
U.S. issuers are subject and different characteristics of non-U.S. economies
and markets. In addition, the prices of securities of non-U.S. issuers may be
more volatile than those of comparable U.S. issuers.
Certain investment practices also may entail special risks. Prospective
investors should read "Risk Considerations" for more information about risk
factors.
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EXPENSE SUMMARY
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The following table summarizes estimated shareholder transaction and annual
operating expenses for the Fund.* For more information on costs and expenses,
see "Management" and "General Information -- Expenses."
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SHAREHOLDER TRANSACTION EXPENSES .............................. None
ANNUAL FUND OPERATING EXPENSES, AFTER FEE WAIVERS AND
REIMBURSEMENTS (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fee(2) ............................................. 0.15%
12b-1 Fees (including service fees)(2)(3) ..................... 0.05%
Other Expenses ................................................ 0.05%
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Total Fund Operating Expenses(2) .............................. 0.25%
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* This table is intended to assist investors in understanding the various
costs and expenses that a shareholder will bear, either directly or
indirectly. The table shows the fees paid to various service providers after
giving effect to expected voluntary partial fee waivers. There can be no
assurance that the fee waivers and reimbursements reflected in the table
will continue at their present levels.
(1) Because the Fund is newly organized, all amounts in the table and the
example are estimated for the current fiscal year.
(2) Absent fee waivers and reimbursements, Management Fees, 12b-1 Fees, Other
Expenses and Total Fund Operating Expenses would be 0.20%, 0.10%, 0.10% and
0.40%, respectively.
(3) Fees under the 12b-1 distribution plan are asset-based sales charges.
Long-term shareholders in the 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.
EXAMPLE: A shareholder would pay the following expenses on a $1,000
investment, assuming a 5% annual return and redemption at the end of each
period indicated below:
ONE YEAR THREE YEARS
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INSTITUTIONAL CASH RESERVES(1) ........................... $3 $8
The Example assumes that all dividends are reinvested. If waivers and
reimbursements were not in place, the amounts in the Example would be $4 and
$13, respectively. 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 the Fund's future performance. THE EXAMPLE SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OF THE FUND. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
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INVESTMENT INFORMATION
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INVESTMENT OBJECTIVE: The investment objective of the Fund is to provide its
shareholders with liquidity and as high a level of current income as is
consistent with the preservation of capital.
The investment objective of the Fund may be changed by its Trustees 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 the Fund will achieve its investment objective.
INVESTMENT POLICIES: The Fund seeks its objective by investing all of its
investable assets in high quality U.S. dollar denominated money market
instruments. Instruments in which the Fund may invest include short-term
obligations of the U.S. Government and repurchase agreements covering these
obligations, bank obligations (such as certificates of deposit, bankers'
acceptances and fixed time deposits) of U.S. and non-U.S banks and obligations
issued or guaranteed by the governments of Western Europe, Scandinavia,
Australia, Japan and Canada. The U.S. Government obligations in which the Fund
invests include U.S. Treasury bills, notes and bonds, and instruments issued by
U.S. Government agencies or instrumentalities. Some obligations of U.S.
Government agencies and instrumentalities are supported by the "full faith and
credit" of the United States, others by the right of the issuer to borrow from
the U.S. Treasury and others only by the credit of the agency or
instrumentality. For more information regarding the Fund's permitted investments
and investment practices, see Appendix A -- Permitted Investments and Investment
Practices on page 13.
CERTAIN ADDITIONAL INVESTMENT POLICIES:
$1.00 NET ASSET VALUE. The Fund employs specific investment policies and
procedures designed to maintain a constant net asset value of $1.00 per share.
There can be no assurance, however, that a constant net asset value will be
maintained on a continuing basis. See "Net Income and Distributions."
MATURITY AND QUALITY. All of the Fund's investments mature or are deemed to
mature within 397 days from the date of acquisition, and the average maturity of
the investments held by the Fund (on a dollar-weighted basis) is 90 days or
less. All of the Fund's investments are in high quality securities which have
been determined by the Manager, under the supervision of and pursuant to
instructions established by the Board of Trustees of CitiFunds Institutional
Trust (the "Trust") to present minimal credit risks. To meet the Fund's high
quality standards a security must be rated in the highest rating category for
short-term obligations by at least two nationally recognized statistical rating
organizations (each, an "NRSRO") assigning a rating to the security or issuer
or, if only one NRSRO assigns a rating, that NRSRO or, in the case of an
investment which is not rated, of comparable quality as determined by the
Manager, under the supervision of and pursuant to instructions established by
the Trust's Board of Trustees. Investments in high quality, short-term
instruments may, in many circumstances, result in a lower yield than would be
available from investments in instruments with a lower quality or a longer term.
PERMITTED INVESTMENTS. Uninvested cash reserves may be held temporarily for
the Fund pending investment. The Fund may borrow from banks up to 1/3 of its net
assets for temporary or emergency purposes. For more information regarding
permitted investments and investment practices, see Appendix A -- Permitted
Investments and Investment Practices on page 13. The Fund will not necessarily
invest or engage in each of the investments and investment practices in Appendix
A but reserves 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 Fund. Except as otherwise indicated, the Fund's investment objective and
policies may be changed without shareholder approval. If a percentage or rating
restriction (other than a restriction as to borrowing or as to illiquid
securities) is adhered to at the time an investment is made, a later change in
percentage or rating resulting from changes in the Fund's securities will not be
a violation of policy.
BROKERAGE TRANSACTIONS. The primary consideration in placing the 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
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The risks of investing in the 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.
"CONCENTRATION" IN BANK OBLIGATIONS. The Fund invests more than 25% of its
assets, and may invest up to 100% of its assets, in bank obligations. This
concentration policy is fundamental, and may not be changed without the consent
of the Fund's investors. Banks are subject to extensive governmental regulation
which may limit both the amounts and types of loans and other financial
commitments which may be made and interest rates and fees which may be charged.
The profitability of this industry is largely dependent upon the availability
and cost of capital funds for the purpose of financing lending operations under
prevailing money market conditions. Also, general economic conditions play an
important part in the operation of this industry and exposure to credit losses
arising from possible financial difficulties of borrowers might affect a bank's
ability to meet its obligations under a letter of credit or guarantee.
NON-U.S. SECURITIES. Investors in the Fund should be aware that
investments in non-U.S. securities involve risks relating to political, social
and economic developments abroad, as well as risks resulting from the
differences between the regulations to which U.S. and non-U.S. issuers and
markets are subject. These risks may include expropriation, confiscatory
taxation, withholding taxes on dividends and interest, limitations on the use
or transfer of Fund assets and political or social instability. 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.
INVESTMENT PRACTICES. Certain of the investment practices employed for the
Fund may entail certain risks. See Appendix A -- Permitted Investments and
Investment Practices on page 13.
VALUATION OF SHARES
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Net asset value per share of the 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 4:00 p.m., Eastern time, by adding the market value of
all securities and other assets of the Fund, then subtracting the liabilities
charged to the Fund, and then dividing the result by the number of outstanding
shares of the Fund. The amortized cost method of valuing Fund securities is used
in order to attempt to stabilize the net asset value of shares of the Fund at
$1.00; however, there can be no assurance that the Fund's net asset value will
always remain at $1.00 per share. The net asset value per share is effective for
orders received and accepted by the Transfer Agent prior to its calculation.
The amortized cost method involves valuing a security at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium. Although the amortized cost method provides certainty in valuation, it
may result in periods during which the stated value of a security is higher or
lower than the price the Fund would receive if the security were sold.
PURCHASES
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Shares of the Fund are offered continuously and may be purchased on any
Business Day without a sales load at the shares' net asset value (normally $1.00
per share) next determined after an order is transmitted to and accepted by the
Transfer Agent. The Fund and the Transfer Agent reserve the right to reject any
purchase order and to suspend the offering of Fund shares for a period of time.
While there is no sales load imposed on shares of the Fund, the
Distributor receives fees from the Fund pursuant to a Service Plan. See
"Management -- Distribution Arrangements."
Shares may be purchased through certain financial institutions (which may
include banks), securities dealers and other industry professionals (called
Service Agents) that have entered into service agreements with the Distributor.
Service Agents may receive certain fees from the Distributor and/ or the Fund.
See "Management -- Distribution Arrangements." Customers should contact their
Service Agents for information on purchases. Each Service 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 Service Agent. Each Service Agent has
agreed to transmit to its customers who are shareholders of the Fund appropriate
written disclosure of any fees that it may charge them directly. Each Service
Agent is responsible for transmitting promptly orders of its customers.
From time to time LFBDS 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 Fund. The amounts of these payments will be determined by the
Distributor in its sole discretion and may vary among different dealers.
EXCHANGES
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Shares of the Fund may be exchanged for shares of other CitiFunds, or may be
acquired through an exchange of shares of those funds. No initial sales charge
is imposed on shares being acquired through an exchange unless the shares being
acquired are subject to a sales charge that 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).
Shareholders may place exchange orders through the Transfer Agent or, if
they are customers of a Service Agent, through their Service Agent, and may do
so by telephone if their account applications so permit. For more information on
telephone transactions see "Redemptions." All exchanges will be effected based
on the relative net asset values per share next determined after the exchange
order is received by the Transfer Agent. See "Valuation of Shares." Where shares
of the Fund were recently purchased, such shares may be exchanged only after
payment in federal funds for such shares has been made.
This exchange privilege may be modified or terminated at any time, upon at
least 60 days' notice when such notice is required by SEC rules, and is
available only in those jurisdictions where such exchanges legally may be made.
See the Statement of Additional Information for further details. An exchange is
treated as a sale of the shares exchanged and could result in taxable gain or
loss to the shareholder making the exchange.
REDEMPTIONS
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Fund shares may be redeemed at their net asset value (normally $1.00 per
share) next determined after a redemption request in proper form is received by
the Transfer Agent. The Transfer Agent is responsible for the prompt
transmission of redemption orders to the Fund on behalf of its customers. A
Service Agent may establish requirements or procedures regarding submission of
redemption requests by its customers that are different from those described
below. Investors should consult their Service Agents for details. A redemption
is treated as a sale of the shares redeemed and could result in taxable gain or
loss to the shareholder making the redemption.
REDEMPTIONS BY MAIL. Shareholders may redeem Fund shares by sending written
instructions in proper form (as determined by the Transfer Agent or a
shareholder's Service Agent) to the Transfer Agent or, if shareholders are
customers of a Service Agent, their Service Agent. 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 the Transfer
Agent or, if they are customers of a Service Agent, their Service Agent. 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 Fund, the Transfer Agent and each Service 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 the shareholder's name,
address, telephone number, Social Security or taxpayer identification number,
and account number. If these or other reasonable procedures are not followed,
the Fund, the Transfer Agent or the Service 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 Business Day the redemption is effected, but in any event
within seven days. If a shareholder requests redemption of shares which were
purchased recently, the 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" in the Statement of
Additional Information regarding the Fund's right to pay the redemption price in
kind with securities (instead of cash).
Questions about redemption requirements should be referred to the Transfer
Agent or, for customers of a Service Agent, their Service 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.
NET INCOME AND DISTRIBUTIONS
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The net income of the Fund is determined each Business Day (and on such
other days as is necessary in order to comply with the 1940 Act). This
determination is made once during each such day as of 4:00 p.m., Eastern time.
All the net income of the Fund is declared as a dividend to shareholders of
record at the time of such determination. Shares begin accruing dividends on the
day they are purchased, and accrue dividends up to and including the day prior
to redemption. Dividends are distributed monthly on or prior to the last
Business Day of each month. Unless a shareholder elects to receive dividends in
cash, dividends are distributed in the form of full and fractional additional
shares of the Fund at the rate of one share of the Fund for each one dollar of
dividend income.
Since the net income of the Fund is declared as a dividend each time the net
income of the Fund is determined, the net asset value per share of the Fund is
expected to remain at $1.00 per share immediately after each such determination
and dividend declaration. Any increase in the value of a shareholder's
investment in the Fund, representing the reinvestment of dividend income, is
reflected by an increase in the number of shares of the Fund in the
shareholder's account.
Because of the short-term maturities of the portfolio investments of the
Fund, the Fund does not expect to realize long-term capital gains or losses. Any
net realized short-term capital gains will be declared and distributed to the
Fund's shareholders annually after the close of the Fund's fiscal year.
Distributions of short-term capital gains are taxable to shareholders as
described in "Tax Matters." Any realized short-term capital losses will be
offset against short-term capital gains or, to the extent possible, utilized as
capital loss carryover. The Fund may distribute short-term capital gains more
frequently than annually, reduce shares to reflect capital losses or make
distributions of capital if necessary in order to maintain the Fund's net asset
value of $1.00 per share.
It is expected that the Fund will have a positive net income at the time of
each determination thereof. If for any reason the Fund's net income is a
negative amount, which could occur, for instance, upon default by an issuer of a
portfolio security, the Fund would first offset the negative amount with respect
to each shareholder account from the dividends declared during the month with
respect to those accounts. If and to the extent that negative net income exceeds
declared dividends at the end of the month, the Fund would reduce the number of
outstanding Fund shares by treating each shareholder as having contributed to
the capital of the Fund that number of full and fractional shares in the
shareholder's account which represents the shareholder's share of the amount of
such excess. Each shareholder would be deemed to have agreed to such
contribution in these circumstances by investment in the Fund.
MANAGEMENT
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TRUSTEES AND OFFICERS: The Fund is supervised by the Board of Trustees of
CitiFunds Institutional Trust. A majority of the Trustees are not affiliated
with the Manager. More information on the Trustees and officers of the Fund
appears under "Management" in the Statement of Additional Information.
INVESTMENT MANAGER: CITIBANK. The 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 $88 billion in assets worldwide. Citibank is a wholly-owned
subsidiary of Citicorp. Citibank also serves as investment adviser to other
registered investment companies. Citibank's address is 153 East 53rd Street, New
York, New York 10043.
Subject to policies set by the Trustees, Citibank is responsible for overall
management of the Fund's business affairs, and has a Management Agreement with
the Fund. Citibank also provides certain administrative services to the Fund.
These administrative services include providing general office facilities and
supervising the overall administration of the Fund. Pursuant to a
sub-administrative services agreement, the Distributor performs such
sub-administrative duties for the Fund as from time to time are agreed upon by
Citibank and the Distributor. The Distributor's compensation as sub-
administrator is paid by Citibank.
MANAGEMENT FEES. For its services under the Management Agreement, Citibank
receives a fee equal to, on an annual basis, up to 0.20% of the Fund's average
daily net assets for the Fund's then-current fiscal year. Citibank has
voluntarily agreed to waive a portion of its management fee.
BANKING RELATIONSHIPS. Citibank and its affiliates may have deposit, loan
and other relationships with the issuers of securities purchased on behalf of
the Fund, 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 Fund 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 Fund. Citibank believes that its services
under the Management Agreement and the activities performed by it or its
affiliates as Service Agents 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 manager or a Service Agent
the Fund would seek alternative means for obtaining these services. The Fund
does not expect that shareholders would suffer any adverse financial
consequences as a result of any such occurrence.
TRANSFER AGENT, CUSTODIAN AND FUND ACCOUNTANT: State Street Bank and Trust
Company acts as transfer agent, dividend disbursing agent and custodian of the
Fund's assets. Securities may be held by a sub-custodian bank approved by the
Trustees. State Street also provides fund accounting services and calculates the
daily net asset value for the Fund. The principal business address of State
Street is 225 Franklin Street, Boston, MA 02110.
DISTRIBUTION ARRANGEMENTS: LFBDS, 6 St. James Avenue, Boston, MA 02116
(telephone: (617) 423-1679) is the Distributor of the Fund's shares. Under a
Service Plan which has been adopted in accordance with Rule 12b-1 under the 1940
Act, the Fund may pay monthly fees at an annual rate not to exceed 0.10% of the
average daily net assets of the Fund. These fees may be used to make payments to
the Distributor for distribution services, and to Service Agents and others as
compensation for the sale of shares of the Fund, and to make payments for
advertising, marketing or other promotional activity, and payments for
preparation, printing and distribution of prospectuses, statements of additional
information and reports for recipients other than regulators and existing
shareholders. The Fund also may make payments to the Distributor, Service Agents
and others for providing personal service or the maintenance of shareholder
accounts.
The Fund and the Distributor provide to the Trustees quarterly a written
report of amounts expended pursuant to the Service Plan and the purposes for
which the expenditures were made.
During the period they are in effect, the Service Plan and related
Distribution Agreement obligate the Fund to pay fees to the Distributor, Service
Agents and others as compensation for their services, not as reimbursement for
specific expenses incurred. Thus, even if their expenses exceed the fees
provided for under the Service Plan, the Fund will not be obligated to pay more
than those fees and, if their expenses are less than the fees paid to them, they
will realize a profit. The Fund will pay the fees to the Distributor, Service
Agents and others until the Service Plan or Distribution Agreement is terminated
or not renewed. In that event, the Distributor's or Service Agent's expenses in
excess of fees received or accrued through the termination date will be the
Distributor's or Service Agent's sole responsibility and not obligations of the
Fund.
TAX MATTERS
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This discussion of taxes is for general information only. Investors should
consult their own tax advisers about their particular situations.
The Fund intends to meet 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.
Shareholders normally are required to pay federal income tax (and any state
or local taxes) on the dividends and other distributions received from the Fund.
Generally, distributions from the Fund's net investment income and any
distributions from short-term capital gains will be taxed as ordinary income.
Distributions of net capital gains (i.e., the excess of net long-term capital
gains over net short-term capital losses), if any, will be taxed as long-term
capital gains regardless of how long the shares of the Fund have been held.
Dividends and distributions are treated in the same manner for federal tax
purposes whether they are paid in cash or as additional shares. Distributions
derived from interest on U.S. Government obligations may be exempt from certain
state and local taxes. Investors should consult with their own tax advisers in
this regard. Early each year, the Fund will notify its shareholders of the
amount and tax status of distributions paid to shareholders for the preceding
year.
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. The Fund may be required to withhold (and pay over to
the IRS for the shareholder's credit) 31% of certain distributions paid to
shareholders who fail to provide this information or otherwise violate IRS
regulations. The Fund will withhold U.S. federal income tax payments at the rate
of 30% (or any lower applicable treaty rate) 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; backup withholding will not be
applied to payments that have been subject to such withholding. Any amount
overwithheld may be recovered by filing a timely refund claim with the U.S.
Internal Revenue Service. Distributions received from the Fund by non-U.S.
persons also may be subject to tax under the laws of their own jurisdictions.
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.
The 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 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.
The Fund may provide annualized "yield" and "effective yield" quotations.
The "yield" of the Fund refers to the income generated by an investment in the
Fund over a seven-day 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
week over a 365-day period and is shown as a percentage of the investment. The
"effective yield" is calculated similarly, but when annualized the income earned
by the investment during that seven-day period is assumed to be reinvested. The
effective yield is slightly higher than the yield because of the compounding
effect of this assumed reinvestment. The Fund may also provide yield and
effective yield quotations for longer periods.
Of course, any fees charged by a shareholder's Service Agent will reduce
that shareholder's net return on investment. See the Statement of Additional
Information for more information concerning the calculation of yield and total
rate of return quotations for the Fund.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
ORGANIZATION: The Fund is a diversified series of CitiFunds Institutional
Trust, a Massachusetts business trust organized on July 8, 1992. Prior to
September 1997 the Trust was known as "Landmark Institutional Trust." The Fund
also is an open-end management investment company registered under the 1940 Act.
The Fund commenced operations on October 1, 1997.
Under the 1940 Act, a diversified series or diversified investment company
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 investment company 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.
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 the 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 the Fund, a Service 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 instructions it receives
for all other shares of which that Service Agent is the holder of record.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will usually be sought only for
changes in the Fund'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 the Fund is entitled to participate
equally in dividends and other distributions and the proceeds of any liquidation
of the Fund.
CERTIFICATES: The Fund's Transfer Agent maintains a share register for
shareholders of record. Share certificates are not issued.
RETIREMENT PLANS: Investors may be able to establish new accounts in the 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 Service Agent and tax and retirement advisers.
EXPENSES: In addition to amounts payable under its Management Agreement and
Service Plan, the Fund is responsible for its own expenses, including among
other things, the costs of securities transactions, the compensation of Trustees
that are not affiliated with Citibank, government fees, taxes, accounting and
legal fees, expenses of communicating with shareholders, interest expense, and
insurance premiums. The Fund commenced operations on October 1, 1997.
CLASSES OF SHARES: The Fund may issue shares of more than one class. Please
call the Distributor at (617) 423-1679 for more information.
INVESTMENT STRUCTURE: The Trustees have the power, without approval by
shareholders of the Fund, to invest the Fund's assets in one or more investment
companies to the extent not prohibited by the 1940 Act and exemptive orders
granted under the 1940 Act. Shareholders will be given at least 30 days' prior
written notice before any such change in structure is implemented.
COUNSEL AND INDEPENDENT AUDITOR: Bingham, Dana & Gould LLP, Boston, MA, is
counsel for the Fund. Deloitte & Touche LLP, serves as independent auditor for
the Fund.
------------------------------
The Statement of Additional Information dated the date hereof contains more
detailed information about the Fund, including information related to (i)
investment policies and restrictions, (ii) the Trustees, officers and investment
manager, (iii) securities transactions, (iv) the Fund's shares, including rights
and liabilities of shareholders, (v) the method used to calculate performance
information and (vi) the determination of net asset value.
No person has been authorized to give any information or make any
representations not contained in this Prospectus 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 Fund or
its distributor. This Prospectus does not constitute an offering by the Fund or
its distributor in any jurisdiction in which such offering may not lawfully be
made.
<PAGE>
APPENDIX A
PERMITTED INVESTMENTS AND
INVESTMENT PRACTICES
- --------------------------------------------------------------------------------
TREASURY RECEIPTS. The Fund may invest in Treasury Receipts, which are unmatured
interest coupons of U.S. Treasury bonds and notes which have been separated and
resold in a custodial receipt program administered by the U.S.
Treasury.
COMMERCIAL PAPER. The Fund may invest in commercial paper, which is
unsecured debt of corporations usually maturing in 270 days or less from its
date of issuance.
ASSET-BACKED SECURITIES. The Fund may invest in asset-backed securities,
which represent fractional interests in underlying pools of assets, such as car
installment loans or credit card receivables. The rate of return on asset-backed
securities may be affected by prepayment of the underlying loans or receivables.
Reinvestment of principal may occur at higher or lower rates than the original
yield.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements.
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.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements and in order to generate additional income, the 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 the Fund would not exceed 30% of the Fund's net assets.
In the event of the bankruptcy of the other party to a securities loan or a
repurchase agreement, the Fund could experience delays in recovering either the
securities lent or cash. To the extent that, in the meantime, the value of the
securities lent have increased or the value of the securities purchased have
decreased, the Fund could experience a loss.
PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS. The Fund may invest up to 10%
of its net assets in securities for which there is no readily available market.
These illiquid securities may include privately placed restricted securities for
which no institutional market exists. The absence of a trading market can make
it difficult to ascertain a market value for illiquid investments. Disposing of
illiquid investments may involve time-consuming negotiation and legal expenses,
and it may be difficult or impossible for the Fund to sell them promptly at an
acceptable price.
RESTRICTED SECURITIES. The Fund may purchase restricted securities that are
not registered for sale to the general public. Provided that a dealer or
institutional trading market in such securities exists, these restricted
securities are not treated as illiquid securities for purposes of the Fund's
investment limitations. Institutional trading in restricted securities is
relatively new, and the liquidity of the Fund's investments could be impaired if
trading does not develop or declines.
WHEN-ISSUED" SECURITIES. In order to ensure the availability of suitable
securities, the 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 purchaser 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.
<PAGE>
- --------------------------------------------------------------------------------
CITIBANK
SERVICE AGENTS
- --------------------------------------------------------------------------------
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,
Registered Representative or (212) 559-5959
FOR CITIBANK GLOBAL ASSET MANAGEMENT CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY 10043
(212) 559-7117
FOR CITIBANK NORTH AMERICAN INVESTOR
SERVICES CLIENTS:
Citibank, N.A.
111 Wall Street, New York, NY 10043
Call Your Account Manager or (212) 657-9100
<PAGE>
CITIFUNDS INSTITUTIONAL CASH RESERVES
TRUSTEES AND OFFICERS
Philip W. Coolidge, President*
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
*Affiliated Person of Distributor
- --------------------------------------------------------------------------------
INVESTMENT MANAGER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
DISTRIBUTOR
The Landmark Funds Broker-Dealer Services, Inc.
6 St. James Avenue, Boston, MA 02116
(617) 423-1679
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
LEGAL COUNSEL
Bingham, Dana & Gould LLP
150 Federal Street, Boston, MA 02110
<PAGE>
497(c) File Nos. 33-49552 and 811-6740
STATEMENT OF
ADDITIONAL INFORMATION
SEPTEMBER 30, 1997
CITIFUNDS INSTITUTIONAL CASH RESERVES
(A MEMBER OF THE CITIFUNDSSM FAMILY OF FUNDS)
CitiFunds Institutional Cash Reserves (the "Fund") is a series of
CitiFunds Institutional Trust (the "Trust"). The address and telephone number
of the Trust are 6 St. James Avenue, Boston, Massachusetts 02116, (617)
423-1679.
FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, CITIBANK, N.A. OR ANY OF ITS AFFILIATES, ARE NOT INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
TABLE OF CONTENTS PAGE
The Fund ............................................................... 2
Investment Objective, Policies and Restrictions ........................ 2
Performance Information ................................................ 6
Determination of Net Asset Value ....................................... 7
Management ............................................................. 8
Portfolio Transactions ................................................. 11
Description of Shares, Voting Rights and Liabilities ................... 11
Certain Additional Tax Matters ......................................... 12
Independent Accountants and Financial Statements ....................... 12
This Statement of Additional Information sets forth information which may be
of interest to investors but which is not necessarily included in the Fund's
Prospectus, dated September 30, 1997, by which shares of the Fund 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 Fund's Distributor (see back cover for address and phone number).
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.
<PAGE>
1. THE FUND
The Trust is a no-load, open-end management investment company which was
organized as a business trust under the laws of the Commonwealth of
Massachusetts on July 8, 1992. Prior to September 1997 the Trust was known as
"Landmark Institutional Trust." Shares of the Trust are divided into four
separate series, one of which is CitiFunds Institutional Cash Reserves.
The Fund is a type of mutual fund commonly referred to as a "money market
fund." The net asset value of the Fund's shares is expected to remain constant
at $1.00, although there can be no assurance that this will be so on a
continuing basis. (See "Determination of Net Asset Value.")
Citibank, N.A. ("Citibank" or the "Manager") is the investment adviser and
also provides certain administrative services to the Fund. Citibank manages the
investments of the Fund from day to day in accordance with the Fund's investment
objective and policies. The selection of investments for the Fund, and the way
they are managed, depend on the conditions and trends in the economy and the
financial marketplaces.
The Board of Trustees of the Trust provides broad supervision over the
affairs of the Trust. Shares of the Fund are continuously sold by The Landmark
Funds Broker-Dealer Services, Inc., the Fund's distributor ("LFBDS" or the
"Distributor"). Shares are sold at net asset value. Although shares of the Fund
are sold without a sales load, LFBDS may receive fees from the Fund pursuant to
a Service Plan adopted in accordance with Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act").
2. INVESTMENT OBJECTIVE, POLICIES AND RESTRICTIONS
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide shareholders with
liquidity and as high a level of current income as is consistent with the
preservation of capital.
The investment objective of the Fund may be changed without approval by
shareholders. Of course, there can be no assurance that the Fund will achieve
its investment objective.
INVESTMENT POLICIES
The Prospectus contains a discussion of the various types of securities in
which the Fund may invest and the risks involved in such investments. The
following supplements the information contained in the Prospectus concerning the
investment objective, policies and techniques of the Fund.
Except for the concentration policy with respect to bank obligations
described in paragraph (1) below, which is fundamental and may not be changed
without the approval of Fund's shareholders, the approval of the Fund's
shareholders would not be required to change any of its investment policies.
The Fund seeks its investment objective through investments limited to the
following types of high quality U.S. dollar-denominated money market
instruments. All investments by the Fund mature or are deemed to mature within
397 days from the date of acquisition and the average maturity of the
investments held by the Fund (on a dollar-weighted basis) is 90 days or less.
All investments by the Fund are in "high quality" securities (i.e., securities
rated in the highest rating category for short-term obligations by at least two
nationally recognized statistical rating organizations (each, an "NRSRO")
assigning a rating to the security or issuer or, if only one NRSRO assigns a
rating, that NRSRO or, in the case of an investment which is not rated, of
comparable quality as determined by the Manager, under the supervision of and
pursuant to instructions established by the Trust's Board of Trustees) and are
determined by the Manager, under the supervision of and pursuant to instructions
established by the Trust's Board of Trustees, to present minimal credit risks.
Investments in high quality, short-term instruments may, in many circumstances,
result in a lower yield than would be available from investments in instruments
with a lower quality or a longer term. Under the 1940 Act, the Fund is
classified as "diversified." A "diversified investment company" 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 investment company and not more
than 10% of the voting securities of the issuer.
(1) Bank obligations. The Fund invests at least 25% of its investable
assets, and may invest up to 100% of its assets, in bank obligations. These
obligations include, but are not limited to, negotiable certificates of
deposit, bankers' acceptances and fixed time deposits. The Fund limits its
investments in U.S. bank obligations (including their non-U.S. branches) to
banks having total assets in excess of $1 billion and which are subject to
regulation by an agency of the U.S. Government. The Fund may also invest in
certificates of deposit issued by banks the deposits in which are insured by
the Federal Deposit Insurance Corporation ("FDIC"), through either the Bank
Insurance Fund or the Savings Association Insurance Fund, having total
assets of less than $1 billion, provided that the Fund at no time owns more
than $100,000 principal amount of certificates of deposit (or any higher
principal amount which in the future may be fully insured by FDIC insurance)
of any one of those issuers. Fixed time deposits are obligations which are
payable at a stated maturity date and bear a fixed rate of interest.
Generally, fixed time deposits may be withdrawn on demand by the Fund, but
they may be subject to early withdrawal penalties which vary depending upon
market conditions and the remaining maturity of the obligation. Although
fixed time deposits do not have a market, there are no contractual
restrictions on the Fund's right to transfer a beneficial interest in the
deposit to a third party. This concentration policy is fundamental and may
not be changed without the approval of the investors in the Fund.
U.S. banks organized under federal law are supervised and examined by
the Comptroller of the Currency and are required to be members of the
Federal Reserve System and to be insured by the FDIC. U.S. banks
organized under state law are supervised and examined by state banking
authorities and are members of the Federal Reserve System only if they
elect to join. However, state banks which are insured by the FDIC are
subject to federal examination and to a substantial body of federal law
and regulation. As a result of federal and state laws and regulations,
U.S. branches of U.S. banks, among other things, are generally required to
maintain specified levels of reserves, and are subject to other
supervision and regulation designed to promote financial soundness.
The Fund limits its investments in non-U.S. bank obligations (i.e.,
obligations of non-U.S. branches and subsidiaries of U.S. banks, and U.S.
and non-U.S. branches of non-U.S. banks) to U.S. dollar-denominated
obligations of banks which at the time of investment are branches or
subsidiaries of U.S. banks which meet the criteria in the preceding
paragraphs or are branches of non-U.S. banks which (i) have more than $10
billion, or the equivalent in other currencies, in total assets; (ii) in
terms of assets are among the 75 largest non-U.S. banks in the world;
(iii) have branches or agencies in the United States; and (iv) in the
opinion of the Manager, are of an investment quality comparable with
obligations of U.S. banks which may be purchased by the Fund. These
obligations may be general obligations of the parent bank, in addition to
the issuing branch or subsidiary, but the parent bank's obligations may be
limited by the terms of the specific obligation or by governmental
regulation. The Fund also limits its investments in non-U.S. bank
obligations to banks, branches and subsidiaries located in Western Europe
(United Kingdom, France, Germany, Belgium, the Netherlands, Italy,
Switzerland), Scandinavia (Denmark, Norway, Sweden), Australia, Japan, the
Cayman Islands, the Bahamas and Canada. The Fund does not purchase any
bank obligation of the Manager or an affiliate of the Manager.
Since the Fund may hold obligations of non-U.S. branches and
subsidiaries of U.S. banks, and U.S. and non-U.S. branches of non-U.S.
banks, an investment in the Fund involves certain additional risks. Such
investment risks include future political and economic developments, the
possible imposition of non-U.S. withholding taxes on interest income
payable on such obligations held by the Fund, the possible seizure or
nationalization of non-U.S. deposits and the possible establishment of
exchange controls or other non-U.S. governmental laws or restrictions
applicable to the payment of the principal of and interest on certificates
of deposit or time deposits that might affect adversely such payment on
such obligations held by the Fund. In addition, there may be less
publicly-available information about a non-U.S. branch or subsidiary of a
U.S. bank or a U.S. or non-U.S. branch of a non-U.S. bank than about a
U.S. bank and such branches and subsidiaries may not be subject to the
same or similar regulatory requirements that apply to U.S. banks, such as
mandatory reserve requirements, loan limitations and accounting, auditing
and financial record-keeping standards and requirements.
The provisions of federal law governing the establishment and
operation of U.S. branches do not apply to non-U.S. branches of U.S.
banks. However, the Fund may purchase obligations only of those non-U.S.
branches of U.S. banks which were established with the approval of the
Board of Governors of the Federal Reserve System (the "Board of
Governors"). As a result of such approval, these branches are subject to
examination by the Board of Governors and the Comptroller of the Currency.
In addition, such non-U.S. branches of U.S. banks are subject to the
supervision of the U.S. bank and creditors of the non-U.S. branch are
considered general creditors of the U.S. bank subject to whatever defenses
may be available under the governing non-U.S. law and to the terms of the
specific obligation. Nonetheless, the Fund generally will be subject to
whatever risk may exist that the non-U.S. country may impose restrictions
on payment of certificates of deposit or time deposits.
U.S. branches of non-U.S. banks are subject to the laws of the state
in which the branch is located or to the laws of the United States. Such
branches are therefore subject to many of the regulations, including
reserve requirements, to which U.S. banks are subject. In addition, the
Fund may purchase obligations only of those U.S. branches of non-U.S.
banks which are located in states which impose the additional requirement
that the branch pledge to a designated bank within the state an amount of
its assets equal to 5% of its total liabilities.
Non-U.S. banks in whose obligations the Fund may invest may not be
subject to the laws and regulations referred to in the preceding two
paragraphs.
(2) Obligations of, or guaranteed by, non-U.S. governments. The Fund
limits its investments in non-U.S. government obligations to obligations
issued or guaranteed by the governments of Western Europe (United Kingdom,
France, Germany, Belgium, the Netherlands, Italy, Switzerland), Scandinavia
(Denmark, Norway, Sweden), Australia, Japan and Canada. Generally, such
obligations may be subject to the additional risks described in paragraph 1
above in connection with the purchase of non-U.S.
bank obligations.
(3) Commercial paper rated Prime-1 by Moody's Investors Service, Inc. or
A-1 by Standard & Poor's Ratings Group or, if not rated, determined to be of
comparable quality by the Manager, under the supervision of and pursuant to
instructions established by the Trust's Board of Trustees, such as unrated
commercial paper issued by corporations having an outstanding unsecured debt
issue currently rated Aaa by Moody's or AAA by Standard & Poor's.
(4) Obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities. These include issues of the U.S. Treasury, such as
bills, certificates of indebtedness, notes and bonds, and issues of agencies
and instrumentalities established under the authority of an Act of Congress.
Some of the latter category of obligations are supported by the full faith
and credit of the United States, others are supported by the right of the
issuer to borrow from the U.S. Treasury, and still others are supported only
by the credit of the agency or instrumentality. Examples of each of the
three types of obligations described in the preceding sentence are (i)
obligations guaranteed by the Export-Import Bank of the United States, (ii)
obligations of the Federal Home Loan Mortgage Corporation, and (iii)
obligations of the Student Loan Marketing Association, respectively.
(5) Repurchase agreements, providing for resale within 397 days or less,
covering obligations of, or guaranteed by, the U.S. Government, its agencies
or instrumentalities which may have maturities in excess of 397 days. A
repurchase agreement arises when a buyer purchases an obligation and
simultaneously agrees with the vendor to resell the obligation to the vendor
at an agreed-upon price and time, which is usually not more than seven days
from the date of purchase. The resale price of a repurchase agreement is
greater than the purchase price, reflecting an agreed-upon market rate which
is effective for the period of time the buyer's funds are invested in the
obligation and which is not related to the coupon rate on the purchased
obligation. Obligations serving as collateral for each repurchase agreement
are delivered to the Fund's custodian or a sub-custodian either physically
or in book entry form and the collateral is marked to the market daily to
ensure that each repurchase agreement is fully collateralized at all times.
A buyer of a repurchase agreement runs a risk of loss if, at the time of
default by the issuer, the value of the collateral securing the agreement is
less than the price paid for the repurchase agreement. If the vendor of a
repurchase agreement becomes bankrupt, the Fund might be delayed, or may
incur costs or possible losses of principal and income, in selling the
collateral. The Fund may enter into repurchase agreements only with a vendor
which is a member bank of the Federal Reserve System or which is a "primary
dealer" (as designated by the Federal Reserve Bank of New York) in U.S.
Government obligations. The Fund will not enter into any repurchase
agreements with the Manager or an affiliate of the Manager. The restrictions
and procedures described above which govern the Fund's investment in
repurchase agreements are designed to minimize the Fund's risk of losses in
making those investments.
(6) Asset-backed securities, which may include securities such as
Certificates for Automobile Receivables ("CARS") and Credit Card Receivable
Securities ("CARDS"), as well as other asset-backed securities that may be
developed in the future. CARS represent fractional interests in pools of car
installment loans, and CARDS represent fractional interests in pools of
revolving credit card receivables. The rate of return on asset-backed
securities may be affected by early prepayment of principal on the
underlying loans or receivables. Prepayment rates vary widely and may be
affected by changes in market interest rates. It is not possible to
accurately predict the average life of a particular pool of loans or
receivables. Reinvestment of principal may occur at higher or lower rates
than the original yield. Therefore, the actual maturity and realized yield
on asset-backed securities will vary based upon the prepayment experience of
the underlying pool of loans or receivables.
(See "Asset-Backed Securities.")
The Fund does not purchase securities which it believes, at the time of
purchase, will be subject to exchange controls or non-U.S. withholding taxes;
however, there can be no assurance that such laws may not become applicable to
certain of the Fund's investments. In the event exchange controls or non-U.S.
withholding taxes are imposed with respect to any of the Fund's investments, the
effect may be to reduce the income received by the Fund on such investments.
ASSET-BACKED SECURITIES
As set forth above, the Fund may purchase asset-backed securities that
represent fractional interests in pools of retail installment loans, both
secured (such as Certificates for Automobile Receivables) and unsecured, leases
or revolving credit receivables, both secured and unsecured (such as Credit Card
Receivable Securities). These assets are generally held by a trust and payments
of principal and interest or interest only are passed through monthly or
quarterly to certificate holders and may be guaranteed up to certain amounts by
letters of credit issued by a financial institution affiliated or unaffiliated
with the trustee or originator of the trust.
Underlying automobile sales contracts, leases or credit card receivables are
subject to prepayment, which may reduce the overall return to certificate
holders. Nevertheless, principal repayment rates tend not to vary much with
interest rates and the short-term nature of the underlying loans, leases or
receivables tends to dampen the impact of any change in the prepayment level.
Certificate holders may also experience delays in payment on the certificates if
the full amounts due on underlying loans, leases or receivables are not realized
by the Fund because of unanticipated legal or administrative costs of enforcing
the contracts or because of depreciation or damage to the collateral (usually
automobiles) securing certain contracts, or other factors. If consistent with
its investment objective and policies, the Fund may invest in other asset-backed
securities that may be developed in the future.
REPURCHASE AGREEMENTS
The Fund may invest assets in instruments subject to repurchase agreements
only with member banks of the Federal Reserve System or "primary dealers" (as
designated by the Federal Reserve Bank of New York) in U.S. Government
securities. Under the terms of a typical repurchase agreement, the Fund would
acquire an underlying debt instrument for a relatively short period (usually not
more than one week) subject to an obligation of the seller to repurchase and the
Fund to resell the instrument at a fixed price and time, thereby determining the
yield during the Fund's holding period. This results in a fixed rate of return
insulated from market fluctuations during such period. A repurchase agreement is
subject to the risk that the seller may fail to repurchase the security.
Repurchase agreements may be deemed to be loans under the 1940 Act. All
repurchase agreements entered into by the Fund shall be fully collateralized at
all times during the period of the agreement in that the value of the underlying
security shall be at least equal to the amount of the loan, including the
accrued interest thereon, and the Fund or its custodian or sub-custodian shall
have possession of the collateral, which the Manager believes will give it a
valid, perfected security interest in the collateral. Whether a repurchase
agreement is the purchase and sale of a security or a collateralized loan has
not been definitively established. This might become an issue in the event of
the bankruptcy of the other party to the transaction. In the event of default by
the seller under a repurchase agreement construed to be a collateralized loan,
the underlying securities are not owned by the Fund but only constitute
collateral for the seller's obligation to pay the repurchase price. Therefore,
the Fund may suffer time delays and incur costs in connection with the
disposition of the collateral. The Manager believes that the collateral
underlying repurchase agreements may be more susceptible to claims of the
seller's creditors than would be the case with securities owned by the Fund.
Repurchase agreements will give rise to income which will not qualify as
tax-exempt income when distributed by the Fund. The Fund will not invest in a
repurchase agreement maturing in more than seven days if any such investment
together with illiquid securities held by the Fund exceed 10% of the Fund's
total net assets. Repurchase agreements are also subject to the same risks
described herein with respect to stand-by commitments.
LENDING OF SECURITIES
Consistent with applicable regulatory requirements and in order to generate
income, the Fund 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 ("NYSE") (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. The Fund would have the right to call a
loan and obtain the securities loaned at any time on customary industry
settlement notice (which will not usually exceed five days). During the
existence of a loan, the Fund would continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities loaned and would also
receive compensation based on investment of the collateral. The Fund would not,
however, have the right to vote any securities having voting rights during the
existence of the loan, but would call the loan in anticipation of an important
vote to be taken among holders of the securities or of the giving or withholding
of their consent on a material matter affecting the investment. As with other
extensions of credit, there are risks of delay in recovery or even loss of
rights in the collateral should the borrower fail financially. However, the
loans would be made only to entities deemed by the Manager to be of good
standing, and when, in the judgment of the Manager, the consideration which can
be earned currently from loans of this type justifies the attendant risk. If the
Manager determines to make loans, it is not intended that the value of the
securities loaned by the Fund would exceed 30% of the value of its net assets.
INVESTMENT RESTRICTIONS
The Trust, on behalf of the Fund, has adopted the following policies which
may not be changed without approval by holders of a "majority of the outstanding
voting securities" of the Fund, which as used in this Statement of Additional
Information means the vote of the lesser of (i) 67% or more of the outstanding
voting securities of the Fund present at a meeting, if the holders of more than
50% of the outstanding "voting securities" of the Fund are present or
represented by proxy, or (ii) more than 50% of the outstanding "voting
securities" of the Fund. The term "voting securities" as used in this paragraph
has the same meaning as in the 1940 Act. The Fund will vote the shares held by
its shareholders who do not give voting instructions in the same proportion as
the shares of the Fund's shareholders who do give voting instructions.
Shareholders of the Fund who do not vote will have no effect on the outcome of
these matters.
THE FUND MAY NOT:
(1) Borrow money, except that as a temporary measure for extraordinary or
emergency purposes it may borrow in an amount not to exceed 1/3 of the current
value of its net assets, including the amount borrowed; or purchase any
securities at any time at which borrowings exceed 5% of the total assets of the
Fund, taken at market value. It is intended that the Fund would borrow money
only from banks and only to accommodate requests for the repurchase of shares of
the Fund while effecting an orderly liquidation of securities.
(2) Underwrite securities issued by other persons, except that all or any
portion of the assets of the Fund may be invested in one or more investment
companies, to the extent not prohibited by the 1940 Act, the rules and
regulations thereunder, and exemptive orders granted under such Act and except
insofar as the Fund may technically be deemed an underwriter under the
Securities Act of 1933 in selling a security for the Fund.
(3) Make loans to other persons except (a) through the lending of the Fund's
portfolio securities and provided that any such loans not exceed 30% of the
Fund's total assets (taken at market value), (b) through the use of repurchase
agreements, fixed time deposits or the purchase of short term obligations, or
(c) by purchasing all or a portion of an issue of debt securities of types
commonly distributed privately to financial institutions. The purchase of
short-term commercial paper or a portion of an issue of debt securities which is
part of an issue to the public shall not be considered the making of a loan.
(4) Purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein), interests
in oil, gas or mineral leases, commodities or commodity contracts in the
ordinary course of business (the foregoing shall not be deemed to preclude the
Fund from purchasing or selling futures contracts or options thereon, and the
Fund reserves the freedom of action to hold and to sell real estate acquired as
a result of the ownership of securities by the Fund).
(5) Purchase securities of any one issuer if such purchase at the time
thereof would cause as to 75% of the Fund's total assets more than 5% of the
Fund's assets (taken at market value) to be invested in the securities of such
issuer (other than securities or obligations issued or guaranteed by the United
States, any state or political subdivision thereof, or any political subdivision
of any such state, or any agency or instrumentality of the United States or of
any state or of any political subdivision of any state), provided that, for
purposes of this restriction, the issuer of an option or futures contract shall
not be deemed to be the issuer of the security or securities underlying such
contract; and provided further that the Fund may invest all or any portion of
its assets in one or more investment companies, to the extent not prohibited by
the 1940 Act, the rules and regulations thereunder, and exemptive orders granted
under such Act.
(6) Concentrate the Fund's investments in any particular industry, but, if
it is deemed appropriate for the achievement of the Fund's investment objective,
up to 25% of the Fund's 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 the Fund will invest
at least 25% of its assets and may invest up to 100% of its assets in bank
obligations.
(7) Issue any senior security (as that term is defined in the 1940 Act) if
such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder.
PERCENTAGE AND RATING RESTRICTIONS
If a percentage restriction or a rating restriction (other than a
restriction as to borrowing) on investment or utilization of assets set forth
above or referred to in the Prospectus is adhered to at the time an investment
is made or assets are so utilized, a later change in percentage resulting from
changes in the value of the securities held by the Fund or a later change in the
rating of a security held by the Fund is not considered a violation of policy.
3. PERFORMANCE INFORMATION
Any current yield quotation of the Fund which is used in such a manner as to
be subject to the provisions of Rule 482(d) under the Securities Act of 1933, as
amended, consists of an annualized historical yield, carried at least to the
nearest hundredth of one percent, based on a specific seven calendar day period
and is calculated by dividing the net change in the value of an account having a
balance of one share at the beginning of the period by the value of the account
at the beginning of the period and multiplying the quotient by 365/7. For this
purpose the net change in account value would reflect the value of additional
shares purchased with dividends declared on the original share and dividends
declared on both the original share and any such additional shares, but would
not reflect any unrealized appreciation or depreciation on portfolio securities.
In addition, any effective yield quotation of the Fund so used shall be
calculated by compounding the current yield quotation for such period by
multiplying such quotation by 7/365, adding 1 to the product, raising the sum to
a power equal to 365/7, and subtracting 1 from the result.
A total rate of return quotation for the Fund is calculated for any period
by (a) dividing (i) the sum of the net asset value per share on the last day of
the period and the net asset value per share on the last day of the period of
shares purchasable with dividends and capital gains distributions declared
during such period with respect to a share held at the beginning of such period
and with respect to shares purchased with such dividends and capital gains
distributions, by (ii) the public offering price on the first day of such
period, and (b) subtracting 1 from the result. Any annualized total rate of
return quotation is calculated by (x) adding 1 to the period total rate of
return quotation calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting 1
from the result.
4. DETERMINATION OF NET ASSET VALUE
The net asset value of each of the shares of the Fund is determined on each
day on which the NYSE is open for trading. This determination is made once
during each such day as of 4:00 p.m. by dividing the value of the Fund's net
assets (i.e., the value of its assets less its liabilities, including expenses
payable or accrued) by the number of shares of the Fund outstanding at the time
the determination is made. As of the date of this Statement of Additional
Information, the NYSE is open for trading every weekday except for the following
holidays (or the days on which they are observed): New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. It is anticipated that the net asset value of each share of
the Fund will remain constant at $1.00 and, although no assurance can be given
that it will be able to do so on a continuing basis, as described below, the
Fund employs specific investment policies and procedures to accomplish this
result.
The securities held by the Fund are valued at their amortized cost.
Amortized cost valuation involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium. If fluctuating interest rates cause the market value of the securities
held by the Fund to deviate more than 1/2 of 1% from their value determined on
the basis of amortized cost, the Fund's Board of Trustees will consider whether
any action should be initiated, as described in the following paragraph.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the stated value of an instrument is higher or
lower than the price the Fund would receive if the instrument were sold.
Pursuant to the rules of the Securities and Exchange Commission ("SEC"), the
Trust's Board of Trustees has established procedures to stabilize the value of
the Fund's net assets within 1/2 of 1% of the value determined on the basis of
amortized cost. These procedures include a review of the extent of any such
deviation of net asset value, based on available market rates. Should that
deviation exceed 1/2 of 1% for the Fund, the Trust's Board of Trustees will
consider whether any action should be initiated to eliminate or reduce material
dilution or other unfair results to the investors in the Fund. Such action may
include withdrawal in kind, selling securities prior to maturity and utilizing a
net asset value as determined by using available market quotations. The Fund
maintains a dollar-weighted average maturity of 90 days or less, does not
purchase any instrument with a remaining maturity greater than 397 days or
subject to a repurchase agreement having a duration of greater than 397 days,
limits its investments, including repurchase agreements, to those U.S.
dollar-denominated instruments that are determined by the Manager to present
minimal credit risks and complies with certain reporting and recordkeeping
procedures. The Trust also has established procedures to ensure that securities
purchased by the Fund meet high quality criteria. (See "Investment Objective,
Policies and Restrictions -- Investment Policies.")
Subject to compliance with applicable regulations, the Trust has reserved
the right to pay the redemption price of shares of the Fund, 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 being
sold. If a holder of shares received a distribution in kind, such holder could
incur brokerage or other charges in converting the securities to cash.
The Trust may suspend the right of redemption or postpone the date of
payment for shares of the Fund more than seven days during any period when (a)
trading in the markets the Fund normally utilizes is restricted, or an
emergency, as defined by the rules and regulations of the SEC, exists making
disposal of the Fund's investments or determination of its net asset value not
reasonably practicable; (b) the NYSE is closed (other than customary weekend and
holiday closings); or (c) the SEC has by order permitted such suspension.
5. MANAGEMENT
The Trustees and officers of the 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.
Unless otherwise indicated below, the address of each Trustee and officer is 6
St. James Avenue, Boston, Massachusetts.
TRUSTEES OF THE TRUST
PHILIP W. COOLIDGE* (aged 45) - President of the Trust; Chief Executive
Officer, Signature Financial Group, Inc. and The Landmark Funds Broker-Dealer
Services, Inc. (since December 1988).
RILEY C. GILLEY (aged 71) - 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 (aged 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 (aged 46) - 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.
OFFICERS OF THE TRUST
SAMANTHA M. BURGESS* (aged 27) - Assistant Secretary and Assistant Treasurer
of the Trust; Assistant Vice President, Signature Financial Group, Inc.
(since November 1995); Graduate Student, Loyola University (prior to August
1995).
PHILIP W. COOLIDGE* (aged 45) - President of the 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* (aged 27) - Assistant Secretary and Assistant Treasurer of
the 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* (aged 49) - Treasurer of the 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* (aged 32) - Secretary of the 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 (September 1989 to May 1992).
JOAN R. GULINELLO* (aged 41) - Assistant Secretary and Assistant Treasurer of
the 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* (aged 50) - Vice President, Assistant Secretary and
Assistant Treasurer of the Trust; Senior Vice President, Signature Financial
Group, Inc.
SUSAN JAKUBOSKI* (aged 33) - Assistant Secretary and Assistant Treasurer of
the Trust; Vice President, 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* (aged 45) - Assistant Secretary and Assistant Treasurer of
the Trust; Vice President, Signature Financial Group, Inc.; Assistant
Secretary, The Landmark Funds Broker-Dealer Services, Inc. (since December
1988).
KARYN A. NOKE* (aged 27) - Vice President, Assistant Secretary and Assistant
Treasurer of the 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* (aged 49) - Assistant Secretary and Assistant Treasurer of
the Trust; Assistant Vice President, Signature Financial Group, Inc. (since
November 1992); Associate Trader, Massachusetts Financial Services Company
(prior to November 1992).
JULIE J. WYETZNER* (aged 38) - Vice President, Assistant Secretary and
Assistant Treasurer of the Trust; Vice President, Signature Financial Group,
Inc.
The Trustees and officers of the Trust also hold comparable positions with
certain other funds for which LFBDS or an affiliate serves as the distributor or
administrator.
<TABLE>
<CAPTION>
TRUSTEES COMPENSATION TABLE
PENSION OR TOTAL COMPENSATION
AGGREGATE RETIREMENT BENEFITS ESTIMATED FROM THE REGISTRANT
COMPENSATION ACCRUED AS PART ANNUAL BENEFITS AND FUND COMPLEX
TRUSTEE FROM REGISTRANT(1) OF FUND EXPENSES UPON RETIREMENT PAID TO TRUSTEES(2)
------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Philip W. Coolidge ................... $ 0 None None $ 0
Riley C. Gilley ...................... $14,507 None None $46,000
Diana R. Harrington .................. $13,564 None None $44,000
Susan B. Kerley ...................... $12,697 None None $42,000
- ----------
(1) For the fiscal year ended August 31, 1997.
(2) Information relates to the fiscal year ended August 31, 1997. Messrs.
Coolidge and Gilley and Mses. Harrington and Kerley are trustees of 45, 28, 26 and 26 Funds, respectively, of the fund family.
</TABLE>
As of the date of this Statement of Additional Information all of the
outstanding shares of the Fund are held by LFBDS.
The Declaration of Trust of the Trust provides that the Trust 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 unless, as to liability to the Trust or its 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. 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 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.
MANAGER
Citibank manages the assets of the Fund and provides certain administrative
services to the Trust pursuant to a management agreement (the "Management
Agreement"). Citibank furnishes at its own expense all services, facilities and
personnel necessary in connection with managing the Fund's investments and
effecting securities transactions for the Fund. The Management Agreement will
continue in effect until August 8, 1999 and thereafter 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 Fund, and, in either case, by a majority of the Trustees of the Trust who
are not parties to the Management Agreement or interested persons of any such
party, at a meeting called for the purpose of voting on the Management
Agreement.
Citibank provides the Trust with general office facilities and supervises
the overall administration of the Trust, including, among other
responsibilities, the negotiation of contracts and fees with, and the monitoring
of performance and billings of, the Trust's independent contractors and agents;
the preparation and filing of all documents required for compliance by the Trust
with applicable laws and regulations; and arranging for the maintenance of books
and records of the Trust. Trustees, officers, and investors in the Trust are or
may be or may become interested in Citibank, as directors, officers, employees,
or otherwise and directors, officers and employees of Citibank are or may become
similarly interested in the Trust.
The Management Agreement provides that Citibank may render services to
others. The Management Agreement is terminable without penalty on not more than
60 days' nor less than 30 days' written notice by the Trust when authorized
either by a vote of a majority of the outstanding voting securities of the Fund
or by a vote of a majority of the Board of Trustees of the Trust, or by the
Manager on not more than 60 days' nor less than 30 days' written notice, and
will automatically terminate in the event of its assignment. The Management
Agreement provides that neither the Manager nor its personnel shall be liable
for any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution of security transactions
for the Fund, except for willful misfeasance, bad faith or gross negligence or
reckless disregard of its or their obligations and duties under the Management
Agreement.
The Prospectus contains a description of the fees payable to the Manager for
services under the Management Agreement. Citibank may reimburse the Fund or
waive all or a portion of it management fees.
Pursuant to a sub-administrative services agreement with Citibank, LFBDS
performs such sub-administrative duties for the Trust as from time to time are
agreed upon by Citibank and LFBDS. For performing such sub-administrative
services, LFBDS receives compensation as from time to time is agreed upon by
Citibank, not in excess of the amount paid to Citibank for its services under
the Management Agreement with the Trust. All such compensation is paid by
Citibank.
DISTRIBUTOR
LFBDS, 6 St. James Avenue, Boston, MA 02116, serves as the Distributor of
the Fund's shares pursuant to a Distribution Agreement with the Trust for shares
of the Fund (the "Distribution Agreement"). Unless otherwise terminated the
Distribution Agreement will continue 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 Fund and by vote of a majority of the Board of Trustees
of the Trust who are not parties to the Distribution Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. The Distribution Agreement will terminate in the event
of its assignment, as defined in the 1940 Act.
Under a Service Plan for shares of the Fund (the "Service Plan") which has
been adopted in accordance with Rule 12b-1 under the 1940 Act, the Fund may pay
monthly fees at an annual rate not to exceed 0.10% of the average daily net
assets of the Fund. Such fees may be used to make payments to the Distributor
for distribution services, to securities dealers and other industry
professionals (called Service Agents) that have entered into service agreements
with the Distributor and others in respect of the sale of shares of the Fund,
and to other parties in respect of the sale of shares of the Fund, and to make
payments for advertising, marketing or other promotional activity, and payments
for preparation, printing, and distribution of prospectuses, statements of
additional information and reports for recipients other than regulators and
existing shareholders. The Fund also may make payments to the Distributor,
Service Agents and others for providing personal service or the maintenance of
shareholder accounts. The Fund and the Distributor provide to the Trustees
quarterly a written report of amounts expended pursuant to the Service Plan and
the purposes for which the expenditures were made.
The Service Plan obligates the Fund to pay fees to the Distributor, Service
Agents and others as compensation for their services, not as reimbursement for
specific expenses incurred. Thus, even if their expenses exceed the fees
provided for by the Service Plan for the Fund, the Fund will not be obligated to
pay more than those fees and, if their expenses are less than the fees paid to
them, they will realize a profit. The Fund will pay the fees to the Distributor,
Service Agents and others until the Service Plan or Distribution Agreement is
terminated or not renewed. In that event, the Distributor's or Service Agent's
expenses in excess of fees received or accrued through the termination date will
be the Distributor's or Service Agent's sole responsibility and not obligations
of the Fund.
The Service Plan continues in effect if such continuance is specifically
approved at least annually by a vote of both a majority of the Trust's Trustees
and a majority of the Trust's Trustees who are not "interested persons" of the
Trust and who have no direct or indirect financial interest in the operation of
the Service Plan or in any agreement related to such Plan (for purposes of this
paragraph "Qualified Trustees"). The Service 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 Service Plan. The Service 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 Service Plan may be terminated with respect to the Fund at any time
by a vote of a majority of the Trust's Qualified Trustees or by a vote of a
majority of the outstanding voting securities of the Fund. The Service Plan may
not be amended to increase materially the amount of the Fund's permitted
expenses thereunder without the approval of a majority of the outstanding voting
securities of the Fund and may not be materially amended in any case without a
vote of the majority of both the Trustees and Qualified Trustees. The
Distributor will preserve copies of any plan, agreement or report made pursuant
to the Service Plan for a period of not less than six years, and for the first
two years the Distributor will preserve such copies in an easily accessible
place.
The Distributor may enter into agreements with Service Agents and may pay
compensation to such Service Agents for accounts for which the Service Agents
are holders of record. Payments may be made to the Service Agents out of the
distribution fees received by the Distributor and out of the Distributor's past
profits or any other source available to it.
TRANSFER AGENT AND CUSTODIAN
The Trust has entered into 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 the Fund. The Trust also has entered into a
Custodian Agreement with State Street, pursuant to which custodial and fund
accounting services are provided for the Fund. See "Transfer Agent, Custodian
and Fund Accountant" in the Prospectus for additional information. The address
of State Street is 225 Franklin Street, Boston, Massachusetts 02110.
6. PORTFOLIO TRANSACTIONS
The Fund's purchases and sales of portfolio securities usually are principal
transactions. Portfolio securities are normally purchased directly from the
issuer or from an underwriter or market maker for the securities. There usually
are no brokerage commissions paid for such purchases. The Fund does not
anticipate paying brokerage commissions. Any transaction for which the Fund pays
a brokerage commission will be effected at the best price and execution
available. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market makers include the spread between the bid and
asked price.
Allocation of transactions, including their frequency, to various dealers is
determined by the Manager in its best judgment and in a manner deemed to be in
the best interest of investors in the Fund rather than by any formula. The
primary consideration is prompt execution of orders in an effective manner at
the most favorable price.
Investment decisions for the Fund will be made independently from those for
any other account, series or investment company that is or may in the future
become managed by the Manager or its affiliates. If, however, the Fund and other
investment companies, series or accounts managed by the Manager are
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by the Fund or the size of the position obtainable for the Fund. In
addition, when purchases or sales of the same security for the Fund and for
other investment companies or series managed by the Manager occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.
Portfolio transactions may be executed with the Manager, or with any
affiliate of the Manager, acting either as principal or as broker, subject to
applicable law.
7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES
The Trust's Declaration of Trust permits the Trust's Board of Trustees to
issue an unlimited number of full and fractional Shares of Beneficial Interest
($0.00001 par value) of each of its 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. In
addition to the Fund, there are currently three other series of the Trust:
Landmark Institutional Liquid Reserves, Landmark Institutional U.S. Treasury
Reserves and Landmark Institutional Tax-Free Reserves. Each share of the Fund
represents an equal proportionate interest in the Fund with each other share.
Upon liquidation or dissolution of the Fund, the Fund's shareholders are
entitled to share pro rata in the Fund's net assets available for distribution
to its shareholders. The Trust reserves the right to create and issue additional
series of shares. Shares of each series of the Trust participate equally in the
earnings, dividends and distribution of net assets of the particular series upon
the liquidation or dissolution of the series. Shares of each series are entitled
to vote separately to approve management 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 series, only shares of that series are entitled to vote.
Shareholders are entitled to one vote for each share held on matters on
which they are entitled to vote. Shareholders in the Trust do not have
cumulative voting rights, and shareholders owning more than 50% of the
outstanding shares of the Trust may elect all of the Trustees of the Trust if
they choose to do so and in such event the other shareholders in the Trust would
not be able to elect any Trustee. The Trust is not required and has no present
intention of holding annual meetings of shareholders but the Trust will hold
special meetings of the Fund's shareholders when in the judgment of the Trust's
Trustees it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have under certain circumstances (e.g., upon application and
submission of certain specified documents to the Trustees by a specified number
of shareholders) the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Trustees. Shareholders also have the right to remove one or more Trustees
without a meeting by a declaration in writing by a specified number of
shareholders. No material amendment may be made to the Trust's Declaration of
Trust without the affirmative vote of the holders of a majority of the
outstanding shares of each series affected by the amendment.
The Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets (or all or substantially all of the assets
belonging to any series of the Trust), if approved by the vote of the holders of
two-thirds of the Trust's outstanding shares voting as a single class, or of the
affected series of the Trust, as the case may be, except that if the Trustees of
the Trust recommend such sale of assets, merger or consolidation, the approval
by vote of the holders of a majority of the Trust's or the affected series'
outstanding shares would be sufficient. The Trust or any series of the Trust, as
the case may be, may be terminated (i) by a vote of a majority of the
outstanding voting securities of the Trust or the affected series or (ii) by the
Trustees by written notice to the shareholders of the Trust or the affected
series. If not so terminated, the Trust will continue indefinitely.
Share certificates will not be issued.
The Trust is an entity of the type commonly known as a "Massachusetts
business trust." Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations and liabilities. However, the Declaration of Trust contains an
express disclaimer of shareholder liability for acts or obligations of the Trust
and provides for indemnification and reimbursement of expenses out of Trust
property for any shareholder held personally liable for the obligations of the
Trust. The Declaration of Trust also provides that the Trust 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 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.
8. CERTAIN ADDITIONAL TAX MATTERS
The 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 the Fund's net investment income and realized capital gains are distributed
to shareholders in accordance with the timing requirements imposed by the Code,
no federal or Massachusetts income or excise taxes will be required to be paid
by the Fund. If the Fund should fail to qualify as a regulated investment
company for any year, the Fund would incur federal and Massachusetts taxes upon
its taxable income and Fund distributions would generally be taxable as ordinary
dividend income to shareholders.
Because the Fund expects to earn primarily interest income, it is expected
that no Fund distributions will qualify for the dividends-received deduction for
corporations.
Investment income received by the Fund from non-U.S. investments may be
subject to foreign income taxes withheld at the source; the Fund does not expect
to be able to pass through to shareholders any foreign tax credits with respect
to those foreign taxes. The United States has entered into tax treaties with
many foreign countries that may entitle the Fund to a reduced rate of tax or an
exemption from tax on these investments. It is not possible to determine the
Fund's effective rate of foreign tax in advance since that rate depends upon the
proportion of the Fund's assets ultimately invested within various countries.
9. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Deloitte & Touche LLP, 125 Summer Street, Boston, MA 02110, are the
independent and chartered accountants for the Fund, providing audit services and
assistance and consultation with respect to the preparation of filings with the
SEC.
The Fund is newly-organized and has not yet issued financial statements.
<PAGE>
CITIBANK
SERVICE AGENTS
FOR CITIBANK PRIVATE BANKING CLIENTS:
Citibank, N.A.
The Citibank Private Bank
153 East 53rd Street, New York, N.Y. 10043
Call Your Citibank Private Banking Account Officer,
Registered Representative or (212) 559-5959
FOR CITIBANK GLOBAL ASSET MANAGEMENT CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY 10043
(212) 559-7117
FOR CITIBANK NORTH AMERICAN INVESTOR SERVICES CLIENTS:
Citibank, N.A.
111 Wall Street, New York, NY 10043
Call Your Account Manager or (212) 657-9100
<PAGE>
CITIFUNDS INSTITUTIONAL CASH RESERVES
TRUSTEES AND OFFICERS
Philip W. Coolidge, President*
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
*Affiliated Person of Distributor
- -------------------------------------------------------------------------------
INVESTMENT MANAGER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
DISTRIBUTOR
The Landmark Funds Broker-Dealer Services, Inc.
6 St. James Avenue, Boston, MA 02116
(617) 423-1679
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
Deloitte & Touche LLP
125 Summer Street
Boston, MA 02110
LEGAL COUNSEL
Bingham, Dana & Gould LLP
150 Federal Street, Boston, MA 02110
