As filed with the Securities and Exchange Commission on April
28, 1995
File No. 811-8438
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 1
THE PREMIUM PORTFOLIOS*
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
ELIZABETHAN SQUARE, GEORGE TOWN, GRAND CAYMAN, CAYMAN ISLANDS,
BWI
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:
(809) 945-1824
SUSAN JAKUBOSKI, ELIZABETHAN SQUARE, GEORGE TOWN,
GRAND CAYMAN, CAYMAN ISLANDS, BWI
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO:
ROGER P. JOSEPH, BINGHAM, DANA & GOULD,
150 FEDERAL STREET, BOSTON, MA 02110
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* Relates only to Government Income Portfolio.
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EXPLANATORY NOTE
Beneficial interests in the Registrant are not registered under the
Securities Act of 1933, as amended (the "1933 Act"), because such interests are
issued solely in private placement transactions which do not involve any "public
offering" within the meaning of Section 4(2) of the 1933 Act. Investments in the
Registrant may be made only by investment companies, common or commingled trust
funds or similar organizations or entities which are "accredited investors"
within the meaning of Regulation D under the 1933 Act. This Registration
Statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any beneficial interests in the Registrant.
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PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
Item 4. General Description of Registrant.
Government Income Portfolio (the "Portfolio") is a separate series of The
Premium Portfolios (the "Trust"). Citibank, N.A. ("Citibank" or the "Adviser")
is the investment adviser for the Portfolio. The Trust is an open-end management
investment company which was organized as a trust under the laws of the State of
New York on September 13, 1993. Beneficial interests in the Portfolio are issued
solely in private placement transactions which do not involve any "public
offering" within the meaning of Section 4(2) of the U.S. Securities Act of 1933,
as amended (the "1933 Act"). Investments in the Portfolio may be made only by
investment companies, common or commingled trust funds or similar organizations
or entities which are "accredited investors" within the meaning of Regulation D
under the 1933 Act. This Registration Statement does not constitute an offer to
sell, or the solicitation of an offer to buy, any "security" within the meaning
of the 1933 Act.
BENEFICIAL INTERESTS IN THE PORTFOLIO 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 THE PRINCIPAL AMOUNT
INVESTED.
INVESTMENT OBJECTIVE AND POLICIES:
The investment objective of the Portfolio is to generate current income
and preserve the value of the investment of investors in the Portfolio.
The Portfolio seeks its objective by investing in debt securities that are
backed, as to timely repayment of principal and interest, by the full faith and
credit of the U.S. Government. The dollar weighted average maturity of
securities held by the Portfolio is generally three years or less.
The Portfolio invests in both direct obligations of the U.S. Treasury and
obligations issued or guaranteed by U.S. Government agencies, including
mortgage-backed securities, that are backed by the full faith and credit of the
U.S. Government as to the timely payment of principal and interest. Up to 80% of
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the Portfolio's assets may be invested in direct pass-through certificates
guaranteed by the Government National Mortgage Association ("GNMA").
The Portfolio is designed to provide a higher level of current income than
is generally available from money market funds. The Portfolio invests in
securities with prices that tend to vary more than the prices on money market
instruments but less than the prices of intermediate and long-term bonds.
The Portfolio may invest in U.S. Government securities, including (1) U.S.
Treasury obligations, such as Treasury bills, notes and bonds, which are backed
by the full faith and credit of the United States; and (2) obligations issued or
guaranteed by U.S. Government agencies or instrumentalities that are backed by
the full faith and credit of the U.S.
Government.
The Portfolio may purchase mortgage-backed securities issued or guaranteed
as to payment of principal and interest by the U.S. Government or one of its
agencies and backed by the full faith and credit of the U.S. Government,
including direct pass-through certificates of GNMA. Mortgage-backed securities
are generally backed or collateralized by a pool of mortgages. These securities
are sometimes called collateralized mortgage obligations or CMOs.
Even if the U.S. Government or one of its agencies guarantees principal
and interest payments of a mortgage-backed security, the market price of a
mortgage-backed security is not insured and may be subject to market volatility.
When interest rates decline, mortgage-backed securities experience higher rates
of prepayment, because the underlying mortgages are refinanced to take advantage
of the lower rates. Thus the prices of mortgage-backed securities may not
increase as much as prices of other debt obligations when interest rates
decline, and mortgage-backed securities may not be an effective means of locking
in a particular interest rate. In addition, any premium paid for a
mortgage-backed security may be lost when it is prepaid.
The Portfolio has adopted a policy which is fundamental and which provides
that all of the assets of the Portfolio will be invested in obligations that are
backed by the full faith and credit of the U.S. Government. (This policy is not
intended to prohibit the use of futures contracts to hedge the Portfolio's
investments.)
CERTAIN ADDITIONAL INVESTMENT POLICIES:
TEMPORARY INVESTMENTS. During periods of unusual economic or market
conditions or for temporary defensive purposes or liquidity, the Portfolio may
invest without limit in cash and in U.S. dollar-denominated high quality money
market and short-term instruments. These investments may result in a lower yield
than would be available from investments with a lower quality or longer term.
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OTHER PERMITTED INVESTMENTS. For more information regarding the
Portfolio's permitted investments and investment practices, see "Permitted
Investments and Investment Practices." The Portfolio will not necessarily invest
or engage in each of the investments and investment practices described in
"Permitted Investments and Investment Practices" but reserves the right to do
so.
INVESTMENT RESTRICTIONS. Part B of this Registration Statement contains a
list of specific investment restrictions which govern the investment policies of
the Portfolio, including a limitation that the Portfolio may borrow money from
banks in an amount not to exceed 33-1/3% of the Portfolio's net assets for
extraordinary or emergency purposes (e.g., to meet redemption requests). Certain
of these specific restrictions may not be changed without approval by holders of
a majority of the outstanding securities of the Portfolio. Except as otherwise
indicated, the Portfolio's investment objectives and policies may be changed
without approval by the holders of the outstanding securities of the Portfolio.
If a percentage or rating restriction (other than a restriction as to borrowing)
is adhered to at the time an investment is made, a later change in percentage or
rating resulting from changes in the Portfolio's securities will not be a
violation of policy.
PORTFOLIO TURNOVER. Securities of the Portfolio will be sold whenever the
Adviser believes it is appropriate to do so in light of the Portfolio's
investment objective, without regard to the length of time a particular security
may have been held. The turnover rate for the Portfolio is expected to be
approximately 125% annually; for the period May 1, 1994 (commencement of
operations) through December 31, 1994 the Portfolio's turnover rate was 40%. The
amount of brokerage commissions and realization of taxable capital gains will
tend to increase as the level of portfolio activity increases.
BROKERAGE TRANSACTIONS. The primary consideration in placing the
Portfolio's security transactions with broker-dealers for execution is to obtain
and maintain the availability of execution at the most favorable prices and in
the most effective manner possible.
RISK CONSIDERATIONS:
The risks of investing in the Portfolio vary depending upon the nature of
the securities held, and the investment practices employed, on its behalf.
Certain of these risks are described below.
CHANGES IN NET ASSET VALUE. The Portfolio's net asset value will fluctuate
based on changes in the values of the underlying portfolio securities. This
means that an investment in the Portfolio may be worth more or less at
redemption than at the time of purchase.
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INTEREST RATE RISK. The value of fixed income securities, including those
backed by the U.S. Government, generally goes down when interest rates go up,
and vice versa. Furthermore, the value of fixed income securities may vary based
on anticipated or potential changes in interest rates. Changes in interest rates
will generally cause bigger changes in the prices of longer-term securities than
in the prices of shorter-term securities.
INVESTMENT PRACTICES. Certain of the investment practices employed for
the Portfolio may entail certain risks. See "Permitted Investments and
Investment Practices" below.
PERMITTED INVESTMENTS AND INVESTMENT PRACTICES:
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements
in order to earn a return on temporarily available cash. The Portfolio will only
enter into repurchase agreements that cover securities that are backed by the
full faith and credit of the U.S. Government. Repurchase agreements are
transactions in which an institution sells the Portfolio a security at one
price, subject to the Portfolio's obligation to resell and the selling
institution's obligation to repurchase that security at a higher price normally
within a seven day period. There may be delays and risks of loss if the seller
is unable to meet its obligation to repurchase.
REVERSE REPURCHASE AGREEMENTS. The Portfolio may enter into reverse
repurchase agreements. Reverse repurchase agreements involve the sale of
securities held by the Portfolio and the agreement by the Portfolio to
repurchase the securities at an agreed-upon price, date and interest payment.
When the Portfolio enters into reverse repurchase transactions, securities of a
dollar amount equal in value to the securities subject to the agreement will be
maintained in a segregated account with the Portfolio's custodian. The
segregation of assets could impair the Portfolio's ability to meet its current
obligations or impede investment management if a large portion of the
Portfolio's assets are involved. Reverse repurchase agreements are considered to
be a form of borrowing.
LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements and in order to generate additional income, the Portfolio 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 Portfolio would not exceed 30% of the Portfolio's
total assets.
In the event of the bankruptcy of the other party to a securities loan, a
repurchase agreement or a reverse repurchase agreement, the Portfolio could
experience delays in recovering either the securities lent or cash. To the
extent that, in the meantime, the value of the securities lent has increased or
the value of the securities purchased has decreased, the Portfolio could
experience a loss.
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RULE 144A SECURITIES. The Portfolio may purchase restricted securities
that are not registered for sale to the general public if the Adviser determines
that there is a dealer or institutional market in the securities. In that case,
the securities will not be treated as illiquid for purposes of the Portfolio's
investment limitations. The Trustees will review these determinations. These
securities are known as "Rule 144A securities," because they are traded under
SEC Rule 144A among qualified institutional buyers. Institutional trading in
Rule 144A securities is relatively new, and the liquidity of these investments
could be impaired if trading in Rule 144A securities does not develop or if
qualified institutional buyers become, for a time, uninterested in purchasing
Rule 144A securities. The Portfolio will not knowingly invest more than 15% of
its net assets (taken at market value) in securities that are subject to legal
or contractual restrictions on resale (other than certain repurchase
agreements).
PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS. The Portfolio may invest up
to 10% of its net assets (taken at the greater of cost or market value) in
securities for which there is no readily available market. These illiquid
securities may include privately placed restricted securities for which no
institutional market exists. The absence of a trading market can make it
difficult to ascertain a market value for illiquid investments. Disposing of
illiquid investments may involve time-consuming negotiation and legal expenses,
and it may be difficult or impossible for the Portfolio to sell them promptly at
an acceptable price.
"WHEN-ISSUED" SECURITIES. In order to ensure the availability of suitable
securities, the Portfolio may purchase securities on a "when-issued" or on a
"forward delivery" basis, which means that the securities would be delivered to
the Portfolio at a future date beyond customary settlement time. Under normal
circumstances, the Portfolio takes delivery of the securities. In general, the
Portfolio 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 Portfolio establishes a segregated account consisting of
cash, cash equivalents or high quality debt securities equal to the amount of
the Portfolio's commitments to purchase "when-issued" securities. An increase in
the percentage of the Portfolio's assets committed to the purchase of securities
on a "when-issued" basis may increase the volatility of its net asset value.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS. To protect against the
effects of adverse changes in interest rates (sometimes known as "hedging"), the
Portfolio may enter into futures contracts on debt securities. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of a security at a specified future time and price. The
Portfolio may also purchase and write put and call options on such futures
contracts. An option on a futures contract gives the purchaser the right, in
exchange for a premium, to assume a position in a futures contract at a
specified exercise price during the term of the option. This type of option must
be traded on a national futures exchange.
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Options and futures can be volatile investments, and involve certain
risks. If the Portfolio applies a hedge at an inappropriate time or judges
market conditions incorrectly, options and futures strategies may lower the
Portfolio's return. The Portfolio could also experience losses if the prices of
its options and futures positions were poorly correlated with its other
investments or if it could not close out its positions because of an illiquid
secondary market.
SHORT SALES "AGAINST THE BOX." In a short sale, the Portfolio sells a
borrowed security and has a corresponding obligation to the lender to return the
identical security. The Portfolio may engage in short sales only if at the time
of the short sale it owns or has the right to obtain, at no additional cost, an
equal amount of the security being sold short. This investment technique is
known as a short sale "against the box." The Portfolio may make a short sale as
a hedge, when it believes that the value of a security owned by the Portfolio
(or a security convertible or exchangeable for such security) may decline, or
when the Portfolio wants to sell the security at an attractive current price but
wishes to defer recognition of gain or loss for tax purposes. Not more than 40%
of the Portfolio's total assets would be involved in short sales "against the
box."
Item 5. Management of the Portfolio.
The Portfolio is supervised by a Board of Trustees. Citibank is the
investment adviser. A majority of the Trustees are not affiliated with the
Adviser. More information on the Trustees and officers of the Portfolio appears
under "Management" in Part B.
The Portfolio 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 $73
billion in assets worldwide. Citibank is a wholly-owned subsidiary of Citicorp.
Citibank manages the Portfolio's assets pursuant to an investment advisory
agreement (the "Advisory Agreement"). Subject to policies set by the Trustees,
Citibank makes investment decisions. Citibank's address is 153 East 53rd Street,
New York, New York 10043.
Thomas M. Halley was appointed Manager of the Portfolio at its inception
in 1994. Prior to that, since December 1988, he managed Landmark U.S. Government
Income Fund, an investor in the Portfolio. He also manages other commingled
investment funds at Citibank as well as institutional insurance portfolios. Mr.
Halley authors the commentary on economic trends for Citibank Global Asset
Management publications. Prior to joining Citibank in 1988, Mr. Halley was a
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Senior Fixed Income Portfolio Manager with Brown Brothers Harriman & Company. He
has more than 20 years of experience in the management of taxable fixed income
investments.
For its services under the Advisory Agreement, the Adviser receives an
investment advisory fee, which is accrued daily and paid monthly, equal to 0.35%
of the Portfolio's average daily net assets on an annualized basis for the
Portfolio's then current fiscal year. The Adviser has voluntarily agreed to
waive a portion of its investment advisory fee.
For the period May 1, 1994 (commencement of operations) to December 31,
1994, the investment advisory fee paid to Citibank under the Advisory Agreement
was $148,797.
Citibank and its affiliates may have deposit, loan and other relationships
with the issuers of securities purchased on behalf of the Portfolio, 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 Trust 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.
The Glass-Steagall Act prohibits certain financial institutions, such as
Citibank, from underwriting securities of open-end investment companies, such as
the Trust. Citibank believes that its services under the Advisory Agreement and
the activities performed by it as sub-administrator are not underwriting and are
consistent with the Glass-Steagall Act and other relevant federal and state
laws. However, there is no controlling precedent regarding the performance of
the combination of investment advisory 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 from continuing
to perform these services. If Citibank were to be prevented from acting as the
Adviser or sub-administrator, the Trust would seek alternative means for
obtaining these services. The Trust does not expect that shareholders would
suffer any adverse financial consequences as a result of any such occurrence.
The Portfolio has an administrative services plan (the "Administrative
Services Plan") which provides that the Portfolio may obtain the services of an
administrator, a transfer agent and a custodian, and may enter into agreements
providing for the payment of fees for such services. Under the Administrative
Services Plan, fees paid to the Portfolio's administrator may not exceed 0.05%
of the Portfolio's average daily net assets on an annualized basis for the
Portfolio's then-current fiscal year.
Signature Financial Group (Cayman), Ltd., either directly or through a
wholly-owned subsidiary ("SFG"), provides certain administrative services to the
Portfolio under an administrative services agreement. These administrative
services include providing general office facilities, supervising the overall
administration of the Portfolio, and providing persons satisfactory to the Board
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of Trustees to serve as Trustees and officers of the Portfolio. These Trustees
and officers may be directors, officers or employees of SFG or its affiliates.
For these services, SFG receives fees accrued daily and paid monthly of
0.05% of the assets of the Portfolio, on an annualized basis for the Portfolio's
then-current fiscal year. However, SFG has voluntarily agreed to waive a portion
of the fees payable to it on a month-to-month basis.
SFG is a wholly-owned subsidiary of Signature Financial Group, Inc.
Pursuant to a sub-administrative services agreement, Citibank performs
such sub-administrative duties for the Portfolio as from time to time are agreed
upon by Citibank and SFG. Citibank's compensation as sub-administrator is paid
by SFG.
Investors Bank & Trust Company acts as the custodian of the Portfolio's
assets. Securities may be held by a sub-custodian bank approved by the Trustees.
In addition to amounts payable under the Advisory Agreement and the
Administrative Services Plan, the Portfolio is responsible for its own expenses,
including, among other things, the costs of securities transactions, the
compensation of Trustees that are not affiliated with the Adviser, government
fees, taxes, accounting and legal fees, expenses of communicating with
investors, interest expense, and insurance premiums.
All fee waivers are voluntary and may be reduced or terminated at any
time.
Item 6. Capital Stock and Other Securities.
Investments in the Portfolio have no pre-emptive or conversion rights and
are fully paid and non-assessable, except as set forth below. The Trust is not
required to hold, and has no current intention of holding, annual meetings of
investors, but the Trust will hold special meetings of investors when in the
judgment of the Trustees it is necessary or desirable to submit matters for an
investor vote. Investors have under certain circumstances (e.g., upon
application and submission of certain specified documents to the Trustees by a
specified number of investors) the right to communicate with other investors in
connection with requesting a meeting of investors for the purpose of removing
one or more Trustees. Investors also have the right to remove one or more
Trustees without a meeting by a declaration in writing by a specified number of
investors. Upon liquidation or dissolution of the Portfolio, investors would be
entitled to share pro rata in the net assets of the Portfolio available for
distribution to its investors.
The Trust reserves the right to create and issue a number of series, in
which case investors in each series would participate equally in the earnings,
dividends and assets of the particular series. Currently, the Trust has five
series.
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The Trust is organized as a trust under the laws of the State of New York.
Under the Declaration of Trust, the Trustees are authorized to issue beneficial
interests in the Portfolio. Each investor in the Portfolio is entitled to a vote
in proportion to the amount of its beneficial interest in the Portfolio.
Investments in the Portfolio may not be transferred, but an investor may
withdraw all or any portion of its investment at any time. The Declaration of
Trust of the Trust provides that entities investing in the Portfolio are each
liable for all obligations of the Portfolio. It is not expected that the
liabilities of the Portfolio would ever exceed its assets.
The net asset value of the Portfolio (i.e., the value of its securities
and other assets less its liabilities) is determined each day on which the New
York Stock Exchange (the "Exchange") is open for trading ("Business Day") (and
on such other days as are deemed necessary in order to comply with Rule 22c-1
under the U.S. Investment Company Act of 1940, as amended (the "1940 Act")).
This determination is made once during each day as of the close of regular
trading on such Exchange. Values of the Portfolio's assets are determined on the
basis of their market or other fair value, as described in Item 19 of Part B.
Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each Business Day. As of the close of regular trading on the
Exchange, on each Business Day, the value of each investor's beneficial interest
in the Portfolio is determined by multiplying the net asset value of the
Portfolio by the percentage, effective for that day, which represents that
investor's share of the aggregate beneficial interests in the Portfolio. Any
additions or withdrawals, which are to be effected on that day, are then
effected. Thereafter, the investor's percentage of the aggregate beneficial
interests in the Portfolio is then re-computed as the percentage equal to the
fraction (i) the numerator of which is the value of such investor's investment
in the Portfolio as of the close of regular trading on such day plus or minus,
as the case may be, the amount of any additions to or withdrawals from the
investor's investment in the Portfolio effected on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
same time on such day plus or minus, as the case may be, the amount of the net
additions to or withdrawals from the aggregate investments in the Portfolio by
all investors in the Portfolio. The percentage so determined is then applied to
determine the value of the investor's interest in the Portfolio as of the close
of regular trading on the following Business Day of the Portfolio.
The Trust has determined that the Portfolio is properly treated as a
partnership for U.S. federal and New York state income tax purposes.
Accordingly, the Trust is not subject to any U.S. federal or New York state
income taxes, but each investor in the Portfolio must take into account its
share of the Portfolio's ordinary income and capital gains in determining its
income tax liability. The determination of such share is made in accordance with
the governing instruments of the Trust and the U.S. Internal Revenue Code of
1986, as amended (the "Code"), and regulations promulgated thereunder.
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The Trust intends to conduct its activities and those of the Portfolio so
that they will not be deemed to be engaged in the conduct of a U.S. trade or
business for U.S. federal income tax purposes. Therefore, it is not anticipated
that an investor in the Portfolio, other than an investor which would be deemed
a "U.S. person" for U.S. federal income tax purposes, will be subject to U.S.
federal income taxation (other than a 30% withholding tax on dividends and
certain interest income) solely by reason of its investment in the Portfolio.
There can be no assurance that the U.S. Internal Revenue Service may not
challenge the above conclusions or take other positions that, if successful,
might result in the payment of U.S. federal income taxes by investors in the
Portfolio.
Item 7. Purchase of Securities.
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by investment companies, common or commingled trust funds or similar
organizations or entities which are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.
An investment in the Portfolio is made without a sales load. All
investments are made at net asset value next determined after an order is
received by the Portfolio. There is no minimum initial or subsequent investment
in the Portfolio. However, since the Portfolio intends to be as fully invested
at all times as is reasonably practicable in order to enhance the yield on its
assets, investments must be made in federal funds (i.e., moneys credited to the
account of the Portfolio's custodian bank by a U.S. Federal Reserve Bank).
The Trust reserves the right to cease accepting investments for the
Portfolio at any time or to reject any investment order.
The exclusive placement agent for the Portfolio is The Landmark Funds
Broker-Dealer Services, Inc. ("LFBDS"). The address of LFBDS is c/o SFG,
Elizabethan Square, George Town, Grand Cayman, Cayman Islands, BWI. LFBDS
receives no compensation for serving as the exclusive placement agent for the
Portfolio.
Item 8. Redemption or Repurchase.
An investor in the Portfolio may withdraw all or any portion of its
investment at any time after a withdrawal request in proper form is received by
the Portfolio from the investor. The proceeds of a withdrawal will be paid by
the Portfolio in federal funds normally on the Business Day the withdrawal is
effected, but in any event within seven days. See "Purchase, Redemption and
Pricing of Securities" in Part B of this Registration Statement regarding the
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Trust's right to pay the redemption price in kind with readily marketable
securities (instead of cash). Investments in the Portfolio may not be
transferred.
The right of any investor to receive payment with respect to any
withdrawal may be suspended or the payment of the withdrawal proceeds postponed
during any period in which the Exchange is closed (other than weekends or
holidays) or trading on the Exchange is restricted, or, to the extent otherwise
permitted by the 1940 Act, if an emergency exists.
Item 9. Pending Legal Proceedings.
Not applicable.
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PART B
Item 10. Cover Page.
Not applicable.
Item 11. Table of Contents.
Page
General Information and History.......................B-01
Investment Objective and Policies.....................B-01
Management of the Trust...............................B-14
Control Persons and Principal Holders of Securities...B-16
Investment Advisory and Other Services................B-16
Brokerage Allocation and Other Practices..............B-19
Capital Stock and Other Securities....................B-20
Purchase, Redemption and Pricing of Securities........B-22
Tax Status............................................B-23
Underwriters..........................................B-26
Calculations of Performance Data......................B-26
Financial Statements..................................B-26
Item 12. General Information and History.
Not applicable.
Item 13. Investment Objective and Policies.
Part A contains additional information about the investment objective and
policies of the Government Income Portfolio (the "Portfolio"), a series of The
Premium Portfolios (the "Trust"). This Part B should be read in conjunction with
Part A.
The investment objective of the Portfolio is to generate current income
and preserve the value of the investment of investors in the Portfolio. The
investment objective of the Portfolio may be changed without approval by the
Portfolio's investors. Of course, there can be no assurance that the Portfolio
will achieve its investment objective.
Part A contains a discussion of the various types of securities in which
the Portfolio may invest and the risks involved in such investments. The
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following supplements the information contained in Part A concerning the
investment objective, policies and techniques of the Portfolio.
The Portfolio seeks its objective by investing in debt obligations that
are backed, as to the timely payment of interest and principal, by the full
faith and credit of the U.S. Government, and by entering into repurchase
agreements covering such obligations. Futures contracts ("Futures Contracts") on
fixed income securities may also be used for the purpose of protecting (i.e.,
"hedging") the value of the Portfolio's securities.
The debt obligations in which assets of the Portfolio are invested
include (1) U.S. Treasury obligations, which differ only in their interest
rates, maturities and times of issuance: U.S. Treasury bills (maturities of one
year or less), U.S. Treasury notes (maturities of one to 10 years), and U.S.
Treasury bonds (generally maturities of greater than 10 years); and (2)
obligations issued or guaranteed by U.S. Government agencies, authorities or
instrumentalities if such obligations are backed, as to the timely payment of
interest and principal, by the full faith and credit of the U.S. Government,
e.g., direct pass-through certificates of the Government National Mortgage
Association ("GNMA"). For a description of such obligations, see the Appendix to
this Part B of the Registration Statement.
When and if available, U.S. Government obligations may be purchased at a
discount from face value. However, it is not intended that such securities will
be held to maturity for the purpose of achieving potential capital gains, unless
current yields on these securities remain attractive.
Although U.S. Government obligations which are purchased for the
Portfolio are backed, as to the timely payments of interest and principal, by
the full faith and credit of the U.S. Government, beneficial interests in the
Portfolio are neither insured nor guaranteed by the U.S. Government or its
agencies, authorities or instrumentalities. MOREOVER, THE NET ASSET VALUE OF
BENEFICIAL INTERESTS IN AN OPEN-END INVESTMENT COMPANY SUCH AS THE PORTFOLIO,
THE ASSETS OF WHICH ARE INVESTED IN FIXED INCOME SECURITIES, CHANGES AS THE
GENERAL LEVELS OF INTEREST RATES FLUCTUATE. WHEN INTEREST RATES DECLINE, THE
VALUE OF THE PORTFOLIO'S SECURITIES CAN GENERALLY BE EXPECTED TO RISE.
CONVERSELY, WHEN INTEREST RATES RISE, THE VALUE OF THE PORTFOLIO'S SECURITIES
CAN BE EXPECTED TO DECLINE. Although changes in the value of the Portfolio's
securities subsequent to their acquisition are reflected in the net asset value
of beneficial interests of the Portfolio, such changes do not affect the income
received by the Portfolio from such securities.
The Adviser intends to fully manage the investments of the Portfolio by
buying and selling U.S. Government obligations, and by entering into repurchase
agreements covering such obligations, as well as by holding selected obligations
to maturity. In managing the Portfolio's investments, the Adviser seeks to
maximize the return for the Portfolio by taking advantage of market developments
and yield disparities, which may include use of the following strategies:
<PAGE>
(1) shortening the average maturity of the
Portfolio's securities in anticipation of a rise in
interest rates so as to minimize depreciation of principal;
(2) lengthening the average maturity of the
Portfolio's securities in anticipation of a decline in
interest rates so as to maximize appreciation of principal;
(3) selling one type of U.S. Government obligation
(e.g., Treasury bonds) and buying another (e.g., GNMA
direct pass-through certificates) when disparities arise
in the relative values of each; and
(4) changing from one U.S. Government obligation to
an essentially similar U.S. Government obligation when
their respective yields are distorted due to market
factors.
In order to enhance the stability of the value of the beneficial interests in
the Portfolio by reducing volatility resulting from changes in interest rates
and other market conditions, the dollar weighted average maturity of the
Portfolio's investment securities is generally three years or less. These
strategies may result in increases or decreases in the Portfolio's current
income and in the holding for the Portfolio of obligations which sell at
moderate to substantial premiums or discounts from face value. Moreover, if the
Adviser's expectations of changes in interest rates or its valuation of the
normal yield relationship between two obligations proves to be incorrect, the
Portfolio's income, net asset value and potential capital gain may be decreased
or its potential capital loss may be increased.
The Portfolio is managed to provide an income yield that is generally
higher than those offered by money market funds (which have a share price which
is more stable than the value of an investment in the Portfolio and which have a
portfolio of investments with an average maturity which is shorter than the
Portfolio's securities) with a value of an investment in the Portfolio that is
more stable than the share price of other fixed income funds that have a longer
term investment focus. Debt securities with longer maturities than those in
which the assets of the Portfolio are invested generally tend to produce higher
yields and are subject to greater market fluctuation as a result of changes in
interest rates than debt securities with shorter maturities. At the same time,
the securities in which the assets of the Portfolio are invested tend to produce
lower yields and are subject to lower market fluctuation as a result of changes
in interest rates than debt securities with longer maturities that tend to be
purchased by longer term bond funds than the Portfolio. However, since available
yields vary over time, no specific level of income can be assured. The income
derived from an investment in the Portfolio increases or decreases in relation
to the income received by the Portfolio from its investments, which in any case
is reduced by the Portfolio's expenses.
<PAGE>
The policies described above (other than the policy to invest in debt
obligations that are backed, as to the timely payment of principal and interest,
by the full faith and credit or the U.S. Government, which is a fundamental
policy) and those described below are not fundamental and may be changed without
investor approval.
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements covering obligations of,
or guaranteed by the U.S. government, its agencies, authorities or
instrumentalities. Repurchase agreements are agreements by which the Portfolio
purchases a security and simultaneously commits to resell that security to the
seller (which is usually a member bank of the U.S. Federal Reserve System or a
member firm of the New York Stock Exchange (or a subsidiary thereof)) at an
agreed-upon date within a number of days (usually not more than seven) from the
date of purchase. The resale price reflects the purchase price plus an
agreed-upon market rate of interest which is unrelated to the coupon rate or
maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security. Under the Investment
Company Act of 1940, as amended (the "1940 Act), repurchase agreements may be
considered to be loans by the buyer. The Portfolio's risk is limited to the
ability of the seller to pay the agreed-upon amount on the delivery date. If the
seller defaults, the underlying security constitutes collateral for the seller's
obligation to pay although the Portfolio may incur certain costs in liquidating
this collateral and in certain cases may not be permitted to liquidate this
collateral. All repurchase agreements entered into by the Portfolio are fully
collateralized, with such collateral being marked to market daily.
FUTURES CONTRACTS
The Portfolio may write, purchase, or sell put and call options and any
combination thereof only with respect to U.S. Government securities or with
respect to Futures Contracts. A Futures Contract is an agreement between two
parties for the purchase or sale for future delivery of fixed income securities
or for the payment or acceptance of a cash settlement based upon changes in the
value of an index of securities. A "sale" of a Futures Contract means the
acquisition of a contractual obligation to deliver the securities or to make or
accept the cash settlement called for by the contract at a specified price on a
specified date. Futures Contracts have been designed by exchanges which have
been designated "contract markets" by the Commodity Futures Trading Commission
("CFTC") and must be executed through a futures commission merchant, or
brokerage firm, which is a member of the relevant contract market. Futures
Contracts trade on these markets; the exchanges, through their clearing
organizations, guarantee that the contracts will be performed as between the
clearing members of the exchange. Futures Contracts will be entered into for the
Portfolio only if such contracts are based on U.S. Government securities,
including any index of U.S. Government securities if any such index is approved
for trading.
<PAGE>
While Futures Contracts based on debt securities do provide for the
delivery and acceptance of securities, such deliveries and acceptances are very
seldom made. Generally a Futures Contract is terminated by entering into an
offsetting transaction. Brokerage fees will be incurred when Futures Contracts
are purchased or sold. At the same time such a purchase or sale is made, cash or
securities must be provided as a deposit ("initial deposit") known as "margin."
The initial deposit required will vary, but may be as low as 2% or less of a
contract's face value. Daily thereafter, the Futures Contract is valued through
a process known as "marking to market," and additional "variation margin" may be
received by or be required to be paid by the Portfolio as the Futures Contract
becomes more or less valuable. At the time of delivery of securities pursuant to
such a contract, adjustments are made to recognize differences in value arising
from the delivery of securities with a different interest rate than the specific
security that provides the standard for the contract. In some (but not many)
cases, securities called for by a Futures Contract may not have been issued when
the contract was entered into.
The purpose of the acquisition or sale of a Futures Contract, in the case
of the Portfolio which may hold or acquire long-term debt securities, would be
to attempt to protect the Portfolio from fluctuations in interest rates without
actually buying or selling long-term debt securities. For example, if the
Portfolio owns long-term bonds, and interest rates were expected to increase,
Futures Contracts for the sale of debt securities might be entered into for the
Portfolio. Such a sale would have much the same effect as selling an equivalent
value of the long-term bonds owned by the Portfolio. If interest rates did
increase, the value of the debt securities in the Portfolio would decline, but
the value of the Futures Contracts to the Portfolio should increase at
approximately the same rate, thereby keeping the net asset value of the
Portfolio from declining as much as it otherwise would have. Similar results
could be accomplished by selling bonds with long maturities and investing in
bonds with short maturities when interest rates are expected to increase.
However, since the futures market is more liquid than the cash market, the use
of Futures Contracts as an investment technique allows a hedging position to be
maintained for the Portfolio without having to sell its securities.
Similarly, when it is expected that interest rates may decline, Futures
Contracts may be purchased to attempt to hedge against anticipated purchases of
long-term bonds at higher prices. Since the fluctuations in the value of Futures
Contracts should be similar to those of long-term bonds, it may be possible to
protect the Portfolio, in whole or in part, against the increased cost of
acquiring bonds resulting from a decline in interest rates. At that time, the
Futures Contracts could be liquidated and long-term bonds could then be
purchased for the Portfolio on the cash market. To the extent Futures Contracts
are entered into for the Portfolio for this purpose, the assets in the
segregated asset account maintained to cover the Portfolio's obligations with
respect to such Futures Contracts will consist of cash, cash equivalents or high
quality debt securities from its portfolio in an amount equal to the difference
between the fluctuating market value of such Futures Contracts and the aggregate
value of the initial and variation margin payments made from the Portfolio with
respect to such Futures Contracts.
<PAGE>
The ability effectively to hedge all or a portion of the Portfolio's
investments through transactions in Futures Contracts depends on the degree to
which movements in the value of the fixed income securities underlying such
contracts correlate with movements in the value of securities held for the
Portfolio. If the security underlying a Futures Contract is different than the
security being hedged, they may not move to the same extent or in the same
direction. In that event, the hedging strategy for the Portfolio might not be
successful and losses on these hedging transactions could be sustained by the
Portfolio which would not be offset by gains on the Portfolio's securities. It
is also possible that there may be a negative correlation between the security
underlying a Futures Contract and the securities being hedged, which could
result in losses both on the hedging transaction and the Portfolio's securities.
In these and other instances, the overall return of the Portfolio could be less
than if the hedging transactions had not been undertaken.
Futures Contracts would be purchased or sold for the Portfolio only if,
in the judgment of the Adviser, there is expected to be a sufficient degree of
correlation between movements in the value of such instruments and changes in
the value of the relevant portion of the Portfolio's securities for the hedge to
be effective. There can be no assurance that the Adviser's judgment will be
accurate.
The ordinary spreads between prices in the cash and futures markets, due
to differences in the nature of those markets, are subject to distortions.
First, all participants in the futures market are subject to initial deposit and
variation margin requirements. Rather than meeting additional variation margin
requirements, investors may close out Futures Contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, there is the potential that the liquidity of the
futures market may be lacking. Prior to expiration, a Futures Contract may be
terminated only by entering into a closing purchase or sale transaction, which
requires a secondary market on the contract market on which the Futures
Contracts was originally entered into. While a futures position will be
established for the Portfolio only if there appears to be a liquid secondary
market therefor, there can be no assurance that such a market will exist for any
particular Futures Contract at any specific time. In that event, it may not be
possible to close out a position held for the Portfolio, which could require the
instrument underlying the Futures Contract to be purchased or sold for the
Portfolio or ongoing variation margin requirements to be met. The inability to
close out futures positions also could have an adverse impact on the ability
effectively to hedge the Portfolio's investments.
The liquidity of a secondary market in a Futures Contract may be
adversely affected by "daily price fluctuation limits" established by the
exchanges, which limit the amount of fluctuation in the price of a Futures
Contract during a single trading day and prohibit trading beyond such limits
once they have been reached. The trading of Futures Contracts also is subject to
the risk of trading halts, suspensions, exchange or clearing house equipment
failures, government intervention, insolvency of a brokerage firm or clearing
<PAGE>
house or other disruptions of normal trading activity, which could at times make
it difficult or impossible to liquidate existing positions or to recover excess
variation margin payments.
Investments in Futures Contracts also entail the risk that if the
Adviser's investment judgment about the general direction of interest rates is
incorrect, the Portfolio's overall performance may be poorer than if any such
contract had not been entered into. For example, if the Portfolio was hedged
against the possibility of an increase in interest rates which would adversely
affect the price of bonds held for the Portfolio and interest rates decrease
instead, part or all of the benefit of the increased value of the Portfolio's
bonds which were hedged will be lost because the Portfolio will have offsetting
losses in its futures positions. In addition, in such situations, if the
Portfolio has insufficient cash, bonds may have to be sold from the Portfolio to
meet daily variation margin requirements, possibly at a time when it may be
disadvantageous to do so. Such sale of bonds may be, but will not necessarily
be, at increased prices which reflect the rising market.
Each contract market on which Futures Contracts are traded has
established a number of limitations governing the maximum number of positions
which may be held by a trader, whether acting alone or in concert with others.
The Adviser does not believe that these trading and position limits will have an
adverse impact on its hedging strategies for the Portfolio.
CFTC regulations require that transactions in Futures Contracts be
entered into for the Portfolio for hedging purposes only, in order to assure
that the Portfolio is not deemed to be a "commodity pool" under such
regulations. In particular, CFTC regulations require that all short futures
positions be entered into in order to hedge the value of securities held for the
Portfolio, and that all long futures positions either constitute bona fide hedge
transactions, as defined in such regulations, or have a total value not in
excess of an amount determined by reference to certain cash and securities
positions maintained for the Portfolio, and accrued profits on such positions.
In addition, such instruments may not be purchased or sold for the Portfolio if,
immediately thereafter, the sum of the amount of initial deposits or margins on
the Portfolio's existing futures positions would exceed 5% of the market value
of the Portfolio's total assets.
When a Futures Contract is purchased for the Portfolio, an amount of cash
or cash equivalents will be deposited in a segregated account for the Portfolio
with the Trust's custodian, Investors Bank & Trust Company (the "Custodian"), so
that the amount so segregated, plus the initial and variation margin held in the
account of the Portfolio's broker, will at all times equal the value of the
Futures Contract, thereby insuring that the use of such futures is unleveraged.
The ability to engage in the hedging transactions described herein may be
limited by the current federal income tax requirement that less than 30% of the
gross income of regulated investment companies be derived from the sale or other
disposition of stock or securities held for less than three months.
<PAGE>
The Trustees have adopted the requirement that Futures Contracts only be
used as a hedge and not for speculation. In addition to this requirement, the
Board of Trustees has also adopted two percentage restrictions on the use of
Futures Contracts. The first is that no Futures Contract will be entered into
for the Portfolio if immediately thereafter the amount of margin deposits on all
the Futures Contracts of the Portfolio would exceed 5% of the market value of
the total assets of the Portfolio. The second restriction is that the aggregate
market value of the Futures Contracts held for the Portfolio not exceed 50% of
the market value of the Portfolio's total assets. Neither of the restrictions
would be changed by the Board of Trustees without considering the policies and
concerns of the various federal and state regulatory agencies.
The Trust has no current intention of entering into any Futures Contract
for the Portfolio in the foreseeable future.
SHORT SALES "AGAINST THE BOX"
In a short sale, the Portfolio sells a borrowed security and has a
corresponding obligation to the lender to return the identical security. The
Portfolio, in accordance with applicable investment restrictions, may engage in
short sales only if at the time of the short sale it owns or has the right to
obtain, at no additional cost, an equal amount of the security being sold short.
This investment technique is known as a short sale "against the box."
In a short sale, the seller does not immediately deliver the securities
sold and is said to have a short position in those securities until delivery
occurs. If the Portfolio engages in a short sale, the collateral for the short
position is maintained for the Portfolio by the custodian or qualified
sub-custodian. While the short sale is open, an amount of securities equal in
kind and amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities are maintained in a segregated
account for the Portfolio. These securities constitute the Portfolio's long
position.
The Portfolio does not engage in short sales against the box for
investment purposes. The Portfolio may, however, make a short sale against the
box as a hedge, when it believes that the price of a security may decline,
causing a decline in the value of a security owned by the Portfolio (or a
security convertible or exchangeable for such security), or when the Portfolio
wants to sell the security at an attractive current price, but also wishes to
defer recognition of gain or loss for federal income tax purposes or for
purposes of satisfying certain tests applicable to regulated investment
companies under the Internal Revenue Code. In such case, any future losses in
the Portfolio's long position should be reduced by a gain in the short position.
Conversely, any gain in the long position should be reduced by a loss in the
short position. The extent to which such gains or losses are reduced depends
upon the amount of the security sold short relative to the amount the Portfolio
owns. There are certain additional transaction costs associated with short sales
against the box, but the Portfolio endeavors to offset these costs with the
income from the investment of the cash proceeds of short sales.
<PAGE>
The Adviser does not expect that more than 40% of the Portfolio's total
assets would be involved in short sales against the box. The Adviser does not
currently intend to engage in such sales.
LENDING OF SECURITIES
Consistent with applicable regulatory requirements and in order to
generate income, the Portfolio may lend its securities to broker-dealers and
other institutional borrowers. Such loans will usually be made only to member
banks of the U.S. Federal Reserve System and to member firms of the New York
Stock Exchange (and subsidiaries thereof). Loans of securities would be secured
continuously by collateral in cash, cash equivalents, or U.S. Treasury
obligations maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The cash collateral would be invested in
high quality short-term instruments. The Portfolio would have the right to call
a loan and obtain the securities loaned at any time on customary industry
settlement notice (which will not usually exceed five days). During the
existence of a loan, the Portfolio would continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities loaned and would
also receive compensation based on investment of the collateral. The Portfolio
would not, however, have the right to vote any securities having voting rights
during the existence of the loan, but would call the loan in anticipation of an
important vote to be taken among holders of the securities or of the giving or
withholding of their consent on a material matter affecting the investment. As
with other extensions of credit, there are risks of delay in recovery or even
loss of rights in the collateral should the borrower fail financially. However,
the loans would be made only to entities deemed by the Adviser to be of good
standing, and when, in the judgment of the Adviser, the consideration which can
be earned currently from loans of this type justifies the attendant risk. If the
Adviser determines to make loans, it is not intended that the value of the
securities loaned by the Portfolio would exceed 30% of the value of its total
assets.
WHEN-ISSUED SECURITIES
The Portfolio may purchase securities on a "when-issued" or on a "forward
delivery" basis. It is expected that, under normal circumstances, the Portfolio
would take delivery of such securities. When the Portfolio commits to purchase a
security on a "when-issued" or on a "forward delivery" basis, it sets up
procedures consistent with SEC policies. Since those policies currently require
that an amount of the Portfolio's assets equal to the amount of the purchase be
held aside or segregated to be used to pay for the commitment, the Portfolio
will always have cash, cash equivalents or high quality debt securities
sufficient to cover any commitments or to limit any potential risk. However,
even though the Portfolio does not intend to make such purchases for speculative
purposes and intends to adhere to the provisions of SEC policies, purchases of
securities on such bases may involve more risk than other types of purchases.
For example, the Portfolio may have to sell assets which have been set aside in
<PAGE>
order to meet redemptions. Also, if the Adviser determines it is advisable as a
matter of investment strategy to sell the "when-issued" or "forward delivery"
securities, the Portfolio would be required to meet its obligations from the
then available cash flow or the sale of securities, or, although it would not
normally expect to do so, from the sale of the "when-issued" or "forward
delivery" securities themselves (which may have a value greater or less than the
Portfolio's payment obligation).
RULE 144A SECURITIES
The Portfolio may purchase securities that are not registered ("Rule 144A
securities") under the Securities Act of 1933 (the "1933 Act"), but can be
offered and sold to "qualified institutional buyers" under Rule 144A under the
1933 Act. However, the Portfolio will not knowingly invest more than 15% of its
net assets in illiquid investments, which includes securities for which there is
no readily available market, securities subject to contractual restrictions on
resale and Rule 144A securities, unless the Trustees of the Trust determine,
based on the trading markets for the specific Rule 144A security, that it is
liquid. The Trustees may adopt guidelines and delegate to the Adviser the daily
function of determining and monitoring liquidity of Rule 144A securities. The
Trustees, however, retain oversight and are ultimately responsible for the
determinations.
Since it is not possible to predict with assurance exactly how the market
for Rule 144A securities will develop, the Trustees will carefully monitor the
Portfolio's investments in Rule 144A securities, focusing on such factors, among
others, as valuation, liquidity and availability of information. The liquidity
of investments in Rule 144A securities could be impaired if trading in Rule 144A
securities does not develop or if qualified institutional buyers become for a
time uninterested in purchasing Rule 144A securities.
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS
The Trust, on behalf of the Portfolio, has adopted the following policies
which may not be changed without approval by holders of a majority of the
outstanding voting securities of the Portfolio, which as used in this Part B
means the vote of the lesser of (i) 67% or more of the outstanding voting
securities of the Portfolio present at a meeting at which the holders of more
than 50% of the outstanding voting securities of the Portfolio are present or
represented by proxy, or (ii) more than 50% of the outstanding voting securities
of the Portfolio. The term "voting securities" as used in this paragraph has the
same meaning as in the 1940 Act.
The Portfolio may not:
(1) borrow money or pledge, mortgage or hypothecate the Portfolio's
assets, except that as a temporary measure for extraordinary or emergency
<PAGE>
purposes it may borrow from banks in an amount not to exceed 1/3 of the value of
the Portfolio's net assets, including the amount borrowed, and may pledge,
mortgage or hypothecate not more than 1/3 of such assets to secure such
borrowings (it is intended that the Portfolio would borrow money only from banks
and only to accommodate requests for the withdrawal of all or a portion of a
beneficial interest in the Portfolio while effecting an orderly liquidation of
securities), provided that collateral arrangements with respect to Futures
Contracts, including deposits of initial and variation margin, are not
considered a pledge of assets for purposes of this restriction; for additional
related restrictions, see clause (i) under the caption "State and Federal
Restrictions" below;
(2) purchase any security or evidence of interest therein on margin,
except that such short-term credit may be obtained for the Portfolio as may be
necessary for the clearance of purchases and sales of securities and except that
deposits of initial and variation margin may be made for the Portfolio in
connection with the purchase, ownership, holding or sale of Futures Contracts;
(3) write, purchase or sell any put or call option or any combination
thereof, provided that this shall not prevent (i) the writing, purchasing or
selling of puts, calls or combinations thereof with respect to U.S. Government
securities or with respect to Futures Contracts, or (ii) the writing, purchase,
ownership, holding or sale of Futures Contracts;
(4) underwrite securities issued by other persons and except insofar as
the Trust acting on behalf of the Portfolio may technically be deemed an
underwriter under the Securities Act of 1933 in selling a portfolio security;
(5) make loans to other persons except (a) through the lending of
securities held for the Portfolio and provided that any such loans not exceed
30% of the Portfolio's total assets (taken at market value), (b) through the use
of repurchase agreements or the purchase of short-term obligations, or (c) by
purchasing a portion of an issue of debt securities of types commonly
distributed privately to financial institutions, for which purposes the purchase
of short-term commercial paper or a portion of an issue of debt securities which
is part of an issue to the public shall not be considered the making of a loan;
(6) purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein), interests
in oil, gas or mineral leases, commodities or commodity contracts (except
Futures Contracts) in the ordinary course of business the Portfolio reserves the
freedom of action to hold and to sell real estate acquired as a result of the
ownership of securities by the Portfolio);
(7) purchase securities of any issuer if such purchase at the time
thereof would cause the Portfolio to hold more than 10% of the voting securities
of such issuer;
<PAGE>
(8) purchase securities of any issuer if such purchase at the time
thereof would cause more than 5% of the Portfolio's assets (taken at market
value) to be invested in the securities of such issuer (other than securities or
obligations issued or guaranteed by the United States, any state or political
subdivision thereof, or any political subdivision of any such state, or any
agency or instrumentality of the United States or of any state or of any
political subdivision of any state or the United States); provided that for
purposes of this restriction the issuer of a Futures Contract shall not be
deemed to be the issuer of the security or securities underlying such contract;
(9) make short sales of securities or maintain a short position, unless
at all times when a short position is open the Portfolio owns an equal amount of
such securities or securities convertible into or exchangeable, without payment
of any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 10% of the
Portfolio's net assets (taken at market value) is held as collateral for such
sales at any one time (it is the present intention of the Trust to make such
sales only for the purpose of deferring realization of gain or loss for federal
income tax purposes; such sales would not be made of securities subject to
outstanding options);
(10) concentrate its investments in any particular industry, but if it is
deemed appropriate for the achievement of the Portfolio's investment objective,
up to 25% of 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; or
(11) issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, provided that collateral arrangements with
respect to Futures Contracts, including deposits of initial and variation
margin, are not considered to be the issuance of a senior security for purposes
of this restriction.
The Portfolio has also adopted a policy which is fundamental and which
provides that all of the assets of the Portfolio will be invested in obligations
that are backed by the full faith and credit of the U.S. Government. This policy
is not intended to prohibit the use of Futures Contracts to hedge the
Portfolio's investments.
STATE AND FEDERAL RESTRICTIONS
In order to comply with certain state and federal statutes and policies
the Portfolio does not as a matter of operating policy:
(i) borrow money for any purpose in excess of 10% of the total assets of
the Portfolio (taken at cost) (moreover, the Portfolio will not purchase any
securities for the Portfolio at any time at which borrowings exceed 5% of the
total assets of the Portfolio (taken at market value)),
<PAGE>
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10% of
the net assets of the Portfolio (taken at market value), provided that
collateral arrangements with respect to Futures Contracts, including deposits of
initial and variation margin, are not considered a pledge of assets for purposes
of this restriction,
(iii) sell any security which the Portfolio does not own unless by
virtue of its ownership of other securities there is at the time of sale a right
to obtain securities, without payment of further consideration, equivalent in
kind and amount to the securities sold and provided that if such right is
conditional the sale is made upon the same conditions,
(iv) invest for the purpose of exercising control or management,
(v) purchase securities issued by any registered investment company,
except by purchase in the open market where no commission or profit to a sponsor
or dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open market, is
part of a plan of merger or consolidation; provided, however, that the Portfolio
will not purchase the securities of any registered investment company if such
purchase at the time thereof would cause more than 10% of the total assets of
the Portfolio (taken at the greater of cost or market value) to be invested in
the securities of such issuers or would cause more than 3% of the outstanding
voting securities of any such issuer to be held for the Portfolio; and provided,
further, that the Portfolio shall not purchase securities issued by any open-end
investment company,
(vi) invest more than 10% of the net assets of the Portfolio
in securities that are not readily marketable,
(vii) purchase securities of any issuer if such purchase at the time
thereof would cause the Portfolio to hold more than 10% of any class of
securities of such issuer, for which purposes all indebtedness of an issuer
shall be deemed a single class and all preferred stock of an issuer shall be
deemed a single class, except that Futures Contracts shall not be subject to
this restriction,
(viii) invest more than 5% of the Portfolio's assets in companies which,
including predecessors, have a record of less than three years continuous
operation, or
(ix) purchase or retain any securities issued by an issuer any of whose
officers, directors, trustees or security holders is an officer or Trustee of
the Trust, or is an officer or director of the Adviser, if after the purchase of
the securities of such issuer by the Portfolio, one or more of such persons owns
beneficially more than 1/2 of 1% of the shares or securities, or both, all taken
at market value, of such issuer, and such persons owning more than 1/2 of 1% of
<PAGE>
such shares or securities together own beneficially more than 5% of such shares
or securities, or both, all taken at market value.
These policies are not fundamental and may be changed by the Trust without
the approval of the holders of the beneficial interests in the Portfolio in
response to changes in the various state and federal requirements.
As a non-fundamental policy, the Trust on behalf of the Portfolio will not
knowingly invest in securities which are subject to legal or contractual
restrictions on resale (other than repurchase agreements maturing in not more
than seven days) if, as a result thereof, more than 15% of the Portfolio's net
assets (taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days).
PERCENTAGE AND RATING RESTRICTIONS
If a percentage or rating restriction on investment or utilization of
assets set forth above or referred to in Part A is adhered to at the time an
investment is made or assets are so utilized, a later change in percentage
resulting from changes in the value of the securities or a later change in the
rating of the securities held for the Portfolio will not be considered a
violation of policy.
Item 14. Management of the Trust.
The Trustees and officers of the Trust 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. The address of the Trust is Elizabethan Square, George
Town, Grand Cayman, Cayman Islands, British West Indies.
TRUSTEES
ELLIOTT J. BERV -- Chairman and Director, Catalyst, Inc. (Management
Consultants)(since June, 1992); President, Chief Operating Officer and Director,
Deven International, Inc. (International Consultants)(June, 1991 to June, 1992);
President and Director, Elliott J. Berv & Associates (Management Consultants)
(since May, 1984). His address is 15 Stornoway Drive, Cumberland Foreside,
Maine.
PHILIP W. COOLIDGE* -- President of the Trust; Chief Executive Officer,
Signature Financial Group, Inc. and The Landmark Funds Broker-Dealer Services,
Inc. (since December, 1988).
<PAGE>
MARK T. FINN -- President and Director, Delta Financial, Inc.
(since June, 1983); Chairman of the Board and Chief Executive
Officer, FX 500 Ltd. (Commodity Trading Advisory Firm) (since
April, 1990); Director, Vantage Consulting Group, Inc. (since
October, 1988). His address is 3500 Pacific Avenue, P.O. Box
539, Virginia Beach, Virginia.
WALTER E. ROBB, III -- President, Benchmark Consulting Group,
Inc. (since 1991); Principal, Robb Associates (corporate
financial advisers)(since 1978); President, Benchmark Advisors,
Inc. (Corporate Financial Advisors)(since 1989); Trustee of
certain registered investment companies in the MFS Family of
Funds. His address is 35 Farm Road, Sherborn, Massachusetts.
OFFICERS
PHILIP W. COOLIDGE* -- President of the Trust; Chief Executive
Officer, Signature Financial Group, Inc. and The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).
JAMES B. CRAVER* -- Secretary and Treasurer of the Trust; Senior
Vice President and General Counsel, Signature Financial Group,
Inc. and The Landmark Funds Broker-Dealer Services, Inc. (since
January, 1991); Partner, Baker & Hostetler (Attorneys) (prior to
January, 1991).
SUSAN JAKUBOSKI* -- Vice President, Assistant Treasurer and
Assistant Secretary of the Trust (since August, 1994); Manager,
Signature Financial Group (Cayman) Ltd. (since August, 1994);
Senior Fund Administrator, Signature Financial Group, Inc. (since
August, 1994); Assistant Treasurer, Signature Broker-Dealer
Services, Inc. (since September, 1994); Fund Compliance
Administrator, Concord Financial Group (November, 1990 to August,
1994); Senior Fund Accountant, Neuberger & Berman Management,
Inc. (from February, 1988 to November, 1990); Customer Service
Representative, I.B.J. Schroder (prior to 1988). Her address is
Elizabethan Square, George Town, Grand Cayman, Cayman Islands,
British West Indies.
MOLLY S. MUGLER* -- Assistant Secretary of the Trust; Legal
Counsel and Assistant Secretary, Signature Financial Group, Inc.
(since December, 1988); Assistant Secretary, The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).
BARBARA M. O'DETTE* -- Assistant Treasurer of the Trust;
Assistant Treasurer, Signature Financial Group, Inc. and The
Landmark Funds Broker-Dealer Services, Inc. (since December,
1988).
The Trustees and officers of the Trust also hold comparable positions
with certain other funds for which SFG or an affiliate serves as the
administrator.
<PAGE>
The Declaration of 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 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.
Item 15. Control Persons and Principal Holders of Securities.
As of December 31, 1994, Landmark U.S. Government Income Fund (the
"Fund") owned approximately 95.8%, and Citi U.S. Government Income Fund, Ltd.
owned approximately 4.2%, of the outstanding interests in the Portfolio. Because
the Fund controls the Portfolio, the Fund could take actions without the
approval of any other investor. The Fund has informed the Portfolio that
whenever it is requested to vote on matters pertaining to the fundamental
policies of the Portfolio, it will hold a meeting of its shareholders and will
cast its vote as instructed by its shareholders. It is anticipated that any
other investor in the Portfolio which is an investment company registered under
the 1940 Act would follow the same or a similar practice. The Fund is a series
of Landmark Fixed Income Funds, a Massachusetts business trust organized on June
23, 1986 (and known prior to June 11, 1992 as Landmark U.S. Government Income
Fund) and registered under the 1940 Act as an investment company.
Item 16. Investment Advisory and Other Services.
Citibank, N.A. ("Citibank" or the "Adviser") manages the assets of the
Portfolio pursuant to an investment advisory agreement (the "Advisory
Agreement"). Subject to such policies as the Board of Trustees may determine,
the Adviser manages the Portfolio's securities and makes investment decisions
for the Portfolio. The Adviser furnishes at its own expense all services,
facilities and personnel necessary in connection with managing the Portfolio's
investments and effecting securities transactions for the Portfolio. The
Advisory Agreement continues in effect until September 13, 1995 and thereafter
as long as such continuance is specifically approved at least annually by the
Board of Trustees or by a vote of a majority of the outstanding voting
securities of the Portfolio, and, in either case, by a majority of the Trustees
who are not parties to the Advisory Agreement or interested persons of any such
party, at a meeting called for the purpose of voting on the Advisory Agreement.
<PAGE>
The Advisory Agreement provides that the Adviser may render services to
others. The Advisory 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 Portfolio or
by a vote of a majority of the Board of Trustees, or by the Adviser on not more
than 60 days' nor less than 30 days' written notice, and will automatically
terminate in the event of its assignment. The Advisory Agreement provides that
neither the Adviser nor its personnel shall be liable for any error of judgment
or mistake of law or for any loss arising out of any investment or for any act
or omission in the execution of security transactions for the Portfolio, except
for willful misfeasance, bad faith or gross negligence or reckless disregard of
its or their obligations and duties under the Advisory Agreement. For the period
May 1, 1994 (commencement of operations) to December 31, 1994 the fee paid to
Citibank under the Advisory Agreement was $148,797.
Pursuant to an administrative services agreement (the "Administrative
Services Agreement"), SFG (in its capacity under the Administrative Services
Agreement, the "Administrator") 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. The Administrative Services
Agreement with SFG continues in effect if such continuance is specifically
approved at least annually by the Board of Trustees or by a vote of a majority
of the outstanding voting securities of the Trust and, in either case, by a
majority of the Trustees who are not parties to the Administrative Services
Agreement or interested persons of any such party. The Administrator provides
persons satisfactory to the Board of Trustees to serve as Trustees and officers
of the Trust. Such Trustees and officers, as well as certain other employees and
Trustees of the Trust, may be directors, officers or employees of the
Administrator or its affiliates. For the period May 1, 1994 (commencement of
operations) to December 31, 1994 the Trust paid the Administrator $19,719 under
the Administrative Services Agreement with respect to the Portfolio.
The Administrative Services Agreement provides that SFG may render
administrative services to others. The Administrative Services Agreement
terminates automatically if it is assigned and may be terminated without penalty
by vote of a majority of the outstanding voting securities of the Trust or by
either party on not more than 60 days' nor less than 30 days' written notice.
The Administrative Services Agreement also provides that neither SFG, as the
Administrator, nor its personnel shall be liable for any error of judgment or
mistake of law or for any act or omission in the administration or management of
the Trust, except for willful misfeasance, bad faith or gross negligence in the
performance of its or their duties or by reason of reckless disregard of its or
their obligations and duties under the Administrative Services Agreement.
<PAGE>
SFG is a wholly-owned subsidiary of Signature Financial Group, Inc. SFG
is a company organized under the laws of the Cayman Islands. Its principal place
of business is in George Town, Grand Cayman, British West Indies.
Pursuant to a sub-administrative services agreement, Citibank performs
such sub-administrative duties for the Trust as from time to time are agreed
upon by Citibank and SFG. Citibank's sub-administrative duties may include
providing equipment and clerical personnel necessary for maintaining the Trust's
organization, participation in the preparation of documents required for
compliance by the Trust with applicable laws and regulations, the preparation of
certain documents in connection with meetings of Trustees and shareholders, and
other functions which would otherwise be performed by the Administrator. For
performing such sub-administrative services, Citibank receives compensation as
from time to time is agreed upon by SFG, not in excess of the amount paid to SFG
for its services under the Administrative Services Agreement with the Trust. All
such compensation is paid by SFG.
The Trust has adopted an administrative services plan (the
"Administrative Plan") which provides that the Trust may obtain the services of
an administrator, a transfer agent and a custodian, and may enter into
agreements providing for the payment of fees for such services. Under the
Administrative Plan, the administrative services fee payable to the
Administrator from the Portfolio may not exceed 0.05% of the Portfolio's average
daily net assets on an annualized basis for its then-current fiscal year.
The Administrative Plan continues in effect if such continuance is
specifically approved at least annually by a vote of both a majority of the
Trustees and a majority of the Trustees who are not "interested persons" of the
Portfolio and who have no direct or indirect financial interest in the operation
of the Administrative Plan or in any agreement related to such Plan ("Qualified
Trustees"). The Administrative Plan requires that the Trust provide to the Board
of Trustees and the Board of Trustees review, at least quarterly, a written
report of the amounts expended (and the purposes therefor) under the
Administrative Plan. The Administrative Plan may be terminated at any time by a
vote of a majority of the Qualified Trustees or, with respect to the Portfolio,
by a vote of a majority of the outstanding voting securities of the Portfolio.
The Administrative Plan may not be amended to increase materially the amount of
permitted expenses thereunder without the approval of a majority of the
outstanding voting securities of the Trust and may not be materially amended in
any case without a vote of the majority of both the Trustees and the Qualified
Trustees.
The Trust, on behalf of the Portfolio, has entered into a Custodian
Agreement with Investors Bank & Trust Company ("IBT") pursuant to which IBT acts
as custodian for the Portfolio. The Trust, on behalf of the Portfolio, has
entered into a Fund Accounting Agreement with Signature Financial Services, Inc.
("SFSI") pursuant to which SFSI provides fund accounting services to the
<PAGE>
Portfolio. Pursuant to a Transfer Agency and Service Agreement with the Trust,
on behalf of the Portfolio, SFSI provides transfer agency services to the
Portfolio.
The principal business address of IBT is One Lincoln Plaza,
Boston, Massachusetts 02111. The address of SFSI is 6 St. James
Avenue Boston, Massachusetts 02116.
Price Waterhouse are the chartered accountants for the Trust, providing
audit services, and assistance and consultation with respect to the preparation
of filings with the U.S. Securities and Exchange Commission. The address of
Price Waterhouse is Suite 3000, 1 First Canadian Place, Toronto, Ontario M5X
1H7, Canada.
Item 17. Brokerage Allocation and Other Practices.
The Trust trades securities for the Portfolio if it believes that a
transaction net of costs (including custodian charges) will help achieve the
Portfolio's investment objectives. Changes in the Portfolio's investments are
made without regard to the length of time a security has been held, or whether a
sale would result in the recognition of a profit or loss. Therefore, the rate of
turnover is not a limiting factor when changes are appropriate. The turnover
rate for the Portfolio is not expected to exceed 100% annually. Specific
decisions to purchase or sell securities for the Portfolio are made by a
portfolio manager who is an employee of the Adviser and who is appointed and
supervised by its senior officers. The portfolio manager may serve other clients
of the Adviser in a similar capacity.
The primary consideration in placing portfolio securities transactions
with broker-dealers for execution is to obtain and maintain the availability of
execution at the most favorable prices and in the most effective manner
possible. The Adviser attempts to achieve this result by selecting
broker-dealers to execute transactions on behalf of the Portfolio and other
clients of the Adviser on the basis of their professional capability, the value
and quality of their brokerage services, and the level of their brokerage
commissions. In the case of securities traded in the over-the-counter market
(where no stated commissions are paid but the prices include a dealer's markup
or markdown), the Adviser normally seeks to deal directly with the primary
market makers, unless in its opinion, best execution is available elsewhere. In
the case of securities purchased from underwriters, the cost of such securities
generally includes a fixed underwriting commission or concession. From time to
time, soliciting dealer fees are available to the Adviser on the tender of the
Portfolio's securities in so-called tender or exchange offers. Such soliciting
dealer fees are in effect recaptured for the Portfolio by the Adviser. At
present no other recapture arrangements are in effect.
Under the Advisory Agreement, in connection with the selection of such
brokers or dealers and the placing of such orders, the Adviser is directed to
seek for the Portfolio in its best judgment, prompt execution in an effective
manner at the most favorable price. Subject to this requirement of seeking the
<PAGE>
most favorable price, securities may be bought from or sold to broker-dealers
who have furnished statistical, research and other information or services to
the Adviser or the Portfolio, subject to any applicable laws, rules and
regulations.
The investment advisory fee that the Portfolio pays to the Adviser will
not be reduced as a consequence of the Adviser's receipt of brokerage and
research services. While such services are not expected to reduce the expenses
of the Adviser, the Adviser would, through the use of the services, avoid the
additional expenses which would be incurred if it should attempt to develop
comparable information through its own staff.
In certain instances there may be securities that are suitable as an
investment for the Portfolio as well as for one or more of the Adviser's other
clients. Investment decisions for the Portfolio and for the Adviser's other
clients are made with a view to achieving their respective investment
objectives. It may develop that a particular security is bought or sold for only
one client even though it might be held by, or bought or sold for, other
clients. Likewise, a particular security may be bought for one or more clients
when one or more clients are selling the same security. Some simultaneous
transactions are inevitable when several clients receive investment advice from
the same investment adviser, particularly when the same security is suitable for
the investment objectives of more than one client. When two or more clients are
simultaneously engaged in the purchase or sale of the same security, the
securities are allocated among clients in a manner believed to be equitable to
each. It is recognized that in some cases this system could adversely affect the
price of or the size of the position obtainable for the security for the
Portfolio. When purchases or sales of the same security for the Portfolio and
for other portfolios managed by the Adviser occur contemporaneously, the
purchase or sale orders may be aggregated in order to obtain any price
advantages available to large volume purchases or sales.
For the period May 1, 1994 to December 31, 1994 the Portfolio paid no
brokerage commissions.
Item 18. Capital Stock and Other Securities.
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Trust and to establish series, each of which shall
be a subtrust, the beneficial interests in which shall be separate and distinct
from the beneficial interests in any other series. The Portfolio is one of the
series of the Trust. Investors in the Portfolio are entitled to participate pro
rata in distributions of taxable income, loss, gain and credit of the Portfolio.
Upon liquidation or dissolution of the Portfolio, investors are entitled to
share pro rata in the Portfolio's net assets available for distribution to its
investors. Interests in the Portfolio have no preference, pre-emptive,
conversion or similar rights and are fully paid and non-assessable, except as
set forth below. Interests in the Portfolio may not be transferred.
Each investor is entitled to a vote in proportion to its percentage of
the aggregate beneficial interests in the Portfolio. Investors in the Portfolio
do not have cumulative voting rights, and investors holding more than 50% of the
<PAGE>
aggregate beneficial interests in the Trust may elect all of the Trustees if
they choose to do so and in such event the other investors in the Trust would
not be able to elect any Trustee. The Trust is not required to hold, and has no
current intention of holding, annual meetings of investors but the Trust will
hold special meetings of investors when in the judgment of the Trustees it is
necessary or desirable to submit matters for an investor vote.
The Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets, if approved by a vote of a majority, as defined
in the 1940 Act, of the holders of the Trust's outstanding voting securities
voting as a single class, or of the affected series of the Trust, as the case
may be, or if authorized by an instrument in writing without a meeting,
consented to by holders of not less than a majority of the interests of the
affected series. However, if the Trust or the affected series is the surviving
entity of the merger, consolidation or sale of assets, no vote of interest
holders is required. Any series of the Trust may be dissolved (i) by the
affirmative vote of not less than two-thirds of the outstanding beneficial
interests in such series at any meeting of holders of beneficial interests or by
an instrument in writing signed by a majority of the Trustees and consented to
by not less than two-thirds of the outstanding beneficial interests, (ii) by the
Trustees by written notice to holders of the beneficial interests in the series
or (iii) upon the bankruptcy or expulsion of a holder of a beneficial interest
in the series, unless the remaining holders of beneficial interests, by majority
vote, agree to continue the series. The Trust may be dissolved by action of the
Trustees upon the dissolution of the last remaining series.
The Portfolio is a series of the Trust, organized as a trust under the
laws of the State of New York. The Trust's Declaration of Trust provides that
investors in the Portfolio are each liable for all obligations of the Portfolio.
The Declaration of Trust also provides that the Trust may maintain appropriate
insurance (for example, fidelity bonding and errors and omissions insurance) for
the protection of the Trust, its investors, Trustees, officers, employees and
agents covering possible tort and other liabilities. Thus, the risk of an
investor incurring financial loss on account of investor liability is limited to
circumstances in which both inadequate insurance existed and the Trust itself
was unable to meet its obligations. It is not expected that the liabilities of
the Portfolio would ever exceed its assets.
The Declaration of Trust further provides that obligations of the Trust
are not binding upon the Trustees individually 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 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 office.
<PAGE>
Item 19. Purchase, Redemption and Pricing of Securities.
Beneficial interests in the Portfolio are issued solely in private
placement transactions which do not involve any "public offering" within the
meaning of Section 4(2) of the 1933 Act. Investments in the Portfolio may only
be made by investment companies, common or commingled trust funds or similar
organizations or entities which are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any "security" within
the meaning of the 1933 Act.
The net asset value of the Portfolio (i.e., the value of its securities
and other assets less its liabilities, including expenses payable or accrued) is
determined each day during which the New York Stock Exchange (the "Exchange") is
open for trading ("Business Day"). As of the date of this Registration
Statement, the Exchange is open for trading every weekday except for the
following holidays (or the days on which they are observed): New Year's Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day and Christmas Day. This determination of net asset value of the
Portfolio is made once each day as of the close of regular trading on the
Exchange. As set forth in more detail below, purchases and withdrawals will be
effected at the time of determination of net asset value next following the
receipt of any purchase or withdrawal order.
For the purpose of calculating the Portfolio's net asset value, bonds and
other fixed income securities held for the Portfolio (other than short-term
obligations) are valued on the basis of valuations furnished by a pricing
service, use of which has been approved by the Board of Trustees of the Trust.
In making such valuations, the pricing service utilizes both dealer-supplied
valuations and electronic data processing techniques which take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics and other market data, without exclusive reliance upon quoted
prices or exchange or over-the-counter prices, since such valuations are
believed to reflect more accurately the fair value of such securities.
Short-term obligations (maturing in 60 days or less) are valued at amortized
cost, which constitutes fair value as determined by the Board of Trustees.
Futures Contracts are normally valued at the settlement price on the exchange on
which they are traded. Securities for which there are no such valuations are
valued at fair value as determined in good faith by or at the direction of the
Board of Trustees.
Interest income on long-term obligations held for the Portfolio is
determined on the basis of interest accrued plus amortization of "original issue
discount" (generally, the difference between issue price and stated redemption
price at maturity) and premiums (generally, the excess of purchase price over
stated redemption price at maturity). Interest income on short-term obligations
is determined on the basis of interest accrued less amortization of premium.
<PAGE>
Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each Business Day. As of the close of regular trading on the
Exchange, on each Business Day, the value of each investor's beneficial interest
in the Portfolio is determined by multiplying the net asset value of the
Portfolio by the percentage, effective for that day, which represents that
investor's share of the aggregate beneficial interests in the Portfolio. Any
additions or withdrawals, which are to be effected on that day, are then
effected. Thereafter, the investor's percentage of the aggregate beneficial
interests in the Portfolio is re-computed as the percentage equal to the
fraction (i) the numerator of which is the value of such investor's investment
in the Portfolio as of the close of regular trading on such day plus or minus,
as the case may be, the amount of any additions to or withdrawals from the
investor's investment in the Portfolio effected on such day, and (ii) the
denominator of which is the aggregate net asset value of the Portfolio as of the
same time on such day plus or minus, as the case may be, the amount of the net
additions to or withdrawals from the aggregate investments in the Portfolio by
all investors in the Portfolio. The percentage so determined is then applied to
determine the value of the investor's interest in the Portfolio as of the close
of regular trading on the following Business Day of the Portfolio.
Subject to compliance with applicable regulations, the Trust has reserved
the right to pay the redemption price of beneficial interests in the Portfolio,
either totally or partially, by a distribution in kind of readily marketable
securities (instead of cash). The securities so distributed would be valued at
the same amount as that assigned to them in calculating the net asset value for
the beneficial interests being sold. If a holder of beneficial interests
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 beneficial interests in the Portfolio more than seven days during
any period when (a) trading in the markets the Portfolio normally utilizes is
restricted, or an emergency, as defined by the rules and regulations of the SEC
exists making disposal of the Portfolio's investments or determination of its
net asset value not reasonably practicable; (b) the Exchange is closed (other
than customary weekend and holiday closings); or (c) the SEC has by order
permitted such suspension.
Item 20. Tax Status.
The Trust is organized as a trust under New York law. The Trust has
determined that the Portfolio is properly treated as a partnership for U.S.
federal and New York State income tax purposes. Accordingly, under those tax
laws, the Trust is not subject to any income tax, but each investor in the
Portfolio must take into account its share of the Portfolio's ordinary income
and capital gains in determining its income tax liability. The determination of
such share is made in accordance with the governing instruments of the Trust and
the U.S. Internal Revenue Code of 1986, as amended (the "Code"), and regulations
promulgated thereunder.
<PAGE>
The Trust's taxable year-end ends December 31. Although,
as described above, the Trust is not subject to U.S. federal
income tax, it files appropriate U.S. federal income tax returns.
The Trust believes that, in the case of an investor in the Portfolio that
seeks to qualify as a regulated investment company ("RIC") under the Code, the
investor should be treated for U.S. federal income tax purposes as an owner of
an undivided interest in the assets and operations of the Portfolio, and
accordingly should be deemed to own a proportionate share of each of the assets
of the Portfolio and be entitled to treat as earned by it the portion of the
Portfolio's gross income attributable to that share. The Trust also believes
that each such investor should be deemed to hold its proportionate share of the
Portfolio's assets for the period the Portfolio has held the assets or for the
period the investor has been a partner in the Portfolio, whichever is shorter.
Each investor should consult its tax advisers regarding whether, in light of its
particular tax status and any special tax rules applicable to it, this approach
applies to its investment in the Portfolio, or whether the Portfolio should be
treated, as to it, as a separate entity as to which the investor has no direct
interest in Portfolio assets or operations.
In order to enable an investor in the Portfolio that is otherwise
eligible to qualify as a RIC under the Code to so qualify, the Trust intends
that the Portfolio will satisfy the requirements of Subchapter M of the Code
relating to the nature of the Portfolio's gross income and the composition
(diversification) and holding period of the Portfolio's assets as if those
requirements were directly applicable to the Portfolio and to allocate and
permit withdrawals of its net investment income and any net realized capital
gains in a manner that will enable an investor that is a RIC to comply with the
qualification requirements imposed by Subchapter M of the Code.
The Trust will allocate at least annually among the Portfolio's investors
each investor's distributive share of the Portfolio's net investment income, net
realized capital gains, and any other items of income, gain, loss, deduction, or
credit in a manner intended to comply with the Code and applicable U.S.
Treasury regulations.
To the extent the cash proceeds of any withdrawal or distribution exceed
an investor's adjusted tax basis in its partnership interest in the Portfolio,
the investor will generally realize gain for U.S. federal income tax purposes.
If, upon a complete withdrawal (i.e., a redemption of its entire interest in the
Portfolio), the investor's adjusted tax basis in its partnership interest in the
Portfolio exceeds the proceeds of the withdrawal, the investor will generally
realize a loss for federal income tax purposes. An investor's adjusted tax basis
in its partnership interest in the Portfolio will generally be the aggregate
price paid therefor, increased by the amounts of its distributive shares of
items of realized net income and gain (including income, if any, exempt from
U.S. Federal income tax), and reduced, but not below zero, by the amounts of its
distributive shares of items of net loss and the amounts of any distributions
received by the investor.
<PAGE>
Any investment in zero coupon bonds, certain stripped securities, and
certain securities purchased at a market discount will cause the Portfolio to
recognize income prior to the receipt of cash payments with respect to those
securities. In order to enable an investor that is a RIC to distribute this
income and avoid a tax on the investor, the Trust may be required to liquidate
Portfolio securities that it might otherwise have continued to hold, potentially
resulting in additional taxable gain or loss to the Portfolio.
Portfolio income allocated to investors that is derived from interest on
obligations of the U.S. Government and certain of its agencies and
instrumentalities (but generally not from capital gains realized upon the
disposition of such obligations) may be exempt from state and local taxes. In
other states, arguments can be made on the basis of a U.S. Supreme Court
decision to the effect that such income should be exempt from state and local
taxes. The Portfolio intends to advise investors of the extent, if any, to which
its income consists of such interest. Investors are urged to consult their tax
advisers regarding the possible exclusion of such portion of the income
allocated to them by the Portfolio for state and local income tax.
There are certain tax issues which will be relevant to only certain
investors, specifically, investors which are segregated asset accounts and
investors who contribute assets other than cash to the Portfolio. It is intended
that such segregated asset accounts will be able to satisfy diversification
requirements applicable to them and that such contributions of assets will not
be taxable provided certain requirements are met. Such investors are advised to
consult their own tax advisers as to the tax consequences of an investment in
the Portfolio.
The Trust intends to conduct its activities and those of the Portfolio so
that they will not be deemed to be engaged in the conduct of a U.S. trade or
business for U.S. federal income tax purposes. Therefore, it is not anticipated
that an investor in the Portfolio, other than an investor which would be deemed
a "U.S. person" for U.S. federal income tax purposes, will be subject to U.S.
federal income taxation (other than a 30% withholding tax on dividends and
certain interest income) solely by reason of its investment in the Portfolio.
There can be no assurance that the U.S. Internal Revenue Service may not
challenge the above conclusions or take other positions that, if successful,
might result in the payment of U.S. federal income taxes by investors in the
Portfolio.
The above discussion does not address the special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance companies,
and financial institutions, or the state, local, or non-U.S. tax laws that may
be applicable to certain investors. Investors should consult their own tax
advisers with respect to the special tax rules that may apply in their
particular situations, as well as the state, local, or foreign tax consequences
to them of investing in the Portfolio.
<PAGE>
Item 21. Underwriters.
The Landmark Funds Broker-Dealer Services, Inc., exclusive placement
agent for the Portfolio, receives no compensation for serving in this capacity.
Investment companies, insurance company separate accounts, common and commingled
trust funds and similar organizations and entities may continuously invest in
the Portfolio.
Item 22. Calculations of Performance Data.
Not applicable.
Item 23. Financial Statements.
See below.
<PAGE>
APPENDIX
DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED BY
U.S. GOVERNMENT AGENCIES, AUTHORITIES OR INSTRUMENTALITIES
BACKED BY THE FULL FAITH AND CREDIT OF THE U.S. GOVERNMENT
U.S. ARMORY BOARD BONDS - bonds issues by the District of
Columbia Armory Board.
EXPORT-IMPORT BANK CERTIFICATES - certificates of beneficial interest and
participation certificates issued and guaranteed by the Export-Import Bank of
the United States.
FHA DEBENTURES - debentures issued by the Federal Housing
Administration if the U.S. Government.
GNMA CERTIFICATES - mortgage-backed securities issued by the Government National
Mortgage Association, with timely payment guaranteed by the full faith and
credit of the U.S. Government, which represent partial ownership interests in
pools of mortgage loans issued by lenders such as mortgage bankers, commercial
banks and savings and loan associations. Each mortgage loan included in the pool
is either insured by the Federal Housing Administration or guaranteed by the
Veterans Administration.
The Portfolio purchases only GNMA Certificates of the "modified pass-through"
type, which entitle the holder to receive its proportionate share of all
interest and principal payments owned by the mortgage pool, net of fees paid to
the issuer and GNMA. Payment of the principal of and interest on GNMA
Certificates of the "modified pass through" type is guaranteed by GNMA.
The average life of a GNMA Certificate is likely to be substantially less than
the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures usually result
in the return of the greater part of principal invested far in advance of the
maturity of the mortgages in the pool. Foreclosures impose no risk to principal
investment because of the GNMA guarantee.
As the prepayment rates of individual mortgage pools vary widely, it is not
possible to accurately predict the average life of a particular issue of GNMA
Certificates. However, statistics published by the FHA indicate that the average
life of a single-family dwelling mortgage with a 25-30-year maturity, the type
of mortgage which backs the vast majority of GNMA Certificates, is approximately
12 years. It is therefore customary practice to treat GNMA Certificates as
30-year mortgage-backed securities which prepay fully in the twelfth year.
<PAGE>
As a consequence of the fees paid to GNMA and the issuer of GNMA Certificates,
the coupon rate of interest of GNMA Certificates is lower than the interest paid
on the VA-guaranteed or FHA-insured mortgages underlying the Certificates.
The yield which is earned on GNMA Certificates may vary from their coupon rates
for the following reasons: (i) Certificates may be issued at a premium or
discount, rather than at par; (ii) Certificates may trade in the secondary
market at a premium or discount after issuance; (iii) interest is earned and
compounded monthly which has the effect of raising the effective yield earned on
the Certificates; and (iv) the actual yield of each Certificate is affected by
the prepayment of mortgages included in the mortgage pool underlying the
Certificates and the rate at which principal so prepaid is reinvested. Principal
which is so prepaid is reinvested, although sometimes at a lower rate. In
addition, prepayment of mortgages included in the mortgage pool underlying a
GNMA Certificate purchased at a premium may result in a loss to the Portfolio.
Due to the large amount of GNMA Certificates outstanding and active
participation in the secondary market by securities dealers and investors. GNMA
Certificates are highly liquid instruments. Prices of GNMA Certificates are
readily available from securities dealers and depend on, among other things, the
level of market rates, the Certificate's coupon rate and the prepayment
experience of the pool of mortgages backing each Certificate.
GNMA FHLMC BONDS - mortgage-backed bonds issued by the Federal Home Loan
Mortgage Corporation and guaranteed by GNMA.
GNMA FNMA BONDS - mortgage-backed bonds issued by the Federal National Mortgage
Association and guaranteed by GNMA.
GSA PARTICIPATION CERTIFICATES - participation certificates issued by the
General Services Administration of the U.S. Government.
NEW COMMUNITIES DEBENTURES - debentures issued in accordance with the provisions
of Title IV of the Housing and Urban Development Act of 1968, as supplemented
and extended by Title VII of the Housing and Urban Development Act of 1970, the
payment of which is guaranteed by the U.S. Government.
PUBLIC HOUSING NOTES AND BONDS - short-term project notes and long-term bonds
issued by public housing and urban renewal agencies in connection with programs
administered by the Department of Housing and Urban Development of the U.S.
Government, the payment of which is guaranteed by the U.S. Government .
PENN CENTRAL TRANSPORTATION CERTIFICATES - certificates issued by Penn Central
Transportation and guaranteed by the U.S. Government.
<PAGE>
SBA DEBENTURES - debentures fully guaranteed as to principal and interest by the
Small Business Administration of the U.S.
Government.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY BONDS - bonds issued by the
Washington Metropolitan Area Transit Authority and guaranteed by the U.S.
Government.
The list of securities set forth above does not purport to be a complete list of
all debt obligations which are backed by the full faith and credit of the U.S.
Government. The Portfolio reserves the right to invest its assets in debt
obligations backed by the full faith and credit of the U.S. Government other
than those listed above.
<PAGE>
PART C
Item 24. Financial Statements and Exhibits.
(a) Financial Statements Included in Part A:
Not applicable.
Financial Statements Included in Part B:
Portfolio of Investments at December 31, 1994*
Statement of Assets and Liabilities at December 31, 1994*
Statement of Operations for the Period May 1, 1994
(Commencement of Operations) to December 31, 1994*
Statement of Changes in Net Assets*
Financial Highlights*
Notes to Financial Statements - December 31, 1994*
Independent Auditors' Report - February 3, 1995*
- --------------------
* Incorporated herein by reference to the Annual Report of the
Registrant relating to Government Income Portfolio (the
"Portfolio") for the fiscal year ended December 31, 1994,
filed with the Securities and Exchange Commission on March 9, 1995
(b) Exhibits
* 1(a) Copy of the Declaration of Trust of the
Trust
* 1(b) Form of Amendment to Declaration of Trust
* 2 By-laws of the Trust
* 5 Form of Investment Advisory Agreement
between the Registrant and Citibank, N.A.,
as investment adviser
* 6 Form of Placement Agency Agreement between
the Registrant and The Landmark Funds
Broker-Dealer Services, Inc., as exclusive
placement agent
* 8 Form of Custodian Agreement between the
Registrant and Investors Bank & Trust
Company, as custodian
<PAGE>
* 9(a) Form of Fund Accounting Agreement between
the Registrant and Signature Financial
Services, Inc.
* 9(b) Form of Administrative Services Agreement
between the Registrant and Signature
Financial Group (Cayman) Ltd., as
administrator
* 9(c) Form of Amended and Restated
Administrative Services Plan of the
Registrant
11 Consent of Independent Accountants
27 Financial Data Schedule
- -----------------------
*Incorporated by reference to the registration statement on Form N-1A of
the Registrant relating to the Portfolio filed March 21, 1994.
Item 25. Persons Controlled by or under Common Control with
Registrant.
Not applicable.
Item 26. Number of Holders of Securities.
(1) (2)
Title of Class Number of Record Holders
(as of 3/31/95)
Beneficial Interests 2
Item 27. Indemnification.
Reference is hereby made to Article V of the Declaration of Trust
(Exhibits 1(a) and 1(b) to this Registration Statement).
The Trustees and officers of the Trust and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940,
as amended.
<PAGE>
Item 28. Business and Other Connections of Investment Adviser.
Citibank, N.A. ("Citibank") is a commercial bank offering a wide range of
banking and investment services to customers across the United States and
throughout the world. Citibank is a wholly-owned subsidiary of Citicorp, a
registered bank holding company. In addition to Balanced Portfolio, Equity
Portfolio, Small Cap Equity Portfolio, and International Equity Portfolio, other
series of the Trust, Citibank also serves as investment adviser to the following
registered investment companies (or series thereof): Tax Free Reserves
Portfolio, U.S. Treasury Reserves Portfolio, Cash Reserves Portfolio, Landmark
Multi-State Tax Free Funds (Landmark New York Tax Free Reserves, Landmark
Connecticut Tax Free Reserves and Landmark California Tax Free Reserves),
Landmark Fixed Income Funds (Landmark Intermediate Income Fund), Landmark Tax
Free Income Funds (Landmark National Tax Free Income Fund and Landmark New York
Tax Free Income Fund) and Landmark VIP Funds (Landmark VIP U.S. Government
Portfolio, Landmark VIP Balanced Portfolio, Landmark VIP Equity Portfolio and
Landmark VIP International Equity Portfolio). As of December 31, 1994, Citibank
and its affiliates managed assets in excess of $73 billion worldwide. The
principal place of business of Citibank is located at 399 Park Avenue, New York,
New York 10043.
The Chairman of the Board and a Director of Citibank is
John S. Reed. The following are Vice Chairmen of the Board and
Directors of Citibank: Paul J. Collins, Pei-yuan Chia, William
R. Rhodes and H. Onno Ruding. Christopher J. Steffen is a
Senior Executive Vice-President of Citicorp and Director of
Citibank. Other Directors of Citibank are D. Wayne Calloway,
Chairman and Chief Executive Officer, PepsiCo, Inc., Purchase,
New York; Colby H. Chandler, Former Chairman and Chief
Executive Officer, Eastman Kodak Company; Kenneth T. Derr,
Chairman and Chief Executive Officer, Chevron Corporation; H.J.
Haynes, Senior Counselor, Bechtel Group, Inc., San Francisco,
California; Rozanne L. Ridgway, President, The Atlantic Council
of the United States; Robert B. Shapiro, President and Chief
Operating Officer, Monsanto Company; Frank A. Shrontz, Chairman
and Chief Executive Officer, The Boeing Company, Seattle,
Washington; Mario Henrique Simonsen, Vice Chairman, Brazilian
Institute of Economics, The Getulio Vargas Foundation; Roger B.
Smith, Former Chairman and Chief Executive Officer, General
Motors Corporation; Franklin A. Thomas, President, The Ford
Foundation, New York, New York; and Edgar S. Woolard, Jr.,
Chairman and Chief Executive Officer, E.I. du Pont de Nemours &
Company.
Each of the individuals named above is also a Director
of Citicorp. In addition, the following persons have the
affiliations indicated:
<PAGE>
D. Wayne Calloway Director, Exxon Corporation
Director, General Electric Company
Director, Pepsico, Inc.
Colby H. Chandler Director, Digital Equipment Corporation
Director, Ford Motor Company
Director, J.C. Penney Company, Inc.
Pei-yuan Chia none
Paul J. Collins Director, Kimberly-Clark Corporation
Kenneth T. Derr Director, Chevron Corporation
Director, Potlatch Corporation
H.J. Haynes Director, Bechtel Group, Inc.
Director, Boeing Company
Director, Fremont Group, Inc.
Director, Hewlett-Packard Company
Director, Paccar Inc.
Director, Saudi Arabian Oil Company
John S. Reed Director, Monsanto Company
Director, Philip Morris Companies
Incorporated
William R. Rhodes Director, Private Export Funding
Corporation
Rozanne L. Ridgway Director, 3M
Director, Bell Atlantic Corporation
Director, Boeing Company
Director, Emerson Electric Company
Member-International Advisory Board,
New Perspective Fund, Inc.
Director, RJR Nabisco, Inc.
Director, Sara Lee Corporation
Director, Union Carbide Corporation
<PAGE>
H. Onno Ruding Member, Board of Supervisory Directors,
Amsterdam Trustee's Kantoor
Advisor, Intercena (C&A) (Netherlands)
Member, Board of Supervisory Directors,
Pechiney Nederland N.V.
Member, Board of Advisers, Robeco N.V.
Advisory Director, Unilever N.V.
Advisory Director, Unilever PLC
Robert B. Shapiro Director, G.D. Searle & Co.
Director, Liposome Technology, Inc.
Director, Monsanto Company
Director, The Nutrasweet Company
Frank A. Shrontz Director, 3M
Director, Baseball of Seattle, Inc.
Director, Boeing Company
Director, Boise Cascade Corp.
Mario Henrique Simonsen Director, Companhia Bozano Simonsen
Comercioe E Industria
Director, Companhia Monteia & Aranha
President, Simposium Consultoria E
Servicos Tecnicos LTDA
Roger B. Smith Director, International Paper Company
Director, Johnson & Johnson
Director, Pepsico, Inc.
Director, Rubatex Corporation
Christopher J. Steffen none
Franklin A. Thomas Director, Aluminum Company of America
Director, American Telephone &
Telegraph, Co.
Director, CBS, Inc.
Director, Cummins Engine Company, Inc.
Director, Pepsico, Inc.
<PAGE>
Edgar S. Woolard, Jr. Director, E.I. DuPont De Nemours &
Company
Director, International Business Machines
Corp.
Director, Seagram Company, Ltd.
Item 29. Principal Underwriters.
(a) The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS"), the
Portfolio's Placement Agent, is also the placement agent for Cash Reserves
Portfolio, U.S. Treasury Reserves Portfolio, Tax Free Reserves Portfolio,
Balanced Portfolio, International Equity Portfolio, Equity Portfolio and Small
Cap Equity Portfolio. LFBDS is also the distributor for Landmark Cash Reserves,
Premium Liquid Reserves, Premium U.S. Treasury Reserves, Landmark Tax Free
Reserves, Landmark New York Tax Free Reserves, Landmark California Tax Free
Reserves, Landmark Connecticut Tax Free Reserves, Landmark New York Tax Free
Income Fund, Landmark Balanced Fund, Landmark Equity Fund, Landmark Small Cap
Equity Fund, Landmark National Tax Free Income Fund, Landmark U.S. Government
Income Fund, Landmark Intermediate Income Fund, Landmark U.S. Treasury Reserves,
Landmark Institutional Liquid Reserves, Landmark Institutional U.S. Treasury
Reserves and Landmark VIP Funds (Landmark VIP U.S. Government Portfolio,
Landmark VIP Balanced Portfolio, Landmark VIP Equity Portfolio and Landmark VIP
International Equity Portfolio).
(b) The information required by this Item 29 with respect to each
director and officer of LFBDS is incorporated by reference to Schedule A of Form
BD filed by LFBDS pursuant to the Securities and Exchange Act of 1934 (File No.
8-32417).
(c) Not applicable.
Item 30. Location of Accounts and Records.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
<PAGE>
Name Address
Signature Financial Group Elizabethan Square, George Town,
(Cayman), Ltd. Grand Cayman, Cayman Islands, BWI
(administrator)
Investors Bank & Trust Company One Lincoln Plaza
(custodian) Boston, MA 02111
Citibank, N.A. 153 East 53rd Street
(investment adviser) New York, NY 10043
The Landmark Funds Broker-Dealer c/o Signature Financial Group
Services, Inc. (Cayman) Ltd.
(placement agent) Elizabethan Square
George Town, Grand Cayman
Cayman Islands BWI
Signature Financial Services, Inc. First Canadian Place
(accounting services agent) Suite 5850, P.O. Box 231
Toronto, Ontario
M5X lC8 CANADA
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
The Registrant undertakes to comply with the provisions of Section 16(c)
of the Investment Company Act of 1940.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment
Company Act of 1940, the Registrant has duly caused
this Amendment to its Registration Statement on Form N-
1A to be signed on its behalf by the undersigned,
thereunto duly authorized, in George Town, Grand
Cayman, Cayman Islands, BWI on the 27th day of April,
1995.
THE PREMIUM PORTFOLIOS
/s/ Susan Jakuboski
By: Susan Jakuboski
Assistant Treasurer of
The Premium Portfolios
<PAGE>
EXHIBIT INDEX
11. Consent of Independent Accountants
27. Financial Data Schedule
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in
Part B of this Amendment No. 1 to the registration
statement on Form N-1A (the "Registration Statement")
of The Premium Portfolios of our report dated February
3, 1995, relating to the financial statements and
financial highlights of the Equity Portfolio appearing
in the December 31, 1994 Annual Report of Landmark U.S.
Government Income Fund, which are also incorporated by
reference into Amendment No. 1 to the Registration
Statement. We also consent to the references to us
under the heading "Investment Advisory and Other
Services" in Part B.
Price Waterhouse
Chartered Accountants
Toronto, Ontario
April 26, 1995
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<PAGE>
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