As filed with the Securities and Exchange Commission on April 28, 1995
File No. 811-8502
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 Balanced Portfolio.
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EXPLANATORY NOTE
This Registration Statement has been filed by the Registrant pursuant to
Section 8(b) of the Investment Company Act of 1940. Beneficial interests in the
Registrant are not being registered under the Securities Act of 1933, as amended
(the "1933 Act"), because such interests will be 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.
Balanced 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 OBJECTIVES AND POLICIES:
The investment objectives of the Portfolio are to earn high current income
by investing in a broad range of securities, to preserve capital, and to provide
growth potential with reduced risk.
The Portfolio seeks its objectives by investing, under normal
circumstances, in a broadly diversified portfolio of income-producing
securities, including common and preferred stocks, bonds and short-term
obligations. Under normal circumstances, at least 25% of the Fund's total assets
is invested in fixed income securities. The Adviser determines the mix of
investments among equity and fixed income securities based on its analysis of
current economic and market conditions and underlying securities values.
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The Adviser selects equity securities that, in the Adviser's judgment,
offer the prospect for above-average growth. Equity securities include common
stocks, preferred stocks and warrants for the purchase of stock. In selecting
common stocks the Adviser emphasizes securities issued by established companies
with medium to large market capitalizations, i.e., $750 million or more, and
seasoned management teams ("Established Companies"). The Portfolio's fixed
income investments include corporate bonds and notes, preferred securities and
government obligations. All of the Portfolio's long-term non-convertible debt
investments are investment grade securities (rated Baa or better by Moody's
Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's
Ratings Group ("S&P")) or unrated securities which the Adviser believes to be of
comparable quality. Less than 5% of the Portfolio's investments consist of
securities rated Baa by Moody's or BBB by S&P. Securities with these ratings may
have speculative characteristics.
CERTAIN ADDITIONAL INVESTMENT POLICIES:
NON-U.S. SECURITIES. While the Portfolio emphasizes U.S. securities, the
Portfolio may invest a portion of its assets in non-U.S. equity and debt
securities, including depository receipts. The Portfolio does not intend to
invest more than 25% of its assets in non-U.S. securities, including sponsored
American Depositary Receipts, which represent the right to receive securities of
non-U.S. issuers deposited in a U.S. or correspondent bank. The Portfolio may
invest up to 5% of its assets in closed-end investment companies which primarily
hold non-U.S. securities.
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.
OTHER PERMITTED INVESTMENTS. For more information regarding the
Portfolio's permitted investments and investment practices, see "Permitted
Investments and Investment Practices" below. 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 objectives, without regard to the length of time a particular
security may have been held. The turnover rate for the common stock portion of
the Portfolio is expected to be approximately 100% annually. For the period May
1, 1994 to December 31, 1994 the turnover rate for the entire Portfolio was
105%. 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. Equity securities fluctuate in response
to general market and economic conditions and other factors, including actual
and anticipated earnings, changes in management, political developments and the
potential for takeovers and acquisitions. During periods of rising interest
rates the value of debt securities generally declines, and during periods of
falling rates the value of these securities generally increases. Changes by
recognized rating agencies in the rating of any debt security, and actual or
perceived changes in an issuer's ability to make principal or interest payments,
also affect the value of these investments.
CREDIT RISK OF DEBT SECURITIES. Investors should be aware that securities
offering above average yields may at times involve above average risks.
Securities rated Baa by Moody's or BBB by S&P and equivalent unrated securities
may have speculative characteristics. Adverse economic or changing circumstances
are more likely to lead to a weakened capacity to make principal and interest
payments than is the case for higher grade obligations.
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SMALL CAP COMPANIES. Investors in the Portfolio should be aware that the
securities of companies with small market capitalizations may have more risks
than the securities of other companies. Small cap companies may be more
susceptible to market downturns or setbacks because they may have limited
product lines, markets, distribution channels, and financial and management
resources. Further, there is often less publicly available information about
small cap companies than about more established companies. As a result of these
and other factors, the prices of securities issued by small cap companies may be
volatile. An investment in the Portfolio, therefore, may be subject to greater
fluctuation in value than an investment in an equity fund investing primarily in
securities of larger, more established companies.
NON-U.S. SECURITIES. Investments in non-U.S. securities involve risks
relating to political, social and economic developments abroad, as well as risks
resulting from the differences between the regulations to which U.S. and non-U.S
issuers and markets are subject. These risks may include expropriation,
confiscatory taxation, withholding taxes on dividends and interest, limitations
on the use or transfer of portfolio assets and political or social instability.
Enforcing legal rights may be difficult, costly and slow in non-U.S. countries,
and there may be special problems enforcing claims against non-U.S. governments.
In addition, non-U.S. companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there may be less
public information about their operations. Non-U.S. markets may be less liquid
and more volatile than U.S. markets, and may offer less protection to investors
such as the Portfolio.
Because non-U.S. securities often are denominated in currencies other than
the U.S. dollar, changes in currency exchange rates will affect the Portfolio's
net asset value, the value of dividends and interest earned and gains and losses
realized on the sale of securities. In addition, some non-U.S. currency values
may be volatile and there is the possibility of governmental controls on
currency exchanges or governmental intervention in currency markets.
The costs attributable to non-U.S. investing, such as the costs of
maintaining custody of securities in non-U.S. countries, frequently are higher
than those attributable to U.S. investing. As a result, the operating expense
ratios of the Portfolio may be higher than those of investment companies
investing exclusively in U.S. securities.
The Portfolio may invest in securities of issuers in developing countries,
and all of these risks are increased for investments in issuers in developing
countries.
INVESTMENT PRACTICES. Certain of the investment practices employed for the
Portfolio may entail certain risks. See "Permitted Investments and Investment
Practices" below.
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PERMITTED INVESTMENTS AND INVESTMENT PRACTICES:
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements
in order to earn a return on temporarily available cash. 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.
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.
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PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS. The Portfolio may invest up
to 15% of its net assets in securities for which there is no readily available
market. These illiquid securities may include privately placed restricted
securities for which no institutional market exists. The absence of a trading
market can make it difficult to ascertain a market value for illiquid
investments. Disposing of illiquid investments may involve time-consuming
negotiation and legal expenses, and it may be difficult or impossible for the
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.
SECURITIES OF ISSUERS IN DEVELOPING COUNTRIES. Investors should be aware
that investing in the equity and fixed income markets of developing countries
involves exposure to economic structures that are generally less diverse and
mature, and to political systems which can be expected to have less stability,
than those of developed countries. Historical experience indicates that the
markets of developing countries have been more volatile than the markets of
developed countries with more mature economies; such markets often have provided
higher rates of return and greater risks. These heightened risks include (i)
greater risks of expropriation, confiscatory taxation and nationalization, and
less social, political and economic stability; (ii) the small current size of
markets for securities of issuers based in developing countries and the
currently low or non-existent volume of trading, resulting in a lack of
liquidity and in price volatility; (iii) certain national policies which may
restrict the Portfolio's investment opportunities including restrictions on
investing in issuers or industries deemed sensitive to relevant national
interests; and (iv) the absence of developed legal structures. Such
characteristics can be expected to continue in the future.
CURRENCY EXCHANGE CONTRACTS. Forward currency exchange contracts may be
entered into for the Portfolio for the purchase or sale of non-U.S. currency for
hedging purposes against adverse rate changes or otherwise to achieve the
Portfolio's investment objectives. A currency exchange contract allows a
definite price in dollars to be fixed for securities of non-U.S. issuers that
have been purchased or sold (but not settled) for the Portfolio. Entering into
such exchange contracts may result in the loss of all or a portion of the
benefits which otherwise could have been obtained from favorable movements in
exchange rates. In addition, entering into such contracts means incurring
certain transaction costs and bearing the risk of incurring losses if rates do
not move in the direction anticipated.
LOWER-RATED DEBT SECURITIES. The Portfolio may purchase lower-rated
securities (those rated Baa or better by Moody's or BBB or better by S&P) which
may have poor protection of payment of principal and interest. These securities
are often considered to be speculative and involve greater risk of default or
price changes than securities assigned a higher quality rating due to changes in
the issuer's creditworthiness. The market prices of these securities may
fluctuate more than higher-rated securities and may decline significantly in
periods of general economic difficulty which may follow periods of rising
interest rates.
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."
ASSET-BACKED SECURITIES. 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 the
Government National Mortgage Association, as well as mortgage-backed securities
for which principal and interest payments are backed by the credit of particular
agencies of the U.S. Government. Mortgage-backed securities are generally backed
or collateralized by a pool of mortgages. These securities are sometimes called
collateralized mortgage obligations or CMOs.
Even if the U.S. Government or one of its agencies guarantees principal
and interest payments of a mortgage-backed security, the market price of a
mortgage-backed security is not insured and may be subject to market volatility.
When interest rates decline, mortgage-backed securities experience higher rates
of prepayment, because the underlying mortgages are refinanced to take advantage
of the lower rates. Thus the prices of mortgage-backed securities may not
increase as much as prices of other debt obligations when interest rates
decline, and mortgage-backed securities may not be an effective means of locking
in a particular interest rate. In addition, any premium paid for a
mortgage-backed security may be lost when it is prepaid.
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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.
A. Dwight Hyde, Jr. and Mark Lindbloom have served as managers of the
Portfolio since its inception in 1994. Mr. Hyde manages the equity portion of
the portfolio. In addition, he manages over $2 billion of other assets at
Citibank. Prior to joining Citibank in 1980, he was Chief Investment Officer at
Dean Witter Asset Management and Paribas Asset Management. Mr. Lindbloom manages
the fixed income portion of the portfolio. He came to Citibank in 1986 from
Brown Brothers Harriman & Co., where he managed fixed income assets for
discretionary corporate portfolios.
For its services under the Advisory Agreement, the Adviser receives an
investment advisory fee, which is accrued daily and paid monthly, equal to 0.40%
of the Portfolio's average daily net assets on an annualized basis for the
Portfolio's then current fiscal year. The Adviser may voluntarily agree to waive
a portion of its investment advisory fees.
For the period May 1, 1994 (commencement of operations) to December 31,
1994, the investment advisory fee paid to Citibank for the Portfolio was
$640,795.
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
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 as necessary to maintain the projected rate of total
operating expenses.
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.
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.
<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 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.
Subject to an investor's right to make withdrawals as provided above, the
Portfolio does not make distributions to its investors.
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.
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
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.
<PAGE>
PART B
Item 10. Cover Page.
Not applicable.
Item 11. Table of Contents. Page
General Information and History B-01
Investment Objectives and Policies B-01
Management of the Trust B-13
Control Persons and Principal Holders of Securities B-15
Investment Advisory and Other Services B-15
Brokerage Allocation and Other Practices B-18
Capital Stock and Other Securities B-19
Purchase, Redemption and Pricing of Securities B-21
Tax Status B-23
Underwriters B-25
Calculations of Performance Data B-25
Financial Statements B-25
Item 12. General Information and History.
Not applicable.
Item 13. Investment Objectives and Policies.
Part A contains additional information about the investment objectives and
policies of the Equity Portfolio (the "Portfolio"), a series of The Premium
Portfolios (the "Trust"). This Part B should be read in conjunction with Part A.
The investment objectives of the Portfolio are to earn high current income
by investing in a broad range of securities, to preserve capital, and to provide
growth potential with reduced risk. The investment objectives 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 objectives.
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
following supplements the information contained in Part A concerning the
investment objectives, policies and techniques of the Portfolio.
The Portfolio's policy is to invest its assets, under normal
circumstances, in a broadly diversified portfolio of income-producing
securities, including common and preferred stocks, bonds and short-term
obligations. Under normal circumstances, at least 25% of the Portfolio's total
assets is invested in fixed income securities.
The Trust has also adopted the following policies with respect to the
Portfolio's investments in (i) warrants and (ii) securities of issuers with less
than three years' continuous operation. The Trust's purchases of warrants for
the Portfolio will not exceed 5% of the Portfolio's net assets. Included within
that amount, but not exceeding 2% of its net assets, may be warrants which are
not listed on the New York Stock Exchange or the American Stock Exchange. Any
such warrants will be valued at their market value except that warrants which
are attached to securities at the time such securities are acquired for the
Portfolio will be deemed to be without value for the purpose of this
restriction. The Trust will not invest more than 5% of the Portfolio's assets in
companies which, including their respective predecessors, have a record of less
than three years' continuous operation.
The policies described above and those described below are not fundamental
and may be changed without investor approval.
REPURCHASE AGREEMENTS
The Portfolio may invest in repurchase agreements collateralized by
securities in which the Portfolio may otherwise invest. 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,
usually U.S. Government or Government agency issues. 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.
<PAGE>
SECURITIES OF NON-U.S. ISSUERS
The Portfolio may invest in securities of non-U.S. issuers. Investing in
securities issued by companies whose principal business activities are outside
the United States may involve significant risks not present in U.S. investments.
For example, the value of such securities fluctuates based on the relative
strength of the U.S. dollar. In addition, there is generally less publicly
available information about non-U.S. issuers, particularly those not subject to
the disclosure and reporting requirements of the U.S. securities laws. Non-U.S.
issuers are generally not bound by uniform accounting, auditing and financial
reporting requirements comparable to those applicable to U.S. issuers.
Investments in securities of non-U.S. issuers also involve the risk of possible
adverse changes in investment or exchange control regulations, expropriation or
confiscatory taxation, limitation on the removal of funds or other assets of the
Portfolio, political or financial instability or diplomatic and other
developments which would affect such investments. Further, economies of other
countries or areas of the world may differ favorably or unfavorably from the
economy of the U.S. It is anticipated that in most cases the best available
market for securities of non-U.S. issuers would be on exchanges or in
over-the-counter markets located outside the U.S. Non-U.S. securities markets,
while growing in volume and sophistication, are generally not as developed as
those in the U.S., and securities of some non-U.S. issuers (particularly those
located in developing countries) may be less liquid and more volatile than
securities of comparable U.S. companies. Non-U.S. security trading practices,
including those involving securities settlement where the Portfolio's assets may
be released prior to receipt of payments, may expose the Portfolio to increased
risk in the event of a failed trade or the insolvency of a non-U.S.
broker-dealer. In addition, non-U.S. brokerage commissions are generally higher
than commissions on securities traded in the U.S. and may be non-negotiable. In
general, there is less overall governmental supervision and regulation of
non-U.S. securities exchanges, brokers and listed companies than in the U.S.
Investments in closed-end investment companies which primarily hold
securities of non-U.S. issuers may entail the risk that the market value of such
investments may be substantially less than their net asset value and that there
would be duplication of investment management and other fees and expenses.
American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs") and other forms of depositary
receipts for securities of non-U.S. issuers provide an alternative method for
the Portfolio to make non-U.S. investments. These securities are not usually
denominated in the same currency as the securities into which they may be
converted. Generally, ADRs, in registered form, are designed for use in U.S.
securities markets and EDRs and GDRs, in bearer form, are designed for use in
European and global securities markets. ADRs are receipts typically issued by a
U.S. bank or trust company evidencing ownership of the underlying securities.
EDRs and GDRs are European and global receipts, respectively, evidencing a
similar arrangement. ADRs, EDRs and GDRs are subject to many of the same risks
that apply to other investments in non-U.S.
securities.
The Portfolio may invest in securities of non-U.S. issuers that impose
restrictions on transfer within the United States or to United States persons.
Although securities subject to such transfer restrictions may be marketable
abroad, they may be less liquid than securities of non-U.S. issuers of the same
class that are not subject to such restrictions.
CURRENCY EXCHANGE TRANSACTIONS
Because the Portfolio may buy and sell securities denominated in currencies
other than the U.S. dollar, and receive interest, dividends and sale proceeds in
currencies other than the U.S. dollar, the Portfolio may enter into currency
exchange transactions to convert U.S. currency to non-U.S. currency and non-U.S.
currency to U.S. currency, as well as convert one non-U.S. currency to another
non-U.S. currency. The Portfolio either enters into these transactions on a spot
(i.e., cash) basis at the spot rate prevailing in the currency exchange markets,
or uses forward contracts to purchase or sell non-U.S. currencies. The Portfolio
may also enter into currency hedging transactions in an attempt to protect the
value of its assets as measured in U.S. dollars from unfavorable changes in
currency exchange rates and control regulations. (Although the Portfolio's
assets are valued daily in terms of U.S. dollars, the Trust does not intend to
convert the Portfolio's holdings of non-U.S. currencies into U.S. dollars on a
daily basis.) The Portfolio does not currently intend to speculate in currency
exchange rates or forward contracts.
The Portfolio may convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion. Although currency
exchange dealers do not charge a fee for conversion, they do realize a profit
based on the difference (the "spread") between the prices at which they are
buying and selling various currencies. Thus, a dealer may offer to sell a
currency at one rate, while offering a lesser rate of exchange should the
Portfolio desire to resell that currency to the dealer.
A forward contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract, agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
forward contract generally has no deposit requirement, and no fees or
commissions are charged at any stage for trades.
When the Portfolio enters into a contract for the purchase or sale of a
security denominated in a non-U.S. currency, it may desire to "lock in" the U.S.
dollar price of the security. By entering into a forward contract for the
purchase or sale, for a fixed amount of U.S. dollars, of the amount of non-U.S.
currency involved in the underlying security transaction, the Portfolio will be
able to protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the non-U.S. currency during the period
between the date the security is purchased or sold and the date on which payment
is made or received.
When the Adviser believes that the currency of a particular country may
suffer a substantial decline against the U.S. dollar, the Portfolio may enter
into a forward contract to sell, for a fixed amount of U.S. dollars, the amount
of non-U.S. currency approximating the value of some or all of the Portfolio's
securities denominated in such non-U.S. currency. The precise matching of the
forward contract amounts and the value of the securities involved is not
generally possible since the future value of such securities in non-U.S.
currencies changes as a consequence of market movements in the value of those
securities between the date the forward contract is entered into and the date it
matures. The projection of a short-term hedging strategy is highly uncertain.
The Portfolio does not enter into such forward contracts or maintain a net
exposure to such contracts where the consummation of the contracts obligates the
Portfolio to deliver an amount of non-U.S. currency in excess of the value of
the Portfolio's securities or other assets denominated in that currency. Under
normal circumstances, consideration of the prospect for currency parities will
be incorporated in the investment decisions made with regard to overall
diversification strategies. However, the Adviser believes that it is important
to have the flexibility to enter into such forward contracts when it determines
that the best interests of the Portfolio will be served.
The Portfolio generally would not enter into a forward contract with a
term greater than one year. At the maturity of a forward contract, the Portfolio
will either sell the security and make delivery of the non-U.S. currency, or
retain the security and terminate its contractual obligation to deliver the
non-U.S. currency by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount of
the non-U.S. currency. If the Portfolio retains the security and engages in an
offsetting transaction, the Portfolio will incur a gain or a loss (as described
below) to the extent that there has been movement in forward contract prices. If
the Portfolio engages in an offsetting transaction, it may subsequently enter
into a new forward contract to sell the non-U.S. currency. Should forward prices
decline during the period between the date the Portfolio enters into a forward
contract for the sale of the non-U.S. currency and the date it enters into an
offsetting contract for the purchase of such currency, the Portfolio will
realize a gain to the extent the selling price of the currency exceeds the
purchase price of the currency. Should forward prices increase, the Portfolio
will suffer a loss to the extent that the purchase price of the currency exceeds
the selling price of the currency.
It is impossible to forecast with precision the market value of the
Portfolio's securities at the expiration of a forward contract. Accordingly, it
may be necessary for the Portfolio to purchase additional non-U.S. currency on
the spot market if the market value of the security is less than the amount of
non-U.S. currency the Portfolio is obligated to deliver and if a decision is
made to sell the security and make delivery of such currency. Conversely, it may
be necessary to sell on the spot market some of the non-U.S. currency received
upon the sale of the security if its market value exceeds the amount of such
currency the Portfolio is obligated to deliver.
The Portfolio may also purchase put options on a non-U.S. currency in order
to protect against currency rate fluctuations. If the Portfolio purchases a put
option on a non-U.S. currency and the value of the U.S. currency declines, the
Portfolio will have the right to sell the non-U.S. currency for a fixed amount
in U.S. dollars and will thereby offset, in whole or in part, the adverse effect
on the Portfolio which otherwise would have resulted. Conversely, where a rise
in the U.S. dollar value of another currency is projected, and where the
Portfolio anticipates investing in securities traded in such currency, the
Portfolio may purchase call options on the non-U.S. currency.
The purchase of such options could offset, at least partially, the effects
of adverse movements in exchange rates. However, the benefit to the Portfolio
from purchases of non-U.S. currency options will be reduced by the amount of the
premium and related transaction costs. In addition, where currency exchange
rates do not move in the direction or to the extent anticipated, the Portfolio
could sustain losses on transactions in non-U.S. currency options which would
require it to forgo a portion or all of the benefits of advantageous changes in
such rates.
The Portfolio may write options on non-U.S. currencies for hedging
purposes or otherwise to achieve its investment objectives. For example, where
the Portfolio anticipates a decline in the value of the U.S. dollar value of a
non-U.S. security due to adverse fluctuations in exchange rates it could,
instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the option will most likely not be
exercised, and the diminution in value of the security held by the Portfolio
will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the cost of a non-U.S. security to be acquired because
of an increase in the U.S. dollar value of the currency in which the underlying
security is primarily traded, the Portfolio could write a put option on the
relevant currency which, if rates move in the manner projected, will expire
unexercised and allow the Portfolio to hedge such increased cost up to the
amount of the premium. However, the writing of a currency option will constitute
only a partial hedge up to the amount of the premium, and only if rates move in
the expected direction. If this does not occur, the option may be exercised and
the Portfolio would be required to purchase or sell the underlying currency at a
loss which may not be offset by the amount of the premium. Through the writing
of options on currencies, the Portfolio also may be required to forgo all or a
portion of the benefits which might otherwise have been obtained from favorable
movements in exchange rates.
Put and call options on non-U.S. currencies written by the Portfolio will
be covered by segregation of cash, short-term money market instruments or high
quality debt securities in an account with the custodian in an amount sufficient
to discharge the Portfolio's obligations with respect to the option, by
acquisition of the non-U.S. currency or of a right to acquire such currency (in
the case of a call option) or the acquisition of a right to dispose of the
currency (in the case of a put option), or in such other manner as may be in
accordance with the requirements of any exchange on which, or the counterparty
with which, the option is traded and applicable laws and regulations.
Investing in ADRs presents many of the same risks regarding currency
exchange rates as investing directly in securities denominated in currencies
other than the U.S. dollar. Because the securities underlying ADRs are traded
primarily in non-U.S. currencies, changes in currency exchange rates will affect
the value of ADRs. For example, a decline in the U.S. dollar value of another
currency in which securities are primarily traded will reduce the U.S. dollar
value of such securities, even if their value in the other currency remains
constant, and thus will reduce the value of the ADRs covering such securities.
The Portfolio may employ any of the above described non-U.S. currency hedging
techniques to protect the value of its assets invested in ADRs.
The Portfolio's dealings in non-U.S. currency contracts are limited to the
transactions described above. Of course, the Portfolio is not required to enter
into such transactions and does not do so unless deemed appropriate by the
Adviser. It should also be realized that these methods of protecting the value
of the Portfolio's securities against a decline in the value of a currency do
not eliminate fluctuations in the underlying prices of the securities.
Additionally, although such contracts tend to minimize the risk of loss due to a
decline in the value of the hedged currency, they also tend to limit any
potential gain which might result should the value of such currency increase.
The Portfolio has established procedures consistent with policies of the
Securities and Exchange Commission (the "SEC") concerning forward contracts.
Since those policies currently recommend 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 expects always to have cash, cash
equivalents or high quality debt securities available sufficient to cover any
commitments under these contracts or to limit any potential risk.
SHORT SALES "AGAINST THE BOX"
In a short sale, 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.
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 33 1/3% 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
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 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, except that as a temporary measure for extraordinary or
emergency purposes it may borrow in an amount not to exceed 1/3 of the current
value of its net assets, including the amount borrowed (nor purchase any
securities at any time at which borrowings exceed 5% of the total assets of the
Portfolio, taken at market value). It is intended that the Portfolio would
borrow money only from banks and only to accommodate requests for the repurchase
of beneficial interests in the Portfolio while effecting an orderly liquidation
of portfolio securities.
(2) Make loans to other persons except (a) through the lending of its
portfolio securities 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 all or a portion of an issue of debt securities of types commonly
distributed privately to financial institutions. The purchase of short-term
commercial paper or a portion of an issue of debt securities which is part of an
issue to the public shall not be considered the making of a loan.
<PAGE>
(3) Purchase securities of any issuer if such purchase at the time thereof
would cause with respect to 75% of the total assets of the Portfolio more than
10% of the voting securities of such issuer to be held by the Portfolio.
(4) Purchase securities of any issuer if such purchase at the time thereof
would cause as to 75% of the Portfolio's total assets 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).
(5) Concentrate its investments in any particular industry, but if it is
deemed appropriate for the achievement of the Portfolio's investment objectives,
up to 25% of its assets, at market value at the time of each investment, may be
invested in any one industry.
NON-FUNDAMENTAL RESTRICTION
The Trust, on behalf of the Portfolio, has adopted the following
non-fundamental restriction, which may be changed by the Trust with respect to
the Portfolio without the approval of holders of its beneficial interests:
The Portfolio may 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 and other than securities which may be
resold pursuant to Rule 144A under the 1933 Act if the Board of Trustees of the
Trust determines that a liquid market exists for such securities) 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).
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 net 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)),
(ii) pledge, mortgage or hypothecate for any purpose in excess of 10%
of the net assets of the Portfolio (taken at market value),
<PAGE>
(iii) sell any security which the Portfolio does not own unless by
virtue of the ownership of other securities there is at the time of sale a
right to obtain securities, without payment of further consideration,
equivalent in kind and amount to the securities sold and provided that if such
right is conditional the sale is made upon the same conditions,
(iv) invest for the purpose of exercising control or management,
(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 in each case at the greater of cost or market value) to be
invested in the securities of such issuers or would cause more than 3% of the
outstanding voting securities of any such issuer to be held for the Portfolio
(for purposes of this clause (v) securities of non-U.S. banks shall be treated
as investment company securities, except that debt securities and non-voting
preferred stock of non-U.S. banks are not subject to the 10% limitation
described herein),
(vi) invest more than 15% of the net assets of the Portfolio in securities
that are not readily marketable, including debt securities for which there is no
established market and fixed time deposits and repurchase agreements maturing in
more than seven days,
(vii)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
such shares or securities together own beneficially more than 5% of such shares
or securities, or both, all taken at market value,
(viii) write, purchase or sell any put or call option or any combination
thereof or enter into any futures contract, except that this restriction shall
not prevent the Portfolio from entering into transactions involving non-U.S.
currencies as described in Part A and this Part B,
(ix) make short sales of securities or maintain a short position, unless
at all times when a short position is open it owns an equal amount of such
securities or securities convertible into or exchangeable, without payment of
any further consideration, for securities of the same issue as, and equal in
amount to, the securities sold short, and unless not more than 10% of the net
assets of the Portfolio (taken at market value) is held as collateral for such
sales at any one time (the Portfolio does not presently intend to make such
short sales for investment purposes).
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.
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).
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.
<PAGE>
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.
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 Balanced Fund (the "Fund") owned 99.3%
and Citi Balanced Fund, Ltd. owned 0.7% 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 Funds I, a Massachusetts business trust organized on April 13, 1984
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 August 19, 1996 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.
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
from May 1, 1994 to December 31, 1994 the fee paid to Citibank under the
Advisory Agreement with respect to the Portfolio was $640,795.
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 from May 1, 1994 through
December 31, 1994, the Trust paid the Administrator $80,099 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.
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.
<PAGE>
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
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.
<PAGE>
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 common stock portion of the Portfolio is expected to be
approximately 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
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.
<PAGE>
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
brokerage commissions of $280,300.
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.
<PAGE>
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
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, all assets
and liabilities initially expressed in non-U.S. currencies will be converted
into U.S. dollars at the prevailing market rates at the time of valuation.
Equity securities are valued at the last sale price on the exchange on which
they are primarily traded or on the NASDAQ system for unlisted national market
issues, or at the last quoted bid price for securities in which there were no
sales during the day or for unlisted securities not reported on the NASDAQ
system. Securities listed on a non-U.S. exchange are valued at the last quoted
sale price available before the time when net assets are valued. Bonds and other
fixed income securities (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 that 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.
<PAGE>
Trading in securities on most non-U.S. exchanges and over-the-counter
markets is normally completed before the close of regular trading on the
Exchange and may also take place on days on which the Exchange is closed. If
events materially affecting the value of non-U.S. securities occur between the
time when the exchange on which they are traded closes and the time when a
Fund's net asset value is calculated, such securities will be valued at fair
value in accordance with procedures established by and under the general
supervision of the Board of Trustees.
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.
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.
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.
<PAGE>
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.
The Portfolio may be subject to foreign withholding taxes with respect to
income on certain securities of non-U.S. issuers. These taxes may be reduced or
eliminated under the terms of an applicable U.S. income tax treaty. Foreign
exchange gains and losses realized by the Portfolio will generally be treated as
ordinary income and losses for federal income tax purposes. Certain uses of
foreign currency and foreign currency forward contracts and investment by the
Portfolio in certain "passive foreign investment companies" may be limited, or a
tax election may be made, if available, in order to enable an investor that is a
RIC to preserve its qualification as a RIC and to avoid imposition of a tax on
such an investor.
The Portfolio's transactions in forward currency contracts will be subject
to special tax rules that may affect the amount, timing, and character of
Portfolio income. For example, certain positions held for the Portfolio on the
last business day of each taxable year will be marked to market (i.e., treated
as if closed out) on that day, and any gain or loss associated with the
positions will be treated as 60% long-term and 40% short-term capital gain or
loss. Certain positions held for the Portfolio that substantially diminish its
risk of loss with respect to other positions in its portfolio may constitute
"straddles," and may be subject to special tax rules that would cause deferral
of Portfolio losses, adjustments in the holding periods of Portfolio securities,
and conversion of short-term into long-term capital losses. Certain tax
elections exist for straddles that may alter the effects of these rules.
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.
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>
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 Balanced 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.
("SFG"), as administrator
** 9(c) Form of Amended and Restated
Administrative Services Plan of the
Registrant
** 9(d) Form of Expense Reimbursement Agreement
between the Registrant and SFG, as administrator.
11 Consent of Price Waterhouse,
independent auditors of the Portfolio.
27 Financial Data Schedule
- -----------------------
*Incorporated by reference to the registration
statement on Form N-1A of the Registrant relating to its
series Government Income Portfolio File No. 811-3438, filed
March 21, 1994.
**Incorporated by reference to the registration
statement on Form N-1A of the Registrant relating to the
Portfolio, filed April 28, 1994.
Item 25. Persons Controlled by or under Common Control
with Registrant.
Not applicable.
Item 26. Number of Holders of Securities.
(1) (2)
Number of Record Holders
Title of Class (as of 4/21/95)
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).
<PAGE>
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.
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 Equity Portfolio, Small Cap
Equity Portfolio, Government Income 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:
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
Stockholder, Tampa Tank & Welding, Inc.
William R. Rhodes Director, Private Export Funding
Corporation
Rozanne L. Ridgway Director, 3M
Director, Bell Atlantic Corporation
Director, Boeing Company
Director, Emerson Electric Company
Member-International Advisory Board,
New Perspective Fund, Inc.
Director, RJR Nabisco, Inc.
Director, Sara Lee Corporation
Director, Union Carbide Corporation
<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 Equity Portfolio,
Cash Reserves Portfolio, U.S. Treasury Reserves Portfolio, Tax Free Reserves
Portfolio, International Equity Portfolio, Small Cap Equity Portfolio and
Government Income 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:
Name Address
Signature Financial Group Elizabethan Square, George Town,
(Cayman), Ltd. Grand Cayman, Cayman Islands, BWI
(administrator)
<PAGE>
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 No. 1 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
Susan Jakuboski
By: Susan Jakuboski
Assistant Treasurer of
The Premium Portfolios
<PAGE>
EXHIBIT INDEX
11 Consent of Price Waterhouse, independent auditors
of the Portfolio.
27 Financial Data Schedule.
Exhibit 11
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 Balanced Portfolio
appearing in the December 31, 1994 Annual Report of Landmark Balanced 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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<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<INVESTMENTS-AT-COST> 242,542
<INVESTMENTS-AT-VALUE> 244,078
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<ACCUMULATED-NII-PRIOR> 0
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