As filed with the Securities and Exchange Commission on May 1, 1997
File No. 811-8434
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 3
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:
(345) 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 LLP,
150 FEDERAL STREET, BOSTON, MA 02110
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* Relates only to International Equity Portfolio.
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EXPLANATORY NOTE
Beneficial interests in the Registrant are not registered under the
Securities Act of 1933, as amended (the "1933 Act"), because such interests are
issued solely in private placement transactions which do not involve any
"public offering" within the meaning of Section 4(2) of the 1933 Act.
Investments in the Registrant may be made only by investment companies, common
or commingled trust funds or similar organizations or entities which are
"accredited investors" within the meaning of Regulation D under the 1933 Act.
This Registration Statement does not constitute an offer to sell, or the
solicitation of an offer to buy, any beneficial interests in the Registrant.
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PART A
Responses to Items 1 through 3 and 5A have been omitted pursuant to
paragraph 4 of Instruction F of the General Instructions to Form N-1A.
Item 4. General Description of Registrant.
International Equity Portfolio (the "Portfolio") is a separate series of
The Premium Portfolios (the "Trust"). Citibank, N.A. ("Citibank" or the
"Adviser") is the investment adviser for the Portfolio. The Trust is an
open-end management investment company which was organized as a trust under the
laws of the State of New York on September 13, 1993. Beneficial interests in
the Portfolio are issued solely in private placement transactions which do not
involve any "public offering" within the meaning of Section 4(2) of the U.S.
Securities Act of 1933, as amended (the "1933 Act"). Investments in the
Portfolio may be made only by investment companies, common or commingled trust
funds or similar organizations or entities which are "accredited investors"
within the meaning of Regulation D under the 1933 Act. This Registration
Statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any "security" within the meaning of the 1933 Act.
BENEFICIAL INTERESTS IN THE PORTFOLIO ARE NOT DEPOSITS OR OBLIGATIONS OF,
OR GUARANTEED OR ENDORSED BY, CITIBANK, N.A. OR ANY OF ITS AFFILIATES, ARE NOT
INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION OR ANY OTHER AGENCY AND
INVOLVE INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
INVESTMENT OBJECTIVE AND POLICIES:
The investment objective of the Portfolio is long-term capital growth.
Dividend income, if any, is incidental to this investment objective.
The Portfolio seeks its objective by investing primarily in common stocks
of companies organized in countries other than the United States, including
developing countries ("non-U.S. issuers"). As a non-fundamental policy, at
least 65% of the value of the Portfolio's total assets is invested in equity
securities of issuers organized in at least three countries other than the
United States. For purposes of this policy, equity securities are defined as
common stock, securities convertible into common stock and trust or limited
partnership interests, and include securities purchased directly or in the form
of sponsored American Depositary Receipts ("ADRs"), European Depositary
Receipts ("EDRs") or other similar securities representing common stock of
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non-U.S. issuers. The Adviser seeks opportunities to invest in non-U.S.
economies which are growing faster than that of the U.S.
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") which
the Adviser believes possess above average prospects for growth. The Adviser
may also select other securities of non-U.S. issuers which it believes provide
an opportunity for appreciation, such as fixed income securities, convertible
and non-convertible bonds, preferred stock and warrants. The Portfolio's assets
usually consist of issues listed on securities exchanges, and its long-term
non-convertible debt investments carry at least a Baa rating from Moody's
Investors Service, Inc. ("Moody's") or a BBB rating from Standard & Poor's
Rating Services ("S&P") or are determined by the Adviser to be of equivalent
quality.
CERTAIN ADDITIONAL INVESTMENT POLICIES:
TEMPORARY INVESTMENTS. During periods of unusual economic or market
conditions or for temporary defensive purposes or liquidity, the Portfolio may
invest without limit in cash and in U.S. dollar-denominated high quality money
market and short-term instruments. These investments may result in a lower
yield than would be available from investments with a lower quality or longer
term.
OTHER PERMITTED INVESTMENTS. For more information regarding the
Portfolio's permitted investments and investment practices, see "Permitted
Investments and Investment Practices." The Portfolio will not necessarily
invest or engage in each of the investments and investment practices described
in "Permitted Investments and Investment Practices" but reserves the right to
do so.
INVESTMENT RESTRICTIONS. Part B of this Registration Statement contains a
list of specific investment restrictions which govern the investment policies
of the Portfolio, including a limitation that the Portfolio may borrow money
from banks in an amount not to exceed 1/3 of the Portfolio's net assets for
extraordinary or emergency purposes (e.g., to meet redemption requests);
securities will not be purchased for the Portfolio at any time at which
borrowings exceed 5% of the Portfolio's net assets (taken at market value).
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.
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PORTFOLIO TURNOVER. Securities of the Portfolio will be sold whenever the
Adviser believes it is appropriate to do so given the Portfolio's investment
objective, without regard to the length of time a particular security may have
been held. For the fiscal years ended December 31, 1995 and 1996 the
Portfolio's turnover rates were 51% and 109%, respectively. 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 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.
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.
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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. Prices at which the Portfolio may acquire
securities may be affected by trading by persons with material non-public
information and by securities transactions by brokers in anticipation of
transactions by 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 Portfolio may invest its assets in issuers located in developing
countries, which are generally defined as countries in the initial stages of
their industrialization cycles with low per capita income. All of the risks of
investing in non-U.S. securities are heightened by investing in 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.
Equity securities traded in certain foreign countries may trade at
price-earnings multiples higher than those of comparable companies trading on
securities markets in the United States, which may not be sustainable. Rapid
increases in money supply in certain countries may result in speculative
investment in equity securities which may contribute to volatility of trading
markets.
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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
ratio of the Portfolio is expected to be higher than those of investment
companies investing exclusively in U.S. securities.
INVESTMENT PRACTICES. Certain of the investment practices employed for the
Portfolio may entail certain risks. See "Permitted Investments and Investment
Practices" below.
PERMITTED INVESTMENTS AND INVESTMENT PRACTICES:
REPURCHASE AGREEMENTS. The Portfolio may enter into repurchase agreements
in order to earn a return on temporarily available cash. 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 33-1/3% of the
Portfolio's net assets.
In the event of the bankruptcy of the other party to a securities loan, a
repurchase agreement or reverse repurchase agreement, the Portfolio could
experience delays in recovering either the securities or cash. To the extent
that, in the meantime, the value of the securities loaned or sold has increased
or the value of the securities purchased has decreased, the Portfolio could
experience a loss.
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RULE 144A SECURITIES. The Portfolio may purchase restricted securities
that are not registered for sale to the general public. If the Adviser
determines that there is a dealer or institutional market in the securities,
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.
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.
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 objective. 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.
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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."
DEPOSITARY RECEIPTS FOR SECURITIES OF NON-U.S. ISSUERS. 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.
OTHER INVESTMENT COMPANIES. Subject to applicable statutory and regulatory
limitations, assets of the Portfolio may be invested in shares of other
registered investment companies. The Portfolio may invest up to 5% of its
assets in closed-end investment companies which primarily hold securities of
non-U.S. issuers.
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 $81
billion in assets worldwide. Citibank is a wholly-owned subsidiary of Citicorp.
Citibank's address is 153 East 53rd Street, New York, New York 10043.
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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.
Trevor Forbes is based in Citibank's London office and is the manager of
the Portfolio. Mr. Forbes, who has been a manager of the Portfolio since 1995,
is Head of European Equity Investment for Citibank. Prior to joining Citibank
in 1991 Mr. Forbes managed the investment business of Abbey Life, a major UK
based insurance group. Mr. Forbes calls on the extensive global network of
Citibank's investment business to select securities in the world markets.
For its services under the Advisory Agreement, the Adviser receives an
investment advisory fee, which is accrued daily and paid monthly, equal to
1.00% of the Portfolio's average daily net assets on an annualized basis for
the Portfolio's then current fiscal year. The investment advisory fee of the
Portfolio is higher than those paid by most investment companies in general.
The Trustees have determined that this advisory fee is reasonable given the
investment policy of investing primarily in non-U.S. securities. The Adviser
may voluntarily agree to waive a portion of its investment advisory fee.
December 31, 1996, the investment advisory fee paid to Citibank under the
Advisory Agreement was 1.00% of the Portfolio's average daily net assets for
that fiscal year.
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
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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. ("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. For the fiscal year
ended December 31, 1996, the Portfolio's total expenses were 1.00% of its
average daily net assets for that fiscal year.
All fee waivers are voluntary and may be reduced or terminated at any
time.
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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 six
active 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 is open for trading ("Business Day") (and on such other
days as are deemed necessary in order to comply with Rule 22c-1 under the U.S.
Investment Company Act of 1940, as amended (the "1940 Act")). This
determination is made once during each day as of the close of regular trading
on such Exchange. Values of the Portfolio's assets are determined on the basis
of their market or other fair value, as described in Item 19 of Part B.
Each investor in the Portfolio may add to or reduce its investment in the
Portfolio on each Business Day. As of the close of regular trading on the New
York Stock 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
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represents that investor's share of the aggregate beneficial interests in the
Portfolio. Any additions or withdrawals, which are to be effected on that day,
are then effected. Thereafter, the investor's percentage of the aggregate
beneficial interests in the Portfolio is then re-computed as the percentage
equal to the fraction (i) the numerator of which is the value of such
investor's investment in the Portfolio as of the close of regular trading on
such day plus or minus, as the case may be, the amount of any additions to or
withdrawals from the investor's investment in the Portfolio effected on such
day, and (ii) the denominator of which is the aggregate net asset value of the
Portfolio as of the same time on such day plus or minus, as the case may be,
the amount of the net additions to or withdrawals from the aggregate
investments in the Portfolio by all investors in the Portfolio. The percentage
so determined is then applied to determine the value of the investor's interest
in the Portfolio as of the close of regular trading on the following Business
Day of the Portfolio.
The Trust has determined that the Portfolio is properly treated as a
partnership for U.S. federal and New York state income tax purposes.
Accordingly, the Portfolio 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, expenses, capital gains or losses,
credits and other items 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.
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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 New York Stock 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-1
Investment Objective and Policies......................... B-1
Management of the Trust................................... B-15
Control Persons and Principal Holders of Securities....... B-18
Investment Advisory and Other Services.................... B-18
Brokerage Allocation and Other Practices.................. B-21
Capital Stock and Other Securities........................ B-23
Purchase, Redemption and Pricing of Securities............ B-24
Tax Status................................................ B-26
Underwriters ............................................. B-29
Calculations of Performance Data.......................... B-29
Financial Statements...................................... B-29
Item 12. General Information and History.
Not applicable.
Item 13. Investment Objective and Policies.
Part A contains additional information about the investment objective and
policies of the International 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 objective of the Portfolio is long-term capital growth.
Dividend income, if any, is incidental to this investment objective. The
investment objective of the Portfolio may be changed without approval by the
Portfolio's investors. Of course, there can be no assurance that the Portfolio
will achieve its investment objective.
Part A contains a discussion of the various types of securities in which
the Portfolio may invest and the risks involved in such investments. The
<PAGE>
following supplements the information contained in Part A concerning the
investment objective, policies and techniques of the Portfolio.
The Portfolio seeks its objective by investing primarily in common stocks
of companies organized in countries other than the United States, including
developing countries ("non-U.S. issuers"). As a non-fundamental policy, at
least 65% of the value of the Portfolio's total assets is invested in equity
securities of issuers organized in at least three countries other than the
United States. For purposes of this policy, equity securities are defined as
common stock, securities convertible into common stock and trust or limited
partnership interests, and include securities purchased directly or in the form
of sponsored American Depositary Receipts ("ADRs"), European Depositary
Receipts ("EDRs") or other similar securities representing common stock of
non-U.S. issuers. The Adviser seeks opportunities to invest in non-U.S.
economies which are growing faster than that of the U.S.
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") which
the Adviser believes possess above average prospects for growth. The Adviser
may also select other securities of non-U.S. issuers which it believes provide
an opportunity for appreciation, such as fixed income securities, convertible
and non-convertible bonds, preferred stock and warrants. The Portfolio's assets
usually consist of issues listed on securities exchanges, and its long-term
non-convertible debt investments carry at least a Baa rating from Moody's
Investors Service, Inc. ("Moody's") or a BBB rating from Standard & Poor's
Rating Services ("S&P") or are determined by the Adviser to be of equivalent
quality.
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.
<PAGE>
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.
SECURITIES OF NON-U.S. ISSUERS
The Portfolio will 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.,
<PAGE>
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.
The Portfolio may invest its assets in issuers located in developing
countries, which are generally defined as countries in the initial stages of
their industrialization cycles with low per capita income. All of the risks of
investing in non-U.S. securities are heightened by investing in 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,
<PAGE>
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.
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
<PAGE>
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 may be
able to protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the non-U.S. currency during the
period between the date the security is purchased or sold and the date on which
payment is made or received.
When the Adviser believes that the currency of a particular country may
suffer a substantial decline against the U.S. dollar, the 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
<PAGE>
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
<PAGE>
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 and other depositary receipts 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 these receipts are traded primarily in non-U.S. currencies, changes
in currency exchange rates will affect the value of these receipts. 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 receipts 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 receipts.
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.
<PAGE>
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
<PAGE>
Stock Exchange (and subsidiaries thereof). Loans of securities would be secured
continuously by collateral in cash, cash equivalents, or U.S. Treasury
obligations maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The cash collateral would be invested in
high quality short-term instruments. Either party has the right to terminate a
loan at any time on customary industry settlement notice (which will not
usually exceed three business 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 with respect to cash collateral
would also receive compensation based on investment of the collateral (subject
to a rebate payable to the borrower). Where the borrower provides the Portfolio
with collateral consisting of U.S. Treasury obligations, the borrower is also
obligated to pay the Portfolio a fee for use of the borrowed securities. 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. In addition, the Portfolio could suffer loss if the
borrower terminates the loan and the Portfolio is forced to liquidate
investments in order to return the cash collateral to the buyer. If the Adviser
determines to make loans, it is not intended that the value of the securities
loaned by the Portfolio would exceed 33-1/3% of the value of its net 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
expects always to have cash, cash equivalents or high quality debt securities
sufficient to cover any commitments or to limit any potential risk. However,
even though the 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
<PAGE>
"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 from banks in an amount not to exceed 1/3 of
the current value of its net assets, including the amount borrowed (the
<PAGE>
Portfolio may not 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) Purchase any security or evidence of interest therein on margin,
except that such short-term credit may be obtained for the Portfolio as may be
necessary for the clearance of purchases and sales of securities.
(3) Underwrite securities issued by other persons, except insofar as the
Trust acting on behalf of the Portfolio may technically be deemed an
underwriter under the Securities Act of 1933 in selling a security.
(4) Make loans to other persons except (a) through the lending of its
portfolio securities and provided that any such loans not exceed 33-1/3% of the
Portfolio's net assets, (b) through the use of fixed time deposits or
repurchase agreements or the purchase of short-term obligations or (c) by
purchasing a portion of an issue of debt securities of types commonly
distributed privately to financial institutions. 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.
(5) Purchase or sell real estate (including limited partnership interests
but excluding securities secured by real estate or interests therein),
interests in oil, gas or mineral leases, commodities or commodity contracts in
the ordinary course of business (the Portfolio reserves the freedom of action
to hold and to sell real estate acquired as a result of the ownership of
securities by the Portfolio).
(6) With respect to 75% of the Portfolio's total assets, purchase
securities of any issuer if such purchase at the time thereof would cause more
than 5% of the Portfolio's assets (taken at market value) to be invested in the
securities of such issuer (other than securities or obligations issued or
guaranteed by the United States or any agency or instrumentality of the United
States); provided that for purposes of this restriction the issuer of an option
or futures contract shall not be deemed to be the issuer of the security or
securities underlying such contract.
(7) With respect to 75% of the total assets of the Portfolio, purchase
securities of any issuer if such purchase at the time thereof would cause more
than 10% of the voting securities of such issuer to be held by the Portfolio.
<PAGE>
(8) Concentrate its investments in any particular industry (including the
securities of foreign governments or multilateral lending institutions), except
that positions in futures or options contracts shall not be subject to this
restriction.
(9) Issue any senior security (as that term is defined in the 1940 Act)
if such issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder, except as appropriate to evidence a debt
incurred without violating Investment Restriction (1) above.
NON-FUNDAMENTAL RESTRICTIONS
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),
(iii)sell any security which the Portfolio does not own unless by virtue
of its ownership of other securities there is at the time of sale a right to
obtain securities, without payment of further consideration, equivalent in kind
and amount to the securities sold and provided that if such right is
conditional the sale is made upon the same conditions,
(iv) invest for the purpose of exercising control or management,
(v) purchase securities issued by any registered investment company,
except by purchase in the open market where no commission or profit to a
sponsor or dealer results from such purchase other than the customary broker's
commission, or except when such purchase, though not made in the open market,
is part of a plan of merger or consolidation; provided, however, that the
Portfolio will not purchase the securities of any registered investment company
if such purchase at the time thereof would cause more than 10% of the total
assets of the Portfolio (taken 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),
<PAGE>
(vi) taken together with any investments described in clause (ix) below,
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) taken together with any investments described in clause (vi) above,
invest in securities which are subject to legal or contractual restrictions on
resale (other than fixed time deposits, repurchase agreements maturing in not
more than seven days and securities which may be resold pursuant to Rule 144A
under the 1933 Act if the Board of Trustees determines that a liquid market
exists for such securities) if, as a result thereof, more than 15% of the net
assets of the Portfolio (taken at market value) would be so invested (including
fixed time deposits and repurchase agreements maturing in more than seven
days), or
(x) 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.
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
<PAGE>
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 (aged 54) -- Chairman and Director, Catalyst, Inc.
(Management Consultants) (since June, 1992); President, Chief Operating Officer
and Director, Deven International, Inc. (International Consultants) (June, 1991
to June, 1992); President and Director, Elliott J. Berv & Associates
(Management Consultants) (since May, 1984). His address is 15 Stornoway Drive,
Cumberland Foreside, Maine.
PHILIP W. COOLIDGE* (aged 45) -- President of the Trust; Chairman, Chief
Executive Officer and President, Signature Financial Group, Inc. and The
Landmark Funds Broker-Dealer Services, Inc. (since December, 1988).
MARK T. FINN (aged 53) -- President and Director, Delta Financial, Inc.
(since June, 1983); Chairman of the Board and Chief Executive Officer, FX 500
Ltd. (Commodity Trading Advisory Firm) (since April, 1990); Director, Vantage
Consulting Group, Inc. (since October, 1988). His address is 3500 Pacific
Avenue, P.O. Box 539, Virginia Beach, Virginia.
WALTER E. ROBB, III (aged 69) -- President, Benchmark Consulting Group,
Inc. (since 1991); Principal, Robb Associates (corporate financial advisers)
(since 1978); President, Benchmark Advisors, Inc. (Corporate Financial
Advisors) (since 1989); Trustee of certain registered investment companies in
the MFS Family of Funds. His address is 35 Farm Road, Sherborn, Massachusetts.
<PAGE>
OFFICERS
PHILIP W. COOLIDGE* (aged 45) -- President of the Trust; Chairman, Chief
Executive Officer and President, Signature Financial Group, Inc. and The
Landmark Funds Broker-Dealer Services, Inc. (since December, 1988).
SAMANTHA M. BURGESS* (aged 27) -- Assistant Secretary and Assistant
Treasurer of the Trust; Assistant Vice President, Signature Financial Group,
Inc. (since November, 1995); Graduate Student, Loyola University (prior to
August, 1995).
CHRISTINE A. DRAPEAU* (aged 26) -- Assistant Secretary and Assistant Treasurer
of the Trust; Assistant Vice President, Signature Financial Group, Inc. (since
January, 1996); Paralegal and Compliance Officer, various financial companies
(July, 1992 to January, 1996); Graduate Student, Bentley College (prior to
December, 1994).
JOHN R. ELDER* (aged 48) -- Treasurer of the Trust; Vice President,
Signature Financial Group, Inc. (since April, 1995); Treasurer of the Phoenix
Family of Mutual Funds, Phoenix Home Life Mutual Insurance Company (1983 to
March, 1995).
LINDA T. GIBSON* (aged 31) -- Secretary of the Trust; Vice President,
Signature Financial Group, Inc. (since May, 1992); Assistant Secretary, The
Landmark Funds Broker-Dealer Services, Inc. (since October, 1992); Law Student,
Boston University School of Law (September, 1989 to May, 1992).
JOAN R. GULINELLO* (aged 41) -- Assistant Secretary and Assistant
Treasurer of the Trust; Vice President, Signature Financial Group, Inc. (since
October, 1993); Secretary, The Landmark Funds Broker-Dealer Services, Inc.
(since October, 1995); Vice President and Assistant General Counsel,
Massachusetts Financial Services Company (prior to October, 1993).
JAMES E. HOOLAHAN* (aged 49) -- Vice President, Assistant Secretary and
Assistant Treasurer of the Trust; Senior Vice President, Signature Financial
Group, Inc. His address is 437 Madison Avenue, 39th Floor, New York, New
York.
SUSAN JAKUBOSKI* (aged 33) -- Assistant Secretary and Assistant Treasurer
of the Trust; Vice President, Signature Financial Group (Cayman) Ltd. (since
August, 1994); Senior Fund Administrator, Signature Financial Group, Inc.
(since August, 1994); Assistant Treasurer, Signature Broker-Dealer Services,
Inc. (since September, 1994); Fund Compliance Administrator, Concord Financial
Group (November, 1990 to August, 1994). Her address is Elizabethan Square,
George Town, Grand Cayman, Cayman Islands, BWI.
<PAGE>
MOLLY S. MUGLER* (aged 45) -- Assistant Secretary and Assistant Treasurer
of the Trust; Vice President, Signature Financial Group, Inc.; Assistant
Secretary, The Landmark Funds Broker-Dealer Services, Inc. (since December,
1988).
KARYN A. NOKE* (aged 26) - Vice President, Assistant Secretary and
Assistant Treasurer of the Trust; Vice President, Signature Financial Group
(Cayman) Ltd. (since September, 1996); Assistant Vice President, Signature
Financial Group, Inc. (May, 1993 to August, 1996); Student, University of
Massachusetts (prior to May, 1993).
SHARON M. WHITSON* (aged 48) -- Assistant Secretary and Assistant
Treasurer of the Trust; Assistant Vice President, Signature Financial Group,
Inc. (since November, 1992); Associate Trader, Massachusetts Financial Services
Company (prior to November, 1992).
JULIE J. WYETZNER* (aged 37) -- Vice President, Assistant Secretary and
Assistant Treasurer of the Trust; Vice President, Signature Financial Group,
Inc. Her address is 437 Madison Avenue, New York, New York.
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.
The Trustees of the Portfolio received the following remuneration from
the Portfolio during its fiscal year ended December 31, 1996.
<PAGE>
Trustee Compensation Table
Aggregate Compensation Total Compensation from
Trustee from the Trust (1) Trust and Complex (1)
Elliott J. Berv $3,354 $42,250
Philip W. Coolidge $0 $0
Mark T. Finn $3,349 $43,000
Walter E. Robb, III $3,444 $45,375
(1) Information relates to the calendar year ended December 31, 1996. Messrs.
Berv, Coolidge, Finn and Robb served as Trustees of 24, 46, 26 and 24 funds
or portfolios, respectively, within the Landmark Family of Funds.
Item 15. Control Persons and Principal Holders of Securities.
As of April 1, 1997, Landmark International Equity Fund (the "Fund")
owned approximately 64.0% and Citi International Equity Fund, Ltd. owned
approximately 36.0% 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
International Funds, a Massachusetts business trust organized on August 7, 1990
and registered under the 1940 Act as an investment company. Landmark
International Funds was known as Landmark International Equity Fund until its
name was changed effective May 5, 1995.
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 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
<PAGE>
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 May 1, 1994 (commencement of operations)
to December 31, 1994 and for the fiscal years ended December 31, 1995 and 1996,
the investment advisory fees paid to Citibank under the Advisory Agreement were
$218,950, $345,632 and $472,204, respectively.
Pursuant to an administrative services agreement (the "Administrative
Services Agreement"), SFG (in its capacity under the Administrative Services
Agreement, the "Administrator") provides the Trust with general office
facilities and supervises the overall administration of the Trust, including,
among other responsibilities, the negotiation of contracts and fees with, and
the monitoring of performance and billings of, the Trust's independent
contractors and agents; the preparation and filing of all documents required
for compliance by the Trust with applicable laws and regulations; and arranging
for the maintenance of books and records of the Trust. The Administrative
Services Agreement with SFG continues in effect if such continuance is
specifically approved at least annually by the Board of Trustees or by a vote
of a majority of the outstanding voting securities of the Trust and, in either
case, by a majority of the Trustees who are not parties to the Administrative
Services Agreement or interested persons of any such party. The Administrator
provides persons satisfactory to the Board of Trustees to serve as Trustees and
officers of the Trust. Such Trustees and officers, as well as certain other
employees and Trustees of the Trust, may be directors, officers or employees of
the Administrator or its affiliates. For the period May 1, 1994 (commencement
of operations) to December 31, 1994 and for the fiscal years ended December 31,
1995 and 1996, the fees payable by the Trust to the Administrator under the
Administrative Services Agreement with respect to the Portfolio were $10,948,
$17,281 and $23,610 (of which $10,363 was voluntarily waived), respectively.
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
<PAGE>
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.
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 performs such sub-administrative duties in a
manner consistent with the Operating Policies and Procedures of the Trust.
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
<PAGE>
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 to the Portfolio. The Trust, on behalf of the Portfolio, has
also entered into a Fund Accounting Agreement with IBT Fund Services, Canada
("IBT Canada") pursuant to which IBT Canada provides fund accounting services
to the Portfolio. Pursuant to a Transfer Agency and Service Agreement with the
Trust, on behalf of the Portfolio, Signature Financial Services, Inc. ("SFSI")
provides transfer agency services to the Portfolio.
The principal business address of IBT is One Lincoln Plaza, Boston,
Massachusetts 02111. The address of IBT Canada is One First Canadian Place,
Suite 2800, Toronto, Ontario, Canada M5X 1C8. 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 3300, 1 First Canadian Place, Toronto, Ontario M5X
1H7, Canada.
Bingham, Dana & Gould LLP, 150 Federal Street, Boston, MA 02110, acts as
counsel for the Portfolio.
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. 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
<PAGE>
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.
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 or obtain such services
independently.
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 and for the fiscal years
ended December 31, 1995 and 1996, the Portfolio paid brokerage commissions of
$48,435, $81,000 and $236,514, respectively.
<PAGE>
Item 18. Capital Stock and Other Securities.
Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Trust and to establish series, each of which shall
be a subtrust, the beneficial interests in which shall be separate and distinct
from the beneficial interests in any other series. The Portfolio is one of the
series of the Trust. Investors in the Portfolio are entitled to participate pro
rata in distributions of taxable income, loss, gain and credit of the
Portfolio. Upon liquidation or dissolution of the Portfolio, investors are
entitled to share pro rata in the Portfolio's net assets available for
distribution to its investors. Interests in the Portfolio have no preference,
pre-emptive, conversion or similar rights and are fully paid and
non-assessable, except as set forth below. Interests in the Portfolio may not
be transferred.
Each investor is entitled to a vote in proportion to its percentage of
the aggregate beneficial interests in the Portfolio. Investors in the Portfolio
do not have cumulative voting rights, and investors holding more than 50% of
the 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
<PAGE>
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 or she would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
or her office.
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
<PAGE>
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.
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 the
Portfolio's 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
<PAGE>
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 Portfolio 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,
expense, capital gains, capital losses, credits and other items 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 Portfolio's taxable year ends December 31. Although, as described
above, the Portfolio 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
<PAGE>
of the Portfolio and be entitled to treat as earned by it the portion of the
Portfolio's gross income attributable to that share. The Trust also believes
that each such investor should be deemed to hold its proportionate share of the
Portfolio's assets for the period the Portfolio has held the assets or for the
period the investor has been a partner in the Portfolio, whichever is shorter.
Each investor should consult its tax advisers regarding whether, in light of
its particular tax status and any special tax rules applicable to it, this
approach applies to its investment in the Portfolio, or whether the Portfolio
should be treated, as to it, as a separate entity as to which the investor has
no direct interest in Portfolio assets or operations.
In order to enable an investor in the Portfolio that is otherwise
eligible to qualify as a RIC under the Code to so qualify, the Trust intends
that the Portfolio will satisfy the requirements of Subchapter M of the Code
relating to the nature of the Portfolio's gross income and the composition
(diversification) and holding period of the Portfolio's assets as if those
requirements were directly applicable to the Portfolio and to allocate and
permit withdrawals of its net investment income and any net realized capital
gains in a manner that will enable an investor that is a RIC to comply with the
qualification requirements imposed by Subchapter M of the Code.
The Trust will allocate at least annually among the Portfolio's investors
each investor's distributive share of the Portfolio's net investment income,
net realized capital gains, and any other items of income, gain, loss,
deduction, or credit in a manner intended to comply with the Code and
applicable U.S. Treasury regulations.
To the extent the cash proceeds of any withdrawal or distribution exceed
an investor's adjusted tax basis in its partnership interest in the Portfolio,
the investor will generally realize gain for U.S. federal income tax purposes.
If, upon a complete withdrawal (i.e., a redemption of its entire interest in
the Portfolio), the investor's adjusted tax basis in its partnership interest
in the Portfolio exceeds the proceeds of the withdrawal, the investor will
generally realize a loss for federal income tax purposes. An investor's
adjusted tax basis in its partnership interest in the Portfolio will generally
be the aggregate price paid therefor, increased by the amounts of its
distributive shares of items of realized net income and gain (including income,
if any, exempt from U.S. Federal income tax), and reduced, but not below zero,
by the amounts of its distributive shares of items of net loss and the amounts
of any distributions received by the investor. This discussion does not address
any distributions by the Portfolio in kind (i.e., any distributions of readily
marketable securities or other non-cash property), which will be subject to
special tax rules and may have consequences different from those described in
this paragraph.
The Portfolio may be subject to foreign withholding and other 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.
<PAGE>
The Trust does not anticipate that investors qualifying as RICs and investing
substantially all of their assets in the Portfolio will be able to pass through
to their shareholders any foreign tax credit for federal income tax purposes
with respect to the foreign withholding taxes paid by the Portfolio, if any.
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 investments
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 and futures contracts
and options 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 sold) 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 and adjustments in the holding
periods of Portfolio securities. Certain tax elections exist for straddles that
may alter the effects of these rules. The Portfolio will limit its activities
in forward currency contracts and options to the extent necessary to enable any
investor that is a RIC to meet the requirements of Subchapter M of the Code.
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.
<PAGE>
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 non-U.S. 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.
The financial statements contained in the Annual Report of the Portfolio
for the fiscal year ended December 31, 1996, as filed with the Securities and
Exchange Commission, via the EDGAR system, on February 26, 1997 (Accession
Number 0000927084-97-000001), are incorporated by reference into this Part B.
A copy of the Annual Report of the Portfolio accompanies this Part B.
<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, 1996*
Statement of Assets and Liabilities at December 31, 1996*
Statement of Operations for the year ended December 31, 1996*
Statement of Changes in Net Assets for the years ended December 31,
1995 and 1996*
Financial Highlights for the period from May 1, 1994
(commencement of operations) to December 31, 1994
and for the years ended December 31, 1995 and 1996*
Notes to Financial Statements - December 31, 1996*
Independent Auditors' Report - February 4, 1997*
- --------------------
* Incorporated herein by reference to the Annual Report of the Registrant
relating to International Equity Portfolio (the "Portfolio") for the
fiscal year ended December 31, 1996 (Accession Number 0000927084-97-000001).
(b) Exhibits
* 1(a) Copy of the Declaration of Trust of the Trust
** 1(b) Form of Amendment to Declaration of Trust
**** 1(c) Amendment to the 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
<PAGE>
*** 8 Form of Custodian Agreement between the Registrant and
Investors Bank & Trust Company, as custodian
* 9(a) Form of Administrative Services Agreement between the
Registrant and Signature Financial Group (Cayman) Ltd., as
administrator
* 9(b) Form of Amended and Restated Administrative Services Plan
of the Registrant
11 Consent of Price Waterhouse
27 Financial Data Schedule
- -----------------------
* Incorporated herein 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 herein by reference to the registration statement on Form
N-1A of the Registrant relating to its series Balanced Portfolio File
No. 811-8502, filed April 28, 1994.
*** Incorporated herein by reference to the Registration Statement on Form
N-1A of the Registrant relating to the Portfolio, filed March 21, 1994.
**** Incorporated herein by reference to Amendment No. 2 to the Registration
Statement on Form N-1A of the Registrant relating to the Portfolio,
filed April 29, 1996.
Item 25. Persons Controlled by or under Common Control with Registrant.
Not applicable.
<PAGE>
Item 26. Number of Holders of Securities.
(1) (2)
Title of Class Number of Record Holders
Beneficial Interests (as of April 29, 1997)
International Equity Portfolio 2
Item 27. Indemnification.
Reference is hereby made to Article V of the Declaration of Trust
(Exhibits 1(a) and 1(b) to this Registration Statement).
The Trustees and officers of the Trust and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940,
as amended.
Item 28. Business and Other Connections of Investment Adviser.
Citibank, N.A. ("Citibank") is a commercial bank offering a wide range of
banking and investment services to customers across the United States and
around the world. Citibank is a wholly-owned subsidiary of Citicorp, a
registered bank holding company. Citibank also serves as investment adviser to
the following registered investment companies (or series thereof): The Premium
Portfolios (Balanced Portfolio, Equity Portfolio, Government Income Portfolio,
Emerging Asian Markets Equity Portfolio and Small Cap Equity Portfolio), Tax
Free Reserves Portfolio, U.S. Treasury Reserves Portfolio, Cash Reserves
Portfolio, Asset Allocation Portfolios (Asset Allocation Portfolio 200, Asset
Allocation Portfolio 300, Asset Allocation Portfolio 400 and Asset Allocation
Portfolio 500), Landmark Multi-State Tax Free Funds (Landmark New York Tax Free
Reserves, Landmark Connecticut Tax Free Reserves and Landmark California Tax
Free Reserves), Landmark Fixed Income Funds (Landmark Intermediate Income
Fund), Landmark Tax Free Income Funds (Landmark National Tax Free Income Fund
and Landmark New York Tax Free Income Fund), Landmark VIP Funds (Landmark VIP
U.S. Government Portfolio, Landmark VIP Balanced Portfolio, Landmark VIP Equity
Portfolio and Landmark VIP International Equity Portfolio) and Variable Annuity
Portfolios (CitiSelectSM VIP Folio 200, CitiSelectSM VIP Folio 300,
CitiSelectSM VIP Folio 400, CitiSelectSM VIP Folio 500 and Landmark Small Cap
Equity VIP Fund). Citibank and its affiliates manage assets in excess of $81
billion worldwide. The principal place of business of Citibank is located at
399 Park Avenue, New York, New York 10043.
<PAGE>
The Chairman of the Board and a Director of Citibank is John S. Reed. The
following are Vice Chairmen of the Board and Directors of Citibank: Paul J.
Collins, William R. Rhodes and H. Onno Ruding. Other Directors of Citibank are
D. Wayne Calloway, former Chairman and Chief Executive Officer, PepsiCo, Inc.,
Purchase, New York; Kenneth T. Derr, Chairman and Chief Executive Officer,
Chevron Corporation; John M. Deutch, Director, CMS Energy; Reuben Marks,
Chairman and Chief Executive Officer, Colgate-Palmolive Company; Richard D.
Parsons, Member, Board of Representatives; Rozanne L. Ridgway, President, The
Atlantic Council of the United States; Robert B. Shapiro, President and Chief
Operating Officer, Monsanto Company; Frank A. Shrontz, Chairman and Chief
Executive Officer, The Boeing Company, Seattle, Washington; Roger B. Smith,
Former Chairman and Chief Executive Officer, General Motors Corporation;
Franklin A. Thomas, President, The Ford Foundation, New York, New York; and
Edgar S. Woolard, Jr., Chairman and Chief Executive Officer, E.I. DuPont De
Nemours & Company.
Each of the individuals named above is also a Director of Citicorp. In
addition, the following persons have the affiliations indicated:
D. Wayne Calloway Director, Exxon Corporation
Director, General Electric Company
Director, Pepsico, Inc.
Paul J. Collins Director, Kimberly-Clark Corporation
Kenneth T. Derr Director, American Telephone and Telegraph, Co.
Director, Chevron Corporation
Director, Potlatch Corporation
John M. Deutch Director, CMS Energy
Director, Palomar Medical Technologies, Inc.
Reuben Marks Director, Colgate-Palmolive Company
Director, New York Stock Exchange
Director, Time Warner, Inc.
Non-Executive Director, Pearson, PLC
Richard D. Parsons Director, Federal National
Mortgage Association
Director, Philip Morris Companies Incorporated
Member, Board of Representatives,
Time Warner
Entertainment Company, L.P.
Director and President, Time Warner, Inc.
<PAGE>
John S. Reed Director, Monsanto Company
Director, Philip Morris Companies
Incorporated
Stockholder, Tampa Tank & Welding, Inc.
William R. Rhodes Director, Private Export Funding
Corporation
Rozanne L. Ridgway Director, 3M
Director, Bell Atlantic Corporation
Director, The Boeing Company
Director, Emerson Electric Company
Member-International Advisory Board,
New Perspective Fund, Inc.
Director, RJR Nabisco, Inc.
Director, Sara Lee Corporation
Director, Union Carbide Corporation
H. Onno Ruding Member, Board of Supervisory Directors,
Amsterdam Trustee's Kantoor
Board Member, Corning Incorporated
Advisor, Intercena (C&A) (Netherlands)
Member, Board of Advisers, Pechiney S.A.
Member, Board of Advisers, Robeco N.V.
Advisory Director, Unilever N.V.
Advisory Director, Unilever PLC
Robert B. Shapiro Director, G.D. Searle & Co.
Director, Silicon Graphics
Director, Monsanto Company
Director, The Nutrasweet Company
Frank A. Shrontz Director, 3M
Director, Baseball of Seattle, Inc.
Director, The Boeing Company
Director, Boise Cascade Corp.
Director, Chevron Corporation
<PAGE>
Franklin A. Thomas Director, Aluminum Company of America
Director, Cummins Engine Company, Inc.
Director, Lucent Technologies
Director, Pepsico, Inc.
Edgar S. Woolard, Jr. Director, E.I. DuPont De Nemours & Company
Director, Apple Computer, Inc.
Director, Zurich Holding Company of America, Inc.
Advisory Director, Zurich
Insurance Corporation
Item 29. Principal Underwriters.
(a) The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS"), the
Registrant's exclusive placement agent, is also the distributor for Landmark
International Equity Fund, Landmark Emerging Asian Markets Equity Fund,
Landmark U.S. Treasury Reserves, Landmark Cash Reserves, Premium U.S. Treasury
Reserves, Premium Liquid Reserves, Landmark Institutional U.S. Treasury
Reserves, Landmark Institutional Liquid Reserves, Landmark Tax Free Reserves,
Landmark California Tax Free Reserves, Landmark Connecticut Tax Free Reserves,
Landmark New York Tax Free Reserves, Landmark U.S. Government Income Fund,
Landmark Intermediate Income Fund, Landmark Balanced Fund, Landmark Equity
Fund, Landmark Small Cap Equity Fund, Landmark National Tax Free Income Fund,
Landmark New York Tax Free Income Fund, Landmark VIP Funds (Landmark VIP U.S.
Government Portfolio, Landmark VIP Balanced Portfolio, Landmark VIP Equity
Portfolio and Landmark VIP International Equity Portfolio), Variable Annuity
Portfolios (CitiSelectSM VIP Folio 200, CitiSelectSM VIP Folio 300,
CitiSelectSM VIP Folio 400, CitiSelectSM VIP Folio 500 and Landmark Small Cap
Equity VIP Fund), CitiSelectSM Folio 200, CitiSelectSM Folio 300, CitiSelectSM
Folio 400 and CitiSelectSM Folio 500. LFBDS is also the placement agent for
Balanced Portfolio, Equity Portfolio, Small Cap Equity Portfolio, Government
Income Portfolio, Emerging Asian Markets Equity Portfolio, Tax Free Reserves
Portfolio, Cash Reserves Portfolio, U.S. Treasury Reserves Portfolio, Asset
Allocation Portfolio 200, Asset Allocation Portfolio 300, Asset Allocation
Portfolio 400 and Asset Allocation Portfolio 500.
(b) The information required by this Item 29 with respect to each
director and officer of LFBDS is incorporated by reference to Schedule A of
Form BD filed by LFBDS pursuant to the Securities and Exchange Act of 1934
(File No. 8-32417).
(c) Not applicable.
<PAGE>
Item 30. Location of Accounts and Records.
The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:
Name Address
Signature Financial Group Elizabethan Square, George Town,
(Cayman) Ltd. Grand Cayman, Cayman Islands, BWI
(administrator)
Investors Bank & Trust Company One Lincoln Plaza
(custodian) Boston, MA 02111
IBT Fund Services, Canada One First Canadian Place
(accounting services agent) Suite 2800
Toronto, Ontario
M5X 1C8 Canada
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
(transfer agent) Suite 5850, P.O. Box 231
Toronto, Ontario
M5X lC8 Canada
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
The Registrant undertakes to comply with the provisions of Section 16(c)
of the Investment Company Act of 1940.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment to its Registration Statement on Form
N-1A to be signed on its behalf by the undersigned, thereunto duly authorized,
in George Town, Grand Cayman, Cayman Islands, BWI on the 30th day of April,
1997.
THE PREMIUM PORTFOLIOS
on behalf of International Equity Portfolio
By: Susan Jakuboski
Assistant Treasurer of
The Premium Portfolios
<PAGE>
EXHIBIT INDEX
Exhibit No.: Description:
11 Consent of Price Waterhouse
27 Financial Data Schedule
Exhibit 11
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in Part B constituting
part of this Post-Effective Amendment No. 3 to the registration statement on
Form N-1A (the "Registration Statement") of The Premium Portfolios of our
report dated February 4, 1997, relating to the financial statements and
financial highlights of International Equity Portfolio appearing in the
December 31, 1996 Annual Report of Landmark International Equity Fund, which
are also incorporated by reference into the Registration Statement. We also
consent to the reference to us under the heading "Investment Advisory and Other
Services" in Part B.
Price Waterhouse
Chartered Accountants
Toronto, Ontario
April 28, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000927084
<NAME> INTERNATIONAL EQUITY PORTFOLIO
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 46,652,068
<INVESTMENTS-AT-VALUE> 48,071,242
<RECEIVABLES> 2,036,391
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 661,654
<TOTAL-ASSETS> 50,769,287
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<PAID-IN-CAPITAL-COMMON> 49,056,241
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<NET-INVESTMENT-INCOME> 306,984
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<APPREC-INCREASE-CURRENT> (2,379,237)
<NET-CHANGE-FROM-OPS> 1,559,817
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 28,377,160
<NUMBER-OF-SHARES-REDEEMED> (20,994,299)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 8,942,678
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
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<GROSS-EXPENSE> 535,571
<AVERAGE-NET-ASSETS> 47,220,427
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