Rule 497(E)-File Nos. 33-6540 and 811-5033

                                                                   Statement of
                                                         Additional Information
LANDMARK U.S. GOVERNMENT INCOME FUND                              April 3, 1995
LANDMARK INTERMEDIATE INCOME FUND                    AS AMENDED JANUARY 2, 1996
(Members of the LandmarkSM Family of Funds)                CLASS A AND B SHARES


     Each of Landmark U.S. Government Income Fund (the "Government Income Fund")
and Landmark  Intermediate  Income Fund (the  "Intermediate  Income  Fund",  and
together with the  Government  Income Fund, the "Funds") is a series of Landmark
Fixed Income Funds (the "Trust").  The address and telephone number of the Trust
are 6 St. James Avenue,  Boston,  Massachusetts 02116, (617) 423-1679. The Trust
invests  all of the  investable  assets  of the  Government  Income  Fund in the
Government Income Portfolio (the "Portfolio"), which is a separate series of The
Premium Portfolios (the "Portfolio  Trust").  The address of the Portfolio Trust
is Elizabethan Square, George Town, Grand Cayman, British West Indies.

     FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED BY, CITIBANK,
N.A. OR ANY OF ITS AFFILIATES,  ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION  OR ANY  OTHER  AGENCY,  AND  INVOLVE  INVESTMENT  RISKS,  INCLUDING
POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.

Table of Contents                                        Page

The Funds                                                  2
Investment Objectives, Policies and Restrictions           3
Performance Information                                   21
Determination of Net Asset Value;                         23
      Valuation of Securities;
      Additional Purchase and Redemption Information
Management                                                25
Portfolio Transactions                                    36
Description of Shares, Voting Rights and Liabilities      38
Certain Additional Tax Matters                            40
Independent Accountants and Financial Statements          42
Appendix A                                                43

     This Statement of Additional  Information sets forth  information which may
be of interest to investors but which is not necessarily  included in the Funds'
Prospectus,  dated April 3, 1995, by which shares of the Funds are offered. This
Statement  of  Additional  Information  should be read in  conjunction  with the
Prospectus,  a copy of which may be obtained by an  investor  without  charge by
contacting the Funds'  Distributor  (see inside back cover for address and phone
number).

THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS AND IS
AUTHORIZED FOR DISTRIBUTION TO PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.





                                  1. THE FUNDS

     Landmark  Fixed  Income  Funds  (the  "Trust")  is an  open-end  management
investment company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on June 23, 1986. The Trust was known as "Landmark
U.S. Government Income Fund" until its name was changed effective June 11, 1992.
This  Statement of Additional  Information  describes  Landmark U.S.  Government
Income Fund and Landmark  Intermediate  Income Fund, each of which is a separate
series of the Trust.  References in this Statement of Additional  Information to
the  "Prospectus"  are to the  Prospectus,  dated April 3, 1995, of the Trust by
which shares of the Funds are offered.

     The Trust seeks the investment  objectives of the Government Income Fund by
investing all of its  investable  assets in  Government  Income  Portfolio  (the
"Portfolio").  The  Portfolio  is  a  series  of  The  Premium  Portfolios  (the
"Portfolio  Trust")  and  is  an  open-end,  diversified  management  investment
company.  The Portfolio has the same  investment  objectives and policies as the
Government  Income Fund.  Because the Government Income Fund invests through the
Portfolio,  all  references in this  Statement of Additional  Information to the
Government  Income Fund include the  Portfolio,  except as otherwise  noted.  In
addition,  references  to the Trust,  insofar as they  relate to the  Government
Income Fund, also include the Portfolio Trust, except as otherwise noted.

     Citibank,  N.A.  ("Citibank" or the "Adviser") is investment adviser to the
Intermediate Income Fund and the Portfolio.  The Adviser manages the investments
of the Intermediate  Income Fund and the Portfolio from day to day in accordance
with such Fund's and the  Portfolio's  investment  objectives and policies.  The
selection of investments for the Intermediate  Income Fund and the Portfolio and
the way they are managed  depend on the conditions and trends in the economy and
the financial marketplaces.

     The  Landmark  Funds   Broker-Dealer   Services,   Inc.   ("LFBDS"  or  the
"Administrator"),  the administrator of each Fund, and Signature Financial Group
(Cayman) Ltd. ("SFG"), either directly or through a wholly-owned subsidiary, the
administrator  of the Portfolio (the "Portfolio  Administrator"),  supervise the
overall administration of each Fund and the Portfolio,  respectively. The Boards
of Trustees of the Trust and the Portfolio Trust provide broad  supervision over
the affairs of the Funds and the  Portfolio,  respectively.  Shares of the Funds
are continuously sold by LFBDS, the Funds' distributor (the "Distributor"), only
to investors who are customers of a financial institution,  such as a federal or
state-chartered  bank,  trust company,  savings and loan  association or savings
bank,  or a securities  broker,  that has entered into a  shareholder  servicing
agreement with the Trusts (collectively, "Shareholder Servicing Agents"). Shares
of each Fund are sold at net asset value, plus, in the case of Class A Shares, a
sales charge that may be reduced on purchases involving  substantial amounts and
that may be eliminated in certain  circumstances.  LFBDS receives a distribution
fee from each Fund pursuant to a Distribution  Plan adopted with respect to each
class of shares of the Funds in accordance  with Rule 12b-1 under the Investment
Company Act of 1940, as amended (the "1940 Act").  LFBDS also receives a service
fee from the assets of each Fund  represented by Class B shares  pursuant to the
Distribution Plan adopted with respect to the Class B shares of the Funds.

               2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

                              INVESTMENT OBJECTIVES

     The investment  objectives of LANDMARK U.S.  GOVERNMENT  INCOME FUND are to
generate current income and preserve the value of its shareholders' investment.

     The  investment  objectives  of  LANDMARK  INTERMEDIATE  INCOME FUND are to
generate  a  high  level  of  current  income  and  preserve  the  value  of its
shareholders' investment.

     The investment  objective of each Fund may be changed  without  approval by
the Fund's shareholders,  but shareholders will be given written notice at least
30 days before any change is implemented.  Of course,  there can be no assurance
that either Fund will achieve its investment objectives.

                               INVESTMENT POLICIES

     The Prospectus  contains a discussion of the various types of securities in
which each Fund and the  Portfolio  may invest  and the risks  involved  in such
investments.   The  following  supplements  the  information  contained  in  the
Prospectus concerning the investment objectives, policies and techniques of each
Fund.

     The Trust may withdraw the  investment of  Government  Income Fund from the
Portfolio at any time, if the Board of Trustees of the Trust  determines that it
is in the best interests of the  Government  Income Fund to do so. Upon any such
withdrawal, the Government Income Fund's assets would continue to be invested in
accordance with the investment  policies  described  herein with respect to that
Fund.  The  policies  described  below are not  fundamental  and may be  changed
without shareholder approval.

U.S. GOVERNMENT SECURITIES

     Each of the Funds may invest in debt obligations that are backed, as to the
timely payment of interest and principal, by the full faith and credit of the
U.S. Government. The Government Income Fund invests only in debt obligations
that are backed, as to the timely payment of interest and principal, by the full
faith and credit of the U.S. Government.

     The debt  obligations in which assets of the Funds are invested include (1)
U.S. Treasury obligations, which differ only in their interest rates, maturities
and times of issuance:  U.S.  Treasury  bills  (maturities of one year or less),
U.S.  Treasury notes  (maturities of one to 10 years),  and U.S.  Treasury bonds
(generally  maturities of greater than 10 years);  and (2) obligations issued or
guaranteed by U.S. Government agencies,  authorities or  instrumentalities.  The
Government  Income Fund may only invest in  obligations  issued or guaranteed by
U.S.  Government  agencies  if such  obligations  are  backed,  as to the timely
payment  of  interest  and  principal,  by the full faith and credit of the U.S.
Government,  e.g., direct  pass-through  certificates of the Government National
Mortgage Association.

     When and if available,  U.S.  Government  obligations may be purchased at a
discount from face value.  However, it is not intended that such securities will
be held to maturity for the purpose of achieving potential capital gains, unless
current yields on these securities remain attractive.

     Although U.S. Government  obligations which are purchased for the Funds may
be backed, as to the timely payment of interest and principal, by the full faith
and credit of the U.S.  Government,  shares of the Funds are neither insured nor
guaranteed   by  the  U.S.   Government   or  its   agencies,   authorities   or
instrumentalities.

REPURCHASE AGREEMENTS

     Each of the Funds may invest in  repurchase  agreements  collateralized  by
securities in which that Fund may otherwise  invest.  Repurchase  agreements are
agreements by which a Fund  purchases a security and  simultaneously  commits to
resell that  security to the seller  (which is usually a member bank of the U.S.
Federal  Reserve  System or a member firm of the New York Stock  Exchange  (or a
subsidiary thereof)) at an agreed-upon date within a number of days (usually not
more than  seven)  from the date of  purchase.  The resale  price  reflects  the
purchase price plus an agreed-upon market rate of interest which is unrelated to
the coupon rate or maturity of the purchased  security.  A repurchase  agreement
involves  the  obligation  of the seller to pay the  agreed  upon  price,  which
obligation is in effect secured by the value of the underlying security, usually
U.S.  Government or government  agency  issues.  Under the 1940 Act,  repurchase
agreements  may be considered to be loans by the buyer. A Fund's risk is limited
to the ability of the seller to pay the agreed-upon amount on the delivery date.
If the seller defaults,  the underlying security constitutes  collateral for the
seller's  obligation  to pay  although  that  Fund may  incur  certain  costs in
liquidating  this  collateral  and in  certain  cases  may not be  permitted  to
liquidate this collateral.  All repurchase  agreements entered into by the Funds
are fully collateralized, with such collateral being marked to market daily.

FUTURES CONTRACTS

     A futures contract is an agreement  between two parties for the purchase or
sale for future  delivery of  securities  or for the payment or  acceptance of a
cash settlement based upon changes in the value of the securities or of an index
of  securities.  A "sale"  of a futures  contract  means  the  acquisition  of a
contractual obligation to deliver the securities called for by the contract at a
specified  price,  or to make or accept  the cash  settlement  called for by the
contract,  on a specified  date. A "purchase"  of a futures  contract  means the
acquisition of a contractual  obligation to acquire the securities called for by
the  contract at a  specified  price,  or to make or accept the cash  settlement
called for by the contract,  on a specified  date.  Futures  contracts have been
designed  by  exchanges  which have been  designated  "contract  markets" by the
Commodity  Futures Trading  Commission  ("CFTC") and must be executed  through a
futures  commission  merchant,  or  brokerage  firm,  which is a  member  of the
relevant  contract  market.  Futures  contracts trade on these markets,  and the
exchanges,  through their clearing  organizations,  guarantee that the contracts
will be performed as between the clearing members of the exchange.

     While  futures  contracts  based  on debt  securities  do  provide  for the
delivery and acceptance of securities,  such deliveries and acceptances are very
seldom made.  Generally,  a futures  contract is  terminated by entering into an
offsetting transaction. Brokerage fees will be incurred when a Fund purchases or
sells a futures contracts. At the same time such a purchase or sale is made, the
Fund must provide cash or securities as a deposit  ("initial  deposit") known as
"margin".  The initial  deposit  required will vary,  but may be as low as 1% or
less of a  contract's  face value.  Daily  thereafter,  the futures  contract is
valued through a process known as "marking to market",  and the Fund may receive
or be  required to pay  additional  "variation  margin" as the futures  contract
becomes more or less valuable. At the time of delivery of securities pursuant to
such a contract,  adjustments are made to recognize differences in value arising
from the delivery of securities with a different interest rate than the specific
security  that  provides the standard for the  contract.  In some (but not many)
cases, securities called for by a futures contract may not have been issued when
the contract was entered into.

     A Fund may  purchase or sell  futures  contracts  to attempt to protect the
Fund from fluctuations in interest rates, or to manage the effective maturity or
duration  of the Fund's  portfolio  in an effort to reduce  potential  losses or
enhance potential gain, without actually buying or selling debt securities.  For
example, if interest rates were expected to increase,  the Fund might enter into
futures  contracts for the sale of debt securities.  Such a sale would have much
the same effect as if the Fund sold bonds that it owned,  or as if the Fund sold
longer-term  bonds and  purchased  shorter-term  bonds.  If  interest  rates did
increase,  the value of the Fund's debt securities would decline,  but the value
of the futures contracts would increase,  thereby keeping the net asset value of
the Fund from  declining as much as it  otherwise  would have.  Similar  results
could be  accomplished  by  selling  bonds,  or by  selling  bonds  with  longer
maturities  and investing in bonds with shorter  maturities.  However,  by using
futures contracts, the Fund avoids having to sell its securities.

     Similarly,  when it is expected  that  interest  rates may decline,  a Fund
might enter into futures  contracts for the purchase of debt securities.  Such a
transaction  would be  intended  to have  much the  same  effect  as if the Fund
purchased  bonds,  or as if the  Fund  sold  shorter-term  bonds  and  purchased
longer-term  bonds.  If  interest  rates did  decline,  the value of the futures
contracts would increase.

     Although the use of futures for hedging should tend to minimize the risk of
loss due to a decline in the value of the hedged position (e.g., if a Fund sells
a futures  contract to protect against losses in the debt securities held by the
Fund),  at the same time the futures  contracts  limit any potential  gain which
might result from an increase in value of a hedged position.

     In addition,  the ability effectively to hedge all or a portion of a Fund's
investments  through  transactions in futures contracts depends on the degree to
which  movements in the value of the debt  securities  underlying such contracts
correlate with movements in the value of the Fund's securities.  If the security
underlying a futures contract is different than the security being hedged,  they
may not move to the same extent or in the same  direction.  In that  event,  the
Fund's  hedging  strategy  might not be  successful  and the Fund could  sustain
losses on these hedging  transactions  which would not be offset by gains on the
Fund's other investments or, alternatively, the gains on the hedging transaction
might not be sufficient to offset losses on the Fund's other investments.  It is
also  possible  that there may be a negative  correlation  between the  security
underlying  a futures  contract and the  securities  being  hedged,  which could
result in losses both on the hedging  transaction and the  securities.  In these
and other instances, the Fund's overall return could be less than if the hedging
transactions had not been undertaken.  Similarly,  even where a Fund enters into
futures  transactions other than for hedging purposes,  the effectiveness of its
strategy may be affected by lack of correlation  between changes in the value of
the  futures  contracts  and changes in value of the  securities  which the Fund
would otherwise buy and sell.

     The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets,  are subject to distortions.  First,
all  participants  in the  futures  market are  subject to initial  deposit  and
variation margin  requirements.  Rather than meeting additional variation margin
requirements,  investors  may close out  futures  contracts  through  offsetting
transactions  which could distort the normal  relationship  between the cash and
futures  markets.  Second,  there is the  potential  that the  liquidity  of the
futures market may be lacking.  Prior to expiration,  a futures  contract may be
terminated only by entering into a closing purchase or sale  transaction,  which
requires  a  secondary  market  on the  contract  market  on which  the  futures
contracts was  originally  entered into.  While a Fund will  establish a futures
position only if there appears to be a liquid secondary  market therefor,  there
can be no  assurance  that such a market will exist for any  particular  futures
contract at any specific  time.  In that event,  it may not be possible to close
out a position  held by the Fund,  which  could  require the Fund to purchase or
sell the instrument underlying the futures contract or to meet ongoing variation
margin  requirements.  The inability to close out futures  positions  also could
have an adverse impact on the ability  effectively  to use futures  transactions
for hedging or other purposes.

     The liquidity of a secondary  market in a futures contract may be adversely
affected by "daily price fluctuation limits" established by the exchanges, which
limit the  amount of  fluctuation  in the price of a futures  contract  during a
single  trading day and prohibit  trading beyond such limits once they have been
reached. The trading of futures contracts also is subject to the risk of trading
halts,  suspensions,  exchange or clearing house equipment failures,  government
intervention,  insolvency  of a  brokerage  firm  or  clearing  house  or  other
disruptions of normal trading  activity,  which could at times make it difficult
or impossible to liquidate  existing  positions or to recover  excess  variation
margin payments.

     Investments in futures contracts also entail the risk that if the Adviser's
investment  judgment about the general direction of interest rates is incorrect,
the Fund's overall  performance  may be poorer than if any such contract had not
been entered into. For example,  if a Fund hedged against the  possibility of an
increase in interest rates which would adversely  affect the price of the Fund's
bonds and interest  rates  decrease  instead,  part or all of the benefit of the
increased  value of the Fund's  bonds which were hedged will be lost because the
Fund will have offsetting losses in its futures positions.  Similarly, if a Fund
purchases futures contracts  expecting a decrease in interest rates and interest
rates  instead  increased,  the Fund will have losses in its  futures  positions
which will increase the amount of the losses on the  securities in its portfolio
which will also decline in value because of the increase in interest  rates.  In
addition,  in such situations,  if the Fund has insufficient  cash, the Fund may
have  to  sell  bonds  from  its  investments  to meet  daily  variation  margin
requirements, possibly at a time when it may be disadvantageous to do so.

     Each contract market on which futures  contracts are traded has established
a number of limitations  governing the maximum number of positions  which may be
held by a trader,  whether  acting alone or in concert with others.  The Adviser
does not believe that these  trading and  position  limits would have an adverse
impact on a Fund's strategies involving futures.

     CFTC regulations  require  compliance with certain  limitations in order to
assure  that  the  Fund  is not  deemed  to be a  "commodity  pool"  under  such
regulations.  In particular,  CFTC regulations prohibit the Fund from purchasing
or selling futures contracts (other than for bona fide hedging transactions) if,
immediately  thereafter,  the sum of the amount of initial  margin  required  to
establish the Fund's non-hedging futures positions would exceed 5% of the Fund's
net assets.

     Each  Fund will  comply  with  this  CFTC  requirement,  and each such Fund
currently intends to adhere to the additional  policies described below.  First,
an  amount  of cash or cash  equivalents  will be  maintained  by each Fund in a
segregated  account with the Fund's  custodian so that the amount so segregated,
plus the  initial  margin held on deposit,  will be  approximately  equal to the
amount necessary to satisfy the Fund's  obligations  under the futures contract.
The second is that a Fund will not enter into a futures  contract if immediately
thereafter  the amount of initial margin  deposits on all the futures  contracts
held by the Fund would  exceed  approximately  5% of the net assets of the Fund.
The third is that the aggregate market value of the futures  contracts held by a
Fund not  generally  exceed 50% of the market  value of the Fund's  total assets
other than its futures  contracts.  For purposes of this third  policy,  "market
value" of a futures  contract is deemed to be the amount obtained by multiplying
the number of units covered by the futures  contract times the per unit price of
the securities covered by that contract.

     The ability of a Fund to engage in futures  transactions  may be limited by
the current federal income tax requirement  that less than 30% of a Fund's gross
income be derived from the sale or other disposition of stock or securities held
for less than  three  months.  In  addition,  the use of futures  contracts  may
increase  the  amount of taxable  income of a Fund and may  affect  the  amount,
timing  and  character  of a  Fund's  income  for tax  purposes,  as more  fully
discussed herein in the section entitled "Certain Additional Tax Matters".

WHEN-ISSUED SECURITIES

     Each of the  Funds  may  purchase  securities  on a  "when-issued"  or on a
"forward delivery" basis. It is expected that, under normal  circumstances,  the
applicable Fund would take delivery of such  securities.  When a Fund commits to
purchase a security on a "when-issued" or on a "forward delivery" basis, it sets
up  procedures  consistent  with  Securities  and  Exchange  Commission  ("SEC")
policies.  Since those  policies  currently  require  that an amount of a Fund's
assets  equal to the amount of the  purchase be held aside or  segregated  to be
used to pay for the commitment, the Fund will always have cash, cash equivalents
or high quality debt securities  sufficient to cover any commitments or to limit
any potential  risk.  However,  even though the Funds do not intend to make such
purchases for speculative purposes and intend to adhere to the provisions of SEC
policies, purchases of securities on such bases may involve more risk than other
types of purchases.  For example, a Fund may have to sell assets which have been
set aside in order to meet  redemptions.  Also, if the Adviser  determines it is
advisable  as a matter  of  investment  strategy  to sell the  "when-issued"  or
"forward delivery" securities,  a Fund would be required to meet its obligations
from the then  available cash flow or the sale of  securities,  or,  although it
would  not  normally  expect  to do so,  from the sale of the  "when-issued"  or
"forward delivery" securities themselves (which may have a value greater or less
than the Fund's payment obligation).

SECURITIES OF NON-U.S. ISSUERS

     The Intermediate Income Fund may invest in securities of non-U.S. issuers.
Investing in securities issued by companies whose principal business activities
are outside the United States may involve significant risks not present in U.S.
investments. For example, the value of such securities fluctuates based on the
relative strength of the U.S. dollar. In addition, there is generally less
publicly available information about non-U.S. issuers, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Non-U.S. issuers are generally not bound by uniform accounting, auditing
and financial reporting requirements comparable to those applicable to U.S.
issuers. Investments in securities of non-U.S. issuers also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of a Fund, political or financial instability or diplomatic and
other developments which would affect such investments. Further, economies of
other countries or areas of the world may differ favorably or unfavorably from
the economy of the U.S.

     It is anticipated that in most cases the best available market for
securities of non-U.S. issuers would be on exchanges or in over-the-counter
markets located outside the U.S. Non-U.S. securities markets, while growing in
volume and sophistication, are generally not as developed as those in the U.S.,
and securities of some non-U.S. issuers (particularly those located in
developing countries) may be less liquid and more volatile than securities of
comparable U.S. companies. Non-U.S. security trading practices, including those
involving securities settlement where a Fund's assets may be released prior to
receipt of payments, may expose the Fund to increased risk in the event of a
failed trade or the insolvency of a non-U.S. broker-dealer. In addition,
non-U.S. brokerage commissions are generally higher than commissions on
securities traded in the U.S. and may be non-negotiable. In general, there is
less overall governmental supervision and regulation of non-U.S. securities
exchanges, brokers and listed companies than in the U.S.

     It is the  Trust's  policy to invest  not more than 5% of the  Intermediate
Income Fund's assets in closed-end  investment  companies  which  primarily hold
foreign  securities.   Investments  in  closed-end  investment  companies  which
primarily  hold  securities  of  non-U.S.  issuers  may entail the risk that the
market value of such investments may be substantially  less than their net asset
value and that there would be  duplication  of investment  management  and other
fees and  expenses.  The Trust may invest a portion of the  Intermediate  Income
Fund's assets in foreign securities that impose  restrictions on transfer within
the United States or to United States persons.  Although  securities  subject to
such transfer  restrictions  may be marketable  abroad,  they may be less liquid
than  foreign  securities  of the  same  class  that  are  not  subject  to such
restrictions.

     The  Trust's  policy  is not to invest  more  than 50% of the  Intermediate
Income Fund's assets in the securities of foreign  issuers.  It is the intention
of the Trust to limit the  Intermediate  Income Fund's  investments  in non-U.S.
obligations to securities rated A or better and unrated securities which, in the
opinion of the Adviser, are of comparable quality to such rated securities.

     The Intermediate  Income Fund may invest in securities of non-U.S.  issuers
that  impose  restrictions  on  transfer  within the United  States or to United
States persons. Although securities subject to such transfer restrictions may be
marketable abroad,  they may be less liquid than securities of non-U.S.  issuers
of the same class that are not subject to such restrictions.

CURRENCY EXCHANGE TRANSACTIONS

     Because the Intermediate Income Fund may buy and sell securities
denominated in currencies other than the U.S. dollar, and receive interest and
sale proceeds in currencies other than the U.S. dollar, that Fund may enter into
currency exchange transactions to convert U.S. currency to non-U.S. currency and
non-U.S. currency to U.S. currency, as well as convert one non-U.S. currency to
another non-U.S. currency. The Intermediate Income Fund either enters into these
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
currency exchange markets, or uses forward contracts to purchase or sell
non-U.S. currencies. The Intermediate Income Fund may also enter into currency
hedging transactions in an attempt to protect the value of its assets as
measured in U.S. dollars from unfavorable changes in currency exchange rates and
control regulations. (Although the Intermediate Income Fund's assets are valued
daily in terms of U.S. dollars, the Trust does not intend to convert the Fund's
holdings of non-U.S. currencies into U.S. dollars on a daily basis.) It is not
intended that the Intermediate Income Fund speculate in currency exchange rates
or forward contracts.

     The Intermediate Income Fund may convert currency on a spot basis from time
to time,  and  investors  should be aware of the costs of  currency  conversion.
Although currency  exchange dealers do not charge a fee for conversion,  they do
realize a profit based on the difference  (the  "spread")  between the prices at
which they are buying and selling various  currencies.  Thus, a dealer may offer
to sell a currency at one rate,  while offering a lesser rate of exchange should
the Intermediate Income Fund desire to resell that currency to the dealer.

     A forward  contract  involves an  obligation to purchase or sell a specific
currency at a future  date,  which may be any fixed number of days from the date
of the contract,  agreed upon by the parties,  at a price set at the time of the
contract.  These contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers. A
forward  contract  generally  has  no  deposit  requirement,   and  no  fees  or
commissions are charged at any stage for trades.

     When the  Intermediate  Income Fund enters into a contract for the purchase
or sale of a security denominated in a non-U.S. currency, it may desire to "lock
in" the U.S. dollar price of the security.  By entering into a forward  contract
for the purchase or sale, for a fixed amount of U.S.  dollars,  of the amount of
non-U.S.   currency  involved  in  the  underlying  security  transaction,   the
Intermediate  Income  Fund  will be able to  protect  against  a  possible  loss
resulting from an adverse change in the relationship between the U.S. dollar and
the  non-U.S.  currency  during  the period  between  the date the  security  is
purchased or sold and the date on which payment is made or received.

     When the Adviser  believes  that the currency of a  particular  country may
suffer a substantial  decline against the U.S. dollar,  the Intermediate  Income
Fund may  enter  into a forward  contract  to sell,  for a fixed  amount of U.S.
dollars, the amount of non-U.S.  currency approximating the value of some or all
of its respective securities denominated in such non-U.S.  currency. The precise
matching  of the  forward  contract  amounts  and the  value  of the  securities
involved is not generally  possible since the future value of such securities in
non-U.S. currencies changes as a consequence of market movements in the value of
those  securities  between the date the forward contract is entered into and the
date it matures.  The  projection  of a  short-term  hedging  strategy is highly
uncertain.  The  Intermediate  Income  Fund  does not enter  into  such  forward
contracts or maintain a net exposure to such contracts where the consummation of
the contracts  obligates  the Fund to deliver an amount of non-U.S.  currency in
excess of the value of the Fund's securities or other assets denominated in that
currency. Under normal circumstances, consideration of the prospect for currency
parities will be  incorporated  in the investment  decisions made with regard to
overall  diversification  strategies.  However,  the Adviser believes that it is
important to have the  flexibility to enter into such forward  contracts when it
determines  that the best  interests  of the  Intermediate  Income  Fund will be
served.

     The  Intermediate  Income  Fund  generally  would not enter  into a forward
contract  with a term  greater  than one  year.  At the  maturity  of a  forward
contract,  the  Intermediate  Income Fund will either sell the security and make
delivery of the non-U.S.  currency,  or retain the security  and  terminate  its
contractual  obligation  to deliver  the  non-U.S.  currency  by  purchasing  an
"offsetting"  contract with the same currency trader  obligating it to purchase,
on the same maturity date, the same amount of the non-U.S. currency. If the Fund
retains the security  and engages in an  offsetting  transaction,  the Fund will
incur a gain or a loss (as  described  below) to the extent  that there has been
movement  in forward  contract  prices.  If the Fund  engages  in an  offsetting
transaction,  it may subsequently  enter into a new forward contract to sell the
non-U.S.  currency.  Should forward prices decline during the period between the
date  the Fund  enters  into a  forward  contract  for the sale of the  non-U.S.
currency and the date it enters into an offsetting  contract for the purchase of
such  currency,  the Fund will realize a gain to the extent the selling price of
the currency  exceeds the purchase price of the currency.  Should forward prices
increase,  the Fund will suffer a loss to the extent that the purchase  price of
the currency exceeds the selling price of the currency.

     It is  impossible  to  forecast  with  precision  the  market  value of the
Intermediate  Income Fund's  securities at the expiration of a forward contract.
Accordingly,  it may be necessary for the  Intermediate  Income Fund to purchase
additional  non-U.S.  currency  on the spot  market if the  market  value of the
security is less than the amount of non-U.S.  currency  the Fund is obligated to
deliver and if a decision is made to sell the security and make delivery of such
currency. Conversely, it may be necessary to sell on the spot market some of the
non-U.S.  currency  received  upon the sale of the  security if its market value
exceeds the amount of such currency the Fund is obligated to deliver.

     The Intermediate Income Fund may also purchase put options on a non-U.S.
currency in order to protect against currency rate fluctuations. If the Fund
purchases a put option on a non-U.S. currency and the value of the U.S. currency
declines, the Fund will have the right to sell the non-U.S. currency for a fixed
amount in U.S. dollars and will thereby offset, in whole or in part, the adverse
effect on the Fund which otherwise would have resulted. Conversely, where a rise
in the U.S. dollar value of another currency is projected, and where the Fund
anticipates investing in securities traded in such currency, the Fund may
purchase call options on the non-U.S. currency.

     The purchase of such options could offset, at least partially,  the effects
of adverse movements in exchange rates. However, the benefit to the Intermediate
Income Fund from purchases of non-U.S.  currency  options will be reduced by the
amount of the premium and related transaction costs. In addition, where currency
exchange  rates do not move in the direction or to the extent  anticipated,  the
Intermediate  Income  Fund could  sustain  losses on  transactions  in  non-U.S.
currency  options  which  would  require  it to  forgo a  portion  or all of the
benefits of advantageous changes in such rates.

     The Intermediate  Income Fund may write options on non-U.S.  currencies for
hedging purposes or otherwise to achieve its investment objectives. For example,
where the  Intermediate  Income Fund  anticipates  a decline in the value of the
U.S. dollar value of a non-U.S. security due to adverse fluctuations in exchange
rates it could,  instead of purchasing a put option,  write a call option on the
relevant  currency.  If the expected decline occurs, the option will most likely
not be exercised,  and the  diminution in value of the security held by the Fund
will be offset by the amount of the premium received.

     Similarly,  instead  of  purchasing  a call  option  to  hedge  against  an
anticipated  increase in the cost of a non-U.S.  security to be acquired because
of an increase in the U.S.  dollar value of the currency in which the underlying
security is primarily  traded,  the  Intermediate  Income Fund could write a put
option on the relevant  currency which,  if rates move in the manner  projected,
will expire  unexercised  and allow the Fund to hedge such  increased cost up to
the amount of the  premium.  However,  the  writing of a  currency  option  will
constitute  only a partial  hedge up to the amount of the  premium,  and only if
rates move in the expected direction.  If this does not occur, the option may be
exercised  and the Fund would be required  to  purchase  or sell the  underlying
currency at a loss which may not be offset by the amount of the premium. Through
the writing of options on currencies,  the Intermediate  Income Fund also may be
required to forgo all or a portion of the benefits  which might  otherwise  have
been obtained from favorable movements in exchange rates.

     Put and call  options on non-U.S.  currencies  written by the  Intermediate
Income Fund will be covered by  segregation  of cash,  short-term  money  market
instruments or high quality debt  securities in an account with the custodian in
an amount  sufficient  to discharge the Fund's  obligations  with respect to the
option,  by acquisition  of the non-U.S.  currency or of a right to acquire such
currency (in the case of a call option) or the acquisition of a right to dispose
of the currency (in the case of a put option), or in such other manner as may be
in  accordance  with  the   requirements  of  any  exchange  on  which,  or  the
counterparty   with  which,  the  option  is  traded  and  applicable  laws  and
regulations.

     The Intermediate Income Fund's dealings in non-U.S.  currency contracts are
limited to the  transactions  described  above. As stated above,  the Government
Income Fund will not deal in such contracts.  Of course, the Intermediate Income
Fund is not required to enter into such  transactions  and does not do so unless
deemed appropriate by the Adviser. It should also be realized that these methods
of protecting the value of the Intermediate  Income Fund's securities  against a
decline  in the  value  of a  currency  do  not  eliminate  fluctuations  in the
underlying prices of the securities.  Additionally, although such contracts tend
to  minimize  the  risk of loss due to a  decline  in the  value  of the  hedged
currency,  they also tend to limit any potential  gain which might result should
the value of such currency increase.

     The  Intermediate  Income Fund has established  procedures  consistent with
policies of the SEC concerning forward contracts. Since those policies currently
recommend  that an amount of a fund's assets equal to the amount of the purchase
be  held  aside  or  segregated  to be  used  to pay  for  the  commitment,  the
Intermediate  Income Fund is expected always to have cash,  cash  equivalents or
high quality debt securities available sufficient to cover any commitments under
these contracts or to limit any potential risk.

SHORT SALES "AGAINST THE BOX"

     In a short sale, a Fund sells a borrowed  security and has a  corresponding
obligation to the lender to return the identical security. Each of the Funds, in
accordance with applicable  investment  restrictions,  may engage in short sales
only if at the time of the short sale it owns or has the right to obtain,  at no
additional  cost,  an equal  amount  of the  security  being  sold  short.  This
investment technique is known as a short sale "against the box."

     In a short sale,  the seller does not  immediately  deliver the  securities
sold and is said to have a short  position in those  securities  until  delivery
occurs. If a Fund engages in a short sale, the collateral for the short position
is maintained  for the Fund by the custodian or qualified  sub-custodian.  While
the short sale is open, an amount of securities  equal in kind and amount to the
securities sold short or securities  convertible  into or exchangeable  for such
equivalent securities are maintained in a segregated account for the Fund. These
securities constitute the Fund's long position.

     The  Funds do not  engage in short  sales  against  the box for  investment
purposes.  A Fund may,  however,  make a short sale  against the box as a hedge,
when it believes that the price of a security may decline,  causing a decline in
the  value  of a  security  owned  by the Fund  (or a  security  convertible  or
exchangeable for such security),  or when the Fund wants to sell the security at
an attractive  current  price,  but also wishes to defer  recognition of gain or
loss for federal income tax purposes or for purposes of satisfying certain tests
applicable to regulated investment companies under the Internal Revenue Code. In
such case, any future losses in the Fund's long position  should be reduced by a
gain in the short position.  Conversely, any gain in the long position should be
reduced  by a loss in the short  position.  The  extent to which  such  gains or
losses are reduced  depends upon the amount of the security sold short  relative
to the amount the Fund owns.  There are  certain  additional  transaction  costs
associated  with short sales  against the box, but the Funds  endeavor to offset
these costs with the income from the  investment  of the cash  proceeds of short
sales.

     The Adviser  does not expect that more than 40% of each Fund's total assets
would be involved in short sales against the box. The Adviser does not currently
intend to engage in such sales.

CORPORATE ASSET-BACKED SECURITIES

     As described in the Prospectus,  certain of the Intermediate  Income Fund's
assets may be invested in corporate asset-backed  securities.  These securities,
issued by trusts  and  special  purpose  corporations,  are  backed by a pool of
assets,   including  but  not  limited  to  credit  card  and  automobile   loan
receivables, representing the obligations of a number of different parties.

     Corporate  asset-backed  securities present certain risks. For instance, in
the case of credit card  receivables,  these securities may not have the benefit
of any security interest in the related collateral.  Credit card receivables are
generally  unsecured and the debtors are entitled to the  protection of a number
of state and federal  consumer  credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards,  thereby reducing the
balance due.  Most issuers of  automobile  receivables  permit the  servicers to
retain  possession of the underlying  obligations.  If the servicer were to sell
these  obligations  to another party,  there is a risk that the purchaser  would
acquire an interest  superior  to that of the holders of the related  automobile
receivables.  In addition, because of the large number of vehicles involved in a
typical  issuance and technical  requirements  under state laws, the trustee for
the  holders  of the  automobile  receivables  may not  have a  proper  security
interest in all of the assets backing such receivables.  Therefore, there is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on these securities.  The underlying assets (e.g.,
loans) are also subject to prepayments  which shorten the  securities,  weighted
average life and may lower their return.

     Corporate  asset-backed  securities  are  often  backed by a pool of assets
representing  the  obligations of a number of different  parties.  To lessen the
effect of  failures  by  obligors on  underlying  assets to make  payments,  the
securities  may  contain   elements  of  credit  support  which  fall  into  two
categories:   (i)  liquidity  protection  and  (ii)  protection  against  losses
resulting  from  ultimate  default  by an  obligor  on  the  underlying  assets.
Liquidity  protection  refers to the  provision  of  advances,  generally by the
entity  administering the pool of assets, to ensure that the receipt of payments
on the underlying  pool occurs in a timely  fashion.  Protection  against losses
resulting from ultimate  default ensures payment through  insurance  policies or
letters  of credit  obtained  by the issuer or sponsor  from third  parties.  No
additional  or  separate  fees will be paid for  credit  support.  The degree of
credit  support  provided  for each  issue  is  generally  based  on  historical
information  respecting the level of credit risk  associated with the underlying
assets.  Delinquency  or loss in excess of that  anticipated  or  failure of the
credit  support  could  adversely  affect the return on an  investment in such a
security.  It is intended that no more than 5% of the Intermediate Income Fund's
total assets would be invested in corporate asset-backed securities.

COLLATERALIZED MORTGAGE OBLIGATIONS

     As  described  in the  Prospectus,  a portion of each Fund's  assets may be
invested  in  collateralized  mortgage  obligations  ("CMOs"),  which  are  debt
obligations   collateralized   by  mortgage   loans  or  mortgage   pass-through
securities;  provided, however, that, in the case of the Government Income Fund,
the CMOs are backed as to the timely  payment of interest  and  principal by the
full faith and credit of the U.S. Government. Typically, CMOs are collateralized
by certificates  issued by the Government  National  Mortgage  Association,  the
Federal  National  Mortgage  Association  or  the  Federal  Home  Loan  Mortgage
Corporation but also may be  collateralized  by whole loans or private  mortgage
pass-through securities (such collateral collectively hereinafter referred to as
"Mortgage  Assets").  Each of the Funds may also  invest a portion  of the their
assets in  multi-class  pass-through  securities  which are interests in a trust
composed  of  Mortgage  Assets;  provided,  however,  that,  in the  case of the
Government  Income Fund, the Mortgage Assets are backed as to the timely payment
of interest and  principal by the full faith and credit of the U.S.  Government.
CMOs  (which  include  multi-class  pass-through  securities)  may be  issued by
agencies,  authorities or instrumentalities of the U.S. Government or by private
originators  of or  investors  in  mortgage  loans,  including  savings and loan
associations,  mortgage banks,  commercial  banks,  investment banks and special
purpose subsidiaries of the foregoing.  Payments of principal of and interest on
the Mortgage Assets, and any reinvestment  income thereon,  provide the funds to
pay debt service on the CMOs or make scheduled  distributions on the multi-class
pass-through securities.  In a CMO, a series of bonds or certificates is usually
issued in multiple classes with different maturities. Each class of a CMO, often
referred to as a  "tranche",  is issued at a specific  fixed or floating  coupon
rate and has a stated maturity or final distribution date. Principal prepayments
on the Mortgage  Assets may cause the CMOs to be retired  substantially  earlier
than their stated maturities or final distribution dates, resulting in a loss of
all or part of the premium if any has been paid.  Interest is paid or accrues on
all  classes  of the CMOs on a  monthly,  quarterly  or  semiannual  basis.  The
principal  of and interest on the  Mortgage  Assets may be  allocated  among the
several  classes of a series of a CMO in various  ways.  In a common  structure,
payments of  principal,  including any  principal  prepayments,  on the Mortgage
Assets are  applied to the  classes of the series of a CMO in the order of their
respective stated maturities or final distribution  dates, so that no payment of
principal  will be made on any class of CMOs until all other  classes  having an
earlier stated maturity or final distribution date have been paid in full.

LENDING OF SECURITIES

     Consistent with applicable regulatory requirements and in order to generate
income,  each of the Funds may lend its securities to  broker-dealers  and other
institutional borrowers. Such loans will usually be made only to member banks of
the U.S.  Federal  Reserve  System  and to  member  firms of the New York  Stock
Exchange  (and  subsidiaries  thereof).  Loans of  securities  would be  secured
continuously  by  collateral  in  cash,  cash  equivalents,   or  U.S.  Treasury
obligations  maintained  on a current  basis at an amount at least  equal to the
market value of the securities  loaned. The cash collateral would be invested in
high quality short-term instruments.  A Fund would have the right to call a loan
and obtain the securities  loaned at any time on customary  industry  settlement
notice  (which will not usually  exceed five days).  During the  existence  of a
loan,  a Fund would  continue  to receive  the  equivalent  of the  interest  or
dividends  paid by the issuer on the  securities  loaned and would also  receive
compensation based on investment of the collateral. The Fund would not, however,
have the right to vote any securities  having voting rights during the existence
of the loan, but would call the loan in  anticipation of an important vote to be
taken among holders of the  securities or of the giving or  withholding of their
consent on a material matter affecting the investment.  As with other extensions
of credit,  there are risks of delay in  recovery  or even loss of rights in the
collateral  should the borrower fail  financially.  However,  the loans would be
made only to entities deemed by the Adviser to be of good standing, and when, in
the judgment of the Adviser,  the  consideration  which can be earned  currently
from loans of this type justifies the attendant risk. If the Adviser  determines
to make loans,  it is not intended that the value of the securities  loaned by a
Fund would exceed 30% of the value of its total assets.

RULE 144A SECURITIES

     Each of the Funds may purchase  securities  that are not registered  ("Rule
144A securities")  under the Securities Act of 1933 (the "Securities  Act"), but
can be offered  and sold to  "qualified  institutional  buyers"  under Rule 144A
under the Securities Act. However,  the Intermediate Income Fund will not invest
more than 15% of its net  assets in  illiquid  investments,  and the  Government
Income  Fund  will not  invest  more  than  10% of its net  assets  in  illiquid
investments,  which include  securities for which there is no readily  available
market,  securities subject to contractual  restrictions on resale and Rule 144A
securities,  unless the  Trustees of the Trust  determine,  based on the trading
markets for the specific Rule 144A security, that it is liquid. The Trustees may
adopt  guidelines  and delegate to the Adviser the daily function of determining
and monitoring liquidity of Rule 144A securities. The Trustees,  however, retain
oversight and are ultimately responsible for the determinations.

     Since it is not possible to predict with  assurance  exactly how the market
for Rule 144A securities will develop,  the Trustees will carefully monitor each
Fund's  investments  in Rule 144A  securities,  focusing on such factors,  among
others, as valuation,  liquidity and availability of information.  The liquidity
of investments in Rule 144A securities could be impaired if trading in Rule 144A
securities  does not develop or if qualified  institutional  buyers become for a
time uninterested in purchasing Rule 144A securities.

                             INVESTMENT RESTRICTIONS

FUNDAMENTAL RESTRICTIONS

     The Trust,  on behalf of the Funds,  and the Portfolio  Trust, on behalf of
the Portfolio, have each adopted the following policies which may not be changed
with respect to either Fund or the  Portfolio  without  approval by holders of a
majority of the outstanding  voting securities of that Fund or Portfolio,  which
as used in this Statement of Additional Information means the vote of the lesser
of (i) 67% or more of the outstanding  voting  securities of the respective Fund
or  Portfolio  present at a meeting at which the holders of more than 50% of the
outstanding   voting  securities  of  the  Fund  or  Portfolio  are  present  or
represented by proxy, or (ii) more than 50% of the outstanding voting securities
of the  respective  Fund or Portfolio.  The term "voting  securities" as used in
this paragraph has the same meaning as in the 1940 Act.


     Neither of the Funds nor the Portfolio may:

     (1) Borrow money or pledge,  mortgage or hypothecate  assets of the Fund or
Portfolio,  except that as a temporary  measure for  extraordinary  or emergency
purposes  it may borrow in an amount not to exceed 1/3 of the  current  value of
the Fund's or the Portfolio's net assets, including the amount borrowed, and may
pledge,  mortgage or hypothecate not more than 1/3 of such assets to secure such
borrowings  (it is  intended  that  money  would  be  borrowed  for the  Fund or
Portfolio only from banks and only to accommodate requests for the repurchase of
shares of the Fund or beneficial  interests in the Portfolio  while effecting an
orderly   liquidation  of  portfolio   securities),   provided  that  collateral
arrangements with respect to futures  contracts,  including  deposits of initial
and variation margin, are not considered a pledge of assets for purposes of this
restriction;  for  additional  related  restrictions,  see  clause (i) under the
caption "State and Federal Restrictions" hereafter.

     (2) Purchase any security or evidence of interest therein on margin, except
that such short-term  credit may be obtained for the Fund or Portfolio as may be
necessary for the clearance of purchases and sales of securities and except that
deposits of initial and  variation  margin may be made for the Fund or Portfolio
in  connection  with  the  purchase,  ownership,  holding  or  sale  of  futures
contracts.

     (3)  Write,  purchase  or sell any put or call  option  or any  combination
thereof,  provided  that this shall not prevent (i) the writing,  purchasing  or
selling of puts, calls or combinations  thereof with respect to U.S.  Government
securities or with respect to futures contracts, or (ii) the writing,  purchase,
ownership, holding or sale of futures contracts.

     (4) Underwrite  securities issued by other persons except insofar as either
the Trust or the Portfolio Trust may technically be deemed an underwriter  under
the Securities Act of 1933 in selling a portfolio security  (provided,  however,
that the Fund may invest all of its assets in an open-end management  investment
company with the same investment  objective and policies and  substantially  the
same investment restrictions as the Fund (a "Qualifying Portfolio")).

     (5) Make loans to other  persons  except  (a)  through  the  lending of the
Fund's or Portfolio's securities and provided that any such loans not exceed 30%
of a Fund's or  Portfolio's  total  assets,  as the case may be (taken at market
value),  (b)  through  the  use of  repurchase  agreements  or the  purchase  of
short-term  obligations  (and,  in the  case of the  Intermediate  Income  Fund,
provided that not more than 15% of the total assets of the Fund, as the case may
be, will be invested in repurchase agreements maturing in more than seven days),
or (c) by purchasing a portion of an issue of debt  securities of types commonly
distributed privately to financial institutions, for which purposes the purchase
of short-term commercial paper or a portion of an issue of debt securities which
are part of an issue to the public shall not be considered the making of a loan.

     (6) Purchase or sell real estate (including limited  partnership  interests
but excluding securities secured by real estate or interests therein), interests
in oil,  gas or mineral  leases,  commodities  or  commodity  contracts  (except
futures  contracts) in the ordinary  course of business (the Trust and Portfolio
Trust reserve the freedom of action to hold and to sell real estate  acquired as
a result of the ownership of securities by the Fund or Portfolio).

     (7) With respect to the Government  Income Fund or the Portfolio,  purchase
securities  of any issuer if such  purchase at the time thereof would cause more
than 10% of the  voting  securities  of such  issuer  to be held for the Fund or
Portfolio,  except that all of the assets of the  Government  Income Fund may be
invested in a Qualifying Portfolio.

     (8) With  respect to 75% of the  assets of the  Intermediate  Income  Fund,
purchase  securities  of any issuer if such  purchase at the time thereof  would
cause more than 10% of the voting  securities  of such issuer to be held for the
Fund,  except that all of the assets of the Fund may be invested in a Qualifying
Portfolio.

     (9) With respect to the Government  Income Fund or the Portfolio,  purchase
securities  of any issuer if such  purchase at the time thereof would cause more
than 5% of the  assets of the Fund or  Portfolio  (taken at market  value) to be
invested in the securities of such issuer (other than  securities or obligations
issued or guaranteed by the United  States,  any state or political  subdivision
thereof,  or any  political  subdivision  of any such  state,  or any  agency or
instrumentality  of the  United  States  or of  any  state  or of any  political
subdivision  of any state or the United  States);  provided that for purposes of
this  restriction the issuer of a futures contract shall not be deemed to be the
issuer of the  security or  securities  underlying  such  contract;  and further
provided that all of the assets of the Government Income Fund may be invested in
a Qualifying Portfolio.

     (10) With  respect to 75% of the assets of the  Intermediate  Income  Fund,
purchase  securities  of any issuer if such  purchase at the time thereof  would
cause  more  than 5% of the  assets of the Fund  (taken  at market  value) to be
invested in the securities of such issuer (other than  securities or obligations
issued or guaranteed by the United  States,  any state or political  subdivision
thereof,  or any  political  subdivision  of any such  state,  or any  agency or
instrumentality  of the  United  States  or of  any  state  or of any  political
subdivision  of any state or the United  States);  provided that for purposes of
this  restriction the issuer of a futures contract shall not be deemed to be the
issuer of the  security or  securities  underlying  such  contract;  and further
provided  that all of the  assets of the Fund may be  invested  in a  Qualifying
Portfolio.

     (11) Make short sales of securities or maintain a short position, unless at
all times  when a short  position  is open the Fund or  Portfolio  owns an equal
amount  of such  securities  or  securities  convertible  into or  exchangeable,
without payment of any further  consideration,  for securities of the same issue
as, and equal in amount to, the securities sold short,  and unless not more than
10% of the net assets of the Fund or Portfolio (taken at market value),  is held
as collateral for such sales at any one time.

     (12) Concentrate its investments in any particular  industry,  but if it is
deemed  appropriate for the achievement of the investment  objective of the Fund
or  Portfolio  up to 25% of its  assets,  at  market  value  at the time of each
investment,  may be  invested in any one  industry,  except  that  positions  in
futures  contracts shall not be subject to this  restriction and except that all
of the assets of the Fund may be invested in a Qualifying Portfolio.

     (13) Issue any senior security (as that term is defined in the 1940 Act) if
such  issuance  is  specifically  prohibited  by the 1940 Act or the  rules  and
regulations promulgated  thereunder,  provided that collateral arrangements with
respect to futures  contracts,  including  deposits  of  initial  and  variation
margin,  are not considered to be the issuance of a senior security for purposes
of this restriction.

     The Trust,  with respect to the  Government  Income Fund, and the Portfolio
Trust,  with respect to the Portfolio,  have each also adopted a policy which is
fundamental  and which provides that all of the assets of the Government  Income
Fund or Portfolio  will be invested in  obligations  that are backed by the full
faith and  credit of the U.S.  Government  except  that all of the assets of the
Government  Income Fund may be invested in a Qualifying  Portfolio  all of whose
assets  will be invested  in  obligations  that are backed by the full faith and
credit of the U.S.  Government.  This policy is not intended to prohibit the use
of futures  contracts on fixed income  securities by the Government Income Fund.
Investment  Restriction  (11)  above  applies  only to  short  sales of or short
positions in securities, and does not prevent the writing, purchase,  ownership,
holding or sale of futures contracts.

NON-FUNDAMENTAL RESTRICTIONS

     As a non-fundamental  policy,  the Trust, on behalf of either Fund, and the
Portfolio  Trust on  behalf  of the  Portfolio,  will not  knowingly  invest  in
securities  which are  subject to legal or  contractual  restrictions  on resale
(other than repurchase agreements maturing in not more than seven days) if, as a
result thereof,  more than 15% of the Fund's or Portfolio's net assets (taken at
market value) would be so invested (including  repurchase agreements maturing in
more than seven days).

STATE AND FEDERAL RESTRICTIONS

     In order to comply with certain  state and federal  statutes and  policies,
the Trust,  on behalf of each Fund,  and the Portfolio  Trust,  on behalf of the
Portfolio, will not, as a matter of operating policy:

     (i) borrow  money for any  purpose in excess of 10% of the total  assets of
the Fund or Portfolio  (taken at cost)  (moreover,  the Trust or Portfolio Trust
will not purchase any  securities for the Fund or Portfolio at any time at which
borrowings  exceed 5% of the total assets of the Fund or Portfolio,  as the case
may be (taken at market value)),

     (ii) pledge,  mortgage or  hypothecate  for any purpose in excess of 10% of
the net assets of the Fund or Portfolio  (taken at market value),  provided that
collateral arrangements with respect to futures contracts, including deposits of
initial and variation margin, are not considered a pledge of assets for purposes
of this restriction,

     (iii) sell any security  which the Fund or Portfolio does not own unless by
virtue of the ownership of other securities there is at the time of sale a right
to obtain securities,  without payment of further  consideration,  equivalent in
kind and  amount  to the  securities  sold and  provided  that if such  right is
conditional the sale is made upon the same conditions,

     (iv) invest for the purpose of exercising control or management, except
that all of the assets of the Fund may be invested in a Qualifying Portfolio,

     (v) purchase securities issued by any registered investment company, except
that all of the assets of the Fund may be invested in a Qualifying Portfolio and
except by purchase in the open market where no commission or profit to a sponsor
or  dealer  results  from  such  purchase  other  than  the  customary  broker's
commission, or except when such purchase, though not made in the open market, is
part of a plan of merger or consolidation; provided, however, that the Trust, on
behalf of the Fund, and the Portfolio  Trust,  on behalf of the Portfolio,  will
not purchase the securities of any registered  investment  company (other than a
Qualifying  Portfolio in which all the assets of the Fund are  invested) if such
purchase at the time  thereof  would cause more than 10% of the total  assets of
the Fund or  Portfolio  (taken  in each  case at the  greater  of cost or market
value) to be invested in the securities of such issuers or would cause more than
3% of the  outstanding  voting  securities of any such issuer to be held for the
Fund or Portfolio (the Portfolio  Trust,  on behalf of the Portfolio,  shall not
purchase securities issued by any open-end investment company),

     (vi) invest more than 10%,  in the case of the  Government  Income Fund and
the Portfolio,  or 15%, in the case of the Intermediate  Income Fund, of the net
assets of the Fund (for the Government  Income Fund or the  Portfolio,  taken at
the greater of cost or market value, and for the Intermediate Income Fund, taken
at market value) in securities that are not readily marketable,

     (vii)  purchase  securities  of any  issuer  if such  purchase  at the time
thereof  would cause the Fund or Portfolio to hold more than 10% of any class of
securities  of such issuer,  for which  purposes all  indebtedness  of an issuer
shall be deemed a single  class and all  preferred  stock of an issuer  shall be
deemed a single class, except that all of the assets of the Fund may be invested
in a Qualifying Portfolio and except that Futures Contracts shall not be subject
to this restriction,

     (viii)  invest  more  than 5% of the  assets  of the Fund or  Portfolio  in
companies which, including predecessors, have a record of less than three years'
continuous operation,  except that all of the assets of the Fund may be invested
in a Qualifying Portfolio, or

     (ix)  purchase  or retain any  securities  issued by an issuer any of whose
officers,  directors,  trustees or security  holders is an officer or Trustee of
the  Trust or of the  Portfolio  Trust,  or is an  officer  or  director  of the
Adviser,  if after the purchase of the  securities of such issuer one or more of
such persons owns  beneficially more than 1/2 of 1% of the shares or securities,
or both, all taken at market value, of such issuer, and such persons owning more
than 1/2 of 1% of such shares or securities  together own beneficially more than
5% of such shares or securities, or both, all taken at market value.

     These  policies  are not  fundamental  and may be changed by the Trust with
respect to a Fund or the Portfolio  Trust with respect to the Portfolio  without
approval of its shareholders (or holders of beneficial interests) in response to
changes in the various state and federal requirements.

PERCENTAGE AND RATING RESTRICTIONS

     If a percentage  restriction  on  investment or  utilization  of assets set
forth  above or  referred  to in the  Prospectus  is  adhered  to at the time an
investment  is made or assets  are so  utilized,  a later  change in  percentage
resulting  from  changes in the value of the  securities  held for a Fund is not
considered a violation of policy.

                           3. PERFORMANCE INFORMATION

     A total rate of return quotation for a Fund is calculated for any period by
(a) dividing (i) the sum of the net asset value per share on the last day of the
period and the net asset value per share on the last day of the period of shares
purchasable with dividends and capital gains distributions  declared during such
period  with  respect to a share held at the  beginning  of such period and with
respect to shares purchased with such dividends and capital gains distributions,
by (ii) the public offering price per share on the first day of such period, and
(b) subtracting 1 from the result. Any annualized total rate of return quotation
is  calculated  by (x)  adding 1 to the period  total  rate of return  quotation
calculated  above, (y) raising such sum to a power which is equal to 365 divided
by the number of days in such  period,  and (z)  subtracting  1 from the result.
Total rates of return may also be  calculated  on  investments  at various sales
charge levels or at net asset value.  Any  performance  data which is based on a
reduced  sales  charge or net asset  value per  share  would be  reduced  if the
maximum sales charge were taken into account.

     Any current yield quotation for a Fund consists of an annualized historical
yield,  carried at least to the nearest hundredth of one percent,  based on a 30
calendar day or one month period and is  calculated  by (a) raising to the sixth
power  the sum of 1 plus the  quotient  obtained  by  dividing  the  Fund's  net
investment  income  earned during the period by the product of the average daily
number of shares  outstanding  during the period  that were  entitled to receive
dividends and the maximum public offering price per share on the last day of the
period, (b) subtracting 1 from the result, and (c) multiplying the result by 2.

     Any tax equivalent  yield quotation of a Fund is calculated as follows:  If
the entire current yield quotation for such period is state tax-exempt,  the tax
equivalent  yield  would be the  current  yield  quotation  divided by 1 minus a
stated income tax rate or rates.  If a portion of the current yield quotation is
not state  tax-exempt,  the tax  equivalent  yield  would be the sum of (a) that
portion  of the  yield  which is state  tax-exempt  divided  by 1 minus a stated
income  tax rate or rates and (b) the  portion  of the yield  which is not state
tax-exempt.

     Set forth below is total rate of return  information for the Class A shares
of the Government  Income Fund and the Intermediate  Income Fund for the periods
indicated, assuming that dividends and capital gains distributions, if any, were
reinvested,  and that at the  beginning of such periods the maximum sales charge
of 1.50% had been  applicable  to purchases of shares of the  Government  Income
Fund and that the maximum sales charge of 4.00% had been applicable to purchases
of shares of the Intermediate Income Fund.

                                 Class A Shares
                                                            REDEEMABLE VALUE
                                                            OF A HYPOTHETICAL
                                                            $1,000 INVESTMENT
                                       ANNUALIZED TOTAL     AT THE  END OF THE
PERIOD                                 RATE OF RETURN       PERIOD



GOVERNMENT INCOME FUND
September 8,1986 (commencement of       5.88%               $1,608.24
  operations)to December 31, 1994
Five years endedDecember 31, 1994       5.89%               $1,331.05
One year ended December 31, 1994        (3.18)%             $  968.19


INTERMEDIATE INCOME FUND
June 25, 1993 (commencement of
  operations) to December 31, 1994      (3.70)%             $  944.45

One year ended December 31, 1994        (8.30)%             $  917.04



     The annualized  yields of the Class A shares of the Government  Income Fund
and the  Intermediate  Income Fund for the 30-day period ended December 31, 1994
were, respectively, 6.80% and 6.57%.

     Comparative  performance  information  may be  used  from  time  to time in
advertising shares of the Funds, including data from Lipper Analytical Services,
Inc. and other industry sources and  publications.  From time to time a Fund may
compare  its  performance  against  inflation  with  the  performance  of  other
instruments against inflation,  such as FDIC-insured bank money market accounts.
In  addition,  advertising  for the Funds may  indicate  that  investors  should
consider diversifying their investment portfolios in order to seek protection of
the value of their  assets  against  inflation.  From time to time,  advertising
materials  for the Funds may refer to or  discuss  current or past  economic  or
financial  conditions,  developments and events. The Intermediate  Income Fund's
advertising  materials  also  may  refer  to  the  integration  of  the  world's
securities markets, discuss the investment opportunities available worldwide and
mention the increasing importance of an investment strategy including non-U.S.
investments.






                4. DETERMINATION OF NET ASSET VALUE; VALUATION OF
           SECURITIES; ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

     The net asset value of each share of each class of each Fund is  determined
each day during which the New York Stock  Exchange (the  "Exchange") is open for
trading.  As of the  date of  this  Statement  of  Additional  Information,  the
Exchange is open for trading every weekday except for the following holidays (or
the days on which they are  observed):  New Year's Day,  Presidents'  Day,  Good
Friday,  Memorial  Day,  Independence  Day,  Labor  Day,  Thanksgiving  Day  and
Christmas  Day.  This  determination  is made  once  each day as of the close of
regular trading on the Exchange (currently 4:00 p.m. Eastern time) by adding the
market  value of all  securities  and other  assets  attributable  to a class of
shares of a Fund  (including in the case of Government  Income Fund its interest
in the Portfolio),  then  subtracting the liabilities  charged to the class, and
then dividing the result by the number of outstanding  shares of the class.  Per
share net asset  value of each class of each  Fund's  shares can be  expected to
differ because the Class B shares bear higher expenses than Class A shares.  The
net asset  value per share of each  class of  shares  is  effective  for  orders
received and accepted by the Distributor prior to its calculation.

     The value of the Portfolio's net assets (i.e.,  the value of its securities
and other assets less its liabilities, including expenses payable or accrued) is
determined  at the same  time and on the same  days as the net  asset  value per
share of the Government  Income Fund is  determined.  The net asset value of the
Government  Income Fund's investment in the Portfolio is equal to the Fund's pro
rata share of the net assets of the Portfolio.

     Bonds and other fixed income securities (other than short-term obligations)
held for each Fund are valued on the basis of valuations  furnished by a pricing
service,  use of which has been  approved by the Board of Trustees of the Trust.
In making such  valuations,  the pricing service  utilizes both  dealer-supplied
valuations and electronic  data  processing  techniques  which take into account
appropriate  factors  such as  institutional-size  trading in similar  groups of
securities,  yield,  quality,  coupon  rate,  maturity,  type of issue,  trading
characteristics  and other market data,  without exclusive  reliance upon quoted
prices or  exchange  or  over-the-counter  prices,  since  such  valuations  are
believed  to  reflect  more  accurately  the  fair  value  of  such  securities.
Short-term  obligations  (maturing  in 60 days or less) are valued at  amortized
cost, which constitutes fair value as determined by the Board of Trustees of the
Trust.  Futures  Contracts are normally  valued at the  settlement  price on the
exchange  on which  they are  traded.  Securities  for  which  there are no such
valuations  are  valued at fair value as  determined  in good faith by or at the
direction of the Board of Trustees of the Trust.

     Trading in  securities  on most  non-U.S.  exchanges  and  over-the-counter
markets is  normally  completed  before the close of regular  trading on the New
York Stock  Exchange and may also take place on days on which the New York Stock
Exchange  is  closed.  If events  materially  affecting  the  value of  non-U.S.
securities  occur  between  the time when the  exchange on which they are traded
closes and the time when a Fund's net asset value is calculated, such securities
will be valued at fair value in accordance  with  procedures  established by and
under the general supervision of the Board of Trustees of the Trust.

     Interest income on long-term  obligations  held for a Fund is determined on
the basis of interest  accrued plus  amortization  of "original  issue discount"
(generally,  the difference  between issue price and stated  redemption price at
maturity)  and  premiums  (generally,  the excess of purchase  price over stated
redemption  price at maturity).  Interest  income on short-term  obligations  is
determined on the basis of interest accrued less amortization of any premium.

     Subject  to  compliance  with  applicable  regulations,  the  Trust and the
Portfolio Trust have each reserved the right to pay the redemption or repurchase
price of shares of the Funds or of beneficial interests in the Portfolio, either
totally or partially, by a distribution in kind of readily marketable securities
(instead of cash).  The  securities so  distributed  would be valued at the same
amount as that  assigned  to them in  calculating  the net  asset  value for the
shares or beneficial  interests  being sold. If a holder of shares or beneficial
interests  received a distribution in kind, such holder could incur brokerage or
other charges in converting the securities to cash.

     The Trust or the  Portfolio  Trust may suspend the right of  redemption  or
postpone the date of payment for shares of a Fund or beneficial interests in the
Portfolio more than seven days during any period when (a) trading in the markets
the Fund or the Portfolio normally utilizes is restricted,  or an emergency,  as
defined by the rules and  regulations  of the SEC exists  making  disposal  of a
Fund's or Portfolio's  investments or  determination  of its net asset value not
reasonably  practicable;  (b) the New York Stock  Exchange is closed (other than
customary weekend and holiday  closings);  or (c) the SEC has by order permitted
such suspension.

LETTER OF INTENT

     If an investor anticipates  purchasing at least the minimum amount of Class
A shares  of any  Fund  required  for a  volume  discount  as  described  in the
Prospectus,  either alone or in  combination  with Class B shares of the Fund or
any of the  classes  of other  Landmark  Funds  within a  13-month  period,  the
investor may obtain such shares at the same  reduced  sales charge as though the
total quantity were invested in one lump sum by completing a Letter of Intent on
the terms  described  below.  Subject to acceptance by the  Distributor  and the
conditions  mentioned  below,  each purchase  will be made at a public  offering
price  applicable to a single  transaction of the dollar amount specified in the
Letter of Intent. The shareholder or his or her Shareholder Servicing Agent must
inform the  Distributor  that the Letter of Intent is in effect each time shares
are  purchased.  The  shareholder  makes no  commitment  to purchase  additional
shares,  but if his or her  purchases  within 13 months plus the value of shares
credited  toward  completion  of the  Letter  of  Intent  do not  total  the sum
specified,  an increased sales charge will apply as described  below. A purchase
not  originally  made  pursuant  to a Letter of Intent may be  included  under a
subsequent  Letter of Intent  executed  within 90 days of such  purchase  if the
Distributor is informed in writing of this intent within such 90-day period. The
value of shares of a Fund  presently  held,  at cost or maximum  offering  price
(whichever  is higher),  on the date of the first  purchase  under the Letter of
Intent,  may be included as a credit toward the  completion of such Letter,  but
the reduced  sales  charge  applicable  to the amount  covered by such Letter is
applied only to new purchases.  Instructions  for issuance of shares in the name
of a person  other  than  the  person  signing  the  Letter  of  Intent  must be
accompanied by a written statement from the Shareholder  Servicing Agent stating
that the shares were paid for by the person signing such Letter.  Neither income
dividends nor capital gain  distributions  taken in additional shares will apply
toward the completion of the Letter of Intent.  The value of any shares redeemed
or otherwise  disposed of by the purchaser prior to termination or completion of
the  Letter of Intent  are  deducted  from the total  purchases  made under such
Letter of Intent.

     If the  investment  specified  in the  Letter of  Intent  is not  completed
(either  prior  to or by the  end  of  the  13-month  period),  the  Shareholder
Servicing  Agent will redeem,  within 20 days of the expiration of the Letter of
Intent,  an appropriate  number of the shares in order to realize the difference
between the reduced  sales charge that would apply if the  investment  under the
Letter of Intent had been  completed  and the sales  charge that would  normally
apply to the number of shares actually purchased.  By completing and signing the
Letter of Intent, the shareholder irrevocably appoints the Shareholder Servicing
Agent  his or  her  attorney  to  surrender  for  redemption  any or all  shares
purchased  under the  Letter of Intent  with full power of  substitution  in the
premises.

RIGHT OF ACCUMULATION

     A shareholder  qualifies for cumulative  quantity discounts on the purchase
of Class A shares  when his or her new  investment,  together  with the  current
offering price value of all holdings of that  shareholder in the Landmark Funds,
reaches a  discount  level.  See  "Purchases"  in the  Prospectus  for the sales
charges  on  quantity  discounts.  For  example,  if a  Government  Income  Fund
shareholder owns shares valued at $50,000 and purchases an additional $50,000 of
Class A shares of a Fund, the sales charge for the $50,000  purchase would be at
the rate of 1.00% (the rate applicable to single  transactions  of $100,000).  A
shareholder  must provide the Shareholder  Servicing  Agent with  information to
verify that the quantity  sales charge  discount is  applicable  at the time the
investment is made.

                                  5. MANAGEMENT

     The Trustees and officers of the Trusts and the  Portfolio  Trust and their
principal  occupations  during  the past five years are set forth  below.  Their
titles  may have  varied  during  that  period.  Asterisks  indicate  that those
Trustees and officers are  "interested  persons" (as defined in the 1940 Act) of
the Trust or the Portfolio Trust.  Unless otherwise indicated below, the address
of each Trustee and officer is 6 St. James Avenue,  Boston,  Massachusetts.  The
address of the Portfolio Trust is Elizabethan Square, George Town, Grand Cayman,
British West Indies.

TRUSTEES OF THE TRUST

H.B. ALVORD -- Treasurer-Tax Collector, County of Los Angeles (retired,
March, 1984); Chairman, certain registered investment companies in the 59 Wall
Street funds group. His address is P.O. Box 1812, Pebble Beach, California.

PHILIP W. COOLIDGE* -- President of the Trust and the Portfolio Trust;
Chief Executive Officer, Signature Financial Group, Inc. and The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).

RILEY C. GILLEY -- Vice President and General Counsel, Corporate Property
Investors (November, 1988 to December, 1991); Partner, Breed, Abbott & Morgan
(Attorneys) (retired, December, 1987). His address is 4041 Gulf Shore Boulevard
North, Naples, Florida.

DIANA R.  HARRINGTON --  Professor,  Babson  College  (since  September,  1993);
Visiting  Professor,   Kellogg  Graduate  School  of  Management,   Northwestern
University  (September,  1992 to September,  1993);  Professor,  Darden Graduate
School of Business, University of Virginia (September, 1978 to September, 1993);
Consultant  to  PanAgora  Asset  Management  (since  1994).  Her  address is 120
Goulding Street, Holliston, Massachusetts.

SUSAN B. KERLEY -- President, Global Research Associates, Inc. (Investment
Research) (since August, 1990); Manager, Rockefeller & Co. (March, 1988 to July,
1990); Trustee, Mainstay Institutional Funds (since December, 1990). Her address
is P.O. Box 9572, New Haven, Connecticut.

C. OSCAR MORONG, JR. -- Managing Director, Morong Capital Management (since
February, 1993); Senior Vice President and Investment Manager, CREF Investments,
Teachers Insurance & Annuity Association (retired January, 1993); Director,
Indonesia Fund; Director, MAS Funds. His address is 1385 Outlook Drive West,
Mountainside, New Jersey.

DONALD B. OTIS -- Director of Investor Relations, International Business
Machines Corporation (retired February, 1982). His address is 6300 Midnight Pass
Road, Sarasota, Florida.

E. KIRBY WARREN -- Professor of Management, Graduate School of Business,
Columbia University (since 1987); Samuel Bronfman Professor of Democratic
Business Enterprise (1978-1987). His address is Columbia University, Graduate
School of Business, 725 Uris Hall, New York, New York.

WILLIAM S. WOODS, JR. -- Vice President-Investments, Sun Company, Inc.
(retired, April, 1984). His address is 35 Colwick Road, Cherry Hill, New Jersey.

TRUSTEES OF THE PORTFOLIO TRUST

ELLIOTT J. BERV -- Chairman and Director, Catalyst, Inc. (Management
Consultants)(since June, 1992); President, Chief Operating Officer and Director,
Deven International, Inc. (International Consultants)(June, 1991 to June 1992);
President and Director, Elliott J. Berv & Associates (Management
Consultants)(since May, 1984). His address is 15 Stornoway Drive, Cumberland
Foreside, Maine.

PHILIP W. COOLIDGE* -- President of the Trust and the Portfolio Trust;
Chief Executive Officer, Signature Financial Group, Inc. and The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).

MARK T. FINN -- President and Director, Delta Financial, Inc. (since June,
1983); Chairman of the Board and Chief Executive Officer, FX 500 Ltd. (Commodity
Trading Advisory Firm)(since April, 1990); Director, Vantage Consulting Group,
Inc. (since October, 1988). His address is 3500 Pacific Avenue, P.O. Box 539,
Virginia Beach, Virginia.

WALTER E. ROBB, III -- President, Benchmark Consulting Group, Inc. (since
1991); Principal, Robb Associates (corporate financial advisers) (since 1978);
President, Benchmark Advisors, Inc. (Corporate Financial Advisors)(since 1989);
Trustee of certain registered investment companies in the MFS Family of Funds.
His address is 35 Farm Road, Sherborn, Massachusetts.

OFFICERS OF THE TRUSTS AND THE PORTFOLIO TRUST

PHILIP W. COOLIDGE* -- President of the Trust and the Portfolio Trust;
Chief Executive Officer, Signature Financial Group, Inc. and The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).

DAVID G. DANIELSON* -- Assistant Treasurer of the Trust and the Portfolio
Trust; Assistant Manager, Signature Financial Group, Inc. (since May, 1991);
Graduate Student, Northeastern University (April, 1990 to March, 1991).

JOHN R. ELDER* -- Treasurer of the Trust and the Portfolio Trust; Vice
President, Signature Financial Group, Inc. (since April, 1995); Treasurer of the
Phoenix Family of Mutual Funds, Phoenix Home Life Mutual Insurance Company (1983
to March, 1995).

LINDA T. GIBSON* -- Assistant Secretary of the Trust and the Portfolio
Trust; Legal Counsel, Signature Financial Group, Inc. (since June, 1991); Law
Student, Boston University School of Law (September, 1989 to May, 1992); Product
Manager, Signature Financial Group, Inc. (January, 1989 to September, 1989).

SUSAN JAKUBOSKI* -- Vice President, Assistant Treasurer and Assistant
Secretary of the Portfolio Trust (since August, 1994); Manager, Signature
Financial Group (Cayman) Ltd. (since August, 1994); Senior Fund Administrator,
Signature Financial Group, Inc. (since August, 1994); Assistant Treasurer,
Signature Broker-Dealer Services, Inc. (since September, 1994); Fund Compliance
Administrator, Concord Financial Group (November, 1990 to August, 1994); Senior
Fund Accountant, Neuberger & Berman Management, Inc. (from February, 1988 to
November, 1990); Customer Service Representative, I.B.J. Schroder (prior to
1988). Her address is Elizabethan Square, George Town, Grand Cayman, Cayman
Islands, BWI.

JAMES S. LELKO, JR.* -- Assistant Treasurer of the Trust and the Portfolio
Trust; Assistant Manager, Signature Financial Group, Inc. (since January, 1993);
Senior Tax Compliance Accountant, the Putnam Companies (September, 1988 to
December, 1992).

THOMAS M. LENZ* -- Secretary of the Trust and the Portfolio Trust; Vice
President and Associate General Counsel, Signature Financial Group, Inc. (since
November, 1989); Assistant Secretary, Signature Broker-Dealer Services, Inc.
(since February, 1991); Attorney, Ropes & Gray (September, 1984 to November,
1989).

MOLLY S. MUGLER* -- Assistant Secretary of the Trust and the Portfolio
Trust; Legal Counsel and Assistant Secretary, Signature Financial Group, Inc.
(since December, 1988); Assistant Secretary, The Landmark Funds Broker-Dealer
Services, Inc. (since December, 1988).

BARBARA M. O'DETTE* -- Assistant Treasurer of the Trust and the Portfolio
Trust; Assistant Treasurer, Signature Financial Group, Inc. and The Landmark
Funds Broker-Dealer Services, Inc. (since December, 1988).

ANDRES E. SALDANA* -- Assistant  Secretary of the Trust and the Portfolio Trust;
Legal Counsel and Assistant  Secretary,  Signature  Financial Group, Inc. (since
November, 1992); Attorney, Ropes & Gray (September, 1990 to November, 1992).

DANIEL E. SHEA* -- Assistant Treasurer of the Trust and the Portfolio
Trust; Assistant Manager of Fund Administration, Signature Financial Group, Inc.
(since November, 1993); Supervisor and Senior Technical Advisor, Putnam
Investments (prior to 1990).

     The Trustees and  officers of the Trust and the  Portfolio  Trust also hold
comparable  positions  with certain  other funds for which  LFBDS,  SFG or their
affiliates serve as the distributor or administrator.

     As of February  28,  1995,  all Trustees and officers as a group owned less
than 1% of the  outstanding  shares of the Funds. As of the same date, more than
95% of the outstanding shares of each Fund were held of record by Citibank, N.A.
or its affiliates, as Shareholder Servicing Agents of the Funds for the accounts
of their respective clients.

     The  Declaration  of Trust of each of the  Trust  and the  Portfolio  Trust
provides  that each of the Trust and the  Portfolio  Trust,  respectively,  will
indemnify its Trustees and officers against liabilities and expenses incurred in
connection  with  litigation  in which  they may be  involved  because  of their
offices with the Trust or the Portfolio Trust, as the case may be, unless, as to
liability to the Trust, the Portfolio Trust or their respective investors, it is
finally adjudicated that they engaged in willful  misfeasance,  bad faith, gross
negligence or reckless  disregard of the duties  involved in their  offices,  or
unless with respect to any other matter it is finally  adjudicated that they did
not act in good faith in the  reasonable  belief that their  actions were in the
best interests of the Trust or the Portfolio  Trust,  as the case may be. In the
case of settlement, such indemnification will not be provided unless it has been
determined  by  a  court  or  other  body  approving  the  settlement  or  other
disposition,  or by a reasonable  determination,  based upon a review of readily
available facts, by vote of a majority of disinterested Trustees of the Trust or
the Portfolio Trust, or in a written opinion of independent  counsel,  that such
officers or Trustees have not engaged in willful  misfeasance,  bad faith, gross
negligence or reckless disregard of their duties.

ADVISER

     Citibank  manages  the  assets  of the  Intermediate  Income  Fund  and the
Portfolio  pursuant to separate  investment  advisory  agreements (the "Advisory
Agreements").  Subject to such policies as the Board of Trustees of the Trust or
the Portfolio Trust, as the case may be, may determine,  the Adviser manages the
securities  of  the  Intermediate  Income  Fund  and  the  Portfolio  and  makes
investment  decisions for the  Intermediate  Income Fund and the Portfolio.  The
Adviser  furnishes at its own expense all  services,  facilities  and  personnel
necessary in  connection  with managing the  Intermediate  Income Fund's and the
Portfolio's   investments  and  effecting   securities   transactions   for  the
Intermediate Income Fund and the Portfolio.  The Portfolio's  Advisory Agreement
will continue in effect until  September 15, 1995 and thereafter as long as such
continuance is specifically  approved at least annually by the Board of Trustees
of the  Portfolio  Trust or by a vote of a majority  of the  outstanding  voting
securities of the Portfolio,  and, in either case, by a majority of the Trustees
of the  Portfolio  Trust  who are  not  parties  to the  Advisory  Agreement  or
interested  persons of any such  party,  at a meeting  called for the purpose of
voting on the Advisory  Agreement.  The Advisory  Agreement of the  Intermediate
Income Fund will continue in effect as long as such  continuance is specifically
approved at least annually by the Board of Trustees of the Trust or by a vote of
a majority of the outstanding voting securities of the Intermediate Income Fund,
and,  in either  case,  by a majority  of the  Trustees of the Trust who are not
parties to the Advisory  Agreement or interested persons of any such party, at a
meeting called for the purpose of voting on the Advisory Agreement.

     Each of the  Advisory  Agreements  provides  that the  Adviser  may  render
services to others. Each Advisory Agreement is terminable without penalty on not
more  than 60 days' nor less  than 30 days'  written  notice by the Trust or the
Portfolio  Trust,  as the case may be,  when  authorized  either  by a vote of a
majority of the outstanding voting securities of the Intermediate Income Fund or
Portfolio  or by a vote of a majority  of the Board of  Trustees of the Trust or
Portfolio Trust, as appropriate, or by the Adviser on not more than 60 days' nor
less than 30 days' written notice, and will automatically terminate in the event
of its assignment. Each Advisory Agreement provides that neither the Adviser nor
its personnel shall be liable for any error of judgment or mistake of law or for
any  loss  arising  out of any  investment  or for  any act or  omission  in the
execution and management of the  Intermediate  Income Fund or Portfolio,  as the
case may be, except for willful  misfeasance,  bad faith or gross  negligence or
reckless  disregard  of its or their  obligations  and duties under the Advisory
Agreement.

     The  Prospectus  contains a description  of the fees payable to the Adviser
for services under the Advisory Agreements. For the fiscal year ended August 31,
1992,  the fee payable to the Adviser  from the  Government  Income Fund under a
prior investment  advisory  agreement between the Government Income Fund and the
Adviser was $135,486 (of which $127,843 was voluntarily  waived). For the fiscal
year ended August 31, 1993,  the fee payable to the Adviser from the  Government
Income Fund under such prior  investment  advisory  agreement  was  $213,869 (of
which $134,725 was voluntarily waived). For the four-month period ended December
31, 1993, the fee payable to the Adviser from the  Government  Income Fund under
the prior  advisory  agreement  was  $96,878 (of which  $61,193 was  voluntarily
waived).  For the four month period  ended April 30, 1994,  the fee payable from
the Government  Income Fund to the Adviser under a prior advisory  agreement was
$93,572 (of which $67,712 was  voluntarily  waived).  For the period from May 1,
1994 to December 31, 1994, the fee payable to the Adviser under the  Portfolio's
Advisory  Agreement was $148,797.  For the period June 25, 1993 (commencement of
operations)  to December  31, 1993 and for the fiscal  year ended  December  31,
1994,  the fees payable from the  Intermediate  Income Fund to the Adviser under
its Advisory  Agreement were $115,175 (of which $53,119 was waived) and $186,301
(of which $120,645 was voluntarily waived), respectively.

ADMINISTRATOR

     Pursuant  to  administrative   services  agreements  (the   "Administrative
Services Agreements"),  LFBDS and SFG provide the Trust and the Portfolio Trust,
respectively,  with general  office  facilities  and LFBDS and SFG supervise the
overall  administration  of the Trust or the Portfolio Trust,  including,  among
other  responsibilities,  the  negotiation  of contracts and fees with,  and the
monitoring of performance and billings of, the Trust's or the Portfolio  Trust's
independent  contractors and agents; the preparation and filing of all documents
required for compliance by the Trust or the Portfolio Trust with applicable laws
and  regulations;  and arranging for the maintenance of books and records of the
Trust or the Portfolio Trust. The Administrator and the Portfolio  Administrator
provide  persons  satisfactory  to the  Board of  Trustees  of the  Trust or the
Portfolio Trust to serve as Trustees and officers of the Trust and the Portfolio
Trust,  respectively.  Such  Trustees  and  officers,  as well as certain  other
employees and Trustees of the Trust and the Portfolio  Trust,  may be directors,
officers or employees of LFBDS, SFG or their affiliates.

     The  Prospectus   contains  a  description  of  the  fees  payable  to  the
Administrator and the Portfolio  Administrator under the Administrative Services
Agreements.  For the fiscal year ended August 31, 1992, the fee payable to LFBDS
from the Government Income Fund under a prior administrative  services agreement
was $38,710 (of which $32,313 was voluntarily waived). For the fiscal year ended
August 31, 1993, the fee payable to LFBDS from the Government  Income Fund under
the  Administrative  Services  Agreement  and a  prior  administrative  services
agreement with the Trust was $122,210 (of which $33,344 was voluntarily waived).
For the four-month period ended December 31, 1993, the fee payable to LFBDS from
the  Government  Income Fund under the  Administrative  Services  Agreement  was
$55,359 (of which  $12,386 was  voluntarily  waived).  For the four month period
ended April 30, 1994 and for the period from May 1, 1994 to December  31,  1994,
the  fees  payable  to  LFBDS  from  the   Government   Income  Fund  under  the
Administrative Services Agreement were $53,470 (of which $15,652 was voluntarily
waived) and $62,191 (of which $60,059 was voluntarily waived), respectively. For
the period from May 1, 1994 to December 31, 1994 the fee payable to SFG from the
Portfolio under the  Administrative  Services Agreement with the Portfolio Trust
was $21,257 (of which $1,583 was voluntarily  waived).  For the period from June
25, 1993  (commencement  of  operations) to December 31, 1993 and for the fiscal
year ended  December 31, 1994,  the fees payable to LFBDS from the  Intermediate
Income Fund were $65,815 (of which $35,202 was voluntarily  waived) and $106,458
(of which $37,176 was voluntarily waived), respectively.

     The Administrative  Services Agreement with the Trust acknowledges that the
names "Landmark" and "Landmark Funds" are the property of the  Administrator and
provides that if LFBDS ceases to serve as the  Administrator  of the Trust,  the
Trust  would  change its name and the name of the Funds so as to delete the word
"Landmark" or the words "Landmark Funds". The Administrative  Services Agreement
with the Trust also  provides that LFBDS may render  administrative  services to
others and may permit other  investment  companies to use the word "Landmark" or
the words "Landmark Funds" in their names.

     The  Administrative  Services  Agreement with the Trust continues in effect
with respect to each Fund if such continuance is specifically  approved at least
annually by the Board of Trustees of the Trust or by a vote of a majority of the
outstanding voting securities of the Trust and, in either case, by a majority of
the Trustees  who are not parties to the  Administrative  Services  Agreement or
interested persons of any such party. The Administrative Services Agreement with
the Trust  terminates  automatically  if it is  assigned  and may be  terminated
without  penalty by vote of a majority of the outstanding  voting  securities of
the  Trust or by  either  party on not more than 60 days' nor less than 30 days'
written  notice.  The  Administrative  Services  Agreement  with the Trust  also
provides that neither LFBDS,  as the  Administrator,  nor its personnel shall be
liable for any error of judgment or mistake of law or for any act or omission in
the administration or management of the Trust,  except for willful  misfeasance,
bad faith or gross  negligence in the  performance  of its or their duties or by
reason of reckless  disregard of its or their  obligations  and duties under the
Administrative Services Agreement.

     The  Administrative  Services  Agreement with the Portfolio  Trust provides
that SFG may  render  administrative  services  to  others.  The  Administrative
Services  Agreement with the Portfolio Trust  terminates  automatically if it is
assigned and may be  terminated  without  penalty by a vote of a majority of the
outstanding  voting  securities of the Portfolio Trust or by either party on not
more than 60 days' nor less than 30 days'  written  notice.  The  Administrative
Services  Agreement with the Portfolio  Trust also provides that neither SFG, as
the Portfolio Administrator,  nor its personnel shall be liable for any error of
judgment or mistake of law or for any act or omission in the  administration  or
management of the Portfolio Trust, except for willful misfeasance,  bad faith or
gross  negligence  in the  performance  of its or their  duties  or by reason of
reckless  disregard of its or their  obligations  and duties under the Portfolio
Trust's Administrative Services Agreement.

     LFBDS and SFG are wholly-owned  subsidiaries of Signature  Financial Group,
Inc.  SFG is a company  organized  under  the laws of the  Cayman  Islands.  Its
principal  place of business  is in George  Town,  Grand  Cayman,  British  West
Indies.

     Pursuant to sub-administrative services agreements,  Citibank performs such
sub-administrative  duties for the Trust and the Portfolio Trust as from time to
time are agreed upon by Citibank  and,  respectively,  LFBDS or SFG.  Citibank's
sub-administrative duties may include providing equipment and clerical personnel
necessary for  maintaining  the Trust's or the Portfolio  Trust's  organization,
participation  in the  preparation  of documents  required for compliance by the
Trust  or  the  Portfolio  Trust  with  applicable  laws  and  regulations,  the
preparation  of certain  documents in  connection  with meetings of Trustees and
shareholders,  and other  functions  which would  otherwise  be performed by the
Administrator.   For  performing  such  sub-administrative   services,  Citibank
receives  compensation  as from time to time is  agreed  upon by  Citibank  and,
respectively, LFBDS or SFG, not in excess of the amount paid to LFBDS or SFG for
its respective  services under the Administrative  Services  Agreements with the
Trust and the Portfolio Trust. All such compensation is paid by LFBDS or SFG.

DISTRIBUTOR

     LFBDS  serves  as  the  Distributor  of  each  Fund's  shares  pursuant  to
Distribution  Agreements  with the Trust with respect to each class of shares of
each Fund. Unless otherwise  terminated,  the Distribution  Agreement remains in
effect from year to year upon annual  approval by the Trust's Board of Trustees,
or by the vote of a majority of the outstanding  voting  securities of the Trust
and by the vote of a majority  of the Board of Trustees of the Trust who are not
parties to the Agreement or interested persons of any such party, cast in person
at a meeting  called for the purpose of voting on such  approval.  The Agreement
will terminate in the event of its assignment, as defined in the 1940 Act.

     The Trust has adopted a Distribution  Plan (each a "Distribution  Plan") in
accordance  with Rule  12b-1  under the 1940 Act with  respect  to each class of
shares of the Funds after concluding that there is a reasonable  likelihood that
the  Distribution  Plans  will  benefit  each  Fund  and its  shareholders.  The
Distribution  Plan with respect to Class A shares  provides that each Fund shall
pay a distribution  fee to the Distributor at an annual rate not to exceed 0.15%
of each Fund's average daily net assets  represented by the Class A shares.  The
Distribution  Plan with respect to Class B shares  provides  that each Fund will
pay the Distributor a distribution fee at annual rate not to exceed 0.75% (0.45%
in the case of the  Government  Income  Fund) of the  average  daily net  assets
represented by the Class B shares.  The  Distributor  receives the  distribution
fees for its services under the  Distribution  Agreements in connection with the
distribution  of each Fund's shares of each class  (exclusive of any advertising
expenses  incurred by the  Distributor  in  connection  with the sale of Class A
shares  of each  Fund).  The  Distributor  may use  all or any  portion  of such
distribution  fee to pay for expenses of printing  prospectuses and reports used
for  sales  purposes,   expenses  of  the  preparation  and  printing  of  sales
literature,  commissions to dealers who sell shares of the  applicable  class of
the Fund and other distribution-related expenses.

     Each of the Funds is  permitted  to pay a service  fee with  respect to the
Class B shares at an  annual  rate not to exceed  0.25% of each  Fund's  average
daily net assets represented by the Class B shares.

     Each  Distribution Plan with respect to the Class A Shares also permits the
Funds to pay the  Distributor  an  additional  fee (not to  exceed  0.05% of the
average  daily  net  assets  of the Class A  shares)  in  anticipation  of or as
reimbursement  for print or electronic media  advertising  expenses  incurred in
connection with the sale of Class A shares.

     The   Distribution   Plans  continue  in  effect  if  such  continuance  is
specifically  approved  at least  annually  by a vote of both a majority  of the
Trust's Trustees and a majority of the Trustees who are not "interested persons"
of the  Trust  and who have no  direct or  indirect  financial  interest  in the
operation of the  Distribution  Plans or in any  agreement  related to the Plans
(for purposes of this paragraph  "Qualified  Trustees").  Each Distribution Plan
requires  that the Trust and the  Distributor  provide to the Board of Trustees,
and the Board of Trustees review,  at least  quarterly,  a written report of the
amounts expended (and the purposes  therefor) under the Distribution  Plan. Each
Distribution  Plan further  provides that the  selection  and  nomination of the
Qualified Trustees is committed to the discretion of the disinterested  Trustees
(as  defined  in the 1940 Act) then in  office.  The  Distribution  Plans may be
terminated with respect to any class of shares of any Fund at any time by a vote
of a majority  of the Trust's  Qualified  Trustees or by a vote of a majority of
the  outstanding  voting  securities  of that  class of shares of the Fund.  The
Distribution Plan applicable to a class of shares of any Fund may not be amended
to increase  materially  the amount of a Fund's  permitted  expenses  thereunder
without the approval of a majority of the  outstanding  securities of that class
of shares of that Fund and may not be  materially  amended in any case without a
vote of a majority of both the Trustees and Qualified Trustees.  The Distributor
will  preserve  copies of any plan,  agreement  or report made  pursuant to each
Distribution  Plan for a period of not less than six years  from the date of the
Plan, and for the first two years the  Distributor  will preserve such copies in
an easily accessible place.

     As contemplated by the Distribution  Plans,  LFBDS acts as the agent of the
Trust in  connection  with the  offering of shares of the Funds  pursuant to the
Distribution  Agreements.  After the  prospectuses  and periodic  reports of the
Funds have been prepared, set in type and mailed to existing  shareholders,  the
Distributor  pays for the printing and  distribution of copies thereof which are
used in  connection  with the  offering  of shares  of the Funds to  prospective
investors.  The  Prospectus  contains  a  description  of  fees  payable  to the
Distributor under the Distribution Agreements. For the fiscal years ended August
31, 1992 and August 31, 1993, for the four-month  period ended December 31, 1993
and for the  fiscal  year  ended  December  31,  1994,  the fees  payable to the
Distributor by the Government Income Fund under the Distribution  Agreement were
$58,066 (of which $52,025 was voluntarily waived), $30,553 (of which $28,974 was
voluntarily  waived),  $13,840 (all of which was voluntarily waived) and $34,098
(all of which was  voluntarily  waived),  no portion of which was  applicable to
reimbursement for expenses incurred in connection with print or electronic media
advertising.  For the period  June 25,  1993  (commencement  of  operations)  to
December  31, 1993 and for the fiscal year ended  December  31,  1994,  the fees
payable  to  the  Distributor  from  the  Intermediate  Income  Fund  under  the
Distribution Plan were $16,454 (all of which was voluntarily waived) and $26,617
(all of which was voluntarily waived), respectively.

SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN

     The Trust has adopted an administrative  services plan (the "Administrative
Services  Plan") after having  concluded  that there is a reasonable  likelihood
that  the  Administrative  Services  Plan  will  benefit  the  Funds  and  their
shareholders.  The  Administrative  Services  Plan  provides  that the Trust may
obtain the services of an  administrator,  a transfer agent, a custodian and one
or more Shareholder  Servicing Agents,  and may enter into agreements  providing
for the  payment of fees for such  services.  Under the  Trust's  Administrative
Services  Plan,  the  total  of  the  fees  paid  from a  Fund  to  the  Trust's
Administrator  and  Shareholder  Servicing  Agents may not  exceed  0.65% of the
Fund's  average  daily  net  assets  on  an  annualized  basis  for  the  Fund's
then-current  fiscal year. Any distribution  fees (other than any fee concerning
electronic or other media  advertising)  payable under the Distribution Plan for
Class A shares are included in this expense  limitation.  This  limitation  with
respect to the Class B shares of each Fund, does not include any amounts payable
under the Distribution Plans for such shares.  The Administrative  Services Plan
continues  in effect  if such  continuance  is  specifically  approved  at least
annually  by a vote of both a majority  of the  Trustees  and a majority  of the
Trustees who are not "interested persons" of the Trust and who have no direct or
indirect financial interest in the operation of the Administrative Services Plan
or in any  agreement  related  to such  Plan  (for  purposes  of this  paragraph
"Qualified Trustees").  The Administrative Services Plan requires that the Trust
provide to its Board of  Trustees  and the Board of  Trustees  review,  at least
quarterly,  a written report of the amounts expended (and the purposes therefor)
under the Administrative  Services Plan. The Administrative Services Plan may be
terminated at any time by a vote of a majority of the Qualified  Trustees of the
Trust  or as to each  Fund by a vote of a  majority  of the  outstanding  voting
securities of the Fund. The  Administrative  Services Plan may not be amended to
increase  materially  the amount of permitted  expenses  thereunder  without the
approval of a majority of the outstanding  voting  securities of the Funds.  The
Administrative  Services  Plan with  respect to each Fund may not be  materially
amended in any case  without a vote of the majority of both the Trustees and the
Qualified Trustees.

     The Trust has entered into a shareholder  servicing agreement (a "Servicing
Agreement")  with each  Shareholder  Servicing  Agent and a Transfer  Agency and
Service  Agreement  with State Street Bank and Trust  Company  ("State  Street")
pursuant to which State Street acts as transfer  agent for each Fund.  The Trust
has entered  into a Custodian  Agreement  with  Investors  Bank & Trust  Company
("IBT") and a Fund Accounting Agreement with Signature Financial Services,  Inc.
("SFSI") pursuant to which custodial and fund accounting services, respectively,
are  provided  for the  Government  Income  Fund.  The Trust has entered  into a
Custodian  Agreement with State Street Bank and Trust Company  pursuant to which
custodial and fund accounting  services are provided for the Intermediate Income
Fund. See "Shareholder Servicing Agents" and "Transfer Agent, Custodian and Fund
Accountant"  in  the  Prospectus   for  additional   information,   including  a
description of fees paid to the Shareholder Servicing Agents under the Servicing
Agreements. For the fiscal year ended August 31, 1993, aggregate fees payable to
Shareholder   Servicing   Agents  by  the  Government   Income  Fund  under  the
Administrative  Services Plan were  $244,421 (of which  $91,658 was  voluntarily
waived).  For the  four-month  period ended  December 31, 1993,  aggregate  fees
payable to Shareholder  Servicing Agents by the Government Income Fund under the
Administrative  Services Plan were  $110,717 (of which  $41,519 was  voluntarily
waived).  For the fiscal year ended December 31, 1994, aggregate fees payable to
Shareholder   Servicing   Agents  by  the  Government   Income  Fund  under  the
Administrative  Services Plan were $272,783 (of which  $102,294 was  voluntarily
waived).  For the period  from June 25, 1993  (commencement  of  operations)  to
December 31, 1993 and for the fiscal year ended  December  31,  1994,  aggregate
fees payable to Shareholder  Servicing  Agents by the  Intermediate  Income Fund
under the  Administrative  Services  Plan were  $131,629  (of which  $51,581 was
voluntarily   waived)  and   $212,916   (of  which   $79,843   was   voluntarily
waived),respectively.

     The Portfolio Trust has also adopted an  administrative  services plan (the
"Portfolio  Administrative  Plan"),  which provides that the Portfolio Trust may
obtain the services of an  administrator,  a transfer  agent and a custodian and
may enter into  agreements  providing for the payment of fees for such services.
Under the Portfolio Administrative Plan, the administrative services fee payable
to the  Portfolio  Administrator  from the Portfolio may not exceed 0.05% of the
Portfolio's average daily net assets on an annualized basis for its then-current
fiscal year.

     The Portfolio  Administrative  Plan continues in effect if such continuance
is  specifically  approved at least annually by a vote of both a majority of the
Portfolio  Trust's Trustees and a majority of the Portfolio Trust's Trustees who
are not "interested persons" of the Portfolio and who have no direct or indirect
financial interest in the operation of the Portfolio  Administrative  Plan or in
any agreement  related to such Plan (for purposes of this  paragraph  "Qualified
Trustees").  The Portfolio Administrative Plan requires that the Portfolio Trust
provide to the Board of  Trustees  and the Board of  Trustees  review,  at least
quarterly,  a written report of the amounts expended (and the purposes therefor)
under the Portfolio  Administrative Plan. The Portfolio  Administrative Plan may
not  be  amended  to  increase  materially  the  amount  of  permitted  expenses
thereunder  without  the  approval  of a  majority  of  the  outstanding  voting
securities of the Portfolio Trust and may not be materially  amended in any case
without a vote of the majority of both the  Portfolio  Trust's  Trustees and the
Portfolio Trust's Qualified Trustees.

     State Street acts as transfer agent and dividend  disbursing agent for each
Fund and as the custodian of  Intermediate  Income Fund's assets.  The Portfolio
Trust,  on behalf of the Portfolio has entered into a Custodian  Agreement  with
IBT pursuant to which IBT acts as custodian  for the  Portfolio.  The  Portfolio
Trust, on behalf of the Portfolio has entered into a Fund  Accounting  Agreement
with SFSI  pursuant to which SFSI  provides  fund  accounting  services  for the
Portfolio. Pursuant to a separate Transfer Agency and Service Agreement with the
Portfolio Trust,  SFSI provides  transfer agency services to the Portfolio.  See
"Shareholder   Servicing  Agents"  and  "Transfer  Agent,   Custodian  and  Fund
Accountant" in the Prospectus for additional information.

     The  principal  business  address of State Street is 225  Franklin  Street,
Boston,  Massachusetts  02110.  The  principal  business  address  of IBT is One
Lincoln Plaza,  Boston,  Massachusetts  02111. The principal business address of
SFSI is 6 St. James Avenue, Boston, Massachusetts 02116.

AUDITORS

     Price Waterhouse LLP are the independent  certified public  accountants for
the  Government  Income  Fund,  providing  audit  services  and  assistance  and
consultation  with  respect  to the  preparation  of filings  with the SEC.  The
address of Price  Waterhouse LLP is 160 Federal  Street,  Boston,  Massachusetts
02110.  Price Waterhouse are the chartered  accountants for the Portfolio Trust.
The address of Price Waterhouse is Suite 3000, 1 First Canadian Place,  Toronto,
Ontario M5X 1H7, Canada.

     Deloitte & Touche LLP are the independent  certified public accountants for
the  Intermediate  Income Fund,  providing  audit  services and  assistance  and
consultation  with  respect  to the  preparation  of filings  with the SEC.  The
address of  Deloitte & Touche LLP is 125 Summer  Street,  Boston,  Massachusetts
02110.

                            6. PORTFOLIO TRANSACTIONS

     The Trust trades  securities  for a Fund if it believes  that a transaction
net of  costs  (including  custodian  charges)  will  help  achieve  the  Fund's
investment  objectives.  Changes in each  Fund's  investments  are made  without
regard to the length of time a security  has been held,  or whether a sale would
result in the recognition of a profit or loss.  Therefore,  the rate of turnover
is not a limiting factor when changes are appropriate. The turnover rate for the
Government  Income Fund is  expected  to be  approximately  125%  annually.  The
turnover  rate for the  Intermediate  Income Fund is expected to be between 100%
and 250% annually.  Specific  decisions to purchase or sell  securities for each
Fund are made by a  portfolio  manager who is an employee of the Adviser and who
is appointed and supervised by its senior  officers.  The portfolio  manager may
serve other clients of the Adviser in a similar capacity.

     The primary consideration in placing portfolio securities transactions with
broker-dealers  for  execution  is to obtain and maintain  the  availability  of
execution  at  the  most  favorable  prices  and in the  most  effective  manner
possible.   The   Adviser   attempts  to  achieve   this  result  by   selecting
broker-dealers to execute  transactions on behalf of each Fund and other clients
of the  Adviser  on the basis of their  professional  capability,  the value and
quality  of  their  brokerage  services,   and  the  level  of  their  brokerage
commissions.  In the case of securities  traded in the  over-the-counter  market
(where no stated  commissions  are paid but the prices include a dealer's markup
or  markdown),  the Adviser  normally  seeks to deal  directly  with the primary
market makers, unless in its opinion, best execution is available elsewhere.  In
the case of securities purchased from underwriters,  the cost of such securities
generally includes a fixed underwriting  commission or concession.  From time to
time,  soliciting  dealer fees are  available  to the Adviser on the tender of a
Fund's securities in so-called tender or exchange offers. Such soliciting dealer
fees are in effect  recaptured for the Fund by the Adviser.  At present no other
recapture arrangements are in effect.

     Under the Advisory  Agreements,  in  connection  with the selection of such
brokers or dealers  and the placing of such  orders,  the Adviser is directed to
seek for each Fund in its best judgment, prompt execution in an effective manner
at the most  favorable  price.  Subject to this  requirement of seeking the most
favorable  price,  securities may be bought from or sold to  broker-dealers  who
have furnished  statistical,  research and other  information or services to the
Adviser or the Funds, subject to any applicable laws, rules and regulations.

     The investment  advisory fee that each Fund pays to the Adviser will not be
reduced as a  consequence  of the  Adviser's  receipt of brokerage  and research
services.  While such  services  are not  expected to reduce the expenses of the
Adviser,  the  Adviser  would,  through  the  use of  the  services,  avoid  the
additional  expenses  which would be  incurred  if it should  attempt to develop
comparable information through its own staff.

     In  certain  instances  there may be  securities  that are  suitable  as an
investment for a Fund as well as for one or more of the Adviser's other clients.
Investment  decisions for each Fund and for the Adviser's other clients are made
with a view to achieving their respective investment objectives.  It may develop
that a particular  security is bought or sold for only one client even though it
might be held by, or bought or sold for, other clients.  Likewise,  a particular
security  may be bought for one or more  clients  when one or more  clients  are
selling the same security.  Some  simultaneous  transactions are inevitable when
several clients  receive  investment  advice from the same  investment  adviser,
particularly when the same security is suitable for the investment objectives of
more than one client. When two or more clients are simultaneously engaged in the
purchase  or sale of the same  security,  the  securities  are  allocated  among
clients in a manner  believed to be equitable to each. It is recognized  that in
some cases this system  could  adversely  affect the price of or the size of the
position  obtainable  in a security for a Fund.  When  purchases or sales of the
same security for a Fund and for other  portfolios  managed by the Adviser occur
contemporaneously,  the  purchase or sale orders may be  aggregated  in order to
obtain any price advantages available to large volume purchases or sales.

     For the fiscal  years ended  August 31, 1992 and August 31,  1993,  for the
four month  period  ended  December 31, 1993 and for the four month period ended
April 30, 1994, the Government  Income Fund paid no brokerage  commissions.  For
the  period  from May 1,  1994 to  December  31,  1994,  the  Portfolio  paid no
brokerage  commissions.  For the  period  from June 25,  1993  (commencement  of
operation) to December 31, 1993 and for the fiscal year ended December 31, 1994,
the Intermediate Income Fund paid no brokerage commissions.

             7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

     The Trust's Declaration of Trust permits the Trustees to issue an unlimited
number of full and fractional Shares of Beneficial  Interest (without par value)
of each  series and to divide or combine the shares of any series into a greater
or  lesser  number  of  shares  of that  series  without  thereby  changing  the
proportionate beneficial interests in that series. Currently, the Trust has four
series of shares,  each  divided  into two  classes.  The Trust has reserved the
right to create and issue additional series and classes of shares. Each share of
each class of each Fund represents an equal  proportionate  interest in the Fund
with each other share of that class.  Shares of each series participate  equally
in the earnings,  dividends  and  distribution  of net assets of the  particular
series upon liquidation or dissolution (except for any differences among classes
of shares in a series). Shares of each series are entitled to vote separately to
approve advisory  agreements or changes in investment  policy, but shares of all
series  may  vote  together  in  the  election  or  selection  of  Trustees  and
accountants for the Trust. In matters affecting only a particular Fund or class,
only shares of that particular Fund or class are entitled to vote.

     Shareholders  are  entitled  to one vote for each  share held on matters on
which  they  are  entitled  to  vote.  Shareholders  in the  Trust  do not  have
cumulative  voting  rights,  and  shareholders  owning  more  than  50%  of  the
outstanding  shares of the Trust may elect all of the  Trustees  of the Trust if
they choose to do so and in such event the other shareholders in the Trust would
not be able to elect any Trustee.  The Trust is not required to hold, and has no
present intention of holding, annual meetings of shareholders but the Trust will
hold special meetings of shareholders when in the judgment of the Trustees it is
necessary or desirable to submit  matters for a shareholder  vote.  Shareholders
have, under certain  circumstances (e.g., upon the application and submission of
certain   specified   documents  to  the  Trustees  by  a  specified  number  of
shareholders),  the right to communicate  with other  shareholders in connection
with  requesting  a meeting of  shareholders  for the purpose of removing one or
more Trustees.  Shareholders also have under certain  circumstances the right to
remove one or more Trustees  without a meeting by a declaration  in writing by a
specified  number of  shareholders.  No  material  amendment  may be made to the
Trust's  Declaration of Trust without the  affirmative  vote of the holders of a
majority of the  outstanding  shares of each series  affected by the  amendment.
(See    "Investment    Objectives,    Policies   and    Restrictions--Investment
Restrictions".)  At any  meeting  of  shareholders  of any Fund,  a  Shareholder
Servicing  Agent may vote any shares of which it is the holder of record and for
which it does not receive voting instructions proportionately in accordance with
the  instructions  it receives  for all other  shares of which that  Shareholder
Servicing Agent is the holder of record. Shares have no preference, pre-emptive,
conversion  or  similar  rights.   Shares,  when  issued,  are  fully  paid  and
non-assessable, except as set forth below.

     The  Trust  may  enter  into a  merger  or  consolidation,  or sell  all or
substantially  all of its  assets  (or all or  substantially  all of the  assets
belonging  to any series of the Trust),  if approved by a vote of the holders of
two-thirds of the Trust's  outstanding  shares,  voting as a single class, or of
the  affected  series  of the  Trust,  as the  case may be,  except  that if the
Trustees of the Trust  recommend such sale of assets,  merger or  consolidation,
the  approval by vote of the  holders of a majority  of the Trust's  outstanding
shares would be  sufficient.  The Trust or any series of the Trust,  as the case
may be, may be terminated (i) by a vote of a majority of the outstanding  voting
securities  of the  Trust or the  affected  series  or (ii) by the  Trustees  by
written notice to the shareholders of the Trust or the affected  series.  If not
so terminated, the Trust will continue indefinitely.

      Share certificates will not be issued.

     The  Trust is an  entity  of the type  commonly  known as a  "Massachusetts
business trust". Under Massachusetts law,  shareholders of such a business trust
may, under certain circumstances,  be held personally liable as partners for its
obligations  and  liabilities.  However,  the  Declaration of Trust of the Trust
contains an express disclaimer of shareholder  liability for acts or obligations
of the Trust and provides for  indemnification and reimbursement of expenses out
of Trust property for any shareholder held personally liable for the obligations
of the Trust. The Declaration of Trust of the Trust also provides that the Trust
may  maintain  appropriate  insurance  (e.g.,  fidelity  bonding  and errors and
omissions  insurance)  for  the  protection  of  the  Trust,  its  shareholders,
Trustees,  officers,  employees  and  agents  covering  possible  tort and other
liabilities. Thus, the risk of a shareholder incurring financial loss on account
of shareholder  liability is limited to  circumstances  in which both inadequate
insurance existed and the Trust itself was unable to meet its obligations.

     The Trust's  Declaration of Trust further  provides that obligations of the
Trust are not binding upon the Trustees  individually but only upon the property
of the Trust and that the Trustees  will not be liable for any action or failure
to act, but nothing in the Declaration of Trust of each Trust protects a Trustee
against any liability to which he or she would otherwise be subject by reason of
willful  misfeasance,  bad faith,  gross negligence or reckless disregard of the
duties involved in the conduct of his or her office.

     The  Portfolio  is a series of the  Portfolio  Trust,  organized as a trust
under the laws of the State of New York.  The Portfolio  Trust's  Declaration of
Trust provides that investors in the Portfolio (e.g., other investment companies
(including the Government Income Fund),  insurance company separate accounts and
common and  commingled  trust funds) are each liable for all  obligations of the
Portfolio.  However,  the risk of the Government Income Fund incurring financial
loss on account of such  liability  is  limited to  circumstances  in which both
inadequate  insurance  existed and the  Portfolio  itself was unable to meet its
obligations. It is not expected that the liabilities of the Portfolio would ever
exceed its assets.

     Each investor in the Portfolio,  including the Government  Income Fund, may
add to or withdraw from its investment in the Portfolio on each Business Day. As
of the  close  of  regular  trading  on each  Business  Day,  the  value of each
investor's beneficial interest in the Portfolio is determined by multiplying the
net asset value of the Portfolio by the percentage, effective for that day, that
represents that investor's  share of the aggregate  beneficial  interests in the
Portfolio.  Any additions or withdrawals that are to be effected on that day are
then effected.  The investor's  percentage of the aggregate beneficial interests
in the Portfolio is then re-computed as the percentage equal to the fraction (i)
the  numerator  of  which  is the  value of such  investor's  investment  in the
Portfolio as of the close of regular  trading on such day plus or minus,  as the
case may be, the amount of any additions to or  withdrawals  from the investor's
investment in the Portfolio  effected on such day, and (ii) the  denominator  of
which is the  aggregate  net  asset  value of the  Portfolio  as of the close of
regular trading on such day plus or minus, as the case may be, the amount of the
net additions to or withdrawals from the aggregate  investments in the Portfolio
by all investors in the Portfolio.  The percentage so determined is then applied
to determine  the value of the  investor's  interest in the  Portfolio as of the
close of regular trading on the next following Business Day.

                        8. CERTAIN ADDITIONAL TAX MATTERS

     Each Fund has elected to be treated, and intends to qualify each year, as a
"regulated  investment  company" under Subchapter M of the Internal Revenue Code
of 1986,  as amended (the "Code"),  by meeting all  applicable  requirements  of
Subchapter  M,  including  requirements  as to the  nature of the  Fund's  gross
income, the amount of Fund distributions, and the composition and holding period
of the Fund's portfolio  assets.  Provided all such requirements are met and all
of a Fund's net investment  income and realized capital gains are distributed to
shareholders in accordance with the timing  requirements  imposed by the Code no
federal  income or excise  taxes  generally  will be  required to be paid by the
Fund,  although  foreign  source  income  earned by the Fund may be  subject  to
non-U.S.  withholding taxes and, as described in the Prospectus, the Fund may be
required to pay  federal  income  taxes on certain  distributions  and  realized
capital gains from securities in "passive foreign investment  companies." If any
Fund should fail to qualify as a  "regulated  investment  company" for any year,
the Fund would  incur a regular  corporate  federal  income tax upon its taxable
income and Fund  distributions  would generally be taxable as ordinary  dividend
income to shareholders. The Portfolio Trust believes the Portfolio also will not
be required to pay any federal income or excise taxes.

     Shareholders  of a Fund will have to pay federal income taxes and any state
or local income taxes on the  dividends  and capital  gains  distributions  they
receive from the Fund. Dividends from ordinary income and any distributions from
net short-term  capital gains are taxable to shareholders as ordinary income for
federal income tax purposes,  whether the  distributions  are made in cash or in
additional shares.  Because each Fund expects to earn primarily interest income,
it is expected that no Fund  dividends  will qualify for the dividends  received
deduction for corporations; however, a portion of the Intermediate Income Fund's
ordinary income dividends may be eligible for this deduction for corporations if
the recipient otherwise qualifies for that deduction with respect to its holding
of Fund shares.  Availability  of the deduction for particular  shareholders  is
subject to  certain  limitations,  and  deducted  amounts  may be subject to the
alternative minimum tax or result in certain basis adjustments. Distributions of
net capital  gains (i.e.,  the excess of net  long-term  capital  gains over net
short-term  capital losses),  whether made in cash or in additional  shares, are
taxable to shareholders as long-term  capital gains without regard to the length
of time the  shareholders  have held their  shares.  Any Fund  dividend  that is
declared in October,  November or December of any calendar year, that is payable
to  shareholders  of  record  in such a month,  and  that is paid the  following
January will be treated as if received by the shareholders on December 31 of the
year in which the dividend is declared.

     Any Fund  distribution  will have the effect of reducing  the per share net
asset  value  of  shares  in  the  Fund  by  the  amount  of  the  distribution.
Shareholders   purchasing   shares   shortly  before  the  record  date  of  any
distribution  may thus pay the full price for the  shares  and then  effectively
receive a portion of the purchase price back as a taxable distribution.

     In general,  any gain or loss realized upon a taxable disposition of shares
of a Fund by a  shareholder  that holds such  shares as a capital  asset will be
treated as long-term  capital gain or loss if the shares have been held for more
than twelve months and otherwise as a short-term capital gain or loss.  However,
any loss  realized  upon a redemption of shares in a Fund held for six months or
less  will  be  treated  as a  long-term  capital  loss  to  the  extent  of any
distributions  of net capital gain made with respect to those  shares.  Any loss
realized  upon a  disposition  of  shares  may also be  disallowed  under  rules
relating  to  wash  sales.  Gain  may be  increased  (or  loss  reduced)  upon a
redemption of shares of a Fund within 90 days after their  purchase  followed by
any purchase (including  purchases by exchanges or by reinvestment) of shares of
the Fund or another Landmark Fund without payment of an additional sales charge.

     Any investments in zero coupon bonds and certain securities  purchased at a
market discount will cause the applicable Fund or Portfolio to recognize  income
prior to the receipt of cash payments with respect to those securities. In order
to distribute  this income and avoid a tax, the Trust or Portfolio  Trust may be
required to liquidate  securities of a Fund or Portfolio that it might otherwise
have  continued to hold. An  investment in residual  interests of a CMO that has
elected to be treated as a real estate mortgage  investment conduit, or "REMIC",
may  result in a federal  tax to the extent a Fund has tax  exempt  entities  as
shareholders.  Each Fund's and the Portfolio's  transactions in options, Futures
Contracts  and forward  contracts  will be subject to special tax rules that may
affect  the  amount,  timing,  and  character  of Fund or  Portfolio  income and
distributions to holders of beneficial interests. For example, certain positions
held by a Fund or the  Portfolio  on the last  business day of each taxable year
will be marked to market  (i.e.,  treated as if closed out) on that day, and any
gain or loss  associated with the positions will be treated as 60% long-term and
40%  short-term  capital gain or loss.  Certain  positions held by a Fund or the
Portfolio  that  substantially  diminish  its risk of loss with respect to other
positions  in its  portfolio  may  constitute  straddles,  and may be subject to
special  tax rules  that  would  cause  deferral  of Fund or  Portfolio  losses,
adjustments  in the  holding  periods  of  securities  held  by the  Fund or the
Portfolio and conversion of short-term into long-term  capital  losses.  Certain
tax elections  exist for  straddles  which may alter the effects of these rules.
Each of the Funds and the  Portfolio  will limit its  investment  activities  in
options, Futures Contracts and forward contracts to the extent necessary to meet
the requirements of Subchapter M of the Code.

     Any investment in certain  securities  purchased at a market  discount will
cause the  Portfolio to recognize  income prior to the receipt of cash  payments
with respect to those securities. In order to distribute this income and avoid a
tax on the  Government  Income  Fund,  the  Portfolio  Trust may be  required to
liquidate  securities of the Portfolio that it might otherwise have continued to
hold and thereby  potentially cause the corresponding Fund to realize additional
taxable gain or loss.

     Special tax  considerations  apply with respect to non-U.S.  investments of
the Funds. Use of non-U.S. currencies for non-hedging purposes may be limited in
order to avoid a tax on the corresponding Fund.  Investment by a Fund in certain
"passive foreign  investment  companies" may also be limited in order to avoid a
tax on the Fund.  Investment income received by a Fund from non-U.S.  securities
may be subject to non-U.S.  income  taxes  withheld  at the  source.  The United
States has entered into tax treaties with many other  countries that may entitle
a Fund to a reduced  rate of tax or an exemption  from tax on such  income.  The
Funds  intend to qualify for treaty  reduced  rates where  available.  It is not
possible,  however,  to determine the Funds'  effective rate of non-U.S.  tax in
advance since the amount of the Funds'  respective  assets to be invested within
various countries is not known.

     The  Funds  generally  do  not  expect  to  be  able  to  pass  through  to
shareholders  foreign tax credits with respect to any foreign  taxes  imposed on
non-U.S. investments.

              9. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS

     Price Waterhouse LLP are the independent  certified public  accountants for
the  Government  Income  Fund,  providing  audit  services  and  assistance  and
consultation  with respect to the  preparation  of filings  with the SEC.  Price
Waterhouse are the chartered  accountants  for the Portfolio  Trust.  Deloitte &
Touche LLP were the independent  certified public accountants for the Government
Income Fund through  December 31, 1993 and are the independent  certified public
accountants for the Intermediate  Income Fund. The selection of Price Waterhouse
LLP for the  Government  Income  Fund was based on  management's  decision  with
respect to certain  areas of expertise  and service  capabilities.  There was no
disagreement  between  the Trust and  Deloitte & Touche LLP with  respect to the
accounting and audit services provided by such firm.

     The audited  financial  statements of the Government Income Fund (Statement
of Assets and Liabilities at December 31, 1994,  Statement of Operations for the
year ended  December 31,  1994,  Statement of Changes in Net Assets for the year
ended December 31, 1994,  for the four-month  period ended December 31, 1993 and
for  the  year  ended  August  31,  1993,  Notes  to  Financial  Statements  and
Independent Auditors' Report), each of which is included in the Annual Report to
Shareholders of the Government  Income Fund, are  incorporated by reference into
this  Statement  of  Additional  Information  and have been so  incorporated  in
reliance  upon the  reports of Price  Waterhouse  LLP (for the fiscal year ended
December 31,  1994) and  Deloitte & Touche LLP (for periods  prior to the fiscal
year ended December 31, 1994),  independent  certified  public  accountants,  on
behalf of the Government Income Fund.

     The audited financial statements of the Portfolio (Portfolio of Investments
at December 31, 1994,  Statement of Assets and Liabilities at December 31, 1994,
Statement of Operations for the period May 1, 1994  (commencement of operations)
to December 31,  1994,  Statement of Changes in Net Assets for the period May 1,
1994 (commencement of operations) to December 31, 1994, Financial Highlights for
the period May 1, 1994  (commencement of operations) to December 31, 1994, Notes
to Financial  Statements and  Independent  Auditors'  Report),  each of which is
included in the Annual Report to Shareholders of the Government Income Fund, are
incorporated by reference into this Statement of Additional Information and have
been so incorporated in reliance upon the report of Price Waterhouse,  chartered
accountants, on behalf of the Portfolio.

     The audited financial statements of the Intermediate Income Fund (Portfolio
of  Investments  at December 31, 1994,  Statement of Assets and  Liabilities  at
December 31, 1994, Statement of Operations for the year ended December 31, 1994,
Statement of Changes in Net Assets for the year ended  December 31, 1994 and for
the period June 25, 1993  (commencement  of  operations)  to December  31, 1993,
Notes to Financial Statements and Independent  Auditors' Report),  each of which
is included in the Annual  Report to  Shareholders  of the  Intermediate  Income
Fund,  are   incorporated   by  reference  into  this  Statement  of  Additional
Information  and have  been so  incorporated  in  reliance  upon the  report  of
Deloitte & Touche LLP,  independent  certified public accountants,  on behalf of
the Intermediate Income Fund.

     Copies of the Annual Reports to Shareholders of each of the Funds accompany
this Statement of Additional Information.

                                   APPENDIX A

                          DESCRIPTION OF BOND RATINGS*

     The ratings of Moody's Investors Service,  Inc.  ("Moody's") and Standard &
Poor's  Ratings  Group  ("S&P")  represent  their  opinions as to the quality of
various debt securities. It should be emphasized,  however, that ratings are not
absolute  standards  of quality.  Consequently,  debt  securities  with the same
maturity,  coupon and rating may have different  yields while debt securities of
the same maturity and coupon with different ratings may have the same yield.
Moody's Investors Service, Inc.

                         MOODY'S INVESTORS SERVICE, INC.

Aaa   Bonds which are rated Aaa are judged to be of the best quality. They carry
      the smallest  degree of  investment  risk and generally are referred to as
      "gilt  edge".  Interest  payments  are  protected  by a  large  or  by  an
      exceptionally  stable  margin and  principal is secure.  While the various
      protective  elements  are  likely  to  change,  such  changes  as  can  be
      visualized are most unlikely to impair the  fundamentally  strong position
      of such issues.

Aa    Bonds  which  are  rated  Aa  are  judged  to be of  high  quality  by all
      standards.  Together  with the Aaa group they  comprise what are generally
      known as high  grade  bonds.  They are  rated  lower  than the best  bonds
      because  margins of protection may not be as large as in Aaa securities or
      fluctuation  of protective  elements may be of greater  amplitude or there
      may be other  elements  present  which  make the  long-term  risks  appear
      somewhat larger than in Aaa securities.

A     Bonds which are rated A possess many favorable  investment  attributes and
      are to be considered  as upper medium grade  obligations.  Factors  giving
      security to principal and interest are considered  adequate,  but elements
      may be present which suggest a susceptibility to impairment sometime in
     the future.

Baa  Bonds which are rated Baa are considered as medium grade obligations, i.e.,
     they are neither highly protected nor poorly secured. Interest payments and
     principal  security appear adequate for the present but certain  protective
     elements may be lacking or may be  characteristically  unreliable  over any
     great   length   of  time.   Such   bonds   lack   outstanding   investment
     characteristics and in fact have speculative characteristics as well.


Note: Those bonds in the Aa, A and Baa groups which Moody's believes possess the
strongest investment  attributes are designated by the symbols Aa 1, A 1 and Baa
1.


                         STANDARD & POOR'S RATINGS GROUP

AAA  Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
     interest and repay principal is extremely strong. AA Debt rated AA has a
     very strong capacity to pay interest and repay principal and differs from
     the highest rated issues only in small degree. A Debt rated A has a strong
     capacity to pay interest and repay principal although it is somewhat more
     susceptible to the adverse effects of changes in circumstances and
     economic conditions than debt in higher rated categories. BBB Debt rated
     BBB is regarded as having an adequate capacity to pay interest and repay
     principal. Whereas it normally exhibits adequate protection parameters,
     adverse economic conditions or changing circumstances are more likely to
     lead to a weakened capacity to pay interest and repay principal for debt in
     this category than in higher rated categories.

* As described by the rating agencies. Ratings are generally given to securities
at the time of issuance.  While the rating agencies may from time to time revise
such ratings, they undertake no obligation to do so.




SHAREHOLDER SERVICING AGENTS

FOR CITIBANK NEW YORK RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CUSTOMERS:
Citibank, N.A.
450 West 33rd Street, New York, NY 10001
(212) 564-3456 or (800) 846-5300

FOR CITIGOLD CUSTOMERS:
Citigold
666 Fifth Avenue, New York, NY 10150-5130
Call Your Account Officer or (212) 974-0900 or (800) 285-1701

FOR PRIVATE BANKING CLIENTS:
Citibank, N.A.
The Citibank Private Bank
153 East 53rd Street, New York, NY 10043
Call Your Citibank Private Banking Account Officer,
Investment Specialist or (212) 559-5959

FOR CITIBANK GLOBAL ASSET MANAGEMENT CLIENTS:
Citibank, N.A.
Citibank Global Asset Management
153 East 53rd Street, New York, NY 10043
(212) 559-7117

FOR NORTH AMERICAN INVESTOR SERVICES CLIENTS:
Citibank, N.A.
111 Wall Street, New York, NY 10043
Call Your Account Manager or (212) 657-9100

FOR CITICORP INVESTMENT SERVICES CUSTOMERS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200,
(212) 736-8170 in New York City






LANDMARK U.S. GOVERNMENT INCOME FUND
LANDMARK INTERMEDIATE INCOME FUND

TRUSTEES AND OFFICERS
Philip W. Coolidge
  President*
H.B. Alvord
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
C. Oscar Morong, Jr.
Donald B. Otis
E. Kirby Warren
William S. Woods, Jr.

SECRETARY AND TREASURER
Thomas M. Lenz*

*Affiliated Person of Administrator and Distributor
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INVESTMENT ADVISER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043

ADMINISTRATOR AND DISTRIBUTOR
The Landmark Funds Broker-Dealer Services, Inc.
6 St. James Avenue, Boston, MA 02116
(617) 423-1679

TRANSFER AGENT
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110

CUSTODIAN

(For U.S. Government Income Fund)
Investors Bank & Trust Company
One Lincoln Plaza, Boston, MA 02111

(For Intermediate Income Fund)
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110

AUDITORS

(For U.S. Government Income Fund)
Price Waterhouse LLP
160 Federal Street, Boston, MA 02110

(For Intermediate Income Fund)
Deloitte & Touche LLP
125 Summer Street, Boston, MA  02110

LEGAL COUNSEL
Bingham, Dana & Gould
150 Federal Street, Boston, MA 02110
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