LANDMARK MULTI-STATE TAX FREE FUNDS
485BPOS, 1996-12-17
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<PAGE>

   
    As filed with the Securities and Exchange Commission on December 17, 1996
    

                                                             File Nos. 33-44749
                                                                       811-4596


                       SECURITIES AND EXCHANGE COMMISSION
                              WASHINGTON D.C. 20549


                                    FORM N-1A

   
                             REGISTRATION STATEMENT
                                      UNDER
                           THE SECURITIES ACT OF 1933
                                 POST-EFFECTIVE
                                 AMENDMENT NO. 7

                                       AND

                             REGISTRATION STATEMENT
                                      UNDER
                       THE INVESTMENT COMPANY ACT OF 1940
                                AMENDMENT NO. 26
    

                      LANDMARK MULTI-STATE TAX FREE FUNDS*
               (EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

                 6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
                    (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

        REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 617-423-1679

       PHILIP W. COOLIDGE, 6 ST. JAMES AVENUE, BOSTON, MASSACHUSETTS 02116
                     (NAME AND ADDRESS OF AGENT FOR SERVICE)
                                    COPY TO:
         ROGER P. JOSEPH, BINGHAM, DANA & GOULD LLP, 150 FEDERAL STREET,
                           BOSTON, MASSACHUSETTS 02110


   
         It is proposed that this filing will become effective on January 2, 
1997, pursuant to paragraph (b) of Rule 485.
    

   
         Pursuant to Rule 24f-2, Registrant has registered an indefinite number
of its Shares of Beneficial Interest (without par value) under the Securities
Act of 1933 and has filed a Rule 24f-2 Notice on October 17, 1996 for
Registrant's fiscal year ended August 31, 1996.
    


- -----------------------------------------------------------------------------
* Relating to shares of beneficial interest of Landmark California Tax Free 
  Reserves.
<PAGE>
<TABLE>
                                     LANDMARK MULTI-STATE TAX FREE FUNDS
                                   (LANDMARK CALIFORNIA TAX FREE RESERVES)
                                     REGISTRATION STATEMENT ON FORM N-1A

                                            CROSS REFERENCE SHEET
   
<CAPTION>
N-1A
ITEM NO.        N-1A ITEM                                                    LOCATION
- -------         ---------                                                    --------
PART A                                                                       PROSPECTUS
- ------                                                                       ----------
<S>            <C>                                                           <C> 
Item 1.        Cover Page.............................................       Cover Page                            
Item 2.        Synopsis...............................................       Expense Summary                       
Item 3.        Condensed Financial Information........................       Condensed Financial Information       
Item 4.        General Description of Registrant......................       Investment Information; General       
                                                                             Information; Appendix                 
Item 5.        Management of the Fund.................................       Management; Expenses                  
Item 5A.       Management's Discussion of Fund Performance............       Not Applicable                        
Item 6.        Capital Stock and Other Securities.....................       General Information; Voting and Other 
                                                                             Rights; Purchases; Exchanges;
                                                                             Redemptions; Net Income and
                                                                             Distributions; Tax Matters
Item 7.        Purchase of Securities Being Offered...................       Purchases; Exchanges; Redemptions
Item 8.        Redemption or Repurchase...............................       Purchases; Exchanges; Redemptions
Item 9.        Pending Legal Proceedings..............................       Not Applicable

<CAPTION>
                                                                             STATEMENT OF
                                                                             ADDITIONAL
PART B                                                                       INFORMATION
- ------                                                                       -----------
<S>             <C>                                                          <C> 
Item 10.       Cover Page.............................................       Cover Page
Item 11.       Table of Contents......................................       Cover Page
Item 12.       General Information and History........................       The Fund
Item 13.       Investment Objectives and Policies.....................       Investment Objectives, Policies and
                                                                             Restrictions
Item 14.       Management of the Fund.................................       Management
Item 15.       Control Persons and Principal Holders of Securities....       Management
Item 16.       Investment Advisory and Other Services.................       Management
Item 17.       Brokerage Allocation and Other Practices...............       Portfolio Transactions
Item 18.       Capital Stock and Other Securities.....................       Description of Shares, Voting Rights and
                                                                             Liabilities
Item 19.       Purchase, Redemption and Pricing of Securities
               Being Offered..........................................       Description of Shares, Voting Rights and
                                                                             Liabilities; Determination of Net Asset
                                                                             Value
Item 20.       Tax Status.............................................       Certain Additional Tax Matters
Item 21.       Underwriters...........................................       Management
Item 22.       Calculation of Performance Data........................       Performance Information
Item 23.       Financial Statements...................................       Independent Accountants and Financial
                                                                             Statements
</TABLE>

PART C  Information required to be included in Part C is set forth under the
        appropriate Item, so numbered, in Part C to this Registration Statement.
    
<PAGE>
   
- --------------------------------------------------------------------------------
                                   PROSPECTUS
                                JANUARY 2, 1997
- --------------------------------------------------------------------------------
    

                    LANDMARK CALIFORNIA TAX FREE RESERVES
                 (A member of the Landmark(SM) Family of Funds)

This Prospectus describes Landmark California Tax Free Reserves, a mutual fund
in the Landmark Family of Funds. The Fund is a type of mutual fund commonly
referred to as a "double tax-exempt money market fund." Citibank, N.A. is the
investment adviser of the Fund.

- --------------------------------------------------------------------------------

   
REMEMBER THAT SHARES OF THE FUND:

[]   ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY

[]   ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, CITIBANK
     OR ANY OF ITS AFFILIATES

[]   ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
     AMOUNT INVESTED

- --------------------------------------------------------------------------------

    INVESTMENTS IN THE FUND ARE NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUND ATTEMPTS TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00
PER SHARE; HOWEVER, THERE CAN BE NO ASSURANCE THAT THE FUND WILL BE ABLE TO DO
SO.

- --------------------------------------------------------------------------------

    This Prospectus concisely sets forth information about the Fund that a
prospective investor should know before investing. A Statement of Additional
Information dated January 2, 1997 (and incorporated by reference in this
Prospectus) has been filed with the Securities and Exchange Commission. Copies
of the Statement of Additional Information may be obtained without charge, and
further inquiries about the Fund may be made, by contacting the investor's
shareholder servicing agent (see inside back cover for address and phone
number).

    THE FUND INVESTS PRIMARILY IN CALIFORNIA MUNICIPAL OBLIGATIONS; AS A
RESULT, AN INVESTMENT IN THE FUND MAY BE RISKIER THAN AN INVESTMENT IN A MORE
DIVERSIFIED MONEY MARKET FUND.


 TABLE OF CONTENTS
 Prospectus Summary ....................................................... 2
 Expense Summary .......................................................... 3
 Condensed Financial Information .......................................... 4
 Investment Information ................................................... 5
 Risk Considerations ...................................................... 6
 Valuation of Shares ...................................................... 7
 Purchases ................................................................ 8
 Exchanges ................................................................ 8
 Redemptions .............................................................. 9
 Net Income and Distributions ............................................. 9
 Management ...............................................................10
 Tax Matters ..............................................................12
 Performance Information ..................................................13
 General Information ......................................................13
 Appendix A -- Permitted Investments
   and Investment Practices ...............................................14
 Appendix B -- Ratings of Municipal Obligations ...........................16
 Appendix C -- Taxable Equivalent Yield Tables ............................19

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
    

  INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
<PAGE>
   
- --------------------------------------------------------------------------------
                               PROSPECTUS SUMMARY
- --------------------------------------------------------------------------------
    

    See the body of the Prospectus for more information on the topics discussed
in this summary.

THE FUND:  This Prospectus describes Landmark California Tax Free Reserves, a
double tax-exempt money market mutual fund.

   
INVESTMENT OBJECTIVES AND POLICIES: To provide its shareholders with high levels
of current income exempt from both federal and California personal income taxes,
preservation of capital and liquidity. The Fund invests primarily in short-term,
high quality obligations issued by state and municipal governments and by other
qualifying issuers, the interest on which is exempt from federal income taxes
("Municipal Obligations"), including obligations of the State of California and
its political subdivisions. There can be no assurance that the Fund will achieve
its objectives.

INVESTMENT ADVISER AND DISTRIBUTOR:  Citibank, N.A. ("Citibank" or the
"Adviser"), a wholly-owned subsidiary of Citicorp, is the investment adviser.
Citibank and its affiliates manage more than $83 billion in assets worldwide.
The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS" or the "Distributor")
is the distributor of shares of the Fund. See "Management."
    

PURCHASES AND REDEMPTIONS:  Customers of Shareholder Servicing Agents may
purchase and redeem shares of the Fund on any Business Day. See "Purchases"
and "Redemptions."

PRICING:  Shares of the Fund are purchased and redeemed at net asset value
(normally $1.00 per share) without a sales load or redemption fees. While
there are no sales loads, shares of the Fund are subject to a distribution
fee. See "Purchases," "Redemptions" and "Management -- Distribution
Arrangements."

EXCHANGES:  Shares may be exchanged for shares of most other Landmark Funds.
See "Exchanges."

DIVIDENDS:  Declared daily and distributed monthly. Shares begin accruing
dividends on the day they are purchased. See "Net Income and Distributions."

REINVESTMENT:  Dividends may be received either in cash or in Fund shares at
net asset value, subject to the policies of a shareholder's Shareholder
Servicing Agent. See "Net Income and Distributions."

WHO SHOULD INVEST:  The Fund is designed for investors seeking liquidity,
preservation of capital and current income exempt from federal income taxes,
and for whom long-term capital growth is not a consideration. The Fund is also
designed for investors seeking income exempt from California personal income
taxes and who are willing to bear the increased risk of an investment
portfolio which is concentrated in obligations of the State of California and
its political subdivisions. See "Investment Information."

RISK FACTORS: There can be no assurance that the Fund will achieve its
investment objectives. In addition, while the Fund intends to maintain a stable
net asset value of $1.00 per share, there can be no assurance that the Fund will
be able to do so. Investments in high quality, short-term instruments may, in
many circumstances, result in a lower yield than would be available from
investments with a lower quality or a longer term.

    The Fund is a non-diversified mutual fund, which means that it is not
subject to any statutory restrictions under the Investment Company Act of 1940
limiting the investment of its assets in one or relatively few issuers. The Fund
may therefore invest a relatively high percentage of its assets in the
obligations of a limited number of issuers. Also, the Fund may invest 25% or
more of its assets in securities of issuers in similar or related industries or
issuers located in the same state. Under normal circumstances, the Fund invests
primarily in obligations of the State of California and its political
subdivisions. As a result, the Fund is more acceptible to any single economic,
political or regulatory occurrence.

    Certain investment practices also may entail special risks. Prospective
investors should read "Risk Considerations" for more information about risk
factors.
<PAGE>
- --------------------------------------------------------------------------------
                                EXPENSE SUMMARY
- --------------------------------------------------------------------------------

   
The following table summarizes estimated shareholder transaction and annual
operating expenses for shares of the Fund.* For more information on costs and
expenses, see "Management" and "General Information -- Expenses."

                                                                --------------
SHAREHOLDER TRANSACTION EXPENSES ................................    None
ANNUAL FUND OPERATING EXPENSES, AFTER FEE WAIVERS AND
 REIMBURSEMENTS (AS A PERCENTAGE OF AVERAGE NET ASSETS):
Investment Management Fee(1).....................................     .09%
12b-1 Fees(1)(2) ................................................     .05%
Other Expenses
  Administrative Services Fees(1) ...............................     .05%
  Shareholder Servicing Agent Fees ..............................     .25%
  Other Operating Expenses ......................................     .21%
                                                                      ---
Total Fund Operating Expenses(1) ................................     .65%
                                                                      ===

  * This table is intended to assist investors in understanding the various
    costs and expenses that a shareholder of the Fund will bear, either directly
    or indirectly. The table shows the fees paid by the Fund to various service
    providers after giving effect to expected voluntary partial fee waivers.
    There can be no assurance that the fee waivers and reimbursements reflected
    in the table will continue at their present levels.
(1) Absent fee waivers and reimbursements, investment management fees, 12b-1
    fees, administrative services fees and total fund operating expenses would
    be .20%, .20%, .25% and 1.11%, respectively.
(2) Fees under the 12b-1 distribution plan are asset-based sales charges.
    Long-term shareholders in the Fund could pay more in sales charges than the
    economic equivalent of the maximum front-end sales charges permitted by the
    National Association of Securities Dealers, Inc.
    

EXAMPLE: A shareholder of the Fund would pay the following expenses on a
$1,000 investment, assuming redemption at the end of each period indicated
below:

        ONE YEAR        THREE YEARS      FIVE YEARS      TEN YEARS
       ------------------------------------------------------------
           $7               $21             $36             $81

   
The Example assumes a 5% annual return and that all dividends are reinvested,
and expenses are based on the Fund's fiscal year ended August 31, 1996, after
waivers and reimbursements. If waivers and reimbursements were not in place,
the amounts in the Example would be $11, $35, $62 and $137, respectively. The
assumption of a 5% annual return is required by the Securities and Exchange
Commission for all mutual funds, and is not a prediction of the Fund's future
performance. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OF THE FUND. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
    
<PAGE>
- --------------------------------------------------------------------------------
                        CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------

   
The following table provides condensed financial information about the Fund for
the periods indicated. This information should be read in conjunction with the
financial statements appearing in the Fund's Annual Report to Shareholders,
which are incorporated by reference in the Statement of Additional Information.
The financial statements and notes, as well as the table below, covering periods
through August 31, 1996 have been audited by Deloitte & Touche LLP, independent
certified public accountants, whose report is included in the Fund's Annual
Report. Copies of the Annual Report may be obtained without charge from an
investor's Shareholder Servicing Agent (see inside of back cover for address and
phone number).

<TABLE>
<CAPTION>
                                                       ---------------------------------------------------------------------------
                                                                                  FINANCIAL HIGHLIGHTS

                                                                                 YEAR ENDED AUGUST 31,
                                                           1996            1995            1994            1993           1992+
- ----------------------------------------------------------------------------------------------------------------------------------
<S>                                                      <C>             <C>             <C>             <C>             <C>
Net Asset Value, beginning of period ...............     $1.00000        $1.00000        $1.00000        $1.00000        $1.00000
Net investment income ..............................      0.03089         0.03434         0.02288         0.02467         0.01304
Less dividends from net investment income ..........     (0.03089)       (0.03434)       (0.02288)       (0.02467)       (0.01304)
                                                         --------        --------        --------        --------        --------
Net Asset Value, end of period .....................     $1.00000        $1.00000        $1.00000        $1.00000        $1.00000
                                                         ========        ========        ========        ========        ========

RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) ..........     $150,557        $51,832         $52,863         $37,808         $16,295
Ratio of expenses to average net assets ............      0.42%           0.30%           0.25%           0.00%           0.00%*
Ratio of net investment income to average net assets      3.05%           3.43%           2.30%           2.42%           2.71%*
Total return .......................................      3.13%           3.49%           2.31%           2.50%           2.75%*

Note: If agents of the Fund had not voluntarily waived all or a portion of their
fees from the Fund and the Administrator had not voluntarily assumed expenses
for the periods indicated, the ratios and net investment income per share would
have been as follows:

Net investment income per share ....................     $0.02481        $0.02513        $0.01423        $0.01121        $0.00279
RATIOS:
Expenses to average net assets .....................      1.01%           1.21%           1.12%           1.32%           2.13%*
Net investment income to average net assets ........      2.45%           2.51%           1.43%           1.10%           0.58%*

<FN>
*Annualized.
+For the period from the start of business, March 10, 1992, to August 31, 1992.
</FN>
</TABLE>
    
<PAGE>
- --------------------------------------------------------------------------------
                             INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

   
INVESTMENT OBJECTIVES: The investment objectives of the Fund are to provide its
shareholders with high levels of current income exempt from both federal and
California personal income taxes, preservation of capital and liquidity.
    

    The investment objectives of the Fund may not be changed without approval by
the Fund's shareholders. Of course, there can be no assurance that the Fund will
achieve its investment objectives.

   
INVESTMENT POLICIES: The Fund seeks its objectives by investing primarily in
short-term, high quality fixed rate and variable rate obligations issued by or
on behalf of states and municipal governments and their authorities, agencies,
instrumentalities and political subdivisions and by other qualifying issuers,
the interest on which is exempt from federal income taxes (these securities are
referred to as "Municipal Obligations"). As a fundamental policy, the Fund
invests at least 80% of its assets, under normal circumstances, in the following
types of Municipal Obligations and in participation interests in these
obligations issued by banks, insurance companies or other financial institutions
("Participation Interests"):
    

(1) Municipal bonds that at the date of purchase are rated Aa or better by
    Moody's Investors Service, Inc. ("Moody's") or AA or better by Standard &
    Poor's Rating Group ("S&P") or Fitch Investors Service, Inc. ("Fitch"), or
    are unrated but are of comparable quality as determined by the Adviser on
    the basis of a credit evaluation of the obligor, or of the bank issuing the
    Participation Interest or guarantee of the bonds, or of any insurance issued
    in support of the bonds or the Participation Interest;
(2) Municipal notes that at the date of purchase are rated MIG2/VMIG2 or better
    by Moody's, SP-2 or better by S&P or F-2 or better by Fitch, or are unrated
    but are of comparable quality as determined by the Adviser; and
(3) Municipal commercial paper that at the date of purchase is rated Prime-2 or
    better by Moody's, A-2 or better by S&P or F-2 or better by Fitch, or is
    unrated but is of comparable quality as determined by the Adviser.

    See Appendix A for an explanation of Municipal Obligations and Appendix B
for an explanation of ratings of Municipal Obligations.

   
    Under normal circumstances, the Fund invests at least 65% of its assets in
Municipal Obligations the interest on which is exempt from both federal and
California personal income taxes (these securities are referred to as
"California Municipal Obligations"). The Fund is a "double tax-exempt money
market fund." California Municipal Obligations include Municipal Obligations of
the State of California and its political subdivisions, Puerto Rico, other U.S.
territories and their political subdivisions and other qualifying issuers. To
the extent that acceptable California Municipal Obligations are not available to
the Fund, the Fund may purchase Municipal Obligations issued by issuers in other
states. The interest on these securities will be subject to California personal
income taxes. BECAUSE THE FUND INVESTS PRIMARILY IN CALIFORNIA MUNICIPAL
OBLIGATIONS, AN INVESTMENT IN THE FUND MAY BE RISKIER THAN AN INVESTMENT IN A
MORE DIVERSIFIED MONEY MARKET FUND.

    Although the Fund attempts to invest all of its assets in Municipal
Obligations, the Fund may invest up to 20% of its assets in taxable securities
(such as U.S. Government obligations or certificates of deposit of domestic
banks). Any taxable securities in which the Fund invests are of comparable
quality to the Municipal Obligations in which the Fund invests.
    

    In determining the tax status of interest on Municipal Obligations, the
Adviser relies on opinions of bond counsel who may be counsel to the issuer.

CERTAIN ADDITIONAL INVESTMENT POLICIES:
    $1.00 NET ASSET VALUE. The Fund employs specific investment policies and
procedures designed to maintain a constant net asset value of $1.00 per share.
There can be no assurance, however, that a constant net asset value will be
maintained on a continuing basis. See "Net Income and Distributions."

   
    90-DAY AVERAGE MATURITY. All of the Fund's investments mature in 397 days or
less from the date of purchase, have a variable rate of interest adjusted no
less frequently than every 397 days, or are purchased pursuant to a repurchase
agreement which provides for repurchase by the seller within 397 days from the
date of purchase. The average maturity of the Fund's investments (on a
dollar-weighted basis) is 90 days or less. All of the Fund's investments are
"eligible securities" within the meaning of Rule 2a-7 under the 1940 Act, and
are determined by the Adviser to present minimal credit risks. Investment in
high quality, short-term instruments may, in many circumstances, result in a
lower yield than would be available from investment in instruments with a lower
quality or a longer term.
    

    PERMITTED INVESTMENTS. Uninvested cash reserves may be held temporarily for
the Fund pending investment. The Fund may borrow from banks up to 15% of its
total assets for temporary or emergency purposes. For more information regarding
permitted investments and investment practices, see Appendix A. The Fund will
not necessarily invest or engage in each of the investments and investment
practices in Appendix A but reserves the right to do so.

    INVESTMENT IN ANOTHER INVESTMENT COMPANY. The Fund may, in the future, seek
its investment objectives by investing all of its investable assets in an
open-end management investment company having the same investment objectives and
policies and substantially the same investment restrictions as those of the
Fund. This investment would be made only if the Fund's Trustees believe that the
aggregate per share expenses of the Fund and such other investment company would
be less than or approximately equal to the expenses which the Fund would incur
if the assets of the Fund were to continue to be invested directly in portfolio
securities.

   
    INVESTMENT RESTRICTIONS. The Statement of Additional Information contains a
list of specific investment restrictions which govern the Fund's investment
policies. Except as otherwise indicated, the Fund's investment restrictions and
policies may be changed without shareholder approval. If a percentage or rating
restriction (other than a restriction as to borrowing) is adhered to at the time
an investment is made, a later change in percentage or rating resulting from
changes in the Fund's securities will not be a violation of policy.
    

    BROKERAGE TRANSACTIONS. The primary consideration in placing the Fund's
security transactions with broker-dealers for execution is to obtain and
maintain the availability of execution at the most favorable prices and in the
most effective manner possible.

   
- --------------------------------------------------------------------------------
                               RISK CONSIDERATIONS
- --------------------------------------------------------------------------------
    

    The risks of investing in the Fund vary depending upon the nature of the
securities held, and the investment practices employed, on its behalf. Certain
of these risks are described below.

    NON-DIVERSIFIED STATUS. The Fund is a non-diversified mutual fund. This
means that it is not subject to any statutory restrictions under the 1940 Act
limiting the investment of its assets in one or relatively few issuers (although
certain diversification requirements are imposed by the Internal Revenue Code).
Since the Fund may invest a relatively high percentage of its assets in the
obligations of a limited number of issuers, the value of shares of the Fund may
be more susceptible to any single economic, political or regulatory occurrence
than the value of shares of a diversified mutual fund would be. The Fund also
may invest 25% or more of its assets in securities the issuers of which are
located in the same state or the interest on which is paid from revenues of
similar type projects or that are otherwise related in such a way that a single
economic, business or political development or change affecting one of the
securities would also affect other securities. Investors should consider the
greater risk inherent in these policies when compared with a more diversified
mutual fund.

    "CONCENTRATION" IN PARTICIPATION INTERESTS. The Fund may invest more than
25% of its assets in Participation Interests in Municipal Obligations which are
secured by bank letters of credit or guarantees. Banks are subject to extensive
governmental regulation which may limit both the amounts and types of loans and
other financial commitments which may be made and interest rates and fees which
may be charged. The profitability of this industry is largely dependent upon the
availability and cost of capital funds for the purpose of financing lending
operations under prevailing money market conditions. Also, general economic
conditions play an important part in the operation of this industry and exposure
to credit losses arising from possible financial difficulties of borrowers might
affect a bank's ability to meet its obligations under a letter of credit or
guarantee. For additional information concerning variable rate instruments and
Participation Interests, see Appendix A.

   
    INVESTMENT PRACTICES. Certain of the investment practices employed for the
Fund may entail certain risks. See Appendix A.

    RISKS AFFECTING INVESTMENTS IN CALIFORNIA MUNICIPAL OBLIGATIONS. The Fund
intends to invest a high proportion of its assets in California Municipal
Obligations. Payment of interest and principal of these Municipal Obligations is
dependent on the continuing ability of issuers in California and obligors of
state, municipal and public authority debt obligations to meet their
obligations. Investors in the Fund should consider the greater risks inherent in
the Fund's concentration in these obligations when compared with the safety that
comes with a less geographically concentrated investment portfolio. The Adviser
believes that by maintaining the Fund's investment portfolio in liquid,
short-term high quality California Municipal Obligations, including
Participation Interests and other variable rate instruments that have high
quality credit support from banks, insurance companies or other financial
institutions, the Fund is somewhat insulated from the credit risks that may
exist for long-term California Municipal Obligations.
    

    Investors should be aware of special economic factors affecting California
before investing in the Fund. While these factors are summarized below, a more
detailed description is set forth in the Statement of Additional Information and
the Appendix thereto (see "Investment Objectives, Policies and Restrictions --
Risk Factors Affecting Investment in California Municipal Obligations" in the
Statement of Additional Information). The information below and in the Statement
of Additional Information is a summary of certain information contained in
official statements of issuers of California Municipal Obligations and does not
purport to be complete. The Fund is not responsible for the accuracy or
timeliness of this information.

    The State of California and other issuers of California Municipal
Obligations have experienced severe financial difficulties. In December, 1994,
Orange County, California and its pooled investment funds filed for protection
under the federal Bankruptcy Code. Orange County's financial difficulties could
continue to adversely affect other issues and issuers of California Municipal
Obligations. The financial difficulties of the State of California, Orange
County and other issuers have resulted in the credit ratings of certain of their
obligations being downgraded by certain rating agencies. There can be no
assurance that credit ratings on obligations of the State of California and
other California Municipal Obligations will not be downgraded further. Many of
the California Fund's Municipal Obligations are likely to be obligations of
California governmental issuers which rely in whole or in part, directly or
indirectly, on real property taxes as a source of revenue.

   
    "Proposition Thirteen" and similar California constitutional and statutory
amendments and initiatives in recent years have restricted the ability of
California taxing entities to increase real property tax revenues. Other
initiative measures approved by California voters in recent years, through
limiting various other taxes, have resulted in a substantial reduction in state
revenues. Decreased state revenues may result in reductions in allocations of
state revenues to local governments.
    

    Investors also should compare the yield available on a portfolio of single
state issues with the yield of a more diversified portfolio including other
state issues before making an investment decision. For a comparison of yields on
Municipal Obligations and taxable securities, see Appendix C.

   
- --------------------------------------------------------------------------------
                               VALUATION OF SHARES
- --------------------------------------------------------------------------------
    

    Net asset value per share of the Fund is determined each day the New York
Stock Exchange is open for trading (a "Business Day"). This determination is
made once each day as of 12:00 noon, Eastern time, by adding the market value of
all of the Fund's securities and other assets, then subtracting the liabilities
charged to the Fund, and then dividing the result by the number of the Fund's
outstanding shares. The Fund attempts to stabilize the net asset value of its
shares at $1.00 by valuing portfolio securities using the amortized cost method;
however, there can be no assurance that the Fund's net asset value will always
remain at $1.00 per share. The net asset value per share is effective for orders
received and accepted by the Fund's distributor, LFBDS, prior to its
calculation.

    The amortized cost method involves valuing a security at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium. Although the amortized cost method provides certainty in valuation, it
may result in periods during which the stated value of a security is higher or
lower than the price the Fund would receive if the security were sold.

- --------------------------------------------------------------------------------
                                    PURCHASES
- --------------------------------------------------------------------------------

    Shares of the Fund are offered continuously and may be purchased on any
Business Day without a sales load at the shares' net asset value next determined
after an order is transmitted to and accepted by the Distributor. Shares may be
purchased either through a securities broker which has a sales agreement with
the Distributor or through a bank or other financial institution which has an
agency agreement with the Distributor. Shares of the Fund are being offered
exclusively to customers of a Shareholder Servicing Agent (i.e., 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 concerning the Fund). The Fund and the
Distributor reserve the right to reject any purchase order and to suspend the
offering of Fund shares for a period of time.

    While there is no sales load imposed on shares of the Fund, the Distributor
receives fees from the Fund pursuant to a Distribution Plan. See "Management --
Distribution Arrangements."

    Each shareholder's account is established and maintained by his or her
Shareholder Servicing Agent, which will be the shareholder of record of the
Fund. Each Shareholder Servicing Agent may offer services to its customers such
as pre-authorized or automatic purchase and redemption programs and "sweep"
checking programs, and may establish its own terms, conditions and charges with
respect to services it offers to its customers. Charges for these services may
include fixed annual fees and account maintenance fees. The effect of any of
these fees will be to reduce the net return on the investment of customers of
that Shareholder Servicing Agent.

   
    Shareholder Servicing Agents will not transmit purchase orders to the
Distributor until they have received the purchase price in federal or other
immediately available funds. If Fund shares are purchased by check, there will
be a delay (usually not longer than two business days) in transmitting the
purchase order until the check is converted into federal funds.

    From time to time the Distributor may make payments for distribution and/ or
shareholder servicing activities out of its past profits and other sources
available to it. The Distributor may also make payments for marketing,
promotional or related expenses to dealers who engage in marketing efforts on
behalf of the Fund. The amounts of these payments will be determined by LFBDS in
its sole discretion and may vary among different dealers.
    

- --------------------------------------------------------------------------------
                                    EXCHANGES
- --------------------------------------------------------------------------------

    Shares of the Fund may be exchanged for shares of the other Landmark Funds
that are made available by a shareholder's Shareholder Servicing Agent, or may
be acquired through an exchange of shares of those funds. No initial sales
charge is imposed on shares being acquired through an exchange unless the shares
being acquired are subject to a sales charge that is greater than the current
sales charge of the Fund (in which case an initial sales charge will be imposed
at a rate equal to the difference). Contingent deferred sales charges may apply
to redemptions of some shares of other Landmark Funds disposed of or acquired
through an exchange.

    Shareholders must place exchange orders through their Shareholder Servicing
Agents, and may do so by telephone if their account applications so permit. For
more information on telephone transactions see "Redemptions." All exchanges will
be effected based on the relative net asset values per share next determined
after the exchange order is received by the Distributor. See "Valuation of
Shares." Shares of the Fund may be exchanged only after payment in federal funds
for the shares has been made.

    This exchange privilege may be modified or terminated at any time, upon at
least 60 days' notice when such notice is required by SEC rules, and is
available only in those jurisdictions where such exchanges legally may be made.
See the Statement of Additional Information for further details. Before making
any exchange, shareholders should contact their Shareholder Servicing Agents to
obtain more information and prospectuses of the Landmark Funds to be acquired
through the exchange.

- --------------------------------------------------------------------------------
                                   REDEMPTIONS
- --------------------------------------------------------------------------------

    Fund shares may be redeemed at their net asset value (normally $1.00 per
share) next determined after a redemption request in proper form is received by
a shareholder's Shareholder Servicing Agent. Shareholders may redeem shares of
the Fund only by authorizing their Shareholder Servicing Agents to redeem such
shares on their behalf through the Distributor.

    REDEMPTIONS BY MAIL. Shareholders may redeem Fund shares by sending written
instructions in proper form (as determined by a shareholder's Shareholder
Servicing Agent) to their Shareholder Servicing Agents. Shareholders are
responsible for ensuring that a request for redemption is in proper form.

    REDEMPTIONS BY TELEPHONE. Shareholders may redeem or exchange Fund shares by
telephone, if their account applications so permit, by calling their Shareholder
Servicing Agents. During periods of drastic economic or market changes or severe
weather or other emergencies, shareholders may experience difficulties
implementing a telephone exchange or redemption. In such an event, another
method of instruction, such as a written request sent via an overnight delivery
service, should be considered. The Fund and each Shareholder Servicing Agent
will employ reasonable procedures to confirm that instructions communicated by
telephone are genuine. These procedures may include recording of the telephone
instructions and verification of a caller's identity by asking for his or her
name, address, telephone number, Social Security number, and account number. If
these or other reasonable procedures are not followed, the Fund or the
Shareholder Servicing Agent may be liable for any losses to a shareholder due to
unauthorized or fraudulent instructions. Otherwise, the shareholder will bear
all risk of loss relating to a redemption or exchange by telephone.

    PAYMENT OF REDEMPTIONS. The proceeds of a redemption are paid in federal
funds normally on the Business Day the redemption is effected, but in any event
within seven days. If a shareholder requests redemption of shares which were
purchased recently, the Fund may delay payment until it is assured that good
payment has been received. In the case of purchases by check, this can take up
to ten days. See "Determination of Net Asset Value" in the Statement of
Additional Information regarding the Fund's right to pay the redemption price in
kind with securities (instead of cash).

    Questions about redemption requirements should be referred to the
shareholder's Shareholder Servicing Agent. The right of any shareholder to
receive payment with respect to any redemption may be suspended or the payment
of the redemption price postponed during any period in which the New York Stock
Exchange is closed (other than weekends or holidays) or trading on the Exchange
is restricted or if an emergency exists.

- --------------------------------------------------------------------------------
                          NET INCOME AND DISTRIBUTIONS
- --------------------------------------------------------------------------------

    The Fund's net income is determined each Business Day (and on such other
days as is necessary in order to comply with the 1940 Act). This determination
is made once during each such day as of 12:00 noon, Eastern time. All the Fund's
net income is declared as a dividend to shareholders of record at the time of
such determination. Shares begin accruing dividends on the day they are
purchased, and accrue dividends up to and including the day prior to redemption.
Dividends are distributed monthly on or prior to the last business day of each
month. Unless a shareholder elects to receive dividends in cash (subject to the
policies of the shareholder's Shareholder Servicing Agent), dividends are
distributed in the form of full and fractional additional Fund shares at the
rate of one share of the Fund for each one dollar of dividend income.

    Since the Fund's net income is declared as a dividend each time the Fund's
net income is determined, the net asset value per share of the Fund is expected
to remain at $1.00 per share immediately after each such determination and
dividend declaration. Any increase in the value of a shareholder's investment in
the Fund, representing the reinvestment of dividend income, is reflected by an
increase in the number of shares of the Fund in the shareholder's account.

   
    Because of the short-term maturities of the portfolio investments of the
Fund, the Fund does not expect to realize long-term capital gains or losses. Any
net realized short-term capital gains will be declared and distributed to the
Fund's shareholders annually after the close of the Fund's fiscal year.
Distributions of short-term capital gains are taxable to shareholders as
described in "Tax Matters." Any realized short-term capital losses will be
offset against short-term capital gains or, to the extent possible, utilized as
capital loss carryover. The Fund may distribute short-term capital gains more
frequently than annually, reduce shares to reflect capital losses or make
distributions of capital if necessary in order to maintain the Fund's net asset
value of $1.00 per share.
    

    It is expected that the Fund will have a positive net income at the time of
each determination thereof. If for any reason the Fund's net income is a
negative amount, which could occur, for instance, upon default by an issuer of a
portfolio security, the Fund would first offset the negative amount with respect
to each shareholder account from the dividends declared during the month with
respect to those accounts. If and to the extent that negative net income exceeds
declared dividends at the end of the month, the Fund would reduce the number of
outstanding Fund shares by treating each shareholder as having contributed to
the capital of the Fund that number of full and fractional shares in his or her
account which represents his or her share of the amount of such excess. Each
shareholder would be deemed to have agreed to such contribution in these
circumstances by his or her investment in the Fund.

- --------------------------------------------------------------------------------
                                   MANAGEMENT
- --------------------------------------------------------------------------------

   
TRUSTEES AND OFFICERS: The Fund is supervised by its Board of Trustees. A
majority of the Trustees are not affiliated with the Adviser. More information
on the Trustees and officers of the Fund appears under "Management" in the
Statement of Additional Information.

INVESTMENT ADVISER: CITIBANK. The Fund draws on the strength and experience of
Citibank. Citibank offers a wide range of banking and investment services to
customers across the United States and throughout the world, and has been
managing money since 1822. Its portfolio managers are responsible for investing
in money market, equity and fixed income securities. Citibank and its affiliates
manage more than $83 billion in assets worldwide. Citibank is a wholly-owned
subsidiary of Citicorp.

    Citibank manages the assets of the Fund pursuant to an Investment Advisory
Agreement. Subject to policies set by the Fund's Trustees, Citibank makes
investment decisions for the Fund.

    ADVISORY FEES. For its services under the Investment Advisory Agreement, the
Adviser receives investment advisory fees, which are accrued daily and paid
monthly, of 0.20% of the Fund's average daily net assets on an annualized basis
for the Fund's then-current fiscal year. The Adviser has voluntarily agreed to
waive all or a portion of its investment advisory fee.

    For the fiscal year ended August 31, 1996, the investment advisory fees paid
to Citibank, after waiver, were 0.01% of the Fund's average daily net assets for
that fiscal year.
    

    BANKING RELATIONSHIPS. Citibank and its affiliates may have deposit, loan
and other relationships with the issuers of securities purchased on behalf of
the Fund, including outstanding loans to such issuers which may be repaid in
whole or in part with the proceeds of securities so purchased. Citibank has
informed the Fund that, in making its investment decisions, it does not obtain
or use material inside information in the possession of any division or
department of Citibank or in the possession of any affiliate of Citibank.

   
    BANK REGULATORY MATTERS. The Glass-Steagall Act prohibits certain financial
institutions, such as Citibank, from underwriting securities of open-end
investment companies, such as the Fund. Citibank believes that its services
under the Investment Advisory Agreement and the activities performed by it or
its affiliates as Shareholder Servicing Agents and sub-administrator are not
underwriting and are consistent with the Glass-Steagall Act and other relevant
federal and state laws. However, there is no controlling precedent regarding the
performance of the combination of investment advisory, shareholder servicing and
sub-administrative activities by banks. State laws on this issue may differ from
applicable federal law and banks and financial institutions may be required to
register as dealers pursuant to state securities laws. Changes in either federal
or state statutes or regulations, or in their interpretations, could prevent
Citibank or its affiliates from continuing to perform these services for the
Fund. If Citibank or its affiliates were to be prevented from acting as the
Adviser, sub-administrator or a Shareholder Servicing Agent, the Fund would seek
alternative means for obtaining these services. The Fund does not expect that
shareholders would suffer any adverse financial consequences as a result of any
such occurrence.

ADMINISTRATIVE SERVICES PLAN: The Fund has an Administrative Services Plan which
provides that the Fund may obtain the services of an administrator, a transfer
agent, a custodian, a fund accountant and one or more Shareholder Servicing
Agents, and may enter into agreements providing for the payment of fees for such
services. Under the Administrative Services Plan, the total of the fees paid to
the Fund's Administrator and Shareholder Servicing Agents and the distribution
fee paid to the Distributor (other than any fee concerning electronic or other
media advertising) may not exceed 0.60% of the Fund's average daily net assets
on an annualized basis for the Fund's then-current fiscal year. Within this
overall limitation, individual fees may vary. See "Administrator," "Shareholder
Servicing Agents" and "Transfer Agent, Custodian and Fund Accountant."
    

ADMINISTRATOR: LFBDS provides certain administrative services to the Fund under
an administrative services agreement. These administrative services include
providing general office facilities, supervising the overall administration of
the Fund, and providing persons satisfactory to the Board of Trustees to serve
as Trustees and officers of the Fund. Such Trustees and officers may be
directors, officers or employees of LFBDS or its affiliates.

    For these services, the Administrator receives fees accrued daily and paid
monthly of 0.25% of the average daily net assets of the Fund on an annualized
basis for the Fund's then-current fiscal year. However, the Administrator has
voluntarily agreed to waive all or a portion of the fees payable to it.

    LFBDS is a wholly-owned subsidiary of Signature Financial Group, Inc.
"Landmark" is a service mark of LFBDS.

SUB-ADMINISTRATOR: Pursuant to a sub-administrative services agreement, Citibank
performs such sub-administrative duties for the Fund as from time to time are
agreed upon by Citibank and LFBDS. Citibank's compensation as sub-administrator
is paid by LFBDS.

SHAREHOLDER SERVICING AGENTS: The Fund has entered into separate shareholder
servicing agreements with each Shareholder Servicing Agent pursuant to which
that Shareholder Servicing Agent provides shareholder services, including
answering customer inquiries, assisting in processing purchase, exchange and
redemption transactions and furnishing Fund communications to shareholders. For
these services, each Shareholder Servicing Agent receives a fee from the Fund at
an annual rate of 0.25% of the average daily net assets of the Fund represented
by shares owned by investors for whom such Shareholder Servicing Agent maintains
a servicing relationship.

    Some Shareholder Servicing Agents may impose certain conditions on their
customers in addition to or different from those imposed by the Fund, such as
requiring a minimum initial investment or charging their customers a direct fee
for their services. Each Shareholder Servicing Agent has agreed to transmit to
its customers who are shareholders of the Fund appropriate prior written
disclosure of any fees that it may charge them directly and to provide written
notice at least 30 days prior to imposition of any transaction fees.

TRANSFER AGENT, CUSTODIAN AND FUND ACCOUNTANT: State Street Bank and Trust
Company acts as transfer agent, dividend disbursing agent and custodian for the
Fund. State Street also provides fund accounting services to the Fund and
calculates the daily net asset value of the Fund.

DISTRIBUTION ARRANGEMENTS: LFBDS is the Distributor of the Fund's shares and
also serves as distributor for each of the other Landmark Funds and as a
Shareholder Servicing Agent for certain investors. As Distributor, LFBDS bears
the cost of compensating personnel involved in the sale of shares of the Fund
and bears all costs of travel, office expenses (including rent and overhead) and
equipment. In those states where LFBDS is not a registered broker-dealer, shares
of the Fund are sold through Signature Broker-Dealer Services, Inc., as dealer.

   
    Under a plan of distribution for the Fund adopted in accordance with Rule
12b-1 under the 1940 Act (the "Plan"), the Fund pays the Distributor a fee at an
annual rate not to exceed 0.10% of the average daily net assets of the Fund. The
Plan also permits the Fund to pay the Distributor an additional fee (not to
exceed 0.10% of the average daily net assets of the Fund) in anticipation of or
as reimbursement for print or electronic media advertising expenses incurred in
connection with the sale of Fund shares. However, the Distributor has agreed to
waive a portion of these fees.

    The Fund and the Distributor provide to the Trustees quarterly a written
report of amounts expended pursuant to the Plan and the purposes for which the
expenditures were made.

- --------------------------------------------------------------------------------
                                   TAX MATTERS
- --------------------------------------------------------------------------------

    This discussion of taxes is for general information only. Investors should
consult their own tax advisers about their particular situations.

FEDERAL INCOME TAXES: The Fund intends to meet requirements of the Internal
Revenue Code applicable to regulated investment companies so that it will not
be liable for any federal income or excise taxes.
    

    The Fund expects that most of its net income will be attributable to
interest on Municipal Obligations and as a result most of the Fund's dividends
to shareholders will be excludable from shareholders' gross income. However, the
Fund may invest from time to time in taxable securities, and certain Fund
dividends may be subject to the federal alternative minimum tax. It is also
possible, but not intended, that the Fund may realize short-term or long-term
capital gains or losses. Generally, distributions from the Fund's short-term
capital gains will be taxed as ordinary income, and distributions from long-term
net capital gains will be taxed as such regardless of how long the shares of the
Fund have been held. Dividends and distributions are treated in the same manner
for federal tax purposes whether they are paid in cash or as additional shares.

   
    Fund dividends of tax-exempt income are taken into account in determining
the amount of a shareholder's social security and railroad retirement benefits
that may be subject to federal income tax. No deduction may be claimed for
interest on indebtedness incurred or continued for the purpose of purchasing or
carrying Fund shares. Investors who are, or who are related to, "substantial
users" of facilities financed by private activity bonds should consult their tax
advisers before buying Fund shares.
    

    Early each year, the Fund will notify its shareholders of the amount and
federal tax status of distributions paid to shareholders for the preceding year.

    The account application asks each new shareholder to certify that the
shareholder's Social Security or taxpayer identification number is correct and
that the shareholder is not subject to 31% backup withholding for failing to
report income to the IRS. The Fund may be required to withhold (and pay over to
the IRS for the shareholder's credit) 31% of certain distributions paid to
shareholders who fail to provide this information or otherwise violate IRS
regulations.

STATE AND LOCAL TAXES: Except as noted below, Fund dividends which are
excludable from shareholders' gross income for federal income tax purposes may
not necessarily be exempt from the income or other tax laws of any state or
local taxing authority. Investors should consult their own tax advisers in this
regard.

    Under existing California law, as long as at the end of each quarter of the
Fund's fiscal year the Fund continues to qualify for the special federal income
tax treatment afforded regulated investment companies and at least 50% of the
value of the Fund's assets consists of California Municipal Obligations,
shareholders of the Fund will be able to exclude from income, for California
personal income tax purposes, dividends received from the Fund which are derived
from income (less related expenses) from the California Municipal Obligations of
the Fund. These dividends must be designated as such by the Fund by written
notice to shareholders within 60 days after the close of that fiscal year.

   
FOREIGN SHAREHOLDERS. The Fund will withhold U.S. federal income tax payments at
a rate of 30% (or any lower applicable treaty rate) on taxable dividends and
other payments subject to withholding taxes that are made to persons who are not
citizens or residents of the United States. Distributions received from the Fund
by non-U.S. persons also may be subject to tax under the laws of their own
jurisdiction.

- --------------------------------------------------------------------------------
                             PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
    

    Fund performance may be quoted in advertising, shareholder reports and other
communications in terms of yield, effective yield, tax equivalent yield, total
rate of return or tax equivalent total rate of return. All performance
information is historical and is not intended to indicate future performance.
Yields and total rates of return fluctuate in response to market conditions and
other factors.

    The Fund may provide its period and average annualized "total rates of
return" and "tax equivalent total rates of return." The "total rate of return"
refers to the change in the value of an investment in the Fund over a stated
period and is compounded to include the value of any shares purchased with any
dividends or capital gains declared during such period. Period total rates of
return may be "annualized." An "annualized" total rate of return assumes that
the period total rate of return is generated over a one-year period. The "tax
equivalent total rate of return" refers to the total rate of return that a fully
taxable money market fund would have to generate in order to produce an
after-tax total rate of return equivalent to that of the Fund. The use of a tax
equivalent total rate of return allows investors to compare the total rates of
return of the Fund, the dividends from which are exempt from federal personal
income taxes, with the total rates of return of funds the dividends from which
are not so tax exempt.

    The Fund may provide annualized "yield," "effective yield" and "tax
equivalent yield" quotations. The "yield" of the Fund refers to the income
generated by an investment in the Fund over a seven-day period (which period is
stated in any such advertisement or communication). This income is then
annualized; that is, the amount of income generated by the investment over that
period is assumed to be generated each week over a 365-day period and is shown
as a percentage of the investment. The "effective yield" is calculated
similarly, but when annualized the income earned by the investment during that
seven-day period is assumed to be reinvested. The effective yield is slightly
higher than the yield because of the compounding effect of this assumed
reinvestment. The "tax equivalent yield" refers to the yield that a fully
taxable money market fund would have to generate in order to produce an
after-tax yield equivalent to that of the Fund. The use of a tax equivalent
yield allows investors to compare the yield of the Fund, the dividends from
which are exempt from federal personal income tax, with yields of funds the
dividends from which are not so tax exempt. The Fund may also provide yield,
effective yield and tax equivalent yield quotations for longer periods.

    Of course, any fees charged by a shareholder's Shareholder Servicing Agent
will reduce that shareholder's net return on his or her investment. See the
Statement of Additional Information for more information concerning the
calculation of yield and total rate of return quotations for the Fund.

- --------------------------------------------------------------------------------
                               GENERAL INFORMATION
- --------------------------------------------------------------------------------

ORGANIZATION: Landmark California Tax Free Reserves is a non-diversified series
of Landmark Multi-State Tax Free Funds (the "Trust"). The Trust is a
Massachusetts business trust which was organized on August 30, 1985; it was
known as Landmark New York Tax Free Reserves until its name was changed
effective December 18, 1991. The Trust is a non-diversified, open-end management
investment company registered under the 1940 Act. There are presently two active
series of the Trust in addition to the Fund.

    Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the trust's
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the trust itself was unable to meet its
obligations.

VOTING AND OTHER RIGHTS: The Trust may issue an unlimited number of shares, may
create new series of shares and may divide shares in each series into classes.
Each share of the Trust gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each series of
the Trust have equal voting rights except that, in matters affecting only a
particular series, only shares of that particular series are entitled to vote.

    At any meeting of shareholders of the 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 which that Shareholder Servicing
Agent is the holder of record.

   
    As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will usually be sought only for
changes in the Fund's fundamental investment restrictions and for the election
of Trustees under certain circumstances. Trustees may be removed by shareholders
under certain circumstances. Each share of the Fund is entitled to participate
equally in dividends and other distributions and the proceeds of any liquidation
of the Fund.
    

CERTIFICATES: The Fund's Transfer Agent maintains a share register for
shareholders of record, i.e., Shareholder Servicing Agents. Share certificates
are not issued.

   
EXPENSES: For the fiscal year ended August 31, 1996, total operating expenses of
the Fund, after giving effect to fee waivers and reimbursements, were 0.65% of
the Fund's average daily net assets for that fiscal year. All fee waivers and
reimbursements are voluntary and may be reduced or terminated at any time.

                           ------------------------

    The Statement of Additional Information dated the date hereof contains more
detailed information about the Fund, including information related to (i)
investment policies and restrictions, (ii) the Trustees, officers, Adviser and
Administrator, (iii) securities transactions, (iv) the Fund's shares, including
rights and liabilities of shareholders, (v) the methods used to calculate
performance information, (vi) programs for the purchase of shares, and (vii) the
determination of net asset value.
    

    No person has been authorized to give any information or make any
representations not contained in this Prospectus in connection with the offering
made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Fund or
its distributor. This Prospectus does not constitute an offering by the Fund or
its distributor in any jurisdiction in which such offering may not lawfully be
made.

- --------------------------------------------------------------------------------
                                   APPENDIX A
- --------------------------------------------------------------------------------

                            PERMITTED INVESTMENTS
                           AND INVESTMENT PRACTICES

    MUNICIPAL BONDS. Municipal bonds are debt obligations of states, cities,
municipalities and municipal agencies and authorities which generally have a
maturity at the time of issue of one year or more and which are issued to raise
funds for various public purposes, such as construction of a wide range of
public facilities, refunding outstanding obligations or obtaining funds for
institutions and facilities. The two principal classifications of municipal
bonds are "general obligation" and "revenue" bonds. General obligation bonds are
secured by the issuer's pledge of its full faith, credit and taxing power for
the payment of principal and interest. The principal of and interest on revenue
bonds are payable from the income of specific projects or authorities and
generally are not supported by the issuer's general power to levy taxes. In some
cases, revenues derived from specific taxes are pledged to support payments on a
revenue bond.

    In addition, certain kinds of private activity bonds ("IDBs") are issued by
or on behalf of public authorities to provide funding for various privately
operated industrial facilities, such as warehouse, office, plant and store
facilities and environmental and pollution control facilities. IDBs are, in most
cases, revenue bonds. The payment of the principal and interest on IDBs usually
depends solely on the ability of the user of the facilities financed by the
bonds or other guarantor to meet its financial obligations and, in certain
instances, the pledge of real and personal property as security for payment.
Many IDBs may not be readily marketable; however, the IDBs or the participation
certificates in IDBs purchased by the Fund will have liquidity because they
generally will be supported by demand features to "high quality" banks,
insurance companies or other financial institutions.

    MUNICIPAL NOTES. There are four major varieties of state and municipal
notes: Tax and Revenue Anticipation Notes ("TRANs"); Tax Anticipation Notes
("TANs"); Revenue Anticipation Notes ("RANs"); and Bond Anticipation Notes
("BANs"). TRANs, TANs and RANs are issued by states, municipalities and other
tax-exempt issuers to finance short-term cash needs or, occasionally, to finance
construction. Many TRANs, TANs and RANs are general obligations of the issuing
entity payable from taxes or designated revenues, respectively, expected to be
received within the related fiscal period. BANs are issued with the expectation
that their principal and interest will be paid out of proceeds from renewal
notes or bonds to be issued prior to the maturity of the BANs. BANs are issued
by both general obligation and revenue bond issuers usually to finance such
items as land acquisition, facility acquisition and/or construction and capital
improvement projects.

    VARIABLE RATE INSTRUMENTS AND PARTICIPATION INTERESTS. Variable rate
instruments provide for a periodic adjustment in the interest rate paid on the
instrument and usually permit the holder to receive payment of principal and
accrued interest upon a specified number of day's notice. Variable rate
instruments in which the Fund may invest include participation interests in
Municipal Obligations owned by a bank, insurance company or other financial
institution or affiliated organization ("Participation Interests"). A variable
rate instrument or a Participation Interest may be backed by an irrevocable
letter of credit or guarantee of, or a right to put to, a bank, or an insurance
policy of an insurance company. See "Stand-by Commitments." Purchase of a
Participation Interest may involve the risk that the Fund will not be deemed to
be the owner of the underlying Municipal Obligation for purposes of the ability
to claim tax exemption of interest paid on that Municipal Obligation. If
interest rates rise or fall, the rates payable on variable rate instruments will
generally be readjusted. As a result variable rate instruments do not offer the
same opportunity for capital appreciation or loss as fixed rate instruments.

    STAND-BY COMMITMENTS. When the Fund purchases Municipal Obligations it may
also acquire stand-by commitments from banks with respect to such Municipal
Obligations. The Fund also may acquire stand-by commitments from broker-dealers.
Under a stand-by commitment, a bank or broker-dealer agrees to purchase at the
Fund's option a specified Municipal Obligation at a specified price. A stand-by
commitment is the equivalent of a "put" option with respect to a particular
Municipal Obligation. The Fund intends to acquire stand-by commitments solely to
facilitate liquidity. Stand-by commitments are subject to certain risks, which
include the ability of the issuer of the commitment to pay for the Municipal
Obligations at the time the commitment is exercised, the fact that the
commitment is not marketable, and that the maturity of the underlying security
will generally be different from that of the commitment.

    "WHEN-ISSUED" SECURITIES. In order to ensure the availability of suitable
securities, the Fund may purchase securities on a "when-issued" or on a "forward
delivery" basis, which means that the securities would be delivered to the Fund
at a future date beyond customary settlement time. Under normal circumstances,
the Fund takes delivery of the securities. In general, the purchaser does not
pay for the securities until received and does not start earning interest until
the contractual settlement date. While awaiting delivery of the securities, the
Fund establishes a segregated account consisting of cash, cash equivalents or
high quality debt securities equal to the amount of the Fund's commitments to
purchase "when-issued" securities. An increase in the percentage of the Fund's
assets committed to the purchase of securities on a "when-issued" basis may
increase the volatility of its net asset value.

    REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements.
Repurchase agreements are transactions in which an institution sells the Fund a
security at one price, subject to the Fund's obligation to resell and the
selling institution's obligation to repurchase that security at a higher price
normally within a seven day period. There may be delays and risks of loss if the
seller is unable to meet its obligation to repurchase. Repurchase agreements may
involve Municipal Obligations or other securities.

    RESTRICTED SECURITIES. The Fund may purchase restricted securities that are
not registered for sale to the general public. Provided that a dealer or
institutional trading market in such securities exists, these restricted
securities are not treated as illiquid securities for purposes of the Fund's
investment limitations. Institutional trading in restricted securities is
relatively new, and the liquidity of the Fund's investments could be impaired if
trading does not develop or declines.

    PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS. The Fund may invest up to 10%
of its net assets in securities for which there is no readily available market.
These illiquid securities may include privately placed restricted securities for
which no institutional market exists. The absence of a trading market can make
it difficult to ascertain a market value for illiquid investments. Disposing of
illiquid investments may involve time-consuming negotiation and legal expenses,
and it may be difficult or impossible for the Fund to sell them promptly at an
acceptable price.

- --------------------------------------------------------------------------------
                                   APPENDIX B
- --------------------------------------------------------------------------------

                      RATINGS OF MUNICIPAL OBLIGATIONS*

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






- ----------
*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.
<PAGE>
                DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
                      TWO HIGHEST LONG-TERM DEBT RATINGS:

   
    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.

   
    Note: Those bonds in the Aa group which Moody's believes possess the
          strongest investment attributes are designated by the symbol Aa1.
    

                DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
               TWO HIGHEST RATINGS OF STATE AND MUNICIPAL NOTES:

    Moody's ratings for state and municipal short-term obligations are
designated Moody's Investment Grade ("MIG"). Such ratings recognize the
differences between short-term credit risk and long-term risk. A short-term
rating ("VMIG") may also be assigned to variable rate demand obligations.
Factors affecting the liquidity of the borrower and short-term cyclical elements
are critical in short-term ratings, while other factors of major importance in
bond risk, long-term secular trends, for example, may be less important over the
short run. Symbols used are as follows:

   
    MIG 1/VMIG 1 -- This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.

    MIG 2/VMIG 2 -- This designation denotes high quality. Margins of protection
are ample although not so large as in the preceding group.

                DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
                     TWO HIGHEST COMMERCIAL PAPER RATINGS:

    Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually senior debt obligations. These obligations have an original
maturity not exceeding one year.

    Issuers rated PRIME-1 (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment ability
will often be evidenced by many of the following characteristics: (1) leading
market positions in well established industries; (2) high rates of return on
funds employed; (3) conservative capitalization structures with moderate
reliance on debt and ample asset protection; (4) broad margins in earnings
coverage of fixed financial charges and high internal cash generation; and (5)
well established access to a range of financial markets and assured sources of
alternate liquidity.

    Issuers rated PRIME-2 (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.
    

                DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S
                       TWO HIGHEST LONG-TERM DEBT RATINGS:

   
    AAA -- An obligation rated AAA has the highest rating assigned by Standard &
Poor's. The obligor's capacity to meet its financial commitment or the
obligation is extremely strong.

    AA -- An obligation rated "AA" differs from the highest rated obligations
only in small degree. The obligor's capacity to meet its financial commitments
or the obligation is very strong.

    Plus (+) or Minus (-): The "AA" rating may be modified by the addition of a
plus or minus sign to show relative standing within the AA rating category.
    

                DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S
                TWO HIGHEST RATINGS OF STATE AND MUNICIPAL NOTES:

   
    A Standard & Poor's note rating reflects the liquidity factors and market
access risks unique to notes. Notes maturing in three years or less will likely
receive a note rating. Notes maturing beyond three years will most likely
receive a long-term debt rating. The following criteria will be used in making
that assessment:

- -- Amortization schedule (the larger the final maturity relative to other
   maturities, the more likely the issue is to be treated as a note).
    

- -- Source of payment (the more dependent the issue is on the market for its
   refinancing, the more likely it will be treated as a note).

   
    Note rating symbols and definitions are as follows:

    SP-1 -- Strong capacity to pay principal and interest. Issues determined to
possess very strong characteristics are given a plus (+) designation.

    SP-2 -- Satisfactory capacity to pay principal and interest, with some
vulnerability to adverse financial and economic changes over the term of the
notes.

                DESCRIPTION OF STANDARD & POOR'S RATINGS GROUP'S
                      TWO HIGHEST COMMERCIAL PAPER RATINGS:

    A Standard & Poor's issue credit rating is a current opinion of the
creditworthiness of an obligor with respect to a specific financial obligation
(including commercial paper programs). It takes into consideration the
creditworthiness of guarantors, insurers or other forms of credit enhancement on
the obligation and takes into account the currency in which the obligation is
denominated.

    A-1 -- A short-term obligation rated "A-1" is rated in the highest category
by Standard & Poor's. The obligor's capacity to meet its financial commitment on
the obligation is strong. Within this category, certain obligations are
designated with a plus sign(+). This indicates that the obligor's capacity to
meet its fiancial commitment on these obligations is extremely strong.

    A-2 -- A short-term obligation rated "A-2" is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
obligations in higher rating categories. However, the obligor's capacity to meet
its financial commitment on the obligaton is satisfactory.

                       DESCRIPTION OF STANDARD & POOR'S
                        RATINGS GROUP'S DUAL RATINGS:

    Standard & Poor's assigns "dual" ratings to all debt issues that have a put
option or demand feature as part of their structure.

    The first rating addresses the likelihood of repayment of principal and
interest as due, and the second rating addresses only the demand feature. The
long-term debt rating symbols are used for bonds to denote the long-term
maturity and the commercial paper rating symbols for the put option (for
example, "AAA/A-1+"). With short-term demand debt Standard & Poor's note rating
symbols are used with the commercial paper rating symbols (for example,
"SP-1+/A-1+").

                DESCRIPTION OF FITCH INVESTORS SERVICE, INC.'S
                          TWO HIGHEST BOND RATINGS:

    The rating takes into consideration special features of the issue, its
relationship to other obligations of the issuer, the current and prospective
financial condition and operating performance of the issuer and any guarantor,
as well as the economic and political environment that might affect the issuer's
future financial strength and credit quality.
    

    AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.

    AA -- Bonds considered to be investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA". Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-1+".

   
    Plus (+) or Minus (-): The "AA" rating may be modified by the addition of a
plus or minus sign to show relative standing within the AA rating category.

                 DESCRIPTION OF FITCH INVESTORS SERVICE, INC.'S
               THREE HIGHEST RATINGS OF STATE AND MUNICIPAL NOTES:

    The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.

    F-1+ -- Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

    F-1 -- Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".

    F-2 -- Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as for issues assigned "F-1+" and "F-1" ratings.

                 DESCRIPTION OF FITCH INVESTORS SERVICE, INC.'S
                    THREE HIGHEST COMMERCIAL PAPER RATINGS:
    

    The short-term rating places greater emphasis than a long-term rating on the
existence of liquidity necessary to meet the issuer's obligations in a timely
manner.

   
    F-1+ -- Exceptionally Strong Credit Quality. Issues assigned this rating are
regarded as having the strongest degree of assurance for timely payment.

    F-1 -- Very Strong Credit Quality. Issues assigned this rating reflect an
assurance of timely payment only slightly less in degree than issues rated
"F-1+".

    F-2 -- Good Credit Quality. Issues assigned this rating have a satisfactory
degree of assurance for timely payment, but the margin of safety is not as great
as for issues assigned "F-1+" and "F-1" ratings.
    
<PAGE>
- --------------------------------------------------------------------------------
                                  APPENDIX C
- --------------------------------------------------------------------------------
   
                       TAXABLE EQUIVALENT YIELD TABLES
                      (RATES FOR 1996 UNDER FEDERAL AND
                     CALIFORNIA PERSONAL INCOME TAX LAWS)

    The tables below show the approximate taxable bond yields which are
equivalent to tax-exempt bond yields under 1996 federal and California personal
income tax laws. SUCH YIELDS MAY DIFFER UNDER THE LAWS APPLICABLE TO SUBSEQUENT
YEARS IF THE EFFECT OF ANY SUCH LAW IS TO CHANGE ANY TAX BRACKET OR THE AMOUNT
OF TAXABLE INCOME WHICH IS APPLICABLE TO A TAX BRACKET. Separate calculations,
showing the applicable taxable income brackets, are provided for investors who
file joint returns and for investors who file individual returns. While it is
expected that a substantial portion of the dividends paid to shareholders of the
Fund will be exempt from federal and California personal income taxes, portions
of such dividends from time to time may be subject to federal income taxes
and/or California personal income taxes.

<TABLE>
<CAPTION>
                                                            FEDERAL TABLE
 ----------------------------------------------------------------------------------------------------------------------------------
              TAXABLE INCOME*                                                    TAX-EXEMPT YIELD
 ----------------------------------------------------------------------------------------------------------------------------------
    SINGLE RETURN          JOINT RETURN       INCOME
                                                TAX      2.00%   2.50%   3.00%  3.50%  4.00%  4.50%  5.00%  5.50%  6.00%   6.50%
                                             BRACKET**
               BUT                   BUT
   OVER     NOT OVER     OVER     NOT OVER                                   EQUIVALENT TAXABLE YIELD
<S>         <C>        <C>        <C>          <C>       <C>     <C>     <C>    <C>    <C>    <C>    <C>    <C>     <C>    <C>   
 $      0   $ 24,000   $      0   $ 40,100     15.00%    2.35%   2.94%   3.53%  4.12%  4.71%  5.29%  5.88%  6.47%   7.06%   7.65%
 $ 24,000   $ 58,150   $ 40,100   $ 96,900     28.00%    2.78%   3.47%   4.17%  4.86%  5.56%  6.25%  6.94%  7.64%   8.33%   9.03%
 $ 58,150   $121,300   $ 96,900   $147,700     31.00%    2.90%   3.62%   4.35%  5.07%  5.80%  6.52%  7.25%  7.97%   8.70%   9.42%
 $121,300   $263,750   $147,700   $263,750     36.00%    3.13%   3.91%   4.69%  5.47%  6.25%  7.03%  7.81%  8.59%   9.38%  10.16%
 $263,750              $263,750                39.60%    3.31%   4.14%   4.97%  5.79%  6.62%  7.45%  8.28%  9.11%   9.93%  10.76%

<FN>
   *Net amount subject to Federal personal income tax after deductions and exemptions.
  **Effective Federal Tax Bracket for 1996. 1997 information is not available as of the date of this Prospectus.
</FN>

<CAPTION>
                                                 FEDERAL AND CALIFORNIA STATE TABLE
 ----------------------------------------------------------------------------------------------------------------------------------
              TAXABLE INCOME*                                                    TAX-EXEMPT YIELD
 ----------------------------------------------------------------------------------------------------------------------------------
    SINGLE RETURN          JOINT RETURN       INCOME
                                                TAX      2.00%   2.50%   3.00%  3.50%  4.00%  4.50%  5.00%   5.50%   6.00%   6.50%
                                             BRACKET**
               BUT                   BUT
   OVER     NOT OVER     OVER     NOT OVER                                   EQUIVALENT TAXABLE YIELD
<S>         <C>        <C>        <C>          <C>       <C>     <C>     <C>    <C>    <C>    <C>    <C>    <C>     <C>     <C>   
 $      0   $ 24,000                           17.80%    2.43%   3.04%   3.65%  4.26%  4.87%  5.47%  6.08%   6.69%   7.30%   7.91%
                       $      0   $ 40,100     17.35%    2.42%   3.02%   3.63%  4.23%  4.84%  5.44%  6.05%   6.65%   7.26%   7.86%
 $ 24,000   $ 58,150                           34.41%    3.05%   3.81%   4.57%  5.34%  6.10%  6.86%  7.62%   8.39%   9.15%   9.91%
                       $ 40,100   $ 96,900     34.02%    3.03%   3.79%   4.55%  5.30%  6.06%  6.82%  7.58%   8.34%   9.09%   9.85%
 $ 58,150   $121,300                           37.49%    3.20%   4.00%   4.80%  5.60%  6.40%  7.20%  8.00%   8.80%   9.60%  10.40%
                       $ 96,900   $147,700     37.42%    3.20%   3.99%   4.79%  5.59%  6.39%  7.19%  7.99%   8.79%   9.59%  10.39%
 $121,300   $263,750                           42.58%    3.48%   4.35%   5.22%  6.10%  6.97%  7.84%  8.71%   9.58%  10.45%  11.32%
                       $147,700   $263,750     42.11%    3.45%   4.32%   5.18%  6.05%  6.91%  7.77%  8.64%   9.50%  10.36%  11.23%
                       $263,750   $439,744     45.64%    3.68%   4.60%   5.52%  6.44%  7.36%  8.28%  9.20%  10.12%  11.04%  11.96%
 $263,750              $439,744                46.24%    3.72%   4.65%   5.58%  6.51%  7.44%  8.37%  9.30%  10.23%  11.16%  12.09%

<FN>
     *Net amount subject to Federal and California personal income tax after deductions and exemptions.
    **Effective combined federal and state tax bracket. State tax rate based on the average state rate for the federal tax bracket.
   ***Combined Federal and California rate assumes itemization of state tax deduction.
  ****California tax rates are based on 1996 information. 1997 information is not available at the date of this Prospectus.
</FN>
</TABLE>
    
<PAGE>
- -----------------------------------
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 CLIENTS:
Citigold
P.O. Box 5130, New York, NY 10126-5130
Call Your Citigold Executive, or in NY or CT (800) 285-1701,
or for all other states (800) 285-1707

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

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

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

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

[logo] LANDMARK
       FUNDS

MONEY MARKET FUNDS:
Cash Reserves
Premium Liquid Reserves
Institutional Liquid Reserves

U.S. Treasury Reserves
Premium U.S. Treasury Reserves
Institutional U.S. Treasury Reserves

Tax Free Reserves
Institutional Tax Free Reserves
       

California Tax Free Reserves
Connecticut Tax Free Reserves
New York Tax Free Reserves

STOCK & BOND FUNDS:
U.S. Government Income Fund
Intermediate Income Fund
National Tax Free Income Fund
New York Tax Free Income Fund

Balanced Fund
Equity Fund
Small Cap Equity Fund
International Equity Fund
Emerging Asian Markets Equity Fund
<PAGE>
TRUSTEES AND OFFICERS
C. Oscar Morong, Jr., Chairman
Philip W. Coolidge*, President
H. B. Alvord
Elliott J. Berv
Mark T. Finn
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Walter E. Robb, III
E. Kirby Warren
William S. Woods, Jr.

   
SECRETARY
Linda T. Gibson*
    

TREASURER
John R. Elder*

*Affiliated Person of Administrator and Distributor

- ------------------------------|-|---------------------------------

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 AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110

AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110

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

- ------------------------------|-|---------------------------------

SHAREHOLDER SERVICING AGENTS
(See Inside of Cover)


CATR/P/97/RB           Printed on Recycled Paper  [recycle symbol]


[LOGO] LANDMARK(SM) FUNDS
       Advised by Citibank, N.A.

- -------------------------------------------------------------------
LANDMARK 
CALIFORNIA
TAX FREE RESERVES
- -------------------------------------------------------------------


   
- -------------------------------------------------------------------
PROSPECTUS
January 2, 1997
- -------------------------------------------------------------------
    
<PAGE>
   
                                                                    STATEMENT OF
                                                          ADDITIONAL INFORMATION
                                                                 January 2, 1997
    

LANDMARK CALIFORNIA TAX FREE RESERVES
(A member of the Landmark(SM) Family of Funds)

         Landmark California Tax Free Reserves (the "Fund") is a separate series
of Landmark Multi-State Tax Free Funds (the "Trust"). The address and telephone
number of the Trust are 6 St. James Avenue, Boston, Massachusetts 02116, (617)
423-1679.

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

Table of Contents                                                        Page
- -----------------                                                        ----

The Fund                                                                   2
Investment Objectives, Policies and Restrictions                           2
Performance Information                                                   14
Determination of Net Asset Value                                          15
Management                                                                16
Portfolio Transactions                                                    24
Description of Shares, Voting Rights and Liabilities                      25
Certain Additional Tax Matters                                            26
Independent Accountants and Financial Statements                          27
Appendix                                                                  28

   
         This Statement of Additional Information sets forth information which
may be of interest to investors but which is not necessarily included in the
Fund's Prospectus, dated January 2, 1997, by which shares of the Fund are
offered. This Statement of Additional Information should be read in conjunction
with the Prospectus, a copy of which may be obtained by an investor without
charge by contacting the Fund's Distributor (see back cover for address and
phone number).
    

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

   
         The Trust is a no-load, non-diversified, open-end management investment
company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on August 30, 1985. The Trust was known as
"Landmark New York Tax Free Reserves" until its name was changed on December 18,
1991. Shares of the Trust are divided into three separate series, one of which,
the Fund, is described in this Statement of Additional Information. References
in this Statement of Additional Information to the Prospectus are to the
Prospectus, dated January 2, 1997, of the Fund by which shares of the Fund are
offered.
    

         The Fund is a type of mutual fund commonly referred to as a "double
tax-exempt money market fund." The net asset value of each of the Fund's shares
is expected to remain constant at $1.00, although there can be no assurance that
this will be so on a continuing basis. (See "Determination of Net Asset Value.")

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

         The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS" or the
"Administrator"), the administrator of the Trust, supervises the overall
administration of the Trust. The Board of Trustees of the Trust provides broad
supervision over the affairs of the Trust. Shares of the Fund are continuously
sold by LFBDS, the Fund's 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 Trust (collectively, "Shareholder Servicing Agents"). Although shares of the
Fund are sold without a sales load, LFBDS may receive a fee from the Fund
pursuant to a Distribution Plan adopted in accordance with Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act").

               2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

                              INVESTMENT OBJECTIVES

         The investment objectives of the Fund are to provide its shareholders
with high levels of current income exempt from federal and California personal
income taxes, preservation of capital and liquidity.

         The investment objectives of the Fund may not be changed without
approval by the Fund's shareholders. Of course, there can be no assurance that
the Fund will achieve its investment objectives.

                               INVESTMENT POLICIES

   
         The Fund seeks its investment objectives by investing primarily in
short-term, high quality fixed rate and variable rate obligations issued by or
on behalf of the State of California, other states, territories and possessions
of the United States and their authorities, agencies, instrumentalities and
political subdivisions and other qualifying issuers, the interest on which is
exempt from federal income taxes, including participation interests in such
obligations issued by banks, insurance companies or other financial
institutions. (These securities, whether or not the interest thereon is subject
to the federal alternative minimum tax, are referred to herein as "Municipal
Obligations").

         Dividends paid by the Fund which are attributable to interest income on
tax-exempt obligations of the State of California and its political
subdivisions, of Puerto Rico, other U.S. territories and their political
subdivisions and of other qualifying issuers ("California Municipal
Obligations"), will be exempt from federal and California personal income taxes.
The Fund may purchase Municipal Obligations issued by other states, their
agencies and instrumentalities, the interest income on which will be exempt from
federal income tax but will be subject to California personal income taxes.
    

         In determining the tax status of interest on Municipal Obligations and
California Municipal Obligations, the Adviser relies on opinions of bond counsel
who may be counsel to the issuer.

         Under normal circumstances, the Fund invests at least 65% of its assets
in California Municipal Obligations, although the exact amount of the Fund's
assets invested in such securities varies from time to time. Although the Fund
attempts to invest 100% of its assets in Municipal Obligations, the Fund may
invest up to 20% of its total assets in securities the interest income on which
is subject to federal, state and local income tax or the federal alternative
minimum tax. The Fund may invest more than 25% of its assets in participation
interests issued by banks in industrial development bonds and other Municipal
Obligations. In view of this possible "concentration" in bank participation
interests, an investment in the Fund should be made with an understanding of the
characteristics of the banking industry and the risks which such an investment
may entail. (See "Variable Rate Instruments and Participation Interests"
hereafter.) Uninvested cash reserves may be held temporarily for the Fund
pending investment. The Fund's investments may include "when-issued" and
"forward delivery" Municipal Obligations, stand-by commitments and taxable
repurchase agreements.

         The Trust's Board of Trustees has determined that the term "high
quality" means Municipal Obligations which at the time of purchase are rated
within the AAA or AA categories by Standard & Poor's Rating Group ("Standard &
Poor's") or Fitch Investors Service, Inc. ("Fitch") or within the Aaa or Aa
categories by Moody's Investors Service, Inc. ("Moody's") in the case of bonds;
MIG 1/VMIG 1 or MIG 2/VMIG 2 by Moody's, SP-1+, SP-1 or SP-2 by Standard &
Poor's or F-1+, F-1 or F-2 by Fitch in the case of notes; A-1+, A-1 or A-2 by
Standard & Poor's or Prime-1, Prime-2 by Moody's or F-1+, F-1 or F-2 by Fitch,
in the case of tax-exempt commercial paper; or which are unrated but are
determined to be of comparable quality by or on behalf of the Trust's Board of
Trustees on the basis of a credit evaluation of the obligor or of the bank
issuing a participation interest, letter of credit or guarantee, or insurance
policy issued in support of the Municipal Obligations or participation
interests. (See "Variable Rate Instruments and Participation Interests" below.)
Such instruments may produce a lower yield than would be available from less
highly rated instruments. The Trust's Board of Trustees has determined that
Municipal Obligations which are backed by the full faith and credit of the U.S.
Government will be considered to have a rating equivalent to Moody's Aaa. (See
"Ratings of Municipal Obligations" in Appendix B to the Prospectus.)

         All of the Fund's investments mature or are deemed to mature within 397
days from the date of acquisition and the average maturity of the investments in
the Fund's portfolio (on a dollar-weighted basis) is 90 days or less. The
maturities of variable rate instruments held in the Fund's portfolio are deemed
to be the longer of the period remaining until the next interest rate adjustment
or the period until the Fund would be entitled to payment pursuant to demand
rights, a letter of credit, guarantee or insurance policy or a right to tender
or put the instrument, although the stated maturities may be in excess of 397
days. (See "Variable Rate Instruments and Participation Interests" below.)

         As a non-diversified investment company, the Fund is not subject to any
statutory restrictions under the 1940 Act with respect to limiting the
investment of its assets in one or relatively few issuers. This concentration
may present greater risks than in the case of a diversified company. However,
the Fund intends to qualify as a "regulated investment company" under Subchapter
M of the Internal Revenue Code of 1986, as amended (the "Code"). In order so to
qualify under current law, at the close of each quarter of the Fund's taxable
year, at least 50% of the value of the Fund's total assets must be represented
by cash, U.S. Government securities, investment company securities and other
securities limited in respect of any one issuer (or related issuers) to not more
than 5% in value of the total assets of the Fund and not more than 10% of the
outstanding voting securities of such issuer. In addition, and again under
current law, at the close of each quarter of its taxable year, not more than 25%
in value of the Fund's total assets may be invested in securities, other than
U.S. Government securities, of one issuer (or related issuers).

         For a general discussion of Municipal Obligations and an explanation of
the ratings of Municipal Obligations by Moody's, Standard & Poor's and Fitch,
see Appendix A and B to the Fund's Prospectus. For a comparison of yields on
such Municipal Obligations and taxable securities, see the "Taxable Equivalent
Yield Tables" in Appendix C to the Prospectus.

         Except as stated below, the Fund's investment policies are not
fundamental and may be changed by the Board of Trustees of the Trust without
approval by the Fund's shareholders. As a fundamental policy, the Fund invests
at least 80% of its assets, under normal circumstances, in:

         (1) Municipal bonds with remaining maturities of 397 days or less that
are rated at the date of purchase within the Aaa or Aa categories by Moody's or
within the AAA or AA categories by Standard & Poor's or Fitch or, if not rated
by any of these rating agencies, are of comparable quality as determined by the
Adviser on the basis of the credit evaluation of the obligor on the bonds or of
the bank issuing a participation interest or guarantee or of any insurance
policy issued in support of the bonds or the participation interests.

         (2) Municipal notes with remaining maturities of 397 days or less that
are rated at the date of purchase MIG 1/VMIG 1 or MIG 2/VMIG 2 by Moody's,
SP-1+, SP-1 or SP-2 by Standard & Poor's or F-1+,F-1 or F-2 by Fitch or, if not
rated by any of these rating agencies, are of comparable quality as determined
by the Adviser. The principal kinds of municipal notes are tax and revenue
anticipation notes, tax anticipation notes, bond anticipation notes and revenue
anticipation notes. Notes sold in anticipation of collection of taxes, a bond
sale or receipt of other revenues are usually general obligations of the issuing
municipality or agency. The Fund's investments may be concentrated in municipal
obligations of California issuers.

         (3) Municipal commercial paper that is rated Prime-1 or Prime-2 by
Moody's, A-1+, A-1 or A-2 by Standard & Poor's or F-1+, F-1 or F-2 by Fitch or,
if not rated by any of these rating agencies, is of comparable quality as
determined by the Adviser. Issues of municipal commercial paper typically
represent very short-term, unsecured, negotiable promissory notes. These
obligations are often issued to meet seasonal working capital needs of
municipalities or to provide interim construction financing and are paid from
general revenues of municipalities or are refinanced with long-term debt. In
most cases municipal commercial paper is backed by letters of credit, lending
agreements, note repurchase agreements or other credit facility agreements
offered by banks or other institutions which may be called upon in the event of
default by the issuer of the commercial paper.

         Subsequent to its purchase by the Fund, a rated Municipal Obligation
may cease to be rated or its rating may be reduced below the minimum required
for purchase for the Fund. Neither event will require sale of such Municipal
Obligation by the Fund (other than variable rate instruments which must be sold
if they are not "high quality"), but the Adviser will consider such event in
determining whether the Fund should continue to hold the Municipal Obligation.
To the extent that the ratings given to the Municipal Obligations or other
securities held by the Fund are altered due to changes in either the Moody's or
Standard & Poor's ratings systems (see Appendix B to the Prospectus for an
explanation of these rating systems), the Adviser will adopt such changed
ratings as standards for its future investments in accordance with the
investment policies contained in the Prospectus. Certain Municipal Obligations
issued by instrumentalities of the U.S. Government are not backed by the full
faith and credit of the U.S. Treasury but only by the creditworthiness of the
instrumentality. The Trust's Board of Trustees has determined that any Municipal
Obligation that depends directly, or indirectly through a government insurance
program or other guarantee, on the full faith and credit of the U.S. Government
will be considered to have a rating in the highest category. Where necessary to
ensure that the Municipal Obligations are of "high quality" (i.e., within the
two highest ratings assigned by any major rating service), or where the
obligations are not freely transferable, the Fund will require that the
obligation to pay the principal and accrued interest be backed by an
unconditional irrevocable bank letter of credit, a guarantee, insurance policy
or other comparable undertaking of an approved financial institution.

         The Fund may invest 25% or more of its assets in securities that are
related in such a way that an economic, business or political development or
change affecting one of the securities would also affect the other securities
including, for example, securities the interest upon which is paid from revenues
of similar type projects, or securities the issuers of which are located in the
same state.

VARIABLE RATE INSTRUMENTS AND PARTICIPATION INTERESTS

         Variable rate instruments that the Fund may purchase are tax-exempt
Municipal Obligations (including municipal notes and municipal commercial paper)
that provide for a periodic adjustment in the interest rate paid on the
instrument and permit the holder to receive payment upon a specified number of
days' notice of the unpaid principal balance plus accrued interest either from
the issuer or by drawing on a bank letter of credit, a guarantee or an insurance
policy issued with respect to such instrument or by tendering or "putting" such
instrument to a third party.

         The variable rate instruments in which the Fund's assets may be
invested are payable upon a specified period of notice which may range from one
day up to one year. The terms of the instruments provide that interest rates are
adjustable at intervals ranging from daily to up to one year and the adjustments
are based upon the prime rate of a bank or other appropriate interest rate
adjustment index as provided in the respective instruments. The Fund will decide
which variable rate instruments it will purchase in accordance with procedures
prescribed by the Board of Trustees to minimize credit risks. An unrated
variable rate instrument may be determined to meet the Fund's high quality
criteria if it is backed by a letter of credit or guarantee or a right to tender
or put the instrument to a third party or is insured by an insurer that meets
the high quality criteria for the Fund discussed above or on the basis of a
credit evaluation of the underlying obligor. If the credit of the obligor is of
"high quality," no credit support from a bank or other financial institution
will be necessary. Each unrated variable rate instrument will be evaluated on a
quarterly basis to determine that it continues to meet the Fund's high quality
criteria. If an instrument is ever deemed to be of less than high quality, the
Fund either will sell it in the market or exercise the liquidity feature
described below.

         Variable rate instruments in which the Fund may invest include
participation interests in variable rate, Municipal Obligations owned by a bank,
insurance company or other financial institution or affiliated organizations.
Although the rate of the underlying Municipal Obligations may be fixed, the
terms of the participation interest may result in the Fund receiving a variable
rate on its investment. A participation interest gives the Fund an undivided
interest in the Municipal Obligation in the proportion that the Fund's
participation bears to the total principal amount of the Municipal Obligation
and provides the liquidity feature. Each participation may be backed by an
irrevocable letter of credit or guarantee of, or a right to put to, a bank
(which may be the bank issuing the participation interest, a bank issuing a
confirming letter of credit to that of the issuing bank, or a bank serving as
agent of the issuing bank with respect to the possible repurchase of the
participation interest) or insurance policy of an insurance company that has
been determined by or on behalf of the Board of Trustees of the Trust to meet
the prescribed quality standards of the Fund. The Fund has the right to sell the
participation interest back to the institution or draw on the letter of credit
or insurance after a specified period of notice, for all or any part of the full
principal amount of the Fund's participation in the security, plus accrued
interest. The Fund intends to exercise the liquidity feature only (1) upon a
default under the terms of the bond documents, (2) as needed to provide
liquidity to the Fund in order to make redemptions of Fund shares, or (3) to
maintain a high quality investment portfolio. In some cases, this liquidity
feature may not be exercisable in the event of a default on the underlying
Municipal Obligations; in these cases, the underlying Municipal Obligations must
meet the Fund's high credit standards at the time of purchase of the
participation interest. Issuers of participation interests will retain a service
and letter of credit fee and a fee for providing the liquidity feature, in an
amount equal to the excess of the interest paid on the instruments over the
negotiated yield at which the participations were purchased by the Fund. The
total fees generally range from 5% to 15% of the applicable prime rate or other
interest rate index. With respect to insurance, the Fund will attempt to have
the issuer of the participation interest bear the cost of the insurance,
although the Fund retains the option to purchase insurance if necessary, in
which case the cost of insurance will be an expense of the Fund subject to the
expense limitation of 2 1/2% of the first $30 million of the Fund's average net
assets, 2% of the next $70 million and 1 1/2% of the Fund's average net assets
in excess of $100 million. The Adviser has been instructed by the Trust's Board
of Trustees to monitor continually the pricing, quality and liquidity of the
variable rate instruments held by the Fund, including the participation
interests, on the basis of published financial information and reports of the
rating agencies and other bank analytical services to which the Fund may
subscribe. Although participation interests may be sold, the Fund intends to
hold them until maturity, except under the circumstances stated above.

         In view of the "concentration" of the Fund in bank participation
interests in Municipal Obligations secured by bank letters of credit or
guarantees, an investment in the Fund should be made with an understanding of
the characteristics of the banking industry and the risks which such an
investment may entail. Banks are subject to extensive governmental regulation
which may limit both the amounts and types of loans and other financial
commitments which may be made and interest rates and fees which may be charged.
The profitability of this industry is largely dependent upon the availability
and cost of capital funds for the purpose of financing lending operations under
prevailing money market conditions. Also, general economic conditions play an
important part in the operation of this industry and exposure to credit losses
arising from possible financial difficulties of borrowers might affect a bank's
ability to meet its obligations under a letter of credit.

         Periods of high inflation and periods of economic slowdown, together
with the fiscal measures adopted to attempt to deal with them, have brought wide
fluctuations in interest rates. When interest rates rise, the value of fixed
income securities generally falls, and vice versa. While this is true for
variable rate instruments generally, the variable rate nature of the underlying
instruments should minimize these changes in value. Accordingly, as interest
rates decrease or increase, the potential for capital appreciation and the risk
of potential capital depreciation is less than would be the case with a
portfolio of fixed income securities. Because the adjustment of interest rates
on the variable rate instruments is made in relation to movements of various
interest rate adjustment indices, the variable rate instruments are not
comparable to long-term fixed rate securities. Accordingly, interest rates on
the variable rate instruments may be higher or lower than current market rates
for fixed rate obligations of comparable quality with similar maturities.

         Because of the variable rate nature of the instruments, when prevailing
interest rates decline the Fund's yield will decline and its shareholders will
forego the opportunity for capital appreciation. On the other hand, during
periods when prevailing interest rates increase, the Fund's yield will increase
and its shareholders will have reduced risk of capital depreciation.

         For purposes of determining whether a variable rate instrument held by
the Fund matures within 397 days from the date of its acquisition, the maturity
of the instrument will be deemed to be the longer of (1) the period required
before the Fund is entitled to receive payment of the principal amount of the
instrument after notice or (2) the period remaining until the instrument's next
interest rate adjustment. The maturity of a variable rate instrument will be
determined in the same manner for purposes of computing the Fund's
dollar-weighted average portfolio maturity.

"WHEN-ISSUED" SECURITIES

         New issues of certain Municipal Obligations frequently are offered on a
"when-issued" or "forward delivery" basis. The payment obligation and the
interest rate that will be received on the Municipal Obligations are each fixed
at the time the buyer enters into the commitment although settlement, i.e.,
delivery of and payment for the Municipal Obligations, takes place beyond
customary settlement time (but normally within 45 days after the date of the
Fund's commitment to purchase). Although the Fund will only make commitments to
purchase "when-issued" or "forward delivery" Municipal Obligations with the
intention of actually acquiring them, the Fund may sell these securities before
the settlement date if deemed advisable by the Adviser.

         Municipal Obligations purchased on a "when-issued" or "forward
delivery" basis and the securities held in the Fund's portfolio are subject to
changes in value based upon the public's perception of the credit-worthiness of
the issuer and changes, real or anticipated, in the level of interest rates. The
value of these Municipal Obligations and securities generally change in the same
way, that is, both experience appreciation when interest rates decline and
depreciation when interest rates rise. Purchasing Municipal Obligations on a
"when-issued" or "forward delivery" basis can involve a risk that the yields
available in the market on the settlement date may actually be higher or lower
than those obtained in the transaction itself. A separate account of the Fund
consisting of cash or liquid debt securities equal to the amount of the
"when-issued" or "forward delivery" commitments will be established at the
Fund's custodian bank. For the purpose of determining the adequacy of the
securities in the account, the deposited securities will be valued at market
value. If the market value of such securities declines, additional cash or
highly liquid securities will be placed in the account daily so that the value
of the account will equal the amount of the Fund's commitments. On the
settlement date of the "when-issued" or "forward delivery" securities, the
Fund's obligations will be met from then-available cash flow, sale of securities
held in the separate account, sale of other securities or, although not normally
expected, from sale of the "when-issued" or "forward delivery" securities
themselves (which may have a value greater or lesser than the Fund's payment
obligations). Sale of securities to meet such obligations may result in the
realization of capital gains or losses, which are not exempt from federal income
tax.

STAND-BY COMMITMENTS

         When the Fund purchases Municipal Obligations it may also acquire
stand-by commitments from banks with respect to such Municipal Obligations. The
Fund also may acquire stand-by commitments from broker-dealers. Under the
stand-by commitment, a bank or broker-dealer agrees to purchase at the Fund's
option a specified Municipal Obligation at a specified price. A stand-by
commitment is the equivalent of a "put" option acquired by the Fund with respect
to a particular Municipal Obligation held in the Fund's portfolio.

         The amount payable to the Fund upon the exercise of a stand-by
commitment normally would be (1) the acquisition cost of the Municipal
Obligation (excluding any accrued interest paid on the acquisition), less any
amortized market premium or plus any amortized market or original issue discount
during the period the Fund owned the security, plus (2) all interest accrued on
the security since the last interest payment date during the period the security
was owned by the Fund. Absent unusual circumstances relating to a change in
market value, the Fund would value the underlying Municipal Obligation at
amortized cost. Accordingly, the amount payable by a bank or dealer during the
time a stand-by commitment is exercisable would be substantially the same as the
market value of the underlying Municipal Obligation. The Fund values stand-by
commitments at zero for purposes of computing the value of its net assets.

         The stand-by commitments that the Fund may enter into are subject to
certain risks, which include the ability of the issuer of the commitment to pay
for the securities at the time the commitment is exercised and the fact that the
commitment is not marketable by the Fund and the maturity of the underlying
security will generally be different from that of the commitment.

TAXABLE SECURITIES

         Although the Fund attempts to invest 100% of its net assets in
tax-exempt Municipal Obligations, the Fund may invest up to 20% of the value of
its net assets in securities of the kind described below, the interest income on
which is subject to federal income tax. Circumstances in which the Fund may
invest in taxable securities include the following: (a) pending investment of
proceeds of sales of Fund shares or of portfolio securities; (b) pending
settlement of purchases of portfolio securities; (c) to maintain liquidity for
the purpose of meeting anticipated redemptions; and (d) when, in the opinion of
the Fund's investment adviser, it is advisable to do so because of adverse
market conditions affecting the market for Municipal Obligations. The kinds of
taxable securities in which the Fund's assets may be invested are limited to the
following short-term, fixed-income securities (maturing in 397 days or less from
the time of purchase): (1) obligations of the U.S. Government or its agencies,
instrumentalities or authorities; (2) commercial paper rated Prime-1 or Prime-2
by Moody's, A-1+, A-1 or A-2 by Standard & Poor's or F-1+, F-1 or F-2 by Fitch;
(3) certificates of deposit of U.S. banks with assets of $1 billion or more; and
(4) repurchase agreements with respect to any Municipal Obligations or other
securities which the Fund is permitted to own. The Fund's assets may also be
invested in Municipal Obligations which are subject to an alternative minimum
tax.

REPURCHASE AGREEMENTS

         The Fund may invest assets in instruments subject to repurchase
agreements only with member banks of the Federal Reserve System or "primary
dealers" (as designated by the Federal Reserve Bank of New York) in U.S.
Government securities. Under the terms of a typical repurchase agreement, the
Fund would acquire an underlying debt instrument for a relatively short period
(usually not more than one week) subject to an obligation of the seller to
repurchase and the Fund to resell the instrument at a fixed price and time,
thereby determining the yield during the Fund's holding period. This results in
a fixed rate of return insulated from market fluctuations during such period. A
repurchase agreement is subject to the risk that the seller may fail to
repurchase the security. Repurchase agreements may be deemed to be loans under
the 1940 Act. All repurchase agreements entered into by the Fund shall be fully
collateralized at all times during the period of the agreement in that the value
of the underlying security shall be at least equal to the amount of the loan,
including the accrued interest thereon, and the Fund or its custodian or
sub-custodian shall have possession of the collateral, which the Trust's Board
of Trustees believes will give it a valid, perfected security interest in the
collateral. Whether a repurchase agreement is the purchase and sale of a
security or a collateralized loan has not been definitively established. This
might become an issue in the event of the bankruptcy of the other party to the
transaction. In the event of default by the seller under a repurchase agreement
construed to be a collateralized loan, the underlying securities are not owned
by the Fund but only constitute collateral for the seller's obligation to pay
the repurchase price. Therefore, the Fund may suffer time delays and incur costs
in connection with the disposition of the collateral. The Trust's Board of
Trustees believes that the collateral underlying repurchase agreements may be
more susceptible to claims of the seller's creditors than would be the case with
securities owned by the Fund. Repurchase agreements will give rise to income
which will not qualify as tax-exempt income when distributed by the Fund. The
Fund will not invest in a repurchase agreement maturing in more than seven days
if any such investment together with illiquid securities held by the Fund exceed
10% of the Fund's total net assets. (see "Investment Restrictions: Investment
Restriction Number (6) hereafter.) Repurchase agreements are also subject to the
same risks described herein with respect to stand-by commitments.

                        RISK FACTORS AFFECTING INVESTMENT
                       IN CALIFORNIA MUNICIPAL OBLIGATIONS

         The Fund intends to invest a high proportion of its assets in
California Municipal Obligations. Payment of interest and preservation of
principal is dependent upon the continuing ability of California issuers and/or
obligors of state, municipal and public authority debt obligations to meet their
obligations thereunder. For information concerning California Municipal
Obligations, see the Appendix to this Statement of Additional Information.

         The Adviser believes that by maintaining the Fund's investment
portfolio in liquid, short-term, high quality investments, including
participation interests and other variable rate instruments that have high
quality credit support from banks, insurance companies or other financial
institutions, the Fund is somewhat insulated from the credit risks that may
exist for long-term California Municipal Obligations.

         The summary set forth above and in the Appendix is included for the
purpose of providing a general description of the State of California credit and
financial conditions. This summary is based on information from statements of
issuers of California Municipal Obligations and does not purport to be complete.
The Trust is not responsible for the accuracy or timeliness of this information.

                             INVESTMENT RESTRICTIONS

         The Trust has adopted the following policies with respect to the Fund
which may not be changed without approval by a "majority of the outstanding
shares" of the Fund, which as used in this Statement of Additional Information,
means the vote of the lesser of (i) 67% or more of the shares of the Fund
present at a meeting, if the holders of more than 50% of the outstanding "voting
securities" of the Fund are present or represented by proxy, or (ii) more than
50% of the outstanding "voting securities" of the Fund. The term "voting
securities" as used in this paragraph has the same meaning as in the 1940 Act.
The Fund will vote the shares held by its shareholders who do not give voting
instructions in the same proportion as the shares of the Fund's shareholders who
do give voting instructions. Shareholders of the Fund who do not vote will have
no effect on the outcome of these matters.

         The Trust may not with respect to the Fund:

         (1) Make investments other than as described under "Investment
Policies" above or any other form of federal tax-exempt investment which meets
the Fund's high quality criteria, as determined by the Board of Trustees and
which is consistent with the Fund's investment objectives and policies
(provided, however, that the Trust may invest all or substantially all of the
Fund's assets in another registered investment company having the same
investment objective and policies and substantially the same investment
restrictions as the Fund).

         (2) Borrow money. This restriction shall not apply to borrowings from
banks for temporary or emergency (not leveraging) purposes, including the
meeting of redemption requests that might otherwise require the untimely
disposition of securities, in an amount up to 15% of the value of the Fund's
total assets (including the amount borrowed) valued at market less liabilities
(not including the amount borrowed) at the time the borrowing was made. While
borrowings exceed 5% of the value of the Fund's total assets, the Trust will not
make any investments on behalf of the Fund. Interest paid on borrowings will
reduce net income.

         (3) Pledge, hypothecate, mortgage or otherwise encumber the Fund's
assets, except in an amount up to 15% of the value of the Fund's total assets
and only to secure borrowings for temporary or emergency purposes.

         (4) Sell securities short or purchase securities on margin, or engage
in the purchase and sale of put, call, straddle or spread options or in writing
such options, except to the extent that securities subject to a demand
obligation and stand-by commitments may be purchased as set forth under
"Investment Policies" above.

         (5) Underwrite the securities of other issuers, except insofar as the
Trust may be deemed an underwriter under the Securities Act of 1933 in disposing
of a portfolio security of the Fund (provided, however, that the Trust may
invest all or substantially all of the Fund's assets in another registered
investment company having the same investment objective and policies and
substantially the same investment restrictions as the Fund).

         (6) The Trust will not invest on behalf of the Fund in a repurchase
agreement maturing in more than seven days if any such investment together with
other illiquid securities held by the Fund exceed 10% of the Fund's total net
assets.

         (7) Purchase or sell real estate, real estate investment trust
securities, commodities or commodity contracts, or oil and gas interests, but
this shall not prevent the Trust from investing in Municipal Obligations secured
by real estate or interests in real estate.

         (8) Make loans to others, except through the purchase of portfolio
investments, including repurchase agreements, as described under "Investment
Policies" above.

         (9) Purchase more than 10% of all outstanding voting securities of any
one issuer or invest in companies for the purpose of exercising control, except
that the Trust may invest all or substantially all of the Fund's assets in
another registered investment company having the same investment objective and
policies and substantially the same investment restrictions as the Fund.

         (10) Invest more than 25% of the Fund's assets in the securities of
"issuers" in any single industry, provided that the Trust may invest more than
25% of the Fund's assets in bank participation interests and there shall be no
limitation on the purchase of those Municipal Obligations and other obligations
issued or guaranteed by the U.S. Government, its agencies or instrumentalities,
except that the Trust may invest all or substantially all of the Fund's assets
in another registered investment company having the same investment objectives
and policies and substantially the same investment restrictions as the Fund.
When the assets and revenues of an agency, authority, instrumentality or other
political subdivision are separate from those of the government creating the
issuing entity and a security is backed only by the assets and revenues of the
entity, the entity would be deemed to be the sole issuer of the security.
Similarly, in the case of a private activity bond, if that bond is backed only
by the assets and revenues of the non-governmental user, then such
non-governmental user would be deemed to be the sole issuer. If, however, in
either case, the creating government or some other entity, such as an insurance
company or other corporate obligor, guarantees a security or a bank issues a
letter of credit, such a guarantee or letter of credit would be considered a
separate security and would be treated as an issue of such government, other
entity or bank.

         (11) Invest in securities of other investment companies, except the
Trust may purchase on behalf of the Fund unit investment trust securities (i.e.,
securities issued by an investment company which (i) is organized under a trust
indenture or contract of custodianship or similar instrument, (ii) does not have
a board of directors, and (iii) issues only redeemable securities, each of which
represents an undivided interest in a unit of specified securities) where such
unit trusts meet the investment objectives and policies of the Fund and then
only up to 5% of the Fund's net assets, except as they may be acquired as part
of a merger, consolidation or acquisition of assets, except that the Trust may
invest all or substantially all of the Fund's assets in another registered
investment company having the same investment objectives and policies and
substantially the same investment restrictions as the Fund. As of the date of
this Statement of Additional Information, the Trust has no intention of
investing in unit investment trust securities on behalf of the Fund.

         For purposes of the investment restrictions described in (9) and (10)
above, the issuer of a tax-exempt security is deemed to be the entity (public or
private) ultimately responsible for the payment of principal of and interest on
the security. If, however, the acting government or some other entity, such as
an insurance company or other corporate obligor, guarantees a security or a bank
issues a Letter of Credit, such a guarantee or Letter of Credit may, in
accordance with applicable Securities and Exchange Commission ("SEC") rules, be
considered a separate security and treated as an issue of such government, other
entity or bank.

         If a percentage restriction or a rating restriction (other than a
restriction as to borrowing) on investment or utilization of assets set forth
above is adhered to at the time an investment is made or assets are so utilized,
a later change in percentage resulting from the changes in the value of the
portfolio securities or a later change in the rating of a portfolio security
will not be considered a violation of such policy.

                           3. PERFORMANCE INFORMATION

         Any current yield quotation of the Fund which is used in such a manner
as to be subject to the provisions of Rule 482(d) under the Securities Act of
1933, as amended, consists of an annualized historical yield, carried at least
to the nearest hundredth of one percent, based on a specific seven calendar day
period and is calculated by dividing the net change in the value of an account
having a balance of one share at the beginning of the period by the value of the
account at the beginning of the period and multiplying the quotient by 365/7.
For this purpose the net change in account value would reflect the value of
additional shares purchased with dividends declared on the original share and
dividends declared on both the original share and any such additional shares,
but would not reflect any realized gains or losses from the sale of securities
or any unrealized appreciation or depreciation on portfolio securities. In
addition, any effective yield quotation of the Fund so used shall be calculated
by compounding the current yield quotation for such period by multiplying such
quotation by 7/365, adding 1 to the product, raising the sum to a power equal to
365/7, and subtracting 1 from the result.

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

         A total rate of return quotation for the Fund is calculated for any
period by (a) dividing (i) the sum of the net asset value per share on the last
day of the period and the net asset value per share on the last day of the
period of shares purchasable with dividends and capital gains distributions
declared during such period with respect to a share held at the beginning of
such period and with respect to shares purchased with such dividends and capital
gains distributions, by (ii) the public offering price on the first day of such
period, and (b) subtracting 1 from the result. Any annualized total rate of
return quotation is calculated by (x) adding 1 to the period total rate of
return quotation calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting 1
from the result.

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

         Set forth below is total rate of return information, assuming that
dividends and capital gains distributions, if any, were reinvested, for the Fund
for the periods indicated, at the beginning of which periods no sales charges
were applicable to purchases of shares of the Fund (unless otherwise indicated).


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

   
March 1, 1992 (commencement of
  operations) to August 31, 1996             2.85%               $1,113.91

One year ended August 31, 1996               3.13                $1,031.33


         The annualized yield of the Fund for the seven-day period ended August
31, 1996 was 2.78%, the effective compound annualized yield of the Fund for such
period was 2.82% and the annualized tax equivalent yield of the Fund for such
period was 4.81% (assuming (i) a combined California State and federal tax
bracket of 46.24% and (ii) that 93% of the Fund's assets were invested in
California Municipal Obligations).
    

                       4. DETERMINATION OF NET ASSET VALUE

         The net asset value of each of the shares of the Fund is determined on
each day on which the New York Stock Exchange is open for trading. This
determination is made once during each such day as of 12:00 noon, Eastern time,
by dividing the value of the Fund's net assets (i.e., the value of its assets
less its liabilities, including expenses payable or accrued) by the number of
shares of the Fund outstanding at the time the determination is made. As of the
date of this Statement of Additional Information, the NYSE is open for trading
every weekday except for the following holidays (or the days on which they are
observed): New Year's Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. It is
anticipated that the net asset value of each share of the Fund will remain
constant at $1.00 and, although no assurance can be given that it will be able
to do so on a continuing basis, as described below, the Fund employs specific
investment policies and procedures to accomplish this result.

         The securities held by the Fund are valued at their amortized cost.
Amortized cost valuation involves valuing an instrument at its cost and
thereafter assuming a constant amortization to maturity of any discount or
premium. If fluctuating interest rates cause the market value of the securities
held by the Fund to deviate more than 1/2 of 1% from their value determined on
the basis of amortized cost, the Board of Trustees of the Trust will consider
whether any action should be initiated, as described in the following paragraph.
Although the amortized cost method provides certainty in valuation, it may
result in periods during which the stated value of an instrument is higher or
lower than the price the Fund would receive if the instrument were sold.

         Pursuant to the rules of the Securities and Exchange Commission, the
Trust's Board of Trustees has established procedures to stabilize the value of
the Fund's net assets within 1/2 of 1% of the value determined on the basis of
amortized cost. These procedures include a review of the extent of any such
deviation of net asset value, based on available market rates. Should that
deviation exceed 1/2 of 1%, the Trust's Board of Trustees will consider whether
any action should be initiated to eliminate or reduce material dilution or other
unfair results to investors in the Fund. Such action may include withdrawal in
kind, selling securities prior to maturity and utilizing a net asset value as
determined by using available market quotations. The Fund maintains a
dollar-weighted average maturity of 90 days or less, does not purchase any
instrument with a remaining maturity greater than 397 days or subject to a
repurchase agreement having a duration of greater than 397 days, and limits its
investments, including repurchase agreements, to those U.S. dollar-denominated
instruments that are determined by the Adviser to present minimal credit risks
and comply with certain reporting and recordkeeping procedures. The Trust also
has established procedures to ensure that securities purchased by it meet the
high quality criteria described above in "Investment Policies."

         Subject to compliance with applicable regulations, the Trust has
reserved the right to pay the redemption price of shares of the Fund, either
totally or partially, by a distribution in kind of readily marketable securities
(instead of cash). The securities so distributed would be valued at the same
amount as that assigned to them in calculating the net asset value for the
shares 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 may suspend the right of redemption or postpone the date of
payment for shares of the Fund for more than seven days during any period when
(a) trading in the markets the Fund normally utilizes is restricted, or an
emergency, as defined by the rules and regulations of the SEC, exists making
disposal of the Fund's investments or determination of its net asset value not
reasonably practicable; (b) the NYSE is closed (other than customary weekend and
holiday closings); or (c) the SEC has by order permitted such suspension.

                                  5. MANAGEMENT

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

TRUSTEES

   
H. B. ALVORD; 74 -- Treasurer - Tax Collector, County of Los Angeles (retired,
March, 1984); Trustee, The 59 Wall Street Trust and The 59 Wall Street Fund,
Inc. (Registered Investment Companies). His address is P.O. Box 1812, Pebble
Beach, California.

ELLIOTT J. BERV; 53 -- Chairman and Director, Catalyst, Inc. (Management
Consultants) (since August, 1992); President, Chief Operating Officer and
Director, Deven International, Inc. (International Consultants) (June, 1991 to
July, 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; 45* -- President of the Trust; Chairman, Chief Executive
Officer and President, Signature Financial Group, Inc. and The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).

MARK T. FINN; 53 -- President and Director, Delta Financial, Inc. (since June,
1983); Chairman of the Board and Chief Executive Officer, FX 500 Ltd. (Commodity
Trading Advisory Firm) (since April, 1990); Director, Vantage Consulting Group,
Inc. (since October, 1988). His address is 3500 Pacific Avenue, P.O. Box 539,
Virginia Beach, Virginia.

RILEY C. GILLEY; 70 -- Vice President and General Counsel, Corporate Property
Investors (December, 1988 to September, 1991); Retired Partner, Breed, Abbott &
Morgan (Attorneys) (Retired, December, 1987). His address is 4041 Gulf Shore
Boulevard North, Naples, Florida.

DIANA R. HARRINGTON; 56 -- 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 Kidder, Peabody & Co. Incorporated (since January, 1990). Her
address is 120 Goulding Street, Holliston, Massachusetts.

SUSAN B. KERLEY; 45 -- President, Global Research Associates, Inc. (Investment
Research) (since August, 1990); Manager of Special Investments, Rockefeller &
Co. (April, 1988 to August, 1990); Director of Research, Rogers, Casey &
Barksdale (Investment Research and Consulting) (November, 1983 to March, 1988);
Director, New York Life Insurance Company (Institutional Mutual Funds) (since
December, 1990). Her address is P.O. Box 9572, New Haven, Connecticut.

C. OSCAR MORONG, JR.; 61 -- Chairman of the Board of Trustees of the Trust;
Managing Director, Morong Capital Management (since February, 1993); Senior Vice
President and Investment Manager, CREF Investments, Teachers Insurance & Annuity
Association (retired January, 1993). His address is 1385 Outlook Drive West,
Mountainside, New Jersey.

WALTER E. ROBB, III; 70 -- 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.

E. KIRBY WARREN; 62 -- Professor of Management, Graduate School of Business,
Columbia University (since 1987). His address is Columbia University, Graduate
School of Business, 725 Uris Hall, New York, New York.

WILLIAM S. WOODS, JR.; 76 -- Vice President - Investments, Sun Company (retired,
April, 1984). His address is 35 Colwick Road, Cherry Hill, New Jersey.
    

OFFICERS

   
PHILIP W. COOLIDGE; 45* -- President of the Trust; Chairman, Chief Executive
Officer and President, Signature Financial Group, Inc., and The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).

SAMANTHA M. BURGESS; 27* -- Assistant Secretary and Assistant Treasurer;
Assistant Vice President, Signature Financial Group, Inc. (since November 1995);
Graduate Student, Loyola University (prior to August 1995).

CHRISTINE A. DRAPEAU; 26* -- Assistant Secretary and Assistant Treasurer;
Assistant Vice President, Signature Financial Group, Inc. (since January 1996);
Paralegal and Compliance Officer, various financial companies (July 1992 to
January 1996); Graduate Student, Bentley College (prior to December 1994).

JOHN R. ELDER; 48* -- Treasurer of the Trust; Vice President, Signature
Financial Group, Inc. (since April 1995); Treasurer, Phoenix Family of Mutual
Funds (Phoenix Home Life Mutual Insurance Company) (from 1983 to March 1995).

LINDA T. GIBSON; 31* -- Secretary of the Trust; Vice President, Signature
Financial Group, Inc. (since June 1991); law student, Boston University School
of Law (from September 1989 to May 1992).

JOAN A. GULINELLO; 41* -- Assistant Secretary and Assistant Treasurer; Vice
President, Signature Financial Group, Inc. (since October 1993); Secretary, The
Landmark Funds Broker-Dealer Services, Inc. (since October 1995); Vice President
and Assistant General Counsel, Massachusetts Financial Services Company (prior
to October 1993).

JAMES E. HOOLAHAN; 49* -- Vice President, Assistant Secretary and Assistant
Treasurer; Senior Vice President, Signature Financial Group, Inc.

MOLLY S. MUGLER; 45* -- Assistant Secretary of the Trust; Vice President,
Signature Financial Group, Inc.; Assistant Secretary, The Landmark Funds
Broker-Dealer Services, Inc. (since December, 1988).

KAYRN A. NOKE; 26 -- Vice President, Assistant Secretary and Assistant
Treasurer; Vice President, Signature Financial Group (Cayman) Limited (since
September 1996); Assistant Vice President, Signature Financial Group, Inc. (May
1993 to August 1996); Student, University of Massachusetts (prior to May 1993).

SHARON M. WHITSON; 48* -- Assistant Secretary and Assistant Treasurer; Assistant
Vice President, Signature Financial Group, Inc. (since November 1992); Associate
Trader, Massachusetts Financial Services Company (prior to November 1992).

JULIE J. WYETZNER; 37* -- Vice President, Assistant Secretary and Assistant
Treasurer; Vice President, Signature Financial Group, Inc.
    

         The Trustees and officers of the Trust also hold comparable positions
with certain other funds for which LFBDS or an affiliate serves as the
distributor or administrator.
<PAGE>

                           TRUSTEES COMPENSATION TABLE

                          AGGREGATE COMPENSATION      TOTAL COMPENSATION FROM
        TRUSTEE             FROM THE TRUST(1)          TRUST AND COMPLEX(2)

   
H.B. Alvord                     $2,083.03                   $42,000.00
Elliott J. Berv                 $1,657.41                   $42,000.00
Philip W. Coolidge                  0                            0
Mark T. Finn                    $1,640.79                   $42,000.00
Riley C. Gilley                 $2,370.77                   $46,000.00
Diana R. Harrington             $2,329.30                   $44,000.00
Susan B. Kerley                 $2,257.14                   $42,000.00
C. Oscar Morong, Jr.            $2,383.26                   $53,000.00
Walter E. Robb, III             $1,713.86                   $46,500.00
E. Kirby Warren                 $2,194.57                   $46,500.00
William S. Woods, Jr.           $2,606.32                   $46,000.00

- ---------------------
(1) For the fiscal year ended August 31, 1996.
(2) Information relates to the fiscal year ended August 31, 1996. Messrs.
Alvord, Berv, Coolidge, Finn, Gilley, Morong, Robb, Warren and Woods and Mses.
Harrington and Kerley are trustees of 12, 12, 28, 14, 11, 12, 12, 12, 11, 11 and
11 Funds, respectively, of the Landmark Family of Funds.

         As of December 16, 1996, all Trustees and officers as a group owned
less than 1% of the Fund's outstanding shares. As of the same date, more than
95% of the outstanding shares of the Fund were held of record by Citibank, N.A.
or an affiliate, as a Shareholder Servicing Agent of the Fund, for the accounts
of their respective clients.
    

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

ADVISER

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

           The Advisory Agreement provides that the Adviser may render services
to others. The Advisory Agreement is terminable without penalty on not more than
60 days' nor less than 30 days' written notice by the Trust when authorized
either by a vote of a majority of the outstanding voting securities of the Fund
or by a vote of a majority of the Board of Trustees of the Trust, or by the
Adviser on not more than 60 days' nor less than 30 days' written notice, and
will automatically terminate in the event of its assignment. The Advisory
Agreement provides that neither the Adviser nor its personnel shall be liable
for any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution of security transactions
for the Fund, 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 Agreement. The Adviser has voluntarily
agreed to waive a portion of the fees payable to it under the Advisory Agreement
on a month-to-month basis. For the fiscal years ended August 31, 1994, 1995 and
1996, the fees payable to the Adviser under the Advisory Agreement were $84,862
and $91,878 (all of which were voluntarily waived) and $225,431 (of which
$220,636 was voluntarily waived).
    

ADMINISTRATOR

         Pursuant to an Administrative Services Agreement (the "Administrative
Services Agreement"), LFBDS provides the Trust with general office facilities
and LFBDS supervises the overall administration of the Trust, including, among
other responsibilities, the negotiation of contracts and fees with, and the
monitoring of performance and billings of, the independent contractors and
agents of the Trust; the preparation and filing of all documents required for
compliance by the Trust with applicable laws and regulations; and arranging for
the maintenance of books and records of the Trust. The Administrator provides
persons satisfactory to the Board of Trustees of the Trust to serve as Trustees
and officers of the Trust. Such Trustees and officers may be directors, officers
or employees of LFBDS or its affiliates.

         The Prospectus contains a description of the fees payable to the
Administrator under the Administrative Services Agreement.

   
         For the fiscal years ended August 31, 1994, 1995 and 1996, the fees
payable to LFBDS from the Fund under the Administrative Services Agreement were
$63,646 and $68,908 (all of which were voluntarily waived) and $281,789 (of
which $115,682 was voluntarily waived).
    

         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 and the Fund will change their respective names 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 in addition to the
Trust to use the word "Landmark" or the words "Landmark Funds" in their names.

         The Administrative Services Agreement with the Trust continues in
effect if such continuance is specifically approved at least annually by the
Trust's Board of Trustees or by a vote of a majority of the outstanding voting
securities of the Trust and, in either case, by a majority of the Trustees of
the Trust who are not interested parties of the Trust or the Administrator. The
Administrative Services Agreement with the Trust terminates automatically if it
is assigned and may be terminated as to the Fund by the Trust without penalty by
vote of a majority of the outstanding voting securities of the Fund 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 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 Administrator has agreed to reimburse the Fund for its operating
expenses (exclusive of interest, taxes, brokerage, and extraordinary expenses)
which in any year exceed the limits prescribed by any state in which the Fund's
shares are qualified for sale. The expenses incurred by the Fund for
distribution purposes pursuant to the Trust's Distribution Plan are included
within such operating expenses only to the extent required by any state in which
the Fund's shares are qualified for sale. The Trust may elect not to qualify the
Fund's shares for sale in every state. The Trust believes that currently the
most restrictive expense ratio limitation imposed by any state is 2 1/2% of the
first $30 million of the Fund's average net assets for its then-current fiscal
year, 2% of the next $70 million of such assets, and 1 1/2% of such assets in
excess of $100 million. For the purpose of this obligation to reimburse
expenses, the Fund's annual expenses are estimated and accrued daily, and any
appropriate estimated payments will be made by the Administrator. Subject to the
obligation of the Administrator to reimburse the Fund for its excess expenses as
described above, the Trust has, under its Administrative Services Agreement,
confirmed its obligation for payment of all other expenses of the Fund.

         LFBDS is a wholly-owned subsidiary of Signature Financial Group, Inc.

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

DISTRIBUTOR

         The Trust, on behalf of the Fund, has adopted a Distribution Plan (the
"Distribution Plan") in accordance with Rule 12b-1 under the 1940 Act after
having concluded that there is a reasonable likelihood that the Distribution
Plan will benefit the Fund and its shareholders. The Distribution Plan provides
that the Trust shall pay a distribution fee to the Distributor at an annual rate
not to exceed 0.10% of the Fund's average daily net assets for distribution of
the Fund's shares (exclusive of any advertising expenses incurred by the
Distributor in connection with the sale of shares of the Fund). The Distributor
may use all or any portion of such fee to pay for Fund expenses of printing
prospectuses and reports used for sales purposes, expenses of the preparation
and printing of sales literature and other distribution-related expenses.

         The Trust is also permitted to pay the Distributor an additional fee
not to exceed 0.10% per annum of the Fund's average daily net assets in
anticipation of, or as reimbursement for, print or electronic media advertising
expenses incurred in connection with the sale of shares of the Fund. No payments
under the Distribution Plan will be made to Shareholder Servicing Agents
although Shareholder Servicing Agents receive payments under the Administrative
Services Plan referred to below.

         The Distribution Plan continues in effect if such continuance is
specifically approved at least annually by a vote of both a majority of the
Trust's Trustees and a majority of the Trust's Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the Distribution Plan or in any agreement related to the Plan
("Qualified Trustees"). The Distribution Plan requires that the Trust and the
Distributor shall provide to the Board of Trustees, and the Board of Trustees
shall review, at least quarterly, a written report of the amounts expended (and
the purposes therefor) under the Distribution Plan. The 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 Plan may be terminated with respect
to the Fund at any time by a vote of a majority of the Trust's Qualified
Trustees or by a vote of a majority of the outstanding voting securities of the
Fund. The Distribution Plan may not be amended to increase materially the amount
of the Fund's permitted expenses thereunder without the approval of a majority
of the outstanding voting securities of the Fund and may not be materially
amended in any case without a vote of the majority of both the Trustees and the
Qualified Trustees. The Distributor will preserve copies of any plan, agreement
or report made pursuant to the 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 Plan, LFBDS acts as the agent of
the Fund in connection with the offering of shares of the Fund pursuant to a
Distribution Agreement (the "Distribution Agreement"). After the prospectus and
periodic reports have been prepared, set in type and mailed to existing
shareholders, the Distributor pays for the printing and distribution of copies
of the prospectuses and periodic reports which are used in connection with the
offering of shares of the Fund to prospective investors. The Prospectus contains
a description of fees payable to the Distributor under the Distribution
Agreement. For the fiscal years ended August 31, 1994, 1995 and 1996, the fees
payable to the Distributor under the Distribution Agreement were $21,215,
$22,969 and $112,716 (all of which were voluntarily waived).
    

SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN

         The Trust has adopted an Administrative Services Plan (the
"Administrative Plan") which provides that the Trust may obtain the services of
an administrator, a transfer agent, 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 Administrative Plan, the aggregate of the fee
paid to the Administrator from the Fund, the fees paid to the Shareholder
Servicing Agents from the Fund and the distribution fee paid from the Fund to
the Distributor under the Distribution Plan may not exceed 0.60% of the Fund's
average daily net assets on an annualized basis for the Fund's then-current
fiscal year. The Administrative Plan continues in effect if such continuance is
specifically approved at least annually by a vote of both a majority of the
Trust's Trustees and a majority of the Trust's Trustees who are not "interested
persons" of the Trust and who have no direct or indirect financial interest in
the operation of the Administrative Plan or in any agreement related to such
Plan ("Qualified Trustees"). The Administrative Plan requires that the Trust
provide to the Trust's Board of Trustees and the Trust's Board of Trustees
review, at least quarterly, a written report of the amounts expended (and the
purposes therefor) under the Administrative Plan. The Administrative Plan may be
terminated at any time with respect to the Fund by a vote of a majority of the
Trust's Qualified Trustees or by a vote of a majority of the outstanding voting
securities of the Fund. The 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 Fund and may not be
materially amended in any case without a vote of the majority of both the
Trust's 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 and a Custodian Agreement with State Street Bank
and Trust Company ("State Street") pursuant to which State Street acts as
transfer agent and custodian and performs fund accounting services for the
Trust. For additional information, including a description of fees paid to the
Shareholder Servicing Agents under the Servicing Agreements, see "Shareholder
Servicing Agents" and "Transfer Agent, Custodian and Fund Accountant" in the
Prospectus. For the fiscal years ended August 31, 1994, 1995 and 1996, the
aggregate fees payable by the Fund to Shareholder Servicing Agents under the
Administrative Services Plan were $169,723 and $183,755 (all of which were
voluntarily waived) and $281,789 (of which $220,086 was voluntarily waived).
    

                            6. PORTFOLIO TRANSACTIONS

         The Fund's purchases and sales of its portfolio securities usually are
principal transactions. Portfolio securities are normally purchased directly
from the issuer or from an underwriter or market maker for the securities. There
usually are no brokerage commissions paid for such purchases. The Fund does not
anticipate paying brokerage commissions. Any transaction for which the Fund pays
a brokerage commission will be effected at the best price and execution
available. Purchases from underwriters of portfolio securities include a
commission or concession paid by the issuer to the underwriter, and purchases
from dealers serving as market makers include the spread between the bid and
asked price.

         Allocation of transactions, including their frequency, to various
dealers is determined by the Adviser in its best judgment and in a manner deemed
to be in the best interest of investors in the Fund rather than by any formula.
The primary consideration is prompt execution of orders in an effective manner
at the most favorable price.

         Investment decisions for the Fund will be made independently from those
for any other account, series or investment company that is or may in the future
become managed by the Adviser or its affiliates. If, however, the Fund and other
investment companies, series or accounts managed by the Adviser are
contemporaneously engaged in the purchase or sale of the same security, the
transactions may be averaged as to price and allocated equitably to each
account. In some cases, this policy might adversely affect the price paid or
received by the Fund or the size of the position obtainable for the Fund. In
addition, when purchases or sales of the same security for the Fund and for
other investment companies or series managed by the Adviser occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large denomination purchases or sales.

         No portfolio transactions are executed with the Adviser, or with any
affiliate of the Adviser, acting either as principal or as broker.

             7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

         The Trust's Declaration of Trust permits the Trust's Board of Trustees
to issue an unlimited number of full and fractional Shares of Beneficial
Interest (without par value) and to divide or combine the shares into a greater
or lesser number of shares without thereby changing the proportionate beneficial
interests in that series. Each share of the series represents an equal
proportionate interest in the series with each other share. Upon liquidation or
dissolution of the Fund, the Fund's shareholders are entitled to share pro rata
in the Fund's net assets available for distribution to its shareholders. The
Trust reserves the right to create and issue additional series of shares, in
which case the shares of each series would participate pro rata in the earnings,
dividends and distribution of net assets of the particular series upon the
liquidation or dissolution of the series. Shares of each series would be
entitled to vote separately to approve advisory agreements or changes in
investment policy, but shares of all series could vote together in the election
or selection of Trustees and accountants for the Fund.

         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 and has no
current intention to hold annual meetings of shareholders but the Trust will
hold special meetings of shareholders when in the judgment of the Trust's
Trustees it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have under certain circumstances (e.g., upon application and
submission of certain specified documents to the Trustees by a specified number
of shareholders) the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Trustees. Shareholders also have the right to remove one or more Trustees
without a meeting by a declaration in writing by a specified number of
shareholders. No material amendment may be made to the Trust's Declaration of
Trust without the affirmative vote of the holders of a majority of its
outstanding shares.

         The Trust's Declaration of Trust provides that, at any meeting of
shareholders of the Trust or of any series of the Trust, 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 it is the holder of
record. Shares have no preference, pre-emptive or 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, if approved by the vote of the holders of
two-thirds of its outstanding shares voting as a single class, except that if
the Trustees of the Trust recommend such sale of assets, merger or
consolidation, the approval by a vote of the holders of a majority of the
Trust's outstanding voting securities would be sufficient. The Trust may be
terminated (i) by a vote of a majority of the outstanding voting securities of
the Trust or (ii) by the Trustees by written notice to the shareholders of the
Trust. 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. However, the Declaration of Trust contains an express disclaimer of
shareholder liability for acts or obligations of the Trust and provides for
indemnification and reimbursement of expenses out of the Trust property for any
shareholder held personally liable for the obligations of the Trust. The
Declaration of Trust also provides that the Trust shall 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 Trust's Trustees individually but only upon
the property of the Trust and that the Trust's Trustees will not be liable for
any action or failure to act, but nothing in the Declaration of Trust protects a
Trustee against any liability to which he would otherwise be subject by reason
of willful misfeasance, bad faith, gross negligence, or reckless disregard of
the duties involved in the conduct of his office.

                        8. CERTAIN ADDITIONAL TAX MATTERS

   
         The Fund has elected to be treated and intends to qualify each year as
a "regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions (as a percentage of both the Fund's
overall income and its tax-exempt income), and the composition and holding
period of the Fund's portfolio assets. Provided all such requirements are met
and all of the Fund's net investment income and realized capital gains are
distributed to shareholders in accordance with the timing requirements imposed
by the Code, no federal income or excise taxes will generally be required to be
paid by the Fund. If the Fund should fail to qualify as a regulated investment
company for any year, the Fund would incur a regular corporate federal income
tax upon its taxable income and Fund distributions would generally be taxable as
ordinary dividend income to shareholders.
    

         The portion of the Fund's distributions of net investment income that
is attributable to interest from tax-exempt securities will be designated by the
Fund as an "exempt-interest dividend" under the Code and will generally be
exempt from federal income tax in the hands of shareholders so long as at least
50% of the total value of the Fund's assets consists of tax-exempt securities at
the close of each quarter of the Fund's taxable year. Distributions of
tax-exempt interest earned from certain securities may, however, be treated as
an item of tax preference for shareholders under the federal alternative minimum
tax, and all exempt-interest dividends may increase a corporate shareholder's
alternative minimum tax. Unless the Fund provides shareholders with actual
monthly percentage breakdowns, the percentage of income designated as tax exempt
will be applied uniformly to all distributions by the Fund of net investment
income made during each fiscal year of the Fund and may differ from the
percentage of distributions consisting of tax-exempt interest in any particular
month. Shareholders are required to report exempt-interest dividends received
from the Fund on their federal income tax returns.

         Because the Fund expects to earn primarily interest income, it is
expected that no Fund distributions will qualify for the dividends-received
deduction for corporations.

               9. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS

         Deloitte & Touche LLP are the independent certified public accountants
for the Fund, providing audit services and assistance and consultation with
respect to the preparation of filings with the Securities and Exchange
Commission.

   
         The audited financial statements of the Fund (Portfolio of Investments
at August 31, 1996, Statement of Assets and Liabilities at August 31, 1996,
Statement of Operations for the year ended August 31, 1996, Statement of Changes
in Net Assets for each of the years ended August 31, 1996 and August 31, 1995,
Financial Highlights for each of the years in the four-year period ended August
31, 1996; and for the period from March 10, 1992 (commencement of operations) to
August 31, 1992, Notes to Financial Statements and Independent Auditor's
Report), which are included in the Annual Report to Shareholders of the 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.
    

         A copy of the Annual Report accompanies this Statement of Additional
Information.
<PAGE>
                                    APPENDIX

                        ADDITIONAL INFORMATION CONCERNING

                        CALIFORNIA MUNICIPAL OBLIGATIONS

   
         The following information is a summary of special factors affecting
investments in California Municipal Obligations. The sources of payment for such
obligations and the marketability thereof may be affected by financial or other
difficulties experienced by the State of California (the "State") and certain of
its municipalities and public authorities. This information does not purport to
be a complete description and is based on information from statements relating
to offerings of California issuers. Landmark California Tax Free Reserves is not
responsible for the accuracy or timeliness of this information.

                               RECENT DEVELOPMENTS

         After suffering through a severe recession, California's economy has
been on a steady recovery since the start of 1994. Employment has grown by over
500,000 in 1994 and 1995, and the prerecession level of total employment is
expected to be matched by early 1996. The strongest growth has been in
export-related industries, business services, electronics, entertainment and
tourism, all of which have offset the recession-related losses which were
heaviest in aerospace and defense-related industries (which accounted for
two-thirds of the job losses), finance and insurance. Residential housing
construction, with new permits for under 100,000 annual new units issued in 1994
and 1995, is weaker than in previous recoveries, but has been growing slowly
since 1993.

         On July 15, 1994, all three of the rating agencies lowered their
ratings of the State's general obligation bonds. Moody's lowered its rating from
"Aa" to "A1," S&P lowered its rating from "A+" to "A" and termed its outlook as
"stable," and Fitch lowered its rating from "AA" to "A." As of July 30, 1996 S&P
assigned its municipal bond rating of A+ to the State's general obligation
bonds, and as of October 18, 1996, Moody's and Fitch assigned their municipal
bond ratings of A1 and A+, respectively, to the State's general obligation
bonds. Each such rating reflects only the views of the respective rating agency,
and an explanation of the significance of such rating may be obtained from such
rating agency. There is no assurance that such ratings will continue for any
given period of time or that they will not be revised or withdrawn entirely by
such rating agency if, in the judgment of such rating agency, circumstances so
warrant. A downward revision or withdrawal of any such rating may have an
adverse effect on the market price of the State's general obligation bonds.
    

                   CONSTITUTIONAL LIMITS ON SPENDING AND TAXES

STATE APPROPRIATIONS LIMIT

   
         The State is subject to an annual appropriations limit imposed by
Article XIII B of the State Constitution (the "Appropriations Limit"). The
Appropriations Limit does not restrict appropriations to pay debt service on the
Bonds or other voter-authorized bonds.
    

         Article XIII B prohibits the State from spending "appropriations
subject to limitation" in excess of the Appropriations Limit. "Appropriations
subject to limitation," with respect to the State, are authorizations to spend
"proceeds of taxes," which consist of tax revenues, and certain other funds,
including proceeds from regulatory licenses, user charges or other fees to the
extent that such proceeds exceed "the cost reasonably borne by that entity in
providing the regulation, product or service," but "proceeds of taxes" exclude
most State subventions to local governments, tax refunds and some benefit
payments such as unemployment insurance. No limit is imposed on appropriations
of funds which are not "proceeds of taxes," such as reasonable user charges or
fees and certain other non-tax funds.

   
         Not included in the Appropriations Limit are appropriations for the
debt service costs of bonds existing or authorized by January 1, 1979, or
subsequently authorized by the voters, appropriations required to comply with
mandates of courts or the federal government appropriations for qualified
capital outlay projects, and appropriations of certain special taxes imposed by
initiative (e.g., cigarette and tobacco taxes).

         The State's Appropriations Limit in each year is based on the limit for
the prior year, adjusted annually for changes in State per capita personal
income and changes in population, and adjusted, when applicable, for any
transfer of financial responsibility of providing services to or from another
unit of government. The measurement of change in population is a blended average
of statewide overall population growth, and change in attendance at local school
and community college ("K-14") districts. The Appropriations Limit is tested
over consecutive two-year periods. Any excess of the aggregate "proceeds of
taxes" received over such two-year period above the combined Appropriations
Limits for those two years is divided equally between transfers to K-14
districts and refunds to taxpayers.
    

PROPOSITION 98

   
         On November 8, 1988, voters of the State approved Proposition 98, a
combined initiative constitutional amendment and statute called the "Classroom
Instructional Improvement and Accountability Act." Proposition 98 changed State
funding of public education below the university level and the operation of the
State Appropriations Limit, primarily by guaranteeing K-14 schools a minimum
share of General Fund revenues. Under Proposition 98 (as modified by Proposition
111, which was enacted on June 5, 1990), K-14 schools are guaranteed the greater
of (a) in general, a fixed percent of General Fund revenues ("Test 1"), (b) the
amount appropriated to K-14 schools in the prior year, adjusted for changes in
the cost of living (measured as in Article XIII B by reference to State per
capita personal income) and enrollment ("Test 2"), or (c) a third test, which
would replace Test 2 in any year when the percentage growth in per capita
General Fund revenues from the prior year plus one half of one percent is less
than the percentage growth in State per capita personal income ("Test 3"). Under
Test 3, schools would receive the amount appropriated in the prior year adjusted
for changes in enrollment and per capita General Fund revenues, plus an
additional small adjustment factor. If Test 3 is used in any year, the
difference between Test 3 and Test 2 would become a "credit" to schools which
would be the basis of payments in future years when per capita General Fund
revenue growth exceeds per capita personal income growth. Legislation adopted
prior to the end of the 1988-89 Fiscal Year, implementing Proposition 98,
determined the K-14 schools' funding guarantee under Test 1 to be 40.3 percent
of the General Fund tax revenues, based on 1986-87 appropriations. However, that
percentage has been adjusted to approximately 35 percent to account for a
subsequent redirection of local property taxes, since such redirection directly
affects the share of General Fund revenues to schools.

         During the recent recession, General Fund revenues for several years
were less than originally projected, so that the original Proposition 98
appropriations turned out to be higher than the minimum percentage provided in
the law. The Legislature responded to these developments by designating the
"extra" Proposition 98 payments in one year as a "loan" from future years'
Proposition 98 entitlements, and also intended that the "extra" payments would
not be included in the Proposition 98 "base" for calculating future years'
entitlements. By implementing these actions, per-pupil funding from Proposition
98 sources stayed almost constant at approximately $4,220 from Fiscal Year
1991-92 to Fiscal Year 1993-94.

         In 1992, a lawsuit was filed, called California Teachers' Association
v. Gould, which challenged the validity of these off-budget loans. As part of
the negotiations leading to the 1995-96 Budget Act, an oral agreement was
reached to settle this case. The settlement required adoption of legislation
satisfactory to the parties to implement its terms. Such legislation has
subsequently been adopted. The court gave final approval to the settlement in
late July, 1996.

         The settlement provides, among other things, that both the State and
K-14 schools share in the repayment of prior years' emergency loans to schools.
Of the total $1.76 billion in loans, the State will repay $935 million by
forgiveness of the amount owed, while schools will repay $825 million. The State
share of the repayment will be reflected as an appropriation above the current
Proposition 98 base calculation. The schools' share of the repayment will count
as appropriations that count toward satisfying the Proposition 98 guarantee, or
from "below" the current base. Repayments are spread over the eight-year period
of 1994-95 through 2001-02 to mitigate any adverse fiscal impact. The Director
of Finance has certified that a settlement has occurred, allowing approximately
$351 million in appropriations from the 1995-96 Fiscal Year to be disbursed to
schools in August 1996.
    

SOURCES OF TAX REVENUE

         The following is a summary of the State's major revenue sources.

         PERSONAL INCOME TAX

   
         The California personal income tax, which in 1994-95 contributed about
44 percent of General Fund revenues, is closely modeled after the federal income
tax law. It is imposed on net taxable income (gross income less exclusions and
deductions). The tax is progressive with rates ranging from 1 to 9.3 percent.
Personal, dependent, and other credits are allowed against the gross tax
liability. In addition, taxpayers may be subject to an alternative minimum tax
("AMT") which is much like the federal AMT. Legislation enacted in July 1991
added two new marginal tax rates, at 10 percent and 11 percent, effective for
tax years 1991 through 1995. After 1995, the maximum personal income tax rate
returned to 9.3 percent, and the AMT rate dropped from 8.5 percent to 7 percent.
    

         The personal income tax is adjusted annually by the change in the
consumer price index to prevent taxpayers from being pushed into higher tax
brackets without a real increase in income.

         SALES TAX

   
         The sales tax is imposed upon retailers for the privilege of selling
tangible personal property in California. Sales tax accounted for about 34
percent of General Fund revenue in 1994-95. Most retail sales and leases are
subject to the tax. However, exemptions have been provided for certain
essentials such as food for home consumption, prescription drugs, gas delivered
through mains and electricity. Other exemptions provide relief for a variety of
sales ranging from custom computer software to aircraft.
    

         BANK AND CORPORATION TAX

   
         Bank and corporation tax revenues, which comprised about 13 percent of
General Fund revenue in 1994-95, are derived from the following taxes:

         1. The franchise tax and the corporate income tax are levied at a 9.3
percent rate on profits, which will be reduced to 8.84 percent for income years
beginning on or after January 1, 1997. The former is imposed on corporations for
the privilege of doing business in California, while the latter is imposed on
corporations which do not do business in the State but which derive income from
California sources.

         2. Banks and other financial corporations are subject to the franchise
tax plus an additional tax at the rate of 2.0 percent on their net income. This
additional tax is in lieu of personal property taxes and business license taxes.

         3. The alternative minimum tax ("AMT") is similar to that in federal
law. In general, the AMT is based on a higher level of net income computed by
adding back certain tax preferences. This tax is imposed at a rate of 7
percent, and will be reduced to 6.65 percent effective for income years
beginning on or after January 1, 1997.

         4.  Sub-Chapter S corporations are taxed at 1.5 percent of profits.
    

         INSURANCE TAX

   
         The majority of insurance written in California is subject to a 2.35
percent gross premium tax. For insurers, this premium tax takes the place of all
other State and local taxes except those on real property and motor vehicles.
Exceptions to the 2.35 percent rate are certain pension and profit-sharing plans
which are taxed at the lesser rate of 0.50 percent, surplus lines and
nonadmitted insurance at 3 percent and ocean marine insurers at 5 percent of
underwriting profits. Insurance taxes comprised approximately 2.3 percent of
General Fund revenues in 1994-95.

         In November, 1988, voters approved Proposition 103, which mandated
reductions and rebates for certain property and casualty insurance premiums. The
measure also directed the State Board of Equalization to adjust the gross
premiums tax rate to compensate for any resultant decrease in insurance tax
revenue through the 1990 tax year. As a result, the State Board of Equalization
increased the gross premiums tax rate from 2.35 percent to 2.37 percent for the
1989 tax year and to 2.46 percent for the 1990 tax year. For 1991 and beyond,
the rate returned to 2.35 percent. According to the Board of Equalization, there
is a potential liability from implementation of the offset rates used for
Proposition 103. The Board's estimate is $60 million, which is based on the
difference between the statutory rate and the rate the Board used for 1990.

         OTHER TAXES

         Other General Fund major taxes and license revenues include: Estate,
Inheritance and Gift Taxes, Cigarette Taxes, Alcoholic Beverage Taxes, Horse
Racing Revenues and trailor coach license fees. These other tax sources and
license revenues total approximately 3 percent of General Fund revenues in the
1994-95 Fiscal Year.
    

         SPECIAL FUND REVENUES

   
         The California Constitution, codes and statutes specify the uses of
certain revenue. Such receipts are accounted for in various Special Funds. In
general, Special Fund revenues comprise three categories of income:
    

         1. Receipts from tax levies which are allocated to specified functions,
such as motor vehicle taxes and fees and certain taxes on tobacco products.

         2. Charges for special services to specific functions, including such
items as business and professional license fees.

         3. Rental royalties and other receipts designated for particular
purposes (for example, oil and gas royalties).

   
         On November 8, 1988, voters approved Proposition 99, which imposed, as
of January 1, 1989, an additional 25 cents per pack excise tax on cigarettes,
and a new, equivalent excise tax on other tobacco products. The initiative
requires that funds from this tax be allocated to anti-tobacco education
programs. The Legislature, as part of the 1994-95 and 1995-96 Budget Acts,
redirected part of the Proposition 99 funds to indigent health care. These
actions have been blocked by court orders, and are currently before the
appellate court, after the State lost in trial court.
    

                      PRIOR FISCAL YEARS' FINANCIAL RESULTS

   
FISCAL YEARS PRIOR TO 1995-96

         The 1989-90 Fiscal Year ended with revenues below estimates, so that
the State's budget reserve (the Special Fund for Economic Uncertainties or
"SFEU") was fully depleted by June 30, 1990. A recession began in mid-1990,
which severely affected State General Fund revenues, and increased expenditures
above initial budget appropriations due to greater health and welfare costs. The
State's budget problems in recent years have also been caused by a structural
imbalance in that the largest General Fund Programs--K-14 education, health,
welfare and corrections--were increasing faster than the revenue base, driven by
the State's rapid population growth. These pressures are expected to continue as
population trends maintain strong demand for health and welfare services, as the
school age population continues to grow, and as the State's corrections program
responds to a "Three Strikes" law enacted in 1994, which requires mandatory life
prison terms for certain third-time felony offenders.

         As a result of these factors and others, from the late 1980's until
1992-93, the State had a period of budget imbalance. Starting in the 1990-91
Fiscal Year and for each fiscal year thereafter, each budget required
multibillion dollar actions to bring projected revenues and expenditures into
balance. Despite these budget actions, the effects of the recession led to
large, unanticipated deficits in the budget reserve, the SFEU, as compared to
projected positive balances. By the 1993-94 Fiscal Year, the accumulated deficit
was so large that it was impractical to retire it in one year, so a two-year
program was implemented, using the issuance of revenue anticipation warrants to
carry a portion of the deficit over the end of the fiscal year. When the economy
failed to recover sufficiently in 1993-94, a second two-year plan was
implemented in 1994-95, again using cross-fiscal year revenue anticipation
warrants to partly finance the deficit into the 1995-96 fiscal year.

         During the past several fiscal years, the State was forced to rely
increasingly on external debt markets to meet its cash needs, as a succession of
notes and revenue anticipation warrants were issued in the period from June 1992
to July 1994, often, to pay previously maturing notes or warrants. These
borrowings were used also in part to spread out the repayment of the accumulated
budget deficit over the end of a fiscal year, as noted earlier. The last and
largest of these borrowings was $4.0 billion of revenue anticipation warrants
issued in July, 1994 and maturing on April 25, 1996.
    

1995-96 FISCAL YEAR

   
         With strengthening revenues and reduced caseload growth based on an
improving economy, the State entered the 1995-96 Fiscal Year budget negotiations
with the smallest nominal "budget gap" to be closed in many years. Nonetheless,
serious policy differences between the Governor and Legislature prevented timely
enactment of the budget. The 1995-96 Budget Act was signed by the Governor on
August 3, 1995, 34 days after the start of the fiscal year. The Budget Act
projected General Fund revenues and transfers of $44.1 billion, a 3.5 percent
increase from the prior year. Expenditures were budgeted at $43.4 billion, a 4
percent increase. The Department of Finance projected that, after repaying the
last of the carryover budget deficit, there would be a positive balance of $28
million in the budget reserve, the SFEU, at June 30, 1996. The Budget Act also
projected Special Fund revenues of $12.7 billion and appropriated Special Fund
expenditures of $13.0 billion.

         The Department of Finance's May Revision to the 1996-97 Governor's
Budget, released on May 21, 1996 (the "May Revision"), updated the projections
for the 1995-96 Fiscal Year, so that revenues and transfers were estimated to be
$46.1 billion, some $2 billion over the original fiscal year estimate, which was
attributed to the strong economic recovery. Expenditures also increased, to an
estimated $45.4 billion, as a result of the requirement to expend revenues for
schools under Proposition 98, and, among other things, failure of the federal
government to enact welfare reform and to budget new aid for illegal immigrant
costs, both of which the Administration had counted on to allow reductions in
State costs. The SFEU was projected to have a small negative balance of about
$70 million at June 30, 1996, all but eliminating the accumulated budget deficit
from the early 1990's. The Department also estimated that on June 30, 1996,
available internal borrowable resources (available cash, after payment of all
obligations due) would be about $4 billion, representing a significant
improvement in the State's cash position, and ending the need for deficit
borrowing over the end of the fiscal year. The State's improved cash position
allowed it to repay the $4.0 billion Revenue Anticipation Warrant issue on April
25, 1996, and to issue only $2.0 billion of revenue anticipation notes during
the fiscal year, which matured on June 28, 1996.

         The following were the principal features of the 1995-96 Budget Act:

         1. Proposition 98 funding for schools and community colleges was
budgeted to increase by about $1.0 billion (General Fund) and $1.2 billion total
above revised 1994-95 levels. Because of higher than projected revenues in
1994-95, an additional $561 million ($92 per K-12 ADA) was appropriated to the
1994-95 Proposition 98 entitlement. A large part of this was a block grant of
about $50 per pupil for any one-time purpose. For the first time in several
years, a full 2.7 percent cost of living allowance was funded. The budget
compromise anticipated a settlement of the California Teachers' Association v.
Gould litigation. See "Proposition 98" above.

         2. Proposed cuts in health and welfare costs totaling about $0.9
billion. Some of these cuts (totaling about $500 million) required federal
legislative or administrative approval, which has not yet been received. In
1995-96, approximately $220 million in cuts were made.

         3. A 5.1 percent increase in funding for the University of California
($106 million General Fund) and the California State University system ($97
million General Fund), with no increases in student fees.

         4. The Budget, as updated by the 1996-97 Governor's Budget dated
January 10, 1996, assumed receipt of $494 million in new federal aid for
incarceration and health care costs of illegal immigrants, above commitments
already made by the federal government. Only $31 million of this total was
actually received in 1995-96.

         5. General Fund support for the Department of Corrections was increased
by about 7 percent over the prior year, reflecting estimates of increased prison
population.

                              CURRENT STATE BUDGET

         The discussion below of the 1996-97 fiscal year budget is based on
estimates and projections of revenues and expenditures for the current fiscal
year and must not be construed as statements of fact. These estimates and
projections are based upon various assumptions which may be affected by numerous
factors, including future economic conditions in the State and the nation, and
there can be no assurance that the estimates will be achieved. See "Economic
Considerations" below.

1996-97 FISCAL YEAR

         Background

         The 1996-97 Governor's Budget, released January 10, 1996, projected
General Fund revenues and transfers of $45.6 billion, a 1.3% increase over
1995-96. Although an expected strong economy would generate larger revenue
growth, the Governor proposed two major initiatives, a 15% personal and
corporate income tax cut and a revision of the trial court funding program,
which would have the effect of reducing General Fund revenues. The Governor's
Budget proposed General Fund expenditures of $45.2 billion. The Governor's
Budget also proposed Special Fund revenues equal to expenditures, at a level of
$13.3 billion.

         The May Revision of the Governor's Budget, released on May 21, 1996
("May Revision"), updated revenue estimates for the 1996-97 Fiscal Year,
reflecting stronger economic activity in the State and thus greater revenue
growth. The revised estimate was for $47.1 billion of revenues, still assuming
the Governor's tax cut would be enacted, and $46.5 billion of expenditures.

         1996-97 Budget Act

         The 1996-97 Budget Act was signed by the Governor on July 15, 1996,
along with various implementing bills. The Governor vetoed about $82 million of
appropriations (both General Fund and Special Fund). With the signing of the
Budget Act, the State implemented its regular cash flow borrowing program with
the issuance of $3.0 billion of Revenue Anticipation Notes to mature on June 30,
1997. The Budget Act appropriates a modest budget reserve in the SFEU of $305
million, as of June 30, 1997. The Department of Finance projects that, on June
30, 1997, the State's available internal borrowable (cash) resources will be
$2.9 billion, after payment of all obligations due by that date, so that no
cross-fiscal year borrowing will be needed.

         Revenues - The Legislature rejected the Governor's proposed 15% cut in
personal income taxes (to be phased over three years), but did approve a 5% cut
in bank and corporation taxes, to be effective for income years starting on
January 1, 1997. As a result, revenues for the Fiscal Year will be an estimated
$550 million higher than projected in the May Revision, and as of October 1996
are estimated to total $47.643 billion, a 3.3 percent increase over the final
estimated 1995-96 revenues. Special Fund revenues are estimated to be $13.3
billion.

         Expenditures - The Budget Act contains General Fund appropriations
totaling $47.251 billion, a 4.0 percent increase over the final estimated
1995-96 expenditures. Special Fund expenditures are budgeted at $12.6 billion.

         The following are principal features of the 1996-97 Budget Act:

         1. Proposition 98 funding for schools and community college districts
increased by almost $1.6 billion (General Fund) and $1.65 billion total above
revised 1995-96 levels. Almost half of this money was budgeted to fund
class-size reductions in kindergarten and grades 1-3. Also, for the second year
in a row, the full cost of living allowance (3.2 percent) was funded. The
Proposition 98 increases have brought K-12 expenditures to almost $4,800 per
pupil (also called per ADA, or Average Daily Attendance), an almost 15% increase
over the level prevailing during the recession years. Community colleges will
receive an increase in funding of $157 million for 1996-97 out of this $1.6
billion total.

         Because of the higher than projected revenues in 1995-96, an additional
$1.1 billion ($190 per K-12 ADA and $145 million for community colleges) was
appropriated and retroactively applied towards the 1995-96 Proposition 98
guarantee, bringing K-12 expenditures in that year to over $4,600 per ADA. These
new funds were appropriated for a variety of purposes, including block grants,
allocations for each school site, facilities for class size reduction, and a
reading initiative. Similar retroactive increases totaling $230 million, based
on final figures on revenues and State population growth, were made to the
1991-92 and the 1994-95 Proposition 98 guarantees, most of which was allocated
to each school site.

         2. The Budget Act assumed savings of approximately $660 million in
health and welfare costs which required changes in federal law, including
federal welfare reform. The Budget Act further assumed federal law changes in
August 1996 which would allow welfare cash grant levels to be reduced by October
1, 1996. These cuts totaled approximately $163 million of the anticipated $660
million savings. See "Federal Welfare Reform" below.

         3. A 4.9 percent increase in funding for the University of California
($130 million General Fund) and the California State University system ($101
million General Fund), with no increases in student fees, maintaining the second
year of the Governor's four year "Compact" with the State's higher education
units.

         4. The Budget Act assumed the federal government will provide
approximately $700 million in new aid for incarceration and health care costs of
illegal immigrants. These funds reduce appropriations in these categories that
would otherwise have to be paid from the General Fund. (For purposes of cash
flow projections, the Department of Finance expects $540 million of this amount
to be received during the 1996-97 fiscal year).

         5. General Fund support for the Department of Corrections was increased
by about 7 percent over the prior year, reflecting estimates of increased prison
population.

         6. With respect to aid to local governments, the principal new programs
included in the Budget Act are $100 million in grants to cities and counties for
law enforcement purposes, and budgeted $50 million for competitive grants to
local governments for programs to combat juvenile crime.

         The Budget Act did not contain any tax increases. As noted, there was a
reduction in corporate taxes. In addition, the Legislature approved another
one-year suspension of the Renters Tax Credit, saving $520 million in
expenditures.

         Federal Welfare Reform - Following enactment of the 1996-97 Budget Act,
Congress passed and the President signed (on August 22, 1996) the Personal
Responsibility and Work Opportunity Act of 1996 (P.L. 104-193, the "Law") making
a fundamental reform of the current welfare system. Among many provisions, the
Law includes: (i) conversion of Aid to Families with Dependent Children from an
entitlement program to a block grant titled Temporary Assistance for Needy
Families (TANF), with lifetime time limits on TANF recipients, work requirements
and other changes; (ii) provisions denying certain federal welfare and public
benefits to legal noncitizens, allowing states to elect to deny additional
benefits (including TANF) to legal noncitizens, and generally denying almost all
benefits to illegal immigrants; and (iii) changes in the Food Stamp program,
including reducing maximum benefits and imposing work requirements.

         The Law requires states to implement the new TANF program not later
than July 1, 1997 and provides California approximately $3.7 billion in block
grant funds for Fiscal Year 1996-97 for the provisions of the Law. States are
allowed to implement TANF as soon as possible and will receive a prorated block
grant effective the date of application. The California State Plan is to be
submitted in time to allow grant reductions to be implemented effective January
1, 1997 (allowing $92 million of the $163 million referred to in paragraph 2
above to be saved) and to allow the State to capture approximately $267 million
in additional federal block grant funds over the currently budgeted level. None
of the other federal changes needed to achieve the balance of the $660 million
cost savings were enacted. Thus, in lieu of the $660 million savings initially
assumed to be saved, it is now projected that savings will total approximately
$360 million.

         A preliminary analysis of the Law by the Legislative Analyst's Office
indicates that an overall assessment of how these changes will affect the
State's General Fund will not be known for some time, and will depend on how the
State implements the Law. There are many choices including how quickly the State
implements the Law; the degree to which the State elects to make up for cuts in
federal aid, provide more aid to counties, or cut some of its own existing
programs for noncitizens; and the State's ability to avoid certain penalties
written into the Law.
    

                             ECONOMIC CONSIDERATIONS

   
         California's economic growth continues to outpace the nation's rate of
growth, with the State on a pace to create more than 300,000 new jobs in both
1996 and 1997. Growth continues to be strong in such high-wage industries as
electronics, software, motion pictures and multimedia. Double-digit gains in
exports are boosting the State's economic performance; growth in manufacturing
is bucking the national trend of factory cutbacks; and the aerospace and
telecommunications industries are showing signs of job stabilization.

         The State's solid economic growth has translated into a substantial
boost in State revenues. For the current year, General Fund revenues are
forecast to be more than $1.1 billion above the January forecast, and nearly
$1.5 billion above the forecast for 1996-97 for a combined total of more than
$2.6 billion. In addition, prior year revenues have been revised upward by more
than $100 million. The most significant factor to revenue growth is strength in
withholding for the Personal Income Tax, which is resulting from such factors as
job growth in high-wage industries and wages increasing faster than the rate of
inflation.

         The national economy struggled through much of 1995. Revised gross
domestic product (GDP) data shows that growth was less than 1 percent at an
annual rate in three of last year's four quarters. But despite a severe winter
in the East, continuing federal government shutdowns and a General Motors
strike, growth picked up smartly in the first quarter of 1996. The advance
estimate places 1996 first quarter growth at a 2.8-percent yearly pace.

         Of particular interest to the State was the continued strength in
business and household purchases of computers in early 1996. High-tech spending
had been widely expected to slow significantly after a year-end 1995 spurt.
There was some slowing: business purchases of computers and related equipment
advanced at "only" a 51-percent annual rate in the first quarter, compared to
71-percent real growth in the last three months of 1995.

         Major GDP revisions, released at the end of January, included new
methodology which reduces measured growth in "real" or inflation-adjusted GDP.
On the new basis, the current 2-percent growth forecast is roughly equivalent to
2.5 percent on the old measurement. Despite this change, the fundamental outlook
for the US economy is very similar to the January Budget. Reflecting the
realities of recent gasoline and food commodity price hikes, interest rates rose
a little more quickly than in the January outlook. Consumer price inflation in
1996 and 1997 is a moderate 0.4 percent higher than in the January forecast.

         The modest rise in interest rates, coupled with unfavorable
demographics--the dwindling young-adult population--will continue to dampen
homebuilding. The combination of high household debt and rising borrowing costs
will also limit new car and light truck sales. Overall, consumer spending will
ease from last year's 2.5-percent increase in real terms to around 2 percent by
1997.

         Business investment spending should continue to expand, with a more
even balance between equipment and construction. Inventories will be a small
drag on growth this year, but should give the economy a small boost in 1997.

         Export prospects remain positive, with Japan's economy now firmly
established on a recovery path. Given somewhat slower growth in consumer
spending, import growth should continue to lag export gains, leading to a modest
improvement in the trade balance.

         Federal government outlays--mainly defense--will continue to decline,
only partially offset by growth in state and local purchases. Government
spending in gross domestic product excludes transfer payments such as Social
Security, Medicare and Medicaid, which will continue to rise.

         California's economy is continuing to thrive even against the
background of relatively tepid nationwide economic growth. Nonfarm wage and
salary employment growth in the first quarter of 1996 averaged almost 3 percent
compared to the year-earlier level. Although job gains in early 1995 were
temporarily held back by unusually wet weather, underlying job growth is still
in excess of 300,000 jobs a year--a pace which is expected to continue in both
1996 and 1997. Highlights of the California forecast include:

         *   Employment growth of 2.7 percent in 1996 and 2.6 percent in 1997,
             adding 660,000 jobs in two years. Unemployment will decline to less
             than 7 percent in 1997.

         *   Personal income will grow by 6 percent per year, more than matching
             1995's underlying 5.8-percent increase. (1995's reported gain of
             6.6 percent included 0.8 percent related to recovery from the
             Northridge earthquake.)

         *   Inflation will remain below the national average. Consumer prices
             are expected to be up 2.7 percent in 1996 and 3.1 percent in 1997.
             Real incomes, therefore, will rise by more than 3 percent each
             year.

         *   Homebuilding is forecast to increase moderately to 101,000 units in
             1996 and 112,000 in 1997. Given continued strong job growth,
             however, there is considerable upside potential in this forecast.
             Nonresidential construction is expected to post gains in dollar
             volume of more than 15 percent both in 1996 and 1997.

         Growth is being driven by a variety of high-technology goods and
services, including such traditional California specialties as motion pictures,
electronics manufacturing, apparel and tourism, as well as emerging industries
such as computer software, multimedia and biotechnology. Booming exports--up 22
percent in 1995 on top of a 15-percent gain in 1994--are playing a role in
virtually every facet of the State's economy.

         Most of these growth industries are in high-wage sectors as well. Wages
in electronics average more than $45,000 per year; in motion picture production,
more than $50,000; and in the software and multimedia industries, almost
$60,000. All of these are export industries and many are service jobs--a fact
which should put to rest the notion that jobs in the services sector are somehow
inferior to those in manufacturing.

         Manufacturing is also contributing to California's recovery. The State
continues to buck the national trend in factory jobs. Over the last year,
California manufacturers have added almost 30,000 jobs, while factories
nationwide cut payrolls by over 300,000.

         Moreover, several of the State's "restructuring" industries are showing
signs of stabilization and even growth. Aerospace job losses have virtually
ceased, partly reflecting an upturn in commercial aircraft orders. While jobs in
the aircraft, missiles and space, and navigation instruments industries may
drift slightly lower in the months ahead, the industry is no longer a drag on
the State's economy and can realistically look forward to the beginnings of
recovery in the next year or two. In telecommunications, gains in "wireless"
(cellular) systems are now offsetting losses in traditional telephone activity.

         Improved prospects for these and other industries in the State are
important, since the explosive growth in several of the newer industries will
not be sustained indefinitely. At the same time, concerns that a major slowdown
in the electronics industry is imminent are also overstated, as evidenced by
continued strength in computer sales during 1996's first quarter.

         Compared to the January forecast, the employment outlook is little
changed, with 1996's job gain virtually identical to the January figure, and
1997 boosted by about 33,000. Personal income estimates for 1995 were about 1
percent less than forecast in January, and although growth is slightly higher in
the current 1996 and 1997 forecast, income averages about $3.5 billion or 0.5
percent less than projected in January.

LITIGATION

         The State is a party to numerous legal proceedings, many of which
normally occur in governmental operations. Following are some of the more
significant lawsuits against the State:

         The State is involved in a lawsuit, Thomas Hayes v. Commission on State
Mandates, related to State-mandated costs. The action involves an appeal by the
Director of Finance from a 1984 decision by the State Board of Control (now
succeeded by the Commission on State Mandates (Commission)). The Board of
Control decided in favor of local school districts' claims for reimbursement for
special education programs for handicapped students. The case was then brought
to the trial court by the State and later remanded to the Commission for
redetermination. The Commission has since expanded the claim to include
supplemental claims filed by seven other educational institutions; the issuance
of a final consolidated decision is anticipated sometime after September 1996.
To date, the Legislature has not appropriated funds. The liability to the State,
if all potentially eligible school districts pursue timely claims, has been
estimated by the Department of Finance at over $1 billion.

         The State is involved in a lawsuit related to contamination at the
Stringfellow toxic waste site. In United States, People of the State of
California v. J.B. Stringfellow, Jr. et al., the State is seeking recovery for
the past costs of cleanup of the site, a declaration that the defendants are
jointly and severally liable for future costs, and an injunction ordering
completion of the cleanup. However, the defendants have filed a counterclaim
against the State for alleged negligent acts. Because the State is the present
owner of the site, the State may be found liable. Present estimates of the
cleanup range from $200 million to $800 million.

         The State is a defendant in a coordinated action involving 3,000
plaintiffs seeking recovery for damages caused by the Yuba River flood of
February 1986. The trial court has found liability in inverse condemnation and
awarded damages of $500,000 to 12 sample plaintiffs. The State's potential
liability to the remaining 3,000 plaintiffs from claims filed ranges from $800
million to $1.5 billion. An appeal has been filed.

         The State is a defendant in Parr, et al. v. State of California where a
number of State employees filed a complaint in federal court claiming that
payment of wages in registered warrants violated the Fair Labor Standards Act
(FLSA) on the premise that registered warrants were neither cash nor cash
equivalents. The parties entered into a Settlement Agreement, which has been
approved by the Court, and is reflected in a Judgment entered by the Court.
Under the terms of the Judgment, a maximum of $1.3 million will be paid to
eligible separated State employees and approximately $1 million will be paid in
statutory attorney's fees and costs. In addition, eligible current State
employees will receive employee leave, in an amount presently not quantified.

         The State has settled Pearce Investments, Ltd. et al. v. Franchise Tax
Board and related cases for $20 million, and the litigation has been dismissed.

         The State is a defendant in two lawsuits challenging the transfer of
monies from special fund accounts within the State Treasury to the State's
General Fund pursuant to the Budget Acts of 1991, 1992, 1993, and 1994.
Plaintiffs in the case of Malibu Video Systems, et al. v. Kathleen Brown, et al.
allege in the State court action that the monetary transfers violated various
State statutes and provisions of the State constitution. In the companion
federal case, plaintiffs allege that the monetary transfers violated the Equal
Protection Clause of the United States Constitution. In the consolidated State
case of Malibu Video Systems, et al. v. Kathleen Brown and Abromovitz, et al. v.
Wilson, et al., a stipulated judgment has been entered requiring return of $119
million plus interest to specified special funds over a period of up to five
years beginning in fiscal year 1996-97. The federal cases will be dismissed.

         The State is a defendant in California State Employees Association v.
Wilson, where the petitioners are challenging several budget appropriations in
the 1994 and 1995 budget acts. The appropriations mandate the transfer of funds
from the State Highway Account to the General Fund to reimburse the General Fund
for debt service costs on two rail bond measures. The petitioners contend that
the transfers violate the bond acts themselves and are requesting the moneys be
returned. The loss to the State's General Fund could be up to $227 million.

         In a similar case, Professional Engineers in California Government v.
Wilson, the petitioners are challenging several appropriations in the 1993,
1994, and 1995 Budget Acts. The appropriations mandate the transfer of
approximately $262 million from the State Highway Account and $113 million from
the Motor Vehicle Account to the General Fund and appropriate approximately $6
million from the State Highway Account to fund a highway-grade crossing program
administered by the Public Utilities Commission. Petitioners contend that the
transfers violate several constitutional provisions and request that the moneys
be returned to the State Highway Account and Motor Vehicle Account.

         The State is a defendant in Just Say No To Tobacco Dough Campaign v.
State of California, where the petitioners challenge the appropriation of
approximately $166 million of Proposition 99 funds in the Cigarette and Tobacco
Products Surtax Fund for fiscal years 1989-90 through 1994-95 for programs which
were allegedly not health education or tobacco-related disease research. If the
State loses, the General Fund and funds from other sources would be used to
reimburse the Cigarette and Tobacco Products Surtax for approximately $166
million.

         The appellate court in February 1996 affirmed the trial court finding
of State liability in Akins v. State of California, litigation involving the
results of 1986 flooding in Sacramento and Sutter Counties. In April 1996 the
California Supreme Court granted the State's petition for review; briefing is in
progress. Patero et al. v. State of California, the 1986 Yuba River flood cases
are currently before the appellate court on liability issues only. Briefing is
not expected to be completed until early 1997. A portion of the damages
litigation is set for trial in October 1996.

         A federal Court of Appeals in the case of Deanna Beno, et al. v. Donna
Shalala, et al., reversing a trial court ruling in favor of the State,
determined in July 1994 that the Secretary of the United States Department of
Health and Human Services violated the federal Administrative Procedure Act when
she approved California's Assistance Payment Demonstration Project, which, in
part, granted California a waiver from complying with requirements for State
participation in the federal program for medical assistance (Medicaid). The
waiver had allowed California to reduce payments under the Aid to Families with
Dependent Children program (AFDC) below 1988 payment levels without violating
Medicaid requirements relating to maintenance of AFDC payment levels. The Court
of Appeals remanded to the trial court with instructions to remand the
demonstration project to the Secretary for additional consideration of
objections raised by the plaintiffs. The State submitted a renewed waiver
request to the Secretary, which was granted in early 1996.

         One of the features of the 1994-95 Budget Act was a 2.3 percent
reduction in AFDC payments. In Welch v. Anderson, on August 19, 1994, the San
Francisco Superior Court issued a preliminary injunction against the California
Director of Social Services to prevent the 2.3 percent AFDC cuts from becoming
effective September 1, 1994. The case has been appealed, and on August 16, 1995,
the appellate court upheld the issuance of the preliminary injunction. The case
on the merits remains pending. Due to the approved federal waiver noted in the
previous paragraph, the preliminary injunction has been lifted and the grant
reduction has been implemented.

         The State is also a respondent/defendant in two additional cases filed
by the American Lung Association and Americans for Nonsmokers' Rights (American
Lung Association v. Wilson; Americans for Nonsmokers' Rights v. State of
California). These cases challenge the amendment of statutes prescribing
specific percentages of tobacco tax revenues to be placed in accounts to be used
for health education and research programs, as well as the appropriation of
approximately $63 million in tobacco tax funds for medical treatment programs,
pursuant to legislation enacted in July 1995. In September 1995, the Sacramento
County Superior Court issued preliminary injunctions, confirming an earlier
temporary restraining order, prohibiting the State from issuing, negotiating or
processing warrants from the challenged appropriations. The State has appealed
the Court's rulings. A hearing on the appeal is anticipated to be scheduled,
which the State will contest.

         In the case of Board of Administration, California Public Employees'
Retirement System, et al. v. Pete Wilson, Governor, et al., plaintiffs
challenged the constitutionality of legislation which deferred payment of the
State's employer contribution to the Public Employees' Retirement System
beginning in Fiscal Year 1992-93. On January 11, 1995, the Sacramento County
Superior Court entered a judgment finding that the legislation
unconstitutionally impaired the vested contract rights of PERS members. The
judgment provides for issuance of a writ of mandate directing State defendants
to disregard the provisions of the legislation, to implement the statute
governing employer contributions that existed before the changes in the
legislation found to be unconstitutional, and to transfer to PERS the 1993-94
and 1994-95 contributions that are unpaid to date. The State defendants have
appealed.

         In Jernigan & Burleson v. State, filed in federal district court, the
prison inmate plaintiffs claim they are entitled to minimum wages while working
for the Prison Industry Authority. The inmates claim the State has violated the
Fair Labor Standards Act (the "FLSA"). Plaintiffs are seeking back pay for the
period from August 1990 onward, and liquidated damages, for a total of
approximately $350 million. In June 1995, the district court ruled that the
inmates are not employees under the FLSA. The inmates appealed to the Ninth
Circuit Court of Appeals, which affirmed the District Court decision holding
that the inmates are not employees under the FLSA. The inmates have filed a
Petition for Rehearing and a Petition for Hearing En Banc with the Ninth
Circuit.
    
<PAGE>
                          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 CLIENTS:
Citigold
P.O. Box 5130, New York, NY 10126-5130
Call Your Citigold Executive or in NY or CT (800) 285-1701,
or for all other states (800) 285-1707

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

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

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

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
<PAGE>
LANDMARK CALIFORNIA TAX FREE RESERVES

TRUSTEES AND OFFICERS
C. Oscar Morong, Jr., Chairman
Philip W. Coolidge,  President*
H.B. Alvord
Elliott J. Berv
Mark T. Finn
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Walter E. Robb, III
E. Kirby Warren
William S. Woods, Jr.

   
SECRETARY
Linda T. Gibson*
    

TREASURER
John R. Elder*

*Affiliated Person of Administrator and Distributor

- ----------------------------------------------------------------------------

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 AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110

AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA  02110

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

- ----------------------------------------------------------------------------

SHAREHOLDER SERVICING AGENTS
(See Inside of Cover)
<PAGE>
                                     PART C

Item 24.  Financial Statements and Exhibits.
   
         (a)      Financial Statements Included in Part A:
                  LANDMARK CALIFORNIA TAX FREE RESERVES
                  Condensed Financial Information - Financial Highlights for the
                     years ended August 31, 1996, August 31, 1995, August 31,
                     1994 and August 31, 1993 and the period from March 10, 1992
                     (commencement of operations) to August 31, 1992.

                  Financial Statements Included in Part B:
                  LANDMARK CALIFORNIA TAX-FREE RESERVES 
                  Portfolio of Investments at August 31, 1996* 
                  Statement of Assets and Liabilities at August 31, 1996* 
                  Statement of Operations for the year ended August 31, 1996*
                  Statement of Changes in Net Assets for the years ended August
                    31, 1996 and August 31, 1995* 
                  Financial Highlights for the years ended August 31, 1996, 
                    August 31, 1995, August 31, 1994 and August 31, 1993 and the
                    period from March 10, 1992 (commencement of operations) to
                    August 31, 1992*

- --------------
 *Incorporated by reference to the Registrant's Annual Report to Shareholders of
    Landmark California Tax-Free Reserves for the fiscal year ended August 31,
    1996, filed with the Securities and Exchange Commission on the EDGAR system
    on October 29, 1996 (Accession Number 0000950156-96-000854).
    

         (b)   Exhibits

   
              *1(a)      Declaration of Trust of the Registrant
              *1(b)      Amendments to Declaration of Trust of the Registrant
              *2(a)      Amended and Restated By-Laws of the Registrant
              *2(b)      Amendments to Amended and Restated By-Laws of the
                         Registrant
             **4         Specimen of certificate representing ownership of
                         shares in the Registrant
              *5         Investment Advisory Agreement between the Registrant 
                         and Citibank, N.A.
              *6         Distribution Agreement between the Registrant and The
                         Landmark Funds Broker-Dealer Services, Inc. ("LFBDS"),
                         as distributor
              *7         Custodian Contract between the Registrant and State
                         Street Bank and Trust Company ("State Street"), as
                         custodian
              *9(a)      Amended and Restated Administrative Services Plan of
                         the Registrant
              *9(b)      Administrative Services Agreement between the
                         Registrant and LFBDS, as administrator
              *9(c)      Sub-Administrative Services Agreement between Citibank,
                         N.A. and LFBDS
              *9(d)(i)   Form of Shareholder Servicing Agreement between the
                         Registrant and Citibank, N.A., as shareholder servicing
                         agent
              *9(d)(ii)  Form of Shareholder Servicing Agreement between the
                         Registrant and a federal savings bank, as shareholder
                         servicing agent
              *9(d)(iii) Form of Shareholder Servicing Agreement between the
                         Registrant and LFBDS, as shareholder servicing agent
              *9(e)      Transfer Agency and Servicing Agreement between the
                         Registrant and State Street, as transfer agent
              *9(f)      Amended and Restated Exchange Privilege Agreement
                         between the Registrant, certain other investment
                         companies and LFBDS, as distributor
              *10        Opinion and Consent of Counsel
               11        Consent of Deloitte & Touche LLP, independent auditors
                         of the Registrant
              *15        Amended and Restated Distribution Plan of the
                         Registrant
               25        Powers of Attorney for the Registrant
               27        Financial data schedule

- ---------------------
 * Incorporated herein by reference to Post-Effective Amendment No. 6 to the
   Registrant's Registration Statement on Form N-1A as filed with the Securities
   and Exchange Commission on August 28, 1996.
** Information defining the rights of shareholders is contained in the
   Registrant's Declaration of Trust, as amended, incorporated herein by 
   reference as Exhibits No. 1(a) and 1(b).

    

Item 25.  Persons Controlled by or under Common Control with Registrant.

         Not applicable.

Item 26.  Number of Holders of Securities.

   
          Title of Class                              Number of Record Holders
                                                       As of December 16, 1996
  Shares of Beneficial Interest
        (without par value)
    

Landmark California Tax Free Reserves                             6

Item 27.  Indemnification.

   
         Reference is hereby made to (a) Article V of the Registrant's
Declaration of Trust, incorporated by reference herein as an Exhibit to its
Registration Statement on Form N-1A; (b) Section 4 of the Distribution Agreement
between the Registrant and The Landmark Funds Broker-Dealer Services, Inc.,
incorporated by reference herein as an Exhibit to the Registrant's Registration
Statement on Form N-1A; and (c) the undertaking of the Registrant regarding
indemnification set forth in its Registration Statement on Form N-1A.
    

         The Trustees and officers of the Registrant and the personnel of the
Registrant's administrator are insured under an errors and omissions liability
insurance policy. The Registrant and its officers are also insured under the
fidelity bond required by Rule 17g-1 under the Investment Company Act of 1940.


Item 28.  Business and Other Connections of Investment Adviser.

   
         Citibank, N.A. ("Citibank") is a commercial bank offering a wide range
of banking and investment services to customers across the United States and
around the world. Citibank is a wholly-owned subsidiary of Citicorp, a
registered bank holding company. Citibank also serves as investment adviser to
the following registered investment companies (or series thereof): The Premium
Portfolios (Balanced Portfolio, Equity Portfolio, Government Income Portfolio,
International Equity Portfolio, Emerging Asian Markets Equity Portfolio and
Small Cap Equity Portfolio), Tax Free Reserves Portfolio, Cash Reserves
Portfolio, U.S. Treasury Reserves Portfolio, Landmark Fixed Income Funds
(Landmark Intermediate Income Fund), Landmark Tax Free Income Funds (Landmark
New York Tax Free Income Fund and Landmark National Tax Free Income Fund),
Landmark New York Tax Free Reserves, Landmark Connecticut Tax Free Reserves,
Asset Allocation Portfolios (Asset Allocation Portfolio 200, Asset Allocation
Portfolio 300, Asset Allocation Portfolio 400 and Asset Allocation Portfolio
500), Landmark VIP Funds (Landmark VIP U.S. Government Fund, Landmark VIP
Balanced Fund, Landmark VIP Equity Fund and Landmark VIP International Equity
Fund), and Variable Annuity Portfolios (CitiSelectSM VIP Folio 200, CitiSelectSM
VIP Folio 300, CitiSelectSM VIP Folio 400, CitiSelectSM VIP Folio 500 and
Landmark Small Cap Equity VIP Fund). As of December 31, 1995, Citibank and its
affiliates managed assets in excess of $83 billion worldwide. The principal
place of business of Citibank is located at 399 Park Avenue, New York, New York
10043.
    

   
         The Chairman of the Board and a Director of Citibank is John S. Reed.
The following are Vice Chairmen of the Board and Directors of Citibank: Paul J.
Collins, William R. Rhodes and H. Onno Ruding. Other Directors of Citibank are
D. Wayne Calloway, Chairman and Chief Executive Officer, PepsiCo, Inc.,
Purchase, New York; Colby H. Chandler, Former Chairman and Chief Executive
Officer, Eastman Kodak Company; Kenneth T. Derr, Chairman and Chief Executive
Officer, Chevron Corporation; H.J. Haynes, Senior Counselor, Bechtel Group,
Inc., San Francisco, California; Rozanne L. Ridgway, President, The Atlantic
Council of the United States; Robert B. Shapiro, President and Chief Operating
Officer, Monsanto Company; Frank A. Shrontz, Chairman and Chief Executive
Officer, Boeing Company, Seattle, Washington; Mario Henrique Simonsen, Vice
Chairman, Brazilian Institute of Economics, The Getulio Vargas Foundation; Roger
B. Smith, Former Chairman and Chief Executive Officer, General Motors
Corporation; Franklin A. Thomas, President, The Ford Foundation, New York, New
York; and Edgar S. Woolard, Jr., Chairman and Chief Executive Officer, E.I.
DuPont De Nemours & Company.
    

         Each of the individuals named above is also a Director of Citicorp. In
addition, the following persons have the affiliations indicated:

D. Wayne Calloway      Director, Exxon Corporation
                       Director, General Electric Company
                       Director, PepsiCo., Inc.

Colby H. Chandler      Director, Digital Equipment Corporation
                       Director, Ford Motor Company
                       Director, J.C. Penney Company, Inc.
       

Paul J. Collins        Director, Kimberly-Clark Corporation

Kenneth T. Derr        Director, American Telephone and Telegraph, Co.
                       Director, Chevron Corporation
                       Director, Potlatch Corporation

H.J. Haynes            Director, Bechtel Group, Inc.
                       Director, Boeing Company
                       Director, Fremont Group, Inc.
                       Director, Hewlett-Packard Company
                       Director, Paccar Inc.
                       Director, Saudi Arabian Oil Company

John S. Reed           Director, Monsanto Company
                       Director, Philip Morris Companies, Incorporated
                       Stockholder, Tampa Tank & Welding, Inc.

William R. Rhodes      Director, Private Export Funding Corporation

Rozanne L. Ridgway     Director, 3M
                       Director, Bell Atlantic Corporation
                       Director, Boeing Company
                       Director, Emerson Electric Company
                       Member-International Advisory Board,
                         New Perspective Fund, Inc.
                       Director, RJR Nabisco, Inc.
                       Director, Sara Lee Corporation
                       Director, Union Carbide Corporation

H. Onno Ruding         Member, Board of Supervisory Directors,
                         Amsterdam Trustee's Kantoor
                       Board Member, Corning, Incorporated
                       Advisor, Intercena (C&A) (Netherlands)
                       Member, Board of Supervisory Directors,
                         Pechiney Nederland N.V.
                       Member, Board of Advisers, Robeco N.V.
                       Advisory Director, Unilever N.V.
                       Advisory Director, Unilever PLC

Robert B. Shapiro      Director, G.D. Searle & Co.
                       Director, Silicon Graphics
                       Director, Monsanto Company
                       Director, The Nutrasweet Company

Frank A. Shrontz       Director, 3M
                       Director, Baseball of Seattle, Inc.
                       Director, Boeing Company
                       Director, Boise Cascade Corp.


Roger B. Smith         Director, International Paper Company
                       Director, Johnson & Johnson
                       Director, PepsiCo, Inc.

Franklin A. Thomas     Director, Aluminum Company of America
                       Director, American Telephone and Telegraph, Co.
                       Director, Cummins Engine Company, Inc.
                       Director, PepsiCo, Inc.

Edgar S. Woolard, Jr.  Director, E.I. DuPont De Nemours & Company

Item 29.  Principal Underwriters.

   
         (a) The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS"), the
Registrant's Distributor, is also the distributor for Landmark International
Equity Fund, Landmark Emerging Asian Markets Equity Fund, Premium U.S. Treasury
Reserves, Premium Liquid Reserves, Landmark Institutional Liquid Reserves,
Landmark Institutional U.S. Treasury Reserves, Landmark Institutional Tax Free
Reserves, Landmark Tax Free Reserves, Landmark New York Tax Free Reserves,
Landmark Connecticut Tax Free Reserves, Landmark Cash Reserves, Landmark U.S.
Treasury Reserves, Landmark U.S. Government Income Fund, Landmark Intermediate
Income Fund, Landmark Balanced Fund, Landmark Equity Fund, Landmark Small Cap
Equity Fund, Landmark National Tax Free Income Fund, Landmark New York Tax Free
Income Fund, Landmark VIP Funds (Landmark VIP U.S. Government Fund, Landmark VIP
Balanced Fund, Landmark VIP Equity Fund and Landmark VIP International Equity
Fund), Variable Annuity Portfolios (CitiSelectSM VIP Folio 200, CitiSelectSM VIP
Folio 300, CitiSelectSM VIP Folio 400, CitiSelectSM VIP Folio 500 and Landmark
Small Cap Equity VIP Fund), CitiSelectSM Folio 200, CitiSelectSM Folio 300,
CitiSelectSM Folio 400 and CitiSelectSM Folio 500. LFBDS is also the placement
agent for International Equity Portfolio, Balanced Portfolio, Equity Portfolio,
Small Cap Equity Portfolio, Government Income Portfolio, Emerging Asian Markets
Equity Portfolio, Tax Free Reserves Portfolio, Cash Reserves Portfolio, U.S.
Treasury Reserves Portfolio, Asset Allocation Portfolio 200, Asset Allocation
Portfolio 300, Asset Allocation Portfolio 400, and Asset Allocation Portfolio
500.
    

         (b) The information required by this Item 29 with respect to each
director and officer of LFBDS is incorporated by reference to Schedule A of Form
BD filed by LFBDS pursuant to the Securities and Exchange Act of 1934 (File No.
8-32417).

         (c)      Not applicable.

Item 30.  Location of Accounts and Records.

         The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:

      NAME                                                          ADDRESS

The Landmark Funds Broker-Dealer Services, Inc.     6 St. James Avenue
  (administrator and distributor)                   Boston, MA 02116

State Street Bank and Trust Company                 1776 Heritage Drive
  (custodian and transfer agent)                    North Quincy, MA 02171

Citibank, N.A.                                      153 East 53rd Street
  (investment adviser)                              New York, NY 10043


SHAREHOLDER SERVICING AGENTS

Citibank, N.A.                                      450 West 33rd Street
                                                    New York, NY 10001

Citibank, N.A. -- Citigold                          Citicorp Mortgage Inc.
                                                      - Citigold
                                                    15851 Clayton Road
                                                    Ballwin, MO 63011

Citibank, N.A. -- The Citibank                      153 East 53rd Street
Private Bank                                        New York, NY 10043

Citibank, N.A. -- Citibank Global                   153 East 53rd Street
Asset Management                                    New York, NY 10043

Citibank, N.A. -- North American                    111 Wall Street
Investor Services                                   New York, NY 10094

Citicorp Investment Services                        One Court Square
                                                    Long Island City, NY 11120

The Landmark Funds Broker-Dealer Services, Inc.     6 St. James Avenue
                                                    Boston, MA 02116


Item 31.  Management Services.

         Not applicable.
<PAGE>


Item 32.  Undertakings.

         (a)  Not applicable.

         (b)  Not applicable.

         (c)  The Registrant undertakes to furnish to each person to whom a
                prospectus of Landmark California Tax Free Reserves is delivered
                with a copy of such fund's latest Annual Report to Shareholders,
                upon request without charge.
<PAGE>
                                   SIGNATURES

         Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that this
Post-Effective Amendment to its Registration Statement on Form N-1A meets all of
the requirements for effectiveness pursuant to Rule 485(b) under the Securities
Act of 1933 and that the Registrant has duly caused this Post-Effective
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston and Commonwealth
of Massachusetts on the 16th day of December, 1996.

                                             LANDMARK MULTI-STATE TAX FREE FUNDS

                                             By: Philip W. Coolidge
                                                 ------------------------------
                                                 Philip W. Coolidge
                                                 President

         Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated below on December 16, 1996.

       Signature                                 Title
       ---------                                 -----

   Philip W. Coolidge         President, Principal Executive Officer and Trustee
- -------------------------
   Philip W. Coolidge

   John R. Elder              Principal Accounting and Financial Officer
- -------------------------
   John R. Elder

   H.B. Alvord*               Trustee
- -------------------------
   H.B. Alvord

   Elliott J. Berv*           Trustee
- -------------------------
   Elliot J. Berv

   Mark T. Finn*              Trustee
- -------------------------
   Mark T. Finn

   Riley C. Gilley*           Trustee
- -------------------------
   Riley C. Gilley

   Diana R. Harrington*       Trustee
- -------------------------
   Diana R. Harrington

   Susan B. Kerley*           Trustee
- -------------------------
   Susan B. Kerley

   C. Oscar Morong, Jr.*      Trustee
- -------------------------
   C. Oscar Morong, Jr.

   Walter E. Robb, III*       Trustee
- -------------------------
   Walter E. Robb, III

   E. Kirby Warren*           Trustee
- -------------------------
   E. Kirby Warren

   William S. Woods, Jr.*     Trustee
- -------------------------
   William S. Woods, Jr.

*By:  Philip W. Coolidge
- -------------------------
      Philip W. Coolidge

      Executed by Philip W. Coolidge on behalf of those indicated pursuant to
      Powers of Attorney.
<PAGE>
                                  EXHIBIT INDEX

Exhibit
No.:            Description:

11         Consent of Deloitte & Touche LLP, independent auditors of the 
           Registrant
25         Powers of Attorney for the Registrant
27         Financial data schedule


<PAGE>

                                                                      EXHIBIT 11




INDEPENDENT AUDITORS' CONSENT


We consent to the incorporation by reference in this Post Effective Amendment
No. 7 to Registration Statement No. 33-44749 of Landmark Multi-State Tax Free
Funds of our report dated October 4, 1996 appearing in the annual report to
shareholders for the year ended August 31, 1996 of Landmark California Tax Free
Reserves (a series of Landmark Multi-State Tax Free Funds), and to the
references to us under the headings "Condensed Financial Information" in the
Prospectus and "Independent Accountants and Financial Statements" in the
Statement of Additional Information, both of which are part of such Registration
Statement.

Deloitte & Touche LLP
Boston, Massachusetts
December 17, 1996


<PAGE>

                                                                      Exhibit 25
LANDMARK MULTI-STATE TAX FREE FUNDS

The undersigned hereby constitutes and appoints Philip W. Coolidge, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, and each of them,
with full powers of substitution as her true and lawful attorneys and agents to
execute in her name and on her behalf in any and all capacities the Registration
Statements on Form N-1A, and any and all amendments thereto, filed by Landmark
Multi-State Tax Free Funds (on behalf of its series, Landmark New York Tax Free
Reserves, Landmark California Tax Free Reserves, and Landmark Connecticut Tax
Free Reserves) (the "Registrant") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, and any and all other instruments which such attorneys
and agents, or any of them, deem necessary or advisable to enable the Registrant
to comply with the Securities Act of 1933, as amended and the Investment Company
Act of 1940, as amended, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction; and the undersigned hereby ratifies and confirms as
her own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.

IN WITNESS WHEREOF, the undersigned has hereunto set her hand this 8th day of
November, 1996.



Susan B. Kerley
- -----------------------------
Susan B. Kerley
<PAGE>

LANDMARK MULTI-STATE TAX FREE FUNDS

The undersigned hereby constitutes and appoints Philip W. Coolidge, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, and each of them,
with full powers of substitution as her true and lawful attorneys and agents to
execute in her name and on her behalf in any and all capacities the Registration
Statements on Form N-1A, and any and all amendments thereto, filed by Landmark
Multi-State Tax Free Funds (on behalf of its series, Landmark New York Tax Free
Reserves, Landmark California Tax Free Reserves, and Landmark Connecticut Tax
Free Reserves) (the "Registrant") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, and any and all other instruments which such attorneys
and agents, or any of them, deem necessary or advisable to enable the Registrant
to comply with the Securities Act of 1933, as amended and the Investment Company
Act of 1940, as amended, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction; and the undersigned hereby ratifies and confirms as
her own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.

IN WITNESS WHEREOF, the undersigned has hereunto set her hand this 8th day of
November, 1996.



Diana R. Harrington
- -----------------------------
Diana R. Harrington
<PAGE>

LANDMARK MULTI-STATE TAX FREE FUNDS

The undersigned hereby constitutes and appoints John R. Elder, Susan Jakuboski,
Molly S. Mugler and Linda T. Gibson, and each of them, with full powers of
substitution as his true and lawful attorneys and agents to execute in his name
and on his behalf in any and all capacities the Registration Statements on Form
N-1A, and any and all amendments thereto, filed by Landmark Multi-State Tax Free
Funds (on behalf of its series, Landmark New York Tax Free Reserves, Landmark
California Tax Free Reserves, and Landmark Connecticut Tax Free Reserves) (the
"Registrant") with the Securities and Exchange Commission under the Securities
Act of 1933, as amended, and under the Investment Company Act of 1940, as
amended, and any and all other instruments which such attorneys and agents, or
any of them, deem necessary or advisable to enable the Registrant to comply with
the Securities Act of 1933, as amended and the Investment Company Act of 1940,
as amended, the rules, regulations and requirements of the Securities and
Exchange Commission, and the securities or Blue Sky laws of any state or other
jurisdiction; and the undersigned hereby ratifies and confirms as his own act
and deed any and all that such attorneys and agents, or any of them, shall do or
cause to be done by virtue hereof. Any one of such attorneys and agents shall
have, and may exercise, all of the powers hereby conferred.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th day of
November, 1996.



Philip W. Coolidge
- -----------------------------
Philip W. Coolidge
<PAGE>

LANDMARK MULTI-STATE TAX FREE FUNDS

The undersigned hereby constitutes and appoints Philip W. Coolidge, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, and each of them,
with full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities the Registration
Statements on Form N-1A, and any and all amendments thereto, filed by Landmark
Multi-State Tax Free Funds (on behalf of its series, Landmark New York Tax Free
Reserves, Landmark California Tax Free Reserves, and Landmark Connecticut Tax
Free Reserves) (the "Registrant") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, and any and all other instruments which such attorneys
and agents, or any of them, deem necessary or advisable to enable the Registrant
to comply with the Securities Act of 1933, as amended and the Investment Company
Act of 1940, as amended, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction; and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th day of
November, 1996.



H.B. Alvord
- -----------------------------
H.B. Alvord
<PAGE>

LANDMARK MULTI-STATE TAX FREE FUNDS

The undersigned hereby constitutes and appoints Philip W. Coolidge, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, and each of them,
with full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities the Registration
Statements on Form N-1A, and any and all amendments thereto, filed by Landmark
Multi-State Tax Free Funds (on behalf of its series, Landmark New York Tax Free
Reserves, Landmark California Tax Free Reserves, and Landmark Connecticut Tax
Free Reserves) (the "Registrant") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, and any and all other instruments which such attorneys
and agents, or any of them, deem necessary or advisable to enable the Registrant
to comply with the Securities Act of 1933, as amended and the Investment Company
Act of 1940, as amended, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction; and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th day of
November, 1996.



Riley C. Gilley
- -----------------------------
Riley C. Gilley
<PAGE>

LANDMARK MULTI-STATE TAX FREE FUNDS

The undersigned hereby constitutes and appoints Philip W. Coolidge, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, and each of them,
with full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities the Registration
Statements on Form N-1A, and any and all amendments thereto, filed by Landmark
Multi-State Tax Free Funds (on behalf of its series, Landmark New York Tax Free
Reserves, Landmark California Tax Free Reserves, and Landmark Connecticut Tax
Free Reserves) (the "Registrant") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, and any and all other instruments which such attorneys
and agents, or any of them, deem necessary or advisable to enable the Registrant
to comply with the Securities Act of 1933, as amended and the Investment Company
Act of 1940, as amended, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction; and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th day of
November, 1996.



C. Oscar Morong, Jr.
- -----------------------------
C. Oscar Morong, Jr.
<PAGE>

LANDMARK MULTI-STATE TAX FREE FUNDS

The undersigned hereby constitutes and appoints Philip W. Coolidge, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, and each of them,
with full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities the Registration
Statements on Form N-1A, and any and all amendments thereto, filed by Landmark
Multi-State Tax Free Funds (on behalf of its series, Landmark New York Tax Free
Reserves, Landmark California Tax Free Reserves, and Landmark Connecticut Tax
Free Reserves) (the "Registrant") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, and any and all other instruments which such attorneys
and agents, or any of them, deem necessary or advisable to enable the Registrant
to comply with the Securities Act of 1933, as amended and the Investment Company
Act of 1940, as amended, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction; and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th day of
November, 1996.



E. Kirby Warren
- -----------------------------
E. Kirby Warren
<PAGE>

LANDMARK MULTI-STATE TAX FREE FUNDS

The undersigned hereby constitutes and appoints Philip W. Coolidge, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, and each of them,
with full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities the Registration
Statements on Form N-1A, and any and all amendments thereto, filed by Landmark
Multi-State Tax Free Funds (on behalf of its series, Landmark New York Tax Free
Reserves, Landmark California Tax Free Reserves, and Landmark Connecticut Tax
Free Reserves) (the "Registrant") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, and any and all other instruments which such attorneys
and agents, or any of them, deem necessary or advisable to enable the Registrant
to comply with the Securities Act of 1933, as amended and the Investment Company
Act of 1940, as amended, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction; and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th day of
November, 1996.



William S. Woods, Jr.
- -----------------------------
William S. Woods, Jr.
<PAGE>

LANDMARK MULTI-STATE TAX FREE FUNDS

The undersigned hereby constitutes and appoints Philip W. Coolidge, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, and each of them,
with full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities the Registration
Statements on Form N-1A, and any and all amendments thereto, filed by Landmark
Multi-State Tax Free Funds (on behalf of its series, Landmark New York Tax Free
Reserves, Landmark California Tax Free Reserves, and Landmark Connecticut Tax
Free Reserves) (the "Registrant") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, and any and all other instruments which such attorneys
and agents, or any of them, deem necessary or advisable to enable the Registrant
to comply with the Securities Act of 1933, as amended and the Investment Company
Act of 1940, as amended, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction; and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th day of
November, 1996.



Elliott J. Berv
- -----------------------------
Elliott J. Berv
<PAGE>

LANDMARK MULTI-STATE TAX FREE FUNDS

The undersigned hereby constitutes and appoints Philip W. Coolidge, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, and each of them,
with full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities the Registration
Statements on Form N-1A, and any and all amendments thereto, filed by Landmark
Multi-State Tax Free Funds (on behalf of its series, Landmark New York Tax Free
Reserves, Landmark California Tax Free Reserves, and Landmark Connecticut Tax
Free Reserves) (the "Registrant") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, and any and all other instruments which such attorneys
and agents, or any of them, deem necessary or advisable to enable the Registrant
to comply with the Securities Act of 1933, as amended and the Investment Company
Act of 1940, as amended, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction; and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th day of
November, 1996.



Mark T. Finn
- -----------------------------
Mark T. Finn
<PAGE>

LANDMARK MULTI-STATE TAX FREE FUNDS

The undersigned hereby constitutes and appoints Philip W. Coolidge, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, and each of them,
with full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities the Registration
Statements on Form N-1A, and any and all amendments thereto, filed by Landmark
Multi-State Tax Free Funds (on behalf of its series, Landmark New York Tax Free
Reserves, Landmark California Tax Free Reserves, and Landmark Connecticut Tax
Free Reserves) (the "Registrant") with the Securities and Exchange Commission
under the Securities Act of 1933, as amended, and under the Investment Company
Act of 1940, as amended, and any and all other instruments which such attorneys
and agents, or any of them, deem necessary or advisable to enable the Registrant
to comply with the Securities Act of 1933, as amended and the Investment Company
Act of 1940, as amended, the rules, regulations and requirements of the
Securities and Exchange Commission, and the securities or Blue Sky laws of any
state or other jurisdiction; and the undersigned hereby ratifies and confirms as
his own act and deed any and all that such attorneys and agents, or any of them,
shall do or cause to be done by virtue hereof. Any one of such attorneys and
agents shall have, and may exercise, all of the powers hereby conferred.

IN WITNESS WHEREOF, the undersigned has hereunto set his hand this 8th day of
November, 1996.



Walter E. Robb, III
- -----------------------------
Walter E. Robb, III


<TABLE> <S> <C>

<PAGE>
<ARTICLE> 6
<CIK> 0000775613
<NAME> LANDMARK CALIFORNIA TAX FREE RESERVES
<SERIES>
   <NUMBER>002
   <NAME>LANDMARK MULTI STATE TAX FREE FUNDS
       
<S>                             <C>
<PERIOD-TYPE>                  YEAR
<FISCAL-YEAR-END>                          AUG-31-1996
<PERIOD-END>                               AUG-31-1996
<INVESTMENTS-AT-COST>                      150,096,234
<INVESTMENTS-AT-VALUE>                     150,096,234
<RECEIVABLES>                                  781,475
<ASSETS-OTHER>                                       0
<OTHER-ITEMS-ASSETS>                            86,850
<TOTAL-ASSETS>                             150,964,559
<PAYABLE-FOR-SECURITIES>                             0
<SENIOR-LONG-TERM-DEBT>                              0
<OTHER-ITEMS-LIABILITIES>                      407,724
<TOTAL-LIABILITIES>                            407,724
<SENIOR-EQUITY>                                      0
<PAID-IN-CAPITAL-COMMON>                   150,565,584
<SHARES-COMMON-STOCK>                      150,565,584
<SHARES-COMMON-PRIOR>                       51,841,085
<ACCUMULATED-NII-CURRENT>                            0
<OVERDISTRIBUTION-NII>                               0
<ACCUMULATED-NET-GAINS>                         (8,749)
<OVERDISTRIBUTION-GAINS>                             0
<ACCUM-APPREC-OR-DEPREC>                             0
<NET-ASSETS>                               150,556,835
<DIVIDEND-INCOME>                                    0
<INTEREST-INCOME>                            3,904,073
<OTHER-INCOME>                                       0
<EXPENSES-NET>                                 468,509
<NET-INVESTMENT-INCOME>                      3,435,564
<REALIZED-GAINS-CURRENT>                            24
<APPREC-INCREASE-CURRENT>                            0
<NET-CHANGE-FROM-OPS>                        3,435,588
<EQUALIZATION>                                       0
<DISTRIBUTIONS-OF-INCOME>                   (3,435,564)
<DISTRIBUTIONS-OF-GAINS>                             0
<DISTRIBUTIONS-OTHER>                                0
<NUMBER-OF-SHARES-SOLD>                    376,454,761
<NUMBER-OF-SHARES-REDEEMED>               (279,078,886)
<SHARES-REINVESTED>                          1,348,624
<NET-CHANGE-IN-ASSETS>                      98,724,523
<ACCUMULATED-NII-PRIOR>                              0
<ACCUMULATED-GAINS-PRIOR>                       (8,773)
<OVERDISTRIB-NII-PRIOR>                              0
<OVERDIST-NET-GAINS-PRIOR>                           0
<GROSS-ADVISORY-FEES>                          225,431
<INTEREST-EXPENSE>                                   0
<GROSS-EXPENSE>                              1,141,763
<AVERAGE-NET-ASSETS>                           112,716
<PER-SHARE-NAV-BEGIN>                             1.00
<PER-SHARE-NII>                                   0.03
<PER-SHARE-GAIN-APPREC>                           0.00
<PER-SHARE-DIVIDEND>                             (0.03)
<PER-SHARE-DISTRIBUTIONS>                         0.00
<RETURNS-OF-CAPITAL>                              0.00
<PER-SHARE-NAV-END>                               1.00
<EXPENSE-RATIO>                                   0.42
<AVG-DEBT-OUTSTANDING>                               0
<AVG-DEBT-PER-SHARE>                                 0
        


</TABLE>


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