LANDMARK TAX FREE INCOME FUNDS, 485B24E, 1997-04-18

LANDMARK TAX FREE INCOME FUNDS
485B24E, 1997-04-18

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<PAGE>

As filed with the Securities and Exchange Commission on April 18, 1997

File Nos. 33-5819
811-5034

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

FORM N-1A

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
POST-EFFECTIVE
AMENDMENT NO. 18
AND
REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
AMENDMENT NO. 19

LANDMARK TAX FREE INCOME 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 May 1, 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 filed a Rule 24f-2 Notice on February 21, 1997 for Registrant's
fiscal year ended December 31, 1996.

<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE - LANDMARK NEW YORK TAX FREE INCOME FUND
- ------------------------------------------------------------------------------------------------------------------------------
PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF SECURITIES BEING AMOUNT OF SHARES BEING OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED UNDER RULE 24E-2 SHARE* PRICE** FEE
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Shares of Beneficial Interest
without par value............ 1,595,466.610 $11.24 $0
- ------------------------------------------------------------------------------------------------------------------------------

*Pursuant to Rule 457(c), this was the maximum offering price per share of the Registrant's shares at the close of business
on April 14, 1997.
**Computed under 17 CFR 270.24e; 1,595,466.610 shares were redeemed or repurchased during the fiscal year ended December 31,
1995, none of which were used for reductions in previous filings during the current year under Rule 24f-2 and 1,595,466.610
of which are being used for reduction in this Post-Effective Amendment No. 18.
</TABLE>

- -------------------------------------------------------------------------------
+Formerly, Landmark New York Tax Free Income Fund.
<PAGE>
LANDMARK TAX FREE INCOME FUNDS
(LANDMARK NATIONAL TAX FREE INCOME FUND AND
LANDMARK NEW YORK TAX FREE INCOME FUND)

REGISTRATION STATEMENT ON FORM N-1A

CROSS REFERENCE SHEET

<TABLE>
<CAPTION>
N-1A
ITEM NO. N-1A ITEM LOCATION
<C> <S> <C>
PART A PROSPECTUS

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; Classes of Shares;
Voting and Other Rights; Purchases;
Exchanges; Redemptions; Dividends 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

STATEMENT OF
ADDITIONAL
PART B INFORMATION

Item 10. Cover Page............................................. Cover Page
Item 11. Table of Contents...................................... Cover Page
Item 12. General Information and History........................ The Funds
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; Valuation of Securities;
Additional Purchase and Redemption
Information
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
- --------------------------------------------------------------------------------
MAY 1, 1997

LANDMARK NATIONAL TAX FREE INCOME FUND
LANDMARK NEW YORK TAX FREE INCOME FUND
(Members of the Landmark(SM) Family of Funds)
Class A and B Shares

This Prospectus describes two mutual funds in the Landmark Family of Funds:
Landmark National Tax Free Income Fund and Landmark New York Tax Free Income
Fund. Each Fund has its own investment objectives and policies. Citibank,
N.A. is the investment adviser.
- --------------------------------------------------------------------------------

REMEMBER THAT SHARES OF THE FUNDS:

o ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY
o ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, CITIBANK
OR ANY OF ITS AFFILIATES
o ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED

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

This Prospectus concisely sets forth information about the Funds that a
prospective investor should know before investing. A Statement of Additional
Information dated May 1, 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 Funds may be made, by contacting the investor's Shareholder
Servicing Agent (see inside back cover for address and phone number).

This Prospectus shall not constitute an offer to sell or the solicitation
of an offer to buy, nor shall there be any sales of these securities in any
state in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.

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

----------------------------------------------------
TABLE OF CONTENTS

2 Prospectus Summary
-----------------------------------------------
4 Expense Summary
-----------------------------------------------
6 Condensed Financial Information
-----------------------------------------------
8 Investment Information
-----------------------------------------------
9 Risk Considerations
-----------------------------------------------
Valuation of Shares
10 Classes of Shares
-----------------------------------------------
12 Purchases
-----------------------------------------------
15 Exchanges
-----------------------------------------------
16 Redemptions
-----------------------------------------------
Dividends and Distributions
17 Management
-----------------------------------------------
20 Tax Matters
-----------------------------------------------

Performance Information
21 General Information
-----------------------------------------------
22 Appendix -- Permitted Investments
and Investment Practices

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

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 FUNDS: This Prospectus describes two mutual funds: Landmark National Tax
Free Income Fund and Landmark New York Tax Free Income Fund. Each Fund has its
own investment objectives and policies. There can be no assurance that either
Fund will achieve its objectives.

INVESTMENT OBJECTIVES AND POLICIES:
LANDMARK NATIONAL TAX FREE INCOME FUND. The Fund's objectives are to
generate high levels of current income exempt from federal income taxes and to
preserve the value of its shareholders' investment. The Fund invests primarily
in municipal obligations that pay interest that is exempt from federal income
taxes.

LANDMARK NEW YORK TAX FREE INCOME FUND. The Fund's objectives are to
generate high levels of current income exempt from federal, New York State and
New York City personal income taxes and to preserve the value of its
shareholders' investment. The Fund invests primarily in municipal obligations
that pay interest that is exempt from federal, New York State and New York City
personal income taxes.

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 $81 billion in assets worldwide.
The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS" or the "Distributor")
is the distributor of shares of each Fund. See "Management."

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

PRICING: Investors may select Class A or Class B shares, with different
expense levels and sales charges (if available through the investors'
Shareholder Servicing Agents). See "Classes of Shares," "Purchases" and
"Management -- Distribution Arrangements."

CLASS A SHARES. Offered at net asset value plus any applicable initial sales
charge (maximum of 4.00% of the public offering price) and subject to a
distribution fee at the annual rate of 0.05% of the average daily net assets
represented by the Class A shares. Purchases of $1 million or more are not
subject to an initial sales charge, but are subject to a 1.00% contingent
deferred sales charge in the event of certain redemptions within 12 months
following purchase.

The sales charge on Class A shares may be reduced or eliminated through
the following programs:
Letter of Intent
Right of Accumulation
Reinstatement Privilege
See "Purchases" and "Redemptions."

CLASS B SHARES. Offered at net asset value (a maximum contingent deferred
sales charge of 5.00% of the lesser of the shares' net asset value at
redemption or their original purchase price is imposed on certain redemptions
made within six years of the date of purchase) and subject to a distribution
fee at the annual rate of 0.75% of the average daily net assets represented by
Class B shares and a service fee at the annual rate of 0.05% of the average
daily net assets represented by Class B shares. Class B shares automatically
convert into Class A shares (which have a lower distribution fee)
approximately eight years after purchase.

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

DIVIDENDS: Dividends are declared and paid monthly for each Fund. Net capital
gains are distributed annually. See "Dividends and Distributions."

REINVESTMENT: All dividend and capital gain distributions may be received
either in cash or in Fund shares of the same class at net asset value, subject
to the policies of a shareholder's Shareholder Servicing Agent. See "Dividends
and Distributions."

WHO SHOULD INVEST: Each Fund has its own suitability considerations and risk
factors, as summarized below and described in more detail in "Investment
Information" and "Risk Considerations." No single Fund is intended to provide
a complete investment program.

NATIONAL TAX FREE INCOME FUND. The Fund is designed for investors seeking
current income that is exempt from federal income taxes. Investors should be
willing to accept fluctuation in the price of shares of the Fund.

NEW YORK TAX FREE INCOME FUND. The Fund is designed for investors seeking
current income that is exempt from federal, New York State and New York City
personal income taxes. Investors should be willing to accept fluctuation in
the price of shares of the Fund and to bear the increased risk of an
investment portfolio that is concentrated in obligations of New York and its
political subdivisions.

RISK FACTORS: There can be no assurance that either Fund will achieve its
investment objectives. Each Fund's net asset value will fluctuate based on
changes in the values of the underlying portfolio securities. As a result, an
investor's shares may be worth more or less at redemption than at the time of
purchase.

The value of fixed income securities, including municipal obligations,
generally goes down when interest rates go up, and vice versa. Changes in
interest rates will generally cause bigger changes in the prices of longer-
term securities than in the prices of shorter-term securities.

Prices of fixed income securities also fluctuate based on changes in the
actual and perceived creditworthiness of issuers. The prices of lower rated
securities often fluctuate more than those of higher rated securities. Also,
it is possible that some issuers will be unable to make required payments on
fixed income securities held by each Fund.

Each Fund is a non-diversified mutual fund, which means that it may invest
a relatively high percentage of its assets in the obligations of a limited
number of issuers. The New York Tax Free Income Fund's investments are, under
normal circumstances, concentrated in municipal obligations of New York
issuers. As a result, each Fund is more susceptible than more diversified
funds to any single economic, political or regulatory occurrence, and the New
York Tax Free Income Fund is particularly susceptible to occurrences affecting
New York issuers. New York State, New York City and other New York
governmental authorities have experienced financial difficulties, and as a
result the credit ratings of some of their municipal obligations have been
downgraded.

Certain investment practices may also entail special risks. 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 Class A and B shares of each Fund.*

------------------------------------------
NEW YORK TAX
NATIONAL TAX FREE FREE
INCOME FUND INCOME FUND

CLASS A CLASS B CLASS A CLASS B
- ------------------------------------------------------------------------------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) . 4.00% None 4.00% None
Maximum Contingent Deferred Sales
Charge (as a percentage of original
purchase price or redemption See See
proceeds, whichever is less) ........ Below(1) 5.00% Below(1) 5.00%
ANNUAL FUND OPERATING EXPENSES AFTER
FEE WAIVERS (AS A PERCENTAGE OF
AVERAGE NET ASSETS):
Investment Management Fee(2) .......... 0.25% 0.25% 0.19% 0.19%
12b-1 Fees (including service fees
for Class B shares)(2)(3) ........... 0.05% 0.80% 0.05% 0.80%
Other Expenses
Administrative Services Fees(2) ..... 0.10% 0.10% 0.09% 0.09%
Shareholder Servicing Agent Fees .... 0.25% 0.25% 0.25% 0.25%
Other Operating Expenses ............ 0.15%(2) 0.15%(2) 0.22% 0.22%
Total Fund Operating Expenses(2) ...... 0.80% 1.55% 0.80% 1.55%

* This table is intended to assist investors in understanding the various
costs and expenses that a shareholder of a Fund will bear, either directly
or indirectly.
Because Class B shares were not offered during the most recent fiscal year of
the Funds, certain figures in the table are based on estimated amounts for the
current fiscal year. The table shows the fees paid to various service
providers after giving effect to expected voluntary partial fee waivers and
reimbursements. There can be no assurance that the fee waivers and
reimbursements reflected in the table will continue at these levels.

(1) Purchases of $1 million or more are not subject to an initial sales
charge; however, a contingent deferred sales charge of 1.00% will be
imposed in the event of certain redemptions within 12 months following
purchase. See "Classes of Shares" and "Purchases."

(2) Absent fee waivers and reimbursements, investment management fees, rule
12b-1 fees, administrative services fees, other operating expenses and
total fund operating expenses would be .40%, .10%, .40%, 7.08% and 8.23%
for Landmark National Tax Free Income Fund -- Class A and .40%, .85%,
.40%, 7.08% and 9.08% of Landmark National Tax Free Income Fund -- Class
B. Absent fee waivers and reimbursements, investment management fees,
12b-1 fees, administrative service fees and total fund operating expenses
would be .40%, .20%, .25% and 1.32% for Landmark New York Tax Free Income
Fund -- Class A; and .40%, .95%, .25% and 2.07% for Landmark New York Tax
Free Income Fund -- Class B. The foregoing 12b-1 fees for Class A shares
assume a 0.05% charge for print or electronic media expenses.
(3) 12b-1 distribution fees are asset-based sales charges. Long-term
shareholders in a 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. The figures for the Class
B shares include service fees, which are payable at the annual rate of
0.05% of the average daily net assets represented by Class B shares.

EXAMPLE: A shareholder would pay the following expenses on a $1,000
investment, assuming, except as otherwise noted, redemption at the end of each
period indicated below:
<PAGE>

ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
NATIONAL TAX FREE INCOME FUND
Class A shares(1) ................... $48 $65 $ 83 $135
Class B shares:
Assuming complete redemption at
end of period(2) .............. $66 $79 $104 $164
Assuming no redemption .......... $16 $49 $ 84 $164

ONE THREE FIVE TEN
YEAR YEARS YEARS YEARS
- --------------------------------------------------------------------------------
NEW YORK TAX FREE INCOME FUND
Class A shares(1) ................. $48 $65 $ 83 $135
Class B shares:
Assuming complete redemption at
end of period(2)(3) ............. $66 $79 $104 $164
Assuming no redemption(3) ....... $16 $49 $ 84 $164
- ----------
(1) Assumes deduction at the time of purchase of the maximum 4.00% sales load.
(2) Assumes deduction at the time of redemption of the maximum applicable
contingent deferred sales charge.
(3) Ten-year figures assume conversion of Class B shares to Class A shares
approximately eight years after purchase.

The Example assumes a 5% annual return and that all dividends are reinvested
and reflects certain voluntary fee waivers. If waivers were not in place, the
amounts in the example would be $118, $266, $404 and $714 for National Tax
Free Income Fund -- Class A; $138, $284, $426 and $726 for National Tax Free
Income Fund -- Class B (assuming complete redemption at the end of each
period); $53, $80, $109 and $193 for New York Tax Free Income Fund -- Class A;
and $71, $95, $131 and $217 for New York Tax Free Income Fund -- Class B
(assuming complete redemption at the end of each period). Expenses for Class A
shares are based on each Fund's fiscal year ended December 31, 1996. Expenses
for Class B shares are estimated because Class B shares were not offered
during the fiscal year ended December 31, 1996. 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 any Fund's future performance. THE EXAMPLE
SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OF ANY
FUND. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.

<PAGE>
CONDENSED FINANCIAL INFORMATION
- --------------------------------------------------------------------------------

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

<TABLE>
<CAPTION>
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NEW YORK TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS
CLASS A SHARES
(No Class B shares were outstanding during these periods.)

FOUR
MONTHS
ENDED
YEAR ENDED DEC. 31, DEC. 31, YEAR ENDED AUGUST 31,
1996 1995 1994 1993(a) 1993 1992 1991 1990 1989 1988 1987++
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
beginning of period ... $11.25 $10.09 $11.54 $11.44 $10.82 $10.27 $ 9.77 $ 9.89 $ 9.34 $ 9.49 $10.00
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Income from Operations:
Net investment income .. 0.585 0.607 0.566 0.210 0.567 0.589 0.583 0.565 0.577 0.586 0.575
Net realized and
unrealized gain (loss)
on investments .... (0.267) 1.153 (1.415) 0.076 0.610 0.541 0.510 (0.117) 0.550 (0.156) (0.517)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Total from
operations ....... 0.318 1.760 (0.849) 0.286 1.177 1.130 1.093 0.448 1.127 0.430 0.058
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Less Dividends From:
Net investment income (0.588) (0.600) (0.601) (0.186) (0.557) (0.580) (0.593) (0.568) (0.577) (0.580) (0.568)
------ ------ ------ ------ ------ ------ ------ ------ ------ ------ ------
Net Asset Value, end of
period ............... $10.98 $11.25 $10.09 $11.54 $11.44 $10.82 $10.27 $ 9.77 $ 9.89 $9.340 $9.490
====== ====== ====== ====== ====== ====== ====== ====== ====== ====== ======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000's omitted) . $82,182 $90,264 $86,399 $120,824 $111,583 $81,185 $73,884 $76,442 $73,790 $70,050 $92,850
Ratio of expenses to
average net assets ..... 0.80% 0.80% 0.80% 0.80%+ 0.80% 0.80% 0.81% 1.37% 1.42% 1.25% 0.72%+
Ratio of net investment
income to average
net assets ........... 5.34% 5.62% 5.52% 4.84%+ 5.11% 5.58% 5.82% 5.73% 5.95% 6.34% 6.18%+
Portfolio turnover ..... 47% 98% 150% 46% 149% 143% 337% 170% 204% 107% 114%
Total return ........... 3.01% 17.89% (7.47%) 2.52%** 11.19% 11.31% 11.52% 4.66% 12.49% 4.67% 0.54%+

Note: If certain agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the periods indicated
and expenses were not reduced for fees paid
indirectly for the years after December 31, 1994, the net investment income per share and the ratios would have been as follows:

Net investment income
per share ............ $0.534 $0.555 $0.508 $0.191 $0.515 $0.537 $0.540 $0.561 * $0.586 $0.519
RATIOS:
Expenses to average net
assets ............... 1.27% 1.27% 1.27% 1.23%+ 1.27% 1.30% 1.24% 1.40% * 1.26% 1.33%+
Net investment income to
average net assets ... 4.87% 5.15% 5.05% 4.40%+ 4.64% 5.09% 5.39% 5.69% * 6.33% 5.57%+

* No waiver or assumption of expenses during the period.
** Not annualized.
+ Annualized.
++ For the period from the start of business, September 8, 1986 to August 31, 1987.
(A) Effective September 1, 1993, the Fund changed its fiscal year end from August 31 to December 31.
</TABLE>

---------------------------------------
NATIONAL TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS
CLASS A SHARES
(No Class B shares were outstanding
during these periods.)

AUGUST 17, 1995
YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, OPERATIONS) TO
1996 DECEMBER 31, 1995
----------------- -----------------
- --------------------------------------------------------------------------------
Net Asset Value, beginning of period ... $10.55 $10.00
------ ------
Income from Operations:

Net investment income .................. 0.562 0.187

Net realized and unrealized gain (loss)
on investments ....................... (0.232) 0.551
------ ------
Total from operations .............. 0.330 0.738
------ ------
Less Dividends From:

Net investment income ................ (0.540) (0.188)
------ ------
Net Asset Value, end of period ......... $10.34 $10.55
====== ======
RATIOS/SUPPLEMENTAL DATA:

Net assets, end of period (000's
omitted) ............................. $2,060 $1,306

Ratio of expenses to average net assets 0% 0%

Ratio of net investment income to
average net assets ................... 5.42%+ 5.20%+

Portfolio turnover ..................... 52% 0%

Total return ........................... 3.31% 7.43%**

Note: If certain agents of the Fund had not voluntarily agreed to waive all or
a portion of their fees for the period, expenses were not reduced for fees
paid indirectly and had expenses been limited to that required by state
securities laws in 1995, the net investment income per share and the ratios
would have been as follows:

Net investment income per share ........ $(0.291) $0.098
RATIOS:
Expenses to average net assets ......... 8.23% 2.50%+
Net investment income to average net
assets ............................... (2.81)% 2.70%+
+Annualized.
**Not annualized.

<PAGE>
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------

INVESTMENT OBJECTIVES: The investment objectives of the NATIONAL TAX FREE
INCOME FUND are to generate high levels of current income exempt from federal
income taxes and to preserve the value of its shareholders' investment.

The investment objectives of the NEW YORK TAX FREE INCOME FUND are to
generate high levels of current income exempt from federal, New York State and
New York City personal income taxes and to preserve the value of its
shareholders' investment.

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

INVESTMENT POLICIES: The NATIONAL TAX FREE INCOME FUND seeks its objectives
by investing in debt securities consisting primarily of obligations issued by
state and municipal governments and by other qualifying issuers ("Municipal
Obligations") that pay interest that is exempt from federal income taxes
including the federal alternative minimum tax ("tax-exempt Municipal
Obligations"). Under normal circumstances at least 80% of the Fund's assets
will be invested in tax-exempt Municipal Obligations.

The National Tax Free Income Fund may invest in short-term debt securities
that pay interest that is subject to federal income taxes, including those
issued by companies, the U.S. Government or agencies of the U.S. Government.
Except for temporary defensive purposes no more than 20% of the Fund's net
assets will be invested in debt securities that pay interest subject to
federal income tax.

The NEW YORK TAX FREE INCOME FUND seeks its objectives by investing in
Municipal Obligations that pay interest that is exempt from federal, New York
State and New York City personal income taxes including the federal
alternative minimum tax ("triple tax-exempt Municipal Obligations"). Under
normal circumstances at least 80% of the Fund's assets will be invested in
triple tax-exempt Municipal Obligations.

The New York Tax Free Income Fund may invest in Municipal Obligations
paying interest that is exempt from federal income taxes but subject to New
York State and New York City personal income taxes. The Fund may also invest
in short-term debt securities that pay interest that is subject to federal,
New York State and New York City personal income taxes, including those issued
by companies, the U.S. Government or agencies of the U.S. Government. Except
for temporary defensive purposes no more than 20% of the Fund's net assets
will be invested in debt securities that pay interest subject to federal
income tax or New York State or New York City personal income taxes.

Municipal Obligations include municipal bonds, notes and commercial paper
issued by the states, territories and possessions of the United States
(including the District of Columbia) and their political subdivisions,
agencies and instrumentalities, and obligations of other qualifying issuers.
The Funds may invest both in "general obligation" bonds, which are backed by
the full faith, credit and taxing power of the issuer, and in "revenue" bonds,
which are payable only from the revenues generated by a specific project or
from another specific revenue source.

Each Fund will invest only in cash and in debt securities that either (i)
carry at least a Baa rating from Moody's Investor's Service, Inc., or a BBB
rating from Standard & Poor's Ratings Group, or are considered by the Adviser
to be of equivalent quality, (ii) are issued or guaranteed by the U.S.
Government or one of its agencies or instrumentalities, or (iii) are
obligations (including certificates of deposit, bankers' acceptances and
repurchase agreements) of banks with at least $1 billion of assets.

Securities rated Baa or BBB, while considered "investment grade," have
speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments on bonds rated Baa or BBB than is the case for higher
grade securities. Investors should review Appendix B to the Statement of
Additional Information for a description of credit ratings.

Under normal market conditions, the weighted average maturity of
securities held by each Fund is in a long-term range (between 10 and 30
years). While long-term debt securities tend to generate a higher rate of
current income than short-term debt securities, the prices of long-term debt
securities generally fluctuate more in response to interest rate changes and
other factors than the prices of short-term debt securities. Therefore,
investors in each Fund should be willing to accept fluctuation in the price of
shares of the Fund.

CERTAIN ADDITIONAL INVESTMENT POLICIES:
TEMPORARY INVESTMENTS. During periods of unusual economic or market
conditions or for temporary defensive purposes or liquidity, each Fund may
invest without limit in cash and in U.S. dollar-denominated high quality money
market and short-term instruments. These investments may result in a lower
yield than would be available from investments with a lower quality or longer
term and the interest on these investments may be subject to tax.

OTHER PERMITTED INVESTMENTS. For more information regarding the Funds'
permitted investments and investment practices, see the Appendix -- Permitted
Investments and Investment Practices on page 22. The Funds will not
necessarily invest or engage in each of the investments and investment
practices in the Appendix but reserve the right to do so.

INVESTMENT RESTRICTIONS. The Statement of Additional Information contains
a list of specific investment restrictions which govern the investment
policies of the Funds, including a limitation that each Fund may borrow money
from banks in an amount not to exceed 33 1/3% of the Fund's net assets for
extraordinary or emergency purposes (e.g., to meet redemption requests).
Except as otherwise indicated, the Funds' investment objectives 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 a Fund's securities will not be a violation of policy.

PORTFOLIO TURNOVER. Securities of each Fund will be sold whenever the
Adviser believes it is appropriate to do so in light of the Fund's investment
objectives, without regard to the length of time a particular security may
have been held. Each Fund's portfolio turnover rate appears in the Financial
Highlights for the Fund. See "Condensed Financial Information." The amount of
transaction costs and realization of taxable capital gains will tend to
increase as the level of portfolio activity increases.

BROKERAGE TRANSACTIONS. The primary consideration in placing each 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 each 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.

CHANGES IN NET ASSET VALUE. Each Fund's net asset value will fluctuate
based on changes in the values of the underlying portfolio securities. This
means that an investor's shares may be worth more or less at redemption than
at the time of purchase.

INTEREST RATE RISK. The value of fixed income securities, including
Municipal Obligations, generally goes down when interest rates go up, and vice
versa. Furthermore, the value of fixed income securities may vary based on
anticipated or potential changes in interest rates. Changes in interest rates
will generally cause bigger changes in the prices of longer-term securities
than in the prices of shorter-term securities.

CREDIT RISK. Prices of fixed income securities fluctuate based on changes
in the actual and perceived creditworthiness of issuers. The prices of lower
rated securities often fluctuate more than those of higher rated securities.
It is possible that some issuers will be unable to make required payments on
fixed income securities held by a Fund.

"REVENUE" OBLIGATIONS. Each Fund may invest in Municipal Obligations that
are payable only from the revenues generated from a specific project or from
another specific revenue source. Each Fund may invest more than 25% of its
assets in (i) industrial revenue bonds issued to finance industrial projects,
and (ii) Municipal Obligations issued to finance housing, electrical utilities
and hospitals (although each Fund may not invest more than 25% of its assets
at any time in debt securities financing any one of housing, electrical
utilities, or hospitals, considered as three separate categories). Projects
may suffer construction delays, increased costs or reduced revenues as a
result of political, regulatory, economic and other factors. As a result
projects may not generate sufficient revenues to pay principal and interest on
Municipal Obligations held by a Fund.

NON-DIVERSIFIED FUNDS. Each Fund is a non-diversified mutual fund. This
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 (although certain diversification requirements are
imposed by the Internal Revenue Code). Since each Fund may invest a relatively
high percentage of its assets in the obligations of a limited number of
issuers, the value of shares of each Fund may be more susceptible to any
single economic, political or regulatory occurrence. The New York Tax Free
Income Fund is particularly susceptible to occurrences affecting New York
issuers. Each 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
more diversified mutual funds.

NEW YORK SECURITIES. The New York Tax Free Income Fund's investments are,
under normal circumstances, concentrated in Municipal Obligations of New York
issuers. Payment of interest and principal of these securities is dependent on
the continuing ability of issuers in New York to meet their obligations.

Investors in the New York Tax Free Income Fund should consider carefully
the special risks inherent in investing in New York Municipal Obligations.
These risks result from the financial condition of New York State, certain of
its public bodies and municipalities, and New York City. Beginning in early
1975, New York State, New York City and other State entities faced serious
financial difficulties which jeopardized the credit standing and impaired the
borrowing abilities of such entities and contributed to high interest rates
on, and lower market prices for, debt obligations issued by them. These
financial difficulties caused the credit ratings of certain New York Municipal
Obligations to be downgraded by ratings agencies. A recurrence of such
financial difficulties or a failure of certain financial recovery programs
could result in defaults or declines in the market values of various New York
Municipal Obligations in which the New York Tax Free Fund may invest. There
can be no assurance that credit ratings on obligations of New York State, New
York City and other New York governmental authorities will not be downgraded
further. Investors in this Fund should consider the greater risks inherent in
the Fund's concentration in these securities when compared with the safety
that comes with a less geographically concentrated investment portfolio.
Further information is set forth in the Statement of Additional Information.

INVESTMENT PRACTICES. Certain of the investment practices employed for the
Funds may entail certain risks. These risks are in addition to risks described
above and are described in the Appendix. See the Appendix -- Permitted
Investments and Investment Practices on page 22.

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

Net asset value per share of each class of shares of each 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 the close of
regular trading on the Exchange (normally 4:00 p.m. Eastern time) by adding
the market value of all securities and other assets attributable to a class of
a Fund, then subtracting the liabilities charged to the class, and then
dividing the result by the number of outstanding shares of the class. Per
share net asset value of each class of a Fund's shares may differ because
Class B shares bear higher expenses than Class A shares. The net asset value
per share is effective for orders received and accepted by the Distributor
prior to its calculation.

Portfolio securities and other assets are valued primarily on the basis of
market quotations, or if quotations are not available, by a method believed to
accurately reflect fair value.

CLASSES OF SHARES
- --------------------------------------------------------------------------------

DIFFERENCES BETWEEN THE CLASSES: Class A and B shares of a Fund represent
interests in the same mutual fund. The primary distinctions between the classes
of each Fund's shares are their initial and contingent deferred sales charge
structures and their ongoing expenses, including service fees and asset-based
sales charges in the form of distribution fees. These differences are summarized
in the following able. Each class has distinct advantages and disadvantages for
different investors, and investors may choose the class that best suits their
circumstances and objectives.

<TABLE>
<CAPTION>
ANNUAL 12B-1 FEES
(AS A PERCENTAGE OF
SALES CHARGE AVERAGE DAILY NET ASSETS) OTHER INFORMATION
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
CLASS A Maximum initial sales charge of 4.00% Distribution fee of Initial sales charge waived or reduced for
of the public offering price 0.05% certain purchases; a contingent deferred
sales charge may apply in certain instances
where the initial sales charge is waived
CLASS B Maximum contingent deferred sales charge of Distribution fee of Shares convert to Class A shares
5.00% of the lesser of redemption proceeds 0.75%. approximately eight years after issuance
or original purchase price; declines to Service fee of 0.05%
zero after six years
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

FACTORS TO CONSIDER IN CHOOSING A CLASS OF SHARES:In deciding which class of
shares to purchase, investors should consider the cost of sales charges together
with the cost of the ongoing annual expenses described below, as well as any
other relevant facts and circumstances.

SALES CHARGES. Class A shares are sold at net asset value plus an initial
sales charge of up to 4.00% of the public offering price (except that for
purchases of $1 million or more, no initial sales charge is imposed and a
contingent deferred sales charge may be imposed instead). Because of this
initial sales charge, not all of a Class A shareholder's purchase price is
invested in a Fund. Class B shares are sold with no initial sales charge, so the
entire amount of a Class B shareholder's purchase price is immediately invested
in a Fund. A contingent deferred sales charge (up to 5.00% of the lesser of the
shares' net asset value at redemption or their original purchase price) applies
to redemptions made within six years of purchase.

WAIVERS AND REDUCTIONS OF SALES CHARGES. Class A share purchases totalling
at least $100,000 and Class A share purchases made under a Fund's reduced sales
charge plan may be made at a reduced sales charge. In considering the combined
cost of sales charges and ongoing annual expenses, investors should take into
account any reduced sales charges on Class A shares for which they may be
eligible.

The entire initial sales charge on Class A shares is waived for certain
eligible purchasers. However, a 1.00% contingent deferred sales charge is
imposed on certain redemptions of Class A shares on which no initial sales
charge was assessed. Because Class A shares bear lower ongoing annual expenses
than Class B shares, in most cases investors eligible for reduced initial sales
charges should purchase Class A shares.

The contingent deferred sales charge may be waived upon redemption of
certain Class B shares. See "Purchases."

ONGOING ANNUAL EXPENSES. Class A shares pay an annual 12b-1 distribution fee
of 0.05% of average daily net assets. Class B shares pay an annual 12b-1
distribution fee of 0.75% of average daily net assets and an annual service fee
of 0.05% of average daily net assets represented by Class B shares. Annual 12b-1
distribution fees are a form of asset-based sales charge.

CONVERSION OF CLASS B SHARES: A shareholder's Class B shares will automatically
convert to Class A shares in the same Fund approximately eight years after the
date of issuance, together with a pro rata portion of all Class B shares
representing dividends and other distributions paid in additional Class B
shares. The conversion will be effected at the relative net asset values per
share of the two classes on the first Business Day of the month in which the
eighth anniversary of the issuance of the Class B shares occurs. If a
shareholder effects one or more exchanges among Class B shares of the Landmark
Funds during the eight-year period, the holding periods for the shares so
exchanged will be counted toward the eight-year period. Because the per share
net asset value of the Class A shares may be higher than that of the Class B
shares at the time of conversion, a shareholder may receive fewer Class A shares
than the number of Class B shares converted, although the dollar value will be
the same. See "Valuation of Shares." The conversion of Class B shares to Class A
shares is subject to the continuing availability of a ruling from the Internal
Revenue Service or an opinion of counsel that the conversion will not constitute
a taxable event for federal tax purposes. There can be no assurance that such a
ruling or opinion will be available, and the conversion of Class B shares to
Class A shares will not occur if such ruling or opinion is not available. In
that event, Class B shares would continue to be subject to higher expenses than
Class A shares for an indefinite period.

OTHER INFORMATION: See "Purchases," "Redemptions" and "Management --
Distribution Arrangements" for a more complete description of the initial and
contingent deferred sales charges and distribution fees for each class of
shares of each Fund. By purchasing shares an investor agrees to the imposition
of initial and deferred sales charges as described in this Prospectus.

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

Each Fund offers two classes of shares, Class A and B shares, with
different expense levels and sales charges. See "Classes of Shares" for more
information. WHEN PLACING PURCHASE ORDERS, INVESTORS SHOULD SPECIFY WHETHER
THE ORDER IS FOR CLASS A OR CLASS B SHARES. ALL SHARE PURCHASE ORDERS THAT
FAIL TO SPECIFY A CLASS AUTOMATICALLY WILL BE INVESTED IN CLASS A SHARES.

Shares of the Funds are offered continuously and may be purchased on any
Business Day at the public offering price 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. Such
a bank or financial institution will receive transaction fees that are equal
to the commissions paid to securities brokers. Shares of the Funds 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 a Fund). A
securities broker may receive both commissions and shareholder servicing fees.
An investor's Shareholder Servicing Agent may not make available both classes
of shares. The public offering price is the net asset value next determined
after an order is transmitted to and accepted by the Distributor, plus any
applicable sales charge for Class A shares. Each Shareholder Servicing Agent
is required to promptly forward orders for Fund shares to the Distributor.
Each 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.

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 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 such 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 unless they are in proper form.

PURCHASING CLASS A SHARES: INITIAL SALES CHARGE -- CLASS A SHARES. Each Fund's
public offering price of Class A shares is the net asset value next determined
after an order is transmitted to and accepted by the Distributor, plus any
applicable sales charge, which will vary with the size of the purchase as
shown in the following table:

SALES CHARGE AS
PERCENTAGE OF THE BROKER
----------------- COMMISSION
PUBLIC NET AS PERCENTAGE
AMOUNT OF PURCHASE AT THE OFFERING AMOUNT OF THE PUBLIC
PUBLIC OFFERING PRICE PRICE INVESTED OFFERING PRICE
- ----------------------------------------------------------------------------
Less than $100,000 .............. 4.00% 4.17% 3.56%
$100,000 to less than $250,000 .. 3.25% 3.36% 2.89%
$250,000 to less than $500,000 .. 2.50% 2.56% 2.23%
$500,000 to less than $1,000,000 2.00% 2.04% 1.78%
$1,000,000 or more .............. none* none* none
- ------------
*A contingent deferred sales charge may apply in certain instances.
- ----------------------------------------------------------------------------

SALES CHARGE ELIMINATION -- CLASS A SHARES. Class A shares of the Funds
are available without a sales charge through exchanges for Class A shares of
most other Landmark Funds. See "Exchanges." Also, the sales charge does not
apply to Class A shares acquired through the reinvestment of dividends and
capital gains distributions. Class A shares may be purchased without a sales
charge by:

(i) tax exempt organizations under Section 501(c)(3-13) of the Internal
Revenue Code (the "Code"),

(ii) trust accounts for which Citibank or any subsidiary or affiliate of
Citibank (a "Citibank Affiliate") acts as trustee and exercises
discretionary investment management authority,

(iii) accounts purchasing shares through the Private Client Division of
Citicorp Investment Services, or through other programs accessed through
the Private Client Division of Citicorp Investment Services, or the
private banking division of either Citibank, N.A., Citibank FSB or
Citicorp Trust, N.A.,

(iv) accounts for which Citibank or any Citibank Affiliate performs investment
advisory services,

(v) accounts for which Citibank or any Citibank Affiliate charges fees for
acting as custodian,

(vi) trustees of any investment company for which Citibank or any Citibank
Affiliate serves as the investment adviser or as a shareholder servicing
agent,

(vii) any affiliated person of a Fund, the Adviser, the Distributor, the
Administrator or any Shareholder Servicing Agent,

(viii) shareholder accounts established through a reorganization or similar form
of business combination approved by a Fund's Board of Trustees or by the
Board of Trustees of any other Landmark Fund the terms of which entitle
those shareholders to purchase shares of a Fund or any other Landmark
Fund at net asset value without a sales charge,

(ix) employee benefit plans qualified under Section 401 of the Code, including
salary reduction plans qualified under Section 401(k) of the Code,
subject to such minimum requirements as may be established by the
Distributor with respect to the number of employees or amount of
purchase; currently, these criteria require that (a) the employer
establishing the qualified plan have at least 50 eligible employees or
(b) the amount invested by such qualified plan in a Fund or in any
combination of Landmark Funds totals a minimum of $500,000,

(x) investors purchasing $1 million or more of Class A shares. However, a
contingent deferred sales charge will be imposed on such investments in
the event of certain share redemptions within 12 months following the
share purchase, at the rate of 1.00% of the lesser of the value of the
shares redeemed (exclusive of reinvested dividends and capital gains
distributions) or the total cost of such shares. In determining whether a
contingent deferred sales charge on Class A shares is payable, and if so,
the amount of the charge, it is assumed that shares not subject to the
contingent deferred sales charge are the first redeemed followed by other
shares held for the longest period of time. All investments made during a
calendar month will age one month on the last day of the month and each
subsequent month. Any applicable contingent deferred sales charge will be
deferred upon an exchange of Class A shares for Class A shares of another
Landmark Fund and deducted from the redemption proceeds when such
exchanged shares are subsequently redeemed (assuming the contingent
deferred sales charge is then payable). The holding period of Class A
shares so acquired through an exchange will be aggregated with the period
during which the original Class A shares were held. The contingent
deferred sales charge on Class A shares will be waived under the same
circumstances as the contingent deferred sales charge on Class B shares
will be waived. See "Sales Charge Waivers -- Class B Shares." Any
applicable contingent deferred sales charges will be paid to the
Distributor,

(xi) subject to appropriate documentation, investors where the amount invested
represents redemption proceeds from a mutual fund (other than a Landmark
Fund) if: (i) the redeemed shares were subject to an initial sales charge
or a deferred sales charge (whether or not actually imposed); and (ii)
such redemption has occurred no more than 90 days prior to the purchase
of Class A shares of the Fund, or

(xii) an investor who has a business relationship with an investment consultant
or other registered representative who joined a broker- dealer which has
a sales agreement with the Distributor from another investment firm
within six months prior to the date of purchase by such investor, if (a)
the investor redeems shares of another mutual fund sold through the
investment firm that previously employed that investment consultant or
other registered representative, and either paid an initial sales charge
or was at some time subject to, but did not actually pay, a deferred
sales charge or redemption fee with respect to the redemption proceeds,
(b) the redemption is made within 60 days prior to the investment in a
Fund, and (c) the net asset value of the shares of the Fund sold to that
investor without a sales charge does not exceed the proceeds of such
redemption.

REDUCED SALES CHARGE PLANS -- CLASS A SHARES. An individual who is a
member of a qualified group may purchase Class A shares of a Fund at the
reduced sales charge applicable to the group as a whole. The sales charge is
based upon the aggregate dollar value of Class A shares previously purchased
and still owned by the group, plus the amount of the purchase. A "qualified
group" is one which (i) has been in existence for more than six months, (ii)
has a purpose other than acquiring Fund shares at a discount, and (iii)
satisfies uniform criteria which enable the Distributor to realize economies
of scale in its costs of distributing shares. A qualified group must have more
than ten members, must be available to arrange for group meetings between
representatives of the Fund and the members, must agree to include sales and
other materials related to the Fund in its publications and mailings to
members at reduced or no cost to the Distributor, and must seek to arrange for
payroll deduction or other bulk transmission of investments to the Fund.

Reduced initial sales charges on Class A shares also may be achieved
through a RIGHT OF ACCUMULATION or a LETTER OF INTENT. Under a RIGHT OF
ACCUMULATION eligible investors are permitted to purchase Class A shares of a
Fund at the public offering price applicable to the total of (a) the dollar
amount then being purchased, plus (b) an amount equal to the then-current net
asset value or cost (whichever is higher) of the purchaser's combined holdings
in the Landmark Funds. The Right of Accumulation may be amended or terminated
at any time.

PURCHASING CLASS B SHARES: CONTINGENT DEFERRED SALES CHARGE -- CLASS B SHARES.
Each Fund's public offering price of Class B shares is the net asset value
next determined after an order is transmitted to and accepted by the
Distributor, and no initial sales charge is imposed. A contingent deferred
sales charge, however, is imposed upon certain redemptions of Class B shares.

Class B shares of a Fund that are redeemed will not be subject to a
contingent deferred sales charge to the extent that the value of such shares
represents (i) capital appreciation of Fund assets, (ii) reinvestment of
dividends or capital gains distributions or (iii) shares redeemed more than
six years after their purchase. Otherwise, redemptions of Class B shares will
be subject to a contingent deferred sales charge. The amount of any applicable
contingent deferred sales charge will be calculated by multiplying the lesser
of net asset value of such shares at the time of redemption or their original
purchase price by the applicable percentage shown in the following table.

CONTINGENT
DEFERRED
REDEMPTION DURING SALES CHARGE
- -------------------------------------------------------
lst Year Since Purchase ............ 5.00%
2nd Year Since Purchase ............ 4.00%
3rd Year Since Purchase ............ 3.00%
4th Year Since Purchase ............ 3.00%
5th Year Since Purchase ............ 2.00%
6th Year Since Purchase ............ 1.00%
7th Year (or Later) Since Purchase . None
- -------------------------------------------------------

In determining the applicability and rate of any contingent deferred sales
charge, it will be assumed that a redemption is made first of Class B shares
representing capital appreciation, next of shares representing the
reinvestment of dividends and capital gains distributions and finally of other
shares held by the shareholder for the longest period of time. The holding
period of Class B shares of a Fund acquired through an exchange with another
Landmark Fund will be calculated from the date that the Class B shares were
initially acquired in one of the other Landmark Funds, and Class B shares
being redeemed will be considered to represent, as applicable, capital
appreciation or dividend and capital gains distribution reinvestments in such
other funds. This will result in any contingent deferred sales charge being
imposed at the lowest possible rate. For federal income tax purposes, the
amount of the contingent deferred sales charge will reduce the gain or
increase the loss, as the case may be, on the amount realized on redemption.
Any contingent deferred sales charges will be paid to the Distributor.

SALES CHARGE WAIVERS -- CLASS B SHARES. The contingent deferred sales
charge will be waived for exchanges. In addition, the contingent deferred
sales charge will be waived for a total or partial redemption made within one
year of the death of the shareholder. This waiver is available where the
deceased shareholder is either the sole shareholder or owns the shares with
his or her spouse as a joint tenant with right of survivorship, and applies
only to redemption of shares held at the time of death. The contingent
deferred sales charge also will be waived in connection with:

(i) a lump sum or other distribution in the case of an Individual
Retirement Account ("IRA"), a self-employed individual retirement plan
(so-called "Keogh Plan") or a custodian account under Section 403(b) of
the Code, in each case following attainment of age 59 1/2,
(ii) a total or partial redemption resulting from any distribution following
retirement in the case of a tax-qualified retirement plan, and
(iii) a redemption resulting from a tax-free return of an excess contribution
to an IRA.

Contingent deferred sales charge waivers will be granted subject to
confirmation by a shareholder's Shareholder Servicing Agent of the
shareholder's status or holdings, as the case may be.

Securities dealers and other financial institutions may receive different
compensation with respect to sales of Class A and Class B shares. Shareholder
Servicing Agents which are banks or financial institutions will receive
transaction fees that are equal to the commissions paid to securities brokers.
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 also may make payments for marketing,
promotional or related expenses to dealers who engage in marketing efforts on
behalf of the Funds. The amounts of these payments will be determined by the
Distributor in its sole discretion and may vary among different dealers.

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

Shares of each Fund may be exchanged for shares of the same class of other
Landmark Funds that are made available by a shareholder's Shareholder
Servicing Agent, or may be acquired through an exchange of shares of the same
class of those funds. No initial sales charge is imposed on shares being
acquired through an exchange unless Class A shares are being acquired and the
sales charge of the fund being exchanged into 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). No contingent deferred sales
charge is imposed on shares being disposed of 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 and accepted by the
Distributor. See "Valuation of Shares."

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.

An exchange is treated as a sale of the shares exchanged and could result
in taxable gain or loss to the shareholder making the exchange.

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

Fund shares may be redeemed at their net asset value next determined after
a redemption request in proper form is received by a shareholder's Shareholder
Servicing Agent (subject to any applicable contingent deferred sales charge).
Shareholders may redeem shares of a Fund only by authorizing their Shareholder
Servicing Agents to redeem such shares on their behalf through the
Distributor. If a redeeming shareholder owns shares of more than one class,
Class A shares will be redeemed first unless the shareholder specifically
requests otherwise.

A redemption is treated as a sale of the shares redeemed and could result
in taxable gain or loss to the shareholder making the redemption.

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 Funds 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 next Business Day, but in any event within seven days.
If a shareholder requests redemption of shares which were purchased recently,
a 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; Valuation of Securities; Additional
Purchase and Redemption Information" in the Statement of Additional
Information regarding the Funds' right to pay the redemption price in kind
with securities (instead of cash).

REINSTATEMENT PRIVILEGE. Shareholders who have redeemed Class A shares may
reinstate their Fund account without a sales charge up to the dollar amount
redeemed (with a credit for any contingent deferred sales charge paid) by
purchasing Class A shares of the same Fund within 30 days after the
redemption. To take advantage of this reinstatement privilege, shareholders
must notify their Shareholder Servicing Agents in writing at the time the
privilege is exercised.

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 Exchange is
closed (other than weekends or holidays) or trading on the Exchange is
restricted or if an emergency exists.

DIVIDENDS AND DISTRIBUTIONS
- --------------------------------------------------------------------------------

Substantially all of each Fund's net income from dividends and interest is
paid to its shareholders of record as a dividend monthly, on or about the last
day of each month.

Each Fund's net realized short-term and long-term capital gains, if any,
will be distributed to the Fund's shareholders at least annually, in December.
Each Fund may also make additional distributions to its shareholders to the
extent necessary to avoid the application of the 4% non-deductible excise tax
on certain undistributed income and net capital gains of mutual funds.

Subject to the policies of the shareholder's Shareholder Servicing Agent,
a shareholder may elect to receive dividends and capital gains distributions
in either cash or additional shares of the same class issued at net asset
value without a sales charge. Distributions paid by each Fund with respect to
Class A shares generally will be higher than those paid with respect to Class
B shares because expenses attributable to Class B shares generally will be
higher.

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

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

INVESTMENT ADVISER: CITIBANK. Each 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 $81 billion in assets worldwide. Citibank is a
wholly-owned subsidiary of Citicorp. Citibank's address is 153 East 53rd
Street, New York 10043.

Citibank manages each Fund's assets pursuant to separate Investment
Advisory Agreements. Subject to policies set by the Trustees, Citibank makes
investment decisions for each Fund.

Kevin Connolly, a Vice President of Citibank, has managed the Funds since
April 1997. Mr. Connolly heads the Municipal Bond Group of Citibank Global
Asset Management. His responsibilities include the supervision of trading and
management for over $4.0 billion in tax-exempt securities, including all
municipal bond activities, and the management of institutional, private client
and retail accounts or funds. He directly manages $600 million in both taxable
and tax-exempt accounts for individuals and institutions. Prior to joining
Citibank, Mr. Connolly spent over two years with the Chase Manhattan
Investment Management Group managing fixed income assets and over four years
with Goldman Sachs Asset Management Group.

Management's discussion of each Fund's performance is included in the
Fund's Annual Report to Shareholders, which investors may obtain without
charge by contacting their Shareholder Servicing Agents.

ADVISORY FEES. For its services under the Investment Advisory Agreements,
the Adviser receives advisory fees from each Fund, which are accrued daily and
paid monthly, at an annual rate of 0.40% of the Fund's average daily net
assets on an annualized basis for the Fund's then-current fiscal year. The
Adviser may voluntarily agree to waive a portion of its investment advisory
fees.

For the fiscal year ended December 31, 1996, the fee paid to Citibank
under the Investment Advisory Agreement for the New York Tax Free Income Fund
was, after waivers, 0.19% of the Fund's average daily net assets for that
fiscal year. For the fiscal year ended December 31, 1996, Citibank voluntarily
waived its entire fee under the Investment Advisory Agreement for the National
Tax Free Income Fund.

BANKING RELATIONSHIPS. Citibank and its affiliates may have deposit, loan
and other relationships with the issuers of securities purchased on behalf of
the Funds, 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 Funds 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 Funds. Citibank believes that its
services under the Investment Advisory Agreements 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. If Citibank or its affiliates were to be
prevented from acting as the Adviser, sub-administrator or a Shareholder
Servicing Agent, the Funds would seek alternative means for obtaining these
services. The Funds do not expect that shareholders would suffer any adverse
financial consequences as a result of any such occurrence.

ADMINISTRATIVE SERVICES PLAN: The Funds have an Administrative Services Plan
which provides that the Funds 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 Services Plan, the total of the fees paid to each
Fund's Administrator and Shareholder Servicing Agents may not exceed 0.65% of
the Fund's average daily net assets on an annualized basis for the Fund's
then-current fiscal year. Any distribution fees (other than any fee concerning
electronic or other media advertising) payable under the Distribution Plan for
the Class A shares of the New York Tax Free Income Fund are included in this
percentage limitation for those shares. This limitation does not include any
amounts payable under the Distribution Plan for the Class A shares of the
National Tax Free Income Fund and for the Class B shares of each Fund. Within
this overall limitation, individual fees may vary. See "Administrator,"
"Shareholder Servicing Agents" and "Transfer Agent and Custodian."

ADMINISTRATOR: The Landmark Funds Broker-Dealer Services, Inc. provides
certain administrative services to the Funds under an administrative services
agreement. These administrative services include providing general office
facilities, supervising the overall administration of the Funds, and providing
persons satisfactory to the Board of Trustees to serve as Trustees and
officers of the Funds. These 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 not to exceed 0.25% of the average daily net assets of the New York
Tax Free Income Fund and 0.40% of the average daily net assets of the National
Tax Free Income Fund on an annualized basis for the Fund's then-current fiscal
year. However, the Administrator has voluntarily agreed to waive 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 Funds 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 Funds have 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 each
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 Funds, 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 a 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 AND CUSTODIAN: State Street Bank and Trust Company acts as
transfer agent, dividend disbursing agent and custodian for each Fund.
Securities may be held by a sub-custodian bank approved by the Trustees. The
principal business address of State Street Bank and Trust Company is 225
Franklin Street, Boston, Massachusetts 02110.

DISTRIBUTION ARRANGEMENTS: LFBDS, 6 St. James Avenue, Boston, Massachusetts
02116, (617) 423-1679, is the distributor of shares of each Fund and also
serves as distributor for each of the other Landmark Funds and as a
Shareholder Servicing Agent for certain investors. LFBDS receives distribution
fees from the Funds pursuant to Distribution Plans adopted in accordance with
Rule 12b-1 under the 1940 Act. As distributor, LFBDS also collects the sales
charges imposed on purchases of Class A shares and collects any contingent
deferred sales charges imposed on redemptions of Class A and Class B shares.
In those states where LFBDS is not a registered broker-dealer, shares of the
Funds are sold through Signature Broker-Dealer Services, Inc., as dealer.

The Funds maintain separate Distribution Plans pertaining to Class A
shares and Class B shares. The Class A Plan provides that the Funds may pay
the Distributor a monthly distribution fee at an annual rate not to exceed
0.05% and 0.15% of the average daily net assets represented by Class A shares
of the National Tax Free Income Fund and the New York Tax Free Income Fund,
respectively. Currently, the distribution fee for Class A shares of each Fund
is 0.05% per annum of the average daily net assets represented by Class A
shares. In addition, the Class A Plan for the National Tax Free Income Fund
provides that the Fund may pay the Distributor a monthly service fee at an
annual rate not to exceed 0.25% of the average daily net assets represented by
Class A shares. However, the Fund has not entered into any agreement to pay
this service fee to the Distributor. The Class A Plan also permits the Funds
to pay the Distributor an additional fee (not to exceed 0.05% of the average
daily net assets represented by Class A shares) in anticipation of or as
reimbursement for print or electronic media advertising expenses incurred in
connection with the sale of Class A shares. The Funds did not pay anything
under this provision during 1996 and do not anticipate doing so during the
current fiscal year.

The Class B Plan provides that the Funds may pay the Distributor a monthly
distribution fee and a monthly service fee at annual rates not to exceed,
respectively, 0.75% and 0.25% of the average daily net assets represented by
Class B shares. The Funds have agreed not to pay service fees in an amount in
excess of 0.10% of the average daily net assets represented by Class B shares
(0.20% for the New York Tax Free Income Fund) during the 1997 fiscal year.
Currently the service fee for Class B shares is 0.05% per annum of the average
daily net assets represented by Class B shares.

The Distributor uses the distribution fees under the Plans to offset each
Fund's marketing costs attributable to the classes, such as preparation of
sales literature, advertising, and printing and distributing prospectuses and
other shareholder materials to prospective investors. In addition, the
Distributor may use the distribution fees to pay costs related to distribution
activities, including employee salaries, bonuses and other overhead expenses.
The Distributor also uses the distribution fees under the Class B Plan to
offset the commissions it pays to brokers and other institutions for selling
the Funds' Class B shares. The Funds and the Distributor provide to the
Trustees quarterly a written report of amounts expended pursuant to the Plans
and the purposes for which the expenditures were made.

During the period they are in effect, the Plans and related Distribution
Agreements pertaining to each class of shares obligate the Funds to pay
distribution fees to LFBDS as compensation for its distribution activities,
not as reimbursement for specific expenses incurred. Thus, even if LFBDS's
expenses exceed its distribution fees for a Fund, the Fund will not be
obligated to pay more than those fees and, if LFBDS's expenses are less than
such fees, it will retain its full fees and realize a profit. Each Fund will
pay the distribution fees to LFBDS until either the applicable Plan or
Distribution Agreement is terminated or not renewed. In that event, LFBDS's
expenses in excess of distribution fees received or accrued through the
termination date will be LFBDS's sole responsibility and not obligations of
the Fund. In their annual consideration of the continuation of the Plans for
each Fund, the Trustees will review each Plan and LFBDS's expenses for each
class separately.

Each class of shares of each Fund has exclusive voting rights with respect
to the Plan for that class.

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: Each Fund intends to meet the 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.

Each Fund expects that most of its net income will be attributable to tax-
exempt Municipal Obligations, and, as a result, most of the Fund's dividends
to shareholders will be excludable from shareholders' gross income. However,
each Fund may invest from time to time in taxable securities, and certain Fund
dividends may be subject to the federal alternative minimum tax. Distributions
of capital gains on the sale or other disposition of Fund investments are also
taxable to Fund shareholders. Generally, distributions of short-term net
capital gains will be taxed as ordinary income, and distributions of 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.

Any gains realized by a shareholder on the sale or redemption of Fund
shares are subject to tax. If Fund shares are redeemed after tax-exempt income
has accrued but not yet been declared as a dividend, the portion of redemption
proceeds representing that income may be taxed as a capital gain even though
it would have been tax-exempt if it had been declared as a dividend prior to
redemption. In addition, any short-term capital loss realized upon the
redemption of Fund shares within six months of their purchase is disallowed to
the extent of any dividends of tax-exempt income received during that period.

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 carried for the purpose of purchasing or
holding Fund shares. Investors who are, or are related to, "substantial
users" of facilities financed by private activity bonds should consult their
tax advisers before buying Fund shares.

By January 31 of each year, each Fund will notify its shareholders of the
amount and tax status of distributions paid to shareholders for the preceding
year.

STATE AND LOCAL TAXES: NEW YORK TAXES. To the extent that dividends received
from the New York Tax Free Income Fund are derived from interest on triple
tax-exempt obligations, the dividends will be excluded from the gross income
of individual shareholders who are New York residents for New York State and
New York City personal income tax purposes. DIVIDENDS FROM THE NEW YORK TAX
FREE INCOME FUND ARE NOT EXCLUDED IN DETERMINING NEW YORK STATE OR NEW YORK
CITY FRANCHISE TAXES ON CORPORATIONS AND FINANCIAL INSTITUTIONS. Dividends
received from the National Tax Free Income Fund are generally not expected to
be excluded from gross income for New York State and New York City personal
income tax purposes.

GENERALLY. Except as described under "New York Taxes," Fund dividends
which are excludable from shareholders' gross income for federal income tax
purposes will 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.

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, and the value of a Fund's shares when redeemed may be more
or less than their original cost.

Each 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 which was made at the maximum public offering price and reflects any
change in net asset value per share, 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 mutual fund would have to
generate in order to produce an after-tax total rate of return equivalent to
that of a Fund. The use of a tax equivalent total rate of return allows
investors to compare the total rates of return of the Funds, the dividends
from which are expected to be mostly exempt from federal income taxes and, in
the case of the New York Tax Free Income Fund, from New York State and New
York City personal income taxes, with the total rates of return of funds the
dividends from which are not so tax-exempt. These total rate of return
quotations may be accompanied by quotations which do not reflect the reduction
in value of the investment due to the initial or contingent deferred sales
charges, and which are thus higher.

Each Fund may provide annualized "yield," "effective yield" and "tax
equivalent yield" quotations. The "yield" of a Fund refers to the income
generated by an investment in the Fund over a 30-day or one month 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 month over a one-
year period and is shown as a percentage of the maximum public offering price
on the last day of that period. The "effective yield" is calculated similarly,
but when annualized the income earned by the investment during that 30-day or
one month 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 fund would have to generate in order to produce an after-tax yield
equivalent to that of a Fund. The use of a tax equivalent yield allows
investors to compare the yield of the Funds, the dividends from which are
expected to be mostly exempt from federal income taxes and, in the case of the
New York Tax Free Income Fund, from New York State and New York City personal
income taxes, with yields of funds the dividends from which are not so tax
exempt. A "yield" quotation, unlike a total rate of return quotation, does not
reflect changes in net asset value.

Each Fund will include performance data for both classes of Fund shares in
any advertisements, reports or communications including Fund performance data.
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 Funds.

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

ORGANIZATION: Each Fund is a series of Landmark Tax Free Income Funds (the
"Trust"), which is a Massachusetts business trust that was organized on May
27, 1986. The Trust was known as "Landmark New York Tax Free Income Fund"
until its name was changed effective October 21, 1993. The Trust is an open-
end management investment company registered under the 1940 Act.

Each Fund is a non-diversified mutual fund, which means that it is not
limited by the 1940 Act in the proportion of its assets that may be invested
in the obligations of a single issuer. Each Fund intends, however, to comply
with diversification requirements imposed on mutual funds by the Internal
Revenue Code.

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 each Fund 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 Fund or class, only shares of that particular Fund
or class are entitled to vote.

At any meeting of shareholders of any Fund, a Shareholder Servicing Agent
may vote any shares of which it is the holder of record and for which it does
not receive voting instructions proportionately in accordance with the
instructions it receives for all other shares of which that Shareholder
Servicing Agent is the holder of record.

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 a 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 each Fund or any other
series of the Trust is entitled to participate equally in dividends and other
distributions and the proceeds of any liquidation of that Fund or such other
series except that, due to the differing expenses borne by each class,
dividends and proceeds generally will be lower for Class B shares than for
Class A shares.

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

EXPENSES: In addition to amounts payable as described above under the
Investment Advisory Agreements, the Administrative Services Plan and the
Distribution Plans, each Fund is responsible for its own expenses, including,
among other things, the costs of securities transactions, the compensation of
Trustees that are not affiliated with the Adviser, government fees, taxes,
accounting and legal fees, expenses of communicating with shareholders,
interest expense, and insurance premiums. All fee waivers are voluntary and
may be reduced or terminated at any time.

For the fiscal year ended December 31, 1996, the total expenses for the
Class A shares of the New York Tax Free Income Fund were .80% of the average
daily net assets attributable to Class A shares of that Fund for the fiscal
year. For the fiscal year ended December 31, 1996, the expenses for the Class
A shares of the National Tax Free Income Fund were absorbed by the Adviser.

COUNSEL AND INDEPENDENT AUDITORS: Bingham, Dana & Gould LLP, Boston,
Massachusetts, is counsel for each Fund. Deloitte & Touche LLP, located at 125
Summer Street, Boston, MA 02110, serves as independent auditors for each Fund.

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

The Statement of Additional Information dated the date hereof contains
more detailed information about the Funds, including information related to
(i) investment policies and restrictions, (ii) the Trustees, officers, Adviser
and Administrator, (iii) securities transactions, (iv) the Funds' shares,
including rights and liabilities of shareholders, (v) the method 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 or the Statement of
Additional Information 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 Funds or their distributor. This
Prospectus does not constitute an offering by the Funds or their distributor
in any jurisdiction in which such offering may not lawfully be made.

APPENDIX
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PERMITTED INVESTMENTS AND
INVESTMENT PRACTICES
- --------------------------------------------------------------------------------

MUNICIPAL BONDS. Municipal bonds are debt obligations of states, cities,
municipalities, municipal agencies and authorities and other qualifying
issuers 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 ("PABs") 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. PABs are, in
most cases, revenue bonds. The payment of the principal and interest on PABs
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 PABs may not be readily marketable; however, the PABs or the
participation certificates in PABs purchased by the Funds may 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. Most 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 principal and interest of the maturing notes will be paid
out of proceeds from notes or bonds to be issued concurrently or at a later
date. BANs are issued most frequently 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. The Funds may invest
in 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 a 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 a Fund purchases Municipal Obligations it may
also acquire stand-by commitments from banks or broker-dealers with respect to
the Municipal Obligations. 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. Each 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
the fact that the maturity of the underlying security will generally be
different from that of the commitment. In some cases it may not be possible to
exercise rights under a stand-by commitment when the underlying Municipal
Obligation is in default.

REPURCHASE AGREEMENTS. Each Fund may enter into repurchase agreements in
order to earn a return on temporarily available cash. Repurchase agreements
are transactions in which an institution sells a 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 and other securities.

REVERSE REPURCHASE AGREEMENTS. Each Fund may enter into reverse repurchase
agreements. Reverse repurchase agreements involve the sale of securities held
by a Fund and the agreement by the Fund to repurchase the securities at an
agreed-upon price, date and interest payment. When a Fund enters into reverse
repurchase transactions, securities of a dollar amount equal in value to the
securities subject to the agreement will be maintained in a segregated account
with the Fund's custodian. The segregation of assets could impair the Fund's
ability to meet its current obligations or impede investment management if a
large portion of the Fund's assets are involved. Reverse repurchase agreements
are considered to be a form of borrowing.

LENDING OF PORTFOLIO SECURITIES. Consistent with applicable regulatory
requirements and in order to generate additional income, each Fund may lend
its portfolio securities to broker-dealers and other institutional borrowers.
Such loans must be callable at any time and continuously secured by collateral
(cash or U.S. Government securities) in an amount not less than the market
value, determined daily, of the securities loaned. It is intended that the
value of securities loaned by a Fund would not exceed 30% of the Fund's total
assets.

In the event of the bankruptcy of the other party to a securities loan, a
repurchase agreement or reverse repurchase agreement, a Fund could experience
delays in recovering either the securities or cash. To the extent that, in the
meantime, the value of the securities loaned or sold has increased or the value
of the securities purchased has decreased, the Fund could experience a loss.

RULE 144A SECURITIES. Each Fund may purchase restricted securities that are
not registered for sale to the general public. If the Adviser determines that
there is a dealer or institutional market in the securities, the securities will
not be treated as illiquid for purposes of the Fund's investment limitations.
The Trustees will review these determinations. These securities are known as
"Rule 144A securities," because they are traded under SEC Rule 144A among
qualified institutional buyers. Institutional trading in Rule 144A securities is
relatively new, and the liquidity of these investments could be impaired if
trading in Rule 144A securities does not develop or to the extent qualified
institutional buyers become, for a time, uninterested in purchasing Rule 144A
securities.

PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS. The National Tax Free Income
Fund and the New York Tax Free Income Fund may invest up to 15% and 10%,
respectively, of their 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 a Fund to sell them promptly at an acceptable price.

"WHEN-ISSUED" SECURITIES. In order to ensure the availability of suitable
securities, each 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 Fund
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 a Fund's assets committed to the purchase of securities on a
"when-issued" basis may increase the volatility of its net asset value.

FUTURES CONTRACTS. Each of the Funds may use financial futures in order to
protect the Fund from fluctuations in interest rates (sometimes called
"hedging") without actually buying or selling debt securities, or to manage
the effective maturity or duration of fixed-income securities in the Fund's
portfolio in an effort to reduce potential losses or enhance potential gain.
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a security at a specified future time
and price, or for making payment of a cash settlement based on changes in the
value of a security or an index of securities. Because the value of a futures
contract changes based on the price of the underlying security, futures
contracts are commonly referred to as "derivatives." Futures contracts are a
generally accepted part of modern portfolio management and are regularly
utilized by many mutual funds and other institutional investors. The futures
contracts that may be purchased by the Funds are standardized contracts traded
on commodities exchanges or boards of trade.

When a Fund purchases or sells a futures contract, it is required to make
an initial margin deposit. Although the amount may vary, initial margin can be
as low as 1% or less of the face amount of the contract. Additional margin may
be required as the contract fluctuates in value. Since the amount of margin is
relatively small compared to the value of the securities covered by a futures
contract, the potential for gain or loss on a futures contract is much greater
than the amount of a Fund's initial margin deposit. Neither Fund currently
intends to enter into a futures contract if, as a result, the initial margin
deposits on all of that Fund's futures contracts would exceed approximately 5%
of the Fund's net assets. Also, each Fund intends to limit its futures
contracts so that the value of the securities covered by its futures contracts
would not generally exceed 50% of the Fund's other assets and to segregate
sufficient assets to meet its obligations under outstanding futures contracts.
In any event, a Fund will not invest in futures contracts to the extent that
the investment would be inconsistent with such Fund's investment policies
which provide that, under normal circumstances, the National Tax Free Income
Fund will invest at least 80% of its assets in tax-exempt Municipal
Obligations and the New York Tax Free Income Fund will invest at least 80% of
its assets in triple tax-exempt Municipal Obligations.

The ability of a Fund to utilize futures contracts successfully will
depend on the Adviser's ability to predict interest rate movements, which
cannot be assured. In addition to general risks associated with any
investment, the use of futures contracts entails the risk that, to the extent
the Adviser's view as to interest rate movements is incorrect, the use of
futures contracts, even for hedging purposes, could result in losses greater
than if they had not been used. This could happen, for example, if there is a
poor correlation between price movements of futures contracts and price
movements in a Fund's related portfolio position. Also, although the Funds
will purchase only standardized futures traded on regulated exchanges, the
futures markets may not be liquid in all circumstances. As a result, in
certain markets, a Fund might not be able to close out a transaction without
incurring substantial losses, if at all. When futures contracts are used for
hedging, even if they are successful in minimizing the risk of loss due to a
decline in the value of the hedged position, at the same time they limit any
potential gain which might result from an increase in value of such position.

The use of futures contracts potentially exposes a Fund to the effects of
"leveraging," which occurs when futures are used so that the Fund's exposure
to the market is greater than it would have been if the Fund had invested
directly in the underlying securities. "Leveraging" increases the Fund's
potential for both gain and loss. As noted above, each of the Funds intends to
adhere to certain policies relating to the use of futures contracts, which
should have the effect of limiting the amount of leverage by the Fund. The use
of futures contracts may increase the amount of taxable income of a Fund and
may affect in other ways the amount, timing and character of a Fund's income
for tax purposes, as more fully discussed in the section entitled
"Certain Additional Tax Matters" in the Statement of Additional Information.

The use of futures by the Funds and some of their risks are described more
fully in the Statement of Additional Information.

SHORT SALES "AGAINST THE BOX." In a short sale, a Fund sells a borrowed
security and has a corresponding obligation to the lender to return the
identical security. Each Fund may engage in short sales only if at the time of
the short sale it owns or has the right to obtain, at no additional cost, an
equal amount of the security being sold short. This investment technique is
known as a short sale "against the box." A Fund may make a short sale as a
hedge, when it believes that the value of a security owned by the Fund (or a
security convertible or exchangeable for such security) may decline, or when
the Fund wants to sell the security at an attractive current price but wishes
to defer recognition of gain or loss for tax purposes. Not more than 40% of
a Fund's total assets would be involved in short sales "against
the box."

<PAGE>
SHAREHOLDER
SERVICING AGENTS
- --------------------------------------------------------------------------------
FOR CITIBANK RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CLIENTS:
Citibank, N.A.
111 Wall Street, New York, NY 10094
(212) 820-2383 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,
Investment Specialist or (212) 559-5959

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

FOR CITIBANK NORTH AMERICAN INVESTOR
SERVICES CLIENTS:
Citibank, N.A.
Master Trust Accounts

111 Wall Street, New York, NY 10094
Call Your Account Manager or (212) 657-9659

FOR CITICORP INVESTMENT SERVICES CLIENTS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200,
(212) 820-2380 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
International Equity Fund
Small Cap Equity Fund
Emerging Asian Markets Equity Fund
<PAGE>

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

-------------------------------------
LANDMARK
NATIONAL
TAX FREE
INCOME FUND
- --------------------------------------
LANDMARK
NEW YORK
TAX FREE
INCOME FUND
- --------------------------------------

PROSPECTUS
May 1, 1997

TFI/P.1/97 Printed on Recycled Paper [recycle symbol]

<PAGE>

Statement of
Additional Information
May 1, 1997

LANDMARK NATIONAL TAX FREE INCOME FUND
LANDMARK NEW YORK TAX FREE INCOME FUND
(Members of the Landmark(SM) Family of Funds) CLASS A AND B SHARES

Each of LANDMARK NATIONAL TAX FREE INCOME FUND (the "National Fund") and
LANDMARK NEW YORK TAX FREE INCOME FUND (the "New York Fund" and together with
the National Fund, the "Funds") is a series of Landmark Tax Free Income 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 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

1. The Funds ............................................................. 2
2. Investment Objectives, Policies and Restrictions ...................... 2
3. Performance Information ............................................... 9
4. Determination of Net Asset Value; Valuation of Securities;
Additional Purchase and Redemption Information ........................ 11
5. Management ............................................................ 12
6. Portfolio Transactions ................................................ 18
7. Description of Shares, Voting Rights and Liabilities .................. 19
8. Certain Additional Tax Matters ........................................ 20
9. Independent Accountants and Financial Statements ...................... 21
Appendix A -- Description of Municipal Obligations ....................... 23
Appendix B -- Description of Securities Ratings .......................... 25
Appendix C -- Additional Information Concerning New York
Municipal Obligations ................................................. 29

This Statement of Additional Information sets forth information which may be
of interest to investors but which is not necessarily included in the Funds'
Prospectus, dated May 1, 1997, by which shares of the Funds are offered. This
Statement of Additional Information should be read in conjunction with the
Prospectus, a copy of which may be obtained by an investor without charge by
contacting the Funds' distributor, The Landmark Funds Broker-Dealer Services,
Inc., at 6 St. James Avenue, Boston, MA 02116, (617) 423-1679.

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

1. THE FUNDS

Landmark Tax Free Income Funds (the "Trust") is an open-end management
investment company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on May 27, 1986. The Trust was known as "Landmark
New York Tax Free Income Fund" until its name was changed effective October 21,
1993. This Statement of Additional Information describes Landmark National Tax
Free Income Fund and Landmark New York Tax Free Income Fund, each of which is a
separate series of the Trust. References in this Statement of Additional
Information to the "Prospectus" are to the Prospectus, dated May 1, 1997, of the
Trust by which shares of the Funds are offered.

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

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

2. INVESTMENT OBJECTIVES, POLICIES AND RESTRICTIONS

Investment ObjectivesThe investment objectives of the Landmark National Tax
Free Income Fund are to generate high levels of current income exempt from
federal income taxes and to preserve the value of its shareholders' investment.

The investment objectives of the Landmark New York Tax Free Income Fund are
to generate high levels of current income exempt from federal, New York State
and New York City personal income taxes and to preserve the value of its
shareholders' investment.

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

INVESTMENT POLICIES

As a fundamental policy, the Trust seeks to achieve the investment objective
of the National Fund by investing in debt obligations consisting primarily
(i.e., at least 80% of its assets under normal circumstances) of municipal bonds
and notes and other debt instruments the interest on which is exempt from
federal personal income taxes ("Municipal Obligations" or "tax-exempt
securities"). As used in this Statement of Additional Information, the terms
"Municipal Obligations" and "tax-exempt securities" are used interchangeably to
refer to debt instruments issued by or on behalf of states, territories and
possessions of the United States and the District of Columbia and their
political subdivisions, agencies or instrumentalities, or other qualifying
issuers, the interest on which is exempt from federal income taxes (without
regard to whether the interest thereon is subject to the federal alternative
minimum tax).

As a fundamental policy, the Trust seeks to achieve the investment objective
of the New York Fund by investing in debt obligations consisting primarily
(i.e., at least 80% of its assets under normal conditions) of municipal bonds
and notes and other debt instruments the interest on which is exempt from
federal, New York State and New York City personal income taxes. These
obligations are issued primarily by the State of New York, its political
subdivisions, municipalities, agencies, instrumentalities or public authorities.

Each Fund's investment policies are described in "Investment Information
Investment Policies" in the Prospectus. The following supplements the
information contained in the Prospectus concerning the investment objectives,
policies and techniques of the Funds. For a general discussion of Municipal
Obligations and the risks associated with investment therein, see Appendix A to
this Statement of Additional Information. 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.

Except as otherwise stated, the following investment policies are not
fundamental and may be changed by the Board of Trustees without approval by the
Funds' shareholders.

FUTURES CONTRACTS

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

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

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

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

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

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

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

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

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

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

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

Each Fund will comply with this CFTC requirement, and each Fund currently
intends to adhere to the additional policies described below. First, an amount
of cash or cash equivalents will be maintained by each Fund in a segregated
account with the Fund's custodian so that the amount so segregated, plus the
initial margin held on deposit, will be approximately equal to the amount
necessary to satisfy the Fund's obligations under the futures contract. The
second is that a Fund will not enter into a futures contract if immediately
thereafter the amount of initial margin deposits on all the futures contracts
held by the Fund would exceed approximately 5% of the net assets of the Fund.
The third is that the aggregate market value of the futures contracts held by a
Fund not generally exceed 50% of the market value of the Fund's total assets
other than its futures contracts. For purposes of this third policy, "market
value" of a futures contract is deemed to be the amount obtained by multiplying
the number of units covered by the futures contract times the per unit price of
the securities covered by that contract. Finally, a Fund will not invest in
futures contracts to the extent that such investment would be inconsistent with
such Fund's investment policies which provide that, under normal circumstances,
the National Tax Free Income Fund will invest at least 80% of its assets in
tax-exempt Municipal Obligations and the New York Tax Free Income Fund will
invest at least 80% of its assets in triple tax-exempt Municipal Obligations
(that is, obligations that pay interest that is exempt from federal, New York
State and New York City personal income taxes including the federal alternative
minimum tax).

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

WHEN-ISSUED SECURITIES

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

VARIABLE AND FLOATING RATE OBLIGATIONS

Investments in floating or variable rate securities normally involve
industrial development or revenue bonds which provide that the rate of interest
is set as a specific percentage of a designated base rate, such as rates on
Treasury Bonds or Bills or the prime rate at a major commercial bank, and that a
bondholder can demand payment of the obligations on short notice at par plus
accrued interest. While there is usually no established secondary market for
issues of this type of security, the dealer that sells an issue of such
securities frequently also offers to repurchase such securities at any time, at
a repurchase price which varies and may be more or less than the amount the
bondholder paid for them.

The maturity of floating or variable rate obligations (including
participation interests therein) is deemed to be the longer of (i) the notice
period required before a Fund is entitled to receive payment of the obligation
upon demand or (ii) the period remaining until the obligation's next interest
rate adjustment. If not redeemed by a Fund through the demand feature, the
obligations mature on a specified date which may range up to 30 years from the
date of issuance.

PARTICIPATION INTERESTS

The Trust may purchase from banks on behalf of each Fund participation
interests in all or part of specific holdings of Municipal Obligations. The
Trust has the right to sell the participation interest back to the bank and draw
on the letter of credit or guarantee for all or any part of the full principal
amount of the participation interest in the security, plus accrued interest. In
some cases, these rights 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 Funds' credit standards at the time of purchase of the
participation interests. Each participation interest is backed by an irrevocable
letter of credit or guarantee of the selling bank. Participation interests will
only be purchased if in the opinion of counsel interest income on such interests
will be tax-exempt when distributed as dividends to shareholders of the Funds.
The Trust will not invest more than 5% of either Fund's total assets (taken at
the greater of cost or market value) in participation interests. Participation
interests include municipal lease obligations which are deemed to be illiquid
unless otherwise determined by the Board of Trustees.

The Trust did not purchase any participation interest for the New York Fund
within the past year and has no current intention of doing so for either Fund in
the foreseeable future.

LENDING OF SECURITIES

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

RULE 144A SECURITIES

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

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

SPECIAL FACTORS AFFECTING NEW YORK

The Trust intends to invest a high proportion of the New York Fund's assets
in Municipal Obligations of the State of New York and its political
subdivisions, municipalities, agencies, instrumentalities and public
authorities. Payment of interest and preservation of principal is dependent upon
the continuing ability of New York issuers and/or obligors of state, municipal
and public authority debt obligations to meet their obligations thereunder.

The fiscal stability of New York State is related, at least in part, to the
fiscal stability of its localities and authorities. Various State agencies,
authorities and localities have issued large amounts of bonds and notes either
guaranteed or supported by the State through lease-purchase arrangements, other
contractual arrangements or moral obligation provisions. While debt service is
normally paid out of revenues generated by projects of such State agencies,
authorities and localities, the State has had to provide special assistance in
recent years, in some cases of a recurring nature, to enable such agencies,
authorities and localities to meet their financial obligations and, in some
cases, to prevent or cure defaults. To the extent State agencies and local
governments require State assistance to meet their financial obligations, the
ability of the State to meet its own obligations as they become due or to obtain
additional financing could be adversely affected.

For further information concerning New York Municipal Obligations, see
Appendix C to this Statement of Additional Information. The summary set forth
above and in Appendix C is included for purposes of providing a general
description of New York State and New York City credit and financial conditions.
This summary is based on information from statements of issuers of New York
Municipal Obligations and does not purport to be complete. The Trust is not
responsible for the accuracy or timeliness of this information.

INVESTMENT RESTRICTIONS

FUNDAMENTAL RESTRICTIONS

The Trust, on behalf of each Fund, has adopted the following policies which
cannot be changed without the approval of the holders of a majority of the
applicable Fund's outstanding voting securities (which, as used in this
Statement of Additional Information, means the lesser of (i) more than 50% of
the outstanding voting securities of the Fund, or (ii) 67% or more of the
outstanding voting securities of the Fund present at a meeting at which holders
of more than 50% of the Fund's outstanding voting securities are represented in
person or by proxy). The term "voting securities" as used in this paragraph has
the same meaning as in the 1940 Act.

The Trust, on behalf of either of the Funds, may not:

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

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

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

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

(5) Make loans to other persons except (a) through the lending of the
Fund's portfolio securities and provided that any such loans not exceed 30%
of the Fund's total assets (taken at market value), (b) through the use of
repurchase agreements or the purchase of short-term obligations and provided
that not more than 10% of the New York Fund's total assets, and 15% of the
National Fund's total assets, will be invested in repurchase agreements
maturing in more than seven days, or (c) by purchasing a portion of an issue
of debt securities of types commonly distributed privately to financial
institutions, for which purposes the purchase of short-term commercial paper
or a portion of an issue of debt securities which are part of an issue to
the public shall not be considered the making of a loan;

(6) With respect to the New York Fund only, knowingly invest in
securities which are subject to legal or contractual restrictions on resale
(other than repurchase agreements maturing in not more than seven days) if,
as a result thereof, more than 10% of the New York Fund's total assets
(taken at market value) would be so invested (including repurchase
agreements maturing in more than seven days);

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

(8) With respect to the New York Fund only, purchase securities of any
issuer if such purchase at the time thereof would cause more than 10% of the
voting securities of such issuer to be held by the New York Fund;

(9) Make short sales of securities or maintain a short position, unless
at all times when a short position is open the Trust, on behalf of the Fund,
owns an equal amount of such securities or securities convertible into or
exchangeable, without payment of any further consideration, for securities
of the same issue as, and equal in amount to, the securities sold short, and
unless not more than 10% of the Fund's net assets (taken at market value) is
held as collateral for such sales at any one time (it is the present
intention of management to make such sales only for the purpose of deferring
realization of gain or loss for federal income tax purposes; such sales
would not be made of securities subject to outstanding options);

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

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

For purposes of the investment restrictions described above and the
non-fundamental restrictions described below, the issuer of a tax-exempt
security is deemed to be the entity (public or private) ultimately responsible
for the payment of the principal of and interest on the security. Investment
Restriction (9) above applies only to short sales of or short positions in
securities, and does not prevent the writing, purchase, ownership, holding or
sale of futures contracts.

NON-FUNDAMENTAL RESTRICTIONS

The Trust on behalf of either Fund does not, as a matter of operating
policy:

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

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

(iii) sell any security which it does not own unless by virtue of its
ownership of other securities it has at the time of sale a right to obtain
securities, without payment of further consideration, equivalent in kind and
amount to the securities sold and provided that if such right is conditional
the sale is made upon the same conditions (this restriction does not apply
to the writing, purchase, ownership, holding or sale of futures contracts),

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

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

(vi) invest more than 15% of the National Fund's net assets and 10% of
the New York Fund's net assets (taken at the greater of cost or market
value) in securities that are not readily marketable, except that all of the
assets of the National Fund may be invested in a Qualifying Portfolio,

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

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

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

These policies are not fundamental and may be changed by the Trust on behalf
of the Fund without shareholder approval.

PERCENTAGE AND RATING RESTRICTIONS

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

3. PERFORMANCE INFORMATION

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

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

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

Set forth below is total rate of return information for Class A shares of
each Fund for the periods indicated, assuming that dividends and capital gains
distributions, if any, were reinvested, and that at the beginning of such
periods the maximum sales charge of 4.00% had been applicable to purchases of
shares of the Fund. No Class B shares were outstanding during such periods.

<TABLE>

<CAPTION>
REDEEMABLE VALUE
ANNUALIZED OF A HYPOTHETICAL
TOTAL $1,000 INVESTMENT
LANDMARK NEW YORK TAX FREE INCOME FUND RATE OF RETURN AT THE END OF THE PERIOD
(CLASS A SHARES)
<S> <C> <C>
September 8, 1986 (commencement of operations) to December 31, 1996 6.23% $1,831
Five years ended December 31, 1996 5.44% $1,303
One year ended December 31, 1996 (1.11)% $ 989

LANDMARK NATIONAL TAX FREE INCOME FUND
(CLASS A SHARES)

August 17, 1995 (commencement of operations) to December 31, 1996 4.72% $1,066
One year ended December 31, 1996 (0.82)% $ 992
</TABLE>

The yields with respect to Class A shares for the 30-day period ended
December 31, 1996 were 5.01% for the New York Fund and 5.38% for the National
Fund.

The New York Fund's tax equivalent yield for the 30-day period ended
December 31, 1996 was 9.43% (assuming (i) a combined New York State, New York
City and federal tax bracket of 46.88% and (ii) that 100% of the New York Fund's
assets were invested in New York Municipal Obligations).

The National Fund's tax equivalent yield for the 30-day period ended
December 31, 1996 was 8.91% (assuming a federal tax bracket of 39.60%).

Comparative performance information may be used from time to time in
advertising shares of the Funds, including data from Lipper Analytical Services,
Inc. and other industry sources and publications. From time to time a Fund may
compare its performance against inflation with the performance of other
instruments against inflation, such as FDIC-insured bank money market accounts.
In addition, advertising for the Funds may indicate that investors should
consider diversifying their investment portfolios in order to seek protection of
the value of their assets against inflation. From time to time, advertising
materials for the Funds may refer to or discuss current or past economic or
financial conditions, developments and events.

From time to time, each Fund may use hypothetical tax equivalent yields or
charts in their advertising. These hypothetical yields or charts will be used
for illustrative purposes only and are not indicative of either Fund's past or
future performance.

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

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

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

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

Subject to compliance with applicable regulations, the Trust has reserved
the right to pay the redemption or repurchase price of shares of the Funds,
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 a Fund 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 a Fund's investments or determination of its net asset value not
reasonably practicable; (b) the Exchange is closed (other than customary weekend
and holiday closings); or (c) the SEC has by order permitted such suspension.

LETTER OF INTENT

If an investor anticipates purchasing $100,000 or more of Class A shares of
a Fund alone or in combination with Class B shares of the Fund or any of the
classes of other Landmark Funds within a 13-month period, the investor may
obtain such shares at the same reduced sales charge as though the total quantity
were invested in one lump sum by completing a Letter of Intent on the terms
described below. Subject to acceptance by the Distributor and the conditions
mentioned below, each purchase will be made at a public offering price
applicable to a single transaction of the dollar amount specified in the Letter
of Intent. The shareholder or his or her Shareholder Servicing Agent must inform
the Distributor that the Letter of Intent is in effect each time shares are
purchased. The shareholder makes no commitment to purchase additional shares,
but if his or her purchases within 13 months plus the value of shares credited
toward completion of the Letter of Intent do not total the sum specified, an
increased sales charge will apply as described below. A purchase not originally
made pursuant to a Letter of Intent may be included under a subsequent Letter of
Intent executed within 90 days of such purchase if the Distributor is informed
in writing of this intent within such 90-day period. The value of shares of a
Fund presently held, at cost or maximum offering price (whichever is higher), on
the date of the first purchase under the Letter of Intent, may be included as a
credit toward the completion of such Letter, but the reduced sales charge
applicable to the amount covered by such Letter is applied only to new
purchases. Instructions for issuance of shares in the name of a person other
than the person signing the Letter of Intent must be accompanied by a written
statement from the Shareholder Servicing Agent stating that the shares were paid
for by the person signing such Letter. Neither income dividends nor capital gain
distributions taken in additional shares will apply toward the completion of the
Letter of Intent. The value of any shares redeemed or otherwise disposed of by
the purchaser prior to termination or completion of the Letter of Intent are
deducted from the total purchases made under such Letter of Intent.

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

RIGHT OF ACCUMULATION

A shareholder qualifies for cumulative quantity discounts on the purchase of
Class A shares when his or her new investment, together with the current
offering price value of all holdings of that shareholder in the Landmark Funds,
reaches a discount level. See "Purchases" in the Prospectus for the sales
charges on quantity discounts. For example, if a Fund shareholder owns shares
valued at $100,000 and purchases an additional $50,000 of Class A shares of the
Fund, the sales charge for the $50,000 purchase would be at the rate of 3.25%
(the rate applicable to single transactions from $100,000 to less than
$250,000). A shareholder must provide the Shareholder Servicing Agent with
information to verify that the quantity sales charge discount is applicable at
the time the investment is made.

5. MANAGEMENT

The Trustees and officers of the 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); Chairman, certain registered investment companies in the 59 Wall
Street funds group. His address is 1450 Oleada Road, Pebble Beach, California.
Mr. Alvord has announced that he intends to retire as a Trustee on May 31,
1997.

ELLIOTT J. BERV; 54 -- Chairman and Director, Catalyst, Inc. (Management
Consultants) (since June 1992); President, Chief Operating Officer and
Director, Deven International, Inc. (International Consultants) (June 1991 to
June 1992); President and Director, Elliott J. Berv & Associates (Management
Consultants) (since May 1984). His address is 15 Stornoway Drive, Cumberland
Foreside, Maine.

PHILIP W. COOLIDGE*; 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 (November 1988 to December 1991); Partner, Breed, Abbott & Morgan
(Attorneys) (retired, December 1987). His address is 4041 Gulf Shore Boulevard
North, Naples, Florida.

DIANA R. HARRINGTON; 57 -- 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); Trustee,
The Highland Family of Funds (since March 1997). Her address is 120 Goulding
Street, Holliston, Massachusetts.

SUSAN B. KERLEY; 45 -- President, Global Research Associates, Inc. (Investment
Research) (since August 1990); Manager, Rockefeller & Co. (March 1988 to July
1990); Trustee, Mainstay Institutional Funds (since December 1990). Her
address is P.O. Box 9572, New Haven, Connecticut.

C. OSCAR MORONG, JR.; 62 -- 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); Director, Indonesia Fund;
Director, MAS Funds. His address is 1385 Outlook Drive West, Mountainside, New
Jersey.

WALTER E. ROBB, III; 70 -- President, Benchmark Consulting Group, Inc. (since
1991); Principal, Robb Associates (corporate financial advisers) (since 1978);
President, Benchmark Advisors, Inc. (Corporate Financial Advisors)(since
1989); Trustee of certain registered investment companies in the MFS Family of
Funds. His address is 35 Farm Road, Sherborn, Massachusetts.

E. KIRBY WARREN; 62 -- Professor of Management, Graduate School of Business,
Columbia University (since 1987); Samuel Bronfman Professor of Democratic
Business Enterprise (1978 to 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, Inc.
(retired, April 1984). His address is 35 Colwick Road, Cherry Hill, New
Jersey.

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

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

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

LINDA T. GIBSON*; 31 -- Secretary of the Trust; Vice President, Signature
Financial Group, Inc. (since May 1992); Assistant Secretary, The Landmark
Funds Broker-Dealer Services, Inc. (since October 1992); law student, Boston
University School of Law (September 1989 to May 1992).

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

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

SUSAN JAKUBOSKI*; 33 -- Vice President, Assistant Treasurer and Assistant
Secretary of the Trust (since August 1994); Manager, Signature Financial Group
(Cayman) Ltd. (since August 1994); Senior Fund Administrator, Signature
Financial Group, Inc. (since August 1994); Assistant Treasurer, Signature
Broker-Dealer Services, Inc. (since September 1994); Fund Compliance
Administrator, Concord Financial Group (November 1990 to August 1994). Her
address is Elizabethan Square, George Town, Grand Cayman, Cayman Islands, BWI.

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).

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

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

JULIE J. WYETZNER*; 37 -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trust; 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 its affiliates serve as the distributor
or administrator.

The Trustees of the Trust received the following remuneration from the Trust
for the periods indicated:

TRUSTEE COMPENSATION TABLE

<TABLE>
<CAPTION>
AGGREGATE AGGREGATE TOTAL
COMPENSATION COMPENSATION COMPENSATION
FROM THE NEW FROM THE NATIONAL FROM TRUST AND
TRUSTEE YORK FUND (1) FUND (1) COMPLEX (2)

<S> <C> <C> <C>
H. B. Alvord .............................................. $2,122 $1,673 $44,000
Elliott J. Berv ........................................... $1,642 $1,601 $42,250
Philip W. Coolidge ........................................ $ 0 $ 0 $ 0
Mark T. Finn .............................................. $1,631 $1,601 $43,000
Riley C. Gilley ........................................... $2,271 $1,610 $46,000
Diana R. Harrington ....................................... $2,381 $1,682 $47,250
Susan B. Kerley ........................................... $2,324 $1,680 $45,250
C. Oscar Morong, Jr. ...................................... $2,478 $1,678 $58,875
Walter E. Robb, III ....................................... $1,755 $1,668 $45,375
E. Kirby Warren ........................................... $2,206 $1,675 $47,375
William S. Wood, Jr. ...................................... $2,529 $1,685 $47,000
</TABLE>

- ----------
(1) For the fiscal year ended December 31, 1996.
(2) Information relates to the fiscal year ended December 31, 1996. Messrs.
Alvord, Berv, Coolidge, Finn, Gilley, Morong, Robb, Warren and Woods, and
Mses. Harrington and Kerley are Trustees of 23, 24, 46, 26, 25, 23, 24,
23, 25, 23, and 23 funds and portfolios, respectively, in the Landmark
Family of Funds.

As of April 9, 1997, all Trustees and officers as a group owned less than 1%
of the outstanding shares of each Fund. As of the same date, more than 95% of
the outstanding shares of each Fund were held of record by Citibank, N.A., or
its affiliates, as Shareholder Servicing Agents 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 each Fund pursuant to separate investment
advisory agreements (the "Advisory Agreements"). Subject to such policies as the
Board of Trustees may determine, the Adviser manages the securities of each Fund
and makes investment decisions for each Fund. The Adviser furnishes at its own
expense all services, facilities and personnel necessary in connection with
managing each Fund's investments and effecting securities transactions for each
Fund. Each Advisory Agreement continues in effect as long as such continuance is
specifically approved at least annually by the Board of Trustees or by a vote of
a majority of the outstanding voting securities of the Fund, and, in either
case, by a majority of the Trustees who are not parties to the Advisory
Agreement or interested persons of any such party, at a meeting called for the
purpose of voting on the Advisory Agreement.

Each of the Advisory Agreements provides that the Adviser may render
services to others. Each Advisory Agreement is terminable without penalty on not
more than 60 days' nor less than 30 days' written notice by the Trust when
authorized either by a vote of a majority of the outstanding voting securities
of the applicable Fund or by a vote of a majority of the Board of Trustees, or
by the Adviser on not more than 60 days' nor less than 30 days' written notice,
and will automatically terminate in the event of its assignment. Each Advisory
Agreement provides that neither the Adviser nor its personnel shall be liable
for any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution and management of the
applicable 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 Agreements. The Adviser has agreed to waive a
portion of the fees payable to it under the Advisory Agreements on a
month-to-month basis. For the fiscal years ended December 31, 1994, 1995 and
1996, the fees payable to the Adviser by the New York Fund were $421,226 (of
which $229,257 was voluntarily waived), $354,135 (of which $191,039 was
voluntarily waived) and $342,600 (of which $254,015 was voluntarily waived),
respectively. For the fiscal period August 17, 1995 (commencement of operations)
to December 31, 1995 and for the fiscal year ended December 31, 1996, the fees
payable to the Adviser by the National Fund were $1,723 (all of which was
voluntarly waived) and $7,598 (all of which was voluntarily waived,
respectively).

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 Trust's independent contractors
and agents; the preparation and filing of all documents required for compliance
by the Trust with applicable laws and regulations; and arranging for the
maintenance of books and records of the Trust. The 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, as well as certain other
employees and Trustees of the Trust, 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. The Administrator has
voluntarily agreed to waive a portion of the fees payable to it under the
Administrative Services Agreement on a month-to-month basis. For the fiscal
years ended December 31, 1994, 1995 and 1996, the fees payable to LFBDS from the
New York Fund under the Administrative Services Agreement were $210,613 (of
which $58,225 was voluntarily waived), $177,067 (of which $48,777 was
voluntarily waived) and $214,125 (of which $18,284 was voluntarily waived),
respectively. For the period August 17, 1995 (commencement of operations) to
December 31, 1995 and for the fiscal year ended December 31, 1996, the fees
payable to LFBDS from the National Fund under the Administrative Services
Agreement were $862 and $7,598, respectively, (all of which 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 would change its name and the name of the Funds so as to delete the word
"Landmark" or the words "Landmark Funds." The Administrative Services Agreement
with the Trust also provides that LFBDS may render administrative services to
others and may permit other investment companies to use the word "Landmark" or
the words "Landmark Funds" in their names.

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

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

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

DISTRIBUTOR

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

The Trust has adopted a Distribution Plan (each a "Distribution Plan") in
accordance with Rule 12b-1 under the 1940 Act with respect to each class of
shares of the Funds after concluding that there is a reasonable likelihood that
the Distribution Plans will benefit each Fund and its shareholders. The
Distribution Plan with respect to Class A shares provides that each Fund shall
pay a distribution fee to the Distributor at an annual rate not to exceed 0.05%
of the average daily net assets represented by Class A shares for the National
Fund and 0.15% of the average daily net assets represented by Class A shares for
the New York Fund. The Distribution Plan with respect to Class B shares provides
that each Fund will pay the Distributor a distribution fee at an annual rate not
to exceed 0.75% of the Fund's average daily net assets represented by Class B
shares. The Distributor receives the distribution fees for its services under
the Distribution Agreements in connection with the distribution of each Fund's
shares of each class (exclusive of any advertising expenses incurred by the
Distributor in connection with the sale of Class A shares of each Fund). The
Distributor may use all or any portion of such distribution fees to pay for
expenses of printing prospectuses and reports used for sales purposes, expenses
of the preparation and printing of sales literature, commissions to dealers who
sell shares of the applicable class of the Funds and other distribution-related
expenses.

The National Fund is permitted to pay the Distributor a service fee with
respect to the Class A shares at an annual rate not to exceed 0.25% of the
National Fund's average daily net assets represented by Class A shares, and both
Funds are permitted to pay the Distributor a service fee with respect to the
Class B shares at an annual rate not to exceed 0.25% of each Fund's average
daily net assets represented by Class B shares.

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

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

As contemplated by the Distribution Plans, LFBDS acts as the agent of the
Trust in connection with the offering of shares of the Funds pursuant to the
Distribution Agreements. After the prospectuses and periodic reports of the
Funds have been prepared, set in type and mailed to existing shareholders, the
Distributor pays for the printing and distribution of copies thereof which are
used in connection with the offering of shares of the Funds to prospective
investors. The Prospectus contains a description of fees payable to the
Distributor under the Distribution Agreements. For the fiscal years ended
December 31, 1994, 1995 and 1996, the fees payable to the Distributor from the
New York Fund under a prior distribution agreement and the Distribution
Agreement were $52,653 (all of which was voluntarily waived), $44,267 (all of
which was voluntarily waived) and $128,475 (all of which was voluntarily
waived), respectively, no portion of which was applicable to reimbursement for
expenses incurred in connection with print or electronic media advertising. For
the period August 17, 1995 (commencement of operations) to December 31, 1995 and
for the fiscal year ended December 31, 1996, the fees payable to the Distributor
from the National Fund under the Distribution Agreement were $216 and $949,
respectively, (all of which were voluntarily waived).

SHAREHOLDER SERVICING AGENTS, TRANSFER AGENT AND CUSTODIAN

The Trust has adopted an administrative services plan (the "Administrative
Services Plan") after having concluded that there is a reasonable likelihood
that the Administrative Services Plan will benefit the Funds and their
shareholders. The Administrative Services Plan provides that the Trust may
obtain the services of an administrator, a transfer agent, a custodian and one
or more Shareholder Servicing Agents, and may enter into agreements providing
for the payment of fees for such services. Under the Administrative Services
Plan, the total of the fees paid from a Fund to the Trust's Administrator and
Shareholder Servicing Agents may not exceed 0.65% of the Fund's average daily
net assets on an annualized basis for the Fund's then-current fiscal year. Any
distribution fees (other than any fee concerning electronic or other media
advertising) payable under the Distribution Plan for the Class A shares of the
New York Fund are included in this percentage limitation for those shares. This
limitation with respect to the Class A shares of the National Fund and with
respect to the Class B shares of each Fund, does not include any amounts payable
under the Distribution Plans for such shares. Within this overall limitation,
individual fees may vary. The Administrative Services Plan continues in effect
if such continuance is specifically approved at least annually by a vote of both
a majority of the Trustees and a majority of the Trustees who are not
"interested persons" of the Trust and who have no direct or indirect financial
interest in the operation of the Administrative Services Plan or in any
agreement related to such Plan (for purposes of this paragraph "Qualified
Trustees"). The Administrative Services Plan requires that the Trust provide to
its Board of Trustees and the Board of Trustees review, at least quarterly, a
written report of the amounts expended (and the purposes therefor) under the
Administrative Services Plan. The Administrative Services Plan may be terminated
at any time by a vote of a majority of the Qualified Trustees of the Trust or as
to each Fund by a vote of a majority of the outstanding voting securities of the
Fund. The Administrative Services Plan may not be amended to increase materially
the amount of the New York Fund's permitted expenses thereunder without the
approval of a majority of the outstanding voting securities of the New York 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 Trust has entered into a shareholder servicing agreement (a "Servicing
Agreement") with each Shareholder Servicing Agent and a Transfer Agency and
Custodian Agreement with State Street Bank and Trust Company ("State Street")
pursuant to which State Street acts as transfer agent and custodian for each
Fund. See "Shareholder Servicing Agents" and "Transfer Agent and Custodian" in
the Prospectus for additional information, including a description of fees paid
to the Shareholder Servicing Agents under the Servicing Agreements. For the
fiscal years ended December 31, 1994, 1995 and 1996, aggregate fees payable from
the New York Fund to Shareholder Servicing Agents were $421,226 (of which
$157,960 was voluntarily waived), $354,135 (of which $132,801 was voluntarily
waived) and $214,125, respectively. For the period August 17, 1995 (commencement
of operations) to December 31, 1995 and for the fiscal year ended December 31,
1996, aggregate fees payable from the National Fund to Shareholder Servicing
Agents were $1,723 and $4,748 (all of which were voluntarily waived),
respectively.

The principal business address of State Street is 225 Franklin Street,
Boston, MA 02110.

AUDITORS

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

COUNSEL

Bingham, Dana & Gould LLP, 150 Federal Street, Boston, MA 02110, acts as
counsel for the Funds.

6. PORTFOLIO TRANSACTIONS

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

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

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

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

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

For the fiscal years ended December 31, 1994, 1995 and 1996, the New York
Fund paid no brokerage commissions. For the period August 17, 1995 (commencement
of operations), to December 31, 1995 and for the fiscal year ended December 31,
1996, the National Fund paid no brokerage commissions.

7. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

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

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

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

Share certificates will not be issued.

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

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

8. CERTAIN ADDITIONAL TAX MATTERS

Each Fund has elected to be treated, and intends to qualify each year, as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions (as a percentage of both the Fund's
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 a
Fund's net investment income and realized capital gains are distributed to
shareholders in accordance with the timing requirements imposed by the Code, no
federal income or excise taxes generally will be required to be paid by the
Fund. If a 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 each 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 a 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 each
Fund on their federal income tax returns.

Shareholders of a Fund will generally have to pay federal income taxes on
the balance of each Fund's distributions of net investment income and on any
distributions from net short-term capital gains, whether the distributions are
made in cash or in additional shares. Distributions of net capital gains (i.e.,
the excess of net long-term capital gains over net short-term capital losses),
whether made in cash or in additional shares, are taxable to shareholders as
long-term capital gains without regard to the length of time the shareholders
have held their shares.

Any Fund dividend that is declared in October, November or December of any
calendar year, that is payable to shareholders of record in such a month, and
that is paid the following January will be treated as if received by the
shareholders on December 31 of the year in which the dividend is declared. Any
Fund distribution will have the effect of reducing the per share net asset value
of shares in the Fund by the amount of the distribution. Shareholders purchasing
shares shortly before the record date of any distribution other than an
exempt-interest dividend may thus pay the full price for the shares and then
effectively receive a portion of the purchase price back as a taxable
distribution.

In general, any gain or loss realized upon a taxable disposition of shares
of a Fund by a shareholder that holds such shares as a capital asset will be
treated as long-term capital gain or loss if the shares have been held for more
than twelve months and otherwise as a short-term capital gain or loss. However,
any loss realized upon a redemption of shares in a Fund held for six months or
less will be disallowed to the extent of any exempt-interest dividends received
with respect to those shares. If not disallowed, any such loss will be treated
as a long-term capital loss to the extent of any distributions of net capital
gain made with respect to those shares. Any loss realized upon a disposition of
shares may also be disallowed under rules relating to wash sales. Gain may be
increased (or loss reduced) upon a redemption of Class A shares of a Fund within
90 days after their purchase followed by any purchase without payment of an
additional sales charge (including purchases by exchanges or by reinvestment) of
Class A shares of the Fund or another Landmark Fund or any other shares of a
Landmark Fund generally sold subject to a sales charge. Shareholders disposing
of shares after tax-exempt income has been accrued but not yet declared as a
dividend should be aware that a portion of the proceeds realized upon
disposition of the shares may reflect the existence of such accrued tax-exempt
income, and that this portion of the proceeds may be subject to tax as a capital
gain even though it would have been tax-exempt had it been declared as a
dividend prior to the disposition.

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

Each Fund's transactions in options, Futures Contracts and forward
contracts, if any, will be subject to special tax rules that may affect the
amount, timing, and character of Fund income and distributions to holders of
beneficial interests. For example, certain positions held by the Trust on behalf
of a Fund on the last business day of each taxable year will be marked to market
(i.e., treated as if closed out) on that day, and any gain or loss associated
with the positions will be treated as 60% long-term and 40% short-term capital
gain or loss. Certain positions held by the Trust on behalf of a Fund that
substantially diminish its risk of loss with respect to other positions in its
portfolio may constitute straddles, and may be subject to special tax rules that
would cause deferral of Fund losses, adjustments in the holding periods of
securities held by the Trust on behalf of the Fund and conversion of short-term
into long-term capital losses. Certain tax elections exist for straddles which
may alter the effects of these rules. The Trust will limit its investment
activities in options, Futures Contracts and forward contracts on behalf of the
Funds to the extent necessary to meet the requirements of Subchapter M of the
Code.

The Fund will withhold tax payments at the rate of 30% (or any lower rate
permitted under an applicable treaty) 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.

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. If a shareholder fails to provide this information, or
otherwise violates IRS regulations, the Fund may be required to withhold tax at
the rate of 31% on certain distributions and redemption proceeds paid to that
shareholder.

9. INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS

Deloitte & Touche LLP are the independent accountants for the Funds,
providing audit services and assistance and consultation with respect to the
preparation of filings with the SEC.

The audited financial statements of the New York Fund (Portfolio of
Investments at December 31, 1996, Statement of Assets and Liabilities at
December 31, 1996, Statement of Operations for the year ended December 31, 1996,
Statement of Changes in Net Assets for the years ended December 31, 1996 and
1995, and Financial Highlights for each of the fiscal years in the three-year
period ended December 31, 1996, for the four months ended December 31, 1993, and
for each of the fiscal years in the four-year period ended August 31, 1993,
Notes to Financial Statements and Independent Auditors' Report), each of which
is included in the Annual Report to Shareholders of the New York Fund, are
incorporated by reference into this Statement of Additional Information and have
been so incorporated in reliance upon the report of Deloitte & Touche LLP,
independent accountants, on behalf of the New York Fund.

The audited financial statements of the National Fund (Portfolio of
Investments at December 31, 1996, Statement of Assets and Liabilities at
December 31, 1996, Statement of Operations for the year ended December 31, 1996,
Statement of Changes in Net Assets for the year ended December 31, 1996 and for
the period August 17, 1995 (commencement of operations) to December 31,
1995, Financial Highlights for the fiscal year ended December 31, 1996 and for
the period August 17, 1995 (commencement of operations) to December 31, 1995,
Notes to Financial Statements and Independent Auditors' Report), each of which
is included in the Annual Report to Shareholders of the National Fund, are
incorporated by reference into this Statement of Additional Information and have
been so incorporated in reliance upon the report of Deloitte & Touche LLP,
independent accountants, on behalf of the National Fund.

Copies of the Annual Reports for each Fund accompany this Statement of
Additional Information.

<PAGE>
APPENDIX A

DESCRIPTION OF MUNICIPAL OBLIGATIONS

Municipal Obligations include bonds, notes and commercial paper issued by or
on behalf of states, territories and possessions of the United States and the
District of Columbia and their political subdivisions, agencies or
instrumentalities, the interest on which is exempt from federal income taxes
(without regard to whether the interest thereon is also exempt from the personal
income taxes of any state). Municipal Obligation bonds are issued to obtain
funds for various public purposes, including the construction of a wide range of
public facilities such as bridges, highways, housing, hospitals, mass
transportation, schools, streets and water and sewer works. Other public
purposes for which Municipal Obligation bonds may be issued include refunding
outstanding obligations, obtaining funds for general operating expenses, and
obtaining funds to loan to other public institutions and facilities. In
addition, certain types of industrial development bonds are issued by or on
behalf of public authorities to obtain funds to provide privately-operated
housing facilities, industrial facilities, sports facilities, convention or
trade show facilities, airport, mass transit, port or parking facilities, air or
water pollution control facilities, hazardous waste treatment or disposal
facilities, and certain local facilities for water supply, gas, electricity or
sewage or solid waste disposal. Such obligations are included within the term
Municipal Obligations if the interest paid thereon qualifies as exempt from
federal income tax. Other types of industrial development bonds, the proceeds of
which are used for the construction, equipment, repair or improvement of
privately operated industrial or commercial facilities, may constitute Municipal
Obligations, although the current federal tax laws place substantial limitations
on the size of such issues.

The two principal classifications of Municipal Obligation bonds are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its good faith, credit and taxing power for the payment of
principal and interest. The payment of the principal of and interest on such
bonds may be dependent upon an appropriation by the issuer's legislative body.
The characteristics and enforcement of general obligation bonds vary according
to the law applicable to the particular issuer. Revenue bonds are payable only
from the revenues derived from a particular facility or class of facilities or,
in some cases, from the proceeds of a special excise or other specific revenue
source. Industrial development bonds which are Municipal Obligations are in most
cases revenue bonds and do not generally constitute the pledge of the credit of
the issuer of such bonds. There are, of course, variations in the security of
Municipal Obligations, both within a particular classification and between
classifications, depending on numerous factors.

Municipal Obligation notes generally are used to provide for short-term
capital needs and generally have maturities of one year or less. Municipal
Obligation notes include:

1. TAX ANTICIPATION NOTES. Tax Anticipation Notes are issued to finance
operational needs of municipalities. Generally, they are issued in
anticipation of the receipt of various tax revenues, such as property, income,
sales, use and business taxes.

2. REVENUE ANTICIPATION NOTES. Revenue Anticipation Notes are issued in
expectation of receipt of dedicated revenues, such as state aid or federal
revenues available under federal revenue sharing programs.

3. TAX AND REVENUE ANTICIPATION NOTES. Tax and Revenue Anticipation Notes are
issued by a state or municipality to fund its day-to-day operations and certain
local assistance payments to its municipalities and school districts. Such Notes
are issued in anticipation of the receipt of various taxes and revenues, such as
personal income taxes, business taxes and user taxes and fees.

4. BOND ANTICIPATION NOTES. Bond Anticipation Notes are issued to provide
interim financing until long-term bond financing can be arranged. Long-term
bonds or renewal Bond Anticipation Notes provide the money for the repayment
of the Notes.

Issues of commercial paper typically represent short-term, unsecured,
negotiable promissory notes. These obligations are issued by agencies of state
and local governments to finance 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 Obligation commercial paper is backed by letters of
credit, lending agreements, note repurchase agreements or other credit facility
agreements offered by banks or other institutions.

The yields on Municipal Obligations are dependent on a variety of factors,
including general market conditions, supply and demand and general conditions of
the Municipal Obligation market, size of a particular offering, the maturity of
the obligation and rating (if any) of the issue. 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 Municipal
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.
<PAGE>
APPENDIX B

DESCRIPTION OF SECURITIES RATINGS

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

DESCRIPTION OF MOODY'S INVESTORS SERVICE, INC.'S
FOUR HIGHEST BOND 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.

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

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

Note: Those bonds in the Aa, A and Baa groups which Moody's believes possess the
strongest investment attributes are designated by the symbols Aa1, A1 and Baa1.

DESCRIPTION OF STANDARD & POOR'S RATING SERVICES'
FOUR HIGHEST BOND RATINGS

AAA An obligation rated AAA has the highest rating assigned by S&P. The
obligor's capacity to meet its financial commitment on the obligation is
extremely strong.

AA An obligation rated AA differs from the highest rated issues only in small
degree. The obligor's capacity to meet its financial commitment on the
obligation is very strong.

A An obligation rated A is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories. However, the obligor's capacity to meet its financial commitment on
the obligation is still strong.

BBB An obligation rated BBB exhibits adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

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

DESCRIPTION OF FITCH INVESTORS SERVICE, INC.'S
FOUR 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+.

A Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.

BBB Bonds considered to be investment grade and of satisfactory credit quality.
The obligor's ability to pay interest and repay principal is considered to be
adequate. Adverse changes in economic conditions and circumstances, however, are
more likely to have an adverse impact on these bonds, and, therefore, impair
timely payment. The likelihood that the ratings of these bonds will fall below
investment grade is higher than for bonds with higher ratings.

PLUS (+) MINUS (-) -- Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the AAA category.

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. 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, such
as long-term secular trends, may be less important over the short run.

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 STANDARD & POOR'S RATING SERVICES'
TWO HIGHEST RATINGS OF STATE AND MUNICIPAL NOTES

An S&P 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 it will be treated as a note.

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

Note rating symbols 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 RATING SERVICES'
RATINGS OF TAX-EXEMPT DEMAND BONDS

S&P 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, note rating symbols are used
with the commercial paper rating symbols (for example, "SP-1+ /A-1+").

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 MOODY'S INVESTORS SERVICE, INC.'S
TWO HIGHEST SHORT-TERM DEBT RATINGS

Moody's short-term debt ratings are opinions of the ability of issuers to
repay punctually senior debt obligations. These obligations are an original
maturity not exceeding one year, unless explicitly noted.

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 structure 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 RATING SERVICES'
TWO HIGHEST COMMERCIAL PAPER RATINGS

An S&P commercial paper rating is a current assessment of the likelihood of
timely payment of debt having an original maturity of no more than 365 days.

A-1 A short-term obligation rated A-1 is rated in the highest category by S&P.
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 financial
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 obligation is satisfactory.

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

ADDITIONAL INFORMATION CONCERNING
NEW YORK MUNICIPAL OBLIGATIONS

The following information is a summary of special factors affecting
investments in New York Municipal Obligations. The sources of payment for such
obligations and the marketability thereof may be affected by financial or other
difficulties experienced by New York State (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 official statements
relating to securities offerings of New York issuers. Landmark New York Tax Free
Income Fund is not responsible for the accuracy or timeliness of this
information.

NEW YORK STATE

The factors affecting the State's financial condition are complex and the
following description constitutes only a summary.

CURRENT ECONOMIC OUTLOOK

The national economy has resumed a more robust rate of growth after a "soft
landing" in 1995, with over 11 million jobs added nationally since early 1992.
The State economy has continued to expand, but growth remains somewhat slower
than in the nation. Although the State has added approximately 240,000 jobs
since late 1992, employment growth in the State has been hindered during recent
years by significant cutbacks in the computer and instrument manufacturing,
utility, defense, and banking industries. Government downsizing has also
moderated these job gains.

The State Financial Plan is based upon a June 1996 projection by the State
Division of the Budget ("DOB") of national and State economic activity. DOB
forecasted that national economic growth would be quite strong in the first half
of calendar 1996, but would moderate considerably as the year progressed. The
overall growth rate of the national economy during calendar year 1996 was
expected to be just slightly below the "consensus" of a widely followed survey
of national economic forecasters. Growth in real Gross Domestic Product during
1996 was projected to be moderate at 2.1 percent, with anticipated declines in
federal spending and net exports more than offset by increases in consumption
and investment. Inflation, as measured by the Consumer Price Index, was
projected to be contained at about 3 percent due to moderate wage growth and
foreign competition. Personal income and wages were projected to increase by
about 5 percent.

New York's economy was expected to continue to expand modestly during 1996,
but it was anticipated that there would be a pronounced slow-down during the
course of the year. Although industries that export goods and services were
expected to continue to do well, growth was expected to be slowed by government
cutbacks at all levels and by tight fiscal constraints on health and social
services. On an average annual basis, employment growth in the State was
expected to be up slightly from the 1995 rate. Personal income was expected to
record moderate gains in 1996. Bonus payments in the securities industry were
expected to increase further from last year's record level.

The State has updated its mid-year forecast of national and State economic
activity through the end of calendar year 1998. The national economic projection
is for slightly slower growth from the initial forecast on which the original
1996-97 State Financial Plan was based, while the State economic forecast has
changed only slightly.

The revised national forecast projects real Domestic Gross National Product
("GDP") growth of 2.3 percent in 1997, which is the same rate now estimated for
1996, followed by a 2.4 percent increase in 1998. The growth of nominal GDP is
expected to rise from 4.3 percent in 1996 to 4.5 percent in 1997 and 4.8 percent
in 1998. The inflation rate is expected to remain stable at 2.9 percent in 1997
and decrease to 2.8 percent in 1998. The annual rate of job growth is expected
to slow to 1.6 percent in both 1997 and 1998, down from the 2.0 percent increase
in 1996. Growth in personal income and wages are expected to slow accordingly in
1997 and 1998.

The revised State economic forecast projects continued moderate growth in
1997 for employment, wages, and personal income, followed by a slight slowing in
1998. Personal income is estimated to have grown by 5.2 percent in 1996, fueled
in part by an unusually large increase in financial sector bonus payments, and
is projected to grow 4.5 percent in 1997 and 4.2 percent in 1998. Overall
employment growth will continue at a modest rate, reflecting the moderate growth
of the national economy, continued spending restraint in government, and
restructuring in the health care, social service, and banking sectors.

1996-97 STATE FINANCIAL PLAN

The State is required to issue three quarterly updates to the cash-basis
State Financial Plan in July, October, and January, respectively. These updates
reflect analysis of actual receipts and disbursements on a cash basis for each
respective period, and contain revised estimates of receipts and disbursements
for the then current fiscal year.

The State issued its first update to the cash-basis 1996-97 State Financial
Plan (the "Mid-Year Update") on October 25, 1996. Revisions were made to
estimates of both receipts and disbursements based on: (1) updated economic
forecasts for both the nation and the State, (2) an analysis of actual receipts
and disbursements through the first six months of the fiscal year, and (3) an
assessment of changing program requirements. The Mid-Year Update reflected a
balanced 1996-97 State Financial Plan, and a projected reserve in the General
Fund of $300 million.

Actual receipts through the first two quarters of the 1996-97 State fiscal
year reflected stronger-than-expected growth in most taxes, with actual receipts
exceeding expectations by $250 million. Based on the revised economic outlook
and actual receipts for the first six months of 1996-97, projected General Fund
receipts for the 1996-97 State fiscal year were increased by $420 million. Most
of this projected increase was in the yield of the personal income tax ($241
million), with additional increases expected in business taxes ($124 million)
and other tax receipts ($49 million). Projected collections from user taxes and
fees were revised downward slightly ($5 million). Revisions were also made to
both miscellaneous receipts and in transfer from other funds (an $11 million
combined projected increase).

Disbursements through the first six months of the fiscal year were $415
million less than projected, primarily because of delays in processing payments
following delayed enactment of the State budget. As a result, no savings were
included in the Mid-Year Update from the slower-than-expected spending.
Projections of the 1996-97 General Fund disbursements were increased by $120
million, since increased General Fund disbursements for education were required
to replace a projected decrease in lottery receipts. The modification was shown
in the form of an increased transfer of General Fund monies to the Lottery Fund
in the Special Revenue fund type.

The projected closing fund balance in the General Fund of $337 million
reflected a balance of $252 million in the Tax Stabilization Reserve Fund
("TSRF") following a payment of $15 million during the current fiscal year, and
a deposit of $85 million to the Contingency Reserve Fund ("CRF").

The State revised the cash-basis 1996-97 State Financial Plan on January 14,
1997, in conjunction with the release of the Executive Budget for the 1997-98
fiscal year.

The 1996-97 General Fund Plan continues to be balanced. The DOB projects
that, prior to taking the actions described below, the General Fund Financial
Plan would have shown an operating surplus of approximately $1.3 billion. These
actions include implementing reduced personal income tax withholding to reflect
the impact of tax reduction actions which took effect on January 1, 1997. This
has the effect of raising taxpayer's current take-home pay rather than requiring
taxpayers to wait until the spring of 1998 for larger refunds. The Financial
Plan assumes the use of $250 million for this purpose. In addition, $943 million
is projected to be used to pay tax refunds during the 1996-97 fiscal year or
reserved to pay refunds during the 1997-98 fiscal year, which produces a benefit
for the 1997-98 Financial Plan (see below). Finally, $65 million is projected to
be deposited into the TSRF (in addition to the required deposit of $15 million),
increasing the cash balance in that fund to $317 million by the end of 1996-97.

The projected surplus results primarily from growth in the underlying
forecast for projected receipts. As compared to the enacted budget, revenues are
expected to increase by more than $1 billion, while disbursements are expected
to fall by $228 million. These changes from original Financial Plan projections
reflect actual results through December 1996 as well as modified economic and
social services caseload projections for the balance of the fiscal year.

As compared to the Mid-Year Update, underlying estimates of General Fund
receipts have been revised upward $566 million, primarily in personal income
taxes and business taxes. However, two transactions offset these projected
increases, producing a projected decline in available General Fund receipts as
compared to the Mid-Year Update:

o First, in order to make the projected 1996-97 cash surplus available
to help finance 1997-98 spending requirements, $943 million in
personal income tax refund payments (or reserves for such payments)
are proposed to be accelerated into 1996-97. This action has the
effect of decreasing reported personal income tax receipts in 1996-97,
while increasing available personal income tax receipts in 1997-98, as
these refunds will no longer be a charge against current revenues in
1997-98.

o Second, January 1997 implementation of personal income tax withholding
table changes to reflect tax reductions effective January 1, 1997,
originally scheduled for April of this year, also depresses personal
income tax receipts by an estimated $250 million this year. The change
lowers withholding rather than having these monies paid to taxpayers
through large refunds in the spring of 1998.

As a result of these transactions, projections of available receipts in
1996-97 have been reduced by $627 million from the time of the Mid-Year Update,
despite the increases in the underlying forecast

Projected General Fund disbursements are reduced by a total of $348 million
from the Mid-Year Update, with changes made in most categories of the Financial
Plan. Most of this savings is attributable to reductions in local assistance
spending, primarily due to significant reestimates in social services spending
to reflect lower caseload growth, yielding savings of $226 million. General
State Charges are reduced $76 million to reflect lower pension and fringe
benefit costs. The General State Charges estimate includes savings achieved from
the refinancing of certain pension liabilities through the issuance of long-term
debt, as planned, and the repayment of that liability to the State Retirement
System. Transfers of the Capital Projects Fund have been reduced $31 million to
reflect slower-than-expected capital disbursements for the balance of the fiscal
year. Reductions in debt service costs of $21 million reflect savings from
refundings undertaken in the current fiscal year, as well as savings from
improved interest rates in the financial markets.

The Mid-Year Update has reserved $300 million in the General Fund for
certain contingencies, including litigation which could have produced an adverse
impact on the State's finances, either by itself or the precedential nature of
the court's decision. Since subsequent events make it unlikely that these risks
will materialize before the end of the 1996-97 fiscal year, the Third Quarter
Update no longer includes this reserve.

The General Fund closing balance is expected to be $358 million at the end
of the 1996-97. Of this amount, $317 million would be on deposit in the TSRF,
while another $41 million would remain on deposit in the CRF as a reserve for
litigation or other unbudgeted costs to the Financial Plan. The TSRF had an
opening balance of $237 million, to be supplemented by a required payment of $15
million and an extraordinary deposit of $65 million from surplus 1996-97 monies.
The $9 million on deposit in the Revenue Accumulation Fund will be drawn down as
planned. A planned deposit of $85 million to the CRF, projected to be received
from contractual efforts to maximize federal revenue, is no longer expected to
be deposited this year.

1997-98 FISCAL YEAR (EXECUTIVE BUDGET FORECAST)

The Governor presented his 1997-98 Executive Budget to the Legislature on
January 14, 1997. The Executive Budget also contains financial projections for
the State's 1998-99 and 1999-2000 fiscal years, detailed estimates of receipts
and an updated Capital Plan. There can be no assurance that the Legislature will
enact the Executive Budget as proposed by the Governor into law, or that the
State's adopted budget projections will not differ materially and adversely from
the projections set forth herein.

The 1997-98 Financial Plan projects balance on a cash basis in the General
Fund. It reflects a continuing strategy of substantially reduced State spending,
including program restructurings, reductions in social welfare spending, and
efficiency and productivity initiatives. Total General Fund receipts and
transfers from other funds are projected to be $32.88 billion, a decrease of $88
million from total receipts projected in the current fiscal year. Total General
Fund disbursements and transfers to other funds are projected to be $32.84
billion, a decrease of $56 million from spending totals projected for the
current fiscal year. As compared to the 1996-97 State Financial Plan, the
Executive Budget proposes a year-to-year decline in General Fund spending of 0.2
percent. State funds spending (i.e., General Fund plus other dedicated funds,
with the exception of federal aid) is projected to grow by 1.2 percent. Spending
from All Governmental Funds (excluding transfers) is proposed to increase by 2.2
percent from the fiscal year.

The Executive Budget proposes $2.3 billion in actions to balance the 1997-98
Financial Plan. Before reflecting any actions proposed by the Governor to
restrain spending, General Fund disbursements for 1997-98 were projected to grow
by approximately 4 percent. This increase would have resulted from growth in
Medicaid, higher fixed costs such as pensions and debt service, collective
bargaining agreements, inflation, and the loss of non-recurring resources that
offset spending in 1996-97. General Fund receipts were projected to fall by
roughly 3 percent. This reduction would have been attributable to modest growth
in the State's economy and underlying tax base, the loss of non-recurring
revenues available in 1996-97 and implementation of previously enacted tax
reduction programs.

The Executive Budget proposes to close this gap primarily through a series
of spending reductions and Medicaid cost containment measures, the use of a
portion of the 1996-97 projected budget surplus, and other actions. The 1997-98
Financial Plan projects receipts of $32.88 billion and spending of $32.84
billion, allowing for a deposit of $24 million into the CRF and a year-ending
CRF reserve of $65 million, and a required repayment of $15 million to the TSRF.

1995-96 FISCAL YEAR

The State ended its 1995-96 fiscal year on March 31, 1996 with a General
Fund cash surplus. The DOB reported that revenues exceeded projections by $270
million, while spending for social service programs was lower than forecast by
$120 million and all other spending was lower by $55 million. From the resulting
benefit of $445 million, a $65 million voluntary deposit was made into the TSRF,
and $380 million was used to reduce 1996-97 Financial Plan liabilities by
accelerating 1996-97 payments, deferring 1995-96 revenues, and making a deposit
to the tax refund reserve account.

The General Fund closing fund balance was $287 million, an increase of $129
million from 1994-95 levels. The $129 million change in fund balance is
attributable to the $65 million voluntary deposit to the TSRF, a $15 million
required deposit to the TSRF, a $40 million deposit to the CRF, and a $9 million
deposit to the Revenue Accumulation Fund. The closing fund balance includes $237
million on deposit in the TSRF, to be used in the event of any future General
Fund deficit, as provided under the State Constitution and State Finance Law. In
addition, $41 million is on deposit in the CRF. The CRF was established in State
fiscal year 1993-94 to assist the State in financing the costs of extraordinary
litigation. The remaining $9 million reflects amounts on deposit in the Revenue
Accumulation Fund. This fund was created to hold certain tax receipts
temporarily before their deposit to other accounts. In addition, $678 million
was on deposit in the tax refund reserve account, of which $521 million was
necessary to complete the restructuring of the State's cash flow under the Local
Government Assistance Corporation ("LGAC") program.

General Fund receipts totaled $32.81 billion, a decrease of 1.1 percent from
1994-95 levels. This decrease reflects the impact of tax reductions enacted and
effective in both 1994 and 1995. General Fund disbursements totaled $32.68
billion for the 1995-96 fiscal year, a decrease of 2.2 percent from 1994-95
levels. Mid-year spending reductions, taken as part of a management review
undertaken in October at the direction of the Governor, yielded savings from
Medicaid utilization controls, office space consolidation, overtime and
contractual expense reductions, and statewide productivity improvements achieved
by State agencies. Together with decreased social services spending, this
management review accounts for the bulk of the decline in spending.

1994-95 FISCAL YEAR

The State ended its 1994-95 fiscal year with the General Fund in balance.
The $241 million decline in the fund balance reflects the planned use of $264
million from the CRF, partially offset by the required deposit of $23 million to
the TSRF. In addition, $278 million was on deposit in the tax refund reserve
account, $250 million of which was deposited to continue the process of
restructuring the State's cash flow as part of the LGAC program. The closing
fund balance of $158 million reflects $157 million in the TSRF and $1 million in
the CRF.

General Fund receipts totaled $33.16 billion, an increase of 2.9 percent
from 1993-94 levels. General Fund disbursements totaled $33.40 billion for the
1994-95 fiscal year, an increase of 4.7 percent from the previous fiscal year.
The increase in disbursements was primarily the result of one-time litigation
costs for the State, funded by the use of the CRF, offset by $188 million in
spending reductions initiated in January 1995 to avert a potential gap in the
1994-95 State Financial Plan. These actions included savings from a hiring
freeze, halting the development of certain services, and the suspension of
non-essential capital projects.

1993-94 FISCAL YEAR

The State ended its 1993-94 fiscal year with a General Fund cash surplus,
primarily the result of an improving national economy, State employment growth,
tax collections that exceeded earlier projections and disbursements that were
below expectations. A deposit of $268 million was made to the CRF, with a
withdrawal during the year of $3 million, and a deposit of $67 million was made
to the TSRF. These three transactions resulted in the change in fund balance of
$332 million. In addition, a deposit of $1.14 billion was made to the tax refund
reserve account, of which $1.03 billion was available for budgetary purposes in
the 1994-95 fiscal year. The remaining $114 million was redeposited in the tax
refund reserve account at the end of the State's 1994-95 fiscal year to continue
the process of restructuring the State's cash flow as part of the LGAC program.
The General Fund closing balance was $399 million, of which $265 million was on
deposit in the CRF and $134 million in the TSRF. The CRF was initially funded
with a transfer of $100 million attributable to a positive margin recorded in
the 1992-93 fiscal year.

General Fund receipts totaled $32.23 billion, an increase of 2.6 percent
from 1992-93 levels. General Fund disbursements totaled $31.90 billion for the
1993-94 fiscal year, 3.5 percent higher than the previous fiscal year. Receipts
were higher in part due to improved tax collections from renewed State economic
growth, although the State continued to lag behind the national economic
recovery. Disbursements were higher in part due to increased local assistance
costs for school aid and social services, accelerated payment of certain
Medicaid expenses, and the cost of an additional payroll for State employees.

During the prior ten years, State-supported long-term debt service increased
by 8.6 percent annually to $2.72 billion by 1995-96 as available revenues
increased by 4.4 percent annually. The relative comparable growth in revenues
and debt service resulted in modest increases in the ratio of debt service to
revenues from 1986-87 to 1995-96. The ratio is estimated to increase to 6.7
percent as a result of the enacted budget.

Principal and interest payments on general obligation bonds and interest
payments on bond anticipation notes ("BANs") were $735 million for the 1995-96
fiscal year, and are estimated to be $719 million for 1996-97. Principal and
interest payments on fixed rate and variable rate bonds issued by LGAC were $340
million for the 1995-96 fiscal year, and are estimated to be $323 million for
1996-97. State lease-purchase rental and contractual-obligation payments
(including State installment payments relating to COPs), classified as "Other
Financial Obligations," were $1.647 billion in 1995-96 and are estimated to be
$1.883 billion for the 1996-97 fiscal year.

Total outstanding State-related debt increased from $24.62 billion at the
end of the 1986-87 fiscal year to $38.25 billion at the end of the 1995-96
fiscal year, an average annual increase of 5 percent. State-supported debt
increased from $10.91 billion at the end of the 1986-87 fiscal year to $30.67
billion at the end of the 1995-96 fiscal year, an average annual increase of
12.2 percent. However, debt issuances resulting from the 1996-97 enacted budget
are only expected to increase outstanding State-supported debt by 4.5 percent
over the prior fiscal year. During the prior ten year period, annual personal
income in the State rose from $310.6 billion to $498.7 billion, an average
annual increase of 5.4 percent. Thus, State-supported debt grew at a faster rate
than personal income while State-related obligations grew at a slower rate.
Expressed in other terms, the total amount of State-supported debt outstanding
grew from 3.5 percent of personal income in the 1986-87 fiscal year to 6.2
percent for the 1995-96 fiscal year, while State-related debt outstanding
declined from 7.9 percent to 7.7 percent for the same period.

Rating Agencies Actions: On February 5, 1993, Fitch assigned its municipal
bond rating of A+ to the State's general obligation bonds. Moody's assigned its
municipal bond rating of A2 on February 14, 1997, and as of October 29, 1996,
S&P assigned its rating of A- 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.

PUBLIC AUTHORITIES

The fiscal stability of the State is related, in part, to the fiscal
stability of its public authorities, meaning public benefit corporations created
pursuant to State law, other than local authorities. Public authorities are not
subject to the constitutional restrictions on the incurrence of debt which apply
to the State itself and may issue bonds and notes within the amounts, and
restrictions set forth in legislative authorization. The State's access to the
public credit markets could be impaired, and the market price of its outstanding
debt may be materially adversely affected, if any of its public authorities were
to default on their respective obligations, particularly those using the
financing techniques referred to as State-supported or State-related debt. As of
September 30, 1995, there were 17 public authorities that had outstanding debt
of $100 million or more, and the aggregate outstanding debt, including refunding
bonds, of all State public authorities was $73.45 billion. As of March 31, 1995,
aggregate public authority debt outstanding as State-supported debt was $27.9
billion and as State-related debt was $36.1 billion.

There are numerous public authorities, with various responsibilities,
including those which finance, construct and/or operate revenue producing public
facilities. Public authority operating expenses and debt service costs are
generally paid by revenues generated by the projects financed or operated, such
as tolls charged for the use of highways, bridges or tunnels, rentals charged
for housing units, and charges for occupancy at medical care facilities.

In addition, State legislation authorizes several financing techniques for
public authorities. Also, there are statutory arrangements providing for State
local assistance payments, otherwise payable to localities, to be made under
certain circumstances to public authorities. Although the State has no
obligation to provide additional assistance to localities whose local assistance
payments have been paid to public authorities under these arrangements if local
assistance payments are so diverted, the affected localities could seek
additional State assistance.

Some authorities also receive money from State appropriations to pay for the
operating costs of certain of their programs. As described below, the
Metropolitan Transportation Authority ("MTA") receives the bulk of this money in
order to carry out mass transit and commuter services.

METROPOLITAN TRANSPORTATION AUTHORITY

The MTA oversees the operation of subway and bus lines in New York City by
its affiliates, the New York City Transit Authority and the Manhattan and Bronx
Surface Transit Operating Authority (collectively, the "TA"). The MTA operates
certain commuter rail and bus services in the New York Metropolitan area through
MTA's subsidiaries, the Long Island Rail Road Company, the Metro-North Commuter
Railroad Company, and the Metropolitan Suburban Bus Authority. In addition, the
Staten Island Rapid Transit Operating Authority, an MTA subsidiary, operates a
rapid transit line on Staten Island. Through its affiliated agency, the
Triborough Bridge and Tunnel Authority (the "TBTA"), the MTA operates certain
intrastate toll bridges and tunnels. Because fare revenues are not sufficient to
finance the mass transit portion of these operations, the MTA has depended, and
will continue to depend, for operating support upon a system of State, local
government and TBTA support, and, to the extent available, federal operating
assistance, including loans, grants and subsidies. If current revenue
projections are not realized and/or operating expenses exceed current
projections, the TA or commuter railroads may be required to seek additional
State assistance, raise fares or take other actions.

Since 1980, the State has enacted several taxes--including a surcharge on
the profits of banks, insurance corporations and general business corporations
doing business in the 12-county Metropolitan Transportation Region served by the
MTA and a special one-quarter of 1 percent regional sales and use tax-- that
provide revenues for mass transit purposes, including assistance to the MTA.
Since 1987 State law has required that the proceeds of a one-quarter of 1
percent mortgage recording tax paid on certain mortgages in the Metropolitan
Transportation Region be deposited in a special MTA fund for operating or
capital expenses. In 1993, the State dedicated a portion of certain additional
State petroleum business tax receipts to fund operating or capital assistance to
the MTA. For the 1996-97 State fiscal year, total State assistance to the MTA is
estimated at approximately $ 1.09 billion.

The MTA received authorization in State legislation accompanying the 1996-97
adopted State budget to issue bonds to finance a portion of a new $11.98 billion
MTA Capital Program for the 1995 through 1999 calendar years. Such plan, once
approved by the MTA Capital Program Review Board, will supersede the MTA's
1992-96 Capital Program. The MTA expects such approval before the end of 1997
legislative session. In the interim, the MTA will proceed with financings for
projects approved under the 1992-96 Capital Program, as well as a subset of the
1997 portion of the 1995-96 Capital Program using federal, New York City and
other non-bonded sources of funds.

There can be no assurance that all the necessary governmental actions for
the 1995-99 Capital Program or future capital programs will be taken, that
funding sources currently identified will not be decreased or eliminated, or
that the 1995-99 Capital Program, or parts thereof, will not be delayed or
reduced. Should funding levels fall below current projections, the MTA would
have to revise its 1995-99 Capital Program accordingly. If the 1995-99 Capital
Program is delayed or reduced, ridership and fare revenues may decline, which
could, among other things, impair the MTA's ability to meet its operating
expenses without additional assistance.

LOCALITIES
THE CITY OF NEW YORK

The fiscal health of the State may also be affected by the fiscal health of
New York City ("the City"), which continues to require significant financial
assistance from the State. The City depends on State aid both to enable the City
to balance its budget and to meet its cash requirements. The City has achieved
balanced operating results for each of its fiscal years since 1981 as reported
in accordance with the then-applicable GAAP standards.

FISCAL OVERSIGHT

In response to the City's fiscal crisis in 1975, the State took action to
assist the City in returning to fiscal stability. Among those actions, the State
established the Municipal Assistance Corporation for the City of New York ("NYC
MAC") to provide financing assistance to the City; the New York State Financial
Control Board (the "Control Board") to oversee the City's financial affairs; and
the Office of the State Deputy Comptroller for the City of New York ("OSDC") to
assist the Control Board in exercising its powers and responsibilities. A
"Control Period" existed from 1975 to 1986 during which the City was subject to
certain statutorily-prescribed fiscal controls. Although the Control Board
terminated the Control Period in 1986 when certain statutory conditions were met
and suspended certain Control Board powers, upon the occurrence or "substantial
likelihood and imminence" of the occurrence of certain events, including (but
not limited to) a City operating budget deficit of more than $100 million or
impaired access to the public credit markets, the Control Board is required by
law to reimpose a Control Period.

Currently, the City and its Covered Organizations (i.e., those which receive
or may receive moneys from the City directly, indirectly or contingently)
operate under a four-year financial plan (the "Financial Plan") which the City
prepares annually and periodically updates. The City's Financial Plan includes
its capital, revenue and expense projections and outlines proposed gap-closing
programs for years with projected budget gaps. The City's projections set forth
in the Financial Plan are based on various assumptions and contingencies, some
of which are uncertain and may not materialize. Unforeseen developments and
changes in major assumptions could significantly affect the City's ability to
balance its budget as required by State law and to meet its annual cash flow and
financing requirements.

Implementation of the Financial Plan is also dependent upon the ability of
the City and certain Covered Organizations to market their securities
successfully. The City issues securities to finance, refinance and rehabilitate
infrastructure and other capital needs, as well as for seasonal financing needs.
The City currently projects that if no action is taken, it will exceed its State
Constitutional general debt limit beginning in City fiscal year 1998. The
current Financial Plan includes certain alternative methods of financing a
portion of the City's capital program which require State or other outside
approval. Future developments concerning the City or its Covered Organizations,
and public discussion of such developments, as well as prevailing market
conditions and securities credit ratings, may affect the ability or cost to sell
securities issued by the City or such Covered Organizations and may also affect
the market for their outstanding securities.

MONITORING AGENCIES

The staffs of the Control Board, OSDC and the City Comptroller issue
periodic reports on the City's Financial Plans which analyze the City's
forecasts of revenues and expenditures, cash flow, and debt service requirements
for, and Financial Plan compliance by, the City and its Covered Organizations.
According to recent staff reports, the City's economy has experienced weak
employment and moderate wage and income growth throughout the mid-1990's.
Although this trend is expected to continue for the rest of the decade, there is
the risk of a slowdown in the City's economy in the next few years, which would
depress revenue growth and put further strains on the City's budget. These
reports have also indicated that recent City budgets have been balanced in part
through the use of non-recurring resources; that the City's Financial Plan tends
to rely on actions outside its direct control; that the City has not yet brought
its long-term expenditure growth in line with recurring revenue growth; and that
the City is therefore likely to continue to face substantial future budget gaps
that must be closed with reduced expenditures and/or increased revenues. Copies
of the most recent Control Board, OSDC and City Comptroller staff reports are
available by contacting the Control Board at 270 Broadway, 21st Floor, New York,
NY, 10007, Attention: Executive Director; OSDC at 270 Broadway, 22nd Floor, New
York, NY 10007, Attention: Deputy Comptroller; and the City Comptroller at
Municipal Building, Room 517, One Centre Street, New York, NY 10007, Attention:
Deputy Comptroller, Finance.

OTHER LOCALITIES

Certain localities outside New York City have experienced financial problems
and have requested and received additional State assistance during the last
several State fiscal years The potential impact on the State of any future
requests by localities for additional assistance is not included in the
projections of the State's receipts and disbursements for the State's 1996-97
fiscal year.

Fiscal difficulties experienced by the City of Yonkers resulted in the
reestablishment of the Financial Control Board for the City of Yonkers by the
State in 1984. That Board is charged with oversight of the fiscal affairs of
Yonkers. Future actions taken by the State to assist Yonkers could result in
increased State expenditures for extraordinary local assistance.

Beginning in 1990, the City of Troy experienced a series of budgetary
deficits that resulted in the establishment of a Supervisory Board for the City
of Troy in 1994. The Supervisory Board's powers were increased in 1995, when
Troy MAC was created to help Troy avoid default on certain obligations. The
legislation creating Troy MAC prohibits the City of Troy from seeking federal
bankruptcy protection while Troy MAC bonds are outstanding.

Seventeen municipalities received extraordinary assistance during the 1996
legislative session through $50 million in special appropriations targeted for
distressed cities.

Municipalities and school districts have engaged in substantial short-term
and long-term borrowings. In 1994, the total indebtedness of all localities in
the State other than New York City was approximately $17.7 billion. A small
portion (approximately $82.9 million) of that indebtedness represented borrowing
to finance budgetary deficits and was issued pursuant to State enabling
legislation. State law requires the Comptroller to review and make
recommendations concerning the budgets of those local government units other
than New York City authorized by State law to issue debt to finance deficits
during the period that such deficit financing is outstanding. Seventeen
localities had outstanding indebtedness for deficit financing at the close of
their fiscal year ending in 1994.

From time to time, federal expenditure reductions could reduce, or in some
cases eliminate, federal funding of some local programs and accordingly might
impose substantial increased expenditure requirements on affected localities. If
the State, the City or any of the public authorities were to suffer serious
financial difficulties jeopardizing their respective access to the public credit
markets, the marketability of notes and bonds issued by localities within the
State could be adversely affected. Localities also face anticipated and
potential problems resulting from certain pending litigation, judicial decisions
and long-range economic trends. Long-range potential problems of declining urban
population, increasing expenditures and other economic trends could adversely
affect localities and require increasing State assistance in the future.

LITIGATION
GENERAL

The legal proceedings noted below involve State finances, State programs and
miscellaneous tort, real property and contract claims in which the State is a
defendant and the monetary damages sought are substantial. These proceedings
could affect adversely the financial condition of the State in the 1996-97
fiscal year or thereafter.

Adverse developments in these proceedings or the initiation of new
proceedings could affect the ability of the State to maintain a balanced 1996-97
State Financial Plan. The State believes that the 1996-97 State Financial Plan
includes sufficient reserves for the payment of judgments that may be required
during the 1996-97 fiscal year. There can be no assurance, however, that an
adverse decision in any of these proceedings would not exceed the amount of the
1996-97 State Financial Plan reserves for the payment of judgments and,
therefore, could affect the ability of the State to maintain a balanced 1996-97
State Financial Plan. In its General Purpose Financial Statements, the State
reports its estimated liability in subsequent fiscal years for awarded and
anticipated unfavorable judgments.

Although other litigation is pending against the State, except as described
below, no current litigation involves the State's authority, as a matter of law,
to contract indebtedness, issue its obligations, or pay such indebtedness when
it matures, or affects the State's power or ability, as a matter of law, to
impose or collect significant amounts of taxes and revenues.

In addition to the proceedings noted below, the State is party to other
claims and litigation which its legal counsel has advised are not probable of
adverse court decisions. Although the amounts of potential losses, if any, are
not presently determinable, it is the State's opinion that its ultimate
liability in these cases is not expected to have a material adverse effect on
the State's financial position in the 1996-97 fiscal year or thereafter.

STATE FINANCE POLICIES
INSURANCE LAW

In Trustees of and The Pension, Hospitalization Benefit Plan of the
Electrical Industry, et al. v. Cuomo, et al. (commenced November 25, 1992 in the
United States District Court for the Eastern District of New York), plaintiff
employee welfare benefit plans sought a declaratory judgment nullifying on the
ground of federal preemption provisions of Section 2807-c of the Public Health
Law and implementing regulations which impose a bad debt and charity care
allowance on all hospital bills and a 13 percent surcharge on inpatient bills
paid by employee welfare benefit plans. This case has been dismissed by
stipulation and order, by and among the parties, with prejudice.

Two separate proceedings challenge regulations promulgated by the
Superintendent of Insurance establishing excess medical malpractice premium
rates for the 1986-87 through 1995-96 and 1996-97 fiscal years, respectively
(New York State Health Maintenance Organization Conference, Inc., et al. v. Muhl
et al, Supreme Court, Albany County). Plaintiffs allege that the method of rate
calculation is arbitrary and capricious and excessive, and seek inter alia, to
annul the present rates and to compel the State to refund accumulated surpluses
not actuarially required.

TAX LAW

Aspects of petroleum business taxes are the subject of administrative claims
and litigation. In Tug Buster Bouchard, et al. v. Wetzler (Supreme Court, Albany
County, commenced November 13, 1992), petitioner tugboat corporations, which
purchased fuel out of State and consumed such fuel within the State, contended
that the assessment of the petroleum business tax pursuant to Tax Law (S)301 to
such fuel violated the Commerce Clause of the United States Constitution.
Petitioners contended that the application of Section 301 to the interstate
transaction but not to purchasers who purchased and consumed fuel within the
State discriminated against interstate commerce. By decision dated November 14,
1996, based upon the State's concession that the challenged provision was
unconstitutional as applied to the petitioners and other similarly situated
vessels, the Court of Appeals affirmed the order of the Appellate Division,
Third Department, dated January 4, 1996, which held that Tax Law
(S)301(a)(1)(ii) (the portion of the petroleum business tax applicable between
1984 and September 1, 1990 to petroleum businesses which import petroleum into
New York State for consumption in the State) was unconstitutional. The State's
motion for reargument, seeking clarification and/or modification of the Court of
Appeals decision, was denied by order dated December 20, 1996.

In Matter of the Petition of Consolidated Rail Corporation v. Tax Appeals
Tribunal (Appellate Division, Third Department, commenced December 22, 1995),
petitioner rail freight corporation, which purchases diesel motor fuel out of
State and imports the fuel into the State for use, distribution, storage or sale
in the State, contends that the assessment of the petroleum business tax
pursuant to Tax Law (S)301-a to such fuel purchases violates the Commerce Clause
of the United States Constitution. Petitioner contends that the application of
Section 301-a to the interstate transaction but not to purchasers who purchase
fuel within the State for use, distribution, storage or sale within the State
discriminates against interstate commerce.

STATE PROGRAMS

Several cases challenge provisions of Chapter 81 of the Laws of 1995 which
alter the nursing home Medicaid reimbursement methodology on and after April
1, 1995. Included are New York State Health Facilities Association, et al. v.
DeBuono, et al., St. Luke's Nursing Center, et al. v. DeBuono, et al., New
York Association of Homes and Services for the Aging v. DeBuono et al. (three
cases), Healthcare Association of New York State v. DeBuono and Bayberry
Nursing Home et al. v. Pataki, et al. Plaintiffs allege that the changes in
methodology have been adopted in violation of procedural and substantive
requirements of State and federal law.

In a consolidated action commenced in 1992, Medicaid recipients and home
health care providers and organizations challenge promulgation by the State
Department of Social Services ("DSS") in June 1992 of a home assessment resource
review instrument ("HARRI"), which is to be used by DSS to determine eligibility
for and the nature of home care services for Medicaid recipients, and challenge
the policy of DSS of limiting reimbursable hours of service until a patient is
assessed using the HARRI (Dowd, et al. v. Bane, Supreme Court, New York County).

OFFICE OF MENTAL HEALTH PATIENT-CARE COSTS

Two actions, Balzi, et al. v. Surles, et al., commenced in November 1985 in
the United States District Court for the Southern District of New York, and
Brogan, et al. v. Sullivan, et al., commenced in May 1990 in the United States
District Court for the Western District of New York, now consolidated, challenge
the practice of using patients' Social Security benefits for the costs of care
of patients of State Office of Mental Health facilities.

SHELTER ALLOWANCE

In an action commenced in March 1987 against State and New York City
officials (Jiggetts, et al. v. Bane, et al.), plaintiffs allege that the shelter
allowance granted to recipients of public assistance is not adequate for proper
housing.

EDUCATION LAW

In New York State Association of Counties v. Pataki, et al., commenced May
29, 1996 (Supreme Court, Albany County), plaintiff seeks reimbursement from the
State for certain costs arising out of the provision of preschool services and
programs for children with handicapping conditions, pursuant to Sections 4410
(10) and (11) of the Education Law.

CLEAN WATER/CLEAN AIR BOND ACT OF 1996

In Robert L. Schulz et al. v. The New York State Executive et al. (Supreme
Court, Albany County, commenced October 16, 1996), plaintiffs challenge the
enactment of the Clean Water/Clean Air Bond Act of 1996 and its implementing
legislation (1996 Laws of New York, Chapters 412 and 413). Plaintiffs claim,
inter alia, that the Bond Act and its implementing legislation violate
provisions of the State Constitution requiring that such debt be authorized by
law for some single work or purpose distinctly specified therein and forbidding
incorporation of other statutes by reference.

REAL PROPERTY CLAIMS
INDIAN LAND CLAIMS

On March 4, 1985 in Oneida Indian Nation of New York, et al. v. County of
Oneida, the United States Supreme Court affirmed a judgment of the United States
Court of Appeals for the Second Circuit holding that the Oneida Indians have a
common-law right of action against Madison and Oneida Counties for wrongful
possession of 872 acres of land illegally sold to the State in 1795. At the same
time, however, the Court reversed the Second Circuit by holding that a
third-party claim by the counties against the State for indemnification was not
properly before the federal courts. The case was remanded to the District Court
for an assessment of damages, which action is still pending. The counties may
still seek indemnification in the State courts.

Several other actions involving Indian claims to land in upstate New York
are also pending. Included are Cayuga Indian Nation of New York v. Cuomo, et
al., and Canadian St. Regis Band of Mohawk Indians, et al. v. State of New York,
et al., both in the United States District Court for the Northern District of
New York. The Supreme Court's holding in Oneida Indian Nation of New York may
impair or eliminate certain of the State's defenses to these actions but may
enhance others.

CONTRACT AND TORT CLAIMS
COGENERATION FACILITY

In Inter-Power of New York, Inc. v. State of New York, commenced November
16, 1994 in the Court of Claims, plaintiff alleges that by reason of the failure
of the State's Department of Environmental Conservation to provide in a timely
manner accurate and complete data, plaintiff was unable to complete by the
projected completion date a cogeneration facility, and thereby suffered damages.

RACIAL SEGREGATION

In an action commenced in 1985 (United States et al. v. Yonkers Board of
Education, et al.), the United States District Court for the Southern District
of New York found that Yonkers and its public schools were intentionally
segregated. Yonkers enacted an "education improvement plan" which was adopted in
1986. Plaintiffs allege that defendants have not fulfilled their responsibility
to alleviate the segregation. On January 19, 1989 the State, the State Education
Department and the New York State Urban Development Corporation were added as
defendants.

<PAGE>

SHAREHOLDER SERVICING AGENTS

FOR CITIBANK RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CUSTOMERS:
Citibank, N.A.
111 Wall Street, New York, NY 10094
(212) 820-2383 or (800) 846-5300

FOR CITIGOLD CUSTOMERS:
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 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.
Master Trust Accounts
111 Wall Street, New York, NY 10094
Call Your Account Manager or (212) 657-9659

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) 820-2380 in New York City

<PAGE>

PART C

Item 24. Financial Statements and Exhibits.

(a) Financial Statements Included in Part A:

LANDMARK NEW YORK TAX FREE INCOME FUND
Condensed Financial Information - Financial Highlights (for
the years ended December 31, 1996, 1995 and 1994, for the
four months ended December 31, 1993 and for each of the
fiscal years in the seven year period ended August 31, 1993)
LANDMARK NATIONAL TAX FREE INCOME FUND
Condensed Financial Information - Financial Highlights (for
the year ended December 31, 1996 and for the period from the
commencement of operations (August 17, 1995) to December 31,
1995)

Financial Statements Included in Part B:

LANDMARK NEW YORK TAX FREE INCOME FUND
Portfolio of Investments at December 31, 1996*
Statement of Assets and Liabilities at December 31, 1996*
Statement of Operations for the year ended December 31,
1996*
Statement of Changes in Net Assets for the years ended
December 31, 1996 and 1995*
Financial Highlights for the years ended December 31, 1996,
1995 and 1994, for the four months ended December 31, 1993
and for each of the years in the two-year period ended
August 31, 1993*
LANDMARK NATIONAL TAX FREE INCOME FUND
Portfolio of Investments at December 31, 1996**
Statement of Assets and Liabilities at December 31, 1996**
Statement of Operations for the year ended December 31, 1996**
Statement of Changes in Net Assets for the year ended December
31, 1996 and for the period from August 17, 1995
(commencement of operations) to December 31, 1995**
Financial Highlights for the year ended December 31, 1996 and
for the period from August 17, 1995 (commencement of
operations) to December 31, 1995**

------------------
* Financial information is included for Landmark New York Tax Free
Income Fund only and is incorporated by reference to the
Registrant's Annual Report to Shareholders of Landmark New York Tax
Free Income Fund for the fiscal year ended December 31, 1996
(Accession Number 0000794047-97-000001).
** Financial information is included for Landmark National Tax Free
Income Fund only and is incorporated by reference to the
Registrant's Annual Report to Shareholders of Landmark National Tax
Free Income Fund for the fiscal year ended December 31, 1996
(Accession Number 0000794047-97-000001).

(b) Exhibits
<TABLE>

<C> <S>
* 1(a) Amended and Restated Declaration of Trust of Registrant
*** 1(b) Amendment to Registrant's Declaration of Trust
*** 1(c) Form of Establishment and Designation of Series of the Registrant
***** 1(d) Amendment to Registrant's Declaration of Trust
*** 2(a) Amended and Restated By-Laws of Registrant
**** 2(b) Amendment to Amended and Restated By-Laws of Registrant
**** 4(a) Form of Certificate representing ownership of Class A shares of the Funds
**** 4(b) Form of Certificate representing ownership of Class B shares of the Funds
**** 6(a) Form of Amendedand Restated Distribution Agreement between the Registrant and
The Landmark Funds Broker-Dealer Services, Inc. ("LFBDS"), as distributor, with
respect to Class A Shares of the Funds
**** 6(b) Form of Distribution Agreement between the Registrant and LFBDS, as
distributor, with respect to Class B Shares of the Funds
* 7 Form of Custodian Contract between the Registrant and State Street Bank and
Trust Company ("State Street"), as custodian
**** 9(a)(i) Form of Amended and Restated Administrative Services Plan of the Registrant

****** 9(a)(ii) Form of 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(d)(iv) Form of Shareholder Servicing Agreement between the Registrant and a

national banking association or subsidiary thereof or state chartered banking
association, as shareholder servicing agent
* 9(e) Transfer Agency and Servicing Agreement between the Registrant and State Street
Bank and Trust Company, as transfer agent
**** 9(f) Form of Amended and Restated Exchange Privilege Agreement between each of the
trusts in the Landmark Family of Funds, including the Registrant, and LFBDS, as
distributor
11 Consent of Deloitte & Touche LLP, independent auditors of the Registrant
**** 15(a) Form of Amended and Restated Distribution Plan of the Registrant with respect
to Class A Shares of the Funds
**** 15(b) Form of Distribution Plan of the Registrant with respect to Class B Shares of
the Funds
**** 16 Performance Calculations
* and ** 25 Powers of Attorney for the Registrant
27 Financial Data Schedule

- ---------------------
* Incorporated herein by reference to Post-Effective Amendment No. 8 to the Registrant's Registration
Statement on Form N-1A (File No. 33-5819) as filed with the Securities and Exchange Commission on
January 2, 1992.
** Incorporated herein by reference to Post-Effective Amendment No. 10 to the Registrant's Registration
Statement on Form N-1A (File No. 33-5819) as filed with the Securities and Exchange Commission on
December 18, 1992.
*** Incorporated herein by reference to Post-Effective Amendment No. 11 to the Registrant's Registration
Statement on Form N-1A (File No. 33-5819) as filed with the Securities and Exchange Commission on
December 16, 1993.
**** Incorporated herein by reference to Post-Effective Amendment No. 12 to the Registrant's Registration
Statement on Form N-1A (File No. 33-5819) as filed with the Securities and Exchange Commission on
October 26, 1994.
***** Incorporated herein by reference to Post-Effective Amendment No. 15 to the Registrant's Registration
Statement on Form N-1A (File No. 33-5819) as filed with the Securities and Exchange Commission on March
3, 1995.

****** Incorporated herein by reference to Post-Effective Amendment No. 17 to the Registrant's Registration
Statement on Form N-1A (File No. 33-5819) as filed with the Securities and Exchange Commission on April
29, 1996.

</TABLE>

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

Not applicable.

Item 26. Number of Holders of Securities.

<TABLE>
Title of Class Number of Record Holders

Shares of Beneficial Interest As of April 17, 1997
(without par value)
<S> <C>
Landmark New York Tax Free Income Fund
Class A 7
Class B 0

Landmark National Tax Free Income Fund
Class A 7
Class B 0
</TABLE>

Item 27. Indemnification.

Reference is hereby made to (a) Article V of the Registrant's
Declaration of Trust, filed as an Exhibit to Post-Effective Amendment No. 8 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., filed as an Exhibit to Post-Effective Amendment No. 8; 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, U.S. Treasury Reserves
Portfolio, Cash Reserves Portfolio, Asset Allocation Portfolios (Asset
Allocation Portfolio 200, Asset Allocation Portfolio 300, Asset Allocation
Portfolio 400 and Asset Allocation Portfolio 500), Landmark Multi-State Tax Free
Funds (Landmark New York Tax Free Reserves, Landmark Connecticut Tax Free
Reserves and Landmark California Tax Free Reserves), Landmark Fixed Income Funds
(Landmark Intermediate Income Fund), Landmark Tax Free Income Funds (Landmark
National Tax Free Income Fund and Landmark New York Tax Free Income Fund),
Landmark VIP Funds (Landmark VIP U.S. Government 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). Citibank and its affiliates manage assets in excess of $81
billion worldwide. The principal place of business of Citibank is located at 399
Park Avenue, New York, New York 10043.

The Chairman of the Board and a Director of Citibank is John S. Reed.
The following are Vice Chairmen of the Board and Directors of Citibank: Paul J.
Collins, William R. Rhodes and H. Onno Ruding. Other Directors of Citibank are
D. Wayne Calloway, former Chairman and Chief Executive Officer, PepsiCo, Inc.,
Purchase, New York; Kenneth T. Derr, Chairman and Chief Executive Officer,
Chevron Corporation; John M. Deutch, Director, CMS Energy; Reuben Marks,
Chairman and Chief Executive Officer, Colgate-Palmolive Company; Richard D.
Parsons, Member, Board of Representatives; Rozanne L. Ridgway, President, The
Atlantic Council of the United States; Robert B. Shapiro, President and Chief
Operating Officer, Monsanto Company; Frank A. Shrontz, Chairman and Chief
Executive Officer, The Boeing Company, Seattle, Washington; Roger B. Smith,
Former Chairman and Chief Executive Officer, General Motors Corporation;
Franklin A. Thomas, President, The Ford Foundation, New York, New York; and
Edgar S. Woolard, Jr., Chairman and Chief Executive Officer, E.I. DuPont De
Nemours & Company.

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

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

Paul J. Collins Director, Kimberly-Clark Corporation

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

John M. Deutch Director, CMS Energy
Director, Palomar Medical Technologies, Inc.

Reuben Mark Director, Colgate-Palmolive Company
Director, New York Stock Exchange
Director, Time Warner, Inc.
Non-Executive Director, Pearson, PLC

Richard D. Parsons Director, Federal National Mortgage Association
Director, Philip Morris Companies Incorporated
Member, Board of Representatives, Time Warner
Entertainment Company, L.P.
Director and President, Time Warner, Inc.

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 Advisers, Pechiney S.A.
Member, Board of Advisers, Robeco N.V.
Advisory Director, Unilever N.V.
Advisory Director, Unilever PLC

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

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

Franklin A. Thomas Director, Aluminum Company of America
Director, Cummins Engine Company, Inc.
Lucent Technologies
Director, Pepsico, Inc.

Edgar S. Woolard, Jr. Director, E.I. DuPont De Nemours & Company
Director, Apple Computer, Inc.
Director, Zurich Holding Company of America, Inc.
Advisory Director, Zurich Insurance Corporation

Item 29. Principal Underwriters.

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

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

<PAGE>

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.

Item 32. Undertakings.

(a) Not applicable.

(b) Not applicable.

(c) The Registrant undertakes to furnish to each person to whom a
prospectus of Landmark New York Tax Free Income Fund and
Landmark National Tax Free Income Fund is delivered with a copy
of the appropriate 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 it meets all
requirements for effectiveness of this Post-Effective Amendment to this
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Boston and
Commonwealth of Massachusetts on the 17th day of April, 1997.

LANDMARK TAX FREE INCOME FUNDS

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

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to this Registration Statement has been signed below by
the following persons in the capacities indicated below April 17, 1997.

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

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

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

Elliott J. Berv* Trustee
- -------------------------
Elliott 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
27 Financial Data Schedule

<PAGE>
Exhibit 99.11

INDEPENDENT AUDITORS' CONSENT

We consent to the incorporation by reference in this Post-Effective Amendment
No. 18 to Registration Statement No. 33-5819 of Landmark Tax Free Income Funds
of our reports each dated January 31, 1997 appearing in the annual reports to
shareholders for the year ended December 31, 1996 of Landmark New York Tax Free
Income Fund and Landmark National Tax Free Income Fund (each a separate series
of Landmark Tax Free Income 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
April 14, 1997

<ARTICLE> 6
<CIK> 0000794047
<NAME> LANDMARK TAX FREE INCOME FUNDS
<SERIES>
<NUMBER> 001
<NAME> LANDMARK NEW YORK TAX FREE INCOME FUND

<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 76,916,400
<INVESTMENTS-AT-VALUE> 81,283,137
<RECEIVABLES> 1,533,077
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 6,978
<TOTAL-ASSETS> 82,823,192
<PAYABLE-FOR-SECURITIES> 540,660
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 540,660
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 83,377,324
<SHARES-COMMON-STOCK> 7,486,395
<SHARES-COMMON-PRIOR> 8,439,334
<ACCUMULATED-NII-CURRENT> 31,506
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (5,593,561)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4,366,737
<NET-ASSETS> 82,182,006
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,258,222
<OTHER-INCOME> 0
<EXPENSES-NET> 685,207
<NET-INVESTMENT-INCOME> 4,573,015
<REALIZED-GAINS-CURRENT> 348,515
<APPREC-INCREASE-CURRENT> (2,544,578)
<NET-CHANGE-FROM-OPS> 2,376,952
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (4,598,756)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 7,081,700
<NUMBER-OF-SHARES-REDEEMED> (17,485,191)
<SHARES-REINVESTED> 4,543,061
<NET-CHANGE-IN-ASSETS> (8,082,234)
<ACCUMULATED-NII-PRIOR> 57,247
<ACCUMULATED-GAINS-PRIOR> (5,942,076)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 342,600
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,088,382
<AVERAGE-NET-ASSETS> 85,649,913
<PER-SHARE-NAV-BEGIN> 11.25
<PER-SHARE-NII> 0.59
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.59)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.98
<EXPENSE-RATIO> 1.27
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000794047
<NAME> LANDMARK TAX FREE INCOME FUNDS
<SERIES>
<NUMBER> 002
<NAME> LANDMARK NATIONAL TAX FREE INCOME FUND

<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 1,907,566
<INVESTMENTS-AT-VALUE> 1,961,427
<RECEIVABLES> 38,716
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 63,409
<TOTAL-ASSETS> 2,063,552
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 2,021,898
<SHARES-COMMON-STOCK> 199,218
<SHARES-COMMON-PRIOR> 133,482
<ACCUMULATED-NII-CURRENT> 2,091
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (17,548)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 53,861
<NET-ASSETS> 2,060,302
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 102,970
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 102,970
<REALIZED-GAINS-CURRENT> (17,548)
<APPREC-INCREASE-CURRENT> (9,055)
<NET-CHANGE-FROM-OPS> 76,367
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (100,879)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 950,184
<NUMBER-OF-SHARES-REDEEMED> (270,666)
<SHARES-REINVESTED> 99,169
<NET-CHANGE-IN-ASSETS> 754,175
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 7,598
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 156,343
<AVERAGE-NET-ASSETS> 1,899,393
<PER-SHARE-NAV-BEGIN> 10.55
<PER-SHARE-NII> 0.56
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> (0.54)
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 10.34
<EXPENSE-RATIO> 0.00
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>