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497(c) File Nos. 33-5819 and 811-5034
PROSPECTUS
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May 1, 1997
as supplemented September 8, 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.
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REMEMBER THAT SHARES OF THE FUNDS:
* ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY
* ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, CITIBANK
OR ANY OF ITS AFFILIATES
* ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL
AMOUNT INVESTED
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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
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4 Expense Summary
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6 Condensed Financial Information
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8 Investment Information
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9 Risk Considerations
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10 Valuation of Shares
Classes of Shares
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12 Purchases
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15 Exchanges
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16 Redemptions
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17 Dividends and Distributions
Management
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20 Tax Matters
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21 Performance Information
General Information
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22 Appendix -- Permitted Investments
and Investment Practices
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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.
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INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.
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PROSPECTUS SUMMARY
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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
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EXPENSE SUMMARY
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The following table summarizes estimated shareholder transaction and annual
operating expenses for Class A and B shares of each Fund.*
<TABLE>
<CAPTION>
--------------------------------------------------
NATIONAL TAX FREE NEW YORK TAX FREE
INCOME FUND INCOME FUND
CLASS A CLASS B CLASS A CLASS B
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<S> <C> <C> <C> <C> <C>
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.
</TABLE>
<PAGE>
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:
<TABLE>
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
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<S> <C> <C> <C> <C> <C>
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
<CAPTION>
ONE YEAR THREE YEARS FIVE YEARS TEN YEARS
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<S> <C> <C> <C> <C> <C>
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
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(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.
</TABLE>
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
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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>
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NEW YORK TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS
CLASS A SHARES
(No Class B shares were outstanding during these periods.)
<CAPTION>
FOUR
MONTHS
YEAR ENDED DEC. 31, ENDED YEAR ENDED AUGUST 31,
DEC. 31,
1996 1995 1994 1993(A) 1993 1992 1991 1990 1989 1988 1987++
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<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>
<PAGE>
<TABLE>
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NATIONAL TAX FREE INCOME FUND
FINANCIAL HIGHLIGHTS
CLASS A SHARES
(No Class B shares were outstanding during
these periods.)
<CAPTION>
AUGUST 17, 1995
YEAR ENDED (COMMENCEMENT OF
DECEMBER 31, OPERATIONS) TO
1996 DECEMBER 31, 1995
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<S> <C> <C>
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.
</TABLE>
<PAGE>
INVESTMENT INFORMATION
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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
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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 table. 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 Distribution fee of 0.05% Initial sales charge waived or reduced for
4.00% of the public offering price 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 Distribution fee of 0.75%; Shares convert to Class A shares
charge of 5.00% of the lesser of Service fee of 0.05% approximately eight years after issuance
redemption proceeds or original
purchase price; declines to 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.
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, subject to the appointment of an attorney for
redemptions of shares if the intended purchases are not completed, by completing
a LETTER OF INTENT. Investors should consult "Determination of Net Asset Value;
Valuation of Securities; Additional Purchase and Redemption Information" in the
Statement of Additional Information and their Shareholder Servicing Agents for
more information about Rights of Accumulation and Letters of Intent.
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 may 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.
John C. Mooney, a Vice President of Citibank, has managed the Funds since
June 1997. Mr. Mooney is a Senior Portfolio Manager responsible for managing
tax-exempt fixed income funds. He is also part of the team responsible for
fixed-income strategy, research and trading. Prior to joining Citibank in 1997,
Mr. Mooney served as a tax-exempt portfolio manager at SunAmerica for over three
years and also served as a tax-exempt portfolio manager at First Investors for
three years. His prior experience also includes positions at Alliance Capital
Management L.P. and The Boston Company.
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
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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
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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
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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.
PROPOSED CHANGES: Currently, the Funds operate on a stand-alone basis; that is,
each Fund invests directly in investment securities. Landmark National Tax Free
Income Fund has the ability to convert to a two-tier, master/feeder structure
whereby the Fund would invest all of its investable assets in a single
investment company. Landmark New York Tax Free Income Fund does not have the
ability to use the master/feeder structure. Subject to shareholder approval, the
Trustees of these Funds have approved an amendment to the Funds' Declaration of
Trust and fundamental investment restrictions to allow these Funds to invest in
one or more investment companies. The Board of Trustees has also approved,
subject to shareholder approval, new Management Agreements with Citibank and new
Rule 12b-1 Service Plans for the Funds.
Under the proposed Management Agreements, Citibank will be responsible for the
overall management of each Fund's business affairs, and will provide investment
advisory as well as administrative services to the Funds. If the proposed
Management Agreements are approved by shareholders, the Fund's existing advisory
and administrative services agreements will be terminated.
Under the proposed Management Agreements, each of the Funds will pay Citibank
management fees equal on an annual basis to 0.75% of the Fund's average daily
net assets, compared to advisory and administrative services fees currently
payable by the National Tax Free Income Fund equal on an annual basis to 0.80%
of the Fund's average daily net assets and by the New York Tax Free Income Fund
equal on an annual basis to 0.65% of the Fund's average daily net assets.
Under the Funds' existing Rule 12b-1 Distribution Plans, the National Tax Free
Income Fund may pay its distributor a monthly distribution fee at an annual rate
not to exceed 0.05% and a monthly service fee at an annual rate not to exceed
0.25%, of the Fund's average daily net assets, and the New York Tax Free Income
Fund may pay its distributor a monthly distribution fee at an annual rate not to
exceed 0.15% of the Fund's average daily net assets. The existing Distribution
Plans also permit the Funds to pay the distributor an additional fee (not to
exceed on an annual basis 0.05% of average daily net assets) in anticipation of
or as reimbursement for print or electronic media advertising expenses incurred
in connection with the sale of Fund shares. Under the proposed Service Plans,
the Funds may pay monthly fees in an amount not to exceed 0.25% per annum of the
Funds' average daily net assets, for both distribution and service matters. If
the proposed Service Plans are approved by shareholders, the existing
Distribution Plans will be terminated.
Assuming the matters described above are approved by shareholders, it is not
expected that the Funds' total expense ratios will increase.
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 a 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>
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SHAREHOLDER
SERVICING AGENTS
FOR CITIBANK RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CLIENTS:
Citibank, N.A.
111 Wall Street, New York, NY 10043
(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 10043
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.
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LANDMARK
NATIONAL
TAX FREE
INCOME FUND
- --------------------------------------------------------------------------------
LANDMARK
NEW YORK
TAX FREE
INCOME FUND
- --------------------------------------------------------------------------------
PROSPECTUS
May 1, 1997
as supplemented
September 8, 1997
TFI/P.1/97/PB Printed on Recycled Paper [recycle logo]
