<PAGE>
TRUSTEES AND OFFICERS
C. Oscar Morong, Jr., Chairman
Philip W. Coolidge*, President
Elliott J. Berv
Mark T. Finn
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Walter E. Robb, III
E. Kirby Warren
William S. Woods, Jr.
SECRETARY
Linda T. Gibson
TREASURER
John R. Elder*
*Affiliated Person of Administrator and Distributor
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND DISTRIBUTOR
The Landmark Funds Broker-Dealer Services, Inc.
6 St. James Avenue, Boston, MA 02116
(617) 423-1679
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
LEGAL COUNSEL
Bingham, Dana & Gould
150 Federal Street, Boston, MA 02110
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENTS
(See Inside Cover)
This report is prepared for the information of shareholders. It is authorized
for distribution to prospective investors only when preceded or accompanied by
an effective prospectus.
NYTFI/S/97 Printed on Recycled Paper (recycle symbol)
[Logo] LANDMARK(SM) FUNDS
Advised by Citibank, N.A.
LANDMARK
NEW YORK TAX FREE
INCOME FUND
SEMI-ANNUAL
REPORT
June 30, 1997
<PAGE>
- --------------------------------------------------------------------------------
A LETTER TO OUR SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Shareholder:
Municipal bonds generally outperformed U.S. government securities during the
first half of 1997, largely the result of a continuing imbalance in supply
versus demand. Despite some volatility early in the period, the U.S. and New
York economies continued to provide an outstanding environment for financial
assets, including municipal bonds: The national economic expansion is in its
seventh year and employment is near record levels, yet inflation is low -- all
of which are good for investments in municipal bonds.
In this environment, the Landmark Funds' investment adviser, Citibank, N.A.,
continued to manage the Landmark New York Tax Free Income Fund with the goal of
achieving its investment objectives: 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. Consistent with this
objective, the Fund seeks to provide an attractive yield from a quality
investment portfolio consisting of municipal obligations primarily of New York
State, its municipalities and their agencies.
This report reviews the Fund's investment activities and performance during
the six-month period ended June 30, 1997, and provides a summary of Citibank's
perspective on and outlook for the New York municipal bond market. On behalf of
the Board of Trustees of the Landmark Funds, I want to thank you for your
confidence and participation.
/s/ Philip W. Coolidge
Philip W. Coolidge
President
July 18, 1997
Remember that Mutual Fund Shares:
o Are not bank deposits or FDIC insured
o Are not obligations of or guaranteed by Citibank or Citicorp Investment
Services
o Are subject to investment risks, including possible loss of the principal
amount invested.
TABLE OF CONTENTS
1 A Letter to Our Shareholders
- --------------------------------------------------------------------------------
2 Market Environment
Fund Snapshot
- --------------------------------------------------------------------------------
Portfolio Manager
3 The Portfolio Manager Responds
Quotes From the Portfolio Manager
- --------------------------------------------------------------------------------
Strategy and Outlook
4 Landmark New York Tax Free
Income Fund--By the Numbers
- --------------------------------------------------------------------------------
5 Fund Data
Performance Highlights
- --------------------------------------------------------------------------------
6 Portfolio of Investments
- --------------------------------------------------------------------------------
8 Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
9 Statement of Operations
- --------------------------------------------------------------------------------
10 Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
11 Financial Highlights
- --------------------------------------------------------------------------------
12 Notes to Financial Statements
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
- --------------------------------------------------------------------------------
The first half of 1997 represented one of the most interesting periods in
recent memory for U.S. financial markets. The national economy continued to grow
with few signs of inflation, marking the sixth year in what is becoming one of
the longest expansions in the post-World War II era. In New York State, a
growing economy helped tax revenues meet or exceed budget projections. As
measured by the Dow Jones Industrial Average, the stock market gained more than
1,100 points for its best six-month performance in 10 years. The bond market
provided positive total rates of return as yields of long-term U.S. Treasury
bonds ended the period at 6.78% despite a one-quarter point increase in the
federal funds rate, a key short-term interest rate set by the Federal Reserve
Board. Municipal bonds generally outperformed comparable taxable fixed-income
securities, largely because of a lack of new supply in an environment of ample
investor demand.
When examined more closely, however, the general uptrend reveals a
considerable amount of volatility. The national economy, for example, grew at a
torrid 5.9% rate during the first three months of the year as consumer spending
and winter temperatures both remained unexpectedly high. As a result,
fixed-income investors became concerned early in the year that the economy was
growing too fast posing an inflation threat. Therefore, yields on municipal
securities rose in sympathy with U.S. Treasury bonds, which saw yields rise by
about one-half a percentage point. The Federal Reserve Board, apparently
agreeing that inflation might become an issue, tightened monetary policy
modestly to curtail economic growth.
Yet, inflation concerns proved to be short-lived as persistently stable
consumer and wholesale prices encouraged fixed-income investors to get back in
the market. Yields on municipal bonds quickly fell and ended the period just
slightly below the levels at which they started the year.
- --------------------------------------------------------------------------------
FUND SNAPSHOT
- --------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
September 8, 1986
NET ASSETS AS OF 6/30/97
$77.7 million
FUND OBJECTIVE
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 through investing in debt obligations consisting
primarily of municipal bonds and notes.
DIVIDENDS
Paid monthly, if any
CAPITAL GAINS
Distributed annually, if any
BENCHMARKS
o Lipper New York State Municipal Bond Funds Average
o Lehman Municipal Bond Index
INVESTMENT ADVISER
Citibank, N.A.
+A portion of the income may be subject to the Federal Alternative Minimum Tax.
Consult your personal tax advisor.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
JOHN C. MOONEY
Vice President, Citibank N.A.
Mr. Mooney has managed the Landmark New York Tax Free Income Fund 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. Prior experience also includes Alliance Capital Management L.P. and
The Boston Company.
- --------------------------------------------------------------------------------
THE PORTFOLIO MANAGER RESPONDS
- --------------------------------------------------------------------------------
We maintained a neutral duration throughout the period, neither lengthening
nor shortening as we saw no reason to do so. Our neutral stance positioned us
well for an increase in the value of municipal bonds relative to comparable U.S.
Treasury securities. In fact, municipal bonds ended the period near the high end
of their valuation range relative to Treasuries, a condition caused by the
relative lack of supply of new municipal bond issues. The nation's and New York
State's economic strength has been good for tax revenues for the state and most
of the municipalities, reducing their need to finance in the public markets.
We also maintained our sector allocation, diversifying the portfolio among
tax-exempt bonds issued by New York State, its municipalities, agencies and
authorities. The portfolio also holds a small number of bonds from U.S.
territories such as Puerto Rico, which are exempt from federal and New York
State and local taxes. At the end of the period, 59% of the portfolio was rated
"AA", "Aa" or better by the major bond rating agencies.
- --------------------------------------------------------------------------------
QUOTES FROM THE PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
"Municipal bonds have generally performed better than U.S. Treasury securities
because of a lack of supply relative to demand."
"We don't expect potential changes in the federal capital gains tax to affect
demand for municipal bonds. New York taxpayers will continue to need the tax
relief they provide."
"We expect interest rates to decline modestly over the next several months,
although the overall trend may be periodically interrupted by volatility."
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
STRATEGY AND OUTLOOK
- --------------------------------------------------------------------------------
We are optimistic about the prospects for municipal bonds over the
foreseeable future both nationally and in New York. While we expect interest
rates to decline modestly over time, we would not be surprised to see
short-lived spikes in yields caused by economic data that does not conform to
the general consensus opinion. In our view, any temporary increases in yields
should be viewed as an opportunity to buy bonds inexpensively.
In addition, the economic conditions that have led to a dearth of new supply
are expected to continue. Yet, demand for tax-exempt financial instruments is
expected to remain steady among high-income investors, especially in areas such
as New York where residents pay relatively high state and local income taxes.
This combination of modest economic growth, low inflation, limited supply
and steady demand should be good for municipal bond investors. Accordingly, we
expect to maintain our neutral duration, and we will be ready to lengthen as
opportunities to do so present themselves. Furthermore, we will continue to
diversify assets among better-quality, highly liquid municipal securities that
we believe offer superior relative values.
- --------------------------------------------------------------------------------
Landmark New York Tax Free Income Fund
- --------------------------------------------------------------------------------
BY THE NUMBERS
- --------------------------------------------------------------------------------
--------------------------------------------------------------------------
CHANGES IN PORTFOLIO COMPOSITION
Portfolio of Investments as of 6/30/97 ... Compared to 12/31/96
CASH/SHORT TERM/OTHER 2% CASH/SHORT TERM/OTHER 2%
OTHER REVENUE 20% OTHER REVENUE 17%
STATE AGENCIES 19% STATE AGENCIES 20%
WATER/SEWER REVENUE 12% WATER/SEWER REVENUE 14%
TRANSPORTATION REVENUE 13% TRANSPORTATION REVENUE 10%
POWER REVENUE 1% POWER REVENUE 2%
HOUSING REVENUE 19% HOUSING REVENUE 10%
GENERAL OBLIGATION BONDS 14% GTD./PREREFUNDED 15%
GENERAL OBLIGATION BONDS 10%
--------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
FUND DATA All Periods Ending June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL RETURNS
----------------------------------
SIX ONE FIVE TEN
MONTHS** YEAR YEARS* YEARS*
-------- ---- ------ ------
<S> <C> <C> <C> <C>
Landmark New York Tax Free Income Fund
without Sales Charge .............................. 3.59% 8.34% 6.23% 7.42%
Lipper New York State Municipal Bond Funds Average . 2.96% 7.71% 6.31% 7.59%
Lehman Municipal Bond Index ........................ 3.20% 8.25% 7.10% 8.17%
Landmark New York Tax Free Income Fund
with Maximum Sales Charge of 4.00% ................(0.55)% 4.01% 5.36% 6.98%
* Average annual total return
** Not Annualized
30-Day SEC Yield 4.90%
Income Dividends Per Share $0.288
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE HIGHLIGHTS
- --------------------------------------------------------------------------------
A $10,000 investment in the Fund made ten years ago (June 1987) would have grown
to $19,646 with sales charge (as of 6/30/97). The graph shows how this compares
to our benchmark over the same period.
The graph includes the initial charge on the Fund (no comparable charge exists
for the other indices) and assumes all dividends and distributions from the Fund
are reinvested at Net Asset Value.
LANDMARK NEW YORK TAX FREE INCOME FUND
LANDMARK NEW YORK LANDMARK NEW LIPPER NEW
TAX FREE INCOME YORK TAX FREE YORK STATE LEHMAN MUNICIPAL
FUND - WITHOUT INCOME FUND - MUNICIPAL BOND BOND INDEX
SALES CHARGE WITH SALES CHARGE FUNDS AVERAGE (UNMANAGED)
---------------------------------------------------------------------
Jun-87 10000.00 9600.00 10000.00 10000.00
Jul-87 10069.25 9666.48 10101.35 10101.86
Aug-87 10079.81 9676.62 10139.11 10124.18
Sep-87 9477.86 9098.75 9663.16 9750.68
Oct-87 9454.73 9076.54 9706.88 9785.60
Nov-87 9830.17 9436.96 9973.17 10040.75
Dec-87 10022.92 9622.00 10186.80 10186.26
Jan-88 10426.80 10009.73 10589.23 10549.09
Feb-88 10542.51 10120.81 10689.59 10660.65
Mar-88 10214.04 9805.48 10461.05 10536.48
Apr-88 10246.00 9836.16 10509.74 10617.00
May-88 10276.02 9864.97 10515.70 10585.95
Jun-88 10458.71 10040.36 10680.64 10741.17
Jul-88 10518.12 10097.39 10746.22 10811.02
Aug-88 10550.98 10128.94 10784.98 10820.72
Sep-88 10766.08 10335.44 10991.65 11016.69
Oct-88 11040.49 10598.87 11234.10 11210.71
Nov-88 10907.75 10471.44 11101.95 11107.88
Dec-88 11140.38 10694.76 11271.86 11221.38
Jan-89 11279.94 10828.74 11432.83 11453.24
Feb-89 11111.62 10667.15 11332.47 11322.27
Mar-89 11149.29 10703.32 11315.58 11295.11
Apr-89 11473.92 11014.97 11603.74 11562.86
May-89 11744.53 11274.75 11824.32 11803.45
Jun-89 11893.94 11418.18 11980.33 11963.52
Jul-89 12048.88 11566.93 12104.53 12126.50
Aug-89 11868.51 11393.77 11986.29 12008.15
Sep-89 11726.90 11257.82 11932.63 11972.25
Oct-89 11893.28 11417.54 12034.98 12118.74
Nov-89 12105.71 11621.49 12218.80 12331.20
Dec-89 12223.85 11734.89 12318.16 12432.09
Jan-90 12090.34 11606.73 12188.00 12372.91
Feb-90 12143.39 11657.66 12291.34 12483.51
Mar-90 12147.10 11661.21 12260.53 12487.39
Apr-90 11955.61 11477.38 12107.51 12397.17
May-90 12278.62 11787.47 12418.52 12667.83
Jun-90 12448.28 11950.35 12564.59 12779.39
Jul-90 12724.43 12215.45 12798.09 12967.60
Aug-90 12421.71 11924.84 12534.78 12779.39
Sep-90 12351.93 11857.85 12483.11 12787.16
Oct-90 12518.29 12017.56 12606.32 13019.01
Nov-90 12921.97 12405.09 12893.48 13280.95
Dec-90 12949.14 12431.18 12936.21 13339.15
Jan-91 13166.25 12639.60 13112.08 13518.63
Feb-91 13148.82 12622.87 13184.62 13636.01
Mar-91 13147.64 12621.74 13233.31 13640.86
Apr-91 13353.07 12818.95 13439.98 13823.24
May-91 13468.15 12929.43 13545.31 13946.45
Jun-91 13455.40 12917.19 13531.40 13932.87
Jul-91 13654.56 13108.37 13750.99 14102.64
Aug-91 13853.07 13298.95 13948.73 14287.93
Sep-91 14073.27 13510.34 14158.39 14474.19
Oct-91 14221.11 13652.26 14294.52 14604.19
Nov-91 14234.78 13665.39 14314.39 14644.94
Dec-91 14547.08 13965.20 14609.50 14959.25
Jan-92 14495.98 13916.14 14529.01 14993.21
Feb-92 14532.18 13950.89 14582.67 14998.06
Mar-92 14487.94 13908.42 14629.37 15003.88
Apr-92 14581.21 13997.96 14784.38 15137.76
May-92 14826.21 14233.17 15000.00 15316.26
Jun-92 15126.11 14521.07 15310.02 15573.34
Jul-92 15646.41 15020.55 15870.43 16039.97
Aug-92 15419.84 14803.04 15628.97 15883.78
Sep-92 15472.63 14853.72 15675.68 15987.58
Oct-92 15193.28 14585.55 15415.34 15830.42
Nov-92 15539.69 14918.10 15792.93 16113.70
Dec-92 15690.06 15062.46 15994.63 16278.62
Jan-93 15938.37 15300.84 16191.38 16467.79
Feb-93 16549.00 15887.04 16832.27 17063.45
Mar-93 16412.73 15756.22 16660.37 16883.00
Apr-93 16537.63 15876.12 16843.20 17053.74
May-93 16574.69 15911.70 16961.45 17149.79
Jun-93 16849.13 16175.16 17246.62 17435.97
Jul-93 16855.25 16181.04 17241.65 17458.28
Aug-93 17145.05 16459.25 17617.25 17821.11
Sep-93 17342.99 16649.27 17813.00 18023.86
Oct-93 17372.81 16677.90 17846.78 18057.82
Nov-93 17215.88 16527.25 17647.06 17898.72
Dec-93 17577.08 16873.99 18017.69 18276.10
Jan-94 17748.11 17038.19 18208.47 18484.67
Feb-94 17310.43 16618.02 17751.39 18006.40
Mar-94 16526.17 15865.12 16952.50 17273.96
Apr-94 16556.64 15894.38 16969.40 17420.45
May-94 16696.32 16028.47 17135.33 17571.79
Jun-94 16493.60 15833.86 17015.10 17469.93
Jul-94 16822.50 16149.60 17314.19 17790.07
Aug-94 16901.47 16225.42 17371.82 17845.36
Sep-94 16569.85 15907.05 17037.96 17583.43
Oct-94 16252.64 15602.54 16666.34 17270.08
Nov-94 15887.30 15251.81 16213.24 16957.70
Dec-94 16264.18 15613.62 16662.36 17331.20
Jan-95 16716.63 16047.96 17132.35 17826.93
Feb-95 17203.27 16515.14 17683.82 18345.94
Mar-95 17399.04 16703.08 17833.86 18556.46
Apr-95 17414.10 16717.54 17855.72 18578.77
May-95 18072.15 17349.26 18431.04 19171.52
Jun-95 17823.97 17111.02 18183.62 19004.66
Jul-95 17910.69 17194.26 18295.91 19185.10
Aug-95 18145.59 17419.76 18502.58 19428.60
Sep-95 18196.04 17468.20 18598.97 19550.83
Oct-95 18600.26 17856.25 18900.04 19834.11
Nov-95 19006.71 18246.44 19262.72 20162.98
Dec-95 19177.33 18410.24 19461.45 20357.00
Jan-96 19262.79 18492.28 19548.89 20511.25
Feb-96 19022.69 18261.78 19384.94 20371.56
Mar-96 18730.94 17981.70 19064.98 20110.59
Apr-96 18644.38 17898.60 18984.50 20054.33
May-96 18678.45 17931.32 18982.51 20046.57
Jun-96 18888.88 18133.33 19184.22 20264.84
Jul-96 19061.07 18298.63 19366.06 20447.23
Aug-96 19003.51 18243.37 19319.36 20443.34
Sep-96 19336.64 18563.17 19618.44 20729.53
Oct-96 19511.12 18730.67 19814.19 20963.33
Nov-96 19865.10 19070.50 20170.91 21346.53
Dec-96 19754.36 18964.18 20067.57 21257.28
Jan-97 19787.06 18995.58 20061.61 21298.02
Feb-97 19981.52 19182.26 20242.45 21493.99
Mar-97 19723.33 18934.39 19981.12 21207.80
Apr-97 19884.39 19089.01 20155.01 21386.30
May-97 20229.17 19420.01 20455.09 21709.35
Jun-97 20464.09 19645.53 20661.76 21941.21
Notes: All Fund performance numbers represent past performance, and are no
guarantee of future results. The Fund's share price and investment return will
fluctuate, so that the value of an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns include change in
share price and reinvestment of dividends and distributions, if any. Total
return figures "with sales charge" are provided in accordance with SEC
guidelines for comparative purposes for prospective investors.
<PAGE>
- --------------------------------------------------------------------------------
Landmark New York Tax Free Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
MOODY'S PRINCIPAL
BOND AMOUNT
RATING ISSUER (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MUNICIPAL BONDS--97.8%
- --------------------------------------------------------------------------------
GENERAL OBLIGATION BONDS -- 13.6%
Baa1 New York City, NY Series F,
7.65% due 2/1/06 .......................... $3,000 $3,338,010
Baa1 New York City, NY Series F,
8.40% due 11/15/06 ........................ 175 199,813
Aaa New York City, NY Series F,
8.40% due 11/15/06 ........................ 1,825 2,133,827
Baa1 New York City, NY Series B,
6.375% due 8/15/11 ........................ 1,500 1,575,570
Baa1 New York City, NY Series A,
6.25% due 8/01/12 ......................... 3,200 3,333,568
-----------
10,580,788
HOUSING REVENUE -- 19.1%
Aaa New York State Housing Finance
Agency, ETM,
7.90% due 11/01/06 ......................... 5,750 6,803,285
Aa New York State Mortgage
Agency Revenue, AMT,
7.25% due 10/01/07 ......................... 6,075 6,474,431
Aa New York State Mortgage
Agency Revenue, AMT,
7.75% due 10/01/23 ......................... 1,470 1,559,156
-----------
14,836,872
-----------
POWER REVENUE -- 1.2%
Baa1 Puerto Rico Electric
Power Authority,
5.25% due 7/1/21 .......................... 1,000 936,570
-----------
STATE AGENCIES -- 18.5%
Baa1 New York State Dormitory
Authority, 6.50% due 2/15/11 .............. 1,610 1,760,744
Baa1 New York State Dormitory
Authority, 5.25% due 5/15/13 .............. 2,000 1,934,600
Aaa New York State Dormitory
Authority, 5.25% due 7/1/18 ............... 2,000 1,923,620
Aaa New York State Dormitory
Authority, City University,
5.75% due 7/1/18 .......................... $3,000 $3,104,130
Aaa New York State Dormitory
Authority, City University,
5.00% due 7/1/20 .......................... 2,000 1,848,240
Baa1 New York State Dormitory
Authority, 5.25% due 5/15/21 .............. 1,000 922,010
Baa1 New York State Dormitory
Authority, 5.40% due 5/15/23 .............. 1,690 1,593,450
Baa1 New York State Urban
Development Revenue,
5.875% due 4/1/09 ......................... 1,245 1,277,121
-----------
14,363,915
-----------
TRANSPORTATION REVENUE --13.3%
Baa1 Metropolitan Transportation
Authority, NY, 5.75% due 7/1/13 ........... 1,000 1,018,700
Baa1 Metropolitan Transportation
Authority, NY, 5.75% due 7/1/13 ........... 3,000 3,085,020
Aaa Puerto Rico Commonwealth
Highway Authority,
8.00% due 7/1/05 .......................... 2,900 3,076,262
Aaa Puerto Rico Commonwealth
Highway Authority,
5.50% due 7/1/13 .......................... 1,125 1,158,694
Aaa Puerto Rico Commonwealth
Highway Authority,
5.50% due 7/1/15 .......................... 1,000 1,026,440
Aa Triborough Bridge & Tunnel
Authority, 5.00% due 1/1/20 ............... 1,000 939,570
-----------
10,304,686
-----------
WATER AND SEWER REVENUE -- 11.9%
Aa New York State Environmental
Facilities, 7.00% due 6/15/12 ............. 3,360 3,674,866
Aa New York State Environmental
Facilities, 7.50% due 6/15/12 ............. 3,000 3,302,940
A1 New York State Environmental
Facilities, 7.125% due 7/1/12 ............. 2,100 2,264,682
-----------
9,242,488
-----------
OTHER REVENUE -- 20.2%
Aaa Municipal Assistance Corp., Series B,
Zero Coupon Bond due 7/15/11 .............. $ 500 $ 237,385
Aaa Municipal Assistance Corp., Series B,
Zero Coupon Bond due 1/15/12 .............. 400 183,632
Aaa Municipal Assistance Corp., Series B,
Zero Coupon Bond due 1/15/13 .............. 800 345,488
Aaa Municipal Assistance Corp., Series B,
Zero Coupon Bond due 1/15/14 .............. 1,405 570,232
N/R New York City Industrial
Development Agency,
7.00% due 5/1/08 .......................... 800 838,696
Aaa New York State Energy Research &
Development, 5.50% due 1/1/21 ............. 2,500 2,458,000
A New York State Local Government
Assist Series E, 6.00% due 4/1/14 ......... 2,000 2,142,200
A New York State Local Government
Assist Series A, 5.25% due 4/1/19 .......... 4,000 3,776,600
Aaa New York State Medical Care
Facilities, 6.90% due 8/15/34 ............. 1,000 1,117,990
N/R Port Authority New York and
New Jersey Special Obligation,
6.75% due 10/1/19 ......................... 3,850 4,059,017
-----------
15,729,240
-----------
TOTAL MUNICIPAL BONDS
(Identified Cost $71,361,625) ................. $75,994,559
-----------
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES AT
AMORTIZED COST*-- 0.5%
- --------------------------------------------------------------------------------
New York, NY, due 8/15/20 ....................... $400 400,000
-----------
TOTAL INVESTMENTS
(Identified Cost $71,761,625) .................. 98.3% 76,394,559
OTHER ASSETS,
LESS LIABILITIES ................................ 1.7 1,344,437
----- -----------
NET ASSETS ....................................... 100.0% $77,738,996
===== ===========
* Variable rate demand notes have a demand feature under which the Fund could
tender them back to the issuer on no more than 7 days' notice.
See notes to financial statements
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------
Landmark New York Tax Free Income Fund
- -----------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES June 30, 1997 (unaudited)
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS:
Investments, at value (Note 1A) (Identified Cost, $71,761,625) $76,394,559
Cash ......................................................... 64,485
Interest receivable .......................................... 1,418,132
Receivable for shares of beneficial interest sold ............ 2,881
-----------
Total assets ................................................ 77,880,057
-----------
LIABILITIES:
Payable for shares of beneficial interest repurchased ........ 38,199
Payable to affiliates:
Investment advisory fees (Note 2) ........................... $15,020
Shareholder Servicing Agents' fees (Note 3B) ................ 16,054 31,074
-------
Accrued expenses and other liabilities ....................... 71,788
-----------
Total liabilities ........................................... 141,061
-----------
NET ASSETS for 7,018,224 shares of beneficial interest outstanding $77,738,996
===========
NET ASSETS CONSIST OF:
Paid-in capital .............................................. $78,246,068
Accumulated net realized loss on investments ................. (5,231,066)
Unrealized appreciation of investments ....................... 4,632,934
Undistributed net investment income .......................... 91,060
-----------
Total ....................................................... $77,738,996
===========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE OF BENEFICIAL
INTEREST ................................................... $11.08
====
COMPUTATION OF OFFERING PRICE:
Maximum Offering Price per share based on a 4.00% sales charge
($11.08 / 0.96) ............................................ $11.54
======
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
- -------------------------------------------------------------------------------------------------
Landmark New York Tax Free Income Fund
- -------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the Six Months Ended June 30, 1997 (unaudited)
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME (Note 1B):
Interest ..................................................... $2,450,507
EXPENSES:
Investment advisory fees (Note 2) ............................ $157,359
Administrative fees (Note 3A) ................................ 98,349
Shareholder servicing agents' fees (Note 3B) ................. 98,349
Distribution fees (Note 4) ................................... 59,009
Custodian fees ............................................... 30,409
Auditing services ............................................ 15,600
Shareholder reports .......................................... 11,666
Trustee fees ................................................. 8,379
Transfer agent fees .......................................... 6,000
Legal services ............................................... 4,907
Miscellaneous ................................................ 2,532
---------
Total expenses ............................................ 492,559
Less aggregate amount waived by Investment Adviser,
Administrator and Distributor (Notes 2, 3A, and 4) ........ (175,709)
Less fees paid indirectly (Note 1G) .......................... (2,113)
---------
Net expenses .............................................. 314,737
----------
Net investment income ..................................... 2,135,770
----------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions ................. 362,495
Unrealized appreciation (depreciation) of investments--
Beginning of period ....................................... 4,366,737
End of period ............................................. 4,632,934
---------
Net change in unrealized appreciation (depreciation) ......... 266,197
----------
Net realized and unrealized gain (loss) on investments .... 628,692
----------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ......... $2,764,462
==========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
- ---------------------------------------------------------------------------------------------------------------
Landmark New York Tax Free Income Fund
- ---------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- ---------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
---------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income ...................................... $ 2,135,770 $ 44,573,015
Net realized gain on investment transactions ............... 362,495 348,515
Net change in unrealized appreciation (depreciation) of
investments .............................................. 266,197 (2,544,578)
------------ ------------
Net increase in net assets resulting from operations ....... 2,764,462 2,376,952
------------ ------------
DIVIDENDS DECLARED TO SHAREHOLDERS FROM:
Net investment income ...................................... (2,076,216) (4,598,756)
------------ ------------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 6):
Net proceeds from sale of shares ........................... 1,008,663 7,081,700
Net asset value of shares issued to shareholders from
reinvestment of dividends ................................. 2,037,919 4,543,061
Cost of shares repurchased ................................. (8,177,838)
------------ ------------
Net decrease in net assets from
transactions in shares of beneficial interest ........... (5,131,256) (5,860,430)
------------ ------------
NET DECREASE IN NET ASSETS ................................. (4,443,010) (8,082,234)
NET ASSETS:
Beginning of period ........................................ 82,182,006 90,264,240
------------ ------------
End of period (including undistributed net investment
income of $91,060 and $31,506, respectively) .............. $ 77,738,996 $ 82,182,006
============ ============
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------------
Landmark New York Tax Free Income Fund
- -----------------------------------------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- -----------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
FOUR MONTHS
SIX MONTHS ENDED
ENDED YEAR ENDED DECEMBER 31, DECEMBER 31, YEAR ENDED AUGUST 31,
JUNE 30, 1997 ----------------------------- 1993 -------------------
(UNAUDITED) 1996 1995 1994 (NOTE 1D) 1993 1992
----------- ---- ---- ---- --------- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, beginning of
period ............................................. $ 10.98 $ 11.25 $ 10.09 $ 11.54 $ 11.44 $ 10.82 $ 10.27
------- ------- ------- ------- ------- ------- -------
Income From Operations:
Net investment income ............................... 0.297 0.585 0.607 0.566 0.210 0.567 0.589
Net realized and unrealized
gain (loss) on investments ......................... 0.091 (0.267) 1.153 (1.415) 0.076 0.610 0.541
------- ------- ------- ------- ------- ------- -------
Total from operations .............................. 0.388 0.318 1.760 (0.849) 0.286 1.177 1.130
------- ------- ------- ------- ------- ------- -------
Less Dividends From:
Net investment income .............................. (0.288) (0.588) (0.600) (0.601) (0.186) (0.557) (0.580)
------- ------- ------- ------- ------- ------- -------
Net Asset Value, end of period ..................... $ 11.08 $ 10.98 $ 11.25 $ 10.09 $ 11.54 $ 11.44 $ 10.82
======= ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) ........... $77,739 $82,182 $90,264 $86,399 $120,824 $111,583 $81,185
Ratio of expenses to average net assets ............. 0.80%+ 0.80% 0.80% 0.80% 0.80%+ 0.80% 0.80%
Ratio of net investment income to average net assets 5.43%+ 5.34% 5.62% 5.52% 4.84%+ 5.11% 5.58%
Portfolio turnover .................................. 6% 47% 98% 150% 46%+ 149% 143%
Total return ........................................ 3.59%** 3.01% 17.89% (7.47)% 2.52%** 11.19% 11.31%
Note: If Agents of the Fund had not voluntarily agreed to waive all or a portion of their fees for the periods indicated and
the 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 $ 0.271 $ 0.534 $ 0.555 $ 0.508 $ 0.191 $ 0.515 $ 0.537
Ratios:
Expenses to average net assets ...................... 1.25%+ 1.27% 1.27% 1.27% 1.23%+ 1.27% 1.30%
Net investment income to
average net assets ................................. 4.98%+ 4.87% 5.15% 5.05% 4.40%+ 4.64% 5.09%
+ Annualized
**Not annualized
See notes to financial statements
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Landmark New York Tax Free Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Landmark New York Tax Free Income Fund (the "Fund") is a separate
non-diversified series of Landmark Tax Free Income Funds (the "Trust"), a
Massachusetts business trust. The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Investment Adviser of the Fund is Citibank, N.A. ("Citibank"). The Landmark
Funds Broker-Dealer Services, Inc. ("LFBDS") acts as the Fund's Administrator
and Distributor. Citibank also serves as Sub-Administrator and makes shares
available to customers as Shareholder Servicing Agent.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
The Fund has approval to issue Class A and Class B shares as described more
fully in the Fund's prospectus. No Class B shares have yet to be offered,
therefore information presented in these financial statements relates solely to
Class A shares.
The significant accounting policies consistently followed by the Fund are in
conformity with generally accepted accounting principles and are as follows:
A. INVESTMENT SECURITY VALUATIONS -- Debt securities (other than short-term
obligations maturing in 60 days or less) are valued on the basis of valuations
furnished by a pricing service which takes into account appropriate factors such
as institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, and other market data, without exclusive
reliance upon quoted prices or exchange or over-the-counter prices, since such
valuations are believed to reflect more accurately the fair value of the
securities. Short-term obligations (maturing in 60 days or less) are valued at
amortized cost, which approximates market value. Securities, if any, for which
there are no such valuations or quotations are valued at fair value as
determined in good faith by or under guidelines established by the Trustees.
B. INCOME -- Interest income is determined on the basis of interest accrued and
discount earned, adjusted for amortization of premium or discount on long-term
debt securities when required for federal income tax purposes.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investment transactions. Accordingly, no provision for federal income or
excise tax is necessary. Dividends by the Fund from net interest received on
tax-exempt municipal bonds are not includable by shareholders as gross income
for federal income tax purposes because the Fund intends to meet certain
requirements of the Internal Revenue Code applicable to regulated investment
companies which will enable the Fund to pay exempt interest dividends. The
portion of such interest, if any, earned on private activity bonds issued after
August 7, 1986, may be considered a tax preference item to shareholders. At
December 31, 1996, the Fund, for federal income tax purposes, had a capital loss
carryover of $5,593,561 which will expire on December 31, 2002. Such capital
loss carryover will reduce the Fund's taxable income arising from future net
realized gain on investment transactions, if any, to the extent permitted by the
Internal Revenue Code, and thus will reduce the amount of the distributions to
shareholders which would otherwise be necessary to relieve the Fund of any
liability for federal income or excise tax.
D. CHANGE IN FISCAL YEAR END -- Effective September 1, 1993, the Fund changed
its fiscal year end from August 31 to December 31.
E. DISTRIBUTIONS -- The Fund distinguishes between distributions on a tax basis
and a financial reporting basis and requires that only distributions in excess
of tax basis earnings and profits be reported in the financial statements as a
return of capital. Differences in the recognition or classification of income
between the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
F. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis. Distributions to shareholders and shares issuable to
shareholders electing to receive distributions in shares are recorded on the
ex-dividend date.
G. FEES PAID INDIRECTLY -- The Fund's custodian bank calculates its fee based on
the fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the Fund.
This amount is shown as a reduction of expenses on the statement of operations.
H. EXPENSES -- The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and LFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund.
(2) INVESTMENT ADVISORY FEES
The investment advisory fee paid to Citibank, as compensation for overall
investment management services, amounted to $157,359, of which $61,516 was
voluntarily waived for the six months ended june 30, 1997. The investment
advisory fee is computed at the annual rate of 0.40% Of average daily net
assets.
(3) ADMINISTRATIVE SERVICES PLAN
The Trust, on behalf of the Fund, has adopted an Administrative Services Plan
(the "Administrative Services Plan") which provides that the Trust may obtain
the services of an Administrator, one or more Shareholder Servicing Agents and
other Servicing Agents and may enter into agreements providing for the payment
of fees for such services. Under the Administrative Services Plan, the aggregate
of the fee paid to the Administrator from the Fund, the fees paid to the
Shareholder Servicing Agents from the Fund and the Basic Distribution Fee paid
from the Fund to the Distributor under the Distribution Plan 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.
A. ADMINISTRATIVE FEES -- Under the terms of an Administrative Services
Agreement, the administrative fee paid to the Administrator, as compensation for
overall administrative services and general office facilities, is accrued daily
and paid monthly at an annual rate of 0.25% of the Fund's average daily net
assets. The Administrative fees amounted to $98,349, of which $57,045 was
voluntarily waived for the six months ended June 30, 1997. Citibank acts as
Sub-Administrator and performs such duties and receives such compensation from
LFBDS as from time to time is agreed to by LFBDS and Citibank. The Fund pays no
compensation directly to any Trustee or any officer who is affiliated with the
Administrator, all of whom receive remuneration for their services to the Fund
from the Administrator or its affiliates. Certain of the officers and a Trustee
of the Fund are officers and directors of the Administrator or its affiliates.
B. SHAREHOLDER SERVICING AGENTS FEES -- The Trust, on behalf of the Fund, has
entered into shareholder servicing agreements with each Shareholder Servicing
Agent pursuant to which that Shareholder Servicing Agent acts as an agent for
its customers and provides other related services. For their services, each
Shareholder Servicing Agent receives fees from the Fund, which may be paid
periodically, but may not exceed, on an annualized basis, an amount equal to
0.25% of the average daily net assets of the Fund represented by shares owned
during the period for which payment is being made by investors for whom such
Shareholder Servicing Agent maintains a servicing relationship. Shareholder
Servicing Agents' fees amounted to $98,349 for the six months ended June 30,
1997.
(4) DISTRIBUTION FEES
The Trust, on behalf of the Fund, has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended, in which the
Fund compensates the Distributor at an annual rate not to exceed 0.15% of the
Fund's average daily net assets. The Distribution fees amounted to $59,009, of
which $57,148 was voluntarily waived for the six months ended June 30, 1997. The
Distributor may also receive an additional fee from the Fund at an annual rate
not to exceed 0.05% of the Fund's average daily net assets in anticipation of,
or as reimbursement for, advertising expenses incurred by the Distributor in
connection with the sale of shares of the Fund. No payment of such additional
fees has been made during the period.
(5) PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $4,337,135 and $9,631,878, respectively.
(6) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional Shares of Beneficial Interest (without par value).
Transactions in shares of beneficial interest were as follows:
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
------------- ------------
Shares sold ................................ 91,844 642,528
Shares issued to shareholders from
reinvestment of dividends ................. 186,022 417,595
Shares repurchased ......................... (746,037) (1,595,467)
-------- ----------
Net decrease ............................... (468,171) (535,344)
======== ==========
(7) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation (depreciation) in value of the investment
securities owned at June 30, 1997, as computed on a federal income tax basis,
are as follows:
Aggregate cost ......................................... $71,761,625
===========
Gross unrealized appreciation .......................... $ 4,677,345
Gross unrealized depreciation .......................... (44,411)
-----------
Net unrealized appreciation ........................... $ 4,632,934
===========
(8) LINE OF CREDIT
The Fund, along with other Landmark Funds, entered into an ongoing agreement
with a bank which allows the Funds collectively to borrow up to $60 million for
temporary or emergency purposes. Interest on borrowings, if any, is charged to
the specific fund executing the borrowing at the base rate of the bank. In
addition, the committed portion of the line of credit requires a quarterly
payment of a commitment fee based on the average daily unused portion of the
line of credit. For the six months ended June 30, 1997, the commitment fee
allocated to the Fund was $174. Since the line of credit was established there
have been no borrowings.
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER
SERVICING AGENTS
- --------------------------------------------------------------------------------
FOR NEW YORK RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CUSTOMERS:
Citibank, N.A.
111 Wall Street, New York, NY 10043
(212) 820-2383 or (800) 846-5300
FOR CITIGOLD CUSTOMERS:
Citigold
P.O. Box 5130, New York, NY 10150-5130
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 CUSTOMERS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200
(212) 820-2380 in New York City
[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>
TRUSTEES AND OFFICERS
C. Oscar Morong, Jr., Chairman
Philip W. Coolidge*, President
Elliott J. Berv
Mark T. Finn
Riley C. Gilley
Diana R. Harrington
Susan B. Kerley
Walter E. Robb, III
E. Kirby Warren
William S. Woods, Jr.
SECRETARY
Linda T. Gibson*
TREASURER
John R. Elder*
*Affiliated Person of Administrator and Distributor
- --------------------------------------------------------------------------------
INVESTMENT ADVISER
Citibank, N.A.
153 East 53rd Street, New York, NY 10043
ADMINISTRATOR AND DISTRIBUTOR
The Landmark Funds Broker-Dealer Services, Inc.
6 St. James Avenue, Boston, MA 02116
(617) 423-1679
TRANSFER AGENT AND CUSTODIAN
State Street Bank and Trust Company
225 Franklin Street, Boston, MA 02110
AUDITORS
Deloitte & Touche LLP
125 Summer Street, Boston, MA 02110
LEGAL COUNSEL Bingham,
Dana & Gould 150 Federal Street, Boston, MA 02110
- --------------------------------------------------------------------------------
SHAREHOLDER SERVICING AGENTS
(See Inside Cover)
This report is prepared for the information of shareholders. It is authorized
for distribution to prospective investors only when preceded or accompanied by
an effective prospectus.
NTFI/S/97 Printed on Recycled Paper [recycle symbol]
[Logo] LANDMARK(SM) FUNDS
Advised by Citibank, N.A.
LANDMARK
NATIONAL TAX FREE
INCOME FUND
SEMI-ANNUAL
REPORT
June 30, 1997
<PAGE>
- --------------------------------------------------------------------------------
A LETTER TO OUR SHAREHOLDERS
- --------------------------------------------------------------------------------
Dear Shareholder:
Municipal bonds generally outperformed U.S. government securities during
the first half of 1997, largely the result of a continuing imbalance in supply
versus demand. Despite some volatility early in the period, the economy
continued to provide an outstanding environment for financial assets, including
municipal bonds: The economic expansion is in its seventh year and employment is
near record levels, yet inflation is low--all of which are good for investments
in municipal bonds.
In this environment, the Landmark Funds' investment adviser, Citibank,
N.A., continued to manage the Landmark National Tax Free Income Fund with the
goal of achieving its investment objectives: to generate high levels of current
income exempt from federal personal income taxes, and to preserve the value of
its shareholders' investment. Consistent with this objective, the Fund seeks to
provide an attractive yield from a high-quality investment portfolio consisting
of municipal obligations primarily of states, municipalities and their agencies.
This report reviews the Fund's investment activities and performance during
the six months ended June 30, 1997, and provides a summary of Citibank's
perspective on and outlook for the municipal bond market. On behalf of the Board
of Trustees of the Landmark Funds, I want to thank you for your confidence and
participation.
/s/ Philip W. Coolidge
President
July 18, 1997
Remember that Mutual Fund Shares:
o Are not bank deposits or FDIC insured
o Are not obligations of or guaranteed by Citibank or Citicorp Investment
Services
o Are subject to investment risks, including possible loss of the principal
amount invested.
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
1 A Letter to Our Shareholders
- --------------------------------------------------------------------------------
2 Market Environment
Fund Snapshot
- --------------------------------------------------------------------------------
Portfolio Manager
3 The Portfolio Manager Responds
Quotes from the Portfolio Manager
- --------------------------------------------------------------------------------
Strategy and Outlook
4 Landmark National Tax Free
Income Fund--By the Numbers
- --------------------------------------------------------------------------------
5 Fund Data
Performance Highlights
- --------------------------------------------------------------------------------
6 Portfolio of Investments
- --------------------------------------------------------------------------------
7 Statement of Assets and Liabilities
- --------------------------------------------------------------------------------
8 Statement of Operations
- --------------------------------------------------------------------------------
9 Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
10 Financial Highlights
- --------------------------------------------------------------------------------
11 Notes to Financial Statements
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
MARKET ENVIRONMENT
- --------------------------------------------------------------------------------
The first half of 1997 represented one of the most interesting periods in
recent memory for U.S. financial markets. The economy continued to grow with few
signs of inflation, marking the sixth year in what is becoming one of the
longest expansions in the post-World War II era. As measured by the Dow Jones
Industrial Average, the stock market gained more than 1,100 points for its best
six-month performance in 10 years. The bond market provided positive total rates
of return as yields of long-term U.S. Treasury bonds ended the period at 6.78%
despite a one-quarter point increase in the federal funds rate, a key short-term
interest rate set by the Federal Reserve Board. Municipal bonds generally
outperformed comparable taxable fixed-income securities, largely because of a
lack of new supply in an environment of ample investor demand.
When examined more closely, however, the general uptrend reveals a
considerable amount of volatility. The economy, for example, grew at a torrid
5.9% rate during the first three months of the year as consumer spending and
winter temperatures both remained unexpectedly high. As a result, fixed-income
investors became concerned early in the year that the economy was growing too
fast posing an inflation threat. Therefore, yields on municipal securities rose
in sympathy with U.S. Treasury bonds, which saw yields rise by about one-half a
percentage point. The Federal Reserve Board, apparently agreeing that inflation
might become an issue, tightened monetary policy modestly to curtail economic
growth.
Yet, inflation concerns proved to be short-lived as persistently stable
consumer and wholesale prices encouraged fixed-income investors to get back in
the market. Yields on municipal bonds quickly fell and ended the period just
slightly below the levels at which they started the year.
- --------------------------------------------------------------------------------
FUND SNAPSHOT
- --------------------------------------------------------------------------------
COMMENCEMENT OF OPERATIONS
August 17, 1995
NET ASSETS AS OF 6/30/97
$1.8 million
FUND OBJECTIVE
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.
DIVIDENDS
Paid monthly
CAPITAL GAINS
Distributed annually, if any
BENCHMARKS
o Lipper General Municipal Bond Funds Average
o Lehman Municipal 4 Years Plus Bond Index
INVESTMENT ADVISER
Citibank, N.A.
+A portion of the income may be subject to the Federal Alternative Minimum Tax.
Consult your personal tax advisor.
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
JOHN C. MOONEY
Vice President, Citibank N.A.
Mr. Mooney has managed the Landmark National Tax Free Income Fund 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. Prior experience also includes Alliance Capital Management L.P. and
The Boston Company.
- --------------------------------------------------------------------------------
THE PORTFOLIO MANAGER RESPONDS
- --------------------------------------------------------------------------------
We maintained a neutral duration of about 73/4 years throughout the period,
neither materially lengthening nor shortening as we saw no reason to do so. Our
neutral stance positioned us well for an increase in the value of municipal
bonds relative to comparable U.S. Treasury securities. In fact, municipal bonds
ended the period near the high end of their valuation range relative to
Treasuries, a condition caused by the relative lack of supply of new municipal
bond issues. The nation's economic strength has been good for tax revenues for
most states and municipalities, reducing their need to finance in the public
markets.
We also maintained our sector allocations, diversifying the portfolio among
tax-exempt bonds issued by states, municipalities, agencies and authorities
throughout the nation. At the end of the period, 64% of the portfolio was rated
"AA", "Aa" or better by the major bond rating agencies.
- --------------------------------------------------------------------------------
QUOTES FROM THE PORTFOLIO MANAGER
- --------------------------------------------------------------------------------
"Municipal bonds have generally performed better than U.S. Treasury securities
because of a lack of supply relative to demand."
"We don't expect potential changes in the federal capital gains tax to affect
demand for municipal bonds. High income investors will continue to need the tax
relief they provide."
"We expect interest rates to decline modestly over the next several months,
although the overall trend may be periodically interrupted by volatility."
- --------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------
STRATEGY AND OUTLOOK
- --------------------------------------------------------------------------------
We are optimistic about the prospects for municipal bonds over the
foreseeable future. While we expect interest rates to decline modestly over
time, we would not be surprised to see short-lived spikes in yields caused by
economic data that does not conform to the general consensus opinion. In our
view, any temporary increases in yields should be viewed as an opportunity to
buy bonds inexpensively.
In addition, the economic conditions that have led to a dearth of new
supply are expected to continue. Yet, demand for tax-exempt financial
instruments is expected to remain steady among high-income investors, especially
in areas with high state and local income taxes.
This combination of modest economic growth, low inflation, limited supply
and steady demand should be good for municipal bond investors. Accordingly, we
expect to maintain our neutral duration, and we will be ready to lengthen as
opportunities to do so present themselves. Furthermore, we will continue to
diversify assets among better-quality, highly liquid municipal securities that
we believe offer superior relative values.
- --------------------------------------------------------------------------------
Landmark National Tax Free Income Fund
- --------------------------------------------------------------------------------
BY THE NUMBERS
- --------------------------------------------------------------------------------
CHANGES IN PORTFOLIO COMPOSITION
Portfolio of Investments
as of 6/30/97 . . . Compared to 12/31/96
GENERAL OBLIGATION BONDS 26% GENERAL OBLIGATION BONDS 30%
TRANSPORTATION REVENUE 20% TRANSPORTATION REVENUE 17%
OTHER REVENUE 15% OTHER REVENUE 13%
CASH/SHORT TERM/OTHER 14% HOUSING REVENUE 9%
POWER REVENUE 7% CASH/SHORT TERM/OTHER 7%
WATER/SEWER REVENUE 7% POWER REVENUE 6%
EDUCATION 6% WATER/SEWER REVENUE 6%
STATE AGENCIES 5% EDUCATION 5%
STATE AGENCIES 4%
HOSPITAL REVENUE 3%
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
FUND DATA Period Ending June 30, 1997 (unaudited)
- -----------------------------------------------------------------------------------------------------------------
<CAPTION>
TOTAL RETURNS
------------------------------
SINCE
SIX ONE 8/17/95
MONTHS** YEAR (INCEPTION)*
------- ------ --------
<S> <C> <C> <C>
Landmark National Tax Free Income Fund without Sales Charge ................ 4.03% 9.45% 7.99%
Lipper General Municipal Bond Funds Average ................................ 2.95% 7.81% 6.35%+
Lehman Municipal 4 Years Plus Bond Index ................................... 3.33% 8.64% 7.13%+
Landmark National Tax Free Income Fund with Maximum Sales Charge of 4.00% .. (0.13)% 5.07% 5.66%
* Average annual total return
** Not Annualized
+ From 8/31/95
30-Day SEC Yield $5.66%
Income Dividends Per Share $0.27
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE HIGHLIGHTS
- --------------------------------------------------------------------------------
A $10,000 investment in the Fund made on inception date would have grown to
$11,085 with sales charge (as of 6/30/97). The graph shows how this compares to
our benchmark over the same period. The graph includes the initial charge on the
Fund (no comparable charge exists for the other indices) and assumes all
dividends and distributions from the Fund are reinvested at Net Asset Value.
LANDMARK NATIONAL TAX FREE INCOME FUND
LANDMARK LANDMARK
NATIONAL NATIONAL LIPPER LEHMAN
TAX FREE TAX FREE GENERAL MUNICIPAL
INCOME INCOME MUNICIPAL 4 YEARS PLUS
FUND - FUND-WITH BOND BOND
WITHOUT SALES FUNDS INDEX
SALES CHARGE CHARGE AVERAGE (UNMANAGED)
------------------------------------------------------------
Aug-95 $10,190 $ 9,782 $10,110 $10,000
Sep-95 $10,248 $ 9,838 $10,170 $10,065
Oct-95 $10,456 $10,038 $10,327 $10,223
Nov-95 $10,636 $10,211 $10,527 $10,405
Dec-95 $10,743 $10,314 $10,644 $10,513
Jan-96 $10,840 $10,407 $10,696 $10,593
Feb-96 $10,712 $10,283 $10,612 $10,514
Mar-96 $10,491 $10,072 $10,442 $10,336
Apr-96 $10,434 $10,017 $10,393 $10,332
May-96 $10,398 $ 9,982 $10,397 $10,326
Jun-96 $10,549 $10,127 $10,495 $10,444
Jul-96 $10,670 $10,243 $10,472 $10,544
Aug-96 $10,643 $10,217 $10,466 $10,539
Sep-96 $10,817 $10,385 $10,617 $10,696
Oct-96 $10,939 $10,502 $10,732 $10,824
Nov-96 $11,158 $10,712 $10,920 $11,034
Dec-96 $11,099 $10,655 $10,873 $10,981
Jan-97 $11,126 $10,681 $10,873 $10,998
Feb-97 $11,228 $10,779 $10,968 $11,106
Mar-97 $11,071 $10,628 $10,825 $10,945
Apr-97 $11,185 $10,738 $10,914 $11,042
May-97 $11,355 $10,901 $11,070 $11,219
Jun-97 $11,546 $11,085 $11,194 $11,346
- --------------------------------------------------------------------------------
Notes: All Fund performance numbers represent past performance, and are no
guarantee of future results. The Fund's share price and investment return will
fluctuate, so that the value of an investor's shares, when redeemed, may be
worth more or less than their original cost. Total returns include change in
share price and reinvestment of dividends and distributions, if any. Total
return figures "with sales charge" are provided in accordance with SEC
guidelines for comparative purposes for prospective investors.
<PAGE>
- --------------------------------------------------------------------------------
Landmark National Tax Free Income Fund
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------
MOODY'S PRINCIPAL
BOND AMOUNT
RATING ISSUER (000'S OMITTED) VALUE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
MUNICIPAL BONDS--85.7%
- --------------------------------------------------------------------------------
GENERAL OBLIGATION BONDS -- 26.3%
Aaa Massachusetts State, Construction
Loan, 5.625% due 8/1/13 ...................... $ 50 $ 51,073
Aa Metro, Oregon Open Spaces
Program Series A,
5.50% due 9/1/10 ............................. 50 50,954
Baa1 New York, New York,
6.25% due 8/1/12 ............................. 50 52,087
Baa1 New York, New York
6.25% due 8/1/17 ............................. 200 203,972
Aaa San Anselmo, California,
5.60% due 8/1/11 .............................. 50 50,897
Aa1 Winston Salem, North Carolina,
5.40% due 6/1/11 .............................. 50 51,366
----------
460,349
----------
EDUCATION -- 5.6%
Aaa Pleasanton, California School
District, 5.60% due 8/1/11 .................... 50 51,351
Aaa University of Southern Florida
5.25% due 7/1/26 .............................. 50 46,898
----------
98,249
----------
POWER REVENUE -- 6.7%
A1 New York State Energy Research &
Dev. Authority, AMT,
7.50% due 7/1/25 ............................. 60 63,769
Aaa Sikeston, Missouri, Electrical
Revenue, 6.00% due 6/1/14 .................... 50 53,753
----------
117,522
----------
STATE AGENCIES--5.4%
Baa1 New York State Dormitory
Authority, 5.50% due 5/15/23 ................. 100 95,230
----------
TRANSPORTATION REVENUE -- 20.0%
Baa Arapahoe County, Colorado
Capital Improvement,
7.00% due 8/31/26 ............................ 150 170,558
Aaa Delaware River and Bay Authority,
6.00% due 1/1/06 .............................. $90 97,023
Aaa Puerto Rico Commonwealth,
Highway Series Y,
6.25% due 7/1/05 .............................. 75 82,684
----------
350,265
----------
WATER AND SEWER REVENUE -- 6.5%
Aaa Bexar, Texas Metropolitan Water
District, 6.00% due 5/1/15 .................... 50 51,888
Aa Charlotte, North Carolina
Water & Sewer Systems,
5.25% due 12/1/21 ............................ 65 62,839
----------
114,727
----------
OTHER -- 15.2%
Aa Municipal Assistance Corp.,
Series E, 6.00% due 7/1/05 ................... 100 107,420
NR Port Authority New York &
New Jersey Special Obligation,
AMT, 6.75% due 10/1/19 ....................... 150 158,143
----------
265,563
----------
TOTAL MUNICIPAL BONDS
(Identified Cost $1,429,902) 1,501,905
----------
- --------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES AT AMORTIZED COST* -- 5.7%
- --------------------------------------------------------------------------------
Louisiana State Offshore
Terminal, due 9/1/06 ........................ 50 50,000
Washington State Health Care
Facilities, due 1/1/05 ...................... 50 50,000
----------
100,000
----------
TOTAL INVESTMENTS
(Identified Cost $1,529,902) ..................... 91.4% 1,601,905
OTHER ASSETS, LESS LIABILITIES ..................... 8.6 151,078
----- ----------
NET ASSETS ......................................... 100.0% $1,752,983
===== ==========
* Variable rate demand notes have a demand feature under which the Fund could
tender them back to the issuer on no more than 7 days' notice.
See notes to financial statements
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------
Landmark National Tax Free Income Fund
- --------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES June 30, 1997 (unaudited)
- --------------------------------------------------------------------------------------------
<S> <C>
ASSETS:
Investments, at value (Note 1A) (Identified Cost, $1,529,902) ................ $1,601,905
Cash ......................................................................... 122,722
Interest receivable .......................................................... 30,677
----------
Total assets ................................................................ 1,755,304
----------
LIABILITIES:
Dividends payable ............................................................ 2,321
----------
NET ASSETS for 167,289 shares of beneficial interest outstanding ............. $1,752,983
==========
NET ASSETS CONSIST OF:
Paid-in capital .............................................................. $1,687,776
Unrealized appreciation of investments ....................................... 72,003
Accumulated net realized loss on investments ................................. (12,011)
Undistributed net investment income .......................................... 5,215
----------
Total ....................................................................... $1,752,983
==========
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE OF BENEFICIAL INTEREST ........ $10.48
======
COMPUTATION OF OFFERING PRICE:
Maximum Offering Price per share based on a 4.00% sales charge ($10.48 / 0.96) $10.92
======
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
- -----------------------------------------------------------------------------------------------------------------
Landmark National Tax Free Income Fund
- -----------------------------------------------------------------------------------------------------------------
STATEMENT OF OPERATIONS
For the six months ended June 30, 1997 (unaudited)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C>
INVESTMENT INCOME (Note 1B):
Interest ............................................................................ $ 57,194
EXPENSES:
Custodian fees ...................................................................... $ 24,190
Auditing services ................................................................... 14,900
Shareholder reports ................................................................. 7,420
Trustee fees ........................................................................ 6,447
Transfer agent fees ................................................................. 6,000
Legal services ...................................................................... 5,200
Investment advisory fees (Note 2) ................................................... 4,121
Administrative fees (Note 3A) ....................................................... 4,121
Shareholder servicing agents' fees (Note 3B) ........................................ 2,575
Distribution fees (Note 4) .......................................................... 515
Miscellaneous ....................................................................... 3,250
--------
Total expenses .................................................................... 78,739
Less aggregate amount waived by Investment Adviser,
Administrator, Shareholder Servicing Agents and Distributor (Notes 2, 3A, 3B, and 4) (11,332)
Less fees paid indirectly (Note 1E) ................................................. (1,347)
Expenses assumed by the Administrator (Note 8) ...................................... (66,060)
--------
Net expenses ...................................................................... --
--------
Net investment income ............................................................. 57,194
--------
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investment transactions ........................................ 5,537
Unrealized appreciation (depreciation) of investments--
Beginning of period ............................................................... 53,861
End of period ..................................................................... 72,003
--------
Net change in unrealized appreciation (depreciation) ................................ 18,142
--------
Net realized and unrealized gain (loss) on investments ............................ 23,679
--------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS ................................ $ 80,873
========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
- --------------------------------------------------------------------------------------------------------------
Landmark National Tax Free Income Fund
- --------------------------------------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS
ENDED
JUNE 30, 1997 YEAR ENDED
(UNAUDITED) DECEMBER 31, 1996
------------- -----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income ...................................................... $ 57,194 $ 4,102,970
Net realized gain (loss) on investment transactions ........................ 5,537 (17,548)
Net change in unrealized appreciation (depreciation) of investments ........ 18,142 (9,055)
----------- -----------
Net increase in net assets resulting from operations ....................... 80,873 76,367
----------- -----------
DIVIDENDS DECLARED TO SHAREHOLDERS FROM:
Net investment income ...................................................... (54,070) (100,879)
----------- -----------
TRANSACTIONS IN SHARES OF BENEFICIAL INTEREST (Note 6):
Net proceeds from sale of shares ........................................... 125,778 950,184
Net asset value of shares issued to shareholders from
reinvestment of dividends ................................................. 53,675 99,169
Cost of shares repurchased ................................................. (513,575) (270,666)
----------- -----------
Net increase (decrease) in net assets from transactions in shares of
beneficial interest ..................................................... (334,122) 778,687
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS ...................................... (307,319) 754,175
NET ASSETS:
Beginning of period ........................................................ 2,060,302 1,306,127
----------- -----------
End of period (Including undistributed net investment income
of $5,215 and $2,091, respectively) ....................................... $ 1,752,983 $ 2,060,302
=========== ===========
See notes to financial statements
</TABLE>
<PAGE>
<TABLE>
- ------------------------------------------------------------------------------------------------
Landmark National Tax Free Income Fund
- ------------------------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------
<CAPTION>
SIX MONTHS YEAR AUGUST 17, 1995
ENDED ENDED (COMMENCEMENT OF
JUNE 30, 1997 DECEMBER 31, OPERATIONS) TO
(UNAUDITED) 1996 DECEMBER 31, 1995
----------- ------------ -----------------
<S> <C> <C> <C>
Net Asset Value, beginning of period .... $10.34 $10.55 $10.00
------ ------ ------
Income From Operations:
Net investment income ................... 0.269 0.562 0.187
Net realized and unrealized gain (loss)
on investments ......................... 0.141 (0.232) 0.551
------ ------ ------
Total from operations ................. 0.410 0.330 0.738
------ ------ ------
Less Dividends From:
Net investment income .................. (0.270) (0.540) (0.188
------ ------ ------
Net Asset Value, end of period ......... $10.48 $10.34 $10.55
====== ====== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $1,753 $2,060 $1,306
Ratio of expenses to average net assets . 0% 0% 0%
Ratio of net investment income to
average net assets ..................... 5.55%+ 5.42% 5.20%+
Portfolio turnover ...................... 2% 52% 0%
Total return ............................ 4.03%** 3.31% 7.43%**
Note: If Agents of the Fund had not voluntarily agreed to waive all of their
fees for the period, the expenses were not reduced for fees paid indirectly and
had expenses been limited to that required by certain state securities law in
1995, the net investment income per share and the ratios would have been as
follows:
Net investment income (loss) per share $(0.101) $(0.291) $0.098
Ratios:
Expenses to average net assets .......... 7.64%+ 8.23% 2.50%+
Net investment income (loss) to
average net assets ..................... (2.09)%+ (2.81)% 2.70%+
+ Annualized
** Not annualized
See notes to financial statements
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Landmark National Tax Free Income Fund
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (unaudited)
- --------------------------------------------------------------------------------
(1) SIGNIFICANT ACCOUNTING POLICIES
The Landmark National Tax Free Income Fund (the "Fund") is a separate
non-diversified series of Landmark Tax Free Income Funds (the "Trust"), a
Massachusetts business trust. The Trust is registered under the Investment
Company Act of 1940, as amended, as an open-end, management investment company.
The Investment Adviser of the Fund is Citibank, N.A. ("Citibank"). The Landmark
Funds Broker-Dealer Services, Inc. ("LFBDS") acts as the Fund's Administrator
and Distributor. Citibank also serves as Sub-Administrator and makes shares
available to customers as Shareholder Servicing Agent.
The preparation of financial statements in accordance with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts and disclosures in the financial statements. Actual
results could differ from those estimates.
The Fund has approval to issue Class A and Class B shares as described more
fully in the Fund's prospectus. No Class B shares have yet to be offered,
therefore information presented in these financial statements relates solely to
Class A shares.
The significant accounting policies consistently followed by the Fund are in
conformity with generally accepted accounting principles and are as follows:
A. INVESTMENT SECURITY VALUATIONS -- Debt securities (other than short-term
obligations maturing in 60 days or less) are valued on the basis of valuations
furnished by a pricing service which takes into account appropriate factors such
as institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, and other market data, without exclusive
reliance upon quoted prices or exchange or over-the-counter prices, since such
valuations are believed to reflect more accurately the fair value of the
securities. Short-term obligations (maturing in 60 days or less) are valued at
amortized cost, which approximates market value. Securities, if any, for which
there are no such valuations or quotations are valued at fair value as
determined in good faith by or under guidelines established by the Trustees.
B. INCOME -- Interest income is determined on the basis of interest accrued and
discount earned, adjusted for amortization of premium or discount on long-term
debt securities when required for federal income tax purposes.
C. FEDERAL TAXES -- The Fund's policy is to comply with the provisions of the
Internal Revenue Code available to regulated investment companies and to
distribute to shareholders all of its taxable income, including any net realized
gain on investment transactions. Accordingly, no provision for federal income or
excise tax is necessary. At December 31, 1996, the Fund, for federal income tax
purposes, had a capital loss carryover of $17,548 which will expire December 31,
2004. Dividends by the Fund from net interest received on tax-exempt municipal
bonds are not includable by shareholders as gross income for federal income tax
purposes because the Fund intends to meet certain requirements of the Internal
Revenue Code applicable to regulated investment companies which will enable the
Fund to pay exempt interest dividends. The portion of such interest, if any,
earned on private activity bonds issued after August 7, 1986, may be considered
a tax preference item to shareholders.
D. DISTRIBUTIONS -- The Fund distinguishes between distributions on a tax basis
and a financial reporting basis and requires that only distributions in excess
of tax basis earnings and profits be reported in the financial statements as a
return of capital. Differences in the recognition or classification of income
between the financial statements and tax earnings and profits which result in
temporary over-distributions for financial statement purposes, are classified as
distributions in excess of net investment income or accumulated net realized
gains.
E. FEES PAID INDIRECTLY -- The Fund's custodian bank calculates its fee based on
the Fund's average daily net assets. The fee is reduced according to a fee
arrangement, which provides for custody fees to be reduced based on a formula
developed to measure the value of cash deposited with the custodian by the Fund.
This amount is shown as a reduction of expense on the Statement of Operations.
F. EXPENSES -- The Fund bears all costs of its operations other than expenses
specifically assumed by Citibank and LFBDS. Expenses incurred by the Trust with
respect to any two or more funds or series are allocated in proportion to the
average net assets of each fund, except when allocations of direct expenses to
each fund can otherwise be made fairly. Expenses directly attributable to a fund
are charged to that fund.
G. OTHER -- Investment transactions are accounted for on the date the
investments are purchased or sold. Realized gains and losses are determined on
the identified cost basis. Distributions to shareholders and shares issuable to
shareholders electing to receive distributions in shares are recorded on the
ex-dividend date.
(2) INVESTMENT ADVISORY FEES
The investment advisory fee paid to Citibank, as compensation for overall
investment management services amounted to $4,121, all of which was voluntarily
waived for the six months ended June 30, 1997. The investment advisory fee is
computed at the annual rate of 0.40% of average daily net assets.
(3) ADMINISTRATIVE SERVICES PLAN
The Trust, on behalf of the Fund, has adopted an Administrative Services Plan
(the "Administrative Services Plan") which provides that the Trust may obtain
the services of an Administrator, one or more Shareholder Servicing Agents and
other Servicing Agents and may enter into agreements providing for the payment
of fees for such services. Under the Administrative Services Plan, the aggregate
of the fee paid to the Administrator from the Fund and of the fees paid to the
Shareholder Servicing Agents from the Fund under such plan 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.
A. ADMINISTRATIVE FEES -- Under the terms of an Administrative Services
Agreement, the administrative fee paid to the Administrator, as compensation for
overall administrative services and general office facilities, is accrued daily
and paid monthly at an annual rate of 0.40% of the Fund's average daily net
assets. The Administrative fee amounted to $4,121, all of which was voluntarily
waived for the six months ended June 30, 1997. Citibank acts as
Sub-Administrator and performs such duties and receives such compensation from
LFBDS as from time to time is agreed to by LFBDS and Citibank. The Fund pays no
compensation directly to any Trustee or any officer who is affiliated with the
Administrator, all of whom receive remuneration for their services to the Fund
from the Administrator or its affiliates. Certain of the officers and a Trustee
of the Fund are officers and directors of the Administrator or its affiliates.
B. SHAREHOLDER SERVICING AGENTS FEES -- The Trust, on behalf of the Fund, has
entered into shareholder servicing agreements with each Shareholder Servicing
Agent pursuant to which that Shareholder Servicing Agent acts as an agent for
its customers and provides other related services. For their services, each
Shareholder Servicing Agent receives fees from the Fund, which may be paid
periodically, but may not exceed, on an annualized basis, an amount equal to
0.25% of the average daily net assets of the Fund represented by shares owned
during the period for which payment is being made by investors for whom such
Shareholder Servicing Agent maintains a servicing relationship. Shareholder
Servicing Agents' fees amounted to $2,575, all of which was voluntarily waived
for the six months ended June 30, 1997.
(4) DISTRIBUTION FEES
The Trust, on behalf of the Fund, has adopted a Plan of Distribution pursuant to
Rule 12b-1 under the Investment Company Act of 1940, as amended, in which the
Fund compensates the Distributor at an annual rate not to exceed 0.05% of the
Fund's average daily net assets. The Distributor may also receive an additional
fee from the Fund at an annual rate not to exceed 0.05% of the Fund's average
daily net assets in anticipation of, or as reimbursement for, advertising
expenses incurred by the Distributor in connection with the sale of shares of
the Fund. No payment of such additional fees has been made during the period.
The Distribution fee amounted to $515, all of which was voluntarily waived for
the six months ended June 30, 1997.
(5) PURCHASES AND SALES OF INVESTMENTS
Purchases and sales of investments, other than U.S. Government securities and
short-term obligations, aggregated $47,500 and $473,875, respectively.
(6) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional Shares of Beneficial Interest (without par value).
Transactions in shares of beneficial interest were as follows:
SIX MONTHS
ENDED YEAR ENDED
JUNE 30, 1997 DECEMBER 31,
(UNAUDITED) 1996
------------- ------------
Shares sold .................................... 12,180 92,257
Shares issued to shareholders
from reinvestment of dividends ............... 5,198 9,709
Shares repurchased ............................. (49,307) (26,521)
------- -------
Net increase (decrease) ........................ (31,929) 75,445
======= =======
(7) FEDERAL INCOME TAX BASIS OF INVESTMENTS
The cost and unrealized appreciation (depreciation) in value of the investment
securities owned at June 30, 1997, as computed on a federal income tax basis,
are as follows:
Aggregate cost ......................................... $1,529,902
==========
Gross unrealized appreciation .......................... $ 73,872
Gross unrealized depreciation .......................... (1,869)
----------
Net unrealized appreciation ............................ $ 72,003
==========
(8) ASSUMPTION OF EXPENSES
LFBDS has voluntarily agreed to pay the unwaived expenses of the Fund for the
six months ended June 30, 1997 which amounted to $66,060.
(9) LINE OF CREDIT
The Fund, along with other Landmark Funds, entered into an ongoing agreement
with a bank which allows the Funds collectively to borrow up to $60 million for
temporary or emergency purposes. Interest on borrowings, if any, is charged to
the specific fund executing the borrowing at the base rate of the bank. The line
of credit requires a quarterly payment of a commitment fee based on the average
daily unused portion of the line of credit. For the six months ended June 30,
1997, the commitment fee allocated to the Fund was $4. Since the line of credit
was established there have been no borrowings.
<PAGE>
- --------------------------------------------------------------------------------
SHAREHOLDER
SERVICING AGENTS
- --------------------------------------------------------------------------------
FOR NEW YORK RETAIL BANKING AND
BUSINESS AND PROFESSIONAL CUSTOMERS:
Citibank, N.A.
111 Wall Street, New York, NY 10043
(212) 820-2383 or (800) 846-5300
FOR CITIGOLD CUSTOMERS:
Citigold
P.O. Box 5130, New York, NY 10150-5130
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 CUSTOMERS:
Citicorp Investment Services
One Court Square, Long Island City, NY 11120
Call Your Investment Consultant or (800) 846-5200
(212) 820-2380 in New York City
[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
