BBH BROAD MARKET FIXED INCOME PORTFOLIO
POS AMI, 2000-12-01
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                                                             File No. 811-09969

  As filed with the Securities and Exchange Commission on December 1, 2000.


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                    FORM N-1A

             REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY
                               ACT OF 1940


                             Amendment No. 1                    / X /

                        (Check appropriate box or boxes)


                     BBH BROAD MARKET FIXED INCOME PORTFOLIO
                (Exact Name of Registrant as Specified in Charter)


                       63 Wall Street, New York, NY 10005
               (Address of Principal Executive Offices) (Zip Code)


       Registrant's Telephone Number, including Area Code: (800) 625-5759

         Philip W. Coolidge, 21 Milk Street, Boston, Massachusetts 02109
                     (Name and Address of Agent for Service)

                                    Copy to:
                          John E. Baumgardner, Jr., Esq.
                              Sullivan & Cromwell
                                125 Broad Street
                               New York, NY 10004




<PAGE>

PART A


         Responses to Items 1 through 3, 5 and 9 have been  omitted  pursuant to
Item 2(b) of Instruction B of the General Instructions to Form N-1A.

Item 4.Investment Objective, Principal Investment Strategies, and Related Risks

INVESTMENT OBJECTIVE


The  investment  objective of the Portfolio is to provide  maximum total return,
consistent with preservation of capital and prudent  investment  management.


PRINCIPAL INVESTMENT STRATEGIES

The Investment  Adviser  invests at the assets of the Portfolio in a broad range
of fixed income securities,  primarily U.S. dollar denominated.  The Portfolio's
assets  may also be  invested  in non U.S.  dollar  denominated  securities.  In
pursuing its investment objective, the Portfolio may use a number of techniques.
These  techniques  and the securities  used include,  but are not limited to the
following:

Asset-Backed Securities                      Payment-In-Kind Bonds

Collateralized Bond Obligations             Forward Contracts on Currencies

Collateralized Loan Obligations             Futures Contracts on Bonds,
                                             Interest Rates and Indexes
Collateralized Mortgage Obligations
                                             Indexed Securities/
Convertible Bonds                            Structured Products

Convertible Preferred Stocks                 Options on Foreign Currencies,
                                             Futures Contracts, Securities
Corporate Securities                         and Swaps

Domestic and Foreign Government Securities   Reset Options

Domestic and Foreign Goverment               Yield Curve Options
Agency Securities
                                             Preferred Stocks

Event-Linked Securities                      Repurchase Agreements

Mortgage-Backed Securities                   Reverse Repurchase Agreements

Municipal Obligations                        Restricted Securities

Pass-Through Securities                      Short Term Instruments

Stripped Mortgage-Backed Securities          Swaps and Related Derivative
                                             Instruments

Supranational Securities                     TBA Mortgage-Backed Securities

Variable Floating-Rate Obligations           "When-Issued" Securities

Zero Coupon and Deferred Interest Bonds      144A Securities

<PAGE>


The Investment  Adviser seeks to deliver superior risk adjusted returns relative
to the Lehman Brothers Aggregate Bond Index by relying upon securities selection
based upon proprietary  credit research and a quantitative  decision  framework.
The Adviser  also seeks to  forecast  excess  returns for each market  sector by
identifying  sectors  with  superior  risk  adjusted  prospectus  (based on each
sector's  historic  volatility  characteristics).  Sector positions are taken in
proportion to the Investment  Adviser's  conviction,  expectations of return and
risk, and the Portfolio's  investment  policies.  The Investment  Adviser's Bond
Policy Group  establishes  risk  parameters  for the  Portfolio and monitors the
distribution of risk across sector, duration and currency categories.

Under normal  circumstances,  the Investment Adviser invests at least 65% of the
assets of the  Portfolio  in a broad  range of  investment  grade  fixed  income
securities.  An investment  grade security is one rated  investment grade at the
time  of  purchase,  by  either  a  nationally  recognized   statistical  rating
organization  such  as  Moody's  Investors  Service,  Inc.,  Standard  &  Poor's
Corporation,  Fitch IBCA or Duff & Phelps Credit  Rating Co. (or, if unrated,  a
security that would,  in the opinion of the  Investment  Adviser,  be investment
grade if rated by a nationally recognized  statistical rating organization).  In
the event that a security is downgraded below  investment  grade, the Investment
Adviser will use his or her  expertise  and judgement to evaluate when and if to
sell the below  investment  grade security.  The weighted  average rating of the
total Portfolio's holdings will be investment grade.

The  Investment  Adviser may invest a portion of the assets of the  Portfolio in
fixed income  securities rated below investment grade or if unrated,  determined
by  the  Adviser  to  be of  comparable  quality.  These  non  investment  grade
securities are commonly  referred to as high yield or junk bonds. The Investment
Adviser of the  Portfolio may invest in  derivative  products,  such as interest
rate swaps, or other  investment  companies in order to obtain  participation in
non  investment  grade  securities.  The Investment  Adviser to such  investment
companies may be Brown Brothers Harriman.

Rather  than  investing  directly  in the  securities  in  which  the  Portfolio
primarily  invests,  the Portfolio may use other  investment  techniques to gain
exposure to market movements related to such securities, such as entering into a
series of contracts to buy or sell such securities  and/or as part of a strategy
designed to reduce to exposure to other risks, such as interest rate or currency
risk. The Portfolio may, but is not required to, use derivative  instruments for
risk management purposes or as part of its investment strategies. The Investment
Adviser  may  decide  not to  employ  any of these  strategies  and  there is no
assurance that any derivatives strategy used by the Portfolio will succeed.


PRINCIPAL RISK FACTORS

The  principal  risks  of  investing  in the  Portfolio  and  the  circumstances
reasonably  likely to adversely  affect an investment are described  below.  The
price of the  Portfolio  changes  daily  based on  market  conditions  and other
factors. An investor may lose money by investing in the Portfolio.


o        Market Risk:

      This is the risk that the price of a  security  will fall due to  changing
     economic,  political or market conditions, or due to a company's individual
     situation.


o        Interest Rate Risk:

     Interest rate risk refers to the price fluctuation of a bond in response to
     changes in interest  rates. In general,  bonds with shorter  maturities are
     less   sensitive  to  interest  rate   movements  than  those  with  longer
     maturities.
<PAGE>

o        Credit Risk:

Credit risk refers to the likelihood  that an issuer will default on interest or
principal payments.

o        Issuer Risk:

     The value of a security may decline for a number of reasons which  directly
     relate to the issuer,  such as management  performance,  financial leverage
     and reduced demand for the issuer's goods or services.

o        Liquidity Risk:

     Liquidity risk exists when a particular instrument is difficult to purchase
     or sell. If a transaction is  particularly  large or if the relevant market
     is illiquid (as is the case with many restricted securities), it may not be
     possible  to  initiate  a  transaction   or  liquidate  a  position  at  an
     advantageous time or price.  Securities in the Portfolio are generally less
     liquid than many other investments  including but not limited to securities
     issued by the U.S.  government,  commercial paper and those of higher rated
     investment grade corporate securities.

o        Maturity Risk:

     Interest  rate  risk will  generally  affect  the  price of a fixed  income
     security  more  if  the  security  has  a  longer  maturity.  Fixed  income
     securities  with longer  maturities  will  therefore be more  volatile than
     other fixed income securities with shorter  maturities.  Conversely,  fixed
     income  securities  with  shorter  maturities  will  be less  volatile  but
     generally  provide lower returns than fixed income  securities  with longer
     maturities.

o        Mortgage Risk:

     Rising  interest  rates tend to extend  the  duration  of  mortgage-related
     securities,  making them more sensitive to changes in interest  rates. As a
     result,  in a period of rising  interest  rates,  the Portfolio  that holds
     mortgage-related  securities  may exhibit  additional  volatility.  This is
     known as extension  risk.  In  addition,  mortgage-related  securities  are
     subject to prepayment risk. When interest rates decline,  borrowers may pay
     off their  mortgages  sooner than expected.  This can reduce the returns of
     the Portfolio  because the Portfolio will have to reinvest the money at the
     lower prevailing interest rates.

o        Derivatives Risk:

     Derivatives  are financial  contracts whose value depends on, or is derived
     from,  the value of an  underlying  asset,  reference  rate or  index.  The
     Portfolio's use of derivative instruments involves risks different from, or
     possibly  greater than, the risks  associated  with  investing  directly in
     securities and other traditional investments.  Derivatives are subject to a
     number of risks  described  elsewhere  in this  section,  such as liquidity
     risk,  interest rate risk,  market risk and credit risk.  They also involve
     the risk of mispricing  or improper  valuation and the risk that changes in
     the value of the derivative may not correlate perfectly with the underlying
     asset,  rate  or  index.  By  investing  in a  derivative  instrument,  the
     Portfolio  could  lose  more  than the  principal  amount  invested.  Also,
     suitable derivative  transactions may not be available in all circumstances
     and there  can be no  assurance  that the  Portfolio  will  engage in these
     transactions  to  reduce  exposure  to  other  risks  when  that  would  be
     beneficial.

                                       2
<PAGE>

o        Foreign Investment Risk:

     Investing in securities  of foreign  issuers  involves  risks not typically
     associated  with  investing in  securities  of domestic  issuers  including
     foreign  exchange risk,  regulatory  and tax risk.  Changes in political or
     social conditions,  diplomatic relations,  or limitations on the removal of
     funds or assets may adversely  affect the value of the  investments  in the
     Portfolio.  Changes in government  administrations  or economic or monetary
     policies in the United  States or abroad  could result in  appreciation  or
     depreciation  of portfolio  securities  and could  favorably or unfavorably
     affect the  Portfolio's  operations.  The economies of  individual  foreign
     nations differ from the U.S. economy, whether favorably or unfavorably,  in
     areas  such as growth  of  domestic  product,  rate of  inflation,  capital
     reinvestment,  resource  self-sufficiency and balance of payments position.
     Interest paid by foreign  issuers may be subject to  withholding  and other
     foreign taxes, which may decrease the net return on foreign  investments as
     compared to interest paid to the Portfolio by domestic issuers.

     Because  foreign  securities  generally are denominated and pay interest in
     foreign currencies, and the Portfolio holds various foreign currencies from
     time to time,  the value of the assets of the Portfolio as measured in U.S.
     dollars is affected  favorably or unfavorably by changes in exchange rates.
     The  Portfolio  also incurs costs in  connection  with  conversion  between
     various currencies.

o        Leveraging Risk:

     The use of derivatives  may create  leveraging  risk. The use of leveraging
     may cause the Portfolio to liquidate portfolio positions when it may not be
     advantageous  to do so to satisfy its  obligations  or to meet  segregation
     requirements.  Leverage, including borrowing, may cause the Portfolio to be
     more volatile than if the Portfolio had not been leveraged. This is because
     leverage  tends to exaggerate the effect of any increase or decrease in the
     value of the Portfolio's securities.



o        Non Investment Grade Security Risk:

     If and to the extent that the Portfolio  invests  directly or indirectly in
     non investment  grade  securities and unrated  securities of similar credit
     quality  (commonly  known as "junk  bonds"),  it may be  subject to greater
     levels of market,  interest rate, credit,  issuer and liquidity risk than a
     portfolio that does not invest in such  securities.  Non  investment  grade
     securities are  considered  predominantly  speculative  with respect to the
     issuer's  continuing  ability to make principal and interest  payments.  An
     economic downturn or period of rising interest rates could adversely affect
     the market for non investment  grade  securities and reduce the Portfolio's
     ability to sell its non investment grade securities. (See "Liquidity Risk")



Investments  in the  Portfolio  are neither  insured nor  guaranteed by the U.S.
Government.   Beneficial   interests  in  the  Portfolio  are  not  deposits  or
obligations  of, or guaranteed  by, Brown  Brothers  Harriman & Co. or any other
bank,  and are not insured by the Federal  Deposit  Insurance  Corporation,  the
Federal Reserve Board or any othe federal, state or other governmental agency.

                                       3
<PAGE>

Item 6. Management, Organization and Capital Structure.

INVESTMENT ADVISER

    The Investment Adviser to the Portfolio is Brown Brothers Harriman,  Private
Bankers, a New York limited partnership established in 1818. The firm is subject
to examination and regulation by the Superintendent of Banks of the State of New
York and by the Department of Banking of the Commonwealth of  Pennsylvania.  The
firm is also subject to supervision and examination by the Commissioner of Banks
of the Commonwealth of  Massachusetts.  The Investment  Adviser is located at 59
Wall Street, New York, NY 10005.


    The Investment Adviser provides  investment advice and portfolio  management
services to the Portfolio. Subject to the general supervision of the Trustees of
the Portfolio,  the Investment Adviser makes the day-to-day investment decisions
for the  Portfolio,  places  the  purchase  and sale  orders  for the  portfolio
transactions   of  the  Portfolio,   and  generally   manages  the   Portfolio's
investments.  The  Investment  Adviser  provides  a broad  range  of  investment
management  services for customers in the United States and abroad.  At June 30,
2000, it managed total assets of approximately $35 billion.


    A team of  individuals  manages the  Portfolio's  securities on a day-to-day
basis.  This team includes Mr. Glenn E. Baker,  Mr. John P. Nelson and Mr. James
J. Evans.  Mr. Baker holds a B.A. and a M.B.A.  from the  University of Michigan
and is a Chartered Financial Analyst. He joined Brown Brothers Harriman in 1991.
Mr. Nelson holds a B.S. from St.  Vincent's  College.  He joined Brown  Brothers
Harriman in 1987.  Mr. Evans holds a B.S. from the  University of Delaware and a
M.B.A. from New York University and is a Chartered  Financial Analyst. He joined
Brown Brothers  Harriman in 1996. Prior to joining Brown Brothers  Harriman,  he
worked at Fleet Investment Advisers.

   The Portfolio pays the Investment  Adviser an annual fee,  computed daily and
payable  monthly,  equal  to  0.30%  of the  average  daily  net  assets  of the
Portfolio.  This fee compensates the Investment Adviser for its services and its
expenses (such as salaries of its personnel).



                                       4


<PAGE>


Item 7. Investor Information.

   The Portfolio  values its assets on the basis of their market  quotations and
valuations  provided by  independent  pricing  services.  If quotations  are not
readily  available,  the  assets are  valued at fair  value in  accordance  with
procedures established by the Portfolio's Trustees.

Beneficial  interests in the Portfolio  are issued  solely in private  placement
transactions  that do not involve any  "public  offering"  within the meaning of
Section 4(2) of the 1933 Act.  Investments  in the Portfolio may only be made by
other  investment  companies,  insurance  company separate  accounts,  common or
commingled  trust  funds,  or  similar   organizations  or  entities  which  are
"accredited  investors"  as  defined  in Rule  501  under  the  1933  Act.  This
Registration Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any "security" within the meaning of the 1933 Act.

An investment in the Portfolio may be made without a sales load. All investments
are made at net asset value next determined  after an order is received in "good
order" by the Portfolio. The net asset value of the Portfolio is determined once
on each business day.

The minimum  initial  investment  in the  Portfolio is  $5,000,000.  There is no
minimum for subsequent investments. However, because the Portfolio intends to be
as fully invested at all times as is reasonably  practicable in order to enhance
the yield on its assets, investments must be made in federal funds (i.e., monies
credited to the account of the Custodian by a Federal Reserve Bank).

The Portfolio  reserves the right to cease accepting  investments at any time or
to reject any investment order.

An investor in the Portfolio may reduce all or any portion of its  investment at
the net asset value next determined after a request in "good order" is furnished
by the investor to the  Portfolio.  The proceeds of a reduction  will be paid by
the Portfolio in federal funds normally on the next Portfolio Business Day after
the reduction is effected,  but in any event within seven days.  Investments  in
the Portfolio may not be transferred.

The right of any investor to receive  payment with respect to any  reduction may
be  suspended  or the payment of the  proceeds  therefrom  postponed  during any
period in which the New York Stock  Exchange is closed  (other than  weekends or
holidays)  or trading on the New York Stock  Exchange is  restricted  or, to the
extent otherwise permitted by the 1940 Act if an emergency exists.

The  Portfolio  reserves  the  right  under  certain   circumstances,   such  as
accommodating  requests for  substantial  withdrawals  or  liquidations,  to pay
distributions in kind to investors (i.e., to distribute  portfolio securities as
opposed to cash).  If  securities  are  distributed,  an  investor  could  incur
brokerage,  tax or other  charges  in  converting  the  securities  to cash.  In
addition,  distribution  in kind may result in a less  diversified  portfolio of
investments or adversely affect the liquidity of the Portfolio.



                                       5
<PAGE>


Item 8.  Distribution Arrangements.

        Not applicable.






                                       6
<PAGE>

PART B


Item 10.  Cover Page.

        Not applicable.

          Table of Contents.
                                                                      Page

        Portfolio History . . . . . . . . . . . .                     B-1
        Description of Portfolio and Its
         Investments and Risks . . . . . . . . . . . . . . . .        B-1
        Management of the Portfolio   . . . . . . . . . . . . .       B-22
        Control Persons and Principal Holders
        of Securities . . . . . . . . . . . . . . . . . . . . .       B-25
        Investment Advisory and Other Services  . . . . . . . .       B-25
        Brokerage Allocation and Other Practices  . . . . . . .       B-27
        Capital Stock and Other Securities  . . . . . . . . . .       B-28
        Purchase, Redemption and Pricing of
        Securities  . . . . . . . . . . . . . . . . . . . . . .       B-29
        Tax Status  . . . . . . . . . . . . . . . . . . . . . .       B-31
        Underwriters  . . . . . . . . . . . . . . . . . . . . .       B-32
        Calculations of Performance Data  . . . . . . . . . . .       B-32
        Financial Statements  . . . . . . . . . . . . . . . . .       B-32
        Appendix . . . . . . . . . . . . . . . . . . . . . . . .      B-33

Item 11.  Portfolio History.

       The  Portfolio is a trust  established  on June 15, 1993 under the law of
the State of New York.

Item 12.  Description of Portfolio, Investments and Risks.

The following  supplements  the  information  contained in Part A concerning the
investment objective,  policies and techniques of the Portfolio.

                                 Debt Securities

Corporate Debt Securities

The  Portfolio's  investment  in U.S.  dollar  or  foreign  currency-denominated
corporate debt securities of domestic or foreign issuers is limited to corporate
bonds, debentures, notes and other similar corporate debt instruments, including
convertible  securities  including corporate  income-producing  securities which
meet the minimum ratings  criteria set forth for the Portfolio,  or, if unrated,
are in the Adviser's opinion  comparable in quality to corporate debt securities
in which the Portfolio may invest.

Corporate  income-producing   securities  may  include  forms  of  preferred  or
preference  stock.  The rate of  interest on a corporate  debt  security  may be
fixed, floating or variable,  and may vary inversely with respect to a reference
rate. The rate of return or return of principal on some debt  obligations may be
linked or indexed to the level of exchange  rates between the U.S.  dollar and a
foreign  currency or currencies.  Debt  securities may be acquired with warrants
attached.

Debt Securities Rating Criteria

Investment  grade debt  securities are those rated "BBB" or higher by Standard &
Poor's  Ratings Group  ("Standard & Poor's") or the  equivalent  rating of other
nationally recognized securities rating organizations. Debt securities rated BBB
are considered  medium grade obligations with speculative  characteristics,  and
adverse economic  conditions or changing  circumstances  may weaken the issuer's
ability to pay  interest  and repay  principal.  If the rating of an  investment
grade debt security changes to above medium  investment  grade, the Adviser will
consider if any action is  appropriate  in light of the  Portfolio's  investment
objective and policies.

Below  investment  grade  debt  securities  are  those  rated  "BB" and below by
Standard  & Poor's  or the  equivalent  rating  of other  nationally  recognized
securities  rating  organizations.  See the Appendix for a description of rating
categories.  An investment  grade security is one rated  investment grade at the
time of purchase,  by either Moody's Investors Service,  Inc., Standard & Poor's
Corporation,  Fitch IBCA or Duff & Phelps Credit  Rating Co. (or, if unrated,  a
security that would,  in the opinion of the  Investment  Adviser,  be investment
grade if rated by a nationally  recognized  rating  organization).  In the event
that a security is downgraded  below investment  grade,  the Investment  Adviser
will use his or her  expertise and judgement to evaluate when and if to sell the
below investment grade security.

                                      B-1
<PAGE>

Collaterialized Bond Obligations

A  Collateralized  Bond  Obligation  (CBO) is a trust  typically  consisting  of
corporate  bonds  (both US &  foreign).  CBO'S  consist of a  portfolio  of many
underlying  securities where the cashflows from the  securitization  are derived
from this  portfolio.  The  cashflows  from the trust are split into two or more
portions,  called  tranches,  varying in risk and yield. The riskiest portion is
the  "Equity"  tranche  which bears the bulk of  defaults  from the bonds in the
trust and serves to protect the other,  more senior tranches from default in all
but the most severe circumstances. Since it is partially protected from defaults
a senior tranche from a CBO trust  typically has a higher rating and lower yield
than its underlying  securities,  and can be rated investment grade. Despite the
protection  from the equity  tranche,  CBO tranches can  experience  substantial
losses  due  to  actual  defaults,  increased  sensitivity  to  defaults  due to
collateral default and disappearance of protecting tranches, market anticipation
of defaults, as well as aversion to CBO securities as a class.

Collaterialized Loan Obligations

A Collateralized Loan Obligation (CLO) is a trust typically  consisting of loans
made to issuers  (both US and  foreign).  CLO'S  consist of a portfolio  of many
underlying  loans where the cashflows from the  securitization  are derived from
this portfolio of loans. The cashflows from the trust are split into two or more
portions,  called  tranches,  varying in risk and yield. The riskiest portion is
the  "Equity"  tranche  which bears the bulk of  defaults  from the loans in the
trust and serves to protect the other,  more senior tranches from default in all
but the most severe circumstances. Since it is partially protected from defaults
a senior tranche from a CLO trust  typically has a higher rating and lower yield
than its underlying  securities,  and can be rated investment grade. Despite the
protection  from the equity  tranche,  CLO tranches can  experience  substantial
losses  due  to  actual  defaults,  increased  sensitivity  to  defaults  due to
collateral default and disappearance of protecting tranches, market anticipation
of defaults, as well as aversion to CLO securities as a class.


Convertible Securities

A convertible debt security is a bond,  debenture,  note, or other security that
entitles the holder to acquire  common stock or other equity  securities  of the
same or a different issuer. A convertible security generally entitles the holder
to receive interest paid or accrued until the convertible security matures or is
redeemed, converted or exchanged. Before conversion, convertible securities have
characteristics   similar  to  non-convertible   debt  securities.   Convertible
securities rank senior to common stock in a corporation's capital structure and,
therefore,  generally  entail  less risk than the  corporation's  common  stock,
although the extent to which such risk is reduced  depends in large measure upon
the degree to which the  convertible  security  sells above its value as a fixed
income security.


Because of the conversion  feature,  the price of the convertible  security will
normally  fluctuate in some proportion to changes in the price of the underlying
equity  security,  and as such is subject to risks relating to the activities of
the issuer and/or general market and economic  conditions.  The income component
of a convertible  security may tend to cushion the security  against declines in
the price of the underlying asset.  However, the income component of convertible
securities  causes  fluctuations  based upon  changes in interest  rates and the
credit  quality of the issuer.  In addition,  convertible  securities  are often
lower-rated securities.

A convertible  security may be subject to redemption at the option of the issuer
at a  predetermined  price.  If a convertible  security held by the Portfolio is
called for  redemption,  the Portfolio would be required to permit the issuer to
redeem the security and convert it to underlying common stock, or would sell the
convertible  security to a third party,  which may have an adverse effect on the
Portfolio's ability to achieve its investment objective. The Portfolio generally
would invest in convertible securities for their favorable price characteristics
and total return potential and would normally not exercise an option to convert.

                                      B-2
<PAGE>
Mortgage-Related and Other Asset-Backed Securities

Mortgage-related  securities are interests in pools of residential or commercial
mortgage  loans,  including  first and second mortgage loans made by savings and
loan  institutions,  mortgage  bankers,  commercial  banks and others.  Pools of
mortgage  loans are  assembled  as  securities  for sale to investors by various
governmental,   government-related  and  private  organizations.  See  "Mortgage
Pass-Through Securities." The Portfolio may also invest in debt securities which
are secured with  collateral  consisting  of  mortgage-related  securities  (see
"Collateralized  Mortgage Obligations"),  and in other types of mortgage-related
securities.

     Mortgage  Pass-Through  Securities.  Interests in pools of mortgage-related
securities  differ from other forms of debt  securities,  which normally provide
for periodic  payment of interest in fixed  amounts with  principal  payments at
maturity or specified call dates.  Instead,  these securities  provide a monthly
payment which consists of both interest and principal payments. In effect, these
payments are a  "pass-through"  of the monthly  payments made by the  individual
borrowers on their  residential or commercial  mortgage  loans,  net of any fees
paid to the issuer or  guarantor  of such  securities.  Additional  payments are
caused by  repayments  of principal  resulting  from the sale of the  underlying
property,  refinancing  or  foreclosure,  net of  fees  or  costs  which  may be
incurred.  Some mortgage-related  securities (such as securities issued by GNMA)
are described as "modified pass-through." These securities entitle the holder to
receive all interest and principal  payments owed on the mortgage  pool,  net of
certain fees, at the  scheduled  payment dates  regardless of whether or not the
mortgagor actually makes the payment.

The rate of  prepayments  on  underlying  mortgages  will  affect  the price and
volatility of a mortgage-related security, and may have the effect of shortening
or extending the effective  maturity of the security beyond what was anticipated
at the time of purchase. To the extent that unanticipated rates of prepayment on
underlying  mortgages  increase in the effective  maturity of a mortgage-related
security, the volatility of such security can be expected to increase.

The principal  governmental  guarantor of  mortgage-related  securities is GNMA.
GNMA  is  a  wholly  owned  United  States  Government  corporation  within  the
Department  of Housing and Urban  Development.  GNMA is authorized to guarantee,
with the full  faith and  credit of the  United  States  Government,  the timely
payment of principal and interest on securities issued by institutions  approved
by GNMA (such as savings and loan  institutions,  commercial  banks and mortgage
bankers)  and  backed  by pools of  mortgages  insured  by the  Federal  Housing
Administration  (the "FHA"), or guaranteed by the Department of Veterans Affairs
(the "VA").

Government-related  guarantors (i.e., not backed by the full faith and credit of
the United States Government) include the Federal National Mortgage  Association
("FNMA") and the Federal Home Loan  Mortgage  Corporation  ("FHLMC").  FNMA is a
government-sponsored  corporation owned entirely by private stockholders.  It is
subject to general regulation by the Secretary of Housing and Urban Development.
FNMA purchases  conventional  (i.e., not insured or guaranteed by any government
agency)  residential  mortgages from a list of approved  seller/servicers  which
include  state and federally  chartered  savings and loan  associations,  mutual
savings  banks,  commercial  banks  and  credit  unions  and  mortgage  bankers.
Pass-through  securities  issued by FNMA are  guaranteed as to timely payment of
principal  and  interest by FNMA but are not backed by the full faith and credit
of the United States  Government.  FHLMC was created by Congress in 1970 for the
purpose of  increasing  the  availability  of  mortgage  credit for  residential
housing. It is a  government-sponsored  corporation formerly owned by the twelve
Federal Home Loan Banks and now owned  entirely by private  stockholders.  FHLMC
issues   Participation   Certificates   ("PCs")  which  represent  interests  in
conventional  mortgages from FHLMC's  national  portfolio.  FHLMC guarantees the
timely payment of interest and ultimate collection of principal, but PCs are not
backed by the full faith and credit of the United States Government.

Commercial  banks,  savings and loan  institutions,  private mortgage  insurance
companies,  mortgage  bankers and other  secondary  market  issuers  also create
pass-through pools of conventional residential mortgage loans. Such issuers may,
in addition,  be the  originators  and/or  servicers of the underlying  mortgage
loans  as well  as the  guarantors  of the  mortgage-related  securities.  Pools
created  by such  non-governmental  issuers  generally  offer a  higher  rate of
interest  than  government  and  government-related  pools  because there are no
direct or indirect  government  or agency  guarantees  of payments in the former
pools.  However,  timely payment of interest and principal of these pools may be

                                      B-3
<PAGE>

supported  by various  forms of insurance or  guarantees,  including  individual
loan,  title,  pool and hazard  insurance  and  letters of credit,  which may be
issued by governmental  entities,  private insurers or the mortgage poolers. The
insurance and guarantees are issued by governmental  entities,  private insurers
and the mortgage poolers. Such insurance and guarantees and the creditworthiness
of  the  issuers   thereof  will  be   considered  in   determining   whether  a
mortgage-related  security meets the Portfolio's  investment  quality standards.
There can be no assurance that the private insurers or guarantors can meet their
obligations  under  the  insurance  policies  or  guarantee  arrangements.   The
Portfolio may buy  mortgage-related  securities  without insurance or guarantees
if,  through  an  examination  of  the  loan  experience  and  practices  of the
originator/servicers  and poolers,  the Adviser  determines  that the securities
meet the Portfolio's quality standards.  Although the market for such securities
is  becoming   increasingly   liquid,   securities  issued  by  certain  private
organizations may not be readily marketable.

Mortgage-backed securities that are issued or guaranteed by the U.S. Government,
its agencies or  instrumentalities,  are not subject to the Portfolio's industry
concentration restrictions,  set forth below under "Investment Restrictions," by
virtue  of the  exclusion  from  that  test  available  to all  U.S.  Government
securities.  In the case of privately issued  mortgage-related  securities,  the
Portfolio takes the position that  mortgage-related  securities do not represent
interests  in any  particular  "industry"  or group of  industries.  The  assets
underlying  such  securities  may be  represented  by a portfolio  of first lien
residential   mortgages  (including  both  whole  mortgage  loans  and  mortgage
participation  interests)  or  portfolios  of mortgage  pass-through  securities
issued  or  guaranteed  by GNMA,  FNMA or FHLMC.  Mortgage  loans  underlying  a
mortgage-related security may in turn be insured or guaranteed by the FHA or the
VA. In the case of private issue  mortgage-related  securities  whose underlying
assets  are  neither  U.S.  Government  securities  nor U.S.  Government-insured
mortgages,  to the  extent  that real  properties  securing  such  assets may be
located  in the same  geographical  region,  the  security  may be  subject to a
greater risk of default than other comparable securities in the event of adverse
economic,  political or business  developments  that may affect such region and,
ultimately,  the ability of residential homeowners to make payments of principal
and interest on the underlying mortgages.

Collateralized  Mortgage  Obligations  (CMOs).  A  CMO  is a  hybrid  between  a
mortgage-backed bond and a mortgage pass-through  security.  CMOs are similar to
both a bond and a pass-through  security,  as interest and prepaid  principal is
paid, in most cases,  on a monthly  basis.  Although  CMOs,  like bonds,  may be
collateralized by whole mortgage loans, CMOS, like pass-through securities,  are
more typically  collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, FHLMC, or FNMA, and their income streams.

 CMOs are  structured  into multiple  classes,  each bearing a different  stated
maturity.  Actual  maturity  and average  life will  depend upon the  prepayment
experience  of  the  collateral.  CMOs  provide  for a  modified  form  of  call
protection  through a de facto  breakdown  of the  underlying  pool of mortgages
according  to how  quickly the loans are repaid.  Monthly  payment of  principal
received from the pool of underlying mortgages,  including prepayments, is first
returned to investors holding the shortest maturity class. Investors holding the
longer maturity  classes  receive  principal only after the first class has been
retired.  An investor is partially  guarded against a sooner than desired return
of principal because of the sequential payments.

In a typical CMO transaction,  a corporation issues multiple series (e.g., A, B,
C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond offering are used to purchase
mortgages or mortgage pass-through certificates  ("Collateral").  The Collateral
is pledged to a third party  trustee as security  for the Bonds.  Principal  and
interest  payments from the Collateral are used to pay principal on the Bonds in
the order A, B, C, Z. The  Series A, B, and C Bonds all bear  current  interest.
Interest  on the  Series Z Bond is  accrued  and added to  principal  and a like
amount is paid as principal on the Series A, B, or C Bond  currently  being paid
off. When the Series A, B, and C Bonds are paid in full,  interest and principal
on the Series Z Bond  begins to be paid  currently.  With some CMOs,  the issuer
serves as a conduit to allow loan originators (primarily builders or savings and
loan associations) to borrow against their loan portfolios.

                                      B-4
<PAGE>
Commercial   Mortgage-Backed  Securities  include  securities  that  reflect  an
interest in, and are secured by, mortgage loans on commercial real property. The
market for commercial  mortgage-backed securities developed more recently and in
terms of total  outstanding  principal  amount  of issues  is  relatively  small
compared to the market for residential single-family mortgage-backed securities.
Many of the risks of investing in commercial  mortgage-backed securities reflect
the risks of  investing  in the real estate  securing  the  underlying  mortgage
loans. These risks reflect the effects of local and other economic conditions on
real  estate  markets,  the  ability of tenants to make loan  payments,  and the
ability of a property to attract and retain tenants.  Commercial mortgage-backed
securities may be less liquid and exhibit  greater price  volatility  than other
types of mortgage- or asset-backed securities.

     Other  Mortgage-Related   Securities.   Other  mortgage-related  securities
include  securities other than those described above that directly or indirectly
represent a participation in, or are secured by and payable from, mortgage loans
on real property,  including  mortgage  dollar rolls,  CMO residuals or stripped
mortgage-backed  securities ("SMBS").  Other mortgage-related  securities may be
equity or debt securities  issued by agencies or  instrumentalities  of the U.S.
Government  or by private  originators  of, or  investors  in,  mortgage  loans,
including  savings  and  loan   associations,   homebuilders,   mortgage  banks,
commercial  banks,  investment banks,  partnerships,  trusts and special purpose
entities of the foregoing.

     CMO Residuals.  CMO residuals are mortgage securities issued by agencies or
instrumentalities  of the U.S.  Government  or by  private  originators  of,  or
investors  in,  mortgage  loans,   including  savings  and  loan   associations,
homebuilders,  mortgage banks,  commercial  banks,  investment banks and special
purpose entities of the foregoing.

The cash flow  generated by the mortgage  assets  underlying a series of CMOs is
applied  first to make  required  payments of principal and interest on the CMOs
and  second  to pay the  related  administrative  expenses  of the  issuer.  The
residual in a CMO structure generally represents the interest in any excess cash
flow remaining after making the foregoing payments.  Each payment of such excess
cash flow to a holder of the related CMO  residual  represents  income  and/or a
return of capital.  The amount of residual cash flow  resulting  from a CMO will
depend on, among other things,  the  characteristics of the mortgage assets, the
coupon  rate of each  class of CMO,  prevailing  interest  rates,  the amount of
administrative expenses and the prepayment experience on the mortgage assets. In
particular,  the yield to maturity on CMO  residuals is  extremely  sensitive to
prepayments on the related underlying  mortgage assets, in the same manner as an
interest-only ("IO") class of stripped  mortgage-backed  securities.  See "Other
Mortgage-Related  Securities--Stripped Mortgage-Backed Securities." In addition,
if a series of a CMO includes a class that bears interest at an adjustable rate,
the yield to  maturity  on the  related  CMO  residual  will  also be  extremely
sensitive  to  changes  in the  level of the  index  upon  which  interest  rate
adjustments   are  based.   As   described   below  with   respect  to  stripped
mortgage-backed  securities,  in certain circumstances the Portfolio may fail to
recoup fully its initial investment in a CMO residual.

CMO  residuals  are  generally  purchased  and sold by  institutional  investors
through several investment  banking firms acting as brokers or dealers.  The CMO
residual market has only very recently developed and CMO residuals currently may
not have the  liquidity of other more  established  securities  trading in other
markets.  Transactions  in CMO  residuals  are  generally  completed  only after
careful  review  of  the  characteristics  of the  securities  in  question.  In
addition, CMO residuals may, or pursuant to an exemption therefrom, may not have
been  registered  under the Securities Act of 1933, as amended (the "1933 Act").
CMO residuals,  whether or not registered  under the 1933 Act, may be subject to
certain  restrictions  on  transferability,  and may be  deemed  "illiquid"  and
subject to the Portfolio's limitations on investment in illiquid securities.

Stripped Mortgage-Backed Securities

SMBS are  derivative  multi-class  mortgage  securities.  SMBS may be  issued by
agencies or instrumentalities of the U.S. Government,  or by private originators
of, or investors in, mortgage loans,  including  savings and loan  associations,
mortgage banks,  commercial banks, investment banks and special purpose entities
of the foregoing.

                                      B-5
<PAGE>

SMBS are usually structured with two classes that receive different  proportions
of the interest and  principal  distributions  on a pool of mortgage  assets.  A
common type of SMBS will have one class  receiving some of the interest and most
of the principal  from the mortgage  assets,  while the other class will receive
most of the interest and the  remainder  of the  principal.  In the most extreme
case,  one class will  receive all of the interest  (the "IO" class),  while the
other  class will  receive all of the  principal  (the  principal-  only or "PO"
class). The yield to maturity on an IO class is extremely  sensitive to the rate
of principal payments (including prepayments) on the related underlying mortgage
assets,  and a rapid rate of  principal  payments  may have a  material  adverse
effect on the  Portfolio's  yield to  maturity  from  these  securities.  If the
underlying  mortgage assets experience  greater than anticipated  prepayments of
principal,  the  Portfolio  may  fail  to  recoup  some  or all  of its  initial
investment  in these  securities  even if the  security is in one of the highest
rating categories.

Although SMBS are purchased and sold by institutional  investors through several
investment  banking firms acting as brokers or dealers,  these  securities  were
only recently developed.  As a result,  established trading markets have not yet
developed  and,  accordingly,  these  securities  may be deemed  "illiquid"  and
subject to the Portfolio's limitations on investment in illiquid securities.

Other Asset-Backed Securities

Consistent with the Portfolio's  investment objectives and policies, the Adviser
also may  invest in other  types of  asset-backed  securities.  An  asset-backed
security is  typically a trust  consisting  of  consumer  or  commercial  loans.
Similar to a bond,  interest and principal is paid, in most cases,  on a monthly
basis.  Asset-backed  securities may be collaterialized  by, but not limited to,
credit card loans,  automobile loans, home equity loans and manufactured housing
and airplane  leases.  Asset-backed  securities  are typically  structured  into
multiple classes each bearing a different  stated maturity.  Actual maturity and
average life will depend upon the prepayment experience of the collateral.

U.S. Government Securities

The Portfolio's assets may be invested in securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities.  These securities, including
those which are guaranteed by federal agencies or instrumentalities,  may or may
not be backed by the "full faith and credit" of the United  States.  In the case
of securities not backed by the full faith and credit of the United  States,  it
may not be possible to assert a claim  against the United  States  itself in the
event the agency or  instrumentality  issuing or  guaranteeing  the security for
ultimate  repayment  does not meet its  commitments.  Securities  which  are not
backed by the full faith and credit of the United  States  include,  but are not
limited to, securities of the Tennessee Valley  Authority,  the Federal National
Mortgage  Association  (FNMA) and the U.S. Postal  Service,  each of which has a
limited  right to borrow  from the U.S.  Treasury to meet its  obligations,  and
securities of the Federal Farm Credit System,  the Federal Home Loan Banks,  the
Federal Home Loan Mortgage Corporation  ("FHLMC") and the Student Loan Marketing
Association,  the  obligations  of each of which  may be  satisfied  only by the
individual credit of the issuing agency. Securities which are backed by the full
faith and credit of the United States include  Treasury  bills,  Treasury notes,
Treasury bonds and pass through  obligations of the Government National Mortgage
Association  ("GNMA"),  the Farmers Home  Administration  and the  Export-Import
Bank.  There is no percentage  limitation  with respect to  investments  in U.S.
Government securities.

Variable and Floating Rate Instruments

The Portfolio may invest in variable rate and floating rate  instruments.  These
are  securities  whose  interest  rates are reset  daily,  weekly or at  another
periodic date so that the security remains close to par,  minimizing  changes in
its market value.  These  securities  often have a demand feature which entitles
the investor to repayment of principal plus accrued interest on short notice. In
calculating  the maturity of a variable rate or floating rate instrument for the
Portfolio, the date of the next interest rate reset is used.

Zero Coupon Bonds

The Portfolio may invest in zero coupon bonds.  These are securities issued at a
discount  from  their  face  value  that pay all  interest  and  principal  upon
maturity.  The  difference  between  the  purchase  price and par is a  specific
compounded  interest rate for the investor.  In calculating  the daily income of
the Portfolio, a portion of the difference between a zero coupon bond's purchase
price and its face value is taken into account as income.

                                      B-6
<PAGE>

Deferred Interest Bonds

A deferred  interest bond is a bond such as a zero-coupon bond that does not pay
interest until a later date.  Prices for deferred interest bonds are less stable
than for a current coupon bond.

PIK (Payment-In-Kind) Securities

Bonds or preferred stock whose dividends are in the form of additional  bonds or
preferred stock.

Municipal Obligations

The Portfolio may purchase municipal  obligations when the Adviser believes that
they offer  favorable rates of income or capital gain potential when compared to
a taxable investment.  The term "municipal  obligations" generally is understood
to include debt obligations issued by municipalities to obtain funds for various
public purposes, the interest on which is, in the opinion of bond counsel to the
issuer, excluded from gross income for federal income tax purposes. In addition,
if the  proceeds  from  private  activity  bonds are used for the  construction,
repair or improvement of privately operated industrial or commercial facilities,
the  interest  paid on such bonds may be excluded  from gross income for federal
income  tax  purposes,  although  current  federal  tax laws  place  substantial
limitations on the size of these issues.  The Portfolio's  distributions  of any
interest it earns on municipal  obligations  will be taxable to  shareholders as
ordinary income.

The  two  principal   classifications  of  municipal  obligations  are  "general
obligation" and "revenue"  bonds.  General  obligation  bonds are secured by the
issuer's  pledge of its  faith,  credit,  and  taxing  power for the  payment of
principal and interest. Revenue bonds are payable from the revenues derived from
a  particular  facility  or class of  facilities  or,  in some  cases,  from the
proceeds of a special excise or other specific revenue source,  but not from the
general taxing power.  Sizable investments in these obligations could involve an
increased risk to the Portfolio should any of the related facilities  experience
financial  difficulties.  Private activity bonds are in most cases revenue bonds
and do not generally carry the pledge of the credit of the issuing municipality.
There are, of course, variations in the security of municipal obligations,  both
within a particular classification and between classifications.

The mortgage  derivatives that the Portfolio may invest in include  interests in
collateralized mortgage obligations and stripped mortgage-backed securities.

Event-linked bonds

Event-linked  bonds  are  fixed  income  securities,  for  which  the  return of
principal  and payment of  interest is  contingent  on the  non-occurrence  of a
specific "trigger" event, such as a hurricane,  earthquake, or other physical or
weather-related phenomenon. They may be issued by government agencies, insurance
companies,  reinsurers,  special  purpose  corporations  or  other  on-shore  or
off-shore entities. If a trigger event causes losses exceeding a specific amount
in the  geographic  region and time period  specified in a bond,  the  Portfolio
investing in the bond may lose a portion or all of its principal invested in the
bond. If no trigger event occurs,  the Portfolio will recover its principal plus
interest.  For some event-linked bonds, the trigger event or losses may be based
on company-wide losses, index-portfolio losses, industry indices, or readings of
scientific   instruments   rather  than  specified  actual  losses.   Often  the
event-linked  bonds provide for  extensions of maturity that are  mandatory,  or
optional at the  discretion  of the  issuer,  in order to process and audit loss
claims in those cases where a trigger event has, or possibly has,  occurred.  In
addition to the specified trigger events, event-linked bonds may also expose the
Portfolio to certain  unanticipated  risks  including  but not limited to issuer
(credit)  default,  adverse  regulatory or jurisdictional  interpretations,  and
adverse tax consequences.

Event-linked bonds are a relatively new type of financial  instrument.  As such,
there is no significant trading history of these securities, and there can be no
assurance that a liquid market in these instruments will develop.  See "Illiquid
Securities"  below.  Lack of a liquid  market  may  impose  the  risk of  higher
transaction  costs  and the  possibility  that the  Portfolio  may be  forced to
liquidate  positions when it would not be  advantageous  to do so.  Event-linked
bonds are typically  rated,  and the Portfolio  will only invest in  catastrophe
bonds that meet the credit quality requirements for the Portfolio.

                                      B-7
<PAGE>
Short-Term Investments

Although it is intended  that the assets of the  Portfolio  stay invested in the
securities  described  above and in the  Prospectus  to the extent  practical in
light  of  the  Portfolio's   investment   objective  and  long-term  investment
perspective, the Portfolio's assets may be invested in short-term instruments to
meet  anticipated  expenses or for  day-to-day  operating  purposes.  Short-term
instruments  consist of foreign and  domestic:  (i)  short-term  obligations  of
sovereign  governments,  their  agencies,   instrumentalities,   authorities  or
political subdivisions;  (ii) other short-term debt securities rated A or higher
by Moody's or Standard & Poor's, or if unrated are of comparable  quality in the
opinion  of  the  Investment   Adviser;   (iii)  commercial   paper;  (iv)  bank
obligations,  including negotiable  certificates of deposit, fixed time deposits
and bankers' acceptances;  and (v) repurchase  agreements.  Time deposits with a
maturity of more than seven days are treated as not readily  marketable.  At the
time the Portfolio's  assets are invested in commercial  paper, bank obligations
or  repurchase  agreements,  the issuer  must have  outstanding  debt rated A or
higher by Moody's or Standard & Poor's; the issuer's parent corporation, if any,
must have  outstanding  commercial  paper  rated  Prime-1  by  Moody's or A-1 by
Standard & Poor's; or, if no such ratings are available,  the instrument must be
of comparable  quality in the opinion of the Investment  Adviser.  The assets of
the Portfolio may be invested in non-U.S.  dollar  denominated  and U.S.  dollar
denominated short-term instruments, including U.S. dollar denominated repurchase
agreements.  Cash is held for the Portfolio in demand deposit  accounts with the
Portfolio's custodian bank.

When-Issued and Delayed Delivery Securities

The Portfolio  may purchase  securities  on a  when-issued  or delayed  delivery
basis.  For  example,  delivery and payment may take place a month or more after
the date of the transaction. The purchase price and the interest rate payable on
the  securities are fixed on the  transaction  date. The securities so purchased
are subject to market fluctuation and no interest accrues to the Portfolio until
delivery and payment take place.

At the time  the  commitment  to  purchase  securities  for the  Portfolio  on a
when-issued or delayed  delivery basis is made, the  transaction is recorded and
thereafter the value of such securities is reflected each day in determining the
Portfolio's  net asset  value.  At the time of its  acquisition,  a  when-issued
security may be valued at less than the  purchase  price.  Commitments  for such
when-issued  securities  are made only when there is an  intention  of  actually
acquiring the securities. To facilitate such acquisitions,  a segregated account
with Brown  Brothers  Harriman  & Co.  (the  Custodian)  is  maintained  for the
Portfolio  with liquid  assets in an amount at least equal to such  commitments.
Such  segregated  account  consists of liquid assets marked to the market daily,
with  additional  liquid assets added when necessary to insure that at all times
the value of such  account is equal to the  commitments.  On delivery  dates for
such  transactions,  such  obligations  are met from  maturities or sales of the
securities held in the segregated account and/or from cash flow. If the right to
acquire a  when-issued  security is disposed  of prior to its  acquisition,  the
Portfolio  could,  as with the  disposition of any other  portfolio  obligation,
incur a gain or loss due to market fluctuation.  When-issued commitments for the
Portfolio  may not be entered into if such  commitments  exceed in the aggregate
15% of the market value of the Portfolio's total assets,  less liabilities other
than the obligations created by when-issued commitments.

                             Derivative Instruments

In pursuing  its  investment  objective,  the  Portfolio  may  purchase and sell
(write) both put options and call options on securities, securities indexes, and
foreign  currencies,  and enter into interest rate,  foreign  currency and index
futures  contracts  and  purchase  and sell  options on such  futures  contracts
("futures  options") for hedging purposes or as part of their overall investment
strategies.  The Portfolio also may purchase and sell foreign  currency  options
for purposes of increasing  exposure to a foreign  currency or to shift exposure
to foreign currency fluctuations from one country to another. The Portfolio also
may enter into swap  agreements  with  respect to interest  rates and indexes of
securities,  and to the  extent it may  invest in  foreign  currency-denominated
securities,  may enter into swap agreements with respect to foreign  currencies.
The  Portfolio  may  invest in  structured  securities  which may be issued by a
trust.  If other  types  of  financial  instruments,  including  other  types of
options,  futures  contracts,  or futures options are traded in the future,  the
Portfolio may also use those instruments, provided that the Portfolio's Trustees
determine  that  their  use  is  consistent  with  the  Portfolio's   investment
objective.

                                      B-8
<PAGE>
The value of some  derivative  instruments in which the Portfolio may invest may
be particularly sensitive to changes in prevailing interest rates, and, like the
other investments of the Portfolio, the ability of the Portfolio to successfully
utilize these  instruments may depend in part upon the ability of the Adviser to
forecast  interest rates and other economic  factors  correctly.  If the Adviser
incorrectly  forecasts  such  factors  and has  taken  positions  in  derivative
instruments contrary to prevailing market trends, the Portfolio could be exposed
to the risk of loss.

The Portfolio  might not employ any of the strategies  described  below,  and no
assurance  can be given that any  strategy  used will  succeed.  If the  Adviser
incorrectly forecasts interest rates, market values or other economic factors in
utilizing a derivatives  strategy for the  Portfolio,  the Portfolio  might have
been in a better  position if it had not entered  into the  transaction  at all.
Also,   suitable   derivative   transactions   may  not  be   available  in  all
circumstances.  The use of these  strategies  involves  certain  special  risks,
including a possible  imperfect  correlation,  or even no  correlation,  between
price  movements  of  derivative  instruments  and price  movements  of  related
investments.  While some strategies involving derivative  instruments can reduce
the risk of loss,  they can also reduce the  opportunity for gain or even result
in losses by offsetting  favorable  price  movements in related  investments  or
otherwise,  due to the  possible  inability  of a Fund  to  purchase  or  sell a
portfolio  security at a time that otherwise  would be favorable or the possible
need  to  sell a  portfolio  security  at a  disadvantageous  time  because  the
Portfolio  is required to maintain  asset  coverage or  offsetting  positions in
connection  with  transactions  in  derivative  instruments,  and  the  possible
inability  of the  Portfolio  to  close  out  or to  liquidate  its  derivatives
positions.  In addition,  the Portfolio's use of such  instruments may cause the
Portfolio to realize higher amounts of short-term capital gains (generally taxed
at ordinary income tax rates) than if it had not used such instruments.

Options on Securities and Indexes

The Portfolio may, to the extent  specified  herein,  purchase and sell both put
and call options on fixed income or other  securities or indexes in standardized
contracts traded on foreign or domestic securities  exchanges,  boards of trade,
or  similar   entities,   or  quoted  on  NASDAQ  or  on  a  regulated   foreign
over-the-counter  market, and agreements,  sometimes called cash puts, which may
accompany the purchase of a new issue of bonds from a dealer.

An option on a security  (or  index) is a contract  that gives the holder of the
option,  in return for a premium,  the right to buy from (in the case of a call)
or  sell to (in the  case  of a put)  the  writer  of the  option  the  security
underlying  the option (or the cash value of the index) at a specified  exercise
price at any time  during the term of the  option.  The writer of an option on a
security  has  the  obligation  upon  exercise  of the  option  to  deliver  the
underlying  security  upon payment of the exercise  price or to pay the exercise
price upon delivery of the underlying security.  Upon exercise, the writer of an
option on an index is obligated to pay the difference  between the cash value of
the index and the exercise price multiplied by the specified  multiplier for the
index  option.  (An  index is  designed  to  reflect  features  of a  particular
financial or securities  market,  a specific  group of financial  instruments or
securities, or certain economic indicators.)

The  Portfolio  will  write  call  options  and put  options  only  if they  are
"covered."  In the case of a call option on a security,  the option is "covered"
if the Portfolio  owns the security  underlying  the call or has an absolute and
immediate right to acquire that security without  additional cash  consideration
(or,  if  additional  cash  consideration  is  required,  cash or  other  assets
determined to be liquid by the Adviser in accordance with procedures established
by the  Portfolio's  Board of  Trustees,  in such amount are  segregated  by its
Custodian)  upon  conversion  or  exchange  of  other  securities  held  by  the
Portfolio. For a call option on an index, the option is covered if the Portfolio
maintains  with its Custodian  assets  determined to be liquid by the Adviser in
accordance with procedures  established by the Portfolio's Board of Trustees, in
an  amount  equal to the  contract  value of the  index.  A call  option is also
covered if the Portfolio  holds a call on the same security or index as the call
written  where the exercise  price of the call held is (i) equal to or less than
the exercise price of the call written,  or (ii) greater than the exercise price
of the call written,  provided the  difference is maintained by the Portfolio in
segregated  assets  determined  to be liquid by the Adviser in  accordance  with
procedures  established by the Porfolio's  Board of Trustees.  A put option on a
security or an index is "covered" if the Portfolio  segregates assets determined
to be liquid by the Adviser in accordance  with  procedures  established  by the
Portfolio's  Board of Trustees equal to the exercise price. A put option is also
covered if the  Portfolio  holds a put on the same  security or index as the put
written where the exercise price of the put held is (i) equal to or greater than
the exercise  price of the put written,  or (ii) less than the exercise price of
the put written,  provided the  difference  is  maintained  by the  Portfolio in
segregated  assets  determined  to be liquid by the Adviser in  accordance  with
procedures established by the Portfolio's Board of Trustees.

                                      B-9
<PAGE>
If an  option  written  by the  Portfolio  expires  unexercised,  the  Portfolio
realizes a capital gain equal to the premium received at the time the option was
written.  If an option  purchased  by the  Portfolio  expires  unexercised,  the
Portfolio  realizes  a capital  loss  equal to the  premium  paid.  Prior to the
earlier of exercise or expiration,  an exchange  traded option may be closed out
by an  offsetting  purchase  or sale of an  option  of the  same  series  (type,
exchange,  underlying security or index, exercise price, and expiration).  There
can be no assurance, however, that a closing purchase or sale transaction can be
effected when the Portfolio desires.

The Portfolio may sell put or call options it has  previously  purchased,  which
could result in a net gain or loss  depending on whether the amount  realized on
the sale is more or less than the  premium and other  transaction  costs paid on
the put or call option which is sold. Prior to exercise or expiration, an option
may be closed  out by an  offsetting  purchase  or sale of an option of the same
series.  The  Portfolio  will  realize  a capital  gain from a closing  purchase
transaction if the cost of the closing option is less than the premium  received
from writing the option, or, if it is more, the Portfolio will realize a capital
loss. If the premium  received from a closing sale  transaction is more than the
premium paid to purchase the option,  the Portfolio will realizes a capital gain
or, if it is less,  the  Portfolio  will realize a capital  loss.  The principal
factors  affecting the market value of a put or a call option include supply and
demand,  interest rates, the current market price of the underlying  security or
index in relation to the exercise  price of the option,  the  volatility  of the
underlying security or index, and the time remaining until the expiration date.

The premium paid for a put or call option purchased by the Portfolio is an asset
of the Portfolio. The premium received for an option written by the Portfolio is
recorded as a deferred  credit.  The value of an option  purchased or written is
marked to market  daily and is valued at the  closing  price on the  exchange on
which it is traded  or, if not  traded on an  exchange  or no  closing  price is
available, at the mean between the last bid and asked prices.

The Portfolio may write covered straddles  consisting of a combination of a call
and a put written on the same  underlying  security.  A straddle will be covered
when  sufficient  assets  are  deposited  to  meet  the  Portfolio's   immediate
obligations. The Portfolio may use the same liquid assets to cover both the call
and put options  where the exercise  price of the call and put are the same,  or
the  exercise  price of the call is higher  than that of the put. In such cases,
the Portfolio will also  segregate  liquid assets  equivalent to the amount,  if
any, by which the put is "in the money."

Risks Associated with Options on Securities and Indexes

There are several risks  associated  with  transactions in options on securities
and on indexes.  For  example,  there are  significant  differences  between the
securities  and options  markets that could  result in an imperfect  correlation
between  these  markets,   causing  a  given  transaction  not  to  achieve  its
objectives.  A decision as to whether,  when and how to use options involves the
exercise of skill and judgment,  and even a  well-conceived  transaction  may be
unsuccessful to some degree because of market behavior or unexpected events.

During the option period, the covered call writer has, in return for the premium
on the option,  given up the  opportunity to profit from a price increase in the
underlying  security above the exercise price, but, as long as its obligation as
a writer  continues,  has  retained  the risk of loss  should  the  price of the
underlying  security  decline.  The writer of an option has no control  over the
time  when it may be  required  to  fulfill  its  obligation  as a writer of the
option.  Once an option writer has received an exercise notice, it cannot effect
a closing  purchase  transaction in order to terminate its obligation  under the
option and must deliver the underlying  security at the exercise price. If a put
or call option  purchased  by the  Portfolio  is not sold when it has  remaining
value,  and if the market price of the underlying  security  remains equal to or
greater than the exercise  price (in the case of a put), or remains less than or
equal to the exercise price (in the case of a call), the Portfolio will lose its
entire  investment  in the  option.  Also,  where  a put  or  call  option  on a
particular  security is purchased to hedge against price  movements in a related
security,  the  price of the put or call  option  may move more or less than the
price of the related security.

There can be no  assurance  that a liquid  market will exist when the  Portfolio
seeks to close out an option position. If the Portfolio were unable to close out
an option that it had  purchased  on a security,  it would have to exercise  the
option in order to realize any profit or the option may expire worthless. If the
Portfolio  were unable to close out a covered call option that it had written on
a  security,  it would not be able to sell the  underlying  security  unless the
option expired  without  exercise.  As the writer of a covered call option,  the
Portfolio  forgoes,  during the option's  life,  the  opportunity to profit from
increases in the market value of the security covering the call option above the
sum of the premium and the exercise price of the call.

                                      B-10
<PAGE>

If trading were suspended in an option purchased by the Portfolio, the Portfolio
would not be able to close out the option.  If  restrictions  on  exercise  were
imposed,  the Portfolio  might be unable to exercise an option it has purchased.
Except to the extent that a call option on an index  written by the Portfolio is
covered by an option on the same index purchased by the Portfolio,  movements in
the index may result in a loss to the  Portfolio;  however,  such  losses may be
mitigated  by  changes  in the value of the  Portfolio's  securities  during the
period the option was outstanding.

Options on Foreign Currencies

The Portfolio may buy or sell put and call options on foreign  currencies either
on  exchanges  or in the  over-the-counter  market.  A put  option  on a foreign
currency gives the purchaser of the option the right to sell a foreign  currency
at the  exercise  price  until the option  expires.  A call  option on a foreign
currency gives the purchaser of the option the right to purchase the currency at
the exercise price until the option expires.  Currency options traded on U.S. or
other exchanges may be subject to position limits which may limit the ability of
the   Portfolio   to  reduce   foreign   currency   risk  using  such   options.
Over-the-counter  options  differ from traded options in that they are two-party
contracts with price and other terms  negotiated  between buyer and seller,  and
generally do not have as much market liquidity as exchange-traded options.

Futures Contracts and Options on Futures Contracts

The Portfolio may invest in interest rate futures  contracts and options thereon
("futures   options"),   and  to  the   extent   it  may   invest   in   foreign
currency-denominated  securities,  may also invest in foreign  currency  futures
contracts  and options  thereon.  An interest  rate,  foreign  currency or index
futures  contract  provides  for the future  sale by one party and  purchase  by
another  party  of a  specified  quantity  of a  financial  instrument,  foreign
currency or the cash value of an index at a specified  price and time. A futures
contract on an index is an agreement pursuant to which two parties agree to take
or make delivery of an amount of cash equal to the difference  between the value
of the index at the close of the last  trading day of the contract and the price
at which the index  contract was  originally  written.  Although the value of an
index  might be a function  of the value of  certain  specified  securities,  no
physical delivery of these securities is made. A public market exists in futures
contracts  covering  a number of indexes as well as  financial  instruments  and
foreign  currencies,  including:  U.S. Treasury bonds; U.S. Treasury notes; GNMA
Certificates;  three-month U.S.  Treasury bills;  90-day  commercial paper; bank
certificates  of deposit;  Eurodollar  certificates  of deposit;  the Australian
dollar;  the Canadian  dollar;  the British pound; the German mark; the Japanese
yen;  the  French  franc;  the  Swiss  franc;  the  Mexican  peso;  and  certain
multinational  currencies,  such as the euro.  It is expected that other futures
contracts will be developed and traded in the future.

The  Portfolio  may  purchase  and write call and put futures  options.  Futures
options  possess many of the same  characteristics  as options on securities and
indexes  (discussed  above).  A futures  option  gives the holder the right,  in
return for the premium paid, to assume a long position  (call) or short position
(put) in a futures contract at a specified exercise price at any time during the
period of the option. Upon exercise of a call option, the holder acquires a long
position in the futures  contract and the writer is assigned the opposite  short
position. In the case of a put option, the opposite is true.

To comply with  applicable  rules of the Commodity  Futures  Trading  Commission
("CFTC") under which the Portfolio  avoids being deemed a "commodity  pool" or a
"commodity pool operator," the Portfolio  intends  generally to limit its use of
futures  contracts and futures options to "bona fide hedging"  transactions,  as
such term is defined in applicable  regulations,  interpretations  and practice.
For  example,  the  Portfolio  might  use  futures  contracts  to hedge  against
anticipated  changes in interest  rates that might  adversely  affect either the
value of the  Portfolio's  securities or the price of the  securities  which the
Portfolio intends to purchase.  The Portfolio's  hedging  activities may include
sales of futures contracts as an offset against the effect of expected increases
in interest rates,  and purchases of futures  contracts as an offset against the
effect of expected  declines in interest rates.  Although other techniques could
be used to reduce the Portfolio's  exposure to interest rate  fluctuations,  the
Portfolio  may be able to hedge its exposure more  effectively  and perhaps at a
lower cost by using futures contracts and futures options.

The Portfolio will only enter into futures  contracts and futures  options which
are  standardized and traded on a U.S. or foreign  exchange,  board of trade, or
similar entity, or quoted on an automated quotation system.

                                      B-11
<PAGE>

When a purchase  or sale of a futures  contract  is made by the  Portfolio,  the
Portfolio  is  required to deposit  with its  Custodian  (or broker,  if legally
permitted) a specified  amount of assets  determined to be liquid by the Adviser
in accordance with procedures  established by the Portfolio's  Board of Trustees
("initial  margin").  The margin  required for a futures  contract is set by the
exchange on which the contract is traded and may be modified  during the term of
the contract.  Margin  requirements  on foreign  exchanges may be different than
U.S.  exchanges.  The initial  margin is in the nature of a performance  bond or
good faith  deposit on the futures  contract  which is returned to the Portfolio
upon termination of the contract, assuming all contractual obligations have been
satisfied.  The Portfolio  expects to earn interest income on its initial margin
deposits.  A futures  contract  held by the  Portfolio  is  valued  daily at the
official  settlement  price of the exchange on which it is traded.  Each day the
Portfolio pays or receives cash, called  "variation  margin," equal to the daily
change in value of the futures  contract.  This  process is known as "marking to
market."  Variation  margin  does  not  represent  a  borrowing  or  loan by the
Portfolio  but is instead a settlement  between the  Portfolio and the broker of
the amount one would owe the other if the futures contract expired. In computing
daily net asset  value,  the  Portfolio  will  mark to market  its open  futures
positions.

The  Portfolio is also  required to deposit and maintain  margin with respect to
put and call options on futures  contracts  written by it. Such margin  deposits
will vary  depending on the nature of the underlying  futures  contract (and the
related  initial margin  requirements),  the current market value of the option,
and other futures positions held by the Portfolio.

 Although  some  futures  contracts  call for making or taking  delivery  of the
underlying  securities,  generally  these  obligations  are  closed out prior to
delivery by offsetting  purchases or sales of matching  futures  contracts (same
exchange,  underlying  security or index, and delivery month).  If an offsetting
purchase  price is less than the original sale price,  the Portfolio  realizes a
capital  gain,  or if  it is  more,  the  Portfolio  realizes  a  capital  loss.
Conversely,  if an  offsetting  sale  price is more than the  original  purchase
price,  the Portfolio  realizes a capital gain, or if it is less,  the Portfolio
realizes a capital loss.  The  transaction  costs must also be included in these
calculations.

The Portfolio may write covered straddles consisting of a call and a put written
on the same  underlying  futures  contract.  A  straddle  will be  covered  when
sufficient assets are deposited to meet the Portfolio's  immediate  obligations.
The  Portfolio  may use the same  liquid  assets to cover  both the call and put
options  where  the  exercise  price of the call  and put are the  same,  or the
exercise  price of the call is higher than that of the put.  In such cases,  the
Portfolio will also segregate liquid assets equivalent to the amount, if any, by
which the put is "in the money."

Other Considerations

When  purchasing  a futures  contract,  the  Portfolio  will  maintain  with its
Custodian (and  mark-to-market  on a daily basis) assets determined to be liquid
by the Adviser in accordance  with  procedures  established  by the  Portfolio's
Board of  Trustees,  that,  when added to the amounts  deposited  with a futures
commission  merchant  as margin,  are equal to the market  value of the  futures
contract.  Alternatively, the Portfolio may "cover" its position by purchasing a
put option on the same  futures  contract  with a strike price as high or higher
than the price of the contract held by the Portfolio.

When selling a futures  contract,  a Portfolio  will maintain with its Custodian
(and  mark-to-market  on a daily basis)  assets  determined  to be liquid by the
Adviser in accordance  with procedures  established by the Portfolio's  Board of
Trustees,  that are equal to the market value of the instruments  underlying the
contract.  Alternatively,  the  Portfolio may "cover" its position by owning the
instruments  underlying  the  contract  (or,  in the  case of an  index  futures
contract,  a portfolio  with a volatility  substantially  similar to that of the
index on which the  futures  contract  is based),  or by  holding a call  option
permitting  the  Portfolio to purchase  the same futures  contract at a price no
higher than the price of the contract  written by the  Portfolio (or at a higher
price if the  difference is  maintained  in liquid  assets with the  Portfolio's
Custodian).

When selling a call option on a futures  contract,  the Portfolio  will maintain
with its Custodian (and mark-to-market on a daily basis) assets determined to be
liquid  by  the  Adviser  in  accordance  with  procedures  established  by  the
Portfolio's Board of Trustees,  that, when added to the amounts deposited with a
futures  commission  merchant  as margin,  equal the total  market  value of the
futures contract  underlying the call option.  Alternatively,  the Portfolio may
cover its position by entering into a long position in the same futures contract
at a price no higher  than the strike  price of the call  option,  by owning the
instruments  underlying  the  futures  contract,  or by holding a separate  call
option permitting the Portfolio to purchase the same futures contract at a price
not higher than the strike price of the call option sold by the Portfolio.

                                      B-12
<PAGE>

When selling a put option on a futures  contract,  the  Portfolio  will maintain
with its Custodian (and mark-to-market on a daily basis) assets determined to be
liquid  by  the  Adviser  in  accordance  with  procedures  established  by  the
Portfolio's  Board of  Trustees,  that equal the  purchase  price of the futures
contract, less any margin on deposit. Alternatively, the Portfolio may cover the
position either by entering into a short position in the same futures  contract,
or by  owning a  separate  put  option  permitting  it to sell the same  futures
contract so long as the strike price of the  purchased put option is the same or
higher than the strike price of the put option sold by the Portfolio.

To the extent that securities with maturities  greater than one year are used to
segregate assets to cover the Portfolio's  obligations  under futures  contracts
and related options, such use will not eliminate the risk of a form of leverage,
which may tend to  exaggerate  the effect on net asset value of any  increase or
decrease  in the market  value of the  Portfolio's  portfolio,  and may  require
liquidation  of  portfolio  positions  when  it is  not  advantageous  to do so.
However,  any potential  risk of leverage  resulting  from the use of securities
with maturities  greater than one year may be mitigated by the overall  duration
limit on a Portfolio's  portfolio of securities.  Thus, the use of a longer-term
security may require the Portfolio to hold offsetting  short-term  securities to
balance  the  Portfolio's  portfolio  of  securities  such that the  Portfolio's
duration does not exceed the maximum permitted for the Portfolio in Part A.


The requirements for  qualification as a regulated  investment  company also may
limit the extent to which the Portfolio may enter into futures,  futures options
or forward contracts. See "Federal Taxes."

Risks Associated with Futures and Futures Options

There are several risks associated with the use of futures contracts and futures
options as hedging  techniques.  A purchase  or sale of a futures  contract  may
result in losses in excess of the amount invested in the futures contract. There
can be no guarantee that there will be a correlation  between price movements in
the hedging vehicle and in the Portfolio's portfolio of securities being hedged.
In  addition,  there are  significant  differences  between the  securities  and
futures  markets  that could  result in an  imperfect  correlation  between  the
markets,  causing a given  hedge not to achieve  its  objectives.  The degree of
imperfection  of  correlation  depends on  circumstances  such as  variations in
speculative  market  demand for  futures  and  futures  options  on  securities,
including  technical  influences  in futures  trading and futures  options,  and
differences  between the financial  instruments being hedged and the instruments
underlying  the standard  contracts  available  for trading in such  respects as
interest rate levels, maturities, and creditworthiness of issuers. A decision as
to whether,  when and how to hedge  involves the exercise of skill and judgment,
and even a  well-conceived  hedge may be  unsuccessful to some degree because of
market behavior or unexpected interest rate trends.

Futures contracts on U.S. Government securities  historically have reacted to an
increase or decrease in interest  rates in a manner similar to that in which the
underlying U.S.  Government  securities  reacted.  Thus, the anticipated  spread
between  the  price of the  futures  contract  and the  hedged  security  may be
distorted due to differences  in the nature of the markets.  The spread also may
be distorted by differences in initial and variation  margin  requirements,  the
liquidity of such markets and the participation of speculators in such markets.

Futures  exchanges  may limit the  amount of  fluctuation  permitted  in certain
futures contract prices during a single trading day. The daily limit establishes
the maximum  amount that the price of a futures  contract  may vary either up or
down from the previous day's  settlement price at the end of the current trading
session.  Once the daily limit has been reached in a futures contract subject to
the limit,  no more trades may be made on that day at a price beyond that limit.
The daily limit governs only price movements during a particular trading day and
therefore does not limit potential  losses because the limit may work to prevent
the  liquidation  of  unfavorable  positions.  For example,  futures prices have
occasionally moved to the daily limit for several  consecutive trading days with
little or no trading,  thereby  preventing  prompt  liquidation of positions and
subjecting some holders of futures contracts to substantial losses.

There can be no  assurance  that a liquid  market  will exist at a time when the
Portfolio  seeks to close out a futures or a futures  option  position,  and the
Portfolio would remain obligated to meet margin  requirements until the position
is closed. In addition, many of the contracts discussed above are relatively new
instruments without a significant trading history. As a result,  there can be no
assurance that an active secondary market will develop or continue to exist.

Reset Options

Typically,  a call option or warrant  whose strike price may be reset to a lower
strike or a put whose strike price may be reset to a higher strike at some point
during the life of the instrument if the option is out of the money on the reset
date.  There may be a limit to the magnitude of the strike price  adjustment and
the reset may be triggered by a specific price on the underlying rather than set
on a specific reset date.

                                      B-13
<PAGE>
"Yield Curve" Options

Options on the shape of the yield  curve.  Yield curve  options  allow buyers to
protect  themselves  from  adverse  movements  in the yield  curve.  Yield curve
options are often based on the  difference  in the yields of bonds of  different
maturities.

Additional Risks of Trading Options

Options on securities,  futures  contracts,  options on futures  contracts,  and
options on currencies may be traded on foreign exchanges.  Such transactions may
not be regulated as  effectively as similar  transactions  in the United States;
may not involve a clearing mechanism and related guarantees,  and are subject to
the risk of governmental actions affecting trading in, or the prices of, foreign
securities.  The value of such positions also could be adversely affected by (i)
other  complex  foreign  political,  legal and  economic  factors,  (ii)  lesser
availability  than  in the  United  States  of  data on  which  to make  trading
decisions,  (iii) delays in the Portfolio's  ability to act upon economic events
occurring in foreign  markets  during  non-business  hours in the United States,
(iv) the imposition of different  exercise and  settlement  terms and procedures
and margin  requirements  than in the  United  States,  and (v)  lesser  trading
volume.

Swap Agreements

The  Portfolio  may enter into  interest  rate,  index and, to the extent it may
invest in foreign currency-denominated  securities,  currency exchange rate swap
agreements.  These  transactions  are  entered  into in a  attempt  to  obtain a
particular return when it is considered  desirable to do so, possibly at a lower
cost  to the  Portfolio  than  if the  Portfolio  had  invested  directly  in an
instrument  that yielded  that desired  return.  Swap  agreements  are two party
contracts entered into primarily by institutional  investors for periods ranging
from a few weeks to more than one year. In a standard  "swap"  transaction,  two
parties  agree to exchange  the returns  (or  differentials  in rates of return)
earned or realized on particular predetermined investments or instruments, which
may be adjusted  for an interest  factor.  The gross  returns to be exchanged or
"swapped"  between  the  parties  are  generally  calculated  with  respect to a
"notional  amount,"  i.e.,  the return on or increase  in value of a  particular
dollar amount  invested at a particular  interest rate, in a particular  foreign
currency, or in a "basket" of securities  representing a particular index. Forms
of swap  agreements  include  interest rate caps,  under which,  in return for a
premium,  one party  agrees to make  payments  to the other to the  extent  that
interest rates exceed a specified  rate, or "cap";  interest rate floors,  under
which,  in return for a premium,  one party agrees to make payments to the other
to the extent that interest rates fall below a specified  rate, or "floor";  and
interest rate collars,  under which a party sells a cap and purchases a floor or
vice versa in an  attempt to protect  itself  against  interest  rate  movements
exceeding given minimum or maximum levels.

Most  swap  agreements  entered  into  by  the  Portfolio  would  calculate  the
obligations of the parties to the agreement on a "net basis." Consequently,  the
Portfolio's  current  obligations  (or  rights)  under  a  swap  agreement  will
generally  be equal  only to the net  amount  to be paid or  received  under the
agreement  based on the relative  values of the positions  held by each party to
the agreement (the "net amount").  The Portfolio's  current  obligations under a
swap  agreement  will be accrued daily  (offset  against any amounts owed to the
Portfolio)  and any accrued but unpaid net amounts  owed to a swap  counterparty
will be  covered by the  segregation  of assets  determined  to be liquid by the
Adviser in accordance  with procedures  established by the Portfolio's  Board of
Trustees,  to avoid any  potential  leveraging of the  Portfolio's  portfolio of
securities.  Obligations  under swap agreements so covered will not be construed
to be "senior securities" for purposes of the Portfolio's investment restriction
concerning senior securities. The Portfolio will not enter into a swap agreement
with any single  party if the net amount owed or to be received  under  existing
contracts with that party would exceed 5% of the Portfolio's assets.

Whether the  Portfolio's use of swap agreements will be successful in furthering
its investment objective of total return will depend on the Adviser's ability to
predict  correctly  whether  certain types of investments  are likely to produce
greater returns than other investments. Because they are two party contracts and
because they may have terms of greater than seven days,  swap  agreements may be
considered to be illiquid. Moreover, the Portfolio bears the risk of loss of the
amount  expected  to be  received  under a swap  agreement  in the  event of the
default or bankruptcy of a swap agreement counterparty. The Portfolio will enter
into swap agreements  only with  counterparties  that meet certain  standards of
creditworthiness.  Certain restrictions imposed on the Portfolio by the Internal
Revenue Code may limit the Portfolio's ability to use swap agreements. The swaps
market is a  relatively  new market and is largely  unregulated.  It is possible
that  developments  in  the  swaps  market,   including   potential   government
regulation, could adversely affect the Portfolio's ability to terminate existing
swap agreements or to realize amounts to be received under such agreements.

                                      B-14
<PAGE>

Certain  swap  agreements  are  exempt  from most  provisions  of the  Commodity
Exchange Act ("CEA") and,  therefore,  are not regulated as futures or commodity
option transactions under the CEA, pursuant to regulations  approved by the CFTC
effective  February 22, 1993. To qualify for this  exemption,  a swap  agreement
must be entered into by "eligible  participants,"  which includes the following,
provided the  participants'  total assets exceed  established  levels: a bank or
trust  company,   savings  association  or  credit  union,   insurance  company,
investment  company  subject to regulation  under the 1940 Act,  commodity pool,
corporation, partnership,  proprietorship,  organization, trust or other entity,
employee benefit plan,  governmental entity,  broker-dealer,  futures commission
merchant,  natural person, or regulated foreign person. To be eligible,  natural
persons and most other  entities  must have total assets  exceeding $10 million;
commodity  pools and  employee  benefit  plans  must have  assets  exceeding  $5
million.  In addition,  an eligible swap transaction must meet three conditions.
First, the swap agreement may not be part of a fungible class of agreements that
are   standardized   as  to  their  material   economic   terms.   Second,   the
creditworthiness of parties with actual or potential  obligations under the swap
agreement must be a material  consideration  in entering into or determining the
terms of the swap  agreement,  including  pricing,  cost or  credit  enhancement
terms. Third, swap agreements may not be entered into and traded on or through a
multilateral transaction execution facility.

This  exemption  is not  exclusive,  and  participants  may  continue to rely on
existing  exclusions for swaps, such as the Policy Statement issued in July 1989
which recognized a safe harbor for swap  transactions from regulation as futures
or commodity option  transactions  under the CEA or its regulations.  The Policy
Statement  applies  to  swap   transactions   settled  in  cash  that  (1)  have
individually  tailored terms,  (2) lack  exchange-style  offset and the use of a
clearing organization or margin system, (3) are undertaken in conjunction with a
line of business, and (4) are not marketed to the public.

Options on Swaps

The Portfolio may enter into options contracts on interest rate swaps,  commonly
referred to as swaptions. The buyer of a swaption has the right to enter into an
interest rate swap agreement by some specified date in the future.  The swaption
agreement  will specify  whether the buyer of the swaption  will be a fixed-rate
receiver  or a  fixed-rate  payer.  The  writer  of  the  swaption  becomes  the
counterparty if the buyer exercise.

Structured Securities

The  Portfolio  may  invest  in  structured  securities.  Structured  notes  are
derivative  debt  securities,  the  interest  rate  or  principal  of  which  is
determined by an unrelated  indicator.  Indexed  securities  include  structured
notes as well as  securities  other than debt  securities,  the interest rate or
principal of which is determined by an unrelated  indicator.  Indexed securities
may include a  multiplier  that  multiplies  the indexed  element by a specified
factor and, therefore, the value of such securities may be very volatile. To the
extent the Portfolio invests in these securities,  however, the Adviser analyzes
these  securities in its overall  assessment  of the  effective  duration of the
Portfolio's  portfolio  of  securities  in an effort to monitor the  Portfolio's
interest rate risk.

                               Foreign Investments

The  Portfolio  may invest its assets in corporate  debt  securities  of foreign
issuers  (including  preferred  or  preference  stock),   certain  foreign  bank
obligations   (see   "Bank    Obligations")   and   U.S.   dollar   or   foreign
currency-denominated  obligations of foreign  governments or their subdivisions,
agencies  and   instrumentalities,   international  agencies  and  supranational
entities.

Investment in sovereign debt can involve a high degree of risk. The governmental
entity that controls the repayment of sovereign  debt may not be able or willing
to repay the principal  and/or interest when due in accordance with the terms of
the debt. A governmental  entity's willingness or ability to repay principal and
interest due in a timely  manner may be affected by,  among other  factors,  its
cash flow situation,  the extent of its foreign  reserves,  the  availability of
sufficient  foreign  exchange on the date a payment is due, the relative size of
the debt service  burden to the economy as a whole,  the  governmental  entity's
policy toward the International  Monetary Fund, and the political constraints to
which a  governmental  entity may be  subject.  Governmental  entities  may also
depend on expected disbursements from foreign governments, multilateral agencies
and others to reduce  principal  and  interest  arrearages  on their  debt.  The
commitment  on the part of these  governments,  agencies and others to make such

                                      B-15
<PAGE>

disbursements  may be conditioned on a governmental  entity's  implementation of
economic  reforms  and/or  economic  performance  and the timely service of such
debtor's obligations.  Failure to implement such reforms, achieve such levels of
economic  performance or repay  principal or interest when due may result in the
cancellation   of  such  third  parties'   commitments  to  lend  funds  to  the
governmental   entity,  which  may  further  impair  such  debtor's  ability  or
willingness to service its debts in a timely manner. Consequently,  governmental
entities  may  default  on their  sovereign  debt.  Holders  of  sovereign  debt
(including the Portfolio) may be requested to participate in the rescheduling of
such debt and to extend  further  loans to  governmental  entities.  There is no
bankruptcy  proceeding by which  sovereign debt on which  governmental  entities
have defaulted may be collected in whole or in part.

The Portfolio's investments in foreign currency denominated debt obligations and
hedging  activities will likely produce a difference between its book income and
its  taxable  income.  This  difference  may cause a portion of the  Portfolio's
income  distributions  to  constitute  returns of capital  for tax  purposes  or
require the Portfolio to make distributions  exceeding book income to qualify as
a regulated investment company for federal tax purposes.




Foreign Currency Transactions

The Portfolio may engage in foreign currency  transactions.  These  transactions
may be conducted at the prevailing spot rate for purchasing or selling  currency
in the foreign exchange  market.  The Portfolio also has authority to enter into
forward  foreign  currency  exchange  contracts  involving   currencies  of  the
different  countries  in which  the fund  invests  as a hedge  against  possible
variations in the foreign  exchange rates between these  currencies and the U.S.
dollar. This is accomplished through contractual  agreements to purchase or sell
a specified currency at a specified future date and price set at the time of the
contract.

Transaction  hedging  is the  purchase  or  sale  of  forward  foreign  currency
contracts  with respect to specific  receivables  or payables of the  Portfolio,
accrued in  connection  with the purchase and sale of its  portfolio  securities
quoted in foreign  currencies.  Hedging of the  portfolio  is the use of forward
foreign currency contracts to offset portfolio security positions denominated or
quoted in such foreign currencies. There is no guarantee that the Portfolio will
be engaged in hedging activities when adverse exchange rate movements occur. The
Portfolio will not attempt to hedge all of its foreign  portfolio  positions and
will enter into such transactions only to the extent, if any, deemed appropriate
by the Adviser.

Hedging  against  a  decline  in the  value of a  currency  does  not  eliminate
fluctuations  in the prices of  portfolio  securities  or prevent  losses if the
prices of such securities decline.  Such transactions also limit the opportunity
for gain if the value of the hedged currency should rise.  Moreover,  it may not
be  possible  for the  Portfolio  to  hedge  against  a  devaluation  that is so
generally  anticipated  that the  Portfolio  is not able to contract to sell the
currency at a price above the devaluation level it anticipates.

The cost to the Portfolio of engaging in foreign  currency  transactions  varies
with such factors as the currency involved, the size of the contract, the length
of the contract period, differences in interest rates between the two currencies
and the  market  conditions  then  prevailing.  Since  transactions  in  foreign
currency and forward  contracts are usually  conducted on a principal  basis, no
fees or commissions are involved. The Portfolio may close out a forward position
in a currency by selling the forward  contract or by entering into an offsetting
forward contract.

The  precise  matching  of the  forward  contract  amounts  and the value of the
securities  involved will not generally be possible  because the future value of
such  securities in foreign  currencies  will change as a consequence  of market
movements  in the  value  of those  securities  between  the  date on which  the
contract is entered  into and the date it matures.  Using  forward  contracts to
protect the value of the Portfolio's  securities  against a decline in the value
of a currency does not eliminate  fluctuations  in the underlying  prices of the
securities.  It simply  establishes  a rate of exchange  which the Portfolio can
achieve at some future  point in time.  The  precise  projection  of  short-term
currency market  movements is not possible,  and short-term  hedging  provides a
means of  fixing  the U.S.  dollar  value of only a portion  of the  Portfolio's
foreign assets.

                                      B-16
<PAGE>

While the  Portfolio  will  enter  into  forward  contracts  to reduce  currency
exchange rate risks, transactions in such contracts involve certain other risks.
While the Portfolio may benefit from such transactions, unanticipated changes in
currency  prices may result in a poorer  overall  performance  for the Portfolio
than if it had not  engaged  in any such  transactions.  Moreover,  there may be
imperfect  correlation between the Portfolio's  holdings of securities quoted or
denominated in a particular  currency and forward  contracts entered into by the
Portfolio.  Such imperfect correlation may cause the Portfolio to sustain losses
which will prevent the Portfolio  from  achieving a complete hedge or expose the
Portfolio to risk of foreign exchange loss.

Over-the-counter  markets for trading foreign forward  currency  contracts offer
less  protection  against  defaults  than is available  when trading in currency
instruments on an exchange.  Since a forward foreign currency  exchange contract
is not  guaranteed  by an exchange or  clearinghouse,  a default on the contract
would  deprive the  Portfolio of  unrealized  profits or force the  Portfolio to
cover its  commitments  for  purchase or resale,  if any, at the current  market
price.

If the Portfolio enters into a forward  contract to purchase  foreign  currency,
the Custodian or the Adviser will segregate liquid assets.

Forward Exchange Contracts

Foreign  exchange  contracts  are made  with  currency  dealers,  usually  large
commercial banks and financial institutions. Although foreign exchange rates are
volatile,  foreign  exchange markets are generally liquid with the equivalent of
approximately  $500  billion  traded  worldwide  on a  typical  day.  While  the
Portfolio may enter into foreign  currency  exchange  transactions to reduce the
risk of loss  due to a  decline  in the  value  of the  hedged  currency,  these
transactions also tend to limit the potential for gain. Forward foreign exchange
contracts  do not  eliminate  fluctuations  in  the  prices  of the  Portfolio's
securities or in foreign  exchange rates, or prevent loss if the prices of these
securities should decline.  The precise matching of the forward contract amounts
and the value of the securities  involved is not generally  possible because the
future value of such securities in foreign  currencies  changes as a consequence
of market movements in the value of such securities between the date the forward
contract is entered  into and the date it matures.  The  projection  of currency
market  movements  is extremely  difficult,  and the  successful  execution of a
hedging strategy is highly unlikely.

The Investment Adviser, on behalf of the Portfolio,  enters into forward foreign
exchange  contracts  in order to  protect  the dollar  value of all  investments
denominated in foreign currencies.  The precise matching of the forward contract
amounts and the value of the securities  involved is not always possible because
the  future  value  of  such  securities  in  foreign  currencies  changes  as a
consequence of market movements in the value of such securities between the date
the forward contract is entered into and the date it matures.

The  Portfolio's  recognition of gain or loss due to foreign  currency  exchange
rates  may  be  treated  differently  for  federal  income  tax  purposes.  This
difference  may require the  Portfolio to make a  distribution  in excess of its
book income to qualify as a registered investment company for federal income tax
purposes.

Equity Investments

Equity  investments may or may not pay dividends and may or may not carry voting
rights.  Common stock occupies the most junior  position in a company's  capital
structure.  Convertible securities entitle the holder to exchange the securities
for a specified  number of shares of common stock,  usually of the same company,
at specified  prices within a certain period of time and to receive  interest or
dividends until the holder elects to convert.  The provisions of any convertible
security determine its ranking in a company's capital structure.  In the case of
subordinated convertible debentures,  the holder's claims on assets and earnings
are subordinated to the claims of other creditors,  and are senior to the claims
of  preferred  and common  shareholders.  In the case of  convertible  preferred
stock, the holder's claims on assets and earnings are subordinated to the claims
of all creditors and are senior to the claims of common shareholders.

                                      B-17
<PAGE>
Borrowings

The Portfolio may borrow for temporary  administrative  purposes. This borrowing
may be  unsecured.  Provisions of the 1940 Act require the Portfolio to maintain
continuous  asset coverage  (that is, total assets  including  borrowings,  less
liabilities  exclusive of  borrowings) of 300% of the amount  borrowed,  with an
exception for  borrowings  not in excess of 5% of the  Portfolio's  total assets
made  for  temporary  administrative  purposes.  Any  borrowings  for  temporary
administrative  purposes in excess of 5% of the  Portfolio's  total  assets must
maintain continuous asset coverage. If the 300% asset coverage should decline as
a result of market fluctuations or other reasons,  the Portfolio may be required
to sell some of its portfolio  holdings within three days to reduce the debt and
restore the 300% asset coverage,  even though it may be disadvantageous  from an
investment  standpoint  to sell  securities  at that time.  As noted below,  the
Portfolio also may enter into certain transactions, including reverse repurchase
agreements,  mortgage  dollar rolls,  and  sale-buybacks,  that can be viewed as
constituting a form of borrowing or financing  transaction by the Portfolio.  To
the  extent  the  Portfolio  covers its  commitment  under a reverse  repurchase
agreement (or  economically  similar  transaction)  by the segregation of assets
determined in accordance with procedures adopted by the Trustees, equal in value
to the amount of the  Portfolio's  commitment to  repurchase,  such an agreement
will not be considered a "senior  security" by the Portfolio and therefore  will
not be subject to the 300% asset coverage  requirement  otherwise  applicable to
borrowings by the Portfolio. Borrowing will tend to exaggerate the effect on net
asset value of any increase or decrease in the market  value of the  Portfolio's
portfolio of securities.  Money borrowed will be subject to interest costs which
may or may not be recovered by  appreciation  of the securities  purchased.  The
Portfolio  also  may  be  required  to  maintain  minimum  average  balances  in
connection with such borrowing or to pay a commitment or other fee to maintain a
line of  credit;  either  of  these  requirements  would  increase  the  cost of
borrowing over the stated interest rate.

In addition to borrowing  for temporary  purposes,  the Portfolio may enter into
reverse repurchase  agreements,  mortgage dollar rolls, and economically similar
transactions.   A  reverse   repurchase   agreement   involves  the  sale  of  a
portfolio-eligible  security by the  Portfolio,  coupled  with its  agreement to
repurchase  the  instrument  at a  specified  time and  price.  Under a  reverse
repurchase  agreement,  the  Portfolio  continues to receive any  principal  and
interest  payments on the underlying  security during the term of the agreement.
The Portfolio  typically  will segregate  assets  determined to be liquid by the
Adviser in accordance with procedures  established by the Portfolio's  Trustees,
equal  (on a  daily  mark-to-market  basis)  to its  obligations  under  reverse
repurchase agreements.  However,  reverse repurchase agreements involve the risk
that the market value of securities  retained by the Portfolio may decline below
the  repurchase  price  of the  securities  sold by the  Portfolio  which  it is
obligated to  repurchase.  To the extent that  positions  in reverse  repurchase
agreements  are not covered  through the  segregation  of liquid assets at least
equal to the amount of any forward purchase commitment,  such transactions would
be subject to the  Portfolio's  limitations on borrowings,  which would restrict
the aggregate of such transactions (plus any other borrowings) to 33 1/3% of the
Portfolio's total assets.

                                      B-18
<PAGE>

 A  "mortgage  dollar  roll" is similar  to a reverse  repurchase  agreement  in
certain  respects.  In  a  "dollar  roll"  transaction  the  Portfolio  sells  a
mortgage-related  security, such as a security issued by the Government National
Mortgage  Association  ("GNMA"),  to  a  dealer  and  simultaneously  agrees  to
repurchase  a similar  security  (but not the same  security) in the future at a
pre-determined  price. A "dollar roll" can be viewed,  like a reverse repurchase
agreement,   as  a   collateralized   borrowing   in  which  a  Fund  pledges  a
mortgage-related  security  to a dealer  to obtain  cash.  Unlike in the case of
reverse repurchase agreements, the dealer with which the Portfolio enters into a
dollar roll  transaction is not obligated to return the same securities as those
originally sold by the Portfolio,  but only securities which are  "substantially
identical." To be considered "substantially  identical," the securities returned
to the Portfolio  generally  must:  (1) be  collateralized  by the same types of
underlying  mortgages;  (2) be issued by the same agency and be part of the same
program;  (3) have a similar  original stated  maturity;  (4) have identical net
coupon rates;  (5) have similar  market yields (and  therefore  price);  and (6)
satisfy  "good  delivery"  requirements,  meaning that the  aggregate  principal
amounts of the securities delivered and received back must be within 2.5% of the
initial amount delivered.

 The  Portfolio's  obligations  under a dollar roll agreement must be covered by
segregated liquid assets equal in value to the securities  subject to repurchase
by the  Portfolio.  As with reverse  repurchase  agreements,  to the extent that
positions in dollar roll agreements are not covered by segregated  liquid assets
at  least  equal  to  the  amount  of  any  forward  purchase  commitment,  such
transactions  would be subject to the  Portfolio's  limitations  on  borrowings.
Furthermore,  because dollar roll  transactions may be for terms ranging between
one and six  months,  dollar  roll  transactions  may be deemed  "illiquid"  and
subject  to  a  Portfolio's  overall  limitations  on  investments  in  illiquid
securities.  The  Portfolio  also  may  effect  simultaneous  purchase  and sale
transactions that are known as  "sale-buybacks".  A sale-buyback is similar to a
reverse repurchase  agreement,  except that in a sale-buyback,  the counterparty
who  purchases  the  security is entitled to receive any  principal  or interest
payments made on the underlying  security pending  settlement of the Portfolio's
repurchase of the  underlying  security.  The  Portfolio's  obligations  under a
sale-buyback  typically  would be offset by liquid  assets equal in value to the
amount of the Portfolio's forward commitment to repurchase the subject security.

Repurchase Agreements

Repurchase  agreements  may be  entered  into  only with a  primary  dealer  (as
designated  by  the  Federal  Reserve  Bank  of New  York)  in  U.S.  Government
obligations. This is an agreement in which the seller (the Lender) of a security
agrees to repurchase  from the Portfolio the security sold at a mutually  agreed
upon  time and  price.  As such,  it is viewed  as the  lending  of money to the
Lender. The resale price normally is in excess of the purchase price, reflecting
an agreed  upon  interest  rate.  The rate is  effective  for the period of time
assets of the  Portfolio are invested in the agreement and is not related to the
coupon  rate  on  the  underlying  security.  The  period  of  these  repurchase
agreements  is usually  short,  from  overnight to one week,  and at no time are
assets of the Portfolio  invested in a repurchase  agreement  with a maturity of
more than one year. The securities  which are subject to repurchase  agreements,
however,  may have maturity  dates in excess of one year from the effective date
of the  repurchase  agreement.  The  Portfolio  always  receives  as  collateral
securities which are issued or guaranteed by the U.S.  Government,  its agencies
or instrumentalities.  Collateral is marked to the market daily and has a market
value  including  accrued  interest at least equal to 100% of the dollar  amount
invested  on  behalf of the  Portfolio  in each  agreement  along  with  accrued
interest.  Payment  for such  securities  is made for the  Portfolio  only  upon
physical  delivery  or  evidence  of book  entry  transfer  to the  account  the
Portfolio's Custodian.  If the Lender defaults, the Portfolio might incur a loss
if the value of the collateral  securing the repurchase  agreement  declines and
might incur disposition costs in connection with liquidating the collateral.  In
addition,  if bankruptcy  proceedings  are commenced with respect to the Lender,
realization  upon the  collateral  on behalf of the  Portfolio may be delayed or
limited in certain  circumstances.  A repurchase  agreement with more than seven
days to maturity may not be entered into for the Portfolio if, as a result, more
than 10% of the market value of the  Portfolio's  total assets would be invested
in such repurchase  agreements together with any other investment being held for
the Portfolio for which market quotations are not readily available.

                                      B-19
<PAGE>
Reverse Repurchase Agreements

Reverse repurchase agreements may be entered into only with a primary dealer (as
designated  by  the  Federal  Reserve  Bank  of New  York)  in  U.S.  Government
obligations.  This is an agreement in which the  Portfolio  agrees to repurchase
securities  sold by it at a mutually  agreed upon time and price. As such, it is
viewed as the borrowing of money for the Portfolio. Proceeds of borrowings under
reverse  repurchase  agreements are invested for the  Portfolio.  This technique
involves the speculative factor known as leverage. If interest rates rise during
the term of a reverse repurchase  agreement utilized for leverage,  the value of
the  securities  to be  repurchased  for the  Portfolio  as well as the value of
securities  purchased  with the  proceeds  will  decline.  Proceeds of a reverse
repurchase  transaction are not invested for a period which exceeds the duration
of the reverse repurchase  agreement.  A reverse repurchase agreement may not be
entered  into for the  Portfolio  if, as a result,  more than  one-third  of the
market value of the Portfolio's  total assets,  less liabilities  other than the
obligations  created  by  reverse  repurchase  agreements,  would be  engaged in
reverse repurchase agreements.  In the event that such agreements exceed, in the
aggregate,  one-third  of such  market  value,  the  amount  of the  Portfolio's
obligations  created by reverse  repurchase  agreements  will be reduced  within
three days  thereafter  (not  including  weekends  and  holidays) or such longer
period as the  Securities and Exchange  Commission  may prescribe,  to an extent
that such obligations will not exceed, in the aggregate, one-third of the market
value of the Portfolio's assets, as defined above. A segregated account with the
Custodian is established  and maintained for the Portfolio with liquid assets in
an amount  at least  equal to the  Portfolio's  purchase  obligations  under its
reverse repurchase agreements. Such segregated account consists of liquid assets
marked to the market daily,  with additional  liquid assets added when necessary
to insure that at all times the value of such  account is equal to the  purchase
obligations.

Rule 144A Securities

The Investment Adviser may, on behalf of the Portfolio, purchase securities that
are not  registered  under  the 1933  Act,  but  that can be sold to  "qualified
institutional  buyers" in accordance with the  requirements  stated in Rule 144A
under  the  1933  Act  (Rule  144A  Securities).  A Rule  144A  Security  may be
considered  illiquid and therefore subject to the 15% limitation on the purchase
of illiquid  securities,  unless it is  determined  on an ongoing  basis that an
adequate  trading market exists for the security.  Guidelines  have been adopted
and the daily  function of  determining  and  monitoring  liquidity of Rule 144A
Securities has been delegated to the Investment  Adviser.  All relevant  factors
will be considered in determining  the liquidity of Rule 144A Securities and all
investments in Rule 144A Securities will be carefully monitored.



Illiquid Securities

The Portfolio may invest up to 15% of its net assets in illiquid securities. The
term  "illiquid  securities"  for this purpose means  securities  that cannot be
disposed  of  within  seven  days  in  the   ordinary   course  of  business  at
approximately  the amount at which the  Portfolio  has  valued  the  securities.
Illiquid  securities  are  considered to include,  among other  things,  written
over-the-counter options,  securities or other liquid assets being used as cover
for such options, repurchase agreements with maturities in excess of seven days,
certain loan participation interests,  fixed time deposits which are not subject
to prepayment or provide for withdrawal  penalties upon  prepayment  (other than
overnight deposits),  and other securities whose disposition is restricted under
the federal  securities laws (other than securities issued pursuant to Rule 144A
under the 1933 Act and certain  commercial paper that the Adviser has determined
to be liquid under procedures approved by the Portfolio's Trustees).

 Illiquid  securities may include  privately placed  securities,  which are sold
directly to a small number of  investors,  usually  institutions.  Unlike public
offerings, such securities are not registered under the federal securities laws.
Although  certain  of  these  securities  may be  readily  sold,  others  may be
illiquid, and their sale may involve substantial delays and additional costs.



                                      B-20
<PAGE>

INVESTMENT RESTRICTIONS

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

The Portfolio is operated under the following investment  restrictions which are
deemed  fundamental  policies  and may be changed  only with the approval of the
holders of a "majority of the outstanding  voting securities" (as defined in the
1940 Act) of the Portfolio. (See "Additional Information".)

The Portfolio may not:

(1) invest in a security  if, as a result of such  investment,  more than 25% of
its total assets (taken at market value at the time of such investment) would be
invested  in the  securities  of  issuers  in  any  particular  industry,  or in
industrial  development  revenue  bonds based,  directly or  indirectly,  on the
credit of private  entities in any one  industry;  except that this  restriction
does not apply to securities issued or guaranteed by the U.S.  Government or its
agencies or instrumentalities  (or repurchase  agreements with respect thereto).
Investments in utilities,  gas, electric,  water and telephone companies will be
considered as being in separate industries;

 (2) with respect to 75% of its assets,  invest in a security if, as a result of
such investment,  more than 5% of its total assets (taken at market value at the
time of such investment)  would be invested in the securities of any one issuer,
except that this restriction  does not apply to securities  issued or guaranteed
by the U.S. Government or its agencies or instrumentalities.  For the purpose of
this restriction,  each state and each separate political  subdivision,  agency,
authority  or   instrumentality  of  such  state,  each  multi-state  agency  or
authority,  and each  guarantor,  if any,  are  treated as  separate  issuers of
Municipal Bonds;

(3) with  respect to 75% of its assets,  invest in a security if, as a result of
such  investment,  it  would  hold  more  than  10%  (taken  at the time of such
investment) of the outstanding voting securities of any one issuer;

(4) purchase or sell real estate, although it may purchase securities secured by
real estate or interests therein, or securities issued by companies which invest
in real estate, or interests therein;

(5) purchase or sell commodities or commodities contracts or oil, gas or mineral
programs.  This  restriction  shall  not  prohibit  the  Portfolio,  subject  to
restrictions  described in Part A and elsewhere in this Part B, from purchasing,
selling or  entering  into  futures  contracts,  options  on futures  contracts,
foreign currency forward  contracts,  foreign currency options,  or any interest
rate,   securities-related  or  foreign   currency-related  hedging  instrument,
including  swap  agreements  and  other  derivative   instruments,   subject  to
compliance  with  any  applicable   provisions  of  the  federal  securities  or
commodities laws;

(6) purchase securities on margin, except for use of short-term credit necessary
for  clearance of purchases and sales of portfolio  securities,  but it may make
margin deposits in connection with transactions in options, futures, and options
on futures;

(7) borrow money,  issue senior securities,  or pledge,  mortgage or hypothecate
its assets,  except that the  Portfolio  may (i) borrow from banks or enter into
reverse  repurchase  agreements,  or employ similar investment  techniques,  and
pledge its assets in connection  therewith,  but only if immediately  after each
borrowing  there is asset coverage of 300% and (ii) enter into  transactions  in
options,  futures,  options on  futures,  and other  derivative  instruments  as
described  in Part A and in this  Part B (the  deposit  of  assets  in escrow in
connection  with the writing of covered put and call options and the purchase of
securities on a when-issued or delayed delivery basis,  collateral  arrangements
with respect to initial or variation  margin deposits for futures  contracts and
commitments entered into under swap agreements or other derivative  instruments,
will not be deemed to be pledges of the Portfolio's assets);

(8) lend any funds or other assets,  except that the Portfolio  may,  consistent
with its  investment  objective  and policies:  (a) invest in debt  obligations,
including bonds, debentures, or other debt securities,  bankers' acceptances and
commercial  paper, even though the purchase of such obligations may be deemed to
be the making of loans, (b) enter into repurchase  agreements,  and (c) lend its
portfolio  securities  in an amount not to exceed  one-third of the value of its
total  assets,  provided  such  loans  are made in  accordance  with  applicable
guidelines established by the SEC and the Trustees of the Portfolio;

(9) act as an underwriter  of securities of other issuers,  except to the extent
that in  connection  with the  disposition  of portfolio  securities,  it may be
deemed to be an underwriter under the federal securities laws;

(10)  maintain  a short  position,  or  purchase,  write  or sell  puts,  calls,
straddles, spreads or combinations thereof, except as set forth in Part A and in
this Part B for  transactions  in  options,  futures,  options on  futures,  and
transactions arising under swap agreements or other derivative instruments.

                                      B-21
<PAGE>

         Non-Fundamental Restrictions. The following polices are not fundamental
and may be changed without investor approval.  The Portfolio may not as a matter
of operating policy:



(i)      invest  more  than 15% of the net  assets  of the  Portfolio  (taken at
         market value at the time of the  investment) in "illiquid  securities,"
         illiquid  securities being defined to include  securities which may not
         be sold or dispposed of in the ordinary course of business within seven
         days at  approximately  the value at which a  portfolio  has valued the
         investment;

(ii)     invest  more than 5% of the  assets of the  Portfolio  (taken at market
         value at the time of investment)  in any  combination of interest only,
         principal only, or inverse floating rate securities;

(iii)    invest less than 65% of the value of the total assets of the  Portfolio
         in a broad range of investment grade fixed income securities.

The Portfolio is classified as  diversified  for purposes of the 1940 Act, which
means that at least 75% of the total assets is represented  by cash;  securities
issued by the U.S.  Government,  its  agencies or  instrumentalities;  and other
securities  limited in  respect  to any one  issuer to an amount not  greater in
value than 5% of the Portfolio's  total assets.  The Portfolio does not purchase
more than 10% of all outstanding  debt obligations of any one issuer (other than
obligations issued by the U.S. Government, its agencies or instrumentalities).

Under the 1940 Act, a "senior  security" does not include any promissory note or
evidence of indebtedness  where such loan is for temporary  purposes only and in
an amount not exceeding 5% of the value of the total assets of the issuer at the
time the loan is made. A loan is presumed to be for temporary  purposes if it is
repaid  within  sixty days and is not extended or renewed.  Notwithstanding  the
provisions of fundamental  investment  restriction (7) above,  the Portfolio may
borrow  money  for  temporary   administrative  purposes.  To  the  extent  that
borrowings for temporary  administrative  purposes exceed 5% of the total assets
of the  Portfolio  such  excess  shall be  subject  to the 300%  asset  coverage
requirement of that restriction.

To the extent the Portfolio  covers its  commitment  under a reverse  repurchase
agreement (or  economically  similar  transaction)  by the segregation of assets
determined to be liquid in accordance with procedures adopted by the Portfolio's
Trustees,  equal  in  value  to the  amount  of the  Portfolio's  commitment  to
repurchase,  such an agreement will not be considered a "senior security" by the
Portfolio  and  therefore  will  not be  subject  to  the  300%  asset  coverage
requirement otherwise applicable to borrowings by the Portfolio.

The staff of the SEC has  taken the  position  that  purchased  over-the-counter
("OTC")  options  and the  assets  used as cover for  written  OTC  options  are
illiquid securities.  Therefore,  the Portfolio has adopted an investment policy
pursuant to which the  Portfolio  will not purchase or sell OTC options if, as a
result  of  such  transactions,  the  sum of the  market  value  of OTC  options
currently  outstanding which are held by the Portfolio,  the market value of the
underlying  securities  covered by OTC call options currently  outstanding which
were sold by the Portfolio and margin deposits on the  Portfolio's  existing OTC
options on futures  contracts  exceeds  15% of the net assets of the  Portfolio,
taken at market value, together with all other assets of the Portfolio which are
illiquid or are otherwise not readily  marketable.  However, if an OTC option is
sold by the Portfolio to a primary U.S. Government  securities dealer recognized
by  the  Federal  Reserve  Bank  of  New  York  and if  the  Portfolio  has  the
unconditional contractual right to repurchase such OTC option from the dealer at
a predetermined  price, then the Portfolio will treat as illiquid such amount of
the underlying securities equal to the repurchase price less the amount by which
the option is  "in-the-money"  (i.e.,  current  market  value of the  underlying
securities  minus the option's  strike  price).  The  repurchase  price with the
primary  dealers is  typically  a formula  price which is  generally  based on a
multiple of the premium  received  for the option,  plus the amount by which the
option  is  "in-the-money."  This  policy  is not a  fundamental  policy  of the
Portfolio and may be amended by the Portfolio's Trustees without the approval of
shareholders. However, the Portfolio will not change or modify this policy prior
to the change or modification by the SEC staff of its position.

                                      B-22
<PAGE>

Percentage  and Rating  Restrictions.  If a percentage or rating  restriction on
investment or  utilization of assets set forth above or referred to in Part A is
adhered to at the time an investment is made or assets are so utilized,  a later
change in  percentage  resulting  from  changes  in the  value of the  portfolio
securities  or a later  change in the  rating  of a  portfolio  security  is not
considered a violation of policy.



Item 13. Management.

TRUSTEES AND OFFICERS

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

The  Portfolio's  Trustees,  in  addition  to  supervising  the  actions  of the
Portfolio's  Investment  Adviser,  decide  upon  matters of general  policy with
respect to the Portfolio.

Because of the services rendered to the Portfolio by the Investment  Adviser and
by its Administrator,  the Portfolio  requires no employees,  and its respective
officers (all of whom are employed by 59 Wall Street Administrators), other than
the Chairman, receive no compensation from the Portfolio.

The Trustees of the  Portfolio and executive  officers of the  Portfolio,  their
principal occupations during the past five years (although their titles may have
varied during the period) and business addresses are:



TRUSTEES OF THE PORTFOLIO


         J.V. SHIELDS,  JR.*(aged 62) - Trustee (since May 2000); Trustee of the
BBH  Portfolios(1)  (since October  1999);  Director of The 59 Wall Street Fund,
Inc.; Trustee of The 59 Wall Street Trust; Managing Director, Chairman and Chief
Executive  Officer  of  Shields  &  Company;   Chairman  of  Capital  Management
Associates,  Inc.;  Director of Flowers Industries,  Inc.(2).  Vice Chairman and
Trustee  of New York  Racing  Association.  His  business  address  is Shields &
Company, 140 Broadway, New York, NY 10005.

         EUGENE P. BEARD** (aged 65) - Trustee (since May 2000);  Trustee of the
BBH Portfolios (since October 1999);  Director of The 59 Wall Street Fund, Inc.;
Trustee of The 59 Wall  Street  Trust;  Executive  Vice  President  Finance  and
Operations of The Interpublic  Group of Companies.  His business  address is The
Interpublic Group of Companies,  Inc., 1271 Avenue of the Americas, New York, NY
10020.

         DAVID P. FELDMAN** (aged 60) - Trustee (since May 2000); Trustee of the
BBH Portfolios (since October 1999);  Director of The 59 Wall Street Fund, Inc.;
Trustee of The 59 Wall Street Trust;  Retired;  Vice  President  and  Investment
Manager of AT&T  Investment  Management  Corporation  (prior to  October  1997);
Director  of Dreyfus  Mutual  Funds,  Jeffrey  Co. and  Heitman  Financial.  His
business address is 3 Tall Oaks Drive, Warren, NJ 07059.

         ALAN G. LOWY** (aged 61) - Trustee (since May 2000); Trustee of the BBH
Portfolios  (since  October  1999);  Director of The 59 Wall Street Fund,  Inc.;
Trustee of The 59 Wall Street  Trust;Private  Investor.  His business address is
4111 Clear Valley Drive, Encino, CA 91436.

         ARTHUR D. MILTENBERGER**  (aged 61) - Trustee (since May 2000); Trustee
of the BBH Portfolios (since October 1999); Director of The 59 Wall Street Fund,
Inc.; Trustee of The 59 Wall Street Trust; Retired, Executive Vice President and
Chief  Financial  Officer of Richard K.  Mellon and Sons  (prior to June  1998);
Treasurer of Richard King Mellon Foundation (prior to June 1998); Vice President
of the Richard King Mellon  Foundation;  Trustee,  R.K.  Mellon  Family  Trusts;
General  Partner,  Mellon Family  Investment  Company IV, V and VI;  Director of
Aerostructures  Corporation (since 1996) (3). His business address is Richard K.
Mellon and Sons, P.O. Box RKM, Ligonier, PA 15658.


         RICHARD L. CARPENTER** (aged 67) - Trustee (since May 2000); Trustee of
the BBH Portfolios;  Trustee of Dow Jones Islamic Market Index Portfolio  (since
March 1999);  Director of The 59 Wall Street Fund,  Inc.  (since  October 1999);
Trustee of The 59 Wall Street Trust (since October 1999);  Retired;  Director of
Investments,  Pennsylvania Public School Employees'  Retirement System (prior to
December 1997). His business address is 12664 Lazy Acres Court,  Nevada City, CA
95959.

         CLIFFORD A. CLARK**  (aged 70) - Trustee  (since May 2000);  Trustee of
the BBH Portfolios;  Trustee of Dow Jones Islamic Market Index Portfolio  (since
March 1999);  Director of The 59 Wall Street Fund,  Inc.  (since  October 1999);
Trustee of The 59 Wall Street Trust (since October 1999);  Retired. His business
address is 42 Clowes Drive, Falmouth, MA 02540.

                                      B-23
<PAGE>
         DAVID M.  SEITZMAN**  (aged 71) - Trustee (since May 2000);  Trustee of
the BBH  Portfolios;  Director of The 59 Wall Street Fund,  Inc.  (since October
1999);  Trustee of The 59 Wall Street Trust  (since  October  1999);  Physician,
Private Practice. His business address is 7117 Nevis Road, Bethesda, MD 20817.


         J. ANGUS IVORY (aged 68) - Trustee (since May 2000); Trustee of the BBH
Portfolios  (since  October  1999);  Trustee of Dow Jones  Islamic  Market Index
Portfolio  (since March 1999);  Director of The 59 Wall Street Fund, Inc. (since
October 1999); Trustee of The 59 Wall Street Trust (since October 1999); Trustee
of Islamic Global Equity Fund (since November 2000); Retired;  Director of Brown
Brothers Harriman Ltd., subsidiary of Brown Brothers Harriman & Co.; Director of
Old Daily Saddlery;  Advisor,  RAF Central Fund;  Committee  Member,  St. Thomas
Hospital Pain Clinic (since 1999).



OFFICERS OF THE PORTFOLIO

         PHILIP  W.  COOLIDGE  (aged  49) --  President;  President  of the  BBH
Portfolios;  Chief Executive Officer and President of Signature Financial Group,
Inc. ("SFG"), 59 Wall Street Distributors,  Inc. ("59 Wall Street Distributors")
and 59 Wall Street Administrators, Inc. ("59 Wall Street Administrators").



         LINWOOD  C.  DOWNS  (aged  38)  -  Treasurer;   Treasurer  of  the  BBH
Portfolios; Senior Vice President and Treasurer of SFG.



         MOLLY  S.  MUGLER  (aged  48)  --  Secretary;   Secretary  of  the  BBH
Portfolios;  Vice  President and  Secretary of SFG;  Secretary of 59 Wall Street
Distributors and 59 Wall Street Administrators.



         SUSAN JAKUBOSKI (aged 36) - Assistant  Treasurer;  Assistant  Treasurer
and  Assistant  Secretary  of the  BBH  Portfolios;  Vice  President,  Assistant
Secretary and Assistant Treasurer of Signature Financial Group (Cayman) Limited.



         CHRISTINE  D.  DORSEY  (aged  30)  --  Assistant  Secretary;  Assistant
Secretary of the BBH  Portfolios;  Vice  President of SFG (since  January 1996);
Paralegal and Compliance  Officer,  various  financial  companies  (July 1992 to
January 1996).

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

*Mr.  Shields  is an  "interested  person"  of  the  Portfolio  because  of  his
affiliation with a registered broker-dealer.  Except for Mr. Shields, no Trustee
is an  "interested  person" of the Portfolio as that term is defined in the 1940
Act.

**These Trustees are members of the Audit Committee of the Portfolio.


(1)      The Portfolios  consist of the following active  investment  companies:
         BBH U.S.  Money  Market  Portfolio,  BBH  U.S.  Equity  Portfolio,  BBH
         European  Equity  Portfolio,  BBH Pacific Basin Equity  Portfolio,  BBH
         International  Equity Portfolio,  BBH High Yield Fixed Income Portfolio
         and BBH Global Equity Portfolio and the following  inactive  investment
         companies:  BBH U.S.  Balanced  Growth  Portfolio and BBH  Intermediate
         Tax-Exempt Bond Portfolio.

(2)      Shields & Company,  Capital  Management  Associates,  Inc.  and Flowers
         Industries,   Inc.,  with  which  Mr.  Shields  is  associated,  are  a
         registered broker-dealer and a member of the New York Stock Exchange, a
         registered   investment  adviser,   and  a  diversified  food  company,
         respectively.

(3)      Richard K. Mellon and Sons, Richard King Mellon Foundation, R.K. Mellon
         Family  Trusts,  Mellon  Family  Investment  Company  IV,  V and VI and
         Aerostructures Corporation,  with which Mr. Miltenberger is or has been
         associated, are a private foundation, a private foundation, a trust, an
         investment company and an aircraft manufacturer, respectively.


         The address of each  officer is 21 Milk Street,  Boston,  Massachusetts
02109.  Messrs.  Coolidge and Downs and Mss.  Mugler,  Jakuboski and Dorsey also
hold similar  positions with other investment  companies for which affiliates of
59 Wall Street Distributors serve as the principal underwriter.

                                      B-24
<PAGE>

Trustees of the Portfolio

         The  Trustees  of the  Portfolio  receive a base  annual fee of $15,000
(except the  Chairman  who  receives a base annual fee of $20,000) and such base
annual fee is allocated  among all series of The 59 Wall Street Fund,  Inc., all
series of The 59 Wall  Street  Trust  and the  Portfolio  and any  other  active
Portfolios  having the same Board of Trustees  based upon their  respective  net
assets.  In addition,  each series of The 59 Wall Street  Fund,  Inc. and The 59
Wall Street Trust,  the Portfolio and each other active BBH Portfolio  which has
commenced operations pays an annual fee to each Trustee of $1,000.
<TABLE>


<S>                        <C>               <C>             <C>                <C>




                                            Pension or                          Total
                           Aggregate        Retirement                          Compensation
                           Compensation     Benefits Accrued  Estimated Annual  from Fund
Name of Person,            from the Fund    as Part of        Benefits upon     Complex* Paid
Position                   Complex**        Expenses          Retirement        to Trustees*

J.V. Shields, Jr.,         $250             none               none              $36,000
Trustee

Eugene P. Beard,           $250             none               none              $31,000
Trustee

Richard L. Carpenter,      $250             none               none              $31,000
Trustee

Clifford A. Clark,         $250             none               none              $31,000
Trustee

David P. Feldman,          $250             none               none              $31,000
Trustee

J. Angus Ivory,            $250             none               none              $31,000
Trustee

Alan G. Lowy,              $250             none               none              $31,000
Trustee

Arthur D. Miltenberger,    $250             none               none              $31,000
Trustee

David M. Seitzman,         $250             none               none              $31,000
Trustee
<FN>


* The Fund Complex  consists of The 59 Wall Street Fund, Inc.  (which  currently
consists of six series),  The 59 Wall Street Trust (which currently  consists of
four series) and the seven active BBH Portfolios.

**Estimated to be paid as of October 31, 2000.
</FN>
</TABLE>

By virtue of the responsibilities assumed by Brown Brothers Harriman & Co. under
the Investment  Advisory  Agreement  with the  Portfolio,  and by Brown Brothers
Harriman Trust Company LLC of New York ("Brown  Brothers  Harriman Trust Company
LLC") under the  Administration  Agreement with the Portfolio  (see  "Investment
Adviser" and  "Administrator"),  the Portfolio does not require  employees other
than its officers,  and none of its officers  devote full time to the affairs of
the Portfolio,  or, other than the Chairman,  receive any compensation  from the
Portfolio.

                                      B-25
<PAGE>

Item 14.  Control Persons and Principal Holders of Securities.

     As of November 1, 2000,  Brown  Brothers  Harriman  Trust Company  (Cayman)
Limited owned 99% of the outstanding  beneficial interests in the Portfolio.  So
long as Brown Brothers  Harriman  Trust Company  (Cayman)  Limited  controls the
Portfolio,  it may take  actions  without the  approval  of any other  holder of
beneficial interest in the Portfolio.

Brown  Brothers  Harriman  Trust  Company  (Cayman)  Limited  has  informed  the
Portfolio  that  whenever it is requested to vote on matters  pertaining  to the
Portfolio  (other than a vote by the  Portfolio to continue the operation of the
Portfolio upon the  withdrawal of another  investor in the  Portfolio),  it will
hold a meeting of its  investors  and will cast its vote as  instructed by those
investors.

Item 15.  Investment Advisory and Other Services.

INVESTMENT ADVISER

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

Under an  Investment  Advisory  Agreement  with the  Portfolio,  subject  to the
general  supervision of the  Portfolio's  Trustees and in  conformance  with the
stated  policies  of the  Portfolio,  Brown  Brothers  Harriman  & Co.  provides
investment advice and portfolio  management  services to the Portfolio.  In this
regard,  it is the  responsibility  of Brown Brothers Harriman & Co. to make the
day-to-day  investment  decisions for the  Portfolio,  to place the purchase and
sale  orders  for  portfolio  transactions,   and  to  manage,   generally,  the
investments of the Portfolio.

The Investment  Advisory Agreement between Brown Brothers Harriman & Co. and the
Portfolio  is dated May 9, 2000 and  remains  in effect  for two years from such
date and thereafter,  but only as long as the agreement is specifically approved
at least annually (i) by a vote of the holders of a "majority of the outstanding
voting  securities"  (as  defined  in the 1940 Act) of the  Portfolio  or by the
Portfolio's  Trustees,  and (ii) by a vote of a majority of the  Trustees of the
Portfolio  who  are  not  parties  to  the  Investment   Advisory  Agreement  or
"interested persons" (as defined in the 1940 Act) of the Portfolio ("Independent
Trustees")  cast in person at a meeting called for the purpose of voting on such
approval.  The Investment  Advisory  Agreement was most recently approved by the
Independent   Trustees  on  May  9,  2000.  The  Investment  Advisory  Agreement
terminates  automatically  if assigned  and is  terminable  at any time  without
penalty by a vote of a majority of the Trustees of the  Portfolio,  or by a vote
of the holders of a "majority of the outstanding  voting securities" (as defined
in the 1940 Act) of the Portfolio on 60 days' written  notice to Brown  Brothers
Harriman & Co. and by Brown  Brothers  Harriman & Co. on 90 days' written notice
to the Portfolio. (See "Additional Information".)

The investment  advisory fee paid to the Investment  Adviser is calculated daily
and paid  monthly at an annual  rate equal to 0.30% of the  Portfolio's  average
daily net assets.

The  investment  advisory  services  of Brown  Brothers  Harriman  & Co.  to the
Portfolio  are  not  exclusive  under  the  terms  of  the  Investment  Advisory
Agreement.  Brown Brothers  Harriman & Co. is free to and does render investment
advisory services to others, including other registered investment companies.

Pursuant to license agreements between Brown Brothers Harriman & Co. and each of
59 Wall Street Administrators and 59 Wall Street Distributors (each a Licensee),
dated June 22, 1993 and June 8, 1990,  respectively,  each Licensee may continue
to use in its name 59 Wall  Street,  the current and  historic  address of Brown
Brothers  Harriman  & Co.,  only if  Brown  Brothers  Harriman  & Co.  does  not
terminate the respective license agreement,  which would require the Licensee to
change its name to eliminate  all  reference  to 59 Wall  Street.  Pursuant to a
license  agreement between the Portfolio and Brown Brothers Harriman & Co. dated
May 9, 2000,  the  Portfolio  may continue to use in its name BBH. The agreement
may be  terminated  by Brown  Brothers  Harriman & Co. at any time upon  written
notice to the  Portfolio  upon the  expiration  or  earlier  termination  of any
investment  advisory agreement between the Portfolio and Brown Brothers Harriman
& Co.  Termination  of the  agreement  would require the Portfolio to change its
name to eliminate all reference to BBH.

                                      B-26
<PAGE>
ADMINISTRATOR

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

Brown  Brothers  Harriman  Trust  Company  LLC  acts  as  Administrator  of  the
Portfolio.   Brown  Brothers  Harriman  Trust  Company  LLC  is  a  wholly-owned
subsidiary  of Brown  Brothers  Harriman & Co.  Brown  Brothers  Harriman  Trust
Company LLC in its capacity as Administrator  of the Portfolio,  administers all
aspects  of  the  Portfolio's  operations  subject  to  the  supervision  of the
Portfolio's  Trustees except as set forth above under "Investment  Adviser".  In
connection with its  responsibilities  as Administrator for the Portfolio and at
its own expense,  Brown  Brothers  Harriman  Trust  Company LLC (i) provides the
Portfolio  with the services of persons  competent to perform such  supervisory,
administrative  and  clerical  functions  as are  necessary  in order to provide
effective administration of the Portfolio,  including the maintenance of certain
books and records, receiving and processing requests for increases and decreases
in the  beneficial  interests in the Portfolio,  notification  to the Investment
Adviser of available funds for investment, reconciliation of account information
and balances between the Custodian and the Investment  Adviser,  and processing,
investigating   and  responding  to  investor   inquiries;   (ii)  oversees  the
performance  of  administrative  and  professional  services to the Portfolio by
others,  including the  Custodian;  (iii)  provides the Portfolio  with adequate
office space and communications  and other facilities;  and (iv) prepares and/or
arranges for the preparation, but does not pay for, the periodic updating of the
Portfolio's  registration statement for filing with the SEC, and the preparation
of tax returns for the Portfolio and reports to investors and the SEC.


The  Administration  Agreement between the Portfolio and Brown Brothers Harriman
Trust  Company  LLC (dated May 9,  2000)  will  remain in effect for  successive
annual  periods but only so long as such agreement is  specifically  approved at
least  annually  in the  same  manner  as the  Portfolio's  Investment  Advisory
Agreement (see  "Investment  Adviser").  The Independent  Trustees most recently
approved the Portfolio's  Administration Agreement on May 9, 2000. The agreement
will  terminate  automatically  if  assigned  by  either  party  thereto  and is
terminable  at any time without  penalty by a vote of a majority of the Trustees
of the  Portfolio or by a vote of the holders of a "majority of the  outstanding
voting  securities"  (as  defined  in  the  1940  Act)  of the  Portfolio.  (See
"Additional   Information").   The  Portfolio's   Administration   Agreement  is
terminable by the Trustees of the Portfolio or by the Portfolio's  corresponding
Fund and other  investors in the Portfolio on 60 days'  written  notice to Brown
Brothers Harriman Trust Company LLC and by Brown Brothers Harriman Trust Company
LLC on 90 days' written notice to the Portfolio.

Pursuant to a Subadministrative  Services Agreement with Brown Brothers Harriman
Trust Company LLC, 59 Wall Street Administrators performs such subadministrative
duties for the Portfolio as are from time to time agreed upon by the parties. 59
Wall  Street  Administrators'  subadministrative  duties may  include  providing
equipment and clerical  personnel  necessary for maintaining the organization of
the  Portfolio,  participation  in the  preparation  of  documents  required for
compliance by the Portfolio with applicable laws and regulations, preparation of
certain  documents in  connection  with meetings of Trustees of and investors in
the  Portfolio,  and other  functions  that would  otherwise be performed by the
Administrator  of  the  Portfolio  as  set  forth  above.  For  performing  such
subadministrative   services,  59  Wall  Street  Administrators   receives  such
compensation  as is from  time to time  agreed  upon,  but not in  excess of the
amount paid to the Administrator from the Portfolio.


PLACEMENT AGENT
-----------------------------------------------------------------

The  Portfolio  has not  retained  the  services of a principal  underwriter  or
distributor,  since  interests in the  Portfolio  are offered  solely in private
placement  transactions.  59 Wall Street Distributors,  Inc. acting as agent for
the Portfolio,  serves as the placement agent of interests in the Portfolio.  59
Wall Street  Distributors  receives  no  compensation  for serving as  placement
agent.

EXPENSE PAYMENT AGREEMENT
-----------------------------------------------------------------

Under an expense payment  agreement dated May 9, 2000,  Brown Brothers  Harriman
Trust  Company LLC pays the expenses of the  Portfolio,  other than fees paid to
Brown Brothers  Harriman Trust Company LLC under the Portfolio's  Administration
Agreement and other than expenses relating to the organization of the Portfolio.
In return,  Brown  Brothers  Harriman  Trust Company LLC receives a fee from the
Portfolio  such that after such payment the aggregate  expenses of the Portfolio
do not exceed an agreed upon annual rate,  currently  0.40% of the average daily
net assets of the Portfolio. Such fees are computed daily and paid monthly.

                                      B-27
<PAGE>

CUSTODIAN
-------------------------------------------------------------------

Brown Brothers Harriman & Co., 40 Water Street, Boston,  Massachusetts 02109, is
Custodian for the Portfolio.  As Custodian,  it is responsible  for  maintaining
books  and  records  of  portfolio  transactions  and  holding  the  Portfolio's
securities and cash pursuant to a custodian  agreement with the Portfolio.  Cash
is held for the Portfolio in demand deposit  accounts at the Custodian.  Subject
to  the  supervision  of  the  Administrator  of the  Portfolio,  the  Custodian
maintains the accounting and portfolio transaction records for the Portfolio and
each day computes the net asset value and net income of the Portfolio.


INDEPENDENT AUDITORS

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

Deloitte & Touche LLP are the independent auditors for the Portfolio.



CODE OF ETHICS
-------------------------------------------------------------------

The Portfolio,  the Adviser and the Placement  Agent each have adopted a code of
ethics  pursuant to Rule 17j-1 under the 1940 Act.  Each code of ethics  permits
personnel  subject  to such code of ethics  to invest in  securities,  including
securities that may be purchased or held by the Portfolio. However, the codes of
ethics  contain  provisions  and  requirements  designed to identify and address
certain  conflicts of interest  between personal  investment  activities and the
interests of the Portfolio.  Of course, there can be no assurance that the codes
of ethics will be effective  in  identifying  and  addressing  all  conflicts of
interest relating to personal securities transactions. The code of ethics of the
Portfolio,  the  Adviser  and  the  Placement  Agent  are on file  with  and are
available from the SEC by calling 1-202-942-8090. Additionally, this information
is   available   on  the  EDGAR   database  at  the  SEC's   internet   site  at
http://www.sec.gov.  A copy may be obtained,  after paying a duplicating fee, by
electronic request at the following e-mail address: [email protected].



Item 16.  Brokerage Allocation, Transactions and Other Practices.

The  securities  in which the  Portfolio  invests  are traded  primarily  in the
over-the-counter  markets  on a net basis  and do not  normally  involve  either
brokerage  commissions or transfer taxes. Where possible  transactions on behalf
of the Portfolio are entered  directly with the issuer or from an underwriter or
market  maker  for the  securities  involved.  Purchases  from  underwriters  of
securities  may include a  commission  or  concession  paid by the issuer to the
underwriter,  and purchases from dealers  serving as market makers may include a
spread  between the bid and asked price.  The policy of the Portfolio  regarding
purchases  and sales of  securities  is that primary  consideration  is given to
obtaining the most favorable prices and efficient executions of transactions. In
seeking to implement the Portfolio's  policies,  the Investment  Adviser effects
transactions with those brokers and dealers who the Investment  Adviser believes
provide  the most  favorable  prices  and are  capable  of  providing  efficient
executions.  While reasonably  competitive spreads or commissions are sought for
the Portfolio, it will not necessarily be paying the lowest spread or commission
available.  If the  Investment  Adviser  believes such prices and executions are
obtainable  from more than one broker or dealer,  it may give  consideration  to
placing  portfolio  transactions with those brokers and dealers who also furnish

                                      B-28
<PAGE>
research  and other  services  to the  Portfolio  or  Investment  Adviser.  Such
services may include,  but are not limited to, any one or more of the following:
information  as  to  the  availability  of  securities  for  purchase  or  sale;
statistical or factual  information or opinions  pertaining to investment;  wire
services; and appraisals or evaluations of portfolio securities. A 100% turnover
would occur,  for example,  if all portfolio  securities  (excluding  short-term
obligations) were replaced once in a period of one year. The amount of brokerage
commissions  and taxes on  realized  capital  tend to  increase  as the level of
portfolio activity increases.

On those occasions when Brown Brothers Harriman & Co. deems the purchase or sale
of a security  to be in the best  interests  of the  Portfolio  as well as other
customers,  Brown Brothers  Harriman & Co. to the extent permitted by applicable
laws and regulations,  may, but is not obligated to, aggregate the securities to
be sold or purchased  for the  Portfolio  with those to be sold or purchased for
other  customers in order to obtain best  execution,  including  lower brokerage
commissions,  if  appropriate.  In such event,  allocation of the  securities so
purchased or sold as well as any expenses  incurred in the  transaction are made
by Brown Brothers Harriman & Co. in the manner it considers to be most equitable
and consistent  with its fiduciary  obligations to its customers,  including the
Portfolio.  In  some  instances,  this  procedure  might  adversely  affect  the
Portfolio.

Over-the-counter  purchases and sales are  transacted  directly  with  principal
market makers,  except in those  circumstances  in which, in the judgment of the
Investment  Adviser,  better  prices and  execution  of orders can  otherwise be
obtained.  If the  Portfolio  effects a closing  transaction  with  respect to a
futures or option contract,  such transaction  normally would be executed by the
same broker-dealer who executed the opening transaction.  The writing of options
by the  Portfolio  may be  subject  to  limitations  established  by each of the
exchanges  governing  the  maximum  number of options in each class which may be
written by a single investor or group of investors acting in concert, regardless
of whether the options are  written on the same or  different  exchanges  or are
held or written in one or more  accounts  or through  one or more  brokers.  The
number of  options  which the  Portfolio  may write may be  affected  by options
written by the Investment  Adviser for other  investment  advisory  clients.  An
exchange may order the  liquidation of positions  found to be in excess of these
limits, and it may impose certain other sanctions.

Item 17.  Capital Stock and Other Securities.

The  Portfolio  is organized as a trust under the laws of the State of New York.
Under the Declaration of Trust,  the Trustees are authorized to issue beneficial
interests in the Portfolio.  Investors are entitled to  participate  pro rata in
distributions  of taxable income,  loss, gain and credit of the Portfolio.  Upon
liquidation or dissolution of the Portfolio, investors are entitled to share pro
rata in the Portfolio's net assets  available for distribution to its investors.
Investments  in the  Portfolio  have no  preference,  preemptive,  conversion or
similar rights and are fully paid and nonassessable,  except as set forth below.
Investments in the Portfolio may not be transferred.  Certificates  representing
an  investor's  beneficial  interest in the  Portfolio  are issued only upon the
written request of an investor.

 Each  investor  is  entitled  to a vote  in  proportion  to the  amount  of its
investment in the Portfolio.  Investors in the Portfolio do not have  cumulative
voting rights,  and investors holding more than 50% of the aggregate  beneficial
interest in the  Portfolio may elect all of the Trustees if they choose to do so
and in such  event the other  investors  in the  Portfolio  would not be able to
elect any Trustee. The Portfolio is not required and has no current intention to
hold annual  meetings of investors but the Portfolio will hold special  meetings
of investors when in the judgment of the Portfolio's Trustees it is necessary or
desirable  to submit  matters  for an  investor  vote.  Changes  in  fundamental
policies  will be submitted  to investors  for  approval.  Investors  have under
certain   circumstances  (e.g.,  upon  application  and  submission  of  certain
specified documents to the Trustees by a specified percentage of the outstanding
interests in the  Portfolio) the right to  communicate  with other  investors in
connection  with  requesting a meeting of investors  for the purpose of removing
one or more  Trustees.  Investors  also  have the  right to  remove  one or more
Trustees without a meeting by a declaration in writing by a specified percentage
of  the  outstanding  interests  in  the  Portfolio.  Upon  liquidation  of  the
Portfolio,  investors  would be  entitled to share pro rata in the net assets of
the Portfolio available for distribution to investors. No material amendment may
be made to the Portfolio's Declaration of Trust without the affirmative majority
vote of investors  (with the vote of each being in  proportion  to the amount of
its investment).

The term "majority of the outstanding voting securities" (as defined in the 1940
Act)  currently  means  the  vote of (i) 67% or more of the  outstanding  voting
securities  present  at a  meeting,  if the  holders  of  more  than  50% of the
outstanding  voting securities are present in person or represented by proxy; or
(ii) more than 50% of the outstanding voting securities, whichever is less.

                                      B-29
<PAGE>
The end of the Portfolio's fiscal year is October 31.

Under the anticipated  method of operation of the Portfolio,  the Portfolio will
not be subject to any income tax.  However,  each investor in the Portfolio will
be  taxable  on its  share  (as  determined  in  accordance  with the  governing
instruments of the  Portfolio) of the  Portfolio's  ordinary  income and capital
gain in determining its income tax liability.  The  determination  of such share
will be made in  accordance  with the Internal  Revenue Code of 1986, as amended
(the "Code"), and regulations promulgated thereunder.

It is intended that the Portfolio's  assets,  income and  distributions  will be
managed in such a way that an investor in the Portfolio  will be able to satisfy
the  requirements  of  Subchapter  M of the  Code,  assuming  that the  investor
invested all of its assets in the Portfolio.

Investor  inquiries  may be  directed to 59 Wall  Street  Distributors,  21 Milk
Street, Boston, Massachusetts 02109, (617) 423-0800.


The  Portfolio  may  enter  into a  merger  or  consolidation,  or  sell  all or
substantially  all of its  assets,  if approved by the vote of two thirds of its
investors  (with the vote of each being in proportion  to its  percentage of the
beneficial  interests in the Portfolio),  except that if the Trustees  recommend
such sale of assets,  the approval by vote of a majority of the investors  (with
the  vote of each  being  in  proportion  to its  percentage  of the  beneficial
interests  of the  Portfolio)  will be  sufficient.  The  Portfolio  may also be
terminated (i) upon  liquidation  and  distribution of its assets if approved by
the  vote of two  thirds  of its  investors  (with  the  vote of each  being  in
proportion to the amount of its  investment)  or (ii) by the Trustees by written
notice to its investors.

Investors in the Portfolio will be held  personally  liable for its  obligations
and liabilities,  subject,  however,  to indemnification by the Portfolio in the
event  that  there  is  imposed  upon  an  investor  a  greater  portion  of the
liabilities and obligations of the Portfolio than its  proportionate  beneficial
interest in the  Portfolio.  The  Declaration  of Trust also  provides  that the
Portfolio shall maintain  appropriate  insurance (for example,  fidelity bonding
and errors and omissions  insurance) for the  protection of the  Portfolio,  its
investors,  Trustees,  officers, employees and agents covering possible tort and
other  liabilities.  Thus, the risk of an investor  incurring  financial loss on
account  of  investor  liability  is  limited  to  circumstances  in which  both
inadequate  insurance  existed and the  Portfolio  itself was unable to meet its
obligations.

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

Item 18.  Purchase, Redemption and Pricing of Securities.

Beneficial  interests in the Portfolio  are issued  solely in private  placement
transactions  that do not involve any  "public  offering"  within the meaning of
Section 4(2) of the 1933 Act.  Investments  in the Portfolio may only be made by
other  investment  companies,  insurance  company separate  accounts,  common or
commingled  trust  funds,  or  similar   organizations  or  entities  which  are
"accredited  investors"  as  defined  in Rule  501  under  the  1933  Act.  This
Registration Statement does not constitute an offer to sell, or the solicitation
of an offer to buy, any "security" within the meaning of the 1933 Act.

An investment in the Portfolio may be made without a sales load. All investments
are made at net asset  value next  determined  after an order is received by the
Portfolio.  The net asset  value of the  Portfolio  is  determined  once on each
business day.

There is no minimum initial or subsequent investment in the Portfolio.  However,
because  the  Portfolio  intends  to be as  fully  invested  at all  times as is
reasonably practicable in order to enhance the yield on its assets,  investments
must be made in federal  funds  (i.e.,  monies  credited  to the  account of the
Custodian by a Federal Reserve Bank).

The Portfolio  reserves the right to cease accepting  investments at any time or
to reject any investment order.

                                      B-30
<PAGE>

Each  investor  in the  Portfolio  may add to or reduce  its  investment  in the
Portfolio on each day the New York Stock  Exchange is open for regular  trading.
At 4:00  P.M.,  New York  time on each  such  business  day,  the  value of each
investor's beneficial interest in the Portfolio is determined by multiplying the
net asset value of the  Portfolio  by the  percentage,  effective  for that day,
which represents that investor's share of the aggregate  beneficial interests in
the Portfolio.  Any additions or  withdrawals,  which are to be effected on that
day, are then effected.  The investor's  percentage of the aggregate  beneficial
interests in the  Portfolio is then  recomputed as the  percentage  equal to the
fraction (i) the numerator of which is the value of such  investor's  investment
in the Portfolio as of 4:00 P.M New York time on such day plus or minus,  as the
case may be, the amount of any additions to or  withdrawals  from the investor's
investment in the Portfolio  effected on such day, and (ii) the  denominator  of
which is the aggregate net asset value of the Portfolio as of 4:00 P.M. New York
time,  on such day plus or  minus,  as the case may be,  the  amount  of the net
additions to or withdrawals  from the aggregate  investments in the Portfolio by
all investors in the Portfolio.  The percentage so determined is then applied to
determine the value of the investor's interest in the Portfolio as of 4:00 P.M.,
New York time on the following business day of the Portfolio.

The net income and  capital  gains and  losses,  if any,  of the  Portfolio  are
determined at 4:00 p.m., New York time on each business day. Net income for days
other than business  days is  determined  as of 4:00 p.m.,  New York time on the
immediately  preceding  business day. All the net income,  as defined below, and
capital gains and losses, if any, so determined are allocated pro rata among the
investors in the Portfolio at the time of such determination.

For this  purpose  the  "net  income"  of the  Portfolio  (from  the time of the
immediately preceding  determination  thereof) consists of (i) accrued interest,
accretion  of  discount  and  amortization  of premium  less (ii) all actual and
accrued expenses of the Portfolio  (including the fees payable to the Investment
Adviser and Administrator of the Portfolio).

The value of investments  listed on a domestic  securities  exchange is based on
the last sale  prices as of the  regular  close of the New York  Stock  Exchange
(which is  currently  4:00 P.M New York  time) or, in the  absence  of  recorded
sales, at the average of readily  available closing bid and asked prices on such
Exchange.  Unlisted  securities  are valued at the average of the quoted bid and
asked  prices in the  over-the-counter  market.  The value of each  security for
which readily available market quotations exist is based on a decision as to the
broadest and most representative market for such security.

Bonds and other fixed income securities  (other than short-term  obligations but
including  listed  issues) are valued on the basis of valuations  furnished by a
pricing  service,  use of which has been  approved by the Board of Trustees.  In
making  such  valuations,  the pricing  service  utilizes  both  dealer-supplied
valuations and electronic  data  processing  techniques  which take into account
appropriate  factors  such as  institutional-size  trading in similar  groups of
securities,  yield,  quality,  coupon  rate,  maturity,  type of issue,  trading
characteristics  and other market data,  without exclusive  reliance upon quoted
prices or exchange or over-the-counter prices.


Securities or other assets for which market quotations are not readily available
are valued at fair value in accordance with procedures  established by and under
the general  supervision and  responsibility of the Portfolio's  Trustees.  Such
procedures  include the use of independent  pricing  services,  which use prices
based  upon  yields or prices  of  securities  of  comparable  quality,  coupon,
maturity and type;  indications  as to values from dealers;  and general  market
conditions. Short-term investments which mature in 60 days or less are valued at
amortized cost if their original  maturity was 60 days or less, or by amortizing
their value on the 61st day prior to maturity,  if their original  maturity when
acquired was more than 60 days,  unless this is determined not to represent fair
value by the Trustees of the Portfolio.

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

                                      B-31
<PAGE>

If the Portfolio determines that it would be detrimental to the best interest of
the  remaining  investors in the  Portfolio to make payment  wholly or partly in
cash,  payment  of the  redemption  price  may be made in  whole or in part by a
distribution  in kind of  securities  from the  Portfolio,  in lieu of cash,  in
conformity with the applicable  rules of the Securities and Exchange  Commission
(the "SEC").  If interests are redeemed in kind,  the redeeming  investor  might
incur  transaction  costs in  converting  the assets  into  cash.  The method of
valuing portfolio  securities is described above and such valuation will be made
as of the same time the redemption price is determined.

An investor in the Portfolio may reduce all or any portion of its  investment at
the net asset value next determined after a request in "good order" is furnished
by the investor to the  Portfolio.  The proceeds of a reduction  will be paid by
the Portfolio in federal funds normally on the next Portfolio Business Day after
the reduction is effected,  but in any event within seven days.  Investments  in
the Portfolio may not be transferred.

The right of any investor to receive  payment with respect to any  reduction may
be  suspended  or the payment of the  proceeds  therefrom  postponed  during any
period in which the New York Stock  Exchange is closed  (other than  weekends or
holidays)  or trading on the New York Stock  Exchange is  restricted  or, to the
extent otherwise permitted by the 1940 Act if an emergency exists.

The  Portfolio  reserves  the  right  under  certain   circumstances,   such  as
accommodating  requests for  substantial  withdrawals  or  liquidations,  to pay
distributions in kind to investors (i.e., to distribute  portfolio securities as
opposed to cash).  If  securities  are  distributed,  an  investor  could  incur
brokerage,  tax or other  charges  in  converting  the  securities  to cash.  In
addition,  distribution  in kind may result in a less  diversified  portfolio of
investments or adversely affect the liquidity of the Portfolio.

Item 19.  Tax Status.

The Portfolio is organized as a New York trust.  The Portfolio is not subject to
any  income or  franchise  tax in the State of New York or the  Commonwealth  of
Massachusetts.  However each  investor in the  Portfolio  will be taxable on its
share  (as  determined  in  accordance  with the  governing  instruments  of the
Portfolio) of the  Portfolio's  ordinary  income and capital gain in determining
its  income  tax  liability.  The  determination  of such  share will be made in
accordance with the Internal Revenue Code of 1986, as amended (the "Code"),  and
regulations promulgated thereunder.

Although,  as  described  above,  the  Portfolio  will not be subject to federal
income tax, it will file appropriate income tax returns.

It is intended that the Portfolio's assets will be managed in such a way that an
investor in the Portfolio will be able to satisfy the requirements of Subchapter
M of the Code.

Gains or losses on sales of  securities  by the  Portfolio  will be  treated  as
long-term  capital  gains or losses if the  securities  have been held by it for
more than one year except in certain cases where,  if applicable,  the Portfolio
acquires a put or writes a call  thereon.  Other  gains or losses on the sale of
securities will be short-term capital gains or losses.

FOREIGN TAXES.  The Portfolio may be subject to foreign  withholding  taxes with
respect to income received from sources within foreign countries.

OTHER  TAXATION.  The  investment by an investor in the Portfolio does not cause
the  investor to be liable for any income or  franchise  tax in the State of New
York.  Investors  are advised to consult  their own tax advisers with respect to
the particular tax consequences to them of an investment in the Portfolio.

                                      B-32
<PAGE>

Item 20.  Underwriters.

The  placement  agent for the  Portfolio is 59 Wall Street  Distributors,  Inc.,
which receives no compensation  for serving in this capacity.  Other  investment
companies,  insurance  company  separate  accounts,  common and commingled trust
funds and similar  organizations  and  entities may  continuously  invest in the
Portfolio  acted as placement  agent for the Portfolio  under the same terms and
conditions as set forth herein.

Item 21.  Calculations of Performance Data.

        Not applicable.

Item 22.  Financial Statements.

The Portfolio's  statement of asset and liabilities  dated June 1, 2000 included
herein has been  included in reliance  upon the report of Deloitte & Touche LLP,
independent auditors for the Portfolio, as experts in accounting and auditing.




                                       B-33
<PAGE>

                    BBH BROAD MARKET FIXED INCOME PORTFOLIO

                      STATEMENT OF ASSETS AND LIABILITIES
                                  June 1, 2000


ASSETS:
     Cash                                                             $100,100

LIABILITIES:
     Accrued expenses                                                      -
                                                                 -------------

NET ASSETS                                                            $100,100
                                                                 =============

                See Notes to Statement of Assets and Liabilities.


                                       B-34
<PAGE>
                     BBH BROAD MARKET FIXED INCOME PORTFOLIO

                  NOTES TO STATEMENT OF ASSETS AND LIABILITIES

         1.   Organization.   BBH  Broad  Market  Fixed  Income  Portfolio  (the
"Portfolio") is registered under the Investment Company Act of 1940, as amended,
as an open-ended  management  investment  company which was organized as a trust
under the laws of the State of New York on June 15, 1993. The Declaration of the
Trust permits the Trustees to create an unlimited number of beneficial interests
in the Portfolio.


                                       B-35
<PAGE>

INDEPENDENT AUDITORS' REPORT


Trustees and Investors
BBH Broad Market Fixed Income Portfolio:

We have  audited the  accompanying  statement of assets and  liabilities  of BBH
Broad  Market  Fixed  Income  Portfolio  (the  "Portfolio")  as of June 1,  2000
(expressed  in  United  States  dollars).   This  financial   statement  is  the
responsibility of the Portfolio's  management.  Our responsibility is to express
an opinion on this financial statement based on our audit.

We conducted our audit in accordance with auditing standards  generally accepted
in the  United  States of  America.  Those  standards  require  that we plan and
perform the audit to obtain reasonable  assurance about whether the statement of
assets and  liabilities  is free of  material  misstatement.  An audit  includes
examining,  on a test basis,  evidence supporting the amounts and disclosures in
the financial statement.  An audit includes assessing the accounting  principles
used and  significant  estimates made by  management,  as well as evaluating the
overall financial statement  presentation.  We believe that our audit provides a
reasonable basis for our opinion.

In our opinion,  this statement assets and liabilities  presents fairly,  in all
material respects, the financial position of the Portfolio as of June 1, 2000 in
conformity with accounting principles generally accepted in the United States of
America.





Boston, Massachusetts
June 2, 2000

                                       B-36

<PAGE>

Appendix A - Description of Ratings

The Portfolio's  investments  may range in quality from securities  rated in the
lowest  category in which the  Portfolio is  permitted  to invest to  securities
rated in the highest category (as rated by Moody's,  Standard & Poor's, Fitch's,
Duff & Phelps or, if  unrated,  determined  by the  Investment  Adviser to be of
comparable  quality).  The  percentage  of the  Portfolio's  assets  invested in
securities in a particular  rating  category will vary. The following  terms are
generally used to describe the credit quality of fixed income securities:

Investment  Grade Debt  Securities  are those  rated in one of the four  highest
rating categories or, if unrated, deemed comparable by the Investment Adviser.

Below Investment  Grade,  High Yield  Securities  ("Junk Bonds") are those rated
lower than Baa by Moody's or BBB by Standard & Poor's and comparable securities.
They are deemed to be  predominately  speculative  with  respect to the issuer's
ability to repay principal and interest.

Moody's Investors Service, Inc. - Corporate Bond Ratings

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

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

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

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

                                      B-37
<PAGE>

Ba:  Bonds  which are rated Ba are judged to have  speculative  elements;  their
future cannot be considered as  well-assured.  Often the  protection of interest
and  principal  payments may be very  moderate and thereby not well  safeguarded
during  both  good  and bad  times  over the  future.  Uncertainty  of  position
characterizes bonds in this class.

B:  Bonds  which are  rated B  generally  lack  characteristics  of a  desirable
investment.  Assurance of interest and principal  payments or of  maintenance of
other terms of the contract over any long period of time may be small.

Caa:  Bonds  which are rated Caa are of poor  standing.  Such  issues  may be in
default or there may be present  elements of danger with respect to principal or
interest.

Ca: Bonds which are rated Ca represent  obligations  which are  speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C:  Bonds  which are rated C are the lowest  rated  class of bonds and issues so
rated can be regarded as having  extremely  poor prospects of ever attaining any
real investment standing.

Moody's  applies  numerical  modifiers,  1,  2,  and 3 in  each  generic  rating
classified from Aa through B in its corporate bond rating system. The modifier 1
indicates  that the  security  ranks in the  higher  end of its  generic  rating
category;  the modifier a mid-range  ranking;  and the modifier 3 indicates that
the issue ranks in the lower end of its generic rating category.

Corporate Short-Term Debt Ratings

Moody's  short-term debt ratings are opinions of the ability of issuers to repay
punctually senior debt obligations which have an original maturity not exceeding
one year.  Obligations relying upon support mechanisms such as letters of credit
and bonds of indemnity are excluded unless explicitly rated.

Moody's  employs the following three  designations,  all judged to be investment
grade, to indicate the relative repayment ability of rated issuers:

                                      B-38
<PAGE>

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


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

PRIME-3:  Issuers rated Prime-3 (or supporting  institutions) have an acceptable
ability for repayment of senior short-term  obligations.  The effect of industry
characteristics and market  compositions may be more pronounced.  Variability in
earnings and profitability may result in changes in the level of debt protection
measurements  and may  require  relatively  high  financial  leverage.  Adequate
alternate liquidity is maintained.

NOT PRIME:  Issuers  rated Not Prime do not fall within any of the Prime  rating
categories.

Short-Term Municipal Bond Ratings

There are four rating  categories for short-term  municipal bonds that define an
investment grade situation, which are listed below. In the case of variable rate
demand  obligations  (VRDOs),  a two-  component  rating is assigned.  The first
element represents an evaluation of the degree of risk associated with scheduled
principal and interest  payments,  and the other represents an evaluation of the
degree  of risk  associated  with the  demand  feature.  The  short-term  rating
assigned to the demand  feature of VRDOs is designated as VMIG.  When either the
long- or short-term  aspect of a VRDO is not rated, that piece is designated NR,
e.g.,  Aaa/NR or NR/VMIG  1. MIG  ratings  terminate  at the  retirement  of the
obligation  while VMIG  rating  expiration  will be a function  of each  issue's
specific structural or credit features.

                                      B-39
<PAGE>

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

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

MIG 3/VMIG 3: This designation denotes favorable quality.  All security elements
are accounted for but there is lacking the undeniable  strength of the preceding
grades.  Liquidity and cash flow  protection may be narrow and market access for
refinancing is likely to be less well established.

MIG 4/VMIG 4: This designation  denotes adequate  quality.  Protection  commonly
regarded as  required of an  investment  security  is present and  although  not
distinctly or predominantly speculative, there is specific risk.

SG: This  designation  denotes  speculative  quality.  Debt  instruments in this
category lack margins of protection.


Corporate Bond Ratings

Standard & Poor's Ratings Services - Investment Grade

AAA:  Debt  rated AAA has the  highest  rating  assigned  by  Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.

AA: Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the highest rated issues only in small degree.

A: Debt  rated A has a strong  capacity  to pay  interest  and  repay  principal
although it is somewhat more  susceptible  to the adverse  effects of changes in
circumstances and economic conditions than debt in higher rated categories.

BBB:  Debt rated BBB is regarded as having an adequate  capacity to pay interest
and  repay  principal.   Whereas  it  normally  exhibits   adequate   protection
parameters,  adverse economic  conditions,  or changing  circumstances  are more
likely to lead to a weakened  capacity to pay interest and repay  principal  for
debt in this category than in higher-rated categories.

                                      B-40
<PAGE>

 Speculative Grade

Debt rated BB, B, CCC, CC, and C is regarded as having predominantly speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates  the least degree of  speculation  and C the highest.  While such debt
will  likely  have  some  quality  and  protective  characteristics,  these  are
outweighed by large uncertainties or major exposures to adverse conditions.


BB:  Debt  rated BB has less  near-term  vulnerability  to  default  than  other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse  business,  financial,  or  economic  conditions  which  could  lead  to
inadequate  capacity to meet timely  interest  and  principal  payments.  The BB
rating  category  is also  used for debt  subordinated  to  senior  debt that is
assigned an actual or implied BBB- rating.

B: Debt rated B has a greater  vulnerability  to default but  currently  has the
capacity to meet interest payments and principal  repayments.  Adverse business,
financial,  or economic conditions will likely impair capacity or willingness to
pay interest and repay  principal.  The B rating  category is also used for debt
subordinated  to  senior  debt that is  assigned  an  actual  or  implied  BB or
BB-rating.

CCC: Debt rated CCC has a currently identifiable vulnerability to default and is
dependent upon favorable  business,  financial,  and economic conditions to meet
timely  payment of interest and repayment of principal.  In the event of adverse
business,  financial  or  economic  conditions,  it is not  likely  to have  the
capacity to pay interest and repay  principal.  The CCC rating  category is also
used for debt  subordinated to senior debt that is assigned an actual or implied
B or B- rating.

CC: The rating CC is typically  applied to debt subordinated to senior debt that
is assigned an actual or implied CCC rating.

C: The rating C is typically applied to debt subordinated to senior debt that is
assigned  an actual or  implied  CCC- debt  rating.  The C rating may be used to
cover a situation where a bankruptcy  petition has been filed,  but debt service
payments are continued.

CI: The rating CI is  reserved  for income  bonds on which no  interest is being
paid.

D:  Debt  rated D is in  payment  default.  The D rating  category  is used when
interest payments or principal payments are not made on the date due even if the
applicable grace period has not expired,  unless Standard & Poor's believes that
such payments  will be made during such grace period.  The D rating will also be
used upon the filing of a  bankruptcy  petition  if debt  service  payments  are
jeopardized.

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

                                      B-41
<PAGE>

Provisional ratings: The letter "p" indicates that the rating is provisional.  A
provisional  rating  assumes the  successful  completion  of the  project  being
financed  by the debt being rated and  indicates  that  payment of debt  service
requirements  is largely or entirely  dependent  upon the  successful and timely
completion of the project. This rating, however, while addressing credit quality
subsequent to completion of the project,  makes no comment on the likelihood of,
or the risk of default upon  failure of, such  completion.  The investor  should
exercise his own judgment with respect to such likelihood and risk.

r: The "r" is attached  to  highlight  derivative,  hybrid,  and  certain  other
obligations  that Standard & Poor's  believes may experience  high volatility or
high variability in expected returns due to non- credit risks.  Examples of such
obligations  are:  securities  whose  principal or interest return is indexed to
equities,  commodities,  or currencies;  certain swaps and options; and interest
only and principal only mortgage securities.

The  absence  of an "r"  symbol  should  not be taken as an  indication  that an
obligation will exhibit no volatility or variability in total return.

N.R.: Not rated.

Debt  obligations of issuers  outside the United States and its  territories are
rated on the same basis as domestic  corporate and municipal issues. The ratings
measure  the  creditworthiness  of the  obligor  but do not  take  into  account
currency exchange and related uncertainties.


Fitch Investors Service ("Fitch") - Investment Grade

AAA, AA and A - Bonds rated AAA are considered to be investment grade and of the
highest quality.  The obligor has an  extraordinary  ability to pay interest and
repay  principal,  which is unlikely to be  affected by  reasonably  foreseeable
events.  Bonds  rated  AA are  considered  to be  investment  grade  and of high
quality.  The obligor's ability to pay interest and repay principal,  while very
strong,  is  somewhat  less than for AAA rated  securities  or more  subject  to
possible  change over the term of the issue.  Bonds rated A are considered to be
investment grade and of good quality.  The obligor's ability to pay interest and
repay  principal  is  considered  to be strong,  but may be more  vulnerable  to
adverse changes in economic  conditions and circumstances than bonds with higher
ratings.

                                      B-42
<PAGE>

Commercial Paper Rating Definitions

     A Standard & Poor's commercial paper rating is a current  assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days.  Ratings are graded into  several  categories,  ranging from A for the
highest  quality  obligations  to D for  the  lowest.  These  categories  are as
follows:

 A-1: This highest category indicates that the degree of safety regarding timely
payment is strong.  Those issues  determined to possess  extremely strong safety
characteristics are denoted with a plus sign (+) designation.

A-2:   Capacity  for  timely   payment  on  issues  with  this   designation  is
satisfactory.  However,  the  relative  degree  of  safety is not as high as for
issues designated A-1.

A-3: Issues carrying this designation have adequate capacity for timely payment.
They are,  however,  more  vulnerable  to the  adverse  effects  of  changes  in
circumstances than obligations carrying the higher designations.

B: Issues  rated B are regarded as having only  speculative  capacity for timely
payment.

C: This  rating is  assigned  to  short-term  debt  obligations  with a doubtful
capacity for payment.

D:  Debt  rated D is in  payment  default.  The D rating  category  is used when
interest  payments or principal  payments are not made on the date due,  even if
the applicable  grace period has not expired,  unless Standard & Poor's believes
that such payments will be made during such grace period.

Fitch - Commercial  Paper  ratings  reflect  current  appraisal of the degree of
assurance of timely  payment.  F-1+ issues are regarded as having the  strongest
degree of assurance for timely  payment.  An F-1 rating reflects an assurance of
timely payment only slightly less in degree than an F-1+ rating.  The symbol LOC
may follow  either  category and  indicates  that a letter of credit issued by a
commercial bank is attached to the commercial paper.

A commercial  paper rating is not a recommendation  to purchase,  sell or hold a
security inasmuch as it does not comment as to market price or suitability for a
particular investor.  The ratings are based on current information  furnished to
Standard  & Poor's or Fitch by the  issuer or  obtained  from  other  sources it
considers  reliable.  Standard  & Poor's or Fitch  does not  perform an audit in
connection  with any rating and may, on occasion,  rely on  unaudited  financial
information.  The ratings may be changed, suspended, or withdrawn as a result of
changes in or unavailability of such information.

                                      B-43
<PAGE>

Duff & Phelps Credit Rating Co.

        Long-Term Debt and Preferred Stock Ratings

  Rating Scale

  These  ratings   represent  a  summary  opinion  of  the  issuer's   long-term
fundamental   quality.   Rating   determination  is  based  on  qualitative  and
quantitative  factors  which  may  vary  according  to the  basic  economic  and
financial   characteristics   of  each  industry  and  each  issuer.   Important
considerations  are vulnerability to economic cycles as well as risks related to
such  factors  as  competition,  government  action,  regulation,  technological
obsolescence, demand shifts, cost structure, and management depth and expertise.
The projected  viability of the obligor at the trough of the cycle is a critical
determination.

 Each rating also takes into account the legal form of the security (e.g., first
 mortgage bonds, subordinated debt, preferred stock, etc.). The extent of rating
 dispersion among the various classes of
securities is determined by several factors including relative weightings of the
different security classes in the capital structure, the overall credit strength
of the issuer, and the nature of covenant protection.  From time to time, Duff &
Phelps Credit Rating Co. places issuers or security classes on Rating Watch. The
Rating Watch status results from a need to notify  investors and the issuer that
there are conditions present leading us to re-evaluate the current rating(s).

 A  listing  on  Rating  Watch,  however,  does  not  mean a  rating  change  is
inevitable.  The Rating  Watch  status can either be resolved  quickly or over a
longer  period of time,  depending on the reasons  surrounding  the placement on
Rating Watch.  The "up" designation  means a rating may be upgraded;  the "down"
designation  means a rating may be downgraded,  and the "uncertain"  designation
means a rating may be raised or lowered.

 Ratings of `BBB-' and higher fall within the  definition  of  investment  grade
securities, as defined by bank and insurance supervisory authorities. Structured
finance  issues,   including  real  estate,   asset-backed  and  mortgage-backed
financings,  use this same rating  scale.  Duff & Phelps  Credit  Rating  claims
paying  ability  ratings of  insurance  companies  use the same scale with minor
modification  in the definitions  (see page vii).  Thus, an investor can compare
the credit quality of investment  alternatives  across industries and structural
types.  A "Cash Flow  Rating"  (as noted for  specific  ratings)  addresses  the
likelihood that aggregate  principal and interest will equal or exceed the rated
amount under appropriate stress conditions.

                                      B-44
<PAGE>

  Rating Definition

 AAA

Highest credit  quality.  The risk factors are  negligible,  being only slightly
more than for risk-free U.S. Treasury debt.

  AA+
  AA
  AA-

High credit quality.  Protection factors are strong. Risk is modest but may vary
slightly from time to time because of economic conditions.

  A+
  A
  A-

Protection  factors are average but  adequate.  However,  risk  factors are more
variable in periods of greater economic stress.

  BBB+
  BBB
  BBB-

Below-average  protection  factors but still  considered  sufficient for prudent
investment. Considerable variability in risk during economic cycles.





  BB+
  BB
  BB-

Below  investment  grade but deemed likely to meet obligations when due. Present
or prospective  financial  protection  factors  fluctuate  according to industry
conditions. Overall quality may move up or down frequently within this category.

  B+
  B
  B-

Below investment grade and possessing risk that obligations will not be met when
due.  Financial  protection  factors will fluctuate widely according to economic
cycles,  industry  conditions  and/or  company  fortunes.  Potential  exists for
frequent  changes in the rating  within this  category or into a higher or lower
rating grade.

                                      B-45
<PAGE>

CCC

Well below investment-grade  securities.  Considerable  uncertainty exists as to
timely payment of principal, interest or preferred dividends. Protection factors
are  narrow  and  risk can be  substantial  with  unfavorable  economic/industry
conditions, and/or with unfavorable company developments.

DD

Defaulted debt  obligations.  Issuer failed to meet scheduled  principal  and/or
interest payments.

DP

 Preferred stock with dividend arrearages.


Credit  ratings are based on  information  obtained from sources  believed to be
accurate  and  reliable  and are  not a  recommendation  to buy,  sell or hold a
financial  obligation.  We do not  perform  an  audit  in  connection  with  any
information received and may rely on unaudited  information.  Credit ratings may
be subject to revision, suspension or withdrawal at any time as necessary due to
changes in or unavailability of information or other circumstances.

    .                                  B-46
<PAGE>



                                     PART C


Item 23. Exhibits.

           (a)   Amended and Restated Declaration of Trust.(1)

           (b)   By-laws.(1)

           (c)   Not Applicable.

           (d)   Investment Advisory Agreement.(1)

           (e)   Placement Agent Agreement.(1)

           (f)   Not Applicable.

           (g)   Custodian Agreement. (1)

           (h)   Administration Agreement. (1)

           (h)(i)   Expense Payment Agreement. (1)

           (i)   Not Applicable.

           (j)   Not Applicable.

           (k)   Not Applicable.

           (l)   Forms of Investment representation letters
                 of initial investors.(1)

           (m)   Not Applicable.

           (n)   Not Applicable.

           (o)   Not Applicable.

           (p)(i)Code of Ethics of the Portfolio.(1)

           (p)(ii)Code of Ethics of the Brown Brothers Harriman & Co.(1)

           (p)(iii) Code of Ethics of 59 Wall Street Distributors, Inc. (1)

_____________________________
(1) Filed with the initial Registration Statement on Form N-1A on June 5, 2000.


<PAGE>

Item 24.  Persons Controlled by or Under Common Control with Registrant.

           Not applicable.

Item 25.  Indemnification.

        Reference is hereby made to Article V of the  Registrant's  Declaration
of Trust, filed in the initial Registration Statement as an Exhibit.


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

Item 26.  Business and Other Connections of Investment Adviser.

       The Registrant's  investment adviser, Brown Brothers Harriman & Co., is
a New York limited partnership. Brown Brothers Harriman & Co. conducts a general
banking business and is a member of the New York Stock Exchange.

         To the  knowledge of the  Registrant,  none of the general  partners or
officers  of Brown  Brothers  Harriman & Co. is  engaged in any other  business,
profession, vocation or employment of a substantial nature.
                                      C-2

<PAGE>

Item 27.  Principal Underwriters.

        Not applicable.

Item 28.  Location of Accounts and Records.

        All accounts,  books and other  documents  required to be maintained by
Section 31(a) of the Investment Company Act of 1940 and the Rules thereunder are
maintained at the offices of:

         BBH Broad Market Fixed Income Portfolio
         63 Wall Street
         New York, NY  10005

         Brown Brothers Harriman & Co.
         59 Wall Street
         New York, NY  10005
         (investment adviser)

         Brown Brothers Harriman Trust Company LLC
         63 Wall Street
         New York, NY  10005
         (administrator)

         59 Wall Street Administrators, Inc.
         21 Milk Street
         Boston, MA  02109
         (subadministrator)

         59 Wall Street Distributors, Inc.
         21 Milk Street
         Boston, MA  02109
         (placement agent)

         Brown Brothers Harriman & Co.
         40 Water Street
         Boston, MA  02109
         (custodian)

Item 29.  Management Services.

        Not applicable.

Item 30.  Undertakings.

        Not applicable.

                                       C-3

<PAGE>


                                   SIGNATURES

     Pursuant to the  requirements  of the  Investment  Company Act of 1940, BBH
Broad  Market  Fixed  Income  Portfolio  has duly caused this  amendment  to its
registration  statement  on  Form  N-1A  to be  signed  on  its  behalf  by  the
undersigned,  thereto duly  authorized,  in the City of Boston,  Commonwealth of
Massachusetts on the 1st day of December, 2000.

BBH BROAD MARKET FIXED INCOME PORTFOLIO

By:   /s/ PHILIP W. COOLIDGE
       Philip W. Coolidge
       President


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