CITIFUNDS TRUST II, 485APOS, 1998-12-21

CITIFUNDS TRUST II
485APOS, 1998-12-21

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As filed with the Securities and Exchange Commission on December 21, 1998

File Nos. 2-90519
811-4007

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

FORM N-1A

REGISTRATION STATEMENT
UNDER

THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 28

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
AMENDMENT NO. 29

CITIFUNDS TRUST II
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

21 MILK STREET, 5TH FLOOR, BOSTON, MASSACHUSETTS 02109
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

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

PHILIP W. COOLIDGE, 21 MILK STREET, 5TH FLOOR, BOSTON, MASSACHUSETTS 02109
(NAME AND ADDRESS OF AGENT FOR SERVICE)

COPY TO:
ROGER P. JOSEPH, BINGHAM DANA LLP, 150 FEDERAL STREET,
BOSTON, MASSACHUSETTS 02110

It is proposed that this filing will become effective on March 1, 1999,
pursuant to paragraph (a) of Rule 485.

The Premium Portfolios, on behalf of Growth & Income Portfolio, Large
Cap Growth Portfolio and Small Cap Growth Portfolio, and Asset Allocation
Portfolios, on behalf of Small Cap Value Portfolio, have also executed this
registration statement.

<PAGE>

Prospectus

CITIFUNDSSM LARGE CAP GROWTH PORTFOLIO

Citibank, N.A., investment manager

CLASS A AND CLASS B SHARES

The Securities and Exchange Commission has
not approved or disapproved these securities or
passed upon the accuracy of this prospectus,
and any representation to the contrary is a
criminal offense.

March 1, 1999

<PAGE>

CITIFUNDS LARGE CAP GROWTH PORTFOLIO

TABLE OF CONTENTS

The Fund at a Glance

Your CitiFunds Account
Choosing a Share Class
How to Buy Shares
How the Price of Your Shares is Calculated
Reinstating Recently Sold Shares
How to Sell Shares
Exchanges
Dividends
Tax Matters

Management of the Fund
Manager
Management Fees

More About the Fund
Principal Investment Strategies
Risks

Financial Highlights

Appendix

<PAGE>

THE FUND AT A GLANCE

THIS SUMMARY BRIEFLY DESCRIBES LARGE CAP GROWTH PORTFOLIO AND THE PRINCIPAL
RISKS OF INVESTING IN IT. FOR MORE INFORMATION, SEE "MORE ABOUT THE FUND" ON
PAGE ____.

FUND GOAL

The Fund's goal is long-term capital growth. Dividend income, if any, is
incidental to this goal. Of course, there is no assurance that the Fund will
achieve its goal.

MAIN INVESTMENT STRATEGIES

Large Cap Growth Portfolio invests primarily in equity securities of U.S.
issuers that have large market capitalizations (that is, market capitalizations
within the top 1,000 stocks of the equity market). Under normal circumstances,
at least 65% of the Fund's total assets is invested in equity securities of
these issuers.

The Fund's equity securities consist primarily of common stocks. The Fund may
also invest in other securities that Citibank believes provide opportunities
for appreciation, such as preferred stock, warrants, securities convertible
into common stock and debt securities. These securities may be issued by
smaller companies. The Fund's debt securities must be investment grade when the
Fund purchases them. Investment grade securities are those rated Baa or better
by Moody's, BBB or better by Standard & Poor's, or which Citibank believes to
be of comparable quality. Less than 5% of the Fund's assets consist of debt
securities rated Baa by Moody's or BBB by Standard & Poor's.

In managing the Fund, Citibank emphasizes well-established companies with
superior management teams, histories of above-average revenues and earnings
growth and continuing above-average prospects for growth.

The Fund may invest up to 25% of its assets in foreign equity and debt
securities, including depositary receipts (receipts representing the right to
receive securities of foreign issuers deposited in a U.S. bank or a local
branch of a foreign bank). Foreign securities may be issued by issuers in
developing countries.

The Fund may use derivatives in order to protect (or "hedge") against changes
in the prices of securities held or to be bought or changes in the values (in
U.S. dollars) of securities of foreign issuers. The Fund may also use
derivatives for non-hedging purposes, to enhance potential gains. These
derivatives include stock index futures and forward foreign currency exchange
contracts. The Fund's ability to use derivatives successfully depends on a
number of factors, including derivatives being available at prices that are not
too costly, tax considerations, and Citibank accurately predicting movements in
stock prices or currency exchange rates.

MAIN RISKS

The principal risks of investing in the Fund are described below. See page ___
for more information about risks.

<PAGE>

o MARKET RISK. This is the risk that the prices of securities will
rise or fall due to changing economic, political or market
conditions, or due to a company's individual situation. The value of
the Fund's shares will change daily as the value of its underlying
securities change. This means that your shares of the Fund may be
worth more or less when you sell them than when you bought them.

o EQUITY SECURITIES. Equity securities are subject to market risk that
historically has resulted in greater price volatility than exhibited
by fixed income securities.

o GROWTH SECURITIES. Growth securities typically are quite sensitive
to market movements because their market prices tend to reflect
future expectations. When it appears those expectations will not be
met, the prices of growth securities typically fall. The success of
the Fund's investment strategy depends largely on Citibank's skill
in assessing the growth potential of companies in which the Fund
invests. In addition, the Fund may underperform certain other stock
funds (those emphasizing value stocks, for example) during periods
when growth stocks are out of favor.

o FOREIGN SECURITIES. Investments in foreign securities involve risks
relating to adverse political, social and economic developments
abroad, as well as risks resulting from the differences between the
regulations to which U.S. and foreign issuers and markets are
subject. These risks may include expropriation of assets,
confiscatory taxation, withholding taxes on dividends and interest
paid on Fund investments, currency exchange controls and other
limitations on the use or transfer of Fund assets and political or
social instability. There may be rapid changes in the value of
foreign currencies or securities, causing the Fund's share price to
be volatile. Also, in certain circumstances, the Fund could realize
reduced or no value in U.S. dollars from its investments in foreign
securities, causing the Fund's share price to go down.

The Fund may invest in issuers located in emerging, or developing,
markets. All of the risks of investing in foreign securities are
heightened by investing in these markets.

o DERIVATIVES. The Fund's use of derivatives (such as futures
contracts and forward foreign currency contracts), particularly for
non-hedging purposes, may be risky. This practice could result in
losses that are not offset by gains on other portfolio assets.
Losses would cause the Fund's share price to go down. The Fund's
ability to use derivatives successfully depends on Citibank's
ability to accurately predict movements in stock prices and currency
exchange rates. If Citibank's predictions are wrong, the Fund could
suffer greater losses than if the Fund had not used derivatives.

o INTEREST RATE RISK. In general, the prices of debt securities rise
when interest rates fall, and fall when interest rates rise. Longer

<PAGE>

term obligations are usually more sensitive to interest rate
changes. A change in interest rates could cause the Fund's share
price to go down.

o CREDIT RISK. Some issuers may not make payments on debt securities
held by the Fund, causing a loss. Or, an issuer's financial
condition may deteriorate, lowering the credit quality of a security
and leading to greater volatility in the price of the security and
in shares of the Fund. The prices of lower rated securities often
are more volatile than those of higher rated securities.

o SPECIAL CHARACTERISTICS OF CONVERTIBLE SECURITIES. Convertible
securities, which are debt securities that may be converted into
stock, are subject to the market risk of stocks, and, like other
debt securities, are also subject to interest rate risk and the
credit risk of their issuers.

Please note that an investment in the Fund is not a deposit of Citibank and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.

WHO MAY WANT TO INVEST

You should keep in mind that an investment in Large Cap Growth Portfolio is not
a complete investment program.

You should consider investing in Large Cap Growth Portfolio if:

o You want to direct a portion of your overall investment portfolio to
stocks of large cap issuers.

o You are seeking growth of principal but are concerned about the high
level of market volatility typically associated with more aggressive
growth funds.

o You are prepared to accept daily share price fluctuations.

o Your investment horizon is longer term -- typically at least five
years.

Don't invest in Large Cap Growth Portfolio if:

o You are not prepared to accept volatility of the Fund's share price
and possible losses.

o Current income is more important to you than growth of principal.

o Your investment horizon is shorter term (less than five years).

<PAGE>

FUND PERFORMANCE

The following bar chart and table can help you evaluate the risks of investing
in the Fund, and how its returns have varied over time.

o The bar chart shows changes in the Fund's performance from year to year
over the last eight calendar years. The chart and related information do
not take into account any sales charges that you may be required to pay.
Any sales charges will reduce your return.

o The table shows how the Fund's average annual returns for the periods
indicated compare to those of a broad measure of market performance. Please
remember that, unlike the Fund, the market index does not include the costs
of buying and selling securities and other Fund expenses.

o In both the chart and table, the returns shown for the Fund are for periods
before the creation of share classes on January 4, 1999. All existing Fund
shares were designated Class A shares on that date. Prior to that date,
there were no sales charges on the purchase or sale of Fund shares. The
returns for Class A in the table, but not the bar chart, have been adjusted
to reflect the maximum front-end sales charge currently applicable to the
Class A Shares.

o The Class B shares are newly offered and have no investment history. Class
B performance would have been lower than that shown for Class A shares,
because of higher fund expenses and the effects of the contingent deferred
sales charge.

When you consider this information, please remember that the Fund's past
performance is not necessarily an indication of how it will perform in the
future.

TOTAL RETURN ----------------------------------------------------
(per calendar year - Class A) HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
1991 1992 1993 1994 1995 1996 1997 1998
----------------------------------------------------
Quarter Ending
[bar chart for calendar years 1994 ----------------------------------------------------
through 1998] Highest [19.48%] [June 30, 1997]
----------------------------------------------------
1991...........30.74% Lowest [-7.71%] [September 30, 1998]
1992........... 7.60% ----------------------------------------------------
1993...........12.26%
1994...........-0.41% ----------------------------------------------------
1995...........27.55%
1996...........13.84% AVERAGE ANNUAL TOTAL RETURNS
1997...........31.38% (through December 31, 1998)
1998...........[ ]%
----------------------------------------------------
1 Year 5 years Since Inception
October 19, 1990

----------------------------------------------------
Class A _____ % ____ % _____ %
----------------------------------------------------
Class B N/A N/A N/A
----------------------------------------------------
Russell 1000
Growth Index _____ % ____ % _____ %
----------------------------------------------------
</TABLE>

<PAGE>

FUND FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.

<TABLE>
<CAPTION>
CLASS A CLASS B
<S> <C> <C>
Class descriptions begin on page [---]

SHAREHOLDER FEES (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases 5.00% None
Maximum Deferred Sales Charge (Load) None(1) 5.00%(2)

ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3):
Management Fees 0.90% 0.90%
Distribution (12b-1) Fees 0.25% 1.00%
Other Expenses (administrative, shareholder servicing and
other expenses) 0.30% 0.30%
TOTAL ANNUAL FUND OPERATING EXPENSES* 1.45% 2.20%
- -------------------------------------------------------------------------------------------------

*Because some of the Fund's expenses were waived or reimbursed, actual total
operating expenses for the prior year were (or, in the case of Class B
shares, would have been):
1.05% 1.80%

These fee waivers and reimbursements may be reduced or terminated at any time.
</TABLE>

1 Except for investment of $500,000 or more.

2 Class B shares have a contingent deferred sales charge (CDSC) which is
deducted from your sale proceeds if you sell your Class B shares within five
years of your original purchase of the shares. In the first year after
purchase, the CDSC is 5.00% of the price at which you purchased your shares, or
the price at which you sold your shares, whichever is less, declining to 1.00%
in the fifth year after purchase.

3 The Fund invests in an underlying mutual fund. This table reflects the
expenses of the Fund and the underlying fund in which it invests.

<PAGE>

EXAMPLE

This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds. The example assumes that:

o you invest $10,000 in the Fund for the time periods indicated;

o you pay the maximum applicable sales charge;

o you reinvest all dividends; and

o you then sell all your shares at the end of those periods, if you own
Class A shares.

If you own Class B shares, two numbers are given, one showing your expenses if
you sold all your shares at the end of each time period and one if you held
onto your shares. The example also shows the effects of the conversion of Class
B shares to Class A shares after 8 years.

The example also assumes that:

o each investment has a 5% return each year -- the assumption of a 5%
return is required by the SEC for the purpose of these examples and is
not a prediction of the Fund's future performance; and

o the Fund's operating expenses shown in the table above remain the same
before taking into consideration any fee waivers or reimbursements.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:
<TABLE>
<CAPTION>

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

1 YEAR 3 YEARS 5 YEARS 10 YEARS

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

Class A $_____ $_____ $_____ $_____

Class B

Assuming sale at end of period $_____ $_____ $_____ $_____

Assuming no sale $_____ $_____ $_____ $_____

- ------------------------------------------------------------------------------------------
</TABLE>

<PAGE>

YOUR CITIFUNDS ACCOUNT

CHOOSING A SHARE CLASS

THE FUND OFFERS TWO SHARES CLASSES, CLASS A AND CLASS B. EACH
CLASS HAS ITS OWN SALES CHARGE AND EXPENSE STRUCTURE. PLEASE
READ THE INFORMATION BELOW CAREFULLY TO HELP YOU DECIDE WHICH
SHARE CLASS IS BEST FOR YOU.
<TABLE>
<CAPTION>

<S> <C>
CLASS A AT A GLANCE: CLASS B AT A GLANCE:

o Front-end load -- there is an initial sales o No initial sales charge
charge of 5.00% or less

o Lower sales charge rates for larger o The deferred sales charge declines from
investments 5% to 1% over five years, and is
eliminated if you hold your shares for six
years or more

o Annual distribution/service fee of up to o Annual distribution/service fee of up to
0.25% 1.00%

o Lower annual expenses than Class B o Automatic conversion to Class A shares
shares after 8 years

</TABLE>

- -------------------------------------------------------------------------------
WHAT ARE DISTRIBUTION/SERVICE FEES?

Both Class A and Class B shares have annual DISTRIBUTION/SERVICE FEES that are
paid under a 12B-1 PLAN. These are fees, also called 12B-1 FEES, that are
deducted from Fund assets and are used to compensate those financial
professionals who sell fund shares and provide ongoing services to shareholders
and to pay other marketing and advertising expenses. Because you pay these fees
during the whole period that you own the shares, over time, you may pay more
than if you had paid other types of sales charges. For this reason, you should
consider the effects of 12b-1 fees as well as sales loads when choosing a share
class.
- -------------------------------------------------------------------------------

SALES CHARGES--CLASS A SHARES

o Class A shares are sold at net asset value plus a front-end, or
initial, sales charge. The rate you pay goes down as the amount of
your investment in Class A shares goes up. The table below shows the
rate of sales charge that you pay, depending on the amount that you
purchase.

o The table below also shows the amount of broker/dealer compensation
that is paid out of the sales charge. This compensation includes
commissions and other fees that financial professionals who sell
shares of the Fund receive. The distributor keeps up to
approximately 10% of the sales charge imposed on Class A shares.
Financial professionals that sell Class A shares will also receive
the service fee payable on Class A shares at an annual rate equal to
0.25% of the average daily net assets represented by the Class A
shares sold by them.

- ------------------------------------------------------------------------------------
<S> <C> <C> <C>
SALES CHARGE SALES CHARGE BROKER/DEALER
AS A % OF AS A % OF COMMISSION AS
AMOUNT OF OFFERING YOUR A % OF OFFERING
YOUR INVESTMENT PRICE INVESTMENT PRICE
- ------------------------------------------------------------------------------------
Less than $25,000 5.00% 5.26% 4.50%
- ------------------------------------------------------------------------------------
$25,000 to less than $50,000 4.00% 4.17% 3.60%
- ------------------------------------------------------------------------------------
$50,000 to less than $100,000 3.50% 3.62% 3.15%
- ------------------------------------------------------------------------------------
$100,000 to less than $250,000 3.00% 3.09% 2.70%
- ------------------------------------------------------------------------------------
$250,000 to less than $500,000 2.00% 2.04% 1.80%
- ------------------------------------------------------------------------------------
$500,000 or more none* none* up to 1.00%
- ------------------------------------------------------------------------------------
</TABLE>
*A contingent deferred sales charge may apply in certain instances.
See below.

o After the initial sales charge is deducted from your investment, the
balance of your investment is invested in the Fund.

o The sales charge may also be waived or reduced in certain circumstances, as
described in "Sales Charge Waivers or Reductions" below. If you qualify to
purchase Class A shares without a sales load, you should purchase Class A
shares rather than Class B shares because Class A shares pay lower fees.

o If you invest at least $500,000 in the Fund, you do not pay any initial
sales charge. However, you may be charged a "contingent deferred sales
charge" (CDSC) of 1% of the purchase price, or the sale price, whichever is
less, if you sell within the first year. Under certain circumstances,
waivers may apply. Other policies regarding the application of the CDSC are
the same as for Class B shares. Please read the discussion below on Class B
shares for more information.

SALES CHARGES--CLASS B SHARES

o Class B shares are sold without a front-end, or initial, sales charge, but
you are charged a "contingent deferred sales charge" (CDSC) when you sell
shares within five years of purchase. The rate of CDSC goes down the longer
you hold your shares. The table below shows the rates that you pay, as a
percentage of the purchase price (or the saleprice, whichever is less),
depending upon when you sell your shares.

---------------------------------------------------------------------
SALE DURING CDSC ON SHARES BEING SOLD
---------------------------------------------------------------------
1st year since purchase 5.00%
---------------------------------------------------------------------
2nd year since purchase 4.00%
---------------------------------------------------------------------
3rd year since purchase 3.00%
---------------------------------------------------------------------
4th year since purchase 2.00%
---------------------------------------------------------------------
5th year since purchase 1.00%
---------------------------------------------------------------------
6th year(or later) since purchase None
---------------------------------------------------------------------

o Financial professionals selling Class B shares receive a commission of
4.50% of the purchase price of the Class B shares that they sell, except
sales exempt from the CDSC. Financial professionals also receive a service
fee at an annual rate equal to 0.25% of the average daily net assets
represented by the Class B shares that they have sold.

o When you sell your shares, the CDSC will be based on either your purchase
price, or the sale price, whichever is less.

<PAGE>

o You do not pay a CDSC on shares acquired through reinvestment of dividends,
capital gain distributions and shares representing capital appreciation.

o To ensure that you pay the lowest CDSC possible, the Fund will always use
the Class B shares with the lowest CDSC to fill your sell requests.

o If you acquired your Class B shares through an exchange from another fund
managed or advised by Citibank, the date of your initial investment will be
used as the basis of the CDSC calculations. If the rate of CDSC on the
shares exchanged was higher than the rate of CDSC on your Fund shares, you
will be charged the higher rate when you sell your Fund shares.

From time to time, the distributor or Citibank may provide additional
promotional bonuses, incentives or payments to dealers that sell shares of the
Fund. These may include payments for travel expenses, including lodging,
incurred in connection with trips taken by invited registered representatives
and their guests to locations within and outside the United States for meetings
or seminars of a business nature. In some instances, these bonuses, incentives
or payments may be offered only to dealers who have sold or may sell
significant amounts of shares.

The Fund's distributor may make payments for distribution and/or shareholder
servicing activities out of its past profits and other available sources. The
distributor may also make payments for marketing, promotional or related
expenses to dealers. The amount of these payments is determined by the
distributor and may vary. Citibank may make similar payments under similar
arrangements.

SALES CHARGE WAIVERS OR REDUCTIONS

You may reduce or eliminate your sales charge on shares if you qualify for
certain waivers or elect to participate in certain programs. These include:

Front-End Loads

o Sales charge elimination for certain eligible purchasers, including certain
tax-exempt organizations, certain employee benefit plans, certain entities
or persons with a qualifying affiliation or relationship with Citibank,
and, under certain circumstances, investors using the proceeds of a
redemption from another mutual fund for their purchase of Class A shares.
Further information about eligible purchasers may be found in the Appendix
to this prospectus.

o Reduced sales charge plan for qualified groups.

o Right of Accumulation.

o Letter of Intent.

CDSC

o Redemptions made within one year of the death of the shareholder.

o Lump sum or other distributions from IRAs and certain other retirement
accounts.

You may learn more about the requirements for waiver or reduction and how the
programs work by requesting a copy of the Fund's Statement of Additional
Information, or by consulting with your financial professional.

<PAGE>

AUTOMATIC CONVERSION OF CLASS B SHARES

Class B shares automatically convert to Class A shares approximately eight
years after purchase. If you acquired your shares through an exchange, the date
of your initial investment will be used to determine your conversion date. You
will receive the same dollar amount of Class A shares as the Class B shares
converted. The price of Class A shares may be higher than Class B shares at the
time of conversion, because of the lower expenses of Class A shares. Therefore,
you may receive fewer Class A shares than the number of Class B shares
converted.

HOW TO BUY SHARES

Shares of Large Cap Growth Portfolio are offered continuously and purchases may
be made Monday through Friday, except on certain holidays. Shares may be
purchased from the Fund's distributor or a broker-dealer or financial
institution (called a Service Agent) that has entered into a service agreement
with the distributor concerning the Fund. Please specify whether you are
purchasing Class A or Class B shares. If you fail to specify, Class A shares
will be purchased for your account. The Fund and the distributor have the right
to reject any purchase order or cease offering Fund shares at any time.

Shares are purchased at net asset value (NAV) the next time it is calculated
after your order is received and accepted by the Fund's transfer agent. NAV is
the value of a single share of the Fund. If you are purchasing Class A shares,
the applicable sales charge will be added to the cost of your shares.

Your Service Agent will not transmit your purchase order for Fund shares until
it receives the purchase price in federal or other immediately available funds.
If you pay by check, the Service Agent transmits the order when the check
clears, usually within two business days.

If you are a customer of a Service Agent, your Service Agent will establish and
maintain your account and be the shareholder of record.

HOW THE PRICE OF YOUR SHARES IS CALCULATED

The Fund calculates its NAV every day the New York Stock Exchange is open for
trading. This calculation is normally made at 4:00 p.m. Eastern time. NAV is
calculated separately for each class of shares. NAV may be higher for Class A
shares because Class A shares bear lower expenses. On days when the financial
markets in which the Fund invests close early, NAV will be calculated as of the
close of those markets.

Portfolio securities and other assets are valued primarily on the basis of
market quotations, or if quotations are not available, by a method believed to
accurately reflect fair value. For foreign securities the values are translated
from the local currency into U.S. dollars using current exchange rates. If
trading in the currency is restricted, the Fund uses a rate believed to reflect
the currency's fair value in U.S. dollars. Trading may take place in foreign
securities held by the Fund on days when the Fund is not open for business. As
a result, the Fund's NAV may change on days on which it is not possible to
purchase or sell shares of the Fund.

<PAGE>

HOW TO SELL SHARES

You may sell (redeem) your shares on any business day without a sales charge.
The price will be the NAV the next time it is calculated after your redemption
request in proper form has been received by the Fund's transfer agent. If your
shares are subject to a CDSC, the applicable charge will be deducted from your
sale proceeds.

You may make redemption requests in writing through the Fund's transfer agent
or, if you are a customer of a Service Agent, through your Service Agent. If
your account application permits, you may also make redemption requests by
calling the Fund's transfer agent or, if you are a customer of a Service Agent,
your Service Agent. Each Service Agent is responsible for promptly submitting
redemption requests to the Fund's transfer agent. You are responsible for
making sure your redemption request is in proper form.

If you own both Class A and Class B shares, and want to sell shares, you should
specify which class of shares you wish to sell. If you fail to specify, Class A
shares will be redeemed first.

When you sell your Class B shares, they will be redeemed so as to minimize your
CDSC. Shares on which the CDSC is not payable, i.e.

o shares representing capital appreciation and

o shares representing the reinvestment of dividends and capital gain
distributions

will be sold first followed by

o shares held for the longest period of time.

You will receive your redemption proceeds in federal funds normally on the
business day after you sell your shares but generally within seven days. Your
redemption proceeds may be delayed for up to ten days if your purchase was made
by check. Your redemption proceeds may also be delayed, or your right to
receive redemption proceeds suspended, if the New York Stock Exchange is closed
(other than on weekends or holidays) or trading is restricted, or if an
emergency exists. The Fund has the right to pay your redemption proceeds by
giving you securities instead of cash. In that case, you may incur costs (such
as brokerage commissions) converting the securities into cash. You should be
aware that you may have to pay taxes on your redemption proceeds.

REINSTATING RECENTLY SOLD SHARES

For 30 days after you sell your Class A shares, the Fund permits you to
repurchase Class A shares in the Fund, up to the dollar amount of shares
redeemed, without paying any sales charges. To take advantage of this
reinstatement privilege, you must notify the Fund in writing at the time you
wish to repurchase the shares.

EXCHANGES

<PAGE>

your Class A shares are subject to a contingent deferred sales charge. You may
not exchange Class B shares for shares of CitiFunds that offer only a single
class of shares. You may acquire Fund shares through an exchange from another
fund managed by Citibank. You may place exchange orders through the transfer
agent or, if you are a customer of a Service Agent, through your Service Agent.
You may place exchange orders by telephone if your account applications
permits. The transfer agent or your Service Agent can provide you with more
information, including a prospectus for any fund that may be acquired through
an exchange.

The exchange will be based on the relative NAVs of both funds when they are
next determined after your order is accepted by the Fund's transfer agent. You
cannot exchange shares until the Fund has received payment in federal funds for
your shares. When you exchange your Class A shares, you will generally be
required to pay the difference, if any, between the sales charge payable on the
shares to be acquired in the exchange and the sales charge paid in connection
with your original purchase of Class A shares. When you exchange your Class B
shares, you will not pay any initial sales charge, and no CDSC is imposed when
your Class B shares are exchanged for Class B shares of certain other CitiFunds
that are made available by your Service Agent. However, you may be required to
pay a contingent deferred sales charge when you sell those shares. The length
of time that you owned Fund shares will be included in the holding period of
your new Class B shares.

The exchange privilege may be changed or terminated at any time. You should be
aware that you may have to pay taxes on any gain on your exchange.

DIVIDENDS

Large Cap Growth Portfolio pays substantially all of its net income (if any)
from dividends and interest to its shareholders of record as a dividend
semi-annually during the months of June and December.

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

Unless you choose to receive your dividends in cash, you will receive them as
full and fractional additional Fund shares.

TAX MATTERS

This discussion of taxes is for general information only. You should consult
your own tax adviser about your particular situation, and the status of your
account under state and local laws.

Shareholders are required to pay federal income tax on any dividends or other
distributions received, whether it is in cash or Fund shares. Generally,
distributions from the Fund's net investment income and short-term capital
gains will be taxed as ordinary income. A portion of distributions from net
investment income may be eligible for the dividends-received deduction
available to corporations. Distributions from long-term net capital gains will,
for tax purposes, be treated as long-term capital gains no matter how long you

<PAGE>

have held the shares of the Fund. The tax you pay on a given capital gains
distribution generally depends on how long the Fund has held the portfolio
securities it sold, and not on how long you have held your Fund shares.

Fund distributions will reduce the Fund's net asset value per share. As a
result, shareholders who buy shares just before the Fund makes a distribution
may pay the full price for the shares and then effectively receive a portion of
the purchase price back as a taxable distribution.

If you sell your shares of the Fund, or exchange them for shares of another
mutual fund, you generally will be subject to tax on any taxable gain. Your
taxable gain is computed by subtracting your tax basis in the shares from the
redemption proceeds (in the case of a sale) or the value of the shares received
(in the case of an exchange).

By law, the Fund must withhold 31% of your distributions and proceeds if you
have not provided complete, correct taxpayer information.

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

MANAGEMENT OF THE FUND

MANAGER

Large Cap Growth Portfolio draws on the strength and experience of Citibank.
Citibank is the investment manager of the Fund, and subject to policies set by
the Fund's Trustees, Citibank makes investment decisions. Citibank, with
headquarters at 153 East 53rd Street, New York, New York, has been managing
money since 1822. With its affiliates, it currently manages more than $290
billion in assets worldwide. Citibank is a wholly-owned subsidiary of Citicorp,
which is, in turn, a wholly-owned subsidiary of Citigroup Inc. Citigroup Inc.
was formed as a result of the merger of Citicorp and Travelers Group, Inc.,
which was completed on October 8, 1998. "CitiFunds" is a service mark of
Citicorp.

Citibank and its affiliates may have banking (including investment banking)
relationships with the issuers of securities that are held in the Fund.
However, in making investment decisions for the Fund, Citibank does not obtain
or use material inside information acquired by any division, department or
affiliate of Citibank in the course of those relationships. Citibank and its
affiliates may have loans outstanding that are repaid with proceeds of
securities purchased by the Fund.

Grant D. Hobson and Richard Goldman, Vice Presidents, have been the portfolio
managers of the Fund since January 1996. Mr. Hobson is a Senior Portfolio
Manager responsible for managing U.S. large capitalization equity portfolios
for trust and pension accounts of Citibank Global Asset Management and
currently manages, or co-manages, more than $4 billion of total assets at
Citibank. Prior to joining Citibank in 1993, Mr. Hobson was a securities
analyst and sector manager for pension accounts and mutual funds for Axe
Houghton, formerly a division of USF&G. Mr. Goldman is a Senior Investment

<PAGE>

Officer and lead portfolio manager for the Focused Growth Large Cap Funds. He
joined Citibank in 1985 as an assistant portfolio manager, working on
quantitative portfolio strategies. Within the investment unit, he has had
responsibilities in both product development and portfolio management, and he
spent several years working for the firm's senior management, responsible for
Citicorp's relationships with its investors and rating agencies. He currently
manages, or co-manages, approximately $6 billion of total assets at Citibank.

MANAGEMENT FEES

For the management services Citibank provided to the Fund and its underlying
mutual fund during the fiscal year ended October 31, 1998, Citibank received a
total of 0.70% of the Fund's average daily net assets, after waivers.

MORE ABOUT THE FUND

The Fund's goal, principal investments and risks are summarized in "The Fund at
a Glance" on page ___. More information on investments, investment strategies
and risks appears below.

PRINCIPAL INVESTMENT STRATEGIES

Large Cap Growth Portfolio's principal investment strategies are the strategies
that, in the opinion of Citibank, are most likely to achieve the Fund's
investment goal. Of course, there can be no assurance that the Fund will
achieve its goal. Please note that the Fund may also use strategies and invest
in securities that are not described below but that are described in the
Statement of Additional Information. Of course, Citibank may decide, as a
matter of investment strategy, not to use the investments and investment
techniques described below and in the Statement of Additional Information at
any particular time. The Fund's goal and strategies may be changed without
shareholder approval.

The Fund invests primarily in equity securities of U.S. issuers. Under normal
circumstances, at least 65% of the Fund's total assets is invested in equity
securities of large cap issuers. Large cap issuers are those with market
capitalizations within the top 1,000 stocks of the equity market.

- -------------------------------------------------------------------------------
WHAT ARE EQUITY SECURITIES?

EQUITY SECURITIES generally represent an ownership interest (or a right to
acquire an ownership interest) in an issuer, and include COMMON STOCKS,
SECURITIES CONVERTIBLE INTO COMMON STOCKS, PREFERRED STOCKS, WARRANTS for the
purchase of stock and DEPOSITARY RECEIPTS (receipts which represent the right
to receive the securities of non-U.S. issuers deposited in a U.S. or
correspondent bank). While equity securities historically have been more
volatile than fixed income securities, they historically have produced higher
levels of total return.
- -------------------------------------------------------------------------------

The Fund may also invest in securities of small cap issuers and international
issuers. Small cap issuers are those with market capitalizations below the top
1,000 stocks of the equity market. International issuers are those based
outside the United States.

The Fund's equity securities consist primarily of common stocks. The Fund's
other equity securities may include securities convertible into common stocks,

<PAGE>

preferred stocks, warrants for the purchase of stock and depositary receipts
(receipts which represent the right to receive the securities of foreign
issuers deposited in a U.S. bank or a local branch of a foreign bank).

The Fund may also invest in debt securities. The Fund's debt securities must be
investment grade when the Fund purchases them. Investment grade securities are
those rated Baa or better by Moody's, BBB or better by Standard & Poor's, or
which Citibank believes to be of comparable quality. Less than 5% of the Fund's
assets consist of debt securities rated Baa by Moody's or BBB by Standard &
Poor's.

In selecting investments, Citibank emphasizes issuers with long histories of
strong, relatively predictable earnings growth rates and the products and
strategies for continuing above-average growth. It seeks issuers that build
earnings by increasing sales, productivity and market share rather than by
cutting costs. Citibank also emphasizes issuers with stable financial
characteristics and low debt levels.

The Fund may hold cash pending investment, and may invest in money market
instruments, repurchase agreements and reverse repurchase agreements for cash
management purposes.

See "Risks" for more information about the risks associated with investing in
equity securities.

DERIVATIVES. The Fund may use derivatives in order to protect (or "hedge")
against declines in the value of securities held by the Fund or increases in
the cost of securities to be purchased in the future. The Fund may also use
derivatives for non-hedging purposes, to enhance potential gains. These
derivatives include stock index futures contracts, forward foreign currency
contracts and options on foreign currencies. In some cases, the derivatives
purchased by the Fund are standardized contracts traded on commodities
exchanges or boards of trade. This means that the exchange or board of trade
guaranties counterparty performance. In some cases, the derivatives may be
illiquid, and the Fund may bear more counterparty risk Derivatives may not be
available on terms that make economic sense (for example, they may be too
costly). The Fund's ability to use derivatives may also be limited by tax
considerations.

DEFENSIVE STRATEGIES. The Fund may, from time to time, take temporary defensive
positions that are inconsistent with the Fund's principal investment strategies
in attempting to respond to adverse market, political or other conditions. When
doing so, the Fund may invest without limit in high quality money market and
other short-term instruments, and may not be pursuing its investment goal.

INVESTMENT STRUCTURE. The Fund invests in securities through an underlying
mutual fund having the same investment goal and strategies. The Fund may stop
investing in its underlying mutual fund at any time, and will do so if the
Fund's Trustees believe that to be in the best interests of the Fund's
shareholders. The Fund could then invest in another mutual fund or pooled
investment vehicle or invest directly in securities.

MANAGEMENT STYLE. Managers of mutual funds use different styles when selecting
securities to purchase. Portfolio managers for the Fund use a "bottom-up"
approach when selecting securities for purchase or sell by the Fund. This means

<PAGE>

that they look primarily for individual companies with consistent earnings
growth, against the context of broader market factors. For more information,
see "Manager" on page ___.

Citibank may use brokers or dealers for Fund transactions who also provide
brokerage and research services to the Fund or other accounts over which
Citibank exercises investment discretion. The Fund may "pay up" for brokerage
services, meaning that it is authorized to pay a broker or dealer who provides
these brokerage and research services a commission for executing a portfolio
transaction which is higher than the commission another broker or dealer would
have charged. However, the Fund will "pay up" only if Citibank determines in
good faith that the higher commission is reasonable in relation to the
brokerage and research services provided, viewed in terms of either the
particular transaction or all of the accounts over which Citibank exercises
investment discretion.

The Fund is actively managed. Although the portfolio managers attempt to
minimize portfolio turnover, from time to time the Fund's annual portfolio
turnover rate may exceed 100%. The sale of securities may produce capital
gains, which, when distributed, are taxable to investors. Active trading may
also increase the amount of commissions or mark-ups the Fund pays to broker or
dealers when it buys and sells securities. The "Financial Highlights" section
of this prospectus shows the Fund's historical portfolio turnover rate.

RISKS

Investing in a mutual fund involves risk. Before investing, you should consider
the risks you will assume. Certain of these risks are described below. More
information about risks appears in the Fund's Statement of Additional
Information. Remember that you may receive little or no return on your
investment in the Fund. You may lose money if you invest in this Fund.

Please remember that an investment in the Fund is not a deposit of Citibank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.

MARKET RISK. This is the risk that the prices of securities will rise or fall
due to changing economic, political or market conditions, or due to a company's
individual situation. The value of the Fund's shares will change daily as the
value of its underlying securities change. This means that your shares of the
Fund may be worth more or less when you sell them than when you bought them.

EQUITY SECURITIES. Equity securities are subject to market risk that
historically has resulted in greater price volatility than exhibited by fixed
income securities.

GROWTH SECURITIES. Growth securities typically are quite sensitive to market
movements because their market prices tend to reflect future expectations. When
it appears those expectations will not be met, the prices of growth securities
typically fall. Growth securities may also be more volatile than other
investments because they generally do not pay dividends. The success of the
Fund's investment strategy depends largely on Citibank's skill in assessing the
growth potential of companies in which the Fund invests.

<PAGE>

FOREIGN SECURITIES. Investments in foreign securities involve risks relating to
political, social and economic developments abroad, as well as risks resulting
from the differences between the regulations to which U.S. and foreign issuers
and markets are subject.

o These risks may include expropriation of assets, confiscatory
taxation, withholding taxes on dividends and interest paid on fund
investments, currency exchange controls and other limitations on the
use or transfer of Fund assets and political or social instability.

o Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there may
be less public information about their operations.

o Foreign markets may be less liquid and more volatile than U.S.
markets. Rapid increases in money supply may result in speculative
investing, contributing to volatility. Also, equity securities may
trade at price-earnings multiples that are higher than those of
comparable U.S. companies, and that may not be sustainable. As a
result, there may be rapid changes in the value of foreign
securities.

o Foreign markets may offer less protection to investors. Enforcing
legal rights may be difficult, costly and slow. There may be special
problems enforcing claims against foreign governments.

o Since foreign securities often trade in currencies other than the
U.S. dollar, changes in currency exchange rates will affect the
Fund's net asset value, the value of dividends and interest earned,
and gains and losses realized on the sale of securities. An increase
in the U.S. dollar relative to these other currencies will adversely
affect the value of the Fund. In addition, some foreign currency
values may be volatile and there is the possibility of governmental
controls on currency exchanges or governmental intervention in
currency markets. Controls or intervention could limit or prevent
the Fund from realizing value in U.S. dollars from its investment in
foreign securities.

o The Fund may invest in issuers located in emerging, or developing,
markets.

o Emerging or developing countries are generally defined as
countries in the initial stages of their industrialization
cycles with low per capita income.

o All of the risks of investing in foreign securities are
heightened by investing in developing countries.

o The markets of developing countries have been more volatile than
the markets of developed countries with more mature economies.
These markets often have provided higher rates of return, and
greater risks, to investors, but they also may provide lower
rates of return or negative returns, for extended periods.

SMALLER COMPANIES. The securities of smaller capitalization companies may have
more risks than those of larger, more seasoned companies. They may be

<PAGE>

particularly susceptible to market downturns because of limited financial or
management resources. Also, there may be less publicly available information
about small cap companies. As a result, their prices may be volatile, causing
the Fund's share price to be volatile.

INTEREST RATE RISK. In general, the prices of debt securities rise when
interest rates fall, and fall when interest rates rise. Longer term obligations
are usually more sensitive to interest rate changes. A change in interest rates
could cause the Fund's share price to go down.

CREDIT RISK. The Fund invests in investment grade debt securities. It is
possible that some issuers will not make payments on debt securities held by
the Fund, causing a loss. Or, an issuer may suffer adverse changes in its
financial condition that could lower the credit quality of a security, leading
to greater volatility in the price of the security and in shares of the Fund. A
change in the quality rating of a bond or other security can also affect the
security's liquidity and make it more difficult for the Fund to sell. The lower
quality debt securities in which the Fund may invest are more susceptible to
these problems than higher quality obligations.

SPECIAL CHARACTERISTICS OF CONVERTIBLE SECURItIES. Convertible securities,
which are debt securities that may be converted into stock, are subject to the
market risk of stocks, and, like other debt securities, are also subject to
interest rate risk and the credit risk of their issuers. Call provisions may
allow the issuer to repay the debt before it matures.

DERIVATIVES. The Fund's use of derivatives (such as futures contracts and
forward foreign currency contracts), particularly when used for non-hedging
purposes, may be risky. This practice could result in losses that are not
offset by gains on other portfolio assets. Losses would cause the Fund's share
price to go down. There is also the risk that the counterparty may fail to
honor its contract terms. This risk becomes more acute when the Fund invests in
derivatives that are not traded on commodities exchanges or boards of trade.
The Fund's ability to use derivatives successfully depends on Citibank's
ability to accurately predict movements in stock prices and currency exchange
rates. If Citibank's predictions are wrong, the Fund could suffer greater
losses than if the Fund had not used derivatives.

YEAR 2000. The Fund could be adversely affected if the computer systems used by
the Fund or its service providers are not programmed to accurately process
information on or after January 1, 2000. The Fund, and its service providers,
are making efforts to resolve any potential Year 2000 problems. While it is
likely these efforts will be successful, the failure to implement any necessary
modifications could have an adverse impact on the Fund. The Fund also could be
adversely affected if the issuers of securities held by the Fund do not solve
their Year 2000 problems, or if it costs them large amounts of money to solve
these problems.

<PAGE>

FINANCIAL HIGHLIGHTS

This table is intended to help you understand the Fund's performance and other
financial information for the fiscal periods indicated. "Total return" shows
how much your investment in the Fund would have increased or decreased during
each period, assuming you had reinvested all dividends and distributions. These
financial statements and notes have been audited by PricewaterhouseCoopers LLP,
independent accountants for the Fund, whose report is included in the Fund's
annual report.

<PAGE>

Appendix

CLASS A SHARES - ELIGIBLE PURCHASERS:

Class A shares may be purchased without a sales charge by the following
eligible purchasers:

[] tax exempt organizations under Section 501(c)(3-13) of
the Internal Revenue Code

[] trust accounts for which Citibank, N.A or any subsidiary
or affiliate of Citibank acts as trustee and exercises
discretionary investment management authority

[] accounts for which Citibank or any subsidiary or
affiliate of Citibank performs investment advisory
services or charges fees for acting as custodian

[] directors or trustees (and their immediate families), and
retired directors or trustees (and their immediate
families), of any investment company for which Citibank
or any subsidiary or affiliate of Citibank serves as the
investment adviser or as a service agent

[] employees of Citibank and its affiliates, CFBDS, Inc. and
its affiliates or any Service Agent and its affiliates
(including immediate families of any of the foregoing),
and retired employees of Citibank and its affiliates or
CFBDS and its affiliates (including immediate families of
any of the foregoing)

[] investors participating in a fee-based arrangement
sponsored or advised by Citibank or its affiliates

[] investors participating in a rewards program that offers
Fund shares as an investment option based on an
investor's balances in selected Citigroup Inc. products
and services

[] employees of members of the National Association of
Securities Dealers, Inc., provided that such sales are
made upon the assurance of the purchaser that the
purchase is made for investment purposes and that the
securities will not be resold except through redemption
or repurchase

[] separate accounts used to fund certain unregistered
variable annuity contracts

[] direct rollovers by plan participants from a 401(k) plan
offered to Citigroup employees

[] shareholder accounts established through a reorganization
or similar form of business combination approved by the
Fund's Board of Trustees or by the Board of Trustees of
any other CitiFund or mutual fund managed or advised by
Citibank (all of such funds being referred to herein as

<PAGE>

CitiFunds) the terms of which entitle those shareholders
to purchase shares of the Fund or any other CitiFund at
net asset value without a sales charge

[] employee benefit plans qualified under Section 401(k) of
the Internal Revenue Code with accounts outstanding on
January 4, 1999

[] employee benefit plans qualified under Section 401 of the
Internal Revenue Code, including salary reduction plans
qualified under Section 401(k) of the Code, subject to
minimum requirements as may be established by CFBDS with
respect to the amount of purchase; currently, the amount
invested by the qualified plan in the Fund or in any
combination of CitiFunds must total a minimum of $1
million

[] accounts associated with Copeland Retirement Programs

[] investors purchasing $500,000 million or more of Class A
shares; however, a contingent deferred sales charge will
be imposed on the investments in the event of certain
share redemptions within 12 months following the share
purchase, at the rate of 1% of the lesser of the value of
the shares redeemed (not including reinvested dividends
and capital gains distributions) or the total cost of the
shares; the contingent deferred sales charge on Class A
shares will be waived under the same circumstances as the
contingent deferred sales charge on Class B shares will
be waived; in determining whether a contingent deferred
sales charge on Class A shares is payable, and if so, the
amount of the charge:
+ it is assumed that shares not subject to the
contingent deferred sales charge are the first
redeemed followed by other shares held for the
longest period of time
+ all investments made during a calendar month will age
one month on the last day of the month and each
subsequent month
+ any applicable contingent deferred sales charge will
be deferred upon an exchange of Class A shares for
Class A shares of another CitiFund and deducted from
the redemption proceeds when the exchanged shares are
subsequently redeemed (assuming the contingent
deferred sales charge is then payable)
+ the holding period of Class A shares so acquired
through an exchange will be aggregated with the
period during which the original Class A shares were
held

[] subject to appropriate documentation, investors where the
amount invested represents redemption proceeds from a
mutual fund (other a CitiFund), if:
+ the redeemed shares were subject to an initial sales
charge or a deferred sales charge (whether or not
actually imposed), and
+ the redemption has occurred no more than 60 days
prior to the purchase of Class A shares of the Fund

[] an investor who has a business relationship with an
investment consultant or other registered representative

<PAGE>

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

<PAGE>

The Statement of Additional Information (SAI) provides more details about the
Fund and its policies. The SAI is incorporated by reference into this
prospectus and is legally part of it.

Additional information about the Fund's investments is available in the Fund's
Annual and Semi-Annual Reports to Shareholders. In the Fund's Annual Report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund's performance.

The Annual and Semi-Annual Reports for the Fund list its portfolio holdings and
describe its performance.

To obtain free copies of the SAI and the Annual and Semi-Annual Reports or to
make other inquiries, please call toll-free 1-800-625-4552.

The SAI is also available from the Securities and Exchange Commission. You can
find it on the SEC Internet site at http://www.sec.gov. Information about the
Fund (including the SAI) can also be reviewed and copied at the SEC's Public
Reference Room in Washington, DC. You can get information on the operation of
the Public Reference Room by calling the SEC at 1-800-SEC-0330. You can receive
copies of this information by sending your request and a duplicating fee to the
SEC's Public Reference Section, Washington, DC 20549-6009.

SEC file number: 811-4007
<PAGE>
Prospectus

CITIFUNDSSM SMALL CAP GROWTH PORTFOLIO

Citibank, N.A., investment manager

CLASS A AND CLASS B SHARES

The Securities and Exchange Commission has
not approved or disapproved these securities or
passed upon the accuracy of this prospectus,
and any representation to the contrary is a
criminal offense.

March 1, 1999

<PAGE>

CITIFUNDS SMALL CAP GROWTH PORTFOLIO

TABLE OF CONTENTS

The Fund at a Glance

Your CitiFunds Account
Choosing a Share Class
How to Buy Shares
How the Price of Your Shares is Calculated
How to Sell Shares
Reinstating Recently Sold Shares
Exchanges
Dividends
Tax Matters

Management of the Fund
Manager
Management Fees

More About the Fund
Principal Investment Strategies
Risks

Financial Highlights

Appendix

<PAGE>

THE FUND AT A GLANCE

THIS SUMMARY BRIEFLY DESCRIBES SMALL CAP GrOWTH PORTFOLIO AND THE PRINCIPAL
RISKS OF INVESTING IN IT. FOR MORE INFORMATION, SEE "MORE ABOUT THE FUND" ON
PAGE ____.

FUND GOAL

The Fund's goal is long-term capital growth. Dividend income, if any, is
incidental to this goal. Of course, there is no assurance that the Fund will
achieve its goal.

MAIN INVESTMENT STRATEGIES

Small Cap Growth Portfolio invests primarily in equity securities of U.S.
issuers that have small market capitalizations (that is, market capitalizations
below the top 1,000 stocks of the equity market). These securities may include
the stocks in the Russell 2000 Index, which is an index of small capitalization
stocks. Under normal circumstances, at least 65% of the Fund's total assets is
invested in equity securities of these issuers. The Fund's equity securities
may include the following:

o common stocks;

o securities convertible into common stocks;

o preferred stocks;

o warrants; and

o depositary receipts (receipts which represent the right to receive
the securities of foreign issuers deposited in a U.S. bank or a
local branch of a foreign bank).

The Fund may also invest in other securities that Citibank believes provide
opportunities for appreciation, such as fixed income securities. The Fund's
debt securities must be investment grade when the Fund purchases them.
Investment grade securities are those rated Baa or better by Moody's, BBB or
better by Standard & Poor's, or which Citibank believes to be of comparable
quality.

In managing the Fund, Citibank uses an aggressive, growth-oriented investment
style that emphasizes companies with superior management teams and good
prospects for growth. In addition, the Fund may invest in companies believed to
be emerging companies relative to their potential markets. The Fund may
continue to hold securities of issuers that become mid cap or large cap issuers
if, in Citibank's judgment, these securities remain good investments for the
Fund.

The Fund may invest up to 25% of its assets in foreign equity and debt
securities, including depositary receipts. Foreign securities may be issued by
issuers in developing countries.

<PAGE>

derivatives include stock index futures and forward foreign currency exchange
contracts. The Fund's ability to use derivatives successfully depends on a
number of factors, including derivatives being available at prices that are not
too costly, tax considerations, and Citibank accurately predicting movements in
stock prices and currency exchange rates.

MAIN RISKS

The principal risks of investing in the Fund are described below. See page ___
for more information about risks.

o EQUITY SECURItIES. Equity securities are subject to market risk that
historically has resulted in greater price volatility than exhibited
by fixed income securities.

o SMALLER COMPANIES. The securities of smaller capitalized companies
may have more risks than those of larger, more seasoned companies.
They may be particularly susceptible to market downturns because of
limited product lines, markets, distribution channels or financial
and management resources. Also, there may be less publicly available
information about small cap companies. As a result, their prices may
be more volatile, causing the Fund's share price to be volatile.
Funds that invest a higher percentage of their assets in small cap
stocks are generally more volatile than funds investing a higher
percentage of their assets in larger, more established companies.

The Fund's aggressive, growth-oriented investment style may increase
the risks associated with investing in smaller companies. For
example, the securities of fast growing small cap companies may be
more volatile than those of other small cap companies.

<PAGE>

limitations on the use or transfer of Fund assets and political or
social instability. There may be rapid changes in the value of
foreign currencies or securities, causing the Fund's share price to
be volatile. Also, in certain circumstances, the Fund could realize
reduced or no value in U.S. dollars from its investments in foreign
securities, causing the Fund's share price to go down.

The Fund may invest in issuers located in emerging, or developing,
markets. All of the risks of investing in foreign securities are
heightened by investing in these markets.

o DERIVATIVES. The Fund's use of derivatives (such as futures
contracts and forward foreign currency contracts), particularly for
non-hedging purposes, may be risky. This practice could result in
losses that are not offset by gains on other portfolio assets,
causing the Fund's share price to go down. The Fund's ability to use
derivatives successfully depends on Citibank's ability to accurately
predict movements in stock prices and currency exchange rates. If
Citibank's predictions are wrong, the Fund could suffer greater
losses than if the Fund had not used derivatives.

o INTEREST RATE RISK. In general, the prices of debt securities rise
when interest rates fall, and fall when interest rates rise. Longer
term obligations are usually more sensitive to interest rate
changes. A change in interest rates could cause the Fund's share
price to go down.

Please note that an investment in the Fund is not a deposit of Citibank and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.

WHO MAY WANT TO INVEST

You should keep in mind that an investment in Small Cap Growth Portfolio is not
a complete investment program.

You should consider investing in Small Cap Growth Portfolio if:

o You want to direct a portion of your overall investment portfolio to
stocks of small cap issuers.

o You are seeking growth of principal.

o You are prepared to accept significant daily share price
fluctuations.

<PAGE>

o Your investment horizon is longer term--typically at least five
years.

Don't invest in Small Cap Growth Portfolio if:

o You are not prepared to accept high volatility of the Fund's share
price and possible losses.

o Current income is more important to you than growth of principal.

o Your investment horizon is shorter term (less than five years).

FUND PERFORMANCE

The following bar chart and table can help you evaluate the risks of investing
in the Fund, and how its returns have varied over time.

o The bar chart shows changes in the Fund's performance from year to year
over the last three calendar years. The chart and related information do
not take into account any sales charges that you may be required to pay.
Any sales charges will reduce your return.

When you consider this information, please remember that the Fund's past
performance is not necessarily an indication of how it will perform in the
future.

<PAGE>

TOTAL RETURN ------------------------------------------------
(per calendar year - Class A) HIGHEST AND LOWEST RETURNS
(for calendar quarters covered by the bar chart)
1996 1997 1998
------------------------------------------------
1996...............37.80% Quarter Ending
1997...............15.81% ------------------------------------------------
1998...............[ ]% Highest _____% [date]
------------------------------------------------
Lowest _____% [date]
------------------------------------------------

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

AVERAGE ANNUAL TOTAL RETURNS
(through December 31, 1998)

------------------------------------------------
Life of Fund
1 Year (since 6/21/95)

------------------------------------------------
Class A _____ % _____ %
------------------------------------------------
Class B N/A N/A
------------------------------------------------
Russell 2000
Growth Index _____ % _____ %
------------------------------------------------

<PAGE>

FUND FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.

<TABLE>
<CAPTION>
<S> <C> <C>
CLASS A CLASS B

Class descriptions begin on page [---]

SHAREHOLDER FEES (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases 5.00% None
Maximum Deferred Sales Charge (Load) None(1) 5.00%(2)

ANNUAL FUND OPERATING EXPENSES (expenses that are
deducted from Fund assets)(3):
Management Fees 1.10% 1.10%
Distribution (12b-1) Fees 0.25% 1.00%
Other Expenses (administrative, shareholder servicing and 0.38% 0.38%
other expenses):
TOTAL ANNUAL FUND OPERATING EXPENSES* 1.73% 2.48%

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

*Because some of the Fund's expenses were waived or reimbursed, actual total
operating expenses for the prior year were (or, in the case of Class B
shares, would have been):
1.35% 2.10%

These fee waivers and reimbursements may be reduced or terminated at any time.
</TABLE>

1 Except for investment of $500,000 or more.

3 The Fund invests in an underlying mutual fund. This table reflects the
expenses of the Fund and the underlying fund in which it invests.

<PAGE>

EXAMPLE

This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds. The example assumes that:

o you invest $10,000 in the Fund for the time periods indicated;

o you pay the maximum applicable sales charge;

o you reinvest all dividends; and

o you then sell all your shares at the end of those periods, if you own
Class A shares.

The example also assumes that:

o each investment has a 5% return each year -- the assumption of a 5%
return is required by the SEC for the purpose of these examples and is
not a prediction of the Fund's future performance; and

o the Fund's operating expenses shown in the table above remain the same
before taking into consideration any fee waivers or reimbursements.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------

1 YEAR 3 YEARS 5 YEARS 10 YEARS

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

Class A $_____ $_____ $_____ $_____

Class B

Assuming sale at end of period $_____ $_____ $_____ $_____

Assuming no sale $_____ $_____ $_____ $_____

- ----------------------------------------------------------------------------------------
</TABLE>

<PAGE>

YOUR CITIFUNDS ACCOUNT

CHOOSING A SHARE CLASS

<S> <C>
CLASS A AT A GLANCE: CLASS B AT A GLANCE:

o Front-end load -- there is an initial o No initial sales charge
sales charge of 5.00% or less
o Lower sales charge rates for larger o The deferred sales charge declines from
investments 5% to 1% over five years, and is
eliminated if you hold your shares for six
years or more

o Annual distribution/service fee of up o Annual distribution/service fee of up to
to 0.25% 1.00%
o Lower annual expenses than Class B o Automatic conversion to Class A shares
shares after 8 years
</TABLE>

- -------------------------------------------------------------------------------
WHAT ARE DISTRIBUTION/SERVICE FEES?

SALES CHARGES--CLASS A SHARES

<S> <C> <C> <C>
---------------------------------------------------------------------------------
SALES CHARGE SALES CHARGE BROKER/DEALER
AS A % OF AS A % OF COMMISSION AS
AMOUNT OF OFFERING YOUR A % OF OFFERING
YOUR INVESTMENT PRICE INVESTMENT PRICE
---------------------------------------------------------------------------------
Less than $25,000 5.00% 5.26% 4.50%
---------------------------------------------------------------------------------
$25,000 to less than $50,000 4.00% 4.17% 3.60%
---------------------------------------------------------------------------------
$50,000 to less than $100,000 3.50% 3.62% 3.15%
---------------------------------------------------------------------------------
$100,000 to less than $250,000 3.00% 3.09% 2.70%
---------------------------------------------------------------------------------
$250,000 to less than $500,000 2.00% 2.04% 1.80%
---------------------------------------------------------------------------------
$500,000 or more none* none* up to 1.00%
---------------------------------------------------------------------------------
*A contingent deferred sales charge may apply in certain instances. See
below.
</TABLE>

o After the initial sales charge is deducted from your investment, the
balance of your investment is invested in the Fund.

SALES CHARGES--CLASS B SHARES

o Class B shares are sold without a front-end, or initial, sales charge, but
you are charged a "contingent deferred sales charge" (CDSC) when you sell
shares within five years of purchase. The rate of CDSC goes down the longer
you hold your shares. The table below shows the rates that you pay, as a
percentage of the purchase price (or the sale price, whichever is less),
depending upon when you sell your shares.

o When you sell your shares, the CDSC will be based on either your purchase
price, or the sale price, whichever is less.

<PAGE>

o You do not pay a CDSC on shares acquired through reinvestment of dividends,
capital gain distributions and shares representing capital appreciation.

o To ensure that you pay the lowest CDSC possible, the Fund will always use
the Class B shares with the lowest CDSC to fill your sell requests.

SALES CHARGE WAIVERS OR REDUCTIONS

You may reduce or eliminate your sales charge on shares if you qualify for
certain waivers or elect to participate in certain programs. These include:

Front-End Loads

o Reduced sales charge plan for qualified groups.

o Right of Accumulation.

o Letter of Intent.

CDSC

o Redemptions made within one year of the death of the shareholder.

o Lump sum or other distributions from IRAs and certain other retirement
accounts.

<PAGE>

AUTOMATIC CONVERSION OF CLASS B SHARES

HOW TO BUY SHARES

Shares of Small Cap Growth Portfolio are offered continuously and purchases may
be made Monday through Friday, except on certain holidays. Shares may be
purchased from the Fund's distributor or a broker-dealer or financial
institution (called a Service Agent) that has entered into a service agreement
with the distributor concerning the Fund. Please specify whether you are
purchasing Class A or Class B shares. If you fail to specify, Class A shares
will be purchased for your account. The Fund and the distributor have the right
to reject any purchase order or cease offering Fund shares at any time.

If you are a customer of a Service Agent, your Service Agent will establish and
maintain your account and be the shareholder of record.

HOW THE PRICE OF YOUR SHARES IS CALCULATED

<PAGE>

HOW TO SELL SHARES

If you own both Class A and Class B shares, and want to sell shares, you should
specify which class of shares you wish to sell. If you fail to specify, Class A
shares will be redeemed first.

When you sell your Class B shares, they will be redeemed so as to minimize your
CDSC. Shares on which the CDSC is not payable, i.e.

o shares representing capital appreciation and

o shares representing the reinvestment of dividends and capital gain
distributions

will be sold first followed by shares held for the longest period of time.

REINSTATING RECENTLY SOLD SHARES

For 90 days after you sell your Class A shares, the Fund permits you to
repurchase Class A shares in the Fund, up to the dollar amount of shares
redeemed, without paying any sales charges. To take advantage of this
reinstatement privilege, you must notify the Fund in writing at the time you
wish to repurchase the shares.

EXCHANGES

You may exchange Fund shares for shares of certain other funds managed or
advised by Citibank. You may also be able to exchange your Class A shares for
shares of certain CitiFunds that offer only a single class of shares, unless
your Class A shares are subject to a contingent deferred sales charge. You may
not exchange Class B shares for shares of CitiFunds that offer only a single

<PAGE>

class of shares. You may acquire Fund shares through an exchange from another
fund managed by Citibank. You may place exchange orders through the transfer
agent or, if you are a customer of a Service Agent, through your Service Agent.
You may place exchange orders by telephone if your account applications
permits. The transfer agent or your Service Agent can provide you with more
information, including a prospectus for any fund that may be acquired through
an exchange.

The exchange privilege may be changed or terminated at any time. You should be
aware that you may have to pay taxes on any gain on your exchange.

DIVIDENDS

Small Cap Growth Portfolio pays substantially all of its net income (if any)
from dividends to its shareholders of record as a dividend semi-annually during
the months of June and December.

Unless you choose to receive your dividends in cash, you will receive them as
full and fractional additional Fund shares.

TAX MATTERS

This discussion of taxes is for general information only. You should consult
your own tax adviser about your particular situation, and the status of your
account under state and local laws.

Shareholders are required to pay federal income tax on any dividends or other
distributions received, whether it is in cash or in Fund shares. Generally,
distributions from the Fund's net investment income and short-term capital
gains will be taxed as ordinary income. A portion of distributions from net
investment income may be eligible for the dividends-received deduction
available to corporations. Distributions from long-term net capital gains will,
for tax purposes, be treated as long-term capital gains no matter how long you
have held the shares of the Fund. The tax you pay on a given capital gains
distribution generally depends on how long the Fund has held the portfolio
securities it sold, and not on how long you have held your Fund shares.

<PAGE>

By law, the Fund must withhold 31% of your distributions and proceeds if you
have not provided complete, correct taxpayer information.

MANAGEMENT OF THE FUND

MANAGER

Small Cap Growth Portfolio draws on the strength and experience of Citibank.
Citibank is the investment manager of the Fund, and subject to policies set by
the Fund's Trustees, Citibank makes investment decisions. Citibank, with
headquarters at 153 East 53rd Street, New York, New York, has been managing
money since 1822. With its affiliates, it currently manages more than $290
billion in assets worldwide. Citibank is a wholly-owned subsidiary of Citicorp,
which is, in turn, a wholly-owned subsidiary of Citigroup Inc. Citigroup Inc.
was formed as a result of the merger of Citicorp and Travelers Group, Inc.,
which was completed on October 8, 1998. "CitiFunds" is a service mark of
Citicorp.

Marguerite Wagner has been the portfolio manager for the Fund since January,
1999. Ms. Wagner joined Citibank in 1985. Since 1995, she has had portfolio
management and research analyst responsibility for private equity managed
accounts. From 1992 to 1994, Ms. Wagner was a member of the small
capitalization equity management group of Citibank Global Asset Management.
Prior to 1992, she managed portfolios for the Private Banking Group of
Citibank.

<PAGE>

MANAGEMENT FEES

For the management services Citibank provided to the Fund and its underlying
mutual fund during the fiscal year ended October 31, 1998, Citibank received a
total of 0.85% of the Fund's average daily net assets, after waivers.

MORE ABOUT THE FUND

The Fund's goal, principal investments and risks are summarized in "The Fund at
a Glance" on page ___. More information on investments, investment strategies
and risks appears below.

PRINCIPAL INVESTMENT STRATEGIES

Small Cap Growth Portfolio's principal investment strategies are the strategies
that, in the opinion of Citibank, are most likely to achieve the Fund's
investment goal. Of course, there can be no assurance that the Fund will
achieve its goal. Please note that the Fund may also use strategies and invest
in securities that are not described below but that are described in the
Statement of Additional Information. Of course, Citibank may decide, as a
matter of investment strategy, not to use the investments and investment
techniques described below and in the Statement of Additional Information at
any particular time. The Fund's goal and strategies may be changed without
shareholder approval.

The Fund invests primarily in stocks of U.S. issuers that have small market
capitalizations (that is, market capitalizations below the top 1,000 stocks of
the equity market). These stocks may include the stocks in the Russell 2000
Index, which is an index of small capitalization stocks. Under normal
circumstances, at least 65% of the Fund's total assets is invested in equity
securities of these issuers.

- -------------------------------------------------------------------------------
WHAT ARE EQUITY SECURITIES?

Small cap companies are generally rapidly growing, with negligible dividend
yields and extremely high levels of volatility. They may offer more profit
opportunity during certain economic conditions than large and medium sized
companies, but they also involve special risks.

<PAGE>

The Fund may invest up to 25% of its assets in foreign equity and debt
securities, including depositary receipts. Foreign securities may be issued by
issuers in developing countries.

Citibank follows an aggressive, growth-oriented investment style that
emphasizes small U.S. companies with superior management teams and good
prospects for growth. In selecting investments, Citibank looks for issuers that
have a predictable, growing demand for their products or services, and issuers
with a dominant position in a niche market or whose customers are very large
companies. Citibank generally attempts to avoid issuers in businesses where
external factors like regulatory changes or rising commodity prices may inhibit
future growth.

The Fund may hold cash pending investment, and may invest in money market
instruments, repurchase agreements and reverse repurchase agreements for cash
management purposes.

See "Risks" for more information about the risks associated with investing in
equity securities.

DERIVATIVES. The Fund may use derivatives in order to protect (or "hedge")
against declines in the value of securities held by the Fund or increases in
the cost of securities to be purchased in the future. The Fund may also use
derivatives for non-hedging purposes, to enhance potential gains. These
derivatives include stock index futures contracts, forward foreign currency
contracts and options on foreign currencies. In some cases, the derivatives
purchased by the Fund are standardized contracts traded on commodities
exchanges or boards of trade. This means that the exchange or board of trade
guaranties counterparty performance. In some cases, the derivatives may be
illiquid, and the Fund may bear more counterparty risk. Derivatives may not be
available on terms that make economic sense (for example, they may be too
costly). The Fund's ability to use derivatives may also be limited by tax
considerations.

MANAGEMENT STYLE. Managers of mutual funds use different styles when selecting
securities to purchase. Portfolio managers for Citibank generally use a
"bottom-up" approach when selecting securities for purchase or sell by the
Fund. This means that they look primarily at individual companies against the
context of broader market forces. For more information, see "Manager" on page
_____.

<PAGE>

services, meaning that it is authorized to pay a broker or dealer who provides
these brokerage and research services a commission for executing a portfolio
transaction which is higher than the commission another broker or dealer would
have charged. However, the Fund will "pay up" only if Citibank determines in
good faith that the higher commission is reasonable in relation to the
brokerage and research services provided, viewed in terms of either the
particular transaction or all of the accounts over which Citibank exercises
investment discretion.

RISKS

Please remember that an investment in the Fund is not a deposit of Citibank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.

EQUITY SECURITIES. Equity securities are subject to market risk that
historically has resulted in greater price volatility than exhibited by fixed
income securities.

SMALLER COMPANIES. The securities of smaller capitalization companies may have
more risks than those of larger, more seasoned companies. They may be
particularly susceptible to market downturns because of limited product lines,
markets, distribution channels or financial and management resources. Also,
there may be less publicly available information about small cap companies.
Investments in small cap companies may be in anticipation of future products or
services to be provided by such companies. If those products or services are
delayed, the prices of the securities of such companies may drop. Sometimes,
the prices of the securities of smaller capitalized companies rise and fall
based on investor perception rather than economics. Securities of small cap
companies may be thinly traded, making their disposition more difficult. For
all these reasons, the prices of the securities of small cap companies may be
more volatile, causing the Fund's share price to be volatile. Funds that invest
a higher percentage of their assets in small cap stocks are generally more
volatile than funds investing a higher percentage of their assets in larger,
more established companies.

<PAGE>

The Fund's aggressive, growth-oriented investment style may increase the risks
already associated with investing in smaller companies. For example, fast
growing small cap companies may be more volatile than other small cap
companies.

GROWTH SECURITIES. Growth securities typically are quite sensitive to market
movements because their market prices tend to reflect future expectations. When
it appears those expectations will not be met, the prices of growth securities
typically fall. Growth securities may also be more volatile than other
investments because they generally do no pay dividends. The success of the
Fund's investment strategy depends largely on Citibank's skill in assessing the
growth potential of companies in which the Fund invests.

o Foreign companies may not be subject to accounting standards or
governmental supervision comparable to U.S. companies, and there may
be less public information about their operations.

o Foreign markets may offer less protection to investors. Enforcing
legal rights may be difficult, costly and slow. There may be special
problems enforcing claims against foreign governments.

o The Fund may invest in issuers located in emerging, or developing,
markets.

o Emerging or developing countries are generally defined as
countries in the initial stages of their industrialization
cycles with low per capita income.

<PAGE>

o All of the risks of investing in foreign securities are
heightened by investing in developing countries.

SPECIAL CHARACTERISTICS OF CONVERTIBLE SECURITIES. Convertible securities,
which are debt securities that may be converted into stock, are subject to the
market risk of stocks, and, like other debt securities, are also subject to
interest rate risk and the credit risk of their issuers. Call provisions may
allow the issuer to repay the debt before it matures.

DERIVATIVES. The Fund's use of derivatives (such as futures contracts and
forward foreign currency contracts), particularly when used for non-hedging
purposes, may be risky. This practice could result in losses that are not
offset by gains on other portfolio assets. Losses would cause the Fund's share
price to go down. There is also the risk that the counterparty may fail to
honor contract terms. This risk becomes more acute when the Fund invests in
derivatives that are not traded on commodities exchanges or boards of trade.
The Fund's ability to use derivatives successfully depends on Citibank's
ability to accurately predict movements in stock prices or currency exchange
rates. If Citibank's predictions are wrong, the Fund could suffer greater
losses than if the Fund had not used derivatives.

<PAGE>

FINANCIAL HIGHLIGHTS

<PAGE>

Appendix

CLASS A SHARES - ELIGIBLE PURCHASERS:

Class A shares may be purchased without a sales charge by the following
eligible purchasers:

[] tax exempt organizations under Section 501(c)(3-13) of the
Internal Revenue Code

[] trust accounts for which Citibank, N.A or any subsidiary or
affiliate of Citibank acts as trustee and exercises
discretionary investment management authority

[] accounts for which Citibank or any subsidiary or affiliate of
Citibank performs investment advisory services or charges fees
for acting as custodian

[] directors or trustees (and their immediate families), and
retired directors or trustees (and their immediate families), of
any investment company for which Citibank or any subsidiary or
affiliate of Citibank serves as the investment adviser or as a
service agent

[] employees of Citibank and its affiliates, CFBDS, Inc. and its
affiliates or any Service Agent and its affiliates (including
immediate families of any of the foregoing), and retired
employees of Citibank and its affiliates or CFBDS and its
affiliates (including immediate families of any of the
foregoing)

[] investors participating in a fee-based arrangement sponsored or
advised by Citibank or its affiliates

[] investors participating in a rewards program that offers Fund
shares as an investment option based on an investor's balances
in selected Citigroup Inc. products and services

[] employees of members of the National Association of Securities
Dealers, Inc., provided that such sales are made upon the
assurance of the purchaser that the purchase is made for
investment purposes and that the securities will not be resold
except through redemption or repurchase

[] separate accounts used to fund certain unregistered variable
annuity contracts

[] direct rollovers by plan participants from a 401(k) plan offered
to Citigroup employees

[] shareholder accounts established through a reorganization or
similar form of business combination approved by the Fund's
Board of Trustees or by the Board of Trustees of any other

<PAGE>

CitiFund or mutual fund managed or advised by Citibank (all of
such funds being referred to herein as CitiFunds) the terms of
which entitle those shareholders to purchase shares of the Fund
or any other CitiFund at net asset value without a sales charge

[] employee benefit plans qualified under Section 401(k) of the
Internal Revenue Code with accounts outstanding on January 4,
1999

[] employee benefit plans qualified under Section 401 of the
Internal Revenue Code, including salary reduction plans
qualified under Section 401(k) of the Code, subject to minimum
requirements as may be established by CFBDS with respect to the
amount of purchase; currently, the amount invested by the
qualified plan in the Fund or in any combination of CitiFunds
must total a minimum of $1 million

[] accounts associated with Copeland Retirement Programs

[] investors purchasing $500,000 million or more of Class A shares;
however, a contingent deferred sales charge will be imposed on
the investments in the event of certain share redemptions within
12 months following the share purchase, at the rate of 1% of the
lesser of the value of the shares redeemed (not including
reinvested dividends and capital gains distributions) or the
total cost of the shares; the contingent deferred sales charge
on Class A shares will be waived under the same circumstances as
the contingent deferred sales charge on Class B shares will be
waived; in determining whether a contingent deferred sales
charge on Class A shares is payable, and if so, the amount of
the charge:
+ it is assumed that shares not subject to the contingent
deferred sales charge are the first redeemed followed by
other shares held for the longest period of time
+ all investments made during a calendar month will age one
month on the last day of the month and each subsequent month
+ any applicable contingent deferred sales charge will be
deferred upon an exchange of Class A shares for Class A
shares of another CitiFund and deducted from the redemption
proceeds when the exchanged shares are subsequently redeemed
(assuming the contingent deferred sales charge is then
payable)
+ the holding period of Class A shares so acquired through an
exchange will be aggregated with the period during which the
original Class A shares were held

[] subject to appropriate documentation, investors where the amount
invested represents redemption proceeds from a mutual fund
(other a CitiFund), if:
+ the redeemed shares were subject to an initial sales charge
or a deferred sales charge (whether or not actually
imposed), and

<PAGE>

+ the redemption has occurred no more than 60 days prior to
the purchase of Class A shares of the Fund

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

<PAGE>

The Statment of Additional Information (SAI) provides more details about the
Fund and its policies. The SAI is incorporated by reference into this
prospectus and is legally part of it.

The Annual and Semi-Annual Reports for the Fund list its portfolio holdings and
describe its performance.

To obtain free copies of the SAI and the Annual and Semi-Annual Reports or to
make other inquiries, please call toll-free 1-800-625-4552.

SEC file number: 811-4007
<PAGE>
Prospectus

CITIFUNDSSM SMALL CAP VALUE PORTFOLIO

Citibank, N.A., investment manager

CLASS A AND CLASS B SHARES

The Securities and Exchange Commission has
not approved or disapproved these securities or
passed upon the accuracy of this prospectus,
and any representation to the contrary is a
criminal offense.

March 1, 1999

<PAGE>

CITIFUNDS SMALL CAP VALUE PORTFOLIO

TABLE OF CONTENTS

The Fund at a Glance

Your CitiFunds Account
Choosing a Share Class
How to Buy Shares
How the Price of Your Shares is Calculated
How to Sell Shares
Reinstating Recently Sold Shares
Exchanges
Dividends
Tax Matters

Management of the Fund
Manager
Management Fees

More About the Fund
Principal Investment Strategies
Risks

Financial Highlights

Appendix

<PAGE>

THE FUND At A GLANCE

THIS SUMMARY BRIEFLY DESCRIBES SMALL CAP VALUE PORTFOLIO AND THE PRINCIPAL
RISKS OF INVESTING IN IT. FOR MORE INFORMATION, sEE "MORE ABOUT THE FUND" ON
PAGE _____.

FUND GOAL

The Fund's goal is long-term capital growth. Dividend income, if any, is
incidental to this goal. Of course, there is no assurance that the Fund will
achieve its goal.

MAIN INVESTMEnT STRATEGIES

Small Cap Value Portfolio invests primarily in securities of U.S. issuers that
have small market capitalizations (that is, market capitalizations below the
top 1,000 stocks of the equity market). These securities may include the stocks
in the Russell 2000 Index, which is an index of small capitalization stocks.
Under normal circumstances, at least 65% of the Fund's total assets is invested
in equity securities of these issuers. The Fund's equity securities may include
the following:

o common stocks;

o securities convertible into common stocks;

o preferred stocks; and

o warrants.

The Fund's portfolio managers use a value oriented approach in managing the
Fund. This means that they look for securities that they believe are currently
undervalued, or priced below their true worth, but whose issuers have good
longer term business prospects. The Fund's portfolio managers also look for
securities that have catalysts or factors that may soon cause their market
value to rise.

The Fund may use derivatives in order to protect (or "hedge") against changes
in the prices of securities held or to be bought. The Fund may also use
derivatives for non-hedging purposes, to enhance potential gains. These
derivatives include stock index futures and options. The Fund's ability to use
these derivatives successfully depends on a number of factors, including
derivatives being available at prices that are not too costly, tax
considerations, and the portfolio managers accurately predicting movements in
stock prices.

MAIN RISKS

The principal risks of investing in the Fund are described below. See page ___
for more information about risks.

<PAGE>

o EQUITY SECURITIES. Equity securities are subject to market risk that
historically has resulted in greater price volatility than exhibited
by fixed income securities.

o VALUE INVESTING. The success of the Fund's investment strategy
depends largely on the skill of the Fund's portfolio managers in
identifying securities of companies that are in fact undervalued,
but have good longer term business prospects. A security may not
achieve its expected value because the circumstances causing it to
be underpriced worsen (causing the security's price to decline
further) or do not change or because the portfolio managers are
incorrect in their determinations. In addition, the Fund may
underperform certain other stock funds (those emphasizing growth
stocks, for example) during periods when value stocks are out of
favor.

o DERIVATIVES. The Fund's use of derivatives (such as futures
contracts and options), particularly for non-hedging purposes, may
be risky. This practice could result in losses that are not offset
by gains on other portfolio assets, causing the Fund's share price
to go down. The Fund's ability to use derivatives successfully
depends on a number of factors, including the ability of the Fund's
portfolio managers to accurately predict movements in stock prices.
If these predictions are wrong, the Fund could suffer greater losses
than if the Fund had not used derivatives.

<PAGE>

Please note that an investment in the Fund is not a deposit of Citibank and is
not insured or guaranteed by the Federal Deposit Insurance Corporation or any
other government agency.

WHO MAY WANT TO INVEST

You should keep in mind that an investment in Small Cap Value Portfolio is not
a complete investment program.

You should consider investing in Small Cap Value Portfolio if:

o You want to direct a portion of your overall investment portfolio to
stocks of small cap issuers.

o You are seeking growth of principal through investment in
undervalued companies.

o You are prepared to accept significant daily share price
fluctuations.

o Your investment horizon is longer term--typically at least five
years.

Don't invest in Small Cap Value Portfolio if:

o You are not prepared to accept high volatility of the Fund's share
price and possible losses.

o Current income is more important to you than growth of principal.

o Your investment horizon is shorter term (less than five years).

<PAGE>

FUND PERFORMANCE

The Fund began operations in 1998 and does not have a full calendar year of
investment returns at the date of this prospectus. The Fund's total return for
the fiscal year ended October 31, 1998 is provided in the "Financial
Highlights" section of this prospectus.

FUND FEES AND EXPENSES

THIS TABLE DESCRIBES THE FEES AND EXPENSES THAT YOU MAY PAY IF YOU BUY AND HOLD
SHARES OF THE FUND.
<TABLE>
<CAPTION>

<S> <C> <C>
CLASS A CLASS B

Class descriptions begin on page [---]

SHAREHOLDER FEES (fees paid directly from your investment):
Maximum Sales Charge (Load) Imposed on Purchases 5.00% None
Maximum Deferred Sales Charge (Load) None(1) 5.00%(2)

ANNUAL FUND EXPENSES (expenses that are deducted from
Fund assets)(3):
Management Fees 1.00% 1.00%
Distribution (12b-1) Fees 0.25% 1.00%
Other Expenses (administrative, shareholder servicing and 1.11% 1.11%
other expenses):
TOTAL ANNUAL FUND OPERATING EXPENSES* 2.36% 3.11%
- -------------------------------------------------------------------------------------------------

*Because some of the Fund's expenses were waived or reimbursed, actual total
operating expenses for the prior year were (or, in the case of Class B
shares, would have been):
1.50% 2.25%

These fee waivers and reimbursements may be reduced or terminated at any time.
</TABLE>

1 Except for investment of $500,000 or more.

3 The Fund invests in an underlying mutual fund. This table reflects the
expenses of the Fund and the underlying fund in which it invests.

<PAGE>

EXAMPLE

This example is intended to help you compare the cost of investing in the Fund
to the cost of investing in other mutual funds. The example assumes that:

o you invest $10,000 in the Fund for the time periods indicated;

o you pay the maximum applicable sales charge;

o you reinvest all dividends; and

o you then sell all your shares at the end of those periods, if you own
Class A shares.

The example also assumes that:

o each investment has a 5% return each year--the assumption of a 5% return
is required by the SEC for the purpose of this example and is not a
prediction of the Fund's future performance; and

o the Fund's operating expenses shown in the table above remain the same
before taking into consideration any fee waivers or reimbursements.

Although your actual costs may be higher or lower, based on these assumptions
your costs would be:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
________________________________________________________________________________________

1 YEAR 3 YEARS 5 YEARS 10 YEARS
________________________________________________________________________________________

Class A $_____ $_____ $_____ $_____

Class B

Assuming sale at end of period $_____ $_____ $_____ $_____

$_____ $_____ $_____ $_____
Assuming no sale
________________________________________________________________________________________
</TABLE>

<PAGE>

YOUR CITIFUNDS ACCOUNT

CHOOSING A SHARE CLASS

<TABLE>
<CAPTION>
<S> <C>
CLASS A AT A GLANCE: CLASS B AT A GLANCE:

o Front-end load -- there is an initial sales o No initial sales charge
charge of 5.00% or less
o Lower sales charge rates for larger o The deferred sales charge declines from
investments 5% to 1% over five years, and is
eliminated if you hold your shares for six
years or more
o Annual distribution/service fee of up to o Annual distribution/service fee of up to
0.25% 1.00%
o Lower annual expenses than Class B o Automatic conversion to Class A shares
shares after 8 years
</TABLE>

_______________________________________________________________________________
WHAT ARE DISTRIBUTION/SERVICE FEES?

Both Class A and Class B shares have annual DISTRIBUTION/SERVICE FEES that are
paid under a 12B-1 PLAN. These are fees, also called 12B-1 FEES, that are
deducted from Fund assets and are used to compensate those financial
professionals who sell fund shares and provide ongoing services to shareholders
and to pay other marketing and advertising expenses. Because you pay these fees
during the whole period that you own the shares, over time, you may pay more
than if you had paid other types of sales charges. For this reason, you should
consider the effects of 12b-1 fees as well as sales loads when choosing a share
class.
_______________________________________________________________________________

SALES CHARGES--CLASS A SHARES

<S> <C> <C> <C>
-----------------------------------------------------------------------------------
SALES CHARGE SALES CHARGE BROKER/DEALER
AS A % OF AS A % OF COMMISSION AS
AMOUNT OF OFFERING YOUR A % OF OFFERING
YOUR INVESTMENT PRICE INVESTMENT PRICE
-----------------------------------------------------------------------------------
Less than $25,000 5.00% 5.26% 4.50%
-----------------------------------------------------------------------------------
$25,000 to less than $50,000 4.00% 4.17% 3.60%
-----------------------------------------------------------------------------------
$50,000 to less than $100,000 3.50% 3.62% 3.15%
-----------------------------------------------------------------------------------
$100,000 to less than $250,000 3.00% 3.09% 2.70%
-----------------------------------------------------------------------------------
$250,000 to less than $500,000 2.00% 2.04% 1.80%
-----------------------------------------------------------------------------------
$500,000 or more none* none* up to 1.00%
-----------------------------------------------------------------------------------
*A contingent deferred sales charge may apply in certain instances. See
below.
</TABLE>

o After the initial sales charge is deducted from your investment, the
balance of your investment is invested in the Fund.

SALES CHARGES--CLASS B SHARES
o Class B shares are sold without a front-end, or initial, sales charge, but
you are charged a "contingent deferred sales charge" (CDSC) when you sell
shares within five years of purchase. The rate of CDSC goes down the longer
you hold your shares. The table below shows the rates that you pay, as a
percentage of the purchase price (or the sale price, whichever is less),
depending upon when you sell your shares.

o When you sell your shares, the CDSC will be based on either your purchase
price, or the sale price, whichever is less.

<PAGE>

o You do not pay a CDSC on shares acquired through reinvestment of dividends,
capital gain distributions and shares representing capital appreciation.

o To ensure that you pay the lowest CDSC possible, the Fund will always use
the Class B shares with the lowest CDSC to fill your sell requests.

SALES CHARGE WAIVERS OR REDUCTIONS

You may reduce or eliminate your sales charge on shares if you qualify for
certain waivers or elect to participate in certain programs. These include:

Front-End Loads

o Reduced sales charge plan for qualified groups.

o Right of Accumulation.

o Letter of Intent.

CDSC

o Redemptions made within one year of the death of the shareholder.

o Lump sum or other distributions from IRAs and certain other retirement
accounts.

<PAGE>

AUTOMATIC CONVERSION OF CLASS B SHARES

HOW TO BUY SHARES

Shares of Small Cap Value Portfolio are offered continuously and purchases may
be made Monday through Friday, except on certain holidays. Shares may be
purchased from the Fund's distributor or a broker-dealer or financial
institution (called a Service Agent) that has entered into a service agreement
with the distributor concerning the Fund. Please specify whether you are
purchasing Class A or Class B shares. If you fail to specify, Class A shares
will be purchased for your account. The Fund and the distributor have the right
to reject any purchase order or cease offering Fund shares at any time.

If you are a customer of a Service Agent, your Service Agent will establish and
maintain your account and be the shareholder of record.

HOW THE PRICE OF YOUR SHARES IS CALCULATED

<PAGE>

HOW TO SELL SHARES

If you own both Class A and Class B shares, and want to sell shares, you should
specify which class of shares you wish to sell. If you fail to specify, Class A
shares will be redeemed first.

When you sell your Class B shares, they will be redeemed so as to minimize your
CDSC. Shares on which the CDSC is not payable, i.e.

o shares representing capital appreciation and

o shares representing the reinvestment of dividends and capital gain
distributions

will be sold first followed by shares held for the longest period of time.

REINSTATING RECENTLY SOLD SHARES

EXCHANGES

<PAGE>

The exchange privilege may be changed or terminated at any time. You should be
aware that you may have to pay taxes on any gain on your exchange.

DIVIDENDS

Small Cap Value Portfolio pays substantially all of its net income (if any)
from dividends to its shareholders of record as a dividend semi-annually during
the months of June and December.

Unless you choose to receive your dividends in cash, you will receive them as
full and fractional additional Fund shares.

TAX MATTERS

This discussion of taxes is for general information only. You should consult
your own tax adviser about your particular situation and the status of your
account under state and local laws.

<PAGE>

By law, the Fund must withhold 31% of your distributions and proceeds if you
have not provided complete, correct taxpayer information.

MANAGEMENT OF THE FUND

MANAGER

Small Cap Value Portfolio draws on the strength and experience of Citibank.
Citibank is the investment manager of the Fund, and subject to policies set by
the Fund's Trustees, Citibank has responsibility for overall management of the
Fund. Citibank, with headquarters at 153 East 53rd Street, New York, New York,
has been managing money since 1822. With its affiliates, it currently manages
more than $290 billion in assets worldwide. Citibank is a wholly-owned
subsidiary of Citicorp, which is, in turn, a wholly-owned subsidiary of
Citigroup Inc. Citigroup Inc. was formed as a result of the merger of Citicorp
and Travelers Group, Inc., which was completed on October 8, 1998. "CitiFunds"
is a service mark of Citicorp.

In addition to overall management of the Fund, Citibank is also responsible for
the daily management of that portion of the Fund's assets allocated to cash and
invested in U.S.-dollar denominated high quality and short-term money market
instruments. The Fund may make such investments during periods of unusual
economic or market conditions or for temporary or defensive purposes or
liquidity.

Citibank has delegated the daily management of the Fund's assets not managed by
Citibank to Franklin Advisory Services, Inc., One Parker Plaza, 16th Floor,

<PAGE>

Fort Lee, New Jersey 07024. Franklin Advisory Services is a registered
investment adviser and a wholly-owned subsidiary of Franklin Resources, Inc.

William J. Lippman, President of Franklin Advisory Services or its predecessor
since 1988, has been responsible for the daily management of U.S. small
capitalization value securities since the Fund's inception. Mr. Lippman holds a
masters of business administration degree from New York University and a
bachelor of business administration degree from City College of New York. Mr.
Lippman also serves as Senior Vice President of Franklin Resources, Inc. and
Franklin Advisers, Inc. He has been in the securities industry for over 30
years and with the Franklin Templeton Group since 1988.

MANAGEMENT FEES

For the management services Citibank and the subadviser provided to the Fund
and its underlying mutual fund for the Fund's most recent fiscal year, Citibank
and the subadviser received a total of 1.00% of the Fund's average daily net
assets.

MORE ABOUT THE FUND

The Fund's goal, principal investments and risks are summarized in "The Fund at
a Glance" on page ___. More information on investments, investment strategies
and risks appears below.

PRINCIPAL INVESTMENT STRATEGIES

Small Cap Value Portfolio's principal investment strategies are the strategies
that, in the opinion of Citibank and the subadviser, are most likely to achieve
the Fund's investment goal. Of course, there can be no assurance that the Fund
will achieve its goal. Please note that the Fund may also use strategies and
invest in securities that are not described below but that are described in the
Statement of Additional Information. Of course, the Fund's portfolio managers
may decide, as a matter of investment strategy, not to use the investments and
investment techniques described below and in the Statement of Additional
Information at any particular time. The Fund's goal and strategies may be
changed without shareholder approval.

The Fund invests primarily in securities of U.S. issuers that have small market
capitalizations (that is, market capitalizations below the top 1,000 stocks of
the equity market). These securities may include the stocks in the Russell 2000
Index, which is an index of small capitalization stocks. Under normal
circumstances, at least 65% of the Fund's total assets is invested in equity
securities of these issuers.

- -------------------------------------------------------------------------------
WHAT ARE EQUITY SECURITIES?

EQUITY SECURITIES generally represent an ownership interest (or a right to
acquire an ownership interest) in an issuer, and include COMMON STOCKS,
SECURITIES CONVERTIBLE INTO COMMON STOCKS, PREFERRED STOCKS, and WARRANTS for
the purchase of stock. While equity securities historically have been more
volatile than fixed income securities, they historically have produced higher
levels of total return.
- -------------------------------------------------------------------------------

<PAGE>

The Fund's portfolio managers use a value oriented approach in managing the
Fund. This means that they look for securities that they believe are currently
undervalued, or priced below their true worth, but whose issuers have good
longer term prospects. An issuer may be undervalued relative to the stock
market in general, relative to the underlying value of its assets or relative
to what a sophisticated private investor would pay for the entire company. The
Fund's portfolio managers analyze a variety of factors to determine whether an
issuer is undervalued. These factors include:

o low price to earnings ratio relative to the market, industry group
or earnings growth;

o low stock price relative to book value or cash flow;

o valuable franchises, patents, trademarks, trade names, distribution
channels or market share for particular products or services, tax
loss carryforwards, or other intangibles that may not be reflected
in stock prices;

o ownership of understated or underutilized tangible assets such as
land, timber or minerals;

o underutilized cash or investment assets; and

o unusually high current income.

Issuers selected by the portfolio managers may exhibit one or more of these
factors, and may include companies in cyclical businesses, turnarounds and
companies emerging from bankruptcy.

The most common reasons for undervaluation are that a particular industry is
out of favor, whether because of problems with specific issuers or because the
economic environment is unfavorable, an issuer's management team has made
mistakes, and issuers are hard to understand or value because they include many
different businesses. Citibank believes that securities of companies which are
temporarily underpriced may provide a higher total return over time than
securities' of companies whose positive attributes are reflected in the
securities current price.

The Fund may hold cash pending investment, and may invest in money market
instruments, repurchase agreements and reverse repurchase agreements for cash
management purposes.

See "Risks" for more information about the risks associated with investing in
equity securities.

<PAGE>

derivatives for non-hedging purposes, to enhance potential gains. These
derivatives include stock index futures and options. In some cases, the
derivatives purchased by the Fund are standardized contracts traded on
commodities exchanges or boards of trade. This means that the exchange or board
of trade guaranties counterparty performance. In some cases, the derivatives
may be illiquid, and the Fund may bear more counterparty credit risk.
Derivatives may not be available on terms that make economic sense (for
example, they may be too costly). The Fund's ability to use derivatives may
also be limited by tax considerations.

MANAGEMENT STYLE. Managers of mutual funds use different styles when selecting
securities to purchase. The Fund's portfolio managers generally use a
"bottom-up" approach when selecting securities for purchase or sell by the
Fund. This means that they look primarily at individual companies against the
context of broader market forces. For more information, see "Manager" on page
____.

Citibank and the subadviser may use brokers or dealers for Fund transactions
who also provide brokerage and research services to the Fund or other accounts
over which Citibank or the subadviser exercises investment discretion. The Fund
may "pay up" for brokerage services, meaning that it is authorized to pay a
broker or dealer who provides these brokerage and research services a
commission for executing a portfolio transaction which is higher than the
commission another broker or dealer would have charged. However, the Fund will
"pay up" only if Citibank or the subadviser determines in good faith that the
higher commission is reasonable in relation to the brokerage and research
services provided, viewed in terms of either the particular transaction or all
of the accounts over which Citibank or the subadviser exercises investment
discretion.

RISKS

<PAGE>

Information. Remember that you may receive little or no return on your
investment in the Fund. You may lose money if you invest in this Fund.

Please remember that an investment in the Fund is not a deposit of Citibank and
is not insured or guaranteed by the Federal Deposit Insurance Corporation or
any other government agency.

EQUITY SECURITIES. Equity securities are subject to market risk that
historically has resulted in greater price volatility than exhibited by fixed
income securities.

SMALLER COMPANIES. The securities of smaller capitalization companies may have
more risks than those of larger, more seasoned companies. They may be
particularly susceptible to market downturns because of limited product lines,
markets, distribution channels or financial and management resources. Also,
there may be less publicly available information about small cap companies.
Investments in small cap companies may be in anticipation of future products or
services to be provided by such companies. If those products or services are
delayed, the prices of the securities of such companies may drop. In addition,
sometimes the prices of the securities of smaller capitalized companies rise
and fall based on investor perception rather than economics. Securities of
small cap companies may be thinly traded, making their disposition more
difficult. For all of these reasons, the prices of the securities of small cap
companies may be more volatile, causing the Fund's share price to be volatile.
Funds that invest a higher percentage of their assets in small cap stocks are
generally more volatile than funds investing a higher percentage of their
assets in larger, more established companies.

VALUE INVESTING. The success of the Fund's investment strategy depends largely
on the skill of the Fund's portfolio manager in identifying securities of
companies that are in fact undervalued, but have good longer term business
prospects. A security may not achieve its expected value because the
circumstances causing it to be underpriced worsen (causing the security's price
to decline further) or do not change or because the portfolio managers are
incorrect in their determinations. In addition, the Fund may underperform
certain other stock funds (those emphasizing growth stocks, for example) during
periods when value stocks are out of favor.

CREDIT RISK. The Fund invests in investment grade debt securities. However, it
is possible that some issuers will not make payments on debt securities held by
the Fund. Or, an issuer may suffer adverse changes in its financial condition
that could lower the credit quality of a security, leading to greater
volatility in the price of the security and in shares of the Fund. A change in

<PAGE>

the quality rating of a bond or other security can also affect the security's
liquidity and make it more difficult for the Fund to sell. The lower quality
debt securities in which the Fund may invest are more susceptible to these
problems than higher quality obligations.

DERIVATIVES. The Fund's use of derivatives (such as futures contracts and
options), particularly when used for non-hedging purposes, may be risky. This
practice could result in losses that are not offset by gains on other portfolio
assets. Losses would cause the Fund's share price to go down. There is also the
risk that the counterparty may fail to honor contract terms. This risk becomes
more acute when the Fund invests in derivatives that are not traded on
commodities exchanges or boards of trade. The Fund's ability to use derivatives
successfully depends on the ability of Citibank and the subadviser to
accurately predict movements in stock prices. If the Fund's portfolio managers'
predictions are wrong, the Fund could suffer greater losses than if the Fund
had not used derivatives.