LANDMARK FUNDS II, 485APOS, 1998-07-10

LANDMARK FUNDS II
485APOS, 1998-07-10

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As filed with the Securities and Exchange Commission on July 10, 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. 25*
AND
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 26

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 September 23,
1998, pursuant to paragraph (a) of Rule 485.

The Premium Portfolios, on behalf of S&P 500 Index Portfolio, has also
executed this registration statement.

- -----------------------------------------------------------------------------
* This filing relates only to shares of CitiFunds S&P 500 Index Portfolio.
** Formerly, Landmark Funds II.

<PAGE>

CITIFUNDS TRUST II
(CITIFUNDS S&P 500 INDEX PORTFOLIO)
REGISTRATION STATEMENT ON FORM N-1A

CROSS REFERENCE SHEET

<TABLE>

N-1A
ITEM NO. N-1A ITEM LOCATION
<S> <C> <C>

PART A PROSPECTUS

Item 1. Cover Page................................... Cover Page
Item 2. Synopsis..................................... Expense Summary
Item 3. Condensed Financial Information.............. Not Applicable
Item 4. General Description of Registrant............ Investment Information; General
Information; Appendix
Item 5. Management of the Fund....................... Management; Expenses
Item 5A. Management's Discussion of Fund Performance.. Not Applicable
Item 6. Capital Stock and Other Securities........... General Information; Voting and
Other Rights; Purchases;
Exchanges; Redemptions; Dividends
and Distributions; Tax Matters
Item 7. Purchase of Securities Being Offered......... Purchases; Exchanges; Redemptions
Item 8. Redemption or Repurchase..................... Purchases; Exchanges; Redemptions
Item 9. Pending Legal Proceedings.................... Not Applicable

STATEMENT OF
ADDITIONAL
PART B INFORMATION

Item 10. Cover Page................................... Cover Page
Item 11. Table of Contents............................ Table of Contents
Item 12. General Information and History.............. The Trust
Item 13. Investment Objectives and Policies........... Investment Objective and Policies
Item 14. Management of the Fund....................... Management
Item 15. Control Persons and Principal Holders of
Securities................................... Management
Item 16. Investment Advisory and Other Services....... Management
Item 17. Brokerage Allocation and Other Practices..... Portfolio Transactions
Item 18. Capital Stock and Other Securities........... Description of Shares, Voting
Rights and Liabilities
Item 19. Purchase, Redemption and Pricing of Securities
Being Offered................................ Description of Shares, Voting
Rights and Liabilities;
Determination of Net Asset Value;
Valuation of Securities;
Additional Redemption Information
Item 20. Tax Status................................... Certain Additional Tax Matters
Item 21. Underwriters................................. Management
Item 22. Calculation of Performance Data.............. Performance Information
Item 23. Financial Statements......................... Financial Statements

PART C Information required to be included in Part C is set forth under
the appropriate Item, so numbered, in Part C to this Registration
Statement.

</TABLE>

<PAGE>

EXPLANATORY NOTE

This Post-Effective Amendment to the Registrant's Registration Statement
on Form N-1A is being filed with respect to CitiFunds S&P 500 Index Portfolio,
a series of the Registrant.

<PAGE>

Prospectus September __, 1998

CitiFundsSM S&P 500 Index Portfolio

This Prospectus describes CitiFundsSM S&P 500 Index Portfolio, a diversified
mutual fund in the CitiFunds Family of Funds. Citibank, N.A. is the investment
manager.

This Prospectus concisely sets forth information about the Fund that a
prospective investor should know before investing. A Statement of Additional
Information with the same date as this Prospectus (and incorporated by
reference in this Prospectus) has been filed with the Securities and Exchange
Commission. Copies of the Statement of Additional Information may be obtained
without charge, and further inquiries about the Fund may be made, by contacting
the investor's Service Agent or by calling 1-800-625-4554. The Statement of
Additional Information and other related materials are available on the SEC's
Internet Web site (http://www.sec.gov).

REMEMBER THAT SHARES OF THE FUND:

O ARE NOT INSURED BY THE FDIC OR ANY OTHER AGENCY;

O ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
CITIBANK OR ANY OF ITS AFFILIATES;

O ARE SUBJECT TO INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE
PRINCIPAL AMOUNT INVESTED.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

INVESTORS SHOULD READ THIS PROSPECTUS AND RETAIN IT FOR FUTURE REFERENCE.

<PAGE>

TABLE OF CONTENTS

Prospectus Summary 3
- -----------------------------------------------------------------------------

Expense Summary 5
- -----------------------------------------------------------------------------

Investment Information 6
- -----------------------------------------------------------------------------

Risk Considerations 8
- -----------------------------------------------------------------------------

Valuation of Shares 9
- -----------------------------------------------------------------------------

Purchases 9
- -----------------------------------------------------------------------------

Exchanges 10
- -----------------------------------------------------------------------------

Redemptions 10
- -----------------------------------------------------------------------------

Dividends and Distributions 11
- -----------------------------------------------------------------------------

Management 11
- -----------------------------------------------------------------------------

Tax Matters 14
- -----------------------------------------------------------------------------

Performance Information 14
- -----------------------------------------------------------------------------

General Information 15
- -----------------------------------------------------------------------------

Appendix -- Permitted Investments and Investment Practices 18
- -----------------------------------------------------------------------------

<PAGE>

PROSPECTUS SUMMARY

See the body of the Prospectus for more information on the topics discussed in
this summary.

THE FUND: This Prospectus describes CitiFundsSM S&P 500 Index Portfolio. The
Fund is a diversified mutual fund.

INVESTMENT OBJECTIVE AND POLICIES: The Fund's objective is to track the
performance of the Standard & Poor's 500 Composite Stock Price Index* (S&P
500). Of course, there can be no assurance that the Fund will achieve its
objective.

The Fund invests primarily in equity securities of companies that make up the
S&P 500. The Fund may also use various investment techniques, such as buying
and selling options and futures contracts, entering into swap agreements and
purchasing indexed securities. Because the Fund invests through an underlying
Portfolio, all references in this Prospectus to the Fund include the Portfolio,
except as otherwise noted.

INVESTMENT MANAGER AND DISTRIBUTOR: Citibank, N.A., a wholly-owned subsidiary
of Citicorp, is the investment manager. Citibank and its affiliates manage more
than $88 billion in assets worldwide. CFBDS, Inc. is the distributor of shares
of the Fund. See "Management."

PURCHASES AND REDEMPTIONS: Investors may purchase and redeem shares of the Fund
through a Service Agent on any day the New York Stock Exchange is open for
trading. See "Purchases" and "Redemptions."

PRICING: Shares of the Fund are purchased and redeemed at net asset value,
without a sales load or redemption fees. Shares are subject to a fee of up to
0.25% per annum of the Fund's average daily net assets for distribution, sales
and marketing and shareholder services. See "Purchases" and "Management --
Distribution Arrangements."

EXCHANGES: Shares may be exchanged for shares of the CitiSelect(R) Portfolios
and certain other CitiFunds. See "Exchanges."

DIVIDENDS: Dividends, if any, are declared and paid semi-annually. Net capital
gains, if any, are distributed annually. See "Dividends and Distributions."

REINVESTMENT: All dividends and capital gains distributions may be received
either in cash or in Fund shares at net asset value. See "Dividends and
Distributions."

- ---------------
* "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500" and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for use by the Fund.

<PAGE>

WHO SHOULD INVEST: The Fund is designed for investors wishing to keep expenses
low while seeking potentially high long-term returns and pursuing growth of
capital and income from investments in large companies. Investors in the Fund
should be willing to tolerate stock market fluctuations.

In managing the Fund, the investment manager will seek to track, rather than
beat, the performance of the S&P 500 and will not judge the merits of any
particular stock as an investment. Therefore, investors should not expect to
achieve the potentially greater results that could be obtained by a fund that
aggressively seeks growth.

RISK FACTORS: There can be no assurance that the Fund will achieve its
investment objective, and the Fund's net asset value will fluctuate based on
changes in the values of the underlying portfolio securities. Equity securities
fluctuate in value based on many factors, including actual and anticipated
earnings, changes in management, political and economic developments and the
potential for takeovers and acquisitions. As a result, shares may be worth more
or less at redemption than at the time of purchase.

Certain investment practices and techniques also may entail special risks. See
"Risk Considerations" and the Appendix for more information.

<PAGE>

EXPENSE SUMMARY

The following table summarizes estimated shareholder transaction and annual
operating expenses for the Fund.* For more information on costs and expenses,
see "Management" on page 11 and "General Information -- Expenses" on page 16.

CITIFUNDS
S&P 500
INDEX
PORTFOLIO
SHAREHOLDER TRANSACTION EXPENSES NONE
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE NET ASSETS):
Management Fees (2) 0.20%
12b-1 Fees (including service fees) (1) 0.25%
Other Expenses (after fee waivers and reimbursements)(2) 0.10%

Total Fund Operating Expenses (after fee waivers and reimbursements)(2) 0.55%

* This table is intended to assist investors in understanding the various
costs and expenses that a shareholder will bear, either directly or
indirectly. The table shows the fees paid to various service providers after
giving effect to expected voluntary partial fee waivers. There can be no
assurance that the fee waivers and reimbursements reflected in the table
will continue at these levels. Because the Fund is newly organized, all
amounts in the table and in the example below are estimated for the current
fiscal year.

(1) Includes fees for distribution and shareholder servicing. Long-term
shareholders in the Fund could pay more in sales charges than the economic
equivalent of the maximum front-end sales charges permitted by the National
Association of Securities Dealers, Inc.

(2) Absent fee waivers and reimbursements, Management Fees, Other Expenses and
Total Fund Operating Expenses would be 0.25%, 0.62% and 1.12%,
respectively.

Example: A shareholder would pay the following expenses on a $1,000 investment,
assuming a 5% annual return and redemption at the end of each period indicated
below:

--------------------------------------- -------------------------
ONE THREE
CITIFUNDS S&P 500 INDEX PORTFOLIO YEAR YEARS
--------------------------------------- -------------------------
$6 $18
--------------------------------------- -------------------------

The Example assumes that all dividends are reinvested. Without waivers and
reimbursements, the amounts in the Example would be $11 and $36, respectively.
The assumption of a 5% annual return is required by the Securities and Exchange
Commission for all mutual funds, and is not a prediction of the Fund's future

<PAGE>

performance. THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES OF THE FUND. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.

INVESTMENT INFORMATION

INVESTMENT OBJECTIVE: The Fund's investment objective is to track the
performance of the S&P 500.

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

INVESTMENT POLICIES: The Fund attempts to duplicate the total return of the S&P
500. To do so, the Fund invests primarily in equity securities of companies
that make up the S&P 500. Under normal market conditions, at least 80% of the
Fund's assets will be invested in these securities. The Fund may invest in
equity securities, including common stocks, preferred stocks, convertible
securities and warrants.

The S&P 500 is made up of 500 common stocks most of which trade on the New York
Stock Exchange; it is a widely recognized, unmanaged index of common stock
prices. Total returns for the S&P 500 assume reinvestment of dividends but do
not include the effect of brokerage commissions or other fees. At some time in
the future the Fund may select another index if such a standard of comparison
is deemed to be more representative of the performance of the common stocks of
large U.S. companies.

The Fund may not always hold all of the same securities as the S&P 500. The
Manager may choose to exclude an index stock from the Fund and substitute a
similar stock when it finds it necessary or desirable to do so. Even if the
Fund's investments match the S&P 500 exactly, the Fund's returns could differ
on a day-to-day basis because of differences in how the Fund and the sponsor of
the S&P 500 value the underlying securities. The Fund's returns will also
reflect the deduction of Fund expenses and the size and frequency of cash flows
into and out of the Fund.

Standard & Poor's is neither an affiliate nor a sponsor of the Fund, and
inclusion of a stock in the S&P 500 does not imply that it is a good
investment.

CERTAIN ADDITIONAL INVESTMENT POLICIES:

OPTIONS AND FUTURES. The Fund can use various investment techniques to increase
or decrease its exposure to changing security prices or other factors that
affect security values. These techniques may involve derivative transactions
such as buying and selling options and futures contracts, entering to swap
agreements, and purchasing indexed securities.

The Fund can use these practices in its effort to track the return of the S&P
500. If the Fund judges market conditions incorrectly or employs a strategy

<PAGE>

that does not correlate well with its investments, these techniques could
result in a loss, regardless of whether the intent was to reduce risk or
increase return. These techniques may increase the volatility of the Fund and
may involve a small investment of cash relative to the magnitude of the risk
assumed. In addition, these techniques could result in a loss if the
counterparty to the transaction does not perform as promised.

Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of a security at a specified future time
and price, or for making payment of a cash settlement based on changes in the
value of a security, an index of securities or other assets. In many cases, the
futures contracts that may be purchased or sold by the Fund are standardized
contracts traded on commodities exchanges or boards of trade. See the Appendix
for more information.

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

OTHER PERMITTED INVESTMENTS. For more information regarding the Fund's
permitted investments and investment practices, see the Appendix. The Fund will
not necessarily invest or engage in each of the investments and investment
practices described in the Appendix but reserves the right to do so.

INVESTMENT RESTRICTIONS. The Statement of Additional Information contains a
list of specific investment restrictions which govern the investment policies
of the Fund, including a limitation that the Fund may borrow money from banks
in an amount not to exceed 1/3 of the Fund's net assets for extraordinary or
emergency purposes (e.g., to meet redemption requests). Except as otherwise
indicated, the Fund's investment objective and policies may be changed without
shareholder approval. If a percentage or rating restriction (other than a
restriction as to borrowing) is adhered to at the time an investment is made, a
later change in percentage or rating resulting from changes in the Fund's
securities will not be a violation of policy.

PORTFOLIO TURNOVER. Securities of the Fund will be sold whenever it is
appropriate to do so in light of the Fund's investment objective, without
regard to the length of time a particular security may have been held. The
turnover rate for the Fund is not expected to exceed 50%, a generally lower
turnover rate than other mutual funds. The amount of brokerage commissions and
realization of taxable capital gains will tend to increase as the level of
portfolio activity increases.

BROKERAGE TRANSACTIONS. In connection with the selection of brokers or dealers
for securities transactions for the Fund and the placing of such orders,
brokers or dealers may be selected who also provide brokerage and research
services to the Fund or the other accounts over which Citibank or its
affiliates exercise investment discretion. The Fund is authorized to pay a
broker or dealer who provides such brokerage and research services a commission
for executing a portfolio transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have charged for effecting

<PAGE>

that transaction if Citibank determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer.

RISK CONSIDERATIONS

The risks of investing in the Fund vary depending upon the nature of the
securities held, and the investment practices employed, on its behalf. Certain
of these risks are described below.

CORRELATION WITH THE S&P 500: The Fund seeks to achieve a 98% or better
correlation between its total return and the total return of the S&P 500. The
investment manager uses an indexing technique to structure the Fund's portfolio
similarly to that of the S&P 500. The investment manager monitors correlation
between the performance of the Fund and that of the S&P 500 on a monthly basis.
Correlation is measured by comparing the Fund's monthly total returns to those
of the S&P 500 over the most recent 36-month period. In the unlikely event that
the Fund cannot achieve a correlation of 98% or better, the Trustees will
consider alternative arrangements.

Differences between the S&P 500 and the Fund's portfolio may cause differences
in performance. Even if the Fund's investments match the S&P 500 exactly, its
returns could differ on a day-to-day basis because of differences in how the
Fund and the S&P 500 are valued. The Fund normally values all of its
investments at 4:00 p.m. Eastern time. The S&P 500 is valued by its sponsor,
who may use different closing prices than the Fund does. The Fund's returns
will reflect Fund expenses and the size and frequency of cash flows into and
out of the Fund. Also, the Fund generally will hold cash in an amount
determined necessary to fund shareholder redemptions. All of these factors will
affect the Fund's correlation with the index.

CHANGES IN NET ASSET VALUE. The Fund's net asset value will fluctuate based on
changes in the values of the underlying portfolio securities. This means that
an investor's interest may be worth more or less at redemption than at the time
of purchase. Equity securities fluctuate in response to general market and
economic conditions and other factors, including actual and anticipated
earnings, changes in management, political developments and the potential for
takeovers and acquisitions.

INVESTMENT PRACTICES. Certain of the investment practices and techniques
employed for the Fund may entail additional risks that are described in the
Appendix. See the Appendix.

<PAGE>

VALUATION OF SHARES

Net asset value per share of the Fund is determined each day the New York Stock
Exchange is open for trading (a "Business Day"). This determination is made
once each day as of the close of regular trading on the Exchange (normally 4:00
p.m. Eastern time) by adding the market value of all securities and other
assets of the Fund (including the Fund's interest in the Portfolio), then
subtracting the Fund's liabilities, and then dividing the result by the number
of the Fund's outstanding shares. The net asset value per share is effective
for orders received and accepted by the Transfer Agent prior to its
calculation.

Portfolio securities and other assets are valued primarily on the basis of
market quotations, or if quotations are not available, by a method believed to
accurately reflect fair value. Non-U.S. securities are generally valued based
on quotations from the primary market in which they are traded and are
translated from the local currency into U.S. dollars using current exchange
rates. In light of the non-U.S. nature of some of the Fund's investments,
trading may take place in securities held by the Fund on days that are not
Business Days and on which it will not be possible to purchase or redeem shares
of the Fund.

PURCHASES

Shares of the Fund are offered continuously and may be purchased on any
Business Day without a sales load at the shares' net asset value next
determined after an order is transmitted to and accepted by the Transfer Agent.
The Fund and the Transfer Agent reserve the right to reject any purchase order
and to suspend the offering of Fund shares for a period of time.

While there is no sales load imposed on shares of the Fund, the Distributor
receives fees from the Fund pursuant to a Service Plan. See "Management --
Distribution Arrangements."

Shares may be purchased through certain financial institutions (which may
include banks), securities dealers and other industry professionals (called
Service Agents) that have entered into service agreements with the Distributor.
Service Agents may receive certain fees from the Distributor and/or the Fund.
See "Management -- Distribution Arrangements." Investors should contact their
Service Agents for information on purchases. Each Service Agent may establish
its own terms, conditions and charges with respect to services it offers to its
customers. Charges for these services may include fixed annual fees and account
maintenance fees. The effect of any such fees will be to reduce the net return
on the investment of customers of that Service Agent. Each Service Agent has
agreed to transmit to its customers who are shareholders of the Fund
appropriate written disclosure of any fees that it may charge them directly.
Each Service Agent is responsible for transmitting promptly orders of its
customers.

From time to time CFBDS may make payments for distribution and/or shareholder
servicing activities out of its past profits and other sources available to it.
The Distributor also may make payments for marketing, promotional or related

<PAGE>

expenses to dealers who engage in marketing efforts on behalf of the Fund. The
amounts of these payments will be determined by the Distributor in its sole
discretion and may vary among different dealers.

EXCHANGES

Shares may be exchanged for shares of the CitiSelect Portfolios and certain
other CitiFunds, or may be acquired through an exchange of shares of those
funds.

Shareholders may place exchange orders through the Transfer Agent or, if they
are customers of a Service Agent, through their Service Agent, and may do so by
telephone if their account applications so permit. For more information on
telephone transactions see "Redemptions." All exchanges will be effected based
on the relative net asset values per share next determined after the exchange
order is received by the Transfer Agent. See "Valuation of Shares." Shares of
the Fund may be exchanged only after payment in federal funds for the shares
has been received by the Transfer Agent.

This exchange privilege may be modified or terminated at any time, upon at
least 60 days' notice when such notice is required by Securities and Exchange
Commission rules, and is available only in those jurisdictions where such
exchanges legally may be made. See the Statement of Additional Information for
further details. An exchange is treated as a sale of the shares exchanged and
could result in taxable gain or loss to the shareholder making the exchange.

REDEMPTIONS

Fund shares may be redeemed at their net asset value next determined after a
redemption request in proper form is received by the Transfer Agent. Each
Service Agent is responsible for the prompt transmission of redemption orders
to the Fund on behalf of its customers. A Service Agent may establish
requirements or procedures regarding submission of redemption requests by its
customers that are different from those described below. Shareholders should
consult their Service Agents for details. A redemption is treated as a sale of
the shares redeemed and could result in taxable gain or loss to the shareholder
making the redemption.

REDEMPTIONS BY MAIL. Shareholders may redeem Fund shares by sending written
instructions in proper form (as determined by the Transfer Agent or a
shareholder's Service Agent) to the Transfer Agent or, if shareholders are
customers of a Service Agent, their Service Agent. Shareholders are responsible
for ensuring that a request for redemption is in proper form.

REDEMPTIONS BY TELEPHONE. Shareholders may redeem or exchange Fund shares by
telephone, if their account applications so permit, by calling the Transfer
Agent or, if they are customers of a Service Agent, their Service Agent. During
periods of drastic economic or market changes or severe weather or other
emergencies, shareholders may experience difficulties implementing a telephone
exchange or redemption. In such an event, another method of instruction, such

<PAGE>

as a written request sent via an overnight delivery service, should be
considered. The Fund, the Transfer Agent and each Service Agent will employ
reasonable procedures to confirm that instructions communicated by telephone
are genuine. These procedures may include recording of the telephone
instructions and verification of a caller's identity by asking for the
shareholder's name, address, telephone number, Social Security or taxpayer
identification number, and account number. If these or other reasonable
procedures are not followed, the Fund, the Transfer Agent or the Service Agent
may be liable for any losses to a shareholder due to unauthorized or fraudulent
instructions. Otherwise, the shareholder will bear all risk of loss relating to
a redemption or exchange by telephone.

PAYMENT OF REDEMPTIONS. The proceeds of a redemption are paid in federal funds
normally on the next Business Day, but in any event within seven days. If a
shareholder requests redemption of shares which were purchased recently, the
Fund may delay payment until it is assured that good payment has been received.
In the case of purchases by check, this can take up to ten days. See
"Determination of Net Asset Value; Valuation of Securities; Additional
Redemption Information" in the Statement of Additional Information regarding
the Fund's right to pay the redemption price in kind with securities (instead
of cash).

Questions about redemption requirements should be referred to the Transfer
Agent or, for customers of a Service Agent, their Service Agent. The right of
any shareholder to receive payment with respect to any redemption may be
suspended or the payment of the redemption price postponed during any period in
which the New York Stock Exchange is closed (other than weekends or holidays)
or trading on the Exchange is restricted or if an emergency exists.

DIVIDENDS AND DISTRIBUTIONS

Substantially all of the Fund's net income from dividends and interest, if any,
is paid to its shareholders of record as a dividend semi-annually.

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

A shareholder may elect to receive dividends and capital gains distributions in
either cash or additional shares of the Fund issued at net asset value.

MANAGEMENT

TRUSTEES AND OFFICERS: The Fund is supervised by the Board of Trustees of
CitiFunds Trust II. The Portfolio is supervised by the Board of Trustees of The
Premium Portfolios. In each case, a majority of the Trustees are not affiliated
with Citibank. More information on the Trustees and officers of the Fund and
the Portfolio appears under "Management" in the Statement of Additional
Information.

<PAGE>

INVESTMENT MANAGER: The Fund draws on the strength and experience of Citibank.
Citibank offers a wide range of banking and investment services to customers
across the United States and throughout the world, and has been managing money
since 1822. Its portfolio managers are responsible for investing in money
market, equity and fixed income securities. Citibank and its affiliates manage
more than $88 billion in assets worldwide. Citibank is a wholly-owned
subsidiary of Citicorp. Citibank also serves as investment adviser to other
registered investment companies. Citibank's address is 153 East 53rd Street,
New York, New York 10043. Citicorp recently announced its intention to merge
with The Travelers Group. Completion of the merger is subject to the
satisfaction of certain conditions.

Subject to policies set by the Trustees, Citibank is responsible for overall
management of the Fund and has a Management Agreement with the Fund. Citibank
also provides certain administrative services to the Fund. These administrative
services include providing general office facilities and supervising the
overall administration of the Fund. Pursuant to a sub-administrative services
agreement with Citibank, CFBDS performs such sub-administrative duties for the
Fund as from time to time are agreed upon by Citibank and CFBDS. CFBDS's
compensation as sub-administrator is paid by Citibank.

[Portfolio manager discussion to follow.]

MANAGEMENT FEES. For the services of Citibank under the Management Agreements
with respect to the Fund and the Portfolio, the Fund and the Portfolio pay an
aggregate fee, which is computed daily and paid monthly, at the annual rate of
0.20% of the Fund's average net assets. Citibank may voluntarily agree to waive
a portion of its management fee.

BANKING RELATIONSHIPS. Citibank and its affiliates may have deposit, loan and
other relationships with the issuers of securities purchased on behalf of the
Fund, including outstanding loans to such issuers which may be repaid in whole
or in part with the proceeds of securities so purchased. Citibank has informed
the Fund that, in making its investment decisions, it does not obtain or use
material inside information in the possession of any division or department of
Citibank or in the possession of any affiliate of Citibank.

BANK REGULATORY MATTERS. The Glass-Steagall Act prohibits certain financial
institutions, such as Citibank, from underwriting securities of open-end
investment companies, such as the Fund. Citibank believes that its services
under the Management Agreement and the activities performed by it or its
affiliates as Service Agents are not underwriting and are consistent with the
Glass-Steagall Act and other relevant federal and state laws. However, there is
no controlling precedent regarding the performance of the combination of
investment advisory, shareholder servicing and administrative activities by
banks. State laws on this issue may differ from applicable federal law and
banks and financial institutions may be required to register as dealers
pursuant to state securities laws. Changes in either federal or state statutes
or regulations, or in their interpretations, could prevent Citibank or its
affiliates from continuing to perform these services. If Citibank or its
affiliates were to be prevented from acting as the Manager or a Service Agent

<PAGE>

the Fund would seek alternative means for obtaining these services. The Fund
does not expect that shareholders would suffer any adverse financial
consequences as a result of any such occurrence.

TRANSFER AGENT, CUSTODIAN AND FUND ACCOUNTANT: State Street Bank and Trust
Company acts as transfer agent, dividend disbursing agent and custodian of the
Fund's assets. Securities may be held by a sub-custodian bank approved by the
Trustees. State Street also provides fund accounting services and calculates
the daily net asset value for the Fund. The principal business address of State
Street is 225 Franklin Street, Boston, MA 02110.

DISTRIBUTION ARRANGEMENTS: CFBDS, 21 Milk Street, 5th Floor, Boston, MA 02109
(telephone: (617) 423-1679) is the Distributor of the Fund's shares. Under a
Service Plan which has been adopted in accordance with Rule 12b-1 under the
1940 Act, the Fund may pay monthly fees at an annual rate not to exceed 0.25%
of the average daily net assets of the Fund. These fees may be used to make
payments to the Distributor for distribution services and to Service Agents and
others as compensation for the sale of shares of the Fund, for advertising,
marketing or other promotional activity, and for preparation, printing and
distribution of prospectuses, statements of additional information and reports
for recipients other than regulators and existing shareholders. The Fund also
may make payments to the Distributor, Service Agents and others for providing
personal service or the maintenance of shareholder accounts. In those states
where CFBDS is not a registered broker-dealer, shares of the Fund are sold
through Signature Broker-Dealer Services, Inc., as dealer.

The amounts paid by the Distributor to each Service Agent and other recipient
may vary based upon certain factors, including, among other things, the levels
of sales of Fund shares and/or shareholder services provided by the Service
Agent.

The Fund and the Distributor provide to the Trustees quarterly a written report
of amounts expended pursuant to the Service Plan and the purposes for which the
expenditures were made.

During the period they are in effect, the Service Plan and Distribution
Agreement obligate the Fund to pay fees to the Distributor, Service Agents and
others as compensation for their services, not as reimbursement for specific
expenses incurred. Thus, even if these entities' expenses exceed the fees
provided for under the Service Plan, the Fund will not be obligated to pay more
than those fees and, if their expenses are less than the fees paid to them,
they will realize a profit. The Fund will pay the fees to the Distributor,
Service Agents and others until the Service Plan or Distribution Agreement is
terminated or not renewed. In that event, the Distributor's or Service Agent's
expenses in excess of fees received or accrued through the termination date
will be the Distributor's or Service Agent's sole responsibility and not
obligations of the Fund.

<PAGE>

TAX MATTERS

This discussion of taxes is for general information only. Investors should
consult their own tax advisers about their particular situations.

The Fund intends to meet requirements of the Internal Revenue Code applicable
to regulated investment companies so that it will not be liable for any federal
income or excise taxes. The Fund may pay withholding or other taxes to foreign
governments during the year, however, and these taxes will reduce the Fund's
dividends.

Fund dividends and capital gains distributions are subject to federal income
tax and may also be subject to state and local taxes. Dividends and
distributions are treated in the same manner for federal tax purposes whether
they are paid in cash or as additional 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 of long-term net capital gains will be taxed as such regardless
of how long the shares of the Fund have been held. Such capital gains may be
taxable to shareholders that are individuals, estates or trusts at maximum
rates of 20%, 25% or 28%, depending on the source of the gains.

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

Early each year, the Fund will notify its shareholders of the amount and tax
status of distributions paid to shareholders for the preceding year. Investors
should consult their own tax advisers regarding the status of their accounts
under state and local laws.

PERFORMANCE INFORMATION

Fund performance may be quoted in advertising, shareholder reports and other
communications in terms of yield, effective yield or total rate of return. All
performance information is historical and is not intended to indicate future
performance. Yields and total rates of return fluctuate in response to market
conditions and other factors, and the value of the Fund's shares when redeemed
may be more or less than their original cost.

The Fund may provide its period and average annualized "total rates of return."
The "total rate of return" refers to the change in the value of an investment
in the Fund over a stated period, reflects any change in net asset value per
share and is compounded to include the value of any shares purchased with any
dividends or capital gains declared during such period. Period total rates of
return may be "annualized." An "annualized" total rate of return assumes that
the period total rate of return is generated over a one-year period.

<PAGE>

The Fund may provide annualized "yield" and "effective yield" quotations. The
"yield" of the Fund refers to the income generated by an investment in the Fund
over a 30-day or one month period (which period is stated in any such
advertisement or communication). This income is then annualized; that is, the
amount of income generated by the investment over that period is assumed to be
generated each month over a one-year period and is shown as a percentage of the
offering price on the last day of that period. The "effective yield" is
calculated similarly, but when annualized the income earned by the investment
during that 30-day or one month period is assumed to be reinvested. The
effective yield is slightly higher than the yield because of the compounding
effect of this assumed reinvestment. The Fund may also provide yield and
effective yield quotations for longer periods.

Of course, any fees charged by a shareholder's Service Agent will reduce that
shareholder's net return on investment. See the Statement of Additional
Information for more information concerning the calculation of yield and total
rate of return quotations for the Fund.

GENERAL INFORMATION

ORGANIZATION: The Fund is a diversified series of CitiFunds Trust II. CitiFunds
Trust II is a Massachusetts business trust organized on April 13, 1984; it also
is an open-end management investment company registered under the 1940 Act.
Prior to January 7, 1998 CitiFunds Trust II was called Landmark Funds II.
CitiFunds Trust II currently has six active series.

The Fund is a diversified mutual fund. Under the 1940 Act, a diversified mutual
fund must invest at least 75% of its assets in cash and cash items, U.S.
Government securities, investment company securities and other securities
limited as to any one issuer to not more than 5% of the total assets of the
mutual fund and not more than 10% of the voting securities of the issuer.

Under Massachusetts law, shareholders of a business trust may, under certain
circumstances, be held personally liable as partners for the trust's
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance existed and the trust itself was unable to meet its
obligations.

The Fund invests in the Portfolio. The Portfolio is a series of The Premium
Portfolios, a New York trust which also is an investment company registered
under the 1940 Act.

VOTING AND OTHER RIGHTS: CitiFunds Trust II may issue an unlimited number of
shares, may create new series of shares and may divide shares in each series
into classes. Each share of the Fund gives the shareholder one vote in Trustee
elections and other matters submitted to shareholders for vote. All shares of
each series of CitiFunds Trust II have equal voting rights except that, in
matters affecting only a particular series or class, only shares of that
particular series or class are entitled to vote.

<PAGE>

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

As a Massachusetts business trust, CitiFunds Trust II is not required to hold
annual shareholder meetings. Shareholder approval will usually be sought only
for changes in the Fund's fundamental investment restrictions and for the
election of Trustees under certain circumstances. Trustees may be removed by
shareholders under certain circumstances. Each share of the Fund is entitled to
participate equally in dividends and other distributions and the proceeds of
any liquidation of the Fund.

CERTIFICATES: The Fund's Transfer Agent maintains a share register for
shareholders of record. Share certificates are not issued.

RETIREMENT PLANS: Investors may be able to establish new accounts in the Fund
under one of several tax-sheltered plans. Such plans include IRAs, Keogh or
Corporate Profit-Sharing and Money-Purchase Plans, 403(b) Custodian Accounts,
and certain other qualified pension and profit-sharing plans. Investors should
consult with their Service Agent and tax and retirement advisers.

EXPENSES: In addition to amounts payable under its Management Agreement and
Service Plan, the Fund is responsible for its own expenses, including, among
other things, the costs of securities transactions, the compensation of
Trustees that are not affiliated with Citibank or the Distributor, government
fees, taxes, accounting and legal fees, expenses of communicating with
shareholders, interest expense, and insurance premiums.

All fee waivers are voluntary and may be reduced or terminated at any time.

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 issues. While it is
likely that these efforts will be successful, the failure to implement any
necessary modifications to computer systems used by the Fund or its service
providers could result in an adverse impact on the Fund.

COUNSEL AND INDEPENDENT AUDITOR: Bingham Dana LLP, 150 Federal Street, Boston,
MA 02110, is counsel for the Fund. PricewaterhouseCoopers LLP, 160 Federal
Street, Boston, MA 02110, serves as independent auditor for the Fund.

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

The Statement of Additional Information dated the date hereof contains more
detailed information about the Fund, including information related to (i)
investment policies and restrictions, (ii) the Trustees, officers and

<PAGE>

investment manager, (iii) securities transactions, (iv) the Fund's shares,
including rights and liabilities of shareholders, (v) the method used to
calculate performance information and (vi) the determination of net asset
value.

No person has been authorized to give any information or make any
representations not contained in this Prospectus in connection with the
offering made by this Prospectus and, if given or made, such information or
representations must not be relied upon as having been authorized by the Fund
or its distributor. This Prospectus does not constitute an offering by the Fund
or its distributor in any jurisdiction in which such offering may not lawfully
be made.

The Fund is not sponsored, endorsed, sold or promoted by Standard & Poor's
(S&P). S&P makes no representation or warranty, implied or express, to
purchasers of the Fund or any member of the public regarding the advisability
of investing in index funds or the ability of the S&P 500 Index to track
general stock market performance. S&P does not guarantee the accuracy and/or
the completeness of the S&P 500 Index or any data included therein.

S&P's only relationship to the Fund is the licensing of the S&P marks and S&P
500, which is determined, composed and calculated by S&P without regard to the
Fund. "Standard & Poor's 500," "S&P 500(R)", "Standard & Poor's(R)," "S&P(R)"
and "500" are trademarks of The McGraw-Hill Companies, Inc.

S&P has no obligation to take the needs of the Fund or the owners of the Fund
into consideration in determining, composing or calculating the S&P 500 Index.
S&P is not responsible for and has not participated in the determination of the
prices and amount of the Fund or the timing of the issuance or sale of the Fund
or in the determination or calculation of the equation by which the Fund is to
be converted into cash. S&P has no obligation or liability in connection with
the administration, marketing or trading of the Fund.

S&P DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE S&P 500
INDEX OR ANY DATA INCLUDED THEREIN AND S&P SHALL HAVE NO LIABILITY FOR ANY
ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P MAKES NO WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUND, OWNERS OF THE FUND, OR ANY
OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR ANY DATA INCLUDED
THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL
WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH
RESPECT TO THE S&P 500 INDEX OR ANY DATA INCLUDED THEREIN.

<PAGE>

APPENDIX

PERMITTED INVESTMENTS AND
INVESTMENT PRACTICES

REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements in order
to earn a return on temporarily available cash. Repurchase agreements are
transactions in which an institution sells the Fund a security at one price,
subject to the Fund's obligation to resell and the selling institution's
obligation to repurchase that security at a higher price normally within a
seven day period. There may be delays and risks of loss if the seller is unable
to meet its obligation to repurchase.

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

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

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

CONVERTIBLE SECURITIES. The Fund may invest in convertible securities. A
convertible security is a fixed-income security (a bond or preferred stock)
which may be converted at a stated price within a specified period of time into
a certain quantity of common stock or other equity securities of the same or a
different issuer. Convertible securities rank senior to common stock in a
corporation's capital structure but are usually subordinated to similar
non-convertible securities. While providing a fixed-income stream (generally
higher in yield than the income derivable from common stock but lower than that
afforded by a similar non-convertible security), a convertible security also
affords an investor the opportunity, through its conversion feature, to

<PAGE>

participate in the capital appreciation attendant upon a market price advance
in the convertible security's underlying common stock.

In general, the market value of a convertible security is at least the higher
of its "investment value" (i.e., its value as a fixed-income security) or its
"conversion value" (i.e., its value upon conversion into its underlying stock).
As a fixed-income security, a convertible security tends to increase in market
value when interest rates decline and tends to decrease in value when interest
rates rise. However, the price of a convertible security is also influenced by
the market value of the security's underlying common stock. The price of a
convertible security tends to increase as the market value of the underlying
stock rises, whereas it tends to decrease as the market value of the underlying
stock declines. While no securities investment is without some risk,
investments in convertible securities generally entail less risk than
investments in the common stock of the same issuer.

NON-U.S. SECURITIES. The Fund may invest a portion of its assets in non-U.S.
securities. Investments in non-U.S. 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 non-U.S. issuers
and markets are subject. These risks may include expropriation, confiscatory
taxation, withholding taxes on dividends and interest, limitations on the use
or transfer of portfolio assets and political or social instability. Enforcing
legal rights may be difficult, costly and slow in non-U.S. countries, and there
may be special problems enforcing claims against non-U.S. governments. In
addition, non-U.S. 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. Non-U.S. markets may be less liquid
and more volatile than U.S. markets, and may offer less protection to investors
such as the Fund. Prices at which the Fund may acquire securities may be
affected by trading by persons with material non-public information and by
securities transactions by brokers in anticipation of transactions by the Fund.

Because non-U.S. securities often are denominated 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. In addition, some non-U.S. currency values
may be volatile and there is the possibility of governmental controls on
currency exchanges or governmental intervention in currency markets.

The Fund may invest in issuers located in developing countries, which are
generally defined as countries in the initial stages of their industrialization
cycles with low per capita income. All of the risks of investing in non-U.S.
securities are heightened by investing in developing countries. Shareholders
should be aware that investing in the equity and fixed income markets of
developing countries involves exposure to economic structures that are
generally less diverse and mature, and to political systems which can be
expected to have less stability, than those of developed countries. Historical
experience indicates that the markets of developing countries have been more
volatile than the markets of developed countries with more mature economies;

<PAGE>

such markets often have provided higher rates of return, and greater risks, to
investors. These heightened risks include (i) greater risks of expropriation,
confiscatory taxation and nationalization, and less social, political and
economic stability; (ii) the small current size of markets for securities of
issuers based in developing countries and the currently low or non-existent
volume of trading, resulting in a lack of liquidity and in price volatility;
(iii) certain national policies which may restrict the Fund's investment
opportunities including restrictions on investing in issuers or industries
deemed sensitive to relevant national interests; and (iv) the absence of
developed legal structures. Such characteristics can be expected to continue in
the future.

Equity securities traded in certain foreign countries may trade at
price-earnings multiples higher than those of comparable companies trading on
securities markets in the United States, which may not be sustainable. Rapid
increases in money supply in certain countries may result in speculative
investment in equity securities which may contribute to volatility of trading
markets.

The costs attributable to non-U.S. investing, such as the costs of maintaining
custody of securities in non-U.S. countries, frequently are higher than those
involved in U.S. investing. As a result, the operating expense ratio of the
Fund may be higher than that of a fund investing exclusively in U.S.
securities.

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

PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS. The Fund may invest up to 15% of
its net assets in securities for which there is no readily available market.
These illiquid securities may include privately placed restricted securities
for which no institutional market exists. The absence of a trading market can
make it difficult to ascertain a market value for illiquid investments.
Disposing of illiquid investments may involve time-consuming negotiation and
legal expenses, and it may be difficult or impossible for the Fund to sell them
promptly at an acceptable price.

OTHER INVESTMENT COMPANIES. Subject to applicable statutory and regulatory
limitations, assets of the Fund may be invested in shares of other investment
companies.

SHORT SALES "AGAINST THE BOX." In a short sale, the Fund sells a borrowed
security and has a corresponding obligation to the lender to return the
identical security. The Fund may engage in short sales only if at the time of
the short sale it owns or has the right to obtain, at no additional cost, an
equal amount of the security being sold short. This investment technique is

<PAGE>

known as a short sale "against the box." The Fund may make a short sale as a
hedge, when it believes that the value of a security owned by the Fund (or a
security convertible or exchangeable for such security) may decline. Not more
than 40% of the Fund's total assets would be involved in short sales "against
the box."

SWAPS AND RELATED TRANSACTIONS. The Fund may enter into swap agreements with
other institutional investors with respect to equity securities, foreign
currencies and interest rates and may enter into other types of available swap
agreements, such as caps, collars and floors, for the purpose of attempting to
obtain a particular desired return at a lower cost to the Fund than if the Fund
had invested directly in an instrument that yielded that desired return. In a
standard swap agreement, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on a particular
predetermined investment or investments.

The Fund may also purchase and sell caps, floors and collars. In a typical cap
or floor agreement, one party agrees to make payments only under specified
circumstances, usually in return for payment of a fee by the counterparty. For
example, the purchase of an interest rate cap entitles the buyer, to the extent
that a specified index exceeds a predetermined interest rate, to receive
payments of interest on a contractually-based principal amount from the
counterparty selling such interest rate cap. The sale of an interest rate floor
obligates the seller to make payments to the extent that a specified interest
rate falls below an agreed-upon level. A collar arrangement combines elements
of buying and selling a floor.

Swap agreements are subject to the Fund's overall limit that not more than 15%
of its net assets may be invested in illiquid securities, and the Fund will not
enter into a swap agreement with any single party if the net amount owed or to
be received under existing contracts with that party would exceed 5% of the
Fund's assets.

FUTURES. Because the value of a futures contract changes based on the price of
the underlying security or other asset, futures contracts are considered to be
"derivatives." When the Fund purchases or sells a futures contract, it is
required to make an initial margin deposit. Although the amount may vary,
initial margin can be as low as 1% or less of the face amount of the contract.
Additional margin may be required as the contract fluctuates in value. Since
the amount of margin is relatively small compared to the value of the
securities covered by a futures contract, the potential for gain or loss on a
futures contract is much greater than the amount of the Fund's initial margin
deposit. The Fund does not currently intend to enter into a futures contract
if, as a result, the initial margin deposits on all of the Fund's futures
contracts would exceed approximately 5% of the Fund's net assets. Also, the
Fund intends to limit its futures contracts so that the value of the securities
covered by its futures contracts would not generally exceed 50% of the Fund's
other assets and to segregate sufficient assets to meet its obligations under
outstanding futures contracts.

The ability of the Fund to utilize futures contracts successfully will depend
on the Fund's ability to predict stock price movements, which cannot be
assured. In addition to general risks associated with any investment, the use
of futures contracts entails the risk that, to the extent the Fund's view as to

<PAGE>

stock price movements is incorrect, the use of futures contracts, even for
hedging purposes, could result in losses greater than if they had not been
used. This could happen, for example, if there is a poor correlation between
price movements of futures contracts and price movements in the Fund's related
portfolio position. Also, the futures markets may not be liquid in all
circumstances. As a result, in certain markets, the Fund might not be able to
close out a transaction without incurring substantial losses, if at all. When
futures contracts are used for hedging, even if they are successful in
minimizing the risk of loss due to a decline in the value of the hedged
position, at the same time they limit any potential gain which might result
from an increase in value of such position. As noted, the Fund may also enter
into transactions in futures contracts for other than hedging purposes (subject
to applicable law), including speculative transactions, which involve greater
risk. In particular, in entering into such transactions, the Fund may
experience losses which are not offset by gains on other portfolio positions,
thereby reducing its gross income. In addition, the markets for such
instruments may be extremely volatile from time to time, which could increase
the risks incurred by the Fund in entering into such transactions.

The use of futures contracts potentially exposes the Fund to the effects of
"leveraging," which occurs when futures are used so that the Fund's exposure to
the market is greater than it would have been if the Fund had invested directly
in the underlying securities. "Leveraging" increases the Fund's potential for
both gain and loss. As noted above, the Fund intends to adhere to certain
policies relating to the use of futures contracts, which should have the effect
of limiting the amount of leverage by the Fund.

OPTIONS. The Fund may write (sell) covered call and put options and purchase
call and put options on securities and securities indices. The Fund will write
options on securities for the purpose of increasing its return on such
securities and/or to protect the value of its portfolio. In particular, where
the Fund writes an option which expires unexercised or is closed out by the
Fund at a profit, it will retain the premium paid for the option which will
increase its gross income and will offset in part the reduced value of the
portfolio security underlying the option, or the increased cost of portfolio
securities to be acquired. If the price of the underlying security moves
adversely to the Fund's position, the option may be exercised and the Fund will
be required to purchase or sell the underlying security at a disadvantageous
price, which may only be partially offset by the amount of the premium.

By writing a call option on a security, the Fund limits its opportunity to
profit from any increase in the market value of the underlying security, since
the holder will usually exercise the call option when the market value of the
underlying security exceeds the exercise price of the call. However, the Fund
retains the risk of depreciation in value of securities on which it has written
call options.

The Fund may purchase and write options on stock index futures contracts. Such
investment strategies will be used for hedging and non-hedging purposes,
subject to applicable law. Put and call options on futures contracts may be
traded by the Fund in order to protect against declines in values of portfolio
securities or against increases in the cost of securities to be acquired.

<PAGE>

Purchase of options on futures contracts may present less risk in hedging the
investment portfolio of the Fund than the purchase or sale of the underlying
futures contracts since the potential loss is limited to the amount of the
premium plus related transaction costs. The writing of such options, however,
does not present less risk than the trading of futures contracts and will
constitute only a partial hedge, up to the amount of the premium received. In
addition, if an option is exercised, the Fund may suffer a loss on the
transaction.

Transactions in options may be entered into on U.S. exchanges regulated by the
SEC, in the over-the-counter market and on foreign exchanges. Futures contracts
and options on futures contracts may be entered into on U.S. exchanges
regulated by the Commodity Futures Trading Commission and on foreign exchanges.

Transactions in options, futures contracts and options on futures contracts
entered into for non-hedging purposes involve greater risk and could result in
losses which are not offset by gains on other portfolio assets. For example,
the Fund may sell futures contracts on an index of securities in order to
profit from any anticipated decline in the value of the securities comprising
the underlying index. In such instances, any losses on the futures transactions
will not be offset by gains on any portfolio securities comprising such index,
as might occur in connection with a hedging transaction.

INDEXED SECURITIES. Indexed securities include commercial paper, certificates
of deposit, and other fixed-income securities whose values at maturity or
coupon interest rates are determined by reference to the returns of the S&P 500
or comparable stock indices. Indexed securities can be affected by stock prices
as well as changes in interest rates and the creditworthiness of their issuers
and may not track the S&P 500 as accurately as direct investments in the S&P
500.

<PAGE>

Statement of
Additional Information
September __, 1998

CITIFUNDSSM S&P 500 INDEX PORTFOLIO

CitiFunds S&P 500 Index Portfolio (the "Fund") is a series of CitiFunds Trust
II (the "Trust"). The Trust is an investment company which was organized as a
business trust under the laws of the Commonwealth of Massachusetts on April 13,
1984. The address and telephone number of the Trust are 21 Milk Street, 5th
Floor, Boston, Massachusetts 02109, (617) 423-1679. The Fund is permitted to
invest all or a portion of its assets in one or more other investment
companies. Currently, the Fund invests its assets in the S&P 500 Index
Portfolio, a series of The Premium Portfolios (the "Portfolio Trust"). The
address of the Portfolio Trust is Elizabethan Square, George Town, Grand
Cayman, British West Indies.

FUND SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY,
CITIBANK, N.A. OR ANY OF ITS AFFILIATES, ARE NOT INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION OR ANY OTHER AGENCY, AND INVOLVE INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.

<TABLE>

Table of Contents Page
<S> <C>

1. The Trust............................................................. 2
2. Investment Objective and Policies..................................... 2
3. Description of Permitted Investments and Investment Practices......... 3
4. Investment Restrictions...............................................15
5. Performance Information...............................................16
6. Determination of Net Asset Value; Valuation of Securities;
Additional Redemption Information....................................17
7. Management............................................................19
8. Portfolio Transactions................................................26
9. Description of Shares, Voting Rights and Liabilities..................27
10. Certain Additional Tax Matters........................................29
11. Financial Statements..................................................31
12. Appendix - The S&P 500................................................32

This Statement of Additional Information sets forth information which may be of
interest to investors but which is not necessarily included in the Fund's
Prospectus, dated September __, 1998. This Statement of Additional Information
should be read in conjunction with the Fund's Prospectus, a copy of which may
be obtained by an investor without charge by calling 1-800-625-4554.

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

</TABLE>

<PAGE>

1. THE TRUST

CitiFunds Trust II is a registered management investment company organized as a
business trust under the laws of the Commonwealth of Massachusetts on April 13,
1984. Prior to January 7, 1998, the Trust was called Landmark Funds II. This
Statement of Additional Information describes shares of CitiFunds S&P 500 Index
Portfolio (the "Fund"), which is one of six active series of the Trust.
References in this Statement of Additional Information to the "Prospectus" of
the Fund are to the Prospectus, dated September __, 1998, of the Fund.

The Fund is permitted to seek its investment objective by investing all or a
portion of its assets in one or more investment companies to the extent not
prohibited by the Investment Company Act of 1940, the rules and regulations
thereunder, and exemptive orders granted under such Act. Currently, the Fund
invests its assets in the S&P 500 Index Portfolio (the "Portfolio"), a series
of The Premium Portfolios. The Portfolio is an open-end, diversified management
investment company. All references in this Statement of Additional Information
to the Fund include the Fund's underlying Portfolio, except as otherwise noted.
In addition, references to the Trust include the Portfolio Trust, except as
otherwise noted.

Citibank, N.A. ("Citibank" or the "Manager") is the manager of the Portfolio.
Citibank manages the investments of the Portfolio from day to day in accordance
with the Portfolio's investment objective and policies. The selection of
investments for the Portfolio, and the way they are managed, depend on the
conditions and trends in the economy and the financial marketplaces.

The Boards of Trustees of the Trust and the Portfolio Trust provide broad
supervision over the affairs of the Fund and the Portfolio, respectively.
Shares of the Fund are continuously sold by CFBDS, Inc., the Fund's distributor
("CFBDS" or the "Distributor"). Shares of the Fund are sold at net asset value.
CFBDS may receive distribution fees from the Fund pursuant to a Service Plan
adopted in accordance with Rule 12b-1 under the Investment Company Act of 1940,
as amended (the "1940 Act").

2. INVESTMENT OBJECTIVE AND POLICIES

The Fund's objective is to track the performance of the Standard & Poor's 500
Composite Stock Price Index* (the "S&P 500").

- ---------------
* "Standard & Poor's(R)," "S&P(R)," "S&P 500(R)," "Standard & Poor's 500" and
"500" are trademarks of The McGraw-Hill Companies, Inc. and have been licensed
for use by the Fund.

<PAGE>

The Fund's Prospectus contains a discussion of the various types of securities
in which the Fund may invest and the risks involved in such investments. The
following supplements the information contained in the Prospectus concerning
the investment objective, policies and techniques of the Fund.

The Trust may withdraw the investment of the Fund from its underlying Portfolio
at any time if the Board of Trustees of the Trust determines that it is in the
best interests of the Fund to do so. Upon any such withdrawal, the Fund's
assets would continue to be invested in accordance with the investment policies
described herein with respect to the Fund. The policies described above and
those described below are not fundamental and may be changed without
shareholder approval.

3. DESCRIPTION OF PERMITTED INVESTMENTS
AND INVESTMENT PRACTICES

OPTIONS

The Fund may write covered call and put options and purchase call and put
options on securities and securities indices. Call and put options written by
the Fund may be covered in the manner set forth below.

A call option written by the Fund is "covered" if the Fund owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account by its custodian) upon conversion or
exchange of other securities held in its portfolio. A call option is also
covered if the Fund holds a call on the same security and in the same principal
amount as the call written where the exercise price of the call held (a) is
equal to or less than the exercise price of the call written or (b) is greater
than the exercise price of the call written if the difference is maintained by
the Fund in cash, short-term money market instruments or high quality debt
securities in a segregated account with its custodian. A put option written by
the Fund is "covered" if the Fund maintains cash, short term money market
instruments or high quality debt securities with a value equal to the exercise
price in a segregated account with its custodian, or else holds a put on the
same security and in the same principal amount as the put written where the
exercise price of the put held is equal to or greater than the exercise price
of the put written or where the exercise price of the put held is less than the
exercise price of the put written if the difference is maintained by the Fund
in cash, short-term money market instruments or high quality debt securities in
a segregated account with its custodian. Put and call options written by the
Fund may also be covered in such other manner as may be in accordance with the
requirements of the exchange on which, or the counter party with which, the
option is traded, and applicable laws and regulations. If the writer's
obligation is not so covered, it is subject to the risk of the full change in
value of the underlying security from the time the option is written until
exercise.

<PAGE>

The Fund may purchase options for hedging purposes or to increase its return.
Put options may be purchased to hedge against a decline in the value of
portfolio securities. If such decline occurs, the put options will permit the
Fund to sell the securities at the exercise price, or to close out the options
at a profit. By using put options in this way, the Fund will reduce any profit
it might otherwise have realized in the underlying security by the amount of
the premium paid for the put option and by transaction costs.

The Fund may purchase call options to hedge against an increase in the price of
securities that the Fund anticipates purchasing in the future. If such increase
occurs, the call option will permit the Fund to purchase the securities at the
exercise price, or to close out the options at a profit. The premium paid for
the call option plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise of the option, and, unless the price of the
underlying security rises sufficiently, the option may expire worthless to the
Fund.

The Fund may write (sell) covered call and put options and purchase call and
put options on stock indices. In contrast to an option on a security, an option
on a stock index provides the holder with the right, but not the obligation, to
make or receive a cash settlement upon exercise of the option, rather than the
right to purchase or sell a security. The amount of this settlement is equal to
(i) the amount, if any, by which the fixed exercise price of the option exceeds
(in the case of a call) or is below (in the case of a put) the closing value of
the underlying index on the date of exercise, multiplied by (ii) a fixed "index
multiplier."

The Fund may cover call options on stock indices by owning securities whose
price changes, in the opinion of the Fund, are expected to be similar to those
of the underlying index, or by having an absolute and immediate right to
acquire such securities without additional cash consideration (or for
additional cash consideration held in a segregated account by its custodian)
upon conversion or exchange of other securities in its portfolio. Where the
Fund covers a call option on a stock index through ownership of securities,
such securities may not match the composition of the index and, in that event,
the Fund will not be fully covered and could be subject to risk of loss in the
event of adverse changes in the value of the index. The Fund may also cover
call options on stock indices by holding a call on the same index and in the
same principal amount as the call written where the exercise price of the call
held (a) is equal to or less than the exercise price of the call written or (b)
is greater than the exercise price of the call written if the difference is
maintained by the Fund in cash, short-term money market instruments or high
quality debt securities in a segregated account with its custodian. The Fund
may cover put options on stock indices by maintaining cash, short-term money
market instruments or high quality debt securities with a value equal to the
exercise price in a segregated account with its custodian, or by holding a put
on the same stock index and in the same principal amount as the put written
where the exercise price of the put held is equal to or greater than the
exercise price of the put written or where the exercise price of the put held
is less than the exercise price of the put written if the difference is
maintained by the Fund in cash, short-term money market instruments or high
quality debt securities in a segregated account with its custodian. Put and
call options on stock indices may also be covered in such other manner as may

<PAGE>

be in accordance with the rules of the exchange on which, or the counterparty
with which, the option is traded and applicable laws and regulations.

The Fund will receive a premium from writing a put or call option, which
increases the Fund's gross income in the event the option expires unexercised
or is closed out at a profit. If the value of an index on which the Fund has
written a call option falls or remains the same, the Fund will realize a profit
in the form of the premium received (less transaction costs) that could offset
all or a portion of any decline in the value of the securities it owns. If the
value of the index rises, however, the Fund will realize a loss in its call
option position, which will reduce the benefit of any unrealized appreciation
in the Fund's stock investments. By writing a put option, the Fund assumes the
risk of a decline in the index. To the extent that the price changes of
securities owned by the Fund correlate with changes in the value of the index,
writing covered put options on indices will increase the Fund's losses in the
event of a market decline, although such losses will be offset in part by the
premium received for writing the option.

The Fund may also purchase put options on stock indices to hedge the Fund's
investments against a decline in value. By purchasing a put option on a stock
index, the Fund will seek to offset a decline in the value of securities it
owns through appreciation of the put option. If the value of the Fund's
investments does not decline as anticipated, or if the value of the option does
not increase, the Fund's loss will be limited to the premium paid for the
option plus related transaction costs. The success of this strategy will
largely depend on the accuracy of the correlation between the changes in value
of the index and the changes in value of the Fund's security holdings.

The purchase of call options on stock indices may be used by the Fund to
attempt to reduce the risk of missing a broad market advance, or an advance in
an industry or market segment, at a time when the Fund holds uninvested cash or
short-term debt securities awaiting investment. When purchasing call options
for this purpose, the Fund will also bear the risk of losing all or a portion
of the premium paid if the value of the index does not rise. The purchase of
call options on stock indices when the Fund is substantially fully invested is
a form of leverage, up to the amount of the premium and related transaction
costs, and involves risks of loss and of increased volatility similar to those
involved in purchasing calls on securities the Fund owns.

FUTURES CONTRACTS

The Fund may enter into stock index futures contracts. This investment strategy
will be used for hedging purposes and for nonhedging purposes, subject to
applicable law.

A futures contract is an agreement between two parties for the purchase or sale
for future delivery of securities or for the payment or acceptance of a cash
settlement based upon changes in the value of the securities or of an index of
securities. A "sale" of a futures contract means the acquisition of a
contractual obligation to deliver the securities called for by the contract at
a specified price, or to make or accept the cash settlement called for by the
contract, on a specified date. A "purchase" of a futures contract means the
acquisition of a contractual obligation to acquire the securities called for by
the contract at a specified price, or to make or accept the cash settlement

<PAGE>

called for by the contract, on a specified date. Futures contracts have been
designed by exchanges which have been designated "contract markets" by the
Commodity Futures Trading Commission ("CFTC") and must be executed through a
futures commission merchant, or brokerage firm, which is a member of the
relevant contract market. Futures contracts trade on these markets, and the
exchanges, through their clearing organizations, guarantee that the contracts
will be performed as between the clearing members of the exchange.

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

The Fund may enter into stock index futures contracts to gain stock market
exposure while holding cash available for investments and redemptions.

Although the use of futures for hedging should tend to minimize the risk of
loss due to a decline in the value of the hedged position, at the same time the
futures contract limits any potential gain which might result from an increase
in value of a hedged position.

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

The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions. First,

<PAGE>

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

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

Investments in futures contracts also entail the risk that if the Fund's
investment judgment about the general direction of the market is incorrect, the
Fund's overall performance may be poorer than if any such contract had not been
entered into.

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

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

The Fund will comply with this CFTC requirement, and the Fund currently intends
to adhere to the additional policies described below. First, an amount of cash
or cash equivalents will be maintained by the Fund in a segregated account with
the Fund's custodian so that the amount so segregated, plus the initial margin
held on deposit, will be approximately equal to the amount necessary to satisfy
the Fund's obligations under the futures contract. The second is that the Fund

<PAGE>

will not enter into a futures contract if immediately thereafter the amount of
initial margin deposits on all the futures contracts held by the Fund would
exceed approximately 5% of the net assets of the Fund. The third is that the
aggregate market value of the futures contracts held by the Fund not exceed
approximately 50% of the market value of the Fund's total assets other than its
futures contracts. For purposes of this third policy, "market value" of a
futures contract is deemed to be the amount obtained by multiplying the number
of units covered by the futures contract times the per unit price of the
securities covered by that contract.

The use of futures contracts may increase the amount of taxable income of the
Fund and may affect the amount, timing and character of the Fund's income for
tax purposes, as more fully discussed herein in the section entitled "Certain
Additional Tax Matters."

OPTIONS ON FUTURES CONTRACTS

The Fund may purchase and write options to buy or sell futures contracts in
which the Fund may invest. Such investment strategies will be used for hedging
purposes and for non-hedging purposes, subject to applicable law.

An option on a futures contract provides the holder with the right to enter
into a "long" position in the underlying futures contract, in the case of a
call option, or a "short" position in the underlying futures contract, in the
case of a put option, at a fixed exercise price up to a stated expiration date
or, in the case of certain options, on such date. Upon exercise of the option
by the holder, the contract market clearinghouse establishes a corresponding
short position for the writer of the option, in the case of a call option, or a
corresponding long position in the case of a put option. In the event that an
option is exercised, the parties will be subject to all the risks associated
with the trading of futures contracts, such as payment of initial and variation
margin deposits. In addition, the writer of an option on a futures contract,
unlike the holder, is subject to initial and variation margin requirements on
the option position.

A position in an option on a futures contract may be terminated by the
purchaser or seller prior to expiration by effecting a closing purchase or sale
transaction, subject to the availability of a liquid secondary market, which is
the purchase or sale of an option of the same series, (i.e., the same exercise
price and expiration date) as the option previously purchased or sold. The
difference between the premiums paid and received represents the trader's
profits or loss on the transaction.

Options on futures contracts that are written or purchased by the Fund on U.S.
exchanges are traded on the same contract market as the underlying futures
contract, and, like futures contracts, are subject to regulation by the CFTC
and the performance guarantee of the exchange clearinghouse. In addition,
options on futures contracts may be traded on foreign exchanges.

The Fund may cover the writing of call options on futures contracts (a) through
purchases of the underlying futures contract, (b) through ownership of the
instrument, or instruments included in the index underlying the futures
contract, or (c) through the holding of a call on the same futures contract and
in the same principal amount as the call written where the exercise price of

<PAGE>

the call held (i) is equal to or less than the exercise price of the call
written or (ii) is greater than the exercise price of the call written if the
difference is maintained by the Fund in cash or securities in a segregated
account with its custodian. The Fund may cover the writing of put options on
futures contracts (a) through sales of the underlying futures contract, (b)
through segregation of cash, short-term money market instruments or high
quality debt securities in an amount equal to the value of the security or
index underlying the futures contract, (c) through the holding of a put on the
same futures contract and in the same principal amount as the put written where
the exercise price of the put held is equal to or greater than the exercise
price of the put written or where the exercise price of the put held is less
than the exercise price of the put written if the difference is maintained by
the Fund in cash, short-term money market instruments or high quality debt
securities in a segregated account with its custodian. Put and call options on
futures contracts may also be covered in such other manner as may be in
accordance with the rules of the exchange on which the option is traded and
applicable laws and regulations. Upon the exercise of a call option on a
futures contract written by the Fund, the Fund will be required to sell the
underlying futures contract which, if the Fund has covered its obligation
through the purchase of such contract, will serve to liquidate its futures
position. Similarly, where a put option on a futures contract written by the
Fund is exercised, the Fund will be required to purchase the underlying futures
contract which, if the Fund has covered its obligation through the sale of such
contract, will close out its futures position.

The writing of a call option on a futures contract constitutes a partial hedge
against declining prices of the securities deliverable on exercise of the
futures contract. The Fund will receive an option premium when it writes the
call, and, if the price of the futures contract at expiration of the option is
below the option exercise price, the Fund will retain the full amount of this
option premium, which provides a partial hedge against any decline that may
have occurred in the Fund's security holdings. Similarly, the writing of a put
option on a futures contract constitutes a partial hedge against increasing
prices of the securities deliverable upon exercise of the futures contract. If
the Fund writes an option on a futures contract and that option is exercised,
the Fund may incur a loss, which loss will be reduced by the amount of the
option premium received, less related transaction costs. The Fund's ability to
hedge effectively through transactions in options on futures contracts depends
on, among other factors, the degree of correlation between changes in the value
of securities held by the Fund and changes in the value of its futures
positions. This correlation cannot be expected to be exact, and the Fund bears
a risk that the value of the futures contract being hedged will not move in the
same amount, or even in the same direction, as the hedging instrument. Thus it
may be possible for the Fund to incur a loss on both the hedging instrument and
the futures contract being hedged.

The Fund may purchase options on futures contracts for hedging purposes instead
of purchasing or selling the underlying futures contracts. For example, where a
decrease in the value of portfolio securities is anticipated as a result of a
projected market-wide decline or changes in interest or exchange rates, the
Fund could, in lieu of selling futures contracts, purchase put options thereon.
In the event that such decrease occurs, it may be offset, in whole or part, by
a profit on the option. Conversely, where it is projected that the value of
securities to be acquired by the Fund will increase prior to acquisition, due
to a market advance or changes in interest or exchange rates, the Fund could

<PAGE>

purchase call options on futures contracts, rather than purchasing the
underlying futures contracts.

INDEXED SECURITIES

Indexed securities include commercial paper, certificates of deposit, and other
fixed-income securities whose values at maturity or coupon interest rates are
determined by reference to the returns of the S&P 500 or comparable stock
indices. Indexed securities can be affected by stock prices as well as changes
in interest rates and the creditworthiness of their issuers and may not track
the S&P 500 as accurately as direct investments in the S&P 500.

SECURITIES OF NON-U.S. ISSUERS

The Fund may invest in securities of non-U.S. issuers. Investing in securities
of foreign issuers may involve significant risks not present in domestic
investments. For example, the value of such securities fluctuates based on the
relative strength of the U.S. dollar. In addition, there is generally less
publicly available information about foreign issuers, particularly those not
subject to the disclosure and reporting requirements of the U.S. securities
laws. Non-U.S. issuers are generally not bound by uniform accounting, auditing
and financial reporting requirements comparable to those applicable to domestic
issuers. Investments in securities of non-U.S. issuers also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of the Fund, political or financial instability or diplomatic and
other developments which would affect such investments. Further, economies of
other countries or areas of the world may differ favorably or unfavorably from
the economy of the U.S.

It is anticipated that in most cases the best available market for securities
of non-U.S. issuers would be on exchanges or in over-the-counter markets
located outside the U.S. Non-U.S. stock markets, while growing in volume and
sophistication, are generally not as developed as those in the U.S., and
securities of some non-U.S. issuers (particularly those located in developing
countries) may be less liquid and more volatile than securities of comparable
U.S. companies. Non-U.S. security trading practices, including those involving
securities settlement where the Fund's assets may be released prior to receipt
of payments, may expose the Fund to increased risk in the event of a failed
trade or the insolvency of a non-U.S. broker-dealer. In addition, foreign
brokerage commissions are generally higher than commissions on securities
traded in the U.S. and may be non-negotiable. In general, there is less overall
governmental supervision and regulation of non-U.S. securities exchanges,
brokers and listed companies than in the U.S.

Investments in closed-end investment companies which primarily hold securities
of non-U.S. issuers may entail the risk that the market value of such
investments may be substantially less than their net asset value and that there
would be duplication of investment management and other fees and expenses.

American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs"),
Global Depositary Receipts ("GDRs") and other forms of depositary receipts for

<PAGE>

securities of non-U.S. issuers provide an alternative method for the Fund to
make non-U.S. investments. These securities are not usually denominated in the
same currency as the securities into which they may be converted. Generally,
ADRs, in registered form, are designed for use in U.S. securities markets and
EDRs and GDRs, in bearer form, are designed for use in European and global
securities markets. ADRs are receipts typically issued by a U.S. bank or trust
company evidencing ownership of the underlying securities. EDRs and GDRs are
European and global receipts, respectively, evidencing a similar arrangement.
ADRs, EDRs and GDRs are subject to many of the same risks that apply to other
investments in non-U.S. securities.

ADRs, EDRs, and GDRs may be issued pursuant to sponsored or unsponsored
programs. In sponsored programs, an issuer has made arrangements to have its
securities traded in the form of depositary receipts. In unsponsored programs,
the issuer may not be directly involved in the creation of the program.
Although regulatory requirements with respect to sponsored and unsponsored
programs are generally similar, in some cases it may be easier to obtain
financial information from an issuer that has participated in the creation of a
sponsored program. Accordingly, there may be less information available
regarding issuers of securities underlying unsponsored programs and there may
not be a correlation between such information and the market value of the
depositary receipts.

The Fund may invest in securities of non-U.S. issuers that impose restrictions
on transfer within the U.S. or to U.S. persons. Although securities subject to
such transfer restrictions may be marketable abroad, they may be less liquid
than securities of non-U.S. issuers of the same class that are not subject to
such restrictions.

The risks described above, including the risks of nationalization or
expropriation of assets, are typically increased to the extent that the Fund
invests in issuers located in less developed and developing nations, whose
securities markets are sometimes referred to as "emerging securities markets."
Investments in securities located in such countries are speculative and subject
to certain special risks. Political and economic structures in many of these
countries may be in their infancy and developing rapidly, and such countries
may lack the social, political and economic stability characteristic of more
developed countries. Certain of these countries have in the past failed to
recognize private property rights and have at times nationalized and
expropriated the assets of private companies.

In addition, unanticipated political or social developments may affect the
value of Fund's investments in these countries and the availability to the Fund
of additional investments in these countries. The small size, limited trading
volume and relative inexperience of the securities markets in these countries
may make the Fund's investment in such countries illiquid and more volatile
than investments in more developed countries, and the Fund may be required to
establish special custodial or other arrangements before making investments in
these countries. There may be little financial or accounting information
available with respect to issuers located in these countries, and it may be
difficult as a result to assess the value or prospects of an investment in such
issuers.

<PAGE>

REPURCHASE AGREEMENTS

The Fund may invest in repurchase agreements collateralized by securities in
which the Fund may otherwise invest. Repurchase agreements are agreements by
which the Fund purchases a security and simultaneously commits to resell that
security to the seller (which is usually a member bank of the U.S. Federal
Reserve System or a member firm of the New York Stock Exchange (or a subsidiary
thereof)) at an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the purchased security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security, usually U.S. Government
or Government agency issues. Under the 1940 Act repurchase agreements may be
considered to be loans by the buyer. The Fund's risk is limited to the ability
of the seller to pay the agreed-upon amount on the delivery date. If the seller
defaults, the underlying security constitutes collateral for the seller's
obligation to pay although the Fund may incur certain costs in liquidating this
collateral and in certain cases may not be permitted to liquidate this
collateral. All repurchase agreements entered into by the Fund are fully
collateralized, with such collateral being marked to market daily.

CONVERTIBLE SECURITIES

The Fund may invest in convertible securities. A convertible security is a
fixed-income security (a bond or preferred stock) which may be converted at a
stated price within a specified period of time into a certain quantity of
common stock or other equity securities of the same or a different issuer.
Convertible securities rank senior to common stock in a corporation's capital
structure but are usually subordinated to similar non-convertible securities.
While providing a fixed-income stream (generally higher in yield than the
income derivable from common stock but lower than that afforded by a similar
non-convertible security), a convertible security also affords an investor the
opportunity, through its conversion feature, to participate in the capital
appreciation attendant upon a market price advance in the convertible
security's underlying common stock.

<PAGE>

RULE 144A SECURITIES

Consistent with applicable investment restrictions, the Fund may purchase
securities that are not registered ("restricted securities") under the
Securities Act of 1933 (the "Securities Act"), but can be offered and sold to
"qualified institutional buyers" under Rule 144A under the Securities Act.
However, the Fund will not invest more than 15% of its net assets in illiquid
investments, which include securities for which there is no readily available
market, securities subject to contractual restrictions on resale and restricted
securities, unless the Board of Trustees of the Trust determine, based on the
trading markets for the specific restricted security, that it is liquid. The
Trustees have adopted guidelines and delegated to the Manager the daily
function of determining and monitoring liquidity of restricted securities. The
Trustees, however, retain sufficient oversight and are ultimately responsible
for the determinations.

Since it is not possible to predict with assurance exactly how the market for
restricted securities sold and offered under Rule 144A will develop, the
Trust's Trustees will carefully monitor the Fund's investments in these
securities, focusing on such factors, among others, as valuation, liquidity and
availability of information.

LENDING OF SECURITIES

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

<PAGE>

SWAPS AND RELATED TRANSACTIONS

The Fund may enter into interest rate swaps, currency swaps, equity swaps and
other types of available swap agreements, such as caps, collars and floors, for
the purpose of attempting to obtain a particular desired return at a lower cost
to the Fund than if the Fund had invested directly in an instrument that
yielded that desired return. Interest rate swaps involve the exchange by the
Fund with another party of their respective commitments to pay or receive
interest. An equity swap is an agreement to exchange cash flows on a principal
amount based on changes in the values of the reference index. A currency swap
is an agreement to exchange cash flows on a principal amount based on changes
in the values of the currency exchange rates. In a typical cap or floor
agreement, one party agrees to make payments only under specified
circumstances, usually in return for payment of a fee by the counterparty. A
collar arrangement combines elements of buying and selling a floor.

The Fund will maintain liquid assets with its custodian to cover its current
obligations under swap transactions. If the Fund enters into a swap agreement
on a net basis (i.e., the two payments streams are netted out, with the Fund
receiving or paying, as the case may be, only the net amount of the two
payments), the Fund will maintain liquid assets with its custodian with a daily
value at least equal to the excess, if any, of the Fund's accrued obligations
under the swap agreement over the accrued amount the Fund is entitled to
receive under the agreement. If the Fund enters into a swap agreement on other
than a net basis, it will maintain liquid assets with a value equal to the full
amount of the Fund's accrued obligations under the agreement.

The most significant factor in the performance of swaps, caps, floors and
collars is the change in the specific interest rate, equity, currency or other
factor that determines the amount of payments to be made under the arrangement.
If the Fund is incorrect in its forecasts of such factors, the investment
performance of the Fund would be less than what it would have been if these
investment techniques had not been used. If a swap agreement calls for payments
by the Fund, the Fund must be prepared to make such payments when due. The Fund
will not enter into any swap unless the Fund deems the counterparty to be
creditworthy. If the counterparty's creditworthiness declined, the value of the
swap agreement would be likely to decline, potentially resulting in losses. If
the counterparty defaults, the Fund's risk of loss consists of the net amount
of payments that the Fund is contractually entitled to receive. The Fund
anticipates that it will be able to eliminate or reduce its exposure under
these arrangements by assignment or other disposition or by entering into an
offsetting agreement with the same or another counterparty.

SHORT SALES "AGAINST THE BOX"

In a short sale, the Fund sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. The Fund, in
accordance with applicable investment restrictions, may engage in short sales
only if at the time of the short sale it owns or has the right to obtain, at no
additional cost, an equal amount of the security being sold short. This
investment technique is known as a short sale "against the box."

<PAGE>

In a short sale, the seller does not immediately deliver the securities sold
and is said to have a short position in those securities until delivery occurs.
If the Fund engages in a short sale, the collateral for the short position is
maintained for the Fund by the custodian or qualified sub-custodian. While the
short sale is open, an amount of securities equal in kind and amount to the
securities sold short or securities convertible into or exchangeable for such
equivalent securities is maintained in a segregated account for the Fund. These
securities constitute the Fund's long position.

The Fund does not engage in short sales against the box for investment
purposes. The Fund may, however, make a short sale against the box as a hedge,
when it believes that the price of a security may decline, causing a decline in
the value of a security owned by the Fund (or a security convertible or
exchangeable for such security). In such case, any future losses in the Fund's
long position should be reduced by a gain in the short position. Conversely,
any gain in the long position should be reduced by a loss in the short
position. The extent to which such gains or losses are reduced depends upon the
amount of the security sold short relative to the amount the Fund owns. There
are certain additional transaction costs associated with short sales against
the box, but the Fund endeavors to offset these costs with the income from the
investment of the cash proceeds of short sales.

The Fund does not expect that more than 40% of its total assets would be
involved in short sales against the box. The Fund does not currently intend to
engage in such sales.

4. INVESTMENT RESTRICTIONS

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

Neither the Fund nor the Portfolio may:

(1) Borrow money, except that as a temporary measure for extraordinary or
emergency purposes it may borrow in an amount not to exceed 1/3 of the current
value of its net assets, including the amount borrowed, or purchase any
securities at any time at which borrowings exceed 5% of the total assets of the
Fund or Portfolio, taken at market value. It is intended that the Fund or
Portfolio would borrow money only from banks and only to accommodate requests
for the repurchase of shares of the Fund or beneficial interests in the
Portfolio while effecting an orderly liquidation of portfolio securities.

<PAGE>

(2) Underwrite securities issued by other persons except that all or any
portion of the assets of the Fund or Portfolio may be invested in one or more
investment companies, to the extent not prohibited by the 1940 Act, the rules
and regulations thereunder, and exemptive orders granted under such Act, and
except insofar as the Fund or Portfolio may technically be deemed an
underwriter under the Securities Act in selling a security.

(3) Make loans to other persons except (a) through the lending of its portfolio
securities and provided that any such loans not exceed 30% of the Fund's or
Portfolio's total assets (taken at market value), (b) through the use of
repurchase agreements or fixed time deposits or the purchase of short-term
obligations or (c) by purchasing all or a portion of an issue of debt
securities of types commonly distributed privately to financial institutions.
The purchase of short-term commercial paper or a portion of an issue of debt
securities which is part of an issue to the public shall not be considered the
making of a loan.

(4) Purchase or sell real estate (including limited partnership interests but
excluding securities secured by real estate or interests therein), interests in
oil, gas or mineral leases, commodities or commodity contracts in the ordinary
course of business (the foregoing shall not be deemed to preclude the Fund or
Portfolio from purchasing or selling futures contracts or options thereon, and
the Fund and Portfolio reserves the freedom of action to hold and to sell real
estate acquired as a result of the ownership of securities by the Fund or
Portfolio).

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

(6) Issue any senior security (as that term is defined in the 1940 Act) if such
issuance is specifically prohibited by the 1940 Act or the rules and
regulations promulgated thereunder.

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

5. PERFORMANCE INFORMATION

A total rate of return quotation for the Fund is calculated for any period by
(a) dividing (i) the sum of the net asset value per share on the last day of
the period and the net asset value per share on the last day of the period of
shares purchasable with dividends and capital gains distributions declared
during such period with respect to a share held at the beginning of such period
and with respect to shares purchased with such dividends and capital gains
distributions, by (ii) the public offering price per share on the first day of
such period, and (b) subtracting 1 from the result. Any annualized total rate

<PAGE>

of return quotation is calculated by (x) adding 1 to the period total rate of
return quotation calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting
1 from the result.

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

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

6. DETERMINATION OF NET ASSET VALUE; VALUATION OF
SECURITIES; ADDITIONAL REDEMPTION INFORMATION

The net asset value per share of the Fund is determined each day which the New
York Stock Exchange is open for trading ("Business Day"). As of the date of
this Statement of Additional Information, the Exchange is open for trading
every weekday except for the following holidays (or the days on which they are
observed): New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. This determination of net asset value of shares of the Fund is
made once each day as of the close of regular trading on such Exchange
(normally 4:00 p.m. Eastern time) by adding the market value of all securities
and other assets of the Fund (including the Fund's interest in the Portfolio),
then subtracting the liabilities of the Fund, and then dividing the result by
the number of outstanding shares of the Fund. The net asset value per share is
effective for orders received and accepted by the Transfer Agent prior to its
calculation.

For purposes of calculating net asset value per share, all assets and
liabilities initially expressed in non-U.S. currencies will be converted into
U.S. dollars at the prevailing market rates at the time of valuation. Equity
securities are valued at the last sale price on the exchange on which they are
primarily traded or on the NASDAQ system for unlisted national market issues,
or at the last quoted bid price for securities in which there where no sales
during the day or for unlisted securities not reported on the NASDAQ system.
Securities listed on a foreign exchange are valued at the last quoted sale

<PAGE>

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

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

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

Subject to compliance with applicable regulations, the Trust has reserved the
right to pay the redemption price of shares of the Fund, either totally or
partially, by a distribution in kind of readily marketable securities (instead
of cash). The securities so distributed would be valued at the same amount as
that assigned to them in calculating the net asset value for the shares being
sold. If a holder of shares received a distribution in kind, such holder could
incur brokerage or other charges in converting the securities to cash.

The Trust may suspend the right of redemption or postpone the date of payment
for shares of the Fund more than seven days during any period when (a) trading
in the markets the Fund normally utilizes is restricted, or an emergency, as
defined by the rules and regulations of the Securities and Exchange Commission
("SEC"), exists making disposal of the Fund's investments or determination of
its net asset value not reasonably practicable; (b) the New York Stock Exchange
is closed (other than customary weekend and holiday closings); or (c) the SEC
has by order permitted such suspension.

<PAGE>

7. MANAGEMENT

The Trustees and officers of the Trust and the Portfolio Trust, their ages and
their principal occupations during the past five years are set forth below.
Their titles may have varied during that period. Asterisks indicate that those
Trustees and officers are "interested persons" (as defined in the 1940 Act) of
the Trust or the Portfolio Trust. Unless otherwise indicated below, the address
of each Trustee and officer is 21 Milk Street, 5th Floor, Boston, Massachusetts
02109. The address of the Portfolio Trust is Elizabethan Square, George Town,
Grand Cayman, British West Indies.

TRUSTEES OF THE TRUST

PHILIP W. COOLIDGE* (aged 47) -- President of the Trust and the Portfolio
Trust; Chief Executive Officer and President, Signature Financial Group, Inc.
and CFBDS.

RILEY C. GILLEY (aged 72) -- Vice President and General Counsel, Corporate
Property Investors (November 1988 to December 1991); Partner, Breed, Abbott &
Morgan (Attorneys) (retired, December 1987). His address is 4041 Gulf Shore
Boulevard North, Naples, Florida.

DIANA R. HARRINGTON (aged 58) -- Professor, Babson College (since September
1993); Visiting Professor, Kellogg Graduate School of Management, Northwestern
University (September 1992 to September 1993); Professor, Darden Graduate
School of Business, University of Virginia (September 1978 to September 1993);
Trustee, The Highland Family of Funds (since March 1997). Her address is 120
Goulding Street, Holliston, Massachusetts.

SUSAN B. KERLEY (aged 47) -- President, Global Research Associates, Inc.
(Investment Research) (since August 1990); Manager, Rockefeller & Co. (March
1988 to July 1990); Trustee, Mainstay Institutional Funds (since December
1990). Her address is P.O. Box 9572 New Haven, Connecticut.

C. OSCAR MORONG, JR. (aged 63) -- Managing Director, Morong Capital Management
(since February 1993); Senior Vice President and Investment Manager, CREF
Investments, Teachers Insurance & Annuity Association (retired, January 1993);
Director, Indonesia Fund; Trustee, MAS Funds (since 1993). His address is 1385
Outlook Drive, West, Mountainside, New Jersey.

E. KIRBY WARREN (aged 64) -- Professor of Management, Graduate School of
Business, Columbia University (since 1987); Samuel Bronfman Professor of
Democratic Business Enterprise (1978 to 1987). His address is Columbia
University, Graduate School of Business, 725 Uris Hall, New York, New York.

WILLIAM S. WOODS, JR. (aged 78) -- Vice President - Investments, Sun Company,
Inc. (retired, April 1984). His address is 35 Colwick Road, Cherry Hill, New
Jersey.

TRUSTEES OF THE PORTFOLIO TRUST

ELLIOTT J. BERV (aged 55) -- Chairman and Director, Catalyst, Inc. (Management
Consultants) (since June 1992); President, Chief Operating Officer and

<PAGE>

Director, Deven International, Inc. (International Consultants) (June 1991 to
June 1992); President and Director, Elliott J. Berv & Associates (Management
Consultants) (since May 1984). His address is 15 Stowaway Drive, Cumberland
Foreside, Maine.

PHILIP W. COOLIDGE* (aged 47) -- President of the Trust and the Portfolio
Trust; Chief Executive Officer and President, Signature Financial Group, Inc.
and CFBDS.

MARK T. FINN (aged 55) -- President and Director, Delta Financial, Inc. (since
June 1983); Chairman of the Board and Chief Executive Officer, FX 500 Ltd.
(Commodity Trading Advisory Firm) (since April 1990); Director, Vantage
Consulting Group, Inc. (since October 1988). His address is 3500 Pacific
Avenue, P.O. Box 539, Virginia Beach, Virginia.

WALTER E. ROBB, III (aged 72) -- President, Benchmark Consulting Group, Inc.
(since 1991); Principal, Robb Associates (Corporate Financial Advisors) (since
1978); President, Benchmark Advisors, Inc. (Corporate Financial Advisors)
(since 1989); Trustee of certain registered investment companies in the MFS
Family of Funds. His address is 35 Farm Road, Sherborn, Massachusetts.

OFFICERS OF THE TRUST AND THE PORTFOLIO TRUST

PHILIP W. COOLIDGE* (aged 47) -- President of the Trust and the Portfolio
Trust; Chief Executive Officer and President, Signature Financial Group, Inc.
and CFBDS.

CHRISTINE A. DRAPEAU* (aged 28) -- Assistant Secretary and Assistant Treasurer
of the Trust and the Portfolio Trust; Assistant Vice President, Signature
Financial Group, Inc. (since January 1996); Paralegal and Compliance Officer,
various financial companies (July 1992 to January 1996); Graduate Student,
Bentley College (prior to December 1994).

TAMIE EBANKS-CUNNINGHAM* (aged 25) -- Assistant Secretary of the Trust and the
Portfolio Trust; Office Manager, Signature Financial Group (Cayman) Ltd. (Since
April 1995); Administrator, Cayman Islands Primary School (prior to April
1995). Her address is P.O. Box 2494, Elizabethan Square, George Town, Grand
Cayman, Cayman Islands, B.W.I.

JOHN R. ELDER* (aged 50) -- Treasurer of the Trust and the Portfolio Trust;
Vice President, Signature Financial Group, Inc. (since April 1995); Treasurer,
CFBDS (since April 1995); Treasurer, Phoenix Family of Mutual Funds (Phoenix
Home Life Mutual Insurance Company) (1983 to March 1995).

LINDA T. GIBSON* (aged 33) -- Secretary of the Trust and the Portfolio Trust;
Vice President, Signature Financial Group, Inc. (since May 1992); Assistant
Secretary, CFBDS (since October 1992).

<PAGE>

JOAN R. GULINELLO* (aged 42) -- Assistant Secretary and Assistant Treasurer of
the Trust and the Portfolio Trust; Vice President, Signature Financial Group,
Inc. (since October 1993); Secretary, CFBDS (since October 1995); Vice
President and Assistant General Counsel, Massachusetts Financial Services
Company (prior to October 1993).

JAMES E. HOOLAHAN* (aged 51) -- Vice President, Assistant Secretary and
Assistant Treasurer of the Trust and the Portfolio Trust; Senior Vice
President, Signature Financial Group, Inc.

SUSAN JAKUBOSKI* (aged 34) -- Vice President, Assistant Secretary and Assistant
Treasurer of the Trust and the Portfolio Trust; Vice President, Signature
Financial Group (Cayman) Ltd. (since August 1994); Fund Compliance
Administrator, Concord Financial Group (November 1990 to August 1994). Her
address is Suite 193, 12 Church St., Hamilton HM 11, Bermuda.

MOLLY S. MUGLER* (aged 46) -- Assistant Secretary and Assistant Treasurer of
the Trust and the Portfolio Trust; Vice President, Signature Financial Group,
Inc.; Assistant Secretary, CFBDS.

CLAIR TOMALIN* (aged 29) -- Assistant Secretary of the Trust and the Portfolio
Trust; Office Manager, Signature Financial Group (Europe) Limited (since 1993).
Her address is 117 Charterhouse Street, London ECIM 6AA.

SHARON M. WHITSON* (aged 50) -- Assistant Secretary and Assistant Treasurer of
the Trust and the Portfolio Trust; Assistant Vice President, Signature
Financial Group, Inc.

JULIE J. WYETZNER* (aged 39) -- Vice President, Assistant Secretary and
Assistant Treasurer of the Trust and the Portfolio Trust; Vice President,
Signature Financial Group, Inc.

The Trustees and officers of the Trust and the Portfolio Trust also hold
comparable positions with certain other funds for which CFBDS, Signature
Financial Group, Inc., or their affiliates serve as the distributor,
administrator or subadministrator.

The following table shows estimated Trustee compensation for the period
indicated.

Pension or Total
Retirement Estimated Compensation
Aggregate Benefits Annual from the Trust
Compensation Accrued as Benefits and Fund
from the Fund Part of Fund Upon Complex Paid to
Trustee (1) Expenses Retirement Trustees (1)(2)
<S> <C> <C> <C> <C>

Philip Coolidge $0 None None $0
Riley C. Gilley $891 None None $50,000
Diana R. Harrington $896 None None $57,000
Susan B. Kerley $892 None None $59,000
C. Oscar Morong, Jr. $900 None None $70,000
E. Kirby Warren $892 None None $50,000
William S. Woods, Jr. $896 None None $58,000

</TABLE>

<PAGE>

(1) Information is estimated for the fiscal year ending October 31, 1998.
(2) Messrs. Coolidge, Gilley, Morong, Warren and Woods and Mses. Harrington and
Kerley are trustees of 60, 35, 34, 32, 34, 33 and 33 funds and portfolios,
respectively, in the family of open-end registered investment companies advised
or managed by Citibank.

As of the date of this Statement of Additional Information, there are no
outstanding shares of the Fund.

The Declaration of Trust of each of the Trust and the Portfolio Trust provides
that the Trust or the Portfolio Trust, as the case may be, will indemnify its
Trustees and officers against liabilities and expenses incurred in connection
with litigation in which they may be involved because of their offices with the
Trust or the Portfolio Trust, as the case may be, unless, as to liability to
the Trust or the Portfolio Trust or their respective investors, it is finally
adjudicated that they engaged in willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in their offices, or
unless with respect to any other matter it is finally adjudicated that they did
not act in good faith in the reasonable belief that their actions were in the
best interests of the Trust or the Portfolio Trust, as the case may be. In the
case of settlement, such indemnification will not be provided unless it has
been determined by a court or other body approving the settlement or other
disposition, or by a reasonable determination, based upon a review of readily
available facts, by vote of a majority of disinterested Trustees of the Trust
or the Portfolio Trust or in a written opinion of independent counsel, that
such officers or Trustees have not engaged in willful misfeasance, bad faith,
gross negligence or reckless disregard of their duties.

MANAGER

Citibank serves as the manager of the Fund and of the Portfolio and provides
certain administrative services to the Trust and the Portfolio Trust pursuant
to separate management agreements (the "Management Agreements"). Subject to
policies as the Board of Trustees of the Portfolio Trust may determine,
Citibank manages the securities of the Portfolio and makes investment decisions
for the Portfolio. The Management Agreement with the Portfolio Trust provides
that Citibank may delegate the daily management of the securities of the
Portfolio to one or more subadvisers. Citibank furnishes at its own expense all
services, facilities and personnel necessary in connection with managing the
Portfolio's investments and effecting securities transactions for the
Portfolio. The Management Agreement with respect to the Portfolio will continue
in effect until August 7, 2000 and thereafter as long as such continuance is
specifically approved at least annually by the Board of Trustees of the
Portfolio Trust or by a vote of a majority of the outstanding voting securities
of the Portfolio, and, in either case, by a majority of the Trustees of the
Portfolio Trust who are not parties to the Management Agreement or interested
persons of any such party, at a meeting called for the purpose of voting on the
Management Agreement. The Management Agreement with the Trust with respect to
the Fund will continue in effect until August 7, 2000, and thereafter as long
as such continuance is specifically approved at least annually by the Board of
Trustees of the Trust or by a vote of a majority of the outstanding voting
securities of the Fund, and, in either case, by a majority of the Trustees of
the Trust who are not parties to the Management Agreement or interested persons

<PAGE>

of any such party, at a meeting called for the purpose of voting on the
Management Agreement.

Citibank provides the Trust and Portfolio Trust with general office facilities
and supervises the overall administration of the Trust and Portfolio Trust,
including, among other responsibilities, the negotiation of contracts and fees
with, and the monitoring of performance and billings of, the Trust's or the
Portfolio Trust's independent contractors and agents; the preparation and
filing of all documents required for compliance by the Trust or the Portfolio
Trust with applicable laws and regulations; and arranging for the maintenance
of books and records of the Trust or Portfolio Trust. Trustees, officers, and
investors in the Trust or Portfolio Trust are or may be or may become
interested in Citibank, as directors, officers, employees, or otherwise, and
directors, officers and employees of Citibank are or may become similarly
interested in the Trust or Portfolio Trust.

Each Management Agreement provides that Citibank may render services to others.
Each Management Agreement is terminable without penalty on not more than 60
days' nor less than 30 days' written notice by the Portfolio Trust or the
Trust, as the case may be, when authorized either by a vote of a majority of
the outstanding voting securities of the Portfolio or the Fund or by a vote of
a majority of the Board of Trustees of the Portfolio Trust or the Trust, or by
Citibank on not more than 60 days' nor less than 30 days' written notice, and
will automatically terminate in the event of its assignment. The Management
Agreement with the Portfolio Trust provides that neither Citibank nor its
personnel shall be liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act or omission in the
execution of security transactions for the Portfolio, except for willful
misfeasance, bad faith or gross negligence or reckless disregard of its or
their obligations and duties under the Management Agreement with the Portfolio
Trust. The Management Agreement with the Trust provides that neither Citibank
nor its personnel shall be liable for any error of judgment or mistake of law
or for any omission in the administration or management of the Trust or the
performance of its duties under the Management Agreement, except for willful
misfeasance, bad faith or gross negligence or reckless disregard of its or
their obligations and duties under the Management Agreement with the Trust.

The Prospectus contains a description of the fees payable to Citibank for
services under each of the Management Agreements. Citibank may reimburse the
Portfolio or Fund or waive all or a portion of its management fees.

Pursuant to separate sub-administrative services agreements with Citibank,
CFBDS and Signature Financial Group (Cayman) Ltd. ("SFG") perform such
sub-administrative duties for the Trust and the Portfolio Trust, respectively,
as from time to time are agreed upon by Citibank, CFBDS and SFG, as
appropriate. For performing such sub-administrative services, CFBDS and SFG
receive compensation as from time to time is agreed upon by Citibank, not in
excess of the amount paid to Citibank for its services under the Management
Agreements with the Trust and the Portfolio Trust, respectively. All such
compensation is paid by Citibank.

<PAGE>

DISTRIBUTOR

CFBDS, 21 Milk Street, 5th Floor, Boston, Massachusetts 02109, serves as the
Distributor of the Fund's shares pursuant to a Distribution Agreement with the
Trust (the "Distribution Agreement"). Unless otherwise terminated the
Distribution Agreement will continue from year to year upon annual approval by
the Trust's Board of Trustees and by vote of a majority of the Board of
Trustees of the Trust who are not parties to the Distribution Agreement or
interested persons of any party to the Distribution Agreement, cast in person
at a meeting called for the purpose of voting on such approval. The
Distribution Agreement will terminate in the event of its assignment, as
defined in the 1940 Act.

Under a Service Plan for shares of the Fund (the "Service Plan") which has been
adopted in accordance with Rule 12b-1 under the 1940 Act, the Fund may pay
monthly fees at an annual rate not to exceed 0.25% of the average daily net
assets of the Fund. Such fees may be used to make payments to the Distributor
for distribution services, to securities dealers and other industry
professionals (called "Service Agents") that have entered into service
agreements with the Distributor and others in respect of the sale of shares of
the Fund, and to other parties in respect of the sale of shares of the Fund,
and to make payments for advertising, marketing or other promotional activity,
and payments for preparation, printing, and distribution of prospectuses,
statements of additional information and reports for recipients other than
regulators and existing shareholders. The Fund also may make payments to the
Distributor, Service Agents and others for providing personal service or the
maintenance of shareholder accounts. The Fund and the Distributor provide to
the Trustees quarterly a written report of amounts expended pursuant to the
Service Plan and the purposes for which the expenditures were made.

The Service Plan obligates the Fund to pay fees to the Distributor, Service
Agents and others as compensation for their services, not as reimbursement for
specific expenses incurred. Thus, even if their expenses exceed the fees
provided for by the Service Plan for the Fund, the Fund will not be obligated
to pay more than those fees and, if their expenses are less than the fees paid
to them, they will realize a profit. The Fund will pay the fees to the
Distributor, Service Agents and others until the Service Plan or Distribution
Agreement is terminated or not renewed. In that event, the Distributor's or
Service Agent's expenses in excess of fees received or accrued through the
termination date will be the Distributor's or Service Agent's sole
responsibility and not obligations of the Fund.

From time to time the Distributor may make payments for distribution out of its
past profits or any other sources available to it.

The Service Plan continues in effect if such continuance is specifically
approved at least annually by a vote of both a majority of the Trust's Trustees
and a majority of the Trust's Trustees who are not "interested persons" of the
Trust and who have no direct or indirect financial interest in the operation of
the Service Plan or in any agreement related to such Plan (for purposes of this
paragraph "Qualified Trustees"). The Service Plan requires that the Trust and
the Distributor provide to the Board of Trustees and the Board of Trustees
review, at least quarterly, a written report of the amounts expended (and the

<PAGE>

purposes therefor) under the Service Plan. The Service Plan further provides
that the selection and nomination of the Qualified Trustees is committed to the
discretion of the disinterested Trustees (as defined in the 1940 Act) then in
office. The Service Plan may be terminated with respect to the Fund at any time
by a vote of a majority of the Trust's Qualified Trustees or by a vote of a
majority of the outstanding voting securities of the Fund. The Service Plan may
not be amended to increase materially the amount of the Fund's permitted
expenses thereunder without the approval of a majority of the outstanding
voting securities of the Fund and may not be materially amended in any case
without a vote of the majority of both the Trustees and Qualified Trustees. The
Distributor will preserve copies of any plan, agreement or report made pursuant
to the Service Plan for a period of not less than six years, and for the first
two years the Distributor will preserve such copies in an easily accessible
place.

The Distributor may enter into agreements with Service Agents and may pay
compensation to such Service Agents for accounts for which the Service Agents
are holders of record. Payments may be made to the Service Agents out of the
distribution fees received by the Distributor and out of the Distributor's past
profits or any other source available to it.

TRANSFER AGENT AND CUSTODIAN

The Trust has entered into a Transfer Agency and Service Agreement with State
Street Bank and Trust Company ("State Street"), pursuant to which State Street
acts as transfer agent for the Fund. The Trust also has entered into a
Custodian Agreement and the Fund Accounting Agreement with State Street,
pursuant to which custodial and fund accounting services, respectively, are
provided for the Fund. See "Transfer Agent, Custodian and Fund Accountant" in
the Prospectus for additional information.

The Portfolio Trust, on behalf of the Portfolio, has entered into a Custodian
Agreement with State Street pursuant to which State Street acts as custodian
for the Portfolio. The Portfolio Trust, on behalf of the Portfolio, also has
entered into the Fund Accounting Agreement with State Street Cayman Trust
Company, Ltd. ("State Street Cayman") pursuant to which State Street Cayman
provides fund accounting services for the Portfolio. State Street Cayman also
provides transfer agency services to the Portfolio.

The principal business address of State Street is 225 Franklin Street, Boston,
Massachusetts 02110. The principal business address of State Street Cayman is
P.O. Box 2508 GT, Grand Cayman, British West Indies.

AUDITORS

PricewaterhouseCoopers LLP are the independent accountants for the Trust,
providing audit services and assistance and consultation with respect to the
preparation of filings with the SEC. The address of PricewaterhouseCoopers LLP
is 160 Federal Street, Boston, Massachusetts 02110. PricewaterhouseCoopers are
the chartered accountants for the Portfolio Trust. The address of
PricewaterhouseCoopers is Suite 3000, Box 82, Royal Trust Towers, Toronto
Dominion Center, Toronto, Ontario, Canada M5K 1G8.

<PAGE>

8. PORTFOLIO TRANSACTIONS

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

In connection with the selection of brokers or dealers and the placing of
portfolio securities transactions, brokers or dealers may be selected who also
provide brokerage and research services (as those terms are defined in Section
28(e) of the Securities Exchange Act of 1934) to the Fund and/or the other
accounts over which Citibank or its affiliates exercise investment discretion.
Citibank is authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio transaction for
the Fund which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if Citibank determines
in good faith that such amount of commission is reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular transaction
or the overall responsibilities which Citibank and its affiliates have with
respect to accounts over which they exercise investment discretion. The
Trustees of the Trust periodically review the commissions paid by the Fund to
determine if the commissions paid over representative periods of time were
reasonable in relation to the benefits to the Fund.

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

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

<PAGE>

position obtainable in a security for the Fund. When purchases or sales of the
same security for the Fund and for other portfolios managed by Citibank occur
contemporaneously, the purchase or sale orders may be aggregated in order to
obtain any price advantages available to large volume purchases or sales.

9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

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

Shareholders are entitled to one vote for each share held on matters on which
they are entitled to vote. Shareholders in the Trust do not have cumulative
voting rights, and shareholders owning more than 50% of the outstanding shares
of the Trust may elect all of the Trustees of the Trust if they choose to do so
and in such event the other shareholders in the Trust would not be able to
elect any Trustee. The Trust is not required and has no present intention of
holding annual meetings of shareholders but the Trust will hold special
meetings of the Fund's shareholders when in the judgment of the Trust's
Trustees it is necessary or desirable to submit matters for a shareholder vote.
Shareholders have under certain circumstances (e.g., upon application and
submission of certain specified documents to the Trustees by a specified number
of shareholders) the right to communicate with other shareholders in connection
with requesting a meeting of shareholders for the purpose of removing one or
more Trustees. Shareholders also have under certain circumstances the right to
remove one or more Trustees without a meeting by a declaration in writing by a
specified number of shareholders. No material amendment may be made to the
Trust's Declaration of Trust without the affirmative vote of the holders of a
majority of the outstanding shares of each series affected by the amendment.
(See "Investment Restrictions.")

The Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets (or all or substantially all of the assets
belonging to any series of the Trust), if approved by the vote of the holders
of two-thirds of the Trust's outstanding shares, voting as a single class, or
of the affected series of the Trust, as the case may be, except that if the
Trustees of the Trust recommend such sale of assets, merger or consolidation,
the approval by vote of the holders of a majority of the Trust's or the
affected series' outstanding shares would be sufficient. The Trust or any
series of the Trust, as the case may be, may be terminated (i) by a vote of a
majority of the outstanding voting securities of the Trust or the affected
series or (ii) by the Trustees by written notice to the shareholders of the

<PAGE>

Trust or the affected series. If not so terminated, the Trust will continue
indefinitely.

Share certificates will not be issued.

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

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

The Portfolio is a series of the Portfolio Trust, which is organized as a trust
under the laws of the state of New York. Each investor in the Portfolio,
including the Fund, may add to or withdraw from its investment in the Portfolio
on each Business Day. As of the close of regular trading on each Business Day,
the value of each investor's beneficial interest in the Portfolio is determined
by multiplying the net asset value of the Portfolio by the percentage,
effective for that day, that represents that investor's share of the aggregate
beneficial interest in the Portfolio. Any additions or withdrawals that are to
be effected on that day are then effected. The investor's percentage of the
aggregate beneficial interests in the Portfolio is then re-computed as the
percentage equal to the fraction (i) the numerator of which is the value of
such investor's investment in the Portfolio as of the close of regular trading
on such day plus or minus, as the case may be, the amount of any additions to
or withdrawals from the investor's investment in the Portfolio effected on such
day, and (ii) the denominator of which is the aggregate net asset value of the
Portfolio as of the close of regular trading on such day plus or minus, as the
case may be, the amount of the net additions to or withdrawals from the
aggregate investments in the Portfolio by all investors in the Portfolio. The
percentage so determined is then applied to determine the value of the
investor's interest in the Portfolio as of the close of regular trading on the
next following Business Day.

<PAGE>

10. CERTAIN ADDITIONAL TAX MATTERS

The Fund has elected to be treated, and intends to qualify each year, as a
"regulated investment company" under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), by meeting all applicable requirements of
Subchapter M, including requirements as to the nature of the Fund's gross
income, the amount of Fund distributions, and the composition of the Fund's
portfolio assets. Provided all such requirements are met, no U.S. federal
income or excise taxes generally will be required to be paid by the Fund,
although non-U.S. source income earned by the Fund may be subject to non-U.S.
withholding or other taxes. If the Fund should fail to qualify as a "regulated
investment company" for any year, the Fund would incur a regular corporate
federal income tax upon its taxable income and Fund distributions would
generally be taxable as ordinary income to shareholders. The Portfolio Trust
believes the Portfolio also will not be required to pay any U.S. federal income
or excise taxes on its income.

The portion of the Fund's ordinary income dividends attributable to dividends
received in respect to equity securities of U.S. issuers is normally eligible
for the dividends received deduction for corporations subject to U.S. federal
income taxes. Availability of the deduction for particular shareholders is
subject to certain limitations, and deducted amounts may be subject to the
alternative minimum tax and result in certain basis adjustments. Any Fund
dividend that is declared in October, November or December of any calendar
year, that is payable to shareholders of record in such a month, and that is
paid the following January will be treated as if received by the shareholders
on December 31 of the year in which the dividend is declared.

Any Fund distribution will have the effect of reducing the per share net asset
value of shares in the Fund by the amount of the distribution. Shareholders
purchasing shares shortly before the record date of any distribution may thus
pay the full price for the shares and then effectively receive a portion of the
purchase price back as a taxable distribution.

In general, any gain or loss realized upon a taxable disposition of shares of
the Fund by a shareholder that holds such shares as a capital asset will be
treated as a long-term capital gain or loss if the shares have been held for
more than twelve months and otherwise as a short-term capital gain or loss; a
long-term capital gain realized by an individual shareholder will be eligible
for reduced tax rates if the shares were held for more than eighteen months.
However, any loss realized upon a disposition of shares in the Fund held for
six months or less will be treated as a long-term capital loss to the extent of
any distributions of net capital gain made with respect to those shares. Any
loss realized upon a disposition of shares may also be disallowed under rules
relating to wash sales.

The Fund's transactions in options, futures and forward contracts will be
subject to special tax rules that may affect the amount, timing and character
of Fund income and distributions to shareholders. For example, certain
positions held by the Fund on the last business day of each taxable year will
be marked to market (i.e., treated as if closed out) on that day, and any gain
or loss associated with the positions will be treated as 60% long-term and 40%
short-term capital gain or loss. Certain positions held by the Fund that

<PAGE>

substantially diminish its risk of loss with respect to other positions in its
portfolio may constitute "straddles," and may be subject to special tax rules
that would cause deferral of Fund losses, adjustments in the holding periods of
Fund securities, and conversion of short-term into long-term capital losses.
Certain tax elections exist for straddles that may alter the effects of these
rules. The Fund intends to limit its activities in options, futures and forward
contracts to the extent necessary to meet the requirements of Subchapter M of
the Code.

The Fund may make non-U.S. investments. Special tax considerations apply with
respect to such investments. Foreign exchange gains and losses realized by the
Fund will generally be treated as ordinary income and loss. Use of non-U.S.
currencies for non-hedging purposes may be limited in order to avoid a tax on
the Fund. The Fund may elect to mark to market any investments in "passive
foreign investment companies" on the last day of each taxable year. This
election may cause the Fund to recognize ordinary income prior to the receipt
of cash payments with respect to those investments; in order to distribute this
income and avoid a tax on the Fund, the Fund may be required to liquidate
portfolio securities that it might otherwise have continued to hold. Investment
by the Fund in certain "passive foreign investment companies" may also be
limited in order to avoid a tax on the Fund. Investment income received by the
Fund from non-U.S. securities may be subject to non-U.S. taxes. The U.S. has
entered into tax treaties with many other countries that may entitle the Fund
to a reduced rate of tax or an exemption from tax on such income. The Fund
intends to qualify for treaty reduced rates where available. It is not
possible, however, to determine the Fund's effective rate of non-U.S. tax in
advance since the amount of the Fund's assets to be invested within various
countries is not known.

If the Fund holds more than 50% of its assets in foreign stock and securities
at the close of its taxable year, the Fund may elect to "pass through" to the
Fund's shareholders foreign income taxes paid. If the Fund so elects,
shareholders will be required to treat their pro rata portion of the foreign
income taxes paid by the Fund as part of the amounts distributed to them by the
Fund and thus includable in their gross income for federal income tax purposes.
Shareholders who itemize deductions would then be allowed to claim a deduction
or credit (but not both) on their federal income tax returns for such amounts,
subject to certain limitations. Shareholders who do not itemize deductions
would (subject to such limitations) be able to claim a credit but not a
deduction. No deduction for such amounts will be permitted to individuals in
computing their alternative minimum tax liability. If the Fund does not qualify
or elect to "pass through" to its shareholders foreign income taxes paid by it,
shareholders will not be able to claim any deduction or credit for any part of
the foreign taxes paid by the Fund.

The Fund will withhold tax payments at a rate of 30% (or any lower applicable
tax 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 U.S.
Distributions received from the Fund by non-U.S. persons also may be subject to
tax under the laws of their own jurisdiction.

The account application asks each new shareholder to certify that the
shareholder's Social Security or taxpayer identification number is correct and
that the shareholder is not subject to 31% backup withholding for failing to
report income to the IRS. The Fund may be required to withhold (and pay over to

<PAGE>

the IRS for the shareholder's credit) tax at the rate of 31% on certain
distributions and redemption proceeds paid to shareholders who fail to provide
this information or who otherwise violate IRS regulations.

11. FINANCIAL STATEMENTS

The Fund is newly-organized and has not yet issued financial statements.

<PAGE>

APPENDIX

THE S&P 500

The S&P 500 is a well-known stock market index that includes common stocks of
companies representing a significant portion of the market value of all common
stocks publicly traded in the United States. The S&P 500 consists of 500 stocks
chosen for market size, liquidity, and industry group representation. It is a
market-value weighted index (stock price times number of shares outstanding),
with each stock's weight in the index proportionate to its market value. The
"500" is one of the most widely used benchmarks of U.S. equity performance.
Standard & Poor's may change the index's composition from time to time. The
performance of the S&P 500 is a hypothetical number that does not take into
account brokerage commissions and other costs of investing, which the Fund
bears.

The following is a list of the 500 stocks comprising the S&P 500 as of June 22,
1998:

Abbott Laboratories (ABT); Adobe Systems (ADBE); Advanced Micro Dev (AMD);
Aeroquip-Vickers Inc (ANV); Aetna Inc (AET); Ahmanson(H F);& Co (AHM); Air
Products & Chem (APD); AirTouch Communications (ATI); Alberto-Culver Cl'B'
(ACV); Albertson's, Inc (ABS); Alcan Aluminium Ltd (AL); Allegheny Teledyne
(ALT); Allergan, Inc (AGN); AlliedSignal Inc (ALD); Allstate Corp (ALL); ALLTEL
Corp (AT); Aluminum Co of Amer (AA); ALZA Corp (AZA); Amer Electric Pwr (AEP);
Amer Express (AXP); Amer General (AGC); Amer Greetings Cl'A' (AM); Amer Home
Products (AHP); Amer Intl Group (AIG); Amer Stores (ASC); Amerada Hess (AHC);
Ameren Corp (AEE); Ameritech Corp (AIT); Amgen Inc (AMGN); Amoco Corp (AN); AMP
Inc (AMP); AMR Corp (AMR); Anadarko Petroleum (APC); Andrew Corp (ANDW);
Anheuser-Busch Cos (BUD); Aon Corp (AOC); Apache Corp (APA); Apple Computer
(AAPL); Applied Materials (AMAT); Archer-Daniels-Midland (ADM); Armco Inc (AS);
Armstrong World Indus (ACK)ASARCO Inc (AR); Ascend Communications (ASND);
Ashland Inc (ASH); Associates First Capital'A' (AFS); AT&T Corp (T); Atlantic
Richfield (ARC); Autodesk, Inc (ADSK); Automatic Data Proc (AUD); AutoZone Inc
(AZO); Avery Dennison Corp (AVY); Avon Products (AVP); Baker Hughes Inc (BHI);
Ball Corp (BLL); Baltimore Gas & El (BGE); Banc One Corp (ONE); Bank of New
York (BK); BankAmerica Corp (BAC); BankBoston Corp (BKB); Bankers Trust (BT);
Bard (C.R.);(BCR); Barrick Gold (ABX); Battle Mtn Gold (BMG); Bausch & Lomb
(BOL); Baxter International (BAX); Bay Networks (BAY); BB&T Corp (BBK); Becton,
Dickinson (BDX); Bell Atlantic Corp (BEL); BellSouth Corp (BLS); Bemis Co
(BMS); Beneficial Corp (BNL); Bestfoods (BFO); Bethlehem Steel (BS); Biomet,
Inc (BMET); Black & Decker Corp (BDK); Block (H & R); (HRB); Boeing Co (BA);
Boise Cascade (BCC); Boston Scientific (BSX); Briggs & Stratton (BGG);

<PAGE>

Bristol-Myers Squibb (BMY); Brown-Forman Cl'B' (BF.B); Browning-Ferris Indus
(BFI); Brunswick Corp (BC); Burlington Northern Santa Fe (BNI); Burlington
Resources (BR); Cabletron Systems (CS); Campbell Soup (CPB); Cardinal Health
(CAH); Carolina Pwr & Lt (CPL); Case Corp (CSE); Caterpillar Inc (CAT); CBS
Corp (CBS); Cendant Corp (CD); Centex Corp (CTX); Central & So. West (CSR);
Ceridian Corp (CEN); Champion Intl (CHA); Chase Manhattan (CMB); Chevron Corp
(CHV); Chrysler Corp (C); Chubb Corp (CB); CIGNA Corp (CI); Cincinnati
Financial (CINF); Cincinnati Milacron (CMZ); CINergy Corp (CIN); Circuit City
Strs-CrctCtyGrp (CC); Cisco Systems (CSCO); Citicorp (CCI); Clear Channel
Commun (CCU); Clorox Co (CLX); Coastal Corp (CGP); Coca-Cola Co (KO);
CognizantCorp (CZT); Colgate-Palmolive (CL); Columbia Energy Group (CG);
Columbia/HCA Hlthcare (COL); Comcast Cl'A'Spl(non-vtg); (CMCSK); Comerica Inc
(CMA); Compaq Computer (CPQ); Computer Assoc Intl (CA); Computer Sciences
(CSC); ConAgra Inc (CAG); Conseco Inc (CNC); Consolidated Edison (ED);
Consolidated Nat Gas (CNG); Consolidated Stores (CNS); Cooper Indus (CBE);
Cooper Tire & Rubber (CTB); Coors (Adolph)Cl'B' (ACCOB); Corning Inc (GLW);
Costco Cos (COST); Countrywide Credit Indus (CCR); Crane Co (CR); Crown Cork &
Seal (CCK); CSX Corp (CSX); Cummins Engine (CUM); CVS Corp (CVS); Cyprus Amax
Minerals (CYM); Dana Corp (DCN); Darden Restaurants (DRI); Data General (DGN);
Dayton Hudson (DH); Deere & Co (DE); Dell Computer Corp (DELL); Delta Air Lines
(DAL); Deluxe Corp (DLX); Dillard's Inc'A' (DDS); Disney (Walt); Co (DIS);
Dominion Resources (D); Donnelley(RR)& Sons (DNY); Dover Corp (DOV); Dow
Chemical (DOW); Dow Jones & Co (DJ); Dresser Industries (DI); DSC
Communications (DIGI); DTE Energy (DTE); Duke Energy (DUK); Dun & Bradstreet
(DNB); duPont(EI)deNemours (DD); Eastern Enterprises (EFU); Eastman Chemical
(EMN); Eastman Kodak (EK); Eaton Corp (ETN); Echlin Inc (ECH); Ecolab Inc
(ECL); Edison Intl (EIX); EG&G Inc (EGG); EMC Corp (EMC); Emerson Electric
(EMR); Engelhard Corp (EC); Enron Corp (ENE); Entergy Corp (ETR); Equifax Inc
(EFX); Exxon Corp (XON); FDX Corp (FDX); Federal Home Loan (FRE); Federal Natl
Mtge (FNM); Federated Dept Stores (FD); Fifth Third Bancorp (FITB); First
Chicago NBD (FCN); First Data (FDC); First Union Corp (FTU); FirstEnergy Corp
(FE); Fleet Financial Group (FLT); Fleetwood Enterpr (FLE); Fluor Corp (FLR);
FMC Corp (FMC); Ford Motor (F); Fort James (FJ); Fortune Brands (FO); Foster
Wheeler (FWC); FPL Group (FPL); Franklin Resources (BEN); Freep't McMoRan
Copper&Gold'B' (FCX); Frontier Corp (FRO); Fruit of The Loom'A' (FTL); Gannett
Co (GCI); Gap Inc (GPS); Gateway 2000 (GTW); Genl Dynamics (GD); Genl Electric
(GE); Genl Instrument (GIC); Genl Mills (GIS); Genl Motors (GM); Genl Re Corp
(GRN); Genl Signal (GSX); Genuine Parts (GPC); Georgia-Pacific (Ga-Pac Grp);
(GP); Giant FoodCl'A' (GFS.A); Gillette Co (G); Golden West Finl (GDW);
Goodrich (B.F.); (GR); Goodyear Tire & Rub (GT); GPU Inc (GPU); Grace (W.R.); &
Co (GRA); Grainger (W.W.); (GWW); Great Atl & Pac Tea (GAP); Great Lakes
Chemical (GLK); Green Tree Finl (GNT); GTE Corp (GTE); Guidant Corp (GDT);
Halliburton Co (HAL); Harcourt General (H); Harnischfeger Indus (HPH); Harrah's
Entertainment (HET); Harris Corp (HRS); Hartford Finl Svcs Gp (HIG); Hasbro Inc
(HAS); HBO & Co (HBOC); HEALTHSOUTH Corp (HRC); Heinz (H.J.); (HNZ); Helmerich
& Payne (HP); Hercules, Inc (HPC); Hershey Foods (HSY); Hewlett-Packard (HWP);
Hilton Hotels (HLT); Home Depot (HD); Homestake Mining (HM); Honeywell, Inc
(HON); Household Intl (HI); Houston Indus (HOU); Humana Inc (HUM); Huntington
Bancshares (HBAN); Ikon Office Solutions (IKN); Illinois Tool Works (ITW); Inco
Ltd (N); Ingersoll-Rand (IR); Inland Steel Indus (IAD); Intel Corp (INTC);
Interpublic Grp Cos (IPG); Intl Bus. Machines (IBM); Intl Flavors/Fragr (IFF);
Intl Paper (IP); ITT Industries (IIN); Jefferson-Pilot (JP); Johnson & Johnson
(JNJ); Johnson Controls (JCI); Jostens Inc (JOS); K mart (KM); Kaufman & Broad
Home (KBH); Kellogg Co (K); Kerr-McGee (KMG); KeyCorp (KEY); Kimberly-Clark
(KMB); King World Prod'ns (KWP); KLA-Tencor Corp (KLAC); Knight-Ridder Inc
(KRI); Kroger Co (KR); Laidlaw Inc (LDW); Lehman Br Holdings (LEH); Lilly
(Eli); (LLY); Limited Inc (LTD); Lincoln Natl Corp (LNC); Liz Claiborne (LIZ);

<PAGE>

Lockheed Martin (LMT); Loews Corp (LTR); Longs Drug Stores (LDG); Louisiana
Pacific (LPX); Lowe's Cos (LOW); LSI Logic (LSI); Lucent Technologies (LU);
Mallinckrodt Inc (MKG); Manor Care (MNR); Marriott Intl 'A' (MAR); Marsh &
McLennan (MMC); Masco Corp (MAS); Mattel, Inc (MAT); May Dept Stores (MAY);
Maytag Corp (MYG); MBIA Inc (MBI); MBNA Corp (KRB); McDermott Intl (MDR);
McDonald's Corp (MCD); McGraw-Hill Companies (MHP); MCI Communications Corp
(MCIC); Mead Corp (MEA); MediaOne Group (UMG); Medtronic, Inc (MDT); Mellon
Bank Corp (MEL); Mercantile Bancorp (MTL); Mercantile Stores (MST); Merck & Co
(MRK); Meredith Corp (MDP); Merrill Lynch (MER); MGIC Investment (MTG); Micron
Technology (MU); Microsoft Corp (MSFT); Millipore Corp (MIL); Minnesota
Min'g/Mfg (MMM); Mirage Resorts (MIR); Mobil Corp (MOB); Monsanto Co (MTC);
Moore Corp Ltd (MCL); Morgan (J.P.); (JPM); Morgan Stan Dean Witter (MWD);
Morton International (MII); Motorola, Inc (MOT); NACCO Indus Cl'A' (NC); Nalco
Chemical (NLC); NationsBank Corp (NB); Natl City Corp (NCC); Natl Semiconductor
(NSM); Natl Service Indus (NSI); Navistar Intl (NAV); New York Times Cl'A'
(NYT); Newell Co (NWL); Newmont Mining (NEM); NEXTEL Communic'ns'A' (NXTL);
Niagara Mohawk Pwr (NMK); NICOR Inc (GAS); NIKE, Inc Cl'B' (NKE); Nordstrom,
Inc (NOBE); Norfolk Southern (NSC); Northern States Pwr (NSP); Northern Telcm
Ltd (NT); Northern Trust (NTRS); Northrop Grumman (NOC); Norwest Corp (NOB);
Novell Inc (NOVL); Nucor Corp (NUE); Occidental Petrol'm (OXY); Omnicom Group
(OMC); ONEOK Inc (OKE); Oracle Corp (ORCL); Oryx Energy Co (ORX); Owens-Corning
(OWC); Owens-Illinois (OI); PACCAR Inc (PCAR); Pacific Enterprises (PET);
PacifiCorp (PPW); Pall Corp (PLL); Parametric Technology (PMTC);
Parker-Hannifin (PH); PECO Energy (PE); Penney (J.C.); (JCP); Pennzoil Co.
(PZL); Peoples Energy (PGL); Pep Boys-Man,Mo,Ja (PBY); PepsiCo Inc (PEP);
Perkin-Elmer (PKN); Pfizer, Inc (PFE); PG&E Corp (PCG); Pharmacia & Upjohn
(PNU); Phelps Dodge (PD); Philip Morris Cos (MO); Phillips Petroleum (P);
Pioneer Hi-Bred Intl (PHB); Pitney Bowes (PBI); Placer Dome Inc (PDG); PNC Bank
Corp (PNC); Polaroid Corp (PRD); Potlatch Corp (PCH); PP&L Resources (PPL); PPG
Indus (PPG); Praxair Inc (PX); Procter & Gamble (PG); Progressive Corp,Ohio
(PGR); Providian Financial (PVN); Public Svc Enterpr (PEG); Pulte Corp (PHM);
Quaker Oats (OAT); Ralston-Purina Group (RAL); Raychem Corp (RYC); Raytheon
Co'B' (RTN.B); Reebok Intl (RBK); Republic New York (RNB); Reynolds Metals
(RLM); Rite Aid (RAD); Rockwell Intl (ROK); Rohm & Haas (ROH); Rowan Cos (RDC);
Royal Dutch Petrol (RD); Rubbermaid, Inc (RBD); Russell Corp (RML); Ryder
System (R); SAFECO Corp (SAFC); Sara Lee Corp (SLE); SBC Communications (SBC);
Schering-Plough (SGP); Schlumberger Ltd (SLB); Schwab(Chas)Corp (SCH);
Scientific-Atlanta (SFA); Seagate Technology (SEG); Seagram Co. Ltd (VO);
Sealed Air (SEE); Sears,Roebuck (S); Service Corp Intl (SRV); Shared Medical
Sys (SMS); Sherwin-Williams (SHW); Sigma-Aldrich (SIAL); Silicon Graphics
(SGI); Snap-On Inc (SNA); Sonat, Inc (SNT); Southern Co (SO); Southwest
Airlines (LUV); Springs Industries'A' (SMI); Sprint Corp (FON); St. Jude
Medical (STJ); St. Paul Cos (SPC); Stanley Works (SWK); State Street Corp
(STT); Stone Container (STO); Summit Bancorp (SUB); Sun Co (SUN); Sun
Microsystems (SUNW); SunAmerica Inc (SAI); SunTrust Banks (STI); Supervalu Inc
(SVU); Synovus Financial (SNV); Sysco Corp (SYY); 3Com Corp (COMS); Tandy Corp
(TAN); Tektronix Inc (TEK); Tele-Communic'A'TCI Group (TCOMA); Tellabs, Inc
(TLAB); Temple-Inland (TIN); Tenet Healthcare (THC); Tenneco Inc (TEN); Texaco
Inc (TX); Texas Instruments (TXN); Texas Utilities (TXU); Textron, Inc (TXT);
Thermo Electron (TMO); Thomas & Betts (TNB); Time Warner Inc (TWX); Times
Mirror 'A' (TMC); Timken Co (TKR); TJX Companies (TJX); Torchmark Corp (TMK);
Toys R Us (TOY); Transamerica Corp (TA); Travelers Group (TRV); Tribune Co.
(TRB); Tricon Global Restaurants (YUM); TRW Inc (TRW); Tupperware Corp (TUP);
Tyco International (TYC); U S West (USW); U.S. Bancorp (USB); U.S. Surgical
(USS); Unicom Corp (UCM); Unilever N.V. (UN); Union Camp (UCC); Union Carbide
(UK); Union Pacific (UNP); Union Pacific Resources Group (UPR); Unisys Corp
(UIS); United Healthcare (UNH); United Technologies (UTX); Unocal Corp (UCL);
UNUM Corp (UNM); US Airways Group (U); UST Inc (UST); USX-Marathon Grp (MRO);
USX-U.S. Steel Group (X); V.F. Corp (VFC); Venator Group (Z); Viacom Inc Cl'B'
(VIA.B); Wachovia Corp (WB); Wal-Mart Stores (WMT); Walgreen Co (WAG);
Warner-Lambert (WLA); Washington Mutual (WAMU); Waste Management (WMX); Wells
Fargo (WFC); Wendy's Intl (WEN); Western Atlas (WAI); Westvaco Corp (W);
Weyerhaeuser Co (WY); Whirlpool Corp (WHR); Willamette Indus (WLL); Williams
Cos (WMB); Winn-Dixie Stores (WIN); WorldCom Inc (WCOM); Worthington Indus
(WTHG); Wrigley, (Wm); Jr (WWY); and Xerox Corp (XRX).

<PAGE>

PART C

Item 24. Financial Statements and Exhibits.

(a) Financial Statements Included in Part A:

Not applicable.

Financial Statements Included in Part B:

Not applicable.

<TABLE>

(b) Exhibits
<S> <C>

* 1(a) Amended and Restated Declaration of Trust of Registrant
** 1(b) Forms of Amendments to Amended and Restated Declaration of Trust
of the Registrant
1(c) Form of Establishment and Designation of Series of the Registrant
**** 2(a) Amended and Restated By-Laws of Registrant
**** 2(b) Amendments to Amended and Restated By-Laws of Registrant
5 Form of Management Agreement between the Registrant and
Citibank, N.A., as manager to CitiFunds S&P 500 Index Portfolio
(the "Fund")
6 Form of Amended and Restated Distribution Agreement between the
Registrant and CFBDS, Inc. ("CFBDS"), as distributor
** 8(a) Custodian Contract between the Registrant and State Street Bank
and Trust Company ("State Street"), as custodian
8(b) Form of letter agreement adding the Fund to the Custodian
Contract with State Street
9(a) Form of Amended and Restated Sub-Administrative Services
Agreement between Citibank, N.A. and CFBDS
**** 9(b) Transfer Agency and Service Agreement between the Registrant and
State Street, as transfer agent
9(c) Form of letter agreement adding the Fund to the Transfer Agency
and Service Agreement with State Street
** 9(d) Accounting Services Agreement between the Registrant and State
Street, as Fund accounting agent
*** 15 Service Plan of the Registrant
**** 25(a) Powers of Attorney for the Registrant

25(b) Powers of Attorney for The Premium Portfolios

</TABLE>

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

* Incorporated herein by reference to Post-Effective Amendment No. 17
to the Registrant's Registration Statement on Form N-1A (File No.
2-90519) as filed with the Securities and Exchange Commission on
February 28, 1997.
** Incorporated herein by reference to Post-Effective Amendment No. 19
to the Registrant's Registration Statement on Form N-1A (File No.
2-90519) as filed with the Securities and Exchange Commission on
October 24, 1997.
*** Incorporated herein by reference to Post-Effective Amendment No. 20
to the Registrant's Registration Statement on Form N-1A (File No.
2-90519) as filed with the Securities and Exchange Commission on
November 3, 1997.
**** Incorporated herein by reference to Post-Effective Amendment No. 24
to the Registrant's Registration Statement on Form N-1A (File No.
2-90519) as filed with the Securities and Exchange Commission on
June 29, 1998.

<PAGE>

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

Not applicable.

Item 26. Number of Holders of Securities.

Title of Class Number of Record Holders

Shares of Beneficial Interest As of July 9, 1998
(without par value)

CitiFunds S&P 500 Index Portfolio 0

Item 27. Indemnification.

Reference is hereby made to (a) Article V of the Registrant's Declaration
of Trust, filed as an Exhibit to Post-Effective Amendment No. 17 to its
Registration Statement on Form N-1A; (b) Section 6 of the Distribution
Agreement between the Registrant and CFBDS, filed as an Exhibit hereto; and (c)
the undertaking of the Registrant regarding indemnification set forth in its
Registration Statement on Form N-1A.

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

Item 28. Business and Other Connections of Investment Adviser.

Citibank, N.A. ("Citibank") is a commercial bank offering a wide range of
banking and investment services to customers across the United States and
around the world. Citibank is a wholly-owned subsidiary of Citicorp, a
registered bank holding company. Citibank also serves as investment adviser to
the following registered investment companies (or series thereof): Asset
Allocation Portfolios (Large Cap Value Portfolio, Small Cap Value Portfolio,
International Portfolio, Foreign Bond Portfolio, Intermediate Income Portfolio
and Short-Term Portfolio), The Premium Portfolios (Growth & Income Portfolio,
Balanced Portfolio, Large Cap Growth Portfolio, International Equity Portfolio,
Government Income Portfolio, Emerging Asian Markets Equity Portfolio and Small
Cap Growth Portfolio), Tax Free Reserves Portfolio, U.S. Treasury Reserves
Portfolio, Cash Reserves Portfolio, CitiFundsSM Multi-State Tax Free Trust
(CitiFundsSM New York Tax Free Reserves, CitiFundsSM Connecticut Tax Free
Reserves and CitiFundsSM California Tax Free Reserves), CitiFundsSM Tax Free
Income Trust (CitiFundsSM National Tax Free Income Portfolio and CitiFundsSM
New York Tax Free Income Portfolio), CitiFundsSM Fixed Income Trust
(CitiFundsSM Intermediate Income Portfolio and CitiFundsSM Short-Term U.S.
Government Income Portfolio), CitiFundsSM Institutional Trust (CitiFundsSM
Institutional Cash Reserves) and Variable Annuity Portfolios (CitiSelect(R) VIP
Folio 200, CitiSelect(R) VIP Folio 300, CitiSelect(R) VIP Folio 400,
CitiSelect(R) VIP Folio 500 and CitiFundsSM Small Cap Growth VIP Portfolio).
Citibank and its affiliates manage assets in excess of $88 billion worldwide.
The principal place of business of Citibank is located at 399 Park Avenue, New
York, New York 10043.

John S. Reed is the Chairman of the Board and a Director of Citibank. The
following are Vice Chairmen of the Board and Directors of Citibank: Paul J.
Collins and William R. Rhodes. Other Directors of Citibank are D. Wayne

<PAGE>

Calloway, former Chairman and Chief Executive Officer, PepsiCo, Inc.; John M.
Deutch, Institute Professor, Massachusetts Institute of Technology; Reuben
Mark, Chairman and Chief Executive Officer, Colgate-Palmolive Company; Richard
D. Parsons, President, Time Warner, Inc.; Rozanne L. Ridgway, Former Assistant
Secretary of State for Europe and Canada; Robert B. Shapiro, Chairman,
President and Chief Executive Officer, Monsanto Company; Frank A. Shrontz,
Chairman Emeritus, The Boeing Company; and Franklin A. Thomas, former
President, The Ford Foundation.

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

D. Wayne Calloway Director, Exxon Corporation
Director, General Electric Company
Retired Chairman and Chief Executive Officer and
Director, PepsiCo, Inc.

Paul J. Collins Director, Kimberly-Clark Corporation

John M. Deutch Director, Ariad Pharmaceuticals, Inc.
Director, CMS Energy
Director, Palomar Medical Technologies, Inc.
Director, Cummins Engine Company, Inc.
Director, Schlumberger, Ltd.

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

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

John S. Reed Director, Monsanto Company
Director, Philip Morris Companies
Incorporated
Stockholder, Tampa Tank & Welding, Inc.

William R. Rhodes Director, Private Export Funding
Corporation

Rozanne L. Ridgway Director, 3M
Director, Bell Atlantic Corporation
Director, Boeing Company
Director, Emerson Electric Company
Member-International Advisory Board,
New Perspective Fund, Inc.
Director, RJR Nabisco, Inc.
Director, Sara Lee Corporation
Director, Union Carbide Corporation

<PAGE>

Robert B. Shapiro Director, Chairman and Chief Executive
Officer, Monsanto Company
Director, Silicon Graphics

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

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

Item 29. Principal Underwriters.

(a) CFBDS, the Registrant's Distributor, is also the distributor for
CitiFundsSM International Growth & Income Portfolio, CitiFundsSM International
Equity Portfolio, CitiFundsSM Large Cap Growth Portfolio, CitiFundsSM
Intermediate Income Portfolio, CitiFundsSM Short-Term U.S. Government Income
Portfolio, CitiFundsSM Emerging Asian Markets Equity Portfolio, CitiFundsSM
U.S. Treasury Reserves, CitiFundsSM Cash Reserves, CitiFundsSM Premium U.S.
Treasury Reserves, CitiFundsSM Premium Liquid Reserves, CitiFundsSM
Institutional U.S. Treasury Reserves, CitiFundsSM Institutional Liquid
Reserves, CitiFundsSM Institutional Cash Reserves, CitiFundsSM Tax Free
Reserves, CitiFundsSM Institutional Tax Free Reserves, CitiFundsSM California
Tax Free Reserves, CitiFundsSM Connecticut Tax Free Reserves, CitiFundsSM New
York Tax Free Reserves, CitiFundsSM Balanced Portfolio, CitiFundsSM Small Cap
Value Portfolio, CitiFundsSM Growth & Income Portfolio, CitiFundsSM Small Cap
Growth Portfolio, CitiFundsSM National Tax Free Income Portfolio, CitiFundsSM
New York Tax Free Income Portfolio, CitiSelect(R) VIP Folio 200, CitiSelect(R)
VIP Folio 300, CitiSelect(R) VIP Folio 400, CitiSelect(R) VIP Folio 500,
CitiFundsSM Small Cap Growth VIP Portfolio, CitiSelect(R) Folio 200,
CitiSelect(R) Folio 300, CitiSelect(R) Folio 400, and CitiSelect(R) Folio 500.
CFBDS is also the placement agent for Large Cap Value Portfolio, International
Portfolio, Foreign Bond Portfolio, Intermediate Income Portfolio, Short-Term
Portfolio, Growth & Income Portfolio, Large Cap Growth Portfolio, Small Cap
Growth Portfolio, International Equity Portfolio, Balanced Portfolio,
Government Income Portfolio, Emerging Asian Markets Equity Portfolio, Tax Free
Reserves Portfolio, Cash Reserves Portfolio and U.S. Treasury Reserves
Portfolio.

(b) The information required by this Item 29 with respect to each
director and officer of CFBDS is incorporated by reference to Schedule A of
Form BD filed by CFBDS pursuant to the Securities and Exchange Act of 1934
(File No. 8-32417).

Item 30. Location of Accounts and Records.

The accounts and records of the Registrant are located, in whole or in
part, at the office of the Registrant and the following locations:

NAME ADDRESS

CFBDS, Inc. 21 Milk Street, 5th Floor
(administrator and distributor) Boston, MA 02109

<PAGE>

State Street Bank and Trust Company 1776 Heritage Drive
(transfer agent, custodian and fund North Quincy, MA 02171
accounting agent)

Citibank, N.A. 153 East 53rd Street
(investment adviser) New York, NY 10043

Item 31. Management Services.

Not applicable.

Item 32. Undertakings.

(a) Not applicable.

(b) Not applicable.

(c) The Registrant hereby undertakes, if requested to do so by the
record holders of not less than 10% of the Registrant's outstanding
shares, to call a meeting of shareholders for the purpose of voting
upon the question of removal of a trustee or trustees, and to assist
in communications with other shareholders as required by Section
16(c) of the Investment Company Act of 1940. The Registrant further
undertakes to furnish to each person to whom a prospectus of the
CitiFunds S&P 500 Index Portfolio is delivered with a copy of the
Fund's latest Annual Report to Shareholders, upon request without
charge.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston and Commonwealth of
Massachusetts on the 9th day of July, 1998.

CITIFUNDS TRUST II

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

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated below on July 9, 1998.

<TABLE>

Signature Title
<S> <C>

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

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

Riley C. Gilley* Trustee
------------------------
Riley C. Gilley

Diana R. Harrington* Trustee
------------------------
Diana R. Harrington

Susan B. Kerley* Trustee
------------------------
Susan B. Kerley

C. Oscar Morong, Jr.* Trustee
------------------------
C. Oscar Morong, Jr.

E. Kirby Warren* Trustee
------------------------
E. Kirby Warren

William S. Woods, Jr.* Trustee
------------------------
William S. Woods, Jr.

*By: Philip W. Coolidge
---------------------
Philip W. Coolidge
Executed by Philip W. Coolidge on
behalf of those indicated pursuant to
Powers of Attorney.

</TABLE>

<PAGE>

SIGNATURES

The Premium Portfolios has duly caused this Post-Effective Amendment to
the Registration Statement on Form N-1A of CitiFunds Trust II to be signed on
its behalf by the undersigned, thereunto duly authorized, in London, England,
on the 10th day of July, 1998.

THE PREMIUM PORTFOLIOS
on behalf of S&P 500 Index Portfolio

By: Philip W. Coolidge
---------------------------------
Philip W. Coolidge,
President of
The Premium Portfolios

This Post-Effective Amendment to the Registration Statement on Form N-1A
of CitiFunds Trust II has been signed by the following persons in the
capacities indicated on July 10, 1998.

Signature Title

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

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

Elliott J. Berv* Trustee
-------------------------------
Elliott J. Berv

Mark T. Finn* Trustee
-------------------------------
Mark T. Finn

C. Oscar Morong, Jr.* Trustee
-------------------------------
C. Oscar Morong, Jr.

Walter E. Robb, III* Trustee
-------------------------------
Walter E. Robb, III

*By: Philip W. Coolidge
--------------------------
Philip W. Coolidge
Executed by Philip W. Coolidge
on behalf of those indicated
as attorney in fact.

<PAGE>

EXHIBIT INDEX

Exhibit
No.: Description:

1(c) Form of Establishment and Designation of Series of the Registrant
5 Form of Management Agreement between the Registrant and Citibank,
N.A., as manager to CitiFunds S&P 500 Index Portfolio (the "Fund")
6 Form of Amended and Restated Distribution Agreement between the
Registrant and CFBDS, Inc. ("CFBDS"), as distributor
8(b) Form of letter agreement adding the Fund to the Custodian Contract
with State Street
9(a) Form of Amended and Restated Sub-Administrative Services Agreement
between Citibank, N.A. and CFBDS
9(c) Form of letter agreement adding the Fund to the Transfer Agency and
Service Agreement with State Street
25(b) Powers of Attorney for The Premium Portfolios

<PAGE>

Exhibit 1(c)

CITIFUNDS TRUST II

Form of Amended and Restated
Establishment and Designation of Series of
Shares of Beneficial Interest (without par value)

Pursuant to Section 6.9 of the Declaration of Trust, dated April 13,
1984, as amended and restated (the "Declaration of Trust"), of CitiFunds Trust
II (formerly, Landmark Funds II) (the "Trust"), the undersigned, being a
majority of the Trustees of the Trust, do hereby amend and restate the Trust's
existing Establishment and Designation of Series of Shares of Beneficial
Interest (without par value) in order to add two additional series of the
Trust. No other changes to the special and relative rights of the existing
series are intended by this amendment and restatement.

1. The series shall be as follows:

The new series of the Trust shall be designated as
"CitiFunds Diversified U.S. Equity Portfolio" and
"CitiFunds S&P 500 Index Portfolio."

The other existing series of the Trust are as follows:
"CitiFunds Small Cap Value Portfolio,"
"CitiFunds Growth & Income Portfolio,"
"CitiFunds Large Cap Growth Portfolio" and
"CitiFunds Small Cap Growth Portfolio."

2. Each series shall be authorized to invest in cash, securities,
instruments and other property as from time to time described in the Trust's
then currently effective registration statement under the Securities Act of
1933 to the extent pertaining to the offering of Shares of each series. Each
Share of each series shall be redeemable, shall be entitled to one vote or
fraction thereof in respect of a fractional share on matters on which shares of
that series shall be entitled to vote, shall represent a pro rata beneficial
interest in the assets allocated or belonging to such series, and shall be
entitled to receive its pro rata share of the net assets of such series upon
liquidation of the series, all as provided in Section 6.9 of the Declaration of
Trust.

<PAGE>

3. Shareholders of each series shall vote separately as a class on any
matter to the extent required by, and any matter shall be deemed to have been
effectively acted upon with respect to each series as provided in, Rule 18f-2,
as from time to time in effect, under the Investment Company Act of 1940, as
amended, or any successor rule, and by the Declaration of Trust.

4. The assets and liabilities of the Trust shall be allocated to each
series as set forth in Section 6.9 of the Declaration of Trust.

5. Subject to the provisions of Section 6.9 and Article IX of the
Declaration of Trust, the Trustees (including any successor Trustees) shall
have the right at any time and from time to time to reallocate assets and
expenses or to change the designation of any series now or hereafter created or
otherwise to change the special and relative rights of any such series.

IN WITNESS WHEREOF, the undersigned have executed this Establishment and
Designation of Series on separate counterparts this 7th day of August, 1998.

________________________________ _____________________________________
PHILIP W. COOLIDGE RILEY C. GILLEY
As Trustee and Not Individually As Trustee and Not Individually

________________________________ _____________________________________
DIANA R. HARRINGTON SUSAN B. KERLEY
As Trustee and Not Individually As Trustee and Not Individually

________________________________ _____________________________________
C. OSCAR MORONG, JR. E. KIRBY WARREN
As Trustee and Not Individually As Trustee and Not Individually

________________________________
WILLIAM S. WOODS, JR.
As Trustee and Not Individually

Exhibit 5

FORM OF MANAGEMENT AGREEMENT

CITIFUNDS TRUST II

CitiFunds S&P 500 Index Portfolio

MANAGEMENT AGREEMENT, dated as of _____ __, 1998, by and between
CitiFunds Trust II, a Massachusetts trust (the "Trust"), and Citibank, N.A., a
national banking association ("Citibank" or the "Manager").

W I T N E S S E T H:

WHEREAS, the Trust engages in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (collectively with the rules and regulations promulgated
thereunder and any exemptive orders thereunder, the "1940 Act"), and

WHEREAS, the Trust wishes to engage Citibank to provide certain
investment advisory and administrative services for the series of the Trust
designated as CitiFunds S&P 500 Index Portfolio (the "Fund"), and Citibank is
willing to provide such investment advisory and administrative services for the
Fund on the terms and conditions hereinafter set forth.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:

1. Duties of Citibank. (a) Citibank shall act as the Manager for the Fund
and as such shall furnish continuously an investment program and shall
determine from time to time what securities shall be purchased, sold or
exchanged and what portion of the assets of the Fund shall be held uninvested,
subject always to the restrictions of the Trust's Declaration of Trust, dated
as of April 13, 1984, and By-Laws, as each may be amended from time to time
(respectively, the "Declaration" and the "By-Laws"), the provisions of the 1940
Act, and the then-current Registration Statement of the Trust with respect to
the Fund. The Manager shall also make recommendations as to the manner in which
voting rights, rights to consent to corporate action and any other rights
pertaining to the Fund's portfolio securities shall be exercised. Should the

<PAGE>

Board of Trustees of the Trust at any time, however, make any definite
determination as to investment policy applicable to the Fund and notify the
Manager thereof in writing, the Manager shall be bound by such determination
for the period, if any, specified in such notice or until similarly notified
that such determination has been revoked. The Manager shall take, on behalf of
the Fund, all actions which it deems necessary to implement the investment
policies determined as provided above, and in particular to place all orders
for the purchase or sale of securities for the Fund's account with the brokers
or dealers selected by it, and to that end the Manager is authorized as the
agent of the Trust to give instructions to the custodian or any subcustodian of
the Fund as to deliveries of securities and payments of cash for the account of
the Fund. In connection with the selection of such brokers or dealers and the
placing of such orders, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) to the Fund and/or the other accounts over
which the Manager or its affiliates exercise investment discretion. The Manager
is authorized to pay a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio transaction for the
Fund which is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if the Manager determines in
good faith that such amount of commission is reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular transaction
or the overall responsibilities which the Manager and its affiliates have with
respect to accounts over which they exercise investment discretion. In making
purchases or sales of securities or other property for the account of the Fund,
the Manager may deal with itself or with the Trustees of the Trust or the
Trust's underwriter or distributor, to the extent such actions are permitted by
the 1940 Act. In providing the services and assuming the obligations set forth
herein, the Manager may employ, at its own expense, or may request that the
Trust employ at the Fund's expense, one or more subadvisers; provided that in
each case the Manager shall supervise the activities of each subadviser. Any
agreement between the Manager and a subadviser shall be subject to the renewal,
termination and amendment provisions applicable to this Agreement. Any
agreement between the Trust on behalf of the Fund and a subadviser may be
terminated by the Manager at any time on not more than 60 days' nor less than
30 days' written notice to the Trust and the subadviser.

(b) Subject to the direction and control of the Board of Trustees of the
Trust, Citibank shall perform such administrative and management services as

<PAGE>

may from time to time be reasonably requested by the Trust, which shall include
without limitation: (i) providing office space, equipment and clerical
personnel necessary for maintaining the organization of the Trust and for
performing the administrative and management functions herein set forth; (ii)
supervising the overall administration of the Trust, including negotiation of
contracts and fees with and the monitoring of performance and billings of the
Trust's transfer agent, shareholder servicing agents, custodian and other
independent contractors or agents; (iii) preparing and, if applicable, filing
all documents required for compliance by the Trust with applicable laws and
regulations, including registration statements, prospectuses and statements of
additional information, semi-annual and annual reports to shareholders, proxy
statements and tax returns; (iv) preparation of agendas and supporting
documents for and minutes of meetings of Trustees, committees of Trustees and
shareholders; and (v) arranging for maintenance of books and records of the
Trust. Notwithstanding the foregoing, Citibank shall not be deemed to have
assumed any duties with respect to, and shall not be responsible for, the
distribution of shares of beneficial interest in the Fund, nor shall Citibank
be deemed to have assumed or have any responsibility with respect to functions
specifically assumed by any transfer agent, fund accounting agent, custodian or
shareholder servicing agent of the Trust or the Fund. In providing
administrative and management services as set forth herein, Citibank may, at
its own expense, employ one or more subadministrators; provided that Citibank
shall remain fully responsible for the performance of all administrative and
management duties set forth herein and shall supervise the activities of each
subadministrator.

2. Allocation of Charges and Expenses. Citibank shall furnish at its own
expense all necessary services, facilities and personnel in connection with its
responsibilities under Section 1 above. Except as provided in the foregoing
sentence, it is understood that the Trust will pay from the assets of the Fund
all of its own expenses allocable to the Fund including, without limitation,
organization costs of the Fund; compensation of Trustees who are not
"affiliated persons" of Citibank; governmental fees; interest charges; loan
commitment fees; taxes; membership dues in industry associations allocable to
the Trust; fees and expenses of independent auditors, legal counsel and any
transfer agent, distributor, shareholder servicing agent, registrar or dividend
disbursing agent of the Trust; expenses of issuing and redeeming shares of
beneficial interest and servicing shareholder accounts; expenses of preparing,
typesetting, printing and mailing prospectuses, statements of additional
information, shareholder reports, notices, proxy statements and reports to
governmental officers and commissions and to existing shareholders of the Fund;
expenses connected with the execution, recording and settlement of security

<PAGE>

transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of the Fund (including but not limited to the fees of independent pricing
services); expenses of meetings of the Fund's shareholders; expenses relating
to the registration and qualification of shares of the Fund; and such
non-recurring or extraordinary expenses as may arise, including those relating
to actions, suits or proceedings to which the Trust on behalf of the Fund may
be a party and the legal obligation which the Trust may have to indemnify its
Trustees and officers with respect thereto.

3. Compensation of Citibank. For the services to be rendered and the
facilities to be provided by Citibank hereunder, the Trust shall pay to
Citibank from the assets of the Fund a management fee computed daily and paid
monthly at an annual rate equal to the lesser of (i) __% of the Fund's average
daily net assets for the Fund's then-current fiscal year or (ii) the difference
between 0.20% of the Fund's average daily net assets for the Fund's
then-current fiscal year and the aggregate investment management fees allocated
to the Fund for the Fund's then-current fiscal year from the portfolios in
which it invests of which Citibank is the manager. If Citibank provides
services hereunder for less than the whole of any period specified in this
Section 3, the compensation to Citibank shall be accordingly adjusted and
prorated.

4. Covenants of Citibank. Citibank agrees that it will not deal with
itself, or with the Trustees of the Trust or the Trust's principal underwriter
or distributor, as principals in making purchases or sales of securities or
other property for the account of the Fund, except as permitted by the 1940
Act, will not take a long or short position in shares of beneficial interest in
the Fund except as permitted by the Declaration, and will comply with all other
provisions of the Declaration and By-Laws and the then-current Registration
Statement applicable to the Fund relative to Citibank and its directors and
officers.

5. Limitation of Liability of Citibank. Citibank shall not be liable for
any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution of securities
transactions for the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder. As used in this Section 5, the term
"Citibank" shall include directors, officers and employees of Citibank as well
as Citibank itself.

<PAGE>

6. Activities of Citibank. The services of Citibank to the Fund are not
to be deemed to be exclusive, Citibank being free to render investment
advisory, administrative and/or other services to others. It is understood that
Trustees, officers, and shareholders of the Trust are or may be or may become
interested in Citibank, as directors, officers, employees, or otherwise and
that directors, officers and employees of Citibank are or may become similarly
interested in the Trust and that Citibank may be or may become interested in
the Trust as a shareholder or otherwise.

7. Duration, Termination and Amendments of this Agreement. This Agreement
shall become effective as of the day and year first above written, shall govern
the relations between the parties hereto thereafter and shall remain in force
until August 7, 2000, on which date it will terminate unless its continuance
after August 7, 2000 is "specifically approved at least annually" (a) by the
vote of a majority of the Trustees of the Trust who are not "interested
persons" of the Trust or of Citibank at a meeting specifically called for the
purpose of voting on such approval, and (b) by the Board of Trustees of the
Trust or by "vote of a majority of the outstanding voting securities" of the
Fund.

This Agreement may be terminated at any time without the payment of any
penalty by the Trustees or by the "vote of a majority of the outstanding voting
securities" of the Fund, or by Citibank, in each case on not more than 60 days'
nor less than 30 days' written notice to the other party. This Agreement shall
automatically terminate in the event of its "assignment."

This Agreement may be amended only if such amendment is approved by the
"vote of a majority of the outstanding voting securities" of the Fund (except
for any such amendment as may be effected in the absence of such approval
without violating the 1940 Act).

The terms "specifically approved at least annually," "vote of a majority
of the outstanding voting securities," "assignment," "affiliated person," and
"interested persons," when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.

Each party acknowledges and agrees that all obligations of the Trust
under this Agreement are binding only with respect to the Fund; that any

<PAGE>

liability of the Trust under this Agreement, or in connection with the
transactions contemplated herein, shall be discharged only out of the assets of
the Fund; and that no other series of the Trust shall be liable with respect to
this Agreement or in connection with the transactions contemplated herein.

The undersigned officer of the Trust has executed this Agreement not
individually, but as an officer under the Declaration and the obligations of
this Agreement are not binding upon any of the Trustees, officers or
shareholders of the Trust individually.

8. Governing Law. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts.

9. Use of Name. The Trust hereby acknowledges that any and all rights in
or to the name "Citi" which exist on the date of this Agreement or which may
arise hereafter are, and under any and all circumstances shall continue to be,
the sole property of Citibank; that Citibank may assign any or all of such
rights to another party or parties without the consent of the Trust; and that
Citibank may permit other parties, including other investment companies, to use
the word "Citi" in their names. If Citibank, or its assignee as the case may
be, ceases to serve as the adviser to and administrator of the Trust, the Trust
hereby agrees to take promptly any and all actions which are necessary or
desirable to change its name so as to delete the word "Citi."

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered in their names and on their behalf by the undersigned,
thereunto duly authorized, all as of the day and year first above written.

CITIFUNDS TRUST II CITIBANK, N.A.

By: _________________________ By: ____________________________

Title:_______________________ Title:__________________________

Exhibit 6

FORM OF AMENDED AND RESTATED
DISTRIBUTION AGREEMENT

AGREEMENT , dated as of November 14, 1997, and amended and restated as of
__________ __, 1998, by and between CitiFunds Trust II, a Massachusetts trust
(the "Trust"), and CFBDS, Inc., a Massachusetts corporation ("Distributor").

WHEREAS, the Trust engages in business as an open-end management
investment company and is registered as such under the Investment Company Act
of 1940, as amended (the "1940 Act");

WHEREAS, the Trust's shares of beneficial interest ("Shares") are divided
into separate series representing interests in separate funds of securities and
other assets;

WHEREAS, the Trust wishes to retain the services of a distributor for
Shares of each class of each of the Trust's series listed on Exhibit A hereto
(the "Funds") and has registered the Shares of the Funds under the Securities
Act of 1933, as amended (the "1933 Act");

WHEREAS, the Trust has adopted a Service Plan pursuant to Rule 12b-1
under the 1940 Act (the "Service Plan") and may enter into related agreements
providing for the distribution and servicing of Shares of the Funds;

WHEREAS, Distributor has agreed to act as distributor of the Shares of
each class of the Funds for the period of this Agreement;

NOW, THEREFORE, it is hereby agreed between the parties hereto as
follows:

1. Appointment of Distributor.

(a) The Trust hereby appoints Distributor its exclusive agent for the
distribution of Shares of each class of the Funds in jurisdictions wherein such
Shares may be legally offered for sale; provided, however, that the Trust in
its absolute discretion may issue Shares of the Funds in connection with (i)
the payment or reinvestment of dividends or distributions; (ii) any merger or
consolidation of the Trust or of the Funds with any other investment company or
trust or any personal holding company, or the acquisition of the assets of any

<PAGE>

such entity or another Fund of the Trust; or (iii) any offer of exchange
permitted by Section 11 of the 1940 Act.

(b) Distributor hereby accepts such appointment as exclusive agent for
the distribution of Shares of each class of the Funds and agrees that it will
sell the Shares as agent for the Trust at prices determined as hereinafter
provided and on the terms hereinafter set forth, all according to the
then-current prospectus and statement of additional information of each Fund
(collectively, the "Prospectus" and the "Statement of Additional Information"),
applicable laws, rules and regulations and the Declaration of Trust of the
Trust. Distributor agrees to use its best efforts to solicit orders for the
sale of Shares of the Funds, and agrees to transmit promptly to the Trust (or
to the transfer agent of the Funds, if so instructed in writing by the Trust)
any orders received by it for purchase or redemption of Shares.

(c) Distributor may sell Shares of the Funds to or through qualified
securities dealers, financial institutions or others. Distributor will require
each dealer or other such party to conform to the provisions of this Agreement,
the Prospectus, the Statement of Additional Information and applicable law; and
neither Distributor nor any such dealers or others shall withhold the placing
of purchase orders for Shares so as to make a profit thereby.

(d) Distributor shall order Shares of the Funds from the Trust only to
the extent that it shall have received unconditional purchase orders therefor.
Distributor will not make, or authorize any dealers or others to make: (i) any
short sales of Shares; or (ii) any sales of Shares to any Trustee or officer of
the Trust, any officer or director of Distributor or any corporation or
association furnishing investment advisory, managerial or supervisory services
to the Trust, or to any such corporation or association, unless such sales are
made in accordance with the Prospectus and the Statement of Additional
Information.

(e) Distributor is not authorized by the Trust to give any information or
make any representations regarding Shares of the Funds, except such information
or representations as are contained in the Prospectus, the Statement of
Additional Information or advertisements and sales literature prepared by or on
behalf of the Trust for Distributor's use.

(f) The Trust agrees to execute any and all documents, to furnish any and
all information and otherwise to take all actions which may be reasonably

<PAGE>

necessary in the discretion of the Trust's officers in connection with the
qualification of Shares of each Fund for sale in such states as Distributor and
the Trust agree.

(g) No Shares of any Fund shall be offered by either Distributor or the
Trust under this Agreement, and no orders for the purchase or sale of such
Shares hereunder shall be accepted by the Trust, if and so long as the
effectiveness of the Trust's then current registration statement as to Shares
of that Fund or any necessary amendments thereto shall be suspended under any
of the provisions of the 1933 Act, or if and so long as a current prospectus
for Shares of that Fund as required by Section 10 of the 1933 Act is not on
file with the Securities and Exchange Commission; provided, however, that
nothing contained in this paragraph (g) shall in any way restrict the Trust's
obligation to repurchase any Shares from any shareholder in accordance with the
provisions of the applicable Fund's Prospectus or charter documents.

(h) Notwithstanding any provision hereof, the Trust may terminate,
suspend or withdraw the offering of Shares of any Fund whenever, in its sole
discretion, it deems such action to be desirable.

2. Offering Price of Shares. All Fund Shares sold under this Agreement
shall be sold at the public offering price per Share in effect at the time of
the sale, as described in the Prospectus. The excess, if any, of the public
offering price over the net asset value of the Shares sold by Distributor as
agent, and any contingent deferred sales charge applicable to Shares of any
class of any Fund as set forth in the applicable Fund's Prospectus, shall be
retained by Distributor as a commission for its services hereunder. Out of such
commission Distributor may allow commissions, concessions or agency fees to
dealers or other financial institutions, including banks, and may allow them to
others in its discretion in such amounts as Distributor shall determine from
time to time. Except as may be otherwise determined by Distributor from time to
time, such commissions, concessions or agency fees shall be uniform to all
dealers and other financial institutions. At no time shall the Trust receive
less than the full net asset value of the Shares of each Fund, determined in
the manner set forth in the Prospectus and the Statement of Additional
Information. Distributor also may receive such compensation under the Trust's
Service Plan as may be authorized by the Trustees of the Trust from time to
time.

<PAGE>

3. Furnishing of Information.

(a) The Trust shall furnish to Distributor copies of any information,
financial statements and other documents that Distributor may reasonably
request for use in connection with the sale of Shares of the Funds under this
Agreement. The Trust shall also make available a sufficient number of copies of
the Funds' Prospectus and Statement of Additional Information for use by the
Distributor.

(b) The Trust agrees to advise Distributor immediately in writing:

(i) of any request by the Securities and Exchange Commission for
amendments to any registration statement concerning a Fund or to a
Prospectus or for additional information;

(ii) in the event of the issuance by the Securities and Exchange
Commission of any stop order suspending the effectiveness of any such
registration statement or Prospectus or the initiation of any proceeding
for that purpose;

(iii) of the happening of any event which makes untrue any statement
of a material fact made in any such registration statement or Prospectus
or which requires the making of a change in such registration statement
or Prospectus in order to make the statements therein not misleading; and

(iv) of all actions of the Securities and Exchange Commission with
respect to any amendments to any such registration statement or
Prospectus which may from time to time be filed with the Securities and
Exchange Commission.

4. Expenses.

(a) The Trust will pay or cause to be paid the following expenses:
organization costs of the Funds; compensation of Trustees who are not
"affiliated persons" of the Distributor; governmental fees; interest charges;
loan commitment fees; taxes; membership dues in industry associations allocable
to the Trust; fees and expenses of independent auditors, legal counsel and any
transfer agent, distributor, shareholder servicing agent, registrar or dividend
disbursing agent of the Trust; expenses of issuing and redeeming shares of
beneficial interest and servicing shareholder accounts; expenses of preparing,
typesetting, printing and mailing prospectuses, statements of additional

<PAGE>

information, shareholder reports, notices, proxy statements and reports to
governmental officers and commissions and to existing shareholders of the
Funds; expenses connected with the execution, recording and settlement of
security transactions; insurance premiums; fees and expenses of the custodian
for all services to the Funds, including safekeeping of funds and securities
and maintaining required books and accounts; expenses of calculating the net
asset value of the Funds (including but not limited to the fees of independent
pricing services); expenses of meetings of shareholders; expenses relating to
the issuance, registration and qualification of shares; and such non-recurring
or extraordinary expenses as may arise, including those relating to actions,
suits or proceedings to which the Trust may be a party and the legal obligation
which the Trust may have to indemnify its Trustees and officers with respect
thereto.

(b) Except as otherwise provided in this Agreement and except to the
extent such expenses are borne by the Trust pursuant to the Service Plan,
Distributor will pay or cause to be paid all expenses connected with its own
qualification as a dealer under state and federal laws and all other expenses
incurred by Distributor in connection with the sale of Shares of each Fund as
contemplated by this Agreement.

(c) Distributor shall prepare and deliver reports to the Trustees of the
Trust on a regular basis, at least quarterly, showing the expenditures with
respect to each Fund pursuant to the Service Plan and the purposes therefor, as
well as any supplemental reports that the Trustees of the Trust, from time to
time, may reasonably request.

5. Repurchase of Shares. Distributor as agent and for the account of the
Trust may repurchase Shares of the Funds offered for resale to it and redeem
such Shares at their net asset value.

6. Indemnification by the Trust. In the absence of willful misfeasance,
bad faith, gross negligence or reckless disregard of obligations or duties
hereunder on the part of Distributor, the Trust agrees to indemnify
Distributor, its officers and directors, and any person which controls
Distributor within the meaning of the 1933 Act against any and all claims,
demands, liabilities and expenses that any such indemnified party may incur
under the 1933 Act, or common law or otherwise, arising out of or based upon
any alleged untrue statement of a material fact contained in the registration
statement for any Fund, any Prospectus or Statement of Additional Information,
or any advertisements or sales literature prepared by or on behalf of the Trust
for Distributor's use, or any omission to state a material fact therein, the

<PAGE>

omission of which makes any statement contained therein misleading, unless such
statement or omission was made in reliance upon and in conformity with
information furnished to the Trust in connection therewith by or on behalf of
Distributor. Nothing herein contained shall require the Trust to take any
action contrary to any provision of its Declaration of Trust or any applicable
statute or regulation.

7. Indemnification by Distributor. Distributor agrees to indemnify the
Trust, its officers and Trustees and any person which controls the Trust within
the meaning of the 1933 Act against any and all claims, demands, liabilities
and expenses that any such indemnified party may incur under the 1933 Act, or
common law or otherwise, arising out of or based upon (i) any alleged untrue
statement of a material fact contained in the registration statement for any
Fund, any Prospectus or Statement of Additional Information, or any
advertisements or sales literature prepared by or on behalf of the Trust for
Distributor's use, or any omission to state a material fact therein, the
omission of which makes any statement contained therein misleading, if such
statement or omission was made in reliance upon and in conformity with
information furnished to the Trust in connection therewith by or on behalf of
Distributor; and (ii) any act or deed of Distributor or its sales
representatives that has not been authorized by the Trust in any Prospectus or
Statement of Additional Information or by this Agreement.

8. Term and Termination.

(a) Unless terminated as herein provided, this Agreement shall continue
in effect as to each Fund until November 14, 1998 and shall continue in effect
for successive periods of one year thereafter, but only so long as each such
continuance is specifically approved by votes of a majority of both the
Trustees of the Trust and the Trustees of the Trust who are not parties to this
Agreement or interested persons (as defined in the 1940 Act) of any such party
and who have no direct or indirect financial interest in this Agreement or in
the operation of the Service Plan or in any agreement related thereto
("Independent Trustees"), cast in person at a meeting called for the purpose of
voting on such approval.

(b) This Agreement may be terminated as to any Fund on not less than
thirty days' nor more than sixty days' written notice to the other party.

<PAGE>

9. Limitation of Liability. The obligations of the Trust hereunder shall
not be binding upon any of the Trustees, officers or shareholders of the Trust
personally, but shall bind only the assets and property of the particular Fund
or Funds in question, and not any other Fund or series of the Trust. The term
"CitiFunds Trust II" means and refers to the Trustees from time to time serving
under the Declaration of Trust of the Trust, a copy of which is on file with
the Secretary of the Commonwealth of Massachusetts. The execution and delivery
of this Agreement has been authorized by the Trustees, and this Agreement has
been signed on behalf of the Trust by an authorized officer of the Trust,
acting as such and not individually, and neither such authorization by such
Trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the assets and property of the Trust as
provided in the Declaration of Trust.

10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of The Commonwealth of Massachusetts and the
provisions of the 1940 Act.

IN WITNESS THEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.

CitiFunds Trust II

By: __________________________

CFBDS, Inc.

By: __________________________

<PAGE>

Exhibit A

Funds

CitiFunds Small Cap Value Portfolio
CitiFunds Growth & Income Portfolio
CitiFunds Diversified U.S. Equity Portfolio
CitiFunds S&P 500 Index Portfolio

Exhibit 8(b)

CitiFunds Trust II
21 Milk Street, 5th Floor
Boston, Massachusetts 02109

__________ __, 1998

State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Re: CitiFunds Trust II - Custodian Contract

Ladies and Gentlemen:

Pursuant to Section 17 of the Custodian Contract dated as of September 1,
1997 (the "Contract"), between CitiFunds Trust II (the "Trust") and State
Street Bank and Trust Company (the "Custodian"), we hereby request that
CitiFunds Diversified U.S. Equity Portfolio and CitiFunds S&P 500 Index
Portfolio (collectively, the "Funds") be added to the list of series of the
Trust to which the Custodian renders services as custodian under the terms of
the Contract.

Please sign below to evidence your agreement to render such services as
custodian on behalf of the Funds and to add the Funds as beneficiaries under
the Contract.

CITIFUNDS TRUST II

By: _____________________________

Title: _____________________________

Agreed:

STATE STREET BANK AND TRUST COMPANY

By: __________________________

Title: __________________________

Exhibit 9(a)

FORM OF AMENDED AND RESTATED
SUB-ADMINISTRATIVE SERVICES AGREEMENT

SUB-ADMINISTRATIVE SERVICES AGREEMENT, dated as of December 5, 1997, and
amended and restated as of __________ __, 1998 by and between CFBDS, INC., a
Massachusetts corporation (the "Sub-Administrator"), and CITIBANK, N.A., a
national banking association ("Citibank").

W I T N E S S E T H :

WHEREAS, Citibank has been retained by certain registered open-end
management investment companies under the Investment Company Act of 1940, as
amended (the "1940 Act"), as listed on Schedule A hereto (each individually a
"Trust" and collectively the "Trusts"), to provide administrative services to
its investment portfolios, as listed on Schedule A hereto (each individually a
"Fund" and collectively the "Funds"), pursuant to separate Management
Agreements (each a "Management Agreement"), and

WHEREAS, as permitted by Section 1 of each Management Agreement, Citibank
desires to subcontract some or all of the performance of its obligations
thereunder to Sub-Administrator, and Sub-Administrator desires to accept such
obligations; and

WHEREAS, Citibank wishes to engage Sub-Administrator to provide certain
administrative services on the terms and conditions hereinafter set forth, so
long as Citibank shall have found Sub-Administrator to be qualified to perform
the obligations sought to be subcontracted.

NOW, THEREFORE, in consideration of the mutual covenants and agreements
of the parties hereto as herein set forth, the parties covenant and agree as
follows:

1. Duties as Sub-Administrator. Subject to the supervision and direction
of Citibank, Sub-Administrator will assist in supervising various aspects of
each Trust's administrative operations and undertakes to perform the following
specific services, from and after the effective date of this Agreement:

<PAGE>

(a) To the extent requested by Citibank, furnish Trust secretarial
services;

(b) To the extent requested by Citibank, furnish Trust treasury
services, including the review of financial data, tax and other
regulatory filings and audit requests;

(c) To the extent requested by Citibank, provide the services of certain
persons who may be appointed as officers or Trustees of the Trust by
the Trust's Board;

(d) To the extent requested by Citibank, participate in the preparation
of documents required for compliance by the Trust with applicable
laws and regulations, including registration statements,
prospectuses, semi-annual and annual reports to shareholders and
proxy statements;

(e) To the extent requested by Citibank, prepare agendas and supporting
documents for and minutes of meetings of the Trustees, Committees of
Trustees and shareholders;

(f) Maintain books and records of the Trust;

(g) To the extent requested by Citibank, provide advice and counsel to
the Trust with respect to regulatory matters, including monitoring
regulatory and legislative developments which may affect the Trust
and assisting the Trust in routine regulatory examinations or
investigations of the Trust, and working closely with outside
counsel to the Trust in connection with litigation in which the
Trust is involved;

(h) To the extent requested by Citibank, generally assist in all aspects
of Trust's operations and provide general consulting services on a
day to day, as needed basis;

(i) In connection with the foregoing activities, maintain office
facilities (which may be in the offices of Sub-Administrator or its
corporate affiliate); and

(j) In connection with the foregoing activities, furnishing clerical
services, and internal executive and administrative services,
stationery and office supplies.

<PAGE>

Notwithstanding the foregoing, Sub-Administrator under this Agreement
shall not be deemed to have assumed any duties with respect to, and shall not
be responsible for, the management of a Trust, or the distribution of
beneficial interests in a Trust, nor shall Sub-Administrator be deemed to have
assumed or have any responsibility with respect to functions specifically
assumed by any transfer agent or custodian of a Trust.

In performing all services under this Agreement, Sub-Administrator shall
(a) act in conformity with the Trust's charter documents and bylaws, the 1940
Act and other applicable laws, as the same may be amended from time to time,
(b) consult and coordinate with legal counsel for the Trust, as necessary or
appropriate, and (c) advise and report to the Trust and its legal counsel, as
necessary or appropriate, with respect to any material compliance or other
matters that come to its attention.

In performing its services under this Agreement, Sub-Administrator shall
cooperate and coordinate with Citibank as necessary and appropriate and shall
provide such information as its reasonably necessary or appropriate for
Citibank to perform its obligations to the Trust. Sub-Administrator shall
perform its obligations under this Agreement in a conscientious and diligent
manner consistent with prevailing industry standards.

2. Compensation of Sub-Administrator. For the services to be rendered and
the facilities to be provided by Sub-Administrator hereunder, Sub-Administrator
shall be paid an administrative fee as may from time to time be agreed to
between Citibank and Sub-Administrator.

3. Additional Terms and Conditions. The parties may amend this agreement
and include such other terms and conditions as may from time to time be agreed
to by both Citibank and Sub-Administrator.

4. Termination. This Agreement may be terminated by Citibank at any time,
in its entirety or as to one or more Funds, with or without cause. This
Agreement may be terminated by the Sub-Administrator, in its entirety or as to
one or more Funds, with or without cause, provided that Sub-Administrator has
notified Citibank of such termination in writing at least 90 days prior to the
effective date thereof.

<PAGE>

CFBDS, INC. CITIBANK, N.A.

By:_________________________ By:____________________________

Title:______________________ Title:_________________________

<PAGE>

Schedule A
to Sub-Administrative Services Agreement
Between
CFBDS, Inc.
and
Citibank, N.A.

Trust Series

CitiFunds International Trust CitiFunds International Growth &
Income Portfolio

CitiFunds Trust II CitiFunds Small Cap Value
Portfolio
CitiFunds Growth & Income
Portfolio
CitiFunds Diversified U.S.
Equity Portfolio
CitiFunds S&P 500 Index Portfolio

Exhibit 9(c)

CitiFunds Trust II
21 Milk Street, 5th Floor
Boston, Massachusetts 02109

__________ __, 1998

State Street Bank and Trust Company
225 Franklin Street
Boston, Massachusetts 02110

Re: CitiFunds Trust II - Transfer Agency and
Service Agreement

Ladies and Gentlemen:

This letter serves as notice that CitiFunds Diversified U.S. Equity
Portfolio and CitiFunds S&P 500 Index Portfolio (collectively, the "Funds") are
added to the list of series of CitiFunds Trust II (formerly known as "Landmark
Capital Growth Fund") (the "Trust") to which State Street Bank and Trust
Company ("State Street") renders services as transfer agent pursuant to the
terms of the Transfer Agency and Service Agreement dated as of August 21, 1986
(the "Agreement") between the Trust and State Street.

Please sign below to acknowledge your receipt of this notice adding the
Funds as beneficiaries under the Agreement.

CITIFUNDS TRUST II

By: ___________________________

Title: ___________________________

Acknowledgment:

STATE STREET BANK AND TRUST COMPANY

By: ________________________

Title: ________________________

Exhibit 25(b)

THE PREMIUM PORTFOLIOS

The undersigned hereby constitutes and appoints Philip W. Coolidge, John R.
Elder, Susan Jakuboski, Molly S. Mugler and Linda T. Gibson, and each of them,
with full powers of substitution as his true and lawful attorneys and agents to
execute in his name and on his behalf in any and all capacities the
Registration Statements on Form N-1A, and any and all amendments thereto, filed
by The Premium Portfolios (on behalf of each of its series now or hereinafter
created) (the "Registrant") with the Securities and Exchange Commission under
the Investment Company Act of 1940, as amended, the Registration Statements on
Form N-1A, and any and all amendments thereto, to be executed by the Registrant
and filed by another registrant with the Securities and Exchange Commission
under the Investment Company Act of 1940, as amended, or under the Securities
Act of 1933, as amended, and any and all other instruments which such attorneys
and agents, or any of them, deem necessary or advisable to enable the
Registrant to comply with the Investment Company Act of 1940, as amended, the
rules, regulations and requirements of the Securities and Exchange Commission,
and the securities or Blue Sky laws of any state or other jurisdiction; and the
undersigned hereby ratifies and confirms as his own act and deed any and all
that such attorneys and agents, or any of them, shall do or cause to be done by
virtue hereof. Any one of such attorneys and agents shall have, and may
exercise, all of the powers hereby conferred.