PREMIUM PORTFOLIOS /, POS AMI, 2000-02-28

PREMIUM PORTFOLIOS /
POS AMI, 2000-02-28

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As filed with the Securities and Exchange Commission on February 28, 2000

File No. 811-8436

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

FORM N-1A

REGISTRATION STATEMENT

UNDER

THE INVESTMENT COMPANY ACT OF 1940

AMENDMENT NO. 9*

THE PREMIUM PORTFOLIOS**
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

ELIZABETHAN SQUARE, GEORGE TOWN, GRAND CAYMAN, CAYMAN ISLANDS, BWI
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE:

(345) 945-1824

SUSAN JAKUBOSKI, ELIZABETHAN SQUARE, GEORGE TOWN,
GRAND CAYMAN, CAYMAN ISLANDS, BWI
(NAME AND ADDRESS OF AGENT FOR SERVICE)

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

* This Amendment also serves as Amendment No. 7 to the Registration Statement
on Form N-1A for The Premium Portfolios as it relates to Small Cap Growth
Portfolio, File No. 811-07269.

** Relates only to Large Cap Growth Portfolio, Small Cap Growth Portfolio, High
Yield Portfolio and U.S. Fixed Income Portfolio.

<PAGE>

EXPLANATORY NOTE

The Premium Portfolios has filed this Registration Statement pursuant to
Section 8(b) of the Investment Company Act of 1940. However, beneficial
interests in the Portfolios are not being registered under the Securities Act
of 1933, since such interests will be issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act. Only investment companies, insurance company
separate accounts, common or commingled trust funds or similar organizations or
entities that are "accredited investors" within the meaning of Regulation D
under the 1933 Act may make investments in the Portfolios. This Registration
Statement is not an offer to sell, or the solicitation of an offer to buy, any
beneficial interests in the Portfolios.

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PART A

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

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

PORTFOLIO GOALS

The goal of LARGE CAP GROWTH PORTFOLIO is long-term capital growth. Dividend
income, if any, is incidental to this goal.

The goal of SMALL CAP GROWTH PORTFOLIO is long-term capital growth. Dividend
income, if any, is incidental to this goal.

The primary goal of HIGH YIELD PORTFOLIO is to generate a high level of current
income. As a secondary goal, the Portfolio seeks capital appreciation.

The goals of U.S. FIXED INCOME PORTFOLIO are to generate a high level of
current income and preserve the value of the investment of its holders of
beneficial interests.

The goal of each Portfolio may be changed without approval by that Portfolio's
investors but not without written notice thereof to the Portfolio's investors
at least 30 days prior to implementing the change. Of course, there can be no
assurance that any Portfolio will achieve its goal.

MAIN INVESTMENT STRATEGIES

Each Portfolio's principal investment strategies are described below. The
Portfolios may use other strategies and invest in other securities that are
described in Part B to this Registration Statement. However, a Portfolio may
not use all of the strategies and techniques or invest in all of the types of
securities described in this Part A or in Part B to this Registration
Statement. Each Portfolio's goal and strategies may be changed without investor
approval. Of course, there can be no assurance that any Portfolio will achieve
its goal.

LARGE CAP GROWTH PORTFOLIO invests primarily in equity securities of U.S. large
cap issuers that, at the time the securities are purchased, have market
capitalizations within the top 1,000 stocks of the equity market. Under normal
circumstances, at least 65% of the Portfolio's total assets is invested in
equity securities of large cap issuers. At December 31, 1999, issuers within
the top 1,000 stocks had market capitalizations of at least $1.4 billion. This
number will change with changes in the market.

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Equity securities generally represent an ownership interest (or a right to
acquire an ownership interest) in an issuer, and include common stocks,
securities convertible into common stocks, preferred stocks, warrants for the
purchase of stock and depositary receipts (receipts which represent the right
to receive the securities of foreign issuers deposited in a U.S. bank or a
local branch of a foreign bank). While equity securities historically have been
more volatile than most fixed income securities, they historically have
produced higher levels of total return.

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

The Portfolio's equity securities consist primarily of common stocks. The
Portfolio's other equity securities may include securities convertible into
common stocks, preferred stocks, warrants for the purchase of stock and
depositary receipts.

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

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

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

Derivatives. The Portfolio may use derivatives in order to protect (or "hedge")
against declines in the value of securities held by the Portfolio or increases
in the cost of securities to be purchased in the future. The Portfolio may also
use derivatives for non-hedging purposes, to enhance potential gains. These
derivatives include stock index futures contracts, forward foreign currency
contracts and options on foreign currencies. In some cases, the derivatives
purchased by the Portfolio are standardized contracts traded on commodities
exchanges or boards of trade. This means that the exchange or board of trade
guarantees counterparty performance. In other cases, the Portfolio may bear
more counterparty risk Derivatives may be thinly traded or illiquid.

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Derivatives may not be available on terms that make economic sense (for
example, they may be too costly). The Portfolio's ability to use derivatives
may also be limited by tax considerations.

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

Management Style. Managers of mutual funds use different styles when selecting
securities to purchase. Portfolio managers for the Portfolio use a "bottom-up"
approach when selecting securities for purchase by the Portfolio. This means
that they look primarily for individual companies with consistent earnings
growth, against the context of broader market factors. The portfolio managers
use this same approach when deciding which securities to sell. Securities are
sold when the Portfolio needs cash to meet redemptions, or when the managers
believe that better opportunities exist or that the security no longer fits
within the managers' overall strategies for achieving the Portfolio's goals.
The Portfolio may continue to hold securities of issuers that become mid cap or
small cap issuers, if, in the managers' judgment, these securities remain good
investments for the Portfolio.

The Portfolio is actively managed. Although the portfolio managers attempt to
minimize portfolio turnover, from time to time the Portfolio's annual portfolio
turnover rate may exceed 100%. The sale of securities may produce capital
gains, which, when distributed, are taxable to investors. Active trading may
also increase the amount of commissions or mark-ups the Portfolio pays to
brokers or dealers when it buys and sells securities. For the fiscal years
ended October 31, 1998 and 1999, the Portfolio's turnover rates were 53% and
108%, respectively.

SMALL CAP GROWTH PORTFOLIO invests primarily in equity securities of U.S. small
cap issuers that, at the time the securities are purchased, have market
capitalizations below the top 1,000 stocks of the equity market. Under normal
circumstances, at least 65% of the Portfolio's total assets is invested in
equity securities of small cap issuers. At December 31, 1999, the maximum
capitalization of issuers in this category was below $1.4 billion. This number
will change with changes in the market. The Portfolio's equity securities may
include stocks listed in the Russell 2000 Index, which is an index of small
capitalization stocks.

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

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better by Standard & Poor's, or which Citibank believes to be of comparable
quality. Generally, less than 5% of the Portfolio's assets may be invested in
debt securities rated Baa by Moody's or BBB by Standard & Poor's.

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

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

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

Management Style. Managers of mutual funds use different styles when selecting
securities to purchase. Portfolio managers for Citibank generally use a
"bottom-up" approach when selecting securities for purchase by the Portfolio.
This means that they look primarily at individual companies against the context
of broader market forces. The portfolio managers use this same approach when
deciding which securities to sell. Securities are sold when the Portfolio needs

<PAGE>

cash to meet redemptions, or when the managers believe that better
opportunities exist or that the security no longer fits within the managers'
overall strategies for achieving the Portfolio's goals. However, the Portfolio
may continue to hold securities of issuers that become mid cap or large cap
issuers if, in Citibank's judgment, these securities remain good investments
for the Portfolio.

HIGH YIELD PORTFOLIO invests primarily (at least 65% of its total assets under
normal circumstances) in high yield debt securities of U.S. and non-U.S.
issuers rated in medium or lower rating categories or determined to be of
comparable quality. Medium and low rated and comparable unrated securities
offer yields that fluctuate over time but that generally are superior to the
yields offered by higher rated securities. However, these securities also
involve significantly greater risks, including price volatility and risk of
default in the payment of interest and principal, than higher rated securities.
Certain of the debt securities purchased by High Yield Portfolio may be rated
as low as Caa by Moody's or CCC by Standard & Poor's or may be comparable to
securities with these ratings. The lower rated bonds in which the Portfolio may
invest are commonly referred to as "junk bonds." Under certain circumstances,
the Portfolio may invest all or any portion of its assets in higher rated
securities or in unrated securities determined to be of comparable quality.
Under normal market conditions, the Portfolio's dollar weighted average
portfolio maturity is from seven to ten years.

In light of the risks associated with high yield debt securities, various
factors will be taken into consideration in evaluating the creditworthiness of
an issuer. For corporate debt securities, these factors will typically include
the issuer's financial resources, its sensitivity to economic conditions and
trends, the operating history of the issuer and the experience and track record
of the issuer's management. For sovereign debt instruments, these factors will
typically include the economic and political conditions within the issuer's
country, the issuer's overall and external debt levels and debt service ratios,
the issuer's access to capital markets and other sources of funding and the
issuer's debt service payment history. The ratings, if any, assigned to the
security by any recognized rating agencies will also be reviewed, although
Citibank's or a subadviser's judgment as to the quality of a debt security may
differ from that suggested by the rating published by a rating service.

The debt securities of non-U.S. issuers in High Yield Portfolio may be
denominated in foreign currencies and may include debt obligations issued or

<PAGE>

guaranteed by foreign national, provincial, state, municipal or other
governments with taxing authority or by their agencies or instrumentalities,
including debt obligations of supranational entities; debt obligations and
other fixed income securities of non U.S. corporate issuers (both dollar and
non-dollar denominated); and non-dollar denominated debt obligations of U.S.
corporate issuers.

Securities issued or guaranteed as to principal and interest by foreign
governments or agencies or instrumentalities of foreign governments (which
include securities of supranational agencies) also may provide opportunities
for income with minimal credit risk. As with U.S. government securities,
however, they still fluctuate in value when interest rates change.

The Portfolio's mortgage-backed securities may be issued or guaranteed as to
payment of principal and interest by the U.S. government or one of its
agencies, such as GNMA. These securities may or may not be backed by the full
faith and credit of the U.S. government. Even if the U.S. government or one of
its agencies guarantees principal and interest payments of a mortgage-backed
security, the market price of the security is not insured and may be volatile.

The Portfolio also may invest in asset-backed securities and in mortgage-backed
securities that are not backed by the U.S. government. These securities are
backed by pools of assets such as automobile loans, credit card receivables or
mortgage loans. It may be difficult to enforce rights against the assets
backing these securities.

The Portfolio may invest in zero coupon obligations, such as zero coupon bonds
issued by companies and securities representing future principal and interest
installments on debt obligations of the U.S. and foreign governments. Zero
coupon obligations pay no current interest. The Portfolio may also invest in
payment-in-kind obligations which are similar to zero coupon securities because
the issuer has the option to make payments in additional debt obligations
rather than cash.

The Portfolio may enter into "dollar rolls" where it sells mortgage-backed
securities and simultaneously agrees to repurchase substantially similar
securities on a specified future date. The Portfolio's dollar rolls are
"covered," meaning that the Portfolio establishes a segregated account with
liquid securities equal in value to the securities it will repurchase.

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

<PAGE>

non-hedging purposes, to generate income or enhance potential gains. In
addition, the Portfolio may use derivatives to manage the effective maturity or
duration of fixed income securities. These derivatives include interest rate
and bond futures, foreign currency futures, forwards and exchange contracts,
options on securities and foreign currencies, options on interest rate futures
and swaps. In some cases, the derivatives purchased by the Portfolio are
standardized contracts traded on commodities exchanges or boards of trade. This
means that the exchange or board of trade guarantees counterparty performance.
In other cases, the Portfolio may bear more counterparty risk. Derivatives may
be thinly traded or illiquid. Derivatives may not be available on terms that
make economic sense (they may be too costly). The Portfolio's ability to use
derivatives may also be limited by tax considerations.

Management Style. Managers of mutual funds use different styles when managing
portfolios. Portfolio managers for the Portfolio generally use a "top-down"
approach when establishing duration and sector allocation and a "bottom-up"
approach when selecting securities to purchase or sell for the Portfolio. When
using a "top-down" approach the portfolio manager looks first at broad economic
factors and market conditions. Security selection combines fundamental credit
analysis with relative value decisions. Portfolio managers, working from an
approved list of issuers, compare the yield advantage of an issue to other
issues in its peer group.

The Portfolio is actively managed. Although the portfolio managers attempt to
minimize portfolio turnover, from time to time the Portfolio's annual portfolio
turnover rate may exceed 100%. The sale of securities may produce capital
gains, which, when distributed, are taxable to investors. Active trading may
also increase the amount of commissions or mark-ups the Portfolio pays to
brokers or dealers when it buys and sells securities. For the period from May
3, 1999 (commencement of operations) to October 31, 1999, the Portfolio's
turnover rate was 41%.

Under normal circumstances, U.S. FIXED INCOME PORTFOLIO invests at least 65% of
its total assets in fixed income securities. However, the Portfolio expects
that, in general, substantially all of its assets will be invested in fixed
income securities.

Fixed income securities generally represent a debt obligation of an issuer, and
include bonds, short-term obligations and mortgage-backed and asset-backed
securities and preferred stock. Fixed income securities, in general, offer a
fixed stream of cash flow. Most bond investments focus on generating income.
The potential for capital appreciation is a secondary objective. The value of

<PAGE>

fixed income securities generally goes up when interest rates go down, and down
when rates go up. The value of these securities also fluctuates based on other
market and credit factors.

The Portfolio's fixed income securities include:

o debt securities of U.S. and foreign companies, such as bonds,
short-term notes and mortgage-backed and asset-backed securities
(including collateralized mortgage obligations, or CMOs);

o U.S. government securities, such as U.S. Treasury bills, notes and
bonds, and obligations issued or guaranteed by U.S. government
agencies or instrumentalities;

o debt securities of foreign governments; and

o preferred stock of U.S. and foreign companies.

The Portfolio may invest up to 20% of its assets in foreign securities,
including securities of issuers in emerging markets countries. The Portfolio
generally purchases U.S. dollar denominated foreign securities.

The U.S. government securities in which the Portfolio may invest include U.S.
Treasury bills, notes and bonds, and obligations issued or guaranteed by U.S.
government agencies or instrumentalities. Securities issued by U.S. government
agencies or instrumentalities may or may not be backed by the full faith and
credit of the U.S. government. U.S. government securities have minimal credit
risk, but they still fluctuate in value when interest rates or currency
exchange rates change.

<PAGE>

The Portfolio may invest up to 15% of its assets in zero coupon obligations,
such as zero coupon bonds issued by companies and securities representing
future principal and interest installments on debt obligations of the U.S. and
foreign governments.

The Portfolio's debt securities issued by U.S. companies must be investment
grade when the Portfolio purchases them. Investment grade securities are those
rated Baa or better by Moody's, BBB or better by Standard & Poor's or which
Citibank believes to be of comparable quality. Securities rated Baa or BBB and
securities of comparable quality may have speculative characteristics. Also,
changes in economic or market conditions or the issuers' circumstances are more
likely to adversely affect the issuers' ability to make payments on the
securities than is the case for higher rated securities. If the credit quality
of a security deteriorates after the Portfolio buys it, Citibank will decide
whether the security should be held or sold.

The Portfolio is permitted to invest in bonds with any maturity. However, the
Portfolio's average weighted maturity is normally expected to be from three to
ten years. Citibank determines the average maturity of mortgage-backed and
asset-backed securities based on its expectations of prepayments of these
securities. Actual prepayments will vary depending on changes in interest
rates. The Portfolio's average maturity may deviate from its normal range as a
result of actual or expected prepayments. The Portfolio will not consider such
a deviation a violation of investment policy.

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

Derivatives. The Portfolio may use derivatives in order to protect (or "hedge")
against declines in the value of securities held by the Portfolio or increases
in the cost of securities to be purchased in the future, or to hedge against
changes in interest rates. The Portfolio may also use derivatives for
non-hedging purposes, to generate income or enhance potential gains. In
addition, the Portfolio may use derivatives to manage the effective maturity or
duration of fixed income securities. These derivatives include interest rate
and bond index futures, foreign currency futures, forwards and exchange
contracts, options on securities and foreign currencies, options on interest
rate futures and swaps. In some cases, the derivatives purchased by the
Portfolio are standardized contracts traded on commodities exchanges or boards

<PAGE>

of trade. This means that the exchange or board of trade guarantees
counterparty performance. In other cases, the Portfolio may bear more
counterparty risk. Derivatives may be thinly traded or illiquid. Derivatives
may not be available on terms that make economic sense (they may be too
costly). The Portfolio's ability to use derivatives may also be limited by tax
considerations.

Management Style. Managers of mutual funds use different styles when managing
portfolios. Portfolio managers for Citibank generally use a "top-down" approach
when establishing duration and sector allocation and a "bottom-up" approach
when selecting securities to purchase or sell for the Portfolio. When using a
"top-down" approach the portfolio managers look first at broad economic factors
and market conditions. Security selection combines fundamental credit analysis
with relative value decisions. Portfolio managers, working from an approved
list of issuers, compare the yield advantage of an issue to other issues in its
peer group.

The Portfolio is actively managed. Although the portfolio managers attempt to
minimize portfolio turnover, from time to time the Portfolio's annual portfolio
turnover rate may exceed 100%. The sale of securities may produce capital
gains, which, when distributed, are taxable to investors. Active trading may
also increase the amount of commissions or mark-ups the Portfolio pays to
brokers or dealers when it buys and sells securities. For the period from
November 1, 1998 (commencement of operations) to October 31, 1999, the
Portfolio's turnover rate was 253%.

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

MAIN RISKS

A Portfolio's net asset value will change daily as the value of its underlying
securities change. This means that an interest in a Portfolio may be worth more
or less when it is sold than when it was bought.

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The principal risks of investing in LARGE CAP GROWTH PORTFOLIO and SMALL CAP
GROWTH PORTFOLIO are described below:

o Market Risk. This is the risk that the prices of securities will rise
or fall due to changing economic, political or market conditions, or
due to a company's individual situation. Some securities held by a
Portfolio may be quite volatile, meaning that their prices can change
significantly in a short time.

o Growth Securities. Growth securities typically are quite sensitive to
market movements because their market prices tend to reflect future
expectations. When it appears those expectations will not be met, the
prices of growth securities typically fall. Growth securities may also
be more volatile than other investments because they generally do not
pay dividends. A Portfolio may underperform certain other stock funds
(those emphasizing value stocks, for example) during periods when
growth stocks are out of favor.

o Portfolio Selection. The success of a Portfolio's investment strategy
depends in large part on Citibank's skill in assessing the growth
potential of companies in which the Portfolio invests. The portfolio
managers may fail to pick stocks that outperform the market or that
fail to do as well as the market. In that case, an investor may lose
money, or its investment may not do as well as an investment in
another stock fund using a growth approach.

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

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

o Interest Rate Risk. In general, the prices of debt securities rise
when interest rates fall, and fall when interest rates rise. Longer
term obligations are usually more sensitive to interest rate changes.
A change in interest rates could cause the Portfolio's net asset value
to go down.

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

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

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

o These risks may include expropriation of assets, confiscatory
taxation, withholding taxes on dividends and interest paid on fund
investments, fluctuations in currency exchange rates, currency
exchange controls and other limitations on the use or transfer of
assets by a Portfolio or issuers of securities, and political or
social instability.

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

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comparable U.S. companies, and that may not be sustainable. As a
result, there may be rapid changes in the value of foreign
securities.

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

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

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

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

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

o The markets of developing countries have been more volatile
than the markets of developed countries with more mature
economies.

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

<PAGE>

o Year 2000 Risk. Year 2000 Risk, the risk that computers will fail
or generate faulty information after December 31, 1999, may
continue to cause problems well into the Year 2000. A Portfolio
may be adversely affected by the Year 2000 problems of its service
providers, the markets on which it trades securities, or the
issuers of the securities it holds.

The principal risks of investing in HIGH YIELD PORTFOLIO and U.S. FIXED INCOME
PORTFOLIO are described below:

o Market Risk. This is the risk that the prices of securities will
rise or fall due to changing economic, political or market
conditions, or due to a company's individual situation. Some
securities held by a Portfolio may be quite volatile, meaning that
their prices can change significantly in a short time.

o Interest Rate Risk. In general, the prices of debt securities rise
when interest rates fall, and fall when interest rates rise.
Longer term obligations are usually more sensitive to interest
rate changes. A change in interest rates could cause the
Portfolio's net asset value to go down.

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

High Yield Portfolio invests primarily in debt securities rated in
medium or lower rating categories or determined to be of
comparable quality, including junk bonds. Junk bonds are
considered to be speculative investments and involve greater risks
than higher quality securities. A higher percentage of issuers of
junk bonds may default on payments of principal and interest than
the issuers of higher quality bonds. The value of junk bonds will
usually fall substantially if the issuer defaults or goes
bankrupt. Even anticipation of defaults by certain issuers, or the
perception of economic or financial weakness, may cause the market
for junk bonds to fall. The price of a junk bond may therefore
fluctuate drastically due to bad news about the issuer or the
economy in general. Lower quality debt securities, especially junk

<PAGE>

bonds, may be less liquid and may be more difficult for the
Portfolio to value and sell. The Portfolio may incur additional
expenses if an issuer defaults and the Portfolio tries to recover
some of its losses in a bankruptcy or other similar proceeding.

o Portfolio Selection. The success of a Portfolio's investment
strategy depends in large part on the investment process. The
portfolio managers may fail to pick securities that perform well
because they are unable to predict accurately the direction of
interest rates or to assess fundamental changes affecting the
credit quality of issuers or other factors. In that case, an
investor may lose money, or its investment may not do as well as
an investment in another fixed income portfolio.

o Prepayment and Extension Risk. The issuers of debt securities that
may be held by a Portfolio may be able to call a bond or prepay
principal due on the securities, particularly during periods of
declining interest rates. A Portfolio may not be able to reinvest
that principal at attractive rates, reducing income to the
Portfolio, and the Portfolio may lose any premium paid. The
Portfolio would also lose the benefit of falling interest rates on
the price of the repaid bond. On the other hand, rising interest
rates may cause prepayments to occur at slower than expected
rates. This effectively lengthens the maturities of the affected
securities, making them more sensitive to interest rate changes
and a Portfolio's net asset value more volatile. Securities
subject to prepayment risk generally offer less potential for
gains when interest rates decline, and may offer a greater
potential for loss when interest rates rise. Mortgage-backed
securities, including CMOs, are particularly susceptible to
prepayment risk and their prices may be more volatile than a
security having no prepayment option.

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

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

o These risks may include expropriation of assets, confiscatory
taxation, withholding taxes on dividends and interest paid on
fund investments, fluctuations in currency exchange rates,
currency exchange controls and other limitations on the use or
transfer of assets by a Portfolio or issuers of securities,
and political or social instability.

<PAGE>

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

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

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

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

o U.S. Fixed Income Portfolio may invest in issuers located in
emerging, or developing, markets.

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

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

o The markets of developing countries have been more
volatile than the markets of developed countries with more
mature economies.

o Derivatives. The Portfolios' use of derivatives (including, as
applicable, futures contracts, options and forward foreign
currency contracts), particularly when used for non-hedging
purposes, may be risky. This practice could result in losses

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that are not offset by gains on other portfolio assets. Losses
would cause a Portfolio's net asset value to go down. There is
also the risk that the counterparty may fail to honor its
contract terms. This risk becomes more acute when a Portfolio
invests in derivatives that are not traded on commodities
exchanges or boards of trade. A Portfolio's ability to use
derivatives successfully depends on Citibank's or a
subadviser's ability to accurately predict movements in stock
prices and currency exchange rates. If a Portfolio's portfolio
manager's predictions are wrong, the Portfolio could suffer
greater losses than if the Portfolio had not used derivatives.

o Zero Coupon and Payment-In-Kind Obligations. The Portfolios
may invest in zero coupon obligations, and High Yield
Portfolio also may invest in payment-in-kind obligations. Zero
coupon obligations pay no current interest. Although
payment-in-kind obligations may pay interest in cash, they are
similar to zero coupon obligations because the issuer has the
option to make interest payments in additional debt
obligations rather than cash. As a result, the prices of zero
coupon and payment-in-kind obligations tend to be more
volatile than those of securities that offer regular payments
of interest. This makes the Portfolio's net asset value more
volatile. In order to pay cash distributions representing
income on zero coupon and payment-in-kind obligations, the
Portfolio may have to sell other securities on unfavorable
terms. These sales may generate taxable gains for Portfolio
investors.

o Year 2000 Risk. Year 2000 Risk, the risk that computers will
fail or generate faulty information after December 31, 1999,
may continue to cause problems well into the Year 2000. A
Portfolio may be adversely affected by the Year 2000 problems
of its service providers, the markets on which it trades
securities, or the issuers of the securities it holds.

PLEASE NOTE THAT AN INVESTMENT IN THE PORTFOLIOS IS NOT A DEPOSIT OF CITIBANK
AND IS NOT INSURED OR GUARANTEED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION
OR ANY OTHER GOVERNMENT AGENCY.

Item 6. Management, Organization and Capital Structure.

INVESTMENT MANAGERS

Each Portfolio draws on the strength and experience of Citibank. Citibank is
the investment manager of each Portfolio, and subject to policies set by the
Portfolio's Trustees, Citibank makes investment decisions. Citibank has been
managing money since 1822. With its affiliates, it currently manages more than
$351 billion in assets worldwide. Citibank, with headquarters at 153 East 53rd
Street, New York, New York, is a wholly-owned subsidiary of Citigroup Inc.

<PAGE>

Citibank and its affiliates, including their directors, officers or employees,
may have banking and investment banking relationships with the issuers of
securities that are held in the Portfolios. They may also own the securities of
these issuers. However, in making investment decisions for each Portfolio,
Citibank does not obtain or use material inside information acquired by any
division, department or affiliate of Citibank in the course of those
relationships. Citibank and its affiliates may have loans outstanding that are
repaid with proceeds of securities purchased by a Portfolio.

Citibank is responsible for recommending the hiring, termination or replacement
of any subadviser and for supervising and monitoring the subadviser's
performance.

LARGE CAP GROWTH PORTFOLIO: Richard Goldman, Vice President, has been the
portfolio manager of Large Cap Growth Portfolio since January 1996. Mr. Goldman
is a Senior Investment Officer and lead portfolio manager for the Focused
Growth Large Cap Funds and has been a member of the Large Cap Growth Team since
June 1994. He currently manages, or co-manages, approximately $4 billion of
total assets at Citibank.

SMALL CAP GROWTH PORTFOLIO: Marguerite Wagner and Stephen Rich are co-portfolio
managers of Small Cap Growth Portfolio. From January 1999 to March 2000, Ms.
Wagner was the lead portfolio manager. Ms. Wagner joined Citibank in 1985.
Since 1995, she has had portfolio management and research analyst
responsibility for an internal mid-cap common trust fund and private equity
managed accounts. Mr. Rich joined Citibank in 1999 and began co-managing the
Portfolio with Ms. Wagner in March 2000. Mr. Rich spent the previous eight
years at J.P. Morgan Investment Management in various investment capacities.
From 1997 to 1999 he was a co-portfolio manager for multiple styles of small
capitalization institutional products and mutual funds. Before that, he worked
in J.P. Morgan's Balanced & Structured Equity Group.

HIGH YIELD PORTFOLIO: Salomon Brothers Asset Management Inc (SBAMInc), 7 World
Trade Center, New York, New York, 10048, an affiliate of Citibank, has been a
registered investment adviser since 1989. SBAMInc has managed High Yield
Portfolio since its inception. SBAMInc is an indirect wholly owned subsidiary
of Citigroup Inc. Beth A. Semmel, a Managing Director of SBAMInc since 1996 and
a member of its Investment Policy Committee, is responsible for the daily
management of the Portfolio. Ms. Semmel is a portfolio manger and senior
analyst responsible for SBAMInc's high yield portfolios, for evaluating high
yield securities and for covering consumer-related industries. Ms. Semmel
joined SBAMInc in May 1993 as a Vice President and Analyst.

U.S. FIXED INCOME PORTFOLIO: Mark Lindbloom, Vice President, has been
responsible for the daily management of U.S. Fixed Income Portfolio's
securities since its inception, and has been a portfolio manager for fixed
income securities since joining Citibank in 1986. Mr. Lindbloom has more than

<PAGE>

20 years of investment management experience. Prior to joining Citibank, Mr.
Lindbloom was a Fixed Income Portfolio Manager with Brown Brothers Harriman &
Co., where he managed fixed income assets for discretionary corporate
portfolios.

MANAGEMENT FEES

For the management services Citibank provided to LARGE CAP GROWTH PORTFOLIO
during the fiscal year ended October 31, 1999, Citibank received a total of
0.60% of the Portfolio's average daily net assets, after waivers.

For the management services Citibank provided to SMALL CAP GROWTH PORTFOLIO
during the fiscal year ended October 31, 1999, Citibank received a total of
0.75% of the Portfolio's average daily net assets, after waivers.

For the management services Citibank and the subadviser provided to HIGH YIELD
PORTFOLIO during the period from May 3, 1999 (commencement of operations) to
October 31, 1999, Citibank received a total of 0.56% of the Portfolio's average
daily net assets, after waivers.

For the management services Citibank provided to U.S. FIXED INCOME PORTFOLIO
during the fiscal year ended October 31, 1999, Citibank received a total of
0.35% of the Portfolio's average daily net assets, after waivers.

CAPITAL STOCK

Investments in the Portfolios have no preference, pre-emptive or conversion
rights and are fully paid and non-assessable, except as set forth below. The
Portfolios are not required and have no current intention to hold annual
meetings of investors, but the Portfolios hold special meetings of investors
when in the judgment of the Trustees it is necessary or desirable to submit
matters for an investor vote. Investors have under certain circumstances (e.g.,
upon application and submission of certain specified documents to the Trustees
by a specified number of investors) the right to communicate with other
investors in connection with requesting a meeting of investors for the purpose
of removing one or more Trustees. Investors also have the right to remove one
or more Trustees without a meeting by a declaration in writing by a specified
number of investors. Upon liquidation or dissolution of a Portfolio, investors
in that Portfolio would be entitled to share pro rata in the net assets of the
Portfolio available for distribution to investors.

The Portfolios are series of The Premium Portfolios (known as the "Trust"),
which is organized as a trust under the laws of the State of New York. Under
the Declaration of Trust, the Trustees are authorized to issue beneficial
interests in each Portfolio. Each investor is entitled to a vote in proportion
to the value of its investment in a Portfolio. Investments in a Portfolio may
not be transferred, but an investor may withdraw all or any portion of its
investment at any time at net asset value.

<PAGE>

Item 7. Investor Information.

HOW NET INCOME IS CALCULATED

Each Portfolio calculates its net asset value (NAV) every day the New York
Stock Exchange is open for trading (Business Day). This calculation is made at
the close of regular trading on the New York Stock Exchange, normally 4:00 p.m.
Eastern time. On days when the financial markets in which the Portfolio invests
close early, NAV may be calculated as of the earlier close of those markets.

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

It is intended that a Portfolio's assets, income and distributions will be
managed in such a way that an investor in the Portfolio will be able to satisfy
the requirements of Subchapter M of the Internal Revenue Code of 1986, as
amended, assuming that the investor invested all of its investable assets in
the Portfolio.

THE PURCHASE AND REDEMPTION OF BENEFICIAL INTERESTS IN THE PORTFOLIOS

Beneficial interests in the Portfolios are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the Securities Act of 1933. Only investment companies,
insurance company separate accounts, common or commingled trust funds or
similar organizations or entities that are "accredited investors" within the
meaning of Regulation D under the 1933 Act may invest in the Portfolios. This
Registration Statement is not an offer to sell, or the solicitation of an offer
to buy, any "security" within the meaning of the 1933 Act.

An investment in each Portfolio is made without a sales load. All investments
are made at net asset value next determined after an order is received by a
Portfolio. There is no minimum initial or subsequent investment in a Portfolio.
However, since each Portfolio intends to be as fully invested at all times as
is reasonably practicable in order to enhance the yield on its assets,
investments must be made in federal funds (i.e., moneys credited to the account
of a Portfolio's custodian bank by a U.S. Federal Reserve Bank).

<PAGE>

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

An investor in a Portfolio may withdraw all or any portion of its investment at
any time after a withdrawal request in proper form is received by the Portfolio
from the investor. The proceeds of a withdrawal will be paid by the Portfolio
in federal funds normally on the Business Day the withdrawal is effected, but
in any event within seven days. Investments in a Portfolio may not be
transferred.

Subject to compliance with applicable regulations, the Portfolio may pay the
redemption price of beneficial interests in a Portfolio, 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 beneficial
interests being redeemed. If a holder of beneficial interests received a
distribution in kind, such holder could incur brokerage or other charges in
converting the securities to cash.

The right of any investor to receive payment with respect to any withdrawal may
be suspended or the payment of the withdrawal proceeds 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, to the extent otherwise
permitted by the 1940 Act, if an emergency exists.

TAX MATTERS

Each Portfolio expects to be treated as a partnership for U.S. federal income
tax purposes. As a result, the Portfolios do not expect to pay any federal
income taxes and, generally, investors in a Portfolio should not have to pay
federal income taxes when they receive distributions or make withdrawals from a
Portfolio. However, each investor in a Portfolio must take into account its
share of that Portfolio's ordinary income, expense, capital gains and losses,
credits and other items whether or not distributed in determining its income
tax liability.

The Trust also expects that investors in a Portfolio which seek to qualify as
regulated investment companies under the Internal Revenue Code will be able to
look to their proportionate share of the assets and gross income of the
Portfolio for purposes of determining their compliance with the requirements
applicable to such companies.

<PAGE>

There can be no assurance that the U.S. Internal Revenue Service may not
challenge the above conclusions or take other positions that, if successful,
might result in the payment of U.S. federal income taxes by investors in a
Portfolio.

The foregoing tax discussion is only for an investor's general information, and
does not take account of the special rules applicable to certain investors
(such as tax-exempt investors) or a number of special circumstances. Each
investor should consult its own tax advisers regarding the tax consequences in
its circumstances of an investment in a Portfolio, as well as any state, local
or foreign tax consequences to them of investing in a portfolio.

Item 8. Distribution Arrangements.

The exclusive placement agent for each Portfolio is CFBDS, Inc. CFBDS receives
no compensation for serving as the Portfolios' exclusive placement agent.

<PAGE>

PART B

Item 10. Cover Page and Table of Contents.

This Part B sets forth information with respect to Large Cap Growth
Portfolio, Small Cap Growth Portfolio, High Yield Portfolio and U.S. Fixed
Income Portfolio, each a series of The Premium Portfolios, an investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). The date of this Part B and Part A to the Registration Statement
for each Portfolio is February 28, 2000.

TABLE OF CONTENTS Page

Portfolio History.......................................................B-2
Description of each Portfolio and Its Investments and Risks.............B-2
Management of each Portfolio............................................B-31
Control Persons and Principal Holders
of Securities.........................................................B-34
Investment Advisory and Other Services..................................B-36
Brokerage Allocation and Other Practices................................B-40
Capital Stock and Other Securities......................................B-41
Purchase, Redemption and Pricing of
Securities............................................................B-43
Taxation of each Portfolio..............................................B-45
Underwriters............................................................B-48
Calculations of Performance Data........................................B-48
Financial Statements....................................................B-48

<PAGE>

Item 11. Portfolio History.

The Premium Portfolios (the "Trust") was organized as a trust under the
laws of the State of New York on September 13, 1993. Large Cap Growth Portfolio
was designated as a series of the Trust on September 13, 1993. Prior to
November 1, 1997 Large Cap Growth Portfolio was known as Equity Portfolio.
Small Cap Growth Portfolio was designated as a series of the Trust on August
19, 1994. Prior to November 1, 1997 Small Cap Growth Portfolio was known as
Small Cap Equity Portfolio. High Yield Portfolio and U.S. Fixed Income
Portfolio were designated as series of the Trust on August 7, 1998.

Item 12. Description of each Portfolio and Its Investments and Risks.

The investment objective of LARGE CAP GROWTH PORTFOLIO is long-term
capital growth. Dividend income, if any, is incidental to this investment
objective.

The investment objective of SMALL CAP GROWTH PORTFOLIO is long-term
capital growth. Dividend income, if any, is incidental to this investment
objective.

The primary investment objective of HIGH YIELD PORTFOLIO is to generate a
high level of current income. As a secondary objective, the Portfolio seeks
capital appreciation.

The investment objectives of U.S. FIXED INCOME PORTFOLIO are to generate a
high level of current income and preserve the value of the investment of its
holders of beneficial interests.

While it is the policy of each of Large Cap Growth Portfolio and Small Cap
Growth Portfolio to invest its assets in a broadly diversified portfolio of
equity securities consisting mainly of common stocks of U.S. issuers, each such
Portfolio may also invest in other types of securities such as fixed income
securities and convertible and non-convertible bonds.

The policies described above and those described below are not fundamental
and may be changed without investor approval.

Each Portfolio may, but need not, invest in all of the investments and
utilize all of the investment techniques described below and in Part A to this
Registration Statement. The selection of investments and the utilization of
investment techniques depend on, among other things, the investment strategies
of Citibank, N.A., each Portfolio's investment manager ("Citibank" or the
"Manager") or, in the case of High Yield Portfolio, Salomon Brothers Asset
Management Inc, the subadviser for that Portfolio ("SBAMInc" or the
"Subadviser"), conditions and trends in the economy and financial markets, and
investments being available on terms that, in Citibank's or the Subadviser's
opinion, make economic sense.

<PAGE>

OPTIONS
High Yield Portfolio may write covered call and put options and purchase
call and put options on securities. Call and put options written by the
Portfolio may be covered in the manner set forth below.

A call option is "covered" if the Portfolio owns the security underlying
the call or has an absolute and immediate right to acquire that security
without additional cash consideration (or for additional cash consideration
held in a segregated account) upon conversion or exchange of other securities
held in its portfolio. A call option is also covered if the Portfolio 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 Portfolio in cash or
liquid securities in a segregated account. A put option is "covered" if the
Portfolio maintains cash or liquid securities with a value equal to the
exercise price in a segregated account, 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 Portfolio in
cash or liquid securities in a segregated account. Put and call options written
by the Portfolio may also be covered in such other manner as may be in
accordance with the requirements of the exchange on which, or the counterparty
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.

High Yield Portfolio 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 Portfolio 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 Portfolio
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.

High Yield Portfolio may purchase call options to hedge against an
increase in the price of securities that the Portfolio anticipates purchasing
in the future. If such increase occurs, the call option will permit the
Portfolio 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 Portfolio upon exercise
of the option, and, unless the price of the underlying security rises
sufficiently, the option may expire worthless to the Portfolio.

High Yield Portfolio will receive a premium from writing a put or call
option, which increases the Portfolio's gross income in the event the option

<PAGE>

expires unexercised or is closed out at a profit. If the value of an index on
which the Portfolio has written a call option falls or remains the same, the
Portfolio 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
Portfolio will realize a loss in its call option position, which will reduce
the benefit of any unrealized appreciation in the Portfolio's stock
investments. By writing a put option, the Portfolio assumes the risk of a
decline in the index. To the extent that the price changes of securities owned
by the Portfolio correlate with changes in the value of the index, writing
covered put options on indices will increase the Portfolio'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.

High Yield Portfolio may purchase and write options on foreign currencies
in a manner similar to that in which futures contracts on foreign currencies,
or forward contracts, will be utilized.

FUTURES CONTRACTS
Large Cap Growth Portfolio and Small Cap Growth Portfolio may enter into
stock index futures contracts. High Yield Portfolio and U.S. Fixed Income
Portfolio may enter into interest rate futures contracts, and High Yield
Portfolio may enter into foreign currency futures contracts. These investment
strategies may be used for hedging and non-hedging purposes.

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
called for by the contract, on a specified date. Futures contracts in the
United States 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. Futures contracts may also be traded on markets outside the
U.S.

Futures contracts provide for the delivery and acceptance of securities,
although such deliveries and acceptances are very seldom made. Generally, a
futures contract is terminated by entering into an offsetting transaction.
Brokerage fees will be incurred when the Portfolio purchases or sells a futures
contract. At the same time such a purchase or sale is made, the Portfolio must

<PAGE>

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 Portfolio 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. Interest rate futures, which are typically
based on shorter-term interest rates, such as overnight to six-month time
periods, settle in cash only rather than by delivery of the underlying
instrument.

Large Cap Growth Portfolio and Small Cap Growth Portfolio may buy and sell
stock index futures contracts to gain stock market exposure while holding cash
available for investments and redemptions and may sell such contracts to
protect against a decline in the stock market.

High Yield Portfolio and U.S. Fixed Income Portfolio may purchase or sell
interest rate futures contracts or bond futures contracts to attempt to protect
the Portfolio from fluctuations in interest rates, to manage the effective
maturity or duration of the Portfolio's investment portfolio in an effort to
reduce potential losses, or in an effort to enhance potential gain, without
actually buying or selling debt securities. For example, if the Portfolio owned
long-term bonds and interest rates were expected to increase, the Portfolio
might enter into interest rate futures contracts for the sale of debt
securities. Such a sale would have much the same effect as if the Portfolio
sold bonds that it owned, or as if the Portfolio sold longer-term bonds and
purchased shorter-term bonds. If interest rates did increase, the value of the
Portfolio's debt securities would decline, but the value of the futures
contracts would increase, thereby keeping the net asset value of the Portfolio
from declining as much as it otherwise would have. Similar results could be
accomplished by selling bonds, or by selling bonds with longer maturities and
investing in bonds with shorter maturities. However, by using futures
contracts, the Portfolio avoids having to sell its securities.

Bond futures may be used for non-hedging purposes. For example, even if a
Portfolio were not trying to protect the value of any bonds held by it, if the
Manager or the Subadviser anticipates that interest rates are about to rise,
depressing future prices of bonds, the Manager or Subadviser may sell bond
futures short, closing out the position later at a lower price, if the future
prices had fallen, as expected. If the prices had not fallen, the Portfolio
would experience a loss and such loss may be unlimited.

Similarly, when it is expected that interest rates may decline, High Yield
Portfolio or U.S. Fixed Income Portfolio might enter into futures contracts for
the purchase of debt securities. Such a purchase would be intended to have much

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the same effect as if the Portfolio purchased bonds, or as if the Portfolio
sold shorter-term bonds and purchased longer-term bonds. If interest rates did
decline, the value of the futures contracts would increase.

High Yield Portfolio may purchase and sell foreign currency futures
contracts to attempt to protect its current or intended foreign investments
from fluctuations in currency exchange rates. Such fluctuations could reduce
the dollar value of portfolio securities denominated in foreign currencies, or
increase the cost of foreign-denominated securities to be acquired, even if the
value of such securities in the currencies in which they are denominated
remains constant. The Portfolio may sell futures contracts on a foreign
currency, for example, where it holds securities denominated in such currency
and it anticipates a decline in the value of such currency relative to the
dollar. In the event such decline occurs, the resulting adverse effect on the
value of foreign-denominated securities may be offset, in whole or in part, by
gains on the futures contracts.

Conversely, the Portfolio could protect against a rise in the dollar cost
of foreign-denominated securities to be acquired by purchasing futures
contracts on the relevant currency, which could offset, in whole or in part,
the increased cost of such securities resulting from a rise in the dollar value
of the underlying currencies. Where the Portfolio purchases futures contracts
under such circumstances, however, and the prices of securities to be acquired
instead decline, the Portfolio will sustain losses on its futures position
which could reduce or eliminate the benefits of the reduced cost of portfolio
securities to be acquired.

Although the use of futures for hedging, if correctly used, may minimize
the risk of loss due to a decline in the value of the hedged position (e.g., if
a Portfolio sells a futures contract to protect against losses in the debt
securities held by the Portfolio), they do not eliminate the risk of loss and
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 a
Portfolio'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 Portfolio'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 Portfolio's hedging strategy might not be successful and the
Portfolio could sustain losses on these hedging transactions which would not be
offset by gains on the Portfolio's other investments or, alternatively, the
gains on the hedging transaction might not be sufficient to offset losses on
the Portfolio'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 Portfolio's

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overall return could be less than if the hedging transactions had not been
undertaken. Similarly, even where a Portfolio 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 Portfolio would
otherwise buy or 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, 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
contracts was originally entered into. While a Portfolio 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 Portfolio, which could require the
Portfolio 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 Citibank's
or the Subadviser's investment judgment about the general direction of interest
rates, equity markets, or other economic factors is incorrect, the Portfolio's
overall performance may be poorer than if any such contract had not been
entered into. For example, if U.S. Fixed Income Portfolio hedged against the
possibility of an increase in interest rates which would adversely affect the
price of the Portfolio's bonds and interest rates decreased instead, part or
all of the benefit of the increased value of the Portfolio's bonds which were
hedged would be lost because the Portfolio would have offsetting losses in its
futures positions. Similarly, if U.S. Fixed Income Portfolio purchased futures
contracts expecting a decrease in interest rates and interest rates instead

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increased, the Portfolio would have losses in its futures positions which would
increase the amount of the losses on the securities in its portfolio which
would also decline in value because of the increase in interest rates. In
addition, in such situations, if the Portfolio had insufficient cash, the
Portfolio might have to sell bonds from its investments to meet daily variation
margin requirements, possibly at a time when it might be disadvantageous to do
so.

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. Citibank does
not believe that these trading and position limits would have an adverse impact
on a Portfolio's hedging strategies.

CFTC regulations require compliance with certain limitations in order to
assure that a Portfolio is not deemed to be a "commodity pool" under such
regulations. In particular, CFTC regulations prohibit a Portfolio 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 that Portfolio's non-hedging futures positions
would exceed 5% of that Portfolio's net assets.

Each Portfolio will comply with this CFTC requirement, and each Portfolio
currently intends to adhere to the additional policies described below. First,
an amount of cash or liquid securities will be maintained by each Portfolio in
a segregated account so that the amount so segregated, plus the applicable
margin held on deposit, will be approximately equal to the amount necessary to
satisfy the Portfolio's obligations under the futures contract. The second is
that the Portfolio will not enter into a futures contract if immediately
thereafter the amount of initial margin deposits on all the futures contracts
held by the Portfolio would exceed approximately 5% of the net assets of the
Portfolio. The third is that the aggregate market value of the futures
contracts held by a Portfolio not exceed approximately 50% of the market value
of the Portfolio'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 potentially exposes a Portfolio to the
effects of "leveraging," which occurs when futures are used so that the
Portfolio's exposure to the market is greater than it would have been if the
Portfolio had invested directly in the underlying securities. "Leveraging"
increases a Portfolio's potential for both gain and loss. As noted above, each
of the Portfolios 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 Portfolio.

The use of futures contracts may increase the amount of taxable income of
a Portfolio and may affect the amount, timing and character of a Portfolio's

<PAGE>

income for tax purposes, as more fully discussed herein in the section entitled
"Taxation of each Portfolio."

OPTIONS ON FUTURES CONTRACTS
High Yield Portfolio may purchase and write options to buy or sell futures
contracts in which the Portfolio may invest. These investment strategies may be
used for hedging and non-hedging purposes.

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
Portfolio 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 Portfolio 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
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 Portfolio in cash or liquid securities in a
segregated account. The Portfolio may cover the writing of put options on
futures contracts (a) through sales of the underlying futures contract, (b)
through segregation of cash or liquid securities in an amount equal to the
value of the security or index underlying the futures contract, (c) through the

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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 Portfolio in cash or liquid securities in a
segregated account. 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
Portfolio, the Portfolio will be required to sell the underlying futures
contract which, if the Portfolio 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 Portfolio is
exercised, the Portfolio will be required to purchase the underlying futures
contract which, if the Portfolio 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 Portfolio 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 Portfolio will retain the full amount
of this option premium, which provides a partial hedge against any decline that
may have occurred in the Portfolio'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 Portfolio writes an option on a futures contract and that
option is exercised, the Portfolio may incur a loss, which loss will be reduced
by the amount of the option premium received, less related transaction costs.
The Portfolio'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 Portfolio and changes in
the value of its futures positions. This correlation cannot be expected to be
exact, and the Portfolio 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 Portfolio to incur a
loss on both the hedging instrument and the futures contract being hedged.

High Yield Portfolio 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 Portfolio 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 Portfolio will
increase prior to acquisition, due to a market advance or changes in interest
or exchange rates, the Portfolio could purchase call options on futures
contracts, rather than purchasing the underlying futures contracts.

<PAGE>

REPURCHASE AGREEMENTS
Each Portfolio may invest in repurchase agreements collateralized by
securities in which that Portfolio may otherwise invest. Repurchase agreements
are agreements by which a Portfolio 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 (frequently overnight and usually not more than seven days) 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. A Portfolio'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 a Portfolio 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 a Portfolio are fully
collateralized, with such collateral being marked to market daily. In the event
of the bankruptcy of the other party to a repurchase agreement, a Portfolio
could experience delays in recovering either the securities or cash. To the
extent that, in the meantime, the value of the securities purchased has
decreased, the Portfolio could experience a loss.

REVERSE REPURCHASE AGREEMENTS
Each Portfolio may enter into reverse repurchase agreements. Reverse
repurchase agreements involve the sale of securities held by the Portfolio and
the agreement by the Portfolio to repurchase the securities at an agreed-upon
price, date and interest payment. When a Portfolio enters into reverse
repurchase transactions, securities of a dollar amount equal in value to the
securities subject to the agreement will be segregated. The segregation of
assets could impair the Portfolio's ability to meet its current obligations or
impede investment management if a large portion of the Portfolio's assets are
involved. Reverse repurchase agreements are considered to be a form of
borrowing by the Portfolio. In the event of the bankruptcy of the other party
to a reverse repurchase agreement, a Portfolio could experience delays in
recovering the securities sold. To the extent that, in the meantime, the value
of the securities sold has changed, the Portfolio could experience a loss.

SECURITIES OF NON-U.S. ISSUERS
Each of the Portfolios may invest in securities of non-U.S. issuers.
Investing in securities issued by foreign governments or by companies whose
principal business activities are outside the United States may involve
significant risks not present in U.S. 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

<PAGE>

non-U.S. 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 U.S. 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 a
Portfolio, 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. securities 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 emerging
markets countries) may be less liquid and more volatile than securities of
comparable U.S. companies. Non-U.S. securities trading practices, including
those involving securities settlement where a Portfolio's assets may be
released prior to receipt of payments, may expose the Portfolios to increased
risk in the event of a failed trade or the insolvency of a non-U.S.
broker-dealer. In addition, non-U.S. 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 securities of non-U.S. issuers provide an alternative method for
the Portfolios 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 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

<PAGE>

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 Portfolios 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 a Portfolio
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 a Portfolio's investments in these countries and the availability to
the Portfolio 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 Portfolio's investment in such countries illiquid
and more volatile than investments in more developed countries, and the
Portfolio 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.

The Trust's policy is not to invest more than 50% of U.S. Fixed Income
Portfolio's assets in the securities of foreign issuers. It is the intention of
the Trust to limit U.S. Fixed Income Portfolio's investments in non-U.S.
obligations to securities rated A or better and securities which, in the
opinion of the Manager, are of comparable quality to such rated securities.

EURO CONVERSION
Each of the Portfolios may invest in securities of issuers in European
countries. Certain European countries have joined the European Economic and
Monetary Union (EMU). Each EMU participant's currency began a conversion into a
single European currency, called the euro, on January 1, 1999, to be completed
by July 1, 2002. The consequences of the euro conversion for foreign exchange

<PAGE>

rates, interest rates and the value of European securities held by a Portfolio
are presently unclear. European financial markets, and therefore, a Portfolio,
could be adversely affected if the euro conversion does not continue as planned
or if a participating country chooses to withdraw from the EMU. A Portfolio
could also be adversely affected if the computing, accounting and trading
systems used by its service providers are not capable of processing
transactions related to the euro. These issues may negatively affect the
operations of the companies in which a Portfolio invests as well.

FOREIGN CURRENCY EXcHANGE TRANSACTIONS
Because each of the Portfolios may buy and sell securities denominated in
currencies other than the U.S. dollar, and receive interest, dividends and sale
proceeds in currencies other than the U.S. dollar, the Portfolios may enter
into currency exchange transactions to convert U.S. currency to non-U.S.
currency and non-U.S. currency to U.S. currency, as well as convert one
non-U.S. currency to another non-U.S. currency. A Portfolio either enters into
these transactions on a spot (i.e., cash) basis at the spot rate prevailing in
the currency exchange markets, or uses forward contracts to purchase or sell
non-U.S. currencies. The Portfolios may also enter into currency hedging
transactions in an attempt to protect the value of their assets as measured in
U.S. dollars from unfavorable changes in currency exchange rates and control
regulations. (Although each Portfolio's assets are valued daily in terms of
U.S. dollars, the Trust does not intend to convert a Portfolio's holdings of
non-U.S. currencies into U.S. dollars on a daily basis.)

The Portfolios may convert currency on a spot basis from time to time, and
investors should be aware of the costs of currency conversion. Although
currency exchange dealers do not charge a fee for conversion, they do realize a
profit based on the difference (the "spread") between the prices at which they
are buying and selling various currencies. Thus, a dealer may offer to sell a
currency at one rate, while offering a lesser rate of exchange should a
Portfolio desire to resell that currency to the dealer.

A forward contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract, agreed upon by the parties, at a price set at the time of the
contract. These contracts are traded in the interbank market conducted directly
between currency traders (usually large commercial banks) and their customers.
A forward contract generally has no deposit requirement, and no fees or
commissions are charged at any stage for trades. A Portfolio may enter into
forward contracts for hedging and non-hedging purposes, including transactions
entered into for the purposes of profiting from anticipated changes in foreign
currency exchange rates.

Forward contracts are traded over-the-counter and not on organized
commodities or securities exchanges. As a result, such contracts operate in a
manner distinct from exchange-traded instruments, and their use involves
certain risks beyond those associated with transactions in the futures and
options contracts described herein.

<PAGE>

When a Portfolio enters into a contract for the purchase or sale of a
security denominated in a non-U.S. currency, it may desire to "lock in" the
U.S. dollar price of the security. By entering into a forward contract for the
purchase or sale, for a fixed amount of U.S. dollars, of the amount of non-U.S.
currency involved in the underlying security transaction, the Portfolio may be
able to protect against a possible loss resulting from an adverse change in the
relationship between the U.S. dollar and the non-U.S. currency during the
period between the date the security is purchased or sold and the date on which
payment is made or received.

When Citibank or the Subadviser believes that the currency of a particular
country may suffer a substantial decline against the U.S. dollar, a Portfolio
may enter into a forward contract to sell, for a fixed amount of U.S. dollars,
the amount of non-U.S. currency approximating the value of some or all of the
Portfolio's securities denominated in such non-U.S. currency. The precise
matching of the forward contract amounts and the value of the securities
involved is not generally possible since the future value of such securities in
non-U.S. currencies changes as a consequence of market movements in the value
of those securities between the date the forward contract is entered into and
the date it matures. The projection of a short-term hedging strategy is highly
uncertain. The Portfolios generally do not enter into such forward contracts or
maintain a net exposure to such contracts where the consummation of the
contracts obligates a Portfolio to deliver an amount of non-U.S. currency in
excess of the value of the Portfolio's securities or other assets denominated
in that currency. Under normal circumstances, consideration of the prospect for
currency parities will be incorporated in the investment decisions made with
regard to overall diversification strategies. However, Citibank believes that
it is important to have the flexibility to enter into such forward contracts
when it determines that the best interests of a Portfolio will be served.

The Portfolios generally would not enter into a forward contract with a
term greater than one year. At the maturity of a forward contract, a Portfolio
will either sell the security and make delivery of the non-U.S. currency, or
retain the security and terminate its contractual obligation to deliver the
non-U.S. currency by purchasing an "offsetting" contract with the same currency
trader obligating it to purchase, on the same maturity date, the same amount of
the non-U.S. currency. If a Portfolio retains the security and engages in an
offsetting transaction, the Portfolio will incur a gain or a loss (as described
below) to the extent that there has been movement in forward contract prices.
If a Portfolio engages in an offsetting transaction, it may subsequently enter
into a new forward contract to sell the non-U.S. currency. Should forward
prices decline during the period between the date a Portfolio enters into a
forward contract for the sale of the non-U.S. currency and the date it enters
into an offsetting contract for the purchase of such currency, the Portfolio
will realize a gain to the extent the selling price of the currency exceeds the
purchase price of the currency. Should forward prices increase, the Portfolio
will suffer a loss to the extent that the purchase price of the currency
exceeds the selling price of the currency.

<PAGE>

It is impossible to forecast with precision the market value of a
Portfolio's securities at the expiration of a forward contract. Accordingly, it
may be necessary for a Portfolio to purchase additional non-U.S. currency on
the spot market if the market value of the security is less than the amount of
non-U.S. currency the Portfolio is obligated to deliver and if a decision is
made to sell the security and make delivery of such currency. Conversely, it
may be necessary to sell on the spot market some of the non-U.S. currency
received upon the sale of the security if its market value exceeds the amount
of such currency the Portfolio is obligated to deliver.

Each of the Portfolios may also purchase put options on a non-U.S.
currency in order to protect against currency rate fluctuations. If a Portfolio
purchases a put option on a non-U.S. currency and the value of the non-U.S.
currency declines, the Portfolio will have the right to sell the non-U.S.
currency for a fixed amount in U.S. dollars and will thereby offset, in whole
or in part, the adverse effect on the Portfolio which otherwise would have
resulted. Conversely, where a rise in the U.S. dollar value of another currency
is projected, and where a Portfolio anticipates investing in securities traded
in such currency, the Portfolio may purchase call options on the non-U.S.
currency.

The purchase of such options could offset, at least partially, the effects
of adverse movements in exchange rates. However, the benefit to each Portfolio
from purchases of non-U.S. currency options will be reduced by the amount of
the premium and related transaction costs. In addition, where currency exchange
rates do not move in the direction or to the extent anticipated, a Portfolio
could sustain losses on transactions in non-U.S. currency options which would
require it to forgo a portion or all of the benefits of advantageous changes in
such rates.

The Portfolios may write options on non-U.S. currencies for hedging
purposes or otherwise to achieve their investment objectives. For example,
where a Portfolio anticipates a decline in the value of the U.S. dollar value
of a non-U.S. security due to adverse fluctuations in exchange rates it could,
instead of purchasing a put option, write a call option on the relevant
currency. If the expected decline occurs, the option will most likely not be
exercised, and the diminution in value of the security held by the Portfolio
may be offset by the amount of the premium received.

Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the cost of a non-U.S. security to be acquired because
of an increase in the U.S. dollar value of the currency in which the underlying
security is primarily traded, a Portfolio could write a put option on the
relevant currency which, if rates move in the manner projected, will expire
unexercised and allow the Portfolio to hedge such increased cost up to the
amount of the premium. However, the writing of a currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be

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exercised and the Portfolio would be required to purchase or sell the
underlying currency at a loss which may not be offset by the amount of the
premium. Through the writing of options on currencies, a Portfolio also may be
required to forgo all or a portion of the benefits which might otherwise have
been obtained from favorable movements in exchange rates.

Put and call options on non-U.S. currencies written by a Portfolio will be
covered by segregation of cash and liquid securities in an amount sufficient to
discharge the Portfolio's obligations with respect to the option, by
acquisition of the non-U.S. currency or of a right to acquire such currency (in
the case of a call option) or the acquisition of a right to dispose of the
currency (in the case of a put option), or in such other manner as may be in
accordance with the requirements of any exchange on which, or the counterparty
with which, the option is traded and applicable laws and regulations.

Investing in ADRs and other depositary receipts presents many of the same
risks regarding currency exchange rates as investing directly in securities
denominated in currencies other than the U.S. dollar. Because the securities
underlying these receipts are traded primarily in non-U.S. currencies, changes
in currency exchange rates will affect the value of these receipts. For
example, a decline in the U.S. dollar value of another currency in which
securities are primarily traded will reduce the U.S. dollar value of such
securities, even if their value in the other currency remains constant, and
thus will reduce the value of the receipts covering such securities. A
Portfolio may employ any of the above described non-U.S. currency hedging
techniques to protect the value of its assets invested in depositary receipts.

Of course, a Portfolio is not required to enter into the transactions
described above and does not do so unless deemed appropriate by Citibank. It
should also be realized that under certain circumstances the Portfolios may not
be able to hedge against a decline in the value of a currency, even if Citibank
deems it appropriate to try to do so, because doing so would be too costly.
This method of protecting the value of a Portfolio's securities against a
decline in the value of a currency does not eliminate fluctuations in the
underlying prices of the securities. Additionally, although such contracts tend
to minimize the risk of loss due to a decline in the value of the hedged
currency, they also tend to limit any potential gain which might result should
the value of such currency increase.

Each Portfolio has established procedures consistent with policies of the
Securities and Exchange Commission (the "SEC") concerning forward contracts.
Those policies currently require that an amount of a Portfolio's assets equal
to the amount of the purchase be held aside or segregated to be used to pay for
the commitment. Therefore, each Portfolio expects to always have cash or liquid
securities available sufficient to cover any commitments under these contracts.

LENDING OF SECURITIES
Consistent with applicable regulatory requirements and in order to
generate income, each of the Portfolios may lend its securities to

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broker-dealers and other institutional borrowers. 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, a
Portfolio 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 the
collateral (subject to a rebate payable to the borrower). Where the borrower
provides a Portfolio with collateral consisting of U.S. Treasury obligations,
the borrower is also obligated to pay the Portfolio a fee for use of the
borrowed securities. The Portfolio 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 their 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 Citibank or the Subadviser to be of good standing. In addition, a
Portfolio could suffer loss if the borrower terminates the loan and the
Portfolio is forced to liquidate investments in order to return the cash
collateral to the buyer. Citibank or the Subadviser will make loans only when,
in the judgment of Citibank or the Subadviser, the consideration which can be
earned currently from loans of this type justifies the attendant risk. If
Citibank or the Subadviser determines to make loans, it is not intended that
the value of the securities loaned by a Portfolio would exceed 30% of the
market value of its total assets.

WHEN-ISSUED SECURITIES
Each of the Portfolios may purchase securities on a "when-issued" or on a
"forward delivery" basis, which means that the securities would be delivered to
the Portfolio at a future date beyond customary settlement time. It is expected
that, under normal circumstances, the applicable Portfolio would take delivery
of such securities, but the Portfolio may sell them before the settlement date.
In general, the Portfolio does not pay for the securities until received and
does not start earning interest until the contractual settlement date. When a
Portfolio commits to purchase a security on a "when-issued" or on a "forward
delivery" basis, it sets up procedures consistent with SEC policies. Since
those policies currently require that an amount of a Portfolio's assets equal
to the amount of the purchase be held aside or segregated to be used to pay for
the commitment, the Portfolio expects always to have cash or liquid securities
sufficient to cover any commitments or to limit any potential risk. However,
even though the Portfolios do not intend to make such purchases for speculative
purposes and intend to adhere to the provisions of SEC policies, purchases of
securities on such bases may involve more risk than other types of purchases.
The when-issued securities are subject to market fluctuation, and no interest
accrues on the security to the purchaser during this period. The payment

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obligation and the interest rate that will be received on the securities are
each fixed at the time the purchaser enters into the commitment. Purchasing
obligations on a when-issued basis is a form of leveraging and can involve a
risk that the yields available in the market when the delivery takes place may
actually be higher than those obtained in the transaction itself. In that case,
there could be an unrealized loss at the time of delivery. An increase in the
percentage of a Portfolio's assets committed to the purchase of securities on a
"when-issued" basis may increase the volatility of its net asset value.

CONVERTIBLE SECURITIES
The Portfolios (other than U.S. Fixed Income Portfolio) 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 smaller 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.

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.

RULE 144A SECURITIES
Consistent with applicable investment restrictions, each of the Portfolios
may purchase securities that are not registered under the Securities Act of
1933, as amended (the "Securities Act"), but can be offered and sold to
"qualified institutional buyers" under Rule 144A under the Securities Act
("Rule 144A securities"). However, no Portfolio will invest more than 15% of
its net assets (taken at market value) in illiquid investments, which includes
securities for which there is no readily available market, securities subject
to contractual restrictions on resale and Rule 144A securities, unless, in the
case of Rule 144A securities, the Board of Trustees of the Trust determines,
based on the trading markets for the specific Rule 144A security, that it is
liquid. The Trustees have adopted guidelines and, subject to oversight by the
Trustees, have delegated to Citibank or to the Subadviser the daily function of
determining and monitoring liquidity of Rule 144A securities.

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PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS
Each Portfolio 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 a Portfolio to sell them promptly at an
acceptable price.

BANK OBLIGATIONS
The Portfolios may invest in bank obligations, i.e., certificates of
deposit, time deposits (including Eurodollar time deposits) and bankers'
acceptances and other short-term debt obligations issued by domestic banks,
foreign subsidiaries or foreign branches of domestic banks, domestic and
foreign branches of foreign banks, domestic savings and loan associations and
other banking institutions. A bankers' acceptance is a bill of exchange or time
draft drawn on and accepted by a commercial bank. It is used by corporations to
finance the shipment and storage of goods and to furnish dollar exchange.
Maturities are generally six months or less. A certificate of deposit is a
negotiable interest-bearing instrument with a specific maturity. Certificates
of deposit are issued by banks and savings and loan institutions in exchange
for the deposit of funds and normally can be traded in the secondary market
prior to maturity. A time deposit is a non-negotiable receipt issued by a bank
in exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot
be traded in the secondary market. Time deposits with a withdrawal penalty are
considered to be illiquid securities.

COMMERCIAL PAPER
Each Portfolio may invest in commercial paper, which is unsecured debt of
corporations usually maturing in 270 days or less from its date of issuance.

OTHER INVESTMENT COMPANIES
Subject to applicable statutory and regulatory limitations, assets of each
Portfolio may be invested in shares of other investment companies. Each
Portfolio may invest up to 5% of its assets in closed-end investment companies
which primarily hold securities of non-U.S. issuers.

MORTGAGE-BACKED SECURITIES
High Yield Portfolio and U.S. Fixed Income Portfolio may invest in
mortgage-backed securities. Some mortgage-backed securities represent interests
in pools of mortgage loans. Interests in pools of mortgage-related securities
differ from other forms of debt securities which normally provide for periodic
payment of interest in fixed amounts with principal payments at maturity or
specified call dates. Instead, these securities provide a monthly payment which
consists of both interest and principal payments. In effect, these payments are

<PAGE>

a "pass-through" of the monthly payments made by the individual borrowers on
their mortgage loans, net of any fees paid to the issuer or guarantor of such
securities. Additional payments are caused by prepayments of principal
resulting from the sale, refinancing or foreclosure of the underlying property,
net of fees or costs which may be incurred. The market value and interest yield
of these instruments can vary due to market interest rate fluctuations and
early prepayments of underlying mortgages.

The principal governmental issuers or guarantors of mortgage-backed
securities are the Government National Mortgage Association ("GNMA"), Federal
National Mortgage Association ("FNMA"), and Federal Home Loan Mortgage
Corporation ("FHLMC"). Obligations of GNMA are backed by the full faith and
credit of the U.S. government while obligations of FNMA and FHLMC are supported
by the respective agency only. Although GNMA certificates may offer yields
higher than those available from other types of U.S. government securities,
GNMA certificates may be less effective than other types of securities as a
means of "locking in" attractive long-term rates because of the prepayment
feature. For instance, when interest rates decline, the value of a GNMA
certificate likely will not rise as much as comparable debt securities due to
the prepayment feature. In addition, these prepayments can cause the price of a
GNMA certificate originally purchased at a premium to decline in price to its
par value, which may result in a loss.

Mortgage-backed securities may also be issued by private issuers such as
commercial banks, savings and loans, mortgage bankers and private mortgage
companies. These obligations are not backed by any governmental authority or
agency.

A portion of the Portfolios' assets may be invested in collateralized
mortgage obligations ("CMOs"), which are debt obligations collateralized by
mortgage loans or mortgage pass-through securities. Typically, CMOs are
collateralized by certificates issued by the GNMA, the FNMA or the FHLMC but
also may be collateralized by whole loans or private mortgage pass-through
securities (such collateral collectively hereinafter referred to as "Mortgage
Assets"). The Portfolios may also invest a portion of their assets in
multi-class pass-through securities which are interests in a trust composed of
Mortgage Assets. CMOs (which include multi-class pass-through securities) may
be issued by agencies, authorities or instrumentalities of the U.S. government
or by private originators of or investors in mortgage loans, including savings
and loan associations, mortgage banks, commercial banks, investment banks and
special purpose subsidiaries of the foregoing. Payments of principal of and
interest on the Mortgage Assets, and any reinvestment income thereon, provide
the funds to pay debt service on the CMOs or make scheduled distributions on
the multi-class pass-through securities. In a CMO, a series of bonds or
certificates is usually issued in multiple classes with different maturities.
Each class of CMO, often referred to as a "tranche," is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution

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date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final
distribution dates, resulting in a loss of all or part of the premium if any
has been paid. Interest is paid or accrues on all classes of the CMOs on a
monthly, quarterly or semiannual basis. The principal of and interest on the
Mortgage Assets may be allocated among the several classes of a series of a CMO
in various ways. In a common structure, payments of principal, including any
principal prepayments, on the Mortgage Assets are applied to the classes of the
series of a CMO in the order of their respective stated maturities or final
distribution dates, so that no payment of principal will be made on any class
of CMOs until all other classes having an earlier stated maturity or final
distribution date have been paid in full.

Even if the U.S. government or one of its agencies guarantees principal
and interest payments of a mortgage-backed security, the market price of a
mortgage-backed security is not insured and may be subject to market
volatility. When interest rates decline, mortgage-backed securities experience
higher rates of prepayment because the underlying mortgages are refinanced to
take advantage of the lower rates. The prices of mortgage-backed securities may
not increase as much as prices of other debt obligations when interest rates
decline, and mortgage-backed securities may not be an effective means of
locking in a particular interest rate. In addition, any premium paid for a
mortgage-backed security may be lost when it is prepaid. When interest rates go
up, mortgage-backed securities experience lower rates of prepayment. This has
the effect of lengthening the expected maturity of a mortgage-backed security.
This particular risk, referred to as "maturity extension risk," may effectively
convert a security that was considered short or intermediate-term at the time
of purchase into a long-term security. Long-term securities generally fluctuate
more widely in response to changes in interest rates than short or
intermediate-term securities. Thus, rising interest rates would not only likely
decrease the value of a Portfolio's fixed income securities, but would also
increase the inherent volatility of the Portfolio by effectively converting
short-term debt instruments into long-term debt instruments. As a result,
prices of mortgage-backed securities may decrease more than prices of other
debt obligations when interest rates go up.

MORTGAGE "DOLLAR ROLL" TRANSACTIONS
High Yield Portfolio and U.S. Fixed Income Portfolio may enter into
mortgage "dollar roll" transactions pursuant to which they sell mortgage-backed
securities for delivery in the future and simultaneously contract to repurchase
substantially similar securities on a specified future date. During the roll
period, the Portfolio foregoes principal and interest paid on the
mortgage-backed securities. The Portfolio is compensated for the lost principal
and interest by the difference between the current sales price and the lower
price for the future purchase (often referred to as the "drop") as well as by
the interest earned on the cash proceeds of the initial sale. The Portfolio may
also be compensated by receipt of a commitment fee. However, the Portfolio
takes the risk that the market price of the mortgage-backed security will drop
below the future purchase price. When the Portfolios use a mortgage dollar
roll, they are also subject to the risk that the other party to the agreement

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will not be able to perform. A "covered roll" is a specific type of dollar roll
for which a Portfolio establishes a segregated account with liquid securities
equal in value to the securities subject to repurchase by the Portfolio. The
Portfolios will invest only in covered rolls.

CORPORATE ASSET-BACKED SECURITIES
High Yield Portfolio and U.S. Fixed Income Portfolio may invest in
corporate asset-backed securities. These securities, issued by trusts and
special purpose corporations, are backed by a pool of assets, such as credit
card and automobile loan receivables, representing the obligations of a number
of different parties.

Corporate asset-backed securities present certain risks. For instance, in
the case of credit card receivables, these securities may not have the benefit
of any security interest in the related collateral. Credit card receivables are
generally unsecured and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. Most issuers of automobile receivables permit the servicers to
retain possession of the underlying obligations. If the servicer were to sell
these obligations to another party, there is a risk that the purchaser would
acquire an interest superior to that of the holders of the related automobile
receivables. In addition, because of the large number of vehicles involved in a
typical issuance and technical requirements under state laws, the trustee for
the holders of the automobile receivables may not have a proper security
interest in all of the obligations backing such receivables. Therefore, there
is the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on these securities. The underlying
assets (e.g., loans) are also subject to prepayments which shorten the
securities' weighted average life and may lower their return.

Corporate asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through insurance policies or
letters of credit obtained by the issuer or sponsor from third parties. The
degree of credit support provided for each issue is generally based on
historical information respecting the level of credit risk associated with the
underlying assets. Delinquency or loss in excess of that anticipated or failure
of the credit support could adversely affect the return on an investment in
such a security. It is intended that no more than 5% of U.S. Fixed Income
Portfolio's total assets would be invested in corporate asset-backed
securities.

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SECURITIES RATED BAA OR BBB
Each Portfolio may purchase securities rated Baa by Moody's Investors
Service, Inc. or BBB by Standard & Poor's Ratings Group and securities of
comparable quality, which may have poor protection of payment of principal and
interest. These securities are often considered to be speculative and involve
greater risk of default or price changes due to changes in the issuer's
creditworthiness than securities assigned a higher quality rating. The market
prices of these securities may fluctuate more than higher-rated securities and
may decline significantly in periods of general economic difficulty which may
follow periods of rising interest rates.

LOWER RATED DEBT SECURITIES
High Yield Portfolio may invest in lower rated fixed income securities
(commonly known as "junk bonds"), to the extent described in Part A to this
Registration Statement. The lower ratings of certain securities held by the
Portfolio reflect a greater possibility that adverse changes in the financial
condition of the issuer or in general economic conditions, or both, or an
unanticipated rise in interest rates, may impair the ability of the issuer to
make payments of interest and principal. The inability (or perceived inability)
of issuers to make timely payment of interest and principal would likely make
the values of such securities held by the Portfolio more volatile and could
limit the Portfolio's ability to sell the securities at prices approximating
the values the Portfolio had placed on them. In the absence of a liquid trading
market for securities held by it, the Portfolio at times may be unable to
establish the fair value of such securities. If the issuer defaults on its
obligation, the value of the security would fall and the Portfolio's income
would also decline.

Securities ratings are based largely on the issuer's historical financial
condition and the rating agencies' analysis at the time of rating.
Consequently, the rating assigned to any particular security is not necessarily
a reflection of the issuer's current financial condition, which may be better
or worse than the rating would indicate. In addition, the rating assigned to a
security by Moody's Investors Service, Inc. or Standard & Poor's Ratings Group
(or by any other nationally recognized securities rating organization) does not
reflect an assessment of the volatility of the security's market value or the
liquidity of an investment in the security.

Like those of other fixed-income securities, the values of lower rated
securities fluctuate in response to changes in interest rates. A decrease in
interest rates will generally result in an increase in the value of fixed
income securities. Conversely, during periods of rising interest rates, the
value of the Portfolio's fixed-income securities will generally decline. The
values of lower rated securities may often be affected to a greater extent by
changes in general economic conditions and business conditions affecting the
issuers of such securities and their industries. Negative publicity or investor
perceptions may also adversely affect the values of lower rated securities.
Changes by recognized rating services in their ratings of any fixed-income
security and changes in the ability of an issuer to make payments of interest

<PAGE>

and principal may also affect the value of these investments. Changes in the
value of portfolio securities generally will not affect income derived from
these securities, but will affect the Portfolio's net asset value. The
Portfolio will not necessarily dispose of a security when its rating is reduced
below its rating at the time of purchase. However, Citibank or the Subadviser
will monitor the investment to determine whether its retention will assist in
meeting the Portfolio's investment objective.

Issuers of lower rated securities are often highly leveraged, so that
their ability to service their debt obligations during an economic downturn or
during sustained periods of rising interest rates may be impaired. Such issuers
may not have more traditional methods of financing available to them and may be
unable to repay outstanding obligations at maturity by refinancing. The risk of
loss due to default in payment of interest or repayment of principal by such
issuers is significantly greater because such securities frequently are
unsecured and subordinated to the prior payment of senior indebtedness.

To the extent High Yield Portfolio invests in securities in the lower
rating categories, the achievement of the Portfolio's objective is more
dependent on Citibank's or the Subadviser's investment analysis than would be
the case if the Portfolio were investing in securities in the higher rating
categories. This may be particularly true with respect to tax-exempt
securities, as the amount of information about the financial condition of an
issuer of tax-exempt securities may not be as extensive as that which is made
available by corporations whose securities are publicly traded.

CALL FEATURES
Certain securities held by High Yield Portfolio may permit the issuer at
its option to "call," or redeem, its securities. If an issuer were to redeem
securities held by the Portfolio during a time of declining interest rates, the
Portfolio may not be able to reinvest the proceeds in securities providing the
same investment return as the securities redeemed.

ZERO-COUPON AND PAYMENT-IN-KIND BONDS
High Yield Portfolio may invest without limit in "zero-coupon" bonds and
"payment-in-kind" bonds. U.S. Fixed Income Portfolio may invest up to 15% of
its assets in zero coupon obligations, such as zero coupon bonds. Zero-coupon
bonds are issued at a significant discount from their principal amount in lieu
of paying interest periodically. Payment-in-kind bonds allow the issuer, at its
option, to make current interest payments on the bonds either in cash or in
additional bonds. Because zero-coupon and payment-in kind bonds do not pay
current interest in cash, their value is subject to greater fluctuation in
response to changes in market interest rates than bonds that pay interest
currently. Both zero-coupon and payment-in-kind bonds allow an issuer to avoid
the need to generate cash to meet current interest payments. Accordingly, such
bonds may involve greater credit risks than bonds paying interest currently in
cash. A Portfolio is required to accrue interest income on such investments and
to distribute such amounts at least annually to investors even though such

<PAGE>

bonds do not pay current interest in cash. Thus, it may be necessary at times
for a Portfolio to liquidate investments in order to satisfy its dividend
requirements.

U.S. GOVERNMENT SECURITIES
Each of the Portfolios may invest in debt obligations that are backed, as
to the timely payment of interest and principal, by the full faith and credit
of the U.S. government. Each Portfolio may also invest in other obligations
issued by agencies or instrumentalities of the U.S. government, some of which
are supported by the right of the issuer to borrow from the U.S. Treasury and
some of which are backed only by the credit of the issuer itself.

The debt obligations in which assets of a Portfolio may be invested
include (1) U.S. Treasury obligations, which differ only in their interest
rates, maturities and times of issuance: U.S. Treasury bills (maturities of one
year or less), U.S. Treasury notes (maturities of one to 10 years), and U.S.
Treasury bonds (generally maturities of greater than 10 years); and (2)
obligations issued or guaranteed by U.S. government agencies, authorities or
instrumentalities.

When and if available, U.S. government obligations may be purchased at a
discount from face value. However, it is not intended that such securities will
be held to maturity for the purpose of achieving potential capital gains,
unless current yields on these securities remain attractive.

ALTHOUGH U.S. GOVERNMENT OBLIGATIONS WHICH ARE PURCHASED FOR A PORTFOLIO
MAY BE BACKED, AS TO THE TIMELY PAYMENT OF INTEREST AND PRINCIPAL, BY THE FULL
FAITH AND CREDIT OF THE U.S. GOVERNMENT, INTERESTS IN A PORTFOLIO ARE NEITHER
INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT OR ITS AGENCIES, AUTHORITIES OR
INSTRUMENtALITIES.

SHORT SALES "AGAINST THE BOX"
In a short sale, High Yield Portfolio or U.S. Fixed Income Portfolio sells
a borrowed security and has a corresponding obligation to the lender to return
the identical security. High Yield Portfolio or U.S. Fixed Income Portfolio, 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."

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 a Portfolio engages in a short sale, the collateral for the short
position is maintained for the Portfolio 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

<PAGE>

exchangeable for such equivalent securities are maintained in a segregated
account for the Portfolio. These securities constitute the Portfolio's long
position.

The Portfolios do not engage in short sales against the box for investment
purposes. A Portfolio 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 Portfolio (or a security
convertible or exchangeable for such security). In such case, any future losses
in the Portfolio'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
Portfolio owns. There are certain additional transaction costs associated with
short sales against the box, but each Portfolio endeavors to offset these costs
with the income from the investment of the cash proceeds of short sales.

The Manager does not expect that more than 40% of High Yield Portfolio's
or U.S. Fixed Income Portfolio's total assets would be involved in short sales
against the box. The Manager does not currently intend to engage in such sales.

SWAPS AND RELATED TRANSACTIONS
High Yield Portfolio and U.S. Fixed Income Portfolio 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
Portfolio than if the Portfolio had invested directly in an instrument that
yielded that desired return. Interest rate swaps involve the exchange by a
Portfolio 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. 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 a cap and selling a floor.

Each of High Yield Portfolio and U.S. Fixed Income Portfolio will maintain
liquid assets with its custodian or otherwise cover its current obligations
under swap transactions in accordance with current regulations and policies
applicable to the respective Portfolio.

<PAGE>

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 Manager or the Subadviser is incorrect in its forecasts of such factors,
the investment performance of a Portfolio 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 a Portfolio, the Portfolio must be prepared to make such
payments when due. A Portfolio will not enter into any swap unless the Manager
or the Subadviser 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 Portfolio's risk of loss consists of the net amount of payments
that the Portfolio is contractually entitled to receive. Each of High Yield
Portfolio and U.S. Fixed Income Portfolio 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.

Swap agreements are subject to the Portfolios' overall limit that not more
than 15% of its net assets may be invested in illiquid securities.

Engaging in swap and related transactions may involve leveraging.
Leveraging adds increased risks to a Portfolio, because the Portfolio's losses
may be out of proportion to the amount invested in the instrument -- a
relatively small investment may lead to much greater losses.

ADDITIONAL DISCLOSURE REGARDING DERIVATIVES
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, while forward
contracts may be entered into only in the over-the-counter market. Futures
contracts and options on futures contracts may be entered into on U.S.
exchanges regulated by the CFTC and on foreign exchanges. The securities
underlying options and futures contracts traded by a Portfolio may include
domestic as well as foreign securities. Investors should recognize that
transactions involving foreign securities or foreign currencies, and
transactions entered into in foreign countries, may involve considerations and
risks not typically associated with investing in U.S. markets.

Transactions in options, futures contracts, options on futures contracts
and forward 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, a Portfolio 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.

<PAGE>

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

INVESTMENT RESTRICTIONS

FUNDAMENTAL RESTRICTIONS

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

None of the Portfolios 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
Portfolio, taken at market value. It is intended that a Portfolio would borrow
money only from banks and only to accommodate requests for the repurchase of
beneficial interests in the Portfolio while effecting an orderly liquidation of
portfolio securities.

(2) 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
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.

(3) Purchase securities of any issuer if such purchase at the time thereof
would cause with respect to 75% of the total assets of the Portfolio more than
10% of the voting securities of such issuer to be held by the Portfolio;
provided that, for purposes of this restriction, the issuer of an option or

<PAGE>

futures contract shall not be deemed to be the issuer of the security or
securities underlying such contract; and provided further that the Portfolio
may invest all or any portion of its assets 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.

(4) Purchase securities of any issuer if such purchase at the time thereof
would cause as to 75% of the Portfolio's total assets more than 5% of the
Portfolio's assets (taken at market value) to be invested in the securities of
such issuer (other than securities or obligations issued or guaranteed by the
United States, any state or political subdivision thereof, or any political
subdivision of any such state, or any agency or instrumentality of the United
States or of any state or of any political subdivision of any state); provided
that, for purposes of this restriction, the issuer of an option or futures
contract shall not be deemed to be the issuer of the security or securities
underlying such contract; and provided further that the Portfolio may invest
all or any portion of its assets in 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.

(5) Concentrate its investments in any particular industry, but if it is
deemed appropriate for the achievement of the 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) Underwrite securities issued by other persons, except that all or any
portion of the assets of the 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 Portfolio may technically be deemed an underwriter under
the Securities Act in selling a security.

(7) 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 Portfolio from purchasing or selling futures contracts or options thereon,
and the Portfolio reserves the freedom of action to hold and to sell real
estate acquired as a result of the ownership of securities by the Portfolio).

(8) 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.

For purposes of restriction (1) above, covered mortgage dollar rolls and
arrangements with respect to securities lending are not treated as borrowing.

<PAGE>

NON-FUNDAMENTAL RESTRICTIONS

Each of Large Cap Growth Portfolio, Small Cap Growth Portfolio, High Yield
Portfolio and U.S. Fixed Income Portfolio does not as a matter of operating
policy:

(i) purchase any securities for the Portfolio at any time at which
borrowings exceed 5% of the total assets of the Portfolio (taken at market
value), or

(ii) purchase securities issued by any registered investment company in
reliance on the provisions of Sections 12(d)(1)(F) or 12(d)(1)(G) of the 1940
Act and the rules and regulations thereunder except to the extent not
prohibited by the 1940 Act, rules and regulations thereunder and exemptive
orders granted thereunder.

These policies are not fundamental and may be changed by each Portfolio
without the approval of its holders of the beneficial interests.

PERCENTAGE AND RATING RESTRICTIONS

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

Item 13. Management of each Portfolio.

The Trustees and officers of each Portfolio 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
Portfolio. Unless otherwise indicated below, the address of each Trustee and
officer is 21 Milk Street, Boston, Massachusetts 02109. The address of each
Portfolio is Elizabethan Square, George Town, Grand Cayman, Cayman Islands,
British West Indies.

TRUSTEES

ELLIOTT J. BERV; 56 -- President and Chief Executive Officer, Catalyst, Inc.
(Management Consultants) (since June 1992); President and Director, Elliott J.
Berv & Associates (Management Consultants) (since May 1984). His address is 24
Atlantic Drive, Scarborough, Maine.

PHILIP W. COOLIDGE*; 48 -- President of the Portfolios; Chief Executive Officer
and President, Signature Financial Group, Inc. and CFBDS, Inc.

<PAGE>

MARK T. FINN; 56 -- President and Director, Delta Financial, Inc. (since June
1983); Chairman of the Board and part Owner, FX 500 Ltd. (Commodity Trading
Advisory Firm) (April 1990 to February 1996); General Partner and Shareholder,
Greenwich Ventures LLC (Investment Partnership) (since January 1996);
President, Secretary and Owner, Phoenix Trading Co. (Commodity Trading Advisory
Firm) (since March 1997); Chairman and Owner, Vantage Consulting Group, Inc.
(since October 1988). His address is 3500 Pacific Avenue, P.O. Box 539,
Virginia Beach, Virginia.

C. OSCAR MORONG, JR.; 64 -- Chairman of the Board of Trustees of the
Portfolios; Managing Director, Morong Capital Management (since February 1993);
Director, Indonesia Fund (since 1990); Trustee, MAS Funds(since 1993). His
address is 1385 Outlook Drive West, Mountainside, New Jersey.

WALTER E. ROBB, III; 73 -- President, Benchmark Consulting Group, Inc. (since
1991); Principal, Robb Associates (Corporate Financial Advisors) (since 1978);
President and Treasurer, Benchmark Advisors, Inc. (Corporate Financial
Advisors) (since 1989); Trustee of certain registered investment companies in
the MFS Family of Funds (since 1985). His address is 35 Farm Road, Sherborn,
Massachusetts.

E. KIRBY WARREN; 65 -- Professor of Management, Graduate School of Business,
Columbia University (since 1987). His address is Columbia University, Graduate
School of Business, 725 Uris Hall, New York, New York.

OFFICERS

PHILIP W. COOLIDGE*; 48 -- President of the Portfolios; Chief Executive Officer
and President, Signature Financial Group, Inc. and CFBDS, Inc.

CHRISTINE D. DORSEY*; 29 -- Assistant Secretary and Assistant Treasurer of the
Portfolios; Vice President, Signature Financial Group, Inc. (since January
1996); Paralegal and Compliance Officer, various financial companies (July 1992
to January 1996).

LINWOOD C. DOWNS*; 38 -- Treasurer of the Portfolios; Chief Financial Officer
and Senior Vice President, Signature Financial Group, Inc.; Treasurer, CFBDS,
Inc.

TAMIE EBANKS-CUNNINGHAM*; 27 -- Assistant Secretary of the Portfolios; 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.

LINDA T. GIBSON*; 34 -- Secretary of the Portfolios; Senior Vice President,
Signature Financial Group, Inc.; Secretary, CFBDS, Inc.

<PAGE>

SUSAN JAKUBOSKI*; 35 -- Vice President, Assistant Treasurer and Assistant
Secretary of the Portfolios; Vice President, Signature Financial Group (Cayman)
Ltd.

MOLLY S. MUGLER*; 48 -- Assistant Secretary and Assistant Treasurer of the
Portfolios; Vice President, Signature Financial Group, Inc.; Assistant
Secretary, CFBDS, Inc.

JULIE J. WYETZNER*; 40 -- Vice President, Assistant Secretary and Assistant
Treasurer of the Portfolios; Vice President, Signature Financial Group, Inc.

The Trustees and officers of the Portfolios also hold comparable positions
with certain other funds for which CFBDS, Inc. ("CFBDS"), each Portfolio's
sub-administrator and a wholly-owned subsidiary of Signature Financial Group,
Inc., or an affiliate serves as the distributor or administrator. Mr. Coolidge
is also a Trustee of CitiFunds Trust I, CitiFunds Trust II and CitiFunds Fixed
Income Trust, open-end investment companies, series of each of which are
investors in one or more Portfolios, and each officer of the Portfolios holds
the same position with those investment companies.

The Trustees of the Portfolios received the following remuneration from
the Portfolios during their fiscal years ended October 31, 1999:

TRUSTEE COMPENSATION TABLE

Aggregate Aggregate
Compen- Compen- Aggregate Total
sation from sation from Aggregate Compen- Compen-
Large Cap Small Cap Compen- sation from sation from
Growth Growth sation from U.S. Fixed Trust and
Portfolio Portfolio High Yield Income Complex
Trustee (1)(2) (1)(2) Portfolio(2) Portfolio(2) (1)(2)

Elliott
J. Berv $2,715 $1,280 $484 $1,280 $69,500
Philip
W. $0 $0 $0 $0 $0
Coolidge
Mark T.
Finn $5,219 $1,806 $767 $2,195 $63,250
C. Oscar
Morong,
Jr. $3,184 $1,122 $621 $1,364 $92,000
Walter
E. Robb, $2,716 $1,215 $454 $1,180 $67,500
III
E. Kirby
Warren $1,671 $817 $491 $914 $62,750

(1) Information relates to the fiscal year ended October 31, 1999.

<PAGE>

(2) Messrs. Berv, Coolidge, Finn, Morong, Robb and Warren are trustees of 25,
48, 24, 39, 28 and 39, funds, respectively, in the family of open-end
registered investment companies advised or managed by Citibank.

The Portfolios' Declaration of Trust provides that each Portfolio 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 Portfolios, unless, as to liability to a Portfolio or its
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 Portfolio. 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 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.

Item 14. Control Persons and Principal Holders of Securities.

As of February 8, 2000, beneficial interests in the Portfolios were held
as follows:

- -------------------------------------------------------------------------------
Large Cap Small Cap U.S. Fixed
Growth Growth Income High Yield
Portfolio Portfolio Portfolio Portfolio
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
CitiFundsSM Balanced
Portfolio N/A N/A 36.35% N/A

- -------------------------------------------------------------------------------
CitiFunds Balanced
Portfolio, Ltd. N/A N/A 3.93% N/A

- -------------------------------------------------------------------------------
CitiFundsSM Intermediate
Income Portfolio N/A N/A 19.40% N/A

- -------------------------------------------------------------------------------
CitiFunds Intermediate
Income Portfolio, Ltd. N/A N/A 0.47% N/A

- -------------------------------------------------------------------------------
CitiFundsSM Large Cap
Growth Portfolio 77.80% N/A N/A N/A

- -------------------------------------------------------------------------------
CitiFunds Large Cap Growth
Portfolio, Ltd. 15.65% N/A N/A N/A

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

<PAGE>

CitiFundsSM Small Cap
Growth Portfolio N/A 34.42% N/A N/A

- -------------------------------------------------------------------------------
CitiFunds Small Cap Growth
Portfolio, Ltd. N/A 11.81% N/A N/A

- -------------------------------------------------------------------------------
CitiSelect(R) Folio 100
Income 0.01% N/A 0.14% 0.15%

- -------------------------------------------------------------------------------
CitiSelect(R) Folio 200
Conservative 0.68% 3.96% 11.99% 23.46%

- -------------------------------------------------------------------------------
CitiSelect(R) Folio 300
Balanced 1.64% 14.34% 13.39% 31.72%

- -------------------------------------------------------------------------------
CitiSelect(R) Folio 400
Growth 2.29% 19.59% 5.85% 23.42%

- -------------------------------------------------------------------------------
CitiSelect(R) Folio 500
Growth Plus 1.14% 9.87% 1.09% 4.92%

- -------------------------------------------------------------------------------
CitiSelect Folio 100, Ltd.
Income 0.01% N/A 0.09% 0.10%

- -------------------------------------------------------------------------------
CitiSelect Folio 200, Ltd.
Conservative 0.26% 1.51% 4.59% 8.98%

- -------------------------------------------------------------------------------
CitiSelect Folio 300, Ltd.
Balanced 0.28% 2.43% 2.24% 5.32%

- -------------------------------------------------------------------------------
CitiSelect Folio 400, Ltd.
Growth 0.16% 1.36% 0.39% 1.57%

- -------------------------------------------------------------------------------
CitiSelect Folio 500, Ltd.
Growth Plus 0.08% 0.71% 0.08% 0.36%

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

The address of each of CitiFunds Balanced Portfolio, Ltd., CitiFunds
Intermediate Income Portfolio, Ltd., CitiFunds Large Cap Growth Portfolio,
Ltd., CitiFunds Small Cap Growth Portfolio, Ltd., and CitiSelect Ltd. Folios
100-500 is c/o Maples and Calder, P.O. Box 309, Ugland House, George Town,
Grand Cayman, Cayman Islands, British West Indies.

The address of each of CitiFunds Balanced Portfolio, CitiFunds
Intermediate Income Portfolio, CitiFunds Large Cap Growth Portfolio, CitiFunds
Small Cap Growth Portfolio and CitiSelect Folios 100-500 (the "Funds") is 21
Milk Street, Boston, Massachusetts 02109. CitiFunds Large Cap Growth Portfolio
and CitiFunds Small Cap Growth Portfolio are series of CitiFunds Trust II;

<PAGE>

CitiFunds Balanced Portfolio and CitiSelect Folios 100-500 are series of
CitiFunds Trust I; and CitiFunds Intermediate Income Portfolio is a series of
CitiFunds Fixed Income Trust. CitiFunds Trust I, CitiFunds Trust II and
CitiFunds Fixed Income Trust are each Massachusetts business trusts and are
registered under the 1940 Act as investment companies.

The Funds control certain Portfolios by virtue of owning of the
outstanding interests in these Portfolios, as noted above. The Funds have
informed the appropriate Portfolios that whenever requested to vote on matters
pertaining to the Portfolios (other than a vote to continue the Portfolios
following the withdrawal of an investor) each will hold a meeting of
shareholders and will cast its vote as instructed by its shareholders when its
Trustees deem it to be necessary or desirable. Notwithstanding the foregoing,
at any meeting of shareholders of a 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 received for
all other shares of which that service agent is the holder of record.

Item 15. Investment Advisory and Other Services.

Citibank manages the assets of each Portfolio pursuant to separate
management agreements relating to each Portfolio ("Management Agreements").
Subject to such policies as the Board of Trustees may determine, Citibank
manages the securities of each Portfolio and makes investment decisions for
each Portfolio. Citibank furnishes at its own expense all services, facilities
and personnel necessary in connection with managing each Portfolio's
investments and effecting securities transactions for each Portfolio. Each
Management Agreement with the Trust provides that Citibank may delegate the
daily management of the securities of each Portfolio to one or more
subadvisers. The Management Agreement for each of the Portfolios continues in
effect for an initial two-year period and thereafter from year to year 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 applicable Portfolio, and, in either case, by a majority of
the Trustees of the Portfolios 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.

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

<PAGE>

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 Trust when
authorized either by a vote of a majority of the outstanding voting securities
of the applicable Portfolio or by a vote of a majority of the Board of Trustees
of 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. Each Management Agreement 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 applicable Portfolio, except for
willful misfeasance, bad faith or gross negligence or reckless disregard of its
or their obligations and duties under the Management Agreement.

For its services under the Management Agreements, Citibank receives a fee,
which is accrued daily and paid monthly, at the annual rate specified below
with respect to each Portfolio of the average daily net assets on an annualized
basis of that Portfolio for that Portfolio's then-current fiscal year, less the
aggregate amount (if any) payable by that Portfolio to one or more subadvisers
pursuant to investment advisory or submanagement agreements between the
Portfolio and such subadviser.

Large Cap Growth Portfolio 0.60%
Small Cap Growth Portfolio 0.75%
High Yield Portfolio 0.65%
U.S. Fixed Income Portfolio 0.35%

If the aggregate investment advisory or subadvisory fee payable by any of
the Portfolios listed above to a subadviser or subadvisers of that Portfolio
exceeds the percentage for that Portfolio in the chart above, Citibank will pay
the amount of such excess to the applicable subadviser or subadvisers on the
Portfolio's behalf. Citibank may voluntarily agree to waive a portion of its
investment advisory fees.

For the fiscal years ended December 31, 1995 and 1996 the fees paid to
Citibank under a prior investment advisory agreement with respect to Large Cap
Growth Portfolio were $1,049,008 and $1,387,227, respectively. For the period
from January 1, 1997 to October 31, 1997 the fees paid to Citibank under its
investment advisory agreement with respect to Large Cap Growth Portfolio were
$1,312,700. For the fiscal years ended October 31, 1998 and 1999 the fees paid
to Citibank under its Management Agreement with respect to Large Cap Growth
Portfolio were $3,167,841 and $4,351,046, respectively.

For the period from June 21, 1995 (commencement of operations) to December
31, 1995 and the fiscal year ended December 31, 1996 the fees payable to
Citibank under a prior investment advisory agreement with respect to Small Cap
Growth Portfolio were $10,222 (all of which was voluntarily waived) and
$147,259 (of which $100,088 was voluntarily waived), respectively. For the

<PAGE>

period from January 1, 1997 to October 31, 1997 the fees payable to Citibank
under its investment advisory agreement with respect to Small Cap Growth
Portfolio were $284,285 (of which $57,125 was voluntarily waived). For the
fiscal years ended October 31, 1998 and 1999 the fees paid to Citibank under
its Management Agreement with respect to Small Cap Growth Portfolio were
$1,673,322 and $1,112,230, respectively.

For the period from May 3, 1999 (commencement of operations) to October
31, 1999 the fees paid to Citibank under its Management Agreement with respect
to High Yield Portfolio were $55,046.

For the period from November 1, 1998 (commencement of operations) to
October 31, 1999 the fees paid to Citibank under its Management Agreement with
respect to U.S. Fixed Income Portfolio were $664,250.

For the fiscal years ended December 31, 1995 and 1996 and the period from
January 1, 1997 to October 31, 1997, The Premium Portfolios paid Signature
Financial Group (Cayman) Ltd. ("SFG") under a prior administrative services
agreement $104,901, $138,723 and $131,270, respectively, with respect to Large
Cap Growth Portfolio. For the period June 21, 1995 (commencement of operations)
to December 31, 1995, the fiscal year ended December 31, 1996 and the period
from January 1, 1997 to October 31, 1997, The Premium Portfolios was obligated
to pay SFG under a prior administrative services agreement $682 (all of which
was voluntarily waived), $9,817 (all of which was voluntarily waived) and
$18,952 (of which $13,008 was voluntarily waived), respectively, with respect
to Small Cap Growth Portfolio.

The Trust has entered into a Submanagement Agreement with SBAMInc for High
Yield Portfolio. For its services to High Yield Portfolio, SBAMInc receives a
fee, which is accrued daily and paid monthly, at the annual rate specified
below of the average daily net assets on an annualized basis of the Portfolio
allocated to SBAMInc for the Portfolio's then-current fiscal year. These fees
reduce the fee payable to Citibank by the Portfolio as described above.

0.45% on the first $100 million
0.40% on assets in excess of $100 million

It is SBAMInc's responsibility to make the day-to-day investment decisions
for those assets of High Yield Portfolio allocated to SBAMInc by Citibank, and
to place the purchase and sales orders for securities transactions concerning
those assets, subject in all cases to the general supervision of Citibank.
SBAMInc furnishes at its own expense all services, facilities and personnel
necessary in connection with managing the assets of High Yield Portfolio
allocated to it and effecting securities transactions concerning those assets.

<PAGE>

The Submanagement Agreement will continue in effect as to High Yield
Portfolio for an initial two-year period and thereafter as long as such
continuance is specifically approved at least annually by the Board of Trustees
of the Trust as to High Yield Portfolio 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 Trust who are not parties to the Submanagement
Agreement or interested persons of any such party, at a meeting called for the
purpose of voting on the Submanagement Agreement.

The Submanagement Agreement provides that SBAMInc may render services to
others. The Submanagement Agreement is terminable without penalty on not more
than 60 days' nor less than 30 days' written notice by the Trust, when
authorized either by a vote of a majority of the outstanding voting securities
of High Yield Portfolio or by a vote of a majority of the Board of Trustees of
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 Submanagement Agreement may be terminated by SBAMInc on not
less than 90 days' written notice. The Submanagement Agreement provides that
neither SBAMInc 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 High Yield Portfolio,
except for willful misfeasance, bad faith or gross negligence or reckless
disregard of its or their obligations and duties under the Submanagement
Agreement.

For the period from May 3, 1999 (commencement of operations) to October
31, 1999 the fees paid to SBAMInc under the Submanagement Agreement were
$219,531.

In addition to amounts payable under the Management Agreements, each
Portfolio 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 CFBDS, government fees, taxes, accounting and legal
fees, expenses of communicating with investors, interest expense, and insurance
premiums. For the fiscal year ended October 31, 1999, the Portfolios' total
expenses, expressed as a percentage of each Portfolio's average daily net
assets for the period or year in question, were as follows: Large Cap Growth
Portfolio: 0.67%; Small Cap Growth Portfolio: 0.86%; High Yield Portfolio (May
3, 1999 to October 31, 1999) 0.70%; and U.S. Fixed Income Portfolio 0.40%.

Pursuant to a services agreement with Citibank, CFBDS performs such
sub-administrative duties for the Trust as from time to time are agreed upon by
Citibank and CFBDS. For performing such sub-administrative services, CFBDS
receives compensation as from time to time is agreed upon by Citibank and
CFBDS, not in excess of the amount paid to Citibank for its services under the
Management Agreements with the Trust. All such compensation is paid by
Citibank.

<PAGE>

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

PricewaterhouseCoopers LLP are the chartered 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 Suite 3000, Box 82, Royal Trust Towers, Toronto Dominion Center, Toronto,
Ontario, Canada M5K 1G8.

Bingham Dana LLP, 150 Federal Street, Boston, MA 02110, acts as counsel to
the Trust.

Item 16. Brokerage Allocation and Other Practices.

Citibank or, in the case of High Yield Portfolio, SBAMInc trades
securities for a Portfolio if it believes that a transaction net of costs
(including custodian charges) will help achieve the Portfolio's investment
objectives. Changes in the Portfolio'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 a Portfolio are made by a portfolio manager who is an
employee of Citibank or, in the case of High Yield Portfolio, of SBAMInc and
who is appointed and supervised by that entity's senior officers. The portfolio
manager may serve other clients of Citibank or SBAMInc 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 Portfolio and/or the other
accounts over which Citibank, SBAMInc or their affiliates exercise investment
discretion. Citibank and SBAMInc are authorized to pay a broker or dealer who
provides such brokerage and research services a commission for executing a
portfolio transaction for the Portfolio which is in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction if Citibank or SBAMInc determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage and research

<PAGE>

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, SBAMInc, or their affiliates have with respect to accounts over
which they exercise investment discretion.

The management fee that each Portfolio pays to Citibank or SBAMInc will
not be reduced as a consequence of Citibank's or SBAMInc's receipt of brokerage
and research services. While such services are not expected to reduce the
expenses of Citibank or SBAMInc, Citibank or SBAMInc 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 a Portfolio as well as for one or more of Citibank's or
SBAMInc's other clients. Investment decisions for each Portfolio and for
Citibank's and SBAMInc'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 of or the size of the position
obtainable for the security for a Portfolio. When purchases or sales of the
same security for a Portfolio and for other portfolios managed by Citibank or
SBAMInc occur contemporaneously, the purchase or sale orders may be aggregated
in order to obtain any price advantages available to large volume purchases or
sales.

For the fiscal year ended December 31, 1996, the period from January 1,
1997 to October 31, 1997 and the fiscal years ended October 31, 1998 and 1999,
Large Cap Growth Portfolio paid brokerage commissions of $586,248, $643,728,
$855,648 and $1,463,273, respectively. For the fiscal year ended December 31,
1996, the period from January 1, 1997 to October 31, 1997 and the fiscal years
ended October 31, 1998 and 1999, Small Cap Growth Portfolio paid brokerage
commissions of $84,320, $77,226, $214,401 and $372,100, respectively. For the
period from May 3, 1999 (commencement of operations) to October 31, 1999, High
Yield Portfolio paid no brokerage commissions. For the period from November 1,
1998 (commencement of operations) to October 31, 1999, U.S. Fixed Income
Portfolio paid no brokerage commissions.

Item 17. Capital Stock and Other Securities.

Under the Declaration of Trust, the Trustees are authorized to issue
beneficial interests in the Trust and to establish series, each of which shall

<PAGE>

be a subtrust, the beneficial interests in which shall be separate and distinct
from the beneficial interests in any other series. Each Portfolio is a series
of the Trust. Investors in each Portfolio are entitled to participate pro rata
in distributions of taxable income, loss, gain and credit of that Portfolio.
Upon liquidation or dissolution of a Portfolio, investors in that Portfolio are
entitled to share pro rata in the Portfolio's net assets available for
distribution to its investors. Interests in a Portfolio have no preference,
pre-emptive, conversion or similar rights and are fully paid and
non-assessable, except as set forth below. Interests in a Portfolio may not be
transferred.

Each investor is entitled to a vote in proportion to its percentage of the
aggregate beneficial interests in a Portfolio. Investors in a Portfolio do not
have cumulative voting rights, and investors holding more than 50% of the
aggregate beneficial interests in the Trust may elect all of the Trustees if
they choose to do so and in such event the other investors in the Trust would
not be able to elect any Trustee. The Trust is not required to hold, and has no
current intention of holding, annual meetings of investors but the Trust will
hold special meetings of investors when it is required to do so by law, or in
the judgment of the Trustees it is necessary or desirable to submit matters for
an investor vote.

The Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets, if approved by a vote of a majority, as
defined in the 1940 Act, of the holders of the Trust's outstanding voting
securities voting as a single class, or of the affected series of the Trust, as
the case may be, or if authorized by an instrument in writing without a
meeting, consented to by holders of not less than a majority of the interests
of the affected series. However, if the Trust or the affected series is the
surviving entity of the merger, consolidation or sale of assets, no vote of
interest holders is required. Any series of the Trust may be dissolved (i) by
the affirmative vote of not less than two-thirds of the outstanding beneficial
interests in such series at any meeting of holders of beneficial interests or
by an instrument in writing signed by a majority of the Trustees and consented
to by not less than two-thirds of the outstanding beneficial interests, (ii) by
the Trustees by written notice to holders of the beneficial interests in the
series or (iii) upon the bankruptcy or expulsion of a holder of a beneficial
interest in the series, unless the remaining holders of beneficial interests,
by majority vote, agree to continue the series. The Trust may be dissolved by
action of the Trustees upon the dissolution of the last remaining series.

Each Portfolio is a series of the Trust, organized as a trust under the
laws of the State of New York. The Declaration of Trust provides that each
Portfolio shall maintain appropriate insurance (e.g., fidelity bonding and
errors and omissions insurance) for the protection of the Portfolio, its
investors, Trustees, officers, employees and agents covering possible tort and
other liabilities.

The Declaration of Trust provides that obligations of the Trust are not
binding upon the Trustees individually and that the Trustees will not be liable
for any action or failure to act, but nothing in the Declaration of Trust

<PAGE>

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.

Each investor in a Portfolio may add to or reduce its investment in that
Portfolio on each business day. As of the close of regular trading on the New
York Stock Exchange, on days during which the Exchange is open for trading, the
value of each investor's beneficial interest in a Portfolio is determined by
multiplying the net asset value of the Portfolio by the percentage, effective
for that day, which represents that investor's share of the aggregate
beneficial interests in the Portfolio. Any additions or withdrawals, which are
to be effected on that day, are then effected. Thereafter, the investor's
percentage of the aggregate beneficial interests in the Portfolio is
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 same time on such day plus or minus, as
the case may be, the amount of the net additions to or withdrawals from the
aggregate investments in the Portfolio by all investors in the Portfolio. The
percentage so determined is then applied to determine the value of the
investor's interest in the Portfolio as of the close of regular trading on the
following business day of the Portfolio.

Item 18. Purchase, Redemption and Pricing of Securities.

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

The net asset value of each Portfolio (i.e., the value of its securities
and other assets less its liabilities, including expenses payable or accrued)
is determined each day during which the New York Stock Exchange is open for
trading ("Business Day"). As of the date of this Registration Statement, 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 each Portfolio is made once each day as of the close of regular trading on
the Exchange (normally 4:00 p.m. Eastern time). As set forth above, purchases
and withdrawals will be effected at the time of determination of net asset
value next following the receipt of any purchase or withdrawal order.

<PAGE>

For the purpose of calculating a Portfolio's net asset value, 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 were 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 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 that 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. 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.

Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of regular trading on the
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 a
Portfolio'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.

Interest income on long-term obligations held for a Portfolio 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 less amortization of
premium.

Subject to compliance with applicable regulations, the Trust has reserved
the right to pay the redemption price of beneficial interests in a Portfolio,
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

<PAGE>

the beneficial interests being sold. If a holder of beneficial interests were
to receive 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 beneficial interests in a Portfolio more than seven days during any
period when (a) trading in the markets the Portfolio normally utilizes is
restricted, or an emergency, as defined by the rules and regulations of the
SEC, exists making disposal of the Portfolio'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.

Item 19. Taxation of each Portfolio.

The Trust is organized as a trust under New York law. The Trust has
determined that each Portfolio is properly treated as a separate partnership
for U.S. federal and New York State income tax purposes. Accordingly, under
those tax laws, the Portfolios are not subject to any income tax. Each
Portfolio's taxable year ends October 31. Although the Portfolios are not
subject to U.S. federal income tax, they file appropriate U.S. federal income
tax returns.

A Portfolio may be subject to foreign withholding and other taxes with
respect to income on certain securities of non-U.S. issuers. These taxes may be
reduced or eliminated under the terms of an applicable U.S. income tax treaty.
It is not possible to determine a Portfolio's effective rate of foreign tax in
advance, since the amount of the Portfolio's assets to be invested within
various countries is not known. The Trust does not anticipate that investors
qualifying as RICs and investing substantially all of their assets in a
Portfolio will be able to pass through to their shareholders any foreign tax
credit or deduction for federal income tax purposes with respect to the foreign
withholding taxes paid by the Portfolio, if any.

Each investor in a Portfolio must take into account its share of that
Portfolio's ordinary income, expense, capital gains and losses, credits, and
other items in determining its income tax liability. The determination of such
share is made in accordance with the governing instruments of the Trust and the
U.S. Internal Revenue Code of 1986, as amended (the "Code"), and regulations
promulgated thereunder. Distributions to and withdrawals by an investor are
generally not taxable. However, to the extent the cash proceeds of any
withdrawal or distribution exceed an investor's adjusted tax basis in its
partnership interest in a Portfolio, the investor will generally realize gain
for U.S. federal income tax purposes. If, upon a complete withdrawal (i.e., a
redemption of its entire interest in the Portfolio), the investor's adjusted
tax basis in its partnership interest in the Portfolio exceeds the proceeds of
the withdrawal, the investor will generally realize a loss for federal income
tax purposes. An investor's adjusted tax basis in its partnership interest in
the Portfolio will generally be the aggregate price paid therefor, increased by

<PAGE>

the amounts of its distributive shares of items of realized net income and gain
(including income, if any, exempt from U.S. Federal income tax), and reduced,
but not below zero, by the amounts of its distributive shares of items of net
loss and the amounts of any distributions received by the investor. This
discussion does not address any distributions by the Portfolios in kind (i.e.,
any distributions of readily marketable securities or other non-cash property),
which will be subject to special tax rules and may have consequences different
from those described in this paragraph.

The Trust believes that, in the case of an investor in a Portfolio that
seeks to qualify as a regulated investment company ("RIC") under the Code, the
investor should be treated for U.S. federal income tax purposes as an owner of
an undivided interest in the assets and operations of the Portfolio, and
accordingly should be deemed to own a proportionate share of each of the assets
of the Portfolio and be entitled to treat as earned by it the portion of the
Portfolio's gross income attributable to that share. Each investor should
consult its tax advisers regarding whether, in light of its particular tax
status and any special tax rules applicable to it, this approach applies to its
investment in the Portfolio, or whether a Portfolio should be treated, as to
it, as a separate entity as to which the investor has no direct interest in
Portfolio assets or operations.

In order to enable an investor in a Portfolio that is otherwise eligible
to qualify as a RIC under the Code to so qualify, the Trust intends that each
Portfolio will satisfy the requirements of Subchapter M of the Code relating to
the nature of each Portfolio's gross income and the composition
(diversification) of each Portfolio's assets as if those requirements were
directly applicable to such Portfolio and will allocate and permit withdrawals
of its net investment income and any net realized capital gains in a manner
that will enable an investor that is a RIC to comply with the qualification
requirements imposed by Subchapter M of the Code.

Foreign exchange gains and losses realized by a Portfolio will generally
be treated as ordinary income and losses for federal income tax purposes.
Certain uses of foreign currency and foreign currency forward contracts and
investments in certain "passive foreign investment companies" may be limited in
order to enable an investor that is a RIC to avoid imposition of a tax. A
Portfolio may elect to mark to market any investments in "passive foreign
investment companies" on the last day of each year. This election may cause the
Portfolio to recognize income prior to the receipt of cash payments with
respect to those investments; in order to distribute this income and avoid a
tax on any RICs investing in the Portfolio, the Portfolio may be required to
liquidate portfolio securities that it might otherwise have continued to hold.

A Portfolio's investment in zero-coupon bonds, payment-in-kind bonds and
certain securities purchased at a market discount will cause the Portfolio to
recognize income prior to the receipt of cash payments with respect to those
securities. In order to enable any investor which is a RIC to distribute this
income and avoid a tax, the Portfolio may be required to liquidate portfolio
securities that it might otherwise have continued to hold, potentially
resulting in additional taxable gain or loss.

<PAGE>

A Portfolio's transactions in options, foreign currency forward contracts,
futures contracts, short sales and swaps and related transactions, if any, will
be subject to special tax rules that may affect the amount, timing, and
character of Portfolio income. For example, certain positions held for the
Portfolio on the last business day of each taxable year will be marked to
market (i.e., treated as if sold) 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 for a Portfolio that 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 Portfolio losses and adjustments in the holding periods of
Portfolio securities. Certain tax elections exist for straddles that may alter
the effects of these rules. Each Portfolio intends to limit its activities in
options, foreign currency forward contracts, and futures contracts to the
extent necessary to enable any investor which is a RIC to meet the requirements
of Subchapter M of the Code.

There are certain tax issues which will be relevant to only certain
investors, specifically, investors which are segregated asset accounts and
investors who contribute assets other than cash to a Portfolio. It is intended
that such segregated asset accounts will be able to satisfy diversification
requirements applicable to them and that such contributions of assets will not
be taxable provided certain requirements are met. Such investors are advised to
consult their own tax advisers as to the tax consequences of an investment in a
Portfolio.

The Trust intends to conduct its activities and those of the Portfolios so
that they will not be deemed to be engaged in the conduct of a U.S. trade or
business for U.S. federal income tax purposes. Therefore, it is not anticipated
that an investor in a Portfolio, other than an investor which would be deemed a
"U.S. person" for U.S. federal income tax purposes, will be subject to U.S.
federal income taxation (other than a 30% withholding tax on dividends and
certain interest income) solely by reason of its investment in a Portfolio.
There can be no assurance that the U.S. Internal Revenue Service may not
challenge the above conclusions or take other positions that, if successful,
might result in the payment of U.S. federal income taxes by investors in a
Portfolio.

The above discussion does not address the special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance companies,
and financial institutions, or the state, local, or non-U.S. tax laws that may
be applicable to certain investors. Investors should consult their own tax
advisers with respect to the special tax rules that may apply in their
particular situations, as well as the state, local, or foreign tax consequences
to them of investing in a Portfolio.

<PAGE>

Item 20. Underwriters.

The exclusive placement agent for each Portfolio is CFBDS, which receives
no compensation for serving in this capacity. Investment companies, insurance
company separate accounts, common and commingled trust funds and similar
organizations and entities may continuously invest in each Portfolio.

Item 21. Calculation of Performance Data.

Not applicable.

Item 22. Financial Statements.

The financial statements contained in the Annual Report of Large Cap
Growth Portfolio, Small Cap Growth Portfolio and U.S. Fixed Income Portfolio,
as filed with the Securities and Exchange Commission on December 30, 1999
(Accession Number 0000930413-99-001564), for the fiscal years ended October 31,
1999 are incorporated by reference into this Part B. A copy of this Annual
Report accompanies this Part B.

The financial statements for High Yield Portfolio for the period from May
3, 1999 (commencement of operations) to October 31, 1999 are as follows:

<PAGE>

HIGH YIELD PORTFOLIO

PORTFOLIO OF INVESTMENTS October 31, 1999
ISSUER PRINCIPAL AMOUNT VALUE

FIXED INCOME -- 95.2%

DOMESTIC CORPORATIONS -- 93.0%

AEROSPACE -- 2.1%
Hexcel Corp.
9.75% due 1/15/09+ $1,000,000 $ 790,000
Sequa Corp.
9.00% due 8/01/09 930,000 904,425
1,694,425

AUTOMOTIVE -- 6.0%
American Axle &
Manufacturing Inc
9.75% due 3/01/09+ 1,250,000 1,240,625
J.H. Heafner Inc.
10.00% due 5/15/08 1,375,000 1,258,125
J.L. French Automotive
Castings
11.50% due 6/01/09+ 1,000,000 987,500
Lear Corp.
8.11% due 5/15/09+ 1,375,000 1,314,790
4,801,040

CABLE & OTHER MEDIA -- 11.4%
Charter Communications
Holdings
8.625% due 4/01/09+ 375,000 354,375
9.92% due 4/01/11+ 3,000,000 1,800,000
CSC Holdings Inc.
9.875% due 2/15/13+ 1,000,000 1,030,000
Frontiervision Holdings LP
11.875% due 9/15/07 2,250,000 1,901,250
Granite Broadcasting Corp.
10.375% due 5/15/05 500,000 511,250
NTL Inc.+
Zero coupon due 4/01/08 2,500,000 1,675,000
Telewest plc
Zero coupon due 10/01/07 2,100,000 1,900,500
9,172,375

CAPITAL GOODS/BUILDING PRODUCTS -- 2.5%
Packard Bioscience Inc. -Series
B
9.375% due 3/01/07 1,000,000 912,500
Jordan Industries Inc. -Series
D
10.375% due 8/01/07 1,125,000 1,051,875
1,964,375
ISSUER PRINCIPAL AMOUNT VALUE

CHEMICALS -- 2.8%
Lyondell Chemical Co.

<PAGE>

9.875% due 5/01/07 $1,250,000 $ 1,246,875
Octel Devs plc
10.00% due 5/01/06 1,000,000 990,000
2,236,875

CONSUMER PRODUCTS/TOBACCO -- 15.6%
French Fragrances Inc.
10.375% due 5/15/07 1,270,000 1,168,400
Home Interiors Gifts Inc.
10.125% due 6/01/08 1,910,000 1,556,650
Mail Well Corp.
8.75% due 12/15/08+ 1,000,000 937,500
Revlon Consumer Products
Corp.
8.625% due 2/01/08 875,000 463,750
Revlon Consumer Products
Corp.
9.00% due 11/01/06 1,000,000 790,000
Simmons Co.
10.25% due 3/15/09+ 1,375,000 1,350,937
Triarc Consumer Products
Group
10.25% due 2/15/09+ 2,000,000 1,935,000
United Industries Corp.
9.875% due 4/01/09+ 1,000,000 890,000
United International
Holdings Inc.
10.75% due 2/15/08 3,000,000 1,725,000
Windmere-Durable
Holdings Inc.
10.00% due 7/31/08 1,750,000 1,684,375
12,501,612

ENERGY -- 3.0%
Bellwether Exploration Co.
10.875% due 4/01/07 1,000,000 922,500
Lomak Petroleum Inc.
8.75% due 1/15/07 500,000 450,000
Western Gas Resources
10.00% due 6/15/09+ 1,000,000 1,025,000
2,397,500

FINANCIAL -- 3.0%
Avis Rent A Car Inc.
11.00% due 5/01/09+ 1,000,000 1,033,750
Contifinancial Corp.
8.375% due 8/15/03 2,000,000 400,000

HIGH YIELD PORTFOLIO

<PAGE>

PORTFOLIO OF INVESTMENTS (Continued) October 31, 1999

ISSUER PRINCIPAL AMOUNT VALUE

Williams Scotsman Inc.
9.875% due 6/01/07 $1,000,000 $ 957,500
2,391,250

FOOD/BEVERAGE/BOTTLING -- 2.5%
AmeriServe Food
Distributors Inc.
10.125% due 7/15/07 2,000,000 1,140,000
B & G Foods Indications
Corp.
9.625% due 8/01/07 1,000,000 890,000
2,030,000

GAMING -- 6.0%
Circus Circus Enterprises Inc.
9.25% due 12/01/05 1,000,000 1,003,750
Majestic Star Casino LLC.
10.875% due 7/01/06+ 1,000,000 950,000
Sun International Ltd.
9.00% due 3/15/07 1,000,000 930,000
Waterford Gaming Finance
Corp. , LLC.+
9.50% due 3/15/10 1,955,000 1,896,350
4,780,100

HEALTHCARE -- 2.2%
Alaris Medical Systems Inc.
9.75% due 12/01/06 1,000,000 800,000
Frensenuis Medical Care
Capital Trust
9.00% due 12/01/06 1,000,000 945,000
1,745,000

HOUSING RELATED -- 1.6%
CB Richards Ellis Services Inc.
8.875% due 6/01/06 1,375,000 1,285,625

LODGING LEISURE -- 2.2%
HMH Properties Inc. -Series
C
8.45% due 8/01/08 2,000,000 1,780,000

METALS/MINING/STEEL -- 2.4% P&L Coal Holdings Corp.
8.875% due 5/15/08 2,000,000 1,925,000

PAPER/FOREST PRODUCTS -- 1.3%
Tembec Finance Corp.
9.875% due 9/30/05 1,000,000 1,032,500

ISSUER PRINCIPAL AMOUNT VALUE

PUBLISHING/PRINTING -- 1.8%
Hollinger International
Publishing Inc.

<PAGE>

9.25% due 3/15/07 $1,500,000 $ 1,470,000

RETAIL -- 4.1%
Advance Stores Inc.
10.25% due 4/15/08 875,000 805,000
Cole National Group Inc.
8.625% due 8/15/07 2,000,000 1,560,000
Finlay Fine Jewelry Corp.
8.375% due 5/01/08 1,000,000 910,000
3,275,000

SERVICES/OTHER -- 7.7%
Allied Waste North
American Inc.
10.00% due 8/01/09+ 1,000,000 846,250
Integrated Electrical Service
9.375% due 2/01/09+ 1,005,000 969,825
Iron Mountain Inc.
10.125% due 10/01/06 1,000,000 1,020,000
Pierce Leahy Command Co.
8.125% due 5/15/08 1,500,000 1,380,000
Safety Kleen Services Inc.
9.25% due 6/01/08 2,000,000 1,955,000
6,171,075

TELECOMMUNICATIONS -- 9.7%
Energis plc
9.75% due 6/15/09+ 1,000,000 1,015,000
Intermedia Communications Inc.
9.50% due 3/01/09+ 2,000,000 1,850,000
Nextel Communications Inc.
Zero coupon due 10/31/07 1,500,000 1,080,000
Nextel Communications Inc.
9.75% due 8/15/04 1,000,000 1,018,750
Orange plc
9.00% due 6/01/09+ 1,000,000 1,035,000
Price Communications
Wireless Inc. - Series B
9.125% due 12/15/06 750,000 759,375
Rogers Cantel
9.375% due 6/01/08 1,000,000 1,040,000
7,798,125

ISSUER PRINCIPAL AMOUNT VALUE

TRANSPORTATION -- 3.9%
Coach USA Inc. - Series B
9.375% due 7/01/07 $1,375,000 $ 1,486,719
Continental Airlines Inc.
8.00% due 12/15/05 1,000,000 922,960
Holt Group Inc.
9.75% due 1/15/06+ 1,000,000 680,000
3,089,679

UTILITIES -- 1.2%
Calpine Corp.
7.875% due 4/01/08 1,000,000 947,500

<PAGE>

MORTGAGE OBLIGATIONS -- 2.2%

MORTGAGE BACKED
SECURITIES/PASSTHROUGHS -- 2.2%
Airplane Trust
10.875% due 3/15/19 2,000,000 1,776,000

TOTAL FIXED INCOME
(Identified Cost $84,159,318) 76,265,056
ISSUER VALUE

SHORT-TERM OBLIGATIONS -- 0.7%
State Street Bank & Trust Repurchase
Agreement 4.25% due 11/01/99
proceeds at maturity $578,000
(collateralized by $590,000 Federal
National Mortgage Association,
4.84% due 11/27/00, valued
at $594,307)$578,000

TOTAL INVESTMENTS
(Identified Cost
$84,737,318) 95.9% 76,843,056

OTHER ASSETS,

LESS LIABILITIES 4.1 3,309,501

NET ASSETS 100.0% $80,152,557

+ Rule 144A - Security exempt from registration under
Rule 144A of the Securities Act of 1933. As of
October 31, 1999 the amount of securities classified
as 144A amounted to 27% of the total net assets.
These securities may be resold in transactions exempt
from registration, normally to qualified institutional
buyers.
See notes to financial statements

<PAGE>

HIGH YIELD PORTFOLIO

STATEMENT OF ASSETS AND LIABILITIES
OCTOBER 31, 1999
ASSETS:
Investments at value (Note 1A) (Identified Cost, $84,737,318) $76,843,056
Cash 355,097
Receivable for investments sold 3,401,802
Interest receivable 2,020,294
Total assets 82,620,249
LIABILITIES:
Payable for investments purchased 2,409,302
Payable to affiliates--Management fees (Note 2) 34,768
Accrued expenses and other liabilities 23,622
Total liabilities 2,467,692
NET ASSETS $80,152,557
REPRESENTED BY:
Paid-in capital for beneficial interests $80,152,557
HIGH YIELD PORTFOLIO
STATEMENT OF OPERATIONS
FOR THE PERIOD MAY 3, 1999 (COMMENCEMENT OF OPERATIONS) TO OCTOBER 31,1999
INVESTMENT INCOME:
Interest Income (Note 1B) $4,467,042
EXPENSES: Management fees (Note 2) 318,371
Custody and fund accounting fees 32,143
Legal fees 19,354
Audit fees 14,800
Trustees fees 2,627
Other 1,517
Total expenses 388,812
Less aggregate amounts waived by the Manager (Note 2) (43,794)
Net expenses 345,018
Net investment income 4,122,024
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Unrealized depreciation of investments (7,894,262)
Net realized loss from investment transactions (568,901)
Net realized and unrealized loss on investments (8,463,163)
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS $(4,341,139)
See notes to financial statements

HIGH YIELD PORTFOLIO
STATEMENT OF CHANGES IN NET ASSETS
FOR THE PERIOD
MAY 3, 1999
(COMMENCEMENT
OF OPERaTIONS)
To
OCTOBER 31, 1999
INCREASE (DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $4,122,024
Net realized loss on investment transactions (568,901)
Unrealized depreciation of investments (7,894,262)
Net decrease in net assets resulting from operations (4,341,139)
CAPITAL TRANSACTIONS:

<PAGE>

Proceeds from contributions 137,682,126
Value of withdrawals (53,188,430)
Net increase in net assets from capital transactions 84,493,696
NET INCREASE IN NET ASSETS 80,152,557
NET ASSETS:
Beginning of period --
End of period $80,152,557

HIGH YIELD PORTFOLIO
FINANCIAL HIGHLIGHTS
FOR THE PERIOD
MAY 3, 1999
(COMMENCEMENT
OF OPERATIONS)
TO
OCTOBER 31, 1999
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000's omitted) $80,153
Ratio of expenses to average net assets 0.70%*
Ratio of net investment income to average net assets 8.42%*
Portfolio turnover 41%
Note: If agents of the Portfolio had not voluntarily waived a portion of their
fees during the period indicated, the ratios would have been as follows:
RATIOS:
Expenses to average net assets 0.79%*
Net investment income to average net assets 8.33%*
*Annualized
See notes to financial statements

HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES High Yield Portfolio (the "Portfolio"), a
separate series of The Premium Portfolios (the "Trust"), is registered under
the Investment Company Act of 1940, as amended, as a no-load, diversified,
open-end management investment company which was organized as a trust under the
laws of the State of New York. The Declaration of Trust permits the Trustees to
issue beneficial interests in the Portfolio. The Investment Manager of the
Portfolio is Citibank, N.A. ("Citibank"). Signature Financial Group (Grand
Cayman), Ltd. ("SFG") acts as the Portfolio's Sub-Administrator. The
preparation of financial statements in accordance with U.S. generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates. The significant accounting
policies consistently followed by the Portfolio are as follows:
A. Investment Security Valuations Debt securities (other than short-term
obligations maturing in sixty days or less), are valued on the basis of
valuations furnished by pricing services approved by the Board of Trustees
which take into account appropriate factors such as institutional-size trading
in similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, and other market data, without exclusive reliance on quoted prices or

<PAGE>

exchange or over-the-counter prices. Short-term obligations, maturing in sixty
days or less, are valued at amortized cost, which constitutes fair value as
determined by the Trustees. Securities, if any, for which there are no such
valuations or quotations are valued at fair value as determined in good faith
by or under guidelines established by the Trustees.
B. Income Interest income consists of interest accrued adjusted for
amortization of premium or accretion of original issue discount and market
discount on long-term debt securities when required for U.S. federal income tax
purposes. The Portfolio may place a debt obligation on non-accrual status and
reduce related interest income by ceasing current accruals and writing off
interest receivables when the collection of all or a portion of interest has
become doubtful based on consistently applied procedures. A debt obligation is
removed from non-accrual status when the issuer resumes interest payments or
when collectibility of interest is reasonably assured.
C. U.S. Federal Income Taxes The Portfolio is considered a partnership under
the U.S. Internal Revenue Code. Accordingly, no provision for federal income
taxes is necessary.

HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Continued)
D. Repurchase Agreements It is the policy of the Portfolio to require the
custodian bank to take possession, to have legally segregated in the Federal
Reserve Book Entry System or to have segregated within the custodian bank's
vault, all securities held as collateral in support of repurchase agreements.
Additionally, procedures have been established by the Portfolio to monitor, on
a daily basis, the market value of the repurchase agreement's underlying
investments to ensure the existence of a proper level of collateral.
E. Expenses The Portfolio bears all costs of its operations other than expenses
specifically assumed by Citibank and SFG. Expenses incurred by the Trust with
respect to any two or more portfolios or series are allocated in proportion to
the average net assets of each portfolio, except when allocations of direct
expenses to each portfolio can otherwise be made fairly. Expenses directly
attributable to a portfolio are charged to that portfolio.
F. Other Investment transactions are accounted for on the date the investments
are purchased or sold. Realized gains and losses on investment transactions are
determined on the identified cost basis.
2. MANAGEMENT FEES Citibank is responsible for overall management of the
Portfolio's business affairs, and has a separate Management Agreement with the
Portfolio. Citibank also provides certain administrative services to the
Portfolio. These administrative services include providing general office
facilities and supervising the overall administration of the Portfolio. SFG
acts as Sub-Administrator and performs certain duties and receives compensation
from Citibank as from time to time are agreed to by Citibank and SFG. Citibank
delegated the daily management of the Portfolio to Salomon Brothers Assets
Management Inc. (the "Subadviser") an affiliate of Citibank. Citibank is a
wholly-owned subsidiary of Citicorp, which in turn, is a wholly-owned
subsidiary of Citigroup Inc. Citigroup Inc. was formed as a result of the

<PAGE>

merger of Citicorp and Travelers Group, Inc. which was completed on October 8,
1998.
The management fee paid to Citibank, amounted to $98,840 of which $43,794 was
voluntarily waived for the period May 3, 1999 (Commencement of Operations) to
October 31, 1999. Citibank management fees are computed at the annual rate of
0.65% of the Portfolio's average daily net assets less the aggregate amount (if
any) payable by the Portfolio Trust pursuant to the Sub-management Agreement
with the Subadviser. The Portfolio pays the Subadviser the following fees,
which are accrued daily and payable monthly and are at the annual rates equal
to a percentage of the aggregate assets of the Portfolio allocated to the
Subadviser 0.45% on first $100 million, 0.40% on remaining assets.
The fees paid to the Sub-adviser amount to $219,531 for the period May 3, 1999
(Commencement of Operations) to October 31, 1999.
The Trust pays no compensation directly to any Trustee or any other officer who
is affiliated with the Sub-Administrator, all of whom receive remuneration for
their services to the Trust from the Sub-Administrator or its affiliates.

HIGH YIELD PORTFOLIO
NOTES TO FINANCIAL STATEMENTS (Continued)
3. PURCHASES AND SALES OF INVESTMENTS Purchases and Sales of Investments, other
than short-term obligations, aggregated $100,182,048 and $16,068,328
respectively, for the period ended October 31, 1999.
4. FEDERAL INCOME TAX BASIS OF INVESTMENTS The cost and unrealized appreciation
(depreciation) in value of the investment securities owned at October 31, 1999,
as computed on a federal income tax basis, are as follows:
Aggregate cost $84,737,318
Gross unrealized appreciation $187,414
Gross unrealized depreciation (8,081,676)
Net unrealized depreciation $(7,894,262)
5. LINE OF CREDIT The Portfolio, along with various other Portfolios in the
CitiFunds Family, entered into an ongoing agreement with a bank which allows
the Funds collectively to borrow up to $75 million for temporary or emergency
purposes. Interest on the borrowings, if any, is charged to the specific fund
executing the borrowing at the base rate of the bank. The line of credit
requires a quarterly payment of a commitment fee based on the average daily
unused portion of the line of credit. For the period ended October 31, 1999,
the commitment fee allocated to the Portfolio was $129. Since the line of
credit was established, there have been no borrowings.

TO THE TRUSTEES AND INVESTORS OF THE PREMIUM PORTFOLIO (THE "TRUST"), WITH
RESPECT TO ITS SERIES, HIGH YIELD PORTFOLIO:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of High Yield Portfolio (the "Portfolio"), a
series of The Premium Portfolios, as at October 31, 1999, and the related
statements of operations and of changes in net assets and the financial
highlights for the period May 3, 1999 (Commencement of Operations) through
October 31, 1999. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the

<PAGE>

Portfolio's management. Our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit in accordance
with U.S. generally accepted auditing standards. Those standards require that
we plan and perform an audit to obtain reasonable assurance whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit which included confirmation of investments owned at October 31, 1999 by
correspondence with the custodian and brokers, provides a reasonable basis for
our opinion.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Portfolio as at October 31, 1999, the
results of its operations and the changes in its net assets and the financial
highlights for the period May 3, 1999 (Commencement of Operations) through
October 31, 1999, in accordance with U.S. generally accepted accounting
principles.
PricewaterhouseCoopers LLP
Chartered Accountants
Toronto, Ontario
December 14,1999

HIGH YIELD PORTFOLIO
INDEPENDENT AUDITORS' REPORT

<PAGE>
PART C

<S> <C>
Item 23. Exhibits.

** a(1) Declaration of Trust of The Premium Portfolios
** and filed a(2) Amendments to Declaration of Trust of The Premium
herewith Portfolios
** a(3) By-laws of The Premium Portfolios
* d(1) Management Agreement between Large Cap Growth
Portfolio and Citibank, N.A., as investment manager and
administrator
* d(2) Management Agreement between Small Cap Growth
Portfolio and Citibank, N.A., as investment manager and
administrator
** d(3) Management Agreement between U.S. Fixed Income
Portfolio and Citibank, N.A., as investment manager and
administrator
*** d(4) Management Agreement between High Yield Portfolio
and Citibank, N.A., as investment manager and
administrator
d(5) Sub-Management Agreement between High Yield
Portfolio and Salomon Brothers Asset Management Inc
** e(1) Placement Agency Agreement between the Registrant
and CFBDS, Inc. (formerly known as The Landmark
Funds Broker-Dealer Services, Inc.), as exclusive
placement agent
** e(2) Letter Agreement adding certain series of the Registrant
to the Placement Agency Agreement
* g(1) Custodian Contract between the Registrant and State
Street Bank and Trust Company, as custodian
** g(2) Letter Agreement adding certain series of the Registrant
to the Custodian Contract
*** h(1) Services Agreement between Citibank, N.A. and
CFBDS, Inc.
* h(2) Accounting Services Agreement between the Registrant
and State Street Cayman Trust Company, Ltd.
** h(3) Letter Agreement adding certain series of the Registrant
to the Accounting Services Agreement
</TABLE>

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

<PAGE>

* Incorporated herein by reference to Amendment No. 4 to the
Registration Statement on Form N-1A of the Registrant relating to its
series Large Cap Growth Portfolio and Growth & Income Portfolio, File
No. 811-8436, filed October 31, 1997. (This Amendment also serves as
Amendment No. 3 to the Registration Statement on Form N-1A for The
Premium Portfolios as it relates to Small Cap Growth Portfolio, File
No. 811-07269.)

** Incorporated herein by reference to Amendment No. 6 to the
Registration Statement on Form N-1A of the Registrant relating to its
series U.S. Fixed Income Portfolio, File No. 811-8436, filed October
30, 1998.

*** Incorporated herein by reference to Amendment No. 7 to the
Registration Statement on Form N-1A of the Registrant relating to its
series Large Cap Growth Portfolio, Growth & Income Portfolio, High
Yield Portfolio and U.S. Fixed Income Portfolio, File No. 811-8436,
filed March 1, 1999. (This Amendment also serves as Amendment No. 5
to the Registration Statement on Form N-1A for The Premium Portfolios
as it relates to Small Cap Growth Portfolio, File No. 811-07269.)

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

Not applicable.

Item 25. Indemnification.

Reference is hereby made to Article V of the Declaration of Trust, as
filed as an exhibit to Post-Effective Amendment No. 6 to its Registration
Statement on Form N-1A.

The Trustees and officers of the Trust 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,
as amended.

Item 26. 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, which is,
in turn, a wholly owned subsidiary of Citigroup Inc. 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 and Foreign Bond Portfolio), The

<PAGE>

Premium Portfolios (International Equity Portfolio, Government Income
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, CitiFundsSM New York Tax Free
Income Portfolio and CitiFundsSM California Tax Free Income Portfolio),
CitiFundsSM Institutional Trust (CitiFundsSM Institutional Cash Reserves) and
Variable Annuity Portfolios (CitiSelect VIP Folio 200 Conservative, CitiSelect
VIP Folio 300 Balanced, CitiSelect VIP Folio 400 Growth, CitiSelect VIP Folio
500 Growth Plus and CitiFundsSM Small Cap Growth VIP Portfolio). Citibank and
its affiliates manage assets in excess of $351 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.
Victor J. Menezes is the President and a Director of Citibank. William R.
Rhodes and H. Onno Ruding are Vice Chairmen and Directors of Citibank. The
other Directors of Citibank are Paul J. Collins, Vice Chairman of Citigroup
Inc. and Robert I. Lipp, Chairman and Chief Executive Officer of The Travelers
Insurance Group Inc. and of Travelers Property Casualty Corp.

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

Paul J. Collins Director, Kimberly-Clark Corporation

Robert I. Lipp Chairman, Chief Executive Officer and President,
Travelers Property Casualty Corp.

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

William R. Rhodes Director, Private Export Funding
Corporation

H. Onno Ruding Supervisory Director, Amsterdamsch
Trustees Cantoor B.V.
Director, Pechiney S.A.
Advisory Director, Unilever NV and Unilever PLC
Director, Corning Incorporated

For information as to the business, profession, vocation or employment of
a substantial nature of each of the officers and directors of Salomon Brothers

<PAGE>

Asset Management Inc ("SBAM"), a subadviser of High Yield Portfolio, a series
of the Registrant, reference is made to SBAM's current Form ADV (File No.
801-32046) filed under the Advisers Act, incorporated herein by reference.

Item 27. Principal Underwriters.

(a) CFBDS, the Registrant's placement agent, is also the distributor for
CitiFundsSM International Growth & Income Portfolio, CitiFundsSM International
Growth 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 Intermediate
Income Portfolio, CitiFundsSM Short-Term U.S. Government Income Portfolio,
CitiFundsSM New York Tax Free Income Portfolio, CitiFundsSM National Tax Free
Income Portfolio, CitiFundsSM California Tax Free Income Portfolio, CitiFundsSM
Small Cap Value Portfolio, CitiFundsSM Large Cap Growth Portfolio, CitiFundsSM
Small Cap Growth Portfolio, CitiFundsSM Balanced Portfolio, CitiSelect Folio
100 Income, CitiSelect Folio 200 Conservative, CitiSelect Folio 300 Balanced,
CitiSelect Folio 400 Growth, CitiSelect Folio 500 Growth Plus, CitiSelect VIP
Folio 200 Conservative, CitiSelect VIP Folio 300 Balanced, CitiSelect VIP Folio
400 Growth, CitiSelect VIP Folio 500 Growth Plus and CitiFundsSM Small Cap
Growth VIP Portfolio. CFBDS is also the placement agent for Government Income
Portfolio, International Equity Portfolio, Large Cap Value Portfolio, Small Cap
Value Portfolio, International Portfolio, Foreign Bond Portfolio, Tax Free
Reserves Portfolio, Cash Reserves Portfolio and U.S. Treasury Reserves
Portfolio. CFBDS also serves as the distributor for the following funds: The
Travelers Fund U for Variable Annuities, The Travelers Fund VA for Variable
Annuities, The Travelers Fund BD for Variable Annuities, The Travelers Fund BD
II for Variable Annuities, The Travelers Fund BD III for Variable Annuities,
The Travelers Fund BD IV for Variable Annuities, The Travelers Fund ABD for
Variable Annuities, The Travelers Fund ABD II for Variable Annuities, The
Travelers Separate Account PF for Variable Annuities, The Travelers Separate
Account PF II for Variable Annuities, The Travelers Separate Account QP for
Variable Annuities, The Travelers Separate Account TM for Variable Annuities,
The Travelers Separate Account TM II for Variable Annuities, The Travelers
Separate Account Five for Variable Annuities, The Travelers Separate Account
Six for Variable Annuities, The Travelers Separate Account Seven for Variable
Annuities, The Travelers Separate Account Eight for Variable Annuities, The
Travelers Fund UL for Variable Annuities, The Travelers Fund UL II for Variable
Annuities, The Travelers Variable Life Insurance Separate Account One, The

<PAGE>

Travelers Variable Life Insurance Separate Account Two, The Travelers Variable
Life Insurance Separate Account Three, The Travelers Variable Life Insurance
Separate Account Four, The Travelers Separate Account MGA, The Travelers
Separate Account MGA II, The Travelers Growth and Income Stock Account for
Variable Annuities, The Travelers Quality Bond Account for Variable Annuities,
The Travelers Money Market Account for Variable Annuities, The Travelers Timed
Growth and Income Stock Account for Variable Annuities, The Travelers Timed
Short-Term Bond Account for Variable Annuities, The Travelers Timed Aggressive
Stock Account for Variable Annuities, The Travelers Timed Bond Account for
Variable Annuities, Small Cap Fund, Government Fund, Growth Fund, Growth and
Income Fund, International Equity Fund, Mid Cap Fund, Municipal Bond Fund,
Select Small Cap Portfolio, Select Government Portfolio, Select Growth
Portfolio, Select Growth and Income Portfolio, Select Mid Cap Portfolio,
Balanced Investments, Emerging Markets Equity Investments, Government Money
Investments, High Yield Investments, Intermediate Fixed Income Investments,
International Equity Investments, International Fixed Income Investments, Large
Capitalization Growth Investments, Large Capitalization Value Equity
Investments, Long- Term Bond Investments, Mortgage Backed Investments,
Municipal Bond Investments, S&P 500 Index Investments, Small Capitalization
Growth Investments, Small Capitalization Value Equity Investments, Multi-Sector
Fixed Income Investments, Multi-Strategy Market Neutral Investments,
Appreciation Portfolio, Diversified Strategic Income Portfolio, Emerging Growth
Portfolio, Equity Income Portfolio, Equity Index Portfolio, Growth & Income
Portfolio, Intermediate High Grade Portfolio, International Equity Portfolio,
Money Market Portfolio, Total Return Portfolio, Smith Barney Adjustable Rate
Government Income Fund, Smith Barney Aggressive Growth Fund Inc., Smith Barney
Appreciation Fund Inc., Smith Barney Arizona Municipals Fund Inc., Smith Barney
California Municipals Fund Inc., Balanced Portfolio, Conservative Portfolio,
Growth Portfolio, High Growth Portfolio, Income Portfolio, Global Portfolio,
Select Balanced Portfolio, Select Conservative Portfolio, Select Growth
Portfolio, Select High Growth Portfolio, Select Income Portfolio, Concert
Social Awareness Fund, Smith Barney Large Cap Blend Fund, Smith Barney
Fundamental Value Fund Inc., Large Cap Value Fund, Short-Term High Grade Bond
Fund, U.S. Government Securities Fund, Smith Barney Balanced Fund, Smith Barney
Convertible Fund, Smith Barney Diversified Strategic Income Fund, Smith Barney
Exchange Reserve Fund, Smith Barney High Income Fund, Smith Barney Municipal
High Income Fund, Smith Barney Premium Total Return Fund, Smith Barney Total
Return Bond Fund, Cash Portfolio, Government Portfolio, Municipal Portfolio,
Concert Peachtree Growth Fund, Smith Barney Contrarian Fund, Smith Barney
Government Securities Fund, Smith Barney Hansberger Global Small Cap Value
Fund, Smith Barney Hansberger Global Value Fund, Smith Barney Investment Grade
Bond Fund, Smith Barney Premier Selections Fund, Smith Barney Small Cap Value
Fund, Smith Barney Small Cap Growth Fund, Smith Barney Intermediate Maturity
California Municipals Fund, Smith Barney Intermediate Maturity New York
Municipals Fund, Smith Barney Large Capitalization Growth Fund, Smith Barney
S&P 500 Index Fund, Smith Barney Mid Cap Blend Fund, Smith Barney EAFE Index
Fund, Smith Barney US 5000 Index Fund, Smith Barney Managed Governments Fund
Inc., Smith Barney Managed Municipals Fund Inc., Smith Barney Massachusetts
Municipals Fund, Cash Portfolio, Government Portfolio, Retirement Portfolio,
California Money Market Portfolio, Florida Portfolio, Georgia Portfolio,
Limited Term Portfolio, National Portfolio, Massachusetts Money Market
Portfolio, New York Money Market Portfolio, New York Portfolio, Pennsylvania
Portfolio, Smith Barney Municipal Money Market Fund, Inc., Smith Barney Natural
Resources Fund Inc., Smith Barney Financial Services Fund, Smith Barney Health
Sciences Fund, Smith Barney Technology Fund, Smith Barney New Jersey Municipals

<PAGE>

Fund Inc., Smith Barney Oregon Municipals Fund, Zeros Plus Emerging Growth
Series 2000, Smith Barney Security and Growth Fund, Smith Barney Small Cap
Blend Fund, Inc., Smith Barney Telecommunications Income Fund, Income and
Growth Portfolio, Reserve Account Portfolio, U.S. Government/High Quality
Securities Portfolio, Emerging Markets Portfolio, European Portfolio, Global
Government Bond Portfolio, International Equity Portfolio, Pacific Portfolio,
AIM Capital Appreciation Portfolio, Smith Aggressive Growth Portfolio, Smith
Mid Cap Portfolio, Alliance Growth Portfolio, INVESCO Global Strategic Income
Portfolio, MFS Total Return Portfolio, Putnam Diversified Income Portfolio,
Smith Barney High Income Portfolio, Smith Barney Large Cap Value Portfolio,
Smith Barney International Equity Portfolio, Smith Barney Large Capitalization
Growth Portfolio, Smith Barney Money Market Portfolio, Smith Barney Pacific
Basin Portfolio, Travelers Managed Income Portfolio, Van Kampen Enterprise
Portfolio, Centurion U.S. Equity Fund, Centurion International Equity Fund,
Centurion U.S. Contra Fund, Centurion International Contra Fund, Global
High-Yield Bond Fund, International Equity Fund, Emerging Opportunities Fund,
Core Equity Fund, Long-Term Bond Fund, Global Dimensions Fund L.P., Citicorp
Private Equity L.P., AIM V.I. Capital Appreciation Fund, AIM V.I. Government
Series Fund, AIM V.I. Growth Fund, AIM V.I. International Equity Fund, AIM V.I.
Value Fund, Fidelity VIP Growth Portfolio, Fidelity VIP High Income Portfolio,
Fidelity VIP Equity Income Portfolio, Fidelity VIP Overseas Portfolio, Fidelity
VIP II Contrafund Portfolio, Fidelity VIP II Index 500 Portfolio, MFS World
Government Series, MFS Money Market Series, MFS Bond Series, MFS Total Return
Series, MFS Research Series, MFS Emerging Growth Series, Salomon Brothers
Institutional Money Market Fund, Salomon Brothers Cash Management Fund, Salomon
Brothers New York Municipal Money Market Fund, Salomon Brothers National
Intermediate Municipal Fund, Salomon Brothers U.S. Government Income Fund,
Salomon Brothers High Yield Bond Fund, Salomon Brothers International Equity
Fund, Salomon Brothers Strategic Bond Fund, Salomon Brothers Large Cap Growth
Fund, Salomon Brothers Balanced Fund, Salomon Brothers Asia Growth Fund,
Salomon Brothers Capital Fund Inc, Salomon Brothers Investors Value Fund Inc,
Salomon Brothers Opportunity Fund Inc, Salomon Brothers Institutional High
Yield Bond Fund, Salomon Brothers Institutional Emerging Markets Debt Fund,
Salomon Brothers Variable Investors Fund, Salomon Brothers Variable Capital
Fund, Salomon Brothers Variable Total Return Fund, Salomon Brothers Variable
High Yield Bond Fund, Salomon Brothers Variable Strategic Bond Fund, Salomon
Brothers Variable U.S. Government Income Fund, Salomon Brothers Variable Asia
Growth Fund, and Salomon Brothers Variable Small Cap Growth Fund.

(b) The information required by this Item 27 with respect to each director
and officer of CFBDS, Inc. is incorporated by reference to Schedule A of Form
BD filed by CFBDS, Inc. pursuant to the Securities and Exchange Act of 1934
(File No. 8-32417).

<PAGE>

Item 28. 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

State Street Bank and Trust Company 225 Franklin Street
(custodian) Boston, MA 02110

State Street Cayman Trust Company, Ltd. P.O. Box 2508 GT
(accounting services agent) Grand Cayman, Cayman Islands

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

CFBDS, Inc. c/o Signature Financial Group
(placement agent) (Cayman) Ltd.
Elizabethan Square
George Town, Grand Cayman
Cayman Islands BWI

Item 29. Management Services.

Not applicable.

Item 30. Undertakings.

Not applicable.

<PAGE>

SIGNATURE

Pursuant to the requirements of the Investment Company Act of 1940, the
Registrant has duly caused this Amendment to its Registration Statement on Form
N-1A to be signed on its behalf by the undersigned, thereunto duly authorized,
in Grand Cayman, Cayman Islands, on the 28th day of February, 2000.

THE PREMIUM PORTFOLIOS

By: Tamie Ebanks-Cunningham
--------------------------
Tamie Ebanks-Cunningham
Assistant Secretary of
The Premium Portfolios
<PAGE>

EXHIBIT INDEX

Exhibit
No.: Description:

a(2) Amendments to Declaration of Trust of The
Premium Portfolios

d(5) Sub-Management Agreement between High Yield
Portfolio and Salomon Brothers Asset Management
Inc

Exhibit a(2)

THE PREMIUM PORTFOLIOS

AMENDMENT TO
DECLARATION OF TRUST

The undersigned, constituting a majority of the Trustees of The Premium
Portfolios (the "Trust"), a trust organized under the laws of the State of New
York, pursuant to the Trust's Declaration of Trust dated as of September 13,
1993, as amended (the "Declaration"), do hereby amend Article III of the
Declaration to provide that Section 3.12 of the Declaration shall not apply
from and after January 1, 1999.

Elliott J. Berv Philip W. Coolidge
- ----------------------------- --------------------------------
ELLIOTT J. BERV PHILIP W. COOLIDGE
As Trustee and Not Individually As Trustee and Not Individually

Mark T. Finn C. Oscar Morong, Jr.
- ----------------------------- --------------------------------
MARK T. FINN C. OSCAR MORONG, JR.
As Trustee and Not Individually As Trustee and Not Individually

Walter E. Robb, III E. Kirby Warren
- ----------------------------- --------------------------------
WALTER E. ROBB, III E. KIRBY WARREN
As Trustee and Not Individually As Trustee and Not Individually

Exhibit d(5)

SUB-MANAGEMENT AGREEMENT

THE PREMIUM PORTFOLIOS

High Yield Portfolio

SUB-MANAGEMENT AGREEMENT, dated May 3, 1999, by and between The Premium
Portfolios (the "Trust"), and Salomon Brothers Asset Management Inc, a Delaware
corporation (the "Subadviser").

W I T N E S S E T H:

WHEREAS, Citibank, N.A. (the "Adviser") has been retained by the Trust to
act as investment adviser to the Trust with respect to the series of the Trust
designated as High Yield Portfolio (the "Portfolio"), and

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, the "1940 Act"), and

WHEREAS, the Adviser has requested that the Trust engage the Subadviser to
provide certain investment advisory services for the Portfolio, and the
Subadviser is willing to provide such investment advisory services for the
Portfolio 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. Appointment of the Subadviser. In accordance with and subject to the
Management Agreement between the Trust and the Adviser (the "Management
Agreement"), the Trust hereby appoints the Subadviser to act as subadviser with
respect to the Portfolio for the period and on the terms set forth in this
Agreement. The Subadviser accepts such appointment and agrees to provide an
investment program with respect to the Portfolio for the compensation provided
by this Agreement.

<PAGE>

2. Duties of the Subadviser. The Subadviser shall provide the Portfolio
and the Adviser with such investment advice and supervision as the Adviser may
from time to time consider necessary for the proper management of such portion
of the Portfolio's investment assets as the Adviser may designate from time to
time. Notwithstanding any provision of this Agreement, the Adviser shall retain
all rights and ultimate responsibilities to supervise and, in its discretion,
conduct investment advisory activities relating to the Trust. The Subadviser
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 Portfolio allocated by the Adviser to the Subadviser shall
be held uninvested, subject always to the restrictions of the Trust's
Declaration of Trust, dated September 13, 1993, 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, the then-current Registration Statement of the
Trust with respect to the Portfolio (the "Registration Statement"), it being
understood that the Subadviser shall be responsible for compliance with any
restrictions imposed in writing by the Adviser from time to time in order to
facilitate compliance with the above-mentioned restrictions and such other
restrictions as the Adviser may determine. The Adviser agrees to provide the
Subadviser with current versions of the Declaration, By-Laws, and Registration
Statement, and to promptly deliver any amendments thereto. Further, the Adviser
or the Trustees of the Trust may at any time, upon written notice to the
Subadviser, suspend or restrict the right of the Subadviser to determine what
securities shall be purchased or sold on behalf of the Portfolio and what
portion, if any, of the assets of the Portfolio allocated by the Adviser to the
Subadviser shall be held uninvested. The Subadviser shall also, as requested,
make recommendations to the Adviser as to the manner in which proxies, voting
rights, rights to consent to corporate action and any other rights pertaining
to the Portfolio's portfolio securities shall be exercised. Should the Board of
Trustees of the Trust or the Adviser at any time, however, make any definite
determination as to investment policy applicable to the Portfolio and notify
the Subadviser thereof in writing, the Subadviser 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 Subadviser shall take, on behalf of the Portfolio, 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 Portfolio's account with the brokers or dealers selected by
it, and to that end the Subadviser is authorized as the agent of the Trust to

<PAGE>

give instructions to the custodian and any subcustodian of the Portfolio as to
deliveries of securities and payments of cash for the account of the Portfolio.
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 Portfolio and/or the other accounts
over which the Subadviser or its affiliates exercise investment discretion. The
Subadviser is authorized to pay a broker or dealer who provides such brokerage
and research services a commission for executing a portfolio transaction for
the Portfolio which is in excess of the amount of commission another broker or
dealer would have charged for effecting that transaction if the Subadviser
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 Subadviser 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 Portfolio, the Subadviser 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.

3. Allocation of Charges and Expenses. The Subadviser shall furnish at its
own expense all necessary services, facilities and personnel in connection with
its responsibilities under Section 2 above. Except as provided in the foregoing
sentence, it is understood that the Trust will pay from the assets of the
Portfolio all of its own expenses allocable to the Portfolio including, without
limitation, organization costs of the Portfolio; compensation of Trustees who
are not "interested persons" of the Trust; 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, registrar or dividend disbursing agent of the
Trust; expenses of issuing and redeeming beneficial interests and servicing
investor accounts; expenses of preparing, typesetting, printing and mailing
investor reports, notices, proxy statements and reports to governmental
officers and commissions and to investors in the Portfolio; expenses connected
with the execution, recording and settlement of security transactions;
insurance premiums; fees and expenses of the custodian for all services to the
Portfolio, including safekeeping of funds and securities and maintaining
required books and accounts; expenses of calculating the net asset value of the
Portfolio (including but not limited to the fees of independent pricing

<PAGE>

services); expenses of meetings of the Portfolio's investors; expenses relating
to the issuance of beneficial interests in the Portfolio; 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 Portfolio
may be a party and the legal obligation which the Trust may have to indemnify
its Trustees and officers with respect thereto.

4. Compensation of the Subadviser. For the services to be rendered by the
Subadviser hereunder, the Trust shall pay to the Subadviser from the assets of
the Portfolio an investment subadvisory fee, accrued daily and paid monthly, at
an annual rate equal to the percentages specified below of the aggregate assets
of the Portfolio allocated to the Subadviser:

0.45% on the first $100 million;
0.40% on assets in excess of $100 million

If the Subadviser serves as investment subadviser for less than the whole
of any period specified in this Section 4, the compensation to the Subadviser
shall be prorated.

5. Covenants of the Subadviser. The Subadviser 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 Portfolio, except as
permitted by the 1940 Act, will not take a long or short position in beneficial
interests of the Portfolio 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 Portfolio relative to the
Subadviser and its partners, directors and officers.

6. Limitation of Liability of the Subadviser. The Subadviser 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 Portfolio, 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 6,
the term "Subadviser" shall include directors, officers, partners and employees
of the Subadviser as well as the Subadviser itself. The Adviser is expressly
made a third party beneficiary of this Agreement, and may enforce any
obligations of the Subadviser under this Agreement and recover directly from
the Subadviser for any liability the Subadviser may have hereunder.

<PAGE>

7. Activities of the Subadviser. The services of the Subadviser to the
Portfolio are not to be deemed to be exclusive, the Subadviser being free to
render investment advisory and/or other services to others, including accounts
or investment management companies with similar or identical investment
objectives to the Portfolio. It is understood that Trustees, officers, and
investors of the Trust or the Adviser are or may be or may become interested in
the Subadviser, as directors, officers, partners, employees, or otherwise and
that directors, officers, partners and employees of the Subadviser are or may
become similarly interested in the Trust or the Adviser and that the Subadviser
may be or may become interested in the Trust as an investor or otherwise.

8. Duration, Termination and Amendments of this Agreement. This Agreement
shall become effective as of the day and year first above written, and shall
govern the relations between the parties hereto thereafter and shall remain in
force until May 1, 2001, on which date it will terminate unless its continuance
after May 1, 2001 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 the Adviser or of the Subadviser 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 Portfolio.

This Agreement may be terminated at any time without the payment of any
penalty by (i) the Trustees, (ii) the "vote of a majority of the outstanding
voting securities" of the Portfolio, or (iii) the Adviser or the Subadviser, 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 constitutes the entire agreement between the parties and
may be amended only if such amendment is approved by the Subadviser and the
"vote of a majority of the outstanding voting securities" of the Portfolio
(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.

<PAGE>

Each party acknowledges and agrees that all obligations of the Trust under
this Agreement are binding only with respect to the Portfolio; that any
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 Portfolio; 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 in his capacity as an officer of the Trust under the
Declaration, and the obligations of this Agreement are not binding upon any of
the Trustees, officers or holders of beneficial interests in the Trust
individually.

9. Governing Law. This Agreement shall be construed and the provisions
thereof interpreted under and in accordance with the laws of The Commonwealth
of Massachusetts provided, however, that nothing herein will be construed in a
manner inconsistent with the 1940 Act or any rules or regulations of the
Securities and Exchange Commission thereunder.

<PAGE>

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.

THE PREMIUM SALOMON BROTHERS ASSET
PORTFOLIOS MANAGEMENT INC
on behalf of High
Yield Portfolio

By: Philip Coolidge By: Peter J. Wilby
--------------------------- -------------------------
Title: President Title: Executive Vice President

The foregoing is acknowledged:

Citibank, N.A.

By: Lawrence Keblusek
--------------------------
Title: U.S. C.I.O.