SMALL CAP GROWTH PORTFOLIO, POS AMI, 1999-03-01

SMALL CAP GROWTH PORTFOLIO
POS AMI, 1999-03-01

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As filed with the Securities and Exchange Commission on March 1, 1999

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. 7*

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. 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.

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

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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 goal of GROWTH & INCOME PORTFOLIO is long-term capital growth and current
income.

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 the strategies that, in
the opinion of Citibank, N.A., the investment manager for each Portfolio, are
most likely to achieve the Portfolio's investment goal. Of course, there can be
no assurance that any Portfolio will achieve its goal. Please note that each
Portfolio may also use strategies and invest in securities that are not
described below but that are described in Part B to this Registration
Statement. Of course, Citibank may decide, as a matter of investment strategy,
not to use the investments and investment techniques described below and in
Part B at any particular time. Each Portfolio's strategies may be changed
without investor approval.

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

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circumstances, at least 65% of the Portfolio's total assets is invested in
equity securities of large cap issuers.

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 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 consist of debt
securities rated Baa by Moody's or BBB by Standard & Poor's.

In selecting investments, Citibank emphasizes issuers with long histories of
strong, relatively predictable earnings growth rates and 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

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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 some cases, the derivatives may be
illiquid, and the Portfolio may bear more counterparty risk 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 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 year ended
December 31, 1996, the period from January 1, 1997 to October 31, 1997, and the
fiscal year ended October 31, 1998, the Portfolio's portfolio turnover rate was
90%, 103% and 53%, 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 these issuers. These stocks may include the stocks in the
Russell 2000 Index, which is an index of small capitalizations stocks.

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

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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, BBB or
better by Standard & Poor's, or which Citibank believes to be of comparable
quality. Generally, less than 5% of the Portfolio's assets consist of 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

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"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
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.

GROWTH & INCOME PORTFOLIO invests primarily in common stocks. Although not
required to, the Portfolio may also purchase debt securities as described
below. The Portfolio invests primarily in equity and debt securities of
established, large cap issuers. Large cap issuers are those with market
capitalizations within the top 1,000 stocks of the equity market.

The Portfolio invests primarily in securities with a record of earnings and
dividend payments but may, from time to time, invest in securities that pay no
dividends or interest.

Debt securities generally represent a debt obligation of an issuer, and include
bonds, short-term obligations and mortgage-backed and asset-backed securities
(including collateralized mortgage obligations or CMOs), U.S. government
securities, preferred stock, and convertible securities (both debt securities
and preferred stocks). Debt 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 Portfolio may invest in investment grade debt securities (those rated Baa
by Moody's, BBB by Standard & Poor's or which Citibank believes to be of
comparable quality), but may also invest in debt securities rated below Baa by
Moody's or below BBB by Standard & Poor's and equivalent debt securities.\
Securities rated below Baa or BBB are commonly known as "junk bonds." These
securities may offer higher income than more highly rated debt securities, but
they have special risks, as discussed below.

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The Portfolio may invest in mortgage-backed securities that are issued or
guaranteed as to payment of principal and interest by the U.S. government or
one of its agencies, such as the Government National Mortgage Association
(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. Home mortgage
loans are typically grouped together into "pools" by banks and other lending
institutions, and interests in these pools are then sold to investors, allowing
the bank or other lending institution to have more money available to loan to
home buyers. When homeowners make interest and principal payments, these
payments are passed on to the investors in the pool. Mortgage-backed securities
generally are backed or collateralized by a pool of mortgages. Certain types of
mortgage-backed securities are called collateralized mortgage obligations, or
CMOs.

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 enter into "dollar rolls," where the Portfolio sells
mortgage-backed securities and simultaneously agrees to repurchase similar
securities in the future at a lower price. 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 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 invest up to 25% of its assets in foreign equity and debt
securities. Foreign securities may be issued by issuers in developing
countries.

Citibank uses a value oriented approach in managing the Portfolio. This means
that it looks for securities that it believes are currently undervalued, or
priced below their true worth, but whose issuers have good longer term
prospects. Citibank looks for securities that it believes are underpriced
according to certain financial measurements of their intrinsic worth or
business prospects (such as the company's cash flow, earnings prospects, growth
rate and/or dividend paying ability). Citibank believes that securities of
companies which are temporarily underpriced due to earnings declines, cyclical
business downturns or other adverse factors may provide a higher total return

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over time than securities of companies whose positive attributes are more
accurately reflected in the security's current price.

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, but is not required to, use derivatives in
order to protect (or "hedge") against declines in the value of securities held
by the Portfolio or increases in 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 financial futures, stock index futures, foreign currency
futures, forwards and exchange contracts, options on securities and foreign
currencies, and options on interest rate and stock index futures. 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 some cases,
the derivatives may be illiquid, and the Portfolio may bear more counterparty
risk. 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 selecting
securities to purchase. The portfolio managers for Growth & Income Portfolio
generally use a "bottom-up" approach when selecting securities to purchase or
sell for 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 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.

<PAGE>

March 2, 1998 (commencement of operations) to October 31, 1998, the Portfolio's
turnover rate was 59%.

HIGH YIELD PORTFOLIO invests primarily 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.

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
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.

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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 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.

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 derivatives may be
illiquid, and the Portfolio may bear more counterparty risk. 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.

<PAGE>

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. The turnover rate for the
Portfolio is not expected to exceed 100% for its fiscal year ending October 31,
1999.

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
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);

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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 developing countries; and 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.

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

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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.

Under normal market conditions, the Portfolio's dollar weighted average
portfolio maturity is 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
of trade. This means that the exchange or board of trade guarantees
counterparty performance. In other cases, the derivatives may be illiquid, and
the Portfolio may bear more counterparty risk. 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.

<PAGE>

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 goals.

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. The turnover rate for the
Portfolio is not expected to exceed 250% for its fiscal year ending October 31,
1999.

BROKERAGE. Citibank may use brokers or dealers for Portfolio transactions who
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 who provides these brokerage and research services a commission for
executing a portfolio transaction which is higher than the commission another
broker or dealer would have charged. However, 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

The principal risks of investing in LARGE CAP GROWTH PORTFOLIO, SMALL CAP
GROWTH PORTFOLIO and GROWTH & 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. 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. Equity securities
are subject to market risk that historically has resulted in greater
price volatility than exhibited by fixed income securities.

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

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.

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

<PAGE>

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.
If a Portfolio holds debt securities, 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.

Growth & Income Portfolio may invest in debt securities of any grade,
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 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 Prepayment Risk. The issuers of debt securities that may be held by a
Portfolio may be able to 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. 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. Mortgage-backed securities, including CMOs are
particularly susceptible to prepayment risk and their prices may be
very volatile.

<PAGE>

o Special Characteristics of Convertible Securities. Convertible
securities, which are debt securities that may be converted into
stock, are subject to the market risk of stocks, and, like other debt
securities, are also subject to interest rate risk and the credit
risk of their issuers. 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.

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
introduction of the euro.

<PAGE>

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.
These markets often have provided higher rates of return, and
greater risks, to investors, but they also may provide lower
rates of return or negative returns, for extended periods.

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 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.

o Zero Coupon and Payment-In-Kind Obligations. Growth & Income
Portfolio may invest in zero coupon and 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 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. A Portfolio could be adversely affected if the computer
systems used by the Portfolio or its service providers are not

<PAGE>

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

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

High Yield Portfolio may invest in debt securities of any grade,
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 bonds, may

<PAGE>

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 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.

<PAGE>

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 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. These markets often have provided higher rates
of return, and greater risks, to investors, but they also
may provide lower rates of return or negative returns, for
extended periods.

<PAGE>

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. High Yield Portfolio and
U.S. Fixed Income Portfolio may invest in zero coupon obligations.
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 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. A Portfolio could be adversely affected if the computer
systems used by the Portfolio or its service providers are not
programmed to accurately process information on or after January 1,
2000. Each Portfolio, and its service providers, are making efforts
to resolve any potential Year 2000 problems. While it is likely these
efforts will be successful, the failure to implement any necessary
modifications could have an adverse impact on a Portfolio. Each
Portfolio also could be adversely affected if the issuers of
securities held by the Portfolio do not solve their Year 2000
problems, or if it costs them large amounts of money to solve these
problems.

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, with its
headquarters at 153 East 53rd Street, New York, New York, has been managing
money since 1822. With its affiliates, it currently manages more than $290
billion in assets worldwide. Citibank is a wholly-owned subsidiary of Citicorp,
which is, in turn, a wholly-owned subsidiary of Citigroup Inc. Citigroup Inc.

<PAGE>

was formed as a result of the merger of Citicorp and Travelers Group, Inc.,
which was completed on October 8, 1998.

Citibank and its affiliates may have banking and investment banking
relationships with the issuers of securities that are held in the Portfolios.
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. Certain CitiFunds have applied for exemptive relief from the
Securities and Exchange Commission which would permit them to employ other or
additional subadvisers without investor approval. The requested exemptive
relief also would permit the terms of sub-advisory agreements to be changed and
the employment of subadvisers to be continued after events that would otherwise
cause an automatic termination of a sub-advisory agreement, in each case
without investor approval if those changes or continuation are approved by the
appropriate Portfolio's Board of Trustees. There is no assurance that the SEC
will grant the requested relief. If the requested relief is granted, Growth &
Income Portfolio, High Yield Portfolio and U.S. Fixed Income Portfolio would be
permitted to employ subadvisers without investor approval, subject to
compliance with certain conditions.

LARGE CAP GROWTH PORTFOLIO: Grant D. Hobson and Richard Goldman, Vice
Presidents, have been the portfolio managers of Large Cap Growth Portfolio
since January 1996. Mr. Hobson is a Senior Portfolio Manager who, since
September 1994, has been managing U.S. equity portfolios for trust and pension
accounts of Citibank Global Asset Management. He currently manages, or
co-manages, more than $4 billion of total assets at Citibank. Prior to joining
Citibank in 1993, Mr. Hobson was a securities analyst and sector manager for
pension accounts and mutual funds for Axe Houghton, formerly a division of
USF&G. Mr. Goldman is a Senior Investment 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 joined Citibank in 1985 as an assistant
portfolio manager, working on quantitative portfolio strategies. Within the
investment unit, he has had responsibilities in both product development and
portfolio management. From September 1988 through June 1994, Mr. Goldman served
as Director of Institutional Investor Relations, where his responsibilities
included Citicorp's relationships with its investors and rating agencies. He
currently manages, or co-manages, approximately $6 billion of total assets at
Citibank.

SMALL CAP GROWTH PORTFOLIO: Marguerite Wagner has been the portfolio manager
for Small Cap Growth Portfolio since January, 1999. Ms. Wagner joined Citibank
in 1985. Since 1995, she has had portfolio management and research analyst

<PAGE>

responsibility for an internal mid-cap common trust fund and private equity
managed accounts. From 1992 through the end of 1994, Ms. Wagner was a member of
the small capitalization equity management group of Citibank Global Asset
Management. Prior to 1992, she managed portfolios for the Private Banking Group
of Citibank.

GROWTH & INCOME PORTFOLIO: Barbara G. Marcin has been the portfolio manager of
Growth & Income Portfolio since its inception. Ms. Marcin is a Senior Portfolio
Manager responsible for managing over $600 million in U.S. equity and balanced
accounts for individuals, and is a member of Citibank's Global Committee. Since
1995, she has been head of Citibank's U.S. Equity Value Investments team.
During 1994, Ms. Marcin was a portfolio manager for U.S. equity and balanced
accounts. Prior to joining Citibank as a Vice President and portfolio manager
in 1993, she was a Vice President and portfolio manager at Fiduciary Trust
Company International. Prior to that, she was with E.F Hutton for three years
in the Personal Financial Management Group.

HIGH YIELD PORTFOLIO: Salomon Brothers Asset Management Inc (SBAMInc), Seven
World Trade Center, New York, New York, 10048, has served as the subadviser for
High Yield Portfolio since its inception. SBAMInc, a registered investment
adviser, is a wholly owned subsidiary of Salomon Brothers Holding Company Inc.
Salomon Brothers Holding Company Inc is wholly owned by Salomon Smith Barney
Holdings Inc, which in turn is a wholly owned subsidiary of Citigroup Inc. Beth
A. Semmel will be the portfolio manager. Ms. Semmel is a Managing Director of
SBAM Inc and an Investment Policy Committee Member. She joined SBAM Inc in May
1993. She is a Portfolio Manager and Senior Analyst responsible for SBAMInc's
high yield portfolios, for evaluating high yield securities and for covering
consumer-related industries. Formerly, Ms. Semmel was with Morgan Stanley Asset
Management as a high yield bond analyst; and prior to that, with Kidder Peabody
as an equity analyst. Ms. Semmel is a Chartered Financial Analyst and a member
of The New York Society of Security Analysts. She holds a BA degree in Math and
Computer Science from Colgate University.

U.S. FIXED INCOME PORTFOLIO: Mark Lindbloom, a Vice President of Citibank, 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
19 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.

<PAGE>

MANAGEMENT FEES

For the management services Citibank provided to LARGE CAP GROWTH PORTFOLIO
during the fiscal year ended October 31, 1998, Citibank received a total of
0.70% 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, 1998, Citibank received a total of
0.75% of the Portfolio's average daily net assets, after waivers.

For the management services Citibank provided to GROWTH & INCOME PORTFOLIO
during the fiscal year ended October 31, 1998, Citibank received a total of
0.62% of the Portfolio's average daily net assets, after waivers.

For the management services Citibank provides to HIGH YIELD PORTFOLIO and U.S.
FIXED INCOME PORTFOLIO, 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.

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
that amount to the applicable subadviser or subadvisers on the Portfolio's
behalf. Citibank may voluntarily agree to waive a portion of its investment
advisory fees.

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

<PAGE>

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. Investors in a Portfolio (e.g.,
investment companies, insurance company separate accounts and common and
commingled trust funds) are each liable for all obligations of that Portfolio.
However, it is not expected that the liabilities of any Portfolio would ever
exceed its assets.

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 will be calculated as of the close of those markets.

Portfolio securities and other assets are valued primarily on the basis of
market quotations, or if quotations are not available, by a method believed to
accurately reflect fair value. For foreign securities the values are translated
from the local currency into U.S. dollars using current exchange rates. If
trading in the currency is restricted, 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

<PAGE>

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).

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.

<PAGE>

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.

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 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, Growth & Income 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 March 1, 1999.

TABLE OF CONTENTS Page

Portfolio History.......................................................B-2
Description of each Portfolio and Its Investments and Risks.............B-2
Management of each Portfolio............................................B-33
Control Persons and Principal Holders
of Securities.........................................................B-37
Investment Advisory and Other Services..................................B-38
Brokerage Allocation and Other Practices................................B-43
Capital Stock and Other Securities......................................B-44
Purchase, Redemption and Pricing of
Securities............................................................B-46
Taxation of each Portfolio..............................................B-48
Underwriters............................................................B-51
Calculations of Performance Data........................................B-51
Financial Statements....................................................B-51

<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. Growth & Income Portfolio was designated as a
series of the Trust on December 15, 1997. 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 investment objective of GROWTH & INCOME PORTFOLIO is long-term capital
growth and current income.

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 any or all of the investments
and utilize any or all of the investment techniques described in Part A to this
Registration Statement and herein. The selection of investments and the
utilization of investment techniques depend on, among other things, the

<PAGE>

investment strategies of Citibank, N.A., each Portfolio's investment manager
("Citibank" or the "Manager") or, in the case of High Yield Portfolio, of a
subadviser for the Portfolio, conditions and trends in the economy and
financial markets, and investments being available on terms that, in Citibank's
or a subadviser's opinion, make economic sense.

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

A call option written by Growth & Income Portfolio or High Yield Portfolio
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 a 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 written by a Portfolio 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 a 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.

Growth & Income Portfolio and High Yield Portfolio may purchase options
for hedging purposes or to increase their 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 a 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, a 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.

Growth & Income Portfolio and 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

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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.

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

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

The Portfolios will receive a premium from writing a put or call option,
which increases a Portfolio's gross income in the event the option expires
unexercised or is closed out at a profit. If the value of an index on which a
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

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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, a Portfolio assumes the risk of a decline in the index. To the
extent that the price changes of securities owned by a 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.

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

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

Growth & Income Portfolio and 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
Each of the Portfolios (other than U.S. Fixed Income Portfolio) may enter
into stock index futures contracts. Growth & Income Portfolio, High Yield
Portfolio and U.S. Fixed Income Portfolio may also enter into interest rate
futures contracts, and Growth & Income Portfolio and High Yield Portfolio may
enter into foreign currency futures contracts. These investment strategies may
be used for hedging purposes and for non-hedging purposes, subject to
applicable law.

A futures contract is an agreement between two parties for the purchase or
sale for future delivery of securities or for the payment or acceptance of a
cash settlement based upon changes in the value of the securities or of an
index of securities. A "sale" of a futures contract means the acquisition of a

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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
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.

Each of the Portfolios (other than U.S. Fixed Income 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.

Growth & Income Portfolio, 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
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

<PAGE>

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 a 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, Growth &
Income Portfolio, 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 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.

Growth & Income Portfolio and High Yield Portfolio may purchase and sell
foreign currency futures contracts to attempt to protect its current or
intended 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. A 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, Growth & Income Portfolio and High Yield 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 a
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 should tend to 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), 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

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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
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.

<PAGE>

Investments in futures contracts also entail the risk that if Citibank's
or a 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 Growth & 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 decrease instead, part or all
of the benefit of the increased value of the Portfolio's bonds which were
hedged will be lost because the Portfolio will have offsetting losses in its
futures positions. Similarly, if Growth & Income Portfolio purchases futures
contracts expecting a decrease in interest rates and interest rates instead
increased, the Portfolio will have losses in its futures positions which will
increase the amount of the losses on the securities in its portfolio which will
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 may 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.

<PAGE>

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
income for tax purposes, as more fully discussed herein in the section entitled
"Tax Status."

OPTIONS ON FUTuRES CONTRACTS
Growth & Income Portfolio and High Yield Portfolio each 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 purposes and for
non-hedging purposes, subject to applicable law.

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

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

Options on futures contracts that are written or purchased by a 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.

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Growth & Income Portfolio and High Yield 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. Each 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 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 a 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 a 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. A 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 a 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. A
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 a Portfolio to incur a
loss on both the hedging instrument and the futures contract being hedged.

<PAGE>

Growth & Income Portfolio and 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, a 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 a 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.

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 (usually not more than seven) from the date of purchase. The resale price
reflects the purchase price plus an agreed-upon market rate of interest which
is unrelated to the coupon rate or maturity of the purchased security. A
repurchase agreement involves the obligation of the seller to pay the agreed
upon price, which obligation is in effect secured by the value of the
underlying security, usually U.S. government or government agency issues. Under
the 1940 Act, repurchase agreements may be considered to be loans by the buyer.
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

<PAGE>

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. 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 increased, 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 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 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
developing 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.

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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
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

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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.

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.

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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.

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 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

<PAGE>

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.

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

<PAGE>

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
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. It
should also be realized that 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

<PAGE>

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
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 a Subadviser to be of good standing, and when, in the
judgment of Citibank or a Subadviser, the consideration which can be earned
currently from loans of this type justifies the attendant risk. 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. If Citibank or a 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. 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

<PAGE>

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. For example, a Portfolio may have to
sell assets which have been set aside in order to meet redemptions. Also, if
Citibank or a Subadviser determines it is advisable as a matter of investment
strategy to sell the "when-issued" or "forward delivery" securities, a
Portfolio would be required to meet its obligations from the then available
cash flow or the sale of securities, or, although it would not normally expect
to do so, from the sale of the "when-issued" or "forward delivery" securities
themselves (which may have a value greater or less than the Portfolio's payment
obligation). 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 ("restricted securities") 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

<PAGE>

Securities Act. 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 restricted securities, unless, in the
case of restricted securities, the Board of Trustees of the Trust determines,
based on the trading markets for the specific restricted security, that it is
liquid. The Trustees have adopted guidelines and, subject to oversight by the
Trustees, have delegated to Citibank or to a Subadviser the daily function of
determining and monitoring liquidity of restricted securities.

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.

<PAGE>

MORTGAGE-BACKED SECURITIES
Growth & Income Portfolio, High Yield Portfolio and U.S. Fixed Income
Portfolio may invest in mortgage-backed securities, which are securities
representing 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 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.

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

<PAGE>

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
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
Growth & Income Portfolio, High Yield Portfolio and U.S. Fixed Income
Portfolio may enter into mortgage "dollar roll" transactions pursuant to which
it sells mortgage-backed securities for delivery in the future and
simultaneously contracts 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. Growth & Income Portfolio,
High Yield Portfolio and U.S. Fixed Income Portfolio are compensated for the

<PAGE>

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.
Growth & Income Portfolio, High Yield Portfolio and U.S. Fixed Income Portfolio
may also be compensated by receipt of a commitment fee. However, Growth &
Income Portfolio, High Yield Portfolio and U.S. Fixed Income Portfolio take 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 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. Growth & Income
Portfolio, High Yield Portfolio and U.S. Fixed Income Portfolio will invest
only in covered rolls.

CORPORATE ASSET-BACKED SECURITIES
Growth & Income Portfolio, 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.

<PAGE>

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.

SECURITIES RATED BAA OR BBB
Each Portfolio may purchase securities rated Baa by Moody's or BBB by
Standard & Poor's 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 than securities assigned a higher quality rating due to changes in the
issuer's creditworthiness. 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
Growth & Income Portfolio and 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 a 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 a Portfolio
more volatile and could limit the Portfolio's ability to sell its securities at
prices approximating the values the Portfolio had placed on such securities. In
the absence of a liquid trading market for securities held by it, a Portfolio
at times may be unable to establish the fair value of such securities.

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.

<PAGE>

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 a 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
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 a Portfolio's net asset value. A Portfolio
will not necessarily dispose of a security when its rating is reduced below its
rating at the time of purchase. However, Citibank or a 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 Growth & Income Portfolio and High Yield Portfolio invest in
securities in the lower rating categories, the achievement of a Portfolio's
objective is more dependent on Citibank's or a 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 Growth & Income Portfolio and 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.

<PAGE>

ZERO-COUPON AND PAYMENT-IN-KIND BONDS
Growth & Income Portfolio and 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 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.

<PAGE>

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 High Yield Portfolio or U.S. Fixed Income 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 exchangeable for such equivalent
securities are maintained in a segregated account for the Portfolio. These
securities constitute the Portfolio's long position.

High Yield Portfolio and U.S. Fixed Income Portfolio 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 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 the 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

<PAGE>

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.

The 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 Portfolio.

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 a Subadviser is incorrect in its forecasts of such factors,
the investment performance of the 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 the Portfolio, the Portfolio must be prepared to make
such payments when due. The Portfolio will not enter into any swap unless the
Manager or a 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. The 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 Portfolio's 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 the 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.

<PAGE>

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.

ADDITIONAL INFORMATION
At times, a substantial portion of Growth & Income Portfolio's assets may
be invested in securities as to which the Portfolio, by itself or together with
other funds and accounts managed by Citibank and its affiliates, holds all or a
major portion. Although Citibank generally considers such securities to be
liquid because of the availability of an institutional market for such
securities, it is possible that, under adverse market or economic conditions or
in the event of adverse changes in the financial condition of the issuer, the
Portfolio could find it more difficult to sell these securities when Citibank
believes it advisable to do so or may be able to sell the securities only at
prices lower than if they were more widely held. Under these circumstances, it
may also be more difficult to determine the fair value of such securities for
purposes of computing the Portfolio's net asset value. In order to enforce its
rights in the event of a default under such securities, the Portfolio may be
required to participate in various legal proceedings or take possession of and
manage assets securing the issuer's obligations on such securities. This could
increase the Portfolio's operating expenses and adversely affect the
Portfolio's net asset value. In addition, the Portfolio's intention to qualify
as a "regulated investment company" under the Internal Revenue Code may limit
the extent to which the Portfolio may exercise its rights by taking possession
of such assets.

DEFENSIVE STRATEGIES
Each Portfolio may, from time to time, take temporary defensive positions
that are inconsistent with the Portfolio's principal investment strategies in

<PAGE>

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
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

<PAGE>

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; 55 -- Chairman and Director, Catalyst, Inc. (Management
Consultants) (since June 1992); President, Chief Operating Officer and
Director, Deven International, Inc. (International Consultants) (June 1991 to
June 1992); President and Director, Elliott J. Berv & Associates (Management
Consultants) (since May 1984). His address is 24 Atlantic Drive, Scarborough,
Maine.

PHILIP W. COOLIDGE*; 47 -- President of the Portfolios; Chief Executive Officer
and President, Signature Financial Group, Inc. and CFBDS, Inc.

<PAGE>

MARK T. FINN; 55 -- President and Director, Delta Financial, Inc. (since June
1983); Chairman of the Board and Chief Executive Officer, FX 500 Ltd.
(Commodity Trading Advisory Firm) (since April 1990); General Partner and
Shareholder, Greenwich Ventures LLC (Investment Partnership) (since January
1996); President and Secretary, Phoenix Trading Co. (Commodity Trading Advisory
Firm) (since March 1997); Director, Vantage Consulting Group, Inc. (since
October 1988). His address is 3500 Pacific Avenue, P.O. Box 539, Virginia
Beach, Virginia.

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

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

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

OFFICERS

PHILIP W. COOLIDGE*; 47 -- President of the Portfolios; Chief Executive Officer
and President, Signature Financial Group, Inc. and CFBDS, Inc.

CHRISTINE A. DRAPEAU*; 28 -- 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).

TAMIE EBANKS-CUNNINGHAM*; 26 -- 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.

<PAGE>

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

LINDA T. GIBSON*; 33 -- Secretary of the Portfolios; Senior Vice President,
Signature Financial Group, Inc.; Secretary, CFBDS, Inc.

JAMES E. HOOLAHAN*; 52 -- Vice President, Assistant Secretary and Assistant
Treasurer of the Portfolios; Senior Vice President, Signature Financial Group,
Inc.

SUSAN JAKUBOSKI*; 34 -- Vice President, Assistant Treasurer and Assistant
Secretary of the Portfolios; Vice President, Signature Financial Group (Cayman)
Ltd. (since August 1994); Fund Compliance Administrator, Concord Financial
Group (November 1990 to August 1994).

MOLLY S. MUGLER*; 47 -- Assistant Secretary and Assistant Treasurer of the
Portfolios; Vice President, Signature Financial Group, Inc.; Assistant
Secretary, CFBDS, Inc.

CLAIR TOMALIN*; 30 -- Assistant Secretary of the Portfolios; Office Manager,
Signature Financial Group (Europe) Limited. Her address is 117 Charterhouse
Street, London ECIM 6AA.

SHARON M. WHITSON*; 50 -- Assistant Secretary and Assistant Treasurer of the
Portfolios; Assistant Vice President, Signature Financial Group, Inc.

JULIE J. WYETZNER*; 39 -- 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 Signature Financial Group (Cayman) Ltd. ("SFG" or
the "Sub-Administrator"), 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, 1998:

<PAGE>

TRUSTEE COMPENSATION TABLE

<S> <C> <C> <C> <C> <C> <C>
Aggregate Aggregate Aggregate Aggregate
Compen- Compen- Compen- Aggregate Compen- Total
sation from sation from sation from Compen- sation from Compen-
Large Cap Small Cap Growth & sation from U.S. Fixed sation from
Growth Growth Income High Yield Income Trust and
Portfolio Portfolio Portfolio Portfolio Portfolio Complex
Trustee (1)(2) (1)(2) (1)(2) (2)(3) (2)(3) (1)(2)

Elliott J.
Berv $1,958 $1,607 $728 $1,825 $1,825 $53,750
Philip W.
Coolidge $0 $0 $0 $0 $0 $0
Mark T.
Finn $1,818 $1,544 $721 $1,825 $1,825 $52,000
C. Oscar
Morong,
Jr. $970 $970 $970 $970 $970 $71,000
Walter E.
Robb, III $1,858 $1,559 $722 $687 $687 $50,000
E. Kirby
Warren $640 $640 $640 $640 $640 $49,000

</TABLE>

(1) Information relates to the fiscal year ended October 31, 1998.
(2) Messrs. Berv, Coolidge, Finn, Morong, Robb and Warren are trustees of 27,
49, 26, 40, 30 and 40, funds, respectively, in the family of open-end
registered investment companies advised or managed by Citibank.
(3) Information is estimated for the fiscal year ending October 31, 1999.

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.

<PAGE>

Item 14. Control Persons and Principal Holders of Securities.

As of February 22, 1999, beneficial interests in the Portfolios were held
as follows:

<S> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------
Large Cap Small Cap Growth & U.S. Fixed
Growth Growth Income Income
Portfolio Portfolio Portfolio Portfolio
- --------------------------------------------------------------------------------------
CitiFundsSM Intermediate
Income Portfolio N/A N/A N/A 86.99%
- --------------------------------------------------------------------------------------
CitiFunds Intermediate
Income Portfolio, Ltd. N/A N/A N/A 13.01%
- --------------------------------------------------------------------------------------
CitiFunds Large Cap
Growth Portfolio 69.69% N/A N/A N/A
- --------------------------------------------------------------------------------------
CitiFunds Large Cap
Growth Portfolio, Ltd. 17.18% N/A N/A N/A
- --------------------------------------------------------------------------------------
CitiFundsSM Small Cap
Growth Portfolio N/A 16.68% N/A N/A
- --------------------------------------------------------------------------------------
CitiFunds Small Cap
Growth Portfolio, Ltd. N/A 5.14% N/A N/A
- --------------------------------------------------------------------------------------
CitiFundsSM Growth &
Income Portfolio N/A N/A 75.78% N/A
- --------------------------------------------------------------------------------------
CitiFunds Growth &
Income Portfolio, Ltd. N/A N/A 24.22% N/A
- --------------------------------------------------------------------------------------
CitiSelect(R)Folio 200 1.72% 7.79% N/A N/A
- --------------------------------------------------------------------------------------
CitiSelect(R)Folio 300 3.73% 16.92% N/A N/A
- --------------------------------------------------------------------------------------
CitiSelect(R)Folio 400 4.13% 28.92% N/A N/A
- --------------------------------------------------------------------------------------
CitiSelect(R)Folio 500 1.35% 13.29% N/A N/A
- --------------------------------------------------------------------------------------
CitiSelect Ltd Folio 200 0.76% 3.27% N/A N/A
- --------------------------------------------------------------------------------------
CitiSelect Ltd Folio 300 0.88% 4.12% N/A N/A
- --------------------------------------------------------------------------------------
CitiSelect Ltd Folio 400 0.41% 2.71% N/A N/A
- --------------------------------------------------------------------------------------
CitiSelect Ltd Folio 500 0.15% 1.16% N/A N/A
- --------------------------------------------------------------------------------------
</TABLE>
<PAGE>

The address of each of CitiFunds Intermediate Income Portfolio, Ltd.,
CitiFunds Large Cap Growth Portfolio, Ltd., CitiFunds Small Cap Growth
Portfolio, Ltd., CitiFunds Growth & Income Portfolio, Ltd. and CitiSelect Ltd
Folios 200-500 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 Intermediate Income Portfolio, CitiFunds
Large Cap Growth Portfolio, CitiFunds Small Cap Growth Portfolio, CitiFunds
Growth & Income Portfolio and CitiSelect Folios 200-500 (the "Funds") is 21
Milk Street, Boston, Massachusetts 02109. CitiFunds Large Cap Growth Portfolio,
CitiFunds Small Cap Growth Portfolio, and CitiFunds Growth & Income Portfolio
are series of CitiFunds Trust II; CitiSelect Folios 200-500 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, or
otherwise act in accordance with applicable law. 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 a Management Agreement or

<PAGE>

interested persons of any such party, at a meeting called for the purpose of
voting on a 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.

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 with the Trust provides that neither
Citibank nor its personnel shall be liable for any error of judgment or mistake
of law or for any 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 a 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%
Growth & Income Portfolio 0.70%
High Yield Portfolio 0.65%
U.S. Fixed Income Portfolio 0.35%

<PAGE>

that amount 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 year ended October 31, 1998 the fees paid to
Citibank under its Management Agreement with respect to Large Cap Growth
Portfolio were $3,167,841.

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
period from January 1, 1997 to October 31, 1997 the fees paid 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 year
ended October 31, 1998 the fees paid to Citibank under its Management Agreement
with respect to Small Cap Growth Portfolio were $1,673,322.

For the period from March 2, 1998 (commencement of operations) to October
31, 1998, the fees paid to Citibank under its Management Agreement with respect
to Growth & Income Portfolio were $246,222.

High Yield Portfolio and U.S. Fixed Income Portfolio had no investment
operations during the fiscal year ended October 31, 1998.

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 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 separate Submanagement Agreement with SBAMInc
for High Yield Portfolio. SBAMInc's compensation is payable by High Yield
Portfolio (with a corresponding reduction in Citibank's management fee).

<PAGE>

For its services to High Yield Portfolio, SBAMInc, as subadviser to High
Yield Portfolio, receives a fee, which is accrued daily and paid monthly, at
the annual rate specified below with respect to High Yield Portfolio of the
average daily net assets on an annualized basis of that Portfolio allocated to
SBAMInc for that 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 its allocated assets of High Yield Portfolio, 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.

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.

The Glass-Steagall Act prohibits certain financial institutions, such as
Citibank, from underwriting securities of openend investment companies, such as
the Trust. Citibank believes that its services under the Management Agreements
and the activities performed by it or by its affiliates as Service Agents

<PAGE>

(which are securities dealers or other industry professionals that have entered
into service agreements with CFBDS, Inc.) are not underwriting and are
consistent with the Glass-Steagall Act and other relevant federal and state
laws. However, there is no controlling precedent regarding the performance of
the combination of investment advisory, shareholder servicing and
administrative activities by banks. State laws on this issue may differ from
applicable federal law, and banks and financial institutions may be required to
register as dealers pursuant to state securities laws. Changes in either
federal or state statutes or regulations, or in their interpretations, could
prevent Citibank from continuing to perform these services. If Citibank were to
be prevented from acting as the Manager or a Service Agent, the Trust would
seek alternative means for obtaining these services. The Trust does not expect
that investors would suffer any adverse financial consequences as a result of
any such occurrence.

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 SFG, government fees, taxes, accounting and legal
fees, expenses of communicating with investors, interest expense, and insurance
premiums. For the period from January 1, 1997 to October 31, 1997 and the
fiscal year ended October 31, 1998, the Portfolios' total expenses, expressed
as a percentage of each Portfolio's average daily net assets, were as follows:
Large Cap Growth Portfolio: 0.60% and 0.71%, respectively; and Small Cap Growth
Portfolio: 0.85% and 0.88%, respectively. For the period from March 2, 1998
(commencement of operations) to October 31, 1998, Growth & Income Portfolio's
total expenses, expressed as a percentage of its average daily net assets were
0.75%. High Yield Portfolio and U.S. Fixed Income Portfolio had no operations
during the fiscal year ended October 31, 1998.

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

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.

<PAGE>

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.

The Trust 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 its 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
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

<PAGE>

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 years ended December 31, 1995 and 1996, the period from
January 1, 1997 to October 31, 1997 and the fiscal year ended October 31, 1998,
Large Cap Growth Portfolio paid brokerage commissions of $418,145, $586,248,
$643,728 and $855,648, respectively. For the period from June 21, 1995 to
December 31, 1995, the fiscal year ended December 31, 1996, the period from
January 1, 1997 to October 31, 1997 and the fiscal year ended October 31, 1998,
Small Cap Growth Portfolio paid brokerage commissions of $6,544, $84,320,
$77,226 and $214,401, respectively. For the period from March 2, 1998
(commencement of operations) to October 31, 1998, Growth & Income Portfolio
paid brokerage commission of $187,468. High Yield Portfolio and U.S. Fixed
Income Portfolio had no operations during the period ended October 31, 1998.

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
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

<PAGE>

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. Investors in a Portfolio are personally liable
for its obligations and liabilities, subject, however, to indemnification by
the Portfolio in the event that there is imposed upon an investor a greater
portion of the liabilities and obligations of the Portfolio than its
proportionate beneficial interest in the Portfolio. The Declaration of Trust
also provides that 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. Thus, the risk of an investor incurring
financial loss on account of investor liability is limited to circumstances in
which both inadequate insurance existed and a Portfolio itself was unable to
meet its obligations. It is not expected that the liabilities of any Portfolio
would ever exceed its assets.

<PAGE>

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
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

<PAGE>

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 in more detail
below, 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.

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.

<PAGE>

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
the beneficial interests being sold. 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 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

<PAGE>

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
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.

<PAGE>

A Portfolio's investment in zero-coupon bonds and payment-in-kind bonds
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.

A Portfolio's transactions in options, foreign currency forward contracts,
and futures contracts, 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,

<PAGE>

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.

Item 20. Underwriters.

The exclusive placement agent for each Portfolio is CFBDS, Inc., 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 Growth & Income Portfolio, as
filed with the Securities and Exchange Commission on January 8, 1999 (Accession
Number 0000930413-99-000024), for the fiscal years ended October 31, 1998 are
incorporated by reference into this Part B. High Yield Portfolio and U.S. Fixed
Income Portfolio had no operations during the period ended October 31, 1998.

A copy of the Annual Report of Large Cap Growth Portfolio, Small Cap
Growth Portfolio and Growth & Income Portfolio accompanies this Part B.

<PAGE>

PART C

Item 23. Exhibits.

*** a(1) Declaration of Trust of The Premium Portfolios
*** a(2) Amendments to Declaration of Trust of The Premium
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 Growth & Income
Portfolio and Citibank, N.A., as investment manager and
administrator
*** d(4) Management Agreement between U.S. Fixed Income
Portfolio and Citibank, N.A., as investment manager and
administrator
d(5) Management Agreement between High Yield Portfolio
and Citibank, N.A., as investment manager and
administrator
d(6) Form of 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

<PAGE>

n Financial Data Schedules

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

* 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 File No. 811-8436 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
the Small Cap Growth Portfolio, File No. 811-07269.)

** Incorporated herein by reference to Amendment No. 5 to the
Registration Statement on Form N-1A of the Registrant relating to its
series Large Cap Growth Portfolio File No. 811-8436, Small Cap Growth
Portfolio File No. 811-8436, and Growth & Income Portfolio File No.
811-8436, filed March 2, 1998. (This Amendment also serves as
Amendment No. 4 to the Registration Statement on Form N-1A for The
Premium Portfolios as it relates to the 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.

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.

<PAGE>

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, Foreign Bond Portfolio, Intermediate
Income Portfolio and Short-Term 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, CitiSelect VIP Folio 300, CitiSelect VIP Folio 400,
CitiSelect VIP Folio 500 and CitiFundsSM Small Cap Growth VIP Portfolio).
Citibank and its affiliates manage assets in excess of $290 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 S. Collins, Vice Chairman of Citigroup,
Inc. and Robert I. Lipp, Chairman and Chief Executive Officer of Travelers
Insurance Group and of Travelers Property Casualty Corp.

Each of the individuals named above is also a Director of Citicorp. 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

<PAGE>

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
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 Distributor, 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 Growth & Income Portfolio, CitiFundsSM
Large Cap Growth Portfolio, CitiFundsSM Small Cap Growth Portfolio, CitiFundsSM
Balanced Portfolio, CitiSelect Folio 200, CitiSelect Folio 300, CitiSelect
Folio 400, CitiSelect Folio 500, CitiSelect VIP Folio 200, CitiSelect VIP Folio
300, CitiSelect VIP Folio 400, CitiSelect VIP Folio 500 and CitiFundsSM Small
Cap Growth VIP Portfolio. CFBDS is also the placement agent for Large Cap Value
Portfolio, Small Cap Value Portfolio, International Portfolio, Foreign Bond
Portfolio, Intermediate Income Portfolio, Short-Term Portfolio, International
Equity Portfolio, Balanced Portfolio, Government Income 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

<PAGE>

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
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, Emerging Growth Fund, Government Fund, Growth and Income
Fund, International Equity Fund, Municipal Fund, 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,
Small Capitalization Growth Investments, Small Capitalization Value Equity
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, 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 Special Equities 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
Managed Governments Fund Inc., Smith Barney Managed Municipals Fund Inc., Smith

<PAGE>

Barney Massachusetts Municipals Fund, Cash Portfolio, Government Portfolio,
Retirement Portfolio, California Money Market Portfolio, Florida Portfolio,
Georgia Portfolio, Limited Term 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 New Jersey
Municipals 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 Balanced Portfolio, International
Equity Portfolio, Pacific Portfolio, AIM Capital Appreciation Portfolio,
Alliance Growth Portfolio, GT 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, TBC
Managed Income Portfolio, Van Kampen American Capital Enterprise Portfolio,
Centurion Tax-Managed U.S. Equity Fund, Centurion Tax-Managed International
Equity Fund, Centurion U.S. Protection Fund, Centurion International Protection
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 Strategic
Bond Fund, Salomon Brothers Total Return Fund, Salomon Brothers Asia Growth
Fund, Salomon Brothers Capital Fund Inc, Salomon Brothers Investors 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, and Salomon Brothers Variable
Asia 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 25086T
(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 the City of Boston, the Commonwealth of Massachusetts, on the 25th day of
February, 1999.

THE PREMIUM PORTFOLIOS
on behalf of:
Large Cap Growth Portfolio
Small Cap Growth Portfolio
Growth & Income Portfolio
U.S. Fixed Income Portfolio
High Yield Portfolio

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

<PAGE>

EXHIBIT INDEX

Exhibit
No.: Description:

d(5) Management Agreement between High Yield
Portfolio and Citibank, N.A., as investment manager
and administrator

d(6) Form of Sub-Management Agreement between High
Yield Portfolio and Salomon Brothers Asset
Management Inc

h(1) Services Agreement between Citibank, N.A. and
CFBDS, Inc.

n Financial Data Schedules

EXHIBIT D(5)

MANAGEMENT AGREEMENT

THE PREMIUM PORTFOLIOS

High Yield Portfolio

MANAGEMENT AGREEMENT, dated as of November 11, 1998, by and between The
Premium Portfolios, a New York trust (the "Trust"), and Citibank, N.A., a
national banking association ("Citibank" or the "Manager").

W I T N E S S E T H:

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

WHEREAS, the Trust wishes to engage Citibank to provide certain investment
advisory and administrative services for the series of the Trust designated as
High Yield Portfolio (the "Portfolio"), and Citibank is willing to provide such
investment advisory and administrative 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. Duties of Citibank. (a) Citibank shall act as the manager for the
Portfolio and as such shall furnish continuously an investment program and
shall determine from time to time what securities shall be purchased, sold or
exchanged and what portion of the assets of the Portfolio 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, and the then-current Registration Statement of the Trust with
respect to the Portfolio. The Manager shall also make recommendations as to the
manner in which voting rights, rights to consent to corporate action and any
other rights pertaining to the Portfolio's portfolio securities shall be
exercised. Should the Board of Trustees of the Trust at any time, however, make

<PAGE>

any definite determination as to investment policy applicable to the Portfolio
and notify the Manager thereof in writing, the Manager shall be bound by such
determination for the period, if any, specified in such notice or until
similarly notified that such determination has been revoked. The Manager shall
take, on behalf of the 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 Manager is authorized as the agent of the Trust to give instructions to the
custodian or 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 Manager or its
affiliates exercise investment discretion. The Manager is authorized to pay a
broker or dealer who provides such brokerage and research services a commission
for executing a portfolio transaction for the Portfolio which is in excess of
the amount of commission another broker or dealer would have charged for
effecting that transaction if the Manager determines in good faith that such
amount of commission is reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer. This determination may
be viewed in terms of either that particular transaction or the overall
responsibilities which the Manager and its affiliates have with respect to
accounts over which they exercise investment discretion. In making purchases or
sales of securities or other property for the account of the Portfolio, the
Manager may deal with itself or with the Trustees of the Trust or the Trust's
underwriter or distributor, to the extent such actions are permitted by the
1940 Act. In providing the services and assuming the obligations set forth
herein, the Manager may employ at its own expense, or may request that the
Trust employ at the Portfolio's expense, one or more subadvisers; provided that
in each case the Manager shall supervise the activities of each subadviser. Any
agreement between the Manager and a subadviser shall be subject to the renewal,
termination and amendment provisions applicable to this Agreement. Any
agreement by the Trust on behalf of the Portfolio and a subadviser may be
terminated by the Manager at any time on not more than 60 days' nor less than
30 days' written notice to the Trust and the subadviser.

(b) Subject to the direction and control of the Board of Trustees of the
Trust, Citibank shall perform such administrative and management services as
may from time to time be reasonably requested by the Trust, which shall include
without limitation: (i) providing office space, equipment and clerical

<PAGE>

personnel necessary for maintaining the organization of the Trust and for
performing the administrative and management functions herein set forth; (ii)
supervising the overall administration of the Trust, including negotiation of
contracts and fees with and the monitoring of performance and billings of the
Trust's transfer agent, custodian and other independent contractors or agents;
(iii) preparing and, if applicable, filing all documents required for
compliance by the Trust with applicable laws and regulations, including
registration statements, semi-annual and annual reports to investors, proxy
statements and tax returns; (iv) preparation of agendas and supporting
documents for and minutes of meetings of Trustees, committees of Trustees and
investors; and (v) arranging for maintenance of books and records of the Trust.
Notwithstanding the foregoing, Citibank shall not be deemed to have assumed any
duties with respect to, and shall not be responsible for, the distribution of
beneficial interests in the Portfolio, nor shall Citibank be deemed to have
assumed or have any responsibility with respect to functions specifically
assumed by any transfer agent, fund accounting agent or custodian of the Trust
or the Portfolio. In providing administrative and management services as set
forth herein, Citibank may, at its own expense, employ one or more
subadministrators; provided that Citibank shall remain fully responsible for
the performance of all administrative and management duties set forth herein
and shall supervise the activities of each subadministrator.

2. Allocation of Charges and Expenses. Citibank shall furnish at its own
expense all necessary services, facilities and personnel in connection with its
responsibilities under Section 1 above. Except as provided in the foregoing
sentence, it is understood that the Trust will pay from the assets of the
Portfolio all of its own expenses allocable to the Portfolio including, without
limitation, organization costs of the Portfolio; compensation of Trustees who
are not "affiliated persons" of Citibank; governmental fees; interest charges;
loan commitment fees; taxes; membership dues in industry associations allocable
to the Trust; fees and expenses of independent auditors, legal counsel and any
transfer agent, distributor, 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
services); expenses of meetings of the Portfolio's investors; expenses relating
to the issuance of beneficial interests in the Portfolio; and such nonrecurring

<PAGE>

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.

3. Compensation of Citibank. For the services to be rendered and the
facilities to be provided by Citibank hereunder, the Trust shall pay to
Citibank from the assets of the Portfolio a management fee computed daily and
paid monthly at an annual rate equal to 0.65% of the Portfolio's average daily
net assets for the Portfolio's then-current fiscal year minus the Portfolio's
subadviser fee (as defined below), if any. To the extent that the Portfolio's
subadviser fee exceeds 0.65% of the Portfolio's average daily net assets for
the Portfolio's then-current fiscal year, the Manager shall pay such amount to
the applicable subadviser(s) on the Portfolio's behalf. The Portfolio's
subadviser fee is the aggregate amount payable by the Portfolio to one or more
subadvisers pursuant to investment advisory or subadvisory agreements between
the Trust on behalf of the Portfolio and any such subadvisers. If Citibank
provides services hereunder for less than the whole of any period specified in
this Section 3, the compensation to Citibank shall be accordingly adjusted and
prorated.

4. Covenants of Citibank. Citibank agrees that it will not deal with
itself, or with the Trustees of the Trust or the Trust's principal underwriter
or distributor, if any, 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
Citibank and its directors and officers.

5. Limitation of Liability of Citibank. Citibank shall not be liable for
any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution of securities
transactions for the 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 5,
the term "Citibank" shall include directors, officers and employees of Citibank
as well as Citibank itself.

6. Activities of Citibank. The services of Citibank to the Portfolio are
not to be deemed to be exclusive, Citibank being free to render investment
advisory, administrative and/or other services to others. It is understood that

<PAGE>

Trustees, officers, and shareholders of the Trust are or may be or may become
interested in Citibank, as directors, officers, employees, or otherwise and
that directors, officers and employees of Citibank are or may become similarly
interested in the Trust and that Citibank may be or may become interested in
the Trust as an investor or otherwise.

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

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

This Agreement may be amended only if such amendment is approved by the
"vote of a majority of the outstanding voting securities" of the 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.

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.

<PAGE>

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

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

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 PORTFOLIOS CITIBANK, N.A.

By: /s/ Philip Coolidge By: /s/ Lawrence P. Keblusek

Title: President Title: U.S. Chief Investment Officer

EXHIBIT D(6)
FORM OF
SUB-MANAGEMENT AGREEMENT

THE PREMIUM PORTFOLIOS

High Yield Portfolio

SUB-MANAGEMENT AGREEMENT, dated __________ ___, 199__, 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 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.

2. Duties of the Subadviser. The Subadviser shall provide the Portfolio
and the Adviser with such investment advice and supervision as the Adviser may

<PAGE>

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, and subject, further, to the Subadviser
notifying the Adviser in advance of the Subadviser's intention to purchase any
securities except insofar as the requirement for such notification may be
waived or limited by the Adviser, 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. 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
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.
The Subadviser will advise the Adviser on the same day it gives any such
instructions. In connection with the selection of such brokers or dealers and

<PAGE>

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. The Board of Trustees of
the Trust, in its discretion, may instruct the Subadviser to effect all or a
portion of its securities transactions with one or more brokers and/or dealers
selected by the Board of Trustees, if it determines that the use of such
brokers and/or dealers is in the best interest of the Trust.

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
services); expenses of meetings of the Portfolio's investors; expenses relating
to the issuance of beneficial interests in the Portfolio; and such

<PAGE>

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.

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

<PAGE>

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 August 7, 2000, on which date it will terminate unless its
continuance after August 7, 2000 is "specifically approved at least annually"
(a) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of 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, in each case on not
more than 60 days' nor less than 30 days' written notice to the other party.
This Agreement may be terminated at any time without the payment of any penalty
by the Subadviser on not less than 90 days' written notice to the Adviser. 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).

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

<PAGE>

liability of the Trust under this Agreement, or in connection with the
transactions contemplated herein, shall be discharged only out of the assets of
the 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.

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

By:_________________________ By:_________________________

Title:______________________ Title:______________________

EXHIBIT H(1)

SERVICES AGREEMENT

SERVICES AGREEMENT, dated as of January 4, 1999, by and between CFBDS,
INC., a Massachusetts corporation ("CFBDS") and CITIBANK, N.A., a national
banking association ("Citibank").

W I T N E S S E T H :

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

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

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

WHEREAS, CFBDS desires to retain Citibank to perform certain services on
the terms and conditions hereinafter set forth, and Citibank is willing to
render such services.

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

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

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

<PAGE>

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

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

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

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

(f) Maintain books and records of the Trust;

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

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

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

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

Notwithstanding the foregoing, CFBDS under this Agreement shall not be
deemed to have assumed any duties with respect to, and shall not be responsible
for, the management of a Trust, or the distribution of beneficial interests in

<PAGE>

a Trust, nor shall CFBDS be deemed to have assumed or have any responsibility
with respect to functions specifically assumed by any transfer agent or
custodian of a Trust.

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

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

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

3. Duties of Citibank. CFBDS hereby retains Citibank to perform the
following services, and Citibank hereby agrees to render such services for the
compensation and on the terms herein provided, from and after the effective
date of this Agreement:

(a) From time to time, Citibank will prepare marketing materials and
advertising materials for the Funds, will review such material for
compliance with applicable legal standards, submit such materials to
CFBDS for final review (unless such material is submitted to another
NASD member for review), assist CFBDS in connection with discussions
with NASD Regulation and others who review such materials submitted
by CFBDS, make responsive changes and obtain final approval for use
in a timely fashion, and arrange and pay for the production and
dissemination of such material. Citibank shall coordinate its
activities in this regard with brokers selling shares of the Funds
and may delegate its duties under this provision to others as
appropriate.

<PAGE>

(b) Citibank will provide liaison between CFBDS and the Funds, other
brokers selling shares of the Funds, and other parties related to the
operations of the Funds, and Citibank shall provide information and
assistance in this regard, as requested by CFBDS.

In performing its services under this Agreement, Citibank shall (a) act in
conformity with the Trust's charter documents, bylaws, prospectus, state of
additional information, the 1940 Act and other applicable laws, as the same may
be amended from time to time, and (b) cooperate and coordinate with CFBDS as
necessary and appropriate.

4. Compensation of Citibank. In consideration for the services to be
rendered by Citibank under this Agreement, CFBDS hereby assigns to Citibank for
the term of this Agreement all revenues payable to CFBDS pursuant to its
Distribution Agreements with the Trusts (as relate to the Funds) and/or any
related Distribution Plans or Service Plans of the Trusts (as relate to the
Funds) (the "Distribution Revenues"). Citibank will be solely responsible for
computing and collecting any and all Distribution Revenues to CFBDS and
assigned to Citibank hereby and it shall do so at its own expense. CFBDS shall
have no obligation to provide any accounting or other computation of the
Distribution Revenues to Citibank or to otherwise assist in the collection of
the Distribution Revenues, provided that CFBDS agrees to execute any
instruments or take any other actions reasonably necessary to effect or perfect
the assignment of the Distribution Revenues to Citibank, and the further
assignment by Citibank, at its discretion, of any part of the Distribution
Revenues to any other entity.

5. Limitation of Liability.

(a) CFBDS shall not be liable to Citibank for any error or judgment or
mistake of law or for any loss, liability, expense, or damage
(collectively a "Loss") suffered by Citibank in connection with the
performance of CFBDS' obligations and duties under this Agreement,
except a Loss resulting from CFBDS' willful misfeasance, bad faith,
or negligence in the performance of such obligations and duties.

(b) Citibank will indemnify CFBDS, its affiliated companies and its
officers, employees, and agents, and hold each of them harmless from
any and all losses, claims, damages, liabilities, or expenses
(including reasonable counsel fees and expenses) resulting from any
claim, demand, action, or suit relating to this Agreement, and not

<PAGE>

resulting from the willful misfeasance, bad faith or negligence of
CFBDS in the performance of its obligations under such agreements,
but only to the extent such losses, claims, damages, liabilities, or
expenses are not covered by an applicable insurance policy maintained
by CFBDS and/or its affiliates (other than by virtue of being part of
a deductible under any such policy). Citibank's indemnification
obligations under this Section (b) are expressly conditioned on
satisfaction of all the following requirements:

(i) CFBDS shall notify Citibank in writing of any claim, demand, or
other occurrence in respect of which CFBDS may seek
indemnification, promptly after CFBDS becomes aware of it;

(ii) Subject to the terms of any applicable insurance policies
maintained by CFBDS and/or its affiliates, Citibank shall have
the right to assume sole control of the defense of any
resulting action or suit; and

(iii) CFBDS shall not confess any claim or settle or make any
compromise relating thereto, except with Citibank's prior
written consent.

(c) CFBDS will indemnify Citibank, its affiliated companies, and their
officers, employees, and agents, and hold each of them harmless from
any and all losses, claims, damages, liabilities, or expenses
(including reasonable counsel fees and expenses) resulting from any
claim, demand, action, or suit relating to CFBDS' performance of its
obligations under this Agreement, not resulting from the willful
misfeasance, bad faith or negligence of Citibank or any of its
affiliated companies, but only to the extent such losses, claims,
damages, liabilities, or expenses are not covered by an applicable
insurance policy maintained by Citibank or any of its affiliates
(other than by virtue of being part of a deductible under any such
policy). CFBDS' indemnification obligations under this Section 5(c)
are expressly conditioned on satisfaction of all the following
requirements:

(i) Citibank shall notify CFBDS in writing of any claim, demand, or
other occurrence which relates to or in respect of which

<PAGE>

Citibank or any of its affiliates may seek indemnification,
promptly after Citibank becomes aware of it;

(ii) Subject to the terms of any applicable insurance policies
maintained by Citibank and/or its affiliates, CFBDS shall have
the right to assume sole control of the defense of any
resulting action or suit; and

(iii) Citibank and/or its affiliates shall not confess any claim or
settle or make any compromise relating thereto, except with
CFBDS' prior written consent.

6. Confidentiality.

(a) All books, records, information and data pertaining to the business
of Citibank, any of its affiliates, each Fund, each Fund's prior,
present, or potential shareholders, and the customers of Citibank or
any of its affiliates that are exchanged or received by CFBDS
pursuant to the performance of CFBDS' duties under this Agreement
shall remain confidential and shall not be disclosed to any other
person, except as specifically authorized in writing by the
applicable affiliate, Citibank, or Fund or as may be required by law,
and shall not be used for any purposes other than the performance of
CFBDS' responsibilities and duties hereunder. The provisions of this
Section 6(a) shall survive this Agreement's termination.

(b) All books, records, information and data that are the property of
CFBDS, which are not included in Section 6(a) above, and which were
received by Citibank or any of its affiliates pursuant to CFBDS'
performance of this Agreement, shall be treated as confidential and
shall not be disclosed to any other person, except as specifically
authorized in writing by CFBDS, as may be required by law or as may
be reasonably necessary in connection with the conversion to a
different party upon termination of this Agreement. The provisions of
this Section 6(b) shall survive termination of this Agreement.

7. Service to Other Companies or Accounts: Limitation on Other Activities.
During the term of this Agreement, CFBDS shall not conduct any business
activities other than as contemplated by (i) this Agreement; (ii) any
Distribution Agreement between CFBDS and a Trust; (iii) any distribution
contract between CFBDS and any other investment company advised or administered

<PAGE>

by a subsidiary of Citigroup Inc.; or (iv) any agreement between CFBDS and a
subsidiary of Citigroup Inc. Citibank acknowledges that the persons employed by
CFBDS to assist in the performance of CFBDS' duties under this Agreement may
not devote their full time to such service and nothing contained in this
Agreement shall be deemed to limit or restrict the right of any employee or
affiliate of CFBDS to engage in and devote time and attention to other business
or to render services of whatever kind or nature, provided such other
activities do not adversely affect CFBDS' performance hereunder, and that in
conducting such business or rending such services CFBDS' employees and
affiliates would take reasonable steps to assure that the other parties
involved are put on notice as to the legal entity with which they are dealing.

8. Books and Records; Audits; Reports. Citibank shall have the right at
any time to have representatives of its auditors and/or legal counsel, and/or
auditors and legal counsel of any of the Funds, and/or employees of any
affiliate to: (a) obtain full and complete access to any of CFBDS' books and
records relating to its services and duties required under this Agreement,
including, but not limited to, correspondence, contracts, agreements, bank
transaction documents and records of any type, receipts, ledgers, and any other
books of account ("Books and Records") and obtain a reasonable number of copies
of any such Books and Records; and (b) perform on-site audits at any of CFBDS'
system of internal controls with respect to its services and duties required
under this Agreement.

9. Change in Control. To the extent possible, CFBDS shall promptly provide
Citibank prior written notice of any change in "control" (as such term is
defined in the 1940 Act) of CFBDS.

10. Use of Name. Except as required by law, CFBDS shall not use the name
Citibank or Citicorp or Citigroup in any manner without Citibank's prior
written consent in any marketing or promotional materials for CFBDS. This
section 10 shall survive termination of this Agreement.

11. Insurance. CFBDS shall, during the term of this Agreement, maintain
directors/officers errors and omissions insurance coverage in the amount of $5
million.

12. Miscellaneous.

(a) Any notice or other written instrument authorized or required by this
Agreement to be given in writing to Citibank or CFBDS shall be
sufficiently given if addressed to the party and received by it at

<PAGE>

its office set forth below or at such other place as it may from time
to time designate in writing.

To Citibank:

Citibank, N.A.
425 Park Avenue
22nd Floor
New York, NY 10022
Attn: Andrew Shoup

To CFBDS:

CFBDS, Inc.
21 Milk Street
Boston, MA 02109
Attn: Philip Coolidge

(b) This Agreement shall extend to and shall be binding upon the parties
hereto and their respective successors and assigns; provided,
however, that this Agreement shall not be assignable without the
written consent of the other party.

(c) This Agreement shall be construed in accordance with the laws of the
State of New York, without giving effect to its conflict of laws
principles.

(d) This Agreement may be executed in counterparts, each of which shall
be an original and which collectively shall be deemed to constitute
only one instrument.

(e) The captions of this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions
hereof or otherwise affect their construction or effect.

(f) The parties hereto acknowledge that in performing its services and
duties under this Agreement, each of Citibank and CFBDS shall do so
in the capacity of an independent contractor.

<PAGE>

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

CFBDS, INC. CITIBANK, N.A.

By: Philip Coolidge By: Andrew B. Shoup

Title: C.E.O. Title: Vice President

<PAGE>

SCHEDULE A

CitiFunds Trust I
CitiSelect(R) Folio 200
CitiSelect(R) Folio 300
CitiSelect(R) Folio 400
CitiSelect(R) Folio 500

CitiFunds Trust II
CitiFunds Large Cap Growth Portfolio
CitiFunds Small Cap Growth Portfolio
CitiFunds Small Cap Value Portfolio
CitiFunds Growth & Income Portfolio

CitiFunds Fixed Income Trust
CitiFunds Intermediate Income Portfolio

CitiFunds Tax Free Income Trust
CitiFunds New York Tax Free Income Portfolio
CitiFunds National Tax Free Income Portfolio
CitiFunds California Tax Free Income Portfolio

The Premium Portfolios
Large Cap Growth Portfolio
Small Cap Growth Portfolio
Growth & Income Portfolio
U.S. Fixed Income Portfolio
High Yield Portfolio

Asset Allocation Portfolios
International Portfolio
Large Cap Value Portfolio
Intermediate Income Portfolio
Foreign Bond Portfolio
Short-Term Portfolio
Small Cap Value Portfolio

VariableAnnuity Portfolios
CitiSelect(R) VIP Folio 200
CitiSelect(R) VIP Folio 300
CitiSelect(R) VIP Folio 400
CitiSelect(R) VIP Folio 500
CitiFunds Small Cap Growth VIP Portfolio

<ARTICLE> 6
<CIK> 0000942918
<NAME> SMALL CAP GROWTH PORTFOLIO
<SERIES>
<NUMBER> 1
<NAME> THE PREMIUM PORTFOLIOS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 189,762,215
<INVESTMENTS-AT-VALUE> 195,598,744
<RECEIVABLES> 4,506,601
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 884
<TOTAL-ASSETS> 200,106,229
<PAYABLE-FOR-SECURITIES> 5,175,433
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 5,175,433
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 194,671,243
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 194,671,243
<DIVIDEND-INCOME> 395,671
<INTEREST-INCOME> 444,717
<OTHER-INCOME> 0
<EXPENSES-NET> 1,963,284
<NET-INVESTMENT-INCOME> (1,122,896)
<REALIZED-GAINS-CURRENT> (9,691,393)
<APPREC-INCREASE-CURRENT> (27,795,087)
<NET-CHANGE-FROM-OPS> (38,609,376)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 260,666,527
<NUMBER-OF-SHARES-REDEEMED> (76,983,925)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 145,073,226
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1,673,322
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,963,284
<AVERAGE-NET-ASSETS> 223,109,657
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.88
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000942918
<NAME> LARGE CAP GROWTH PORTFOLIO
<SERIES>
<NUMBER> 2
<NAME> THE PREMIUM PORTFOLIOS

<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Oct-31-1998
<PERIOD-END> Oct-31-1998
<INVESTMENTS-AT-COST> 511,723,908
<INVESTMENTS-AT-VALUE> 629,534,825
<RECEIVABLES> 281,880
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 340
<TOTAL-ASSETS> 629,817,045
<PAYABLE-FOR-SECURITIES> 18,272,508
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 18,272,508
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 610,904,467
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 610,904,467
<DIVIDEND-INCOME> 3,787,649
<INTEREST-INCOME> 1,185,975
<OTHER-INCOME> 0
<EXPENSES-NET> 3,748,586
<NET-INVESTMENT-INCOME> 1,225,038
<REALIZED-GAINS-CURRENT> 61,181,518
<APPREC-INCREASE-CURRENT> 55,065,852
<NET-CHANGE-FROM-OPS> 117,472,408
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 369,790,712
<NUMBER-OF-SHARES-REDEEMED> (201,271,389)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 285,991,731
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 3,167,841
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 3,748,586
<AVERAGE-NET-ASSETS> 527,973,428
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.71
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>

<ARTICLE> 6
<CIK> 0000942918
<NAME> GROWTH & INCOME PORTFOLIO
<SERIES>
<NUMBER> 3
<NAME> THE PREMIUM PORTFOLIOS

<S> <C>
<PERIOD-TYPE> 8-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-END> OCT-31-1998
<INVESTMENTS-AT-COST> 74,071,968
<INVESTMENTS-AT-VALUE> 69,069,830
<RECEIVABLES> 2,142,856
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 37,340
<TOTAL-ASSETS> 71,250,026
<PAYABLE-FOR-SECURITIES> 575,524
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 575,524
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 70,584,700
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 70,584,700
<DIVIDEND-INCOME> 822,900
<INTEREST-INCOME> 130,277
<OTHER-INCOME> 0
<EXPENSES-NET> 353,194
<NET-INVESTMENT-INCOME> 599,983
<REALIZED-GAINS-CURRENT> (4,352,369)
<APPREC-INCREASE-CURRENT> (5,002,138)
<NET-CHANGE-FROM-OPS> (8,754,524)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 89,328,025
<NUMBER-OF-SHARES-REDEEMED> (9,988,801)
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 70,584,700
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 329,723
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 436,695
<AVERAGE-NET-ASSETS> 71,044,288
<PER-SHARE-NAV-BEGIN> 0.00
<PER-SHARE-NII> 0.00
<PER-SHARE-GAIN-APPREC> 0.00
<PER-SHARE-DIVIDEND> 0.00
<PER-SHARE-DISTRIBUTIONS> 0.00
<RETURNS-OF-CAPITAL> 0.00
<PER-SHARE-NAV-END> 0.00
<EXPENSE-RATIO> 0.75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

</TABLE>