VARIABLE ANNUITY PORTFOLIOS /, 485APOS, 1999-02-12

VARIABLE ANNUITY PORTFOLIOS /
485APOS, 1999-02-12

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As filed with the Securities and Exchange Commission on February 12, 1999

File Nos. 333-15119
811-07893

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549

FORM N-1A

REGISTRATION STATEMENT
UNDER

THE SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 4

AND

REGISTRATION STATEMENT UNDER THE INVESTMENT
COMPANY ACT OF 1940
AMENDMENT NO. 5

VARIABLE ANNUITY PORTFOLIOS
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

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

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

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

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

It is proposed that this filing will become effective on the 75th day
after the date of filing hereof pursuant to paragraph (a)(2) of Rule 485.

<PAGE>

Prospectus

CITISELECT(R) VIP PORTFOLIOS

A Family of Asset Allocation Mutual Funds
Managed by Citibank, N.A.
and Offered through the Separate Accounts of
Participating Life Insurance Companies

CITISELECT(R) VIP FOLIO 100
CITISELECT(R) VIP FOLIO 200
CITISELECT(R) VIP FOLIO 300
CITISELECT(R) VIP FOLIO 400
CITISELECT(R) VIP FOLIO 500

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

[ ] 1999

<PAGE>

CITISELECT VIP PORTFOLIOS

TABLE OF CONTENTS

Funds at a Glance

Investing in CitiSelect VIP Portfolios
How to Invest
How the Price of Shares is Calculated
How to Sell Shares
Dividends
Tax Matters

Management of the Funds
Manager
Management Fees

More About the Funds
Principal Investment Strategies
Risks

Financial Highlights

<PAGE>

FUNDS AT A GLANCE

The five diversified mutual funds described in this prospectus are asset
allocation funds that are available for investment through separate accounts
offered by certain life insurance companies. You may not purchase these funds
directly. You may invest indirectly in the Funds by purchasing an annuity
contract or variable life insurance policy offered by a participating life
insurance company.

Each Fund invests in a carefully selected mix of equity and fixed income
securities that is designed by Citibank to offer a different level of potential
return with a corresponding amount of risk. For example, CitiSelect VIP Folio
100 is designed to provide the lowest relative risk, but with a lower level of
potential return. CitiSelect VIP Folio 500 is designed to provide the highest
potential for return, but with the highest risk. Your investment objective,
your investment time frame and your comfort level with risk will help you
decide which Fund to consider.

Each Fund has its own investment goal and its own mix of investments. Of
course, there is no assurance that any Fund will achieve its goal.

THIS SUMMARY BRIEFLY DESCRIBES EACH OF THE FUNDS AND THE PRINCIPAL RISKS OF
INVESTING. FOR MORE INFORMATION, SEE "MORE ABOUT THE FUNDS" ON PAGE______.

FUND GOALS

CITISELECT VIP FOLIO 100

This Fund's goal is as high a level of current income as is consistent with
a dominant emphasis on fixed income securities and a small allocation to equity
securities.

CITISELECT VIP FOLIO 200

This Fund's goal is as high a total return over time as is consistent with a
primary emphasis on fixed income securities and a secondary emphasis on equity
securities.

CITISELECT VIP FOLIO 300

This Fund's goal is as high a total return over time as is consistent with a
balanced emphasis on equity and fixed income securities.

CITISELECT VIP FOLIO 400

This Fund's goal is as high a total return over time as is consistent with a
primary emphasis on equity securities, and a secondary emphasis on fixed income
securities.

CITISELECT VIP FOLIO 500

This Fund's goal is as high a total return over time as is consistent with a
dominant emphasis on equity securities and a small allocation to fixed income
securities.

<PAGE>

MAIN INVESTMENT STRATEGIES

Each Fund invests in a mix of equity and fixed income securities that is
designed by Citibank to offer a different level of potential return with a
different amount of risk. The Funds' equity securities include common stocks,
preferred stocks, securities convertible into common stocks, warrants and
depositary receipts (receipts representing the right to receive securities of
foreign issuers deposited in a U.S. bank or a local branch of a foreign bank).
The Funds' fixed income securities include bonds, short-term notes,
mortgage-backed and asset-backed securities, certificates of deposit and
repurchase agreements.

o CITISELECT VIP FOLIO 100 invests primarily in fixed income
securities with a small allocation to equity securities. This Fund
is expected to be the least volatile of the Funds.

o CITISELECT VIP FOLIO 200 invests primarily in fixed income
securities. A smaller allocation to equity securities gives the
potential for some capital growth.

o CITISELECT VIP FOLIO 300 emphasizes both equity and fixed income
securities. This balanced mix offers the growth potential of stocks
with the lower volatility of fixed income securities.

o CITISELECT VIP FOLIO 400 and CITISELECT VIP FOLIO 500 invest
primarily in equity securities. They may invest more of their assets
in international securities and small cap securities. CitiSelect VIP
Folio 500 is expected to be the most volatile of the Funds.

Citibank generally allocates each Fund's assets as provided in this chart, but
cash flows into or out of a Fund, or market fluctuations, could produce
different results. Citibank monitors each Fund's asset mix daily and conducts
quarterly reviews to determine whether to rebalance the Fund's investments.
Rebalancing may be accomplished over a period of time, subject to any
regulatory restrictions.

-------------------------------
ASSET CLASS RANGE *
- ----------------------- ------------- -----------------
FIXED
EQUITY INCOME
- ----------------------- ------------- -----------------
CITISELECT VIP
FOLIO 100 0-20% 80-100%
- ----------------------- ------------- -----------------
CITISELECT VIP
FOLIO 200 20-40% 60-80%
- ----------------------- ------------- -----------------
CITISELECT VIP
FOLIO 300 40-60% 40-60%
- ----------------------- ------------- -----------------
CITISELECT VIP
FOLIO 400 60-80% 20-40%
- ----------------------- ------------- -----------------
CITISELECT VIP
FOLIO 500 75-100% 0-25%
- ----------------------- ------------- -----------------

*Each asset class includes other types of investments which are described
in this prospectus and which are deemed related to the management of that
asset class. Equity and fixed income ranges include investment positions
that seek equivalent asset class exposure. When money market instruments
are used in connection with these positions they will be counted towards
the assets of the applicable asset class.

<PAGE>

Citibank may further allocate assets within the equity and fixed income asset
classes seeking to minimize risk and volatility and to maximize returns.

o Equity securities may be allocated among:
o large cap growth securities
o large cap value securities
o small cap growth securities
o small cap value securities, and
o international securities.

o Fixed income securities may be allocated among
o U.S. fixed income--government and corporate bonds and short-term debt
o foreign government bonds and
o high yield (so-called "junk bonds") bonds.

Citibank is not required to allocate each Fund's assets among all of these
types of equity and fixed income securities at all times.

Citibank also allocates assets among different subadvisers who specialize in
managing particular kinds of securities or managing in a particular style. This
may help the Funds benefit from different investment cycles, such as periods
when equities with different characteristics (i.e., growth or value) perform
differently. Citibank monitors and supervises all of the Funds' subadvisers and
may terminate the services of any subadviser at any time.

The Funds may use derivatives in order to protect (or "hedge") against changes
in interest rates or the prices of securities held or to be bought. The Funds
may also use derivatives for non-hedging purposes, to enhance potential gains
or generate income. In addition, the Funds may use derivatives to manage the
maturity or duration of fixed income securities. These derivatives include
futures, options and forward foreign currency exchange contracts. A Fund's use
of derivatives may involve leveraging. Under leveraging, a relatively small
investment may produce substantial losses or gains for the Fund, well beyond
the Fund's initial investment.

The Funds may use other investment techniques, such as short sales, which also
may entail leveraging, in that a Fund's losses from short sales may be
unlimited.

MAIN RISKS

Like all mutual funds, you may lose money if you invest in the Funds. The
principal risks of investing in CitiSelect VIP Folios are described below.
Please remember that the risks of investing in each Fund depend on the
securities it holds and the investment strategies it uses. For example, Funds
investing more of their assets in fixed income securities may be more
susceptible to interest rate risk and credit risk than Funds investing more of
their assets in equity securities. Conversely, Funds investing more of their
assets in equity securities may be susceptible to greater price volatility than
Funds investing more of their assets in fixed income securities. See page ___
for more information about risks.

<PAGE>

will change daily as the value of their underlying securities change.
This means that your shares may be worth more or less when you sell
them than when you bought them.

It is also possible that the Funds will not perform as intended. For
example, CitiSelect VIP Folio 100 is expected to be the least volatile
of the Funds. However, under certain market conditions this Fund could
be more volatile than one or more of the other Funds.

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

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

o CREDIT RISK. Some issuers may not make payments on debt securities held
by the Funds, causing a loss. Or, an issuer's financial condition may
deteriorate, lowering the credit quality of a security and leading to
greater volatility in the price of the security and in shares of a
Fund. The prices of lower rated securities often are more volatile than
those of higher rated securities, and there may be more difficulty in
selling lower rated securities in the market. These risks are more
pronounced with so-called "junk bonds" which are debt obligations that
are rated below investment-grade.

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

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

o PREPAYMENT RISK. The issuers of debt securities held by a Fund may be
able to prepay principal due on the securities, particularly during
periods of declining interest rates. A Fund may not be able to reinvest
that principal at attractive rates, reducing income to the Fund, and

<PAGE>

the Fund 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 Fund's share
prices more volatile. Mortgage-backed securities are particularly
susceptible to prepayment risk and their prices may be very volatile.

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.

o DERIVATIVES. The Funds' use of derivatives (such as futures contracts
and forward foreign currency contracts), particularly for non-hedging
purposes, may be risky. This practice could result in losses that are
not offset by gains on other portfolio assets. Losses would cause the
Funds' share prices to go down. Each Fund's ability to use derivatives
successfully depends on the ability of the Fund's portfolio managers to
accurately predict movements in stock prices, interest rates, currency
exchange rates or other economic factors. If these predictions are
wrong, the Fund could suffer greater losses than if the Fund had not
used derivatives. Some of a Fund's use of derivatives may involve
leveraging. Leveraging adds increased risks to a Fund, because the
Fund's losses may be out of proportion to the amount invested in the
instrument--a relatively small investment may lead to much greater
losses.

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

WHO MAY WANT TO INVEST

You should keep in mind that an investment in CitiSelect VIP Portfolios is not
a complete investment program.

You should consider investing in CitiSelect VIP Folios if you are seeking to
reduce the risks of investing in a single asset or type of asset, and to
cushion the volatility of financial markets by investing in diversified
portfolios of several types of assets. The Funds offer a convenient way to own
a portfolio tailored to specific investment goals.

o CITISELECT VIP FOLIO 100 is designed for investors seeking current
income with relatively low risk but with some growth potential, and who
have an investment horizon of at least three years.

o CITISELECT VIP FOLIO 200 is designed for investors seeking relatively
lower risk provided by substantial investments in fixed income
securities, but who also seek some capital growth, and who have an
investment horizon of at least five years.

o CITISELECT VIP FOLIO 300 is designed for investors seeking a balanced
approach by emphasizing stocks for their higher capital appreciation
potential but retaining a significant fixed income component to temper
volatility, and who have an investment horizon of at least five years.

<PAGE>

o CITISELECT VIP FOLIO 400 and CITISELECT VIP FOLIO 500 are designed for
investors willing and able to take higher risks in the pursuit of
long-term capital appreciation, and who have an investment horizon of
at least five years. CitiSelect VIP Folio 500 is designed for investors
who can withstand greater market swings to seek potential long-term
rewards. CitiSelect VIP Folio 400 is designed for investors seeking
long-term rewards, but with less volatility.

Don't invest in CitiSelect VIP Portfolios if you are not prepared to accept
daily share price fluctuations.

FUND PERFORMANCE

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

o The bar charts show changes in the Funds' performance from year to year.

o The tables show how the Funds' average annual returns for the periods
indicated compare, in each case, to several broad measures of stock and
bond performance. Please remember that, unlike the Funds, the market
indexes do not include the costs of buying and selling securities and
other Fund expenses.

o In both the charts and tables, and the related information, the returns
shown for the Funds do not take into account any fees that are paid by the
separate accounts through which shares of the Funds are sold. If these
fees had been included, the returns would have been lower.

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

<PAGE>

CITISELECT VIP FOLIO 100

The Fund is newly offered and does not have any investment returns at the date
of this prospectus. For up-to-date yield information, please call 1-800-[ ].

<S> <C>

-------------------------------------------------
CITISELECT VIP FOLIO 200 HIGHEST AND LOWEST RETURNS
For Calendar Quarters Covered by the Bar Chart

-------------------------------------------------
Quarter Ending
TOTAL RETURN -------------------------------------------------
(per calendar year) Highest [ %] [ , 1998]
-------------------------------------------------
Lowest [ %] [ , 1998]
-------------------------------------------------

1998
-------------------------------------------------
[bar chart for calendar AVERAGE ANNUAL TOTAL RETURNS
year 1998] As of December 31, 1998
-------------------------------------------------
1 Year Life of Fund
1998........... [ ]% Since
February 10,
1997
-------------------------------------------------
CitiSelect VIP ____% ____%
Folio 200
-------------------------------------------------
Lehman Bros.
Intermediate
Gov't Corp. ____% ____%
Bond Index
-------------------------------------------------
S&P 500 Index ____% ____%
-------------------------------------------------
Russell 2000
Index ____% ____%
-------------------------------------------------
MSCI-EAFE
Index ____% ____%
-------------------------------------------------
Salomon Bros.
Non-$World
Gov't - Foreign ____% ____%
Gov't Bonds
-------------------------------------------------

<PAGE>

-------------------------------------------------
CITISELECT VIP FOLIO 300 HIGHEST AND LOWEST RETURNS
For Calendar Quarters Covered by the Bar Chart
-------------------------------------------------
TOTAL RETURN Quarter Ending
(per calendar year) -------------------------------------------------
Highest [ %] [ , 1998]
-------------------------------------------------
Lowest [ %] [ , 1998]
-------------------------------------------------

1998
-------------------------------------------------
[bar chart for calendar AVERAGE ANNUAL TOTAL RETURNS
year 1998] As of December 31, 1998

-------------------------------------------------
1 Year Life of Fund
1998........... [ ]% Since
February 10,
1997
-------------------------------------------------
CitiSelect VIP ____% ____%
Folio 300
-------------------------------------------------
Lehman Bros.
Intermediate
Gov't Corp. ____% ____%
Bond Index
------------------------------------------------
S&P 500 Index ____% ____%
------------------------------------------------
Russell 2000
Index ____% ____%
------------------------------------------------
MSCI-EAFE
Index ____% ____%
------------------------------------------------
Salomon Bros.
Non-$World
Gov't - Foreign ____% ____%
Gov't Bonds
------------------------------------------------
<PAGE>

-------------------------------------------------
CITISELECT VIP FOLIO 400 HIGHEST AND LOWEST RETURNS
For Calendar Quarters Covered by the Bar Chart
-------------------------------------------------
Quarter Ending
TOTAL RETURN -------------------------------------------------
(per calendar year) Highest [ %] [ , 1998]
-------------------------------------------------
Lowest [ %] [ , 1998]
-------------------------------------------------

1998
-------------------------------------------------
[bar chart for calendar AVERAGE ANNUAL TOTAL RETURNS
year 1998] As of December 31, 1998
-------------------------------------------------
1 Year Life of Fund
1998........... [ ]% Since
February 10,
1997
-------------------------------------------------
CitiSelect VIP ____% ____%
Folio 400
-------------------------------------------------
Lehman Bros.
Intermediate
Gov't Corp. ____% ____%
Bond Index
-------------------------------------------------
S&P 500 Index ____% ____%
-------------------------------------------------
Russell 2000
Index ____% ____%
-------------------------------------------------
MSCI-EAFE
Index ____% ____%
-------------------------------------------------
Salomon Bros.
Non-$World
Gov't - Foreign ____% ____%
Gov't Bonds
-------------------------------------------------
<PAGE>

-------------------------------------------------
CITISELECT VIP FOLIO 500 HIGHEST AND LOWEST RETURNS
For Calendar Quarters Covered by the Bar Chart
-------------------------------------------------
Quarter Ending
TOTAL RETURN -------------------------------------------------
(per calendar year) Highest [ %] [ , 1998]
-------------------------------------------------
Lowest [ %] [ , 1998]
-------------------------------------------------

1998

-------------------------------------------------
[bar chart for calendar AVERAGE ANNUAL TOTAL RETURNS
year 1998] As of December 31, 1998
-------------------------------------------------
1 Year Life of Fund
Since
February 10,
1997
-------------------------------------------------
CitiSelect VIP ____% ____%
Folio 500
-------------------------------------------------
S&P 500
Index
____% ____%
-------------------------------------------------
Russell 2000
Index ____% ____%
-------------------------------------------------
MSCI-EAFE
Index ____% ____%
-------------------------------------------------
Salomon Bros.
Non-$ World
Gov't - Foreign
Gov't Bonds ____% ____%
-------------------------------------------------
</TABLE>

<PAGE>

INVESTING IN CITISELECT VIP PORTFOLIOS

HOW TO INVEST

You may not buy shares directly. You can invest in the Funds by purchasing a
variable annuity contract or variable life insurance policy offered by a
participating insurance company separate account. Variable annuity contracts
and life insurance policies are issued by insurance companies. You should read
both this prospectus and the prospectus of the participating insurance company
separate account before you invest. The separate account prospectus will tell
you:

o how to purchase a variable annuity contract or variable life insurance
policy

o how to select specific Funds as investment options for the contract or
policy

o whether you can transfer money from one investment option to another

o how to withdraw from or cancel your contract or policy

o the specific terms and provisions of the contract or policy, including

o sales and surrender charges

o mortality and expense risk fees, and

o other fees and expenses that may be payable under the contract or
policy

The separate accounts buy Fund shares based upon available cash from premium
payments and the instructions the accounts receive from their contract and
policyholders. Shares of the CitiSelect VIP Portfolios are offered continuously
and purchases may be made Monday through Friday, except on certain holidays.
The Funds and the Funds' distributor have the right to reject any purchase
order or cease offering Fund shares at any time.

Shares are purchased at net asset value (NAV) the next time it is calculated
after the order is received and accepted by the Funds or the Fund's agent. NAV
is the value of a single share of a Fund. The Funds do not have any sales
charges.

HOW THE PRICE OF SHARES IS CALCULATED

Each Fund calculates its NAV every day the New York Stock Exchange is open for
trading. 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 Funds invest close early, NAV will be calculated
as of the close of those markets.

The Fund's securities are valued primarily on the basis of market quotations.
When market quotations are not available, the Fund may price securities at fair
value. Fair value is determined in accordance with procedures approved by the
Fund's Board of Trustees. When the Fund uses the fair pricing method, a
security may be priced higher or lower than if the Fund had used a market
quotation to price the same security. For foreign securities the values are
translated from the local currency into U.S. dollars using current exchange
rates. If trading in the currency is restricted, the Funds use a rate believed
to reflect the currency's fair value in U.S. dollars. Trading may take place in
foreign securities held by a Fund on days when the Fund is not open for
business. As a result, a Fund's NAV may change on days on which it is not
possible to purchase or sell shares of the Fund.

<PAGE>

HOW TO SElL SHARES

A separate account may sell Fund shares to generate cash to meet various
obligations under the contracts and policies issued by it. For example, if you
invest in a Fund through a variable annuity contract and request a partial
withdrawal or cancellation of the contract, the separate account may sell Fund
shares to pay you. You should read your separate account prospectus carefully
to find out:

o how you may withdraw from or cancel your contract or policy

o what surrender fees or expenses you may incur

o whether you may be taxed on the amount of withdrawal, including any
penalty tax

A separate account may sell (redeem) shares on any business day. The price will
be the NAV the next time it is calculated after the redemption request in
proper form has been received.

Payment from the redemption will be generally made to the separate account
within seven days after the request is made. Redemption proceeds may be
delayed, or the right to receive redemption proceeds suspended, if the New York
Stock Exchange is closed (other than on weekends or holidays) or trading is
restricted, or if an emergency exists. Each Fund has the right to pay
redemption proceeds by distributing securities instead of cash. In that case,
the separate account may incur costs (such as brokerage commissions) converting
the securities into cash.

DIVIDENDS

Each Fund pays substantially all of its net income (if any) from dividends and
interest to its shareholders of record as a dividend on or about the last day
of December. Each Fund's net realized short-term and long-term capital gains,
if any, will also be distributed annually in December. A Fund may also make
additional distributions to shareholders to the extent necessary to avoid the
application of the 4% non-deductible excise tax on certain undistributed income
and net capital gains of mutual funds.

All dividends and distributions from a Fund are automatically invested in
additional shares of the Fund.

TAX MATTERS

Because you do not own shares in the Funds directly, generally you are not
taxed directly on Fund distributions. However, you may be subject to taxation
when you receive distributions from your variable annuity contract or variable
life insurance policy. You should refer to the prospectus for your contract or
policy for information on the taxes relating to your investment and the tax
consequences of any withdrawal of your investment. You may also wish to consult
with your own tax advisor about your particular situation, and the tax
consequences of your investment under state and local laws.

<PAGE>

MANAGEMENT OF THE FUNDS

MANAGER

The CitiSelect VIP Portfolios draw on the strength and experience of Citibank.
Citibank is the investment manager of each Fund, and subject to policies set by
the Funds' Trustees, Citibank makes investment decisions. Citibank, with
headquarters at 153 East 53rd Street, New York, New York, has been managing
money since 1822. With its affiliates, it currently manages more than $290
billion in assets worldwide. Citibank is a wholly owned subsidiary of Citicorp,
which is, in turn, a wholly owned subsidiary of Citigroup Inc. Citigroup Inc.
was formed as a result of the merger of Citicorp and Travelers Group, Inc.,
which was completed on October 8, 1998. "CitiSelect" is a registered trademark
of Citicorp.

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

Richard Goldman, a Vice President of Citibank, has been the overall portfolio
manager of the Funds since January, 1999 and is responsible for determining
asset allocations, supervising and monitoring the performance of the Citibank
personnel described below who are responsible for the Funds' securities, and
supervising and monitoring the performance of the subadvisers. Mr. Goldman's
investment experience is discussed below.

The following subadvisers currently manage the following kinds of securities
for the Funds:

SMALL CAP VALUE SECURITIES: Franklin Advisory Services, Inc., One Parker Plaza,
19th Floor, Fort Lee, New Jersey 07024. Franklin Advisory Services is a
registered investment adviser. William J. Lippman, President of Franklin
Advisory Services or its predecessor since 1988, has been responsible for the
daily management of U.S. small cap value securities since the Funds' inception.

LARGE CAP VALUE SECURITIES: Mutual Management Corp. (MMC), 388 Greenwich
Street, New York, New York 10013. MMC, an affiliate of Citibank, is a
registered investment adviser that took over responsibility for the daily
management of the Funds' large cap value securities on January 22, 1999. Prior
to this date, Miller Anderson & Sherrerd LLP was responsible for the daily
management of large cap value securities. MMC is a wholly owned subsidiary of
Salomon Smith Barney Holdings Inc., which in turn is a wholly owned subsidiary
of Citigroup Inc. Frances A. Root, a Director of MMC and a Senior Portfolio
Manager, has been responsible for the daily management of large cap value
securities since MMC assumed responsibility on January 22, 1999. She joined
Smith Barney Capital Management in 1992. Formerly, she was with Shearson Lehman
Advisors as a Vice President and Portfolio Manager for seven years and prior to
that, with E.F. Hutton & Company, Inc.

<PAGE>

INTERNATIONAL EQUITY SECURITIES: Hotchkis and Wiley, 725 South Figueroa Street,
Suite 4000, Los Angeles, California 90017-5400. Hotchkis and Wiley is a
division of Merrill Lynch Asset Management, L.P., a registered investment
adviser. Harry W. Hartford and Sarah H. Ketterer have been responsible for the
daily management of international equity securities since the Funds' inception.
Prior to joining Hotchkis and Wiley in 1994, Mr. Hartford was with The
Investment Bank of Ireland (now Bank of Ireland Asset Management), as a Senior
Manager, where he gained 10 years of experience in both international and
global equity management. Prior to joining Hotchkis and Wiley in 1990, Ms.
Ketterer was an associate with Bankers Trust and an analyst at Dean Witter.

HIGH YIELD BOND: Salomon Brothers Asset Management Inc (SBAM Inc), 7 World
Trade Center, New York, New York 10048. SBAM Inc, an affiliate of Citibank, is
a registered investment adviser that began to manage the Funds' high yield bond
securities on [ ], 1999, the date on which this asset class was added to the
Funds. SBAM Inc is an indirect wholly owned subsidiary of Citigroup Inc. Beth
A. Semmel, a Managing Director of SBAM Inc and a member of its Investment
Policy Committee, has been responsible for the daily management of the Fund's
high yield bond securities since SBAM Inc assumed responsibility for these
assets. At SBAM Inc, Ms. Semmel, who joined SBAM Inc. as a Vice President and
Analyst in May 1993, is a Portfolio Manager and Senior Analyst and has been
responsible for SBAM Inc's high yield portfolios, for evaluating high yield
securities and for covering consumer-related industries. Ms. Semmel was with
Morgan Stanley Asset Management as a high yield bond analyst from 1989 to 1993
and with Kidder Peabody as an equity analyst from 1982 to 1989.

FOREIGN GOVERNMENT SECURITIES: Salomon Brothers Asset Management Limited
(SBAML), Victoria Plaza, 111 Buckingham Palace Road, London SWIS OSB, U.K.
SBAML, an affiliate of Citibank, is a U.S. registered investment adviser that
took over responsibility for the daily management of the Funds' foreign
government securities on ________, 1999. Prior to this date, Pacific Investment
Management Company was responsible for the daily management of the Funds'
foreign government securities. SBAML is a wholly owned indirect subsidiary of
Citigroup Inc. David Scott, a Director and Head of Global Fixed Income of
SBAML, has been responsible for the management of foreign government securities
since SBAML assumed responsibility for these assets. Mr. Scott joined SBAML in
April 1994. Prior to that, Mr. Scott worked for four years at JP Morgan
Investment Management where he had responsibility for global and non-dollar
portfolios; and prior to that, for Mercury Asset Management.

Citibank is responsible for recommending the hiring, termination or replacement
of any subadviser and for supervising and monitoring the performance of any
subadviser. Certain funds managed by Citibank have applied for exemptive relief
from the Securities and Exchange Commission which would permit them to employ
subadvisers without shareholder 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 shareholder approval if those changes or continuation are approved by
the fund's Board of Trustees. There is no assurance that the SEC will grant the
requested relief. If the requested relief is granted, the Funds also will be
permitted to employ subadvisers without shareholder approval, subject to
compliance with certain conditions. If a Fund adds or changes a subadviser
without shareholder approval, this Prospectus would be revised and shareholders
notified.

The following individuals at Citibank are responsible for the management of all
other Fund investments:

LARGE CAP GROWTH SECURITIES: Grant D. Hobson and Richard Goldman, Vice
Presidents, have been responsible for the daily management of large cap growth
securities since the Funds' inception. Mr. Hobson is a Senior Portfolio Manager
responsible for managing U.S. equity portfolios for trust and pension accounts
of Citibank Global Asset Management and currently manages, or co-manages, more
than $4 billion of total assets at Citibank. Prior to joining Citibank in 1993,
Mr. Hobson was a securities analyst and sector manager for pension accounts and
mutual funds for Axe Houghton, formerly a division of USF&G. Mr. Goldman is a
Senior Investment Officer and lead portfolio manager for the Focused Growth
Large Cap Funds. He joined Citibank in 1985 as an assistant portfolio manager,
working on quantitative portfolio strategies. Within the investment unit, he
has had responsibilities in both product development and portfolio management,
and he spent several years working for the firm's senior management where his
responsibilities included Citicorp's relationships with its investors and

<PAGE>

rating agencies. He currently manages, or co-manages, approximately $6 billion
of total assets at Citibank.

SMALL CAP GROWTH SECURITIES: Marguerite Wagner, Vice President and Senior
Portfolio Manager, has been responsible for the daily management of the Funds'
small cap growth securities since January, 1999. Ms. Wagner joined Citibank in
1985. Since 1995, she has had portfolio management and research analyst
responsibility for an internal mid-cap common trust fund and private equity
managed accounts. 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.

DOMESTIC FIXED INCOME SECURITIES: Mark Lindbloom, Vice President, has been
responsible for the daily management of domestic fixed income securities since
the Funds' 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.

MANAGEMENT FEES

For the services Citibank and the subadvisers provided under management
agreements for the Funds and their underlying mutual funds for their fiscal
years ended December 31, 1998, Citibank and the subadvisers received for each
Fund other than CitiSelect VIP Folio 100, a total of 0.75% of each Fund's
average daily net assets. Citibank and the subadvisers receive fees at an
annual rate of 0.50% of CitiSelect VIP Folio 100's average daily net assets for
its then-current fiscal year.

MORE ABOUT THE FUNDS

The Funds' goals, principal investments and risks are summarized in FUNDS AT A
GLANCE. More information on investments, investment strategies and risks
appears below.

PRINCIPAL INVESTMENT STRATEGIES

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

Each Fund is a diversified asset allocation mutual fund that invests in a mix
of equity and fixed income securities. Each Fund's asset mix is designed by
Citibank to offer a different level of potential return with a corresponding
amount of risk. For example, equity securities typically have greater potential
for growth of capital than fixed income securities, and have the potential to
outperform fixed income securities over the long term. However, equity
securities generally are more volatile. Fixed income securities sometimes go up

<PAGE>

in value when equity securities go down. As a result, a Fund investing a higher
percentage of its assets in equity securities may, over time, have the
potential to generate higher returns than a Fund investing more in fixed income
securities, but it may be more volatile and a riskier investment. In making
asset allocations, Citibank studies the long-term performance and valuation
relationships among these two types of securities and the effects of market and
economic variables on those relationships. Each Fund's asset mix is determined
by Citibank to be an optimal combination of stocks and bonds that maximizes
potential returns for the level of risk associated with that Fund's investment
goal. Of course, there can be no assurance that the Funds will perform as
intended.

Citibank generally allocates each Fund's assets among equity and fixed income
securities (each referred to as an asset class) as provided in the following
chart. However, cash flows into or out of a Fund, or changes in market
valuations, could produce different results. Citibank monitors each Fund's
asset mix daily and conducts quarterly reviews to determine whether to
rebalance the Fund's investments. Rebalancing may be accomplished over a period
of time, subject to any regulatory restrictions.

----------------------------------------
ASSET CLASS RANGE *
- ---------------------- ----------------- ----------------------
FIXED
EQUITY INCOME
- ---------------------- ----------------- ----------------------
CITISELECT VIP
FOLIO 100 0-20% 80-100%
- ---------------------- ----------------- ----------------------
CITISELECT VIP
FOLIO 200 20-40% 60-80%
- ---------------------- ----------------- ----------------------
CITISELECT VIP
FOLIO 300 40-60% 40-60%
- ---------------------- ----------------- ----------------------
CITISELECT VIP
FOLIO 400 60-80% 20-40%
- ---------------------- ----------------- ----------------------
CITISELECT VIP
FOLIO 500 75-100% 0-25%
- ---------------------- ----------------- ----------------------

Citibank may further allocate each Fund's equity securities among large cap
securities, small cap securities and international securities, and each Fund's
fixed income securities among U.S. and foreign government and corporate bonds
and between high yield securities and investment grade securities. These
further allocations are intended to maximize returns while managing overall
volatility. Each asset class and the types of securities in that class are
described below. There is no requirement that Citibank allocate a Fund's assets
among all of the foregoing types of equity and fixed income securities at all
times.

MANAGEMENT STYLE. In allocating assets while seeking to maximize returns,
Citibank employs a multi-style, multi-manager strategy. Citibank believes that
there are periods when securities with particular characteristics, or selected
based on a particular investment style, outperform other kinds of securities in

<PAGE>

the same asset class. Citibank attempts to blend asset classes and
complementary investment styles through investment cycles.

To implement this strategy, Citibank has recommended that the Funds employ
subadvisers with expertise managing specific types of securities or managing in
a particular style. The following subadvisers currently manage the following
kinds of securities:

- ------------------------------------------------------------------------------
small cap value securities Franklin Advisory Services, Inc.
- ------------------------------------------------------------------------------
large cap value securities Mutual Management Corporation
- ------------------------------------------------------------------------------
international equity securities Hotchkis and Wiley
- ------------------------------------------------------------------------------
foreign government securities Salomon Brothers Asset Management Limited
- ------------------------------------------------------------------------------
high yield bonds Salomon Brothers Asset Management, Inc
- ------------------------------------------------------------------------------

Citibank manages all other kinds of securities, including large cap growth,
small cap growth, and domestic fixed income securities. Citibank monitors and
supervises the activities of the subadvisers and may terminate the services of
any subadviser at any time.

THE EQUITY CLASS

Each Fund generally diversifies its equity securities among large cap issuers,
small cap issuers and international issuers. The mix of equity securities
varies from Fund to Fund. For example, CitiSelect VIP Folio 400 currently
emphasizes securities of small cap issuers and international issuers to a
greater extent than CitiSelect VIP Folios 100, 200 and 300. CitiSelect VIP
Folio 500 currently emphasizes securities of small cap issuers and
international issuers to a greater extent than CitiSelect VIP Folio 400. The
types of equity securities emphasized may change over time and in different
market conditions, and there is no requirement that each Fund invest in each
type of equity security.

LARGE CAP ISSUERS. Large cap issuers are those with market capitalizations
within the top 1,000 stocks of the equity market. In selecting large cap
securities, the Funds emphasize securities issued by established companies with
stable operating histories.

SMALL CAP ISSUERS. Small cap issuers are those with market capitalizations
below the top 1,000 stocks of the equity market. These stocks may include
stocks in the Russell 2000 Index, which is an index of small cap stocks. Small
cap companies generally have negligible dividend yields and extremely high
levels of volatility. They may offer more profit opportunity during certain
economic conditions than large and medium sized companies, but they also
involve special risks.

INTERNATIONAL ISSUERS. International issuers are those based outside the United
States. The Funds emphasize securities included in the EAFE Index, which
contains securities of companies located in Europe, Australia and the Far East.
The Funds also may invest in emerging market equity securities. There may be
investment opportunities in overseas markets not present in the U.S., and
market performance in the U.S. and abroad may not be the same or highly
correlated. However, overseas investments, particularly in emerging markets,
involve special risks.

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

<PAGE>

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

EQUITY SECURITIES generally represent an ownership interest (or a right to
acquire an ownership interest) in an issuer, and include COMMON STOCKS,
SECURITIES CONVERTIBLE INTO COMMON STOCKS, PREFERRED STOCKS, WARRANTS for the
purchase of stock and DEPOSITARY RECEIPTS (receipts which represent the right
to receive the securities of non-U.S. issuers deposited in a U.S. or
correspondent bank). While equity securities historically have been more
volatile than fixed income securities, they historically have produced higher
levels of total return. Citibank believes that longer term, investors with
diversified equity portfolios have a higher probability of achieving their
investment goals with lower levels of volatility than those who have not
diversified.
- ------------------------------------------------------------------------------

THE FIXED INCOME CLASS

Each Fund generally diversifies its fixed income securities among investment
grade corporate debt obligations, securities issued by the U.S. government and
its agencies and instrumentalities, securities issued by foreign governments,
and high yield corporate debt obligations. The mix of fixed income securities
varies from Fund to Fund. There is no requirement that each Fund invest in each
type of fixed income security.

The Funds may invest in securities with all maturities, including long bonds
(10+ years), intermediate notes (3 to 10 years) and short-term notes (1 to 3
years).

GOVERNMENT SECURITIES. U.S. government securities are high quality instruments
issued or guaranteed as to principal and interest by the U.S. government or by
an agency or instrumentality of the U.S. government. U.S. government securities
have minimal credit risk. 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. Even though
government securities have minimal credit risk, they still fluctuate in value
when interest rates change.

INVESTMENT GRADE CORPORATE BONDS. Corporate bonds are used by U.S. and foreign
corporate issuers to borrow money from investors, and may have varying
maturities. Investment grade securities are those rated Baa or better by
Moody's, BBB or better by Standard & Poor's or which Citibank or a subadviser
believes to be of comparable quality. Securities rated Baa or BBB and
securities of comparable quality may have speculative characteristics. Bonds
have varying degrees of quality and varying degrees of sensitivity to changes
in interest rates. For example, the values of lower quality bonds generally
fluctuate more than higher quality bonds. Investment in bonds of U.S. and
foreign corporate issuers may provide higher levels of current income than
government securities.

HIGH YIELD DEBT OBLIGATIONS. High yield debt obligations, also called "junk
bonds," are fixed income securities that are generally rated in the lower
rating categories, if rated, and are considered to be below investment grade.
Some may be rated, at the time of purchase, as low as Caa by Moody's or CCC by
S&P or may be deemed to be of comparable quality. These securities often offer
higher yields than higher rated securities. However, these securities also
involve significantly greater risks, including the risk of default and price
volatility, than higher rated securities. The Funds may purchase both U.S. and
foreign high yield debt obligations, including both dollar-denominated

<PAGE>

securities and those denominated in foreign currencies, as well as those from
developing countries. No Fund anticipates investing more than 25% of its assets
in high yield debt obligations.

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

- ------------------------------------------------------------------------------
WHAT ARE 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. 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.
- ------------------------------------------------------------------------------

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

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

A Fund's use of derivatives may involve leveraging. Under leveraging, a
relatively small investment may produce substantial losses or gains for the
Fund, well beyond the Fund's initial investment.

- ------------------------------------------------------------------------------
WHAT ARE SHORT SALES?

When a Fund's portfolio manager anticipates that the price of a security will
decline, the manager may enter into an agreement to sell the security, even
though the Fund does not own the security. This technique is called SELLING
SHORT. The Fund will then borrow the same security from a broker or other
institution in order to complete the sale. The Fund must later purchase the
security in order to return the security borrowed. If the portfolio manager has
predicted accurately, the price at which the Fund buys the security will be
less than the price at which the Fund earlier sold the security, creating a
profit for the Fund. However, if the price of the security goes up during this
period, the Fund will be forced to buy the security for more than its sale
price, causing a loss to the Fund.
- ------------------------------------------------------------------------------

<PAGE>

The Funds may use other investment techniques, such as short sales, which also
may entail leveraging. The Fund's short sales are not required to be "against
the box," and therefore, a Fund's losses from short sales may be unlimited.

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

NEW INVESTMENT STRUCTURE. At the date of this prospectus, the Funds, like most
mutual funds, invest directly in securities. However, the Funds intend, in the
future, to convert to a new investment structure, sometimes called a "fund of
funds." In the new investment structure, the Funds, instead of investing
directly in securities, will invest in multiple Portfolios. Each Portfolio is a
mutual fund with its own investment goals and policies. The Portfolios buy,
hold and sell securities in accordance with these goals and policies. Of
course, there can be no assurance that the Funds or the Portfolios will achieve
their goals. Each Portfolio invests in securities in a particular asset class,
in particular types of securities or in securities of particular maturities or
duration.

The Funds expect to convert to the new investment structure during 1999,
although it is possible that the conversion could be delayed.

After the new investment structure is in place, a Fund may withdraw its
investment in any Portfolio at any time, and will do so if the Fund's Trustees
believe it to be in the best interest of the Fund's shareholders. Each
Portfolio may change its investment goals and certain of its investment
policies and restrictions without approval by its investors, but the Portfolio
will notify the Fund and its other investors at least 30 days before
implementing any change in its investment goals. A change in investment goals,
policies or restrictions may cause a Fund to withdraw its investment in a
Portfolio. If the Fund were to withdraw, the Fund could either invest in
another mutual fund or pooled investment vehicle or invest directly in
securities. Upon withdrawal, the Fund could receive securities from a Portfolio
instead of cash, causing the Fund to incur brokerage, tax and other charges or
leaving it with securities which may or may not be readily marketable or widely
diversified.

Under the new investment structure, each Fund bears its share of each
Portfolio's fees and expenses. However, the total fees of each Fund and the
underlying Portfolios will not change from the fees reflected in the fee tables
in "Funds at a Glance."

Certain investment restrictions of each Portfolio cannot be changed without
approval by the investors in that Portfolio. Of course, a Fund could be
outvoted, or otherwise adversely affected, by other investors in a Portfolio.

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

<PAGE>

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

RISKS

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

The risks of investing in each Fund vary depending on the securities it holds
and the investment strategies it uses. For example, Funds investing more of
their assets in fixed income securities may be more susceptible to interest
rate risk and credit risk than Funds investing more of their assets in equity
securities. Conversely, Funds investing more of their assets in equity
securities may be more susceptible to greater price volatility than Funds
investing more of their assets in fixed income securities. Please remember that
an investment in the Funds is not a deposit of Citibank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency.

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

It is also possible that the Funds will not perform as intended. For example,
CitiSelect VIP Folio 100 is expected to be the least volatile of the Funds.
However, under certain market conditions this Fund could be more volatile than
one or more of the other Funds.

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

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

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

<PAGE>

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

JUNK BONDS. Credit risk is more pronounced with so-called "junk bonds"
which are debt obligations that are rated below investment-grade. The risk
of default may be greater and the market for these securities may be less
active, making it more difficult to sell the securities at reasonable
prices, and also making valuation of the securities more difficult. A Fund
may incur additional expenses if an issuer defaults and the Fund tries to
recover some of its losses in a bankruptcy or other similar proceeding.

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

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

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

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

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

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

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

<PAGE>

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

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

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

SMALLER COMPANIES. The securities of smaller capitalization companies may have
more risks than those of larger, more seasoned companies. They may be
particularly susceptible to market downturns because of limited financial or
management resources. Also, there may be less publicly available information
about small cap companies. As a result, their prices may be volatile, causing
the Funds' share prices to be volatile.

PREPAYMENT RISK. The issuers of debt securities held by a Fund may be able to
prepay principal due on the securities, particularly during periods of
declining interest rates. A Fund may not be able to reinvest that principal at
attractive rates, reducing income to the Fund, and the Fund may lose any
premium paid. In addition, 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
the Funds' share prices more volatile. Mortgage-backed securities are
particularly susceptible to prepayment risk and their prices may be very
volatile.

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

DERIVATIVES. The Funds' use of derivatives (such as futures contracts and
forward foreign currency contracts), particularly when used for non-hedging
purposes, may be risky. This practice could result in losses that are not
offset by gains on other portfolio assets. Losses would cause the Funds' share
prices to go down. There is also the risk that the counterparty may fail to
honor its contract terms. This risk becomes acute when the Fund invests in
derivatives that are not traded on commodities exchanges or boards of trade.
Each Fund's ability to use derivatives successfully depends on its portfolio
managers' ability to accurately predict movements in stock prices, interest
rates, currency exchange rates, or other economic factors. If the portfolio
managers' predictions are wrong, the Fund could suffer greater losses than if
the Fund had not used derivatives. In some instances, a Fund's use of
derivatives may have the effect of leveraging the Fund. Leveraging adds
increased risks to a Fund, because the Fund's losses may be out of proportion
to the amount invested in the instrument--a relatively small investment may
lead to much greater losses.

STATE INSURANCE REGULATION. Each Fund provides an investment vehicle for
variable annuity contracts and variable life insurance policies offered by the
separate accounts of participating insurance companies. Certain states have
regulations concerning concentration of investments and purchase and sale of
futures contracts, among other techniques. If these regulations are applied to
a Fund, the Fund may be limited in its ability to engage in such techniques and
to manage its investments with the greatest flexibility. It is each Fund's

<PAGE>

intention to operate in material compliance with current insurance laws and
regulations, as applied in each jurisdiction in which contracts or policies of
separate accounts of participating insurance companies are offered.

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

<PAGE>

FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the Funds'
financial performance for the fiscal periods indicated. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in a Fund (assuming investment of all dividends and distributions).
This information has been audited by PricewaterhouseCoopers LLP, independent
accountants for the Fund, whose report, along with the Funds' financial
statements, is included in the annual report which is incorporated by reference
into the Statement of Additional Information and which is available upon
request.

<PAGE>

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

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

The Annual and Semi-Annual Reports for the Funds list their portfolio holdings
and describe their performance.

To obtain free copies of the SAI and the Annual and Semi-Annual Reports or to
make other inquiries, please call toll-free 1-800-625-4554.

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

SEC file number: 811-07893

<PAGE>

Prospectus

CITIFUNDSSM SMALL CAP GROWTH VIP PORTFOLIO

A Mutual Fund Managed by Citibank, N.A.
and Offered Through the Separate Accounts of
Participating Insurance Companies

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

[_____], 1999

<PAGE>

CITIFUNDS SMALL CAP GROWTH VIP PORTFOLIO

TABLE OF CONTENTS

Fund at a Glance

Investing in the Fund
How to Invest
How the Price of Shares is Calculated
How to Sell Shares
Dividends
Tax Matters

Management of the Fund
Manager
Management Fees

More About the Fund
Principal Investment Strategies
Risks

Financial Highlights

<PAGE>

FUND AT A GLANCE

The mutual fund described in this prospectus is available for investment
through separate accounts offered by certain insurance companies. You may not
purchase shares in this Fund directly. You may invest indirectly in the Fund by
purchasing a variable annuity contract or variable life insurance policy
offered by a participating life insurance company.

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

FUND GOAL

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

MAIN INVESTMENT STRATEGIES

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

o common stocks;

o securities convertible into common stocks;

o preferred stocks;

o warrants; and

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

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

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

<PAGE>

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

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

MAIN RISKS

Like all mutual funds, you may lose money if you invest in the Fund. The
principal risks of investing in the Fund are described below. See page ___ for
more information about risks.

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

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

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

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

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

<PAGE>

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

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

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

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

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

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

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

WHO MAY WANT TO INVEST

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

You should consider investing in Small Cap Growth VIP Portfolio if:

<PAGE>

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

o You are seeking growth of principal.

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

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

Don't invest in Small Cap Growth VIP Portfolio if:

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

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

FUND PERFORMANCE

The following bar chart and table can help you evaluate the risks of investing
in the Fund, and how its returns have varied over time.
o The bar chart shows changes in the Fund's performance from year to year.
o The table shows how the Fund's average annual returns for the periods
indicated compare to those of a broad measure of market performance.
o In both the chart and table, and the related information, the returns
shown for the Fund do not take into account any fees that are paid by the
separate accounts through which shares of the Fund are sold. If these
fees had been included, the returns would have been lower.

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

TOTAL RETURN
(per calendar year)

1998

1998...............[ ]%

<PAGE>
__________________________________________________
HIGHEST AND LOWEST RETURNS
For Calendar Quarters Covered by the Bar Chart
__________________________________________________
Quarter Ending
__________________________________________________
Highest _____% [date]
__________________________________________________
Lowest _____% [date]
__________________________________________________

__________________________________________________
AVERAGE ANNUAL TOTAL RETURNS
As of December 31, 1998
__________________________________________________
1 Year Life of Fund
Since
February 10,
1997
__________________________________________________
CitiFunds _____ % _____ %
Small Cap
Growth VIP
Portfolio
__________________________________________________
Russell 2000
Growth Index _____ % _____ %
__________________________________________________

<PAGE>

INVESTING IN THE FUND

HOW TO INVEST

You may not buy shares directly. You can invest in the Fund by purchasing a
variable annuity contract or variable life insurance policy offered by a
participating insurance company separate account. Variable annuity contracts
and life insurance policies are issued by insurance companies. You should read
both this prospectus and the prospectus of the participating insurance company
separate account before you invest. The separate account prospectus will tell
you:

o how to purchase a variable annuity contract or variable life insurance
policy
o how to select the Fund as an investment option for the contract or policy
o whether you can transfer money from one investment option to another
o how to withdraw from or cancel your contract or policy
o the specific terms and provisions of the contract or policy, including
o sales and surrender charges,
o mortality and expense risk fees, and
o other fees and expenses that may be payable under the contract or
policy

The separate accounts buy Fund shares based upon available cash from premium
payments and the instructions the accounts receive from their contract and
policyholders. Shares of the CitiFunds Small Cap Growth VIP Portfolio are
offered continuously and purchases may be made Monday through Friday, except on
certain holidays. The Fund and the Fund's distributor have the right to reject
any purchase order or cease offering Fund shares at any time.

Shares are purchased at net asset value (NAV) the next time it is calculated
after the order is received and accepted by the Fund or the Fund's agent. NAV
is the value of a single share of a Fund. The Fund does not have any sales
charges.

HOW THE PRICE OF SHARES IS CALCULATED

The Fund calculates its NAV every day the New York Stock Exchange is open for
trading. 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 Fund invests close early, NAV will be calculated
as of the close of those markets.

The Fund's securities are valued primarily on the basis of market quotations.
When market quotations are not readily available, the Fund may price securities
at fair value. Fair value is determined in accordance with procedures approved
by the Fund's Board of Trustees. When the Fund uses the fair value pricing
method, a security may be priced higher or lower than if the Fund had used a
market quotation to price the same security. For foreign securities the values
are translated from the local currency into U.S. dollars using current exchange
rates. If trading in the currency is restricted, the Fund uses a rate believed

<PAGE>

to reflect the currency's fair value in U.S. dollars. Trading may take place in
foreign securities held by the Fund on days when the Fund is not open for
business. As a result, the Fund's NAV may change on days on which it is not
possible to purchase or sell shares of the Fund.

HOW TO SELL SHARES

A separate account may sell Fund shares to generate cash to meet various
obligations under the contracts and policies issued by it. For example, if you
invest in the Fund through a variable annuity contract and request a partial
withdrawal or cancellation of the contract, the separate account may sell Fund
shares to pay you. You should read your separate account prospectus carefully
to find out

o how you may withdraw from or cancel your contract or policy

o what fees or expenses you may incur

o whether you may be taxed on the amount of withdrawal, including any
penalty tax

A separate account may sell (redeem) shares on any business day. The price will
be the NAV the next time it is calculated after the redemption request in
proper form has been received.

Payment from the redemption will be generally made to the separate account
within seven days after the request is made. Redemption proceeds may be
delayed, or the right to receive redemption proceeds suspended, if the New York
Stock Exchange is closed (other than on weekends or holidays) or trading is
restricted, or if an emergency exists. The Fund has the right to pay redemption
proceeds by distributing securities instead of cash. In that case, the separate
account may incur costs (such as brokerage commissions) converting the
securities into cash.

DIVIDENDS

The Fund pays substantially all of its net income (if any) from dividends and
interest to its shareholders of record as a dividend on or about the last day
of December. The Fund's net realized short-term and long-term capital gains, if
any, is also distributed annually in December. The Fund may also make
additional distributions to shareholders to the extent necessary to avoid the
application of the 4% non-deductible excise tax on certain undistributed income
and net capital gains of mutual funds.

All dividends and distributions are automatically invested in additional shares
of the Fund.

TAX MATTERS

Because you do not own shares in the Funds directly, the Fund expects that
normally you will not be taxed directly on Fund distributions. However, you may
be subject to taxation when you receive distributions from your variable
annuity contract or variable life insurance policy. You should refer to the
prospectus for your contract or policy for information on the taxes relating to

<PAGE>

your investment and the tax consequences of any withdrawal of your investment.
You may also wish to consult with your own tax advisor about your particular
situation, and the tax consequences of your investment under state and local
laws.

MANAGEMENT OF THE FUND

MANAGER

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

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

Marguerite Wagner has been the portfolio manager for the Fund since January,
1999. Ms. Wagner joined Citibank in 1985. Since 1995, she has had portfolio
management and research analyst responsibility for 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.

<PAGE>

MANAGEMENT FEES

For the management services Citibank provided to the Fund and its underlying
mutual fund during the fiscal year ended December 31, 1998, Citibank received a
fee equal to 0.75% of the Fund's average daily net assets.

MORE ABOUT THE FUND

The Fund's goal, principal investments and risks are summarized in FUND AT A
GLANCE. More information on investments, investment strategies and risks
appears below.

PRINCIPAL INVESTMENT STRATEGIES

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

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

_______________________________________________________________________________
WHAT ARE EQUITY SECURITIES?

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

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.

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

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

<PAGE>

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

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

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

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

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

NEW INVESTMENT STRUCTURE. At the date of this prospectus the Fund like most
mutual funds, invests directly in securities. However, the Fund intends, in the
future, to convert to a new investment structure. In the new investment
structure, the Fund will invest in securities through an underlying mutual fund
having the same investment goals and policies.

The Fund expects to convert to the new investment structure during 1999,
although it is possible that the conversion could be delayed.

After the new investment structure is in place, the Fund may stop investing in
its underlying mutual fund at any time, and will do so if the Fund's Trustees
believe it to be in the best interest of the Fund's shareholders. The Fund
could then invest in another mutual fund or pooled investment vehicle or invest
directly in securities.

Under the new investment structure, the Fund bears its share of the underlying
mutual fund's expenses. However, the total fees of the Fund and the underlying
fund are not expected to change from fees reflected in the fee tables in "Fund
at a Glance".

<PAGE>

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

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

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

RISKS

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

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

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

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

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

<PAGE>

delayed, the prices of the securities of such companies may drop. Sometimes,
the prices of the securities of smaller capitalized companies rise and fall
based on investor perception rather than economics. Securities of small cap
companies may be thinly traded, making their disposition more difficult. For
all these reasons, the prices of the securities of small cap companies may be
more volatile, causing the Fund's share price to be volatile. Funds that invest
a higher percentage of their assets in small cap stocks are generally more
volatile than funds investing a higher percentage of their assets in larger,
more established companies.

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

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

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

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

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

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

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

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

<PAGE>

Controls or intervention could limit or prevent the Fund from
realizing value in U.S. dollars from its investment in foreign
securities. The Fund may also be adversely affected by the
introduction of the Euro.

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

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

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

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

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

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

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

STATE INSURANCE REGULATION. The Fund provides an investment vehicle for
variable annuity contracts and variable life insurance policies offered by the
separate accounts of participating insurance companies. Certain states have
regulations concerning concentration of investments and purchase and sale of
futures contracts, among other techniques. If these regulations are applied to

<PAGE>

the Fund, the Fund may be limited in its ability to engage in such techniques
and to manage its investments with the greatest flexibility. It is the Fund's
intention to operate in material compliance with current insurance laws and
regulations, as applied in each jurisdiction in which contracts or policies of
separate accounts of participating insurance companies are offered.

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

<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights table is intended to help you understand the Fund's
financial performance for the fiscal periods indicated. Certain information
reflects financial results for a single Fund share. The total returns in the
table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming investment of all dividends and
distributions). This information has been audited by PricewaterhouseCoopers
LLP, independent accountants for the Fund, whose report, along with the Fund's
financial statements, is included in the annual report which is incorporated by
reference into the Statement of Additional Information and which is available
upon request.

February 10, 1997
(commencement of
Year Ended operations)
December 31, to
1998 December 31, 1997
_______________________________________________________________________________

Net Asset Value, beginning of period $ $
_______________________________________________________________________________
Income From Operations:
Net investment income (loss) + +
Net realized and unrealized gain + +
(loss)
_______________________________________________________________________________
Total from operations
_______________________________________________________________________________
Less Distributions From:
Net investment income -- --
Net realized gain
_______________________________________________________________________________
Total distributions )
Net Asset Value, end of period $ $
_______________________________________________________________________________
Total Return % %**
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(000's omitted) $ $
Ratio of expenses to average net
assets % %*
Ratio of net investment income
(loss) to average net assets % %*
Portfolio turnover [ ] [ ]
_______________________________________________________________________________
* Annualized
** Not Annualized
+ The per share amounts were computed using a monthly average number of
shares outstanding during the period.

<PAGE>

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

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

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

To obtain free copies of the SAI and the Annual and Semi-Annual Reports or to
make other inquiries, please call toll-free 1-800-625-4554.

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

SEC file number: 811-07893

<PAGE>

Statement of Additional Information
[_____], 1999

CITISELECT VIP FOLIO 100
CITISELECT VIP FOLIO 200
CITISELECT VIP FOLIO 300
CITISELECT VIP FOLIO 400
CITISELECT VIP FOLIO 500

Variable Annuity Portfolios (the "Trust") is an open-end investment
company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on October 18, 1996. The Trust offers shares of
five investment funds -- CitiSelect VIP Folio 100, CitiSelect VIP Folio 200,
CitiSelect VIP Folio 300, CitiSelect VIP Folio 400 and CitiSelect VIP Folio 500
(each, a "Fund" and collectively, the "Funds"), as well as the shares of one
other series. The shares of the Funds are offered only to separate accounts
("Separate Accounts") of participating life insurance companies ("Participating
Insurance Companies") for the purpose of funding variable annuity contracts and
variable life insurance policies. The address and telephone number of the Trust
are 21 Milk Street, Boston, Massachusetts 02109, (617) 423-1679.

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

TABLE OF CONTENTS PAGE

1. The Trust..........................................................................
2. Investment Objectives and Policies.................................................
3. Description of Permitted Investments and Investment Practices......................
4. Investment Restrictions............................................................
5. Performance Information and Advertising............................................
6. Determination of Net Asset Value; Valuation of Securities; Additional Purchase
and Redemption Information........................................................
7. Management.........................................................................
8. Portfolio Transactions.............................................................
9. Description of Shares, Voting Rights and Liabilities...............................
10. Certain Additional Tax Matters.....................................................
11. Certain Bank Regulatory Matters....................................................
12. Financial Statements...............................................................

</TABLE>

This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Trust's Prospectus, dated May 1, 1999, by which shares of the Funds are
offered. This Statement of Additional Information should be read in conjunction
with the Prospectus. This Statement of Additional Information incorporates by
reference the financial statements described on page ___ hereof. These
financial statements can be found in the Funds' Annual Report to Shareholders.
An investor may obtain copies of the Prospectus and Annual Report without
charge by calling 1-800-625-4554 or by contacting a Participating Insurance
Company.

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

<PAGE>

1. THE TRUST

Variable Annuity Portfolios, the Trust, is an open-end investment company
organized as a business trust under the laws of the Commonwealth of
Massachusetts on October 18, 1996. This Statement of Additional Information
relates to five Funds offered by the Trust - CitiSelect VIP Folio 100,
CitiSelect VIP Folio 200, CitiSelect VIP Folio 300, CitiSelect VIP Folio 400
and CitiSelect VIP Folio 500. The Funds are investment vehicles for variable
annuity contracts and variable life insurance policies offered by Separate
Accounts of Participating Insurance Companies.

Each Fund is a diversified series of the Trust. Under the Investment
Company Act of 1940, as amended (the "1940 Act"), a diversified series or
diversified investment company must invest at least 75% of its assets in cash
and cash items, U.S. Government securities, investment company securities and
other securities limited as to any one issuer to not more than 5% of the total
assets of the investment company and not more than 10% of the voting securities
of the issuer.

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

The Board of Trustees of the Trust provides broad supervision over the
affairs of the Funds. Shares of the Funds are continuously sold by CFBDS, Inc.,
the Funds' distributor ("CFBDS" or the "Distributor"), only to Separate
Accounts.

PROPOSED RESTRUCTURING
At the date of this Statement of Additional Information, the Funds, like
most mutual funds, invest directly in securities. However, the Funds intend, in
the future, to convert to a new investment structure, sometimes called a "fund
of funds." In the new investment structure, the Funds, instead of investing
directly in securities, will invest in multiple Portfolios. Each Portfolio is a
mutual fund with its own investment goals and policies. The Portfolios buy,
hold and sell securities in accordance with these goals and policies. Of
course, there can be no assurance that the Funds or the Portfolios will achieve
their goals. Each Portfolio invests in securities in a particular asset class,
in particular types of securities or in securities of particular maturities or
duration.

The Funds expect to convert to the new investment structure during 1999,
although it is possible that the conversion could be delayed.

Following the restructuring, the Trust will seek the investment objective
of each Fund by investing all of its investable assets in multiple underlying
investment companies or series thereof. Currently, the Trust intends to invest
in VAP Large Cap Growth Portfolio, VAP Large Cap Value Portfolio, VAP Small Cap
Value Portfolio, VAP Fixed Income Portfolio, VAP International Portfolio, VAP
Foreign Portfolio, VAP High Yield Portfolio, VAP Small Cap Growth Portfolio
(collectively, the "Portfolios"). The Portfolios are series of VAP Master
Portfolios (the "Portfolio Trust"). The Portfolio Trust is an open end,
diversified management investment company organized as a New York trust.

Following the restructuring, all references in this Statement of
Additional Information to a Fund will include that Fund's underlying
Portfolios, except as otherwise noted. In addition, references to the Trust
will include the Portfolio Trust, except as otherwise noted.

2. INVESTMENT OBJECTIVES AND POLICIES

Each Fund is an asset allocation fund that allocates its investments among
three primary classes of assets -- equity, fixed income and money market

<PAGE>

securities. Each Fund's asset mix is designed by Citibank to offer a different
level of potential return within a corresponding amount of risk. The investment
objective (or goal) of each Fund is as follows:

The investment objective of CitiSelect VIP Folio 100 is as high a level
of current income as is consistent with a dominant emphasis on fixed income
securities and a small allocation to equity securities.

The investment objective of CitiSelect VIP Folio 200 is as high a total
return over time as is consistent with a primary emphasis on fixed income
securities, and a secondary emphasis on equity securities.

The investment objective of CitiSelect Folio VIP 300 is as high a total
return over time as is consistent with a balanced emphasis on equity and fixed
income securities.

The investment objective of CitiSelect Folio VIP 400 is as high a total
return over time as is consistent with a primary emphasis on equity securities,
and a secondary emphasis on fixed income securities.

The investment objective of CitiSelect Folio VIP 500 is as high a total
return over time as is consistent with a dominant emphasis on equity securities
and a small allocation to fixed income securities.

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

The Prospectus contains a discussion of the principal investment
strategies of each Fund and the principal risks of investing in each Fund. The
following supplements the information contained in the Prospectus concerning
the investment policies and techniques of each Fund.

CitiSelect VIP Folio 100 is expected to be the least volatile of the five
Funds and is designed for the investor who is seeking current income with
relatively low risk but with some growth potential. CitiSelect VIP Folio 200 is
designed for the investor who is seeking relatively low risk provided by
substantial investments in fixed income securities, but who also seeks some
capital growth. CitiSelect VIP Folio 300 is designed for the investor seeking a
balanced approach by emphasizing stocks for their higher capital appreciation
potential but retaining a significant fixed income investment component to
temper volatility. CitiSelect VIP Folio 400 and CitiSelect VIP Folio 500 are
designed for the investor willing and able to take higher risks in the pursuit
of long-term capital appreciation. CitiSelect VIP Folio 500 is expected to be
the most volatile of the five Funds, and is designed for investors who can
withstand greater market swings to seek potential long-term rewards. CitiSelect
VIP Folio 400 is designed for investors seeking long-term rewards, but with
less volatility.

The Trust has also adopted the following policies with respect to each
Fund's investments in (i) warrants and (ii) securities of issuers with less
than three years' continuous operation. The Trust's purchases of warrants for
each Fund will not exceed 5% of the Fund's net assets. Included within that
amount, but not exceeding 2% of its net assets, may be warrants which are not
listed on the New York Stock Exchange or the American Stock Exchange. Any such
warrants will be valued at their market value except that warrants which are
attached to securities at the time such securities are acquired for a Fund will
be deemed to be without value for the purpose of this restriction. The Trust
will not invest more than 5% of each Fund's assets in companies which,
including their respective predecessors, have a record of less than three
years' continuous operation.

3. DESCRIPTION OF PERMITTED INVESTMENTS AND INVESTMENT PRACTICES

The Funds may, but need not, invest in any or all of the investments and
utilize any or all of the investment techniques described in the Prospectus and
herein. The selection of investments and the utilization of investment
techniques depend on, among other things, the Manager's and, as applicable, the
subadvisers' investment strategies for the Funds, conditions and trends in the
economy and financial markets and investments being available on terms that, in
the Manager's or a subadviser's opinion, make economic sense.

<PAGE>

BANK OBLIGATIONS
Each of the Funds 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 Fund 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
Fund may be invested in shares of other investment companies. Each Fund may
invest up to 5% of its assets in closed-end investment companies which
primarily hold securities of non-U.S. issuers.

SECURITIES RATED BAA OR BBB
Each Fund may purchase securities rated Baa by Moody's or BBB by S&P 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.

MORTGAGE-BACKED SECURITIES
Each of the Funds 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 United States 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.

<PAGE>

Each Fund may also invest a portion of its assets in collateralized
mortgage obligations or "CMOs," a type of mortgage-backed security. CMOs are
securities collateralized by mortgages, mortgage pass-through certificates,
mortgage pay-through bonds (bonds representing an interest in a pool of
mortgages where the cash flow generated from the mortgage collateral pool is
dedicated to bond repayment), and mortgage-backed bonds (general obligations of
the issuers payable out of the issuers' general funds and additionally secured
by a first lien on a pool of single family detached properties). Many CMOs are
issued with a number of classes or series which have different maturities and
are retired in sequence.

Investors purchasing such CMOs in the shortest maturities receive or are
credited with their pro rata portion of the scheduled payments of interest and
principal on the underlying mortgages plus all unscheduled prepayments of
principal up to a predetermined portion of the total CMO obligation. Until that
portion of such CMO obligations is repaid, investors in the longer maturities
receive interest only. Accordingly, the CMOs in the longer maturity series are
less likely than other mortgage pass-through certificates to be prepaid prior
to their stated maturity. Although some of the mortgages underlying CMOs may be
supported by various types of insurance, and some CMOs may be backed by GNMA
certificates or other mortgage pass-through certificates issued or guaranteed
by U.S. Government agencies or instrumentalities, the CMOs themselves are not
generally guaranteed.

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 Fund's fixed income securities, but would also increase
the inherent volatility of the Fund 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
The Funds may enter into mortgage "dollar roll" transactions pursuant to
which they sell mortgage-backed securities for delivery in the future and
simultaneously contract to repurchase substantially similar securities on a
specified future date. During the roll period, a Fund forgoes principal and
interest paid on the mortgage-backed securities. The Fund is compensated for
the lost principal and interest by the difference between the current sales
price and the lower price for the future purchase (often referred to as the
"drop") as well as by the interest earned on the cash proceeds of the initial
sale. The Fund may also be compensated by receipt of a commitment fee. However,
unless such compensation exceeds the income, capital appreciation and gain or
loss due to mortgage repayments that would have been realized on the securities
sold as part of the mortgage dollar roll, the use of this technique will
diminish the investment performance of the Fund compared with what such
performance would have been without the use of mortgage dollar rolls. The
benefits derived from the use of mortgage dollar rolls may depend upon the
Manager's ability to predict correctly mortgage prepayments and interest rates.
There is no assurance that mortgage dollar rolls can be successfully employed.
A "covered roll" is a specific type of dollar roll for which a Fund establishes
a segregated account with liquid securities equal in value to the securities
subject to repurchase by the Fund. The Funds will invest only in covered rolls.

CORPORATE ASSET-BACKED SECURITIES
Each of the Funds may invest in corporate asset-backed securities. These
securities, issued by trusts and special purpose corporations, are backed by a

<PAGE>

pool of assets, such as credit card and automobile loan receivables,
representing the obligations of a number of different parties.

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

Corporate asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors on underlying assets to make payments, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through insurance policies or
letters of credit obtained by the issuer or sponsor from third parties. A Fund
will not pay any additional or separate fees for credit support. 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.

RULE 144A SECURITIES
Consistent with applicable investment restrictions, each of the Funds may
purchase securities that are not registered ("restricted securities") under the
Securities Act of 1933 (the "Securities Act"), but can be offered and sold to
"qualified institutional buyers" under Rule 144A under the Securities Act.
However, none of the Funds invests more than 10% of its net assets (taken at
market value) in illiquid investments, which include securities for which there
is no readily available market, securities subject to contractual restrictions
on resale and restricted securities, unless, 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 the Manager and to each Subadviser the daily function of
determining and monitoring liquidity of restricted securities.

PRIVATE PLACEMENTS AND ILLIQUID INVESTMENTS
Each Fund may invest up to 10% 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 Fund to sell them promptly at an acceptable price.

SECURITIES OF NON-U.S. ISSUERS
Each of the Funds may invest in securities of non-U.S. issuers. Investing
in securities of foreign issuers may involve significant risks not present in
domestic investments. For example, the value of such securities fluctuates
based on the relative strength on the U.S. dollar. In addition, there is
generally less publicly available information about foreign issuers,
particularly those not subject to the disclosure and reporting requirements of

<PAGE>

the U.S. securities laws. Non-U.S. issuers are generally not bound by uniform
accounting, auditing and financial reporting requirements comparable to those
applicable to domestic issuers. Investments in securities of non-U.S. issuers
also involve the risk of possible adverse changes in investment or exchange
control regulations, expropriation or confiscatory taxation, limitation on the
removal of funds or other assets of the Fund, political or financial
instability or diplomatic and other developments which would affect such
investments. Further, economies of other countries or areas of the world may
differ favorably or unfavorably from the economy of the U.S.

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

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

American Depositary Receipts ("ADRs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs") and other forms of depositary
receipts for securities of non-U.S. issuers provide an alternative method for
the Funds 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 Funds may invest in securities of non-U.S. issuers that impose
restrictions on transfer within the United States or to United States 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.

REPURCHASE AGREEMENTS
Each of the Funds may invest in repurchase agreements collateralized by
securities in which that Fund may otherwise invest. Repurchase agreements are
agreements by which a Fund purchases a security and simultaneously commits to
resell that security to the seller (which is usually a member bank of the U.S.
Federal Reserve System or a member firm of the New York Stock Exchange (or a
subsidiary thereof)) at an agreed upon date within a number of days (usually
not more than seven) from the date of purchase. The resale price reflects the
purchase price plus an agreed upon market rate of interest which is unrelated
to the coupon rate or maturity of the purchased security. A repurchase
agreement involves the obligation of the seller to pay the agreed upon price,

<PAGE>

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 Fund's risk
is limited to the ability of the seller to pay the agreed-upon amount on the
delivery date. If the seller defaults, the underlying security constitutes
collateral for the seller's obligation to pay although that Fund may incur
certain costs in liquidating this collateral and in certain cases may not be
permitted to liquidate this collateral. All repurchase agreements entered into
by the Funds 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 Fund 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 Fund could experience a loss.

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

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

WHEN-ISSUED SECURITIES
Each of the Funds may purchase securities on a "when-issued" or on a
"forward delivery" basis, which means that the securities would be delivered to
the Fund at a future date beyond customary settlement time. It is expected
that, under normal circumstances, the applicable Fund would take delivery of
such securities. In general, the Fund does not pay for the securities until
received and does not start earning interest until the contractual settlement
date. When a Fund commits to purchase a security on a "when-issued" or on a
"forward delivery" basis, it sets up procedures consistent with Securities and
Exchange Commission policies. Since those policies currently require that an

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amount of a Fund's assets equal to the amount of the purchase be held aside or
segregated to be used to pay for the commitment, the Funds expect always to
have cash or liquid securities sufficient to cover any commitments or to limit
any potential risk. However, even though the Funds do not intend to make such
purchases for speculative purposes and intend to adhere to the provisions of
Securities and Exchange Commission policies, purchases of securities on such
bases may involve more risk than other types of purchases. For example, a Fund
may have to sell assets which have been set aside in order to meet redemptions.
Also, if the Manager or a Subadviser determines it is advisable as a matter of
investment strategy to sell the "when-issued" or "forward delivery" securities,
the Fund 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 Fund's payment
obligation). An increase in the percentage of the Fund's assets committed to
the purchase of securities on a "when-issued" basis may increase the volatility
of its net asset value.

FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Because each of the Funds 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 Funds may enter into
foreign currency exchange transactions to convert United States currency to
foreign currency and foreign currency to United States currency, as well as
convert foreign currency to other foreign currencies. A Fund either enters into
these transactions on a spot (i.e., cash) basis at the spot rate prevailing in
the foreign currency exchange market, or uses forward contracts to purchase or
sell foreign currencies. The Funds may also enter into foreign currency hedging
transactions (including proxy hedges and cross hedges) 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 Fund's
assets are valued daily in terms of U.S. dollars, the Trust does not intend to
convert a Fund's holdings of other currencies into U.S. dollars on a daily
basis.)

The Funds 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 the Fund
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 Fund may enter into forward
contracts for hedging and non-hedging purposes, including transactions entered
into for the purposes of profiting from anticipated changes in foreign currency
exchange rates.

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

When a Fund 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 Fund 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 the Manager or a Subadviser believes that the currency of a
particular country may suffer a substantial decline against the U.S. dollar, a
Fund 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 Fund's securities denominated in such non-U.S. currency. The precise

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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 Funds generally do not enter into such forward contracts or
maintain a net exposure to such contracts where the consummation of the
contracts obligates a Fund to deliver an amount of non-U.S. currency in excess
of the value of the Fund'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, the Manager believes
that it is important to have the flexibility to enter into such forward
contracts when it determines that the best interests of the Fund will be
served.

The Funds generally would not enter into a forward contract with a term
greater than one year. At the maturity of a forward contract, a Fund 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 Fund retains the security and engages in an offsetting
transaction, the Fund will incur a gain or a loss (as described below) to the
extent that there has been movement in forward contract prices. If a Fund
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 Fund enters into a forward contract for
the sale of the non-U.S. currency and the date it enters into an offsetting
contract for the purchase of such currency, the Fund 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 Fund 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 Fund
securities at the expiration of the contract. Accordingly, it may be necessary
for a Fund 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
Fund 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 Fund is
obligated to deliver.

Each of the Funds may also purchase put options on a non-U.S. currency in
order to protect against currency rate fluctuations. If a Fund purchases a put
option on a non-U.S. currency and the value of the non- U.S. currency declines,
the Fund 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 Fund which otherwise would have resulted. Conversely, where a
rise in the U.S. dollar value of another currency is projected, and where the
Fund anticipates investing in securities traded in such currency, the Fund may
purchase call options on the non-U.S. currency.

The purchase of such options could offset, at least partially, the effects
of the adverse movements in exchange rates. However, the benefit to the Fund
from purchases of foreign 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, the Fund could
sustain losses on transactions in foreign currency options which would require
it to forgo a portion or all of the benefits of advantageous changes in such
rates.

The Funds may write options on non-U.S. currencies for hedging purposes or
otherwise to achieve their investment objectives. For example, where a Fund
anticipates a decline in the value of the U.S. dollar value of a foreign
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 Fund 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 foreign security to be acquired because

<PAGE>

of an increase in the U.S. dollar value of the currency in which the underlying
security is primarily traded, a Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will expire unexercised
and allow the Fund 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
Fund 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 Fund 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 Fund will be
covered by segregation of cash and liquid securities in an amount sufficient to
discharge the Fund'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.

In a proxy hedge, which is generally less costly than a direct hedge, a
Fund, having purchased a security, would sell a currency whose value is
believed to be closely linked to the currency in which the security is
denominated. Interest rates prevailing in the country whose currency was sold
would be expected to be closer to those in the U.S. and lower than those of
securities denominated in the currency of the original holding. This type of
hedging entails greater risk than a direct hedge because it is dependent on a
stable relationship between the two currencies paired as proxies and the
relationships can be very unstable at times. A Fund may enter into a cross
hedge if a particular currency is expected to decrease against another
currency. The Fund would sell the currency expected to decrease and purchase a
currency which is expected to increase against the currency sold in an amount
equal to some or all of the Fund's holdings denominated in the currency sold.

Investing in ADRs and other depositary receipts presents many of the same
risks regarding currency exchange rates as investing directly in securities
traded in currencies other than the U.S. dollar. Because the securities
underlying ADRs 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 non-U.S. currency remains constant, and thus will
reduce the value of the receipts covering such securities. A Fund may employ
any of the above described foreign currency hedging techniques to protect the
value of its assets invested in depositary receipts.

Of course, a Fund is not required to enter into the transactions described
above and does not do so unless deemed appropriate by the Manager or a
Subadviser. It should be realized that under certain circumstances, the Funds
may not be able to hedge against a decline in the value of a currency, even if
the Manager or a Subadviser 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 Fund'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 Fund has established procedures consistent with policies of the
Securities and Exchange Commission concerning forward contracts. Those policies
currently require that an amount of a Fund's assets equal to the amount of the
purchase be held aside or segregated to be used to pay for the commitment.
Therefore, each Fund expects to always have cash or liquid securities available
sufficient to cover any commitments under these contracts.

OPTIONS
Each of the Funds may write covered call and put options and purchase call
and put options on securities. Call and put options written by a Fund may be
covered in the manner set forth below.

<PAGE>

A call option written by a Fund is "covered" if the Fund owns the security
underlying the call or has an absolute and immediate right to acquire that
security without additional cash consideration (or for additional cash
consideration held in a segregated account) upon conversion or exchange of
other securities held in its portfolio. A call option is also covered if a Fund
holds a call on the same security and in the same principal amount as the call
written where the exercise price of the call held (a) is equal to or less than
the exercise price of the call written or (b) is greater than the exercise
price of the call written if the difference is maintained by a Fund in cash or
liquid securities in a segregated account. A put option written by a Fund is
"covered" if the Fund 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 Fund in cash or
liquid securities in a segregated account. Put and call options written by a
Fund 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.

Each of the Funds may purchase options for hedging purposes or to increase
the Fund's 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 Fund to sell the securities at the exercise price, or to close out the
options at a profit. By using put options in this way, the Fund will reduce any
profit it might otherwise have realized in the underlying security by the
amount of the premium paid for the put option and by transaction costs.

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

Each of the Funds 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."

Each of the Funds may cover call options on stock indices by owning
securities whose price changes, in the opinion of the Manager 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 by its custodian) upon conversion or exchange of other securities in
its portfolio. Where a Fund covers a call option on a stock index through
ownership of securities, such securities may not match the composition of the
index and, in that event, the Fund will not be fully covered and could be
subject to risk of loss in the event of adverse changes in the value of the
index. A Fund may also cover call options on stock indices by holding a call on
the same index and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the exercise price
of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash or liquid
securities in a segregated account. A Fund may cover put options on stock

<PAGE>

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 stock
index and in the same principal amount as the put written where the exercise
price of the put held is equal to or greater than the exercise price of the put
written or where the exercise price of the put held is less than the exercise
price of the put written if the difference is maintained by the Fund in cash 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.

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

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

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

Each of the Funds 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 Funds may enter into interest rate futures contracts, stock
index futures contracts and/or foreign currency futures contracts. Such
investment strategies may be used for hedging purposes and for nonhedging
purposes, subject to applicable law.

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

While futures contracts based on debt securities do provide for the
delivery and acceptance of securities, such deliveries and acceptances are very

<PAGE>

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

A Fund may purchase or sell futures contracts to attempt to protect the
Fund from fluctuations in interest rates, or to manage the effective maturity
or duration of the Fund's portfolio in an effort to reduce potential losses or
enhance potential gain, without actually buying or selling debt securities. For
example, if interest rates were expected to increase, the Fund might enter into
futures contracts for the sale of debt securities. Such a sale would have much
the same effect as if the Fund sold bonds that it owned, or as if the Fund sold
longer-term bonds and purchased shorter-term bonds. If interest rates did
increase, the value of the Fund's debt securities would decline, but the value
of the futures contracts would increase, thereby keeping the net asset value of
the Fund 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 Fund avoids having to sell its securities.

Similarly, when it is expected that interest rates may decline, a Fund
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 Fund
purchased bonds, or as if the Fund sold shorter-term bonds and purchased
longer-term bonds. If interest rates did decline, the value of the futures
contracts would increase.

Each of the Funds may enter into 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.

Each of the Funds 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
Fund may sell futures contracts on a foreign currency, for example, where it
holds securities denominated in such currency and it anticipates a decline in
the value of such currency relative to the dollar. In the event such decline
occurs, the resulting adverse effect on the value of foreign-denominated
securities may be offset, in whole or in part, by gains on the futures
contracts.

Conversely, the Fund could protect against a rise in the dollar cost of
foreign-denominated securities to be acquired by purchasing futures contracts
on the relevant currency, which could offset, in whole or in part, the
increased cost of such securities resulting from a rise in the dollar value of
the underlying currencies. Where the Fund purchases futures contracts under
such circumstances, however, and the prices of securities to be acquired
instead decline, the Fund 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 Fund
sells a futures contract to protect against losses in the debt securities held
by the Fund), 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 Fund's
investments through transactions in futures contracts depends on the degree to
which movements in the value of the securities underlying such contracts

<PAGE>

correlate with movements in the value of the Fund's securities. If the security
underlying a futures contract is different than the security being hedged, they
may not move to the same extent or in the same direction. In that event, the
Fund's hedging strategy might not be successful and the Fund could sustain
losses on these hedging transactions which would not be offset by gains on the
Fund's other investments or, alternatively, the gains on the hedging
transaction might not be sufficient to offset losses on the Fund's other
investments. It is also possible that there may be a negative correlation
between the security underlying a futures contract and the securities being
hedged, which could result in losses both on the hedging transaction and the
securities. In these and other instances, the Fund's overall return could be
less than if the hedging transactions had not been undertaken. Similarly, even
where a Fund enters into futures transactions other than for hedging purposes,
the effectiveness of its strategy may be affected by lack of correlation
between changes in the value of the futures contracts and changes in value of
the securities which the Fund would otherwise buy 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
contract was originally entered into. While a Fund will establish a futures
position only if there appears to be a liquid secondary market therefor, there
can be no assurance that such a market will exist for any particular futures
contract at any specific time. In that event, it may not be possible to close
out a position held by the Fund, which could require the Fund to purchase or
sell the instrument underlying the futures contract or to meet ongoing
variation margin requirements. The inability to close out futures positions
also could have an adverse impact on the ability effectively to use futures
transactions for hedging or other purposes.

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

Investments in futures contracts also entail the risk that if the
Manager's or a Subadviser's investment judgment about the general direction of
interest rates, equity markets, or other economic factors is incorrect, the
Fund's overall performance may be poorer than if any such contract had not been
entered into. For example, if a Fund hedged against the possibility of an
increase in interest rates which would adversely affect the price of the Fund's
bonds and interest rates decrease instead, part or all of the benefit of the
increased value of the Fund's bonds which were hedged will be lost because the
Fund will have offsetting losses in its futures positions. Similarly, if a Fund
purchases futures contracts expecting a decrease in interest rates and interest
rates instead increased, the Fund 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 Fund has insufficient cash, the Fund may
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. The Manager
does not believe that these trading and position limits would have an adverse
impact on a Fund's hedging strategies.

CFTC regulations require compliance with certain limitations in order to
assure that a Fund is not deemed to be a "commodity pool" under such

<PAGE>

regulations. In particular, CFTC regulations prohibit a Fund from purchasing or
selling futures contracts (other than for bona fide hedging transactions) if,
immediately thereafter, the sum of the amount of initial margin required to
establish that Fund's non-hedging futures positions would exceed 5% of that
Fund's net assets.

Each Fund will comply with this CFTC requirement, and each Fund currently
intends to adhere to the additional policies described below. First, an amount
of cash or liquid securities will be maintained by each Fund 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
Fund's obligations under the futures contract. The second is that a Fund will
not enter into a futures contract if immediately thereafter the amount of
initial margin deposits on all the futures contracts held by the Fund would
exceed approximately 5% of the net assets of the Fund. The third is that the
aggregate market value of the futures contracts held by a Fund not exceed
approximately 50% of the market value of the Fund's total assets other than its
futures contracts. For purposes of this third policy, "market value" of a
futures contract is deemed to be the amount obtained by multiplying the number
of units covered by the futures contract times the per unit price of the
securities covered by that contract.

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

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

OPTIONS ON FUTURES CONTRACTS
Each of the Funds may purchase and write options to buy or sell futures
contracts in which the Fund may invest. Such 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 Fund on
U.S. exchanges are traded on the same contract market as the underlying futures
contract, and, like futures contracts, are subject to regulation by the CFTC
and the performance guarantee of the exchange clearinghouse. In addition,
options on futures contracts may be traded on foreign exchanges.

Each of the Funds 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

<PAGE>

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

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

Each of the Funds 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 Fund could, in lieu of selling futures contracts, purchase
put options thereon. In the event that such decrease occurs, it may be offset,
in whole or part, by a profit on the option. Conversely, where it is projected
that the value of securities to be acquired by a Fund will increase prior to
acquisition, due to a market advance or changes in interest or exchange rates,
the Fund could purchase call options on futures contracts, rather than
purchasing the underlying futures contracts.

CONVERTIBLE SECURITIES
Each Fund may invest in convertible securities. A convertible security is
a fixed-income security (a bond or preferred stock) which may be converted at a
stated price within a specified period of time into a certain quantity of
common stock or other equity securities of the same or a different issuer.
Convertible securities rank senior to common stock in a corporation's capital
structure but are usually subordinated to similar non-convertible securities.
While providing a fixed-income stream (generally higher in yield than the
income derivable from common stock but lower than that afforded by a similar
non-convertible security), a convertible security also affords an investor the
opportunity, through its conversion feature, to participate in the capital
appreciation attendant upon a market price advance in the convertible
security's underlying common stock. Convertible securities purchased are not
subject to the ratings requirements applicable to the Funds' purchase of fixed
income investments.

<PAGE>

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.

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

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

The most significant factor in the performance of swaps, caps, floors and
collars is the change in the specific interest rate, equity, currency or other
factor that determines the amount of payments to be made under the arrangement.
If the Manager or a Subadviser is incorrect in its forecasts of such factors,
the investment performance of the Fund would be less than what it would have
been if these investment techniques had not been used. If a swap agreement
calls for payments by the Fund, the Fund must be prepared to make such payments
when due. No Fund will enter into any swap unless the Manager or 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
Fund's risk of loss consists of the net amount of payments that the Fund is
contractually entitled to receive. Each Fund anticipates that it will be able
to eliminate or reduce its exposure under these arrangements by assignment or
other disposition or by entering into an offsetting agreement with the same or
another counterparty.

Swap agreements are subject to each Fund's overall limit that not more
than 10% of its net assets may be invested in illiquid securities, and no Fund
will enter into a swap agreement with any single party if the net amount owed
or to be received under existing contracts with that party would exceed 5% of
the Fund's assets.

ADDITIONAL DISCLOSURE REGARDING DERIVATIVES
Transactions in options may be entered into on U.S. exchanges regulated by

<PAGE>

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 Fund 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 Fund may sell futures contracts on an index of
securities in order to profit from any anticipated decline in the value of the
securities comprising the underlying index. In such instances, any losses on
the futures transactions will not be offset by gains on any portfolio
securities comprising such index, as might occur in connection with a hedging
transaction.

Some of the Fund's use of derivatives may involve leveraging. Leveraging
adds increased risks to a Fund, because the Fund's losses may be out of
proportion to the amount invested in the instrument--a relatively small
investment may lead to much greater losses.

Options, futures contracts, options on futures contracts, forward
contracts and swaps may be used alone or in combinations in order to create
synthetic exposure to securities in which a Fund otherwise invests, such as
non-U.S. government securities.

SHORT SALES
The Funds may seek to hedge investments or realize additional gains
through short sales. Short sales are transactions in which a Fund sells a
security it does not own in anticipation of a decline in the market value of
that security. To complete such a transaction, a Fund must borrow the security
to make delivery to the buyer. A Fund then is obligated to replace the security
borrowed by purchasing it at the market price at or prior to the time of
replacement. The price at such time may be more or less than the price at which
the security was sold by a Fund. Until the security is replaced, a Fund is
required to repay the lender any dividends or interest that accrue during the
period of the loan. To borrow the security, a Fund also may be required to pay
a premium, which would increase the cost of the security sold. The net proceeds
of the short sale will be retained by the broker (or by the Fund's custodian in
a special custody account), to the extent necessary to meet margin
requirements, until the short position is closed out. A Fund will also incur
transaction costs in effecting short sales.

A Fund will incur a loss as a result of the short sale if the price of the
security increases between the date of the short sale and the date on which a
Fund replaces the borrowed security. A Fund will realize a gain if the security
declines in price between those dates. The amount of any gain will be
decreased, and the amount of any loss increased, by the amount of the premiums,
dividends, interest or expenses a Fund may be required to pay in connection
with a short sale. An increase in the value of a security sold short by a Fund
over the price at which it was sold short will result in a loss to the Fund,
and there can be no assurance that a Fund will be able to close out the
position at any particular time or at an acceptable price.

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

<PAGE>

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

Like those of other fixed-income securities, the values of lower rated
securities fluctuate in response to changes in interest rates. A decrease in
interest rates will generally result in an increase in the value of fixed
income securities. Conversely, during periods of rising interest rates, the
value of a Fund'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 Fund's net asset value. The Funds will not
necessarily dispose of a security when its rating is reduced below its rating
at the time of purchase. However, the Manager will monitor the investment to
determine whether its retention will assist in meeting the Fund'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.

At times, a substantial portion of a Fund's assets may be invested in
securities as to which a Fund, 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, a Fund 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 a Fund's
net asset value. In order to enforce its rights in the event of a default under
such securities, a Fund 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 Fund's operating
expenses and adversely affect a Fund's net asset value. In addition, a Fund's
intention to qualify as a "regulated investment company" under the Internal
Revenue Code may limit the extent to which the Fund may exercise its rights by
taking possession of such assets.

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

ZERO-COUPON BONDS AND "PAYMENT-IN-KIND" BONDS
The Funds may invest in "zero-coupon" bonds and "payment-in-kind" 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

<PAGE>

bonds may involve greater credit risks than bonds paying interest currently in
cash. The Funds are required to accrue interest income on such investments and
to distribute such amounts at least annually to shareholders even though such
bonds do not pay current interest in cash. Thus, it may be necessary at times
for the Funds to liquidate investments in order to satisfy its dividend
requirements.

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

4. INVESTMENT RESTRICTIONS

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

None of the Funds may:

(1) Borrow money, except that as a temporary measure for extraordinary or
emergency purposes it may borrow in an amount not to exceed 1/3 of the current
value of its net assets, including the amount borrowed (or purchase any
securities at any time at which borrowings exceed 5% of the total assets of the
Fund, taken at market value). It is intended that a Fund would borrow money
only from banks and only to accommodate requests for the repurchase of shares
of the Fund 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
Fund's total assets (taken at market value), (b) through the use of repurchase
agreements, 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 Fund more than 10%
of the voting securities of such issuer to be held by the Fund; 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 a Fund may invest all or substantially
all of its assets in one or more investment companies, to the extent not
prohibited by the 1940 Act, the rules and regulations thereunder, and exemptive
orders granted under such Act.

(4) Purchase securities of any issuer if such purchase at the time thereof
would cause as to 75% of the Fund's total assets more than 5% of the Fund'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 each of the Funds may
invest all or substantially all of its assets in one or more investment
companies, to the extent not prohibited by the 1940 Act, the rules and
regulations thereunder, and exemptive orders granted under such Act.

<PAGE>

(5) Concentrate its investments in any particular industry, but if it is
deemed appropriate for the achievement of the Fund's investment objectives, 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 the
assets of the Fund 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 in so far as the Fund
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
any Fund from purchasing or selling futures contracts or options thereon, and
each Fund reserves the freedom of action to hold and to sell real estate
acquired as a result of the ownership of securities by the Fund).

(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.

NON-FUNDAMENTAL RESTRICTIONS

Each Fund does not as a matter of operating policy:

(i) borrow money in excess of 10% of the total assets of the Fund (taken
at cost), except that such Fund may borrow up to 25% of its total assets when
such borrowing is necessary to meet redemption requests (moreover, the Fund
will not purchase any securities for the Fund at any time at which borrowings
exceed 5% of the total assets of the Fund (taken at market value)),

(ii) invest more than 20% of is total assets in the securities of issuers
located in any one foreign country, except that the Fund may have an additional
15% of its total assets in the securities of issuers located in any one of the
following countries: Australia, Canada, France, Japan, the United Kingdom, or
Germany.

These policies are not fundamental and may be changed by each Fund without
the approval of its shareholders.

PERCENTAGE AND RATING RESTRICTIONS

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

5. PERFORMANCE INFORMATION AND ADVERTISING

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

Each Fund may provide its period and average annualized "total rates of
return". The "total rate of return" refers to the change in the value of an
investment in the Fund over a stated period which was made at the maximum
public offering price and reflects any change in net asset value per share and
is compounded to include the value of any shares purchased with any dividends

<PAGE>

or capital gains declared during such period. Period total rates of return may
be "annualized". An "annualized" total rate of return assumes that the period
rate of return is generated over a one-year period.

A total rate of return quotation for a Fund is calculated for any period
by (a) dividing (i) the sum of the net asset value per share on the last day of
the period and the net asset value per share on the last day of the period of
shares purchasable with dividends and capital gains distributions declared
during such period with respect to a share held at the beginning of such period
and with respect to shares purchased with such dividends and capital gains
distributions, by (ii) the public offering price per share on the first day of
such period, and (b) subtracting 1 from the result. Any annualized total rate
of return quotation is calculated by (x) adding 1 to the period total rate of
return quotation calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting
1 from the result.

Each Fund may provide annualized "yield" quotations. The yield" of a Fund
refers to the income generated by an investment in the Fund over a 30-day or
one-month period (which period is stated in any such advertisement or
communication). This income is then annualized; that is, the amount of income
generated by the investment over that period is assumed to be generated each
month over a one year period and is shown as a percentage of the maximum public
offering price on the last day of that period. A "yield" quotation, unlike a
total rate of return quotation, does not reflect changes in net asset value.

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

Yields and total returns quoted for the Funds include the effect of
deducting the Funds' expenses, but may not include charges and expenses
attributable to a particular variable annuity contract or variable life
insurance policy. Since shares of the Funds can be purchased only through a
variable annuity contract or variable life insurance policy, a prospective
purchaser should carefully review the prospectus of the variable annuity
contract or variable life insurance policy he or she has chosen for information
on relevant charges and expenses. Including these charges in the quotations of
the Funds' yield and total return would have the effect of decreasing
performance. Performance information for the Funds must always be accompanied
by, and be reviewed with, performance information for the insurance product
which invests in the Funds.

Set forth below is total rate of return information for the shares of each
Fund for the periods indicated, assuming that dividends and capital gains
distributions, if any, were reinvested. CitiSelect VIP Folio 100 is newly
organized and had no operations at October 31, 1998.

Redeemable Value of a
Hypothetical
$1,000 Investment
Total Rate of Return at the end of the Period

CITISELECT VIP FOLIO 200
February 10, 1997
(commencement of
operations) to
December 31, 1997 ______% $_______
One year ended
December 31, 1998 ______% $_______

<PAGE>

CITISELECT VIP FOLIO 300
February 10, 1997
(commencement of
operations) to
December 31, 1997 ______% $_______
One year ended
December 31, 1998 ______% $_______

CITISELECT VIP FOLIO 400
February 10, 1997
(commencement of
operations) to
December 31, 1997 ______% $_______
One year ended
December 31, 1998 ______% $_______

CITISELECT VIP FOLIO 500
February 10, 1997
(commencement of
operations) to
December ______% $_______
31, 1997
One year ended ______% $_______
December 31, 1998

The annualized yield of shares of each of CitiSelect VIP Folio 200,
CitiSelect VIP Folio 300, CitiSelect VIP Folio 400, and CitiSelect VIP Folio
500 for the 30-day period ended December 31, 1998 was ____%, _____%, _____%,
and _____%, respectively.

From time to time, advertising and marketing material of any of the Funds
may include charts showing the historical performance of hypothetical
portfolios comprised of classes of assets similar to those in which the Funds
invest. The classes of assets will be represented by the historical performance
of specific unmanaged indices. The information contained in such charts should
not be viewed as a projection of results of any of the Funds or as the
historical performance of any of the Funds. In addition, the past performance
illustrated by such charts should not be viewed as a guarantee of future
results.

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

The net asset value of each share of each Fund is determined each day
during which the New York Stock Exchange is open for trading. As of the date of
this Statement of Additional Information, the Exchange is open for trading
every weekday except for the following holidays (or the days on which they are
observed): New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. This determination of net asset value of shares of a Fund is
made once each day as of the close of regular trading on such Exchange by
dividing the value of the Fund's net assets (i.e., the value of its assets less
its liabilities, including expenses payable or accrued) by the number of shares
of the Fund outstanding at the time the determination is made. A share's net
asset value is effective for orders received by the Trust prior to its
calculation and received by the Distributor prior to the close of the business
day on which such net asset value is determined.

<PAGE>

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 which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon quoted prices or exchange or
over-the-counter prices, since such valuations are believed to reflect more
accurately the fair value of such securities. In certain instances, securities
are valued on the basis of valuations received from a single dealer, which is
usually an established market maker in the security. In these instances,
additional dealer valuations are obtained monthly. Short-term obligations
(maturing in 60 days or less) are valued at amortized cost, which constitutes
fair value as determined by the Board of Trustees of the Trust. Futures
contracts are normally valued at the settlement price on the exchange on which
they are traded. Securities for which there are no such valuations are valued
at fair value as determined in good faith by or at the direction of the Board
of Trustees of the Trust.

Trading in securities on most foreign exchanges and over-the-counter
markets is normally completed before the close of regular trading on the
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
Fund's net asset value is calculated, such securities may be valued at fair
value in accordance with procedures established by and under the general
supervision of the Board of Trustees of the Trust.

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

Subject to compliance with applicable regulations, the Trust has reserved
the right to pay the redemption or repurchase price of shares of the Funds,
either totally or partially, by a distribution in kind of readily marketable
securities (instead of cash). The securities so distributed would be valued at
the same amount as that assigned to them in calculating the net asset value for
the shares or beneficial interests being sold. If a holder of shares or
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 shares of a Fund more than seven days during any period when (a)
trading in the markets a Fund normally utilizes is restricted, or an emergency,
as defined by the rules and regulations of the Securities and Exchange
Commission (the "SEC"), exists making disposal of a Fund's investments or
determination of its net asset value not reasonably practicable; (b) the New
York Stock Exchange is closed (other than customary weekend and holiday
closings); or (c) the SEC has by order permitted such suspension.

Shares of the Funds may be sold to and held by Separate Accounts that fund
variable annuity and variable life insurance contracts issued by both
affiliated and unaffiliated Participating Insurance Companies. The Funds
currently do not foresee any disadvantages to the holders of variable annuity
contracts and variable life insurance policies of affiliated and unaffiliated
Participating Insurance Companies arising from the fact that interests of the
holders of variable annuity contracts and variable life insurance policies may
differ due to differences of tax treatment or other considerations or due to
conflicts between affiliated or unaffiliated Participating Insurance Companies.

<PAGE>

Nevertheless, the Trustees will monitor events to seek to identify any material
irreconcilable conflicts which may possibly arise and to determine what action,
if any, should be taken in response to such conflicts. Should a material
irreconcilable conflict arise between the holders of variable annuity contracts
and variable life insurance policies of affiliated or unaffiliated
Participating Insurance Companies, the Participating Insurance Companies may be
required to withdraw the assets allocable to some or all of the Separate
Accounts from the Funds. Any such withdrawal could disrupt orderly portfolio
management to the potential detriment of such holders. The variable annuity
contracts and variable life insurance policies are described in separate
prospectuses issued by the Participating Insurance Companies. The Funds assume
no responsibility for such prospectuses.

7. MANAGEMENT

TRUSTEES

The Trustees and officers of the Trust, their ages and their principal
occupations during the past five years are set forth below. Their titles may
have varied during that period. Asterisks indicate that those Trustees and
officers are "interested persons" (as defined in the 1940 Act) of the Trust.
Unless otherwise indicated below, the address of each Trustee and officer is 21
Milk Street, Boston, Massachusetts.

TRUSTEES OF THE TRUST

ELLIOTT J. BERV (aged 56) -- 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* (aged 47) -- President of the Trust; Chief Executive
Officer and President, Signature Financial Group, Inc. and CFBDS.

MARK T. FINN (aged 55) -- President and Director, Delta Financial, Inc.
(since June, 1983); Chairman of the Board and Chief Executive Officer, FX 500
Ltd. (Commodity Trading Advisory Firm) (since April, 1990); 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.

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

DIANA R. HARRINGTON (aged 59) -- Professor, Babson College (since
September, 1993); Visiting Professor, Kellogg Graduate School of Management,
Northwestern University (September, 1992 to September, 1993); Professor, Darden
Graduate School of Business, University of Virginia (September, 1978 to
September, 1993); Trustee, The Highland Family of Funds (March, 1997 to March,
1998). Her address is 120 Goulding Street, Holliston, Massachusetts.

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

HEATH B. MCLENDON (aged 65) - Chairman, President and Chief Executive
Officer of Mutual Management Corp. (since [____]); Managing Director of Salomon
Smith Barney (since [____]). His address is 388 Greenwich Street, New York, New
York.

C. OSCAR MORONG, JR. (aged 64) - Chairman of the Board of the Trust;
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.

<PAGE>

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

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

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

OFFICERS OF THE TRUST

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

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

TAMIE EBANKS-CUNNINGHAM* (aged 26) -- Assistant Secretary of the Trust;
Office Manager, Signature Financial Group (Cayman) Ltd. (since April 1995);
Administrator, Cayman Islands Primary School (prior to April 1995). Her address
is P.O. Box 2494, Elizabethan Square, George Town, Grand Cayman, Cayman
Islands, British West Indies.

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

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

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

SUSAN JAKUBOSKI* (aged 35) -- Vice President, Assistant Secretary and
Assistant Treasurer of the Trust; Vice President, Signature Financial Group
(Cayman) Ltd. (since August, 1994); Fund Compliance Administrator, Concord
Financial Group (November, 1990 to August, 1994).

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

CLAIR TOMALIN* (aged 30) -- Assistant Secretary of the Trust; Office
Manager, Signature Financial Group (Europe) Limited (since 1993). Her address
is 117 Charterhouse Street, London ECIM 6AA.

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

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

<PAGE>

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

The Trustees of the Trust received the following remuneration from the
Trust during its fiscal year ended December 31, 1998:

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PENSION OR ESTIMATED
AGGREGATE RETIREMENT ANNUAL TOTAL COMPENSATION
COMPENSATION BENEFITS ACCRUED BENEFITS FROM TRUST AND FUND
FROM AS PART UPON COMPLEX
TRUSTEE REGISTRANT OF FUND EXPENSES RETIREMENT PAID TO TRUSTEES (1)
Elliott J. Berv............ $3,409.27 None None $53,150.00
Philip W. Coolidge......... None None None None
Mark T. Finn............... $3,389.53 None None $52,100.00
Riley C. Gilley............ $3,384.44 None None $41,510.00
Diana R. Harrington........ $3,545.56 None None $59,100.00
Susan B. Kerley............ $3,513.95 None None $55,110.00
Heath B. McLendon (2)...... None None None None
C. Oscar Morong, Jr........ $3,669.31 None None $71,110.00
Walter E. Robb, III........ $3,395.04 None None $50,110.00
E. Kirby Warren............ $3,483.71 None None $49,110.00
William S. Woods, Jr....... $3,484.86 None None $54,110.00

</TABLE>

(1) Information relates to the fiscal year ended December 31, 1998.
Messrs. Berv, Coolidge, Finn, Gilley, McLendon, Morong, Robb, Warren and
Woods and Mses. Harrington and Kerley are trustees of 27, 49, 26, 33, 20,
40, 30, 40, 26, 28 and 28 funds, respectively, of the family of open-end
registered investment companies advised or managed by Citibank.
(2) Mr. McLendon was appointed as a Trustee in February 1999.

As of ___________, 1999, all Trustees and officers as a group owned less
than 1% of the outstanding shares of each Fund. As of the same date, First
Citicorp Life Insurance Company owned of record _____%, _____%, _____% and
_____% of the shares of CitiSelect VIP Folio 200, CitiSelect VIP Folio 300,
CitiSelect VIP Folio 400 and CitiSelect VIP Folio 500, respectively; and
Citicorp Life Insurance Company owned of record _____%, _____%, _____% and
_____% of the shares of CitiSelect VIP Folio 200, CitiSelect VIP Folio 300,
CitiSelect VIP Folio 400 and CitiSelect VIP Folio 500, respectively.

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

MANAGER
Citibank manages the assets of each Fund and provides certain
administrative services to the Trust pursuant to separate management agreements
(the "Management Agreements"). Citibank furnishes at its own expense all
services, facilities and personnel necessary in connection with managing each
Fund's investments and effecting securities transactions for each Fund. The
Management Agreements provide that Citibank may delegate the daily management

<PAGE>

of securities of each Fund to one or more subadvisers and that the Funds may
employ one or more subadvisers to be responsible for the daily management of
securities of each Fund. The Management Agreements provide that in each case
Citibank will supervise and monitor the performance of the subadvisers. The
Management Agreements will continue in effect 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 Fund, and, in either case, by a majority of the Trustees of the
Trust who are not parties to the Management Agreement or interested persons of
any such party, at a meeting called for the purpose of voting on the Management
Agreement.

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

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 Fund or by a vote of a majority of the Board of Trustees of
the Trust, or by Citibank on not more than 60 days' nor less than 30 days'
written notice, and will automatically terminate in the event of its
assignment. Each Management Agreement provides that neither Citibank nor its
personnel shall be liable for any error of judgment or mistake of law or for
any loss arising out of any investment or for any act or omission in the
execution of securities transactions for the applicable Fund, except for
willful misfeasance, bad faith or gross negligence in the performance of its
duties, or by reason of reckless disregard of its obligations and duties under
the Management Agreement.

For the period from February 10, 1997, commencement of operations, to
December 31, 1997, the fees payable to Citibank under the Management Agreements
were as follows: CitiSelect VIP Folio 200 $70,961 (of which $51,585 was
voluntarily waived), CitiSelect VIP Folio 300 $79,571 (of which $51,799 was
voluntarily waived), CitiSelect VIP Folio 400 $75,204 (of which $39,271 was
voluntarily waived) and CitiSelect VIP Folio 500 $69,516 (of which $32,727 was
voluntarily waived). For the period from January 1, 1998 to December 31, 1998,
the fees payable to Citibank under the Management Agreements were as follows:
CitiSelect VIP Folio 200 $______ (of which $_____ was voluntarily waived),
CitiSelect VIP Folio 300 $______ (of which $______ was voluntarily waived),
CitiSelect VIP Folio 400 $______ (of which $______ was voluntarily waived) and
CitiSelect VIP Folio 500 $_____ (of which $_____ was voluntarily waived).

Pursuant to a sub-administrative services agreement with Citibank, CFBDS
performs such sub-administrative duties for the Trust as from time to time are
agreed upon by Citibank and CFBDS. For performing such sub-administrative
services, CFBDS receives compensation as from time to time is agreed upon by
Citibank. All such compensation is paid by Citibank.

The Funds have entered into separate Submanagement Agreements with the
Subadvisers listed below for the kinds of assets of each Fund noted opposite
the Subadvisers' names.

Small cap value securities Franklin Advisory Services, Inc.

Large cap value securities Mutual Management Corp.

International equity securities Hotchkis and Wiley

Foreign government securities Salomon Brothers Asset Management Limited

High yield securities Salomon Brothers Asset Management Inc

</TABLE>

<PAGE>

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

The Submanagement Agreements with Franklin Advisory Services, Inc. and
Hotchkis and Wiley will continue in effect as to each applicable Fund
indefinitely as long as such continuance is specifically approved at least
annually by the Board of Trustees of the Trust as to that Fund or by a vote of
a majority of the outstanding voting securities of that Fund, 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 with Mutual Management Corp. will continue in
effect until January 22, 2001, and thereafter indefinitely as long as such
continuance is specifically approved at least annually by the Board of Trustees
of the Trust as to that Fund or by a vote of a majority of the outstanding
voting securities of that Fund, 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 with Salomon Brothers Asset Management Limited
will continue in effect until March 1, 2001, and thereafter indefinitely as
long as such continuance is specifically approved at least annually by the
Board of Trustees of the Trust as to that Fund or by a vote of a majority of
the outstanding voting securities of that Fund, 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 with Salomon Brothers Asset Management Inc
will continue in effect until _______ __, 2001, and thereafter indefinitely as
long as such continuance is specifically approved at least annually by the
Board of Trustees of the Trust as to that Fund or by a vote of a majority of
the outstanding voting securities of that Fund, 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.

Each Submanagement Agreement provides that the applicable Subadviser may
render services to others. Each Submanagement Agreement is terminable as to any
Fund 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 Fund 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 Submanagement Agreement may be terminated by the
applicable Subadviser on not less than 90 days' written notice to the Trust and
to Citibank. Each Submanagement Agreement provides that neither the Subadviser
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 any Fund, except for willful
misfeasance, bad faith or gross negligence or reckless disregard of its or
their obligations and duties under the Submanagement Agreement.

The management fee is allocated among the Subadvisers at the annual rates
equal to the percentages specified below of the aggregate assets managed by the
particular Subadviser. Citibank retains any management fee in excess of amounts
payable to the Subadvisers. Citibank pays the Subadvisers' fees to the extent
they exceed the aggregate fee of 0.75% of each Fund's average daily net assets.

Franklin Advisory Services, Inc.
0.55% on first $250 million
0.50% on remaining assets

<PAGE>

Mutual Management Corp.
0.65% on the first $10 million
0.50% on the next $10 million
0.40% on the next $10 million
0.30% on remaining assets

Hotchkis and Wiley
0.60% on first $10 million
0.55% on next $40 million
0.45% on next $100 million
0.35% on next $150 million
0.30% on remaining assets

Salomon Brothers Asset Management Limited
0.30% on the first $200 million
0.25% on assets in excess of $200 million

Salomon Brothers Asset Management Inc
0.45% on the first $100 million
0.40% on assets in excess of $100 million

The aggregate fees paid by Citibank to each of the Subadvisers under the
Submanagement Agreements in effect for the prior fiscal year were as follows:

<TABLE>
<CAPTION>
<S> <C> <C> <C>
FEBRUARY 10, 1997
(COMMENCEMENT OF
OPERATIONS) TO JANUARY 1, 1998 TO
SUBADVISER: DECEMBER 31, 1997: DECEMBER 31, 1998:

Franklin Advisory Services,
Inc. $28,471 $______

Hotchkis and Wiley $47,955 $______

Pacific Investment
Management Company (1) $23,368 $______

Miller Anderson &
Sherrerd, LLP (2) $20,075 $______

Mutual Management
Corp. (2) N/A N/A

Salomon Brothers Asset
Management Limited (1) N/A N/A

Salomon Brothers Asset
Management Inc. (3) N/A N/A

</TABLE>

(1) Pacific Investment Management Company ("PIMCO") served as subadviser
for the foreign government securities of the Funds from the Funds' inception
through February 28, 1999. Since March 1, 1999, Salomon Brothers Asset
Management Limited ("SBAM"), also an affiliate of CitiBank, has managed the
foreign government securities of the Funds that were previously managed by
PIMCO.

<PAGE>

(2) Miller Anderson & Sherrerd, LLP ("MAS"), served as a subadviser for
the large cap value securities from the Funds' inception through January 21,
1999. Since January 22, 1999. Mutual Management Corp. ("MMC"), an affiliate of
Citibank, has managed the large cap value securities of the Funds that were
previously managed by MAS.

(3) Salomon Brothers Asset Management Inc. ("SBAMInc.") has served as the
subadviser for the high yield securities, a new asset class of the Funds, since
________, 1999.

DISTRIBUTOR
CFBDS, 21 Milk Street, Boston, Massachusetts 02109 serves as the
Distributor of the Trust's shares pursuant to a Distribution Agreement with the
Trust. Unless otherwise terminated, the Distribution Agreement continues in
effect from year to year upon annual approval by the Trust's Board of Trustees,
or by the vote of a majority of the outstanding shares of the Trust and by the
vote of a majority of the Board of Trustees of the Trust who are not parties to
the Agreement or interested persons of any party to the Agreement, cast in
person at a meeting called for the purpose of voting on such approval. The
Agreement will terminate in the event of its assignment, as defined in the 1940
Act. CFBDS is not currently paid a fee for the provision of distribution
services with respect to shares of the Funds.

EXPENSES
In addition to amounts payable to Citibank and the Subadvisers under the
Management and Submanagement Agreements, each Fund is responsible for its own
expenses, including, among other things, the costs of securities transactions,
the compensation of Trustees that are not affiliated with Citibank, government
fees, taxes, accounting and legal fees, expenses of communicating with
shareholders, interest expense, and insurance premiums. The Prospectus for each
Fund contains more information about the expenses of each Fund.

TRANSFER AGENT AND CUSTODIAN
The Trust has entered into a Transfer Agency and Service Agreement with
State Street Bank and Trust Company ("State Street") pursuant to which State
Street acts as transfer agent for each Fund. The Trust also has entered into a
Custodian Agreement and a Fund Accounting Agreement with State Street, pursuant
to which custodial and fund accounting services, respectively, are provided for
each Fund. Among other things, State Street calculates the daily net asset
value for the Funds. The principal business address of State Street is 225
Franklin Street, Boston, Massachusetts 02110.

AUDITORS
PricewaterhouseCoopers LLP are the independent accountants for the Trust
providing audit services and assistance and consultation with respect to the
preparation of filings with the SEC. The address of PricewaterhouseCoopers LLP
is 160 Federal Street, Boston, Massachusetts 02110.

COUNSEL
Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts 02110, is the
counsel for each Fund.

8. PORTFOLIO TRANSACTIONS

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

<PAGE>

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 a Fund and/or the other
accounts over which the Manager, the Subadvisers or their affiliates exercise
investment discretion. The Manager and the Subadvisers are authorized to pay a
broker or dealer who provides such brokerage and research services a commission
for executing a portfolio transaction for the Fund which is in excess of the
amount of commission another broker or dealer would have charged for effecting
that transaction if the Manager or the applicable 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 Manager, the Subadvisers and their
affiliates have with respect to accounts over which they exercise investment
discretion.

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

In certain instances there may be securities that are suitable as an
investment for a Fund as well as for one or more of Citibank's or a
Subadviser's other clients. Investment decisions for each Fund and for
Citibank's and the Subadvisers' 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 in a security for a Fund. When purchases or sales of the same
security for a Fund and for other portfolios managed by Citibank or a
Subadviser 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 period from February 10, 1997, commencement of operations, to
December 31, 1997, the Funds paid brokerage commissions in the following
amounts: CitiSelect VIP Folio 200 $11,009, CitiSelect VIP Folio 300 $19,855,
CitiSelect VIP Folio 400 $27,008 and CitiSelect VIP Folio 500 $23,314. For the
period from January 1, 1998 to December 31, 1998, the Funds paid brokerage
commissions in the following amounts: CitiSelect VIP Folio 200 $______,
CitiSelect VIP Folio 300 $______, CitiSelect VIP Folio 400 $______ and
CitiSelect VIP Folio 500 $_______.

9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

The Trust's Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional Shares of Beneficial Interest ($0.00001
par value per share) of each series and to divide or combine the shares of any
series into a greater or lesser number of shares of that series without thereby
changing the proportionate beneficial interests in that series. The Funds and
CitiFunds Small Cap Growth VIP Portfolio are the only current series of shares
of the Trust and the Trust has reserved the right to create and issue
additional series of shares. Each share of each Fund represents an equal
proportionate interest in the Fund with each other share. Shares of each series
participate equally in the earnings, dividends and distribution of net assets
of the particular series upon liquidation or dissolution. Shares of each series
are entitled to vote separately to approve advisory agreements or changes in
investment policy, but shares of all series may vote together in the election
or selection of Trustees and accountants for the Trust.

<PAGE>

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

The Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets (or all or substantially all of the assets
belonging to any series of the Trust), if approved by a vote of the holders of
two-thirds of the Trust's outstanding shares, voting as a single class, or of
the affected series of the Trust, as the case may be, except that if the
Trustees of the Trust recommend such sale of assets, merger or consolidation,
the approval by vote of the holders of a majority of the Trust's outstanding
shares would be sufficient. The Trust or any series of the Trust, as the case
may be, may be terminated (i) by a vote of a majority of the outstanding voting
securities of the Trust or the affected series or (ii) by the Trustees by
written notice to the shareholders of the Trust or the affected series. If not
so terminated, the Trust will continue indefinitely.

The rights accompanying Fund shares are legally vested in the Separate
Accounts. However, in accordance with current law and interpretations thereof,
Participating Insurance Companies will vote shares held in the Separate
Accounts in a manner consistent with timely voting instructions received from
the holders of variable annuity contracts and variable life insurance policies.
Each Participating Insurance Company will vote Fund shares held in Separate
Accounts for which no timely instructions are received from the holders of
variable annuity contracts and variable life insurance policies, as well as
shares it owns, in the same proportion as those shares for which voting
instructions are received. For a further discussion, please refer to the
insurance company's Separate Account prospectus.

The Funds' Transfer Agent maintains a share register for shareholders of
record, i.e., the Separate Accounts of the Participating Insurance Companies.
Share certificates will not be issued.

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

10. CERTAIN ADDITIONAL TAX MATTERS

Each Fund is treated as a separate entity for federal income tax purposes
under the Internal Revenue Code of 1986, as amended (the "Code"). Each Fund has
elected to be treated, and intends to qualify each year, as a "regulated
investment company" under Subchapter M of the Code by meeting all applicable

<PAGE>

requirements of Subchapter M, including requirements as to the nature of the
Fund's gross income, the amount of Fund distributions, and the composition of
the Fund's portfolio assets. Provided all such requirements are met, no U.S.
federal income or excise taxes generally will be required to be paid by the
Funds, although non-U.S. source income earned by each Fund may be subject to
non-U.S. withholding or other taxes. If a Fund should fail to qualify as a
"regulated investment company" for any year, the Fund would incur a regular
corporate federal income tax upon its taxable income and Fund distributions
would generally be taxable as ordinary income to shareholders.

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

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

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

Any investment by a Fund in zero coupon bonds, deferred interest bonds,
payment-in-kind bonds, certain stripped securities, and certain securities
purchased at a market discount will cause the Fund to recognize income prior to
the receipt of cash payments with respect to those securities. In order to
distribute this income and avoid a tax on the Fund, the Fund may be required to
liquidate portfolio securities that it might otherwise have continued to hold,
potentially resulting in additional taxable gain or loss to the Fund.

Each Fund's transactions in options, futures and forward contracts will be
subject to special tax rules that may affect the amount, timing and character
of Fund income and distributions to shareholders. For example, certain
positions held by each Fund on the last business day of each taxable year will
be marked to market (i.e., treated as if closed out) on that day, and any gain
or loss associated with the positions will be treated as 60% long-term and 40%
short-term capital gain or loss. Certain positions held by a Fund 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 Fund losses, adjustments in the holding periods of
Fund securities, and conversion of short-term into long-term capital losses.
Certain tax elections exist for straddles that may alter the effects of these
rules. Each Fund intends to limit its activities in options, futures and
forward contracts to the extent necessary to meet the requirements of
Subchapter M of the Code.

An investment by a Fund in residual interests of a CMO that has elected to
be treated as a real estate mortgage investment conduit, or "REMIC," can create
complex tax problems, especially if the Fund has state or local governments or
other tax-exempt organizations as shareholders.

The Funds may make non-U.S. investments. Special tax considerations apply
with respect to such investments. Foreign exchange gains and losses realized by
a Fund will generally be treated as ordinary income and loss. Use of non-U.S.

<PAGE>

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

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

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

The account application asks each new shareholder to certify that the
shareholder's Social Security or taxpayer identification number is correct and
that the shareholder is not subject to 31% backup withholding for failing to
report income to the IRS. The Funds may be required to withhold (and pay over
to the IRS for the shareholder's credit) 31% of certain distributions and
redemption proceeds paid to shareholders who fail to provide this information
or who otherwise violate IRS regulations.

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

11. CERTAIN BANK REGULATORY MATTERS

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

<PAGE>

12. FINANCIAL STATEMENTS

The audited financial statements of each of the Funds (Portfolio of
Investments at December 31, 1998, Statement of Assets and Liabilities at
December 31, 1998, Statement of Operations for the period January 1, 1998 to
December 31, 1998, Statement of Changes in Net Assets for the period January 1,
1998 to December 31, 1998, Financial Highlights for the period January 1, 1998
to December 31, 1998, Notes to Financial Statements and Report of Independent
Accountants), each of which is included in the Annual Report to Shareholders of
the Funds, are incorporated by reference into this Statement of Additional
Information and have been so incorporated in reliance upon the report of
PricewaterhouseCoopers LLP, independent accountants, on behalf of the Funds.

A copy of the Annual Report for the Funds accompanies this Statement of
Additional Information.

<PAGE>

Statement of Additional Information
[_____], 1999

CITIFUNDSSM SMALL CAP GROWTH VIP PORTFOLIO

Variable Annuity Portfolios (the "Trust") is an open-end investment
company which was organized as a business trust under the laws of the
Commonwealth of Massachusetts on October 18, 1996. The Trust offers shares of
CitiFundsSM Small Cap Growth VIP Portfolio (the "Fund"), as well as the shares
of five other series. The shares of the Fund are offered only to separate
accounts ("Separate Accounts") of participating life insurance companies
("Participating Insurance Companies") for the purpose of funding variable
annuity contracts and variable life insurance policies. The address and
telephone number of the Trust are 21 Milk Street, Boston, Massachusetts 02109,
(617) 423-1679.

<TABLE>
<CAPTION>
<S> <C> <C>
TABLE OF CONTENTS PAGE

1. The Trust.........................................................................
2. Investment Objective and Policies.................................................
3. Description of Permitted Investments and Investment Practices.....................
4. Investment Restrictions...........................................................
5. Performance Information and Advertising...........................................
6. Determination of Net Asset Value; Valuation of Securities; Additional Purchase
and Redemption Information........................................................
7. Management........................................................................
8. Portfolio Transactions............................................................
9. Description of Shares, Voting Rights and Liabilities..............................
10. Certain Additional Tax Matters....................................................
11. Certain Bank Regulatory Matters...................................................
12. Financial Statements..............................................................

</TABLE>

This Statement of Additional Information sets forth information which may
be of interest to investors but which is not necessarily included in the
Trust's Prospectus, dated May 1, 1999, by which shares of the Fund are offered.
This Statement of Additional Information should be read in conjunction with the
Prospectus. This Statement of Additional Information incorporates by reference
the financial statements described on page ___ hereof. These financial
statements can be found in the Fund's Annual Report to Shareholders. An
investor may obtain copies of the Prospectus and Annual Report without charge
by calling 1-800-625-4554 or by contacting a Participating Insurance Company.

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

<PAGE>

1. THE TRUST

Variable Annuity Portfolios, the Trust, is an open-end investment company
organized as a business trust under the laws of the Commonwealth of
Massachusetts on October 18, 1996. This Statement of Additional Information
relates to CitiFunds Small Cap Growth VIP Portfolio, a series of the Trust.
Prior to March 2, 1998 the Fund was called Landmark Small Cap Equity VIP Fund.
The Fund is an investment vehicle for variable annuity contracts and variable
life insurance policies offered by Separate Accounts of Participating Insurance
Companies.

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

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

The Board of Trustees of the Trust provides broad supervision over the
affairs of the Fund. Shares of the Fund are continuously sold by CFBDS, Inc.,
the Fund's distributor ("CFBDS" or the "Distributor"), only to Separate
Accounts.

PROPOSED RESTRUCTURING
At the date of this Statement of Additional Information, the Fund, like
most mutual funds, invests directly in securities. However, the Fund intends,
in the future, to convert to a new investment structure, sometimes called a
"master feeder structure." In the new investment structure, the Fund, instead
of investing directly in securities, may invest in a Portfolio which is a
mutual fund with its own investment goals and policies. The Portfolio buys,
holds and sells securities in accordance with these goals and policies. Of
course, there can be no assurance that the Fund or the Portfolio will achieve
their goals.

The Fund expects to convert to the new investment structure during 1999,
although it is possible that the conversion could be delayed.

Following the restructuring, the Trust intends to invest in VAP Small Cap
Growth Portfolio (the "Portfolio"). The Portfolio is a series of VAP Master
Portfolios (the "Portfolio Trust"). The Portfolio Trust is an open end,
diversified management investment company organized as a New York trust.

Following the restructuring, all references in this Statement of
Additional Information to the Fund will include the Fund's underlying Portfolio
, except as otherwise noted. In addition, references to the Trust will include
the Portfolio Trust, except as otherwise noted.

2. INVESTMENT OBJECTIVE AND POLICIES

The investment objective of the Fund is long-term capital growth. Dividend
income, if any, is incidental to the investment objective.

The policies described herein and those described below under "Description
of Permitted Investments and Investment Practices" are not fundamental and may
be changed without shareholder approval.

The Trust has also adopted the following policies with respect to the
Fund's investments in (i) warrants and (ii) securities of issuers with less
than three years' continuous operation. The Trust's purchases of warrants for

<PAGE>

the Fund will not exceed 5% of the Fund's net assets. Included within that
amount, but not exceeding 2% of its net assets, may be warrants which are not
listed on the New York Stock Exchange or the American Stock Exchange. Any such
warrants will be valued at their market value except that warrants which are
attached to securities at the time such securities are acquired for the Fund
will be deemed to be without value for the purpose of this restriction. The
Trust will not invest more than 5% of the Fund's assets in companies which,
including their respective predecessors, have a record of less than three
years' continuous operation.

3. DESCRIPTION OF PERMITTED INVESTMENTS AND INVESTMENT PRACTICES

FUTURES CONTRACTS
The Fund may enter into stock index futures contracts and/or foreign
currency futures contracts. Such investment strategies will be used for hedging
purposes and for nonhedging purposes, subject to applicable law.

While futures contracts based on securities do provide for the delivery
and acceptance of securities, 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 Fund purchases
or sells a futures contract. At the same time such a purchase or sale is made,
the Fund must provide cash or securities as a deposit ("initial deposit") known
as "margin." The initial deposit required will vary, but may be as low as 1% or
less of a contract's face value. Daily thereafter, the futures contract is
valued through a process known as "marking to market," and the Fund may receive
or be required to pay additional "variation margin" as the futures contract
becomes more or less valuable.

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

The Fund 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.
The Fund 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.

<PAGE>

such circumstances, however, and the prices of securities to be acquired
instead decline, the Fund 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 the Fund
sells a futures contract to protect against losses in the securities held by
the Fund), at the same time the futures contract limits any potential gain
which might result from an increase in value of a hedged position.

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

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

CFTC regulations require compliance with certain limitations in order to
assure that the Fund is not deemed to be a "commodity pool" under such
regulations. In particular, CFTC regulations prohibit the Fund from purchasing

<PAGE>

or selling futures contracts (other than for bona fide hedging transactions)
if, immediately thereafter, the sum of the amount of initial margin required to
establish the Fund's non-hedging futures positions would exceed 5% of the
Fund's net assets.

The Fund will comply with this CFTC requirement, and the Fund currently
intends to adhere to the additional policies described below. First, an amount
of cash or liquid securities will be maintained by the Fund in a segregated
account so that the amount so segregated, plus the initial margin held on
deposit, will be approximately equal to the amount necessary to satisfy the
Fund's obligations under the futures contract. The second is that the Fund will
not enter into a futures contract if immediately thereafter the amount of
initial margin deposits on all the futures contracts held by the Fund would
exceed approximately 5% of the net assets of the Fund. The third is that the
aggregate market value of the futures contracts held by the Fund not exceed
approximately 50% of the market value of the Fund's total assets other than its
futures contracts. For purposes of this third policy, "market value" of a
futures contract is deemed to be the amount obtained by multiplying the number
of units covered by the futures contract times the per unit price of the
securities covered by that contract.

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

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

SECURITIES OF NON-U.S. ISSUERS
The Fund 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 domestic
investments. For example, the value of such securities fluctuates based on the
relative strength of the U.S. dollar. In addition, there is generally less
publicly available information about 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 domestic
issuers. Investments in securities of non-U.S. issuers also involve the risk of
possible adverse changes in investment or exchange control regulations,
expropriation or confiscatory taxation, limitation on the removal of funds or
other assets of the Fund, political or financial instability or diplomatic and
other developments which would affect such investments. Further, economies of
other countries or areas of the world may differ favorably or unfavorably from
the economy of the U.S.

<PAGE>

developing countries) may be less liquid and more volatile than securities of
comparable U.S. companies. Non-U.S. security trading practices, including those
involving securities settlement where the Fund's assets may be released prior
to receipt of payments, may expose the Fund to increased risk in the event of a
failed trade or the insolvency of a non-U.S. broker-dealer. In addition,
foreign brokerage commissions are generally higher than commissions on
securities traded in the U.S. and may be non-negotiable. In general, there is
less overall governmental supervision and regulation of non-U.S. securities
exchanges, brokers and listed companies than in the U.S.

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

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

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

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

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

SHORT SALES "AGAINST THE BOX"
In a short sale, a fund sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. The Fund, in

<PAGE>

accordance with its 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 the Fund engages in a short sale, the collateral for the short
position is maintained for the Fund by the custodian or qualified
sub-custodian. While the short sale is open, an amount of securities equal in
kind and amount to the securities sold short or securities sold convertible
into or exchangeable for such equivalent securities are maintained in a
segregated account for the Fund. These securities constitute the Fund's long
position.

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

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

FOREIGN CURRENCY EXCHANGE TRANSACTIONS
Because the Fund 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 Fund 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. The Fund either enters into these transactions on a
spot (i.e., cash) basis at the spot rate prevailing in the foreign currency
exchange markets, or uses forward contracts to purchase or sell non-U.S.
currencies. The Fund may also enter into currency hedging transactions in an
attempt to protect the value of its assets as measured in U.S. dollars from
unfavorable changes in currency exchange rates and control regulations.
(Although the Fund's assets are valued daily in terms of U.S. dollars, the
Trust does not intend to convert the Fund's holdings of non-U.S. currencies
into U.S. dollars on a daily basis.) It is not currently intended that the Fund
speculate in currency exchange rates or forward contracts.

The Fund 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 the Fund
desire to resell that currency to the dealer.

When the Fund 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 Fund may be able

<PAGE>

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 the Manager believes that the currency of a particular country may
suffer a substantial decline against the U.S. dollar, the Fund 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 Fund'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 Fund does not enter into such forward contracts or maintain a
net exposure to such contracts where the consummation of the contracts
obligates the Fund to deliver an amount of non-U.S. currency in excess of the
value of the Fund'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, the Manager believes that it is important
to have the flexibility to enter into such forward contracts when it determines
that the best interests of the Fund will be served.

The Fund generally would not enter into a forward contract with a term
greater than one year. At the maturity of a forward contract, the Fund 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 the Fund retains the security and engages in an
offsetting transaction, the Fund will incur a gain or a loss (as described
below) to the extent that there has been movement in forward contract prices.
If the Fund 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 the Fund enters into a
forward contract for the sale of the non-U.S. currency and the date it enters
into an offsetting contract for the purchase of such currency, the Fund 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 Fund 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 the Fund's
securities at the expiration of the contract. Accordingly, it may be necessary
for the Fund 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
Fund 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 Fund is
obligated to deliver.

The Fund may also purchase put options on a non-U.S. currency in order to
protect against currency rate fluctuations. If the Fund purchases a put option
on a non-U.S. currency and the value of the U.S. currency declines, the Fund
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
Fund which otherwise would have resulted. Conversely, where a rise in the U.S.
dollar value of another currency is projected, and where the Fund anticipates
investing in securities traded in such currency, the Fund 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 the Fund 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, the Fund 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.

<PAGE>

The Fund may write options on non-U.S. currencies for hedging purposes or
otherwise to achieve its investment objectives. For example, where the Fund
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 Fund will be offset by the
amount of the premium received.

Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the cost of a non-U.S. security to be acquired because
of an increase in the U.S. dollar value of the currency in which the underlying
security is primarily traded, the Fund could write a put option on the relevant
currency which, if rates move in the manner projected, will expire unexercised
and allow the Fund 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
Fund 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, the Fund 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 the Fund will be
covered by segregation of cash or liquid securities in an amount sufficient to
discharge the Fund'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. The Fund
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, the Fund is not required to enter into such transactions and
does not do so unless deemed appropriate by the Manager. It should also be
realized that these methods of protecting the value of the Fund's securities
against a decline in the value of a currency do 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.

The Fund has established procedures consistent with policies of the
Securities and Exchange Commission (the "SEC") concerning forward contracts.
Since those policies currently recommend that an amount of the Fund's assets
equal to the amount of the purchase be held aside or segregated to be used to
pay for the commitment, the Fund expects always to have cash or liquid
securities available sufficient to cover any commitments under these contracts
or to limit any potential risk.

LENDING OF SECURITIES
Consistent with applicable regulatory requirements and in order to
generate income, the Fund may lend its securities to broker-dealers and other
institutional borrowers. Such loans will usually be made only to member banks
of the U.S. Federal Reserve System and to member firms of the New York Stock
Exchange (and subsidiaries thereof). Loans of securities would be secured

<PAGE>

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 at
any time on customary industry settlement notice (which will not usually exceed
three business days). During the existence of a loan, the Fund would continue
to receive the equivalent of the interest or dividends paid by the issuer on
the securities loaned and with respect to cash collateral would also receive
compensation based on investment of the collateral (subject to a rebate payable
to the borrower). Where the borrower provides the Fund with collateral
consisting of U.S. Treasury obligations, the borrower is also obligated to pay
the Fund a fee for use of the borrowed securities. The Fund, would not,
however, have the right to vote any securities having voting rights during the
existence of the loan, but would call the loan in anticipation of an important
vote to be taken among holders of the securities or of the giving or
withholding of 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 the Manager to be of good
standing, and when, in the judgment of the Manager, the consideration which can
be earned currently from loans of this type justifies the attendant risk. In
addition, the Fund could suffer a loss if the borrower terminates the loan and
the Fund is forced to liquidate investments in order to return the cash
collateral to the buyer. If the Manager determines to make loans, it is not
intended that the value of the securities loaned would exceed 30% of the market
value of the Fund's total assets.

WHEN-ISSUED SECURITIES
The Fund may purchase securities on a "when-issued" or on a "forward
delivery" basis. It is expected that, under normal circumstances, the Fund
would take delivery of such securities. When the Fund commits to purchase a
security on a "when-issued" or on a "forward delivery" basis, it sets up
procedures consistent with Securities and Exchange Commission policies. Since
those policies currently require that an amount of the Fund's assets equal to
the amount of the purchase be held aside or segregated to be used to pay for
the commitment, the Fund expects always to have cash or liquid securities
sufficient to cover any commitments or to limit any potential risk. However,
even though the Fund does not intend to make such purchases for speculative
purposes and intends to adhere to the provisions of Securities and Exchange
Commission policies, purchases of securities on such bases may involve more
risk than other types of purchases. For example, the Fund may have to sell
assets which have been set aside in order to meet redemptions. Also, if the
Manager determines it is advisable as a matter of investment strategy to sell
the "when-issued" or "forward delivery" securities, the Fund 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 Fund's payment obligation).

CONVERTIBLE SECURITIES
The Fund may invest in convertible securities. A convertible security is a
fixed-income security (a bond or preferred stock) which may be converted at a
stated price within a specified period of time into a certain quantity of
common stock or other equity securities of the name 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. Convertible securities purchased are not
subject to the rating requirements applicable to the Funds' purchase of fixed
income investments.

<PAGE>

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, the Fund 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
Securities Act. However, the Fund will not invest more than 15% of its net
assets (taken at market value) in illiquid investments, which include
securities for which there is no readily available market, securities subject
to contractual restrictions on resale and restricted securities, unless, 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 delegated to the Manager the
daily function of determining and monitoring liquidity of restricted
securities. The Trustees, however, retain sufficient oversight and are
ultimately responsible for the determinations.

Since it is not possible to predict with assurance exactly how the market
for restricted securities sold and offered under Rule 144A will develop, the
Trust's Trustees will carefully monitor the Fund's investments in these
securities, focusing on such factors, among others, as valuation, liquidity and
availability of information. The liquidity of investments in Rule 144A
securities could be impaired if trading in Rule 144A securities does not
develop or if qualified institutional buyers become for a time uninterested in
purchasing Rule 144A securities.

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 Fund 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.

4. INVESTMENT RESTRICTIONS

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

<PAGE>

The Fund may not:

(4) Purchase securities of any issuer if such purchase at the time thereof
would cause as to 75% of the Fund's total assets more than 5% of the Fund'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 Fund may invest all or
substantially all of its assets in one or more investment companies, to the
extent not prohibited by the 1940 Act, the rules and regulations thereunder,
and exemptive orders granted under such Act.

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

(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.

<PAGE>

NON-FUNDAMENTAL RESTRICTIONS
The Fund does not as a matter of operating policy:

(i) borrow money in excess of 10% of the total assets of the Fund (taken
at cost), except that the Fund may borrow up to 25% of its total assets when
such borrowing is necessary to meet redemption requests (moreover, the Fund
will not purchase any securities for the Fund at any time at which borrowings
exceed 5% of the total assets of the Fund (taken at market value)),

These policies are not fundamental and may be changed by the Fund without
the approval of its shareholders.

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

5. PERFORMANCE INFORMATION AND ADVERTISING

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

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

A total rate of return quotation for the Fund is calculated for any period
by (a) dividing (i) the sum of the net asset value per share on the last day of
the period and the net asset value per share on the last day of the period of
shares purchasable with dividends and capital gains distributions declared
during such period with respect to a share held at the beginning of such period
and with respect to shares purchased with such dividends and capital gains
distributions, by (ii) the public offering price per share on the first day of
such period, and (b) subtracting 1 from the result. Any annualized total rate
of return quotation is calculated by (x) adding 1 to the period total rate of
return quotation calculated above, (y) raising such sum to a power which is
equal to 365 divided by the number of days in such period, and (z) subtracting
1 from the result.

The Fund may provide annualized "yield" quotations. The "yield" of the
Fund refers to the income generated by an investment in the Fund over a 30-day
or one-month period (which period is stated in any such advertisement or
communication). This income is then annualized; that is, the amount of income
generated by the investment over that period is assumed to be generated each
month over a one year period and is shown as a percentage of the maximum public
offering price on the last day of that period. A "yield" quotation, unlike a
total rate of return quotation, does not reflect changes in net asset value.

Any current yield quotation for the Fund consists of an annualized
historical yield, carried at least to the nearest hundredth of one percent,
based on a 30 calendar day or one month period and is calculated by (a) raising
to the sixth power the sum of 1 plus the quotient obtained by dividing the

<PAGE>

Fund's net investment income earned during the period by the product of the
average daily number of shares outstanding during the period that were entitled
to receive dividends and the public offering price per share on the last day of
the period, (b) subtracting 1 from the result, and (c) multiplying the result
by 2.

Yields and total returns quoted for the Fund include the effect of
deducting the Fund's expenses, but may not include charges and expenses
attributable to a particular variable annuity contract or variable life
insurance policy. Since shares of the Fund can be purchased only through a
variable annuity contract or variable life insurance policy, a prospective
purchaser should carefully review the prospectus of the variable annuity
contract or variable life insurance policy he or she has chosen for information
on relevant charges and expenses. Including these charges in the quotations of
the Fund's yield and total return would have the effect of decreasing
performance. Performance information for the Fund must always be accompanied
by, and be reviewed with, performance information for the insurance product
which invests in the Fund.

Set forth below is total rate of return information for the shares of the
Fund for the periods indicated, assuming that dividends and capital gains
distributions, if any, were reinvested.

Redeemable Value of a
Hypothetical
$1,000 Investment
Total Rate of Return at the end of the Period

CITIFUNDS SMALL CAP
GROWTH VIP PORTFOLIO
February 10, 1997
(commencement of
operations) to
December 31, 1997 ______% $_______
One year ended
December 31, 1998 ______% $_______

The annualized yield of shares of the Fund for the 30-day period ended on
December 31, 1998 was -----%.

From time to time, advertising and marketing material of the Fund may
include charts showing the historical performance of hypothetical portfolios
comprised of classes of assets similar to those in which the Fund invests. The
classes of assets will be represented by the historical performance of specific
unmanaged indices. The information contained in such charts should not be
viewed as a projection of results of the Fund or as the historical performance
of the Fund. In addition, the past performance illustrated by such charts
should not be viewed as a guarantee of future results.

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

The net asset value of each share of the Fund is determined each day
during which the New York Stock Exchange is open for trading. As of the date of
this Statement of Additional Information, the Exchange is open for trading
every weekday except for the following holidays (or the days on which they are
observed): New Year's Day, Martin Luther King Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day. This determination of net asset value of shares of the Fund is
made once each day as of the close of regular trading on such Exchange by
dividing the value of the Fund's net assets (i.e., the value of its assets less

<PAGE>

its liabilities, including expenses payable or accrued) by the number of shares
of the Fund outstanding at the time the determination is made. A share's net
asset value is effective for orders received by the Trust prior to its
calculation and received by the Distributor prior to the close of the business
day on which such net asset value is determined.

For purposes of calculating net asset value per share, all assets and
liabilities initially expressed in non-U.S. currencies will be converted into
U.S. dollars at the prevailing market rates at the time of valuation. Equity
securities are valued at the last sale price on the exchange on which they are
primarily traded or on the NASDAQ system for unlisted national market issues,
or at the last quoted bid price for securities in which there 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 which take into account appropriate factors such as
institutional-size trading in similar groups of securities, yield, quality,
coupon rate, maturity, type of issue, trading characteristics and other market
data, without exclusive reliance upon quoted prices or exchange or
over-the-counter prices, since such valuations are believed to reflect more
accurately the fair value of such securities. In certain instances, securities
are valued on the basis of valuations received from a single dealer, which is
usually an established market maker in the security. In these instances,
additional dealer valuations are obtained monthly. Short-term obligations
(maturing in 60 days or less) are valued at amortized cost, which constitutes
fair value as determined by the Board of Trustees of the Trust. Futures
contracts are normally valued at the settlement price on the exchange on which
they are traded. Securities for which there are no such valuations are valued
at fair value as determined in good faith by or at the direction of the Board
of Trustees of the Trust.

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

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

Subject to compliance with applicable regulations, the Trust has reserved
the right to pay the redemption or repurchase price of shares of the Fund,
either totally or partially, by a distribution in kind of readily marketable
securities (instead of cash). The securities so distributed would be valued at
the same amount as that assigned to them in calculating the net asset value for
the shares or beneficial interests being sold. If a holder of shares or
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 shares of the Fund more than seven days during any period when (a)
trading in the markets the Fund normally utilizes is restricted, or an
emergency, as defined by the rules and regulations of the Securities and
Exchange Commission (the "SEC"), exists making disposal of the Fund's
investments or determination of its net asset value not reasonably practicable;
(b) the New York Stock Exchange is closed (other than customary weekend and
holiday closings); or (c) the SEC has by order permitted such suspension.

<PAGE>

Shares of the Fund may be sold to and held by Separate Accounts that fund
variable annuity and variable life insurance contracts issued by both
affiliated and unaffiliated Participating Insurance Companies. The Fund
currently does not foresee any disadvantages to the holders of variable annuity
contracts and variable life insurance policies of affiliated and unaffiliated
Participating Insurance Companies arising from the fact that interests of the
holders of variable annuity contracts and variable life insurance policies may
differ due to differences of tax treatment or other considerations or due to
conflicts between affiliated or unaffiliated Participating Insurance Companies.
Nevertheless, the Trustees will monitor events to seek to identify any material
irreconcilable conflicts which may possibly arise and to determine what action,
if any, should be taken in response to such conflicts. Should a material
irreconcilable conflict arise between the holders of variable annuity contracts
and variable life insurance policies of affiliated or unaffiliated
Participating Insurance Companies, the Participating Insurance Companies may be
required to withdraw the assets allocable to some or all of the Separate
Accounts from the Fund. Any such withdrawal could disrupt orderly portfolio
management to the potential detriment of such holders. The variable annuity
contracts and variable life insurance policies are described in separate
prospectuses issued by the Participating Insurance Companies. The Fund assumes
no responsibility for such prospectuses.

7. MANAGEMENT

TRUSTEES
The Trustees and officers of the Trust, their ages and their principal
occupations during the past five years are set forth below. Their titles may
have varied during that period. Asterisks indicate that those Trustees and
officers are "interested persons" (as defined in the 1940 Act) of the Trust.
Unless otherwise indicated below, the address of each Trustee and officer is 21
Milk Street, Boston, Massachusetts.

TRUSTEES OF THE TRUST

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

<PAGE>

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

OFFICERS OF THE TRUST

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

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

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

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

<PAGE>

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

CLAIR TOMALIN* (aged 30) -- Assistant Secretary of the Trust; Office
Manager, Signature Financial Group (Europe) Limited (since 1993). Her address
is 117 Charterhouse Street, London ECIM 6AA.

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

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

The Trustees of the Trust received the following remuneration from the
Trust during its fiscal year ended December 31, 1998:

Elliott J. Berv........... $3,409.27 None None $53,150.00
Philip W. Coolidge........ None None None None
Mark T. Finn.............. $3,389.53 None None $52,100.00
Riley C. Gilley........... $3,384.44 None None $41,510.00
Diana R. Harrington....... $3,545.56 None None $59,100.00
Susan B. Kerley........... $3,513.95 None None $55,110.00
Heath B. McLendon (2)..... None None None None
C. Oscar Morong, Jr....... $3,669.31 None None $71,110.00
Walter E. Robb, III....... $3,395.04 None None $50,110.00
E. Kirby Warren........... $3,483.71 None None $49,110.00
William S. Woods, Jr...... $3,484.86 None None $54,110.00

</TABLE>

(1) Information relates to the fiscal year ended December 31, 1998.
Messrs. Berv, Coolidge, Finn, Gilley, McLendon, Morong, Robb, Warren and
Woods and Mses. Harrington and Kerley are trustees of 27, 49, 26, 33,
20, 40, 30, 40, 26, 28 and 28 funds, respectively, of the family of
open-end registered investment companies advised or managed by Citibank.
(2) Mr. McLendon was appointed as a Trustee in February 1999.

As of ___________, 1999, all Trustees and officers as a group owned less
than 1% of the outstanding shares of the Fund. As of the same date, First
Citicorp Life Insurance Company owned of record _____% of the shares of the
Fund and Citicorp Life Insurance Company owned _____% of the shares of the
Fund.

<PAGE>

indemnification will not be provided unless it has been determined by a court
or other body approving the settlement or other disposition, or by a reasonable
determination, based upon a review of readily available facts, by vote of a
majority of disinterested Trustees of the Trust, or in a written opinion of
independent counsel, that such officers or Trustees have not engaged in willful
misfeasance, bad faith, gross negligence or reckless disregard of their duties.

MANAGER
Citibank manages the assets of the Fund and provides certain
administrative services to the Trust pursuant to a management agreement (the
"Management Agreement") with the Trust. Citibank furnishes at its own expense
all services, facilities and personnel necessary in connection with managing
the Fund's investments and effecting securities transactions for the Fund. The
Management Agreement with the Trust will continue in effect as long as such
continuance is specifically approved at least annually by the Board of Trustees
of the Trust or by a vote of a majority of the outstanding voting securities of
the Fund, and, in either case, by a majority of the Trustees of the Trust who
are not parties to the Management Agreement or interested persons of any such
party, at a meeting called for the purpose of voting on the Management
Agreement.

The Management Agreement provides that Citibank may render services to
others. The 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 Fund
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 Management
Agreement provides that neither Citibank nor its personnel shall be liable for
any error of judgment or mistake of law or for any loss arising out of any
investment or for any act or omission in the execution of securities
transactions for the Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties under the Management Agreement with the Trust.

Citibank, if required by state law, will reimburse the Fund or waive all
or a portion of its management fees to the extent that the expenses of the Fund
exceed the expense limitation prescribed by any state in which the Fund is
qualified for offer or sale.

For the period from February 10, 1997, commencement of operations, to
December 31, 1997, the fees payable to Citibank under the Management Agreement
were $21,036 (all of which was voluntarily waived). For the period from January
1, 1998 to December 31, 1998, the fees payable to Citibank under the Management
Agreement were $_______ (all of which was voluntarily waived).

CFBDS is a wholly-owned subsidiary of Signature Financial Group, Inc.

DISTRIBUTOR
CFBDS, 21 Milk Street, Boston, Massachusetts 02109 serves as the
Distributor of the Trust's shares pursuant to a Distribution Agreement with the

<PAGE>

Trust. Unless otherwise terminated, the Distribution Agreement continues in
effect from year to year upon annual approval by the Trust's Board of Trustees,
or by the vote of a majority of the outstanding shares of the Trust and by the
vote of a majority of the Board of Trustees of the Trust who are not parties to
the Agreement or interested persons of any party to the Agreement, cast in
person at a meeting called for the purpose of voting on such approval. The
Agreement will terminate in the event of its assignment, as defined in the 1940
Act. CFBDS is not currently paid a fee for the provision of distribution
services with respect to shares of the Fund.

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

TRANSFER AGENT AND CUSTODIAN
The Trust has entered into a Transfer Agency and Service Agreement with
State Street Bank and Trust Company ("State Street") pursuant to which State
Street acts as transfer agent for the Fund. The Trust also has entered into a
Custodian Agreement and a Fund Accounting Agreement with State Street, pursuant
to which custodial and fund accounting services, respectively, are provided for
the Fund. Among other things, State Street calculates the daily net asset value
for the Fund. The principal business address of State Street is 225 Franklin
Street, Boston, Massachusetts 02110.

COUNSEL
Bingham Dana LLP, 150 Federal Street, Boston, Massachusetts 02110, is the
counsel for the Fund.

8. PORTFOLIO TRANSACTIONS

The Trust trades securities for the Fund if it believes that a transaction
net of costs (including custodian charges) will help achieve the Fund's
investment objective. Changes in the Fund's investments are made without regard
to the length of time a security has been held, or whether a sale would result
in the recognition of a profit or loss. Therefore, the rate of turnover is not
a limiting factor when changes are appropriate. Specific decisions to purchase
or sell securities for the Fund are made by a portfolio manager who is an
employee of Citibank and who is appointed and supervised by senior officers of
Citibank. The portfolio manager may serve other clients 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 a Fund and/or the other
accounts over which the Manager, or its affiliates exercise investment
discretion. The Manager is authorized to pay a broker or dealer who provides
such brokerage and research services a commission for executing a portfolio
transaction for the Fund which is in excess of the amount of commission another
broker or dealer would have charged for effecting that transaction if the
Manager determines in good faith that such amount of commission is reasonable
in relation to the value of the brokerage and research services provided by
such broker or dealer. This determination may be viewed in terms of either that
particular transaction or the overall responsibilities which the Manager, and
its affiliates have with respect to accounts over which they exercise
investment discretion.

The investment advisory fee that the Fund pays to Citibank will not be
reduced as a consequence of Citibank's receipt of brokerage and research

<PAGE>

services. While such services are not expected to reduce the expenses of
Citibank, Citibank would, through the use of the services, avoid the additional
expenses which would be incurred if it should attempt to develop comparable
information through its own staff or obtain such services independently.

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

For the period from February 10, 1997, commencement of operations, to
December 31, 1997, the Fund paid $8,928 in brokerage commissions. For the
period from January 1, 1998 to December 31, 1998, the Fund paid $_______ in
brokerage commissions.

9. DESCRIPTION OF SHARES, VOTING RIGHTS AND LIABILITIES

The Trust's Declaration of Trust permits the Trustees to issue an
unlimited number of full and fractional Shares of Beneficial Interest ($0.00001
par value per share) of each series and to divide or combine the shares of any
series into a greater or lesser number of shares of that series without thereby
changing the proportionate beneficial interests in that series. The Fund, and
CitiSelect VIP Folio 200, CitiSelect VIP Folio 300, CitiSelect VIP Folio 400,
and CitiSelect VIP Folio 500 are the only current series of shares of the Trust
and the Trust has reserved the right to create and issue additional series of
shares. Each share of the Fund represents an equal proportionate interest in
the Fund with each other share. Shares of each series participate equally in
the earnings, dividends and distribution of net assets of the particular series
upon liquidation or dissolution. Shares of each series are entitled to vote
separately to approve advisory agreements or changes in investment policy, but
shares of all series may vote together in the election or selection of Trustees
and accountants for the Trust.

The Trust may enter into a merger or consolidation, or sell all or
substantially all of its assets (or all or substantially all of the assets

<PAGE>

belonging to any series of the Trust), if approved by a vote of the holders of
two-thirds of the Trust's outstanding shares, voting as a single class, or of
the affected series of the Trust, as the case may be, except that if the
Trustees of the Trust recommend such sale of assets, merger or consolidation,
the approval by vote of the holders of a majority of the Trust's outstanding
shares would be sufficient. The Trust or any series of the Trust, as the case
may be, may be terminated (i) by a vote of a majority of the outstanding voting
securities of the Trust or the affected series or (ii) by the Trustees by
written notice to the shareholders of the Trust or the affected series. If not
so terminated, the Trust will continue indefinitely.

The Fund's Transfer Agent maintains a share register for shareholders of
record, i.e., the Separate Accounts of the Participating Insurance Companies.
Share certificates will not be issued.

10. CERTAIN ADDITIONAL TAX MATTERS

The Fund is treated as a separate entity for federal income tax purposes
under the Internal Revenue Code of 1986, as amended (the "Code"). Each Fund has
elected to be treated, and intends to qualify each year, as a "regulated
investment company" under Subchapter M of the Code by meeting all applicable
requirements of Subchapter M, including requirements as to the nature of the
Fund's gross income, the amount of Fund distributions, and the composition of
the Fund's portfolio assets. Provided all such requirements are met, no U.S.
federal income or excise taxes generally will be required to be paid by the
Funds, although non-U.S. source income earned by each Fund may be subject to
non-U.S. withholding or other taxes. If a Fund should fail to qualify as a
"regulated investment company" for any year, the Fund would incur a regular
corporate federal income tax upon its taxable income and Fund distributions
would generally be taxable as ordinary income to shareholders.

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

Any Fund distribution will have the effect of reducing the per share net

<PAGE>

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

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

Any investment by the Fund in zero coupon bonds, deferred interest bonds,
payment-in-kind bonds, certain stripped securities, and certain securities
purchased at a market discount will cause the Fund to recognize income prior to
the receipt of cash payments with respect to those securities. In order to
distribute this income and avoid a tax on the Fund, the Fund may be required to
liquidate portfolio securities that it might otherwise have continued to hold,
potentially resulting in additional taxable gain or loss to the Fund.

The Fund's transactions in options, futures and forward contracts will be
subject to special tax rules that may affect the amount, timing and character
of Fund income and distributions to shareholders. For example, certain
positions held by the Fund on the last business day of each taxable year will
be marked to market (i.e., treated as if closed out) on that day, and any gain
or loss associated with the positions will be treated as 60% long-term and 40%
short-term capital gain or loss. Certain positions held by the Fund that
substantially diminish its risk of loss with respect to other positions in its
portfolio may constitute "straddles," and may be subject to special tax rules
that would cause deferral of Fund losses, adjustments in the holding periods of
Fund securities, and conversion of short-term into long-term capital losses.
Certain tax elections exist for straddles that may alter the effects of these
rules. The Fund intends to limit its activities in options, futures and forward
contracts to the extent necessary to meet the requirements of Subchapter M of
the Code.

An investment by the Fund in residual interests of a CMO that has elected
to be treated as a real estate mortgage investment conduit, or "REMIC," can
create complex tax problems, especially if the Fund has state or local
governments or other tax-exempt organizations as shareholders.

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

<PAGE>

foreign income taxes paid by the Fund as part of the amounts distributed to
them by the Fund and thus includable in their gross income for federal income
tax purposes. Shareholders who itemize deductions would then be allowed to
claim a deduction or credit (but not both) on their federal income tax returns
for such amounts, subject to certain limitations. Shareholders who do not
itemize deductions would (subject to such limitations) be able to claim a
credit but not a deduction. No deduction for such amounts will be permitted to
individuals in computing their alternative minimum tax liability. If the Fund
does not qualify or elect to "pass through" to the Fund's shareholders foreign
income taxes paid by it, shareholders will not be able to claim any deduction
or credit for any part of the foreign taxes paid by the Fund.

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

The account application asks each new shareholder to certify that the
shareholder's Social Security or taxpayer identification number is correct and
that the shareholder is not subject to 31% backup withholding for failing to
report income to the IRS. The Fund may be required to withhold (and pay over to
the IRS for the shareholder's credit) 31% of certain distributions and
redemption proceeds paid to shareholders who fail to provide this information
or who otherwise violate IRS regulations.

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

11. CERTAIN BANK REGULATORY MATTERS

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

12. FINANCIAL STATEMENTS

The audited financial statements of the Fund (Portfolio of Investments at
December 31, 1998, Statement of Assets and Liabilities at December 31, 1998,
Statement of Operations for the period January 1, 1998 to December 31, 1998,
Statement of Changes in Net Assets for the period January 1, 1998 to December
31, 1998, Financial Highlights for the period January 1, 1998 to December 31,
1998, Notes to Financial Statements and Report of Independent Accountants),
each of which is included in the Annual Report to Shareholders of the Fund, are
incorporated by reference into this Statement of Additional Information and
have been so incorporated in reliance upon the report of PricewaterhouseCoopers
LLP, independent accountants, on behalf of the Fund.

A copy of the Annual Report for the Fund accompanies this Statement of
Additional Information.

<PAGE>

PART C

Item 23. Exhibits.

* a(1) Amended and Restated Declaration of Trust of the Registrant
**** a(2) Amended and Restated Designation of Series of the Registrant
* b(1) By-Laws of the Registrant
*** b(2) Amendment to the By-Laws of the Registrant
*** d(1) Management Agreements between the Registrant and Citibank, N.A., as
investment manager and administrator
d(2) Form of Management Agreement between the Registrant and Citibank, N.A.,
as investment manager and administrator to CitiSelect VIP Folio 100
*** d(3) Sub-Management Agreements with Franklin Advisory Services, Inc.
d(4) Form of Sub-Management Agreement with Franklin Advisory Services, Inc.
with respect to CitiSelect VIP Folio 100
*** d(5) Sub-Management Agreements with Hotchkis & Wiley
d(6) Form of Sub-Management Agreement with Hotchkis & Wiley with respect to
CitiSelect VIP Folio 100
d(7) Sub-Management Agreement with Mutual Management Corp.
d(8) Form of Sub-Management Agreement with Mutual Management Corp. with
respect to CitiSelect VIP Folio 100
d(9) Form of Sub-Management Agreement with Salomon Brothers Asset Management
Limited
d(10) Form of Sub-Management Agreement with Salomon Brothers Asset Management
Limited with respect to CitiSelect VIP Folio 100
*** e(1) Distribution Agreement between the Registrant and CFBDS, Inc.
(formerly known as The Landmark Funds Broker-Dealer Services, Inc.)
("CFBDS"), as distributor
e(2) Form of Letter Agreement adding CitiSelect VIP Folio 100 to the
Distribution Agreement between the Registrant and CFBDS
*** g(1) Custodian Contract between the Registrant, on behalf of the Funds, and
State Street Bank and Trust Company ("State Street"), as custodian
g(2) Form of Letter Agreement adding CitiSelect VIP Folio 100 to the
Custodian Contract between the Registrant and State Street, as custodian
*** h(1) Transfer Agency and Service Agreement between the Registrant and State
Street, as transfer agent
h(2) Form of Letter Agreement adding CitiSelect VIP Folio 100 to the
Transfer Agency and Service Agreement between the Registrant and State Street,
as transfer agent
** i Opinion of Bingham Dana LLP
*** p Powers of Attorney

</TABLE>

- ------------------
* Incorporated by reference to the Registrant's Initial Registration
Statement on Form N-1A (File No. 333-15119) as filed with the Securities
and Exchange Commission on October 30, 1996.
** Incorporated by reference to Pre-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A (File No. 333-15119) as
filed with the Securities and Exchange Commission on November 15, 1996.
*** Incorporated by reference to Post-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A (File No. 333-15119) as
filed with the Securities and Exchange Commission on February 26, 1998.
**** Incorporated by reference to Post-Effective Amendment No. 3 to the
Registrant's Registration Statement on Form N-1A (File No. 333-15119) as
filed with the Securities and Exchange Commission on April 29, 1998.

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

Not applicable.

<PAGE>

Item 25. Indemnification.

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

Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to Trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a Trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
Trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.

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

Item 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 Portfolio), The Premium Portfolios (U.S. Fixed
Income Portfolio, Growth & Income Portfolio, Balanced Portfolio, Large Cap
Growth Portfolio, International Equity Portfolio, Government Income Portfolio
and Small Cap Growth Portfolio), Tax Free Reserves Portfolio, U.S. Treasury
Reserves Portfolio, Cash Reserves Portfolio, CitiFundsSM Tax Free Income Trust
(CitiFundsSM New York Tax Free Income Portfolio, CitiFundsSM National Tax Free
Income Portfolio and CitiFundsSM California Tax Free Income Portfolio),
CitiFundsSM Multi-State Tax Free Trust (CitiFundsSM California Tax Free
Reserves, CitiFundsSM New York Tax Free Reserves and CitiFundsSM Connecticut
Tax Free Reserves), and CitiFundsSM Institutional Trust (CitiFundsSM
Institutional Cash Reserves). 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 and a Director of Citibank. Victor J. Menezes
is the President and a Director of Citibank. William R. Rhodes and H. Onno
Ruding are Vice Chairmen and Directors of Citibank. The other Directors of
Citibank are Paul J. Collins, Vice Chairman of Citigroup Inc. and Robert I.
Lipp, Chairman and Chief Executive Officer of The Travelers Insurance Group
Inc. and of Travelers Property Casualty Corp.

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

Paul J. Collins Director, Kimberly-Clark Corporation

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

<PAGE>

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

William R. Rhodes Director, Private Export Funding
Corporation

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

Franklin Advisory Services, Inc. ("Franklin"), a sub-adviser with respect
to the small cap value securities of Small Cap Value Portfolio, a series of
Asset Allocation Portfolios, maintains its principal office at One Parker
Plaza, 16th Floor, Fort Lee, New Jersey 07024. Franklin, a Delaware corporation
incorporated in 1996, is a registered investment adviser under the Investment
Advisers Act of 1940 (the "Advisers Act") and is a wholly-owned subsidiary of
Franklin Resources, Inc., a publicly owned holding company. Franklin is an
investment adviser to various open-end and closed-end investment companies.

William J. Lippman is the President and Director of Franklin Advisory
Services, Inc. Mr. Lippman holds a master of business administration degree
from New York University and a bachelor of business administration degree from
City College of New York. Mr. Lippman also serves as Senior Vice President of
Franklin Resources, Inc. and Franklin Management, Inc. and has been with the
Franklin Templeton Group since 1988. Prior to joining Franklin Advisers Inc.,
Mr. Lippman was president of L.F. Rothschild Fund Management, Inc. and has been
in the securities industry for over 30 years.

Each of the individuals named below is an officer and/or Director of
Franklin and has the affiliations indicated:

<S> <C>

Name: Affiliations:

William J. Lippman Senior Vice President, Franklin Resources, Inc.
President and Director Senior Vice President, Franklin Advisers, Inc.
Senior Vice President, Franklin Templeton Distributors, Inc.
Senior Vice President, Franklin Management, Inc.

Mr. Lippman also serves as officer and/or director
or trustee of eight of the investment companies in
the Franklin Group of Funds.

<PAGE>

Charles B. Johnson President, Chief Executive Officer and Director, Franklin
Chairman of the Board and Resources, Inc.
Director Chairman of the Board and Director, Franklin Advisers, Inc.
Chairman of the Board and Director, Franklin Investment
Advisory Services, Inc.
Chairman of the Board and Director, Franklin Templeton
Distributors, Inc.
Director, Franklin/Templeton Investor Services, Inc.
Director, Franklin Templeton Services, Inc.
Director, General Host Corporation

Mr. Johnson also serves as officer and/or director or trustee, as
the case may be, of most of the other subsidiaries of Franklin
Resources, Inc. and of 54 of the investment companies in the
Franklin Templeton Group of Funds.

Rupert H. Johnson, Jr. Executive Vice President and Director, Franklin Resources, Inc.
Senior Vice President and Executive Vice President and Director, Franklin Templeton
Director Distributors, Inc.
President and Director, Franklin Advisers, Inc.
Senior Vice President and Director, Franklin Investment
Advisory Services, Inc.
Director, Franklin/Templeton Investor Services, Inc.

Mr. Johnson also serves as officer and/or director, trustee or
managing general partner, as the case may be, of most other
subsidiaries of Franklin Resources, Inc. and of 60 of the
investment companies in the Franklin Templeton Group of
Funds.

Deborah R. Gatzek Senior Vice President and General Counsel, Franklin Resources,
Vice President and Assistant Inc.
Secretary Senior Vice President, Franklin Templeton Distributors, Inc.
Vice President, Franklin Advisers, Inc.
Vice President, Franklin Investment Advisory Services, Inc.

Ms. Gatzek also serves as officer of 60 of the investment
companies in the Franklin Templeton Group of Funds.

Martin L. Flanagan Senior Vice President, Chief Financial Officer and Treasurer,
Treasurer Franklin Resources, Inc.
Executive Vice President, Templeton Worldwide, Inc.
Senior Vice President and Treasurer, Franklin Advisers, Inc.
Senior Vice President and Treasurer, Franklin Templeton
Distributors, Inc.
Senior Vice President, Franklin/Templeton Investor Services,
Inc.
Treasurer, Franklin Investment Advisory Services, Inc.

Mr. Flanagan also serves as officer of most other subsidiaries of
Franklin Resources, Inc. and officer, director and/or trustee of
60 of the investment companies in the Franklin Templeton
Group of Funds.

<PAGE>

Leslie M. Kratter Vice President, Franklin Resources, Inc.
Secretary Vice President, Franklin Institutional Services Corporation
President and Director, Franklin/Templeton Travel, Inc.

</TABLE>

Hotchkis and Wiley, a division of the Capital Management Group of Merrill
Lynch Asset Management, L.P. ("Hotchkis"), a sub-adviser to International
Portfolio, a series of Asset Allocation Portfolios, maintains its principal
office at 725 South Figueroa Street, Suite 4000, Los Angeles, California
90017-5400. Harry Hartford and Sarah Ketterer manage international equity
accounts and are also responsible for international investment research. Each
serves on the Investment Policy Committee at Hotchkis. Prior to joining
Hotchkis, Mr. Hartford was with the Investment Bank of Ireland, where he gained
10 years of experience in both international and global equity management.
Prior to joining Hotchkis, Ms. Ketterer was an associate with Bankers Trust and
an analyst at Dean Witter.

Hotchkis became a division of the Capital Management Group of Merrill
Lynch Asset Management, L.P. upon the completion of the sale by Hotchkis and
Wiley, a Delaware Limited Liability Company and the general partner of Hotchkis
& Wiley, a California limited partnership, of all of the partnership interests
in Hotchkis & Wiley to Merrill Lynch & Co., Inc., a Delaware corporation, in
November of 1996.

Following are the managing personnel of Hotchkis:

<S> <C>
Name and Position: Other Affiliations:

John F. Hotchkis Trustee, Hotchkis and Wiley Funds
Portfolio Manager Board of Governors, The Music Center
Chairman Director, The Music Center Foundation
Director, Los Angeles Philharmonic Orchestra
Director, Big Brothers of Greater Los Angeles
Director, Executive Service Corps of Southern California
Director, KCET
Director, Teach for America
Trustee, The Lawrenceville School
Trustee, Robert Louis Stevenson School
Director, Fountainhead Water Company, Inc.

Michael L. Quinn Head of Merrill Lynch Capital Management Group
Chief Executive Officer

</TABLE>

For information as to the business, profession, vocation or employment of
a substantial nature of each of the officers and directors of Mutual Management
Corp. ("MMC"), a subadviser of the Registrant, reference is made to MMC's
current Form ADV (File No. 801-8314) filed under the Advisers Act, incorporated
herein by reference.

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 the Registrant, reference is
made to SBAM's current Form ADV (File No. 801-32046) filed under the Advisers
Act, incorporated herein by reference.

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 Limited ("SBAML"), a subadviser of the Registrant, reference
is made to SBAML's current Form ADV (File No. 801-43335) filed under the
Advisers Act, incorporated herein by reference.

<PAGE>

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, and CitiSelect Folio 500. 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,
Growth & Income Portfolio, U.S. Fixed Income Portfolio, Large Cap Growth
Portfolio, Small Cap Growth 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 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

<PAGE>

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
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 is incorporated by reference to Schedule A of Form BD
filed by CFBDS pursuant to the Securities and Exchange Act of 1934 (File No.
8-32417).

Item 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

CFBDS, Inc. 21 Milk Street
(distributor) Boston, MA 02109

<PAGE>

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

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

Item 29. Management Services.

Not applicable.

Item 30. Undertakings.

Not applicable.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Boston and Commonwealth of
Massachusetts on the 12th day of February, 1999.

VARIABLE ANNUITY PORTFOLIOS

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

Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment to the Registration Statement has been signed below by
the following persons in the capacities indicated below on February 12, 1999.

Signature Title

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

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

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

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

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

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

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

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

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

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

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

<PAGE>

*By: Philip W. Coolidge
---------------------
Philip W. Coolidge

Executed by Philip W. Coolidge on behalf of
those indicated pursuant to Powers of Attorney.

<PAGE>

EXHIBIT INDEX

d(2) Form of Management Agreement between the Registrant and Citibank, N.A.,
as investment manager and administrator to CitiSelect VIP Folio 100
d(4) Form of Sub-Management Agreement with Franklin Advisory Services, Inc.
with respect to CitiSelect VIP Folio 100
d(6) Form of Sub-Management Agreement with Hotchkis & Wiley with respect to
CitiSelect VIP Folio 100
d(7) Sub-Management Agreement with Mutual Management Corp.
d(8) Form of Sub-Management Agreement with Mutual Management Corp. with
respect to CitiSelect VIP Folio 100
d(9) Form of Sub-Management Agreement with Salomon Brothers Asset Management
Limited
d(10) Form of Sub-Management Agreement with Salomon Brothers Asset Management
Limited with respect to CitiSelect VIP Folio 100
e(2) Form of Letter Agreement adding CitiSelect VIP Folio 100 to the
Distribution Agreement between the Registrant and CFBDS
g(2) Form of Letter Agreement adding CitiSelect VIP Folio 100 to the
Custodian Contract between the Registrant and State Street, as custodian
h(2) Form of Letter Agreement adding CitiSelect VIP Folio 100 to the
Transfer Agency and Service Agreement between the Registrant and
State Street, as transfer agent

Exhibit d(2)

FORM OF
MANAGEMENT AGREEMENT

VARIABLE ANNUITY PORTFOLIOS
CitiSelect(R) VIP Folio 100

MANAGEMENT AGREEMENT, dated as of __________ __, ______, by and between
Variable Annuity Portfolios, Massachusetts business 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
CitiSelect(R) VIP Folio 100 (the "Fund"), and Citibank is willing to provide
such investment advisory and administrative services for the Fund on the terms
and conditions hereinafter set forth.

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

1. Duties of Citibank. (a) Citibank shall act as the Manager for the Fund
and as such shall furnish continuously an investment program and shall
determine from time to time what securities shall be purchased, sold or
exchanged and what portion of the assets of the Fund shall be held uninvested,
subject always to the restrictions of the Trust's Declaration of Trust, dated
October 18, 1996, and By-laws, as each may be amended from time to time
(respectively, the "Declaration" and the "By-Laws"), the provisions of the 1940
Act, and the then-current Registration Statement of the Trust with respect to
the Fund. The Manager shall also make recommendations as to the manner in which
voting rights, rights to consent to corporate action and any other rights
pertaining to the Fund's portfolio securities shall be exercised. Should the
Board of Trustees of the Trust at any time, however, make any definite
determination as to investment policy applicable to the Fund and notify the
Manager thereof in writing, the Manager shall be bound by such determination
for the period, if any, specified in such notice or until similarly notified
that such determination has been revoked. The Manager shall take, on behalf of
the Fund, all actions which it deems necessary to implement the investment
policies determined as provided above, and in particular to place all orders
for the purchase or sale of securities for the Fund's account with the brokers
or dealers selected by it, and to that end the Manager is authorized as the
agent of the Trust to give instructions to the custodian or any subcustodian of

<PAGE>

the Fund as to deliveries of securities and payments of cash for the account of
the Fund. In connection with the selection of such brokers or dealers and the
placing of such orders, brokers or dealers may be selected who also provide
brokerage and research services (as those terms are defined in Section 28(e) of
the Securities Exchange Act of 1934) to the Fund and/or the other accounts over
which the Manager or its affiliates exercise investment discretion. The Manager
is authorized to pay a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio transaction for the
Fund which is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if the Manager determines in
good faith that such amount of commission is reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer.
This determination may be viewed in terms of either that particular transaction
or the overall responsibilities which the Manager and its affiliates have with
respect to accounts over which they exercise investment discretion. The
Trustees of the Trust shall periodically review the commissions paid by the
Fund to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits to the Fund. In making purchases or
sales of securities or other property for the account of the Fund, the Manager
may deal with itself or with the Trustees of the Trust or the Trust's
underwriter or distributor, to the extent such actions are permitted by the
1940 Act. In providing the services and assuming the obligations set forth
herein, the Manager may employ at its own expense, or may request that the
Trust employ at the Fund's expense, one or more subadvisers; provided that in
each case the Manager shall supervise the activities of each subadviser. Any
agreement between the Manager and a subadviser shall be subject to the renewal,
termination and amendment provisions applicable to this Agreement. Any
agreement between the Trust on behalf of the Fund and a subadviser may be
terminated by the Manager at any time on not more than 60 days' nor less than
30 days' written notice to the Trust and the subadviser.

(b) Subject to the direction and control of the Board of Trustees of the
Trust, Citibank shall perform such administrative and management services as
may from time to time be reasonably requested by the Trust, which shall include
without limitation: (a) providing office space, equipment and clerical
personnel necessary for maintaining the organization of the Trust and for
performing the administrative and management functions herein set forth; (b)
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;
(c) preparing and, if applicable, filing all documents required for compliance
by the Trust with applicable laws and regulations, including registration
statements, prospectuses and statements of additional information, semi-annual
and annual reports to shareholders, proxy statements and tax returns; (d)
preparation of agendas and supporting documents for and minutes of meetings of
Trustees, committees of Trustees and shareholders; and (e) arranging for
maintenance of books and records of the Trust. Notwithstanding the foregoing,
Citibank shall not be deemed to have assumed any duties with respect to, and
shall not be responsible for, the distribution of shares of beneficial interest
in the Fund, nor shall Citibank be deemed to have assumed or have any
responsibility with respect to functions specifically assumed by any transfer

<PAGE>

agent, fund accounting agent or custodian of the Trust or the Fund. In
providing administrative and management services as set forth herein, Citibank
may, at its own expense, employ one or more subadministrators; provided that
Citibank shall remain fully responsible for the performance of all
administrative and management duties set forth herein and shall supervise the
activities of each subadministrator.

2. Allocation of Charges and Expenses. Citibank shall furnish at its own
expense all necessary services, facilities and personnel in connection with its
responsibilities under Section 1 above. Except as provided in the foregoing
sentence, it is understood that the Trust will pay from the assets of the Fund
all of its own expenses allocable to the Fund including, without limitation,
organization costs of the Fund; compensation of Trustees who are not
"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 shares of beneficial interest and
servicing shareholder accounts; expenses of preparing, typesetting, printing
and mailing prospectuses, statements of additional information, shareholder
reports, notices, proxy statements and reports to governmental officers and
commissions and to existing shareholders of the Fund; expenses connected with
the execution, recording and settlement of security transactions; insurance
premiums; fees and expenses of the custodian for all services to the Fund,
including safekeeping of funds and securities and maintaining required books
and accounts; expenses of calculating the net asset value of the Fund
(including but not limited to the fees of independent pricing services);
expenses of meetings of the Fund's shareholders; expenses relating to the
issuance, registration and qualification of shares of the Fund; and such
non-recurring or extraordinary expenses as may arise, including those relating
to actions, suits or proceedings to which the Trust on behalf of the Fund may
be a party and the legal obligation which the Trust may have to indemnify its
Trustees and officers with respect thereto.

3. Compensation of Citibank. For the services to be rendered and the
facilities to be provided by Citibank hereunder, the Trust shall pay to
Citibank from the assets of the Fund a management fee computed daily and paid
monthly at an annual rate equal to 0.50% of the Fund's average daily net assets
for the Fund's then-current fiscal year minus the Fund's Aggregate Subadviser
Fee (as defined below), if any. To the extent that the Fund's Aggregate
Subadviser Fee exceeds 0.50% of the Fund's average daily net assets for the
Fund's then-current fiscal year, the Manager shall pay such amount to the
applicable subadvisers on the Fund's behalf. The Fund's Aggregate Subadviser
Fee is the aggregate amount payable by the Fund to subadvisers pursuant to
agreements between the Trust on behalf of the Fund and the 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

<PAGE>

or distributor, as principals in making purchases or sales of securities or
other property for the account of the Fund, except as permitted by the 1940
Act, will not take a long or short position in shares of the Fund except as
permitted by the Declaration, and will comply with all other provisions of the
Declaration, the By-Laws and the then-current Registration Statement applicable
to the Fund relative to Citibank and its directors and officers.

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

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

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

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

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

<PAGE>

meanings specified in, and shall be construed in a manner consistent with, the
1940 Act, subject, however, to such exemptions as may be granted by the
Securities and Exchange Commission under said Act.

Each party acknowledges and agrees that all obligations of the Trust under
this Agreement are binding only with respect to the Fund; that any liability of
the Trust under this Agreement, or in connection with the transactions
contemplated herein, shall be discharged only out of the assets of the Fund;
and that no other series of the Trust shall be liable with respect to this
Agreement or in connection with the transactions contemplated herein.

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

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

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

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered as of the day and year first above written.

VARIABLE ANNUITY PORTFOLIOS CITIBANK, N.A.

By:___________________________ By:_____________________________

Title:________________________ Title:__________________________

Exhibit d(4)

FORM OF
SUB-MANAGEMENT AGREEMENT

VARIABLE ANNUITY PORTFOLIOS

CitiSelect(R) VIP Folio 100

SUB-MANAGEMENT AGREEMENT, dated as of _____________ ___, ____, by and
between Variable Annuity Portfolios, a Massachusetts business trust (the
"Trust"), and Franklin Advisory Services, Inc., a Delaware corporation (the
"Subadviser").

W I T N E S S E T H:

WHEREAS, the Manager has requested that the Trust engage the Subadviser to
provide certain investment advisory services for the Fund, and the Subadviser
is willing to provide such investment advisory services for the Fund on the
terms and conditions hereinafter set forth.

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

1. Appointment of the Subadviser. In accordance with and subject to the
Management Agreement between the Trust and the Manager (the "Management
Agreement"), the Trust hereby appoints the Subadviser to act as Subadviser with
respect to the Fund for the period and on the terms set forth in this
Agreement. The Subadviser accepts such appointment and agrees to manage the
Fund assets as are allocated to it by the Manager for the compensation provided
by this Agreement.

2. Duties of the Subadviser. The Subadviser shall manage the Fund assets
as are allocated to it by the Manager. Notwithstanding any provision of this
Agreement, the Manager shall retain all rights and ultimate responsibilities to
supervise and, in its discretion, conduct investment advisory activities
relating to the Trust. The Subadviser shall determine from time to time what
securities shall be purchased, sold or exchanged and what portion of the assets
of the Fund allocated by the Manager to the Subadviser shall be held
uninvested, subject always to the restrictions of the Trust's Declaration of
Trust, dated October 25, 1996, and By-laws, as each may be amended from time to

<PAGE>

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 Fund, and subject, further, to the Subadviser, if requested, notifying the
Manager 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 Manager, it being understood that the Subadviser shall be
responsible for compliance with any restrictions imposed in writing by the
Manager from time to time in order to facilitate compliance with the
above-mentioned restrictions and such other restrictions as the Manager may
determine. Further, the Manager 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 Fund and what portion, if any, of the assets of the Fund allocated by the
Manager to the Subadviser shall be held uninvested. The Subadviser shall also,
as requested, make recommendations to the Manager as to the manner in which
proxies, voting rights, rights to consent to corporate action and any other
rights pertaining to the Fund's portfolio securities shall be exercised.
However, in no event shall the Subadviser have the power to exercise proxies or
voting rights or be responsible for record-keeping relating to such items.
Should the Board of Trustees of the Trust or the Manager at any time, however,
make any definite determination as to investment policy applicable to the Fund
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 Fund, all actions which it
deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
securities for the Fund's account with the brokers or dealers selected by it,
and to that end the Subadviser is authorized as the agent of the Trust to give
instructions to the custodian and any subcustodian of the Fund as to deliveries
of securities and payments of cash for the account of the Fund. The Subadviser
will advise the Manager on the same day it gives any such instructions. In
connection with the selection of such brokers or dealers and the placing of
such orders, brokers or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Fund and/or the other accounts over
which the 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 Fund 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. The Trustees of the Trust shall periodically review the
commissions paid by the Fund to determine if the commissions paid over
representative periods of time were reasonable in relation to the benefits to
the Fund. In making purchases or sales of securities or other property for the
account of the Fund, the Subadviser may deal with affiliated brokers and/or
dealers as defined by the 1940 Act and to the extent such actions are permitted

<PAGE>

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. The Subadviser shall not be responsible for and
shall be held harmless with respect to any execution costs incurred by the
Trust relating to securities transactions conducted with brokers and/or dealers
in accordance with instructions given to the Subadviser by the Trust's Board of
Trustees. In addition, the Board of Trustees acknowledges that to the extent
the Subadviser is directed to use a particular broker and/or dealer, it may not
be able to obtain best execution on all trades executed through that broker
and/or dealer.

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 Fund
all of its own expenses allocable to the Fund including, without limitation,
organization costs of the Fund; 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 shares of beneficial interests and
servicing shareholder accounts; expenses of preparing, typesetting, printing
and mailing shareholder reports, notices, proxy statements and reports to
governmental officers and commissions and to shareholders in the Fund; expenses
connected with the execution, recording and settlement of security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of the Fund (including but not limited to the fees of independent pricing
services); expenses of meetings of the Fund's shareholders; expenses relating
to the issuance of shares of beneficial interests in the Fund; and such
non-recurring or extraordinary expenses as may arise, including those relating
to actions, suits or proceedings to which the Trust on behalf of the Fund may
be a party and the legal obligation which the Trust may have to indemnify its
Trustees and officers with respect thereto.

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 Fund 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 Fund allocated to the Subadviser:

0.55% on the first $250 million; and
0.50% on remaining assets.

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

<PAGE>

shall be prorated. The fee shall be paid to Subadviser by the tenth business
day following the end of the month.

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 a Fund, except as permitted by
the 1940 Act, will not take a long or short position in shares of beneficial
interests of the Fund except as permitted by the Declaration, and will comply
with all other provisions of the Declaration and By-Laws and the then-current
Registration Statement applicable to the Fund relative to the Subadviser and
its 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 Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder. As used in this Section 6, the term
"Subadviser" shall include directors, officers and employees of the Subadviser
as well as the Subadviser itself. The Manager 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. Indemnification. The Trust and the Manager agree to indemnify and hold
harmless the Subadviser against any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees) arising out of or
based upon any untrue statement or alleged untrue statement of any material
fact contained in the registration statement, prospectus or statement of
additional information for the Trust or contained in the sales literature or
other promotional material for the Trust (or any statement or supplement to any
of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading provided that this
agreement to indemnify shall not apply as to the Subadviser if such statement
or omission or such alleged statement or omission was made in reasonable
reliance upon and in conformity with information furnished to the Trust or the
Manager by or on behalf of the Subadviser for use in the registration
statement, prospectus or statement of additional information for the Fund or
sales literature or other promotional material (or any amendment or supplement)
or otherwise for use in connection with the sale of shares of the Trust.

The Subadviser agrees to indemnify and hold harmless the Trust and the
Manager against any and all losses, claims, damages, liabilities or expenses
(including reasonable counsel fees) arising out of or based upon any untrue
statement or alleged untrue statement of any material fact contained in the
registration statement, prospectus or statement of additional information for
the Trust or contained in the sales literature or other promotional material
for the Trust (or any statement or supplement to any of the foregoing), or
arise out of or are based upon the omission or the alleged omission to state

<PAGE>

therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, provided that this agreement to indemnify
shall apply as to the Trust and/or the Manager only if such statement or
omission or such alleged statement or omission was made in reasonable reliance
upon and in conformity with information furnished to the Trust or the Manager
by or on behalf of the Subadviser for use in the registration statement,
prospectus or statement of additional information for the Fund or sales
literature or other promotional material (or any amendment or supplement) or
otherwise for use in connection with the sale of shares of the Trust.

8. Activities of the Subadviser. The services of the Subadviser to the
Fund are not to be deemed to be exclusive, the Subadviser being free to render
investment advisory and/or other services to others, including accounts or
investment management companies with similar or identical investment objectives
to the Fund. It is understood that Trustees, officers, and shareholders of the
Trust or the Manager are or may be or may become interested in the Subadviser,
as directors, officers, employees, or otherwise and that directors, officers,
and employees of the Subadviser are or may become similarly interested in the
Trust or the Manager and that the Subadviser may be or may become interested in
the Trust as a shareholder or otherwise.

9. 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 ___________ __, ____, on which date it will terminate unless its
continuance after ___________ __, ____ 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 Manager 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 Fund.

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 Fund, or (iii) the Manager, 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 Trust and the
Manager. 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 Fund (except
for any such amendment as may be effected in the absence of such approval
without violating the 1940 Act).

The terms "specifically approved at least annually," "vote of a majority
of the outstanding voting securities," "assignment," "affiliated person," and
"Interested persons," when used in this Agreement, shall have the respective
meanings specified in, and shall be construed in a manner consistent with, the

<PAGE>

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 particular series of the
Trust to which a particular obligation relates; 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 particular series of
the Trust to which a particular obligation relates; 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 shareholders of the Trust individually.

10. 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, the Investment Advisers Act of 1940 or
any rules or regulations of the Securities and Exchange Commission thereunder.

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,
hereunto duly authorized, all as of the day and year first above written.

VARIABLE ANNUITY PORTFOLIOS FRANKLIN ADVISORY SERVICES INC.

By:__________________________ By:____________________________

Title:_______________________ Title:_________________________

The foregoing is acknowledged:

CITIBANK, N.A.

By:__________________________

Title:_______________________

Exhibit d(6)

FORM OF
SUB-MANAGEMENT AGREEMENT

VARIABLE ANNUITY PORTFOLIOS

CitiSelect(R) VIP Folio 100

SUB-MANAGEMENT AGREEMENT, dated as of ______________, _____, by and
between Variable Annuity Portfolios, a Massachusetts business trust (the
"Trust"), and Hotchkis & Wiley, a division of the Capital Management Group of
Merrill Lynch Asset Management, L.P. (the "Subadviser").

W I T N E S S E T H:

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 Manager (the "Management
Agreement"), the Trust hereby appoints the Subadviser to act as subadviser with
respect to the Fund 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 Fund for the compensation provided by
this Agreement.

2. Duties of the Subadviser. The Subadviser shall provide the Fund and the
Manager with such investment advice and supervision as the Manager may from
time to time consider necessary for the proper supervision of such portion of
the Fund investment assets as the Manager may designate from time to time.
Notwithstanding any provision of this Agreement, the Manager 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

<PAGE>

of the assets of the Fund allocated by the Manager to the Subadviser shall be
held uninvested, subject always to the restrictions of the Trusts Declaration
of Trust, dated October 25, 1996, and Bylaws, 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 Fund, and subject further, to the Subadviser noticing the Manager 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
Manager, it being understood that the Subadviser shall be responsible for
compliance with any restrictions imposed in writing by the Manager from time to
time in order to facilitate compliance with the above-mentioned restrictions
and such other restrictions as the Manager may determine. Further, the Manager
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 Fund and what portion,
if any, of the assets of the Fund allocated by the Manager to the Subadviser
shall be held uninvested. The Subadviser shall also, as requested, make
recommendations to the Manager as to the manner in which proxies, voting
rights, rights to consent to corporate action and any other rights pertaining
to the Fund's portfolio securities shall be exercised. Should the board of
Trustees of the Trust or the Manager at any time, however, make any definite
determination as to investment policy applicable to the Fund 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 Fund, all actions which it
deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
securities for the Fund's account with the brokers or dealers selected by it,
and to that end the Subadviser is authorized as the agent of the Trust to give
instructions to the custodian and any subcustodian of the Fund as to deliveries
of securities and payments of cash for the account of the Fund. The Subadviser
will advise the Manager on the same day it gives any such instructions. In
connection with the selection of such brokers or dealers and the placing of
such orders, brokers or dealers may be selected who also provide brokerage and
research services (as those terms are defined in Section 28(e) of the
Securities Exchange Act of 1934) to the Fund and/or the other accounts over
which the 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 Fund 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 Fund, the Subadviser may deal with itself or
with the Trustees of the Trust or the Trust's underwriter or distributor, to

<PAGE>

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 Fund
all of its own expenses allocable to the Fund including, without limitation,
organization costs of the Fund; 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 shares of beneficial interests and
servicing shareholder accounts; expenses of preparing, typesetting, printing
and mailing shareholder reports, notices, proxy statements and reports to
governmental officers and commissions and to shareholders in the Fund; expenses
connected with the execution, recording and settlement of security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of the Fund (including but not limited to the fees of independent pricing
services); expenses of meetings of the Fund's shareholders; expenses relating
to the issuance of shares of beneficial interests in the Fund; and such
non-recurring or extraordinary expenses as may arise, including those relating
to actions, suits or proceedings to which the Trust on behalf of the Fund may
be a party and the legal obligation which the Trust may have to indemnify its
Trustees and officers with respect thereto.

0.60% on the first $10 million;
0.55% on the next $40 million;
0.45% on the next $100 million;
0.35% on the next $150 million; and
0.30% on remaining assets.

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.

If in any fiscal year the aggregate expenses of the Fund and any fund
investing its assets therein (including fees pursuant to the Management

<PAGE>

Agreement, but excluding interest, taxes, brokerage and, with the prior written
consent of the necessary state securities commissions, extraordinary expenses)
exceed the expense limitation of any state having jurisdiction over the Fund
and any fund investing its assets therein, the Trust may deduct from the fees
to be paid hereunder, or the Subadviser will bear such excess expense on a
pro-rata basis with the Manager, in the proportion that the subadvisory fee
payable pursuant to this Agreement bears to the fee payable to the Manager
pursuant to the Management Agreement, to the extent required by state law. The
Subadviser's obligation pursuant hereto will be limited to the amount of its
fees hereunder. Such deduction or payment, if any, will be estimated daily, and
reconciled and effected or paid, as the case may be, on a monthly basis.

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 Fund, except as permitted
by the 1940 Act, will not take a long or short position in shares of beneficial
interests of the Fund except as permitted by the Declaration, and will comply
with all other provisions of the Declaration and By-Laws and the then-current
Registration Statement applicable to the Fund relative to the Subadviser and
its directors and officers.

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

<PAGE>

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 Manager 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 Fund.

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.

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, the Investment Advisers Act of 1940 or
any rules or regulations of the Securities and Exchange Commission thereunder.

VARIABLE ANNUITY PORTFOLIOS HOTCHKIS & WILEY

By:__________________________ By:____________________________

Title:_______________________ Title:_________________________

The foregoing is acknowledged:

CITIBANK, N.A.

By:__________________________

Title:_______________________

Exhibit d(7)

SUB-MANAGEMENT AGREEMENT

VARIABLE ANNUITY PORTFOLIOS

SUB-MANAGEMENT AGREEMENT, dated as of January 22, 1999, by and between
Variable Annuity Portfolios, a Massachusetts business trust (the "Trust"), and
Mutual Management Corp., a Delaware corporation (the "Subadviser").

W I T N E S S E T H:

WHEREAS, Citibank, N.A. (the "Manager") has been retained by the Trust to
act as investment adviser to the Trust with respect to the series of the Trust
designated as CitiSelect(R) VIP Folio 200, CitiSelect(R) VIP Folio 300,
CitiSelect(R) VIP Folio 400 and CitiSelect(R) VIP Folio 500 (each individually
a "Fund" and collectively the "Funds"), and

WHEREAS, the Manager has requested that the Trust engage the Subadviser to
provide certain investment advisory services for the Funds, and the Subadviser
is willing to provide such investment advisory services for the Funds 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 Manager (the "Management
Agreement"), the Trust hereby appoints the Subadviser to act as subadviser with
respect to each of the Funds 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 Funds for the compensation provided by
this Agreement.

2. Duties of the Subadviser. The Subadviser shall provide the Funds and
the Manager with such investment advice and supervision as the Manager may from
time to time consider necessary for the proper supervision of such portion of
each Fund's investment assets as the Manager may designate from time to time.
Notwithstanding any provision of this Agreement, the Manager 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 a Fund allocated by the Manager to the Subadviser shall be

<PAGE>

held uninvested, subject always to the restrictions of the Trust's Declaration
of Trust, dated October 25, 1996, 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 that Fund, and subject, further, to the Subadviser notifying the Manager 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
Manager, it being understood that the Subadviser shall be responsible for
compliance with any restrictions imposed in writing by the Manager from time to
time in order to facilitate compliance with the above-mentioned restrictions
and such other restrictions as the Manager may determine. Further, the Manager
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 a Fund and what portion, if
any, of the assets of a Fund allocated by the Manager to the Subadviser shall
be held uninvested. The Subadviser shall also, as requested, make
recommendations to the Manager as to the manner in which proxies, voting
rights, rights to consent to corporate action and any other rights pertaining
to a Fund's portfolio securities shall be exercised. Should the Board of
Trustees of the Trust or the Manager at any time, however, make any definite
determination as to investment policy applicable to a Fund 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 each Fund, all actions which it
deems necessary to implement the investment policies determined as provided
above, and in particular to place all orders for the purchase or sale of
securities for each Fund'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 a Fund as to deliveries
of securities and payments of cash for the account of that Fund. The Subadviser
will advise the Manager on the same day it gives any such instructions. 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 a Fund 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 a Fund
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. The
Trustees of the Trust shall periodically review the commissions paid by each
Fund to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits to the Fund. In making purchases or
sales of securities or other property for the account of a Fund, 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

<PAGE>

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 each Fund
all of its own expenses allocable to that Fund including, without limitation,
organization costs of the Fund; 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 shares of beneficial interests and
servicing shareholder accounts; expenses of preparing, typesetting, printing
and mailing shareholder reports, notices, proxy statements and reports to
governmental officers and commissions and to shareholders in the Fund; expenses
connected with the execution, recording and settlement of security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of the Fund (including but not limited to the fees of independent pricing
services); expenses of meetings of the Fund's shareholders; expenses relating
to the issuance of shares of beneficial interests in the Fund; and such
non-recurring or extraordinary expenses as may arise, including those relating
to actions, suits or proceedings to which the Trust on behalf of the Fund may
be a party and the legal obligation which the Trust may have to indemnify its
Trustees and officers with respect thereto.

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 Funds pro rata an investment subadvisory fee, accrued daily and paid
monthly, at an annual rate equal to the percentages specified below of the
aggregate assets of all Funds allocated to the Subadviser:

0.65% on the first million;
0.50% on the next $10 million;
0.40% on the next $10 million; and
0.30% on remaining assets.

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.

<PAGE>

exceed the expense limitation of any state having jurisdiction over that Fund
and any fund investing its assets therein, the Trust may deduct from the fees
to be paid hereunder, or the Subadviser will bear such excess expense on a
pro-rata basis with the Manager, in the proportion that the subadvisory fee
payable pursuant to this Agreement bears to the fee payable to the Manager
pursuant to the Management Agreement, to the extent required by state law. The
Subadviser's obligation pursuant hereto will be limited to the amount of its
fees hereunder. Such deduction or payment, if any, will be estimated daily, and
reconciled and effected or paid, as the case may be, on a monthly basis.

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 a Fund, except as permitted by
the 1940 Act, will not take a long or short position in shares of beneficial
interests of a Fund except as permitted by the Declaration, and will comply
with all other provisions of the Declaration and By-Laws and the then-current
Registration Statement applicable to each Fund relative to the Subadviser and
its 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 a Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder. As used in this Section 6, the term
"Subadviser" shall include directors, officers and employees of the Subadviser
as well as the Subadviser itself. The Manager 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
Funds are not to be deemed to be exclusive, the Subadviser being free to render
investment advisory and/or other services to others, including accounts or
investment management companies with similar or identical investment objectives
to the Funds. It is understood that Trustees, officers, and shareholders of the
Trust or the Manager are or may be or may become interested in the Subadviser,
as directors, officers, employees, or otherwise and that directors, officers,
and employees of the Subadviser are or may become similarly interested in the
Trust or the Manager and that the Subadviser may be or may become interested in
the Trust as a shareholder 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 January 22, 2001, on which date it will terminate unless its
continuance after January 22, 2001 is "specifically approved at least annually"
(a) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Manager or of the Subadviser at a
meeting specifically called for the purpose of voting on such approval, and (b)

<PAGE>

by the Board of Trustees of the Trust or by "vote of a majority of the
outstanding voting securities" of each Fund.

This Agreement may be terminated as to any Fund 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 that Fund, or (iii) the Manager, 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 as to any Fund at any time without the
payment of any penalty by the Subadviser on not less than 90 days' written
notice to the Trust and the Manager. This Agreement shall automatically
terminate in the event of its "assignment." Termination of this Agreement as to
any Fund shall not terminate this Agreement as it applies to the remaining
Funds.

This Agreement constitutes the entire agreement between the parties and
may be amended as to any Fund only if such amendment is approved by the
Subadviser and the "vote of a majority of the outstanding voting securities" of
that Fund (except for any such amendment as may be effected in the absence of
such approval without violating the 1940 Act). Amendment of any term of this
Agreement with respect to any single Fund shall not, without more, amend such
term with respect to any other Fund.

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 particular Fund to which a
particular obligation relates; 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 particular Fund to which a particular
obligation relates; and that no other Fund or other series of the Trust shall
be liable with respect to this Agreement or in connection with the transactions
contemplated herein.

<PAGE>

10. Override Provisions. Notwithstanding any other provision of this
Agreement, prior to this Agreement being approved by investors in the Funds in
accordance with the 1940 Act, in no event shall the compensation paid to the
Subadviser hereunder exceed the amount permitted by Rule 15a-4 under the 1940
Act.

<PAGE>

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

VARIABLE ANNUITY PORTFOLIOS MUTUAL MANAGEMENT CORP.
on behalf of CitiSelect(R) VIP Folio 200,
CitiSelect(R) VIP Folio 300, CitiSelect(R)
VIP Folio 400 and CitiSelect(R) VIP Folio
500

By:/s/ Philip Coolidge By:/s/ Heath B. McLendon
-------------------- ----------------------
Philip Coolidge Heath B. McLendon

Title: President Title: President

The foregoing is acknowledged:

Citibank, N.A.

By:/s/ Lawrence Keblusek
---------------------
Lawrence Keblusek

Title: U.S. CIO

Exhibit d(8)

FORM OF
SUB-MANAGEMENT AGREEMENT

VARIABLE ANNUITY PORTFOLIOS

CitiSelect(R) VIP Folio 100

SUB-MANAGEMENT AGREEMENT, dated as of ___________ ___, 1999, by and
between Variable Annuity Portfolios, a Massachusetts business trust (the
"Trust"), and Mutual Management Corp., a Delaware corporation (the
"Subadviser").

W I T N E S S E T H:

WHEREAS, the Manager has requested that the Trust engage the Subadviser to
provide certain investment advisory services for the Fund and for CitiSelect(R)
VIP Folio 200, CitiSelect(R) VIP Folio 300, CitiSelect(R) VIP Folio 400, and
CitiSelect(R) VIP Folio 500, each a series of the Trust (collectively, the
"Funds"), and the Subadviser is willing to provide such investment advisory
services for the Funds 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 Manager (the "Management
Agreement"), the Trust hereby appoints the Subadviser to act as subadviser with
respect to each of the Funds 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 Funds for the compensation provided by
this Agreement.

<PAGE>

of the assets of a Fund allocated by the Manager to the Subadviser shall be
held uninvested, subject always to the restrictions of the Trust's Declaration
of Trust, dated October 18, 1996, and By-laws, as each may be amended and
restated 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 that Fund, and subject, further, to the Subadviser
notifying the Manager 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 Manager, it being understood that the Subadviser shall
be responsible for compliance with any restrictions imposed in writing by the
Manager from time to time in order to facilitate compliance with the
above-mentioned restrictions and such other restrictions as the Manager may
determine. Further, the Manager 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
a Fund and what portion, if any, of the assets of a Fund allocated by the
Manager to the Subadviser shall be held uninvested. The Subadviser shall also,
as requested, make recommendations to the Manager as to the manner in which
proxies, voting rights, rights to consent to corporate action and any other
rights pertaining to a Fund's portfolio securities shall be exercised. Should
the Board of Trustees of the Trust or the Manager at any time, however, make
any definite determination as to investment policy applicable to a Fund 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.

<PAGE>

with respect to accounts over which they exercise investment discretion. The
Trustees of the Trust shall periodically review the commissions paid by each
Fund to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits to the Fund. In making purchases or
sales of securities or other property for the account of a Fund, 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 each Fund
all of its own expenses allocable to that Fund including, without limitation,
organization costs of the Fund; 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 shares of beneficial interests and
servicing shareholder accounts; expenses of preparing, typesetting, printing
and mailing shareholder reports, notices, proxy statements and reports to
governmental officers and commissions and to shareholders in the Fund; expenses
connected with the execution, recording and settlement of security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of the Fund (including but not limited to the fees of independent pricing
services); expenses of meetings of the Fund's shareholders; expenses relating
to the issuance of shares of beneficial interests in the Fund; and such
non-recurring or extraordinary expenses as may arise, including those relating
to actions, suits or proceedings to which the Trust on behalf of the Fund may
be a party and the legal obligation which the Trust may have to indemnify its
Trustees and officers with respect thereto.

0.65% on the first $10 million
0.50% on the next $10 million
0.40% on the next $10 million
0.30% on the remaining assets

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.

<PAGE>

If in any fiscal year the aggregate expenses of a Fund and any fund
investing its assets therein (including fees pursuant to the Management
Agreement, but excluding interest, taxes, brokerage and, with the prior written
consent of the necessary state securities commissions, extraordinary expenses)
exceed the expense limitation of any state having jurisdiction over that Fund
and any fund investing its assets therein, the Trust may deduct from the fees
to be paid hereunder, or the Subadviser will bear such excess expense on a
pro-rata basis with the Manager, in the proportion that the subadvisory fee
payable pursuant to this Agreement bears to the fee payable to the Manager
pursuant to the Management Agreement, to the extent required by state law. The
Subadviser's obligation pursuant hereto will be limited to the amount of its
fees hereunder. Such deduction or payment, if any, will be estimated daily, and
reconciled and effected or paid, as the case may be, on a monthly basis.

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 a Fund, except as permitted by
the 1940 Act, will not take a long or short position in shares of beneficial
interests of a Fund except as permitted by the Declaration, and will comply
with all other provisions of the Declaration and By-Laws and the then-current
Registration Statement applicable to each Fund relative to the Subadviser and
its 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 a Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder. As used in this Section 6, the term
"Subadviser" shall include directors, officers and employees of the Subadviser
as well as the Subadviser itself. The Manager is expressly made a third party
beneficiary of this Agreement, and may enforce any obligations of the
Subadviser under this Agreement and recover directly from the Subadviser for
any liability the Subadviser may have hereunder.

<PAGE>

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 ____________, ____, on which date it will terminate unless its
continuance after ____________, ____ 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 Manager 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 each Fund.

<PAGE>

VARIABLE ANNUITY PORTFOLIOS MUTUAL MANAGEMENT CORP.

By:__________________________ By:____________________________

Title:_______________________ Title:_________________________

The foregoing is acknowledged:

CITIBANK, N.A.

By:__________________________

Title:_______________________

Exhibit d(9)

FORM OF SUB-MANAGEMENT AGREEMENT

VARIABLE ANNUITY PORTFOLIOS

SUB-MANAGEMENT AGREEMENT, dated as of March 1, 1999, by and between
Variable Annuity Portfolios, a Massachusetts business trust (the "Trust"), and
Salomon Brothers Asset Management Limited, a British limited liability private
corporation (the "Subadviser").

W I T N E S S E T H:

WHEREAS, Citibank, N.A. (the "Manager") has been retained by the Trust to
act as investment adviser to the Trust with respect to the series of the Trust
designated as CitiSelect(R) VIP Folio 200, CitiSeleCt(R) VIP Folio 300,
CitiSeLect(R) VIP Folio 400 and CitiSelect(R) VIP Folio 500 (each individually
a "Fund" and collectively the "Funds"), and

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 Manager (the "Management
Agreement"), the Trust hereby appoints the Subadviser to act as subadviser with
respect to each of the Funds 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 Funds for the compensation provided by
this Agreement.

<PAGE>

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 a Fund allocated by the Manager to the Subadviser shall be
held uninvested, subject always to the restrictions of the Trust's Declaration
of Trust, dated October 18, 1996, and By-laws, as each may be amended and
restated 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 that Fund, and subject, further, to the Subadviser
notifying the Manager 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 Manager, it being understood that the Subadviser shall
be responsible for compliance with any restrictions imposed in writing by the
Manager from time to time in order to facilitate compliance with the
above-mentioned restrictions and such other restrictions as the Manager may
determine. Further, the Manager 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
a Fund and what portion, if any, of the assets of a Fund allocated by the
Manager to the Subadviser shall be held uninvested. The Subadviser shall also,
as requested, make recommendations to the Manager as to the manner in which
proxies, voting rights, rights to consent to corporate action and any other
rights pertaining to a Fund's portfolio securities shall be exercised. Should
the Board of Trustees of the Trust or the Manager at any time, however, make
any definite determination as to investment policy applicable to a Fund 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.

<PAGE>

or the overall responsibilities which the Subadviser and its affiliates have
with respect to accounts over which they exercise investment discretion. The
Trustees of the Trust shall periodically review the commissions paid by each
Fund to determine if the commissions paid over representative periods of time
were reasonable in relation to the benefits to the Fund. In making purchases or
sales of securities or other property for the account of a Fund, 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 each Fund
all of its own expenses allocable to that Fund including, without limitation,
organization costs of the Fund; 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 shares of beneficial interests and
servicing shareholder accounts; expenses of preparing, typesetting, printing
and mailing shareholder reports, notices, proxy statements and reports to
governmental officers and commissions and to shareholders in the Fund; expenses
connected with the execution, recording and settlement of security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of the Fund (including but not limited to the fees of independent pricing
services); expenses of meetings of the Fund's shareholders; expenses relating
to the issuance of shares of beneficial interests in the Fund; and such
non-recurring or extraordinary expenses as may arise, including those relating
to actions, suits or proceedings to which the Trust on behalf of the Fund may
be a party and the legal obligation which the Trust may have to indemnify its
Trustees and officers with respect thereto.

0.30% on the first $200 million;
0.25% on assets over $200 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.

<PAGE>

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 a Fund, except as permitted by
the 1940 Act, will not take a long or short position in shares of beneficial
interests of a Fund except as permitted by the Declaration, and will comply
with all other provisions of the Declaration and By-Laws and the then-current
Registration Statement applicable to each Fund relative to the Subadviser and
its 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 a Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder. As used in this Section 6, the term
"Subadviser" shall include directors, officers and employees of the Subadviser
as well as the Subadviser itself. The Manager is expressly made a third party
beneficiary of this Agreement, and may enforce any obligations of the
Subadviser under this Agreement and recover directly from the Subadviser for
any liability the Subadviser may have hereunder.

<PAGE>

force until March 1, 2001, on which date it will terminate unless its
continuance after March 1, 2001 is "specifically approved at least annually"
(a) by the vote of a majority of the Trustees of the Trust who are not
"interested persons" of the Trust or of the Manager 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 each Fund.

<PAGE>

manner inconsistent with the 1940 Act, the Investment Advisers Act of 1940 or
any rules or regulations of the Securities and Exchange Commission thereunder.

<PAGE>

VARIABLE ANNUITY PORTFOLIOS SALOMON BROTHERS ASSET
on behalf of CitiSelect(R) VIP Folio 200, MANAGEMENT LIMITED
CitiSelect(R) VIP Folio 300, CitiSelect(R)
VIP Folio 400 and CitiSelect(R) VIP Folio
500

By:____________________________ By:___________________________

Title:_________________________ Title:________________________

The foregoing is acknowledged:

Citibank, N.A.

By:____________________________

Title:_________________________

Exhibit d(10)

FORM OF SUB-MANAGEMENT AGREEMENT

VARIABLE ANNUITY PORTFOLIOS

CitiSelect(R) VIP Folio 100

SUB-MANAGEMENT AGREEMENT, dated as of ______ __, 1999, by and between
Variable Annuity Portfolios, a Massachusetts business trust (the "Trust"), and
Salomon Brothers Asset Management Limited, a British limited liability private
corporation (the "Subadviser").

W I T N E S S E T H:

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 Manager (the "Management
Agreement"), the Trust hereby appoints the Subadviser to act as subadviser with
respect to each of the Funds 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 Funds for the compensation provided by
this Agreement.

<PAGE>

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 each Fund
all of its own expenses allocable to that Fund including, without limitation,
organization costs of the Fund; 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 shares of beneficial interests and
servicing shareholder accounts; expenses of preparing, typesetting, printing
and mailing shareholder reports, notices, proxy statements and reports to
governmental officers and commissions and to shareholders in the Fund; expenses
connected with the execution, recording and settlement of security
transactions; insurance premiums; fees and expenses of the custodian for all
services to the Fund, including safekeeping of funds and securities and
maintaining required books and accounts; expenses of calculating the net asset
value of the Fund (including but not limited to the fees of independent pricing
services); expenses of meetings of the Fund's shareholders; expenses relating
to the issuance of shares of beneficial interests in the Fund; and such
non-recurring or extraordinary expenses as may arise, including those relating
to actions, suits or proceedings to which the Trust on behalf of the Fund may
be a party and the legal obligation which the Trust may have to indemnify its
Trustees and officers with respect thereto.

0.30% on the first $200 million;
0.25% on assets over $200 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.

<PAGE>

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 a Fund, except as permitted by
the 1940 Act, will not take a long or short position in shares of beneficial
interests of a Fund except as permitted by the Declaration, and will comply
with all other provisions of the Declaration and By-Laws and the then-current
Registration Statement applicable to each Fund relative to the Subadviser and
its 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 a Fund, except for willful misfeasance, bad faith or gross
negligence in the performance of its duties, or by reason of reckless disregard
of its obligations and duties hereunder. As used in this Section 6, the term
"Subadviser" shall include directors, officers and employees of the Subadviser
as well as the Subadviser itself. The Manager is expressly made a third party
beneficiary of this Agreement, and may enforce any obligations of the
Subadviser under this Agreement and recover directly from the Subadviser for
any liability the Subadviser may have hereunder.

<PAGE>

manner inconsistent with the 1940 Act, the Investment Advisers Act of 1940 or
any rules or regulations of the Securities and Exchange Commission thereunder.

<PAGE>

VARIABLE ANNUITY PORTFOLIOS SALOMON BROTHERS ASSET
on behalf of CitiSelect(R) VIP Folio 100 MANAGEMENT LIMITED

By:_____________________________ By:____________________________

Title:__________________________ Title:_________________________

The foregoing is acknowledged:

Citibank, N.A.

By:_____________________________

Title:__________________________

Exhibit e(2)

Variable Annuity Portfolios
6 St. James Avenue
Boston, Massachusetts 02116

__________ ___, 1999

CFBDS, Inc.
21 Milk Street, 5th Floor
Boston, Massachusetts 02109

Re: Variable Annuity Portfolios - Distribution Agreement

Ladies and Gentlemen:

This letter serves as notice that CitiSelect VIP Folio 100 is hereby added
to the list of series of the above-named Trust to which CFBDS, Inc. ("CFBDS")
renders services as distributor pursuant to the terms of the Distribution
Agreement dated as of November 8, 1996 (the "Agreement") between the Trust and
CFBDS.

Please sign below to acknowledge your receipt of this notice adding the
Series as a beneficiary under the Agreement.

VARIABLE ANNUITY PORTFOLIOS

By:

Title:

Acknowledgment:

CFBDS, INC.

By:

Title:

Exhibit g(2)

Variable Annuity Portfolios
6 St. James Avenue
Boston, Massachusetts 02116

__________ __, 1999

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

Re: Variable Annuity Portfolios - Custodian Contract

Ladies and Gentlemen:

Pursuant to Section 17 of the Custodian Contract dated as of November 8,
1996 (the "Contract"), between Variable Annuity Portfolios (the "Trust") and
State Street Bank and Trust Company (the "Custodian"), we hereby request that
CitiSelect VIP Folio 100 be added to the list of series of the Trust to which
the Custodian renders services as custodian under the terms of the Contract.

Please sign below to evidence your agreement to render such services as
custodian on behalf of the Series as a beneficiary under the Contract.

VARIABLE ANNUITY PORTFOLIOS

By:

Title:

Agreed:
STATE STREET BANK AND TRUST COMPANY

By:

Title:

Exhibit h(2)

Variable Annuity Portfolios
6 St. James Avenue
Boston, Massachusetts 02116

__________ __, 1999

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

Re: Variable Annuity Portfolios - Transfer Agency and Service Agreement

Ladies and Gentlemen:

This letter serves as notice that CitiSelect VIP Folio 100 is added to the
list of series of Variable Annuity Portfolios (the "Trust") to which State
Street Bank and Trust Company ("State Street") renders services as transfer
agent pursuant to the terms of the Transfer Agency and Service Agreement dated
as of November 8, 1996 (the "Agreement") between the Trust and State Street.

Please sign below to acknowledge your receipt of this notice adding the
Series as a beneficiary under the Agreement.

VARIABLE ANNUITY PORTFOLIOS

By:

Title:

Acknowledgment:

STATE STREET BANK AND TRUST COMPANY

By:

Title: