OFFIT VARIABLE INSURANCE FUND INC, 497, 2000-05-01

OFFIT VARIABLE INSURANCE FUND INC
497, 2000-05-01

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<PAGE>

THE OFFIT VARIABLE INSURANCE FUND, INC.

OFFIT VIF - HIGH YIELD FUND

The OFFIT Variable Insurance Fund, Inc. (the "Company") is an open-end,
management investment company comprised of nine separate, no-load investment
portfolios. This Prospectus contains information relating only to the OFFIT VIF
- - High Yield Fund (the "Fund").

Shares of the Fund are sold by the Company's distributor, OFFIT Funds
Distributor, Inc. (the "Distributor") to certain life insurance companies
(collectively, "Participating Companies") and their separate accounts
(collectively, the "Accounts") to fund benefits under variable annuity contracts
("Contracts") and variable life insurance policies ("Policies") to be offered by
the Participating Companies. The Accounts invest in shares of one or more of the
Company's Funds in accordance with allocation instructions received from
Contract and Policy owners ("Contract Owners" or "Policy Owners," as
appropriate). Such allocation rights are further described in the accompanying
Account Prospectus. Shares are redeemed to the extent necessary to provide
benefits under the Contracts and Policies.

PROSPECTUS

APRIL 30, 2000

LIKE ALL MUTUAL FUND SHARES, THESE FUND SHARES HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION (THE "SEC") NOR HAS THE
SEC DETERMINED WHETHER THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. TO STATE
OTHERWISE IS A CRIMINAL OFFENSE.

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TABLE OF CONTENTS

<S> <C>
A LOOK AT GOALS, STRATEGIES, FUND DESCRIPTION
RISKS AND FINANCIAL HISTORY. Investment Objective.............................................3
Principal Investment Strategies..................................3
Principal Risk Factors...........................................3
Prior Performance................................................4
Financial Highlights.............................................5
Investment Objective and Principal Strategies....................7
Additional Strategies............................................8
Risks of Investing in the Fund...................................9

DETAILS ON THE MANAGEMENT MANAGEMENT OF THE FUND
AND OPERATIONS OF THE FUND. Investment Adviser..............................................21
Service Provider Chart..........................................21

POLICIES AND INSTRUCTIONS FOR SHAREHOLDER INFORMATION
OPENING, MAINTAINING AND Pricing of Fund Shares..........................................22
CLOSING AN ACCOUNT IN THE Purchase of Fund Shares.........................................22
FUND. Redemption of Fund Shares.......................................23
Shareholder Services............................................23
Dividends and Distributions.....................................23
Taxes...........................................................23
Shareholder Communications......................................24
Performance Information.........................................24

Appendix A: Ratings............................................A-1
Appendix B: Hedging and Derivatives............................B-1

FOR MORE INFORMATION................................see back cover
</TABLE>

2
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OFFIT VIF - HIGH YIELD FUND

INVESTMENT OBJECTIVE

The Fund's investment objective is high current income. Capital appreciation is
a secondary objective.

PRINCIPAL INVESTMENT STRATEGIES

The Fund invests at least 65% of its total assets in U.S. corporate fixed income
securities that are rated below investment grade (i.e. high yield/high risk debt
securities), offering potential returns that are sufficiently high to justify
the greater investment risks. Securities offering the high yield that the Fund
seeks are generally found in mature cyclical or depressed industries and highly
leveraged companies. The Fund also invests in senior securities and securities
with an operating history of more than one year (though the Fund may invest in
the securities of issuers with a shorter operating history). The Fund may invest
in debt securities of any maturity and the interest rates on such securities may
be fixed or floating.

PRINCIPAL RISK FACTORS

- - Investors may lose money.

- - The net asset value ("NAV") of the Fund will change with changes in the
market value of its portfolio positions.

- - All or a substantial portion of the securities purchased by the Fund are
lower rated or unrated debt securities (i.e., high yield, high risk debt
securities). High yield, high risk debt securities have a higher risk of
default in the payment of interest and principal than are higher rated
securities and are subject to significant changes in price. Investment by
the Fund in such securities involves a high degree of credit risk and such
securities are regarded as speculative by the major rating agencies.

- - The Fund is subject to interest rate risk. Rising interest rates cause the
prices of debt securities to decrease and falling rates cause the prices of
debt securities to increase. Securities with longer maturities can be more
sensitive to interest rate changes. In effect, the longer the maturity of a
security, the greater the impact a change in interest rates could have on
the security's price.

- - The Fund is a "non-diversified" mutual fund. This permits the Fund to
invest most of its assets in securities issued by a small number of
companies. This makes the Fund more susceptible to the risks associated
with these particular companies, or to a single economic, political or
regulatory occurrence.

For more detail on the principal risks summarized here, please see "Risks of
Investing in the Fund" herein.

3
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PRIOR PERFORMANCE

ANNUAL TOTAL RETURNS

The bar chart below shows the annual total returns for the Fund for the last
three calendar years. The bar chart provides some indication of the risks of
investment in the Fund by showing changes in the Fund's performance from year to
year. Past performance is not necessarily an indicator of how the Fund will
perform in the future. The returns shown do not reflect separate account charges
for the Accounts and if those had been included, performance would have been
lower.

[GRAPH]

<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
PERFORMANCE YEARS

1997 1998 1999
<S> <C> <C>
11.93% 4.35% -0.29%
</TABLE>

Since inception (April 1, 1996), the highest calendar quarter total return for
the Fund was 5.04% (quarter ended September 30, 1996) and the lowest calendar
quarter total return was (3.16%) (quarter ended September 30, 1998).

AVERAGE ANNUAL TOTAL RETURNS - COMPARISON

The table below shows how the Fund's average annual total returns for the past
one year and since inception compare with the Merrill Lynch High Yield "BB" for
the same periods. The table, like the bar chart, provides some indication of the
risks of investing in the Fund by showing how the Fund's average annual total
returns for one year and since inception compare with that of a broad measure of
market performance. Past performance is not necessarily an indicator of how the
Fund will perform in the future.

Average Annual Total Returns
1 YEAR SINCE INCEPTION

<S> <C> <C>
Fund Shares*......................................... (0.29%) 7.17%

Merrill Lynch High Yield "BB"........................ 2.48% 7.33%
* Commenced operations on April 1, 1996.
</TABLE>

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FINANCIAL HIGHLIGHTS

The financial highlights tables are intended to help you understand the Fund's
financial performance for the periods presented. This information reflects
financial results for a single Fund share. The total returns in the table
represent the rate that a shareholder would have earned (or lost) on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). The information for the period ended December 31, 1999 has been
audited by PricewaterhouseCoopers LLP, whose unqualified report, along with the
Fund's financial statements, is included in the Company's Annual Report dated
December 31, 1999, which is available without charge upon request. The financial
statements for the Fund for periods prior to December 31, 1999 were audited by
PricewaterhouseCoopers LLP, whose report expressed an unqualified opinion on
those statements.

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
FOR THE YEAR FOR THE PERIOD
ENDED FOR THE NINE FOR THE APRIL 1, 1996*
DECEMBER 31, MONTHS ENDED YEAR ENDED THROUGH
1999 DECEMBER 31, 1998 MARCH 31, 1998 MARCH 31, 1997
- -----------------------------------------------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE:
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.40 $ 11.00 $ 10.37 $ 10.00 (d)
------------ ------------- ------------ ---------------
Net investment income 0.82 0.65 0.86 0.78
Net realized and unrealized gains (loss)
(0.85) (0.53) 0.63 0.37
------------ ------------- ------------ ---------------
Total income (loss) from investment
operations (0.03) 0.12 1.49 1.15
------------ ------------- ------------ ---------------

LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.82) (0.65) (0.86) (0.78)
Excess of net investment income (0.01) (0.02) -
-
Net realized gains
(0.04) (0.05) - -
------------ ------------- ------------ ---------------
Total dividends and distributions
(0.87) (0.72) (0.86) (0.78)
------------ ------------- ------------ ---------------

Net change in net asset value per share
(0.90) (0.60) 0.63 0.37
------------ ------------- ------------ ---------------

NET ASSET VALUE, END OF PERIOD $ 9.50 $ 10.40 $ 11.00 $ 10.37
------------ ------------- ------------ ---------------
------------ ------------- ------------ ---------------
TOTAL RETURN (A) (0.29%) 1.15% (b) 14.84% 11.90% (b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in $48,200 $44,354 $31,675 $25,114
thousands)
Ratios to average net assets:

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Expenses** 1.15% 1.15% (c) 1.15% 1.15% (c)
Net investment income 8.24% 8.25% (c) 7.98% 7.45% (c)
PORTFOLIO TURNOVER RATE 19% 14% 32% 4%
</TABLE>

* Commencement of operations.
** During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the ratio would have been higher.
(a) Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b) Not annualized.
(c) Annualized.
(d) Initial offering price.

6
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INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

The Fund's primary investment objective is high current income. The Fund seeks
to achieve its objectives by investing, under normal circumstances, at least 65%
of its total assets in U.S. corporate fixed income securities (including debt
securities, convertible securities and preferred stocks) which are lower rated
or unrated at the time of investment. In addition, the Fund seeks to invest in
debt securities which are "seasoned" senior securities (as defined below) and
offer sufficiently high potential yields to justify the greater investment risk
or issued by once creditworthy companies that are now considered a high risk
investment generally due to changing industry conditions, a change in company
capitalization or a reduction of earning power. For purposes of this Prospectus,
a "senior" security of an issuer is any security entitled to preference over the
issuer's common stock in the distribution of income or assets upon liquidation.

Securities offering the high yield and appreciation potential characteristics
that the Fund seeks are generally found in mature cyclical or depressed
industries and highly leveraged companies. The Adviser attempts to identify
securities which have underlying fundamentals that are improving or are
sufficiently strong to sustain the issuer.

Through credit analysis, the Adviser seeks to protect principal and to minimize
market and individual credit risk, as well as to identify opportunity for
capital appreciation. In selecting a security for investment by the Fund, the
Adviser considers the following factors, among others: (i) the current yield,
the yield to maturity where appropriate, and the price of the security relative
to other securities of comparable quality and maturity; (ii) the balance sheet
and capital structure of the issuer; (iii) the market price of the security
relative to its face value; (iv) the rating, or absence of a rating, by Standard
& Poor's Ratings Group ("S&P"), Moody's Investors Services, Inc. ("Moody's") or
Duff & Phelps Credit Rating Co. ("D&P"); (v) the variety of issuers and
industries represented in the Fund's portfolio; and (vi) management of the
issuer. Industry trends and fundamental developments that may affect an issuer
are also analyzed, including factors such as liquidity, profitability and asset
quality. The Adviser is free to invest in high yield, high risk debt securities
of any maturity and duration and the interest rates on such securities may be
fixed or floating.

The Fund invests primarily in "seasoned" senior securities. The Fund defines a
"seasoned" security as any security whose issuer or predecessors have been
operating in their current form generally for more than one year, though the
Fund may invest in securities of issuers having less than one year of operation.
The Fund generally does not invest in original issue high yield securities of
newly formed, highly leveraged corporations but reserves the right to do so. An
additional risk associated with such investments is the unproven credit quality
of newly formed corporations because of the lack of any operating history.

The higher yields sought by the Fund are generally obtainable from
non-investment grade securities (i.e., rated BB or lower by S&P or D&P, or Ba or
lower by Moody's, or if unrated, of equivalent quality as determined by the
Adviser). See Appendix A to this Prospectus for a description of ratings of S&P,
Moody's and D&P. Investments in high yield, high risk debt securities involve
comparatively greater risks, including price volatility and the risk of default
in

7
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the timely payment of interest and principal, than higher rated securities. See
"Risks of Investing in the Fund - High Yield, High Risk Debt Securities" below.

The Fund retains the flexibility to respond promptly to changes in market and
economic conditions. Accordingly, consistent with the Fund's investment
objective, the Adviser may employ a temporary defensive investment strategy if
it determines such a strategy is warranted. Under such a defensive strategy, the
Fund may temporarily hold cash (U.S. dollars, foreign currencies or
multinational currency units) and/or invest up to 100% of its assets in high
quality debt securities or money market instruments of U.S. or foreign issuers,
and most of the Fund's investments may be made in the United States and
denominated in U.S. dollars. In addition, pending investment of proceeds from
new sales of Fund shares or to meet ordinary daily cash needs, the Fund may
temporarily hold cash (U.S. dollars, foreign currencies or multinational
currency units) and may invest any portion of its assets in high quality foreign
or domestic money market instruments. The Adviser's choice to employ a temporary
defensive investment strategy may prevent the Fund from achieving its investment
objective.

ADDITIONAL STRATEGIES

The Fund's secondary objective is capital appreciation. The Fund seeks to
achieve its objective by investing under normal circumstances, in fixed income
securities that are judged by the Adviser to be more creditworthy than generally
perceived in the marketplace or issued by once creditworthy companies that are
now considered a high risk investment generally due to changing industry
conditions, a change in company capitalization or a reduction of earning power.
In addition, the Fund seeks capital appreciation opportunities in those special
situations in which an issuer's senior securities sell at a substantial discount
in relation to their liquidation value, or in which the creditworthiness of an
issuer is believed, in the judgement of the Adviser, to be improving.

The Adviser also attempts to identify securities in which the asset values
ultimately supporting the credit are sufficient so that attractive returns are
achievable in the event of bankruptcy, reorganization or liquidation of the
issuer. Some of the Fund's securities may be obtained as a result of the
issuer's reorganization and may be non-performing, in default or arrears. The
Adviser will obtain such securities in cases where it believes that capital
appreciation may be possible.

Although the Fund's investments are primarily in U.S. corporate securities, it
may also invest in foreign corporate debt securities, sovereign debt and
mortgage-backed debt having many of the characteristics of its corporate
portfolio. In addition, the Fund may invest in U.S. dollar denominated municipal
obligations in seeking to achieve its investment objectives. Such investments
may include municipal bonds issued at a discount, in circumstances where the
Adviser determines that such investments would facilitate the Fund's ability to
achieve its investment objectives. Dividends on shares attributable to interest
on municipal securities held by the Fund will not be exempt from federal income
taxes. The Adviser does not currently anticipate seeking investments in the
common stock of any issuers. However, the Fund may acquire securities
convertible into common stock or receive common stock in lieu of dividends,
interest or principal.

8
<PAGE>

RISKS OF INVESTING IN THE FUND

GENERAL

The Fund is generally managed in a style similar to other open-end investment
companies which are managed by OFFITBANK (the "Adviser") and whose shares are
generally offered to the public. These other OFFIT Funds may, however, employ
different investment practices and may invest in securities different from those
in which the Fund invests, and, as such, may not have identical portfolios or
experience identical investment results.

INTEREST RATE FLUCTUATIONS AND CREDIT RISK

The performance of the Fund depends in part on interest rate changes. As
interest rates increase, the value of the fixed income securities held by the
Fund tends to decrease. To the extent the Fund invests in securities with longer
maturities, the volatility of the Fund in response to changes in interest rates
can be expected to be greater than if the Fund had invested in comparable
securities with shorter maturities. The performance of the Fund will also depend
on the credit quality of its investments.

HIGH YIELD, HIGH RISK DEBT SECURITIES

9
<PAGE>

capacity to pay interest and repay principal when due in the event of adverse
business, financial or economic conditions, and/or to be in default or not
current in the payment of interest or principal. Such securities are considered
speculative with respect to the issuer's capacity to pay interest and repay
principal in accordance with the terms of the obligations. Unrated securities
deemed comparable to these lower- and lowest-rated securities will have similar
characteristics. Accordingly, it is possible that these types of factors could,
in certain instances, reduce the value of securities held by the Fund with a
commensurate effect on the value of their respective shares. Therefore, an
investment in the Fund should not be considered as a complete investment program
for all investors.

The secondary markets for high yield, high risk corporate and sovereign debt
securities are not as liquid as the secondary markets for higher-rated
securities. The secondary markets for high yield, high risk debt securities are
characterized by relatively few market makers and participants in the market are
mostly institutional investors, including insurance companies, banks, other
financial institutions and mutual funds. In addition, the trading volume for
high yield, high risk debt securities is generally lower than that for
higher-rated securities and the secondary markets could contract under adverse
market or economic conditions independent of any specific adverse changes in the
condition of a particular issuer. These factors may have an adverse effect on
the Fund's ability to dispose of particular portfolio investments and may limit
its ability to obtain accurate market quotations for purposes of valuing
securities and calculating NAV. If the Fund is not able to obtain precise or
accurate market quotations for a particular security, it will become more
difficult for the Company's Board of Directors to value the Fund's portfolio
securities and the Company's Directors may have to use a greater degree of
judgment in making such valuations. Furthermore, adverse publicity and investor
perceptions about lower-rated securities, whether or not based on fundamental
analysis, may tend to decrease the market value and liquidity of such
lower-rated securities. Less liquid secondary markets may also affect the Fund's
ability to sell securities at their fair value. In addition, the Fund may invest
up to 15% of its net assets, measured at the time of investment, in illiquid
securities, which may be more difficult to value and to sell at fair value. If
the secondary markets for high yield, high risk debt securities contract due to
adverse economic conditions or for other reasons, certain previously liquid
securities in the Fund's portfolio may become illiquid and the proportion of the
Fund's assets invested in illiquid securities may increase.

The ratings of fixed income securities by Moody's, S&P and D&P are a generally
accepted barometer of credit risk. You should be aware, however, that they are
subject to certain limitations. The rating of an issuer is heavily weighted by
past developments and does not necessarily reflect probable future conditions.
There is frequently a lag between the time a rating is assigned and the time it
is updated. In addition, there may be varying degrees of difference in credit
risk of securities within each rating category. See Appendix A to this
Prospectus for a description of such ratings.

10
<PAGE>

market values of securities rated below investment grade and comparable unrated
securities tend to react less to fluctuations in interest rate levels than do
those of higher-rated securities, the market values of certain of these
securities also tend to be more sensitive to individual issuer developments and
changes in economic conditions than higher-rated securities. In addition, such
securities generally present a higher degree of credit risk. Corporate issuers
of securities valued below investment grade and comparable unrated securities
are often highly leveraged and may not have more traditional methods of
financing available to them, so that their ability to service their debt
obligations during an economic downturn or during sustained periods of rising
interest rates may be impaired. The risk of loss due to default in payment of
interest or principal by such issuers is significantly greater than with
investment grade securities because such securities generally are unsecured and
frequently are subordinated to the prior payment of senior indebtedness.

Many fixed income securities, contain call or buy-back features which permit the
issuer of the security to call or repurchase it. Such securities may present
risks based on payment expectations. If an issuer exercises such a "call option"
and redeems the security, the Fund may have to replace the called security with
a lower yielding security, resulting in a decreased rate of return for the Fund.

SOVEREIGN DEBT SECURITIES. Investing in sovereign debt securities will expose
the Fund to the direct or indirect consequences of political, social or economic
changes in the developing and emerging countries, that issue the securities. The
ability and willingness of sovereign obligors in developing and emerging
countries or the governmental authorities that control repayment of their
external debt to pay principal and interest on such debt when due may depend on
general economic and political conditions within the relevant country. Emerging
and developing countries such as those in which the Fund may invest have
historically experienced, and may continue to experience, high rates of
inflation, high interest rates, exchange rate fluctuations, trade difficulties
and extreme poverty and unemployment. Many of these countries are also
characterized by political uncertainty or instability. Additional factors which
may influence the ability or willingness to service debt include, but are not
limited to, a country's cash flow situation, the availability of sufficient
foreign exchange on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, and its government's policy towards
the International Monetary Fund, the World Bank and other international
agencies.

11
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may be conditioned on the government's implementation of economic reforms and/or
economic performance and the timely service of its obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may curtail the willingness of such third parties
to lend funds, which may further impair the obligor's ability or willingness to
service its debts in a timely manner. The cost of servicing external debt will
also generally be adversely affected by rising international interest rates,
because many external debt obligations bear interest at rates which are adjusted
based upon international interest rates. The ability to service external debt
will also depend on the level of the relevant government's international
currency reserves and its access to foreign exchange. Currency devaluations may
affect the ability of a sovereign obligor to obtain sufficient foreign exchange
to service its external debt.

As a result of the foregoing, a governmental obligor may default on its
obligations. If such a default occurs, the Fund may have limited legal recourse
against the issuer and/or guarantor. Remedies must, in some cases, be pursued in
the courts of the defaulting party itself, and the ability of the holder of
foreign sovereign debt securities to obtain recourse may be subject to the
political climate in the relevant country. In addition, no assurance can be
given that the holders of commercial bank debt will not contest payments to the
holders of other foreign sovereign debt obligations in the event of default
under their commercial bank loan agreements.

Sovereign obligors in developing and emerging countries are among the world's
largest debtors to commercial banks, other governments, international financial
organizations and other financial institutions. These obligors have in the past
experienced substantial difficulties in servicing their external debt
obligations, which led to defaults on certain obligations and the restructuring
of certain indebtedness. Restructuring arrangements have included, among other
things, reducing and rescheduling interest and principal payments by negotiating
new or amended credit agreements or converting outstanding principal and unpaid
interest to Brady Bonds, and obtaining new credit to finance interest payments.
Holders of certain foreign sovereign debt securities may be requested to
participate in the restructuring of such obligations and to extend further loans
to their issuers. There can be no assurance that the Brady Bonds and other
foreign sovereign debt securities in which the Fund may invest will not be
subject to similar defaults or restructuring arrangements which may adversely
affect the value of such investments. Furthermore, certain participants in the
secondary market for such debt may be directly involved in negotiating the terms
of these arrangements and may therefore have access to information not available
to other market participants.

In addition to high yield foreign sovereign debt securities, the Fund may also
invest in foreign corporate securities. For a discussion of such securities and
their associated risks, see "Securities of Non-U.S. Issuers," below.

SECURITIES OF NON-U.S. ISSUERS

12
<PAGE>

in securities of U.S. issuers. Further, certain investments of the Fund, and
investment techniques in which the Fund may engage involve risks, including
those set forth below.

SOCIAL, POLITICAL AND ECONOMIC FACTORS. Many countries in which the Fund will
invest, and emerging market countries in particular, may be subject to a
substantially greater degree of social, political and economic instability than
is the case in the United States, Japan and Western European countries. Such
instability may result from, among other things, some or all of the following:
(i) authoritarian governments or military involvement in political and economic
decision-making, and changes in government through extra-constitutional means;
(ii) popular unrest associated with demands for improved political, economic and
social conditions; (iii) internal insurgencies and terrorist activities; (iv)
hostile relations with neighboring countries; and (v) drug trafficking. Social,
political and economic instability could significantly disrupt the principal
financial markets in which the Fund invests and adversely affect the value of
the Fund's assets.

Individual foreign economies in general and those of emerging market countries
in particular, may differ favorably or unfavorably and significantly from the
U.S. economy in such respects as the rate of growth of gross domestic product or
gross national product, rate of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency, structural unemployment and balance of
payments position. Governments of many of these countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector. In some cases, the government owns or controls many companies, including
some of the largest in the country. Accordingly, government actions in the
future could have a significant effect on economic conditions in many countries,
including emerging market countries, which could affect private sector companies
and the Fund, and on market conditions, prices and yields of securities in the
Fund's portfolio. There may be the possibility of nationalization or
expropriation of assets, or future confiscatory levels of taxation affecting the
Fund. In the event of nationalization, expropriation or other confiscation, the
Fund may not be fairly compensated for its loss and could lose its entire
investment in the country involved.

INVESTMENT AND REPATRIATION RESTRICTIONS. Investment by the Fund in non-U.S.
issuers may be restricted or controlled to varying degrees. These restrictions
may limit or preclude investment in certain of such issuers or countries and may
increase the costs and expenses of the Fund. For example, certain countries
require governmental approval prior to investments by foreign persons in the
country or in a particular company or industry sector or limit investment by
foreign persons to only a specific class of securities of a company which may
have less advantageous terms (including price) than securities of the company
available for purchase by nationals. Certain countries may also restrict or
prohibit investment opportunities in issuers or industries deemed important to
national interests. As a result of investment restrictions, the Fund may, in
certain countries, such as Mexico, invest through intermediary vehicles or
trusts. In addition, the repatriation of both investment income and capital from
some of these countries requires governmental approval and if there is a
deterioration in a country's balance of payments or for other reasons, a country
may impose temporary restrictions on foreign capital remittances abroad. Even
where there is no outright restriction on repatriation of capital, the mechanics
of repatriation may affect certain aspects of the operation of the Fund.

13
<PAGE>

The Fund could be adversely affected by delays in, or a refusal to grant any
required governmental approval for repatriation of capital, as well as by the
application to the Fund of any restrictions on investments. If, because of
restrictions on repatriation or conversion, the Fund was unable to distribute
substantially all of its net investment income and net capital gain within
applicable time periods, the Fund could be subject to U.S. federal income and
excise taxes which would not otherwise be incurred and may cease to qualify for
the favorable tax treatment afforded to regulated investment companies under the
Internal Revenue Code of 1986, as amended ("the Code"), in which case it would
become subject to U.S. federal income tax on all of its income and gains. See
"Taxes" below.

CURRENCY FLUCTUATIONS. Because the Fund may invest a portion of its assets in
the securities of non-U.S. issuers which are denominated in foreign currencies,
the strength or weakness of the U.S. dollar against such foreign currencies will
account for part of the Fund's investment performance. A decline in the value of
any particular currency against the U.S. dollar will cause a decline in the U.S.
dollar value of the Fund's holdings of securities denominated in such currency
and, therefore, will cause an overall decline in the Fund's NAV and any net
investment income and capital gains to be distributed in U.S. dollars to
shareholders of the Fund.

The rate of exchange between the U.S. dollar and other currencies is determined
by several factors including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the pace of business activity in certain other countries and the United
States, and other economic and financial conditions affecting the world economy.

Although the Fund values its assets daily in terms of U.S. dollars, the Fund
does not intend to convert its holdings of foreign currencies into U.S. dollars
on a daily basis. The Fund will do so from time to time, and you should be aware
of the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
("spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Fund at
one rate, while offering a lesser rate of exchange should the Fund desire to
sell that currency to the dealer.

EURO RISK. Upon the introduction of the European common currency, the euro, the
participating countries ceased to retain control of their respective monetary
policies and agreed to follow a single monetary policy established by the
European Central Bank. For participating countries, adopting the same monetary
policy, regardless of the conditions of their domestic economies, could have a
negative impact on their economies. Some of the economic criteria for the
participating countries include the following: a sustainable budget deficit less
than 3% of Gross Domestic Product (GDP), public debt less than 60% of GDP, low
inflation and interest rates and no currency devaluations within two years of
application. Some of the original participating countries do not yet meet these
standards, but are expected to be compliant before 2002. Countries joining later
may have to be in strict accord before entering the European Monetary Union, or
at least be well along the path to achieving them. So far, the transition seems
to be progressing smoothly, but there has been resistance to some of the more
stringent terms. Therefore, it is unclear whether complete economic and monetary
convergence will be attained as planned.

14
<PAGE>

INFLATION. Many countries have experienced substantial, and in some periods
extremely high and volatile, rates of inflation. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of these countries and emerging
market countries in particular. In an attempt to control inflation, wage and
price controls have been imposed at times in certain countries.

MARKET CHARACTERISTICS; DIFFERENCES IN SECURITIES MARKETS. The securities
markets in many countries, and in emerging market countries in particular,
generally have substantially less volume than the New York Stock Exchange, and
equity securities of most companies listed on such markets may be less liquid
and more volatile than equity securities of U.S. companies of comparable size.
Some of the stock exchanges outside of the United States and in emerging market
countries, to the extent that established securities markets even exist, are in
the earlier stages of their development. A high proportion of the shares of many
foreign companies may be held by a limited number of persons, which may limit
the number of shares available for investment by the Fund. A limited number of
issuers in most, if not all, of these securities markets may represent a
disproportionately large percentage of market capitalization and trading volume.
In addition, the application of certain Investment Company Act of 1940, as
amended ("1940 Act") provisions may limit the Fund's ability to invest in
certain non-U.S. issuers and to participate in public offerings in these
countries. The limited liquidity of certain non-U.S. securities markets may also
affect the Fund's ability to acquire or dispose of securities at the price and
time it wishes to do so.

Many companies traded on securities markets in foreign countries are smaller,
newer and less seasoned than companies whose securities are traded on securities
markets in the United States. Investments in smaller companies involve greater
risk than is customarily associated with investing in larger companies. Smaller
companies may have limited product lines, markets or financial or managerial
resources and may be more susceptible to losses and risks of bankruptcy.
Additionally, market making and arbitrage activities are generally less
extensive in such markets and with respect to such companies, which may
contribute to increased volatility and reduced liquidity of such markets or such
securities. Accordingly, each of these markets and companies may be subject to
greater influence by adverse events generally affecting the market, and by large
investors trading significant blocks of securities, than is usual in the United
States. To the extent that any of these countries experience rapid increases in
their money supplies and investment in equity securities for speculative
purposes, the equity securities traded in any such country may trade at
price-earning multiples higher than those of comparable companies trading on
securities markets in the United States, which may not be sustainable. In
addition, risks due to the lack of modern technology, the lack of a sufficient
capital base to expand business operations, the possibility of permanent or
temporary termination of trading, and greater spreads between bid and ask prices
may exist in such markets.

15
<PAGE>

Fund may be subject to delays or other material difficulties and could
experience a loss if a counterparty defaults. Delays in settlement could result
in temporary periods when assets of the Fund are uninvested and therefore no
return is earned. The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive investment
opportunities. The inability to dispose of a portfolio security due to
settlement problems could result either in losses to the Fund due to subsequent
declines in the value of such portfolio security or, if the Fund has entered
into a contract to sell the security, could result in possible liability to the
purchaser.

NON-U.S. SUBCUSTODIANS. Rules adopted under the 1940 Act permit the Fund, to
maintain its non-U.S. securities and cash in the custody of certain eligible
non-U.S. banks and securities depositories. Certain banks in non-U.S. countries
may not be eligible subcustodians for the Fund, in which event the Fund may be
precluded from purchasing securities in which it would otherwise invest, and
other banks that are eligible subcustodians may be recently organized or
otherwise lack extensive operating experience. At present, custody arrangements
complying with the requirements of the SEC are available in each of the
countries in which the Adviser intends to invest. In certain countries in which
the Fund may make investments, there may be legal restrictions or limitations on
the ability of the Fund to recover assets held in custody by subcustodians in
the event of the bankruptcy of the subcustodian.

GOVERNMENT SUPERVISION; LEGAL SYSTEMS. Disclosure and regulatory standards in
certain foreign countries, including emerging market countries, are in many
respects less stringent than U.S. standards. There may be less government
supervision and regulation of securities exchanges, listed companies and brokers
in these countries than exists in the United States. Brokers in some countries
may not be as well capitalized as those in the United States, so that they may
be more susceptible to financial failure in times of market, political, or
economic stress, exposing the Fund to a risk of loss. Less information may be
available to the Fund than with respect to investments in the United States and,
in certain of these countries, less information may be available to the Fund
than to local market participants. In addition, existing laws and regulations
are often inconsistently applied. Foreign investors may be adversely affected by
new laws and regulations, changes to existing laws and regulations and
preemption of local laws and regulations by national laws. In circumstances
where adequate laws exist, it may not be possible to obtain swift and equitable
enforcement of the law.

FINANCIAL INFORMATION AND STANDARDS. Non-U.S. issuers may be subject to
accounting, auditing and financial standards and requirements that differ, in
some cases significantly, from those applicable to U.S. issuers. In particular,
the assets and profits appearing on the financial statements of certain non-U.S.
issuers may not reflect their financial position or results of operations in the
way they would be reflected had the financial statements been prepared in
accordance with U.S. generally accepted accounting principles. In addition, for
an issuer that keeps accounting records in local currency, inflation accounting
rules may require, for both tax and accounting purposes, that certain assets and
liabilities be restated on the issuer's balance sheet in order to express items
in terms of currency of constant purchasing power. Inflation accounting may
indirectly generate losses or profits. Consequently, financial data may be
materially affected by restatements for inflation and may not accurately reflect
the real condition

16
<PAGE>

of those issuers and securities markets. Moreover, substantially less
information may be publicly available about non-U.S. issuers than is available
about U.S. issuers.

FOREIGN TAXES. The Fund's investment income from foreign issuers may be subject
to non-U.S. withholding taxes, thereby reducing the Fund's net investment
income. For more information about tax risks related to the Fund, see "Taxes"
below and "Additional Information Concerning Dividends, Distributions and Taxes"
in the Statement of Additional Information.

CONVERTIBLE SECURITIES

GENERAL. The Fund may invest in convertible securities. Set forth below is
additional information concerning traditional convertible securities and
"synthetic" convertible securities.

Apart from currency considerations, the value of convertible securities is
influenced by both the yield of non-convertible securities of comparable issuers
and by the value of the underlying common stock. The value of a convertible
security viewed without regard to its conversion feature (i.e., strictly on the
basis of its yield) is sometimes referred to as its "investment value." To the
extent there are changes in interest rates or yields of similar non-convertible
securities, the investment value of the convertible security typically will
fluctuate. However, at the same time, the value of the convertible security will
be influenced by its "conversion value," which is the market value of the
underlying common stock that would be obtained if the convertible security were
converted. Conversion value fluctuates directly with the price of the underlying
common stock. If, because of a low price of the underlying common stock, the
conversion value is below the investment value of the convertible security, the
price of the convertible security is governed principally by its investment
value.

To the extent the conversion value of a convertible security increases to a
point that approximates or exceeds its investment value, the price of the
convertible security will be influenced principally by its conversion value. A
convertible security will sell at a premium over the conversion value to the
extent investors place value on the right to acquire the underlying common stock
while holding a fixed income security. The yield and conversion premium of
convertible securities issued in Japan and the Euromarket are frequently
determined at levels that cause the conversion value to affect their market
value more than the securities' investment value. If no capital appreciation
occurs on the underlying common stock, a premium may not be fully recovered.

17
<PAGE>

Holders of convertible securities have a claim on the assets of the issuer prior
to the common stockholders but may be subordinated to similar non-convertible
debt securities of the same issuer. A convertible security may be subject to
redemption at the option of the issuer at a price established in the charter
provision, indenture or other governing instrument pursuant to which the
convertible security was issued. If a convertible security held by the Fund is
called for redemption, the Fund will be required to redeem the security, convert
it into the underlying common stock or sell it to a third party. Certain
convertible debt securities may provide a put option to the holder which
entitles the holder to cause the security to be redeemed by the issuer at a
premium over the stated principal amount of the debt security.

SYNTHETIC CONVERTIBLE SECURITIES. "Synthetic" convertible securities are created
by combining separate securities that possess the two principal characteristics
of a true convertible security, i.e., fixed income ("fixed income component")
and the right to acquire equity securities ("convertibility component"). The
fixed income component is achieved by investing in nonconvertible fixed income
securities such as nonconvertible bonds, preferred stocks and money market
instruments. The convertibility component is achieved by investing in warrants,
exchanges or NASDAQ-listed call options or stock index call options granting the
holder the right to purchase a specified quantity of securities within a
specified period of time at a specified price or to receive cash in the case of
stock index options.

A warrant is an instrument issued by a corporation that gives a holder the right
to subscribe to a specified amount of capital stock at a set price for a
specified period of time. Warrants involve the risk that the price of the
security underlying the warrant may not exceed the exercise price of the warrant
and the warrant may expire without any value. See "Hedging and Derivatives"
below for a discussion of call options and stock index call options.

A synthetic convertible security differs from a traditional convertible security
in several respects. Unlike a traditional convertible security, which is a
single security having a unitary market value, a synthetic convertible security
is comprised of two or more separate securities, each with its own market value.
Therefore, the "market value" of a synthetic convertible security is the sum of
the values of its fixed income component and its convertibility component. For
this reason, the values of a synthetic convertible security and a traditional
convertible security will respond differently to market fluctuations.

More flexibility is possible in the assembly of a synthetic convertible security
than in the purchase of a convertible security. Synthetic convertible securities
may be selected where the two components represent one issuer or are issued by a
single issuer, thus making the synthetic convertible security similar to a
traditional convertible security. Alternatively, the character of a synthetic
convertible security allows the combination of components representing distinct
issuers which will be used when the Adviser believes that such a combination
would better promote the Fund's investment objective. A synthetic convertible
security also is a more flexible investment in that its two components may be
purchased or sold separately. For example, the Fund may purchase a warrant for
inclusion in a synthetic convertible security but temporarily hold short-term
investments while postponing the purchase of a corresponding bond pending
development of more favorable market conditions.

18
<PAGE>

A holder of a synthetic convertible security faces the risk of a decline in the
price of the stock or the level of the index involved in the convertibility
component, causing a decline in the value of the call option or warrant. Should
the price of the stock fall below the exercise price and remain there throughout
the exercise period, the entire amount paid for the call option or warrant would
be lost. Since a synthetic convertible security includes the fixed income
component as well, the holder of a synthetic convertible security also faces the
risk that interest rates will rise, causing a decline in the value of the fixed
income instrument.

SHORT SALES

Short sales by the Fund involve certain risks and special considerations.
Possible losses from short sales differ from losses that could be incurred from
a purchase of a security, because losses from short sales may be unlimited,
whereas losses from purchases can equal only the total amount invested. The Fund
is permitted to engage in short sales only with respect to securities related to
those in its portfolio. The Adviser therefore expects that if the price of the
securities the Fund is required to replace in connection with a short sale
increases, the value of the related securities in the Fund's portfolio will also
increase, although not necessarily in the same proportion.

HEDGING AND DERIVATIVES

The Fund may be authorized to use a variety of investment strategies described
below to hedge various market risks (such as interest rates, currency exchange
rates and broad or specific market movements), to manage the effective maturity
or duration of debt instruments held by the Fund, or to seek to increase the
Fund's income or gain. Limitations on the portion of the Fund's assets that may
be used in connection with the investment strategies described below are set out
in Appendix B to this Prospectus.

The Fund may (if and to the extent so authorized) purchase and sell (or write)
exchange-listed and over-the-counter put and call options on securities, index
futures contracts, financial futures contracts and fixed income indices and
other financial instruments, enter into financial futures contracts, enter into
interest rate transactions, and enter into currency transactions (collectively,
these transactions are referred to in this Prospectus as "Hedging and
Derivatives"). The Fund's interest rate transactions may take the form of swaps,
caps, floors and collars, and the Fund's currency transactions may take the form
of currency forward contracts, currency futures contracts, currency swaps and
options on currencies or currency futures contracts.

19
<PAGE>

use of any authorized Hedging and Derivatives will be a function of numerous
variables, including market conditions. The ability of the Fund to utilize
Hedging and Derivatives successfully will depend on, in addition to the factors
described above, the Adviser's ability to predict pertinent market movements,
which cannot be assured. These skills are different from those needed to select
the Fund's securities. The Fund is not a "commodity pool" (i.e., a pooled
investment vehicle which trades in commodity futures contracts and options
thereon and the operator of which is registered with the Commodity Futures
Trading Commission (the "CFTC")) and Hedging and Derivatives involving futures
contracts and options on futures contracts will be purchased, sold or entered
into only for bona fide hedging, and non-hedging purposes to the extent
permitted by CFTC regulations; provided that the Fund may enter into futures
contracts or options thereon for purposes other than bona fide hedging if
immediately thereafter, the sum of the amount of its initial margin and premiums
on open contracts would not exceed 5% of the liquidation value of the Fund's
portfolio; provided further, than in the case of an option that is in-the-money
at the time of the purchase, the in-the-money amount may be excluded in
calculating the 5% limitation. The use of certain Hedging and Derivatives will
require that the Fund segregate cash, U.S. government securities or other liquid
high grade debt obligations to the extent the Fund's obligations are not
otherwise "covered" through ownership of the underlying security, financial
instrument or currency.

To the extent the Fund conducts Hedging and Derivatives outside the United
States, such transactions may be subject to political, economic and legal risks
that are distinct from domestic transactions. Such risks are similar to those
applicable to investment in foreign securities described under "Securities of
Non-U.S. Issuers" above.

The Fund will not be obligated to pursue any of the Hedging and Derivatives
strategies and the Fund makes no representation as to the availability of these
techniques at this time or at any time in the future. In addition, the Fund's
ability to pursue certain of these strategies may be limited by current economic
conditions, the Commodity Exchange Act, as amended, applicable rules and
regulations of the CFTC thereunder and the federal income tax requirements
applicable to regulated investment companies which are not operated as commodity
pools. To the extent not otherwise restricted by the SEC, the CFTC, the Code or
its investment objectives and policies, the Fund may utilize, without
limitation, Hedging and Derivatives.

A detailed discussion of various Hedging and Derivatives including applicable
regulations of the CFTC and the requirement to segregate assets with respect to
these transactions appears in Appendix B. Risks associated with Hedging and
Derivatives are also described in Appendix B to this Prospectus.

NON-DIVERSIFIED FUNDS

The Fund is classified as a "non-diversified" fund under the 1940 Act, which
means that the Fund is not limited by the 1940 Act in the proportion of its
assets that may be invested in the obligations of a single issuer. Thus, the
Fund may invest a greater proportion of its assets in the securities of a
smaller number of issuers and, as a result, will be subject to greater risk of
loss with respect to its portfolio securities as compared to a diversified Fund.
The Fund, however, intends to comply with the diversification requirements
imposed by the Code with respect to

20
<PAGE>

segregated asset accounts underlying variable products under section 817(h) of
the Code and to regulated investment companies under Subchapter M of the Code.

YEAR 2000

The Company did not experience any significant malfunctions or errors in the
computer systems used by its service providers when the date changed from 1999
to 2000. Based on operations since January 1, 2000, the Company does not expect
any significant impact to its on-going business as a result of the "Year 2000
issue." However, it is possible that the full impact of the date change, which
was of concern due to computer programs that use two digits instead of four
digits to define years, has not been fully recognized. For example, it is
possible that Year 2000 or similar issues may affect the computer systems used
by the Company's service providers at month, quarter or year end. The Company
believes that any such problems are likely to be minor and correctable.

MANAGEMENT OF THE FUND

INVESTMENT ADVISER

The Fund's investment adviser is OFFITBANK, whose principal address is 520
Madison Avenue, New York, New York 10022 (the "Adviser" or "OFFITBANK").
OFFTIBANK is a subsidiary of the Wachovia Corporation, a leading bank holding
company with Wachovia Bank, NA as its principal subsidiary. OFFITBANK manages
the Fund's business and investment activities, subject to the authority of the
Company's Board of Directors. OFFITBANK's principal business is providing
discretionary investment management services to high net worth individuals and
family groups, foundations, endowments and corporations. OFFITBANK specializes
in global fixed income asset management and offers its clients a complete range
of investments in the major capital markets of the world. OFFITBANK currently
manages approximately $10.7 billion in assets and serves as investment adviser
to twenty registered investment company portfolios.

Stephen T. Shapiro serves as the portfolio manager for the Fund. Mr. Shapiro is
a Managing Director of OFFITBANK and has been associated with OFFITBANK since
1983. Mr. Shapiro has managed the Fund since its inception on April 1, 1996.

The advisory fee paid by the Fund, as a percentage of average net assets, for
the fiscal year ended December 31, 1999, after waivers and reimbursements, was
.63%.

The following chart shows the Company's other service providers and includes
their addresses and principal activities.

OFFIT VIF-HIGH YIELD FUND

<TABLE>
<S><C>
|-------------------------------|
| SHAREHOLDERS |
|-------------------------------|
|
|
|
|
------------------------------------------------
Distribution and | | |
Shareholder | | |
Services | | |
|------------------------------------| | |----------------------------------------|
| PRINCIPAL DISTRIBUTOR | | | TRANSFER AGENT |
| OFFIT FUNDS DISTRIBUTOR, INC. | | | PFPC INC. |
| 3200 HORIZON DRIVE | | | 400 BELLEVUE PARKWAY |
| KING OF PRUSSIA, PA | | | WILMINGTON, DE 19809 |
| 19406 |----|----| |
| Distributes the Fund's shares. | | | Handles shareholder services, |
| | | |including recordkeeping and statements, |
| | | |distribution of dividends and processing|
| | | | of buy and sell requests. |
|------------------------------------| | |----------------------------------------|
|
|
|
|
Asset Management |
|------------------------------------| | |-----------------------------------------|
| INVESTMENT ADVISER | | | CUSTODIAN |
| OFFITBANK | | | THE BANK OF NEW YORK |
| 520 MADISION AVENUE | | | ("BONY") |
| NEW YORK, NY 10022-4213 | | | 90 WASHINGTON STREET |
| | | | NEW YORK, NY 10286 |
| |----| | |
| Manages the Fund's business and | | |Serves as custodian of the assets of the |
| investment activities. | | |Fund. The custodian settles all portfolio|
| | | |trades and collects most of the valuation|
| | | |data required for calculating the Fund's |
| | | | net asset value ("NAV"). |
|------------------------------------| | |-----------------------------------------|
| |
| |
| |
Fund | |
Operations | |
|-------------------------------------| | |
| ADMINISTRATOR AND | | |
| FUND ACCOUNTING AGENT | | |
| PFPC INC. | | |
| 400 BELLEVUE PARKWAY | | |
| WILMINGTON, DE 19809 |---|---------------------------
| | |
| Provides facilities, equipment and | |
|personnel to carry out administrative| |
| services related to the Fund and | |
|calculates the Fund's NAV, dividends | |
| and distributions. | |
|-------------------------------------| |
|
|
|--------------------------------|
| BOARD OF DIRECTORS |
|Supervises the Fund's activities|
|--------------------------------|
</TABLE>

21
<PAGE>

SHAREHOLDER INFORMATION

PRICING OF FUND SHARES

Shares of the Fund are priced at their net asset value ("NAV"). The NAV of the
Fund is calculated as follows:

Value of Assets
NAV = - Value of Liabilities
---------------------------------
Number of Outstanding Shares

The Fund's NAV is calculated once daily at 4:00 p.m. Eastern Time, Monday
through Friday on each day that the New York Stock Exchange (the "Exchange") is
open. The Fund will effect purchases or redemptions of Fund shares at the next
NAV calculated after receipt of your order or request in proper form.

Foreign and domestic equity securities held by the Fund are valued using the
closing price or the last sale price on the exchange or in the principal
over-the-counter market where they are traded. If the last sale price is
unavailable, the last available quote or last bid price is normally used. Debt
securities held by the Fund generally are valued based on quoted bid prices.
Short term debt investments having maturities of 60 days or less are amortized
to maturity based on their cost, and if applicable, adjusted for foreign
exchange translation. If market quotations are unavailable or if an event occurs
after the close of an exchange that is expected to materially affect the value
of a security held by the Fund, securities and other assets will be valued at
fair value as determined in good faith by the Adviser according to procedures
adopted by the Company's Board of Directors.

If the Fund holds foreign equity securities, the calculation of the Fund's NAV
will not occur at the same time as the determination of the value of the foreign
equity securities in the Fund's portfolio, since these securities are traded on
foreign exchanges. Additionally, if the foreign equity securities held by the
Fund trade on days when the Fund does not price its shares, the NAV of the
Fund's shares may change when shareholders will not be able to purchase or
redeem the Fund's shares.

PURCHASE OF FUND SHARES

Shares of the Fund are offered on a continuous basis directly by OFFIT Funds
Distributor, Inc. (the "Distributor"), the Fund's Principal Underwriter, to the
Accounts without any sales or other charge, at the Fund's NAV on each day on
which the Exchange is open for business. The Company will effect orders to
purchase or redeem shares of the Fund, that are based on premium payments,
surrender and transfer requests and any other transaction requests from Contract
and Policy Owners, annuitants and beneficiaries, at the Fund's NAV per share
next computed after the Account receives such transaction request. Any orders to
purchase or redeem Fund shares that are not based on actions by Contract or
Policy Owners, annuitants, and beneficiaries will be effected at the Fund's NAV
per share next computed after the order is received by the Distributor. The Fund
reserves the right to suspend the sale of the Fund's shares in response to

22
<PAGE>

conditions in the securities markets or for other reasons.

Individuals may not place orders directly with the Fund. Please refer to the
appropriate Account Prospectus of the Participating Company for more information
on the purchase of Fund shares.

REDEMPTION OF FUND SHARES

An Account may redeem all or any portion of the shares of the Fund in its
account at any time at the NAV per share of the Fund calculated in the manner
described above. Shares redeemed are entitled to earn dividends, if any, up to
and including the day redemption is effected. There is no redemption charge.
Payment of the redemption price will normally be made within seven days after
receipt of such tender for redemption.

The right of redemption may be suspended or the date of payment may be postponed
for any period during which the Exchange is closed (other than customary weekend
and holiday closings) or during which the SEC determines that trading thereon is
restricted, or for any period during which an emergency (as determined by the
SEC) exists as a result of which disposal by the Fund of securities is not
reasonably practicable or as a result of which it is not reasonably practicable
for the Company fairly to determine the value of the Fund's net assets, or for
such other periods as the SEC may by order permit for the protection of security
holders of the Company.

SHAREHOLDER SERVICES

A Contract or Policy Owner investing through an Account may exchange shares of
the Fund for shares of any of the other investment portfolios of the Company
offered through the Account on the basis of their respective NAV.

DIVIDENDS AND DISTRIBUTIONS

The Fund will declare dividends daily and pay the dividends monthly from net
investment income and will distribute its net capital gains, if any, at least
annually. The Fund will inform shareholders of the amount and nature of all such
income or gains.

Any income and capital gains distributions are paid in the form of additional
shares of the Fund.

TAXES

The Fund intends to qualify for taxation as a "regulated investment company"
("RIC") under Subchapter M of the Code. If so qualified, each Fund will not be
subject to federal income taxes with respect to net investment income (i.e., its
investment company taxable income, as that term is defined in the Code,
determined without regard to the deduction for dividends paid) and net capital
gain (i.e., the excess of a Fund's net realized long-term capital gain over its
net realized short-term capital loss), if any, that are distributed to its
shareholders.

23
<PAGE>

Shares of the Fund must be purchased through Policies or Contracts. As a result,
it is anticipated that any dividend or capital gains distribution from the Fund
will be exempt from current taxation if left to accumulate within a Policy or
Contract. The Fund is managed without regard to tax ramifications. Withdrawals
from Contracts or Policies may be subject to ordinary income tax plus a 10%
penalty tax if made before age 59 1/2.

The foregoing discussion of federal income tax consequences is based on tax laws
and regulations in effect on the date of this Prospectus, and is subject to
change by legislative, administrative or judicial action. As the foregoing
discussion is for general information only, a prospective investor should also
review the more detailed discussion of federal income tax considerations that is
contained in the Statement of Additional Information. In addition, each
prospective investor should consult with his own tax adviser as to the tax
consequences of investments in the Fund, including the application of state and
local taxes which may differ from the federal income tax consequences described
above.

THE TAX STATUS OF YOUR INVESTMENT IN THE FUND DEPENDS UPON THE FEATURES OF YOUR
POLICY OR CONTRACT. FOR FURTHER INFORMATION, PLEASE REFER TO THE ACCOUNT OR
POLICY PROSPECTUS.

SHAREHOLDER COMMUNICATIONS

It is expected that Contract or Policy Owners will receive from the
Participating Companies for which shares of one or more Funds are the investment
vehicle reports that will include, among other things, the Company's unaudited
semi-annual financial statements and year-end financial statements audited by
the Company's independent accountants. Each report will show the investments
owned by the Fund and will provide other information about the Fund and its
operations. It is expected that the Company will pay a portion of the cost of
preparing certain of these reports. Contract and Policy Owners may obtain
information about their investment on any business day by calling toll-free
1-800-618-9510 between 8:15 a.m. and 6:00 p.m., New York time. Specially trained
representatives will answer questions and provide information about Contract and
Policy Owners accounts.

Each Account owning shares of the Fund will vote its shares in accordance with
instructions received from Contract or Policy Owners, annuitants and
beneficiaries. Fund shares held by an Account as to which no instructions have
been received will be voted for or against any proposition, or in abstention, in
the same proportion as the shares of that Account as to which instructions have
been received. Fund shares held by an Account that are not attributable to
Contracts or Policies will also be voted for or against any proposition in the
same proportion as the shares for which voting instructions are received by the
Account. If the Participating Insurance Company determines, however, that it is
permitted to vote any such shares of the Fund in its own right, it may elect to
do so, subject to the then current interpretation of the 1940 Act and the rules
thereunder.

PERFORMANCE INFORMATION

24
<PAGE>

Nonstandardized total return differs from the standardized total return only in
that it may be related to a nonstandard period or is presented in the aggregate
rather than as an annual average. In addition, the Fund may make available
information as to their respective "yield" and "effective yield" over a
thirty-day period, as calculated in accordance with the SEC's prescribed
formula. The "effective yield" assumes that the income earned by an investment
in the Fund is reinvested, and will therefore be slightly higher than the yield
because of the compounding effect of this assumed reinvestment.

The performance of the Fund may be quoted and compared to those of other mutual
funds with similar investment objectives and to other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example,
performance information may be compared with data published by Lipper Analytical
Services, Inc. or to unmanaged indices of performance, including, but not
limited to, Value Line Composite, Lehman Brothers Bond, Government Corporate,
Corporate and Aggregate Indices, Merrill Lynch Government & Agency and
Intermediate Agency Indices, Morgan Stanley Capital International Europe,
Australia, Far East Index or Morgan Stanley Capital International World Index.
The performance information may also include evaluations of the Funds published
by nationally recognized ranking services and by various national or local
financial publications, such as BUSINESS WEEK, FORBES, FORTUNE, INSTITUTIONAL
INVESTOR, MONEY, THE WALL STREET JOURNAL, BARRON'S, KIPLINGER'S, MORNINGSTAR,
MUTUAL FUND VALUES, U.S.A. TODAY OR THE NEW YORK TIMES or other industry or
financial publications.

Performance information presented for the Fund should not be compared directly
with performance information of other insurance products without taking into
account insurance-related charges and expenses payable under the variable
annuity contract and variable life insurance policy. These charges and expenses
are not reflected in the Fund's performance and would reduce an investor's
return under the annuity contract or life policy.

THE FUND'S PERFORMANCE INFORMATION IS HISTORICAL, WILL FLUCTUATE AND SHOULD NOT
BE CONSIDERED AS REPRESENTATIVE OF FUTURE RESULTS. The SEC's formulas for
calculating performance are described under "Performance Information" in the
Statement of Additional Information. Quotations of the Fund's performance will
not reflect charges levied at the Account level.

25
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APPENDIX A

The following is a description of certain ratings of Standard & Poor's
Ratings Group ("S&P"), Moody's Investors Service, Inc. ("Moody's"), Duff &
Phelps Credit Rating Co. ("D&P") and Fitch IBCA ("Fitch") that are applicable to
certain obligations in which the Fund may invest.

COMMERCIAL PAPER RATINGS

A S&P commercial paper rating is a current opinion of the creditworthiness
of an obligor with respect to financial obligations having an original maturity
of no more than 365 days. The following summarizes the rating categories used by
S&P for commercial paper:

"A-1" - Obligations are rated in the highest category indicating that the
obligor's capacity to meet its financial commitment on the obligation is strong.
Within this category, certain obligations are designated with a plus sign (+).
This indicates that the obligor's capacity to meet its financial commitment on
these obligations is extremely strong.

"A-2" - Obligations are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than obligations in higher
rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.

"A-3" - Obligations exhibit adequate protection parameters. However,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity of the obligor to meet its financial commitment on the
obligation.

"B" - Obligations are regarded as having significant speculative
characteristics. The obligor currently has the capacity to meet its financial
commitment on the obligation; however, it faces major ongoing uncertainties
which could lead to the obligor's inadequate capacity to meet its financial
commitment on the obligation.

"C" - Obligations are currently vulnerable to nonpayment and are dependent
upon favorable business, financial, and economic conditions for the obligor to
meet its financial commitment on the obligation.

"D" - Obligations are in payment default. The "D" rating category is used
when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.

LOCAL CURRENCY AND FOREIGN CURRENCY RISKS

County risk considerations are a standard part of S&P's analysis for credit
ratings on any issuer or issue. Currency of repayment is a key factor in this
analysis. An obligor's capacity to

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repay foreign obligations may be lower than its capacity to repay obligations in
its local currency due to the sovereign government's own relatively lower
capacity to repay external versus domestic debt. These sovereign risk
considerations are incorporated in the debt ratings assigned to specific issues.
Foreign currency issuers ratings are also distinguished from local currency
issuer ratings to identify those instances where sovereign risks make them
different for the same issuer.

Moody's commercial paper ratings are opinions of the ability of issuers to
repay punctually senior debt obligations not having an original maturity in
excess of one year, unless explicitly noted. The following summarizes the rating
categories used by Moody's for commercial paper:

"Prime-1" - Issuers (or supporting institutions) have a superior ability
for repayment of senior short-term debt obligations. Prime-1 repayment ability
will often be evidenced by many of the following characteristics: leading market
positions in well-established industries; high rates of return on funds
employed; conservative capitalization structure with moderate reliance on debt
and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.

"Prime-2" - Issuers (or supporting institutions) have a strong ability for
repayment of senior short-term debt obligations. This will normally be evidenced
by many of the characteristics cited above but to a lesser degree. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternate liquidity is maintained.

"Prime-3" - Issuers (or supporting institutions) have an acceptable ability
for repayment of senior short-term debt obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.

"Not Prime" - Issuers do not fall within any of the Prime rating
categories.

The three rating categories of D&P for investment grade commercial paper
and short-term debt are "D-1," "D-2" and "D-3." D&P employs three designations,
"D-1+," "D-1" and "D-1-," within the highest rating category. The following
summarizes the rating categories used by D&P for commercial paper:

"D-1+" - Debt possesses the highest certainty of timely payment. Short-term
liquidity, including internal operating factors and/or access to alternative
sources of funds, is outstanding, and safety is just below risk-free U.S.
Treasury short-term obligations.

"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors. Risk
factors are minor.

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"D-1-" - Debt possesses high certainty of timely payment. Liquidity factors
are strong and supported by good fundamental protection factors. Risk factors
are very small.

"D-2" - Debt possesses good certainty of timely payment. Liquidity factors
and company fundamentals are sound. Although ongoing funding needs may enlarge
total financing requirements, access to capital markets is good. Risk factors
are small.

"D-3" - Debt possesses satisfactory liquidity and other protection factors
qualify issues as to investment grade. Risk factors are larger and subject to
more variation. Nevertheless, timely payment is expected.

"D-4" - Debt possesses speculative investment characteristics. Liquidity is
not sufficient to insure against disruption in debt service. Operating factors
and market access may be subject to a high degree of variation.

"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.

Fitch short-term ratings apply to debt obligations that have time horizons
of less than 12 months for most obligations, or up to three years for U.S.
public finance securities. The following summarizes the rating categories used
by Fitch for short-term obligations:

"F1" - Securities possess the highest credit quality. This designation
indicates the strongest capacity for timely payment of financial commitments and
may have an added "+" to denote any exceptionally strong credit feature.

"F2" - Securities possess good credit quality. This designation indicates a
satisfactory capacity for timely payment of financial commitments, but the
margin of safety is not as great as in the case of the higher ratings.

"F3" - Securities possess fair credit quality. This designation indicates
that the capacity for timely payment of financial commitments is adequate;
however, near-term adverse changes could result in a reduction to non-investment
grade.

"B" - Securities possess speculative credit quality. This designation
indicates minimal capacity for timely payment of financial commitments, plus
vulnerability to near-term adverse changes in financial and economic conditions.

"C" - Securities possess high default risk. This designation indicates that
default is a real possibility and that the capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic
environment.

"D" - Securities are in actual or imminent payment default.

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS

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The following summarizes the ratings used by S&P for corporate and
municipal debt:

"AAA" - An obligation rated "AAA" has the highest rating assigned by S&P.
The obligor's capacity to meet its financial commitment on the obligation is
extremely strong.

"AA" - An obligation rated "AA" differs from the highest rated obligations
only in small degree. The obligor's capacity to meet its financial commitment on
the obligation is very strong.

"A" - An obligation rated "A" is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher-rated categories. However, the obligor's capacity to meet its financial
commitment on the obligation is still strong.

"BBB" - An obligation rated "BBB" exhibits adequate protection parameters.
However, adverse economic conditions or changing circumstances are more likely
to lead to a weakened capacity of the obligor to meet its financial commitment
on the obligation.

Obligations rated "BB," "B," "CCC," "CC" and "C" are regarded as having
significant speculative characteristics. "BB" indicates the least degree of
speculation and "C" the highest. While such obligations will likely have some
quality and protective characteristics, these may be outweighed by large
uncertainties or major exposures to adverse conditions.

"BB" - An obligation rated "BB" is less vulnerable to nonpayment than other
speculative issues. However, it faces major ongoing uncertainties or exposure to
adverse business, financial or economic conditions which could lead to the
obligor's inadequate capacity to meet its financial commitment on the
obligation.

"B" - An obligation rated "B" is more vulnerable to nonpayment than
obligations rated "BB," but the obligor currently has the capacity to meet its
financial commitment on the obligation. Adverse business, financial or economic
conditions will likely impair the obligor's capacity or willingness to meet its
financial commitment on the obligation.

"CCC" - An obligation rated "CCC" is currently vulnerable to nonpayment,
and is dependent upon favorable business, financial and economic conditions for
the obligor to meet its financial commitment on the obligation. In the event of
adverse business, financial, or economic conditions, the obligor is not likely
to have the capacity to meet its financial commitment on the obligation.

"CC" - An obligation rated "CC" is currently highly vulnerable to
nonpayment.

"C" - The "C" rating may be used to cover a situation where a bankruptcy
petition has been filed or similar action has been taken, but payments on this
obligation are being continued.

A-4
<PAGE>

The "D" rating also will be used upon the filing of a bankruptcy petition or the
taking of a similar action if payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within the
major rating categories.

"c" - The `c' subscript is used to provide additional information to
investors that the bank may terminate its obligation to purchase tendered bonds
if the long-term credit rating of the issuer is below an investment-grade level
and/or the issuer's bonds are deemed taxable.

"p" - The letter `p' indicates that the rating is provisional. A
provisional ratings assumes the successful completion of the project financed by
the debt being rated and indicates that payment of debt service requirements is
largely or entirely dependent upon the successful, timely completion of the
project. This rating, however, while addressing credit quality subsequent to
completion of the project, makes no comment on the likelihood of or the risk of
default upon failure of such completion. The investor should exercise his own
judgment with respect to such likelihood and risk.

* - Continuance of the ratings is contingent upon S&P's receipt of an
executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.

"r" - The `r' highlights derivative, hybrid, and certain other obligations
that S&P believes may experience high volatility or high variability in expected
returns as a result of noncredit risks. Examples of such obligations are
securities with principal or interest return indexed to equities, commodities,
or currencies; certain swaps and options; and interest-only and principal-only
mortgage securities. The absence of an `r' symbol should not be taken as an
indication that an obligation will exhibit no volatility or variability in total
return.

N.R. Indicates that no rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular obligation as a matter of policy. Debt obligations if issuers outside
the United States and its territories are rated on the same basis as domestic
corporate and municipal issues. The ratings measure the creditworthiness of the
obligor but do not take into account currency exchange and related
uncertainties.

The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:

"Aaa" - Bonds are judged to be of the best quality. They carry the smallest
degree of investment risk and are generally referred to as "gilt edged."
Interest payments are protected by a large or by an exceptionally stable margin
and principal is secure. While the various protective elements are likely to
change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

A-5
<PAGE>

fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risk appear somewhat larger than
the "Aaa" securities.

"A" - Bonds possess many favorable investment attributes and are to be
considered as upper-medium-grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.

"Baa" - Bonds are considered as medium-grade obligations, (i.e., they are
neither highly protected nor poorly secured). Interest payments and principal
security appear adequate for the present but certain protective elements may be
lacking or may be characteristically unreliable over any great length of time.
Such bonds lack outstanding investment characteristics and in fact have
speculative characteristics as well.

"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these ratings
provide questionable protection of interest and principal ("Ba" indicates
speculative elements; "B" indicates a general lack of characteristics of
desirable investment; "Caa" are of poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.

Con. (...) - Bonds for which the security depends upon the completion of
some act or the fulfillment of some condition are rated conditionally. These are
bonds secured by (a) earnings of projects under construction, (b) earnings of
projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.

Note: Moody's applies numerical modifiers 1, 2, and 3 in each generic
rating classification from "Aa" through "Caa". The modifier 1 indicates that the
obligation ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates a ranking in the
lower end of its generic rating category.

The following summarizes the long-term debt ratings used by D&P for
corporate and municipal long-term debt:

"AAA" - Debt is considered to be of the highest credit quality. The risk
factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.

"AA" - Debt is considered to be of high credit quality. Protection factors
are strong. Risk is modest but may vary slightly from time to time because of
economic conditions.

"A" - Debt possesses protection factors which are average but adequate.
However, risk factors are more variable in periods of greater economic stress.

A-6
<PAGE>

"BBB" - Debt possesses below-average protection factors but such protection
factors are still considered sufficient for prudent investment. Considerable
variability in risk is present during economic cycles.

"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these ratings
is considered to be below investment grade. Although below investment grade,
debt rated "BB" is deemed likely to meet obligations when due. Debt rated "B"
possesses the risk that obligations will not be met when due. Debt rated "CCC"
is well below investment grade and has considerable uncertainty as to timely
payment of principal, interest or preferred dividends. Debt rated "DD" is a
defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend arrearages.

To provide more detailed indications of credit quality, the "AA," "A,"
"BBB," "BB" and "B" ratings may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within these major categories.

The following summarizes the ratings used by Fitch for corporate and
municipal bonds:

"AAA" - Bonds considered to be investment grade and of the highest credit
quality. These ratings denote the lowest expectation of credit risk and are
assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.

"AA" - Bonds considered to be investment grade and of very high credit
quality. These ratings denote a very low expectation of credit risk and indicate
very strong capacity for timely payment of financial commitments. This capacity
is not significantly vulnerable to foreseeable events.

"A" - Bonds considered to be investment grade and of high credit quality.
These ratings denote a low expectation of credit risk and indicate strong
capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.

"BBB" - Bonds considered to be investment grade and of good credit quality.
These ratings denote that there is currently a low expectation of credit risk.
The capacity for timely payment of financial commitments is considered adequate,
but adverse changes in circumstances and in economic conditions are more likely
to impair this capacity.

"BB" - Bonds considered to be speculative. These ratings indicate that
there is a possibility of credit risk developing, particularly as the result of
adverse economic changes over time; however, business or financial alternatives
may be available to allow financial commitments to be met. Securities rated in
this category are not investment grade.

"B" - Bonds are considered highly speculative. These ratings indicate that
significant credit risk is present, but a limited margin of safety remains.
Financial commitments are

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<PAGE>

currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.

"CCC," "CC," "C" - Bonds have high default risk. Default is a real
possibility, and capacity for meeting financial commitments is solely reliant
upon sustained, favorable business or economic developments. "CC" ratings
indicate that default of some kind appears probable, and "C" ratings signal
imminent default.

"DDD," "DD" and "D" - Bonds are in default. The ratings of obligations in
this category are based on their prospects for achieving partial or full
recovery in a reorganization or liquidation of the obligor. While expected
recovery values are highly speculative and cannot be estimated with any
precision, the following serve as general guidelines. "DDD" obligations have the
highest potential for recovery, around 90%-1000% of outstanding amounts and
accrued interest. "DD" indicates potential recoveries in the range of 50%-90%,
and "D" the lowest recovery potential, i.e., below 50%.

Entities rated in this category have defaulted on some or all of their
obligations. Entities rated "DDD" have the highest prospect for resumption of
performance or continued operation with or without a formal reorganization
process. Entities rated "DD" and "D" are generally undergoing a formal
reorganization or liquidation process; those rated "DD" are likely to satisfy a
higher portion of their outstanding obligations, while entities rated "D" have a
poor prospect for repaying all obligations.

To provide more detailed indications of credit quality, the Fitch ratings
from and including "AA" to "CCC" may be modified by the addition of a plus (+)
or minus (-) sign to denote relative standing within these major rating
categories.

`NR' indicates the Fitch does not rate the issuer or issue in questions.

`Withdrawn': A rating is withdrawn when Fitch deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.

RatingAlert: Ratings are placed on RatingAlert to notify investors that
there is a reasonable probability of a rating change and the likely direction of
such change. These are designated as "Positive," indicating a potential upgrade,
"Negative," for a potential downgrade, or "Evolving," if ratings may be raised,
lowered or maintained. RatingAlert is typically resolved over a relatively short
period.

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<PAGE>

MUNICIPAL NOTE RATINGS

A S&P rating reflects the liquidity factors and market access risks unique
to notes due in three years or less. The following summarizes the ratings used
by S&P for municipal notes:

"SP-1" - The issuers of these municipal notes exhibit a strong capacity to
pay principal and interest. Those issues determined to possess very strong
characteristics are given a plus (+) designation.

"SP-2" - The issuers of these municipal notes exhibit satisfactory capacity
to pay principal and interest, with some vulnerability to adverse financial and
economic changes over the term of the notes.

"SP-3" - The issuers of these municipal notes exhibit speculative capacity
to pay principal and interest.

Moody's ratings for state and municipal notes and other short-term loans
are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:

"MIG-1"/"VMIG-1" - This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad-based access to the market for refinancing.

"MIG-2"/"VMIG-2" - This designation denotes high quality. Margins of
protection that are ample although not so large as in the preceding group.

"MIG-3"/"VMIG-3" - This designation denotes favorable quality, with all
security elements accounted for but lacking the undeniable strength of the
preceding grades. Liquidity and cash flow protection may be narrow and market
access for refinancing is likely to be less well established.

"MIG-4"/"VMIG-4" - This designation denotes adequate quality. Protection
commonly regarded as required of an investment security is present and although
not distinctly or predominantly speculative, there is specific risk.

"SG" - This designation denotes speculative quality. Debt instruments in
this category lack margins of protection.

Fitch and D&P use the short-term ratings described under Commercial Paper
Ratings for municipal notes.

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APPENDIX B

HEDGING AND DERIVATIVES

The Fund may be authorized to use a variety of investment strategies to
hedge various market risks (such as interest rates, currency exchange rates and
broad or specific market movements), to manage the effective maturity or
duration of debt instruments held by the Fund, or, with respect to certain
strategies, to seek to increase the Fund's income or gain (such investment
strategies and transactions are referred to herein as "Hedging and
Derivatives"). The Fund may be unable or limited in its ability to engage in
Hedging and Derivatives by certain factors, including current economic
conditions.

A detailed discussion of Hedging and Derivatives follows below. The Fund is
not obligated, however, to pursue any of such strategies and the Fund makes no
representation as to the availability of these techniques at this time or at any
time in the future. In addition, the Fund's ability to pursue certain of these
strategies may be limited by the Commodity Exchange Act, as amended, applicable
rules and regulations of the Commodity Futures Trading Commission ("CFTC")
thereunder and the federal income tax requirements applicable to regulated
investment companies which are not operated as commodity pools. To the extent
not otherwise restricted by the Securities and Exchange Commission (the "SEC"),
the CFTC, the Code or its investment objectives and policies, the Fund may
utilize, without limitation, Hedging and Derivatives. See "Additional
Information Concerning Dividends, Distributions and Taxes" in the Statement of
Additional Information.

GENERAL CHARACTERISTICS OF OPTIONS

Put options and call options typically have similar structural
characteristics and operational mechanics regardless of the underlying
instrument on which they are purchased or sold. Thus, the following general
discussion relates to each of the particular types of options discussed in
greater detail below. In addition, many Hedging and Derivatives involving
options require segregation of Fund assets in special accounts, as described
below under "Use of Segregated and Other Special Accounts."

A put option gives the purchaser of the option, upon payment of a premium,
the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
The Fund's purchase of a put option on a security, for example, might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
of such instrument by giving the Fund the right to sell the instrument at the
option exercise price. A call option, upon payment of a premium, gives the
purchaser of the option the right to buy, and the seller the obligation to sell,
the underlying instrument at the exercise price. The Fund's purchase of a call
option on a security, financial futures contract, index, currency or other
instrument might be intended to protect the Fund against an increase in the
price of the underlying instrument that it

B-1
<PAGE>

intends to purchase in the future by fixing the price at which it may purchase
the instrument. An "American" style put or call option may be exercised at any
time during the option period, whereas a "European" style put or call option may
be exercised only upon expiration or during a fixed period prior to expiration.
Exchange-listed options are issued by a regulated intermediary such as the
Options Clearing Corporation ("OCC"), which guarantees the performance of the
obligations of the parties to the options. The discussion below uses the OCC as
an example, but is also applicable to other similar financial intermediaries.

OCC-issued and exchange-listed options, with certain exceptions, generally
settle by physical delivery of the underlying security or currency, although in
the future, cash settlement may become available. Index options and Eurodollar
instruments (which are described below under "Eurodollar Instruments") are cash
settled for the net amount, if any, by which the option is "in-the-money" (that
is, the amount by which the value of the underlying instrument exceeds, in the
case of a call option, or is less than, in the case of a put option, the
exercise price of the option) at the time the option is exercised. Frequently,
rather than taking or making delivery of the underlying instrument through the
process of exercising the option, listed options are closed by entering into
offsetting purchase or sale transactions that do not result in ownership of the
new option.

The Fund's inability to close out its position as a purchaser or seller of
an OCC-issued or exchange-listed put or call option is dependent, in part, upon
the liquidity of the particular option market. Among the possible reasons for
the absence of a liquid option market on an exchange are: (1) insufficient
trading interest in certain options; (2) restrictions on transactions imposed by
an exchange; (3) trading halts, suspensions or other restrictions imposed with
respect to particular classes or series of options or underlying securities,
including reaching daily price limits; (4) interruption of the normal operations
of the OCC or an exchange; (5) inadequacy of the facilities of an exchange or
the OCC to handle current trading volume; or (6) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or series
of options), in which event the relevant market for that option on that exchange
would cease to exist, although any such outstanding options on that exchange
would continue to be exercisable in accordance with their terms.

The hours of trading for listed options may not coincide with the hours
during which the underlying financial instruments are traded. To the extent that
the option markets close before the markets for the underlying financial
instruments, significant price and rate movements can take place in the
underlying markets that would not be reflected in the corresponding option
markets.

Over-the-counter ("OTC") options are purchased from or sold to securities
dealers, financial institutions or other parties (collectively referred to as
"Counterparties" and individually referred to as a "Counterparty") through a
direct bilateral agreement with the Counterparty. In contrast to exchange-listed
options, which generally have standardized terms and performance mechanics, all
of the terms of an OTC option, including such terms as method of settlement,
term, exercise price, premium, guarantees

B-2
<PAGE>

and security, are determined by negotiation of the parties. It is anticipated
that the Fund will generally only enter into OTC options that have cash
settlement provisions, although it will not be required to do so.

Unless the parties provide for it, no central clearing or guarantee
function is involved in an OTC option. As a result, if a Counterparty fails to
make or take delivery of the security, currency or other instrument underlying
an OTC option it has entered into with the Fund or fails to make a cash
settlement payment due in accordance with the terms of that option, the Fund
will lose any premium it paid for the option as well as any anticipated benefit
of the transaction. Thus, the Adviser must assess the creditworthiness of each
such Counterparty or any guarantor or credit enhancement of the Counterparty's
credit to determine the likelihood that the terms of the OTC option will be met.
The Fund will enter into OTC option transactions only with U.S. government
securities dealers recognized by the Federal Reserve Bank of New York as
"primary dealers," or broker-dealers, domestic or foreign banks, or other
financial institutions that are deemed creditworthy by the Adviser. In the
absence of a change in the current position of the staff of the SEC, OTC options
purchased by the Fund and the amount of the Fund's obligation pursuant to an OTC
option sold by the Fund (the cost of the sell-back plus the in-the-money amount,
if any) or the value of the assets held to cover such options will be deemed
illiquid.

If the Fund sells a call option, the premium that it receives may serve as
a partial hedge, to the extent of the option premium, against a decrease in the
value of the underlying securities or instruments held by the Fund or will
increase the Fund's income. Similarly, the sale of put options can also provide
Fund gains.

The Fund may purchase and sell call options on securities and on Eurodollar
instruments that are traded on U.S. and foreign securities exchanges and in the
OTC markets, and on securities indices, currencies and futures contracts. All
calls sold by the Fund must be "covered," that is, the Fund must own the
securities subject to the call, must own an offsetting option on a futures
position, or must otherwise meet the asset segregation requirements described
below for so long as the call is outstanding. Even though the Fund will receive
the option premium to help protect it against loss, a call sold by the Fund will
expose the Fund during the term of the option to possible loss of opportunity to
realize appreciation in the market price of the underlying security or
instrument and may require the Fund to hold a security or instrument that it
might otherwise have sold.

The Fund reserves the right to purchase or sell options on instruments and
indices which may be developed in the future to the extent consistent with
applicable law, the Fund's investment objective and the restrictions set forth
herein.

If and to the extent authorized to do so, the Fund may purchase and sell
put options on securities (whether or not it holds the securities in its
portfolio) and on securities indices, currencies and futures contracts. In
selling put options, the Fund faces

B-3
<PAGE>

the risk that it may be required to buy the underlying security at a
disadvantageous price above the market price.

GENERAL CHARACTERISTICS OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

The Fund may trade financial futures contracts or purchase or sell put and
call options on those contracts as a hedge against anticipated interest rate,
currency or market changes, for duration management and for permissible
non-hedging purposes. Futures contracts are generally bought and sold on the
commodities exchanges on which they are listed with payment of initial and
variation margin as described below. The sale of a futures contract creates a
firm obligation by the Fund, as seller, to deliver to the buyer the specific
type of financial instrument called for in the contract at a specific future
time for a specified price (or, with respect to certain instruments, the net
cash amount). Options on futures contracts are similar to options on securities
except that an option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract and
obligates the seller to deliver that position.

The Fund's use of financial futures contracts and options thereon will in
all cases be consistent with applicable regulatory requirements and in
particular the rules and regulations of the CFTC and generally will be entered
into only for bona fide hedging, risk management (including duration management)
or other permissible non-hedging purposes. Maintaining a futures contract or
selling an option on a futures contract will typically require the Fund to
deposit with a financial intermediary, as security for its obligations, an
amount of cash or other specified assets ("initial margin") that initially is
from 1% to 10% of the face amount of the contract (but may be higher in some
circumstances). Additional cash or assets ("variation margin") may be required
to be deposited thereafter daily as the mark-to-market value of the futures
contract fluctuates. The purchase of an option on a financial futures contract
involves payment of a premium for the option without any further obligation on
the part of the Fund. If the Fund exercises an option on a futures contract it
will be obligated to post initial margin (and potentially variation margin) for
the resulting futures position just as it would for any futures position.
Futures contracts and options thereon are generally settled by entering into an
offsetting transaction, but no assurance can be given that a position can be
offset prior to settlement or that delivery will occur.

The Fund will not enter into a futures contract or option thereon for
purposes other than bona fide hedging if, immediately thereafter, the sum of the
amount of its initial margin and premiums required to maintain permissible
non-hedging positions in futures contracts and options thereon would exceed 5%
of the liquidation value of the Fund's net assets; however, in the case of an
option that is in-the-money at the time of the purchase, the in-the-money amount
may be excluded in calculating the 5% limitation. The segregation requirements
with respect to futures contracts and options thereon are described below under
"Use of Segregated and Other Special Accounts."

B-4
<PAGE>

OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES

The Fund may purchase and sell call and put options on securities indices
and other financial indices. In so doing, the Fund can achieve many of the same
objectives it would achieve through the sale or purchase of options on
individual securities or other instruments. Options on securities indices and
other financial indices are similar to options on a security or other instrument
except that, rather than settling by physical delivery of the underlying
instrument, options on indices settle by cash settlement; that is, an option on
an index gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the index upon which the option is based
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option (except if, in the case of an OTC option, physical
delivery is specified). This amount of cash is equal to the excess of the
closing price of the index over the exercise price of the option, which also may
be multiplied by a formula value. The seller of the option is obligated, in
return for the premium received, to make delivery of this amount. The gain or
loss on an option on an index depends on price movements in the instruments
comprising the market, market segment, industry or other composite on which the
underlying index is based, rather than price movements in individual securities,
as is the case with respect to options on securities.

CURRENCY TRANSACTIONS

The Fund may engage in currency transactions with Counterparties to hedge
the value of portfolio securities denominated in particular currencies against
fluctuations in relative value. Currency transactions include currency forward
contracts, exchange-listed currency futures contracts and options thereon,
exchange-listed and OTC options on currencies, and currency swaps. A forward
currency contract involves a privately negotiated obligation to purchase or sell
(with delivery generally required) 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. A currency swap is an
agreement to exchange cash flows based on the notional difference among two or
more currencies and operates similarly to an interest rate swap, which is
described below under "Swaps, Caps, Floors and Collars." The Fund may enter into
currency transactions only with Counterparties that are deemed creditworthy by
the Adviser.

The Fund's dealings in forward currency contracts and other currency
transactions such as futures contracts, options, options on futures contracts
and swaps will be limited to hedging and other non- speculative purposes,
including transaction hedging and position hedging. Transaction hedging is
entering into a currency transaction with respect to specific assets or
liabilities of the Fund, which will generally arise in connection with the
purchase or sale of the Fund's portfolio securities or the receipt of income
from them. Position hedging is entering into a currency transaction with respect
to portfolio securities positions denominated or generally quoted in that
currency. The Fund will not enter into a transaction to hedge currency exposure
to an extent greater, after netting all transactions intended wholly or
partially to offset other transactions, than the aggregate market value (at the
time of entering into the transaction) of the securities held by the Fund that
are

B-5
<PAGE>

denominated or generally quoted in or currently convertible into the currency,
other than with respect to proxy hedging as described below.

The Fund may cross-hedge currencies by entering into transactions to
purchase or sell one or more currencies that are expected to increase or decline
in value relative to other currencies to which the Fund has or in which the Fund
expects to have exposure. To reduce the effect of currency fluctuations on the
value of existing or anticipated holdings of its securities, the Fund may also
engage in proxy hedging. Proxy hedging is often used when the currency to which
the Fund's holdings is exposed is difficult to hedge generally or difficult to
hedge against the dollar. Proxy hedging entails entering into a forward contract
to sell a currency, the changes in the value of which are generally considered
to be linked to a currency or currencies in which some or all of the Fund's
securities are or are expected to be denominated, and to buy dollars. The amount
of the contract would not exceed the market value of the Fund's securities
denominated in linked currencies.

Currency transactions are subject to risks different from other portfolio
transactions, as discussed below under "Risk Factors." If the Fund enters into a
currency hedging transaction, the Fund will comply with the asset segregation
requirements described below under "Use of Segregated and Other Special
Accounts."

COMBINED TRANSACTIONS

The Fund may enter into multiple transactions, including multiple options
transactions, multiple futures transactions, multiple currency transactions
(including forward currency contracts), multiple interest rate transactions and
any combination of futures, options, currency and interest rate transactions as
part of a single or combined strategy when, in the judgment of the Adviser, it
is in the best interests of the Fund to do so. A combined transaction will
usually contain elements of risk that are present in each of its component
transactions. Although combined transactions will normally be entered into by
the Fund based on the Adviser's judgment that the combined strategies will
reduce risk or otherwise more effectively achieve the desired portfolio
management goal, it is possible that the combination will instead increase the
risks or hinder achievement of the portfolio management objective.

SWAPS, CAPS, FLOORS AND COLLARS

The Fund may enter into interest rate, currency and index swaps and the
purchase or sale of related caps, floors and collars. The Fund will enter into
these transactions primarily to seek to preserve a return or spread on a
particular investment or portion of its portfolio, to protect against currency
fluctuations, as a duration management technique or to protect against any
increase in the price of securities the Fund anticipates purchasing at a later
date. The Fund will use these transactions for non-speculative purposes and will
not sell interest rate caps or floors if it does not own securities or other
instruments providing the income the Fund may be obligated to pay. Interest rate
swaps involve the exchange by the Fund with another party of their respective
commitments to pay or receive interest (for example, an exchange of floating
rate payments for fixed rate

B-6
<PAGE>

payments with respect to a notional amount of principal). A currency swap is an
agreement to exchange cash flows on a notional amount based on changes in the
values of the reference indices. An index swap is an agreement to exchange cash
flows on a notional principal amount based on changes in the values of the
reference index. The purchase of a cap entitles the purchaser to receive
payments on a notional principal amount from the party selling the cap to the
extent that a specified index exceeds a predetermined interest rate. The
purchase of an interest rate floor entitles the purchaser to receive payments of
interest on a notional principal amount from the party selling the interest rate
floor to the extent that a specified index falls below a predetermined interest
rate or amount. The purchase of a floor entitles the purchaser to receive
payments on a notional principal amount from the party selling the floor to the
extent that a specific index falls below a predetermined interest rate or
amount. A collar is a combination of a cap and a floor that preserves a certain
return with a predetermined range of interest rates or values.

Provided the contract so permits, the Fund will usually enter into interest
rate swaps on a net basis, that is, the two payments streams are netted out in a
cash settlement on the payment date or dates specified in the instrument, with
the Fund receiving or paying, as the case may be, only the net amount of the two
payments. Inasmuch as these swaps, caps, floors, collars and other similar
derivatives are entered into for good faith hedging or other non-speculative
purposes, they do not constitute senior securities under the Investment Company
Act of 1940, as amended and, thus, will not be treated as being subject to the
Fund's borrowing restrictions. The Fund will not enter into any swap, cap,
floor, collar or other derivative transaction unless the Counterparty is deemed
creditworthy by the Adviser. If a Counterparty defaults, the Fund may have
contractual remedies pursuant to the agreements related to the transaction. The
swap market has grown substantially in recent years with a large number of banks
and investment banking firms acting both as principals and as agents utilizing
standardized swap documentation. As a result, the swap market has become
relatively liquid. Caps, floors and collars are more recent innovations for
which standardized documentation has not yet been fully developed and, for that
reason, they are less liquid than swaps.

The liquidity of swap agreements will be determined by the Adviser based on
various factors, including: (1) the frequency of trades and quotations; (2) the
number of dealers and prospective purchasers in the marketplace; (3) dealer
undertakings to make a market; (4) the nature of the security (including any
demand or tender features); and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). Such determination will govern whether a swap will
be deemed within the 15% restriction on investments in securities that are not
readily marketable.

The Fund will maintain cash and appropriate liquid assets in a segregated
custodial account to cover its current obligations under swap agreements. If the
Fund enters into a swap agreement on a net basis, it will segregate assets 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

B-7
<PAGE>

the Fund enters into a swap agreement on other than a net basis, it will
segregate assets with a value equal to the full amount of the Fund's accrued
obligations under the agreement. See "Use of Segregated and Other Special
Accounts."

EURODOLLAR INSTRUMENTS

The Fund may make investments in Eurodollar instruments, which are
typically dollar-denominated futures contracts or options on those contracts
that are linked to the London Interbank Offered Rate ("LIBOR"), although foreign
currency denominated instruments are available from time to time. Eurodollar
futures contracts enable purchasers to obtain a fixed rate for the lending of
funds and sellers to obtain a fixed rate for borrowings. The Fund might use
Eurodollar futures contracts and options thereon to hedge against changes in
LIBOR, to which many interest rate swaps and fixed income instruments are
linked.

RISK FACTORS

Hedging and Derivatives have special risks associated with them, including
possible default by the Counterparty to the transaction, illiquidity and, to the
extent the Adviser's view as to certain market movements is incorrect, the risk
that the use of the Hedging and Derivatives could result in losses greater than
if they had not been used. Use of put and call options could result in losses to
the Fund, force the sale or purchase of portfolio securities at inopportune
times or for prices higher than (in the case of put options) or lower than (in
the case of call options) current market values, or cause the Fund to hold a
security it might otherwise sell.

The use of futures and options transactions entails certain special risks.
In particular, the variable degree of correlation between price movements of
futures contracts and price movements in the related securities position of the
Fund could create the possibility that losses on the hedging instrument are
greater than gains in the value of the Fund's position. In addition, futures and
options markets could be illiquid in some circumstances and certain
over-the-counter options could have no markets. As a result, in certain markets,
the Fund might not be able to close out a transaction without incurring
substantial losses. Although the Fund's use of futures and options transactions
for hedging should tend to minimize the risk of loss due to a decline in the
value of the hedged position, at the same time it will tend to limit any
potential gain to the Fund that might result from an increase in value of the
position. Finally, the daily variation margin requirements for futures contracts
create a greater ongoing potential financial risk than would purchases of
options, in which case the exposure is limited to the cost of the initial
premium.

Currency hedging involves some of the same risks and considerations as
other transactions with similar instruments. Currency transactions can result in
losses to the Fund if the currency being hedged fluctuates in value to a degree
or in a direction that is not anticipated. Further, the risk exists that the
perceived linkage between various currencies may not be present or may not be
present during the particular time that a

B-8
<PAGE>

Fund is engaging in proxy hedging. Currency transactions are also subject to
risks different from those of other portfolio transactions. Because currency
control is of great importance to the issuing governments and influences
economic planning and policy, purchases and sales of currency and related
instruments can be adversely affected by government exchange controls,
limitations or restrictions on repatriation of currency, and manipulations or
exchange restrictions imposed by governments. These forms of governmental
actions can result in losses to the Fund if it is unable to deliver or receive
currency or monies in settlement of obligations and could also cause hedges it
has entered into to be rendered useless, resulting in full currency exposure as
well as incurring transaction costs. Buyers and sellers of currency futures
contracts are subject to the same risks that apply to the use of futures
contracts generally. Further, settlement of a currency futures contract for the
purchase of most currencies must occur at a bank based in the issuing nation.
Trading options on currency futures contracts is relatively new, and the ability
to establish and close out positions on these options is subject to the
maintenance of a liquid market that may not always be available. Currency
exchange rates may fluctuate based on factors extrinsic to that country's
economy.

Losses resulting from the use of Hedging and Derivatives will reduce the
Fund's net asset value, and possibly income, and the losses can be greater than
if Hedging and Derivatives had not been used.

RISKS OF HEDGING AND DERIVATIVES OUTSIDE THE UNITED STATES

When conducted outside the United States, Hedging and Derivatives may not
be regulated as rigorously as in the United States, may not involve a clearing
mechanism and related guarantees, and will be subject to the risk of
governmental actions affecting trading in, or the prices of, foreign securities,
currencies and other instruments. The value of positions taken as part of
non-U.S. Hedging and Derivatives also could be adversely affected by: (1) other
complex foreign political, legal and economic factors; (2) lesser availability
of data on which to make trading decisions than in the United States; (3) delays
in the Fund's ability to act upon economic events occurring in foreign markets
during non-business hours in the United States; (4) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (5) lower trading volume and liquidity.

USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS

Use of many Hedging and Derivatives by the Fund will require, among other
things, that the Fund segregate cash or other liquid assets with its custodian,
or a designated sub-custodian, to the extent the Fund's obligations are not
otherwise "covered" through ownership of the underlying security, financial
instrument or currency. In general, either the full amount of any obligation by
the Fund to pay or deliver securities or assets must be covered at all times by
the securities, instruments or currency required to be delivered, or, subject to
any regulatory restrictions, an amount of cash or liquid assets at least equal
to the current amount of the obligation must be segregated with the custodian or
sub-custodian. The segregated assets cannot be sold or transferred unless

B-9
<PAGE>

equivalent assets are substituted in their place or it is no longer necessary to
segregate them. A call option on securities written by the Fund, for example,
will require the Fund to hold the securities subject to the call (or securities
convertible into the needed securities without additional consideration) or to
segregate liquid assets sufficient to purchase and deliver the securities if the
call is exercised. A call option sold by the Fund on an index will require the
Fund to own portfolio securities that correlate with the index or to segregate
liquid assets equal to the excess of the index value over the exercise price on
a current basis. A put option on securities written by the Fund will require the
Fund to segregate liquid assets equal to the exercise price. Except when the
Fund enters into a forward contract in connection with the purchase or sale of a
security denominated in a foreign currency or for other non-speculative
purposes, which requires no segregation, a currency contract that obligates the
Fund to buy or sell a foreign currency will generally require the Fund to hold
an amount of that currency, liquid securities denominated in that currency equal
to the Fund's obligations or to segregate liquid assets equal to the amount of
the Fund's obligations.

OTC options entered into by the Fund, including those on securities,
currency, financial instruments or indices, and OCC-issued and exchange-listed
index options will generally provide for cash settlement, although the Fund will
not be required to do so. As a result, when the Fund sells these instruments it
will segregate an amount of assets equal to its obligations under the options.
OCC-issued and exchange-listed options sold by the Fund other than those
described above generally settle with physical delivery, and the Fund will
segregate an amount of assets equal to the full value of the option. OTC options
settling with physical delivery or with an election of either physical delivery
or cash settlement will be treated the same as other options settling with
physical delivery.

In the case of a futures contract or an option on a futures contract, the
Fund must deposit initial margin and, in some instances, daily variation margin
in addition to segregating assets sufficient to meet its obligations to purchase
or provide securities or currencies, or to pay the amount owed at the expiration
of an index-based futures contract. These assets may consist of cash, cash
equivalents or other liquid assets. The Fund will accrue the net amount of the
excess, if any, of its obligations relating to swaps over its entitlements with
respect to each swap on a daily basis and will segregate with its custodian, or
designated sub-custodian, an amount of cash or liquid assets having an aggregate
value equal to at least the accrued excess. Caps, floors and collars require
segregation of assets with a value equal to the Fund's net obligation, if any.

Hedging and Derivatives may be covered by means other than those described
above when consistent with applicable regulatory policies. The Fund may also
enter into offsetting transactions so that its combined position, coupled with
any segregated assets, equals its net outstanding obligation in related options
and Hedging and Derivatives. The Fund could purchase a put option, for example,
if the strike price of that option is the same or higher than the strike price
of a put option sold by the Fund. Moreover, instead of segregating assets if it
holds a futures contracts or forward contract, the Fund could purchase a put
option on the same futures contract or forward contract with a strike price as
high or higher than the price of the contract held. Other Hedging and
Derivatives may also be offset in combinations. If the offsetting transaction
terminates at the time of

B-10
<PAGE>

or after the primary transaction, no segregation is required, but if it
terminates prior to that time, assets equal to any remaining obligation would
need to be segregated.

B-11
<PAGE>

THE OFFIT VARIABLE INSURANCE FUND, INC.

<S> <C>
OFFICERS AND DIRECTORS INVESTMENT ADVISERS
Dr. Wallace Mathai-Davis OFFITBANK
CHAIRMAN OF THE BOARD, PRESIDENT AND 520 Madison Avenue
DIRECTOR New York, NY 10022-4213

Edward J. Landau David J. Greene & Company, LLC
DIRECTOR 599 Lexington Avenue
New York, NY 10022
The Very Reverend James Parks Morton (DJG VALUE EQUITY FUND)
DIRECTOR
SUB-ADVISER
Stephen M. Peck Rockefeller & Co., Inc.
DIRECTOR 30 Rockefeller Plaza
New York, NY 10112
Vincent M. Rella (U.S. SMALL CAP FUND)
TREASURER
DISTRIBUTOR
Stephen Brent Wells OFFIT Funds Distributor, Inc.
SECRETARY 3200 Horizon Drive
King of Prussia, PA 19406
Michael Kagan
ASSISTANT TREASURER CUSTODIANS
The Chase Manhattan Bank
4 MetroTech Center, 18th Floor
Brooklyn, NY 11245
(LATIN AMERICA EQUITY FUND)

The Bank of New York
90 Washington Street
New York, NY 10286
(ALL OTHER FUNDS)

LEGAL COUNSEL
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022

ADMINISTRATOR; TRANSFER AND DIVIDEND
DISBURSING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809

INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
</TABLE>

<PAGE>

FOR MORE INFORMATION

FOR INVESTORS WHO WANT MORE INFORMATION ON THE FUND, THE FOLLOWING DOCUMENTS ARE
AVAILABLE FREE UPON REQUEST:

ANNUAL/SEMI-ANNUAL REPORTS: Contain performance data and information on
portfolio holdings for the Fund's most recently completed fiscal year or half
year and, on an annual basis, a statement from portfolio management and the
auditor's report.

STATEMENT OF ADDITIONAL INFORMATION (SAI): Contains more detailed information
about the Fund's policies, investment restrictions, risks and business
structure. This prospectus incorporates the SAI by reference.

Copies of these documents and answers to questions about the Fund may be
obtained without charge by contacting:

THE OFFIT VARIABLE INSURANCE FUND, INC.
P.O. BOX 8701
WILMINGTON, DELAWARE 19899
1-800-618-9510

Information about the Fund (including the SAI) can be viewed and copied at the
Public Reference Room of the Securities and Exchange Commission (the "SEC") in
Washington, D.C. Copies of this information may be obtained, upon payment of a
duplicating fee, by writing the Public Reference Room of the SEC, Washington,
D.C., 20549-6009. Information on the operation of the Public Reference Room may
be obtained by calling the SEC at 1-800-SEC-0330. Reports and other information
about the Company may be viewed on-screen or downloaded from the SEC's Internet
site at http://www.sec.gov.

- -------------------------------------------------------------------------------
FOR MORE INFORMATION ON OPENING A NEW ACCOUNT, MAKING
CHANGES TO EXISTING ACCOUNTS, PURCHASING, EXCHANGING OR
REDEEMING SHARES, OR OTHER INVESTOR SERVICES, PLEASE CALL:

1-800-618-9510
MONDAY THROUGH FRIDAY
8:15 A.M. TO 6:00 P.M. (EST)
- -------------------------------------------------------------------------------

The Company's Investment Company Act File number is 811-08640.

<PAGE>

THE OFFIT VARIABLE INSURANCE FUND, INC.

OFFIT VIF - EMERGING MARKETS BOND FUND

PROSPECTUS

APRIL 30, 2000

<PAGE>

TABLE OF CONTENTS

A LOOK AT GOALS, STRATEGIES, FUND DESCRIPTION
RISKS AND FINANCIAL HISTORY. Investment Objective...........................3
Principal Investment Strategies................3
Principal Risk Factors.........................3
Prior Performance..............................4
Financial Highlights...........................6
Investment Objective and Principal
Strategies.....................................8
Additional Strategies.........................10
Risks of Investing in the Fund................10

DETAILS ON THE MANAGEMENT MANAGEMENT OF THE FUND
AND OPERATIONS OF THE FUND. Investment Adviser............................23
Service Provider Chart........................24

POLICIES AND INSTRUCTIONS FOR SHAREHOLDER INFORMATION
OPENING, MAINTAINING AND Pricing of Fund Shares........................25
CLOSING AN ACCOUNT IN THE Purchase of Fund Shares.......................25
FUND. Redemption of Fund Shares.....................26
Shareholder Services..........................26
Dividends and Distributions...................26
Taxes.........................................26
Shareholder Communications....................27
Performance Information.......................27

Appendix A: Ratings.........................A-1
Appendix B: Hedging and Derivatives.........B-1

FOR MORE INFORMATION..............see back cover

2
<PAGE>

OFFIT VIF EMERGING MARKETS BOND FUND

INVESTMENT OBJECTIVE

The Fund's investment objective is to provide investors with a competitive total
return by focusing on current yield and opportunities for capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

The Fund invests primarily in corporate and sovereign debt securities of
emerging market countries. Under normal circumstances, the Fund will invest at
least 80% of its total assets in debt instruments denominated in any currency,
including U.S. dollars, but may invest up to 20% of its total assets in equity
securities. An emerging market country is a country that is considered to be an
emerging or developing country by the World Bank or the International Finance
Corporation, or is determined by the Adviser to have per capita gross domestic
product below $7,500 (in 1994 dollars). The Fund attempts to benefit from
investment opportunities deriving from long-term improvement in economic and
political conditions, and other positive developments and trends in emerging
markets countries. In addition, the Fund may invest in Brady Bonds, zero coupon
securities, pay-in-kind bonds and discount obligations. The Fund may invest in
debt securities of any maturity and the interest rates on such securities may be
fixed or floating.

PRINCIPAL RISK FACTORS

- - Investors may lose money.

- - There is no limit on the amount of the Fund's total assets that may be
invested in non-U.S. dollar-denominated securities. International investing
is subject to special risks, including, but not limited to, currency
exchange rate volatility, political, social or economic instability, and
differences in taxation, auditing and other financial practices. These
types of risks may lead to greater losses in emerging markets.

- - Although the Fund will generally be invested in the issues of at least
three different countries, it may invest up to 25% of its total assets in
the debt obligations of any one country. Concentration in any one country
intensifies the international investing risks related to such country.

- - All or a substantial portion of the securities purchased by the Fund may be
lower rated or unrated debt securities (i.e., high yield, high risk debt
securities). High yield, high risk debt securities have a higher risk of
default in the payment of interest and principal and are subject to
significant changes in price. Investment by the Fund in such securities
involves a high degree of credit risk and such securities are regarded as
speculative by the major rating agencies.

- - The Fund is subject to interest rate risk. Rising interest rates cause the
prices of debt securities to decrease and falling rates cause the prices of
debt securities to increase.

3
<PAGE>

Securities with longer maturities can be more sensitive to interest rate
changes. In effect, the longer the maturity of a security, the greater the
impact a change in interest rates could have on the security's price.

- - The net asset value ("NAV") of the Fund will change with changes in the
market value of its portfolio positions.

- - Since the Fund attempts to benefit from investment opportunities derived
from long-term improvement in economic and political conditions, and other
positive trends and developments in emerging market countries, it is
intended for long-term investors. You should consider your ability to buy
and hold this Fund for the long-term.

For more detail on the principal risks summarized here, please see "Risks of
Investing in the Fund" herein.

PRIOR PERFORMANCE

ANNUAL TOTAL RETURNS

The bar chart below shows the annual total returns for the Fund for the last two
calendar years. The bar chart provides some indication of the risks of investing
in the Fund by showing changes in the Fund's performance from year to year. The
returns shown do not reflect separate charges for the Accounts and if those had
been included, performance would have been lower. Past performance is not
necessarily an indicator of how the Fund will perform in the future.

[GRAPH]
<TABLE>
<CAPTION>
ANNUAL TOTAL RETURN
PERFORMANCE YEARS
1997 1998 1999
<S> <C> <C>
8.14% -16.24% 25.19%
</TABLE>

Since inception (August 28, 1996), the highest calendar quarter total return for
the Fund was 16.71% (quarter ended December 30, 1998) and the lowest calendar
quarter total return was (29.33%) (quarter ended September 30, 1998).

4
<PAGE>

AVERAGE ANNUAL TOTAL RETURNS - COMPARISON

The table below shows how the Fund's average annual total returns for the past
one calendar year and since inception, compare with the Lipper Analytical
Emerging Market Debt Fund Objective (the "Lipper Emerging Market Index") for the
same periods. The table, like the bar chart, provides some indication of the
risks of investing in the Fund by showing how the Fund's average annual total
returns for one year and since inception compare with that of a broad measure of
market performance. Past performance is not necessarily an indicator of how the
Fund will perform in the future.

<TABLE>
<CAPTION>
Average Annual Total Returns
1 Year Since Inception
------ ---------------
<S> <C> <C>
Fund Shares*............................... 25.19% 5.64%
Lipper Emerging Market Index............... 24.40% 7.37%
</TABLE>

*Commenced operations on August 28, 1996.

5
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR FOR THE NINE FOR THE YEAR AUGUST 28,
ENDED MONTHS ENDED ENDED 1996* THROUGH
DECEMBER 31, DECEMBER 31, MARCH 31, MARCH 31,
1999 1998 1998 1997
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.60 $ 10.55 $ 10.30 $10.00(d)
---------- --------- ---------- ---------
Net investment income 0.94 0.66 0.86 0.48
Net realized and unrealized gains (loss) 0.86 (2.79) 0.27 0.34
---------- --------- ---------- ---------
Total income (loss) from investment operations 1.80 (2.13) 1.13 0.82
---------- --------- ---------- ---------
LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.94) (0.66) (0.86) (0.48)
Excess of net investment income - (0.07) (0.02) -
Net realized gains - (0.09) (0.04)
---------- --------- ---------- ---------
-
Total dividends and distributions (0.94) (0.82) (0.88) (0.52)
---------- --------- ---------- ---------
Net change in net asset value per share 0.86 (2.95) 0.25 0.30
---------- --------- ---------- ---------
NET ASSET VALUE, END OF PERIOD $ 8.46 $ 7.60 $ 10.55 $ 10.30
---------- --------- ---------- ---------
---------- --------- ---------- ---------

6
<PAGE>

TOTAL RETURN (a) 25.19% (20.36%)(b) 11.26% 8.29%(b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $ 7,686 $5,575 $5,780 $4,346
Ratios to average net assets:
Expenses ** 1.50% 1.50%(c) 1.50% 1.50%(c)
Net investment income 12.11% 10.38%(c) 8.27% 8.04%(c)
PORTFOLIO TURNOVER RATE 71% 100% 53% 96%
</TABLE>

7
<PAGE>

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

The investment objective of the Fund is to provide a competitive total
investment return by focusing on current yield and opportunities for capital
appreciation. The Fund seeks to achieve its objective by investing primarily in
corporate and sovereign debt instruments of emerging market countries. Under
normal circumstances, the Fund will invest at least 80% of its total assets in
debt instruments. As used in this Prospectus, an "emerging market country" is
any country that is considered to be an emerging or developing country by the
International Bank for Reconstruction and Development (the "World Bank") or the
International Finance Corporation, or is determined by the Adviser to have per
capita gross domestic product below $7,500 (in 1994 dollars). Under normal
circumstances, the Fund will be invested in at least three different countries.
Subject to the restriction that the Fund will not invest 25% or more of its
total assets in obligations issued by any one country, its agencies,
instrumentalities or political subdivisions, there is no limit on the amount the
Fund may invest in issuers located in any one country, or in securities
denominated in the currency of any one country, in order to take advantage of
what the Adviser believes to be favorable yields, currency exchange conditions
or total investment return potential. The Fund's investments may be denominated
in any currency, including U.S. dollars.

The Fund seeks to achieve a competitive U.S. dollar total investment return
while reducing volatility. The Fund attempts to benefit from investment
opportunities deriving from long-term improving economic and political
conditions, and other positive trends and developments in emerging market
countries. Accordingly, the Fund is intended for long-term investors and should
not be considered as a vehicle for trading purposes. The continuation of a
long-term international trend encouraging greater market orientation and
economic growth may result in local or international political, economic or
financial developments that could benefit the capital markets in emerging market
countries.

An "emerging market country" debt instrument or equity security, as used in this
Prospectus, means an instrument or security (i) of an issuer organized or with
more than 50% of its business activities in such emerging market country, (ii)
denominated in such country's currency or with a primary trading market in such
emerging market country, (iii) of a company which derives at least 50% of its
gross revenues from goods produced, sales made, services performed or
investments in such emerging market country, or (iv) issued or guaranteed by the
government of such emerging market country, its agencies, political subdivisions
or instrumentalities, or the central bank of such country. Determinations as to
eligibility will be made by the Adviser based on publicly available information
and inquiries made to companies. See "Risks of Investing in the Fund -
Securities of Non-U.S. Issuers" and "Risks of Investing in the Fund - High
Yield, High Risk Debt Securities."

Through credit analysis, the Adviser seeks to protect principal and to minimize
market and individual credit risk, as well as to identify opportunities for
capital appreciation. In selecting particular debt instruments for the Fund, the
Adviser intends to consider factors such as liquidity, price volatility, tax
implications, interest rate sensitivity, foreign currency exchange risks,
counterparty risks and technical market considerations. The Adviser is free to
invest in debt instruments of any maturity and duration and interest rates on
such securities may be fixed or floating. Debt instruments in which the Fund may
invest will not be required to meet a minimum

8
<PAGE>

rating standard and a substantial amount of such instruments are expected to be
non-investment grade securities (i.e., rated BB or lower by S&P or D&P, or Ba or
lower by Moody's, or if unrated, of comparable quality as determined by the
Adviser). See Appendix A to this Prospectus for a description of ratings of S&P,
Moody's and D&P. Investments in high yield, high risk debt securities involve
comparatively greater risks, including price volatility and the risk of default
in the timely payment of interest and principal, than higher rated securities.
Some of such investments may be non-performing securities or securities in
default when purchased. See "Risks of Investing in the Fund - High Yield, High
Risk Debt Securities."

The Fund may invest in "Brady Bonds," which are debt securities issued or
guaranteed by foreign governments in exchange for existing external commercial
bank indebtedness under a plan announced by former U.S. Treasury Secretary
Nicholas F. Brady in 1989. Brady Bonds may be collateralized or uncollateralized
and are issued in various currencies (primarily the U.S. dollar) and are
actively traded in the over-the-counter secondary market.

The Fund may invest in either collateralized or uncollateralized Brady Bonds.
U.S. dollar-denominated, collateralized Brady Bonds, which may be fixed rate par
bonds or floating rate discount bonds, are collateralized in full as to
principal by U.S. Treasury zero coupon bonds having the same maturity as the
bonds. Interest payments on such bonds generally are collateralized by cash or
securities in an amount that, in the case of fixed rate bonds, is equal to at
least six months of rolling interest payments or, in the case of floating rate
bonds, initially equal to at least one year's rolling interest payments based on
the applicable interest rate at that time and then adjusted at regular intervals
thereafter.

The Fund may invest in zero coupon securities and debt securities acquired at a
discount. A substantial portion of the Fund's sovereign debt securities may be
acquired at a discount. These investments involve special risk considerations.
Zero coupon securities are debt securities that pay no cash income but are sold
at substantial discounts from their value at maturity. The entire return of a
zero coupon security consists of the amortization of discount. The Fund may also
purchase pay-in-kind bonds. Pay-in-kind bonds pay all or a portion of their
interest in the form of debt or equity securities. The Fund may receive payments
from pay-in-kind bonds in the form of both debt and equity securities provided
that such equity securities do not cause the Fund to exceed its respective
investment limitation in equity securities. Zero coupon securities and
pay-in-kind bonds may be issued by a wide variety of corporate and governmental
issuers.

The Fund retains the flexibility to respond promptly to changes in market and
economic conditions. Accordingly, consistent with the Fund's investment
objectives, the Adviser may employ a temporary defensive investment strategy if
it determines such a strategy is warranted. Under such a defensive strategy, the
Fund may temporarily hold cash (U.S. dollars, foreign

9
<PAGE>

currencies or multinational currency units) and/or invest up to 100% of its
assets in high quality debt securities or money market instruments of U.S. or
foreign issuers, and most or all of the Fund's investments may be made in the
United States and denominated in U.S. dollars. In addition, pending investment
of proceeds from new sales of Fund shares or to meet ordinary daily cash needs,
the Fund may temporarily hold cash (U.S. dollars, foreign currencies or
multinational currency units) and may invest any portion of its assets in high
quality foreign or domestic money market instruments. The Adviser's choice to
employ a temporary defensive investment strategy may prevent the Fund from
achieving its investment objective.

ADDITIONAL STRATEGIES

The Fund may invest up to 20% of its total assets in common stocks, preferred
stocks, detachable warrants and other equity securities that may or may not be
listed or traded on a recognized securities exchange. The Fund intends that such
investments in equity securities often will be related to the Fund's investments
in debt instruments, such as those equity securities received upon the exercise
of convertible debt instruments or attached warrants, or those equity securities
acquired pursuant to investment opportunities derived from the Fund's activities
in emerging market debt markets. The equity securities purchased by the Fund may
include American Depository Receipts, European Depository Receipts and interests
in investment companies.

RISKS OF INVESTING IN THE FUND

GENERAL

The Fund's NAV will fluctuate, reflecting fluctuations in the market value of
its portfolio positions and its net currency exposure. The value of the
securities held by the Fund generally fluctuates, based on, among other things,
(i) interest rate movements and, for debt securities, their duration, (ii)
changes in the actual and perceived creditworthiness of the issuers of such
securities, (iii) changes in any applicable foreign currency exchange rates,
(iv) social, economic or political factors, (v) factors affecting the industry
in which the issuer operates, such as competition or technological advances, and
(vi) factors affecting the issuer directly, such as management changes or labor
relations. The objectives and policies of the Fund can be expected to affect the
return of the Fund and the degree of market and financial risk to which the Fund
is subject. The investment objective and policies of the Fund may, unless
otherwise specifically stated, be changed by the Directors of the Company
without a vote of the shareholders. As a matter of policy, the Directors would
not materially change the investment objective of the Fund without shareholder
approval. There is no assurance that the Fund will achieve its investment
objective.

10
<PAGE>

INTEREST RATE FLUCTUATIONS AND CREDIT RISK

HIGH YIELD, HIGH RISK DEBT SECURITIES

GENERAL. The Fund may invest all or substantially all of its assets in high
yield, high risk debt securities. High yield, high risk debt securities are
those debt securities rated below investment grade and unrated securities of
comparable quality. They offer yields that fluctuate over time, but which
generally are superior to the yields offered by higher-rated securities.
However, securities rated below investment grade also involve greater risks,
including greater price volatility and a greater risk of default in the timely
payment of principal and interest, than higher-rated securities. Under rating
agency guidelines, medium- and lower-rated securities and comparable unrated
securities will likely have some quality and protective characteristics that are
outweighed by large uncertainties or major risk exposures to adverse conditions.
Certain of the debt securities in which the Fund may invest may have, or be
considered comparable to securities having, the lowest ratings for
non-subordinated debt instruments assigned by Moody's, S&P or D&P (i.e., rated C
by Moody's or D by S&P or D&P). Under rating agency guidelines, these securities
are considered to have extremely poor prospects of ever attaining investment
grade standing, to have a current identifiable vulnerability to default, to be
unlikely to have the capacity to pay interest and repay principal when due in
the event of adverse business, financial or economic conditions, and/or to be in
default or not current in the payment of interest or principal. Such securities
are considered speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligations. Unrated
securities deemed comparable to these lower- and lowest-rated securities will
have similar characteristics. Accordingly, it is possible that these types of
factors could, in certain instances, reduce the value of securities held by the
Fund with a commensurate effect on the value of their respective shares.
Therefore, an investment in the Fund should not be considered as a complete
investment program for all investors.

11
<PAGE>

more difficult for the Company's Board of Directors to value the Fund's
portfolio securities and the Company's Directors may have to use a greater
degree of judgment in making such valuations. Furthermore, adverse publicity and
investor perceptions about lower-rated securities, whether or not based on
fundamental analysis, may tend to decrease the market value and liquidity of
such lower-rated securities. Less liquid secondary markets may also affect the
Fund's ability to sell securities at their fair value. In addition, the Fund may
invest up to 15% of its net assets, measured at the time of investment, in
illiquid securities, which may be more difficult to value and to sell at fair
value. If the secondary markets for high yield, high risk debt securities
contract due to adverse economic conditions or for other reasons, certain
previously liquid securities in the Fund's portfolio may become illiquid and the
proportion of the Fund's assets invested in illiquid securities may increase.

FIXED INCOME DEBT SECURITIES. The Fund may invest in fixed income debt
securities. Changes in market yields will affect a Fund's NAV as prices of fixed
income securities generally increase when interest rates decline and decrease
when interest rates rise. Prices of longer term securities generally increase or
decrease more sharply than those of shorter term securities in response to
interest rate changes, particularly if such securities were purchased at a
discount. While the market values of securities rated below investment grade and
comparable unrated securities tend to react less to fluctuations in interest
rate levels than do those of higher-rated securities, the market values of
certain of these securities also tend to be more sensitive to individual issuer
developments and changes in economic conditions than higher-rated securities. In
addition, such securities generally present a higher degree of credit risk.
Corporate issuers of securities valued below investment grade and comparable
unrated securities are often highly leveraged and may not have more traditional
methods of financing available to them, so that their ability to service their
debt obligations during an economic downturn or during sustained periods of
rising interest rates may be impaired. The risk of loss due to default in
payment of interest or principal by such issuers is significantly greater than
with investment grade securities because such securities generally are unsecured
and frequently are subordinated to the prior payment of senior indebtedness.

SOVEREIGN DEBT SECURITIES. Investing in sovereign debt securities will expose
the Fund to the direct or indirect consequences of political, social or economic
changes in the developing and

12
<PAGE>

emerging countries, that issue the securities. The ability and willingness of
sovereign obligors in developing and emerging countries or the governmental
authorities that control repayment of their external debt to pay principal and
interest on such debt when due may depend on general economic and political
conditions within the relevant country. Emerging and developing countries such
as those in which the Fund may invest have historically experienced, and may
continue to experience, high rates of inflation, high interest rates, exchange
rate fluctuations, trade difficulties and extreme poverty and unemployment. Many
of these countries are also characterized by political uncertainty or
instability. Additional factors which may influence the ability or willingness
to service debt include, but are not limited to, a country's cash flow
situation, the availability of sufficient foreign exchange on the date a payment
is due, the relative size of its debt service burden to the economy as a whole,
and its government's policy towards the International Monetary Fund, the World
Bank and other international agencies.

The ability of a foreign sovereign obligor to make timely and ultimate payments
on its external debt obligations will also be strongly influenced by the
obligor's balance of payments, including export performance, its access to
international credits and investments, fluctuations in interest rates and the
extent of its foreign reserves. A country whose exports are concentrated in a
few commodities or whose economy depends on certain strategic imports could be
vulnerable to fluctuations in international prices of these commodities or
imports. To the extent that a country receives payment for its exports in
currencies other than U.S. dollars, its ability to make debt payments
denominated in dollars could be adversely affected. If a foreign sovereign
obligor cannot generate sufficient earnings from foreign trade to service its
external debt, it may need to depend on continuing loans and aid from foreign
governments, commercial banks and multilateral organizations, and inflows of
foreign investment. The commitment on the part of these foreign governments,
multilateral organizations and others to make such disbursements may be
conditioned on the government's implementation of economic reforms and/or
economic performance and the timely service of its obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may curtail the willingness of such third parties
to lend funds, which may further impair the obligor's ability or willingness to
service its debts in a timely manner. The cost of servicing external debt will
also generally be adversely affected by rising international interest rates,
because many external debt obligations bear interest at rates which are adjusted
based upon international interest rates. The ability to service external debt
will also depend on the level of the relevant government's international
currency reserves and its access to foreign exchange. Currency devaluations may
affect the ability of a sovereign obligor to obtain sufficient foreign exchange
to service its external debt.

13
<PAGE>

SECURITIES OF NON-U.S. ISSUERS

A portion of the Fund's assets may be invested in the securities of non-U.S.
issuers. You should recognize that investing in securities of non-U.S. issuers
involves certain risks and special considerations, including those set forth
below, which are not typically associated with investing in securities of U.S.
issuers. Further, certain investments of the Fund, and investment techniques in
which the Fund may engage involve risks, including those set forth below.

14
<PAGE>

the government owns or controls many companies, including some of the largest in
the country. Accordingly, government actions in the future could have a
significant effect on economic conditions in many countries, including emerging
market countries, which could affect private sector companies and the Fund, and
on market conditions, prices and yields of securities in the Fund's portfolio.
There may be the possibility of nationalization or expropriation of assets, or
future confiscatory levels of taxation affecting the Fund. In the event of
nationalization, expropriation or other confiscation, the Fund may not be fairly
compensated for its loss and could lose its entire investment in the country
involved.

15
<PAGE>

countries and the United States, and other economic and financial conditions
affecting the world economy.

MARKET CHARACTERISTICS; DIFFERENCES IN SECURITIES MARKETS. The securities
markets in many countries, and in emerging market countries in particular,
generally have substantially less volume than the New York Stock Exchange, and
equity securities of most companies listed on such markets may be less liquid
and more volatile than equity securities of U.S. companies of comparable size.
Some of the stock exchanges outside of the United States and in emerging
market countries, to the extent that established securities markets even
exist, are in the earlier stages of their development. A high proportion of
the shares of many foreign companies may be held by a limited number of
persons, which may limit the number of shares available for investment by the
Fund. A limited number of issuers in most, if not all, of these securities
markets may represent a disproportionately large percentage of market
capitalization and trading volume. In addition, the application of certain
Investment Company Act of 1940, as amended ("1940 Act") provisions may limit
the Fund's ability to invest in certain non-U.S. issuers and to participate in
public offerings in these countries. The limited liquidity of certain non-U.S.

16
<PAGE>

securities markets may also affect the Fund's ability to acquire or dispose of
securities at the price and time it wishes to do so.

Trading practices in certain foreign securities markets are also significantly
different from those in the United States. Brokerage commissions and other
transaction costs on the securities exchanges in many countries are generally
higher than in the United States. In addition, securities settlements and
clearance procedures in certain countries, and emerging market countries in
particular, are less developed and less reliable than those in the United States
and the Fund may be subject to delays or other material difficulties and could
experience a loss if a counterparty defaults. Delays in settlement could result
in temporary periods when assets of the Fund are uninvested and therefore no
return is earned. The inability of the Fund to make intended security purchases
due to settlement problems could cause the Fund to miss attractive investment
opportunities. The inability to dispose of a portfolio security due to
settlement problems could result either in losses to the Fund due to subsequent
declines in the value of such portfolio security or, if the Fund has entered
into a contract to sell the security, could result in possible liability to the
purchaser.

17
<PAGE>

CONVERTIBLE SECURITIES

GENERAL. The Fund may invest in convertible securities. Set forth below is
additional information concerning traditional convertible securities and
"synthetic" convertible securities.

18
<PAGE>

where the issuer is domiciled. With respect to convertible securities
denominated in a currency different from that of the underlying equity
securities, the conversion price may be based on a fixed exchange rate
established at the time the security is issued. As a result, fluctuations in the
exchange rate between the currency in which the debt security is denominated and
the currency in which the share price is quoted will affect the value of the
convertible security. The Fund may enter into foreign currency hedging
transactions in which they may seek to reduce the impact of such fluctuations.

19
<PAGE>

money market instruments. The convertibility component is achieved by investing
in warrants, exchanges or NASDAQ-listed call options or stock index call options
granting the holder the right to purchase a specified quantity of securities
within a specified period of time at a specified price or to receive cash in the
case of stock index options.

SHORT SALES

20
<PAGE>

the Fund is required to replace in connection with a short sale increases, the
value of the related securities in the Fund's portfolio will also increase,
although not necessarily in the same proportion.

HEDGING AND DERIVATIVES

Hedging and Derivatives may generally be used to attempt to protect against
possible changes in the market value of securities held or to be purchased by
the Fund resulting from securities markets or currency exchange rate
fluctuations, to protect the Fund's unrealized gains in the value of its
securities, to facilitate the sale of those securities for investment purposes,
to manage the effective maturity or duration of the Fund's securities or to
establish a position in the derivatives markets as a temporary substitute for
purchasing or selling particular securities. The Fund may use any or all types
of Hedging and Derivatives which it is authorized to use at any time; no
particular strategy will dictate the use of one type of transaction rather than
another, as use of any authorized Hedging and Derivatives will be a function of
numerous variables, including market conditions. The ability of the Fund to
utilize Hedging and Derivatives successfully will depend on, in addition to the
factors described above, the Adviser's ability to predict pertinent market
movements, which cannot be assured. These skills are different from those needed
to select the Fund's securities. The Fund is not a "commodity pool" (i.e., a
pooled investment vehicle which trades in commodity futures contracts and
options thereon and the operator of which is registered with the Commodity
Futures Trading Commission (the "CFTC")) and Hedging and Derivatives involving
futures contracts and options on futures contracts will be purchased, sold or
entered into only for bona fide hedging, and non-hedging purposes to the extent
permitted by CFTC regulations; provided that the Fund may enter into futures
contracts or options thereon for purposes other than bona fide hedging if
immediately thereafter, the sum of the amount of its initial margin and premiums
on open contracts would not exceed 5% of the liquidation value of the Fund's
portfolio; provided further, than in the case of an option that is in-the-money
at the time of the purchase, the in-the-money amount may be excluded in
calculating the 5% limitation. The use of certain Hedging and Derivatives will
require that the Fund segregate cash, U.S. government securities or other liquid
high grade debt obligations to the

21
<PAGE>

extent the Fund's obligations are not otherwise "covered" through ownership of
the underlying security, financial instrument or currency.

NON-DIVERSIFIED FUNDS

YEAR 2000

22
<PAGE>

MANAGEMENT OF THE FUND

INVESTMENT ADVISER

The Fund's investment adviser is OFFITBANK, whose principal address is 520
Madison Avenue, New York, New York 10022 (the "Adviser" or "OFFITBANK").
OFFITBANK is a subsidiary of the Wachovia Corporation, a leading bank holding
company with Wachovia Bank, NA as its principal subsidiary. OFFITBANK manages
the Fund's business and investment activities, subject to the authority of the
Company's Board of Directors. OFFITBANK's principal business is providing
discretionary investment management services to high net worth individuals and
family groups, foundations, endowments and corporations. OFFITBANK specializes
in global fixed income asset management and offers its clients a complete range
of investments in the major capital markets of the world. OFFITBANK currently
manages approximately $10.7 billion in assets and serves as investment adviser
to twenty registered investment company portfolios.

Richard M. Johnston and Richard C. Madigan serve as portfolio managers of the
Fund. Mr. Johnston is a Managing Director of the Adviser and has been the
director of Latin American investments since 1992. From 1988 to 1992 Mr.
Johnston was Vice President, International Corporate Finance at Salomon Brothers
Inc. Mr. Madigan co-heads the Adviser's emerging markets investment team and has
been associated with the Adviser since 1998. From 1996 to 1998, Mr. Madigan was
Vice President and Principal of the Emerging Markets Fixed Income Institutional
Sales group at JP Morgan Securities, Inc. and from 1994 to 1996, Mr. Madigan was
Vice President and Principal of the Cross Border Finance Group at Citicorp
Securities, Inc.

The advisory fee paid by the Fund, as a percentage of average net assets, for
the fiscal year ended December 31, 1999, after waivers and reimbursements, was
0.33%.

The following chart shows the Company's other service providers and includes
their addresses and principal activities.

23
<PAGE>
OFFIT VIF-EMERGING MARKETS FUND

<TABLE>
<S><C>
|-------------------------------|
| SHAREHOLDERS |
|-------------------------------|
|
|
|
|
------------------------------------------------
| | |
| | |
| | |
|------------------------------------| | |----------------------------------------|
| PRINCIPAL DISTRIBUTOR | | | TRANSFER AGENT |
OFFIT FUNDS DISTRIBUTOR, INC. | | | PFPC INC. |
| 3200 HORIZON DRIVE | | | 400 BELLEVUE PARKWAY |
| KING OF PRUSSIA, PA | | | WILMINGTON, DE 19809 |
| 19406 |----|----| |
| Distributes the Fund's shares. | | | Handles shareholder services, |
| | | |including recordkeeping and statements, |
| | | |distribution of dividends and processing|
| | | | of buy and sell requests. |
|------------------------------------| | |----------------------------------------|
|
|
|
|
|
|------------------------------------| | |-----------------------------------------|
| INVESTMENT ADVISER | | | CUSTODIAN |
| OFFITBANK | | | THE BANK OF NEW YORK |
| 520 MADISON AVENUE | | | ("BONY") |
| NEW YORK, NY 10022-4213 | | | 90 WASHINGTON STREET |
| |----| | NEW YORK, NY 10286 |
| Manages the Fund's business and | | | |
| investment activities. | | |Serves as custodian of the assets of the |
| | | |Fund. The custodian settles all portfolio|
| | | |trades and collects most of the valuation|
| | | |data required for calculating the Fund's |
|------------------------------------| | | net asset value ("NAV") |
| |-----------------------------------------|
| |
| |
| |
| |
|-------------------------------------| | |
| ADMINISTRATOR AND | | |
| FUND ACCOUNTING AGENT | | |
| PFPC INC. | | |
| 400 BELLEVUE PARKWAY | | |
| WILMINGTON, DE 19809 |---|---------------------------
| | |
| Provides facilities, equipment and | |
|personnel to carry out administrative| |
| services related to the Fund and | |
|calculates the Fund's NAV, dividends | |
| and distributions. | |
|-------------------------------------| |
|
|
|--------------------------------|
| BOARD OF DIRECTORS |
|Supervises the Fund's activities|
|--------------------------------|
</TABLE>

24
<PAGE>

SHAREHOLDER INFORMATION

PRICING OF FUND SHARES

Shares of the Fund are priced at their net asset value ("NAV"). The NAV of the
Fund is calculated as follows:

Value of Assets
NAV = - Value of Liabilities
---------------------------------
Number of Outstanding Shares

PURCHASE OF FUND SHARES

25
<PAGE>

conditions in the securities markets or for other reasons.

Individuals may not place orders directly with the Fund. Please refer to the
appropriate Account Prospectus of the Participating Company for more information
on the purchase of Fund shares.

REDEMPTION OF FUND SHARES

SHAREHOLDER SERVICES

DIVIDENDS AND DISTRIBUTIONS

The Fund will declare dividends of substantially all of its net investment
income daily and pay dividends quarterly. The Fund distributes, at least
annually, its net capital gains, if any. The Fund will inform shareholders of
the amount and nature of all such income or gains.

Any income and capital gains distributions are paid in the form of additional
shares of the Fund.

TAXES

26
<PAGE>

THE TAX STATUS OF YOUR INVESTMENT IN THE FUND DEPENDS UPON THE FEATURES OF YOUR
POLICY OR CONTRACT. FOR FURTHER INFORMATION, PLEASE REFER TO THE ACCOUNT OR
POLICY PROSPECTUS.

SHAREHOLDER COMMUNICATIONS

PERFORMANCE INFORMATION

27
<PAGE>

28
<PAGE>

APPENDIX A

COMMERCIAL PAPER RATINGS

A S&P commercial paper rating is a current opinion of the
creditworthiness of an obligor with respect to financial obligations having an
original maturity of no more than 365 days. The following summarizes the rating
categories used by S&P for commercial paper:

"A-1" - Obligations are rated in the highest category indicating that
the obligor's capacity to meet its financial commitment on the obligation is
strong. Within this category, certain obligations are designated with a plus
sign (+). This indicates that the obligor's capacity to meet its financial
commitment on these obligations is extremely strong.

"A-2" - Obligations are somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than obligations in
higher rating categories. However, the obligor's capacity to meet its financial
commitment on the obligation is satisfactory.

"C" - Obligations are currently vulnerable to nonpayment and are
dependent upon favorable business, financial, and economic conditions for the
obligor to meet its financial commitment on the obligation.

"D" - Obligations are in payment default. The "D" rating category is
used when payments on an obligation are not made on the date due even if the
applicable grace period has not expired, unless S&P believes that such payments
will be made during such grace period. The "D" rating will be used upon the
filing of a bankruptcy petition or the taking of a similar action if payments on
an obligation are jeopardized.

LOCAL CURRENCY AND FOREIGN CURRENCY RISKS

County risk considerations are a standard part of S&P's analysis for
credit ratings on any issuer or issue. Currency of repayment is a key factor in
this analysis. An obligor's capacity to

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Moody's commercial paper ratings are opinions of the ability of issuers
to repay punctually senior debt obligations not having an original maturity in
excess of one year, unless explicitly noted. The following summarizes the rating
categories used by Moody's for commercial paper:

"Prime-1" - Issuers (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries; high rates of return on
funds employed; conservative capitalization structure with moderate reliance on
debt and ample asset protection; broad margins in earnings coverage of fixed
financial charges and high internal cash generation; and well-established access
to a range of financial markets and assured sources of alternate liquidity.

"Prime-2" - Issuers (or supporting institutions) have a strong ability
for repayment of senior short-term debt obligations. This will normally be
evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.

"Prime-3" - Issuers (or supporting institutions) have an acceptable
ability for repayment of senior short-term debt obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.

"Not Prime" - Issuers do not fall within any of the Prime rating
categories.

The three rating categories of D&P for investment grade commercial
paper and short-term debt are "D-1," "D-2" and "D-3." D&P employs three
designations, "D-1+," "D-1" and "D-1-," within the highest rating category. The
following summarizes the rating categories used by D&P for commercial paper:

"D-1+" - Debt possesses the highest certainty of timely payment.
Short-term liquidity, including internal operating factors and/or access to
alternative sources of funds, is outstanding, and safety is just below risk-free
U.S. Treasury short-term obligations.

"D-1" - Debt possesses very high certainty of timely payment. Liquidity
factors are excellent and supported by good fundamental protection factors. Risk
factors are minor.

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<PAGE>

"D-1-" - Debt possesses high certainty of timely payment. Liquidity
factors are strong and supported by good fundamental protection factors. Risk
factors are very small.

"D-2" - Debt possesses good certainty of timely payment. Liquidity
factors and company fundamentals are sound. Although ongoing funding needs may
enlarge total financing requirements, access to capital markets is good. Risk
factors are small.

"D-3" - Debt possesses satisfactory liquidity and other protection
factors qualify issues as to investment grade. Risk factors are larger and
subject to more variation. Nevertheless, timely payment is expected.

"D-4" - Debt possesses speculative investment characteristics.
Liquidity is not sufficient to insure against disruption in debt service.
Operating factors and market access may be subject to a high degree of
variation.

"D-5" - Issuer has failed to meet scheduled principal and/or interest
payments.

Fitch short-term ratings apply to debt obligations that have time
horizons of less than 12 months for most obligations, or up to three years for
U.S. public finance securities. The following summarizes the rating categories
used by Fitch for short-term obligations:

"F2" - Securities possess good credit quality. This designation
indicates a satisfactory capacity for timely payment of financial commitments,
but the margin of safety is not as great as in the case of the higher ratings.

"F3" - Securities possess fair credit quality. This designation
indicates that the capacity for timely payment of financial commitments is
adequate; however, near-term adverse changes could result in a reduction to
non-investment grade.

"C" - Securities possess high default risk. This designation indicates
that default is a real possibility and that the capacity for meeting financial
commitments is solely reliant upon a sustained, favorable business and economic
environment.

"D" - Securities are in actual or imminent payment default.

CORPORATE AND MUNICIPAL LONG-TERM DEBT RATINGS

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The following summarizes the ratings used by S&P for corporate and
municipal debt:

"AAA" - An obligation rated "AAA" has the highest rating assigned by
S&P. The obligor's capacity to meet its financial commitment on the obligation
is extremely strong.

"AA" - An obligation rated "AA" differs from the highest rated
obligations only in small degree. The obligor's capacity to meet its financial
commitment on the obligation is very strong.

"A" - An obligation rated "A" is somewhat more susceptible to the
adverse effects of changes in circumstances and economic conditions than
obligations in higher-rated categories. However, the obligor's capacity to meet
its financial commitment on the obligation is still strong.

"BBB" - An obligation rated "BBB" exhibits adequate protection
parameters. However, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity of the obligor to meet its financial
commitment on the obligation.

"BB" - An obligation rated "BB" is less vulnerable to nonpayment than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial or economic conditions which could lead
to the obligor's inadequate capacity to meet its financial commitment on the
obligation.

"CCC" - An obligation rated "CCC" is currently vulnerable to
nonpayment, and is dependent upon favorable business, financial and economic
conditions for the obligor to meet its financial commitment on the obligation.
In the event of adverse business, financial, or economic conditions, the obligor
is not likely to have the capacity to meet its financial commitment on the
obligation.

"CC" - An obligation rated "CC" is currently highly vulnerable to
nonpayment.

"C" - The "C" rating may be used to cover a situation where a
bankruptcy petition has been filed or similar action has been taken, but
payments on this obligation are being continued.

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The "D" rating also will be used upon the filing of a bankruptcy petition or the
taking of a similar action if payments on an obligation are jeopardized.

PLUS (+) OR MINUS (-) - The ratings from "AA" through "CCC" may be
modified by the addition of a plus or minus sign to show relative standing
within the major rating categories.

* - Continuance of the ratings is contingent upon S&P's receipt of an
executed copy of the escrow agreement or closing documentation confirming
investments and cash flows.

"r" - The `r' highlights derivative, hybrid, and certain other
obligations that S&P believes may experience high volatility or high variability
in expected returns as a result of noncredit risks. Examples of such obligations
are securities with principal or interest return indexed to equities,
commodities, or currencies; certain swaps and options; and interest-only and
principal-only mortgage securities. The absence of an `r' symbol should not be
taken as an indication that an obligation will exhibit no volatility or
variability in total return.

The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt:

"Aaa" - Bonds are judged to be of the best quality. They carry the
smallest degree of investment risk and are generally referred to as "gilt
edged." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.

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<PAGE>

fluctuation of protective elements may be of greater amplitude or there may be
other elements present which make the long-term risk appear somewhat larger than
the "Aaa" securities.

"Baa" - Bonds are considered as medium-grade obligations, (i.e., they
are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.

"Ba," "B," "Caa," "Ca," and "C" - Bonds that possess one of these
ratings provide questionable protection of interest and principal ("Ba"
indicates speculative elements; "B" indicates a general lack of characteristics
of desirable investment; "Caa" are of poor standing; "Ca" represents obligations
which are speculative in a high degree; and "C" represents the lowest rated
class of bonds). "Caa," "Ca" and "C" bonds may be in default.

Con. (...) - Bonds for which the security depends upon the completion
of some act or the fulfillment of some condition are rated conditionally. These
are bonds secured by (a) earnings of projects under construction, (b) earnings
of projects unseasoned in operating experience, (c) rentals which begin when
facilities are completed, or (d) payments to which some other limiting condition
attaches. Parenthetical rating denotes probable credit stature upon completion
of construction or elimination of basis of condition.

The following summarizes the long-term debt ratings used by D&P for
corporate and municipal long-term debt:

"AAA" - Debt is considered to be of the highest credit quality. The
risk factors are negligible, being only slightly more than for risk-free U.S.
Treasury debt.

"AA" - Debt is considered to be of high credit quality. Protection
factors are strong. Risk is modest but may vary slightly from time to time
because of economic conditions.

"A" - Debt possesses protection factors which are average but adequate.
However, risk factors are more variable in periods of greater economic stress.

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<PAGE>

"BBB" - Debt possesses below-average protection factors but such
protection factors are still considered sufficient for prudent investment.
Considerable variability in risk is present during economic cycles.

"BB," "B," "CCC," "DD," and "DP" - Debt that possesses one of these
ratings is considered to be below investment grade. Although below investment
grade, debt rated "BB" is deemed likely to meet obligations when due. Debt rated
"B" possesses the risk that obligations will not be met when due. Debt rated
"CCC" is well below investment grade and has considerable uncertainty as to
timely payment of principal, interest or preferred dividends. Debt rated "DD" is
a defaulted debt obligation, and the rating "DP" represents preferred stock with
dividend arrearages.

The following summarizes the ratings used by Fitch for corporate and
municipal bonds:

"AAA" - Bonds considered to be investment grade and of the highest
credit quality. These ratings denote the lowest expectation of credit risk and
are assigned only in case of exceptionally strong capacity for timely payment of
financial commitments. This capacity is highly unlikely to be adversely affected
by foreseeable events.

"A" - Bonds considered to be investment grade and of high credit
quality. These ratings denote a low expectation of credit risk and indicate
strong capacity for timely payment of financial commitments. This capacity may,
nevertheless, be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings.

"BBB" - Bonds considered to be investment grade and of good credit
quality. These ratings denote that there is currently a low expectation of
credit risk. The capacity for timely payment of financial commitments is
considered adequate, but adverse changes in circumstances and in economic
conditions are more likely to impair this capacity.

"B" - Bonds are considered highly speculative. These ratings indicate
that significant credit risk is present, but a limited margin of safety remains.
Financial commitments are

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<PAGE>

currently being met; however, capacity for continued payment is contingent upon
a sustained, favorable business and economic environment.

"DDD," "DD" and "D" - Bonds are in default. The ratings of obligations
in this category are based on their prospects for achieving partial or full
recovery in a reorganization or liquidation of the obligor. While expected
recovery values are highly speculative and cannot be estimated with any
precision, the following serve as general guidelines. "DDD" obligations have the
highest potential for recovery, around 90%-1000% of outstanding amounts and
accrued interest. "DD" indicates potential recoveries in the range of 50%-90%,
and "D" the lowest recovery potential, i.e., below 50%.

To provide more detailed indications of credit quality, the Fitch
ratings from and including "AA" to "CCC" may be modified by the addition of a
plus (+) or minus (-) sign to denote relative standing within these major rating
categories.

`NR' indicates the Fitch does not rate the issuer or issue in
questions.

`Withdrawn': A rating is withdrawn when Fitch deems the amount of
information available to be inadequate for rating purposes, or when an
obligation matures, is called, or refinanced.

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<PAGE>

MUNICIPAL NOTE RATINGS

A S&P rating reflects the liquidity factors and market access risks
unique to notes due in three years or less. The following summarizes the ratings
used by S&P for municipal notes:

"SP-1" - The issuers of these municipal notes exhibit a strong capacity
to pay principal and interest. Those issues determined to possess very strong
characteristics are given a plus (+) designation.

"SP-2" - The issuers of these municipal notes exhibit satisfactory
capacity to pay principal and interest, with some vulnerability to adverse
financial and economic changes over the term of the notes.

"SP-3" - The issuers of these municipal notes exhibit speculative
capacity to pay principal and interest.

Moody's ratings for state and municipal notes and other short-term
loans are designated Moody's Investment Grade ("MIG") and variable rate demand
obligations are designated Variable Moody's Investment Grade ("VMIG"). Such
ratings recognize the differences between short-term credit risk and long-term
risk. The following summarizes the ratings by Moody's Investors Service, Inc.
for short-term notes:

"MIG-1"/"VMIG-1" - This designation denotes best quality. There is
present strong protection by established cash flows, superior liquidity support
or demonstrated broad-based access to the market for refinancing.

"MIG-2"/"VMIG-2" - This designation denotes high quality. Margins of
protection that are ample although not so large as in the preceding group.

"MIG-4"/"VMIG-4" - This designation denotes adequate quality.
Protection commonly regarded as required of an investment security is present
and although not distinctly or predominantly speculative, there is specific
risk.

"SG" - This designation denotes speculative quality. Debt instruments
in this category lack margins of protection.

Fitch and D&P use the short-term ratings described under Commercial
Paper Ratings for municipal notes.

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<PAGE>

APPENDIX B

HEDGING AND DERIVATIVES

A detailed discussion of Hedging and Derivatives follows below. The
Fund is not obligated, however, to pursue any of such strategies and the Fund
makes no representation as to the availability of these techniques at this time
or at any time in the future. In addition, the Fund's ability to pursue certain
of these strategies may be limited by the Commodity Exchange Act, as amended,
applicable rules and regulations of the Commodity Futures Trading Commission
("CFTC") thereunder and the federal income tax requirements applicable to
regulated investment companies which are not operated as commodity pools. To the
extent not otherwise restricted by the Securities and Exchange Commission (the
"SEC"), the CFTC, the Code or its investment objectives and policies, the Fund
may utilize, without limitation, Hedging and Derivatives. See "Additional
Information Concerning Dividends, Distributions and Taxes" in the Statement of
Additional Information.

GENERAL CHARACTERISTICS OF OPTIONS

A put option gives the purchaser of the option, upon payment of a
premium, the right to sell, and the writer the obligation to buy, the underlying
security, commodity, index, currency or other instrument at the exercise price.
The Fund's purchase of a put option on a security, for example, might be
designed to protect its holdings in the underlying instrument (or, in some
cases, a similar instrument) against a substantial decline in the market value
of such instrument by giving the Fund the right to sell the instrument at the
option exercise price. A call option, upon payment of a premium, gives the
purchaser of the option the right to buy, and the seller the obligation to sell,
the underlying instrument at the exercise price. The Fund's purchase of a call
option on a security, financial futures contract, index, currency or other
instrument might be intended to protect the Fund against an increase in the
price of the underlying instrument that it

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<PAGE>

OCC-issued and exchange-listed options, with certain exceptions,
generally settle by physical delivery of the underlying security or currency,
although in the future, cash settlement may become available. Index options and
Eurodollar instruments (which are described below under "Eurodollar
Instruments") are cash settled for the net amount, if any, by which the option
is "in-the-money" (that is, the amount by which the value of the underlying
instrument exceeds, in the case of a call option, or is less than, in the case
of a put option, the exercise price of the option) at the time the option is
exercised. Frequently, rather than taking or making delivery of the underlying
instrument through the process of exercising the option, listed options are
closed by entering into offsetting purchase or sale transactions that do not
result in ownership of the new option.

The Fund's inability to close out its position as a purchaser or seller
of an OCC-issued or exchange-listed put or call option is dependent, in part,
upon the liquidity of the particular option market. Among the possible reasons
for the absence of a liquid option market on an exchange are: (1) insufficient
trading interest in certain options; (2) restrictions on transactions imposed by
an exchange; (3) trading halts, suspensions or other restrictions imposed with
respect to particular classes or series of options or underlying securities,
including reaching daily price limits; (4) interruption of the normal operations
of the OCC or an exchange; (5) inadequacy of the facilities of an exchange or
the OCC to handle current trading volume; or (6) a decision by one or more
exchanges to discontinue the trading of options (or a particular class or series
of options), in which event the relevant market for that option on that exchange
would cease to exist, although any such outstanding options on that exchange
would continue to be exercisable in accordance with their terms.

Over-the-counter ("OTC") options are purchased from or sold to
securities dealers, financial institutions or other parties (collectively
referred to as "Counterparties" and individually referred to as a
"Counterparty") through a direct bilateral agreement with the Counterparty. In
contrast to exchange-listed options, which generally have standardized terms and
performance mechanics, all of the terms of an OTC option, including such terms
as method of settlement, term, exercise price, premium, guarantees

B-2
<PAGE>

If the Fund sells a call option, the premium that it receives may serve
as a partial hedge, to the extent of the option premium, against a decrease in
the value of the underlying securities or instruments held by the Fund or will
increase the Fund's income. Similarly, the sale of put options can also provide
Fund gains.

The Fund may purchase and sell call options on securities and on
Eurodollar instruments that are traded on U.S. and foreign securities exchanges
and in the OTC markets, and on securities indices, currencies and futures
contracts. All calls sold by the Fund must be "covered," that is, the Fund must
own the securities subject to the call, must own an offsetting option on a
futures position, or must otherwise meet the asset segregation requirements
described below for so long as the call is outstanding. Even though the Fund
will receive the option premium to help protect it against loss, a call sold by
the Fund will expose the Fund during the term of the option to possible loss of
opportunity to realize appreciation in the market price of the underlying
security or instrument and may require the Fund to hold a security or instrument
that it might otherwise have sold.

The Fund reserves the right to purchase or sell options on instruments
and indices which may be developed in the future to the extent consistent with
applicable law, the Fund's investment objective and the restrictions set forth
herein.

If and to the extent authorized to do so, the Fund may purchase and
sell put options on securities (whether or not it holds the securities in its
portfolio) and on securities indices, currencies and futures contracts. In
selling put options, the Fund faces

B-3
<PAGE>

the risk that it may be required to buy the underlying security at a
disadvantageous price above the market price.

GENERAL CHARACTERISTICS OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

The Fund may trade financial futures contracts or purchase or sell put
and call options on those contracts as a hedge against anticipated interest
rate, currency or market changes, for duration management and for permissible
non-hedging purposes. Futures contracts are generally bought and sold on the
commodities exchanges on which they are listed with payment of initial and
variation margin as described below. The sale of a futures contract creates a
firm obligation by the Fund, as seller, to deliver to the buyer the specific
type of financial instrument called for in the contract at a specific future
time for a specified price (or, with respect to certain instruments, the net
cash amount). Options on futures contracts are similar to options on securities
except that an option on a futures contract gives the purchaser the right, in
return for the premium paid, to assume a position in a futures contract and
obligates the seller to deliver that position.

The Fund's use of financial futures contracts and options thereon will
in all cases be consistent with applicable regulatory requirements and in
particular the rules and regulations of the CFTC and generally will be entered
into only for bona fide hedging, risk management (including duration management)
or other permissible non-hedging purposes. Maintaining a futures contract or
selling an option on a futures contract will typically require the Fund to
deposit with a financial intermediary, as security for its obligations, an
amount of cash or other specified assets ("initial margin") that initially is
from 1% to 10% of the face amount of the contract (but may be higher in some
circumstances). Additional cash or assets ("variation margin") may be required
to be deposited thereafter daily as the mark-to-market value of the futures
contract fluctuates. The purchase of an option on a financial futures contract
involves payment of a premium for the option without any further obligation on
the part of the Fund. If the Fund exercises an option on a futures contract it
will be obligated to post initial margin (and potentially variation margin) for
the resulting futures position just as it would for any futures position.
Futures contracts and options thereon are generally settled by entering into an
offsetting transaction, but no assurance can be given that a position can be
offset prior to settlement or that delivery will occur.

B-4
<PAGE>

OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES

The Fund may purchase and sell call and put options on securities
indices and other financial indices. In so doing, the Fund can achieve many of
the same objectives it would achieve through the sale or purchase of options on
individual securities or other instruments. Options on securities indices and
other financial indices are similar to options on a security or other instrument
except that, rather than settling by physical delivery of the underlying
instrument, options on indices settle by cash settlement; that is, an option on
an index gives the holder the right to receive, upon exercise of the option, an
amount of cash if the closing level of the index upon which the option is based
exceeds, in the case of a call, or is less than, in the case of a put, the
exercise price of the option (except if, in the case of an OTC option, physical
delivery is specified). This amount of cash is equal to the excess of the
closing price of the index over the exercise price of the option, which also may
be multiplied by a formula value. The seller of the option is obligated, in
return for the premium received, to make delivery of this amount. The gain or
loss on an option on an index depends on price movements in the instruments
comprising the market, market segment, industry or other composite on which the
underlying index is based, rather than price movements in individual securities,
as is the case with respect to options on securities.

CURRENCY TRANSACTIONS

The Fund may engage in currency transactions with Counterparties to
hedge the value of portfolio securities denominated in particular currencies
against fluctuations in relative value. Currency transactions include currency
forward contracts, exchange-listed currency futures contracts and options
thereon, exchange-listed and OTC options on currencies, and currency swaps. A
forward currency contract involves a privately negotiated obligation to purchase
or sell (with delivery generally required) 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. A currency swap is
an agreement to exchange cash flows based on the notional difference among two
or more currencies and operates similarly to an interest rate swap, which is
described below under "Swaps, Caps, Floors and Collars." The Fund may enter into
currency transactions only with Counterparties that are deemed creditworthy by
the Adviser.

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<PAGE>

denominated or generally quoted in or currently convertible into the currency,
other than with respect to proxy hedging as described below.

Currency transactions are subject to risks different from other
portfolio transactions, as discussed below under "Risk Factors." If the Fund
enters into a currency hedging transaction, the Fund will comply with the asset
segregation requirements described below under "Use of Segregated and Other
Special Accounts."

COMBINED TRANSACTIONS

The Fund may enter into multiple transactions, including multiple
options transactions, multiple futures transactions, multiple currency
transactions (including forward currency contracts), multiple interest rate
transactions and any combination of futures, options, currency and interest rate
transactions as part of a single or combined strategy when, in the judgment of
the Adviser, it is in the best interests of the Fund to do so. A combined
transaction will usually contain elements of risk that are present in each of
its component transactions. Although combined transactions will normally be
entered into by the Fund based on the Adviser's judgment that the combined
strategies will reduce risk or otherwise more effectively achieve the desired
portfolio management goal, it is possible that the combination will instead
increase the risks or hinder achievement of the portfolio management objective.

SWAPS, CAPS, FLOORS AND COLLARS

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<PAGE>

Provided the contract so permits, the Fund will usually enter into
interest rate swaps on a net basis, that is, the two payments streams are netted
out in a cash settlement on the payment date or dates specified in the
instrument, with the Fund receiving or paying, as the case may be, only the net
amount of the two payments. Inasmuch as these swaps, caps, floors, collars and
other similar derivatives are entered into for good faith hedging or other
non-speculative purposes, they do not constitute senior securities under the
Investment Company Act of 1940, as amended and, thus, will not be treated as
being subject to the Fund's borrowing restrictions. The Fund will not enter into
any swap, cap, floor, collar or other derivative transaction unless the
Counterparty is deemed creditworthy by the Adviser. If a Counterparty defaults,
the Fund may have contractual remedies pursuant to the agreements related to the
transaction. The swap market has grown substantially in recent years with a
large number of banks and investment banking firms acting both as principals and
as agents utilizing standardized swap documentation. As a result, the swap
market has become relatively liquid. Caps, floors and collars are more recent
innovations for which standardized documentation has not yet been fully
developed and, for that reason, they are less liquid than swaps.

The liquidity of swap agreements will be determined by the Adviser
based on various factors, including: (1) the frequency of trades and quotations;
(2) the number of dealers and prospective purchasers in the marketplace; (3)
dealer undertakings to make a market; (4) the nature of the security (including
any demand or tender features); and (5) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and obligations
relating to the investment). Such determination will govern whether a swap will
be deemed within the 15% restriction on investments in securities that are not
readily marketable.

The Fund will maintain cash and appropriate liquid assets in a
segregated custodial account to cover its current obligations under swap
agreements. If the Fund enters into a swap agreement on a net basis, it will
segregate assets 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

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<PAGE>

EURODOLLAR INSTRUMENTS

RISK FACTORS

Hedging and Derivatives have special risks associated with them,
including possible default by the Counterparty to the transaction, illiquidity
and, to the extent the Adviser's view as to certain market movements is
incorrect, the risk that the use of the Hedging and Derivatives could result in
losses greater than if they had not been used. Use of put and call options could
result in losses to the Fund, force the sale or purchase of portfolio securities
at inopportune times or for prices higher than (in the case of put options) or
lower than (in the case of call options) current market values, or cause the
Fund to hold a security it might otherwise sell.

The use of futures and options transactions entails certain special
risks. In particular, the variable degree of correlation between price movements
of futures contracts and price movements in the related securities position of
the Fund could create the possibility that losses on the hedging instrument are
greater than gains in the value of the Fund's position. In addition, futures and
options markets could be illiquid in some circumstances and certain
over-the-counter options could have no markets. As a result, in certain markets,
the Fund might not be able to close out a transaction without incurring
substantial losses. Although the Fund's use of futures and options transactions
for hedging should tend to minimize the risk of loss due to a decline in the
value of the hedged position, at the same time it will tend to limit any
potential gain to the Fund that might result from an increase in value of the
position. Finally, the daily variation margin requirements for futures contracts
create a greater ongoing potential financial risk than would purchases of
options, in which case the exposure is limited to the cost of the initial
premium.

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<PAGE>

Losses resulting from the use of Hedging and Derivatives will reduce
the Fund's net asset value, and possibly income, and the losses can be greater
than if Hedging and Derivatives had not been used.

RISKS OF HEDGING AND DERIVATIVES OUTSIDE THE UNITED STATES

When conducted outside the United States, Hedging and Derivatives may
not be regulated as rigorously as in the United States, may not involve a
clearing mechanism and related guarantees, and will be subject to the risk of
governmental actions affecting trading in, or the prices of, foreign securities,
currencies and other instruments. The value of positions taken as part of
non-U.S. Hedging and Derivatives also could be adversely affected by: (1) other
complex foreign political, legal and economic factors; (2) lesser availability
of data on which to make trading decisions than in the United States; (3) delays
in the Fund's ability to act upon economic events occurring in foreign markets
during non-business hours in the United States; (4) the imposition of different
exercise and settlement terms and procedures and margin requirements than in the
United States; and (5) lower trading volume and liquidity.

USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS

Use of many Hedging and Derivatives by the Fund will require, among
other things, that the Fund segregate cash or other liquid assets with its
custodian, or a designated sub-custodian, to the extent the Fund's obligations
are not otherwise "covered" through ownership of the underlying security,
financial instrument or currency. In general, either the full amount of any
obligation by the Fund to pay or deliver securities or assets must be covered at
all times by the securities, instruments or currency required to be delivered,
or, subject to any regulatory restrictions, an amount of cash or liquid assets
at least equal to the current amount of the obligation must be segregated with
the custodian or sub-custodian. The segregated assets cannot be sold or
transferred unless

B-9
<PAGE>

In the case of a futures contract or an option on a futures contract,
the Fund must deposit initial margin and, in some instances, daily variation
margin in addition to segregating assets sufficient to meet its obligations to
purchase or provide securities or currencies, or to pay the amount owed at the
expiration of an index-based futures contract. These assets may consist of cash,
cash equivalents or other liquid assets. The Fund will accrue the net amount of
the excess, if any, of its obligations relating to swaps over its entitlements
with respect to each swap on a daily basis and will segregate with its
custodian, or designated sub-custodian, an amount of cash or liquid assets
having an aggregate value equal to at least the accrued excess. Caps, floors and
collars require segregation of assets with a value equal to the Fund's net
obligation, if any.

Hedging and Derivatives may be covered by means other than those
described above when consistent with applicable regulatory policies. The Fund
may also enter into offsetting transactions so that its combined position,
coupled with any segregated assets, equals its net outstanding obligation in
related options and Hedging and Derivatives. The Fund could purchase a put
option, for example, if the strike price of that option is the same or higher
than the strike price of a put option sold by the Fund. Moreover, instead of
segregating assets if it holds a futures contracts or forward contract, the Fund
could purchase a put option on the same futures contract or forward contract
with a strike price as high or higher than the price of the contract held. Other
Hedging Derivatives may also be offset in combinations. If the offsetting
transaction terminates at the time of or

B-10
<PAGE>

after the primary transaction, no segregation is required, but if it terminates
prior to that time, assets equal to any remaining obligation would need to be
segregated.

B-11
<PAGE>

THE OFFIT VARIABLE INSURANCE FUND, INC.

<TABLE>
<S> <C>
OFFICERS AND DIRECTORS INVESTMENT ADVISERS
Dr. Wallace Mathai-Davis OFFITBANK
CHAIRMAN OF THE BOARD, PRESIDENT AND 520 Madison Avenue
DIRECTOR New York, NY 10022-4213

The Bank of New York
90 Washington Street
New York, NY 10286
(ALL OTHER FUNDS)

LEGAL COUNSEL
Kramer Levin Naftalis & Frankel LLLP
919 Third Avenue
New York, NY 10022

ADMINISTRATOR; TRANSFER AND DIVIDEND
DISBURSING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809

INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
</TABLE>

<PAGE>

FOR MORE INFORMATION

FOR INVESTORS WHO WANT MORE INFORMATION ON THE FUND, THE FOLLOWING DOCUMENTS ARE
AVAILABLE FREE UPON REQUEST:

Copies of these documents and answers to questions about the Fund may be
obtained without charge by contacting:

THE OFFIT VARIABLE INSURANCE FUND, INC.
P.O. BOX 8701
WILMINGTON, DELAWARE 19899
1-800-618-9510

- --------------------------------------------------------------------------------
FOR MORE INFORMATION ON OPENING A NEW ACCOUNT, MAKING
CHANGES TO EXISTING ACCOUNTS, PURCHASING, EXCHANGING OR
REDEEMING SHARES, OR OTHER INVESTOR SERVICES, PLEASE CALL:

1-800-618-9510
MONDAY THROUGH FRIDAY
8:15 A.M. TO 6:00 P.M. (EST)
- --------------------------------------------------------------------------------

The Company's Investment Company Act File number is 811-08640.

<PAGE>

THE OFFIT VARIABLE INSURANCE FUND, INC.

OFFIT VIF - DJG VALUE EQUITY FUND

PROSPECTUS

APRIL 30, 2000

<PAGE>

<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
A LOOK AT GOALS, STRATEGIES, FUND DESCRIPTION
RISKS AND FINANCIAL HISTORY. Investment Objective......................................3
Principal Investment Strategies...........................3
Principal Risk Factors....................................3
Prior Performance.........................................3
Financial Highlights......................................5
Investment Objective and Principal Strategies.............7
Risks of Investing in the Fund............................8

DETAILS ON THE MANAGEMENT MANAGEMENT OF THE FUND
AND OPERATIONS OF THE FUND. Investment Adviser.......................................10
Service Provider Chart...................................11

POLICIES AND INSTRUCTIONS FOR SHAREHOLDER INFORMATION
OPENING, MAINTAINING AND Pricing of Fund Shares...................................12
CLOSING AN ACCOUNT IN THE Purchase of Fund Shares..................................12
FUND. Redemption of Fund Shares................................13
Shareholder Services.....................................13
Dividends and Distributions..............................13
Taxes....................................................13
Shareholder Communications...............................14
Performance Information..................................14

FOR MORE INFORMATION.........................see back cover
</TABLE>

2
<PAGE>

OFFIT VIF - DJG VALUE EQUITY FUND

INVESTMENT OBJECTIVES

The Fund's investment objectives are long-term capital appreciation and
preservation of capital.

PRINCIPAL INVESTMENT STRATEGIES

The Fund will seek to achieve its objectives by researching and investing in
equity securities priced at a discount to their intrinsic values. Capital
appreciation is achieved over time as the price-value gap narrows, often as a
result of a corporate change or the occurrence of a major non-operating event or
combination thereof.

PRINCIPAL RISK FACTORS

- - Investors may lose money.

- - At least 65% of the Fund's total assets will be invested in a diversified
portfolio of equity securities, including common stocks, rights and
warrants to subscribe for or purchase common stocks. Because the Fund will
invest primarily in equity securities, the net asset value ("NAV") of the
Fund will change with changes in the market value of its portfolio
positions.

For more detail on the principal risks summarized here, please see "Risks of
Investing in the Fund" herein.

PRIOR PERFORMANCE

ANNUAL TOTAL RETURN

The bar chart below shows the annual total return for the Fund for the last two
calendar years. The bar chart provides some indication of the risks of investing
in the Fund by showing changes in the Fund's performance over time. Past
performance is not necessarily an indicator of how the Fund will perform in the
future. The return shown does not reflect separate account charges for the
Accounts and if those had been included, performance would have been lower.

[GRAPH]
<TABLE>
<CAPTION>

PERFORMANCE YEAR 1998 1999
<S> <C> <C>
ANNUAL TOTAL RETURN -4.31% 23.37%
</TABLE>

3
<PAGE>

Since inception (April 11, 1997), the highest calendar quarter total return for
the Fund was 17.97% (quarter ended June 30, 1999) and the lowest calendar
quarter total return was (17.80%) (quarter ended September 30, 1998).

AVERAGE ANNUAL TOTAL RETURNS - COMPARISON

The table below shows how the Fund's average annual total returns for the past
one year and since inception compare with the S&P 500 Stock Index for the same
periods. The table provides some indication of the risks of investing in the
Fund by showing how the Fund's average annual total returns for one year and
since inception compare with that of a broad measure of market performance. Past
performance is not necessarily an indicator of how the Fund will perform in the
future.

<TABLE>
<CAPTION>
Average Annual Total Returns
1 Year Since Inception
------ ---------------
<S> <C> <C>
Fund Shares*......................................... 23.37% 18.06%

S&P 500 Stock Index.................................. 21.04% 29.50%
</TABLE>

* Commenced operations on April 11, 1997.

4
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
For the nine For the period
For the year ended months ended April 11, 1997* through
December 31, 1999 December 31, 1998 March 31, 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:

NET ASSET VALUE, BEGINNING OF PERIOD $ 11.91 $ 14.94 $ 10.00 (d)
-------------------- -------------------- --------------------

Net investment income 0.02 0.05 0.02

Net realized and unrealized gains (loss)
2.76 (2.16) 4.92
-------------------- -------------------- --------------------
Total income (loss) from investment operations 2.78 (2.11) 4.94
-------------------- -------------------- --------------------

LESS DIVIDENDS AND DISTRIBUTIONS FROM:

Net investment income (0.02) (0.03) -

Net realized gains (0.37) (0.89) -
-------------------- -------------------- --------------------
Total dividends and distributions (0.39) (0.92) -
-------------------- -------------------- --------------------

Net change in net asset value per share 2.39 (3.03) 4.94
-------------------- -------------------- --------------------

NET ASSET VALUE, END OF PERIOD $ 14.30 $ 11.91 $ 14.94
-------------------- -------------------- --------------------
-------------------- -------------------- --------------------

TOTAL RETURN (A) 23.37% (14.75%) (b) 49.40% (b)

RATIOS/SUPPLEMENTAL DATA:

Net assets at end of period (in thousands) $ 4,352 $ 2,164 $ 2,018
-------------------- -------------------- --------------------
Ratios to average net assets:

Expenses** 1.25% 1.25% (c) 1.25% (c)

5
<PAGE>

Net investment income 0.28% 0.29% (c) 0.16% (c)

PORTFOLIO TURNOVER RATE 39% 21% 33%
-------------------- -------------------- --------------------
</TABLE>

6
<PAGE>

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

The investment objectives of the Fund are long-term appreciation and
preservation of capital, which the Fund seeks to achieve by investing in
undervalued securities and in special situations. Capital appreciation is
achieved over time as the price-value gap narrows, often as a result of a
corporate change or the occurrence of a major non-operating event - such as a
major management change, substantial share repurchase, spin-off, split-up,
restructuring, liquidation, acquisition or other catalyst. The Fund attempts to
provide consistent absolute returns as well as outperform the Standard & Poor's
500 Index ("S&P 500") over a market cycle by using a bottom up value-oriented
approach to equity investment that stresses the purchase of securities with cash
flow, reported earnings and asset value at a measured price. The investment
objective and policies of the Fund may, unless otherwise specifically stated, be
changed by the Company without a vote of the shareholders. As a matter of
fundamental policy, the Company would not materially change the investment
objectives of the Fund without notifying shareholders.

The Fund's investment philosophy is centered upon fundamental research with
particular emphasis on event-driven special situations. Valuations are based on
cash flow (defined as earnings plus non-cash charges, less required capital
spending and working capital) rather than reported earnings in order to focus on
underlying economics rather than accounting. Furthermore, the Fund believes that
management's capabilities and motivations with respect to the enhancement of
shareholder value are particularly important in making investment decisions.
Generally, the sale of a security will be based upon factors such as: (1) an
increase in the share price which adequately reflects the original investment
premise; (2) any other significant increase in the market valuation of a stock
relative to its true economic value (a narrowing of the price-value gap); (3)
availability of alternative investments with greater ratios of reward to risk;
and (4) perceived deterioration of the issuer's operations which may adversely
affect the underlying value of the security. Turnover will be influenced by
sound investment practices related to the Fund's objectives, and the need for
funds in the event of redemptions of the Funds shares.

Investments for the Fund will be made by the Adviser on a stock by stock basis
without regard to market timing. The Fund will normally invest at least 65% of
total assets in a diversified portfolio of equity securities, including common
stocks, rights, and warrants to subscribe for or purchase common stocks. The
Fund may purchase listed and unlisted common and preferred stocks, securities of
companies in bankruptcy, fixed income securities which are convertible into
equity securities, as well as write covered call options on such equity
securities. In addition, the Fund may invest in "risk arbitrage positions,"
which include securities that may become exchangeable for cash or other
securities as a result of the issuer being an announced candidate for a merger,
acquisition, restructuring or similar transaction, or securities the issuer of
which has been the subject of a filing on Schedule 13D under the Securities
Exchange Act of 1934. Dividends and interest are not prime considerations in the
purchase of securities but are considered in relation to the total expected
return of the investment. Because the Fund will invest primarily in equity
securities, it will be subject to general conditions prevailing in securities
markets and the net asset value of the Fund's shares will fluctuate with changes
in the market prices of its portfolio securities. Cash reserves may be invested
in short-term fixed income instruments including money market funds,
certificates of deposit and commercial paper.

7
<PAGE>

The Fund retains the flexibility to respond promptly to changes in market and
economic conditions. Accordingly, consistent with the Fund's investment
objective, the Adviser may employ a temporary defensive investment strategy if
it determines such a strategy is warranted. Under such a defensive strategy, the
Fund temporarily may hold cash (U.S. dollars, foreign currencies or
multinational currency units) and/or invest up to 100% of its assets in high
quality debt securities or money market instruments of U.S. or foreign issuers,
and most or all of the Fund's investments may be made in the United States and
denominated in U.S. dollars. The Adviser's choice to employ a temporary
defensive investment strategy may prevent the Fund from achieving its investment
objective.

RISKS OF INVESTING IN THE FUND

GENERAL

COVERED CALL OPTIONS

To assist in the management of its portfolio and to enhance the Fund's
performance, the Fund may engage in the writing (selling) of call option
contracts on securities at such times as may be appropriate. However, options
shall be written solely as "covered" call options, that is, options on
securities that the Fund owns. The Fund will write covered call options on
securities held in the portfolio at the exercise price which would approximate
the price at which the Fund would desire to sell the security. The Fund will not
write covered call options on portfolio securities having an aggregate value in
excess of 20% of the Fund's net assets. A call option gives the purchaser of the
option the right to buy a security from a writer at the exercise price at any
time prior to the expiration of the contract, regardless of the market price of
the security during the option period. The premium paid to the writer is the
consideration for undertaking the obligations under the option contract. The
writer forgoes the opportunity to profit from an increase in the market price of
the underlying security above the exercise price except insofar as the premium
represents a profit.

The Fund will purchase options only to close out a call option position. In
order to close out a position, the Fund will make a "closing purchase
transaction" - the purchase of a call option on the same security with the same
exercise price and expiration date as a call option which it has previously
written. When a security is sold from the Fund's portfolio, the Fund will effect
a closing purchase transaction so as to close out any existing call option on
that security. The

8
<PAGE>

Fund will realize a profit or loss from a closing purchase transaction if the
amount paid to purchase a call option is less or more than the amount received
from the sale thereof. There can be no assurance that the Fund will be able to
effect closing purchase transactions at a time when it desires to do so. To
facilitate closing purchase transactions, however, the Fund will write options
only if a secondary market for the options exists on a national securities
exchange.

Securities for the Fund's portfolio will at all times be bought and sold solely
on the basis of investment considerations and appropriateness to the fulfillment
of the Fund's objective.

SHORT SALES

RISKS ASSOCIATED WITH VALUE INVESTING

The Fund invests in securities that it has determined are undervalued by the
overall market. The risk associated with this method of investing is that the
market will fail to recognize an undervalued security's intrinsic value for an
unexpected length of time or that the Fund's determinations regarding such
security's intrinsic value is found to be incorrect due to unforeseen problems.
Upon the occurrence of such events, the Fund would sustain a loss.

CORPORATE REORGANIZATIONS

The Fund may invest in securities for which a tender or exchange offer has been
made or announced and in securities of companies for which a merger,
consolidation, liquidation or similar reorganization proposal has been announced
if, in the judgement of the Adviser, there is a reasonable prospect of capital
appreciation significantly greater than the added portfolio turnover expenses
inherent in the short term nature of such transactions. The principal risk is
that such offers or proposals may not be consummated within the time and under
the terms contemplated at the time of the investment, in which case, unless such
offers or proposals are replaced by equivalent or increased offers or proposals
which are consummated, the Fund may sustain a loss.

YEAR 2000

9
<PAGE>

digits to define years, has not been fully recognized. For example, it is
possible that Year 2000 or similar issues may affect the computer systems used
by the Company's service providers at month, quarter or year end. The Company
believes that any such problems are likely to be minor and correctable.

MANAGEMENT OF THE FUND

INVESTMENT ADVISER

The Fund's investment adviser is David J. Greene & Company, LLC, whose principal
address is 599 Lexington Avenue, New York, New York 10022 (the "Adviser"). The
Adviser manages the Fund's business and investment activities, subject to the
authority of the Company's Board of Directors. The Adviser is an investment
adviser and broker-dealer registered with the SEC and the National Association
of Securities Dealers, Inc. As of December 31, 1999, the Adviser had investment
management authority with respect to approximately $1.7 billion of assets for
pension, profit sharing, endowment and individual accounts. The Adviser consists
of 14 principals and a staff of 22 professional and support persons, all of whom
devote their full time to the business. The Adviser specializes in equity
management with a value style orientation.

Erwin A. Zeuschner is primarily responsible for the daily management of the
Fund.
Mr. Zeuschner is principal and Senior Vice President of the Adviser and has been
associated with the Adviser for 20 years as a senior portfolio manager and head
of Investment Management.
Mr. Zeuschner will undertake his responsibilities under guidelines established
by the Adviser's Investment Committee.

The advisory fee paid by the Fund, as a percentage of average net assets, for
the fiscal year ended December 31, 1999, after waivers and reimbursements, was
0.10%.

The following chart shows the Company's other service providers and includes
their addresses and principal activities.

10
<PAGE>

OFFIT VIF-DJG VALUE EQUITY FUND

<TABLE>
<S> <C>
|-------------------------------|
| SHAREHOLDERS |
|-------------------------------|
|
|
|
|
------------------------------------------------
Distribution and | | |
Shareholder | | |
Services | | |
|------------------------------------| | |----------------------------------------|
| PRINCIPAL DISTRIBUTOR | | | TRANSFER AGENT |
| OFFIT FUNDS DISTRIBUTOR, INC. | | | PFPC INC. |
| 3200 HORIZON DRIVE | | | 400 BELLEVUE PARKWAY |
| KING OF PRUSSIA, PA | | | WILMINGTON, DE 19809 |
| 19406 |----|----| |
| Distributes the Fund's shares. | | | Handles shareholder services, |
| | | |including recordkeeping and statements, |
| | | |distribution of dividends and processing|
| | | | of buy and sell requests. |
|------------------------------------| | |----------------------------------------|
|
|
|
|
Asset Management |
|------------------------------------| | |-----------------------------------------|
| INVESTMENT ADVISER | | | CUSTODIAN |
| DAVID J. GREENE & COMPANY, LLC | | | THE BANK OF NEW YORK |
| 599 LEXINGTON AVENUE | | | ("BONY") |
| NEW YORK, NY 10022 | | | 90 WASHINGTON STREET |
| | | | NEW YORK, NY 10286 |
| |----| | |
| Manages the Fund's business and | | |Serves as custodian of the assets of the |
| investment activities. | | |Fund. The custodian settles all portfolio|
| | | |trades and collects most of the valuation|
| | | |data required for calculating the Fund's |
| | | | net asset value ("NAV"). |
|------------------------------------| | |-----------------------------------------|
| |
| |
| |
Fund | |
Operations | |
|-------------------------------------| | |
| ADMINISTRATOR AND | | |
| FUND ACCOUNTING AGENT | | |
| PFPC INC. | | |
| 400 BELLEVUE PARKWAY | | |
| WILMINGTON, DE 19809 |---|---------------------------
| | |
| Provides facilities, equipment and | |
|personnel to carry out administrative| |
| services related to the Fund and | |
|calculates the Fund's NAV, dividends | |
| and distributions. | |
|-------------------------------------| |
|
|
|--------------------------------|
| BOARD OF DIRECTORS |
|Supervises the Fund's activities|
|--------------------------------|
</TABLE>

11
<PAGE>

SHAREHOLDER INFORMATION

PRICING OF FUND SHARES

Shares of the Fund are priced at their net asset value ("NAV"). The NAV of the
Fund is calculated as follows:

Value of Assets
NAV = - Value of Liabilities
-------------------------------
Number of Outstanding Shares

PURCHASE OF FUND SHARES

12
<PAGE>

conditions in the securities markets or for other reasons.

Individuals may not place orders directly with the Fund. Please refer to the
appropriate Account Prospectus of the Participating Company for more information
on the purchase of Fund shares.

REDEMPTION OF FUND SHARES

SHAREHOLDER SERVICES

DIVIDENDS AND DISTRIBUTIONS

The Fund will declare and distribute dividends of substantially all of its net
investment income as well as its net capital gains, if any, at least annually.
The Fund will inform shareholders of the amount and nature of all such income or
gains.

Any income and capital gains distributions are paid in the form of additional
shares of the Fund.

TAXES

13
<PAGE>

THE TAX STATUS OF YOUR INVESTMENT IN THE FUND DEPENDS UPON THE FEATURES OF YOUR
POLICY OR CONTRACT. FOR FURTHER INFORMATION, PLEASE REFER TO THE ACCOUNT OR
POLICY PROSPECTUS.

SHAREHOLDER COMMUNICATIONS

PERFORMANCE INFORMATION

14
<PAGE>

15
<PAGE>

THE OFFIT VARIABLE INSURANCE FUND, INC.

<TABLE>
<S> <C>
OFFICERS AND DIRECTORS INVESTMENT ADVISERS
Dr. Wallace Mathai-Davis OFFITBANK
CHAIRMAN OF THE BOARD, PRESIDENT AND 520 Madison Avenue
DIRECTOR New York, NY 10022-4213

Edward J. Landau David J. Greene & Company, LLC
DIRECTOR 599 Lexington Avenue
New York, NY 10022
The Very Reverend James Parks Morton (DJG VALUE EQUITY FUND)
DIRECTOR

SUB-ADVISER
Stephen M. Peck Rockefeller & Co., Inc.
DIRECTOR 30 Rockefeller Plaza
New York, NY 10112
Vincent M. Rella (U.S. SMALL CAP FUND)
TREASURER

DISTRIBUTOR
Stephen Brent Wells OFFIT Funds Distributor, Inc.
SECRETARY 3200 Horizon Drive
King of Prussia, PA 19406

Michael Kagan
ASSISTANT TREASURER CUSTODIANS
The Chase Manhattan Bank
4 MetroTech Center, 18th Floor
Brooklyn, NY 11245
(LATIN AMERICA EQUITY FUND)

The Bank of New York
90 Washington Street
New York, NY 10286
(ALL OTHER FUNDS)

LEGAL COUNSEL
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022

ADMINISTRATOR; TRANSFER AND DIVIDEND
DISBURSING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809

INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
</TABLE>

<PAGE>

FOR MORE INFORMATION

FOR INVESTORS WHO WANT MORE INFORMATION ON THE FUND, THE FOLLOWING DOCUMENTS ARE
AVAILABLE FREE UPON REQUEST:

Copies of these documents and answers to questions about the Fund may be
obtained without charge by contacting:

THE OFFIT VARIABLE INSURANCE FUND, INC.
P.O. BOX 8701
WILMINGTON, DELAWARE 19899
1-800-618-9510

1-800-618-9510
MONDAY THROUGH FRIDAY
8:15 A.M. TO 6:00 P.M. (EST)
- --------------------------------------------------------------------------------

The Company's Investment Company Act File number is 811-08640.

<PAGE>

THE OFFIT VARIABLE INSURANCE FUND, INC.

OFFIT VIF - U.S. SMALL CAP FUND

PROSPECTUS

APRIL 30, 2000

<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C> <C>
A LOOK AT GOALS, STRATEGIES, FUND DESCRIPTION
RISKS AND FINANCIAL HISTORY. Investment Objective.............................................3
Principal Investment Strategies..................................3
Principal Risk Factors...........................................3
Prior Performance................................................3
Financial Highlights.............................................5
Investment Objective and Principal Strategies....................7
Risks of Investing in the Fund...................................8

DETAILS ON THE MANAGEMENT MANAGEMENT OF THE FUND
AND OPERATIONS OF THE FUND. Investment Adviser..............................................15
Service Provider Chart..........................................17

POLICIES AND INSTRUCTIONS FOR SHAREHOLDER INFORMATION
OPENING, MAINTAINING AND Pricing of Fund Shares..........................................18
CLOSING AN ACCOUNT IN THE Purchase of Fund Shares.........................................18
FUND. Redemption of Fund Shares.......................................19
Shareholder Services............................................19
Dividends and Distributions.....................................19
Taxes...........................................................19
Shareholder Communications......................................20
Performance Information.........................................20

Appendix A: Hedging and Derivatives...........................A-1

FOR MORE INFORMATION................................see back cover
</TABLE>

2
<PAGE>

OFFIT VIF - U.S. SMALL CAP FUND

INVESTMENT OBJECTIVE

The Fund's investment objective is to achieve capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

The Fund will seek to achieve its objective by investing primarily in a
diversified portfolio of securities of smaller companies located in the United
States. At least 65% of the Fund's portfolio will consist of securities of
smaller companies with a market value of $1 billion or less at the time of
purchase, although the Fund may also invest in any company, entity or vehicle
that conforms to its investment objective, including investments such as
warrants and convertible debt securities. Up to 10% of the Fund's portfolio may
be in companies located outside the United States. The Fund intends to invest
primarily in publicly-held companies.

PRINCIPAL RISK FACTORS

- - Investors may lose money.

- - The Fund will invest in smaller issuers which are more volatile than
investments in issuers with a market value greater than $1 billion. Small
capitalization issuers are not as diversified in their business activities
as issuers with market values greater than $1 billion and are more
susceptible to changes in the business cycle.

- - The net asset value ("NAV") of the Fund will change with changes in the
market value of its portfolio positions.

For more detail on the principal risks summarized here, please see "Risks of
Investing in the Fund" herein.

PRIOR PERFORMANCE

ANNUAL TOTAL RETURN

The bar chart below shows the annual total return for the Fund for the last two
calendar years. The bar chart provides some indication of the risks of investing
in the Fund by showing changes in the Fund's performance over time. Past
performance is not necessarily an indicator of how the Fund will perform in the
future. The return shown does not reflect separate charges for the Accounts and
if those had been included, performance would have been lower.

3
<PAGE>

<TABLE>
<CAPTION>
[BAR CHART]

PERFORMANCE YEAR 1998 1999
<S> <C> <C>
ANNUAL TOTAL RETURN -1.83% 54.00%
</TABLE>

Since inception (April 11, 1997), the highest calendar quarter total return for
the Fund was 37.72% (quarter ended December 31, 1999) and the lowest calendar
quarter total return was (21.68%) (quarter ended September 30, 1998).

AVERAGE ANNUAL TOTAL RETURNS - COMPARISON

The table below shows how the Fund's average annual total returns for the past
one year and since inception compare with the Russell 2000 Index for the same
periods. The table provides some indication of the risks of investing in the
Fund by showing how the Fund's average annual total returns for one year and
since inception compare with that of a broad measure of market performance. Past
performance is not necessarily an indicator of how the Fund will perform in the
future.

<TABLE>
<CAPTION>
Average Annual Total Returns
1 Year Since Inception
------ ---------------
<S> <C> <C>
Fund Shares*......................................... 54.00% 27.01%

Russell 2000 Index................................... 21.26% 16.38%
</TABLE>

* Commenced operations on April 11, 1997.

4
<PAGE>

FINANCIAL HIGHLIGHTS

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
For the nine For the period
For the year ended months ended April 11, 1997* through
December 31, 1999 December 31, 1998 March 31, 1998
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.34 $ 14.14 $ 10.00 (d)
--------------- --------------- ----------------

Net investment loss (0.15) (0.08) (0.08)
Net realized and unrealized gains (loss) 6.27 (1.50) 4.22
--------------- --------------- ----------------
Total income (loss) from investment
operations 6.12 (1.58) 4.14
--------------- --------------- ----------------

LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income - - -
Net realized gains (0.26) (1.22) -
--------------- --------------- ----------------
Total dividends and distributions (0.26) (1.22) -
--------------- --------------- ----------------

Net change in net asset value per share 5.86 (2.80) 4.14
--------------- --------------- ----------------

NET ASSET VALUE, END OF PERIOD $ 17.20 $ 11.34 $ 14.14
--------------- --------------- ----------------
--------------- --------------- ----------------
TOTAL RETURN (A) 54.00% (11.95%) (b) 41.40% (b)
RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $ 1,926 $ 1,218 $ 1,394
--------------- --------------- ----------------
Ratios to average net assets:
Expenses** 1.50% 1.50% (c) 1.50% (c)

5
<PAGE>

Net investment loss (1.19%) (.92%) (c) (.74%)(c)
PORTFOLIO TURNOVER RATE 31% 39% 51%
</TABLE>

* Commencement of operations.
** During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred,
the above expense ratio would have been higher.
(a) Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b) Not annualized.
(c) Annualized.
(d) Initial offering price.

6
<PAGE>

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

The investment objective of the Fund is to achieve capital appreciation. The
Fund will seek to achieve its objective by investing primarily in a diversified
portfolio of securities of smaller publicly-held companies located in the United
States. At least 65% of the Fund's portfolio will consists of securities of
smaller companies with a market value of $1 billion or less at the time of
purchase, although the Fund may also invest in any company, entity or vehicle
that conforms to its investment objective, including investments such as
convertible debt securities and warrants. Up to 10% of the Fund's portfolio may
be in companies located outside the United States. In analyzing convertible debt
securities, management will consider both the yield on the convertible security
and the potential capital appreciation that is offered by the underlying common
stock. The investment objective and policies of the Fund may, unless otherwise
specifically stated, be changed by the Company without a vote of the
shareholders. As a matter of policy, the Company would not materially change the
investment objective of the Fund without notifying shareholders.

The Fund will invest primarily in publicly-held companies which are expected to
meet most of the following criteria: the company should have a market position
in a fast growing segment of the economy, good management, preferably a leading
position in its business, superior financial returns (I.E., primarily return on
assets and invested capital) with ability to self-finance, and a reasonable
market valuation. While the Fund will not generally invest in start-ups, it may
invest in stock of companies' initial public securities offerings and companies
having only a few years' operating history.

In addition to investments expected to meet the preceding criteria, the Fund may
also invest in companies which have undervalued assets and in special
situations. Special situations might include private placements, fixed-income
securities, cyclically depressed companies or take-over candidates.

The Fund will have a diversified portfolio. It will not ordinarily acquire more
than 5% of its assets in the equity securities of any single issuer, although
the holding of higher equity percentages will be considered under some
circumstances. In furthering its objective, the Fund may also engage in indirect
investments as discussed below, including investments in mutual funds, funds
directed by other investment advisers or other pooled vehicles, (although
management does not currently intend to invest in mutual funds). Such
investments will not exceed 10% of the portfolio. In the case of mutual funds,
funds directed by other investment advisers or other pooled vehicles, such
investments may be subject to management fees including performance fees which
will be reflected in the net asset value of such securities. The Fund's
management may alter the proportion of the portfolio invested for defensive
purposes in order to respond to market conditions.

Trading policy (as opposed to investment policy) is determined by market
conditions and is not constrained by tax considerations.

The convertible securities that may be held by the Fund include any corporate
debt security or preferred stock that may be converted into underlying shares of
common stock and include both

7
<PAGE>

traditional convertible securities and synthetic convertible securities. The
common stock underlying convertible securities may be issued by a different
entity than the issuer of the convertible securities. Convertible securities
entitle the holder to receive interest payments paid on corporate debt
securities or the dividend preference on a preferred stock until such time as
the convertible security matures or is redeemed or until the holder elects to
exercise the conversion privilege.

The Fund believes that the characteristics of convertible securities make them
appropriate investments for an investment company seeking capital appreciation.
These characteristics include the potential for capital appreciation as the
value of the underlying common stock increases and decreased risks of decline in
value relative to the underlying common stock due to their fixed income nature.

Under normal circumstances, the Fund may invest up to 10% of its assets in other
types of securities including equity securities and nonconvertible debt
securities of U.S. and non-U.S. issuers.

The Fund retains the flexibility to respond promptly to changes in market and
economic conditions. Accordingly, consistent with the Fund's investment
objective, the Adviser may employ a temporary defensive investment strategy if
it determines such a strategy is warranted. Under such a defensive strategy, the
Fund temporarily may hold cash (U.S. dollars, foreign currencies or
multinational currency units) and/or invest up to 100% of its assets in high
quality debt securities or money market instruments of U.S. or foreign issuers,
and most or all of the Fund's investments may be made in the United States and
denominated in U.S. dollars. The Adviser's choice to employ a temporary
defensive investment strategy may prevent the Fund from achieving its investment
objective.

In addition, pending investment of proceeds from new sales of Fund shares or to
meet ordinary daily cash needs, the Fund temporarily may hold cash (U.S.
dollars, foreign currencies or multinational currency units) and may invest any
portion of its assets in high quality foreign or domestic money market
instruments.

RISKS OF INVESTING IN THE FUND

GENERAL

There can be no assurance that the investment methodology employed will satisfy
the Fund's objective of capital appreciation. The Fund believes that investments
that meet its objective potentially offer above average return, but they are
higher risk investments and are expected to fluctuate more widely in price than
the general market. An investor should be aware that investment in small
capitalization issuers may be more volatile than investments in issuers with
market capitalizations greater than $1 billion due to the lack of
diversification in the business activities, limited product lines, markets or
financial resources, and correspondingly greater susceptibility to changes in
the business cycle of small capitalization issuers. Smaller capitalization
stocks as a group may not respond to general market rallies or downturns as much
as other types of equity securities. This investment policy involves the risks
that the changes or trends identified by management will not occur or will not
be as significant as projected and that, even if the changes or trends develop,
the particular issues held by the Fund will not benefit as

8
<PAGE>

anticipated from such changes or trends.

The Fund's NAV will fluctuate, reflecting fluctuations in the market value of
its portfolio positions and its net currency exposure. The value of the
securities held by the Fund generally fluctuates, based on, among other things,
(i) interest rate movements and, for debt securities, their duration, (ii)
changes in the actual and perceived creditworthiness of the issuers of such
securities, (iii) changes in any applicable foreign currency exchange rates,
(iv) social, economic or political factors, (v) factors affecting the industry
in which the issuer operates, such as competition or technological advances, and
(vi) factors affecting the issuer directly, such as management changes or labor
relations. The objective and policies of the Fund can be expected to affect the
return of the Fund and the degree of market and financial risk to which the Fund
is subject. There is no assurance that the Fund will achieve its investment
objective.

SECURITIES OF SMALL COMPANIES

Investments in common stocks in general are subject to market, economic and
business risks that will cause their price to fluctuate over time. While
securities of small market value companies may offer greater opportunity for
capital appreciation than the securities of larger companies, investment in
smaller companies presents greater risks than investment in larger, more
established companies. Historically, small market value stocks have been more
volatile in price than larger market value stocks. Among the reasons for the
greater price volatility of small market value stocks are the lower degree of
liquidity in the markets for such stocks, and the potentially greater
sensitivity of such small companies to changes in or failure of management and
changes in competitive, business, industry and economic conditions. Besides
exhibiting greater volatility, small company stocks may, to a degree, fluctuate
independently of larger company stocks. Small company stocks may decline in
price as large company stocks rise, or rise in price as large company stocks
decline. Investors should therefore expect that the price of the Fund's shares
will be more volatile than the shares of a fund that invests in larger
capitalization stocks. Additionally, while the markets in securities of small
companies have grown rapidly in recent years, such securities may trade less
frequently and in smaller volume than more widely held securities. The values of
these securities may fluctuate more sharply than those of other securities, and
the Fund may experience some difficulty in establishing or closing out positions
in these securities at prevailing market prices. There may be less publicly
available information about the issuers of these securities or less market
interest in such securities than in the case of larger companies, and it may
take a longer period of time for the prices of such securities to reflect the
full value of their issuers' underlying earnings potential or assets. The Fund
should not be considered suitable for investors who are unable or unwilling to
assume the risks of loss associated with such an investment program, nor should
investment in the Fund be considered a balanced or complete investment program.

SECURITIES OF NON-U.S. ISSUERS

The Fund may invest up to 10% of its total assets in the securities of non-U.S.
issuers. You should recognize that investing in securities of non-U.S. issuers
involves certain risks and special considerations, including those set forth
below, which are not typically associated with investing in securities of U.S.
issuers. Further, certain investments of the Fund, and investment techniques in
which the Fund may engage involve risks, including those set forth below.

9
<PAGE>

The Fund could be adversely affected by delays in, or a refusal to grant any
required governmental approval for repatriation of capital, as well as by the
application to the Fund of any

10
<PAGE>

restrictions on investments. If, because of restrictions on repatriation or
conversion, the Fund was unable to distribute substantially all of its net
investment income and net capital gain within applicable time periods, the Fund
could be subject to U.S. federal income and excise taxes which would not
otherwise be incurred and may cease to qualify for the favorable tax treatment
afforded to regulated investment companies under the Internal Revenue Code of
1986, as amended ("the Code"), in which case it would become subject to U.S.
federal income tax on all of its income and gains. See "Taxes" below.

EURO RISK. Upon the introduction of the new European common currency, the euro,
the participating countries ceased to retain control of their respective
monetary policies and agreed to follow a single monetary policy established by
the European Central Bank. For participating countries, adopting the same
monetary policy, regardless of the conditions of their domestic economies, could
have a negative impact on their economies. Some of the economic criteria for the
participating countries include the following: a sustainable budget deficit less
than 3% of Gross Domestic Product (GDP), public debt less than 60% of GDP, low
inflation and interest rates and no currency devaluations within two years of
application. Some of the original participating countries do not yet meet these
standards, but are expected to be compliant before 2002. Countries joining later
may have to be in strict accord before entering the European Monetary Union, or
at least be well along the path to achieving them. So far, the transition seems
to be progressing smoothly, but there has been resistance to some of the more
stringent terms. Therefore, it is unclear whether complete economic and monetary
convergence will be attained as planned.

11
<PAGE>

Many companies traded on securities markets in foreign countries are smaller and
less seasoned than companies whose securities are traded on securities markets
in the United States. Investments in smaller companies involve greater risk than
is customarily associated with investing in larger companies. Smaller companies
may have limited product lines, markets or financial or managerial resources and
may be more susceptible to losses and risks of bankruptcy. Additionally, market
making and arbitrage activities are generally less extensive in such markets and
with respect to such companies, which may contribute to increased volatility and
reduced liquidity of such markets or such securities. Accordingly, each of these
markets and companies may be subject to greater influence by adverse events
generally affecting the market, and by large investors trading significant
blocks of securities, than is usual in the United States. To the extent that any
of these countries experience rapid increases in their money supplies and
investment in equity securities for speculative purposes, the equity securities
traded in any such country may trade at price-earning multiples higher than
those of comparable companies trading on securities markets in the United
States, which may not be sustainable. In addition, risks due to the lack of
modern technology, the lack of a sufficient capital base to expand business
operations, the possibility of permanent or temporary termination of trading,
and greater spreads between bid and ask prices may exist in such markets.

12
<PAGE>

counterparty defaults. Delays in settlement could result in temporary periods
when assets of the Fund are uninvested and therefore no return is earned. The
inability of the Fund to make intended security purchases due to settlement
problems could cause the Fund to miss attractive investment opportunities. The
inability to dispose of a portfolio security due to settlement problems could
result either in losses to the Fund due to subsequent declines in the value of
such portfolio security or, if the Fund has entered into a contract to sell the
security, could result in possible liability to the purchaser.

13
<PAGE>

SHORT SALES

HEDGING AND DERIVATIVES

The Fund may (if and to the extent so authorized) enter into currency
transactions. The Fund's currency transactions may take the form of currency
forward contracts, currency futures contracts, currency swaps and options on
currencies or currency futures contracts (collectively, these transactions are
referred to in this Prospectus as "Hedging and Derivatives").

Hedging and Derivatives may generally be used to attempt to protect against
possible changes in the market value of securities held or to be purchased by
the Fund resulting from currency exchange rate fluctuations. The Fund may use
any or all types of Hedging and Derivatives which it is authorized to use at any
time; no particular strategy will dictate the use of one type of transaction
rather than another, as use of any authorized Hedging and Derivatives will be a
function of numerous variables, including market conditions. The ability of the
Fund to utilize Hedging and Derivatives successfully will depend on, in addition
to the factors described above, Management's ability to predict pertinent market
movements, which cannot be assured. These skills are different from those needed
to select the Fund's securities.

14
<PAGE>

A detailed discussion of various Hedging and Derivatives including applicable
regulations of the CFTC and the requirement to segregate assets with respect to
these transactions appears in Appendix A. Risks associated with Hedging and
Derivatives are also described in Appendix A to this Prospectus.

YEAR 2000

MANAGEMENT OF THE FUND

INVESTMENT ADVISER

THE SUB-ADVISER AND PORTFOLIO MANAGER

The Sub-Adviser, Rockefeller & Co., Inc., has been retained to provide
sub-advisory services to the Fund pursuant to an agreement between Rockefeller &
Co. and OFFITBANK (the "Sub-

15
<PAGE>

Advisory Agreement"). Pursuant to the Sub-Advisory Agreement, and subject to
the overall supervision of OFFITBANK, Rockefeller & Co. provides the Fund
with investment advisory services, including portfolio management. The
Sub-Adviser, which is registered as an investment adviser under the
Investment Advisers Act of 1940, is a private investment advisory and
management firm established by the Rockefeller Family to serve its own needs
and those of a small number of other persons and institutions. As of December
31, 1999, the Sub-Adviser's total assets under management were approximately
$5.5 billion. The Sub-Adviser, with offices at 30 Rockefeller Plaza, New
York, New York 10112, is a wholly-owned subsidiary of Rockefeller Financial
Services, Inc., which is owned by members of the Rockefeller family directly
and through a Trust created for their benefit.

The Sub-Adviser places the orders for the purchase and sale of portfolio
securities and options transactions for the Fund. In doing so, the Sub-Adviser
seeks to obtain the best combination of price and execution, which involves a
number of judgmental factors.

Rockefeller & Co., Inc. utilizes a team approach with respect to the management
of this portfolio. As such, the day to day portfolio management of the Fund is
the responsibility of members of the Rockefeller & Co., Inc. U.S. Small Cap
Group and certain other members of the Rockefeller & Co., Inc. Investment Staff.

The Sub-Advisory Agreement provides that OFFITBANK, and not the Fund will pay
Rockefeller & Co. monthly compensation based on the average daily net assets of
the Fund at an annual rate of 1.00%. For the fiscal year ended December 31, 1999
the fee was waived by Rockefeller & Co.

Rockefeller & Co., Inc. has announced its intention to resign as Sub-Adviser
once a replacement sub-adviser is identified and approved by shareholders.
OFFITBANK is currently considering a replacement sub-adviser. Shareholders
of the Fund will be asked to approve any replacement sub-adviser.

The following chart shows the Company's other service providers and includes
their addresses and principal activities.

16
<PAGE>

OFFIT VIF-U.S. SMALL CAP FUND

<TABLE>
<S> <C>
|-------------------------------|
| SHAREHOLDERS |
|-------------------------------|
|
|
|
|
------------------------------------------------
Distribution and | | |
Shareholder | | |
Services | | |
|------------------------------------| | |----------------------------------------|
| PRINCIPAL DISTRIBUTOR | | | TRANSFER AGENT |
| OFFIT FUNDS DISTRIBUTOR, INC. | | | PFPC INC. |
| 3200 HORIZON DRIVE | | | 400 BELLEVUE PARKWAY |
| KING OF PRUSSIA, PA | | | WILMINGTON, DE 19809 |
| 19406 |----|----| |
| Distributes the Fund's shares. | | | Handles shareholder services, |
| | | |including recordkeeping and statements, |
| | | |distribution of dividends and processing|
| | | | of buy and sell requests. |
|------------------------------------| | |----------------------------------------|
|
|
|
|
Asset Management |
|------------------------------------| | |-----------------------------------------|
| INVESTMENT ADVISER | | | CUSTODIAN |
| OFFITBANK | | | THE BANK OF NEW YORK |
| 520 MADISON AVENUE | | | ("BONY") |
| NEW YORK, NY 10022-4213 | | | 90 WASHINGTON STREET |
| |----| | NEW YORK, NY 10286 |
| Supervises the management | | | |
| of the Fund's business and | | |Serves as custodian of the assets of the |
| investment activities | | |Fund. The custodian settles all portfolio|
| | | |trades and collects most of the valuation|
| | | |data required for calculating the Fund's |
|------------------------------------| | | net asset value ("NAV"). |
| | |-----------------------------------------|
| | |
| | |
|------------------------------------| | |
| | | |
| SUB-ADVISER | | |
| ROCKEFELLER & CO., INC. | | |
| 30 ROCKEFELLER PLAZA | | |
| NEW YORK, NY 10112 | | |
| | | |
|------------------------------------| | |
| |
| |
|-------------------------------------| | |
| ADMINISTRATOR AND | | |
| FUND ACCOUNTING AGENT | | |
| PFPC INC. | | |
| 400 BELLEVUE PARKWAY | | |
| WILMINGTON, DE 19809 |---|---------------------------
| | |
| Provides facilities, equipment and | |
|personnel to carry out administrative| |
| services related to the Fund and | |
|calculates the Fund's NAV, dividends | |
| and distributions. | |
|-------------------------------------| |
|
|
|--------------------------------|
| BOARD OF DIRECTORS |
|Supervises the Fund's activities|
|--------------------------------|
</TABLE>

17
<PAGE>

SHAREHOLDER INFORMATION

PRICING OF FUND SHARES

Shares of the Fund are priced at their net asset value ("NAV"). The NAV of the
Fund is calculated as follows:

Value of Assets
NAV = - Value of Liabilities
-------------------------------
Number of Outstanding Shares

PURCHASE OF FUND SHARES

18
<PAGE>

conditions in the securities markets or for other reasons.

Individuals may not place orders directly with the Fund. Please refer to the
appropriate Account Prospectus of the Participating Company for more information
on the purchase of Fund shares.

REDEMPTION OF FUND SHARES

SHAREHOLDER SERVICES

DIVIDENDS AND DISTRIBUTIONS

Any income and capital gains distributions are paid in the form of additional
shares of the Fund.

TAXES

19
<PAGE>

THE TAX STATUS OF YOUR INVESTMENT IN THE FUND DEPENDS UPON THE FEATURES OF YOUR
POLICY OR CONTRACT. FOR FURTHER INFORMATION, PLEASE REFER TO THE ACCOUNT OR
POLICY PROSPECTUS.

SHAREHOLDER COMMUNICATIONS

PERFORMANCE INFORMATION

20
<PAGE>

21
<PAGE>

APPENDIX A

HEDGING AND DERIVATIVES

GENERAL CHARACTERISTICS OF OPTIONS

A-1
<PAGE>

A-2
<PAGE>

A-3
<PAGE>

the risk that it may be required to buy the underlying security at a
disadvantageous price above the market price.

GENERAL CHARACTERISTICS OF FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS

A-4
<PAGE>

OPTIONS ON SECURITIES INDICES AND OTHER FINANCIAL INDICES

CURRENCY TRANSACTIONS

A-5
<PAGE>

denominated or generally quoted in or currently convertible into the currency,
other than with respect to proxy hedging as described below.

COMBINED TRANSACTIONS

SWAPS, CAPS, FLOORS AND COLLARS

A-6
<PAGE>

A-7
<PAGE>

EURODOLLAR INSTRUMENTS

RISK FACTORS

A-8
<PAGE>

Losses resulting from the use of Hedging and Derivatives will reduce the
Fund's net asset value, and possibly income, and the losses can be greater than
if Hedging and Derivatives had not been used.

RISKS OF HEDGING AND DERIVATIVES OUTSIDE THE UNITED STATES

USE OF SEGREGATED AND OTHER SPECIAL ACCOUNTS

A-9
<PAGE>

A-10
<PAGE>

or after the primary transaction, no segregation is required, but if it
terminates prior to that time, assets equal to any remaining obligation would
need to be segregated.

A-11
<PAGE>

THE OFFIT VARIABLE INSURANCE FUND, INC.

<TABLE>
<S> <C>
OFFICERS AND DIRECTORS INVESTMENT ADVISERS
Dr. Wallace Mathai-Davis OFFITBANK
CHAIRMAN OF THE BOARD, PRESIDENT AND 520 Madison Avenue
DIRECTOR New York, NY 10022-4213

The Bank of New York
90 Washington Street
New York, NY 10286
(ALL OTHER FUNDS)

LEGAL COUNSEL
Kramer Levin Naftalis & Frankel LLP
919 Third Avenue
New York, NY 10022

ADMINISTRATOR; TRANSFER AND DIVIDEND
DISBURSING AGENT
PFPC Inc.
400 Bellevue Parkway
Wilmington, DE 19809

INDEPENDENT ACCOUNTANTS
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
</TABLE>

<PAGE>

FOR MORE INFORMATION

FOR INVESTORS WHO WANT MORE INFORMATION ON THE FUND, THE FOLLOWING DOCUMENTS ARE
AVAILABLE FREE UPON REQUEST:

Copies of these documents and answers to questions about the Fund may be
obtained without charge by contacting:

THE OFFIT VARIABLE INSURANCE FUND, INC.
P.O. BOX 8701
WILMINGTON, DELAWARE 19899
1-800-618-9510

1-800-618-9510
MONDAY THROUGH FRIDAY
8:15 A.M. TO 6:00 P.M. (EST)
- --------------------------------------------------------------------------------

The Company's Investment Company Act File number is 811-08640.

<PAGE>
THE OFFIT VARIABLE INSURANCE FUND, INC.

OFFIT VIF - TOTAL RETURN FUND

PROSPECTUS

APRIL 30, 2000

<PAGE>

<TABLE>
TABLE OF CONTENTS
<S> <C> <C>
A LOOK AT GOALS, STRATEGIES, FUND DESCRIPTION
RISKS AND FINANCIAL HISTORY. Investment Objective .............................................3
Principal Investment Strategies ..................................3
Principal Risk Factors ...........................................3
Prior Performance ................................................4
Description of the Underlying Funds in which the
Total Return Fund May Invest...................................5
Financial Highlights ............................................11
Investment Objective and Principal Strategies ...................21
Risks of Investing in the Fund ..................................23

DETAILS ON THE MANAGEMENT MANAGEMENT OF THE FUND
AND OPERATIONS OF THE FUND. Investment Adviser ..............................................37
Service Provider Chart ..........................................38

POLICIES AND INSTRUCTIONS FOR SHAREHOLDER INFORMATION
OPENING, MAINTAINING AND Pricing of Fund Shares ..........................................39
CLOSING AN ACCOUNT IN THE Purchase of Fund Shares .........................................39
FUND. Redemption of Fund Shares .......................................40
Shareholder Services ............................................40
Dividends and Distributions .....................................40
Taxes ...........................................................40
Shareholder Communications ......................................41
Performance Information .........................................41

Appendix A: Ratings ...........................................A-1
Appendix B: Hedging and Derivatives ...........................B-1

FOR MORE INFORMATION ................................see back cover
</TABLE>

2
<PAGE>

OFFIT VIF - TOTAL RETURN FUND

INVESTMENT OBJECTIVE

The Fund's investment objective is to maximize total return from a combination
of capital appreciation and current income.

PRINCIPAL INVESTMENT STRATEGIES

The Fund seeks to achieve its investment objective by investing primarily in a
portfolio of fixed-income securities of varying maturities and by giving the
Adviser broad discretion to invest the Fund's assets among certain segments of
the fixed-income market that the Adviser believes will best contribute to
achieving the Fund's objective. The Adviser may invest the Fund's assets based
on the Adviser's analysis of current economic and market conditions and the
relative risks and opportunities present in the following market segments: U.S.
Government Securities, foreign sovereign and supranational debt obligations,
including obligations of emerging market and developing countries, and debt
instruments, convertible securities and preferred stocks of domestic and foreign
corporations, including high yield securities. Portfolio holdings will be
concentrated from time to time in areas of the fixed income markets which the
Adviser believes to be relatively undervalued. The Fund may pursue the
investment objective through investing directly in the markets and securities
described in this Prospectus, or indirectly through investing in the following
investment portfolios of the OFFIT Investment Fund, Inc. and the Company: 1) the
OFFIT U.S. Government Securities Fund (the "U.S. Government Securities Fund");
2) the OFFIT Mortgage Securities Fund (the "Mortgage Securities Fund"); 3) the
OFFIT VIF-High Yield Fund (the "High Yield Fund"); and 4) the OFFIT VIF-Emerging
Markets Bond Fund formerly, the "OFFIT VIF - Emerging Markets Fund" (the
"Emerging Markets Bond Fund" and collectively with the Total Return Fund, U.S.
Government Securities Fund, Mortgage Securities Fund and High Yield Fund, the
"Funds" and each individually, a "Fund").

PRINCIPAL RISK FACTORS

- - Investors may lose money.

- - Under normal market conditions, the Fund will be invested in a variety of
markets and instruments. However, the Fund may invest without limitation in
any of the securities and markets in which it is authorized to invest, and
the Fund's portfolio holdings will be concentrated, from time to time, in
areas or securities which the Adviser believes to be relatively
undervalued. Concentration in any area or security intensifies the risks to
the Fund related to such area or security.

- - The Fund may invest without limitation in lower rated or unrated debt
securities (i.e., high yield, high risk debt securities). High yield, high
risk debt securities have a higher risk of default in the payment of
interest and principal and are subject to significant changes in price.
Investment by the Fund in such securities involves a high degree of credit
risk and such securities are regarded as speculative by the major rating
agencies.

3
<PAGE>

- - The Fund may invest without limitation in international securities.
International investing is subject to special risks, including, but not
limited to, currency exchange rate volatility, political, social or
economic instability, and differences in taxation, auditing and other
financial practices. These types of risks are intensified in emerging
markets.

- - The net asset value ("NAV") of the Fund will change with changes in the
market value of its portfolio positions.

- - In managing the Fund's assets, the Adviser may invest without limitation in
other OFFIT Funds. To the extent such a strategy is used, the Fund will be
subject to the risks related to such Funds.

For more detail on the principal risks summarized here, please see "Risks of
Investing in the Fund" herein.

PRIOR PERFORMANCE

ANNUAL TOTAL RETURNS

The bar chart below shows the annual total return for the Fund for the last
calendar year. The bar chart provides some indication of the risks of investing
in the Fund by showing changes in the Fund's performance over time. Past
performance is not necessarily an indicator of how the Fund will perform in the
future. The return shown does not reflect separate charges for the accounts and
if those had been included, performance would have been lower.

[GRAPH]
<TABLE>
<CAPTION>
<S><C>
ANNUAL TOTAL RETURN
PERFORMANCE YEARS
1999

-2.18%
</TABLE>

4
<PAGE>

Since inception (June 30, 1998), the highest calendar quarter total return for
the Fund was 0.91% (quarter ended September 30, 1998) and the lowest calendar
quarter total return was (1.19%) (quarter ended June 30, 1999).

AVERAGE ANNUAL TOTAL RETURNS - COMPARISON

The table below shows how the Fund's average annual total returns for the past
one year and since inception compare with the Lehman Aggregate Bond Index (the
"Lehman Index") for the same periods. The table, like the bar chart, provides
some indication of the risks of investing in the Fund by showing how the Fund's
average annual total returns for one year and since inception compare with that
of a broad measure of market performance. Past performance is not necessarily an
indicator of how the Fund will perform in the future.

<TABLE>
<CAPTION>
Average Annual Total Returns
----------------------------
1 Year Since Inception
------ ---------------
<S> <C> <C>
Fund Shares* (2.18%) (0.35%)

Lehman Index (0.83%) 2.46%

</TABLE>

* Commenced operations on June 30, 1998.

DESCRIPTION OF THE UNDERLYING FUNDS IN WHICH
THE TOTAL RETURN FUND MAY INVEST

OFFIT U.S. GOVERNMENT SECURITIES FUND

INVESTMENT OBJECTIVE

The Fund's investment objective is to seek current income.

PRINCIPAL INVESTMENT STRATEGIES

The Fund seeks to achieve its investment objective through the active management
of portfolio duration and sector allocation and by investing, under normal
circumstances, at least 80% of its total assets in U.S. Government Securities
(as defined in this Prospectus). In addition, the Fund may invest up to 20% of
its total assets in other fixed income securities rated AAA by Standard & Poor's
Rating Group or Duff & Phelps Credit Rating Co., or Aaa by Moody's Investors
Services, Inc., or securities deemed to be of comparable quality by the Adviser,
including: debt obligations issued or guaranteed by foreign national,
provincial, state, municipal or other governments with taxing authority or by
the agencies or instrumentalities of Australia, Canada, Denmark, France,
Germany, Japan, New Zealand and the United Kingdom; debt obligations of
supranational entities; non-U.S. dollar denominated debt obligations of the U.S.
Government; and corporate obligations including asset-backed securities.
Investment decisions are based on a continual evaluation of the supply and
demand for capital, the current and future shape of the yield curve, underlying
trends in the direction of interest rates and relative value among market

5
<PAGE>

sectors. The Fund is not limited with regard to the maturities of the securities
in which it may invest.

PRINCIPAL RISK FACTORS

- - Investors may lose money.

- - The NAV of the Fund will change with changes in the market value of its
portfolio positions.

- - The Fund is a "non-diversified" mutual fund. This permits the Fund to
invest most of its assets in the securities of a small number of issuers.
This makes the Fund more susceptible to the risks associated with these
particular issuers, or to a single economic, political or regulatory
occurrence.

- - The Fund is subject to prepayment risk, which is the risk that a debt
security may be paid off and proceeds must be reinvested earlier than
anticipated. Depending on market conditions, the new investments may or may
not carry the same interest rates.

For further information on the investment objective, principal investment
strategies and risks associated with the Fund, please see the prospectus of the
OFFIT Investment Fund, Inc. dated April 30, 2000.

OFFIT MORTGAGE SECURITIES FUND

INVESTMENT OBJECTIVE

The Fund's investment objective is to maximize total return from a combination
of investment income and capital appreciation.

PRINCIPAL INVESTMENT STRATEGIES

The Fund seeks to achieve its investment objective by investing at least 80% of
its total assets in a portfolio of investment grade or comparable
mortgage-related securities issued by U.S. entities. The Fund will invest
primarily in mortgage-related securities representing interests in residential
property, adjustable rate and derivative multiclass mortgage securities and
collateralized mortgage obligations issued by U.S. entities. Up to 20% of the
Fund's assets may be invested in investment grade or comparable fixed income
securities of U.S. and non-U.S. issuers, including mortgage related securities
of issuers in Canada, the United Kingdom, Denmark or other countries which may
develop mortgage securities markets in the future. The Fund is not limited with
regard to the maturities of the securities in which it may invest.

6
<PAGE>

PRINCIPAL RISK FACTORS

- - Investors may lose money.

- - A substantial portion of the securities purchased by the Fund may be
mortgage-backed and/or asset-backed securities, the value of which may be
sensitive to interest rate changes.

- - Under normal circumstances at least 80% of the Fund's net assets will be
invested in mortgage related securities issued by U.S. entities, which are
inversely affected by changes in interest rates (increasing in value during
periods of declining interest rates and decreasing in value during periods
of increasing interest rates).

- - The NAV of the Fund will change with changes in the market value of its
portfolio positions.

- - Stripped mortgage securities or derivative multiclass mortgage securities
have greater volatility than other types of mortgage securities and are
extremely sensitive to changes in interest rates and prepayments.

OFFIT VIF - EMERGING MARKETS BOND FUND

INVESTMENT OBJECTIVE

The Fund's investment objective is to provide investors with a competitive total
return by focusing on current yield and opportunities for capital appreciation.

7
<PAGE>

PRINCIPAL INVESTMENT STRATEGIES

The Fund invests primarily in corporate and sovereign debt securities of
emerging market countries. Under normal circumstances, the Fund will invest at
least 80% of its total assets in debt instruments denominated in any currency,
including U.S. dollars, but may invest up to 20% of its total assets in equity
securities. An emerging market country is a country that is considered to be an
emerging or developing country by the World Bank of the International Finance
Corporation, or is determined by the Adviser to have per capita gross domestic
product below $7,500 (in l994 dollars). The Fund attempts to benefit from
investment opportunities deriving from long-term improvement in economic and
political conditions, and other positive developments and trends in emerging
markets countries. In addition, the Fund may invest in Brady Bonds, zero coupon
securities, Pay-in-kind bonds, and discount obligations. The Fund may invest in
debt securities of any maturity and the interest rates on such securities may be
fixed or floating.

PRINCIPAL RISK FACTORS

- - Investors may lose money.

- - All or a substantial portion of the securities purchased by the Fund may be
lower rated or unrated debt securities (i.e., high yield, high risk debt
securities). High yield, high risk debt securities have a higher risk of
default in the payment of interest and principal and are subject to
significant changes in prices. Investment by the Fund in such securities
involves a high degree of credit risk and such securities are regarded as
speculative by the major rating agencies.

- - The NAV of the Fund will change with changes in the market value of its
portfolio positions.

8
<PAGE>

For further information on the investment objective, principal investment
strategies and risks associated with the Fund, please see the prospectus of the
OFFIT VIF-Emerging Markets Bond Fund dated April 30, 2000.

OFFIT VIF - HIGH YIELD FUND

INVESTMENT OBJECTIVE

The Fund's investment objective is high current income with capital appreciation
a secondary objective.

PRINCIPAL INVESTMENT STRATEGIES

PRINCIPAL RISK FACTORS

- - Investors may lose money.

- - The NAV of the Fund will change with changes in the market value of its
portfolio positions.

- - All or a substantial portion of the securities purchased by the Fund may be
lower rated or unrated debt securities (i.e., high yield, high risk debt
securities). High yield, high risk debt securities have a higher risk of
default in the payment of interest and principal than higher rated
securities and are subject to significant changes in prices. Investment by
the Fund in such securities involves a high degree of credit risk and such
securities are regarded as speculative by the major rating agencies.

9
<PAGE>

- - The Fund is a "non-diversified" mutual fund. This permits the Fund to
invest more of its assets in securities issued by a small number of
companies. This makes the Fund more susceptible to the risks associated
with these particular companies, or a single economic, political or
regulatory occurrence.

For further information on the investment objective, principal investment
strategies and risks associated with the Fund, please see the prospectus of the
OFFIT VIF-High Yield Fund dated April 30, 2000.

10
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights tables are intended to help you understand the Fund's
financial performance for the periods presented. The tables also set forth
certain information with respect to the investment results of the U.S.
Government Securities, Mortgage Securities, VIF-High Yield and VIF-Emerging
Markets Bond Funds. This information reflects financial results for a single
Fund share. The total returns in the table represent the rate that a shareholder
would have earned (or lost) on an investment in the Funds (assuming reinvestment
of all dividends and distributions). The information for the period ended
December 31, 1999 has been audited by PricewaterhouseCoopers LLP, whose
unqualified report, along with the Funds' financial statements, is included in
the Company's Annual Report dated December 31, 1999 and the Annual Report of the
OFFIT Investment Fund, Inc. dated December 31, 1999, which are available without
charge upon request. The financial statements for the Funds for periods prior to
December 31, 1999 were audited by PricewaterhouseCoopers LLP, whose reports
expressed an unqualified opinion on those statements.

<TABLE>
<CAPTION>
OFFIT VIF - TOTAL RETURN FUND
------------------------------------------------------------------------

FOR THE YEAR ENDED FOR THE PERIOD JUNE 30, 1998*
DECEMBER 31, 1999 THROUGH DECEMBER 31, 1998
------------------------------------------------------------------------
<S> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.17 $ 10.00(d)
------------------ -------------------

Net investment income 0.74 0.25
Net realized and unrealized loss (0.97) (0.08)
------------------ -------------------
Total income from investment operations (0.23) 0.17
------------------ -------------------

LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.34) -
Net realized gains (0.02) -
------------------ -------------------
Total dividends and distributions (0.36) -
------------------ -------------------

Net change in net asset value per share (0.59) 0.17
------------------ -------------------

NET ASSET VALUE, END OF PERIOD $ 9.58 $ 10.17
------------------ -------------------
------------------ -------------------
TOTAL RETURN (a) (2.18%) 1.70%(b)

RATIOS/SUPPLEMENTAL DATA:

11
<PAGE>

Net assets at end of period (in thousands) $ 818 $ 1,001
------------------ -------------------

Ratios to average net assets:
Expenses** 0.80% 0.80%(c)
Net investment income 5.48% 5.35%(c)

PORTFOLIO TURNOVER RATE 81% 58%
------------------ -------------------
</TABLE>

12
<PAGE>

<TABLE>
<CAPTION>
OFFIT U.S. GOVERNMENT SECURITIES FUND
SELECT SHARES (d)
- -------------------------------------------------------------------------------------------------------------

FOR THE PERIOD
FOR THE YEAR JULY 1, 1997*
FOR THE YEAR ENDED THROUGH
ENDED DECEMBER DECEMBER 31, DECEMBER 31,
31, 1999 1998 1997
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.46 $ 10.17 $ 10.00 (e)
-------------- ------------- --------------

INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.49 0.50 0.27
Net realized and unrealized gain (loss) (0.69) 0.48 0.19
-------------- ------------- --------------

Total income (loss) from investment operations (0.20) 0.98 0.46
-------------- ------------- --------------

LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.49) (0.50) (0.27)
Excess of net investment income - - (0.01)
Net realized gains (0.01) (0.19) (0.01)
-------------- ------------- --------------

Total dividends and distributions (0.50) (0.69) (0.29)
-------------- ------------- --------------

Net change in net asset value per share (0.70) 0.29 0.17
-------------- ------------- --------------

NET ASSET VALUE, END OF PERIOD $ 9.76 $ 10.46 $ 10.17
-------------- ------------- --------------
-------------- ------------- --------------
TOTAL RETURN (a) (1.95%) 9.82% 4.71% (b)

RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $ 42,422 $ 39,359 $ 3,955
-------------- ------------- --------------
Ratios to average net assets:

Expenses** 0.50% 0.50% 0.50% (c)

13
<PAGE>

Net investment income 4.85% 4.59% 5.32% (c)

PORTFOLIO TURNOVER RATE 225% 423% 153%
</TABLE>

* Commencement of operations.
** During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratio would have been higher.
(a) Total return is based on the change in net asset value during the period
and assumes reinvestment of all dividends and distributions.
(b) Not annualized.
(c) Annualized.
(d) As of December 31, 1999 there were no Advisor Shares outstanding.
(e) Initial offering price.

14
<PAGE>

<TABLE>
<CAPTION>
OFFIT MORTGAGE SECURITIES FUND
SELECT SHARES (d)
---------------------------------------

FOR THE PERIOD
JULY 1, 1997*
FOR THE YEAR ENDED FOR THE YEAR ENDED THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998 DECEMBER 31, 1997
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.28 $ 10.17 $ 10.00 (e)
------------------ ------------------ -----------------

INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.59 0.58 0.29
Net realized and unrealized gain (loss) (0.57) 0.14 0.22
------------------ ------------------ -----------------
Total income from investment operations 0.02 0.72 0.51
------------------ ------------------ -----------------

LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.59) (0.58) (0.29)
Excess of net investment income - (0.01) (0.01)
Net realized gains - (0.02) (0.04)
------------------ ------------------ -----------------

Total dividends and distributions (0.59) (0.61) (0.34)
------------------ ------------------ -----------------

Net change in net asset value per share (0.57) 0.11 0.17
------------------ ------------------ -----------------

NET ASSET VALUE, END OF PERIOD $ 9.71 $ 10.28 $ 10.17
------------------ ------------------ -----------------
------------------ ------------------ -----------------
TOTAL RETURN (a) 0.23% 7.26% 5.10% (b)

RATIOS/SUPPLEMENTAL DATA:

Net assets at end of period (in thousands) $ 62,309 $ 54,461 $ 17,037

Ratios to average net assets:

Expenses** 0.50% 0.50% 0.50% (c)

15
<PAGE>

Net investment income 5.92% 5.72% 5.77% (c)

PORTFOLIO TURNOVER RATE 29% 78% 81%
</TABLE>

* Commencement of operations.
** During the period, certain fees were voluntarily reduced and/or reimbursed.
If such voluntary fee reductions and/or reimbursements had not occurred, the
ratio would have been higher.
(a) Total return is based on the change in net asset value during the period and
assumes reinvestment of all dividends and distributions.
(b) Not annualized.
(c) Annualized.
(d) As of December 31, 1999 there were no Advisor Shares outstanding.
(e) Initial offering price.

16
<PAGE>

OFFIT VIF - EMERGING MARKETS BOND FUND
----------------------------------------------------------------

- --------------------------------------------------------------------------------------------------------------------
FOR THE YEAR FOR THE NINE FOR THE YEAR FOR THE PERIOD
ENDED MONTHS ENDED ENDED AUGUST 28,
DECEMBER 31, DECEMBER 31, MARCH 31, 1996* MARCH 31,
1999 1998 1998 1998
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 7.60 $ 10.55 $ 10.30 $ 10.00 (d)
------------ ------------- ------------- --------------
Net investment income 0.94 0.66 0.86 0.48
Net realized and unrealized gains (loss) 0.86 (2.79) 0.27 0.34
------------ ------------- ------------- --------------
Total income (loss) from investment operations 1.80 (2.13) 1.13 0.82
------------ ------------- ------------- --------------

LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.94) (0.66) (0.86) (0.48)
Excess of net investment income - (0.07) (0.02) -
Net realized gains - (0.09) - (0.04)
Total dividends and distributions (0.94) (0.82) (0.88) (0.52)
------------ ------------- ------------- --------------

Net change in net asset value per share 0.86 (2.95) 0.25 0.30
------------ ------------- ------------- --------------

NET ASSET VALUE, END OF PERIOD $ 8.46 $ 7.60 $ 10.55 $ 10.30
------------ ------------- ------------- --------------
------------ ------------- ------------- --------------
TOTAL RETURN (a) 25.19% (20.36%) (b) 11.26% 8.29% (b)

RATIOS/SUPPLEMENTAL DATA:

Net assets at end of period (in thousands) $ 7,686 $ 5,575 $ 5,780 $ 4,346
------------ ------------- ------------- --------------

Ratios to average net assets:

17
<PAGE>

Expenses ** 1.50% 1.50% (c) 1.50% 1.50% (c)

Net investment income 12.11% 10.38% (c) 8.27% 8.04% (c)

PORTFOLIO TURNOVER RATE 71% 100% 53% 96%
</TABLE>

18
<PAGE>

<TABLE>
<CAPTION>
OFFIT VIF - HIGH YIELD FUND
------------------------------------------------------------------------------
FOR THE PERIOD
FOR THE YEAR FOR THE NINE FOR THE APRIL 1, 1996*
ENDED MONTHS ENDED YEAR ENDED THROUGH
DECEMBER 31, 1999 DECEMBER 31, 1998 MARCH 31, 199 MARCH 31, 1997
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.40 $ 11.00 $ 10.37 $ 10.00 (d)
----------------- ----------------- ------------- ---------------

Net investment income 0.82 0.65 0.86 0.78
Net realized and unrealized gains (loss) (0.85) (0.53) 0.63 0.37
----------------- ----------------- ------------- ---------------

Total income (loss) from investment
operations (0.03) 0.12 1.49 1.15
----------------- ----------------- ------------- ---------------

LESS DIVIDENDS AND DISTRIBUTIONS FROM:
Net investment income (0.82) (0.65) (0.86) (0.78)
Excess of net investment income (0.01) (0.02) - -
Net realized gains (0.04) (0.05) - -
----------------- ----------------- ------------- ---------------
Total dividends and distributions (0.87) (0.72) (0.86) (0.78)
----------------- ----------------- ------------- ---------------

Net change in net asset value per share (0.90) (0.60) 0.63 0.37

RATIOS/SUPPLEMENTAL DATA:
Net assets at end of period (in thousands) $ 48,200 $ 44,354 $ 31,675 $ 25,114
Ratios to average net assets:
Expenses** 1.15% 1.15% (c) 1.15% 1.15% (c)
Net investment income 8.24% 8.25% (c) 7.98% 7.45% (c)

PORTFOLIO TURNOVER RATE 19% 14% 32% 4%
</TABLE>

19
<PAGE>

(b) Not annualized.
(c) Annualized.
(d) Initial offering price.

20
<PAGE>

INVESTMENT OBJECTIVE AND PRINCIPAL STRATEGIES

The investment objective of the Fund is to maximize total return from a
combination of capital appreciation and current income. The Fund will seek to
achieve its objective by investing primarily in a portfolio of fixed-income
securities of varyin g maturities and by giving OFFITBANK (the "Adviser") broad
discretion to invest the Fund's assets among certain segments of the
fixed-income market that the Adviser believes will best contribute to achieving
the Fund's objective. At any point in time, the Adviser will invest the Fund's
assets based on the Adviser's analysis of current economic and market conditions
and the relative risks and opportunities present in the following market
segments: securities of the U.S. Government, its agencies and instrumentalities,
mortgage-backed and asset-backed securities, foreign sovereign and
multi-national debt obligations, including obligations of emerging market and
developing countries, debt instruments, convertible securities and preferred
stocks of domestic and foreign corporations, including high yield securities,
and local-currency denominated fixed income securities of issuers located in
developed and emerging markets. The Fund may also invest in the securities of
the other investment portfolios of the Company or investment companies managed
by the Adviser. The Fund may invest directly in the markets and securities
described in this prospectus, or indirectly through investing in the U.S.
Government Securities Fund, the Mortgage Securities Fund, the High Yield Fund
and the Emerging Markets Fund series of the Company (the "underlying funds"). In
allocating Fund assets among different investments, the Adviser will attempt to
diversify its portfolio by investing directly in the various securities noted
above. In order to increase its diversification of assets, the Adviser may
invest portions of Fund assets in underlying funds that invest in the securities
that the Adviser believes will allow the Fund to achieve its objective. To the
extent that the Fund invests in the underlying funds, Contract or Policy Owners
will be exposed to the fees of those underlying funds. The investment objective
of the Fund may not be changed except by a vote of a majority of the Fund's
outstanding voting securities, as defined in the Investment Company Act of 1940,
as amended (the "1940 Act"). The investment policies of the Fund may, unless
otherwise specifically stated, be changed by the Company without a vote of the
shareholders.

In evaluating proposed investments for the Fund, the Adviser will seek to
enhance the total return on the Fund's portfolio through the active management
of: (1) portfolio duration; (2) allocation of investments among the various
sectors of the fixed income market; (3) yield curve positioning; and (4)
currency exposure. The Adviser will seek to maximize the Fund's total return in
terms of U.S. dollars. The Adviser intends to base its investment decisions for
the Fund on the continual evaluation of various factors, including: (1) the
supply and demand for capital in various capital markets; (2) the shape of the
global yield curve; (3) "bottom up" credit analysis of particular issuers, which
involves research focused on individual issuers rather than on broad economic
trends; (4) relative value between and within global capital markets; and (5)
yield spreads among domestic high grade, non-dollar and high yield sectors.
Portfolio holdings will be concentrated in areas of the fixed income market
which the Adviser believes to be relatively undervalued. In evaluating markets,
the Adviser will consider such factors as the condition and growth potential of
various economies and securities markets, currency and taxation factors
(including the applicability and rate of withholding taxes) and other pertinent
financial, social, national and political factors. There can be no assurance
that the Fund will achieve its investment objective.

The "total return" sought by the Fund will consist of interest from underlying
securities, capital appreciation reflected in increases in the value of
portfolio securities or from the purchase and sale of securities, and use of
futures and options, or gains from favorable changes in foreign currency
exchange rates. Under normal market conditions, the Fund will invest its assets
in a

21
<PAGE>

variety of markets and instruments, including securities of other investment
companies, securities issued or guaranteed by the U.S. Government, its agencies
or instrumentalities, investment grade fixed income securities (including
asset-backed and mortgage backed securities), high yield securities and
international fixed income securities.

The Fund may invest in any country where the Adviser sees potential for total
return. In making international fixed income securities investments, the Adviser
may consider, among other things, the relative growth and inflation rates of
different countries. The Adviser may also consider expected changes in foreign
currency exchange rates, including the prospects for central bank intervention,
in determining the anticipated returns of securities denominated in foreign
currencies. The Adviser may further evaluate, among other things, foreign yield
curves and regulatory and political factors, including the fiscal and monetary
policies of such countries.

The Fund expects to primarily invest in income-producing securities, together
with certain futures, options and foreign currency contracts and other
investments described below. The Fund may also invest in lower quality fixed
income securities. Investments in these high yield, high risk debt securities
are considered to be speculative and involve comparatively greater risks,
including price volatility and the risk of default in the timely payment of
interest and principal, than investment grade securities or securities of
comparable value. Some of these high yield, high risk investments may be
non-performing when purchased. See "Risks of Investing in the Fund-High Yield,
High Risk Debt Securities."

The Fund has established no rating criteria for the debt securities in which it
may invest and such securities may not be rated at all for creditworthiness.
Securities rated in the medium to lower rating categories of nationally
recognized statistical rating organizations and unrated securities of comparable
quality are predominantly speculative with respect to the capacity to pay
interest and repay principal in accordance with the terms of the security and
generally involve a greater volatility of price and risk of default than
securities in higher rating categories. See "Risks of Investing in the Fund -
High Yield, High Risk Debt Securities." In purchasing such securities, the Fund
will rely on the Adviser's judgment, analysis and experience in evaluating the
creditworthiness of an issuer of such securities. The Adviser will take into
consideration, among other things, the issuer's financial resources, its
sensitivity to economic conditions and trends, its operating history, the
quality of the issuer's management and regulatory matters. The Fund does not
intend to purchase debt securities that are in default or which the Adviser
believes will be in default. See Appendix A to this Prospectus for a description
of ratings of Standard & Poor's Ratings Group ("S&P"), Moody's Investors
Services, Inc. ("Moody's") and Duff & Phelps Credit Ratings Co. ("D&P").

The Fund retains the flexibility to respond promptly to changes in market and
economic conditions. Accordingly, consistent with the Fund's investment
objective, the Adviser may employ a temporary defensive investment strategy if
it determines such a strategy is warranted. Under such a defensive strategy, the
Fund temporarily may hold cash (U.S. dollars, foreign currencies or
multinational currency units) and/or invest up to 100% of its assets in high
quality debt securities or money market instruments of U.S. or foreign issuers,
and most or all of the Fund's investments may be made in the United States and
denominated in U.S. dollars. The Adviser's choice to employ a temporary
defensive investment strategy may prevent the Fund from achieving its investment
objective.

22
<PAGE>

domestic money market instruments.

RISKS OF INVESTING IN THE FUND

GENERAL

The Fund's NAV and the NAV of any underlying fund in which the Fund may invest
will fluctuate, reflecting fluctuations in the market value of its portfolio
positions and its net currency exposure. In addition, to the extent that the
Fund holds shares of the underlying Funds, the Fund will be subject to the same
risks as those Funds. The value of the securities held by a Fund generally
fluctuates, based on, among other things, (i) interest rate movements and, for
debt securities, their duration, (ii) changes in the actual and perceived
creditworthiness of the issuers of such securities, (iii) changes in any
applicable foreign currency exchange rates, (iv) social, economic or political
factors, (v) factors affecting the industry in which the issuer operates, such
as competition or technological advances, and (vi) factors affecting the issuer
directly, such as management changes or labor relations. The objective and
policies of the Fund can be expected to affect the return of the Fund and the
degree of market and financial risk to which the Fund is subject. There is no
assurance that the Fund will achieve its investment objective.

The Fund is generally managed in a style similar to other open-end investment
companies which are managed by OFFITBANK and whose shares are generally offered
to the public. These other OFFIT Funds may, however, employ different investment
practices and may invest in securities different from those in which the Fund
invests, and, as such, may not have identical portfolios or experience identical
investment results.

SECURITIES OF NON-U.S. ISSUERS

Most of the assets of the Emerging Markets Fund will be invested in the
securities of non-U.S. issuers. Each of the U.S. Government Securities, Mortgage
Securities, High Yield and Total Return Fund's assets may be invested in the
securities of non-U.S. issuers. You should recognize that investing in
securities of non-U.S. issuers involves certain risks and special
considerations, including those set forth below, which are not typically
associated with investing in securities of U.S. issuers. Further, certain
investments of the Fund, and investment techniques in which the Fund may engage
involve risks, including those set forth below.

SOCIAL, POLITICAL AND ECONOMIC FACTORS. Many countries in which the Funds will
invest, and emerging market countries in particular, may be subject to a
substantially greater degree of social, political and economic instability than
is the case in the United States, Japan and Western European countries. Such
instability may result from, among other things, some or all of the following:
(i) authoritarian governments or military involvement in political and economic
decision-making, and changes in government through extra-constitutional means;
(ii) popular unrest associated with demands for improved political, economic and
social conditions; (iii) internal insurgencies and terrorist activities; (iv)
hostile relations with neighboring countries; and (v) drug trafficking. Social,
political and economic instability could significantly disrupt the principal
financial markets in which the Funds invest and adversely affect the value of a
Fund's assets.

23
<PAGE>

Individual foreign economies in general and those of emerging market countries
in particular, may differ favorably or unfavorably and significantly from the
U.S. economy in such respects as the rate of growth of gross domestic product or
gross national product, rate of inflation, currency depreciation, capital
reinvestment, resource self-sufficiency, structural unemployment and balance of
payments position. Governments of many of these countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector. In some cases, the government owns or controls many companies, including
some of the largest in the country. Accordingly, government actions in the
future could have a significant effect on economic conditions in many countries,
including emerging market countries, which could affect private sector companies
and the Funds, and on market conditions, prices and yields of securities in a
Fund's portfolio. There may be the possibility of nationalization or
expropriation of assets, or future confiscatory levels of taxation affecting the
Funds. In the event of nationalization, expropriation or other confiscation, a
Fund may not be fairly compensated for its loss and could lose its entire
investment in the country involved.

INVESTMENT AND REPATRIATION RESTRICTIONS. Investment by the Funds in non-U.S.
issuers may be restricted or controlled to varying degrees. These restrictions
may limit or preclude investment in certain of such issuers or countries and may
increase the costs and expenses of the Funds. For example, certain countries
require governmental approval prior to investments by foreign persons in the
country or in a particular company or industry sector or limit investment by
foreign persons to only a specific class of securities of a company which may
have less advantageous terms (including price) than securities of the company
available for purchase by nationals. Certain countries may also restrict or
prohibit investment opportunities in issuers or industries deemed important to
national interests. As a result of investment restrictions, the Funds may, in
certain countries, such as Mexico, invest through intermediary vehicles or
trusts. In addition, the repatriation of both investment income and capital from
some of these countries requires governmental approval and if there is a
deterioration in a country's balance of payments or for other reasons, a country
may impose temporary restrictions on foreign capital remittances abroad. Even
where there is no outright restriction on repatriation of capital, the mechanics
of repatriation may affect certain aspects of the operation of the Funds.

The Funds could be adversely affected by delays in, or a refusal to grant any
required governmental approval for repatriation of capital, as well as by the
application to the Funds of any restrictions on investments. If, because of
restrictions on repatriation or conversion, a Fund was unable to distribute
substantially all of its net investment income and net capital gain within
applicable time periods, the Fund could be subject to U.S. federal income and
excise taxes which would not otherwise be incurred and may cease to qualify for
the favorable tax treatment afforded to regulated investment companies under the
Internal Revenue Code of 1986, as amended ("the Code"), in which case it would
become subject to U.S. federal income tax on all of its income and gains. See
"Taxes" below.

CURRENCY FLUCTUATIONS. Because each Fund may invest a portion and the Emerging
Markets Fund may invest a substantial portion of its assets in the securities of
non-U.S. issuers which are denominated in foreign currencies, the strength or
weakness of the U.S. dollar against such foreign currencies will account for
part of the Fund's investment performance. A decline in the value of any
particular currency against the U.S. dollar will cause a decline in the U.S.
dollar

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<PAGE>

value of a Fund's holdings of securities denominated in such currency and,
therefore, will cause an overall decline in the value of that Fund's NAV and any
net investment income and capital gains to be distributed in U.S. dollars to
shareholders of the Fund.

Although each Fund values its assets daily in terms of U.S. dollars, the Funds
do not intend to convert their holdings of foreign currencies into U.S. dollars
on a daily basis. The Funds will do so from time to time, and you should be
aware of the costs of currency conversion. Although foreign exchange dealers do
not charge a fee for conversion, they do realize a profit based on the
difference ("spread") between the prices at which they are buying and selling
various currencies. Thus, a dealer may offer to sell a foreign currency to a
Fund at one rate, while offering a lesser rate of exchange should the Fund
desire to sell that currency to the dealer.

25
<PAGE>

held by a limited number of persons, which may limit the number of shares
available for investment by the Funds. A limited number of issuers in most, if
not all, of these securities markets may represent a disproportionately large
percentage of market capitalization and trading volume. In addition, the
application of certain 1940 Act provisions may limit the Fund's ability to
invest in certain non-U.S. issuers and to participate in public offerings in
these countries. The limited liquidity of certain non-U.S. securities markets
may also affect a Fund's ability to acquire or dispose of securities at the
price and time it wishes to do so.

Trading practices in certain foreign securities markets are also significantly
different from those in the United States. Brokerage commissions and other
transaction costs on the securities exchanges in many countries are generally
higher than in the United States. In addition, securities settlements and
clearance procedures in certain countries, and emerging market countries in
particular, are less developed and less reliable than those in the United States
and a Fund may be subject to delays or other material difficulties and could
experience a loss if a counterparty defaults. Delays in settlement could result
in temporary periods when assets of a Fund are uninvested and therefore no
return is earned. The inability of a Fund to make intended security purchases
due to settlement problems could cause a Fund to miss attractive investment
opportunities. The inability to dispose of a portfolio security due to
settlement problems could result either in losses to a Fund due to subsequent
declines in the value of such portfolio security or, if the Fund has entered
into a contract to sell the security, could result in possible liability to the
purchaser.

NON-U.S. SUBCUSTODIANS. Rules adopted under the 1940 Act permit each Fund, to
maintain its non-U.S. securities and cash in the custody of certain eligible
non-U.S. banks and securities depositories. Certain banks in non-U.S. countries
may not be eligible subcustodians for the Funds, in which event a Fund may be
precluded from purchasing securities in which it would otherwise invest, and
other banks that are eligible subcustodians may be recently organized or
otherwise lack extensive operating experience. At present, custody arrangements
complying with

26
<PAGE>

the requirements of the SEC are available in each of the countries in which the
Adviser intends to invest. In certain countries in which a Fund may make
investments, there may be legal restrictions or limitations on the ability of
the Fund to recover assets held in custody by subcustodians in the event of the
bankruptcy of the subcustodian.

GOVERNMENT SUPERVISION; LEGAL SYSTEMS. Disclosure and regulatory standards in
certain foreign countries, including emerging market countries, are in many
respects less stringent than U.S. standards. There may be less government
supervision and regulation of securities exchanges, listed companies and brokers
in these countries than exists in the United States. Brokers in some countries
may not be as well capitalized as those in the United States, so that they may
be more susceptible to financial failure in times of market, political, or
economic stress, exposing the Funds to a risk of loss. Less information may be
available to the Funds than with respect to investments in the United States
and, in certain of these countries, less information may be available to the
Funds than to local market participants. In addition, existing laws and
regulations are often inconsistently applied. Foreign investors may be adversely
affected by new laws and regulations, changes to existing laws and regulations
and preemption of local laws and regulations by national laws. In circumstances
where adequate laws exist, it may not be possible to obtain swift and equitable
enforcement of the law.

HIGH YIELD, HIGH RISK DEBT SECURITIES

GENERAL. The Funds, except the U.S. Government Securities and Mortgage
Securities Funds, may invest all or substantially all of their respective assets
in high yield, high risk debt securities. High yield, high risk debt securities
are those debt securities rated below investment grade and unrated securities of
comparable quality. They offer yields that fluctuate over time, but which
generally are superior to the yields offered by higher-rated securities.
However, securities rated below investment grade also involve greater risks,
including greater price volatility and a greater

27
<PAGE>

risk of default in the timely payment of principal and interest, than
higher-rated securities. Under rating agency guidelines, medium- and lower-rated
securities and comparable unrated securities will likely have some quality and
protective characteristics that are outweighed by large uncertainties or major
risk exposures to adverse conditions. Certain of the debt securities in which
the Funds may invest may have, or be considered comparable to securities having,
the lowest ratings for non-subordinated debt instruments assigned by Moody's,
S&P or D&P (i.e., rated C by Moody's or D by S&P or D&P). Under rating agency
guidelines, these securities are considered to have extremely poor prospects of
ever attaining investment grade standing, to have a current identifiable
vulnerability to default, to be unlikely to have the capacity to pay interest
and repay principal when due in the event of adverse business, financial or
economic conditions, and/or to be in default or not current in the payment of
interest or principal. Such securities are considered speculative with respect
to the issuer's capacity to pay interest and repay principal in accordance with
the terms of the obligations. Unrated securities deemed comparable to these
lower- and lowest-rated securities will have similar characteristics.
Accordingly, it is possible that these types of factors could, in certain
instances, reduce the value of securities held by the Funds with a commensurate
effect on the value of their respective shares. Therefore, an investment in the
Funds should not be considered as a complete investment program for all
investors.

The secondary markets for high yield, high risk corporate and sovereign debt
securities are not as liquid as the secondary markets for higher-rated
securities. The secon dary markets for high yield, high risk debt securities are
characterized by relatively few market makers and participants in the market are
mostly institutional investors, including insurance companies, banks, other
financial institutions and mutual funds. In addition, the trading volume for
high yield, high risk debt securities is generally lower than that for
higher-rated securities and the secondary markets could contract under adverse
market or economic conditions independent of any specific adverse changes in the
condition of a particular issuer. These factors may have an adverse effect on a
Fund's ability to dispose of particular portfolio investments and may limit its
ability to obtain accurate market quotations for purposes of valuing securities
and calculating NAV. If a Fund is not able to obtain precise or accurate market
quotations for a particular security, it will become more difficult for the
Company's Board of Directors to value such Fund's portfolio securities and the
Company's Directors may have to use a greater degree of judgment in making such
valuations. Furthermore, adverse publicity and investor perceptions about
lower-rated securities, whether or not based on fundamental analysis, may tend
to decrease the market value and liquidity of such lower-rated securities. Less
liquid secondary markets may also affect each Fund's ability to sell securities
at their fair value. In addition, each of the Funds may invest up to 15% of its
net assets, measured at the time of investment, in illiquid securities, which
may be more difficult to value and to sell at fair value. If the secondary
markets for high yield, high risk debt securities contract due to adverse
economic conditions or for other reasons, certain previously liquid securities
in a Fund's portfolio may become illiquid and the proportion of the Fund's
assets invested in illiquid securities may increase.

28
<PAGE>

is assigned and the time it is updated. In addition, there may be varying
degrees of difference in credit risk of securities within each rating category.
See Appendix A to this Prospectus for a description of such ratings.

FIXED INCOME DEBT SECURITIES. Each of the Funds may invest in fixed income debt
securities. Changes in market yields will affect a Fund's NAV as prices of fixed
income securities generally increase when interest rates decline and decrease
when interest rates rise. Prices of longer term securities generally increase or
decrease more sharply than those of shorter term securities in response to
interest rate changes, particularly if such securities were purchased at a
discount. While the market values of securities rated below investment grade and
comparable unrated securities tend to react less to fluctuations in interest
rate levels than do those of higher-rated securities, the market values of
certain of these securities also tend to be more sensitive to individual issuer
developments and changes in economic conditions than higher-rated securities. In
addition, such securities generally present a higher degree of credit risk.
Corporate issuers of securities valued below investment grade and comparable
unrated securities are often highly leveraged and may not have more traditional
methods of financing available to them, so that their ability to service their
debt obligations during an economic downturn or during sustained periods of
rising interest rates may be impaired. The risk of loss due to default in
payment of interest or principal by such issuers is significantly greater than
with investment grade securities because such securities generally are unsecured
and frequently are subordinated to the prior payment of senior indebtedness.

Many fixed income securities, contain call or buy-back features which permit the
issuer of the security to call or repurchase it. Such securities may present
risks based on payment expectations. If an issuer exercises such a "call option"
and redeems the security, a Fund may have to replace the called security with a
lower yielding security, resulting in a decreased rate of return for such Fund.

SOVEREIGN DEBT SECURITIES. Each of the Funds may invest in sovereign debt
securities. Investing in sovereign debt securities will expose the Funds to the
direct or indirect consequences of political, social or economic changes in the
countries, including developing or emerging countries such as those in Latin
America , that issue the securities. The ability and willingness of sovereign
obligors in developing and emerging countries or the governmental authorities
that control repayment of their external debt to pay principal and interest on
such debt when due may depend on general economic and political conditions
within the relevant country. Emerging and developing countries such as those in
which the Funds may invest have historically experienced, and may continue to
experience, high rates of inflation, high interest rates, exchange rate
fluctuations, trade difficulties and extreme poverty and unemployment. Many of
these countries are also characterized by political uncertainty or instability.
Additional factors which may influence the ability or willingness to service
debt include, but are not limited to, a country's cash flow situation, the
availability of sufficient foreign exchange on the date a payment is due, the
relative size of its debt service burden to the economy as a whole, and its
government's policy towards the International Monetary Fund, the World Bank and
other international agencies.

The ability of a foreign sovereign obligor to make timely and ultimate payments
on its external debt obligations will also be strongly influenced by the
obligor's balance of payments, including

29
<PAGE>

export performance, its access to international credits and investments,
fluctuations in interest rates and the extent of its foreign reserves. A country
whose exports are concentrated in a few commodities or whose economy depends on
certain strategic imports could be vulnerable to fluctuations in international
prices of these commodities or imports. To the extent that a country receives
payment for its exports in currencies other than dollars, its ability to make
debt payments denominated in dollars could be adversely affected. If a foreign
sovereign obligor cannot generate sufficient earnings from foreign trade to
service its external debt, it may need to depend on continuing loans and aid
from foreign governments, commercial banks and multilateral organizations, and
inflows of foreign investment. The commitment on the part of these foreign
governments, multilateral organizations and others to make such disbursements
may be conditioned on the government's implementation of economic reforms and/or
economic performance and the timely service of its obligations. Failure to
implement such reforms, achieve such levels of economic performance or repay
principal or interest when due may curtail the willingness of such third parties
to lend funds, which may further impair the obligor's ability or willingness to
service its debts in a timely manner. The cost of servicing external debt will
also generally be adversely affected by rising international interest rates,
because many external debt obligations bear interest at rates which are adjusted
based upon international interest rates. The ability to service external debt
will also depend on the level of the relevant government's international
currency reserves and its access to foreign exchange. Currency devaluations may
affect the ability of a sovereign obligor to obtain sufficient foreign exchange
to service its external debt.

As a result of the foregoing, a governmental obligor may default on its
obligations. If such a default occurs, the Funds may have limited legal recourse
against the issuer and/or guarantor. Remedies must, in some cases, be pursued in
the courts of the defaulting party itself, and the ability of the holder of
foreign sovereign debt securities to obtain recourse may be subject to the
political climate in the relevant country. In addition, no assurance can be
given that the holders of commercial bank debt will not contest payments to the
holders of other foreign sovereign debt obligations in the event of default
under their commercial bank loan agreements.

Sovereign obligors in developing and emerging countries, including those in
Latin America, are among the world's largest debtors to commercial banks, other
governments, international financial organizations and other financial
institutions. These obligors have in the past experienced substantial
difficulties in servicing their external debt obligations, which led to defaults
on certain obligations and the restructuring of certain indebtedness.
Restructuring arrangements have included, among other things, reducing and
rescheduling interest and principal payments by negotiating new or amended
credit agreements or converting outstanding principal and unpaid interest to
Brady Bonds, and obtaining new credit to finance interest payments. Holders of
certain foreign sovereign debt securities may be requested to participate in the
restructuring of such obligations and to extend further loans to their issuers.
There can be no assurance that the Brady Bonds and other foreign sovereign debt
securities in which the Funds may invest will not be subject to similar defaults
or restructuring arrangements which may adversely affect the value of such
investments. Furthermore, certain participants in the secondary market for such
debt may be directly involved in negotiating the terms of these arrangements and
may therefore have access to information not available to other market
participants.

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<PAGE>

In addition to high yield foreign sovereign debt securities, the Funds may also
invest in foreign corporate securities. For a discussion of such securities and
their associated risks, see "Securities of Non-U.S. Issuers", above.

MORTGAGE SECURITIES

The investment characteristics of mortgage-related securities differ from
traditional debt securities. These differences can result in significantly
greater price and yield volatility than is the case with traditional fixed
income securities. The major differences typically include more frequent
interest and principal payments, usually monthly, the adjustability of interest
rates, and the possibility that prepayments of principal may be made at any
time. Prepayment rates are influenced by changes in current interest rates and a
variety of economic, geographic, social and other factors. During periods of
declining interest rates, prepayment rates can be expected to accelerate. Under
certain interest rate and prepayment rate scenarios, the Mortgage Securities
Fund may fail to recoup fully its investment in mortgage-backed securities (and
incur capital losses) notwithstanding a direct or indirect governmental or
agency guarantee. In general, changes in the rate of prepayments on a
mortgage-related security will change that security's market value and its yield
to maturity. When interest rates fall, high prepayments could force the Mortgage
Securities Fund to reinvest principal at a time when investment opportunities
are not attractive. Thus, mortgage-backed securities may not be an effective
means for the Mortgage Securities Fund to lock in long-term interest rates.
Conversely, during periods when interest rates rise, slow prepayments could
cause the average life of the security to lengthen and the value to decline more
than anticipated. However, during periods of rising interest rates, principal
repayments by mortgage-backed securities allows the Mortgage Securities Fund to
reinvest at increased interest rates.

Mortgage-related securities issued by private issuers in the U.S. may entail
greater risk than mortgage-related securities that are guaranteed by the U.S.
Government, its agencies or instrumentalities. Privately-issued mortgage
securities are issued by private originators of, or investors in, mortgage
loans, including mortgage bankers, commercial banks, investment banks, savings
and loan associations and special purpose subsidiaries of the foregoing. Since
privately-issued mortgage certificates are not guaranteed by an entity having
the credit status of GNMA or FHLMC, such securities generally are structured
with one or more types of credit enhancement. Such credit support falls into two
categories: (1) liquidity protection; and (2) 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 pass-through of
payments due on the underlying pool occurs in a timely fashion. Protection
against losses resulting from ultimate default enhances the likelihood of
ultimate payment of the obligations on at least a portion of the assets in the
pool. Such protection may be provided through guarantees, insurance policies or
letters of credit obtained by the issuer or sponsor from third parties, through
various means of structuring the transaction or through a combination of such
approaches.

The ratings of mortgage securities for which third-party credit enhancement
provides liquidity protection or protection against losses from default are
generally dependent upon the continued creditworthiness of the provider of the
credit enhancement. The ratings of such securities could be subject to reduction
in the event of deterioration in the creditworthiness of the credit enhancement
provider even in cases where the delinquency and loss experience on the
underlying pool of assets is better than expected.

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<PAGE>

Examples of credit support arising out of the structure of the transaction
include "senior-subordinated securities" (multiple class securities with one or
more classes subordinate to other classes as to the payment of principal thereof
and interest thereon, with the result that defaults on the underlying assets are
borne first by the holders of the subordinated class), creation of "reserve
funds" (where cash or investments sometimes funded from a portion of the
payments on the underlying assets are held in reserve against future losses) and
"over-collateralization" (where the scheduled payments of, or the principal
amount of, the underlying assets exceed those required to make payment of the
securities and pay any servicing or other fees). The degree of credit support
provided for each issue is generally based on historical information with
respect to the level of credit risk associated with the underlying assets.
Delinquency or loss in excess of that which is anticipated could adversely
affect the return on an investment in such security.

CONVERTIBLE SECURITIES

GENERAL. Each Fund (other than the U.S. Government Securities and Mortgage
Securities Funds) may invest in convertible securities. Set forth below is
additional information concerning traditional convertible securities and
"synthetic" convertible securities.

To the extent there are changes in interest rates or yields of similar
non-convertible securities, the investment value of the convertible security
typically will fluctuate. However, at the same time, the value of the
convertible security will be influenced by its "conversion value," which is the
market value of the underlying common stock that would be obtained if the
convertible security were converted. Conversion value fluctuates directly with
the price of the underlying common stock. If, because of a low price of the
underlying common stock, the conversion value is below the investment value of
the convertible security, the price of the convertible security is governed
principally by its investment value.

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<PAGE>

the conversion value to the extent investors place value on the right to acquire
the underlying common stock while holding a fixed income security. The yield and
conversion premium of convertible securities issued in Japan and the Euromarket
are frequently determined at levels that cause the conversion value to affect
their market value more than the securities' investment value. If no capital
appreciation occurs on the underlying common stock, a premium may not be fully
recovered.

Holders of convertible securities have a claim on the assets of the issuer prior
to the common stockholders but may be subordinated to similar non-convertible
debt securities of the same issuer. A convertible security may be subject to
redemption at the option of the issuer at a price established in the charter
provision, indenture or other governing instrument pursuant to which the
convertible security was issued. If a convertible security held by a Fund is
called for redemption, the Fund will be required to redeem the security, convert
it into the underlying common stock or sell it to a third party. Certain
convertible debt securities may provide a put option to the holder which
entitles the holder to cause the security to be redeemed by the issuer at a
premium over the stated principal amount of the debt security.

33
<PAGE>

which will be used when the Adviser believes that such a combination
would better promote a Fund's investment objective. A synthetic convertible
security also is a more flexible investment in that its two components may be
purchased or sold separately. For example, a Fund may purchase a warrant for
inclusion in a synthetic convertible security but temporarily hold short-term
investments while postponing the purchase of a corresponding bond pending
development of more favorable market conditions.

SHORT SALES

Short sales by the Funds involve certain risks and special considerations.
Possible losses from short sales differ from losses that could be incurred from
a purchase of a security, because losses from short sales may be unlimited,
whereas losses from purchases can equal only the total amount invested. The
Funds are permitted to engage in short sales only with respect to securities
related to those in their portfolios. The Adviser therefore expects that if the
price of the securities a Fund is required to replace in connection with a short
sale increases, the value of the related securities in the Fund's portfolio will
also increase, although not necessarily in the same proportion.

HEDGING AND DERIVATIVES

Each Fund may be authorized to use a variety of investment strategies described
below to hedge various market risks (such as interest rates, currency exchange
rates and broad or specific market movements), to manage the effective maturity
or duration of debt instruments held by the Fund, or to seek to increase the
Fund's income or gain. Currently, each Fund may use, as portfolio management
strategies, cross currency hedges, interest rate transactions, commodity futures
contracts in the form of futures contracts on securities, securities indices and
foreign currencies, and related options transactions. Each Fund also may enter
into forward foreign currency contracts and options transactions to hedge in
connection with currency and interest rate positions and in order to enhance the
Fund's income or gain. Limitations on the portion of each Fund's assets that may
be used in connection with the investment strategies described below are set out
in Appendix B to this Prospectus.

Each Fund may (if and to the extent so authorized) purchase and sell (or write)
exchange-listed and over-the-counter put and call options on securities, index
futures contracts, financial futures contracts and fixed income indices and
other financial instruments, and enter into financial futures contracts,
interest rate transactions, and currency transactions (collectively, these
transactions are referred to in this Prospectus as "Hedging and Derivatives").
Each Fund's interest rate transactions may take the form of swaps, caps, floors
and collars, and each Fund's

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<PAGE>

currency transactions may take the form of currency forward contracts, currency
futures contracts, currency swaps and options on currencies or currency futures
contracts.

Hedging and Derivatives may generally be used to attempt to protect against
possible changes in the market value of securities held or to be purchased by a
Fund resulting from securities markets or currency exchange rate fluctuations,
to protect a Fund's unrealized gains in the value of its securities, to
facilitate the sale of those securities for investment purposes, to manage the
effective maturity or duration of a Fund's securities or to establish a position
in the derivatives markets as a temporary substitute for purchasing or selling
particular securities. Each Fund may use any or all types of Hedging and
Derivatives which it is authorized to use at any time; no particular strategy
will dictate the use of one type of transaction rather than another, as use of
any authorized Hedging and Derivatives will be a function of numerous variables,
including market conditions. The ability of a Fund to utilize Hedging and
Derivatives successfully will depend on, in addition to the factors described
above, the Adviser's ability to predict pertinent market movements, which cannot
be assured. These skills are different from those needed to select a Fund's
securities. No Fund is a "commodity pool" (i.e., a pooled investment vehicle
which trades in commodity futures contracts and options thereon and the operator
of which is registered with the Commodity Futures Trading Commission (the
"CFTC")) and Hedging and Derivatives involving futures contracts and options on
futures contracts will be purchased, sold or entered into only for bona fide
hedging, and non-hedging purposes to the extent permitted by CFTC regulations;
provided that each Fund may enter into futures contracts or options thereon for
purposes other than bona fide hedging if immediately thereafter, the sum of the
amount of its initial margin and premiums on open contracts would not exceed 5%
of the liquidation value of the Fund's portfolio; provided further, than in the
case of an option that is in-the-money at the time of the purchase, the
in-the-money amount may be excluded in calculating the 5% limitation. The use of
certain Hedging and Derivatives will require that each Fund segregate cash, U.S.
government securities or other liquid high grade debt obligations to the extent
the Fund's obligations are not otherwise "covered" through ownership of the
underlying security, financial instrument or currency.

To the extent the Funds conduct Hedging and Derivatives outside the United
States, such transactions may be subject to political, economic and legal risks
that are distinct from domestic transactions. Such risks are similar to those
applicable to investment in foreign securities described under "Securities of
Non-U.S. Issuers" above.

The Funds will not be obligated to pursue any of the Hedging and Derivatives
strategies and the Funds make no representation as to the availability of these
techniques at this time or at any time in the future. In addition, a Fund's
ability to pursue certain of these strategies may be limited by current economic
conditions, the Commodity Exchange Act, as amended, applicable rules and
regulations of the CFTC thereunder and the federal income tax requirements
applicable to regulated investment companies which are not operated as commodity
pools. To the extent not otherwise restricted by the SEC, the CFTC, the Code or
its investment objectives and policies, a Fund may utilize, without limitation,
Hedging and Derivatives.

A detailed discussion of various Hedging and Derivatives including applicable
regulations of the CFTC and the requirement to segregate assets with respect to
these transactions appears in

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<PAGE>

Appendix B. Risks associated with Hedging and Derivatives are also described in
Appendix B to this Prospectus.

INTEREST RATE FLUCTUATIONS AND CREDIT RISK

The performance of the Funds, especially the U.S. Government Securities Fund,
depends in part on interest rate changes. As interest rates increase, the value
of the fixed income securities held by the Funds tend to decrease. This effect
will be more pronounced with respect to investments by the Funds in
mortgage-related securities, the value of which are more sensitive to interest
rate changes. There is no restriction on the maturity of the portfolios of the
Funds or any individual portfolio security, and to the extent each Fund invests
in securities with longer maturities, the volatility of the Fund in response to
changes in interest rates can be expected to be greater than if the Fund had
invested in comparable securities with shorter maturities. The performance of
the Funds will also depend on the quality of its investments. While U.S.
Government securities generally are of high quality, government securities that
are not backed by the full faith and credit of the U.S. Treasury may be affected
by changes in the creditworthiness of the agency that issued them. Guarantees of
principal and interest on obligations that may be purchased by the Funds are not
guarantees of the market value of such obligations, nor do they extend to the
value of shares of the Funds. Other fixed-income securities in which the Funds
may invest, while of investment-grade quality, may be of lesser credit quality
than U.S. Government securities.

NON-DIVERSIFIED FUNDS

Each Fund is classified as a "non-diversified" fund under the 1940 Act, which
means that the Funds are not limited by the 1940 Act in the proportion of their
respective assets that may be invested in the obligations of a single issuer.
Thus, a Fund may invest a greater proportion of its assets in the securities of
a smaller number of issuers and, as a result, will be subject to greater risk of
loss with respect to its portfolio securities as compared to a diversified Fund.
The Funds, however, intend to comply with the diversification requirements
imposed by the Code with respect to segregated asset accounts underlying
variable products under section 817(h) of the Code and to regulated investment
companies under Subchapter M of the Code.

YEAR 2000

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<PAGE>

MANAGEMENT OF THE FUND

INVESTMENT ADVISER

Stephen Blitz and Isaac Frankel serve as the portfolio managers for the Fund.
Mr. Blitz is a Managing Director of OFFITBANK and has been associated with
OFFITBANK since 1989. Mr. Frankel has been associated with OFFITBANK since
1999. From 1994 to 1999, Mr. Frankel was Executive Vice President at Andrew
M. Carter & Company, where he developed and implemented a fixed income
relative value strategy for endowment and corporate pension accounts.

The advisory fee paid by the Fund, as a percentage of average net assets, for
the fiscal year ended December 31, 1999 was .80%, which was waived by the
Adviser.

The following chart shows the Company's other service providers and includes
their addresses and principal activities.

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<PAGE>

OFFIT VIF-TOTAL RETURN FUND

<TABLE>
<S><C>
|-------------------------------|
| SHAREHOLDERS |
|-------------------------------|
|
|
|
|
------------------------------------------------
Distribution and | | |
Shareholder | | |
Services | | |
|------------------------------------| | |----------------------------------------|
| PRINCIPAL DISTRIBUTOR | | | TRANSFER AGENT |
| OFFIT FUNDS DISTRIBUTOR, INC. | | | PFPC INC. |
| 3200 HORIZON DRIVE | | | 400 BELLEVUE PARKWAY |
| KING OF PRUSSIA, PA | | | WILMINGTON, DE 19809 |
| 19406 |----|----| |
| Distributes the Fund's shares. | | | Handles shareholder services, |
| | | |including recordkeeping and statements, |
| | | |distribution of dividends and processing|
| | | | of buy and sell requests. |
|------------------------------------| | |----------------------------------------|
|
|
|
|
Asset |
Management |
|------------------------------------| | |-----------------------------------------|
| INVESTMENT ADVISER | | | CUSTODIAN |
| OFFIBANK | | | THE BANK OF NEW YORK |
| 520 MADISON AVENUE | | | ("BONY") |
| NEW YORK, NY 10022-4213 | | | 90 WASHINGTON STREET |
| | | | NEW YORK, NY 10286 |
| |----| | |
| Manages the Fund's business and | | |Serves as custodian of the assets of the |
| investment activities. | | |Fund. The custodian settles all portfolio|
| | | |trades and collects most of the valuation|
| | | |data required for calculating the Fund's |
| | | | net asset value ("NAV"). |
|------------------------------------| | |-----------------------------------------|
| |
| |
| |
Fund | |
Operations | |
|-------------------------------------| | |
| ADMINISTRATOR AND | | |
| FUND ACCOUNTING AGENT | | |
| PFPC INC. | | |
| 400 BELLEVUE PARKWAY | | |
| WILMINGTON, DE 19809 |---|---------------------------
| | |
| Provides facilities, equipment and | |
|personnel to carry out administrative| |
| services related to the Fund and | |
|calculates the Fund's NAV, dividends | |
| and distributions. | |
|-------------------------------------| |
|
|
|--------------------------------|
| BOARD OF DIRECTORS |
|Supervises the Fund's activities|
|--------------------------------|
</TABLE>

38
<PAGE>

SHAREHOLDER INFORMATION

PRICING OF FUND SHARES

Shares of the Fund are priced at their net asset value ("NAV"). The NAV of the
Fund is calculated as follows:

Value of Assets
NAV = - Value of Liabilities
-------------------------------
Number of Outstanding Shares

PURCHASE OF FUND SHARES

39
<PAGE>

conditions in the securities markets or for other reasons.

Individuals may not place orders directly with the Fund. Please refer to the
appropriate Account Prospectus of the Participating Company for more information
on the purchase of Fund shares.

REDEMPTION OF FUND SHARES

SHAREHOLDER SERVICES

DIVIDENDS AND DISTRIBUTIONS

The Fund will declare and distribute dividends of substantially all of its net
investment income annually and will distribute its net capital gains, if any, at
least annually. The Fund will inform shareholders of the amount and nature of
all such income or gains.

Any income and capital gains distributions are paid in the form of additional
shares of the Fund.

TAXES

40
<PAGE>

THE TAX STATUS OF YOUR INVESTMENT IN THE FUND DEPENDS UPON THE FEATURES OF YOUR
POLICY OR CONTRACT. FOR FURTHER INFORMATION, PLEASE REFER TO THE ACCOUNT OR
POLICY PROSPECTUS.

SHAREHOLDER COMMUNICATIONS

PERFORMANCE INFORMATION

41
<PAGE>

THE FUND'S PERFORMANCE INFORMATION IS HISTORICAL, WILL FLUCTUATE AND SHOULD NOT
BE CONSIDERED AS REPRESENTATIVE OF FUTURE RESULTS. The SEC 's formulas for
calculating performance are described under "Performance Information" in the
Statement of Additional Information. Quotations of the Fund's performance will
not reflect charges levied at the Account level.

42
<PAGE>