WARBURG PINCUS TRUST, 497, 1999-07-08

WARBURG PINCUS TRUST
497, 1999-07-08

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SUPPLEMENT TO THE PROSPECTUSES

WARBURG PINCUS EMERGING MARKETS FUND
WARBURG PINCUS INSTITUTIONAL FUND -- EMERGING MARKETS PORTFOLIO
WARBURG PINCUS INSTITUTIONAL FUND -- INTERNATIONAL EQUITY PORTFOLIO
WARBURG PINCUS INTERNATIONAL EQUITY FUND
WARBURG PINCUS INTERNATIONAL SMALL COMPANY FUND
WARBURG PINCUS MAJOR FOREIGN MARKETS FUND
WARBURG PINCUS TRUST -- EMERGING MARKETS PORTFOLIO
WARBURG PINCUS TRUST -- INTERNATIONAL EQUITY PORTFOLIO

The following information supersedes certain information in the funds'
Prospectuses.

New Adviser. Effective today, Credit Suisse Asset Management, LLC (CSAM) became
the funds' investment adviser as a result of the closing of the previously
announced acquisition of Warburg Pincus Asset Management, Inc. (Warburg Pincus)
by Credit Suisse Group (Credit Suisse), and the combination of Warburg Pincus
with Credit Suisse's existing U.S. asset management business. Accordingly, all
references in the Prospectuses to Warburg Pincus are now to CSAM.

CSAM in an indirect wholly-owned U.S. subsidiary of Credit Suisse. CSAM,
together with its predecessor firms, has been engaged in the investment advisory
business for over 60 years and has assets under management of approximately
$58.7 billion. CSAM's principal business address is 153 East 53rd Street, New
York, New York 10022.

Change of Name of Distributor. Counsellors Securities Inc., the funds'
distributor, has changed its name to Credit Suisse Asset Management Securities,
Inc. to reflect its ownership by Credit Suisse.

Address Change. The following address replaces the current address provided in
the Prospectus for overnight or courier service: Boston Financial, Attn: Warburg
Pincus Funds, 66 Brooks Drive, Braintree, MA 02184.

Portfolio Manager Changes. The following information replaces certain
information in the funds' Prospectuses:

WARBURG PINCUS EMERGING MARKETS FUND
WARBURG PINCUS INSTITUTIONAL FUND -- EMERGING MARKETS PORTFOLIO

Harold E. Sharon (see biography below) now serves as Co-Portfolio Manager of
these funds along with Vincent J. McBride. Richard H. King no longer serves as a
Co-Portfolio Manager. Morid Kamshad, Jun Sung Kim and Federico D. Laffan
continue to serve as Associate Portfolio Managers of the funds.

WARBURG PINCUS INTERNATIONAL EQUITY FUND
WARBURG PINCUS INSTITUTIONAL FUND -- INTERNATIONAL EQUITY PORTFOLIO

P. Nicholas Edwards (see biography below), Harold W. Ehrlich, Vincent J. McBride
and Harold E. Sharon (see biography below) continue to serve as
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Co-Portfolio Managers of these funds. Richard H. King no longer serves as a
Co-Portfolio Manager of the funds.

WARBURG PINCUS INTERNATIONAL SMALL COMPANY FUND

Harold E. Sharon (see biography below), formerly Portfolio Manager, and J.H.
Cullum Clark, formerly Associate Portfolio Manager, now each serve as
Co-Portfolio Manager of this fund.

WARBURG PINCUS MAJOR FOREIGN MARKETS FUND

P. Nicholas Edwards (see biography below) and Harold W. Ehrlich continue to
serve as Co-Portfolio Managers and Vincent J. McBride, Nancy Nierman, J.H.
Cullum Clark and Todd Jacobson continue to serve as Associate Portfolio Managers
of these funds. Richard H. King no longer serves as a Co-Portfolio Manager of
the funds.

WARBURG PINCUS TRUST -- EMERGING MARKETS PORTFOLIO

Harold E. Sharon (see biography below) now serves as Co-Portfolio Manager of
this portfolio along with Vincent J. McBride. Richard H. King no longer serves
as a Co-Portfolio Manager. Jun Sung Kim (see biography below) and Federico D.
Laffan (see biography below) now serve as Associate Portfolio Managers along
with Morid Kamshad.

WARBURG PINCUS TRUST -- INTERNATIONAL EQUITY PORTFOLIO

P. Nicholas Edwards (see biography below) now serves as Co-Portfolio Manager of
this portfolio along with Harold W. Ehrlich, Vincent J. McBride and Harold E.
Sharon. Richard H. King no longer serves as a Co-Portfolio Manager. Nancy
Nierman continues to serve as Associate Portfolio Manager of the portfolio.

CERTAIN MANAGER BIOGRAPHIES

P. Nicholas Edwards joined Warburg Pincus, CSAM's predecessor, in 1995.
Previously, Mr. Edwards was a director at Jardine Fleming Investment Advisors,
Tokyo, from 1984 to 1995.

Harold E. Sharon joined Warburg Pincus, CSAM's predecessor, in March 1998.
Previously, Mr. Sharon was an executive director and portfolio manager with CIBC
Oppenheimer from 1994 to 1998 and a Senior Vice President and portfolio manager
at Warburg Pincus from 1990 to 1994.

Jun Sung Kim joined Warburg Pincus, CSAM's predecessor, in 1997. Previously, Mr.
Kim was an investment manager with Asset Korea Ltd., Seoul, from 1995 to 1997,
an investment analyst with Baring Securities Ltd., Seoul, from 1994 to 1995 and
an assistant investment manager with Koeneman Capital Management, Singapore,
from 1992 to 1994.

Federico D. Laffan joined Warburg Pincus, CSAM's predecessor, in 1997.
Previously, Mr. Laffan was a senior manager and partner with Green Cay Asset
Management from 1996 to 1997 and a senior portfolio manager and director with
Foreign & Colonial Emerging Markets, London, from 1990 to 1996.

Dated: July 6, 1999
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STATEMENT OF ADDITIONAL INFORMATION

May 27, 1999
As Revised July 6, 1999
---------------------------

WARBURG PINCUS TRUST

EMERGING GROWTH PORTFOLIO

This Statement of Additional Information provides information about Warburg
Pincus Trust (the "Trust"), relating to the Emerging Growth Portfolio (the
"Portfolio") that supplements information contained in the Prospectus for the
Portfolio (the "Prospectus"), dated May 27, 1999.

This Statement of Additional Information is not itself a Prospectus, no
investment in shares of the Portfolio should be made solely upon the information
contained herein. Copies of the Trust's Prospectus relating to the Portfolio and
information regarding the Portfolio's current performance may be obtained by
writing or telephoning:

Warburg Pincus
P.O. Box 9030
Boston, MA 02205-9030
1-800-222-8977

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TABLE OF CONTENTS

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INVESTMENT OBJECTIVE AND POLICIES............................................................ 1
Options, Futures and Currency Exchange Transactions.......................................... 1
Securities Options........................................................................... 1
Securities Index Options..................................................................... 4
OTC Options.................................................................................. 4
Futures Activities........................................................................... 5
Currency Exchange Transactions............................................................... 7
Hedging .................................................................................. 8
Asset Coverage for Forward Contracts, Options, Futures and Options on Futures................ 9
Additional Information on Other Investment Practices........................................ 10
Foreign Investments......................................................................... 10
U.S. Government Securities.................................................................. 13
Money Market Obligations.................................................................... 13
Convertible Securities...................................................................... 14
Structured Securities....................................................................... 15
Debt Securities............................................................................. 18
Below Investment Grade Securities........................................................... 19
Securities of Other Investment Companies.................................................... 20
Lending of Portfolio Securities............................................................. 20
When-Issued Securities and Delayed-Delivery Transactions.................................... 20
Reverse Repurchase Agreements and Dollar Rolls.............................................. 21
Warrants ................................................................................. 22
Non-Publicly Traded and Illiquid Securities................................................. 22
Borrowing ................................................................................. 23
Non-Diversified Status...................................................................... 23
REITs ................................................................................. 24
Small Capitalization and Emerging Growth Companies; Unseasoned Issuers...................... 24
Other Investment Limitations................................................................ 24
General ................................................................................. 26
Portfolio Valuation......................................................................... 26
Portfolio Transactions...................................................................... 27
Portfolio Turnover.......................................................................... 29
MANAGEMENT OF THE TRUST..................................................................... 29
Officers and Board of Trustees.............................................................. 29
Trustees' Compensation...................................................................... 34
Portfolio Managers.......................................................................... 34
Investment Adviser and Co-Administrators.................................................... 35
Custodian and Transfer Agent................................................................ 36
Distribution and Shareholder Servicing...................................................... 37
Distributor................................................................................. 37
Shareholder Servicing....................................................................... 37
Organization of the Trust................................................................... 37
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION.............................................. 38
ADDITIONAL INFORMATION CONCERNING TAXES..................................................... 38
Investment in Passive Foreign Investment Companies.......................................... 40
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DETERMINATION OF PERFORMANCE................................................................ 41
INDEPENDENT ACCOUNTANTS AND COUNSEL......................................................... 43
MISCELLANEOUS............................................................................... 43
FINANCIAL STATEMENTS........................................................................ 43
APPENDIX -- DESCRIPTION OF RATINGS......................................................... A-1
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INVESTMENT OBJECTIVE AND POLICIES

The following information supplements the description of the
Portfolio's investment objective and policies in the Prospectus. The investment
objective of the Portfolio is maximum capital appreciation. There are no
assurances that the Portfolio will achieve its investment objective.

Unless otherwise indicated, the Portfolio is permitted, but not
obligated, to engage in the following investment strategies, subject to any
percentage limitations set forth below.

The Portfolio is not obligated to pursue any of the following
strategies and do not represent that these techniques are available now or will
be available at any time in the future.

Options, Futures and Currency Exchange Transactions

Securities Options. The Portfolio may write covered call options on
stock and debt securities and the Portfolio may purchase U.S. exchange-traded
and over-the-counter ("OTC") put and call options.

The Portfolio realizes fees (referred to as "premiums") for granting
the rights evidenced by the options it has written. A put option embodies the
right of its purchaser to compel the writer of the option to purchase from the
option holder an underlying security at a specified price for a specified time
period or at a specified time. In contrast, a call option embodies the right of
its purchaser to compel the writer of the option to sell to the option holder an
underlying security at a specified price for a specified time period or at a
specified time.

The potential loss associated with purchasing an option is limited
to the premium paid, and the premium would partially offset any gains achieved
from its use. However, for an option writer the exposure to adverse price
movements in the underlying security or index is potentially unlimited during
the exercise period. Writing securities options may result in substantial losses
to the Portfolio, force the sale or purchase of portfolio securities at
inopportune times or at less advantageous prices, limit the amount of
appreciation the Portfolio could realize on its investments or require the
Portfolio to hold securities it would otherwise sell.

The principal reason for writing covered options on a security is to
attempt to realize, through the receipt of premiums, a greater return than would
be realized on the securities alone. In return for a premium, the Portfolio as
the writer of a covered call option forfeits the right to any appreciation in
the value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). When the
Portfolio writes call options it retains the risk of an increase in the price of
the underlying security. The size of the premiums that the Portfolio may receive
may be adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option-writing activities.

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If security prices rise, a put writer would generally expect to
profit, although its gain would be limited to the amount of the premium it
received. If security prices remain the same over time, it is likely that the
writer will also profit, because it should be able to close out the option at a
lower price. If security prices decline, the put writer would expect to suffer a
loss. This loss may be less than the loss from purchasing the underlying
instrument directly to the extent that the premium received offsets the effects
of the decline.

In the case of options written by the Portfolio that are deemed
covered by virtue of the Portfolio's holding convertible or exchangeable
preferred stock or debt securities, the time required to convert or exchange and
obtain physical delivery of the underlying common stock with respect to which
the Portfolio has written options may exceed the time within which the Portfolio
must make delivery in accordance with an exercise notice. In these instances,
the Portfolio may purchase or temporarily borrow the underlying securities for
purposes of physical delivery. By so doing, the Portfolio will not bear any
market risk, since the Portfolio will have the absolute right to receive from
the issuer of the underlying security an equal number of shares to replace the
borrowed securities, but the Portfolio may incur additional transaction costs or
interest expenses in connection with any such purchase or borrowing.

Additional risks exist with respect to certain of the securities for
which the Portfolio may write covered call options. For example, if the
Portfolio writes covered call options on mortgage-backed securities, the
mortgage-backed securities that it holds as cover may, because of scheduled
amortization or unscheduled prepayments, cease to be sufficient cover. If this
occurs, the Portfolio will compensate for the decline in the value of the cover
by purchasing an appropriate additional amount of mortgage-backed securities.

Options written by the Portfolio will normally have expiration dates
between one and nine months from the date written. The exercise price of the
options may be below, equal to or above the market values of the underlying
securities at the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money," "at-the-money" and
"out-of-the-money," respectively. The Portfolio may write (i) in-the-money call
options when Credit Suisse Asset Management, LLC, the Portfolio's investment
adviser ("CSAM"), expects that the price of the underlying security will remain
flat or decline moderately during the option period, (ii) at-the-money call
options when CSAM expects that the price of the underlying security will remain
flat or advance moderately during the option period and (iii) out-of-the-money
call options when CSAM expects that the premiums received from writing the call
option plus the appreciation in market price of the underlying security up to
the exercise price will be greater than the appreciation in the price of the
underlying security alone. In any of the preceding situations, if the market
price of the underlying security declines and the security is sold at this lower
price, the amount of any realized loss will be offset wholly or in part by the
premium received. Out-of-the-money, at-the-money and in-the-money put options
(the reverse of call options as to the relation of exercise price to market
price) may be used in the same market environments that such call options are
used in equivalent transactions. To secure its obligation to deliver the
underlying security when it writes a call option, the Portfolio will be required
to deposit in escrow the underlying security or other assets in accordance with
the rules of the Options Clearing Corporation (the "Clearing Corporation") and
of the securities exchange on which the option is written.

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<PAGE> 8

Prior to their expirations, put and call options may be sold in
closing sale or purchase transactions (sales or purchases by the Portfolio prior
to the exercise of options that it has purchased or, if permissible, written,
respectively, of options of the same series) in which the Portfolio may realize
a profit or loss from the sale. An option position may be closed out only where
there exists a secondary market for an option of the same series on a recognized
securities exchange or in the OTC market. When the Portfolio has purchased an
option and engages in a closing sale transaction, whether the Portfolio realizes
a profit or loss will depend upon whether the amount received in the closing
sale transaction is more or less than the premium the Portfolio initially paid
for the original option plus the related transaction costs. Similarly, in cases
where the Portfolio has written an option, it will realize a profit if the cost
of the closing purchase transaction is less than the premium received upon
writing the original option and will incur a loss if the cost of the closing
purchase transaction exceeds the premium received upon writing the original
option. The Portfolio may engage in a closing purchase transaction to realize a
profit, to prevent an underlying security with respect to which it has written
an option from being called or put or, in the case of a call option, to unfreeze
an underlying security (thereby permitting its sale or the writing of a new
option on the security prior to the outstanding option's expiration). The
obligation of the Portfolio under an option it has written would be terminated
by a closing purchase transaction, but the Portfolio would not be deemed to own
an option as a result of the transaction. So long as the obligation of the
Portfolio as the writer of an option continues, the Portfolio may be assigned an
exercise notice by the broker-dealer through which the option was sold,
requiring the Portfolio to deliver the underlying security against payment of
the exercise price. This obligation terminates when the option expires or the
Portfolio effects a closing purchase transaction. The Portfolio cannot effect a
closing purchase transaction with respect to an option once it has been assigned
an exercise notice.

There is no assurance that sufficient trading interest will exist to
create a liquid secondary market on a securities exchange for any particular
option or at any particular time, and for some options no such secondary market
may exist. A liquid secondary market in an option may cease to exist for a
variety of reasons. In the past, for example, higher than anticipated trading
activity or order flow or other unforeseen events have at times rendered certain
of the facilities of the Clearing Corporation and various securities exchanges
inadequate and resulted in the institution of special procedures, such as
trading rotations, restrictions on certain types of orders or trading halts or
suspensions in one or more options. There can be no assurance that similar
events, or events that may otherwise interfere with the timely execution of
customers' orders, will not recur. In such event, it might not be possible to
effect closing transactions in particular options. Moreover, the Portfolio's
ability to terminate options positions established in the OTC market may be more
limited than for exchange-traded options and may also involve the risk that
securities dealers participating in OTC transactions would fail to meet their
obligations to the Portfolio. The Portfolio, however, intends to purchase OTC
options only from dealers whose debt securities, as determined by CSAM, are
considered to be investment grade. If, as a covered call option writer, the
Portfolio is unable to effect a closing purchase transaction in a secondary
market, it will not be able to sell the underlying security and would continue
to be at market risk on the security.

Securities exchanges generally have established limitations
governing the maximum number of calls and puts of each class which may be held
or written, or exercised

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within certain time periods by an investor or group of investors acting in
concert (regardless of whether the options are written on the same or different
securities exchanges or are held, written or exercised in one or more accounts
or through one or more brokers). It is possible that the Trust or the Portfolio
and other clients of CSAM and certain of its affiliates may be considered to be
such a group. A securities exchange may order the liquidation of positions found
to be in violation of these limits and it may impose certain other sanctions.
These limits may restrict the number of options the Portfolio will be able to
purchase on a particular security.

Securities Index Options. The Portfolio may purchase and write
exchange-listed and OTC put and call options on securities indexes. A securities
index measures the movement of a certain group of securities by assigning
relative values to the securities included in the index, fluctuating with
changes in the market values of the securities included in the index. Some
securities index options are based on a broad market index, such as the NYSE
Composite Index, or a narrower market index such as the Standard & Poor's 100.
Indexes may also be based on a particular industry or market segment.

Options on securities indexes are similar to options on securities
except that (i) the expiration cycles of securities index options are monthly,
while those of securities options are currently quarterly, and (ii) the delivery
requirements are different. Instead of giving the right to take or make delivery
of securities at a specified price, an option on a securities index gives the
holder the right to receive a cash "exercise settlement amount" equal to (a) the
amount, if any, by which the fixed exercise price of the option exceeds (in the
case of a put) or is less than (in the case of a call) the closing value of the
underlying index on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the securities index upon which the option is based being greater than, in the
case of a call, or less than, in the case of a put, the exercise price of the
index and the exercise price of the option times a specified multiple. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Securities index options may be offset by entering into
closing transactions as described above for securities options.

OTC Options. The Portfolio may purchase OTC or dealer options or
sell covered OTC options. Unlike exchange-listed options where an intermediary
or clearing corporation, such as the Clearing Corporation, assures that all
transactions in such options are properly executed, the responsibility for
performing all transactions with respect to OTC options rests solely with the
writer and the holder of those options. A listed call option writer, for
example, is obligated to deliver the underlying securities to the clearing
organization if the option is exercised, and the clearing organization is then
obligated to pay the writer the exercise price of the option. If the Portfolio
were to purchase a dealer option, however, it would rely on the dealer from whom
it purchased the option to perform if the option were exercised. If the dealer
fails to honor the exercise of the option by the Portfolio, the Portfolio would
lose the premium it paid for the option and the expected benefit of the
transaction.

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close out the option prior to its expiration only by entering into a closing
purchase transaction with the dealer to which the Portfolio originally wrote the
option. Although the Portfolio will seek to enter into dealer options only with
dealers who will agree to and that are expected to be capable of entering into
closing transactions with the Portfolio, there can be no assurance that the
Portfolio will be able to liquidate a dealer option at a favorable price at any
time prior to expiration. The inability to enter into a closing transaction may
result in material losses to the Portfolio. Until the Portfolio, as a covered
OTC call option writer, is able to effect a closing purchase transaction, it
will not be able to liquidate securities (or other assets) used to cover the
written option until the option expires or is exercised. This requirement may
impair the Portfolio's ability to sell portfolio securities or, with respect to
currency options, currencies at a time when such sale might be advantageous. In
the event of insolvency of the other party, the Portfolio may be unable to
liquidate a dealer option.

Futures Activities. The Portfolio may enter into foreign currency,
interest rate and securities index futures contracts and purchase and write
(sell) related options traded on exchanges designated by the Commodity Futures
Trading Commission (the "CFTC") or consistent with CFTC regulations on foreign
exchanges. These transactions may be entered into for "bona fide hedging"
purposes as defined in CFTC regulations and other permissible purposes including
hedging against changes in the value of portfolio securities due to anticipated
changes in currency values, interest rates and/or market conditions and
increasing return.

The Portfolio will not enter into futures contracts and related
options for which the aggregate initial margin and premiums (discussed below)
required to establish positions other than those considered to be "bona fide
hedging" by the CFTC exceed 5% of the Portfolio's net asset value after taking
into account unrealized profits and unrealized losses on any such contracts it
has entered into. The Portfolio reserves the right to engage in transactions
involving futures contracts and options on futures contracts to the extent
allowed by CFTC regulations in effect from time to time and in accordance with
the Portfolio's policies. There is no overall limit on the percentage of
Portfolio assets that may be at risk with respect to futures activities.

Futures Contracts. A foreign currency futures contract provides for
the future sale by one party and the purchase by the other party of a certain
amount of a specified non-U.S. currency at a specified price, date, time and
place. An interest rate futures contract provides for the future sale by one
party and the purchase by the other party of a certain amount of a specific
interest rate sensitive financial instrument (debt security) at a specified
price, date, time and place. Securities indexes are capitalization weighted
indexes which reflect the market value of the securities represented in the
indexes. A securities index futures contract is an agreement to be settled by
delivery of an amount of cash equal to a specified multiplier times the
difference between the value of the index at the close of the last trading day
on the contract and the price at which the agreement is made.

No consideration is paid or received by the Portfolio upon entering
into a futures contract. Instead, the Portfolio is required to segregate with
its custodian an amount of cash or securities acceptable to the broker, such as
U.S. government securities or other liquid high-grade debt obligations, equal to
approximately 1% to 10% of the contract amount (this amount is subject to change
by the exchange on which the contract is traded, and brokers may

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charge a higher amount). This amount is known as "initial margin" and is in the
nature of a performance bond or good faith deposit on the contract which is
returned to the Portfolio upon termination of the futures contract, assuming all
contractual obligations have been satisfied. The broker will have access to
amounts in the margin account if the Portfolio fails to meet its contractual
obligations. Subsequent payments, known as "variation margin," to and from the
broker, will be made daily as the currency, financial instrument or securities
index underlying the futures contract fluctuates, making the long and short
positions in the futures contract more or less valuable, a process known as
"marking-to-market." The Portfolio will also incur brokerage costs in connection
with entering into futures transactions.

At any time prior to the expiration of a futures contract, the
Portfolio may elect to close the position by taking an opposite position, which
will operate to terminate the Portfolio's existing position in the contract.
Positions in futures contracts and options on futures contracts (described
below) may be closed out only on the exchange on which they were entered into
(or through a linked exchange). No secondary market for such contracts exists.
Although the Portfolio may enter into futures contracts only if there is an
active market for such contracts, there is no assurance that an active market
will exist at any particular time. Most futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit or trading may be suspended for
specified periods during the day. It is possible that futures contract prices
could move to the daily limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions at an
advantageous price and subjecting the Portfolio to substantial losses. In such
event, and in the event of adverse price movements, the Portfolio would be
required to make daily cash payments of variation margin. In such situations, if
the Portfolio had insufficient cash, it might have to sell securities to meet
daily variation margin requirements at a time when it would be disadvantageous
to do so. In addition, if the transaction is entered into for hedging purposes,
in such circumstances the Portfolio may realize a loss on a futures contract or
option that is not offset by an increase in the value of the hedged position.
Losses incurred in futures transactions and the costs of these transactions will
affect the Portfolio's performance.

Options on Futures Contracts. The Portfolio may purchase and write
put and call options on foreign currency, interest rate and stock index futures
contracts and may enter into closing transactions with respect to such options
to terminate existing positions. There is no guarantee that such closing
transactions can be effected; the ability to establish and close out positions
on such options will be subject to the existence of a liquid market.

An option on a currency, interest rate or securities index futures
contract, as contrasted with the direct investment in such a contract, gives the
purchaser the right, in return for the premium paid, to assume a position in a
futures contract at a specified exercise price at any time prior to the
expiration date of the option. The writer of the option is required upon
exercise to assume an offsetting futures position (a short position if the
option is a call and a long position if the option is a put). Upon exercise of
an option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contract exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. The

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potential loss related to the purchase of an option on a futures contract is
limited to the premium paid for the option (plus transaction costs). Because the
value of the option is fixed at the point of sale, there are no daily cash
payments by the purchaser to reflect changes in the value of the underlying
contract; however, the value of the option does change daily and that change
would be reflected in the net asset value of the Portfolio.

Currency Exchange Transactions. The value in U.S. dollars of the
assets of the Portfolio that are invested in foreign securities may be affected
favorably or unfavorably by changes in exchange control regulations, and the
Portfolio may incur costs in connection with conversion between various
currencies. Currency exchange transactions may be from any non-U.S. currency
into U.S. dollars or into other appropriate currencies. The Portfolio will
conduct its currency exchange transactions (i) on a spot (i.e., cash) basis at
the rate prevailing in the currency exchange market, (ii) through entering into
futures contracts or options on such contracts (as described above), (iii)
through entering into forward contracts to purchase or sell currency or (iv) by
purchasing exchange-traded currency options.

Forward Currency Contracts. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract as agreed upon by the
parties, at a price set at the time of the contract. These contracts are entered
into in the interbank market conducted directly between currency traders
(usually large commercial banks and brokers) and their customers. Forward
currency contracts are similar to currency futures contracts, except that
futures contracts are traded on commodities exchanges and are standardized as to
contract size and delivery date.

At or before the maturity of a forward contract, the Portfolio may
either sell a portfolio security and make delivery of the currency, or retain
the security and fully or partially offset its contractual obligation to deliver
the currency by negotiating with its trading partner to enter into an offsetting
transaction. If the Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio, at the time of execution of the
offsetting transaction, will incur a gain or a loss to the extent that movement
has occurred in forward contract prices.

Currency Options. The Portfolio may purchase exchange-traded put and
call options on foreign currencies. Put options convey the right to sell the
underlying currency at a price which is anticipated to be higher than the spot
price of the currency at the time the option is exercised. Call options convey
the right to buy the underlying currency at a price which is expected to be
lower than the spot price of the currency at the time the option is exercised.

Currency Hedging. The Portfolio's currency hedging will be limited
to hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward currency with respect to
specific receivables or payables of the Portfolio generally accruing in
connection with the purchase or sale of its portfolio securities. Position
hedging is the sale of forward currency with respect to portfolio security
positions. The Portfolio may not position hedge to an extent greater than the
aggregate market value (at the time of entering into the hedge) of the hedged
securities.

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<PAGE> 13

A decline in the U.S. dollar value of a foreign currency in which
the Portfolio's securities are denominated will reduce the U.S. dollar value of
the securities, even if their value in the foreign currency remains constant.
The use of currency hedges does not eliminate fluctuations in the underlying
prices of the securities, but it does establish a rate of exchange that can be
achieved in the future. For example, in order to protect against diminutions in
the U.S. dollar value of non-dollar denominated securities it holds, the
Portfolio may purchase foreign currency put options. If the value of the
currency does decline, the Portfolio will have the right to sell the foreign
currency for a fixed amount in dollars and will thereby offset, in whole or in
part, the adverse effect on the U.S. dollar value of its securities that
otherwise would have resulted. Conversely, if a rise in the U.S. dollar value of
a currency in which securities to be acquired are denominated is projected,
thereby potentially increasing the cost of the securities, the Portfolio may
purchase call options on the particular currency. The purchase of these options
could offset, at least partially, the effects of the adverse movements in
exchange rates. The benefit to the Portfolio derived from purchases of currency
options, like the benefit derived from other types of options, will be reduced
by premiums and other transaction costs. Because transactions in currency
exchange are generally conducted on a principal basis, no fees or commissions
are generally involved. Currency hedging involves some of the same risks and
considerations as other transactions with similar instruments. Although currency
hedges limit the risk of loss due to a decline in the value of a hedged
currency, at the same time, they also limit any potential gain that might result
should the value of the currency increase. If a devaluation is generally
anticipated, the Portfolio may not be able to contract to sell a currency at a
price above the devaluation level it anticipates.

While the values of currency futures and options on futures, forward
currency contracts and currency options may be expected to correlate with
exchange rates, they will not reflect other factors that may affect the value of
the Portfolio's investments and a currency hedge may not be entirely successful
in mitigating changes in the value of the Portfolio's investments denominated in
that currency. A currency hedge, for example, should protect a Yen-denominated
bond against a decline in the Yen, but will not protect the Portfolio against a
price decline if the issuer's creditworthiness deteriorates.

Hedging. In addition to entering into options, futures and currency
exchange transactions for other purposes, including generating current income to
offset expenses or increase return, the Portfolio may enter into these
transactions as hedges to reduce investment risk, generally by making an
investment expected to move in the opposite direction of a portfolio position. A
hedge is designed to offset a loss in a portfolio position with a gain in the
hedged position; at the same time, however, a properly correlated hedge will
result in a gain in the portfolio position being offset by a loss in the hedged
position. As a result, the use of options, futures and currency exchange
transactions for hedging purposes could limit any potential gain from an
increase in the value of the position hedged. In addition, the movement in the
portfolio position hedged may not be of the same magnitude as movement in the
hedge. With respect to futures contracts, since the value of portfolio
securities will far exceed the value of the futures contracts sold by the
Portfolio, an increase in the value of the futures contracts could only
mitigate, but not totally offset, the decline in the value of the Portfolio's
assets.

In hedging transactions based on an index, whether the Portfolio
will realize a gain or loss from the purchase or writing of options on an index
depends upon movements in

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<PAGE> 14

the level of prices in the securities market generally or, in the case of
certain indexes, in an industry or market segment, rather than movements in the
price of a particular security. The risk of imperfect correlation increases as
the composition of the Portfolio's portfolio varies from the composition of the
index. In an effort to compensate for imperfect correlation of relative
movements in the hedged position and the hedge, the Portfolio's hedge positions
may be in a greater or lesser dollar amount than the dollar amount of the hedged
position. Such "over hedging" or "under hedging" may adversely affect the
Portfolio's net investment results if market movements are not as anticipated
when the hedge is established. Securities index futures transactions may be
subject to additional correlation risks. First, all participants in the futures
market are subject to margin deposit and maintenance requirements. Rather than
meeting additional margin deposit requirements, investors may close futures
contracts through offsetting transactions which would distort the normal
relationship between the securities index and futures markets. Secondly, from
the point of view of speculators, the deposit requirements in the futures market
are less onerous than margin requirements in the securities market. Therefore,
increased participation by speculators in the futures market also may cause
temporary price distortions. Because of the possibility of price distortions in
the futures market and the imperfect correlation between movements in a
securities index and movements in the price of securities index futures, a
correct forecast of general market trends by CSAM still may not result in a
successful hedging transaction.

The Portfolio will engage in hedging transactions only when deemed
advisable by CSAM, and successful use by the Portfolio of hedging transactions
will be subject to CSAM's ability to predict trends in currencies, interest
rates or securities markets, as the case may be, and to predict correctly
movements in the directions of the hedge and the hedged position and the
correlation between them, which predictions could prove to be inaccurate. This
requires different skills and techniques than predicting changes in the price of
individual securities, and there can be no assurance that the use of these
strategies will be successful. Even a well-conceived hedge may be unsuccessful
to some degree because of unexpected market behavior or trends. Losses incurred
in hedging transactions and the costs of these transactions will affect the
Portfolio's performance.

To the extent that the Portfolio engages in the strategies described
above, the Portfolio may experience losses greater than if these strategies had
not been utilized. In addition to the risks described above, these instruments
may be illiquid and/or subject to trading limits, and the Portfolio may be
unable to close out a position without incurring substantial losses, if at all.
The Portfolio is also subject to the risk of a default by a counterparty to an
off-exchange transaction.

Asset Coverage for Forward Contracts, Options, Futures and Options
on Futures. The Portfolio will comply with guidelines established by the U.S.
Securities and Exchange Commission (the "SEC") and other applicable regulatory
bodies with respect to coverage of forward currency contracts; options written
by the Portfolio on securities and securities indexes; and currency, interest
rate and index futures contracts and options on these futures contracts. These
guidelines may, in certain instances, require segregation by the Portfolio of
cash or liquid securities with its custodian or a designated sub-custodian to
the extent the Portfolio's obligations with respect to these strategies are not
otherwise "covered" through ownership of the underlying security, financial
instrument or currency or by other portfolio positions or by other means
consistent with applicable regulatory policies.

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<PAGE> 15

Segregated assets cannot be sold or transferred unless equivalent assets are
substituted in their place or it is no longer necessary to segregate them. As a
result, there is a possibility that segregation of a large percentage of the
Portfolio's assets could impede portfolio management or the Portfolio's ability
to meet redemption requests or other current obligations.

For example, a call option written by the Portfolio on securities
may require the Portfolio to hold the securities subject to the call (or
securities convertible into the securities without additional consideration) or
to segregate assets (as described above) sufficient to purchase and deliver the
securities if the call is exercised. A call option written by the Portfolio on
an index may require the Portfolio to own portfolio securities that correlate
with the index or to segregate assets (as described above) equal to the excess
of the index value over the exercise price on a current basis. A put option
written by the Portfolio may require the Portfolio to segregate assets (as
described above) equal to the exercise price. The Portfolio could purchase a put
option if the strike price of that option is the same or higher than the strike
price of a put option sold by the Portfolio. If the Portfolio holds a futures or
forward contract, the Portfolio could purchase a put option on the same futures
or forward contract with a strike price as high or higher than the price of the
contract held. The Portfolio may enter into fully or partially offsetting
transactions so that its net position, coupled with any segregated assets (equal
to any remaining obligation), equals its net obligation. Asset coverage may be
achieved by other means when consistent with applicable regulatory policies.

Additional Information on Other Investment Practices

Foreign Investments. The portfolio may invest up to 10% of its total
assets in the securities of foreign issuers. Investors should recognize that
investing in foreign companies involves certain risks, including those discussed
below, in addition to those associated with investing in U.S. issuers.

Depositary Receipts. The assets of the Portfolio may be invested in
the securities of foreign issuers in the form of American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and International Depositary
Receipts ("IDRs"). These securities may not necessarily be denominated in the
same currency as the securities into which they may be converted. ADRs are
receipts typically issued by a U.S. bank or trust company which evidence
ownership of underlying securities issued by a foreign corporation. EDRs, which
are sometimes referred to as Continental Depositary Receipts ("CDRs"), are
receipts issued in Europe, and IDRs, which are sometimes referred to as Global
Depositary Receipts ("GDRs"), are issued outside the United States. EDRs (CDRs)
and IDRs (GDRs) are typically issued by non-U.S. banks and trust companies and
evidence ownership of either foreign or domestic securities. Generally, ADRs in
registered form are designed for use in U.S. securities markets and EDRs (CDRs)
and IDRs (GDRs) in bearer form are designed for use in European and non-U.S.
securities markets, respectively.

Foreign Currency Exchange. Since the Portfolio may invest in
securities denominated in currencies other than the U.S. dollar, and since the
Portfolio may temporarily hold funds in bank deposits or other money market
investments denominated in foreign currencies, the Portfolio's investments in
foreign companies may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between such currencies and the
dollar. A change in the value of a foreign currency relative to the U.S.

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<PAGE> 16

dollar will result in a corresponding change in the dollar value of the
Portfolio's assets denominated in that foreign currency. Changes in foreign
currency exchange rates may also affect the value of dividends and interest
earned, gains and losses realized on the sale of securities and net investment
income and gains, if any, to be distributed by the Portfolio with respect to its
foreign investments. The rate of exchange between the U.S. dollar and other
currencies is determined by the forces of supply and demand in the foreign
exchange markets. Changes in the exchange rate may result over time from the
interaction of many factors directly or indirectly affecting economic and
political conditions in the United States and a particular foreign country,
including economic and political developments in other countries. Of particular
importance are rates of inflation, interest rate levels, the balance of payments
and the extent of government surpluses or deficits in the United States and the
particular foreign country, all of which are in turn sensitive to the monetary,
fiscal and trade policies pursued by the governments of the United States and
foreign countries important to international trade and finance. Governmental
intervention may also play a significant role. National governments rarely
voluntarily allow their currencies to float freely in response to economic
forces. Sovereign governments use a variety of techniques, such as intervention
by a country's central bank or imposition of regulatory controls or taxes, to
affect the exchange rates of their currencies. The Portfolio may use hedging
techniques with the objective of protecting against loss through the fluctuation
of the valuation of foreign currencies against the U.S. dollar, particularly the
forward market in foreign exchange, currency options and currency futures.

Euro Conversion. The introduction of a single European currency, the
euro, on January 1, 1999 for participating European nations in the Economic
Monetary Union presents unique risks and uncertainties for investors in those
countries, including (i) the functioning of the payment and operational systems
of banks and other financial institutions; (ii) the creation of suitable
clearing and settlement payment schemes for the euro; (iii) the fluctuation of
the euro relative to non-euro currencies during the transition period from
January 1, 1999 to December 31, 2000 and beyond; and (iv) whether the interest
rate, tax and labor regimes of the European countries participating in the euro
will converge over time. Further, the conversion of the currencies of other
Economic Monetary Union countries, such as the United Kingdom, and the admission
of other countries, including Central and Eastern European countries, to the
Economic Monetary Union could adversely affect the euro. These or other factors
may cause market disruptions and could adversely affect the value of foreign
securities and currencies held by the Portfolio.

Information. The majority of the foreign securities held by the
Portfolio will not be registered with, nor the issuers thereof be subject to
reporting requirements of, the SEC. Accordingly, there may be less publicly
available information about the securities and about the foreign company or
government issuing them than is available about a domestic company or government
entity. Foreign companies are generally subject to financial reporting
standards, practices and requirements that are either not uniform or less
rigorous than those applicable to U.S. companies.

Political Instability. With respect to some foreign countries, there
is the possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets of the Portfolio, political or social
instability, or domestic developments which could affect U.S. investments in
those and neighboring countries.

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<PAGE> 17

Delays. Securities of some foreign companies are less liquid and
their prices are more volatile than securities of comparable U.S. companies.
Certain foreign countries are known to experience long delays between the trade
and settlement dates of securities purchased or sold. Due to the increased
exposure of the Portfolio to market and foreign exchange fluctuations brought
about by such delays, and due to the corresponding negative impact on the
Portfolio's liquidity, the Portfolio will avoid investing in countries which are
known to experience settlement delays which may expose the Portfolio to
unreasonable risk of loss.

Increased Expenses. The operating expenses of the Portfolio, to the
extent it invests in foreign securities, may be higher than that of an
investment company investing exclusively in U.S. securities, since the expenses
of the Portfolio associated with foreign investing, such as custodial costs,
valuation costs and communication costs, are higher than those costs incurred by
other investment companies.

Foreign Debt Securities. The returns on foreign debt securities
reflect interest rates and other market conditions prevailing in those countries
and the effect of gains and losses in the denominated currencies against the
U.S. dollar, which have had a substantial impact on investment in foreign fixed
income securities. The relative performance of various countries' fixed income
markets historically has reflected wide variations relating to the unique
characteristics of each country's economy. Year-to-year fluctuations in certain
markets have been significant, and negative returns have been experienced in
various markets from time to time.

The foreign government securities in which the Portfolio may invest
generally consist of obligations issued or backed by national, state or
provincial governments or similar political subdivisions or central banks in
foreign countries. Foreign government securities also include debt obligations
of supranational entities, which include international organizations designated
or backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
"World Bank"), the European Coal and Steel Community, the Asian Development Bank
and the InterAmerican Development Bank.

Foreign government securities also include debt securities of
"quasi-governmental agencies" and debt securities denominated in multinational
currency units of an issuer (including supranational issuers). Debt securities
of quasi-governmental agencies are issued by entities owned by either a
national, state or equivalent government or are obligations of a political unit
that is not backed by the national government's full faith and credit and
general taxing powers. An example of a multinational currency unit is the
European Currency Unit ("ECU"). An ECU represents specified amounts of the
currencies of certain member states of the European Economic Community. The
specific amounts of currencies comprising the ECU may be adjusted by the Council
of Ministers of the European Community to reflect changes in relative values of
the underlying currencies.

Privatizations. The Portfolio may invest in privatizations (i.e.
foreign government programs of selling interests in government-owned or
controlled enterprises). The ability of U.S. entities, such as the Portfolio, to
participate in privatizations may be limited by

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<PAGE> 18

local law, or the terms for participation may be less advantageous than for
local investors. There can be no assurance that privatization programs will be
available or successful.

Brady Bonds. The Portfolio may invest in so-called "Brady Bonds,"
which have been issued by Costa Rica, Mexico, Uruguay and Venezuela and which
may be issued by other Latin American countries. Brady Bonds are issued as part
of a debt restructuring in which the bonds are issued in exchange for cash and
certain of the country's outstanding commercial bank loans. Investors should
recognize that Brady Bonds do not have a long payment history. Brady Bonds may
be collateralized or uncollateralized, are issued in various currencies
(primarily the U.S. dollar) and are actively traded in the over-the-counter
("OTC") secondary market for debt of Latin American issuers. In light of the
history of commercial bank loan defaults by Latin American public and private
entities, investments in Brady Bonds may be viewed as speculative.

General. Individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency, and
balance of payments positions. The Portfolio may invest in securities of foreign
governments (or agencies or instrumentalities thereof), and many, if not all, of
the foregoing considerations apply to such investments as well.

U.S. Government Securities. The Portfolio may invest in debt
obligations of varying maturities issued or guaranteed by the United States
government, its agencies or instrumentalities ("U.S. Government Securities").
Direct obligations of the U.S. Treasury include a variety of securities that
differ in their interest rates, maturities and dates of issuance. U.S.
Government Securities also include securities issued or guaranteed by the
Federal Housing Administration, Farmers Home Loan Administration, Export-Import
Bank of the United States, Small Business Administration, Government National
Mortgage Association, General Services Administration, Central Bank for
Cooperatives, Federal Farm Credit Banks, Federal Home Loan Banks, Federal Home
Loan Mortgage Corporation, Federal Intermediate Credit Banks, Federal Land
Banks, Federal National Mortgage Association, Federal Maritime Administration,
Tennessee Valley Authority, District of Columbia Armory Board and Student Loan
Marketing Association. Each Portfolio may also invest in instruments that are
supported by the right of the issuer to borrow from the U.S. Treasury and
instruments that are supported by the credit of the instrumentality. Because the
U.S. government is not obligated by law to provide support to an instrumentality
it sponsors, the Portfolio will invest in obligations issued by such an
instrumentality only if CSAM determines that the credit risk with respect to the
instrumentality does not make its securities unsuitable for investment by the
Portfolio.

Money Market Obligations. The Portfolio is authorized to invest,
under normal market conditions, up to 20% of its total assets in domestic and
foreign short-term (one year or less remaining to maturity) and medium-term
(five years or less remaining to maturity) money market obligations and for
temporary defensive purposes may invest in these securities without limit. These
instruments consist of obligations issued or guaranteed by the U.S. government
or a foreign government, their agencies or instrumentalities; bank obligations
(including certificates of deposit, time deposits and bankers' acceptances of
domestic or foreign banks, domestic savings and loans and similar institutions)
that are high quality investments or, if unrated, deemed by CSAM to be high
quality investments; commercial paper rated no lower

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<PAGE> 19

than A-2 by Standard & Poor's Ratings Services ("S&P") or Prime-2 by Moody's
Investors Service, Inc. ("Moody's") or the equivalent from another major rating
service or, if unrated, of an issuer having an outstanding, unsecured debt issue
then rated within the three highest rating categories; and repurchase agreements
with respect to the foregoing.

Repurchase Agreements. The Portfolio may invest in repurchase
agreement transactions with member banks of the Federal Reserve System and
certain non-bank dealers. Repurchase agreements are contracts under which the
buyer of a security simultaneously commits to resell the security to the seller
at an agreed-upon price and date. Under the terms of a typical repurchase
agreement, the Portfolio would acquire any underlying security for a relatively
short period (usually not more than one week) subject to an obligation of the
seller to repurchase, and the Portfolio to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the Portfolio's
holding period. This arrangement results in a fixed rate of return that is not
subject to market fluctuations during the Portfolio's holding period. The value
of the underlying securities will at all times be at least equal to the total
amount of the purchase obligation, including interest. The Portfolio bears a
risk of loss in the event that the other party to a repurchase agreement
defaults on its obligations or becomes bankrupt and the Portfolio is delayed or
prevented from exercising its right to dispose of the collateral securities,
including the risk of a possible decline in the value of the underlying
securities during the period in which the Portfolio seeks to assert this right.
CSAM, acting under the supervision of the Trust's Board of Trustees (the
"Board"), monitors the creditworthiness of those bank and non-bank dealers with
which the Portfolio enters into repurchase agreements to evaluate this risk. A
repurchase agreement is considered to be a loan under the Investment Company Act
of 1940, as amended (the "1940 Act").

Money Market Mutual Funds. Where CSAM believes that it would be
beneficial to the Portfolio and appropriate considering the factors of return
and liquidity, the Portfolio may invest up to 5% of its assets in securities of
money market mutual funds that are unaffiliated with the Portfolio or CSAM. A
money market mutual fund is an investment company that invests in short-term
high quality money market instruments. A money market mutual fund generally does
not purchase securities with a remaining maturity of more than one year. As a
shareholder in any mutual fund, the Portfolio will bear its ratable share of the
mutual fund's expenses, including management fees, and will remain subject to
payment of the Portfolio's management fees and other expenses with respect to
assets so invested.

Convertible Securities. Convertible securities in which the
Portfolio may invest, including both convertible debt and convertible preferred
stock, may be converted at either a stated price or stated rate into underlying
shares of common stock. Because of this feature, convertible securities enable
an investor to benefit from increases in the market price of the underlying
common stock. Convertible securities provide higher yields than the underlying
equity securities, but generally offer lower yields than non-convertible
securities of similar quality. The value of convertible securities fluctuates in
relation to changes in interest rates like bonds and, in addition, fluctuates in
relation to the underlying common stock. Subsequent to purchase by the
Portfolio, convertible securities may cease to be rated or a rating may be
reduced below the minimum required for purchase by the Portfolio. Neither event
will require sale of such securities, although CSAM will consider such event in
its determination of whether the Portfolio should continue to hold the
securities.

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Structured Securities. The Portfolio may purchase any type of
publicly traded or privately negotiated fixed income security, including
mortgage-backed securities; structured notes, bonds or debentures; and
assignments of and participations in loans.

Mortgage-Backed Securities. The Portfolio may invest in
mortgage-backed securities, such as those issued by the Government National
Mortgage Association ("GNMA"), Federal National Mortgage Association ("FNMA"),
Federal Home Loan Mortgage Corporation ("FHLMC") or certain foreign issuers.
Mortgage-backed securities represent direct or indirect participations in, or
are secured by and payable from, mortgage loans secured by real property. The
mortgages backing these securities include, among other mortgage instruments,
conventional 30-year fixed-rate mortgages, 15-year fixed-rate mortgages,
graduated payment mortgages and adjustable rate mortgages. The government or the
issuing agency typically guarantees the payment of interest and principal of
these securities. However, the guarantees do not extend to the securities' yield
or value, which are likely to vary inversely with fluctuations in interest
rates, nor do the guarantees extend to the yield or value of the Portfolio's
shares. These securities generally are "pass-through" instruments, through which
the holders receive a share of all interest and principal payments from the
mortgages underlying the securities, net of certain fees.

Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. The occurrence of mortgage prepayments is affected by various
factors, including the level of interest rates, general economic conditions, the
location, scheduled maturity and age of the mortgage and other social and
demographic conditions. Because prepayment rates of individual pools vary
widely, it is not possible to predict accurately the average life of a
particular pool. For pools of fixed-rate 30-year mortgages, a common industry
practice in the U.S. has been to assume that prepayments will result in a
12-year average life. At present, pools, particularly those with loans with
other maturities or different characteristics, are priced on an assumption of
average life determined for each pool. In periods of falling interest rates, the
rate of prepayment tends to increase, thereby shortening the actual average life
of a pool of mortgage-related securities. Conversely, in periods of rising rates
the rate of prepayment tends to decrease, thereby lengthening the actual average
life of the pool. However, these effects may not be present, or may differ in
degree, if the mortgage loans in the pools have adjustable interest rates or
other special payment terms, such as a prepayment charge. Actual prepayment
experience may cause the yield of mortgage-backed securities to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting the
Portfolio's yield.

The rate of interest on mortgage-backed securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificate holders and to any guarantor, such as GNMA, and
due to any yield retained by the issuer. Actual yield to the holder may vary
from the coupon rate, even if adjustable, if the mortgage-backed securities are
purchased or traded in the secondary market at a premium or discount. In
addition, there is normally some delay between the time the issuer receives
mortgage payments from the

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<PAGE> 21

servicer and the time the issuer makes the payments on the mortgage-backed
securities, and this delay reduces the effective yield to the holder of such
securities.

Asset-Backed Securities. The Portfolio may invest in asset-backed
securities, which represent participations in, or are secured by and payable
from, assets such as motor vehicle installment sales, installment loan
contracts, leases of various types of real and personal property and receivables
from revolving credit (credit card) agreements. Such assets are securitized
through the use of trusts and special purpose corporations. Payments or
distributions of principal and interest may be guaranteed up to certain amounts
and for a certain time period by a letter of credit or a pool insurance policy
issued by a financial institution unaffiliated with the trust or corporation.

Asset-backed securities present certain risks that are not presented
by other securities in which the Portfolio may invest. Automobile receivables
generally are secured by automobiles. Most issuers of automobile receivables
permit the loan servicers to retain possession of the underlying obligations. If
the servicer were to sell these obligations to another party, there is a risk
that the purchaser would acquire an interest superior to that of the holders of
the asset-backed securities. In addition, because of the large number of
vehicles involved in a typical issuance and technical requirements under state
laws, the trustee for the holders of the automobile receivables may not have a
proper security interest in the underlying automobiles. Therefore, there is the
possibility that recoveries on repossessed collateral may not, in some cases, be
available to support payments on these securities. Credit card receivables are
generally unsecured, and the debtors are entitled to the protection of a number
of state and federal consumer credit laws, many of which give such debtors the
right to set off certain amounts owed on the credit cards, thereby reducing the
balance due. In addition, there is no assurance that the security interest in
the collateral can be realized.

Structured Notes, Bonds or Debentures. Typically, the value of the
principal and/or interest on these instruments is determined by reference to
changes in the value of specific currencies, interest rates, commodities,
indexes or other financial indicators (the "Reference") or the relevant change
in two or more References. The interest rate or the principal amount payable
upon maturity or redemption may be increased or decreased depending upon changes
in the applicable Reference. The terms of the structured securities may provide
that in certain circumstances no principal is due at maturity and, therefore,
may result in the loss of the Portfolio's entire investment. The value of
structured securities may move in the same or the opposite direction as the
value of the Reference, so that appreciation of the Reference may produce an
increase or decrease in the interest rate or value of the security at maturity.
In addition, the change in interest rate or the value of the security at
maturity may be a multiple of the change in the value of the Reference so that
the security may be more or less volatile than the Reference, depending on the
multiple. Consequently, structured securities may entail a greater degree of
market risk and volatility than other types of debt obligations.

Assignments and Participations. The Portfolio may invest in
assignments of and participations in loans issued by banks and other financial
institutions.

When the Portfolio purchases assignments from lending financial
institutions, the Portfolio will acquire direct rights against the borrower on
the loan. However, since

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assignments are generally arranged through private negotiations between
potential assignees and potential assignors, the rights and obligations acquired
by the Portfolio as the purchaser of an assignment may differ from, and be more
limited than, those held by the assigning lender.

Participations in loans will typically result in the Portfolio
having a contractual relationship with the lending financial institution, not
the borrower. The Portfolio would have the right to receive payments of
principal, interest and any fees to which it is entitled only from the lender of
the payments from the borrower. In connection with purchasing a participation,
the Portfolio generally will have no right to enforce compliance by the borrower
with the terms of the loan agreement relating to the loan, nor any rights of
set-off against the borrower, and the Portfolio may not benefit directly from
any collateral supporting the loan in which it has purchased a participation. As
a result, the Portfolio will assume the credit risk of both the borrower and the
lender selling the participation. In the event of the insolvency of the lender
selling the participation, the Portfolio may be treated as a general creditor of
the lender and may not benefit from any set-off between the lender and the
borrower.

The Portfolio may have difficulty disposing of assignments and
participations because there is no liquid market for such securities. The lack
of a liquid secondary market will have an adverse impact on the value of such
securities and on the Portfolio's ability to dispose of particular assignments
or participations when necessary to meet the Portfolio's liquidity needs or in
response to a specific economic event, such as a deterioration in the
creditworthiness of the borrower. The lack of a liquid market for assignments
and participations also may make it more difficult for the Portfolio to assign a
value to these securities for purposes of valuing the Portfolio's investment
portfolio and calculating its net asset value.

The Portfolio may invest in fixed and floating rate loans ("Loans")
arranged through private negotiations between a foreign government (a
"Borrower") and one or more financial institutions ("Lenders"). The majority of
the Portfolio's investments in Loans are expected to be in the form of
participations in Loans ("Participations") and assignments of portions of Loans
from third parties ("Assignments"). Participations typically will result in the
Portfolio having a contractual relationship only with the Lender, not with the
Borrower. The Portfolio will have the right to receive payments of principal,
interest and any fees to which it is entitled only from the Lender selling the
Participation and only upon receipt by the Lender of the payments from the
Borrower. In connection with purchasing Participations, the Portfolio generally
will have no right to enforce compliance by the Borrower with the terms of the
loan agreement relating to the Loan, nor any rights of set-off against the
Borrower, and the Portfolio may not directly benefit from any collateral
supporting the Loan in which it has purchased the Participation. As a result,
the Portfolio will assume the credit risk of both the Borrower and the Lender
that is selling the Participation. In the event of the insolvency of the Lender
selling a Participation, the Portfolio may be treated as a general creditor of
the Lender and may not benefit from any set-off between the Lender and the
Borrower. The Portfolio will acquire Participations only if the Lender
interpositioned between the Portfolio and the Borrower is determined by CSAM to
be creditworthy.

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<PAGE> 23

assignors, the rights and obligations acquired by the Portfolio as the purchaser
of an Assignment may differ from, and be more limited than, those held by the
assigning Lender.

There are risks involved in investing in Participations and
Assignments. The Portfolio may have difficulty disposing of them because there
is no liquid market for such securities. The lack of a liquid secondary market
will have an adverse impact on the value of such securities and on the
Portfolio's ability to dispose of particular Participations or Assignments when
necessary to meet the Portfolio's liquidity needs or in response to a specific
economic event, such as a deterioration in the creditworthiness of the Borrower.
The lack of a liquid market for Participations and Assignments also may make it
more difficult for the Portfolio to assign a value to these securities for
purposes of valuing the Portfolio's investment portfolio and calculating its net
asset value.

Debt Securities. The Portfolio may invest up to 20% of its total
assets in debt securities (other than money market obligations). The Portfolio
may also invest to a limited extent in zero coupon bonds, which may result in
taxable income to shareholders in the Portfolio. Debt obligations of
corporations in which the Portfolio may invest include corporate bonds,
debentures and notes. Debt securities convertible into common stock and certain
preferred stocks may have risks similar to those described below. The interest
income to be derived may be considered as one factor in selecting debt
securities for investment by CSAM. Because the market value of debt obligations
can be expected to vary inversely to changes in prevailing interest rates,
investing in debt obligations may provide an opportunity for capital
appreciation when interest rates are expected to decline. The success of such a
strategy is dependent upon CSAM's ability to accurately forecast changes in
interest rates. The market value of debt obligations may also be expected to
vary depending upon, among other factors, the ability of the issuer to repay
principal and interest, any change in investment rating and general economic
conditions.

A security will be deemed to be investment grade if it is rated
within the four highest grades by Moody's or S&P or, if unrated, is determined
to be of comparable quality by CSAM. Bonds rated in the fourth highest grade may
have speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a weakened capacity to make principal
and interest payments than is the case with higher grade bonds. The Portfolio's
holdings of debt securities rated below investment grade (commonly referred to
as "junk bonds") may be rated as low as C by Moody's or D by S&P at the time of
purchase, or may be unrated securities considered to be of equivalent quality.
Securities that are rated C by Moody's comprise the lowest rated class and can
be regarded as having extremely poor prospects of ever attaining any real
investment standing. Debt rated D by S&P is in default or is expected to default
upon maturity or payment date. Subsequent to its purchase by the Portfolio, an
issue of securities may cease to be rated or its rating may be reduced below the
minimum required for purchase by the Portfolio. Neither event will require sale
of such securities, although CSAM will consider such event in its determination
of whether the Portfolio should continue to hold the securities. Any percentage
limitation on the Portfolio's ability to invest in debt securities will not be
applicable during periods when the Portfolio pursues a temporary defensive
strategy as discussed below.

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<PAGE> 24

When CSAM believes that a defensive posture is warranted, the
Portfolio may invest temporarily without limit in investment grade debt
obligations and in domestic and foreign money market obligations, including
repurchase agreements.

Below Investment Grade Securities. The Portfolio may invest up to 5%
of its total assets in securities rated below investment grade, including
convertible debt securities. While the market values of below investment grade
securities tend to react less to fluctuations in interest rate levels than do
those of investment grade securities, the market values of certain of these
securities also tend to be more sensitive to individual corporate developments
and changes in economic conditions than investment grade securities. In
addition, below investment grade securities generally present a higher degree of
credit risk. Issuers of below investment grade securities are often highly
leveraged and may not have more traditional methods of financing available to
them so that their ability to service their obligations during an economic
downturn or during sustained periods of rising interest rates may be impaired.
The risk of loss due to default by such issuers is significantly greater because
below investment grade securities generally are unsecured and frequently are
subordinated to the prior payment of senior indebtedness.

The market for below investment grade securities is relatively new
and has not weathered a major economic recession. Any such recession could
disrupt severely the market for such securities and may adversely affect the
value of such securities and the ability of the issuers of such securities to
repay principal and pay interest thereon.

The Portfolio may have difficulty disposing of certain of these
securities because there may be a thin trading market. Because there is no
established retail secondary market for many of these securities, the Portfolio
anticipates that these securities could be sold only to a limited number of
dealers or institutional investors. To the extent a secondary trading market for
these securities does exist, it generally is not as liquid as the secondary
market for higher-rated securities. The lack of a liquid secondary market, as
well as adverse publicity and investor perception with respect to these
securities, may have an adverse impact on market price and the Portfolio's
ability to dispose of particular issues when necessary to meet the Portfolio's
liquidity needs or in response to a specific economic event such as a
deterioration in the creditworthiness of the issuer. The lack of a liquid
secondary market for certain securities also may make it more difficult for the
Portfolio to obtain accurate market quotations for purposes of valuing the
Portfolio and calculating its net asset value.

The market value of below investment grade securities is more
volatile than that of investment grade securities. Factors adversely impacting
the market value of these securities will adversely impact the Portfolio's net
asset value. The Portfolio will rely on the judgment, analysis and experience of
CSAM in evaluating the creditworthiness of an issuer. In this evaluation, CSAM
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.
Normally, below investment grade securities are not intended for short-term
investment. The Portfolio may incur additional expenses to the extent it is
required to seek recovery upon a default in the payment of principal or interest
on its portfolio holdings of such securities.

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<PAGE> 25

Securities of Other Investment Companies. The Portfolio may invest
in securities of other investment companies to the extent permitted under the
Investment Company Act of 1940, as amended (the "1940 Act"). Presently, under
the 1940 Act, the Portfolio may hold securities of another investment company in
amounts which (i) do not exceed 3% of the total outstanding voting stock of such
company, (ii) do not exceed 5% of the value of the Portfolio's total assets and
(iii) when added to all other investment company securities held by the
Portfolio, do not exceed 10% of the value of the Portfolio's total assets.

Lending of Portfolio Securities. The Portfolio may lend portfolio
securities to brokers, dealers and other financial organizations that meet
capital and other credit requirements or other criteria established by the
Trust's Board of Trustees (the "Board"). These loans, if and when made, may not
exceed 33 1/3% of the Portfolio's total assets taken at value (including the
loan collateral). The Portfolio will not lend portfolio securities to CSAM or
its affiliates unless it has applied for and received specific authority to do
so from the SEC. Loans of portfolio securities will be collateralized by cash or
liquid securities which are segregated at all times in an amount equal to at
least 100% of the current market value of the loaned securities. Any gain or
loss in the market price of the securities loaned that might occur during the
term of the loan would be for the account of the Portfolio involved. From time
to time, the Portfolio may return a part of the interest earned from the
investment of collateral received for securities loaned to the borrower and/or a
third party that is unaffiliated with the Portfolio and that is acting as a
"finder."

By lending its securities, the Portfolio can increase its income by
continuing to receive interest and any dividends on the loaned securities as
well as by either investing the collateral received for securities loaned in
short-term instruments or obtaining yield in the form of interest paid by the
borrower when U.S. Government Securities are used as collateral. Although the
generation of income is not an investment objective of the Portfolio, income
received could be used to pay the Portfolio's expenses and would increase an
investor's total return. The Portfolio will adhere to the following conditions
whenever its portfolio securities are loaned: (i) the Portfolio must receive at
least 100% cash collateral or equivalent securities of the type discussed in the
preceding paragraph from the borrower; (ii) the borrower must increase such
collateral whenever the market value of the securities rises above the level of
such collateral; (iii) the Portfolio must be able to terminate the loan at any
time; (iv) the Portfolio must receive reasonable interest on the loan, as well
as any dividends, interest or other distributions on the loaned securities and
any increase in market value; (v) the Portfolio may pay only reasonable
custodian fees in connection with the loan; and (vi) voting rights on the loaned
securities may pass to the borrower, provided, however, that if a material event
adversely affecting the investment occurs, the Board must terminate the loan and
regain the right to vote the securities. Loan agreements involve certain risks
in the event of default or insolvency of the other party including possible
delays or restrictions upon the Portfolio's ability to recover the loaned
securities or dispose of the collateral for the loan.

When-Issued Securities and Delayed-Delivery Transactions. The
Portfolio may utilize up to 20% of its total assets to purchase securities on a
"when-issued" basis or purchase or sell securities for delayed delivery (i.e.,
payment or delivery occur beyond the normal settlement date at a stated price
and yield). The Portfolio will enter into a when-issued transaction for the
purpose of acquiring portfolio securities and not for the purpose of leverage,
but may sell the securities before the settlement date if CSAM deems it
advantageous

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<PAGE> 26

to do so. The payment obligation and the interest rate that will be received on
when-issued securities are fixed at the time the buyer enters into the
commitment. Due to fluctuations in the value of securities purchased or sold on
a when-issued or delayed-delivery basis, the prices obtained on such securities
may be higher or lower than the prices available in the market on the dates when
the investments are actually delivered to the buyers.

When the Portfolio agrees to purchase when-issued or
delayed-delivery securities, its custodian will set aside cash or liquid
securities equal to the amount of the commitment. Normally, the custodian will
set aside portfolio securities to satisfy a purchase commitment, and in such a
case the Portfolio may be required subsequently to segregate additional assets
in order to ensure that the value of the segregated assets remains equal to the
amount of the Portfolio's commitment. It may be expected that the Portfolio's
net assets will fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments than when it sets aside cash. When
the Portfolio engages in when-issued or delayed-delivery transactions, it relies
on the other party to consummate the trade. Failure of the seller to do so may
result in the Portfolio's incurring a loss or missing an opportunity to obtain a
price considered to be advantageous.

Reverse Repurchase Agreements and Dollar Rolls. The Portfolio may
enter into reverse repurchase agreements member banks of the Federal Reserve
System and certain non-bank dealers. Reverse repurchase agreements involve the
sale of securities held by the Portfolio pursuant to its agreement to repurchase
them at a mutually agreed upon date, price and rate of interest. At the time the
Portfolio enters into a reverse repurchase agreement, it will segregate cash or
liquid securities having a value not less than the repurchase price (including
accrued interest). The segregated assets will be marked-to-market daily and
additional assets will be segregated on any day in which the assets fall below
the repurchase price (plus accrued interest). The Portfolio's liquidity and
ability to manage its assets might be affected when it sets aside cash or
portfolio securities to cover such commitments. Reverse repurchase agreements
involve the risk that the market value of the securities retained in lieu of
sale may decline below the price of the securities the Portfolio has sold but is
obligated to repurchase. In the event the buyer of securities under a reverse
repurchase agreement files for bankruptcy or becomes insolvent, such buyer or
its trustee or receiver may receive an extension of time to determine whether to
enforce the Portfolio's obligation to repurchase the securities, and the
Portfolio's use of the proceeds of the reverse repurchase agreement may
effectively be restricted pending such decision.

The Portfolio also may enter into "dollar rolls," in which the
Portfolio sells fixed-income securities for delivery in the current month and
simultaneously contracts to repurchase similar but not identical (same type,
coupon and maturity) securities on a specified future date. During the roll
period, the Portfolio would forego principal and interest paid on such
securities. The Portfolio would be compensated by the difference between the
current sales price and the forward price for the future purchase, as well as by
the interest earned on the cash proceeds of the initial sale. At the time the
Portfolio enters into a dollar roll transaction, it will segregate with an
approved custodian cash or liquid securities having a value not less than the
repurchase price (including accrued interest) and will subsequently monitor the
segregated assets to ensure that their value is maintained. Reverse repurchase
agreements and dollar rolls that are accounted for as financings are considered
to be borrowings under the 1940 Act.

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<PAGE> 27

Warrants. The Portfolio may invest up to 10% of net assets in
warrants. Warrants are securities that give the holder the right, but not the
obligation to purchase equity issues of the company issuing the warrants, or a
related company, at a fixed price either on a date certain or during a set
period. The Portfolio may invest in warrants to purchase newly created equity
securities consisting of common and preferred stock. The equity security
underlying a warrant is authorized at the time the warrant is issued or is
issued together with the warrant.

Investing in warrants can provide a greater potential for profit or
loss than an equivalent investment in the underlying security, and, thus, can be
a speculative investment. At the time of issue, the cost of a warrant is
substantially less than the cost of the underlying security itself, and price
movements in the underlying security are generally magnified in the price
movements of the warrant. This leveraging effect enables the investor to gain
exposure to the underlying security with a relatively low capital investment.
This leveraging increases an investor's risk, however, in the event of a decline
in the value of the underlying security and can result in a complete loss of the
amount invested in the warrant. In addition, the price of a warrant tends to be
more volatile than, and may not correlate exactly to, the price of the
underlying security. If the market price of the underlying security is below the
exercise price of the warrant on its expiration date, the warrant will generally
expire without value. The value of a warrant may decline because of a decline in
the value of the underlying security, the passage of time, changes in interest
rates or in the dividend or other policies of the company whose equity underlies
the warrant or a change in the perception as to the future price of the
underlying security, or any combination thereof. Warrants generally pay no
dividends and confer no voting or other rights other than to purchase the
underlying security.

Non-Publicly Traded and Illiquid Securities. The Portfolio may
invest up to 10% of its total assets in illiquid securities, including
securities that are illiquid by virtue of the absence of a readily available
market, repurchase agreements which have a maturity of longer than seven days,
time deposits maturing in more than seven days and certain Rule 144A Securities
(as defined below). Securities that have legal or contractual restrictions on
resale but have a readily available market are not considered illiquid for
purposes of this limitation. Repurchase agreements subject to demand are deemed
to have a maturity equal to the notice period.

Historically, illiquid securities have included securities subject
to contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Companies whose securities are not publicly traded may not be
subject to the disclosure and other investor protection requirements applicable
to companies whose securities are publicly traded. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days without borrowing. A mutual fund might
also have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.

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<PAGE> 28

In recent years, however, a large institutional market has developed
for certain securities that are not registered under the Securities Act
including repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.

Rule 144A Securities. Rule 144A under the Securities Act adopted by
the SEC allows for a broader institutional trading market for securities
otherwise subject to restriction on resale to the general public. Rule 144A
establishes a "safe harbor" from the registration requirements of the Securities
Act for resales of certain securities to qualified institutional buyers. CSAM
anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and use of automated systems for the trading, clearance and
settlement of unregistered securities of domestic and foreign issuers, such as
the PORTAL System sponsored by the National Association of Securities Dealers,
Inc.

An investment in Rule 144A Securities will be considered illiquid
and therefore subject to the Portfolio's limit on the purchase of illiquid
securities unless the Board or its delegates determines that the Rule 144A
Securities are liquid. In reaching liquidity decisions, the Board or its
delegates may consider, inter alia, the following factors: (i) the unregistered
nature of the security; (ii) the frequency of trades and quotes for the
security; (iii) the number of dealers wishing to purchase or sell the security
and the number of other potential purchasers; (iv) dealer undertakings to make a
market in the security and (v) the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the security, the method
of soliciting offers and the mechanics of the transfer).

Borrowing. The Portfolio may borrow up to 10% of its total assets
for temporary or emergency purposes, including to meet portfolio redemption
requests so as to permit the orderly disposition of portfolio securities or to
facilitate settlement transactions on portfolio securities. Investments
(including roll-overs) will not be made when borrowings exceed 5% of the
Portfolio's total assets. Although the principal of such borrowings will be
fixed, the Portfolio's assets may change in value during the time the borrowing
is outstanding. The Portfolio expects that some of its borrowings may be made on
a secured basis. In such situations, either the custodian will segregate the
pledged assets for the benefit of the lender or arrangements will be made with a
suitable sub-custodian, which may include the lender.

Non-Diversified Status The Portfolio is classified as
non-diversified within the meaning of the 1940 Act, which means that the
Portfolio is not limited by such Act in the proportion of its assets that it may
invest in securities of a single issuer. The Portfolio's investments will be
limited, however, in order to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"). To
qualify, the Portfolio will comply with certain requirements, including limiting
its investments so that at the close of each quarter of the taxable year (i) not
more than 25% of the market value of its total assets will be invested in the
securities of a single issuer, and (ii) with respect to 50% of the market value
of its total assets, not more than 5% of the market value of its total assets
will

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<PAGE> 29

be invested in the securities of a single issuer and the Portfolio will not own
more than 10% of the outstanding voting securities of a single issuer.

REITs. The Portfolio may invest in real estate investment trusts
("REITs"), which are pooled investment vehicles that invest primarily in
income-producing real estate or real estate related loans or interests. Like
regulated investment companies such as the Portfolio, REITs are not taxed on
income distributed to shareholders provided they comply with several
requirements of the Code. By investing in a REIT, the Portfolio will indirectly
bear its proportionate share of any expenses paid by the REIT in addition to the
expenses of the Portfolio.

Investing in REITs involves certain risks. A REIT may be affected by
changes in the value of the underlying property owned by such REIT or by the
quality of any credit extended by the REIT. REITs are dependent on management
skills, are not diversified (except to the extent the Code requires), and are
subject to the risks of financing projects. REITs are subject to heavy cash flow
dependency, default by borrowers, self-liquidation, the possibilities of failing
to qualify for the exemption from tax for distributed income under the Code and
failing to maintain exemptions from the 1940 Act. REITs are also subject to
interest rate risks.

Small Capitalization and Emerging Growth Companies; Unseasoned
Issuers. Investments in small- and medium- sized and emerging growth companies
and companies with continuous operations of less than three years ("unseasoned
issuers"), which may include foreign securities involve considerations that are
not applicable to investing in securities of established, larger-capitalization
issuers, including reduced and less reliable information about issuers and
markets, less stringent financial disclosure requirements, illiquidity of
securities and markets, higher brokerage commissions and fees and greater market
risk in general. In addition, securities of these companies may involve greater
risks since these securities may have limited marketability and, thus, may be
more volatile.

"Special situation companies" are involved in an actual or
prospective acquisition or consolidation; reorganization; recapitalization;
merger, liquidation or distribution of cash, securities or other assets; a
tender or exchange offer; a breakup or workout of a holding company; or
litigation which, if resolved favorably, would improve the value of the
company's stock. If the actual or prospective situation does not materialize as
anticipated, the market price of the securities of a "special situation company"
may decline significantly. CSAM believes, however, that if it analyzes "special
situation companies" carefully and invests in the securities of these companies
at the appropriate time, the Portfolio may achieve capital growth. There can be
no assurance, however, that a special situation that exists at the time of an
investment will be consummated under the terms and within the time period
contemplated.

Other Investment Limitations

The investment limitations numbered 1 through 9 may not be changed
without the affirmative vote of the holders of a majority of the Portfolio's
outstanding shares. Such majority is defined as the lesser of (i) 67% or more of
the shares present at the meeting, if the holders of more than 50% of the
outstanding shares of the Portfolio are present or represented

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<PAGE> 30

by proxy, or (ii) more than 50% of the outstanding shares. Investment
limitations 10 through 13 may be changed by a vote of the Board at any time.

The Portfolio may not:

1. Borrow money or issue senior securities except that the
Portfolio may (a) borrow from banks for temporary or emergency purposes, and
not for leveraging, and then in amounts not in excess of 10% of the value of
the Portfolio's total assets at the time of such borrowing and (b) enter into
futures contracts; or mortgage, pledge or hypothecate any assets except in
connection with any bank borrowing and in amounts not in excess of the lesser
of the dollar amounts borrowed or 10% of the value of the Portfolio's total
assets at the time of such borrowing. Whenever borrowings described in (a)
exceed 5% of the value of the Portfolio's total assets, the Portfolio will not
make any additional investments (including roll-overs). For purposes of this
restriction, (a) the deposit of assets in escrow in connection with the
purchase of securities on a when-issued or delayed-delivery basis and (b)
collateral arrangements with respect to initial or variation margin for futures
contracts will not be deemed to be pledges of the Portfolio's assets.

2. Purchase any securities which would cause 25% or more of the
value of the Portfolio's total assets at the time of purchase to be invested in
the securities of issuers conducting their principal business activities in the
same industry; provided that there shall be no limit on the purchase of U.S.
Government Securities.

3. Make loans, except that the Portfolio may purchase or hold
publicly distributed fixed-income securities, lend portfolio securities and
enter into repurchase agreements.

4. Underwrite any securities issued by others except to the extent
that the investment in restricted securities and the purchase of fixed-income
securities directly from the issuer thereof in accordance with the Portfolio's
investment objective, policies and limitations may be deemed to be
underwriting.

5. Purchase or sell real estate, real estate investment trust
securities, real estate limited partnerships, and distributed commodities
contracts or invest in oil, gas or mineral exploration or development programs,
except that the Portfolio may invest in (a) fixed-income securities secured by
real estate, mortgages or interests therein, (b) securities of companies that
invest in or sponsor oil, gas or mineral exploration or development programs
and (c) futures contracts and related options.

6. Make short sales of securities or maintain a short position.

7. Purchase, write or sell puts, calls, straddles, spreads or
combinations thereof, except that the Portfolio may (a) purchase put and call
options on securities, (b) write covered call options on securities, (c)
purchase and write put and call options on stock indices and (d) enter into
options on futures contracts.

8. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition, reorganization or offer
of exchange or as otherwise permitted under the 1940 Act.

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<PAGE> 31

9. Purchase securities on margin, except that the Portfolio may
obtain any short-term credits necessary for the clearance of purchases and
sales of securities. For purposes of this restriction, the deposit or payment
of initial or variation margin in connection with futures contracts or related
options will not be deemed to be a purchase of securities on margin.

10. Invest more than 10% of the value of the Portfolio's total
assets in securities which may be illiquid because of legal or contractual
restrictions on resale or securities for which there are no readily available
market quotations. For purposes of this limitation, repurchase agreements with
maturities greater than seven days shall be considered illiquid securities.

11. Invest more than 10% of the value of the Portfolio's total
assets in time deposits maturing in more than seven calendar days.

12. Invest in warrants (other than warrants acquired by the
Portfolio as part of a unit or attached to securities at the time of purchase)
if, as a result, the investments (valued at the lower of cost or market) would
exceed 10% of the value of the Portfolio's net assets.

13. Invest in oil, gas or mineral leases.

General. If a percentage limitation (other than the percentage
limitation set forth in investment restriction No. 1 above) is adhered to at the
time of an investment, a later increase or decrease in the percentage of assets
resulting from a change in the values of portfolio securities or in the amount
of the Portfolio's assets will not constitute a violation of such restriction.

Portfolio Valuation

The following is a description of the procedures used by the
Portfolio in valuing its assets.

Securities listed on a U.S. securities exchange (including
securities traded through the Nasdaq National Market System) or foreign
securities exchange or traded in an OTC market will be valued at the most recent
sale as of the time the valuation is made or, in the absence of sales, at the
mean between the highest bid and lowest asked quotations. If there are no such
quotations, the value of the securities will be taken to be the most recent bid
quotation on the exchange or market. Options contracts will be valued similarly.
Futures contracts will be valued at the most recent settlement price at the time
of valuation. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security. The valuation of short sales of securities, which are not traded
on a national exchange, will be at the mean of bid and asked prices. Amortized
cost involves valuing a portfolio instrument at its initial cost and thereafter
assuming a constant amortization to maturity of an discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. Short-term obligations with maturities of 60 days or less are
valued at amortized cost, which constitutes fair value as determined by the
Board. Amortized cost involves valuing a portfolio instrument at its initial
cost and thereafter assuming a constant amortization to maturity of any discount
or

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<PAGE> 32

premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. The amortized cost method of valuation may also be used
with respect to other debt obligations with 60 days or less remaining to
maturity. Notwithstanding the foregoing, in determining the market value of
portfolio investments, the Portfolio may employ outside organizations (each, a
"Pricing Service") which may use a matrix formula or other objective method that
takes into consideration market indexes, matrices, yield curves and other
specific adjustments. The procedures of Pricing Services are reviewed
periodically by the officers of the Trust under the general supervision and
responsibility of the Board, which may replace a Pricing Service at any time.
Securities, options, futures contracts and other assets for which market
quotations are not available will be valued at their fair value as determined in
good faith pursuant to consistently applied procedures established by the Board.
In addition, the Board or its delegates may value a security at fair value if it
determines that such security's value determined by the methodology set forth
above does not reflect its fair value.

Trading in securities in certain foreign countries is completed at
various times prior to the close of business on each business day in New York
(i.e., a day on which The New York Stock Exchange, Inc. (the "NYSE") is open for
trading). In addition, securities trading in a particular country or countries
may not take place on all business days in New York. Furthermore, trading takes
place in various foreign markets on days which are not business days in New York
and days on which the Portfolio's net asset value is not calculated. As a
result, calculation of the Portfolio's net asset value may not take place
contemporaneously with the determination of the prices of certain foreign
portfolio securities used in such calculation. All assets and liabilities
initially expressed in foreign currency values will be converted into U.S.
dollar values at the prevailing rate as quoted by a Pricing Service as of 12:00
noon (Eastern time). If such quotations are not available, the rate of exchange
will be determined in good faith pursuant to consistently applied procedures
established by the Board.

Portfolio Transactions

CSAM is responsible for establishing, reviewing and, where
necessary, modifying the Portfolio's investment program to achieve its
investment objective. Purchases and sales of newly issued portfolio securities
are usually principal transactions without brokerage commissions effected
directly with the issuer or with an underwriter acting as principal. Other
purchases and sales may be effected on a securities exchange or
over-the-counter, depending on where it appears that the best price or execution
will be obtained. The purchase price paid by the Portfolio to underwriters of
newly issued securities usually includes a concession paid by the issuer to the
underwriter, and purchases of securities from dealers, acting as either
principals or agents in the after market, are normally executed at a price
between the bid and asked price, which includes a dealer's mark-up or mark-down.
Transactions on U.S. stock exchanges and some foreign stock exchanges involve
the payment of negotiated brokerage commissions. On exchanges on which
commissions are negotiated, the cost of transactions may vary among different
brokers. On most foreign exchanges, commissions are generally fixed. There is
generally no stated commission in the case of securities traded in domestic or
foreign OTC markets, but the price of securities traded in OTC markets includes
an undisclosed commission or mark-up. U.S. Government Securities are generally
purchased from underwriters or dealers, although certain newly issued U.S.
Government Securities may be purchased directly from the U.S. Treasury or from
the issuing agency or instrumentality.

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<PAGE> 33

CSAM will select specific portfolio investments and effect
transactions for the Portfolio and in doing so seeks to obtain the overall best
execution of portfolio transactions. In evaluating prices and executions, CSAM
will consider the factors it deems relevant, which may include the breadth of
the market in the security, the price of the security, the financial condition
and execution capability of a broker or dealer and the reasonableness of the
commission, if any, for the specific transaction and on a continuing basis. CSAM
may, in its discretion, effect transactions in portfolio securities with dealers
who provide brokerage and research services (as those terms are defined in
Section 28(e) of the Securities Exchange Act of 1934) to the Portfolio and/or
other accounts over which CSAM exercises investment discretion. CSAM may place
portfolio transactions with a broker or dealer with whom it has negotiated a
commission that is in excess of the commission another broker or dealer would
have charged for effecting the transaction if CSAM determines in good faith that
such amount of commission was reasonable in relation to the value of such
brokerage and research services provided by such broker or dealer viewed in
terms of either that particular transaction or of the overall responsibilities
of CSAM. Research and other services received may be useful to CSAM in serving
both the Portfolio and its other clients and, conversely, research or other
services obtained by the placement of business of other clients may be useful to
CSAM in carrying out its obligations to the Portfolio. Research may include
furnishing advice, either directly or through publications or writings, as to
the value of securities, the advisability of purchasing or selling specific
securities and the availability of securities or purchasers or sellers of
securities; furnishing seminars, information, analyses and reports concerning
issuers, industries, securities, trading markets and methods, legislative
developments, changes in accounting practices, economic factors and trends and
portfolio strategy; access to research analysts, corporate management personnel,
industry experts, economists and government officials; comparative performance
evaluation and technical measurement services and quotation services; and
products and other services (such as third party publications, reports and
analyses, and computer and electronic access, equipment, software, information
and accessories that deliver, process or otherwise utilize information,
including the research described above) that assist CSAM in carrying out its
responsibilities. Research received from brokers or dealers is supplemental to
CSAM's own research program. The fees to CSAM under its advisory agreements with
the Trust are not reduced by reason of its receiving any brokerage and research
services.

Because the Portfolio has not yet commenced operations as of the
date of this Statement of Additional Information, no brokerage commissions have
been paid by the Portfolio.

Investment decisions for the Portfolio concerning specific portfolio
securities are made independently from those for other clients advised by CSAM.
Such other investment clients may invest in the same securities as the
Portfolio. When purchases or sales of the same security are made at
substantially the same time on behalf of such other clients, transactions are
averaged as to price and available investments allocated as to amount, in a
manner which CSAM believes to be equitable to each client, including the
Portfolio. In some instances, this investment procedure may adversely affect the
price paid or received by the Portfolio or the size of the position obtained or
sold for the Portfolio. To the extent permitted by law, securities to be sold or
purchased for the Portfolio may be aggregated with those to be sold or purchased
for such other investment clients in order to obtain best execution.

28
<PAGE> 34

In no instance will portfolio securities be purchased from or sold
to CSAM, Credit Suisse Asset Management Securities, Inc. ("CSAMSI") or Credit
Suisse First Boston ("CS First Boston") or any affiliated person of such
companies.

Transactions for the Portfolio may be effected on foreign securities
exchanges. In transactions for securities not actively traded on a foreign
securities exchange, the Portfolio will deal directly with the dealers who make
a market in the securities involved, except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting as
principal for their own account. On occasion, securities may be purchased
directly from the issuer. Such portfolio securities are generally traded on a
net basis and do not normally involve brokerage commissions. Securities firms
may receive brokerage commissions on certain portfolio transactions, including
options, futures and options on futures transactions and the purchase and sale
of underlying securities upon exercise of options.

The Portfolio may participate, if and when practicable, in bidding
for the purchase of securities for the Portfolio's portfolio directly from an
issuer in order to take advantage of the lower purchase price available to
members of such a group. The Portfolio will engage in this practice, however,
only when CSAM, in its sole discretion, believes such practice to be otherwise
in the Portfolio's interest.

Portfolio Turnover

The Portfolio does not intend to seek profits through short-term
trading, but the rate of turnover will not be a limiting factor when the
Portfolio deems it desirable to sell or purchase securities. The Portfolio's
portfolio turnover rate is calculated by dividing the lesser of purchases or
sales of its portfolio securities for the year by the monthly average value of
the portfolio securities. Securities with remaining maturities of one year or
less at the date of acquisition are excluded from the calculation.

Certain practices that may be employed by the Portfolio could result
in high portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. To the extent that its portfolio is
traded for the short-term, the Portfolio will be engaged essentially in trading
activities based on short-term considerations affecting the value of an issuer's
stock instead of long-term investments based on fundamental valuation of
securities. Because of this policy, portfolio securities may be sold without
regard to the length of time for which they have been held. Consequently, the
annual portfolio turnover rate of the Portfolio may be higher than mutual funds
having similar objectives that do not utilize these strategies.

MANAGEMENT OF THE TRUST

Officers and Board of Trustees

29
<PAGE> 35

reclassify any unissued shares of the Trust into one or more additional classes
by setting or changing in any one or more respects their relative rights, voting
powers, restrictions, limitations as to dividends, qualifications and terms and
conditions of redemption. The Board may similarly classify or reclassify any
class of its shares into one or more series and, without shareholder approval,
may increase the number of authorized shares of the Trust.

The names (and ages) of the Trust's Trustees and officers, their
addresses, present positions and principal occupations during the past five
years and other affiliations are set forth below.

<TABLE>
<S> <C>
Richard H. Francis (67) Trustee
40 Grosvenor Road Currently retired; Executive Vice President and
Short Hills, New Jersey 07078 Chief Financial Officer of Pan Am Corporation
and Pan American World Airways, Inc. from 1988
to 1991; Director of The Infinity Mutual Funds,
BISYS Group Incorporated; Director/Trustee of
other Warburg Pincus Funds and other CSAM-advised
investment companies.

Jack W. Fritz (72) Trustee
2425 North Fish Creek Road Private investor; Consultant and Director of
P.O. Box 483 Fritz Broadcasting, Inc. and Fritz
Wilson, Wyoming 83014 Communications (developers and operators of
radio stations); Director of Advo, Inc. (direct
mail advertising); Director/Trustee of other
Warburg Pincus Funds.

Jeffrey E. Garten (52) Trustee
Box 208200 Dean of Yale School of Management and William
New Haven, Connecticut 06520-8200 S. Beinecke Professor in the Practice of
International Trade and Finance; Undersecretary
of Commerce for International Trade from
November 1993 to October 1995; Professor at
Columbia University from September 1992 to
November 1993; Director/Trustee of other
Warburg Pincus Funds.

</TABLE>

30
<PAGE> 36

<TABLE>
<S> <C>
James S. Pasman, Jr. (68) Trustee
29 The Trillium Currently retired; President and Chief
Pittsburgh, Pennsylvania 15238 Operating Officer of National InterGroup, Inc.
from April 1989 to March 1991; Chairman of
Permian Oil Co. from April 1989 to March 1991;
Director of Education Management Corp., Tyco
International Ltd.; Trustee, BT Insurance Funds
Trust; Director/Trustee of other Warburg Pincus
Funds and other CSAM-advised investment companies.

William W. Priest* (57) Chairman of the Board
153 East 53rd Street Chairman- Management Committee, Chief Executive
New York, New York 10022 Officer and Managing Director of CSAM (U.S.)
since 1990; Director of TIG Holdings, Inc.;
Director/Trustee of other Warburg Pincus Funds
and other CSAM-advised investment companies.

Steven N. Rappaport (50) Trustee
c/o Loanet, Inc. President of Loanet, Inc. since 1997; Executive
153 East 53rd Street, Vice President of Loanet, Inc. from 1994 to
Suite 5500 1997; Director, President, North American
New York, New York 10022 Operations, and former Executive Vice President
from 1992 to 1993 of Worldwide Operations of
Metallurg Inc.; Executive Vice President,
Telerate, Inc. from 1987 to 1992; Partner in
the law firm of Hartman & Craven until 1987;
Director/Trustee of other Warburg Pincus Funds
and other CSAM-advised investment companies.

Arnold M. Reichman* (51) Vice Chairman of the Board
466 Lexington Avenue Managing Director and Chief Operating Officer
New York, New York 10017-3147 of CSAM; Associated with CSAM since CSAM
acquired the Portfolio's predecessor adviser
in July 1999; with the predecessor adviser
since 1984; Officer of CSAMSI; Director of
The RBB Fund, Inc.; Director/Trustee of other
Warburg Pincus Funds.

</TABLE>

- ------------------------
* Indicates a Trustee who is an "interested person" of the Fund as defined in
the 1940 Act.

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<PAGE> 37

<TABLE>
<S> <C>
Alexander B. Trowbridge (69) Trustee
1317 F Street, N.W., 5th Floor Currently retired; President of Trowbridge
Washington, DC 20004 Partners, Inc. (business consulting) from
January 1990 to November 1996; Director or
Trustee of New England Mutual Life Insurance
Co., ICOS Corporation (biopharmaceuticals), IRI
International (energy services), The Rouse
Company (real estate development), Harris Corp.
(electronics and communications equipment), The
Gillette Co. (personal care products) and
Sunoco, Inc. (petroleum refining and
marketing); Director/Trustee of other
Warburg Pincus Funds.

Eugene L. Podsiadlo (42) President
466 Lexington Avenue Managing Director of CSAM; Associated
New York, New York 10017-3147 with CSAM since CSAM acquired the Portfolio's
predecessor adviser in July 1999; with the
predecessoradviser since 1991; Vice President
of Citibank, N.A. from 1987 to 1991; Officer
of CSAMSI and of other Warburg Pincus Funds.

Hal Liebes, Esq. (34) Vice President and Secretary
153 East 53rd Street Director and General Counsel of CSAM;
New York, New York 10022 Associated with CSAM since 1995; Associated
with CS First Boston Investment Management from
1994 to 1995; Associated with Division of
Enforcement, U.S. Securities and Exchange
Commission from 1991 to 1994; Officer of
CSAMSI and of other Warburg Pincus Funds.

Michael A. Pignataro (39) Treasurer and Chief Financial Officer
153 East 53rd Street Vice President and Director of Fund
New York, New York 10022 Administration of CSAM; Associated with CSAM
since 1986; Officer of other Warburg Pincus
Funds.

</TABLE>

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<PAGE> 38

<TABLE>
<S> <C>
Janna Manes (31) Assistant Secretary
466 Lexington Avenue Vice President and Legal Counsel of CSAM;
New York, New York 10017-3147 Associated with CSAM since CSAM acquired the
Portfolio's predecessor adviser in July 1999;
with the predecessor adviser since 1996;
Associated with the law firm of Willkie Farr &
Gallagher from 1993 to 1996; Officer of other
Warburg Pincus Funds.

Stuart J. Cohen, Esq. (30) Assistant Secretary
466 Lexington Avenue Vice President and Legal Counsel of CSAM;
New York, New York 10017-3147 Associated with CSAM since CSAM acquired the
Portfolio's predecessor adviser in July 1999;
with the predecessor adviser since 1997;
Associated with the law firm of Gordon Altman
Butowsky Weitzen Shalov & Wein from 1995 to
1997; Officer of other Warburg Pincus Funds.

Rocco A. DelGuercio (36) Assistant Treasurer
153 East 53rd Street Assistant Vice President and Administrative
New York, New York 10022 Officer of CSAM; Associated with CSAM since
June 1996; Assistant Treasurer, Bankers Trust
Corp. -- Fund Administration from March 1994 to
June 1996; Mutual Fund Accounting Supervisor,
Dreyfus Corporation from April 1987 to March
1994; Officer of other Warburg Pincus Funds.

</TABLE>

No employee of CSAM, PFPC Inc., the Trust's co-administrator
("PFPC"), or any of their affiliates receives any compensation from the Trust
for acting as an officer or Trustee of the Trust. Each Trustee who is not a
director, trustee, officer or employee of CSAM, PFPC or any of their affiliates
receives an annual fee of $500 for his services as Trustee, $250 for each
meeting of the Board attended and $250 for each Audit Committee meeting
attended ($325 for the Chairman of the Audit Committee), and is reimbursed
for expenses incurred in connection with his attendance at Board meetings.

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<PAGE> 39

Trustees' Compensation

(for the fiscal year ended December 31, 1998)

<TABLE>
<CAPTION>
Total Compensation from
Total all Investment Companies
Compensation from in Warburg Pincus Fund
Name of Trustee Trust Complex*
- ------------------------------------- ----------------- --------------------------
<S> <C> <C>
William W. Priest** None None

Arnold M. Reichman** None None

Richard N. Cooper*** $2,150 $56,600

Donald J. Donahue*** $475 $13,525

Richard H. Francis**** None None

Jack W. Fritz $2,400 $63,100

Jeffrey E. Garten**** $1,925 $49,325

Thomas A. Melfe*** $2,400 $60,700

James S. Pasman, Jr. **** None None

Steven N. Rappaport**** None None

Alexander B. Trowbridge $2,250 $64,000
</TABLE>

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

* Each Trustee also serves as a Director or Trustee of 39 investment
companies in the Warburg Pincus family of funds.

** Mr. Priest and Mr. Reichman receive compensation as affiliates of CSAM,
and, accordingly, receive no compensation from the Trust or any other
investment company in the Warburg Pincus family of funds.

*** Mr. Donahue resigned as Trustee of the Trust effective February 6, 1998.
Messrs. Cooper and Melfe resigned as Trustees of the Trust effective
July 6, 1999.

**** Mr. Garten became a Trustee of the Trust effective February 6, 1998.
Messrs. Francis, Pasman and Rappaport became Trustees of the Trust
effective July 6, 1999.

As of April 30, 1999, no Trustees or officers of the Trust owned any of
the outstanding shares of the Portfolio.

Portfolio Managers

Elizabeth B. Dater is Co-Portfolio Manager of the Portfolio and
manages other Warburg Pincus Funds. Ms. Dater has been associated with CSAM
since CSAM acquired the Portfolio's predecessor adviser in July 1999 and joined
the predecessor adviser in 1978. Prior to that Ms. Dater was a vice president of
Research at Fiduciary Trust Company of New York and an institutional sales
assistant at Lehman Brothers. Ms. Dater has been a regular panelist on Maryland
Public Television's Wall Street Week with Louis Rukeyser since 1976. Ms. Dater
earned a B.A. degree from Boston University in Massachusetts.

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<PAGE> 40

Stephen J. Lurito is Co-Portfolio Manager of the Portfolio and
manages other Warburg Pincus Funds. Mr. Lurito has been associated with CSAM
since CSAM acquired the Portfolio's predecessor adviser in July 1999 and joined
the predecessor adviser in 1987. Prior to that Mr. Lurito was a research analyst
at Sanford C. Bernstein & Company, Inc. Mr. Lurito earned a B.A. degree from the
University of Virginia and a M.B.A. from the University of Pennsylvania.

Investment Adviser and Co-Administrators

CSAM, located at 153 East 53rd Street, New York, New York 10022,
serves as investment adviser to the Portfolio. CSAM is an indirect wholly-owned
U.S. subsidiary of Credit Suisse Group ("Credit Suisse"). Credit Suisse is a
global financial services company, providing a comprehensive range of banking
and insurance products. Active on every continent and in all major financial
centers, Credit Suisse comprises five business units -- Credit Suisse Asset
Management (asset management); Credit Suisse First Boston (investment banking);
Credit Suisse Private Banking (private banking); Credit Suisse (retail banking);
and Winterthur (insurance). Credit Suisse has approximately $680 billion of
global assets under management and employs approximately 62,000 people
worldwide. The principal business address of Credit Suisse is Paradeplatz 8, CH
8070, Zurich, Switzerland.

Prior to July 6, 1999, Warburg Pincus Asset Management, Inc.
("Warburg") served as investment adviser to the Portfolio. On that date, Credit
Suisse acquired Warburg and combined Warburg with Credit Suisse's existing
U.S.-based asset management business ("Credit Suisse Asset Management").
Consequently, the combined entity, CSAM, became the Portfolio's investment
adviser. Credit Suisse Asset Management, formerly known as BEA Associates,
together with its predecessor firms, has been engaged in the investment advisory
business for over 60 years.

CSAM serves as investment adviser to the Portfolio and Counsellors
Funds Service, Inc. ("Counsellors Service") and PFPC serve as co-administrators
to the Trust pursuant to separate written agreements (the "Advisory Agreement,"
the "Counsellors Service Co-Administration Agreements" and the "PFPC
Co-Administration Agreement," respectively). CSAM, subject to the control of the
Trust's officers and the Board, manages the investment and reinvestment of the
assets of the Portfolio in accordance with the Portfolio's investment objective
and stated investment policies. CSAM makes investment decisions for the
Portfolio and places orders to purchase or sell securities on behalf of the
Portfolio. CSAM also employees a support staff of management personnel to
provide services to the Trust and furnishes the Trust with office space,
furnishings and equipment.

For the services provided by CSAM, the Trust pays CSAM a fee
calculated at an annual rate equal to .90% of the Portfolio's average daily net
assets. CSAM and the Portfolio's co-administrators may voluntarily waive a
portion of their fees from time to time and temporarily limit the expenses to be
borne by the Portfolio.

As co-administrator, Counsellors Service provides shareholder
liaison services to the Portfolio, including responding to shareholder inquiries
and providing information on shareholder investments. Counsellors Service also
performs a variety of other services, including furnishing certain executive and
administrative services, acting as liaison between the

35
<PAGE> 41

Portfolio and its various service providers, furnishing corporate secretarial
services, which include preparing materials for meetings of the Board, preparing
proxy statements and annual and semiannual reports, assisting in the preparation
of tax returns and developing and monitoring compliance procedures for the
Portfolio. As compensation, the Portfolio pays Counsellors Service a fee
calculated at an annual rate of .10% of the Portfolio's average daily net
assets.

As a co-administrator, PFPC calculates the Portfolio's net asset
value, provides all accounting services for the Portfolio and assists in related
aspects of the Portfolio's operations. As compensation, the Portfolio pays PFPC
a fee calculated at an annual rate of .10% of the Portfolio's first $500 million
in average daily net assets, .075% of the next $1 billion in average daily net
assets, and .05% of average daily net assets over $1.5 billion. PFPC has its
principal offices at 400 Bellevue Parkway, Wilmington, Delaware 19809.

Because the Portfolio has not yet commenced operations as of the
date of this Statement of Additional Information no advisory fees or
co-administration fees have been paid by this Portfolio.

Custodian and Transfer Agent

PFPC Trust Company ("PFPC Trust") serves as custodian of the
Portfolio's U.S. assets and State Street Bank and Trust Company ("State Street")
serves as custodian of the Portfolio's non-U.S. assets. Each custodian serves
pursuant to separate custodian agreements (the "Custodian Agreements"). Under
the Custodian Agreements, PFPC and State Street each (i) maintains a separate
account or accounts in the name of the Portfolio, (ii) holds and transfers
portfolio securities on account of the Portfolio, (iii) makes receipts and
disbursements of money on behalf of the Portfolio, (iv) collects and receives
all income and other payments and distributions on account of the Portfolio's
portfolio securities held by it and (v) makes periodic reports to the Board
concerning the Trust's custodial arrangements. PFPC Trust may delegate its
duties under its Custodian Agreement with the Trust to a wholly owned direct or
indirect subsidiary of PFPC Trust or PNC Bank Corp. upon notice to the Trust and
upon the satisfaction of certain other conditions. State Street is authorized to
select one or more foreign banking institutions and foreign securities
depositaries as sub-custodian on behalf of the relevant Portfolio and PFPC Trust
is authorized to select one or more domestic banks or trust companies to serve
as sub-custodian on behalf of the Portfolio. PFPC Trust has entered into a
sub-custodian agreement with PNC Bank, National Association ("PNC"), pursuant to
which PNC provides asset safekeeping and securities clearing services. PFPC
Trust and PNC are indirect, wholly owned subsidiaries of PNC Bank Corp., and
their principal business address is 200 Stevens Drive, Lester, Pennsylvania
19113. The principal business address of State Street is 225 Franklin Street,
Boston, Massachusetts 02110.

State Street also serves as the shareholder servicing, transfer and
dividend disbursing agent of the Trust pursuant to a Transfer Agency and Service
Agreement, under which State Street (i) issues and redeems shares of the
Portfolio, (ii) addresses and mails all communications by the Trust to record
owners of Portfolio shares, including reports to shareholders, dividend and
distribution notices and proxy material for its meetings of shareholders, (iii)
maintains shareholder accounts and, if requested, sub-accounts and (iv) makes
periodic reports to the Board concerning the transfer agent's operations with
respect

36
<PAGE> 42

to the Trust. State Street has delegated to Boston Financial Data Services,
Inc., an affiliate of State Street ("BFDS"), responsibility for most shareholder
servicing functions. BFDS's principal business address is 2 Heritage Drive,
Boston, Massachusetts 02171.

Distribution and Shareholder Servicing

Distributor. CSAMSI, serves as the distributor of the Portfolio.
CSAMSI's principal business address is 466 Lexington Avenue, New York, New York
10017-3147.

Shareholder Servicing. The Trust has authorized certain insurance
companies ("Service Organizations") or, if applicable, their designees to enter
confirmed purchase and redemption orders on behalf of their clients and
customers, with payment to follow no later than the Portfolio's pricing on the
following business day. If payment is not received by such time, the Service
Organization could be held liable for resulting fees or losses. The Trust may
be deemed to have received a purchase or redemption order when a Service
Organization, or, if applicable, its authorized designee, accepts the order.
Such orders received by the Trust in proper form will be priced at the
Portfolio's net asset value next computed after they are accepted by the
Service Organization or its authorized designee. Service Organizations may
impose transaction or administrative charges or other direct fees, which
charges or fees would not be imposed if the Portfolio's shares are purchased
directly from the Trust.

For administration, subaccounting, transfer agency and/or other
services, CSAM or its affiliates may pay Service Organizations a fee of up to
.35% of the average annual value of accounts with the Trust maintained by such
Service Organizations. Service Organizations may also be reimbursed for
marketing costs. The Service Fee payable to any one Service Organization
is determined based upon a number of factors, including the nature and quality
of services provided, the operations processing requirements of the relationship
and the standardized fee schedule of the Service Organization or recordkeeper.

Organization of the Trust

The Trust was organized on March 15, 1995 under the laws of the
Commonwealth of Massachusetts as a "Massachusetts business trust." The Trust's
Declaration of Trust authorizes the Board to issue an unlimited number of full
and fractional shares of beneficial interest, $.001 par value per share. Shares
of six series have been authorized, one of which constitutes the interests in
the Portfolio. The Board may classify or reclassify any of its shares into one
or more additional series without shareholder approval.

When matters are submitted for shareholder vote, shareholders of the
Portfolio will have one vote for each full share held and fractional votes for
fractional shares held. Generally, shares of the Trust will vote by individual
series on all matters except where otherwise required by law. There will
normally be no meetings of shareholders for the purpose of electing Trustees
unless and until such time as less than a majority of the members holding office
have been elected by shareholders. Shareholders of record of no less than
two-thirds of the outstanding shares of the Trust may remove a Trustee through a
declaration in writing or by vote cast in person or by proxy at a meeting called
for that purpose. A meeting will be called for the purpose of voting on the
removal of a Trustee at the written request of holders of 10% of the Trust's
outstanding shares. Under current law, a Participating Insurance Company is
required to request voting instructions from Variable Contract owners and must
vote all Trust shares held in the separate account in proportion to the voting
instructions received. Plans may or may not pass through voting rights to Plan
participants, depending on the terms of the Plan's governing documents. For a
more complete discussion of voting rights, refer to the sponsoring Participating
Insurance Company separate account prospectus or the Plan documents or other
informational materials supplied by Plan sponsors.

Massachusetts law provides that shareholders could, under certain
circumstances, be held personally liable for the obligations of the Portfolio.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or a Trustee. The Declaration of Trust provides for indemnification from the
Portfolio's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the Portfolio would be unable to meet its
obligations, a possibility that CSAM believes is remote and immaterial. Upon
payment of any liability incurred by the Trust, the shareholder paying the
liability will be entitled to reimbursement from the general assets of the
Portfolio. The Trustees intend to conduct the operations of the Trust in such a
way so as to avoid, as far as possible, ultimate liability of the shareholders
for liabilities of the Trust.

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<PAGE> 43

All shareholders of the Portfolio, upon liquidation, will
participate ratably in the Portfolio's net assets. Shares do not have cumulative
voting rights, which means that holders of more than 50% of the shares voting
for the election of Trustees can elect all Trustees. Shares are transferable but
have no preemptive, conversion or subscription rights.

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares of the Portfolio may not be purchased or redeemed by
individual investors directly but may be purchased or redeemed only through
Variable Contracts offered by separate accounts of Participating Insurance
Companies and through Plans, including participant-directed Plans which elect to
make the Portfolio an investment option for Plan participants. The offering
price of the Portfolio's shares is equal to its per share net asset value.

Under the 1940 Act, the Portfolio may suspend the right of
redemption or postpone the date of payment upon redemption for any period during
which the NYSE is closed, other than customary weekend and holiday closings, or
during which trading on the NYSE is restricted, or during which (as determined
by the SEC) an emergency exists as a result of which disposal or fair valuation
of portfolio securities is not reasonably practicable, or for such other periods
as the SEC may permit. (The Portfolio may also suspend or postpone the
recordation of an exchange of its shares upon the occurrence of any of the
foregoing conditions.)

If conditions exist which make payment of redemption proceeds wholly
in cash unwise or undesirable, the Portfolio may make payment wholly or partly
in securities or other investment instruments which may not constitute
securities as such term is defined in the applicable securities laws. If a
redemption is paid wholly or partly in securities or other property, a
shareholder would incur transaction costs in disposing of the redemption
proceeds. The Trust intends to comply with Rule 18f-1 promulgated under the 1940
Act with respect to redemptions in kind.

ADDITIONAL INFORMATION CONCERNING TAXES

The discussion set out below of tax considerations generally
affecting the Trust and its shareholders is intended to be only a summary and is
not intended as a substitute for careful tax planning by prospective
shareholders. Shareholders are advised to consult the sponsoring Participating
Insurance Company separate account prospectus or the Plan documents or other
informational materials supplied by Plan sponsors and their own tax advisers
with respect to the particular tax consequences to them of an investment in the
Portfolio.

The Portfolio intends to continue to qualify to be treated as a
regulated investment company each taxable year under the Code. If it qualifies
as a regulated investment company, the Portfolio will effectively pay no federal
income taxes on its taxable net investment income (that is, taxable income other
than net realized capital gains) and its net realized capital gains that are
distributed to Shareholders. To so qualify, the Portfolio must, among other
things: (a) derive at least 90% of its gross income in each taxable year from
dividends, interest, payments with respect to securities, loans and gains from
the sale or other

38
<PAGE> 44

disposition of stock, securities or foreign currencies, or other income
(including, but not limited to, gains from options, futures or forward
contracts) derived with respect to its business of investing in such stock,
securities or currencies; and (b) diversify its holdings so that, at the end of
each quarter of the Portfolio's taxable year, (i) at least 50% of the market
value of the Portfolio's assets is represented by cash, securities of other
regulated investment companies, U.S. Government securities and other securities,
with such other securities limited, in respect of any one issuer, to an amount
not greater than 5% of the Portfolio's assets and not greater than 10% of the
outstanding voting securities of such issuer and (ii) not more than 25% of the
value of its assets is invested in the securities (other than U.S. Government
Securities or securities of other regulated investment companies) of any one
issuer or any two or more issuers that the Portfolio controls and are determined
to be engaged in the same or similar trades or businesses or related trades or
businesses. The Portfolio expects that all of its foreign currency gains will be
directly related to its principal business of investing in stocks and
securities.

If, in any taxable year, the Portfolio fails to qualify as a
regulated investment company under the Code or fails to meet the distribution
requirement, it would be taxed in the same manner as an ordinary corporation and
distributions to its shareholders would not be deductible by the Portfolio in
computing its taxable income. In addition, in the event of a failure to qualify,
the Portfolio's distributions, to the extent derived from the Portfolio's
current or accumulated earnings and profits would constitute dividends (eligible
for the corporate dividends-received deduction) which are taxable to
shareholders as ordinary income, even though those distributions might otherwise
(at least in part) have been treated in the shareholders' hands as long-term
capital gains. If the Portfolio fails to qualify as a regulated investment
company in any year, it must pay out its earnings and profits accumulated in
that year in order to qualify again as a regulated investment company. In
addition, if the Portfolio failed to qualify as a regulated investment company
for a period greater than one taxable year, the Portfolio may be required to
recognize any net built-in gains (the excess of the aggregate gains, including
items of income, over aggregate losses that would have been realized if it had
been liquidated) in order to qualify as a regulated investment company in a
subsequent year.

In addition, the Portfolio intends to comply with the
diversification requirements of Section 817(h) of the Code related to the
tax-deferred status of insurance company separate accounts. To comply with
regulations under Section 817(h) of the Code, the Portfolio will be required to
diversify its investments so that on the last day of each calendar quarter no
more than 55% of the value of its assets is represented by any one investment,
no more than 70% is represented by any two investments, no more than 80% is
represented by any three investments and no more than 90% is represented by any
four investments. Generally, all securities of the same issuer are treated as a
single investment. For the purposes of Section 817(h), obligations of the United
States Treasury and each U.S. government agency or instrumentality are treated
as securities of separate issuers. The Treasury Department has indicated that it
may issue future pronouncements addressing the circumstances in which a Variable
Contract owner's control of the investments of a separate account may cause the
Variable Contract owner, rather than the Participating Insurance Company, to be
treated as the owner of the assets held by the separate account. If the Variable
Contract owner is considered the owner of the securities underlying the separate
account, income and gains produced by those securities would be included
currently in the

39
<PAGE> 45

Variable Contract owner's gross income. It is not known what
standards will be set forth in such pronouncements or when, if at all, these
pronouncements may be issued. In the event that rules or regulations are
adopted, there can be no assurance that the Portfolio will be able to operate as
currently described, or that the Trust will not have to change the investment
goal or investment policies of the Portfolio. While the Portfolio's investment
goal is fundamental and may be changed only by a vote of a majority of the
Portfolio's outstanding shares, the Board reserves the right to modify the
investment policies of the Portfolio as necessary to prevent any such
prospective rules and regulations from causing a Variable Contract owner to be
considered the owner of the shares of the Portfolio underlying the separate
account.

The Portfolio's short sales against the box, if any, and
transactions in foreign currencies, forward contracts, options and futures
contracts (including options and futures contracts on foreign currencies) will
be subject to special provisions of the Code that, among other things, may
affect the character of gains and losses realized by the Portfolio (i.e., may
affect whether gains or losses are ordinary or capital), accelerate recognition
of income to the Portfolio and defer Portfolio losses. These rules could
therefore affect the character, amount and timing of distributions to
shareholders. These provisions also (a) will require the Portfolio to
mark-to-market certain types of the positions in its portfolio (i.e., treat them
as if they were closed out) and (b) may cause the Portfolio to recognize income
without receiving cash with which to pay dividends or make distributions in
amounts necessary to satisfy the distribution requirements for avoiding income
and excise taxes. The Portfolio will monitor its transactions, will make the
appropriate tax elections and will make the appropriate entries in its books and
records when it acquires any foreign currency, forward contract, option, futures
contract or hedged investment in order to mitigate the effect of these rules and
prevent disqualification of the Portfolio as a regulated investment company.

Investments by the Portfolio in zero coupon securities may create
special tax consequences. Zero coupon securities do not make interest payments,
although a portion of the difference between a zero coupon security's face value
and its purchase price is imputed as income to the Portfolio each year even
though the Portfolio receives no cash distribution until maturity. Under the
U.S. federal tax laws, the Portfolio will not be subject to tax on this income
if it pays dividends to its shareholders substantially equal to all the income
received from, or imputed with respect to, its investments during the year,
including its zero coupon securities. These dividends ordinarily will constitute
taxable income to the shareholders of the Portfolio.

Because shares of the Portfolio may only be purchased through
Variable Contracts and Plans, it is anticipated that dividends and distributions
will be exempt from current taxation if left to accumulate within the Variable
Contracts or Plans.

Investment in Passive Foreign Investment Companies

If the Portfolio purchases shares in certain foreign entities
classified under the Code as "passive foreign investment companies" ("PFICs"),
the Portfolio may be subject to federal income tax on a portion of an "excess
distribution" or gain from the disposition of the shares, even though the income
may have to be distributed by the Portfolio to its shareholders, the Variable
Contracts and Plans. In addition, gain on the disposition of shares in a PFIC
generally is treated as ordinary income even though the shares are capital
assets in the hands of

40
<PAGE> 46

the Portfolio. Certain interest charges may be imposed on the Portfolio with
respect to any taxes arising from excess distributions or gains on the
disposition of shares in a PFIC.

The Portfolio may be eligible to elect Qualified Electing Fund
treatment, which would require the Portfolio to include in its gross income its
share of earnings of a PFIC on a current basis. Generally, the election would
eliminate the interest charge and the ordinary income treatment on the
disposition of stock, but such an election may have the effect of accelerating
the recognition of income and gains by the Portfolio compared to a fund that did
not make the election. In addition, information required to make such an
election may not be available to the Portfolio.

Alternatively, the Portfolio may make a mark-to-market election that
will result in the Portfolio being treated as if it had sold and repurchased all
of the PFIC stock at the end of each year. In this case, the Portfolio would
report gains as ordinary income and would deduct losses as ordinary losses to
the extent of previously recognized gains. The election, once made, would be
effective for all subsequent taxable years of the Portfolio, unless revoked with
the consent of the IRS. By making the election, the Portfolio could potentially
ameliorate the adverse tax consequences with respect to its ownership of shares
in a PFIC, but in any particular year may be required to recognize income in
excess of the distributions it receives from PFICs and its proceeds from
dispositions of PFIC company stock. The Portfolio may have to distribute this
"phantom" income and gain to satisfy its distribution requirement and to avoid
imposition of the 4% excise tax. The Portfolio will make the appropriate tax
elections, if possible, and take any additional steps that are necessary to
mitigate the effect of these rules.

DETERMINATION OF PERFORMANCE

From time to time, the Portfolio may quote its total return in
advertisements or in reports and other communications to shareholders.

Total return is calculated by finding the average annual compounded
rates of return for the one-, five-, and ten- (or such shorter period as the
Portfolio has been offered) year periods that would equate the initial amount
invested to the ending redeemable value according to the following formula: P (1
+ T)(n)= ERV. For purposes of this formula, "P" is a hypothetical investment of
$1,000; "T" is average annual total return; "n" is number of years; and "ERV" is
the ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the one-, five- or ten-year periods (or fractional portion
thereof). Total return or "T" is computed by finding the average annual change
in the value of an initial $1,000 investment over the period and assumes that
all dividends and distributions are reinvested during the period.

When considering average total return figures for periods longer
than one year, it is important to note that the annual total return for one year
in the period might have been greater or less than the average for the entire
period. When considering total return figures for periods shorter than one year,
investors should bear in mind that such return may not be representative of the
Portfolio's return over a longer market cycle. The Portfolio may also advertise
aggregate total return figures for various periods, representing the cumulative
change in value of an investment in the Portfolio for the specific period.
Aggregate and average total returns may be shown by means of schedules, charts
or graphs, and may indicate various

41
<PAGE> 47

components of total return (i.e., change in value of initial investment, income
dividends and capital gain distributions).

The Portfolio may advertise, from time to time, comparisons of its
performance with that of one or more other mutual funds with similar investment
objectives. The Portfolio may advertise average annual calendar-year-to-date and
calendar quarter returns, which are calculated according to the formula set
forth in the preceding paragraph, except that the relevant measuring period
would be the number of months that have elapsed in the current calendar year or
most recent three months, as the case may be. Investors should note that this
performance may not be representative of the Portfolio's total return in longer
market cycles.

The Portfolio's performance will vary from time to time depending
upon market conditions, the composition of its portfolio and operating expenses
allocable to it. As described above, total return is based on historical
earnings and is not intended to indicate future performance. Consequently, any
given performance quotation should not be considered as representative of
performance for any specified period in the future. Performance information may
be useful as a basis for comparison with other investment alternatives. However,
the Portfolio's performance will fluctuate, unlike certain bank deposits or
other investments which pay a fixed yield for a stated period of time.
Performance quotations for the Portfolio include the effect of deducting the
Portfolio's expenses, but may not include charges and expenses attributable to
any particular Variable Contract or Plan, which would reduce the returns
described in this section.

The Portfolio may compare its performance with (i) that of other
mutual funds with similar investment objectives and policies, which may be based
on the rankings prepared by Lipper Analytical Services, Inc. or similar
investment services that monitor the performance of mutual funds; (ii) which
appropriate indexes prepared by Frank Russell Company relating to securities
represented in the Portfolio; or (iii) other appropriate indexes of investment
securities or with data developed by CSAM derived from such indexes. The
Portfolio may also include evaluations of the Portfolio published by nationally
recognized ranking services and by financial publications such as Barron's,
Business Week, Financial Times, Forbes, Fortune, Inc., Institutional Investor,
Investor's Business Daily, Money, Morningstar, Mutual Fund Magazine, SmartMoney,
The Wall Street Journal and Worth. Morningstar, Inc. rates funds in broad
categories based on risk/reward analyses over various time periods. In addition,
the Portfolio may from time to time compare its expense ratio to that of
investment companies with similar objectives and policies, based on data
generated by Lipper Analytical Services, Inc. or similar investment services
that monitor mutual funds.

In reports or other communications to investors or in advertising,
the Portfolio may also describe the general biography or work experience of the
portfolio managers of the Portfolio and may include quotations attributable to
the portfolio managers describing approaches taken in managing the Portfolio's
investments, research methodology underlying stock selection or the Portfolio's
investment objective. In addition, the Portfolio and its portfolio managers may
render updates of Portfolio activity, which may include a discussion of
significant portfolio holdings; analysis of holdings by industry, country,
credit quality and other characteristics; and comparison and analysis of the
Portfolio with respect to relevant market and industry benchmarks. The Portfolio
may also discuss measures of risk, the

42
<PAGE> 48

continuum of risk and return relating to different investments and the potential
impact of foreign stocks on a portfolio otherwise composed of domestic
securities.

INDEPENDENT ACCOUNTANTS AND COUNSEL

PricewaterhouseCoopers LLP ("PwC"), with principal offices at 2400
Eleven Penn Center, Philadelphia, Pennsylvania 19103, serves as independent
accountants for the Trust. The financial statements for the Trust that are
incorporated by reference in this Statement of Additional Information have been
audited by PwC, and have been included herein in reliance upon the report of
such firm of independent accountants given upon their authority as experts in
accounting and auditing.

Willkie Farr & Gallagher serves as counsel for the Trust and
provides legal services from time to time for CSAM, Counsellors Service
and CSAMSI.

MISCELLANEOUS

The Portfolio and the Trust are not sponsored, endorsed, sold or
promoted by Warburg, Pincus & Co. Warburg, Pincus & Co. makes no representation
or warranty, express or implied, to the owners of the Portfolio or any member of
the public regarding the advisability of investing in securities generally or in
the Portfolio particularly. Warburg, Pincus & Co. licenses certain trademarks
and trade names of Warburg, Pincus & Co., and is not responsible for and has not
participated in the calculation of the Portfolio's net asset value, nor is
Warburg, Pincus & Co. a distributor of the Portfolio. Warburg, Pincus & Co. has
no obligation or liability in connection with the administration, marketing or
trading of the Portfolio.

As of the date of this Statement of Additional Information, the
Portfolio has not yet begun selling shares. Consequently, there are no persons
that own of record 5% or more of the Portfolio's outstanding shares.

FINANCIAL STATEMENTS

As of the date of this Statement of Additional Information, the
Portfolio has not yet commenced operations. Consequently, there are no financial
statements for the Portfolio at this time.

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<PAGE> 49

APPENDIX

DESCRIPTION OF RATINGS

Commercial Paper Ratings

Commercial paper rated A-1 by Standard and Poor's Ratings Group
("S&P") indicates that the degree of safety regarding timely payment is strong.
Those issues determined to possess extremely strong safety characteristics are
denoted with a plus sign designation. Capacity for timely payment on commercial
paper rated A-2 is satisfactory, but the relative degree of safety is not as
high as for issues designated A-1.

The rating Prime-1 is the highest commercial paper rating assigned
by Moody's Investors Services, Inc. ("Moody's"). Issuers rated Prime-1 (or
related supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 (or
related supporting institutions) are considered to have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.

Corporate Bond Ratings

The following summarizes the ratings used by S&P for corporate
bonds:

AAA - This is the highest rating assigned by S&P to a debt
obligation and indicates an extremely strong capacity to pay interest and repay
principal.

AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from AAA issues only in small degree.

A - Debt rated A has a strong capacity to pay interest and repay
principal although they are somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher-rated
categories.

BBB - This is the lowest investment grade. Debt rated BBB has an
adequate capacity to pay interest and repay principal. Although they normally
exhibit adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category than for bonds in higher-rated
categories.

To provide more detailed indications of credit quality, the ratings
from "AA" to "BBB" may be modified by the addition of a plus or minus sign to
show relative standing within this major rating category.

A-1
<PAGE> 50

The following summarizes the ratings used by Moody's for corporate
bonds:

Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or 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.

Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long-term risks appear somewhat larger than in Aaa securities.

A - Bonds which are rated A 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 which are rated Baa 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.

Moody's applies numerical modifiers (1, 2 and 3) with respect to the
bonds rated "Aa" through "Baa". The modifier 1 indicates that the bond being
rated ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the bond ranks
in the lower end of its generic rating category.

A-2
<PAGE> 51

STATEMENT OF ADDITIONAL INFORMATION

April 30, 1999
As Revised July 6, 1999
-----------------------------------

WARBURG PINCUS TRUST

EMERGING MARKETS PORTFOLIO
GROWTH & INCOME PORTFOLIO
INTERNATIONAL EQUITY PORTFOLIO
POST-VENTURE CAPITAL PORTFOLIO
SMALL COMPANY GROWTH PORTFOLIO

This Statement of Additional Information provides information about Warburg
Pincus Trust (the "Trust"), relating to the Emerging Markets, Growth & Income,
International Equity, Post-Venture Capital and Small Company Growth Portfolios
(each a "Portfolio," and together, the "Portfolios") that supplements
information contained in the Prospectus or Prospectuses for the relevant
Portfolio (collectively, the "Prospectuses"), each dated April 30, 1999.

The Trust's audited Annual Reports dated December 31, 1998, which either
accompany this Statement of Additional Information or have previously been
provided to the investor to whom this Statement of Additional Information is
being sent, is incorporated herein by reference.

This Statement of Additional Information is not itself a Prospectus, no
investment in shares of the Portfolios should be made solely upon the
information contained herein. Copies of the Trust's Prospectuses, Annual Report
and information regarding each Portfolio's current performance may be obtained
by writing or telephoning:

Warburg Pincus
P.O. Box 9030
Boston, MA 02205-9030
1-800-222-8977

<PAGE> 52

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----

<S> <C>
INVESTMENT OBJECTIVES AND POLICIES............................................................................1

Options on Securities and Securities Indices and Currency Exchange Transactions...............................1
Securities Options........................................................................................1
Securities Index Options..................................................................................4
OTC Options...............................................................................................5
Currency Exchange Transactions............................................................................5
Futures Activities........................................................................................7
Hedging Generally.........................................................................................9
Swaps....................................................................................................10
Asset Coverage for Forward Contracts, Options, Futures and Options on Futures and Swaps..................11
Foreign Investments..........................................................................................11
U.S. Government Securities...................................................................................15
Money Market Obligations.....................................................................................15
Debt Securities..............................................................................................16
Below Investment Grade Securities........................................................................17
Convertible Securities.......................................................................................18
Structured Securities....................................................................................18
Temporary Defensive Strategies...............................................................................22
Securities of Other Investment Companies.....................................................................22
Lending of Portfolio Securities..............................................................................22
When-Issued Securities and Delayed-Delivery Transactions.....................................................23
Short Sales..................................................................................................23
Short Sales "Against the Box"................................................................................24
Reverse Repurchase Agreements and Dollar Rolls...............................................................24
Warrants.....................................................................................................25
Non-Publicly Traded and Illiquid Securities..................................................................26
Rule 144A Securities.....................................................................................26
Borrowing....................................................................................................27
Small Capitalization and Emerging Growth Companies; Unseasoned Issuers.......................................27
"Special Situation" Companies................................................................................27
General..................................................................................................28
Private Funds................................................................................................28
REITs........................................................................................................29
Non-Diversified Status.......................................................................................30

INVESTMENT RESTRICTIONS......................................................................................30

PORTFOLIO VALUATION..........................................................................................32

Private Funds................................................................................................33

PORTFOLIO TRANSACTIONS.......................................................................................33

PORTFOLIO TURNOVER...........................................................................................36

MANAGEMENT OF THE TRUST......................................................................................37

Officers and Board of Trustees...............................................................................37
Trustees' Compensation.......................................................................................41
Portfolio Managers...........................................................................................41
Investment Advisers and Co-Administrators....................................................................44
</TABLE>

i
<PAGE> 53

<TABLE>
<S> <C>
Custodian and Transfer Agent.................................................................................47
Distribution and Shareholder Servicing.......................................................................47
Distributor..................................................................................................47
Shareholder Servicing........................................................................................48
Organization of the Trust....................................................................................48

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION...............................................................49

ADDITIONAL INFORMATION CONCERNING TAXES......................................................................49

DETERMINATION OF PERFORMANCE.................................................................................53

INDEPENDENT ACCOUNTANTS AND COUNSEL..........................................................................56

FINANCIAL STATEMENTS.........................................................................................56

MISCELLANEOUS................................................................................................57
</TABLE>

ii
<PAGE> 54

INVESTMENT OBJECTIVES AND POLICIES

The following information supplements the descriptions of each
Portfolio's investment objective and policies in the Prospectuses. There are no
assurances that the Portfolios will achieve their investment objectives.

The investment objective of each of the Emerging Markets Portfolio and
the Post-Venture Capital Portfolio is long-term growth of capital.

The investment objectives of the Growth & Income Portfolio are long-term
growth of capital and income.

The investment objective of the International Equity Portfolio is
long-term capital appreciation.

The investment objective of the Small Company Growth Portfolio is capital
growth.

Unless otherwise indicated, all of the Portfolios are permitted, but not
obligated, to engage in the following investment strategies, subject to any
percentage limitations set forth below.

The Portfolios are not obligated to pursue any of the following
strategies and do not represent that these techniques are available now or will
be available at any time in the future.

Options on Securities and Securities Indices and Currency Exchange
Transactions.

Each Portfolio may purchase and write (sell) options on securities,
securities indices and currencies for hedging purposes or to increase total
return. Up to 25% of a Portfolio's total assets may be at risk in connection
with investing in options on securities, securities indices and, if applicable,
currencies. The amount of assets considered to be "at risk" in these
transactions is, in the case of purchasing options, the amount of the premium
paid, and, in the case of writing options, the value of the underlying
obligation.

Securities Options. Each Portfolio may write covered put and call options
on stock and debt securities and each Portfolio may purchase such options that
are traded on foreign and U.S. exchanges, as well as OTC Options.

Each Portfolio that may write options realizes fees (referred to as
"premiums") for granting the rights evidenced by the options it has written. A
put option embodies the right of its purchaser to compel the writer of the
option to purchase from the option holder an underlying security at a specified
price for a specified time period or at a specified time. In contrast, a call
option embodies the right of its purchaser to compel the writer of the option to
sell to the option holder an underlying security at a specified price for a
specified time period or at a specified time.

<PAGE> 55

The potential loss associated with purchasing an option is limited to the
premium paid, and the premium would partially offset any gains achieved from its
use. However, for an option writer the exposure to adverse price movements in
the underlying security or index is potentially unlimited during the exercise
period. Writing securities options may result in substantial losses to a
Portfolio, force the sale or purchase of portfolio securities at inopportune
times or at less advantageous prices, limit the amount of appreciation the
Portfolio could realize on its investments or require the Portfolio to hold
securities it would otherwise sell.

The principal reason for writing covered options on a security is to
attempt to realize, through the receipt of premiums, a greater return than would
be realized on the securities alone. In return for a premium, a Portfolio as the
writer of a covered call option forfeits the right to any appreciation in the
value of the underlying security above the strike price for the life of the
option (or until a closing purchase transaction can be effected). A Portfolio
that writes call options retains the risk of an increase in the price of the
underlying security. The size of the premiums that the Portfolio may receive may
be adversely affected as new or existing institutions, including other
investment companies, engage in or increase their option-writing activities.

If security prices rise, a put writer would generally expect to profit,
although its gain would be limited to the amount of the premium it received. If
security prices remain the same over time, it is likely that the writer will
also profit, because it should be able to close out the option at a lower price.
If security prices decline, the put writer would expect to suffer a loss. This
loss may be less than the loss from purchasing the underlying instrument
directly to the extent that the premium received offsets the effects of the
decline.

In the case of options written by a Portfolio that are deemed covered by
virtue of the Portfolio's holding convertible or exchangeable preferred stock or
debt securities, the time required to convert or exchange and obtain physical
delivery of the underlying common stock with respect to which the Portfolio has
written options may exceed the time within which the Portfolio must make
delivery in accordance with an exercise notice. In these instances, the
Portfolio may purchase or temporarily borrow the underlying securities for
purposes of physical delivery. By so doing, the Portfolio will not bear any
market risk, since the Portfolio will have the absolute right to receive from
the issuer of the underlying security an equal number of shares to replace the
borrowed securities, but the Portfolio may incur additional transaction costs or
interest expenses in connection with any such purchase or borrowing.

Additional risks exist with respect to certain of the securities for
which a Portfolio may write covered call options. For example, if a Portfolio
writes covered call options on mortgage-backed securities, the mortgage-backed
securities that it holds as cover may, because of scheduled amortization or
unscheduled prepayments, cease to be sufficient cover. If this occurs, the
Portfolio will compensate for the decline in the value of the cover by
purchasing an appropriate additional amount of mortgage-backed securities.

Options written by a Portfolio will normally have expiration dates
between one and nine months from the date written. The exercise price of the
options may be below, equal to or above the market values of the underlying
securities at the times the options are written. In the case of call options,
these exercise prices are referred to as "in-the-money,"

2
<PAGE> 56

"at-the-money" and "out-of-the-money," respectively. The Portfolios, other than
the Emerging Markets Portfolio, may write (i) in-the-money call options when
Credit Suisse Asset Management, LLC, the Portfolios' investment adviser
("CSAM"), expects that the price of the underlying security will remain flat or
decline moderately during the option period, (ii) at-the-money call options when
CSAM expects that the price of the underlying security will remain flat or
advance moderately during the option period and (iii) out-of-the-money call
options when CSAM expects that the premiums received from writing the call
option plus the appreciation in market price of the underlying security up to
the exercise price will be greater than the appreciation in the price of the
underlying security alone. In any of the preceding situations, if the market
price of the underlying security declines and the security is sold at this lower
price, the amount of any realized loss will be offset wholly or in part by the
premium received. Out-of-the-money, at-the-money and in-the-money put options
(the reverse of call options as to the relation of exercise price to market
price) may be used in the same market environments that such call options are
used in equivalent transactions. To secure its obligation to deliver the
underlying security when it writes a call option, a Portfolio will be required
to deposit in escrow the underlying security or other assets in accordance with
the rules of the Options Clearing Corporation (the "Clearing Corporation") and
of the securities exchange on which the option is written.

Prior to their expirations, put and call options may be sold in closing
sale or purchase transactions (sales or purchases by the Portfolio prior to the
exercise of options that it has purchased or, if permissible, written,
respectively, of options of the same series) in which the Portfolio may realize
a profit or loss from the sale. An option position may be closed out only where
there exists a secondary market for an option of the same series on a recognized
securities exchange or in the OTC market. When the Portfolio has purchased an
option and engages in a closing sale transaction, whether the Portfolio realizes
a profit or loss will depend upon whether the amount received in the closing
sale transaction is more or less than the premium the Portfolio initially paid
for the original option plus the related transaction costs. Similarly, in cases
where the Portfolio has written an option, it will realize a profit if the cost
of the closing purchase transaction is less than the premium received upon
writing the original option and will incur a loss if the cost of the closing
purchase transaction exceeds the premium received upon writing the original
option. The Portfolio may engage in a closing purchase transaction to realize a
profit, to prevent an underlying security with respect to which it has written
an option from being called or put or, in the case of a call option, to unfreeze
an underlying security (thereby permitting its sale or the writing of a new
option on the security prior to the outstanding option's expiration). The
obligation of the Portfolio under an option it has written would be terminated
by a closing purchase transaction, but the Portfolio would not be deemed to own
an option as a result of the transaction. So long as the obligation of the
Portfolio as the writer of an option continues, the Portfolio may be assigned an
exercise notice by the broker-dealer through which the option was sold,
requiring the Portfolio to deliver the underlying security against payment of
the exercise price. This obligation terminates when the option expires or the
Portfolio effects a closing purchase transaction. A Portfolio cannot effect a
closing purchase transaction with respect to an option once it has been assigned
an exercise notice.

There is no assurance that sufficient trading interest will exist to
create a liquid secondary market on a securities exchange for any particular
option or at any particular time,

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and for some options no such secondary market may exist. A liquid secondary
market in an option may cease to exist for a variety of reasons. In the past,
for example, higher than anticipated trading activity or order flow or other
unforeseen events have at times rendered certain of the facilities of the
Clearing Corporation and various securities exchanges inadequate and resulted in
the institution of special procedures, such as trading rotations, restrictions
on certain types of orders or trading halts or suspensions in one or more
options. There can be no assurance that similar events, or events that may
otherwise interfere with the timely execution of customers' orders, will not
recur. In such event, it might not be possible to effect closing transactions in
particular options. Moreover, a Portfolio's ability to terminate options
positions established in the OTC market may be more limited than for
exchange-traded options and may also involve the risk that securities dealers
participating in OTC transactions would fail to meet their obligations to the
Portfolio. The Portfolio, however, intends to purchase OTC options only from
dealers whose debt securities, as determined by CSAM, are considered to be
investment grade. If, as a covered call option writer, the Portfolio is unable
to effect a closing purchase transaction in a secondary market, it will not be
able to sell the underlying security and would continue to be at market risk on
the security.

Securities exchanges generally have established limitations governing the
maximum number of calls and puts of each class which may be held or written, or
exercised within certain time periods by an investor or group of investors
acting in concert (regardless of whether the options are written on the same or
different securities exchanges or are held, written or exercised in one or more
accounts or through one or more brokers). It is possible that the Trust or a
Portfolio and other clients of CSAM and certain of its affiliates may be
considered to be such a group. A securities exchange may order the liquidation
of positions found to be in violation of these limits and it may impose certain
other sanctions. These limits may restrict the number of options a Portfolio
will be able to purchase on a particular security.

Securities Index Options. Each Portfolio may purchase and write
exchange-listed and OTC put and call options on securities indexes. A securities
index measures the movement of a certain group of securities by assigning
relative values to the securities included in the index, fluctuating with
changes in the market values of the securities included in the index. Some
securities index options are based on a broad market index, such as the NYSE
Composite Index, or a narrower market index such as the Standard & Poor's 100.
Indexes may also be based on a particular industry or market segment.

Options on securities indexes are similar to options on securities except
that (i) the expiration cycles of securities index options are monthly, while
those of securities options are currently quarterly, and (ii) the delivery
requirements are different. Instead of giving the right to take or make delivery
of securities at a specified price, an option on a securities index gives the
holder the right to receive a cash "exercise settlement amount" equal to (a) the
amount, if any, by which the fixed exercise price of the option exceeds (in the
case of a put) or is less than (in the case of a call) the closing value of the
underlying index on the date of exercise, multiplied by (b) a fixed "index
multiplier." Receipt of this cash amount will depend upon the closing level of
the securities index upon which the option is based being greater than, in the
case of a call, or less than, in the case of a put, the exercise price of the
index and the exercise price of the option times a specified multiple. The
writer of the option is obligated, in return for the premium received, to make
delivery of this amount. Securities

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index options may be offset by entering into closing transactions as described
above for securities options.

OTC Options. The Portfolios may purchase OTC or dealer options or sell
covered OTC options. Unlike exchange-listed options where an intermediary or
clearing corporation, such as the Clearing Corporation, assures that all
transactions in such options are properly executed, the responsibility for
performing all transactions with respect to OTC options rests solely with the
writer and the holder of those options. A listed call option writer, for
example, is obligated to deliver the underlying securities to the clearing
organization if the option is exercised, and the clearing organization is then
obligated to pay the writer the exercise price of the option. If a Portfolio
were to purchase a dealer option, however, it would rely on the dealer from whom
it purchased the option to perform if the option were exercised. If the dealer
fails to honor the exercise of the option by the Portfolio, the Portfolio would
lose the premium it paid for the option and the expected benefit of the
transaction.

Exchange traded options generally have a continuous liquid market while
OTC or dealer options do not. Consequently, the Portfolio will generally be able
to realize the value of a dealer option it has purchased only by exercising it
or reselling it to the dealer who issued it. Similarly, when the Portfolio
writes a dealer option, it generally will be able to close out the option prior
to its expiration only by entering into a closing purchase transaction with the
dealer to which the Portfolio originally wrote the option. Although the
Portfolios will seek to enter into dealer options only with dealers who will
agree to and that are expected to be capable of entering into closing
transactions with the Portfolios, there can be no assurance that the Portfolio
will be able to liquidate a dealer option at a favorable price at any time prior
to expiration. The inability to enter into a closing transaction may result in
material losses to a Portfolio. Until the Portfolio, as a covered OTC call
option writer, is able to effect a closing purchase transaction, it will not be
able to liquidate securities (or other assets) used to cover the written option
until the option expires or is exercised. This requirement may impair the
Portfolio's ability to sell portfolio securities or, with respect to currency
options, currencies at a time when such sale might be advantageous.

Currency Exchange Transactions. The value in U.S. dollars of the assets
of a Portfolio that are invested in foreign securities may be affected favorably
or unfavorably by changes in a variety of factors not applicable to investment
in U.S. securities, and the Portfolio may incur costs in connection with
conversion between various currencies. Currency exchange transactions may be
from any non-U.S. currency into U.S. dollars or into other appropriate
currencies. Each Portfolio will conduct its currency exchange transactions (i)
on a spot (i.e., cash) basis at the rate prevailing in the currency exchange
market, (ii) through entering into futures contracts or options on such
contracts (as described above), (iii) through entering into forward contracts to
purchase or sell currency or (iv) by purchasing exchange-traded currency
options. Risks associated with currency forward contracts and purchasing
currency options are similar to those described herein for futures contracts and
securities and stock index options. In addition, the use of currency
transactions could result in losses from the imposition of foreign exchange
controls, suspension of settlement or other governmental actions or unexpected
events.

Forward Currency Contracts. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed

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number of days from the date of the contract as agreed upon by the parties, at a
price set at the time of the contract. These contracts are entered into in the
interbank market conducted directly between currency traders (usually large
commercial banks and brokers) and their customers. Forward currency contracts
are similar to currency futures contracts, except that futures contracts are
traded on commodities exchanges and are standardized as to contract size and
delivery date.

At or before the maturity of a forward contract, the Portfolio may either
sell a portfolio security and make delivery of the currency, or retain the
security and fully or partially offset its contractual obligation to deliver the
currency by negotiating with its trading partner to enter into an offsetting
transaction. If the Portfolio retains the portfolio security and engages in an
offsetting transaction, the Portfolio, at the time of execution of the
offsetting transaction, will incur a gain or a loss to the extent that movement
has occurred in forward contract prices.

Currency Options. The Portfolios may purchase exchange-traded put and
call options on foreign currencies. Put options convey the right to sell the
underlying currency at a price which is anticipated to be higher than the spot
price of the currency at the time the option is exercised. Call options convey
the right to buy the underlying currency at a price which is expected to be
lower than the spot price of the currency at the time the option is exercised.

Currency Hedging. The Portfolios' currency hedging will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward currency with respect to
specific receivables or payables of a Portfolio generally accruing in connection
with the purchase or sale of its portfolio securities. Position hedging is the
sale of forward currency with respect to portfolio security positions. A
Portfolio may not position hedge to an extent greater than the aggregate market
value (at the time of entering into the hedge) of the hedged securities.

A decline in the U.S. dollar value of a foreign currency in which the
Portfolio's securities are denominated will reduce the U.S. dollar value of the
securities, even if their value in the foreign currency remains constant. The
use of currency hedges does not eliminate fluctuations in the underlying prices
of the securities, but it does establish a rate of exchange that can be achieved
in the future. For example, in order to protect against diminutions in the U.S.
dollar value of non-dollar denominated securities it holds, a Portfolio may
purchase foreign currency put options. If the value of the foreign currency does
decline, the Portfolio will have the right to sell the foreign currency for a
fixed amount in dollars and will thereby offset, in whole or in part, the
adverse effect on the U.S. dollar value of its securities that otherwise would
have resulted. Conversely, if a rise in the U.S. dollar value of a currency in
which securities to be acquired are denominated is projected, thereby
potentially increasing the cost of the securities, the Portfolio may purchase
call options on the particular currency. The purchase of these options could
offset, at least partially, the effects of the adverse movements in exchange
rates. The benefit to the Portfolio derived from purchases of currency options,
like the benefit derived from other types of options, will be reduced by
premiums and other transaction costs. Because transactions in currency exchange
are generally conducted on a principal basis, no fees or commissions are
generally involved. Currency hedging involves some of the same risks and
considerations as other transactions with similar instruments. Although currency
hedges limit the risk of loss due to a decline in the value of a hedged

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currency, at the same time, they also limit any potential gain that might result
should the value of the currency increase. If a devaluation is generally
anticipated, the Portfolio may not be able to contract to sell a currency at a
price above the devaluation level it anticipates.

Futures Activities. Each Portfolio may enter into foreign currency,
interest rate and securities index futures contracts and purchase and write
(sell) related options traded on exchanges designated by the Commodity Futures
Trading Commission (the "CFTC") or consistent with CFTC regulations on foreign
exchanges. These futures contracts are standardized contracts for the future
delivery of foreign currency or an interest rate sensitive security or, in the
case of stock index and certain other futures contracts, a cash settlement with
reference to a specified multiplier times the change in the specified index,
exchange rate or interest rate. 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. These transactions may be entered into for "bona fide hedging"
purposes as defined in CFTC regulations and other permissible purposes including
hedging against changes in the value of portfolio securities due to anticipated
changes in currency values, interest rates and/or market conditions and
increasing return. Aggregate initial margin and premiums (discussed below)
required to establish positions other than those considered to be "bona fide
hedging" by the CFTC will not exceed 5% of the Portfolio's net asset value after
taking into account unrealized profits and unrealized losses on any such
contracts it has entered into. The Portfolios reserve the right to engage in
transactions involving futures contracts and options on futures contracts to the
extent allowed by CFTC regulations in effect from time to time and in accordance
with a Portfolio's policies. There is no overall limit on the percentage of
Portfolio assets that may be at risk with respect to futures activities.

Futures Contracts. A foreign currency futures contract provides for the
future sale by one party and the purchase by the other party of a certain amount
of a specified non-U.S. currency at a specified price, date, time and place. An
interest rate futures contract provides for the future sale by one party and the
purchase by the other party of a certain amount of a specific interest rate
sensitive financial instrument (debt security) at a specified price, date, time
and place. Securities indexes are capitalization weighted indexes which reflect
the market value of the securities represented in the indexes. A securities
index futures contract is an agreement to be settled by delivery of an amount of
cash equal to a specified multiplier times the difference between the value of
the index at the close of the last trading day on the contract and the price at
which the agreement is made.

No consideration is paid or received by a Portfolio upon entering into a
futures contract. Instead, the Portfolio is required to segregate with its
custodian an amount of cash or securities acceptable to the broker, such as U.S.
government securities or other liquid high-grade debt obligations, equal to
approximately 1% to 10% of the contract amount (this amount

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is subject to change by the exchange on which the contract is traded, and
brokers may charge a higher amount). This amount is known as "initial margin"
and is in the nature of a performance bond or good faith deposit on the contract
which is returned to the Portfolio upon termination of the futures contract,
assuming all contractual obligations have been satisfied. The broker will have
access to amounts in the margin account if the Portfolio fails to meet its
contractual obligations. Subsequent payments, known as "variation margin," to
and from the broker, will be made daily as the currency, financial instrument or
securities index underlying the futures contract fluctuates, making the long and
short positions in the futures contract more or less valuable, a process known
as "marking-to-market." The Portfolios will also incur brokerage costs in
connection with entering into futures transactions.

At any time prior to the expiration of a futures contract, a Portfolio
may elect to close the position by taking an opposite position, which will
operate to terminate the Portfolio's existing position in the contract.
Positions in futures contracts and options on futures contracts (described
below) may be closed out only on the exchange on which they were entered into
(or through a linked exchange). No secondary market for such contracts exists.
Although the Portfolios may enter into futures contracts only if there is an
active market for such contracts, there is no assurance that an active market
will exist at any particular time. Most futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit or trading may be suspended for
specified periods during the day. It is possible that futures contract prices
could move to the daily limit for several consecutive trading days with little
or no trading, thereby preventing prompt liquidation of futures positions at an
advantageous price and subjecting a Portfolio to substantial losses. In such
event, and in the event of adverse price movements, the Portfolio would be
required to make daily cash payments of variation margin. In such situations, if
the Portfolio had insufficient cash, it might have to sell securities to meet
daily variation margin requirements at a time when it would be disadvantageous
to do so. In addition, if the transaction is entered into for hedging purposes,
in such circumstances the Portfolio may realize a loss on a futures contract or
option that is not offset by an increase in the value of the hedged position.
Losses incurred in futures transactions and the costs of these transactions will
affect the Portfolio's performance.

Options on Futures Contracts. Each Portfolio may purchase and write put
and call options on foreign currency, interest rate and index futures contracts
and may enter into closing transactions with respect to such options to
terminate existing positions. There is no guarantee that such closing
transactions can be effected; the ability to establish and close out positions
on such options will be subject to the existence of a liquid market.

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less than, in the case of a put, the exercise price of the option on the futures
contract. The potential loss related to the purchase of an option on a futures
contract is limited to the premium paid for the option (plus transaction costs).
Because the value of the option is fixed at the point of sale, there are no
daily cash payments by the purchaser to reflect changes in the value of the
underlying contract; however, the value of the option does change daily and that
change would be reflected in the net asset value of the Portfolio.

Hedging Generally. In addition to entering into options, futures and
currency exchange transactions for other purposes, including generating current
income to offset expenses or increase return, each Portfolio may enter into
these transactions as hedges to reduce investment risk, generally by making an
investment expected to move in the opposite direction of a portfolio position. A
hedge is designed to offset a loss in a portfolio position with a gain in the
hedged position; at the same time, however, a properly correlated hedge will
result in a gain in the portfolio position being offset by a loss in the hedged
position. As a result, the use of options, futures and currency exchange
transactions for hedging purposes could limit any potential gain from an
increase in the value of the position hedged. In addition, the movement in the
portfolio position hedged may not be of the same magnitude as movement in the
hedge. With respect to futures contracts, since the value of portfolio
securities will far exceed the value of the futures contracts sold by the
Portfolio, an increase in the value of the futures contracts could only
mitigate, but not totally offset, the decline in the value of the Portfolio's
assets.

In hedging transactions based on an index, whether a Portfolio will
realize a gain or loss from the purchase or writing of options on an index
depends upon movements in the level of prices in the securities market generally
or, in the case of certain indexes, in an industry or market segment, rather
than movements in the price of a particular security. The risk of imperfect
correlation increases as the composition of the Portfolio's portfolio varies
from the composition of the index. In an effort to compensate for imperfect
correlation of relative movements in the hedged position and the hedge, the
Portfolio's hedge positions may be in a greater or lesser dollar amount than the
dollar amount of the hedged position. Such "over hedging" or "under hedging" may
adversely affect the Portfolio's net investment results if market movements are
not as anticipated when the hedge is established. Securities index futures
transactions may be subject to additional correlation risks. First, all
participants in the futures market are subject to margin deposit and maintenance
requirements. Rather than meeting additional margin deposit requirements,
investors may close futures contracts through offsetting transactions which
would distort the normal relationship between the securities index and futures
markets. Secondly, from the point of view of speculators, the deposit
requirements in the futures market are less onerous than margin requirements in
the securities market. Therefore, increased participation by speculators in the
futures market also may cause temporary price distortions. Because of the
possibility of price distortions in the futures market and the imperfect
correlation between movements in a securities index and movements in the price
of securities index futures, a correct forecast of general market trends by CSAM
still may not result in a successful hedging transaction.

A Portfolio will engage in hedging transactions only when deemed
advisable by CSAM, and successful use by the Portfolio of hedging transactions
will be subject to CSAM's ability to predict trends in currencies, interest
rates or securities markets, as the case may be, and to predict correctly
movements in the directions of the hedge and the hedged position and

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the correlation between them, which predictions could prove to be inaccurate.
This requires different skills and techniques than predicting changes in the
price of individual securities, and there can be no assurance that the use of
these strategies will be successful. Even a well-conceived hedge may be
unsuccessful to some degree because of unexpected market behavior or trends.
Losses incurred in hedging transactions and the costs of these transactions will
affect the Portfolio's performance.

To the extent that a Portfolio engages in the strategies described above,
the Portfolio may experience losses greater than if these strategies had not
been utilized. In addition to the risks described above, these instruments may
be illiquid and/or subject to trading limits, and the Portfolio may be unable to
close out a position without incurring substantial losses, if at all. The
Portfolio is also subject to the risk of a default by a counterparty to an
off-exchange transaction.

Swaps. (Emerging Markets and International Equity Portfolios) The
Emerging Markets and International Equity Portfolios may each enter into swaps
relating to interest rates, indexes, currencies and equity interests of foreign
issuers. A swap transaction is an agreement between a Portfolio and a
counterparty to act in accordance with the terms of the swap contract. Interest
rate swaps involve the exchange by the Portfolio with another party of their
respective commitments to pay or receive interest, such as an exchange of fixed
rate payments for floating rate payments. Index swaps involve the exchange by
the Portfolio with another party of the respective amounts payable with respect
to a notional principal amount related to one or more indexes. Currency swaps
involve the exchange of cash flows on a notional amount of two or more
currencies based on their relative future values. An equity swap is an agreement
to exchange streams of payments computed by reference to a notional amount based
on the performance of a stock index, a basket of stocks or a single stock. A
Portfolio may enter into these transactions for hedging purchases, such as to
preserve a return or spread on a particular investment or portion of its assets,
to protect against currency fluctuations, as a duration management technique or
to protect against any increase in the price of securities the Portfolio
anticipates purchasing at a later date. The Portfolios may also use these
transactions for speculative purposes to increase total return, such as to
obtain the price performance of a security without actually purchasing the
security in circumstances where, for example, the subject security is illiquid,
is unavailable for direct investment or available only on less attractive terms.
Swaps have risks associated with them, including possible default by the
counterparty to the transaction, illiquidity and, where swaps are used as
hedges, the risk that the use of a swap could result in losses greater than if
the swap had not been employed.

A Portfolio will usually enter into swaps on a net basis, i.e., the two
payment streams are netted out in a cash settlement on the payment date or dates
specified in the agreement, with the Portfolio receiving or paying, as the case
may be, only the net amount of the two payments. Swaps do not involve the
delivery of securities, other underlying assets or principal. Accordingly, the
risk of loss with respect to swaps is limited to the net amount of payments that
the Portfolio is contractually obligated to make. If the counterparty to a swap
defaults, the Portfolio's risk of loss consists of the net amount of payments
that the Portfolio is contractually entitled to receive. Where swaps are entered
into for good faith hedging purposes, CSAM believes such obligations do not
constitute senior securities under the Investment Company Act of 1940, as
amended (the "1940 Act"), and, accordingly, will not treat them as being subject
to a Portfolio's borrowing restrictions. Where swaps are entered

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into for other than hedging purposes, a Portfolio will segregate an amount of
cash or liquid securities having a value equal to the accrued excess of its
obligations over its entitlements with respect to each swap on a daily basis.

Asset Coverage for Forward Contracts, Options, Futures and Options on
Futures and Swaps. Each Portfolio will comply with guidelines established by the
U.S. Securities and Exchange Commission (the "SEC") and other applicable
regulatory bodies with respect to coverage of forward currency contracts;
options written by the Portfolios on currencies, securities and securities
indexes and swaps; and currency, interest rate and index futures contracts and
options on these futures contracts. These guidelines may, in certain instances,
require segregation by the Portfolio of cash or liquid securities with its
custodian or a designated sub-custodian to the extent the Portfolio's
obligations with respect to these strategies are not otherwise "covered" through
ownership of the underlying security, financial instrument or currency or by
other portfolio positions or by other means consistent with applicable
regulatory policies. Segregated assets cannot be sold or transferred unless
equivalent assets are substituted in their place or it is no longer necessary to
segregate them. As a result, there is a possibility that segregation of a large
percentage of a Portfolio's assets could impede portfolio management or the
Portfolio's ability to meet redemption requests or other current obligations.

For example, a call option written by a Portfolio on securities may
require the Portfolio to hold the securities subject to the call (or securities
convertible into the securities without additional consideration) or to
segregate assets (as described above) sufficient to purchase and deliver the
securities if the call is exercised. A call option written by a Portfolio on an
index may require the Portfolio to own portfolio securities that correlate with
the index or to segregate assets (as described above) equal to the excess of the
index value over the exercise price on a current basis. A put option written by
a Portfolio may require the Portfolio to segregate assets (as described above)
equal to the exercise price. The Portfolio could purchase a put option if the
strike price of that option is the same or higher than the strike price of a put
option sold by the Portfolio. If a Portfolio holds a futures or forward
contract, the Portfolio could purchase a put option on the same futures or
forward contract with a strike price as high or higher than the price of the
contract held. The Portfolio may enter into fully or partially offsetting
transactions so that its net position, coupled with any segregated assets (equal
to any remaining obligation), equals its net obligation. Asset coverage may be
achieved by other means when consistent with applicable regulatory policies.

Foreign Investments. Since the Emerging Markets and International Equity
Portfolios will, and the Growth & Income and Post-Venture Capital Portfolios
(each up to 20% of its total assets), and the Small Company Growth Portfolio (up
to 10% of its total assets) may, be investing in foreign securities, investors
should recognize that investing in foreign companies involves certain risks,
including those discussed below, which are in addition to those associated with
investing in U.S. issuers. Individual foreign economies may differ favorably or
unfavorably from the U.S. economy in such respects as growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments positions. A Portfolio may invest in securities of foreign
governments (or agencies or instrumentalities thereof), and many, if not all, of
the foregoing considerations apply to such investments as well.

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Foreign Currency Exchange. Since each Portfolio may be investing in
securities denominated in currencies other than the U.S. dollar, and since a
Portfolio may temporarily hold funds in bank deposits or other money market
investments denominated in foreign currencies, each Portfolio's investments in
foreign companies may be affected favorably or unfavorably by exchange control
regulations or changes in the exchange rate between such currencies and the
dollar. A change in the value of a foreign currency relative to the U.S. dollar
will result in a corresponding change in the dollar value of a Portfolio's
assets denominated in that foreign currency. Changes in foreign currency
exchange rates may also affect the value of dividends and interest earned, gains
and losses realized on the sale of securities and net investment income and
gains, if any, to be distributed by a Portfolio with respect to its foreign
investments. Unless otherwise contracted, the rate of exchange between the U.S.
dollar and other currencies is determined by the forces of supply and demand in
the foreign exchange markets. Changes in the exchange rate may result over time
from the interaction of many factors directly or indirectly affecting economic
and political conditions in the United States and a particular foreign country,
including economic and political developments in other countries. Governmental
intervention may also play a significant role. National governments rarely
voluntarily allow their currencies to float freely in response to economic
forces. Sovereign governments use a variety of techniques, such as intervention
by a country's central bank or imposition of regulatory controls or taxes, to
affect the exchange rates of their currencies. A Portfolio may use hedging
techniques with the objective of protecting against loss through the fluctuation
of the valuation of foreign currencies against the U.S. dollar, particularly the
forward market in foreign exchange, currency options and currency futures.

Information. The majority of the foreign securities held by a Portfolio
will not be registered with, nor the issuers thereof be subject to reporting
requirements of, the SEC. Accordingly, there may be less publicly available
information about the securities and about the foreign company or government
issuing them than is available about a domestic company or government entity.
Foreign companies are generally subject to financial reporting standards,
practices and requirements that are either not uniform or less rigorous than
those applicable to U.S. companies.

Political Instability. With respect to some foreign countries, there is
the possibility of expropriation or confiscatory taxation, limitations on the
removal of funds or other assets of the Portfolio, political or social
instability, or domestic developments which could affect U.S. investments in
those and neighboring countries.

Foreign Markets. Securities of some foreign companies are less liquid and
their prices are more volatile than securities of comparable U.S. companies.
Certain foreign countries are known to experience long delays between the trade
and settlement dates of securities purchased or sold, which may result in
increased exposure to market and foreign exchange fluctuation and increased
liquidity.

Increased Expenses. The operating expenses of the International Equity
and Emerging Markets Portfolios (and, to the extent they invest in foreign
securities, the Growth & Income, Post-Venture Capital and Small Company Growth
Portfolios) can be expected to be higher than that of an investment company
investing exclusively in U.S. securities, since the expenses of the Portfolio
associated with foreign investing, such as custodial costs, valuation

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costs and communication costs, as well as the rate of the investment advisory
fees, though similar to such expenses of some other international funds, are
higher than those costs incurred by other investment companies.

Privatizations. Each Portfolio may invest in privatizations (i.e. foreign
government programs of selling interests in government-owned or controlled
enterprises). The ability of U.S. entities, such as the Portfolios, to
participate in privatizations may be limited by local law, or the terms for
participation may be less advantageous than for local investors. There can be no
assurance that privatization programs will be available or successful. The
International Equity and Emerging Markets Portfolios could invest to a
significant extent in privatizations.

Foreign Debt Securities. The returns on foreign debt securities reflect
interest rates and other market conditions prevailing in those countries and the
effect of gains and losses in the denominated currencies against the U.S.
dollar, which have had a substantial impact on investment in foreign fixed
income securities. The relative performance of various countries' fixed income
markets historically has reflected wide variations relating to the unique
characteristics of each country's economy. Year-to-year fluctuations in certain
markets have been significant, and negative returns have been experienced in
various markets from time to time.

The foreign government securities in which a Portfolio may invest
generally consist of obligations issued or backed by national, state or
provincial governments or similar political subdivisions or central banks in
foreign countries. Foreign government securities also include debt obligations
of supranational entities, which include international organizations designated
or backed by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples include the International Bank for Reconstruction and Development (the
"World Bank"), the European Coal and Steel Community, the Asian Development Bank
and the InterAmerican Development Bank.

Brady Bonds. Each Portfolio may invest in so-called "Brady Bonds," which
have been issued by Costa Rica, Mexico, Uruguay and Venezuela and which may be
issued by other Latin American countries. Brady Bonds are issued as part of a
debt restructuring in which the bonds are issued in exchange for cash and
certain of the country's outstanding commercial bank loans. Investors should
recognize that Brady Bonds do not have a long payment history. Brady Bonds may
be collateralized or uncollateralized, are issued in various

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currencies (primarily the U.S. dollar) and are actively traded in the
over-the-counter ("OTC") secondary market for debt of Latin American issuers.
The International Equity and Emerging Markets Portfolios could invest to a
significant extent in Brady bonds.

Depositary Receipts. Certain of the above risks may be involved with
ADRs, European Depositary Receipts ("EDRs") and International Depositary
Receipts ("IDRs"), instruments that evidence ownership of underlying securities
issued by a foreign corporation. ADRs, EDRs and IDRs may not necessarily be
denominated in the same currency as the securities whose ownership they
represent. ADRs are typically issued by a U.S. bank or trust company. EDRs
(sometimes referred to as Continental Depositary Receipts) are issued in Europe
and IDRs (sometimes referred to as Global Depositary Receipts) are issued
outside the United States, each typically by non-U.S. banks and trust companies.
The risks associated with investing in securities of non-U.S. issuers are
generally heightened for investments in securities of issuers in emerging
markets.

Emerging Markets. One or more Portfolios with authority to invest outside
of the United States may invest in securities of issuers located in less
developed countries considered to be "emerging markets." The Emerging Market
Portfolio and the International Equity Portfolio may invest in securities of
issuers located in emerging markets to a significant extent. Investing in
securities of issuers located in emerging markets involves not only the risks
described above with respect to investing in foreign securities, but also other
risks, including exposure to economic structures that are generally less diverse
and mature than, and to political systems that can be expected to have less
stability than, those of developed countries. For example, many investments in
emerging markets experienced significant declines in value due to political and
currency volatility in emerging markets countries during the latter part of
1997. Other characteristics of emerging markets that may affect investment there
include certain national policies that may restrict investment by foreigners in
issuers or industries deemed sensitive to relevant national interests and the
absence of developed legal structures governing private and foreign investments
and private property. The typically small size of the markets for securities of
issuers located in emerging markets and the possibility of a low or nonexistent
volume of trading in those securities may also result in a lack of liquidity and
in price volatility of those securities.

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U.S. Government Securities. The obligations issued or guaranteed by the
U.S. government in which a Portfolio may invest include: direct obligations of
the U.S. Treasury and obligations issued by U.S. government agencies and
instrumentalities. Included among direct obligations of the United States are
Treasury Bills, Treasury Notes and Treasury Bonds, which differ in terms of
their interest rates, maturities and dates of issuance. Treasury Bills have
maturities of less than one year, Treasury Notes have maturities of one to 10
years and Treasury Bonds generally have maturities of greater than 10 years at
the date of issuance. Included among the obligations issued by agencies and
instrumentalities of the United States are: instruments that are supported by
the full faith and credit of the United States (such as certificates issued by
the Government National Mortgage Association ("GNMA")); instruments that are
supported by the right of the issuer to borrow from the U.S. Treasury (such as
securities of Federal Home Loan Banks); and instruments that are supported by
the credit of the instrumentality (such as Federal National Mortgage Association
("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC") bonds).

Other U.S. government securities the Portfolios may invest in include
securities issued or guaranteed by the Federal Housing Administration, Farmers
Home Loan Administration, Export-Import Bank of the United States, Small
Business Administration, Government National Mortgage Association, General
Services Administration, Central Bank for Cooperatives, Federal Farm Credit
Banks, Federal Home Loan Banks, Federal Home Loan Mortgage Corporation, Federal
Intermediate Credit Banks, Federal Land Banks, Federal National Mortgage
Association, Federal Maritime Administration, Tennessee Valley Authority,
District of Columbia Armory Board and Student Loan Marketing Association. Each
Portfolio may also invest in instruments that are supported by the right of the
issuer to borrow from the U.S. Treasury and instruments that are supported by
the credit of the instrumentality. Because the U.S. government is not obligated
by law to provide support to an instrumentality it sponsors, a Portfolio will
invest in obligations issued by such an instrumentality only if CSAM determines
that the credit risk with respect to the instrumentality does not make its
securities unsuitable for investment by the Portfolio.

Money Market Obligations. Each Portfolio is authorized to invest under
normal market conditions up to 20% of its assets in domestic and foreign
short-term (one year or less remaining to maturity) and, in the case of the
Emerging Markets, International Equity, Post-Venture Capital and Small Company
Growth Portfolios, medium-term (five years or less remaining maturity) money
market obligations. Money market instruments consist of obligations issued or
guaranteed by the U.S. government or a foreign government, their agencies or
instrumentalities; bank obligations (including certificates of deposit, time
deposits and bankers' acceptances of domestic or foreign, domestic savings and
loans and similar institutions) that are high quality investments; commercial
paper rated no lower than A-2 by Standard & Poor's Ratings Services ("S&P") or
Prime-2 by Moody's Investors Service, Inc. ("Moody's") or the equivalent from
another major rating service or, if unrated, of an issuer having an outstanding,
unsecured debt issue then rated within the three highest rating categories; and
repurchase agreements with respect to the foregoing.

Repurchase Agreements. Each Portfolio may invest in repurchase agreement
transactions with member banks of the Federal Reserve System and certain
non-bank dealers. Repurchase agreements are contracts under which the buyer of a
security simultaneously commits to resell the security to the seller at an
agreed-upon price and date. Under the terms

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of a typical repurchase agreement, a Portfolio would acquire any underlying
security for a relatively short period (usually not more than one week) subject
to an obligation of the seller to repurchase, and the Portfolio to resell, the
obligation at an agreed-upon price and time, thereby determining the yield
during the Portfolio's holding period. This arrangement results in a fixed rate
of return that is not subject to market fluctuations during the Portfolio's
holding period. The value of the underlying securities will at all times be at
least equal to the total amount of the purchase obligation, including interest.
The Portfolio bears a risk of loss in the event that the other party to a
repurchase agreement defaults on its obligations or becomes bankrupt and the
Portfolio is delayed or prevented from exercising its right to dispose of the
collateral securities, including the risk of a possible decline in the value of
the underlying securities during the period while the Portfolio seeks to assert
this right. CSAM, acting under the supervision of each Portfolio's Board,
monitors the creditworthiness of those bank and non-bank dealers with which the
Portfolio enters into repurchase agreements to evaluate this risk. A repurchase
agreement is considered to be a loan under the 1940 Act.

Money Market Mutual Funds. Where CSAM believes that it would be
beneficial to a Portfolio and appropriate considering the factors of return and
liquidity, a Portfolio may invest up to 5% of its assets in securities of money
market mutual funds that are unaffiliated with the Portfolio or CSAM. A money
market mutual fund is an investment company that invests in short-term high
quality money market instruments. A money market mutual fund generally does not
purchase securities with a remaining maturity of more than one year. As a
shareholder in any mutual fund, a Portfolio will bear its ratable share of the
mutual fund's expenses, including management fees, and will remain subject to
payment of the Portfolio's management fees and other expenses with respect to
assets so invested.

Debt Securities. Each of the Emerging Markets Portfolio and the
International Equity Portfolio may invest up to 35%, and each of the Growth &
Income Portfolio, the Post-Venture Capital Portfolio and the Small Company
Growth Portfolio may invest up to 20%, of its total assets in debt securities
(other than money market obligations). Any percentage limitation on a
Portfolio's ability to invest in debt securities will not be applicable during
periods when the Portfolio pursues a temporary defensive strategy as discussed
below. The interest income to be derived may be considered as one factor in
selecting debt securities for investment by CSAM. Because the market value of
debt obligations can be expected to vary inversely to changes in prevailing
interest rates, investing in debt obligations may provide an opportunity for
capital growth when interest rates are expected to decline. The success of such
a strategy is dependent upon CSAM's ability to forecast accurately changes in
interest rates. The market value of debt obligations may also be expected to
vary depending upon, among other factors, the ability of the issuer to repay
principal and interest, any change in investment rating and general economic
conditions.

Each Portfolio may invest to a limited extent in zero coupon securities.
See "Additional Information Concerning Taxes" for a discussion of the tax
consequences to shareholders in a Portfolio that invests in zero coupon
securities.

A security will be deemed to be investment grade if it is rated within
the four highest grades by Moody's or S&P or, if unrated, is determined to be of
comparable quality by CSAM. Securities rated in the fourth highest grade may
have speculative characteristics and changes in economic conditions or other
circumstances are more likely to lead to a

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weakened capacity to make principal and interest payments than is the case with
higher grade bonds. Subsequent to its purchase by a Portfolio, an issue of
securities may cease to be rated or its rating may be reduced below the minimum
required for purchase by the Portfolio. Neither event will require sale of such
securities, although CSAM will consider such event in its determination of
whether the Portfolio should continue to hold the securities.

Below Investment Grade Securities. The Emerging Markets Portfolio may
invest or hold up to 35% of its net assets in below investment grade debt and
equity securities including convertible securities. Within the 20% limitation on
investments in debt securities, up to 10% of the Growth & Income Portfolio's
assets may be invested in debt securities rated below investment grade,
including convertible debt securities. The International Equity, Post-Venture
Capital and Small Company Growth Portfolios may each invest up to 5% of its
total assets in below investment grade debt securities, which will be included
in any overall investment limitation or investment minimum on debt securities.

Below investment grade debt securities may be rated as low as C by
Moody's or D by S&P, or be deemed by CSAM to be of equivalent quality.
Securities that are rated C by Moody's are the lowest rated class and can be
regarded as having extremely poor prospects of ever attaining any real
investment standing. A security rated D by S&P is in default or is expected to
default upon maturity or payment date. Below investment grade securities
(commonly referred to as "junk bonds"), (i) will likely have some quality and
protective characteristics that, in the judgment of the rating organizations,
are outweighed by large uncertainties or major risk exposures to adverse
conditions and (ii) are predominantly speculative with respect to the issuer's
capacity to pay interest and repay principal in accordance with the terms of the
obligation. The market values of certain of these securities also tend to be
more sensitive to individual corporate developments and changes in economic
conditions than investment grade securities. In addition, these securities
generally present a higher degree of credit risk. The risk of loss due to
default is significantly greater because these securities generally are
unsecured and frequently are subordinated to the prior payment of senior
indebtedness.

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

An economic recession could disrupt severely the market for such
securities and may adversely affect the value of such securities and the ability
of the issuers of such securities to repay principal and pay interest thereon.

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A Portfolio may have difficulty disposing of certain of these securities
because there may be a thin trading market. Because there is no established
retail secondary market for many of these securities, the Trust anticipates that
these securities could be sold only to a limited number of dealers or
institutional investors. To the extent a secondary trading market for these
securities does exist, it generally is not as liquid as the secondary market for
investment grade securities. The lack of a liquid secondary market, as well as
adverse publicity and investor perception with respect to these securities, may
have an adverse impact on market price and a Portfolio's ability to dispose of
particular issues when necessary to meet the Portfolio's liquidity needs or in
response to a specific economic event such as a deterioration in the
creditworthiness of the issuer. The lack of a liquid secondary market for
certain securities also may make it more difficult for a Portfolio to obtain
accurate market quotations for purposes of valuing the Portfolio and calculating
its net asset value.

The market value of below investment grade securities is more volatile
than that of investment grade securities. Factors adversely impacting the market
value of these securities will adversely impact the Portfolio's net asset value.
The Portfolio will rely on the judgment, analysis and experience of CSAM in
evaluating the creditworthiness of an issuer. In this evaluation, CSAM 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. Normally, below
investment grade securities are not intended for short-term investment. A
Portfolio may incur additional expenses to the extent it is required to seek
recovery upon a default in the payment of principal or interest on its portfolio
holdings of such securities.

Convertible Securities. Convertible securities in which a Portfolio may
invest, including both convertible debt and convertible preferred stock, may be
converted at either a stated price or stated rate into underlying shares of
common stock. Because of this feature, convertible securities enable an investor
to benefit from increases in the market price of the underlying common stock.
Convertible securities provide higher yields than the underlying equity
securities, but generally offer lower yields than non-convertible securities of
similar quality. Like bonds, the value of convertible securities fluctuates in
relation to changes in interest rates and, in addition, also fluctuates in
relation to the underlying common stock.

Structured Securities. The Portfolios may purchase any type of publicly
traded or privately negotiated fixed income security, including mortgage-backed
securities; structured notes, bonds or debentures; and assignments of and
participations in loans.

Mortgage-Backed Securities. Each Portfolio may invest in mortgage-backed
securities, such as those issued by the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA"), the Federal Home
Loan Mortgage Corporation ("FHLMC") or certain foreign issuers. Mortgage-backed
securities represent direct or indirect participations in, or are secured by and
payable from, mortgage loans secured by real property. The mortgages backing
these securities include, among other mortgage instruments, conventional 30-year
fixed-rate mortgages, 15-year fixed rate mortgages, graduated payment mortgages
and adjustable rate mortgages. The government or the issuing agency typically
guarantees the payment of interest and principal of these securities. However,
the guarantees do not extend to the securities' yield or value, which are likely
to vary inversely with fluctuations in interest rates, nor do the guarantees
extend to the yield or

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value of the Portfolio's shares. These securities generally are "pass-through"
instruments, through which the holders receive a share of all interest and
principal payments from the mortgages underlying the securities, net of certain
fees.

Yields on pass-through securities are typically quoted by investment
dealers and vendors based on the maturity of the underlying instruments and the
associated average life assumption. The average life of pass-through pools
varies with the maturities of the underlying mortgage loans. A pool's term may
be shortened by unscheduled or early payments of principal on the underlying
mortgages. The occurrence of mortgage prepayments is affected by various
factors, including the level of interest rates, general economic conditions, the
location, scheduled maturity and age of the mortgage and other social and
demographic conditions. Because prepayment rates of individual pools vary
widely, it is not possible to predict accurately the average life of a
particular pool. At present, pools, particularly those with loans with other
maturities or different characteristics, are priced on an assumption of average
life determined for each pool. In periods of falling interest rates, the rate of
prepayment tends to increase, thereby shortening the actual average life of a
pool of mortgage-related securities. Conversely, in periods of rising rates the
rate of prepayment tends to decrease, thereby lengthening the actual average
life of the pool. However, these effects may not be present, or may differ in
degree, if the mortgage loans in the pools have adjustable interest rates or
other special payment terms, such as a prepayment charge. Actual prepayment
experience may cause the yield of mortgage-backed securities to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting the
Portfolio's yield. In addition, mortgage-backed securities issued by certain
non-government entities and collateralized mortgage obligations may be less
marketable than other securities.

Asset-Backed Securities. Each Portfolio may invest in asset-backed
securities, which represent participations in, or are secured by and payable
from, assets such as motor vehicle installment sales, installment loan
contracts, leases of various types of real and personal property and receivables
from revolving credit (credit card) agreements. Such assets are securitized
through the use of trusts and special purpose corporations. Payments or
distributions of principal and interest may be guaranteed up to certain amounts
and for a certain time period by a letter of credit or a pool insurance policy
issued by a financial institution unaffiliated with the trust or corporation.

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possession of the underlying obligations. If the servicer were to sell these
obligations to another party, there is a risk that the purchaser would acquire
an interest superior to that of the holders of the asset-backed securities. In
addition, because of the large number of vehicles involved in a typical issuance
and technical requirements under state laws, the trustee for the holders of the
automobile receivables may not have a proper security interest in the underlying
automobiles. Therefore, there is the possibility that recoveries on repossessed
collateral may not, in some cases, be available to support payments on these
securities. Credit card receivables are generally unsecured, and the debtors are
entitled to the protection of a number of state and federal consumer credit
laws, many of which give such debtors the right to set off certain amounts owed
on the credit cards, thereby reducing the balance due. In addition, there is no
assurance that the security interest in the collateral can be realized.

Loan Participations and Assignments. Each Portfolio may invest in fixed
and floating rate loans ("Loans") arranged through private negotiations between
a foreign government (a "Borrower") and one or more financial institutions
("Lenders"). The majority of a Portfolio's investments in Loans are expected to
be in the form of participations in Loans ("Participations") and assignments of
portions of Loans from third parties ("Assignments"). Participations typically
will result in the Portfolio having a contractual relationship only with the
Lender, not with the Borrower. The Portfolio will have the right to receive
payments of principal, interest and any fees to which it is entitled only from
the Lender selling the Participation and only upon receipt by the Lender of the
payments from the Borrower. In connection with purchasing Participations, the
Emerging Markets Portfolio generally will have no right to enforce compliance by
the Borrower with the terms of the loan agreement relating to the Loan, nor any
rights of set-off against the Borrower, and the Portfolio may not directly
benefit from any collateral supporting the Loan in which it has purchased the
Participation. As a result, the Portfolio will assume the credit risk of both
the Borrower and the Lender that is selling the Participation. In the event of
the insolvency of the Lender selling a Participation, the Portfolio may be
treated as a general creditor of the Lender and may not benefit from any set-off
between the Lender and the Borrower. The Emerging Markets Portfolio will acquire
Participations only if the Lender interpositioned between the Portfolio and the
Borrower is determined by CSAM to be creditworthy.

When the Portfolio purchases Assignments from Lenders, the Portfolio will
acquire direct rights against the Borrower on the Loan. However, since
Assignments are generally arranged through private negotiations between
potential assignees and potential assignors, the rights and obligations acquired
by the Portfolio as the purchaser of an Assignment may differ from, and be more
limited than, those held by the assigning Lender.

There are risks involved in investing in Participations and Assignments.
The Portfolio may have difficulty disposing of them because there is no liquid
market for such securities. The lack of a liquid secondary market will have an
adverse impact on the value of such securities and on the Portfolio's ability to
dispose of particular Participations or Assignments when necessary to meet the
Portfolio's liquidity needs or in response to a specific economic event, such as
a deterioration in the creditworthiness of the Borrower. The lack of a liquid
market for Participations and Assignments also may make it more difficult for
the Portfolio to assign a value to these securities for purposes of valuing the
Portfolio's portfolio and calculating its net asset value.

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Structured Notes, Bonds or Debentures. Typically, the value of the
principal and/or interest on these instruments is determined by reference to
changes in the value of specific currencies, interest rates, commodities,
indexes or other financial indicators (the "Reference") or the relevant change
in two or more References. The interest rate or the principal amount payable
upon maturity or redemption may be increased or decreased depending upon changes
in the applicable Reference. The terms of the structured securities may provide
that in certain circumstances no principal is due at maturity and, therefore,
may result in the loss of a Portfolio's entire investment. The value of
structured securities may move in the same or the opposite direction as the
value of the Reference, so that appreciation of the Reference may produce an
increase or decrease in the interest rate or value of the security at maturity.
In addition, the change in interest rate or the value of the security at
maturity may be a multiple of the change in the value of the Reference so that
the security may be more or less volatile than the Reference, depending on the
multiple. Consequently, structured securities may entail a greater degree of
market risk and volatility than other types of debt obligations.

Stand-By Commitments. (Emerging Markets Portfolio) The Emerging Markets
Portfolio may acquire "stand-by commitments" with respect to securities held in
its portfolio. Under a stand-by commitment, a dealer agrees to purchase at the
Portfolio's option specified securities at a specified price. The Portfolio's
right to exercise stand-by commitments is unconditional and unqualified.
Stand-by commitments acquired by the Portfolio may also be referred to as "put"
options. A stand-by commitment is not transferable by the Portfolio, although
the Portfolio can sell the underlying securities to a third party at any time.

The principal risk of stand-by commitments is that the writer of a
commitment may default on its obligation to repurchase the securities acquired
with it. When investing in stand-by commitments, the Portfolio will seek to
enter into stand-by commitments only with brokers, dealers and banks that, in
the opinion of CSAM, present minimal credit risks. In evaluating the
creditworthiness of the issuer of a stand-by commitment, CSAM will periodically
review relevant financial information concerning the issuer's assets,
liabilities and contingent claims.

The amount payable to the Portfolio upon its exercise of a stand-by
commitment is normally (i) the Portfolio's acquisition cost of the securities
(excluding any accrued interest which the Portfolio paid on their acquisition),
less any amortized market premium or plus any amortized market or original issue
discount during the period the Portfolio owned the securities, plus (ii) all
interest accrued on the securities since the last interest payment date during
that period.

The Portfolio expects that stand-by commitments will generally be
available without the payment of any direct or indirect consideration. However,
if necessary or advisable, the Portfolio may pay for a stand-by commitment
either separately in cash or by paying a higher price for portfolio securities
which are acquired subject to the commitment (thus reducing the yield to
maturity otherwise available for the same securities). The total amount paid in
either manner for outstanding stand-by commitments held in the Portfolio's
portfolio will not exceed 1/2 of 1% of the value of the Portfolio's total assets
calculated immediately after each stand-by commitment is acquired.

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The Portfolio would acquire stand-by commitments solely to facilitate
portfolio liquidity and does not intend to exercise its rights thereunder for
trading purposes. The acquisition of a stand-by commitment would not affect the
valuation or assumed maturity of the underlying securities. Stand-by commitments
acquired by the Portfolio would be valued at zero in determining net asset
value. Where the Portfolio paid any consideration directly or indirectly for a
stand-by commitment, its cost would be reflected as unrealized depreciation for
the period during which the commitment was held by the Portfolio. Stand-by
commitments would not affect the average weighted maturity of the Portfolio's
portfolio.

Temporary Defensive Strategies. When CSAM believes that a defensive
posture is warranted, each Portfolio may invest temporarily without limit in
investment grade debt obligations and in domestic and foreign money market
obligations, including repurchase agreements.

Securities of Other Investment Companies. Each Portfolio may invest in
securities of other investment companies to the extent permitted under the 1940
Act. Presently, under the 1940 Act, a Portfolio may hold securities of another
investment company in amounts which (i) do not exceed 3% of the total
outstanding voting stock of such company, (ii) do not exceed 5% of the value of
the Portfolio's total assets and (iii) when added to all other investment
company securities held by the Portfolio, do not exceed 10% of the value of the
Portfolio's total assets.

Lending of Portfolio Securities. A Portfolio may lend portfolio
securities to brokers, dealers and other financial organizations that meet
capital and other credit requirements or other criteria established by the
Trust's Board of Trustees (the "Board"). These loans, if and when made, may not
exceed 33 1/3% of the Portfolio's total assets (including the Loan collateral)
taken at value. A Portfolio will not lend portfolio securities to its investment
adviser, any sub-investment adviser or their affiliates unless it has applied
for and received specific authority to do so from the SEC. Loans of portfolio
securities will be collateralized by cash or liquid securities, which are
segregated at all times in an amount equal to at least 100% of the current
market value of the loaned securities. Any gain or loss in the market price of
the securities loaned that might occur during the term of the loan would be for
the account of the Portfolio involved. From time to time, a Portfolio may return
a part of the interest earned from the investment of collateral received for
securities loaned to the borrower and/or a third party that is unaffiliated with
the Portfolio and that is acting as a "finder."

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other distributions on the loaned securities and any increase in market value;
(v) the Portfolio may pay only reasonable custodian fees in connection with the
loan; and (vi) voting rights on the loaned securities may pass to the borrower,
provided, however, that if a material event adversely affecting the investment
occurs, the Board must terminate the loan and regain the right to vote the
securities. Loan agreements involve certain risks in the event of default or
insolvency of the other party including possible delays or restrictions upon the
Portfolio's ability to recover the loaned securities or dispose of the
collateral for the loan.

When-Issued Securities and Delayed-Delivery Transactions. Each Portfolio
may use up to 20% of its total assets to purchase securities on a "when-issued"
basis or purchase or sell securities for delayed delivery (i.e., payment or
delivery occur beyond the normal settlement date at a stated price and yield). A
Portfolio will enter into a when-issued transaction for the purpose of acquiring
portfolio securities and not for the purpose of leverage, but may sell the
securities before the settlement date if CSAM deems it advantageous to do so.
The payment obligation and the interest rate that will be received on
when-issued securities are fixed at the time the buyer enters into the
commitment. Due to fluctuations in the value of securities purchased or sold on
a when-issued or delayed-delivery basis, the prices obtained on such securities
may be higher or lower than the prices available in the market on the dates when
the investments are actually delivered to the buyers. When a Portfolio agrees to
purchase when-issued or delayed-delivery securities, its custodian will set
aside cash or liquid securities equal to the amount of the commitment. Normally,
the custodian will set aside portfolio securities to satisfy a purchase
commitment, and in such a case the Portfolio may be required subsequently to
segregate additional assets in order to ensure that the value of the segregated
assets remains equal to the amount of the Portfolio's commitment. It may be
expected that the Portfolio's net assets will fluctuate to a greater degree when
it sets aside portfolio securities to cover such purchase commitments than when
it sets aside cash. When the Portfolio engages in when-issued or
delayed-delivery transactions, it relies on the other party to consummate the
trade. Failure of the seller to do so may result in the Portfolio's incurring a
loss or missing an opportunity to obtain a price considered to be advantageous.

Short Sales (Post-Venture Capital Portfolio). The Post-Venture Capital
Portfolio may engage in "short sales" that do not meet the definition of short
sales "against the box" with respect to up to 10% of its total assets. In a
short sale, the investor sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. The seller does not
immediately deliver the securities sold and is said to have a short position in
those securities until delivery occurs. To deliver the securities to the buyer,
the Portfolio must arrange through a broker to borrow the securities and, in so
doing, the Portfolio becomes obligated to replace the securities borrowed at
their market price at the time of replacement, whatever that price may be. The
Portfolio will make a profit or incur a loss as a result of a short sale
depending on whether the price of the security decreases or increases between
the date of the short sale and the date on which the Portfolio purchases the
security to replace the borrowed securities that have been sold. The amount of
any loss would be increased (and any gain decreased) by any premium or interest
the Portfolio is required to pay in connection with a short sale.

The Portfolio's obligation to replace the securities borrowed in
connection with a short sale will be secured by cash or liquid securities
deposited as collateral with the broker. In addition, the Portfolio will place
in a segregated account with its custodian or a qualified

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subcustodian an amount of cash or liquid securities equal to the difference, if
any, between (i) the market value of the securities sold at the time they were
sold short and (ii) any cash or liquid securities deposited as collateral with
the broker in connection with the short sale (not including the proceeds of the
short sale). Until it replaces the borrowed securities, the Portfolio will
maintain the segregated account daily at a level so that (a) the amount
deposited in the account plus the amount deposited with the broker (not
including the proceeds from the short sale) will equal the current market value
of the securities sold short and (b) the amount deposited in the account plus
the amount deposited with the broker (not including the proceeds of the short
sale) will not be less than the market value of the securities at the time they
were sold short.

Short Sales "Against the Box". Each Portfolio may enter into short sales
"against the box." Not more than 10% of a Portfolio's net assets (taken at
current value) may be held as collateral for such sales at any one time. In a
short sale, a Portfolio sells a borrowed security and has a corresponding
obligation to the lender to return the identical security. The seller does not
immediately deliver the securities sold and is said to have a short position in
those securities until delivery occurs. While a short sale is made by selling a
security a Portfolio does not own, a short sale is "against the box" to the
extent that a Portfolio contemporaneously owns or has the right to obtain, at no
added cost, securities identical to those sold short. If the Portfolio engages
in a short sale, the collateral for the short position will be segregated by the
Portfolio's custodian or qualified sub-custodian. While the short sale is open,
the Portfolio will continue to segregate an amount of securities equal in kind
and amount to the securities sold short or securities convertible into or
exchangeable for such equivalent securities. These securities constitute the
Portfolio's long position.

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

If a Portfolio effects a short sale of securities at a time when it has
an unrealized gain on the securities, it may be required to recognize that gain
as if it had actually sold the securities (as a "constructive sale") on the date
it effects the short sale. However, such constructive sale treatment may not
apply if the Portfolio closes out the short sale with securities other than the
appreciated securities held at the time of the short sale and if certain other
conditions are satisfied. Uncertainty regarding the tax consequences of
effecting short sales may limit the extent to which a Portfolio may effect short
sales.

Reverse Repurchase Agreements and Dollar Rolls. Each Portfolio may enter
into reverse repurchase agreements with member banks of the Federal Reserve
System and certain non-bank dealers. Reverse repurchase agreements involve the
sale of securities held by

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a Portfolio pursuant to its agreement to repurchase them at a mutually agreed
upon date, price and rate of interest. At the time the Portfolio enters into a
reverse repurchase agreement, it will segregate cash or liquid securities having
a value not less than the repurchase price (including accrued interest). The
segregated assets will be marked-to-market daily and additional assets will be
segregated on any day in which the assets fall below the repurchase price (plus
accrued interest). The Portfolio's liquidity and ability to manage its assets
might be affected when it sets aside cash or portfolio securities to cover such
commitments. Reverse repurchase agreements involve the risk that the market
value of the securities retained in lieu of sale may decline below the price of
the securities the Portfolio has sold but is obligated to repurchase. In the
event the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, such buyer or its trustee or receiver may
receive an extension of time to determine whether to enforce the Portfolio's
obligation to repurchase the securities, and the Portfolio's use of the proceeds
of the reverse repurchase agreement may effectively be restricted pending such
decision.

The Portfolios also may enter into "dollar rolls," in which the Portfolio
sells fixed-income securities for delivery in the current month and
simultaneously contracts to repurchase similar but not identical (same type,
coupon and maturity) securities on a specified future date. During the roll
period, the Portfolio would forego principal and interest paid on such
securities. The Portfolio would be compensated by the difference between the
current sales price and the forward price for the future purchase, as well as by
the interest earned on the cash proceeds of the initial sale. At the time the
Portfolio enters into a dollar roll transaction, it will segregate with an
approved custodian cash or liquid securities having a value not less than the
repurchase price (including accrued interest) and will subsequently monitor the
segregated assets to ensure that their value is maintained. Reverse repurchase
agreements and dollar rolls that are accounted for as financings are considered
to be borrowings under the 1940 Act.

Warrants. Each Portfolio may invest up to 10% of net assets (15% of its
total assets in the case of the Growth & Income Portfolio) in warrants. Warrants
are securities that give the holder the right, but not the obligation to
purchase equity issues of the company issuing the warrants, or a related
company, at a fixed price either on a date certain or during a set period. A
Portfolio may invest in warrants to purchase newly created equity securities
consisting of common and preferred stock. The equity security underlying a
warrant is authorized at the time the warrant is issued or is issued together
with the warrant.

Investing in warrants can provide a greater potential for profit or loss
than an equivalent investment in the underlying security, and, thus, can be a
speculative investment. At the time of issue, the cost of a warrant is
substantially less than the cost of the underlying security itself, and price
movements in the underlying security are generally magnified in the price
movements of the warrant. This leveraging effect enables the investor to gain
exposure to the underlying security with a relatively low capital investment.
This leveraging increases an investor's risk, however, in the event of a decline
in the value of the underlying security and can result in a complete loss of the
amount invested in the warrant. In addition, the price of a warrant tends to be
more volatile than, and may not correlate exactly to, the price of the
underlying security. If the market price of the underlying security is below the
exercise price of the warrant on its expiration date, the warrant will generally
expire without value. The value of a warrant may decline because of a decline in
the value of the underlying security, the

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passage of time, changes in interest rates or in the dividend or other policies
of the company whose equity underlies the warrant or a change in the perception
as to the future price of the underlying security, or any combination thereof.
Warrants generally pay no dividends and confer no voting or other rights other
than to purchase the underlying security.

Non-Publicly Traded and Illiquid Securities. A Portfolio may not invest
more than 15% of its net assets in illiquid securities, including securities
that are illiquid by virtue of the absence of a readily available market,
repurchase agreements which have a maturity of longer than seven days, time
deposits maturing in more than seven day, certain Rule 144A Securities (as
defined below) and, with respect to the Post-Venture Capital Portfolio, Private
Funds (as defined below). Securities that have legal or contractual restrictions
on resale but have a readily available market are not considered illiquid for
purposes of this limitation. Repurchase agreements subject to demand are deemed
to have a maturity equal to the notice period.

Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the Securities Act are referred to as private placements or
restricted securities and are purchased directly from the issuer or in the
secondary market. Companies whose securities are not publicly traded may not be
subject to the disclosure and other investor protection requirements applicable
to companies whose securities are publicly traded. Limitations on resale may
have an adverse effect on the marketability of portfolio securities and a mutual
fund might be unable to dispose of restricted or other illiquid securities
promptly or at reasonable prices and might thereby experience difficulty
satisfying redemptions within seven days without borrowing. A mutual fund might
also have to register such restricted securities in order to dispose of them
resulting in additional expense and delay. Adverse market conditions could
impede such a public offering of securities.

In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.

Rule 144A Securities. Rule 144A under the Securities Act adopted by the
SEC allows for a broader institutional trading market for securities otherwise
subject to restriction on resale to the general public. Rule 144A establishes a
"safe harbor" from the registration requirements of the Securities Act for
resales of certain securities to qualified institutional buyers. CSAM
anticipates that the market for certain restricted securities such as
institutional commercial paper will expand further as a result of this
regulation and use of automated systems for the trading, clearance and
settlement of unregistered securities of domestic and foreign issuers, such as
the PORTAL System sponsored by the National Association of Securities Dealers,
Inc.

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An investment in Rule 144A Securities will be considered illiquid and
therefore subject to a Portfolio's limit on the purchase of illiquid securities
unless the Board or its delegates determines that the Rule 144A Securities are
liquid. In reaching liquidity decisions, the Board or its delegates may
consider, inter alia, the following factors: (i) the unregistered nature of the
security; (ii) the frequency of trades and quotes for the security; (iii) the
number of dealers wishing to purchase or sell the security and the number of
other potential purchasers; (iv) dealer undertakings to make a market in the
security and (v) the nature of the security and the nature of the marketplace
trades (e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of the transfer).

Investing in Rule 144A Securities could have the effect of increasing the
level of illiquidity in the Portfolios to the extent that qualified
institutional buyers are unavailable or uninterested in purchasing such
securities from the Portfolios. The Board may adopt guidelines and delegate to
CSAM the daily function of determining and monitoring the illiquidity of Rule
144A Securities, although the Board will retain ultimate responsibility for
liquidity determinations.

Borrowing. Each Portfolio may borrow up to 30% of its total assets for
temporary or emergency purposes, including to meet portfolio redemption requests
so as to permit the orderly disposition of portfolio securities or to facilitate
settlement transactions on portfolio securities. Investments (including
roll-overs) will not be made when borrowings exceed 5% of the Portfolio's net
assets. Although the principal of such borrowings will be fixed, the Portfolio's
assets may change in value during the time the borrowing is outstanding. Each
Portfolio expects that some of its borrowings may be made on a secured basis. In
such situations, either the custodian will segregate the pledged assets for the
benefit of the lender or arrangements will be made with a suitable
sub-custodian, which may include the lender.

Small Capitalization and Emerging Growth Companies; Unseasoned Issuers.
Investments in small- and medium- sized and emerging growth companies and
companies with continuous operations of less than three years ("unseasoned
issuers"), which may include foreign securities, involve considerations that are
not applicable to investing in securities of established, larger-capitalization
issuers, including reduced and less reliable information about issuers and
markets, less stringent financial disclosure requirements, illiquidity of
securities and markets, higher brokerage commissions and fees and greater market
risk in general. In addition, securities of these companies may involve greater
risks since these securities may have limited marketability and, thus, may be
more volatile.

"Special Situation" Companies. "Special situation companies" are involved
in an actual or prospective acquisition or consolidation; reorganization;
recapitalization; merger, liquidation or distribution of cash, securities or
other assets; a tender or exchange offer; a breakup or workout of a holding
company; or litigation which, if resolved favorably, may provide an attractive
investment opportunity. If the actual or prospective situation does not
materialize as anticipated, the market price of the securities of a "special
situation company" may decline significantly. Although investing in securities
of small- and medium-sized and emerging growth companies, unseasoned issuers or
issuers in "special situations" offers potential for above-average returns if
the companies are successful, the risk exists that the companies will not
succeed and the prices of the companies' shares could significantly decline in
value. Therefore, an investment in a Portfolio may involve a greater degree of
risk than an

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investment in other mutual funds that seek growth of capital or capital
appreciation by investing in better-known, larger companies.

General. The Portfolio may invest in securities of companies of any size,
whether traded on or off a national securities exchange. Portfolio holdings may
include emerging growth companies, which are small- or medium-sized companies
that have passed their start-up phase and that show positive earnings and
prospects for achieving profit and gain in a relatively short period of time.

In appropriate circumstances, such as when a direct investment by the
Portfolio in the securities of a particular country cannot be made or when the
securities of an investment company are more liquid than the underlying
portfolio securities, the Portfolio may, consistent with the provisions of the
1940 Act, invest in the securities of closed-end investment companies that
invest in foreign securities. As a shareholder in a closed-end investment
company, the Portfolio will bear its ratable share of the investment company's
expenses, including management fees, and will remain subject to payment of the
Portfolio's administration fees and other expenses with respect to assets so
invested.

Private Funds. (Post-Venture Capital Portfolio) Up to 10% of the
Portfolio's assets may be invested in United States or foreign private limited
partnerships or other investment funds ("Private Funds") that themselves invest
in equity or debt securities of (a) companies in the venture capital or
post-venture capital stages of development or (b) companies engaged in special
situations or changes in corporate control, including buyouts. In selecting
Private Funds for investment, Abbott Capital Management, LLC, the Portfolio's
sub-investment adviser with respect to Private Funds ("Abbott"), attempts to
invest in a mix of Private Funds that will provide an above average internal
rate of return (i.e., the discount rate at which the present value of an
investment's future cash inflows (dividend income and capital gains) are equal
to the cost of the investment). CSAM believes that the Portfolio's investments
in Private Funds offer individual investors a unique opportunity to participate
in venture capital and other private investment funds, providing access to
investment opportunities typically available only to large institutions and
accredited investors. Although investments in Private Funds offer the
opportunity for significant capital gains, these investments involve a high
degree of business and financial risk that can result in substantial losses in
the portion of the Post-Venture Capital Portfolio's portfolio invested in these
investments. Among these are the risks associated with investment in companies
in an early stage of development or with little or no operating history,
companies operating at a loss or with substantial variation in operation results
from period to period, companies with the need for substantial additional
capital to support expansion or to maintain a competitive position, or companies
with significant financial leverage. Such companies may also face intense
competition from others including those with greater financial resources or more
extensive development, manufacturing, distribution or other attributes, over
which the Portfolio will have no control.

Interests in the Private Funds in which the Post-Venture Capital
Portfolio may invest will be subject to substantial restrictions on transfer
and, in some instances, may be non-transferable for a period of years. Private
Funds may participate in only a limited number of investments and, as a
consequence, the return of a particular Private Fund may be substantially
adversely affected by the unfavorable performance of even a single investment.
Certain of the Private Funds in which the Portfolio may invest may pay their
investment managers a fee

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based on the performance of the Private Fund, which may create an incentive for
the manager to make investments that are riskier or more speculative than would
be the case if the manager was paid a fixed fee. Private Funds are not
registered under the 1940 Act and, consequently, are not subject to the
restrictions on affiliated transactions and other protections applicable to
regulated investment companies. The valuation of companies held by Private
Funds, the securities of which are generally unlisted and illiquid, may be very
difficult and will often depend on the subjective valuation of the managers of
the Private Funds, which may prove to be inaccurate. Inaccurate valuations of a
Private Fund's portfolio holdings may affect the Portfolio's net asset value
calculations. Private Funds in which the Portfolio invests will not borrow to
increase the amount of assets available for investment or otherwise engage in
leverage. Debt securities held by a Private Fund will tend to be rated below
investment grade and may be rated as low as C by Moody's or D by S&P. Securities
in these rating categories are in payment default or have extremely poor
prospects of attaining any investment standing. The Portfolio may also hold
non-publicly traded equity securities of companies in the venture and
post-venture stages of development, such as those of closely held companies or
private placements of public companies. The portion of the Portfolio's assets
invested in these non-publicly traded securities will vary over time depending
on investment opportunities and other factors. The Portfolio's illiquid assets,
including interests in Private Funds and other illiquid non-publicly traded
securities, may not exceed 15% of the Portfolio's net assets.

CSAM believes that venture capital participation in a company's capital
structure can lead to revenue/earnings growth rates above those of older, public
companies such as those in the Dow Jones Industrial Average, the Fortune 500 or
the Morgan Stanley Capital International Europe, Australasia, Far East ("EAFE")
Index. Venture capitalists finance start-up companies, companies in the early
stages of developing new products or services and companies undergoing a
restructuring or recapitalization, since these companies may not have access to
conventional forms of financing (such as bank loans or public issuances of
stock). Venture capitalists may hold substantial positions in companies that may
have been acquired at prices significantly below the initial public offering
price. This may create a potential adverse impact in the short-term on the
market price of a company's stock due to sales in the open market by a venture
capitalist or others who acquired the stock at lower prices prior to the
company's IPO. CSAM will consider the impact of such sales in selecting
post-venture capital investments. Venture capitalists may be individuals or
funds organized by venture capitalists which are typically offered only to large
institutions, such as pension funds and endowments, and certain accredited
investors. Outside of the United States, venture capitalists may also consist of
merchant banks and other banking institutions that provide venture capital
financing in a manner similar to U.S. venture capitalists. Venture capital
participation in a company is often reduced when the company engages in an IPO
of its securities or when it is involved in a merger, tender offer or
acquisition.

REITs. Each Portfolio may invest in real estate investment trusts
("REITs"), which are pooled investment vehicles that invest primarily in
income-producing real estate or real estate related loans or interests. Like
regulated investment companies such as the Trust, REITs are not taxed on income
distributed to shareholders provided they comply with several requirements of
the Internal Revenue Code of 1986, amended (the "Code"). By investing in a REIT,
the Portfolio will indirectly bear its proportionate share of any expenses paid
by the REIT in addition to the expenses of the Portfolio.

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Investing in REITs involves certain risks. A REIT may be affected by
changes in the value of the underlying property owned by such REIT or by the
quality of any credit extended by the REIT. REITs are dependent on management
skills, are not diversified (except to the extent the Code requires), and are
subject to the risks of financing projects. REITs are subject to heavy cash flow
dependency, default by borrowers, self-liquidation, the possibilities of failing
to qualify for the exemption from tax for distributed income under the Code and
failing to maintain their exemptions from the 1940 Act. REITs are also subject
to interest rate risks.

Non-Diversified Status (Emerging Markets and Small Company Growth
Portfolios). These Portfolios are classified as non-diversified within the
meaning of the 1940 Act, which means that each Portfolio is not limited by such
Act in the proportion of its assets that it may invest in securities of a single
issuer. As a non-diversified portfolio, each Portfolio may invest a greater
proportion of its assets in the obligations of a smaller number of issuers and,
as a result, may be subject to greater risk with respect to portfolio
securities. Each Portfolio's investments will be limited, however, in order to
qualify as a "regulated investment company" for purposes of the Code. To
qualify, the Portfolio will comply with certain requirements, including limiting
its investments so that at the close of each quarter of the taxable year (i) not
more than 25% of the market value of its total assets will be invested in the
securities of a single issuer or of two or more issuers of which the Portfolio
has 20% or more voting control and which are in similar or related trades or
businesses, and (ii) with respect to 50% of the market value of its total
assets, not more than 5% of the market value of its total assets will be
invested in the securities of a single issuer and the Portfolio will not own
more than 10% of the outstanding voting securities of a single issuer.

INVESTMENT RESTRICTIONS

The investment limitations numbered 1 through 10 may not be changed
without the affirmative vote of the holders of a majority of a Portfolio's
outstanding shares. Such majority is defined as the lesser of (i) 67% or more of
the shares present at the meeting, if the holders of more than 50% of the
outstanding shares of the Portfolio are present or represented by proxy, or (ii)
more than 50% of the outstanding shares. Investment limitations 11 through 15
may be changed by a vote of the Board at any time. If a percentage limitation
(other than the percentage limitation set forth in investment restriction No. 1
below) is adhered to at the time of an investment, a later increase or decrease
in the percentage of assets resulting from a change in the values of portfolio
securities or in the amount of the Portfolio's assets will not constitute a
violation of such restriction.

A Portfolio may not:

1. Borrow money except that the Portfolio may (a) borrow from banks
for temporary or emergency purposes and (b) enter into reverse repurchase
agreements; provided that reverse repurchase agreements, dollar roll
transactions that are accounted for as financings and any other transactions
constituting borrowing by the Portfolio may not exceed 30% of the value of the
Portfolio's total assets at the time of such borrowing. For purposes of this
restriction, short sales, the entry into currency transactions, options, futures
contracts, options on futures contracts, forward commitment transactions and
dollar roll transactions that are not

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accounted for as financings (and the segregation of assets in connection with
any of the foregoing) shall not constitute borrowing.

2. Purchase any securities which would cause 25% or more of the value
of the Portfolio's total assets at the time of purchase to be invested in the
securities of issuers conducting their principal business activities in the same
industry; provided that there shall be no limit on the purchase of U.S.
Government Securities.

3. For the Growth & Income, International Equity and Post-Venture
Capital Portfolios only, purchase the securities of any issuer, if as a result
more than 5% of the value of the Portfolio's total assets would be invested in
the securities of such issuer, except that this 5% limitation does not apply to
U.S. Government Securities and except that up to 25% of the value of the
Portfolio's total assets may be invested without regard to this 5% limitation.

4. Make loans, except that the Portfolio may purchase or hold
fixed-income securities, including loan participations, assignments and
structured securities, lend portfolio securities and enter into repurchase
agreements.

5. Underwrite any securities issued by others except to the extent
that the investment in restricted securities and the sale of securities in
accordance with the Portfolio's investment objective, policies and limitations
may be deemed to be underwriting.

6. Purchase or sell real estate or invest in oil, gas or mineral
exploration or development programs, except that the Portfolio may invest in (a)
securities secured by real estate, mortgages or interests therein (and, in the
case of the Growth & Income Portfolio, securities issued by companies which
invest in real estate or interests therein) and (b) securities of companies that
invest in or sponsor oil, gas or mineral exploration or development programs.

7. For the Emerging Markets, Growth & Income, International Equity
and Small Company Growth Portfolios only, make short sales of securities or
maintain a short position, except that the Portfolio may maintain short
positions in forward currency contracts, options, futures contracts and options
on futures contracts and make short sales "against the box".

8. Purchase securities on margin, except that the Portfolio may
obtain any short-term credits necessary for the clearance of purchases and sales
of securities. For purposes of this restriction, the deposit or payment of
initial or variation margin in connection with transactions in currencies,
options, futures contracts or related options will not be deemed to be a
purchase of securities on margin.

9. Invest in commodities, except that the Portfolio may purchase and
sell futures contracts, including those relating to securities, currencies and
indexes, and options on futures contracts, securities, currencies or indexes,
and purchase and sell currencies on a forward commitment or delayed-delivery
basis and, with respect to the Emerging Markets Portfolio, enter into stand-by
commitments.

10. Issue any senior security except as permitted in these investment
limitations.

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11. Purchase securities of other investment companies except in
connection with a merger, consolidation, acquisition, reorganization or offer of
exchange, or as otherwise permitted under the 1940 Act.

12. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to the
deposit of assets in escrow and in connection with the writing of covered put
and call options and purchase of securities on a forward commitment or
delayed-delivery basis and collateral and initial or variation margin
arrangements with respect to currency transactions, options, futures contracts,
and options on futures contracts.

13. Invest more than 15% of the Portfolio's net assets in securities
which may be illiquid because of legal or contractual restrictions on resale or
securities for which there are no readily available market quotations. For
purposes of this limitation, repurchase agreements with maturities greater than
seven days shall be considered illiquid securities.

14. Invest in warrants (other than warrants acquired by the Portfolio
as part of a unit or attached to securities at the time of purchase) if, as a
result, the investments (valued at the lower of cost or market) would exceed 10%
of the value of the Portfolio's net assets (in the case of the Growth & Income
Portfolio, 15% of the value of that Portfolio's total assets).

15. Make additional investments (including roll-overs) if the
Portfolio's borrowings exceed 5% of its net assets.

PORTFOLIO VALUATION

The following is a description of the procedures used by each Portfolio
in valuing its assets.

Securities listed on a U.S. securities exchange (including securities
traded through the Nasdaq National Market System) or foreign securities exchange
or traded in an OTC market will be valued at the most recent sale as of the time
the valuation is made or, in the absence of sales, at the mean between the
highest bid and lowest asked quotations. If there are no such quotations, the
value of the securities will be taken to be the most recent bid quotation on the
exchange or market. Options contracts will be valued similarly. Futures
contracts will be valued at the most recent settlement price at the time of
valuation. A security which is listed or traded on more than one exchange is
valued at the quotation on the exchange determined to be the primary market for
such security. The valuation of short sales of securities, which are not traded
on a national exchange, will be at the mean of bid and asked prices. Amortized
cost involves valuing a portfolio instrument at its initial cost and thereafter
assuming a constant amortization to maturity of an discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the instrument. Short-term obligations with maturities of 60 days or less are
valued at amortized cost, which constitutes fair value as determined by the
Board. Amortized cost involves valuing a portfolio instrument at its initial
cost and thereafter assuming a constant amortization to maturity of any discount
or premium, regardless of the impact of fluctuating interest rates on the market
value of the instrument. The amortized cost method of valuation may also be used
with respect to other debt obligations with 60 days or less remaining to
maturity. Notwithstanding the foregoing, in

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determining the market value of portfolio investments, the Portfolio may employ
outside organizations (each, a "Pricing Service") which may use a matrix formula
or other objective method that takes into consideration market indexes,
matrices, yield curves and other specific adjustments. The procedures of Pricing
Services are reviewed periodically by the officers of the Trust under the
general supervision and responsibility of the Board, which may replace a Pricing
Service at any time. Securities, options, futures contracts and other assets for
which market quotations are not available will be valued at their fair value as
determined in good faith pursuant to consistently applied procedures established
by the Board. In addition, the Board or its delegates may value a security at
fair value if it determines that such security's value determined by the
methodology set forth above does not reflect its fair value.

Private Funds (Post-Venture Capital Portfolio). Private Funds are
initially valued at cost (i.e., the actual dollar amount invested). Thereafter,
Private Funds are valued at the prices set forth in periodic reports received by
Abbott from the Private Funds. These reports are generally made quarterly.
Neither Abbott nor the Portfolio will monitor interim changes in the value of
portfolio holdings of the Private Funds. As a result, these changes will not be
taken into account by the Portfolio in calculating its net asset value.

PORTFOLIO TRANSACTIONS

CSAM is responsible for establishing, reviewing and, where necessary,
modifying each Portfolio's investment program to achieve its investment
objective. Purchases and sales of newly issued portfolio securities are usually
principal transactions without brokerage commissions effected directly with the
issuer or with an underwriter acting as principal. Private Funds may be
purchased directly from the issuer or may involve a broker or placement agent.
Other purchases and sales may be effected on a securities exchange or
over-the-counter, depending on where it appears that the best price or execution
will be obtained. The purchase price paid by a Portfolio to underwriters of
newly issued securities usually includes a concession paid by the issuer to the
underwriter, and purchases of securities from dealers, acting as either
principals or agents in the after market, are normally executed at a price
between the bid and asked price, which includes a dealer's mark-up or mark-down.
Transactions on U.S. stock exchanges and some foreign stock exchanges involve
the payment of negotiated brokerage commissions. On exchanges on which
commissions are negotiated, the cost of transactions may vary among different
brokers. On most foreign exchanges, commissions are generally fixed. Purchases
of Private Funds through a broker or placement

33
<PAGE> 87

agent will involve a commission or other fee. There is generally no stated
commission in the case of securities traded in domestic or foreign OTC markets,
but the price of securities traded in OTC markets includes an undisclosed
commission or mark-up. U.S. Government Securities are generally purchased from
underwriters or dealers, although certain newly issued U.S. Government
Securities may be purchased directly from the U.S. Treasury or from the issuing
agency or instrumentality.

Except for the Post-Venture Capital Portfolio's investments in Private
Funds, which will be managed by Abbott, CSAM will select specific portfolio
investments and effect transactions for each Portfolio and in doing so seeks to
obtain the overall best execution of portfolio transactions. In evaluating
prices and executions, CSAM will consider the factors it deems relevant, which
may include the breadth of the market in the security, the price of the
security, the financial condition and execution capability of a broker or dealer
and the reasonableness of the commission, if any, for the specific transaction
and on a continuing basis. CSAM may, in its discretion, effect transactions in
portfolio securities with dealers who provide brokerage and research services
(as those terms are defined in Section 28(e) of the Securities Exchange Act of
1934) to a Portfolio and/or other accounts over which CSAM exercises investment
discretion. CSAM may place portfolio transactions with a broker or dealer with
whom it has negotiated a commission that is in excess of the commission another
broker or dealer would have charged for effecting the transaction if CSAM
determines in good faith that such amount of commission was reasonable in
relation to the value of such brokerage and research services provided by such
broker or dealer viewed in terms of either that particular transaction or of the
overall responsibilities of CSAM. Research and other services received due to
brokerage business on behalf of the Portfolios may be useful to CSAM in serving
its other clients and, conversely, research or other services obtained by the
placement of business of other clients may be useful to CSAM in carrying out its
obligations to the Portfolios. Research may include furnishing advice, either
directly or through publications or writings, as to the value of securities, the
advisability of purchasing or selling specific securities and the availability
of securities or purchasers or sellers of securities; furnishing seminars,
information, analyses and reports concerning issuers, industries, securities,
trading markets and methods, legislative developments, changes in accounting
practices, economic factors and trends and portfolio strategy; access to
research analysts, corporate management personnel, industry experts, economists
and government officials; comparative performance evaluation and technical
measurement services and quotation services; and products and other services
(such as third party publications, reports and analyses, and computer and
electronic access, equipment, software, information and accessories that
deliver, process or otherwise utilize information, including the research
described above) that assist CSAM in carrying out its responsibilities. For the
fiscal year ended December 31, 1998, $23,991, $1,839,536, $112,145 and $704,479
of total brokerage commissions was paid by the Growth & Income, International
Equity, Post-Venture Capital and Small Company Growth Portfolios, respectively,
to brokers and dealers who provided such research and other services. Research
received from brokers or dealers is supplemental to CSAM's own research program.
The fees to CSAM under its advisory agreements with each Portfolio are not
reduced by reason of its receiving any brokerage and research services.

34
<PAGE> 88

The following table details amounts paid by each Portfolio in commissions
to broker-dealers for execution of portfolio transactions during the indicated
fiscal years ended December 31.

<TABLE>
<CAPTION>
Portfolio Year Commissions
- --------- ---- -----------

<S> <C> <C>
Emerging Markets 1998 $19,212

Growth & Income 1997 $2,412
1998 $23,991

International Equity 1996 $1,056,276
1997 $1,594,509
1998 $1,839,536

Post-Venture Capital 1996 $5,237
1997 $88,821
1998 $112,145

Small Company Growth 1996 $386,387
1997 $883,377
1998 $794,479
</TABLE>

The table below shows the amount each Portfolio held, as of December 31,
1998, with Merrill Lynch & Co., one of the regular broker-dealers of these
Portfolios:

<TABLE>
<S> <C>
Emerging Markets $351,000

Growth & Income $1,524,000

International Equity $15,172,000

Post-Venture Capital $6,253,000

Small Company Growth $8,394,000
</TABLE>

Investment decisions for each Portfolio concerning specific portfolio
securities are made independently from those for other clients advised by CSAM
or Abbott, as relevant. Such other investment clients may invest in the same
securities as a Portfolio. When purchases or sales of the same security are made
at substantially the same time on behalf of such other clients, transactions are
averaged as to price and available investments allocated as to amount, in a
manner which CSAM or Abbott, as the case may be, believes to be equitable to
each client, including the Portfolios. In some instances, this investment
procedure may adversely affect the price paid or received by a Portfolio or the
size of the position obtained or sold for a Portfolio. To the extent permitted
by law, securities to be sold or purchased for a Portfolio may be aggregated
with those to be sold or purchased for such other investment clients in order to
obtain best execution.

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<PAGE> 89

In no instance will portfolio securities be purchased from or sold to
CSAM, Abbott or Credit Suisse Asset Management Securities, Inc. ("CSAMSI) or
Credit Suisse First Boston ("CS First Boston") or any affiliated person of such
companies.

Transactions for the Portfolios may be effected on foreign securities
exchanges. In transactions for securities not actively traded on a foreign
securities exchange, the Portfolios will deal directly with the dealers who make
a market in the securities involved, except in those circumstances where better
prices and execution are available elsewhere. Such dealers usually are acting as
principal for their own account. On occasion, securities may be purchased
directly from the issuer. Such portfolio securities are generally traded on a
net basis and do not normally involve brokerage commissions. Securities firms
may receive brokerage commissions on certain portfolio transactions, including
options, futures and options on futures transactions and the purchase and sale
of underlying securities upon exercise of options.

Each Portfolio may participate, if and when practicable, in bidding for
the purchase of securities for the Portfolio's portfolio directly from an issuer
in order to take advantage of the lower purchase price available to members of
such a group. A Portfolio will engage in this practice, however, only when CSAM,
in its sole discretion, believes such practice to be otherwise in the
Portfolio's interest.

PORTFOLIO TURNOVER

The Portfolios do not intend to seek profits through short-term trading,
but the rate of turnover will not be a limiting factor when a Portfolio deems it
desirable to sell or purchase securities. A Portfolio's portfolio turnover rate
is calculated by dividing the lesser of purchases or sales of its portfolio
securities for the year by the monthly average value of the portfolio
securities. Securities with remaining maturities of one year or less at the date
of acquisition are excluded from the calculation. The portfolio turnover rate of
73.18% for the Post-Venture Capital Portfolio for the year ended December 31,
1998 was attributable to sales of securities that were necessary to accommodate
unanticipated redemption orders.

Certain practices that may be employed by a Portfolio could result in
high portfolio turnover. For example, options on securities may be sold in
anticipation of a decline in the price of the underlying security (market
decline) or purchased in anticipation of a rise in the price of the underlying
security (market rise) and later sold. To the extent that its portfolio is
traded for the short-term, the Portfolio will be engaged essentially in trading
activities based on short-term considerations affecting the value of an issuer's
stock instead of long-term investments based on fundamental valuation of
securities. Because of this policy, portfolio securities may be sold without
regard to the length of time for which they have been held. Consequently, the
annual portfolio turnover rate of a Portfolio may be higher than mutual funds
having similar objectives that do not utilize these strategies.

It is not possible to predict the Portfolios' portfolio turnover rates.
High portfolio turnover rates (100% or more) may result in dealer markups or
underwriting commissions as well as other transaction costs, including
correspondingly higher brokerage commissions. In addition, short-term gains
realized from portfolio turnover may be taxable to shareholders as ordinary
income.

36
<PAGE> 90

MANAGEMENT OF THE TRUST

Officers and Board of Trustees

The business and affairs of the Trust are managed by the Board of
Trustees in accordance with the laws of the Commonwealth of Massachusetts. The
Board elects officers who are responsible for the day-to-day operations of the
Trust and who execute policies authorized by the Board. Under the Trust's
Declaration of Trust, the Board may classify or reclassify any unissued shares
of the Trust into one or more additional classes by setting or changing in any
one or more respects their relative rights, voting powers, restrictions,
limitations as to dividends, qualifications and terms and conditions of
redemption. The Board may similarly classify or reclassify any class of its
shares into one or more series and, without shareholder approval, may increase
the number of authorized shares of the Trust.

The names (and ages) of the Trust's Trustees and officers, their
addresses, present positions and principal occupations during the past five
years and other affiliations are set forth below.

<TABLE>
<S> <C>
Richard H. Francis (67) Trustee
40 Grosvenor Road Currently retired; Executive Vice President and Chief Financial Officer of Pan Am
Short Hills, New Jersey 07078 Corporation and Pan American World Airways, Inc. from 1988 to 1991; Director of
The Infinity Mutual Funds, BISYS Group Incorporated; Director/Trustee of other
Warburg Pincus Funds and other CSAM-advised investment companies.

Jack W. Fritz (72) Trustee
2425 North Fish Creek Road Private investor; Consultant and Director of Fritz Broadcasting, Inc. and Fritz
P.O. Box 483 Communications (developers and operators of radio stations); Director of Advo,
Wilson, Wyoming 83014 Inc. (direct mail advertising); Director/Trustee of other Warburg Pincus Funds.

Jeffrey E. Garten (52) Trustee
Box 208200 Dean of Yale School of Management and William S. Beinecke Professor in the
New Haven, Connecticut 06520-8200 Practice of International Trade and Finance; Undersecretary of Commerce for
International Trade from November 1993 to October 1995; Professor at Columbia
University from September 1992 to November 1993; Director/Trustee of other
Warburg Pincus Funds.
</TABLE>

37
<PAGE> 91

<TABLE>
<S> <C>
James S. Pasman, Jr. (68) Trustee
29 The Trillium Currently retired; President and Chief Operating Officer of National InterGroup,
Pittsburgh, Pennsylvania 15238 Inc. from April 1989 to March 1991; Chairman of Permian Oil Co. from April 1989
to March 1991; Director of Education Management Corp., Tyco International Ltd.;
Trustee, BT Insurance Funds Trust; Director/Trustee of other Warburg Pincus
Funds and other CSAM-advised investment companies.

William W. Priest* (57) Chairman of the Board
153 East 53rd Street Chairman- Management Committee, Chief Executive Officer and Managing Director of
New York, New York 10022 CSAM (U.S.) since 1990; Director of TIG Holdings, Inc.; Director/Trustee of other
Warburg Pincus Funds and other CSAM-advised investment companies.

Steven N. Rappaport (50) Trustee
c/o Loanet, Inc. President of Loanet, Inc. since 1997; Executive Vice President of Loanet, Inc.
153 East 53rd Street, from 1994 to 1997; Director, President, North American Operations, and former
Suite 5500 Executive Vice President from 1992 to 1993 of Worldwide Operations of Metallurg
New York, New York 10022 Inc.; Executive Vice President, Telerate, Inc. from 1987 to 1992; Partner in the
law firm of Hartman & Craven until 1987; Director/Trustee of other Warburg Pincus
Funds and other CSAM-advised investment companies.

Arnold M. Reichman* (51) Vice Chairman of the Board
466 Lexington Avenue Managing Director and Chief Operating Officer of CSAM; Associated with CSAM
New York, New York 10017-3147 since CSAM acquired the Portfolios' predecessor adviser in July 1999; with the
predecessor adviser since 1984; Officer of CSAMSI; Director of The RBB Fund Inc.;
Director/Trustee of other Warburg Pincus Funds.
</TABLE>

- ------------------
* Indicates a Director/Trustee who is an "interested person" of the Fund as
defined in the 1940 Act.

38
<PAGE> 92

<TABLE>
<S> <C>
Alexander B. Trowbridge (69) Trustee
1317 F Street, N.W., 5th Floor Currently retired; President of Trowbridge Partners, Inc. (business consulting)
Washington, DC 20004 from January 1990 to November 1996; Director or Trustee of New England Mutual
Life Insurance Co., ICOS Corporation (biopharmaceuticals), IRI International
(energy services), The Rouse Company (real estate development), Harris Corp.
(electronics and communications equipment), The Gillette Co. (personal care
products) and Sunoco, Inc. (petroleum refining and marketing); Director/Trustee
of other Warburg Pincus Funds.

Eugene L. Podsiadlo (42) President
466 Lexington Avenue Managing Director of CSAM; Associated with CSAM since CSAM acquired the
New York, New York 10017-3147 Portfolios' predecessor adviser in July 1999; with the predecessor adviser since
1991; Vice President of Citibank,N.A. from 1987 to 1991; Officer of CSAMSI and
of other Warburg Pincus Funds.

Hal Liebes, Esq. (34) Vice President and Secretary
153 East 53rd Street Director and General Counsel of CSAM; Associated with CSAM since 1995;
New York, New York 10022 Associated with CS First Boston Investment Management from 1994 to 1995;
Associated with Division of Enforcement, U.S. Securities and Exchange Commission
from 1991 to 1994; Officer of CSAMSI and of other Warburg Pincus Funds.

Michael A. Pignataro (39) Treasurer and Chief Financial Officer
153 East 53rd Street Vice President and Director of Fund Administration of CSAM; Associated with CSAM
New York, New York 10022 since 1986; Officer of other Warburg Pincus Funds.
</TABLE>

39
<PAGE> 93

<TABLE>
<S> <C>
Janna Manes (31) Assistant Secretary
466 Lexington Avenue Vice President and Legal Counsel of CSAM; Associated with CSAM since CSAM
New York, New York 10017-3147 acquired the Funds' predecessor adviser in July 1999; with the predecessor
adviser since 1996; Associated with the law firm of Willkie Farr & Gallagher from
1993 to 1996; Officer of other Warburg Pincus Funds.

Stuart J. Cohen, Esq. (30) Assistant Secretary
466 Lexington Avenue Vice President and Legal Counsel of CSAM; Associated with CSAM since CSAM
New York, New York 10017-3147 acquired the Portfolios' predecessor adviser in July 1999; with the predecessor
adviser since 1997; Associated with the law firm of Gordon Altman Butowsky
Weitzen Shalov & Wein from 1995 to 1997; Officer of other Warburg Pincus Funds.

Rocco A. DelGuercio (36) Assistant Treasurer
153 East 53rd Street Assistant Vice President and Administrative Officer of CSAM; Associated with CSAM
New York, New York 10022 since June 1996; Assistant Treasurer, Bankers Trust Corp. -- Fund Administration
from March 1994 to June 1996; Mutual Fund Accounting Supervisor, Dreyfus
Corporation from April 1987 to March 1994; Officer of other Warburg Pincus Funds.
</TABLE>

No employee of CSAM, PFPC Inc., the Trust's co-administrator ("PFPC"), or
any of their affiliates receives any compensation from the Trust for acting as
an officer or Trustee of the Trust. For each fund in the Warburg Pincus family
of funds, each Director/Trustee who is not a director, trustee, officer or
employee of CSAM, PFPC or any of their affiliates receives an annual fee of
$500, $1,000 or $2,000 per fund for Director/Trustee services provided, $250 for
each Board meeting attended and $250 for each Audit Committee meeting attended
($325 for the Chairman of the Audit Committee), in addition to reimbursement
for expenses incurred in connection with attendance at Board meetings.

40
<PAGE> 94

Trustees' Compensation
(for the fiscal year ended December 31, 1998)

<TABLE>
<CAPTION>
Total Compensation from
Total all Investment Companies
Compensation from in Warburg Pincus
Name of Trustee Trust Fund Complex*
- ----------------------------- --------------------------- ----------------------------
<S> <C> <C>
William W. Priest** None None
Arnold M. Reichman** None None
Richard N. Cooper*** $2,150 $56,600
Donald J. Donahue*** $475 $13,525
Richard H. Francis**** None None
Jack W. Fritz $2,400 $63,100
Jeffrey E. Garten**** $1,925 $49,325
Thomas A. Melfe*** $2,400 $60,700
James S. Pasman, Jr. **** None None
Steven N. Rappaport**** None None
Alexander B. Trowbridge $2,250 $64,000
</TABLE>

- --------------------------
* Each Trustee also serves as a Director or Trustee of 39 investment
companies in the Warburg Pincus family of funds.

*** Mr. Donahue resigned as Trustee of the Trust effective February 6, 1998.
Messrs. Cooper and Melfe resigned as Trustees of the Trust effective July
6, 1999.

**** Mr. Garten became a Trustee of the Trust effective February 6, 1998.
Messrs. Francis, Pasman and Rappaport became Trustees of the Trust
effective July 6, 1999.

As of March 30, 1999, no Trustees or officers of the Trust owned any of
the outstanding shares of the Portfolios.

Portfolio Managers

Emerging Markets Portfolio. Harold E. Sharon is Co-Portfolio Manager of
the Emerging Markets Portfolio and serves in similar positions with other
Warburg Pincus Funds. Mr. Sharon has been associated with CSAM since CSAM
acquired the Portfolios' predecessor adviser in July 1999 and joined the
predecessor adviser in 1998. Prior to that Mr. Sharon was an executive director
and portfolio manager at CIBC Oppenheimer from 1994 to 1998. Mr. Sharon was
previously a Vice President and Portfolio Manager at Warburg from 1990 to 1994.
Mr. Sharon earned a B.S. Degree with honors from the University of Rochester and
an M.S. degree in Management from the Sloan School of Management, M.I.T.

41
<PAGE> 95

Vincent J. McBride, Co-Portfolio Manager of the Emerging Markets
Portfolio, also manages other Warburg Pincus Funds. Mr. McBride has been
associated with CSAM since CSAM acquired the Portfolios' predecessor adviser in
July 1999 and joined the predecessor adviser in 1994. Prior to that Mr. McBride
was an international equity analyst at Smith Barney Inc. from 1993 to 1994 and
at General Electric Investment Corporation from 1992 to 1993. He was also a
portfolio manager/analyst at United Jersey Bank from 1989 to 1992 and a
portfolio manager at First Fidelity Bank from 1987 to 1989. Mr. McBride earned a
B.S. degree from the University of Delaware and an M.B.A. degree from Rutgers
University.

Morid Kamshad, Associate Portfolio Manager of the Emerging Markets
Portfolio, also manages other Warburg Pincus Funds. Mr. Kamshad has been
associated with CSAM since CSAM acquired the Portfolios' predecessor adviser in
July 1999 and joined the predecessor adviser in 1997. Prior to that Mr. Kamshad
was a senior investment manager at Pictet Asset Management from 1995 to 1997.
From 1994 to 1995 he was an investment analyst at HSBC Asset Management, and
from 1989 to 1993, he was a business development manager at Air Products and
Chemicals-France. Mr. Kamshad received his M.B.A. from I.E.S.E. in Barcelona and
his B.S. from the University of Colorado.

Jun Sung Kim, Associate Portfolio Manager of the Emerging Markets
Portfolio, also manages other Warburg Pincus Funds. Mr. Kim has been associated
with CSAM since CSAM acquired the Portfolios' predecessor adviser in July 1999
and joined the predecessor adviser in 1997. Prior to that Mr. Kim was an
investment manager with Asset Korea Ltd., Seoul from 1994 to 1995. He was also
an assistant investment manager with Koeneman Capital Management, Singapore from
1992 to 1994.

Federico D. Laffan, Associate Portfolio Manager of the Emerging Markets
Portfolio, also manages other Warburg Pincus Funds. Mr. Laffan has been
associated with CSAM since CSAM acquired the Portfolios' predecessor adviser in
July 1999 and joined the predecessor adviser in 1997. Prior to that Mr. Laffan
was a senior manager and partner with Green Cay Asset Management from 1996 to
1997 and a senior portfolio manager and director with Foreign & Colonial
Emerging Markets, London from 1990 to 1996.

International Equity Portfolio. Mr. Sharon and Mr. McBride, described
above, are also Co-Portfolio Managers of the International Equity Portfolio (see
biographies above).

P. Nicholas Edwards, Co-Portfolio Manager of the International Equity
Portfolio, also manages other Warburg Pincus Funds. Mr. Edwards has been
associated with CSAM since CSAM acquired the Portfolios' predecessor adviser in
July 1999 and joined the predecessor adviser in 1995. Prior to that Mr. Edwards
was a director at Jardine Fleming Investment Advisers, Tokyo from 1984 to 1995.
Mr. Edwards earned M.A. degrees from Oxford University and Hiroshima University
in Japan.

Harold W. Ehrlich, Co-Portfolio Manager of the International Equity
Portfolio, also manages other Warburg Pincus Funds. Mr. Ehrlich has been
associated with CSAM since CSAM acquired the Portfolios' predecessor adviser in
July 1999 and joined the predecessor adviser in 1995. Prior to that Mr. Ehrlich
was a senior vice president, portfolio manager and analyst at Templeton
Investment Counsel Inc. from 1987 to 1995. He was a research analyst

42
<PAGE> 96

and assistant portfolio manager at Fundamental Management Corporation from 1985
to 1986, and a research analyst at First Equity Corporation of Florida from 1983
to 1985. Mr. Ehrlich earned a B.S.B.A. degree from University of Florida and
earned his Chartered Financial Analyst designation in 1990.

Nancy Nierman, Associate Portfolio Manager of the International Equity
Portfolio, also manages other Warburg Pincus Funds. Ms. Nierman has been
associated with CSAM since CSAM acquired the Portfolios' predecessor adviser in
July 1999 and joined the predecessor adviser in 1996. Prior to that Ms. Nierman
was a vice president at Fiduciary Trust Company International from 1990 to 1996
and an international equity trader at TIAA-CREF from 1985 to 1990. She received
her B.B.A. degree from Barite College in 1985.

Growth & Income Portfolio. Brian S. Poser, Portfolio Manager of the
Growth & Income Portfolio, also manages other Warburg Pincus Funds. Mr. Posner
has been associated with CSAM since CSAM acquired the Portfolios' predecessor
adviser in July 1999 and joined the predecessor adviser in 1996. Prior to that
Mr. Poser was employed from 1987 to 1996 by Fidelity Investments, where, most
recently, he was the vice president and portfolio manager of the Fidelity
Equity-Income II Fund. Mr. Poser received an undergraduate degree from
Northwestern University and his M.B.A. in finance from the University of
Chicago.

Post-Venture Capital Portfolio. Elizabeth B. Dater is Co-Portfolio
Manager of the Post-Venture Capital Portfolio and manages other Warburg Pincus
Funds. Ms. Dater has been associated with CSAM since CSAM acquired the
Portfolios' predecessor adviser in July 1999 and joined the predecessor adviser
in 1978. Prior to that Ms. Dater was a vice president of Research at Fiduciary
Trust Company of New York and an institutional sales assistant at Lehman
Brothers. Ms. Dater has been a regular panelist on Maryland Public Television's
Wall Street Week with Louis Rukeyser since 1976. Ms. Dater earned a B.A. degree
from Boston University in Massachusetts.

Robert S. Janis is Co-Portfolio Manager of the Post-Venture Portfolio and
serves in similar positions with other Warburg Pincus Funds. Mr. Janis has been
associated with CSAM since CSAM acquired the Portfolios' predecessor adviser in
July 1999 and joined the predecessor adviser in 1994. Prior to that Mr. Janis
was a vice president and senior research analyst at U.S. Trust Company of New
York. He earned B.A. and M.B.A. degrees from the University of Pennsylvania.

Raymond L. Held and Thaddeus I. Gray, Investment Managers and Managing
Directors of Abbott, manage the Post-Venture Capital Portfolio's investments in
Private Funds. Abbott also acts as sub-investment adviser for other Warburg
Pincus Funds. Prior to co-founding a predecessor of Abbott in 1986, Mr. Held had
been an investment analyst and portfolio manager at Manufacturers Hanover
Investment Corporation since 1970, before which time he had been a security
analyst with Weis, Voisin, Cannon, Inc., L.M. Rosenthal & Co., Shearson, Hammill
& Co. and Standard & Poor's Corporation. Mr. Held earned an M.B.A. from New York
University, an M.A. from Columbia University and a B.A. from Queens College.

Prior to joining a predecessor of Abbott in 1989, Mr. Gray was an
assistant vice president at Commerzbank Capital Markets Corporation, where he
managed the area

43
<PAGE> 97

responsible for underwriting and distributing all new issues of securities.
Prior to this, he was an associate with Credit Commercial de France in Paris in
the Corporate Finance Department. Mr. Gray received his B.A. in History from the
University of Pennsylvania and his M.B.A. in Finance from New York University.
He is also a Chartered Financial Analyst.

Small Company Growth Portfolio. Ms. Dater is also Co-Portfolio Manager of
the Small Company Growth Portfolio (see biography above).

Stephen J. Lurito is Co-Portfolio Manager of the Small Company Growth
Portfolio and manages other Warburg Pincus Funds. Mr. Lurito has been associated
with CSAM since CSAM acquired the Portfolios' predecessor adviser in July 1999
and joined the predecessor adviser in 1987. Prior to that Mr. Lurito was a
research analyst at Sanford C. Bernstein & Company, Inc. Mr. Lurito earned a
B.A. degree from the University of Virginia and a M.B.A. from the University of
Pennsylvania.

Sammy Oh is Co-Portfolio Manager of the Small Company Growth Portfolio
and serves in similar positions with other Warburg Pincus Funds. Mr. Oh has been
associated with CSAM since CSAM acquired the Portfolios' predecessor adviser in
July 1999 and joined the predecessor adviser in 1997. Prior to that Mr. Oh was a
vice president at Bessemer Trust from 1995 to 1996 and a Vice President at
Forstmann-Leff from 1993 to 1995. Mr. Oh earned his A.B. from Stanford
University and his M.B.A. from Dartmouth College.

Investment Advisers and Co-Administrators

CSAM, located at 153 East 53rd Street, New York, New York 10022, serves
as investment adviser to each Portfolio. CSAM is an indirect wholly-owned U.S.
subsidiary of Credit Suisse Group ("Credit Suisse"). Credit Suisse is a global
financial services company, providing a comprehensive range of banking and
insurance products. Active on every continent and in all major financial
centers, Credit Suisse comprises five business units -- Credit Suisse Asset
Management (asset management); Credit Suisse First Boston (investment banking);
Credit Suisse Private Banking (private banking); Credit Suisse (retail banking);
and Winterthur (insurance). Credit Suisse has approximately $680 billion of
global assets under management and employs approximately 62,000 people
worldwide. The principal business address of Credit Suisse is Paradeplatz 8, CH
8070, Zurich, Switzerland.

Prior to July 6, 1999, Warburg Pincus Asset Management, Inc. ("Warburg")
served as investment adviser to each Portfolio. On that date, Credit Suisse
acquired Warburg and combined Warburg with Credit Suisse's existing U.S.-based
asset management business ("Credit Suisse Asset Management"). Consequently, the
combined entity, CSAM, became the Portfolios' investment adviser. Credit Suisse
Asset Management, formerly known as BEA Associates, together with its
predecessor firms, has been engaged in the investment advisory business for over
60 years.

CSAM serves as investment adviser to the Portfolios, Abbott serves as
sub-investment adviser to the Post-Venture Capital Portfolio, and Counsellors
Funds Service, Inc. ("Counsellors Service") and PFPC serve as co-administrators
to the Trust pursuant to separate written agreements (the "Advisory Agreements,"
the "Counsellors Service Co-Administration Agreements" and the "PFPC
Co-Administration Agreements," respectively). These fees are

44
<PAGE> 98

calculated at an annual rate based on a percentage of a Portfolio's average
daily net assets. CSAM, subject to the control of the Trust's officers and the
Board, manages the investment and reinvestment of the assets of the Portfolios
in accordance with each Portfolio's investment objective and stated investment
policies. CSAM makes investment decisions for each Portfolio and places orders
to purchase or sell securities on behalf of the Portfolio and, with respect to
the Post-Venture Capital Portfolio, supervises the activities of Abbott. CSAM
also employs a support staff of management personnel to provide services to the
Trust and furnishes the Trust with office space, furnishings and equipment.
Abbott, in accordance with the investment objective and polices of the
Post-Venture Capital Portfolio, makes investment decisions for the Portfolio
regarding investments in Private Funds, effects transactions in Private Funds on
behalf of the Portfolio and assists in other administrative functions relating
to investments in Private Funds.

For the services provided by CSAM, the Trust pays CSAM a fee calculated
at an annual rate equal to percentages of the relevant Portfolio's average daily
net assets, as follows: Emerging Markets Portfolio -- 1.25%, Growth & Income
Portfolio -- .75%, International Equity Portfolio -- 1.00%, and Small Company
Growth Portfolio -- .90%. For the services provided by CSAM, the Post-Venture
Capital Portfolio pays CSAM a fee calculated at an annual rate of 1.25% of the
Portfolio's average daily net assets, out of which CSAM pays Abbott for
sub-investment advisory services. CSAM and the Portfolios' co-administrators may
voluntarily waive a portion of their fees from time to time and temporarily
limit the expenses to be borne by the Portfolios.

As co-administrator, Counsellors Service provides shareholder liaison
services to the Portfolios, including responding to shareholder inquiries and
providing information on shareholder investments. Counsellors Service also
performs a variety of other services, including furnishing certain executive and
administrative services, acting as liaison between each Portfolio and its
various service providers, furnishing corporate secretarial services, which
include preparing materials for meetings of the Board, preparing proxy
statements and annual and semiannual reports, assisting in the preparation of
tax returns and developing and monitoring compliance procedures for the
Portfolios. As compensation, each Portfolio pays Counsellors Service a fee
calculated at an annual rate of .10% of the Portfolio's average daily net
assets.

As a co-administrator, PFPC calculates each Portfolio's net asset value,
provides all accounting services for the Portfolios and assists in related
aspects of the Portfolios' operations. As compensation, each of the Post-Venture
Capital and Small Company Growth Portfolios pays PFPC a fee calculated at an
annual rate of .10% of the Portfolio's first $500 million in average daily net
assets, .075% of the next $1 billion in average daily net assets, and .05% of
average daily net assets over $1.5 billion. Each of the Emerging Markets and
International Equity Portfolios pays PFPC a fee calculated at an annual rate of
.12% of the Portfolio's first $250 million in average daily net assets, .10% of
the next $250 million in average daily net assets, .08% of the next $250 million
in average daily net assets, and .05% of average daily net assets over $750
million. The Growth & Income Portfolio pays PFPC a fee calculated at an annual
rate of .15% of the Portfolio's first $500 million in average daily net assets,
.10% of the next $1 billion in average daily net assets and .05% of average
daily net assets over $1.5 billion. PFPC has its principal offices at 400
Bellevue Parkway, Wilmington, Delaware 19809.

45
<PAGE> 99

The advisory fees earned by CSAM's predecessor, Warburg, and the
co-administration fees earned by PFPC and Counsellors Service, respectively, for
the last three fiscal years are described below.

Advisory Fees earned by Warburg for the fiscal years ended December 31
(portions of fees waived, if any, are noted in parentheses next to the amount
earned)*

<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
1996 1997 1998
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Emerging N/A N/A N/A N/A $17,606 $(17,606)
Markets
- -------------------------------------------------------------------------------------------------------------------------
Growth & N/A N/A $2,055 ($2,055) $58,759 ($52,105)
Income
- -------------------------------------------------------------------------------------------------------------------------
International $2,217,681 ($79,157) $3,592,157 0 $3,689,492 0
Equity
- -------------------------------------------------------------------------------------------------------------------------
Post-Venture $6,696 ($6,696) $386,073 ($55,829) $567,052 0
Capital **
- -------------------------------------------------------------------------------------------------------------------------
Small Company $2,100,487 ($10,689) $4,349,002 0 $6,094,569 0
Growth
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>

- ------------------
* During the fiscal period ended December 31, 1996, Warburg also
reimbursed expenses of $15,007 to the Post-Venture Capital Portfolio.
During the fiscal year ended December 31, 1997, Warburg also reimbursed
expenses of $23,347 to the Growth & Income Portfolio. During the fiscal
year ended December 31, 1998, Warburg also reimbursed expenses of
$80,129 to the Emerging Markets Portfolio and $31,926 to the Growth &
Income Portfolio.

** From its investment advisory fee, Warburg paid Abbott a sub-investment
advisory fee for its services to the Post-Venture Capital Portfolio. No
compensation was paid by the Post-Venture Capital Portfolio to Abbott
for its sub-investment advisory services.

Co-Administration Fees earned by PFPC for the fiscal years ended December 31
(portions of fees waived, if any, are noted in parentheses next to the amount
earned)

<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
1996 1997 1998
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Emerging
Markets N/A N/A N/A N/A $9,116 ($1,690)
- -----------------------------------------------------------------------------------------------------------------------
Growth & Income N/A N/A $411 ($411) $15,824 ($11,752)
- -----------------------------------------------------------------------------------------------------------------------
International
Equity $263,565 ($2,836) $409,216 0 $436,977 0
- -----------------------------------------------------------------------------------------------------------------------
Post-Venture
Capital $536 ($536) $30,886 ($30,886) $48,364 ($45,364)
- -----------------------------------------------------------------------------------------------------------------------
Small Company
Growth $233,388 ($1,188) $471,801 0 $638,099 0
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

46
<PAGE> 100

Co-Administration Fees earned by Counsellors Service for the fiscal years ended
December 31

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
1996 1997 1998
---- ---- ----
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Emerging Markets N/A N/A $1,409
- ---------------------------------------------------------------------------------------------
Growth & Income N/A $274 $7,835
- ---------------------------------------------------------------------------------------------
International Equity $221,792 $359,216 $368,949
- ---------------------------------------------------------------------------------------------
Post-Venture Capital $536 $30,886 $45,364
- ---------------------------------------------------------------------------------------------
Small Company Growth $233,388 $483,223 $677,174
- ---------------------------------------------------------------------------------------------
</TABLE>

Custodian and Transfer Agent

PFPC Trust Company ("PFPC Trust") serves as custodian of each Portfolio's
U.S. assets and State Street Bank and Trust Company ("State Street") serves as
custodian of the each Portfolio's non-U.S. assets. Each custodian serves
pursuant to separate custodian agreements (the "Custodian Agreements"). Under
the Custodian Agreements, PFPC Trust and State Street each (i) maintains a
separate account or accounts in the name of each Portfolio, (ii) holds and
transfers portfolio securities on account of each Portfolio, (iii) makes
receipts and disbursements of money on behalf of each Portfolio, (iv) collects
and receives all income and other payments and distributions on account of each
Portfolio's portfolio securities held by it and (v) makes periodic reports to
the Board concerning the Trust's custodial arrangements. PFPC Trust may delegate
its duties under its Custodian Agreement with the Trust to a wholly owned direct
or indirect subsidiary of PFPC Trust or PNC Bank Corp. upon notice to the Trust
and upon the satisfaction of certain other conditions. State Street is
authorized to select one or more foreign banking institutions and foreign
securities depositaries as sub-custodian on behalf of the relevant Portfolio and
PFPC Trust is authorized to select one or more domestic banks or trust companies
to serve as sub-custodian on behalf of the Portfolios. PFPC Trust has entered
into a sub-custodian agreement with PNC Bank, National Association ("PNC"),
pursuant to which PNC provides asset safekeeping and securities clearing
services. PFPC Trust and PNC are indirect, wholly owned subsidiaries of PNC Bank
Corp., and their principal business address is 200 Stevens Drive, Suite 440,
Lester, Pennsylvania 19113. The principal business address of State Street is
225 Franklin Street, Boston, Massachusetts 02110.

State Street also serves as the shareholder servicing, transfer and
dividend disbursing agent of the Trust pursuant to a Transfer Agency and Service
Agreement, under which State Street (i) issues and redeems shares of each
Portfolio, (ii) addresses and mails all communications by the Trust to record
owners of Portfolio shares, including reports to shareholders, dividend and
distribution notices and proxy material for its meetings of shareholders, (iii)
maintains shareholder accounts and, if requested, sub-accounts and (iv) makes
periodic reports to the Board concerning the transfer agent's operations with
respect to the Trust. State Street has delegated to Boston Financial Data
Services, Inc., an affiliate of State Street ("BFDS"), responsibility for most
shareholder servicing functions. BFDS's principal business address is 2 Heritage
Drive, Boston, Massachusetts 02171.

Distribution and Shareholder Servicing

Distributor. CSAMSI acts as the distributor of the Portfolios.
CSAMSI's principal business address is 466 Lexington Avenue, New York,
New York 10017-3147.

Shareholder Servicing. The Trust has authorized certain insurance
companies ("Service Organizations") or, if applicable, their designees to enter
confirmed purchase and redemption orders on behalf of their clients and
customers, with payment to follow no later than the relevant Portfolio's
pricing on the following business day. If payment is not received by such time,
the Service Organization could be held liable for resulting fees or losses. The
Trust may be deemed to have received a purchase or redemption order when a
Service Organization, or, if applicable, its authorized designee, accepts the
order. Such orders received by the Trust in proper form will be priced at the
relevant Portfolio's net asset value next computed after they are accepted by
the Service Organization or its authorized designee. Service Organizations may
impose transaction or administrative charges or other direct fees, which
charges or fees would not be imposed if a Portfolio's shares are purchased
directly from the Trust.

For administration, subaccounting, transfer agency and/or other
services, CSAM or its affiliates may pay Service Organizations a fee of up to
.35% of the average annual value of accounts with the Trust maintained by such
Service Organizations. Service Organizations may also be reimbursed for
marketing costs. The Service Fee payable to any one Service Organization is
determined based upon a number of factors, including the nature and quality of
services provided, the operations processing requirements of the relationship
and the standardized fee schedule of the Service Organization or recordkeeper.

47
<PAGE> 101

Organization of the Trust

The Trust was organized on March 15, 1995 under the laws of the
Commonwealth of Massachusetts as a "Massachusetts business trust." The Trust's
Declaration of Trust authorizes the Board to issue an unlimited number of full
and fractional shares of beneficial interest, $.001 par value per share. Shares
of six series have been authorized, five of which constitute the interests in
the Portfolios. The Board may classify or reclassify any of its shares into one
or more additional series without shareholder approval.

When matters are submitted for shareholder vote, shareholders of each
Portfolio will have one vote for each full share held and fractional votes for
fractional shares held. Generally, shares of the Trust will vote by individual
Portfolio on all matters except where otherwise required by law. There will
normally be no meetings of shareholders for the purpose of electing Trustees
unless and until such time as less than a majority of the members holding office
have been elected by shareholders. Shareholders of record of no less than
two-thirds of the outstanding shares of the Trust may remove a Trustee through a
declaration in writing or by vote cast in person or by proxy at a meeting called
for that purpose. A meeting will be called for the purpose of voting on the
removal of a Trustee at the written request of holders of 10% of the Trust's
outstanding shares. Under current law, a Participating Insurance Company is
required to request voting instructions from Variable Contract owners and must
vote all Trust shares held in the separate account in proportion to the voting
instructions received. Plans may or may not pass through voting rights to Plan
participants, depending on the terms of the Plan's governing documents. For a
more complete discussion of voting rights, refer to the sponsoring Participating
Insurance Company separate account prospectus or the Plan documents or other
informational materials supplied by Plan sponsors.

Massachusetts law provides that shareholders could, under certain
circumstances, be held personally liable for the obligations of a Portfolio.
However, the Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or a Trustee. The Declaration of Trust provides for indemnification from a
Portfolio's property for all losses and expenses of any shareholder held
personally liable for the obligations of the Trust. Thus, the risk of a
shareholder's incurring financial loss on account of shareholder liability is
limited to circumstances in which the relevant Portfolio would be unable to meet
its obligations, a possibility that CSAM believes is remote and immaterial. Upon
payment of any liability incurred by the Trust, the shareholder paying the
liability will be entitled to reimbursement from the general assets of the
relevant Portfolio. The Trustees intend to conduct the operations of the Trust
in such a way so as to avoid, as far as possible, ultimate liability of the
shareholders for liabilities of the Trust.

All shareholders of a Portfolio, upon liquidation, will participate
ratably in the Portfolio's net assets. Shares do not have cumulative voting
rights, which means that holders of more than 50% of the shares voting for the
election of Trustees can elect all Trustees. Shares are transferable but have no
preemptive, conversion or subscription rights.

48
<PAGE> 102

ADDITIONAL PURCHASE AND REDEMPTION INFORMATION

Shares of the Portfolios may not be purchased or redeemed by individual
investors directly but may be purchased or redeemed only through Variable
Contracts offered by separate accounts of Participating Insurance Companies and
through Plans, including participant-directed Plans which elect to make a
Portfolio an investment option for Plan participants. The offering price of each
Portfolio's shares is equal to its per share net asset value.

Under the 1940 Act, a Portfolio may suspend the right of redemption or
postpone the date of payment upon redemption for any period during which the
NYSE is closed, other than customary weekend and holiday closings, or during
which trading on the NYSE is restricted, or during which (as determined by the
SEC) an emergency exists as a result of which disposal or fair valuation of
portfolio securities is not reasonably practicable, or for such other periods as
the SEC may permit. (A Portfolio may also suspend or postpone the recordation of
an exchange of its shares upon the occurrence of any of the foregoing
conditions.)

If conditions exist which make payment of redemption proceeds wholly in
cash unwise or undesirable, a Portfolio may make payment wholly or partly in
securities or other investment instruments which may not constitute securities
as such term is defined in the applicable securities laws. If a redemption is
paid wholly or partly in securities or other property, a shareholder would incur
transaction costs in disposing of the redemption proceeds. The Trust intends to
comply with Rule 18f-1 promulgated under the 1940 Act with respect to
redemptions in kind.

ADDITIONAL INFORMATION CONCERNING TAXES

The discussion set out below of tax considerations generally affecting
the Trust and its shareholders is intended to be only a summary and is not
intended as a substitute for careful tax planning by prospective shareholders.
Shareholders are advised to consult the sponsoring Participating Insurance
Company separate account prospectus or the Plan documents or other informational
materials supplied by Plan sponsors and their own tax advisers with respect to
the particular tax consequences to them of an investment in a Portfolio.

Each Portfolio intends to continue to qualify to be treated as a
regulated investment company each taxable year under the Code. If it qualifies
as a regulated investment company, a Portfolio will effectively pay no federal
income taxes on its taxable net investment income (that is, taxable income other
than net realized capital gains) and its net realized capital gains that are
distributed to Shareholders. To so qualify, a Portfolio must, among other
things: (a) derive at least 90% of its gross income in each taxable year from
dividends, interest, payments with respect to securities, loans and gains from
the sale or other disposition of stock, securities or foreign currencies, or
other income (including, but not limited to, gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies; and (b) diversify its holdings so that, at the
end of each quarter of the Portfolio's taxable year, (i) at least 50% of the
market value of the Portfolio's assets is represented by cash, securities of
other regulated investment

49
<PAGE> 103

companies, U.S. Government securities and other securities, with such other
securities limited, in respect of any one issuer, to an amount not greater than
5% of the Portfolio's assets and not greater than 10% of the outstanding voting
securities of such issuer and (ii) not more than 25% of the value of its assets
is invested in the securities (other than U.S. Government Securities or
securities of other regulated investment companies) of any one issuer or any two
or more issuers that the Portfolio controls and are determined to be engaged in
the same or similar trades or businesses or related trades or businesses. Each
Portfolio expects that all of its foreign currency gains will be directly
related to its principal business of investing in stocks and securities.

If, in any taxable year, a Portfolio fails to qualify as a regulated
investment company under the Code or fails to meet the distribution requirement,
it would be taxed in the same manner as an ordinary corporation and
distributions to its shareholders would not be deductible by the Portfolio in
computing its taxable income. In addition, in the event of a failure to qualify,
the Portfolio's distributions, to the extent derived from the Portfolio's
current or accumulated earnings and profits would constitute dividends (eligible
for the corporate dividends-received deduction) which are taxable to
shareholders as ordinary income, even though those distributions might otherwise
(at least in part) have been treated in the shareholders' hands as long-term
capital gains. If a Portfolio fails to qualify as a regulated investment company
in any year, it must pay out its earnings and profits accumulated in that year
in order to qualify again as a regulated investment company. In addition, if a
Portfolio failed to qualify as a regulated investment company for a period
greater than one taxable year, the Portfolio may be required to recognize any
net built-in gains (the excess of the aggregate gains, including items of
income, over aggregate losses that would have been realized if it had been
liquidated) in order to qualify as a regulated investment company in a
subsequent year.

In addition, each Portfolio intends to comply with the diversification
requirements of Section 817(h) of the Code related to the tax-deferred status of
insurance company separate accounts. To comply with regulations under Section
817(h) of the Code, each Portfolio will be required to diversify its investments
so that on the last day of each calendar quarter no more than 55% of the value
of its assets is represented by any one investment, no more than 70% is
represented by any two investments, no more than 80% is represented by any three
investments and no more than 90% is represented by any four investments.
Generally, all securities of the same issuer are treated as a single investment.
For the purposes of Section 817(h), obligations of the United States Treasury
and each U.S. government agency or instrumentality are treated as securities of
separate issuers. The Treasury Department has indicated that it may issue future
pronouncements addressing the circumstances in which a Variable Contract owner's
control of the investments of a separate account may cause the Variable Contract
owner, rather than the Participating Insurance Company, to be treated as the
owner of the assets held by the separate account. If the Variable Contract owner
is considered the owner of the securities underlying the separate account,
income and gains produced by those securities would be included currently in the
Variable Contract owner's gross income. It is not known what standards will be
set forth in such pronouncements or when, if at all, these pronouncements may be
issued. In the event that rules or regulations are adopted, there can be no
assurance that the Portfolios will be able to operate as currently described, or
that the Trust will not have to change the investment goal or investment
policies of a Portfolio. While a Portfolio's investment goal is fundamental and

50
<PAGE> 104

may be changed only by a vote of a majority of the Portfolio's outstanding
shares, the Board reserves the right to modify the investment policies of a
Portfolio as necessary to prevent any such prospective rules and regulations
from causing a Variable Contract owner to be considered the owner of the shares
of the Portfolio underlying the separate account.

A Portfolio's short sales against the box, if any, and transactions in
foreign currencies, forward contracts, options and futures contracts (including
options and futures contracts on foreign currencies) will be subject to special
provisions of the Code that, among other things, may affect the character of
gains and losses realized by the Portfolio (i.e., may affect whether gains or
losses are ordinary or capital), accelerate recognition of income to the
Portfolio and defer Portfolio losses. These rules could therefore affect the
character, amount and timing of distributions to shareholders. These provisions
also (a) will require a Portfolio to mark-to-market certain types of the
positions in its portfolio (i.e., treat them as if they were closed out) and (b)
may cause the Portfolio to recognize income without receiving cash with which to
pay dividends or make distributions in amounts necessary to satisfy the
distribution requirements for avoiding income and excise taxes. Each Portfolio
will monitor its transactions, will make the appropriate tax elections and will
make the appropriate entries in its books and records when it engages in a short
sale against-the-box or acquires any foreign currency, forward contract, option,
futures contract or hedged investment in order to mitigate the effect of these
rules and prevent disqualification of the Portfolio as a regulated investment
company.

Investments by a Portfolio in zero coupon securities may create special
tax consequences. Zero coupon securities do not make interest payments, although
a portion of the difference between a zero coupon security's face value and its
purchase price is imputed as income to the Portfolio each year even though the
Portfolio receives no cash distribution until maturity. Under the U.S. federal
tax laws, the Portfolio will not be subject to tax on this income if it pays
dividends to its shareholders substantially equal to all the income received
from, or imputed with respect to, its investments during the year, including its
zero coupon securities. These dividends ordinarily will constitute taxable
income to the shareholders of the Portfolio.

Because shares of a Portfolio may only be purchased through Variable
Contracts and Plans, it is anticipated that dividends and distributions will be
exempt from current taxation if left to accumulate within the Variable Contracts
or Plans.

Investment in Passive Foreign Investment Companies

If a Portfolio purchases shares in certain foreign entities classified
under the Code as "passive foreign investment companies" ("PFICs"), the
Portfolio may be subject to federal income tax on a portion of an "excess
distribution" or gain from the disposition of the shares, even though the income
may have to be distributed by the Portfolio to its shareholders, the Variable
Contracts and Plans. In addition, gain on the disposition of shares in a PFIC
generally is treated as ordinary income even though the shares are capital
assets in the hands of the Portfolio. Certain interest charges may be imposed on
the Portfolio with respect to any taxes arising from excess distributions or
gains on the disposition of shares in a PFIC.

51
<PAGE> 105

A Portfolio may be eligible to elect Qualified Electing Fund treatment,
which would require the Portfolio to include in its gross income its share of
earnings of a PFIC on a current basis. Generally, the election would eliminate
the interest charge and the ordinary income treatment on the disposition of
stock, but such an election may have the effect of accelerating the recognition
of income and gains by the Portfolio compared to a fund that did not make the
election. In addition, information required to make such an election may not be
available to the Portfolio.

Alternatively, a Portfolio may make a mark-to-market election that will
result in a Portfolio being treated as if it had sold and repurchased all of the
PFIC stock at the end of each year. In this case, the Portfolio would report
gains as ordinary income and would deduct losses as ordinary losses to the
extent of previously recognized gains. The election, once made, would be
effective for all subsequent taxable years of the Portfolio, unless revoked with
the consent of the IRS. By making the election, a Portfolio could potentially
ameliorate the adverse tax consequences with respect to its ownership of shares
in a PFIC, but in any particular year may be required to recognize income in
excess of the distributions it receives from PFICs and its proceeds from
dispositions of PFIC company stock. The Portfolio may have to distribute this
"phantom" income and gain to satisfy its distribution requirement and to avoid
imposition of the 4% excise tax. Each Portfolio will make the appropriate tax
elections, if possible, and take any additional steps that are necessary to
mitigate the effect of these rules.

Income received by a Portfolio from investments in foreign securities may
be subject to withholding and other taxes imposed by foreign countries. The
foreign taxes paid by a Portfolio will reduce its return from investments in the
Portfolio.

52
<PAGE> 106

DETERMINATION OF PERFORMANCE

From time to time, a Portfolio may quote its total return in
advertisements or in reports and other communications to shareholders. The
average annual total return for the fiscal periods ended December 31, 1998, were
as follows (performance figures calculated without the waiver of fees by a
Portfolio's service provider(s), if any, are noted in italics):

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
One-Year Since Inception (Date)
-------- ----------------------

- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Emerging Markets (17.30%) (20.40%) (17.30%) (20.40%)
(12/31/97)

- ----------------------------------------------------------------------------------------------------
Growth & Income 12.13% 10.94% 13.94% 12.27%
(10/31/97)

- ----------------------------------------------------------------------------------------------------
International Equity (5.35%) (5.35%) 5.71% 5.65%
(6/30/95)

- ----------------------------------------------------------------------------------------------------
Post-Venture Capital 6.87% 6.60% 7.70% 7.50%
(9/30/96)

- ----------------------------------------------------------------------------------------------------
Small Company Growth (2.85%) (2.85%) 14.35% 14.35%
(6/30/95)

- ----------------------------------------------------------------------------------------------------
</TABLE>

These total return figures show the average percentage change in value of
an investment in a Portfolio from the beginning of the measurement period to the
end of the measurement period. The figures reflect changes in the price of the
Portfolio's shares assuming that any income dividends and/or capital gain
distributions made by the Portfolio during the period were reinvested in shares
of the Portfolio. Total return will be shown for recent one-, five- and ten-year
periods, and may be shown for other periods as well (such as from commencement
of the Portfolio's operations or on a year-by-year, quarterly or current
year-to-date basis).

Total return is calculated by finding the average annual compounded rates
of return for the one-, five-, and ten- (or such shorter period as the Portfolio
has been offered) year periods that would equate the initial amount invested to
the ending redeemable value according to the following formula: P (1 + T)n =
ERV. For purposes of this formula, "P" is a hypothetical investment of $1,000;
"T" is average annual total return; "n" is number of years; and "ERV" is the
ending redeemable value of a hypothetical $1,000 payment made at the beginning
of the one-, five- or ten-year periods (or fractional portion thereof). Total
return or "T" is computed by finding the average annual change in the value of
an initial $1,000 investment over the period and assumes that all dividends and
distributions are reinvested during the period.

53
<PAGE> 107

periods shorter than one year, investors should bear in mind that such return
may not be representative of any Portfolio's return over a longer market cycle.
A Portfolio may also advertise aggregate total return figures for various
periods, representing the cumulative change in value of an investment in the
relevant Portfolio for the specific period. Aggregate and average total returns
may be shown by means of schedules, charts or graphs, and may indicate various
components of total return (i.e., change in value of initial investment, income
dividends and capital gain distributions).

A Portfolio may advertise, from time to time, comparisons of its
performance with that of one or more other mutual funds with similar investment
objectives. A Portfolio may advertise average annual calendar-year-to-date and
calendar quarter returns, which are calculated according to the formula set
forth in the preceding paragraph, except that the relevant measuring period
would be the number of months that have elapsed in the current calendar year or
most recent three months, as the case may be. Investors should note that this
performance may not be representative of the Portfolio's total return in longer
market cycles.

A Portfolio's performance will vary from time to time depending upon
market conditions, the composition of its portfolio and operating expenses
allocable to it. As described above, total return is based on historical
earnings and is not intended to indicate future performance. Consequently, any
given performance quotation should not be considered as representative of
performance for any specified period in the future. Performance information may
be useful as a basis for comparison with other investment alternatives. However,
a Portfolio's performance will fluctuate, unlike certain bank deposits or other
investments which pay a fixed yield for a stated period of time. Performance
quotations for the Portfolios include the effect of deducting each Portfolio's
expenses, but may not include charges and expenses attributable to any
particular Variable Contract or Plan, which would reduce the returns described
in this section.

A Portfolio may compare its performance with (i) that of other mutual
funds with similar investment objectives and policies, which may be based on the
rankings prepared by Lipper Analytical Services, Inc. or similar investment
services that monitor the performance of mutual funds; (ii) in the case of the
Post-Venture Capital Portfolio, with the Nasdaq Industrials Index and
appropriate indexes prepared by Frank Russell Company relating to securities
represented in the Portfolio, which are unmanaged indexes of common stocks; in
the case of the Small Company Growth Portfolio, with appropriate indexes
prepared by Frank Russell company relating to securities represented in the
Portfolio; in the case of the Growth & Income Portfolio, with the S&P 500 Index,
which is an unmanaged index; in the case of the Emerging Markets Portfolio, with
the Morgan Stanley Capital International Emerging Markets Free Index; and in the
case of the International Equity Portfolio, the Morgan Stanley Capital
International All Country World Except U.S. Index and the Morgan Stanley Capital
International Europe, Australia, Far East ("EAFE") Index, which are unmanaged
indexes of common stocks; or (iii) other appropriate indexes of investment
securities or with data developed by CSAM derived from such indexes. A Portfolio
may also include evaluations of the Portfolio published by nationally recognized
ranking services and by financial publications such as Barron's, Business Week,
Financial Times, Forbes, Fortune, Inc., Institutional Investor, Investor's
Business Daily, Money, Morningstar, Mutual Fund Magazine, SmartMoney, The Wall
Street Journal and Worth. Morningstar, Inc. rates funds in broad categories
based on risk/reward analyses over various time periods. In addition, each
Portfolio

54
<PAGE> 108

may from time to time compare its expense ratio to that of investment companies
with similar objectives and policies, based on data generated by Lipper
Analytical Services, Inc. or similar investment services that monitor mutual
funds.

In reports or other communications to investors or in advertising, each
Portfolio may also describe the general biography or work experience of the
portfolio managers of the Portfolio and may include quotations attributable to
the portfolio managers describing approaches taken in managing the Portfolio's
investments, research methodology underlying stock selection or the Portfolio's
investment objective. In addition, a Portfolio and its portfolio managers may
render updates of Portfolio activity, which may include a discussion of
significant portfolio holdings; analysis of holdings by industry, country,
credit quality and other characteristics; and comparison and analysis of the
Portfolio with respect to relevant market and industry benchmarks. The
Post-Venture Capital Portfolio may discuss characteristics of venture capital
financed companies and the benefits expected to be achieved from investing in
these companies. Each Portfolio may also discuss measures of risk, the continuum
of risk and return relating to different investments and the potential impact of
foreign stocks on a portfolio otherwise composed of domestic securities.

CSAM believes that a diversified portfolio of international equity
securities, when combined with a similarly diversified portfolio of domestic
equity securities, tends to have a lower volatility than a portfolio composed
entirely of domestic securities. Furthermore, international equities have been
shown to reduce volatility in single asset portfolios regardless of whether the
investments are in all domestic equities or all domestic fixed-income
instruments, and research has indicated that volatility can be significantly
decreased when international equities are added.

To illustrate this point, the performance of international equity
securities, as measured by the Morgan Stanley Capital International (EAFE)
Europe, Australasia, Far East Index (the "EAFE Index"), has equaled or exceeded
that of domestic equity securities, as measured by the Standard & Poor's 500
Composite Stock Index (the "S&P 500 Index") in 14 of the last 26 years. The
following table compares annual total returns of the EAFE Index and the S&P 500
Index for the calendar years shown.

<TABLE>
<CAPTION>
EAFE INDEX VS. S&P 500 INDEX
1972-1998
ANNUAL TOTAL RETURN+
YEAR EAFE(R) INDEX S&P 500 INDEX
- ---- ------------- -------------
<S> <C> <C>
1972* 33.28 15.63
1973* -16.82 -17.37
1974* -25.60 -29.72
1975 31.21 31.55
1976 -.36 19.15
1977* 14.61 -11.50
1978* 28.91 1.06
1979 1.82 12.31
1980 19.01 25.77
1981* -4.85 -9.73
1982 -4.63 14.76
1983* 20.91 17.27
1984* 5.02 1.40
</TABLE>

55
<PAGE> 109

<TABLE>
<CAPTION>
EAFE INDEX VS. S&P 500 INDEX
1972-1998
ANNUAL TOTAL RETURN+
YEAR EAFE(R) INDEX S&P 500 INDEX
- ---- ------------- -------------
<S> <C> <C>
1985* 52.97 26.33
1986* 66.80 14.62
1987* 23.18 2.03
1988* 26.66 12.40
1989 9.22 27.25
1990 -24.71 -6.56
1991 10.19 26.31
1992 -13.89 4.46
1993* 30.49 7.06
1994* 6.24 -1.54
1995 9.42 34.11
1996 4.40 20.26
1997 0.24 31.01
1998 19.99 28.57
</TABLE>

- -----------------
+ Without reinvestment of dividends.

* The EAFE Index has outperformed the S&P 500 Index 14 out of the last 26
years.

Source: Morgan Stanley Capital International; Bloomberg Financial Markets

The quoted performance information shown above is not intended to
indicate the future performance of the International Equity Portfolio.
Advertising or supplemental sales literature relating to the Portfolio may
describe the percentage decline from all-time high levels for certain foreign
stock markets. It may also describe how the Portfolio differs from the EAFE(R)
Index in composition.

INDEPENDENT ACCOUNTANTS AND COUNSEL

PricewaterhouseCoopers LLP ("PwC"), with principal offices at 2400 Eleven
Penn Center, Philadelphia, Pennsylvania 19103, serves as independent accountants
for the Trust. The financial statements for the Trust that are incorporated by
reference in this Statement of Additional Information have been audited by PwC,
and have been included herein in reliance upon the report of such firm of
independent accountants given upon their authority as experts in accounting and
auditing.

Willkie Farr & Gallagher serves as counsel for the Trust and provides
legal services from time to time for CSAM, Counsellors Service and CSAMSI.

FINANCIAL STATEMENTS

The Trust's audited Annual Report dated December 31, 1998, which either
accompanies this Statement of Additional Information or has previously been
provided to the investor to whom this Statement of Additional Information is
being sent, is incorporated herein by reference with respect to all information
regarding the Portfolios included therein. The Trust will furnish without charge
a copy of its Annual Report upon request by calling the Trust at 1-800-222-8977.

56
<PAGE> 110

MISCELLANEOUS

The Portfolios and the Trust are not sponsored, endorsed, sold or
promoted by Warburg, Pincus & Co. Warburg, Pincus & Co. makes no representation
or warranty, express or implied, to the owners of the Portfolios or any member
of the public regarding the advisability of investing in securities generally or
in the Portfolios particularly. Warburg, Pincus & Co. licenses certain
trademarks and trade names of Warburg, Pincus & Co., and is not responsible for
and has not participated in the calculation of the Portfolios' net asset value,
nor is Warburg, Pincus & Co. a distributor of the Portfolios. Warburg, Pincus &
Co. has no obligation or liability in connection with the administration,
marketing or trading of the Portfolios.

As of March 30, 1999, the following persons owned of record 5% or more of
each Portfolio's outstanding shares:

EMERGING MARKETS PORTFOLIO

The Travelers Separate Account 31.78%
TM2 for Variable Annuities
of The Travelers Insurance Co.
1 Tower Square
Hartford, CT 06183-0002

Warburg, Pincus Asset Management 24.59%
Attn: Stephen Distler
466 Lexington Avenue 10th Fl.
New York, NY 10017-3140

The Travelers Separate Account 22.44%
ABD2 for Variable Annuities
of The Travelers Insurance Co.
1 Tower Square
Hartford, CT 06183-0002

Sun Life of Canada (US) 7.94%
c/o Retirement Products &
Services Accounting Control
P.O. Box 9134
Boston, MA 02117-9134

The Travelers Separate Account 7.62%
ABD for Variable Annuities
of The Travelers Insurance Co.
1 Tower Square
Hartford, CT 06183-0002

GROWTH & INCOME PORTFOLIO

57
<PAGE> 111

Nationwide Life Insurance Company 92.75%
NWVA-9
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029

INTERNATIONAL EQUITY PORTFOLIO

Nationwide Life Insurance Company 57.07%
Nationwide Variable Account II
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029

Golden American Life 20.17%
Separate Account B
1001 Jefferson Street Suite 400
Wilmington, DE 19801-1493

Equitable Life Insurance Co of Iowa 11.15%
Separate Account A
Danielle Knopf
909 Locust Street
Des Moines, IA 50309-2803

POST-VENTURE CAPITAL PORTFOLIO

Nationwide Life Insurance Company 35.04%
Nationwide Variable Account II
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029

Pruco Life Flexible Premium 34.81%
Variable Annuity Account
213 Washington Street 7th Floor
Newark, NJ 07102-2917

Nationwide Life Insurance Company 11.44%
NWVA-9
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029

Fidelity Investments 9.75%
Life Insurance Company
82 Devonshire St #R25B
Boston, MA 02109-3605

58
<PAGE> 112

SMALL COMPANY GROWTH PORTFOLIO

IDS Life Insurance Company 48.73%
c/o American Express Financial
Attn: Flex Variable Annuity T11-125
IDS Tower 10
Minneapolis, MN 55440

Nationwide Life Insurance Company 40.05%
Nationwide Variable Account II
c/o IPO Portfolio Accounting
P.O. Box 182029
Columbus, OH 43218-2029

59
<PAGE> 113
APPENDIX

DESCRIPTION OF RATINGS

Commercial Paper Ratings

Commercial paper rated A-1 by Standard and Poor's Ratings Group ("S&P")
indicates that the degree of safety regarding timely payment is strong. Those
issues determined to possess extremely strong safety characteristics are denoted
with a plus sign designation. Capacity for timely payment on commercial paper
rated A-2 is satisfactory, but the relative degree of safety is not as high as
for issues designated A-1.

The rating Prime-1 is the highest commercial paper rating assigned by
Moody's Investors Services, Inc. ("Moody's"). Issuers rated Prime-1 (or related
supporting institutions) are considered to have a superior capacity for
repayment of short-term promissory obligations. Issuers rated Prime-2 (or
related supporting institutions) are considered to have a strong capacity for
repayment of short-term promissory obligations. This will normally be evidenced
by many of the characteristics of issuers rated Prime-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternative liquidity is maintained.

Corporate Bond Ratings

The following summarizes the ratings used by S&P for corporate bonds:

AAA - This is the highest rating assigned by S&P to a debt obligation and
indicates an extremely strong capacity to pay interest and repay principal.

AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in small degree.

BBB - This is the lowest investment grade. Debt rated BBB has an adequate
capacity to pay interest and repay principal. Although they normally exhibit
adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for bonds in this category than for bonds in higher-rated
categories.

To provide more detailed indications of credit quality, the ratings from
"AA" to "BBB" may be modified by the addition of a plus or minus sign to show
relative standing within this major rating category.

A-1
<PAGE> 114

The following summarizes the ratings used by Moody's for corporate bonds:

Aaa - Bonds that are rated Aaa are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large or 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 - Bonds which are rated A 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.

A-2