INVESTORS MARK SERIES FUND INC, N-1A EL, 1997-08-01

INVESTORS MARK SERIES FUND INC
N-1A EL, 1997-08-01

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As filed with the Securities and Exchange Commission
on August 1, 1997

Registration Nos. 333-
811-08321
==============================================================================
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
____________________

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]
Pre-Effective Amendment No. [ ]
Post-Effective Amendment No. [ ]

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [X]
Amendment No. [ ]
(Check appropriate box or boxes.)

INVESTORS MARK SERIES FUND, INC.
_________________________________________________
(Exact name of registrant as specified in charter)

700 Karnes Boulevard
Kansas City, Missouri 64108
________________________________________ __________
(Address of Principal Executive Offices) (Zip Code)

Registrant's Telephone Number, Including Area Code (816) 753-8000

David A. Gates, Esq.
700 Karnes Boulevard
Kansas City, Missouri 64108

(Name and Address of Agent For Service)

Copies to:

Raymond A. O'Hara III, Esq. and to David A. Gates, Esq.
Blazzard, Grodd & Hasenauer, P.C. 700 Karnes Boulevard
P.O. Box 5108 Kansas City, MO 64108
Westport, CT 06881 (816) 751-5441
(203) 226-7866

Approximate Date of
Proposed Public Offering:
As soon as practicable after the effective date of this Filing.

Calculation of Registration Fee under the Securities Act of 1933:
Registrant is registering an indefinite number of securities under
the Securities Act of 1933 pursuant to Investment Company Act Rule 24f-2.
==============================================================================
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section
8(a), may determine.

INVESTORS MARK SERIES FUND, INC.

CROSS REFERENCE SHEET
(as required by Rule 404 (c))

<TABLE>
<CAPTION>
<S> <C> <C>
PART A
N-1A
- --------
Item No. Location
- -------- -----------------------------

1. Cover Page Cover Page

2. Synopsis. Summary; Expense Summary

3. Condensed Financial Information Not Applicable

4. General Description of Registrant Investment Objectives and
Policies of the Portfolios;
Common Types of Securities
and Management Practices;
Investment Risks; Investment
Restrictions; General
Information--The Fund

5. Management of the Fund Management of the Fund;
General Information--The
Transfer Agent; General
Information - The Distributor

6. Capital Stock and Other Securities General Information--
Voting Rights; Tax Status,
Dividends and
Distributions

7. Purchase of Securities Being Offered. Purchases and Redemptions;
Net Asset Value

8. Redemption or Repurchase Purchases and Redemptions;
Net Asset Value

9. Pending Legal Proceedings Not Applicable

PART B

10. Cover Page Cover Page

11. Table of Contents Table of Contents

12. General Information and History General Information and
History

13. Investment Objectives and Policies Investment Objectives and
Policies; Investment
Restrictions; Description
of Shares

14. Management of the Fund Directors and Officers of
the Fund

15. Control Persons and Principal Holders Directors and Officers of
of Securities the Fund

16. Investment Advisory and Other The Adviser; Sub-Advisers
Services.

17. Brokerage Allocation and Other Portfolio Transactions
Practices

18. Capital Stock and Other Securities Description of Shares

19. Purchase, Redemption and Pricing of Purchase and Redemption of
Securities Being Offered Shares; Determination of Net
Asset Value

20. Tax Status Taxes

21. Underwriters Not Applicable

22. Calculation of Performance Data Performance Information

23. Financial Statements Financial Statements

</TABLE>

PART C

Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of the Registration Statement.

PART A

INVESTORS MARK SERIES FUND, INC.

PROSPECTUS DATED _____, 1997

Investors Mark Series Fund, Inc. (the "Fund") is an open-end management
investment company authorized to issue multiple series of shares, each
representing a diversified portfolio of investments (individually, a
"Portfolio" and collectively, the "Portfolios"). The Fund currently has
authorized ten series.

This Prospectus sets forth concisely the information about the Fund that a
prospective investor should know before investing. The Fund's shares are
offered only to (a) insurance companies ("Participating Insurance Companies")
to fund benefits under their variable annuity contracts ("VA Contracts") and
variable life insurance policies ("VLI Policies") and (b) tax-qualified
pension and retirement plans ("Qualified Plans"), including
participant-directed Qualified Plans which elect to make the Portfolios
available as investment options for Qualified Plan Participants.

Please read this Prospectus carefully and retain it for future reference. This
Prospectus should be read in conjunction with the prospectuses issued by the
Participating Insurance Companies for the VA Contracts and VLI Policies that
accompany this Prospectus or with the Qualified Plan documents or other
informational materials supplied by Qualified Plan sponsors. Additional
information about the Fund and the Portfolios is contained in a Statement of
Additional Information ("SAI") which has been filed with the Securities and
Exchange Commission (the "SEC") and is available to investors without charge
by calling the Fund at 1-800-___-____. The SAI, as amended from time to time,
bears the same date as this Prospectus and is incorporated by reference in its
entirety into this Prospectus. The Securities and Exchange Commission
maintains a Web Site (http://www.sec.gov) that contains the SAI, material
incorporated by reference, and other information regarding the Fund.

This Prospectus does not constitute an offer to sell, or a solicitation of an
offer to buy, the securities of the Fund in any jurisdiction in which such
sale, offer to sell, or solicitation may not be lawfully made.

PURCHASERS SHOULD BE AWARE THAT AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS
NEITHER INSURED NOR GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO
ASSURANCE THAT THE MONEY MARKET PORTFOLIO WILL BE ABLE TO MAINTAIN A STABLE
NET ASSET VALUE OF $1.00 PER SHARE. THE BALANCED PORTFOLIO WILL INVEST UP TO
75% OF ITS ASSETS IN LOWER RATED BONDS, COMMONLY KNOWN AS "JUNK BONDS", THAT
ENTAIL GREATER RISKS INCLUDING DEFAULT RISKS, THAN THOSE FOUND IN HIGHER RATED
SECURITIES. INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE INVESTING.
INVESTMENTS IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK. SHARES OF THE FUND ARE NOT FEDERALLY INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUND IS SUBJECT TO RISK THAT MAY
CAUSE THE VALUE OF THE INVESTMENT TO FLUCTUATE, AND WHEN THE INVESTMENT IS
REDEEMED, THE VALUE MAY BE HIGHER OR LOWER THAN THE AMOUNT ORIGINALLY INVESTED
BY THE INVESTOR.

LIKE ALL MUTUAL FUNDS, THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION,
NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

SHARES OF THE FUND ARE AVAILABLE AND ARE BEING OFFERED EXCLUSIVELY (i) AS A
POOLED FUNDING VEHICLE FOR LIFE INSURANCE COMPANIES WRITING ALL TYPES OF
VARIABLE LIFE INSURANCE POLICIES AND VARIABLE ANNUITY CONTRACTS AND (ii) TO
TAX-QUALIFIED PENSION AND RETIREMENT PLANS.

TABLE OF CONTENTS

PAGE

SUMMARY

EXPENSE SUMMARY

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS

COMMON TYPES OF SECURITIES AND MANAGEMENT PRACTICES

INVESTMENT RISKS

INVESTMENT RESTRICTIONS

PORTFOLIO TURNOVER

MANAGEMENT OF THE FUND

PERFORMANCE ADVERTISING

PURCHASES AND REDEMPTIONS

NET ASSET VALUE

TAX STATUS, DIVIDENDS AND DISTRIBUTIONS

GENERAL INFORMATION

SUMMARY

THE FUND

The Fund is an open-end management investment company which currently offers
shares of nine of its ten Portfolios as follows: the Balanced Portfolio, the
Global Fixed Income Portfolio, the Growth & Income Portfolio, the Intermediate
Fixed Income Portfolio, the Large Cap Value Portfolio, the Large Cap Growth
Portfolio, the Mid Cap Equity Portfolio, the Money Market Portfolio and the
Small Cap Equity Portfolio. Shares of the International Equity Portfolio are
not currently offered for sale. Each of the Portfolios has distinct investment
objectives and policies. See "Investment Objectives and Policies." Additional
Portfolios may be added to the Fund in the future. This Prospectus will be
supplemented or amended to reflect the addition of any new Portfolios.

This summary, which provides basic information about the Portfolios and the
Fund, is qualified in its entirety by reference to the more detailed
information provided elsewhere in this Prospectus and in the SAI.

INVESTMENT ADVISER AND SUB-ADVISERS

Subject to the authority of the Board of Directors of the Fund, Investors Mark
Advisors, LLC (the "Adviser") serves as the Fund's investment adviser and has
responsibility for the overall management of the investment strategies and
policies of the Portfolios. The Adviser has engaged Sub-Advisers for each of
the Portfolios to make investment decisions and place orders. The
Sub-Advisers for the Portfolios are as follows:

<TABLE>
<CAPTION>
Sub-Adviser Name of Portfolio
- --------------------------- -------------------------
<S> <C>

Standish, Ayer & Wood, Inc. Intermediate Fixed Income
Mid Cap Equity
Money Market

Standish International Management Global Fixed Income
Company, L.P.

Stein Roe & Farnham, Incorporated Small Cap Equity
Large Cap Growth

David L. Babson & Co., Inc. Large Cap Value

Lord, Abbett & Co. Growth & Income

Kornitzer Capital Management, Inc. Balanced

BBOI Worldwide LLC International Equity
</TABLE>

For additional information concerning the Adviser and the Sub-Advisers,
including a description of advisory and sub-advisory fees, see "Management of
the Fund."

THE PORTFOLIOS

BALANCED PORTFOLIO. The Portfolio seeks both long-term capital growth and
high current income. Long-term capital growth is intended to be achieved
primarily by the Portfolio's investment in common stocks and secondarily by
the Portfolio's investment in convertible bonds and convertible preferred
stocks. High current income is intended to be achieved by the Portfolio's
investment in corporate bonds, government bonds, convertible bonds, preferred
stocks and convertible preferred stocks. THE PORTFOLIO WILL INVEST UP TO 75%
OF ITS ASSETS IN LOWER RATED BONDS, COMMONLY KNOWN AS "JUNK BONDS," THAT
ENTAIL GREATER RISKS INCLUDING DEFAULT RISKS, THAN THOSE FOUND IN HIGHER-RATED
SECURITIES. INVESTORS SHOULD CAREFULLY CONSIDER THESE RISKS BEFORE INVESTING.

GLOBAL FIXED INCOME PORTFOLIO. The investment objective of the Portfolio is
to maximize total return while realizing a market level of income consistent
with preserving principal and liquidity. Under normal market conditions, the
Portfolio will invest at least 65% of its total assets in fixed income
securities of foreign governments or their political subdivisions and
companies located in countries around the world, including the United States.

GROWTH & INCOME PORTFOLIO. The investment objective of the Portfolio is
long-term growth of capital and income without excessive fluctuation in market
value. The Portfolio will normally invest in common stocks (including
securities convertible into common stocks) of large, seasoned companies in
sound financial condition, which common stocks are expected to show
above-average price appreciation.

INTERMEDIATE FIXED INCOME PORTFOLIO. The investment objective of this
Portfolio is primarily to achieve a high level of current income, consistent
with conserving principal and liquidity, and secondarily to seek capital
appreciation when changes in interest rates or other economic conditions
indicate that capital appreciation may be available without significant risk
to principal. Under normal market conditions, substantially all, and at least
65%, of the Portfolio's total assets will be invested in investment grade
fixed income securities.

INTERNATIONAL EQUITY PORTFOLIO. The investment objective of the Portfolio is
long-term capital appreciation. The Portfolio seeks to achieve this objective
by investing primarily in common stocks of well established companies located
outside the United States. The Portfolio intends to diversify its holdings
among several countries and to have, under normal market conditions, at least
65% of the Portfolio's total assets invested in the securities of companies
located in at least five countries, not including the United States.

LARGE CAP VALUE PORTFOLIO. The Portfolio seeks long-term growth of capital
and income by investing in a diversified portfolio of common stocks which are
considered to be undervalued in relation to earnings, dividends and/or assets.
The Portfolio may be considered "contrarian" in nature in that its investments
will typically include shares of companies that are relatively unpopular and
out-of-favor with general investors.

LARGE CAP GROWTH PORTFOLIO. The Portfolio seeks long-term capital
appreciation. The Portfolio will normally invest at least 65% of its total
assets in common stocks and other equity-type securities that the Portfolio's
Sub-Adviser believes to have long-term appreciation possibilities.

MID CAP EQUITY PORTFOLIO. The investment objective of the Portfolio is to
achieve long-term growth of capital through investment primarily in equity and
equity-related securities of companies which appear to be undervalued. Under
normal circumstances, at least 80% of the Portfolio's total assets will be
invested in equity and equity-related securities.

MONEY MARKET PORTFOLIO. The investment objective of the Portfolio is to
obtain the highest level of current income that is consistent with the
preservation of capital and maintenance of liquidity. The Portfolio will
invest primarily in high-quality, short-term money market instruments. AN
INVESTMENT IN THE PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT.

SMALL CAP EQUITY PORTFOLIO. The Portfolio seeks long-term capital
appreciation by investing primarily in a diversified portfolio of equity
securities of entrepreneurially managed companies that the Sub-Adviser
believes represent special opportunities. It emphasizes investments in
financially strong small and medium-sized companies, based principally on
appraisal of their management and stock valuations.

The investment objectives, policies and practices of the Portfolios are not
fundamental and may be changed by the Board of Directors without the approval
of a majority of the outstanding shares of each Portfolio. Certain investment
restrictions are fundamental and may not be changed without shareholder
approval. A complete list of investment restrictions, including those
restrictions which cannot be changed without shareholder approval, is
contained in the SAI. There is no assurance that a Portfolio will meet its
stated objective.

INVESTMENT RISKS

Each Portfolio invests in securities that fluctuate in value, and investors
should expect each Portfolio's net asset value per share to fluctuate.
Certain Portfolios may invest in stocks and convertible securities that may be
traded in the over-the-counter market. Some of these securities may not be as
liquid as exchange-listed stocks. In addition, certain Portfolios may invest
in the securities of small capitalization companies which may experience
greater price volatility than investment companies that invest primarily in
more established, larger capitalized companies.

When interest rates decline, the value of an investment portfolio invested in
fixed-income securities can be expected to rise. Conversely, when interest
rates rise, the value of an investment portfolio invested in fixed-income
securities can be expected to decline. In the case of foreign currency
denominated securities, these trends may be offset or amplified by
fluctuations in foreign currencies. Investments by a Portfolio in foreign
securities may be affected by adverse political, diplomatic, and economic
developments, changes in foreign currency exchange rates, taxes or other
assessments imposed on distributions with respect to those investments, and
other factors affecting foreign investments generally. High-yielding
fixed-income securities, which are commonly known as "junk bonds", are subject
to greater market fluctuations and risk of loss of income and principal than
investments in lower yielding fixed-income securities. Certain Portfolios
intend to employ, from time to time, certain investment techniques which are
designed to enhance income or total return or hedge against market or currency
risks but which themselves involve additional risks. These techniques include
options on securities, futures, options on futures, options on indexes,
options on foreign currencies, foreign currency exchange transactions, lending
of securities and when-issued securities and delayed-delivery transactions.
Certain Portfolios may have higher-than-average portfolio turnover which may
result in higher-than-average brokerage commissions and transaction costs.
See "Investment Risks."

PURCHASES AND REDEMPTIONS

The purpose of this section is to provide you with information about the
expenses of the various Portfolios.

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES Intermediate Mid Cap Money Global Small Cap Large Cap
Fixed Income Equity Market Fixed Income Equity Growth
Portfolio Portfolio Portfolio Portfolio Portfolio Portfolio
------------ --------- --------- ------------ --------- ---------
Sales Load Imposed on Purchases None None None None None None
Sales Load Imposed on Reinvested Dividends None None None None None None
Deferred Sales Load None None None None None None
Redemption Fees None None None None None None
Exchange Fees None None None None None None
</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Large Cap Growth & International
Value Income Balanced Equity
Portfolio Portfolio Portfolio Portfolio
--------- --------- --------- -------------
Sales Load Imposed on Purchases None None None None
Sales Load Imposed on Reinvested Dividends None None None None
Deferred Sales Load None None None None
Redemption Fees None None None None
Exchange Fees None None None None
</TABLE>

<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
ANNUAL OPERATING EXPENSES
(as a percentage of average net assets after applicable
expense reimbursements) Intermediate Mid Cap Money Global Small Cap
Fixed Income Equity Market Fixed Income Equity
Portfolio Portfolio Portfolio Portfolio Portfolio
------------- ---------- ---------- ------------- ----------
Advisory Fees .60% .80% .40% .75% .95%
12b-1 Fees None None None None None
Other Expenses (after expense reimbursement) .20% .10% .10% .25% .10%
Total Operating Expenses (after expense reimbursement) .80% .90% .50% 1.00% 1.05%
Estimated Total Operating Expenses
without reimbursement by Adviser 2.04% 1.10% 1.15% 2.04% 1.25%

<S> <C>

ANNUAL OPERATING EXPENSES
(as a percentage of average net assets after applicable
expense reimbursements) Large Cap
Growth
Portfolio
----------
Advisory Fees .80%
12b-1 Fees None
Other Expenses (after expense reimbursement) .10%
Total Operating Expenses (after expense reimbursement) .90%
Estimated Total Operating Expenses
without reimbursement by Adviser 1.02%
</TABLE>

<TABLE>

<CAPTION>
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Large Cap Growth & International
Value Income Balanced Equity
Portfolio Portfolio Portfolio Portfolio
---------- ---------- ---------- --------------
Advisory Fees .80% .80% .80% --
12b-1 Fees None None None None
Other Expenses (after expense reimbursement) .10% .10% .10% --
Total Operating Expenses (after expense reimbursement) .90% .90% .90% 1.20%
Estimated Total Operating Expenses
without reimbursement by Adviser 1.02% 1.10% 1.10% --%
</TABLE>

The Adviser has voluntarily agreed to assume Other Expenses in an amount that
operates to limit Total Operating Expenses of the Portfolios to the
percentages shown above through _________________, 1998. Total Operating
Expenses include, but are not limited to, expenses such as investment advisory
fees, custodian fees, transfer agent fees, audit fees and legal fees. Such
possible assumptions of Other Expenses by the Adviser are subject to a
possible reimbursement by the Portfolios in future years if such reimbursement
can be achieved within the foregoing annual expense limits. Such expense
reimbursement arrangements may be modified or terminated at any time after
________________________, 1998. The Sub-Advisers have voluntarily agreed to
waive their fees for a period of time to assist the Adviser in subsidizing
Other Expenses.

EXAMPLE

An investor in a Portfolio would pay the following expenses on a $1,000
investment assuming (1) 5% annual return, and (2) redemption at the end of
each time period.

<TABLE>
<CAPTION>
<S> <C> <C>
1 Year 3 Years
------- --------
Intermediate Fixed Income $ 8.17 $ 25.55
Mid Cap Equity $ 9.18 $ 28.70
Money Market $ 5.11 $ 16.04
Global Fixed Income $ 10.20 $ 31.84
Small Cap Equity $ 10.71 $ 33.41
Large Cap Growth $ 9.18 $ 28.70
Large Cap Value $ 9.18 $ 28.70
Growth & Income $ 9.18 $ 28.70
Balanced $ 9.18 $ 28.70
International Equity $ ____ $ ____
</TABLE>

The example is based upon estimated Total Operating Expenses for the
Portfolios, as set forth in the "Annual Operating Expenses" table above and
reflects the expense reimbursement arrangement in effect. THE EXAMPLE SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL
EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THE TABLE DOES NOT REFLECT
ADDITIONAL CHARGES AND EXPENSES WHICH ARE, OR MAY BE, IMPOSED UNDER THE VA
CONTRACTS, VLI POLICIES OR QUALIFIED PLANS. SUCH CHARGES AND EXPENSES ARE
DESCRIBED IN THE PROSPECTUS OF THE PARTICIPATING INSURANCE COMPANY SEPARATE
ACCOUNT OR IN THE QUALIFIED PLAN DOCUMENTS OR OTHER INFORMATIONAL MATERIALS
SUPPLIED BY QUALIFIED PLAN SPONSORS. The purpose of this table is to assist
the investor in understanding the various costs and expenses that may be
directly or indirectly borne by investors in the Portfolios. See "The
Adviser" and "The Sub-Advisers".

INVESTMENT OBJECTIVES AND POLICIES OF THE PORTFOLIOS

Each Portfolio of the Fund has a different investment objective or objectives
which it pursues through separate investment policies as described below. The
differences in objectives and policies among the Portfolios can be expected to
affect the return of each Portfolio and the degree of market and financial
risk to which each Portfolio is subject. An investment in a single Portfolio
should not be considered a complete investment program. The investment
objective(s) and policies of each Portfolio are non-fundamental and may be
changed by the Directors of the Fund without a vote of the shareholders. Such
changes may result in a Portfolio having an investment objective(s) which
differs from that which an investor may have considered at the time of
investment. There is no assurance that any Portfolio will achieve its
objective(s). United States Treasury Regulations applicable to portfolios
that serve as the funding vehicles for variable annuity and variable life
insurance contracts generally require that such portfolios invest no more than
55% of the value of their assets in one investment, 70% in two investments,
80% in three investments, and 90% in four investments. The Portfolios intend
to comply with the requirements of these Regulations.

In order to comply with regulations which may be issued by the U.S. Treasury,
the Fund may be required to limit the availability or change the investment
policies of one or more Portfolios or to take steps to liquidate one or more
Portfolios. The Fund will not change any fundamental investment policy of a
Portfolio without a vote of shareholders of that Portfolio.

Except as otherwise noted herein, if the securities rating of a debt security
held by a Portfolio declines below the minimum rating for securities in which
the Portfolio may invest, the Portfolio will not be required to dispose of the
security, but the Portfolio's Adviser or Sub-Adviser will consider whether
continued investment in the security is consistent with the Portfolio's
investment objective.

In implementing its investment objectives and policies, each Portfolio uses a
variety of instruments, strategies and techniques which are described in more
detail in the Appendix and the SAI. With respect to each Portfolio's
investment policies (except for the Small Cap Equity Portfolio), use of the
term "primarily" means that under normal circumstances, at least 65% of such
Portfolio's assets will be invested as indicated. A description of the
ratings systems used by the following nationally recognized statistical rating
organizations ("NRSROs") is also contained in the SAI: Moody's Investors
Service, Inc. ("Moody's"), Standard & Poor's Ratings Group ("S&P"), Duff &
Phelps, Inc. ("Duff"), Fitch Investors Service, Inc. ("Fitch"), Thomson
Bankwatch, Inc., IBCA, Ltd. and IBCA Inc. New instruments, strategies and
techniques, however, are evolving continually and the Fund reserves authority
to invest in or implement them to the extent consistent with the investment
objectives and policies of each Portfolio. If new instruments, strategies or
techniques would involve a material change to the information contained
herein, they will not be purchased or implemented until this Prospectus is
appropriately supplemented.

For a complete description of permissible investments for the Portfolios and
for a discussion of risk factors in connection with such investments, see
"Common Types of Securities and Management Practices" and "Investment Risks."

BALANCED PORTFOLIO

The Balanced Portfolio seeks both long-term capital growth and high current
income. Long-term capital growth is intended to be achieved primarily by the
Portfolio's investment in common stocks and secondarily by the Portfolio's
investment in convertible bonds and convertible preferred stocks. High
current income is intended to be achieved by the Portfolio's investment in
corporate bonds, government bonds, mortgage-backed securities, convertible
bonds, preferred stocks and convertible preferred stocks.

The Portfolio will normally invest in a broad array of securities, diversified
not only in terms of companies and industries, but also in terms of types of
securities. The types of securities include common stocks, preferred stocks,
convertible bonds, convertible preferred stocks, corporate bonds and
government bonds. It is expected that the majority of common stocks purchased
by the Portfolio will be large capitalization companies with most, if not all,
listed on the New York Stock Exchange. Large capitalization stocks are
considered to be those with capitalization in excess of $1 billion.

It is not the Sub-Adviser's intention to make wide use of NASDAQ traded,
smaller capitalization common stocks. Smaller capitalization stocks are
considered to be those with capitalization of less than $1 billion. The
Portfolio may invest up to 75% of its assets in corporate bonds, convertible
bonds, preferred stocks and convertible preferred stocks. The Sub-Adviser
expects that from time-to-time these securities may be rated below investment
grade (BBB) by the major rating agencies. The Sub-Adviser believes this
policy is justified given the Sub-Adviser's view that these securities from
time-to-time offer superior value and the Sub-Adviser's experience and
substantial in-house credit research capabilities with higher yielding
securities.

Securities rated Baa or higher by Moody's or BBB by S&P are classified as
investment grade securities. Although securities rated Baa by Moody's and BBB
by S&P have speculative characteristics, they are considered to be investment
grade. Such securities carry a lower degree of risk than lower rated
securities. (See "Investment Risks--Risk Factors Applicable to High Yielding
High Risk Debt Securities.")

Securities rated below Baa by Moody's or BBB by S&P are commonly known as
"junk bonds" and are considered to be high risk. Yields on such bonds will
fluctuate over time, and achievement of the Portfolio's investment objective
may be more dependent on the Portfolio's own credit analysis than is the case
for higher rated bonds. (See "Investment Risks--Risk Factors Applicable to
High Yielding High Risk Debt Securities.")

The Portfolio may also invest in high-yielding, high-risk corporate debt
securities (so-called "junk bonds"). Up to 20% of the Portfolio's assets may
be invested in debt securities which are rated less than B or unrated.

The Portfolio will not invest in securities that, at the time of initial
investment, are rated less than B by Moody's or S&P. Securities that are
subsequently downgraded in quality below B may continue to be held by the
Portfolio, and will be sold only if the Sub-Adviser believes it would be
advantageous to do so. In addition, the credit quality of unrated securities
purchased by the Portfolio must be, in the opinion of the Sub-Adviser, at
least equivalent to a B rating by Moody's or S&P.

Securities rated less than Baa by Moody's or BBB by S&P are classified as
non-investment grade securities. Such securities carry a high degree of risk
and are considered speculative by the major credit rating agencies. (See
"Investment Risks--Risk Factors Applicable to High Yielding High Risk Debt
Securities.")
The proportion of the Portfolio invested in each type of security is expected
to change over time in accordance with the Sub-Adviser's interpretation of
economic conditions and underlying security values. However, it is expected
that a minimum of 25% of the Portfolio's total assets will always be invested
in fixed income senior securities and that a minimum of 25% of its total
assets will always be invested in equity securities. When, in the
Sub-Adviser's judgment, market conditions warrant substantial temporary
investments in high-quality money market securities, the Portfolio may do so.

The Portfolio is authorized to write (i.e. sell) covered call options on the
securities in which it may invest and to enter into closing purchase
transactions with respect to certain of such options. A covered call option
is an option where the Portfolio in return for a premium gives another party a
right to buy specified securities owned by the Portfolio at a specified future
date and price set at the time of the contract. (See "Investment
Risks--Covered Call Options.")

Covered call options serve as a partial hedge against the price of the
underlying security declining.

Investments in money market securities shall include government securities,
commercial paper, bank certificates of deposit and repurchase agreements
collateralized by government securities. Investment in commercial paper is
restricted to companies in the top two rating categories by Moody's and S&P.

The Portfolio may also invest in issues of the United States treasury or a
United States government agency subject to repurchase agreements. The use of
repurchase agreements by the Portfolio involves certain risks. For a
discussion of these risks, see "Investment Risks--Repurchase Agreements."

GLOBAL FIXED INCOME PORTFOLIO

The Portfolio's investment objective is to maximize total return while
realizing a market level of income consistent with preserving principal and
liquidity.

Under normal market conditions, the Portfolio invests at least 65% of its
total assets in fixed income securities of foreign governments or their
political subdivisions and companies located in countries around the world,
including the United States.

Under normal market conditions, the Portfolio's assets are invested in
securities of issuers located in at least three different countries, one of
which may be the United States. The Portfolio intends, however, to invest in
no fewer than eight foreign countries. The Portfolio may invest a substantial
portion of its assets in one or more of those eight countries. The Portfolio
may also invest up to 10% of its total assets in emerging markets generally
and may invest up to 3% of its total assets in any one emerging market.

The Portfolio will be an actively managed non-diversified portfolio consisting
primarily of fixed income securities denominated in foreign currencies and the
U.S. dollar. In pursuing the Portfolio's investment strategy, the Sub-Adviser
seeks to add value to the Portfolio by selecting undervalued investments,
rather than by varying the average maturity of a Portfolio to reflect interest
rate forecasts. The Sub-Adviser utilizes fundamental credit and sector
valuation techniques to evaluate what it considers to be less efficient
markets and sectors of the fixed income marketplace in an attempt to select
securities with the potential for the highest return. The Sub-Adviser
emphasizes intermediate term economic fundamentals relating to foreign
countries and emerging markets, rather than focusing on day-to-day
fluctuations in a particular currency or in the fixed income markets.

The Portfolio may invest in all types of fixed income securities including
bonds, notes (including structured or hybrid notes), mortgage-backed
securities, asset-backed securities, convertible securities, Eurodollar and
Yankee Dollar instruments, preferred stocks (including convertible preferred
stock), listed and unlisted warrants and money market instruments. These
fixed income securities may be issued by foreign and U.S. corporations or
entities, foreign governments and their political subdivisions, the U.S.
Government, its agencies, authorities, instrumentalities or sponsored
enterprises and supranational entities. Supranational entities include
international organizations designated or supported by governmental entities
to promote economic reconstruction or development, and international banking
institutions and related government agencies.

The Portfolio purchases securities that pay interest on a fixed, variable,
floating, inverse floating, contingent, in-kind or deferred basis. The
Portfolio may enter into repurchase agreements and forward dollar roll
transactions, may purchase zero coupon and deferred payment securities, may
buy securities on a when-issued or delayed delivery basis, may engage in short
sales and may lend portfolio securities. The Portfolio may enter into various
forward foreign currency exchange transactions and foreign currency futures
transactions and utilize over-the-counter ("OTC") options to seek to manage
the Portfolio's foreign currency exposure.

The Portfolio invests primarily in investment grade fixed income securities,
i.e., securities rated at the time of purchase at least Baa by Moody's or BBB
by S&P, Duff, Fitch or IBCA, Ltd., or, if unrated, determined by the
Sub-Adviser to be of comparable credit quality. If a security is rated
differently by two or more rating agencies, the Sub-Adviser uses the highest
rating to compute the Portfolio's credit quality and also to determine its
rating category. In determining whether unrated securities are of equivalent
credit quality, the Sub-Adviser may take into account, but will not rely
entirely on, ratings assigned by foreign rating agencies. If the rating of a
security held by the Portfolio is downgraded below the minimum rating required
for the Portfolio, the Sub-Adviser will determine whether to retain that
security in the Portfolio.

Securities rated within the top three investment grade ratings (i.e., Aaa, Aa,
A or P-1 by Moody's or AAA, AA, A, A-1 or Duff-1 by S&P, Duff, Fitch or IBCA)
are generally regarded as high grade obligations. Securities rated Baa or P-2
by Moody's or BBB, A-2 or Duff-2 by S&P, Duff, Fitch or IBCA are generally
considered medium grade obligations and have some speculative characteristics.
Adverse changes in economic conditions or other circumstances are more likely
to weaken the medium grade issuer's capability to pay interest and repay
principal than is the case for high grade securities. If a non-investment
grade fixed income security presents special opportunities for the Portfolio,
the Portfolio may invest up to 15% of its total assets in securities rated Ba
by Moody's or BB by S&P, Duff, Fitch or IBCA, or, if not rated, judged by the
Sub-Adviser to be of equivalent credit quality. Below investment grade
securities, commonly referred to as "junk bonds," carry a higher degree of
risk than investment grade securities and are considered speculative by the
rating agencies. (See "Investment Risks--Risk Factors Applicable to High
Yielding High Risk Debt Securities.") The Sub-Adviser attempts to select for
the Portfolio those medium grade and non-investment grade fixed income
securities that have the potential for upgrade. The average dollar weighted
credit quality of the Portfolio is expected to be in a range of Aa to A
according to Moody's or AA to A according to S&P, Duff, Fitch or IBCA.

GROWTH & INCOME PORTFOLIO

The investment objective of the Growth & Income Portfolio is long-term growth
of capital and income without excessive fluctuation in market value.

The Fund intends to keep the Portfolio's assets invested in those securities
which are selling at reasonable prices in relation to value and, in doing so,
it may have to forego some opportunities for gains when, in the Fund's
judgment, they carry excessive risk.

The Portfolio will try to anticipate major changes in the economy and select
stocks which it believes will benefit most from these changes.

The Portfolio will normally invest in common stocks (including securities
convertible into common stocks) of large, seasoned companies in sound
financial condition, which common stocks are expected to show above-average
price appreciation. Although the prices of common stocks fluctuate and their
dividends vary, historically, common stocks have appreciated in value and
their dividends have increased when the companies they represent have
prospered and grown.

The Portfolio constantly seeks to balance the opportunity for profit against
the risk of loss. In the past, very few industries have continuously provided
the best investment opportunities. The Portfolio will take a flexible
approach and make adjustments to reflect changes in the opportunity for sound
investments relative to the risks assumed. Therefore, the Portfolio will sell
stocks that are judged to be overpriced and reinvest the proceeds in other
securities which are believed to offer better values.

The Portfolio may write covered call options on securities it owns, may invest
in rights and warrants to purchase securities, may enter into repurchase
agreements and may invest in shares of closed-end investment companies. The
Portfolio may also lend its securities. No more than 5% of the Portfolio's
net assets will be at risk with respect to each of the investment techniques
and policies described in this paragraph. Further, the Portfolio may invest
up to 2% of the value of the Portfolio's net assets in warrants which are not
listed on the New York Stock Exchange or the American Stock Exchange.

The Portfolio will not purchase securities for trading purposes. To create
reserve purchasing power and also for temporary defensive purposes, the
Portfolio may invest in straight bonds and other fixed-income securities.
When the Fund believes that the Portfolio should assume a temporary defensive
position because of unfavorable investment conditions, the Portfolio may
temporarily hold its assets in cash and short-term money market instruments.

INTERMEDIATE FIXED INCOME PORTFOLIO

The Portfolio's investment objective is primarily to achieve a high level of
current income, consistent with conserving principal and liquidity, and
secondarily to seek capital appreciation when changes in interest rates or
other economic conditions indicate that capital appreciation may be available
without significant risk to principal.

Under normal market conditions, substantially all, and at least 65%, of the
Portfolio's assets are invested in investment grade fixed income securities.
The Portfolio may invest up to 20% of its total assets in fixed income
securities of foreign corporations and foreign governments and their political
subdivisions, including securities of issuers located in emerging markets. No
more than 10% of the Portfolio's total assets will be invested in foreign
securities not subject to currency hedging transactions back into U.S.
dollars. The Portfolio may also engage in short selling. See "Common Types
of Securities and Management Practices" and "Investment Risks" for additional
information.

The Portfolio will be an actively managed diversified portfolio consisting
primarily of fixed income securities.

The Sub-Adviser's primary investment management and research focus is at the
security and industry/sector level. The Sub-Adviser seeks to add value to the
Portfolio by selecting undervalued investments, rather than by varying the
average maturity of the Portfolio to reflect interest rate forecasts. The
Sub-Adviser utilizes fundamental credit and sector valuation techniques to
evaluate what it considers to be less efficient markets and sectors of the
fixed income marketplace in an attempt to select securities with the potential
for the highest return.

Fixed income securities in which the Portfolio invests include bonds, notes
(including structured or hybrid notes), mortgage-backed securities,
asset-backed securities, convertible securities, Eurodollar and Yankee Dollar
instruments, preferred stocks and money market instruments. These fixed
income securities may be issued by U.S. and foreign corporations or entities,
U.S. and foreign banks, the U.S. government, its agencies, authorities,
instrumentalities or sponsored enterprises, and foreign governments and their
political subdivisions. The Portfolio purchases securities that pay interest
on a fixed, variable, floating, inverse floating, contingent, in-kind or
deferred basis. The Portfolio may enter into repurchase agreements and
forward dollar roll transactions, may purchase zero coupon and deferred
payment securities and may buy securities on a when-issued or delayed delivery
basis.

The Portfolio invests primarily in investment grade fixed income securities.
Investment grade securities are those that are rated at least Baa by Moody's
or BBB by S&P, Duff or Fitch or, if unrated, determined by the Sub-Adviser to
be of comparable credit quality. Foreign securities in which the Portfolio
invests are rated by IBCA, Ltd., in addition to the above listed ratings
organizations. IBCA uses the same ratings system as does S&P, Duff and Fitch.
If a security is rated differently by two or more rating agencies, the
Sub-Adviser uses the highest rating to compute the Portfolio's credit quality
and also to determine its rating category. In the case of unrated sovereign
and subnational debt of foreign countries, the Sub-Adviser may take into
account, but will not rely entirely on, the ratings assigned to the issuers of
such securities. If the rating of a security held by the Portfolio is
downgraded below the minimum rating required, the Sub-Adviser will determine
whether to retain that security in the Portfolio.

Securities rated Baa or P-2 by Moody's or BBB, A-2 or Duff-2 by S&P, Duff or
Fitch are generally considered medium grade obligations and have some
speculative characteristics. Adverse changes in economic conditions or other
circumstances are more likely to weaken the medium grade issuer's capability
to pay interest and repay principal than is the case for high grade
securities. The Portfolio may invest up to 20% of its total assets in below
investment grade fixed income securities rated Ba by Moody's or BB by S&P,
Duff or Fitch, or, if unrated, determined by the Sub-Adviser to be of
comparable credit quality. Below investment grade securities, commonly
referred to as "junk bonds," carry a higher degree of risk than medium grade
securities and are considered speculative by the rating agencies. (See
"Investment Risks--Risk Factors Applicable to High Yielding High Risk Debt
Securities.") The Sub-Adviser attempts to select for the Portfolio those
medium grade and investment grade fixed income securities that have the
potential for upgrade. The average dollar-weighted credit quality of the
Portfolio's portfolio is expected to be Aa according to Moody's or AA
according to S&P, Duff or Fitch.

The Portfolio generally invests in securities with final maturities, average
lives or interest rate reset frequencies of 15 years or less.

Under normal market conditions, the Portfolio's average dollar-weighted
effective portfolio maturity will vary from five to thirteen years.

INTERNATIONAL EQUITY PORTFOLIO

The investment objective of the Portfolio is long-term capital appreciation.
The Portfolio seeks to achieve this objective by investing primarily in common
stocks of well established companies located outside the United States. A
company will be considered to be located outside the United States if the
principal securities trading market for its equity securities is located
outside the U.S. or it is organized under the laws of, and has a principal
office in, a country other than the U.S. The Portfolio may also invest in
securities other than common stock if the Sub-Adviser believes these are
likely to be the best suited at that time to achieve the Portfolio's
objective. These include equity-related securities (such as preferred stocks
and convertible securities), debt securities issued by foreign governments or
foreign corporations, and U.S. or foreign short-term investments. The
Portfolio may invest in the securities of smaller companies and in the
securities of unseasoned issuers. The Portfolio may also invest in repurchase
agreements, lend its securities, purchase illiquid securities and engage in
various hedging transactions. The Portfolio intends to diversify its holdings
among several countries and to have, under normal market conditions, at least
65% of the Portfolio's total assets invested in the securities of companies
located in at least five countries, not including the United States. Current
income is not an investment objective of the Portfolio and any income produced
will be only of secondary importance as a by-product of the investment
selection process used to achieve the Portfolio's objective.

In selecting its portfolio securities, the Portfolio places primary emphasis
on fundamentally undervalued stocks as determined by a range of
characteristics, including relatively low price-earnings multiples, dividend
yield, consistency of earnings growth and cash flow, financial strength,
realizable asset value and liquidity. Securities of companies with medium to
large market capitalizations usually constitute the majority of the
Portfolio's investments. The Portfolio currently considers medium to large
market capitalizations to be those in excess of $1 billion. Market
capitalization is defined as total current market value of a company's
outstanding common stock. In addition, the Portfolio is presently anticipated
to be weighted largely toward companies located in Western Europe (for
example, the United Kingdom, Germany, France, Italy, Spain, Switzerland, the
Netherlands, Sweden, Ireland and Finland), Australia and the Far East (for
example, Japan, Hong Kong, Singapore, Malaysia, Thailand, Indonesia and the
Philippines). However, the Portfolio is free to invest in companies of any
size and in companies located in other foreign countries, including developing
countries.

The investment approach of the Sub-Adviser is based on "bottom-up" fundamental
analysis of individual companies within a framework of dynamic economic and
business themes that are believed to provide the best opportunities for
effective stock selection. Stock selection decisions are guided by:

- --GLOBAL ECONOMIC AND BUSINESS THEMES. The Sub-Adviser identifies economic
and business themes and trends that have the potential to support the
long-term growth prospects of companies best positioned to take advantage of
them. These themes and trends may transcend political and geographic
boundaries and may be global or regional in nature. Current themes and trends
include, for example, worldwide growth in telecommunications and multimedia,
positive banking environment, rapid economic development in the Pacific Basin,
global healthcare trends and unique consumer franchises.

- --FUNDAMENTAL ANALYSIS. The Sub-Adviser seeks to identify companies that it
believes are best positioned to benefit from the identified themes and trends.
It conducts an extensive "bottom-up" analysis seeking individual quality
companies with stocks that are fundamentally undervalued relative to their
long-term prospective earnings growth rate, their historic valuation levels
and their peer group. This process includes examining financial statements,
evaluating management and products, assessing competitive position and
strengths, as well as analyzing the economic variables affecting the company's
operating environment. This in-depth, fundamental analysis is believed to be
the most important step in identifying stock selections for the Portfolio.

Actual country weightings are a by-product of the bottom-up stock selection
approach. Accordingly, the country in which a company is located is
considered by the Sub-Adviser to be less important than the diversity of its
sources of earnings and earnings growth.

Investors should also be aware that investment in foreign securities carries
additional risks not present when investing in domestic securities. See
"Investment Risks--Foreign Securities" below. The Portfolio is not intended
as a complete or balanced investment vehicle, but rather as an investment for
persons who are in a financial position to assume the risk and share price
volatility associated with foreign investments. As a result, the Portfolio
should be considered as a long-term investment vehicle.

LARGE CAP VALUE PORTFOLIO

The Portfolio's investment objective is to seek long-term growth of capital
and income by investing principally in a diversified portfolio of common
stocks which are considered to be undervalued in relation to earnings,
dividends and/or assets.

The Portfolio intends to invest in stocks of companies which are rated "B-" or
better in investment quality (growth and stability of earnings and dividends)
by S&P and/or "B" or better by Value Line in financial strength. (For a
description of these ratings see "Description of Stock Ratings" in the SAI.)

A stock will be considered to be undervalued if it is currently trading at a
price below which the Sub-Adviser believes it should be trading and therefore
a superior potential investment based on one or more of the following
comparisons:

1. price relative to earnings,
2. price relative to dividends,
3. price relative to assets as measured by book value.

Valuation levels as described above for each security will be compared to a
large universe of stocks as selected by the Sub-Adviser, as well as its own
past history of valuation over several years. The universe will vary from
time to time and may consist of as many as a thousand stocks. The holdings in
the Portfolio will be monitored regularly by the Sub-Adviser to determine that
they continue to be relatively favorable investments. For a discussion of
risk factors involved in investing in undervalued stocks, see "Investment
Risks--Common Stocks."

Investors' attitudes toward different kinds of companies tend to shift back
and forth over time, from enthusiasm to pessimism and back to enthusiasm. The
Portfolio may be considered to be "contrarian" in nature because of its
primary focus on undervalued stocks, and typically its portfolio will consist
of companies whose shares are relatively unpopular and out-of-favor, among
investors generally, at the time of purchase. However, the Portfolio will be
restricted to companies which the Sub-Adviser believes are sound businesses
with good future potential and should, therefore, eventually gain greater
investor favor.

Although individual stocks in the Portfolio may be in any price range because
value as determined by the Sub-Adviser is relative rather than absolute, it is
expected that the average price/earnings ratio of the stocks in the Portfolio
as a whole will be lower than that of the S&P 500, that the average dividend
yield on the investments will be higher than that of the S&P 500, and that the
average price to book value ratio will be lower than that of the S&P 500. It
is also anticipated that some of the companies in the Portfolio may not be
paying current dividends.

Except for necessary reserves including but not limited to reserves held to
cover redemptions and unanticipated expenses, as determined by management, all
assets will be invested in marketable securities composed principally of
common stocks and securities convertible into common stocks. The reserves
will be held in cash or high-quality, short-term debt obligations readily
changeable into cash.

The Sub-Adviser believes, however, that there may be times when the
shareholders' interests are best served by investing temporarily in preferred
stocks, bonds or other defensive issues. It retains the freedom to administer
the Portfolio accordingly when, in its judgment, economic and market
conditions make such a course desirable. Normally, however, the Portfolio
will maintain at least 90% of the Portfolio in common stocks. There are no
restrictions or guidelines regarding the investment of Portfolio assets in
shares listed on an exchange or traded over-the-counter.

LARGE CAP GROWTH PORTFOLIO

The investment objective of the Portfolio is long-term capital appreciation.
The Portfolio attempts to achieve its objective by normally investing at least
65% of its total assets in common stocks and other equity-type securities
(such as preferred stocks, securities convertible into or exchangeable for
common stocks, and warrants or rights to purchase common stocks) that, in the
opinion of the Sub-Adviser, have long-term appreciation possibilities.

The Portfolio is designed for long-term investors who desire to participate in
the stock market with more investment risk and volatility than the stock
market in general, but with less investment risk and volatility than
aggressive capital appreciation funds. The Portfolio seeks to reduce risk by
investing in a diversified portfolio, but this does not eliminate risk.

In pursuing its investment objective, the Portfolio may invest in debt
securities of corporate and governmental issuers. Investments in debt
securities are limited to those that are rated within the four highest grades
(generally referred to as "investment grade") assigned by an NRSRO.
Investments in unrated debt securities are limited to those deemed to be of
comparable quality by the Sub-Adviser. Securities in the fourth highest grade
may possess speculative characteristics, and changes in economic conditions
are more likely to affect the issuer's capacity to pay interest and repay
principal. If the rating of a security held by the Portfolio is lost or
reduced below investment grade, the Portfolio is not required to dispose of
the security--the Sub-Adviser will, however, consider that fact in determining
whether the Portfolio should continue to hold the security.

When the Sub-Adviser determines that adverse market or economic conditions
exist and considers a temporary defensive position advisable, the Portfolio
may invest without limitation in high-quality fixed income securities or hold
assets in cash or cash equivalents.

The Portfolio may also invest in convertible securities. The Portfolio may
invest up to 25% of its total assets in foreign securities. The Portfolio may
make loans of its portfolio securities to broker-dealers and banks subject to
certain restrictions described in the SAI. The Portfolio may also invest in
securities purchased on a when-issued or delayed-delivery basis.

Consistent with its investment objective, the Portfolio may invest in a broad
array of financial instruments and securities, including conventional
exchange-traded and non-exchange-traded options, futures contracts, futures
options, securities collateralized by underlying pools of mortgages or other
receivables, floating rate instruments, and other instruments that securitize
assets of various types ("Derivatives"). In each case, the value of the
instrument or security is "derived" from the performance of an underlying
asset or a "benchmark" such as a security index, an interest rate, or a
currency. The Portfolio does not expect to invest more than 5% of its net
assets in any type of Derivative except for options, futures contracts, and
futures options. (See "Common Types of Securities and Management
Practices--Strategic Transactions.")

The Portfolio may sell short securities the Portfolio owns or has the right to
acquire without further consideration, a technique called selling short
"against the box."

MID CAP EQUITY PORTFOLIO

The Portfolio's investment objective is to achieve long-term growth of capital
through investment primarily in equity and equity-related securities of
companies which appear to be undervalued.

Under normal circumstances, at least 80% of the Portfolio's total assets will
be invested in equity and equity-related securities.

The Portfolio follows a disciplined investment strategy, emphasizing stocks
which the Sub-Adviser believes offer above average potential for capital
growth. The Sub-Adviser intends to use statistical modeling techniques that
utilize stock specific factors (e.g., current price earnings ratios, stability
of earnings growth, forecasted changes in earnings growth, trends in consensus
analysts' estimates, and measures of earnings results relative to
expectations) to identify equity securities that are attractive to purchase as
candidates. Once identified, these securities will be subject to further
fundamental analysis by the Sub-Adviser's professional staff before they are
included in the Portfolio's holdings. Securities selected for inclusion in
the Portfolio's holdings will represent various industries and sectors. The
Sub-Adviser's security selection tends to have a midcap bias, as their
research indicates that the potential returns associated with their approach
are highest in that sector of the market.

The Portfolio will be an actively managed diversified portfolio consisting
primarily of equity and equity-related securities.

The Sub-Adviser seeks to add value to portfolios of securities by finding
companies with improving business momentum whose securities have reasonable
valuations. The Sub-Adviser utilizes both quantitative and fundamental
analysis to find stocks whose estimates of earnings are being revised upwards
but whose valuation does not yet reflect this positive trend.

When the Sub-Adviser believes that foreign markets offer above average growth
potential, the Portfolio may invest without limit in equity and equity-related
securities of foreign issuers that are listed on a United States securities
exchange or traded in the U.S. OTC market. The Portfolio may not invest more
than 10% of its total assets in such securities which are not so listed or
traded.

The equity and equity-related securities in which the Portfolio invests
include exchange-traded and over-the-counter common and preferred stocks but
may also include warrants, rights, convertible securities, depositary
receipts, depositary shares, trust certificates, shares of other investment
companies, limited partnership interests and equity participations. These
equity securities may be issued by U.S. or foreign companies.

The Portfolio may invest in debt securities and preferred stocks which are
convertible into, or exchangeable for, common stocks. These securities will
be rated Aaa, Aa or A by Moody's, or AAA, AA, or A by S&P, Duff or Fitch, or,
if unrated, determined by the Sub-Adviser to be of comparable credit quality.
Up to 5% of the Portfolio's total assets invested in convertible debt
securities and preferred stocks may be rated Baa by Moody's or BBB by S&P,
Duff, or Fitch. The Portfolio may enter into repurchase agreements and invest
in restricted and illiquid securities, although it intends to invest in
restricted and illiquid securities on an occasional basis only. The Portfolio
may purchase and sell put and call options, enter into futures contracts on
U.S. equity indices and purchase and sell options on such futures contracts.

MONEY MARKET PORTFOLIO

The investment objective of the Portfolio is to obtain the highest level of
current income which is consistent with the preservation of capital and
maintenance of liquidity.

The Portfolio invests only in: (1) obligations of the United States
Government; (2) obligations issued by agencies or instrumentalities of the
United States Government; (3) instruments that are secured or collateralized
by obligations of the United States Government, its agencies, or its
instrumentalities; (4) short-term obligations of United States banks and
savings and loan associations and companies having assets of more than
$1,000,000,000; (5) instruments fully secured or collateralized by such bank
and savings and loans obligations; (6) dollar denominated short-term
obligations of foreign banks, foreign branches of foreign or U.S. banks
(referred to as "Eurodollars"), and short-term obligations of U.S. branches
and agencies of foreign banks (referred to as "Yankee dollars"); (7)
commercial paper and short-term corporate debt securities rated in one of the
two highest categories for short term debt securities by at least two NRSROs
or one such NRSRO if only one has rated the security (see the SAI for a
description of commercial paper ratings); (8) corporate or other notes
guaranteed by letters of credit from banks in the United States (satisfying
the criteria described in (4), above) or collateralized by United States
Government obligations; and (9) obligations of (i) consumer and commercial
finance companies, (ii) securities brokerage companies, (iii) leasing
companies and (iv) insurance companies. Certain of these obligations may be
variable or floating rate instruments.

The Portfolio will enter into repurchase agreements under which it purchases
securities, subject to agreement by the seller to repurchase the securities at
a higher price on a specified date, with the gain establishing the yield
during the Portfolio's holding period. The Sub-Adviser, under general
policies established by the Fund's Directors, reviews the creditworthiness of
the other party to any repurchase agreement, and will only enter into
repurchase agreements with parties whose credit is deemed satisfactory. If
the seller becomes bankrupt, the Portfolio may experience delays in recovering
its money, fail to recover part or all of its investment, and incur costs in
disposing of the securities used as collateral for the seller's repurchase
obligation.

The Portfolio may also enter into reverse repurchase agreements when the
Sub-Adviser considers them to be advantageous to the Portfolio and only for
temporary liquidity purposes not to exceed 60 days, without renewal or
extension. Reverse repurchase agreements permit the Portfolio to leverage its
investment portfolio by selling securities while agreeing to repurchase them
at an agreed time and price. The bankruptcy of the other party to a reverse
repurchase agreement could cause the Portfolio to experience delays in
recovering its securities. If, in the meantime, the value of the securities
fluctuated, the Portfolio could experience a loss.

The Portfolio will not invest in "firm commitments" or "when
issued"securities.

The Portfolio may only invest in U.S. dollar-denominated instruments that are
determined to present minimal credit risks and that, at the time of
acquisition, are rated in one of the two highest rating categories by at least
two NRSROs or by the only NRSRO that has rated the instrument, or in the case
of unrated instruments, have been determined to be of comparable quality to
either of the above. The Portfolio's investments must also meet the maturity
and diversification requirements applicable to money market funds.

See "Investment Objectives and Policies" in the SAI for information about the
quality of the securities in which the Portfolio may invest and more complete
descriptions of repurchase agreements and other obligations that the Portfolio
may hold.

RISK FACTORS. The principal risks associated with investment in the Portfolio
are the risk of fluctuations in the short-term interest rates, the risks
associated with entering into repurchase agreements described above, and the
risk of default among one or more issuers of securities which comprise the
Portfolio's assets.

SMALL CAP EQUITY PORTFOLIO

The investment objective of the Portfolio is to seek long-term capital
appreciation. The Portfolio invests primarily in a diversified portfolio of
common stocks and other equity-type securities (such as preferred stocks,
securities convertible or exchangeable for common stocks, and warrants or
rights to purchase common stocks) of entrepreneurially managed companies that
the Sub-Adviser believes represent special opportunities. The Portfolio
emphasizes investments in financially strong small and medium-sized companies,
based principally on appraisal of their management and stock valuations. The
Sub-Adviser considers "small" and "medium-sized" companies to be those with
market capitalizations of less than $1 billion and $1 to $3 billion,
respectively.

In both its initial and ongoing appraisals of a company's management, the
Sub-Adviser seeks to know both the principal owners and senior management and
to assess their business judgment and strategies through personal visits. The
Sub-Adviser favors companies whose management has an owner/operator,
risk-averse orientation and a demonstrated ability to create wealth for
investors. Attractive company characteristics include unit growth, favorable
cost structures or competitive positions, and financial strength that enables
management to execute business strategies under difficult conditions. A
company is attractively valued when its stock can be purchased at a meaningful
discount to the value of the underlying business.

The Portfolio is designed for long-term investors who want greater return
potential than is available from the stock market in general, and who are
willing to tolerate the greater investment risk and market volatility
associated with investments in small and medium-sized companies. Although the
Portfolio does not attempt to reduce or limit risk through wide industry
diversification of investment, it usually allocates its investments among a
number of different industries rather than concentrating in a particular
industry or group of industries.

In pursuing its investment objective, the Portfolio may invest in debt
securities of corporate and governmental issuers. Debt securities rated
within the four highest grades by an NRSRO are generally referred to as
"investment grade." The Portfolio may invest up to 35% of its net assets in
debt securities, but does not expect to invest more than 5% of its net assets
in debt securities that are rated below investment grade.

The Portfolio may sell short securities the Portfolio owns or has the right to
acquire without further consideration, a technique called selling short
"against the box."

COMMON TYPES OF SECURITIES AND MANAGEMENT PRACTICES

This section describes some of the types of securities a Portfolio may hold
and the various kinds of investment practices that may be used in day-to-day
portfolio management. A Portfolio may invest in the following securities or
engage in the following practices to the extent that such securities and
practices are consistent with the Portfolio's investment objective(s) and
policies described herein. Each Portfolio's investment program is subject to
further restrictions described in the SAI.

COMMON STOCKS. Common stocks are shares of a corporation or other entity that
entitle the holder to a pro rata share of the profits of the corporation, if
any, without preference over any other shareholder or class of shareholders,
including holders of the entity's preferred stock and other senior equity.
Common stock usually carries with it the right to vote and frequently an
exclusive right to do so.

SMALL CAPITALIZATION STOCKS. Certain Portfolios may invest in securities of
companies with small or mid-sized market capitalizations. Market
capitalization is defined as the total current market value of a company's
outstanding common stock. Although investments in small capitalization
companies may present greater opportunities for growth, they also involve
greater risks than are customarily associated with investments in larger, more
established companies. The securities of small companies may be subject to
more volatile market movements than securities of larger, more established
companies. Smaller companies may have limited product lines, markets or
financial resources, and they may depend upon a limited or less experienced
management group. The securities of small capitalization companies may be
traded only on the over-the-counter market or on a regional securities
exchange and may not be traded daily or in the volume typical of trading on a
national securities exchange. As a result, the disposition by a Portfolio of
securities in order to meet redemptions or otherwise may require the Portfolio
to sell securities at a discount from market prices, over a longer period of
time or during periods when disposition is not desirable.

UNSEASONED ISSUERS. Certain of the Portfolios may invest in unseasoned
issuers. Unseasoned issuers are companies with a record of less than three
years' continuous operation, even including the operations of any predecessors
and parents. Unseasoned issuers by their nature have only a limited operating
history which can be used for evaluating the company's growth prospects. As a
result, investment decisions for these securities may place a greater emphasis
on current or planned product lines and the reputation and experience of the
company's management and less emphasis on fundamental valuation factors than
would be the case for more mature growth companies. In addition, many
unseasoned issuers may also be small companies and involve the risks and price
volatility associated with smaller companies. The International Equity
Portfolio may invest up to 5% of its total assets in such securities.

WARRANTS. Warrants acquired by a Portfolio entitle it to buy common stock
from the issuer at a specified price and time. Warrants are subject to the
same market risks as stocks, but may be more volatile in price. A Portfolio's
investment in warrants will not entitle it to receive dividends or exercise
voting rights and will become worthless if the warrants cannot be profitably
exercised before their expiration dates.

CONVERTIBLE SECURITIES. Certain Portfolios may invest in convertible
securities consisting of bonds, notes, debentures and preferred stocks.
Convertible debt securities and preferred stock acquired by a Portfolio
entitle the Portfolio to exchange such instruments for common stock of the
issuer at a predetermined rate. By investing in convertible securities, a
Portfolio obtains the right to benefit from the capital appreciation potential
in the underlying stock upon exercise of the conversion right, while earning
higher current income than would be available if the stock were purchased
directly. Convertible securities are subject both to the credit and interest
rate risks associated with debt obligations and to the stock market risk
associated with equity securities. Although convertible securities purchased
by a Portfolio are frequently rated investment grade, certain Portfolios also
may purchase unrated securities or securities rated below investment grade if
the securities meet the Sub-Adviser's other investment criteria. Convertible
securities rated below investment grade:

--Tend to be more sensitive to interest rate and economic changes;

--May be obligations of issuers who are less creditworthy than issuers of
higher quality convertible securities;

--May be more thinly traded due to the fact that such securities are less
well known to investors than either common stock or conventional debt
securities.

As a result, a Sub-Adviser's own investment research and analysis tends to be
more important than other factors in the purchase of such securities.

The International Equity Portfolio will not invest in any security in default
at the time of purchase or in any nonconvertible debt securities rated below
investment grade, and will invest less than 20% of the market value of its
assets at the time of purchase in convertible securities rated below
investment grade. If convertible securities purchased by the International
Equity Portfolio are downgraded following purchase, or if other circumstances
cause 20% or more of the International Equity Portfolio's assets to be
invested in convertible securities rated below investment grade, the Directors
of the Fund, in consultation with the Sub-Adviser, will determine what action,
if any, is appropriate in light of all relevant circumstances.

MORTGAGE-BACKED SECURITIES. Certain Portfolios may invest in privately issued
mortgage-backed securities and mortgage-backed securities issued or guaranteed
by foreign entities or the U.S. Government or any of its agencies,
instrumentalities or sponsored enterprises, including, but not limited to, the
Government National Mortgage Association ("GNMA"), the Federal National
Mortgage Association ("FNMA") or the Federal Home Loan Mortgage Corporation
("FHLMC"). Mortgage-backed securities represent direct or indirect
participations in, or are collateralized by and payable from, mortgage loans
secured by real property. Mortgagors can generally prepay interest or
principal on their mortgages whenever they choose. Therefore, mortgage-backed
securities are often subject to more rapid repayment than their stated
maturity date would indicate as a result of principal prepayments on the
underlying loans. This can result in significantly greater price and yield
volatility than is the case with traditional fixed income securities. During
periods of declining interest rates, prepayments can be expected to
accelerate, and thus impair a Portfolio's ability to reinvest the returns of
principal at comparable yields. Conversely, in a rising interest rate
environment, a declining prepayment rate will extend the average life of many
mortgage-backed securities, increase a Portfolio's exposure to rising interest
rates and prevent a Portfolio from taking advantage of such higher yields.

GNMA securities are backed by the full faith and credit of the U.S.
Government, which means that the U.S. Government guarantees that the interest
and principal will be paid when due. FNMA securities and FHLMC securities are
not backed by the full faith and credit of the U.S. Government; however, these
enterprises have the ability to obtain financing from the U.S. Treasury. See
the SAI for additional descriptions of GNMA, FNMA and FHLMC certificates.

Multiple class securities include collateralized mortgage obligations ("CMOs")
and Real Estate Mortgage Investment Conduit ("REMIC") pass-through or
participation certificates. CMOs provide an investor with a specified
interest in the cash flow from a pool of underlying mortgages or other
mortgage-backed securities. CMOs are issued in multiple classes, each with a
specified fixed or floating interest rate and a final scheduled distribution
date. In most cases, payments of principal are applied to the CMO classes in
the order of their respective stated maturities, so that no principal payments
will be made on a CMO class until all other classes having an earlier stated
maturity date are paid in full. A REMIC is a CMO that qualifies for special
tax treatment under the Internal Revenue Code of 1986, as amended ("Code"),
and invests in certain mortgages principally secured by interests in real
property and other permitted investments. The Portfolios do not intend to
purchase residual interests in REMICs.

Stripped mortgage-back securities ("SMBS") are derivative multiple class
mortgage-backed securities. SMBS are usually structured with two different
classes; one that receives 100% of the interest payments and the other that
receives 100% of the principal payments from a pool of mortgage loans. If the
underlying mortgage loans experience prepayments of principal at a rate
different from what was anticipated, a Portfolio may fail to fully recoup its
initial investment in their securities. Although the market for SMBS is
increasingly liquid, certain SMBS may not be readily marketable and will be
considered illiquid for purposes of each Portfolio's limitation on investments
in illiquid securities. The market value of the class consisting entirely of
principal payments generally is unusually volatile in response to changes in
interest rates. The yields on a class of SMBS that receives all or most of
the interest from mortgage loans are generally higher than prevailing market
yields on other mortgage-backed securities because their cash flow patterns
are more volatile and there is a greater risk that the initial investment will
not be fully recouped.

ASSET-BACKED SECURITIES. Certain Portfolios may invest in asset-backed
securities issued by foreign or U.S. entities. The principal and interest
payments on asset-backed securities are collateralized by pools of assets such
as auto loans, credit card receivables, leases, installment contracts and
personal property. Such asset pools are securitized through the use of
special purpose trusts or corporations. Payments or distributions of
principal and interest on asset-backed securities 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; however, privately issued
obligations collateralized by a portfolio of privately issued asset-backed
securities do not involve any government-related guaranty or insurance. Like
mortgage-backed securities, asset-backed securities are subject to more rapid
prepayment of principal than indicated by their stated maturity which may
greatly increase price and yield volatility. Asset-backed securities
generally do not have the benefit of a security interest in collateral that is
comparable to mortgage assets and there is the possibility that recoveries on
repossessed collateral may not be available to support payments on these
securities.

FOREIGN SECURITIES. Certain Portfolios may invest in securities of foreign
governments and companies. Investments in foreign securities involve certain
risks that are different from the risks of investing in securities of U.S.
issuers. (See "Investment Risks - Foreign Securities" for a discussion of
these risks.) Certain Portfolios may also invest in issuers located in
emerging markets. Investments in emerging markets involve risks in addition
to those generally associated with investments in foreign securities. (See
"Investment Risks - Investing in Emerging Markets".)

The Mid Cap Equity Portfolio may invest without limit in foreign securities
which trade on a U.S. exchange or in the U.S. OTC market, but is limited to
10% of total assets on those foreign securities which are not so listed or
traded. The Mid Cap Equity Portfolio may invest up to 10% of its total assets
in issuers located in emerging markets generally and up to 3% of its total
assets in issuers of any one specific emerging market country.

Other than American Depositary Receipts, foreign debt securities denominated
in U.S. dollars, and securities guaranteed by a U.S. person, each of the Large
Cap Growth and Small Cap Equity Portfolios is limited to investing no more
than 25% of its total assets in foreign securities.

DEPOSITARY RECEIPTS AND DEPOSITARY SHARES. Depositary receipts and depositary
shares are typically issued by a U.S. or foreign bank or trust company and
evidence ownership of underlying securities of a U.S. or foreign issuer.
Unsponsored programs are organized independently and without the cooperation
of the issuer of the underlying securities. As a result, available
information concerning the issuer may not be as current as for sponsored
depositary instruments and their prices may be more volatile than if they were
sponsored by the issuers of the underlying securities. Examples of such
investments include, but are not limited to, American Depositary Receipts and
Shares ("ADRs" and "ADSs"), Global Depository Receipts and Shares ("GDRs" and
"GDSs") and European Depository Receipts and Shares ("EDRs" and "EDSs").

EURODOLLAR AND YANKEE DOLLAR INVESTMENTS. Certain Portfolios may invest in
Eurodollar and Yankee Dollar instruments. Eurodollar instruments are bonds of
foreign corporate and government issuers that pay interest and principal in
U.S. dollars held in banks outside the United States, primarily in Europe.
Yankee Dollars instruments are U.S. dollar denominated bonds typically issued
in the U.S. by foreign governments and their agencies and foreign banks and
corporations. (See "Investment Risks - Foreign Securities.")

SOVEREIGN DEBT OBLIGATIONS. Certain Portfolios may invest in sovereign debt
obligations, which involve special risks that are not present in corporate
debt obligations. The foreign issuer of the sovereign debt or the foreign
governmental authorities that control the repayment of the debt may be unable
or unwilling to repay principal or interest when due, and a Portfolio may have
limited recourse in the event of a default. During periods of economic
uncertainty, the market prices of sovereign debt, and the Portfolio's net
asset value, to the extent it invests in such securities, may be more volatile
than prices of debt obligations of U.S. issuers. In the past, certain foreign
countries have encountered difficulties in servicing their debt obligations,
withheld payments of principal and interest and declared moratoria on the
payment of principal and interest on their sovereign debt.

A sovereign debtor's willingness or ability to repay principal and pay
interest in a timely manner may be affected by, among other factors, its cash
flow situation, the extent of its foreign currency reserves, the availability
of sufficient foreign exchange, the relative size of the debt service burden,
the sovereign debtor's policy toward principal international lenders and local
political constraints. Sovereign debtors may also be dependent on expected
disbursements from foreign governments, multilateral agencies and other
entities to reduce principal and interest arrearages on their debt. The
failure of a sovereign debtor to implement economic reforms, achieve specified
levels of economic performance or repay principal or interest when due may
result in the cancellation of third-party commitments to lend funds to the
sovereign debtor, which may further impair such debtor's ability or
willingness to service its debts.

BRADY BONDS. Brady Bonds are securities created through the exchange of
existing commercial bank loans to public and private entities in certain
emerging markets for new bonds in connection with debt restructurings. In
light of the history of defaults of countries issuing Brady Bonds on their
commercial bank loans, investments in Brady Bonds may be viewed as
speculative. Brady Bonds may be fully or partially collateralized or
uncollateralized, are issued in various currencies (but primarily in U.S.
dollars) and are actively traded in over-the-counter secondary markets.
Incomplete collateralization of interest or principal payment obligations
results in increased credit risk. U.S. dollar-denominated collateralized
Brady Bonds, which may be fixed-rate bonds or floating-rate bonds, are
generally collateralized by U.S. Treasury zero coupon bonds having the same
maturity as the Brady Bonds.

OBLIGATIONS OF SUPRANATIONAL ENTITIES. Certain Portfolios may invest in
obligations of supranational entities designated or supported by governmental
entities to promote economic reconstruction or development and of
international banking institutions and related government agencies. Examples
include the International Bank for Reconstruction and Development (the "World
Bank"), the Asian Development Bank and the Inter-American Development Bank.
Each supranational entity's lending activities are limited to a percentage of
its total capital (including "callable capital" contributed by its
governmental members at the entity's call), reserves and net income. There is
no assurance that participating governments will be able or willing to honor
their commitments to make capital contributions to a supranational entity.

RESTRICTED AND ILLIQUID SECURITIES. Certain Portfolios may invest in
restricted and illiquid securities. Restricted securities are securities
which are not readily marketable because they are subject to restrictions on
their resale. Illiquid securities include those that are not readily
marketable, repurchase agreements maturing in more than seven days, time
deposits with a notice or demand period of more than seven days, certain SMBS,
swap transactions, certain over-the-counter options and certain restricted
securities. Based upon continuing review of the trading markets for a
specific restricted security, the security may be determined to be eligible
for resale to qualified institutional buyers pursuant to Rule 144A under the
Securities Act of 1933 and, therefore, to be liquid. Also, certain illiquid
securities may be determined to be liquid if they are found to satisfy certain
relevant liquidity requirements.

The Board of Directors has adopted guidelines and delegated to the
Sub-Advisers the daily function of determining and monitoring the liquidity of
portfolio securities, including restricted and illiquid securities. The Board
of Directors, however, retains oversight and is ultimately responsible for
such determinations. The purchase price and subsequent valuation of illiquid
securities normally reflect a discount, which may be significant, from the
market price of comparable securities for which a liquid market exists.

Each of the Intermediate Fixed Income, Mid Cap Equity, Global Fixed Income ,
International Equity, Small Cap Equity and Large Cap Growth Portfolios may
invest up to 15% of its net assets in illiquid securities. Each of the
Balanced, Large Cap Value and Money Market Portfolios may invest up to 10% of
its net assets in illiquid securities, while the Growth & Income Portfolio may
invest up to 5% of its net assets in illiquid securities.

CORPORATE DEBT OBLIGATIONS. Certain Portfolios may invest in corporate debt
obligations and zero coupon securities issued by financial institutions and
corporations. Corporate debt obligations are subject to the risk of an
issuer's inability to meet principal and interest payments on the obligations
and may also be subject to price volatility due to such factors as market
interest rates, market perception of the creditworthiness of the issuer and
general market liquidity.

BELOW INVESTMENT GRADE SECURITIES. Certain Portfolios may invest their assets
in securities rated below investment grade. Securities rated below Baa by
Moody's or BBB by S&P are commonly known as "junk bonds" and are considered to
be high risk. (See "Investment Risks - Risk Factors Applicable to High
Yielding High Risk Debt Securities.")

ZERO COUPON AND DEFERRED PAYMENT SECURITIES. Certain Portfolios may invest in
zero coupon and deferred payment securities. Zero coupon securities are
securities sold at a discount to par value and on which interest payments are
not made during the life of the security. Upon maturity, the holder is
entitled to receive the par value of the security. A Portfolio is required to
accrue income with respect to these securities prior to the receipt of cash
payments. Because a Portfolio will distribute this accrued income to
shareholders, to the extent that shareholders elect to receive dividends in
cash rather than reinvesting such dividends in additional shares, the
Portfolio will have fewer assets with which to purchase income producing
securities. Deferred payment securities are securities that remain zero
coupon securities until a predetermined date, at which time the stated coupon
rate becomes effective and interest becomes payable at regular intervals.
Zero coupon and deferred payment securities may be subject to greater
fluctuation in value and may have less liquidity in the event of adverse
market conditions than comparably rated securities paying cash interest at
regular interest payment periods.

FORWARD ROLL TRANSACTIONS. To seek to enhance current income, the
Intermediate Fixed Income Portfolio may invest up to 10% of its net assets and
the Global Fixed Income Portfolio may invest up to 5% of its total assets in
forward roll transactions involving mortgage-backed securities. In a forward
roll transaction, a Portfolio sells a mortgage-backed security to a financial
institution, such as a bank or broker-dealer, and simultaneously agrees to
repurchase a similar security from the institution at a later date at an
agreed-upon price. The mortgage-backed securities that are repurchased will
bear the same interest rate as those sold, but generally will be
collateralized by different pools of mortgages with different prepayment
histories than those sold. During the period between the sale and repurchase,
the Portfolio will not be entitled to receive interest and principal payments
on the securities sold. Proceeds of the sale will be invested in short-term
instruments, such as repurchase agreements or other short-term securities, and
the income from these investments, together with any additional fee income
received on the sale and the amount gained by repurchasing the securities in
the future at a lower price, will generate income and gain for the Portfolio
which is intended to exceed the yield on the securities sold. Forward roll
transactions involve the risk that the market value of the securities sold by
the Portfolio may decline below the repurchase price of those securities. At
the time that a Portfolio enters into a forward roll transaction, it will
place cash or liquid assets in a segregated account that is marked to market
daily having a value equal to the repurchase price (including accrued
interest).

LEVERAGE. The use of forward roll transactions involves leverage. Leverage
allows any investment gains made with the additional monies received (in
excess of the costs of the forward roll transaction), to increase the net
asset value of a Portfolio's shares faster than would otherwise be the case.
On the other hand, if the additional monies received are invested in ways that
do not fully recover the costs of such transactions to a Portfolio, the net
asset value of the Portfolio would fall faster than would otherwise be the
case.
STRUCTURED OR HYBRID NOTES. Certain Portfolios may invest in structured or
hybrid notes. The distinguishing feature of a structured or hybrid note is
that the amount of interest and/or principal payable on the note is based on
the performance of a benchmark asset or market other than fixed income
securities or interest rates. Examples of these benchmarks include stock
prices, currency exchange rates and physical commodity prices. Investing in a
structured note allows a Portfolio to gain exposure to the benchmark market
while fixing the maximum loss that it may experience in the event that the
market does not perform as expected. Depending on the terms of the note, a
Portfolio may forego all or part of the interest and principal that would be
payable on a comparable conventional note; the Portfolio's loss cannot exceed
this foregone interest and/or principal. An investment in structured or
hybrid notes involves risks similar to those associated with a direct
investment in the benchmark asset.

TAX-EXEMPT SECURITIES. The Intermediate Fixed Income Portfolio may invest up
to 10% of its total assets in tax-exempt securities if the Sub-Adviser
believes that tax-exempt securities will provide competitive returns.

INVERSE FLOATING RATE SECURITIES. Certain Portfolios may invest in inverse
floating rate securities. The interest rate on an inverse floater resets in
the opposite direction from the market rate of interest to which the inverse
floater is indexed. An inverse floater may be considered to be leveraged to
the extent that its interest rate varies by a magnitude that exceeds the
magnitude of the change in the index rate of interest. The higher the degree
of leverage of an inverse floater, the greater the volatility of its market
value.

REPURCHASE AGREEMENTS. A repurchase agreement involves the sale of securities
to a Portfolio with the concurrent agreement by the seller to repurchase the
securities at the Portfolio's cost plus interest at an agreed rate upon demand
or within a specified time, thereby determining the yield during the
purchaser's period of ownership. The result is a fixed rate of return
insulated from market fluctuations during such period. Under the 1940 Act,
repurchase agreements are considered loans by a Portfolio.

The Portfolios will enter into such repurchase agreements only with United
States banks having assets in excess of $1 billion which are members of the
Federal Deposit Insurance Corporation, and with certain securities dealers who
meet the qualifications set from time to time by the Board of Directors. The
term to maturity of a repurchase agreement normally will be no longer than a
few days.

The Intermediate Fixed Income Portfolio, the Mid Cap Equity Portfolio and the
Global Fixed Income Portfolio may invest up to 5%, 10% and 25%, respectively,
of net assets in repurchase agreements. Each of the Small Cap Equity and
Large Cap Growth Portfolios may invest up to 15% of its assets in repurchase
agreements. Certain other Portfolio of the Fund may invest in repurchase
agreements as described elsewhere herein and in the SAI.

STRATEGIC TRANSACTIONS. Certain Portfolios may, but are not required to,
utilize various investment strategies to seek to hedge market risks (such as
interest rates, currency exchange rates and broad or specific fixed income or
equity market movements), to manage the effective maturity or duration of
fixed income securities, or to enhance potential gain. Such strategies are
generally accepted as part of modern portfolio management and are regularly
utilized by many mutual funds and other institutional investors. Techniques
and instruments used by the Portfolios may change over time as new instruments
and strategies are developed or regulatory changes occur.

In the course of pursuing its investment objective, a Portfolio may purchase
and sell (write) exchange-listed and over-the-counter put and call options on
securities, indices and other financial instruments; purchase and sell
financial futures contracts and options thereon; enter into various interest
rate transactions such as swaps, caps, floors or collars; and to the extent a
Portfolio invests in foreign securities, enter into currency transactions such
as forward foreign currency exchange contracts, currency futures contracts,
currency swaps and options on currencies or currency futures (collectively,
all the above are called "Strategic Transactions"). Strategic Transactions
may be used in an attempt to protect against possible changes in the market
value of securities held in or to be purchased for a Portfolio resulting from
securities markets, currency exchange rate or interest rate fluctuations, to
seek to protect a Portfolio's unrealized gains in the value of portfolio
securities, to facilitate the sale of such securities for investment purposes,
to seek to manage the effective maturity or duration of a Portfolio's
portfolio, or to establish a position in the derivatives markets as a
temporary substitute for purchasing or selling particular securities. In
addition to the hedging transactions referred to in the preceding sentence,
Strategic Transactions may also be used to enhance potential gain in
circumstances where hedging is not involved.

The ability of a Portfolio to utilize Strategic Transactions successfully will
depend on the Sub-Adviser's ability to predict pertinent market and interest
rate movements, which cannot be assured. Each Portfolio will comply with
applicable regulatory requirements when implementing these strategies,
techniques and instruments. A Portfolio's activities involving Strategic
Transactions may be limited by the requirements of the Code for qualification
as a regulated investment company.

Strategic Transactions have risks associated with them including possible
default by the other party to the transaction, illiquidity and, to the extent
a Sub-Adviser's view as to certain market, interest rate or currency movements
is incorrect, the risk that the use of such Strategic Transactions could
result in losses greater than if they had not been used. The writing of put
and call options may result in losses to a Portfolio, force the purchase or
sale, respectively, of portfolio securities at inopportune times or for prices
higher than (in the case of purchases due to the exercise of put options) or
lower than (in the case of sales due to the exercise of call options) current
market values, limit the amount of appreciation a Portfolio can realize on its
investments or cause a Portfolio to hold a security it might otherwise sell.

The use of options and futures transactions entails certain other risks.
Futures markets are highly volatile and the use of futures may increase the
volatility of a Portfolio's net asset value. In particular, the variable
degree of correlation between price movements of futures contracts and price
movements in the related portfolio position of a Portfolio creates the
possibility that losses on the hedging instrument may be greater than gains in
the value of the Portfolio's position. The writing of options could
significantly increase a Portfolio's portfolio turnover rate and associated
brokerage commissions or spreads. In addition, futures and options markets
may not be liquid in all circumstances and certain over-the-counter options
may have no markets. As a result, in certain markets, a Portfolio might not
be able to close out a transaction without incurring substantial losses.
Losses resulting from the use of Strategic Transactions could reduce net asset
value and the net result may be less favorable than if the Strategic
Transactions had not been utilized. Although the use of futures and options
transactions for hedging and managing effective maturity and duration should
tend to minimize the risk of loss due to a decline in the value of the
position, at the same time, such transactions can limit any potential gain
which might result from an increase in value of such position. The loss
incurred by a Portfolio in writing options on futures and entering into
futures transactions is potentially unlimited.

The use of currency transactions can result in a Portfolio incurring losses as
a result of a number of factors including the imposition of exchange controls,
suspension of settlements, or the inability to deliver or receive a specified
currency.

Each Portfolio will attempt to limit its net loss exposure resulting from
Strategic Transactions entered into for non-hedging purposes. In calculating
each Portfolio's net loss exposure from such Strategic Transactions, an
unrealized gain from a particular Strategic Transaction position would be
netted against an unrealized loss from a related position. See the SAI for
further information regarding the use of Strategic Transactions.

SHORT SALES. Certain Portfolios may engage in short sales and short sales
against the box. In a short sale, a Portfolio sells a security it does not
own in anticipation of a decline in the market value of that security. In a
short sale against the box, a Portfolio either owns or has the right to obtain
at no extra cost the security sold short. The broker holds the proceeds of
the short sale until the settlement date, at which time the Portfolio delivers
the security (or an identical security) to cover the short position. The
Portfolio receives the net proceeds from the short sale. When a Portfolio
enters into a short sale other than against the box, the Portfolio must first
borrow the security to make delivery to the buyer and must place cash or
liquid assets in a segregated account with the Fund's custodian that is marked
to market daily. Short sales other than against the box involve unlimited
exposure to loss. No securities will be sold short if, after giving effect to
any such short sale, the total market value of all securities sold short would
exceed 5% of the value of a Portfolio's net assets.

LENDING PORTFOLIO SECURITIES. Certain Portfolios may lend their portfolio
securities to qualified institutional investors such as brokers, dealers or
other financial organizations. This practice permits a Portfolio to earn
income, which, in turn, can be invested in additional securities to pursue its
investment objective. Loans of securities by a Portfolio will be
collateralized by cash, letters of credit, or securities issued or guaranteed
by the U.S. Government or its agencies. The collateral will equal at least
100% of the current market value of the loaned securities, marked-to-market on
a daily basis. A Portfolio bears a risk of loss in the event that the other
party to a securities lending transaction defaults on its obligations and the
Portfolio is delayed in or prevented from exercising its rights to dispose of
the collateral, including the risk of a possible decline in the value of the
collateral securities during the period in which the Portfolio seeks to assert
these rights, the risk of incurring expenses associated with asserting these
rights, and the risk of losing all or a part of the income from the
transaction.

The International Equity Portfolio will not lend any security if, as a result
of such loan, the aggregate value of securities then on loan would exceed
33-1/3% of the market value of the Portfolio's total assets. The market value
of securities loaned by the Global Fixed Income Portfolio may not exceed 20%
of the value of the Portfolio's total assets, with a 10% limit for any single
borrower. Each Sub-Adviser, under the supervision of the Board of Directors
of the Fund, monitors the creditworthiness of the parties to whom each
Portfolio makes securities loans. (See "Investment Restrictions" in the SAI
for a description of the limitations on lending with respect to the other
Portfolios.)

WHEN-ISSUED AND DELAYED DELIVERY SECURITIES. Certain Portfolios may invest in
when-issued and delayed delivery securities. Although a Portfolio will
generally purchase securities on a when-issued or delayed delivery basis with
the intention of actually acquiring the securities, a Portfolio may dispose of
these securities prior to settlement, if the Sub-Adviser deems it appropriate
to do so. The payment obligation and interest rate on these securities is
fixed at the time a Portfolio enters into the commitment, but no income will
accrue to the Portfolio until they are delivered and paid for. Unless a
Portfolio has entered into an offsetting agreement to sell the securities,
cash or liquid assets equal to the amount of the Portfolio's commitment must
be segregated and maintained with the Fund's custodian to secure the
Portfolio's obligation and to partially offset the leverage inherent in these
securities. The market value of the securities when they are delivered may be
less than the amount paid by the Portfolio.

The International Equity Portfolio may invest up to 5% of its net assets in
when-issued and delayed delivery securities. The Intermediate Fixed Income
Portfolio may invest up to 15% of its net assets in when-issued and delayed
delivery securities. The Global Fixed Income Portfolio may invest up to 25%
of its total assets in when-issued and delayed delivery securities.

EMERGENCY BORROWING. Certain Portfolios will be permitted to borrow money up
to one-third of the value of the Portfolio's total assets taken at current
value but only from banks as a temporary measure for extraordinary or
emergency purposes. Beyond 5% of a Portfolio's total assets (at current
value), this borrowing may not be used for investment leverage to purchase
securities.

INVESTMENTS IN OTHER INVESTMENT COMPANIES. Certain Portfolios are permitted
to invest in shares of other investment companies. A Portfolio may invest up
to 10% of its total assets in shares of investment companies and up to 5% of
its total assets in any one investment company as long as that investment does
not represent more than 3% of the total voting stock of the acquired
investment company. Investments in the securities of other investment
companies may involve duplication of advisory fees and other expenses.
Because certain emerging markets are closed to investment by foreigners, a
Portfolio may invest in issuers in those markets primarily through
specifically authorized investment funds. In addition, a Portfolio may invest
in investment companies that are designed to replicate the composition and
performance of a particular index. For example, Standard & Poor's Depositary
Receipts ("SPDERS") are exchange-traded shares of a closed-end investment
company designed to replicate the price performance and dividend yield of the
Standard & Poor's 500 Composite Stock Price Index. Another example is World
Equity Benchmark Series ("WEBS") which are exchange traded shares of open-end
investment companies designed to replicate the composition and performance of
publicly traded issuers in particular countries. Investments in index baskets
involve the same risks associated with a direct investment in the types of
securities included in the baskets.

The Growth & Income Portfolio may invest in shares of closed-end investment
companies if bought in primary or secondary offerings with a fee or commission
no greater than the customary broker's commission. Shares of such investment
companies sometimes trade at a discount or premium in relation to their net
asset value.

REITS. Certain of the Portfolios may invest in shares of real estate
investment trusts ("REITs"), which are pooled investment vehicles that invest
in real estate or real estate loans or interests. Investing in REITs involves
risks similar to those associated with investing in equity securities of small
capitalization companies. REITs are dependent upon management skills, are not
diversified, and are subject to risks of project financing, default by
borrowers, self-liquidation, and the possibility of failing to qualify for the
exemption from taxation under the Code.

MONEY MARKET INSTRUMENTS AND SHORT-TERM SECURITIES. Although the Mid Cap
Equity Portfolio intends to stay invested in equity and equity-related
securities to the extent practical in light of its investment objective, the
Portfolio may, under normal market conditions, establish and maintain cash
balances and may purchase money market instruments with maturities of less
than one year and short-term interest-bearing fixed income securities with
maturities of one to three years ("Short-Term Obligations") to maintain
liquidity to meet redemptions.

Money market instruments in which the Mid Cap Equity Portfolio invests will be
rated at the time of purchase P-1 by Moody's or A-1 or Duff-1 by S&P, Duff and
Fitch or, if unrated, determined by the Sub-Adviser to be of comparable
quality. Money market instruments and Short-Term Obligations include
obligations issued or guaranteed by the U.S. Government or any of its agencies
and instrumentalities, U.S. and foreign commercial paper, bank obligations,
repurchase agreements and other debt obligations of U.S. and foreign issuers.
At least 95% of the Mid Cap Equity Portfolio's assets that are invested in
Short-Term Obligations must be invested in obligations rated at the time of
purchase Aaa, Aa, A or P-1 by Moody's or AAA, AA, A, A-1 or Duff-1 by S&P,
Duff or Fitch or, if unrated, determined by the Sub-Adviser to be of
comparable credit quality. Up to 5% of the Mid Cap Equity Portfolio's total
assets invested in Short-Term Obligations may be invested in obligations rated
Baa by Moody's or BBB by S&P, Duff or Fitch or, if unrated, determined by the
Sub-Adviser to be of comparable credit quality.

Securities rated within the top three investment grade ratings (i.e., Aaa, Aa,
A or P-1 by Moody's or AAA, AA, A, A-1 or Duff-1 by S&P, Duff or Fitch) are
generally regarded as high grade obligations. Securities rated Baa by Moody's
or BBB by S&P, Duff or Fitch are generally considered medium grade obligations
and have some speculative characteristics. (See "Investment Risks - Risk
Factors Applicable to High Yielding High Risk Debt Securities.")

U.S. GOVERNMENT SECURITIES. Generally, these securities include U.S. Treasury
obligations and obligations issued or guaranteed by U.S. Government agencies,
instrumentalities or sponsored enterprises which are supported by (a) the full
faith and credit of the U.S. Treasury (such as GNMA), (b) the right of the
issuer to borrow from the U.S. Treasury (such as securities of the Student
Loan Marketing Association), (c) the discretionary authority of the U.S.
Government to purchase certain obligations of the issuer (such as FNMA and
FHLMC), or (d) only the credit of the agency. No assurance can be given that
the U.S. Government will provide financial support to U.S. Government
agencies, instrumentalities or sponsored enterprises in the future. U.S.
Government securities also include Treasury receipts, zero coupon bonds,
deferred interest securities and other stripped U.S. Government securities,
where the interest and principal components of stripped U.S. Government
securities are traded independently ("STRIPS").

TEMPORARY DEFENSIVE INVESTMENTS. Each Portfolio may adopt a temporary
defensive position during adverse market conditions by investing without limit
in high quality money market instruments, including short-term U.S. Government
securities, negotiable certificates of deposit, non-negotiable fixed time
deposits, bankers' acceptances, commercial paper, floating-rate notes and
repurchase agreements. To the extent a Portfolio is invested in temporary
defensive instruments, it will not be pursuing its investment objective.

PORTFOLIO DIVERSIFICATION AND CONCENTRATION. The Global Fixed Income
Portfolio is non-diversified which means that it may invest more than 5% of
its total assets in the securities of a single issuer. Investing a
significant amount of the Portfolio's assets in the securities of a small
number of foreign issuers will cause the Portfolio's net asset value to be
more sensitive to events affecting those issuers. The Portfolio will not
concentrate (invest 25% or more of its total assets) in the securities of
issuers in any one industry. For purposes of this limitation, the staff of
the Securities and Exchange Commission considers (a) all supranational
organizations as a group to be a single industry and (b) each foreign
government and its political subdivisions to be a single industry.

INVESTMENT RISKS

FOREIGN SECURITIES

Investing in the securities of foreign issuers involves risks that are not
typically associated with investing in U.S. dollar-denominated securities of
domestic issuers. Investments in foreign issuers may be affected by changes
in currency rates, changes in foreign or U.S. laws or restrictions applicable
to such investments and in exchange control regulations (i.e., currency
blockage). A decline in the exchange rate of the currency (i.e., weakening of
the currency against the U.S. dollar) in which a portfolio security is quoted
or denominated relative to the U.S. dollar would reduce the value of the
portfolio security. Commissions may be higher and spreads may be greater on
transactions in foreign securities than those for similar transactions in
domestic markets. In addition, clearance and settlement procedures may be
different in foreign countries and, in certain markets, such procedures have
on occasion been unable to keep pace with the volume of securities
transactions, thus making it difficult to conduct such transactions.

Foreign issuers are not generally subject to uniform accounting, auditing and
financial reporting standards comparable to those applicable to U.S. issuers.
There may be less publicly available information about a foreign issuer than
about a U.S. issuer. In addition, there is generally less government
regulation of foreign markets, companies and securities dealers than in the
U.S. Most foreign securities markets may have substantially less trading
volume than U.S. securities markets and securities of many foreign issuers are
less liquid and more volatile than securities of comparable U.S. issuers.
Furthermore, with respect to certain foreign countries, there is a possibility
of nationalization, expropriation or confiscatory taxation, imposition of
withholding or other taxes on dividend or interest payments (or, in some
cases, capital gains), limitations on the removal of funds or other assets,
political or social instability or diplomatic developments which could affect
investments in those countries.

INVESTING IN EMERGING MARKETS

Certain Portfolios may invest in securities of issuers in emerging markets,
including issuers in Asia, Eastern Europe, Latin and South America, the
Mediterranean, Russia and Africa. Certain Portfolios may also invest in
currencies of such countries and may engage in Strategic Transactions in the
markets of such countries. Investments in securities of issuers in emerging
markets may involve a high degree of risk and many may be considered
speculative. Investments in emerging markets involve risks in addition to
those generally associated with investments in foreign securities. Political
and economic structures in many emerging markets may be undergoing significant
evolution and rapid development, and such countries may lack the social,
political and economic stability characteristics of more developed countries.
As a result, the risks described above relating to investments in foreign
securities, including the risks of nationalization or expropriation of assets,
may be heightened. In addition, unanticipated political or social
developments may affect the values of a Portfolio's investments and the
availability to the Portfolio of additional investments in such emerging
markets. The small size of the securities markets in certain emerging markets
and the limited volume of trading in securities in those markets may make a
Portfolio's investments in such countries less liquid and more volatile than
investments in countries with more developed securities markets (such as the
U.S., Japan and most Western European countries).

CURRENCY RISKS

The U.S. dollar value of securities denominated in a foreign currency will
vary with changes in currency exchange rates, which can be volatile.
Accordingly, changes in the value of these currencies against the U.S. dollar
will result in corresponding changes in the U.S. dollar value of a Portfolio's
assets quoted in those currencies. Exchange rates are generally affected by
the forces of supply and demand in the international currency markets, the
relative merits of investing in different countries and the intervention or
failure to intervene of U.S. or foreign governments and central banks. Some
countries in emerging markets also may have managed currencies, which do not
float freely against the U.S. dollar and may restrict the free conversion of
their currencies into other currencies. Any devaluations in the currencies in
which a Portfolio's securities are denominated may have a detrimental impact
on the Portfolio's net asset value. A Portfolio may utilize various
investment strategies to seek to minimize the currency risks described above.
These strategies include the use of currency transactions such as currency
forward and futures contracts, cross currency forward and futures contracts,
currency swaps and options and cross currency options on currencies or
currency futures.

DEBT SECURITIES

Investments in debt securities are subject to certain risks including interest
rate risk, default risk and call and extension risk.

INTEREST RATE RISK. When interest rates decline, the market value of fixed
income securities tends to increase. Conversely, when interest rates
increase, the market value of fixed income securities tends to decline. The
volatility of a security's market value will differ depending upon the
security's duration, the issuer and the type of instrument.

DEFAULT RISK/CREDIT RISK. Investments in fixed income securities are subject
to the risk that the issuer of the security could default on its obligations
causing a Portfolio to sustain losses on such investments. A default could
impact both interest and principal payments.

CALL RISK AND EXTENSION RISK. Fixed income securities may be subject to both
call risk and extension risk. Call risk exists when the issuer may exercise a
right to pay principal on an obligation earlier than scheduled which would
cause cash flows to be returned earlier than expected. This typically results
when interest rates have declined and a Portfolio will suffer from having to
reinvest in lower yielding securities. Extension risk exists when the issuer
may exercise a right to pay principal on an obligation later than scheduled
which would cause cash flows to be returned later than expected. This
typically results when interest rates have increased and a Portfolio will
suffer from the inability to invest in higher yield securities.

RISK FACTORS APPLICABLE TO HIGH YIELDING HIGH RISK DEBT SECURITIES

Certain Portfolios may invest in high-yielding, high-risk debt securities.
Lower rated bonds involve a higher degree of credit risk, the risk that the
issuer will not make interest or principal payments when due. In the event of
an unanticipated default, a Portfolio would experience a reduction in its
income, and could expect a decline in the market value of the securities so
affected. More careful analysis of the financial condition of each issuer of
lower grade securities is therefore necessary. During an economic downturn or
substantial period of rising interest rates, highly leveraged issuers may
experience financial stress which would adversely affect their ability to
service their principal and interest payment obligations, to meet projected
business goals and to obtain additional financing.

The market prices of lower grade securities are generally less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic or political changes or, in the case of corporate issuers,
individual corporate developments. Periods of economic or political
uncertainty and change can be expected to result in volatility of prices of
these securities. Since the last major economic recession, there has been a
substantial increase in the use of high-yield debt securities to fund highly
leveraged corporate acquisitions and restructurings, so past experience with
high-yield securities in a prolonged economic downturn may not provide an
accurate indication of future performance during such periods. Lower rated
securities also may have less liquid markets than higher rated securities, and
their liquidity as well as their value may be adversely affected by adverse
economic conditions. Adverse publicity and investor perceptions, as well as
new or proposed laws, may also have a negative impact on the market for
high-yield/high-risk bonds.

Credit quality of high-yield/high risk securities (so-called "junk bonds") can
change suddenly and unexpectedly and even recently issued credit ratings may
not fully reflect the actual risks posed by a particular high-yield/high-risk
security. For these reasons, it is the Portfolios' policy not to rely
primarily on ratings issued by established credit rating agencies, but to
utilize such ratings in conjunction with each Sub-Adviser's own independent
and ongoing review of credit quality.

COMMON STOCKS

A Portfolio investing in common stocks is subject to market risk. Market risk
is the possibility that stock prices in general will decline over short or
even extended periods of time. Stock markets tend to be cyclical, with
periods when stock prices generally rise and periods when stock prices
generally decline. There is also the risk that a Portfolio's performance
during a specific period may not meet or exceed that of the stock market as a
whole.

COVERED CALL OPTIONS

Certain Portfolios may engage in covered call options as described herein. Up
to 25% of the Balanced Portfolio's total assets may be subject to covered call
options. By writing covered call options, a Portfolio gives up the
opportunity, while the option is in effect, to profit from any price increase
in the underlying security above the option exercise price. In addition, a
Portfolio's ability to sell the underlying security will be limited while the
option is in effect unless the Portfolio effects a closing purchase
transaction. A closing purchase transaction cancels out a Portfolio's
position as the writer of an option by means of an offsetting purchase of an
identical option prior to the expiration of the option it has written.

Upon the termination of a Portfolio's obligation under a covered call option
other than through exercise of the option, the Portfolio will realize a
short-term capital gain or loss. Any gain realized by a Portfolio from the
exercise of an option will be short- or long-term depending on the period for
which the stock was held. The writing of covered call options creates a
straddle that is potentially subject to the straddle rules, which may override
some of the foregoing rules and result in a deferral of some losses for tax
purposes.

REPURCHASE AGREEMENTS

The use of repurchase agreements involves certain risks. For example, if the
seller of the agreement defaults on its obligation to repurchase the
underlying securities at a time when the value of these securities has
declined, a Portfolio may incur a loss upon disposition of them. If the
seller of the agreement becomes insolvent and subject to liquidation or
reorganization under the Bankruptcy Code or other laws, disposition of the
underlying securities may be delayed pending court proceedings. Finally, it
is possible that a Portfolio may not be able to perfect its interest in the
underlying securities. While a Portfolio's management acknowledges these
risks, it is expected that they can be controlled through stringent security
selection criteria and careful monitoring procedures.

INVESTMENT RESTRICTIONS

The Portfolios are subject to certain investment restrictions relating to the
investment of assets which are set forth in the SAI. Certain of these
investment restrictions are deemed fundamental and may not be changed without
the approval of the holders of a majority of the outstanding shares of the
Portfolio (which for this purpose and under the 1940 Act means the lesser of
(I) 67% of the shares represented at a meeting at which more than 50% of the
outstanding shares are present or represented by proxy or (ii) more than 50%
of the outstanding shares).

PORTFOLIO TURNOVER

Although the Portfolios do not purchase securities with a view to rapid
turnover, each Portfolio's Sub-Adviser, in pursuit of each Portfolio's
investment objective, will continuously monitor the Portfolio's investments
and make changes to the Portfolio whenever changes in the markets, industry
trends or the outlook for any portfolio security indicates to them that the
objective could be better achieved by investment in another security,
regardless of portfolio turnover. Portfolio turnover may increase as a result
of large amounts of purchases and redemptions of shares of a Portfolio due to
economic, market or other factors that are not within the control of the
Portfolio's management.

Portfolio turnover will tend to rise during periods of economic turbulence and
decline during periods of stable growth. A higher turnover rate (100% or more)
increases transaction costs (e.g., brokerage commissions) and increases
realized gains and losses. It is expected that under normal market conditions,
the annual portfolio turnover rate for each of the Portfolios will not exceed
100%. High rates of portfolio turnover necessarily result in correspondingly
greater brokerage and portfolio trading costs, which are paid by the
Portfolios. Trading in fixed-income securities does not generally involve the
payment of brokerage commissions, but does involve indirect transaction costs.
In addition, high rates of portfolio turnover may adversely affect each
Portfolio's status as a "regulated investment company" ("RIC") under Section
851 of the Code.

MANAGEMENT OF THE FUND

The management and affairs of the Fund are supervised by the Board of
Directors under the laws of the State of Maryland. The Directors have
approved agreements under which, as described below, certain companies provide
essential management services to the Fund.

INVESTMENT ADVISER

Investors Mark Advisors, LLC (the "Adviser"), 700 Karnes Boulevard, Kansas
City, Missouri 64108, serves as the investment adviser of each Portfolio and,
as such, provides each Portfolio with professional investment supervision and
management pursuant to an Investment Advisory Agreement dated July 15, 1997.
The Adviser, a Delaware limited liability company, is a majority-owned
subsidiary of Jones & Babson, Inc. ("Jones & Babson"). Jones & Babson is a
wholly-owned subsidiary of Business Men's Assurance Company of America
("BMA"). Assicurazioni Generali S.p.A., an insurance organization founded in
1831 based in Trieste, Italy, is the ultimate parent of BMA.

The Adviser is newly formed and thus has no previous experience in advising a
mutual fund. However, personnel of Jones & Babson serve as officers of the
Adviser and provide the Adviser with experienced professional fund
administration. Jones & Babson, founded in 1960, serves as the investment
manager of numerous other mutual funds.

Under the Investment Advisory Agreement, the Adviser is obligated to formulate
a continuing program for the investment of the assets of each Portfolio of the
Fund in a manner consistent with each Portfolio's investment objectives,
policies and restrictions and to determine from time to time securities to be
purchased, sold, retained or lent by the Fund and implement those decisions.
The Investment Advisory Agreement also provides that the Adviser shall manage
the Fund's business and affairs and shall provide such services required for
effective administration of the Fund as are now provided by employees or other
agents engaged by the Fund. The Investment Advisory Agreement further
provides that the Adviser shall furnish the Fund with office space and
necessary personnel, pay ordinary office expenses, pay all executive salaries
of the Fund and furnish, without expense to the Fund, the services of such
members of its organization as may be duly elected officers or Directors of
the Fund. The Investment Advisory Agreement provides that the Adviser may
retain sub-advisers, at the Adviser's own cost and expense, for the purpose of
making investment recommendations and research information available to the
Fund.

As full compensation for its services under the Investment Advisory Agreement,
the Fund pays the Adviser a monthly fee at the following annual rates shown in
the table below based on the average daily net assets of each Portfolio.

<TABLE>
<CAPTION>
<S> <C>
Advisory Fee
(Annual Rate based on average
daily net assets of each
Portfolio Portfolio)

Intermediate Fixed Income .60%

Mid Cap Equity .80%

Money Market .40%

Global Fixed Income .75%

Small Cap Equity .95%

Large Cap Growth .80%

Large Cap Value .80%

Growth & Income .80%

Balanced .80%

International Equity .__%
</TABLE>

The Adviser may enter into administrative services agreements with
Participating Insurance Companies pursuant to which the Adviser will
compensate such companies for administrative responsibilities relating to the
Fund which are performed by such Participating Insurance Companies.

EXPENSE LIMITATION AGREEMENT

In the interest of limiting expenses of the Portfolios, the Adviser has
entered into an expense limitation agreement with the Fund ("Expense
Limitation Agreement"), with respect to each Portfolio, pursuant to which the
Adviser has agreed to limit the expenses of the Portfolios to the extent
necessary to limit the total annual operating expenses (expressed as a
percentage of each Portfolio's average daily net assets) to not more than
.90% of the average daily net assets of each of the Mid Cap Equity, Large Cap
Growth, Large Cap Value, Growth & Income and Balanced Portfolios; to not more
than .80% of the average daily net assets of the Intermediate Fixed Income
Portfolio; to not more than .50% of the average daily net assets of the Money
Market Portfolio; to not more than 1.00% of the average daily net assets of
the Global Fixed Income Portfolio; to not more than 1.05% of the average daily
net assets of the Small Cap Equity Portfolio; and to not more than 1.20% of
the average daily net assets of the International Equity Portfolio.
This expense limitation will remain in place through _____________, 1998,
after which it may be modified or terminated in the discretion of the Adviser.
Reimbursement by the Portfolios of expenses paid by the Adviser pursuant
to the Expense Limitation Agreement may be made at a later date when the
Portfolios have reached a sufficient asset size to permit reimbursement to
be made without causing the total annual expense ratio of each Portfolio to
exceed the Total Operating Expense percentages described above.

EXPENSES OF THE FUND

The organizational expenses of the Fund are being amortized on a straight-line
basis over a period of five years (beginning with the commencement of
operations). If any of the initial shares (purchased by Jones & Babson, Inc.,
the Fund's principal underwriter) through its contribution of the initial
"seed money" to the Fund totaling $100,000) are redeemed during the
amortization period by the holder thereof, the redemption proceeds will be
reduced by any unamortized organizational expenses in the same proportion as
the number of initial shares being redeemed bears to the number of initial
shares outstanding at the time of the redemption.

SUB-ADVISERS

In accordance with each Portfolio's investment objective and policies and
under the supervision of the Adviser and the Fund's Board of Directors, each
Sub-Adviser is responsible for the day-to-day investment management of the
Portfolio(s) and for making investment decisions for the Portfolio(s) and
placing orders on behalf of the Portfolio(s) to effect the investment
decisions made as provided in separate Sub-Advisory Agreements among each
Sub-Adviser, the Adviser and the Fund. The following organizations act as
Sub-Advisers to the Portfolios:

STANDISH, AYER & WOOD, INC. ("Standish"), One Financial Center, Boston,
Massachusetts 02111, is the Sub-Adviser for the Intermediate Fixed Income, Mid
Cap Equity and Money Market Portfolios of the Fund. Standish is a
Massachusetts corporation incorporated in 1933 and is a registered investment
adviser under the Investment Advisers Act of 1940. Standish provides fully
discretionary management services and counseling and advisory services to a
broad range of clients throughout the United States and abroad. As of March
31, 1997, Standish managed approximately $31 billion of assets.

The Intermediate Fixed Income Portfolio manager is Caleb F. Aldrich. Mr.
Aldrich also manages the Standish Fixed Income Fund. During the past five
years, Mr. Aldrich has served as a Director and Vice President of Standish.

The Mid Cap Equity Portfolio managers are Ralph S. Tate and David C. Cameron.
Mr. Tate and Mr. Cameron also manage the Equity Portfolio of the Standish,
Ayer & Wood Master Portfolio. During the past five years, Mr. Tate has served
as a Managing Director of Standish (since 1995) and President of Standish
International Management Company, L.P. ("SIMCO") (since 1996) and both Messrs.
Tate and Cameron have served as a Director and Vice President of Standish and
a Director of SIMCO (since 1995 for Mr. Cameron).

The Money Market Portfolio manager is Jennifer A. Pline. Ms. Pline also
manages the Standish Short-Term Asset Reserve Fund. During the past five
years, Ms. Pline has served as a Vice President of Standish.

Under the terms of the Sub-Advisory Agreement, the Adviser shall pay to
Standish, as full compensation for services rendered under the Sub-Advisory
Agreement with respect to the Intermediate Fixed Income, Mid Cap Equity and
Money Market Portfolios, the following annual fees based on the average daily
net assets of each Portfolio:

<TABLE>
<CAPTION>
<S> <C>
Intermediate Fixed Income Portfolio .20%
Mid Cap Equity Portfolio .35%
Money Market Portfolio .15%
</TABLE>

SIMCO, One Financial Center, Boston, Massachusetts 02111, is the Sub-Adviser
for the Global Fixed Income Portfolio of the Fund. SIMCO is a Delaware
limited partnership organized in 1991 and is a registered investment adviser
under the Investment Advisers Act of 1940. The general partner of the Adviser
is Standish which holds a 99.98% partnership interest. The limited partners,
who each hold a 0.01% interest in SIMCO, are Walter M. Cabot, Sr., a Director
of and Senior Adviser to SIMCO and Standish, and D. Barr Clayson, Chairman and
Vice President of the Board of SIMCO and Managing Director and Vice President
of Standish. Ralph S. Tate, Managing Director of Standish, is President and a
Director of SIMCO. Richard S. Wood, Vice President and a Managing Director of
Standish, is the Executive Vice President of SIMCO. Standish and SIMCO
provide fully discretionary management services and counseling and advisory
services to a broad range of clients throughout the United States and abroad.

The Global Fixed Income Portfolio manager is Richard S. Wood. Mr. Wood also
manages the Standish International Fixed Income Fund and the Standish Global
Fixed Income Portfolio. During the past five years, Mr. Wood has served as a
Vice President and a Managing Director (since 1995) of Standish and Executive
Vice President of SIMCO.

Under the terms of the Sub-Advisory Agreement, the Adviser shall pay to SIMCO,
as full compensation for services rendered under the Sub-Advisory Agreement
with respect to the Global Fixed Income Portfolio, the following annual fee
based on the average daily net assets of the Portfolio:

Global Fixed Income Portfolio .35%
</TABLE>

STEIN ROE & FARNHAM INCORPORATED ("Stein Roe"), One South Wacker Drive,
Chicago, Illinois 60606, is the Sub-Adviser for the Large Cap Growth and Small
Cap Equity Portfolios of the Fund. Stein Roe is registered as an investment
adviser under the Investment Advisers Act of 1940. Stein Roe was organized in
1986 to succeed to the business of Stein Roe & Farnham, a partnership that had
advised and managed mutual funds since 1949. Stein Roe is a wholly-owned
subsidiary of Liberty Financial Companies, Inc. ("Liberty Financial"), which
in turn is a majority owned indirect subsidiary of Liberty Mutual Insurance
Company.

The Large Cap Growth Portfolio manager is Erik P. Gustafson. Mr. Gustafson
also manages the Growth Stock Portfolio of SR&F Base Trust and had managed
Stein Roe Growth Stock Fund since 1994. Mr. Gustafson is a senior vice
president and senior portfolio manager with Stein Roe which he joined in 1992.
From 1989 to 1992 he was an attorney with Fowler, White, Burnett, Hurley,
Banick & Strickroot. He holds a B.A. from the University of Virginia (1985)
and M.B.A. and J.D. degrees from Florida State University (1989). Mr.
Gustafson was responsible for managing $877 million in mutual fund net assets
at December 31, 1996. David P. Brady is associate portfolio manager. Mr.
Brady is a vice president of Stein Roe, which he joined in 1993, and was an
equity investment analyst with State Farm Mutual Automobile Insurance Company
from 1986 to 1993.

The Small Cap Equity Portfolio managers are Richard B. Peterson and John S.
McLandsborough. Mr. Peterson and Mr. McLandsborough also manage the Special
Venture Portfolio of SR&F Base Trust. Mr. Peterson had been a co-portfolio
manager of Special Fund since 1991 and of Special Venture Fund since its
inception in 1994. Mr. Peterson is a senior vice president of the
Sub-Adviser. Mr. Peterson, who began his investment career at Stein Roe &
Farnham in 1965 after graduating with a B.A. from Carleton College (1962) and
the Woodrow Wilson School at Princeton University (1964) with a Masters in
Public Administration, rejoined Stein Roe in 1991 after 15 years of equity
research and portfolio management experience with State Farm Investment
Management Corp. As of December 31, 1996, Mr. Peterson was responsible for
co-managing $1.5 billion in mutual fund net assets. Prior to joining Stein
Roe in April 1996, Mr. McLandsborough was an equity research analyst with CS
First Boston from June 1994 until January 1996 and with National City Bank of
Cleveland prior thereto. Mr. McLandsborough, a chartered financial analyst,
earned a bachelor's degree in finance in 1989 from Miami University and a
master's degree in 1992 from Indiana University.

Under the terms of the Sub-Advisory Agreement, the Adviser shall pay to Stein
Roe, as full compensation for services rendered under the Sub-Advisory
Agreement with respect to the Large Cap Growth and Small Cap Equity
Portfolios, the following annual fees based on the average daily net assets of
each Portfolio:

<TABLE>
<CAPTION>
<S> <C>
Large Cap Growth Portfolio .45%
Small Cap Equity Portfolio .55%
</TABLE>

DAVID L. BABSON & CO. INC. ("Babson"), One Memorial Drive, Cambridge,
Massachusetts 02142-1300, is the Sub-Adviser for the Large Cap Value Portfolio
of the Fund. Babson, a registered investment adviser under the Investment
Advisers Act of 1940, is an indirect subsidiary of Massachusetts Mutual Life
Insurance Company headquartered in Springfield, Massachusetts. Massachusetts
Mutual Life Insurance Company is an insurance organization founded in 1851 and
is considered to be a controlling person of Babson under the 1940 Act.

The Large Cap Value Portfolio manager is Roland W. Whitridge. Mr. Whitridge
also manages the Babson Value Fund and has done so since its inception in
1984. Mr. Whitridge, a Chartered Financial Analyst, joined Babson in 1974,
and has over 30 years of investment management experience.

Under the terms of the Sub-Advisory Agreement, the Adviser shall pay to
Babson, as full compensation for services rendered with respect to the Large
Cap Value Portfolio, the following annual fees based on the average daily net
assets of the Portfolio:

<TABLE>
<CAPTION>
<S> <C>
Large Cap Value Portfolio .45% of first $40 million
.40% of average daily net
assets over and above
$ 40 million
</TABLE>

LORD, ABBETT & CO. ("Lord Abbett"), The General Motors Building, 767 Fifth
Avenue, New York, New York 10153-0203, is the Sub-Adviser for the Growth &
Income Portfolio of the Fund. Lord Abbett, a registered investment adviser
under the Investment Advisers Act of 1940, has been an investment manager for
over 67 years. As of June 30, 1997, Lord Abbett managed approximately $23
billion in a family of mutual funds and other advisory accounts.

The Growth & Income Portfolio manager is W. Thomas Hudson, Jr. Mr. Hudson has
been employed by Lord Abbett since 1982.

Under the terms of the Sub-Advisory Agreement, the Adviser shall pay to Lord
Abbett, as full compensation for services rendered under the Sub-Advisory
Agreement with respect to the Growth & Income Portfolio, the following annual
fee based on the average daily net assets of the Portfolio:

<TABLE>
<CAPTION>
<S> <C>
Growth & Income Portfolio .45% of first $40 million
.40% of average daily net
assets over and above
$ 40 million
</TABLE>

KORNITZER CAPITAL MANAGEMENT, INC. ("Kornitzer"), 7715 Shawnee Mission
Parkway, Shawnee Mission, Kansas 66202, is the Sub-Adviser for the Balanced
Portfolio of the Fund. Kornitzer, a registered investment adviser under the
Investment Advisers Act of 1940, is an independent investment counseling firm
founded in 1989. It serves a broad variety of individual, corporate and other
institutional clients by maintaining an extensive research and analytical
staff. Kornitzer is a closely held corporation and has limitations in the
ownership of its stock designed to maintain control in those who are active in
management. Owners of 5% or more of Kornitzer are John C. Kornitzer, Kent W.
Gasaway, Willard R. Lynch, Thomas W. Laming and Susan Stack. Kornitzer
manages over $1.3 billion including the Buffalo family of mutual funds.

The Balanced Portfolio utilizes a team approach to both research and portfolio
management.

Under the terms of the Sub-Advisory Agreement, the Adviser shall pay to
Kornitzer, as full compensation for services rendered under the Sub-Advisory
Agreement with respect to the Balanced Portfolio, the following annual fee
based on the average daily net assets of the Portfolio:

<TABLE>
<CAPTION>
<S> <C>
Balanced Portfolio .40% of first $40 million
.35% of average daily net assets
over and above $40 million
</TABLE>

BBOI WORLDWIDE LLC ("BBOI Worldwide"), 210 University Boulevard, Denver,
Colorado 80206, is the Sub-Adviser for the International Equity Portfolio of
the Fund. BBOI Worldwide, a registered investment adviser under the
Investment Advisers Act of 1940, is a Delaware limited liability company
formed in 1996. Since BBOI Worldwide was only recently formed, it has only
limited prior experience as in investment adviser. However, BBOI Worldwide is
a joint venture between Berger Associates, Inc. ("Berger Associates") and Bank
of Ireland Asset Management (U.S.) Limited ("BIAM"), which have both been in
the investment advisory business for many years.

Berger Associates and BIAM each own a 50% membership interest in BBOI
Worldwide and each have an equal number of representatives on BBOI Worldwide's
Board of Managers. Berger Associates' role in the joint venture is to provide
administrative services and BIAM's role is to provide international and global
investment management expertise. Agreement of representatives of both Berger
Associates and BIAM is required for all significant management decisions for
BBOI Worldwide.

Since its founding in 1966, Bank of Ireland's investment management group has
become recognized among international and global investment managers, serving
clients in Europe, the United States, Canada, Australia and South Africa.
BIAM is an indirect wholly-owned subsidiary of Bank of Ireland. Bank of
Ireland, founded in 1783, is a publicly traded, diversified financial services
group with business operations worldwide. Bank of Ireland provides investment
management services through a network of related companies, including BIAM
which serves primarily institutional clients in the United States and Canada.
Bank of Ireland and its affiliates managed assets for clients worldwide in
excess of $21 billion as of December 31, 1996.

BBOI Worldwide has delegated day-to-day portfolio management responsibility to
BIAM which manages the investments in the Portfolio and determines what
securities and other investments will be purchased, retained, sold or loaned,
consistent with the investment objective and policies established by the
Directors of the Fund. BIAM serves as investment adviser or sub-adviser to
pension and profit-sharing plans and other institutional investors and mutual
funds. BIAM also acts as sub-adviser for and is responsible for the
day-to-day management of the portfolio in which the assets of the Berger/BIAM
International Fund and the Berger/BIAM International Core Fund are invested.
BIAM's main offices are at 26 Fitzwilliam Place, Dublin 2, Ireland. BIAM
maintains a representative office at 20 Horseneck Lane, Greenwich, CT 06830.

All investment decisions made for the International Equity Portfolio are made
by a team of BIAM investment personnel. No one individual is primarily
responsible for making the day-to-day investment decisions for the Portfolio.
Most of the investment professionals at BIAM have been with BIAM at least 10
years.

Bank of Ireland or its affiliates may have deposit, loan or other commercial
or investment banking relationships with the issuers of securities which may
be purchased by the Portfolio, including outstanding loans to such issuers
which could be repaid in whole or in part with the proceeds of securities
purchased by the Portfolio. Federal law prohibits the Sub-Adviser, in making
investment decisions, from using material non-public information in its
possession or in the possession of any of its affiliates.

Under the terms of the Sub-Advisory Agreement, the Adviser shall pay to BBOI
Worldwide, as full compensation for services rendered under the Sub-Advisory
Agreement with respect to the International Equity Portfolio, the following
annual fee based on the average daily net assets of the Portfolio:

International Equity Portfolio ___%

</TABLE>

SUB-ADVISORY FEE WAIVERS

The Sub-Advisers have voluntarily agreed to waive their sub-advisory fees for
a period of time to assist the Adviser in subsidizing Other Expenses.

PERFORMANCE ADVERTISING

From time to time, each Portfolio may advertise its yield and total return.
These figures will be based on historical earnings and are not intended to
indicate future performance. No representation can be made regarding actual
future yields or returns. Yield refers to the annualized income generated by
an investment in the Portfolio over a specified 30-day period. The yield is
calculated by assuming that the same amount of income generated by the
investment during that period is generated in each 30-day period over one year
and is shown as a percentage of the investment.

The total return of each Portfolio refers to the average compounded rate of
return on a hypothetical investment for designated time periods (including but
not limited to the period from which the Portfolio commenced operations
through the specified date), assuming that the entire investment is redeemed
at the end of each period and assuming the reinvestment of all dividend and
capital gain distributions.

Total returns quoted for a Portfolio include the effect of deducting the
Portfolio's expenses, but may not include charges and expenses attributable to
any particular Variable Contract or Qualified Plan. Accordingly, the
prospectus of the sponsoring Participating Insurance Company separate account
or Qualified Plan documents or other informational materials supplied by
Qualified Plan sponsors should be carefully reviewed for information on
relevant charges and expenses. Excluding these charges and expenses from
quotations of a Portfolio's performance has the effect of increasing the
performance quoted, and the effect of these charges should be considered when
comparing a Portfolio's performance to that of other mutual funds.

Each Portfolio may periodically compare its performance to that of other
mutual funds tracked by mutual fund rating services (such as Lipper Analytical
Services, Inc.) or by financial and business publications and periodicals,
broad groups of comparable mutual funds, unmanaged indices which may assume
investment of dividends but generally do not reflect deductions for
administrative and management costs and other investment alternatives. Each
Portfolio may quote services such as Morningstar, Inc., a service that ranks
mutual funds on the basis of risk-adjusted performance, and Ibbotson
Associates of Chicago, Illinois, which provides historical returns of the
capital markets in the U.S. In addition, the International Equity Portfolio
may compare its performance to that of broad-based foreign securities market
indices, such as the Morgan Stanley Capital International EAFE (Europe,
Australia, Asia, Far East) Index and the Dow Jones World Index. Each
Portfolio may use long-term performance of these capital markets to
demonstrate general long-term risk versus reward scenarios and could include
the value of a hypothetical investment in any of the capital markets. Each
Portfolio may also quote financial and business publications and periodicals
as they relate to fund management, investment philosophy, and investment
techniques.

Each Portfolio may quote various measures of volatility and benchmark
correlation in advertising and may compare these measures to those of other
funds. Measures of volatility attempt to compare historical share price
fluctuations or total returns to a benchmark while measures of benchmark
correlation indicate how valid a comparative benchmark might be. Measures of
volatility and correlation are calculated using averages of historical data
and cannot be calculated precisely.

PUBLIC FUND PERFORMANCE

The Portfolios are newly organized and do not yet have their own performance
records. However, certain of the Portfolios have the same investment
objectives and follow substantially the same investment strategies as certain
public mutual funds ("public funds") whose shares are currently sold to the
public and managed by the Sub-Advisers.

Set forth below is the historical performance of each of the corresponding
public funds. Investors should not consider the performance data of the public
funds as an indication of the future performance of the Portfolios. The
performance figures shown below reflect the deduction of the historical fees
and expenses paid by the corresponding public funds, and NOT THOSE TO BE PAID
BY THE PORTFOLIOS. The figures also do not reflect the deduction of any
insurance fees or charges which are imposed by the Participating Insurance
Company in connection with its sale of the VA Contracts and VLI Policies nor
do the figures reflect any charges or expenses which may be attributable to
any Qualified Plan. Investors should refer to the separate account
prospectuses describing the VA Contracts and VLI Policies or to the Qualified
Plan documents or other informational materials supplied by Qualified Plan
sponsors for information pertaining to these fees and charges. Any such fees
and charges will have a detrimental effect on the performance of the
Portfolios. Additionally, although it is anticipated that each Portfolio and
its corresponding public fund will hold similar securities, their investment
results are expected to differ. In particular, differences in asset size and
in cash flow resulting from purchases and redemptions of Portfolio shares may
result in different security selections, differences in the relative
weightings of securities or differences in the price paid for particular
portfolio holdings. The results shown reflect the reinvestment of dividends
and distributions, and were calculated in the same manner that will be used by
the Portfolios to calculate their own performance.

The following tables show average annualized total returns for the time
periods shown for the public funds.

<TABLE>
<CAPTION>
<S> <C> <C> <C>
INTERMEDIATE FIXED INCOME
Portfolio 10 Years or
1 Year 5 Years Since Inception