CHUBB AMERICA FUND INC, 497, 1997-09-09

CHUBB AMERICA FUND INC
497, 1997-09-09

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

CHUBB AMERICA FUND, INC.
ONE GRANITE PLACE
CONCORD, NEW HAMPSHIRE 03301
(603) 226-5000

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

Chubb America Fund, Inc. (the "Fund") is an open-end management investment
company which was incorporated in Maryland on October 19, 1984. The Fund is
composed of nine separate Portfolios which operate as distinct investment
vehicles. The names and investment objectives of the Portfolios are as
follows:

World Growth Stock Portfolio: seeks to achieve long-term capital growth
through a policy of investing primarily in stocks of companies organized in
the United States or in any foreign nation. A portion of the Portfolio may
also be invested in debt obligations of companies and governments of any
nation. Any income realized will be incidental.

Money Market Portfolio: seeks to achieve as high a level of current income
as is consistent with preservation of capital and liquidity. AN INVESTMENT IN
THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT.

Gold Stock Portfolio: to realize long-term capital appreciation, while
retaining the option to take current income into account, by investing
primarily, and sometimes exclusively, in common stocks of gold mining
companies.

Bond Portfolio: to provide a stable level of income, consistent with
limiting risk to principal, by investing primarily in high quality corporate
debt securities and U.S. Government debt obligations.

Domestic Growth Stock Portfolio: to achieve reasonable income and growth of
capital by investing primarily in a diversified portfolio of equity securities
issued by companies organized in the U.S. and considered to be undervalued in
light of the company's earning power and growth potential.

Growth and Income Portfolio: to seek long-term growth of capital by
investing primarily in a wide range of equity issues that may offer capital
appreciation and, secondarily, to seek a reasonable level of current income.

Capital Growth Portfolio: to seek capital growth. Realization of income is
not a significant investment consideration and any income realized will be
incidental.

Balanced Portfolio: to seek reasonable current income and long-term capital
growth, consistent with conservation of capital, by investing primarily in
common stocks and fixed income securities.

Emerging Growth Portfolio: seeks to provide long-term growth of capital.
Dividend and interest income from portfolio securities, if any, is incidental
to the Portfolio's investment objective of long-term growth. THE PORTFOLIO IS
INTENDED FOR INVESTORS WHO UNDERSTAND AND ARE WILLING TO ACCEPT RISKS ENTAILED
IN SEEKING LONG-TERM GROWTH OF CAPITAL.

The World Growth Stock Portfolio, the Gold Stock Portfolio, the Growth and
Income Portfolio, the Capital Growth Portfolio, the Balanced Portfolio and the
Emerging Growth Portfolio permit investments in any nation, and investments in
these Portfolios involve special considerations and risks.

AN INVESTMENT IN THE MONEY MARKET PORTFOLIO IS NEITHER INSURED NOR
GUARANTEED BY THE UNITED STATES GOVERNMENT. INVESTMENTS IN THE PORTFOLIOS ARE
NOT BANK DEPOSITS AND ARE NOT INSURED BY, GUARANTEED BY, OBLIGATIONS OF, OR
OTHERWISE SUPPORTED BY THE FDIC OR ANY BANK. AN INVESTMENT IN ANY OF THE
PORTFOLIOS 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.

This Prospectus sets forth concisely the information about the Fund and its
Portfolios that a prospective investor should know before investing. This
Prospectus should be read and retained for future reference.

A Statement of Additional Information for the Fund, dated August 28, 1997,
has been filed with the Securities and Exchange Commission and is incorporated
herein by reference. This Statement of Additional Information is available
upon request, and without charge, from the Fund by calling 1-800-452-4822 or
at the address or telephone number above. Inquiries about the Fund should be
directed to the Fund at the same address or telephone number.

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

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

THE DATE OF THIS PROSPECTUS IS AUGUST 28, 1997
<PAGE>

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
FINANCIAL HIGHLIGHTS....................................................... 2
PERFORMANCE AND YIELD INFORMATION.......................................... 16
PORTFOLIOS................................................................. 16
INVESTMENT OBJECTIVES AND POLICIES......................................... 16
World Growth Stock Portfolio............................................. 17
Investment Objectives.................................................. 17
Investment Policies.................................................... 17
Risk Factors........................................................... 18
Money Market Portfolio................................................... 18
Investment Objectives.................................................. 18
Investment Policies.................................................... 18
Risk Factors........................................................... 18
Gold Stock Portfolio..................................................... 18
Investment Objectives.................................................. 18
Investment Policies.................................................... 18
Risk Factors........................................................... 19
Bond Portfolio........................................................... 19
Investment Objectives.................................................. 19
Investment Policies.................................................... 19
Risk Factors........................................................... 20
Domestic Growth Stock Portfolio.......................................... 20
Investment Objectives.................................................. 20
Investment Policies.................................................... 20
Risk Factors........................................................... 21
Growth and Income Portfolio.............................................. 21
Investment Objectives.................................................. 21
Investment Policies.................................................... 21
Risk Factors........................................................... 21
Capital Growth Portfolio................................................. 21
Investment Objectives.................................................. 21
Investment Policies.................................................... 22
Risk Factors........................................................... 22
Balanced Portfolio....................................................... 23
Investment Objectives.................................................. 23
Investment Policies.................................................... 23
Risk Factors........................................................... 23
Emerging Growth Portfolio................................................ 23
Investment Objective................................................... 23
Investment Policies.................................................... 23
Risk Factors........................................................... 24
Additional Risk Factors.................................................. 25
Foreign Securities....................................................... 25
Emerging Market Securities............................................... 26
American Depository Receipts............................................. 27
Forward Foreign Currency Exchange Contracts.............................. 27
Repurchase Agreements.................................................... 27
Zero Coupon Bonds........................................................ 28
Securities and Index Options............................................. 28
Purchasing Put and Call Options.......................................... 28
Futures Contracts........................................................ 28
Lending of Securities.................................................... 29
When Issued Securities................................................... 29
Corporate Asset-Backed Securities........................................ 29
Loan Participations and Other Direct Indebtedness........................ 29
INVESTMENT RESTRICTIONS.................................................... 30
Portfolio Turnover....................................................... 30
MANAGEMENT OF THE FUND..................................................... 30
CAPITAL STOCK.............................................................. 33
TAXES AND DIVIDENDS........................................................ 34
OFFERING AND REDEMPTION OF SHARES.......................................... 34
OTHER INFORMATION.......................................................... 35
</TABLE>

THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFERING IN ANY JURISDICTION IN WHICH
SUCH OFFERING MAY NOT LAWFULLY BE MADE. NO PERSON IS AUTHORIZED TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS, IN THE STATEMENT OF ADDITIONAL INFORMATION, AND IN THE
ATTACHED PROSPECTUS FOR THE POLICY.
<PAGE>

FINANCIAL HIGHLIGHTS

The following tables include selected data for a share of capital stock
outstanding for each fund throughout the periods indicated. The related
financial statements and report of Ernst & Young LLP, independent auditors,
are incorporated by reference into the Statement of Additional Information and
both are available upon request and without charge by calling 1-800-452-4822.

For a share outstanding throughout the year:

<TABLE>
<CAPTION>
WORLD GROWTH STOCK PORTFOLIO
------------------------------------------------------------

YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $ 21.20 $ 19.00 $ 20.89 $ 16.73
INCOME FROM INVESTMENT
OPERATIONS
Net investment in-
come................. .49 0.45 0.25 0.24
Net realized and
unrealized gains
(losses) on securi-
ties and foreign cur-
rencies.............. 3.56 2.65 (0.89) 5.40
----------- ----------- ----------- -----------
Total from investment
operations........... 4.05 3.10 (0.64) 5.64
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net in-
vestment income...... (.48) (0.43) (0.25) (0.24)
Dividends in excess of
net investment in-
come.................
Distributions from
capital gains........ (1.46) (0.47) (0.81) (1.24)
Distributions in ex-
cess of capital
gains................ (0.19)
Returns of capital....
----------- ----------- ----------- -----------
Total distributions... (1.94) (0.90) (1.25) (1.48)
Net asset value, end of
year................... $ 23.31 $ 21.20 $ 19.00 $ 20.89
=========== =========== =========== ===========
Total Return (A)........ 19.22% 16.35% (3.05%) 33.73%
Ratios to Average Net
Assets:
Expenses.............. .88% 0.96% 1.00% 1.04%
Net investment in-
come................. 2.20% 2.31% 1.56% 1.64%
Portfolio Turnover
Rate................... 27.50% 18.09% 18.47% 34.90%
Average Commission Rate
Paid................... $ 0.0155
Net Assets, At End of
Year................... $91,995,634 $73,692,357 $52,903,768 $42,031,141
</TABLE>
- -------
(A) Total return assumes reinvestment of all dividends during the year and
does not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost.

2
<PAGE>

<TABLE>
<CAPTION>
WORLD GROWTH STOCK PORTFOLIO
---------------------------------------------------------------------------------

YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1992 1991 1990 1989 1988 1987
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 16.45 $ 13.70 $ 16.07 $ 12.77 $ 11.48 $ 13.75
0.35 0.34 0.36 0.32 0.18 0.06
0.65 2.75 (2.00) 3.34 1.32 (0.91)
----------- ----------- ----------- ----------- ---------- ----------
1.00 3.09 (1.64) 3.66 1.50 (0.85)
(0.35) (0.34) (0.37) (0.36) (0.18) (0.34)
(0.37) (0.36) (0.03) (1.08)
----------- ----------- ----------- ----------- ---------- ----------
(0.72) (0.34) (0.73) (0.36) (0.21) (1.42)
$ 16.73 $ 16.45 $ 13.70 $ 16.07 $ 12.77 $ 11.48
=========== =========== =========== =========== ========== ==========
6.10% 22.53% (10.38%) 28.62% 13.10% (7.74%)
1.17% 1.14% 1.22% 1.42% 1.60% 1.81%
2.19% 2.40% 2.65% 2.46% 1.80% 1.14%
32.27% 50.06% 25.79% 5.73% 14.75% 8.88%
$25,416,357 $22,659,930 $16,052,089 $14,467,050 $8,781,827 $5,253,616
</TABLE>

3
<PAGE>

FINANCIAL HIGHLIGHTS--(CONTINUED)

For a share outstanding throughout the year (A):

<TABLE>
<CAPTION>
MONEY MARKET PORTFOLIO
----------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $ 10.27 $ 10.25 $ 10.26 $ 10.22 $ 10.22
INCOME FROM INVESTMENT
OPERATIONS
Net investment in-
come................. 0.50 0.50 0.35 0.20 0.29
Net realized and
unrealized gains
(losses) on
securities........... (0.02) 0.02 (0.01) 0.04
---------- ---------- ---------- ---------- ----------
Total from investment
operations........... 0.48 0.52 0.34 0.24 0.29
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net in-
vestment income...... (0.50) (0.50) (0.35) (0.20) (0.29)
Dividends in excess of
net investment in-
come.................
Distributions from
capital gains........
Distributions in ex-
cess of capital
gains................
Returns of capital....
---------- ---------- ---------- ---------- ----------
Total distributions... (0.50) (0.50) (0.35) (0.20) (0.29)
Net asset value, end of
year................... $ 10.25 $ 10.27 $ 10.25 $ 10.26 $ 10.22
========== ========== ========== ========== ==========
Total Return (B)........ 4.65% 5.06% 3.28% 2.32% 2.83%
Ratios to Average Net
Assets:
Expenses.............. 0.62% 0.63% 0.65% 0.74% 0.85%
Net investment in-
come................. 4.54% 4.89% 3.31% 2.32% 2.81%
Portfolio Turnover Rate
(C).................... N/A N/A N/A N/A N/A
Average Commission Rate
Paid (D)............... N/A
Net Assets, At End of
Year................... $7,896,257 $8,312,676 $7,680,485 $5,061,181 $3,956,152
</TABLE>
- -------
(A) The per share amounts which are shown have been computed based on the
average number of shares outstanding during each year.
(B) Total return assumes reinvestment of all dividends during the year and
does not reflect account fees and charges that apply to the separate
account or related insurance policies. Investment returns and principal
values will fluctuate and shares, when redeemed, may be worth more or less
than the original cost.
(C) There were no purchase and/or sales of securities other than short term
obligations during the year. Therefore, the portfolio turnover rate has
not been calculated.
(D) During the period, the portfolio held less than 10% of the value of
average net assets in equity securities. Therefore, the Average Commission
Rate Paid has not been calculated.

4
<PAGE>

5
<PAGE>

FINANCIAL HIGHLIGHTS--(CONTINUED)

For a share outstanding throughout the year:

<TABLE>
<CAPTION>
GOLD STOCK PORTFOLIO
-----------------------------------------------------
YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net asset value, begin-
ning of year............ $ 16.61 $ 16.25 $ 19.00 $ 11.57
INCOME FROM INVESTMENT
OPERATIONS
Net investment income.. (0.03) 0.05 0.03 0.02
Net realized and
unrealized gains
(losses) on securities
and foreign curren-
cies.................. 0.45 0.40 (2.65) 7.43
---------- ---------- ---------- ----------
Total from investment
operations............ 0.42 0.45 (2.62) 7.45
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net in-
vestment income....... (0.05) (0.03) (0.02)
Dividends in excess of
net investment in-
come.................. (0.04)
Distributions from cap-
ital gains............ (0.43)
Distributions in excess
of capital gains...... (0.10)
Returns of capital.....
---------- ---------- ---------- ----------
Total distributions.... (0.43) (0.09) (0.13) (0.02)
Net asset value, end of
year.................... $ 16.60 $ 16.61 $ 16.25 $ 19.00
========== ========== ========== ==========
Total Return (A)......... 2.57% 2.76% (13.77%) 63.90%
Ratios to Average Net As-
sets:
Expenses............... 1.04% 1.01% 0.99% 1.01%
Net investment income.. (0.11%) 0.24% 0.18% 0.14%
Portfolio Turnover Rate.. 64.78% 23.98% 11.12% 7.32%
Average Commission Rate
Paid.................... $ 0.0151
Net Assets, At End of
Year.................... $7,554,427 $6,867,645 $7,351,625 $7,863,581
</TABLE>
- -------
(A) Total return assumes reinvestment of all dividends during the year and
does not reflect deduction of account fees and charges that apply to the
separate current or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost.

6
<PAGE>

<TABLE>
<CAPTION>
GOLD STOCK PORTFOLIO
---------------------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1992 1991 1990 1989 1988 1987
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
$ 11.99 $ 12.76 $ 16.95 $ 14.37 $ 18.24 $ 13.59
0.03 0.07 0.07 0.06 (0.03) (0.03)
(0.42) (0.77) (4.19) 2.70 (3.84) 4.69
---------- ---------- ---------- ---------- ---------- ----------
(0.39) (0.70) (4.12) 2.76 (3.87) 4.66
(0.03) (0.07) (0.07) (0.05)
(0.12) (0.01)
(0.01)
---------- ---------- ---------- ---------- ---------- ----------
(0.03) (0.07) (0.07) (0.18) (0.01)
$ 11.57 $ 11.99 $ 12.76 $ 16.95 $ 14.37 $ 18.24
========== ========== ========== ========== ========== ==========
(3.29%) (5.48%) (24.28%) 19.24% (21.24%) 34.29%
1.13% 1.16% 1.36% 1.39% 1.62% 1.92%
0.24% 0.57% 0.59% 0.39% (0.38%) (0.24%)
7.78% 14.23% 17.61% 3.05% 9.92% 7.02%
$4,338,297 $4,646,951 $5,390,279 $5,969,256 $4,258,297 $3,821,605
</TABLE>

7
<PAGE>

FINANCIAL HIGHLIGHTS--(CONTINUED)

For a share outstanding throughout the year:

<TABLE>
<CAPTION>
DOMESTIC GROWTH STOCK PORTFOLIO
--------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $ 17.87 $ 15.94 $ 16.14 $ 15.16 $ 12.96
INCOME FROM INVESTMENT
OPERATIONS
Net investment
income............... .06 0.15 0.09 0.12 0.14
Net realized and
unrealized gains
(losses) on
securities........... 2.85 4.48 1.12 2.29 3.27
----------- ----------- ----------- ----------- -----------
Total from investment
operations........... 2.91 4.63 1.21 2.41 3.41
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net
investment income.... (.06) (0.15) (0.09) (0.12) (0.14)
Dividends in excess of
net investment
income...............
Distributions from
captal gains......... (2.53) (2.55) (1.32) (1.31) (1.07)
Distributions in
excess of capital
gains................
Returns of capital....
----------- ----------- ----------- ----------- -----------
Total distributions... (2.59) (2.70) (1.41) (1.43) (1.21)
Net asset value, end of
year................... $18.19 $ 17.87 $ 15.94 $ 16.14 $ 15.16
=========== =========== =========== =========== ===========
Total Return (A)........ 16.46% 29.72% 7.66% 15.89% 26.50%
Ratios to Average Net
Assets:
Expenses.............. .85% 0.87% 0.89% 0.97% 1.07%
Net investment
income............... .31% 0.95% 0.63% 0.76% 1.07%
Portfolio Turnover
Rate................... 49.75% 64.17% 46.65% 49.47% 41.36%
Average Commission Rate
Paid................... $0.0555
Net Assets, At End of
Year................... $62,166,366 $48,517,886 $31,458,666 $25,072,289 $19,985,838
</TABLE>
- -------
(A) Total return assumes reinvestment of all dividends during the year and does
not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost.

8
<PAGE>

9
<PAGE>

FINANCIAL HIGHLIGHTS--(CONTINUED)

For a share outstanding throughout the year:

<TABLE>
<CAPTION>
BOND PORTFOLIO
-------------------------------------------------------------------
YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $ 10.59 $ 9.70 $ 10.28 $ 10.21 $ 10.61
INCOME FROM INVESTMENT
OPERATIONS
Net investment in-
come................. .56 0.74 0.35 0.74 0.66
Net realized and
unrealized gains
(losses) on securi-
ties................. (.29) 0.89 (0.58) 0.13 0.13
----------- ---------- ----------- ---------- ----------
Total from investment
operations........... .27 1.63 (0.23) 0.87 0.79
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net in-
vestment income...... (.56) (0.74) (0.35) (0.74) (0.66)
Dividends in excess of
net investment
income...............
Distributions from
capital gains........ (.03) (0.06) (0.53)
Distributions in ex-
cess of capital
gains................
Returns of capital....
----------- ---------- ----------- ---------- ----------
Total distributions... (.59) (0.74) (0.35) (0.80) (1.19)
Net asset value, end of
year................... $ 10.27 $ 10.59 $ 9.70 $ 10.28 $ 10.21
----------- ========== =========== ========== ==========
Total Return (A)........ 2.47% 16.76% (2.28%) 8.68% 7.46%
Ratios to Average Net
Assets:
Expenses.............. .60% 0.63% 0.68% 0.74% 0.88%
Net investment in-
come................. 5.93% 6.43% 6.07% 7.59% 6.83%
Portfolio Turnover
Rate................... 23.25% 127.74% 140.30% 112.66% 81.23%
Average Commission Rate
Paid (B)............... N/A
Net Assets, At End of
Year................... $11,717,693 $9,230,090 $13,066,445 $5,461,879 $4,042,506
</TABLE>
- -------
(A) Total return assumes reinvestment of all dividends during the year and does
not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost.
(B) During the period, the portfolio held less than 10% of the value of its
average net assets in equity securities. Therefore, the Average Commission
Rate Paid has not been calculated.

10
<PAGE>

11
<PAGE>

FINANCIAL HIGHLIGHTS--(CONTINUED)

For a share outstanding throughout the year:

<TABLE>
<CAPTION>
GROWTH AND INCOME PORTFOLIO
---------------------------------------------------------------------
FOR THE
YEAR YEAR YEAR YEAR PERIOD FROM
ENDED ENDED ENDED ENDED MAY 1, 1992 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992 (A)
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $ 14.41 $ 11.22 $ 12.35 $ 11.10 $ 10.27
INCOME FROM INVESTMENT
OPERATIONS
Net investment in-
come................. 0.18 0.15 0.13 0.12 0.02
Net realized and
unrealized gains
(losses) on securi-
ties................. 3.12 3.62 (0.65) 1.53 0.83
----------- ----------- ---------- ---------- ----------
Total from investment
operations........... 3.30 3.77 (0.52) 1.65 0.85
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net in-
vestment income...... (0.18) (0.15) (0.13) (0.12) (0.02)
Dividends in excess of
net investment
income...............
Distributions from
capital gains........ (0.62) (0.29) (0.48) (0.28)
Distributions in ex-
cess of capital
gains................ (0.14)
Returns of capital....
----------- ----------- ---------- ---------- ----------
Total distributions... (0.80) (0.58) (0.61) (0.40) (0.02)
Net asset value, end of
year................... $ 16.91 $ 14.41 $ 11.22 $ 12.35 $ 11.10
=========== =========== ========== ========== ==========
Total Return (B)........ 22.88% 33.58% (4.24%) 14.94% 12.48%
Ratios to Average Net
Assets:
Expenses.............. 0.88% 0.92% 1.10% 1.35% 2.09%(C)
Net investment in-
come................. 1.39% 1.50% 1.52% 1.38% 0.36%(C)
Portfolio Turnover
Rate................... 35.69% 32.30% 38.17% 77.68% 54.11%
Average Commission Rate
Paid................... $0.0700
Net Assets, At End of
Period................. $23,711,696 $13,126,023 $5,610,472 $2,831,442 $1,489,179
</TABLE>
- -------
(A) Per share data calculated from the initial offering date, May 1, 1992, for
sale to Chubb Separate Account A.
(B) Total return assumes reinvestment of all dividends during the year and does
not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total Return for periods of less than
one year have not been annualized.
(C) Per share data and ratios calculated on an annualized basis.

12
<PAGE>

FINANCIAL HIGHLIGHTS--(CONTINUED)

For a share outstanding throughout the year:

<TABLE>
<CAPTION>
CAPITAL GROWTH PORTFOLIO
------------------------------------------------------------------------
FOR THE
YEAR YEAR YEAR YEAR PERIOD FROM
ENDED ENDED ENDED ENDED MAY 1, 1992 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992 (A)
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $ 17.38 $ 13.38 $ 14.26 $ 12.42 $ 9.95
INCOME FROM INVESTMENT
OPERATIONS
Net investment in-
come................. 0.05 0.03 0.03 (0.01)
Net realized and
unrealized gains
(losses) on securi-
ties and foreign cur-
rencies.............. 3.24 5.56 (0.49) 3.03 2.69
----------- ----------- ----------- ----------- ----------
Total from investment
operations........... 3.29 5.59 (0.46) 3.03 2.68
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net in-
vestment income...... (0.05) (0.03) (0.03)
Dividends in excess of
net investment
income...............
Distributions from
capital gains........ (3.36) (1.56) (0.33) (1.19) (0.21)
Distributions in ex-
cess of capital
gains................ (0.06)
Returns of capital....
----------- ----------- ----------- ----------- ----------
Total distributions... (3.41) (1.59) (0.42) (1.19) (0.21)
Net asset value, end of
year................... $ 17.26 $ 17.38 $ 13.38 $ 14.26 $ 12.42
=========== =========== =========== =========== ==========
Total Return (B)........ 19.25% 41.74% (3.26%) 24.73% 40.40%
Ratios to Average Net
Assets:
Expenses.............. 1.13% 1.15% 1.22% 1.33% 1.96% (C)
Net investment in-
come................. 0.30% 0.21% 0.25% (0.11%) (0.37%)(C)
Portfolio Turnover
Rate................... 147.82% 170.32% 202.04% 162.79% 104.76%
Average Commission Rate
Paid................... $0.0502
Net Assets, At End of
Period................. $70,832,162 $49,853,029 $27,564,086 $15,373,489 $5,343,734
</TABLE>
- -------
(A) Per share data calculated from the initial offering date, May 1, 1992 for
sale to Chubb Separate Account A.
(B) Total return assumes reinvestment of all dividends during the year and does
not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total Return for periods of less than
one year have not been annualized.
(C) Per share data and ratios calculated on an annualized basis.

13
<PAGE>

FINANCIAL HIGHLIGHTS--(CONTINUED)

For a share outstanding throughout the year:

<TABLE>
<CAPTION>
BALANCED PORTFOLIO
----------------------------------------------------------------------
FOR THE
YEAR YEAR YEAR YEAR PERIOD FROM
ENDED ENDED ENDED ENDED MAY 1, 1992 TO
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1996 1995 1994 1993 1992 (A)
------------ ------------ ------------ ------------ --------------
<S> <C> <C> <C> <C> <C>
Net asset value, begin-
ning of year........... $ 11.91 $ 10.62 $ 11.22 $ 10.77 $ 10.10
INCOME FROM INVESTMENT
OPERATIONS
Net investment in-
come................. 0.26 0.37 0.32 0.25 0.16
Net realized and
unrealized gains
(losses) on securi-
ties................. 0.99 1.99 (0.47) 0.74 0.67
----------- ----------- ----------- ----------- ----------
Total from investment
operations........... 1.25 2.36 (0.15) 0.99 0.83
LESS DISTRIBUTIONS TO
SHAREHOLDERS
Dividends from net in-
vestment income...... (0.26) (0.37) (0.32) (0.25) (0.16)
Dividends in excess of
net investment
income...............
Distributions from
capital gains........ (0.83) (0.70) (0.13) (0.25)
Distributions in ex-
cess of capital
gains................ (0.04)
Returns of capital....
----------- ----------- ----------- ----------- ----------
Total distributions... (1.09) (1.07) (0.45) (0.54) (0.16)
Net asset value, end of
year................... $ 12.07 $ 11.91 $ 10.62 $ 11.22 $ 10.77
=========== =========== =========== =========== ==========
Total Return (B)........ 10.56% 22.35% (1.33%) 9.27% 12.33%
Ratios to Average Net
Assets:
Expenses.............. 0.97% 0.99% 1.01% 1.07% 1.43%(C)
Net investment in-
come................. 2.20% 3.20% 3.34% 2.79% 2.80%(C)
Portfolio Turnover
Rate................... 222.35% 164.70% 103.68% 65.49% 77.33%
Average Commission Rate
Paid................... $ 0.0601
Net Assets, At End of
Period................. $18,256,430 $14,532,268 $14,764,853 $11,703,898 $6,944,437
</TABLE>
- -------
(A) Per share data calculated from the initial offering date, May 1, 1992, for
sale to Chubb Separate Account A.
(B) Total return assumes reinvestment of all dividends during the year and does
not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total Return for periods of less than
one year have not been annualized.
(C) Per share data and ratios calculated on an annualized basis.

14
<PAGE>

FINANCIAL HIGHLIGHTS--(CONTINUED)

For a share outstanding throughout the year:

<TABLE>
<CAPTION>
EMERGING GROWTH PORTFOLIO
-----------------------------
FOR THE
YEAR PERIOD FROM
ENDED MAY 1, 1995 TO
DECEMBER 31, DECEMBER 31,
1996 1995 (A)
------------ --------------
<S> <C> <C>
Net asset value, beginning of period........... $ 13.29 $ 10.00
INCOME FROM INVESTMENT OPERATIONS
Net investment income (loss)................. (0.05) (0.04)
Net realized and unrealized gains on securi-
ties........................................ 2.48 3.33
----------- -----------
Total from investment operations............. 2.43 3.29
LESS DISTRIBUTIONS TO SHAREHOLDERS
Dividends from net investment income.........
Dividends in excess of net investment in-
come........................................
Distributions from capital gains............. (0.49)
Distributions in excess of capital gains.....
Returns of capital...........................
----------- -----------
Total distributions.......................... (0.49) 0.00
Net asset value, end of period................. $ 15.23 $ 13.29
=========== ===========
Total Return (B)............................... 18.30% 32.91%
Ratios to Average Net Assets:
Expenses..................................... 1.16% 1.63% (C)
Net investment income........................ (0.48%) (0.84%)(C)
Portfolio Turnover Rate........................ 94.58% 30.31%
Average Commission Rate Paid................... $ 0.0390
Net Assets, At End of Period................... $30,794,030 $11,439,524
</TABLE>
- -------
(A) Per share data calculated from the initial offering date, May 1, 1995, for
sale to Chubb Separate Account A.
(B) Total return assumes reinvestment of all dividends during the year and does
not reflect deduction of account fees and charges that apply to the
separate account or related insurance policies. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total return for periods of less than
one year have not been annualized.
(C) Per share data and ratios calculated on an annualized basis.

15
<PAGE>

PERFORMANCE AND YIELD INFORMATION

From time to time the Fund may advertise the yield and/or the average annual
total return of some or all of its nine investment portfolios. These figures
are based on historical earnings and are not intended to indicate future
performance. Shares of the portfolios are presently offered only to
corresponding divisions of separate accounts established by Chubb Life
Insurance Company of America ("Chubb Life"), Jefferson Pilot Life ("Jefferson
Pilot"), Alexander Hamilton Life ("Hamilton") or their affiliated insurance
companies, to fund variable annuities and flexible premium life insurance
policies. None of these performance figures reflect fees and charges imposed
under such variable annuities or flexible premium life insurance policies,
which fees and charges will reduce the yield and total return to policyowners;
therefore, these performance figures may be of limited use for comparative
purposes.

The Money Market Portfolio's yield quotations represent the Portfolio's
investment income, less expenses, expressed as a percentage of assets on an
annualized basis for a seven-day period. The yield is expressed as both a
simple annualized yield and a compounded effective yield. The yield for the
non-money market portfolios is calculated by dividing the portfolio's net
investment income per share during a recent 30-day period by the maximum
offering price per share of that Portfolio (which is the net asset value of
that Portfolio) on the last day of the period.

The average annual total return quotations of the non-money market
portfolios are determined by computing the average annual percentage change in
value of a $1,000 investment, made at the maximum public offering price (which
is net asset value) for certain specified periods. This computation assumes
reinvestment of all dividends and distributions.

PORTFOLIOS

The Fund currently consists of nine investment portfolios, namely the World
Growth Stock Portfolio, the Money Market Portfolio, the Gold Stock Portfolio,
the Bond Portfolio, the Domestic Growth Stock Portfolio, the Growth and Income
Portfolio, the Capital Growth Portfolio, the Balanced Portfolio and the
Emerging Growth Portfolio (the "Portfolios").

The separate accounts established by Chubb Life, Jefferson Pilot, Hamilton
or their affiliated insurance companies are used for the purpose of funding
variable annuities and Flexible Premium Variable Life Insurance Policies (the
"Policies") issued by Chubb Life, Jefferson Pilot, Hamilton or their
affiliated insurance companies and their successors or assigns. The owner of a
Policy may allocate among the Portfolios the amounts available for investment
under the Policy. Chubb Life, Jefferson Pilot and Hamilton (the "Affiliates")
are wholly-owned subsidiaries of Jefferson-Pilot Corporation, a North Carolina
Corporation.

In the future, the Fund may sell its shares to other separate accounts,
funding variable annuities and variable life insurance policies, established
by Chubb Life, its Affiliates, successors or assigns, or by other insurance
companies with which Chubb Life may or may not be affiliated, and may add or
delete Portfolios.

Shares of each Portfolio are both offered and redeemed at their net asset
value without the addition of any sales load or redemption charge. See
"OFFERING AND REDEMPTION OF SHARES" in the Prospectus.

The investment manager to the Fund is Chubb Investment Advisory Corporation
("Chubb Investment Advisory"), a wholly-owned subsidiary of Chubb Life. Chubb
Investment Advisory and the Fund have contracted with eight unaffiliated
companies, Templeton Global Advisors, Inc. ("Templeton"), Van Eck Associates
Corporation ("Van Eck Associates"), Pioneering Management Corporation
("Pioneer"), Janus Capital Corporation ("Janus"), J.P. Morgan Investment
Management, Inc. ("Morgan"), Massachusetts Financial Services Company ("MFS"),
Chubb Asset Managers, Inc. ("CAM"), and Warburg, Pincus Counsellors, Inc.
("Warburg") to act as sub-investment advisers or managers to the World Growth
Stock, Gold Stock, Domestic Growth Stock, Capital Growth, Balanced, Emerging
Growth and Money Market, Bond, and Growth and Income Portfolios, respectively.
(Collectively the "Sub-Investment Managers"). The fees of the Sub-Investment
Managers are paid directly by Chubb Investment Advisory.

INVESTMENT OBJECTIVES AND POLICIES

The investment objectives and policies of each Portfolio are described
below. The investment objectives of a Portfolio, and certain investment
restrictions discussed in the Statement of Additional Information, may be
changed only with the approval of the stockholders of each Portfolio that are
affected by such change. The investment policies of a Portfolio, used to
achieve the Portfolio's objectives, may be changed by the Fund's Board of
Directors without the approval of the Portfolio's stockholders.

16
<PAGE>

Because investment involves both opportunities for gain and risks of loss,
no assurance can be given that the Portfolios will achieve their objectives.
The difference in objectives and policies among the various Portfolios can be
expected to affect each Portfolio's investment return as well as the degree of
market and financial risks to which each Portfolio is subject. Prospective
purchasers of Policies should carefully review the objectives and policies of
the Portfolios and consider their ability to assume the risks involved before
purchasing Policies and allocating amounts thereunder to particular
Portfolios.

World Growth Stock Portfolio

Investment Objectives. The investment objective of the World Growth Stock
Portfolio is long-term capital growth, which it seeks to achieve through a
flexible policy of investing primarily in stocks of companies organized in the
United States or in any foreign nation. A portion of the Portfolio may also be
invested in debt obligations of companies and governments of any nation. Any
income realized will be incidental.

The Portfolio invests primarily in securities of companies of any size that
are (i) believed to be well-managed and possessing good growth potential or
(ii) are considered by Templeton, the Sub-Investment Manager, to be
undervalued. See "Foreign Securities," in the Prospectus.

Investment Policies. The Portfolio believes that in a world where investment
opportunities change rapidly, not only from company to company and from
industry to industry but also from one national economy to another, its
objective is more likely to be achieved through an investment policy that is
flexible and mobile. Accordingly, the Portfolio seeks investment opportunities
in all types of securities issued by companies or governments of any nation.
Investments are usually made in common stocks, but may also include preferred
stocks and certain debt securities, rated or unrated, such as convertible
bonds and bonds selling at a discount; all of these debt securities will have
credit ratings in the four highest rating categories of Standard & Poor's
Rating Service Corporation ("Standard & Poor's") or Moody's Investors Service,
Inc. ("Moody's") or other nationally recognized statistical rating
organizations ("NRSROs") or, if not rated, will be of comparable quality to
obligations so rated in the judgment of Templeton. Securities rated BBB or Baa
by Standard & Poor's or Moody's are considered investment-grade obligations
and are regarded as having adequate capacity to pay interest and repay
principal, although adverse economic conditions or changing circumstances are
more likely to lead to a weakening of such capacity than for higher grade
bonds. Such securities may be considered to have speculative characteristics.
See "DESCRIPTION OF CERTAIN INVESTMENTS" in the Statement of Additional
Information for a more complete description of investment ratings. In the
event that the ratings of securities held by the Portfolio fall below
investment grade, the Portfolio will not be obligated to dispose of such
securities and may continue to hold such securities if, in the opinion of the
Sub-Investment Manager, such investment is considered appropriate under the
circumstances.

Notwithstanding the investment objective of long-term capital growth, the
Portfolio may on occasion, for defensive purposes and without limitation as to
amount, invest in debt obligations of the U.S. Government, its agencies or
instrumentalities for the purpose of earning income; hold cash and time
deposits with banks in the U.S. or Canadian currencies or currencies of other
nations; acquire repurchase agreements with respect to U.S. or Canadian
government obligations; or invest in high-grade commercial paper. For a more
complete description of obligations of the U.S. Government, its agencies or
instrumentalities, see the description in the "Investment Policies" section of
the description of the Bond Portfolio. The Portfolio may also invest in
warrants, which are rights to buy certain securities at set prices during
specified time periods. See "DESCRIPTION OF CERTAIN INVESTMENTS" in the
Statement of Additional Information for more information concerning repurchase
agreements, warrants, and commercial paper. See also "Repurchase Agreements"
in the Prospectus.

The Portfolio may enter into agreements with banks or broker-dealers to
purchase some securities on a "forward commitment," "when issued" or on a
"delayed delivery" basis. Such agreements involve a commitment to purchase
securities at a price, which is fixed at the time of commitment, for delivery
at a future date, which may be up to three months in the future. The Portfolio
will not pay for the securities or begin earning interest on them until the
securities are paid for and received. The securities so purchased are subject
to market fluctuations so that at the time of delivery, the value of such
securities may be more or less than the purchase price.

The Portfolio will generally be composed of investments from among many
different industries. Although management may invest up to 25% of the
Portfolio's assets in a single industry, it has no present intention of doing
so. As a general matter, the Portfolio will be invested in a minimum of five
different foreign countries at all times. However, this minimum is reduced to
four when foreign country investments comprise less than 80% of the
Portfolio's net asset value; to three when less than 60% of such value; to two
when less than 40%; and to one when less than 20%.

17
<PAGE>

Risk Factors. All or a significant portion of this Portfolio may be invested
in foreign securities, including Depository Receipts, and investors should
understand the special considerations and risks related to such an investment
emphasis. See "Foreign Securities" and "Depository Receipts" in the
Prospectus.

Money Market Portfolio

Investment Objectives. The primary objective of the Money Market Portfolio
is to seek as high a level of current income as is consistent with
preservation of capital and liquidity.

Investment Policies. The Portfolio invests exclusively in (1) obligations
whose timely payment of principal and interest is backed by the full faith and
credit of the U.S. Government or that of its agencies or instrumentalities
("U.S. Government Obligations") or which are secured or collateralized by such
obligations, (2) short-term obligations of U.S. banks which are members of the
Federal Deposit Insurance Corporation ("FDIC"), (3) U.S. dollar obligations of
foreign branches of U.S. banks, or (4) instruments fully secured or
collateralized by such bank obligations. Some of the obligations which the
Portfolio buys are insured by the FDIC up to $100,000. The Portfolio may also
invest in commercial paper, and may buy corporate or other notes if such notes
are guaranteed as to the payment of principal and interest by U.S. banks'
letters of credit or collateralized by U.S. Government Obligations. For a more
complete description of U.S. Government Obligations see the description in the
"Investment Policies" section of the description of the Bond Portfolio.

The Portfolio will invest only in securities which present minimal credit
risk and (1) which have been rated or whose issuer has received a rating at
the time of acquisition in one of the two highest rating categories for short-
term debt obligations by any two Nationally Recognized Securities Rating
Organization ("NRSROs"), or by one NRSRO if it is the only NRSRO to have
issued a rating, ("Requisite NRSROs") or (2) which are unrated securities of
comparable quality. The Portfolio will invest no more than 5% of the value of
its total assets, at time of acquisition, in the securities of any one issuer,
other than U.S. Government Obligations, except that the Portfolio may invest
more than 5% of its total assets in securities of a single issuer rated in the
highest rating category by the Requisite NRSROs for up to three business days
after purchase. The Portfolio will also invest no more than 5% of its total
assets, at time of acquisition, in securities rated in the second highest
rating category by the Requisite NRSROs, with investment in any one issuer
limited to no more than the greater of 1% of the Portfolio's total assets or
$1,000,000.

MFS, the Sub-Investment Manager, under the supervision of Chubb Investment
Advisory, will use its best judgment in selecting investments, taking into
consideration rates, terms, and marketability of obligations as well as the
capitalization, earnings, liquidity, and other indicators of the financial
condition of their issuers. Because the market value of debt obligations
fluctuates as an inverse function of changing interest rates, the Portfolio
seeks to minimize the effect of such fluctuations by investing in instruments
with a remaining maturity of 397 calendar days or less at the time of
investment, except for U.S. government obligations which may have a remaining
maturity of 762 calendar days or less. The Portfolio will maintain a dollar-
weighted average portfolio maturity of 90 days or less.

The Portfolio may enter into repurchase agreements whereby it purchases
securities, subject to agreement by the other party to repurchase the
obligations at a specified price and date. Repurchase agreements may involve
certain additional risks. See "Repurchase Agreements" in the Prospectus and
"RISK CONSIDERATIONS" in the Statement of Additional Information for a
discussion of these risks. See "DESCRIPTION OF CERTAIN INVESTMENTS" in the
Statement of Additional Information for a more complete description of
repurchase agreements.

Risk Factors. The principal risk factors associated with investment in the
Money Market Portfolio are the risk of fluctuations in short-term interest
rates and the risk of default among one or more issuers of securities which
comprise the Portfolio's assets. Compared with the other available Portfolios,
the Money Market Portfolio could be considered the least risky of all the
Fund's Portfolios. See "RISK CONSIDERATIONS" in the Statement of Additional
Information for a description of the risks associated with investment in U.S.
dollar obligations of foreign branches of U.S. banks.

Gold Stock Portfolio

Investment Objectives. The primary investment objective of the Gold Stock
Portfolio is long-term capital appreciation while retaining, however, freedom
of action to take current income into consideration in selecting its
investments.

Investment Policies. The present policy is to concentrate investments in
common stocks of gold mining companies. Up to 100% of the value of the
Portfolio's assets may be invested in this industry. The Fund does not
currently plan to concentrate investments of the Gold Stock Portfolio in any
industry other than the gold mining industry. Under unusual

18
<PAGE>

economic, political or financial conditions, it may temporarily place a
substantial portion (no more than 75%) of its investments in debt or equity
securities issued by foreign companies, debt obligations of one or more
foreign governments and/or U.S. Government Obligations. All such debt
securities in which the Portfolio invests will have credit ratings in the four
highest rating categories of Standard & Poor's or Moody's or other NRSROs or,
if not rated, will be of comparable quality to obligations so rated in the
judgment of Van Eck. Securities rated BBB or Baa by Standard & Poor's or
Moody's are considered investment-grade obligations and are regarded as having
adequate capacity to pay interest and repay principal, although adverse
economic conditions or changing circumstances are more likely to lead to a
weakening of such capacity than for higher grade bonds. Such securities may be
considered to have speculative characteristics. See "DESCRIPTION OF CERTAIN
INVESTMENTS" in the Statement of Additional Information for a more complete
description of investment ratings. In the event that the ratings of securities
held by the Portfolio fall below investment grade, the Portfolio will not be
obligated to dispose of such securities and may continue to hold such
securities if, in the opinion of the Sub-Investment Manager, such investment
is considered appropriate under the circumstances.

The Gold Stock Portfolio may invest in securities of U.S. companies and also
in the following types of securities: securities of companies, wherever
organized, whose properties, products or services are international in scope
or substantially in countries outside of the U.S.; securities of foreign
governments; and U.S. Government Obligations. The Portfolio may also invest in
American Depository Receipts ("ADRs") European Depository Receipts ("EDRs")
and Global Depository Receipts ("GDRs"). See "Foreign Securities" and
"Depository Receipts" in the Prospectus and "DESCRIPTION OF CERTAIN
INVESTMENTS" in the Statement of Additional Information for a description of
ADRs, EDRs and GDRs.

The Portfolio may also enter into repurchase agreements and invest in
warrants, which are rights to buy certain securities at set prices during
specified time periods. See "Repurchase Agreements" in the Prospectus and
"DESCRIPTION OF CERTAIN INVESTMENTS" in the Statement of Additional
Information for a description of repurchase agreements and warrants.

Risk Factors. All or a significant portion of this Portfolio may be invested
in foreign securities, including ADRs, EDRs and GDRs, and investors should
understand the special considerations and risks related to such an investment
emphasis. See "Foreign Securities" below. In addition, given the Portfolio's
concentration in stocks of gold mining companies, investors should be aware
that gold mining shares are at times volatile; there may be sharp fluctuations
in prices even during periods of general inflation and political conditions in
gold mining countries may affect the Fund's investment decisions relating to
gold mining shares. The price of gold may affect the value of investments in
the Gold Stock Portfolio. Gold has been subject to substantial price
fluctuations over short periods of time and may be affected by the actions of
certain governments and changes in existing governments, by unpredictable
international monetary and political policies such as currency devaluations or
revaluations, by economic and social conditions within a country, trade
imbalances or trade or currency restrictions between countries or political
unrest. See "RISK CONSIDERATIONS -- Gold Mining Shares" in the Statement of
Additional Information.

Bond Portfolio

Investment Objectives. The investment objective of the Bond Portfolio is to
provide a stable level of income, consistent with limiting risk to principal,
by investing primarily in high quality corporate debt securities and U.S.
Government debt obligations.

Investment Policies. At least 85% of the assets of the Bond Portfolio are
invested in (a) U.S. Government Obligations, (b) debt securities, including
convertible securities, which are rated "AA" or higher by Standard & Poor's or
Moody's or other NRSROs or, if unrated, are considered by the Portfolio's Sub-
Investment Manager to be of comparable quality and (c) cash and cash
equivalents (such as bankers' acceptances, commercial paper and certificates
of deposit no greater than $100,000 per issuing bank, having ratings of A-1 or
Prime-1 by Standard & Poor's or Moody's or other NRSROs or, if unrated, are
considered by CAM, the Portfolio's Sub-Investment Manager, to be of comparable
quality.)

U.S. Government Obligations consist of marketable securities issued or
guaranteed as to the timely payment of both principal and interest by the U.S.
Government, its agencies or instrumentalities. Federal agency securities are
debt obligations issued by agencies of the U.S. Government established under
authority granted by Congress. Such obligations include, but are not limited
to, those issued by the Federal Housing Authority, Maritime Administration,
Government National Mortgage Association, the Tennessee Valley Authority, and
the General Services Administration. Instrumentalities include, for example,
each of the Federal Home Loan Banks, the National Bank for Cooperatives, the
Federal Home Loan Mortgage Corporation, the Farm Credit Banks, the Federal
National Mortgage Association, and the U.S. Postal Service. These

19
<PAGE>

U.S. Government Obligations are either: (i) backed by the full faith and
credit of the U.S. Government (e.g., U.S. Treasury Bills); (ii) guaranteed by
the U.S. Treasury (e.g., Government National Mortgage Association mortgage-
backed securities); (iii) supported by the issuing agency's or
instrumentality's right to borrow from the U.S. Treasury (e.g., Federal
National Mortgage Association Discount Notes); or (iv) supported only by the
issuing agency's or instrumentality's own credit (e.g., each of the Federal
Home Loan Banks).

The Portfolio may also invest up to 15% of its total assets in corporate
debt securities which are rated A or BBB by Standard & Poor's or A and Baa by
Moody's or other NRSROs or, if not rated, are of comparable quality to
obligations so rated in the judgment of the Sub-Investment Manager. Securities
rated BBB or Baa by Standard & Poor's or Moody's are considered investment-
grade obligations and are regarded as having adequate capacity to pay interest
and repay principal, although adverse economic conditions or changing
circumstances are more likely to lead to a weakening of such capacity than for
higher grade bonds. Such securities may be considered to have speculative
characteristics. See "DESCRIPTION OF CERTAIN INVESTMENTS" in the Statement of
Additional Information for a more complete description of investment ratings.
In the event that the ratings of securities held by the Portfolio fall below
investment grade, the Portfolio will not be obligated to dispose of such
securities and may continue to hold such securities if, in the opinion of the
Sub-Investment Manager, such investment is considered appropriate under the
circumstances.

The Portfolio will not purchase preferred or common stocks but may acquire
and retain up to 10% of its total assets in preferred or common stocks either
by conversion of fixed income securities or by the exercise of related
warrants.

It is the policy of the Bond Portfolio not to engage in trading for short-
term profits. The Portfolio will engage in trading if it believes a
transaction net of costs (including custodian's fees) will contribute to the
achievement of its investment objective.

It is anticipated that the Portfolio's average portfolio maturity will not
exceed 15 years, with the precise term to maturity dependent upon general
market and economic conditions.

Risk Factors. If the Bond Portfolio disposes of an obligation prior to
maturity, it may realize a loss or a gain. An increase in interest rates will
generally reduce the value of portfolio investments, and a decline in interest
rates will generally increase the value of portfolio investments. As a result,
the level of income under such circumstances may vary. In addition, portfolio
investments (other than U.S. Government Obligations) are dependent upon the
ability of the issuer to make scheduled payments of principal and income.

Domestic Growth Stock Portfolio

Investment Objectives. The investment objective of the Domestic Growth Stock
Portfolio is to achieve reasonable income and growth of capital by investing
primarily in a diversified portfolio of equity securities issued by companies
organized in the U.S. and considered to be undervalued in light of the
company's earning power and growth potential.

Investment Policies. The mix of assets of the Portfolio will vary with
prevailing economic and market conditions. Generally, at least 80% of the
Portfolio's assets are invested in common stocks and other equity related
securities such as preferred stocks and securities convertible into common
stock. The Portfolio may also invest up to 20% of its assets in both U.S.
Government Obligations and corporate debt securities, which will be rated
within the top four rating categories of Standard & Poor's or Moody's or other
NRSROs or, if unrated, are considered by the Portfolio's Sub-Investment
Manager to be of comparable quality and cash equivalent investments, such as
certificates of deposit, bankers' acceptances, and commercial paper, having
ratings of A-1 or Prime-1 by Standard & Poor's or Moody's or other NRSROs or,
if unrated, are considered by the Portfolio's Sub-Investment Manager to be of
comparable quality. Securities rated BBB or Baa by Standard & Poor's or
Moody's are considered investment-grade obligations and are regarded as having
adequate capacity to pay interest and repay principal, although adverse
economic conditions or changing circumstances are more likely to lead to a
weakening of such capacity than for higher grade bonds. Such securities may be
considered to have speculative

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characteristics. In the event that the ratings of securities held by the
Portfolio fall below investment grade, the Portfolio will not be obligated to
dispose of such securities and may continue to hold such securities if, in the
opinion of the Sub-Investment Manager, such investment is considered
appropriate under the circumstances. Generally, at least 60% of the
Portfolio's assets will be invested in securities which have paid dividends or
interest within the preceding 12 months, but non-income producing securities
will be held for anticipated increases in value. The Portfolio may also invest
in warrants, which are rights to buy certain securities at set prices during
specified time periods. See "DESCRIPTION OF CERTAIN INVESTMENTS--Warrants" in
the Statement of Additional Information.

This Portfolio invests primarily in stocks listed on the New York Stock
Exchange and on other national securities exchanges and, to a lesser extent,
in stocks that are traded over-the-counter. Securities are selected
principally for their potential appreciation and anticipated income. Assets of
the Portfolio will be substantially fully invested at all times.

Risk Factors. The prices of the types of securities usually purchased for
the Domestic Growth Stock Portfolio will tend to fluctuate more than the
prices of the securities usually purchased for the Bond Portfolio or the Money
Market Portfolio. As a result, the net asset value of the Domestic Growth
Stock Portfolio may experience greater short-term and long-term variations
than Portfolios that invest primarily in fixed income securities.

Growth and Income Portfolio

Investment Objectives. The objective of the Growth and Income Portfolio is
to seek long-term growth of capital by investing primarily in a wide range of
equity issues that may offer capital appreciation and, secondarily, to seek a
reasonable level of current income.

Investment Policies. The Growth and Income Portfolio invests at least 80% of
its assets in common stocks and other equity securities such as preferred
stocks and securities convertible into common stock that are either listed on
the New York Stock Exchange, traded over-the-counter or, to a lesser extent,
listed on other national securities exchanges. Securities are selected
principally for potential capital appreciation, based upon such criteria as
relatively low price to earnings ratio and relatively low price to book value
ratio, as compared to such ratios for the market in general and, secondarily,
for current income and increasing future dividends. While the Growth and
Income Portfolio intends to invest at least 60% of its assets in securities
which have paid dividends or interest within the preceding 12 months, the
Portfolio may invest in securities not currently paying dividends where
Warburg the Sub-Investment Manager anticipates that they will increase in
value.

The Growth and Income Portfolio may also invest for temporary or defensive
purposes in high-grade debt securities and money market securities, including
U.S. Government Obligations, commercial paper and bank obligations, and
repurchase agreements.

The Growth and Income Portfolio will invest primarily in U.S. companies, but
may, when deemed appropriate by Warburg, invest in and hold up to 20% of the
Portfolio's total assets in foreign securities which are traded in the U.S. or
in Depository Receipts. The Growth and Income Portfolio may also purchase the
securities of foreign issuers directly in foreign markets. The Portfolio's
investments in foreign securities will primarily be in equity securities of
companies organized outside the U.S., but may also include debt obligations of
foreign companies and governments. See "Foreign Securities" and "Depository
Receipts" in the Prospectus and "DESCRIPTION OF CERTAIN INVESTMENTS--
Depository Receipts" in the Statement of Additional Information.

The Growth and Income Portfolio may write covered call options or purchase
put and call options with respect to certain of its portfolio securities or
purchase stock index options for hedging purposes or to enhance income. The
Growth and Income Portfolio may also purchase or write futures contracts,
including stock index futures contracts. The Portfolio may also enter into
closing transactions with respect to such options and futures contracts. See
"Securities and Index Options" and "Futures Contracts" in this Prospectus.

Risk Factors. The prices of the securities purchased for the Growth and
Income Portfolio will tend to fluctuate more than the prices of securities
purchased for the Bond Portfolio or the Money Market Portfolio. As a result,
the net asset value of the Growth and Income Portfolio may experience greater
short-term and long-term variations than Portfolios that invest primarily in
fixed income securities.

Capital Growth Portfolio

Investment Objectives. The investment objective of the Capital Growth
Portfolio is to seek capital growth. Realization of income is not a
significant investment consideration and any income realized will be
incidental.

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Investment Policies. The Capital Growth Portfolio will invest primarily in
common stocks when Janus, the Sub-Investment Manager believes that the market
environment favors investment in those securities. Common stock investments
are selected in industries and companies that Janus believes are experiencing
favorable demand for their products and services and that operate in a
favorable environment from a competitive and regulatory standpoint.

It is the policy of the Capital Growth Portfolio to purchase and hold
securities for capital growth. If the Sub-Investment Manager is satisfied with
the performance of a security and anticipates continued appreciation, the
Portfolio will generally retain such security. However, changes in the
Portfolio will generally be made whenever the Sub-Investment Manager believes
they are advisable, either as a result of securities having reached a price
objective, or by reason of developments not foreseen at the time of the
investment decision. Since investment changes usually will be made without
reference to the length of time a security has been held, a significant number
of short-term transactions may result. To a limited extent, the Portfolio may
also purchase individual securities in anticipation of relatively short-term
price gains, and the rate of portfolio turnover will not be a determining
factor in the sale of such securities. However, certain tax rules may restrict
the Portfolio's ability to sell securities held for less than 90 days.

Although the Portfolio expects that under normal conditions its assets will
be primarily invested in common stocks, to the extent that it is not so
invested, the Capital Growth Portfolio may also invest in other securities,
including: U.S. Government Obligations, corporate bonds and debentures, high
grade commercial paper, preferred stocks, convertible securities, warrants or
other securities of U.S. issuers when the Sub-Investment Manager perceives an
opportunity for capital growth from such securities or so that the Portfolio
may receive a return on its idle cash. The Portfolio's cash position may
increase when the Sub-Investment Manager is unable to locate investment
opportunities that it believes have desirable risk/reward characteristics.
Investments in debt securities will be limited to securities of U.S.
companies, the U.S. Government and foreign governments and foreign
governmental entities. Foreign governmental entities include supranational
organizations, such as the European Economic Community and the World Bank,
that are chartered to promote economic development and are supported by
various governments and governmental entities. All debt securities in which
the Portfolio invests, except as noted below, will have credit ratings in the
four highest rating categories of Standard & Poor's or Moody's or other NRSROs
or, if not rated, will be of comparable quality to obligations so rated in the
judgment of the Sub-Investment Manager. The Capital Growth Portfolio may
invest up to 5% of its assets in high-yield/high-risk bonds. Such securities
include debt securities that are below investment grade (securities rated Ba
or lower by Moody's or BB or lower by Standard & Poor's) and unrated
securities of comparable quality as determined by the Sub-Investment Manager.

Investments may also be made in foreign equity securities and in Depository
Receipts. The Portfolio will not invest more than 25% of its assets in foreign
securities denominated in foreign currencies and not publicly traded in the
U.S. See "Foreign Securities" and "Depository Receipts" in the Prospectus.
Additionally, in order to manage exchange rate risks, the Portfolio may enter
into foreign currency exchange contracts (agreements to exchange one currency
for another at a future date). See "Forward Foreign Currency Exchange
Contracts" in the Prospectus.

The Portfolio may purchase and sell futures contracts as more fully
described under "Futures Contracts" in this Prospectus and may write covered
call options and purchase call and put options as described under "Securities
and Index Options" in this Prospectus.

The Portfolio may invest in "special situations" from time to time. A
special situation arises when, in the Sub-Investment Manager's opinion, the
securities of a particular company will be recognized and appreciate in value
due to a specific development, such as a technological breakthrough or a new
product, at that company.

The Portfolio expects that its securities will primarily be traded on U.S.
and foreign securities exchanges and established over-the-counter markets.

Risk Factors. The foreign securities and ADRs, EDRs and GDRs in which the
Portfolio may invest involve special considerations and risks. See "Foreign
Securities" and "Depository Receipts" in this Prospectus. Investing in foreign
currency exchange contracts involves certain risks since shifting the
Portfolio's currency exposure from one currency to another removes the
Portfolio's opportunity to profit from increases in the value of the original
currency and involves a risk of increased losses if the Sub-Investment
Manager's projection of future exchange rates is inaccurate. Investment in
special situations may carry an additional risk of loss in the event that the
anticipated development does not occur or does not attract the expected
attention. The price of the securities purchased by the Capital Growth
Portfolio will tend to fluctuate more than the prices of securities purchased
by the Bond Portfolio and the Money Market Portfolio.

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<PAGE>

Balanced Portfolio

Investment Objectives. The investment objective of the Balanced Portfolio is
to seek reasonable current income and long-term capital growth, consistent
with conservation of capital, by investing primarily in common stocks and
fixed income securities.

Investment Policies. The Balanced Portfolio intends to invest based on
combined considerations of risk, income, capital enhancement and protection of
capital value. The Balanced Portfolio may invest in any type or class of
security. Normally, the Balanced Portfolio will invest in common stocks and
fixed income securities; however, it may also invest in warrants and in
securities convertible into common stocks. At least 25% of the value of its
assets will be invested in high-grade fixed income senior securities which are
rated in the three highest rating categories by any NRSRO or, if unrated, are
considered by Morgan, the Portfolio's Sub-Investment Manager, to be of
comparable quality. The Portfolio may purchase and sell futures contracts as
more fully described under "Futures Contracts" in this Prospectus and may
write covered call options and purchase call and put options as described
under "Securities and Index Options" in this Prospectus. The Portfolio may
also invest in zero coupon debt obligations. In order to provide additional
diversification the Portfolio may invest in equity and debt securities of
foreign issuers limited to 15% of the Portfolio's total assets and in
Depository Receipts. See "Foreign Securities" and "Depository Receipts" in
this Prospectus.

In implementing the investment objectives of the Balanced Portfolio, Morgan
will select securities believed to have potential for the production of
current income, with emphasis on securities that also have potential for
capital enhancement. In an effort to protect its assets against major market
declines, or for other temporary defensive purposes, the Balanced Portfolio
may actively pursue a policy of retaining cash or investing part or all of its
assets in cash equivalents, such as U.S. Government Obligations, high grade
commercial paper and U.S. dollar obligations of foreign branches of U.S.
banks.

Risk Factors. The prices of equity securities in which the Balanced
Portfolio invests will fluctuate day to day and, as a result, the value of an
investment in the Balanced Portfolio will vary based upon such market
conditions. The value of the Balanced Portfolio's investment in fixed income
securities will vary depending on various factors including prevailing
interest rates. Fixed income securities are also subject to the ability of the
issuer to make payments of principal and interest when due. Although the
Balanced Portfolio seeks to reduce both financial and market risks associated
with any one investment medium, performance of the Balanced Portfolio will
depend on such additional factors as timing the mix of investments and the
ability of Morgan to predict and react to changing market conditions.
Investment in foreign securities and ADRs involve special considerations and
risks. See "Foreign Securities" and "Depository Receipts" in this Prospectus.

Emerging Growth Portfolio

Investment Objective. The Emerging Growth Portfolio seeks to provide long-
term growth of capital. Dividend and interest income from portfolio
securities, if any, is incidental to the Portfolio's investment objective of
long term growth of capital.

Investment Policies. The Portfolio's policy is to invest primarily (i.e., at
least 80% of its assets under normal circumstances) in common stocks of small
and medium-sized companies that are early in their life cycle but which have
the potential to become major enterprises (emerging growth companies). Such
companies generally would be expected to show earnings growth over time that
is well above the growth rate of the overall economy and the rate of
inflation, and would have the products, technologies, management and market
and other opportunities which are usually necessary to become more widely
recognized as growth companies. Emerging growth companies can be of any size
and the Portfolio may also invest in larger or more established companies
whose rates of earnings growth are expected to accelerate because of special
factors, such as rejuvenated management, new products, changes in consumer
demand, or basic changes in the economic environment.

While the Portfolio will invest primarily in common stocks, the Portfolio
may, to a limited extent, seek appreciation in other types of securities such
as foreign or convertible securities and warrants when relative values make
such purchases appear attractive either as individual issues or as types of
securities in certain economic environments (see "Risk Factors" and "Foreign
Securities" below). The Portfolio may also enter into forward foreign currency
exchange contracts for the purchase or sale of foreign currency for hedging
purposes and non-hedging purposes, including transactions entered into for the
purpose of profiting from anticipated changes in foreign currency exchange
rates, as well as options on foreign currencies.

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<PAGE>

The Portfolio may also hold foreign currency (see "Risk Factors" below). The
Portfolio may invest up to 25% (and generally expects to invest between 0% and
10%) of its total assets in foreign securities (not including American
Depository Receipts ("ADRs") (see "American Depository Receipts" below)),
which may be traded on foreign exchanges. The Portfolio may hold cash
equivalents or other forms of debt securities as a reserve for future
purchases of common stock or to meet liquidity needs. The Portfolio may also
invest in emerging market securities.

The Portfolio may invest in corporate asset-backed securities (see
"Corporate Asset-Backed Securities" below). The Portfolio may write covered
call and put options and purchase call and put options on securities and stock
indices in an effort to increase current income and for hedging purposes. The
Portfolio may also purchase and sell stock index futures contracts and may
write and purchase options thereon for hedging purposes and for non-hedging
purposes, subject to applicable law (see "Futures Contracts" below and the
Statement of Additional Information). In addition, the Portfolio may purchase
portfolio securities on a "when-issued" or on a "forward delivery" basis (See
"When-Issued Securities" below). The Portfolio may also invest a portion of
its assets in "loan participations" (see "Loan Participations and Other Direct
Indebtedness" below and in the Statement of Additional Information).

While it is not generally the Portfolio's policy to invest or trade for
short-term profits, the Portfolio may dispose of a portfolio security whenever
MFS, the Sub-Investment Manager, is of the opinion that such security no
longer has an appropriate appreciation potential or when another security
appears to offer relatively greater appreciation potential. Subject to tax
requirements, portfolio changes are made without regard to the length of time
a security has been held, or whether a sale would result in a profit or loss.

During periods of unusual market conditions when MFS, believes that
investing for temporary defensive purposes is appropriate, or in order to meet
anticipated redemption requests, a large portion or all of the assets of the
Portfolio may be invested in cash or cash equivalents including, but not
limited to, obligations of banks (including certificates of deposit, bankers'
acceptances and repurchases agreements) with assets of $1 billion or more,
commercial paper, short-term notes, obligations issued or guaranteed by the
U.S. Government or any of its agencies, authorities or instrumentalities and
related repurchase agreements. U.S. Government securities also include
interests in trust or other entities representing interests in obligations
that are issued or guaranteed by the U.S. Government, its agencies,
authorities or instrumentalities.

Risk Factors. The nature of investing in emerging growth companies involves
greater risk than is customarily associated with investments in more
established companies. Emerging growth companies often have limited product
lines, markets or financial resources, and they may be dependent on one-person
management. In addition, there may be less research available on many
promising small and medium sized emerging growth companies. The securities of
emerging growth companies may have limited marketability and may be subject to
more abrupt or erratic market movements than securities of larger, more
established growth companies or the market averages in general. Shares of the
Portfolio, therefore, are subject to greater fluctuation in value than shares
of a conservative equity Portfolio or of a growth Portfolio which invests
entirely in proven growth stocks.

The Portfolio may invest to a limited extent in lower rated fixed income
securities or comparable unrated securities. Investments in lower rated income
securities, while offering generally high current income and generally
providing greater income and opportunity for gain than investments in higher
rated securities, usually entail greater risk of principal and income
(including the possibility of default or bankruptcy of the issuers of such
securities), and involve greater volatility of price (especially during
periods of economic uncertainty or change) than investments in higher rated
securities and because yields may vary over time, no specified level of income
can ever be assured. In particular, securities rated lower than Baa by Moody's
Investors Service, Inc. ("Moody's") or BBB by Standard & Poor's Rating Service
or comparable unrated securities (commonly known as "junk bonds") are
considered speculative. These lower rated high yielding fixed income
securities generally tend to reflect economic changes (and the outlook for
economic growth), short-term corporate and industry developments and the
market's perception of their credit quality (especially during times of
adverse publicity) to a greater extent than higher rated securities which
react primarily to fluctuations in the general level of interest rates
(although these lower rated fixed income securities are also affected by
changes in interest rates). In the past, economic downturns or an increase in
interest rates have under certain circumstances caused a higher incidence of
default by the issuers of these securities and may do so in the future,
especially in the case of highly leveraged issuers. During certain periods,
the higher yields on the Portfolio's lower rated high yielding fixed income
securities are paid primarily because of the increased risk of loss of
principal and income, arising from such factors as the heightened possibility
of default or bankruptcy of the issuers of such securities. Due to the fixed
income payments of these securities, the Portfolio may continue to earn the
same level of

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<PAGE>

interest income while its net asset value declines due to portfolio losses,
which could result in an increase in the Portfolio's yield despite the actual
loss of principal. The prices for these securities may be affected by
legislative and regulatory developments. An effect of such rules may be to
depress the prices of outstanding lower rated high yielding fixed income
securities. Changes in the value of securities subsequent to their acquisition
will not affect cash income or yield to maturity to the Portfolio but will be
reflected in the net asset value of shares of the Portfolio. The market for
these lower rated fixed income securities may be less liquid than the market
for investment grade fixed income securities. Furthermore, the liquidity of
these lower rated securities may be affected by the market's perception of
their credit quality. Therefore, the Sub-Investment Manager's judgment may at
times play a greater role in valuing these securities than in the case of
investment grade fixed income securities, and it also may be more difficult
during times of certain adverse market conditions to sell these lower rated
securities at their fair value to meet redemption requests or to respond to
changes in the market. No minimum rating standard is required by the
Portfolio. To the extent the Portfolio invests in these lower rated fixed
income securities, the achievement of its investment objective may be more
dependent on the Sub-Investment Manager's own credit analysis than in the case
of a Portfolio investing in higher quality bonds. While the Sub-Investment
Manager may refer to ratings issued by established credit rating agencies, it
is not a policy of the Portfolio to rely exclusively on ratings issued by
these agencies, but rather to supplement such ratings with the Sub-Investment
Manager's own independent and ongoing review of credit quality.

The Portfolio may also invest in fixed income securities rated Baa by
Moody's or BBB by S&P and comparable unrated securities. These securities,
while normally exhibiting adequate protection parameters, may have speculative
characteristics and changes in economic conditions and other circumstances are
more likely to lead to a weakened capacity to make principal and interest
payments than in the case of higher rated securities.

Additional Risk Factors

The net asset value of the shares of an open-end investment company which
may invest to a limited extent in fixed income securities changes as the
general levels of interest rates fluctuate. When interest rates decline, the
value of a fixed income portfolio can be expected to rise. Conversely, when
interest rates rise, the value of a fixed income portfolio can be expected to
decline.

Although changes in the value of securities subsequent to their acquisition
are reflected in the net asset value of shares of the Portfolio, such changes
will not affect the income received by the Portfolios from such securities.
However, the dividends paid by the Portfolios, if any, will increase or
decrease in relation to the income received by the Portfolio from its
investments, which would in any case be reduced by the Portfolio's expenses
before it is distributed to shareholders.

In addition, the use of options, futures contracts, options on futures
contracts, forward contracts and options on foreign currencies may result in
the loss of principal, particularly where such instruments are traded for
other than hedging purposes (e.g., to enhance current yield).

The Emerging Growth Portfolio is aggressively managed and, therefore, the
value of its shares is subject to greater fluctuation and investments in its
shares involve the assumption of a higher degree of risk than would be the
case with an investment in a conservative equity portfolio or a growth
portfolio investing entirely in proven growth equities.

See the Statement of Additional Information for further discussion of
foreign securities and the holding of foreign currency as well as the
associated risks.

Given the above average investment risk inherent to the Emerging Growth
Portfolio, investment in shares of the Emerging Growth Portfolio should not be
considered a complete investment program and may not be appropriate for all
investors.

Foreign Securities

The World Growth Stock Portfolio, the Capital Growth Portfolio, the Gold
Stock Portfolio and the Emerging Growth Portfolio intend to purchase
securities that are listed on stock exchanges in foreign countries. They may
also, to a limited extent, purchase unlisted foreign securities. The Growth
and Income Portfolio, the Capital Growth Portfolio and the Balanced Portfolio
may also invest in listed and unlisted foreign securities. Foreign investments
may involve greater risks than are present in domestic investments. Compared
to domestic companies, there is generally less publicly available information
about foreign companies, less comprehensive accounting, reporting and
disclosure requirements, and there may be less governmental regulation and
supervision of foreign stock exchanges, brokers and listed companies.
Investments in foreign

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<PAGE>

securities also involve the risk of expropriation or confiscatory taxation
that could affect investments, currency blockages which would prevent cash
from being brought back into the United States, generally higher brokerage and
custodial costs than those of domestic securities and settlement of
transactions with respect to such securities may sometimes be delayed beyond
periods customary in the United States. The Sub-Investment Managers, under the
supervision of Chubb Investment Advisory, consider possible political and
financial instability abroad, as well as the liquidity and volatility of
foreign investments.

Investing in foreign securities or on foreign exchanges may present a
greater degree of risk than investing in domestic issuers. These risks include
changes in currency rates, exchange control regulations, governmental
administration, economic or monetary policy (in this country or abroad), war
or expropriation. In particular, the dollar value of portfolio securities of
non-U.S. issuers fluctuates with changes in market and economic conditions
abroad and with changes in relative currency values (when the value of the
dollar increases as compared to a foreign currency, the dollar value of a
foreign-denominated security decreases, and vice versa). Costs may be incurred
in connection with conversions between various currencies. Special
considerations may also include more limited information about foreign
issuers, higher brokerage costs, different accounting standards and thinner
trading markets. Foreign securities markets may also be less liquid, more
volatile and less subject to government supervision than in the United States.
Investments in foreign countries could be affected by other factors including
confiscatory taxation and potential difficulties in enforcing contractual
obligations and could be subject to extended settlement periods. Therefore, an
investment in shares of a Portfolio may be subject to a greater degree of risk
than investments in other investment companies which invest exclusively in
domestic securities.

As a result of its investments in foreign securities, the Portfolios may
receive interest or dividend payments, or the proceeds of the sale or
redemption of such securities, in the foreign currencies in which such
securities are denominated. In that event, a Portfolio may promptly convert
such currencies into dollars at the then current exchange rate. Under certain
circumstances, however, such as where the Sub-Investment Manager believes that
the applicable exchange rate is unfavorable at the time the currencies are
received or the Sub-Investment Manager anticipates, for any other reason, that
the exchange rate will improve, a Portfolio may hold such currencies for an
indefinite period of time.

In addition, a Portfolio may be required to receive delivery of the foreign
currency underlying forward currency contracts it has entered into. This could
occur, for example, if an option written by the Portfolio is exercised or is
unable to close out a forward contract it has entered into. A Portfolio may
also hold foreign currency in anticipation of purchasing foreign securities. A
Portfolio may also elect to take delivery of the currencies underlying options
or forward contracts if, in the judgment of the Sub-Investment Manager, it is
in the best interest of the Portfolio to do so. In such instances as well, a
Portfolio may promptly convert the foreign currencies to dollars at the then
current exchange rate, or may hold such currencies for an indefinite period of
time.

While the holding of currencies will permit a Portfolio to take advantage of
favorable movements in the applicable exchange rate, it also exposes a
Portfolio to risk of loss if such rates move in a direction adverse to the
Portfolio's position. Such losses could reduce any profits or increase any
losses sustained by the Portfolio from the sale or redemption of securities,
and could reduce the dollar value of interest or dividend payments received.
In addition, the holding of currencies could adversely affect the Portfolio's
profit or loss on currency options or forward contracts, as well as its
hedging strategies.

Prior to investing in foreign securities, a Portfolio may hold funds
temporarily in foreign currencies. The value of the assets of that Portfolio
may be affected favorably or unfavorably by changes in foreign currency
exchange rates and exchange control regulations. The Portfolio may also incur
costs in connection with conversions between various currencies. The
Portfolios will, therefore, consider foreign exchange rates in making
investment decisions, but, other than the Capital Growth Portfolio and the
Emerging Growth Portfolio, will not actively hedge foreign currency
fluctuations by entering into contracts to purchase or sell foreign currencies
at a future date or options or futures contracts on foreign currencies. See
"RISK CONSIDERATIONS--Foreign Securities" in the Statement of Additional
Information.

Emerging Market Securities

Consistent with the Portfolios' objectives and policies the Portfolios may
invest in securities of issuers whose principal activities are located in
emerging market countries. Emerging market countries include any country
determined by the Sub-Investment Manager to have an emerging market economy,
taking into account a number of factors including whether the country has a
low to middle economy according to the International Bank for Reconstruction
and Development, the country's foreign currency debt rating, its political and
economic stability and the development of its financial and capital markets.
The Sub-Investment Manager determines whether an issuer's principal activities
are located in an emerging market country

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<PAGE>

by considering such factors as country of organization, the principal trading
market for its securities and the source of its revenues and assets. The
issuer's principal activities generally are deemed to be located in a
particular country if: (a) the security is issued or guaranteed by the
government of the country or any of its agencies, authorities, or
instrumentalities; (b) the issuer is organized under the laws of, and
maintains a principal office in that country; (c) the issuer has its principal
securities trading market in that country; (d) the issuer derives 50% or more
of its total revenue from goods sold or services performed in that country; or
(e) the issuer has 50% or more of its assets in that country.

Depository Receipts

The World Growth Portfolio, the Gold Stock Portfolio, the Growth and Income
Portfolios, the Capital Growth Portfolio, the Balanced Portfolio and the
Emerging Growth Portfolio may also invest in Depository Receipts, (ADRs, GDRs
and EDRs.) ADRs are certificates issued by a United States bank representing
the right to receive securities of a foreign issuer deposited in a foreign
branch of a United States bank and traded on a United States exchange or over-
the-counter. European Depository Receipts ("EDRs") and Global Depository
Receipts ("GDRs") are typically issued by foreign banks or trust companies,
although they may be by US banks or trust companies, and also evidence
ownership of underlying securities issued by a foreign or U.S. securities
market. Generally, Depository Receipts in registered form are designed for use
in the U.S. securities market and Depository Receipts in bearer form are
designed for use in securities markets outside the United States. Depository
Receipts may not necessarily be denominated in the same currency as the
underlying securities in to which they may be converted. Depository Receipts
may be issued pursuant to sponsored or unsponsored programs. In sponsored
programs, an issuer has made arrangements to have its securities traded in the
form of Depository Receipts. In unsponsored programs the issuer may not be
directly involved in the creation of the program. In some cases it may be
easier to obtain financial information from an issuer that has participated in
the creation of the sponsored program. Accordingly, there may be less
information available regarding issuers of securities underlying unsponsored
programs and there may not be a correlation between such information and the
market value of the Securities. Brokerage commissions will be incurred if ADRs
are purchased through brokers on the U.S. stock exchanges.

Depository Receipts also involve the risks of other investment in foreign
securities, for purposes of each Fund's investment policies, a Fund's
investment in Depository Receipts will be deemed to be investments in the
underlying securities.

Forward Foreign Currency Exchange Contracts

The Portfolios (except the Money Market Portfolio) may utilize forward
foreign currency exchange contracts ("forward currency contracts"). A forward
currency contract involves an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the forward currency contract agreed upon by the parties, at a price set at
the time of the contract. These forward currency contracts are principally
traded in the interbank market conducted directly between currency traders
(usually large commercial banks) and their customers. The Portfolios will
enter into forward currency contracts only under two circumstances. First,
when a Portfolio has entered into a contract to purchase or sell a security
denominated in a foreign currency, the Portfolio may be able to protect itself
against a possible loss, between trade date and settlement date for such
security, resulting from an adverse change in the relationship between the
U.S. dollar and the foreign currency in which such security is denominated, by
entering into a forward currency contract in U.S. dollars for the purchase or
sale of the amount of the foreign currency involved in the underlying security
transaction. However, this tends to limit potential gains which might result
from a positive change in such currency relationships. Second, when management
of a Portfolio believes that the currency of a particular foreign country may
suffer or enjoy a substantial movement against the U.S. dollar (or another
currency), the Portfolio may enter into a forward currency contract to sell or
buy an amount of foreign currency approximating the value of some or all of
the Portfolio's securities denominated in such foreign currency, or a proxy
currency whose performance is expected to correlate to the currency. The
forecasting of short-term currency market movement is extremely difficult and
whether such a short-term hedging strategy will be successful is highly
uncertain.

Repurchase Agreements

All of the Portfolios may enter into repurchase agreements, whereby the
Portfolio purchases securities (referred to as "underlying securities") from
well-established securities dealers or banks, subject to agreement by the
seller to repurchase the securities at a stated price on a specified date.
Repurchase agreements involve certain risks not associated with direct
investment in securities, including the risk that the original seller will
default on its obligations to repurchase, as a result of bankruptcy or
otherwise. To minimize this risk, a Portfolio will enter into repurchase
agreements only if the repurchase agreement is structured in a manner
reasonably designed to collateralize fully the value of a Portfolio's
investment during the entire term of the agreement and in accordance with
guidelines regarding the creditworthiness of the seller determined

27
<PAGE>

by the Board of Directors of the Fund. As a general matter, if the seller of
the repurchase agreement is a bank it must have assets of at least
$1,000,000,000; if the seller is a broker-dealer it must have a net worth of
at least $25,000,000. The underlying securities, held as collateral, will be
marked to market on a daily basis, and must be high-quality short-term
securities. In addition, the securities underlying repurchase agreements must
be either U.S. Government Obligations or securities that, at the time the
repurchase agreement is made, are rated in the highest rating category by the
Requisite NRSROs. Nevertheless, in the event that the other party to the
agreement fails to repurchase the securities subject to the agreement, a
Portfolio could suffer a loss to the extent proceeds from the sale of the
underlying securities held as collateral were less than the price specified in
the repurchase agreement.

Zero Coupon Bonds

The Portfolios may invest in zero coupon bonds which are debt obligations
that do not make any interest payments for a specified period of time prior to
maturity or until maturity. The value of these obligations fluctuates more in
response to interest rate changes than does the value of debt obligations that
make current interest payments.

Securities and Index Options

The Growth and Income Portfolio, the Capital Growth Portfolio, the Balanced
Portfolio and the Emerging Growth Portfolio may write covered call options and
purchase call and put options on securities and stock indices. The Capital
Growth Portfolio and the Emerging Growth Portfolio may also utilize options on
foreign currencies. See the Statement of Additional Information for a more
detailed description of these options.

Writing (Selling) Call Options. In order to earn additional income or to
protect partially against declines in the value of its securities, the
Portfolios noted above may write (sell) covered call options. A Portfolio may
also purchase call options to the extent necessary to close out call option
positions previously written by the Portfolio. A call option gives the holder
(purchaser) the right to buy and obligates the writer (seller) to sell, in
return for a premium paid to the writer, the underlying security at the
exercise price at any time during the option period. A call option on a
securities index is similar to a call option on an individual security, except
that the value of the option depends on the weighted value of the group of
securities comprising the index and all settlements are made in cash rather
than by delivery of a particular security.

The writing of call options on securities and securities indices involves
the following risks: (1) during the option period the writer of a call option
gives up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but retains the
risk of loss should the price of the underlying security or index decline and
(ii) the inability to close out options previously written, which would
require the Portfolio to retain the option and the securities covering the
option until its exercise or expiration.

Purchasing Put and Call Options

In order to hedge against changes in the market value of their portfolio
securities, the Growth and Income Portfolio, the Capital Growth Portfolio, the
Balanced Portfolio and the Emerging Growth Portfolio may also purchase put and
call options with respect to equity securities, bonds, and stock and bond
indices which correlate with their portfolio securities, provided that the
premiums paid for such options are limited in each case to no more than 5% of
the Portfolio's total assets. A put option on a security gives the purchaser
of the option, in return for the premium paid to the writer (seller), the
right to sell the underlying security at the exercise price at any time during
the option period. Upon exercise by the purchaser, the writer of a put option
has the obligation to purchase the underlying security at the exercise price.
A put option on a securities index is similar to a put option on an individual
security, except that the value of the option depends on the weighted value of
the group of securities comprising the index and all settlements are made in
cash, rather than by delivery of a particular security.

Purchasing a put or call option on securities and securities indices
involves the risk that the Portfolio may lose the premium it paid plus
transaction costs.

Futures Contracts

The Growth and Income Portfolio, the Capital Growth Portfolio, the Balanced
Portfolio and the Emerging Growth Portfolio may purchase and sell futures
contracts on debt securities and indexes of debt securities (i.e., interest
rate futures contracts) as a hedge against or to minimize adverse principal
fluctuations resulting from anticipated interest rate changes. They may also,
where appropriate, enter into stock index futures contracts to provide a hedge
for a portion of a Portfolio's

28
<PAGE>

equity holdings. Stock index futures contracts may be used as a way to
implement either an increase or decrease in portfolio exposure to the equity
markets in response to changing market conditions. The Capital Growth
Portfolio and the Emerging Growth Portfolio may also enter into currency
futures contracts to hedge the currency fluctuations of its foreign
securities. A Portfolio may also write covered call options and purchase put
or call options on futures contracts of the type which that Portfolio is
permitted to purchase. The Portfolios will not enter into futures contracts
for speculation and will only enter into futures contracts that are traded on
national futures exchanges. No Portfolio will enter into futures contracts or
options thereon if immediately thereafter the sum of the amounts of initial
margin deposits on the Portfolio's existing futures contracts and premiums
paid for options on unexpired futures contracts would exceed 5% of the value
of the Portfolio's total assets.

The use of futures contracts by the Growth and Income Portfolio, the Capital
Growth Portfolio, the Balanced Portfolio and the Emerging Growth Portfolio
entails certain risks, including but not limited to the following: no
assurance that futures contracts transactions can be offset in closing
transactions at favorable prices or at all unless a liquid secondary market
exists; possible reduction of the Portfolio's income due to the use of
hedging; possible reduction in value of both the securities hedged and the
hedging instrument; possible lack of liquidity due to daily limits on price
fluctuation; imperfect correlation between the contract and the securities
being hedged; and potential losses well in excess of the amount invested in
futures contracts themselves. If a Sub-Investment Manager's forecasts
regarding movements in securities prices or interest rates are incorrect, the
Portfolio's investment results may have been better without the hedge. Futures
contracts and their associated risks are described in more detail in the
Statement of Additional Information.

Lending of Securities

The Emerging Growth Portfolio may make loans of its portfolio securities.
Such loans will usually be made to member banks of the Federal Reserve System
and member firms (and subsidiaries thereof) of the New York Stock Exchange and
would be required to be secured continuously by collateral in cash, U.S.
Government securities or an irrevocable letter of credit maintained on a
current basis at an amount at least equal to the market value of the
securities loaned. The Portfolio would continue to collect the equivalent of
the interest on the securities loaned and would receive either interest
(through investment of cash collateral) or a fee (if the collateral is U.S.
Government securities or a letter of credit).

When-Issued Securities

In order to help ensure the availability of suitable securities, the Bond,
Balanced, Capital Growth, World Growth Stock and Emerging Growth Portfolios
may purchase securities on a "when-issued" or on a "forward delivery" basis,
which means that the obligations will be delivered to the Portfolios at a
future date usually beyond customary settlement time. It is expected that,
under normal circumstances, the Portfolios will take delivery of such
securities. In general, the Portfolios do not pay for the securities until
received and does not start earning interest on the obligations until the
contractual settlement date. While awaiting delivery of the obligations
purchased on such bases, the Portfolios will establish a segregated account
consisting of cash, short-term money market instruments or other liquid assets
equal to the amount of the commitments to purchase "when-issued" securities.
See the Statement of Additional Information.

Corporate Asset-Backed Securities

The Bond and the Emerging Growth Portfolios may invest in corporate asset-
backed securities. These securities, issued by trusts and special purpose
corporations, are backed by a pool of assets, such as credit card or
automobile loan receivables, representing the obligations of a number of
different parties. Corporate asset-backed securities present certain risks.
For instance, in the case of credit card receivables, these securities may not
have the benefit of any security interest in the related collateral. See the
Statement of Additional Information for further information on these
securities.

Loan Participations and Other Direct Indebtedness

The Bond and the Emerging Growth Portfolios may invest a portion of their
assets in "Loan Participations" and other direct indebtedness. By purchasing a
loan participation, the Portfolios acquire some or all of the interest of a
bank or other lending institution in a loan to a corporate borrower. Many such
loans are secured, and impose restrictive covenants which must be met by the
borrower. These loans are made generally to finance internal growth, mergers,
acquisitions, stock repurchases, leveraged buy-outs and other corporate
activities. Such loans may be in default at the time of purchase. The
Portfolios may also purchase other direct indebtedness such as trade or other
claims against companies, which generally represent money owed by the company
to a supplier of goods and services. These claims may also be purchased at a
time when the company is in default. Certain of the loan participations and
other direct indebtedness acquired by the Portfolios may involve revolving
credit facilities or other standby financing commitments which obligate the
Portfolios to pay additional cash on a certain date or on demand.

29
<PAGE>

The highly leveraged nature of many such loans and other direct indebtedness
may make such loans especially vulnerable to adverse changes in economic or
market conditions. Loan participations and other direct indebtedness may not
be in the form of securities or may be subject to restrictions on transfer,
and only limited opportunities may exist to resell such instruments. As a
result, the Portfolios may be unable to sell such investments at an opportune
time or may have to resell them at less than fair market value. For a further
discussion of loan participations, other direct indebtedness and the risks
related to transactions therein, see the Statement of Additional Information.

INVESTMENT RESTRICTIONS

Investments of the Portfolios are further restricted by certain policies
that may not be changed without a vote of stockholders. See "INVESTMENT
RESTRICTIONS" in the Statement of Additional Information.

Portfolio Turnover

Portfolio turnover may vary and from year to year or within a year depending
upon economic, market and business conditions. The annual portfolio turnover
rates for the Portfolios in 1996 and 1995 were as follows: 27.50% and 18.09%
for the World Growth Stock Portfolio; 64.78% and 23.98% for the Gold Stock
Portfolio; 49.75% and 64.17% for the Domestic Growth Stock Portfolio; 23.25%
and 127.74% for the Bond Portfolio; 35.69% and 32.30%, for the Growth and
Income Portfolio; 147.82% and 170.32% for the Capital Growth Portfolio; and
222.35% and 164.70% for the Balanced Portfolio. In addition, the portfolio
turnover rate for the Balanced Portfolio for such periods can be broken down
into rates of 233.29% and 219.50%, respectively, for the common stock portion
of the Portfolio and 202.08% and 92.85%, respectively, for the fixed income
portion. The Portfolio turnover rate for Emerging Growth Portfolio for 1996
and for the period from May 1, 1995 (commencement of operations) to December
31, 1995 was 94.58% and 30.31%, respectively. Portfolios having higher
turnover rates may realize larger amounts of gains and losses relative to a
portfolio having a lower turnover rate and will generally incur
correspondingly greater brokerage commissions. Excessive short-term trading
may result in excessive "short-short" income under the Internal Revenue Code
("IRC") which, in turn, could affect the status of such Portfolios as
regulated investment companies and the tax status of the contracts invested in
the Portfolio. See "TAXES AND DIVIDENDS" in this Prospectus and "PORTFOLIO
TRANSACTIONS AND BROKERAGE ALLOCATIONS" in the Statement of Additional
Information.

MANAGEMENT OF THE FUND

The Board of Directors of the Fund is responsible for the administration of
the affairs of the Fund.

The Fund's investment manager is Chubb Investment Advisory, a registered
investment adviser, a wholly-owned subsidiary of Chubb Life which, in turn, is
a wholly-owned Subsidiary of Jefferson Pilot Corporation. Its address is One
Granite Place, Concord, NH 03301. It provides supervisory investment advice,
and provides certain administrative services for all of the Fund's Portfolios.
Its investment advisory responsibilities include, among other things,
recommending, evaluating, monitoring and overseeing the activities of the Sub-
Investment Managers and reviewing the practices of broker-dealers selected by
the Sub-Investment Managers. Chubb Investment Advisory also provides office
space and related utilities, including telephones, necessary for the Fund's
operations; recommends auditors, counsel and custodians; maintains records not
otherwise maintained by other parties; and provides personnel, data processing
services, and supplies to the Fund. The cost of such facilities, supplies and
services is included in the investment management fee described below. Chubb
Investment Advisory also acts as transfer agent and dividend disbursing agent
for the fund and serves as investment administrator to Chubb Investment Funds,
Inc., an open-end management investment companies organized in 1987.

Investment management fees are paid to Chubb Investment Advisory monthly at
an annual rate based on a percentage of the average daily net asset value of
each Portfolio as shown below:

<TABLE>
<CAPTION>
WORLD GROWTH STOCK,
GOLD STOCK,
DOMESTIC GROWTH STOCK,
MONEY MARKET GROWTH AND INCOME, CAPITAL EMERGING
AVERAGE DAILY NET ASSETS AND BOND AND BALANCED GROWTH GROWTH
- ------------------------ ------------ ---------------------- ------- --------
<S> <C> <C> <C> <C>
First $200 Million........ .50% .75% 1.00% .80%
Next $1.1 Billion......... .45% .70% .95% .75%
Over $1.3 Billion......... .40% .65% .90% .70%
</TABLE>

30
<PAGE>

The Sub-Investment Managers for the Portfolios are Templeton Global Advisors
Limited, Lyford Cay, Nassau, Bahamas for the World Growth Stock Portfolio;
Chubb Asset Managers, Inc., 15 Mountain View Road, Warren, New Jersey 07061
for the Bond Portfolio; Van Eck Associates Corporation, 99 Park Avenue, New
York, New York 10016 for the Gold Stock Portfolio; Pioneering Management
Corporation, 60 State Street, Boston, Massachusetts 02109 for the Domestic
Growth Stock Portfolio; Janus Capital Corporation, 100 Fillmore Street, Suite
300, Denver, Colorado 80206 for the Capital Growth Portfolio; J.P. Morgan
Investment Management, Inc. ("Morgan") 522 Fifth Avenue, New York, New York
10036 for the Balanced Portfolio; Warburg Pincus Counsellors, Inc. 466
Lexington Avenue, New York, New York 10017-3147 for the Growth and Income
Portfolio; Massachusetts Financial Services Company, 500 Boylston Street,
Boston, Massachusetts 02116 for the Money Market and Emerging Growth
Portfolios.

Templeton, a registered investment adviser, is organized under the laws of
the Bahamas. Templeton is an indirect wholly owned subsidiary of Franklin
Resources, Inc. ("Franklin"), a Delaware corporation. Franklin is a publicly
traded company whose ordinary shares of common stock are listed on the New
York Stock Exchange. Templeton serves as an investment adviser or sub-adviser
to various investment companies registered under the Investment Company Act of
1940, subject to the supervision and direction of each company's Board of
Directors and, where appropriate, the company's investment adviser, as well as
to investment companies registered in foreign jurisdictions. In this capacity,
Templeton is responsible on a daily basis for managing the companies'
investments, making investment decisions on behalf of the companies and
supplying research services. Templeton may also provide investment research
and advice to certain common trust vehicles. Templeton is also an adviser or
sub-adviser to several private accounts. Templeton and its affiliates
currently serve as investment manager to 175 U.S. registered investment
companies. Mr. Jeffrey Everett, Mr. Sean Farrington and Mr. Mark Holowesko are
primarily responsible for the day to day management of the World Growth Stock
Portfolio. Mr. Everett, Executive Vice President of Templeton, has been a
portfolio manager at Templeton since 1989. Mr Farrington, Vice President of
Templeton, has been portfolio manager since 1995, and joined Templeton as a
portfolio manager in 1991. Mr. Holowesko, President of Templeton, has been
with Templeton as a portfolio manger since 1987.

Chubb Asset, a registered investment adviser, is a Delaware corporation and
a wholly-owned subsidiary of The Chubb Corporation. It is in no way affiliated
with Chubb Investment Advisory or Chubb Life. Since 1987, Chubb Asset has been
the investment manager for Chubb Investment Funds, Inc., which currently
consists of the Chubb Money Market Fund, the Chubb Government Securities Fund,
the Chubb Tax-Exempt Fund, the Chubb Total Return Fund, the Chubb Growth and
Income Fund, the Capital Appreciation Fund and the Global Income Fund. Persons
employed by Chubb Asset, who are also investment personnel of Chubb & Son,
Inc., a wholly-owned subsidiary of The Chubb Corporation, currently provide
investment advice to and supervise and monitor investment portfolios for The
Chubb Corporation and its affiliates, including general accounts of insurance
affiliates of The Chubb Corporation. In addition, certain investment personnel
employed by Chubb Asset currently provide advice to other investment
portfolios of entities not affiliated with The Chubb Corporation or its
affiliates in their capacity as officers or directors of certain registered
investment advisers not related to Chubb Asset. Ned Gerstman and Paul Geyer
have been primarily responsible for the day-to-day management of the Bond
Portfolio since 1988 and 1991, respectively. Mr. Gerstman is Senior Vice
President of Chubb Asset and Vice President and Portfolio Manager of The Chubb
Corporation. He has been employed by Chubb Asset since 1988 and has been
Portfolio Manager for The Chubb Corporation since 1987. Mr. Geyer, Assistant
Vice President and Assistant Portfolio Manager of Chubb Asset, has been
affiliated with Chubb Asset since 1991 and with The Chubb Corporation since
1990. He was previously affiliated with Merrill Lynch in New York.

Van Eck Associates, a registered investment adviser, is a Delaware
corporation. It acts as an adviser to three other registered investment
companies, Van Eck Funds, Van Eck Investment Trust and International Growth
Trust and as a sub-adviser to two other registered investment companies,
Thomson Fund Group--Thomson Precious Metals and Natural Resources Fund and GCG
Trust--Natural Resources Fund, and manages or advises managers of portfolios
of pension plans and other accounts. Mr. John C. van Eck owns 25.6% of the
outstanding voting securities of Van Eck Associates and his wife and two sons,
are each the beneficial owners of 24.8% of such securities. Mr. John C. van
Eck has retained the right to direct the voting and disposition of the shares
of Van Eck Associates held by his wife. Since October 1996, Henry J. Bingham
has been primarily responsible for the day-to-day management of the Gold Stock
Portfolio. He has been associated with Van Eck Associates as a portfolio
manager since 1984 and is currently Executive Managing Director of Van Eck.

Pioneer, a registered investment adviser, is a Delaware corporation. It is a
wholly-owned subsidiary of The Pioneer Group, Inc., a Delaware corporation.
Pioneer currently acts as a manager and investment adviser of twenty-two other
registered investment companies. Robert W. Benson, Senior Vice President of
Pioneer, has been primarily responsible for

31
<PAGE>

the day-to-day management of the Domestic Growth Stock Portfolio since 1986.
Mr. Benson has been employed as a portfolio manager by Pioneer since 1974.

Janus, a registered investment adviser, is a Colorado corporation. It serves
as investment adviser or sub-adviser to Janus Growth and Income Fund, Janus
Worldwide Fund, Janus Fund, Janus Twenty Fund, Janus Venture Fund, Janus
Flexible Income Fund and Janus Intermediate Government Securities Fund, as
well as several other mutual funds and individual, corporate and pension and
profit-sharing accounts. Kansas City Southern Industries, Inc. ("KCSI") owns
approximately 83% of the outstanding voting stock of Janus, most of which it
acquired in 1984. KCSI is a publicly-traded holding company whose primary
subsidiaries are engaged in transportation, financial services and real
estate. Mr. Marc Pinto is primarily responsible for the day-to-day management
of the Capital Growth Fund. Mr. Pinto has been a portfolio manager of the firm
since 1994, previously he was employed by a family firm and as an Associate in
the Investment Banking Division of Goldman Sachs.

Warburg, Pincus, Counsellors, Inc. ("Warburg"), is a wholly owned subsidiary
of Warburg Pincus Counsellors G.P. ("Warburg G.P."), a New York General
Partnership which is in itself controlled by Warburg, Pincus & Co. ("W.P. &
Co."), also a New York partnership. Lionel I. Pincus, the Managing Director of
W.P. & Co. may be deemed to control both W.P. & Co. and Warburg. Warburg G.P.
has no business other than being a holding company of Warburg and its
subsidiaries. Warburg, organized in 1970, is a professional investment
counselling firm which provides investment services to investment companies,
employee benefit plans, endowment funds, foundations, and other institutions
and individuals. As of May 31, 1997 Warburg managed nearly $18.8 billion in
assets. Brian Posner, a managing Director of Warburg, has been with Warburg
since January 1997 and since May 1, 1997 has been chief investment officer.
Prior to joining Warburg, Mr. Posner had been a portfolio manager with
Fidelity Investments since 1987, most recently the Vice President and
portfolio manager of Fidelity Equity-Income II Fund.

J.P. Morgan Investment Management Inc. ("Morgan") is the sub-adviser to the
Balanced Portfolio. Morgan is a wholly owned subsidiary of J.P. Morgan & Co.
Incorporated, a bank holding company organized in Delaware. Morgan offers a
wide range of investment management services and acts as investment adviser to
corporate and institutional clients. As of March 31, 1997 Morgan had assets
under management of $180 Billion. Michael J. Kelley, Vice President, (employed
by Morgan since 1985) and Harriet T. Huber, Vice President (employed by Morgan
since 1989) are primarily responsible for the day to day management of and
implementation of Morgan's investment process for the Balanced Portfolio.

Massachusetts Financial Services Company ("MFS") is America's oldest mutual
fund organization. MFS and its predecessor organizations have a history of
money management dating from 1924 and the founding of the first mutual fund in
the United States, Massachusetts Investors Trust. Net assets under the
management of the MFS organization were approximately $52.8 billion on behalf
of approximately 2.3 million investor accounts as of May 31, 1997. As of such
date, the MFS organization manages approximately $34.19 billion of assets
invested in equity securities and approximately $19.93 billion of assets
invested in fixed income securities. Approximately $4.0 billion of the assets
managed by MFS are invested in securities of foreign issuers and non-U.S.
dollar denominated securities of U.S. issuers. MFS is a subsidiary of Sun Life
Assurance Company of Canada (U.S.), a subsidiary of Sun Life of Canada (U.S.)
Holdings Inc., which in turn is a wholly owned subsidiary of Sun Life
Assurance Company of Canada.

MFS also serves as investment adviser to each of the other funds in the MFS
Family of Funds (the "MFS Funds") and to MFS(R) Municipal Income Trust, MFS
Multimarket Income Trust, MFS Government Markets Income Trust, MFS
Intermediate Income Trust, MFS Charter Income Trust, MFS Special Value Trust,
MFS Variable Insurance Trust, MFS Institutional Trust, MFS Union Standard
Trust, MFS/Sun Life Series Trust, Sun Growth Variable Annuity Fund, Inc. and
twelve variable accounts, each of which is a registered investment company
established by Sun Life Assurance Company of Canada (U.S.) in connection with
the sale of various combination fixed/variable annuity contracts. MFS and its
wholly owned subsidiary, MFS Asset Management, Inc., provide investment advice
to substantial private clients. John W. Ballen, a Senior Vice President of
MFS, is the Emerging Growth Portfolio's portfolio manager. Mr. Ballen has been
employed as a portfolio manager by MFS since 1984.

The compensation of the Sub-Investment Managers is paid directly from the
investment management fees of Chubb Investment Advisory and is set forth in
the table below as an annual percentage of the average daily net asset value
of the Portfolio managed:

32
<PAGE>

<TABLE>
<CAPTION>
SUB-INVESTMENT MANAGER
---------------------------------------------------
VAN
AVERAGE DAILY NET ASSETS JANUS TEMPLETON CHUBB ASSET ECK PIONEER
- ------------------------ ------- --------------- ------------ ------ -------
<S> <C> <C> <C> <C> <C>
First $200 Million......... .75% .50% .35% .50% .50%
Next $1.1 Billion.......... .70% .45% .30% .45% .45%
Over $1.3 Billion.......... .65% .40% .25% .40% .40%
<CAPTION>
MFS MFS
NET ASSETS WARBURG EMERGING GROWTH MONEY MARKET MORGAN
- ---------- ------- --------------- ------------ ------
<S> <C> <C> <C> <C>
First $100 Million......... .50% .40% .30% .45%
Next $100 Million.......... .50% .40% .30% .40%
Next $200 Million.......... .50% .40% .25% .35%
Over $400 Million.......... .50% .40% .25% .30%
</TABLE>

As noted above, under the Investment Management Agreement Chubb Investment
Advisory acts as transfer agent and dividend paying agent for the Fund and
assumes a number of administrative functions in addition to its investment
management services. For example, Chubb Investment Advisory prepares and
distributes proxy statements, prospectuses, Statements of Additional
Information, reports and other communications with stockholders; schedules,
plans the agenda for, and conducts the meetings of the Fund's directors and
stockholders; and prepares and files tax returns and reports which federal,
state, local or foreign laws may require. The cost of preparing, printing and
distributing all materials and holding such meetings is borne by the Fund. The
Fund also pays certain other expenses which are described under the heading
"INVESTMENT ADVISORY AND OTHER SERVICES--Payment of Expenses" in the Statement
of Additional Information.

For the year ended December 31, 1996, all investment management fees paid to
Chubb Investment Advisory totalled: .75%, .50%, .75%, .75%, .50%, .75%, 1.00%,
.75% and .80%, respectively, of the average daily net assets of the World
Growth Stock Portfolio, Money Market Portfolio, Gold Stock Portfolio, Domestic
Growth Stock Portfolio, Bond Portfolio, Growth and Income Portfolio, Capital
Growth Portfolio, Balanced Portfolio and Emerging Growth Portfolio. For the
year ended December 31, 1996 the ratio of operating expenses to average net
assets was 0.88%, 0.62%, 1.04%, 0.85%, 0.60%, 0.88%, 1.13%, 0.97% and 1.16%
respectively, for the World Growth Stock Portfolio, the Money Market
Portfolio, the Gold Stock Portfolio, the Domestic Growth Stock Portfolio, the
Bond Portfolio, the Growth and Income Portfolio, the Capital Growth Portfolio,
the Balanced Portfolio and Emerging Growth Portfolio. Chubb Investment
advisory paid each of its sub advisors a sub advisory fee equal to the fee
levels above for the first $200 million of assets.

CAPITAL STOCK

The Fund issues a separate series of capital stock for each Portfolio. Each
share of capital stock issued with respect to a Portfolio has a pro rata
interest in the assets of that Portfolio. Each share of capital stock is
entitled to one vote on all matters submitted to a vote of all stockholders of
the Fund, and fractional shares are entitled to a corresponding fractional
vote. Shares of a Portfolio will be voted separately from shares of other
Portfolios on matters affecting only that Portfolio, including approval of the
investment management agreement, a sub-investment management agreement, and
changes in fundamental investment policies of that Portfolio. The assets of
each Portfolio are charged with the liabilities of that Portfolio and a
proportionate share of the general liabilities of the Fund. All shares may be
redeemed at any time.

As a Maryland corporate entity, the Fund is not required to hold regular
annual shareholder meetings and, in the normal course, does not expect to hold
such meetings. The Fund is, however, required to hold shareholder meetings for
such purposes as, for example: (i) approving certain agreements as required by
the 1940 Act; (ii) changing fundamental investment objectives and restrictions
of the Portfolios; and (iii) filling vacancies on the Board of Directors in
the event that less than a majority of the directors were elected by
shareholders. The Fund expects that there will be no meetings of shareholders
for the purpose of electing directors unless and until such time as less than
a majority of the directors holding office have been elected by shareholders.
At such time, the directors then in office will call a shareholder meeting for
the election of directors. In addition, holders of record of not less than
two-thirds of the outstanding shares of the Fund may remove a director from
office by a vote cast in person or by proxy at a shareholder meeting called
for that purpose at the request of holders of 10% or more of the outstanding
shares of the Fund. The Fund has the obligation to assist in such shareholder
communications. Except as set forth above, directors will continue in office
and may appoint successor directors.

Chubb Life initially purchased 100,000 shares of the capital stock of each
Portfolio, other than the Balanced Portfolio and the Emerging Growth
Portfolio, for its general account. Chubb Life initially purchased 500,000
shares of the capital stock of the Balanced Portfolio and will purchase
300,000 shares of capital stock of the Emerging Growth Portfolio for its

33
<PAGE>

general account. The purchase price of each share was $10.00. All other shares
are offered only to corresponding divisions of separate accounts established
by Chubb Life or its affiliated insurance companies. As of March 26, 1997,
Chubb Life owned shares of capital stock of the Capital Growth, the Growth and
Income Portfolio and the Balanced Portfolio, representing .14%, .57% and .75%,
respectively, of total shares outstanding. The shares held in a separate
account which are attributable to Policies will be voted by Chubb Life or its
affiliated insurance companies in accordance with instructions received from
the owners of Policies. The shares held by Chubb Life or its affiliated
insurance companies, including shares for which no voting instructions have
been received, shares held in the separate account representing charges
imposed by Chubb Life or its affiliated insurance companies against the
separate account and shares held by Chubb Life or its affiliated insurance
companies that are not otherwise attributable to Policies, will also be voted
by Chubb Life or its affiliated insurance companies in proportion to
instructions received from the owners of Policies. Chubb Life and its
affiliated insurance companies reserve the right to vote any or all such
shares at their discretion to the extent consistent with then current
interpretations of the Investment Company Act of 1940 and rules thereunder.

TAXES AND DIVIDENDS

Each Portfolio intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code ("Code"). It is the Fund's policy to
comply with the provisions of the Code regarding distribution of investment
income. Under those provisions, a Portfolio will not be subject to federal
income tax on that portion of its ordinary income and net capital gains
distributed to shareholders.

The Fund expects that each Portfolio will declare and distribute by the end
of each calendar year all or substantially all ordinary income and net capital
gains. Failure to distribute substantially all ordinary and net capital gains,
as described, may subject the Fund to an excise tax.

Dividends from ordinary income will be declared and distributed with respect
to each Portfolio at least once each year. Ordinary income of each Portfolio
is the investment company taxable income as defined in Section 852(b) of the
Code. All dividends and distributions will be automatically reinvested in
additional shares of the Portfolio with respect to which dividends have been
declared, at net asset value, as of the ex-dividend date of such dividends.

Section 817(h) of the Code and regulations thereunder set standards for
diversification of the investments underlying variable life insurance policies
in order for such policies to be treated as life insurance. These
requirements, which are in addition to diversification requirements applicable
to the Portfolios under Subchapter M and the Investment Company Act of 1940,
may affect the composition of a Portfolio's investments. Since the shares of
the Fund are currently sold to segregated asset accounts underlying such
variable life insurance policies, the Fund intends to comply with the
diversification requirements as set forth in the regulations.

The Secretary of the Treasury may in the future issue additional regulations
or revenue rulings that will prescribe the circumstances in which a
policyowner's control of the investments of a separate account may cause the
policyowner, rather than the insurance company, to be treated as the owner of
the assets of the separate account. Failure to comply with Section 817(h) of
the Code or any regulations thereunder, or with any regulations or revenue
rulings on policyowner control, if promulgated, would cause earnings on a
policyowner's interest in the separate account to be includible in the
policyowner's gross income in the year earned.

OFFERING AND REDEMPTION OF SHARES

Shares of capital stock of each Portfolio of the Fund are offered only to
the corresponding division of a separate account to which premiums have been
allocated by the owner of a Policy. Shares are sold and redeemed at their net
asset value as next determined following receipt by the separate account of
premium payments, surrender requests under Policies, loan payments, transfer
requests, and similar or related transactions through the separate account.
The Fund's principal underwriter and distributor is Chubb Securities
Corporation, One Granite Place, Concord, New Hampshire 03301. Chubb Securities
Corporation is an affiliate of Chubb Investment Advisory and a wholly-owned
subsidiary of Chubb Life and Jefferson Pilot Corporation. No selling
commission or redemption charge is made with respect to the purchase or sale
of Fund shares.

Net asset value is normally determined as of the close of regular trading on
the New York Stock Exchange (presently 4:00 p.m. New York Time) on each day
during which the New York Stock Exchange is open for trading.

34
<PAGE>

An equity security listed on a stock exchange is valued at the closing sale
price on the exchange on which such security is principally traded. If no sale
took place, the mean of the bid and asked prices at the close of trading is
used. A security not listed on a stock exchange is valued at the closing sale
price as reported on a readily available market quotation system, or, if no
sales took place, the mean of the bid and asked prices at the close of trading
in the over-the-counter market. Quotations of foreign securities in foreign
currencies are converted to United States dollar equivalents using
appropriately translated foreign market prices.

Trading in securities on exchanges in European and Far Eastern countries,
and in over-the-counter markets in such other nations, is normally completed
well before the close of trading on the New York Stock Exchange. Trading of
European and Far Eastern securities, either generally or in a particular
country or countries, may not take place on every day on which the New York
Stock Exchange is open. Furthermore, trading takes place in Japanese markets
on certain Saturdays, and in various foreign markets on days which are not
business days in New York and on which the Fund's net asset value is not
normally calculated. The calculation of the net asset value of those
Portfolios which do such trading, therefore, may not take place
contemporaneously with the determination of the prices of many of the
securities of each such Portfolio which are used in making the calculation of
net asset value. Occasionally, events affecting the values of such securities
may occur between the times at which they are determined and the close of the
New York Stock Exchange, which events may not be reflected in the computation
of a Portfolio's net asset value. If, during such periods, events occur which
materially affect the value of the securities of a Portfolio, and during such
periods either shares are tendered for redemption or a purchase or sale order
is received by the Fund, such securities will be valued at fair value as
determined in good faith by the Board of Directors of the Fund.

Short-term debt securities having remaining maturities of 60 days or less
are valued on an amortized cost basis unless the Board determines that such
method does not represent fair value. This procedure values a purchased
instrument at cost on the date of purchase plus assumes a constant rate of
amortization of any discount or premium, regardless of any intervening change
in general interest rates or the market value of the instrument.

Options and convertible preferred stocks listed on a national securities
exchange are valued as of their last sale price or, if there is no sale, at
the current bid price. Futures Contracts are valued as of their last sale
price or, if there is no sale, at the mean of the bid and asked price.

All other securities and assets are valued at their fair value as determined
in good faith by the Board of Directors of the Fund.

With the approval of the Board, the Fund may utilize a pricing service, a
bank, or a broker-dealer experienced in such matters to perform any of the
above-described valuation functions.

Further discussion of asset valuation methods is included in the Statement
of Additional Information under the heading "DETERMINATION OF NET ASSET
VALUE."

OTHER INFORMATION

Shares of the Portfolios are presently offered only to corresponding
divisions of separate accounts established by Chubb Life or its affiliated
insurance companies in order to fund the Policies. In the future, however, the
shares of the Portfolios may also be offered to separate accounts of Chubb
Life, Hamilton and Jefferson Pilot, affiliates of Chubb Life, Hamilton and
Jefferson Pilot and other non-affiliated insurance companies in order to fund
additional variable life insurance policies or variable annuity contracts.

A potential for certain conflicts of interest exists between the interests
of variable life insurance policyowners and variable annuity contract owners.
In the event that shares of the Portfolios are offered to separate accounts
funding variable annuity contracts, the Board of Directors of the Fund intends
to monitor events for the existence of any material conflict between the
interests of variable life insurance policyowners and variable annuity
contract owners and to determine what action, if any, should be taken in
response thereto.

35
<PAGE>

CHUBB AMERICA FUND, INC

One Granite Place

Concord, New Hampshire 03301

(603) 226-5000

A Series Fund
with a
World Growth Stock Portfolio Investing Primarily in Stocks
International Equity Portfolio Invests In Securities Whose Primary Trading
Markets Are Putside The United States.
Money Market Portfolio Investing Primarily
in Money Market Instruments
Gold Stock Portfolio Investing Primarily in Gold Mining Shares
Bond Portfolio Investing Primarily in Debt Securities
High Yield Bond Portfolio Invests Primarily In Corporate Obligations With
Emphasis On Higher Yielding, Higher Risk, Lower-Rated Or Unrated
Securities.
Domestic Growth Stock Portfolio Investing Primarily in Stocks
Growth Portfolio Invests In Equity Securities That Have Above-Average
Growth Prospects.
Growth and Income Portfolio Investing Primarily in Stocks
Capital Growth Portfolio Investing Primarily in Stocks
Balanced Portfolio Investing Primarily in
Stocks and Fixed Income Securities
Emerging Growth Portfolio Investing Primarily in Common Stocks
of Small and Medium-Sized Companies

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

This Statement of Additional Information is not a prospectus but supplements and
should be read in conjunction with the Prospectus for the Fund. It is
incorporated by reference into the Prospectus. A copy of the Prospectus may be
obtained by writing or calling the Fund at the address or telephone number
above.

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

The date of the Prospectus to which this Statement of Additional Information
relates is November 15, 1997.

The date of this Statement of Additional Information is November 15, 1997.

S-1
<PAGE>

TABLE OF CONTENTS
Page
----

Business History

Investment Restrictions

Description of Certain Investments
Bank Obligations
Repurchase Agreements
Commercial Paper
Loan Participation and other Direct Indebtedness
Corporate Asset Backed Securities
Lending of Securities
Foreward Commitments
Warrants
Forward Foreign Currency Exchange Contracts
American Depository Receipts
Securities and Index Options
Futures Contracts and Related Options
High Yield Bonds
Description of Investment Ratings

Risk Considerations
U.S. Dollar Obligations of Foreign
Branches of U.S. Banks
Repurchase Obligations
Foreign Securities
Forward Foreign Currency Exchange Contracts
Gold Mining Shares
Options
Futures Contracts and Related Options
Federal Tax Matters

Investment Advisory and Other Services
Investment Management Agreements
and Sub-Investment Management Agreements
Independent Auditors
Custodians
Payment of Expenses

Portfolio Transactions and Brokerage Allocations

Management of the Fund

Capital Stock

Offering and Redemption of Shares

Determination of Net Asset Value

Taxes

S-2
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Page
----
Performance and Yield Information

Additional Information
Reports
Name and Service Mark

S-3
<PAGE>

BUSINESS HISTORY

Chubb America Fund, Inc. (the "Fund") is an open-end diversified management
investment company established by Chubb Life Insurance Company of America
("Chubb Life") to provide for the investment of assets of separate accounts
established by Chubb Life, Jefferson Pilot Life ("Jefferson Pilot") and
Alexander Hamilton Life ("Alexander Hamilton") or their affiliated insurance
companies. Chubb Life was acquired by Jefferson-Pilot Corporation, a North
Carolina corporation, as of April 30, 1997. Such assets are acquired by the
separate accounts pursuant to the sale of flexible premium variable life
insurance policies and variable annuities (the "Policies"). The Fund has no
business history prior to being incorporated in Maryland on October 19, 1984. In
the future, the Fund may sell its shares to other separate accounts funding
variable annuities and variable life insurance policies established by Chubb
Life, its successors or assigns, or by other insurance companies with which
Chubb Life is affiliated or unaffiliated, and may add or delete Portfolios.

INVESTMENT RESTRICTIONS

Each of the following investment restrictions are fundamental policies of the
World Growth Stock, Money Market, Gold Stock, Bond and Domestic Growth Stock
Portfolios and may not be changed for any such Portfolio without approval of a
majority of the outstanding shares of each affected Portfolio. Investment
restrictions 2, 3, 5, 6, 8-12 and 17 are fundamental policies for the Growth,
International Equity, High Yield Bond, Growth and Income, Capital Growth,
Emerging Growth and Balanced Portfolios and may not be changed for any such
Portfolio without approval of a majority of the outstanding shares of the
affected Portfolio. Each restriction, whether or not fundamental, applies to
each Portfolio of the Fund, unless otherwise indicated. A change in policy
affecting only one Portfolio may be effected with the approval of a majority of
the outstanding shares of that Portfolio only. (As used in the Prospectus and
this Statement of Additional Information, the term "majority of the outstanding
voting shares" means the lesser of (1) 67% of the shares represented at a
meeting at which more than 50% of the outstanding shares are represented or (2)
more than 50% of the outstanding shares.) A Portfolio will not:

1. Invest more than 10%, or in the case of Emerging Growth Portfolio,
High Yield Portfolio, and the Growth Portfolio 15%, of the value of the
total assets of the Portfolio in securities, or 5%, except with respect to
Emerging Growth Portfolio, of the value of the total assets of the
Portfolio in equity securities, International Equity Portfolio, which are
not readily marketable, such as repurchase agreements having a maturity of
more than seven days, restricted securities, and securities that are
secured by interests in real estate.

2. Invest in real estate, although it may buy securities of companies which
deal in real estate and securities which are secured by interests in real
estate, including interests in real estate investment trusts.

3. Invest in commodities or commodity contracts, except that the Growth and
Income Portfolio, International Equity Portfolio, High Yield Portfolio, the
Growth Portfolio, the Capital Growth Portfolio, the Balanced Portfolio and
the Emerging Growth Portfolio may each enter into financial futures
contracts and options thereon that are listed on a national securities or
commodities exchange if, immediately thereafter for that Portfolio: (a) the
total of the initial margin deposits required with respect to all open
futures positions at the time such positions were established plus the sum
of the premiums paid for all unexpired options on futures contracts would
not exceed 5% of the value of a Portfolio's total assets and (b) a
segregated account consisting of cash or liquid high-grade debt securities
in an amount equal to the total market value of any futures contracts
purchased by a Portfolio, less the amount of any initial margin, is
established by that Portfolio. In the case of an option that is "in-the-
money" at the time of purchase, the "in-the-money" amount, as defined under
Commodity Futures Trading Commission

S-4
<PAGE>

regulations, may be excluded in computing the 5% limit. Except the Growth
Portfolio may not engage in futures or options transactions which are
impermissible pursuant to Rule 4.5 under the Commodity Exchange Act,
provided, however, that the Portfolio may use futures and options on
futures (within the meaning of the Commodity Exchange Act), provided that
the initial margin and premiums required to establish such positions, less
the amount by which such options positions are in the money (within the
meaning of the Commodity Exchange Act), do not exceed 5% of the Portfolio's
net assets. In addition, (i) the aggregate value of securities underlying
call options on securities written by the Growth Portfolio or obligations
underlying put options on securities written by the Portfolio determined
as of the date the options are written will not exceed 50% of the
Portfolio's net assets; (ii) the aggregate premiums paid on all options
purchased by the Portfolio and which are being held will not exceed 20% of
the Portfolio's net assets; (iii) the Portfolio will not purchase put or
call options, other than hedging positions, if, as a result thereof, more
than 5% of its total assets would be so invested; and (iv) the aggregate
margin deposits required on all futures and options on futures transactions
being held will not exceed 5% of the Portfolio's total assets.

4. Invest in securities of other investment companies, except by purchases in
the open market involving only customary broker's commissions or as part of
a merger, consolidation, or acquisition, subject to limitations in the
Investment Company Act of 1940 (the "1940 Act") and rules thereunder.
Provided, however, that notwithstanding any other fundamental policy or
restriction, the Growth Portfolio may invest all of its assets in the
securities of a single open-end management investment company with
substantially the same fundamental investment objective, policies, and
restrictions as the Growth Portfolio.

5. Make loans, except by the purchase of bonds or other debt obligations
customarily distributed privately to institutional investors and except
that the Fund may buy repurchase agreements and provided that the Emerging
Growth Fund may lend its portfolio securities representing not in excess of
30% of its total assets (taken at market value and provided the
International Equity Portfolio and the High Yield Portfolio may make loans
if as a result less than 33 1/3% of the Portfolio's assets would be lent to
other persons).

6. Except with respect to the International Equity Portfolio, make an
investment unless, when considering all its other investments, 75% of the
value of the Portfolio's assets would consist of cash, cash items, U.S.
Government securities, securities of other investment companies, and other
securities. For this restriction, "other securities" are limited, for each
issuer, to not more than 5% of the value of the Portfolio's assets and to
not more than 10% of the issuer's outstanding voting securities.

As a matter of operating policy, the Fund except the International Equity
Portfolio considers bank obligations as "other securities" and will invest no
more than 5% of a Portfolio's total assets in the obligations of any one issuer
and will own no more than 10% of the outstanding voting securities of such
issuer. Pursuant to this operating policy, the Fund will not consider repurchase
agreements to be subject to this 5% limitation if the collateral underlying the
repurchase agreements are exclusively U.S. Government Obligations.

7. Except with respect to the International Equity Portfolio and High Yield
Portfolio invest more than 5% of the value of the total assets of the
Portfolio in securities of companies having a record of less than three
years' continuous operations, including predecessors and unconditional
guarantors.

8. Act as an underwriter of securities of other issuers, except to the extent
that it may be deemed to be an underwriter in reselling securities, such as
restricted securities, acquired in private transactions and subsequently
registered under the Securities Act of 1933.

9. Except with respect to the Emerging Growth Portfolio, borrow money, except
that, as a temporary measure for extraordinary or emergency purposes and
not for investment purposes, any Portfolio may borrow from banks up to 5%
of its assets taken at cost, provided in each case that the total
borrowings have an asset coverage, based on value, of at least 300%. The
Emerging Growth Portfolio, High Yield Bond Portfolio and Growth Portfolio
may not borrow money in an amount in excess of 33 1/3% of its total assets,
and then only as a temporary measure for extraordinary or emergence
purposes. This restriction will not prevent the Growth Portfolio,
International Equity Portfolio, High Yield Portfolio, Growth and Income
Portfolio, the Capital Growth Portfolio, the Balanced Portfolio or Emerging
Growth Portfolio from entering into futures contracts as set forth above in
restriction 3.

10. Issue securities senior to its common stock except to the extent set out in
paragraph 9 above. For purposes hereof, writing covered call options, and
as regards Emerging Growth Portfolio, put options, and entering into
futures contracts, to the extent permitted by restrictions 3 and 13, shall
not involve the issuance of senior securities.

11. Except with respect to the International Equity Portfolio sell securities
short, except the Growth Portfolio, Growth and Income Portfolio, the
Capital Growth Portfolio, the Balanced Portfolio and the Emerging Growth
Portfolio may make short sales against the box.

S-5
<PAGE>

12. Buy securities on margin, except that (1) it may obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities, and (2) the Growth and Income Portfolio, the Capital Growth
Portfolio, the Balanced Portfolio, Growth Portfolio and the Emerging Growth
Portfolio may make margin deposits in connection with futures contracts and
options transactions to the extent permitted by restrictions 3 and 13.

13. Invest in or write puts, calls, straddles, or spreads. However, this
restriction shall not prohibit the Portfolios (other than the Money Market
Portfolio) from writing or selling covered call options or purchasing call
options in order to close transactions. Nor shall this restriction prohibit
the Emerging Growth or Capital Growth Portfolio from writing or selling
covered call and put options or purchasing call or put options. This
restriction shall not prohibit the Growth and Income Portfolio, High Yield
Bond Portfolio, International Equity Portfolio, the Capital Growth
Portfolio, the Balanced Portfolio and the Emerging Growth Portfolio from
investing more than 5% of the value of the total assets of the Portfolio in
securities of companies having a record of less than three years'
continuous operations, including predecessors and unconditional guarantors.
(In addition, as a matter of operating policy, no Portfolio may write
covered call options if, as a result, a Portfolio's securities covering all
call options written or subject to put or call options would exceed 25% of
the value of the Portfolio's total assets.) Provided that the International
Equity Portfolio and the High Yield Portfolio may write covered Calls or
Put Options with respect to 25% of their assets at any time and may invest
more that 25% of the value of their net assets at any time in purchased
puts, calls, spreads or straddles, or any combination thereof other than
protective put options. The aggregate value or premiums paid on all options
held by either the International Equity Portfolio or the High Yield
Portfolio may not exceed 20% of the Portfolio's total net assets.

14. Except for the Growth and Income Portfolio, the International Equity
Portfolio, the High Yield Portfolio and the Growth Portfolio enter into a
repurchase agreement with Chubb Life Insurance Company of America ("Chubb
Life"); The Chubb Corporation; or a subsidiary of either of such
corporations.

15. Except for the Emerging Growth Portfolio, the International Equity
Portfolio, the High Yield Portfolio and the Growth Portfolio participate
on a joint or joint and several basis in any trading account in securities.
Transactions for the Portfolios and any other accounts under common
management may be combined or allocated between the Portfolios and such
other accounts.

16. Except for the Growth and Income Portfolio, the International Equity
Portfolio, the High Yield Portfolio and the Growth Portfolio invest in
companies for the purpose of exercising control of management.

17. Invest more than 25% of the value of the total assets of the Portfolio
(other than the Gold Stock Portfolio and High Yield Portfolio) in
securities of any one industry. Banks are not considered a single industry
for purposes of this restriction. (As a matter of operating policy, only
the Money Market Portfolio may utilize this exception.) Nor shall this
restriction apply to securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities.

S-6
<PAGE>

18. Invest in interests, other than debentures or equity stock interests, in
oil and gas or other mineral exploration or development programs.

19. Invest more than 5% of the total value of the assets of the Portfolio in
warrants, whether or not the warrants are listed on the New York or
American Stock Exchanges, or more than 2% of the value of the assets of the
Portfolio in warrants which are not listed on those exchanges. Warrants
acquired in units or attached to securities are not included in this
restriction.

20. Invest more than 15% of the value of the assets of the Portfolios (except
the Emerging Growth Portfolio and the International Equity Portfolio,
Growth Portfolio, and High Yield Bond Portfolio) in securities of foreign
issuers that are not listed on a recognized U.S. or foreign securities
exchange, or quoted on an inter-dealer quotation system. Provided, however
that the International Equity Portfolio may not invest in foreign issuers
unless, after such investment, issuers in at least the following number of
different countries are represented in the Portfolio's holding: if up to
40% of the Portfolio's total assets are invested in foreign issuers, two
foreign countries; if between 40% and 60% of the Portfolio's total assets
are invested in foreign issuers, three foreign countries; if between 60%
and 80% of the Portfolio's total assets are invested in foreign issuers,
four foreign countries if over 80% of the Portfolio's total assets are
invested in foreign issuers, five foreign countries.

DESCRIPTION OF CERTAIN INVESTMENTS

The following is a description of certain types of investments which may be made
by the Portfolios and which may involve certain specific risks, discussed under
"RISK CONSIDERATIONS" below:

Bank Obligations

All of the Portfolios may acquire obligations of banks. These include
certificates of deposit, which are normally limited to $100,000 per issuing
bank, bankers' acceptances and time deposits. Certificates of deposit are
generally short-term, interest-bearing negotiable certificates issued by
commercial banks or savings and loan associations against funds deposited in the
issuing institution. Bankers' acceptances are time drafts drawn on a commercial
bank by a borrower, usually in connection with an international commercial
transaction (to finance the import, export, transfer or storage of goods). With
a bankers' acceptance, the borrower is liable for payment as is the bank, which
unconditionally guarantees to pay the draft at its face amount on the maturity
date. Most bankers' acceptances have maturities of six months or less and are
traded in secondary markets prior to maturity. Time deposits are generally
short-term, interest-bearing negotiable obligations issued by commercial banks
against funds deposited in the issuing institution. None of the Portfolios will
invest in time deposits maturing in more than seven days.

The Money Market Portfolio will not invest in any security issued by a
commercial bank unless the bank is organized and operating in the U.S. and is a
member of the Federal Deposit Insurance Corporation. However, this limitation
shall not prohibit investments in foreign branches of U.S. banks which otherwise
meet the foregoing requirements.

Repurchase Agreements

All of the Portfolios, except the Bond Portfolio and the Domestic Growth Stock
Portfolio, may invest in repurchase agreements.

A repurchase agreement customarily obligates the seller, at the time it sells
securities to the Portfolio, to repurchase the securities at a mutually agreed
upon time and price. The total amount received on repurchase would be calculated
to exceed the price paid by the Portfolio, reflecting an agreed upon market rate
of interest for the period from the time of the repurchase agreement to the
settlement date, and would not necessarily be related to the interest rate on
the underlying securities. The differences between the total amount to be
received upon repurchase

S-7
<PAGE>

of the securities and the price which was paid by the Portfolio upon their
acquisition is accrued as interest and is included in the Portfolio's net income
declared as dividends. The underlying securities will consist of high-quality
securities. With respect to the Money Market Portfolio, the underlying security
must be either a U.S. Government Obligation or a security rated in the highest
rating category by the Requisite NRSROs (as defined in the Prospectus) and must
be determined to present minimal credit risk. The Fund has the right to sell
securities subject to repurchase agreements but would be required to deliver
identical securities upon maturity of the repurchase agreements unless the
seller fails to pay the repurchase price. It is each Portfolio's intention not
to sell securities subject to repurchase agreements prior to the agreement's
maturity.

Commercial Paper

All of the Portfolios may invest in commercial paper. Commercial paper involves
an unsecured promissory note issued by a corporation. It is usually sold on a
discount basis and has a maturity at the time of issuance of nine months or
less. In connection with the World Growth Stock Portfolio, the Gold Stock
Portfolio, the Bond Portfolio and the Domestic Growth Stock Portfolio, on the
date of investment, such paper must be rated A-1 by Standard & Poor's
Corporation ("Standard & Poor's") or Prime-1 by Moody's Investor's Service, Inc.
("Moody's"), the highest commercial paper ratings, or the highest commercial
paper ratings by other Nationally Recognized Securities Rating Organization
(NRSROs), or, if not rated, must have been issued by a corporation with an
outstanding debt issue rated AAA or AA by Standard & Poor's or AAA or Aa by
Moody's as described below, and be of equivalent investment quality in the
judgment of the Portfolio's Investment Manager or Sub-Investment Manager, as
appropriate. On the date of investment, with respect to the Money Market
Portfolio, such paper or its issuer must be rated in one of the two highest
commercial paper rating categories by at least two NRSROs which have issued a
rating with respect to such commercial paper or its issuer or by one NRSRO if
that paper or its issuer has been rated by only one NRSRO or, if not rated, must
be of comparable quality. In connection with the Growth and Income Portfolio,
the Capital Growth Portfolio and the Balanced Portfolio, on the date of
investment, such paper must be rated within the three highest categories by
Moody's, Standard & Poor's or other NRSROs or, if not rated, must be of
equivalent investment quality in the judgment of the Portfolio's Investment
Manager or Sub-Investment Manager, as appropriate.

Loan Participations and Other Direct Indebtedness

As described in the Prospectus, the Portfolios may purchase loan participations
and other direct indebtedness. In purchasing a loan participation, a Portfolio
acquires some or all of the of the interest of a bank or other lending
institution in a loan to a corporate borrower. Many such loans are secured,
although some may be unsecured. Such loans may be in default at the time of
purchase. Loans and other direct indebtedness that are fully secured offer a
Portfolio more protection than an unsecured loan in the event of non-payment of
scheduled interest or principal. However, there is no assurance that the
liquidation collateral from a secured loan or other direct indebtedness would
satisfy the corporate borrower's obligation, or that the collateral can be
liquidated.

These loans and other direct indebtedness are made generally to finance internal
growth, mergers, acquisitions, stock repurchases, leveraged buy-outs and other
corporate activities. Such loans and other direct indebtedness loans are
typically made by a syndicate of lending institutions represented by an agent
lending institution which has negotiated and structured the loan and is

S-8
<PAGE>

responsible for collecting interest, principal and other amounts due on its own
behalf and on behalf of the others in the syndicate, and for enforcing its and
their other rights against the borrower. Alternatively, such loans and other
direct indebtedness may be structured as a novation, pursuant to which the
Portfolio would assume all of the rights of the lending institution in a loan,
or as an assignment, pursuant to which the Portfolio would purchase an
assignment of a portion of a lender's interest in a loan or other direct
indebtedness either directly from the lender or through an intermediary. A
Portfolio may also purchase trade or other claims against companies, which
generally represent money owed by the company to a supplier of goods or
services. These claims may also be purchased at a time when the company is in
default.

Certain of the loan participations and other direct indebtedness acquired by a
Portfolio may involve revolving credit facilities or other standby financing
commitments which obligates a Portfolio to pay additional cash on a certain date
or on demand. These commitments may have the effect of requiring a Portfolio to
increase its investment in a company at a time when the Emerging Growth
Portfolio might not otherwise decide to do so (including at a time when the
company's financial condition makes it unlikely that such amounts will be
repaid). To the extent that a Portfolio is committed to advance additional
funds, it will at all times hold and maintain in a segregated account cash or
other high grade debt obligations in an amount sufficient to meet such
commitments.

The Emerging Growth Portfolio's ability to receive payment of principal,
interest and other amounts due in connection with these investments will depend
primarily on the financial condition of the borrower. In selecting the loan
participations and other direct indebtedness which the Portfolio will purchase,
The Sub-Investment Manager will rely upon its own (and not the original lending
institution's) credit analysis of the borrower. As the Portfolio may be required
to rely upon another lending institution to collect and pass on to the Portfolio
amounts payable with respect to the loan and to enforce the Portfolio's rights
under the loan and other direct indebtedness, an insolvency, bankruptcy or
reorganization of the lending institution may delay or prevent the Portfolio
from receiving such amounts. In such cases, the Portfolio will evaluate as well
the creditworthiness of the lending institution and will treat both the borrower
and the lending institution as an "issuer" of the loan participation for the
purposes of certain investment restrictions pertaining to the diversification of
the Portfolio's investments. The highly leveraged nature of many such loans and
other direct indebtedness may make such loans and other direct indebtedness
especially vulnerable to adverse changes in economic or market conditions.
Investments in such loans and other direct indebtedness may involve additional
risk to the Portfolio. For example, if a loan or other direct indebtedness is
foreclosed, the Portfolio could become part owner of any collateral, and would
bear the costs and liabilities associated with owning and disposing of
collateral. In addition, it is conceivable that under emerging legal theories of
lender liability, the Portfolio could be held liable as co-lender. It is unclear
whether loans and other forms of direct indebtedness offer securities law
protections against fraud and misrepresentation. In the absence of definitive
regulatory guidance, the Portfolio relies on the Sub-Investment Manager's
research in an attempt to avoid situations where fraud and misrepresentation
could adversely affect the Portfolio. In addition, loan participations and other
direct investments may not be in the form of securities or may be subject to
restrictions on transfer, and only limited opportunities may exist to resell
such instruments. As a result, the Portfolio may be unable to sell such
investments at an opportune time or may have to resell them at less than fair
market value. To the extent that the Sub-Investment Manager determines that any
such

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investments are illiquid, the Portfolio will include them in the investment
limitations described below.

Corporate Asset-Backed Securities

As described in the Prospectus, the Fund may invest in corporate asset-backed
securities. These securities, issued by trusts and special purposes
corporations, are backed by a pool of assets, such as credit card and automobile
loan receivables, representing the obligations of a number of different parties.

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

Corporate asset-backed securities are often backed by a pool of assets
representing the obligations of a number of different parties. To lessen the
effect of failures by obligors and underlying assets to make payments, the
securities may contain elements of credit support which fall into two
categories: (i) liquidity protection and (ii) protection against losses
resulting from ultimate default by an obligor on the underlying assets.
Liquidity protection refers to the provision of advances, generally by the
entity administering the pool of assets, to ensure that the receipt of payments
on the underlying pool occurs in a timely fashion. Protection against losses
resulting from ultimate default ensures payment through insurance policies or
letter of credit obtained by the issuer or sponsor from third parties. The Fund
will not pay any additional or separate fees for credit support. The degree of
credit support provided for each issue is generally based on historical
information respecting the level of credit risk associated with the underlying
assets. Delinquency or loss in excess of that anticipated or failure of the
credit support could adversely affect the return on an investment in such a
security.

Lending of Securities

Subject to their investment limitation the Portfolios may seek to increase their
income by lending portfolio securities. Such loans will usually be made to
member banks of the Federal Reserve System and to its member firms (and
subsidiaries thereof) of the New York Stock Exchange and would be required to be
secured continuously by collateral in cash, cash equivalents, or U.S. Government
securities maintained on a current basis at an amount at least equal to the
market value of the securities loaned. The Portfolios would have the right to
call a loan and obtain the securities loaned at any time on customary industry
settlement notice (which will usually not exceed five days). During the
existence of a loan, the Portfolio would continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities

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<PAGE>

loaned and would also receive compensation based on investment of the
collateral. The Emerging Growth Portfolio would not, however, have the right to
vote any securities having voting rights during the existence of the loan, but
would call the loan in anticipation of an important vote to be taken among
holders of the securities or of the giving or withholding of their consent on a
material matter affecting the investment. As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in the collateral
should the borrower fail financially. However, the loans would be made only to
firms deemed by The Sub-Investment Manager to be of good standing, and when, in
the judgment of The Sub-Investment Manager, the consideration which could be
earned currently from securities loans of this type justifies the attendant
risk. If The Sub-Investment Manager determines to make securities loans, it is
not intended that the value of the securities loaned would exceed 30% of the
value of the Emerging Growth Portfolio's total assets.

Forward Commitments

The Portfolios may, from time to time, purchase securities on a forward
commitment, when issued, or delayed delivery basis. The price of such forward
commitment securities, which may be expressed in yield terms, is fixed at the
time the commitment to purchase is made. Delivery and payment will take place at
a later date. Normally, the settlement date may take up to three months. During
the period between purchase and settlement, no payments are made by the
Portfolio to the issuer and no interest accrues to the Portfolio. Forward
commitments involve a risk of loss if the value of the security to be purchased
declines prior to the settlement date. While forward commitment securities may
be sold prior to the settlement date, each Portfolio intends to purchase such
securities with the purpose of actually acquiring them, unless a sale appears
desirable for investment reasons. At the time a Portfolio makes the commitment
to purchase a security on a forward commitment basis, the Portfolio will record
the transaction and reflect the value of the security in determining its net
asset value. [The Investment Managers do not believe that the net asset value or
income of the Portfolios will be adversely affected by the purchase of
securities on a forward commitment basis.] Each Portfolio using forward
commitments will maintain with it's custodian, in a segregated account, cash or
securities equal in value to its total commitments for forward commitment
securities.

Warrants

All of the Portfolios, except the Money Market Portfolio, may invest in
warrants, which are rights to buy certain securities at set prices during
specified time periods. If, prior to the expiration date, the Portfolio is not
able to exercise a warrant at a cost lower than the underlying securities, the
Portfolio will suffer a loss of its entire investment in the warrant.

Forward Foreign Currency Exchange Contracts

Certain of the Growth Portfolios may use forward foreign currency exchange
contracts ("forward currency contracts") to hedge against the decline of a
currency in which the Portfolio's securities are denominated. A forward currency
contract involves an obligation to purchase or sell a specific currency at a
future date, which may be any fixed number of days from the date of the contract
as agreed by the parties, at a price set at the time of the contracts.

The Portfolios may enter into forward currency contracts or maintain a net
exposure on such contracts only if (i) the consummation of

S-11
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the contracts would not obligate the Portfolio to deliver an amount of foreign
currency in excess of the value of the Portfolio's securities or other assets
denominated in the currency and (ii) the Portfolios maintain with their
custodian cash, U.S. government securities, or liquid, high-grade debt
securities in a segregated account in an amount not less than the value of the
Portfolio's total assets committed to the consummation of the contracts or
otherwise cover the forward currency contract in accordance with the current
SEC's regulations.

Depository Receipts

Certain of the Portfolios may invest in American Depository Receipts ("ADR's"),
Global Depository Receipts ("GDR's"), and European Depository Receipts
("EDR's"). ADR's are certificates issued by a U.S. bank representing the right
to receive securities of a foreign issuer deposited in that bank or a
correspondent bank. There are no fees imposed on the purchase or sale of ADR's
when purchased from the issuing bank in the initial underwriting, although the
issuing bank may impose charges for the collection of dividends and the
conversion of ADR's into the underlying ordinary shares. Brokerage commissions
will be incurred if ADR's are purchased through brokers on U.S. stock exchanges.
Investments in ADR's often have advantages over direct investments in the
underlying foreign securities, including the following: they are more liquid
investments, they can be sold for U.S. dollars, they may be transferred easily,
market quotations are readily available in the U.S. and more uniform financial
information is available for the issuers of such securities. GDRs and EDRs are
similar to ADRs except that they are not necessarily issued by a US Bank in that
they represent evidence of ownership of underlying securities issued in the US
or foreign securities market. Generally, Depository Receipts in bearer form are
designed for care in securities market outside the United States. Depository
Receipts may not necesarily be denominated in the same currency as the
underlying securities into which they may be converted. Depository Receipts may
be in sponsored or unsponsored programs. The issuer may not be involved and less
issuer information may be available. The Fund believes that the risk associated
with ownership of depository receipts are no greater than the risks associated
with the direct ownership of foreign shares.

Restricted and Illiquid Securities

All of the Portfolios may to some extent purchase certain restricted securities
(those that are not registered under the Securities Act of 1933 ("33 Act") but
can be offered and sold to "qualified institutional buyers" under Rule 144A of
the 33 Act) and limited amounts of illiquid investments, including illiquid
restricted securities. Limitations on illiquid securities and other illiquid
investments for each Portfolio are described in the Portfolio's investment
restriction above.

Illiquid investments include many restricted securities, repurchase agreements
that mature in more than seven days, currency and interest rate swaps, time
deposits that mature in more than seven days or that have a notice or demand
period more than seven days, certain over-the-counter option contracts,
participation interests in loans, securities not readily marketable and certain
restricted securities.

Certain repurchase agreements which provide for settlement in more than seven
days, however, can be liquidated before the nominal fixed term on seven days or
less notice. The Portfolios will consider such repurchase agreements as liquid.
Likewise, restricted securities (including commercial paper issued pursuant to
4(2) of the 33 Act) that the Board of Directors or the sub-advisers have
determined to be liquid will be treated as such.

Securities and Index Options

All of the Portfolios, except the Money Market Portfolio and the Equity Income
Portfolio, may write (sell) covered call options and purchase call options in
order to close transactions. In addition, the Growth and Income Portfolio, the
Capital Growth Portfolio, the Balanced Portfolio, Growth Portfolio, High Yield
Bond Portfolio and the Emerging Growth Portfolio may purchase put and call
options to enhance investment performance or for hedging purposes. The options
activities of a Portfolio may increase its portfolio turnover rate and the
amount of brokerage commissions paid. These commissions may be higher than those
which would apply to purchases and sales of securities directly.

Writing Covered Call Options. A call option is a contract that gives the holder
(buyer) of the option the right to buy (in return for a premium paid), and the
writer of the option (in return for a premium received) the obligation to sell,
the underlying security at a specified price (the exercise price) at any time
before the option expires. A covered call option is a call in which the writer
of the option, for example, owns the underlying security throughout the option
period. In such cases, the security covering the call will be maintained in a
segregated account with the Fund's custodian. The exercise price of a call
option written by a Portfolio may be below, equal to or above the current market
value of the underlying security at the time the option is written. A Portfolio
will write covered call options to reduce the risks associated with certain of
its investments or to increase total investment return through the receipt of
premiums.

A Portfolio may attempt to protect itself from loss due to a decline in value of
the underlying security or from the loss of appreciation due to its rise in
value by buying an identical option, in which case the purchase cost of such
option may offset the premium received for the option previously written. In
order to do this, the Portfolio makes a "closing purchase transaction" by the
purchase of a call option on the same security with the same exercise price and
expiration date as the covered call option which it has previously written. The
Portfolio will realize a gain or loss from a closing purchase transaction if the
amount paid to purchase a call option is less

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or more than the amount received from the sale of the corresponding call option.
Also, because increases in the market price of a call option will generally
reflect increases in the market price of the underlying security, any loss
resulting from the exercise or closing out of a call option is likely to be
offset in whole or in part by unrealized appreciation of the underlying security
owned by the Portfolio.

Purchasing Put and Call Options. A Portfolio may purchase put options on
securities to protect its holdings in an underlying or related security against
an anticipated decline in market value. Such hedge protection is provided only
during the life of the option. Securities are considered related if their price
movements generally correlate with one another. The purchase of put options on
securities held by a Portfolio or related to such securities will enable a
Portfolio to preserve, at least partially, unrealized gains in an appreciated
security in its portfolio without actually selling the security. In addition, a
Portfolio will continue to receive interest or dividend income on the security.

A Portfolio may purchase call options on individual securities or stock indices
in order to take advantage of anticipated increases in the price of those
securities by purchasing the right to acquire the securities underlying the
option or, with respect to options on indices, to receive income equal to the
value of such index over the strike price. As the holder of a call option with
respect to individual securities, a Portfolio obtains the right to purchase the
underlying securities at the exercise price at any time during the option
period. As the holder of a call option on a stock index, a Portfolio obtains the
right to receive, upon exercise of the option, a cash payment equal to the
multiple of any excess of the value of the index on the exercise date over the
strike price specified in the option.

Options on Indexes. A Portfolio may write covered call options and purchase put
and call options on appropriate securities indexes for the purpose of hedging
against the risk of unfavorable price movements adversely affecting the value of
a Portfolio's securities or to enhance income. Unlike a stock option which gives
the holder the right to purchase or sell a specified stock at a specified price,
an option on a securities index gives the holder the right to receive a cash
settlement amount based upon price movements in the stock market generally (or
in a particular industry or segment of the market represented by the index)
rather than the price movements in individual stocks.

A securities index fluctuates with changes in the market values of the
securities so included. For example, some securities index options are based on
a broad market index such as the S&P 500 or the NYSE Composite Index, or a
narrower market index such as the S&P 100. Indexes may also be based on an
industry or market segment such as the AMEX Oil and Gas Index or the Computer
and Business Equipment Index. Options on stock indexes are currently traded on
the following exchanges, among others: The Chicago Board Options Exchange, New
York Stock Exchange and American Stock Exchange. Options on other types of
securities indexes, which do not currently exist, including indexes on certain
debt securities, may be introduced and traded on exchanges in the future.

Futures Contracts and Related Options

The Growth and Income Portfolio, Growth Portfolio, High Yield Bond Portfolio,
International Equity Portfolio, the Capital Growth Portfolio, the Balanced
Portfolio and the Emerging Growth Portfolio may purchase or sell futures
contracts and related options.

Futures Transactions. A futures contract is an agreement to buy or sell a
security (or deliver a final cash settlement price in the case of a contract
relating to an index or otherwise not calling

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<PAGE>

for physical delivery at the end of trading in the contracts) for a set price in
the future. Futures exchanges and trading in futures is regulated under the
Commodity Exchange Act by the Commodity Futures Trading Commission ("CFTC").
Futures contracts trade on certain regulated contracts markets.

Positions taken in the futures markets are not normally held until delivery or
cash settlement is required, but are instead liquidated through offsetting
transactions which may result in a gain or a loss. While futures positions taken
by a Portfolio will usually be liquidated in this manner, the Portfolio may
instead make or take delivery of underlying securities whenever it appears
economically advantageous to the Portfolio to do so. A clearing organization
associated with the exchange on which futures are traded assumes responsibility
for closing-out transactions and guarantees that, as between the clearing
members of an exchange, the sale and purchase obligations will be performed with
regard to all positions that remain open at the termination of the contract.

Upon entering into a futures contract, a Portfolio will be required to deposit
with a futures commission merchant a certain percentage (usually 1% to 5%) of
the futures contracts market value as initial margin. A Portfolio may not commit
in the aggregate more than 5% of the market value of its total assets to initial
margin deposits on the Portfolio's existing futures contracts and premium paid
for options on unexpired futures contracts used for non hedging purposes.
Initial margin is in the nature of a performance bond or good faith deposit on
the contract which is returned upon termination of the futures contract if all
contractual obligations have been satisfied. The initial margin in most cases
will consist of cash or U.S. Government securities. Subsequent payments, called
variation margin, may be made with the futures commission merchant as a result
of marking the contracts to market on a daily basis as the contract value
fluctuates.

Futures on Debt Securities. A futures contract on a debt security is a binding
contractual commitment which, if held to maturity, will result in an obligation
to make or accept delivery, during a particular future month, of securities
having a standardized face value and rate of return. By purchasing futures on
debt securities [assuming a "long" position] a Portfolio will legally obligate
itself to accept the future delivery of the underlying security and pay the
agreed price. By selling futures on debt securities [assuming a "short"
position] it will legally obligate itself to make the future delivery of the
security against payment of the agreed price. Open future positions on debt
securities will be valued at the most recent settlement price, unless such price
does not appear to the Sub-Investment Manager to reflect the fair value of the
contract, in which case the positions will be valued by, or under the direction
of, the Board of Directors.

The Portfolios by hedging through the use of futures on debt securities seek to
establish more certainty with respect to the effective rate of return on their
portfolio securities. A Portfolio may, for example, take a "short" position in
the futures market by selling contracts for the future delivery of debt
securities held by the Portfolio (or securities having characteristics similar
to those held by the Portfolio) in order to hedge against an anticipated rise in
interest rates that would adversely affect the value of the Portfolio's
portfolio securities. When hedging of this character is successful, any
depreciation in the value of portfolio securities will be substantially offset
by appreciation in the value of the futures position.

On other occasions, a Portfolio may take a "long" position by purchasing futures
on debt securities. This would be done, for example, when the Portfolio intends
to purchase particular debt securities, but expects the rate of return available
in the bond market at that time to be less favorable than rates currently
available in the futures markets. If the anticipated rise in the price of the
debt securities should occur (with its concomitant reduction in yield), the
increased cost to the Portfolio of purchasing the debt securities will be
offset, at least to some extent, by the

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<PAGE>

rise in the value of the futures position in debt securities taken in
anticipation of the subsequent purchase of such debt securities.

The Portfolio could accomplish similar results by selling debt securities with
long maturities and investing in debt securities with short maturities when
interest rates are expected to increase or by buying debt securities with long
maturities and selling debt securities with short maturities when interest rates
are expected to decline. However, by using futures contracts as a risk
management technique (to reduce a Portfolio's exposure to interest rate
fluctuations), given the greater liquidity in the futures market than in the
bond market, it might be possible to accomplish the same result more effectively
and perhaps at a lower cost. See Limitations on Purchase and Sale of Futures
Contracts and Options on Futures Contracts below.

Stock Index Futures. A stock index futures contract does not require the
physical delivery of securities, but merely provides for profits and losses
resulting from changes in the market value of the contract to be credited or
debited at the close of each trading day to the respective accounts of the
parties to the contract. On the contract's expiration date, a final cash
settlement occurs and the futures positions are simply closed out. Changes in
the market value of a particular stock index futures contract reflect changes in
the specified index of equity securities on which the future is based.

Stock index futures may be used to hedge the equity portion of a Portfolio's
securities portfolio with regard to market risk (involving the market's
assessment of over-all economic prospects), as distinguished from stock-specific
risk (involving the market's evaluation of the merits of the issuer of a
particular security). By establishing an appropriate "short" position in stock
index futures, a Portfolio may seek to protect the value of its portfolio
against an overall decline in the market for equity securities. Alternatively,
in anticipation of a generally rising market, a Portfolio can seek to avoid
losing the benefit of apparently low current prices by establishing a "long"
position in stock index futures and later liquidating that position as
particular equity securities are in fact acquired. To the extent that these
hedging strategies are successful, a Portfolio will be affected to a lesser
degree by adverse overall market price movements, unrelated to the merits of
specific portfolio equity securities, than would otherwise be the case. See
Limitations on Purchase and Sale of Futures Contracts and Options on Futures
Contracts below.

Options on Futures. For bona fide hedging purposes, the Growth Portfolio,
International Equity Portfolio, High Yield Bond Portfolio, Growth and Income
Portfolio, the Capital Growth Portfolio, the Emerging Growth Portfolio and the
Balanced Portfolio may purchase put and call options and write call options on
futures contracts. These options are traded on exchanges that are licensed and
regulated by the CFTC for the purpose of options trading. A call option on a
futures contract gives the purchaser the right, in return for the premium paid,
to purchase a futures contract (assume a "long" position) at a specified
exercise price at any time before the option expires. A put option gives the
purchaser the right, in return for the premium paid, to sell a futures contract
(assume a "short" position) at a specified exercise price at any time before the
option expires. Upon the exercise of a call, the writer of the option is
obligated to sell the futures contract (to deliver a "long" position to the
option holder) at the option exercise price, which presumably will be lower than
the current market price of the contract in the futures market. Upon exercise of
a put, the writer of the option is obligated to purchase the futures contract
(to deliver a "short" position to the option holder) at the option exercise
price which presumably will be higher than the current market price of the
contract in the futures market.

When a Portfolio, as a purchaser of an option on a futures contract, exercises
such option and assumes a long futures position, in the case of a call, or a
short futures position, in the case of

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<PAGE>

a put, its gain will be credited to its futures variation margin account. Any
loss suffered by the writer of the option of a futures contract will be debited
to its futures variation margin account. However, as with the trading of
futures, most participants in the options markets do not seek to realize their
gains or losses by exercise of their option rights. Instead, the holder of an
option usually will realize a gain or loss by buying or selling an offsetting
option at a market price that will reflect an increase or a decrease from the
premium originally paid as purchaser or required as a writer.

Options on futures contracts can be used by a Portfolio to hedge the same risks
as might be addressed by the direct purchase or sale of the underlying futures
contracts themselves. Depending on the pricing of the option, compared to either
the futures contract upon which it is based or upon the price of the underlying
securities themselves, it may or may not be less risky than direct ownership of
the futures contract or the underlying securities.

In contrast to a futures transaction, in which only transaction costs are
involved, benefits received by a Portfolio as a purchaser in an option
transaction will be reduced by the amount of the premium paid as well as by
transaction costs. In the event of an adverse market movement, however, a
Portfolio which purchased an option will not be subject to a risk of loss on the
option transaction beyond the price of the premium it paid plus its transaction
costs, and may consequently benefit from a favorable movement in the value of
its portfolio securities that would have been more completely offset if the
hedge had been effected through the use of futures.

If a Portfolio writes call options on futures contracts, the Portfolio will
receive a premium but will assume a risk of adverse movement in the price of the
underlying futures contract comparable to that involved in holding a futures
position. If the option is not exercised, the Portfolio will realize a gain in
the amount of the premium, which may partially offset unfavorable changes in the
value of securities held by, or to be acquired for, the Portfolio. If the option
is exercised, the Portfolio will incur a loss in the option transaction, which
will be reduced by the amount of the premium it has received, but which may be
partially offset by favorable changes in the value of its portfolio securities.

While the purchaser or writer of an option on a futures contract may normally
terminate its position by selling or purchasing an offsetting option of the same
series, a Portfolio's ability to establish and close out options positions at
fairly established prices will be subject to the existence of a liquid market.
The Portfolios will not purchase or write options on futures contracts unless,
in the Sub-Investment Manager's opinion, the market for such options has
sufficient liquidity that the risks associated with such options transactions
are not at unacceptable levels.

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<PAGE>

Options on Foreign Currencies

As noted in the Prospectus, the Capital Growth and Emerging Growth Portfolios
may purchase and write options on foreign currencies for hedging purposes in a
manner similar to that in which Forward Contracts will be utilized. For
example, a decline in the dollar value of a foreign currency in which portfolio
securities are denominated will reduce the dollar value of such securities, even
if their value in the foreign currency remains constant.

In order to protect against such diminutions in the value of portfolio
securities, the Portfolios may purchase put options on the foreign currency. If
the value of the currency does decline, the Portfolios will have the right to
sell such currency for a fixed amount in dollars and will thereby offset, in
whole or in part, the adverse effect on its investments which otherwise would
have resulted.

Conversely, where a rise in the dollar value of a currency in which securities
to be acquired are denominated is projected, thereby increasing the cost of such
securities, the Capital Growth and the Emerging Growth Portfolios may purchase
call options thereon. The purchase of such options could offset, at least
partially, the effects of the adverse movements in exchange rates. As in the
case of other types of options, however, the benefit to Portfolios deriving from
purchases of foreign options will be reduced by the amount of the premium and
related transactions costs. In addition, where currency exchange rates do not
move in the direction or to the extent anticipated, Portfolios could sustain
losses on transactions in foreign currency options which would require it to
forgo a portion or all of the benefits of advantageous changes in such rates.

The Capital Growth, Growth, International Equity, High Yield Bond, and Emerging
Growth Portfolios may write options on foreign currencies for the same types of
hedging purposes. For example, where the Capital Growth or Emerging Growth
Portfolios anticipate a decline in the dollar value of foreign-dominated
securities due to adverse fluctuations in exchange rates it could, instead of
purchasing a put option, write a call option on the relevant currency. If the
expected decline occurs, the options will most likely not be exercised, and the
diminution in value of portfolio securities will be offset by the amount of
premium received.

Similarly, instead of purchasing a call option to hedge against anticipated
increase in the dollar cost of securities to be acquired, Portfolio could write
a put option on the relevant currency which, if rates move in the manner
projected, will expire unexercised and allow a Portfolio to hedge such increased
costs up to the amount of the premium. Foreign currency options written by a
Portfolio will generally be covered in a manner similar to the covering of other
types of options. As in the case of other types of options, however, the writing
of a foreign currency option will constitute only a partial hedge up to the
amount of the premium, and only if rates move in the expected direction. If this
does not occur, the option may be exercised and the Emerging Growth Portfolio
would be required to purchase or sell the underlying currency at a loss which
may not be offset by the amount of the premium. Through the writing of options
on foreign currencies, Portfolio also may be required to forgo all or a portion
of the benefits which might otherwise have been obtained from favorable
movements in exchange rates.

Limitations on Purchase and Sale of Futures Contracts
and Options on Futures Contracts.

The Portfolios will engage in transactions in futures contracts and related
options only for bona fide hedging purposes and not for speculation. The
Portfolios may not purchase or sell futures contracts or related options if
immediately thereafter the sum of the amounts of initial margin

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deposits on a Portfolio's existing futures contracts and premiums paid for
unexpired options on futures contracts would exceed 5% of the value of the
Portfolio's total assets; provided, however, that in the case of an option that
is "in-the-money" at the time of purchase, the "in-the-money" amount may be
excluded in calculating the 5% limitation. In instances involving the purchase
or sale of futures contracts or the writing of covered call options thereon by a
Portfolio, such positions will always be "covered", as appropriate, by either
(i) an amount of cash and cash equivalents, equal to the market value of the
futures contracts purchased or sold and options written thereon (less any
related margin deposits), deposited in a segregated account with its custodian
or (ii) by owning the instruments underlying the futures contract sold (i.e.,
short futures positions) or option written thereon or by holding a separate
option permitting the Portfolio to purchase or sell the same futures contract or
option at the same strike price or better.

High Yield Bonds

The medium and lower quality debt securities in which the Growth, Capital
Growth, High Yield and Emerging Growth Portfolios may invest are regarded as
predominantly speculative with respect to the issuer's continuing ability to
meet principal and interest payments. Medium and lower quality bonds may be more
susceptible to real or perceived adverse economic and individual corporate
developments than would investment grade bonds. For example, a projected
economic downturn or the possibility of an increase in interest rates could
cause a decline in high yield bond prices because such an event might lessen the
ability of highly leveraged high yield issuers to meet their principal and
interest payment obligations, meet projected business goals or obtain additional
financing. In addition, the secondary trading market for medium and lower
quality bonds may be less liquid than the market for investment grade bonds.
This potential lack of liquidity may make it more difficult for the Sub-
Investment Manager to accurately value certain portfolio securities. Further,
there is the risk that certain high yield bonds containing redemption or call
provisions may be called by the issuers of such bonds in a declining interest
rate market and the Portfolio might then have to replace such called bonds with
lower yielding bonds, thereby decreasing the net investment income to the
Portfolio.

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Description of Investment Ratings

Moody's - Bond Ratings

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

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

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

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

Ba-Bonds which are rated Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during other good and bad times over the future. Uncertainty of position
characterizes bonds in this class.

B-Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa-Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca-Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C-Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

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Moody's Commercial Paper Ratings

Moody's Commercial Paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of
nine months. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative capacity of rated issuers:

Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations.

Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations.

Issuers rated Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations.

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

Standard & Poor's - Bond Ratings

AAA-This is the highest rating assigned by Standard & Poor's to a debt
obligation and indicates an extremely strong capacity to pay principal and
interest.

AA-Bonds rated AA also qualify as quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree.

A-Bonds rated A have a strong capacity to pay principal and interest, although
they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions.

BBB-Bonds rated BBB are regarded as having an adequate capacity to pay principal
and interest. Whereas they normally exhibit adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay principal and interest for bonds in this category
than for bonds in the A category.

BB, B, CCC, CC-Bonds rated BB, B, CCC, and CC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay interest
and repay principal in accordance with the terms of the obligation. BB indicates
the lowest degree of speculation and CC the highest degree. While such bonds
will likely have some equality and protective characteristics, these are
outweighed by large uncertainties or major risk exposures to adverse conditions.

C-Bonds rated C are typically subordinated to senior debt which is assigned an
actual or implied CCC rating.

D-Bonds rated D are in payment default or may be used upon the filing of a
bankruptcy petition if debt service payments are jeopardized.

Standard & Poor's Commercial Paper Ratings

A Standard & Poor's Commercial Paper Rating is a current assessment of the
likelihood of

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timely payment of debt having an original maturity of no more than 365 days.
Ratings are graded into four categories, ranging from "A" for the highest
quality obligations to "D" for the lowest. Ratings are applicable to both
taxable and tax-exempt commercial paper. The four categories are as follows:

A-Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designation 1, 2 and 3 to indicate the relative degree of safety.

A-1-This designation indicates that the degree of safety regarding timely
payment is very strong.

A-2-Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated "A-1".

A-3-Issues carrying this designation have a satisfactory capacity for timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.

The Commercial Paper Rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard &
Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information.

SP-1-A very strong, or strong, capacity to pay principal and interest. Issues
that possess overwhelming safety characteristics will be given a "+"
designation.

SP-2-A satisfactory capacity to pay principal and interest.

SP-3-A speculative capacity to pay principal and interest.

Standard & Poor's may continue to rate note issues with a maturity greater than
three years in accordance with the same rating scale currently employed for
municipal bond ratings.

RISK CONSIDERATIONS

U.S. Dollar Obligations of Foreign Branches of U.S. Banks

The Money Market Portfolio and the Balanced Portfolio may regularly invest in
U.S. dollar denominated obligations of foreign branches of FDIC-member U.S.
banks. These instruments represent the loan of funds actually on deposit in the
U.S. The Fund believes that the U.S. bank would be liable in the event that the
foreign branch failed to pay on its U.S. dollar obligations. Nevertheless, the
assets supporting the liability could be expropriated or otherwise restricted if
located outside the U.S. Exchange controls, taxes, or political and economic
developments could affect liquidity or repayment. Because of possibly
conflicting laws or regulations, the issuing bank could maintain and prevail
that the liability is solely that of the branch, thus exposing the Portfolio to
a possible loss. Such U.S. dollar obligations of foreign branches of FDIC-member

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U.S. banks are not covered by the usual $100,000 of FDIC insurance if they are
payable only at an office of such a bank located outside the U.S., the District
of Columbia, Puerto Rico, Guam, American Samoa, and the Virgin Islands.

Repurchase Agreements

During the holding period of a repurchase agreement, the seller marks to market
the collateral on a daily basis and must provide additional collateral if the
market value of the obligation falls below the repurchase price. If a Portfolio
acquires a repurchase agreement and then the seller defaults at a time when the
value of the underlying securities is less than the obligation of the seller,
the Fund could incur a loss. If the seller defaults or becomes insolvent, a
Portfolio could realize delays, costs or a loss in asserting its rights to the
collateral in satisfaction of the seller's repurchase agreement. The Portfolios
will enter into repurchase agreements only with sellers who are believed to
present minimal credit risks and whose creditworthiness has been evaluated by
the Board of Directors of the Fund. As a general matter, if the seller of the
repurchase agreement is a bank it must have assets of at least $1,000,000,000;
if the seller is a broker-dealer it must have a net worth of at least
$25,000,000.

Foreign Securities

The investment in securities of foreign issuers by certain of the Portfolios may
involve special considerations associated with fluctuating exchange rates, the
fact that foreign securities and the markets therefore are not as liquid as
their domestic counterparts, the imposition of exchange control restrictions,
and economic or political instability. In addition, issuers of foreign
securities are subject to different, and in some cases less comprehensive,
accounting, reporting and disclosure requirements than domestic issuers. As a
result, the selection of investments in foreign issuers may be more difficult
and subject to greater risks than investments in domestic issuers.

These Portfolios make investments in businesses located in foreign nations.
Thus, there is the possibility of expropriation or confiscatory taxation,
political or social instability or diplomatic developments which could affect
investments in those nations. Further, foreign brokerage commissions and
custodian fees are generally higher than in the U.S. In addition, government
restrictions in certain countries and other limitations or investment may affect
the maximum percentage of equity ownership in any one company by the Portfolios.
Moreover, in some countries, only special classes of securities may be purchased
by external investors and the price, liquidity, and rights with respect to such
securities may differ from those relating to shares owned by nationals. In
addition, there may also be the absence of developed legal structures governing
private or foreign investment or allowing for judicial redress for injury to
private property. As a result, the selection of securities of non-U.S. issuers
may be more difficult and subject to greater risks than investment in domestic
issuers.

A Portfolio may be affected, either unfavorably or favorably, by fluctuations in
the relative rates of exchange between the currencies of different nations and
the exchange control regulations and by their indigenous economic and political
developments. The Sub-Investment Managers for these Portfolios will consider
these and other factors before investing in particular foreign securities, and
will not make such investments unless, in its opinion, such investments will
meet the policies and objectives of its respective Portfolio. In addition, the
Board of Directors will monitor all foreign custody arrangements to ensure
compliance with the 1940 Act and the rules thereunder, and will review and
approve, at least annually, the continuance of such arrangements as consistent
with the best interests of the Fund and the stockholders.

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Forward Foreign Currency Exchange Contracts

The Portfolios' use of forward foreign currency exchange contracts involves the
special risks described below. The precise matching of the amounts of foreign
currency contracts and the value of the portfolio securities being hedged will
not generally be possible, because the future value of such securities in
foreign currencies will change as a consequence of movements in the market value
of those securities between the dates the forward currency contracts are entered
into and the dates they mature.

In addition, since it is impossible to forecast with precision the market value
of portfolio securities at the expiration or maturity of a forward currency
contract, it may be necessary for the Portfolio to purchase additional foreign
currency on the spot (i.e., cash) market (and bear the expense of such purchase)
if the market value of the securities being hedged is less than the amount of
foreign currency the Portfolio would be obligated to deliver upon the sale of
such securities. Conversely, it may be necessary for the Portfolio to sell some
of the foreign currency received upon the sale of portfolio securities on the
spot market if the market value of such securities exceeds the amount of foreign
currency the Portfolio is obligated to deliver.

Further, the Portfolios may not always be able to enter into a forward currency
contract when the Sub-Investment Manager deems it advantageous to do so, for
instance, if the Portfolio is unable to find a counterparty to the transaction
at an attractive price. Moreover, the Portfolio may not be able to purchase
forward currency contracts with respect to all of the foreign currencies in
which its portfolio securities may be denominated. In those circumstances, and
in other circumstances in which the Portfolio enters into a cross-hedging
forward currency contract, the correlation between the movements in the exchange
rates of the subject currency and the currency in which the portfolio security
is denominated may not be precise. Finally, the cost of purchasing forward
currency contracts in a particular currency will reflect, in part, the rate of
return available on instruments denominated in that currency. The cost of
purchasing forward contracts to hedge portfolio securities that are denominated
in currencies that, in general, yield high rates of return may, therefore, tend
to reduce the rate of return.

Gold Mining Shares

The four largest producers of gold currently are the Republic of South Africa,
the U.S., Australia and Canada. Economic and political conditions and objectives
prevailing in these countries may have direct effects on the production and
marketing of newly produced gold and sales of central bank gold holdings.
Political and social conditions in South Africa, due to the history of apartheid
and the volatility of the political conditions in the new South African
government and unsettled political conditions which could recur in South Africa
as well as in neighboring countries, may pose certain risks to investments in
South Africa if aggravated by local or international developments, such risks
could have an adverse effect on investments in South Africa including the Fund's
investments and, under certain conditions, on the liquidity of the Funds
portfolio and its ability to meet shareholder redemption requests. The ability
of the Fund to invest or hold investments in South African companies may be
further affected by changes in the United States or South African laws or
regulations. In the past legislation has been proposed in Congress which would
require U.S. investors, including the Fund, to sell their investment in South
Africa. If such legislation were to be enacted it could have a materially
adverse effect on the value of the Fund's investments in South Africa.
Notwithstanding these considerations, the recent liberalization of South
Africa's political system could reduce the risks described above in the future.

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Options

During the option period, the writer of a call option has, in return for the
premium received on the option, given up the opportunity for capital
appreciation above the exercise price should the market price of the underlying
security increase, but has retained the risk of loss should the price of the
underlying security decline. The writer has no control over the time when it may
be required to fulfill its obligation as a writer of the option. The premium is
intended to offset that loss in whole or in part. Unlike the situation in which
the Portfolio owns securities not subject to a call option, the Portfolio in
writing call options must assume that the call may be exercised at any time
prior to the expiration of its obligation as a seller, and that in such
circumstances the net proceeds realized from the sale of the underlying
securities pursuant to the call may be substantially below the prevailing market
price, although it must be at the previously agreed to exercise price.

The risk of purchasing a call option or a put option is that the Portfolio may
lose the premium it paid plus transaction costs. If a Portfolio does not
exercise the option and is unable to close out the position prior to expiration
of the option, it will lose its entire investment. An option position may be
closed out only on an exchange that provides a secondary market for an option of
the same series. Although a Portfolio will write and purchase options only when
the Sub-Investment Manager believes that a liquid secondary market will exist
for options of the same series, there can be no assurance that a liquid
secondary market will exist for a particular option at a particular time and
that a Portfolio, if it so desires, can close out its position by effecting a
closing transaction. If the writer of a covered call option is unable to effect
a closing purchase transaction, it cannot sell the underlying security until the
option expires or the option is exercised. Accordingly, a covered call writer
may not be able to sell the underlying security at a time when it might
otherwise be advantageous to do so.

The effectiveness of hedging through the purchase of securities index options
will depend upon the extent to which price movements in the portion of the
securities portfolio being hedged correlate with price movements in the selected
securities index. Perfect correlation is not possible because the securities
held or to be acquired by a Portfolio will not exactly match the composition of
the securities indexes on which options are written. The principal risk in
purchasing securities index options is that the premium and transaction costs
paid by a Portfolio will be lost as a result of unanticipated movements in the
price of the securities comprising the securities index for which the option has
been purchased. In writing securities index options, the principal risks are the
inability to effect closing transactions at favorable prices and the inability
to participate in the appreciation of the underlying securities.

Futures Contracts and Related Options

Positions in futures contracts and related options may be closed out only on an
exchange that provides a secondary market for such contracts or options. A
Portfolio will enter into an option or futures contract only if there appears to
be a liquid secondary market. However, there can be no assurance that a liquid
secondary market will exist for any particular option or futures contract at any
specific time. Thus, it may not be possible to close out a futures contract or
related option position. In the case of a futures contract, in the event of
adverse price movements a Portfolio would continue to be required to make daily
margin payments. In this situation, if a Portfolio has insufficient cash to meet
daily margin requirements it may have to sell portfolio securities at a time
when it may be disadvantageous to do so. In addition, a Portfolio may be
required to take or make delivery of the securities underlying the futures
contracts it holds. The inability to close out futures contracts also could have
an adverse impact on a Portfolio's ability to hedge its portfolio effectively.

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There are several risks in connection with the use of futures contracts as a
hedging device. While hedging can provide protection against an adverse movement
in market prices, it can also preclude a hedger's opportunity to benefit from a
favorable market movement. In addition, investing in futures contracts and
options on futures contracts will cause a Portfolio to incur additional
brokerage commissions and may cause an increase in a Portfolio's turnover rate.

The successful use of futures contracts and related options also depends on the
ability of the Sub-Investment Manager to forecast correctly the direction and
extent of market movements within a given time frame. To the extent market
prices remain stable during the period a futures contract or option is held by a
Portfolio or such prices move in a direction opposite to that anticipated, a
Portfolio may realize a loss on the hedging transaction that will not be offset
by an increase in the value of its portfolio securities. As a result, a
Portfolio's return for the period may be less than if it had not engaged in the
hedging transaction.

Utilization of futures contracts by a Portfolio involves the risk of imperfect
correlation in movements in the price of futures contracts and movements in the
price of the securities which are being hedged. If the price of the futures
contract moves more or less than the price of the securities being hedged, a
Portfolio will experience a gain or loss which will not be completely offset by
movements in the price of the securities.

Compared to the purchase or sale of futures contracts, the purchase of put or
call options on futures contracts involves less potential risk for a Portfolio
because the maximum amount at risk is the premium paid for the options plus
transaction costs. However, there may be circumstances when the purchase of an
option on a futures contract would result in a loss to a Portfolio while the
purchase or sale of the futures contract would not have resulted in a loss, such
as when there is no movement in the price of the underlying securities.

Federal Tax Matters

A policyowner's interest in earnings on assets held in a separate account and
invested in the Fund are not includible in the policyowner's gross income
because the Policies presently qualify as life insurance contracts for Federal
income tax purposes.

The Fund intends that each Portfolio will comply with Section 817(h) of the Code
and the regulations thereunder. Pursuant to that Section, the only shareholders
of the Fund and its Portfolios will be separate accounts funding variable
annuities and variable life insurance policies established by Chubb Life, its
successors and assigns or by other insurance companies with which Chubb Life is
affiliated and Chubb Life's general account which provided the initial capital
for the Portfolios.

In addition, Section 817(h) of the Code and the regulations thereunder impose
diversification requirements on the separate accounts and on the Portfolios.
These diversification requirements are in addition to the diversification
requirements imposed by the Code for the Portfolios to be treated as regulated
investment companies. Failure to meet the requirements of Section 817(h) could
result in taxation to Chubb Life or its affiliated insurance companies and
immediate taxation of the owners of the policies funded by the Fund.

The Secretary of the Treasury may in the future issue regulations or one or more
revenue rulings which would prescribe the circumstances in which a policyowner's
control of the investments of a segregated asset account may cause the
policyowner, rather than an insurance company, to be treated as the owner of the
assets of the account. The regulations could impose requirements that are not
reflected in the Policy, relating, for example, to such elements of policyowner

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<PAGE>

control as premium allocation, transfer privileges and investment in a division
focusing on a particular investment sector such as the Gold Stock Portfolio.
Failure to comply with any such regulations presumably would cause earnings on a
policyowner's interest in the separate account to be includible in the
policyowner's gross income in the year earned.

The Fund may, therefore, find it necessary to take action to assure that the
Policy continues to qualify as a life insurance policy under Federal tax laws.
The Fund, for example, may be required to alter the investment objectives of any
Portfolios or substitute the shares of one Portfolio for those of another. No
such change of investment objectives or substitution of securities will take
place without notice to affected policyholders and the approval of a majority of
such policyholders or without prior approval of the Securities and Exchange
Commission, to the extent legally required. See "TAXES" below.

INVESTMENT ADVISORY AND OTHER SERVICES

Investment Management Agreements and Sub-Investment Management Agreements.

The Fund has entered into Investment Management Agreements with Chubb Investment
Advisory Corporation ("Chubb Investment Advisory") with respect to all
Portfolios. The Fund and Chubb Investment Advisory have also executed Sub-
Investment Management Agreements with Templeton Global Advisors, Inc.
("Templeton"), Chubb Asset Managers, Inc. ("Chubb Asset"), Van Eck Associates
Corporation ("Van Eck Associates"), Pioneering Management Corporation
("Pioneer"), Janus Capital Corporation ("Janus"), J.P. Morgan Investment
Management, Inc. ("Morgan"), Warburg, Pincus Counsellors, Inc. ("Warburg")
Strong Capital Management Inc. ("Strong"), Lombard Odier International Portfolio
Management Limited ("Lombard Odier") Massachusetts Financial Services Company
("MFS") (collectively the "Sub-Investment Managers") with regard to the World
Growth Stock; Bond; Gold Stock; Domestic Growth Stock; Capital Growth; Balanced,
Growth and Income, Growth; International Equity; Money Market and Emerging
Growth Portfolios, respectively.

The Investment Management Agreements provide that Chubb Investment Advisory,
subject to control and review by the Fund's Board of Directors, is responsible
for the overall management and supervision of each Portfolio and for providing
certain administrative services to the Fund. See "MANAGEMENT OF THE FUND" in the
Prospectus. The Sub-Investment Management Agreements provide that the Sub-
Investment Managers, subject to review by the Fund's Board of Directors and by
Chubb Investment Advisory, have the day-to-day responsibility for making
decisions to buy, sell or hold any particular security for the Portfolio which
they advise.

Chubb Investment Advisory, each Sub-Investment Manager and their affiliates may
provide investment advice to other clients, including, but not limited to,
mutual funds, individuals, pension funds and institutional investors. Some of
the advisory accounts of Chubb Investment Advisory, each Sub-Investment Manager,
and their affiliates may have investment objectives and investment programs
similar to those of the Portfolios. Accordingly, occasions may arise when
securities that are held by other advisory accounts, or that are currently being
purchased or sold for other advisory accounts, are also being selected for
purchase or sale for a Portfolio. It is the practice of Chubb Investment
Advisory, each Sub-Investment Manager and their affiliates to allocate such
purchases or sales insofar as feasible among their several clients in a manner
they deem equitable, to all accounts involved. Under normal circumstances such
transactions will be (1) done on a pro-rata basis substantially in proportion to
the amounts ordered by each account, (2) entered into only if the

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trade is likely to produce a benefit for the Portfolios, and (3) at the same
average price for each client. While it is conceivable that in certain instances
this procedure could adversely affect the price or number of shares involved in
the Fund's transaction, it is believed that the procedure generally contributes
to better overall execution of the Fund's portfolio transactions. It is also the
policy of Chubb Investment Advisory, each Sub-Investment Manager, and each of
their affiliates not to favor any one account over the other.

For providing investment advisory and management services to the Fund, Chubb
Investment Advisory receives monthly compensation from the Fund and has sole
responsibility to provide each Sub-Investment Manager, other than Janus, with
quarterly compensation and Janus with monthly compensation, at annual rates
computed as described under "MANAGEMENT OF THE FUND" in the Prospectus. For the
year ended December 31, 1994, the Fund paid $377,344, $39,051, $60,959, $38,648,
$221,681, $32,319, $214,041, and $100,956 to Chubb Investment Advisory for the
World Growth Stock Portfolio, the Money Market Portfolio, the Gold Stock
Portfolio, the Bond Portfolio Domestic Growth Stock Portfolio, the Growth &
Income Portfolio, the Capital Growth Portfolio and the Balance Portfolio
respectively. For the year ended December 31, 1995, the Fund paid $511,260,
$40,941, $59,640, $50,107, $317,840, $65,332, $387,176 and $106,430 and $33,463
to Chubb Investment Advisory for the World Growth Stock Portfolio, the Money
Market Portfolio, the Gold Stock Portfolio, the Bond Portfolio, the Domestic
Growth Stock Portfolio, the Growth and Income Portfolio, the Capital Growth
Portfolio, the Balanced Portfolio, and the Emerging Growth Portfolio,
respectively. For the year ended December 31, 1996 the Fund paid and $656,061,
$42,558, $62,705, $53,464 $480,015, $135,739, $703,701, $134,709, and $173,563
to Chubb Investment Advisory for the World Growth Stock Portfolio, the Money
Market Portfolio, the Gold Stock Portfolio, the Bond Portfolio, the Domestic
Growth Stock Portfolio, the Growth and Income Portfolio, the Capital Growth
Portfolio, the Balanced Portfolio and the Emerging Growth Portfolio. All such
fees were paid pursuant to the terms of the Investment Management Agreements and
the Sub-Investment Management Agreements. The Emerging Growth Portfolio was
added to the Fund on May 1, 1995 and therefore no investment advisory fees were
paid by it during 1994.

For providing sub-investment advisory services to the Portfolios, as described
under "MANAGEMENT OF THE FUND" Chubb Investment Advisory for the years 1996,
1995 and 1994 respectively paid: $437,374, $340,840 and $251,563 to Templeton
for the World Growth Portfolio; $29,791, $28,659 and $27,336 to Chubb Asset
Managers, Inc. for the Money Market Portfolio for the years 1996, 1995 and 1994
respectively; $41,803, $37,760, and $40,639 to Van Eck Associates for the Gold
Portfolio; $320,010, $211,893 and $147,547 to Pioneering Management for the
Domestic Growth Portfolio $37,425, $35,075 and $27,054 to Chubb Asset Managers,
Inc. for the Bond Portfolio; $90,493, $43,555 and $21,546 to Chubb Asset
Managers, Inc. for the Growth and Income Portfolio; $527,776, $290,382 and
$160,531 to Janus for the Capital Growth Portfolio; and $89,806, $70,953 and
$67,304 to Phoenix for the Balanced Portfolio; and Chubb Investment Advisory
paid $108,477 for 1996 and $20,914 for 1995, to MFS for the Emerging Growth
Portfolio.

The Investment Management Agreements also obligate Chubb Investment Advisory to
perform certain administrative services which are described more completely in
the Prospectus. Certain of these functions have been delegated to the Sub-
Investment Managers.

The continuance of the Investment Management Agreements and the Sub-Investment
Management Agreements were approved by the Fund's Board of Directors on January
30, 1997. As a result of the sale by the Chubb Corporation of Chubb Life to
Jefferson-Pilot on April 30, 1997 (the "Transaction") and the resulting change
in control of Chubb Investment Advisory, the Investment Management Agreements
and each of the Sub-Investment Management Agreements terminated by operation of
law on that date. On April 30, 1997 the Fund and Chubb Investment Advisory
received an exemptive order from the Securities and Exchange Commission that
permits Chubb Investment Advisory to continue to provide investment management
services to the Fund and each of its series during an interim period of not more
than 120 days from the date of the Transaction and continuing through the date a
new investment management agreement and new sub-investment management agreements
are approved or disapproved by shareholders (but in no event later than August
28, 1997). Shareholders of record August 15, 1997 approved the Investment
Management Agreement with Chubb Investment Advisory Corporation and with each of
the Sub-Investment Advisory Agreements with each of the Sub-Investment Advisors,
including the new arrangements with Warburg, Morgan and MFS at a Special Meeting
of Shareholders held on August 15, 1997. See "CAPITAL STOCK" in this Statement
of Additional Information.

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Independent Auditors

Ernst & Young LLP, 200 Clarendon Street, Boston, Massachusetts 02116, has been
selected as the independent auditors of the Fund.

The financial statements of the Fund incorporated by reference in this Statement
of Additional Information and the related financial highlights included in the
Prospectus for the periods indicated therein have been audited by Ernst & Young
LLP, independent auditors, as set forth in their report thereon incorporated by
reference herein, and are included in reliance upon such report given upon the
authority of such firm as experts in accounting and auditing.

Custodians

Citibank, N.A., 111 Wall Street, New York, New York 10043, acts as custodian of
the Fund's assets. The Fund has also appointed, with the approval of the Fund's
Board of Directors, from time to time, sub-custodians, qualified under Rule 17f-
5 of the 1940 Act, with respect to certain foreign securities. The Fund may
authorize Citibank to enter into an agreement with any U.S. banking institution
or trust company to act as a sub-custodian pursuant to a resolution of the
Fund's Board of Directors. Securities owned by the Fund subject to repurchase
agreements may be held in the custody of other U.S. banks.

Payment of Expenses

Chubb Investment Advisory is obligated to assume the cost of certain
administrative expenses for the Fund, as described in the Prospectus under the
heading "MANAGEMENT OF THE FUND." The Fund pays the following expenses:
brokerage commissions and transfer taxes; other state, federal and local taxes
and filing fees; fees and expenses of qualification of the Fund and its shares
under federal and state securities laws subsequent to the effective date of this
Prospectus; compensation of directors who are not interested persons of the Fund
("disinterested directors"); travel expenses of disinterested directors;
interest and other borrowing costs; extraordinary or nonrecurring expenses such
as litigation; costs of printing and distributing communications to current
policyowners; insurance premiums; charges and expenses of the custodian,
independent auditors, and counsel; industry association dues; and other expenses
not expressly assumed by Chubb Investment Advisory. Certain other expenses are
assumed by Chubb Securities Corporation ("Chubb Securities") pursuant to a
distribution agreement with the Fund. See "OFFERING AND REDEMPTION OF SHARES"
below.

PORTFOLIO TRANSACTIONS AND BROKERAGE
ALLOCATIONS

Under the Investment Management Agreements, Chubb Investment Advisory has
ultimate authority to select broker-dealers through which securities are to be
purchased and sold, subject to the general control of the Board of Directors.
Under the Sub-Investment Management Agreements, the Sub-Investment Managers have
day-to-day responsibility for selecting broker-dealers through which securities
are to be purchased and sold, subject to Chubb Investment Advisory's overall
monitoring and supervision. The Sub-Investment Managers each provide the trading
desk for their respective Portfolio transactions. Chubb Investment Advisory will
perform daily valuation of the assets of each Portfolio.

The Money Market Portfolio's investments usually will be purchased on a
principal basis directly from issuers, underwriters or dealers. Accordingly,
minimal brokerage charges are expected to be paid on such transactions.
Purchases from an underwriter generally include a commission or concession paid
by the issuer, and transactions with a dealer usually include the dealer's

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<PAGE>

mark-up.

The amount of brokerage commissions paid by the Fund for all Portfolios, for the
year 1996 were $532,729, and for all portfolios for 1995 were $402,052 and
Portfolios for 1994 was $201,435.

Insofar as known to management, no director or officer of the Fund, Chubb
Investment Advisory, any Sub-Investment Manager or any person affiliated with
any of them has any material direct or indirect interest in any broker-dealer
employed by or on behalf of the Fund.

In selecting broker-dealers to execute transactions for the Fund, the Sub-
Investment Managers are obligated to use their best efforts to obtain for each
Portfolio the most favorable overall price and execution available, considering
all the circumstances. Such circumstances include the price of the security, the
size of the broker-dealer's "spread" or commission, the willingness of the
broker-dealer to position the trade, the reliability, financial strength and
stability and operational capabilities of the broker-dealer, the ability to
effect the transaction at all where a large block is involved, the availability
of the broker-dealer to stand ready to execute possibly difficult transactions
in the future, and past experience as to qualified broker-dealers, including
broker-dealers who specialize in any Canadian or foreign securities held by the
Portfolios. Such considerations are judgmental and are weighed by the Sub-
Investment Managers in seeking the most favorable overall economic result for
the Fund.

Notwithstanding the foregoing, however, and subject to appropriate policies and
procedures as then approved by the Board of Directors of the Fund, Chubb
Investment Advisory and the Sub-Investment Managers are authorized to allocate
portfolio transactions to broker-dealers who have provided brokerage and
research services, as such services are defined in Section 28(e) of the
Securities and Exchange Act of 1934, for the Portfolios or other advisory
accounts as to which Chubb Investment Advisory or any Sub-Investment Manager has
investment discretion. In addition, Chubb Investment Advisory and the Sub-
Investment Managers may cause the Portfolios to pay a broker-dealer a commission
for effecting a securities transaction in excess of the amount another broker-
dealer would have charged for effecting the same transaction, if Chubb
Investment Advisory or the Sub-Investment Manager determines in good faith that
such amount of commission is reasonable in relation to the value of the
brokerage and research services, as defined above, provided by such broker-
dealer viewed in terms of either that particular transaction or the overall
responsibilities of Chubb Investment Advisory or the Sub-Investment Managers
with respect to the Portfolios or their other advisory accounts. Such brokerage
and research services may include, among other things, analyses and reports
concerning issuers, industries, securities, economic factors and trends, and,
portfolio strategy. Such brokerage and research services may be used by Chubb
Investment Advisory or a Sub-Investment Manager in connection with any other
advisory accounts managed by it. Conversely, research services for any other
advisory accounts may be used by the Sub-Investment Manager or Chubb Investment
Advisory in managing the investments of a Portfolio. Chubb Investment Advisory
or a Sub-Investment Manager may also receive from such broker-dealers quotations
for Portfolio valuation purposes, provided that this results in no additional
cost to the Fund.

Research services may be provided to Templeton, at no additional cost to the
Fund, by various wholly owned subsidiaries, including Templeton Investment
Counsel, Inc., a corporation registered under the Investment Advisers Act of
1940, Templeton Investment Management (Hong Kong) Ltd., and Templeton Management
Limited, a Canadian company. The research services include information,
analytical reports, computer screening studies, statistical data, and factual
resumes pertaining to securities in the U.S. and in various foreign nations
which

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<PAGE>

Templeton considers as having relatively stable and friendly governments.
Such supplemental research, when utilized, is subjected to analysis by Templeton
before being incorporated into the investment advisory process. Templeton pays
these subsidiaries compensation and reimbursement of expenses as mutually agreed
on, without cost to the Fund. These subsidiaries and Templeton are independent
contractors and in no sense is any of them an agent for the other. Any of them
is free to discontinue such research services at any time on 30 days' notice
without cost or penalty.

In 1996, $37,663 of commissions were paid to brokers because of research
services provided to either Chubb Investment Advisory or the Sub-Investment
Managers.

The Sub-Investment Managers will use their best efforts to recapture all
available tender offer solicitation fees and similar payments in connection with
tenders of the securities of the Fund and to advise the Fund of any fees or
payments of whatever type which it may be possible to obtain for the Fund's
benefit in connection with the purchase or sale of Fund securities.

Any of the Sub-Investment Managers and Chubb Investment Advisory may combine
transactions for the Fund with transactions for other accounts managed by them
or their affiliates, including other investment companies registered under the
1940 Act, as previously described above. Transactions will be combined only when
the transaction meets the Fund's requirements as to selection of brokers or
dealers and negotiation of prices and commissions which the Sub-Investment
Managers would otherwise apply.

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<PAGE>

MANAGEMENT OF THE FUND

The directors and officers of the Fund, their addresses, their positions with
the Fund, and their principal occupations for the past five years are set forth
below:

Positions
with Principal Occupations for
Name and Address the Fund the Past Five Years
- ---------------- --------- -------------------

Ronald Angarella* President Senior Vice President, Chubb Life,
One Granite Place and Director President and Director, Chubb
Concord, N.H. 03301 Investment Advisory, Chubb
Securities and Hampshire Funding,
Inc.; Senior Vice President and
Director, Chubb Investment Funds,
Inc.

Charles C. Cornelio Vice Executive Vice President,
One Granite Place President Chubb Life and Jefferson Pilot
Concord, N.H. 03301 and Corporation, Vice President, and
General Counsel Secretary, Chubb Securities
Corporation.

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<PAGE>

Positions
with Principal Occupations
Name and Address the Fund for the Past Five Years
- ---------------- -------- -----------------------
Shari J. Lease Secretary Assistant Vice President and
One Granite Place Associate Counsel, Chubb Life;
Concord, N.H. 03301 Secretary, Chubb Investment Funds,
Inc.; Assistant Secretary, Chubb
Investment Advisory, previously
Assistant Counsel and Assistant Vice
President, State Bond and Mortgage
Company and affiliated companies.

John A. Weston Treasurer Assistant Vice President of
One Granite Place ChubbLife; Treasurer of Chubb
Concord, N.H. 03301 Securities Corporation, Chubb
Investment Advisory and Hampshire
Funding, Inc.; formerly, Mutual Fund
Accounting Officer for the Fund,
Chubb Investment Funds, Inc. and
Chubb Investment Advisory
Corporation and Assistant Treasurer
for Chubb Securities Corporation and
Hampshire Funding, Inc.

Thomas H. Elwood Assistant Assistant Counsel, Chubb Life
One Granite Place Secretary Assistant Secretary, Chubb
Concord, N.H. 03301 Investment Funds, Inc. and Chubb
Investment Advisory; formerly,
Associate Counsel, New York Life
Insurance Company; Secretary New York
Life Institutional Funds, Inc.,
Assistant Secretary, Mainstay Funds,
Chubb Series Trust and MFA Funds.

Mark D. Landry Assistant Mutual Fund Accounting and
One Granite Place Treasurer Operations Officer for ChubbLife
Concord, N.H. 03301 Concord, N.H. 03301 and Chubb
Investment Advisory; Assistant
Treasurer of Chubb Investment Funds,
Inc.; formerly Mutual Fund Accounting
and Operations Manager for the Fund,
Chubb Investment Funds, Inc. and
Chubb Investment Advisory.

S-32
<PAGE>

Position
with Principal Occupations
Name and Address the Fund for the Past Five Years
- ---------------- ------------ -----------------------

James J. Weisbart Director Retired, previously President of
301 Smithfield Road Bird Bath Laundromats and President
Contoocook, N.H. 03329 of Solomon's Inc. (retail clothing
company)

Michael D. Coughlin Director President of Concord Litho
106 School Street Company, Inc. (printing company)
Concord, N.H. 03301

Elizabeth S. Hager Director Formerly State Representative, New
5 Auburn Street Hampshire; Consultant, Fund
Concord, N.H. 03301 Development; previously, City
Councilor, City of Concord, N.H. and
Mayor, City of Concord, N.H.

Asterisks indicate those directors who are "interested persons" within the
meaning of Section 2(a)(19) of the 1940 Act. Messrs. Weisbart and Coughlin and
Ms. Hager are members of the audit committee and Mr. Angarella and Ms. Hager and
members of the valuation committee.

CAPITAL STOCK

The authorized capital stock of the Fund consists of 12,000,000,000 shares of
common stock which are divided into twelve series: World Growth Stock Portfolio
common stock, International Equity Portfolio, Money Market Portfolio common
stock, Gold Stock Portfolio common stock, Bond Portfolio common stock, High
Yield Bond Portfolio, Domestic Growth Stock Portfolio common stock, Growth and
Income Portfolio common stock, Capital Growth Portfolio common stock, Growth
Portfolio, Balanced Portfolio common stock and Emerging Growth Portfolio common
stock. Each series currently consists of 1,000,000,000 shares. The Fund has the
right to issue additional shares without the consent of stockholders and may
reallocate shares to new series or to one or more of the existing series.

The assets received by the Fund for the issuance or sale of shares of each
Portfolio and all income, earnings, profits and proceeds thereof are
specifically allocated to each Portfolio. They constitute the underlying assets
of each Portfolio, are required to be segregated on the books of account and are
to be charged with the expenses of such Portfolio. Any assets which are not
clearly allocable to a particular Portfolio or Portfolios are allocated in a
manner determined by the Board of Directors. Accrued liabilities which are not
clearly allocable to one or more Portfolios would generally be allocated among
the Portfolios in proportion to their relative net assets before adjustment for
such unallocated liabilities. Each issued and outstanding share in a Portfolio
is entitled to participate equally in dividends and distributions declared with
respect to such Portfolio and in the net assets of such Portfolio upon
liquidation or dissolution remaining after satisfaction of outstanding
liabilities.

The shares of each Portfolio, when issued, will be fully paid and non-
assessable, will have no preference, preemptive, conversion, exchange or similar
rights, and will be freely transferable. Shares do not have cumulative voting
rights.

Chubb Life provided the initial capital for the Fund by purchasing $1,000,000
worth of shares of the World Growth Stock Portfolio, the Money Market Portfolio
and the Gold Stock Portfolio

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<PAGE>

for its general account. Subsequently, upon formation of the Bond Portfolio and
Domestic Growth Stock Portfolio, Chubb Life purchased $1,000,000 worth of shares
of the two additional Portfolios for its general account. Most recently, Chubb
Life purchased $1,000,000 worth of shares of the Growth and Income Portfolio and
the Capital Growth Portfolio,$5,000,000 worth of shares of the Balanced
Portfolio and $3,000,000 worth of shares of Emerging Growth Portfolio for its
general account and may purchase shares in the three new portfolios in the
future. Chubb Life intends to withdraw such investment from time to time.

As of February 28, 1997, Chubb Life owned of record and beneficially the
following percentages of shares of the Fund's Portfolios in its general account:
1.35% of the Growth and Income Portfolio, .36% of the Capital Growth, Portfolio,
1.23% of the Balanced Portfolio. Chubb Separate Account A, a separate account
established by Chubb Life, owned of record as of February 28, 1997, 100.00% of
the World Growth Stock Portfolio, the Money Market Portfolio, the Gold Stock
Portfolio, the Bond Portfolio, the Domestic Growth Stock Portfolio and the
Emerging Growth Portfolio, 98.65% of the Growth and Income Portfolio, 99.64% of
the Capital Growth Portfolio, 98.77% of the Balanced Portfolio.The shares held
by Chubb Life or its affiliated insurance companies, including shares for which
no voting instructions have been received, shares held in a separate account
representing charges imposed by Chubb Life or its affiliates and shares held by
Chubb Life that are not otherwise attributable to Policies, will be voted by
Chubb Life or its affiliated insurance companies in proportion to instructions
received from the owners of Policies. Chubb Life and its affiliated insurance
companies reserve the right to vote any or all such shares at their discretion
to the extent consistent with then current interpretations of the 1940 Act and
rules thereunder.

The officers and directors of the Fund cannot directly own shares of the Fund
without purchasing a Policy. As a result, the amount of shares owned by the
directors and officers of the Fund as a group is less than 1% of each Portfolio.

OFFERING AND REDEMPTION OF SHARES

The Fund offers shares of each Portfolio only for purchase by the corresponding
division of separate accounts established by Chubb Life or its affiliated
insurance companies. It thus will serve as an investment medium for the Policies
offered by Chubb Life and its affiliated insurance companies. The offering is
without a sales charge and is made at each Portfolio's net asset value per
share, which is determined in the manner set forth below under "DETERMINATION OF
NET ASSET VALUE." In the future, the shares of the Fund may be offered to
additional separate accounts of Chubb Life, its successor or assigns, or of its
affiliated insurance companies.

Chubb Securities is the principal underwriter and distributor of the Fund's
shares. It is also the principal underwriter and distributor of the Policies.

Under the terms of the Fund Distribution Agreement entered into by Chubb
Securities and the Fund, Chubb Securities is not obligated to sell any specific
number of shares of the Fund. Chubb Securities also pays any distribution
expenses and costs (that is, those arising from any activity

S-34
<PAGE>

which is primarily intended to result in the sale of shares issued by the Fund)
including expenses and costs attributable to the Fund which are related to the
printing and distributing of prospectuses and periodic reports to new or
prospective owners of Policies. Such expenses are reimbursed by Chubb Life or
its affiliated insurance companies, their successors or assigns, pursuant to the
terms of separate agreements with Chubb Securities relating to the sale of
Policies.

The Fund redeems all full and fractional shares of the Fund at the net asset
value per share applicable to each Portfolio. See "DETERMINATION OF NET ASSET
VALUE" below.

Redemptions are normally made in cash, but the Fund has authority, at its
discretion, to make full or partial payment by assignment to the separate
account of portfolio securities at their value used in determining the
redemption price. The Fund, nevertheless, pursuant to Rule 18f-1 under the 1940
Act, has filed a notification of election on Form N-18f-1, by which the Fund has
committed itself to pay to the separate account in cash, all such separate
account's requests for redemption made during any 90-day period, up to the
lesser of $250,000 or 1% of the applicable Portfolio's net asset value at the
beginning of such period. The securities, if any, to be paid in-kind to the
separate account will be selected in such manner as the Board of Directors deems
fair and equitable. In such cases, the separate account would incur brokerage
costs should it wish to liquidate these portfolio securities.

The right to redeem shares or to receive payment with respect to any redemption
of shares of any Portfolio may only be suspended (1) for any period during which
trading on the New York Stock Exchange is restricted or such Exchange is closed,
other than customary weekend and holiday closings, (2) for any period during
which an emergency exists as a result of which disposal of securities or
determination of the net asset value of that Portfolio is not reasonably
practicable, or (3) for such other periods as the Securities and Exchange
Commission may by order permit for the protection of stockholders of the
Portfolio.

DETERMINATION OF NET ASSET VALUE

The net asset value of the shares of each Portfolio of the Fund is determined
immediately after the declaration by the Fund of dividends, if any, as of the
close of regular trading on the New York Stock Exchange (presently 4:00 P.M. New
York Time), on each day during which the New York Stock Exchange is open for
trading except on days where both (i) the degree of trading in the Portfolio's
securities would not materially affect the net asset value of the Portfolio's
shares and (ii) no shares of the Portfolio were tendered for redemption or no
purchase order was received. The New York Stock Exchange is open from Monday
through Friday except on the following national holidays: New Years Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day. In the event that any of the above holidays
falls on a Sunday, it is regularly observed on the following Monday. The net
asset value per share of each Portfolio is computed by dividing the sum of the
value of the securities held by that Portfolio, plus any cash or other assets
and minus all liabilities, by the total number of outstanding shares of that
Portfolio at such time. Any expenses borne by the Fund, including the investment
management fee payable to Chubb Investment Advisory, are accrued daily except
for extraordinary or non-recurring expenses. See "INVESTMENT ADVISORY AND OTHER
SERVICES-Payment of Expenses" above.

Portfolio securities which are traded on national stock exchanges are valued at
the last sale price as of the close of business of the New York Stock Exchange
on the day the securities are being valued, or, lacking any sales, at the mean
between the closing bid and asked prices.

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<PAGE>

Securities traded in the over-the-counter market are valued at the closing sales
price as reported on a readily available market quotation system, or, if no sale
took place, the mean between the bid and asked prices. Securities and assets for
which market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Directors of the Fund.

Quotations of foreign securities in foreign currencies are converted to U.S.
dollar equivalents using appropriately translated foreign market closing prices.

Long-Term U.S. Treasury securities and other obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities are valued at
representative quoted prices from bond pricing services.

Long-term publicly traded corporate bonds are valued at prices obtained from a
bond pricing service when such prices are available or, when appropriate, from
broker-dealers who make a market in that security.

Debt instruments with a remaining maturity of 60 days or less are valued on an
amortized cost basis. Under this method of valuation, the security is valued
at cost on the date of purchase plus a constant rate of amortization of any
discount or premium until maturity, regardless of any intervening change in
general interest rates or the market value of the instrument. The amortized cost
value of the security may be either more or less than the market value at any
given time. If for any reason the fair value of any security is not fairly
reflected through the amortized cost method of valuation, such security will be
valued by market quotations, if available, otherwise as determined in good faith
by the Board of Directors.

TAXES

In order for each Portfolio of the Fund to qualify for Federal income tax
treatment as a regulated investment company, two of the tests they must meet are
(i) that at least 90% of its gross income for a taxable year must be derived
from qualifying income, i.e., dividends, interest, income derived from loans of
securities, and gains from the sale of securities and (ii) gains realized on the
sale or other disposition of securities held for less than three months must be
limited to less than 30% of each Portfolio's annual gross income. It is the
Fund's policy to comply with the provisions of the Internal Revenue Code of 1986
regarding distribution of investment income and capital gains so that each
Portfolio will not be subject to Federal income tax on amounts distributed and
undistributed or an excise tax on certain undistributed income or capital gains.
For these purposes, if a regulated investment company declares a dividend in
December to stockholders of record in December and pays such dividends before
the end of January they will be treated as paid in the preceding calendar year
and to have been received by such stockholder in December.

PERFORMANCE AND YIELD INFORMATION

Money Market Portfolio

For the seven days ended December 31, 1996, the yield of the Money Market
Portfolio expressed as a simple annualized yield was 4.28%; the yield of the
Money Market Portfolio expressed as a compounded effective yield was 4.37%.

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<PAGE>

The Money Market Portfolio's yield is its investment income, less expenses,
expressed as a percentage of assets on an annualized basis for a seven-day
period. The yield is expressed as a simple annualized yield and as a compounded
effective yield. The yield does not reflect the fees and charges imposed on the
assets of Separate Account A.

The simple annualized yield is computed by determining the net change (exclusive
of realized gains and losses from the sale of securities and unrealized
appreciation and depreciation) in the value of a hypothetical pre-existing
account having a balance of one share at the beginning of the seven-day period,
dividing the net change in account value by the value of the account at the
beginning of the period, and annualizing the resulting quotient (base period
return) on a 365-day basis. The net change in account value reflects the value
of additional shares purchased with dividends from the original shares in the
account during the seven-day period, dividends declared on such additional
shares during the period, and expenses accrued during the period.

The compounded effective yield is computed by determining the unannualized base
period return, adding one to the base period return, raising the sum to a power
equal to 365 divided by seven, and subtracting one from the result.

Non-Money Market Portfolios

The yield for the 30-day period ended December 31, 1996 for the Bond Portfolio
was 6.25%.

This yield figure represents the net annualized yield based on a specified 30-
day (or one month) period assuming a reinvestment semiannual compounding of
income. Yield is calculated by dividing the average daily net investment income
per share earned during the specified period by the maximum offering price,
which is net asset value per share on the last day of the period, and
annualizing the result according to the following formula:

Yield = 2(((A-B + 1) 6) -1)
---
CD

Where A equals dividends and interest earned during the period, B equals
expenses accrued for the period (net of reimbursements), C equals the average
daily number of shares outstanding during the period that were entitled to
receive dividends, and D equals the maximum offering price per share on the last
day of the period.

The average annual total return quotations for the World Growth Stock Portfolio,
the Money Market Portfolio, the Gold Stock Portfolio, the Bond Portfolio, the
Domestic Growth Stock Portfolio, the Growth and Income Portfolio, the Capital
Growth Portfolio, the Balanced Portfolio and Emerging Growth Portfolio for the
year ended December 31, 1996 are 19.22%, 4.65%, 2.57%, 2.47%, 16.46%, 22.88%,
19.25%, 10.56% and 18.30%, respectively. The average annual total return
quotations for these Portfolios, other than the Growth and Income Portfolio, the
Capital Growth Portfolio, the Balanced Portfolio and the Emerging Growth
Portfolio, for the 5 years ended December 31, 1996 are 13.79%, 3.63%, 7.64%,
6.42% and 18.98%, respectively. The average annual total return quotations for
these Portfolios since each Portfolio's inception are 12.34%, 5.01%, 5.17%,
7.20%, 13.96%, 15.43%, 22.65%, 10.32% and 31.10%, respectively.

The average annual total return figures represent the average annual compounded
rate of return of the stated period. Average annual total return quotations
reflect the percentage change between the beginning value of a static account in
the Portfolio and the ending value of that account measured by the then current
net asset value of that Portfolio assuming that all dividends

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<PAGE>

and capital gains distributions during the stated period were reinvested in
shares of the Portfolio when paid. Total return is calculated by finding the
average annual compounded rates of return of a hypothetical investment that
would compare the initial amount to the ending redeemable value of such
investment according to the following formula:

T = (ERV/P)/1/n/-1

where T equals average annual total return, where ERV, the ending redeemable
value, is the value, at the end of the applicable period, of a hypothetical
$10,000 payment made at the beginning of the applicable period, where P equals a
hypothetical initial payment of $1,000, and where N equals the number of years.
From time to time, in reports and sales literature: (1) each Portfolio's
performance or P/E ratio may be compared to: (i) the Standard & Poor's 500
Composite Stock Price Index ("S&P 500 Index") and Dow Jones Industrial Average
so that you may compare that Portfolio's results with those of a group of
unmanaged securities widely regarded by investors as representative of the U.S.
stock market in general; (ii) other groups of mutual funds traced by: (A) Lipper
Analytical Services, a widely-used independent research firm which ranks mutual
funds by overall performance, investment objectives, and asset size; (B) Forbes
Magazine's Annual Mutual Funds Survey and Mutual Fund Honor Roll; or (C) other
financial or business publications, such as the Wall Street Journal, Business
Week, Money Magazine, and Barron's, which provide similar information; (iii)
indices of stocks comparable to those in which the particular Portfolio invests;
(2) the Consumer Price Index (measure of inflation) may be used to assess the
real rate of return from an investment in each Portfolio; (3) other U.S.
government statistics such as GNP, and net import and export figures derived
from governmental publications, e.g., The Survey of Current Business, may be
used to illustrate investment attributes of each Portfolio or the general
economic, business, investment, or financial environment in which each Portfolio
operates; and (4) the effect of tax-deferred compounding on the particular
Portfolio's investment returns, or on returns in general, may be illustrated by
graphs, charts, etc. where such graphs or charts would compare, at various
points in time, the return from an investment in the particular Portfolio (or
returns in general) on a tax-deferred basis (assuming reinvestment of capital
gains and dividends and assuming one or more tax rates) with the return on a
taxable basis. Each Portfolio's performance may also be compared to the
performance of other mutual funds by Morningstar, Inc. which ranks mutual funds
on the basis of historical risk and total return. Morningstar rankings are
calculated using the mutual fund's performance relative to three-month Treasury
bill monthly returns. Morningstar's rankings range from five stars (highest) to
one star (lowest) and represent Morningstar's assessment of the historical risk
level and total return of a mutual fund as a weighted average for 3, 5, and 10-
year periods. In each category, Morningstar limits its five star rankings to 10%
of the funds it follows and its four star rankings to 22.5% of the funds it
follows. Rankings are not absolute or necessarily predictive of future
performance.

The performance of the Portfolios may be compared, for example, to the record of
the S&P 500 Index, NASDAQ Composite Index, and the Europe, Australia, Far
Eastern ("EAFE") Index. The S&P 500 Index is a well known measure of the price
performance of 500 leading larger domestic stocks which represent approximately
80% of the market capitalization of the U.S. equity market. The NASDAQ Composite
Index is comprised of all stocks on NASDAQ's National Market Systems, as well as
other NASDAQ domestic equity securities. The NASDAQ Composite Index has
typically included smaller, less mature companies representing 10% to 15% of the
capitalization of the entire domestic equity market. The EAFE Index is comprised
of more than 900 companies in Europe, Australia and the Far East. All of these
indices are unmanaged and capitalization weighted. In general, the securities
comprising the NASDAQ Composite Index are more growth oriented and have a
somewhat higher beta and P/E ratio than those in the S&P

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500 Index.

The total returns of all of these indices will show the changes in prices for
the stocks in each index. However, only the performance data for the S&P 500
Index assumes reinvestment of all capital gains distributions and dividends paid
by the stocks in each data base. Tax consequences will not be included in such
illustration, nor will brokerage or other fees or expenses of investing be
reflected in the NASDAQ Composite, S&P 500, EAFE Index.

ADDITIONAL INFORMATION

Reports

Annual and semi-annual reports containing financial statements of the Fund, as
well as voting instruction soliciting material for the Fund, have been sent to
Policyowners.

Name and Service Mark

The Chubb Corporation in conjunction with its sale of Chubb Life to Jefferson-
Pilot Corporation has granted a limited right to use the "Chubb" name and
service mark

FINANCIAL STATEMENTS

The financial statements contained in the Fund's December 31, 1996 Annual Report
to Shareholders are incorporated herein by reference.

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