<PAGE>
As filed with the Securities and Exchange Commission on November 22, 1995
Registration No. 33-13954
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 485APOS
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No. ________ [ ]
Post-Effective Amendment No. 16 [X]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [ ]
Amendment No. 17 [X]
(Check appropriate box or boxes)
Pacific Select Fund
(Exact Name of Registrant as Specified in Charter)
700 Newport Center Drive, P.O. Box 7500, Newport Beach, CA 92660
(Address of Principal Executive Offices ) (Zip Code)
Registrant's Telephone Number: (714) 640-3326
Sharon A. Cheever
Vice President and Investment Counsel of
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Post Office Box 9000
Newport Beach, CA 92660
(Name and Address of Agent for Service)
Copies to:
Jeffrey S. Puretz, Esq.
Dechert Price & Rhoads
1500 K Street, N.W., Suite 500
Washington, D.C. 20005
[X] It is proposed that this filing will become effective on February 5, 1996
pursuant to paragraph (a)(2) of Rule 485.
The Registrant has registered an indefinite number of shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company Act
of 1940. The Registrant will file its Notice pursuant to Rule 24f-2 for the
fiscal year ending December 31, 1995, on or before February 28, 1996.
================================================================================
<PAGE>
CROSS-REFERENCE SHEET
REQUIRED BY RULE 495
UNDER THE SECURITIES ACT OF 1933
PART A
Form N-1A
Item Number Caption in Prospectus
1. Prospectus front cover
2. Prospectus Synopsis
3. Financial Highlights
4. Investment Objectives and Policies; Description of
Securities and Investment Techniques; Investment
Restrictions; Other Information
5. Management of the Fund; Portfolio Transactions
6. Other Information
7. Purchase of Shares
8. Redemption of Shares
9. N/A
PART B
Form N-1A Caption in Statement
Item Number of Additional Information
10. Statement of Additional Information front cover
11. Table of Contents
12. N/A
13. Description of Securities and Investment Techniques;
Investment Restrictions
<PAGE>
14. Management of the Fund
15. Portfolio Transactions and Brokerage
16. Investment Adviser; Portfolio Management Agreements
17. Portfolio Transactions and Brokerage
18. Description of Securities and Investment Techniques
19. Purchases and Redemptions
20. Taxation
21. Distribution of Fund Shares
22. Performance Information
23. Financial Statements
PART C
Form N-1A
Item Number Caption in Part C
24. Financial Statements and Exhibits
25. Persons Controlled by or Under Common Control with
Registrant
26. Number of Holders of Securities
27. Indemnification
28. Business and Other Connections of Investment Adviser
29. Principal Underwriters
30. Location of Accounts and Records
31. Management Services
32. Undertakings
<PAGE>
PACIFIC SELECT FUND
700 NEWPORT CENTER
DRIVE
NEWPORT BEACH, CA 92660
[LOGO OF PACIFIC SELECT FUND]
Pacific Select Fund (the "Fund") is a mutual fund that currently offers
fourteen separate portfolios (each a "Portfolio"). The Portfolios serve as the
investment medium for variable life insurance policies and variable annuity
contracts (the "Variable Contracts") issued or administered by Pacific Mutual
Life Insurance Company ("Pacific Mutual" or the "Adviser") or Pacific
Corinthian Life Insurance Company ("Pacific Corinthian"). You can instruct
Pacific Mutual or Pacific Corinthian to allocate cash value under your
Variable Contract to investment options funded by an account known as a
"Separate Account," which invests in the Portfolios. Your allocation rights
are described in the accompanying Prospectus for the Separate Account.
The fourteen Portfolios of the Fund are as follows:
The Money Market Portfolio* The Equity Income
The High Yield Bond Portfolio
Portfolio The Multi-Strategy
The Managed Bond Portfolio Portfolio
The Government Securities The Equity Portfolio***
Portfolio The Bond and Income
The Growth Portfolio** Portfolio***
The Aggressive Equity The Equity Index Portfolio
Portfolio The International
The Growth LT Portfolio Portfolio
The Emerging Markets
Portfolio
This Prospectus contains information about the investment objective and
policies of each Portfolio and related information. You should carefully
consider a Portfolio's investment objective and policies and potential risks
before investing.
THE FUND'S SHARES INVOLVE INVESTMENT RISK, INCLUDING LOSS OF PRINCIPAL, AND
ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK.
THE FUND'S SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER AGENCY.
This Prospectus sets forth concisely the information a prospective investor
should know before investing in the Fund. A Statement of Additional
Information ("SAI"), dated , 1996 containing additional and more detailed
information about the Fund has been filed with the Securities and Exchange
Commission and is hereby incorporated by reference into this Prospectus. The
SAI is available without charge and may be obtained by writing to the Fund at
the address printed above or calling the Fund at (800) 800-7681.
- --------
* Investment in the Money Market Portfolio (or in any other Portfolio) is
neither insured nor guaranteed by the U.S. Government.
** The Growth Portfolio is not available for variable annuity contracts issued
on or after January 1, 1994 or administered by Pacific Corinthian. See "How
Do You Purchase Shares of the Fund?" on page 30.
*** The Equity Portfolio and Bond and Income Portfolio are not available for
variable life insurance policies.
----------------
THIS PROSPECTUS SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS OF
THE SEPARATE ACCOUNT, WHICH ACCOMPANIES THIS PROSPECTUS. BOTH
PROSPECTUSES SHOULD BE READ CAREFULLY AND RETAINED FOR
FUTURE REFERENCE.
----------------
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 , 1996.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
THE FUND'S PORTFOLIOS AT A GLANCE.......................................... 1
CONDENSED FINANCIAL INFORMATION............................................ 1
THE PORTFOLIOS: INVESTMENT OBJECTIVES AND POLICIES......................... 4
General.................................................................. 4
Money Market Portfolio................................................... 4
High Yield Bond Portfolio................................................ 5
Managed Bond Portfolio................................................... 6
Government Securities Portfolio.......................................... 7
Growth Portfolio......................................................... 8
Aggressive Equity Portfolio.............................................. 8
Growth LT Portfolio...................................................... 9
Equity Income Portfolio.................................................. 10
Multi-Strategy Portfolio................................................. 11
Equity Portfolio......................................................... 12
Bond and Income Portfolio................................................ 12
Equity Index Portfolio................................................... 13
International Portfolio.................................................. 14
Emerging Markets Portfolio............................................... 15
All Portfolios: Diversification and Changes in Policies.................. 17
SECURITIES AND INVESTMENT TECHNIQUES....................................... 17
Derivatives.............................................................. 17
Mortgage-Related Securities.............................................. 17
High Yield Bonds......................................................... 19
Small Capitalization Stocks.............................................. 19
Borrowing................................................................ 19
Illiquid and Restricted Securities....................................... 20
Precious Metals-Related Securities....................................... 20
Foreign Securities....................................................... 20
Forward Foreign Currency Contracts....................................... 21
Options.................................................................. 22
Foreign Currency Options................................................. 22
Swap Agreements.......................................................... 23
Spread Transactions...................................................... 23
Futures Contracts and Futures Options.................................... 24
ORGANIZATION AND MANAGEMENT OF THE FUND.................................... 25
MORE ON THE FUND'S SHARES.................................................. 30
OTHER INFORMATION ABOUT THE FUND........................................... 32
TOTAL RETURN............................................................... 34
APPENDIX................................................................... 34
Description of Bond Ratings.............................................. 34
</TABLE>
<PAGE>
THE FUND'S PORTFOLIOS AT A GLANCE
A summary of the highlights of Pacific Select Fund's Portfolios appears
below. THIS CHART IS ONLY A SUMMARY. YOU SHOULD ALSO READ THE COMPLETE
DESCRIPTIONS OF EACH PORTFOLIO'S INVESTMENT OBJECTIVES AND POLICIES, WHICH
BEGINS ON PAGE 4, AND RELATED INFORMATION. Pacific Mutual has retained other
investment advisory firms as Portfolio Managers for twelve of the Portfolios
of the Fund.
<TABLE>
<CAPTION>
PRIMARY INVESTMENTS INVESTMENT ADVISER/
PORTFOLIO OBJECTIVE (UNDER NORMAL CIRCUMSTANCES) PORTFOLIO MANAGER
<C> <C> <S> <C>
Money Market Current income consistent Highest quality money Pacific Mutual
with preservation of capital market instruments
- --------------------------------------------------------------------------------------------------------------
High Yield Bond High level of current income Intermediate and long- Pacific Mutual
term, high-yielding,
lower and medium quality
(high risk) fixed-income
securities
- --------------------------------------------------------------------------------------------------------------
Managed Bond Maximize total return Investment grade Pacific Investment
consistent with prudent marketable debt Management Company
investment management securities. Will
normally maintain an
average portfolio
duration of 3-6 years.
- --------------------------------------------------------------------------------------------------------------
Government Maximize total return U.S. Government Pacific Investment
Securities consistent with prudent securities including Management Company
investment management futures and options
thereon and high-grade
corporate debt
securities. Will
normally maintain an
average portfolio
duration of 3-6 years.
- --------------------------------------------------------------------------------------------------------------
Growth Growth of capital Common stock Capital Guardian Trust Company
- --------------------------------------------------------------------------------------------------------------
Aggressive Capital appreciation Stocks of small- and Columbus Circle Investors
Equity medium-sized companies
- --------------------------------------------------------------------------------------------------------------
Growth LT Long-term growth of capital Common stock Janus Capital Corporation
consistent with the
preservation of capital
- --------------------------------------------------------------------------------------------------------------
Equity Income Long-term growth of capital Dividend paying common J.P. Morgan Investment
and income stock Management Inc.
- --------------------------------------------------------------------------------------------------------------
Multi-Strategy High total return Equity and fixed income J.P. Morgan Investment
securities Management Inc.
- --------------------------------------------------------------------------------------------------------------
Equity Capital appreciation Common stocks and Greenwich Street Advisors
securities convertible Division of Smith Barney
into or exchangeable for Mutual Funds Management Inc.
common stocks
- --------------------------------------------------------------------------------------------------------------
Bond and High level of current Investment grade debt Greenwich Street Advisors
Income income consistent with securities Division of Smith Barney
prudent investment Mutual Funds Management Inc.
management and
preservation of capital
- --------------------------------------------------------------------------------------------------------------
Equity Index Provide investment results Stocks included in the Bankers Trust Company
that correspond to the total S&P 500
return performance of
common stocks publicly traded
in the U.S.
- --------------------------------------------------------------------------------------------------------------
International Long-term capital Equity securities of Templeton Investment
appreciation corporations domiciled Counsel, Inc.
outside the United
States
- --------------------------------------------------------------------------------------------------------------
Emerging Markets Long-term growth of capital Common stocks of Blairlogie Capital Management
companies domiciled in
emerging market
countries
</TABLE>
CONDENSED FINANCIAL INFORMATION
The following tables present condensed financial information about each
Portfolio of the Fund. The tables present historical information based upon a
single share outstanding through each fiscal year and for the six month period
ended June 30, 1995. The information in the tables for the years 1990 through
1994 is included and can be read in conjunction with the Fund's financial
statements, which are in the Fund's Annual Report dated as of December 31,
1994. These financial statements have been audited by Deloitte & Touche LLP,
independent public accountants, except for information with respect to the
Equity Portfolio and Bond and Income Portfolio for years prior to 1994, which
was audited by other independent public accountants. The Annual Report, which
is available without charge, contains more information about the Fund's
performance. Information for the period ended June 30, 1995 has not been
audited and can be read in conjunction with the Fund's unaudited financial
statements as of and for the period ended June 30, 1995, which are in the
Fund's Semi-Annual Report dated as of June 30, 1995.
1
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Investment Activities Distributions
----------------------------------------- --------------------------------------------
Net
Realized
Six Months Net Asset and Total Dividends Distributions
Ended 6/30/95 Value, Net Unrealized from (from Net (from
and Years Beginning Investment Gain (Loss) Investment Investment Capital Total
Ended 12/31 of Period Income on Securities Operations Income) Gains) Distribution
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO
1995 $10.03 $0.28 $(0.01) $0.27 $0.28 $0.00 $0.28
1994 9.99 0.33 0.04 0.37 0.33 0.00 0.33
1993 9.96 0.23 0.03 0.26 0.23 0.00 0.23
1992 9.94 0.29 0.02 0.31 0.29 0.00 0.29
1991 9.94 0.56 0.00 0.56 0.56 0.00 0.56
1990 9.82 0.79 (0.03) 0.76 0.64 0.00 0.64
1989 9.81 0.82 0.01 0.83 0.82 0.00 0.82
1988(1) 10.00 0.58 (0.01) 0.57 0.76 0.00 0.76
- ------------------------------------------------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
1995 $ 8.91 $0.36 $ 0.59 $0.95 $0.36 $0.00 $0.36
1994 9.67 0.73 (0.70) 0.03 0.73 0.06 0.79
1993 9.24 0.86 0.77 1.63 0.86 0.34 1.20
1992 8.54 0.87 0.69 1.56 0.86 0.00 0.86
1991 7.84 0.91 0.95 1.86 0.91 0.25 1.16
1990 8.90 1.04 (1.01) 0.03 1.04 0.05 1.09
1989 9.72 1.20 (0.79) 0.41 1.23 0.00 1.23
1988(1) 10.00 1.07 (0.26) 0.81 0.99 0.10 1.09
- ------------------------------------------------------------------------------------------------------------------------
MANAGED BOND PORTFOLIO
1995 $ 9.90 $0.32 $ 0.76 $1.08 $0.32 $0.00 $0.32
1994 10.89 0.50 (0.98) (0.48) 0.50 0.01 0.51
1993 10.62 0.52 0.70 1.22 0.52 0.43 0.95
1992 10.79 0.68 0.23 0.91 0.67 0.41 1.08
1991 10.35 0.82 0.88 1.70 0.82 0.44 1.26
1990 10.43 0.85 (0.01) 0.84 0.85 0.07 0.92
1989 9.99 0.86 0.56 1.42 0.86 0.12 0.98
1988(1) 10.00 0.68 0.03 0.71 0.62 0.10 0.72
- ------------------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
1995 $ 9.64 $0.28 $ 0.78 $1.06 $0.28 $0.00 $0.28
1994 10.64 0.44 (0.99) (0.55) 0.44 0.01 0.45
1993 10.48 0.34 0.78 1.12 0.34 0.62 0.96
1992 10.55 0.51 0.27 0.78 0.51 0.34 0.85
1991 10.07 0.69 0.93 1.62 0.71 0.43 1.14
1990 10.22 0.79 (0.02) 0.77 0.78 0.14 0.92
1989 9.82 0.84 0.56 1.40 0.84 0.16 1.00
1988(1) 10.00 0.65 0.01 0.66 0.65 0.19 0.84
- ------------------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO(3)
1995 $14.90 $0.07 $ 1.99 $2.06 $0.08 $0.00 $0.08
1994 18.20 0.10 (2.01) (1.91) 0.10 1.29 1.39
1993 15.76 0.08 3.37 3.45 0.08 0.93 1.01
1992 13.70 0.11 2.69 2.80 0.11 0.63 0.74
1991 10.09 0.15 3.78 3.93 0.15 0.17 0.32
1990 13.67 0.20 (2.39) (2.19) 0.19 1.20 1.39
1989 11.15 0.18 3.70 3.88 0.17 1.19 1.36
1988(1)(2) 10.00 0.00 1.53 1.53 0.02 0.36 0.38
- ------------------------------------------------------------------------------------------------------------------------
GROWTH LT PORTFOLIO
1995 $11.11 $0.03 $ 2.10 $2.13 $0.08 $0.01 $0.09
1994(4) 10.00 0.10 1.21 1.31 0.12 0.08 0.20
- ------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
--------------------------------------------------------------------------------------------
Six Months Net Assets, Ratio of Ratio of Net
Ended 6/30/95 Net Asset End of Expenses to Investment Income
and Years Value, End Total Period Average to Average Portfolio
Ended 12/31 of Period Return (8) (in thousands) Net Assets Net Assets Turnover Rate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
MONEY MARKET PORTFOLIO
1995 $10.02 2.78% $ 97,311 0.55%* 5.59%* N/A
1994 10.03 3.76% 94,150 0.64% 3.94% N/A
1993 9.99 2.58% 33,910 0.65% 2.56% N/A
1992 9.96 3.22% 23,905 0.65% 3.13% N/A
1991 9.94 5.74% 14,502 0.65% 5.53% N/A
1990 9.94 7.92% 15,401 0.65% 7.57% N/A
1989 9.82 8.73% 4,252 1.00% 8.38% N/A
1988(1) 9.81 5.85% 3,913 1.65%* 6.04%* N/A
- --------------------------------------------------------------------------------------------------------------
HIGH YIELD BOND PORTFOLIO
1995 $ 9.50 10.78% $ 46,806 0.83%* 8.92%* 95.29%
1994 8.91 0.42% 25,338 0.88% 8.13% 141.86%
1993 9.67 18.01% 16,017 0.75% 8.37% 185.83%
1992 9.24 18.72% 14,152 0.75% 9.46% 186.23%
1991 8.54 24.58% 10,356 0.75% 10.77% 149.20%
1990 7.84 0.38% 8,288 0.75% 12.02% 69.59%
1989 8.90 4.16% 8,208 0.95% 12.48% 121.76%
1988(1) 9.72 8.30% 7,871 1.65%* 10.63%* 69.14%
- --------------------------------------------------------------------------------------------------------------
MANAGED BOND PORTFOLIO
1995 $10.66 10.93% $ 86,482 0.76%* 6.60%* 86.10%
1994 9.90 (4.36)% 53,219 0.84% 5.04% 127.95%
1993 10.89 11.63% 43,116 0.75% 4.74% 163.11%
1992 10.62 8.68% 26,406 0.75% 6.39% 89.55%
1991 10.79 17.03% 16,645 0.75% 7.74% 80.96%
1990 10.35 8.52% 12,412 0.75% 8.32% 68.79%
1989 10.43 14.74% 11,371 0.91% 8.36% 115.89%
1988(1) 9.99 7.11% 9,031 1.69%* 6.76%* 209.49%
- --------------------------------------------------------------------------------------------------------------
GOVERNMENT SECURITIES PORTFOLIO
1995 $10.42 11.03% $ 37,454 0.84%* 6.02%* 113.90%
1994 9.64 (5.10)% 21,489 0.88% 4.29% 232.99%
1993 10.64 10.79% 23,584 0.75% 3.15% 402.37%
1992 10.48 7.52% 17,701 0.75% 4.95% 212.31%
1991 10.55 16.67% 10,841 0.75% 6.90% 110.74%
1990 10.07 8.01% 7,469 0.75% 7.87% 45.99%
1989 10.22 14.61% 6,428 0.98% 8.22% 151.10%
1988(1) 9.82 6.65% 5,523 1.77%* 6.42%* 284.30%
- --------------------------------------------------------------------------------------------------------------
GROWTH PORTFOLIO(3)
1995 $16.88 13.86% $111,131 0.80%* 0.97%* 17.52%
1994 14.90 (10.49)% 81,451 0.86% 0.58% 40.42%
1993 18.20 21.89% 77,405 0.71% 0.51% 35.08%
1992 15.76 20.53% 34,747 0.75% 0.81% 39.97%
1991 13.70 39.15% 13,482 0.75% 1.31% 31.48%
1990 10.09 (17.30)% 6,351 0.75% 1.75% 41.18%
1989 13.67 34.96% 5,896 0.97% 1.42% 65.35%
1988(1)(2) 11.15 15.31% 3,335 2.46%* 0.01%* 33.61%
- --------------------------------------------------------------------------------------------------------------
GROWTH LT PORTFOLIO
1995 $13.15 18.95% $107,891 0.99%* 1.45%* 79.41%
1994(4) 11.11 13.25% 49,374 1.08%* 1.32%* 257.20%
- --------------------------------------------------------------------------------------------------------------
(continued on next page)
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
Investment Activities Distributions
-------------------------------------- ---------------------------------------------------------------
Net
Realized
Six Months Net Asset and Total Dividends In excess Distributions
Ended 6/30/95 Value, Net Unrealized from (from Net of Net (from
and Years Beginning Investment Gain (Loss) Investment Investment Investment Capital Return of Total
Ended 12/31 of Period Income on Securities Operations Income) Income Gains) Capital Distribution
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
EQUITY INCOME PORTFOLIO(3)(6)
1995 $14.05 $0.13 $ 2.34 $ 2.47 $0.13 $0.00 $0.01 $0.00 $0.14
1994 15.52 0.20 (0.25) (0.05) 0.20 0.00 1.22 0.00 1.42
1993 15.11 0.26 0.98 1.24 0.26 0.00 0.57 0.00 0.83
1992 14.74 0.19 0.59 0.78 0.19 0.00 0.22 0.00 0.41
1991 11.64 0.32 3.28 3.60 0.32 0.00 0.18 0.00 0.50
1990 13.11 0.32 (1.30) (0.98) 0.32 0.00 0.17 0.00 0.49
1989 10.68 0.17 2.94 3.11 0.30 0.00 0.38 0.00 0.68
1988(1) 10.00 0.12 0.70 0.82 0.12 0.00 0.02 0.00 0.14
- -----------------------------------------------------------------------------------------------------------------------------------
MULTI-STRATEGY PORTFOLIO(3)(6)
1995 $11.73 $0.23 $ 1.44 $ 1.67 $0.23 $0.00 $0.00 $0.00 $0.23
1994 12.66 0.32 (0.51) (0.19) 0.32 0.00 0.42 0.00 0.74
1993 12.18 0.35 0.77 1.12 0.35 0.00 0.29 0.00 0.64
1992 11.99 0.37 0.27 0.64 0.37 0.00 0.08 0.00 0.45
1991 10.14 0.46 1.93 2.39 0.45 0.00 0.09 0.00 0.54
1990 10.84 0.51 (0.66) (0.15) 0.48 0.00 0.07 0.00 0.55
1989 10.35 0.57 1.82 2.39 0.59 0.00 1.31 0.00 1.90
1988(1) 10.00 0.34 0.34 0.68 0.32 0.00 0.01 0.00 0.33
- -----------------------------------------------------------------------------------------------------------------------------------
EQUITY PORTFOLIO (FORMERLY A SERIES OF PACIFIC CORINTHIAN VARIABLE FUND)
1995 $14.20 $0.06 $ 1.50 $ 1.56 $0.06 $0.00 $0.00 $0.00 $0.06
1994 14.94 0.32 (0.74) (0.42) 0.32 0.00 0.00 0.00 0.32
1993 14.39 0.22 1.90 2.12 0.22 0.00 0.81 0.54 1.57
1992 14.83 0.19 0.49 0.68 0.19 0.00 0.93 0.00 1.12
1991 11.71 0.33 3.12 3.45 0.33 0.00 0.00 0.00 0.33
1990 12.59 0.56 (0.88) (0.32) 0.56 0.00 0.00 0.00 0.56
1989 10.37 0.82 2.23 3.05 0.83 0.00 0.00 0.00 0.83
1988 10.23 0.56 0.14 0.70 0.56 0.00 0.00 0.00 0.56
1987 14.17 0.36 0.12 0.48 0.38 0.00 4.04 0.00 4.42
1986 12.98 0.38 2.15 2.53 0.40 0.00 0.94 0.00 1.34
1985 10.65 0.34 2.71 3.05 0.39 0.00 0.33 0.00 0.72
- -----------------------------------------------------------------------------------------------------------------------------------
BOND AND INCOME PORTFOLIO (FORMERLY A SERIES OF PACIFIC CORINTHIAN VARIABLE FUND)
1995 $10.42 $0.41 $ 1.72 $ 2.13 $0.41 $0.00 $0.00 $0.00 $0.41
1994 13.05 0.83 (1.87) (1.04) 0.83 0.00 0.53 0.23 1.59
1993 11.70 0.87 1.35 2.22 0.86 0.01 0.00 0.00 0.87
1992 11.69 0.89 0.01 0.90 0.89 0.00 0.00 0.00 0.89
1991 10.27 0.93 1.42 2.35 0.93 0.00 0.00 0.00 0.93
1990 10.93 0.97 (0.66) 0.31 0.97 0.00 0.00 0.00 0.97
1989 10.40 1.00 0.69 1.69 1.00 0.00 0.16 0.00 1.16
1988 10.75 1.01 (0.35) 0.66 1.01 0.00 0.00 0.00 1.01
1987 13.03 1.03 (1.17) (0.14) 1.19 0.00 0.95 0.00 2.14
1986 11.81 1.12 1.36 2.48 0.97 0.00 0.29 0.00 1.26
1985 10.56 1.17 1.50 2.67 1.15 0.00 0.27 0.00 1.42
- -----------------------------------------------------------------------------------------------------------------------------------
EQUITY INDEX PORTFOLIO(3)
1995 $13.02 $0.16 $ 2.45 $ 2.61 $0.16 $0.00 $0.00 $0.00 $0.16
1994 13.24 0.30 (0.18) 0.12 0.30 0.00 0.04 0.00 0.34
1993 12.43 0.29 0.86 1.15 0.29 0.00 0.05 0.00 0.34
1992 11.98 0.29 0.53 0.82 0.29 0.00 0.08 0.00 0.37
1991(5) 10.00 0.30 2.16 2.46 0.30 0.00 0.18 0.00 0.48
- -----------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL PORTFOLIO(3)(7)
1995 $11.94 $0.14 $ 0.68 $ 0.82 $0.01 $0.00 $0.00 $0.00 $0.01
1994 12.09 0.07 0.30 0.37 0.07 0.00 0.45 0.00 0.52
1993 9.38 0.09 2.73 2.82 0.09 0.02 0.00 0.00 0.11
1992 10.59 0.15 (1.19) (1.04) 0.17 0.00 0.00 0.00 0.17
1991 9.72 0.13 0.94 1.07 0.17 0.00 0.03 0.00 0.20
1990 12.44 0.16 (1.84) (1.68) 0.16 0.00 0.88 0.00 1.04
1989 11.29 0.02 2.30 2.32 0.06 0.00 1.11 0.00 1.17
1988(1) 10.00 0.09 1.66 1.75 0.06 0.00 0.40 0.00 0.46
- ------------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Ratios/Supplemental Data
-------------------------------------------------------------------------------
Six Months Net Assets, Ratio of Ratio of Net
Ended 6/30/95 Net Asset End of Expenses to Investment Income
and Years Value, End Total Period Average to Average Portfolio
Ended 12/31 of Period Return (8) (in thousands) Net Assets Net Assets Turnover Rate
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EQUITY INCOME PORTFOLIO(3)(6)
1995 $16.38 17.59% $126,970 0.87%* 1.82%* 53.70%
1994 14.05 (0.28)% 75,083 0.94% 1.39% 134.57%
1993 15.52 8.29% 33,356 0.75% 1.74% 27.67%
1992 15.11 5.36% 22,021 0.75% 1.39% 18.52%
1991 14.74 31.42% 12,117 0.76% 2.49% 17.43%
1990 11.64 (7.54)% 5,974 0.75% 2.67% 17.63%
1989 13.11 29.22% 5,449 1.02% 2.52% 24.89%
1988(1) 10.68 8.25% 3,292 2.45%* 1.21%* 8.15%
- --------------------------------------------------------------------------------------------------------------
MULTI-STRATEGY PORTFOLIO(3)(6)
1995 $13.17 14.37% $100,129 0.87%* 3.79%* 112.02%
1994 11.73 (1.50)% 79,147 0.94% 2.78% 187.40%
1993 12.66 9.25% 41,448 0.75% 3.01% 27.87%
1992 12.18 5.57% 19,931 0.75% 3.36% 16.52%
1991 11.99 24.03% 10,454 0.75% 4.30% 11.24%
1990 10.14 (1.47)% 4,559 0.75% 4.77% 26.04%
1989 10.84 23.42% 3,120 1.10% 4.38% 19.67%
1988(1) 10.35 6.85% 4,111 2.20%* 3.33%* 22.30%
- --------------------------------------------------------------------------------------------------------------
EQUITY PORTFOLIO (FORMERLY A SERIES OF PACIFIC CORINTHIAN VARIABLE FUND)
1995 $15.70 10.97% $ 82,543 0.80%* 0.78%* 133.49%
1994 14.20 (2.87)% 73,125 0.96% 2.19% 178.63%
1993 14.94 16.06% 84,791 0.93% 1.52% 229.77%
1992 14.39 6.30% 81,902 0.93% 1.30% 242.37%
1991 14.83 29.77% 107,366 0.91% 2.52% 449.75%
1990 11.71 (2.55)% 178,191 0.86% 4.63% 541.61%
1989 12.59 30.12% 239,478 0.74% 7.01% 621.45%
1988 10.37 7.19% 233,020 0.69% 5.41% 402.26%
1987 10.23 2.18% 254,863 0.68% 2.58% 415.62%
1986 14.17 20.92% 222,945 0.69% 2.75% 334.91%
1985 12.98 30.02% 65,845 0.95% 3.62% 395.09%
- --------------------------------------------------------------------------------------------------------------
BOND AND INCOME PORTFOLIO (FORMERLY A SERIES OF PACIFIC CORINTHIAN VARIABLE FUND)
1995 $12.14 20.73% $ 42,004 0.80%* 7.56%* 29.28%
1994 10.42 (8.36)% 34,078 0.93% 7.25% 31.97%
1993 13.05 19.39% 43,223 0.84% 6.86% 41.92%
1992 11.70 8.09% 42,731 0.85% 7.67% 21.99%
1991 11.69 24.32% 59,323 0.78% 8.70% 131.40%
1990 10.27 3.27% 107,921 0.73% 9.35% 43.52%
1989 10.93 17.04% 146,310 0.61% 9.30% 108.64%
1988 10.40 6.37% 161,208 0.61% 10.05% 50.49%
1987 10.75 (2.09)% 194,603 0.55% 9.20% 101.25%
1986 13.03 21.39% 194,814 0.55% 8.71% 202.87%
1985 11.81 27.61% 78,750 0.72% 10.12% 549.28%
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EQUITY INDEX PORTFOLIO(3)
1995 $15.47 20.15% $ 73,006 0.43%* 2.46%* 0.72%
1994 13.02 1.05% 40,612 0.51% 2.37% 2.02%
1993 13.24 9.38% 33,836 0.50% 2.34% 1.15%
1992 12.43 6.95% 23,030 0.50% 2.53% 3.52%
1991(5) 11.98 24.88% 15,205 0.50%* 3.03%* 4.26%
- --------------------------------------------------------------------------------------------------------------
INTERNATIONAL PORTFOLIO(3)(7)
1995 $12.75 6.95% $118,067 1.11%* 3.04%* 10.16%
1994 11.94 3.01% 75,971 1.22% 1.28% 52.22%
1993 12.09 30.02% 30,574 1.04% 0.92% 46.48%
1992 9.38 (9.78)% 19,402 1.05% 1.43% 38.99%
1991 10.59 10.92% 18,239 1.04% 1.19% 69.71%
1990 9.72 (13.48)% 14,266 1.05% 1.48% 69.24%
1989 12.44 20.51% 15,735 1.20% 0.14% 94.35%
1988(1) 11.29 17.69% 13,980 1.69%* 0.84%* 62.48%
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(continued on next page)
</TABLE>
3
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- --------
(1) Information is for the period from January 4, 1988 (commencement of
operations) to December 31, 1988.
(2) The net investment income per share for the Growth Portfolio for the
period from January 4, 1988 (commencement of operations) to December 31,
1988, has been calculated by dividing the Portfolio's net investment
income by the average shares of beneficial interest outstanding during the
period. Due to fluctuations in shares outstanding and in investment income
during the period, this acceptable method derives a more accurate per
share amount than the prescribed method.
(3) Prior years ratios of expenses to average net assets have been restated
for comparative purposes to reflect expenses exclusive of foreign taxes on
dividends which are reflected as a component of dividend income.
(4) Information is for the period from January 4, 1994 (commencement of
operations) to December 31, 1994.
(5) Information is for the period from January 30, 1991 (commencement of
operations) to December 31, 1991.
(6) J.P. Morgan Investment began serving as Portfolio Manager to the Equity
Income and Multi-Strategy Portfolios on January 1, 1994. Prior to January
1, 1994, a different firm served as Portfolio Manager.
(7) Templeton began serving as Portfolio Manager to the International
Portfolio on January 1, 1994. Prior to January 1, 1994, a different firm
served as Portfolio Manager.
(8) Total return includes reinvestment of dividends and distributions. Total
return does not include deductions at the separate account or contract
level for fees and charges that may be incurred under a variable contract.
* Ratios are annualized.
THE PORTFOLIOS: INVESTMENT OBJECTIVES AND POLICIES
GENERAL
Each Portfolio of the Fund has its own investment objective and investment
policies which are described below. There can be no assurance that any
Portfolio will achieve its investment objective. YOU SHOULD CAREFULLY CONSIDER
THE INVESTMENT OBJECTIVE, INVESTMENT POLICIES, AND POTENTIAL RISKS OF ANY
PORTFOLIO BEFORE INVESTING. YOU SHOULD ALSO CAREFULLY CONSIDER AND CONSULT
YOUR INVESTMENT PROFESSIONAL ON THE ALLOCATION OF YOUR INVESTMENT TO A
PORTFOLIO OR PORTFOLIOS IN SEEKING YOUR FINANCIAL GOALS, AND CONSIDER THE
APPROPRIATENESS OF ANY PORTFOLIO OR PORTFOLIOS AS A COMPLETE INVESTMENT
PROGRAM. As with any security, a risk of loss is inherent in investment in the
Fund's shares. Each Portfolio is subject to varying degrees of financial,
market, and credit risks. Each Portfolio is subject to the risk of changing
economic conditions.
The different types of securities and investment techniques used by the
individual Portfolios all have attendant risks of varying degrees. For
example, for equity securities, there can be no assurance of capital
appreciation and there is a substantial risk of market decline. For debt
securities, there is a risk of market decline and there is the risk that the
issuer of a security may not be able to meet its obligations on interest or
principal payments at the time called for by an instrument. In addition,
because the value of debt instruments generally rises and falls inversely with
interest rates, the longer the maturity of a debt security, the more volatile
it can be in terms of changes in value. Both equity and debt securities can
also be subject to general economic conditions, company and industry earnings
prospects and investor psychology.
Certain types of investments and investment techniques common to one or more
Portfolios are described in greater detail, including the risks of each, in
this Prospectus under "Securities and Investment Techniques" and in the SAI.
MONEY MARKET PORTFOLIO
INVESTMENT OBJECTIVE. Current income consistent with preservation of
capital.
INVESTMENT POLICIES. The Portfolio invests at least 95% of its total assets,
measured at the time of investment, in a diversified portfolio of money market
securities that are in the highest rating category for short term instruments,
or, if not rated, are of equivalent quality. The Portfolio may also invest up
to 5% of its total assets, measured at the time of investment, in money market
securities that are in the second-highest rating category for short-term debt
obligations, or, if not rated, are of equivalent quality. Money market
securities in which the Portfolio may invest may include: (i) U.S. Government
obligations; (ii) bank obligations;
4
<PAGE>
(iii) commercial paper; (iv) short-term corporate debt securities; (v) savings
and loan obligations; (vi) repurchase agreements involving these securities;
and (vii) foreign securities--U.S. dollar denominated money market securities
issued by foreign issuers and foreign branches of U.S. banks. The Portfolio
may also lend its securities to brokers, dealers and other financial
institutions to earn income.
ELIGIBLE SECURITIES. The Portfolio may invest only in U.S. dollar
denominated money market instruments that present minimal credit risk. The
Adviser shall determine whether a security presents minimal credit risk under
procedures adopted by the Fund's Board of Trustees that conform to Securities
and Exchange Commission ("SEC") rules for money market funds.
The Money Market Portfolio's investments are limited to securities that
mature in 13 months or less from the date of purchase (except that securities
held subject to repurchase agreements having terms of 13 months or less from
the date of delivery may mature in excess of 13 months from such date). It is
anticipated that the dollar-weighted average portfolio maturity of the
Portfolio will not exceed 90 days. The Portfolio is subject to diversification
standards applicable to money market funds under SEC rules.
Unlike many money market funds that are offered to the public, the Fund's
Money Market Portfolio does not attempt to maintain a stable net asset value
of $1.00 per share.
HIGH YIELD BOND PORTFOLIO
INVESTMENT OBJECTIVE. High level of current income.
INVESTMENT POLICIES. The Portfolio invests primarily in a diversified
portfolio of intermediate and long-term, high-yielding, lower and medium
quality ("high risk") fixed-income securities, including corporate bonds and
notes, convertible securities and preferred stock. Such securities will be
rated Baa or lower by Moody's Investor Service, Inc. ("Moody's"), or BBB or
lower by Standard & Poor's Corporation ("S&P"), or, if not rated by Moody's or
S&P, be of equivalent investment quality as determined by the Adviser. These
debt securities include high yield bonds that are commonly referred to as
"junk bonds."
The convertible securities in which the Portfolio may invest include debt
securities convertible into or exchangeable for equity securities. The
Portfolio may also invest in: (i) U.S. Government securities (including
securities of U.S. agencies and instrumentalities); (ii) bank obligations;
(iii) commercial paper; (iv) repurchase and reverse repurchase agreements
involving these securities; (v) foreign securities--U.S. dollar-denominated
debt securities issued by foreign issuers and foreign branches of U.S. banks;
(vi) dividend-paying common stocks (including up to 10% of the market value of
the Portfolio's total assets in warrants to purchase common stocks) that are
considered by Pacific Mutual to be consistent with the investment objective of
current income; and (vii) higher-quality corporate bonds.
The Portfolio will hold short-term cash reserves (money market instruments
maturing in 13 months or less) as Pacific Mutual believes is advisable to
maintain liquidity or for temporary defensive purposes. During times that
Pacific Mutual believes that adoption of a temporary defensive position is
desirable due to prevailing market or economic conditions, the Portfolio may
invest to a greater degree in U.S. Government securities, higher-quality
corporate securities, and money market securities.
OTHER TECHNIQUES. In seeking higher income or a reduction in principal
volatility, the Portfolio may (1) purchase and sell put and call options on
debt securities, (2) purchase or sell interest rate futures contracts and
options on interest rate futures contracts, and (3) purchase, up to 5% of the
Portfolio's total assets, covered spread options, which give the Portfolio the
right to sell a security that it owns at a fixed dollar spread or yield spread
in relationship to another security that the Portfolio does not own, but which
is used as a benchmark. The Portfolio may also lend its securities to brokers,
dealers, and other financial institutions to earn income. Certain of these
techniques may involve a greater degree or different type of risk than those
inherent in more conservative investment approaches.
5
<PAGE>
HIGH YIELD BONDS. In general, debt securities rated lower than Baa by
Moody's or BBB by S&P or of equivalent quality ("high yield bonds") are not
considered to be investment grade, and are regarded as predominantly
speculative with respect to the issuer's continuing ability to meet principal
and interest payments. See the Appendix for a description of Moody's and S&P
ratings applicable to the fixed-income securities.
In an effort to reduce credit risk, the Portfolio diversifies its holdings
among many issuers. As of December 31, 1994, the Portfolio held securities of
59 corporate issuers, excluding short-term obligations. Based upon an average
of the Portfolio's holdings at the end of each month in 1994, an average of
approximately 85.5% of the Portfolio's holdings during 1994 were invested in
bonds rated Ba or B by Moody's or rated BB or B by S&P or if unrated,
determined to be of equivalent rating as determined by the Adviser. The asset
composition after this time may or may not be the same as shown in 1994.
VOLATILITY. Since shares of the Portfolio normally represent an investment
primarily in securities with fluctuating market prices, an investor should
understand that the value of the Portfolio's shares will vary as the aggregate
value of the Portfolio's securities increases or decreases. Changes in the
value of portfolio securities subsequent to their acquisition will normally
not affect the Portfolio's income, but will be reflected in the net asset
value of the Portfolio's shares. The Portfolio is intended for long-term
investors who can accept the risks associated with investment in high yield
securities.
MANAGED BOND PORTFOLIO
INVESTMENT OBJECTIVE. Maximize total return consistent with prudent
investment management.
INVESTMENT POLICIES. The Portfolio will primarily invest in the following
types of securities: obligations issued or guaranteed by the U.S. Government,
its agencies, or instrumentalities; U.S. dollar-denominated corporate debt
securities of domestic or foreign issuers; mortgage and other asset-backed
securities; variable and floating rate debt securities; U.S. dollar-
denominated obligations of foreign governments, foreign government agencies,
and international agencies (such as the International Bank for Reconstruction
and Development); and any of the following: high quality commercial paper,
certificates of deposit, fixed time deposits and bankers' acceptances issued
by domestic and foreign banks denominated in U.S. dollars, and repurchase and
reverse repurchase agreements.
The Portfolio, except as provided below, may invest only in securities rated
Baa or better by Moody's or BBB or better by S&P or, if not rated by Moody's
or S&P, determined by the Portfolio Manager to be of comparable quality. The
dollar-weighted average quality of all fixed-income securities held by the
Portfolio will be A or higher as rated by Moody's and S&P. The Portfolio may
also invest up to 10% of its assets in debt securities that are below
investment grade, but rated B or higher by Moody's or S&P or, if not rated by
Moody's or S&P, of equivalent quality. A security is generally of investment
grade when rated in one of the top four categories of investment ratings as
described by Moody's or S&P. In general, debt securities rated lower than Baa
by Moody's or BBB by S&P or of equivalent quality ("high yield/high risk
bonds") are not considered to be investment grade, and are regarded as
predominantly speculative with respect to the issuer's continuing ability to
meet principal and interest payments. For more information on the risks of
such securities, see "High Yield Bonds." In the event that a security owned by
the Portfolio is downgraded to below a rating of B, the Portfolio may
nonetheless retain the security. See the Appendix for a description of Moody's
and S&P ratings applicable to fixed income securities. For the year ended
December 31, 1994, the amount of the Portfolio's average total assets,
measured on the basis of month-end values, invested in debt securities rated
less than investment grade was approximately 10.39%.
SELECTION OF SECURITIES. The Portfolio invests in a diversified portfolio
primarily consisting of long, intermediate, and short-term marketable debt
securities. The proportion invested in each category of maturity can be
expected to vary depending upon the evaluation of market patterns and trends
by the Portfolio Manager. In selecting securities for the Portfolio, the
Portfolio Manager will use economic forecasting, interest rate
6
<PAGE>
anticipation, credit and call risk analysis, and other security selection
techniques. The proportion of the Portfolio's assets committed to investment
in securities with particular characteristics of maturity, type, and coupon
rate may vary based on the Portfolio Manager's outlook for the economy, the
financial markets, and other factors.
DURATION. The Portfolio will invest in a portfolio of securities of varying
maturities and, under normal circumstances, will maintain an average portfolio
duration of 3 to 6 years. Duration is one of the fundamental tools used by the
Portfolio Manager in security selection. Historically, the maturity of a bond
was used as a proxy for the sensitivity of a bond's price to changes in
interest rates, otherwise known as a bond's "interest rate risk" or
"volatility." According to this measure, the longer the maturity of a bond,
the more its price will change for a given change in market interest rates.
However, this method ignores the amount and timing of all cash flows from the
bond prior to final maturity. Duration is a measure of average life of a bond
on a present value basis, which was developed to incorporate a bond's yield,
coupons, final maturity and call features into one measure. For point of
reference, the maturity of a current coupon bond with a 3 year duration is
approximately 3.5 years, and the maturity of a current coupon bond with a 6
year duration is approximately 9 years.
OTHER TECHNIQUES. In pursuing its investment objective, the Portfolio may
purchase and sell put and call options on debt securities. In addition, the
Portfolio may purchase or sell interest rate futures contracts and options on
interest rate futures contracts. The Portfolio may also lend its securities to
brokers, dealers, and other financial institutions to earn income, and borrow
money for temporary administrative or emergency purposes. In addition, the
Portfolio may invest up to 20% of its assets in debt securities of foreign
issuers which may be denominated in foreign currencies. Furthermore, the
Portfolio may engage in forward currency contracts, options on foreign
currency contracts, and foreign currency futures and options thereon, in
anticipation of or to protect itself against fluctuations in currency exchange
rates with respect to investments in securities of foreign issuers. These
investment techniques may involve a greater degree or different type of risk
than those inherent in more conservative investment approaches.
GOVERNMENT SECURITIES PORTFOLIO
INVESTMENT OBJECTIVE. Maximize total return consistent with prudent
investment management.
INVESTMENT POLICIES. The Portfolio invests primarily in securities that are
obligations of or guaranteed by the U.S. Government, its agencies or
instrumentalities. Among the securities the Portfolio may purchase are
mortgage-backed securities guaranteed by the Government National Mortgage
Association, the Federal Home Loan Mortgage Corporation, or the Federal
National Mortgage Association.
The Portfolio normally maintains at least 65% of its assets invested in U.S.
Government securities (including futures contracts and options thereon and
options relating to U.S. Government securities). The remainder of the
Portfolio's assets may be invested in corporate debt securities of domestic
issuers rated Aa or better by Moody's or AA or better by S&P, or, if not rated
by Moody's or S&P, of comparable quality as determined by the Portfolio
Manager, in mortgage-related securities, including collateralized mortgage
obligations and mortgage-backed bonds, and in cash or high quality money
market instruments. The Portfolio may increase the amount of its assets
invested in money market securities during times that the Portfolio Manager
believes that adoption of a temporary defensive position is desirable due to
prevailing market or economic conditions.
DURATION. The Portfolio invests in securities of varying maturities and,
under normal circumstances, intends to maintain an average portfolio duration
of 3 to 6 years. A discussion of "duration" is provided above in the
description of the Managed Bond Portfolio and in the SAI.
7
<PAGE>
OTHER TECHNIQUES. In pursuing its investment objective, the Portfolio may
purchase and sell put and call options on U.S. Government securities and on
other debt securities. In addition, the Portfolio may purchase or sell
interest rate futures contracts and options on interest rate futures
contracts. The Portfolio also may make loans of portfolio securities (up to an
aggregate of 25% of its total assets) and enter into reverse repurchase
agreements. In addition, the Portfolio may invest up to 20% of its assets in
debt securities of foreign issuers, which may be denominated in foreign
currencies. Furthermore, the Portfolio may engage in forward currency
contracts, options on forward currency contracts, and foreign currency futures
and options thereon, in anticipation of or to protect itself against
fluctuations in currency exchange rates with respect to investments in
securities of foreign issuers. These investment techniques may involve a
greater degree or different type of risk than those inherent in more
conservative investment approaches.
GROWTH PORTFOLIO
THE GROWTH PORTFOLIO OFFERS ITS SHARES ONLY TO (1) SEPARATE ACCOUNTS OF
PACIFIC MUTUAL TO SERVE AS AN INVESTMENT MEDIUM FOR VARIABLE LIFE INSURANCE
POLICIES, AND (2) SEPARATE ACCOUNTS OF PACIFIC MUTUAL TO SERVE AS THE
INVESTMENT MEDIUM FOR VARIABLE ANNUITY CONTRACTS THAT WERE ISSUED PRIOR TO
JANUARY 1, 1994. THE PORTFOLIO IS NOT AVAILABLE FOR VARIABLE ANNUITY CONTRACTS
ISSUED ON OR AFTER JANUARY 1, 1994.
INVESTMENT OBJECTIVE. Growth of capital. The realization of current income
will not be a factor in considering portfolio securities.
INVESTMENT POLICIES: The Portfolio seeks to invest in the common stocks of
growing and profitable companies, turnaround situations, and unseasoned
companies. The major portion of investments of the Portfolio will be in common
stocks. The Portfolio may also invest in convertible debt securities and in
convertible preferred stocks of companies which, in the opinion of the
Portfolio Manager, appear to have growth possibilities that are consistent
with the investment objective. If economic conditions warrant, the Portfolio
may temporarily invest in defensive type securities, including U.S. Government
securities, short-term corporate debt, preferred stocks, and money market
instruments.
Among the investments the Portfolio will consider are the stock of smaller
emerging growth companies still in the developing stage of their life cycle or
companies embarking upon a new, promising development that is expected to
reverse a past downswing in earnings. These growing companies or "turnaround
situations" may offer the possibility of accelerating earnings growth due to
factors such as rejuvenated management, new innovative products, or change in
the economy. However, small-to-medium size companies often have limited
product and market diversification, fewer financial resources, or may be
dependent on a few key managers. Any one of the foregoing may change suddenly
and have an immediate impact on the value of the company's securities.
Furthermore, whenever the securities markets are experiencing rapid price
changes due to national economic trends, emerging growth securities, often
valued at premium standards by investors, have historically been subject to
exaggerated price changes. The Portfolio is intended for aggressive long-term
investors seeking above average gains who are willing to accept the risks
associated with small capitalization stocks.
OTHER INVESTMENTS. A portion of assets may also be held in cash. To a
limited extent, the Portfolio may also invest in various foreign securities if
U.S. exchange-listed.
Convertible bonds and other fixed income securities (other than money market
instruments) in which the Portfolio may invest will, at the time of
investment, be rated Baa or better by Moody's or BBB or better by S&P or, if
not rated by Moody's or S&P, will be comparable quality as determined by the
Portfolio Manager. In the event that an existing holding is downgraded below
these ratings, the Portfolio may nonetheless retain the security.
AGGRESSIVE EQUITY PORTFOLIO
INVESTMENT OBJECTIVE. Capital appreciation. No consideration is given to
income.
8
<PAGE>
INVESTMENT POLICIES. The Portfolio invests primarily in common stock of
companies that utilize innovative technologies in their products or services
or to gain a strategic competitive advantage in their industry, as well as
companies that provide and service those technologies. Particular emphasis is
placed on common stocks of companies whose perceived strength lies in their
use of innovative technologies in new products, enhanced distribution systems,
and/or improved management techniques. While the Portfolio is expected to
emphasize the utilization of technologies, it is not restricted to investment
in companies in a particular business sector or industry. The Portfolio may
invest in companies with small and medium equity capitalizations, and it is
intended for aggressive long-term investors seeking above average gains who
are willing to accept the greater risks associated with technology and small
capitalization stocks.
Securities will be selected with minimal emphasis on more traditional
factors such as growth potential or value relative to intrinsic worth. In
selecting securities, the Portfolio Manager uses an investment discipline
called "Positive Momentum & Positive Surprise." It is based on the premise
that companies doing better than expected will have rising securities prices,
while companies producing less than expected results will not. Through
analysis of company fundamentals in the context of the prevailing economic
environment, the companies selected for purchase remain in the Portfolio only
if they continue to achieve or exceed expectations, and are replaced when
business or earnings results are disappointing.
OTHER TECHNIQUES. The Portfolio may invest up to 15% of its assets in
securities that are traded principally in securities markets outside of the
United States (Eurodollar certificates of deposit are excluded for purposes of
this limitation), and may invest without limit in securities of foreign
issuers that are traded in U.S. securities markets. For temporary defensive
purposes, the Portfolio also may invest up to 100% of its assets in U.S.
Government securities, high quality money market instruments (such as short-
term corporate or U.S. Government obligations and bank certificates of
deposit), and repurchase agreements.
In addition to the above, the Portfolio may purchase convertible securities,
buy or sell foreign currencies or forward foreign currency contracts, engage
in transactions in options on securities, securities indexes, and foreign
currencies, stock index futures and foreign futures contracts, and options on
futures contracts on securities indexes and foreign currencies, lend its
portfolio securities, purchase warrants on securities that it is eligible to
purchase, enter into repurchase agreements and reverse repurchase agreements,
enter into firm commitment transactions and purchase and sell securities on a
when-issued basis, and enter into short sales "against the box."
OTHER INVESTMENT CONSIDERATIONS. Companies that utilize innovative
technologies face special risks. Innovative technologies may require a
substantial capital commitment. Yet, many of these companies are in industries
that change rapidly. Their products or services may not prove commercially
successful and may become obsolete quickly. The value of the Portfolio's
shares may be more volatile than other portfolios with diversification across
more industry sectors. The Portfolio may also invest in small capitalization
stocks.
GROWTH LT PORTFOLIO
INVESTMENT OBJECTIVE. Long-term growth of capital in a manner consistent
with the preservation of capital.
INVESTMENT POLICIES. The Portfolio pursues its investment objective by
investing in the common stock of a large number of issuers of any size. The
Portfolio may invest in large, well-established companies, as well as smaller
emerging growth companies. Small-to-medium sized companies may suffer more
significant losses as well as realize more substantial growth than larger,
more established issuers. Thus, investments in such companies tend to be more
volatile and somewhat speculative. The Portfolio may invest in securities of
both domestic and foreign issuers. The Portfolio is not designed as a short-
term trading vehicle.
STOCK SELECTION. The Portfolio invests substantially all of its assets in
common stocks when the Portfolio Manager believes that the relevant market
environment favors profitable investing in those securities. Common stock
investments are selected in industries and companies that the Portfolio
Manager believes are experiencing favorable demand for their products and
services, and which operate in a favorable competitive environment and
9
<PAGE>
regulatory climate. The Portfolio Manager's analysis and selection process
focuses on earnings growth potential. In particular, the Portfolio intends to
buy stocks with earnings growth potential that may not be recognized by the
market. Securities are selected solely for their capital growth potential;
investment income is not a consideration and any income realized on the
Portfolio's investments will be incidental to its primary objective. These
selection criteria apply equally to stocks of foreign issuers. In selecting
foreign stocks, factors such as expected levels of inflation, government
policies influencing business conditions, the outlook for currency
relationships, and prospects for relative economic growth among countries,
regions, or geographic areas may warrant greater consideration.
OTHER INVESTMENTS. Although the Portfolio normally invests primarily in
equity securities, it may increase its cash position when the Portfolio
Manager is unable to locate investment opportunities with desirable
risk/reward characteristics. The Portfolio may invest in government
securities, corporate bonds and debentures, high-grade commercial paper,
warrants, preferred stocks, certificates of deposit, or other debt securities
when the Portfolio Manager perceives an opportunity for capital growth from
such securities or so that the Portfolio may receive a return on idle cash.
The Portfolio may invest up to 10% of its assets, measured at the time of
investment, in debt securities that are lower rated bonds, i.e., rated below
investment grade by one of the primary rating agencies (or if not rated,
deemed to be comparable quality by the Portfolio Manager), but which may offer
higher yields. When the Portfolio invests in fixed income securities,
investment income will increase and may constitute a large portion of the
return on the Portfolio, and the Portfolio probably would not participate in
market advances or declines to the extent that it would if it remained fully
invested in common stocks.
The Portfolio may invest up to 25% of its assets in foreign securities
denominated in a foreign currency and not publicly traded in the United
States. In addition, the Portfolio may purchase American Depositary Receipts
("ADRs"), European Depository Receipts ("EDRs"), Global Depository Receipts
("GDRs"), and other types of receipts of shares evidencing ownership of the
underlying foreign securities. In pursuing its investment objective, the
Portfolio may engage in the purchase and writing of put and call options on
securities, stock indexes and foreign currencies. In addition, the Portfolio
may purchase or sell interest rate, stock index, and foreign currency futures
contracts and options thereon. The Portfolio may also engage in forward
foreign currency contracts. These investment techniques may involve a greater
degree or different type of risk than those inherent in more conservative
investment approaches.
EQUITY INCOME PORTFOLIO
INVESTMENT OBJECTIVE. Long-term growth of capital and income.
INVESTMENT POLICIES. The Portfolio seeks to achieve its objective consistent
with reasonable investment risk. Ordinarily, the Portfolio pursues its
investment objective by investing primarily in dividend-paying common stock.
The Portfolio may also invest in other equity securities, consisting of, among
other things, non dividend-paying common stock, preferred stock, and
securities convertible into common stock, such as convertible preferred stock
and convertible bonds, and warrants. The Portfolio may also invest in ADRs and
in various foreign securities if U.S. exchange-listed.
STOCK SELECTION. The Portfolio is not subject to any limit on the size of
companies in which it may invest, but intends, under normal circumstances, to
be fully invested to the extent practicable in the large- and medium-sized
companies primarily included in the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500" or the "Index"). The Portfolio is designed for
investors who want an actively managed equity portfolio of selected equity
securities that seeks to outperform the total return of the S&P 500. In
managing the Portfolio, the potential for appreciation and dividend growth is
given more weight than current dividends. Nonetheless, the Portfolio Manager
will normally strive for gross income for the Portfolio at a level not less
than 75% of the dividend income generated on the stocks included in the S&P
500, although this income level is merely a guideline and there can be no
certainty that this income level will be achieved.
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The Portfolio does not seek to achieve its objective with any individual
portfolio security, but rather it aims to manage the portfolio as a whole in
such a way as to achieve its objective. The Portfolio attempts to reduce risk
by investing in many different economic sectors, industries and companies. The
Portfolio Manager may under- or over-weight selected economic sectors against
the S&P 500's sector weightings to seek to enhance the Portfolio's total
return or reduce fluctuations in market value relative to the S&P 500. In
selecting securities, the Portfolio Manager may emphasize securities that it
believes to be undervalued. Securities of a company may be undervalued for a
variety of reasons such as an overreaction by investors to unfavorable news
about a company, an industry, or the stock markets in general; or as a result
of a market decline, poor economic conditions, tax-loss selling, or actual or
anticipated unfavorable developments affecting a company.
OTHER SECURITIES. During ordinary market conditions, the Portfolio Manager
will keep the Portfolio as fully invested as practicable in the equity
securities described above. The Portfolio may also invest in money market
instruments, including U.S. Government securities, short term bank obligations
rated in the highest two rating categories by Moody's or S&P, or, if unrated,
determined to be of equal quality by the Portfolio's Manager, certificates of
deposit, time deposits and banker's acceptances issued by U.S. and foreign
banks and savings and loan institutions with assets of at least $500 million
as of the end of their most recent fiscal year; and commercial paper and
corporate obligations, including variable rate demand notes, that are issued
by U.S. and foreign issuers and that are rated in the highest two rating
categories by Moody's or S&P, or if unrated, determined to be of equal quality
by the Portfolio Manager. Under normal circumstances, the Portfolio will
invest in such money market instruments to invest temporary cash balances or
to maintain liquidity to meet redemptions or expenses. The Portfolio may also,
however, invest in these instruments, without limitation, as a temporary
defensive measure taken during, or in anticipation of, adverse market
conditions.
Convertible bonds and other fixed income securities (other than money market
instruments) in which the Portfolio may invest will, at the time of
investment, be rated Baa or better by Moody's or BBB or better by S&P or, if
not rated by Moody's or S&P, will be of comparable quality as determined by
the Portfolio Manager. In the event that an existing holding is downgraded
below these ratings, the Portfolio may nonetheless retain the security.
OTHER TECHNIQUES. In pursuing its investment objective, the Portfolio may
purchase and sell put and call options on securities and stock indexes. In
addition, the Portfolio may purchase or sell stock index futures contracts and
options thereon. These investment techniques may involve a greater degree or
different type of risk or than those inherent in more conservative investment
approaches.
MULTI-STRATEGY PORTFOLIO
INVESTMENT OBJECTIVE. Provide a high total return from a portfolio of equity
and fixed income securities. Total return will consist of income plus realized
and unrealized capital gains and losses.
INVESTMENT POLICIES. The Portfolio is managed to earn current income on, and
to anticipate long-term capital growth of, the Portfolio as a whole rather
than any individual security in it. The Portfolio's equity investments will be
primarily the common stock of large and medium-size U.S. companies, including
common stock of any class or series or any similar equity interest. The
Portfolio's equity investments may also include preferred stock, warrants,
rights, and convertible securities. The Portfolio may also invest in the
equity securities of small companies and foreign issuers. The Portfolio's
equity securities may or may not pay dividends and may or may not carry voting
rights. Fixed income securities may include corporate bonds, debentures,
notes, mortgage-related securities, and asset-backed securities, U.S.
Government securities, preferred stock, money market instruments, and other
securities that may have conversion or purchase rights. It is contemplated
that most of the Portfolio's common stock investments will be made in
securities listed on a U.S. stock exchange, and the Portfolio may invest in
various foreign securities if U.S. exchange-listed.
ASSET ALLOCATION. Under normal circumstances, the Portfolio Manager expects
that approximately 60% of the Portfolio's assets will be invested in equities
and approximately 40% in fixed income securities. However,
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these amounts may vary in that the Portfolio Manager may allocate the
Portfolio's investments between these asset classes in a manner consistent
with the Portfolio's investment objective and current market conditions. Using
a variety of analytical tools, the Portfolio Manager assesses the relative
attractiveness of each asset class and determines an allocation between them
believed to be optimal. The Portfolio Manager then selects securities in each
asset class based on fundamental research and quantitative analysis.
OTHER TECHNIQUES. In pursuing its investment objective, the Portfolio may
purchase and sell put and call options on securities and stock indexes. In
addition, the Portfolio may purchase or sell interest rate and stock index
futures contracts and options thereon. These investment techniques may involve
a greater degree or different type of risk than those inherent in more
conservative investment approaches.
EQUITY PORTFOLIO
THE EQUITY PORTFOLIO OFFERS ITS SHARES ONLY TO SEPARATE ACCOUNTS OF PACIFIC
MUTUAL AND PACIFIC CORINTHIAN TO SERVE AS AN INVESTMENT MEDIUM FOR VARIABLE
ANNUITY CONTRACTS. THE PORTFOLIO IS NOT AVAILABLE FOR VARIABLE LIFE INSURANCE
POLICIES.
INVESTMENT OBJECTIVE. The primary investment objective of the Equity
Portfolio is capital appreciation. Current income is of secondary importance.
INVESTMENT POLICIES. The Portfolio seeks to achieve this objective by
investing primarily in common stocks, or securities convertible into or
exchangeable for common stocks (such as convertible preferred stocks,
convertible debentures, or warrants), which are believed by the Portfolio
Manager to have above-average market appreciation potential. From time to time
the Portfolio Manager will not seek to diversify across a broad spectrum of
industry classifications. Thus, the Portfolio could be invested in fewer
industries or groups of industries than more broad based equity portfolios if,
in the opinion of the Portfolio Manager, the securities selected within those
industries have above-average market appreciation potential. Less
diversification among industries may create an opportunity for higher returns,
but may also result in higher risk of loss because of greater exposure to an
industry or group of industries in a market decline.
Except when in a temporary defensive investment position, the Portfolio
intends to maintain at least 65% of its assets invested in common stocks or
securities convertible or exchangeable for common stocks. The Equity Portfolio
also may invest in U.S. Government securities, corporate bonds, money market
instruments, enter into repurchase agreements, and for temporary defensive
purposes, increase its investment in these securities up to 100% of its
assets. The Equity Portfolio may lend its portfolio securities and enter into
short sales "against the box." Corporate bonds purchased by the Portfolio must
be rated at the time of purchase Aa or better by Moody's or AA or better by
S&P, and commercial paper must be rated at the time of purchase Prime-1 by
Moody's or A-1 by S&P or, if not so rated, must have been issued by a
corporation with corporate bonds outstanding which meet the standards set
forth above.
OTHER TECHNIQUES. The Equity Portfolio may sell exchange-listed call options
("calls") if the calls are "covered" throughout the life of the option and may
purchase a call on securities only to effect a "closing purchase transaction".
BOND AND INCOME PORTFOLIO
THE BOND AND INCOME PORTFOLIO OFFERS ITS SHARES ONLY TO SEPARATE ACCOUNTS OF
PACIFIC MUTUAL AND PACIFIC CORINTHIAN TO SERVE AS AN INVESTMENT MEDIUM FOR
VARIABLE ANNUITY CONTRACTS. THE PORTFOLIO IS NOT AVAILABLE FOR VARIABLE LIFE
INSURANCE POLICIES.
INVESTMENT OBJECTIVE. Provide as high a level of current income as is
consistent with prudent investment management and preservation of capital.
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INVESTMENT POLICIES. The Portfolio may invest in any of the following
securities: corporate bonds which are rated Baa or better by Moody's or BBB or
better by S&P; U.S. Government securities; commercial paper rated Prime-1 or
Prime-2 by Moody's or A-1 or A-2 by S&P or, if not rated by Moody's or S&P,
issued by a corporation having an outstanding debt issue rated Aa or better by
Moody's or AA or better by S&P; negotiable bank certificates of deposit or
banker's acceptances issued by domestic banks (but not their foreign branches)
having, together with branches or subsidiaries, total assets in excess of $2
billion; high dividend-paying common stocks; and warrants. Securities rated
Baa by Moody's are described by it as having speculative characteristics and,
according to S&P, fixed income securities rated BBB normally exhibit adequate
protection parameters, although adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest
and repay principal.
Except when in a temporary defensive investment position, the Portfolio
intends to maintain at least 65% of its assets invested in bonds. The
Portfolio may also invest in U.S. Government securities, and money market
instruments, and may enter into repurchase agreements, and for temporary
defensive purposes, may increase its investment in these securities.
OTHER TECHNIQUES. The Bond and Income Portfolio may enter into reverse
repurchase agreements, and lend its portfolio securities.
EQUITY INDEX PORTFOLIO
INVESTMENT OBJECTIVE. Provide investment results that correspond to the
total return performance of common stocks that are publicly traded in the
United States.
INVESTMENT POLICIES. The Portfolio attempts to achieve its objective by
investing in stocks included in the S&P 500. The Portfolio attempts to
replicate the investment results of the S&P 500, while minimizing
transactional costs and other expenses. The Portfolio will purchase the common
stock of those companies included in the S&P 500, which the Portfolio Manager
believes, based on statistical data, will represent the industry
diversification of the entire S&P 500. The Portfolio will be managed to
attempt to minimize the degree to which the investment results of the
Portfolio (before taking into account the Portfolio's expenses) differ from
the results of the Index ("tracking error"). The Portfolio will incur expenses
not reflected in the investment results of the Index, including advisory and
administrative fees and transactional and other expenses. The degree to which
the Portfolio correlates with the Index will depend upon the size and cash
flow of the Portfolio, the liquidity of the securities represented in the
Index, and the Portfolio's expenses, among other factors. There is no fixed
number of component stocks in which the Portfolio will invest. However, it is
anticipated that under normal circumstances the Portfolio will hold between
200 and 450 of the stocks listed in the S&P 500.
The composition of the portfolio securities may be rebalanced by the
Portfolio Manager at such times as it deems advisable in order to minimize
tracking error. No attempt, however, is made to "manage" the Portfolio in the
traditional sense, such as by using economic, financial, and market analysis,
nor will the adverse financial situation of a company directly result in its
elimination from the Portfolio unless, of course, the company is removed from
the Index. From time to time, administrative adjustments may be made in the
Portfolio because of mergers, changes in the composition of the Index, and
similar reasons, but such changes should be infrequent and the attendant costs
minimized. Thus, portfolio turnover is expected to be lower than that of most
other investment company portfolios investing in common stock. As a
consequence, brokerage costs are expected to be relatively low. Due to
tracking error, transactional costs, and other expenses, the return on the
Portfolio likely will be lower than the return on the S&P 500.
OTHER TECHNIQUES. The Portfolio may purchase and sell stock index futures,
purchase options on stock indexes, and purchase options on stock index futures
that are based on stock indexes which the Portfolio attempts to track or which
tend to move together with stocks included in the index. The Portfolio may use
these techniques as an adjunct to its securities activities or to hedge
against changes in securities prices.
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The Portfolio may invest in foreign equity securities if U.S. exchange
listed to the extent included in the S&P 500. The Portfolio may temporarily
invest cash balances, maintained for liquidity purposes or pending investment,
in short-term high quality debt instruments, including commercial paper, bank
obligations, and U.S. Government securities. Temporary investments will not be
made for defensive purposes in the event of or in anticipation of a general
decline in the market price of stocks in which the Portfolio invests. A
defensive investment posture is precluded by the investment objective to
provide investment results that correspond to the total return performance of
common stocks that are publicly traded in the United States; accordingly,
investors in the Portfolio bear the risk of general declines in stock prices
in the stock markets.
ABOUT THE S&P 500: The S&P 500 is a capitalization-weighted index, based on
the relative market capitalization of 500 different companies selected by S&P,
including companies in the industrial, utility, financial, and transportation
industry sectors. The weightings of stocks in the Index are based on each
component stock's relative total market value, that is, its market price per
share multiplied by the number of common shares outstanding for that company.
S&P may, from time to time, adjust the composition of common stocks in the
Index. Inclusion of a stock in the S&P 500 in no way implies an opinion by S&P
as to its attractiveness as an investment; nor is S&P a sponsor or in any way
affiliated with the Portfolio, the Fund, the Adviser, or the Portfolio
Manager.
The Fund reserves the right to change the index whose performance the
Portfolio will attempt to replicate or for the Portfolio to seek its
investment objective by means other than attempting to replicate an index,
such as by operating the Portfolio as a managed fund, and reserves the right
to do so without seeking shareholder approval, but only if operating the
Portfolio as described above is not permitted under applicable law for an
investment company that serves as an investment medium for variable insurance
contracts, or otherwise involves substantial legal risk. See "What is the
Federal Income Tax Status of the Fund" below.
INTERNATIONAL PORTFOLIO
INVESTMENT OBJECTIVE. Seek long-term capital appreciation primarily through
investment in equity securities of corporations domiciled in countries other
than the United States. Current income from dividends and interest will not be
an important consideration.
INVESTMENT POLICIES. Other than when in a defensive posture, at least 70% of
the Portfolio's assets will consist of corporate securities, primarily common
stock and, to a lesser extent, securities convertible into common stock. The
Portfolio may, however, for defensive purposes as described below, invest in
non-convertible fixed income securities denominated in currencies of foreign
countries and in United States dollars.
The Portfolio will attempt to maximize opportunity and reduce risk by
investing in a diversified portfolio of companies in different stages of
development. Portfolio companies will range from large, well established
companies to medium-sized companies and smaller, less seasoned companies in an
earlier stage of development.
The allocation of the Portfolio's assets among the various securities
markets in the different countries will be determined by the Portfolio
Manager. In making the allocation of assets among the securities markets, the
Portfolio Manager may consider such factors as technological developments in
the various countries, the condition and growth potential for the various
economies and securities markets, currency and taxation considerations, and
other pertinent financial, social, national, and political factors. Some of
these countries can be considered "emerging market countries," which generally
refers to countries whose economies are less developed or mature than
economies in other countries or whose markets are undergoing a process of
development. Under certain adverse investment conditions, the Portfolio may
restrict the securities markets in which its assets will be invested, and may
increase the proportion of assets invested in United States Government and
money market securities.
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The Portfolio reserves the right as a defensive measure to invest in
nonconvertible fixed income securities denominated in currencies of foreign
countries and in United States dollars. (For this purpose, investments made
for defensive purposes will be maintained only during periods in which
Templeton determines that economic or financial conditions are adverse for
holding equity securities of corporate issuers.) Securities held for defensive
purposes, which include non-convertible preferred stock, debt securities,
government securities issued by United States and foreign countries, and money
market securities, may be held in such proportions as, in the opinion of the
Portfolio Manager, prevailing market or economic conditions warrant. The
Portfolio may invest up to 5% of its assets, measured at the time of
investment, in debt securities that are rated below investment grade, or if
not rated, of equivalent quality.
The Portfolio may also hold cash (in United States dollars or foreign
currencies) or short-term securities denominated in such currencies to provide
for redemptions; it is not expected that such reserve for redemptions will
exceed 10% of the Portfolio's assets. Money market securities which may be
held for defensive purposes, or to provide for redemptions, include short-term
corporate or U.S. Government obligations and bank certificates of deposit.
The Portfolio is subject to guidelines for diversification of foreign
security investments that prescribe the minimum number of countries in which
the Portfolio's assets may be invested. These guidelines are discussed under
"Foreign Securities."
OTHER TECHNIQUES. The Portfolio may enter into repurchase agreements and may
lend its securities to brokers, dealers, and other financial institutions to
earn income. The Portfolio may purchase and sell financial futures contracts,
stock index futures contracts, and foreign currency futures contracts and
options on such futures contracts.
RISKS OF FOREIGN INVESTMENT. Investing in the securities of foreign issuers
involves special risks and considerations not typically associated with
investing in U.S. companies. These risks include exposure to foreign
currencies and fluctuations in such currencies and political, economic,
regulatory, and operational factors associated with exposure to foreign
countries. Investment in emerging market countries presents risks in greater
degree than, and in addition to, those presented by investment in foreign
issuers in general.
The United States Government has, from time to time in the past, imposed
restrictions, through taxation and otherwise, on foreign investments by United
States investors such as the Portfolio. If such restrictions should be
reinstituted, it might become necessary for the Portfolio to invest all, or
substantially all, of its assets in United States short-term securities. In
such event, the Portfolio would review its investment objective and investment
policies to determine whether changes are appropriate.
CURRENCY TECHNIQUES. The Portfolio may engage in foreign currency
transactions in anticipation of or to protect itself against fluctuations in
currency exchange rates. The Portfolio may enter into forward currency
contracts. The Portfolio may also purchase and write put and call options on
foreign currencies. The use of these techniques is discretionary with the
Portfolio Manager, and there is no commitment to use them.
EMERGING MARKETS PORTFOLIO
INVESTMENT OBJECTIVE. Long-term growth of capital.
INVESTMENT POLICIES. The Portfolio seeks its investment objective by
investing primarily in common stocks of companies domiciled in countries
identified as "emerging market countries" (See "International Portfolio--
Investment Policies"). The Morgan Stanley Capital International Emerging
Markets Free Index ("MSCI Index") is used as the basis for choosing the
countries in which the Portfolio invests. However, the Portfolio is not
limited to the countries and weightings in this index.
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It is the policy of the Fund to be as fully invested in common stock as
practicable at all times. This policy precludes the Fund from investing in
debt securities as a defensive investment posture (although the Fund may
invest in such securities to provide for payment of expenses and meet
redemption requests). Accordingly, investors in this Fund bear the risk of
general declines in stock prices, and bear any risk that the Fund's exposure
to such declines cannot be lessened by investment in debt securities. The Fund
may temporarily not be invested primarily in equity securities after receipt
of significant new monies.
The Portfolio Manager applies two levels of screening in selecting
investments for the Portfolio. First, an active country selection model
analyzes world markets and assigns a relative value ranking, or "favorability
weighting," to each country in the relevant country universe to determine
markets that are relatively undervalued. Second, at the stock selection level,
quality analysis and value analysis are applied to each security, assessing
variables such as balance sheet strength and earnings growth (quality factors)
and performance relative to the industry, price to earnings ratios, and price
to book ratios (value factors). This two-level screening method identifies
undervalued securities for purchasing and provides a sell discipline for fully
valued securities.
For purposes of allocating the Portfolio's investments, a company is
considered to be located in the country in which it is domiciled, in which it
is primarily traded, from which it derives a significant portion of its
revenues, or in which a significant portion of its goods or services are
produced.
The Portfolio is subject to guidelines for diversification of foreign
security investments that prescribe the minimum number of countries in which
the Portfolio may invest its assets. These guidelines are discussed under
"Foreign Securities."
CURRENCY TECHNIQUES. Most of the foreign securities in which the Portfolio
invests will be denominated in foreign currencies. The Portfolio may engage in
foreign currency transactions to protect itself against fluctuations in
currency exchange rates in relation to the U.S. dollar or to the weighting of
a particular foreign currency on the MSCI Free Index. These foreign currency
transactions may include forward foreign currency contracts, currency exchange
transactions on a spot (i.e., cash) basis, put and call options on foreign
currencies, and foreign exchange futures contracts.
OTHER TECHNIQUES. The Portfolio may invest up to 10% of its assets in U.S.
Government securities, high quality debt securities, money market obligations,
and in cash. Such money market obligations may include short-term corporate or
U.S. Government obligations and bank certificates of deposit. The debt
securities and money market obligations in which the Portfolio invests may be
issued by U.S. and foreign issuers and be denominated in U.S. dollars or
foreign currencies.
The Portfolio also may engage in transactions in options, futures, and
options on future contracts on securities and securities indexes. The
Portfolio also may purchase convertible securities, enter into equity index
swap agreements, lend its portfolio securities, purchase warrants on
securities that it is eligible to purchase, invest in preferred stock, enter
into repurchase agreements and reverse repurchase agreements, and enter into
firm commitment transactions and purchase and sell securities on a when-issued
basis.
RISKS OF FOREIGN INVESTMENT. Investing in the securities of foreign issuers
involves special risks and considerations not typically associated with
investing in U.S. companies. Investment in emerging market countries presents
risks in greater degree than, and in addition to, those presented by
investment in foreign issuers in general. Some of these risks include
restrictions on foreign investment and repatriation of investment income or
gain, risks of currency fluctuations, inflation, and illiquid or volatile
securities markets. The Portfolio is intended for aggressive long-term
investors who can accept the risks associated with emerging market countries.
As noted previously, the United States Government has, from time to time in
the past, imposed restrictions, through taxation and otherwise, on foreign
investments by United States investors such as the Portfolio. If such
restrictions should be reinstated, it might become necessary for the Portfolio
to invest all, or substantially all, of its assets in United States short-term
securities. In such event, the Portfolio would review its investment objective
and investment policies to determine whether changes are appropriate.
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ALL PORTFOLIOS: DIVERSIFICATION AND CHANGES IN POLICIES
Each of the Portfolios is diversified, so that with respect to 75% of the
assets of each Portfolio, it may not invest more than 5% of its assets (taken
at market value at the time of investment) in securities of any one issuer,
except that this restriction does not apply to U.S. Government securities.
The investment policies for any of the Portfolios may be changed by the
Fund's Board of Trustees. The investment objective of each Portfolio, as
described in the previous section, is considered "fundamental." In addition,
the Portfolios are subject to investment restrictions that are described in
the SAI. Some of those investment restrictions, including the diversified
status of each Portfolio, are also designated as "fundamental." These
fundamental investment objectives and investment restrictions require a vote
of a majority of the shareholders of a Portfolio to be changed.
SECURITIES AND INVESTMENT TECHNIQUES
This section describes certain securities and investment techniques that may
be used by the Portfolios and the potential risks associated with these
securities and investment techniques. For more detailed information on these
investment techniques, see the SAI. The SAI also contains information on other
types of securities in which a Portfolio may invest, including U.S. Government
securities, debt securities generally, variable and floating rate securities,
repurchase agreements, reverse repurchase agreements, lending portfolio
securities, firm commitment agreements and when-issued securities, and
warrants.
DERIVATIVES
"Derivatives" is a broad term which may be used to describe many investment
instruments whose value is derived, at least in part, from the value of
another underlying asset or investment instrument. Some derivative instruments
have simple structures and others have intricate components and terms. Some
are more volatile and some have equal or less volatility than the investment
instrument upon whose value the derivative is based. If used to leverage a
portfolio, derivatives could magnify risk. However, the Fund is not permitted
to engage in leveraging transactions. Derivatives are often used by the
Portfolio Managers to hedge positions, defray the risks of interest rate or
currency changes and reduce portfolio or market risk.
Each Portfolio has its own authorizations to use prescribed derivative
instruments, which may include forward foreign currency contracts, options,
foreign currency options, swap agreements, spread transactions, futures
contracts and options thereon, foreign futures, mortgage-related securities,
collateralized mortgage obligations ("CMOs"), CMO residuals, stripped
mortgage-backed securities and other asset-backed securities. Each of the
Portfolios has the authority to use some type of derivative instrument. The
strategy employed and the magnitude of the position maintained will determine
the level of risk a Portfolio may assume by utilizing derivative instruments.
The types and investment techniques employed with respect to the derivative
instruments which are most commonly purchased and sold by the Portfolios are
described below and in the SAI.
MORTGAGE-RELATED SECURITIES
APPLICABLE PORTFOLIOS: Money Market, High Yield Bond, Managed Bond,
Government Securities, Growth LT, Multi-Strategy, Equity, and Bond and Income
Portfolios. The Government Securities, Growth LT, and Multi-Strategy
Portfolios, and the Money Market Portfolio, subject to its investment
policies, may invest only in high-quality, mortgage-related (or other asset-
backed) securities either (i) issued by United States Government sponsored
corporations (currently GNMA, FHLMC, FNMA) or (ii) rated Aa or better by
Moody's or AA or better by S&P or, if not rated, determined to be of
equivalent investment quality. The Equity Portfolio and Bond and Income
Portfolio may only invest in mortgage-related securities that are obligations
of, or guaranteed by, the U.S. Government, its agencies, or instrumentalities.
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Mortgage-related securities include mortgage pass-through securities, which
are securities under which payments of both interest and principal from an
underlying pool of mortgages are made periodically, in effect "passing
through" payments made by the individual borrowers on the mortgage loans.
Timely payment of principal and interest on mortgage backed securities known
as "GNMAs", which are guaranteed by the Government National Mortgage
Association, is guaranteed by the full faith and credit of the U.S.
Government. Some mortgage related securities are not backed by the full faith
and credit of the U.S. Government, but are guaranteed by agencies or
instrumentalities of the U.S. Government such as the Federal National Mortgage
Association ("FNMA") or the Federal Home Loan Mortgage Corporation ("FHLMC").
Other mortgage-related securities are issued by financial institutions such
as commercial banks, savings and loan associations, mortgage banks, and
securities broker-dealers (or affiliates) and are called collateralized
mortgage obligations ("CMOs"). CMOs are fully collateralized directly or
indirectly by a pool of mortgages, and in some instances by portfolios of
mortgage pass-through securities guaranteed by GNMA, FHLMC, or FNMA. Payments
are passed through to the holders, although not necessarily on a pro rata
basis, on the same schedule as they are received. CMOs are structured into
multiple classes, with each class bearing a different stated maturity. Monthly
payments of principal, including prepayments, generally are first returned to
investors holding the shortest maturity class; investors holding the longer
maturity classes receive principal only after the first class has been
retired.
The Managed Bond, Government Securities, and Multi-Strategy Portfolios may
also invest in stripped mortgage-backed securities and CMO residuals. Stripped
mortgage-backed securities are usually structured with two classes. One class
will receive all of the interest (the interest-only class, or "IO"), whereas
the other class will receive all of the principal (the principal-only class or
"PO").
RISKS OF MORTGAGE-RELATED SECURITIES. Although mortgage loans underlying a
mortgage-related security may have maturities of up to 30 years, the actual
average life of a mortgage-backed security typically will be substantially
less because (1) the mortgages will be subject to normal principal
amortization, and (2) may be prepaid prior to maturity due to the sale of the
underlying property, the refinancing of the loan, or foreclosure. Early
repayment may expose a Portfolio to a lower rate of return upon reinvestment
of the principal. Prepayment rates vary widely and cannot be accurately
predicted. They may be affected by changes in market interest rates.
Therefore, prepayments will be reinvested at rates that are available upon
receipt, which likely will be higher or lower than the original yield on the
certificates. Accordingly, the actual maturity and realized yield on pass-
through or modified pass-through mortgage-related securities will vary from
the designated maturity and yield on the original security based upon the
prepayment experience of the underlying pool of mortgages.
Stripped mortgage-backed securities are likely to experience greater price
volatility than other types of mortgage securities. The yield to maturity on
the IO class is extremely sensitive, both to changes in prevailing interest
rates and to the rate of principal payments (including prepayments) on the
underlying mortgage assets. Similarly, the yield to maturity on CMO residuals
is extremely sensitive to prepayments on the related underlying mortgage
assets. In addition, if a series of a CMO includes a class that bears interest
at an adjustable rate, the yield to maturity on the related CMO residual will
also be extremely sensitive to changes in the level of the index upon which
interest rate adjustments are made. A Portfolio could fail to fully recover
its initial investment in a CMO residual or a stripped mortgage-backed
security.
OTHER ASSET-BACKED SECURITIES. The High Yield Bond, Managed Bond, Government
Securities, Growth LT and Multi-Strategy Portfolios, and the Money Market
Portfolio, subject to its investment policies, may purchase other asset-backed
securities which are backed by particular assets such as automobile loans,
installment sales contracts, home equity loans, computer and other leases,
credit card receivables, or other assets. As in the case of mortgage-related
securities, those asset-backed securities are subject to prepayment risk,
which will alter an instrument's maturity and yield. Other risks relate to the
nature of the underlying collateral. For example, credit card debt receivables
are generally unsecured and the debtors are entitled to the protection of a
number of consumer credit laws, many of which can result in reductions in
outstanding balances. Additionally, holders of asset-backed securities may
also experience delays in payments or losses if the full amounts due on
underlying sales contracts are not realized. Because asset-backed securities
are relatively new, the market experience in these securities is limited and
the market's ability to sustain liquidity through all phases of the market
cycle has not been tested.
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HIGH YIELD BONDS
APPLICABLE PORTFOLIOS. High Yield Bond, Managed Bond (up to 10% of its
assets), Growth LT (up to 10% of its assets), and International Portfolios (up
to 5% of its assets).
Generally, high yield/high risk debt securities are those rated lower than
Baa or BBB, or, if not rated by Moody's or S&P, of equivalent quality (although
the Managed Bond Portfolio may not invest in securities rated lower than B) and
which are commonly referred to as "junk bonds". Investment in such securities
generally provides greater income and increased opportunity for capital
appreciation than investments in higher quality debt securities, but they also
typically entail greater potential price volatility and principal and income
risk.
In general, high yield bonds are not considered to be investment grade. They
are regarded as predominately speculative with respect to the issuing company's
continuing ability to meet principal and interest payments. The prices of high
yield bonds have been found to be less sensitive to interest-rate changes than
higher-rated investments, but more sensitive to adverse economic downturns or
individual corporate developments. A projection of an economic downturn or of a
period of rising interest rates, for example, could cause a decline in high
yield bond prices. In the case of high yield bonds structured as zero-coupon or
pay-in-kind securities, their market prices are affected to a greater extent by
interest rate changes, and therefore tend to be more volatile than securities
which pay interest periodically and in cash.
The secondary market in which high yield bonds are traded is generally less
liquid than the market for higher grade bonds. Less liquidity in the secondary
trading market could adversely affect the price at which a Portfolio could sell
a high yield bond, and could adversely affect the daily net asset value of the
Portfolio's shares. At times of less liquidity, it may be more difficult to
value the high yield bonds because such valuation may require more research,
and elements of judgment may play a greater role in the valuation because there
is less reliable, objective data available.
SMALL CAPITALIZATION STOCKS
APPLICABLE PORTFOLIOS. Growth, Aggressive Equity, Growth LT, Equity, and
Emerging Markets Portfolios, and to a lesser degree, Equity Income and Multi-
Strategy Portfolios.
Investments in larger companies present certain advantages in that such
companies generally have greater financial resources, more extensive research
and development, manufacturing, marketing and service capabilities, more
stability and greater depth of management and technical personnel. Investments
in smaller, less seasoned companies may present greater opportunities for
growth but also involve greater risks than customarily are associated with more
established companies. The securities of smaller companies may be subject to
more abrupt or erratic market movements than larger, more established
companies. These companies may have limited product lines, markets or financial
resources, or they may be dependent upon a limited management group. Their
securities may be traded only in the over-the-counter market or on a regional
securities exchange and may not be traded every day or in the volume typical of
trading on a major securities exchange. As a result, the disposition by a
Portfolio of securities to meet redemptions or otherwise may require the
Portfolio to sell these securities at a discount from market prices or during a
period when such disposition is not desirable or to make many small sales over
a lengthy period of time.
BORROWING
APPLICABLE PORTFOLIOS. All Portfolios.
Though not an ordinary practice, each Portfolio may borrow money to help meet
redemptions or for other purposes. Borrowing may exaggerate the effect on net
asset value of any increase or decrease in the market value of a Portfolio, and
money borrowed will be subject to interest costs. For information on limits on
the ability of any Portfolio to borrow, see the SAI.
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ILLIQUID AND RESTRICTED SECURITIES
APPLICABLE PORTFOLIOS: All Portfolios may acquire illiquid securities. The
Money Market, High Yield Bond, Managed Bond, Government Securities, Growth,
Aggressive Equity, Growth LT, Equity Income, Multi-Strategy, Equity, Bond and
Income, International, and Emerging Markets Portfolios may acquire restricted
securities.
A Portfolio may invest in an illiquid or restricted security if the
Portfolio Manager believes that it presents an attractive investment
opportunity. Generally, a security is considered illiquid if it cannot be
disposed of within seven days. Its illiquidity might prevent the sale of such
a security at a time when a Portfolio Manager might wish to sell, and these
securities could have the effect of decreasing the overall level of a
Portfolio's liquidity. Further, the lack of an established secondary market
may make it more difficult to value illiquid securities, requiring the Fund to
rely on judgments that may be somewhat subjective in determining value, which
could vary from the amount that a Portfolio could realize upon disposition.
Restricted securities, including private placements, are subject to legal or
contractual restrictions on resale. They can be eligible for purchase without
SEC registration by certain institutional investors known as "qualified
institutional buyers," and under the Fund's procedures, restricted securities
could be treated as liquid. However, some restricted securities may be
illiquid and restricted securities that are treated as liquid could be less
liquid than registered securities traded on established secondary markets. A
Portfolio may not invest more than 15%, (10% for the Money Market Portfolio),
of its total assets in illiquid securities, measured at the time of
investment.
PRECIOUS METALS-RELATED SECURITIES
APPLICABLE PORTFOLIOS. Equity Portfolio, and possibly other Portfolios that
invest in equity securities.
Precious-metals-related securities are considered equity securities of U.S.
and foreign companies involved in the exploration, mining, development,
production, or distribution of gold or other natural resources, including
minerals and metals such as copper, aluminum, silver, platinum, uranium,
strategic metals, diamonds, coal, oil, and phosphates.
The value of these securities may be affected by worldwide financial and
political factors, and prices may fluctuate sharply over short time periods.
For example, precious metals securities may be affected by changes in
inflation expectations in various countries, metal sales by central banks of
governments or international agencies, governmental restrictions on the
private ownership of certain precious metals or minerals and other factors.
FOREIGN SECURITIES
APPLICABLE PORTFOLIOS: International and Emerging Markets Portfolios--invest
primarily in equity securities of foreign issuers and may invest in debt
securities and money market obligations of foreign issuers; Aggressive Equity
Portfolio--may invest up to 15% of its assets in securities that are traded
principally in securities markets outside of the United States (excluding
Eurodollar certificates of deposit) and may invest without limit in securities
of foreign issuers that are traded in U.S. securities markets; Growth LT
Portfolio--may invest up to 25% of its assets in foreign securities
denominated in a foreign currency; Growth, Growth LT, Equity Income, Multi-
Strategy, and Equity Index Portfolios--may invest in equity securities of
foreign issuers if U.S. exchange listed or included in the S&P 500; Managed
Bond and Government Securities Portfolios--may invest up to 20% of their
assets in foreign debt securities denominated in a foreign currency; Money
Market, High Yield Bond, Managed Bond, Government Securities, Growth LT,
Multi-Strategy, and International Portfolios--may invest in fixed income
securities, including money market instruments and bank obligations of foreign
issuers, including corporate, foreign governmental, and international agency
issuers, that are denominated in U.S. dollars. All Portfolios may purchase
American Depositary Receipts (ADRs), which are dollar-denominated receipts
issued generally by domestic banks and representing the deposit with the bank
of a security of a foreign issuer. ADRs are publicly traded on exchanges or
over-the-counter in the United States. The Growth
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LT and International Portfolios may invest in European Depositary Receipts
(EDRs), which are receipts issued in Europe, typically by banking institutions
in London or Brussels, which evidence a similar ownership arrangement, and are
designed for use in European securities markets, and Global Depositary
Receipts (GDRs), which are similar to ADRs, but are issued and traded in
several international financial markets, as well as other types of receipts of
shares evidencing ownership of the underlying foreign securities.
Most foreign securities are denominated in foreign currencies and investment
in foreign securities involves exposure to currency fluctuations. Transactions
in most foreign securities are conducted in foreign currencies, so that a
Portfolio's assets must be exchanged for another currency each time a security
is bought or sold or a dividend is paid. Similarly, share price quotations and
total return information reflect conversion into U.S. dollars. Fluctuations in
foreign exchange rates can significantly increase or decrease the U.S. dollar
value of a foreign investment, which will enhance or diminish the return of a
foreign security in its own currency.
Investing in the securities of foreign issuers involves other special risks
and considerations not typically associated with investing in U.S. companies.
These include differences in accounting, auditing and financial reporting
standards, generally higher commission rates on foreign portfolio
transactions, the possibility of expropriation, nationalization or
confiscatory taxation, adverse changes in investment or exchange control
regulations, political instability that could affect U.S. investments in
foreign countries, and potential restrictions on the flow of international
capital. In many countries, there is less publicly available information about
issuers than is available in reports about companies in the United States. It
may be more difficult to obtain and enforce judgments against foreign
entities. Additionally, income (including interest and dividends) derived from
foreign securities may be subject to foreign taxes, including foreign
withholding taxes, and other foreign taxes may apply with respect to
securities transactions. Foreign securities often trade with less frequency
and volume than domestic securities and therefore may exhibit greater price
volatility and less liquidity. These risks are intensified with respect to
investments in emerging market countries. In addition, a number of the
currencies of developing countries have experienced significant declines
against the U.S. dollar in recent years, and devaluation may occur subsequent
to investments in these currencies by a Portfolio. Inflation and rapid
fluctuations in inflation rates have had and may continue to have negative
effects on the economies and securities markets of certain emerging market
countries. Emerging markets have different clearance and settlement procedures
and in certain markets there have been times when settlements have been unable
to keep pace with the volume of securities transactions making it difficult to
conduct such transactions. The inability of the Fund to make intended security
purchases due to settlement problems could cause the Fund to miss attractive
investment opportunities. Inability to dispose of a portfolio security due to
settlement problems could result either in losses to the Fund due to
subsequent declines in the value of the portfolio security or, if the Fund has
entered into a contract to sell a security, could result in possible liability
of the Fund to the purchaser. Investment in foreign securities also involves
the risk of possible losses through the holding of securities in custodian
banks and securities depositories in foreign countries. For a description of
the Fund's custody arrangements for foreign securities, see "Foreign
Securities" in the SAI.
DIVERSIFICATION. Each Portfolio that invests in foreign securities is
subject to guidelines for diversification of foreign security investments that
are imposed by California insurance authorities. Under these guidelines,
foreign investments must be allocated to at least five countries if at least
80% of a Portfolio's net assets is invested in foreign issuers. A Portfolio
may not invest more than 20% of its net assets in any one country, except that
a Portfolio may invest up to 35% of its net assets in issuers domiciled or
primarily traded in any one of the following countries: Australia, Canada,
France, Japan, the United Kingdom, or Germany. A Portfolio is not subject to
any limit upon investment in issuers domiciled or primarily traded in the
United States. The California diversification guidelines are more fully
described in the SAI.
FORWARD FOREIGN CURRENCY CONTRACTS
APPLICABLE PORTFOLIOS: Managed Bond, Government Securities, Aggressive
Equity, Growth LT, Multi-Strategy, International, and Emerging Markets
Portfolios.
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A forward currency contract is an obligation to purchase or sell a currency
against another currency at a future date at a price set at the time of the
contract. A Portfolio could engage in a forward currency transaction in
anticipation of or to protect itself against fluctuations in currency exchange
rates. Although forward contracts typically will involve the purchase or sale
of a foreign currency against the dollar, a Portfolio also may purchase or
sell one foreign currency forward against another foreign currency. In
addition, a Portfolio may hedge a foreign currency with forward contracts on
another ("proxy") currency of which changes in value generally correlate with
the currency to be hedged. There are certain markets where it is not possible
to engage in effective foreign currency hedging. This may be true, for
example, for the currencies of various Latin American countries in which the
foreign exchange markets are not sufficiently developed to permit hedging
activity to take place.
A Portfolio's dealings in forward foreign exchange will be limited to
hedging involving either specific transactions or portfolio positions.
Transaction hedging is the purchase or sale of forward foreign currency to
"lock in" the U.S. dollar price of a security purchased or sold by a
Portfolio. Position hedging is the sale of forward foreign currency with
respect to portfolio security positions denominated in a foreign currency. A
Portfolio will not speculate in forward foreign exchange.
Employing hedging strategies with forward currency contracts does not
eliminate fluctuations in the prices of portfolio securities or prevent losses
if the prices of such securities decline. Forward contracts involve some
transactional expense for a Portfolio. Although forward contracts will be used
primarily to protect a Portfolio from adverse currency movements, they also
involve the risk that anticipated currency movements will not be accurately
predicted and a Portfolio's total return could be adversely affected as a
result.
OPTIONS
APPLICABLE PORTFOLIOS: The High Yield Bond, Managed Bond, Government
Securities, Aggressive Equity, Growth LT, Equity Income, Multi-Strategy, and
Emerging Markets Portfolios may purchase put and call options on securities in
pursuing their investment objectives. The High Yield Bond, Managed Bond,
Government Securities, Aggressive Equity, Growth LT, Equity Income, Multi-
Strategy, and Emerging Markets Portfolios may sell (write) covered call and
secured put options. The Growth LT, Equity Income, Multi-Strategy, and Equity
Index Portfolios may purchase put and call options on securities indexes that
are exchange traded to protect against price movements in the stock market
generally (or in particular segments of the market) rather than in individual
stocks. The Aggressive Equity and Emerging Markets Portfolios may purchase and
sell put and call options on securities indexes that are exchange traded or
traded on over-the-counter markets. The Equity Portfolio may write covered
call options that are traded on a national securities exchange with respect to
securities comprising 25% of its aggregate net assets, taken at market value
at the time the option is written.
RISKS OF OPTIONS TRANSACTIONS. The purchase and selling (writing) of options
involves certain risks. During the option period, the covered call writer has
given up the opportunity to profit from a price increase in the underlying
securities above the exercise price. The writer of an option has no control
over the time when it may be required to fulfill its obligation as a writer of
the option. If a put or call option purchased by a Portfolio is not sold when
it has remaining value, and if the market price of the underlying security, in
the case of a put, remains equal to or greater than the exercise price or, in
the case of a call, remains less than or equal to the exercise price, the
Portfolio will lose its entire investment in the option. Also, where a put or
call option is purchased to hedge against price movements in a particular
security or market, the price of the put or call option may move more or less
than the price of the related security or index. In this regard, index options
can never be a perfect hedge against the overall risk of a stock position
except where the stock position and the index are composed of exactly the same
stocks, in the same proportions. There can be no assurance that a liquid
market will exist when a Portfolio seeks to close out an option position.
Furthermore, if trading restrictions or suspensions are imposed on the options
markets, a Portfolio may be unable to close out a position.
FOREIGN CURRENCY OPTIONS
APPLICABLE PORTFOLIOS: Managed Bond, Government Securities, Aggressive
Equity, Growth LT, International, and Emerging Markets Portfolios.
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Options on foreign currencies may be purchased or written as a hedge against
changes in the value of the U.S. dollar (or another currency) in relation to a
foreign currency in which a Portfolio's securities may be denominated.
Currency options traded on U.S. or other exchanges may be subject to position
limits which may limit the ability of the Portfolio to reduce foreign currency
risk using such options. Over-the-counter options may be negotiated, but they
generally do not have as much market liquidity as exchange-traded options.
Employing hedging strategies with options on currencies does not eliminate
fluctuations in the prices of portfolio securities or prevent losses if the
prices of such securities decline. Furthermore, such hedging transactions
reduce or preclude the opportunity for gain if the value of the hedged
currency should change relative to the U.S. dollar (or other hedged currency).
A Portfolio will not speculate in options on foreign currencies.
There is no assurance that a liquid secondary market will exist for any
particular foreign currency option, or at any particular time. In the event no
liquid secondary market exists, it might not be possible to effect closing
transactions in particular options. If a Portfolio cannot close out an option
which it holds, it would have to exercise its option in order to realize any
profit and would incur transactional costs on the sale of the underlying
assets.
SWAP AGREEMENTS
APPLICABLE PORTFOLIO: Emerging Markets Portfolio.
The Emerging Markets Portfolio may enter into equity index swap agreements
for purposes of gaining exposure to the stocks making up an index of
securities in a foreign market without actually purchasing those stocks. In a
standard swap transaction, two parties agree to exchange the returns (or
differentials in rates of return) earned or realized on particular
predetermined investments or instruments, which may be adjusted for an
interest factor. The gross returns to be exchanged between the parties (i.e.,
the return on or increase in value of a particular dollar amount invested at a
particular interest rate, or in a "basket" of securities representing a
particular index) generally are calculated with respect to a "notional
amount." The "notional amount" of the swap agreement is only a fictive basis
on which to calculate the obligations of the parties. The Portfolio will not
enter into a swap agreement with any single party if the net amount owed or to
be received under existing contracts with that party would exceed 5% of the
Portfolio's assets.
RISKS OF SWAP AGREEMENTS. Whether the Portfolio's use of swap agreements
will be successful in furthering its investment objective will depend on the
Portfolio Manager's ability to predict correctly whether certain types of
investments are likely to produce greater returns than other investments.
Because they are two-party contracts and because they may have terms of
greater than seven days, swap agreements may be considered to be illiquid
investments. It may not be possible to enter into a reverse swap or close out
a swap position prior to its original maturity and, therefore, the Portfolio
may bear the risk of such position until its maturity. Moreover, the Portfolio
bears the risk of loss of the amount expected to be received under a swap
agreement in the event of the default or bankruptcy of a swap agreement
counterparty. The Portfolio will enter into swap agreements only with
counterparties that meet certain standards for creditworthiness (generally,
such counterparties would have to be eligible counterparties under the terms
of the Portfolio's repurchase agreement guidelines). Certain tax
considerations may limit the Portfolio's ability to use swap agreements. The
swaps market is a relatively new market and is largely unregulated. It is
possible that developments in the swaps market, including potential government
regulation, could adversely affect the Portfolio's ability to terminate
existing swap agreements or to realize amounts to be received under such
agreements. See "Swap Agreements" and "Taxation" in the SAI.
SPREAD TRANSACTIONS
APPLICABLE PORTFOLIO: High Yield Bond Portfolio.
The High Yield Bond Portfolio may purchase and sell covered spread options
to securities dealers. Covered spread options are not presently exchange
listed or traded. The purchase of a spread option gives the Portfolio
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the right to put, or sell, a security that it owns at a fixed dollar spread or
fixed yield spread in relationship to another security that the Portfolio does
not own, but which is used as a benchmark. The purchase of spread options will
be used to protect the Portfolio against adverse changes in the yield spread
between high quality and lower quality securities. Such protection is only
provided during the life of the spread option.
The risk of loss on a spread transaction includes the premium and any
transaction costs paid by the Portfolio to obtain the option. There is no
assurance that closing transactions will be available.
FUTURES CONTRACTS AND FUTURES OPTIONS
APPLICABLE PORTFOLIOS: The High Yield Bond, Managed Bond, Government
Securities, Growth LT, Multi-Strategy and International Portfolios may invest
in interest rate futures contracts and options thereon. The Aggressive Equity,
Growth LT, Equity Income, Multi-Strategy, Equity Index, International, and
Emerging Markets Portfolios may invest in stock index futures contracts and
options thereon. The High Yield Bond, Managed Bond, Government Securities,
Growth LT, and Multi-Strategy Portfolios may purchase and write call and put
options on interest rate futures contracts, and the Growth LT, Equity Income,
Multi-Strategy, and Equity Index Portfolios may purchase call and put options
on stock index futures ("futures options"). The Managed Bond, Government
Securities, Aggressive Equity, Growth LT, International, and Emerging Markets
Portfolios may invest in foreign currency futures contracts and may purchase
and write options thereon. The Emerging Markets Portfolios may invest in
futures contracts on securities, and in options thereon.
USE OF FUTURES. These investments may be made for bona fide hedging purposes
and as an adjunct to a Portfolio's securities activities. A Portfolio is
required to collateralize or cover a futures transaction or futures option so
that the position will be unleveraged.
RISKS OF FUTURES AND FUTURES OPTIONS. There are several risks associated
with the use of futures and futures options. While a Portfolio's hedging
transactions may protect the Portfolio against adverse movements in the
general level of interest rates or stock or currency prices, such transactions
could also preclude the opportunity to benefit from favorable movements in the
level of interest rates or stock or currency prices. A hedging transaction may
not correlate perfectly with price movements in the assets being hedged. An
incorrect correlation could result in a loss on both the hedged assets in a
Portfolio and/or the hedging vehicle, so that the Portfolio's return might
have been better had hedging not been attempted.
There can be no assurance that a liquid market will exist at a time when a
Portfolio seeks to close out a futures contract or a futures option position.
Most futures exchanges and boards of trade limit the amount of fluctuation
permitted in futures contract prices during a single day; once the daily limit
has been reached on a particular contract, no trades may be made that day at a
price beyond that limit. In addition, certain of these instruments are
relatively new and lack a deep secondary market. Lack of a liquid market for
any reason may prevent a Portfolio from liquidating an unfavorable position
and the Portfolio would remain obligated to meet margin requirements until the
position is closed.
A Portfolio other than the Managed Bond, Government Securities, Aggressive
Equity, Growth LT, International, and Emerging Markets Portfolios will only
enter into futures contracts or futures options which are standardized and
traded on a U.S. exchange or board of trade, or, in the case of futures
options, for which an established over-the-counter market exists. Each
Portfolio is subject to limitations on the amount that may be invested in
futures and futures options transactions for purposes other than bona fide
hedging, under which initial margin deposits for futures contracts and
premiums paid for futures options may not exceed 5% of a Portfolio's total
assets (net of amounts that are "in the money").
FOREIGN FUTURES. The Managed Bond, Government Securities, Aggressive Equity,
Growth LT, International, and Emerging Markets Portfolios may trade futures
contracts and options on futures contracts not only on U.S. domestic markets,
but also on exchanges located outside of the United States. Foreign markets
may offer advantages such as trading in indices that are not currently traded
in the United States. Foreign markets,
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however, may have greater risk potential than domestic markets. Unlike trading
on domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the Commodity Futures Trading Commission ("CFTC"). Foreign
exchanges generally are principal markets so that no common clearing facility
exists, and a Portfolio might be able to look only to the broker for
performance of the contract. Amounts received for foreign futures or foreign
options transactions may not be provided the same protection as funds received
in respect of transactions on United States futures exchanges. Trading in
foreign futures or foreign options contracts may not be afforded certain of
the protective measures provided by U.S. law and regulation, including the
right to use reparations proceedings before the CFTC and arbitration
proceedings provided by the National Futures Association or any domestic
futures exchange. In addition, any profits that a Portfolio might realize in
trading could be eliminated by adverse changes in the exchange rate of the
currency in which the transaction is denominated. Transactions on foreign
exchanges may include both commodities that are traded on domestic exchanges
or boards of trade and those that are not.
The Fund reserves the right to engage in other types of futures transactions
in the future.
ORGANIZATION AND MANAGEMENT OF THE FUND
HOW IS THE FUND ORGANIZED? The Fund was organized as a Massachusetts
business trust on May 4, 1987, and currently consists of fourteen separate
Portfolios. The assets of each Portfolio are segregated, and your interest is
limited to the Portfolio to which proceeds from your Variable Contract's
Accumulated Value is allocated.
WHO OVERSEES THE BUSINESS OF THE FUND? The business and affairs of the Fund
are managed under the direction of the Board of Trustees under the Fund's
Agreement and Declaration of Trust. The Trustees are Thomas C. Sutton, Richard
L. Nelson, Lyman W. Porter, and Alan Richards. Mr. Sutton is also the Chief
Executive Officer of Pacific Mutual. Messrs. Nelson, Porter, and Richards are
independent Trustees. See the SAI under the heading "Management of the Fund."
WHO IS THE FUND'S INVESTMENT ADVISER? Pacific Mutual Life Insurance Company.
Under an Investment Advisory Agreement with the Fund, Pacific Mutual, subject
to the supervision of the Fund's Board of Trustees, administers the affairs of
the Fund and supervises the investment program for the Fund's Portfolios.
Pacific Mutual also provides support services to the Fund pursuant to an
Agreement for Support Services with the Fund.
MORE ABOUT PACIFIC MUTUAL. Pacific Mutual is a mutual life insurance company
that was organized under the laws of the State of California and was
authorized to conduct business as a life insurance company on January 2, 1868.
Its address is 700 Newport Center Drive, Post Office Box 9000, Newport Beach,
California 92660. Pacific Mutual offers a complete line of life insurance
policies and annuity contracts, as well as financial and retirement contracts.
As of the end of 1994, Pacific Mutual had over $38.3 billion of individual
life insurance in force and total assets of approximately $14.7 billion.
Together with its subsidiaries and affiliated enterprises, Pacific Mutual had
total assets and funds under management of over $91.1 billion. Pacific Mutual
also has extensive investment advisory experience in managing its general
account and pension and other accounts.
DOES PACIFIC MUTUAL MANAGE ANY OF THE PORTFOLIOS DIRECTLY? Pacific Mutual
directly manages both the High Yield Bond and the Money Market Portfolios.
Mr. Larry J. Card, Executive Vice President, Securities, of Pacific Mutual,
has primary responsibility for investment management of the Money Market
Portfolio, as well as various other accounts of Pacific Mutual. Mr. Card
joined Pacific Mutual in 1972 and holds a Bachelor of Science Degree from
Northern State College and an MBA Degree from Harvard University. He is a
Chartered Financial Analyst. Mr. Raymond J. Lee has portfolio management
responsibilities for the High Yield Bond Portfolio, and also is in charge of
all publicly traded bonds and has responsibility for portfolio management of
pension assets for Pacific Mutual. Mr. Lee is Senior Vice President, Portfolio
Manager, of Pacific Mutual, and joined Pacific Mutual in 1976 after completing
his MBA in Finance from the Wharton School of the University of Pennsylvania.
Mr. Lee received his bachelor's
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degree in Economics from UCLA. He is a member of the Los Angeles Society of
Financial Analysts. Mr. Simon T. Lee, Assistant Vice President, Securities, of
Pacific Mutual, shares portfolio management responsibilities for the High
Yield Bond Portfolio and has responsibility for portfolio management of
Pacific Mutual's high yield and convertible bond assets. Mr. Lee joined
Pacific Mutual in 1985. He holds a bachelor's degree in Business
Administration and an MBA from Loyola Marymount University. He is a Chartered
Financial Analyst.
Pacific Mutual and the Fund employ other investment advisory firms as
Portfolio Managers for twelve of the Fund's fourteen Portfolios.
WHO IS THE PORTFOLIO MANAGER FOR THE MANAGED BOND AND GOVERNMENT SECURITIES
PORTFOLIOS? Pacific Investment Management Company ("PIMCO"). PIMCO is an
investment management firm organized as a general partnership.
PIMCO is the successor investment adviser to the former Pacific Investment
Management Company, which was an indirect wholly-owned subsidiary of Pacific
Mutual that commenced operations in 1971. PIMCO has two partners, PIMCO
Advisors L.P. as the supervisory partner, and PIMCO Management, Inc. as the
managing partner. PIMCO is a subsidiary partnership of PIMCO Advisors L.P. a
Delaware limited partnership organized in 1987. PIMCO Advisors L.P. succeeded
to the investment advisory and other business of PIMCO and other former
investment advisory subsidiaries of Pacific Mutual as a result of a
consolidation of PIMCO and other businesses with Thomson Advisory Group L.P.,
the former name for PIMCO Advisors L.P., which closed in November, 1994. A
portion of the units of the limited partner interests in PIMCO Advisors L.P.
is traded publicly on the New York Stock Exchange. The general partner of
PIMCO Advisors L.P. is PIMCO Partners, G.P. Pacific Mutual and its
subsidiaries and affiliates hold a substantial interest in PIMCO Advisors L.P.
through direct or indirect ownership of its outstanding units, and indirectly
hold a majority interest in PIMCO Partners G.P., with a remainder held
indirectly by a group comprised of the Managing Directors of PIMCO. PIMCO
Advisors L.P. is governed by an Operating Board and an Equity Board, which
exercise substantially all of the governance powers of the general partner and
serves as the functional equivalent of a board of directors.
PIMCO had approximately $56.9 billion assets under management as of year-end
1994. PIMCO also provides investment advisory services to PIMCO Funds and
several other mutual fund portfolios and to private accounts for pension and
profit sharing plans. PIMCO's address is 840 Newport Center Drive, Suite 360,
Newport Beach, California 92660.
WHO AT PIMCO MANAGES THE MANAGED BOND AND GOVERNMENT SECURITIES
PORTFOLIOS? Mr. John L. Hague, Managing Director and senior member of PIMCO,
has primary responsibility for investment management of the Managed Bond and
Government Securities Portfolios as well as various other accounts of PIMCO.
Mr. Hague joined Pacific Investment Management Company in 1987. During his 14
years of investment experience, he was associated with Salomon Brothers, Inc.
specializing in international fixed income products and mortgage securities
and Morgan Guaranty in credit research. Mr. Hague holds a bachelor's degree in
Economic Analysis from Bowdoin College and an MBA in Finance from Stanford
University.
WHO IS THE PORTFOLIO MANAGER FOR THE GROWTH PORTFOLIO? Capital Guardian
Trust Company ("Capital Guardian"), a wholly-owned subsidiary of The Capital
Group, Inc. ("CG"). Capital Guardian's address is 333 South Hope Street, Los
Angeles, California 90071. Capital Research and Management Company ("CRMC"),
another wholly-owned subsidiary of CG, provides investment advisory services
to mutual funds known collectively as the American Funds Group.
WHO AT CAPITAL GUARDIAN MANAGES THE GROWTH PORTFOLIO? The following persons
are primarily responsible for the portfolio management of the Growth
Portfolio. Richard C. Barker, Chairman of the Board of Capital Guardian, has
had 33 years of experience as an investment professional (23 years with
Capital Guardian or its affiliates). Michael R. Ericksen, Vice President of
Capital Guardian, has had 13 years experience as an investment professional (7
years with Capital Guardian or its affiliates). Robert G. Kirby, Senior
Partner of The Capital Group Partners L.P., an affiliate of CRMC, has had 43
years of experience as an investment
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professional (29 years with Capital Guardian or its affiliates). Douglas M.
Urban, Senior Vice President, Capital Guardian, has had 21 years of experience
as an investment professional (11 years with Capital Guardian or its
affiliates). K. Bryan Jacoboski, Vice President of Capital Guardian, spent 11
years with Paine-Webber, where he was a Managing Director in equity research
prior to joining Capital Guardian in 1994. Messrs. Barker and Kirby have been
responsible for the portfolio management of the Growth Portfolio since the
Portfolio began operations. Mr. Urban has shared responsibility for the
management of the Growth Portfolio since 1991; prior to that time, he spent
seven years as a research professional. Mr. Erickson is the lead portfolio
manager, with the assistance of Messrs. Barker, Urban, Kirby, and Jacoboski,
and is responsible for management of the Portfolio.
WHO IS THE PORTFOLIO MANAGER FOR THE AGGRESSIVE EQUITY PORTFOLIO? Columbus
Circle Investors ("Columbus Circle Investors"), a subsidiary partnership of
PIMCO Advisors, L.P., an affiliate of Pacific Mutual. Columbus Circle
Investors is located at Metro Center, One Station Place, 8th Floor, Stamford,
Connecticut 06902. Columbus Circle Investors and its predecessors have been
advising institutional investors since 1975. As of December 31, 1994, Columbus
Circle Investors managed approximately $ billion of assets.
WHO AT COLUMBUS CIRCLE INVESTORS MANAGES THE AGGRESSIVE EQUITY
PORTFOLIO? The investment decisions made by Columbus Circle Investors with
respect to the Aggressive Equity Portfolio are made by a committee rather than
by a single person acting as Portfolio Manager. No person is primarily
responsible for making recommendations to that committee.
WHO IS THE PORTFOLIO MANAGER FOR THE GROWTH LT PORTFOLIO? Janus Capital
Corporation ("Janus"). Kansas City Southern Industries, Inc. owns
approximately 83% of the outstanding voting stock of Janus. Janus' address is
100 Fillmore Street, Suite 300, Denver, Colorado 80206-4923. Janus currently
serves as investment adviser or subadviser to the Janus Funds, as well as
other mutual funds and individual, corporate, charitable, and retirement
accounts.
WHO AT JANUS MANAGES THE GROWTH LT PORTFOLIO? Warren B. Lammert, III, Vice
President of Janus, is primarily responsible for the day-to-day management and
implementation of Janus' investment strategy for the Growth LT Portfolio. Mr.
Lammert is portfolio manager and Executive Vice President of Janus Mercury
Fund and Janus Venture Fund, Executive Vice President of Janus Investment
Fund, and has been the portfolio manager of various growth oriented accounts
since 1991. He joined Janus as a securities analyst in 1987, taking an
educational sabbatical from 1988 to 1989. He received his undergraduate degree
in economics from Yale University and received his M.S. in economic history
(with distinction) from the London School of Economics, London, England. Mr.
Lammert is a Chartered Financial Analyst.
WHO IS THE PORTFOLIO MANAGER FOR THE EQUITY INCOME AND MULTI-STRATEGY
PORTFOLIOS? J.P. Morgan Investment Management Inc. ("J.P. Morgan Investment"),
a wholly-owned subsidiary of J.P. Morgan & Co. J.P. Morgan Investment's
address is 522 Fifth Avenue, New York, New York 10036. J.P. Morgan Investment
is an investment manager for corporate, public, and union employee benefit
funds, foundations, endowments, insurance companies, government agencies and
the accounts of other institutional investors. Capital Guardian served as
portfolio manager to the Equity Income and Multi-Strategy Portfolios from
their commencement of operations in 1988 through December 31, 1993.
WHO AT J.P. MORGAN INVESTMENT MANAGES THE EQUITY INCOME AND MULTI-STRATEGY
PORTFOLIOS? Lisa J. Oram and William G. Tennille are primarily responsible for
the day-to-day management and implementation of J.P. Morgan Investment's
process for the Multi-Strategy Portfolio, and Ms. Oram is primarily
responsible for the Equity Income Portfolio. Lisa J. Oram, Vice President, is
a portfolio manager with responsibility for several pension fund clients. Ms.
Oram previously followed the aerospace and multi-industry sectors before
becoming head of Small Capitalization Research. She joined Morgan in 1982 upon
graduation from the University of Wisconsin where she earned undergraduate and
graduate degrees. Ms. Oram is a Chartered Financial Analyst. William G.
Tennille, Vice President, is a portfolio manager for separately managed and
commingled funds with an emphasis in mortgage securities and derivatives.
Prior to joining Morgan in 1992, he managed the investment portfolios of
Manufacturers Hanover Trust, Deposit Guaranty Bank, and First Florida Banks.
He is a graduate of the University of North Carolina. Mr. Tennille manages 16
accounts at the present time.
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WHO IS THE PORTFOLIO MANAGER FOR THE EQUITY PORTFOLIO AND BOND AND INCOME
PORTFOLIO? Greenwich Street Advisors Division of Smith Barney Mutual Funds
Management Inc. ("Greenwich Street Advisors"), a wholly-owned subsidiary of
Smith Barney Holdings Inc., which in turn is a wholly-owned subsidiary of The
Travelers Inc. The Greenwich Street Advisors Division is located at 388
Greenwich Street, 23rd Floor, New York, New York 10013.
The Greenwich Street Advisors Division and its predecessors have been in the
investment counseling business since 1934. Smith Barney Mutual Funds
Management Inc. ("SBMFM") and its predecessors have been providing investment-
advisory services to mutual funds since 1968. As of December 31, 1994, SBMFM
managed approximately $54 billion of mutual fund assets.
WHO AT GREENWICH STREET ADVISORS MANAGES THE EQUITY PORTFOLIO AND BOND AND
INCOME PORTFOLIO? George V. Novello is primarily responsible for the day-to-
day management of the Equity Portfolio. Mr. Novello became Managing Director
of Smith Barney Inc. in August 1993. He previously held the same position with
Shearson or its predecessor firms since 1990. Mr. Novello was a Managing
Director and Director of Research for McKinley Allsopp and Gruntal from 1988
through 1990. Mr. Novello received a B.A. from St. John's University. George
Mueller is primarily responsible for the day-to-day management of the Bond and
Income Portfolio. Mr. Mueller became Director of Smith Barney Inc. in August
1993. He previously held the same position at Shearson or its predecessor
firms since 1985. Mr. Mueller holds a B.S. from Duquesne University and a
M.B.A. from Pace University.
WHO IS THE PORTFOLIO MANAGER OF THE EQUITY INDEX PORTFOLIO? Bankers Trust
Company ("BTC"), a wholly-owned subsidiary of Bankers Trust New York
Corporation. BTC's address is 130 Liberty Street, New York, New York 10006.
BTC is a wholly-owned subsidiary of Bankers Trust New York Corporation, the
seventh largest bank holding company in the United States. The Global
Investment Management Group of BTC, the department directly responsible for
the management of the Equity Index Portfolio, as of December 31, 1994, managed
assets approximating $159.1 billion. BTC is the investment adviser to 23 other
mutual fund portfolios.
WHO IS THE PORTFOLIO MANAGER OF THE INTERNATIONAL PORTFOLIO? Templeton
Investment Counsel, Inc. ("Templeton"), an indirect wholly-owned subsidiary of
Templeton Worldwide, Inc., which is in turn a wholly-owned subsidiary of
Franklin Resources, Inc. Templeton's address is Broward Financial Centre,
Suite 2100, Fort Lauderdale, Florida 33394-3091. Templeton and its affiliates
serve as advisers for over 150 registered investment companies. The Templeton
organization has been investing globally over the past 52 years and provides
investment management and advisory services to a worldwide client base,
including approximately 850,000 mutual fund shareholders, foundations and
endowments, employee benefit plans and individuals. Franklin Resources, Inc.
is engaged in various aspects of the financial services industry through its
subsidiaries. Nomura Capital Management, Inc. served as portfolio manager to
the International Portfolio from its commencement of operations in 1988
through December 31, 1993.
WHO AT TEMPLETON MANAGES THE INTERNATIONAL PORTFOLIO? Lauretta A. Reeves,
Vice President, Portfolio Management/Research, is primarily responsible for
the day-to-day investment management and implementation of Templeton's
investment strategy for the International Portfolio. She also is a research
analyst covering European and Asian banks, and for other accounts, has
research responsibility for the chemical, medical supply and devices sectors,
as well as the coverage of the Belgium market. Prior to joining Templeton in
1987, Ms. Reeves was the manager of equity trading for the First Equity
Corporation of Florida, a regional investment banking firm. Ms. Reeves holds a
bachelor's degree in Business Administration from Florida International
University and an MBA in Business Administration from Nova University. Ms.
Reeves is a Chartered Financial Analyst. James E. Chaney, Senior Vice
President, Portfolio Management/Research, assists in the day-to-day investment
management and implementation of Templeton's investment strategy for the
International Portfolio. He currently manages several investment company,
corporate, and public fund separate accounts. He is also a research analyst
whose responsibilities include merchandising, regional banks and environmental
companies. Prior to joining Templeton in 1991, Mr. Chaney was a Vice President
of International Equities with GE
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Investments, from 1986 to 1991. Mr. Chaney holds a bachelor's degree in
Engineering from the University of Massachusetts-Amherst, an MS in Engineering
from Northeastern University and an MBA from Columbia University. Howard J.
Leonard, Senior Vice President, Portfolio Management/Research, also assists in
the day-to-day investment management and implementation of Templeton's
investment strategy for the International Portfolio. He also is a research
analyst whose research responsibilities include forest products and money
management industries. Prior to joining Templeton in 1989, Mr. Leonard was
Director of Investment Research at First Pennsylvania Bank, from 1986 to 1989.
Mr. Leonard holds a bachelor's degree in Business Administration from Temple
University. Mr. Leonard is a Chartered Financial Analyst.
WHO IS THE PORTFOLIO MANAGER OF THE EMERGING MARKETS PORTFOLIO? Blairlogie
Capital Management ("Blairlogie"), a subsidiary partnership of PIMCO Advisors,
L.P., an affiliate of Pacific Mutual. Blairlogie's address is 4th Floor, 125
Princes Street, Edinburgh EH2 4AD, Scotland. Blairlogie Capital Management,
Ltd., the predecessor investment advisor to Blairlogie, commenced operations
in 1992. As of December 31, 1994, accounts managed by Blairlogie had combined
assets of approximately $0.5 billion.
WHO AT BLAIRLOGIE MANAGES THE EMERGING MARKETS PORTFOLIO? James Smith, a
Managing Director and Chief Investment Officer of Blairlogie, is primarily
responsible for the day-to-day management of the Emerging Markets Portfolio.
Mr. Smith is responsible for managing an investment team of seven
professionals, who, in turn, specialize in selection of stocks within Europe,
Asia, the Americas, and in currency and derivatives. He previously served as a
Senior Portfolio Manager at Murray Johnstone in Glasgow, Scotland, responsible
for international investment management for North American clients, and at
Schroder Investment Management in London. Mr. Smith received his bachelor's
degree in Economics from London University and his MBA from Edinburgh
University. He is an Associate of the Institute of Investment Management and
Research.
HOW MUCH DOES THE FUND PAY FOR THE SERVICES OF PACIFIC MUTUAL AND THE
PORTFOLIO MANAGERS? The Fund pays the Adviser for its services under the
Investment Advisory Agreement, a fee based on an annual percentage of the
average daily net assets of each Portfolio. For the Money Market Portfolio,
the Fund pays to the Adviser a fee at an annual rate of .40% of the first $250
million of the average daily net assets of the Portfolio, .35% of the next
$250 million of the average daily net assets of the Portfolio, and .30% of the
average daily net assets of the Portfolio in excess of $500 million. For the
Equity Index Portfolio, the Fund pays .25% of the first $100 million of the
average daily net assets of the Portfolio, .20% of the next $100 million of
the average daily net assets of the Portfolio, and .15% of the average daily
net assets of the Portfolio in excess of $200 million. For the Managed Bond,
High Yield Bond, Government Securities, and Bond and Income Portfolios, the
Fund pays .60% of the average daily net assets of each of the Portfolios. For
the Growth, Equity Income, Equity, and Multi-Strategy Portfolios, the Fund
pays .65% of the average daily net assets of each of the Portfolio. For the
Growth LT Portfolio, the Fund pays .75% of the average daily net assets of the
Portfolio. For the Aggressive Equity Portfolio, the Fund pays to the Advisor a
fee at an annual rate of .80% of the average daily net assets of the
Portfolio. For the International Portfolio, the Fund pays .85% of the average
daily net assets of the Portfolio. For the Emerging Markets Portfolio, the
Fund pays to the Adviser a fee at an annual rate of 1.10% of the average daily
net assets of the Portfolio. These fees are computed and accrued daily and
paid monthly.
HOW HAS THE FUND SECURED THE SERVICES OF THE INVESTMENT ADVISER AND THE
PORTFOLIO MANAGERS? The Fund has entered into an Investment Advisory Agreement
with Pacific Mutual under which Pacific Mutual serves as Investment Adviser to
the Fund. The Fund and Pacific Mutual have entered into Portfolio Management
Agreements with the Portfolio Managers. After initial two year terms, the
Investment Advisory Agreement and the Portfolio Management Agreements require
renewal by the Fund's Board of Trustees annually. Any of these agreements can
be terminated by the Fund's Board of Trustees. The Portfolio Management
Agreements can be terminated by Pacific Mutual or by any of the Portfolio
Managers. In the event of termination of a Portfolio Management Agreement, the
current Portfolio Manager could no longer service the applicable Portfolio.
Pacific Mutual could manage the applicable Portfolio directly or could
recommend a replacement to the Fund's Board of Trustees.
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Under the Portfolio Management Agreements, the Portfolio Managers are
compensated directly by Pacific Mutual, and not directly from the Fund.
Pacific Mutual derives the amounts that it pays the Portfolio Managers from
its own fees under the Investment Advisory Agreement. For information on the
fees payable to the Portfolio Managers, see the Statement of Additional
Information.
WHAT OTHER EXPENSES DOES THE FUND BEAR? The Fund bears all costs of its
operations. These costs may include expenses for custody, portfolio
accounting, printing, legal and audit fees, fees and expenses of the
independent trustees, organizational expenses and other expenses of its
operations, including the cost of support services, and may, if applicable,
include extraordinary expenses such as expenses for special consultants or
legal expenses. Fund expenses directly attributable to a Portfolio are charged
to that Portfolio; other expenses are allocated proportionately among all the
Portfolios in relation to the net assets of each Portfolio. For the period
ended June 30, 1995, the total annualized expenses of each Portfolio that had
commenced operations on or before such date were the following percentages of
average daily net assets: Money Market Portfolio--.55%, High Yield Bond
Portfolio--.83%, Managed Bond Portfolio--.76%, Government Securities
Portfolio--.84%, Growth Portfolio--.80%, Growth LT Portfolio--.99%, Equity
Income Portfolio--.87%, Multi-Strategy Portfolio--.87%, Equity Portfolio--
.80%, Bond and Income Portfolio--.80%, Equity Index Portfolio--.43%, and
International Portfolio--1.11%. The expenses of each Portfolio, expressed as a
percentage of the Portfolio's average daily net assets, is shown under "Ratio
of Expenses to Average Net Assets" in the Financial Highlights section at the
beginning of this Prospectus for each year of each Portfolio's operation. More
information on the expenses of the Portfolios is included in the Portfolios'
Statements of Operations, which can be found in the financial statements
included in the Fund's annual and semi-annual reports sent to shareholders.
WHAT IS PACIFIC MUTUAL DOING TO LIMIT FUND EXPENSES? Pacific Mutual has
agreed, until at least December 31, 1996, to reimburse each Portfolio for its
operating expenses to the extent that such expenses, exclusive of advisory
fees, additional custodial charges associated with holding foreign securities,
foreign taxes on dividends, interest, or gains, and extraordinary expenses,
exceed 0.25% of the Portfolio's average daily net assets. Pacific Mutual began
this expense reimbursement policy in April 1989. There can be no assurance
that this policy will be continued beyond December 31, 1996.
WHO DISTRIBUTES THE FUND'S SHARES? Shares of the Fund are distributed
through Pacific Equities Network (the "Distributor" or "PEN"), an indirect
wholly-owned subsidiary of Pacific Mutual. PEN's address is 700 Newport Center
Drive, Newport Beach, California 92660. PEN is a broker-dealer registered with
the SEC and a member of the National Association of Securities Dealers. PEN
acts as Distributor without remuneration from the Fund.
WHO IS THE CUSTODIAN OF THE FUND? Investor's Fiduciary Trust Company
("IFTC") provides the Fund with portfolio accounting and custodial services.
IFTC's address is 127 West 10th Street, Kansas City, Missouri 64105.
MORE ON THE FUND'S SHARES
HOW DO YOU PURCHASE SHARES OF THE FUND? Shares of the Fund are not sold
directly to the general public. Shares of the Fund are currently offered only
for purchase by the Separate Accounts to serve as an investment medium for the
Variable Contracts issued or administered by Pacific Mutual and Pacific
Corinthian. For information on purchase of a Variable Contract, consult a
prospectus for the Separate Account. Shares of the Growth Portfolio are
offered only to Separate Accounts of Pacific Mutual that fund (1) variable
life insurance policies, and (2) variable annuity contracts that were issued
by Pacific Mutual prior to January 1, 1994. The Portfolio is not available for
variable annuity contracts issued on or after January 1, 1994. The shares of
the Equity Portfolio and Bond and Income Portfolio are offered to only
Separate Accounts of Pacific Mutual and Pacific Corinthian that fund variable
annuity contracts; thus, these Portfolios are not available for variable life
insurance policies. The shares of the Aggressive Equity and Emerging Markets
Portfolios are offered only to Separate Accounts of Pacific Mutual that fund
variable life insurance policies and variable annuity contracts; thus, these
Portfolios are not available for variable contracts administered by Pacific
Corinthian.
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HOW ARE SHARES REDEEMED? Shares of any Portfolio may be redeemed on any
business day upon receipt of a request for redemption from the insurance
company whose separate account owns the shares. Redemptions are effected at
the per share net asset value next determined after receipt of the redemption
request. Redemption proceeds ordinarily will be paid within seven days
following receipt of instructions in proper form or, if sooner, other period
required by law. The right of redemption may be suspended by the Fund or the
payment date postponed beyond seven days when the New York Stock Exchange is
closed (other than customary weekend and holiday closings) or for any period
during which trading thereon is restricted because an emergency exists, as
determined by the SEC, making disposal of portfolio securities or valuation of
net assets not reasonably practicable, and whenever the SEC has by order
permitted such suspension or postponement for the protection of shareholders.
If the Board of Trustees should determine that it would be detrimental to the
best interests of the remaining shareholders of a Portfolio to make payment
wholly or partly in cash, the Portfolio may pay the redemption price in whole
or part by a distribution in kind of securities from the Portfolio, in lieu of
cash, in conformity with applicable rules of the SEC. If shares are redeemed
in kind, the redeeming shareholder might incur brokerage costs in converting
the assets into cash. Under the Investment Company Act of 1940, the Fund is
obligated to redeem shares solely in cash up to the lesser of $250,000 or 1
percent of its net assets during any 90-day period for any one shareholder.
CAN YOU MAKE EXCHANGES AMONG THE PORTFOLIOS? Variable Contract Owners do not
deal directly with the Fund to purchase, redeem, or exchange shares of a
Portfolio, and Variable Contract Owners should refer to the Prospectus for the
applicable Separate Account for information on the allocation of premiums and
on transfers of accumulated value among options available under the contract.
HOW IS THE VALUE OF THE PORTFOLIOS' SHARES DETERMINED? Shares of each
Portfolio are sold at their respective net asset values (without a sales
charge) computed after receipt of a purchase order. Net asset value of a share
is determined by dividing the value of a Portfolio's net assets by the number
of its shares outstanding. That determination is made once each business day,
Monday through Friday, exclusive of federal holidays at or about 4:00 P.M.,
New York City time, on each day that the New York Stock Exchange is open for
trading. To calculate a Portfolio's net asset value, a Portfolio's assets are
valued and totalled, liabilities are subtracted, and the balance, called net
assets, is divided by the number of shares outstanding. In general, the value
of assets is based on actual or estimated market value, with special
provisions for assets not having readily available market quotations and
short-term debt securities. The value of foreign portfolio securities traded
on foreign exchanges is based upon the price of the close of the exchange
immediately preceding the time of the Fund's valuation, or, if earlier, at the
time of the Fund's valuation. Therefore, the calculation of the net asset
value of the International and Emerging Markets Portfolios or other Portfolios
that invest in foreign securities may not take place contemporaneously with
the determination of the prices of certain foreign securities used in the
calculation. Further, under the Fund's procedures, the prices of foreign
securities are determined using information derived from pricing services and
other sources. Prices derived under these procedures will be used in
determining daily net asset value. Information that becomes known to the Fund
or its agents after the time that net asset value is calculated on any
business day may be assessed in determining net asset value per share after
the time of receipt of the information, but will not be used to retroactively
adjust the price of the security so determined earlier or on a prior day.
Events affecting the values of portfolio securities that occur between the
time their prices are determined and the time the Portfolio's net asset value
is determined may not be reflected in the calculation of net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities may be valued at fair value as determined by the
management and approved in good faith by the Board of Trustees. The Money
Market Portfolio's securities are valued using the amortized cost method of
valuation, which involves valuing a security at cost on the date of
acquisition and thereafter assuming a constant accretion of a discount or
amortization of a premium to maturity. The net asset values per share of each
Portfolio will fluctuate in response to changes in market conditions and other
factors. See the Statement of Additional Information.
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INFORMATION ABOUT PORTFOLIO TRANSACTIONS. The Adviser or the Portfolio
Manager for a Portfolio places orders for the purchase and sale of portfolio
investments for a Portfolio with brokers or dealers selected by it in its
discretion. In effecting purchases and sales of portfolio securities in
transactions on United States stock exchanges for the account of the Fund, the
Adviser or Portfolio Manager may pay higher commission rates than the lowest
available when the Adviser or Portfolio Manager believes it is reasonable to
do so in light of the value of the brokerage and research services provided by
the broker effecting the transaction. Consistent with a policy of obtaining
best net results, a Portfolio Manager's affiliate, including BT Brokerage
Corporation and BT Futures Corporation, J.P. Morgan Securities, and Smith
Barney Inc. may serve as the Fund's broker in effecting portfolio
transactions, including transactions on a national securities exchange, and
may retain commissions, in accordance with certain regulations of the SEC.
INFORMATION ABOUT PORTFOLIO TURNOVER. The Portfolio turnover rate represents
the rate at which securities in a Portfolio other than short-term debt
obligations are replaced. This rate for the Portfolios is shown in the tables
in Condensed Financial Information. The High Yield Bond, Managed Bond, and
Government Securities, Growth LT, Equity Income, Multi-Strategy, Equity, and
Bond and Income Portfolios had portfolio turnover rates in excess of 100% in
certain years, which could be considered relatively high. Such a Portfolio
turnover rate may result in higher brokerage commissions or other
transactional expenses for these Portfolios than for other Portfolios, which
expenses must be borne, directly or indirectly, by a Portfolio and ultimately
by the Portfolio's shareholders. In addition, high portfolio turnover may
affect the ability of a Portfolio to qualify as a regulated investment
company. See "Taxation" and "Portfolio Turnover" in the SAI.
DO ANY ISSUES ARISE FROM THE FUND OFFERING ITS SHARES FOR VARIABLE ANNUITIES
AND VARIABLE LIFE INSURANCE POLICIES? The Fund serves as an investment medium
for both variable annuity contracts and variable life insurance policies. The
Fund currently does not foresee any disadvantages to Variable Contract Owners
due to the fact that the Fund serves as an investment medium for both variable
life insurance policies and annuity contracts; however, due to differences in
tax treatment or other considerations, it is theoretically possible that the
interests of owners of annuity contracts and insurance policies for which the
Fund serves as investment medium might at some time be in conflict. However,
the Fund's Board of Trustees, Pacific Mutual and Pacific Corinthian are
required to monitor events to identify any material conflicts between variable
annuity contract owners and variable life policy owners, and will determine
what action, if any, should be taken in the event of such a conflict. If such
a conflict were to occur, Pacific Mutual, Pacific Corinthian, or another
insurance company participating in the Fund might be required to redeem the
investment of one or more of its separate accounts from the Fund. This might
force the Fund to sell securities at disadvantageous prices.
OTHER INFORMATION ABOUT THE FUND
HOW IS THE FUND CAPITALIZED? The capitalization of the Fund consists solely
of an unlimited number of shares of beneficial interest with a par value of
$0.001 each. When issued, shares of the Fund are fully paid, freely
transferable, and non-assessable by the Fund.
Under Massachusetts law, shareholders could under certain circumstances, be
held personally liable for the obligations of the Fund. However, the
Declaration of Trust disclaims liability of the shareholders, Trustees, or
officers of the Fund for acts or obligations of the Fund, which are binding
only on the assets and property of the Fund and requires that notice of the
disclaimer be given in each contract or obligation entered into or executed by
the Fund or the Trustees. The Declaration of Trust provides for
indemnification out of Fund property for all loss and expense of any
shareholder held personally liable for the obligations of the Fund. The risk
of a shareholder incurring financial loss on account of shareholder liability
is limited to circumstances in which the Fund itself would be unable to meet
its obligations and thus should be considered remote.
WHAT IS THE FEDERAL INCOME TAX STATUS OF THE FUND? Each Portfolio intends to
qualify each year as a regulated investment company under Subchapter M of the
Internal Revenue Code ("Code"). A Portfolio so qualifying generally will not
be subject to federal income taxes to the extent that it distributes on a
timely basis
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its investment company taxable income and its net capital gains. Such income
and capital gains distributions are automatically reinvested in additional
shares of the Portfolio, unless the shareholder elects to receive cash. Each
Portfolio also intends to comply with diversification regulations under
section 817(h) of the Code, that apply to mutual funds underlying variable
contracts. Generally, a Portfolio will be required to diversify its
investments so that on the last day of each quarter of a calendar year no more
than 55% of the value of its total assets is represented by any one
investment, no more than 70% is represented by any two investments, no more
than 80% is represented by any three investments, and no more than 90% is
represented by any four investments. For this purpose, securities of a given
issuer generally are treated as one investment, but each U.S. Government
agency and instrumentality is treated as a separate issuer. Compliance with
the diversification rules under Section 817(h) of the Code generally will
limit the ability of any Portfolio, and in particular, the Government
Securities Portfolio, to invest greater than 55% of its total assets in direct
obligations of the U.S. Treasury (or any other issuer) or to invest primarily
in securities issued by a single agency or instrumentality of the U.S.
Government.
Reference is made to the Prospectus for the applicable Separate Account and
Contract for information regarding the Federal income tax treatment of
distributions to the Separate Account. See "Taxation" in the Fund's SAI for
more information on taxes.
WHAT VOTING RIGHTS DO SHAREHOLDERS HAVE? Shareholders of the Fund are given
certain voting rights. Each share of each Portfolio will be given one vote,
unless a different allocation of voting rights is required under applicable
law for a mutual fund that is an investment medium for variable insurance
products.
Massachusetts business trust law does not require the Fund to hold annual
shareholder meetings, although special meetings may be called for a specific
Portfolio, or for the Fund as a whole, for purposes such as electing or
removing Trustees, changing fundamental policies, or approving a new or
amended advisory contract or portfolio management agreement. In accordance
with current laws, it is anticipated that an insurance company issuing a
Variable Contract that participates in the Fund will request voting
instructions from Variable Contract Owners and will vote shares or other
voting interests in the Separate Account in proportion to the voting
instructions received.
MAY THE FUND DISCONTINUE THE OFFERING OF ANY PORTFOLIO? The Fund reserves
the right to discontinue offering shares of one or more Portfolio at any time.
In the event that a Portfolio ceases offering its shares, any investments
allocated by an insurance company investing in the Fund to such Portfolio
will, subject to any necessary regulatory approvals, be invested in the
Portfolio deemed appropriate by the Trustees.
ADVERTISING PERFORMANCE. The Fund may, from time to time, include the yield
and effective yield of its Money Market Portfolio, the yield of the remaining
Portfolios, and the total return of all Portfolios in advertisements, sales
literature, or reports to shareholders or prospective investors. Total return
for the Fund will not be advertised or included in sales literature unless
accompanied by comparable performance information for a Separate Account to
which the Fund offers its shares.
Performance information should be considered in light of a Portfolio's
investment objectives and policies, characteristics of the Portfolio, and the
market conditions during the given time period, and should not be considered
as a representation of what may be achieved in the future. For a description
of the methods used to determine yield and total return for the Portfolios,
see the SAI.
33
<PAGE>
TOTAL RETURN
The table below presents the total return for each Portfolio that began
operations before January, 1996. The total return shown in the table tells you
how much an investment in a Portfolio has changed in value for each year or
period shown. It reflects any net increase or decrease in the share price and
assumes that all dividends and distributions were reinvested in additional
shares. The total return does not include fees and charges at the Separate
Account level under the Variable Contracts or other fees and charges under the
Variable Contracts.
<TABLE>
<CAPTION>
YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED ENDED
12/31/84 12/31/85 12/31/86 12/31/87 12/31/88(1) 12/31/89 12/31/90 12/31/91(2) 12/31/92 12/31/93 12/31/94(3)
-------- -------- -------- -------- ----------- -------- -------- ----------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Money Market.... -- -- -- -- 5.85 8.73 7.92 5.74 3.22 2.58 3.76
High Yield Bond. -- -- -- -- 8.30 4.16 0.38 24.58 18.72 18.01 0.42
Managed Bond.... -- -- -- -- 7.11 14.74 8.52 17.03 8.68 11.63 - 4.36
Government
Securities..... -- -- -- -- 6.65 14.61 8.01 16.67 7.52 10.79 - 5.10
Growth.......... -- -- -- -- 15.31 34.96 - 17.30 39.15 20.53 21.89 - 10.49
Growth LT....... -- -- -- -- -- -- -- -- -- -- 13.25
Equity
Income(4)...... -- -- -- -- 8.25 29.22 - 7.54 31.42 5.36 8.29 - 0.28
Multi-
Strategy(4).... -- -- -- -- 6.85 23.42 - 1.47 24.03 5.57 9.25 - 1.50
Equity(5)....... 9.80 30.02 20.92 2.18 7.19 30.12 - 2.55 29.77 6.30 16.06 - 2.87
Bond and
Income(5)...... 14.76 27.61 21.39 - 2.09 6.37 17.04 3.27 24.32 8.09 19.39 - 8.36
Equity Index.... -- -- -- -- -- -- -- 24.88 6.95 9.38 1.05
International(4). -- -- -- -- 17.69 20.51 - 13.48 10.92 - 9.78 30.02 3.01
<CAPTION>
AVERAGE
ANNUAL
TOTAL
SIX RETURN
MONTHS (FOR ALL
ENDED YEARS AND
6/30/95 PERIODS SHOWN)
------- --------------
<S> <C> <C>
Money Market.... 2.78 5.40
High Yield Bond. 10.78 11.09
Managed Bond.... 10.93 9.76
Government
Securities..... 11.03 9.20
Growth.......... 13.86 14.07
Growth LT....... 18.95 22.13
Equity
Income(4)...... 17.59 11.59
Multi-
Strategy(4).... 14.37 10.37
Equity(5)....... 10.97 13.30
Bond and
Income(5)...... 20.73 12.97
Equity Index.... 20.15 13.85
International(4). 6.95 7.83
</TABLE>
- --------
(1) Information is for the period from January 4, 1988 (commencement of
operations) to December 31, 1988 except as otherwise indicated.
(2) Information for the Equity Index Portfolio is for the period from January
30, 1991 (commencement of operations) to December 31, 1991.
(3) Information for the Growth LT Portfolio is for the period from January 4,
1994 (commencement of operations) to December 31, 1994.
(4) The performance results of the Equity Income, Multi-Strategy, and
International Portfolios occurred when these Portfolios were advised by
different Portfolio Managers. J.P. Morgan Investment began serving as
Portfolio Manager to the Equity Income Portfolio and Multi-Strategy
Portfolio and Templeton began serving as Portfolio Manager of the
International Portfolio on January 1, 1994.
(5) The performance results of the Equity Portfolio and the Bond and Income
Portfolio are based on the performance of predecessor portfolios (series)
of Pacific Corinthian Variable Fund, which began their first full year of
operations on January 1, 1984 and were acquired by the Fund on December
31, 1994.
APPENDIX
DESCRIPTION OF BOND RATINGS
Corporate Bonds: Bonds rated Aa by Moody's are judged by Moody's to be of
high quality by all standards. Together with bonds rated Aaa (Moody's highest
rating) they comprise what are generally known as high-grade bonds. Aa bonds
are rated lower than Aaa bonds because margins of protection may not be as
large as those of Aaa bonds, or fluctuation of protective elements may be of
greater amplitude, or there may be other elements present which make the long-
term risks appear somewhat larger than those applicable to Aaa securities.
Bonds which are rated A by Moody's 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.
Moody's Baa rated bonds are considered as medium-grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and, in
fact, have speculative characteristics as well.
Bonds rated AA by Standard & Poor's are judged by Standard & Poor's to be
high-grade obligations and in the majority of instances differ only in small
degree from issues rated AAA (Standard & Poor's highest rating).
34
<PAGE>
Bonds rated AAA are considered by Standard & Poor's to be the highest grade
obligations and possess the ultimate degree of protection as to principal and
interest. With AA bonds, as with AAA bonds, prices move with the long-term
money market.
Bonds rated A by Standard & Poor's, regarded as upper medium grade, have a
strong capacity and interest, although they are somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions.
Standard & Poor's BBB rated bonds, or medium-grade category bonds, are
borderline between definitely sound obligations and those where the
speculative element begins to predominate. These bonds have adequate asset
coverage and normally are protected by satisfactory earnings. Their
susceptibility to changing conditions, particularly to depressions,
necessitates constant watching. These bonds generally are more responsive to
business and trade conditions than to interest rates. This group is the lowest
which qualifies for commercial bank investment.
Moody's Ba rated bonds 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 both good and bad times over the future. Uncertainty of position
characterizes bonds rated Ba. Bonds which are rated B by Moody's 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.
Bonds rated Caa by Moody's are considered to be of poor standing. Such
issues may be in default or there may be elements of danger with respect to
principal or interest. Bonds rated Ca are considered by Moody's to be
speculative in a high degree, often in default. Bonds rated C, the lowest
class of bonds under Moody's bond ratings, are regarded by Moody's as having
extremely poor prospects.
Moody's also applies numerical indicators 1, 2 and 3 to rating categories.
The modifier 1 indicates that the security is in the higher end of its rating
category; 2 indicates a mid-range ranking; and 3 indicates a ranking toward
the lower end of the category.
A bond rated BB, B, CCC, and CC by Standard & Poor's is regarded, on
balance, as predominantly speculative with respect to 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 of
speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.
Commercial Paper: The Prime rating is the highest commercial paper rating
assigned by Moody's. Among the factors considered by Moody's in assigning
ratings are the following: (1) evaluation of the management of the issuer; (2)
economic evaluation of the issuer's industry or industries and an appraisal of
speculative-type risks which may be inherent in certain areas; (3) evaluation
of the issuer's products in relation to competition and customer acceptance;
(4) liquidity; (5) amount and quality of long-term debt; (6) trend of earnings
over a period of ten years; (7) financial strength of a parent company and the
relationships which exist with the issuer; and (8) recognition by management
of obligations which may be present or may arise as a result of public
interest questions and preparations to meet such obligations. Issuers with
this Prime category may be given ratings 1, 2 or 3, depending on the relative
strengths of these factors.
Commercial paper rated A by Standard & Poor's has the following
characteristics: (i) liquidity ratios are adequate to meet cash requirements;
(ii) long-term senior debt rating should be A or better, although in some
cases BBB credits may be allowed if other factors outweigh the BBB rating,
(iii) the issuer should have access to at least two additional channels of
borrowing; (iv) basic earnings and cash flow should have an upward trend with
allowances made for unusual circumstances; and (v) typically the issuer's
industry should be well established and the issuer should have a strong
position within its industry and the reliability and quality of management
should be unquestioned. Issuers rated A are further referred to by use of
numbers 1, 2 and 3 to denote relative strength with this highest
classification.
35
<PAGE>
[LOGO OF PACIFIC SELECT FUND]
PACIFIC SELECT FUND
INVESTMENT ADVISER Pacific Investment Management Company
Pacific Mutual Life Insurance Company 840 Newport Center Drive
700 Newport Center Drive Post Office Box 9000
Post Office Box 9000 Newport Beach, California 92660
Newport Beach, California 92660
Templeton Investment Counsel, Inc.
PORTFOLIO MANAGERS Broward Financial Centre
Bankers Trust Company Suite 2100
130 Liberty Street Fort Lauderdale, Florida 33394-3091
New York, New York 10006
DISTRIBUTOR
Blairlogie Capital Management Ltd. Pacific Equities Network
4th Floor Member: NASD & SIPC
125 Princes Street 700 Newport Center Drive
Edinburgh EH2 4AD, Scotland P.O. Box 9000
Newport Beach, California 92660
Capital Guardian Trust Company
333 South Hope Street CUSTODIAN
Los Angeles, California 90071 Investors Fiduciary Trust Company
127 West Tenth Street
Columbus Circle Investors Kansas City, Missouri 64105
Metro Center
One Station Place ACCOUNTANTS
Stamford, Connecticut 06902 Deloitte & Touche LLP
695 Town Center Drive
Greenwich Street Advisors Suite 1200
Two World Trade Center Costa Mesa, California 92626
101st Floor
New York, New York 10048 COUNSEL
Dechert Price & Rhoads
Janus Capital Corporation 1500 K Street, N.W.
100 Fillmore Street Suite 500
Suite 300 Washington, D.C. 20005
Denver, Colorado 80206-4923
J.P. Morgan Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Prospectus dated , 1996
FORM NO. 15-19532-01
<PAGE>
[LOGO OF PACIFIC SELECT FUND]
PACIFIC SELECT FUND
STATEMENT OF ADDITIONAL INFORMATION
DATE: , 1996
----------------
Pacific Select Fund (the "Fund") is an open-end diversified management
investment company currently offering fourteen separate investment Portfolios:
the Money Market Portfolio; the High Yield Bond Portfolio; the Managed Bond
Portfolio; the Government Securities Portfolio; the Growth Portfolio; the
Aggressive Equity Portfolio; the Growth LT Portfolio; the Equity Income
Portfolio; the Multi-Strategy Portfolio; the Equity Portfolio; the Bond and
Income Portfolio; the Equity Index Portfolio; the International Portfolio; and
the Emerging Markets Portfolio. The Fund's Adviser is Pacific Mutual Life
Insurance Company.
This Statement of Additional Information ("SAI") is intended to supplement
the information provided to investors in the Prospectus dated , 1996, of
the Fund and has been filed with the Securities and Exchange Commission as
part of the Fund's Registration Statement. Investors should note, however,
that this SAI is not itself a prospectus and should be read carefully in
conjunction with the Fund's Prospectus and retained for future reference. The
contents of this SAI are incorporated by reference in the Prospectus in their
entirety. A copy of the Prospectus may be obtained free of charge from the
Fund at the address and telephone numbers listed below.
----------------
Distributor:
Pacific Equities Network
700 Newport Center Drive
P.O. Box 9000
Newport Beach, CA 92660
(800) 800-7681
Adviser:
Pacific Mutual Life Insurance Company
700 Newport Center Drive
P.O. Box 9000
Newport Beach, CA 92660
(800) 800-7681
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
INTRODUCTION................................................................ 1
INVESTMENT POLICIES FOR MONEY MARKET PORTFOLIO.............................. 1
SECURITIES AND INVESTMENT TECHNIQUES........................................ 1
U.S. Government Securities................................................ 1
Mortgage-Related Securities............................................... 2
Mortgage Pass-Through Securities........................................ 2
GNMA Certificates....................................................... 2
FNMA and FHLMC Mortgage-Backed Obligations.............................. 3
Collateralized Mortgage Obligations (CMOs).............................. 4
FHLMC Collateralized Mortgage Obligations............................... 4
Other Mortgage-Related Securities....................................... 4
CMO Residuals........................................................... 5
Stripped Mortgage-backed Securities..................................... 5
Other Asset-Backed Securities............................................. 6
High Yield Bonds.......................................................... 6
Bank Obligations.......................................................... 7
Corporate Debt Securities................................................. 8
Variable and Floating Rate Securities..................................... 9
Commercial Paper.......................................................... 9
Convertible Securities.................................................... 10
Repurchase Agreements..................................................... 11
Borrowing................................................................. 12
Reverse Repurchase Agreements and Other Borrowings........................ 12
Firm Commitment Agreements and When-Issued Securities..................... 13
Loans of Portfolio Securities............................................. 13
Short Sales Against the Box............................................... 13
Restricted Securities (Private Placements)................................ 14
Foreign Securities........................................................ 14
Foreign Currency Transactions............................................. 16
Forward Foreign Currency Contracts...................................... 17
Options................................................................... 18
Purchasing and Writing Options on Securities............................ 18
Purchasing Options on Stock Indexes..................................... 19
Risks of Options Transactions........................................... 20
Spread Transactions..................................................... 21
Options on Foreign Currencies............................................. 21
Futures Contracts and Options on Futures Contracts........................ 23
Interest Rate Futures................................................... 23
Stock Index Futures..................................................... 23
Futures Options......................................................... 24
Limitations............................................................. 25
Risks Associated with Futures and Futures Options....................... 25
Foreign Currency Futures and Options Thereon.............................. 26
Swap Agreements........................................................... 27
Warrants.................................................................. 27
Duration.................................................................. 27
INVESTMENT RESTRICTIONS..................................................... 29
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
MANAGEMENT OF THE FUND...................................................... 31
Trustees and Officers..................................................... 31
Investment Adviser........................................................ 32
Portfolio Management Agreements........................................... 34
Distribution of Fund Shares............................................... 39
Purchases and Redemptions................................................. 40
PORTFOLIO TRANSACTIONS AND BROKERAGE........................................ 40
Investment Decisions...................................................... 40
Brokerage and Research Services........................................... 40
Portfolio Turnover........................................................ 42
NET ASSET VALUE............................................................. 42
PERFORMANCE INFORMATION..................................................... 44
TAXATION.................................................................... 46
Distributions............................................................. 48
Hedging Transactions...................................................... 48
OTHER INFORMATION........................................................... 48
Concentration Policy...................................................... 48
Capitalization............................................................ 48
Voting Rights............................................................. 48
Custodian and Transfer Agency and Dividend Disbursing Services............ 49
Financial Statements...................................................... 49
Independent Accountants................................................... 49
Counsel................................................................... 49
Registration Statement.................................................... 50
</TABLE>
ii
<PAGE>
INTRODUCTION
This SAI is designed to elaborate upon information contained in the
Prospectus, including the discussion of certain securities and investment
techniques. The more detailed information contained herein is intended solely
for investors who have read the Prospectus and are interested in a more
detailed explanation of certain aspects of the Fund's securities and
investment techniques. Captions and defined terms in this SAI generally
correspond to like captions and terms in the Prospectus.
INVESTMENT POLICIES FOR MONEY MARKET PORTFOLIO
The investment objective and investment policies of the Money Market
Portfolio are described in the Prospectus. The following description presents
more detailed information on investment policies that apply to the Portfolio,
and is intended to supplement the information provided in the Prospectus. A
money market instrument will be considered to be highest quality (1) if the
instrument (or other comparable short-term instrument of the same issuer) is
rated in the highest rating category, (i.e., Aaa or Prime-1 by Moody's
Investors Service, Inc. ("Moody's"), AAA or A-1 by Standard & Poor's
Corporation ("S&P")) by (i) any two nationally recognized statistical rating
organizations ("NRSROs") or, (ii) if rated by only one NRSRO, by that NRSRO,
and whose acquisition is approved or ratified by the Board of Trustees; (2)
if, for an instrument with a remaining maturity of 13 months or less that was
long term at the time of issuance, it is issued by an issuer that has short-
term debt obligations of comparable maturity, priority, and security, and that
are rated in the highest rating category by (i) any two NRSROs or, (ii) if
rated by only one NRSRO, by that NRSRO, and whose acquisition is approved or
ratified by the Board of Trustees; or (3) an unrated security that is of
comparable quality to a security in the highest rating category as determined
by the Adviser and, unless it is a U.S. Government security, whose acquisition
is approved or ratified by the Board of Trustees. With respect to 5% of its
total assets, measured at the time of investment, the Portfolio may also
invest in money market instruments that are in the second-highest rating
category for short-term debt obligations (i.e., rated Aa or Prime-2 by Moody's
or AA or A-2 by S&P). A money market instrument will be considered to be in
the second-highest rating category under the criteria described above with
respect to instruments considered highest quality, as applied to instruments
in the second-highest rating category.
The Portfolio may not invest more than 5% of its total assets, measured at
the time of investment, in securities of any one issuer that are of the
highest quality, except that this limitation shall not apply to U.S.
Government securities and repurchase agreements thereon. The Portfolio may not
invest more than the greater of 1% of its total assets or $1,000,000, measured
at the time of investment, in securities of any one issuer that are in the
second-highest rating category, except that this limitation shall not apply to
U.S. Government securities. In the event that an instrument acquired by the
Portfolio is downgraded or otherwise ceases to be of the quality that is
eligible for the Portfolio, the Adviser, under procedures approved by the
Board of Trustees (or the Board of Trustees itself if the Adviser becomes
aware an unrated security is downgraded below high quality and the Adviser
does not dispose of the security or it does not mature within five business
days) shall promptly reassess whether such security presents minimal credit
risk and determine whether or not to retain the instrument.
SECURITIES AND INVESTMENT TECHNIQUES
U.S. GOVERNMENT SECURITIES
All Portfolios may invest in U.S. Government securities. U.S. Government
securities are obligations of, or guaranteed by, the U.S. Government, its
agencies, or instrumentalities. Treasury bills, notes, and bonds are direct
obligations of the U.S. Treasury, and they differ with respect to certain
items such as coupons, maturities, and dates of issue. Treasury bills have a
maturity of one year or less. Treasury notes have maturities of one to ten
1
<PAGE>
years and Treasury bonds generally have a maturity of greater than ten years.
Securities guaranteed by the U.S. Government include federal agency
obligations guaranteed as to principal and interest by the U.S. Treasury (such
as GNMA certificates (described below) and Federal Housing Administration
debentures). In guaranteed securities, the payment of principal and interest
is unconditionally guaranteed by the U.S. Government, and thus they are of the
highest credit quality. Such direct obligations or guaranteed securities are
subject to variations in market value due to fluctuations in interest rates,
but, if held to maturity, the U.S. Government is obligated to or guarantees to
pay them in full.
Securities issued by U.S. Government instrumentalities and certain federal
agencies are neither direct obligations of, nor guaranteed by, the U.S.
Treasury. However, they involve federal sponsorship in one way or another:
some are backed by specific types of collateral; some are supported by the
issuer's right to borrow from the U.S. Treasury; some are supported by the
discretionary authority of the U.S. Treasury to purchase certain obligations
of the issuer; others are supported only by the credit of the issuing
government agency or instrumentality. These agencies and instrumentalities
include, but are not limited to Federal National Mortgage Association, Federal
Home Loan Bank, Federal Land Banks, Farmers Home Administration, Central Bank
for Cooperatives, Federal Intermediate Credit Banks, Federal Financing Bank,
Farm Credit Banks, and the Tennessee Valley Authority. All the Portfolios may
invest in U.S. Government securities.
MORTGAGE-RELATED SECURITIES
Mortgage-related securities are interests in pools of mortgage loans made to
residential home buyers, including mortgage loans made by savings and loan
institutions, mortgage banks, commercial banks, and others. Pools of mortgage
loans are assembled as securities for sale to investors by various
governmental, government-related, and private organizations. The High Yield
Bond, Managed Bond, Government Securities, Growth LT, and Multi-Strategy
Portfolios, and the Money Market Portfolio, subject to its investment
policies, may invest in mortgage-related securities as well as debt securities
which are secured with collateral consisting of mortgage-related securities,
and in other types of mortgage-related securities. The Equity Portfolio and
Bond and Income Portfolio may only invest in mortgage-related securities that
are obligations of, or guaranteed by, the U.S. Government, its agencies or
instrumentalities.
Mortgage Pass-Through Securities. These are securities representing
interests in "pools" of mortgages in which payments of both interest and
principal on the securities are made periodically, in effect "passing through"
periodic payments made by the individual borrowers on the residential mortgage
loans which underlie the securities (net of fees paid to the issuer or
guarantor of the securities). Early repayment of principal on mortgage pass-
through securities (arising from prepayments of principal due to sale of the
underlying property, refinancing, or foreclosure, net of fees and costs which
may be incurred) may expose a Portfolio to a lower rate of return upon
reinvestment of principal. Payment of principal and interest on some mortgage
pass-through securities may be guaranteed by the full faith and credit of the
U.S. Government (in the case of securities guaranteed by the Government
National Mortgage Association, or "GNMAs"); or guaranteed by agencies or
instrumentalities of the U.S. Government (in the case of securities guaranteed
by the Federal National Mortgage Association ("FNMA") or the Federal Home Loan
Mortgage Corporation ("FHLMC"), which are supported only by the discretionary
authority of the U.S. Government to purchase the agency's obligations).
Mortgage pass-through securities created by nongovernmental issuers (such as
commercial banks, savings and loan institutions, private mortgage insurance
companies, mortgage bankers, and other secondary market issuers) may be
supported by various forms of insurance or guarantees, including individual
loan, title, pool and hazard insurance and letters of credit, which may be
issued by governmental entities, private insurers, or the mortgage poolers.
GNMA Certificates. GNMA certificates are mortgage-backed securities
representing part ownership of a pool of mortgage loans on which timely
payment of interest and principal is guaranteed by the full faith and credit
of the U.S. Government. GNMA is a wholly-owned U.S. Government corporation
within the Department of Housing and Urban Development. GNMA is authorized to
guarantee, with the full faith and credit of the U.S. Government, the timely
payment of principal and interest on securities issued by institutions
approved by GNMA (such as savings and loan institutions, commercial banks, and
mortgage bankers) and backed by pools of
2
<PAGE>
mortgages insured by the Federal Housing Administration ("FHA"), or guaranteed
by the Department of Veterans Affairs ("VA"). GNMA certificates differ from
typical bonds because principal is repaid monthly over the term of the loan
rather than returned in a lump sum at maturity. Because both interest and
principal payments (including prepayments) on the underlying mortgage loans
are passed through to the holder of the certificate, GNMA certificates are
called "pass-through" securities.
Interests in pools of mortgage-related securities differ from other forms of
debt securities, which normally provide for periodic payment of interest in
fixed amounts with principal payments at maturity or specified call dates.
Instead, these securities provide a periodic payment which consists of both
interest and principal payments. In effect, these payments are a "pass-
through" of the periodic payments made by the individual borrowers on the
residential mortgage loans, net of any fees paid to the issuer or guarantor of
such securities. Additional payments are caused by repayments of principal
resulting from the sale of the underlying residential property, refinancing or
foreclosure, net of fees or costs which may be incurred. Mortgage-related
securities issued by GNMA are described as "modified pass-through" securities.
These securities entitle the holder to receive all interest and principal
payments owed on the mortgage pool, net of certain fees, at the scheduled
payment dates regardless of whether or not the mortgagor actually makes the
payment. Although GNMA guarantees timely payment even if homeowners delay or
default, tracking the "pass-through" payments may, at times, be difficult.
Expected payments may be delayed due to the delays in registering the newly
traded paper securities. The custodian's policies for crediting missed
payments while errant receipts are tracked down may vary. Other mortgage-
backed securities such as those of FHLMC and FNMA trade in book-entry form and
are not subject to the risk of delays in timely payment of income.
Although the mortgage loans in the pool will have maturities of up to 30
years, the actual average life of the GNMA certificates typically will be
substantially less because the mortgages will be subject to normal principal
amortization and may be prepaid prior to maturity. Early repayments of
principal on the underlying mortgages may expose a Portfolio to a lower rate
of return upon reinvestment of principal. Prepayment rates vary widely and may
be affected by changes in market interest rates. In periods of falling
interest rates, the rate of prepayment tends to increase, thereby shortening
the actual average life of the GNMA certificates. Conversely, when interest
rates are rising, the rate of prepayment tends to decrease, thereby
lengthening the actual average life of the GNMA certificates. Accordingly, it
is not possible to accurately predict the average life of a particular pool.
Reinvestment of prepayments may occur at higher or lower rates than the
original yield on the certificates. Due to the prepayment feature and the need
to reinvest prepayments of principal at current rates, GNMA certificates can
be less effective than typical bonds of similar maturities at "locking in"
yields during periods of declining interest rates, although they may have
comparable risks of decline in value during periods of rising interest rates.
FNMA and FHLMC Mortgage-Backed Obligations. Government-related guarantors
(i.e., not backed by the full faith and credit of the U.S. Government) include
FNMA and FHLMC. FNMA, a federally chartered and privately-owned corporation,
issues pass-through securities representing interests in a pool of
conventional mortgage loans. FNMA guarantees the timely payment of principal
and interest but this guarantee is not backed by the full faith and credit of
the U.S. Government. FNMA is a government sponsored corporation owned entirely
by private stockholders. It is subject to general regulation by the Secretary
of Housing and Urban Development. FNMA purchases conventional (i.e., not
insured or guaranteed by any government agency) residential mortgages from a
list of approved seller/servicers which include state and federally-chartered
savings and loan associations, mutual savings banks, commercial banks and
credit unions, and mortgage bankers. FHLMC, a corporate instrumentality of the
United States, was created by Congress in 1970 for the purpose of increasing
the availability of mortgage credit for residential housing. Its stock is
owned by the 12 Federal Home Loan Banks. FHLMC issues Participation
Certificates ("PCs") which represent interests in conventional mortgages from
FHLMC's national portfolio. FHLMC guarantees the timely payment of interest
and ultimate collection of principal and maintains reserves to protect holders
against losses due to default, but PCs are not backed by the full faith and
credit of the U.S. Government. As is the case with GNMA certificates, the
actual maturity of and realized yield on particular FNMA and FHLMC pass-
through securities will vary based on the prepayment experience of the
underlying pool of mortgages.
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Collateralized Mortgage Obligations (CMOs). A CMO is a hybrid between a
mortgage-backed bond and a mortgage pass-through security. Similar to a bond,
interest and prepaid principal is paid, in most cases, semiannually. CMOs may
be collateralized by whole mortgage loans but are more typically
collateralized by portfolios of mortgage pass-through securities guaranteed by
GNMA, FHLMC, or FNMA, and their income streams.
CMOs that are issued or guaranteed by the U.S. Government or by any of its
agencies or instrumentalities will be considered U.S. Government securities by
the Portfolios, while other CMOs, even if collateralized by U.S. Government
securities, will have the same status as other privately issued securities for
purposes of applying a Portfolio's diversification tests.
CMOs are structured into multiple classes, each bearing a different stated
maturity. Actual maturity and average life will depend upon the prepayment
experience of the collateral. CMOs provide for a modified form of call
protection through a de facto breakdown of the underlying pool of mortgages
according to how quickly the loans are repaid. Monthly payment of principal
received from the pool of underlying mortgages, including prepayments,
generally is first returned to investors holding the shortest maturity class.
Investors holding the longer maturity classes receive principal only after the
first class has been retired. An investor is partially guarded against a
sooner than desired return of principal because of the sequential payments.
In a typical CMO transaction, a corporation ("issuer") issues multiple
series (e.g., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the Bond
offering are used to purchase mortgages or mortgage pass-through certificates
("Collateral"). The Collateral is pledged to a third party trustee as security
for the Bonds. Principal and interest payments from the Collateral are used to
pay principal on the Bonds in the order A, B, C, Z. The series A, B, and C
Bonds all bear current interest. Interest on the series Z Bond is accrued and
added to principal and a like amount is paid as principal on the series A, B,
or C Bond currently being paid off. When the series A, B, and C Bonds are paid
in full, interest and principal on the series Z Bond begins to be paid
currently. With some CMOs, the issuer serves as a conduit to allow loan
originators (primarily builders or savings and loan associations) to borrow
against their loan portfolios.
FHLMC Collateralized Mortgage Obligations. FHLMC CMOs are debt obligations
of FHLMC issued in multiple classes having different maturity dates which are
secured by the pledge of a pool of conventional mortgage loans purchased by
FHLMC. Unlike FHLMC PCs, payments of principal and interest on the CMOs are
made semiannually, as opposed to monthly. The amount of principal payable on
each semiannual payment date is determined in accordance with FHLMC's
mandatory sinking fund schedule, which, in turn, is equal to approximately
100% of FHA prepayment experience applied to the mortgage collateral pool. All
sinking fund payments in the CMOs are allocated to the retirement of the
individual classes of bonds in the order of their stated maturities. Payment
of principal on the mortgage loans in the collateral pool in excess of the
amount of FHLMC's minimum sinking fund obligation for any payment date are
paid to the holders of the CMOs as additional sinking fund payments. Because
of the "pass-through" nature of all principal payments received on the
collateral pool in excess of FHLMC's minimum sinking fund requirement, the
rate at which principal of the CMOs is actually repaid is likely to be such
that each class of bonds will be retired in advance of its scheduled maturity
date.
If collection of principal (including prepayments) on the mortgage loans
during any semiannual payment period is not sufficient to meet FHLMC's minimum
sinking fund obligation on the next sinking fund payment date, FHLMC agrees to
make up the deficiency from its general funds.
Criteria for the mortgage loans in the pool backing the CMOs are identical
to those of FHLMC PCs. FHLMC has the right to substitute collateral in the
event of delinquencies and/or defaults.
Other Mortgage-Related Securities. Commercial banks, savings and loan
institutions, private mortgage insurance companies, mortgage bankers, and
other secondary market issuers also create pass-through pools of conventional
residential mortgage loans. Such issuers may, in addition, be the originators
and/or servicers of the
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underlying mortgage loans as well as the guarantors of the mortgage-related
securities. Pools created by such non-governmental issuers generally offer a
higher rate of interest than government and government-related pools because
there are no direct or indirect government or agency guarantees of payments in
the former pools. However, timely payment of interest and principal of these
pools may be supported by various forms of insurance or guarantees, including
individual loan, title, pool and hazard insurance, and letters of credit. The
insurance and guarantees are issued by governmental entities, private
insurers, and the mortgage poolers. Such insurance and guarantees and the
creditworthiness of the issuers thereof will be considered in determining
whether a mortgage-related security meets a Portfolio's investment quality
standards. There can be no assurance that the private insurers or guarantors
can meet their obligations under the insurance policies or guarantee
arrangements. A Portfolio may buy mortgage-related securities without
insurance or guarantees, if, in an examination of the loan experience and
practices of the originator/servicers and poolers, the Adviser or Portfolio
Manager determines that the securities meet a Portfolio's quality standards.
Although the market for such securities is becoming increasingly liquid,
securities issued by certain private organizations may not be readily
marketable. A Portfolio will not purchase mortgage-related securities or any
other assets which in the opinion of the Adviser or Portfolio Manager are
illiquid if, as a result, more than 15% of the value of a Portfolio's total
assets will be illiquid. It is expected that governmental, government-related,
or private entities may create mortgage loan pools and other mortgage-related
securities offering mortgage pass-through and mortgage collateralized
investments in addition to those described above. As new types of mortgage-
related securities are developed and offered to investors, the Adviser or
Portfolio Manager will, consistent with a Portfolio's investment objectives,
policies, and quality standards, consider making investments in such new types
of mortgage-related securities.
CMO Residuals. CMO residuals are derivative mortgage securities issued by
agencies or instrumentalities of the U.S. Government or by private originators
of, or investors in, mortgage loans, including savings and loan associations,
homebuilders, mortgage banks, commercial bank, investment banks and special
purpose entities of the foregoing.
The cash flow generated by the mortgage assets underlying a series of CMOs
is applied first to make required payments of principal and interest on the
CMOs and second to pay the related administrative expenses of the issuer. The
residual in a CMO structure generally represents the interest in any excess
cash flow remaining after making the foregoing payments. Each payment of such
excess cash flow to a holder of the related CMO residual represents income
and/or a return of capital. The amount of residual cash flow resulting from a
CMO will depend on, among other things, the characteristics of the mortgage
assets, the coupon rate of each class of CMO, prevailing interest rates, the
amount of administrative expenses and the prepayment experience on the
mortgage assets. In particular, the yield to maturity on CMO residuals is
extremely sensitive to prepayments on the related underlying mortgage assets,
in the same manner as an interest-only ("IO") class of stripped mortgage-
backed securities. See "Other Mortgage-Related Securities--Stripped Mortgage-
Backed Securities." In addition, if a series of a CMO includes a class that
bears interest at an adjustable rate, the yield to maturity on the related CMO
residual will also be extremely sensitive to changes in the level of the index
upon which interest rate adjustments are based. As described below with
respect to stripped mortgage-backed securities, in certain circumstances a
Portfolio may fail to recoup fully its initial investment in a CMO residual.
CMO residuals are generally purchased and sold by institutional investors
through several investment banking firms acting as brokers or dealers. The CMO
residual market has only very recently developed and CMO residuals currently
may not have the liquidity of other more established securities trading in
other markets. Transactions in CMO residuals are generally completed only
after careful review of the characteristics of the securities in question. In
addition, CMO residuals may or, pursuant to an exemption therefrom, may not
have been registered under the Securities Act of 1933, as amended. CMO
residuals, whether or not registered under such Act, may be subject to certain
restrictions on transferability, and may be deemed "illiquid" and subject to a
Portfolio's limitations on investment in illiquid securities.
Stripped Mortgage-backed Securities. Stripped mortgage-backed securities
("SMBS") are derivative multi-class mortgage securities. SMBS may be issued by
agencies or instrumentalities of the U.S. Government, or by private
originators of, or investors in, mortgage loans, including savings and loan
associations, mortgage banks, commercial banks, investment banks and special
purpose entities of the foregoing.
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SMBS are usually structured with two classes that receive different
proportions of the interest and principal distributions on a pool of mortgage
assets. A common type of SMBS will have one class receiving some of the
interest and most of the principal from the mortgage assets, while the other
class will receive most of the interest and the remainder of the principal. In
the most extreme case, one class will receive all of the interest (the IO
class), while the other class will receive all of the principal (the
principal-only or "PO" class). The yield to maturity on an IO class is
extremely sensitive to the rate of principal payments (including prepayments)
on the related underlying mortgage assets, and a rapid rate of principal
payments may have a material adverse effect on the Portfolio's yield to
maturity from these securities. If the underlying mortgage assets experience
greater than anticipated prepayments of principal, a Portfolio may fail to
fully recoup its initial investment in these securities even if the security
is in one of the highest rating categories.
Although SMBS are purchased and sold by institutional investors through
several investment banking firms acting as brokers or dealers, these
securities were only recently developed. As a result, established trading
markets have not yet developed and, accordingly, these securities may be
deemed "illiquid" and subject to a Portfolio's limitations on investment in
illiquid securities.
OTHER ASSET-BACKED SECURITIES
In addition to mortgage-related securities, the High Yield Bond, Managed
Bond, Government Securities, Growth LT, and Multi-Strategy Portfolios, and the
Money Market Portfolio, subject to its investment policies, may invest in
other asset-backed securities which are securities that directly or indirectly
represent a participation interest in, or are secured by and payable from a
stream of payments generated by particular assets such as automobile loans or
installment sales contracts, home equity loans, computer and other leases,
credit card receivables, or other assets. Generally, the payments from the
collateral are passed through to the security holder. Due to the possibility
that prepayments (on automobile loans and other collateral) will alter cash
flow on asset-backed securities, generally it is not possible to determine in
advance the actual final maturity date or average life of many asset-backed
securities. Faster prepayment will shorten the average life and slower
prepayments will lengthen it. However, it may be possible to determine what
the range of that movement could be and to calculate the effect that it will
have on the price of the security. Other risks relate to limited interests in
applicable collateral. For example, credit card debt 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 on credit card debt thereby reducing the balance due.
Additionally, holders of asset-backed securities may also experience delays in
payments or losses if the full amounts due on underlying sales contracts are
not realized. Because asset-backed securities are relatively new, the market
experience in these securities is limited and the market's ability to sustain
liquidity through all phases of the market cycle has not been tested.
HIGH YIELD BONDS
The High Yield Bond Portfolio and, to the extent of 10% of their assets, the
Managed Bond Portfolio and Growth LT Portfolio, and, to the extent of 5% of
its assets, the International Portfolio, (measured at the time of investment),
may invest in high risk debt securities rated lower than Baa or BBB, or, if
not rated by Moody's or S&P, of equivalent quality (although the Managed Bond
Portfolio may not invest in securities rated lower than B) ("high yield
bonds," which are commonly referred to as "junk bonds").
In general, high yield bonds are not considered to be investment grade, and
investors should consider the risks associated with high yield bonds before
investing in the pertinent Portfolio, and in particular the High Yield Bond
Portfolio. Investment in such securities generally provides greater income and
increased opportunity for capital appreciation than investments in higher
quality securities, but they also typically entail greater price volatility
and principal and income risk.
Investment in high yield bonds involves special risks in addition to the
risks associated with investments in higher rated debt securities. High yield
bonds are regarded as predominately speculative with respect to the issuer's
continuing ability to meet principal and interest payments. The high yield
bond market is relatively new,
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and many of the outstanding high yield bonds have not endured a lengthy
business recession. A long-term track record on bond default rates such as
that for investment grade corporate bonds, does not exist for the high yield
market. Analysis of the creditworthiness of issuers of debt securities that
are high yield bonds may be more complex than for issuers of higher quality
debt securities, and the ability of a Portfolio to achieve its investment
objective may, to the extent of investment in high yield bonds, be more
dependent upon such creditworthiness analysis than would be the case if the
Portfolio were investing in higher quality bonds.
High yield bonds may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade bonds. The
prices of high yield bonds have been found to be less sensitive to interest-
rate changes than higher-rated investments, but more sensitive to adverse
economic downturns or individual corporate developments. A projection of an
economic downturn or of a period of rising interest rates, for example, could
cause a decline in high yield bond prices because the advent of a recession
could lessen the ability of a highly leveraged company to make principal and
interest payments on its debt securities. If an issuer of high yield bonds
defaults, in addition to risking payment of all or a portion of interest and
principal, a Portfolio may incur additional expenses to seek recovery. In the
case of high yield bonds structured as zero-coupon or pay-in-kind securities,
their market prices are affected to a greater extent by interest rate changes,
and therefore tend to be more volatile than securities which pay interest
periodically and in cash.
The secondary market on which high yield bonds are traded may be less liquid
than the market for higher grade bonds. Less liquidity in the secondary
trading market could adversely affect the price at which a Portfolio could
sell a high yield bond, and could adversely affect and cause large
fluctuations in the daily net asset value of the Portfolio's shares. Adverse
publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease the values and liquidity of high yield bonds,
especially in a thinly-traded market. When secondary markets for high yield
bonds are less liquid than the market for higher grade bonds, it may be more
difficult to value the securities because such valuation may require more
research, and elements of judgment may play a greater role in the valuation
because there is less reliable, objective data available.
There are also certain risks involved in using credit ratings for evaluating
high yield bonds. For example, credit ratings evaluate the safety of principal
and interest payments, not the market value risk of high yield bonds. Also,
credit rating agencies may fail to timely reflect subsequent events.
BANK OBLIGATIONS
Bank obligations in which all Portfolios may invest include certificates of
deposit, bankers' acceptances, and fixed time deposits. Each Portfolio may
also hold funds on deposit with its sub-custodian bank in an interest-bearing
account for temporary purposes.
Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank for a definite period of time and earning a
specified return. Bankers' acceptances are negotiable drafts or bills of
exchange, normally drawn by an importer or exporter to pay for specific
merchandise, which are "accepted" by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on maturity.
Fixed time deposits are bank obligations payable at a stated maturity date and
bearing interest at a fixed rate. Fixed time deposits may be withdrawn on
demand by the investor, but may be subject to early withdrawal penalties which
vary depending upon market conditions and the remaining maturity of the
obligation. There are no contractual restrictions on the right to transfer a
beneficial interest in a fixed time deposit to a third party, although there
is no market for such deposits. A Portfolio will not invest in fixed time
deposits which are (i) not subject to prepayment, or (ii) which provide for
withdrawal penalties upon prepayment (other than overnight deposits) if, in
the aggregate, more than 15% of its assets would be invested in such deposits,
repurchase agreements maturing in more than seven days, and other illiquid
assets.
A Portfolio will not invest in any security issued by a commercial bank
unless: (i) the bank has total assets of at least U.S. $1 billion (U.S. $2
billion in the case of the Bond and Income Portfolio), or the equivalent in
other currencies, or, in the case of domestic banks which do not have total
assets of at least U.S. $1 billion, the
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aggregate investment made in any one such bank is limited to an amount,
currently U.S. $100,000, insured in full by the Federal Deposit Insurance
Corporation; (ii) in the case of U.S. banks, it is a member of the Federal
Deposit Insurance Corporation; and (iii) in the case of foreign banks, the
security is, in the opinion of the Adviser or the Portfolio's Portfolio
Manager, of an investment quality comparable with other debt securities of
similar maturities which may be purchased by the Portfolio. These limitations
do not prohibit investments in securities issued by foreign branches of U.S.
banks, provided such U.S. banks meet the foregoing requirements.
All Portfolios may invest in short-term debt obligations of savings and loan
associations. A Portfolio will not invest in any security issued by a savings
and loan association unless: (i) the savings and loan association has total
assets of at least $1 billion (U.S. $2 billion in the case of the Bond and
Income Portfolio), or, in the case of savings and loan associations which do
not have total assets of at least $1 billion, the aggregate investment made in
any one savings and loan association is insured in full, currently up to
$100,000, by the Savings Association Insurance Fund; (ii) the savings and loan
association issuing the security is a member of the Federal Home Loan Bank
System; and (iii) the institution is insured by the Savings Association
Insurance Fund.
A Portfolio will not purchase any security of a small bank or savings and
loan association which is not readily marketable if, as a result, more than
15% of the value of its total assets would be invested in such securities,
other illiquid securities, or securities without readily available market
quotations, such as restricted securities and repurchase agreements maturing
in more than seven days.
The International Portfolio limits its investments in obligations of foreign
banks (including U.S. branches of foreign banks) which at the time of
investment (i) have more than U.S. $1 billion, or the equivalent in other
currencies, in total assets; and (ii) in the opinion of the Portfolio's
Portfolio Manager, are of an investment quality comparable to fixed income
obligations in which the Portfolio may invest. There is no limitation on the
amount of the Portfolio's assets which may be invested in obligations of
foreign banks which meet the conditions set forth herein. The Aggressive
Equity and Emerging Markets Portfolios limit their investments in obligations
of foreign banks (including U.S. branches of foreign banks) which at the time
of investment (i) have more than $10 billion, or the equivalent in other
currencies, in total assets; (ii) in terms of assets are among the 75 largest
foreign banks in the world; (iii) have branches or agencies (limited purpose
offices which do not offer all banking services) in the United States; and
(iv) in the opinion of the Portfolio Managers, are of an investment quality
comparable to obligations of United States banks in which the Portfolios may
invest.
Obligations of foreign banks involve somewhat different investment risks
than those affecting obligations of U.S. banks, including: (i) the
possibilities that their liquidity could be impaired because of future
political and economic developments; (ii) their obligations may be less
marketable than comparable obligations of U.S. banks; (iii) a foreign
jurisdiction might impose withholding taxes on interest income payable on
those obligations; (iv) foreign deposits may be seized or nationalized; (v)
foreign governmental restrictions, such as exchange controls, may be adopted
which might adversely affect the payment of principal and interest on those
obligations; and (vi) the selection of those obligations may be more difficult
because there may be less publicly available information concerning foreign
banks or the accounting, auditing, and financial reporting standards,
practices and requirements applicable to foreign banks may differ from those
applicable to United States banks. Foreign banks are not generally subject to
examination by any U.S. Government agency or instrumentality.
The International Portfolio's investment in convertible securities,
described below, that are purchased in furtherance of the Portfolio's
investment objective, is not subject to the limitations described above with
respect to bank obligations.
CORPORATE DEBT SECURITIES
All Portfolios may invest in U.S. dollar-denominated corporate debt
securities of domestic issuers and the Money Market, High Yield Bond, Managed
Bond, Aggressive Equity, Growth LT, Multi-Strategy, International, and
Emerging Markets Portfolios may invest in U.S. dollar-denominated debt
securities of foreign issuers. The Aggressive Equity, Growth LT, Multi-
Strategy, International, and Emerging Markets Portfolios, and, to the
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extent of 20% of their assets, the Managed Bond, and Government Securities
Portfolios, may also invest in debt securities of foreign issuers denominated
in foreign currencies. The debt securities in which any Portfolio other than
the Money Market Portfolio may invest are limited to corporate debt securities
(corporate bonds, debentures, notes, and other similar corporate debt
instruments) which meet the minimum ratings criteria set forth for that
particular Portfolio, or, if not so rated, are, in the Portfolio Manager's
opinion, comparable in quality to corporate debt securities in which a
Portfolio may invest. The debt securities in which the Money Market Portfolio
may invest are described in the discussion of the investment objective and
policies of that Portfolio.
The investment return on corporate debt securities reflects interest
earnings and changes in the market value of the security. The market value of
corporate debt obligations may be expected to rise and fall inversely with
interest rates generally. There also exists the risk that the issuers of the
securities may not be able to meet their obligations on interest or principal
payments at the time called for by an instrument.
The High Yield Bond, Managed Bond, Growth, Aggressive Equity, Growth LT,
Equity Income, Multi-Strategy, Bond and Income, International, and Emerging
Markets Portfolios may invest in corporate debt securities rated Baa (Moody's)
or BBB (S&P), or, if not rated by Moody's or S&P, of equivalent quality. Such
securities are considered medium grade, and do not have economic
characteristics that provide the high degree of security with respect to
payment of principal and interest associated with higher rated bonds, and
generally have some speculative characteristics. A bond will be placed in this
rating category where interest payments and principal security appear adequate
for the present, but economic characteristics that provide longer term
protection may be lacking.
The High Yield Bond and, to the extent of 10% of their assets, the Managed
Bond Portfolio and Growth LT Portfolio, and to the extent of 5% of its assets,
the International Portfolio, may invest in debt securities rated lower than
Baa or BBB (although the Managed Bond Portfolio may not invest in securities
rated lower than B), or, if not rated by Moody's or S&P, of equivalent
quality. Such securities are not considered to be investment grade, and are
regarded as predominately speculative with respect to the issuer's continuing
ability to meet principal and interest payments. For more information on the
risks of such securities, see the discussion of "High Yield Bonds" above.
VARIABLE AND FLOATING RATE SECURITIES
All Portfolios may invest in variable and floating rate securities which
provide for a periodic adjustment in the interest rate paid on obligations.
The terms of such obligations must provide that interest rates are adjusted
periodically based upon an appropriate interest rate adjustment index as
provided in the respective obligations. The adjustment intervals may be
regular, and range from daily to annually, or may be event based, such as
based on a change in the prime rate.
COMMERCIAL PAPER
All of the Portfolios may invest in commercial paper (including variable
amount master demand notes). Each Portfolio other than the Money Market and
Equity Portfolios may invest in commercial paper denominated in U.S. dollars,
issued by U.S. corporations or foreign corporations and (1) rated at the date
of investment Prime-1 or Prime-2 by Moody's or A-1 or A-2 by S&P, (2) if not
rated by either Moody's or S&P, issued by a corporation having an outstanding
debt issue rated Aa or better by Moody's or AA or better by S&P or (3) if not
rated, are determined to be of an investment quality comparable to rated
commercial paper in which a Portfolio may invest. If issued by a foreign
corporation, such commercial paper is U.S. dollar-denominated and not subject
at the time of purchase to foreign tax withholding. The Aggressive Equity,
International, and Emerging Markets Portfolios may, however, invest in
commercial paper denominated in foreign currencies. The Money Market Portfolio
may invest in commercial paper that meets the standards for money market
securities that that Portfolio may acquire as described in the Prospectus in
the section "Investment Objectives and Policies." The Equity Portfolio may
invest in commercial paper (1) rated at the time of purchase Prime-1 by
Moody's or A-1 by S&P or (2) if not rated by either Moody's or S&P, issued by
a corporation having an outstanding debt issue rated Aa or better by Moody's
or AA or better by S&P.
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Commercial paper obligations may include variable amount master demand
notes. These are obligations that permit the investment of fluctuating amounts
at varying rates of interest pursuant to direct arrangements between a
Portfolio, as lender, and the borrower. These notes permit daily changes in
the amounts borrowed. The lender has the right to increase the amount under
the note at any time up to the full amount provided by the note agreement, or
to decrease the amount, and the borrower may prepay up to the full amount of
the note without penalty. Because variable amount master demand notes are
direct lending arrangements between the lender and borrower, it is not
generally contemplated that such instruments will be traded and there is no
secondary market for these notes. However, they are redeemable (and thus
immediately repayable by the borrower) at face value, plus accrued interest,
at any time. In connection with master demand note arrangements, the Adviser
or Portfolio Manager will monitor, on an ongoing basis, the earning power,
cash flow, and other liquidity ratios of the borrower and its ability to pay
principal and interest on demand. The Adviser or Portfolio Manager also will
consider the extent to which the variable amount master demand notes are
backed by bank letters of credit. These notes generally are not rated by
Moody's or S&P; a Portfolio other than the Money Market Portfolio may invest
in them only if the Adviser or Portfolio Manager believes that at the time of
investment the notes are of comparable quality to the other commercial paper
in which the Portfolio may invest. With respect to the Money Market Portfolio,
determination of eligibility for the Portfolio will be in accordance with the
standards described in the discussion of the Portfolio in the prospectus on
"Investment Objectives and Policies." Master demand notes are considered by
the Portfolio to have a maturity of one day unless the Adviser or Portfolio
Manager has reason to believe that the borrower could not make immediate
repayment upon demand. See the Appendix in the Prospectus for a description of
Moody's and S&P ratings applicable to commercial paper.
CONVERTIBLE SECURITIES
All Portfolios except the Money Market Portfolio may invest in convertible
securities. The convertible securities in the Portfolio's portfolios are
fixed-income securities which may be converted or exchanged at a stated
exchange ratio into underlying shares of common stock. The exchange ratio for
any particular convertible security may be adjusted from time to time due to
stock splits, dividends, spin-offs, other corporate distributions, or
scheduled changes in the exchange ratio. Convertible bonds and convertible
preferred stocks, until converted, have general characteristics similar to
both fixed-income and equity securities. Although to a lesser extent than with
fixed-income securities generally, the market value of convertible securities
tends to decline as interest rates increase and, conversely, tends to increase
as interest rates decline. In addition, because of the conversion or exchange
feature, the market value of convertible securities tends to vary with
fluctuations in the market value of the underlying common stocks, and,
therefore, also will react to variations in the general market for equity
securities. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
As fixed-income securities, convertible securities are investments which
provide for a stable stream of income with generally higher yields than common
stocks. Of course, like all fixed-income securities, there can be no assurance
of current income because the issuers of the convertible securities may
default in their obligations. Convertible securities, however, generally offer
lower interest or dividend yields than non-convertible securities of similar
quality because of the potential for capital appreciation.
A convertible security, in addition to providing fixed-income, offers the
potential for capital appreciation through the conversion feature which
enables the holder to benefit from increases in the market price of the
underlying common stock. In selecting the securities for a Portfolio, the
Adviser or Portfolio Manager gives substantial consideration to the potential
for capital appreciation of the common stock underlying the convertible
securities. However, there can be no assurance of capital appreciation because
securities prices fluctuate.
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Convertible securities generally are subordinated to other similar but non-
convertible securities of the same issuer although convertible bonds, as
corporate debt obligations, enjoy seniority in right of payment to all equity
securities, and convertible preferred stock is senior to common stock, of the
same issuer. However, because of the subordination feature, convertible bonds
and convertible preferred stock typically have lower ratings than similar non-
convertible securities.
A "synthetic convertible" is created by combining distinct securities which
possess the two principal characteristics of a true convertible, i.e., fixed-
income ("fixed-income component") and the right to acquire equity securities
("convertibility component"). This combination is achieved by investing in
non-convertible fixed-income securities (non-convertible bonds and preferred
stocks) and in warrants, granting the holder the right to purchase a specified
quantity of securities within a specified period of time at a specified price.
However, the synthetic convertible differs from the true convertible
security in several respects. Unlike a true convertible, which is a single
security having a unitary market value, a synthetic convertible is comprised
of two distinct securities, each with its own market value. Therefore, the
"market value" of a synthetic convertible is the sum of the values of its
fixed-income component and its convertibility component. For this reason, the
value of a synthetic convertible and a true convertible security will respond
differently to market fluctuations.
More flexibility is possible in the assembly of a synthetic convertible than
in the purchase of a convertible security in that its two components may be
purchased separately. For example, a Portfolio Manager may purchase a warrant
for inclusion in a synthetic convertible but temporarily hold short-term
investments while postponing purchase of a corresponding bond pending
development of more favorable market conditions.
A holder of a synthetic convertible faces the risk that the price of the
stock underlying the convertibility component will decline, causing a decline
in the value of the warrant; should the price of the stock fall below the
exercise price and remain there throughout the exercise period, the entire
amount paid for the warrant would be lost. Since a synthetic convertible
includes the fixed-income component as well, the holder of a synthetic
convertible also faces the risk that interest rates will rise, causing a
decline in the value of the fixed-income instrument.
REPURCHASE AGREEMENTS
All Portfolios may invest in repurchase agreements, which entail the
purchase of a portfolio eligible security from a bank or broker-dealer that
agrees to repurchase the security at the Portfolio's cost plus interest within
a specified time (normally one day). Repurchase agreements permit an investor
to maintain liquidity and earn income over periods of time as short as
overnight. If a Portfolio acquires securities from a bank or broker-dealer it
may simultaneously enter into a repurchase agreement with the seller wherein
the seller agrees at the time of sale to repurchase the security at a mutually
agreed upon time and price. The term of such an agreement is generally quite
short, possibly overnight or for a few days, although it may extend over a
number of months (up to one year) from the date of delivery. The resale price
is in excess of the purchase price by an amount which reflects an agreed upon
market rate of return, effective for the period of time the Portfolio is
invested in the security. This results in a fixed rate of return protected
from market fluctuations during the period of the agreement. This rate is not
tied to the coupon rate on the security subject to the repurchase agreement.
If the party agreeing to repurchase should default and if the value of the
securities held by a Portfolio should fall below the repurchase price, a loss
could be incurred. Repurchase agreements will be entered into only where the
underlying security is within the three highest credit categories assigned by
established rating agencies (Aaa, Aa, or A by Moody's or AAA, AA, or A by S&P)
or, if not rated by Moody's or S&P, are of equivalent investment quality as
determined by the Adviser or Portfolio Manager, except that the Money Market
Portfolio will enter into repurchase agreements only where the underlying
securities are of the quality that is eligible for the Portfolio as described
in the discussion of that Portfolio's investment objective and policies.
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Under the Investment Company Act of 1940 (the "1940 Act"), repurchase
agreements are considered to be loans by the purchaser collateralized by the
underlying securities. The Adviser or Portfolio Manager to a Portfolio
monitors the value of the underlying securities at the time the repurchase
agreement is entered into and at all times during the term of the agreement to
ensure that its value always equals or exceeds the agreed upon repurchase
price to be paid to the Portfolio. The Adviser or Portfolio Manager, in
accordance with procedures established by the Board of Trustees, also
evaluates the creditworthiness and financial responsibility of the banks and
brokers or dealers with which the Portfolio enters into repurchase agreements.
A Portfolio may not enter into a repurchase agreement having more than seven
days remaining to maturity if, as a result, such agreements, together with any
other securities which are not readily marketable, would exceed 15% of the
total assets of the Portfolio (10% for the Money Market Portfolio). If the
seller should become bankrupt or default on its obligations to repurchase the
securities, a Portfolio may experience delay or difficulties in exercising its
rights to the securities held as collateral and might incur a loss if the
value of the securities should decline. A Portfolio also might incur
disposition costs in connection with liquidating the securities.
BORROWING
Each Portfolio may borrow up to certain limits. A Portfolio may not borrow
if, as a result of such borrowing, the total amount of all money borrowed by
the Portfolio exceeds 10% of the value of its net assets (at the time of such
borrowing), or if borrowing for temporary purposes, such as to facilitate
redemptions, 25% of the value of its net assets. These limits may be exceeded
by 5% of the value of a Portfolio's net assets so that they are 15% and 30%,
respectively, to the extent that a Portfolio purchases securities on a "when-
issued" basis or enters into firm-commitment agreements to purchase
securities, both of which are considered borrowings for purposes of the Fund's
limits. This borrowing may be unsecured. Borrowing may exaggerate the effect
on net asset value of any increase or decrease in the market value of a
Portfolio. Money borrowed will be subject to interest costs which may or may
not be recovered by appreciation of the securities purchased. A Portfolio also
may be required to maintain minimum average balances in connection with such
borrowing or to pay a commitment or other fee to maintain a line of credit;
either of these requirements would increase the cost of borrowing over the
stated interest rate.
Reverse repurchase agreements will be included as borrowing subject to the
borrowing limitations described above.
REVERSE REPURCHASE AGREEMENTS AND OTHER BORROWINGS
Among the forms of borrowing in which the High Yield Bond, Managed Bond,
Government Securities, Aggressive Equity, Growth LT, Bond and Income, Equity
Index, and Emerging Markets Portfolios may engage is the entry into reverse
repurchase agreements, which involves the sale of a debt security held by the
Portfolio, with an agreement by that Portfolio to repurchase the security at a
stated price, date and interest payment.
A Portfolio will use the proceeds of a reverse repurchase agreement to
purchase other money market instruments which either mature at a date
simultaneous with or prior to the expiration of the reverse repurchase
agreement or which are held under an agreement to resell maturing as of that
time. The use of reverse repurchase agreements by a Portfolio creates leverage
which increases a Portfolio's investment risk. If the income and gains on
securities purchased with the proceeds of reverse repurchase agreements exceed
the cost of the agreements, the Portfolio's earnings or net asset value will
increase faster than otherwise would be the case; conversely, if the income
and gains fail to exceed the costs, earnings or net asset value would decline
faster than otherwise would be the case. A Portfolio will enter into a reverse
repurchase agreement only when the interest income to be earned from the
investment of the proceeds of the transaction is greater than the interest
expense of the transaction. However, reverse repurchase agreements involve the
risk that the market value of securities retained by the Portfolio may decline
below the repurchase price of the securities sold by the Portfolio which it is
obligated to repurchase.
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Under the 1940 Act, reverse repurchase agreements may be considered to be
borrowings by the seller; accordingly, a Portfolio will limit its investments
in reverse repurchase agreements consistent with the borrowing limits
applicable to the Portfolio. See "Borrowing" for further information on these
limits.
A Portfolio may enter into reverse repurchase agreements with banks or
broker-dealers. Entry into such agreements with broker-dealers requires the
creation and maintenance of a segregated account consisting of U.S. Government
securities or cash or cash equivalents equal in value to its obligations in
respect of reverse repurchase agreements.
FIRM COMMITMENT AGREEMENTS AND WHEN-ISSUED SECURITIES
All Portfolios may enter into firm commitment agreements for the purchase of
securities at an agreed upon price on a specified future date. A Portfolio may
purchase new issues of securities on a "when-issued" basis, whereby the
payment obligation and interest rate on the instruments are fixed at the time
of the transaction. Such transactions might be entered into, for example, when
the Adviser or Portfolio Manager to a Portfolio anticipates a decline in the
yield of securities of a given issuer and is able to obtain a more
advantageous yield by committing currently to purchase securities to be issued
or delivered later.
A Portfolio will not enter into such a transaction for the purpose of
investment leverage. Liability for the purchase price--and all the rights and
risks of ownership of the securities--accrue to the Portfolio at the time it
becomes obligated to purchase such securities, although delivery and payment
occur at a later date. Accordingly, if the market price of the security should
decline, the effect of the agreement would be to obligate the Portfolio to
purchase the security at a price above the current market price on the date of
delivery and payment. During the time the Portfolio is obligated to purchase
such securities it will maintain in a segregated account U.S. Government
securities, high-grade debt obligations, and/or cash or cash equivalents of an
aggregate current value sufficient to make payment for the securities.
LOANS OF PORTFOLIO SECURITIES
For the purpose of realizing additional income, each Portfolio, except the
Growth, Equity Income, Multi-Strategy, and Equity Index Portfolios, may make
secured loans of its portfolio securities to broker-dealers or U.S. banks
provided: (i) such loans are secured continuously by collateral consisting of
cash, cash equivalents, or U.S. Government securities maintained on a daily
marked-to-market basis in an amount or at a market value at least equal to the
current market value of the securities loaned; (ii) the Portfolio may at any
time call such loans and obtain the securities loaned; (iii) the Portfolio
will receive an amount in cash at least equal to the interest or dividends
paid on the loaned securities; and (iv) the aggregate market value of
securities loaned will not at any time exceed 25% of the total assets of the
Portfolio. In addition, it is anticipated that the Portfolio may share with
the borrower some of the income received on the collateral for the loan or
that it will be paid a premium for the loan. It should be noted that in
connection with the lending of its portfolio securities, the Portfolio is
exposed to the risk of delay in recovery of the securities loaned or possible
loss of rights in the collateral should the borrower become insolvent. In
determining whether to lend securities, the Adviser or Portfolio Manager
considers all relevant facts and circumstances including the creditworthiness
of the borrower. Voting rights attached to the loaned securities may pass to
the borrower with the lending of portfolio securities. However, the Portfolio
intends to call loaned voting securities if important shareholder meetings are
imminent.
SHORT SALES AGAINST THE BOX
The Aggressive Equity and Equity Portfolios may enter into short sales
"against the box." A short sale is made by selling a security the Portfolio
does not own. A short sale is "against the box" when, at all times during
which a short position is open, the Portfolio owns an equal amount of such
securities, or owns securities giving it the right, without payment of future
consideration, to obtain an equal amount of securities sold short. No more
than 15% of the value of the Equity Portfolio's net assets will be subject to
such short sales at any time.
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RESTRICTED SECURITIES (PRIVATE PLACEMENTS)
The Money Market, High Yield Bond, Managed Bond, Government Securities,
Growth, Aggressive Equity, Growth LT, Equity Income, Multi-Strategy, Equity,
Bond and Income, International, and Emerging Markets Portfolios may invest in
restricted securities (including privately placed securities) but a Portfolio
will not acquire such securities if they are illiquid and other securities
that are illiquid, such as repurchase agreements maturing in more than seven
days, if as a result they would comprise more than 15% of the value of the
Portfolio's total assets, and in the case of the Money Market Portfolio, 10%
of the value of its Portfolio assets. The privately placed securities in which
these Portfolios may invest are called restricted securities because there are
restrictions or conditions attached to their resale.
Restricted securities may be sold only in a public offering with respect to
which a registration statement is in effect under the Securities Act of 1933
or in a transaction exempt from such registration such as certain privately
negotiated transactions. Where registration is required, the Portfolio may be
obligated to pay all or part of the registration expenses and a considerable
period may elapse between the time of the decision to sell and the time the
Portfolio may be permitted to sell a security under an effective registration
statement. If, during such a period, adverse market conditions were to
develop, the Portfolio might obtain a less favorable price than prevailed when
it decided to sell. Restricted securities will be priced at fair value as
determined in good faith under the direction of the Board of Trustees. If
through the appreciation of restricted securities or the depreciation of
unrestricted securities, the Portfolio should be in a position where more than
15% of the value of its total assets are invested in restricted securities
that are illiquid and other securities that are illiquid, the Portfolio will
consider whether steps should be taken to assure liquidity.
Certain restricted securities may be purchased by certain "qualified
institutional buyers" without the necessity for registration of the
securities. A Portfolio may acquire such a security without the security being
treated as illiquid for purposes of the above-described limitation on
acquisition of illiquid assets if the Portfolio Manager determines that the
security is liquid under guidelines adopted by the Fund's Board of Trustees.
Investing in such restricted securities could have the effect of increasing
the level of the Portfolio's illiquidity to the extent that qualified
institutional buyers become, for a time, uninterested in purchasing these
securities.
FOREIGN SECURITIES
The Money Market, High Yield Bond, Managed Bond, Government Securities,
Aggressive Equity, Growth LT, Multi-Strategy, International, and Emerging
Markets Portfolios may invest directly in U.S. dollar-denominated corporate
debt securities of foreign issuers, certain foreign bank obligations and U.S.
dollar-denominated obligations of foreign governments, foreign government
agencies and international agencies. The Growth, Growth LT, Equity Income,
Multi-Strategy and Equity Index Portfolios may invest in equity securities of
foreign issuers if U.S. exchange listed or if otherwise included in the S&P
500. The Growth LT Portfolio may invest in U.S. exchange listed securities of
foreign issuers and may invest up to 25% of its assets in foreign securities
denominated in a foreign currency and not publicly traded in the United
States. The Aggressive Equity Portfolio may invest in securities of foreign
issuers that are traded in U.S. securities markets and may invest up to 15% of
its assets in securities that are traded principally in securities markets
outside of the United States. The International and Emerging Markets
Portfolios may invest in equity securities of foreign corporations,
nonconvertible fixed income securities denominated in foreign currencies, and
in securities represented by European Depository Receipts (" EDRs"), Global
Depositary Receipts ("GDRs"), or other securities convertible into equity
securities of foreign issuers. The Growth LT Portfolio may also invest in EDRs
and GDRs and other types of receipts of shares evidencing ownership of the
underlying foreign securities. The Managed Bond and Government Securities
Portfolios may each invest up to 20% of their assets in non-U.S. dollar-
denominated debt securities of foreign issuers. All Portfolios may purchase
American Depositary Receipts ("ADRs") which are dollar-denominated receipts
issued generally by domestic banks and representing the deposit with the bank
of a security of a foreign issuer. ADRs are publicly-traded on exchanges or
over-the-counter in the United States.
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Investing in the securities of foreign issuers involves special risks and
considerations not typically associated with investing in U.S. companies.
These risks are intensified with respect to investments in emerging market
countries. These include differences in accounting, auditing and financial
reporting standards, generally higher commission rates on foreign portfolio
transactions, the possibility of expropriation, nationalization, or
confiscatory taxation, adverse changes in investment or exchange control
regulations, trade restrictions, political instability (which can affect U.S.
investments in foreign countries), and potential restrictions on the flow of
international capital. It may be more difficult to obtain and enforce
judgments against foreign entities. Additionally, income (including dividends
and interest) from foreign securities may be subject to foreign taxes,
including foreign withholding taxes, and other foreign taxes may apply with
respect to securities transactions. Transactions on foreign exchanges or over-
the-counter markets may involve greater time from the trade date until
settlement than for domestic securities transactions and, if the securities
are held abroad, may involve the risk of possible losses through the holding
of securities in custodians and depositories in foreign countries. Foreign
securities often trade with less frequency and volume than domestic securities
and therefore may exhibit greater price volatility. Changes in foreign
exchange rates will affect the value of those securities which are denominated
or quoted in currencies other than the U.S. dollar. Investing in ADRs may
involve many of the same special risks associated with investing in securities
of foreign issuers other than liquidity risks.
There is generally less publicly available information about foreign
companies comparable to reports and ratings that are published about companies
in the United States. Foreign companies are also generally not subject to
uniform accounting and auditing and financial reporting standards, practices,
and requirements comparable to those applicable to U.S. companies.
It is contemplated that most foreign securities will be purchased in over-
the-counter markets or on stock exchanges located in the countries in which
the respective principal offices of the issuers of the various securities are
located, if that is the best available market. Foreign stock markets are
generally not as developed or efficient as those in the United States. While
growing in volume, they usually have substantially less volume than the New
York Stock Exchange, and securities of some foreign companies are less liquid
and more volatile than securities of comparable U.S. companies. Similarly,
volume and liquidity in most foreign bond markets is less than in the United
States and at times, volatility of price can be greater than in the United
States. Fixed commissions on foreign stock exchanges are generally higher than
negotiated commissions on U.S. exchanges, although the Portfolio will endeavor
to achieve the most favorable net results on its portfolio transactions. There
is generally less government supervision and regulation of stock exchanges,
brokers, and listed companies than in the United States.
With respect to certain foreign countries, there is the possibility of
adverse changes in investment or exchange control regulations,
nationalization, expropriation or confiscatory taxation, limitations on the
removal of funds or other assets of the Portfolio, political or social
instability, or diplomatic developments which could affect United States
investments in those countries. Moreover, individual foreign economies may
differ favorably or unfavorably from the United States' economy in such
respects as growth of gross national product, rate of inflation, capital
reinvestment, resource self-sufficiency, and balance of payments position.
The dividends and interest payable on certain of the Portfolios' foreign
portfolio securities may be subject to foreign withholding taxes, thus
reducing the net amount of income available for distribution.
Investors should understand that the expense ratio of the International
Portfolio can be expected to be higher than investment companies investing in
domestic securities since the cost of maintaining the custody of foreign
securities and the rate of advisory fees paid by the Portfolio are higher.
Investment in foreign securities also involves the risk of possible losses
through the holding of securities in custodian banks and securities
depositories in foreign countries. The Fund has entered into a Custody
Agreement with Investors Fiduciary Trust Company ("IFTC"), a trust company
chartered under the laws of Missouri, which has entered into a Subcustodial
Agreement with The Chase Manhattan Bank, N.A., ("Chase") under which Chase,
together with certain of its foreign branches and agencies and foreign banks
and securities depositories acting as subcustodian to Chase, will maintain
custody of the securities and other assets of foreign issuers for the
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Fund. Under these agreements, Chase and IFTC have agreed to use reasonable
care in the safekeeping of these securities and to indemnify and hold harmless
the Fund from and against any loss which shall occur as a result of the
failure of a foreign bank or securities depository holding such securities to
exercise reasonable care in the safekeeping of such securities to the same
extent as if the securities were held in New York. Pursuant to requirements of
the Securities and Exchange Commission ("SEC"), Chase is required to use
reasonable care in the selection of foreign subcustodians, and to consider the
financial strength of the foreign subcustodian, its general reputation and
standing in the country in which it is located, its ability to provide
efficiently the custodial services required, and the relative costs for the
services to be rendered by it. No assurance can be given that expropriation,
nationalization, freezes, or confiscation of assets, which would impact assets
of the Portfolio, will not occur, and shareholders bear the risk of losses
arising from these or other events.
As indicated in the Prospectus, the International Portfolio may invest in
shares of investment companies organized to invest in foreign countries. Under
the 1940 Act, the Portfolio may not own more than 3% of the outstanding voting
stock of an investment company, invest more than 5% of the Portfolio's total
assets in any one investment company, or invest more than 10% of the
Portfolio's total assets in the securities of investment companies.
The International Portfolio will invest in the securities of issuers
domiciled or primarily traded in at least five foreign countries if the
Portfolio has invested at least 80% of its net assets in foreign issuers. If
the Portfolio has less than 20% of its net assets in foreign issuers, then all
of such investment may be in issuers domiciled or primarily traded in one
country. If the Portfolio has at least 20% but less than 40% of its net assets
in foreign issuers, then such investment must be allocated to issuers
domiciled or primarily traded in at least two foreign countries. Similarly, if
the Portfolio has at least 40% but less than 60% of its net assets invested in
foreign issuers such investment must be allocated to at least three foreign
countries. Foreign investments must be allocated to at least four foreign
countries if such investments comprise at least 60% but less than 80% of the
Portfolio's net assets. The Portfolio will not invest more than 20% of its net
assets in securities of issuers domiciled or primarily traded in any one
country, except that the Portfolio may invest up to 35% of its net assets in
issuers domiciled or primarily traded in any one of the following countries:
Australia, Canada, France, Japan, the United Kingdom, or Germany. The
Portfolio is not subject to any limit upon investment in issuers domiciled or
primarily traded in the United States.
FOREIGN CURRENCY TRANSACTIONS
Generally, the foreign exchange transactions of the Managed Bond, Government
Securities, Aggressive Equity, Growth LT, Multi-Strategy, International, and
Emerging Markets Portfolios will be conducted on a spot, i.e., cash, basis at
the spot rate for purchasing or selling currency prevailing in the foreign
exchange market. This rate, under normal market conditions, differs from the
prevailing exchange rate in an amount generally less than 0.15 of 1% due to
the costs of converting from one currency to another. However, the Managed
Bond, Government Securities, Aggressive Equity, Growth LT, Multi-Strategy,
International, and Emerging Markets Portfolios have authority to deal in
forward foreign exchange as a hedge against possible fluctuations in foreign
exchange rates. This is accomplished through contractual agreements to
purchase or sell a specified currency at a specified future date and price set
at the time of the contract. A Portfolio's dealings in forward foreign
exchange will be limited to hedging involving either specific transactions or
portfolio positions. Transaction hedging is the purchase or sale of forward
foreign currency with respect to specific receivables or payables of a
Portfolio arising from the purchase and sale of portfolio securities, the sale
and redemption of shares of a Portfolio, or the payment of dividends and
distributions by a Portfolio. Position hedging is the sale of forward foreign
currency with respect to portfolio security positions denominated or quoted in
a foreign currency. In connection with either of these types of hedging, a
Portfolio may also engage in proxy hedging. Proxy hedging entails entering
into a forward contract to buy or sell a currency whose changes in value are
generally considered to be moving in correlation with a currency or currencies
in which portfolio securities are or are expected to be denominated. Proxy
hedging is often used when a currency in which portfolio securities are
denominated is difficult to hedge. The precise matching of a currency with a
proxy currency will not generally be possible and there may be some additional
currency risk in connection with such hedging transactions. The Portfolios
will not speculate in forward foreign exchange.
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Forward Foreign Currency Contracts. The Managed Bond, Government Securities,
Aggressive Equity, Growth LT, Multi-Strategy, International, and Emerging
Markets Portfolios may enter into forward foreign currency contracts only
under the following circumstances. First, when a Portfolio enters into a
contract for the purchase or sale of a security denominated in a foreign
currency, it may desire to "lock in" the U.S. dollar price of the security. By
entering into a forward contract for the purchase or sale of the amount of
foreign currency involved in the underlying security transactions (or a proxy
currency considered to move in correlation with that currency) for a fixed
amount of dollars, a Portfolio may be able to protect itself against a
possible loss resulting from an adverse change in the relationship between the
U.S. dollar and the subject foreign currency during the period between the
date the security is purchased or sold and the date on which payment in made
or received.
Second, when the Portfolio Manager of a Portfolio believes that the currency
of a particular foreign country may suffer a substantial movement against
another currency, it may enter into a forward contract to sell or buy the
amount of the former foreign currency (or a proxy currency considered to move
in correlation with that currency), approximating the value of some or all of
the Portfolio's portfolio securities denominated in such foreign currency. The
precise matching of the forward contract amounts and the value of the
securities involved will not generally be possible since the future value of
such securities in foreign currencies will change as a consequence of market
movements in the value of those securities between the date the forward
contract is entered into and the date it matures. The projection of short-term
currency market movements is extremely difficult and the successful execution
of a short-term hedging strategy is highly uncertain. In no event will a
Portfolio enter into forward contracts under this second circumstance, or
maintain a net exposure to such contracts, where the consummation of the
contracts would obligate the Portfolio to deliver an amount of foreign
currency in excess of the value of that Portfolio's portfolio securities or
other assets denominated in foreign currency. In addition, a Portfolio will
not enter into forward contracts under this second circumstance, if, as a
result, the Portfolio will have more than 25% of the value of its total assets
committed to the consummation of such contracts. Under normal circumstances,
consideration of the prospect for currency parities will be incorporated into
the longer term investment decisions made with regard to overall
diversification strategies. The Portfolios will cover outstanding forward
currency contracts by maintaining liquid portfolio securities denominated in
the currency underlying the forward contract or the currency being hedged. To
the extent that a Portfolio is not able to cover its forward currency
positions with underlying portfolio securities, the Portfolio's custodian bank
will place cash or liquid equity or debt securities in a separate account of
the Portfolio in an amount equal to the value of the Portfolio's total assets
committed to the consummation of forward foreign currency exchange contracts.
If the value of the securities used to cover a position or the value of asset
placed in the separate account declines, a Portfolio will find alternative
cover or additional cash or securities will be placed in the account on a
daily basis so that the value of the segregated assets will equal the amount
of the Portfolio's commitments with respect to such contracts.
When a Portfolio Manager of a Portfolio believes that the currency of a
particular foreign country may suffer a decline against the U.S. dollar, that
Portfolio may enter into a forward contract to sell the amount of foreign
currency approximating the value of some or all of the Portfolio's holdings
denominated in such foreign currency. At the maturity of the forward contract
to sell, the Portfolio may either sell the portfolio security and make
delivery of the foreign currency or it may retain the security and terminate
its contractual obligation to deliver the foreign currency by purchasing an
"offsetting" contract with the same currency trader obligating the Portfolio
to purchase, on the same maturity date, the same amount of the foreign
currency.
It is impossible to forecast with absolute precision the market value of
portfolio securities at the expiration of the contract. Accordingly, it may be
necessary for a Portfolio to purchase additional foreign currency on the spot
market (and bear the expense of such purchase) if the market value of the
security is less than the amount of foreign currency the Portfolio is
obligated to deliver and if a decision is made to sell the security and make
delivery of the foreign currency. Conversely, it may be necessary to sell on
the spot market some of the foreign currency received upon the sale of the
portfolio security if its market value exceeds the amount of foreign currency
the Portfolio is obligated to deliver.
If a Portfolio retains the portfolio security and engages in an offsetting
transaction, the Portfolio will incur a gain or a loss (as described below) to
the extent that there has been movement in forward contract prices. If the
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Portfolio engages in an offsetting transaction, it may subsequently enter into
a new forward contract to sell the foreign currency. Should forward prices
decline during the period between the Portfolio's entering into a forward
contract for the sale of a foreign currency and the date it enters into an
offsetting contract for the purchase of the foreign currency, the Portfolio
will realize a gain to the extent the price of the currency it has agreed to
sell exceeds the price of the currency it has agreed to purchase. Should
forward prices increase, the Portfolio will suffer a loss to the extent the
price of the currency it has agreed to purchase exceeds the price of the
currency it has agreed to sell.
A Portfolio's dealings in forward foreign currency exchange contracts will
be limited to the transactions described above. Of course, a Portfolio is not
required to enter into such transactions with regard to their foreign currency
denominated securities and will not do so unless deemed appropriate by its
Portfolio Manager. It also should be realized that this method of protecting
the value of a Portfolio's holdings in securities against a decline in the
value of a currency does not eliminate fluctuations in the underlying prices
of the securities. It simply establishes a rate of exchange which one can
achieve at some future point in time. Additionally, although such contracts
tend to minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time they tend to limit any potential gain which might
result from the value of such currency increase.
Although a Portfolio values its shares in terms of U.S. dollars, it does not
intend to convert its holdings of foreign currencies into U.S. dollars on a
daily basis. It will do so from time to time, and investors should be aware of
the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to a Portfolio
at one rate, while offering a lesser rate of exchange should the Portfolio
desire to resell that currency to the dealer.
The Aggressive Equity, Growth LT, and Emerging Markets Portfolios may also
purchase and write options on foreign currencies, invest in foreign currency
futures contracts, and purchase and write options thereon, as described below.
OPTIONS
In pursuing their investment objectives, the High Yield Bond, Managed Bond,
Government Securities, Aggressive Equity, Growth LT, Equity Income, Multi-
Strategy, and Emerging Markets Portfolios may engage in the purchase and
writing of put and call options on securities. In pursuing their investment
objectives, the Aggressive Equity, Growth LT, Equity Income, Multi-Strategy,
Equity Index, and Emerging Markets Portfolios may purchase put and call
options on stock indexes. The Equity Portfolio may write exchange-listed call
options.
Purchasing and Writing Options on Securities. The High Yield Bond, Managed
Bond, Government Securities, Aggressive Equity, Growth LT, Equity Income,
Multi-Strategy, and Emerging Markets Portfolios may purchase and write put and
call options on securities. A Portfolio may purchase and sell (write) (i) both
put and call options on debt or other securities in standardized contracts
traded on national securities exchanges, boards of trade, similar entities, or
for which an established over-the-counter market exists; and (ii) agreements,
sometimes called cash puts, which may accompany the purchase of a new issue of
bonds from a dealer. The Equity Portfolio may only write call options that are
traded on a national securities exchange, and it may purchase a call option on
securities only to effect a "closing purchase transaction" (i.e., the purchase
of a call covering the same underlying security and having the same exercise
price and expiration date as a call previously written by the Equity Portfolio
on which it wished to terminate its obligation).
An option on a security is a contract that gives the holder of the option,
in return for a premium, the right to buy from (in the case of a call) or sell
to (in the case of a put) the writer of the option the security underlying the
option at a specified exercise price at any time during the term of the
option. The writer of an option on a security has the obligation upon exercise
of the option to deliver the underlying security upon payment of the exercise
price or to pay the exercise price upon delivery of the underlying security. A
Portfolio may purchase put options on securities to protect holdings in an
underlying or related security against a substantial decline in market value.
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Securities are considered related if their price movements generally correlate
to one another. For example, the purchase of put options on debt securities
held in a Portfolio will enable a Portfolio to protect, at least partially, an
unrealized gain in an appreciated security without actually selling the
security. In addition, the Portfolio will continue to receive interest income
on such security.
A Portfolio may purchase call options on securities to protect against
substantial increases in prices of securities the Portfolio intends to
purchase pending its ability to invest in such securities in an orderly
manner. A Portfolio may sell put or call options it has previously purchased,
which could result in a net gain or loss depending on whether the amount
realized on the sale is more or less than the premium and other transaction
costs paid on the put or call option which is sold. A Portfolio may also allow
options to expire unexercised.
Gains or losses on the Portfolios' transactions in securities index options
depend primarily on price movements in the stock market generally (or, for
narrow market indexes, in a particular industry or segment of the market)
rather than the price movements of individual securities held by a Portfolio
of the Fund. A Portfolio may sell securities index options prior to expiration
in order to close out its positions in stock index options which it has
purchased. A Portfolio may also allow options to expire unexercised.
A Portfolio may write call options and put options only if they are
"covered" or "secured." In the case of a call option on a security, the option
is "covered" if the Portfolio owns the security underlying the call or has an
absolute and immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, cash or cash
equivalents in such amount are placed in a segregated account by its
custodian) upon conversion or exchange of other securities held by the
Portfolio. A put is secured if the Portfolio maintains cash, cash equivalents
or U.S. Government securities with a value equal to the exercise price in a
segregated account or holds a put on the same underlying security at an equal
or greater exercise price.
In the case of options on certain U.S. Government securities, the Portfolio
will maintain, in a segregated account with the Fund's Custodian, cash or cash
equivalents, or U.S. Government securities with a value sufficient to meet its
obligations under the call, or by other means which would permit immediate
satisfaction of the Portfolio's obligation as writer of the option. Prior to
exercise or expiration, an option may be closed out by an offsetting purchase
or sale of an option of the same series.
Prior to the earlier of exercise or expiration, an option may be closed out
by an offsetting purchase or sale of an option of the same series (type,
exchange, underlying security, exercise price, and expiration). There can be
no assurance, however, that a closing purchase or sale transaction can be
effected when the Portfolio desires.
A Portfolio will realize a capital gain from a closing purchase transaction
if the cost of the closing option is less than the premium received from
writing the option, or, if it is more, the Portfolio will realize a capital
loss. If the premium received from a closing sale transaction is more than the
premium paid to purchase the option, the Portfolio will realize a capital gain
or, if it is less, the Portfolio will realize a capital loss. The principal
factors affecting the market value of a put or a call option include supply
and demand, interest rates, the current market price of the underlying
security in relation to the exercise price of the option, the volatility of
the underlying security, and the time remaining until the expiration date.
The premium paid for a put or call option purchased by a Portfolio is an
asset of the Portfolio. The premium received for an option written by a
Portfolio is recorded as a deferred credit. The value of an option purchased
or written is marked-to-market daily and is valued at the closing price on the
exchange on which it is traded or, if not traded on an exchange or no closing
price is available, at the mean between the last bid and asked prices.
Purchasing Options on Stock Indexes. The Aggressive Equity, Growth LT,
Equity Income, Multi-Strategy, Equity Index and Emerging Markets Portfolios
may purchase exchange traded put and call options on stock indexes. Like other
options listed on United States securities exchanges, index options are issued
by the Options Clearing Corporation ("OCC").
A stock index is a method of reflecting in a single number the market values
of many different stocks or, in the case of value weighted indices that take
into account prices of component stocks and the number of shares outstanding,
the market values of many different companies. Stock indexes are compiled and
published by various sources, including securities exchanges. An index may be
designed to be representative of the stock
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market as a whole, of a broad market sector (e.g., industrials), or of a
particular industry (e.g., electronics). An index may be based on the prices
of all, or only a sample, of the stocks whose value it is intended to
represent.
A stock index is ordinarily expressed in relation to a "base" established
when the index was originated. The base may be adjusted from time to time to
reflect, for example, capitalization changes affecting component stocks. In
addition, stocks may from time to time be dropped from or added to an index
group. These changes are within the discretion of the publisher of the index.
Different stock indexes are calculated in different ways. Often the market
prices of the stocks in the index group are "value weighted;" that is, in
calculating the index level, the market price of each component stock is
multiplied by the number of shares outstanding. Because of this method of
calculation, changes in the stock prices of larger corporations will generally
have a greater influence on the level of a value weighted (or sometimes
referred to as a capitalization weighted) index than price changes affecting
smaller corporations.
In general, index options are very similar to stock options, and are
basically traded in the same manner. However, when an index option is
exercised, the exercise is settled by the payment of cash--not by the delivery
of stock. The assigned writer of a stock option is obligated to pay the
exercising holder cash in an amount equal to the difference (expressed in
dollars) between the closing level of the underlying index on the exercise
date and the exercise price of the option, multiplied by a specified index
"multiplier." A multiplier of 100, for example, means that a one-point
difference will yield $100.
In order to earn additional income on its portfolio securities or to protect
partially against declines in the value of such securities, a Portfolio may
write covered call options. The exercise price of a call option may be below,
equal to, or above the current market value of the underlying security at the
time the option is written. During the option period, a covered call option
writer may be assigned an exercise notice by the broker-dealer through whom
such call option was sold requiring the writer to deliver the underlying
security against payment of the exercise price. This obligation is terminated
upon the expiration of the option period or at such earlier time in which the
writer effects a closing purchase transaction. Closing purchase transactions
will ordinarily be effected to realize a profit on an outstanding call option,
to prevent an underlying security from being called, to permit the sale of the
underlying security, or to enable the Portfolio to write another call option
on the underlying security with either a different exercise price or
expiration date or both.
In order to earn additional income or to facilitate its ability to purchase
a security at a price lower than the current market price of such security, a
Portfolio may write secured put options. During the option period, the writer
of a put option may be assigned an exercise notice by the broker-dealer
through whom the option was sold requiring the writer to purchase the
underlying security at the exercise price.
A Portfolio will enter only into options which are standardized and traded
on a U.S. exchange or board of trade, or for which an established over-the-
counter market exists.
Risks of Options Transactions. There are several risks associated with
transactions in options. For example, there are significant differences
between the securities and options markets that could result in an imperfect
correlation between these markets, causing a given transaction not to achieve
its objectives. A decision as to whether, when, and how to use options
involves the exercise of skill and judgment, and even a well-conceived
transaction may be unsuccessful to some degree because of market behavior or
unexpected events.
There can be no assurance that a liquid market will exist when a Portfolio
seeks to close out an option position. If a Portfolio were unable to close out
an option it had purchased on a security, it would have to exercise the option
to realize any profit or the option may expire worthless. If a Portfolio were
unable to close out a covered call option it had written on a security, it
would not be able to sell the underlying security
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unless the option expired without exercise. As the writer of a covered call
option, a Portfolio forgoes, during the option's life, the opportunity to
profit from increases in the market value of the security covering the call
option above the sum of the premium and the exercise price of the call.
If trading were suspended in an option purchased by a Portfolio, the
Portfolio would not be able to close out the option. If restrictions on
exercise were imposed, the Portfolio might be unable to exercise an option it
has purchased.
With respect to index options, current index levels will ordinarily continue
to be reported even when trading is interrupted in some or all of the stocks
in an index group. In that event, the reported index levels will be based on
the current market prices of those stocks that are still being traded (if any)
and the last reported prices for those stocks that are not currently trading.
As a result, reported index levels may at times be based on non-current price
information with respect to some or even all of the stocks in an index group.
Exchange rules permit (and in some instances require) the trading of index
options to be halted when the current value of the underlying index is
unavailable or when trading is halted in stocks accounts for more than a
specified percentage of the value of the underlying index. In addition, as
with other types of options, an exchange may halt the trading of index options
whenever it considers such action to be appropriate in the interests of
maintaining a fair and orderly market and protecting investors. If a trading
halt occurs, whether for these or for other reasons, holders of index options
may be unable to close out their positions and the options may expire
worthless.
Spread Transactions. The High Yield Bond Portfolio may purchase from and
sell to securities dealers covered spread options. Such covered spread options
are not presently exchange listed or traded. The purchase of a spread option
gives the Portfolio the right to put, or sell, a security that it owns at a
fixed dollar spread or fixed yield spread in relationship to another security
that the Portfolio does not own, but which is used as a benchmark. The risk to
the Portfolio in purchasing covered spread options is the cost of the premium
paid for the spread option and any transaction costs. In addition, there is no
assurance that closing transactions will be available. The purchase of spread
options will be used to protect the Portfolio against adverse changes in
prevailing credit quality spreads, i.e., the yield spread between high quality
and lower quality securities. Such protection is only provided during the life
of the spread option. The security covering the spread option will be
maintained in a segregated account by the Fund's custodian. The Portfolio does
not consider a security covered by a spread option to be "pledged" as that
term is used in the Fund's policy limiting the pledging or mortgaging of its
assets.
OPTIONS ON FOREIGN CURRENCIES
The Managed Bond, Government Securities, Aggressive Equity, Growth LT,
International, and Emerging Markets Portfolios may buy and write options on
foreign currencies for hedging purposes in a manner similar to that in which
futures or forward contracts on foreign currencies will be utilized. For
example, a decline in the U.S. dollar value of a foreign currency in which
portfolio securities are denominated will reduce the U.S. 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, a Portfolio may buy put options on the foreign currency. If the
value of the currency declines, the Portfolio will have the right to sell such
currency for a fixed amount in U.S. dollars and will offset, in whole or in
part, the adverse effect on its portfolio.
Conversely, when a rise in the U.S. dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, a Portfolio may buy 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 the Portfolio from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, if currency exchange rates do not move in the direction or
to the extent desired, the Portfolio could sustain losses on transactions in
foreign currency options that would require the Portfolio to forgo a portion
or all of the benefits of advantageous changes in those rates.
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A Portfolio may write options on foreign currencies for hedging purposes.
For example, to hedge against a potential decline in the U.S. dollar value of
foreign currency denominated securities due to adverse fluctuations in
exchange rates, the Portfolio could, instead of purchasing a put option, write
a call option on the relevant currency. If the expected decline occurs, the
option will most likely not be executed and the diminution in value of
portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against a potential
increase in the U.S. dollar cost of securities to be acquired, the Portfolio
could write a put option on the relevant currency which, if rates move in the
manner projected, will expire unexercised and allow the Portfolio to hedge the
increased cost up to the amount of the premium. 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. If exchange rates do not
move in the expected direction, the option may be exercised and the Portfolio
would be required to buy 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, the Portfolio also may lose all or a portion of the
benefits which might otherwise have been obtained from favorable movements in
exchange rates.
A Portfolio may write covered call options on foreign currencies. A call
option written on a foreign currency by the Portfolio is "covered" if the
Portfolio owns the underlying foreign currency covered by the call or has an
absolute and immediate right to acquire that foreign currency without
additional cash consideration (or for additional cash consideration held in a
segregated account by its custodian) upon conversion or exchange of other
foreign currency held in its portfolio. A call option is also covered if the
Portfolio has a call on the same foreign currency and in the same principal
amount as the call written if the exercise price of the call held (i) is equal
to or less than the exercise price of the call written or (ii) is greater than
the exercise price of the call written, if the difference is maintained by the
Portfolio in cash or high-grade liquid assets in a segregated account with the
Fund's custodian.
A Portfolio also may write call options on foreign currencies for cross-
hedging purposes that would not be deemed to be covered. A call option on a
foreign currency is for cross-hedging purposes if it is not covered but is
designed to provide a hedge against a decline due to an adverse change in the
exchange rate in the U.S. dollar value of a security which the Portfolio owns
or has the right to acquire and which is denominated in the currency
underlying the option. In such circumstances, the Portfolio collateralizes the
option by maintaining, in a segregated account with the Fund's custodian, cash
or high-grade liquid assets in an amount not less than the value of the
underlying foreign currency in U.S. dollars marked-to-market daily.
Foreign currency options are subject to the risks of the availability of a
liquid secondary market described above, as well as the risks regarding
adverse market movements, margining of options written, the nature of the
foreign currency market, possible intervention by governmental authorities and
the effects of other political and economic events. In addition, exchange-
traded options on foreign currencies involve certain risks not presented by
the over-the-counter market. For example, exercise and settlement of such
options must be made exclusively through the OCC, which has established
banking relationships in applicable foreign countries for this purpose. As a
result, the OCC may, if it determines that foreign governmental restrictions
or taxes would prevent the orderly settlement of foreign currency option
exercises, or would result in undue burdens on the OCC or its clearing member,
impose special procedures on exercise and settlement, such as technical
changes in the mechanics of delivery of currency, the fixing of dollar
settlement prices or prohibitions on exercise.
In addition, options on foreign currencies may be traded on foreign
exchanges and over-the-counter in foreign countries. Such transactions are
subject to the risk of governmental actions affecting trading in or the prices
of foreign currencies or securities. The value of such positions also could be
adversely affected by (i) other complex foreign political and economic
factors, (ii) lesser availability than in the United States of data on which
to make trading decisions, (iii) delays in a Portfolio's ability to act upon
economic events occurring in foreign markets during non-business hours in the
United States, (iv) the imposition of different exercise and settlement terms
and procedures and margin requirements than in the United States, and (v) low
trading volume.
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FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS
The High Yield Bond, Managed Bond, Government Securities, Growth LT, Multi-
Strategy, and International Portfolios may invest in interest rate futures and
options thereon. The Aggressive Equity, Growth LT, Equity Income, Multi-
Strategy, Equity Index, International, and Emerging Markets Portfolios may
invest in stock index futures and options thereon.
Interest Rate Futures. (The High Yield Bond, Managed Bond, Government
Securities, Growth LT, Multi-Strategy, and International Portfolios.) An
interest rate futures contract is an agreement between two parties (buyer and
seller) to take or make delivery of a specified quantity of financial
instruments (such as GNMA certificates or Treasury bonds) at a specified price
at a future date. In the case of futures contracts traded on U.S. exchanges,
the exchange itself or an affiliated clearing corporation assumes the opposite
side of each transaction (i.e., as buyer or seller). A futures contract may be
satisfied or closed out by delivery or purchase, as the case may be, of the
financial instrument or by payment of the change in the cash value of the
index. Frequently, using futures to effect a particular strategy instead of
using the underlying or related security will result in lower transaction
costs being incurred. A public market exists in futures contracts covering
various financial instruments including U.S. Treasury bonds, U.S. Treasury
notes, GNMA certificates, three month U.S. Treasury bills, 90 day commercial
paper, bank certificates of deposit, and Eurodollar certificates of deposit.
As a hedging strategy a Portfolio might employ, a Portfolio would purchase
an interest rate futures contract when it is not fully invested in long-term
debt securities but wishes to defer their purchase for some time until it can
orderly invest in such securities or because short-term yields are higher than
long-term yields. Such purchase would enable the Portfolio to earn the income
on a short-term security while at the same time minimizing the effect of all
or part of an increase in the market price of the long-term debt security
which the Portfolio intended to purchase in the future. A rise in the price of
the long-term debt security prior to its purchase either would be offset by an
increase in the value of the futures contract purchased by the Portfolio or
avoided by taking delivery of the debt securities under the futures contract.
A Portfolio would sell an interest rate futures contract in order to
continue to receive the income from a long-term debt security, while
endeavoring to avoid part or all of the decline in market value of that
security which would accompany an increase in interest rates. If interest
rates did rise, a decline in the value of the debt security held by the
Portfolio would be substantially offset by the ability of the Portfolio to
repurchase at a lower price the interest rate futures contract previously
sold. While the Portfolio could sell the long-term debt security and invest in
a short-term security, ordinarily the Portfolio would give up income on its
investment, since long-term rates normally exceed short-term rates.
Stock Index Futures. (The Aggressive Equity, Growth LT, Equity Income,
Multi-Strategy, Equity Index, International, and Emerging Markets Portfolios.)
A stock index is a method of reflecting in a single number the market values
of many different stocks or, in the case of capitalization weighted indices
that take into account both stock prices and the number of shares outstanding,
many different companies. An index fluctuates generally with changes in the
market values of the common stocks so included. A stock index futures contract
is a bilateral agreement pursuant to which two parties agree to take or make
delivery of an amount of cash equal to a specified dollar amount multiplied by
the difference between the stock index value at the close of the last trading
day of the contract and the price at which the futures contract is originally
purchased or sold. No physical delivery of the underlying stocks in the index
is made.
The Aggressive Equity, Growth LT, Equity Income, Multi-Strategy, Equity
Index, International, and Emerging Markets Portfolios may purchase and sell
stock index futures contracts to hedge its securities portfolio. A Portfolio
may engage in transactions in futures contracts only in an effort to protect
it against a decline in the value of the Portfolio's portfolio securities or
an increase in the price of securities that the Portfolio intends to acquire.
For example, a Portfolio may sell stock index futures to protect against a
market decline in an attempt to offset partially or wholly a decrease in the
market value of securities that the Portfolio intends to sell. Similarly, to
protect against a market advance when the Portfolio is not fully invested in
the securities market, the Portfolio may purchase stock index futures that may
partly or entirely offset increases in the cost of securities that the
Portfolio intends to purchase.
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Futures Options. The High Yield Bond, Managed Bond, Government Securities,
Growth LT, Multi-Strategy, and International Portfolios may purchase and sell
(write) call and put futures options on interest rate futures. Futures options
possess many of the same characteristics as options on securities. A futures
option gives the holder the right, in return for the premium paid, to assume a
long position (call) or short position (put) in a futures contract at a
specified exercise price at any time during the period of the option. Upon
exercise of a call option, the holder acquires a long position in the futures
contract and the writer is assigned the opposite short position. In the case
of a put option, the opposite is true.
The Aggressive Equity, Growth LT, Equity Income, Multi-Strategy, Equity
Index, International, and Emerging Markets Portfolios may purchase put and
call options on stock index futures. Options on stock index futures contracts
give the purchaser the right, in return for the premium paid, to assume a
position in a stock index futures contract (a long position if the option is a
call and a short position if the option is a put) at a specified exercise
price at any time during the period of the option. Upon exercise of the
option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account which represents the amount by
which the market price of the stock index futures contract, at exercise,
exceeds (in the case of a call) or is less than (in the case of a put) the
exercise price of the option on the stock index futures contract. If an option
is exercised on the last trading day prior to the expiration date of the
option, the settlement will be made entirely in cash equal to the difference
between the exercise price of the option and the closing level of the index on
which the futures contract is based on the expiration date. Purchasers of
options who fail to exercise their options prior to the exercise date suffer a
loss of the premium paid.
A Portfolio other than the Aggressive Equity, Growth LT, International, and
Emerging Markets Portfolios will only enter into futures contracts and futures
options which are standardized and traded on an U.S. exchange, board of trade,
or similar entity, or in the case of futures options, for which an established
over-the-counter market exists.
If a purchase or sale of a futures contract is made by a Portfolio, the
Portfolio is required to deposit with its custodian (or broker, if legally
permitted) a specified amount of cash or U.S. Government securities ("initial
margin"). The margin required for a futures contract is set by the exchange on
which the contract is traded and may be modified during the term of the
contract. The initial margin is in the nature of a performance bond or good
faith deposit on the futures contract which is returned to the Portfolio upon
termination of the contract, assuming all contractual obligations have been
satisfied. Each investing Portfolio expects to earn interest income on its
initial margin deposits. A futures contract held by a Portfolio is valued
daily at the official settlement price of the exchange on which it is traded.
Each day the Portfolio pays or receives cash, called "variation margin," equal
to the daily change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or loan
by a Portfolio but is instead settlement between the Portfolio and the broker
of the amount one would owe the other if the futures contract expired. In
computing daily net asset value, each Portfolio will mark to market its open
futures positions.
A Portfolio is also required to deposit and maintain margin with respect to
put and call options on futures contracts written by it. Such margin deposits
will vary depending on the nature of the underlying futures contract (and the
related initial margin requirements), the current market value of the option,
and other futures positions held by the Portfolio.
Although some futures contracts call for making or taking delivery of the
underlying securities, generally these obligations are closed out prior to
delivery by offsetting purchases or sales of matching futures contracts (same
exchange, underlying security, and delivery month). If an offsetting purchase
price is less than the original sale price, the Portfolio realizes a capital
gain, or if it is more, the Portfolio realizes a capital loss. Conversely, if
an offsetting sale price is more than the original purchase price, the
Portfolio realizes a capital gain, or if it is less, the Portfolio realizes a
capital loss. The transaction costs must also be included in these
calculations.
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Limitations. The Fund will comply with certain regulations of the Commodity
Futures Trading Commission ("CFTC") under which an investment company may
engage in futures transactions and qualify for an exclusion from being a
"commodity pool." Under these regulations, a Portfolio may only enter into a
futures contract or purchase an option thereon (1) for bona fide hedging
purposes and (2) for other purposes if, immediately thereafter, the initial
margin deposits for futures contracts held by that Portfolio plus premiums
paid by it for open futures option positions, less the amount by which any
such positions are "in-the-money," would not exceed 5% of the Portfolio's
total assets. A call option is "in-the-money" if the value of the futures
contract that is the subject of the option exceeds the exercise price. A put
option is "in-the-money" if the exercise price exceeds the value of the
futures contract that is the subject of the option.
When purchasing a futures contract, a Portfolio must maintain with its
custodian in a segregated account (or broker, if legally permitted) cash, U.S.
Government securities of other high quality liquid debt securities (including
any margin) equal to the purchase price of such contract. When writing a call
option on a futures contract, the Portfolio similarly will maintain with its
custodian cash, U.S. Government securities or other high quality liquid debt
securities (including any margin) equal to the amount such option is in-the-
money until the option expires or is closed out by the Portfolio. When selling
a futures contract or selling a call option on a futures contract, the
Portfolio is required to maintain with its custodian high-quality liquid debt
securities, cash, or U.S. Government securities (including any margin) equal
to the market value of such contract or option, or to otherwise cover the
position.
A Portfolio may not maintain open short positions in futures contracts or
call options written on futures contracts if, in the aggregate, the market
value of all such open positions exceeds the current value of its portfolio
securities, plus or minus unrealized gains and losses on the open positions,
adjusted for the historical relative volatility of the relationship between
the Portfolio and the positions. For this purpose, to the extent the Portfolio
has written call options on specific securities it owns, the value of those
securities will be deducted from the current market value of the securities
portfolio.
The Fund reserves the right to engage in other types of futures transactions
in the future and to use futures and related options for other than hedging
purposes to the extent permitted by regulatory authorities. If other types of
options, futures contracts, or futures options are traded in the future, a
Portfolio may also use such investment techniques, provided that the Board of
Trustees determines that their use is consistent with the Portfolio's
investment objective.
Risks Associated with Futures and Futures Options. There are several risks
associated with the use of futures contracts and futures options as hedging
techniques. A purchase or sale of a futures contract may result in losses in
excess of the amount invested in the futures contract. There can be
significant differences between the securities and futures markets that could
result in an imperfect correlation between the markets, causing a given hedge
not to achieve its objectives. The degree of imperfection of correlation
depends on circumstances such as variations in speculative market demand for
futures and futures options on securities, including technical influences in
futures trading and futures options, and differences between the portfolio
securities being hedged and the instruments underlying the hedging vehicle in
such respects as interest rate levels, maturities, conditions affecting
particular industries, and creditworthiness of issuers. A decision as to
whether, when, and how to hedge involves the exercise of skill and judgment
and even a well-conceived hedge may be unsuccessful to some degree because of
market behavior or unexpected interest rate trends.
The price of futures contracts may not correlate perfectly with movement in
the underlying security or stock index, due to certain market distortions.
This might result from decisions by a significant number of market
participants holding stock index futures positions to close out their futures
contracts through offsetting transactions rather than to make additional
margin deposits. Also, increased participation by speculators in the futures
market may cause temporary price distortions. These factors may increase the
difficulty of effecting a fully successful hedging transaction, particularly
over a short time frame. With respect to a stock index futures contract, the
price of stock index futures might increase, reflecting a general advance in
the market price of the index's component securities, while some or all of the
portfolio securities might decline. If a Portfolio had
25
<PAGE>
hedged its portfolio against a possible decline in the market with a position
in futures contracts on an index, it might experience a loss on its futures
position until it could be closed out, while not experiencing an increase in
the value of its portfolio securities. If a hedging transaction is not
successful, the Portfolio might experience losses which it would not have
incurred if it had not established futures positions. Similar risk
considerations apply to the use of interest rate and other futures contracts.
Futures exchanges may limit the amount of fluctuation permitted in certain
futures contract prices during a single trading day. The daily limit
establishes the maximum amount that the price of a futures contract may vary
either up or down from the previous day's settlement price at the end of the
current trading session. Once the daily limit has been reached in a futures
contract subject to the limit, no more trades may be made on that day at a
price beyond that limit. The daily limit governs only price movements during a
particular trading day and therefore does not limit potential losses because
the limit may work to prevent the liquidation of unfavorable positions. For
example, futures prices have occasionally moved to the daily limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of positions and subjecting some holders of futures contracts to
substantial losses.
The Aggressive Equity, Growth LT, International, and Emerging Markets
Portfolios may trade futures contracts and options on futures contracts not
only on U.S. domestic markets, but also on exchanges located outside of the
United States. Foreign markets may offer advantages such as trading in indices
that are not currently traded in the United States. Foreign markets, however,
may have greater risk potential than domestic markets. Unlike trading on
domestic commodity exchanges, trading on foreign commodity exchanges is not
regulated by the CFTC and may be subject to greater risk than trading on
domestic exchanges. For example, some foreign exchanges are principal markets
so that no common clearing facility exists and a trader may look only to the
broker for performance of the contract. Trading in foreign futures or foreign
options contracts may not be afforded certain of the protective measures
provided by the Commodity Exchange Act, the CFTC's regulations, and the rules
of the National Futures Association and any domestic exchange, including the
right to use reparations proceedings before the CFTC and arbitration
proceedings provided by the National Futures Association or any domestic
futures exchange. Amounts received for foreign futures or foreign options
transactions may not be provided the same protection as funds received in
respect of transactions on United States futures exchanges. In addition, any
profits that the Portfolio might realize in trading could be eliminated by
adverse changes in the exchange rate of the currency in which the transaction
is denominated, or the Portfolio could incur losses as a result of changes in
the exchange rate. Transactions on foreign exchanges may include both
commodities that are traded on domestic exchanges or boards of trade and those
that are not.
There can be no assurance that a liquid market will exist at a time when a
Portfolio seeks to close out a futures or a futures option position, and that
Portfolio would remain obligated to meet margin requirements until the
position is closed. In addition, many of the contracts discussed above are
relatively new instruments without a significant trading history. As a result,
there can be no assurance that an active secondary market will develop or
continue to exist.
FOREIGN CURRENCY FUTURES AND OPTIONS THEREON
The Managed Bond, Government Securities, Aggressive Equity, Growth LT,
International, and Emerging Markets Portfolios may enter into contracts for
the purchase or sale for future delivery of foreign currencies ("foreign
currency futures") and may purchase and write options on foreign currency
futures. This investment technique will be used only to hedge against
anticipated future changes in exchange rates which otherwise might adversely
affect the value of the Portfolio's securities or adversely affect the prices
of securities that the Portfolio has purchased or intends to purchase at a
later date. The successful use of foreign currency futures will usually depend
on the Portfolio Manager's ability to forecast currency exchange rate
movements correctly. Should exchange rates move in an unexpected manner, the
Portfolio may not achieve the anticipated benefits of foreign currency futures
or may realize losses.
26
<PAGE>
SWAP AGREEMENTS
The Emerging Markets Portfolio may enter into equity index swap agreements.
The Portfolio's current obligations (or rights) under a swap agreement will
generally be equal only to the net amount to be paid or received under the
agreement based on the relative values of the positions held by each party to
the agreement (the "net amount"). The Portfolio's current obligations under a
swap agreement will be accrued daily (offset against any amounts owing to the
Portfolio) and any accrued but unpaid net amounts owed to a swap counterparty
will be covered by the maintenance of a segregated account consisting of cash,
U.S. Government securities, or high grade debt obligations, to avoid any
potential leveraging of the Portfolio.
Generally, the swap agreement transactions in which the Portfolio will
engage are not regulated as futures or commodity option transactions under the
Commodity Exchange Act or by the Commodity Futures Trading Commission.
WARRANTS
The Growth LT, Equity Income, Multi-Strategy, Equity, Bond and Income, and
High Yield Bond Portfolios may invest in warrants; however, not more than 10%
of the market value of a Portfolio's assets (at the time of purchase), and in
the case of the Equity Portfolio--5%, may be invested in warrants other than
warrants acquired in units or attached to other securities. The Aggressive
Equity and Emerging Markets Portfolios each may invest up to 5% of its net
assets in warrants or rights (valued at the lower of cost or market) to
purchase securities, provided that no more than 2% of its net assets are
invested in warrants not listed on the New York or American Stock Exchanges.
Each of these Portfolios may invest in warrants or rights acquired as part of
a unit or attached to securities at the time of purchase without limitation.
Warrants may be considered speculative in that they have no voting rights, pay
no dividends, and have no rights with respect to the assets of the corporation
issuing them. Warrants basically are options to purchase equity securities at
a specific price valid for a specific period of time. They do not represent
ownership of the securities, but only the right to buy them. Warrants differ
from call options in that warrants are issued by the issuer of the security
which may be purchased on their exercise, whereas call options may be written
or issued by anyone. The prices of warrants do not necessarily move parallel
to the prices of the underlying securities.
DURATION
Duration is a measure of average life of a bond on a present value basis,
which was developed to incorporate a bond's yield, coupons, final maturity and
call features into one measure. Duration is one of the fundamental tools that
may be used by the Adviser or Portfolio Manager in fixed income security
selection. In this discussion, the term "bond" is generally used to connote
any type of debt instrument.
Most notes and bonds have provided interest ("coupon") payments in addition
to a final ("par") payment at maturity. Some obligations also feature call
provisions. Depending on the relative magnitude of these payments, debt
obligations may respond differently to changes in the level and structure of
interest rates. Traditionally, a debt security's "term to maturity" has been
used as a proxy for the sensitivity of the security's price to changes in
interest rates (which is the "interest rate risk" or "volatility" of the
security). However, "term to maturity" measures only the time until a debt
security provides its final payment, taking no account of the pattern of the
security's payments prior to maturity.
Duration is a measure of the average life of a fixed-income security on a
present value basis. Duration takes the length of the time intervals between
the present time and the time that the interest and principal payments are
scheduled or, in the case of a callable bond, expected to be received, and
weights them by the present values of the cash to be received at each future
point in time. For any fixed-income security with interest payments occurring
prior to the payment of principal, duration is always less than maturity. In
general, all other things being the same, the lower the stated or coupon rate
of interest of a fixed-income security, the longer the duration of the
security; conversely, the higher the stated or coupon rate of interest of a
fixed-income security, the shorter the duration of the security.
27
<PAGE>
Although frequently used, the "term of maturity" of a bond is not a useful
measure of the longevity of a bond's cash flow because it refers only to the
time remaining to the repayment of principal or corpus and disregards earlier
coupon payments. Thus, for example, three bonds with the same maturity may not
have the same investment characteristics (such as risk or repayment time). One
bond may have large coupon payments early in its life, whereas another may
have payments distributed evenly throughout its life. Some bonds (such as zero
coupon bonds) make no coupon payments until maturity. Clearly, an investor
contemplating investing in these bonds should consider not only the final
payment or sum of payments on the bond, but also the timing and magnitude of
payments in order to make an accurate assessment of each bond. Maturity, or
the term to maturity, does not provide a prospective investor with a clear
understanding of the time profile of cash flows over the life of a bond.
Another way of measuring the longevity of a bond's cash flow is to compute a
simple average time to payment, where each year is weighted by the number of
dollars the bond pays that year. This concept is termed the "dollar-weighted
mean waiting time," indicating that it is a measure of the average time to
payment of a bond's cash flow. The critical shortcoming of this approach is
that it assigns equal weight to each dollar paid over the life of a bond,
regardless of when the dollar is paid. Since the present value of a dollar
decreases with the amount of time which must pass before it is paid, a better
method might be to weight each year by the present value of the dollars paid
that year. This calculation puts the weights on a comparable basis and creates
a definition of longevity which is known as duration.
A bond's duration depends upon three variables: (i) the maturity of the
bond; (ii) the coupon payments attached to the bond; and (iii) the bond's
yield to maturity. Yield to maturity, or investment return as used here,
represents the approximate return an investor purchasing a bond may expect if
he holds that bond to maturity. In essence, yield to maturity is the rate of
interest which, if applied to the purchase price of a bond, would be capable
of exactly reproducing the entire time schedule of future interest and
principal payments.
Increasing the size of the coupon payments on a bond, while leaving the
maturity and yield unchanged, will reduce the duration of the bond. This
follows from the fact that because bonds with higher coupon payments pay
relatively more of their cash flows sooner, they have shorter durations.
Increasing the yield to maturity on a bond (e.g., by reducing its purchase
price), while leaving the terms to maturity and coupon payments unchanged,
also reduces the duration of the bond. Because a higher yield leads to lower
present values for more distant payments relative to earlier payments, and, to
relatively lower weights attached to the years remaining to those payments,
the duration of the bond is reduced.
There are some situations where even the standard duration calculation does
not properly reflect the interest rate exposure of a security. For example,
floating and variable rate securities often have final maturities of ten or
more years; however, their interest rate exposure corresponds to the frequency
of the coupon reset. Another example where the interest rate exposure is not
properly captured by duration is mortgage pass-throughs. The stated final
maturity is generally 30 years but current prepayment rates are more critical
in determining the securities' interest rate exposure. In these and other
similar situations, the Adviser or Portfolio Manager to a Portfolio will use
more sophisticated analytical techniques which incorporate the economic life
of a security into the determination of its interest rate exposure.
Futures, options, and options on futures have durations which, in general,
are closely related to the duration of the securities which underlie them.
Holding long futures or call option positions (backed by a segregated account
of cash and cash equivalents) will lengthen the portfolio duration if interest
rates go down and bond prices go up by approximately the same amount that
holding an equivalent amount of the underlying securities would.
Short futures or put option positions have durations roughly equal to the
negative duration of the securities that underlie those positions, and have
the effect of reducing portfolio duration if interest rates go up and bond
prices go down by approximately the same amount that selling an equivalent
amount of the underlying securities would.
28
<PAGE>
INVESTMENT RESTRICTIONS
Each Portfolio's investment objective as set forth under "Investment
Objectives and Policies," and the investment restrictions as set forth below,
are fundamental policies of each Portfolio and may not be changed with respect
to any Portfolio without the approval of a majority of the outstanding voting
shares of that Portfolio. The vote of a majority of the outstanding voting
securities of a Portfolio means the vote, at an annual or special meeting of
(a) 67% or more of the voting securities present at such meeting, if the
holders of more than 50% of the outstanding voting securities of such
Portfolio are present or represented by proxy; or (b) more than 50% of the
outstanding voting securities of such Portfolio, whichever is the less. Under
these restrictions, a Portfolio may not:
(i) invest in a security if, as a result of such investment, more than 25%
of its total assets (taken at market value at the time of such investment)
would be invested in the securities of issuers in any particular industry,
except that this restriction does not apply to securities issued or guaranteed
by the U.S. Government or its agencies or instrumentalities (or repurchase
agreements with respect thereto);
(ii) with respect to 75% of its total assets, invest in a security if, as a
result of such investment, more than 5% of its total assets (taken at market
value at the time of such investment) would be invested in the securities of
any one issuer, except that this restriction does not apply to securities
issued or guaranteed by the U.S. Government or its agencies or
instrumentalities;
(iii) invest in a security if, as a result of such investment, it would hold
more than 10% (taken at the time of such investment) of the outstanding voting
securities of any one issuer;
(iv) purchase or sell real estate (although it may purchase securities
secured by real estate or interests therein, or securities issued by companies
which invest in real estate, or interests therein);
(v) purchase or sell commodities or commodities contracts, except that,
subject to restrictions described in the Prospectus and in the Statement of
Additional Information (a) the Managed Bond, Equity Index, Government
Securities, High Yield Bond, Growth LT, Equity Income, Multi-Strategy, and
International Portfolios may engage in futures contracts and options on
futures contracts, (b) all Portfolios may enter into foreign forward currency
contracts; and (c) the Equity Index Portfolio may purchase and sell stock
index futures, purchase options on stock indexes, and purchase options on
stock index futures;
(vi) with respect to the Money Market, Managed Bond, Government Securities,
High Yield Bond, Growth, Equity Income, Multi-Strategy, Equity Index, and
International Portfolios, purchase securities on margin (except for use of
short-term credit necessary for clearance of purchases and sales of portfolio
securities) but it may make margin deposits in connection with transactions in
options, futures, and options on futures;
(vii) borrow money or pledge, mortgage or hypothecate its assets, except
that a Portfolio may: (a) borrow from banks but only if immediately after each
borrowing and continuing thereafter there is asset coverage of 300%; and (b)
enter into reverse repurchase agreements and transactions in options, futures,
and options on futures as described in the Prospectus and in the Statement of
Additional Information (the deposit of assets in escrow in connection with the
writing of covered put and call options and the purchase of securities on a
"when-issued" or delayed delivery basis and collateral arrangements with
respect to initial or variation margin deposits for futures contracts will not
be deemed to be pledges of a Portfolio's assets);
(viii) lend any funds or other assets, except that a Portfolio may,
consistent with its investment objective and policies: (a) invest in debt
obligations including bonds, debentures or other debt securities, bankers'
acceptances, and commercial paper, even though the purchase of such
obligations may be deemed to be the making of loans; (b) enter into repurchase
agreements and reverse repurchase agreements; and (c) lend its portfolio
securities in an amount not to exceed 25% of the value of its total assets,
provided such loans are made in accordance with applicable guidelines
established by the Securities and Exchange Commission and the Fund's Trustees;
29
<PAGE>
(ix) act as an underwriter of securities of other issuers, except, when in
connection with the disposition of portfolio securities, it may be deemed to
be an underwriter under the federal securities laws; and
(x) with respect to the Money Market, Managed Bond, Government Securities,
High Yield Bond, Growth, Equity Income, Multi-Strategy, Equity Index, and
International Portfolios, maintain a short position, or purchase, write, or
sell puts, calls, straddles, spreads, or combinations thereof, except as set
forth in the Prospectus and in the SAI for transactions in options, futures,
and options on futures.
Each Portfolio is also subject to the following restrictions and policies
(which are not fundamental and may therefore be changed without shareholder
approval) relating to the investment of its assets and activities. Unless
otherwise indicated, a Portfolio may not:
(i) invest for the purpose of exercising control or management;
(ii) sell securities or property short, except short sales against the box;
(iii) purchase warrants if immediately after and as a result of such
purchase more than 10% of the market value of the total assets of the
Portfolio would be invested in such warrants;
(iv) with respect to the Growth LT, Aggressive Equity, Equity, Bond and
Income and Emerging Markets Portfolios, purchase securities on margin (except
for use of short-term credit necessary for clearance of purchases and sales of
portfolio securities) but it may make margin deposits in connection with
transactions in options, futures, and options on futures;
(v) with respect to the Growth LT, Aggressive Equity, Equity, Bond and
Income and Emerging Markets Portfolios, maintain a short position, or
purchase, write, or sell puts, calls, straddles, spreads, or combinations
thereof, except as set forth in the Prospectus and in the SAI for transactions
in options, futures, and options on futures;
(vi) invest in securities that are illiquid, or in repurchase agreements
maturing in more than seven days, if as a result of such investment, more than
15% of the total assets of the Portfolio (taken at market value at the time of
such investment) would be invested in such securities, and with respect to the
Money Market Portfolio, more than 10% of the total assets of the Portfolio
(taken at market value at the time of such investment) would be invested in
such securities; and
(vii) purchase or sell commodities or commodities contracts, except that,
subject to restrictions described in the Prospectus and in the SAI, the
Aggressive Equity and Emerging Markets Portfolios (a) may engage in futures
contracts and options on futures contracts, (b) may enter into foreign forward
currency contracts and (c) may purchase and sell stock index futures, purchase
options on stock indexes, and purchase options on stock index futures.
Unless otherwise indicated, as in the restriction for borrowing or
hypothecating assets of a Portfolio, for example, all percentage limitations
listed above apply to each Portfolio only at the time into which a transaction
is entered. Accordingly, if a percentage restriction is adhered to at the time
of investment, a later increase or decrease in the percentage which results
from a relative change in values or from a change in a Portfolio's net assets
will not be considered a violation. For purposes of fundamental restriction
(v) and nonfundamental restriction (vii) as set forth above, an option on a
foreign currency shall not be considered a commodity or commodity contract.
For purposes of nonfundamental restriction (v), a short sale "against the box"
shall not be considered a short position.
30
<PAGE>
MANAGEMENT OF THE FUND
TRUSTEES AND OFFICERS
The Trustees and Executive Officers of the Fund, their business address, and
principal occupations during the past five years are:
<TABLE>
<CAPTION>
BUSINESS AFFILIATES AND
NAME AND ADDRESS POSITION WITH THE FUND PRINCIPAL OCCUPATIONS
---------------- ---------------------- -----------------------
<C> <C> <S>
Thomas C. Sutton Chairman of the Chairman of the Board,
700 Newport Center Drive Board, Trustee Director and Chief Executive
Newport Beach, CA 92660 and President Officer of Pacific Mutual;
Age 53 Equity Board Member of PIMCO
Advisors L.P.; and similar
positions with other
subsidiaries of Pacific
Mutual; Director of Newhall
Land & Farming; Director of
Health Insurance Association
of America.
Richard A. Nelson Trustee President of Nelson
8 Cherry Hills Lane Financial Consultants;
Newport Beach, CA 92660 retired Partner with Ernst &
Age 65 Young; Director, Wynn's
International, Inc.
Lyman W. Porter Trustee Professor of Management at
University of California the University of
at Irvine California, Irvine.
Irvine, CA 92717
Age 65
Alan Richards Trustee Consultant and Investor;
P. O. Box 2128 Partner, Old Winery Estates;
555 San Filipe, Suite 900 Partner, Lomas Verdes
Rancho Santa Fe, CA 92067 Estates; Director,
Age 65 Consultant and Member of
Executive Committee, Western
National Corporation.
Marilee Roller Vice President Senior Vice President,
700 Newport Center Drive and Treasurer Corporate Finance and
Newport Beach, CA 92660 Administration, of Pacific
Age 43 Mutual; President and COO of
Pacific Corinthian Life
Insurance Company; and
similar positions with other
subsidiaries of Pacific
Mutual; formerly Vice
President of Pacific Mutual.
Diane N. Ledger Vice President Assistant Vice President,
700 Newport Center Drive and Assistant Variable Regulatory
Newport Beach, CA 92660 Secretary Compliance, Corporate Law,
Age 56 of Pacific Mutual.
Sharon A. Cheever Vice President Vice President and
700 Newport Center Drive and General Investment Counsel of
Newport Beach, CA 92660 Counsel Pacific Mutual; formerly
Age 40 Assistant Vice President and
Associate General Counsel of
Pacific Mutual.
Audrey L. Milfs Secretary Vice President and Corporate
700 Newport Center Drive Secretary of Pacific Mutual;
Newport Beach, CA 92660 and similar positions with
Age 50 other subsidiaries of
Pacific Mutual.
</TABLE>
- --------
* Mr. Sutton is an "interested person" of the Fund (as that term is defined
in the Investment Company Act) because of his position with Pacific Mutual
as shown above.
31
<PAGE>
Trustees other than those affiliated with Pacific Mutual or a Portfolio
Manager, currently receive an annual fee of $10,000 and $1,000 for each Board
of Trustees meeting attended, including each Audit, Policy, or Nominating
Committee meeting attended, plus reimbursement of related expenses. In
addition, the Chairman of the Fund's Audit Committee and Policy Committee each
receives an additional annual fee of $1,000. The following table summarizes
the aggregate compensation paid by the Fund to each Trustee who is not
affiliated with Pacific Mutual or a Portfolio Manager in 1994. It also shows
total compensation paid to these Trustees in 1994 by the Fund and PIMCO
Advisors Institutional Funds, an investment company managed by an affiliate of
Pacific Mutual for which Messrs. Nelson, Porter, and Richards (but not Mr.
Sutton) also serve as trustees (collectively, "Fund Complex").
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT TOTAL
BENEFITS ESTIMATE COMPENSATION
ACCRUED ANNUAL FROM FUND
AGGREGATE AS PART OF BENEFITS COMPLEX
COMPENSATION FUND UPON PAID TO
NAME OF TRUSTEE FROM FUND EXPENSES RETIREMENT TRUSTEES
- --------------- ------------ ---------- ---------- ------------
<S> <C> <C> <C> <C>
Richard A. Nelson............... $14,250 0 0 $27,250
Lyman W. Porter................. $13,250 0 0 $25,250
Alan Richards................... $13,250 0 0 $25,250
</TABLE>
None of the Trustees or Officers directly own shares of the Fund. As of
January 31, 1994, the Trustees and Officers as a group owned Variable
Contracts that entitled them to give voting instructions with respect to less
than 1% of the outstanding shares of the Fund.
INVESTMENT ADVISER
Pacific Mutual Life Insurance Company ("Pacific Mutual") serves as
Investment Adviser to the Fund pursuant to an Investment Advisory Agreement
("Advisory Contract") between Pacific Mutual and the Fund. Pacific Mutual is
responsible for administering the affairs of and supervising the investment
program for the Fund. Pacific Mutual also furnishes to the Board of Trustees,
which has overall responsibility for the business and affairs of the Fund,
periodic reports on the investment performance of each Portfolio.
Under the terms of the Advisory Contract, Pacific Mutual is obligated to
manage the Fund's Portfolios in accordance with applicable laws and
regulations.
The Advisory Contract will continue in effect until November 9, 1995, and
from year to year thereafter, provided such continuance is approved annually
by (i) the holders of a majority of the outstanding voting securities of the
Fund or by the Board of Trustees, and (ii) a majority of the Trustees who are
not parties to such Advisory Contract or "interested persons" (as defined in
the Investment Company Act of 1940, the "1940 Act") of any such party. The
Advisory Contract was originally approved by the Board of Trustees, including
a majority of the Trustees who are not parties to the Advisory Contract, or
interested persons of such parties, at its meeting held on July 21, 1987, and
by the shareholders of the Fund at a Meeting of Shareholders held on October
28, 1988. The Advisory Contract was also approved by the shareholders of the
Equity Index Portfolio of the Fund at a Meeting of Shareholders of the Equity
Index Portfolio held on April 21, 1992. An addendum to the Advisory Contract
was approved by the Board of Trustees, including a majority of the Trustees
who are not parties to the Contract, or interested persons of such parties, at
a meeting held on October 28, 1988. An Addendum to the Advisory Contract which
increased the advisory fee schedule with respect to the High Yield Bond,
Managed Bond, Government Securities, Growth, Equity Income, Multi-Strategy,
and International Portfolios, and which included the Growth LT Portfolio as a
Portfolio to which the Adviser will perform services under the Advisory
Contract, was approved by the Board of Trustees, including a majority of the
Trustees who are not parties to the Contract, or interested persons of such
parties, at a meeting held on September 29, 1993, and was approved by
shareholders of the High Yield Bond, Managed Bond, Government Securities,
Growth, Equity Income, Multi-Strategy, and International Portfolios at a
Special Meeting of Shareholders on December 13, 1993. An Addendum to the
Advisory Contract for the Equity Portfolio and Bond and Income Portfolio was
approved by
32
<PAGE>
the Board of Trustees, including a majority of the Trustees who are not
parties to the Advisory Contract or interested persons of such parties, at a
meeting held on August 12, 1994, and by the sole shareholder of those
Portfolios on September 6, 1994. An Addendum to the Advisory Contract for the
Aggressive Equity Portfolio and Emerging Markets Portfolio was approved by the
Board of Trustees, including a majority of the Trustees who are not parties to
the Advisory Contract or interested persons of such parties, at a meeting held
on November 17, 1995, and by the sole shareholder of those Portfolios on
, 199 . The Advisory Contract may be terminated without penalty by vote
of the Trustees or the shareholders of the Fund, or by the Adviser, on 60
days' written notice by either party to the Advisory Contract and will
terminate automatically if assigned.
The Fund pays the Adviser, for its services under the Agreement, a fee based
on an annual percentage of the average daily net assets of each Portfolio. For
the Money Market Portfolio, the Fund will pay to the Adviser a fee at an
annual rate of .40% of the first $250 million of the average daily net assets
of the Portfolio, .35% of the next $250 million of the average daily net
assets of the Portfolio, and .30% of the average daily net assets of the
Portfolio in excess of $500 million. For the High Yield Bond, Managed Bond,
Government Securities, and Bond and Income Portfolios, the Fund will pay .60%
of the average daily net assets of each of the Portfolios. For the Growth,
Equity Income, Multi-Strategy, and Equity Portfolios, the Fund will pay .65%
of the average daily net assets of each of the Portfolios. For the Growth LT
Portfolio, the Fund will pay .75% of the average daily net assets of the
Portfolio. For the International Portfolio, the Fund will pay .85% of the
average daily net assets of the Portfolio. For the Equity Index Portfolio, the
Fund will pay .25% of the first $100 million of the average daily net assets
of the Portfolio, .20% of the next $100 million of the average daily net
assets of the Portfolio, and .15% of the average daily net assets of the
Portfolio in excess of $200 million. For the Aggressive Equity Portfolio, the
Fund pays to the Adviser a fee at an annual rate of .80% of the average daily
net assets of the Portfolio. For the Emerging Markets Portfolio, the Fund pays
to the Adviser a fee at an annual rate of 1.10% of the average daily net
assets of the Portfolio. The fee shall be computed and accrued daily and paid
monthly.
Prior to January 1, 1994, the Fund paid the Adviser for its services under
the Agreement a fee based on an annual percentage of the average daily net
assets of each Portfolio then in existence as follows. For the High Yield
Bond, Managed Bond, Government Securities, Growth, Equity Income, and Multi-
Strategy Portfolios, the Fund paid .50% of the first $250 million of the
average daily net assets of each of the Portfolios, .45% of the next $250
million of the average daily net assets of each of the Portfolios, and .40% of
the average daily net assets of each of the Portfolios in excess of $500
million. For the International Portfolio, the Fund paid .65% of the first $250
million of the average daily net assets of the Portfolio, .60% of the next
$250 million of the average daily net assets of the Portfolio, and .55% of the
average daily net assets of the Portfolio in excess of$500 million. For the
Money Market and Equity Index Portfolios, the Fund paid the Adviser a fee
based on the same fee schedule as is currently in effect.
Pacific Mutual has agreed, until at least December 31, 1996, to waive its
fees or otherwise reimburse each Portfolio for its operating expenses to the
extent that such expenses, exclusive of advisory fees, additional custodial
charges associated with holding foreign securities, foreign taxes on
dividends, interest, or gains, and extraordinary expenses, exceed 0.25% of the
Portfolio's average daily net assets. Pacific Mutual began this expense
reimbursement policy in April 1989. There can be no assurance that this policy
will be continued beyond December 31, 1996.
Net fees paid or owed to Pacific Mutual for 1994 were as follows: Money
Market Portfolio--$208,743, High Yield Bond Portfolio--$94,365, Managed Bond
Portfolio--$297,183, Government Securities Portfolio--$111,828, Growth
Portfolio--$532,241, Growth LT Portfolio--$132,860, Equity Income Portfolio--
$251,902, Multi-Strategy Portfolio--$304,896, Equity Index Portfolio--$79,401,
and International Portfolio--$454,012.
Net fees paid or owed to Pacific Mutual for 1993 (before the Addendum to the
Advisory Contract that increased the fees for certain Portfolios was in
effect) were as follows: Money Market Portfolio--$68,994, High Yield Bond
Portfolio--$62,112, Managed Bond Portfolio--$151,389, Government Securities
Portfolio--$80,256, Growth Portfolio--$222,900, Equity Income Portfolio--
$121,504, Multi-Strategy Portfolio--$120,529, Equity Index Portfolio--$44,656,
and International Portfolio--$144,024.
33
<PAGE>
Net fees paid or owed to Pacific Mutual for 1992 were as follows: Money
Market Portfolio--$30,169, High Yield Bond Portfolio--$22,861, Managed Bond
Portfolio--$74,703, Government Securities Portfolio--$23,514, Growth
Portfolio--$65,913, Equity Income Portfolio--$47,643, Multi-Strategy
Portfolio--$34,412, Equity Index Portfolio--$0, and International Portfolio--
$74,115.
Net advisory and administrative fees, respectively, paid by the Equity
Portfolio's predecessor--the Equity Series of Pacific Corinthian Variable
Fund--were $401,325 and $120,397 in 1994, $415,347 and $124,604 in 1993, and
$469,325 and $140,798 in 1992. Net advisory and administrative fees,
respectively, paid by the Bond and Income Portfolio's predecessor--the Bond
and Income Series of Pacific Corinthian Variable Fund--were $149,270 and
$55,976 in 1994, $178,349 and $66,881 in 1993, and $211,515 and $79,318 in
1992.
PORTFOLIO MANAGEMENT AGREEMENTS
Pursuant to a Portfolio Management Agreement between the Fund, the Adviser,
and Pacific Investment Management Company ("PIMCO"), 840 Newport Center Drive,
Post Office Box 9000, Newport Beach, California 92660, PIMCO is the Portfolio
Manager and provides investment advice and makes and implements investment
decisions with respect to the Managed Bond Portfolio and Government Securities
Portfolio. For the services provided, Pacific Mutual pays PIMCO a fee based on
a percentage of each Portfolio's average daily net assets according to the
following schedule:
MANAGED BOND AND GOVERNMENT SECURITIES PORTFOLIOS
<TABLE>
<CAPTION>
RATE
% BREAK POINT (ASSETS)
---- --------------------
<S> <C>
.50% On first $25 million
.375% On next $25 million
.25% On excess
</TABLE>
PIMCO is registered as an investment adviser with the SEC and a commodity
trading adviser with the CFTC. Such registration does not involve supervision
by the SEC over investment advice or supervision by the CFTC over commodities
trading. PIMCO is currently providing investment advisory services to the
PIMCO Funds, PIMCO Commercial Mortgage Securities Trust, Inc., PIMCO Advisors
Institutional Funds, the Harbor Bond Fund of the Harbor Fund, The Total Return
Bond and the Intermediate-Term Bond Portfolios of the Target Portfolio Trust,
the Fixed Income I Fund, Diversified Bond Fund, Fixed Income III Fund, and
Multi-Strategy Bond Fund of the Frank Russell Investment Management Company,
the PIMCO Total Return Bond Portfolio of the American Skandia Trust, the
Government Income Portfolio of the Cambridge Portfolio Trust, the Total Return
Fund of Fremont Mutual Funds, Inc., the fixed income segment of the Balanced
Portfolio of the Pacific Corinthian Variable Fund, as well as to managed
accounts consisting of proceeds from pension and profit sharing plans. Net
fees paid or owed by Pacific Mutual to PIMCO in 1994 were $149,130 for the
Managed Bond Portfolio and $106,476 for the Government Securities Portfolio,
in 1993 were $159,860 for the Managed Bond Portfolio and $106,139 for the
Government Securities Portfolio, and in 1992 were $115,405 for the Managed
Bond Portfolio and $68,657 for the Government Securities Portfolio.
Pursuant to a Portfolio Management Agreement between the Fund, the Adviser,
and Capital Guardian Trust Company ("Capital Guardian"), a wholly-owned
subsidiary of The Capital Group, Inc. ("CG"), 333 South Hope Street, Los
Angeles, California 90071, Capital Guardian is the Portfolio Manager and
provides investment advisory services to the Growth Portfolio. For the
services provided, Pacific Mutual pays Capital Guardian a fee based on a
percentage of the average daily net assets of the Growth Portfolio according
to the following schedule:
GROWTH PORTFOLIO
<TABLE>
<CAPTION>
RATE
(%) BREAK POINT (ASSETS)
---- --------------------
<S> <C>
.50% On first $30 million
.40% On next $30 million
.30% On excess
</TABLE>
34
<PAGE>
Capital Guardian is a California state chartered trust company organized in
1968 which provides fiduciary and investment management services to a limited
number of large accounts such as employee benefit plans, college endowment
funds, foundations, and individuals. Accounts managed by Capital Guardian had
combined assets, as of December 31, 1994, of approximately $36.8 billion.
Capital Guardian's research activities are conducted by a wholly-owned
subsidiary, Capital Guardian Research Company, and other affiliates that have
research facilities in Los Angeles, San Francisco, New York, Washington, D.C.,
Atlanta, London, Geneva, Hong Kong, Singapore, and Tokyo.
CG, 333 South Hope Street, Los Angeles, CA 90071, is the parent of Capital
Guardian because it owns all of its outstanding shares of common stock. David
I. Fisher, William C. Newton, and R. Michael Shanahan each owns beneficially
shares representing more than 5% but less than 10%, and Jon B. Lovelace owns
beneficially shares representing more than 10% but less than 25% of the voting
rights of CG.
Capital Research and Management Company ("CRMC"), another wholly-owned
subsidiary of CG, provides investment advisory services to the following
mutual funds, which are known collectively as the American Funds Group: AMCAP
Fund, American Balanced Fund, American High Income Trust, American Mutual
Fund, The Bond Fund of America, Intermediate Bond Fund of America, The Cash
Management Trust of America, Capital Income Builder, Inc., Capital World Bond
Fund, EuroPacific Growth Fund, Fundamental Investors, The Growth Fund of
America, The Income Fund of America, The Investment Company of America, The
New Economy Fund, New Perspective Fund, Smallcap World Fund, The Tax-Exempt
Bond Fund of America, The Tax-Exempt Fund of California, The Tax-Exempt Fund
of Maryland, The Tax-Exempt Fund of Virginia, The Tax-Exempt Money Fund of
America, U.S. Government Securities Fund, The U.S. Treasury Money Fund of
America, Washington Mutual Investors Fund, and Capital World Growth and Income
Fund. CRMC also provides investment advisory services to American Variable
Insurance Series and Anchor Pathway Fund, which are used exclusively as
underlying investment vehicles for variable insurance contracts and policies,
and to Endowments, Inc. and Bond Portfolio for Endowments, Inc., whose shares
may be owned only by tax-exempt organizations. Capital International Inc., an
indirect wholly-owned subsidiary of CG, provides investment advisory services
to Emerging Market Growth Fund, Inc. and New World Investment Fund, which are
closed-end investment companies.
Net fees paid or owed by Pacific Mutual to Capital Guardian for the Growth
Portfolio in 1994 were $335,544, in 1993 were $196,614, and in 1992 were
$93,390.
Pursuant to a Portfolio Management Agreement between the Fund, the Adviser,
and Janus Capital Corporation ("Janus"), 100 Fillmore Street, Suite 300,
Denver, Colorado 80206-4923, Janus is the Portfolio Manager and provides
investment advisory services to the Growth LT Portfolio. For the services
provided, Pacific Mutual pays Janus a fee based on a percentage of the average
daily net assets of the Growth LT Portfolio according to the following
schedule:
GROWTH LT PORTFOLIO
<TABLE>
<CAPTION>
RATE
(%) BREAK POINT (ASSETS)
---- ---------------------
<S> <C>
.60% On first $100 million
.55% On excess
</TABLE>
Janus serves as investment adviser to the Janus Funds, as well as other
mutual funds and individual, corporate, charitable, and retirement accounts.
Kansas City Southern Industries, Inc. ("KCSI") owns approximately 83% of the
outstanding voting stock of Janus. KCSI is a publicly traded holding company
whose primary subsidiaries are engaged in transportation and financial
services. Net fees paid or owed by Pacific Mutual to Janus for the Growth LT
Portfolio from January 4, 1994 (date of commencement of operations) to
December 31, 1994 were $134,659.
35
<PAGE>
Pursuant to a Portfolio Management Agreement between the Fund, the Adviser,
and J.P. Morgan Investment Management Inc. ("J.P. Morgan Investment"), 522
Fifth Avenue, New York, New York 10036, J.P. Morgan Investment is the
Portfolio Manager and provides investment advisory services to the Equity
Income Portfolio and the Multi-Strategy Portfolio. For the services provided,
Pacific Mutual pays J.P. Morgan Investment a fee based on a percentage of the
combined average daily net assets of these two Portfolios according to the
following schedule:
EQUITY INCOME AND MULTI-STRATEGY PORTFOLIOS
<TABLE>
<CAPTION>
RATE
(%) BREAK POINT (ASSETS)
---- ---------------------
<S> <C>
.45% On first $100 million
.40% On next $100 million
.35% On next $200 million
.30% On excess
</TABLE>
J.P. Morgan Investment is an investment manager for corporate, public, and
union employee benefit funds, foundations, endowments, insurance companies,
government agencies and the accounts of other institutional investors. A
wholly owned subsidiary of J.P. Morgan & Co. Inc., J.P. Morgan Investment was
incorporated in the state of Delaware on February 7, 1984 and commenced
operations on July 2, 1984. It was formed from the Institutional Investment
Group of Morgan Guaranty Trust Company of New York, also a subsidiary of J.P.
Morgan & Co. Inc.
Morgan acquired its first tax-exempt client in 1913 and its first pension
account in 1940. Assets under management have grown to over $121 billion. With
offices in London and Singapore, J.P. Morgan Investment draws from a worldwide
resources base to provide comprehensive service to an international group of
clients. Investment management activities in Japan, Australia, and Germany are
carried out by affiliates, Morgan Trust Bank in Tokyo, J.P. Morgan Investment
Management Australia Limited in Melbourne, and J.P. Morgan Investment GmbH in
Frankfurt.
J.P. Morgan Investment currently provides investment advisory services to
the following investment companies: Global Money Fund, International Growth
Fund and Growth and Income Fund of Sierra Trust Funds, Global Money Fund,
International Growth Fund and Growth and Income Fund of The Sierra Variable
Trust, Frank Russell Equity Q Fund and Frank Russell Quantitative Equity Fund
of Frank Russell Investment Co., Preferred Fixed Income Fund and Preferred
Money Market Fund of Caterpillar Investment Management Ltd., AST Money Market
Fund of American Skandia Life Investment Management Inc., Benham European
Government Bond Fund, Growth and Income Stock Portfolio of Northwestern Mutual
Portfolio Fund, Inc., North American Funds International Growth and Income
Portfolio of North American Life Insurance Company and Venture International
Growth and Income Portfolio of North American Security Life Insurance Company.
Net fees paid or owed by Pacific Mutual to J.P. Morgan Investment in 1994
were $190,312 for the Equity Income Portfolio and $212,060 for the Multi-
Strategy Portfolio. From 1988 to 1993, Capital Guardian served as Portfolio
Manager to the Equity Income and Multi-Strategy Portfolios. Net fees paid by
Pacific Mutual to Capital Guardian for these Portfolios in 1993 were $103,788
for the Equity Income Portfolio and $108,861 for the Multi-Strategy Portfolio,
and in 1992 were $75,696 for the Equity Income Portfolio and $65,117 for the
Multi-Strategy Portfolio.
36
<PAGE>
Pursuant to a Portfolio Management Agreement between the Fund, the Adviser,
and Greenwich Street Advisors Division of Smith Barney Mutual Funds Management
Inc. ("Greenwich Street Advisors"), 338 Greenwich Street, 23rd Floor, New York,
New York 10048, Greenwich Street Advisors serves as the Portfolio Manager and
provides investment advisory service to the Equity Portfolio and Bond and
Income Portfolio. For the services provided, Pacific Mutual pays a fee to
Greenwich Street Advisors based on a percentage of each Portfolio's average
daily net assets according to the following fee schedules:
EQUITY PORTFOLIO
<TABLE>
<CAPTION>
RATE
(%) BREAK POINT (ASSETS)
---- ---------------------
<S> <C>
.50% On first $500 million
.45% On next $500 million
.40% On excess
BOND AND INCOME PORTFOLIO
<CAPTION>
RATE
(%) BREAK POINT (ASSETS)
---- ---------------------
<S> <C>
.40% On first $500 million
.35% On next $500 million
.30% On excess
</TABLE>
Greenwich Street Advisors has been in the investment counselling business
since 1934 and renders investment advice to a wide variety of individual,
institutional and investment company clients with aggregate assets under
management as of December 31, 1994 in excess of $48 billion.
Greenwich Street Advisors is a division of Smith Barney Mutual Fund's
Management Inc. ("SBMFM"), a wholly-owned subsidiary of Smith Barney Holdings
Inc., which is in turn a wholly-owned subsidiary of The Travelers Inc. The
Travelers Inc. is a financial services holding company engaged, through its
subsidiaries, principally in three business segments: (1) life and property and
casualty insurance services, (2) investment services and (3) consumer finance
services.
Net fees paid or owed to Greenwich Street Advisors by the Equity Portfolio's
predecessor the Equity Series of Pacific Corinthian Variable Fund--were
$401,325 in 1994, $415,347 in 1993, and $469,325 in 1992. Net fees paid or owed
to Greenwich Street Advisors by the Bond and Income Portfolio's predecessor--
the Bond and Income Series of Pacific Corinthian Variable Fund--were $149,270
in 1994, $178,349 in 1993, and $211,515 in 1992. The same fee schedules were in
effect for the predecessors of the Equity Portfolio and Bond and Income
Portfolio as are currently in effect.
The Greenwich Street Advisors and its predecessors have been in the
investment counseling business since 1934. SBMFM and its predecessors have been
providing investment-advisory services to mutual funds since 1968. As of
December 31, 1994 SBMFM manages approximately $54 billion of mutual funds.
Pursuant to a Portfolio Management Agreement between the Fund, the Adviser
and Columbus Circle Investors ("Columbus Circle Investors"), Metro Center, One
Station Place, 8th Floor, Stamford, Connecticut 06902, Columbus Circle
Investors serves as the Portfolio Manager and provides investment advisory
services to the Aggressive Equity Portfolio. For the services provided, Pacific
Mutual pays a fee to Columbus Circle Investors based on a percentage of the
Portfolio's average daily net assets according to the following fee schedules:
AGGRESSIVE EQUITY PORTFOLIO
<TABLE>
<CAPTION>
RATE
(%) BREAK POINT (ASSETS)
---- ---------------------
<S> <C>
.55% On first $100 million
.50% On next $250 million
.45% On excess
</TABLE>
37
<PAGE>
Columbus Circle Investors is a subsidiary partnership of PIMCO Advisors,
L.P., an affiliate of Pacific Mutual. Columbus Circle Investors manages
discretionary accounts for institutions such as corporate, government and
union pension and profit-sharing plans, foundations, and educational
institutions, as well as several funds in the PIMCO Advisors Funds and the
PIMCO Advisors Institutional Funds, and the Cash Accumulation Trust. As of
December 31, 1994, Columbus Circle Investors managed approximately $ billion
of assets, including approximately $ of mutual fund assets.
Pursuant to a Portfolio Management Agreement between the Fund, the Adviser
and Bankers Trust Company ("BTC"), a wholly-owned subsidiary of Bankers Trust
New York Corporation, 130 Liberty Street, New York, New York 10006, BTC is the
Portfolio Manager and provides investment advisory services to the Equity
Index Portfolio. For the services provided, Pacific Mutual pays a quarterly
fee in advance to BTC, based on the net assets of the Equity Index Portfolio
at the beginning of each calendar quarter in accordance with the following
schedule:
EQUITY INDEX PORTFOLIO
<TABLE>
<CAPTION>
RATE
(%) BREAK POINT (ASSETS)
---- ---------------------
<S> <C>
.07% On first $100 million
.03% On next $100 million
.01% On excess
</TABLE>
This fee is subject to a minimum annual fee of $100,000 for the calendar
year 1996 and each year thereafter. Prior to the calendar year 1996, 1995 and
October 18, 1994, the fee was subject to a minimum annual fee of $75,000,
$50,000 and $20,000, respectively.
BTC is a wholly-owned subsidiary of Bankers Trust New York Corporation, the
seventh largest bank holding company in the United States. The Global
Investment Management Group of BTC, the department directly responsible for
the management of the Equity Index Portfolio, as of June 30, 1994, managed
assets approximating $165 billion. BTC is the investment adviser to the
following registered investment companies: Short-Intermediate Fixed-Income
Portfolio of Accessor Funds, Inc.; Full Maturity Fixed Income Portfolio of AHA
Investment Funds, Inc.; MidCap Index Fund, Stock Index Fund and Small Cap
Index Fund of American General Series Portfolio ("VALIC"); Asset Management
Portfolio; Asset Management Portfolio II; Asset Management Portfolio III; the
Equity Portfolio and the Fixed Income Portfolio of the Bank Fiduciary Funds;
Capital Appreciation Portfolio; Capital Growth Portfolio; Cash Management
Portfolio; Equity 500 Index Portfolio of BTC Institutional Funds; Global High
Yield Portfolio; Hercules Latin American Value Fund; Intermediate Tax Free
Portfolio; International Equity Portfolio; Latin American Equity Portfolio;
Liquid Assets Portfolio; NY Tax Free Money Portfolio; Pacific Basin Equity
Portfolio; Short/Intermediate Government Securities Portfolio; Short Term
Securities Portfolio; Small Cap Portfolio; Tax Free Money Portfolio; Treasury
Money Portfolio and Utility Portfolio.
Net fees paid or owed by Pacific Mutual to BTC in 1994 were $50,000, in 1993
were $21,027, and in 1992 were $20,000.
Pursuant to a Portfolio Management Agreement between the Fund, the Adviser,
and Templeton Investment Counsel, Inc. ("Templeton"), Broward Financial
Centre, Suite 2100, Fort Lauderdale, Florida 33394-3091, Templeton is the
Portfolio Manager and provides investment advice with respect to the
International Portfolio. Pacific Mutual pays a fee to Templeton based on a
percentage of the Portfolio's average daily net assets according to the
following fee schedule:
INTERNATIONAL PORTFOLIO
<TABLE>
<CAPTION>
RATE
(%) BREAK POINT (ASSETS)
---- --------------------
<S> <C>
.70% On first $25 million
.55% On next $25 million
.50% On next $50 million
.40% On excess
</TABLE>
38
<PAGE>
Templeton is a Florida corporation with offices in Ft. Lauderdale, Florida,
and affiliated research offices in New York, Hong Kong, Singapore, Edinburgh,
Melbourne, Toronto, and the Bahamas. Templeton and its affiliates serve as
advisers for over 150 registered investment companies. The Templeton
organization provides investment management and advisory services to a
worldwide client base, including mutual fund shareholders, foundations and
endowments, employee benefit plans and individuals, As of December 31, 1994,
the Templeton organization managed approximately $42.0 billion in assets,
including over $5.4 billion invested in equity securities in emerging market
countries, and over $570.9 million invested in fixed-income securities in
those countries. Templeton is an indirect wholly-owned subsidiary of Templeton
Worldwide, Inc., which is in turn, a wholly-owned subsidiary of Franklin
Resources, Inc. ("Franklin"). Through its subsidiaries, Franklin is engaged in
various aspects of the financial services industry. As of December 31, 1994,
the Templeton/Franklin organization managed over $115 billion in assets
worldwide.
Net fees paid or owed by Pacific Mutual to Templeton for the International
Portfolio in 1994 were $328,196. From 1988 to 1993, Nomura Capital Management,
Inc. ("NCM") served as Portfolio Manager to the International Portfolio. Net
fees paid by Pacific Mutual to NCM for the International Portfolio in 1993
were $157,869, and in 1992 were $119,790.
Pursuant to a Portfolio Management Agreement between the Fund, the Adviser
and Blairlogie Capital Management Ltd. ("Blairlogie"), 4th Floor, 125 Princes
Street, Edinburgh EH2 4AD, Scotland, Blairlogie serves as the Portfolio
Manager and provides investment advisory services to the Emerging Markets
Portfolio. For the services provided, Pacific Mutual pays a fee to Blairlogie
based on a percentage of the Portfolio's average daily net assets according to
the following fee schedules:
EMERGING MARKETS PORTFOLIO
<TABLE>
<CAPTION>
RATE
(%) BREAK POINT (ASSETS)
---- --------------------
<S> <C>
.85% On first $50 million
.75% On next $50 million
.70% On next $50 million
.65% On excess
</TABLE>
Blairlogie is a subsidiary partnership of PIMCO Advisors, L.P. an affiliate
of Pacific Mutual. Blairlogie is a U.K. limited partnership with two general
partners and one limited partner. PIMCO Advisors L.P., the supervising general
partner of Blairlogie, has agreed to acquire one-fifth of Blairlogie's limited
partner's interest annually, beginning December 31, 1997.
Blairlogie manages a limited number of large accounts, such as employee
benefit plans, college endowment funds and foundations, as well as two funds
in the PIMCO Advisors Institutional Trust. As of December 31, 1994, Blairlogie
managed approximately $ billion of assets, including approximately $ of
mutual fund assets.
The Portfolio Management Agreements are not exclusive, and PIMCO, Capital
Guardian, BTC, Janus, J.P. Morgan Investment, Columbus Circle Investors,
Greenwich Street Advisors, Templeton, and Blairlogie may provide and currently
are providing investment advisory services to other clients, including other
investment companies.
DISTRIBUTION OF FUND SHARES
Pacific Equities Network ("PEN") serves as the Fund's Distributor pursuant
to a Distribution Contract (the "Distribution Contract") with the Fund. The
Distributor is not obligated to sell any specific amount of Fund shares. PEN
bears all expenses of providing services pursuant to the Distribution Contract
including the costs of sales presentations, mailings, advertising, and any
other marketing efforts by PEN in connection with the distribution or sale of
the shares.
The expenses incurred by the Fund with respect to each Portfolio in
connection with the Fund's organization, its registration with the SEC and any
states where registered, and the public offering of its shares were advanced
on behalf of the Fund by the Adviser. These organizational expenses were
deferred and amortized
39
<PAGE>
by the Fund's Portfolios over a period of 60 months. Similarly, the
organizational expenses of Portfolios of the Fund that have been organized
after the Fund commenced operations have been advanced on behalf of the Fund
by the Adviser, and are deferred and amortized by the pertinent Portfolio over
a period of 60 months from the commencement of operations of the Portfolio.
See "Financial Statements."
As of February 1, 1995, Pacific Mutual did not beneficially own shares of
any of the Portfolios of the Fund. In the event that Pacific Mutual were to
acquire a beneficial interest in any Portfolio, Pacific Mutual would exercise
voting rights attributable to these shares in accordance with voting
instructions received by Owners of the Policies issued by Pacific Mutual. To
this extent, as of February 1, 1995, Pacific Mutual did not exercise control
over any Portfolio.
PURCHASES AND REDEMPTIONS
For information on purchase and redemption of shares, see "More on the
Fund's Shares" in the Fund's Prospectus. The Fund may suspend the right of
redemption of shares of any Portfolio and may postpone payment for more than
seven days for any period: (i) during which the New York Stock Exchange is
closed other than customary weekend and holiday closings or during which
trading on the New York Stock Exchange is restricted; (ii) when the SEC
determines that a state of emergency exists which may make payment or transfer
not reasonably practicable; (iii) as the SEC may by order permit for the
protection of the security holders of the Fund; or (iv) at any other time when
the Fund may, under applicable laws and regulations, suspend payment on the
redemption of its shares. If the Board of Trustees should determine that it
would be detrimental to the best interests of the remaining shareholders of a
Portfolio to make payment wholly or partly in cash, the Portfolio may pay the
redemption price in whole or in part by a distribution in kind of securities
from the portfolio of the Portfolio, in lieu of cash, in conformity with
applicable rules of the SEC. If shares are redeemed in kind, the redeeming
shareholder might incur brokerage costs in converting the assets into cash.
Under the 1940 Act, the Fund is obligated to redeem shares solely in cash up
to the lesser of $250,000 or 1 percent of its net assets during any 90-day
period for any one shareholder.
PORTFOLIO TRANSACTIONS AND BROKERAGE
INVESTMENT DECISIONS
Investment decisions for the Fund and for the other investment advisory
clients of the Adviser, or applicable Portfolio Manager, are made with a view
to achieving their respective investment objectives. Investment decisions are
the product of many factors in addition to basic suitability for the
particular client involved (including the Fund). Thus, a particular security
may be bought or sold for certain clients even though it could have been
bought or sold for other clients at the same time. It also sometimes happens
that two or more clients simultaneously purchase or sell the same security, in
which event each day's transactions in such security are, insofar as possible,
averaged as to price and allocated between such clients in a manner which in
the opinion of the Adviser or Portfolio Manager is equitable to each and in
accordance with the amount being purchased or sold by each. There may be
circumstances when purchases or sales of portfolio securities for one or more
clients will have an adverse effect on other clients.
BROKERAGE AND RESEARCH SERVICES
There is generally no stated commission in the case of fixed-income
securities, which are traded in the over-the-counter markets, but the price
paid by the Fund usually includes an undisclosed dealer commission or mark-up.
In underwritten offerings, the price paid by the Fund includes a disclosed,
fixed commission or discount retained by the underwriter or dealer.
Transactions on U.S. stock exchanges and other agency transactions involve the
payment by the Fund of negotiated brokerage commissions. Such commissions vary
among different brokers. Also, a particular broker may charge different
commissions according to such factors as the difficulty and size of the
transaction. In the case of securities traded on some foreign stock exchanges,
brokerage commissions may be fixed and the Adviser or Portfolio Manager may be
unable to negotiate commission rates for these transactions.
40
<PAGE>
The Adviser or Portfolio Manager for a Portfolio places all orders for the
purchase and sale of portfolio securities, options, and futures contracts for
a Portfolio through a substantial number of brokers and dealers or futures
commission merchants. In executing transactions, the Adviser or Portfolio
Manager will attempt to obtain the best net results for a Portfolio taking
into account such factors as price (including the applicable brokerage
commission or dollar spread), size of order, the nature of the market for the
security, the timing of the transaction, the reputation, experience and
financial stability of the broker-dealer involved, the quality of the service,
the difficulty of execution and operational facilities of the firms involved,
and the firm's risk in positioning a block of securities. In transactions on
stock exchanges in the United States, payments of brokerage commissions are
negotiated. In effecting purchases and sales of portfolio securities in
transactions on United States stock exchanges for the account of the Fund, the
Adviser or Portfolio Manager may pay higher commission rates than the lowest
available when the Adviser or Portfolio Manager believes it is reasonable to
do so in light of the value of the brokerage and research services provided by
the broker effecting the transaction, as described below. In the case of
securities traded on some foreign stock exchanges, brokerage commissions may
be fixed and the Adviser or Portfolio Manager may be unable to negotiate
commission rates for these transactions. In the case of securities traded on
the over-the-counter markets, there is generally no stated commission, but the
price includes an undisclosed commission or markup. Consistent with the above
policy of obtaining the best net results, a portion of the Equity Index
Portfolio's brokerage and futures transactions may be conducted through BT
Brokerage Corporation and BT Futures Corporation, respectively, both wholly-
owned subsidiaries of Bankers Trust New York Corporation. The brokerage
commissions paid to BT Brokerage Corporation will not exceed 25% of the
brokerage commission incurred per year by the Equity Index Portfolio. Smith
Barney Inc. and its affiliates may serve as the Fund's broker in effecting
portfolio transactions on a national securities exchange, and may retain
commissions, in accordance with certain regulations of the SEC. Smith Barney
Inc. may receive no more than 25% of the brokerage commission incurred per
annum by any Portfolio managed by Greenwich Street Advisors.
Some securities considered for investment by the Fund's Portfolios may also
be appropriate for other clients served by the Adviser or Portfolio Manager.
If a purchase or sale of securities consistent with the investment policies of
a Portfolio and one or more of these clients served by the Adviser or
Portfolio Manager is considered at or about the same time, transactions in
such securities will be allocated among the Portfolio and clients in a manner
deemed fair and reasonable by the Adviser or Portfolio Manager. Although there
is no specified formula for allocating such transactions, the various
allocation methods used by the Adviser or Portfolio Manager, and the results
of such allocations, are subject to periodic review by the Fund's Adviser and
Board of Trustees.
It has for many years been a common practice in the investment advisory
business for advisers of investment companies and other institutional
investors to receive research services from broker-dealers which execute
portfolio transactions for the clients of such advisers. Consistent with this
practice, the Adviser or Portfolio Manager for a Portfolio may receive
research services from many broker-dealers with which the Adviser or Portfolio
Manager places the Portfolio's portfolio transactions. These services, which
in some cases may also be purchased for cash, include such matters as general
economic and security market reviews, industry and company reviews,
evaluations of securities and recommendations as to the purchase and sale of
securities. Some of these services may be of value to the Adviser or Portfolio
Manager in advising its various clients (including the Portfolio), although
not all of these services are necessarily useful and of value in managing a
Portfolio. The advisory fee paid by the Portfolio is not reduced because the
Adviser or Portfolio Manager and its affiliates receive such services.
As permitted by Section 28(e) of the Securities Exchange Act of 1934, the
Adviser or Portfolio Manager may cause a Portfolio to pay a broker-dealer,
which provides "brokerage and research services" (as defined in the Act) to
the Adviser or Portfolio Manager, an amount of disclosed commission for
effecting a securities transaction for the Portfolio in excess of the
commission which another broker-dealer would have charged for effecting that
transaction.
During the year 1994, the following Portfolios incurred brokerage
commissions and markups on principal transactions as follows: the High Yield
Bond Portfolio--$0, the Managed Bond Portfolio--$9,636, the
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Government Securities Portfolio--$5,652, the Growth Portfolio--$118,823, of
which $558 (0.47%) was paid to J.P. Morgan Securities, an affiliate of J.P.
Morgan Investment, the Equity Income Portfolio--$126,489, of which $84 (0.07%)
was paid to BT Securities, an affiliate of BTC, the Multi-Strategy Portfolio--
$77,944, of which $62 (0.08%) was paid to BT Securities, an affiliate of
Bankers Trust Company, the Equity Portfolio--$318,235 of which $53,700
(16.87%) was paid to Smith Barney Inc. or its predecessors, and $5,100 (1.60%)
was paid to Lehman Brothers Securities, the Bond and Income Portfolio--$0, the
Equity Index Portfolio--$6,337, the International Portfolio--$304,029, of
which $515 (0.17%) was paid to J.P. Morgan Securities, and the Growth LT
Portfolio--$101,353, of which $259 (0.26%) was paid to J.P. Morgan Securities.
During the years 1993 and 1992, respectively, the following Portfolios
incurred brokerage commissions as follows: the High Yield Bond Portfolio--$690
and $1,299, the Managed Bond Portfolio--$5,568 and $4,001, the Government
Securities Portfolio--$4,548 and $3,267, the Growth Portfolio--$119,526 and
$64,620, the Equity Income Portfolio--$33,310 and $24,271, the Multi-Strategy
Portfolio--$28,251 and $13,790, the Equity Portfolio--$418,458 of which
$71,472 (17.08%) were paid to Smith Barney Inc. or its predecessors, and
$537,146 of which $99,432 (18.51%) were paid to Smith Barney Inc. or its
predecessors, the Bond and Income Portfolio--$0 and $0, the Equity Index
Portfolio--$6,541 and $5,500, and the International Portfolio--$126,924 and
$49,519. The Equity and Bond and Income Portfolios had not yet commenced
operations as of December 31, 1994. Information for the Equity Portfolio and
Bond and Income Portfolio is based on activity of the predecessor series of
Pacific Corinthian Variable Fund, the assets of which were acquired by the
Fund on December 31, 1994. The Aggressive Equity and Emerging Markets
Portfolios had not commenced operations as of December 31, 1994.
PORTFOLIO TURNOVER
For reporting purposes, each Portfolio's portfolio turnover rate is
calculated by dividing the value of the lesser of purchases or sales of
portfolio securities for the fiscal year by the monthly average of the value
of portfolio securities owned by the Portfolio during the fiscal year. In
determining such portfolio turnover, long-term U.S. Government securities are
included. Short-term U.S. Government securities and all other securities whose
maturities at the time of acquisition were one year or less are excluded. A
100% portfolio turnover rate would occur, for example, if all of the
securities in the portfolio (other than short-term securities) were replaced
once during the fiscal year. The portfolio turnover rate for each of the
Portfolios will vary from year to year, depending on market conditions.
It is anticipated that the rate of portfolio turnover as defined above for
the Money Market Portfolio will be 0%, and for each of the other Portfolios
will be approximately 100% under normal market conditions. For the Portfolios
other than the Money Market Portfolio, portfolio turnover could be greater in
periods of unusual market movement and volatility. For the years 1994, 1993,
and 1992, respectively, the portfolio turnover rate for each of the Portfolios
was as follows: Money Market Portfolio--0%, 0%, and 0%, High Yield Bond
Portfolio--142%, 186%, and 186%, Managed Bond Portfolio--128%, 163%, and 90%,
Government Securities Portfolio--233%, 402%, and 212%, Growth Portfolio--40%,
35%, and 40%, Equity Income Portfolio--135%, 28%, and 19%, Multi-Strategy
Portfolio--187%, 28%, and 17%, Equity Portfolio--179%, 230%, and 242%, Bond
and Income Portfolio--32%, 42%, and 22%, International Portfolio--52%, 46%,
and 39%, and Equity Index Portfolio--2%, 1%, and 4%. The portfolio turnover
rate for the Growth LT Portfolio, which commenced operations on January 4,
1994, was 257% in 1994. Information for the Equity Portfolio and Bond and
Income Portfolio is based on activity of the predecessor series of Pacific
Corinthian Variable Fund, the assets of which were acquired by the Fund on
December 31, 1994.
NET ASSET VALUE
As indicated under "Net Asset Value" in the Prospectus, the Fund's net asset
value per share for the purpose of pricing purchase and redemption orders is
determined at or about 4:00 P.M., New York City time, on each day the New York
Stock Exchange is open for trading. Net asset value will not be determined on
the following holidays: New Year's Day, Martin Luther King, Jr. Day,
Presidents' Day, Good Friday, Memorial
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Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. With
respect to the Portfolios that invest in foreign securities, the value of
foreign securities that are traded on stock exchanges outside the United
States are based upon the price on the exchange as of the close of business of
the exchange immediately preceding the time of valuation. Securities traded in
over-the-counter markets outside the United States are valued at the last
available price in the over-the-counter market prior to the time of valuation.
Trading in securities on exchanges and over-the-counter markets in European
and Pacific Basin countries is normally completed well before 4:00 P.M., New
York City time. In addition, European and Pacific Basin securities trading may
not take place on all business days in New York. 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 calculated. Quotations of foreign securities in foreign
currencies are converted to U.S. dollar equivalents using the foreign exchange
quotation in effect at the time net asset value is computed. The calculation
of the net asset value of the Managed Bond, Government Securities, Aggressive
Equity, Growth LT, International, and Emerging Markets Portfolios may not take
place contemporaneously with the determination of the prices of portfolio
securities of foreign issuers used in such calculation. Further, under the
Fund's procedures, the prices of foreign securities are determined using
information derived from pricing services and other sources every day that the
Fund values its shares. Prices derived under these procedures will be used in
determining net asset value. Information that becomes known to the Fund or its
agents after the time that net asset value is calculated on any business day
may be assessed in determining net asset value per share after the time of
receipt of the information, but will not be used to retroactively adjust the
price of the security so determined earlier or on a prior day. Events
affecting the values of portfolio securities that occur between the time their
prices are determined and the time a Portfolio's net asset value is determined
may not be reflected in the calculation of net asset value. If events
materially affecting net asset value occur during such period, the securities
would be valued at fair market value as determined by the management and
approved in good faith by the Board of Trustees of the Fund.
The Money Market Portfolio's portfolio securities are valued using the
amortized cost method of valuation. This involves valuing a security at cost
on the date of acquisition and thereafter assuming a constant accretion of a
discount or amortization of a premium to maturity, regardless of the impact of
fluctuating interest rates on the market value of the instrument. While this
method provides certainty in valuation, it may result in periods during which
value, as determined by amortized cost, is higher or lower than the price the
Portfolio would receive if it sold the instrument. During such periods the
yield to investors in the Portfolio may differ somewhat from that obtained in
a similar investment company which uses available market quotations to value
all of its portfolio securities.
The Commission's regulations require the Money Market Portfolio to adhere to
certain conditions. The Portfolio is required to maintain a dollar-weighted
average portfolio maturity of 90 days or less, to limit its investments to
instruments having remaining maturities of 13 months or less (except
securities held subject to repurchase agreements having 13 months or less to
maturity) and to invest only in securities that meet specified quality and
credit criteria.
All other Portfolios are valued as follows:
Portfolio securities for which market quotations are readily available are
stated at market value. Market value is determined on the basis of last
reported sales price, or, if no sales are reported, the mean between
representative bid and asked quotations obtained from a quotation reporting
system or from established market makers. In other cases, securities are
valued at their fair value as determined in good faith by the Board of
Trustees of the Fund, although the actual calculations may be made by persons
acting under the direction of the Board. Money market instruments are valued
at market value, except that instruments maturing in sixty days or less are
valued using the amortized cost method of valuation.
The value of a foreign security is determined in its national currency based
upon the price on the foreign exchange as of its close of business immediately
preceding the time of valuation. Securities traded in over-the-counter markets
outside the United States are valued at the last available price in the over-
the-counter market prior to the time of valuation.
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Debt securities, including those to be purchased under firm commitment
agreements (other than obligations having a maturity of sixty days or less at
their date of acquisition), are normally valued on the basis of quotes
obtained from brokers and dealers or pricing services, which take into account
appropriate factors such as institutional-size trading in similar groups of
securities, yield, quality, coupon rate, maturity, type of issue, trading
characteristics, and other market data. Debt obligations having a maturity of
sixty days or less are generally valued at amortized cost unless the amortized
cost value does not approximate market value. Certain debt securities for
which daily market quotations are not readily available may be valued,
pursuant to guidelines established by the Board of Trustees, with reference to
debt securities whose prices are more readily obtainable and whose durations
are comparable to the securities being valued.
When a Portfolio writes a put or call option, the amount of the premium is
included in the Portfolio's assets and an equal amount is included in its
liabilities. The liability thereafter is adjusted to the current market value
of the option. The premium paid for an option purchased by the Portfolio is
recorded as an asset and subsequently adjusted to market value. The values of
futures contracts are based on market prices. Quotations of foreign securities
in foreign currency are converted to U.S. dollar equivalents at the prevailing
market rates quoted by the custodian on the morning of valuation.
PERFORMANCE INFORMATION
The Fund may, from time to time, include the yield and effective yield of
its Money Market Portfolio, the yield of the remaining Portfolios, and the
total return of all Portfolios in advertisements, sales literature, or reports
to shareholders or prospective investors. Total return information for the
Fund will not be advertised or included in sales literature unless accompanied
by comparable performance information for a Separate Account to which the Fund
offers its shares.
Current yield for the Money Market Portfolio will be based on the change in
the value of a hypothetical investment (exclusive of capital charges) over a
particular 7-day period, less a pro-rata share of Portfolio expenses accrued
over that period (the "base period"), and stated as a percentage of the
investment at the start of the base period (the "base period return"). The
base period return is then annualized by multiplying by 365/7, with the
resulting yield figure carried to at least the nearest hundredth of one
percent. "Effective yield" for the Money Market Portfolio assumes that all
dividends received during an annual period have been reinvested. Calculation
of "effective yield" begins with the same "base period return" used in the
calculation of yield, which is then annualized to reflect weekly compounding
pursuant to the following formula:
Effective Yield = [(Base Period Return + 1) 365/7]-1
For the 7-day period ending June 30, 1995, the current yield of the Money
Market Portfolio was 5.45% and the effective yield of the Portfolio was 5.60%.
Quotations of yield for the remaining Portfolios will be based on all
investment income per share earned during a particular 30-day period
(including dividends and interest), less expenses accrued during the period
("net investment income"), and are computed by dividing net investment income
by the maximum offering price per share on the last day of the period,
according to the following formula:
(a-b +1)/6/
2[ ------------- -1]
cd
where
a = dividends and interest earned during the period,
b = expenses accrued for the period (net of reimbursements),
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends, and
d = the maximum offering price per share on the last day of the period.
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For the 30 day period ended June 30, 1995, the yield of the remaining
Portfolios that had commenced operations on or before that date was as
follows: % for the High Yield Bond Portfolio, % for the Managed Bond
Portfolio, % for the Government Securities Portfolio, % for the Growth
Portfolio, % for the Growth LT Portfolio, % for the Multi-Strategy
Portfolio, % for the Equity Income Portfolio, % for the Equity
Portfolio, % for the Bond and Income Portfolio, % for the
International Portfolio, and % for the Equity Index Portfolio. The
Aggressive Equity and Emerging Markets Portfolios had not commenced operations
as of that date.
Quotations of average annual total return for a Portfolio will be expressed
in terms of the average annual compounded rate of return of a hypothetical
investment in the Portfolio over certain periods that will include a period of
one year (or, if less, up to the life of the Portfolio), calculated pursuant
to the following formula: P (1 + T)n = ERV (where P = a hypothetical initial
payment of $1,000, T = the total return for the period, n = the number of
periods, and ERV = the ending redeemable value of a hypothetical $1,000
payment made at the beginning of the period). Quotations of total return may
also be shown for other periods. All total return figures reflect the
deduction of a proportional share of Portfolio expenses on an annual basis,
and assume that all dividends and distributions are reinvested when paid.
For the one year period ended June 30, 1995, the total return for each
Portfolio that had commenced operations on or before that date was as follows:
5.07% for the Money Market Portfolio, 12.59% for the High Yield Bond
Portfolio, 11.77% for the Managed Bond Portfolio, 11.65% for the Government
Securities Portfolio, 11.23% for the Growth Portfolio, 36.35% for the Growth
LT Portfolio (which commenced operations on January 4, 1994), 20.84% for the
Equity Income Portfolio, 16.57% for the Multi-Strategy Portfolio, 12.53% for
the Equity Portfolio, 21.55% for the Bond and Income Portfolio, 9.51% for the
International Portfolio, and 25.85% for the Equity Index Portfolio. The
Aggressive Equity and Emerging Markets Portfolios had not commenced operations
as of that date.
For the five year period ended June 30, 1995, the average annual total
return for each Portfolio that had commenced operations on or before that date
was as follows: 4.39% for the Money Market Portfolio, 13.58% for the High
Yield Bond Portfolio, 9.88% for the Managed Bond Portfolio, 9.21% for the
Government Securities Portfolio, 11.22% for the Growth Portfolio, 9.49% for
the Equity Income Portfolio, 9.06% for the Multi-Strategy Portfolio, 10.28%
for the Equity Portfolio, 12.64% for the Bond and Income Portfolio, and 4.71%
for the International Portfolio. The Equity Index Portfolio did not begin
operations until January 30, 1991, and the Growth LT Portfolio did not begin
operations until January 4, 1994. The Aggressive Equity and Emerging Markets
Portfolios had not commenced operations on June 30, 1995.
For the ten year period ended June 30, 1995, the average annual total
returns for the Equity Portfolio, and Bond and Income Portfolio were 13.03%
and 12.07%, respectively.
Based upon the period from the commencement of Fund operations on January 4,
1988 until June 30, 1995, the average annual total return for each Portfolio,
except the Equity Index, Growth LT, Aggressive Equity, Equity, Bond and Income
and Emerging Markets Portfolios, was as follows: 5.40% for the Money Market
Portfolio, 11.09% for the High Yield Bond Portfolio, 9.76% for the Managed
Bond Portfolio, 9.20% for the Government Securities Portfolio, 14.07% for the
Growth Portfolio, 11.59% for the Equity Income Portfolio, 10.37% for the
Multi-Strategy Portfolio, and 7.83% for the International Portfolio. Based
upon the period from the commencement of the Equity Index Portfolio operations
on January 30, 1991 until June 30, 1995, the average annual total return for
the Equity Index Portfolio was 13.85%. Based upon the period from the
commencement of operations of the Growth LT Portfolio on January 4, 1994 until
June 30, 1995, the average annual total return for the Growth LT Portfolio was
22.13%. Based upon the period from the commencement of the first full year of
operations of the Equity Portfolio and Bond and Income Portfolio on January 1,
1984, the average annual total return for each of these Portfolios was 13.30%
and 12.97%, respectively. The Aggressive Equity and Emerging Markets
Portfolios had not commenced operations on June 30, 1995.
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<PAGE>
The performance results for the Equity Income, Multi-Strategy, and
International Portfolios occurred when these Portfolios were advised by
different Portfolio Managers. J.P. Morgan Investment began serving as
Portfolio Manager to the Equity Income Portfolio and the Multi-Strategy
Portfolio and Templeton began serving as Portfolio Manager to the
International Portfolio on January 1, 1994. The performance results for the
Equity Portfolio and Bond and Income Portfolio are based, in part, on the
performance results of the predecessor series of Pacific Corinthian Variable
Fund, the assets of which were acquired by the Fund on December 31, 1994.
Performance information for a Portfolio may be compared, in advertisements,
sales literature, and reports to shareholders to: (i) the Standard & Poor's
500 Stock Index ("S&P 500"), the Dow Jones Industrial Average ("DJIA"), for
the Money Market Portfolio, Donoghue Money Market Institutional Averages; for
those Portfolios with investments in fixed income securities, the Lehman
Brothers Government Corporate Index; for the Government Securities Portfolio,
the Lehman Brothers Government Bond Index; for the High Yield Bond Portfolio,
the Salomon High Yield Bond Indexes; for the International Portfolio, Morgan
Stanley Capital International's EAFE Index, which represents the stock markets
of Europe, Australia, and the Far East; for the Emerging Markets Fund, the
Morgan Stanley Capital International Emerging Markets Free Index; or other
unmanaged indexes, so that investors may compare a Portfolio's results with
those of a group of unmanaged securities widely regarded by investors as
representative of the securities markets in general; (ii) other groups of
mutual funds tracked by Lipper Analytical Services, a widely used independent
research firm which ranks mutual funds by overall performance, investment
objectives, and assets, or tracked by other services, companies, publications,
or persons who rank mutual funds on overall performance or other criteria; and
(iii) the Consumer Price Index (measure for inflation) to assess the real rate
of return from an investment in the Portfolio. Unmanaged indexes may assume
the reinvestment of dividends but generally do not reflect deductions for
administrative and management costs and expenses.
Quotations of yield or total return for the Fund will not take into account
charges and deductions against any Separate Accounts to which the Fund shares
are sold or charges and deductions against the Contracts issued or
administered by Pacific Mutual or Pacific Corinthian. The Portfolio's yield
and total return should not be compared with mutual funds that sell their
shares directly to the public since the figures provided do not reflect
charges against the Separate Accounts or the Contracts. Performance
information for any Portfolio reflects only the performance of a hypothetical
investment in the Portfolio during the particular time period on which the
calculations are based. Performance information should be considered in light
of the Portfolio's investment objectives and policies, characteristics and
quality of the portfolios and the market conditions during the given time
period, and should not be considered as a representation of what may be
achieved in the future.
TAXATION
Each Portfolio intends to qualify annually and to elect to be treated as a
regulated investment company under the Internal Revenue Code of 1986 (the
"Code").
To qualify as a regulated investment company, each Portfolio generally must,
among other things:(i) derive in each taxable year at least 90% of its gross
income from dividends, interest, payments with respect to securities loans,
and gains from the sale or other disposition of stock, securities or foreign
currencies, or other income derived with respect to its business of investing
in such stock, securities or currencies; (ii) derive in each taxable year less
than 30% of its gross income from the sale or other disposition of certain
assets held less than three months including stocks, securities, and certain
foreign currencies, futures, options, and forward contracts; (iii) diversify
its holdings so that, at the end of each quarter of the taxable year, (a) at
least 50% of the market value of the Portfolio's assets is represented by
cash, U.S. Government securities, the securities of other regulated investment
companies and other securities, with such other securities of any one issuer
limited for the purposes of this calculation to an amount not greater than 5%
of the value of the Portfolio's total assets and 10% of the outstanding voting
securities of such issuer, and (b) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than U.S.
Government securities or the securities of other regulated
46
<PAGE>
investment companies); and (iv) distribute at least 90% of its investment
company taxable income (which includes, among other items, dividends,
interest, and net short-term capital gains in excess of any net long-term
capital losses) each taxable year.
As a regulated investment company, a Portfolio generally will not be subject
to U.S. federal income tax on its investment company taxable income and net
capital gains (any net long-term capital gains in excess of the sum of net
short-term capital losses and capital loss carryovers from prior years), if
any, that it distributes to shareholders. Each Portfolio intends to distribute
to its shareholders, at least annually, substantially all of its investment
company taxable income and any net capital gains. In addition, amounts not
distributed by a Portfolio on a timely basis in accordance with a calendar
year distribution requirement are subject to a nondeductible 4% excise tax. To
avoid the tax, a Portfolio must distribute (or be deemed to have distributed)
during each calendar year, (i) at least 98% of its ordinary income (not taking
into account any capital gains or losses) for the calendar year, (ii) at least
98% of its capital gains in excess of its capital losses for the twelve month
period ending on October 31 of the calendar year (adjusted for certain
ordinary losses), and (iii) all ordinary income and capital gains for previous
years that were not distributed during such years. To avoid application of the
excise tax, each Portfolio intends to make its distributions in accordance
with the calendar year distribution requirement. A distribution will be
treated as paid on December 31 of the calendar year if it is declared by a
Portfolio during October, November, or December of that year to shareholders
of record on a date in such a month and paid by the Portfolio during January
of the following calendar year. Such distributions will be taxable to
shareholders (the Separate Accounts) for the calendar year in which the
distributions are declared, rather than the calendar year in which the
distributions are received.
If a Portfolio invests in shares of a foreign investment company, the
Portfolio may be subject to U.S. federal income tax on a portion of an "excess
distribution" from, or of the gain from the sale of part or all of the shares
in, such company. In addition, an interest charge may be imposed with respect
to deferred taxes arising from such distributions or gains.
Under the Code, gains or losses attributable to fluctuations in exchange
rates which occur between the time a Portfolio accrues income or other
receivables or accrues expenses or other liabilities denominated in a foreign
currency and the time that Portfolio actually collects such receivables or
pays such liabilities generally are treated as ordinary income or ordinary
loss. Similarly, on disposition of debt securities denominated in a foreign
currency and on disposition of certain futures contracts, forward contracts,
and options, gains or losses attributable to fluctuations in the value of
foreign currency between the date of acquisition of the security or contract
and the date of disposition also are treated as ordinary gain or loss. These
gains or losses, referred to under the Code as "Section 988" gains or losses,
may increase or decrease the amount of a Portfolio's investment company
taxable income to be distributed to its shareholders as ordinary income.
The Treasury Department announced that it would issue future regulations or
rulings addressing the circumstances in which a variable contract owner's
control of the investments of a separate account may cause the contract owner,
rather than the insurance company, to be treated as the owner of the assets
held by the separate account. If the contract owner is considered the owner of
the securities underlying the separate account, income and gains produced by
those securities would be included currently in the contract owner's gross
income. It is not known what standards will be set forth in the regulations or
rulings.
In the event that the rules or regulations are adopted there can be no
assurance that the Portfolios will be able to operate as currently described
in the Prospectus, or that the Trust will not have to change any Portfolio's
investment objective or investment policies. While each Portfolio's investment
objective is fundamental and may be changed only by a vote of a majority of
its outstanding shares, the Trustees have reserved the right to modify the
investment policies of the Portfolios as necessary to prevent any such
prospective rules and regulations from causing the contract owners to be
considered the owners of the shares of the Portfolio's underlying the Separate
Accounts.
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<PAGE>
DISTRIBUTIONS
Distributions of any investment company taxable income (which includes among
other items, dividends, interest, and any net realized short-term capital
gains in excess of net realized long-term capital losses) are treated as
ordinary income for tax purposes in the hands of the shareholder (Separate
Account). Net capital gains (the excess of any net long-term capital gains
over net short-term capital losses) will, to the extent distributed, be
treated as long-term capital gains in the hands of a Separate Account
regardless of the length of time a Separate Account may have held the shares.
HEDGING TRANSACTIONS
The 30% limitation and the diversification requirements applicable to a
Portfolio's assets may limit the extent to which a Portfolio will be able to
engage in transactions in options, futures contracts, or forward contracts.
OTHER INFORMATION
CONCENTRATION POLICY
Under each Portfolio's investment restrictions, a Portfolio may not invest
in a security if, as a result of such investment, more than 25% of its total
assets (taken at market value at the time of such investment) would be
invested in the securities of issuers in any particular industry, except that
this restriction does not apply to securities issued or guaranteed by the U.S.
Government or its agencies or instrumentalities (or repurchase agreements with
respect thereto). For purposes of complying with this restriction, the Fund,
in consultation with its Portfolio Managers, utilizes its own industry
classifications.
CAPITALIZATION
The Fund is a Massachusetts business trust established under a Declaration
of Trust dated May 4, 1987. The capitalization of the Fund consists solely of
an unlimited number of shares of beneficial interest with a par value of
$0.001 each. The Board of Trustees may establish additional Portfolios (with
different investment objectives and fundamental policies) at any time in the
future. Establishment and offering of additional Portfolios will not alter the
rights of the Fund's shareholders. When issued, shares are fully paid,
redeemable, freely transferable, and non-assessable by the Fund. Shares do not
have preemptive rights or subscription rights. In liquidation of a Portfolio
of the Fund, each shareholder is entitled to receive his pro rata share of the
net assets of that Portfolio.
Expenses incurred by the Equity Index Portfolio and Growth LT Portfolio in
connection with the Fund's organization and establishment of those Portfolios
and the public offering of the shares of those Portfolios, aggregated
approximately $40,358 and $3,952, respectively. These costs have been deferred
by the Equity Index and Growth LT Portfolios and are being amortized by it
over a period of five years from the beginning of operations of those
Portfolios.
VOTING RIGHTS
Shareholders of the Fund are given certain voting rights. Each share of each
Portfolio will be given one vote, unless a different allocation of voting
rights is required under applicable law for a mutual fund that is an
investment medium for variable insurance products.
Under the Declaration of Trust, the Fund is not required to hold annual
meetings of Fund shareholders to elect Trustees or for other purposes. It is
not anticipated that the Fund will hold shareholders' meetings unless required
by law or the Declaration of Trust. In this regard, the Fund will be required
to hold a meeting to elect Trustees to fill any existing vacancies on the
Board if, at any time, fewer than a majority of the Trustees have
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<PAGE>
been elected by the shareholders of the Fund. In addition, the Declaration of
Trust provides that the holders of not less than two-thirds of the outstanding
shares or other voting interests of the Fund may remove a person serving as
Trustee either by declaration in writing or at a meeting called for such
purpose. The Trustees are required to call a meeting for the purpose of
considering the removal of a person serving as Trustee, if requested in
writing to do so by the holders of not less than 10% of the outstanding shares
or other voting interests of the Fund. The Fund's shares do not have
cumulative voting rights.
CUSTODIAN AND TRANSFER AGENCY AND DIVIDEND DISBURSING SERVICES
Investors Fiduciary Trust Company ("IFTC") serves as Custodian for assets of
the Fund. Pursuant to a sub-custody agreement between IFTC and The Chase
Manhattan Bank, N.A. ("Chase"), Chase serves as subcustodian of the Fund for
the custody of the foreign securities acquired by the Fund. Under the
agreement, Chase may hold the foreign securities at its principal office at
One Chase Manhattan Plaza, New York, New York 10081, and at Chase's branches,
and subject to approval by the Board of Trustees, at a foreign branch of a
qualified U.S. bank, an eligible foreign subcustodian, or an eligible foreign
securities depository.
Pursuant to rules or other exemptions under the 1940 Act, the Fund may
maintain foreign securities and cash for the Fund in the custody of certain
eligible foreign banks and securities depositories. Selection of these foreign
custodial institutions is made by the Board of Trustees, and is reviewed
annually, following a consideration of a number of factors, including (but not
limited to) the reliability and financial stability of the institution; the
ability of the institution to perform capably custodial services for the Fund;
the reputation of the institution in its national market; the political and
economic stability of the country in which the institution is located; and
further risks of potential nationalization or expropriation of Fund assets.
Pacific Mutual provides dividend disbursing and transfer agency services to
the Fund.
FINANCIAL STATEMENTS
The financial statements of the Fund as of December 31, 1994, including the
notes thereto, are incorporated by reference in this Statement of Additional
Information from the Annual Report of the Fund dated as of December 31, 1994.
The financial statements have been audited by Deloitte & Touche LLP, except
for information for the Equity Portfolio and Bond and Income Portfolio for
years before 1994, which was audited by other independent public accountants.
Financial statements of the Fund as of June 30, 1995, including the notes
thereto, are incorporated by reference in this Statement of Additional
Information from the Semi-Annual Report of the Fund dated as of June 30, 1995.
The information set forth in the statement of assets and liabilities as of
June 30, 1995 and the statements of operations and changes in net assets for
the six month period ended June 30, 1995 is unaudited. The information
reflects all adjustments, consisting only of normal recurring adjustments,
that, in the opinion of management, are necessary to present fairly the
financial position and results of operations of Pacific Select Fund for the
period indicated. Results of operations for the period is not necessarily
indicative of the results of operations for the full year.
INDEPENDENT ACCOUNTANTS
Deloitte & Touche LLP serves as the independent public accountants for the
Fund. Deloitte & Touche LLP provides audit services and assistance and
consultation in connection with Securities and Exchange Commission filings.
The address of Deloitte & Touche LLP is 695 Town Center Drive, Suite 1200,
Costa Mesa, California 92626.
COUNSEL
Dechert Price & Rhoads, 1500 K Street, N.W., Suite 500, Washington, D.C.
20005, passes upon certain legal matters in connection with the shares offered
by the Fund and also acts as outside counsel to the Fund.
49
<PAGE>
REGISTRATION STATEMENT
This Statement of Additional Information and the Prospectus do not contain
all the information included in the Fund's Registration Statement filed with
the SEC under the Securities Act of 1933 with respect to the securities
offered hereby, certain portions of which have been omitted pursuant to the
rules and regulations of the SEC. The Registration Statement, including the
exhibits filed therewith, may be examined at the offices of the SEC in
Washington, D.C.
Statements contained herein and in the Prospectus as to the contents of any
contract or other documents referred to are not necessarily complete, and, in
each instance, reference is made to the copy of such contract or other
documents filed as an exhibit to the Registration Statement, each such
statement being qualified in all respects by such reference.
50
<PAGE>
PACIFIC SELECT FUND
Part C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements
Part A:
Financial Highlights
Part B.
The following audited financial statements are incorporated
by reference in Part B from the Annual Report of the Fund
dated as of December 31, 1994;
(1) Statements of Assets and Liabilities
(2) Statements of Operations
(3) Statements of Changes in Net Assets
(4) Notes to Financial Statements
(5) Financial Highlights
(6) Portfolio of Investments
(b) Exhibits
(1)(a) Agreement and Declaration of Trust
(1)(b) Establishment and Designation of Shares of
Beneficial Interest in the Equity Index Series
(2) By-Laws of Registrant
(3) Not Applicable
(4) Instruments Defining Rights of Holders of
Securities*
(5)(a) Investment Advisory Agreement
(5)(b) Portfolio Management Agreement - Capital Guardian
Trust Company
(5)(c) Portfolio Management Agreement - Bankers Trust
Company
(5)(d) Portfolio Management Agreement - J.P. Morgan
Investment Management Inc.
(5)(e) Portfolio Management Agreement - Janus Capital
Corporation
(5)(f) Portfolio Management Agreement - Templeton
Investment Counsel, Inc.
(5)(g) Portfolio Management Agreement - Greenwich Street
Advisors
(5)(h) Transfer and Assumption Agreement - Greenwich
Street Advisors
II-1
<PAGE>
(5)(i) Portfolio Management Agreement - Pacific
Investment Management Company
(5)(j) Portfolio Management Agreement - Blairlogie
Capital Management LTD
(5)(k) Portfolio Management Agreement - Columbus Circle
Investors
(6)(a) Distribution Agreement
(7) Not Applicable
(8)(a) Custodian Agreement
(9)(a) Agency Agreement
(9)(b) Participation Agreement
(9)(c) Participation Agreement with Pacific Corinthian
Life Insurance Company
(10) Opinion and Consent of Counsel
(11) Accountant's Consent
(12)(a) Annual Report - December 31, 1994**
(12)(b) Semi-Annual Report - June 30, 1995***
(13) Not Applicable
(14) Not Applicable
(15) Not Applicable
(16) Performance Quotation Computations
(17) Financial Data Schedules - June 30, 1995
[FN]
- ------------
* Included in Registrant's Agreement and Declaration of Trust, Article VI,
Section 6.3 submitted with this filing and incorporated by reference herein.
** Included in Registrant's Post-Effective Amendment No. 15 to the Registration
Statement (File No. 33-13954) filed on March 2, 1995 and incorporated by
reference herein.
*** Included in Registrant's Suspended Form Type N-30D, Accession
No. 0000898430-95-001724 filed on August 28, 1995 and incorporated by
reference herein.
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
Pacific Mutual Life Insurance Company, on its own behalf and on behalf of
its Pacific Select Variable Annuity, Pacific Select Exec, Pacific COLI, and
Pacific Select Separate Accounts ("Separate Accounts"), and its affiliate,
Pacific Corinthian Life Insurance Company on behalf of its Pacific Corinthian
Variable Account ("Separate Account") owns all of the outstanding shares of the
Series of Registrant. Pacific Mutual Life Insurance Company will vote fund
shares in accordance with instructions received from Policy Owners having
interests in the Variable Accounts of its Separate Accounts, and Pacific
Corinthian Life Insurance Company will vote fund shares in accordance with
instructions received from Policy Owners having interests in the Variable
Accounts of its Separate Account.
Item 26. Numbers of Holders of Securities
--------------------------------
Pacific Mutual Life Insurance Company, on its own behalf and on behalf of
its Pacific Select, Pacific Select Variable Annuity, Pacific Select Exec and
Pacific COLI Separate Accounts, and its affiliate Pacific Corinthian Life
Insurance Company on behalf of its Pacific Corinthian Variable Account are the
sole record owners of securities registered pursuant to this registration
statement.
Item 27. Indemnification
---------------
II-2
<PAGE>
Reference is made to Article V of the Registrant's Declaration of Trust,
which is filed herewith.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 ("Act") may be permitted to trustees, officers and controlling persons
of the Registrant by the Registrant pursuant to the Declaration of Trust or
otherwise, the Registrant is aware that in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy as expressed
in the Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, officers or controlling
persons of the Registrant in connection with the successful defense of any act,
suit or proceeding) is asserted by such trustees, officers or controlling
persons in connection with the shares being registered, the Registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issues.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
Each investment adviser, and the trustees or directors and officers of each
investment adviser and their business and other connections are as follows:
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Pacific Mutual Insurance Company
</TABLE>
II-3
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Pacific Mutual Thomas C. Sutton Director, Chairman of the Board and Chief
Executive Officer of Pacific Mutual Life
Insurance Company, January, 1990 to
present; Director of Pacific Corinthian
Life Insurance Company; President, Chief
Executive Officer and Director of Group
Holding Company and Pacific Financial
Holding Company; Director of: Alliance
Health Plan Network, Inc., Cadence
Capital Management Corporation,
Employee Benefits America
Administration Corporation, Mutual
Service Corporation, NFJ Investment
Group, Inc., Pacific Equities Network,
Pacific Financial Asset Management
Corporation, Pacific Investment
Management Company, Pacific Mutual
Realty Finance, Inc., PM Group Life
Insurance Co.; PM Realty Advisors, Inc.;
Director of Newhall Land & Farming;
SCE Corp.; Health Insurance Association
of America
Pacific Mutual Harry G. Bubb Director and Chairman Emeritus of Pacific
Mutual Life Insurance Company, January
1990 to present
Pacific Mutual Richard M. Ferry Director of Pacific Mutual Life Insurance
Company, 1986 to present; Chairman of:
Korn/Ferry International; Avery Dennison
Corporation; ConAm Management; First
Business Bank; Northwestern Restaurants,
Inc.; Dole Food Company; Mullin
Consulting Inc.
Pacific Mutual Donald E. Guinn Director of Pacific Mutual Life Insurance
Company, 1984 to present; Chairman
Emeritus and Director of: Pacific Telesis
Group; Pacific Bell; The Dial Corporation;
Bank of America NT&SA; Bank America
Corporation; Pyramid Technology Group
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Pacific Mutual Ignacio E. Lozano, Jr. Director of Pacific Mutual Life Insurance
Company, March 1988 to present;
Chairman and Editor-in-Chief of La
Opinion; Director of: BankAmerica
Corporation; Bank of America NT&SA;
Pacific Enterprises; The Walt Disney
Company
Pacific Mutual Charles A. Lynch Director of Pacific Mutual Life Insurance
Company, 1985 to present; Chairman and
CEO of Fresh Choice, Inc.; Director of:
Nordstrom, Inc.; Greyhound Lines, Inc.;
Hexcel Corp.
Pacific Mutual Allen W. Mathies, Jr., Director of Pacific Mutual Life Insurance
M.D. Company, 1985 to present; President
Emeritus of Huntington Memorial
Hospital; Director of Occidental College
Pacific Mutual Charles D. Miller Director of Pacific Mutual Life Insurance
Company, 1986 to present; Chairman,
Chief Executive Officer and Director of
Avery Dennison Corporation; Director of:
Great Western Financial Corporation;
Nationwide Health Properties, Inc.;
Southern California Edison Company
Pacific Mutual Donn B. Miller Director of Pacific Mutual Life Insurance
Company, 1977 to present; President,
Chief Executive Officer and Director of
Pearson-Sibert Oil Co. of Texas; Director
of: Automobile Club of Southern
California; The Irvine Company, St.
John's Hospital & Health Center
Foundation; Former Senior Partner with
the law firm of O'Melveny & Meyers
Pacific Mutual J. Fernando Niebla Director of Pacific Mutual Life Insurance
Company, 1995 to present; Chairman and
CEO of Infotec Development, Inc.
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Pacific Mutual Susan Westerberg Prager Director of Pacific Mutual Life Insurance
Company, 1979 to present; Dean of the
UCLA School of Law at the University of
California at Los Angeles; Director of
Lucille Salter Packard Children's Hospital
of Stanford
Pacific Mutual James R. Ukropina Director of Pacific Mutual Life Insurance
Company, January 1989 to present;
Partner with the law firm of O'Melveney
& Meyers; Former Chairman and Chief
Executive Officer of Pacific Enterprises;
Director of Lockheed Corporation
Pacific Mutual Raymond L. Watson Director of Pacific Mutual Life Insurance
Company, 1975 to present; Vice Chairman
and Director of: The Irvine Company; The
Walt Disney Company; The Mitchell
Energy and Development Company; Irvine
Apartment Communities, Inc.
Pacific Mutual Glenn S. Schafer Director and President of Pacific Mutual
Life Insurance Company, January 1995 to
present; Executive Vice President and
Chief Financial Officer of Pacific Mutual
Life Insurance Company; April 1991 to
January 1995; Director of Pacific Equities
Network, April 1989 to present; Past
President, Chief Executive Officer, Chief
Financial Officer, Treasurer and Director
of Pacific Equities Network; Director of
Pacific Financial Holding Company,
Group Holding Company, PM Group Life
Insurance Company and Pacific Corinthian
Life Insurance Company; and similar
positions with various affiliated companies
of Pacific Mutual Life Insurance Company
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Pacific Mutual David R. Carmichael Senior Vice President and General Counsel
of Pacific Mutual Life Insurance
Company, April 1992 to present; Director
of Pacific Corinthian Life Insurance
Company and PM Group Life Insurance
Company; Director of Association of
California Life Insurance Companies
Pacific Mutual Audrey L. Milfs Vice President and Corporate Secretary of
Pacific Mutual Life Insurance Company,
March 1991 to present; Secretary to all
affiliated companies of Pacific Mutual Life
Insurance Company; 1981 to present
Pacific Mutual Edward R. Byrd Vice President and Controller of Pacific
Mutual Life Insurance Company, June
1992 to present
Pacific Mutual Khanh T. Tran Vice President and Treasurer and
Treasurer of Pacific Mutual Life Insurance
Company, November 1991 to present;
Treasurer to several affiliated companies
of Pacific Mutual, 1990 to present
Pacific Investment Investment Advisor
Management
Company
("PIMCO")
PIMCO George C. Allan Vice President, PIMCO
PIMCO Tamara J. Arnold Vice President, PIMCO
PIMCO Leslie A. Barbi Vice President, PIMCO
PIMCO William R. Benz Executive Vice President, PIMCO
PIMCO John B. Brynjolfsson Vice President, PIMCO
PIMCO Robert W. Burns Vice President, PIMCO
PIMCO Kathleen A. Clune Assistant Treasurer and Assistant Secretary
of PIMCO
PIMCO Charles M. Daniels III Executive Vice President, PIMCO
PIMCO Anita Dunn Vice President, PIMCO
PIMCO David H. Edington Managing Director, PIMCO
</TABLE>
II-7
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
PIMCO Benjamin A. Ehlert Executive Vice President, PIMCO
PIMCO William H. Gross Managing Director and Director, PIMCO
PIMCO John L. Hague Managing Director, PIMCO
PIMCO Gordon C. Hally Executive Vice President, PIMCO
PIMCO John P. Hardaway Vice President, PIMCO
PIMCO Brent R. Harris Managing Director, PIMCO
PIMCO Douglas M. Hodge Vice President, PIMCO
PIMCO Brent L. Holden Executive Vice President, PIMCO
PIMCO Dwight F. Holloway, Jr. Vice President, PIMCO
PIMCO Jane T. Howe Vice President, PIMCO
PIMCO Stephen M. Kane Vice President, PIMCO
PIMCO Margaret E. Isberg Executive Vice President, PIMCO
PIMCO John S. Loftus Executive Vice President, PIMCO
PIMCO James F. MacIntosh Director, PIMCO; Executive Director,
Paul, Hastings, Janofsky & Walker
PIMCO Dean S. Meiling Managing Director and Director, PIMCO
PIMCO James F. Muzzy Managing Director and Director, PIMCO
PIMCO William F. Podlich III Managing Director and Director, PIMCO
PIMCO William C. Powers Managing Director, PIMCO
PIMCO Frank B. Rabinovitch Managing Director, PIMCO
PIMCO Edward P. Rennie Vice President, PIMCO
PIMCO Ernest L. Schmider Vice President, Chief Administrative and
Legal Officer, PIMCO
PIMCO Leland T. Scholey Vice President, PIMCO
PIMCO Ronald L. Solberg Vice President, PIMCO
PIMCO William S. Thompson, Chief Executive Officer and Managing
Jr. Director, PIMCO
PIMCO Benjamin L. Trosky Executive Vice President, PIMCO
</TABLE>
II-8
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
PIMCO James G. Ward Vice President, PIMCO
PIMCO Ram Willner Vice President, PIMCO
PIMCO George H. Wood Vice President, PIMCO
PIMCO Lynette L. Zeller Vice President, PIMCO
Capital Guardian Trust Investment Advisor
Company
Capital Guardian Trust Richard C. Barker Chairman of the Board, Capital Guardian
Company Trust Company and Capital International
Limited; Senior Vice President and
Director, Capital Management Services;
Director, The Capital Group, Inc. and
Capital Group International, Inc.
Capital Guardian Trust Michael D. Beckman Senior Vice President, Treasurer and
Company Director, Capital Guardian Trust
Company; Director, Capital Guardian
Trust Company of Nevada
Capital Guardian Trust Fred R. Betts Senior Vice President, Capital Guardian
Company Trust Company
Capital Guardian Trust Larry Paul Director of Capital Guardian Trust
Company Clemmensen Company, American Funds Distributors,
Inc. and American Funds Service
Company; Executive Vice President,
Director, and Chief Financial Officer,
The Capital Group; Senior Vice
President and Director, Capital Research
and Management Company; Senior Vice
President and Treasurer, Capital Income
Builder, Inc. and Capital World Growth
& Income Fund, Inc.
</TABLE>
II-9
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Capital Guardian Trust David I. Fisher Chairman of the Board, Capital and
Company Capital International S.A.; Vice
Chairman of the Board, Capital Guardian
Trust Company, Capital International
Limited, Emerging Markets Growth
Fund, Inc., and Capital International
K.K.; President and Director, Capital
Group International, Inc., Capital
International, Inc. and Capital
International Limited (Bermuda);
President and Principal Executive
Officer, New World Investment Fund;
Director, Capital Group Research, Inc.,
Capital Research International, Global
Capital Management Limited, New
Perspective Fund, Inc. and EuroPacific
Growth Fund, Inc.
Capital Guardian Trust William H. Hurt Senior Vice President and Director,
Company Capital Guardian Trust Company;
Chairman of the Board, Capital Guardian
Trust Company of Nevada and Capital
Strategy Research, Inc.; Director, The
Capital Group, Inc.
Capital Guardian Trust Robert G. Kirby Director, Capital Guardian Trust
Company Company; Senior Partner, The Capital
Group Partners L.P.; Director,
Lockheed Corporation
Capital Guardian Trust Nancy J. Kyle Senior Vice President and Director,
Company Capital Guardian Trust Company
Capital Guardian Trust Karen L. Larson Director, Capital Guardian Trust
Company Company; President, Director, and
Director of Research, Capital Guardian
Research Company
Capital Guardian Trust D. James Martin Director, Capital Guardian Trust
Company Company; Senior Vice President and
Director, Capital Guardian Research
Company
</TABLE>
II-10
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Capital Guardian Trust John R. McIlwraith Senior Vice President and Director,
Company Capital Guardian Trust Company; Senior
Vice President and Director, Capital
International Limited
Capital Guardian Trust James R. Mulally Senior Vice President and Director,
Company Capital Guardian Trust Company; Senior
Vice President, Capital International
Limited; Director, Capital Guardian
Research Company
Capital Guardian Trust Robert V. Pennington Senior Vice President, Capital Guardian
Company Trust Company; President, Capital
Guardian Trust Company of Nevada
Capital Guardian Trust Jason M. Pilalas Director, Capital Guardian Trust
Company Company; Senior Vice President and
Director, Capital Guardian Research
Company
Capital Guardian Trust Merlin E. Robertson Senior Vice President, Capital Guardian
Company Trust Company
Capital Guardian Trust Robert Ronus President, Capital Guardian Trust
Company Company; Chairman, Capital Research
International and Capital Guardian
Research Company; Senior Vice
President, Capital International Limited
and Capital International S.A.; Director,
Capital Group International, Inc., Capital
International, Inc., Capital International
Fund, and Nomura Capital International
Equity Fund.
Capital Guardian Trust Theodore Samuels Senior Vice President and Director,
Company Capital Guardian Trust Company;
Director, Capital Guardian Research
Company
Capital Guardian Trust John H. Seiter Executive Vice President and Director,
Company Capital Guardian Trust Company; Senior
Vice President, Capital Group
International, Inc.
Capital Guardian Trust Robert L. Spare Senior Vice President, Capital Guardian
Company Trust Company
</TABLE>
II-11
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Capital Guardian Trust Eugene P. Stein Executive Vice President and Director,
Company Capital Guardian Trust Company;
Director, Capital Guardian Research
Company
Capital Guardian Trust Douglas M. Urban Senior Vice President and Director,
Company Capital Guardian Trust Company
Capital Guardian Trust Edus H. Warren, Jr. Senior Vice President and Director,
Company Capital Guardian Trust Company
J.P. Morgan Investment Adviser
Investment
Management Inc.
J.P. Morgan Keith M. Schappert President, Director and Managing
Investment Director, J.P. Morgan Investment
Management Inc. Management Inc.
J.P. Morgan William L. Cobb, Jr. Vice Chairman, Director and Managing
Investment Director, J.P. Morgan Investment
Management Inc. Management Inc.
J.P. Morgan Michael R. Granito Director and Managing Director
Investment
Management Inc.
J.P. Morgan Cary Nicholas Potter Chairman of the Board, J.P. Morgan
Investment Investment Management Inc.
Management Inc.
J.P. Morgan Kenneth W. Anderson Director and Managing Director J.P.
Investment Morgan Investment Management Inc.
Management Inc.
J.P. Morgan Robert A. Anselmi Director, Managing Director and
Investment Secretary J.P. Morgan Investment
Management Inc. Management Inc.
J.P. Morgan David L. Brigham Director and Managing Director, J.P.
Investment Morgan Investment Management Inc.
Management Inc.
J.P. Morgan Jean L. Brunel Director, Morgan Guaranty Trust
Investment Company of New York
Management Inc.
</TABLE>
II-12
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
J.P. Morgan Thomas M. Luddy Director and Managing Director, J.P.
Investment Morgan Investment Management Inc.
Management Inc.
J.P. Morgan Michael E. Patterson Director, J.P. Morgan & Company Inc.
Investment
Management Inc.
J.P. Morgan M. Steven Soltis Director and Managing Director, J.P.
Investment Morgan Investment Management Inc.
Management Inc.
J.P. Morgan John R. Thomas Director, J.P. Morgan Trust Bank Ltd.
Investment
Management Inc.
Janus Capital Investment Advisor
Corporation
Janus Capital Thomas H. Bailey President, Director and Chairman of the
Corporation Board 1978 to present, Chief Executive
Officer 1994 to present
Janus Capital James P. Craig, III Director April 1995 to present, Vice
Corporation President and Chief Investment Officer,
June 1995 to present
Janus Capital Michael E. Herman Director, 1984 to present
Corporation
Janus Capital Thomas A. McDonnell Director, 1990 to present
Corporation
Janus Capital Michael Stolper Director, 1984 to present
Corporation
Janus Capital Mark B. Whiston Vice President and Chief Marketing
Corporation Officer, June 1995 to present
Janus Capital Marjorie G. Hurd Vice President, June 1995 to present
Corporation
Janus Capital David C. Tucker Vice President and General Counsel,
Corporation 1990 to present, Secretary, 1993 to
present, Chief Compliance Officer 1994
to present
</TABLE>
II-13
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Janus Capital Steven R. Goodbarn Treasurer, 1992 to present, Vice
Corporation President, June 1995 to present
Templeton Investment Investment Advisor
Counsel, Inc.
Templeton Investment Charles E. Johnson Chairman of the Board; Director of
Counsel, Inc. Franklin; Director of various Templeton
Funds
Templeton Investment Martin L. Flanagan Executive Vice President and Director,
Counsel, Inc. Senior Vice President, Treasurer and
Chief Financial Officer of Franklin; Vice
President of various Templeton Funds
Templeton Investment Gregory E. McGowan Executive Vice President and Director;
Counsel, Inc. Attorney, Senior Vice President and
Director
Templeton Investment Howard J. Leonard Senior Vice President; Portfolio Manager
Counsel, Inc.
Templeton Investment Gary P. Motyl Executive Vice President; Portfolio
Counsel, Inc. Manager
Templeton Investment James E. Chaney Senior Vice President; Portfolio Manager
Counsel, Inc.
Templeton Investment Donald F. Reed President and Director
Counsel, Inc.
Templeton Investment Samuel J. Forester, Jr. President of Templeton Global Bond
Counsel, Inc. Managers Division of Templeton
Worldwide
Templeton Investment Douglas R. Lempereur Senior Vice President of Templeton
Counsel, Inc. Global Bond Managers Division;
Director of Fixed-Income Research
Templeton Investment Wesley E. Freeman Senior Vice President; Director of
Counsel, Inc. Institutional Business Development
Templeton Investment Neil S. Devlin Executive Vice President, Portfolio
Counsel, Inc. Manager and Chief Investment Officer of
Templeton Global Bond Managers
Division
</TABLE>
II-14
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Templeton Investment Michael J. Corcoran Vice President and Controller
Counsel, Inc.
Templeton Investment Elizabeth M. Knoblock Senior Vice President, Secretary and
Counsel, Inc. General Counsel
Bankers Trust Trust Company
Company ("Bankers
Trust")
Bankers Trust George B. Beitzel Director of Bankers Trust and Bankers
Trust New York Corporation
Bankers Trust William R. Howell Director of Bankers Trust and Bankers
Trust New York Corporation
Bankers Trust Jon M. Huntsman Director of Bankers Trust and Bankers
Trust New York Corporation
Bankers Trust Vernon E. Jordan, Jr. Director of Bankers Trust and Bankers
Trust New York Corporation
Bankers Trust Hamish Maxwell Director of Bankers Trust and Bankers
Trust New York Corporation
Bankers Trust Donald F. McCullough Director of Bankers Trust and Bankers
Trust New York Corporation
Bankers Trust N.J. Nicholas, Jr. Director of Bankers Trust and Bankers
Trust New York Corporation
Bankers Trust Russell E. Palmer Director of Bankers Trust and Bankers
Trust New York Corporation
Bankers Trust Didier Pineau- Director of Bankers Trust New York
Valencienne Corporation
Bankers Trust Charles S. Sanford, Jr. Chairman of the Board of Bankers Trust
and Bankers Trust New York
Corporation
Bankers Trust Eugene B. Shanks, Jr. President of Bankers Trust and Bankers
Trust New York Corporation
Bankers Trust Patricia Carry Stewart Director of Bankers Trust and Bankers
Trust New York Corporation
</TABLE>
II-15
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Bankers Trust George J. Vojta Vice Chairman of the Board of Bankers
Trust and Bankers Trust New York
Corporation
Smith Barney Mutual Investment Advisor
Funds Management
Inc., ("SBMFM"),
through its Greenwich
Street Advisors
Division
SBMFM Jessica Bibliowicz Chief Executive Officer of SBMFM,
Executive Vice President of Smith
Barney Inc.
SBMFM Heath B. McLendon President of SBMFM, Managing
Director of Smith Barney Inc.
SBMFM Lewis E. Daidone Director and Senior Vice President of
SBMFM, Managing Director of Smith
Barney Inc.
SBMFM A. George Saks Director of SBMFM, Managing
Director, Secretary and General Counsel
of Smith Barney Inc.
SBMFM Michael J. Day Treasurer of SBMFM, Managing
Director of Smith Barney Inc.
SBMFM Christina T. Sydor General Counsel and Secretary of
SBMFM, Managing Director of Smith
Barney Inc.
SBMFM Thomas M. Reynolds Assistant Secretary of SBMFM, Director
of Smith Barney Inc.
SBMFM Nancy W. LeDonne Associate General Counsel of SBMFM,
Vice President of Smith Barney Inc.
SBMFM Irving P. David Assistant Treasurer of SBMFM, Vice
President of Smith Barney Inc. in the
Asset Management Division
SBMFM Anthony Pace Assistant Secretary of SBMFM in the
Asset Management Division; Vice
President of Smith Barney Inc. in the
Asset Management Division
</TABLE>
II-16
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
SBMFM Malcolm Van Arsdale Vice President of SBMFM in the Asset
Management Division; Vice President of
Smith Barney Inc. in the Asset
Management Division
SBMFM Bruce D. Sargent Director and Vice President of SBMFM,
Managing Director of Smith Barney Inc.
SBMFM Sureshkumar R. Patel Assistant Treasurer of SBMFM, Director
of Smith Barney Inc.
SBMFM James Conahan Controller of SBMFM, Senior Vice
President and Assistant Controller of
Smith Barney Inc.
SBMFM Lee D. Augsburger Deputy General Counsel of SBMFM,
Director of Smith Barney Inc.
SBMFM Caren Cunningham Associate General Counsel, Vice
President of Smith Barney Inc.
SBMFM Robert Vegliante Associate General Counsel, Vice
President of Smith Barney Inc.
SBMFM Mary Marsden-Cochran Associate General Counsel, Vice
President of Smith Barney Inc.
SBMFM Michael Kocur Assistant General Counsel, Vice
President of Smith Barney Inc.
Blairlogie Capital Investment Advisor
Management
("Blairlogie")
Blairlogie Gavin Dobson Managing Director, Chief Executive
Officer and Limited Partner, Blairlogie
Capital Management
Blairlogie James Smith Managing Director, Chief Investment
Officer and Limited Partner, Blairlogie
Capital Management
Blairlogie Robert Stephens Managing Director, Chief Financial
Officer and Limited Partner, Blairlogie
Capital Management
</TABLE>
II-17
<PAGE>
<TABLE>
<CAPTION>
Name of Adviser Name of Individual Business and Other Connections
- ------------------------- ----------------------- --------------------------------------------
<S> <C> <C>
Columbus Circle Investment Advisor
Investors ("CCI")
CCI Irwin F. Smith Managing Director, Chairman and Chief
Executive Officer, Columbus Circle
Investors
CCI Donald A. Chiboucas Managing Director, Columbus Circle
Investors
CCI Daniel S. Pickert Managing Director, Columbus Circle
Investors
CCI Amy Mae Hogan Managing Director, Columbus Circle
Investors
CCI Robert W. Fehrmann Managing Director, Columbus Circle
Investors
CCI Louis P. Celentano Managing Director, Columbus Circle
Investors
</TABLE>
Item 29. Principal Underwriters
----------------------
(a) Pacific Equities Network ("PEN") member, NASD & SIPC serves as
Distributor of Shares of Pacific Select Fund. PEN is an indirect,
wholly-owned subsidiary of Pacific Mutual.
(b)
<TABLE>
<CAPTION>
Name and Principal**** Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ------------------------- ------------------------- ---------------------
<S> <C> <C>
Kathy R. Gough Assistant Vice None
President,
Compliance
Marc S. Franklin Vice President, None
Variable Annuities Div.
Don M. Ward Vice President, None
Marketing
Audrey L. Milfs Secretary Secretary
Edward R. Byrd Chief Financial Officer, None
Treasurer and Director
</TABLE>
II-18
<PAGE>
<TABLE>
<CAPTION>
Name and Principal**** Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
- ------------------------- ------------------------- ---------------------
<S> <C> <C>
Gerald W. Robinson Director None
Glenn S. Schafer Director None
Thomas C. Sutton Director Trustee
</TABLE>
Item 30. Location of Accounts and Records
--------------------------------
The accounts, books and other documents required to be maintained by
Registrant pursuant to Section 31(a) of the Investment Company Act of 1940
and the rules under that section will be maintained by Pacific Mutual at
700 Newport Center Drive, Newport Beach, California 92660.
Item 31. Management Services
-------------------
Not applicable
Item 32. Undertakings
------------
The registrant hereby undertakes:
(a) Not applicable
(b) Not applicable
(c) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of Registrant's latest annual report to
shareholders upon request and without charge.
- -----------------
**** Principal business address for all individuals listed is 700 Newport
Center Drive, Newport Beach, California 92660
II-19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Post-
Effective Amendment No. 16 to the Registration Statement to be signed on its
behalf by the undersigned thereunto duly authorized, in the City of Newport
Beach, and State of California, on this 21st day of November, 1995.
PACIFIC SELECT FUND
By: Thomas C. Sutton*
__________________________________
President
*By: /s/ Diane N. Ledger
_______________________________
Diane N. Ledger
as attorney-in-fact
II-20
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 16 to the Registration Statement has been signed below
by the following persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ TC Sutton Chairman and President November 21, 1995
____________________________________ (Chief Executive Officer)
Thomas C. Sutton
/s/ Marilee Roller Vice President and Treasurer November 21, 1995
____________________________________ (Senior Vice President)
Marilee Roller
/s/ Richard L. Nelson Trustee November 21, 1995
____________________________________
Richard L. Nelson
/s/ Lyman W. Porter Trustee November 21, 1995
____________________________________
Lyman W. Porter
/s/ Alan Richards Trustee November 21, 1995
____________________________________
Alan Richards
</TABLE>
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
above constitutes and appoints David R. Carmichael, Sharon A. Cheever, Diane
N. Ledger, Jeffrey S. Puretz, Paul F. Roye and Robin Yonis-Sandlaufer his or
her true and lawful attorney-in-fact and agent, each with full power of
substitution and resubstitution for him or her in his or her name, place and
stead, in any and all Registration Statements applicable to Pacific Select
Fund and any amendments or supplements thereto, and to file the same, with all
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, granting unto said attorney-in-fact and
agent full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorney-in-fact and agent, or his or her substitute or substitutes, may
lawfully do or cause to be done by virtue thereof.
II-21
<PAGE>
EXHIBIT 99.1(a)
Agreement and Declaration of Trust
<PAGE>
PACIFIC SELECT FUND
AMENDED AND RESTATED
AGREEMENT AND
DECLARATION OF TRUST
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I -- THE TRUST................................................... 1
Section 1.1 Name................................................... 1
Section 1.2 Definitions............................................ 2
ARTICLE II -- TRUSTEES................................................... 3
Section 2.1 Management of the Trust................................ 3
Section 2.2 Election of Trustees................................... 3
Section 2.3 Term of Office of Trustees............................. 3
Section 2.4 Termination of Service and Appointment of Trustees..... 4
Section 2.5 Temporary Absence of Trustee........................... 4
Section 2.6 Number of Trustees..................................... 4
Section 2.7 Effect of Death, Resignation, etc. of a Trustee........ 4
Section 2.8 No Accounting.......................................... 5
Section 2.9 Ownership of the Trust................................. 5
ARTICLE III -- POWERS OF TRUSTEES........................................ 5
Section 3.1 General................................................ 5
Section 3.2 Investments............................................ 5
Section 3.3 Legal Title............................................ 6
Section 3.4 Issuance and Repurchase of Securities.................. 6
Section 3.5 Borrow Money........................................... 7
Section 3.6 Officers; Delegation; Committees....................... 7
Section 3.7 Collection and Payment................................. 7
Section 3.8 Expenses............................................... 7
Section 3.9 Manner of Acting; By-laws.............................. 7
Section 3.10 Voting Trusts.......................................... 8
Section 3.11 Miscellaneous Powers................................... 8
Section 3.12 Further Powers......................................... 8
ARTICLE IV -- ADVISORY, MANAGEMENT AND DISTRIBUTION ARRANGEMENTS......... 9
Section 4.1 Advisory and Management Arrangements................... 9
</TABLE>
-i-
<PAGE>
<TABLE>
<S> <C>
Section 4.2 Distribution Arrangements.............................. 9
Section 4.3 Parties to Contract.................................... 10
Section 4.4 Provisions and Amendments.............................. 10
ARTICLE V -- LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS...................................... 10
Section 5.1 Trustees, Shareholders, etc. Not Personally Liable;
Notice................................................. 10
Section 5.2 Trustee's Good Faith Action; Expert Advice; No Bond or
Surety................................................. 11
Section 5.3 Indemnification of Shareholders........................ 11
Section 5.4 Indemnification of Trustees, Officers, etc............. 12
Section 5.5 Compromise Payment..................................... 12
Section 5.6 Indemnification Not Exclusive, etc..................... 13
Section 5.7 Liability of Third Persons Dealing with Trustees....... 13
ARTICLE VI -- SHARES OF BENEFICIAL INTEREST.............................. 13
Section 6.1 Beneficial Interest.................................... 13
Section 6.2 Series Designation..................................... 13
Section 6.3 Rights of Shareholders................................. 16
Section 6.4 Trust Only............................................. 16
Section 6.5 Issuance of Shares..................................... 16
Section 6.6 Register of Shares..................................... 16
Section 6.7 Transfer Agent and Registrar........................... 17
Section 6.8 Transfer of Shares..................................... 17
Section 6.9 Notice................................................. 17
ARTICLE VII -- CUSTODIANS................................................ 17
Section 7.1 Appointment and Duties................................. 18
Section 7.2 Action Upon Termination of Custodian Agreement......... 18
Section 7.3 Central Certificate System............................. 19
Section 7.4 Acceptance of Receipts in Lieu of Certificates......... 19
ARTICLE VIII -- REDEMPTION............................................... 19
Section 8.1 Redemptions............................................ 19
Section 8.2 Redemptions of Accounts of Less than a Minimum Dollar
Amount................................................. 19
ARTICLE IX -- DETERMINATION OF NET ASSET VALUE, NET INCOME
AND DISTRIBUTIONS........................................ 20
</TABLE>
-ii-
<PAGE>
<TABLE>
<S> <C>
Section 9.1 Net Asset Value........................................ 20
Section 9.2 Distributions to Shareholders.......................... 20
Section 9.3 Power to Modify Foregoing Procedures................... 20
ARTICLE X -- SHAREHOLDERS................................................ 20
Section 10.1 Voting Powers......................................... 21
Section 10.2 Meetings.............................................. 21
Section 10.3 Quorum and Required Vote.............................. 21
Section 10.4 Record Date for Meetings.............................. 22
Section 10.5 Proxies............................................... 22
Section 10.6 Additional Provisions................................. 22
Section 10.7 Reports............................................... 22
Section 10.8 Shareholder Action by Written Consent................. 22
ARTICLE XI -- DURATION; TERMINATION OF TRUST; AMENDMENT;
MERGERS; ETC............................................. 23
Section 11.1 Duration.............................................. 23
Section 11.2 Termination........................................... 23
Section 11.3 Reorganization........................................ 24
Section 11.4 Amendment Procedure................................... 25
Section 11.5 Incorporation......................................... 25
ARTICLE XII -- MISCELLANEOUS............................................. 26
Section 12.1 Filing................................................ 26
Section 12.2 Resident Agent........................................ 26
Section 12.3 Governing Law......................................... 26
Section 12.4 Counterparts.......................................... 26
Section 12.5 Reliance by Third Parties............................. 26
Section 12.6 Provisions in Conflict with Law or Regulations........ 27
</TABLE>
-iii-
<PAGE>
AMENDED AND RESTATED
AGREEMENT AND
DECLARATION OF TRUST
OF
PACIFIC SELECT FUND
THE AMENDED AND RESTATED AGREEMENT AND DECLARATION OF TRUST of Pacific
Select Fund made the 9th day of July, 1987 by the parties signatory hereto, as
trustees (such persons, so long as they shall continue in office in accordance
with the terms of this Amended and Restated Agreement and Declaration of Trust,
and all other persons who at the time in question have been duly elected or
appointed as trustees in accordance with the provisions of this Amended and
Restated Agreement and Declaration of Trust and are then in office, being
hereinafter called the "Trustees") and by the holders of shares of beneficial
interest to be issued hereunder hereinafter provided.
W I T N E S S E T H
-------------------
WHEREAS, the Trustees desire to form a trust fund under the laws of the
Commonwealth of Massachusetts for the investment and reinvestment of funds
contributed thereto; and
WHEREAS, it is proposed that the beneficial interest in the trust assets be
divided into transferable shares of beneficial interest, which may, at the
discretion of the Trustees, be divided into separate series as hereinafter
provided;
NOW, THEREFORE, the Trustees hereby declare that they will hold in trust
all money and property contributed to the trust fund to manage and dispose of
the same for the benefit of the holders from time to time of the shares of
beneficial interest issued hereunder and subject to the provisions hereof, to
wit:
ARTICLE I
THE TRUST
SECTION 1.1 NAME. The name of the trust created hereby (the "Trust"),
----
which term shall be deemed to include any series of the Trust when the context
requires, shall be "Pacific Select Fund", and so far as may be practicable the
Trustees shall conduct the activities of the Trust, execute all documents and
sue or be sued under that name, which name (and the word "Trust" wherever
hereinafter used) shall refer to the Trustees as Trustees, and not individually,
and shall not refer to the officers, agents, employees or shareholders of the
Trust or any Series thereof. Each Series of the Trust which shall be established
and designated by the Trustees pursuant to Section 6.2 shall conduct its
activities under such name as the Trustees shall determine and set forth in the
instrument establishing such Series. Should the Trustees determine that the use
of the name of the Trust or any Series is not advisable, they may select such
other name for the
<PAGE>
Trust or such Series as they deem proper and the Trust or such Series may
conduct its activities under such other name. Any name change shall be
effective upon the execution by a majority of the then Trustees of an instrument
setting forth the new name. Any such instrument shall have the status of an
amendment to this Amended and Restated Declaration of Trust.
SECTION 1.2 DEFINITIONS. As used in this Agreement and Declaration of
-----------
Trust, the following terms shall have the following meanings:
The "1940 Act" refers to the Investment Company Act of 1940 and the
--------
regulations promulgated thereunder, as amended from time to time.
The terms "Affiliated Person", "Assignment", "Commission", "Interested
----------------- ---------- ---------- ----------
Person", "Majority Shareholder Vote" (the 67% or 50% requirement of the third
- ------ -------------------------
sentence of Section 2(a)(42) of the 1940 Act, whichever may be applicable) and
"Principal Underwriter" shall have the meanings given them in the 1940 Act.
- ----------------------
"Commission" shall mean the U.S. Securities and Exchange Commission.
"Declaration" or "Declaration of Trust" shall mean this Amended and
--------------------------------------
Restated Agreement and Declaration of Trust as amended from time to time.
References in this Declaration to "Declaration", "hereof", "herein" and
----------- ------ ------
"hereunder" shall be deemed to refer to the Declaration rather than the article
- ----------
or section in which such words appear.
"Fundamental Policies" shall mean the investment objective for each
--------------------
Series and the investment restrictions set forth in the registration statement
for the Trust on Form N-1A and designated as fundamental policies therein.
"Person" shall mean and include individuals, corporations,
------
partnerships, trusts, associations, joint ventures and other entities, whether
or not legal entities, and governments and agencies and political subdivisions
thereof.
"Prospectus" shall mean the currently effective prospectus of any
----------
Series of the Trust under the Securities Act of 1933, as amended.
"Series" shall mean any separate Series that may be established and
------
designated pursuant to Section 6.2.
"Shareholders" shall mean as of any particular time all holders of
------------
record of outstanding Shares at such time.
"Shares" shall mean the equal proportionate transferable units of
------
interest into which the beneficial interest in any Series of the Trust shall be
divided from time to time and
-2-
<PAGE>
includes fractions of Shares as well as whole Shares. All references to Shares
shall be deemed to be Shares of any or all Series as the context may require.
"Trustees" shall mean the signatories to this Declaration, so long as
--------
they shall continue in office in accordance with the terms hereof, and all other
persons who at the time in question have been duly elected or appointed and have
qualified as Trustees in accordance with the provisions hereof and are then in
office, and each such person is herein referred to as the "Trustee", and
reference in this Declaration to a Trustee or Trustees shall refer to such
person or persons in their capacity as Trustees hereunder.
"Trust Property" shall mean as of any particular time any and all
--------------
property, real or personal, tangible or intangible, which at such time is owned
or held by or for the account of the Trust, any Series thereof or the Trustees.
ARTICLE II
TRUSTEES
SECTION 2.1 MANAGEMENT OF THE TRUST. The business and affairs of the
-----------------------
Trust shall be managed by the Trustees, and they shall have all powers necessary
and desirable to carry out that responsibility. The Trustees named herein (or
their successors appointed hereunder) shall serve until the election of Trustees
at the first meeting of Shareholders of the Trust.
SECTION 2.2 ELECTION OF TRUSTEES. Except for the Trustees named herein
--------------------
and those Trustees designated by such Trustees prior to the issuance of Shares,
or appointed to fill vacancies pursuant to Section 2.4 hereof, the Shareholders
of the Trust shall elect Trustees at Shareholder meetings called for that
purpose. The Trustees need not be elected annually or at regular intervals.
Except as provided in Section 10.2, the Trustees shall not be required to call a
meeting of Shareholders for the purpose of electing Trustees, provided, however,
that in the event that at any time, other than the time preceding the first
meeting of Shareholders for the purpose of electing Trustees, less than a
majority of the Trustees holding office at that time were elected by the
Shareholders, a meeting of the Shareholders for the purpose of electing Trustees
shall be held promptly and in any event within 60 days (unless the Commission
shall by order extend such period). No election of a Trustee shall become
effective, however, until the person elected shall have accepted such election
and agreed in writing to be bound by the terms of this Declaration. If re-
elected, a Trustee may succeed himself. Trustees need not own shares.
SECTION 2.3 TERM OF OFFICE OF TRUSTEES. A Trustee duly appointed or
--------------------------
elected hereunder shall hold office until the occurrence of any of the
following: (a) the Trustee may resign his trust by written instrument signed by
him and delivered to the other Trustees, which shall take effect upon such
delivery or upon such later date as is specified therein; (b) the Trustee may be
-3-
<PAGE>
removed at any time by written instrument signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date when such removal
shall become effective; (c) the Trustee who requests in writing to be retired or
who has become mentally or physically incapacitated may be retired by written
instrument signed by a majority of the other Trustees, specifying the date of
his retirement; and (d) the Trustee may be removed at any meeting of
Shareholders of the Trust by a vote of two-thirds of the outstanding Shares or
by a written declaration executed, without a meeting, by the holders of not less
than two-thirds of the outstanding Shares.
SECTION 2.4 TERMINATION OF SERVICE AND APPOINTMENT OF TRUSTEES. In case
--------------------------------------------------
of the death, resignation, retirement, removal or mental or physical incapacity
of any of the Trustees, or in case a vacancy shall, by reason of an increase in
number, or for any other reason, exist, the remaining Trustees may (but need not
unless required by the 1940 Act, so long as there are at least two remaining
Trustees) fill such vacancy by appointing for the remaining term of the
predecessor Trustee such other person as they in their discretion shall see fit.
Such appointment shall be effective upon the signing of a written instrument by
a majority of the Trustees in office and the written acceptance of this
Declaration by the appointee. An appointment of a Trustee may be made by the
Trustees then in office in anticipation of a vacancy to occur by reason of
retirement, resignation or increase in number of Trustees effective at a later
date, provided that said appointment shall become effective only at or after the
effective date of said retirement, resignation or increase in number of Trustees
and the written acceptance of this Declaration by the appointee. As soon as any
Trustee so appointed shall have accepted this Trust, the trust estate shall vest
in the new Trustee or Trustees, together with the continuing Trustees, without
any further act or conveyance, and he shall be deemed a Trustee hereunder. Any
appointment authorized by this Section 2.4 is subject to the provisions of
Section 16(a) of the 1940 Act.
SECTION 2.5 TEMPORARY ABSENCE OF TRUSTEE. Any Trustee may, by power of
----------------------------
attorney, delegate his power for a period not exceeding six months at any one
time to any other Trustee or Trustees, provided that in no case shall less than
two of the Trustees personally exercise the power hereunder except as herein
otherwise expressly provided.
SECTION 2.6 NUMBER OF TRUSTEES. The number of Trustees serving hereunder
------------------
at any time shall be determined by the Trustees themselves, but once Shares have
been issued shall not be less than two (2) or more than fifteen (15).
SECTION 2.7 EFFECT OF DEATH, RESIGNATION, ETC. OF A TRUSTEE. The death,
-----------------------------------------------
resignation, retirement, removal, or mental or physical incapacity of the
Trustees, or any one of them, shall not operate to annul or terminate the Trust
or any Series hereunder or to revoke or terminate any existing agency or
contract created pursuant to the terms of this Declaration, and until such
vacancy is filled, the Trustees in office, regardless of their number, shall
have all of the powers granted to the Trustees and shall discharge all the
duties imposed upon them by this Declaration.
-4-
<PAGE>
SECTION 2.8 NO ACCOUNTING. Except to the extent required by the 1940 Act
-------------
or under circumstances which would justify his removal for cause, no person
ceasing to be a Trustee as a result of his death, resignation, retirement,
removal or incapacity (nor the estate of any such person) shall be required to
make an accounting to the shareholders or remaining Trustees upon such
cessation.
SECTION 2.9 OWNERSHIP OF THE TRUST. The assets of the Trust shall be
----------------------
held separate and apart from any assets now or hereafter held in any capacity
other than as Trustee hereunder by the Trustees or by any successor Trustees.
All of the assets of the Trust shall at all times be considered as vested in the
Trustees. No Shareholder shall be deemed to have a severable ownership in any
individual asset of the Trust or any right of partition or possession thereof,
but each Shareholder shall have a proportionate undivided beneficial interest in
the Trust.
ARTICLE III
POWERS OF TRUSTEES
SECTION 3.1 GENERAL. The Trustees in all instances shall act as
-------
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. The
Trustees shall not be bound or limited by present or future laws or customs with
regard to investment by trustees or fiduciaries, but shall have full authority
and absolute power and control over the Trust Property and business of the Trust
to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, including such authority, power and control to
do all acts and things as they, in their uncontrolled discretion, shall deem
proper to accomplish the purposes of this Trust. The enumeration of any
specific power herein shall not be construed as limiting the aforesaid powers.
SECTION 3.2 INVESTMENTS. The Trustees shall have power, subject to the
-----------
Fundamental Policies, to:
(a) conduct, operate and carry on the business of an investment
company;
(b) subscribe for, invest in, reinvest in, purchase or otherwise
acquire, hold, pledge, sell, assign, transfer, lend, exchange,
mortgage, hypothecate, lease, distribute or otherwise deal in or
dispose of common stocks, preferred stocks, bonds, debentures,
warrants and rights to purchase securities, mortgage related
securities such as mortgage-backed securities and collateralized
mortgage obligations, options on securities, futures contracts and
options on futures contracts, covered spread options, certificates
of
-5-
<PAGE>
beneficial interest, negotiable or non-negotiable instruments,
bank obligations, evidences of indebtedness, privately placed debt
securities, certificates of deposit or indebtedness, commercial
paper, repurchase agreements, reverse repurchase agreements, firm
commitment agreements and "when-issued" securities and other
securities, including, without limitation, those issued,
guaranteed or sponsored by any state, territory or possession of
the United States and the District of Columbia and their political
subdivisions, agencies and instrumentalities, or by the United
States Government or its agencies or instrumentalities, or
international instrumentalities, or by any bank, savings
institution, corporation or other business entity organized under
the laws of the United States and, to the extent provided in the
Prospectus and not prohibited by the Fundamental Policies of the
Trust, foreign securities of issuers or governments organized
under foreign laws; and to exercise any and all rights, powers and
privileges of ownership or interest in respect of any and all such
investments of every kind and description, with power to
designate one or more persons, firms, associations or corporations
to exercise any of said rights, powers and privileges in respect
of any of said instruments; and the Trustees shall be deemed to
have the foregoing powers with respect to any additional
securities in which any Series of the Trust may invest should the
investment policies set forth in the Prospectus or the Fundamental
Policies be amended.
The Trustees shall not be limited to investing in obligations maturing
before the possible termination of the Trust or any Series.
SECTION 3.3 LEGAL TITLE. Legal title to all the Trust Property shall be
-----------
vested in the Trustees as joint tenants except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust or any Series thereof,
or in the name of any other Person as nominee, on such terms as the Trustees may
determine, provided that the interest of the Trust or any Series thereof is
appropriately protected.
SECTION 3.4 ISSUANCE AND REPURCHASE OF SECURITIES. The Trustees shall
-------------------------------------
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in, Shares,
including shares in fractional denominations, and, subject to the more detailed
provisions set forth in Articles VIII and IX, to apply to any such repurchase,
redemption, retirement, cancellation or acquisition of Shares any funds or
property of the applicable Series of the Trust whether capital or surplus or
otherwise, to the full extent now or hereafter permitted by the laws of the
Commonwealth of Massachusetts governing business corporations.
-6-
<PAGE>
SECTION 3.5 BORROW MONEY. Subject to the Fundamental Policies, the
------------
Trustees shall have power to borrow money or otherwise obtain credit and to
secure the same by mortgaging, pledging or otherwise subjecting as security the
assets of the Trust or any Series thereof, including the lending of portfolio
securities, and to endorse, guarantee or undertake the performance of any
obligation, contract or engagement of any other person, form, association or
corporation.
SECTION 3.6 OFFICERS; DELEGATION; COMMITTEES. The Trustees may, as they
--------------------------------
consider appropriate, elect and remove officers and appoint and terminate agents
and consultants and hire and terminate employees, any one or more of the
foregoing of whom may be a Trustee and may provide for the compensation of all
of the foregoing. The Trustees shall have power, consistent with their
continuing exclusive authority over the management of the Trust and the Trust
Property, to delegate from time to time to such of their number or to officers,
employees or agents of the Trust the doing of such things and the execution of
such instruments either in the name of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient. The Trustees may appoint from
their number and terminate any one or more committees consisting of two or more
Trustees, including without implied limitation an Executive Committee which may,
when the Trustees are not in session and subject to the 1940 Act, exercise some
or all of the powers and authority of the Trustees as the Trustees may
determine.
SECTION 3.7 COLLECTION AND PAYMENT. The Trustees shall have power to
----------------------
collect all property due to the Trust or any Series thereof; to pay all claims,
including taxes, against the Trust Property; to prosecute, defend, compromise,
arbitrate or abandon any claims relating to the Trust Property; to foreclose any
security interest securing any obligations, by virtue of which any property is
owed to the Trust or any Series thereof; and to enter into releases, agreements
and other instruments.
SECTION 3.8 EXPENSES. The Trustees shall have power to incur and pay any
--------
expenses which in the opinion of the Trustees are necessary or incidental to
carry out any of the purposes of the Trust or any Series, and to pay reasonable
compensation from the funds of the Trust to themselves as Trustees. The
Trustees shall fix the compensation of all officers, employees and Trustees.
The Trustees may pay themselves such compensation for special services,
including legal, underwriting, syndicating and brokerage services, as they in
good faith may deem reasonable and reimbursement for expenses reasonably
incurred by themselves on behalf of the Trust.
SECTION 3.9 MANNER OF ACTING; BY-LAWS. Except as otherwise provided
-------------------------
herein or in the By-laws or required by the 1940 Act, any action to be taken by
the Trustees may be taken by a majority of the Trustees present at a meeting of
the Trustees (a quorum being present), including any meeting held by means of
conference telephone or similar communications equipment by means of which all
persons participating in the meeting can hear each other, or by written
-7-
<PAGE>
consents of a majority of Trustees then in office (or such larger or different
number as may be required by the 1940 Act or other applicable law). The
Trustees may adopt and from time to time amend or repeal the By-laws for the
conduct of the business of the Trust.
SECTION 3.10 VOTING TRUSTS. The Trustees shall have power and authority
-------------
for and on behalf of the Trust to join with other holders of any securities or
debt instruments in acting through a committee, depositary, voting trustee or
otherwise, and in that connection to deposit any security or debt instrument
with, or transfer any security or debt instrument to, any such committee,
depositary or trustee, and to delegate to them such power and authority with
relation to any security or debt instrument (whether or not so deposited or
transferred) as the Trustees shall deem proper, and to agree to pay, and to pay,
such portion of the expenses and compensation of such committee, depositary or
trustee as the Trustees shall deem proper.
SECTION 3.11 MISCELLANEOUS POWERS. The Trustees shall have the power to:
--------------------
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust or any Series thereof; (b) enter
into joint ventures, partnership and any other combinations or associations; (c)
purchase, and pay for out of Trust Property, insurance as they deem necessary or
appropriate for the conduct of the business, including without limitation,
policies insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers, distributors, selected dealers or independent contractors
of the Trust or any Series thereof against all claims arising by reason of
holding any such position or by reason of any action taken or omitted by any
such Person in such capacity, whether or not constituting negligence, or whether
or not the Trust would have the power to indemnify such Person against such
liability; (d) establish pension, profit-sharing, share purchase, and other
retirement, incentive and benefit plans for any Trustees, officers, employees
and agents of the Trust; (e) make donations, irrespective of benefit to the
Trust, for charitable, religious, educational, scientific, civic or similar
purposes; (f) to the extent permitted by law, indemnify any Person with whom the
Trust or any Series thereof has dealings, including any adviser, administrator,
manager, distributor and selected dealers with respect to any Series, to such
extent as the Trustees shall determine; (g) guarantee indebtedness or
contractual obligations of others; (h) determine and change the fiscal year of
the Trust and the method in which its accounts shall be kept; and (i) adopt a
seal for the Trust, provided that the absence of such seal shall not impair the
validity of any instrument executed on behalf of the Trust.
SECTION 3.12 FURTHER POWERS. The Trustees shall have power to conduct
--------------
the business of the Trust or any Series thereof, carry on its operations and
maintain offices both within and without the Commonwealth of Massachusetts, in
any and all states of the United States of America, in the District of Columbia,
and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the
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Trust or any Series thereof although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust or any
Series thereof made by the Trustees in good faith shall be conclusive. In
construing the provisions of this Declaration, the presumption shall be in favor
of a grant of power to the Trustees. The Trustees will not be required to
obtain any court order to deal with the Trust Property. No Trustee shall be
required to give any bond or other security for the performance of any of his
duties hereunder.
ARTICLE IV
ADVISORY, MANAGEMENT AND DISTRIBUTION ARRANGEMENTS
SECTION 4.1 ADVISORY AND MANAGEMENT ARRANGEMENTS. Subject to a Majority
------------------------------------
Shareholder Vote, if required by law, of the applicable Series, the Trustees may
in their discretion from time to time enter into advisory, administrative or
management contracts whereby the other party to such contract shall undertake to
furnish to the Trustees such advisory, administrative and management services,
with respect to a Series as the Trustees shall from time to time consider
desirable and all upon such terms and conditions as the Trustees may in their
discretion determine. Subject to a Majority Shareholder Vote if required by
law, the investment adviser may engage one or more firms to serve as Portfolio
Manager to a Series pursuant to a sub-investment advisory contract in which the
Portfolio Manager makes all determinations with respect to the purchase and sale
of portfolio securities and places, in the names of the Series all orders for
execution of the Series' portfolio transactions upon such terms and conditions
and for such compensation as the Trustees may in their discretion approve. A
Portfolio Manager may, in turn, engage its own sub-adviser in managing a
particular Series. Notwithstanding any provisions of this Declaration, the
Trustees may authorize any adviser, portfolio manager, administrator or manager
(subject to such general or specific instructions as the Trustees may from time
to time adopt) to effect purchases, sales, loans or exchanges of portfolio
securities of any Series of the Trust on behalf of the Trustees or may authorize
any officer, employee or Trustee to effect such purchases, sales, loans or
exchanges pursuant to recommendations of any such adviser, portfolio manager,
administrator or manager (and all without further action by the Trustees). Any
such purchases, sales, loans or exchanges shall be deemed to have been
authorized by all of the Trustees.
SECTION 4.2 DISTRIBUTION ARRANGEMENTS. The Trustees may in their
-------------------------
discretion from time to time enter into a contract, providing for the sale of
the Shares of the Trust or any Series of the Trust, whereby the Trust may either
agree to sell the Shares to the other party to the contract or appoint such
other party as its sales agent for such Shares. In either case, the contract
shall be on such terms and conditions as the Trustees may in their discretion
determine to be not inconsistent with the provisions of this Article IV or the
By-laws; and such contract may also provide for the repurchase or sale of Shares
by such other party as principal or as agent of the Trust and may provide that
such other party may enter into selected dealer agreements with
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registered securities dealers to further the purpose of the distribution or
repurchase of the Shares. The Trustees may adopt a Distribution Plan pursuant to
Rule 12b-1 of the 1940 Act and may authorize the Trust to make payments from its
assets pursuant to such Plan.
SECTION 4.3 PARTIES TO CONTRACT. Any contract of the character described
-------------------
in Sections 4.1 and 4.2 of this Article IV or in Article VII hereof may be
entered into with any corporation, firm, trust or association, although one or
more of the Trustees or officers of the Trust may be an officer, director,
Trustee, shareholder or member of such other party to the contract, and no such
contract shall be invalidated or rendered voidable by reason of the existence of
any such relationship, nor shall any person holding such relationship be liable
merely by reason of such relationship for any loss or expense to the Trust under
or by reason of said contract or accountable for any profit realized directly or
indirectly therefrom, provided that the contract when entered into was
reasonable and fair and not inconsistent with the provisions of this Article IV
or the By-laws. The same person (including a firm, corporation, trust or
association) may be the other party to contracts entered into pursuant to
Sections 4.1 and 4.2 above or Article VII, and any individual may be financially
interested or otherwise affiliated with persons who are parties to any or all of
the contracts mentioned in this Section 4.3.
SECTION 4.4 PROVISIONS AND AMENDMENTS. Any contract entered into
-------------------------
pursuant to Sections 4.1 and 4.2 of this Article IV shall be consistent with and
subject to the requirements of Section 15 of the 1940 Act with respect to its
continuance in effect, its termination, and the method of authorization and
approval of such contract or renewal thereof, and no amendment to any contract
entered into pursuant to Section 4.1 shall be effective unless consented to by a
Majority Shareholder Vote of the applicable Series if required by law.
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHERS
SECTION 5.1 TRUSTEES, SHAREHOLDERS, ETC. NOT PERSONALLY LIABLE; NOTICE.
----------------------------------------------------------
All persons extending credit to, contracting with or having any claim against
the Trust shall look only to the assets of the Series with which such person
dealt for payment under such credit, contract or claim; and neither the
Shareholders of any Series nor the Trustees, nor any of the Trust's officers,
employees or agents, whether past, present or future, nor any other Series shall
be personally liable therefor. Every note, bond, contract, instrument,
certificate or undertaking and every other act or thing whatsoever executed or
done by or on behalf of the Trust, any Series or the Trustees or any of them in
connection with the Trust shall be conclusively deemed to have been executed or
done only by or for the Trust (or the Series) or the Trustees and not
personally. Nothing in this Declaration shall protect any Trustee or officer
against any liability to the Trust or the Shareholders to which such Trustee or
officer would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
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conduct of the office of Trustee or of such officer.
Every note, bond, contract, instrument, certificate, share or undertaking
made or issued by the Trustees or by any officers or officer shall give notice
that this Declaration is on file with the Secretary of The Commonwealth of
Massachusetts and shall recite to the effect that the same was executed or made
by or on behalf of the Trust or by them as Trustees or Trustee or as officers or
officer and not individually and that the obligations of such instrument are not
binding upon any of them or the Shareholders individually but are binding only
upon the assets and property of the Trust, or the particular Series in question,
as the case may be, but the omission thereof shall not operate to bind any
Trustees or Trustee or officers or officer or Shareholders or Shareholder
individually.
SECTION 5.2 TRUSTEE'S GOOD FAITH ACTION; EXPERT ADVICE; NO BOND OR
------------------------------------------------------
SURETY. The exercise by the Trustees of their powers and discretion hereunder
shall be binding upon everyone interested. A Trustee shall be liable for his
own willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of the office of Trustee, and for nothing
else, and shall not be liable for errors of judgment or mistakes of fact or law.
Subject to the foregoing, (a) the Trustees shall not be responsible or liable in
any event for any neglect or wrongdoing of any officer, agent, employee,
consultant, adviser, administrator, distributor or principal underwriter,
custodian or transfer, dividend disbursing, Shareholder servicing or accounting
agent of the Trust, nor shall any Trustee be responsible for the act or omission
of any other Trustee; (b) the Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Declaration and their
duties as Trustees, and shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice; and (c) in
discharging their duties, the Trustees, when acting in good faith, shall be
entitled to rely upon the books of account of the Trust and upon written reports
made to the Trustees by any officer appointed by them, any independent public
accountant, and (with respect to the subject matter of the contract involved)
any officer, partner or responsible employee of any adviser, administrator,
manager, distributor, selected dealer, appraiser or other expert, consultant or
agent. The Trustees as such shall not be required to give any bond or surety or
any other security for the performance of their duties.
SECTION 5.3 INDEMNIFICATION OF SHAREHOLDERS. In case any Shareholder (or
-------------------------------
former Shareholder) of any Series of the Trust shall be charged or held to be
personally liable for any obligation or liability of the Trust solely by reason
of being or having been a Shareholder and not because of such Shareholder's acts
or omissions or for some other reason, said Series (upon proper and timely
request by the Shareholder) shall assume the defense against such charge and
satisfy any judgment thereon, and the Shareholder or former Shareholder (or his
heirs, executors, administrators or other legal representatives or in the case
of a corporation or other entity, its corporate or other general successor)
shall be entitled out of the assets of said Series' estate to be held harmless
from and indemnified against all loss and expense arising from such liability.
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SECTION 5.4 INDEMNIFICATION OF TRUSTEES, OFFICERS, ETC. The Trust shall
-------------------------------------------
indemnify (from the assets of the Series or Series in question) each of its
Trustees and officers (including persons who serve at the Trust's request as
directors, officers or trustees of another organization in which the Trust has
any interest as a shareholder, creditor or otherwise) [hereinafter referred to
as a "Covered Person"] against all liabilities, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and expenses, including reasonable accountants' and counsel fees,
incurred by any Covered Person in connection with the defense or disposition of
any action, suit or other proceeding, whether civil or criminal, before any
court or administrative or legislative body, in which such Covered Person may be
or may have been involved as a party or otherwise or with which such person may
be or may have been threatened, while in office or thereafter, by reason of
being or having been such a Trustee or officer, director or trustee, except with
respect to any matter as to which it has been determined that such Covered
Person (i) did not act in good faith in the reasonable belief that such Covered
Person's action was in or not opposed to the best interests of the Trust or (ii)
had acted with willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of such Covered Person's office
(either and both of the conduct described in (i) and (ii) being referred to
hereafter as "Disabling Conduct"). A determination that the Covered Person is
entitled to indemnification may be made by (i) a final decision on the merits by
a court or other body before whom the proceeding was brought that the person to
be indemnified was not liable by reason of Disabling Conduct, (ii) dismissal of
a court action or an administrative proceeding against a Covered Person for
insufficiency of evidence of Disabling Conduct, or (iii) a reasonable
determination, based upon a review of the facts, that the indemnitee was not
liable by reason of Disabling Conduct by (a) a vote of a majority of a quorum of
Trustees who are neither "interested persons" of the Trust as defined in section
2(a)(19) of the 1940 Act nor parties to the proceeding, or (b) an independent
legal counsel in a written opinion. Expenses, including accountants' and
counsel fees so incurred by any such Covered Person (but excluding amounts paid
in satisfaction of judgments, in compromise or as fines or penalties), may be
paid from time to time by the Series in question in advance of the final
disposition of any such action, suit or proceeding, provided that the Covered
Person shall have undertaken to repay the amounts so paid to the Series in
question if it is ultimately determined that indemnification of such expenses is
not authorized under this Article V and (i) the Covered Person shall have
provided security for such undertaking, (ii) the Trust shall be insured against
losses arising by reason of any lawful advances, or (iii) a majority of a quorum
of the disinterested Trustees who are not a party to the proceeding, or an
independent legal counsel in a written opinion, shall have determined, based on
a review of readily available facts (as opposed to a full trial-type inquiry),
that there is reason to believe that the Covered Person ultimately will be found
entitled to indemnification.
SECTION 5.5 COMPROMISE PAYMENT. As to any matter disposed of by a
------------------
compromise payment by any such Covered Person referred to in Section 5.4,
pursuant to a consent decree or otherwise, no such indemnification either for
said payment or for any other expenses shall be provided unless such
indemnification shall be approved (a) by a majority of the disinterested
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Trustees who are not parties to the proceeding or (b) by an independent legal
counsel in a written opinion. Approval by the Trustees pursuant to clause (a)
or by independent legal counsel pursuant to clause (b) shall not prevent the
recovery from any Covered Person of any amount paid to such Covered Person in
accordance with any of such clauses as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not to have acted
in good faith in the reasonable belief that such Covered Person's action was in
or not opposed to the best interests of the Trust or to have been liable to the
Trust or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of such
Covered Person's office.
SECTION 5.6 INDEMNIFICATION NOT EXCLUSIVE, ETC. The right of
-----------------------------------
indemnification provided by this Article V shall not be exclusive of or affect
any other rights to which any such Covered Person may be entitled. As used in
this Article V, "Covered Person" shall include such person's heirs, executors
and administrators; "interested Covered Person" is one against whom the action,
suit or other proceeding in question or another action, suit or other proceeding
on the same or similar grounds is then or has been pending or threatened, and a
"disinterested" person is a person against whom none of such actions, suits or
other proceedings or another action, suit or other proceeding on the same or
similar grounds is then or has been pending or threatened. Nothing contained in
this Article shall affect any rights to indemnification to which personnel of
the Trust, other than Trustees and officers, and other persons may be entitled
by contract or otherwise under law, nor the power of the Trust to purchase and
maintain liability insurance on behalf of any such person.
SECTION 5.7 LIABILITY OF THIRD PERSONS DEALING WITH TRUSTEES. No person
------------------------------------------------
dealing with the Trustees shall be bound to make any inquiry concerning the
validity of any transaction made or to be made by the Trustees or to see to the
application of any payments made or property transferred to the Trust or upon
its order.
ARTICLE VI
SHARES OF BENEFICIAL INTEREST
SECTION 6.1 BENEFICIAL INTEREST. The interest of the beneficiaries
-------------------
hereunder shall be divided into transferable shares of beneficial interest with
par value $.001 per share. The number of such shares of beneficial interest
authorized hereunder is unlimited. All Shares issued hereunder including,
without limitation, Shares issued in connection with a dividend in Shares or a
split of Shares, shall be fully paid and nonassessable.
SECTION 6.2 SERIES DESIGNATION. The Trustees, in their discretion from
------------------
time to time, may authorize the division of Shares into additional Series, each
additional Series relating to a separate portfolio of investments. The first
eight such Series are hereby established and
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designated:
The Money Market Series
The Managed Bond Series
The Government Securities Series
The High Yield Bond Series
The Growth Series
The Equity Income Series
The Multi-Strategy Series
The International Series
These eight Series shall be the only Series until additional Series are
established and designated by the Trustees. Different Series may be established
and designated and variations in the relative rights and preferences as between
the different Series shall be fixed and determined by the Trustees; provided
that all Shares shall be identical except that there may be variations between
different Series as to investment policies, securities portfolios, purchase
price, determination of net asset value, the price, terms and manner of
redemption, special and relative rights as to dividends and on liquidation,
conversion rights, and conditions under which the several Series shall have
separate voting rights. All references to Shares in this Declaration shall be
deemed to be shares of any or all Series as the context may require.
The following provisions shall be applicable to all Series:
(a) The number of Shares of each Series that may be issued shall be
unlimited. The Trustees may classify or reclassify any unissued
Shares or any Shares previously issued and required of any Series
into one or more Series that may be established and designated
from time to time. The Trustees may hold as treasury Shares (of
the same or some other Series), reissue for such consideration and
on such terms as they may determine, or cancel any Shares of any
Series reacquired by the Trust at their discretion from time to
time.
(b) The power of the Trustees to invest and reinvest the Trust
Property of each Series that has been or that may be established
shall be governed by Section 3.2 of this Declaration.
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular Series, together with all assets in which
such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange or liquidation of such assets, and
any funds or payments derived from any reinvestment of
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such proceeds in whatever form the same may be, shall irrevocably
belong to that Series for all purposes, subject only to the rights
of creditors, and shall be so recorded upon the books of account
of the Trust. In the event that there are any assets, income,
earnings, profits and proceeds thereof, funds or payments which
are not readily identifiable as belonging to any particular
Series, the Trustees shall allocate them among any one or more of
the Series established and designated from time to time in such
manner and on such basis as they, in their sole discretion, deem
fair and equitable. Each such allocation by the Trustees shall be
conclusive and binding upon the Shareholders of all Series for all
purposes.
(d) The assets belonging to each particular Series shall be charged
with the liabilities of the Trust in respect of that Series and
all expenses, costs, charges and reserves attributable to that
Series, and any general liabilities, expenses, costs, charges or
reserves of the Trust which are not readily identifiable as
belonging to any particular Series shall be allocated and charged
by the Trustees to and among any one or more of the Series
established and designated from time to time in such manner and on
such basis as the Trustees in their sole discretion deem fair and
equitable. Each allocation of liabilities, expenses, costs,
charges and reserves by the Trustees shall be conclusive and
binding upon the holders of all Series for all purposes. The
Trustees shall have full discretion, to the extent not
inconsistent with the 1940 Act, to determine which items shall be
treated as income and which items as capital; and each such
determination and allocation shall be conclusive and binding upon
the Shareholders.
(e) The power of the Trustees to pay dividends and make distributions
with respect to any one or more Series shall be governed by
Section 9.2 of this Trust. Dividends and distributions on Shares
of a particular Series may be paid with such frequency as the
Trustees may determine, which may be daily or otherwise, pursuant
to a standing resolution or resolutions adopted only once or with
such frequency as the Trustees may determine, to the holders of
Shares of that Series, from such of the income and capital gains,
accrued liabilities belonging to that Series. All dividends and
distributions on Shares of a particular Series shall be
distributed pro rata to the holders of that Series in proportion
to the number of Shares of that Series held by such holders at the
date and time of record established for the payment of such
dividends or distributions.
The establishment and designation of any additional Series of Shares shall
be effective upon the execution by a majority of the then Trustees of any
instrument setting forth the
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establishment and designation of such Series. Such instrument shall also set
forth any rights and preferences of such Series which are in addition to the
rights and preferences of Shares set forth in this Declaration. The Trustees
may by an instrument executed by a majority of their number abolish a Series and
the establishment and designation thereof. Each instrument referred to in this
paragraph shall have the status of an amendment to this Declaration.
SECTION 6.3 RIGHTS OF SHAREHOLDERS. The ownership of the Trust Property
----------------------
of every description and the right to conduct any business hereinbefore
described are vested exclusively in the Trustees, and the Shareholders shall
have no interest therein other than the beneficial interest conferred by their
Shares with respect to a particular Series, and they shall have no right to call
for any partition or division of any property, profits, rights or interests of
the Trust nor can they be called upon to share or assume any losses of the
Trust, or suffer an assessment of any kind by virtue of their ownership of
Shares. The Shares shall be personal property giving only the rights in this
Declaration specifically set forth. The Shares shall not entitle the holder to
preference, preemptive, appraisal, conversion or exchange rights (except for
rights to exchange Shares of one Series for Shares of another Series as set
forth in the Prospectus).
SECTION 6.4 TRUST ONLY. It is the intention of the Trustees to create
----------
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to
create a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
SECTION 6.5 ISSUANCE OF SHARES. The Trustees, in their discretion, may
------------------
from time to time without a vote of the Shareholders issue Shares with respect
to any Series that may have been established pursuant to Section 6.2, in
addition to the then issued and outstanding Shares and Shares held in the
treasury, to such party or parties and for such amount not less than the then
current net asset value of said Shares and type of consideration, including cash
or property, at such time or times and on such terms as the Trustee may deem
best, and may in such manner acquire other assets (including the acquisition of
assets subject to, and in connection with the assumption of, liabilities) and
businesses. In connection with any issuance of Shares, the Trustees may issue
fractional Shares. The Trustees may from time to time divide or combine the
Shares of any Series into a greater or lesser number without thereby changing
the proportionate beneficial interests in such Series of the Trust.
Contributions to the Trust may be accepted for, and Shares shall be redeemed as,
whole Shares and/or 1/1,000ths of a Share or multiples thereof.
SECTION 6.6 REGISTER OF SHARES. A register shall be kept at the Trust or
------------------
the offices of any transfer agent duly appointed by the Trustees under the
direction of the Trustees which shall contain the names and addresses of the
Shareholders and the number of Shares (with respect to each Series that may have
been established) held by them respectively and a record of all
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transfers thereof. Separate registers shall be established and maintained for
each Series of the Trust. Each such register shall be conclusive as to who are
the holders of the Shares of the applicable Series and who shall be entitled to
receive dividends or distributions or otherwise to exercise or enjoy the rights
of Shareholders. No Shareholder shall be entitled to receive payment of any
dividend or distribution, nor to have notice given to him as herein provided,
until he has given his address to a transfer agent or such other officer or
agent of the Trustees as shall keep the register for entry thereon. The Trust
shall not be required to issue certificates for the Shares; however, the
Trustees, in their discretion, may authorize the issuance of share certificates
and promulgate appropriate rules and regulations as to their use.
SECTION 6.7 TRANSFER AGENT AND REGISTRAR. The Trustee shall have power
----------------------------
to employ a transfer agent or transfer agents, and a registrar or registrars,
with respect to the Shares of the various Series. The transfer agent may keep
the applicable register and record therein the original issues and transfers, if
any, of the said Shares of the applicable Series. Any such transfer agent and
registrar shall perform the duties usually performed by transfer agents and
registrars of certificates of stock in a corporation, except as modified by the
Trustees.
SECTION 6.8 TRANSFER OF SHARES. Shares shall be transferable on the
------------------
records of the Trust only by the record holder thereof or by his agent thereto
duly authorized in writing, upon delivery to the Trustees or a transfer agent of
the Trust of a duly executed instrument of transfer, together with such evidence
of the genuineness of each such execution and authorization and of other matters
as may reasonably be required. Upon such delivery, the transfer shall be
recorded on the applicable register of the Trust. Until such record is made,
the Shareholder of record shall be deemed to be the holder of such Shares for
all purposes hereof and neither the Trustees nor any transfer agent or registrar
nor any officer, employee or agent of the Trust shall be affected by any notice
of the proposed transfer.
Any person becoming entitled to any Shares in consequence of the death,
bankruptcy or incompetence of any Shareholder, or otherwise by operation of law,
shall be recorded on the applicable register of Shares as the holder of such
Shares upon production of the proper evidence thereof to the Trustees or a
transfer agent of the Trust, but until such record is made, the Shareholder of
record shall be deemed to be the holder of such Shares for all purposes hereof
and neither the Trustees nor any transfer agent or registrar nor any officer or
agent of the Trust shall be affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
SECTION 6.9 NOTICE. Any and all notices to which any Shareholder
------
hereunder may be entitled and any and all communications shall be deemed duly
served or given if mailed, postage prepaid, addressed to any Shareholder of
record at his last known address as recorded on the applicable register of the
Trust.
ARTICLE VII
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CUSTODIANS
SECTION 7.1 APPOINTMENT AND DUTIES. The Trustees shall at all times
----------------------
employ, as custodian with respect to each Series of the Trust, a custodian or
custodians, each of which shall have an aggregate capital, surplus and undivided
profits (as shown on its last published report) of at least two million dollars
and shall meet the qualifications for custodians for portfolio securities of
investment companies contained in the 1940 Act. It is contemplated that
separate custodians may be employed for the different Series of the Trust. Any
custodian, acting with respect to one or more Series, shall have authority as
agent of the Trust or the Series with respect to which it is acting, but subject
to such restrictions, limitations and other requirements, if any, as may be
contained in the By-laws of the Trust and the 1940 Act:
(1) to hold the securities owned by the Trust or the Series and
deliver the same upon written order;
(2) to receive any receipt for any monies due to the Trust or the
Series and deposit the same in its own banking department (if a
bank) or elsewhere as the Trustees may direct;
(3) to disburse such funds upon orders or vouchers;
(4) if authorized by the Trustees, to keep the books and accounts of
the Trust or the Series and furnish clerical and accounting
services; and
(5) if authorized to do so by the Trustees, to compute the net income
and the value of the net assets of the Trust or the Series;
all upon such basis of compensation as may be agreed upon between the Trustees
and the custodian. If so directed by a Majority Shareholder Vote of the Series
with respect to which the custodian is acting, the custodian shall deliver and
pay over all property of the Trust held by it as specified in such vote.
The Trustees may also authorize each custodian to employ one or more sub-
custodians from time to time to perform such of the acts and services of the
custodian and upon such terms and conditions, as may be agreed upon between the
custodian and such sub-custodian and approved by the Trustees, provided that in
every case such sub-custodian shall meet the qualifications for custodians
contained in the 1940 Act.
SECTION 7.2 ACTION UPON TERMINATION OF CUSTODIAN AGREEMENT. Upon
----------------------------------------------
termination of any custodian agreement with respect to any Series or inability
of any custodian to continue to serve, the Trustees shall promptly appoint a
successor custodian, but in the event that no
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successor custodian can be found who has the required qualifications and is
willing to serve, the Trustees shall call as promptly as possible a special
Shareholders' meeting to determine whether such Series shall function without a
custodian or shall be liquidated. If so directed by vote of the holders of a
majority of the Shares of such Series outstanding and entitled to vote, the
custodian shall deliver and pay over all Trust Property held by it as specified
in such vote.
SECTION 7.3 CENTRAL CERTIFICATE SYSTEM. Subject to such rules,
--------------------------
regulations and orders as the Commission may adopt or issue, the Trustees may
direct the custodian to deposit all or any part of the securities owned by the
Trust or the Series in a system for the central handling of securities
established by a national securities exchange or a national securities
association registered with the Commission under the Securities Exchange Act of
1934, or such other person as may be permitted by the Commission, or otherwise
in accordance with the 1940 Act, pursuant to which system all securities of any
particular class or series of any issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry without
physical delivery of such securities, provided that all such deposits shall be
subject to withdrawal only upon the order of the Trust.
SECTION 7.4 ACCEPTANCE OF RECEIPTS IN LIEU OF CERTIFICATES. Subject to
----------------------------------------------
such rules, regulations and orders as the Commission may adopt, the Trustees may
direct the custodian to accept written receipts or other written evidences
indicating purchases of securities held in book-entry form in the Federal
Reserve System in accordance with regulations promulgated by the Board of
Governors of the Federal Reserve System and the local Federal Reserve Banks in
lieu of receipt of certificates representing such securities.
ARTICLE VIII
REDEMPTION
SECTION 8.1 REDEMPTIONS. All outstanding Shares of any Series of the
-----------
Trust may be redeemed at the option of the holders thereof, upon and subject to
the terms and conditions provided in this Article VIII. The Trust shall, upon
application of any Shareholder or pursuant to authorization from any Shareholder
of a particular Series, redeem or repurchase from such Shareholder outstanding
Shares of such Series at the then current net asset value of such Shares. If so
authorized by the Trustees, the Trust may, at any time and from time to time,
charge fees or deferred sales charges for effecting such redemption, at such
rates as the Trustees may establish, as and to the extent permitted under the
1940 Act, and may, at any time and from time to time, pursuant to such Act,
suspend such right of redemption. The procedures for effecting redemption shall
be as set forth in the Prospectus with respect to the applicable Series from
time to time.
SECTION 8.2 REDEMPTIONS OF ACCOUNTS OF LESS THAN A MINIMUM DOLLAR AMOUNT.
------------------------------------------------------------
The Trustees shall have the power to redeem shares at a redemption price
determined in accordance
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with Section 8.1 if at any time the total investment in such account does not
have a minimum dollar value determined from time to time by the Trustees in
their sole discretion; provided, however, that the Trustees may exercise such
power with respect to Shares of any Series only to the extent the Prospectus
describes such power with respect to such Series. In the event the Trustees
determine to exercise their power to redeem Shares provided in this Section 8.2,
Shareholders shall be notified that the value of their account is less than the
then effective minimum dollar amount and allowed 60 days to make an additional
investment before redemption is processed.
ARTICLE IX
DETERMINATION OF NET ASSET VALUE, NET INCOME AND DISTRIBUTIONS
SECTION 9.1 NET ASSET VALUE. The net asset value of each outstanding
---------------
Share of each Series of the Trust shall be determined with respect to each
Series at such time or times on such days as the Trustees may determine, in
accordance with the 1940 Act. The method of determination of net asset value
shall be determined by the Trustees and shall be as set forth in the Prospectus
with respect to the applicable Series. The power and duty to make the daily
calculations for any Series may be delegated by the Trustees to the adviser,
administrator, manager, custodian, transfer agent or such other person as the
Trustees may determine. The Trustees may suspend the daily determination of net
asset value to the extent permitted by the 1940 Act.
SECTION 9.2 DISTRIBUTIONS TO SHAREHOLDERS. Except at such times when the
-----------------------------
Trustees deem proper, the Trustees will not distribute to Shareholders net
investment income and realized capital gains, but will retain and reinvest such
net profits. The Trustees may make distributions to Shareholders to the extent
the distribution and the circumstances in which it may be made are determined by
the Trustees to be in the best interests of the Series. The Trustees may retain
and not reinvest from the net profits such amount as they may deem necessary to
pay the debts or expenses of the Trust or to meet obligations of the Trust, or
as they may deem desirable to use in the conduct of its affairs or to retain for
future requirements or extensions of the business.
SECTION 9.3 POWER TO MODIFY FOREGOING PROCEDURES. Notwithstanding any of
------------------------------------
the foregoing provisions of this Article IX, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the per
share net asset value of the Trust's Shares or net income, or the declaration
and payment of dividends and distributions as they may deem necessary or
desirable to enable the Trust to comply with any provision of the 1940 Act, or
any securities association registered under the Securities Exchange Act of 1934,
or any order of exemption issued by said Commission, all as in effect now or
hereafter amended or modified.
ARTICLE X
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SHAREHOLDERS
SECTION 10.1 VOTING POWERS. The Shareholders shall have the power to
-------------
vote (i) for the election of Trustees as provided in Article II, Section 2.2;
(ii) for the removal of Trustees as provided in Article II, Section 2.3(d);
(iii) with respect to any investment adviser as provided in Article IV, Section
4.1; (iv) with respect to the merger, consolidation and sale of assets of the
Trust as provided in Article XI, Section 11.3; (v) with respect to the amendment
of this Declaration as provided in Article XI, Section 11.4; (vi) to the same
extent as the Shareholders of a Massachusetts business corporation as to whether
or not a court action, proceeding or claim should be brought or maintained
derivatively or as a class action on behalf of the Trust or the Shareholders
(provided, however, that a shareholder of a particular Series shall not be
entitled to a derivative or class action on behalf of any other Series (or
shareholders of any other Series) of the Trust); and (vii) with respect to such
additional matters relating to the Trust as may be required by law, by this
Declaration, or the By-laws of the Trust or any regulation of the Trust, by the
Commission or any State, or as the Trustees may consider desirable. Any matter
affecting a particular Series, including without limitation, matters affecting
the investment advisory arrangements or investment policies or restrictions of a
Series, if required by law, shall not be deemed to have been effectively acted
upon unless approved by the required vote of the Shareholders of such Series if
required by law. Unless otherwise required by law, each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Until Shares are
issued, the Trustees may exercise all rights of Shareholders and may take any
action to be taken by Shareholders which is required or permitted by law, this
Declaration or any By-laws of the Trust.
SECTION 10.2 MEETINGS. Shareholder meetings shall be held as specified
--------
in Article I of the By-laws and in Section 2.2 hereof at the principal office of
the Trust or at such other place as the Trustees may designate. No annual or
regular meetings of shareholders are required. Meetings of the Shareholders may
be called by the Trustees and shall be held at such times, on such day and at
such hour as the Trustees may from time to time determine, for the purposes
specified in Section 2.2 and for such other purposes as may be specified by the
Trustees.
SECTION 10.3 QUORUM AND REQUIRED VOTE. Except as otherwise provided by
------------------------
law, the holders of thirty percent of the outstanding Shares of each Series
present in person or by proxy shall constitute a quorum for the transaction of
any business at any meeting of Shareholders. If a quorum, as above defined,
shall not be present for the purpose of any vote that may properly come before
the meeting, the Shareholders present in person or by proxy and entitled to vote
at such meeting on such matter holding a majority of the Shares present entitled
to vote on such matter may by vote adjourn the meeting from time to time to be
held at the same place without further notice than by announcement to be given
at the meeting until a quorum, as above defined, entitled to vote on such matter
shall be present, whereupon any such matter may be voted upon at
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<PAGE>
the meeting as though held when originally convened. Subject to any applicable
requirement of law, this Declaration or the By-laws, a plurality of the votes
cast shall elect a Trustee and all other matters shall be decided by a majority
of the votes cast entitled to vote thereon.
SECTION 10.4 RECORD DATE FOR MEETINGS. For the purpose of determining
------------------------
the Shareholders who are entitled to notice of and to vote at any meeting, or to
participate in any distribution, or for the purpose of any other action, the
Trustees may from time to time close the transfer books for such period, not
exceeding 30 days, as the Trustees may determine; or without closing the
transfer books the Trustees may fix a date not more than 180 days prior to the
date of any meeting of Shareholders or declaration of dividends or other action
as a record date for the determination of the persons to be treated as
Shareholders of record for such purposes, except for dividend payments which
shall be governed by Section 9.2 hereof.
SECTION 10.5 PROXIES. Any vote by a Shareholder of the Trust may be made
-------
in person or by proxy, provided that no proxy shall be voted at any meeting
unless it shall have been placed on file with the Trustees or their designee
prior to the time the vote is taken. Pursuant to a resolution of a majority of
the Trustees, proxies may be solicited in the name of one or more Trustees or
one or more officers of the Trust. Only Shareholders of record shall be
entitled to vote. A proxy purporting to be executed by or on behalf of a
Shareholder shall be deemed valid unless challenged at or prior to its exercise,
and the burden of proving invalidity shall rest on the challenger. A proxy with
respect to shares held in the name of two or more persons shall be valid if
executed by any one of them unless at or prior to exercise of the proxy the
Trust receives a specific written notice to the contrary from any one of them.
SECTION 10.6 ADDITIONAL PROVISIONS. The By-laws may include further
---------------------
provisions for Shareholders' votes, meetings and related matters.
SECTION 10.7 REPORTS. The Trustees shall cause to be prepared with
-------
respect to each Series at least annually a report of operations containing a
balance sheet and statement of income and undistributed income of the applicable
Series of the Trust prepared in conformity with generally accepted accounting
principles and an opinion of an independent public accountant on such financial
statements. It is contemplated that separate reports may be prepared for the
various Series. Copies of such reports shall be mailed to all Shareholders of
record of the applicable Series within the time required by the 1940 Act. The
Trustees shall, in addition, furnish to the Shareholders at least semi-annually,
interim reports containing an unaudited balance sheet of the Series as of the
end of such period and an unaudited statement of income and surplus for the
period from the beginning of the current fiscal year to the end of such period.
SECTION 10.8 SHAREHOLDER ACTION BY WRITTEN CONSENT. Any action which may
-------------------------------------
be taken by Shareholders may be taken without a meeting if a majority of
Shareholders of each Series entitled to vote on the matter (or such larger
proportion thereof as shall be required by any
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<PAGE>
express provision of this Declaration) consent to the action in writing and the
written consents are filed with the records of the meetings of Shareholders.
Such consent shall be treated for all purposes as a vote taken at a meeting of
Shareholders.
ARTICLE XI
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS; ETC.
SECTION 11.1 DURATION. Subject to the provisions of Sections 11.2 and
--------
11.3 hereof, this Trust shall continue without limitation of time.
SECTION 11.2 TERMINATION.
-----------
(a) The Trust, or any Series thereof, may be terminated by the
affirmative vote of a majority of the Trustees. Upon the termination of the
Trust or any Series:
(i) the Trust or such Series shall carry on no business except
for the purpose of winding up its affairs;
(ii) the Trustees shall proceed to wind up the affairs of the
Trust or such Series and all of the powers of the Trustees
under this Declaration shall continue until the affairs of
the Trust or such Series shall have been wound up,
including the power to fulfill or discharge the contracts
of the Trust or such Series, collect its assets, sell,
convey, assign, exchange, transfer or otherwise dispose of
all or any part of the remaining Trust Property to one or
more persons at public or private sale for consideration
which may consist in whole or in part of cash, securities
or other property of any kind, discharge or pay its
liabilities, and do all other acts appropriate to liquidate
its business; provided that any sale, conveyance,
assignment, exchange, transfer or other disposition of all
or substantially all the Trust Property shall require
approval of the principal terms of the transaction and the
nature and amount of the consideration by vote or consent
of the holders of a majority of the Shares entitled to
vote; and
(iii) after payment or adequately providing for the payment of
all liabilities, and upon receipt of such releases,
indemnities and refunding agreements as they deem necessary
for their protection, the Trustees may distribute the
remaining Trust Property of any Series, in cash or in kind
or partly each, among the Shareholders of such Series
according to their respective rights.
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<PAGE>
(b) After termination of the Trust or any Series and distribution to
the Shareholders as herein provided, a majority of the Trustees shall execute
and lodge among the records of the Trust an instrument in writing setting forth
the fact of such termination. Upon termination of the Trust, the Trustees shall
thereupon be discharged from all further liabilities and duties hereunder, and
the rights and interests of all Shareholders shall thereupon cease. Upon
termination of any Series, the Trustees thereunder shall be discharged from any
further liabilities and duties with respect to such Series, and the rights and
interests of all Shareholders of such Series shall thereupon cease.
SECTION 11.3 REORGANIZATION. The Trustees may sell, convey, merge and
--------------
transfer the assets of the Trust, or the assets belonging to any one or more
Series, to another trust, partnership, association or corporation organized
under the laws of any state of the United States, or to the Trust to be held as
assets belonging to another Series of the Trust, in exchange for cash, shares or
other securities (including, in the case of a transfer to another Series of the
Trust, Shares of such other Series) with such transfer either (1) being made
subject to, or with the assumption by the transferee of, the liabilities
belonging to each Series the assets of which are so transferred, or (2) not
being made subject to, or not with the assumption of, such liabilities;
provided, however, that no assets belonging to any particular Series shall be so
transferred unless the terms of such transfer shall have first been approved at
a meeting called for the purpose by a Majority Shareholder Vote of that Series.
Following such transfer, the Trustees shall distribute such cash, shares or
other securities (giving due effect to the assets and liabilities belonging to
and any other differences among the various Series the assets belonging to which
have so been transferred) among the Shareholders of the Series the assets
belonging to which have been so transferred; and if all of the assets of the
Trust have been so transferred, the Trust shall be terminated.
The Trust, or any one or more Series, may, either as the successor,
survivor, or non-survivor, (1) consolidate with one or more other trusts,
partnerships, associations or corporations organized under the laws of the
Commonwealth of Massachusetts or any other state of the United States, to form a
new consolidated trust, partnership, association or corporation under the laws
of which any one of the constituent entities is organized, or (2) merge into one
or more other trusts, partnerships, associations or corporations organized under
the laws of the Commonwealth of Massachusetts or any other state of the United
States, or have one or more such trusts, partnerships, associations or
corporations merged into it, any such consolidation or merger to be upon such
terms and conditions as are specified in an agreement and plan of reorganization
entered into by the Trust, or one or more Series as the case may be, in
connection therewith. The terms "merge" or "merger" as used herein shall also
include the purchase or acquisition of any assets of any other trust,
partnership, association or corporation which is an investment company organized
under the laws of the Commonwealth of Massachusetts or any other state of the
United States. Any such consolidation or merger shall require the approval of a
Majority Shareholder Vote of each Series affected thereby.
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<PAGE>
Shareholders shall have no right to demand payment for their shares or to
any other rights of dissenting shareholders in the event the Trust or any Series
participates in any transaction which would give rise to appraisal or
dissenters' rights by a shareholder of a corporation organized under Chapter
156B of the General Laws of the Commonwealth of Massachusetts.
SECTION 11.4 AMENDMENT PROCEDURE. All rights granted to the Shareholders
-------------------
under this Declaration are granted subject to the reservation of the right to
amend this Declaration as herein provided, except that no amendment shall repeal
the limitations on personal liability of any Shareholder or Trustee or repeal
the prohibition of assessment upon the Shareholders without the express consent
of each Shareholder or Trustee involved. Subject to the foregoing, the
provisions of this Declaration (whether or not related to the rights of
Shareholders) may be amended at any time, so long as such amendment does not
adversely affect the rights of any Shareholder with respect to which such
amendment is or purports to be applicable and so long as such amendment is not
in contravention of applicable law, including the 1940 Act, by an instrument in
writing signed by a majority of the then Trustees (or by an officer of the Trust
pursuant to the vote of a majority of such Trustees). Any amendment to this
Declaration that adversely affects the rights of Shareholders may be adopted at
any time by an instrument in writing signed by a majority of the then Trustees
(or by an officer of the Trust pursuant to a vote of a majority of such
Trustees) when authorized to do so by the vote of a majority of the Shares
entitled to vote. Subject to the foregoing, any such amendment shall be
effective as provided in the instrument containing the terms of such amendment
or, if there is no provision therein with respect to effectiveness, upon the
execution of such instrument and of a certificate (which may be a part of such
instrument) executed by a Trustee or officer of the Trust to the effect that
such amendment has been duly adopted.
SECTION 11.5 INCORPORATION. With the approval of the holders of a
-------------
majority of the Shares, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction or
any other trust, partnership, association or other organization to take over all
of the Trust Property or to carry on any business in which the Trust shall
directly or indirectly have any interest, and to sell, convey and transfer the
Trust Property to any such corporation, trust, association or organization in
exchange for the shares or securities thereof or otherwise, and to lend money
to, subscribe for the Shares or securities of, and enter into any contracts with
any such corporation, trust, partnership, association or organization, or any
corporation, trust, partnership, association or organization in which the Trust
holds or is about to acquire shares or any other interest. The Trustees may
also cause a merger or consolidation between the Trust or any successor thereto
and any such corporation, trust, partnership, association or other organization
if and to the extent permitted by law, as provided under the law then in effect.
Nothing contained herein shall be construed as requiring approval of
Shareholders for the Trustees to organize or assist in organizing one or more
corporations, trusts, partnerships, associations or other organizations and
selling, conveying or transferring a portion of the Trust Property to such
organizations or entities.
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<PAGE>
ARTICLE XII
MISCELLANEOUS
SECTION 12.1 FILING. This Declaration and any amendment hereto shall be
------
filed in the office of the Secretary of the Commonwealth of Massachusetts and in
such other places as may be required under the laws of Massachusetts and also
may be filed or recorded in such other places as the Trustees deem appropriate.
Each amendment so filed shall be accompanied by a certificate signed and
acknowledged by a Trustee stating that such action was duly taken in a manner
provided herein, and unless such amendment or such certificate sets forth some
later time for the effectiveness of such amendment, such amendment shall be
effective upon its filing. A restated Declaration, containing the original
Declaration and all amendments theretofore made, may be executed from time to
time by a majority of the Trustees and shall, upon filing with the Secretary of
the Commonwealth of Massachusetts, be conclusive evidence of all amendments
contained therein and may thereafter be referred to in lieu of the original
Declaration and the various amendments thereto.
SECTION 12.2 RESIDENT AGENT. The Trust shall maintain a resident agent
--------------
in the Commonwealth of Massachusetts, which agent shall initially be CT
Corporation System, 2 Oliver Street, Boston, Massachusetts 02109. The Trustees
may designate a successor resident agent, provided, however, that such
appointment shall not become effective until written notice thereof is delivered
to the office of the Secretary of the Commonwealth of Massachusetts.
SECTION 12.3 GOVERNING LAW. This Declaration is executed by the Trustees
-------------
and delivered in the Commonwealth of Massachusetts and with reference to the
laws thereof, and the rights of all parties and the validity and construction of
every provision hereof shall be subject to and construed according to the laws
of said Commonwealth and reference shall be specifically made to the business
corporation law of the Commonwealth of Massachusetts as to the construction of
matters not specifically covered herein or as to which an ambiguity exists but
the reference to said business corporation law is not intended to give the
Trust, Trustees, Shareholders or any other person, any right, power, authority
or responsibility only to or in connection with an entity organized in corporate
form.
SECTION 12.4 COUNTERPARTS. This Declaration may be simultaneously
------------
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
SECTION 12.5 RELIANCE BY THIRD PARTIES. Any certificate executed by an
-------------------------
individual who, according to the records of the Trust or of any recording office
in which this Declaration may be recorded, appears to be a Trustee hereunder,
certifying to: (a) the number or identity of
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<PAGE>
Trustees or Shareholders; (b) the name of the Trust or any Series thereof; (c)
the due authorization of the execution of any instrument or writing; (d) the
form of any vote passed at a meeting of Trustees or Shareholders; (e) the fact
that the number of Trustees or Shareholders present at any meeting or executing
any written instrument satisfies the requirements of this Declaration; (f) the
form of any By-laws adopted by or the identity of any officers elected by the
Trustees; (g) the existence of any fact or facts which in any manner relate to
the affairs of the Trust or any Series; or (h) the establishment of any Series,
shall be conclusive evidence as to the matters so certified in favor of any
person dealing with the Trustees and their successors.
SECTION 12.6 PROVISIONS IN CONFLICT WITH LAW OR REGULATIONS.
----------------------------------------------
(a) The provisions of this Declaration are severable, and if the
Trustees shall determine, with the advice of counsel, that any of such
provisions is in conflict with the 1940 Act, the regulated investment company
provisions of the Internal Revenue Code or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have constituted
a part of this Declaration; provided, however, that such determination shall not
affect any of the remaining provisions of this Declaration or render invalid or
improper any action taken or omitted prior to such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the day and year first above written.
/s/Diane N. Ledger
Diane N.Ledger
Trustee
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<PAGE>
July 9, 1987
There personally appeared before me, Diane N. Ledger, who resides at 46
--
Wildwood, Irvine, California, who acknowledged the foregoing instrument to be
- ----------------------------
her free act and deed and the free act and deed of the Trustees of Pacific
Select Fund.
/s/Marcella A. Beaulieu
Marcella A. Beaulieu
Notary Public
My commission expires: 1/21/88
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<PAGE>
WRITTEN INSTRUMENT AMENDING THE
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF PACIFIC SELECT FUND
RESOLVED, that the undersigned, being a majority of the Trustees of Pacific
Select Fund, a Massachusetts business trust, (the "Trust") acting pursuant to
Section 6.2 of the Amended and Restated Agreement and Declaration of Trust,
dated July 9, 1987 and subsequently amended on October 28, 1988 (the
"Declaration of Trust"), and having heretofore divided the Shares of beneficial
interest of the Trust in nine separate Series (the "Series"), hereby amend the
Declaration of Trust by designating and establishing three additional Series to
be known as the "Growth LT Series", the "Equity Series", and the "Bond and
Income Series", such new Series to have the relative rights and preferences set
forth in Subsections (a) through (e) of Section 6.2 of the Declaration of Trust.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the 18th day of October, 1993.
--------
/s/TC SUTTON /s/LYMAN W. PORTER
Thomas C. Sutton Lyman W. Porter
Trustee Trustee
/s/WILLIAM D. CVENGROS /s/ALAN RICHARDS
William D. Cvengros Alan Richards
Trustee Trustee
/s/RICHARD L. NELSON
Richard L. Nelson
Trustee
<PAGE>
AMENDMENT TO AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF PACIFIC SELECT FUND
The undersigned, being a majority of the Trustees of Pacific Select Fund, a
Massachusetts business trust, (the "Trust") acting pursuant to Section 11.4 of
the Amended and Restated Agreement and Declaration of Trust, which was
established on July 9, 1987 and subsequently amended on October 28, 1988 and
October 18, 1993 (the "Declaration of Trust"), hereby amend the Declaration of
Trust so as to provide that shareholder approval is not required for the Series
of the Trust to purchase or acquire any assets of any other trust, partnership,
association or corporation which is organized as an investment company. Section
11.3 of Article XI shall be amended to read as stated below:
The Trust, or any one or more Series, may either as the successor, survivor, or
non-survivor, (1) consolidate with one or more other trusts, partnerships,
associations or corporations organized under the laws of the Commonwealth of
Massachusetts or any other state in the United States, to form a new
consolidated trust, partnership, association, or corporation under the laws of
which any one of the constituent entities is organized, or (2) merge into one or
more other trusts, partnerships, associations, or corporations organized under
the laws of the Commonwealth of Massachusetts or any other state of the United
States, or have one or more such trusts, partnerships, associations, or
corporations merged into it, any such consolidation or merger to be upon such
terms and conditions as are specified in an agreement and plan of reorganization
entered into by the Trust, or one or more Series as the case may be, in
connection therewith. Any such consolidation or merger shall require the
approval of a Majority Shareholder Vote of each Series affected thereby. The
terms "merge" or "merger" as used herein shall not include the purchase or
acquisition of any assets of any other trust, partnership, association or
corporation which is an investment company organized under the laws of the
Commonwealth of Massachusetts or any other state of the United States.
IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as
of the 30th day of December, 1994.
/s/TC SUTTON
Thomas C. Sutton
Trustee
/s/RICHARD L. NELSON
Richard L. Nelson
Trustee
/s/LYMAN W. PORTER
Lyman W. Porter
Trustee
/s/ALAN RICHARDS
Alan Richards
Trustee
<PAGE>
WRITTEN INSTRUMENT AMENDING THE
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF PACIFIC SELECT FUND
RESOLVED, that the undersigned, being a majority of the Trustees of Pacific
Select Fund (the "Trust"), acting pursuant to Section 6.2 of the Amended and
Restated Agreement and Declaration of Trust, dated July 9, 1987, and amended on
October 28, 1988, and October 18, 1993 ("Declaration of Trust"), hereby amend
the Declaration of Trust to redesignate the names of each Series of the Trust as
follows:
Old Name New Name
The Money Market Series The Money Market Portfolio
The Managed Bond Series The Managed Bond Portfolio
The Government Securities Series The Government Securities Portfolio
The High Yield Bond Series The High Yield Bond Portfolio
The Growth Series The Growth Portfolio
The Equity Income Series The Equity Income Portfolio
The Multi-Strategy Series The Multi-Strategy Portfolio
The International Series The International Portfolio
The Equity Index Series The Equity Index Portfolio
The Growth LT Series The Growth LT Portfolio
The Equity Series The Equity Portfolio
The Bond and Income Series The Bond and Income Portfolio
IN WITNESS WHEREOF, the undersigned have caused these presents to be executed as
of the 3rd day of March, 1995.
/s/TC SUTTON /s/LYMAN W. PORTER
Thomas C. Sutton Lyman W. Porter
Trustee Trustee
/s/RICHARD L. NELSON /s/ALAN RICHARDS
Richard L. Nelson Alan Richards
Trustee Trustee
<PAGE>
WRITTEN INSTRUMENT AMENDING THE
AMENDED AND RESTATED
AGREEMENT AND DECLARATION OF TRUST
OF PACIFIC SELECT FUND
RESOLVED, that the undersigned, being a majority of the Trustees of Pacific
Select Fund, a Massachusetts business trust (the "Trust"), acting pursuant
to Section 6.2 of the Amended and Restated Agreement and Declaration of
Trust, dated July 9, 1987, and amended on October 28, 1988, October 18,
1993, January 10, 1995 and March 15, 1995 ("Declaration of Trust"), and
having heretofore divided the Shares of beneficial interest of the Trust in
twelve separate Series (the "Series"), hereby amend the Declaration of
Trust by designating and establishing two additional Series to be known as
the "Emerging Markets Portfolio" and the "Aggressive Equity Portfolio",
such new Series to have the relative rights and preferences set forth in
Subsections (a) through (e) of Section 6.2 of the Declaration of Trust.
IN WITNESS WHEREOF, the undersigned have caused these presents to be
executed as of the ____ day of _______________, 1995.
____________________________ ________________________________
Thomas C. Sutton Lyman W. Porter
Trustee Trustee
____________________________ ________________________________
Richard L. Nelson Alan Richards
Trustee Trustee
<PAGE>
EXHIBIT 99.(1)(b)
Establishment and Designation of Shares
of Beneficial Interest in the Equity Index Series
<PAGE>
PACIFIC SELECT FUND
Establishment and Designation of
Shares of Beneficial Interest, $.001 Par Value
The undersigned, being all the Trustees of Pacific Select Fund, a Massachusetts
business trust (the "Trust"), acting pursuant to Section 6.2 of the AMENDED AND
RESTATED AGREEMENT AND DECLARATION OF TRUST, dated July 9th, 1987, ("Declaration
of Trust"), and having heretofore divided the Shares of beneficial interest of
the Trust into eight separate Series (the "Series"), hereby establish one
additional Series of the Trust and the additional Series to have the following
special and relative rights:
1. The Series shall be designated the Equity Index Series;
2. The Series shall be authorized to hold cash and invest in securities,
instruments and other property as from time to time described in the Trust's
then currently effective prospectuses and registration statement under the
Securities Act of 1933. Each Share of beneficial interest of the Series shall
be redeemable as provided in the Declaration of Trust, and shall be entitled to
one vote (or fraction thereof in respect of a fractional share), unless
otherwise required by law, on matters in which that Series shall be entitled to
vote, and shall represent a pro rata beneficial interest in the assets allocated
to that Series. The proceeds of sales of Shares of a Series, together with any
income and gain thereon, less any dimution or expenses thereof, shall
irrevocably belong to that Series, unless otherwise required by law and shall be
entitled to vote and be entitled to receive its pro rata share of net assets
upon liquidation of that Series, all as provided in the Declaration of Trust.
Upon redemption of a Shareholder's Shares, or indemnification for liabilities
incurred by reason of a Shareholder being or having been a Shareholder of the
Series, such Shareholder shall be paid solely out of the property of such
Series.
3. Shareholders of the Series shall vote separately as a class on any
matter, except to the extent required by the Investment Company Act of 1940 or
when the Trustees have determined that the matter affects only the interests of
Shareholder of such Series, then only the Shareholders of such Series shall be
entitled to vote thereon. Any matter shall be deemed to have been effectively
acted upon with respect to any Series as provided in Rule 18f-2 under such Act
or any successor rule and in the Declaration of Trust.
4. The assets and liabilities of the Series shall be allocated as set
forth in Section 6.2 of the Declaration of Trust.
5. The Trustees (including any successor Trustees) shall have the right at
any time and from time to time to reallocate assets and expenses or to change
the designation of the Series now or hereafter created, or to otherwise change
the special and relative rights of any such Series provided that such change
shall not adversely affect the rights of Shareholders of the Series.
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this instrument on this
28th day of October, 1988.
/s/ THOMAS C. SUTTON /s/ ALAN RICHARDS
Trustee Trustee
/s/ RICHARD L. NELSON /s/ WILLIAM D. CVENGROS
Trustee Trustee
/s/ LYMAN W. PORTER
Trustee
<PAGE>
EXHIBIT 99.2
By-Laws of Registrant
<PAGE>
PACIFIC SELECT FUND
BY-LAWS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
ARTICLE I -- SHAREHOLDER MEETINGS
Section 1.1 Calling of Meetings 1
Section 1.2 Notices 1
Section 1.3 Place of Meeting 1
Section 1.4 Chairman 1
Section 1.5 Proxies; Voting 1
Section 1.6 Closing of Transfer Books and Fixing Record Dates 2
Section 1.7 Inspectors of Election 2
ARTICLE II -- TRUSTEES
Section 2.1 The Trustees 2
Section 2.2 Regular and Special Meetings 3
Section 2.3 Notice 3
Section 2.4 Records 3
Section 2.5 Quorum and Vote 3
Section 2.6 Telephone Meeting 4
Section 2.7 Special Action 4
Section 2.8 Action by Consent 4
Section 2.9 Compensation of Trustees 4
ARTICLE III -- OFFICERS
Section 3.1 Officers of the Trust 4
Section 3.2 Election and Tenure 4
Section 3.3 Removal of Officers 5
Section 3.4 Bonds and Surety 5
Section 3.5 Chairman, President and Vice-Presidents 5
Section 3.6 Secretary 6
Section 3.7 Treasurer 6
Section 3.8 Other Officers and Duties 7
ARTICLE IV -- POWER AND DUTIES OF THE EXECUTIVE AND OTHER COMMITTEES
Section 4.1 Executive and Other Committees 7
Section 4.2 Vacancies in Executive Committee 7
Section 4.3 Executive Committee to Report to Trustees 7
Section 4.4 Procedure of Executive Committee 7
Section 4.5 Powers of Executive Committee 7
Section 4.6 Compensation 8
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
Section 4.7 Informal Action by Executive Committee or Other Committee 8
ARTICLE V -- SHARES OF BENEFICIAL INTEREST
Section 5.1 Book Entry Shares 8
Section 5.2 Transfer Agents, Registrars and the Like 8
Section 5.3 Transfer of Shares 8
Section 5.4 Registered Shareholders 9
ARTICLE VI -- AMENDMENT OF BY-LAWS 9
ARTICLE VII -- INSPECTION OF BOOKS 9
ARTICLE VIII -- AGREEMENTS, CHECKS, DRAFTS, ENDORSEMENTS, ETC.
Section 8.1 Agreements, Etc. 9
Section 8.2 Checks, Drafts, Etc. 10
Section 8.3 Endorsements, Assignments and Transfer of Securities 10
Section 8.4 Evidence of Authority 10
ARTICLE IX -- SEAL 10
ARTICLE X -- FISCAL YEAR 10
ARTICLE XI -- WAIVERS OF NOTICE 11
ARTICLE XII -- BOOKS AND RECORDS 11
</TABLE>
<PAGE>
PACIFIC SELECT FUND
BY-LAWS
These By-laws are made and adopted pursuant to Section 3.9 of the Agreement and
Declaration of Trust establishing PACIFIC SELECT FUND ("Trust") dated May 4,
1987, as from time to time amended (hereinafter called the "Declaration"). All
words and terms capitalized in these By-laws shall have the meaning or meanings
set forth for such words or terms in the Declaration.
ARTICLE I
Shareholder Meetings
Section 1.1 Calling of Meetings. Meetings of the Shareholders shall be held as
provided in Section 10.2 of the Declaration at such place within or without the
Commonwealth of Massachusetts as the Trustees shall designate.
Section 1.2 Notices. Notice of all meetings of Shareholders, stating the time,
place and purposes of the meeting, shall be given by mail to each Shareholder at
his registered address as recorded on the register of the Trust, mailed at least
10 days and not more than sixty (60) days before the meeting. Any adjourned
meeting shall be held as adjourned without further notice. No notice need be
given to any Shareholder who shall have failed to inform the Trust of his
current address or if a written waiver of notice, executed before or after the
meeting by the Shareholder or his attorney, thereunto authorized, is filed with
the records of the meeting.
Section 1.3. Place of Meeting. Meetings of the Shareholders of the Trust shall
be held at such place within or without the Commonwealth of Massachusetts as may
be fixed from time to time by resolution of the Trustees.
Section 1.4. Chairman. The Chairman, if any, shall act as Chairman at all
meetings of the Shareholders; in his absence, the President shall act as
Chairman; and in the absence of the Chairman and the President, the Trustee or
Trustees present at each meeting may elect a temporary Chairman for the meeting,
who may be one of themselves.
Section 1.5. Proxies; Voting. Shareholders may vote either in person or by
duly executed proxy and, unless otherwise required by applicable law, each full
share represented at the meeting shall have one vote, and each fractional share
shall have a proportionate fractional vote all as provided in Article X of the
Declaration. No proxy shall be valid after eleven (11) months from the date of
its execution, unless a longer period is expressly stated in such proxy.
Section 1.6. Closing of Transfer Books and Fixing Record Dates. For the
purpose of determining the Shareholders who are entitled to notice of or to vote
or act at any meeting, including any adjournment thereof, or who are entitled to
participate in any dividends, or for any other proper purpose, the Trustees may
from time to time close the transfer books or fix a record date in the
<PAGE>
manner provided in Section 10.4 of the Declaration. If the Trustees do not,
prior to any meeting of Shareholders, so fix a record date or close the transfer
books, then an officer of the Trust shall determine a date which shall be not
more than 180 days prior to the date of the meeting or the date upon which the
dividend is declared, as the case may be, and such date shall be the record
date.
Section 1.7. Inspectors of Election. In advance of any meeting of
Shareholders, the Trustees may appoint Inspectors of Election to act at the
meeting or any adjournment thereof. If Inspectors of Election are not so
appointed, the Chairman, if any, of any meeting of Shareholders may, and on the
request of any Shareholder or his proxy shall, appoint Inspectors of Election of
the meeting. The number of Inspectors shall be either one or three. If
appointed at the meeting on the request of one or more Shareholders or proxies,
a majority of Shares present shall determine whether one or three Inspectors are
to be appointed, but failure to allow such determination by the Shareholders
shall not affect the validity of the appointment of Inspectors of Election. In
case any person appointed as Inspector fails to appear or fails or refuses to
act, the vacancy may be filled by appointment made by the Trustees in advance of
the convening of the meeting or at the meeting by the person acting as Chairman.
The Inspectors of Election shall ascertain and monitor the number of Shares
outstanding, the Shares represented at the meeting, the existence of a quorum,
the authenticity, validity and effect of proxies, shall receive votes, ballots
or consents, shall hear and determine all challenges and questions in any way
arising in connection with the right to vote, shall count and tabulate all votes
or consents, determine the results, and do such other acts as may be proper to
conduct the election or vote with fairness to all Shareholders. If there are
three Inspectors of Election, the decision, act or certificate of a majority is
effective in all respects as the decision, act or certificate of all. On
request of the Chairman, if any, of the meeting, or of any Shareholder or his
proxy, the Inspectors of Election shall make a report in writing of any
challenge or question or matter determined by them and shall execute a
certificate of any facts found by them.
ARTICLE II
Trustees
Section 2.1. The Trustees. The Trustees shall be responsible for the
management of the Trust; they may retain such authority to direct the business
affairs of the Trust as they deem advisable, but, subject to the Declaration and
the provisions of applicable law, they may delegate any of the various functions
involved in the management of the Trust to its officers and/or agents as they
deem fit. The term of office of each Trustee shall continue until the Trustee
resigns, is removed, retires, or is retired pursuant to Section 2.3 of the
Declaration. Subject to the provisions of Sections 2.2 and 2.4 of the
Declaration, all persons to serve as Trustees of the Trust shall be elected at
each meeting of the Shareholders of the Trust called for that purpose.
Section 2.2. Regular and Special Meetings. Regular Meetings of the Trustees
may be held without call or notice at such place or places and times as the
Trustees may determine from time to time. Special Meetings of the Trustees shall
be held upon the call of the Chairman, if any, the President, the Secretary or
any two Trustees, at such time, on such day, and at such place, as shall be
designated in the notice of the meeting.
<PAGE>
Section 2.3. Notice. Notice of a meeting shall be given by mail or by telegram
(which term shall include a cablegram) or delivered personally. If notice is
given by mail, it shall be mailed not later than 24 hours preceding the meeting
and if given by telegram or personally, such telegram shall be sent or delivered
not later than 24 hours preceding the meeting, unless otherwise subject to the
provisions of the 1940 Act. Notice by telephone shall constitute personal
delivery for these purposes. Notice of a meeting of Trustees may be waived
before or after any meeting by signed written waiver. Neither the business to
be transacted at, nor the purpose of, any meeting of the Trustees need be stated
in the notice or waiver of notice of such meeting, and no notice need be given
of action proposed to be taken by unanimous written consent. The attendance of
a Trustee at a meeting shall constitute a waiver of notice of such meeting
except where a Trustee attends a meeting for the express purpose of objecting to
the transaction of any business on the ground that the meeting has not been
lawfully called or convened.
Section 2.4. Records. The results of all actions taken at a meeting of the
Trustees, or by unanimous written consent of the Trustees, shall be recorded by
the Secretary or Assistant Secretary.
Section 2.5. Quorum and Vote. A majority of the Trustees shall constitute a
quorum for the transaction of business. The act of a majority of the Trustees
present at any meeting at which a quorum is present shall be the act of the
Trustees unless a greater proportion is required by the Declaration or these By-
laws or applicable law. In the absence of a quorum, a majority of the Trustees
present may adjourn the meeting from time to time until a quorum shall be
present. Notice of any adjourned meeting need not be given.
Section 2.6. Telephone Meeting. Subject to compliance with the provisions of
the 1940 Act, the Trustees may meet by means of a conference telephone or
similar equipment by means of which all persons participating in the meeting can
hear each other.
Section 2.7. Special Action. When all the Trustees shall be present at any
meeting, however called or whenever held, or shall assent to the holding of the
meeting without notice, or after the meeting shall sign a written assent thereto
on the record of such meeting, the acts of such meeting shall be valid as if
such meeting had been regularly held.
Section 2.8. Action by Consent. Subject to compliance with the provisions of
the 1940 Act, any action by Trustees may be taken without a meeting if a written
consent thereto is signed by a majority of the Trustees then in office and filed
with the records of the Trustees' meetings. Such consent shall be treated as a
vote of the Trustees for all purposes.
Section 2.9. Compensation of Trustees. The Trustees may receive a stated
salary for their services as Trustees, and by resolution of the Trustees a fixed
fee and expense of attendance may be allowed for attendance at each meeting.
Nothing herein contained shall be construed to preclude any Trustee from serving
the Trust in any other capacity, as an officer, agent or otherwise, and
receiving compensation therefore.
<PAGE>
ARTICLE III
Officers
Section 3.1. Officers of the Trust. The officers of the Trust may consist of a
Chairman, if one shall be appointed by the Trustees, and shall consist of a
President, a Secretary, a Treasurer and such other officers or assistant
officers, including Vice-Presidents, as may be elected by the Trustees. Any two
or more of the offices may be held by the same person, except that the same
person may not be both President and Secretary. The Trustees may designate a
Vice-President as an Executive Vice-President and may designate the order in
which the other Vice-Presidents may act. The Chairman and the President shall
be Trustees, but no other officer of the Trust need be a Trustee.
Section 3.2. Election and Tenure. At the initial organizational meeting and at
least once a year thereafter the Trustees shall elect the Chairman, if any, the
President, Secretary, Treasurer and such other officers as the Trustees shall
deem necessary or appropriate in order to carry out the business of the Trust.
Such officers shall hold the office until their successors have been duly
elected and qualified. The Trustees may fill any vacancy in office or add any
additional officers at any time.
Section 3.3. Removal of Officers. Any officer may be removed at any time, with
or without cause, by action of a majority of the Trustees. This provision shall
not prevent the making of a contract of employment for a definite term with any
officer and shall have no effect upon any cause of action which any officer may
have as a result of removal in breach of a contract of employment. Any officer
may resign at any time by notice in writing signed by such officer and delivered
or mailed to the Chairman, if any, President, or Secretary, and such resignation
shall take effect immediately upon receipt by the Chairman, if any, President,
or Secretary, or at a later date according to the terms of such notice in
writing.
Section 3.4. Bonds and Surety. Any officer may be required by the Trustees to
be bonded for the faithful performance of his duties in such amount and with
such sureties as the Trustees may determine.
Section 3.5. Chairman, President and Vice-Presidents. The Chairman, if any,
shall, if present, preside at all meetings of the Shareholders and of the
Trustees and shall exercise and perform such other powers and duties as may be
from time to time assigned to him by the Trustees. Subject to such supervisory
powers, if any, as may be given by the Trustees to the Chairman, if any, the
President shall be the chief executive officer of the Trust, and, subject to the
control of the Trustees, shall have general supervision, direction and control
of the business of the Trust and of its employees and shall exercise such
general powers of management as are usually vested in the office of President of
a corporation. In the absence of the Chairman, if any, the President shall
preside at all meetings of the shareholders and of the Trustees. The President
shall be, ex officio, a member of all outstanding committees (except the Audit
Committee or any other Committee that consists only of Trustees who are not
interested persons of the Trust or its Investment Adviser). Subject to
direction of the Trustees, the Chairman, if any, and the President shall each
have power in the name and on behalf of the Trust to execute any and all loan
documents, contracts, agreements, deeds, mortgages and other instruments in
writing, and to employ and discharge employees and agents of the Trust. Unless
otherwise directed by the Trustees, the Chairman, if any, and the President
shall each have full authority and power, on behalf of all of the Trustees, to
attend and to act and to vote, on behalf
<PAGE>
of the Trust at any meetings of the business organizations in which the Trust
holds an interest, or to confer such powers upon any other persons, by executing
any proxies duly authorizing such persons. The Chairman, if any, and the
President shall have such further authorities and duties as the Trustees shall
from time to time determine. In the absence or disability of the President, the
Vice-Presidents in order of their rank as fixed by the Trustees or, if more than
one and not ranked, the Vice-President designated by the Trustees, shall perform
all of the duties of the President, and when so acting shall have all the powers
of and be subject to all of the restrictions upon the President. Subject to the
direction of the Trustees, and of the President, each Vice-President shall have
the power in the name and on behalf of the Trust to execute any and all loan
documents, contracts, agreements, deeds, mortgages and other instruments in
writing, and, in addition, shall have such other duties and powers as shall be
designated from time to time by the Trustees or by the President.
Section 3.6. Secretary. The Secretary shall keep the minutes of all meeting
of, and record all votes of, Shareholders, Trustees and the Executive Committee,
if any. He shall be custodian of the seal of the Trust, if any, and he (and any
other person so authorized by the Trustees) shall affix the seal or, if
permitted, a facsimile thereof, to any instrument executed by the Trust which
would be sealed by a Massachusetts corporation executing the same or a similar
instrument and shall attest to the seal and the signature or signatures of the
officer or officers executing such instrument on behalf of the Trust. The
Secretary shall also perform any other duties commonly incident to such office
in a Massachusetts business corporation, and shall have such other authorities
and duties as the Trustees shall from time to time determine. Any of the duties
of the Secretary may be performed by an Assistant Secretary duly appointed by
the Trustees.
Section 3.7. Treasurer. Except as otherwise directed by the Trustees, the
Treasurer shall have the general supervision of the monies, funds, securities,
notes receivable and other valuable papers and documents of the Trust, and shall
have and exercise under the supervision of the Trustees and of the President all
powers and duties normally incident to his office. He may endorse for deposit
or collection all notes, checks and other instruments payable to the Trust or to
its order. He shall deposit all funds of the Trust in such depositories as the
Trustees shall designate. he shall be responsible for such disbursement of the
funds of the Trust as may be ordered by the Trustees or the President. He shall
keep accurate account of the books of the Trust's transactions which shall be
the property of the Trust, and which together with all other property of the
Trust in his possession, shall be subject at all times to the inspection and
control of the Trustees. Unless the Trustees shall otherwise determine, the
Treasurer shall be the principal accounting officer of the Trust and shall also
be the principal financial officer of the Trust. He shall have such other
duties and authorities as the Trustees shall from time to time determine.
Notwithstanding anything to the contrary herein contained, the Trustees may
authorize any adviser, administrator, manager or transfer agent to maintain bank
accounts and deposit and disburse funds of any Series of the Trust on behalf of
such Series.
Section 3.8. Other Officers and Duties. The Trustees may elect such other
officers and assistant officers as they shall from time to time determine to be
necessary or desirable in order to conduct the business of the Trust. Assistant
officers shall act generally in the absence of the officer whom they assist and
shall assist that officer in the duties of his office. Each officer, employee
and agent of the Trust shall have such other duties and authority as may be
conferred upon him by the Trustees
<PAGE>
or delegated to him by the President.
ARTICLE IV
Power and Duties of the Executive and Other Committees
Section 4.1. Executive and Other Committees. The Trustees may, but shall not
be required to, elect from their own number an Executive Committee to consist of
not less than two members, which number shall include the President, who shall,
ex officio, be a member thereof. The Executive Committee shall be elected by a
resolution passed by a vote of at least a majority of the Trustees then in
office. The Trustees may also elect from their own number other committees from
time to time, the number composing such committees and the powers conferred upon
the same to be determined by vote of the Trustees.
Section 4.2. Vacancies in Executive Committee. Vacancies occurring in the
Executive Committee from any cause shall be filled by the Trustees by a
resolution passed by the vote of at least a majority of the Trustees then in
office.
Section 4.3. Executive Committee to Report to Trustees. All action by the
Executive Committee shall be reported to the Trustees at their meeting next
succeeding such action.
Section 4.4. Procedure of Executive Committee. The Executive Committee shall
fix its own rules of procedures not inconsistent with these By-laws or with any
directions of the Trustees. It shall meet at such times and places and upon
such notice as shall be provided by such rules or by resolution of the Trustees.
The presence of a majority shall constitute a quorum for the transaction of
business, and in every case an affirmative vote of a majority of all the members
of the Committee present shall be necessary for the taking of any action.
Section 4.5. Powers of Executive Committee. During the intervals between the
meetings of the Trustees, the Executive Committee, except as limited by the By-
laws of the Trust or by specific directions of the Trustees, shall possess and
may exercise all the powers of the Trustees in the management and direction of
the business and conduct of the affairs of the Trust in such manner as the
Executive Committee shall deem for the best interests of the Trust, and shall
have power to authorize the seal of the Trust to be affixed to all instruments
and documents requiring same. Notwithstanding the foregoing, the Executive
Committee shall not have the power to elect Trustees, increase or decrease the
number of Trustees, elect or remove any officer, declare dividends, issue shares
or recommend to Shareholders any action requiring Shareholder approval.
Section 4.6. Compensation. The members of any duly appointed committee shall
receive such compensation and/or fees as from time to time may be fixed by the
Trustees.
Section 4.7. Informal Action by Executive Committee or Other Committee. Any
action required or permitted to be taken at any meeting of the Executive
Committee or any other duly appointed Committee may be taken without a meeting
if a consent in writing setting forth such action is signed by all members of
such committee and such consent is filed with the records of the Trust.
<PAGE>
ARTICLE V
Shares of Beneficial Interest
Section 5.1. Book Entry Shares. No certificates will be issued to represent
shares in the Trust unless the Trustees, in their discretion, may so authorize.
The Trust may issue certificates in any fixed denomination of shares, or
alternatively, may issue to all investors certificates evidencing ownership of
shares of beneficial interest in the Trust which will not evidence ownership of
a fixed number of shares but will indicate on its face that it represents all
Trust shares of beneficial interest for which the investor is the record owner
as shown on the books of record of the Transfer Agent of the Trust. The Trust
shall maintain adequate records to determine the holdings of each Shareholder of
record, and such records shall be deemed the equivalent of a certificate
representing the shares for all purposes.
Section 5.2. Transfer Agent, Registrars and the Like. As provided in Section
6.7 of the Declaration, the Trustees shall have authority to employ and
compensate such transfer agents and registrars with respect to the Shares of the
various Series of the Trust as the Trustees shall deem necessary or desirable.
In addition, the Trustees shall have power to employ and compensate such
dividend disbursing agents, warrant agents and agents for the reinvestment of
dividends as they shall deem necessary or desirable. Any of such agents shall
have such power and authority as is delegated to any of them by the Trustees.
Section 5.3. Transfer of Shares. The shares of the Trust shall be transferable
on the books of the Trust only upon delivery to the Trustees or a transfer agent
of the Trust of proper documentation as provided in Section 6.8 of the
Declaration. The Trust, or its transfer agents, shall be authorized to refuse
any transfer unless and until there is presented such evidence as may be
reasonably required to show that the requested transfer is proper.
Section 5.4. Registered Shareholders. The Trust may deem and treat the holder
of record of any Share as the absolute owner thereof for all purposes and shall
not be required to take any notice of any right or claim of right of any other
person, unless otherwise required by applicable law.
ARTICLE VI
Amendment of By-laws
In accordance with Section 3.9 of the Declaration, the Trustees shall have the
power to alter, amend or repeal the By-laws or adopt new By-laws at any time.
Action by the Trustees with respect to the By-laws shall be taken by an
affirmative of a majority of the Trustees. The Trustees shall in no event adopt
By-laws which are in conflict with the Declaration, and any apparent
inconsistency shall be construed in favor of the related provisions in the
Declaration.
The Agreement and Declaration of Trust establishing Pacific Select Fund, dated
May 4, 1987, a copy of which, together with all amendments thereto, (the
"Declaration"), is on file in the office of the Secretary of the Commonwealth of
Massachusetts, provides that the name Pacific Select Fund refers
<PAGE>
to the Trustees under the Declaration collectively as Trustees, but not as
individuals or personally; and no Trustee, Shareholder, officer, employee or
agent of Pacific Select Fund shall be held to any personal liability, nor shall
resort be had to their private property for the satisfaction of any obligation
or claim or otherwise in connection with the affairs of said Pacific Select Fund
but the Trust Estate only shall be liable.
ARTICLE VII
Inspection of Books
The Trustees shall from time to time determine whether and to what extent, and
at what times and places, and under what conditions and regulations the accounts
and books of the Trust or any of them shall be open to the inspection of the
Shareholders; and no Shareholder shall have any right to inspect an account or
book or document of the Trust except as conferred by law or authorized by the
Trustees or by resolution of the Shareholders.
ARTICLE VIII
Agreements, Checks, Drafts, Endorsements, Etc.
Section 8.1. Agreements, Etc. The Trustees or the Executive Committee may
authorize any officer or officers, or agent or agents of the Trust to enter into
any agreement or execute and deliver any instrument in the name of and on behalf
of the Trust, and such authority may be general or confined to specific
instances; and, unless so authorized by the Trustees or by the Executive
Committee or by these By-laws, no officer, agent or employee shall have any
power or authority to bind the Trust by any agreement or engagement or to pledge
its credit or to render it liable for any purpose or in any amount.
Section 8.2. Checks, Drafts, Etc. All checks, drafts, or orders for the
payment of money, notes and other evidences of indebtedness shall be signed by
such officer or officers, employee or employees, or agent or agents, as shall
from time to time be designated by the Trustees or the Executive Committee, if
any, or as may be specified in or pursuant to the agreement between the Trust
and any bank or trust company appointed as custodian depository pursuant to the
provisions of the Declaration.
Section 8.3. Endorsements, Assignments and Transfer of Securities. All
endorsements, assignments, stock powers or other instruments of transfer of
securities standing in the name of the Trust or its nominees or directions for
the transfer of securities belonging to the Trust shall be made by such officer
or officers, employee or employees, or agent or agents as may be authorized by
the Trustees or the Executive Committee, if any.
Section 8.4. Evidence of Authority. Anyone dealing with the Trust shall be
fully justified in relying on a copy of a resolution of the Trustees or of any
committee thereof empowered to act in the premises which is certified as true by
the Secretary or an Assistant Secretary under the seal of the Trust.
<PAGE>
ARTICLE IX
Seal
The seal of the Trust shall be circular in form, bearing the inscription:
Pacific Select Fund - 1987 - Massachusetts
ARTICLE X
Fiscal Year
The fiscal year of the trust shall be the period of twelve months ending on
December 31 of each calendar year.
ARTICLE XI
Waivers of Notice
Whenever any notice whatsoever is required to be given under the provisions of
any statute of the Commonwealth of Massachusetts, or under the provisions of the
Declaration or these By-laws, a waiver thereof in writing, signed by the person
or persons entitled to said notice whether before or after the time stated
therein, shall be deemed equivalent thereto. A notice shall be deemed to have
been given if telegraphed, cabled or sent by wireless when it has been delivered
to a representative of any telegraph, cable or wireless company with
instructions that it be telegraphed, cabled or sent by wireless. Any notice, if
mailed, shall be deemed to be given at the time when the same shall be deposited
in the mail.
ARTICLE XII
Books and Records
The books and records of the Trust, including the stock ledger or ledgers, may
be kept in or outside the Commonwealth of Massachusetts at such office or agency
of the Trust as may be from time to time determined by the Trustees.
<PAGE>
EXHIBIT 99.5(a)
Investment Advisory Agreement
Pacific Select Fund and Pacific Mutual Life Insurance Company
<PAGE>
ADVISORY AGREEMENT
Agreement, made this 9th day of November, 1987 between Pacific Select Fund
("Fund"), and Pacific Mutual Life Insurance Company ("Adviser").
WHEREAS, the Fund is an open-end diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Adviser is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended (the "Advisers Act");
WHEREAS, the Fund is authorized to issue shares of beneficial interest
("Beneficial Interest") in eight separate Series with each such Series
representing interests in a separate portfolio of securities and other assets;
and
WHEREAS, the Fund initially established eight series to be designated as the
Money Market Series, Managed Bond Series, the High Yield Bond Series, the
Government Securities Series, the Growth Series, the Equity Income Series, the
Multi-Strategy Series, and the International Series, (the "Initial Series"),
such Series together with all other Series subsequently established by the Fund
with respect to which the Fund desires to retain the Adviser to render
investment advisory services hereunder and with respect to which the Adviser is
willing so to do (being herein collectively referred to as the "Series").
Therefore, in consideration of the promises and mutual covenants herein
contained, it is agreed between the parties as follows:
1. Appointment. The Fund hereby appoints the Adviser to act as manager and
investment adviser to the Fund with respect to Initial Series for the period and
on the terms set forth in this Agreement. The Adviser accepts such appointment
and agrees to render the services herein set forth, for the compensation herein
provided.
In the event the Fund establishes one or more classes other than the Initial
Series with respect to which it desires to retain the Adviser to render
management and investment advisory services hereunder, it shall notify the
Adviser in writing. If the Adviser is willing to render such services it shall
notify the Fund in writing, whereupon such class shall become a Series
hereunder.
2. Duties. Subject to the general supervision of the Board of Trustees, the
Adviser shall provide general, overall advice and guidance with respect to the
Fund's portfolio and provide advice and guidance to the Fund's Trustees. In
discharging these duties the Adviser shall, either directly or indirectly
through others selected by it pursuant to Section 7 of this Agreement manage the
investments of the Fund and the composition of each Series' portfolio of
securities and investments, including cash, and the purchase, retention and
disposition thereof, in accordance with each Series' investment objectives and
policies as stated in the Fund's current registration statement on Form N-1A
under the Securities Act of 1933 ("Registration Statement") and subject to the
following understandings:
<PAGE>
(a) The Adviser shall furnish and implement a continuous investment
program which is consistent with the investment policies and objectives of each
of the Series, and determine from time to time what investments or securities
will be purchased, retained, sold or lent by each Series and what portion of the
assets will be invested or held invested as cash;
(b) The Adviser shall use the same skill and care in the management of
each Series' portfolio as it uses in the administration of other accounts for
which it has investment responsibility as agent;
(c) The Adviser, in the performance of its duties and obligations under
this Agreement shall act in conformity with the Registration Statement of the
Fund and with the instructions and directions of the Board of Trustees of the
Fund and will conform to, and comply with, the requirements of the 1940 Act and
all other applicable federal and state laws and regulations.
(d) The Adviser shall determine the securities to be purchased, sold or
lent by each of the Series and as agent for the Fund will effect portfolio
transactions pursuant to its determinations either directly with the issuer or
with any broker and/or dealer in such securities. The Adviser will supervise
the acquisition and disposition of investments by the Fund, including the
selection of the brokers or dealers to carry out portfolio transactions in
accordance with the policies set forth in the Registration Statement. In
accordance with Section 11(a) of the Securities Exchange Act of 1934 and Rule
11a2-(T) thereunder, and subject to any other applicable laws and regulations,
the Adviser is authorized to effect portfolio transactions for the Fund and to
retain brokerage commissions on such transactions.
(e) On occasions when the Adviser deems the purchase or sale of a security
to be in the best interest of the Fund as well as its other clients, the Adviser
may, to the extent permitted by applicable laws and regulations, but shall not
be obligated to, aggregate the securities to be so sold or purchased with those
of its other clients where such aggregation is not inconsistent with the
policies set forth in the Registration Statement. In such event, allocation of
the securities so purchased or sold will be made by the Adviser in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to such other clients.
(f) The Adviser shall maintain books and records with respect to the
Fund's securities transactions and shall render to the Board of Trustees of the
Fund such periodic and special reports as the Board may reasonably request.
(g) The Adviser agrees to provide the Fund with necessary office space,
telephones, and personnel competent to perform administrative and clerical
functions for the Fund.
(h) The Adviser will furnish to regulatory authorities any information or
reports in connection with such services which may be requested in order to
ascertain whether the operations of the Fund are being conducted in a manner
consistent with applicable laws and regulations.
(i) The investment management services of the Adviser to the Fund under
this Agreement are not to be deemed exclusive, and the Adviser, or any affiliate
thereof, shall be free to render similar services to other investment companies
and other clients (whether or not their investment
<PAGE>
objectives and policies are similar to those of the Fund) and to engage in other
activities, so long as its services hereunder are not impaired thereby.
(j) The Adviser shall not disclose or use any records or information
obtained pursuant to this Agreement, in any manner whatsoever except as
expressly authorized in the Agreement, and will keep confidential any
information obtained as Adviser to the Fund, and disclose such information only
if a Fund officer has authorized such disclosure, or if sure disclosure is
expressly required by applicable federal or state regulatory authorities.
3. Documents. The Fund has delivered properly certified or authenticated
copies of each of the following documents to the Adviser and will deliver to it
all future amendments and supplements thereto, if any:
(a) certified resolution of the Board of Trustees of the Fund authorizing
the appointment of the Adviser and approving the form of this Agreement;
(b) the Registration Statement as filed with the Securities and Exchange
Commission and any amendments thereto;
(c) exhibits, powers of attorneys, certificates and any and all other
documents relating to or filed in connection with the Registration Statement
described above.
4. Records. The Adviser agrees to maintain and to preserve for the periods
prescribed under the 1940 Act any such records as are required to be maintained
by the Adviser with respect to the Fund by the 1940 Act. The Adviser further
agrees that all records which it maintains for the Fund are the property of the
Fund and it will promptly surrender any of such records upon request.
5. Expenses. During the term of this Agreement, the Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement,
except such expenses as are assumed by the Fund under this Agreement. The
Adviser further agrees to pay or cause its affiliates to pay all salaries, fees
and expenses of any officer or trustee of the Fund who is an officer, director
or employee of the Adviser. The Adviser shall not be required to bear the
following expenses: fees and expenses (including legal fees) of the trustees of
the Fund who are not officers, directors or employees of the Adviser or any
affiliate thereof; salary and expenses of any officers or directors or employees
of the Fund who are not affiliated with the Adviser or any affiliate thereof;
interest expenses; taxes and governmental fees; brokerage commissions and other
expenses incurred in acquiring or disposing of the Fund's portfolio securities;
expenses of registering and qualifying the Fund with the Securities and Exchange
Commission and with any state commissions; accounting and legal costs; insurance
premiums; expenses of obtaining quotations on the Fund's portfolio securities
and pricing of the Shares of Beneficial Interest of the Series; recordkeeping
expenses (except that the Adviser shall bear its expenses of maintaining records
pursuant to Section 4 of this Agreement); custodian fees and expenses; expenses
of maintaining the Fund's legal existence and of shareholders' meetings;
expenses of preparation of reports, proxies and prospectuses and of printing and
distributing reports, proxies and prospectuses to existing shareholders, and
fees and expenses of the Fund's membership in industry organizations.
<PAGE>
6. Compensation. For the services provided and the expenses borne by the
Adviser pursuant to this Agreement, the Fund will pay to the Adviser a fee at an
annual rate on the Money Market Series of .40% of the first $250 million of the
average daily net assets of the Series, .35% of the next $250 million of the
average daily net assets of the series, and .30% of the average daily net assets
of the series in excess of $500 million; on the Managed Bond Series, High Yield
Bond Series, Government Securities Series, Growth Series, Equity Income Series,
and Multi-Strategy Series of .50% of the first $250 million of the average daily
net assets of each of the series, .45% of the next $250 million of the average
daily net assets of each of the Series, and .40% of the average daily net assets
of each of the Series in excess of $500 million; and on the International Series
of .65% of the first $250 million of the average daily net assets of the Series,
.60% of the next $250 million of the average daily net assets of the Series, and
.55% of the average daily net assets of the Series in excess of $500
million. This fee shall be computed and accrued daily and paid monthly. The
Adviser agrees that it will reimburse a Series, up to the amount of its fees
payable under this Agreement with respect to the assets of that Series, if and
to the extent that the total expenses of such Series for such year (including
compensation payable pursuant to this Agreement, but excluding interest, taxes,
brokerage commissions, and extraordinary expenses) exceed limits applicable to
the Series in any state in which shares of the Series are then registered and
qualified for sale.
7. Sub-contracts. In rendering the services required under this Agreement, the
Adviser may, subject to the approval of the Trust, its Shareholders, and
Trustees, to the extent required under law, from time to time, employ or
associate with itself such person or persons as it believes necessary to assist
it in carrying out its obligations under this Agreement, and may contract with
such other parties as the Adviser deems appropriate to obtain information,
advisory and management services and other assistance, but any fees,
compensation or expenses to be paid to any such party shall be paid by the
Adviser, and no obligation shall be incurred on the Fund's behalf in any such
respect. Any such person contracted to provide advisory and management services
for one or more Series will be designated a "Portfolio Manager." A Portfolio
Manager may, in turn, at its own expense, employ or associate one or more
persons to assist it in cerrying out its functions. For so long as the Fund
sells its shares to a separate account of Pacific Mutual Life Insurance Company,
the Advisor shall be responsible for making inquiries and for insuring that any
Portfolio Manager, any employee thereof, any person or firm that a Portfolio
Manager has employed or with which it has associated, or any employee thereof
has not, in any material connection with the handling of Fund assets:
a) been convicted, in the last 10 years, of any felony or misdemeanor
arising out of conduct involving embezzlement, fraudulent conversion, or
misappropriation of funds or securities, or involving violations of sections
1341, 1342, or 1343 of Title 18, United States Code; or
(b) been found by any state regulatory authority, within the last 10
years, to have violated or to have acknowledged violation of any provision of
any state insurance law involving fraud, deceit or knowing misrepresentation; or
(c) been found by any federal or state regulatory authorities, within the
last 10 years, to have violated or to have acknowledged violation of any
provision of federal or state securities laws involving fraud, deceit or knowing
misrepresentation.
<PAGE>
8. Liability of the Adviser. The Adviser may rely on information reasonably
believed by it to be accurate and reliable. Except as may otherwise be required
by the 1940 Act or the rules thereunder, neither the Adviser nor its
stockholders, officers, directors, employees or agents shall be subject to any
liability for, or any damages, expenses or losses incurred in connection with,
any act or omission connected with or arising out of any investment advisory
services rendered under this Agreement, except by reason of willful misfeasance,
bad faith or gross negligence in performance of the Adviser's duties or by
reason of reckless disregard of the Adviser's investment advisory or other
obligations and duties under this Agreement.
9. Continuation and Termination. This Agreement shall take effect on the
effective date of the Registration Statement, and shall continue in effect,
unless sooner terminated as provided herein, for two years from such date and
shall continue from year to year thereafter with respect to each Series so long
as each such continuance is specifically approved at least annually (i) by the
vote of a majority of the Board of Trustees of the Fund, or (ii) by vote of a
majority of the outstanding voting shares of the Fund, and provided continuance
is also approved by the vote of a majority of the Board of Trustees of the Fund
who are not parties to this Agreement or "interested persons" (as defined in the
1940 Act) of the Fund or the Adviser, cast in person at a meeting called for the
purpose of voting on such approval. This Agreement may be not amended in any
material respect without a majority vote of the outstanding voting shares (as
defined in the 1940 Act).
However, any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 1940 Act) of a Series shall be effective
to continue this Agreement with respect to such Series notwithstanding (A) that
this Agreement has not been approved by the holders of a majority of the
outstanding shares of any other Series or (B) that this Agreement has not been
approved by the vote of a majority of the outstanding shares of the Fund, unless
such approval shall be required by any other applicable law or otherwise. This
Agreement may be terminated by the Fund at any time for any reason, without the
payment of any penalty, by vote of a majority of the entire Board of Trustees of
the Fund or by a vote of a majority of the outstanding voting shares of the
Fund, or with respect to a Series, by vote of a majority of the outstanding
voting shares of such
Series, on 60 days' written notice to the Adviser, or by the Adviser at any
time, without the payment of any penalty, on 90 days' written notice to the
Fund. In the event of termination for any reason, all records shall promptly be
returned to the Fund, free from any claim or retention of rights by the Advisor.
This Agreement will automatically and immediately terminate in the event of its
assignment (as defined in the 1940 Act).
Adviser agrees that it will keep confidential and not disclose or use any
records of or information in its possession relating to the Fund obtained
pursuant to this Agreement in any manner whatsoever except as expressly
authorized in this Agreement, and will keep confidential any information
obtained pursuant to the investment advisory relationship, and disclose such
information only if the Fund has authorized such disclosure, or if such
disclosure is expressly required by federal or state regulatory authorities.
10. Control. Notwithstanding any other provision of this Agreement, it is
understood and agreed that the Fund shall at all times retain the ultimate
responsibility for and control of all investments made pursuant to this
Agreement and reserve the right to direct, approve or disapprove any action
<PAGE>
hereunder taken on its behalf by the Adviser.
11. Independent Contractor. The Adviser shall for all purposes herein be
deemed to be an independent contractor and shall, unless otherwise expressly
provided herein or authorized by the Board of Trustees of the Fund from time to
time, have no authority to act for or represent the Fund in any way or otherwise
be deemed its agent.
12. Use of Name. It is understood that the name "Pacific", "Pacific Mutual",
"Pacific Select" or any derivative thereof or logo associated with that name is
the valuable property of the Adviser and its affiliates, and that the Fund
and/or the Series have the right to use such name (or derivative or logo) only
so long as this Agreement shall continue with respect to such Fund and/or
Series. Upon termination of this Agreement the Fund (or Series) shall forthwith
cease to use such name (or derivative or logo) and, in the case of the Fund,
shall promptly amend its Agreement and Declaration of Trust to change its name.
13. Notices. Notices of any kind to be given to the Adviser by the Fund shall
be in writing and shall be duly given if mailed or delivered to the Adviser at
700 Newport Center Drive, Newport Beach, California 92660 or at such other
address or to such individual as shall be specified by the Adviser to the Fund.
Notices of any kind to be given to the Fund by the Adviser shall be in writing
and shall be duly given if mailed or delivered to 700 Newport Center Drive,
Newport Beach, California, 92660 or at such other address or to such individual
as shall be specified by the Fund to the Adviser.
14. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original.
15. To the extent permitted, this Agreement may not be assigned by either party
without the prior written consent of the other party.
16. (a) Applicable Law. This Agreement shall be governed by the laws of
California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Investment Advisers Act of 1940, any rule or
order of the Securities and Exchange Commission thereunder or any other
applicable law or regulation of the United States.
(b) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby and, to this extent, the provisions of this
Agreement shall be deemed to be severable.
(c) Nothing herein shall be construed as constituting the Adviser an agent
of the Fund or the Series.
17. Fund Obligation. A copy of the Fund's Agreement and Declaration of Trust
is on file with the Secretary of the Commonwealth of Massachusetts and notice is
hereby given that the Agreement has been executed on behalf of the Fund by a
Trustee of the Fund in her capacity as trustee and not individually. The
obligations of this Agreement shall only be binding upon the assets and property
of the Fund and shall not be binding upon any trustee, officer or shareholder of
the Fund
<PAGE>
individually.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below on the day and year first above
written.
PACIFIC SELECT FUND
By: /s/ THOMAS C. SUTTON
President
PACIFIC MUTUAL LIFE INSURANCE COMPANY
By: /s/ WILLIAM CVENGROS
Executive Vice President
<PAGE>
ADDENDUM TO ADVISORY AGREEMENT
------------------------------
The Advisory Agreement, made the 9th day of November, 1987, and
subsequently amended on January 17, 1989, between the PACIFIC SELECT FUND, (the
"Fund") a Massachusetts business trust, and PACIFIC MUTUAL LIFE INSURANCE
COMPANY (the "Adviser"), a corporation organized under the laws of California,
(the "Agreement") is hereby amended by the addition of the provisions set forth
in this Addendum to the Agreement.
WITNESSETH:
WHEREAS, the Fund is authorized to issue an unlimited number of shares of
beneficial interest ("Beneficial Interest") in separate Series with, such series
representing interests in a separate portfolio of securities and other assets;
and
WHEREAS, the Fund currently consists of eight series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
and International Series; and
WHEREAS, the Fund intends to establish an additional Series to be
designated as the Equity Index Series; and
WHEREAS, the Fund desires to appoint the Adviser as manager and investment
adviser to the Equity Index Series under the provisions set forth in the
Agreement and in this Addendum to the Agreement; and
WHEREAS, the Adviser is willing to accept such appointment;
NOW THEREFORE, in consideration of the mutual promises and covenants
contained in this Addendum, it is agreed between the parties hereto as follows:
1. In addition to its responsibilities as specified in the Agreement, the
Fund hereby appoints the Adviser to act as manager and investment adviser with
respect to the Equity Index Series which, together with all other Series
previously established, shall each be a Series under the Agreement as provided
in paragraph one (1), subject to the terms and conditions as specified in the
Agreement, including paragraph six (6), "Compensation," as amended
------------
<PAGE>
by this Addendum.
2. Section six (6) ("Compensation") of the Agreement is amended by adding
------------
the following underscored language immediately after the second semicolon in the
first sentence of that paragraph six (6):
"On the Equity Index Series of .24% of the first $100 million of
the average dialy net assets of the Series, .20% of the next $100 million
of the average daily net assets of the Series, and .15% of the average
daily net assets of the Series in excess of $200 million."
This Addendum shall take effect as of the date of its execution.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed on the date indicated.
PACIFIC SELECT FUND
/s/ TC SUTTON
Date: 1/17/89 By: Thomas C. Sutton
President
PACIFIC MUTUAL LIFE
INSURANCE COMPANY
/s/ WILLIAM D. CVENGROS
Date: 1/17/89 By: William D. Cvengros
Executive Vice President
<PAGE>
ADDENDUM TO ADVISORY AGREEMENT
------------------------------
The Advisory Agreement, made the 9th day of November, 1987, and
subsequently amended on January 17, 1989, between the PACIFIC SELECT FUND, (the
"Fund") a Massachusetts business trust, and PACIFIC MUTUAL LIFE INSURANCE
COMPANY (the "Adviser"), a corporation organized under the laws of California,
(the "Agreement") is hereby amended by the addition of the provisions set forth
in this Addendum to the Agreement ("Addendum"), which is made this 4th day of
January, 1994.
WITNESSETH:
WHEREAS, the Fund is authorized to issue an unlimited number of shares of
beneficial interest ("Beneficial Interest") in separate Series with each such
series representing interests in a separate portfolio of securities and other
assets; and
WHEREAS, the Fund currently consists of nine series designated as the Money
Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series and Equity Index Series; and
WHEREAS, the Fund intends to establish one additional Series to be
designated as the Growth LT Series; and
WHEREAS, the Fund desires to appoint the Adviser as manager and investment
adviser to the Growth LT Series under the provisions set forth in the Agreement
and in this Addendum; and
WHEREAS, the Adviser is willing to accept such appointment;
NOW THEREFORE, in consideration of the mutual promises and covenants
contained in this Addendum, it is agreed between the parties hereto as follows:
1. In addition to its responsibilities as specified in the Agreement, the
Fund hereby appoints the Adviser to act as manager and investment adviser with
respect to the Growth LT Series which, in addition to all other Series
previously established, shall be deemed one of the Series under the Agreement,
subject to the terms and conditions as specified in the Agreement, including
section six (6), "Compensation," as amended by this Addendum.
------------
2. Section six (6) ("Compensation") of the Agreement is amended by
------------
replacing the first paragraph with the following language:
<PAGE>
"6. Compensation. For the services provided and the expenses borne by
------------
the Adviser pursuant to this Agreement, the Fund will pay to the Adviser a
fee at an annual rate on the Money Market Series of .40% of the first $250
million of the average daily net assets of the Series, .35% of the next
$250 million of the average daily net assets of the Series, and .30% of the
average daily net assets of the Series in excess of $500 million; on the
Managed Bond, High Yield Bond, and Government Securities Series of .60% of
the average daily net assets of the Series; on the Growth, Equity Income,
and Multi-Strategy Series of .65% of the average daily net assets of the
Series; on the Growth LT Series of .75% of the average daily net assets of
the Series; on the International Series of .85% of the average daily net
assets of the Series; and on the Equity Index Series of .25% of the first
$100 million of the average daily net assets of the Series, .20% of the
next $100 million of the average daily net assets of the Series, and .15%
of the average daily net assets of the Series in excess of $200 million.
This fee shall be computed and accrued daily and paid monthly."
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed by their officers designated below on the date written above.
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ TC SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC MUTUAL LIFE
INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ WILLIAM CVENGROS
Name: Diane N. Ledger Name: William D. Cvengros
Title: Assistant Vice President Title: Chief Investment Officer
Attest: /s/DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: Chief Financial Officer
<PAGE>
ADDENDUM TO ADVISORY AGREEMENT
------------------------------
The Advisory Agreement, made the 9th day of November, 1987, and
subsequently amended on January 17, 1989, between the PACIFIC SELECT FUND, (the
"Fund") a Massachusetts business trust, and PACIFIC MUTUAL LIFE INSURANCE
COMPANY (the "Adviser"), a corporation organized under the laws of California,
(the "Agreement") is hereby amended by the addition of the provisions set forth
in this Addendum to the Agreement ("Addendum"), which is made this 15th day of
August, 1994.
WITNESSETH:
WHEREAS, the Fund is authorized to issue an unlimited number of shares of
beneficial interest ("Beneficial Interest") in separate Series with each such
series representing interests in a separate portfolio of securities and other
assets; and
WHEREAS, the Fund currently consists of ten series designated as the Money
Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series, Equity Index Series and Growth LT Series; and
WHEREAS, the Fund intends to establish two additional Series to be
designated as the Equity Series and the Bond and Income Series; and
WHEREAS, the Fund desires to appoint the Adviser as manager and investment
adviser to the Equity Series and Bond and Income Series under the provisions set
forth in the Agreement and in this Addendum; and
WHEREAS, the Adviser is willing to accept such appointment;
NOW THEREFORE, in consideration of the mutual promises and covenants
contained in this Addendum, it is agreed between the parties hereto as follows:
-2-
<PAGE>
1. In addition to its responsibilities as specified in the Agreement, the
Fund hereby appoints the Adviser to act as manager and investment adviser with
respect to the Equity Series and Bond and Income Series which, in addition to
all other Series previously established, shall each be
deemed one of the Series under the Agreement, subject to the terms and
conditions as specified in the Agreement, including section six (6),
"Compensation," as amended by this Addendum.
- -------------
2. Section six (6) ("Compensation") of the Agreement is amended by
------------
replacing the first paragraph with the following language:
"6. Compensation. For the services provided and the expenses
------------
borne by the Adviser pursuant to this Agreement, the Fund will pay to the
Adviser a fee at an annual rate on the Money Market Series of .40% of the
first $250 million of the average daily net assets of the Series, .35% of
the next $250 million of the average daily net assets of the Series, and
.30% of the average daily net assets of the Series in excess of $500
million; on the Managed Bond, High Yield Bond, Government Securities, and
Bond and Income Series of .60% of the average daily net assets of the
Series; on the Growth, Equity Income, Equity, and Multi-Strategy Series of
.65% of the average daily net assets of the Series; on the Growth LT Series
of .75% of the average daily net assets of the Series; on the International
Series of .85% of the average daily net assets of the Series; and on the
Equity Index Series of .25% of the first $100 million of the average daily
net assets of the Series, .20% of the next $100 million of the average
daily net assets of the Series, and .15% of the average daily net assets of
the Series in excess of
-3-
<PAGE>
$200 million. This fee shall be computed and accrued daily and paid
monthly."
-4-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed by their officers designated below on the date written above.
PACIFIC SELECT FUND
ATTEST: /s/ AUDREY L. MILFS By: /s/ TC SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC MUTUAL LIFE
INSURANCE COMPANY
ATTEST: /s/ DIANE N. LEDGER By: /s/ WILLIAM D. CVENGROS
Name: Diane N. Ledger Name: William D. Cvengros
Title: Assistant Vice President Title: Chief Investment Officer
ATTEST: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: Chief Financial Officer
-5-
<PAGE>
EXHIBIT 99.5(b)
Portfolio Management Agreement - Capital Guardian Trust Company
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this 12th day of November, 1987 among Pacific Mutual Life
Insurance Company, a California Company ("Pacific Mutual"), Capital Guardian
Trust Company, a California Corporation ("Capital Guardian"), and Pacific Select
Fund, a Massachusetts Business Trust (the "Fund").
WHEREAS, Pacific Select Fund, is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company and is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series having
its own investment objective, policies and limitations;
WHEREAS, the Fund intends initially to offer shares in eight classes to be
designated as the Money Market Series, Managed Bond Series, High Yield Bond
Series, International Series, Government Securities Series, Growth Series,
Equity Income Series, and Multi-Strategy Series, (the "Initial Series");
WHEREAS, the Fund has retained Pacific Mutual to render investment management
and administrative services to the Initial Series;
WHEREAS, Pacific Mutual represents and warrants that it is a duly registered
investment adviser under the Investment Advisers Act of 1940 ("Advisers Act"),
as amended;
WHEREAS, Capital Guardian represents and warrants that it is a "bank" as that
term is defined in the 1940 Act and the Advisers Act; and
WHEREAS, Pacific Mutual and the Fund desire to retain Capital Guardian to
furnish portfolio management services to the Growth Series, Equity Income Series
and Multi-Strategy Series in connection with Pacific Mutual's investment
management activities on behalf of the Series, and Capital Guardian is willing
to furnish such services to Pacific Mutual and the Fund;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between Pacific Mutual, Capital Guardian and the Fund as
follows:
1. Appointment. Pacific Mutual and the Fund hereby appoint Capital Guardian to
act as Portfolio Manager to the Growth Series, Equity Income Series and Multi-
Strategy Series, (the "Series"), for the periods and on the terms set forth in
this Agreement. Capital Guardian accepts such appointment and agrees to furnish
the services herein set forth, for the compensation herein provided.
In the event the Fund designates one or more classes other than the Series with
respect to which Pacific Mutual and the Fund desire to retain Capital Guardian
to render portfolio management services hereunder, they shall notify Capital
Guardian in writing. If Capital Guardian is willing to render such services, it
shall notify Pacific Mutual and the Fund in writing, whereupon such class shall
become a Series hereunder, and be subject to this Agreement.
<PAGE>
2. Portfolio Management Duties. Subject to the supervision of Pacific Mutual
and the Fund's Board of Trustees, Capital Guardian will provide a continuous
investment program for the Series' portfolios, including investment research and
management with respect to all securities and investments and cash equivalents
in the portfolios. Capital Guardian will provide the services under this
Agreement in accordance with the Series' investment objectives, policies and
restrictions as stated in their registration statement filed with the Securities
and Exchange Commission ("SEC"), as amended. Capital Guardian further agrees
that it will:
(a) conform to and comply with all applicable rules and regulations of the 1940
Act, all other applicable federal and state laws and regulations and with any
applicable procedures adopted by the Fund's Board of Trustees;
(b) place orders pursuant to its investment determinations for the Series either
directly with the issuer or with any broker or dealer. In placing orders with
brokers and dealers, Capital Guardian will attempt to obtain the best net price
and the most favorable execution of its orders. Consistent with this
obligation, when the execution and price offered by two or more brokers or
dealers are comparable, Capital Guardian may, in its discretion, purchase and
sell portfolio securities to and from brokers and dealers who provide it with
research advice and other services of lawful assistance to Capital Guardian in
serving the Series as Portfolio Manager;
(c) on occasions when the Capital Guardian deems the purchase or sale of a
security to be in the best interest of the Fund as well as its other clients,
Capital Guardian may, to the extent permitted by applicable laws and
regulations, but shall not be obligated to, aggregate the securities to be so
sold or purchased with those of its other clients where such aggregation is not
inconsistent with the policies set forth in the Registration Statement. In such
event, allocation of the securities so purchased or sold will be made by Capital
Guardian in the manner it considers to be the most equitable and consistent with
its fiduciary obligations to the Fund and to such other clients. Securities so
allocated shall be delivered in proportions to the consideration paid. The
expenses incurred in the transaction shall be allocated pro rata.
(d) in connection with the purchase and sale of securities of each Series,
Capital Guardian will arrange for the transmission to custodian for the Fund on
a daily basis, such confirmation, trade tickets and other documents as may be
necessary to enable them to perform their administrative responsibilities with
respect to the Series. With respect to portfolio securities to be purchased or
sold through the Depository Trust Company, Capital Guardian will arrange for the
automatic transmission of the confirmation of such trades to the Fund's
custodian.
(e) Capital Guardian will make available to Pacific Mutual and the Fund promptly
upon their request all its investment records and ledgers to assist Pacific
Mutual and the Fund in their compliance with respect to the Series' securities
transactions as required by the 1940 Act and the Investment Advisers Act of
1940, as well as other applicable laws. Capital Guardian will furnish the
Fund's Board of Trustees with respect to the Series such periodic and special
reports as Pacific Mutual and the Trustees may reasonably request. Capital
Guardian will furnish to regulatory authorities any information or reports in
connection with such services which may be requested in order to ascertain
whether the operations of the Fund are being conducted in a manner consistent
with applicable laws
<PAGE>
and regulations.
(f) Capital Guardian will not disclose or use any records or information
obtained pursuant to this Agreement in any manner whatsoever except as expressly
authorized in this Agreement, and will keep confidential any information
obtained pursuant this service relationship, and disclose such information only
if the Board of Trustees of the Fund has authorized such disclosure, or if such
disclosure is expressly required by applicable federal or state regulatory
authorities.
(g) In rendering the services required under this Agreement, Capital Guardian
may, from time to time, employ or associate with itself such person or persons
as it believes necessary to assist it in carrying out its obligations under this
Agreement, subject to approval by a majority of the Fund's Board of Trustees and
a majority of Trustees who are not parties to any agreement or contract with
such person or persons and who are not "interested persons," as defined in the
1940 Act, of the Fund, Capital Guardian, or any such person or persons, and to
approval by the vote of a majority of the outstanding voting securities of the
Fund to the extent required by the 1940 Act. Capital Guardian shall be
responsible for making inquiries and for insuring that any employee of Capital
Guardian, any person or firm that Capital Guardian has employed or with which it
has associated, or any employee thereof has not, in any material connection with
the handling of Fund assets:
(a) been convicted, in the last 10 years, of any felony or misdemeanor arising
out of conduct involving embezzlement, fraudulent conversion, or
misappropriation of funds or securities, or involving violations of sections
1341, 1342, or 1343 of Title 18, United States Code; or
(b) been found by any state regulatory authority, within the last 10 years, to
have violated or to have acknowledged violation of any provision of any state
insurance law involving fraud, deceit or knowing misrepresentation; or
(c) been found by any federal or state regulatory authorities, within the last
10 years, to have violated or to have acknowledged violation of any provision of
federal or state securities laws involving fraud, deceit or knowing
misrepresentation.
3. Expenses. During the term of this Agreement, Capital Guardian will pay all
expenses incurred by it, its staff and their activities, in connection with its
portfolio management under this Agreement. This does not include costs payable
by the Fund, the Custodian or Pacific Mutual.
4. Compensation. For the services provided, Pacific Mutual will pay Capital
Guardian a fee, payable monthly, based on the aggregate average daily net assets
of the Growth Series, Equity Income Series and Multi-Strategy Series, at the
annual rate of .50% of the aggregate average daily net assets of each Series up
to $30 million, .40% of aggregate average daily net assets of each Series on the
next $30 million and .35% of each Series' aggregate average daily net assets
thereafter.
5. Books and Records. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, Capital Guardian hereby agrees that all records which it maintains
for the Series are the property of the Fund and further agrees to surrender
promptly to the Fund any of such records upon the Fund's request. Capital
Guardian further agrees to preserve for the periods prescribed by Rule 31a-2
under
<PAGE>
the 1940 Act the records required to be maintained by Rule 31a-1 under the 1940
Act and to preserve the records required by Rule 204-2 under the Investment
Advisers Act of 1940 ("Advisers Act") for the period specified in the Rule.
6. Indemnification. Capital Guardian agrees to indemnify and hold harmless,
Pacific Mutual, any affiliated person within the meaning of Section 2(a)(3) of
the 1940 Act ("affiliated person") of Pacific Mutual and each person, if any
who, within the meaning of Section 15 of the Securities Act of 1933 (the "1933
Act"), controls ("controlling person") Pacific Mutual against any and all
losses, claims, damages, liabilities or litigation (including legal and other
expenses), to which Pacific Mutual or such affiliated person or controlling
person may become subject under the 1933 Act, 1940 Act, the Advisers Act, under
any other statute, at common law or otherwise, arising out of Capital Guardian's
responsibilities as Portfolio Manager of the Fund which (1) may be based upon
any wrongful act or omission by Capital Guardian, any of its employees or
representatives or any affiliate of or any person acting on behalf of Capital
Guardian, or (2) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration statement or prospectus
covering the shares of the Fund or any Series or any amendment thereof or any
supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if such a statement or omission was made in reliance
upon written information furnished to Pacific Mutual, the Fund or any affiliated
person of the Fund by Capital Guardian or any affiliated person of Capital
Guardian; provided, however, that in no case is Capital Guardian's indemnity in
favor of Pacific Mutual or any affiliated person or controlling person of
Pacific Mutual deemed to protect such person against any liability to which any
such person would otherwise be subject by reason of willful misfeasance, bad
faith or gross negligence in the performance of his duties or by reason of his
reckless disregard of obligation and duties under this Agreement.
Pacific Mutual agrees to indemnify and hold harmless Capital Guardian, any
affiliated person within the meaning of Section 2(a)(3) of the 1940 Act
("affiliated person") of Capital Guardian and each person, if any, who, within
the meaning of Section 15 of the 1933 Act controls ("controlling person")
Capital Guardian against any and all losses, claims, damages, liabilities or
litigation (including legal and other expenses) to which Capital Guardian or
such affiliated person or controlling person may become subject under the 1933
Act, the 1940 Act, the Advisers Act, under any other statute, at common law or
otherwise, arising out of Pacific Mutual's responsibilities as Investment
Adviser of the Fund which (1) may be based upon any wrongful act or omission by
Pacific Mutual, any of its employees or representatives or any affiliate of or
any person acting on behalf of Pacific Mutual or (2) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering shares of the Fund or any Series
or any amendment thereof or any supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading unless such statement or
omission was made in reliance upon written information furnished to Pacific
Mutual or any affiliated person of Pacific Mutual by Capital Guardian or any
affiliated person of Capital Guardian; provided however, that in no case is the
indemnity of Pacific Mutual in favor of Capital Guardian, or any affiliated
person or controlling person of Capital Guardian deemed to protect such person
against any liability to which any such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of his duties or by reason of his
<PAGE>
reckless disregard of obligations and duties under this Agreement.
Except as may otherwise be required by the 1940 Act or the rules thereunder, the
Fund agrees not to hold Capital Guardian, any affiliated person within the
meaning of Section 2(a)(3) of the 1940 Act of Capital Guardian and each person,
if any, who, within the meaning of Section 15 of the 1933 Act controls Capital
Guardian liable, or subject to any damages, expenses or losses, in connection
with any act or omission connected with or arising out of any investment
advisory services rendered under this Agreement, except by reason of willful
misfeasance, bad faith or gross negligence in the performance of Capital
Guardian's duties or by reason of reckless disregard of Capital Guardian's
obligations and duties under this Agreement.
7. Control. Notwithstanding any other provision of the Agreement, it is
understood and agreed that Pacific Select Fund shall at all times retain the
ultimate responsibility for and control of all functions performed pursuant to
this Agreement and reserve the right to direct, approve or disapprove any action
hereunder taken on their behalf by Capital Guardian.
8. Services Not Exclusive. It is understood that the services of Capital
Guardian are not exclusive, and nothing in this Agreement shall prevent Capital
Guardian from providing similar services to other investment companies (whether
or not their investment objectives and policies are similar to those of the
Series) or from engaging in other activities.
9. Duration and Termination. This Agreement shall become effective on the
effective date of the Fund's Registration Statement. Unless terminated as
provided herein, the Agreement shall remain in full force and effect for two
years from such date and continue on an annual basis with respect to each Series
unless terminated in accordance with the following sentence; provided that such
annual continuance is specifically approved each year by (a) the vote of a
majority of the entire Board of Trustees of the Fund, or by the vote of a
majority of the outstanding voting securities of each Series (as defined in the
1940 Act), and (b) the vote of a majority of those Trustees who are not parties
to this Agreement or interested persons (as such term is defined in the 1940
Act) of any such party to this Agreement cast in person at a meeting called for
the purpose of voting on such approval. In the event this Agreement is not
approved in the manner described in the preceding sentence, the paragraph
numbered six (6), of this Agreement shall remain in effect as well as any
applicable provision of this paragraph numbered nine (9) and Capital Guardian
shall not provide any services for the account or receive any fees on account of
such Series that fail to so approve of this Agreement. Notwithstanding the
foregoing, this Agreement may be terminated: (a) by Pacific Mutual at any time
without penalty, upon sixty (60) days' written notice to Capital Guardian and
the Fund (b) at any time without payment of any penalty by the Fund, upon the
vote of a majority of the Fund's Board of Trustees or a majority of the
outstanding voting securities of each Series, upon sixty (60) days' written
notice to Capital Guardian, or (c) by Capital Guardian at any time without
penalty by Capital Guardian, upon sixty (60) days' written notice to Pacific
Mutual and the Fund. In the event of termination for any reason, all records
shall promptly be returned to Pacific Mutual or the Fund, free from any claim or
retention of rights by Capital Guardian: the Agreement shall automatically
terminate in the event of its assignment (as such term is defined in the 1940
Act).
10. Amendments. No provision of this Agreement may be changed, waived,
discharged or
<PAGE>
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought and no amendment of this Agreement shall be effective until approved by
an affirmative vote of (i) the holders of a majority of the outstanding voting
securities of the Series, and (ii) the Trustees of the Fund, including a
majority of the Trustees of the Fund who are not interested persons of any party
to this Agreement, cast in person at a meeting called for the purpose of voting
on such approval, if such approval is required by applicable law.
11. Use of Name. It is understood that the name Pacific Select or any
derivative thereof or logo associated with that name is the valuable property of
Pacific Mutual and its affiliates, and that the Fund and/or the Series have the
right to use such name (or derivative or logo) only so long as Pacific Mutual is
Investment Manager to the Fund and/or the Series. Upon termination of the
Investment Management Agreement between the Fund (or Series) and Pacific Mutual,
the Fund (or Series) shall forthwith cease to use such name (or derivative or
logo) and, in the case of the Fund, shall promptly amend its Agreement and
Declaration of Trust to change its name.
It is understood that the name Capital, Capital Guardian Trust Company or any
derivative thereof or logo associated with that name is the valuable property of
Capital Guardian and its affiliates and that the Fund and/or the Series have the
right to use such name (or derivative or logo) in offering materials of the Fund
so long as Capital Guardian is Portfolio Manager to the Fund and/or the Series.
Upon termination of the Portfolio Management Agreement between the Fund (or
Series), Pacific Mutual, and Capital Guardian, the Fund (or Series) shall
forthwith cease to use such name (or derivative or logo).
12. Miscellaneous
a. This Agreement shall be governed by the laws of the State of California,
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Advisers Act or rules or orders of the SEC thereunder.
b. The captions of this Agreement are included for convenience only and in no
way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
c. To the extent permitted under Section 9 of the Agreement this Agreement may
not be assigned by any party without the prior written consent of the other
parties.
d. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby, and to this extent, the provisions of this Agreement shall
be deemed to be severable.
e. Nothing herein shall be construed as constituting Capital Guardian as an
agent of the Fund or Pacific Mutual.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
<PAGE>
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Date: 11-20-87 By /s/ WILLIAM D. CVENGROS
Executive Vice President
CAPITAL GUARDIAN TRUST COMPANY
Date: 11-20-87 By /s/ JAMES F. ROTHENBERG
Executive Vice President & Treasurer
PACIFIC SELECT FUND
Date: 11-20-87 By /s/ TC SUTTON
President
<PAGE>
CAPITAL GUARDIAN TRUST COMPANY
333 South Hope Street, Los Angeles, California 90071 - Telephone (213) 486-9200
- - Telex 67-3320
September 24, 1993
Mr. Arthur M. Kesselhaut
Senior Executive Vice President
Pacific Mutual Life Insurance Company
700 Newport Center Drive
Newport Beach, California 92660
Dear Mr. Kesselhaut:
This will confirm your telephone conversation with Paul Haaga as follows:
1. Capital Guardian Trust Company ("CGTC") hereby tenders its resignation
as Portfolio Manager for the Equity Income Series and the Multi-
Strategy Series of Pacific Select Fund, effective as of the close of
business on December 31, 1993.
2. CGTC will continue to serve as Portfolio Manager for the Growth Series
of Pacific Select Fund, subject to the understanding reflected in the
following paragraphs as well as, of course, the terms of the Portfolio
Management Agreement and the requirements of the Investment Company Act
of 1940 relating to termination and annual renewal of investment
advisory contracts.
3. Assets underlying variable annuity contracts may continue to be
invested in the Growth Series after December 31, 1993 only if the
contracts were entered into on or before that date. This can include
assets exchanged from other Series of Pacific Select Fund as well as
assets representing additional investments in the qualifying contracts.
4. Assets underlying variable life insurance contracts may continue to be
invested in the Growth Series, even if such contracts are entered into
after December 31, 1993.
The net effect of our understanding is that CGTC will not manage the assets
underlying any variable annuity contracts offered by Pacific Mutual Life
Insurance Company or its affiliates that are entered into after December 31,
1993.
We appreciate your cooperation and will be pleased to assist in the
transition to new Portfolio Managers for the Equity Income Series and the Multi-
Strategy Series.
Sincerely,
/s/ JAMES F. ROTHENBERG
James F. Rothenberg
San Francisco Office: Four Embarcadero Center, Suite 1800, San Francisco,
California 94111-4125 -Telephone (415) 421-0985
New York Office: 630 Fifth Avenue, 36th Floor, New York, New York 10111 -
Telephone (212) 581-5000
Geneva Office: 3 Place des Bergues, 1201 Geneva, Switzerland
<PAGE>
EXHIBIT 99.5(c)
Portfolio Management Agreement - Bankers Trust Company
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this 17th day of January, 1989 among Pacific Mutual Life
Insurance Company, a California Company ("Pacific Mutual"), Bankers Trust
Company, ("BTC") and Pacific Select Fund, a Massachusetts business trust (the
"Fund").
WHEREAS, Pacific Select Fund, is registered under the Investment Company Act of
1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company and is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series having
its own investment objective, policies and limitations;
WHEREAS, the Fund offers shares in nine series designated as the Money Market
Series, Managed Bond Series, High Yield Bond Series, International Series,
Government Securities Series, Growth Series, Equity Income Series, Equity Index
Series and Multi-Strategy Series, (the "Nine Series");
WHEREAS, the Fund has retained Pacific Mutual to render investment management
and administrative services to the Nine Series;
WHEREAS, Pacific Mutual represents and warrants that it is a duly registered
investment adviser under the Investment Advisers Act of 1940 ("Advisers Act"),
as amended;
WHEREAS, BTC represents and warrants that it is a bank as that term is defined
in the 1940 Act and the Advisers Act; and
WHEREAS, Pacific Mutual and the Fund desire to retain BTC to furnish portfolio
management services to the Equity Index Series in connection with Pacific
Mutual's investment management activities on behalf of the Series, and BTC is
willing to furnish such services to Pacific Mutual and the Fund;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between Pacific Mutual, BTC and the Fund as follows:
1. APPOINTMENT. Pacific Mutual and the Fund hereby appoint BTC to act as
Portfolio Manager to the Equity Index Series (the "Series"), for the periods and
on the terms set forth in this Agreement. BTC accepts such appointment and
agrees to furnish the services herein set forth, for the compensation herein
provided.
In the event the Fund designates one or more classes other than the Series with
respect to which Pacific Mutual and the Fund desire to retain BTC to render
portfolio management services hereunder, they shall notify BTC in writing. If
BTC is willing to render such services, it shall notify Pacific Mutual and the
Fund in writing, whereupon such class shall become a Series hereunder, and be
subject to this Agreement.
2. PORTFOLIO MANAGEMENT DUTIES. Subject to the supervision of Pacific Mutual
and
<PAGE>
the Fund's Board of Trustees, BTC will provide a continuous investment program
for the Series' portfolios, including investment research and management with
respect to all securities and investments and cash equivalents in the
portfolios. BTC will determine from time to time what securities and other
investments will be purchased, retained or sold by the Series. BTC will provide
the services under this Agreement in accordance with the Series' investment
objectives, policies and restrictions as stated in the Fund's registration
statement filed with the Securities and Exchange Commission ("SEC"), as amended.
BTC further agrees that it will:
(a) conform with all applicable rules and regulations of the 1940 Act, all
other applicable federal and state laws and regulations and with any
applicable procedures adopted by the Fund's Board of Trustees;
(b) place orders pursuant to its investment determinations for the Series
either directly with the issuer or with any broker or dealer. BTC is
authorized to select brokers, dealers, and futures commission merchants and
authorized to open and maintain brokerage accounts, commodities trading
accounts, and accounts for and on behalf of the Series in accordance with
procedures established by Pacific Mutual and approved by the Fund's Board
of Trustees. BTC may place orders for the Series with its affiliate, BT
Brokerage Corporation, in accordance with Section 11(a) of the Securities
Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and other applicable
laws and regulations. In placing orders with brokers, dealers, and futures
commission merchants, BTC will attempt to obtain the best net price and the
most favorable execution of its orders. Consistent with this obligation,
when the execution and price offered by two or more brokers or dealers are
comparable, BTC may, in its discretion, purchase and sell portfolio
securities to and from brokers and dealers who provide it with research
advice and other services of lawful assistance to BTC in serving the Series
as Portfolio Manager. BTC may effect transactions in futures contracts and
options thereon for the Series with its affiliate, BT Futures Corporation,
in accordance with applicable laws and regulations and with any applicable
procedures established by Pacific Mutual and approved by the Fund's Board
of Trustees;
(c) on occasions when BTC deems the purchase or sale of a security to be in the
best interest of the Fund as well as BTC's other investment advisory
clients or any of its affiliates' investment advisory clients, BTC may, to
the extent permitted by applicable laws and regulations, but shall not be
obligated to, aggregate the securities to be so sold or purchased with
those of its other clients where such aggregation is not inconsistent with
the policies set forth in the Registration Statement. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by BTC in the manner it considers
to be the most equitable and consistent with its fiduciary obligations to
the Fund and to such other clients.
(d) in connection with the purchase and sale of securities of each Series, BTC
will arrange for the transmission to the custodian and recordkeeping agent
for the Fund on a daily basis, such confirmation, trade tickets and other
documents and information, including, but not limited to, Cusip, Sedol, or
other numbers that identify securities to be purchased or sold on behalf of
the Series, as may be necessary to enable them to perform their
administrative and recordkeeping responsibilities with respect to the
Series. With respect to portfolio securities to be purchased or sold
through the Depository Trust Company, BTC will arrange for the automatic
transmission of the
<PAGE>
confirmation of such trades to the Fund's custodian.
(e) make available to Pacific Mutual and the Fund promptly upon their request
all of the Fund's investment records and ledgers as are necessary to assist
Pacific Mutual and the Fund in their compliance with respect to the Series'
securities transactions as required by the 1940 Act and the Advisers Act,
as well as other applicable laws. BTC will provide reports to the Fund's
Board of Trustees for consideration at meetings of the Board on the
investment program for the Series and the issuers and securities
represented in the Series' Portfolio, and will furnish the Fund's Board of
Trustees with respect to the Series such periodic and special reports as
Pacific Mutual and the Trustees may reasonably request. BTC will furnish
to regulatory authorities any information or reports in connection with
such services which may be requested in order to ascertain whether the
operations of the Fund are being conducted in a manner consistent with
applicable laws and regulations.
(f) not disclose or use any records or information obtained pursuant to this
Agreement in any manner whatsoever except as expressly authorized in this
Agreement or in the ordinary course of business in connection with placing
orders for the purchase and sale of securities, and will keep confidential
any information obtained pursuant to this Agreement, and disclose such
information only if (i) the Board of Trustees of the Fund has authorized
such disclosure, (ii) such disclosure is expressly required by applicable
federal or state regulatory authorities, or (iii) such information has been
made public other than by a breach of this subsection (f).
(g) monitor on a daily basis the determination by the custodian and
recordkeeping agent for the Fund of the valuation of portfolio securities
and other investments of the Series. BTC will assist the custodian and
recordkeeping agent for the Fund in determining or confirming, consistent
with the procedures and policies stated in the Registration Statement for
the Fund, the value of any portfolio securities or other assets of the
Series for which the custodian and recordkeeping agent seeks assistance
from or identifies for review by BTC.
(h) (i) use all necessary efforts to manage the Series so that it will qualify
as a regulated investment company under Subchapter M of the Internal
Revenue Code, and (ii) use all necessary efforts to manage the Series so
that it will comply with the diversification requirements of Section 817(h)
of the Internal Revenue Code and regulations issued thereunder.
(i) in rendering the services required under this Agreement, BTC may, from time
to time, employ or associate with itself such person or persons as it
believes necessary to assist it in carrying out its obligations under this
Agreement. However, BTC may not retain as subadvisors any company that
would be an "investment adviser," as that term is defined in the 1940 Act,
to the Fund unless the contract with such company is approved by a majority
of the Fund's Board of Trustees and a majority of Trustees who are not
parties to any agreement or contract with such person or persons and who
are not "interested persons," as defined in the 1940 Act, of the Fund, BTC,
or any such person or persons, and approved by the vote of a majority of
the outstanding voting securities of the Fund to the extent required by the
1940 Act.
BTC shall be responsible for making inquiries and for reasonably insuring that
any employee of
<PAGE>
BTC, any person or firm that BTC has employed or with which it has associated,
or any employee thereof, who has or will have a material connection with the
handling of Fund assets, has not, to the best of BTC's knowledge:
(i) been convicted, in the last 10 years, of any felony or misdemeanor arising
out of conduct involving embezzlement, fraudulent conversion, or
misappropriation of funds or securities, or involving violations of
sections 1341, 1342, or 1343 of Title 18, United States Code, or involving
the purchase or sale of any security; or
(ii) been found by any state regulatory authority, within the last 10 years, to
have violated or to have acknowledged violation of any provision of any
state insurance law involving fraud, deceit or knowing misrepresentation;
or
(iii) been found by any federal or state regulatory authorities, within the
last 10 years, to have violated or to have acknowledged violation of any
provision of federal or state securities laws involving fraud, deceit or knowing
misrepresentation.
3. EXPENSES. During the term of this Agreement, BTC will pay all expenses
incurred by it, its staff and their activities, in connection with its portfolio
management under this Agreement. BTC shall not be required to bear the costs
payable by the Fund, including the following expenses:
(i) Expenses of all audits by the Fund's independent public accountants;
(ii) Expenses of the Fund's transfer agent, dividend disbursing agent, and
shareholder recordkeeping services;
(iii) Expenses of the Fund's custodial services including recordkeeping
services provided by the custodian;
(iv) Expenses of maintaining the Fund's tax records;
(v) Salaries and other compensation of any of the Fund's executive officers
and employees, if any, who are not officers, directors, stockholders, or
employees of Pacific Mutual or any Portfolio Manager or an affiliate of
Pacific Mutual or any Portfolio Manager;
(vi) Taxes levied against the Fund;
(vii) Brokerage fees and commissions in connection with the purchase and sale
of portfolio securities for the Series;
(viii) Costs, including the interest expense, of borrowing money;
(ix) Costs and/or fees incident to meetings of the trust's shareholders, the
preparation and mailings of prospectuses and reports of the Fund to its
shareholders, the filing of reports with regulatory bodies, the
maintenance of the Fund's existence, and the registration of shares with
federal
<PAGE>
and state securities or insurance authorities;
(x) The Fund's legal fees, including the legal fees related to the
registration and continued qualification of the Fund's shares for sale;
(xi) Costs of printing stock certificates, if any, representing shares of the
Fund;
(xii) Trustees, fees and expenses to trustees who are not officers, employees,
or stockholders of Pacific Mutual or any Portfolio Manager or any
affiliate thereof;
(xiii) The Fund's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums;
(xiv) Association membership dues for the Fund;
(xv) Extraordinary expenses of the Fund as may arise including expenses
incurred in connection with litigation, proceedings, and other claims
(unless the Portfolio Manager is responsible for such expenses under this
Agreement), and the legal obligations of the Fund to indemnify its
Trustees, officers, employees, shareholders, distributors, and agents
with respect thereto; and
(xvi) Organizational and offering expenses.
4. COMPENSATION. For the services provided, Pacific Mutual will pay a
quarterly fee in advance to BTC, based on the net assets of the Equity Index
Series at the beginning of each calendar quarter, at the annual rate of .07% of
the first $100 million of the Series' net assets, reduced to .03% on the next
$100 million of the Series' net assets, and further reduced to .01% of the
Series' net assets over $200 million. This fee is subject to a minimum annual
fee of $20,000 (payable at the end of each calendar year), starting from the
time that BTC renders active investment management services for the assets of
the Series, and this amount shall be pro-rated for any portion of a year in
which the Agreement is not effective or the obligation to pay this minimum fee
has not commenced.
If this Agreement terminates before the end of a calendar quarter, the fee for
that quarter (as determined under this paragraph four) shall be prorated based
upon the proportion that the period from the beginning of the calendar quarter
in which the Agreement was terminated to the date of termination bears to the
full period of such quarter. The amount of such prorated fee shall be
subtracted from the full fee that Pacific Mutual paid in advance for the quarter
in which the Agreement was terminated and, subject to any minimum fee, as
provided above, the difference shall be refunded to Pacific Mutual.
5. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, BTC hereby agrees that all records which it maintains for the
Series are the property of the Fund and further agrees to surrender promptly to
the Fund any of such records upon the Fund's request, although BTC may, at its
own expense, make and retain its own copy of such records. BTC further agrees
to preserve the Series' records that are required to be maintained by Rule 31a-1
under the 1940 Act and that are not otherwise maintained by the Fund's
recordkeeping agent, for the
<PAGE>
periods prescribed by Rule 31a-2 under the 1940 Act.
6. COMPLIANCE. (a) The Portfolio Manager agrees that it shall immediately
notify Pacific Mutual and the Fund (i) in the event that the Securities and
Exchange Commission has censured the Portfolio Manager; placed limitations upon
its activities, functions or operations; or has commenced proceedings or an
investigation that may result in any of these actions, (ii) upon having a
reasonable basis for believing that the Series has ceased to qualify or might
not qualify as a regulated investment company under Subchapter M of the Internal
Revenue Code, or (iii) upon having a reasonable basis for believing that the
Series has ceased to comply with the diversification provisions of Section
817(h) of the Internal Revenue Code or the Regulations thereunder. The
Portfolio Manager further agrees to notify Pacific Mutual and the Fund
immediately of any material fact known to the Portfolio Manager respecting or
relating to the Portfolio Manager that is not contained in the Registration
Statement or prospectus for the Fund, or any amendment or supplement thereto, or
of any statement contained therein that becomes untrue in any material respect.
(b) Pacific Mutual agrees that it shall immediately notify the Portfolio
Manager (i) in the event that the Securities and Exchange Commission has
censured Pacific Mutual or the Fund; placed limitations upon either of
their activities, functions, or operations; suspended or revoked Pacific
Mutual's registration as an investment adviser; or has commenced
proceedings or an investigation that may result in any of these actions,
(ii) upon having a reasonable basis for believing that the Series has
ceased to qualify or might not qualify as a regulated investment company
under Subchapter M of the Internal Revenue Code, or (iii) upon having a
reasonable basis for believing that the Series has ceased to comply with
the diversification provisions of Section 817(h) of the Internal Revenue
Code or the regulations thereunder.
7. STANDARD OF CARE. BTC shall be responsible for the exercise of reasonable
care in carrying out its responsibilities under this Agreement and for managing
the Series in good faith and in accordance with the investment objectives,
policies and instructions provided it; provided, however that no provision of
this Agreement shall be construed to protect any trustee, director, officer,
agent or employee of the Fund, Pacific Mutual or BTC from liability by reason of
willful misfeasance, bad faith or gross negligence in the performance of such
person's duties or by reason of reckless disregard of obligations and duties
under this Agreement.
8. INDEMNIFICATION. BTC agrees to indemnify and hold harmless, Pacific Mutual,
any affiliated person within the meaning of Section 2(a)(3) of the 1940 Act
("affiliated person") of Pacific Mutual and each person, if any who, within the
meaning of Section 15 of the Securities Act of 1933 (the "1933 Act"), controls
("controlling person") Pacific Mutual against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses), to
which Pacific Mutual or such affiliated person or controlling person may become
subject under the 1933 Act, 1940 Act, the Advisers Act, under any other statute,
at common law or otherwise, arising out of BTC's responsibilities as Portfolio
Manager of the Fund which (1) may be based upon any wrongful act or omission by
BTC, any of its employees or representatives or any affiliate of or any person
acting on behalf of BTC, or (2) may be based upon any untrue statement or
alleged untrue statement of a material fact contained in a registration
statement or prospectus covering the shares of the Fund or any Series or any
amendment thereof or any supplement thereto or the omission or alleged omission
<PAGE>
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, if such a statement or omission was
made in reliance upon written information furnished to Pacific Mutual, the Fund
or any affiliated person of the Fund by BTC or any affiliated person of BTC;
provided, however, that in no case is the indemnity of BTC in favor of Pacific
Mutual or any affiliated person or controlling person of Pacific Mutual deemed
to protect such person against any liability to which any such person would
otherwise be subject by reason of willful misfeasance, bad faith or gross
negligence in the performance of his duties or by reason of his reckless
disregard of obligations and duties under this Agreement.
Pacific Mutual agrees to indemnify and hold harmless BTC, any affiliated person
within the meaning of Section 2(a)(3) of the 1940 Act ("affiliated person") of
BTC and each person, if any, who, within the meaning of Section 15 of the 1933
Act, controls ("controlling person" BTC against any and all losses, claims,
damages, liabilities or litigation (including legal and other expenses) to which
BTC or such affiliated person or controlling person may become subject under the
1933 Act, the 1940 Act, the Advisers Act, under any other statute, at common law
or otherwise, arising out of Pacific Mutual's responsibilities as Investment
Advisor of the Fund which (1) may be based upon any wrongful act or omission by
Pacific Mutual, any of its employees or representatives or any affiliate of or
any person acting on behalf of Pacific Mutual or (2) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering shares of the Fund or any Series
or any amendment thereof or any supplement thereto or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading unless such statement or
omission was made in reliance upon written information furnished to Pacific
Mutual or any affiliated person of Pacific Mutual by BTC or any affiliated
person of BTC; provided however, that in no case is the indeminity of Pacific
Mutual in favor of BTC, or any affiliated person or controlling person of BTC
deemed to protect such person against any liability to which any such person
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his duties or by reason of his reckless
disregard of obligations and duties under this Agreement.
9. CONTROL. Notwithstanding any other provision of the Agreement, it is
understood and agreed that the Fund shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve or disapprove any action
hereunder taken on its behalf by BTC.
10. SERVICES NOT EXCLUSIVE. It is understood that the services of BTC are not
exclusive, and nothing in this Agreement shall prevent BTC, or any of its
affiliates, from providing similar services to other clients, including
investment companies (whether or not their investment objectives and policies
are similar to those of the Series) or from engaging in other activities.
11. DURATION AND TERMINATION. This Agreement shall become effective on the
date of its execution. Unless terminated as provided herein, the Agreement
shall remain in full force and effect for two years from such date and continue
on an annual basis with respect to each Series unless terminated in accordance
with the following sentence; provided that such annual continuance is
specifically approved each year by (a) the vote of a majority of the entire
Board of Trustees of the Fund, or by the vote of a majority of the outstanding
voting securities of each Series (as defined in
<PAGE>
the 1940 Act), and (b) the vote of a majority of those Trustees who are not
parties to this Agreement or interested persons (as such term is defined in the
1940 Act) of any such party to this Agreement cast in person at a meeting called
for the purpose of voting on such approval. In the event this Agreement is not
approved in the manner described in the preceding sentence, the paragraph
numbered eight (8) of this Agreement shall remain in effect as well as any
applicable provision of this paragraph numbered eleven (11) and BTC shall not
provide any services for such Series or receive any fees on account of such
Series that fail to so approve of this Agreement. Notwithstanding the foregoing,
this Agreement may be terminated: (a) by Pacific Mutual at any time without
penalty, upon sixty (60) days' written notice to BTC and the Fund (b) at any
time without payment of any penalty by the Fund, upon the vote of a majority of
the Fund's Board of Trustees or a majority of the outstanding voting securities
of each Series, upon sixty (60) days' written notice to BTC, or (c) by BTC, at
any time without penalty by BTC, upon sixty (60) days' written notice to Pacific
Mutual and the Fund. In the event of termination for any reason, all records of
the Fund shall promptly be returned to Pacific Mutual or the Fund, free from any
claim or retention of rights by BTC, although BTC may, at its own expense, make
and retain its own copy of such records. The Agreement shall automatically
terminate in the event of its assignment (as such term is defined in the 1940
Act).
12. AMENDMENTS. No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the Fund,
including a majority of the Trustees of the Fund who are not interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, if such approval is required by applicable
law.
13. USE OF NAME. It is understood that the name Pacific Select or any
derivative therof or logo associated with that name is the valuable property of
Pacific Mutual and its affiliates, and that BTC has the right to use such name
(or derivative or logo) only with the approval of Pacific Mutual and only so
long as Pacific Mutual is Investment Adviser to the Fund and/or the Series.
Upon termination of the Investment Management Agreement between the Fund (or
Series) and Pacific Mutual or this agreement, BTC shall forthwith cease to use
such name (or derivative or logo) and, in the case of the Fund, shall promptly
amend its Agreement and Declaration of Trust to change its name.
It is understood that the name Bankers Trust Company or any derivative therof or
logo associated with that name is the valuable property of BTC and its
affiliates and that the Fund and/or the Series and Pacific Mutual have the right
to use such name (or derivative or logo) in offering materials of the Fund with
the approval of BTC and for so long as BTC is Portfolio Manager to the Fund
and/or the Series. Upon termination of this Agreement, the Fund (or Series) and
Pacific Mutual shall forthwith cease to use such name (or derivative or logo).
14. MISCELLANEOUS
<PAGE>
(a) This Agreement shall be governed by the laws of the State of California,
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Advisers Act or rules or orders of the SEC thereunder.
(b) The captions of this Agreement are included for convenience only and in no
way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
(c) To the extent permitted under paragraph numbered eleven (11) of this
Agreement, the Agreement may not be assigned by any party without the prior
written consent of the other parties.
(d) If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby, and to this extent, the provisions of this Agreement shall
be deemed to be severable.
(e) Nothing herein shall be construed as constituting BTC as an agent of
Pacific Mutual.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first above written.
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Date: 1-17-89 By: /s/ WILLIAM D. CVENGROS
Executive Vice President
BANKERS TRUST COMPANY
Date: 2-2-89 By: /s/ FRANK SALERNO
Vice President
PACIFIC SELECT FUND
Date: 1-17-89 By: /s/ TC SUTTON
President
<PAGE>
ADDENDUM TO THE PORTFOLIO MANAGEMENT AGREEMENT
The Portfolio Management Agreement ("Agreement") made the 17th day of January,
1989, between Pacific Mutual Life Insurance Company ("Pacific Mutual"), a life
insurance company domiciled in California, Bankers Trust Company ("BTC"), and
Pacific Select Fund (the "Fund"), a Massachusetts business trust, is hereby
amended as set forth in this Addendum to the Portfolio Management Agreement,
which is dated as of April 22, 1992.
WHEREAS, the Fund is registered with the Securities and Exchange Commission as
an open-end management investment company;
WHEREAS, the Fund offers shares in several series, one of which is designated
the Equity Index Series ("Series");
WHEREAS, pursuant to the Agreement, Pacific Mutual and the Fund have appointed
BTC to act as Portfolio Manager to the Series and BTC has accepted such
appointment;
WHEREAS, Pacific Mutual, BTC, and the Fund desire to amend Section 2(g) of the
Portfolio Management Agreement;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed among Pacific Mutual, BTC, and the Fund that Section
2(g) of the Agreement be deleted, and a new Section 2(g) be added to the
Agreement to read as follows:
(g) assist the custodian and recordkeeping agent for the Fund in determining or
confirming, consistent with the procedures and policies stated in the
Registration Statement for the Fund, the value of any portfolio securities or
other assets of the Series for which the custodian and recordkeeping agent seeks
assistance from or identifies for review by BTC, and the parties agree that to
the extent consistent with applicable law, BTC shall not bear responsibility for
the determination of value of any such portfolio securities or other assets.
This Addendum shall take effect the business day after this Addendum shall be
approved by a vote of a majority of the outstanding voting securities of the
Series at a meeting of shareholders, and approval by a vote of a majority of
outstanding voting securities of the Series of the Agreement as amended by this
Addendum shall constitute approval of the Addendum for these purposes.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed
as of the date first indicated above.
PACIFIC MUTUAL LIFE INSURANCE COMPANY
/s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON
<PAGE>
Attest Title: Chairman of the Board, Director
Title: Secretary and Chief Executive Officer
BANKERS TRUST COMPANY
/s/ ANNE KILCOYNE By: /s/ BETTY A. GOOD
Attest Title: Vice President
Title: Vice President
PACIFIC SELECT FUND
/s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON
Attest Title: President
Title: Secretary
<PAGE>
ADDENDUM II TO THE PORTFOLIO MANAGEMENT AGREEMENT
The Portfolio Management Agreement ("Agreement") made the 17th day of
January, 1989, and amended April 22, 1992, between Pacific Mutual Life Insurance
Company ("Pacific Mutual"), a life insurance company domiciled in California,
Bankers Trust Company ("BTC"), and Pacific Select Fund (the "Fund"), a
Massachusetts business trust, is hereby amended as set forth in this Addendum II
to the Portfolio Management Agreement, which is dated as of October 18, 1994.
WHEREAS, the Fund is registered with the Securities and Exchange Commission
as an open-end management investment company;
WHEREAS, the Fund offers shares in several series, one of which is
designated the Equity Index Series ("Series");
WHEREAS, pursuant to the Agreement, Pacific Mutual and the Fund have
appointed BTC to act as Portfolio Manager to the Series and BTC has accepted
such appointment;
WHEREAS, Pacific Mutual, BTC, and the Fund desire to amend Section 4 of the
Portfolio Management Agreement;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed among Pacific Mutual, BTC, and the Fund that Section 4
of the Agreement be deleted, and a new Section 4 be added to the Agreement to
read as follows:
4. Compensation. For the services provided, Pacific Mutual will pay a
------------
quarterly fee in advance to BTC, based on the net assets of the Equity Index
Series at the beginning of each calendar quarter, at the annual rate of .07% of
the first $100 million of the Series' net assets, reduced to .03% on the next
$100 million of the Series' net assets, and further reduced to .01% of the
Series' net assets over $200 million. This fee is subject to a minimum annual
fee of $50,000 for calendar year 1994, $75,000 for calendar year 1995 and
$100,000 for calendar year 1996 and each year thereafter (payable as soon as
practicable after shareholder approval for 1994, payable on the second business
day of the year for 1995 and 1996, and payable at the end of each calendar year
thereafter). These fees for services, including minimum annual fees, shall be
prorated for any portion of a year in which the Agreement is not effective;
provided, however, that there shall be no proration or reimbursement of the
minimum fees paid by Pacific Mutual to BTC for calendar years 1994, 1995 and
1996. With respect to calendar years 1994, 1995 and 1996, the minimum annual
fees paid in advance by Pacific Mutual shall reduce any payments otherwise due
in accordance with the above fee schedule.
If this Agreement terminates before the end of a calendar quarter, the
fee for that quarter (as determined under this paragraph four) shall be prorated
based upon the proportion that the period from the beginning of the calendar
quarter in which the Agreement was terminated to the date of termination bears
to the full period of such quarter. The amount of such prorated fee shall be
subtracted from the full fee that Pacific Mutual paid in advance for the quarter
in which
<PAGE>
the Agreement was terminated and, subject to any minimum fee, as provided above,
the difference shall be refunded to Pacific Mutual.
This Addendum shall take effect on the business day after this Addendum
shall be approved by a vote of a majority of the outstanding voting securities
of the Series at a meeting of shareholders, and approval by a vote of a majority
of outstanding voting securities of the Series of the Agreement as amended by
this Addendum shall constitute approval of the Addendum for these purposes.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed as of the date first indicated above.
PACIFIC MUTUAL LIFE INSURANCE
/s/AUDREY L. MILFS By: /s/THOMAS C. SUTTON
Attest Title: Chairman of the Board,
Title: Secretary Director and Chief Executive Officer
BANKERS TRUST COMPANY
/s/ MARCO VEISSID By: /s/ FRANK SALERNO
Attest Title: Managing Director
Title: Assistant Vice President
PACIFIC SELECT FUND
/s/ AUDREY L. MILFS By: /s/ THOMAS C. SUTTON
Attest Title: President
Title: Secretary
<PAGE>
EXHIBIT 99.5(d)
Portfolio Management Agreement - J.P. Morgan Investment Management Inc.
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this 16th day of December, 1993 between Pacific Mutual Life
Insurance Company ("Adviser"), a California corporation, and J.P. Morgan
Investment Management Inc. ("Portfolio Manager"), a Delaware corporation, and
Pacific Select Fund (the "Fund"), a Massachusetts Business Trust.
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end, management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of beneficial interest
("Shares") in separate series, with each such series representing interests in a
separate portfolio; and
WHEREAS, the Fund currently offers multiple series, two of which are
designated as the Equity Income Series and the Multi-Strategy Series, such
Series together with any other series subsequently established by the Fund, with
respect to which the Fund and Adviser desire to retain the Portfolio Manager to
render investment advisory services hereunder, and with respect to which the
Portfolio Manager is willing to do so, being herein collectively referred to
also as the "Series"; and
WHEREAS, the Portfolio Manager is registered with the SEC as an investment
adviser under the Investment Advisers Act of 1940 ("Advisers Act"); and
WHEREAS, the Fund has retained the Adviser to render investment advisory
services to the Series pursuant to an Advisory Agreement, as amended, and such
Agreement authorizes the Adviser to engage Portfolio Manager to discharge the
Adviser's responsibilities with respect to the investment management of the
Series, a copy of which has been provided to the Portfolio Manager and is
incorporated by reference herein; and
WHEREAS, the Fund and the Adviser desire to retain the Portfolio Manager to
furnish investment advisory services to two or more of the Series of the Fund,
and the Portfolio Manager is willing to furnish such services to such Series and
the Adviser in the manner and on the terms hereinafter set forth; and
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Fund, the Adviser, and the
Portfolio Manager as follows:
<PAGE>
1. Appointment. The Fund and the Adviser hereby appoint J.P. Morgan
-----------
Investment Management Inc. to act as Portfolio Manager to the Equity Income
Series and the Multi-Strategy Series (the "Series") for the periods and on the
terms set forth in this Agreement. The Portfolio Manager accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
In the event the Adviser wishes to retain the Portfolio Manager to render
investment advisory services to one or more series other than the Series, the
Adviser shall notify the Portfolio Manager in writing. If the Portfolio Manager
is willing to render such services, it shall notify the Fund and Adviser in
writing, whereupon such series shall become a Series hereunder, and be subject
to this Agreement.
2. Portfolio Manager Duties. Subject to the supervision of the Fund's
------------------------
Board of Trustees and the Adviser, the Portfolio Manager will provide a
continuous investment program for the Series and determine the composition of
the assets of the Series, including determination of the purchase, retention, or
sale of the securities, cash, and other investments for the Series. The
Portfolio Manager will provide investment research and analysis, which may
consist of computerized investment methodology, and will conduct a continuous
program of evaluation, investment, sales, and reinvestment of the Series' assets
by determining the securities and other investments that shall be purchased,
entered into, sold, closed, or exchanged for the Series, when these transactions
should be executed, and what portion of the assets of the Series should be held
in the various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of the Series. To the extent permitted by the investment policies of the
Series, the Portfolio Manager shall make decisions for the Series as to foreign
currency matters and make determinations as to the retention or disposition of
foreign currencies or securities or other instruments denominated in foreign
currencies, or derivative instruments based upon foreign currencies, including
forward foreign currency contracts and options and futures on foreign currencies
and shall execute and perform the same on behalf of the Series. The Portfolio
Manager will provide the services under this Agreement in accordance with the
Series' investment objective or objectives, investment policies, and investment
restrictions as stated in the Fund's Registration Statement filed on Form N-1A
with the SEC, as supplemented or amended from time to time, copies of which
shall be sent to the Portfolio Manager by the Adviser. In performing these
duties, the Portfolio Manager:
(a) Will manage the Series in accordance with any guidelines provided by
the Adviser to the Portfolio Manager in writing. The Adviser will notify the
Portfolio Manager of any amendments to the Section 817(h) of the Internal
Revenue Code and Regulations issued thereunder. In managing the Series in
accordance with these requirements, the Portfolio Manager shall be entitled to
receive and act upon advice of counsel to the Fund, counsel to the Adviser, or
counsel to the Portfolio Manager, which counsel is also reasonably acceptable to
the Adviser.
(b) Shall conform with the 1940 Act and all rules and regulations
thereunder, all other applicable federal and state laws and regulations, with
any applicable procedures adopted by the Fund's Board of Trustees, and with the
provisions of the Fund's
<PAGE>
Registration Statement filed on Form N-1A under the Securities Act of 1933 (the
"1933 Act") and the 1940 Act, as supplemented or amended from time to time.
(c) Is responsible, in connection with its responsibilities under this
Section 2, for decisions to buy and sell securities and other investments for
the Series, for broker-dealer and futures commission merchant ("FCM") selection,
and for negotiation of commission rates. The Portfolio Manager's primary
consideration in effecting a security or other transaction will be to obtain the
best execution for the Series, taking into account the factors specified in the
Prospectus and Statement of Additional Information for the Fund, as they may be
amended or supplemented from time to time. Subject to such policies as the
Board of Trustees may determine and advise the Portfolio Manager in writing and,
consistent with Section 28(e) of the Securities Exchange Act of 1934, the
Portfolio Manager shall not be deemed to have acted unlawfully or to have
breached any duty created by this Agreement or otherwise solely by reason of its
having caused the Series to pay a broker or dealer, acting as agent, for
effecting a portfolio transaction at a price in excess of the amount of
commission another broker or dealer would have charged for effecting that
transaction, if the Portfolio Manager determines in good faith that such amount
of commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or the Portfolio Manager's or its affiliates overall
responsibilities with respect to the Series and to its other clients as to which
it exercises investment discretion. To the extent consistent with these
standards, and in accordance with Section 11(a) of the Securities Exchange Act
of 1934 and Rule 11a2-2(T) thereunder, and subject to any other applicable laws
and regulations including Section 17(e) of the 1940 Act, the Portfolio Manager
is further authorized to allocate the orders placed by it on behalf of the
Series to the Portfolio Manager if it is registered as a broker or dealer with
the SEC or as a FCM with the Commodities Futures Trading Commission ("CFTC"), to
any of its affiliates that are registered as a broker or dealer with the SEC or
as a FCM with the CFTC, or to such brokers and dealers that also provide
research or statistical research and material, or other services to the Series
or the Portfolio Manager. Such allocation shall be in such amounts and
proportions as the Portfolio Manager shall determine consistent with the above
standards, and, upon request, the Portfolio Manager will report on said
allocation to the Adviser and Board of Trustees of the Fund, indicating the
brokers, dealers or FCMs to which such allocations have been made and the basis
therefor.
(d) May, on occasions when the purchase or sale of a security is deemed to
be in the best interest of a Series as well as any other investment advisory
clients, to the extent permitted by applicable laws and regulations, but shall
not be obligated to, aggregate the securities to be so sold or purchased with
those of its other clients where such aggregation is not inconsistent with the
policies set forth in the Registration Statement. In such event, allocation of
the securities so purchased or sold, as well as the expenses incurred in the
transaction, will be made by the Portfolio Manager in a manner that is fair and
equitable in the judgment of the Portfolio Manager in the exercise of its
fiduciary obligations to the Fund and to such other clients.
(e) Will, in connection with the purchase and sale of securities for the
Series, together with the Adviser, arrange for the transmission to the
custodian, and the
<PAGE>
recordkeeping agent for the Fund on a daily basis, such confirmations, trade
tickets, and other documents and information, including, but not limited to,
Cusip, Sedol, or other numbers that identify securities to be purchased or sold
on behalf of the Series, as may be reasonably necessary to enable the custodian
and recordkeeping agent to perform its administrative and recordkeeping
responsibilities with respect to the Series, and, with respect to portfolio
securities to be purchased or sold through the Depository Trust Company, will
arrange for the automatic transmission of the confirmation of such trades to the
Fund's custodian, recordkeeping agent, and, if required, the Adviser.
(f) Will assist the custodian and recordkeeping agent for the Fund in
determining or confirming, consistent with the procedures and policies stated in
the Registration Statement for the Fund, the value of any portfolio securities
or other assets of the Series for which the custodian and recordkeeping agent
seek assistance from the Portfolio Manager or identifies for review by the
Portfolio Manager.
(g) Will make available to the Fund, and the Adviser promptly upon request,
any of the Series' investment records and ledgers maintained by the Portfolio
Manager (which shall not include the records and ledgers maintained by the
custodian and recordkeeping agent for the Fund), as are necessary to assist the
Fund and the Adviser to comply with requirements of the 1940 Act and the
Investment Advisers Act of 1940, as well as other applicable laws, and will
furnish to regulatory authorities having the requisite authority any information
or reports in connection with such services which may be requested in order to
ascertain whether the operations of the Fund are being conducted in a manner
consistent with applicable laws and regulations.
(h) Will regularly report to the Fund's Board of Trustees on the investment
program for the Series and the issuers and securities represented in the Series'
portfolio, and will furnish the Fund's Board of Trustees with respect to the
Series such periodic and special reports as the Directors and the Adviser may
reasonably request.
(i) Will not disclose or use any records or information obtained pursuant
to this Agreement (excluding investment research and investment advice) in any
manner whatsoever except as expressly authorized in this Agreement or in the
ordinary course of business in connection with placing orders for the purchase
and sale of securities, and will keep confidential any information obtained
pursuant to this Agreement, and disclose such information only if the Board of
Trustees of the Fund has authorized such disclosure, or if such disclosure is
required by applicable federal or state law or regulations or regulatory
authorities having the requisite authority. The Fund and the Adviser will not
disclose or use any records or information respecting the Portfolio Manager
obtained pursuant to this Agreement in any manner whatsoever except as expressly
authorized in this Agreement, and will keep confidential any information
obtained pursuant to this Agreement, and disclose such information only as
expressly authorized in this Agreement, if the Board of Trustees of the Fund has
authorized such disclosure, or if such disclosure is required by applicable
federal or state law or regulations or regulatory authorities having the
requisite authority.
<PAGE>
(j) Shall be responsible for making reasonable inquiries and for reasonably
ensuring that any employee of the Portfolio Manager has not, to the best of the
Portfolio Manager's knowledge:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor involving the purchase or sale of any security or arising out of
such person's conduct as an underwriter, broker, dealer, investment adviser,
municipal securities dealer, government securities broker, government securities
dealer, transfer agent, or entity or person required to be registered under the
Commodity Exchange Act, or as an affiliated person, salesman, or employee of any
investment company, bank, insurance company, or entity or person required to be
registered under the Commodity Exchange Act; or
(ii) been permanently or temporarily enjoined by reason of any misconduct,
by order, judgment, or decree of any court of competent jurisdiction from acting
as an underwriter, broker, dealer, investment adviser, municipal securities
dealer, government securities broker, government securities dealer, transfer
agent, or entity or person required to be registered under the Commodity
Exchange Act, or as an affiliated person, salesman or employee of any investment
company, bank, insurance company, or entity or person required to be registered
under the Commodity Exchange Act, or from engaging in or continuing any conduct
or practice in connection with any such activity or in connection with the
purchase or sale of any security.
3. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
----------------------------------
the current Registration Statement for the Fund filed with the SEC and
represents and warrants that, with respect to the disclosure about the Portfolio
Manager or information relating, directly or indirectly, to the Portfolio
Manager, such Registration Statement contains, as of the date hereof, no untrue
statement of any material fact and does not omit any statement of a material
fact which was required to be stated therein or necessary to make the statements
contained therein not misleading. The Portfolio Manager further represents and
warrants that it is a duly registered investment adviser under the Advisers Act
and a duly registered investment adviser in all states in which the Portfolio
Manager is required to be registered. The Adviser has received a current copy
of the Portfolio Manager's Uniform Application for Investment Adviser
Registration on Form ADV, as filed with the SEC. The Portfolio Manager agrees
to provide the Adviser with current copies of the Portfolio Manager's Form ADV,
and any supplements or amendments thereto, as filed with the SEC.
4. Expenses. During the term of this Agreement, the Portfolio Manager
--------
will pay all expenses incurred by it and its staff and for their activities in
connection with its services under this Agreement. The Portfolio Manager shall
not be responsible, unless the Portfolio Manager is responsible for an expense
under the standards specified in Section 13 of this Agreement, for the costs of
operating the Fund, including, without limitation, any of the following:
(a) Expenses of all audits by the Fund's independent public accountants;
<PAGE>
(b) Expenses of the Fund's transfer agent, registrar, dividend disbursing
agent, and shareholder recordkeeping services;
(c) Expenses of the Fund's custodial services including recordkeeping
services provided by the custodian;
(d) Expenses of the Fund's recordkeeping services provided by the
recordkeeping agent;
(e) Expenses of obtaining quotations for calculating the value of the
Series' net assets;
(f) Expenses of obtaining portfolio activity reports for each Series;
(g) Expenses of maintaining the Fund's tax records;
(h) Salaries and other compensation of any of the Fund's executive officers
and employees, if any, who are not officers, directors, stockholders, or
employees of the Portfolio Manager or its subsidiaries or affiliates (except
that the Adviser, or any of its subsidiaries or affiliates, shall bear the
expense with respect to executive officers and employees, if any, who are
officers, directors, stockholders or employees of the Adviser or of its
subsidiaries or affiliates);
(i) Taxes or governmental fees, if any, levied against the Fund or any of
its Series;
(j) Brokerage fees and commissions in connection with the purchase and sale
of portfolio securities for the Series;
(k) Costs, including the interest expenses, of borrowing money;
(l) Costs and/or fees incident to meetings of the Fund's shareholders, the
preparation and mailings of prospectuses and reports of the Fund to its
shareholders, the filing of reports with regulatory bodies, the maintenance of
the Fund's existence, and the registration of shares with federal and state
securities or insurance authorities;
(m) The Fund's legal fees, including the legal fees related to the
registration and continued qualification of the Fund's shares for sale;
(n) Costs of printing share certificates, if any, representing shares of
the Fund;
(o) Trustees' fees and expenses to trustees of the Fund who are not
officers, employees, or stockholders of the Portfolio Manager or any affiliate
thereof (except that
<PAGE>
the Adviser shall bear the expense of any trustee who is an officer, employee,
or stockholder of the Adviser or any affiliate thereof);
(p) The Fund's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums;
(q) Association membership dues;
(r) Extraordinary expenses of the Fund as may arise including expenses
incurred in connection with litigation, proceedings and other claims and the
legal obligations of the Fund to indemnify its trustees, officers, employees,
shareholders, distributors, and agents with respect thereto; and
(s) Organizational and offering expenses and, if applicable, reimbursement
(with interest) of underwriting discounts and commissions.
5. Compensation. For the services provided and the expenses borne by the
------------
Portfolio Manager pursuant to this Agreement, the Adviser will pay to the
Portfolio Manager a fee based on the aggregate average daily net assets of the
Equity Income Series and the Multi-Strategy Series, at an annual rate equal to
.45% of the Series' aggregate average daily net assets up to $100 million, .40%
of the Series' aggregate average daily net assets on the next $100 million, .35%
of the Series' aggregate average daily net assets on the next $200 million and
.30% of the Series' aggregate average daily net assets above $400 million. This
fee shall be computed and accrued daily and payable monthly.
6. Seed Money. The Adviser agrees that the Portfolio Manager shall not be
----------
responsible for providing money for the initial capitalization of any Series.
7. Compliance.
----------
(a) The Portfolio Manager agrees that it shall immediately notify the
Adviser and the Fund in the event (i) that the SEC has censured the Portfolio
Manager; placed limitations upon its activities, functions or operations;
suspended or revoked its registration as an investment adviser; or has commenced
proceedings or an investigation that may result in any of these actions, (ii)
that it believes that a Series has ceased to qualify or might not qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code,
and (iii) that it believes that the Series has ceased to comply with the
diversification provisions of Section 817(h) of the Internal Revenue Code or the
Regulations thereunder. The Portfolio Manager further agrees to notify the
Adviser and the Fund immediately of any material fact known to the Portfolio
Manager respecting or relating to any disclosure in the Registration Statement
with respect to the Portfolio Manager's activities in connection with the Fund
that is not contained in the Registration Statement or prospectus for the Fund,
or any amendment or supplement thereto, or of any statement contained therein
that becomes untrue in any material respect.
<PAGE>
(b) The Adviser agrees that it shall immediately notify the Portfolio
Manager in the event (i) that the SEC has censured the Adviser or the Fund;
placed limitations upon either of their activities, functions, or operations;
suspended or revoked the Adviser's registration as an investment adviser; or has
commenced proceedings or an investigation that may result in any of these
actions, (ii) upon having a reasonable basis for believing that a Series has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and (iii) upon having a reasonable
basis for believing that the Series has ceased to comply with the
diversification provisions of Section 817(h) of the Internal Revenue Code or the
Regulations thereunder.
8. Independent Contractor. The Portfolio Manager shall for all purposes
----------------------
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Adviser from time to time, have
no authority to act for or represent the Adviser in any way or otherwise be
deemed its agent. The Portfolio Manager understands that unless expressly
provided herein or authorized from time to time by the Fund and except as
otherwise contemplated herein, the Portfolio Manager shall have no authority to
act for or represent the Fund in any way or otherwise be deemed the Fund's
agent.
9. Books and Records. In compliance with the requirements of Rule 31a-3
-----------------
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Series are the property of the Fund and further agrees to
surrender promptly to the Fund any of such records upon the Fund's or the
Adviser's request, although the Portfolio Manager may, at its own expense, make
and retain a copy of such records. The Portfolio Manager further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-l under the 1940 Act and to preserve the
records required by Rule 204-2 under the Advisers Act for the period specified
in the Rule.
10. Cooperation. Each party to this Agreement agrees to cooperate with
-----------
each other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the SEC and state
insurance authorities) in connection with any investigation or inquiry relating
to this Agreement or the Fund.
11. Responsibility and Control. Notwithstanding any other provision of
--------------------------
this Agreement, it is understood and agreed that the Fund shall at all times
retain the ultimate responsibility for and control of all functions performed
pursuant to this Agreement and reserves the right to direct any action hereunder
taken on its behalf by the Portfolio Manager pursuant to guidelines provided to
Portfolio Manager in writing.
12. Services Not Exclusive. It is understood that the services of the
----------------------
Portfolio Manager are not exclusive, and nothing in this Agreement shall prevent
the Portfolio Manager (or its affiliates) from providing similar services to
other clients, including investment companies (whether or not their investment
objectives and policies are similar to those of the Series) or from engaging in
other activities.
<PAGE>
13. Liability. Except as may otherwise be required by the 1940 Act or the
---------
rules thereunder or other applicable law, the Fund and the Adviser agree that
the Portfolio Manager, any affiliated person of the Portfolio Manager, and each
person, if any, who, within the meaning of Section 15 of the 1933 Act, controls
the Portfolio Manager shall not be liable for, or subject to any damages,
expenses, or losses in connection with, any act or omission connected with or
arising out of any services rendered under this Agreement, except by reason of
willful misfeasance, bad faith, or gross negligence in the performance of the
Portfolio Manager's duties, or by reason of reckless disregard of the Portfolio
Manager's obligations and duties under this Agreement.
The Adviser shall indemnify and hold harmless Portfolio Manager,
individually and as investment manager, from and against any and all third-party
claims (including reasonable attorneys' fees, with respect to counsel reasonably
satisfactory to the Adviser or retained by the Adviser for Portfolio Manager),
arising from or relating to the performance by or obligations of Portfolio
Manager as investment manager hereunder except to the extent any such claims are
caused by the negligence or willful misconduct of Portfolio Manager.
14. Duration and Termination. This Agreement shall become effective as of
------------------------
January 1, 1994 and shall continue in effect for two years from such date and
continue thereafter on an annual basis with respect to the Series; provided that
such annual continuance is specifically approved at least annually (a) by the
vote of a majority of the Board of Trustees of the Fund, or (b) by the vote of a
majority of the outstanding voting shares of each Series, and provided that
continuance is also approved by the vote of a majority of the Board of Trustees
of the Fund who are not parties to this Agreement or "interested persons" (as
such term is defined in the 1940 Act) of the Fund, the Adviser, or the Portfolio
Manager, cast in person at a meeting called for the purpose of voting on such
approval. This Agreement may not be materially amended without a majority vote
of the outstanding shares (as defined in the 1940 Act) of the Series. This
Agreement may be terminated:
(a) by the Fund at any time with respect to the services provided by the
Portfolio Manager, without the payment of any penalty, forfeiture, compulsory
buyout amount, or performance of any other obligation which could deter
termination, by vote of a majority of the entire Board of Trustees of the Fund
or by a vote of a majority of the outstanding voting shares of the Fund or, with
respect to a particular Series, by vote of a majority of the outstanding voting
shares of such Series, on 60 days' written notice to the Portfolio Manager and
the Adviser;
(b) by the Portfolio Manager at any time, without the payment of any
penalty, forfeiture, compulsory buyout amount or performance of any other
obligation which could deter termination, upon 60 days' written notice to the
Adviser and the Fund.
(c) by the Adviser at any time, without the payment of any penalty,
forfeiture, compulsory buyout amount or performance of any other obligation
which could deter termination, upon 60 days' written notice to the Portfolio
Manager and the Fund.
<PAGE>
However, any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 1940 Act) of a particular Series shall be
effective to continue this Agreement with respect to such Series notwithstanding
(a) that this Agreement has not been approved by the holders of a majority of
the outstanding shares of any other Series or (b) that this Agreement has not
been approved by the vote of a majority of the outstanding shares of the Fund,
unless such approval shall be required by any other applicable law or otherwise.
In the event of termination for any reason, all records of the Series shall
promptly be returned to the Adviser or the Fund, free from any claim or
retention of rights in such record by the Portfolio Manager, although the
Portfolio Manager may, at its own expense, make and retain a copy of such
records. This Agreement will terminate automatically in event of its assignment
(as that term is defined in the 1940 Act), but shall not terminate in connection
with any transaction not deemed an assignment within the meaning of Rules 2a-6
under the 1940 Act, or any other rule adopted by the SEC regarding transactions
not deemed to be assignments. In the event this Agreement is terminated or is
not approved in the manner described above, the Sections or Paragraphs numbered
2(g), 2(i), 9, 10, 11, 13 and 15 of this Agreement as well as any applicable
provision of this Paragraph numbered 14 shall remain in effect.
15. Use of Name.
-----------
(a) It is understood that the name "Pacific Mutual Life Insurance Company"
or "Pacific Mutual", or "Pacific Select Fund" or "Pacific Select" or any
derivative thereof or logo associated with that name is the valuable property of
the Adviser and its affiliates, and that the Portfolio Manager has the right to
use such name (or derivative or logo) only with the approval of the Adviser and
only so long as the Adviser is an investment adviser to the Fund and/or the
Series. Upon termination of the Advisory Agreement between the Fund and the
Adviser, the Portfolio Manager shall forthwith cease to use such name (or
derivative or logo).
(b) It is understood that the name J.P. Morgan or any derivative thereof or
logo associated with that name is the valuable property of the Portfolio Manager
and that the Adviser has the right to use such name (or derivative or logo), in
offering materials of the Fund and/or Series with the approval of the Portfolio
Manager and for so long as the Portfolio Manager is a Portfolio Manager to the
Fund and/or the Series. Upon termination of this Agreement between the Adviser
and the Portfolio Manager, the Fund and the Adviser shall forthwith cease to use
such name (or derivative or logo).
16. Limitation of Liability. A copy of the Amended and Restated Agreement
-----------------------
and Declaration of Trust for the Fund is on file with the Secretary of the
Commonwealth of Massachusetts. The obligations of this Agreement shall be
binding upon the assets and property of the Fund and shall not be binding upon
any Trustee, officer, employee, agent or shareholder, whether past, present, or
future, of the Fund individually.
<PAGE>
17. Miscellaneous.
-------------
(a) This Agreement shall be governed by the laws of California, provided
that nothing herein shall be construed in a manner inconsistent with the 1940
Act, the Investment Advisers Act of 1940 or rules or orders of the SEC
thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of the
1940 Act.
(b) The captions of this Agreement are included for convenience only and in
no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
(c) To the extent permitted under Section 14 of this Agreement, this
Agreement may only be assigned by any party with prior written consent of the
other parties.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable. To the extent that any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise with regard to any party hereunder, such provisions with respect to
other parties hereto shall not be affected thereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first written above.
PACIFIC MUTUAL LIFE
INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ TC SUTTON
Title: Assistant Vice President Title: Chairman and Chief Executive
Officer
Attest: /s/ DIANE N. LEDGER By: /s/ WILLIAM D. CVENGROS
Title: Assistant Vice President Title: Chief Investment Officer
J.P. MORGAN INVESTMENT
MANAGEMENT INC.
Attest: /s/ MARY E. WAGNER By: /s/ THOMAS PERNICE
Title: Assistant Vice President Title: President
PACIFIC SELECT FUND
Attest: /s/ DIANE N. LEDGER By: /s/ TC SUTTON
Title: Assistant Vice President Title: President
<PAGE>
EXHIBIT 99.5(e)
Portfolio Management Agreement - Janus Capital Corporation
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
This Portfolio Management Agreement (this "Agreement") is entered into as of
January 1, 1994 by and among Pacific Mutual Life Insurance Company, a California
corporation ("Investment Manager"), Janus Capital Corporation, a Colorado
corporation ("Portfolio Manager"), and Pacific Select Fund, a Massachusetts
Business Trust ("Fund").
WHEREAS, Investment Manager has entered into an Advisory Agreement dated
November 9, 1987 (the "Advisory Agreement") with the Fund to act as investment
adviser and manager to the Growth LT Series, a series of the Fund (the
"Portfolio");
WHEREAS, the Advisory Agreement provides that Investment Manager may engage a
portfolio manager to furnish investment information and advice to assist
Investment Manager in carrying out its responsibilities under the Advisory
Agreement;
WHEREAS, Investment Manager and the Trustees of the Fund desire to retain
Portfolio Manager to render investment adviser services to Investment Manager in
the manner and on the terms set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, Investment Manager and Portfolio Manager agree as
follows:
1. APPOINTMENT. The Fund and Investment Manager hereby appoint Janus Capital
Corporation to act as Portfolio Manager to the Portfolio for the periods and on
the terms set forth in this Agreement. Portfolio Manager accepts such
appointment and agrees to furnish the services herein set forth for the
compensation herein provided. In the event Investment Manager wishes to retain
Portfolio Manager to render investment advisory services to one or more
portfolios other than the Portfolio, Investment Manager shall notify Portfolio
Manager in writing. If Portfolio Manager is willing to render such services, it
shall notify the Fund and Investment Manager in writing, whereupon such
portfolios shall become a Portfolio hereunder, and be subject to this Agreement.
1. PORTFOLIO SERVICES.
(a) Portfolio Manager shall, subject to the supervision of Investment Manager,
manage the investment and reinvestment of the assets of the Portfolio.
Portfolio Manager is authorized, in its discretion and without prior
consultation with Investment Manager, to buy, sell, lend, and otherwise
trade in any stocks, bonds, and other securities and investment instruments
on behalf of the Portfolio, and so long as consistent with the foregoing,
without regard to the length of time the securities have been held and the
resulting rate of portfolio turnover or any tax considerations. Subject to
the investment objectives, policies, and restrictions concerning the
Portfolio set forth in the Fund's declaration of trust and in its
registration statements under the Investment Company Act of 1940 (the "1940
Act"), the majority or the whole of the Portfolio may be invested in such
proportions of stocks, bonds, other securities or investment instruments,
or cash as Portfolio Manager shall
<PAGE>
determine. Notwithstanding any other provision of this Agreement, it is
understood and agreed that the Fund shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to the
Agreement and reserves the right to direct, approve, or disapprove any
action hereunder taken on its behalf by the Portfolio Manager. Portfolio
Manager is responsible for compliance with the provisions of Section 817(h)
of the Internal Revenue Code of 1986, as amended, applicable to the
Portfolio.
(b) Portfolio Manager shall furnish Investment Manager monthly, quarterly, and
annual reports concerning transactions and performance of the Portfolio in
such form as may be mutually agreed upon, and agrees to review the
Portfolio and discuss the management of it. Portfolio Manager shall permit
the financial statements, books and records with respect to the Portfolio
to be inspected and audited by the Investment Manager at all reasonable
times during normal business hours. Portfolio Manager shall also provide
Investment Manager and the Fund with such other information and reports as
may reasonably be requested by Investment Manager and the Fund from time to
time.
(c) Portfolio Manager shall provide to Investment Manager a copy of Portfolio
Manager's Form ADV as filed with the Securities and Exchange Commission and
a list of persons who Portfolio Manager wishes to have authorized to give
written and/or oral instructions to Custodians of Fund assets for the
Portfolio.
(d) Portfolio Manager will, in connection with the purchase and sale of
securities for the Portfolio, together with Investment Manager, arrange for
the transmission to the custodian, and the recordkeeping agent for the Fund
on a daily basis, such confirmation, trade tickets, and other documents and
information, including, but not limited to Cusip, Sedol, or other numbers
that identify securities to be purchased or sold on behalf of the
Portfolio, as may be reasonably necessary to enable the custodian and
recordkeeping agent to perform its administrative and recordkeeping
responsibilities with respect to the Portfolio, and, with respect to
portfolio securities to be purchased or sold through the Depository Trust
Company, will arrange for the automatic transmission of the confirmation of
such trades to the Fund's custodian, recordkeeping agent, [and, if required
by the Investment Manager].
(e) Portfolio Manager will assist the custodian and recordkeeping agent for the
Fund in determining or confirming, consistent with the procedures and
policies stated in the Registration Statement for the fund, the value of
any portfolio securities or other assets of the Portfolio for which the
custodian and recordkeeping agent seeks assistance from Portfolio Manager
or identifies for review by Portfolio Manager.
(f) Portfolio Manager will report regularly to the Fund's Board of Trustees on
the investment program for the Portfolio and the issuers and securities
represented in the Portfolio and will furnish the Fund's Board of Trustees
with respect to the portfolio such periodic and special reports as the
Trustees and Investment Manager may reasonably request.
(g) Portfolio Manager will not knowingly disclose or use any records or
information obtained pursuant to this Agreement (excluding investment
research and investment advice) in any manner whatsoever except as
expressly authorized in this agreement or in the ordinary course of
business
<PAGE>
in connection with placing orders for the purchase and sale of securities,
and will keep confidential any information obtained pursuant to this
Agreement, and disclose such information only if the Board of Trustees of
the Fund has authorized such disclosure, or if such disclosure is required
by applicable federal or state law or regulations or regulatory authorities
having requisite authority. The Fund, the Portfolio, and Investment
Manager will not knowingly disclose or use any records or information
respecting Portfolio Manager obtained pursuant to this Agreement in any
manner whatsoever except as expressly authorized in this Agreement, and
will keep confidential any information obtained pursuant to this Agreement,
and disclose such information only as expressly authorized by this
Agreement, if Portfolio Manager has authorized such disclosure, or if such
disclosure is required by applicable federal or state law or regulations or
regulatory authorities having the requisite authority.
3. OBLIGATIONS OF INVESTMENT MANAGER AND THE PORTFOLIO.
(a) Investment Manager or its agent shall provide timely information to
Portfolio Manager regarding such matters as the composition of assets in
the Portfolio, cash requirements and cash available for investment in the
Portfolio, and all other information as may be reasonably necessary for
Portfolio Manager to perform its responsibilities hereunder.
(b) Investment Manager has herewith furnished Portfolio Manager a copy of the
Portfolio's registration statement currently in effect and agrees during
the continuance of this Agreement to furnish Portfolio Manager copies of
any amendments or supplements thereto before or at the time the amendments
or supplements become effective. Investment Manager agrees to furnish
Portfolio Manager with minutes of meetings of the Trustees of the Fund
applicable to the Portfolio to the extent they may affect the duties of
Investment Manager, a copy of any financial statements or reports prepared
for the Fund, including the Portfolio, by certified or independent public
accountants, and with copies of any financial statements or reports made by
the Portfolio to its shareholders or to any governmental body or securities
exchange, and any further materials or information which Portfolio Manager
may reasonably request to enable it to perform its functions under this
Agreement.
4. CUSTODIAN. Investment Manager shall provide Portfolio Manager with a copy
of the Portfolio's agreement with the Custodian (the "Custodian") designated to
hold the assets in the Portfolio and any modification thereto (excepting any
information concerning the calculation of fees, in particular, the "Fee
Schedule") (the "Custody Agreement") in advance. The Portfolio assets shall be
maintained in the custody of the Custodian identified in, and in accordance with
the terms and conditions of, the Custody Agreement. Portfolio Manager shall
have no liability for the acts or omissions of the Custodian. Any assets added
to the Portfolio shall be delivered directly to the Custodian.
5. PROPRIETARY RIGHTS
(a) Investment Manager agrees and acknowledges that Portfolio Manager is the
sole owner of the name and mark "Janus" and that all use of any designation
comprised in whole or part of Janus (a "Janus Mark") under this Agreement
shall inure to the benefit of Portfolio Manager. The use by Investment
Manager on its own behalf or on behalf of the Portfolio of any Janus Mark
in any
<PAGE>
advertisement or sales literature or other materials promoting the
Portfolio shall be with the prior written consent of Portfolio Manager.
Investment Manager shall not, and Investment Manager shall use its best
efforts to cause the Portfolio not to, without the prior written consent of
Portfolio Manager, make representations regarding Portfolio Manager in any
disclosure document, advertisement or sales literature or other materials
promoting the Portfolio. Upon termination of this Agreement for any
reason, Investment Manager shall cease, and Investment Manager shall use
its best efforts to cause the Portfolio to cease, all use of any Janus
Mark(s) as soon as reasonably practicable.
(b) Portfolio Manager agrees and acknowledges that Investment Manager is the
sole owner of the name and mark Pacific Mutual ("PM") or Pacific Select
("PS") and that all use of any designation comprised in whole or part of PM
or PS (collectively, the "PM Mark") under the Agreement shall inure to the
benefit of Investment Manager. The use by Portfolio Manager on its behalf
or on behalf of the Portfolio of any PM Mark in any advertisement or sales
literature or other materials promoting the Portfolio shall be with the
prior written consent of Investment Manager. Portfolio Manager shall not,
and Portfolio Manager shall use its best efforts to cause the Portfolio not
to, without the prior written consent of Investment Manager, make
representations regarding Investment Manager in any disclosure document,
advertisement or sales literature or other materials promoting the
Portfolio. Upon termination of the Agreement for any reason, Portfolio
Manager shall cease all use of any PM Mark(s) as soon as reasonably
practicable.
6. EXPENSES. The Fund shall assume and pay all its organizational,
operational, and business expenses not specifically assumed or agreed to be paid
by Portfolio Manager pursuant hereto, including, without limitation, (a)
interest and taxes; (b) brokerage commissions and other costs in connection with
the purchase or sale of securities or other investment instruments with respect
to the Portfolio; and (c) custodian fees and expenses. Any reimbursement of
advisory fees required by any expense limitation provision shall be the sole
responsibility of Investment Manager. The Fund, Investment Manager, and
Portfolio Manager shall not be considered as partners or participants in a joint
venture. Portfolio Manager will pay its own expenses for the services to be
provided pursuant to this Agreement to the extent not assumed by the Fund or
Investment Manager above, and will not be obligated to pay any expenses of the
Fund, Investment Manager, or the Portfolio unless Portfolio Manager is
responsible for expenses incurred pursuant to Section 10 of this Agreement.
7. PURCHASE AND SALE OF ASSETS. Absent instructions from Investment Manager to
the contrary, Portfolio Manager shall place all orders for the purchase and sale
of securities for the Portfolio with brokers or dealers selected by Portfolio
Manager which may include brokers or dealers affiliated with Portfolio Manager.
Purchase or sell orders for the Portfolio may be aggregated with contemporaneous
purchase or sell orders of other clients of Portfolio Manager. Portfolio Manager
shall use its best efforts to obtain execution of Portfolio transactions at
prices which are advantageous to the Portfolio and at commission rates that are
reasonable in relation to the benefits received. However, Portfolio Manager may
select brokers or dealers on the basis that they provide brokerage, research, or
other services or products to the Portfolio and/or other accounts serviced by
Portfolio Manager. Portfolio Manager may pay a broker or dealer an amount of
commission for effecting a securities transaction in excess of the amount of
commission or dealer spread another broker or dealer would have charged for
effecting that transaction if Portfolio
<PAGE>
Manager determines in good faith that such amount of commission was reasonable
in relation to the value of the brokerage and research products and/or services
provided by such broker or dealer. This determination, with respect to
brokerage and research services or products, may be viewed in terms of either
that particular transaction or the overall responsibilities which Portfolio
Manager and its affiliates have with respect to the portfolio and to accounts
over which they exercise investment discretion, and not all such services or
products may be used by Portfolio Manager in managing the Portfolio.
8. COMPENSATION OF PORTFOLIO MANAGER. Investment Manager shall pay to
Portfolio Manager a monthly fee in accordance with the fee schedule attached to
this Agreement. Monthly fees shall be calculated by Investment Manager based
upon the average daily net assets of the Portfolio (including cash or cash
equivalents) for the preceding month for investment advisory services rendered
during that preceding month, and shall be payable to Portfolio Manager by the
fifteenth day of the succeeding month. The fee for the first month during which
Portfolio Manager shall render investment advisory services under this Agreement
shall be based upon the number of days the account was open in that month. If
this Agreement is terminated, the fee shall be based upon the number of days the
account was open during the month in which the Agreement is terminated.
9. NON-EXCLUSIVITY. Investment Manager and the Portfolio agree that the
services of Portfolio Manager are not to be deemed exclusive and that Portfolio
Manager and its affiliates are free to act as investment manager and provide
other services to various investment companies and other managed accounts.
Subject to Section 17j-1 of the 1940 Act, this Agreement shall not in any way
limit or restrict Portfolio Manager or any of its directors, officers,
employees, or agents from buying, selling, or trading any securities or other
investment instruments for its or their own account or for the account of others
for whom it or they may be acting, provided that such activities will not
adversely affect or otherwise impair the performance by Portfolio Manager of its
duties and obligations under this Agreement. Investment Manager and the
Portfolio recognize and agree that Portfolio Manager may provide advice to or
take action with respect to other clients, which advice or action, including the
timing and nature of such action, may differ from or be identical to advice
given or action taken with respect to the Portfolio. Portfolio Manager shall
for all purposes herein be deemed to be an independent contractor and shall,
unless otherwise provided or authorized, have no authority to act for or
represent the Portfolio or Investment Manager in any way or otherwise be deemed
an agent of the Portfolio or Investment Manager other than in furtherance of its
duties and responsibilities as set forth in this Agreement.
10. LIABILITY. Except as may otherwise be required by the 1940 Act or the
rules thereunder or other federal securities laws, the Fund and Investment
Manager agree that Portfolio Manager, any affiliated person of Portfolio
Manager, and each person, if any, who, within the meaning of Section 15 of the
1933 Act, controls Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of Portfolio Manager's duties, or by reason of reckless disregard of Portfolio
Manager's obligations and duties under this Agreement. Investment Manager and
the Portfolio shall indemnify and hold harmless Portfolio Manager, individually
and as investment
<PAGE>
manager, from and against any and all third-party claims (including reasonable
attorneys' fees, with respect to counsel reasonably satisfactory to Investment
Manager or retained by Investment Manager for Portfolio Manager), arising from
or relating to the performance by or obligations of Portfolio Manager as
investment manager hereunder except to the extent any such claims are caused by
the gross negligence or will misconduct of Portfolio Manager. Investment
Manager acknowledges and agrees that Portfolio Manager makes no representation
or warranty, express or implied, that any level of performance or investment
results will be achieved by the Portfolio or that the Portfolio will perform
comparably with any standard or index, including other clients of Portfolio
Manager, whether public or private.
11. TERMINATION. This Agreement shall remain in full force and effect for one
year from the date hereof, and is renewable annually thereafter by agreement of
the parties to this Agreement and by specific approval of the Board of Trustees
of the Fund or by vote of a majority of the outstanding voting securities of the
Portfolio. Any such renewal shall be approved by a vote of a majority of the
Trustees who are not interested persons under the 1940 Act, cast in person at a
meeting called for the purpose of voting on such renewal. However, any approval
of this Agreement by the holders of a majority of the outstanding shares (as
defined in the 1940 Act) of the Portfolio shall be effective to continue this
Agreement with respect to such Portfolio notwithstanding (a) that this Agreement
has not been approved by the holders of a majority of the outstanding shares of
any other portfolio or (b) that this Agreement has not been approved by the vote
of a majority of the outstanding shares of the Fund, unless such approval shall
be required by any other applicable law or otherwise. This Agreement may be
terminated without penalty, forfeiture, compulsory buyout amount, or performance
of any obligation that could deter termination at any time by either party upon
60 days written notice to the other party, and will automatically terminate in
the event of its assignment, as defined in the 1940 Act, or upon termination of
the Investment Manager's Agreement with the Fund.
12. AMENDMENT. This Agreement may be amended only if such amendment is
specifically approved by (a) the vote of a majority of the outstanding voting
securities of the Portfolio, if required by applicable law, and (b) the vote of
a majority of those directors of the Portfolio who are not parties to this
Agreement or interested persons of any such party cast in person at a meeting
called for the purpose of voting on such approval.
13. BOOKS AND RECORDS. In compliance with the requirements of Rule 31a-3 under
the 1940 Act, Portfolio Manager hereby agrees that all records which it
maintains for the Portfolio are the property of the Fund and further agrees to
surrender promptly to the Fund any of such records upon the Fund's or Investment
Manager's request, although Portfolio Manager may, at its own expense, make and
retain a copy of such records. Portfolio Manager further agrees to preserve
such records for the periods prescribed by Rule 31a-2 under the 1940 Act and to
preserve the records required by Rule 204-2 under the Advisers Act for the
period specified in the Rule.
14. LIMITATION AND LIABILITY. A copy of the Amended and Restated Agreement and
Declaration of Fund for the Fund is on file with the Secretary of the
Commonwealth of Massachusetts. The obligations of this Agreement shall be
binding upon the assets and property of the Fund and shall not be binding upon
any Trustee, officer, employee, agent, or shareholder, whether past, present, or
future, of the Fund individually.
<PAGE>
15. DISCLOSURE ABOUT PORTFOLIO MANAGER. Portfolio Manager has reviewed the
Registration Statement for the Fund filed with the SEC on December 10, 1993 and
represents and warrants that, with respect to the disclosure about Portfolio
Manager such Registration Statement contains, as of the date thereof, no untrue
statement of any material fact and does not omit any statement of a material
fact which was required to be stated therein or necessary to make the statements
contained therein not misleading. Portfolio Manager further agrees to notify
Investment Adviser and the Fund immediately of any material fact known to
Portfolio Manager respecting or relating to Portfolio Manager that is not
contained in the Registration Statement or prospectus for the Fund, or any
amendment or supplement thereto, or of any statement contained therein that
becomes untrue in any material respect.
16. GENERAL
(a) Portfolio Manager may perform its services through any employee, officer,
or agent of Portfolio Manager, and Investment Manager shall not be entitled
to the advice, recommendation, or judgment of any specific person.
(b) Each party to this Agreement agrees to cooperate with each other party and
with all appropriate governmental authorities having the requisite
jurisdiction (including, but not limited to, the SEC and state insurance
authorities) in connection with any investigation or inquiry relating to
this Agreement or the Fund.
(c) If any term or provision or this Agreement or the application thereof to
any person or circumstances is held to be invalid or unenforceable to any
extent, the remainder of this Agreement or the application of such
provision to other persons or circumstances shall not be affected thereby
and shall be enforced to the greatest extent permitted by law.
(d) This Agreement shall be governed by and interpreted in accordance with the
laws of the State of Colorado exclusive of conflicts of laws, provided that
nothing herein shall be construed in a manner inconsistent with the 1940
Act, the Investment Advisers Act of 1940 or rules or orders of the SEC
thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of
the 1940 Act.
PACIFIC MUTUAL LIFE INSURANCE COMPANY
By: /s/ TC SUTTON
Name: THOMAS C. SUTTON
Title: Chairman and
Chief Executive Officer
<PAGE>
By: /s/ WILLIAM D. CVENGROS
Name: WILLIAM D. CVENGROS
Title: Chief Investment Officer
JANUS CAPITAL CORPORATION
By: /s/ STEPHEN L. STEINEKER
Name: STEPHEN L. STEINEKER
Title: Assistant Vice President
PACIFIC SELECT FUND
By: /s/ TC SUTTON
Name: THOMAS C. SUTTON
Title: President
<PAGE>
PACIFIC SELECT FUND
FEE SCHEDULE
Series: Growth LT Series
Fee:
If, at the end of the first six calendar months following the Growth LT Series'
commencement of operations, the Series reaches at least $50 million in net
assets, and during each of the next succeeding six calendar months, maintains
average daily net assets of at least $50 million, computed monthly, based on the
daily net assets during each succeeding calendar month, respectively:
.55% on an annual basis of the Growth LT Series' average daily net assets
If, at the end of the first six calendar months following the Growth LT Series'
commencement of operations, the Series does not reach at least $50 million in
net assets, or, during each of the next succeeding six calendar months, does not
maintain average daily net assets of at least $50 million, computed monthly,
based on the daily net assets during each succeeding calendar month,
respectively:
.60% on an annual basis of the first $100 million of the Growth LT Series'
average daily assets, retroactive to the Series' commencement of operations.
.55% on an annual basis of the Growth LT Series' average daily net assets in
excess of $100 million.
<PAGE>
EXHIBIT 99.5(f)
Portfolio Management Agreement - Templeton Investment Counsel, Inc.
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this 16th day of December, 1993 between Pacific Mutual
Life Insurance Company ("Adviser"), a California corporation, and Templeton
Investment Counsel, Inc. ("Portfolio Manager"), a Florida corporation, and
Pacific Select Fund (the "Fund"), a Massachusetts Business Trust.
WHEREAS, the Fund is registered with the Securities and Exchange
Commission ("SEC") as an open-end, management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of beneficial interest
("Shares") in separate series, with each such series representing interests in a
separate portfolio; and
WHEREAS, the Fund currently offers multiple series, one of which is
designated as the International Series, such Series together with any other
series subsequently established by the Fund, with respect to which the Fund and
Adviser desire to retain the Portfolio Manager to render investment advisory
services hereunder, and with respect to which the Portfolio Manager is willing
to do so, being herein collectively referred to also as the "Series"; and
WHEREAS, the Portfolio Manager is registered with the SEC as an
investment adviser under the Investment Advisers Act of 1940 ("Advisers Act");
and
WHEREAS, the Fund has retained the Adviser to render investment
advisory services to the Series pursuant to an Advisory Agreement, and such
Agreement authorizes the Adviser to engage Portfolio Manager to discharge the
Adviser's responsibilities with respect to the investment management of the
Series, a copy of which has been provided to the Portfolio Manager and is
incorporated by reference herein; and
WHEREAS, the Fund and the Adviser desire to retain the Portfolio
Manager to furnish investment advisory services to one or more of the Series of
the Fund, and the Portfolio Manager is willing to furnish such services to such
Series and the Adviser in the manner and on the terms hereinafter set forth; and
NOW THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Fund, the Adviser,
and the Portfolio Manager as follows:
<PAGE>
1. Appointment. The Fund and the Adviser hereby appoint Templeton
-----------
Investment Counsel, Inc. to act as Portfolio Manager to the International Series
(the "Series") for the periods and on the terms set forth in this Agreement.
The Portfolio Manager accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
In the event the Adviser wishes to retain the Portfolio Manager to
render investment advisory services to one or more series other than the Series,
the Adviser shall notify the Portfolio Manager in writing. If the Portfolio
Manager is willing to render such services, it shall notify the Fund and Adviser
in writing, whereupon such series shall become a Series hereunder, and be
subject to this Agreement.
2. Portfolio Manager Duties. Subject to the supervision of the
------------------------
Fund's Board of Trustees and the Adviser, the Portfolio Manager will provide a
continuous investment program for the Series and determine the composition of
the assets of the Series, including determination of the purchase, retention, or
sale of the securities, cash, and other investments for the Series. The
Portfolio Manager will provide investment research and analysis, which may
consist of computerized investment methodology, and will conduct a continuous
program of evaluation, investment, sales, and reinvestment of the Series' assets
by determining the securities and other investments that shall be purchased,
entered into, sold, closed, or exchanged for the Series, when these transactions
should be executed, and what portion of the assets of the Series should be held
in the various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of the Series. To the extent permitted by the investment policies of the
Series, the Portfolio Manager shall make decisions for the Series as to foreign
currency matters and make determinations as to the retention or disposition of
foreign currencies or securities or other instruments denominated in foreign
currencies, or derivative instruments based upon foreign currencies, including
forward foreign currency contracts and options and futures on foreign currencies
and shall execute and perform the same on behalf of the Series. The Portfolio
Manager will provide the services under this Agreement in accordance with the
Series' investment objective or objectives, investment policies, and investment
restrictions as stated in the Fund's Registration Statement filed on Form N-1A
with the SEC, as supplemented or amended from time to time, copies of which
shall be sent to the Portfolio Manager by the Adviser. In performing these
duties, the Portfolio Manager:
(a) Will (1) manage the Series so that it will qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, (2) manage
the Series so as to ensure compliance by the Series with the diversification
requirements of Section 817(h) of the Internal Revenue Code and Regulations
issued thereunder, and (3) manage the Series so as to ensure compliance by the
Series with the requirements of the 1940 Act and all other federal and/or state
laws or regulations pertaining to investment vehicles underlying variable
annuity or variable life insurance policies. The Adviser will notify the
Portfolio Manager of any amendments to the Section 817(h) of the Internal
Revenue Code and Regulations issued thereunder. In managing the Series in
accordance with these requirements, the Portfolio Manager shall be entitled to
receive and act upon advice of counsel to the Fund, counsel to the Adviser, or
counsel to the Portfolio Manager that is also acceptable to the Adviser.
<PAGE>
(b) Shall conform with the 1940 Act and all rules and regulations
thereunder, all other applicable federal and state laws and regulations, with
any applicable procedures adopted by the Fund's Board of Trustees, and with the
provisions of the Fund's Registration Statement filed on Form N-1A under the
Securities Act of 1933 (the "1933 Act") and the 1940 Act, as supplemented or
amended from time to time.
(c) Is responsible, in connection with its responsibilities under this
Section 2, for decisions to buy and sell securities and other investments for
the Series, for broker-dealer and futures commission merchant ("FCM") selection,
and for negotiation of commission rates. The Portfolio Manager's primary
consideration in effecting a security or other transaction will be to obtain the
best execution for the Series, taking into account the factors specified in the
Prospectus and Statement of Additional Information for the Fund, as they may be
amended or supplemented from time to time. Subject to such policies as the
Board of Trustees may determine and consistent with Section 28(e) of the
Securities Exchange Act of 1934, the Portfolio Manager shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Series to pay a broker or
dealer, acting as agent, for effecting a portfolio transaction at a price in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction, if the Portfolio Manager determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Portfolio Manager's or its
affiliates overall responsibilities with respect to the Series and to its other
clients as to which it exercises investment discretion. To the extent
consistent with these standards, and in accordance with Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and subject to
any other applicable laws and regulations including Section 17(e) of the 1940
Act, the Portfolio Manager is further authorized to allocate the orders placed
by it on behalf of the Series to the Portfolio Manager if it is registered as a
broker or dealer with the SEC or as a FCM with the Commodities Futures Trading
Commission ("CFTC"), to any of its affiliates that are registered as a broker or
dealer with the SEC or as a FCM with the CFTC, or to such brokers and dealers
that also provide research or statistical research and material, or other
services to the Series or the Portfolio Manager. Such allocation shall be in
such amounts and proportions as the Portfolio Manager shall determine consistent
with the above standards, and, upon request, the Portfolio Manager will report
on said allocation to the Adviser and Board of Trustees of the Fund, indicating
the brokers, dealers or FCMs to which such allocations have been made and the
basis therefor.
(d) May, on occasions when the purchase or sale of a security is
deemed to be in the best interest of a Series as well as any other investment
advisory clients, to the extent permitted by applicable laws and regulations,
but shall not be obligated to, aggregate the securities to be so sold or
purchased with those of its other clients where such aggregation is not
inconsistent with the policies set forth in the Registration Statement. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Portfolio Manager in a
manner that is fair and equitable in the judgment of the Portfolio Manager in
the exercise of its fiduciary obligations to the Fund and to such other clients.
<PAGE>
(e) Will, in connection with the purchase and sale of securities for
the Series, together with the Adviser, arrange for the transmission to the
custodian, and the recordkeeping agent for the Fund on a daily basis, such
confirmations, trade tickets, and other documents and information, including,
but not limited to, Cusip, Sedol, or other numbers that identify securities to
be purchased or sold on behalf of the Series, as may be reasonably necessary to
enable the custodian and recordkeeping agent to perform its administrative and
recordkeeping responsibilities with respect to the Series, and, with respect to
portfolio securities to be purchased or sold through the Depository Trust
Company, will arrange for the automatic transmission of the confirmation of such
trades to the Fund's custodian, recordkeeping agent, and, if required, the
Adviser.
(f) Will assist the custodian and recordkeeping agent for the Fund in
determining or confirming, consistent with the procedures and policies stated in
the Registration Statement for the Fund, the value of any portfolio securities
or other assets of the Series for which the custodian and recordkeeping agent
seek assistance from the Portfolio Manager or identifies for review by the
Portfolio Manager.
(g) Will make available to the Fund, and the Adviser promptly upon
request, any of the Series' investment records and ledgers maintained by the
Portfolio Manager (which shall not include the records and ledgers maintained by
the custodian and recordkeeping agent for the Fund), as are necessary to assist
the Fund and the Adviser to comply with requirements of the 1940 Act and the
Investment Advisers Act of 1940, as well as other applicable laws, and will
furnish to regulatory authorities having the requisite authority any information
or reports in connection with such services which may be requested in order to
ascertain whether the operations of the Fund are being conducted in a manner
consistent with applicable laws and regulations.
(h) Will regularly report to the Fund's Board of Trustees on the
investment program for the Series and the issuers and securities represented in
the Series' portfolio, and will furnish the Fund's Board of Trustees with
respect to the Series such periodic and special reports as the Directors and the
Adviser may reasonably request.
(i) Will not disclose or use any records or information obtained
pursuant to this Agreement (excluding investment research and investment advice)
in any manner whatsoever except as expressly authorized in this Agreement or in
the ordinary course of business in connection with placing orders for the
purchase and sale of securities, and will keep confidential any information
obtained pursuant to this Agreement, and disclose such information only if the
Board of Trustees of the Fund has authorized such disclosure, or if such
disclosure is required by applicable federal or state law or regulations or
regulatory authorities having the requisite authority. The Fund and the Adviser
will not disclose or use any records or information respecting the Portfolio
Manager obtained pursuant to this Agreement in any manner whatsoever except as
expressly authorized in this Agreement, and will keep confidential any
information obtained pursuant to this Agreement, and disclose such information
only as expressly authorized in this Agreement, if the Board of Trustees of the
Fund has authorized such disclosure, or if such
<PAGE>
disclosure is required by applicable federal or state law or regulations or
regulatory authorities having the requisite authority.
(j) Shall be responsible for making reasonable inquiries and for
reasonably ensuring that any employee of the Portfolio Manager has not, to the
best of the Portfolio Manager's knowledge:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor involving the purchase or sale of any security or arising out of
such person's conduct as an underwriter, broker, dealer, investment adviser,
municipal securities dealer, government securities broker, government securities
dealer, transfer agent, or entity or person required to be registered under the
Commodity Exchange Act, or as an affiliated person, salesman, or employee of any
investment company, bank, insurance company, or entity or person required to be
registered under the Commodity Exchange Act; or
(ii) been permanently or temporarily enjoined by reason of any
misconduct, by order, judgment, or decree of any court of competent jurisdiction
from acting as an underwriter, broker, dealer, investment adviser, municipal
securities dealer, government securities broker, government securities dealer,
transfer agent, or entity or person required to be registered under the
Commodity Exchange Act, or as an affiliated person, salesman or employee of any
investment company, bank, insurance company, or entity or person required to be
registered under the Commodity Exchange Act, or from engaging in or continuing
any conduct or practice in connection with any such activity or in connection
with the purchase or sale of any security.
3. Disclosure about Portfolio Manager. The Portfolio Manager has
----------------------------------
reviewed the current Registration Statement for the Fund filed with the SEC and
represents and warrants that, with respect to the disclosure about the Portfolio
Manager or information relating, directly or indirectly, to the Portfolio
Manager, such Registration Statement contains, as of the date hereof, no untrue
statement of any material fact and does not omit any statement of a material
fact which was required to be stated therein or necessary to make the statements
contained therein not misleading. The Portfolio Manager further represents and
warrants that it is a duly registered investment adviser under the Advisers Act
and a duly registered investment adviser in all states in which the Portfolio
Manager is required to be registered. The Adviser has received a current copy
of the Portfolio Manager's Uniform Application for Investment Adviser
Registration on Form ADV, as filed with the SEC. The Portfolio Manager agrees
to provide the Adviser with current copies of the Portfolio Manager's Form ADV,
and any supplements or amendments thereto, as filed with the SEC.
4. Expenses. During the term of this Agreement, the Portfolio
--------
Manager will pay all expenses incurred by it and its staff and for their
activities in connection with its services under this Agreement. The Portfolio
Manager shall not be responsible, unless the Portfolio Manager is responsible
for an expense under the standards specified in Section 13 of this Agreement,
for any of the following:
<PAGE>
(a) Expenses of all audits by the Fund's independent public
accountants;
(b) Expenses of the Fund's transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Fund's custodial services including
recordkeeping services provided by the custodian;
(d) Expenses of the Fund's recordkeeping services provided by
the recordkeeping agent;
(e) Expenses of obtaining quotations for calculating the value of
the Series' net assets;
(f) Expenses of obtaining portfolio activity reports for each
Series;
(g) Expenses of maintaining the Fund's tax records;
(h) Salaries and other compensation of any of the Fund's
executive officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or its subsidiaries or
affiliates (except that the Adviser, or any of its subsidiaries or affiliates,
shall bear the expense with respect to executive officers and employees, if any,
who are officers, directors, stockholders or employees of the Adviser or of its
subsidiaries or affiliates);
(i) Taxes or governmental fees, if any, levied against the Fund
or any of its Series;
(j) Brokerage fees and commissions in connection with the
purchase and sale of portfolio securities for the Series;
(k) Costs, including the interest expenses, of borrowing money;
(l) Costs and/or fees incident to meetings of the Fund's
shareholders, the preparation and mailings of prospectuses and reports of the
Fund to its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Fund's existence, and the registration of shares with federal
and state securities or insurance authorities;
(m) The Fund's legal fees, including the legal fees related to
the registration and continued qualification of the Fund's shares for sale;
(n) Costs of printing share certificates, if any, representing
shares of the Fund;
<PAGE>
(o) Trustees' fees and expenses to trustees of the Fund who are not
officers, employees, or stockholders of the Portfolio Manager or any affiliate
thereof (except that the Adviser shall bear the expense of any trustee who is an
officer, employee, or stockholder of the Adviser or any affiliate thereof);
(p) The Fund's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
(q) Association membership dues;
(r) Extraordinary expenses of the Fund as may arise including expenses
incurred in connection with litigation, proceedings and other claims (unless
Portfolio Manager is responsible for such expenses under Section 14 of this
Agreement) and the legal obligations of the Fund to indemnify its trustees,
officers, employees, shareholders, distributors, and agents with respect
thereto; and
(s) Organizational and offering expenses and, if applicable,
reimbursement (with interest) of underwriting discounts and commissions.
5. Compensation. For the services provided and the expenses borne
------------
by the Portfolio Manager pursuant to this Agreement, the Adviser will pay to the
Portfolio Manager a fee at an annual rate equal to .70% of the International
Series' average daily net assets up to $25 million, .55% of average daily net
assets on the next $25 million, .50% of average daily net assets on the next $50
million and .40% of average daily net assets thereafter. This fee shall be
computed and accrued daily and payable in arrears on the last day of the month.
6. Seed Money. The Adviser agrees that the Portfolio Manager shall
----------
not be responsible for providing money for the initial capitalization of any
Series.
7. Compliance.
----------
(a) The Portfolio Manager agrees that it shall immediately notify the
Adviser and the Fund in the event (i) that the SEC has censured the Portfolio
Manager; placed limitations upon its activities, functions or operations;
suspended or revoked its registration as an investment adviser; or has commenced
proceedings or an investigation that may result in any of these actions, (ii)
upon having a reasonable basis for believing that a Series has ceased to qualify
or might not qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code, and (iii) upon having a reasonable basis for believing
that the Series has ceased to comply with the diversification provisions of
Section 817(h) of the Internal Revenue Code or the Regulations thereunder. The
Portfolio Manager further agrees to notify the Adviser and the Fund immediately
of any material fact known to the Portfolio Manager respecting or relating to
the Portfolio Manager that is not contained in the Registration Statement or
prospectus for the Fund, or any amendment or supplement thereto, or of any
statement contained therein that becomes untrue in any material respect.
<PAGE>
(b) The Adviser agrees that it shall immediately notify the Portfolio
Manager in the event (i) that the SEC has censured the Adviser or the Fund;
placed limitations upon either of their activities, functions, or operations;
suspended or revoked the Adviser's registration as an investment adviser; or has
commenced proceedings or an investigation that may result in any of these
actions, (ii) upon having a reasonable basis for believing that a Series has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and (iii) upon having a reasonable
basis for believing that the Series has ceased to comply with the
diversification provisions of Section 817(h) of the Internal Revenue Code or the
Regulations thereunder. It is understood that the Adviser is responsible for
preparation of routine compliance reports with respect to the Series.
8. Independent Contractor. The Portfolio Manager shall for all
----------------------
purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided herein or authorized by the Adviser from time to
time, have no authority to act for or represent the Adviser in any way or
otherwise be deemed its agent. The Portfolio Manager understands that unless
expressly provided herein or authorized from time to time by the Fund, the
Portfolio Manager shall have no authority to act for or represent the Fund in
any way or otherwise be deemed the Fund's agent.
9. Books and Records. In compliance with the requirements of Rule
-----------------
31a-3 under the 1940 Act, the Portfolio Manager hereby agrees that all records
which it maintains for the Series are the property of the Fund and further
agrees to surrender promptly to the Fund any of such records upon the Fund's or
the Adviser's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-l under the 1940 Act and to preserve the
records required by Rule 204-2 under the Advisers Act for the period specified
in the Rule.
10. Cooperation. Each party to this Agreement agrees to cooperate
-----------
with each other party and with all appropriate governmental authorities having
the requisite jurisdiction (including, but not limited to, the SEC and state
insurance authorities) in connection with any investigation or inquiry relating
to this Agreement or the Fund.
11. Responsibility and Control. Notwithstanding any other provision
--------------------------
of this Agreement, it is understood and agreed that the Fund shall at all times
retain the ultimate responsibility for and control of all functions performed
pursuant to this Agreement and reserves the right to direct, approve or
disapprove any action hereunder taken on its behalf by the Portfolio Manager.
12. Services Not Exclusive. It is understood that the services of
----------------------
the Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or its affiliates) from providing similar
services to other clients, including investment companies
<PAGE>
(whether or not their investment objectives and policies are similar to those of
the Series) or from engaging in other activities.
13. Liability. Except as provided in Section 14 and as may otherwise
---------
be required by the 1940 Act or the rules thereunder or other applicable law, the
Fund and the Adviser agree that the Portfolio Manager, any affiliated person of
the Portfolio Manager, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act, controls the Portfolio Manager shall not be liable
for, or subject to any damages, expenses, or losses in connection with, any act
or omission connected with or arising out of any services rendered under this
Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Portfolio Manager's duties, or by reason of
reckless disregard of the Portfolio Manager's obligations and duties under this
Agreement.
14. Indemnification.
---------------
(a) Notwithstanding Section 13 of this Agreement, the Portfolio
Manager agrees to indemnify and hold harmless, the Adviser, any affiliated
person within the meaning of Section 2(a)(3) of the 1940 Act ("affiliated
person") of the Adviser, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act, controls ("controlling person") the Adviser, the
Fund, and each of the Fund's Trustees and Officers (collectively, "Adviser/Fund
Indemnified Persons") against any and all losses, claims, damages, liabilities
or litigation (including reasonable legal and other expenses), to which the
Adviser/Fund Indemnified Persons may become subject under the 1933 Act, 1940
Act, the Advisers Act, under any other statute, at common law or otherwise,
arising out of the Portfolio Manager's responsibilities to the Series which (i)
may be based upon any misfeasance, malfeasance, or nonfeasance by the Portfolio
Manager, any of its employees or representatives, or any affiliate of or any
person acting on behalf of the Portfolio Manager (other than an Adviser/Fund
Indemnified Person), or (ii) may be based upon a failure to comply with the
Section 2, Paragraph (a) of this Agreement, or (iii) may be based upon any
untrue statement or alleged untrue statement of a material fact contained in a
registration statement or prospectus covering the Shares of the Fund or any
Series, or any amendment thereof or any supplement thereto, or the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, if such a statement
or omission was made in reliance upon information furnished to the Adviser or
the Fund, or any affiliated person of the Adviser or the Fund by the Portfolio
Manager or any affiliated person of the Portfolio Manager (other than an
Adviser/Fund Indemnified Person); provided, however, that in no case is the
Portfolio Manager's indemnity in favor of the Adviser/Fund Indemnified Persons
deemed to protect such person against any liability to which any such person
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance of his duties, or by reason of his reckless
disregard of obligation and duties under this Agreement.
(b) The Adviser agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person within the meaning of Section 2(a)(3) of the 1940
Act of the Portfolio Manager and each person, if any, who, within the meaning of
Section 15 of the 1933 Act controls ("controlling person") the Portfolio Manager
(collectively, "Portfolio Manager
<PAGE>
Indemnified Persons") against any and all losses, claims, damages, liabilities
or litigation (including reasonable legal and other expenses) to which a
Portfolio Manager Indemnified Person may become subject under the 1933 Act, the
1940 Act, the Advisers Act, under any other statute, at common law or otherwise,
arising out of the Adviser's responsibilities as adviser of the Fund which (i)
may be based upon any misfeasance, malfeasance, or nonfeasance by the Adviser,
any of its employees or representatives or any affiliate of or any person acting
on behalf of the Adviser, or (ii) may be based upon a failure by Adviser to
provide Portfolio Manager with accurate (except to the extent any inaccuracies
are caused by Portfolio Manager) compliance reports relating to compliance with
Section 2, Paragraph (a) of this Agreement or (iii) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or prospectus covering Shares of the Fund or any Series,
or any amendment thereof or any supplement thereto, or the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading, unless such statement or
omission was made in reliance upon written information furnished to the Fund or
the Adviser or any affiliated person of the Adviser by a Portfolio Manager
Indemnified Person; provided however, that in no case is the indemnity of the
Adviser in favor of the Portfolio Manager Indemnified Persons deemed to protect
such person against any liability to which any such person would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of his duties, or by reason of his reckless disregard of obligations
and duties under this Agreement.
(c) The Adviser shall not be liable under Paragraph (b) or (c),
respectively of this Section 14 with respect to any claim made against a
Portfolio Manager Indemnified Person unless such Portfolio Manager Indemnified
Person shall have notified the Adviser in writing within a reasonable time after
the summons or other first legal process giving information of the nature of the
claim shall have been served upon such Portfolio Manager Indemnified Person (or
after such Portfolio Manager Indemnified Person shall have received notice of
such service on any designated agent), but failure to notify the Adviser of any
such claim shall not relieve the Adviser from any liability which it may have to
the Portfolio Manager Indemnified Person against whom such action is brought
otherwise than on account of this Section 14. In case any such action is
brought against the Portfolio Manager Indemnified Person, the Adviser will be
entitled to participate, at its own expense, in the defense thereof or, after
notice to the Portfolio Manager Indemnified Person, to assume the defense
thereof, with counsel satisfactory to the Portfolio Manager Indemnified Person.
If the Adviser assumes the defense and the selection of counsel by the Adviser
to represent both the Adviser and the Portfolio Manager Indemnified Person would
result in a conflict of interests and therefore, would not, in the reasonable
judgement of the Portfolio Manager Indemnified Person, adequately represent the
interests of the Portfolio Manager Indemnified Person, the Adviser will, at its
own expense, assume the defense with counsel to the Adviser and, also at its own
expense, with separate counsel to the Portfolio Manager Indemnified Person which
counsel shall be satisfactory to the Adviser and to the Portfolio Manager
Indemnified Person. The Portfolio Manager Indemnified Person shall bear the
fees and expenses of any additional counsel retained by it, and the Adviser
shall not be liable to the Portfolio Manager Indemnified Person under this
Agreement for any legal or other expenses subsequently incurred by the Portfolio
Manager Indemnified Person independently in connection with the defense thereof
other than reasonable
<PAGE>
costs of investigation. The Adviser shall not have the right to compromise on
or settle the litigation without the prior written consent of the Portfolio
Manager Indemnified Person if the compromise or settlement results, or may
result in a finding of wrongdoing on the part of the Portfolio Manager
Indemnified Person.
(d) The Portfolio Manager shall not be liable under Paragraph (a) of
this Section 14 with respect to any claim made against an Adviser/Fund
Indemnified Person unless such Adviser/Fund Indemnified Person shall have
notified the Portfolio Manager in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon such Adviser/Fund Indemnified Person (or after
such Adviser/Fund Indemnified Person shall have received notice of such service
on any designated agent), but failure to notify the Portfolio Manager of any
such claim shall not relieve the Portfolio Manager from any liability which it
may have to the Adviser/Fund Indemnified Person against whom such action is
brought otherwise than on account of this Section 14. In case any such action
is brought against the Adviser/Fund Indemnified Person, the Portfolio Manager
will be entitled to participate, at its own expense, in the defense thereof or,
after notice to the Adviser/Fund Indemnified Person, to assume the defense
thereof, with counsel satisfactory to the Adviser/Fund Indemnified Person. If
the Portfolio Manager assumes the defense and the selection of counsel by the
Portfolio Manager to represent both the Portfolio Manager and the Adviser/Fund
Indemnified Person would result in a conflict of interest and therefore, would
not, in the reasonable judgement of the Adviser/Fund Indemnified Person,
adequately represent the interests of the Adviser/Fund Indemnified Person, the
Portfolio Manager will, at its own expense, assume the defense with counsel to
the Portfolio Manager and, also at its own expense, with separate counsel to the
Adviser/Fund Indemnified Person which counsel shall be satisfactory to the
Portfolio Manager and to the Adviser/Fund Indemnified Person. The Adviser/Fund
Indemnified Person shall bear the fees and expenses of any additional counsel
retained by it, and the Portfolio Manager shall not be liable to the
Adviser/Fund Indemnified Person under this Agreement for any legal or other
expenses subsequently incurred by the Adviser/Fund Indemnified Person
independently in connection with the defense thereof other than reasonable costs
of investigation. The Portfolio Manager shall not have the right to compromise
on or settle the litigation without the prior written consent of the
Adviser/Fund Indemnified Person if the compromise or settlement results, or may
result in a finding of wrongdoing on the part of the Adviser/Fund Indemnified
Person.
15. Duration and Termination. This Agreement shall become effective
------------------------
as of January 1, 1994, and shall continue in effect for two years from such date
and continue thereafter on an annual basis with respect to the Series; provided
that such annual continuance is specifically approved at least annually (a) by
the vote of a majority of the Board of Trustees of the Fund, or (b) by the vote
of a majority of the outstanding voting shares of each Series, and provided that
continuance is also approved by the vote of a majority of the Board of Trustees
of the Fund who are not parties to this Agreement or "interested persons" (as
such term is defined in the 1940 Act) of the Fund, the Adviser, or the Portfolio
Manager, cast in person at a meeting called for the purpose of voting on such
approval. This Agreement may not be materially amended without a majority vote
of the outstanding shares (as defined in the 1940 Act) of the Series. This
Agreement may be terminated:
<PAGE>
(a) by the Fund at any time with respect to the services provided by
the Portfolio Manager, without the payment of any penalty, forfeiture,
compulsory buyout amount, or performance of any other obligation which could
deter termination, by vote of a majority of the entire Board of Trustees of the
Fund or by a vote of a majority of the outstanding voting shares of the Fund or,
with respect to a particular Series, by vote of a majority of the outstanding
voting shares of such Series, on 60 days' written notice to the Portfolio
Manager and the Adviser;
(b) by the Portfolio Manager at any time, without the payment of any
penalty, forfeiture, compulsory buyout amount or performance of any other
obligation which could deter termination, upon 60 days' written notice to the
Adviser and the Fund.
(c) by the Adviser at any time, without the payment of any penalty,
forfeiture, compulsory buyout amount or performance of any other obligation
which could deter termination, upon 60 days' written notice to the Portfolio
Manager and the Fund.
However, any approval of this Agreement by the holders of a majority
of the outstanding shares (as defined in the 1940 Act) of a particular Series
shall be effective to continue this Agreement with respect to such Series
notwithstanding (a) that this Agreement has not been approved by the holders of
a majority of the outstanding shares of any other Series or (b) that this
Agreement has not been approved by the vote of a majority of the outstanding
shares of the Fund, unless such approval shall be required by any other
applicable law or otherwise. In the event of termination for any reason, all
records of the Series shall promptly be returned to the Adviser or the Fund,
free from any claim or retention of rights in such record by the Portfolio
Manager, although the Portfolio Manager may, at its own expense, make and retain
a copy of such records. This Agreement will terminate automatically in event of
its assignment (as that term is defined in the 1940 Act), but shall not
terminate in connection with any transaction not deemed an assignment within the
meaning of Rules 2a-6 under the 1940 Act, or any other rule adopted by the SEC
regarding transactions not deemed to be assignments. In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(g), 2(i), 9, 10, 11, 13, 14 and 16 of this
Agreement as well as any applicable provision of this Paragraph numbered 15
shall remain in effect.
16. Use of Name.
-----------
(a) It is understood that the name "Pacific Mutual Life Insurance
Company" or "Pacific Mutual", or "Pacific Select Fund" or "Pacific Select" or
any derivative thereof or logo associated with that name is the valuable
property of the Adviser and its affiliates, and that the Portfolio Manager has
the right to use such name (or derivative or logo) only with the approval of the
Adviser and only so long as the Adviser is an investment adviser to the Fund
and/or the Series. Upon termination of the Advisory Agreement between the Fund
and the Adviser, the Portfolio Manager shall forthwith cease to use such name
(or derivative or logo).
(b) It is understood that the name "Templeton Investment Counsel,
Inc." or "Templeton" or any derivative thereof or logo associated with that name
is the valuable
<PAGE>
property of the Portfolio Manager and that the Adviser has the right to use such
name (or derivative or logo), in offering materials of the Fund and/or Series
with the approval of the Portfolio Manager and for so long as the Portfolio
Manager is a Portfolio Manager to the Fund and/or the Series. Upon termination
of this Agreement between the Adviser and the Portfolio Manager, the Fund and
the Adviser shall forthwith cease to use such name (or derivative or logo).
17. Limitation of Liability. A copy of the Amended and Restated
-----------------------
Agreement and Declaration of Trust for the Fund is on file with the Secretary of
the Commonwealth of Massachusetts. The obligations of this Agreement shall be
binding upon the assets and property of the Fund and shall not be binding upon
any Trustee, officer, employee, agent or shareholder, whether past, present, or
future, of the Fund individually.
18. Miscellaneous.
-------------
(a) This Agreement shall be governed by the laws of California,
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Investment Advisers Act of 1940 or rules or orders of the SEC
thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of the
1940 Act.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 15 of this Agreement, this
Agreement may only be assigned by any party with prior written consent of the
other parties.
(d) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable. To the extent that any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise with regard to any party hereunder, such provisions with respect to
other parties hereto shall not be affected thereby.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first written above.
PACIFIC MUTUAL LIFE
INSURANCE COMPANY
<PAGE>
Attest: /s/ DIANE N. LEDGER By: /s/ TC SUTTON
Title: Assistant Vice President Title: Chairman and Chief
Executive Officer
Attest: /s/ DIANE N. LEDGER By: /s/ WILLIAM D. CVENGROS
Title: Assistant Vice President Title: Chief Investment Officer
TEMPLETON INVESTMENT
COUNSEL, INC.
Attest: /s/ ELIZABETH M. KNOBLOCK By: /s/ JAMES R. WOOD
Title: Vice President, General Counsel Title: Senior Vice President and
and Secretary Director
PACIFIC SELECT FUND
Attest: /s/ DIANE N. LEDGER By: /s/ TC SUTTON
Title: Vice President and Title: President
Assistant Secretary
<PAGE>
EXHIBIT 99.5(g)
Portfolio Management Agreement - Greenwich Street Advisors
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this 5th day of December, 1994 between Pacific Mutual
Life Insurance Company ("Adviser"), a California corporation, and Mutual
Management Corp. on behalf of its Greenwich Street Advisors Division ("Portfolio
Manager"), a New York corporation, and Pacific Select Fund (the "Fund"), a
Massachusetts Business Trust.
WHEREAS, the Fund is registered with the Securities and Exchange
Commission ("SEC") as an open-end, management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of beneficial interest
("Shares") in separate series, with each such series representing interests in a
separate portfolio; and
WHEREAS, the Fund currently offers multiple series, two of which are
designated as the Equity Series and the Bond and Income Series, such Series
together with any other series subsequently established by the Fund, with
respect to which the Fund and Adviser desire to retain the Portfolio Manager to
render investment advisory services hereunder, and with respect to which the
Portfolio Manager is willing to do so, being herein collectively referred to
also as the "Series"; and
WHEREAS, the Portfolio Manager is registered with the SEC as an
investment adviser under the Investment Advisers Act of 1940 ("Advisers Act");
and
WHEREAS, the Fund has retained the Adviser to render investment
advisory services to the Series pursuant to an Advisory Agreement, as amended,
and such Agreement authorizes the Adviser to engage Portfolio Manager to
discharge the Adviser's responsibilities with respect to the investment
management of the Series, a copy of which has been provided to the Portfolio
Manager and is incorporated by reference herein; and
WHEREAS, the Fund and the Adviser desire to retain the Portfolio
Manager to furnish investment advisory services to one or more of the Series of
the Fund, and the Portfolio Manager is willing to furnish such services to such
Series and the Adviser in the manner and on the terms hereinafter set forth; and
NOW THEREFORE, in consideration of the premises and the promises and
mutual covenants herein contained, it is agreed between the Fund, the Adviser,
and the Portfolio Manager as follows:
-2-
<PAGE>
1. Appointment. The Fund and the Adviser hereby appoint Greenwich
-----------
Street Advisors Division of Mutual Management Corp. to act as Portfolio Manager
to the Equity Series and the Bond and Income Series (the "Series") for the
periods and on the terms set forth in this Agreement. The Portfolio Manager
accepts such appointment and agrees to furnish the services herein set forth for
the compensation herein provided.
In the event the Adviser wishes to retain the Portfolio Manager to
render investment advisory services to one or more series other than the Series,
the Adviser shall notify the Portfolio Manager in writing. If the Portfolio
Manager is willing to render such services, it shall notify the Fund and Adviser
in writing, whereupon such series shall become a Series hereunder, and be
subject to this Agreement.
2. Portfolio Manager Duties. Subject to the supervision of the
------------------------
Fund's Board of Trustees and the Adviser, the Portfolio Manager will provide a
continuous investment program for the Series and determine the composition of
the assets of the Series, including determination of the purchase, retention, or
sale of the securities, cash, and other investments for the Series. The
Portfolio Manager will provide investment research and analysis, which may
consist of computerized investment methodology, and will conduct a continuous
program of evaluation, investment, sales, and reinvestment of the Series' assets
by determining the securities and other investments that shall be purchased,
entered into, sold, closed, or exchanged for the Series, when these transactions
should be executed, and what portion of the assets of the Series should be held
in the various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of the Series. The Portfolio Manager will provide the services under
this Agreement in accordance with the Series' investment objective or
objectives, investment policies, and investment restrictions as stated in the
Fund's Registration Statement filed on Form N-1A with the SEC, as supplemented
or amended from time to time, copies of which shall be sent promptly to the
Portfolio Manager by the Adviser. Until the Adviser delivers any supplements or
amendments to the Portfolio Manager the Portfolio Manager shall be fully
protected in relying on the Fund's Registration Statement previously furnished
to the Portfolio Manager by the Adviser. In performing these duties, the
Portfolio Manager:
(a) Will (1) manage the Series so that it will qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code, (2) manage
the Series so as to ensure compliance by the Series with the diversification
requirements of Section 817(h) of the Internal Revenue Code and Regulations
issued thereunder, and (3) manage the Series so as to ensure compliance with the
Series' objectives, investment policies and investment restrictions as stated in
the Fund's Prospectus and Statement of Additional Information. The Adviser will
notify the Portfolio Manager of any amendments to the Section 817(h) of the
Internal Revenue Code and Regulations issued thereunder. In managing the Series
in accordance with these requirements, the Portfolio Manager shall be entitled
to receive and act upon advice of counsel to the Fund, counsel to the Adviser,
or counsel to the Portfolio Manager that is also acceptable to the Adviser.
-3-
<PAGE>
(b) Shall comply with the Series' procedures, policies, and guidelines
adopted by the Fund's Board of Trustees pursuant to the rules and regulations
promulgated under the 1940 Act and/or federal or state laws pertaining to
investment vehicles underlying variable annuity or variable life insurance
contracts and releases and interpretations related thereto (such Procedures,
Policies and Guidelines to be furnished by the Fund to the Portfolio Manager)
and with the provisions of the Fund's Registration Statement filed on Form N-1A
under the Securities Act of 1933 (the "1933 Act") and the 1940 Act, as
supplemented or amended from time to time. The Portfolio Manager shall be
responsible for its compliance with the Investment Advisers Act of 1940.
(c) Is responsible, in connection with its responsibilities under this
Section 2, for decisions to buy and sell securities and other investments for
the Series, for broker-dealer and futures commission merchant ("FCM") selection,
and for negotiation of commission rates. The Portfolio Manager's primary
consideration in effecting a security or other transaction will be to obtain the
best execution for the Series, taking into account the factors specified in the
Prospectus and Statement of Additional Information for the Fund, as they may be
amended or supplemented from time to time. Subject to such policies as the
Board of Trustees may determine and consistent with Section 28(e) of the
Securities Exchange Act of 1934, the Portfolio Manager shall not be deemed to
have acted unlawfully or to have breached any duty created by this Agreement or
otherwise solely by reason of its having caused the Series to pay a broker or
dealer, acting as agent, for effecting a portfolio transaction at a price in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction, if the Portfolio Manager determines in good
faith that such amount of commission was reasonable in relation to the value of
the brokerage and research services provided by such broker or dealer, viewed in
terms of either that particular transaction or the Portfolio Manager's or its
affiliates overall responsibilities with respect to the Series and to its other
clients as to which it exercises investment discretion. To the extent
consistent with these standards, and in accordance with Section 11(a) of the
Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and subject to
any other applicable laws and regulations including Section 17(e) of the 1940
Act, the Portfolio Manager is further authorized to allocate the orders placed
by it on behalf of the Series to the Portfolio Manager if it is registered as a
broker or dealer with the SEC or as a FCM with the Commodities Futures Trading
Commission ("CFTC"), to any of its affiliates that are registered as a broker or
dealer with the SEC or as a FCM with the CFTC, or to such brokers and dealers
that also provide research or statistical research and material, or other
services to the Series or the Portfolio Manager. Such allocation shall be in
such amounts and proportions as the Portfolio Manager shall determine consistent
with the above standards, and, upon request, the Portfolio Manager will report
on said allocation to the Adviser and Board of Trustees of the Fund, indicating
the brokers, dealers or FCMs to which such allocations have been made and the
basis therefor.
(d) May, on occasions when the purchase or sale of a security is
deemed to be in the best interest of a Series as well as any other investment
advisory clients, to the extent permitted by applicable laws and regulations,
but shall not be obligated to, aggregate the securities
-4-
<PAGE>
to be so sold or purchased with those of its other clients where such
aggregation is not inconsistent with the policies set forth in the Registration
Statement. In such event, allocation of the securities so purchased or sold, as
well as the expenses incurred in the transaction, will be made by the Portfolio
Manager in a manner that is fair and equitable in the judgment of the Portfolio
Manager in the exercise of its fiduciary obligations to the Fund and to such
other clients.
(e) Will, in connection with the purchase and sale of securities for
the Series, together with the Adviser, arrange for the transmission to the
custodian, and the recordkeeping agent for the Fund on a daily basis, such
confirmations, trade tickets, and other documents and information, including,
but not limited to, Cusip, Sedol, or other numbers that identify securities to
be purchased or sold on behalf of the Series, as may be reasonably necessary to
enable the custodian and recordkeeping agent to perform its administrative and
recordkeeping responsibilities with respect to the Series, and with respect to
portfolio securities to be purchased or sold through the Depository Trust
Company, will arrange for the automatic transmission of the confirmation of such
trades to the Fund's custodian, recordkeeping agent, and, if required, the
Adviser.
(f) Will assist the custodian and recordkeeping agent for the Fund in
determining or confirming, consistent with the procedures and policies stated in
the Registration Statement for the Fund, the value of any portfolio securities
or other assets of the Series for which the custodian and recordkeeping agent
seek assistance from the Portfolio Manager or identifies for review by the
Portfolio Manager.
(g) Will make available to the Fund, and the Adviser promptly upon
request, any of the Series' investment records and ledgers maintained by the
Portfolio Manager (which shall not include the records and ledgers maintained by
the custodian and recordkeeping agent for the Fund), as are necessary to assist
the Fund and the Adviser to comply with requirements of the 1940 Act and the
Investment Advisers Act of 1940, as well as other applicable laws, and will
furnish to regulatory authorities having the requisite authority any information
or reports in connection with such services which may be requested in order to
ascertain whether the operations of the Fund are being conducted in a manner
consistent with applicable laws and regulations.
(h) Will regularly report to the Fund's Board of Trustees on the
investment program for the Series and the issuers and securities represented in
the Series' portfolio, and will furnish the Fund's Board of Trustees with
respect to the Series such periodic and special reports as the Directors and the
Adviser may reasonably request.
(i) Will not disclose or use any records or information obtained
pursuant to this Agreement (excluding investment research and investment advice)
in any manner whatsoever except as expressly authorized in this Agreement or in
the ordinary course of business in connection with placing orders for the
purchase and sale of securities, and will keep confidential any information
obtained pursuant to this Agreement, and disclose such information
-5-
<PAGE>
only if the Board of Trustees of the Fund has authorized such disclosure, or if
such disclosure is required by applicable federal or state law or regulations or
regulatory authorities having the requisite authority. The Fund and the Adviser
will not disclose or use any records or information respecting the Portfolio
Manager obtained pursuant to this Agreement in any manner whatsoever except as
expressly authorized in this Agreement, and will keep confidential any
information obtained pursuant to this Agreement, and disclose such information
only as expressly authorized in this Agreement, if the Board of Trustees of the
Fund has authorized such disclosure, or if such disclosure is required by
applicable federal or state law or regulations or regulatory authorities having
the requisite authority.
(j) Shall be responsible for making reasonable inquiries and for
reasonably ensuring that any employee of the Portfolio Manager has not, to the
best of the Portfolio Manager's knowledge:
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor involving the purchase or sale of any security or arising out of
such person's conduct as an underwriter, broker, dealer, investment adviser,
municipal securities dealer, government securities broker, government securities
dealer, transfer agent, or entity or person required to be registered under the
Commodity Exchange Act, or as an affiliated person, salesman, or employee of any
investment company, bank, insurance company, or entity or person required to be
registered under the Commodity Exchange Act; or
(ii) been permanently or temporarily enjoined by reason of any
misconduct, by order, judgment, or decree of any court of competent jurisdiction
from acting as an underwriter, broker, dealer, investment adviser, municipal
securities dealer, government securities broker, government securities dealer,
transfer agent, or entity or person required to be registered under the
Commodity Exchange Act, or as an affiliated person, salesman or employee of any
investment company, bank, insurance company, or entity or person required to be
registered under the Commodity Exchange Act, or from engaging in or continuing
any conduct or practice in connection with any such activity or in connection
with the purchase or sale of any security.
(k) Shall provide to Adviser a copy of Portfolio Manager's Form ADV as
filed with the Securities and Exchange Commisssion and a list of persons who
Portfolio Manager wishes to have authorized to give written and/or oral
instructions to Custodians of Fund assets for the Series.
3. Expenses. During the term of this Agreement, the Portfolio
--------
Manager will pay all expenses incurred by it and its staff and for their
activities in connection with its services under this Agreement. The Portfolio
Manager shall not be responsible, unless the Portfolio Manager is responsible
for an expense under the standards specified in Section 12 of this Agreement,
for any of the following:
-6-
<PAGE>
(a) Expenses of all audits by the Fund's independent public
accountants;
(b) Expenses of the Fund's transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Fund's custodial services including
recordkeeping services provided by the custodian;
(d) Expenses of the Fund's recordkeeping services provided by
the recordkeeping agent;
(e) Expenses of obtaining quotations for calculating the value of
the Series' net assets;
(f) Expenses of obtaining portfolio activity reports for each
Series;
(g) Expenses of maintaining the Fund's tax records;
(h) Salaries and other compensation of any of the Fund's
executive officers and employees, if any, who are not officers, directors,
stockholders, or employees of the Portfolio Manager or its subsidiaries or
affiliates (except that the Adviser, or any of its subsidiaries or affiliates,
shall bear the expense with respect to executive officers and employees, if any,
who are officers, directors, stockholders or employees of the Adviser or of its
subsidiaries or affiliates);
(i) Taxes or governmental fees, if any, levied against the Fund
or any of its Series;
(j) Brokerage fees and commissions in connection with the
purchase and sale of portfolio securities for the Series;
(k) Costs, including the interest expenses, of borrowing money;
(l) Costs and/or fees incident to meetings of the Fund's
shareholders, the preparation and mailings of prospectuses and reports of the
Fund to its shareholders, the filing of reports with regulatory bodies, the
maintenance of the Fund's existence, and the registration of shares with federal
and state securities or insurance authorities;
(m) The Fund's legal fees, including the legal fees related to
the registration and continued qualification of the Fund's shares for sale;
(n) Costs of printing share certificates, if any, representing
shares of the Fund;
-7-
<PAGE>
(o) Trustees' fees and expenses to trustees of the Fund who are
not officers, employees, or stockholders of the Portfolio Manager or any
affiliate thereof (except that the Adviser shall bear the expense of any trustee
who is an officer, employee, or stockholder of the Adviser or any affiliate
thereof);
(p) The Fund's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
(q) Association membership dues;
(r) Extraordinary expenses of the Fund as may arise including
expenses incurred in connection with litigation, proceedings and other claims
(unless Portfolio Manager is responsible for such expenses under Section 14 of
this Agreement) and the legal obligations of the Fund to indemnify its trustees,
officers, employees, shareholders, distributors, and agents with respect
thereto; and
(s) Organizational and offering expenses and, if applicable,
reimbursement (with interest) of underwriting discounts and commissions.
4. Compensation. For the services provided and the expenses borne
------------
by the Portfolio Manager pursuant to this Agreement, the Adviser will pay to the
Portfolio Manager a fee at an annual rate equal to .50% of the Equity Series'
average daily net assets up to $500 million, .45% of average daily net assets on
the next $500 million and .40% of average daily net assets thereafter; and .40%
of the Bond and Income Series' average daily net assets up to $500 million, .35%
of average daily net assets on the next $500 million and .30% of average daily
net assets thereafter. This fee shall be computed and accrued daily and payable
monthly.
5. Seed Money. The Adviser agrees that the Portfolio Manager shall
----------
not be responsible for providing money for the initial capitalization of any
Series.
6. Compliance.
----------
(a) The Portfolio Manager agrees that it shall immediately notify the
Adviser and the Fund in the event (i) that the SEC has censured the Portfolio
Manager; placed limitations upon its activities, functions or operations;
suspended or revoked its registration as an investment adviser; or has commenced
proceedings or an investigation that may result in any of these actions, (ii)
upon having a reasonable basis for believing that a Series has ceased to qualify
or might not qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code, and (iii) upon having a reasonable basis for believing
that the Series has ceased to comply with the diversification provisions of
Section 817(h) of the Internal Revenue Code or the Regulations thereunder. The
Portfolio Manager further agrees to notify the Adviser and the Fund immediately
of any material fact known to the Portfolio Manager respecting or relating to
the Portfolio Manager that is not contained in the Registration Statement or
prospectus for the
-8-
<PAGE>
Fund, or any amendment or supplement thereto, or of any statement contained
therein that becomes untrue in any material respect.
(b) The Adviser agrees that it shall immediately notify the Portfolio
Manager in the event (i) that the SEC has censured the Adviser or the Fund;
placed limitations upon either of their activities, functions, or operations;
suspended or revoked the Adviser's registration as an investment adviser; or has
commenced proceedings or an investigation that may result in any of these
actions, (ii) upon having a reasonable basis for believing that a Series has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and (iii) upon having a reasonable
basis for believing that the Series has ceased to comply with the
diversification provisions of Section 817(h) of the Internal Revenue Code or the
Regulations thereunder.
7. Independent Contractor. The Portfolio Manager shall for all
----------------------
purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided herein or authorized by the Adviser from time to
time, have no authority to act for or represent the Adviser in any way or
otherwise be deemed its agent. The Portfolio Manager understands that unless
expressly provided herein or authorized from time to time by the Fund, the
Portfolio Manager shall have no authority to act for or represent the Fund in
any way or otherwise be deemed the Fund's agent.
8. Books and Records. In compliance with the requirements of Rule
-----------------
31a-3 under the 1940 Act, the Portfolio Manager hereby agrees that all records
which it maintains for the Series are the property of the Fund and further
agrees to surrender promptly to the Fund any of such records upon the Fund's or
the Adviser's request, although the Portfolio Manager may, at its own expense,
make and retain a copy of such records. The Portfolio Manager further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-l under the 1940 Act and to preserve the
records required by Rule 204-2 under the Advisers Act for the period specified
in the Rule.
9. Cooperation. Each party to this Agreement agrees to cooperate
-----------
with each other party and with all appropriate governmental authorities having
the requisite jurisdiction (including, but not limited to, the SEC and state
insurance authorities) in connection with any investigation or inquiry relating
to this Agreement or the Fund.
10. Responsibility and Control. Notwithstanding any other provision
--------------------------
of this Agreement, it is understood and agreed that the Fund shall at all times
retain the ultimate responsibility for and control of all functions performed
pursuant to this Agreement and reserves the right to direct, approve or
disapprove any action hereunder taken on its behalf by the Portfolio Manager.
11. Services Not Exclusive. It is understood that the services of
----------------------
the Portfolio Manager are not exclusive, and nothing in this Agreement shall
prevent the Portfolio Manager (or
-9-
<PAGE>
its affiliates) from providing similar services to other clients, including
investment companies (whether or not their investment objectives and policies
are similar to those of the Series) or from engaging in other activities.
12. Liability. Except as may otherwise be required by the 1940 Act
---------
or the rules thereunder or other applicable law, the Fund and the Adviser agree
that the Portfolio Manager, any affiliated person of the Portfolio Manager, and
each person, if any, who, within the meaning of Section 15 of the 1933 Act,
controls the Portfolio Manager shall not be liable for, or subject to any
damages, expenses, or losses in connection with, any act or omission connected
with or arising out of any services rendered under this Agreement, except by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of the Portfolio Manager's duties, or by reason of reckless disregard of the
Portfolio Manager's obligations and duties under this Agreement.
13. Duration and Termination. This Agreement shall become effective
------------------------
as of December 31, 1994 and shall continue in effect for two years from such
date and continue thereafter on an annual basis with respect to the Series;
provided that such annual continuance is specifically approved at least annually
(a) by the vote of a majority of the Board of Trustees of the Fund, or (b) by
the vote of a majority of the outstanding voting shares of each Series, and
provided that continuance is also approved by the vote of a majority of the
Board of Trustees of the Fund who are not parties to this Agreement or
"interested persons" (as such term is defined in the 1940 Act) of the Fund, the
Adviser, or the Portfolio Manager, cast in person at a meeting called for the
purpose of voting on such approval. This Agreement may not be materially
amended without a majority vote of the outstanding shares (as defined in the
1940 Act) of the Series. This Agreement may be terminated:
(a) by the Fund at any time with respect to the services provided by
the Portfolio Manager, without the payment of any penalty, forfeiture,
compulsory buyout amount, or performance of any other obligation which could
deter termination, by vote of a majority of the entire Board of Trustees of the
Fund or by a vote of a majority of the outstanding voting shares of the Fund or,
with respect to a particular Series, by vote of a majority of the outstanding
voting shares of such Series, on 60 days' written notice to the Portfolio
Manager and the Adviser;
(b) by the Portfolio Manager at any time, without the payment of any
penalty, forfeiture, compulsory buyout amount or performance of any other
obligation which could deter termination, upon 60 days' written notice to the
Adviser and the Fund.
(c) by the Adviser at any time, without the payment of any penalty,
forfeiture, compulsory buyout amount or performance of any other obligation
which could deter termination, upon 60 days' written notice to the Portfolio
Manager and the Fund.
However, any approval of this Agreement by the holders of a majority
of the outstanding shares (as defined in the 1940 Act) of a particular Series
shall be effective to continue
-10-
<PAGE>
this Agreement with respect to such Series notwithstanding (a) that this
Agreement has not been approved by the holders of a majority of the outstanding
shares of any other Series or (b) that this Agreement has not been approved by
the vote of a majority of the outstanding shares of the Fund, unless such
approval shall be required by any other applicable law or otherwise. In the
event of termination for any reason, all records of the Series shall promptly be
returned to the Adviser or the Fund, free from any claim or retention of rights
in such record by the Portfolio Manager, although the Portfolio Manager may, at
its own expense, make and retain a copy of such records. This Agreement will
terminate automatically in event of its assignment (as that term is defined in
the 1940 Act), but shall not terminate in connection with any transaction not
deemed an assignment within the meaning of Rules 2a-6 under the 1940 Act, or any
other rule adopted by the SEC regarding transactions not deemed to be
assignments. In the event this Agreement is terminated or is not approved in
the manner described above, the Sections or Paragraphs numbered 2(g), 2(i), 8,
9, 10, 12, and 14 of this Agreement as well as any applicable provision of this
Paragraph numbered 13 shall remain in effect.
14. Use of Name.
-----------
(a) It is understood that the name "Pacific Mutual Life Insurance
Company" or "Pacific Mutual", or "Pacific Select Fund" or "Pacific Select" or
any derivative thereof or logo associated with that name is the valuable
property of the Adviser and its affiliates, and that the Portfolio Manager has
the right to use such name (or derivative or logo) only with the approval of the
Adviser and only so long as the Adviser is an investment adviser to the Fund
and/or the Series. Upon termination of the Investment Advisory Agreement
between the Fund and the Adviser, the Portfolio Manager shall forthwith cease to
use such name (or derivative or logo).
(b) It is understood that the name "Greenwich Street Advisors Division
of Mutual Management Corp." or any derivative thereof or logo associated with
that name is the valuable property of the Portfolio Manager and that the Adviser
has the right to use such name (or derivative or logo), in offering materials of
the Fund and/or Series with the approval of the Portfolio Manager and for so
long as the Portfolio Manager is a Portfolio Manager to the Fund and/or the
Series. Upon termination of this Agreement between the Adviser and the
Portfolio Manager, the Fund and the Adviser shall forthwith cease to use such
name (or derivative or logo).
15. Limitation of Liability. A copy of the Amended and Restated
-----------------------
Agreement and Declaration of Trust for the Fund is on file with the Secretary of
the Commonwealth of Massachusetts. The obligations of this Agreement shall be
binding upon the assets and property of the Fund and shall not be binding upon
any Trustee, officer, employee, agent or shareholder, whether past, present, or
future, of the Fund individually.
-11-
<PAGE>
16. Miscellaneous.
-------------
(a) This Agreement shall be governed by the laws of California,
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Investment Advisers Act of 1940 or rules or orders of the SEC
thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of the
1940 Act.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 13 of this Agreement, this
Agreement may only be assigned by any party with prior written consent of the
other parties.
(d) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable. To the extent that any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise with regard to any party hereunder, such provisions with respect to
other parties hereto shall not be affected thereby.
-12-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first written above.
PACIFIC MUTUAL LIFE
INSURANCE COMPANY
Attest: /s/DIANE N. LEDGER By: /s/WILLIAM D. CVENGROS
Name: Diane N. Ledger Name: William D. Cvengros
Title: Assistant Vice President Title: Chief Investment Officer
Attest: /s/DIANE N. LEDGER By: /s/GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: Chief Financial Officer
MUTUAL MANAGEMENT CORP.
Attest: /s/NANCY W. LEDONNE By: /s/STEPHEN TREADWAY
Name: Nancy W. Ledonne Name: Stephen Treadway
Title: Assistant Secretary Title: Chairman and Chief
Executive Officer
PACIFIC SELECT FUND
Attest: /s/AUDREY L. MILFS By: /s/TC SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
-13-
<PAGE>
EXHIBIT 99.5(h)
Transfer and Assumption Agreement - Greenwich Street Advisors
<PAGE>
Form of
TRANSFER AND ASSUMPTION OF
PORTFOLIO MANAGEMENT AGREEMENT
for
PACIFIC SELECT FUND
TRANSFER AND ASSUMPTION OF PORTFOLIO MANAGEMENT AGREEMENT, made as of the
31st day of December, 1994, by and among Pacific Mutual Life Insurance Company
("Adviser"), a California corporation, Pacific Select Fund (the "Fund"), a
Massachusetts Business Trust, Mutual Management Corp. ("MMC"), on behalf of its
Greenwich Street Advisors Division, a New York corporation, and Smith Barney
Mutual Funds Management Inc. ("SBMFM"), on behalf of its Greenwich Street
Advisors Division, a Delaware corporation.
WHEREAS, the Fund is registered with the Securities and Exchange Commission
as an open-end management investment company under the Investment Company Act of
1940, as amended (the "Act"); and
WHEREAS, the Fund currently offers multiple series, two of which are
designated as the Equity Series and the Bond and Income Series, such Series
together with any other series subsequently established by the Fund, with
respect to which the Fund and Adviser desire to retain SBMFM to render
investment advisory services hereunder, and with respect to which SBMFM is
willing to do so, being herein collectively referred to also as the "Series";
and
WHEREAS, the Fund, Adviser, and MMC entered into a Portfolio Management
Agreement on December 5, 1994, under which MMC serves as the portfolio manager
(the "Portfolio Manager") for Series of the Fund; and
WHEREAS, MMC desires that its interest, rights, responsibilities and
obligations in and under the Portfolio Management Agreement be transferred to
SBMFM and SBMFM desires to assume MMC's interest, rights, responsibilities and
obligations in and under the Portfolio Management Agreement; and
WHEREAS, this Agreement does not result in a change of actual control or
management of the Portfolio Manager to the Series and, therefore, is not an
"assignment" as defined in Section 2(a)(4) of the Act nor an "assignment" for
the purposes of Section 15(a)(4) of the Act.
NOW, THEREFORE, in consideration of the mutual covenants set forth in this
Agreement and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereby agree as follows:
1. Assignment. Effective as of December 31, 1994 (the "Effective Date"),
-----------
MMC hereby transfers to SBMFM all of MMC's interest, rights, responsibilities
and obligations in and under the Portfolio Management Agreement dated December
5, 1994, to which MMC is a party with the Fund and adviser.
<PAGE>
2. Assumption and Performance of Duties. As of the Effective Date, SBMFM
-------------------------------------
hereby accepts all of MMC's interest and rights, and assumes and agrees to
perform all of MMC's responsibilities and obligations in and under the Portfolio
Management Agreement; SBMFM agrees to subject to all of the terms and
conditions of said Agreement; and SBMFM shall indemnify and hold harmless MMC
from any claim or demand made thereunder arising or incurred after the Effective
Date.
3. Representation of SBMFM. SBMFM represents and warrants that: (1) it
-----------------------
is registered as an investment adviser under the Investment Advisers Act of
1940, as amended; and (2) Smith Barney Holdings Inc. is its sole shareholder.
4. Consent. The Fund and Adviser hereby consent to this transfer by MMC
--------
to SBMFM of MMC's interest, rights, responsibilities and obligations in and
under the Portfolio Management Agreement and to the acceptance and assumption by
SBMFM of the same. The Fund and the Adviser agree, subject to the terms and
conditions of said Agreement, to look solely to SBMFM for the performance of the
Portfolio Manager's responsibilities and obligations under said Agreement from
and after the Effective Date, and to recognize as inuring solely to SBMFM the
interest and rights heretofore held by MMC thereunder.
5. Limitation of Liability of Trustees, Officers, and Shareholders. It
----------------------------------------------------------------
is expressly agreed that the obligations of the Fund hereunder shall not be
binding upon any of the Trustees, shareholders, nominees, officers, agents, or
employees of the Fund, personally, but shall bind assets and trust property of
the Fund as provided in the Declaration of Trust of the Fund. The execution and
delivery of this Agreement have been authorized by the Trustees of the Fund and
signed by the President of the Fund, acting as such, and neither such
authorization by such Trustees nor such execution and delivery by such officer
shall be deemed to have been made by any of them individually or to impose any
liability on any of them, personally, but shall bind assets and trust property
of the Fund as provided in its Declaration of Trust.
6. Counterparts. This Agreement may be signed in any number of
-------------
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers hereunto duly attested.
<PAGE>
Attest: PACIFIC SELECT FUND
/s/ DIANE N. LEDGER By: /s/ TC SUTTON
Diane N. Ledger Thomas C. Sutton
Chairman and Chief Executive
Officer
Attest:
/s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Diane N. Ledger Glenn S. Schafer
Chief Financial Officer
Attest: MUTUAL MANAGEMENT CORP.
/s/ NANCY W. LeDONNE By: /s/ STEPHEN TREADWAY
Nancy W. LeDonne Stephen Treadway
Title: Chairman and Chief Executive
Officer
Attest: SMITH BARNEY MUTUAL FUNDS
MANAGEMENT INC.
/s/ NANCY W. LeDONNE By: /s/ STEPHEN TREADWAY
Nancy W. LeDonne Stephen Treadway
Title: Chairman and Chief Executive
Officer
<PAGE>
EXHIBIT 99.5(i)
Portfolio Management Agreement - Pacific Investment Management Company
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this 15th day of November 1994 among Pacific Mutual Life
Insurance Company, a California Company ("Pacific Mutual"), Pacific Investment
Management Company, ("PIMCO"), a Delaware general partnership, and Pacific
Select Fund, a Massachusetts Business Trust (the "Fund").
WHEREAS, Pacific Select Fund, is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end, diversified management
investment company and is authorized to issue separate series, each of which
will offer a separate class of shares of beneficial interest, each series having
its own investment objective, policies and limitations;
WHEREAS, the Fund intends initially to offer shares in eight classes to be
designated as the Money Market Series, Managed Bond Series, High Yield Bond
Series, International Series, Government Securities Series, Growth Series,
Equity Income Series, and Multi-Strategy Series, (the "Initial Series");
WHEREAS, the Fund has retained Pacific Mutual to render investment
management and administrative services to the Initial Series;
WHEREAS, Pacific Mutual represents and warrants that it is a duly
registered investment adviser under the Investment Advisers Act of 1940
("Advisers Act"), as amended;
WHEREAS, PIMCO represents and warrants that it is a duly registered
investment adviser under the Investment Advisers Act of 1940, as amended; and
WHEREAS, Pacific Mutual and the Fund desire to retain PIMCO to furnish
portfolio management services to the Managed Bond Series and Government
Securities Series in connection with Pacific Mutual's investment management
activities on behalf of the Series, and PIMCO is willing to furnish such
services to Pacific Mutual and the Fund;
NOW THEREFORE, in consideration of the promises and mutual covenants herein
contained, it is agreed between Pacific Mutual, PIMCO and the Fund as follows:
1. Appointment. Pacific Mutual and the Fund hereby appoint PIMCO to
------------
act as Portfolio Manager to the Managed Bond Series and Government Securities
Series, (the "Series"), for the periods and on the terms set forth in this
Agreement. PIMCO accepts such appointment and agrees to furnish the services
herein set forth, for the compensation herein provided.
In the event the Fund designates one or more classes other than the Series
with respect to which Pacific Mutual and the Fund desire to retain PIMCO to
render portfolio management services hereunder, they shall notify PIMCO in
writing. If PIMCO is willing to render such services, it shall notify Pacific
Mutual and the Fund in writing, whereupon such class shall become a Series
hereunder, and be subject to this Agreement.
<PAGE>
2. Portfolio Management Duties. Subject to the supervision of Pacific
----------------------------
Mutual and the Fund's Board of Trustees, PIMCO will provide a continuous
investment program for the Series' portfolios, including investment research and
management with respect to all securities and investments and cash equivalents
in the portfolios. PIMCO will determine from time to time what securities and
other investments will be purchased, retained or sold by the Series. PIMCO will
provide the services under this Agreement in accordance with the Series'
investment objectives, policies and restrictions as stated in the Fund's
registration statement filed with the Securities and Exchange Commission
("SEC"), as amended. PIMCO further agrees that it will:
(a) conform with all applicable rules and regulations of the 1940 Act,
all other applicable federal and state laws and regulations and with any
applicable procedures adopted by the Fund's Board of Trustees;
(b) place orders pursuant to its investment determinations for the Series
either directly with the issuer or with any broker or dealer. PIMCO is
authorized to select brokers and dealers and open and maintain brokerage
accounts and trading accounts for the purchasing and selling of financial
futures contracts and related options with futures commission merchants for and
on behalf of the Series in accordance with procedures established by Pacific
Mutual and approved by the Fund's Board of Trustees. In placing orders with
brokers and dealers, PIMCO will attempt to obtain the best net price and the
most favorable execution of its orders. Consistent with this obligation, when
the execution and price offered by two or more brokers or dealers are
comparable, PIMCO may, in its discretion, purchase and sell portfolio securities
to and from brokers and dealers who provide it with research advice and other
services of lawful assistance to PIMCO in serving the Series as Portfolio
Manager;
(c) on occasions when the PIMCO deems the purchase or sale of a security
to be in the best interest of the Fund as well as its other investment advisory
clients, PIMCO may, to the extent permitted by applicable laws and regulations,
but shall not be obligated to, aggregate the securities to be so sold or
purchased with those of its other clients where such aggregation is not
inconsistent with the policies set forth in the Registration Statement. In such
event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by PIMCO in the manner it
considers to be the most equitable and consistent with its fiduciary obligations
to the Fund and to such other clients.
(d) in connection with the purchase and sale of securities of each Series,
PIMCO will arrange for the transmission to custodian for the Fund on a daily
basis, such confirmation, trade tickets and other documents as may be necessary
to enable them to perform their administrative responsibilities with respect to
the Series. With respect to portfolio securities to be purchased or sold through
the Depository Trust Company, PIMCO will arrange for the automatic transmission
of the confirmation of such trades to the Fund's custodian.
<PAGE>
(e) PIMCO will make available to Pacific Mutual and the Fund promptly
upon their request all of the Fund's investment records and ledgers as are
necessary to assist Pacific Mutual and the Fund in their compliance with respect
to the Series' securities transactions as required by the 1940 Act and the
Investment Advisers Act of 1940, as well as other applicable laws. PIMCO will
furnish the Fund's Board of Trustees with respect to the Series such periodic
and special reports as Pacific Mutual and the Trustees may reasonably request.
PIMCO will furnish to regulatory authorities any information or reports in
connection with such services which may be requested in order to ascertain
whether the operations of the Fund are being conducted in a manner consistent
with applicable laws and regulations.
(f) PIMCO will not disclose or use any records or information obtained
pursuant to this Agreement in any manner whatsoever except as expressly
authorized in this Agreement or in the ordinary course of business in connection
with placing orders for the purchase and sale of securities, and will keep
confidential any information obtained pursuant this Agreement, and disclose such
information only if the Board of Trustees of the Fund has authorized such
disclosure, or if such disclosure is expressly required by applicable federal or
state regulatory authorities.
(g) In rendering the services required under this Agreement, PIMCO may,
from time to time, employ or associate with itself such person or persons as it
believes necessary to assist it in carrying out its obligations under this
Agreement. However, PIMCO may not retain as subadvisors any company that would
be an "investment adviser," as that term is defined in the 1940 Act, to the Fund
unless the contract with such company is approved by a majority of the Fund's
Board of Trustees and a majority of Trustees who are not parties to any
agreement or contract with such person or persons and who are not "interested
persons," as defined in the 1940 Act, of the Fund, PIMCO, or any such person or
persons, and to approval by the vote of a majority of the outstanding voting
securities of the Fund to the extent required by the 1940 Act. PIMCO shall be
responsible for making inquiries and for reasonably insuring that any employee
of PIMCO, any person or firm that PIMCO has employed or with which it has
associated, or any employee thereof has not, to the best of PIMCO's knowledge,
in any material connection with the handling of Fund assets:
(a) been convicted, in the last 10 years, of any felony or misdemeanor
arising out of conduct involving embezzlement, fraudulent conversion, or
misappropriation of funds or securities, or involving violations of sections
1341, 1342, or 1343 of Title 18, United States Code; or
(b) been found by any state regulatory authority, within the last 10
years, to have violated or to have acknowledged violation of any provision of
any state insurance law involving fraud, deceit or knowing misrepresentation; or
(c) been found by any federal or state regulatory authorities, within the
last 10 years, to have violated or to have acknowledged violation of any
provision of federal or state securities laws involving fraud, deceit or knowing
misrepresentation.
<PAGE>
3. Expenses. During the term of this Agreement, PIMCO will pay all
---------
expenses incurred by it, its staff and their activities, in connection with its
portfolio management under this Agreement. This does not include costs payable
by the Fund, the Custodian or Pacific Mutual.
4. Compensation. For the services provided, Pacific Mutual will pay PIMCO
-------------
a fee, payable monthly, based on the average daily net assets of the Managed
Bond Series and Government Securities Series, at the annual rate of .50% of the
average daily net assets of each Series up to $25 million, .375% of average
daily net assets of each Series on the next $25 million and .25% of each Series'
average daily net assets thereafter.
5. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, PIMCO hereby agrees that all records which it maintains for
the Series are the property of the Fund and further agrees to surrender promptly
to the Fund any of such records upon the Fund's request. PIMCO further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the 1940 Act and to preserve the
records required by Rule 204-2 under the Investment Advisers Act of 1940
("Advisers Act") for the period specified in the Rule.
6. Indemnification. PIMCO agrees to indemnify and hold harmless, Pacific
----------------
Mutual, any affiliated person within the meaning of Section 2(a)(3) of the 1940
Act ("affiliated person") of Pacific Mutual and each person, if any who, within
the meaning of Section 15 of the Securities Act of 1933 (the "1933 Act"),
controls ("controlling person") Pacific Mutual against any and all losses,
claims, damages, liabilities or litigation (including legal and other expenses),
to which Pacific Mutual or such affiliated person or controlling person may
become subject under the 1933 Act, 1940 Act, the Advisers Act, under any other
statute, at common law or otherwise, arising out of PIMCO's responsibilities as
Portfolio Manager of the Fund which (1) may be based upon any misfeasance,
malfeasance, or nonfeasance by PIMCO, any of its employees or representatives or
any affiliate of or any person acting on behalf of PIMCO, or (2) may be based
upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus covering the shares of the
Fund or any Series or any amendment thereof or any supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, if
such a statement or omission was made in reliance upon written information
furnished to Pacific Mutual, the Fund or any affiliated person of the Fund by
PIMCO or any affiliated person of PIMCO; provided, however, that in no case is
PIMCO's indemnity in favor of Pacific Mutual or any affiliated person or
controlling person of Pacific Mutual deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the performance of his
duties or by reason of his reckless disregard of obligation and duties under
this Agreement.
Pacific Mutual agrees to indemnify and hold harmless PIMCO, any affiliated
person within the meaning of Section 2(a) (3) of the 1940 Act ("affiliated
person") of PIMCO and each person, if any, who, within the meaning of Section 15
of the 1933 Act controls ("controlling person") PIMCO against any and all
losses, claims, damages, liabilities or litigation (including legal and other
<PAGE>
expenses) to which PIMCO or such affiliated person or controlling person may
become subject under the 1933 Act, the 1940 Act, the Advisers Act, under any
other statute, at common law or otherwise, arising out of Pacific Mutual's
responsibilities as Investment Adviser of the Fund which (1) may be based upon
any misfeasance, malfeasance, or nonfeasance by Pacific Mutual, any of its
employees or representatives or any affiliate of or any person acting on behalf
of Pacific Mutual or (2) may be based upon any untrue statement or alleged
untrue statement of a material fact contained in a registration statement or
prospectus covering shares of the Fund or any Series or any amendment thereof or
any supplement thereto or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading unless such statement or omission was made in reliance
upon written information furnished to Pacific Mutual or any affiliated person of
Pacific Mutual by PIMCO or any affiliated person of PIMCO; provided however,
that in no case is the indemnity of Pacific Mutual in favor of PIMCO, or any
affiliated person or controlling person of PIMCO deemed to protect such person
against any liability to which any such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of his duties or by reason of his reckless disregard of obligations and duties
under this Agreement.
Except as may otherwise be required by the 1940 Act or the rules
thereunder, the Fund agrees that PIMCO, any affiliated person within the meaning
of Section 2(a)(3) of the 1940 Act of PIMCO and each person, if any, who, within
the meaning of Section 15 of the 1933 Act controls PIMCO shall not be liable, or
subject to any damages, expenses or losses, in connection with any act or
omission connected with or arising out of any investment advisory services
rendered under this Agreement, except by reason of willful misfeasance, bad
faith or gross negligence in the performance of PIMCO's duties or by reason of
reckless disregard of PIMCO's obligations and duties under this Agreement.
7. Control. Notwithstanding any other provision of the Agreement, it is
--------
understood and agreed that the Fund shall at all times retain the ultimate
responsibility for and control of all functions performed pursuant to this
Agreement and reserve the right to direct, approve or disapprove any action
hereunder taken on its behalf by PIMCO.
8. Services Not Exclusive. It is understood that the services of PIMCO
----------------------
are not exclusive, and nothing in this Agreement shall prevent PIMCO from
providing similar services to other clients, including investment companies
(whether or not their investment objectives and policies are similar to those of
the Series) or from engaging in other activities.
9. Duration and Termination. This Agreement shall become effective as of
-------------------------
the "Closing Date" as that term is defined in the Agreement and Plan of
Consolidation for PIMCO Advisers L.P., dated July 11, 1994 (the "Effective
Date"). Unless terminated as provided herein, the Agreement shall remain in full
force and effect for two years from such date and continue on an annual basis
with respect to each Series unless terminated in accordance with the following
sentence; provided that such annual continuance is specifically approved each
year by (a) the vote of a majority of the entire Board of Trustees of the Fund,
or by the vote of a majority of the outstanding voting securities
<PAGE>
of each Series (as defined in the 1940 Act), and (b) the vote of a majority of
those Trustees who are not parties to this Agreement or interested persons (as
such term is defined in the 1940 Act) of any such party to this Agreement cast
in person at a meeting called for the purpose of voting on such approval. In
the event this Agreement is not approved in the manner described in the
preceding sentence, the paragraph numbered six (6), of this Agreement shall
remain in effect as well as any applicable provision of this paragraph numbered
nine (9) and PIMCO shall not provide any services for such Series or receive any
fees on account of such Series that fail to so approve of this Agreement.
Notwithstanding the foregoing, this Agreement may be terminated: (a) by Pacific
Mutual at any time without penalty, upon sixty (60) days' written notice to
PIMCO and the Fund (b) at any time without payment of any penalty by the Fund,
upon the vote of a majority of the Fund's Board of Trustees or a majority of the
outstanding voting securities of each Series, upon sixty (60) day's written
notice to PIMCO, or (c) by PIMCO at any time without penalty by PIMCO, upon
sixty (60) day's written notice to Pacific Mutual and the Fund. In the event of
termination for any reason, all records of each Series for which the Agreement
is terminated shall promptly be returned to Pacific Mutual or the Fund, free
from any claim or retention of rights by PIMCO: the Agreement shall
automatically terminate in the event of its assignment (as such term is defined
in the 1940 Act).
10. Amendments. No provision of this Agreement may be changed, waived,
-----------
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought and no amendment of this Agreement shall be effective
until approved by an affirmative vote of (i) the holders of a majority of the
outstanding voting securities of the Series, and (ii) the Trustees of the Fund,
including a majority of the Trustees of the Fund who are not interested persons
of any party to this Agreement, cast in person at a meeting called for the
purpose of voting on such approval, if such approval is required by applicable
law.
11. Use of Name. It is understood that the name Pacific Select or any
------------
derivative thereof or logo associated with that name is the valuable property of
Pacific Mutual and its affiliates, and that the Fund and/or the Series have the
right to use such name (or derivative or logo) only so long as Pacific Mutual is
Investment Manager to the Fund and/or the Series. Upon termination of the
Investment Management Agreement between the Fund (or Series) and Pacific Mutual,
the Fund (or Series) shall forthwith cease to use such name (or derivative or
logo) and, in the case of the Fund, shall promptly amend its Agreement and
Declaration of Trust to change its name.
It is understood that the name (PIMCO) Pacific Investment Management
Company or any derivative thereof or logo associated with that name is the
valuable property of PIMCO and its affiliates and that the Fund and/or the
Series have the right to use such name (or derivative or logo) in offering
materials of the Fund with the approval of PIMCO and for so long as PIMCO is
Portfolio Manager to the Fund and/or the Series. Upon termination of this
Agreement between the Fund (or Series), Pacific Mutual, and PIMCO, the Fund (or
Series) shall forthwith cease to use such name (or derivative or logo).
<PAGE>
12. Miscellaneous.
-------------
a. This Agreement shall be governed by the laws of the State of
California, provided that nothing herein shall be construed in a manner
inconsistent with the 1940 Act, the Advisers Act or rules or orders of the SEC
thereunder.
b. The captions of this Agreement are included for convenience only and
in no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
c. To the extent permitted under Section 9 of the Agreement, this
Agreement may not be assigned by any party without the prior written consent of
the other parties.
d. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable.
e. Nothing herein shall be construed as constituting PIMCO as an agent of
the Fund or Pacific Mutual.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed as of the day and year first above written.
PACIFIC MUTUAL LIFE
INSURANCE COMPANY
Date: November 15, 1994 By /s/ GLENN S. SCHAFER
Executive Vice President
PACIFIC INVESTMENT
MANAGEMENT COMPANY
Date: November 15, 1994 By /s/ WILLIAM D. CVENGROS
Managing Director
PACIFIC SELECT FUND
Date: November 15, 1994 By /s/ THOMAS C. SUTTON
President
<PAGE>
EXHIBIT 99.5(j)
Portfolio Management Agreement - Blairlogie Capital Management
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this ______________________________________, 1995 between
Pacific Mutual Life Insurance Company ("Adviser"), a California corporation, and
Blairlogie Capital Management ("Portfolio Manager"), a Scottish (U.K.) limited
partnership, and Pacific Select Fund (the "Fund"), a Massachusetts Business
Trust.
WHEREAS, the Fund is registered with the Securities and Exchange
Commission ("SEC") as an open-end, management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of beneficial interest
("Shares") in separate portfolios, with each such portfolio representing
interests in a separate portfolio; and
WHEREAS, the Fund currently offers multiple Portfolios, one of which is
designated as the Emerging Markets Portfolio, such Portfolio together with any
other Portfolios subsequently established by the Fund, with respect to which the
Fund and Adviser desire to retain the Portfolio Manager to render investment
advisory services hereunder, and with respect to which the Portfolio Manager is
willing to do so, being herein collectively referred to also as the
"Portfolios"; and
WHEREAS, the Portfolio Manager is registered with the SEC as an investment
adviser under the Investment Advisers Act of 1940 ("Advisers Act") and is
registered with and regulated by Investment Managers Regulatory Organization
("IMRO") in the United Kingdom; and
WHEREAS, the Fund has retained the Adviser to render investment advisory
services to the Portfolios pursuant to an Advisory Agreement, as amended, and
such Agreement authorizes the Adviser to engage Portfolio Manager to discharge
the Adviser's responsibilities with respect to the investment management of the
Portfolio, a copy of which has been provided to the Portfolio Manager and is
incorporated by reference herein; and
WHEREAS, the Fund and the Adviser desire to retain the Portfolio Manager to
furnish investment advisory services to one or more Portfolios of the Fund, and
the Portfolio Manager is willing to furnish such services to such Portfolio and
the Adviser in the manner and on the terms hereinafter set forth; and
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Fund, the Adviser, and the
Portfolio Manager as follows:
1. Appointment. The Fund and the Adviser hereby appoint Blairlogie
------------
Capital Management to act as Portfolio Manager to the Emerging Markets Portfolio
("the Portfolio") for the periods and on the terms set forth in this Agreement.
The Portfolio Manager accepts such appointment and agrees to furnish the
services herein set forth for the compensation herein provided.
<PAGE>
In the event the Adviser wishes to retain the Portfolio Manager to render
investment advisory services to one or more portfolio other than the Portfolio,
the Adviser shall notify the Portfolio Manager in writing. If the Portfolio
Manager is willing to render such services, it shall notify the Fund and Adviser
in writing, whereupon such portfolio shall become a Portfolio hereunder, and be
subject to this Agreement.
2. Portfolio Manager Duties. Subject to the supervision of the Fund's
-------------------------
Board of Trustees and the Adviser, the Portfolio Manager will provide a
continuous investment program for the Portfolio and determine the composition of
the assets of the Portfolio, including determination of the purchase, retention,
or sale of the securities, cash, and other investments, including futures
contracts and options thereon, for the Portfolio. The Portfolio Manager will
provide investment research and analysis, which may consist of computerized
investment methodology, and will conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Portfolio's assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Portfolio, when these transactions should be
executed, and what portion of the assets of the Portfolio should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of the Portfolio. To the extent permitted by the investment policies of
the Portfolio, the Portfolio Manager shall make decisions for the Portfolio as
to foreign currency matters and make determinations as to the retention or
disposition of foreign currencies or securities or other instruments denominated
in foreign currencies, or derivative instruments based upon foreign currencies,
including forward foreign currency contracts and options and futures on foreign
currencies and shall execute and perform the same on behalf of the Portfolio.
The Portfolio Manager is authorized to exercise tender offers, exchange offers
and to vote proxies on behalf of the Fund, each as the Portfolio Manager
determines is in the best interest of the Fund. In performing these duties, the
Portfolio Manager:
(a) Will (1) manage the Portfolio so that it will qualify as a
regulated investment company under Subchapter M of the Internal Revenue Code and
(2) manage the Portfolio so as to ensure compliance by the Portfolio with the
diversification requirements of Section 817(h) of the Internal Revenue Code and
Regulations issued thereunder. The Adviser will notify the Portfolio Manager of
any amendments to the Section 817(h) of the Internal Revenue Code and
Regulations issued thereunder. In managing the Portfolio in accordance with
these requirements, the Portfolio Manager shall be entitled to receive and act
upon advice of counsel to the Fund, counsel to the Adviser, or counsel to the
Portfolio Manager that is also acceptable to the Adviser.
(b) In managing the Portfolio or Portfolios, the Portfolio Manager
shall conform with (1) the 1940 Act and all rules and regulations thereunder,
and releases and interpretations related thereto, (2) with all other applicable
federal and state laws and regulations pertaining to investment vehicles
underlying variable annuity and/or variable life insurance contracts, (3) with
any applicable procedures, policies and guidelines adopted by the Fund's Board
of Trustees, (4) with the Portfolio's objectives, investment policies and
investment restrictions as stated in the Fund's Prospectus and Statement of
Additional Information, and (5) with the provisions of the Fund's Registration
Statement filed on Form N-1A under the Securities Act of 1933 (the "1933 Act")
and the 1940 Act, as supplemented or amended from time to time. Until the
Adviser delivers any
<PAGE>
supplements or amendments to the Portfolio Manager, the Portfolio Manager shall
be fully protected in relying on the Fund's Registration Statement previously
furnished to the Portfolio Manager by the Adviser.
(c) Is responsible, in connection with its responsibilities under this
Section 2, for decisions to buy and sell securities and other investments for
the Portfolio, for broker-dealer and futures commission merchant ("FCM")
selection, and for negotiation of commission rates. The Portfolio Manager's
primary consideration in effecting a security or other transaction will be to
obtain the best execution for the Portfolio, taking into account the factors
specified in the Prospectus and Statement of Additional Information for the
Fund, as they may be amended or supplemented from time to time. Subject to such
policies as the Board of Trustees may determine and consistent with Section
28(e) of the Securities Exchange Act of 1934, the Portfolio Manager shall not be
deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of its having caused the Portfolio to
pay a broker or dealer, acting as agent, for effecting a portfolio transaction
at a price in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Portfolio Manager determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Portfolio Manager's
(or its affiliates) overall responsibilities with respect to the Portfolio and
to its other clients as to which it exercises investment discretion. To the
extent consistent with these standards, and in accordance with Section 11(a) of
the Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and subject
to any other applicable laws and regulations including Section 17(e) of the 1940
Act, the Portfolio Manager is further authorized to allocate the orders placed
by it on behalf of the Portfolio to the Portfolio Manager if it is registered as
a broker or dealer with the SEC or as a FCM with the Commodities Futures Trading
Commission ("CFTC"), to any of its affiliates that are registered as a broker or
dealer with the SEC or as a FCM with the CFTC, or to such brokers and dealers
that also provide research or statistical research and material, or other
services to the Portfolio or the Portfolio Manager. Such allocation shall be in
such amounts and proportions as the Portfolio Manager shall determine consistent
with the above standards, and, upon request, the Portfolio Manager will report
on said allocation to the Adviser and Board of Trustees of the Fund, indicating
the brokers, dealers or FCMs to which such allocations have been made and the
basis therefor.
(d) May, on occasions when the purchase or sale of a security is
deemed to be in the best interest of a Portfolio as well as any other investment
advisory clients, to the extent permitted by applicable laws and regulations,
but shall not be obligated to, aggregate the securities to be so sold or
purchased with those of its other clients where such aggregation is not
inconsistent with the policies set forth in the Fund's Registration Statement.
In such event, allocation of the securities so purchased or sold, as well as the
expenses incurred in the transaction, will be made by the Portfolio Manager in a
manner that is fair and equitable in the judgment of the Portfolio Manager in
the exercise of its fiduciary obligations to the Fund and to such other clients.
(e) Will, in connection with the purchase and sale of securities for
the Portfolio, together with the Adviser, arrange for the transmission to the
custodian and recordkeeping agent for the Fund, on a daily basis, such
confirmation(s), trade tickets, and other documents and information,
<PAGE>
including, but not limited to, Cusip, Sedol, or other numbers that identify
securities to be purchased or sold on behalf of the Portfolio, as may be
reasonably necessary to enable the custodian and recordkeeping agent to perform
its administrative and recordkeeping responsibilities with respect to the
Portfolio, and with respect to portfolio securities to be purchased or sold
through the Depository Trust Company, will arrange for the automatic
transmission of the confirmation of such trades to the Fund's custodian, and
recordkeeping agent, and, if required, the Adviser.
(f) Will assist the custodian and recordkeeping agent for the Fund in
determining or confirming, consistent with the procedures and policies stated in
the Registration Statement for the Fund, the value of any portfolio securities
or other assets of the Portfolio for which the custodian and recordkeeping agent
seeks assistance from the Portfolio Manager or identifies for review by the
Portfolio Manager.
(g) Will make available to the Fund and the Adviser promptly upon
request, any of the Portfolio's investment records and ledgers maintained by the
Portfolio Manager (which shall not include the records and ledgers maintained by
the custodian and recordkeeping agent for the Fund), as are necessary to assist
the Fund and the Adviser to comply with requirements of the 1940 Act and the
Advisers Act, as well as other applicable laws, and will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with such services which may be requested in order to ascertain
whether the operations of the Fund are being conducted in a manner consistent
with applicable laws and regulations.
(h) Will regularly report to the Fund's Board of Trustees on the
investment program for the Portfolio and the issuers and securities represented
in the Portfolio's portfolio, and will furnish the Fund's Board of Trustees with
respect to the portfolio such periodic and special reports as the Trustees and
the Adviser may reasonably request.
(i) Will not disclose or use any records or information obtained
pursuant to this Agreement (excluding investment research and investment
advice) in any manner whatsoever except as expressly authorized in this
Agreement or in the ordinary course of business in connection with placing
orders for the purchase and sale of securities, and will keep confidential any
information obtained pursuant to the Agreement, and disclose such information
only if the Board of Trustees of the Fund has authorized such disclosure, or if
such disclosure is required by applicable federal or state law or regulations or
regulatory authorities having the requisite authority. The Fund and the Adviser
will not disclose or use any records or information respecting the Portfolio
Manager obtained pursuant to this Agreement in any manner whatsoever except as
expressly authorized in this Agreement, and will keep confidential any
information obtained pursuant to this Agreement, and disclose such information
only as expressly authorized in this Agreement, if the Board of Trustees of the
Fund has authorized such disclosure, or if such disclosure is required by
applicable federal or state law or regulations or regulatory authorities having
the requisite authority.
(j) Shall be responsible for making reasonable inquiries and for
reasonably ensuring that any employee of the Portfolio Manager has not, to the
best of the Portfolio Manager's knowledge:
<PAGE>
(i) been convicted, in the last ten (10) years, of any felony or
misdemeanor involving the purchase or sale of any security or arising out of
such person's conduct as an underwriter, broker, dealer, investment adviser,
municipal securities dealer, government securities broker, government securities
dealer, transfer agent, or entity or person required to be registered under the
Commodity Exchange Act, or as an affiliated person, salesman, or employee of any
investment company, bank, insurance company, or entity or person required to be
registered under the Commodity Exchange Act; or
(ii) been permanently or temporarily enjoined by reason of any
misconduct, by order, judgment, or decree of any court of competent jurisdiction
from acting as an underwriter, broker, dealer, investment adviser, municipal
securities dealer, government securities broker, government securities dealer,
transfer agent, or entity or person required to be registered under the
Commodity Exchange Act, or as an affiliated person, salesman or employee of any
investment company, bank, insurance company, or entity or person required to be
registered under the Commodity Exchange Act, or from engaging in or continuing
any conduct or practice in connection with any such activity or in connection
with the purchase or sale of any security.
(k) Shall provide to Adviser a copy of Portfolio Manager's Form ADV
as filed with the Securities and Exchange Commission and a list of persons who
Portfolio Manager wishes to have authorized to give written and/or oral
instructions to Custodians of Fund assets for the Portfolio.
3. Disclosure about Portfolio Manager. The Portfolio Manager has
----------------------------------
reviewed the current Registration Statement for the Fund filed with the SEC and
represents and warrants that, with respect to the disclosure about the Portfolio
Manager or information relating, directly or indirectly, to the Portfolio
Manager, such Registration Statement contains, as of the date hereof, no untrue
statement of any material fact and does not omit any statement of a material
fact which was required to be stated therein or necessary to make the statements
contained therein not misleading. The Portfolio Manager further represents and
warrants that it is a duly registered investment adviser under the Advisers Act
and a duly registered investment adviser in all states in which the Portfolio
Manager is required to be registered. The Adviser has received a current copy
of the Portfolio Manager's Uniform Application for Investment Adviser
Registration on Form ADV, as filed with the SEC. The Portfolio Manager agrees
to provide the Adviser with current copies of the Portfolio Manager's Form ADV,
and any supplements or amendments thereto, as filed with the SEC.
4. Expenses. During the term of this Agreement, the Portfolio Manager
--------
will pay all expenses incurred by it and its staff and for their activities in
connection with its services under this Agreement. The Portfolio Manager shall
not be responsible for any of the following:
(a) Expenses of all audits by the Fund's independent public
accountants;
(b) Expenses of the Fund's transfer agent, registrar, dividend
disbursing agent, and shareholder recordkeeping services;
(c) Expenses of the Fund's custodial services including recordkeeping
services
<PAGE>
provided by the custodian;
(d) Expenses of the Fund's recordkeeping services provided by the
recordkeeping agent;
(e) Expenses of obtaining quotations for calculating the value of the
Portfolio's net assets;
(f) Expenses of obtaining portfolio activity reports for each
Portfolio;
(g) Expenses of maintaining the Fund's tax records;
(h) Salaries and other compensation of any of the Fund's executive
officers and employees, if any, who are not officers, directors, stockholders,
or employees of the Portfolio Manager or its subsidiaries or affiliates (except
that the Adviser, or any of its subsidiaries or affiliates, shall bear the
expense with respect to executive officers and employees, if any, who are
officers, directors, stockholders or employees of the Adviser or of its
subsidiaries or affiliates);
(i) Taxes, if any, levied against the Fund or any of its Portfolios;
(j) Brokerage fees and commissions in connection with the purchase and
sale of portfolio securities for the Portfolio;
(k) Costs, including the interest expenses, of borrowing money;
(l) Costs and/or fees incident to meetings of the Fund's shareholders,
the preparation and mailings of prospectuses and reports of the Fund to its
shareholders, the filing of reports with regulatory bodies, the maintenance of
the Fund's existence, and the registration of shares with federal and state
securities or insurance authorities;
(m) The Fund's legal fees, including the legal fees related to the
registration and continued qualification of the Fund's shares for sale;
(n) Costs of printing "share" stock certificates, if any, representing
shares of the Fund;
(o) Trustees' fees and expenses of Trustees of the Fund who are not
officers, employees, or stockholders of the Portfolio Manager or any affiliate
thereof (except that the Adviser shall bear the expense of any trustee who is an
officer, employee, or stockholder of the Adviser or any affiliate thereof);
(p) The Fund's pro rata portion of the fidelity bond required by
Section 17(g) of the 1940 Act, or other insurance premiums;
(q) Association membership dues;
<PAGE>
(r) Extraordinary expenses of the Fund as may arise including expenses
incurred in connection with litigation, proceedings and other claims and the
legal obligations of the Fund to indemnify its trustees, officers, employees,
shareholders, distributors, and agents with respect thereto (unless Portfolio
Manager is responsible for such expenses under Section 14 of this Agreement);
and
(s) Organizational and offering expenses and, if applicable,
reimbursement (with interest) of underwriting discounts and commissions.
5. Compensation. For the services provided and the expenses borne by the
------------
Portfolio Manager pursuant to this Agreement, the Adviser will pay to the
Portfolio Manager a fee in accordance with the Fee Schedule attached to this
Agreement. This fee will be computed and accrued daily and payable monthly.
6. Seed Money. The Adviser agrees that the Portfolio Manager shall not
----------
be responsible for providing money for the initial capitalization of any
Portfolio.
7. Compliance.
----------
(a) The Portfolio Manager agrees that it shall immediately notify the
Adviser and the Fund in the event (i) that the SEC has censured the Portfolio
Manager; placed limitations upon its activities, functions or operations;
suspended or revoked its registration as an investment adviser; or has commenced
proceedings or an investigation that may result in any of these actions, (ii)
upon having a reasonable basis for believing that a Portfolio has ceased to
qualify or might not qualify as a regulated investment company under Subchapter
M of the Internal Revenue Code, and (iii) upon having a reasonable basis for
believing that the Portfolio has ceased to comply with the diversification
provisions of Section 817(h) of the Internal Revenue Code or the Regulations
thereunder. The Portfolio Manager further agrees to notify the Adviser and the
Fund immediately of any material fact known to the Portfolio Manager respecting
or relating to the Portfolio Manager that is not contained in the Registration
Statement or prospectus for the Fund, or any amendment or supplement thereto, or
of any statement contained therein that becomes untrue in any material respect.
(b) The Adviser agrees that it shall immediately notify the Portfolio
Manager in the event (i) that the SEC has censured the Adviser or the Fund;
placed limitations upon either of their activities, functions, or operations;
suspended or revoked the Adviser's registration as an investment adviser; or has
commenced proceedings or an investigation that may result in any of these
actions, (ii) upon having a reasonable basis for believing that a Portfolio has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and (iii) upon having a reasonable
basis for believing that the Portfolio has ceased to comply with the
diversification provisions of Section 817(h) of the Internal Revenue Code or the
Regulations thereunder.
8. Independent Contractor. The Portfolio Manager shall for all purposes
----------------------
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Adviser from time to time, have
no authority to act for or represent the Adviser
<PAGE>
in any way or otherwise be deemed its agent. The Portfolio Manager understands
that unless expressly provided herein or authorized from time to time by the
Fund, the Portfolio Manager shall have no authority to act for or represent the
Fund in any way or otherwise be deemed the Fund's Agent.
9. Books and Records. In compliance with the requirements of Rule 31a-3
-----------------
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Portfolio are the property of the Fund and further agrees
to surrender promptly to the Fund any of such records upon the Fund's or the
Adviser's request, although the Portfolio Manager may, at its own expense, make
and retain a copy of such records. The Portfolio Manager further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the 1940 Act and to preserve the
records required by Rule 204-2 under the Advisers Act for the period specified
in the Rule.
10. Cooperation. Each party to this Agreement agrees to cooperate with
-----------
each other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the SEC and state
insurance authorities) in connection with any investigation or inquiry relating
to this Agreement or the Fund.
11. Responsibility and Control. Notwithstanding any other provision of
--------------------------
this Agreement, it is understood and agreed that the Fund shall at all times
retain the ultimate responsibility for and control of all functions performed
pursuant to this Agreement and reserves the right to direct, approve or
disapprove any action hereunder taken on its behalf by the Portfolio Manager.
12. Services Not Exclusive. It is understood that the services of the
----------------------
Portfolio Manager are not exclusive, and nothing in this Agreement shall prevent
the Portfolio Manager (or its affiliates) from providing similar services to
other clients, including investment companies (whether or not their investment
objectives and policies are similar to those of the Portfolio) or from engaging
in other activities.
13. Liability. Except as provided in Section 14 and as may otherwise be
---------
required by the 1940 Act or the rules thereunder or other applicable law, the
Fund and the Adviser agree that the Portfolio Manager, any affiliated person of
the Portfolio Manager, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act, controls the Portfolio Manager shall not be liable
for, or subject to any damages, expenses, or losses in connection with, any act
or omission connected with or arising out of any services rendered under this
Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Portfolio Manager's duties, or by reason of
reckless disregard of the Portfolio Manager's obligations and duties under this
Agreement.
14. Indemnification.
---------------
(a) The Portfolio Manager agrees to indemnify and hold harmless, the
Adviser, any affiliated person within the meaning of Section 2(a)(3) of the 1940
Act ("affiliated person") of the Adviser, and each person, if any, who, within
the meaning of Section 15 of the 1933 Act,
<PAGE>
controls ("controlling person") the Adviser (collectively, "PM Indemnified
Persons") against any and all losses, claims, damages, liabilities or litigation
(including legal and other expenses), to which the Adviser or such affiliated
person or controlling person may become subject under the 1933 Act, 1940 Act,
the Advisers Act, under any other statute, at common law or otherwise, arising
out of the Portfolio Manager's responsibilities to the Trust which (i) may be
based upon any misfeasance, malfeasance, or nonfeasance by the Portfolio
Manager, any of its employees or representatives, or any affiliate of or any
person acting on behalf of the Portfolio Manager (other than a PM Indemnified
Person), or (ii) may be based upon any untrue statement or alleged untrue
statement of a material fact contained in a registration statement or prospectus
covering the Shares of the Trust or any Fund, or any amendment thereof or any
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, if such a statement or omission was made in reliance
upon information furnished to the Adviser, the Trust, or any affiliated person
of the Trust by the Portfolio Manager or any affiliated person of the Portfolio
Manager (other than a PM Indemnified Person); provided, however, that in no case
is the Portfolio Manager's indemnity in favor of the Adviser or any affiliated
person or controlling person of the Adviser deemed to protect such person
against any liability to which any such person would otherwise be subject by
reason of willful misfeasance, bad faith, or gross negligence in the performance
of his duties, or by reason of his reckless disregard of obligation and duties
under this Agreement.
(b) The Adviser agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person within the meaning of Section 2(a)(3) of the 1940
Act of the Portfolio Manager and each person, if any, who, within the meaning of
Section 15 of the 1933 Act controls ("controlling person") the Portfolio Manager
(collectively, "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities or litigation (including legal and other
expenses) to which a Portfolio Manager Indemnified Person may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, under any other statute, at
common law or otherwise, arising out of the Adviser's responsibilities as
adviser of the Fund which (i) may be based upon any misfeasance, malfeasance, or
nonfeasance by the Adviser, any of its employees or representatives or any
affiliate of or any person acting on behalf of the Adviser (other than a
Portfolio Manager Indemnified person) or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or prospectus covering Shares of the Fund or any
Portfolio, or any amendment thereof or any supplement thereto, or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statement therein not misleading, unless such
statement or omission was made in reliance upon written information furnished to
the Fund or the Adviser or any affiliated person of the Adviser by a Portfolio
Manager Indemnified Person (other than an Adviser Indemnified Person); provided
however, that in no case is the indemnity of the Adviser in favor of the
Portfolio Manager Indemnified Persons deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his
duties, or by reason of his reckless disregard of obligations and duties under
this Agreement.
15. Duration and Termination. This Agreement shall become effective as of
------------------------
the __________________ , and shall continue in effect for two years from such
date and continue
<PAGE>
thereafter on an annual basis with respect to the Portfolio; provided that such
annual continuance is specifically approved at least annually (a) by the vote of
a majority of the Board of Trustees of the Fund, or (b) by the vote of a
majority of the outstanding voting shares of each Portfolio, and provided that
continuance is also approved by the vote of a majority of the Board of Trustees
of the Fund who are not parties to this Agreement or "interested persons" (as
such term is defined in the 1940 Act) of the Fund, the Adviser, or the Portfolio
Manager, cast in person at a meeting called for the purpose of voting on such
approval. This Agreement may not be materially amended without a majority vote
of the outstanding shares (as defined in the 1940 Act) of the Portfolio. This
Agreement may be terminated:
(a) by the Fund at any time with respect to the services provided by
the Portfolio Manager, without the payment of any penalty, forfeiture,
compulsory buyout amount, or performance of any other obligation which could
deter termination, by vote of a majority of the entire Board of Trustees of the
Fund or by a vote of a majority of the outstanding voting shares of the Fund or,
with respect to a particular Portfolio, by vote of a majority of the
outstanding voting shares of such Portfolio, on 60 days' written notice to the
Portfolio Manager and the Adviser;
(b) by the Portfolio Manager at any time, without the payment of any
penalty, forfeiture, compulsory buyout amount or performance of any other
obligation which could deter termination, upon 60 days' written notice to the
Adviser and the Fund.
(c) by the Adviser at any time, without the payment of any penalty,
forfeiture, compulsory buyout amount or performance of any other obligation
which could deter termination, upon 60 days' written notice to the Portfolio
Manager and the Fund.
However, any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 1940 Act) of a particular Portfolio shall
be effective to continue this Agreement with respect to such Portfolio
notwithstanding (a) that this Agreement has not been approved by the holders of
a majority of the outstanding shares of any other Portfolio or (b) that this
Agreement has not been approved by the vote of a majority of the outstanding
shares of the Fund, unless such approval shall be required by any other
applicable law or otherwise. In the event of termination for any reason, all
records of the Portfolio shall promptly be returned to the Adviser or the Fund,
free from any claim or retention of rights in such record by the Portfolio
Manager, although the Portfolio Manager may, at its own expense, make and retain
a copy of such records. This Agreement will terminate automatically in event of
its assignment (as that term is defined in the 1940 Act), but shall not
terminate in connection with any transaction not deemed an assignment within the
meaning of Rules 2a-6 under the 1940 Act, or any other rule adopted by the SEC
regarding transactions not deemed to be assignments. In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(g), 2(i), 9, 10, 11, 13, 14 and 16 of this
Agreement as well as any applicable provision of this Paragraph numbered 15
shall remain in effect.
16. Use of Name.
-----------
(a) It is understood that the name "Pacific Mutual Life Insurance
Company" or
<PAGE>
"Pacific Mutual", or "Pacific Select Fund" or any derivative thereof or logo
associated with that name is the valuable property of the Adviser and its
affiliates, and that the Portfolio Manager has the right to use such name (or
derivative or logo) only with the approval of the Adviser and only so long as
the Adviser is an investment adviser to the Fund and/or the Portfolio. Upon
termination of the Investment Advisory Agreement between the Fund and the
Adviser, the Portfolio Manager shall forthwith cease to use such name (or
derivative or logo).
(b) It is understood that the name "Blairlogie Capital Management" or
"Blairlogie" or any derivative thereof or logo associated with that name is the
valuable property of the Portfolio Manager and that the Adviser has the right to
use such name (or derivative or logo), in offering materials of the Fund and/or
Portfolio with the approval of the Portfolio Manager and for so long as the
Portfolio Manager is a Portfolio Manager to the Fund and/or the Portfolio. Upon
termination of this Agreement between the Adviser and the Portfolio Manager, the
Fund and the Adviser shall forthwith cease to use such name (or derivative or
logo).
17. Limitation of Liability. A copy of the Amended and Restated Agreement
-----------------------
and Declaration of Trust for the Fund is on file with the Secretary of the
Commonwealth of Massachusetts. The Agreement and Declaration of Trust has been
executed on behalf of the Trust by a Trustee of the Trust in his capacity as
Trustee of the Trust and not individually. The obligations of this Agreement
shall be binding upon the assets and property of the Fund and shall not be
binding upon any Trustee, officer, employee, agent or shareholder, whether past,
present, or future, of the Fund individually.
18. Miscellaneous.
-------------
(a) This Agreement shall be governed by the laws of California,
provided that nothing herein shall be construed in a manner inconsistent with
the 1940 Act, the Investment Advisers Act of 1940 or rules or orders of the SEC
thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of the
1940 Act.
(b) The captions of this Agreement are included for convenience only
and in no way define or limit any of the provisions hereof or otherwise affect
their construction or effect.
(c) To the extent permitted under Section 15 of this Agreement, this
Agreement may only be assigned by any party with prior written consent of the
other parties. Further, if there is a change in the general partner(s) of the
Portfolio Manager, the Portfolio Manager will promptly notify the Fund of such
change.
(d) If any provision of this Agreement shall be held or made invalid
by a court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable. To the extent that any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise with regard to any party hereunder, such provisions with respect to
other parties hereto shall not be affected thereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first written above.
PACIFIC MUTUAL LIFE
INSURANCE COMPANY
Attest: By:
----------------------- --------------------------------
Title: Title:
BLAIRLOGIE CAPITAL
MANAGEMENT
BY: BLAIRLOGIE HOLDINGS LIMITED,
ITS GENERAL PARTNER
Attest: By:
------------------------ --------------------------------
Title: Title:
PACIFIC SELECT FUND
Attest: By:
------------------------ --------------------------------
Title: Title:
<PAGE>
PACIFIC SELECT FUND
FEE SCHEDULE
Portfolio: Emerging Markets Portfolio
Fee:
The Advisor will pay to the Portfolio Manager a fee at an annual rate equal to:
.85% of the first $50 million of the Emerging Market Portfolio's average daily
net assets;
.75% on the next $50 million of the Emerging Market Portfolio's average daily
net assets;
.70% on the next $50 million of the Emerging Market Portfolio's average daily
net assets; and
.65% of the Emerging Market Portfolio's average daily net assets in excess of
$150 million.
<PAGE>
EXHIBIT 99.5(k)
Portfolio Management Agreement - Columbus Circle Investors
<PAGE>
PORTFOLIO MANAGEMENT AGREEMENT
AGREEMENT made this ______________________________________, 1995 between
Pacific Mutual Life Insurance Company ("Adviser"), a California corporation, and
Columbus Circle Investors ("Portfolio Manager"), a Delaware general partnership,
and Pacific Select Fund (the "Fund"), a Massachusetts Business Trust.
WHEREAS, the Fund is registered with the Securities and Exchange
Commission ("SEC") as an open-end, management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, the Fund is authorized to issue shares of beneficial interest
("Shares") in separate portfolios, with each such portfolio representing
interests in a separate portfolio; and
WHEREAS, the Fund currently offers multiple Portfolios, one of which is
designated as the Aggressive Equity Portfolio, such Portfolio together with any
other Portfolios subsequently established by the Fund, with respect to which the
Fund and Adviser desire to retain the Portfolio Manager to render investment
advisory services hereunder, and with respect to which the Portfolio Manager is
willing to do so, being herein collectively referred to also as the
"Portfolios"; and
WHEREAS, the Portfolio Manager is registered with the SEC as an investment
adviser under the Investment Advisers Act of 1940 ("Advisers Act"); and
WHEREAS, the Fund has retained the Adviser to render investment advisory
services to the Portfolios pursuant to an Advisory Agreement, as amended, and
such Agreement authorizes the Adviser to engage Portfolio Manager to discharge
the Adviser's responsibilities with respect to the investment management of the
Portfolio, a copy of which has been provided to the Portfolio Manager and is
incorporated by reference herein; and
WHEREAS, the Fund and the Adviser desire to retain the Portfolio Manager to
furnish investment advisory services to one or more Portfolios of the Fund, and
the Portfolio Manager is willing to furnish such services to such Portfolio and
the Adviser in the manner and on the terms hereinafter set forth; and
NOW THEREFORE, in consideration of the premises and the promises and mutual
covenants herein contained, it is agreed between the Fund, the Adviser, and the
Portfolio Manager as follows:
1. Appointment. The Fund and the Adviser hereby appoint Columbus Circle
------------
Investors to act as Portfolio Manager to the Aggressive Equity Portfolio ("the
Portfolio") for the periods and on the terms set forth in this Agreement. The
Portfolio Manager accepts such appointment and agrees to furnish the services
herein set forth for the compensation herein provided.
In the event the Adviser wishes to retain the Portfolio Manager to render
investment
<PAGE>
advisory services to one or more portfolio other than the Portfolio, the Adviser
shall notify the Portfolio Manager in writing. If the Portfolio Manager is
willing to render such services, it shall notify the Fund and Adviser in
writing, whereupon such portfolio shall become a Portfolio hereunder, and be
subject to this Agreement.
2. Portfolio Manager Duties. Subject to the supervision of the Fund's
-------------------------
Board of Trustees and the Adviser, the Portfolio Manager will provide a
continuous investment program for the Portfolio and determine the composition of
the assets of the Portfolio, including determination of the purchase, retention,
or sale of the securities, cash, and other investments, including futures
contracts and options thereon, for the Portfolio. The Portfolio Manager will
provide investment research and analysis, which may consist of computerized
investment methodology, and will conduct a continuous program of evaluation,
investment, sales, and reinvestment of the Portfolio's assets by determining the
securities and other investments that shall be purchased, entered into, sold,
closed, or exchanged for the Portfolio, when these transactions should be
executed, and what portion of the assets of the Portfolio should be held in the
various securities and other investments in which it may invest, and the
Portfolio Manager is hereby authorized to execute and perform such services on
behalf of the Portfolio. To the extent permitted by the investment policies of
the Portfolio, the Portfolio Manager shall make decisions for the Portfolio as
to foreign currency matters and make determinations as to the retention or
disposition of foreign currencies or securities or other instruments denominated
in foreign currencies, or derivative instruments based upon foreign currencies,
including forward foreign currency contracts and options and futures on foreign
currencies and shall execute and perform the same on behalf of the Portfolio.
The Portfolio Manager is authorized to exercise tender offers, exchange offers
and to vote proxies on behalf of the Fund, each as the Portfolio Manager
determines is in the best interest of the Fund. In performing these duties, the
Portfolio Manager:
(a) Will (1) manage the Portfolio so that it will qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code and (2)
manage the Portfolio so as to ensure compliance by the Portfolio with the
diversification requirements of Section 817(h) of the Internal Revenue Code and
Regulations issued thereunder. The Adviser will notify the Portfolio Manager of
any amendments to the Section 817(h) of the Internal Revenue Code and
Regulations issued thereunder. In managing the Portfolio in accordance with
these requirements, the Portfolio Manager shall be entitled to receive and act
upon advice of counsel to the Fund, counsel to the Adviser, or counsel to the
Portfolio Manager that is also acceptable to the Adviser.
(b) In managing the Portfolio or Portfolios, the Portfolio Manager shall
conform with (1) the 1940 Act and all rules and regulations thereunder, and
releases and interpretations related thereto, (2) with all other applicable
federal and state laws and regulations pertaining to investment vehicles
underlying variable annuity and/or variable life insurance contracts, (3) with
any applicable procedures, policies and guidelines adopted by the Fund's Board
of Trustees, (4) with the Portfolio's objectives, investment policies and
investment restrictions as stated in the Fund's Prospectus and Statement of
Additional Information, and (5) with the provisions of the Fund's Registration
Statement filed on Form N-1A under the Securities Act of 1933 (the "1933 Act")
and the 1940 Act, as supplemented or amended from time to time. Until the
Adviser delivers any supplements or amendments to the Portfolio Manager, the
Portfolio Manager shall be fully protected
<PAGE>
in relying on the Fund's Registration Statement previously furnished to the
Portfolio Manager by the Adviser.
(c) Is responsible, in connection with its responsibilities under this
Section 2, for decisions to buy and sell securities and other investments for
the Portfolio, for broker-dealer and futures commission merchant ("FCM")
selection, and for negotiation of commission rates. The Portfolio Manager's
primary consideration in effecting a security or other transaction will be to
obtain the best execution for the Portfolio, taking into account the factors
specified in the Prospectus and Statement of Additional Information for the
Fund, as they may be amended or supplemented from time to time. Subject to such
policies as the Board of Trustees may determine and consistent with Section
28(e) of the Securities Exchange Act of 1934, the Portfolio Manager shall not be
deemed to have acted unlawfully or to have breached any duty created by this
Agreement or otherwise solely by reason of its having caused the Portfolio to
pay a broker or dealer, acting as agent, for effecting a portfolio transaction
at a price in excess of the amount of commission another broker or dealer would
have charged for effecting that transaction, if the Portfolio Manager determines
in good faith that such amount of commission was reasonable in relation to the
value of the brokerage and research services provided by such broker or dealer,
viewed in terms of either that particular transaction or the Portfolio Manager's
(or its affiliates) overall responsibilities with respect to the Portfolio and
to its other clients as to which it exercises investment discretion. To the
extent consistent with these standards, and in accordance with Section 11(a) of
the Securities Exchange Act of 1934 and Rule 11a2-2(T) thereunder, and subject
to any other applicable laws and regulations including Section 17(e) of the 1940
Act, the Portfolio Manager is further authorized to allocate the orders placed
by it on behalf of the Portfolio to the Portfolio Manager if it is registered as
a broker or dealer with the SEC or as a FCM with the Commodities Futures Trading
Commission ("CFTC"), to any of its affiliates that are registered as a broker or
dealer with the SEC or as a FCM with the CFTC, or to such brokers and dealers
that also provide research or statistical research and material, or other
services to the Portfolio or the Portfolio Manager. Such allocation shall be in
such amounts and proportions as the Portfolio Manager shall determine consistent
with the above standards, and, upon request, the Portfolio Manager will report
on said allocation to the Adviser and Board of Trustees of the Fund, indicating
the brokers, dealers or FCMs to which such allocations have been made and the
basis therefor.
(d) May, on occasions when the purchase or sale of a security is deemed to
be in the best interest of a Portfolio as well as any other investment advisory
clients, to the extent permitted by applicable laws and regulations, but shall
not be obligated to, aggregate the securities to be so sold or purchased with
those of its other clients where such aggregation is not inconsistent with the
policies set forth in the Fund's Registration Statement. In such event,
allocation of the securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by the Portfolio Manager in a manner
that is fair and equitable in the judgment of the Portfolio Manager in the
exercise of its fiduciary obligations to the Fund and to such other clients.
(e) Will, in connection with the purchase and sale of securities for the
Portfolio, together with the Adviser, arrange for the transmission to the
custodian and recordkeeping agent for the Fund, on a daily basis, such
confirmation(s), trade tickets, and other documents and information, including,
but not limited to, Cusip, Sedol, or other numbers that identify securities to
be purchased
<PAGE>
or sold on behalf of the Portfolio, as may be reasonably necessary to enable the
custodian and recordkeeping agent to perform its administrative and
recordkeeping responsibilities with respect to the Portfolio, and with respect
to portfolio securities to be purchased or sold through the Depository Trust
Company, will arrange for the automatic transmission of the confirmation of such
trades to the Fund's custodian, and recordkeeping agent, and, if required, the
Adviser.
(f) Will assist the custodian and recordkeeping agent for the Fund in
determining or confirming, consistent with the procedures and policies stated in
the Registration Statement for the Fund, the value of any portfolio securities
or other assets of the Portfolio for which the custodian and recordkeeping agent
seeks assistance from the Portfolio Manager or identifies for review by the
Portfolio Manager.
(g) Will make available to the Fund and the Adviser promptly upon request,
any of the Portfolio's investment records and ledgers maintained by the
Portfolio Manager (which shall not include the records and ledgers maintained by
the custodian and recordkeeping agent for the Fund), as are necessary to assist
the Fund and the Adviser to comply with requirements of the 1940 Act and the
Advisers Act, as well as other applicable laws, and will furnish to regulatory
authorities having the requisite authority any information or reports in
connection with such services which may be requested in order to ascertain
whether the operations of the Fund are being conducted in a manner consistent
with applicable laws and regulations.
(h) Will regularly report to the Fund's Board of Trustees on the investment
program for the Portfolio and the issuers and securities represented in the
Portfolio's portfolio, and will furnish the Fund's Board of Trustees with
respect to the portfolio such periodic and special reports as the Trustees and
the Adviser may reasonably request.
(i) Will not disclose or use any records or information obtained pursuant
to this Agreement (excluding investment research and investment advice) in any
manner whatsoever except as expressly authorized in this Agreement or in the
ordinary course of business in connection with placing orders for the purchase
and sale of securities, and will keep confidential any information obtained
pursuant to the Agreement, and disclose such information only if the Board of
Trustees of the Fund has authorized such disclosure, or if such disclosure is
required by applicable federal or state law or regulations or regulatory
authorities having the requisite authority. The Fund and the Adviser will not
disclose or use any records or information respecting the Portfolio Manager
obtained pursuant to this Agreement in any manner whatsoever except as expressly
authorized in this Agreement, and will keep confidential any information
obtained pursuant to this Agreement, and disclose such information only as
expressly authorized in this Agreement, if the Board of Trustees of the Fund has
authorized such disclosure, or if such disclosure is required by applicable
federal or state law or regulations or regulatory authorities having the
requisite authority.
(j) Shall be responsible for making reasonable inquiries and for reasonably
ensuring that any employee of the Portfolio Manager has not, to the best of the
Portfolio Manager's knowledge:
(i) been convicted, in the last ten (10) years, of any felony or
<PAGE>
misdemeanor involving the purchase or sale of any security or arising out of
such person's conduct as an underwriter, broker, dealer, investment adviser,
municipal securities dealer, government securities broker, government securities
dealer, transfer agent, or entity or person required to be registered under the
Commodity Exchange Act, or as an affiliated person, salesman, or employee of any
investment company, bank, insurance company, or entity or person required to be
registered under the Commodity Exchange Act; or
(ii) been permanently or temporarily enjoined by reason of any misconduct,
by order, judgment, or decree of any court of competent jurisdiction from acting
as an underwriter, broker, dealer, investment adviser, municipal securities
dealer, government securities broker, government securities dealer, transfer
agent, or entity or person required to be registered under the Commodity
Exchange Act, or as an affiliated person, salesman or employee of any investment
company, bank, insurance company, or entity or person required to be registered
under the Commodity Exchange Act, or from engaging in or continuing any conduct
or practice in connection with any such activity or in connection with the
purchase or sale of any security.
(k) Shall provide to Adviser a copy of Portfolio Manager's Form ADV as
filed with the Securities and Exchange Commission and a list of persons who
Portfolio Manager wishes to have authorized to give written and/or oral
instructions to Custodians of Fund assets for the Portfolio.
3. Disclosure about Portfolio Manager. The Portfolio Manager has reviewed
----------------------------------
the current Registration Statement for the Fund filed with the SEC and
represents and warrants that, with respect to the disclosure about the Portfolio
Manager or information relating, directly or indirectly, to the Portfolio
Manager, such Registration Statement contains, as of the date hereof, no untrue
statement of any material fact and does not omit any statement of a material
fact which was required to be stated therein or necessary to make the statements
contained therein not misleading. The Portfolio Manager further represents and
warrants that it is a duly registered investment adviser under the Advisers Act
and a duly registered investment adviser in all states in which the Portfolio
Manager is required to be registered. The Adviser has received a current copy
of the Portfolio Manager's Uniform Application for Investment Adviser
Registration on Form ADV, as filed with the SEC. The Portfolio Manager agrees
to provide the Adviser with current copies of the Portfolio Manager's Form ADV,
and any supplements or amendments thereto, as filed with the SEC.
4. Expenses. During the term of this Agreement, the Portfolio Manager
--------
will pay all expenses incurred by it and its staff and for their activities in
connection with its services under this Agreement. The Portfolio Manager shall
not be responsible for any of the following:
(a) Expenses of all audits by the Fund's independent public accountants;
(b) Expenses of the Fund's transfer agent, registrar, dividend disbursing
agent, and shareholder recordkeeping services;
(c) Expenses of the Fund's custodial services including recordkeeping
services provided by the custodian;
<PAGE>
(d) Expenses of the Fund's recordkeeping services provided by the
recordkeeping agent;
(e) Expenses of obtaining quotations for calculating the value of the
Portfolio's net assets;
(f) Expenses of obtaining portfolio activity reports for each Portfolio;
(g) Expenses of maintaining the Fund's tax records;
(h) Salaries and other compensation of any of the Fund's executive officers
and employees, if any, who are not officers, directors, stockholders, or
employees of the Portfolio Manager or its subsidiaries or affiliates (except
that the Adviser, or any of its subsidiaries or affiliates, shall bear the
expense with respect to executive officers and employees, if any, who are
officers, directors, stockholders or employees of the Adviser or of its
subsidiaries or affiliates);
(i) Taxes, if any, levied against the Fund or any of its Portfolios;
(j) Brokerage fees and commissions in connection with the purchase and sale
of portfolio securities for the Portfolio;
(k) Costs, including the interest expenses, of borrowing money;
(l) Costs and/or fees incident to meetings of the Fund's shareholders, the
preparation and mailings of prospectuses and reports of the Fund to its
shareholders, the filing of reports with regulatory bodies, the maintenance of
the Fund's existence, and the registration of shares with federal and state
securities or insurance authorities;
(m) The Fund's legal fees, including the legal fees related to the
registration and continued qualification of the Fund's shares for sale;
(n) Costs of printing "share" stock certificates, if any, representing
shares of the Fund;
(o) Trustees' fees and expenses of Trustees of the Fund who are not
officers, employees, or stockholders of the Portfolio Manager or any affiliate
thereof (except that the Adviser shall bear the expense of any trustee who is an
officer, employee, or stockholder of the Adviser or any affiliate thereof);
(p) The Fund's pro rata portion of the fidelity bond required by Section
17(g) of the 1940 Act, or other insurance premiums;
(q) Association membership dues;
(r) Extraordinary expenses of the Fund as may arise including expenses
incurred
<PAGE>
in connection with litigation, proceedings and other claims and the legal
obligations of the Fund to indemnify its trustees, officers, employees,
shareholders, distributors, and agents with respect thereto (unless Portfolio
Manager is responsible for such expenses under Section 14 of this Agreement);
and
(s) Organizational and offering expenses and, if applicable, reimbursement
(with interest) of underwriting discounts and commissions.
5. Compensation. For the services provided and the expenses borne by the
------------
Portfolio Manager pursuant to this Agreement, the Adviser will pay to the
Portfolio Manager a fee in accordance with the Fee Schedule attached to this
Agreement. This fee will be computed and accrued daily and payable monthly.
6. Seed Money. The Adviser agrees that the Portfolio Manager shall not be
----------
responsible for providing money for the initial capitalization of any Portfolio.
7. Compliance.
----------
(a) The Portfolio Manager agrees that it shall immediately notify the
Adviser and the Fund in the event (i) that the SEC has censured the Portfolio
Manager; placed limitations upon its activities, functions or operations;
suspended or revoked its registration as an investment adviser; or has commenced
proceedings or an investigation that may result in any of these actions, (ii)
upon having a reasonable basis for believing that a Portfolio has ceased to
qualify or might not qualify as a regulated investment company under Subchapter
M of the Internal Revenue Code, and (iii) upon having a reasonable basis for
believing that the Portfolio has ceased to comply with the diversification
provisions of Section 817(h) of the Internal Revenue Code or the Regulations
thereunder. The Portfolio Manager further agrees to notify the Adviser and the
Fund immediately of any material fact known to the Portfolio Manager respecting
or relating to the Portfolio Manager that is not contained in the Registration
Statement or prospectus for the Fund, or any amendment or supplement thereto, or
of any statement contained therein that becomes untrue in any material respect.
(b) The Adviser agrees that it shall immediately notify the Portfolio
Manager in the event (i) that the SEC has censured the Adviser or the Fund;
placed limitations upon either of their activities, functions, or operations;
suspended or revoked the Adviser's registration as an investment adviser; or has
commenced proceedings or an investigation that may result in any of these
actions, (ii) upon having a reasonable basis for believing that a Portfolio has
ceased to qualify or might not qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code, and (iii) upon having a reasonable
basis for believing that the Portfolio has ceased to comply with the
diversification provisions of Section 817(h) of the Internal Revenue Code or the
Regulations thereunder.
8. Independent Contractor. The Portfolio Manager shall for all purposes
----------------------
herein be deemed to be an independent contractor and shall, unless otherwise
expressly provided herein or authorized by the Adviser from time to time, have
no authority to act for or represent the Adviser in any way or otherwise be
deemed its agent. The Portfolio Manager understands that unless
<PAGE>
expressly provided herein or authorized from time to time by the Fund, the
Portfolio Manager shall have no authority to act for or represent the Fund in
any way or otherwise be deemed the Fund's Agent.
9. Books and Records. In compliance with the requirements of Rule 31a-3
-----------------
under the 1940 Act, the Portfolio Manager hereby agrees that all records which
it maintains for the Portfolio are the property of the Fund and further agrees
to surrender promptly to the Fund any of such records upon the Fund's or the
Adviser's request, although the Portfolio Manager may, at its own expense, make
and retain a copy of such records. The Portfolio Manager further agrees to
preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the records
required to be maintained by Rule 31a-1 under the 1940 Act and to preserve the
records required by Rule 204-2 under the Advisers Act for the period specified
in the Rule.
10. Cooperation. Each party to this Agreement agrees to cooperate with
-----------
each other party and with all appropriate governmental authorities having the
requisite jurisdiction (including, but not limited to, the SEC and state
insurance authorities) in connection with any investigation or inquiry relating
to this Agreement or the Fund.
11. Responsibility and Control. Notwithstanding any other provision of
--------------------------
this Agreement, it is understood and agreed that the Fund shall at all times
retain the ultimate responsibility for and control of all functions performed
pursuant to this Agreement and reserves the right to direct, approve or
disapprove any action hereunder taken on its behalf by the Portfolio Manager.
12. Services Not Exclusive. It is understood that the services of the
----------------------
Portfolio Manager are not exclusive, and nothing in this Agreement shall prevent
the Portfolio Manager (or its affiliates) from providing similar services to
other clients, including investment companies (whether or not their investment
objectives and policies are similar to those of the Portfolio) or from engaging
in other activities.
13. Liability. Except as provided in Section 14 and as may otherwise be
---------
required by the 1940 Act or the rules thereunder or other applicable law, the
Fund and the Adviser agree that the Portfolio Manager, any affiliated person of
the Portfolio Manager, and each person, if any, who, within the meaning of
Section 15 of the 1933 Act, controls the Portfolio Manager shall not be liable
for, or subject to any damages, expenses, or losses in connection with, any act
or omission connected with or arising out of any services rendered under this
Agreement, except by reason of willful misfeasance, bad faith, or gross
negligence in the performance of the Portfolio Manager's duties, or by reason of
reckless disregard of the Portfolio Manager's obligations and duties under this
Agreement.
14. Indemnification.
---------------
(a) The Portfolio Manager agrees to indemnify and hold harmless, the
Adviser, any affiliated person within the meaning of Section 2(a)(3) of the 1940
Act ("affiliated person") of the Adviser, and each person, if any, who, within
the meaning of Section 15 of the 1933 Act, controls ("controlling person") the
Adviser (collectively, "PM Indemnified Persons") against any and
<PAGE>
all losses, claims, damages, liabilities or litigation (including legal and
other expenses), to which the Adviser or such affiliated person or controlling
person may become subject under the 1933 Act, 1940 Act, the Advisers Act, under
any other statute, at common law or otherwise, arising out of the Portfolio
Manager's responsibilities to the Trust which (i) may be based upon any
misfeasance, malfeasance, or nonfeasance by the Portfolio Manager, any of its
employees or representatives, or any affiliate of or any person acting on behalf
of the Portfolio Manager (other than a PM Indemnified Person), or (ii) may be
based upon any untrue statement or alleged untrue statement of a material fact
contained in a registration statement or prospectus covering the Shares of the
Trust or any Fund, or any amendment thereof or any supplement thereto, or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, if
such a statement or omission was made in reliance upon information furnished to
the Adviser, the Trust, or any affiliated person of the Trust by the Portfolio
Manager or any affiliated person of the Portfolio Manager (other than a PM
Indemnified Person); provided, however, that in no case is the Portfolio
Manager's indemnity in favor of the Adviser or any affiliated person or
controlling person of the Adviser deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his
duties, or by reason of his reckless disregard of obligation and duties under
this Agreement.
(b) The Adviser agrees to indemnify and hold harmless the Portfolio
Manager, any affiliated person within the meaning of Section 2(a)(3) of the 1940
Act of the Portfolio Manager and each person, if any, who, within the meaning of
Section 15 of the 1933 Act controls ("controlling person") the Portfolio Manager
(collectively, "Portfolio Manager Indemnified Persons") against any and all
losses, claims, damages, liabilities or litigation (including legal and other
expenses) to which a Portfolio Manager Indemnified Person may become subject
under the 1933 Act, the 1940 Act, the Advisers Act, under any other statute, at
common law or otherwise, arising out of the Adviser's responsibilities as
adviser of the Fund which (i) may be based upon any misfeasance, malfeasance, or
nonfeasance by the Adviser, any of its employees or representatives or any
affiliate of or any person acting on behalf of the Adviser (other than a
Portfolio Manager Indemnified person) or (ii) may be based upon any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or prospectus covering Shares of the Fund or any
Portfolio, or any amendment thereof or any supplement thereto, or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statement therein not misleading, unless such
statement or omission was made in reliance upon written information furnished to
the Fund or the Adviser or any affiliated person of the Adviser by a Portfolio
Manager Indemnified Person (other than an Adviser Indemnified Person); provided
however, that in no case is the indemnity of the Adviser in favor of the
Portfolio Manager Indemnified Persons deemed to protect such person against any
liability to which any such person would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his
duties, or by reason of his reckless disregard of obligations and duties under
this Agreement.
15. Duration and Termination. This Agreement shall become effective as of
------------------------
the __________________ , and shall continue in effect for two years from such
date and continue thereafter on an annual basis with respect to the Portfolio;
provided that such annual continuance is
<PAGE>
specifically approved at least annually (a) by the vote of a majority of the
Board of Trustees of the Fund, or (b) by the vote of a majority of the
outstanding voting shares of each Portfolio, and provided that continuance is
also approved by the vote of a majority of the Board of Trustees of the Fund who
are not parties to this Agreement or "interested persons" (as such term is
defined in the 1940 Act) of the Fund, the Adviser, or the Portfolio Manager,
cast in person at a meeting called for the purpose of voting on such approval.
This Agreement may not be materially amended without a majority vote of the
outstanding shares (as defined in the 1940 Act) of the Portfolio. This
Agreement may be terminated:
(a) by the Fund at any time with respect to the services provided by the
Portfolio Manager, without the payment of any penalty, forfeiture, compulsory
buyout amount, or performance of any other obligation which could deter
termination, by vote of a majority of the entire Board of Trustees of the Fund
or by a vote of a majority of the outstanding voting shares of the Fund or, with
respect to a particular Portfolio, by vote of a majority of the outstanding
voting shares of such Portfolio, on 60 days' written notice to the Portfolio
Manager and the Adviser;
(b) by the Portfolio Manager at any time, without the payment of any
penalty, forfeiture, compulsory buyout amount or performance of any other
obligation which could deter termination, upon 60 days' written notice to the
Adviser and the Fund.
(c) by the Adviser at any time, without the payment of any penalty,
forfeiture, compulsory buyout amount or performance of any other obligation
which could deter termination, upon 60 days' written notice to the Portfolio
Manager and the Fund.
However, any approval of this Agreement by the holders of a majority of the
outstanding shares (as defined in the 1940 Act) of a particular Portfolio shall
be effective to continue this Agreement with respect to such Portfolio
notwithstanding (a) that this Agreement has not been approved by the holders of
a majority of the outstanding shares of any other Portfolio or (b) that this
Agreement has not been approved by the vote of a majority of the outstanding
shares of the Fund, unless such approval shall be required by any other
applicable law or otherwise. In the event of termination for any reason, all
records of the Portfolio shall promptly be returned to the Adviser or the Fund,
free from any claim or retention of rights in such record by the Portfolio
Manager, although the Portfolio Manager may, at its own expense, make and retain
a copy of such records. This Agreement will terminate automatically in event of
its assignment (as that term is defined in the 1940 Act), but shall not
terminate in connection with any transaction not deemed an assignment within the
meaning of Rules 2a-6 under the 1940 Act, or any other rule adopted by the SEC
regarding transactions not deemed to be assignments. In the event this
Agreement is terminated or is not approved in the manner described above, the
Sections or Paragraphs numbered 2(g), 2(i), 9, 10, 11, 13, 14 and 16 of this
Agreement as well as any applicable provision of this Paragraph numbered 15
shall remain in effect.
16. Use of Name.
-----------
(a) It is understood that the name "Pacific Mutual Life Insurance Company"
or "Pacific Mutual", or "Pacific Select Fund" or any derivative thereof or logo
associated with that
<PAGE>
name is the valuable property of the Adviser and its affiliates, and that the
Portfolio Manager has the right to use such name (or derivative or logo) only
with the approval of the Adviser and only so long as the Adviser is an
investment adviser to the Fund and/or the Portfolio. Upon termination of the
Investment Advisory Agreement between the Fund and the Adviser, the Portfolio
Manager shall forthwith cease to use such name (or derivative or logo).
(b) It is understood that the name "Columbus Circle Investors" or
"Columbus" or any derivative thereof or logo associated with that name is the
valuable property of the Portfolio Manager and that the Adviser has the right to
use such name (or derivative or logo), in offering materials of the Fund and/or
Portfolio with the approval of the Portfolio Manager and for so long as the
Portfolio Manager is a Portfolio Manager to the Fund and/or the Portfolio. Upon
termination of this Agreement between the Adviser and the Portfolio Manager, the
Fund and the Adviser shall forthwith cease to use such name (or derivative or
logo).
17. Limitation of Liability. A copy of the Amended and Restated Agreement
-----------------------
and Declaration of Trust for the Fund is on file with the Secretary of the
Commonwealth of Massachusetts. The Agreement and Declaration of Trust has been
executed on behalf of the Trust by a Trustee of the Trust in his capacity as
Trustee of the Trust and not individually. The obligations of this Agreement
shall be binding upon the assets and property of the Fund and shall not be
binding upon any Trustee, officer, employee, agent or shareholder, whether past,
present, or future, of the Fund individually.
18. Miscellaneous.
-------------
(a) This Agreement shall be governed by the laws of California, provided
that nothing herein shall be construed in a manner inconsistent with the 1940
Act, the Investment Advisers Act of 1940 or rules or orders of the SEC
thereunder. The term "affiliate" or "affiliated person" as used in this
Agreement shall mean "affiliated person" as defined in Section 2(a)(3) of the
1940 Act.
(b) The captions of this Agreement are included for convenience only and in
no way define or limit any of the provisions hereof or otherwise affect their
construction or effect.
(c) To the extent permitted under Section 15 of this Agreement, this
Agreement may only be assigned by any party with prior written consent of the
other parties. Further, if there is a change in the general partner(s) of the
Portfolio Manager, the Portfolio Manager will promptly notify the Fund of such
change.
(d) If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby, and to this extent, the provisions of this
Agreement shall be deemed to be severable. To the extent that any provision of
this Agreement shall be held or made invalid by a court decision, statute, rule
or otherwise with regard to any party hereunder, such provisions with respect to
other parties hereto shall not be affected thereby.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed as of the day and year first written above.
PACIFIC MUTUAL LIFE
INSURANCE COMPANY
Attest: By:
- ------------------------------------ -------------------------------------
Title: Title:
COLUMBUS CIRCLE INVESTORS
BY: COLUMBUS CIRCLE INVESTORS
MANAGEMENT, INC., ITS GENERAL PARTNER
Attest: By:
- ------------------------------------ -------------------------------------
Title: Title:
PACIFIC SELECT FUND
Attest: By:
- ------------------------------------ -------------------------------------
Title: Title:
<PAGE>
PACIFIC SELECT FUND
FEE SCHEDULE
Portfolio: Aggressive Equity Portfolio
Fee:
The Advisor will pay to the Portfolio Manager a fee at an annual rate equal to:
.55% of the first $100 million of the Aggressive Equity Portfolio's
average daily net assets;
.50% on the next $250 million of the Aggressive Equity Portfolio's average
daily net assets;
.45% of the Aggressive Equity Portfolio's average daily net assets in
excess of $350 million.
<PAGE>
EXHIBIT 99.6(a)
Distribution Agreement
<PAGE>
DISTRIBUTION AGREEMENT
Agreement, made this 1st day of Dec., 1987 between Pacific Select Fund ("the
Fund") and Pacific Equities Network ("PEN" or "Distributor").
WHEREAS, the Fund is an open-end, diversified management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Fund is authorized to issue shares of Capital Stock ("Capital
Stock") in separate Series (the "Series") with each such Series representing
interests in a separate portfolio of securities and other assets; and
WHEREAS, the Fund intends initially to offer shares in eight series to be
designated as the Money Market Series, the Growth Series, the Equity Income
Series, the Multi-Strategy Series, the Managed Bond Series, the High Yield Bond
Series, the Government Securities Series, and the International Series (the
"Initial Series"), such Series together with all other Series subsequently
established by the Fund with respect to which the Fund desires to retain the
distributor to render services hereunder and with respect to which the
Distributor is willing so to do, being herein collectively referred to as the
"Series."
Therefore, in consideration of the mutual promises and covenants hereinafter set
forth, the parties hereto agree as follows:
1. The Fund hereby appoints PEN as Distributor of the Capital Stock on the
terms and for the period set forth in this Agreement and PEN hereby accepts such
appointment and agrees to render the services and undertake the duties set forth
herein.
2. (a) In performing its duties as Distributor, PEN will act in conformity with
the Prospectus and with the instructions and directions of the Board of Trustees
of the Fund, the requirements of the 1933 Act, the 1940 Act, and all other
applicable federal and state laws and regulations.
(b) After effectiveness of the Fund's Registration Statement, PEN will hold
itself available to receive by mail, telex and/or telephone orders for the
purchase or redemption of the Capital Stock and will accept or reject such
orders on behalf of the Fund in accordance with the provisions of the
Prospectus, and will transmit such orders as are so accepted to the Fund's
transfer agent promptly for processing at the share's net asset value next
determined in accordance with the prospectus. Distributor will not use any sales
literature which has not been previously approved by the Fund.
(c) PEN shall not be obligated to sell any certain number of shares of Capital
Stock. Such shares shall be sold without sales charge. No commission or other
fee will be paid to PEN in connection with the sale of shares of Capital Stock.
3. During the term of this Agreement, PEN will bear all its expenses in
complying with this Agreement, including the following expenses:
<PAGE>
(a) costs of sales presentations, mailings, advertising, and any other marketing
efforts by PEN in connection with the distribution or sale of Capital Stock; and
(b) any compensation paid to employees of PEN in connection with the
distribution or sale of the Capital Stock.
4. The Fund shall bear all of its other expenses including, but not limited to:
(a) preparation and setting in type of its reports, proxies and prospectuses and
printing and distributing reports, proxies and prospectuses and other
communications to existing shareholders;
(b) registration of the Fund's shares with the Securities and Exchange
Commission;
(c) qualification of the Fund's shares for sale in jurisdictions designated by
the Distributor;
5. PEN shall not be liable for any error of judgement or mistake of law or for
any loss suffered by the Fund in connection with the matters to which this
Agreement relates, except a loss resulting from its willful misfeasance, bad
faith or negligence in the performance of its duties under this Agreement. Any
person, even though also an officer, employee or agent of PEN, who may be or
become an officer, director, employee or agent of the Fund shall be deemed, when
rendering services to the Fund or acting in any business of the Fund, to be
rendering such services to or acting solely for the Fund and not as an officer,
partner, employee or agent or one under the control or direction of PEN even
though paid by PEN.
6. PEN hereby agrees to indemnify and hold harmless the Fund and the several
officers and Trustees thereof against any and all losses, liabilities, damages
and claims arising out of or based upon any untrue or alleged untrue statement
or representation made (except for such statements made in reliance on any
prospectus, registration statement or sales material supplied by the Fund), any
failure to deliver a currently effective prospectus, or the use of any
unauthorized sales literature by any officer, employee or agent of PEN in
connection with the offer or sale of the Contracts. PEN shall reimburse each
such person for any legal or other expenses reasonably incurred in connection
with investigating or defending any such loss, liability, damage or claim.
Promptly after receipt by a party entitled to indemnification under this section
("indemnified party") of notice of the commencement of any action, if a claim
for indemnification in respect thereof is to be made against PEN, such
indemnified party will notify PEN in writing of the commencement thereof, and
the omission so to notify PEN will not relieve it from any liability under this
section, except to the extent that the omission results in a failure of actual
notice to PEN and it is damaged solely as a result of the failure to give such
notice.
7. This Agreement shall take effect on the effective date of the Fund's
Registration Statement under the 1933 Act, and shall continue in effect, unless
sooner terminated as provided herein, for two years from such date and shall
continue from year to year thereafter so long as such continuance is
specifically approved at least annually (a) by the vote of a majority of those
members of the Board of Trustees of the Fund who are not parties to this
Agreement or interested persons (as defined in
<PAGE>
the 1940 Act) of any such party, cast in person at a meeting called for the
purpose of voting on such approval, and (b) either by a majority of the entire
Board of Trustees of the Fund or by a majority vote (as defined in the
Prospectus) of the shareholders of the Fund; provided, HOWEVER, that this
Agreement may be terminated without penalty by the Board of Trustees of the
Fund; by a majority vote (as defined in the Prospectus) of the shareholders of
the Fund on 60 days' written notice to PEN, or by PEN at any time, without
payment of any penalty, on 90 days' written notice to the Fund. This Agreement
will automatically and immediately terminate in the event of its assignment (as
defined in the 1940 Act).
8. Notices of any kind to be given to PEN by the Fund shall be in writing and
shall be duly given if mailed, first class postage prepaid, or delivered to PEN,
800 Newport Center Drive, Suite 450, Newport Beach, California 92660, or at such
other address or to such individual as shall be specified by PEN to the Fund.
Notices of any kind to be given to the Fund shall be in writing and shall be
duly given if mailed, first class postage prepaid, or delivered to them at 700
Newport Center Drive, Newport Beach, California 92660 or at such other address
or to such individual as shall be specified by the Fund.
9. The service of the Distributor to the Fund under this Agreement are not to
be deemed exclusive, and the Distributor shall be free to render similar
services or other services to others so long as its services hereunder are not
impaired thereby.
10. The Distributor shall prepare reports for the Board of Trustees of the Fund
on a quarterly basis showing such information as from time to time shall be
reasonably requested by the Board.
11. The Distributor shall for all purposes herein provided be deemed to be an
independent contractor and, unless otherwise expressly provided or authorized,
shall have no authority to act for or represent the Fund in any way or otherwise
be deemed an agent of the Fund. It is understood and agreed that the
Distributor, by separate agreement with the Fund, may also serve the Fund in
other capacities.
12. This Agreement may be executed in one or more counterparts, each of which
shall be deemed to be an original.
13. This Agreement shall be governed by the laws of California, provided that
nothing herein shall be construed in a manner inconsistent with the Investment
Company Act of 1940, the Securities Exchange Act of 1934 or any rule or order of
the Securities and Exchange Commission.
14. If any provision of this Agreement shall be held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement shall not
be affected thereby and, to this extent, the provisions of this Agreement shall
be deemed to be severable.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
<PAGE>
PACIFIC EQUITIES NETWORK
By /s/ RICHARD F. HANLY
Richard F. Hanly
President
PACIFIC SELECT FUND
By /s/ TC SUTTON
Name: Thomas C. Sutton
Title: President
<PAGE>
ADDENDUM TO DISTRIBUTION AGREEMENT
- ----------------------------------
The Agreement, made the 1st day of December, 1987 between the PACIFIC SELECT
FUND ("Fund"), a Massachusetts business trust having its principal place of
business at 700 Newport Center Drive, Newport Beach, CA 92660 and PACIFIC
EQUITIES NETWORK ("PEN"), a wholly owned subsidiary of Pacific Financial Holding
Company, located at 800 Newport Center Drive, Suite 300, Newport Beach, CA
92660 ("the Agreement"), is hereby amended by the addition of the provisions set
forth in this Addendum to the Agreement.
WITNESSETH:
WHEREAS, the Fund initially established and currently offers eight separate
Series designated as the Money Market Series, Managed Bond Series, High Yield
Bond Series, Government Securities Series, Growth Series, Equity Income Series,
Multi-Strategy Series and International Series; and
WHEREAS, the Fund has appointed PEN as Distributor of the Capital Stock
("Distributor") with respect to the Series and PEN has accepted such
appointment; and
WHEREAS, the Fund intends to establish an additional Series to be designated as
the Equity Index Series; and
WHEREAS, the Fund desires to appoint PEN as Distributor for the Equity Index
Series on the terms set forth in the Agreement and hereinafter;
NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this Addendum, it is agreed between the parties hereto as follows:
1. The Equity Index Series together with all other Series previously
established by the Fund are referred to as "Series" as that term is used in
the Agreement. In addition to its responsibilities as specified in the
Agreement, PEN shall serve as Distributor of the Capital Stock of the Equity
Index Series of the Fund under the terms and conditions specified in the
Agreement. For purposes of the Agreement and this Addendum, the phrase
"Capital Stock" shall mean the shares of beneficial interest issued by the
Fund.
This Addendum shall take effect as of the date of its execution.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed
on the date indicated.
<PAGE>
PACIFIC SELECT FUND
1-17-89 /s/ THOMAS C. SUTTON
Date President
PACIFIC EQUITIES NETWORK
1-17-89 /s/ ARTHUR M. KESSELHAUT
Date President
<PAGE>
ADDENDUM TO DISTRIBUTION AGREEMENT
- ----------------------------------
The Distribution Agreement made the 1st day of December, 1987, and subsequently
amended on January 17, 1989, between PACIFIC SELECT FUND, (the "Fund") a
Massachusetts business trust having its principal place of business at 700
Newport Center Drive, Newport Beach, CA 92660, and PACIFIC EQUITIES NETWORK
("PEN"), a California corporation, having its principal place of business at 700
Newport Center Drive, Newport Beach, CA 92660 (the "Agreement") is hereby
amended by the addition of the provisions set forth in this Addendum to the
Agreement ("Addendum"), which is made this 4th day of January, 1994,
WITNESSETH:
WHEREAS, the Fund currently consists of nine separate series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series, and Equity Index Series (each a "Series"); and
WHEREAS, the Fund has appointed PEN as Distributor of the Capital Stock
("Distributor") with respect to the Series and PEN has accepted such
appointment; and
WHEREAS, the Fund intends to establish one additional Series to be designated as
the Growth LT Series; and
WHEREAS, the Fund desires to appoint PEN as Distributor for the Growth LT Series
on the terms set forth in this Agreement and hereinafter; and
WHEREAS, PEN is willing to accept such appointment;
NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this Addendum, it is agreed between the parties hereto as follows:
1. The Growth LT Series, together with all other Series previously
established by the Fund, are referred to as "Series" as that term is used in the
Agreement. In addition to its responsibilities as specified in the Agreement,
PEN shall serve as Distributor of the Capital Stock of the Growth LT Series of
the Fund under the terms and conditions specified in the Agreement. For
purposes of the Agreement and this Addendum, the phrase "Capital Stock" shall
mean the shares of beneficial interest issued by the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed
by their officers designated below on the date written above.
<PAGE>
PACIFIC SELECT FUND
ATTEST /s/ AUDREY L. MILFS By: /s/ TC SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
ATTEST /s/ AUDREY L. MILFS By: /s/ GERALD W. ROBINSON
Name: Audrey L. Milfs Name:
Title: Secretary Title: Director
ATTEST /s/ AUDREY L. MILFS By: /s/ DIANE N. LEDGER
Name: Audrey L. Milfs Name: Diane N. Ledger
Title: Secretary Title: Assistant Vice President
<PAGE>
ADDENDUM TO DISTRIBUTION AGREEMENT
- ----------------------------------
The Distribution Agreement made the 1st day of December, 1987, and subsequently
amended on January 17, 1989, between PACIFIC SELECT FUND, (the "Fund") a
Massachusetts business trust having its principal place of business at 700
Newport Center Drive, Newport Beach, CA 92660, and PACIFIC EQUITIES NETWORK
("PEN"), a California corporation having its principal place of business at 700
Newport Center Drive, Newport Beach, CA 92660 (the "Agreement") is hereby
amended by the addition of the provisions set forth in this Addendum to the
Agreement ("Addendum"), which is made this 15th day of August, 1994.
WITNESSETH:
WHEREAS, the Fund currently consists of ten separate series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series, Equity Index Series and Growth LT Series (each a
"Series"); and
WHEREAS, the Fund has appointed PEN as Distributor of the Capital Stock
("Distributor) with respect to the Series and PEN has accepted such appointment;
and
WHEREAS, the Fund intends to establish two additional Series to be designated as
the Equity Series and Bond and Income Series; and
WHEREAS, the Fund desires to appoint PEN as Distributor for the Equity Series
and Bond and Income Series on the terms set forth in this Agreement and
hereinafter; and
WHEREAS, PEN is willing to accept such appointment;
NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this Addendum, it is agreed between the parties hereto as follows:
1. The Equity Series and Bond and Income Series, together with all other
Series previously established by the Fund, are referred to as "Series" as that
term is used in the Agreement. In addition to its responsibilities as specified
in the Agreement, PEN shall serve as Distributor of the Capital Stock of the
Equity Series and Bond and Income Series of the Fund under the terms and
conditions specified in the Agreement. For purposes of the Agreement and this
Addendum, the phrase "Capital Stock" shall mean the shares of beneficial
interest issued by the Fund.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed
by their officers designated below on the date written above.
<PAGE>
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/TC SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: /s/ AUDREY L. MILFS By: /s/ GERALD W. ROBINSON
Name: Audrey L. Milfs Name: Gerald W. Robinson
Title: Secretary Title: President and Chief
Executive Officer
Attest: /s/ AUDREY L. MILFS By: /s/ DIANE N. LEDGER
Name: Audrey L. Milfs Name: Diane N. Ledger
Title: Secretary Title: Assistant Vice President
<PAGE>
ADDENDUM TO DISTRIBUTION AGREEMENT
----------------------------------
The Distribution Agreement made the 1st day of December, 1987, and
subsequently amended on January 17, 1989, January 4, 1994 and August 15, 1994
between PACIFIC SELECT FUND, (the "Fund") a Massachusetts business trust having
its principal place of business at 700 Newport Center Drive, Newport Beach, CA
92660, and PACIFIC EQUITIES NETWORK ("PEN"), a California corporation, having
its principal place of business at 700 Newport Center Drive, Newport Beach, CA
92660 (the "Agreement") is hereby amended by the addition of the provisions set
forth in this Addendum to the Agreement ("Addendum"), which is made this _____
day of ___________, 1995.
WITNESSETH:
WHEREAS, the Fund currently consists of twelve separate series designated
as the Money Market Portfolio, Managed Bond Portfolio, High Yield Bond
Portfolio, Government Securities Portfolio, Growth Portfolio, Equity Income
Portfolio, Multi-Strategy Portfolio, International Portfolio, Equity Index
Portfolio, Growth LT portfolio, Equity Portfolio and Bond and Income Portfolio
(each referred to as a "Series" in the Agreement, and hereinafter referred to as
a "Portfolio"); and
WHEREAS, the Fund has appointed PEN as Distributor of the Capital Stock
("Distributor") with respect to the Portfolios and PEN has accepted such
appointment; and
WHEREAS, the Fund intends to establish two additional Portfolios to be
designated as the Emerging Markets Portfolio and Aggressive Equity Portfolio;
and
WHEREAS, the Fund desires to appoint PEN as Distributor for the Emerging
Markets Portfolio and Aggressive Equity Portfolio on the terms set forth in this
Agreement and hereinafter; and
WHEREAS, PEN is willing to accept such appointment;
NOW THEREFORE, in consideration of the mutual promises and covenants
contained in this Addendum, it is agreed between the parties hereto as follows:
1. The Emerging Markets Portfolio and Aggressive Equity Portfolio,
together with all other Portfolios previously established by the Fund, are
referred to as "Series" as that term is used in the Agreement, and hereinafter
referred to as "Portfolios". In addition to its responsibilities as specified
in the Agreement, PEN shall serve as Distributor of the Capital Stock of the
Emerging Markets Portfolio and Aggressive Equity Portfolio of the Fund under the
terms and conditions specified in the Agreement. For purposes of the Agreement
and this Addendum, the phrase "Capital Stock" shall mean the shares of
beneficial interest issued by the Fund.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed by their officers designated below on the date written above.
PACIFIC SELECT FUND
Attest: By:
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: By:
Name: Audrey L. Milfs Name: Gerald W. Robinson
Title: Secretary Title: President, Director & CEO
Attest: By:
Name: Audrey L. Milfs Name: Edward R. Byrd
Title: Secretary Title: CFO & Treasurer
<PAGE>
EXHIBIT 99.8(a)
Custodian Agreement
<PAGE>
CUSTODY AGREEMENT
-----------------
THIS AGREEMENT made the 1st day of December, 1987, by and between
INVESTORS FIDUCIARY TRUST COMPANY, a trust company chartered under the laws of
the state of Missouri, having its trust office located at 21 West 10th Street,
16th Floor, Kansas City, Missouri 64105 ("Custodian"), and PACIFIC SELECT FUND,
a Massachusetts business trust having its principal office and place of business
at P.O. Box 7500, 700 Newport Center Drive, Newport Beach, California 92660
("Fund").
WITNESSETH:
WHEREAS, the Fund initially established eight Series to be designated as
the Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
and International Series (the "Initial Series"); and
WHEREAS, the Fund desires to appoint Investors Fiduciary Trust Company as
Custodian of the securities and monies for the investment portfolios of the
Initial Series together with all other Series subsequently established by the
Fund with respect to which the Fund desires to appoint Investors Fiduciary Trust
Company as Custodian and for which Investors Fiduciary Trust Company is willing
to be so appointed; and
WHEREAS, Investors Fiduciary Trust Company is willing to accept such
appointment;
NOW THEREFORE, for and in consideration of the mutual promises contained
herein, the parties hereto, intending to be legally bound, mutually covenant and
agree as follows:
I. APPOINTMENT OF CUSTODIAN. Fund hereby constitutes and appoints Custodian
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as custodian with respect to the Initial Series and any additional Series
established by the Fund for which the Fund desires to retain Custodian as
custodian and for which Custodian is willing to serve as custodian, whereupon
such Series shall become a Series under this Agreement. Custodian accepts such
appointment, which includes:
A. Appointment as custodian of the securities and monies at any time
owned by the Series; and
B. Appointment as agent to perform certain accounting and recordkeeping
functions required of a duly registered investment company in compliance with
applicable provisions of federal, state and local laws, rules and regulations
including, as may be required:
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1. Providing information necessary for Fund to file required
financial reports; maintaining and preserving required books, accounts and
records as the basis for such reports; and performing certain daily functions in
connection with such accounts and records,
2. Calculating daily net asset values and per share net asset
values of each Series of the Fund, and
3. Acting as liaison with independent auditors.
II. DELIVERY OF CORPORATE DOCUMENTS. Fund has delivered or will deliver to
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Custodian prior to the effective date of this Agreement, copies of the following
documents and all amendments or supplements thereto, properly certified or
authenticated:
A. Resolutions of the Board of Trustees of Fund appointing Custodian as
custodian for the Series hereunder and approving the form of this Agreement; and
B. Resolutions of the Board of Trustees of Fund designating certain
persons to give instructions on behalf of Fund to Custodian and authorizing
Custodian to rely upon written instructions over their signatures.
III. DUTIES AND RESPONSIBILITIES OF CUSTODIAN.
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A. Delivery of Assets
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Fund will deliver or cause to be delivered to Custodian on the effective date of
this Agreement, or as soon thereafter as practicable, and from time to time
thereafter, all portfolio securities acquired by it with respect to each Series
and monies then owned by it except as permitted by the Investment Company Act of
1940, as amended, (the "1940 Act") or from time to time coming into its
possession during the time this Agreement shall continue in effect. Custodian
shall have no responsibility or liability whatsoever for or on account of
securities or monies not so delivered. All securities so delivered to Custodian
(other than bearer securities) shall be registered in the name of Fund and the
appropriate Series, or of a nominee of Custodian, or shall be properly endorsed
and in form for transfer satisfactory to Custodian.
B. Delivery of Accounts and Records
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Fund shall turn over to Custodian all of the Fund's relevant accounts and
records previously maintained by it. Custodian shall be entitled to rely
conclusively on the completeness and correctness of the accounts and records
turned over to it by
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Fund, and Fund shall indemnify and hold Custodian harmless of and from any and
all expenses, damages and losses whatsoever arising out of or in connection with
any error, omission, inaccuracy or other deficiency of such accounts and records
or in the failure of Fund to provide any portion of such or to provide any
information needed by the Custodian knowledgeably to perform its function
hereunder.
C. Delivery of Assets to Third Parties
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1. Custodian will receive delivery and keep safely the assets of
the Series delivered to it from time to time segregated in a separate account or
accounts. Custodian will not deliver, assign, pledge or hypothecate any such
assets to any person except as permitted by the provisions of this Agreement or
any agreement executed by it according to the terms of section III.U. of this
Agreement.
2. The Custodian is responsible for the securities and
monies of the Series only until they have been transmitted to and received by
other persons as permitted under the terms of this Agreement, except the
Custodian remains responsible for all securities and monies held by a sub-
custodian employed pursuant to Section III.U.1. of this Agreement, a sub-
custodian employed pursuant to Section III.U.2. (but only to the extent provided
in Section IV of this Agreement), a nominee, correspondent, depository or the
Federal Reserve Book-Entry system, or other agent, all of which entities shall
be deemed agents of the Custodian.
3. Notwithstanding any other provision of this Agreement, the
Custodian, subject to approval and annual review of the arrangement by the
Fund's Board of Trustees, is hereby authorized to deposit or arrange for the
deposit of securities of the Fund eligible for book entry deposit in Federal
Reserve Banks under book entry to the extent acceptable under applicable
regulations of the Department of the Treasury of the United States and the
Federal Reserve Bank involved, which shall be considered an agent of the
Custodian for such purpose. The books and records of the Custodian shall at all
times show such assets and monies as part of the account of the applicable
Series of the Fund.
4. Notwithstanding any other provision of this Agreement, the
Custodian, subject to approval and annual review of the arrangement by the
Fund's Board of Trustees, is authorized in its capacity as Custodian and agent
for the Fund to use the facilities and services of the Depository Trust Company,
or any regional system for the central handling of securities with which
securities may be deposited under the provisions of section
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17(f) of the 1940 Act, which shall be considered an agent of the Custodian for
such purpose.
D. Registration of Securities and Bearer Form Securities
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1. Custodian will hold stocks and other registrable portfolio
securities of the Series registered in the name of the Series or in the name of
any nominee of Custodian for whose fidelity and liability Custodian will be
fully responsible, with or without any indication of fiduciary capacity. Unless
otherwise instructed, Custodian will register all such portfolio securities in
the name of its authorized nominee, provided that such nominee is either "doing
business as" the Custodian, a partnership consisting solely of the Custodian's
officers, employees, directors and affiliated entities subject to the legal and
operational control of the Custodian, or the nominee of a depository that has
been registered with or approved by the Securities and Exchange Commission, and
provided further that Custodian and any sub-custodian will use only one nominee
each for the Fund. All securities, and the ownership thereof by Fund, which are
held by Custodian, its sub-custodian, nominee, correspondent, depository or the
Federal Reserve Book Entry System hereunder, however, shall at all times be
identifiable on the records of the Custodian and, where applicable, its sub-
custodian.
2. All securities issued in bearer form shall be maintained in
that form and not be subject to reregistration in definitive form; that is,
bearer form securities shall not be reregistered in the name of a nominee of the
Custodian, sub-custodian, or any depository, except upon specific instructions
from the Fund as to a given security. Bearer form securities shall be retained
by the Custodian or sub-custodian, unless deposited with a depository authorized
by the Securities and Exchange Commission and, if applicable, a State Insurance
Commissioner.
3. At least quarterly, Custodian shall provide the Fund an updated
list of all securities held by the Custodian including securities held by a sub-
custodian, or redeposited by the Custodian (or sub-custodian) with a depository,
Federal Reserve Bank, or correspondent bank.
E. Exchange of Securities
----------------------
Upon receipt of instructions as defined herein in Section V.A., Custodian will
exchange, or cause to be exchanged, portfolio securities held by it for the
account of the applicable Series for other securities or cash issued or paid in
connection with any reorganization, recapitalization, merger, consolidation,
split-up of shares,
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change of par value, conversion or otherwise, and will deposit any such
securities in accordance with the terms of any reorganization or protective
plan. Without instructions, Custodian is authorized to exchange securities held
by it in temporary form for securities in definitive form, to effect an exchange
of shares when the par value of the stock is changed, and, upon receiving
payment therefore, with the understanding that Custodian may deliver or cause to
be delivered securities for payment in accordance with the customs prevailing
among dealers in securities, to surrender bonds or other securities held by it
at maturity or when advised of earlier call for redemption with the
understanding that Custodian may deliver or cause to be delivered securities for
payment in accordance with the customs prevailing among dealers in securities,
except that Custodian shall receive instructions prior to surrendering any
convertible security.
F. Purchases of Investments of the Fund
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1. Fund will, on each business day on which a purchase of
securities for a Series shall be made by it, deliver to Custodian instructions
which shall specify with respect to each such purchase:
a. The name of the issuer and description of the security;
b. The number of shares or the principal amount purchased,
and accrued interest, if any;
c. The trade date;
d. The settlement date;
e. The purchase price per unit and the brokerage commission,
taxes and other expenses payable in connection with the purchase;
f. The total amount payable by the Series upon such purchase;
g. The name of the person from whom or the broker or dealer
through whom the purchase was made; and
h. The name of the Series with respect to which the purchase
was made.
In accordance with such instructions, Custodian will pay for out of monies held
for the account of the applicable Series, but only insofar as monies are
available therein for such purpose, and receive the portfolio securities so
purchased by or for the account of the applicable Series. Such payment
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will be made only upon receipt by Custodian of the securities so purchased in
form for transfer satisfactory to Custodian.
G. Sales and Deliveries of Investments of the Fund -Other Than Options
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and Futures
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Fund will, on each business day on which a sale of investment securities of a
Series has been made, deliver to Custodian instructions specifying with respect
to each such sale:
1. The name of the issuer and description of the securities;
2. The number of shares or principal amount sold, and accrued
interest, if any;
3. The date on which the securities sold were purchased or other
information identifying the securities sold and to be delivered;
4. The trade date;
5. The settlement date;
6. The sale price per unit and the brokerage commission, taxes or
other expenses payable in connection with such sale;
7. The total amount to be received by the Series upon such sale;
8. The name of the broker or dealer through whom or person to whom
the sale was made; and
9. The name of the Series with respect to which the sale was made.
In accordance with such instructions, Custodian will deliver or cause to be
delivered the securities thus designated as sold for the account of the
applicable Series to the broker or other person specified in the instructions
relating to such sale, such delivery to be made only upon receipt of payment
therefor in such form as is satisfactory to Custodian, with the understanding
that Custodian may deliver or cause to be delivered securities for payment in
accordance with the customs prevailing among dealers in securities.
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H. Purchases or Sales of Security Options, Options on Indices, Security
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Index Futures Contracts, Interest Rate Futures Contracts or Foreign Currency
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Futures Contracts
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Fund will, on each business day on which a purchase or sale of the following
options and/or futures shall be made by it, deliver to Custodian instructions
which shall specify with respect to each such purchase or sale:
1. Security Options
a. The underlying security;
b. The price at which purchased or sold;
c. The expiration date;
d. The number of contracts;
e. The exercise price;
f. Whether the transaction is an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. Market on which option traded;
j. Name and address of the broker or dealer through whom the
sale or purchase was made; and
k. The name of the Series with respect to which the purchase
or sale was made.
2. Options on Indices
a. The index;
b. The price at which purchased or sold;
c. The exercise price;
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d. The premium;
e. The multiple;
f. The expiration date;
g. Whether the transaction is an opening, exercising,
expiring or closing transaction;
h. Whether the transaction involves a put or call;
i. Whether the option is written or purchased;
j. The name and address of the broker or dealer through whom
the sale or purchase was made, or other applicable
settlement instructions; and
k. The name of the Series with respect to which the purchase
or sale was made.
3. Security Index Futures Contracts, Interest Rate Futures
Contracts or Foreign Currency Futures Contracts
a. The last trading date specified in the contract and, when
available, the closing level, thereof;
b. The index level, or value of the underlying security or
currency on the date the contract is entered into;
c. The multiple;
d. Any margin requirements;
e. The need for a segregated margin account (in addition to
instructions, and if not already in the possession of
Custodian, Fund shall deliver a substantially complete and
executed custodial safekeeping account and procedural
agreement which shall be incorporated by reference into
this Custody Agreement);
f. The name and address of the futures commission merchant
through whom the sale or purchase was made, or other
applicable settlement instructions; and
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g. The name of the Series for which the purchase or sale was
made.
4. Options on Index Futures Contracts
a. The underlying index futures contract;
b. The premium;
c. The expiration date;
d. The number of options;
e. The exercise price;
f. Whether the transaction involves an opening, exercising,
expiring or closing transaction;
g. Whether the transaction involves a put or call;
h. Whether the option is written or purchased;
i. The market on which the option is traded; and
j. The name of the Series for which the option is traded.
I. Securities Pledged or Loaned
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If specifically allowed for in the prospectus of Fund:
1. Upon receipt of instructions, Custodian will release or cause
to be released securities held in custody to the pledgee designated in such
instructions by way of pledge or hypothecation to secure any loan incurred by a
Series; provided, however, that the securities shall be released only upon
payment to Custodian of the monies borrowed, except that in cases where
additional collateral is required to secure a borrowing already made, further
securities may be released or caused to be released for that purpose upon
receipt of instructions. Upon receipt of instructions, Custodian will pay, but
only from funds available for such purpose, any such loan upon redelivery to it
of the securities pledged or hypothecated therefor and upon surrender of the
note or notes evidencing such loan.
2. Upon receipt of instructions, Custodian will release securities
held in custody to the borrower designated in such instructions; provided,
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however, that if the borrower is a bank or securities broker-dealer, the
securities will be released only upon deposit with Custodian of full collateral
consisting of U.S. Government securities or cash or obligations fully guaranteed
by the United States of America or any agency or instrumentality thereof as
specified in such instructions, and that the Series will retain the right to any
dividends, interest or distribution on such loaned securities. Upon receipt of
instructions and the loaned securities, Custodian will release the collateral to
the borrower.
J. Routine Matters
---------------
Custodian will, in general, attend to all routine and mechanical matters in
connection with the sale, exchange, substitution, purchase, transfer, or other
dealings with securities or other property of the Series except as may be
otherwise provided in this Agreement or directed from time to time by the Board
of Trustees of the Fund.
K. Deposit Account
---------------
Custodian will open and maintain a special purpose deposit account or accounts
in the name of Custodian ("Account"), subject only to draft or order by
Custodian upon receipt of instructions. All monies received by Custodian from
or for the account of the Series shall be deposited in said Account of the
applicable Series, barring events not in the control of the Custodian such as
strikes, lockouts or labor disputes, riots, war or equipment or transmission
failure or damage, fire, flood, earthquake or other natural disaster, action or
inaction of governmental authority or other causes beyond its control, at 9:00
a.m., Kansas City time, on the next business day after deposit of any check into
Fund's Account, and will be available for withdrawal by the Fund in the form of
Federal Funds. Custodian may open and maintain an Account in such other banks
or trust companies as may be designated by it or by properly authorized
resolution of the Board of Trustees of Fund, such Account, however, to be in the
name of Custodian and subject only to its draft or order.
L. Cash Accounts
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Any cash account maintained by the Fund with the Custodian under this Agreement,
wherein there is deposited cash, interest, dividends or the proceeds of security
sales, shall be deemed to be a part of the custody account and shall be subject
to all of the other terms and provisions of this Agreement.
M. Sweep Accounts
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Any "sweep" account maintained by the sub-custodian or foreign sub-
custodian on behalf of a Series of the Fund wherein available cash is
automatically invested shall be deemed a part of the Account or Accounts subject
to the terms and provisions of this Agreement. The Fund shall have the option
of selecting the type of account into which the funds are to be swept and, if
the available Accounts are mutual funds, the particular mutual fund.
N. Income and Other Payments to Fund
---------------------------------
Custodian will:
1. Collect, claim and receive and deposit for the Account of each
Series of the Fund all income and other payments which become due
and payable on or after the effective date of this Agreement with
respect to the securities deposited under this Agreement, and
credit the account of each Series of the Fund with such income on
the date received;
2. Execute ownership and other certificates and affidavits for all
federal, state and local tax purposes in connection with the
collection of bond and note coupons; and
3. Take such other action as may be necessary or proper in
connection with:
a. the collection, receipt and deposit of such income and other
payments, including but not limited to the presentation for
payment of:
(1) all coupons and other income items requiring purpose;
and
(2) all other securities which may mature or be called,
redeemed, retired or otherwise become payable and
regarding which the Custodian has actual knowledge, or
notice of which is contained in publications of the type
to which it normally subscribes for such purpose; and
b. the endorsement for collection, in the name of each Series of
the Fund, of all checks, drafts or other negotiable
instruments.
Custodian, however, will not be required to institute suit or take other
extraordinary action to enforce collection except upon receipt of instructions
and upon being indemnified to its satisfaction against the costs and expenses of
such suit or other actions. Custodian will receive, claim and collect all stock
dividends, rights and other similar items and will deal with the same pursuant
to instructions. Unless prior instructions have been received to the contrary,
Custodian will,
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without further instructions, sell any rights held for the account of each
Series of the Fund on the last trade date prior to the date of expiration of
such rights.
O. Payment of Dividends and other Distributions
--------------------------------------------
On the declaration of any dividend or other distribution on the shares of
beneficial interest of a Series of Fund ("Fund Shares") by the Board of Trustees
of Fund, Fund shall deliver to Custodian instructions with respect thereto,
including a copy of the Resolution of said Board of Trustees certified by the
Secretary or an Assistant Secretary of Fund wherein there shall be set forth the
record date as of which shareholders entitled to receive such dividend or other
distribution shall be determined, the date of payment of such dividend or
distribution, and the amount payable per share on such dividend or distribution.
Except if the ex-dividend date and the reinvestment date of any dividend are the
same, in which case funds shall remain in the Custody Account, on the date
specified in such Resolution for the payment of such dividend or other
distribution, Custodian will pay out of the monies held for the account of a
Series, insofar as the same shall be available for such purposes, and credit to
the account of the Dividend Disbursing Agent for Fund, such amount as may be
necessary to pay the amount per share payable in cash on Fund Shares for a
Series issued and outstanding on the record date established by such Resolution.
P. Shares of Fund Purchased by Fund
--------------------------------
Whenever any Fund Shares for a Series are repurchased or redeemed by Fund, Fund
or its agent shall advise Custodian of the aggregate dollar amount to be paid
for such shares and shall confirm such advice in writing. Upon receipt of such
advice, Custodian shall charge such aggregate dollar amount to the Account of
the Series and either deposit the same in the account maintained for the purpose
of paying for the repurchase or redemption of Fund Shares or deliver the same in
accordance with such advice.
Custodian shall not have any duty or responsibility to determine that Fund
Shares repurchased or redeemed by Fund have been removed from the proper
shareholder account or accounts or that the proper number of such shares have
been cancelled and removed from the shareholder records.
Q. Shares of Fund Purchased from Fund
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Whenever Fund Shares are purchased from Fund, Fund will deposit or cause to be
deposited with Custodian the amount received for such shares.
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Custodian shall not have any duty or responsibility to determine that
Fund Shares purchased from Fund have been added to the proper shareholder
account or accounts or that the proper number of such shares have been added to
the shareholder records.
R. Proxies and Notices
-------------------
Custodian will promptly deliver or mail or have delivered or mailed to Fund all
proxies properly signed, all notices of meetings, all proxy statements and other
notices, requests or announcements affecting or relating to securities held by
Custodian for a Series and will, upon receipt of instructions, execute and
deliver or cause its nominee to execute and deliver or mail or have delivered or
mailed such proxies or other authorizations as may be required. Except as
provided by this Agreement or pursuant to instructions hereafter received by
Custodian, neither it nor its nominee will exercise any power inherent in any
such securities, including any power to vote the same, or execute any proxy,
power of attorney, or other similar instrument voting any of such securities, or
give any consent, approval or waiver with respect thereto, or take any other
similar action.
S. Disbursements
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Custodian will pay or cause to be paid insofar as funds are available for the
purpose, bills, statements and other obligations of Fund or a Series (including
but not limited to obligations in connection with the conversion, exchange or
surrender of securities owned by a Series, interest charges, dividend
disbursements, taxes, management fees, custodian fees, legal fees, auditors'
fees, transfer agents' fees, brokerage commissions, compensation to personnel,
and other operating expenses of Fund or a Series pursuant to instructions of
Fund setting forth the name of the person to whom payment is to be made, the
amount of the payment, the Series to be charged, and the purpose of the payment.
T. Daily Statement of Accounts
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Custodian will, within a reasonable time, render to Fund as of the close of
business on each day, a detailed statement of the amounts received or paid and
of securities received or delivered for the account of each Series of the Fund
during said day. Custodian will, from time to time, upon request by Fund,
render a detailed statement of the securities and monies held for one or more of
the Series under this Agreement, and Custodian will maintain such books and
records as are necessary to enable it to do so and will permit such persons as
are authorized by Fund, and if demanded, federal and state regulatory agencies
to examine the securities, accounts, books and records of the Fund. In any
requested review by a regulatory authority having the requisite authority of
Fund's accounts and
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records maintained by Custodian, Custodian will furnish any information or
reports regarding accounts and records of Fund which may be requested in order
to ascertain whether the operations of the Fund are being conducted in a manner
consistent with applicable laws and regulations. Upon the instructions of Fund
or as demanded by federal or state regulatory agencies, Custodian will instruct
sub-custodian to permit such persons as are authorized by Fund and if demanded,
federal and state regulatory agencies to examine the books, records and
securities held by sub-custodian which relate to Fund.
U. Appointment of Sub-Custodian
----------------------------
1. Notwithstanding any other provisions of this Agreement, all or
any of the monies or securities of Fund may be held in Custodian's own custody
or in the custody of one or more other banks or trust companies acting as sub-
custodians as may be selected by Custodian. Any such sub-custodian must have
the qualifications required for custodian under the 1940 Act. The sub-custodian
may participate directly or indirectly pursuant to the approval of the Fund's
Board of Trustees in the Depository Trust Company, any other depository approved
by the Fund, or the Treasury/Federal Reserve Book Entry System (as such entity
is defined at 17 CFR Sec. 270.17f-4(b)). Neither Custodian nor sub-custodian
will be entitled to reimbursement by Fund for any fees or expenses of any sub-
custodian. The appointment of a sub-custodian will not relieve Custodian of any
of its obligations hereunder.
2. Notwithstanding any other provision of this Agreement, the
Custodian is authorized and instructed to employ as sub-custodian, or to
instruct a sub-custodian to employ as its sub-custodian, for the Series'
securities and other assets maintained outside of the United States the foreign
banking institutions and foreign securities depositories designated on Schedule
A hereto ("foreign sub-custodians"), provided that any such foreign sub-
custodian is an "eligible foreign custodian" as defined under Rule 17-5(c)(2)
under the 1940 Act or is otherwise eligible to serve as such a foreign sub-
custodian under an exemptive order issued by the U.S. Securities and Exchange
Commission from Section 17(f) of the 1940 Act applicable to the custodian or a
sub-custodian. Upon receipt of instructions, together with a certified
resolution of the Fund's Board of Trustees, the Custodian and the Fund may agree
to amend Schedule A hereto from time to time to designate additional foreign
banking institutions and foreign securities depositories to act as foreign sub-
custodians. Upon receipt of instructions from the Fund, the Custodian shall
cease the employment, or direct its sub-custodian to cease the employment, as
the case may be, of any one or more of such foreign sub-
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custodians for maintaining custody of the Series' assets.
3. Monitoring Responsibilities. The Custodian shall furnish
---------------------------
annually to the Fund, upon the request of the Fund, information concerning any
sub-custodian and any foreign sub-custodians employed by the Custodian. Such
information shall be similar in kind and scope to that furnished to the Fund in
connection with the initial approval of this Agreement. In addition, the
Custodian will promptly inform the Fund in the event that the Custodian learns
of a material adverse change in the financial condition of a sub-custodian or
foreign sub-custodian or is notified by a foreign banking institution employed
as a foreign sub-custodian that there appears to be a substantial likelihood
that its shareholders' equity will decline below $200 million (U.S. dollars or
the equivalent thereof) or that its shareholders' equity has declined below $200
million (in each case computed in accordance with generally accepted U.S.
accounting principles).
V. Accounts and Records
--------------------
1. Custodian will prepare and maintain complete, accurate and
current the accounts and records required to be maintained by Fund (1) under the
General Rules and Regulations under the 1940 Act ("Rules") and (2) to the extent
necessary to maintain records for the requirements pertaining to regulated
investment companies (but not for tax accounting purposes) under the Internal
Revenue Code ("Code"), to the extent that records described in (1) and (2) are
customarily maintained by custodians of open-end management investment
companies, and as agreed upon between the parties, and Custodian will preserve
said records in the manner and for the periods prescribed in said Code and
Rules, or for such longer period as is agreed upon by the parties.
2. Custodian shall allow, upon not more than 48 hours' notice and
during the course of the Custodian's regular business hours, any insurance or
banking authority having the requisite authority to inspect the securities held
by the Custodian and all of the Custodian's records pertaining to the Fund's
securities held by the Custodian.
3. Custodian relies upon Fund to furnish, in writing, accurate and
timely information to complete Fund's records and perform daily calculation of
the Series' net asset value, as provided in Section III.Y. below.
4. Custodian shall incur no liability and Fund shall indemnify and
hold harmless Custodian from and against any liability arising from any failure
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of Fund to furnish such information in a timely and accurate manner, even if
Fund subsequently provides accurate but untimely information. It shall be the
responsibility of Fund to furnish Custodian with the declaration, record and
payment dates and amounts of any dividends or income and any other special
actions required concerning each of its securities when such information is not
readily available from generally accepted securities industry services or
publications.
W. Accounts and Records Property of Fund
-------------------------------------
Custodian acknowledges that all of the accounts and records maintained by
Custodian pursuant to this Agreement are the property of Fund, and will be made
available to Fund for inspection or reproduction within a reasonable period of
time, upon demand. Custodian will assist Fund's independent auditors, or upon
approval of Fund, or upon demand, any regulatory body, in any requested review
of Fund's accounts and records but shall be reimbursed for all expenses and
employee time invested in any such review outside of routine and normal periodic
reviews. Upon receipt from Fund of the necessary information, Custodian will
supply necessary data for Fund's completion of any necessary tax returns,
questionnaires, periodic reports to regulatory authorities and Shareholders and
such other reports and information requests as Fund and Custodian shall agree
upon from time to time.
X. Adoption of Procedures
----------------------
Custodian and Fund may from time to time adopt procedures as they agree upon,
and Custodian may conclusively assume that no procedure approved by Fund, or
directed by Fund, conflicts with or violates any requirements of its prospectus,
Declaration of Trust, Bylaws, or any rule or regulation of any regulatory body
or governmental agency. Fund will be responsible to notify Custodian of any
changes in state statutes, regulations, rules or policies which might
necessitate changes in Custodian's responsibilities or procedures.
Y. Calculation of Net Asset Value
------------------------------
Custodian will calculate the net asset value of each Series of the Fund, in
accordance with Fund's prospectus, once daily at or about 4:00 p.m. New York
City time, or at such other time as instructed by the Fund's Board of Trustees
that, subject to applicable law, is agreeable to Custodian. Custodian will
prepare and maintain a daily evaluation of securities for which market
quotations are available by the use of outside services normally used and
contracted for this purpose; all other securities will be evaluated in
accordance with Fund's instructions. Custodian will have no responsibility for
the accuracy of the prices quoted by
17
<PAGE>
these outside services or for the information supplied by Fund or upon
instructions.
IV. DUTIES OF THE CUSTODIAN WITH RESPECT TO PROPERTY OF THE FUND HELD OUTSIDE
-------------------------------------------------------------------------
OF THE UNITED STATES.
--------------------
A. Assets to be Held. The Fund shall limit the securities and other
-----------------
assets maintained in the custody of the foreign sub-custodians to: (a) "foreign
securities," as defined in paragraph (c)(1) of Rule 17f-5 under the 1940 Act,
and (b) cash and cash equivalents in such amounts as the Fund may determine to
be reasonably necessary to effect the Fund's foreign securities transactions.
B. Foreign Securities Depositories. Except as may otherwise be agreed
-------------------------------
upon in writing by the Custodian and the Fund, assets of the Fund shall be
maintained in foreign securities depositories only through arrangements
implemented by the banking institutions serving as sub-custodians or foreign
sub-custodians pursuant to the terms hereof, provided such depositories may be
used under Rule 17f-5 under the 1940 Act or similar exemption applicable to the
Custodian or sub-custodian from Section 17(f) of the 1940 Act. Such
arrangements shall provide that the Custodian and, if applicable, the sub-
custodian shall identify on its books as belonging to the Fund any securities
held by such foreign securities depositories.
C. Identification of Securities. The Custodian shall identify on its
----------------------------
books as belonging to the Series, the foreign securities of the Series held by
each foreign sub-custodian. Each agreement pursuant to which the Custodian or
sub-custodian employs a foreign banking institution shall require that such
institution establish a custody account for the Custodian or sub-custodian on
behalf of the Fund and its Series. In the event that such foreign banking
institution deposits the Series' securities in a foreign securities depository,
the foreign banking institution shall identify on its books as belonging to the
Custodian or sub-custodian, as agent for its customers, the securities so
deposited (all collectively referred to as the "Account").
D. Agreements with Foreign Banking Institutions. Each agreement with a
--------------------------------------------
foreign banking institution shall provide that: (a) the Series' assets will not
be subject to any right, charge, security interest, lien or claim of any kind in
favor of the foreign banking institutions or its creditors, except a claim of
payment for their safe custody or administration; (b) beneficial ownership for
the Series' assets will be freely transferable without the payment of money or
value other than for custody or administration; (c) adequate records will be
maintained identifying the assets as belonging to the Fund and its Series; (d)
officers of or auditors employed by,
18
<PAGE>
or other representatives of the Custodian, including to the extent permitted
under applicable law the independent public accountants for the Fund, will be
given access to the books and records of the foreign banking institution
relating to its actions under its agreement with the Custodian; and (e) assets
of the Fund held by the foreign sub-custodian will be subject only to the
instructions of the Custodian or its agents.
E. Access by Independent Accountants of the Fund or by Banking or
--------------------------------------------------------------
Insurance Authority. Upon request of the Fund, the Custodian will use its best
- -------------------
efforts to arrange for the independent accountants of the Fund or any banking or
insurance regulatory body having the requisite authority to be afforded
reasonable access to the books and records of any foreign banking institution
employed as a foreign sub-custodian to the extent authorized by applicable law
insofar as such books and records relate to the performance of such foreign
banking institutions under its agreement with the Custodian. Each contract
between the Custodian or sub-custodian and such foreign banking institution
shall provide for such access.
F. Reports by Custodian. The Custodian will supply to the Fund from
--------------------
time to time, as mutually agreed upon, statements in respect of the securities
and other assets of the Series held by foreign sub-custodians, including but not
limited to an identification of entities having possession of the Series'
securities and other assets and advices or notifications of any transfers of
securities to or from each custodial account maintained by a foreign banking
institution for the Custodian on behalf of the Fund indicating, as to securities
acquired for the Fund, the identity of the entity having physical possession of
such securities.
G. Transactions in Foreign Custody Account.
---------------------------------------
1. Upon receipt of instructions, the Custodian or sub-custodian
shall make or cause its foreign sub-custodian to deliver or exchange foreign
securities owned by the Fund, to the extent delivery or exchange of domestic
securities is authorized in Section III. of this Agreement.
2. Upon receipt of instructions, the Custodian shall pay out or
cause its foreign sub-custodians to pay out monies of the Series, to the extent
payment of monies by the Custodian is otherwise authorized by this Agreement.
3. Notwithstanding any provision of this Agreement to the
contrary, settlement and payment for securities received for the account of the
Fund and its Series and delivery of securities maintained for the account of the
Fund and its Series may be effected in accordance with the customary or
established securities trading or securities processing practices and
19
<PAGE>
procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser thereof or
to a dealer thereof or to a dealer therefor (or an agent for such purchaser or
dealer) against a receipt with the expectation of receiving later payment for
such securities from such purchaser or dealer.
4. Securities maintained in the custody of a foreign sub-custodian
may be maintained in the name of such entity's nominee.
H. Liability of Foreign Sub-Custodians. Each agreement pursuant to
-----------------------------------
which the Custodian or sub-custodian employs a foreign banking institution as a
foreign sub-custodian shall require the institution to exercise reasonable care
(which may be defined in such agreement according to the standards of the
country of such foreign sub-custodian) in the performance of its duties and to
indemnify, and hold harmless, the Custodian or sub-custodian from and against
any loss or liability arising out of or in connection with the institution's
performance of such obligations.
I. Liability of Custodian and Sub-Custodian. The Custodian shall be
----------------------------------------
liable to the Fund for any loss which shall occur as the result of the failure
of a foreign sub-custodian or an eligible foreign securities depository engaged
by such Custodian or sub-custodian thereof or the nominee of the foreign sub-
custodian or foreign securities depository to exercise reasonable care with
respect to the safekeeping of such securities and other assets to the same
extent that the foreign sub-custodian or foreign securities depository would be
liable to the Fund if the Custodian were holding such securities and other
assets in New York. In the event of any loss to the Fund by reason of the
failure of the Custodian, any sub-custodian, a foreign sub-custodian or an
eligible foreign securities depository engaged by such foreign sub-custodian or
the nominee of either a foreign sub-custodian or foreign securities depository
to utilize reasonable care, the Custodian shall be liable to the Fund to the
extent of the Fund's or the Custodian's damages, to be determined based on the
market value of the property which is the subject of the loss at the date of
discovery of such loss and without reference to any special conditions or
circumstances. The Custodian shall be held to the exercise of reasonable care
in carrying out this Agreement but shall be indemnified by, and shall be without
liability to, Fund for any action taken or omitted by the Custodian in good
faith without negligence.
J. Branches of U.S. Banks. Except as otherwise set forth in this
-----------------------
Agreement, the provisions of this subsection other than Section IV.I shall not
apply where the custody of the Fund assets maintained in a foreign branch of a
banking institution which is a "bank" as defined by Section 2(a)(5) of the 1940
Act which meets the qualification set forth in Section 26(a) of said Act. The
appointment of any such
20
<PAGE>
branch as a sub-custodian shall be governed by Subsection III.U.1. of this
Agreement.
V. INSTRUCTIONS.
------------
A. The term "instructions", as used herein, means written or oral
instructions to Custodian from a designated representative of Fund. Certified
copies of Resolutions of the Board of Trustees of Fund naming one or more
designated representatives to give instructions in the name and on behalf of
Fund, may be received and accepted from time to time by Custodian as conclusive
evidence of the authority of any designated representative to act for Fund and
may be considered to be in full force and effect (and Custodian will be fully
protected in acting in reliance thereon) until receipt by Custodian of notice to
the contrary. Unless the Resolution delegating authority to any person to give
instructions specifically requires that the approval of anyone else will first
have been obtained, Custodian will be under no obligation to inquire into the
right of the person giving such instructions to do so. Notwithstanding any of
the foregoing provisions of this Section V., no authorizations or instructions
received by Custodian from Fund, will be deemed to authorize or permit any
trustee, officer, employee, or agent of Fund to withdraw any of the securities
or similar investments of Fund upon the mere receipt of such authorization or
instructions from such trustee, officer, employee or agent.
Notwithstanding any other provision of this Agreement, Custodian, upon receipt
(and acknowledgement if required at the discretion of Custodian) of the
instructions of a designated representative of Fund will undertake to deliver
for a Series' account monies, (provided such monies are on hand or available) in
connection with the Series' transactions and to wire transfer such monies to
such broker, dealer, sub-custodian, bank or other agent specified in such
instructions by a designated representative of the Fund.
B. No later than the next business day immediately following each oral
instruction, Fund will send Custodian written confirmation of such oral
instruction. At Custodian's sole discretion, Custodian may record on tape, or
otherwise, any oral instruction whether given in person or via telephone, each
such recording identifying the parties, the date and the time of the beginning
and ending of such oral instruction.
VI. LIABILITY OF CUSTODIAN.
----------------------
21
<PAGE>
A. 1. Except with respect to securities and other assets held under
agreements with foreign sub-custodians and foreign securities depositories, the
liability for which shall be governed by Sections IV.H. and IV.I. of this
Agreement, Custodian shall assume the entire responsibility for physical loss,
damage or injury to custodied securities occasioned by robbery, burglary, fire,
theft or mysterious disappearance irrespective of whether such losses occur
while the securities are in possession of Custodian or one of Custodian's
agents, sub-custodian, nominee, depository or correspondent. In addition, in
the event of any loss to the securities due to other cause, unless the Custodian
can prove that it and its agents, sub-custodian, nominees, depositories and
correspondents were not negligent and did not act with willful misconduct, the
Custodian will be liable for the negligence or willful misconduct of its
employees, officers, sub-custodian, agents, nominees, depositories and
correspondents.
2. Except with respect to securities and other assets held under
agreements with foreign sub-custodians and foreign securities depositories, the
replacement of which shall be governed by Sections IV.H. and IV.I. of this
Agreement, in the event of loss, damage or injury to the securities and/or
monies while on deposit in Custodian's account, whether held by Custodian, its
sub-custodian, nominee, correspondent or depository (including Federal Reserve
Book Entry System), upon Fund's demand, Custodian will promptly cause the said
securities and/or monies to be replaced with securities and/or monies of like
kind and quality, together with all rights and privileges pertaining thereto,
or, if acceptable to Fund, remit cash equal to the fair market value of the
securities as of the date when the loss was discovered, which acceptance will
not unreasonably be denied.
3. Custodian may request and obtain the advice and opinion of
counsel for Fund with respect to questions or matters of law, and it shall be
without liability to Fund for any action taken or omitted by it in good faith,
in conformity with such advice or opinion.
B. Custodian may rely upon statements of Fund's independent certified
public accountants and any representative of Fund authorized to give
instructions, and Custodian shall not be liable for any actions taken, in good
faith, upon such statements.
C. If Fund requires Custodian in any capacity to take, with respect to
any securities, any action which involves the payment of money by it, or which
in Custodian's opinion might make it or its nominee liable for payment of monies
or in any other way, Custodian, upon notice to Fund given prior to such actions,
shall be and be
22
<PAGE>
kept indemnified by Fund in an amount and form satisfactory to Custodian against
any liability on account of such action.
D. Custodian shall be entitled to receive, and Fund agrees to pay to
Custodian, on demand, reimbursement for such cash disbursements, costs and
expenses as may be agreed upon from time to time by Custodian and Fund.
E. Custodian shall be protected in acting as custodian hereunder upon
any instructions, advice, notice, request, consent, certificate or other
instrument or paper reasonably appearing to it to be genuine and to have been
properly executed and shall, unless otherwise specifically provided herein, be
entitled to receive as conclusive proof of any fact or matter required to be
ascertained from Fund hereunder, a certificate signed by the Fund's President,
or other officer specifically authorized for such purpose.
F. Without limiting the generality of the foregoing, Custodian shall be
under no duty or obligation to inquire into, and shall not be liable for:
1. The legality of the purchase of any security by or for a Series
or evidence of ownership required by Fund to be received by Custodian, or the
propriety of the decision to purchase or amount paid therefore;
2. The legality of the sale of any securities by or for a Series,
or the propriety of the amount for which the same are sold;
3. The legality of the issue or sale of any beneficial interest of
Fund, or the sufficiency of the amount to be received therefore;
4. The legality of the repurchase or redemption of any shares of
beneficial interest of, or the propriety of the amount to be paid therefore; or
5. The legality of the declaration of any dividend of a Series by
Fund, or the legality of the issue of any shares of beneficial interest of a
Series of Fund in payment of any stock dividend.
G. Custodian shall not be liable for, or considered to be Custodian of,
any money represented by any check, draft, wire transfer, clearing house funds,
uncollected funds, or instrument for the payment of money received by it on
behalf of Fund, until Custodian actually receives such money, provided only that
it shall advise Fund promptly if it fails to receive any such money in the
ordinary course of business, and use its best efforts and cooperate with Fund
toward the end that such money shall be received.
23
<PAGE>
H. Notwithstanding anything herein to the contrary, Custodian may
provide Fund for its approval, agreements with banks or trust companies which
will act as sub-custodians for Fund pursuant to Section III.U. of this
Agreement.
VII. COMPENSATION. Fund will pay to Custodian such compensation as is stated
------------
in the Fee Schedule attached hereto as Exhibit A which may be changed from time
to time as agreed to in writing by Custodian and Fund. Such compensation will
be computed monthly on the last trading day each month and billed to, and paid
by, the Fund monthly. Custodian may not charge such compensation or other fees
for which it may be entitled to reimbursement under the provisions of this
Agreement against monies held by it for the account of Fund. Custodian will not
be entitled to reimbursement by Fund for any loss or expenses of any sub-
custodian or eligible foreign custodian.
VIII. TERMINATION. The term of this Agreement shall be one year. Either party
-----------
to this Agreement may terminate the same by notice in writing, delivered or
mailed, postage prepaid, to the other party hereto and received not less than
sixty (60) days prior to the date upon which such termination will take effect.
The Fund may terminate this Agreement without payment of any penalty,
forfeiture, compulsory buyout amount or performance of any other obligation
which could deter termination. Upon termination of this Agreement, Fund will
pay to Custodian such compensation for its reimbursable disbursements, fees,
costs and expenses paid or incurred to such date and Fund will use its best
efforts to obtain a successor custodian. Unless the holders of a majority of
the outstanding shares of beneficial interest vote to have the securities,
funds, records and other properties held under this Agreement delivered and paid
over to some other person, firm or corporation specified in the vote, having not
less than two million dollars ($2,000,000) aggregate capital, surplus and
undivided profits, as shown by its last published report, and meeting such other
qualifications for Custodian as set forth in the Bylaws of Fund or under
applicable law, the Board of Trustees of Fund will, forthwith upon giving or
receiving notice of termination of this Agreement, appoint as successor
custodian a bank or trust company having such qualifications. Custodian will,
upon termination of this Agreement, deliver, free from any claim of rights
respecting the records, funds and property of the Fund, to the successor
custodian so specified or appointed, at Custodian's office, all securities then
held by Custodian hereunder, duly endorsed and in form for transfer, all funds,
records and other properties of Fund deposited with or held by Custodian
hereunder, or will cooperate in effecting changes in book-entries at the
Depository Trust Company or in the Treasury/Federal Reserve Book Entry System
pursuant to 31 CFR Sec. 306.118. In the event no such vote has been adopted by
the holder of shares of beneficial interest of Fund and no written order
designating a successor custodian has been delivered to Custodian on or before
the date when such termination becomes effective, then Custodian will deliver
the securities, funds, records and properties of Fund to a bank or trust company
at the selection of Custodian and meeting the qualifications for Custodian, if
any, set forth in the Bylaws of Fund and having not less than two million
dollars ($2,000,000) aggregate capital, surplus
24
<PAGE>
and undivided profits, as shown by its last published report. Upon either such
delivery to a successor custodian, Custodian will have no further duties under
this Agreement, although any liabilities pursuant to Section VI. of this
Agreement will survive termination of this Agreement. Thereafter such bank or
trust company will be the successor custodian under this Agreement and will be
entitled to reasonable compensation for its services. In the event that no such
successor custodian can be found, Fund will submit to its shareholders, before
permitting delivery of the cash and securities owned by Fund to anyone other
than a successor custodian, the question of whether Fund will be liquidated or
function without a custodian. Notwithstanding the foregoing requirement as to
delivery upon termination of this Agreement, Custodian may make any other
delivery of the securities, funds, records and property of the Series which is
permitted by the 1940 Act, Fund's Declaration of Trust and Bylaws then in effect
or apply to a court of competent jurisdiction for the appointment of a successor
custodian.
IX. NOTICES. Notices, requests, instructions and other writings received by
-------
Fund at P.O. Box 7500, 700 Newport Center Drive, Newport Beach, California
92660 or at such other address as Fund may have designated to Custodian in
writing, will be deemed to have been properly given to Fund hereunder; and
notices, requests, instructions and other writings received by Custodian as its
offices at 21 West 10th Street, 16th Floor, Kansas City, Missouri 64105, or to
such other address as it may have designated to Fund in writing, will be deemed
to have been properly given to Custodian hereunder.
X. EMPLOYEES. Custodian shall be responsible for making inquiries for
---------
reasonably insuring and, upon request of the Fund, for providing an annual
certification to the Fund that, to the best of the Custodian's knowledge,
Custodian or any employee thereof, or any sub-custodian or any employee thereof
has not, in any material connection with the handling of the assets of the
Series:
A. been convicted, in the last 10 years, of any felony or misdemeanor
arising out of conduct involving embezzlement, fraudulent conversion, or
misappropriation of funds or securities, or involving violations of Sections
1341, 1342, or 1343 of Title 18, United States Code; or
B. been found by any state regulatory authority, within the last 10
years, to have violated or to have acknowledged violation of any provision of
any state insurance law involving fraud, deceit or knowing misrepresentation; or
C. been found by any federal or state regulatory authorities, within
the last 10 years, to have violated or to have acknowledged violation of any
provision of federal or state securities laws involving fraud, deceit or knowing
misrepresentation.
XI. CONFIDENTIALITY. The Custodian, sub-custodian, or any agent thereof
---------------
shall not disclose or use any records or information obtained pursuant to this
Agreement in any
25
<PAGE>
manner whatsoever except as expressly authorized in this Agreement, will keep
confidential any information obtained pursuant to the arrangements under this
Agreement and will disclose such information only if the Fund has authorized
such disclosure, or if such disclosure is expressly required by applicable
federal or state regulatory authorities.
XII. RESERVATION OF AUTHORITY. Notwithstanding any other provision of this
------------------------
Agreement, it is understood and agreed that the Fund shall at all times retain
the ultimate responsibility for direction and control of all services provided
pursuant to this Agreement, and retain the right to direct, approve, or
disapprove any action hereunder, which responsibility and right shall be
reasonably exercised.
XIII. MISCELLANEOUS.
-------------
A. This Agreement is executed and delivered in the State of Missouri
and shall be governed by the laws of said state.
B. All the terms and provisions of this Agreement shall be binding
upon, inure to the benefit of, and be enforceable by the respective successor
and assigns of the parties hereto.
C. No provisions of the Agreement may be amended or modified, in any
manner except by a written agreement properly authorized and executed by both
parties hereto.
D. The captions in this Agreement are included for convenience of
reference only, and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect.
E. This Agreement shall become effective at the close of business on __
day of _______________, 1987.
F. This Agreement may be executed simultaneously in two or more
counterparts, each of which will be deemed an original but all of which together
will constitute one and the same instrument.
G. If any part, term or provision of this Agreement is by the courts
held to be illegal, in conflict with any law or otherwise invalid, the remaining
portion or portions shall be considered severable and not be affected, and the
rights and obligations of the parties shall be construed and enforced as if the
Agreement did not contain the particular part, term or provision held to be
illegal or invalid.
H. This Agreement may not be assigned by either party without prior
written consent of the other party.
26
<PAGE>
I. If any provision of the Agreement, either in its present form or as
amended from time to time, limits, qualifies or conflicts with the 1940 Act and
the rules and regulations promulgated thereunder, such statutes, rules and
regulations shall be deemed to control and supersede such provision without
nullifying or terminating the remainder of the provisions of this Agreement.
J. A copy of the Declaration of Trust is on file with the Secretary of
the Commonwealth of Massachusetts. The Declaration of Trust has been executed
on behalf of the Fund by a Trustee of the Fund in her capacity as Trustee of the
Fund and not individually. The obligations of this Custody Agreement shall be
binding upon the assets and property of the Fund and shall not be binding upon
any Trustee, officer or shareholder of the Fund individually.
K. Should the California Department of Insurance succeed to control of
Pacific Mutual's assets in the event of an impairment or insolvency, the
custodian will recognize the Department's succession to Pacific Mutual's rights
under the contract as shareholder of the Fund, and accordingly will accept
instructions from the Department in the same manner as from Pacific Mutual to
the extent consistent with applicable law.
L. Notwithstanding the provisions of this Agreement, the maximum
standard of care applicable to Custodian will be the greater of (1) the standard
imposed by applicable California law and/or federal law under the 1940 Act, and
(2) the standard under which Custodian shall hold harmless and indemnify the
Fund from and against any loss or liability arising out of Custodian's failure
to comply with the terms of this Agreement or arising out of Custodian's
negligence, willful misconduct or bad faith.
Custodian represents that it does meet all requirements of a custodian of
Section 17(f) of the 1940 Act and any Rules thereunder and agrees to immediately
notify the Fund in the event that Custodian, for any reason, no longer meets
such requirements.
27
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their respective authorized corporate officers, and their respective
corporate seals to be affixed.
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/ RICHARD J. BRAUN
Richard J. Braun, President
(Corporate Seal)
ATTEST: /s/ CHERYL J. NAEGLER
Cheryl J. Naegler, Assistant Secretary
PACIFIC SELECT FUND
-------------------
By: /s/ TC SUTTON
Thomas C. Sutton
President
(Corporate Seal)
ATTEST: /s/DIANE N. LEDGER
Diane N. Ledger
28
<PAGE>
ADDENDUM TO CUSTODY AGREEMENT
-----------------------------
The Agreement, made the 1st day of December, 1987 between the PACIFIC SELECT
FUND ("Fund"), a Massachusetts business trust having its principal place of
business at 700 Newport Center Drive, Newport Beach, CA 92660 and INVESTORS
FIDUCIARY TRUST COMPANY ("IFTC"), a state chartered trust company organized and
existing under the laws of the state of Missouri, having its principal place of
business at 21 West 10th Street, Kansas City, Missouri 64105 ("the Agreement"),
is hereby amended by the addition of the provisions set forth in this Addendum
to the Agreement.
WITNESSETH:
WHEREAS, pursuant to the Agreement, the Fund has appointed IFTC as Custodian and
IFTC has accepted such appointment; and
WHEREAS, the Agreement provides that its term shall be one year, and the Fund
and IFTC desire to extend the term of the Agreement; and
WHEREAS, the Fund initially established and currently offers eight separate
Series designated as the Money Market Series, Managed Bond Series, High Yield
Bond Series, Government Securities Series, Growth Series, Equity Income Series,
Multi-Strategy Series and International Series; and
WHEREAS, the Fund intends to establish an additional Series to be designated as
the Equity Index Series; and
WHEREAS, the Fund desires to appoint IFTC as Custodian for the Equity Index
Series on the terms set forth in the Agreement and hereafter and IFTC is willing
to accept such appointment;
NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this Addendum, it is agreed between the parties hereto as follows:
1. In addition to its responsibilities as specified in the Agreement,
the Fund hereby constitutes and appoints IFTC as custodian with respect to the
Equity Index Series, which, together with all other Series previously
established by the Fund, shall be a Series under the Agreement as provided in
Section I, subject to the terms and conditions as specified in the Agreement and
this Addendum.
2. Section VII (on page 28) of the Agreement, entitled "Compensation,"
is hereby amended by deleting the first sentence of this Section and
substituting the following in lieu thereof:
29
<PAGE>
With respect to the Initial Series, Fund will pay to Custodian such
compensation as is stated in the Fee Schedule attached hereto as Exhibit A which
may be changed from time to time as agreed to in writing by Custodian and Fund.
With respect to the Equity Index Series, Fund will pay to Custodian such
compensation as is stated in the Fee Schedule attached hereto as Exhibit B which
may be changed from time to time as agreed to in writing by Custodian and Fund.
3. Section VIII (on page 28) of this Agreement, entitled "Termination",
is hereby amended by deleting the first sentence of this Section and
substituting the following in lieu thereof:
"Unless otherwise required by applicable law, this Agreement as
amended by the Addendum shall remain in effect until termination as provided
below."
This Addendum shall take effect as of the day the Equity Index Series begins
operations.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed
on the date indicated.
PACIFIC SELECT FUND
1-17-89 /s/ THOMAS C. SUTTON
Date President
INVESTORS FIDUCIARY TRUST COMPANY
1-17-89 /s/ R.A. WINEGAR
Date Senior Vice President
30
<PAGE>
ADDENDUM TO CUSTODY AGREEMENT
- -----------------------------
The Custody Agreement, made the 1st day of December, 1987, and subsequently
amended on January 30, 1991, between PACIFIC SELECT FUND (the "Fund") a
Massachusetts business trust having its principal place of business at 700
Newport Center Drive, Newport Beach, CA 92660, and Investors Fiduciary Trust
Company ("IFTC"), a state chartered trust company organized and existing under
the laws of the state of Missouri, having its principal place of business at 127
West 10th Street, Kansas City, Missouri 64105 (the "Agreement") is hereby
amended by the addition of the provisions set forth in this Addendum to the
Agreement ("Addendum"), which is made this 4th day of January, 1994.
WITNESSETH:
WHEREAS, pursuant to the Agreement, the Fund has appointed IFTC as Custodian and
IFTC has accepted such appointment; and
WHEREAS, the Fund currently consists of nine separate series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series and Equity Index Series (each a "Series"); and
WHEREAS, the Fund intends to establish one additional Series to be designated as
the Growth LT Series; and
WHEREAS, the Fund desires to appoint IFTC as Custodian for the Growth LT Series
on the terms set forth in the Agreement and this Addendum; and
WHEREAS, IFTC is willing to accept such appointment;
NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this Addendum, it is agreed between the parties hereto as follows:
1. In addition to its responsibilities as specified in the Agreement,
the Fund hereby constitutes and appoints IFTC as custodian with respect to the
Growth LT Series, which, in addition to all other Series previously established
by the Fund, shall be deemed as a Series under the Agreement as provided in the
Agreement subject to the terms and conditions as specified in the Agreement and
this Addendum, including the compensation provisions in section seven (7)
("Compensation") of the Agreement and in the Fee Schedule ("Exhibit A") attached
thereto.
31
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed
by their officers designated below on the date written above.
PACIFIC SELECT FUND
By: /s/TC SUTTON
ATTEST /s/ AUDREY L. MILFS Name: Thomas C. Sutton
Name: Audrey L. Milfs Title: President
Title: Secretary
INVESTORS FIDUCIARY TRUST COMPANY
By: /s/ ALLEN R. STRAIN
ATTEST /s/ MARVIN RAU Name: Allen R. Strain
Name: Marvin Rau Title: Executive Vice President
Title: Secretary
32
<PAGE>
ADDENDUM TO CUSTODY AGREEMENT
-----------------------------
The Custody Agreement, made the 1st day of December, 1987, and subsequently
amended on January 30, 1991, between PACIFIC SELECT FUND (the "Fund") a
Massachusetts business trust having its principal place of business at 700
Newport Center Drive, Newport Beach, CA 92660, and Investors Fiduciary Trust
Company ("IFTC"), a state chartered trust company organized and existing under
the laws of the state of Missouri, having its principal place of business at 127
West 10th Street, Kansas City, Missouri 64105 (the "Agreement") is hereby
amended by the addition of the provisions set forth in this Addendum to the
Agreement ("Addendum"), which is made this 15th day of August, 1994.
WITNESSETH:
WHEREAS, pursuant to the Agreement, the Fund has appointed IFTC as Custodian and
IFTC has accepted such appointment; and
WHEREAS, the Fund currently consists of ten separate series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series, Equity Index Series and Growth LT Series (each a
"Series"); and
WHEREAS, the Fund intends to establish two additional Series to be designated as
the Equity Series and Bond and Income Series; and
WHEREAS, the Fund desires to appoint IFTC as Custodian for the Equity Series and
Bond and Income Series on the terms set forth in the Agreement and this
Addendum; and
WHEREAS, IFTC is willing to accept such appointment;
NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this Addendum, it is agreed between the parties hereto as follows:
1. In addition to its responsibilities as specified in the Agreement,
the Fund hereby constitutes and appoints IFTC as custodian with respect to the
Equity Series and Bond and Income Series, which, in addition to all other Series
previously established by the Fund, shall be deemed as a Series under the
Agreement as provided in the Agreement subject to the terms and conditions as
specified in the Agreement and this Addendum, including the compensation
provisions in section seven (7) ("Compensation") of the Agreement and in the Fee
Schedule ("Exhibit A") attached thereto.
33
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed
by their officers designated below on the date written above.
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ TC SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
INVESTORS FIDUCIARY TRUST COMPANY
Attest: /s/MARVIN RAU By: /s/ALLEN R. STRAIN
Name: Marvin Rau Name: Allen R. Strain
Title: Secretary Title: Executive Vice
President
34
<PAGE>
ADDENDUM TO CUSTODY AGREEMENT
-----------------------------
The Custody Agreement, made the 1st day of December, 1987, and
subsequently amended on January 17, 1989, January 4, 1994 and August 15, 1994,
between PACIFIC SELECT FUND (the "Fund") a Massachusetts business trust having
its principal place of business at 700 Newport Center Drive, Newport Beach, CA
92660, and Investors Fiduciary Trust Company ("IFTC"), a state chartered trust
company organized and existing under the laws of the state of Missouri, having
its principal place of business at 127 West 10th Street, Kansas City, Missouri
64105 (the "Agreement") is hereby amended by the addition of the provisions set
forth in this Addendum to the Agreement ("Addendum"), which is made this _____
day of _________________.
WITNESSETH:
WHEREAS, pursuant to the Agreement, the Fund has appointed IFTC as
Custodian and IFTC has accepted such appointment; and
WHEREAS, the Fund currently consists of twelve separate series designated
as the Money Market Portfolio, Managed Bond Portfolio, High Yield Bond
Portfolio, Government Securities Portfolio, Growth Portfolio, Equity Income
Portfolio, Multi-Strategy Portfolio, International Portfolio, Equity Index
Portfolio, Growth LT Portfolio, Equity Portfolio and Bond and Income Portfolio
(each referred to as a "Series" in the Agreement, and hereinafter referred to as
a "Portfolio"); and
WHEREAS, the Fund intends to establish two additional Portfolios to be
designated as the Emerging Markets Portfolio and Aggressive Equity Portfolio;
and
WHEREAS, the Fund desires to appoint IFTC as Custodian for the Emerging
Markets Portfolio and Aggressive Equity Portfolio on the terms set forth in the
Agreement and this Addendum; and
WHEREAS, IFTC is willing to accept such appointment;
NOW THEREFORE, in consideration of the mutual promises and covenants
contained in this Addendum, it is agreed between the parties hereto as follows:
1. In addition to its responsibilities as specified in the Agreement,
the Fund hereby constitutes and appoints IFTC as custodian with respect to the
Emerging Markets Portfolio and Aggressive Equity Portfolio, which, in addition
to all other Portfolios previously established by the Fund, shall be deemed as a
Portfolio under the Agreement as provided in the Agreement subject to the terms
and conditions as specified in the Agreement and this Addendum, including the
compensation provisions in section seven (7) ("Compensation") of the Agreement
and in the Fee Schedule ("Exhibit A") attached thereto.
35
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed by their officers designated below on the date written above.
PACIFIC SELECT FUND
Attest: By:
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
INVESTORS FIDUCIARY TRUST COMPANY
Attest: By:
Name: Name:
Title: Title:
36
<PAGE>
EXHIBIT 99.9(a)
Agency Agreement
<PAGE>
AGENCY AGREEMENT
THIS AGREEMENT made the July 1, 1990, by and between PACIFIC SELECT FUND
("Fund"), a Massachusetts business trust having its principal place of business
at 700 Newport Center Drive, Newport Beach, California 92660, and Pacific
Mutual Life Insurance Company ("Pacific Mutual"), a corporation organized and
existing under the laws of the State of California, having its principal place
of business at 700 Newport Center Drive, Newport Beach, California 92660.
WITNESSETH:
WHEREAS, Fund desires to appoint Pacific Mutual as Transfer Agent and Dividend
Disbursing Agent, and Pacific Mutual desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants here contained, the
parties hereto agree as follows:
1. Documents to be Filed with Appointment.
In connection with the appointment of Pacific Mutual as Transfer Agent and
Dividend Disbursing Agent for Fund, there will be filed with Pacific Mutual the
following documents:
A. A certified copy of the resolutions of the Board of Trustees of Fund
appointing Pacific Mutual as Transfer Agent and Dividend Disbursing Agent,
approving the form of this Agreement, and designating certain persons to sign
certificates of shares of beneficial interest, if any, and give written
instructions and requests on behalf of Fund;
B. A certified copy of the Declaration of Trust of Fund and all amendments
thereto;
C. A certified copy of the Bylaws of Fund;
D. Copies of Registration Statements, and amendments thereto, filed with the
Securities and Exchange Commission;
E. Specimens of all forms of outstanding certificates of shares of beneficial
interest, in the form approved by the Board of Trustees of Fund, with a
certificate of the Secretary of Fund, as to such approval;
F. Specimens of the signatures of the officers of the Fund authorized to sign
certificates of shares of beneficial interest and individuals authorized to sign
written instructions and requests;
G. An opinion of counsel for Fund with respect to:
(1) Fund's organization and existence under the laws of its state of
organization; and
(2) The status of all shares of beneficial interest of Fund covered by the
appointment under the Securities Act of 1933, as amended, and any other
applicable federal statute; and
(3) The fact that all issued shares are, and all unissued shares will be, when
issued, validly issued, fully paid and nonassessable.
H. A legal memorandum with respect to the status of all shares of beneficial
interest of Fund under state statutes.
2. Certain Representations and Warranties of Pacific Mutual. Pacific Mutual
represents and warrants to Fund that:
A. It is a corporation duly organized and existing and in good standing under
the laws of California.
<PAGE>
B. It is duly qualified to carry on its business in the State of California.
C. It is empowered under applicable laws and by its Articles of Incorporation
and Bylaws to enter into and perform the services contemplated in this
Agreement.
D. It is registered as a transfer agent to the extent required under the
Securities Act of 1934.
E. All requisite corporate proceedings have been taken to authorize it to enter
into and perform this Agreement.
F. It has and will continue to have and maintain the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
3. Certain Representations and Warranties of Fund. Fund represents and
warrants to Pacific Mutual that:
A. It is a business trust duly organized and existing and in good standing under
the laws of the State of Massachusetts.
B. It is an open-end diversified management investment company registered under
the Investment Company Act of 1940, as amended.
C. A registration statement under the Securities Act of 1933 has been filed and
will be effective with respect to all shares of Fund being offered for sale.
D. All requisite steps have been or will be taken to register Fund's shares for
sale in all applicable states.
E. Fund is empowered under applicable laws and by its Declaration of Trust and
Bylaws to enter into and perform this Agreement.
4. Scope of Appointment.
A. Subject to the conditions set forth in this Agreement, Fund hereby employs
and appoints Pacific Mutual as Transfer Agent and Dividend Disbursing Agent
effective the 1st of May, 1990.
B. Pacific Mutual hereby accepts such employment and appointment and agrees that
it will act as Fund's Transfer Agent and Dividend Disbursing Agent.
C. Pacific Mutual agrees to provide the necessary facilities, equipment and
personnel to perform its duties and obligations hereunder in accordance with
industry practice.
D. Fund agrees to use its best efforts to deliver to Pacific Mutual in Newport
Beach, California, as soon as they are available, all of its shareholders
account records.
E. Subject to the provisions of Sections 20. and 21. hereof, Pacific Mutual
agrees that it will perform all of the usual and ordinary services of Transfer
Agent and Dividend Disbursing Agent and as Agent for the various shareholder
accounts, including, without limitation, the following: Issuing, transferring
and cancelling certificates of shares of beneficial interest, maintaining all
shareholder accounts, preparing shareholder meeting lists, mailing proxies,
receiving and tabulating proxies, mailing shareholder reports and prospectuses,
withholding taxes on non-resident alien and foreign corporation accounts, for
pension and deferred income, backup withholding or other instances agreed upon
by the parties, preparing and mailing checks for disbursing of income dividends
and capital gain distributions, preparing and filing U.S. Treasure Department
Form 1099 for all shareholders, preparing and mailing confirmation forms to
shareholders and dealers with respect to all purchases and liquidations of Fund
shares and other transactions in shareholder accounts for which confirmations
are required, recording reinvestments of dividends and distributions in Fund
shares, recording redemptions of Fund shares and preparing for payments upon
redemption and for disbursements.
<PAGE>
5. Limit of Authority.
Unless otherwise expressly limited by the resolution of appointment or by
subsequent action by the Fund, the appointment of Pacific Mutual as Transfer
Agent will be construed to cover the full amount of the shares of beneficial
interest for which Pacific Mutual is appointed as the same will, from time to
time, be constituted.
6. Compensation and Expenses.
A. In consideration for its services hereunder as Transfer Agent and Dividend
Disbursing Agent, Fund will pay to Pacific Mutual from time to time a reasonable
compensation for all services rendered as Agent, and also, all its reasonable
out-of-pocket expenses, charges, counsel fees and other disbursements incurred
by Pacific Mutual in connection with the agency. Such compensation will be set
forth in a separate schedule (Exhibit C) to be agreed to by Fund and Pacific
Mutual, a copy of which is attached hereto and incorporated herein by reference
as though fully set out at this point.
B. Fund agrees to promptly reimburse Pacific Mutual for all reasonable out-of-
pocket expenses or advances incurred by Pacific Mutual in connection with
mailing stock certificates, envelopes, check forms, continuous forms, forms for
reports and statements, stationery, and other similar items, telephone and
telegraph charges incurred in answering inquiries from dealers of shareholders,
microfilm used each year to record the previous year's transaction in
shareholder accounts and computer tapes used for permanent storage of records
and cost of insertion of materials in mailing envelopes by outside firms.
Pacific Mutual will provide to Fund, not less frequently than monthly, a
detailed accounting of all out-of-pocket expenditures made by Pacific Mutual on
behalf of Fund.
7. Efficient Operation Pacific Mutual System.
A. In connection with the performance of its services under this Agreement,
Pacific Mutual is responsible for the accurate and efficient functioning of its
system at all times, including:
(1) The accuracy of all entries in Pacific Mutual's records reflecting orders
and instructions received by Pacific Mutual from dealers, shareholder, Fund or
its principal underwriter;
(2) The continuous availability and the accuracy of shareholder lists,
shareholder account verifications, confirmations and other shareholder account
information to be produced from its records or data;
(3) The accurate and timely issuance of dividend and distribution checks in
accordance with instructions received from Fund;
(4) The accuracy of redemption transactions and payments in accordance with
redemption instructions received from dealers, shareholders or Fund;
(5) The deposit daily in Fund's appropriate special bank account of all checks
and payments received from dealers or shareholders for investment in shares;
(6) The requiring of proper forms of instructions, signatures and signature
guarantees and any necessary documents supporting the legality of transfers,
redemptions and other shareholder account transactions, all in conformance with
Pacific Mutual's present procedures with such changes as may be required or
approved by the Fund.
8. Indemnification.
A. Except to the extent that Pacific Mutual is covered by and receives payment
from any insurance required hereunder, Pacific Mutual will not be responsible
for, and Fund will hold harmless and
<PAGE>
indemnify Pacific Mutual from and against any loss by or liability to the Fund
or a third party, including attorney's fees, in connection with any claim or
suit asserting any such liability arising out of or attributable to actions
taken or omitted by Pacific Mutual pursuant to this Agreement, unless Pacific
Mutual has acted negligently or in bad faith. Further, Pacific Mutual will be
liable under this Agreement for its own willful misconduct. The matters covered
by this indemnification include but are not limited to those of Section 14
hereof.
Fund will be responsible for, and will have the right to conduct or control the
defense of any litigation asserting liability against which Pacific Mutual is
indemnified hereunder. Pacific Mutual will not be under any obligation to
prosecute or defend any action or suit in respect of the agency relationship
hereunder, which, in its opinion, may involve it in expense of liability, unless
Fund will, as often as requested furnish Pacific Mutual with reasonable,
satisfactory security and indemnity against such expense or liability.
B. Pacific Mutual will hold harmless and indemnify Fund from and against any
loss or liability arising out of Pacific Mutual's failure to comply with the
terms of this Agreement in breach of any representation or warranty of Pacific
Mutual hereunder or arising out of Pacific Mutual's negligence, misconduct, or
bad faith.
9. Certain Covenants of Pacific Mutual and Fund.
A. All requisite steps will be taken by Fund from time to time when and as
necessary to register the Fund's shares for sale in all states in which Fund's
shares shall at the time be offered for sale and require registration. If at
any time Fund will receive notice of any stop order or other proceeding in any
such state affecting such registration or the sale of Fund's shares, or of any
stop order or other proceeding under the Federal securities laws affecting the
sale of Fund's shares, Fund will give prompt notice hereof to Pacific Mutual.
B. Pacific Mutual hereby agrees to perform such transfer agency functions as are
attached hereto as Exhibit A and establish and maintain facilities and
procedures reasonably acceptable to Fund for safekeeping of stock certificates,
check forms, and facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates, forms and
devices, and to carry insurance as specified in Exhibit B which will not be
lowered without notice to Fund.
C. To the extent required by Section 31 of the Investment Company Act of 1940 as
amended and Rules thereunder, Pacific Mutual agrees that all records maintained
by Pacific Mutual relating to the services to be performed by Pacific Mutual
under this Agreement are the property of Fund and will be preserved and will be
surrendered promptly to Fund on request and will not be released to any other
party except as required by law. Pacific mutual agrees to notify Fund of any
request for records to which, in its opinion it must respond, prior to
responding.
D. Pacific Mutual agrees to furnish Fund Annual reports of its financial
condition, consisting of a balance sheet, earnings statement and any other
financial information reasonably requested by Fund.
E. Pacific Mutual represents and agrees that it will use reasonable efforts to
keep current on the trends of the investment company industry relating to
shareholder services and will use reasonable efforts to continue to modernize
and improve its system without additional cost to Fund.
F. Pacific Mutual will permit Fund and its authorized representatives to make
periodic inspections of its operations at reasonable time during business hours.
<PAGE>
10. Recapitalization or Readjustment.
In case of any recapitalization, readjustment or other change in the capital
structure of Fund requiring a change in the form of share certificates, Pacific
Mutual will issue or register certificates in the new form in exchange for, or
in transfer of, the outstanding certificates in the old form, upon receiving:
A. Written instructions from an officer of Fund;
B. Certified copy of the amendment to the Declaration of Trust or other document
effecting the change;
C. Certified copy of the order or consent of each governmental or regulatory
authority required by law to the issuance of the shares in the new form, and an
opinion of counsel that the order or consent of no other government or
regulatory authority is required;
D. Specimens of the new certificates in the form approved by the Board of
Trustees of Fund, with a certificate of the Secretary of Fund as to such
approval;
E. Opinion of counsel for Fund stating:
(1) The status of the shares of beneficial interest of Fund in the new form
under the Securities Act of 1933, as amended and any other applicable federal or
state statute; and
(2) That the issued shares in the new form are, and all unissued shares will be,
when issued, validly issued, fully paid and non-assessable.
11. Share Certificates.
Fund will furnish Pacific Mutual with a sufficient supply of blank certificates
of shares of beneficial interest and from time to time will renew such supply
upon the request of Pacific Mutual. Such certificates will be signed manually
or by facsimile signatures of the officers of Fund authorized by law and by
bylaws to sign share certificates, and if required, will bear the Fund's seal or
facsimile thereof.
12. Death, Resignation or Removal of Signing Officer.
Fund will file promptly with Pacific Mutual written notice of any change in the
officers authorized to sign share certificates, written instruments or requests,
together with two signature cards bearing the specimen signature of each newly
authorized officer. In case any officer of Fund who will have signed manually
or whose facsimile signature will have been affixed to blank share certificates
will die, resign, or be removed prior to the issuance of such certificates,
Pacific Mutual may issue or register such share certificates as the share
certificates of Fund notwithstanding such death, resignation, or removal, until
specifically directed to the contrary by Fund in writing. In the absence of
such direction, Fund will file promptly with Pacific Mutual such approval,
adoption, or ratification as may be required by law.
13. Future Amendments of Declaration of Trust and Bylaws.
Fund will promptly file with Pacific Mutual copies of all material amendments to
its Declaration of Trust or Bylaws made after the date of this Agreement.
14. Instructions, Opinion of Counsel and Signatures.
At any time Pacific Mutual may apply to any officer of Fund for instructions,
and may consult with legal counsel for Fund at the expense of Fund, with respect
to any matter arising in connection with the agency and it will not be liable
for any action taken or omitted by it in good faith in reliance upon such
instructions or upon the opinion of such counsel. Pacific Mutual will be
protected in acting
<PAGE>
upon any paper or document reasonably believed by it to be genuine and to have
been signed by the proper person or persons and will not be held to have notice
of any change of authority of any person, until receipt of written notice
thereof from Fund. It will also be protected in recognizing share certificates
which it reasonably believes to bear the proper manual or facsimile signatures
of the officers of Fund, and the proper countersignature of any former Transfer
Agent or Registrar, or of a Co-Transfer Agent or Co-Registrar.
15. Papers Subject to Approval of Counsel.
The acceptance by Pacific Mutual, of its appointment as Transfer Agent and
Dividend Disbursing Agent and all documents filed in connection with such
appointment and thereafter in connection with the agencies, will be subject to
the approval of legal counsel for Pacific Mutual.
16. Certification of Documents.
The required copy of the Declaration of Trust of Fund and copies of all
amendments thereto will be certified by the Secretary of State (or other
appropriate official) of the Commonwealth of Massachusetts, and if such
Declaration of Trust and amendments are required by law to be also filed with a
county, city or other officer of official body, a certificate of such filing
will appear on the certified copy submitted to Pacific Mutual. A copy of the
order to consent of each governmental or regulatory authority required by law to
the issuance of the shares will be certified by the Secretary of Clerk of such
governmental or regulatory authority, under proper seal of such authority. The
copy of the Bylaws and copies of all amendments thereto, and copies of
resolutions of the Board of Trustees of Fund, will be certified by the Secretary
or an Assistant Secretary of Fund under the Fund's seal.
17. Records.
Pacific Mutual will maintain customary records in connection with its agency,
and particularly will maintain those records required to be maintained pursuant
to sub-paragraph (2)(iv) of paragraph (b) of Rule 31a-1, Rule 31a-2 and Rule
31a-3 under the Investment Company Act of 1940, if any, and any amended or
successor rule or rules.
18. Disposition of Books, Records and Cancelled Certificates.
Pacific Mutual will send periodically to Fund, or to where designated by the
Secretary or an Assistant Secretary of Fund, all books, documents, and all
records no longer deemed needed for current purposes and share certificates
which have been cancelled in transfer or in exchange, upon the understanding
that such books, documents, records, and share certificates will not be
destroyed by Fund without the consent of Pacific Mutual (which consent will not
be unreasonably withheld), but will be safely stored for possible future
reference.
19. Annual Certification.
Pacific Mutual shall be responsible for making inquiries, for reasonably
insuring, and for providing an annual certification, upon request of the Fund,
to the Fund that, to the best of Pacific Mutual's knowledge, Pacific Mutual or
any employee thereof has not, in any material connection with the handling of
separate account assets or assets of any underlying fund:
(a) been convicted, in the last 10 years, of any felony or misdemeanor arising
out of conduct involving embezzlement, fraudulent conversion, or
misappropriation of funds or securities, or
<PAGE>
involving violations of Sections 1341, 1342, or 1343 of Title 18, United States
Code; or
(b) been found by any state regulatory authority, within the last 10 years, to
have violated or to have acknowledged violation of any provision of any state
insurance law involving fraud, deceit or knowing misrepresentations; or
(c) been found by any federal or state regulatory authorities, within the last
10 years, to have violated or to have acknowledged violation of any provision of
federal or state securities laws involving fraud, deceit or knowing
misrepresentation.
20. Provisions Relating to Pacific Mutual as Transfer Agent.
A. Pacific Mutual will make original issues of certificates evidencing ownership
of shares of beneficial interest ("certificates") upon written request of an
officer of Fund and upon being furnished with a certified copy of a resolution
of the Board of Trustees authorizing such original issue, an opinion of counsel
as outlined in paragraphs 1.D and G. of this Agreement, and any documents
required by paragraphs 5. or 10. of this Agreement, and necessary funds for the
payment of any original issue tax. Unless otherwise required by the Board of
Trustees of the Fund, Pacific Mutual will issue to all investors certificates
evidencing ownership of shares of beneficial interest for which the investor is
the record owner as shown on the books or record of Pacific Mutual.
B. Before making any original issue of certificates Fund will furnish Pacific
Mutual with sufficient funds to pay all required taxes on the original issue of
shares of beneficial interest, if any. Fund will furnish Pacific Mutual such
evidence as may be required by Pacific Mutual to show the actual value of the
shares. If no taxes are payable, Pacific Mutual will be furnished with an
opinion of outside counsel to that effect.
C. Shares of beneficial interest will be transferred and new shares issued in
transfer, or shares of beneficial interest accepted for redemption and funds
remitted therefor, a request for transfer or redemption of the old shares in
form deemed by Pacific Mutual properly endorsed for transfer or redemption
accompanied by such documents as Pacific Mutual may deem necessary to evidence
that authority of the person making the transfer or redemption, and bearing
satisfactory evidence of the payment of any applicable transfer taxes. Pacific
Mutual reserves the right to refuse to transfer or redeem shares until it is
satisfied that the endorsement or signature on the certificate or any other
document is valid and genuine, and for that purpose it may require a guaranty of
signature by a firm having membership in the New York Stock Exchange, Midwest
Stock Exchange, American Stock Exchange Securities Corporation, Pacific Coast
Stock Exchange, or any other exchange acceptable to Pacific Mutual or by a bank
or trust company approved by it. Pacific Mutual also reserves the right to
refuse to transfer or redeem shares until it is satisfied that the requested
transfer or redemption is legally authorized, and it will incur no liability for
the refusal in good faith to make transfers or redemptions which, in its
judgement, are improper or unauthorized. Pacific Mutual may, in effecting
transfers or redemptions, rely upon Simplification Acts or other statutes which
protect is and Fund in not requiring complete fiduciary documentation. In cases
in which Pacific Mutual is not directed or otherwise required to maintain the
consolidated records of shareholder's account, Pacific Mutual will not be liable
for any loss which may arise by reason of not having such records, provided that
such loss could not have been prevented by the exercise of ordinary diligence.
Pacific Mutual will be under no duty to use a greater degree of diligence by
reason of not having such records.
D. When mail is used for delivery of certificates Pacific Mutual will forward
certificates in "nonnegotiable" form by first class of registered mail and
certificates in "negotiable" form by
<PAGE>
registered mail, all such mail deliveries to be covered while in transit to the
addressee by insurance arranged for by Pacific Mutual.
E. Pacific Mutual will issue and mail certificates representing dividends,
exchanges or split ups, or act as Conversion Agent upon receiving written
instructions from any officer of Fund and such other documents as Pacific Mutual
deems necessary.
F. Pacific Mutual will issue and transfer certificates upon receiving written
instructions from an officer of Fund and such other documents as Pacific Mutual
may deem necessary.
G. Pacific Mutual may issue new certificates in place of certificates
represented to have been lost, destroyed, stolen or otherwise wrongfully taken
upon receiving instructions from Fund and indemnity satisfactory to Pacific
Mutual and Fund, and may issue new certificates in exchange for, and upon
surrender of, mutilated certificates. Such instructions from Fund will be in
such form as will be approved by the board of Trustees of Fund and will be in
accordance with the provisions of law and the Bylaws of Fund governing such
matter.
H. Pacific Mutual will supply a shareholders' list to Fund for its annual
meeting upon receiving a request from an officer of Fund. It will also supply
lists at such other times as may be requested by an officer of Fund.
I. Upon receipt of written instructions of an officer of Fund, Pacific Mutual
will address and mail notices to shareholders.
J. Pacific Mutual will furnish to regulatory authorities any information or
reports regarding the records of the Fund which may be requested in order to
ascertain whether the operations of the Fund are being conducted in a manner
consistent with applicable laws and regulations.
K. In case of any request or demand for the inspection of the shareholder
records of Fund or any other books in the possession of Pacific Mutual, Pacific
Mutual will notify Fund promptly and endeavor to secure instructions as to
permitting or refusing such inspection. Pacific Mutual reserves the right,
however, to exhibit the shareholder records or other books to any person in case
it is advised by its counsel that it may be held responsible for the failure to
exhibit the shareholder records or other books to such person.
L. Notwithstanding any other provision of the Agreement, it is understood and
agreed that Pacific Select Fund shall at all times retain the ultimate
responsibility for and control of all services provided pursuant to this
Agreement and reserves the right to direct, approve or disapprove any action
hereunder taken on their behalf by Pacific Mutual, which control and right will
be reasonably exercised.
21. Provisions Relating to Dividend Disbursing Agent.
A. Pacific Mutual will, at the expense of Fund, provide a special form of check
containing the imprint of any device or other matter desired by Fund. Said
checks must, however, be of a form and size convenient for use by Pacific
Mutual.
B. If Fund desires to include additional printed matter, financial statements,
etc., with the dividend checks the same will be furnished to Pacific Mutual
within a reasonable time prior to the date of mailing of the dividend checks, at
the expense of Fund.
C. If Fund desires its distributions mailed in any special form of envelopes,
sufficient supply of the same will be furnished to Pacific Mutual but the size
and form of said envelopes will be subject to the approval of Pacific Mutual.
If stamps are to be affixed to the envelopes, the stamps or the cash necessary
for such stamps must be furnished by Fund.
D. Pacific Mutual will maintain one or more deposit accounts as Agent for Fund,
into which the
<PAGE>
funds for payment of dividends, distributions, redemptions or other
disbursements provided for hereunder will be deposited, and against which checks
will be drawn.
E. Pacific Mutual is authorized and directed to stop payment of checks therefore
issued hereunder, but not presented for payment, when the payees thereof allege
either that they have not received the checks or that such checks have been
mislaid, lost, stolen, destroyed or through no fault of theirs, are otherwise
beyond their control, and cannot be produced by them for presentation and
collection, and, to issue and deliver duplicate checks in replacement thereof.
22. Termination of Agreement.
A. This Agreement may be terminated by either party upon receipt of ninety (90)
days written notice from the other party.
B. Fund, in addition to any other rights and remedies, shall have the right to
terminate this Agreement forthwith upon the occurrence at any time of any of the
following events:
(1) Any interruption or cessation of operation by Pacific Mutual or its assigns
which materially interferes with the business operation of Fund;
(2) The bankruptcy or reorganization of Pacific Mutual or its assigns or the
appointment of a receiver for Pacific Mutual or its assigns;
(3) Any merger, consolidation or sale of substantially all the assets of Pacific
Mutual or its assigns;
(4) the acquisition of a controlling interest in Pacific Mutual or its assigns,
by any broker, dealer, investment adviser or investment company except as may
presently exist; or
(5) Failure by Pacific Mutual or its assigns to perform its duties in a
satisfactory manner in accordance with the Agreement, which failure materially
adversely affects the business operations of Fund and which failure continues
for thirty (30) days after receipt of written notice from Fund.
C. If at any time this Agreement will be terminated by Fund pursuant to clause
(1), (2) or (5) of Section 22.B, Fund will have and is hereby granted the right,
at its option, to use or cause its agents, employees or independent contractors
to use, for as long as Fund deems reasonably necessary to transfer to its own
operations, and no other, with payment of any compensation or reimbursement to
Pacific Mutual, Pacific Mutual's system including all of the programs, manuals
and other materials and information necessary to operate the system.
D. In the event of termination, Fund will promptly pay Pacific Mutual all
amounts due to Pacific Mutual hereunder.
E. In the event of termination Pacific Mutual agrees to cooperate with Fund in
effecting all necessary transfers of Fund's records to Fund, free from any claim
or retention of rights to the records, by Pacific Mutual.
23. Assignment.
A. Neither this Agreement nor any rights or obligations hereunder may be
assigned by Pacific Mutual without the prior written consent of Fund; provided,
however, no assignment will relieve Pacific Mutual of any of its obligations
hereunder.
B. This Agreement will inure to the benefit of and be binding upon the parties
and their respective successors and assigns.
24. Confidentiality.
A. Pacific Mutual agrees that, except as provided in the last sentence of
Section 20.K hereof, or as otherwise required by law, Pacific Mutual will keep
confidential all records of and information in
<PAGE>
its possession relating to Fund or its shareholders or shareholder accounts and
will not disclose the same to any person except at the request or with the
consent of Fund.
B. Fund agrees that, subject to Section 22.C and except as otherwise required by
law, Fund or its agents, employees or independent contractors will keep
confidential all financial statements and other financial records (other than
statements and records relating solely to Fund's business dealings with Pacific
Mutual) and all manuals, systems and other technical information and data, not
publicly disclosed, relating to Pacific Mutual's operations and programs
furnished to it by Pacific Mutual pursuant to this Agreement and will not
disclose the same to any person except at the request or with the consent of
Pacific Mutual.
25. Survival of representations and Warranties.
A. All representations and warranties by either party herein contained will
survive the execution and delivery of this Agreement.
26. Miscellaneous.
A. This Agreement is executed and delivered in the State of California and shall
be governed by the laws of said state.
B. No provisions of the Agreement may be amended or modified, in any manner
except by a written agreement properly authorized and executed by both parties
hereto.
C. The captions in this agreement are included for convenience of reference
only, and in no way define or delimit any of the provisions hereof or otherwise
affect their construction or effect.
D. This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
E. If any part, term or provision of this Agreement is by the courts held to be
illegal, in conflict with any law or otherwise invalid, the remaining portion or
portions shall be considered severable and not be affected, and the rights and
obligations of the parties shall be construed and enforced as if the Agreement
did not contain the particular part, term or provision held to be illegal or
invalid.
F. A copy of the Fund's Agreement and Declaration of Trust is on file with the
Secretary of the Commonwealth of Massachusetts and notice is hereby given that
the Agreement has been executed on behalf of Fund by a Trustee of Fund in her
capacity as a Trustee of Fund and not individually. The obligations of this
Agreement shall only be binding upon the assets and property of Fund and shall
not be binding upon any Trustee, officer or shareholder of Fund individually.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by
their respective duly authorized officers.
PACIFIC MUTUAL LIFE INSURANCE COMPANY
By: /s/ WILLIAM D. CVENGROS
William D. Cvengros, Vice Chairman of the Board
and Chief Investment Officer
ATTEST:
/s/ AUDREY L. MILFS
<PAGE>
Audrey L. Milfs, Secretary
PACIFIC SELECT FUND
By: /s/ TC SUTTON
Thomas C. Sutton, Chairman of the Board
and President
ATTEST:
/s/ DIANE N. LEDGER
Diane N. Ledger, Vice President
and Assistant Secretary
<PAGE>
EXHIBIT A
TRANSFER AGENCY SERVICES AND SYSTEMS FEATURES
FUNCTIONS
A. Issuance of stock certificates
B. Recording of non-certificate shares
C. Purchase, redemptions, exchanges, transfers and legals
D. Changes of address, etc.
E. Daily balancing of fund
F. Dividend calculation and disbursement
G. Mailing of quarterly and annual reports
H. Filing 1099/1042 information to shareholders and government
I. Provide NIR information
J. Reconcilement of dividend and disbursement accounts
K. Provide research and correspondence to shareholder's inquiries
L. Daily communication of reports to funds
M. Provide listings, labels and other special reports
N. Proxy issuance and tabulation
O. Annual statements of shareholders on microfilm
P. Blue-sky reports
Q. Wire order processing
<PAGE>
ADDENDUM TO AGENCY AGREEMENT
- ----------------------------
The Agency Agreement, made the 1st day of July, 1990, by and between PACIFIC
SELECT FUND ("Fund"), a Massachusetts business trust having its principal place
of business at 700 Newport Center Drive, Newport Beach, CA 92660, and PACIFIC
MUTUAL LIFE INSURANCE COMPANY ("Pacific Mutual"), a California Corporation
having its principal place of business at 700 Newport Center Drive, Newport
Beach, California 92660 (the "Agreement") is hereby amended by the addition of
the provisions set forth in this Addendum to the Agreement ("Addendum"), which
is made this 4th day of January, 1994.
WITNESSETH:
WHEREAS, pursuant to the Agreement, the Fund has appointed Pacific Mutual as
Transfer Agent and Dividend Disbursing Agent and Pacific Mutual has accepted
such appointment; and
WHEREAS, the Fund currently consists of nine separate series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series and Equity Index Series (each a "Series"); and
WHEREAS, the Fund intends to establish one additional Series to be designated as
the Growth LT Series; and
WHEREAS, the Fund desires to appoint Pacific Mutual as Transfer Agent and
Dividend Disbursing Agent for the Growth LT Series on the terms set forth in the
Agreement and in this Addendum to the Agreement;
WHEREAS, Pacific Mutual is willing to accept such appointment;
NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this Addendum, it is agreed between the parties hereto as follows:
1. In addition to its responsiblities as specified in the Agreement, the
Fund hereby employs and appoints Pacific Mutual as Transfer Agent and Dividend
Disbursing Agent with respect to the Growth LT Series which, in addition to all
other Series previously established by the Fund, shall be deemed one of the
Series under the Agreement as provided for in the Agreement, subject to the
terms and conditions as specified in the Agreement and this Addendum, including
the compensation provisions in Section six (6) ("Compensation and Expenses") of
the Agreement and in the Compensation Schedule ("Exhibit C") attached thereto.
Addendum to be executed by their officers designated below on the date written
above.
<PAGE>
PACIFIC SELECT FUND
By: /s/ TC SUTTON
ATTEST /s/ AUDREY L. MILFS Name: Thomas C. Sutton
Name: Audrey L. Milfs Title: President
Title: Secretary
PACIFIC MUTUAL LIFE INSURANCE COMPANY
By: /s/ WILLIAM D. CVENGROS
ATTEST /s/ DIANE N. LEDGER Name: William D. Cvengros
Name: Diane N. Ledger Title: Chief Investment Officer
Title: Assistant Vice President
By: /s/ GLENN S. SCHAFER
ATTEST /s/ DIANE N. LEDGER Name: Glenn S. Schafer
Name: Diane N. Ledger Title: Chief Financial Officer
Title: Assistant Vice President
<PAGE>
ADDENDUM TO AGENCY AGREEMENT
- ----------------------------
The Agency Agreement, made the 1st day of July, 1990 by, and between PACIFIC
SELECT FUND ("Fund"), a Massachusetts business trust having its principal place
of business at 700 Newport Center Drive, Newport Beach, CA 92660, and PACIFIC
MUTUAL LIFE INSURANCE COMPANY ("Pacific Mutual"), a California Corporation
having its principal place of business at 700 Newport Center Drive, Newport
Beach, California 92660 (the "Agreement"), is hereby amended by the addition of
the provisions set forth in this Addendum to the Agreement ("Addendum"), which
is made this 15th day of August, 1994.
WITNESSETH:
WHEREAS, pursuant to the Agreement, the Fund has appointed Pacific Mutual as
Transfer Agent and Dividend Disbursing Agent and Pacific Mutual has accepted
such appointment; and
WHEREAS, the Fund currently consists of ten separate Series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series, Equity Index Series and Growth LT Series (each a
"Series"); and
WHEREAS, the Fund intends to establish two additional Series to be designated as
the Equity Series and Bond and Income Series; and
WHEREAS, the Fund desires to appoint Pacific Mutual as Transfer Agent and
Dividend Disbursing Agent for the Equity Series and the Bond and Income Series
on the terms set forth in the Agreement and in this Addendum to the Agreement;
WHEREAS, Pacific Mutual is willing to accept such appointment;
NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this Addendum, it is agreed between the parties hereto as follows:
1. In addition to its responsibilities as specified in the Agreement, the
Fund hereby employs and appoints Pacific Mutual as Transfer Agent and Dividend
Disbursing Agent with respect to the Equity Series and Bond and Income Series
which, in addition to all other Series previously established by the Fund, shall
be deemed to be one of the Series under the Agreement as provided for in the
Agreement, subject to the terms and conditions as specified in the Agreement and
this Addendum, including the compensation provisions in Section six (6)
("Compensation and Expenses") of the Agreement and in the Compensation Schedule
("Exhibit C") attached thereto.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed
by their officers designated below on the date written above.
<PAGE>
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ TC SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ WILLIAM D. CVENGROS
Name: Diane N. Ledger Name: William D. Cvengros
Title: Assistant Vice President Title: Chief Investment Officer
Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: Chief Financial Officer
<PAGE>
ADDENDUM TO AGENCY AGREEMENT
----------------------------
The Agency Agreement, made the 1st day of July, 1990 and subsequently
amended on January 4, 1994 and August 15, 1994 by and between PACIFIC SELECT
FUND("Fund"), a Massachusetts business trust having its principal place of
business at 700 Newport Center Drive, Newport Beach, CA 92660, and PACIFIC
MUTUAL LIFE INSURANCE COMPANY ("Pacific Mutual"), a California Corporation,
having its principal place of business at 700 Newport Center Drive, Newport
Beach, California 92660 (the "Agreement") is hereby amended by the addition of
the provisions set forth in this Addendum to the Agreement ("Addendum"), which
is made this _____ day of _____________, 1995.
WITNESSETH:
WHEREAS, pursuant to the Agreement, the Fund has appointed Pacific Mutual
as Transfer Agent and Dividend Disbursing Agent and Pacific Mutual has accepted
such appointment; and
WHEREAS, the Fund currently consists of twelve separate series designated
as the Money Market Portfolio, Managed Bond Portfolio, High Yield Bond
Portfolio, Government Securities Portfolio, Growth Portfolio, Equity Income
Portfolio, Multi-Strategy Portfolio, International Portfolio, Equity Index
Portfolio, Growth LT Portfolio, Equity Portfolio and Bond and Income Portfolio
(each referred to as a "Series" in the Agreement, and hereinafter referred to as
a "Portfolio"); and
WHEREAS, the Fund intends to establish two additional Portfolios to be
designated as the Emerging Markets Portfolio and Aggressive Equity Portfolio;
and
WHEREAS, the Fund desires to appoint Pacific Mutual as Transfer Agent and
Dividend Disbursing Agent for the Emerging Markets Portfolio and Aggressive
Equity Portfolio on the terms set forth in the Agreement and in this Addendum to
the Agreement;
WHEREAS, Pacific Mutual is willing to accept such appointment;
NOW THEREFORE, in consideration of the mutual promises and covenants
contained in this Addendum, it is agreed between the parties hereto as follows:
1. In addition to its responsibilities as specified in the Agreement, the
Fund hereby employs and appoints Pacific Mutual as Transfer Agent and Dividend
Disbursing Agent with respect to the Emerging Markets Portfolio and Aggressive
Equity Portfolio which, in addition to all other Portfolios previously
established by the Fund, shall be deemed one of the Portfolios under the
Agreement as provided for in the Agreement, subject to the terms and conditions
as specified in the Agreement and this Addendum, including the compensation
provisions in Section six (6) ("Compensation and Expenses") of the Agreement and
in the Compensation Schedule ("Exhibit C") attached thereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed by their officers designated below on the date written above.
PACIFIC SELECT FUND
Attest: By:
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Attest: By:
Name: Diane N. Ledger Name: Thomas C. Sutton
Title: Assistant Vice President Title: Chairman & CEO
Attest: By:
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: President
<PAGE>
EXHIBIT 99.9(b)
Participation Agreement
<PAGE>
FUND PARTICIPATION AGREEMENT
This AGREEMENT is made this 6th day of November, 1992, by and between Pacific
Mutual Life Insurance Company (the "Company"), a life insurance company
domiciled in California, on its behalf and on behalf of the segregated asset
accounts of the Company listed on Exhibit A to this Agreement (the "Separate
Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust;
and Pacific Equities Network ("Distributor"), a California corporation.
WITNESSETH
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended ("1940 Act") and the Fund is authorized to issue
separate classes of shares of beneficial interests ("shares"), each representing
an interest in a separate portfolio of assets known as a "series" and each
series has its own investment objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts") and to serve as
an investment medium for Variable Contracts offered by insurance companies that
have entered into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is currently
comprised of nine separate series, and other series may be established in the
future; and
WHEREAS, the Fund has obtained an order from the SEC granting Participating
Insurance Companies, separate accounts funding Variable Contracts of
Participating Insurance Companies, and the Fund exemptions from the provisions
of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and paragraph (b)(15)
of Rule 6e-3(T) under the 1940 Act, to the extent necessary to permit such
persons to rely on the exemptive relief provided under paragraph (b)(15) of Rule
6e-3(T), even though shares of the Fund may be offered to and held by separate
accounts funding variable annuity contracts or scheduled or flexible premium
variable life insurance contracts of both affiliated and unaffiliated life
insurance companies (the "Shared Funding Exemptive Order"); and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC under the
Securities Exchange Act of 1934, as amended ("1934 Act"), and is a member in
good standing of the National Association of Securities Dealers, Inc. ("NASD");
and
WHEREAS, to the extent permitted by applicable insurance laws and regulations,
the Company wishes to purchase shares of one or more of the Fund's series on
behalf of its Separate Accounts to serve as an investment medium for Variable
Contracts funded by the Separate Accounts, and the Distributor is authorized to
sell shares of the Fund's series;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises and
covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I. Sale of Fund Shares
<PAGE>
1.1. The Distributor agrees to sell to the Company those shares of the series
offered and made available by the Fund and identified on Exhibit B ("Series")
that the Company orders on behalf of its Separate Accounts, and agrees to
execute such orders on each day on which the Fund calculates its net asset value
pursuant to rules of the SEC ("business day") at the net asset value next
computed after receipt and acceptance by the Fund or its agent of the order for
the shares of the Fund.
1.2. The Fund agrees to make available on each business day shares of the
Series for purchase at the applicable net asset value per share by the Company
on behalf of its Separate Accounts' provided, however, that the Board of
Trustees of the Fund may refuse to sell shares of any Series to any person, or
suspend or terminate the offering of shares of any Series, if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Trustees, acting in good faith and in light of the
Trustees' fiduciary duties under applicable law, necessary in the best interests
of the shareholders of any Series.
1.3. The Fund and the Distributor agree that shares of the Series of the Fund
will be sold only to Participating Insurance Companies, their separate accounts,
and other persons consistent with each Series being adequately diversified
pursuant to Section 817(h) of the Internal Revenue Code of 1986, as amended
("Code") and the regulations thereunder. No shares of any Series will be sold
directly to the general public.
1.4. The Fund and the Distributor will not sell shares of the Series to any
insurance company or separate account unless an agreement containing provisions
substantially the same as this Agreement is in effect to govern such sales.
1.5. Upon receipt of a request for redemption in proper form from the Company,
the Fund agrees to redeem any full or fractional shares of the Series held by
the Company, ordinarily executing such requests on each business day at the net
asset value next computed after receipt and acceptance by the Fund or its agent
of the request for redemption, except that the Fund reserves the right to
suspend the right of redemption, consistent with Section 22(e) of the 1940 Act
and any rules thereunder. Such redemption shall be paid consistent with
applicable rules of the SEC and procedures and policies of the Fund as described
in the current prospectus.
1.6. The Company agrees to purchase and redeem the shares of each Series in
accordance with the provisions of the current prospectus for the Fund.
1.7. The Company shall pay for shares of the Series on the same day that it
places an order to purchase shares of the Series. Payment shall be in federal
funds transmitted by wire.
1.8. Issuance and transfer of shares of the Series will be by book entry only
unless otherwise agreed by the Fund. Stock certificates will not be issued to
the Company or the Separate Accounts unless otherwise agreed by the Fund.
Shares ordered from the Fund will be recorded in an appropriate title for the
Separate Accounts or the appropriate subaccounts of the Separate Accounts.
1.9. The Fund shall promptly furnish notice (by wire or telephone, followed by
written confirmation) to the Company of any income dividends or capital gain
distributions payable on the
<PAGE>
shares of the Series. The Company hereby elects to reinvest in the Series all
such dividends and distributions as are payable on a Series' shares and to
receive such dividends and distributions in additional shares of that Series.
The Company reserves the right to revoke this election in writing and to receive
all such dividends and distributions in cash. The Fund shall notify the Company
of the number of shares so issued as payment of such dividends and
distributions.
1.10. The Fund shall instruct its recordkeeping agent to advise the Company on
each business day of the net asset value per share for each Series as soon as
reasonably practical after the net asset value per share is calculated.
ARTICLE II. Representations and Warranties
2.1. The Company represents and warrants that it is an insurance company duly
organized and in good standing under applicable law and that it is taxed as an
insurance company under Subchapter L of the Code.
2.2. The Company represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the California Insurance Code, and that each of the Separate Accounts is a
validly existing segregated asset account under applicable federal and state
law.
2.3. The Company represents and warrants that the Variable Contracts issued by
the Company or interests in the Separate Accounts under such Variable Contracts
(1) are or, prior to issuance, will be registered as securities under the
Securities Act of 1933 ("1933 Act") or, alternatively (2) are not registered
because they are properly exempt from registration under the 1933 Act or will be
offered exclusively in transactions that are properly exempt from registration
under the 1933 Act.
2.4. The Company represents and warrants that each of the Separate Accounts (1)
has been registered as a unit investment trust in accordance with the provisions
of the 1940 Act or, alternatively (2) has not been registered in proper reliance
upon an exclusion from registration under the 1940 Act.
2.5. The Company represents that it believes, in good faith, that the Variable
Contracts issued by the Company are currently treated as annuity contracts or
life insurance policies (which may include modified endowment contracts),
whichever is appropriate, under applicable provisions of the Code.
2.6. The Company represents and warrants that any of its Separate Accounts that
fund variable life insurance contracts and that are registered with the SEC as
investment companies rely on the exemptions provided by Rule 6e-3(T), or any
successor thereto, and not on Rule 6e-2 under the 1940 Act.
2.7. The Fund represents and warrants that it is duly organized as a business
trust under the laws of the Commonwealth of Massachusetts, and is in good
standing under applicable law.
2.8. The Fund represents and warrants that the shares of the Series are duly
authorized for issuance
<PAGE>
in accordance with applicable law and that the Fund is registered as an open-end
management investment company under the 1940 Act.
2.9. The Fund represents that it believes, in good faith, that the Series
currently comply with the diversification provisions of Section 817(h) of the
Code and the regulations issued thereunder relating to the diversification
requirements for variable life insurance policies and variable annuity
contracts.
2.10. The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
ARTICLE III. General Duties
3.1. The Fund shall take all such actions as are necessary to permit the sale
of the shares of each Series to the Separate Accounts, including maintaining its
registration as an investment company under the 1940 Act, and registering the
shares of the Series sold to the Separate Accounts under the 1933 Act for so
long as required by applicable law. The Fund shall amend its Registration
Statement filed with the SEC under the 1933 Act and the 1940 Act from time to
time as required in order to effect the continuous offering of the shares of the
Series. The Fund shall register and qualify the shares for sale in accordance
with the laws of the various states to the extent deemed necessary by the Fund
or the Distributor.
3.2. The Fund shall make every effort to maintain qualification of each Series
as a Regulated Investment Company under Subchapter M of the Code (or any
successor or similar provision) and shall notify the Company immediately upon
having a reasonable basis for believing that a Series has ceased to so qualify
or that it might not so qualify in the future.
3.3. The Fund shall make every effort to enable each Series to comply with the
diversification provisions of Section 817(h) of the Code and the regulations
issued thereunder relating to the diversification requirements for variable life
insurance policies and variable annuity contracts and any prospective amendments
or other modifications to Section 817 or regulations thereunder, and shall
notify the Company immediately upon having a reasonable basis for believing that
any Series has ceased to comply.
3.4. The Fund shall be entitled to receive and act upon advice of its General
Counsel or its outside counsel in meeting the requirements specified in Sections
3.2 and 3.3 hereof.
3.5 The Company shall take all such actions as are necessary under applicable
federal and state law to permit the sale of the Variable Contracts issued by the
Company, including registering each Separate Account as an investment company to
the extent required under the 1940 Act, and registering the Variable Contracts
or interests in the Separate Accounts under the Variable Contracts to the extent
required under the 1933 Act, and obtaining all necessary approvals to offer the
Variable Contracts from state insurance commissioners.
3.6. The Company shall make every effort to maintain the treatment of the
Variable Contracts issued
<PAGE>
by the Company as annuity contracts or life insurance policies, whichever is
appropriate, under applicable provisions of the Code, and shall notify the Fund
and the Distributor immediately upon having a reasonable basis for believing
that such Variable Contracts have ceased to be so treated or that they might not
be so treated in the future.
3.7. The Company shall offer and sell the Variable Contracts issued by the
Company in accordance with applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity contracts.
3.8. The Distributor shall sell and distribute the shares of the Series of the
Fund in accordance with the applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law.
3.9. A majority of the Board of Trustees of the Fund shall consist of persons
who are not "interested persons" of the Fund ("disinterested Trustees"), as
defined by Section 2(a)(19) of the 1940 Act, except that if this provision of
this Section 3.9 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
3.10. The Company agrees to provide, as promptly as possible, notice to the
Fund and to the Distributor if the Company has reason to know about a meeting os
some or all of the owners of the Variable Contracts or shareholders of the Fund,
where the agenda or purpose of the meeting relates, in whole or in part, to the
Fund and that has not been called by the Fund's Board of Trustees (and which
shall not include a vote of Variable Contract Owners having an interest in a
Separate Account to substitute shares of another investment company for
corresponding shares of the Fund or a Series, as described in Section 9(e) and
to which the notice provision of Section 9.2 shall apply). In such an event,
the Company agrees to distribute proxy statements and any additional
solicitation materials upon the request of the Fund or the Distributor to the
owners of the Variable Contracts issued by the Company at least 30 days prior to
the meeting. The Company further agrees that it shall take no action, directly
or indirectly, in furtherance of shareholders of the Fund or Contract Owners
taking any action with respect to the Fund by written consent and without a
meeting.
3.11. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
ARTICLE IV. Potential Conflicts
4.1. The Fund's Board of Trustees shall monitor the Fund for the existence of
any material irreconcilable conflict (1) between the interests of owners of
variable annuity contracts and variable
<PAGE>
life insurance policies, and (2) between the interests of owners of Variable
Contracts ("Variable Contract Owners") issued by different Participating
Insurance Companies that invest in the Fund. An irreconcilable material conflict
may arise for a variety of reasons, including: (a) an action by any state
insurance regulatory authority; (b) a change in applicable federal or state
insurance, tax, or securities laws or regulations, or a public ruling, private
letter ruling, no-action or interpretive letter, or any similar action by
insurance, tax, or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of the Fund or any Series are being managed; or (e) a decision by a
Participating Insurance Company to disregard the voting instructions of Variable
Contract Owners.
4.2. The Company agrees that it shall be responsible for reporting any
potential or existing conflicts to the Fund's Board of Trustees. The Company
will be responsible for assisting the Board of Trustees of the Fund in carrying
out its responsibilities under this agreement, by providing the Board with all
information reasonably necessary for the Board to consider any issues raised.
This includes, but is not limited to, an obligation by the Company to inform the
Board whenever Variable Contract Owner voting instructions are disregarded. The
Company shall carry out its responsibility under this Section 4.2 with a view
only to the interests of the Variable Contract Owners.
4.3. The Company agrees that in the event that it is determined by a majority
of the Board of Trustees of the Fund or a majority of the Fund's disinterested
Trustees that a material irreconcilable conflict exists, the Company shall, to
the extent reasonably practicable (as determined by a majority of the
disinterested Trustees of the Board of the Fund), take whatever steps are
necessary to eliminate the irreconcilable material conflict, including: (1)
withdrawing the assets allocable to some or all of the Separate Accounts from
the Fund or any Series and reinvesting such assets in a different investment
medium, which may include another series of the Fund, or submitting the question
of whether such segregation should be implemented to a vote of all affected
Variable Contract Owners and, as appropriate, segregating the assets of any
appropriate group (i.e., Contract Owners of Variable Contracts issued by one or
more Participating Insurance Companies) that votes in favor of such segregation,
or offering to the affected Variable Contract Owners the option of making such a
change; and (2) establishing a new registered management investment company or
managed separate account. If a material irreconcilable conflict arises because
of the Company's decision to disregard Variable Contract Owners' voting
instructions and that decision represents a minority position or would preclude
a majority vote, the Company shall be required, at the Fund's election, to
withdraw the Separate Accounts' investment in the Fund, and no charge or penalty
will be imposed as a result of such withdrawal. The Fund shall neither be
required to bear the costs of remedial actions taken to remedy a material
irreconcilable conflict nor shall it be requested to pay a higher investment
advisory fee for the sole purpose of covering such costs. In addition, no
Variable Contract Owner shall be required directly or indirectly to bear the
direct or indirect costs of remedial actions taken to remedy a material
irreconcilable conflict. A new funding medium for any Variable Contract need
not be established pursuant to this Section 4.3, if an offer to do so has been
declined by vote of a majority of Variable Contract Owners materially adversely
affected by the irreconcilable material conflict. All reports received by the
Fund's Board of Trustees of potential or existing conflicts, and all Board
action with regard to determining the existence of a conflict, notifying
Participating Insurance Companies and the Fund's investment adviser of a
conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded
<PAGE>
in the minutes of the Board of Trustees of the Fund or other appropriate
records, and such minutes or other records shall be made available to the SEC
upon request. The Company and the Fund shall carry out their responsibilities
under this Section 4.3 with a view only to the interests of the Variable
Contract Owners.
4.4. The Board of Trustees of the Fund shall promptly notify the Company in
writing of its determination of the existence of an irreconcilable material
conflict and its implications.
ARTICLE V. Prospectuses and Proxy Statements; Voting
5.1. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Fund to the owners of Variable Contracts issued by the
Company as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
5.2. The Distributor shall provide the Company with as many copies of the
current prospectus of the Fund as the Company may reasonably request. If
requested by the Company in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary in order
for the Company to print together in one document the current prospectus for the
Variable Contracts issued by the Company and the current prospectus for the
Fund. The Fund shall bear the expense of printing copies of its current
prospectus that will be distributed to existing Variable Contract Owners, and
the Company shall bear the expense of printing copies of the Fund's prospectus
that are used in connection with offering the Variable Contracts issued by the
Company.
5.3. The Fund and the Distributor shall provide (1) at the Fund's expense, one
copy of the Fund's current Statement of Additional Information ("SAI") to the
Company and to any owner of a Variable Contract issued by the Company who
requests such SAI, (2) at the Company's expense, such additional copies of the
Fund's current SAI as the Company shall reasonably request and that the Company
shall require in accordance with applicable law in connection with offering the
Variable Contracts issued by the Company.
5.4. The Fund, at its expense, shall provide the Company with copies of its
proxy material, periodic reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require for
purposes of distributing to owners of Variable Contracts issued by the Company.
The Fund, at the Company's expense, shall provide the Company with copies of its
periodic reports to shareholders and other communications to shareholders in
such quantity as the Company shall reasonably request for use in connection with
offering the Variable Contracts issued by the Company. If requested by the
Company in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund's proxy materials, periodic reports to shareholders and
other communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Company to print
such shareholder communications for distribution to owners of Variable Contracts
issued by the Company.
5.5. For so long as the SEC interprets the 1940 Act to require pass-through
voting by Participating Insurance Companies whose Separate Accounts are
registered as investment companies under the
<PAGE>
1940 Act, the Company shall vote shares of each Series of the Fund held in a
Separate Account or a subaccount thereof, whether or not registered under the
1940 Act, at regular and special meetings of the Fund in accordance with
instructions timely received by the Company (or its designated agent) from
owners of Variable Contracts funded by such Separate Account or subaccount
thereof having a voting interest in the Series. The Company shall vote shares
of a Series of the Fund held in a Separate Account or a subaccount thereof that
are attributable to the Variable Contracts as to which no timely instructions
are received, as well as shares held in such Separate Account or subaccount
thereof that are not attributable to the Variable Contracts and owned
beneficially by the Company (resulting from charges against the Variable
Contracts or otherwise), in the same proportion as the votes cast by owners of
the Variable Contracts funded by that Separate Account or subaccount thereof
having a voting interest in the Series from whom instructions have been timely
received. The Company shall vote shares of each Series of the Fund held in its
general account, if any, in the same proportion as the votes cast with respect
to shares of the Series held in all Separate Accounts of the Company or
subaccounts thereof, in the aggregate.
5.6. The Fund shall disclose in its prospectus that (1) shares of the Series of
the Fund are offered to affiliated or unaffiliated insurance company separate
accounts which fund both annuity and life insurance contracts, (2) due to
differences in tax treatment or other considerations, the interests of various
Variable Contract Owners participating in the Fund or a Series might at some
time be in conflict, and (3) the Board of Trustees of the Fund will monitor for
any material conflicts and determine what action, if any, should be taken. The
Fund hereby notifies the Company that prospectus disclosure may be appropriate
regarding potential risks of offering shares of the Fund to separate accounts
funding both variable annuity contracts and variable life insurance policies and
to separate accounts funding Variable Contracts of unaffiliated life insurance
companies.
ARTICLE VI. Sales Material and Information
6.1. The Company shall furnish, or shall cause to be furnished, to the Fund or
its designee, each piece of sales literature or other promotional material in
which the Fund (or any Series thereof) or its investment adviser or the
Distributor is named, and no such sales literature or other promotional material
shall be used without the approval of the Fund and the Distributor or the
designee of either.
6.2. The Company agrees that neither it nor any of its affiliates or agents
shall give any information or make any representations or statements on behalf
of the Fund or concerning the Fund other than the information or representations
contained in the Registration Statement or prospectus for the Fund shares, as
such registration statement and prospectus may be amended or supplemented from
time to time, or in reports or proxy statements for the Fund, or in sales
literature or other promotional material approved by the Fund or its designee
and by the Distributor or its designee, except with the permission of the Fund
or its designee and the Distributor or its designee.
6.3. The Fund or the Distributor or the designee of either shall furnish to the
Company or its designee, each piece of sales literature or other promotional
material in which the Company or its Separate Accounts are named, and no such
material shall be used without the approval of the Company or its designee.
<PAGE>
6.4. The Fund and the Distributor agree that each and the affiliates and agents
of each shall not give any information or make any representations on behalf of
the Company or concerning the Company, the Separate Accounts, or the Variable
Contracts issued by the Company, other than the information or representations
contained in a registration statement or prospectus for such Variable Contracts,
as such registration statement and prospectus may be amended or supplemented
from time to time, or in reports for the Separate Accounts or prepared for
distribution to owners of such Variable Contracts, or in sales literature or
other promotional material approved by the Company or its designee, except with
the permission of the Company.
6.5. The Fund will provide to the Company at least one complete copy of all
prospectuses, Statements of Additional Information, reports, proxy statements
and other voting solicitation materials, and all amendments and supplements to
any of the above, that relate to the Fund or its shares, promptly after the
filing of such document with the SEC or other regulatory authorities.
6.6. The Company will provide to the Fund at least one complete copy of all
prospectuses (which shall include an offering memorandum if the Variable
Contracts issued by the Company or interests therein are not registered under
the 1933 Act), Statements of Additional Information, reports, solicitations for
voting instructions, and all amendments or supplements to any of the above, that
relate to the Variable Contracts issued by the Company or the Separate Accounts
promptly after the filing of such document with the SEC or other regulatory
authority.
6.7. For purposes of this Article VI, the phrase "sales literature or other
promotional material" includes, but is not limited to, advertisements (such as
material published, or designed for use in, a newspaper, magazine, or other
periodical, radio, television, telephone or tape recording, videotape display,
signs or billboards, motion pictures, computerized media, or other public
media), sales literature (i.e., any written communication distributed or made
generally available to customers or the public, including brochures, circulars,
research reports, market letters, form letters, seminar texts, reprints or
excerpts of any other advertisement, sales literature, or published article),
educational or training materials or other communications distributed or made
generally available to some or all agents or employees.
ARTICLE VII. Indemnification
7.1. Indemnification By The Company
7.1(a). The Company agrees to indemnify and hold harmless the Fund, each of its
Trustees and officers, any affiliated person of the Fund within the meaning of
Section 2(a)(3) of the 1940 Act, and the Distributor (collectively, the
"Indemnified Parties" for purposes of this Section 7.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation expenses (including legal and
other expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Company
and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material
<PAGE>
fact contained in the registration statement or prospectus (which shall include
an offering memorandum) for the Variable Contracts issued by the Company or
sales literature for such Variable Contracts (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Company by or on behalf
of the Fund for use in the registration statement or prospectus for the Variable
Contracts issued by the Company or sales literature (or any amendment or
supplement) or otherwise for use in connection with the sale of such Variable
Contracts or Fund shares; or
(ii) arise out of or as a result of any statement or representation (other than
statements or representations contained in the registration statement,
prospectus or sales literature of the Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company or any of its
affiliates, employees or agents with respect to the sale or distribution of the
Variable Contracts issued by the Company or the Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature of the Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such a statement or omission was made in reliance upon information furnished to
the Fund by or on behalf of the Company;
except to the extent provided in Sections 7.1(b) and 7.1(c) hereof.
7.1(b). The Company shall not be liable under this indemnification provision
with respect to any losses, claims, damages, liabilities or litigation expenses
to which an Indemnified Party would otherwise be subject by reason of willful
misfeasance, bad faith, or gross negligence in the performance of his or her
duties or by reason of his or her reckless disregard of obligations or duties
under this Agreement or to the Fund.
7.1(c). The Company shall not be liable under this indemnification provision
with respect to any claim made against an Indemnified Party unless such Party
shall have notified the Company in writing within a reasonable time after the
summons or other first legal process giving information of the nature of the
claim shall have been served upon such Indemnified Party (or after such Party
shall have received notice of such service on any designated agent), but failure
to notify the Company of any such claim shall not relieve the Company from any
liability which it may have to the Indemnified Party against whom such action is
brought otherwise than on account of this indemnification provision. In case
any such action is brought against the Indemnified Parties, the Company shall be
entitled to participate, at its own expense, in the defense of such action. The
Company also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from the Company to
such party of the Company's election to assume the defense thereof, the
Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under this
Agreement for
<PAGE>
any legal or other expenses subsequently incurred by such party independently in
connection with the defense thereof other than reasonable costs of
investigation.
7.1(d). The Indemnified Parties shall promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Variable Contracts issued by the
Company or the operation of the Fund.
7.2 Indemnification By the Distributor
7.2(a). The Distributor agrees to indemnify and hold harmless the Company and
each of its directors and officers and each person, if any, who is an affiliated
person of the Company within the meaning of Section 2(a)(3) of the 1940 Act
(collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Distributor) or litigation
expenses (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or litigation expenses are related to
the sale or acquisition of the Fund's shares or the Variable Contracts issued by
the Company and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material face contained in the registration statement or
prospectus or sales literature of the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Distributor or the Fund
or the designee of either by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection with the sale of the
Variable Contracts issued by the Company or Fund shares; or
(ii) arise out of or as a result of any statement or representation (other than
statements or representations contained in the registration statement,
prospectus or sales literature for the Variable Contracts not supplied by the
Distributor or any employees or agents thereof) or wrongful conduct of the Fund
or Distributor, or the affiliates, employees, or agents of the Fund or the
Distributor with respect to the sale or distribution of the Variable Contracts
issued by the Company or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature covering the Variable Contracts issued by the Company, or any
amendment thereof or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such statement or
omission was made in reliance upon information furnished to the Company by or on
behalf of the Fund;
except to the extent provided in Sections 7.2(b) and 7.2(c) hereof.
<PAGE>
7.2(b). The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his or
her duties or by reason of his or her reckless disregard of obligations and
duties under this Agreement or to the Company or the Separate Accounts.
7.2(c). The Distributor shall not be liable under this indemnification
provision with respect to any claim made against the Indemnified Party unless
such Party shall have notified the Distributor in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Party shall have received notice of such service on any designated agent),
but failure to notify the Distributor of any such claim shall not relieve the
Distributor from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
Indemnification Provision. In case any such action is brought against the
Indemnified Parties, the Distributor will be entitled to participate, at its own
expense, in the defense thereof. The Distributor also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Distributor to such party of the Distributor's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Distributor
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
7.2(d). The Company shall promptly notify the Distributor of the commencement
of any litigation or proceedings against it or any of its officers or directors
in connection with the issuance or sale of the Variable Contracts issued by the
Company or the operation of the Separate Accounts.
ARTICLE VIII. Applicable Law
8.1. This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the State of California.
8.2. This Agreement shall be subject to the provisions of the 1933, 1934, and
1940 Acts, and the rules and regulations and rulings thereunder, including such
exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
ARTICLE IX. Termination
9.1. This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written notice to the other
parties; or
(b) at the option of the Company if shares of the Series are not reasonably
available to meet the requirements of the Variable Contracts issued by the
Company, as determined by the Company, and upon prompt notice by the Company to
the other parties; or
<PAGE>
(c) at the option of the Fund or the Distributor upon institution of formal
proceedings against the Company or its agent by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body regarding the
Company's duties under this Agreement or related to the sale of the Variable
Contracts issued by the Company, the operation of the Separate Accounts, or the
purchase of the Fund shares; or
(d) at the option of the Company upon institution of formal proceedings against
the Fund or the Distributor by the NASD, the SEC, or any state securities or
insurance department or any other regulatory body; or
(e) upon requisite vote of the Variable Contract Owners having an interest in
the Separate Accounts (or any subaccounts thereof) to substitute the shares of
another investment company for the corresponding shares of the Fund or a Series
in accordance with the terms of the Variable Contracts for which those shares
had been selected to serve as the underlying investment media; or
(f) in the event any of the shares of a Series are not registered, issued or
sold in accordance with applicable state and/or federal law, or such law
precludes the use of such shares as the underlying investment media of the
Variable Contracts issued or to be issued by the Company; or
(g) by any party to the Agreement upon a determination by a majority of the
Trustees of the Fund, or a majority of its disinterested Trustees, that an
irreconcilable conflict exists; or
(h) at the option of the Company if the Fund or a Series fails to meet the
diversification requirements specified in Section 3.3 hereof.
9.2. Each party to this Agreement shall promptly notify the other parties to
the Agreement of the institution against such party of any such formal
proceedings as described in Sections 9.1(c) and (d) hereof. The Company shall
give 60 day's prior written notice to the Fund of the date of any proposed vote
of Variable Contract Owners to replace the Fund's shares as described in Section
9.1(e) hereof.
9.3. Except as necessary to implement Variable Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the Company
shall not redeem Fund shares attributable to the Variable Contracts issued by
the Company (as opposed to Fund shares attributable to the Company's assets held
in the Separate Accounts), and the Company shall not prevent Variable Contract
Owners from allocating payments to a Series, until 60 days after the Company
shall have notified the Fund or Distributor of its intention to do so.
9.4. If this Agreement terminates, any provision of this Agreement necessary to
the orderly windup of business under it will remain in effect as to that
business, after termination.
ARTICLE X. Notices
Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth below or at such other
address as such party may from time to time specify in writing to the other
party.
<PAGE>
If to the Fund:
Pacific Select Fund
Attn: SEC Regulatory Compliance Department
700 Newport Center Drive
P.O. Box 7500
Newport Beach, CA 92260
If to the Distributor:
Pacific Equities Network
Attn: Compliance Officer
700 Newport Center Drive, NB-4
Newport Beach, CA 92660
If to the Company:
Pacific Mutual Life Insurance Company
Attn: SEC Regulatory Compliance Department
700 Newport Center Drive
P.O. Box 7500
Newport Beach, CA 92660
ARTICLE XI. Miscellaneous
11.1. The Fund and the Company agree that if and to the extent Rule 6e-3(T)
under the 1940 Act is amended or if Rule 6e-3 is adopted in final form, to the
extent applicable, the Fund and the Company shall each take such steps as may
be necessary to comply with the Rule as amended or adopted in final form.
11.2. A copy of the Fund's Agreement and Declaration of Trust is on file with
the Secretary of the Commonwealth of Massachusetts and notice is hereby given
that the Agreement has been executed on behalf of the Fund by a Trustee of the
Fund in his or her capacity as Trustee and not individually. The obligations of
this Agreement shall only be binding upon the assets and property of the Fund
and shall not be binding upon any Trustee, officer or shareholder of the Fund
individually.
11.3. Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Series from exercising any of the
rights provided to such Trustees or shareholders in the Fund's Agreement and
Declaration of Trust, as amended, a copy of which will be provided to the
Company upon request.
11.4. It is understood that the name "Pacific", "Pacific Mutual", "Pacific
Select" or any derivative thereof or logo associated with that name is the
valuable property of the Distributor and its affiliates, and that the Company
has the right to use such name (or derivative or logo) only so long as this
Agreement is in effect. Upon termination of this Agreement the Company shall
forthwith cease to
<PAGE>
use such name (or derivative or logo).
11.5. The captions in this Agreement are included for convenience of reference
only and in no way define or delineate any of the provisions hereof or otherwise
affect their construction or effect.
11.6. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.7. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.
11.8. This Agreement may not be assigned by any party to the Agreement except
with the written consent of the other parties to the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
PACIFIC SELECT FUND
ATTEST: /s/AUDREY L. MILFS BY: /s/ TC SUTTON
Name: AUDREY L. MILFS Name: THOMAS C. SUTTON
Title: SECRETARY Title: PRESIDENT
PACIFIC EQUITIES NETWORK
ATTEST: /s/ AUDREY L. MILFS BY: /s/ ARTHUR M. KESSELHAUT
Name: AUDREY L. MILFS Name: ARTHUR M. KESSELHAUT
Title: SECRETARY Title: PRESIDENT
PACIFIC MUTUAL LIFE INSURANCE CO.
ATTEST: /s/AUDREY L. MILFS BY: /s/ WILLIAM D. CVENGROS
Name: AUDREY L. MILFS Name: WILLIAM D. CVENGROS
Title: SECRETARY Title: CHIEF INVESTMENT OFFICER
<PAGE>
EXHIBIT A
PACIFIC SELECT SEPARATE ACCOUNT
PACIFIC SELECT EXEC SEPARATE ACCOUNT
PACIFIC SELECT VARIABLE ANNUITY SEPARATE ACCOUNT
PACIFIC COLI SEPARATE ACCOUNT
SEPARATE ACCOUNT A
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Exhibit A to be executed
by their Officers designated below on this 3rd day of January, 1995.
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ TC SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: /s/AUDREY L. MILFS By: /s/GERALD W. ROBINSON
Name: Audrey L. Milfs Name: Gerald W. Robinson
Title: Secretary Title: President
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Attest: /s/DIANE N. LEDGER By: /s/GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: President
<PAGE>
EXHIBIT B
MONEY MARKET SERIES
MANAGED BOND SERIES
GOVERNMENT SECURITIES SERIES
HIGH YIELD BOND SERIES
GROWTH SERIES
GROWTH LT SERIES
EQUITY INCOME SERIES
MULTI-STRATEGY SERIES
EQUITY SERIES
BOND AND INCOME SERIES
EQUITY INDEX SERIES
INTERNATIONAL SERIES
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Exhibit B to be executed
by their Officers designated below on this 3rd day of January, 1995.
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ TC SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: /s/ AUDREY L. MILFS By: /s/ GERALD W. ROBINSON
Name: Audrey L. Milfs Name: Gerald W. Robinson
Title: Secretary Title: President
PACIFIC MUTUAL LIFE INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: President
<PAGE>
ADDENDUM TO PARTICIPATION AGREEMENT
- -----------------------------------
The Participation Agreement, made the 6th day of November, 1992, by and between
PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance company
domiciled in California, on its behalf and on behalf of the segregated asset
accounts of the Company listed on Exhibit A to this Agreement (the "Separate
Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust;
and Pacific Equities Network ("Distributor"), a California Corporation ("the
Agreement") is hereby amended by the addition of the provisions set forth in
this Addendum to the Agreement ("Addendum"), which is made this 4th day of
January, 1994.
WITNESSETH:
WHEREAS, the Fund is authorized to issue separate classes of shares of
beneficial interest ("shares") each representing an interest in a separate
portfolio of assets known as a "series" and each series has its own investment
objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts"); and
WHEREAS, the Fund currently consists of nine separate series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series and Equity Index Series; and
WHEREAS, the Fund intends to establish one additional Series to be designated as
the Growth LT Series; and
NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this Addendum, it is agreed between the parties hereto as follows:
The Agreement is amended by replacing the second paragraph with the following
language:
"WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts") and to serve as
an investment medium for Variable Contracts offered by insurance companies that
have entered into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is comprised of
multiple separate series, and other series may be established in the future;
and"
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed
by their officers designated below on the date written above.
<PAGE>
PACIFIC SELECT FUND
By: /s/TC SUTTON
ATTEST /s/AUDREY L. MILFS Name: Thomas C. Sutton
Name: Audrey L. Milfs Title: President
Title:
PACIFIC EQUITIES NETWORK
By: /s/GLENN S. SCHAFER
ATTEST /s/ AUDREY L. MILFS Name: Glenn S. Schafer
Name: Audrey L. Milfs Title: Director
Title: Secretary
By: /s/DIANE N. LEDGER
ATTEST /s/ AUDREY L. MILFS Name: Diane N. Ledger
Name: Audrey L. Milfs Title: Assistant Vice President
Title: Secretary
PACIFIC MUTUAL LIFE
INSURANCE COMPANY
By: /s/WILLIAM D. CVENGROS
ATTEST /s/ DIANE N. LEDGER Name: William D. Cvengros
Name: Diane N. Ledger Title: Chief Investment Officer
Title: Assistant Vice President
By: /s/GLENN S. SCHAFER
ATTEST /s/ DIANE N. LEDGER Name: Glenn S. Schafer
Name: Diane N. Ledger Title: Chief Financial Officer
Title: Secretary
<PAGE>
ADDENDUM TO PARTICIPATION AGREEMENT
The Participation Agreement, made the 6th day of November, 1992, by and between
PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance company
domiciled in California, on its behalf and on behalf of the segregated asset
accounts of the Company listed on Exhibit A to this Agreement (the "Separate
Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust;
and Pacific Equities Network ("Distributor"), a California Corporation ("the
Agreement") is hereby amended by the addition of the provisions set forth in
this Addendum to the Agreement ("Addendum"), which is made this 15th day of
August, 1994.
WITNESSETH:
WHEREAS, the Fund is authorized to issue separate classes of shares of
beneficial interest ("shares") each representing an interest in a separate
portfolio of assets known as a "series" and each series has its own investment
objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its series to
separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts"); and
WHEREAS, the Fund currently consists of ten separate series designated as the
Money Market Series, Managed Bond Series, High Yield Bond Series, Government
Securities Series, Growth Series, Equity Income Series, Multi-Strategy Series,
International Series, Equity Index Series and Growth LT Series; and
WHEREAS, the Fund intends to establish two additional Series to be designated as
the Equity Series and Bond and Income Series; and
NOW THEREFORE, in consideration of the mutual promises and covenants contained
in this Addendum, it is agreed between the parties hereto as follows:
The Agreement is amended by replacing the second paragraph with the
following language:
"WHEREAS, the Fund is available to offer shares of one or more of its series
to separate accounts of insurance companies that fund variable life
insurance policies and variable annuity contracts ("Variable Contracts") and
to serve as an investment medium for Variable Contracts offered by insurance
companies that have entered into participation agreements substantially
similar to this agreement ("Participating Insurance Companies"), and the
Fund is comprised of multiple separate series, and other series may be
established in the future; and"
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be executed
by their officers designated below on the date written above.
<PAGE>
PACIFIC SELECT FUND
Attest: /s/ AUDREY L. MILFS By: /s/ TC SUTTON
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: /s/ AUDREY L. MILFS By: /s/ GERALD W. ROBINSON
Name: Audrey L. Milfs Name: Gerald W. Robinson
Title: Secretary Title: President and Chief
Executive Officer
Attest: /s/ AUDREY L. MILFS By: /s/ DIANE N. LEDGER
Name: Audrey L. Milfs Name: Diane N. Ledger
Title: Secretary Title: Assistant Vice President
PACIFIC MUTUAL LIFE
INSURANCE COMPANY
Attest: /s/ DIANE N. LEDGER By: /s/ WILLIAM D. CVENGROS
Name: Diane N. Ledger Name: William D. Cvengros
Title: Assistant Vice President Title: Chief Investment Officer
Attest: /s/ DIANE N. LEDGER By: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: Chief Financial Officer
<PAGE>
ADDENDUM TO PARTICIPATION AGREEMENT
-----------------------------------
The Participation Agreement, made the 6th day of November, 1992 and
subsequently amended on January 4, 1994 and August 15, 1994, by and between
PACIFIC MUTUAL LIFE INSURANCE COMPANY (the "Company"), a life insurance company
domiciled in California, on its behalf and on behalf of the segregated asset
accounts of the Company listed on Exhibit A to this Agreement (the "Separate
Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business trust;
and Pacific Equities Network ("Distributor"), a California Corporation ("the
Agreement") is hereby amended by the addition of the provisions set forth in
this Addendum to the Agreement ("Addendum"), which is made this _____ day of
__________________, 1995.
WITNESSETH:
WHEREAS, the Fund is authorized to issue separate classes of beneficial
interest ("shares") each representing an interest in a separate portfolio of
assets known as a "series" and each series has its own investment objective,
policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its series
to separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts"); and
WHEREAS, the Fund currently consists of twelve separate series designated
as the Money Market Portfolio, Managed Bond Portfolio, High Yield Bond
Portfolio, Government Securities Portfolio, Growth Portfolio, Equity Income
Portfolio, Multi-Strategy Portfolio, International Portfolio, Equity Index
Portfolio, Growth LT Portfolio, Equity Portfolio and Bond and Income Portfolio
(each referred to as a "Series" in the Agreement, and hereinafter referred to as
a "Portfolio"); and
WHEREAS, the Fund intends to establish two additional Portfolios to be
designated as the Emerging Markets Portfolio and Aggressive Equity Portfolio;
and
NOW THEREFORE, in consideration of the mutual promises and covenants
contained in this Addendum, it is agreed between the parties hereto as follows:
The Agreement is amended by replacing the second paragraph with the
following language:
WHEREAS, the Fund is available to offer shares of one or more of its
Portfolios to separate accounts of insurance companies that fund variable
life insurance policies and variable annuity contracts ("Variable
Contracts") and to serve as an investment medium for Variable Contracts
offered by insurance companies that have entered into participation
agreements substantially similar to this agreement ("Participating
Insurance Companies"), and the Fund is comprised of multiple separate
Portfolios, and other Portfolios may be established in the future; and
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
executed by their officers designated below on the date written above.
PACIFIC SELECT FUND
Attest: By:
Name: Audrey L. Milfs Name: Thomas C. Sutton
Title: Secretary Title: President
PACIFIC EQUITIES NETWORK
Attest: By:
Name: Audrey L. Milfs Name: Gerald W. Robinson
Title: Secretary Title: President, Director & CEO
Attest: By:
Name: Audrey L. Milfs Name: Edward R. Byrd
Title: Secretary Title: CFO & Treasurer
PACIFIC MUTUAL LIFE
INSURANCE COMPANY
Attest: By:
Name: Diane N. Ledger Name: Thomas C. Sutton
Title: Assistant Vice President Title: Chairman and CEO
Attest: By:
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: President
<PAGE>
EXHIBIT 99.9(c)
Participation Agreement with
Pacific Corinthian Life Insurance Company
<PAGE>
FUND PARTICIPATION AGREEMENT
----------------------------
This AGREEMENT is made this 9th day of November 1994, by and between
Pacific Corinthian Life Insurance Company (the "Company"), a life insurance
company domiciled in California, on its behalf and on behalf of the segregated
asset accounts of the Company listed on Exhibit A to this Agreement (the
"Separate Accounts"); Pacific Select Fund (the "Fund"), a Massachusetts business
trust; and Pacific Equities Network ("Distributor"), a California corporation.
W I T N E S S E T H
-------------------
WHEREAS, the Fund is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended ("1940 Act") and the Fund is authorized to issue
separate classes of shares of beneficial interests ("shares"), each representing
an interest in a separate portfolio of assets known as a "series" and each
series has its own investment objective, policies, and limitations; and
WHEREAS, the Fund is available to offer shares of one or more of its series
to separate accounts of insurance companies that fund variable life insurance
policies and variable annuity contracts ("Variable Contracts") and to serve as
an investment medium for Variable Contracts offered by insurance companies that
have entered into participation agreements substantially similar to this
agreement ("Participating Insurance Companies"), and the Fund is currently
comprised of twelve separate series, eleven of which are initially offered to
the Separate Accounts of the Company, and other series may be established in the
future; and
WHEREAS, the Fund has obtained an order from the SEC, granting
Participating Insurance Companies, separate accounts funding Variable Contracts
of Participating Insurance Companies, and the Fund exemptions from the
provisions of sections 9(a), 13(a), 15(a), and 15(b) of the 1940 Act and
paragraph (b)(15) of Rule 6e-3(T) under the 1940 Act, to the extent necessary to
permit such persons to rely on the exemptive relief provided under paragraph
(b)(15) of Rule 6e-3(T), even though shares of the Fund may be offered to and
held by separate accounts funding variable annuity contracts or scheduled or
flexible premium variable life insurance contracts of both affiliated and
unaffiliated life insurance companies (the "Shared Funding Exemptive Order");
and
WHEREAS, the Distributor is registered as a broker-dealer with the SEC
under the Securities Exchange Act of 1934, as amended ("1934 Act"), and is a
member in good standing of the National Association of Securities Dealers, Inc.
("NASD"); and
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, the Company wishes to purchase shares of one or more of the Fund's
series on behalf of its Separate
<PAGE>
Accounts to serve as an investment medium for Variable Contracts funded by the
Separate Accounts, and the Distributor is authorized to sell shares of the
Fund's series;
NOW, THEREFORE, in consideration of the foregoing and the mutual promises
and covenants hereinafter set forth, the parties hereby agree as follows:
ARTICLE I. Sale of Fund Shares
-------------------
1.1. The Distributor agrees to sell to the Company those shares of the
series offered and made available by the Fund and identified on Exhibit B
("Series") that the Company orders on behalf of its Separate Accounts, and
agrees to execute such orders on each day on which the Fund calculates its net
asset value pursuant to rules of the SEC ("business day") at the net asset value
next computed after receipt and acceptance by the Fund or its agent of the order
for the shares of the Fund.
1.2. The Fund agrees to make available on each business day shares of the
Series for purchase at the applicable net asset value per share by the Company
on behalf of its Separate Accounts; provided, however, that the Board of
Trustees of the Fund may refuse to sell shares of any Series to any person, or
suspend or terminate the offering of shares of any Series, if such action is
required by law or by regulatory authorities having jurisdiction or is, in the
sole discretion of the Trustees, acting in good faith and in light of the
Trustees' fiduciary duties under applicable law, necessary in the best interests
of the shareholders of any Series.
1.3. The Fund and the Distributor agree that shares of the Series of the
Fund will be sold only to Participating Insurance Companies, their separate
accounts, and other persons consistent with each Series being adequately
diversified pursuant to Section 817(h) of the Internal Revenue Code of 1986, as
amended ("Code") and the regulations thereunder. No shares of any Series will
be sold directly to the general public.
1.4. The Fund and the Distributor will not sell shares of the Series to
any insurance company or separate account unless an agreement containing
provisions substantially the same as this Agreement is in effect to govern such
sales.
1.5. Upon receipt of a request for redemption in proper form from the
Company, the Fund agrees to redeem any full or fractional shares of the Series
held by the Company, ordinarily executing such requests on each business day at
the net asset value next computed after receipt and acceptance by the Fund or
its agent of the request for redemption, except that the Fund reserves the right
to suspend the right of redemption, consistent with Section 22(e) of the 1940
Act and any rules thereunder. Such redemption shall be paid consistent with
applicable rules of the SEC and procedures and policies of the Fund as described
in the current prospectus.
1.6. The Company agrees to purchase and redeem the shares of each Series
in accordance with the provisions of the current prospectus for the Fund.
<PAGE>
1.7. The Company shall pay for shares of the Series on the same day that
it places an order to purchase shares of the Series. Payment shall be in
federal funds transmitted by wire.
1.8. Issuance and transfer of shares of the Series will be by book entry
only unless otherwise agreed by the Fund. Stock certificates will not be issued
to the Company or the Separate Accounts unless otherwise agreed by the Fund.
Shares ordered from the Fund will be recorded in an appropriate title for the
Separate Accounts or the appropriate subaccounts of the Separate Accounts.
1.9. The Fund shall promptly furnish notice (by wire or telephone,
followed by written confirmation) to the Company of any income dividends or
capital gain distributions payable on the shares of the Series. The Company
hereby elects to reinvest in the Series all such dividends and distributions as
are payable on a Series' shares and to receive such dividends and distributions
in additional shares of that Series. The Company reserves the right to revoke
this election in writing and to receive all such dividends and distributions in
cash. The Fund shall notify the Company of the number of shares so issued as
payment of such dividends and distributions.
1.10. The Fund shall instruct its recordkeeping agent to advise the
Company on each business day of the net asset value per share for each Series as
soon as reasonably practical after the net asset value per share is calculated.
ARTICLE II. Representations and Warranties
------------------------------
2.1. The Company represents and warrants that it is an insurance company
duly organized and in good standing under applicable law and that it is taxed as
an insurance company under Subchapter L of the Code.
2.2. The Company represents and warrants that it has legally and validly
established each of the Separate Accounts as a segregated asset account under
the California Insurance Code, and that each of the Separate Accounts is a
validly existing segregated asset account under applicable federal and state
law.
2.3. The Company represents and warrants that the Variable Contracts
issued by the Company or interests in the Separate Accounts under such Variable
Contracts (1) are or, prior to issuance, will be registered as securities under
the Securities Act of 1933 ("1933 Act") or, alternatively (2) are not registered
because they are properly exempt from registration under the 1933 Act or will be
offered exclusively in transactions that are properly exempt from registration
under the 1933 Act.
2.4. The Company represents and warrants that each of the Separate
Accounts (1) has been registered as a unit investment trust in accordance with
the provisions of the 1940 Act or, alternatively (2) has not been registered in
proper reliance upon an exclusion from registration under the 1940 Act.
<PAGE>
2.5. The Company represents that it believes, in good faith, that the
Variable Contracts issued by the Company are currently treated as annuity
contracts or life insurance policies (which may include modified endowment
contracts), whichever is appropriate, under applicable provisions of the Code.
2.6. The Company represents and warrants that any of its Separate Accounts
that fund variable life insurance contracts and that are registered with the SEC
as investment companies rely on the exemptions provided by Rule 6e-3(T), or any
successor thereto, and not on Rule 6e-2 under the 1940 Act.
2.7. The Fund represents and warrants that it is duly organized as a
business trust under the laws of the Commonwealth of Massachusetts, and is in
good standing under applicable law.
2.8. The Fund represents and warrants that the shares of the Series are
duly authorized for issuance in accordance with applicable law and that the Fund
is registered as an open-end management investment company under the 1940 Act.
2.9. The Fund represents that it believes, in good faith, that the Series
currently comply with the diversification provisions of Section 817(h) of the
Code and the regulations issued thereunder relating to the diversification
requirements for variable life insurance policies and variable annuity
contracts.
2.10. The Distributor represents and warrants that it is a member in good
standing of the NASD and is registered as a broker-dealer with the SEC.
ARTICLE III. General Duties
--------------
3.1. The Fund shall take all such actions as are necessary to permit the
sale of the shares of each Series to the Separate Accounts, including
maintaining its registration as an investment company under the 1940 Act, and
registering the shares of the Series sold to the Separate Accounts under the
1933 Act for so long as required by applicable law. The Fund shall amend its
Registration Statement filed with the SEC under the 1933 Act and the 1940 Act
from time to time as required in order to effect the continuous offering of the
shares of the Series. The Fund shall register and qualify the shares for sale
in accordance with the laws of the various states to the extent deemed necessary
by the Fund or the Distributor.
3.2. The Fund shall make every effort to maintain qualification of each
Series as a Regulated Investment Company under Subchapter M of the Code (or any
successor or similar provision) and shall notify the Company immediately upon
having a reasonable basis for believing that a Series has ceased to so qualify
or that it might not so qualify in the future.
<PAGE>
3.3. The Fund shall make every effort to enable each Series to comply with
the diversification provisions of Section 817(h) of the Code and the regulations
issued thereunder relating to the diversification requirements for variable life
insurance policies and variable annuity contracts and any prospective amendments
or other modifications to Section 817 or regulations thereunder, and shall
notify the Company immediately upon having a reasonable basis for believing that
any Series has ceased to comply.
3.4. The Fund shall be entitled to receive and act upon advice of its
General Counsel or its outside counsel in meeting the requirements specified in
Sections 3.2 and 3.3 hereof.
3.5. The Company shall take all such actions as are necessary under
applicable federal and state law to permit the sale of the Variable Contracts
issued by the Company, including registering each Separate Account as an
investment company to the extent required under the 1940 Act, and registering
the Variable Contracts or interests in the Separate Accounts under the Variable
Contracts to the extent required under the 1933 Act, and obtaining all necessary
approvals to offer the Variable Contracts from state insurance commissioners.
3.6. The Company shall make every effort to maintain the treatment of the
Variable Contracts issued by the Company as annuity contracts or life insurance
policies, whichever is appropriate, under applicable provisions of the Code, and
shall notify the Fund and the Distributor immediately upon having a reasonable
basis for believing that such Variable Contracts have ceased to be so treated or
that they might not be so treated in the future.
3.7. The Company shall offer and sell the Variable Contracts issued by the
Company in accordance with applicable provisions of the 1933 Act, the 1934 Act,
the 1940 Act, the NASD Rules of Fair Practice, and state law respecting the
offering of variable life insurance policies and variable annuity contracts.
3.8. The Distributor shall sell and distribute the shares of the Series of
the Fund in accordance with the applicable provisions of the 1933 Act, the 1934
Act, the 1940 Act, the NASD Rules of Fair Practice, and state law.
3.9. A majority of the Board of Trustees of the Fund shall consist of
persons who are not "interested persons" of the Fund ("disinterested Trustees"),
as defined by Section 2(a)(19) of the 1940 Act, except that if this provision of
this Section 3.9 is not met by reason of the death, disqualification, or bona
fide resignation of any Trustee or Trustees, then the operation of this
provision shall be suspended (a) for a period of 45 days if the vacancy or
vacancies may be filled by the Fund's Board; (b) for a period of 60 days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
3.10. The Company agrees to provide, as promptly as possible, notice to
the Fund and to the Distributor if the Company has reason to know about a
meeting of some or all of the owners of the
<PAGE>
Variable Contracts or shareholders of the Fund, where the agenda or purpose of
the meeting relates, in whole or in part, to the Fund, and that has not been
called by the Fund's Board of Trustees (and which shall not include a vote of
Variable Contract Owners having an interest in a Separate Account to substitute
shares of another investment company for corresponding shares of the Fund or a
Series, as described in Section 9(e) and to which the notice provision of
Section 9.2 shall apply). In such an event, the Company agrees to distribute
proxy statements and any additional solicitation materials upon the request of
the Fund or the Distributor to the owners of the Variable Contracts issued by
the Company at least 30 days prior to the meeting. The Company further agrees
that it shall take no action, directly or indirectly, in furtherance of
shareholders of the Fund or Contract Owners taking any action with respect to
the Fund by written consent and without a meeting.
3.11. Each party hereto shall cooperate with each other party and all
appropriate governmental authorities having jurisdiction (including, without
limitation, the SEC, the NASD, and state insurance regulators) and shall permit
such authorities reasonable access to its books and records in connection with
any investigation or inquiry relating to this Agreement or the transactions
contemplated hereby.
ARTICLE IV. Potential Conflicts
-------------------
4.1. The Fund's Board of Trustees shall monitor the Fund for the existence
of any material irreconcilable conflict (1) between the interests of owners of
variable annuity contracts and variable life insurance policies, and (2) between
the interests of owners of Variable Contracts ("Variable Contract Owners")
issued by different Participating Insurance Companies that invest in the Fund.
An irreconcilable material conflict may arise for a variety of reasons,
including: (a) an action by any state insurance regulatory authority; (b) a
change in applicable federal or state insurance, tax, or securities laws or
regulations, or a public ruling, private letter ruling, no-action or
interpretive letter, or any similar action by insurance, tax, or securities
regulatory authorities; (c) an administrative or judicial decision in any
relevant proceeding; (d) the manner in which the investments of the Fund or any
Series are being managed; or (e) a decision by a Participating Insurance Company
to disregard the voting instructions of Variable Contract Owners.
4.2. The Company agrees that it shall be responsible for reporting any
potential or existing conflicts to the Fund's Board of Trustees. The Company
will be responsible for assisting the Board of Trustees of the Fund in carrying
out its responsibilities under this Agreement, by providing the Board with all
information reasonably necessary for the Board to consider any issues raised.
This includes, but is not limited to, an obligation by the Company to inform the
Board whenever Variable Contract Owner voting instructions are disregarded. The
Company shall carry out its responsibility under this Section 4.2 with a view
only to the interests of the Variable Contract Owners.
4.3. The Company agrees that in the event that it is determined by a
majority of the Board of Trustees of the Fund or a majority of the Fund's
disinterested Trustees that a material irreconcilable conflict exists, the
Company shall, to the extent reasonably practicable (as determined
<PAGE>
by a majority of the disinterested Trustees of the Board of the Fund), take
whatever steps are necessary to eliminate the irreconcilable material conflict,
including: (1) withdrawing the assets allocable to some or all of the Separate
Accounts from the Fund or any Series and reinvesting such assets in a different
investment medium, which may include another series of the Fund, or submitting
the question of whether such segregation should be implemented to a vote of all
affected Variable Contract Owners and, as appropriate, segregating the assets of
any appropriate group (i.e., Contract Owners of Variable Contracts issued by one
----
or more Participating Insurance Companies) that votes in favor of such
segregation, or offering to the affected Variable Contract Owners the option of
making such a change; and (2) establishing a new registered management
investment company or managed separate account. If a material irreconcilable
conflict arises because of the Company's decision to disregard Variable Contract
Owners' voting instructions and that decision represents a minority position or
would preclude a majority vote, the Company shall be required, at the Fund's
election, to withdraw the Separate Accounts' investment in the Fund, and no
charge or penalty will be imposed as a result of such withdrawal. The Fund
shall neither be required to bear the costs of remedial actions taken to remedy
a material irreconcilable conflict nor shall it be requested to pay a higher
investment advisory fee for the sole purpose of covering such costs. In
addition, no Variable Contract Owner shall be required directly or indirectly to
bear the direct or indirect costs of remedial actions taken to remedy a material
irreconcilable conflict. A new funding medium for any Variable Contract need
not be established pursuant to this Section 4.3, if an offer to do so has been
declined by vote of a majority of Variable Contract Owners materially adversely
affected by the irreconcilable material conflict. All reports received by the
Fund's Board of Trustees of potential or existing conflicts, and all Board
action with regard to determining the existence of a conflict, notifying
Participating Insurance Companies and the Fund's investment adviser of a
conflict, and determining whether any proposed action adequately remedies a
conflict, shall be properly recorded in the minutes of the Board of Trustees of
the Fund or other appropriate records, and such minutes or other records shall
be made available to the SEC upon request. The Company and the Fund shall carry
out their responsibilities under this Section 4.3 with a view only to the
interests of the Variable Contract Owners.
4.4. The Board of Trustees of the Fund shall promptly notify the Company
in writing of its determination of the existence of an irreconcilable material
conflict and its implications.
ARTICLE V. Prospectuses and Proxy Statements; Voting
-----------------------------------------
5.1. The Company shall distribute such prospectuses, proxy statements and
periodic reports of the Fund to the owners of Variable Contracts issued by the
Company as required to be distributed to such Variable Contract Owners under
applicable federal or state law.
5.2. The Distributor shall provide the Company with as many copies of the
current prospectus of the Fund as the Company may reasonably request. If
requested by the Company in lieu thereof, the Fund shall provide such
documentation (including a final copy of the Fund's prospectus as set in type or
in camera-ready copy) and other assistance as is reasonably necessary
<PAGE>
in order for the Company to print together in one document the current
prospectus for the Variable Contracts issued by the Company and the current
prospectus for the Fund. The Fund shall bear the expense of printing copies of
its current prospectus that will be distributed to existing Variable Contract
Owners, and the Company shall bear the expense of printing copies of the Fund's
prospectus that are used in connection with offering the Variable Contracts
issued by the Company.
5.3. The Fund and the Distributor shall provide (1) at the Fund's expense,
one copy of the Fund's current Statement of Additional Information ("SAI") to
the Company and to any owner of a Variable Contract issued by the Company who
requests such SAI, (2) at the Company's expense, such additional copies of the
Fund's current SAI as the Company shall reasonably request and that the Company
shall require in accordance with applicable law in connection with offering the
Variable Contracts issued by the Company.
5.4. The Fund, at its expense, shall provide the Company with copies of
its proxy material, periodic reports to shareholders and other communications to
shareholders in such quantity as the Company shall reasonably require for
purposes of distributing to owners of Variable Contracts issued by the Company.
The Fund, at the Company's expense, shall provide the Company with copies of its
periodic reports to shareholders and other communications to shareholders in
such quantity as the Company shall reasonably request for use in connection with
offering the Variable Contracts issued by the Company. If requested by the
Company in lieu thereof, the Fund shall provide such documentation (including a
final copy of the Fund's proxy materials, periodic reports to shareholders and
other communications to shareholders, as set in type or in camera-ready copy)
and other assistance as reasonably necessary in order for the Company to print
such shareholder communications for distribution to owners of Variable Contracts
issued by the Company.
5.5. For so long as the SEC interprets the 1940 Act to require pass-
through voting by Participating Insurance Companies whose Separate Accounts are
registered as investment companies under the 1940 Act, the Company shall vote
shares of each Series of the Fund held in a Separate Account or a subaccount
thereof, whether or not registered under the 1940 Act, at regular and special
meetings of the Fund in accordance with instructions timely received by the
Company (or its designated agent) from owners of Variable Contracts funded by
such Separate Account or subaccount thereof having a voting interest in the
Series. The Company shall vote shares of a Series of the Fund held in a
Separate Account or a subaccount thereof that are attributable to the Variable
Contracts as to which no timely instructions are received, as well as shares
held in such Separate Account or subaccount thereof that are not attributable to
the Variable Contracts and owned beneficially by the Company (resulting from
charges against the Variable Contracts or otherwise), in the same proportion as
the votes cast by owners of the Variable Contracts funded by that Separate
Account or subaccount thereof having a voting interest in the Series from whom
instructions have been timely received. The Company shall vote shares of each
Series of the Fund held in its general account, if any, in the same proportion
as the votes cast with respect to shares of the Series held in all Separate
Accounts of the Company or subaccounts thereof, in the aggregate.
<PAGE>
5.6. The Fund shall disclose in its prospectus that (1) shares of the
Series of the Fund are offered to affiliated or unaffiliated insurance company
separate accounts which fund both annuity and life insurance contracts, (2) due
to differences in tax treatment or other considerations, the interests of
various Variable Contract Owners participating in the Fund or a Series might at
some time be in conflict, and (3) the Board of Trustees of the Fund will monitor
for any material conflicts and determine what action, if any, should be taken.
The Fund hereby notifies the Company that prospectus disclosure may be
appropriate regarding potential risks of offering shares of the Fund to separate
accounts funding both variable annuity contracts and variable life insurance
policies and to separate accounts funding Variable Contracts of unaffiliated
life insurance companies.
ARTICLE VI. Sales Material and Information
------------------------------
6.1. The Company shall furnish, or shall cause to be furnished, to the
Fund or its designee, each piece of sales literature or other promotional
material in which the Fund (or any Series thereof) or its investment adviser or
the Distributor is named, and no such sales literature or other promotional
material shall be used without the approval of the Fund and the Distributor or
the designee of either.
6.2. The Company agrees that neither it nor any of its affiliates or
agents shall give any information or make any representations or statements on
behalf of the Fund or concerning the Fund other than the information or
representations contained in the Registration Statement or prospectus for the
Fund shares, as such registration statement and prospectus may be amended or
supplemented from time to time, or in reports or proxy statements for the Fund,
or in sales literature or other promotional material approved by the Fund or its
designee and by the Distributor or its designee, except with the permission of
the Fund or its designee and the Distributor or its designee.
6.3. The Fund or the Distributor or the designee of either shall furnish
to the Company or its designee, each piece of sales literature or other
promotional material in which the Company or its Separate Accounts are named,
and no such material shall be used without the approval of the Company or its
designee.
6.4. The Fund and the Distributor agree that each and the affiliates and
agents of each shall not give any information or make any representations on
behalf of the Company or concerning the Company, the Separate Accounts, or the
Variable Contracts issued by the Company, other than the information or
representations contained in a registration statement or prospectus for such
Variable Contracts, as such registration statement and prospectus may be amended
or supplemented from time to time, or in reports for the Separate Accounts or
prepared for distribution to owners of such Variable Contracts, or in sales
literature or other promotional material approved by the Company or its
designee, except with the permission of the Company.
6.5. The Fund will provide to the Company at least one complete copy of
all prospectuses, Statements of Additional Information, reports, proxy
statements and other voting solicitation
<PAGE>
materials, and all amendments and supplements to any of the above, that relate
to the Fund or its shares, promptly after the filing of such document with the
SEC or other regulatory authorities.
6.6. The Company will provide to the Fund at least one complete copy of
all prospectuses (which shall include an offering memorandum if the Variable
Contracts issued by the Company or interests therein are not registered under
the 1933 Act), Statements of Additional Information, reports, solicitations for
voting instructions, and all amendments or supplements to any of the above, that
relate to the Variable Contracts issued by the Company or the Separate Accounts
promptly after the filing of such document with the SEC or other regulatory
authority.
6.7. For purposes of this Article VI, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, computerized media, or other
public media), sales literature (i.e., any written communication distributed or
----
made generally available to customers or the public, including brochures,
circulars, research reports, market letters, form letters, seminar texts,
reprints or excerpts of any other advertisement, sales literature, or published
article), educational or training materials or other communications distributed
or made generally available to some or all agents or employees.
ARTICLE VII. Indemnification
---------------
7.1. Indemnification By The Company
------------------------------------
7.1(a). The Company agrees to indemnify and hold harmless the Fund, each
of its Trustees and officers, any affiliated person of the Fund within the
meaning of Section 2(a)(3) of the 1940 Act, and the Distributor (collectively,
the "Indemnified Parties" for purposes of this Section 7.1) against any and all
losses, claims, damages, liabilities (including amounts paid in settlement with
the written consent of the Company) or litigation expenses (including legal and
other expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise, insofar as such losses, claims,
damages, liabilities or litigation expenses are related to the sale or
acquisition of the Fund's shares or the Variable Contracts issued by the Company
and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus (which shall include an offering memorandum) for the Variable
Contracts issued by the Company or sales literature for such Variable Contracts
(or any amendment or supplement to any of the foregoing), or arise out of or are
based upon the omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, provided that this agreement to indemnify shall not apply as to any
Indemnified Party if such statement or omission or such alleged statement or
omission was made in reliance upon and in
<PAGE>
conformity with information furnished to the Company by or on behalf of the Fund
for use in the registration statement or prospectus for the Variable Contracts
issued by the Company or sales literature (or any amendment or supplement) or
otherwise for use in connection with the sale of such Variable Contracts or Fund
shares; or
(ii) arise out of or as a result of any statement or representation (other
than statements or representations contained in the registration statement,
prospectus or sales literature of the Fund not supplied by the Company or
persons under its control) or wrongful conduct of the Company or any of its
affiliates, employees or agents with respect to the sale or distribution of the
Variable Contracts issued by the Company or the Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature of the Fund or any amendment thereof or supplement thereto or the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading if
such a statement or omission was made in reliance upon information furnished to
the Fund by or on behalf of the Company;
except to the extent provided in Sections 7.1(b) and 7.1(c) hereof.
7.1(b). The Company shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his or
her duties or by reason of his or her reckless disregard of obligations or
duties under this Agreement or to the Fund.
7.1(c). The Company shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Company in writing within a reasonable time
after the summons or other first legal process giving information of the nature
of the claim shall have been served upon such Indemnified Party (or after such
Party shall have received notice of such service on any designated agent), but
failure to notify the Company of any such claim shall not relieve the Company
from any liability which it may have to the Indemnified Party against whom such
action is brought otherwise than on account of this indemnification provision.
In case any such action is brought against the Indemnified Parties, the Company
shall be entitled to participate, at its own expense, in the defense of such
action. The Company also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Company to such party of the Company's election to assume the defense thereof,
the Indemnified Party shall bear the fees and expenses of any additional counsel
retained by it, and the Company will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.
<PAGE>
7.1(d). The Indemnified Parties shall promptly notify the Company of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Fund shares or the Variable Contracts issued by the
Company or the operation of the Fund.
7.2. Indemnification By the Distributor
----------------------------------------
7.2(a). The Distributor agrees to indemnify and hold harmless the Company
and each of its directors and officers and each person, if any, who is an
affiliated person of the Company within the meaning of Section 2(a)(3) the 1940
Act (collectively, the "Indemnified Parties" for purposes of this Section 7.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of the Distributor) or litigation
expenses (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or litigation expenses are related to
the sale or acquisition of the Fund's shares or the Variable Contracts issued by
the Company and:
(i) arise out of or are based upon any untrue statement or alleged untrue
statement of any material fact contained in the registration statement or
prospectus or sales literature of the Fund (or any amendment or supplement to
any of the foregoing), or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, provided that this
agreement to indemnify shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or omission was made in reliance
upon and in conformity with information furnished to the Distributor or the Fund
or the designee of either by or on behalf of the Company for use in the
registration statement or prospectus for the Fund or in sales literature (or any
amendment or supplement) or otherwise for use in connection with the sale of the
Variable Contracts issued by the Company or Fund shares; or
(ii) arise out of or as a result of any statement or representation (other
than statements or representations contained in the registration statement,
prospectus or sales literature for the Variable Contracts not supplied by the
Distributor or any employees or agents thereof) or wrongful conduct of the Fund
or Distributor, or the affiliates, employees, or agents of the Fund or the
Distributor with respect to the sale or distribution of the Variable Contracts
issued by the Company or Fund shares; or
(iii) arise out of any untrue statement or alleged untrue statement of a
material fact contained in a registration statement, prospectus, or sales
literature covering the Variable Contracts issued by the Company, or any
amendment thereof or supplement thereto, or the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statement or statements therein not misleading, if such statement or
omission was made in reliance upon information
<PAGE>
furnished to the Company by or on behalf of the Fund; except to the extent
provided in Sections 7.2(b) and 7.2(c) hereof.
7.2(b). The Distributor shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
expenses to which an Indemnified Party would otherwise be subject by reason of
willful misfeasance, bad faith, or gross negligence in the performance of his or
her duties or by reason of his or her reckless disregard of obligations and
duties under this Agreement or to the Company or the Separate Accounts.
7.2(c). The Distributor shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Party shall have notified the Distributor in writing within a reasonable
time after the summons or other first legal process giving information of the
nature of the claim shall have been served upon such Indemnified Party (or after
such Party shall have received notice of such service on any designated agent),
but failure to notify the Distributor of any such claim shall not relieve the
Distributor from any liability which it may have to the Indemnified Party
against whom such action is brought otherwise than on account of this
Indemnification Provision. In case any such action is brought against the
Indemnified Parties, the Distributor will be entitled to participate, at its own
expense, in the defense thereof. The Distributor also shall be entitled to
assume the defense thereof, with counsel satisfactory to the party named in the
action. After notice from the Distributor to such party of the Distributor's
election to assume the defense thereof, the Indemnified Party shall bear the
fees and expenses of any additional counsel retained by it, and the Distributor
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.
7.2(d). The Company shall promptly notify the Distributor of the
commencement of any litigation or proceedings against it or any of its officers
or directors in connection with the issuance or sale of the Variable Contracts
issued by the Company or the operation of the Separate Accounts.
ARTICLE VIII. Applicable Law
--------------
8.1. This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of the State of California.
8.2. This Agreement shall be subject to the provisions of the 1933, 1934,
and 1940 Acts, and the rules and regulations and rulings thereunder, including
such exemptions from those statutes, rules and regulations as the SEC may grant
(including, but not limited to, the Shared Funding Exemptive Order) and the
terms hereof shall be interpreted and construed in accordance therewith.
<PAGE>
ARTICLE IX. Termination
-----------
9.1. This Agreement shall terminate:
(a) at the option of any party upon 180 days advance written notice to the
other parties; or
(b) at the option of the Company if shares of the Series are not
reasonably available to meet the requirements of the Variable Contracts issued
by the Company, as determined by the Company, and upon prompt notice by the
Company to the other parties; or
(c) at the option of the Fund or the Distributor upon institution of
formal proceedings against the Company or its agent by the NASD, the SEC, or any
state securities or insurance department or any other regulatory body regarding
the Company's duties under this Agreement or related to the sale of the Variable
Contracts issued by the Company, the operation of the Separate Accounts, or the
purchase of the Fund shares; or
(d) at the option of the Company upon institution of formal proceedings
against the Fund or the Distributor by the NASD, the SEC, or any state
securities or insurance department or any other regulatory body; or
(e) upon requisite vote of the Variable Contract Owners having an interest
in the Separate Accounts (or any subaccounts thereof) to substitute the shares
of another investment company for the corresponding shares of the Fund or a
Series in accordance with the terms of the Variable Contracts for which those
shares had been selected to serve as the underlying investment media; or
(f) in the event any of the shares of a Series are not registered, issued
or sold in accordance with applicable state and/or federal law, or such law
precludes the use of such shares as the underlying investment media of the
Variable Contracts issued or to be issued by the Company; or
(g) by any party to the Agreement upon a determination by a majority of
the Trustees of the Fund, or a majority of its disinterested Trustees, that an
irreconcilable conflict exists; or
(h) at the option of the Company if the Fund or a Series fails to meet the
diversification requirements specified in Section 3.3 hereof.
9.2. Each party to this Agreement shall promptly notify the other parties
to the Agreement of the institution against such party of any such formal
proceedings as described in Sections 9.1(c) and (d) hereof. The Company shall
give 60 day's prior written notice to the Fund of the date of any
<PAGE>
proposed vote of Variable Contract Owners to replace the Fund's shares as
described in Section 9.1(e) hereof.
9.3. Except as necessary to implement Variable Contract Owner initiated
transactions, or as required by state insurance laws or regulations, the Company
shall not redeem Fund shares attributable to the Variable Contracts issued by
the Company (as opposed to Fund shares attributable to the Company's assets held
in the Separate Accounts), and the Company shall not prevent Variable Contract
Owners from allocating payments to a Series, until 60 days after the Company
shall have notified the Fund or Distributor of its intention to do so.
9.4. If this Agreement terminates, any provision of this Agreement
necessary to the orderly windup of business under it will remain in effect as to
that business, after termination.
ARTICLE X. Notices
-------
Any notice shall be sufficiently given when sent by registered or certified
mail to the other party at the address of such party set forth below or at such
other address as such party may from time to time specify in writing to the
other party.
If to the Fund:
Pacific Select Fund
Attn: SEC Regulatory Compliance Department
700 Newport Center Drive
P.O. Box 7500
Newport Beach, CA 92660
If to the Distributor:
Pacific Equities Network
Attn: Compliance Officer
700 Newport Center Drive, NB-4
Newport Beach, CA 92660
If to the Company:
Pacific Corinthian Life Insurance Company
Attn: SEC Regulatory Compliance Department
700 Newport Center Drive
<PAGE>
Newport Beach, CA 92660
ARTICLE XI. Miscellaneous
-------------
11.1. The Fund and the Company agree that if and to the extent Rule 6e-
3(T) under the 1940 Act is amended or if Rule 6e-3 is adopted in final form, to
the extent applicable, the Fund and the Company shall each take such steps as
may be necessary to comply with the Rule as amended or adopted in final form.
11.2. A copy of the Fund's Agreement and Declaration of Trust is on file
with the Secretary of the Commonwealth of Massachusetts and notice is hereby
given that the Agreement has been executed on behalf of the Fund by a Trustee of
the Fund in his or her capacity as Trustee and not individually. The
obligations of this Agreement shall only be binding upon the assets and property
of the Fund and shall not be binding upon any Trustee, officer or shareholder of
the Fund individually.
11.3. Nothing in this Agreement shall impede the Fund's Trustees or
shareholders of the shares of the Fund's Series from exercising any of the
rights provided to such Trustees or shareholders in the Fund's Agreement and
Declaration of Trust, as amended, a copy of which will be provided to the
Company upon request.
11.4. It is understood that the name "Pacific", "Pacific Mutual", "Pacific
Select" or any derivative thereof or logo associated with that name is the
valuable property of the Distributor and its affiliates, and that the Company
has the right to use such name (or derivative or logo) only so long as this
Agreement is in effect. Upon termination of this Agreement the Company shall
forthwith cease to use such name (or derivative or logo).
11.5. The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions hereof or
otherwise affect their construction or effect.
11.6. This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together shall constitute one and the same
instrument.
11.7. If any provision of this Agreement shall be held or made invalid by
a court decision, statute, rule or otherwise, the remainder of the Agreement
shall not be affected thereby.
11.8. This Agreement may not be assigned by any party to the Agreement
except with the written consent of the other parties to the Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day and year first above written.
PACIFIC SELECT FUND
ATTEST: /s/DIANE N. LEDGER BY: /s/ TC SUTTON
Name: Diane N. Ledger Name: Thomas C. Sutton
Title: Vice President and Title: President
Assistant Secretary
PACIFIC EQUITIES NETWORK
ATTEST: /s/ DIANE N. LEDGER BY: /s/ GERALD W. ROBINSON
Name: Diane N. Ledger Name: Gerald W. Robinson
Title: Assistant Vice President Title: President
PACIFIC CORINTHIAN LIFE
INSURANCE COMPANY
ATTEST: /s/ DIANE N. LEDGER BY: /s/ GLENN S. SCHAFER
Name: Diane N. Ledger Name: Glenn S. Schafer
Title: Assistant Vice President Title: Chief Financial Officer
<PAGE>
EXHIBIT A
PACIFIC CORINTHIAN VARIABLE SEPARATE ACCOUNT
<PAGE>
EXHIBIT B
Money Market Series
Managed Bond Series
Government Securities Series
High Yield Bond Series
Growth LT Series
Equity Income Series
Equity Series
Bond and Income Series
Multi-Strategy Series
Equity Index Series
International Series
<PAGE>
EXHIBIT 99.10
Opinion and Consent of Counsel
<PAGE>
September 1, 1987
Pacific Select Fund
700 Newport Center Drive
P.O. Box 7500
Newport Beach, California 92660
Dear Sirs:
In connection with the registration under the Securities Act of 1933 of an
indefinite number of shares of beneficial interest (the "Shares") of the Pacific
Select Fund (the "Fund"), we have examined such matters as we have deemed
necessary, and we are of the opinion that:
(i) The Fund is a business trust duly organized and existing under the laws of
Massachusetts;
(ii) The authorized capital of the Fund consists of an unlimited number of
shares, par value of .001 per share; and
(iii) Assuming that the Fund or its agent receives consideration for such shares
in accordance with the provisions of its Agreement and Declaration of Trust and
that such shares are sold in compliance with the Securities Act of 1933, the
Investment Company Act of 1940, and terms of its Agreement and Declaration of
Trust, each of such authorized shares of beneficial interest will be legally and
validly issued and will be fully paid and non-assessable.
We hereby consent to the use of this opinion as an exhibit to the Fund's
Registration Statement on Form N-1A to be filed with the Securities and Exchange
Commission for the registration under the Securities Act of 1933 of an
indefinite number of shares of beneficial interest of the Trust and to the use
of our name in the related prospectus, and any amendments thereto.
Very truly yours,
Dechert Price & Rhoads
<PAGE>
EXHIBIT 99.11
Accountant's Consent
<PAGE>
EXHIBIT 11
DELOITTE & TOUCHE LLP
Suite 1200 Telephone: (714) 436-7100
695 Town Center Drive Facsimile: (714) 436-7200
Costa Mesa, California 92626-1924
CONSENT OF INDEPENDENT ACCOUNTANTS
Pacific Select Fund:
We hereby consent to the use in Post-Effective Amendment No. 16 to
Registration Statement No. 33-13954 on Form N-1A of our report dated February
17, 1995 related to the financial statements of Pacific Select Fund as of and
for the period ended December 31, 1994 incorporated by reference in such
Registration Statement and to the references to us under the heading
"Condensed Financial Information" appearing in the Prospectus of Pacific
Select Fund and under the headings, "Financial Statements" and "Independent
Accountants" in the Statement of Additional Information, which is a part of
such Registration Statement.
/s/ DELOITTE & TOUCHE LLP
November 20, 1995
DELOITTE TOUCHE
TOHMATSU
INTERNATIONAL
<PAGE>
EXHIBIT 99.16
Performance Quotation Computations
<PAGE>
PERFORMANCE QUOTATION COMPUTATIONS
PACIFIC SELECT FUND
AVERAGE ANNUAL RETURN
FROM COMMENCEMENT OF OPERATIONS
THRU JUNE 30, 1995
AAR=(ERV/P) (To the power of) [1/(N/365)]-1
<TABLE>
<CAPTION>
GOVERN- HIGH
MONEY MANAGED MENT YIELD EQUITY MULTI- INTER- EQUITY GROWTH
MARKET BOND SECURITIES BOND GROWTH INCOME STRATEGY NATIONAL INDEX LT
------ ------- ---------- ------ ------ ------ -------- -------- ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
P (PAYMENT) $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000 $1,000
ERV (ENDING
REDEEMABLE VALUE) 1,483 2,009 1,933 2,199 2,681 2,274 2,094 1,759 1,774 1,347
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
T (TOTAL RETURN) 48.30% 100.90% 93.33% 119.86% 168.14% 127.40% 109.40% 75.90% 77.37% 34.71%
N (NUMBER OF DAYS) 2,735 2,735 2,735 2,735 2,735 2,735 2,735 2,735 1,613 544
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
AAR (AVERAGE
ANNUAL RETURN) 5.40% 9.76% 9.20% 11.09% 14.07% 11.59% 10.37% 7.83% 13.85% 22.13%
====== ====== ====== ====== ====== ====== ====== ====== ====== ======
PRIOR AVERAGE ANNUAL
RETURNS
LAST MONTH-END 5.40% 9.81% 9.25% 11.15% 13.68% 11.54% 10.33% 7.75% 13.52% 19.42%
LAST YEAR-END 5.38% 8.86% 8.25% 10.30% 13.03% 9.89% 9.03% 7.37% 10.44% 13.41%
</TABLE>
<PAGE>
PACIFIC SELECT FUND
PERFORMANCE INFORMATION
RETURNS SINCE INCEPTION
THRU JUNE 30, 1995
<TABLE>
<CAPTION>
GOVERN- HIGH
MONEY MANAGED MENT YIELD EQUITY MULTI- INTER- EQUITY GROWTH
MARKET BOND SECURITIES BOND GROWTH INCOME STRATEGY NATIONAL INDEX LT
-------- -------- ---------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCEPTION DATE 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88 1/4/88 1/30/91 1/3/94
INITIAL INVESTMENT 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00 1,000.00
RETURN--1984
REDEEMABLE VALUE
RETURN--1985
REDEEMABLE VALUE
RETURN--1986
REDEEMABLE VALUE
RETURN--1987
REDEEMABLE VALUE
RETURN--1988 5.85% 7.11% 6.65% 8.30% 15.31% 8.25% 6.85% 17.69%
ENDING REDEEMABLE
VALUE--1988 1,058.50 1,071.10 1,066.50 1,083.00 1,153.10 1,082.50 1,068.50 1,176.90
RETURN--1989 8.73% 14.74% 14.61% 4.16% 34.96% 29.22% 23.42% 20.51%
ENDING REDEEMABLE
VALUE--1989 1,150.91 1,228.98 1,222.32 1,128.05 1,556.22 1,398.81 1,318.74 1,418.28
RETURN--1990 7.92% 8.52% 8.01% 0.38% -17.30% -7.54% -1.47% -13.48%
ENDING REDEEMABLE
VALUE--1990 1,242.06 1,333.69 1,320.22 1,132.34 1,287.00 1,293.34 1,299.36 1,227.10
RETURN--1991 5.74% 17.03% 16.67% 24.58% 39.15% 31.42% 24.03% 10.92% 24.88%
ENDING REDEEMABLE
VALUE--1991 1,313.35 1,560.82 1,540.30 1,410.67 1,790.86 1,699.70 1,611.59 1,361.10 1,248.80
RETURN--1992 3.22% 8.68% 7.52% 18.72% 20.53% 5.36% 5.57% -9.78% 6.95%
ENDING REDEEMABLE
VALUE--1992 1,355.64 1,696.30 1,656.14 1,674.75 2,158.52 1,790.81 1,701.36 1,227.98 1,335.59
RETURN--1993 2.58% 11.63% 10.79% 18.01% 21.89% 8.29% 9.25% 30.02% 9.38%
ENDING REDEEMABLE
VALUE--1993 1,390.62 1,893.57 1,834.83 1,276.37 2,631.02 1,939.26 1,858.73 1,596.62 1,460.87
RETURN--
DECEMBER 1994 3.76% -4.36% -5.10% 0.42% -10.49% -0.28% -1.50% 3.01% 1.05% 13.25%
ENDING REDEEMABLE
VALUE--1994 1,442.95 1,811.10 1,741.32 1,984.58 2,355.04 1,933.75 1,830.94 1,644.64 1,476.17 1,132.52
RETURN--
JUNE 1995 YTD
ENDING REDEEMABLE
VALUE-1995 1,483.01 2,008.95 1,933.34 2,198.63 2,681.44 2,273.98 2,093.99 1,758.99 1,773.69 1,347.15
CHANGE IN VALUE 483.01 1,008.95 933.34 1,198.63 1,681.44 1,273.98 1,093.99 758.99 773.69 347.15
-------- -------- -------- -------- -------- -------- -------- -------- -------- --------
RETURN SINCE
INCEPTION 48.30% 100.90% 93.33% 119.86% 168.14% 127.40% 109.40% 75.90% 77.37% 34.71%
======== ======== ======== ======== ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE>
PACIFIC SELECT FUND
PERFORMANCE INFORMATION
YEAR TO DATE RETURN
THROUGH JUNE 30, 1995
<TABLE>
<CAPTION>
MM MB GS HYB GR EQ INC MS IN EI LT
----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
NAV--12/31/94 10.024968 9.899377 9.639542 8.912566 14.896795 14.053199 11.730492 11.935174 13.022683 11.112614
NAV--6/30/95 10.020322 10.654107 10.415494 9.496786 16.878993 16.375970 13.172596 12.746464 15.472037 13.122991
SHARES OWNED--YTD 1.028274 1.030714 1.027594 1.039656 1.004892 1.009102 1.018512 1.001430 1.011308 1.007304
CHANGE IN VALUE/SHARE 0.278668 1.081956 1.063361 0.960827 2.064764 2.471828 1.685953 0.829521 2.624312 2.106226
PERIOD/YEAR (365/181) 2.016575 2.016575 2.016575 2.016575 2.016575 2.016575 2.016575 2.016575 2.016575 2.016575
----------------------------------------------------------------------------------------------------------
YEAR TO DATE RETURN 2.78% 10.93% 11.03% 10.78% 13.86% 17.59% 14.37% 6.95% 20.15% 18.95%
YTD--ANNUALIZED 5.68% 23.27% 23.49% 22.93% 29.92% 38.64% 31.10% 14.51% 44.80% 41.91%
==========================================================================================================
<CAPTION>
B&I EQUITY
--------------------
<S> <C> <C>
NAV--12/31/94 10.423590 14.202413
NAV--6/30/95 12.137037 15.700194
SHARES OWNED--YTD 1.036826 1.003834
CHANGE IN VALUE/SHARE 2.160405 1.557983
PERIOD/YEAR (365/181) 2.016575 2.016575
--------------------
YEAR TO DATE RETURN 20.73% 10.97%
YTD--ANNUALIZED 46.20% 23.36%
====================
</TABLE>
<PAGE>
PACIFIC SELECT FUND--MONEY MARKET SERIES
PERFORMANCE QUOTATION COMPUTATIONS
YIELD FOR THE PERIOD ENDED JUNE 30, 1995
CURRENT YIELD=[(BASE PERIOD RETURN)*(365/7)]
<TABLE>
<CAPTION>
WITH
EXPENSES
<S> <C>
NET ASSETS 6/30/95(A) 93,672,197
SHARES OUTSTANDING(B) 9,348,222
----------
N.A.V. 6/30/95 (C=A/B) 10.020322
DIVIDENDS(D) 0.042929
----------
ADJ. N.A.V. 6/30/95 (E=C+D) 10.063251
N.A.V. 6/23/95(F) 10.052735
----------
CHANGE IN VALUE (G=E-F) 0.010516
TOTAL RETURN (H=G/F) 0.1046%
==========
YIELD=[(H)*(365/7)] 5.45%
</TABLE>
<PAGE>
PACIFIC SELECT FUND--MONEY MARKET SERIES
PERFORMANCE QUOTATION COMPUTATIONS
YIELD FOR THE PERIOD ENDED JUNE 30, 1995
EFFECTIVE YIELD=[(BASE PERIOD RETURN + 1) (To the power of) 365/7]-1
<TABLE>
<CAPTION>
WITH
EXPENSES
<S> <C>
NET ASSETS 6/30/95(A) 93,672,197
SHARES OUTSTANDING(B) 9,348,222
----------
N.A.V. 6/30/95 (C=A/B) 10.020322
DIVIDENDS(D) 0.042929
----------
ADJ. N.A.V. 6/30/95 (E=C+D) 10.063251
N.A.V. 6/23/95(F) 10.052735
----------
CHANGE IN VALUE (G=E-F) 0.010516
TOTAL RETURN (H=G/F) 0.104609%
==========
YIELD=[(H+1) (To the power of) (365/7)]-1 5.60%
</TABLE>
<PAGE>
PACIFIC CORINTHIAN VARIABLE FUND
PERFORMANCE INFORMATION
JUNE 1995
<TABLE>
<CAPTION>
THREE YEARS TEN YEARS
- ----------- ---------
BOND & BOND &
EQUITY INCOME EQUITY INCOME
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NAV-6/30/92 14.097000 11.656000 NAV-6/30/85 11.260000 10.850000
SHARES OWNED 2.146000 2.533000 SHARES OWNED 1.097000 1.199000
ADJUSTED NAV 30.252162 29.524648 ADJUSTED NAV 12.352220 13.009150
NAV-6/30/95 15.700194 12.137037 NAV-6/30/95 15.700194 12.137037
SHARES OWNED 2.678229 3.350578 SHARES OWNED 2.678229 3.350578
ADJUSTED NAV 42.048715 40.666089 ADJUSTED NAV 42.048715 40.666089
THREE YEAR RETURN 38.99% 37.74% THREE YEAR RETURN 240.41% 212.60%
PERIOD/MONTH (365/1095) 0.333333 0.333333 PERIOD/MONTH (365/3651) 0.099973 0.099973
---------- ---------- --------- ---------
ANNUALIZED 11.60% 11.26% ANNUALIZED 13.03% 12.07%
========== ========== ========= =========
<CAPTION>
FIVE YEARS INCEPTION
- ---------- ---------
BOND & BOND &
EQUITY INCOME EQUITY INCOME
--------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
NAV-6/30/90 12.734000 10.540000 NAV-1/1/84 10.000000 10.000000
SHARES OWNED 2.024000 2.127000 SHARES OWNED 1.000000 1.000000
ADJUSTED NAV 25.773616 22.418580 ADJUSTED NAV 10.000000 10.000000
NAV-6/30/95 15.700194 12.137037 NAV-6/30/95 15.700194 12.137037
SHARES OWNED 2.678229 3.350578 SHARES OWNED 2.678229 3.350578
ADJUSTED NAV 42.048715 40.666089 ADJUSTED NAV 42.048715 40.666089
FIVE YEAR RETURN 63.15% 81.39% THREE YEAR RETURN 320.49% 306.66%
PERIOD/MONTH (365/1826) 0.19989047 0.19989047 PERIOD/MONTH (365/4200) 0.086905 0.086905
---------- ---------- --------- ---------
ANNUALIZED 10.28% 12.64% ANNUALIZED 13.30% 12.97%
========== ========== ========= =========
<CAPTION>
BOND &
EQUITY INCOME
--------- ---------
<S> <C> <C>
MONTHLY 4.21% 0.95%
ANNUALIZED 65.13% 12.14%
LAST THREE MONTHS 7.84% 11.96%
ANNUALIZED 35.38% 57.31%
LAST TWELVE MONTHS 12.53% 21.56%
THREE YEAR RETURN 38.99% 37.74%
ANNUALIZED 11.60% 11.26%
FIVE YEAR RETURN 63.15% 81.39%
ANNUALIZED 10.28% 12.64%
TEN YEAR RETURN 240.41% 212.60%
ANNUALIZED 13.03% 12.07%
INCEPTION* 320.49% 306.66%
ANNUALIZED 13.30% 12.97%
</TABLE>
*Inception return based on a January 1, 1984 as beginning value.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING JUNE 30, 1995
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> MONEY MARKET PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 93356
<INVESTMENTS-AT-VALUE> 93356
<RECEIVABLES> 4025
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 97381
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 70
<TOTAL-LIABILITIES> 70
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 97335
<SHARES-COMMON-STOCK> 9711
<SHARES-COMMON-PRIOR> 9390
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (24)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 97311
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2805
<OTHER-INCOME> 0
<EXPENSES-NET> (252)
<NET-INVESTMENT-INCOME> 2553
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 2553
<EQUALIZATION> 3
<DISTRIBUTIONS-OF-INCOME> (2577)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 12181
<NUMBER-OF-SHARES-REDEEMED> (12117)
<SHARES-REINVESTED> 257
<NET-CHANGE-IN-ASSETS> 3161
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 185
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 252
<AVERAGE-NET-ASSETS> 93375
<PER-SHARE-NAV-BEGIN> 10.03
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> (0.01)
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.02
<EXPENSE-RATIO> 0.55
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING JUNE 30, 1995
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> HIGH YIELD BOND PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 43863
<INVESTMENTS-AT-VALUE> 47884
<RECEIVABLES> 3523
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 48407
<PAYABLE-FOR-SECURITIES> 1550
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 51
<TOTAL-LIABILITIES> 1601
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 45353
<SHARES-COMMON-STOCK> 4929
<SHARES-COMMON-PRIOR> 2843
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (6)
<ACCUMULATED-NET-GAINS> 438
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1021
<NET-ASSETS> 46806
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1871
<OTHER-INCOME> 0
<EXPENSES-NET> (162)
<NET-INVESTMENT-INCOME> 1709
<REALIZED-GAINS-CURRENT> 438
<APPREC-INCREASE-CURRENT> 1821
<NET-CHANGE-FROM-OPS> 3968
<EQUALIZATION> 326
<DISTRIBUTIONS-OF-INCOME> (1715)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2932
<NUMBER-OF-SHARES-REDEEMED> (1030)
<SHARES-REINVESTED> 183
<NET-CHANGE-IN-ASSETS> 21468
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 117
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 162
<AVERAGE-NET-ASSETS> 39248
<PER-SHARE-NAV-BEGIN> 8.91
<PER-SHARE-NII> 0.36
<PER-SHARE-GAIN-APPREC> 0.59
<PER-SHARE-DIVIDEND> (0.36)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.50
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING JUNE 30, 1995
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> GOVERNMENT SECURITIES PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 39355
<INVESTMENTS-AT-VALUE> 39745
<RECEIVABLES> 368
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 40113
<PAYABLE-FOR-SECURITIES> 2587
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 72
<TOTAL-LIABILITIES> 2659
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 37242
<SHARES-COMMON-STOCK> 3596
<SHARES-COMMON-PRIOR> 2229
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (3)
<ACCUMULATED-NET-GAINS> (104)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 319
<NET-ASSETS> 37454
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 963
<OTHER-INCOME> 0
<EXPENSES-NET> (120)
<NET-INVESTMENT-INCOME> 843
<REALIZED-GAINS-CURRENT> 1526
<APPREC-INCREASE-CURRENT> 551
<NET-CHANGE-FROM-OPS> 2920
<EQUALIZATION> 134
<DISTRIBUTIONS-OF-INCOME> (846)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1524
<NUMBER-OF-SHARES-REDEEMED> (240)
<SHARES-REINVESTED> 83
<NET-CHANGE-IN-ASSETS> 15965
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1630)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 85
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 120
<AVERAGE-NET-ASSETS> 28787
<PER-SHARE-NAV-BEGIN> 9.64
<PER-SHARE-NII> 0.28
<PER-SHARE-GAIN-APPREC> 0.78
<PER-SHARE-DIVIDEND> (0.28)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.42
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING JUNE 30, 1995
</LEGEND>
<SERIES>
<NUMBER> 4
<NAME> MANAGED BOND PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 90405
<INVESTMENTS-AT-VALUE> 91259
<RECEIVABLES> 1824
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 93083
<PAYABLE-FOR-SECURITIES> 6468
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 133
<TOTAL-LIABILITIES> 6601
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 85762
<SHARES-COMMON-STOCK> 8117
<SHARES-COMMON-PRIOR> 5376
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (3)
<ACCUMULATED-NET-GAINS> 28
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 695
<NET-ASSETS> 86482
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2488
<OTHER-INCOME> 0
<EXPENSES-NET> (259)
<NET-INVESTMENT-INCOME> 2229
<REALIZED-GAINS-CURRENT> 3096
<APPREC-INCREASE-CURRENT> 1685
<NET-CHANGE-FROM-OPS> 7010
<EQUALIZATION> 573
<DISTRIBUTIONS-OF-INCOME> (2229)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2670
<NUMBER-OF-SHARES-REDEEMED> (142)
<SHARES-REINVESTED> 214
<NET-CHANGE-IN-ASSETS> 33263
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (3071)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 205
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 259
<AVERAGE-NET-ASSETS> 69241
<PER-SHARE-NAV-BEGIN> 9.90
<PER-SHARE-NII> 0.32
<PER-SHARE-GAIN-APPREC> 0.76
<PER-SHARE-DIVIDEND> (0.32)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.66
<EXPENSE-RATIO> 0.76
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR PERIOD ENDING JUNE 30, 1995
</LEGEND>
<SERIES>
<NUMBER> 5
<NAME> GROWTH PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 105123
<INVESTMENTS-AT-VALUE> 111444
<RECEIVABLES> 1739
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 113183
<PAYABLE-FOR-SECURITIES> 1904
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 148
<TOTAL-LIABILITIES> 2052
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 103845
<SHARES-COMMON-STOCK> 6584
<SHARES-COMMON-PRIOR> 5468
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (21)
<ACCUMULATED-NET-GAINS> 986
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6321
<NET-ASSETS> 111131
<DIVIDEND-INCOME> 551
<INTEREST-INCOME> 303
<OTHER-INCOME> 0
<EXPENSES-NET> (386)
<NET-INVESTMENT-INCOME> 468
<REALIZED-GAINS-CURRENT> 986
<APPREC-INCREASE-CURRENT> 11414
<NET-CHANGE-FROM-OPS> 12868
<EQUALIZATION> 55
<DISTRIBUTIONS-OF-INCOME> (489)
<DISTRIBUTIONS-OF-GAINS> (13)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2269
<NUMBER-OF-SHARES-REDEEMED> (1183)
<SHARES-REINVESTED> 31
<NET-CHANGE-IN-ASSETS> 29680
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 13
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 314
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 386
<AVERAGE-NET-ASSETS> 96857
<PER-SHARE-NAV-BEGIN> 14.90
<PER-SHARE-NII> 0.07
<PER-SHARE-GAIN-APPREC> 1.99
<PER-SHARE-DIVIDEND> (0.08)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.88
<EXPENSE-RATIO> 0.80
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING JUNE 30, 1995
</LEGEND>
<SERIES>
<NUMBER> 6
<NAME> EQUITY INCOME PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 117228
<INVESTMENTS-AT-VALUE> 127092
<RECEIVABLES> 851
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 127943
<PAYABLE-FOR-SECURITIES> 806
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 167
<TOTAL-LIABILITIES> 973
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 115210
<SHARES-COMMON-STOCK> 7753
<SHARES-COMMON-PRIOR> 5343
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (19)
<ACCUMULATED-NET-GAINS> 1915
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 9864
<NET-ASSETS> 126970
<DIVIDEND-INCOME> 1147
<INTEREST-INCOME> 141
<OTHER-INCOME> 0
<EXPENSES-NET> (419)
<NET-INVESTMENT-INCOME> 869
<REALIZED-GAINS-CURRENT> 3250
<APPREC-INCREASE-CURRENT> 11278
<NET-CHANGE-FROM-OPS> 15397
<EQUALIZATION> 178
<DISTRIBUTIONS-OF-INCOME> (888)
<DISTRIBUTIONS-OF-GAINS> (55)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2845
<NUMBER-OF-SHARES-REDEEMED> (495)
<SHARES-REINVESTED> 60
<NET-CHANGE-IN-ASSETS> 51887
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (1280)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 311
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 419
<AVERAGE-NET-ASSETS> 97325
<PER-SHARE-NAV-BEGIN> 14.05
<PER-SHARE-NII> 0.13
<PER-SHARE-GAIN-APPREC> 2.34
<PER-SHARE-DIVIDEND> (0.13)
<PER-SHARE-DISTRIBUTIONS> (0.01)
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 16.38
<EXPENSE-RATIO> 0.87
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING JUNE 30, 1995
</LEGEND>
<SERIES>
<NUMBER> 7
<NAME> MULTI-STRATEGY PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 95195
<INVESTMENTS-AT-VALUE> 101323
<RECEIVABLES> 1061
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 102384
<PAYABLE-FOR-SECURITIES> 2101
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 154
<TOTAL-LIABILITIES> 2255
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 92643
<SHARES-COMMON-STOCK> 7601
<SHARES-COMMON-PRIOR> 6747
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (20)
<ACCUMULATED-NET-GAINS> 1378
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6128
<NET-ASSETS> 100129
<DIVIDEND-INCOME> 565
<INTEREST-INCOME> 1441
<OTHER-INCOME> 0
<EXPENSES-NET> (376)
<NET-INVESTMENT-INCOME> 1630
<REALIZED-GAINS-CURRENT> 2158
<APPREC-INCREASE-CURRENT> 7893
<NET-CHANGE-FROM-OPS> 11681
<EQUALIZATION> 85
<DISTRIBUTIONS-OF-INCOME> (1642)
<DISTRIBUTIONS-OF-GAINS> (12)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1228
<NUMBER-OF-SHARES-REDEEMED> (504)
<SHARES-REINVESTED> 130
<NET-CHANGE-IN-ASSETS> 20982
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<ACCUMULATED-GAINS-PRIOR> (776)
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<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 376
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<PER-SHARE-GAIN-APPREC> 1.44
<PER-SHARE-DIVIDEND> (0.23)
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<PER-SHARE-NAV-END> 13.17
<EXPENSE-RATIO> 0.87
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING JUNE 30, 1995
</LEGEND>
<SERIES>
<NUMBER> 8
<NAME> INTERNATIONAL PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
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<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 108787
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<OVERDISTRIBUTION-GAINS> 0
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<INTEREST-INCOME> 299
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<NET-INVESTMENT-INCOME> 1405
<REALIZED-GAINS-CURRENT> 1318
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<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> 42096
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 8
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<OVERDIST-NET-GAINS-PRIOR> 0
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<GROSS-EXPENSE> 518
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<PER-SHARE-NAV-BEGIN> 11.94
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<EXPENSE-RATIO> 1.11
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING JUNE 30, 1995
</LEGEND>
<SERIES>
<NUMBER> 9
<NAME> EQUITY INDEX PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
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<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 59539
<SHARES-COMMON-STOCK> 4718
<SHARES-COMMON-PRIOR> 3119
<ACCUMULATED-NII-CURRENT> 0
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<OVERDISTRIBUTION-GAINS> 0
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<NET-ASSETS> 73006
<DIVIDEND-INCOME> 703
<INTEREST-INCOME> 66
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<NET-INVESTMENT-INCOME> 659
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<APPREC-INCREASE-CURRENT> 8922
<NET-CHANGE-FROM-OPS> 9914
<EQUALIZATION> 100
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<DISTRIBUTIONS-OF-GAINS> (6)
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<NUMBER-OF-SHARES-SOLD> 1780
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<SHARES-REINVESTED> 46
<NET-CHANGE-IN-ASSETS> 32394
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<ACCUMULATED-GAINS-PRIOR> 10
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 115
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<PER-SHARE-NAV-BEGIN> 13.02
<PER-SHARE-NII> 0.16
<PER-SHARE-GAIN-APPREC> 2.45
<PER-SHARE-DIVIDEND> (0.16)
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<PER-SHARE-NAV-END> 15.47
<EXPENSE-RATIO> 0.43
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING JUNE 30, 1995
</LEGEND>
<SERIES>
<NUMBER> 10
<NAME> GROWTH LT PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<INVESTMENTS-AT-COST> 102248
<INVESTMENTS-AT-VALUE> 114000
<RECEIVABLES> 3750
<ASSETS-OTHER> 4
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<TOTAL-ASSETS> 117754
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<OTHER-ITEMS-LIABILITIES> 212
<TOTAL-LIABILITIES> 9863
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 93492
<SHARES-COMMON-STOCK> 8203
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<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (584)
<ACCUMULATED-NET-GAINS> 3329
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 11654
<NET-ASSETS> 107891
<DIVIDEND-INCOME> 319
<INTEREST-INCOME> 524
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<EXPENSES-NET> (342)
<NET-INVESTMENT-INCOME> 501
<REALIZED-GAINS-CURRENT> 2952
<APPREC-INCREASE-CURRENT> 9510
<NET-CHANGE-FROM-OPS> 12963
<EQUALIZATION> 50
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<DISTRIBUTIONS-OF-GAINS> (69)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 5050
<NUMBER-OF-SHARES-REDEEMED> (1337)
<SHARES-REINVESTED> 47
<NET-CHANGE-IN-ASSETS> 58517
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (125)
<OVERDIST-NET-GAINS-PRIOR> 0
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<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 342
<AVERAGE-NET-ASSETS> 70879
<PER-SHARE-NAV-BEGIN> 11.11
<PER-SHARE-NII> 0.03
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<PER-SHARE-NAV-END> 13.15
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING JUNE 30, 1995
</LEGEND>
<SERIES>
<NUMBER> 11
<NAME> EQUITY PORTFOLIO
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
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<PAID-IN-CAPITAL-COMMON> 71999
<SHARES-COMMON-STOCK> 5257
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<ACCUMULATED-NET-GAINS> 6
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 10538
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<EXPENSES-NET> (302)
<NET-INVESTMENT-INCOME> 296
<REALIZED-GAINS-CURRENT> 1332
<APPREC-INCREASE-CURRENT> 6446
<NET-CHANGE-FROM-OPS> 8074
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<DISTRIBUTIONS-OF-GAINS> 0
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<NUMBER-OF-SHARES-SOLD> 473
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<SHARES-REINVESTED> 20
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<GROSS-EXPENSE> 302
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<PER-SHARE-NAV-BEGIN> 14.20
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</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<LEGEND>
CONSOLIDATED SCHEDULE OF FINANCIAL DATA
FOR THE PERIOD ENDING JUNE 30, 1995
</LEGEND>
<SERIES>
<NUMBER> 12
<NAME> BOND AND INCOME PORTFOLIO
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
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<NET-INVESTMENT-INCOME> 1379
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<SHARES-REINVESTED> 121
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<PER-SHARE-NAV-BEGIN> 10.42
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<PER-SHARE-DIVIDEND> (0.41)
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</TABLE>
